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12 • May 23, 2016 • Powersports Business FINANCIAL www.PowersportsBusiness.com Indian bike sales were up more than 50 percent Polaris Industries Inc. (NYSE:PII) reported first quarter net income of $46.9 million, or $0.71 per diluted share, for the quarter ended March 31, compared to $88.6 million, or $1.30 per diluted share reported in the first quarter of 2015, in-line with company expectations. Sales for the first quarter 2016 totaled $983.0 million, down five percent compared to last year's first quarter sales of $1.033 billion. "Our first quarter results were in line with our projections, in spite of increased expenses for warranty and product liability. Our Customer Excel- lence initiatives and new products drove a 6 percent increase in North American retail, and in conjunction with shipment reduc- tions, better demand forecasting and pro- cess control improvements, enabled us to continue reducing dealer inventory lev- els year-over-year. During the quarter, we improved shipment lead times, met retail demand from our Spirit Lake motorcycle facility and completing the acquisition of Taylor-Dunn. I still believe 2016 is likely to be another volatile year in powersports, but we are seeing pockets of strength. The North American ORV industry was up in the first quarter, with March experiencing the strongest improvement," commented Scott Wine, Polaris' chairman and chief executive officer. "We remain focused on an all-out assault on costs and rededicating the business to drive growth, not only for this year but as part of a renewed commitment to achieving our 2020 objectives. The entire Polaris team is united, and determined, to grow sales and expand margins." 2016 BUSINESS OUTLOOK While the powersports industry was slightly better than anticipated in the 2016 first quar- ter, the company is keeping its guidance range unchanged for the full year 2016 with earnings expected to be in the range of $6.20 to $6.80 per diluted share with sales in the range of down 2 percent to up 3 percent over 2015 due to the persistent unpredictability around overall economic trends and more specifically powersports industry trends for the remainder of 2016. Off-road vehicle (ORV) and snowmobile segment sales, including their respective PG&A related sales, decreased 9 percent from the first quarter of 2015 to $720.6 mil- lion. ORV vehicle sales decreased 12 percent, snowmobile vehicle sales were up 2 percent, and ORV and snowmobile related PG&A sales, combined, increased 2 percent in the 2016 first quarter compared to the same period last year. ORV wholegood sales decreased 12 per- cent reflecting ongoing softness in retail sales in North American oil markets and tough comparables in the first quarter of last year. Polaris North American ORV unit retail sales were flat with the 2015 first quarter, with consumer purchases of side-by-side vehicles down low single-digits percent and ATV retail sales up low-single digits percent over prior year. ORV dealer inventory was down 10 percent in the 2016 first quarter compared to the same period last year. While the com- pany experienced modest ORV market share loss in the 2016 first quarter with ATV market share up slightly and side-by-side's down, Polaris continues to be the clear No. 1 market share leader in ORV in North America. Snowmobile wholegood sales increased 2 percent due to the acquisition of Timbersled in the second quarter of 2015. The company gained market share the 2016 first quarter and for a third consecutive year for the season ending March 31. Motorcycle segment sales, including their respective PG&A related sales, increased 18 percent in the 2016 first quarter to $188.2 million primarily due to continued strong retail sales for Indian motorcycles. North American consumer retail demand for the Polaris motorcycle segment, including Victory, Indian Motorcycle and Slingshot, was up low-teens percent during the 2016 first quarter, while the overall motorcycle industry retail sales, 900cc and above was about flat in the 2016 first quarter. During the 2016 first quarter, the company began retailing two new additions to its Victory and Indian motorcycle lineup with the introduc- tion of the Octane, Victory motorcycles' first mid-sized cruiser and the new Indian Spring- field, named after the birthplace of Indian Motorcycle. Slingshot also broadened its color options with its 2016 model introduc- tion including the new Limited Edition White Pearl SL. Product availability for Victory, Indian Motorcycle and Slingshot improved considerably in the 2016 first quarter, and dealer inventories were essentially at targeted stocking levels at quarter-end. Global Adjacent Markets segment sales, along with their respective PG&A related sales, decreased 5 percent to $74.1 million in the 2016 first quarter compared to the 2015 first quarter. Work and Transportation group whole- good sales were up low single digits percent during the quarter primarily due to growth in the Aixam business. Sales for the company's defense business were down significantly due to U.S. military budget spending patterns pushing orders into the future. PSB Polaris sees North American sales rise 6 percent in Q1 SCOTT WINE