Larson acquisition gives Polaris access to ‘very attractive fishing segment’

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Polaris purchased Larson Boats earlier this month

Polaris’s acquisition of Larson Boats was perhaps the smallest the company has ever made, but it has piqued a lot of curiosity, said Scott Wine, Polaris CEO.

“It's a bit ironic. I think that ranks up there with one of the smallest acquisitions we've ever done, and it's probably got more coverage than we've got when we bought Boat Holding,” Wine said during a conference call with analysts to discuss fourth quarter results.

Larson Boats, which Polaris purchased earlier this month, is about the size of its Rinker business, Wine said. Rinker is one of the four brands Polaris purchased as part of the Boat Holding group for $805 million last May. The other brands were Bennington, Godfrey and Hurricane.

“What we like about it strategically is, it gives us access to the fishing market, which we didn't previously have with our other brands,” Wine said. “For us it was just a very cost-efficient way for us to enter the very attractive fishing segment. And I think we feel good about our ability to take that and grow it profitably along with our other boat brands.”

The integration of Boat Holdings is going according to plan, Wine said. “Bennington is set for another strong year, and our other boat brands offer significant opportunity for growth and margin expansion,” he said.

Wine dismissed concerns about softness in the pontoon segment over the last couple of months, saying the fourth quarter isn’t worth worrying about trend-wise.

“We feel very good based on the orders that have been taken at the recent boat shows and the lineup that we have,” Wine said. “We were a little bit light on some of the lower end less-expensive models, previously with Bennington, and we feel like we've got those lined up. And again, the relationship that we have with Yamaha and Mercury we still believe gives us competitive advantage in pontoons.”

Tariffs were top of mind for analysts and Polaris. Early in the conference call Wine referenced President Trump’s Dec. 4 tweet about the “Tariff Man.”


“Rising tariffs are an unfortunate reality we must consider in our strategic sourcing efforts and deal with in our business,” Wine said. “They all impact our operations.”

The most significant impacts involve the Section 301, List 3 tariffs, which are factored into the company’s outlook, Wine said.

“There is currently no legal framework to claim an exemption to List 3, but rest assured, we are working every possible angle to be at or near the front of the line if and when it is authorized,” he said. “While there is risk of the 301 tariffs going from 10 percent to 25 percent, my belief is that the economic damage to the U.S. economy would be too great for that to happen.”

If tariffs do rise to 25 percent, the company would be more concerned about the indirect impact on consumer demand than the actual tariffs, Wine said.

“As a reminder, although we only directly source about 15 percent of our parts from China, we nevertheless pay a large tariff penalty that our foreign competitors avoid, only because we employ thousands of American workers to assemble these parts,” he said. “Ironically, if we produce all of our vehicles in Mexico or Canada, we would be exempt from 301, List 3 tariffs.

“Our comprehensive efforts to obtain relief are ongoing, as we closely monitor the latest negotiations,” Wine added. “But our best assumption for 2019 is that List 3 will remain at 10 percent, which is driving most of the $80 million to $90 million increase in tariff cost that we expect.”


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