By Dee Depass, Minneapolis
Star Tribune
Grouse if you must, but Medina-based Polaris Industries Inc.
is grateful for each and every flake of fresh snow.
That's because this snowy winter and spring helped boost snowmobile
sales 217 percent during the first quarter and helped Polaris beat Wall
Street's earnings expectations by a stretch.
Polaris, which makes snowmobiles, ATVs and motorcycles,
reported quarterly earnings Tuesday of $75.5 million, or $1.07 a share. That's
up from $60 million from a year ago and 6 cents a share higher than the $1.01
analysts expected. A well-timed tax break also contributed to the earnings
boost.
Total sales rose 11 percent to $745.9 million during the
quarter thanks to strong sales of all-terrain vehicles (ATVs), accessories, and
snowmobiles. Although revenue rose, they missed analysts' expectations of $751
million in sales. Analysts called the quarter OK and noted that the hefty snow
boosted snowmobile sales but tempered some ATV and motorcycle sales.
CEO Scott Wine and President Bennett Morgan told analysts
that "the North American snowmobile industry finished the season strong . due
to more normal snowfall levels and later snow cover for this snowmobile riding
season."
Morgan said snowmobile sales "were about triple the first
quarter of 2012, driven primarily by sales to dealers by our Scandinavian
subsidiaries.'' In addition, he said, retail sales were "particularly strong in
U.S.
mountain states.''
Morgan noted that while the big snowfall helped snowmobile
sales, in some cases it hurt sales of ATVs and motorcycles.
"We are seeing a notable split between what we might call
`Sun versus Snowbelt,'?" Morgan said.
Polaris got its start as a Minnesota company with snowmobiles. But today
they are the smallest part of its business. First quarter snowmobile sales
jumped from $4 million in 2012 to $14 million this year.
Meanwhile, first-quarter ATV sales grew 7 percent to $541.2
million. That compares to double-digit increases during the warmer and drier
2012. Still, the division avoided industry-wide declines seen across North America.
Parts and garments grew 27 percent to $127 million.
Motorcycles, electric vehicles and other "on-road" products fell 3 percent to
$62.8 million due mainly to the messy weather.
Bobcat Partnership
Wine noted the recent purchase of Aixam Mega-the French
maker of small cars and commercial vehicles-and raised his 2013 earnings
guidance by 15 to 18 percent. Polaris now expects earnings of $5.05 to $5.20 a
share. Revenue is forecast to grow 12 to 15 percent this year.
Adding to expectations was news that Polaris finally
launched a line of utility vehicles that it has co-developed with Bobcat.
Shipments of the long awaited Polaris Brutus and Bobcat utility vehicles begin
this month, Wine told investment analysts.
Wine also said Polaris' redesigned Indian motorcycle
launches later this year, which should "enhance growth in the second half of
the year."
Polaris also announced it has chosen Opole, Poland,
as the site of its newest ATV factory. Construction begins this quarter, and
the factory is expected to open in fall 2014.
Mark Smith, Feltl & Co. senior research analyst, noted
the Poland expansion, plus
factory expansions in Wyoming, MN, and Mexico and a
developing joint venture with India-based Eicher Motors.
"Just look at all the projects these guys have going on,"
Smith said. "They doubled capital expenditures this year to $200 million. This
company is just growing up by leaps and bounds, and it is setting them for
future growth."
However, Smith said that without the tax break, earnings
would have been flat or lower than planned. Polaris' income tax rate fell from
35 percent to 26 percent during the quarter, resulting in a one-time $8.2
million benefit. The big tax return resulted from Congress reinstating an
R&D tax credit for 2012 and because Polaris had several favorable tax
audits.
CEO Wine also acknowledged some sales softness.
"We saw a degree of timidity in some customer segments that
corresponded with the [U.S.]
payroll tax increases that took effect at the start of the year,'' Wine said.
"We remain cautious of the economic risks in both North America and Europe."
Polaris shares rose 0.8 percent, or 72 cents, to close at
$85.96.
Dee DePass (612) 673-7725