Polaris(PII) - 2023 Q4 - Annual Report

Financial Performance - Total sales for 2023 reached $8.9 billion, a 4% increase from 2022, driven by product mix and increased shipments [158]. - Net income from continuing operations attributable to Polaris Inc. was$ 502.8 million, a decrease of 17% from 2022, with diluted earnings per share dropping from $10.04 to$ 8.71 [159]. - Adjusted EBITDA for 2023 was $1,020.9 million, down 5% from$ 1,075.9 million in 2022, reflecting increased operating expenses and higher finance interest [161]. - Gross profit remained stable at $2.0 billion, but as a percentage of sales, it decreased to 21.9% from 22.8% in 2022 [158]. - Total gross profit for 2023 was$ 1,959.9 million, remaining stable compared to $1,959.5 million in 2022, with a gross profit margin of 21.9% [176]. - Comprehensive income for 2023 was$ 532.8 million, an increase from $437.0 million in 2022, showing improved overall financial health [264]. - Net income for 2023 was$ 502.7 million, an increase of 12.5% compared to $447.6 million in 2022 [270]. Sales and Revenue - Total sales for 2023 reached$ 8,934.4 million, a 4% increase from $8,589.0 million in 2022 [187]. - Sales in the United States increased by 5% to$ 7.1 billion, accounting for 80% of total sales [163]. - Off Road segment sales increased by 9% to $6,984.4 million, driven by increased shipments and a favorable product mix [175]. - On Road segment sales rose by 2% to$ 1,184.6 million, with a 5% increase in average per unit sales price [179]. - Marine segment sales decreased by 23% to $765.4 million, primarily due to decreased shipments [181]. - Wholegoods revenue reached$ 7,122.1 million in 2023, up from $6,945.8 million in 2022, reflecting a growth of 2.5% [324]. - The United States accounted for$ 7,122.2 million of total revenue in 2023, representing approximately 79.7% of total revenue [324]. Expenses and Costs - Operating expenses increased by 11% to $1,339.4 million in 2023, primarily due to higher selling and marketing and general and administrative expenses [161]. - Research and development expenses increased to$ 374.3 million in 2023, up from $366.7 million in 2022, reflecting a commitment to innovation [262]. - Depreciation and amortization expenses for 2023 were$ 258.9 million, compared to $232.8 million in 2022, reflecting an increase of 11.2% [270]. - The company incurred advertising expenses of$ 94.1 million, $87.6 million, and$ 90.8 million for the years ended December 31, 2023, 2022, and 2021, respectively [306]. Cash Flow and Investments - Cash provided by operating activities increased to $925.8 million in 2023, up from$ 534.5 million in 2022 [190]. - Total cash used for investing activities was $(462.0) million, an increase from$ (319.3) million in 2022 [190]. - Net cash used for investing activities of continuing operations was $462.0 million, compared to$ 319.3 million in 2022, indicating a 44.6% increase [270]. - Cash and cash equivalents rose to $367.8 million in 2023, compared to$ 324.5 million in 2022, marking an increase of 13.3% [260]. Debt and Financing - The company had outstanding borrowings of $228.2 million under its$ 1.0 billion Revolving Loan Facility as of December 31, 2023 [195]. - In November 2023, the company issued $500 million in Senior Notes at a 6.950% interest rate, maturing in March 2029 [199]. - The debt to total capital ratio improved to 57% as of December 31, 2023, down from 65% in the previous year [201]. - Total borrowings under financing obligations were$ 2,770.0 million, a decrease from $2,987.5 million in 2022 [270]. - The weighted-average interest rate for total borrowings as of December 31, 2023, was 5.67% [346]. Shareholder Returns - The company declared a quarterly cash dividend of$ 0.66 per share for Q1 2024, marking a 2% increase and the 29th consecutive year of increased dividends [160]. - The company declared cash dividends of $2.60 per share in 2023, up from$ 2.56 in 2022, indicating a focus on returning value to shareholders [268]. - The company authorized an additional $1,185.1 million for share repurchases, having repurchased 1.6 million shares for$ 178.6 million in 2023, positively impacting diluted net income per share by 13 cents [202]. Assets and Liabilities - Total assets increased to $5,516.3 million in 2023, up from$ 5,217.9 million in 2022, reflecting a growth of 5.7% [260]. - Total liabilities decreased to $4,085.2 million in 2023 from$ 4,103.8 million in 2022, a reduction of 0.5% [260]. - Total accrued expenses increased to $1,123.6 million as of December 31, 2023, compared to$ 896.8 million in 2022, marking a rise of 25.3% [322]. Warranty and Liability - The accrued warranty liability increased to $181.1 million as of December 31, 2023, compared to$ 172.9 million in the previous year [210]. - The warranty reserve balance at the end of 2023 was $181.1 million, an increase from$ 172.9 million in 2022, with additions charged to expense amounting to $209.1 million in 2023 [308]. - The company reported accruals of$ 136.7 million for product liability claims as of December 31, 2023, up from $107.5 million in 2022 [211]. Currency and Foreign Exchange - A hypothetical 10% fluctuation of the U.S. dollar compared to the Euro could impact annual operating income by approximately$ 21 million, while the same fluctuation against the Canadian dollar could impact it by approximately $47 million [224]. - In 2023, foreign currencies negatively impacted net income compared to 2022, and a similar negative impact is expected in 2024 compared to 2023 [226]. Goodwill and Intangible Assets - Goodwill as of December 31, 2023, increased to$ 394.4 million from $386.2 million in 2022, reflecting a growth of 3.0% [355]. - Other intangible assets, net, decreased to$ 512.0 million in 2023 from $524.4 million in 2022, a decline of 2.5% [355]. - Total goodwill and other intangible assets, net, amounted to$ 906.4 million in 2023, down from $910.6 million in 2022, a decrease of 0.5% [355].