POLARIS REPORTS THIRD QUARTER 2010 RESULTS; SALES INCREASED 33% AND EARNINGS PER SHARE INCREASED 46%Company increases full year 2010 guidance
Third Quarter 2010 Highlights:
•Sales grew 33% to $580.1 million and net income per share increased 46% to a record $1.37 per diluted share from last year’s third quarter, both exceeding Company expectations
•North American retail sales for the Company increased 21 percent for the third quarter compared to the same period last year
•Net income increased 51% to $47.2 million compared to the same period last year
•Gross margin percentage increased 190 basis points to 26.0%, driven by lower product costs, favorable currency movements and pricing
•Raising guidance for full year 2010 earnings to a record earnings per share range of $4.17 to $4.20 per diluted share, a 37% to 38% increase over full year 2009 on expected full year 2010 sales growth of 24% to 25%
MINNEAPOLIS (October 19, 2010) — Polaris Industries Inc. (NYSE: PII) today reported third quarter net income of $47.2 million, or a record $1.37 per diluted share, for the quarter ended September 30, 2010. By comparison, 2009 third quarter net income was $31.2 million, or $0.94 per diluted share. Sales for the third quarter 2010 totaled $580.1 million, an increase of 33 percent when compared to $436.2 million recorded in the year-earlier period.
“We are pleased with the execution of the Polaris team and our Company’s performance during the third quarter,” commented Scott Wine, Polaris’ Chief Executive Officer. “While the economy and overall consumer demand remains weak, our growth continues to be fueled by innovative new products and our strong dealer network. It is rewarding to see our hard work pay off and be able to report 33 percent sales growth and record earnings per share for the quarter. The momentum we experienced during the first half of 2010 accelerated during the third quarter, as we saw continued market share gains, retail sales growth and margin expansion.”
2010 Business Outlook
As a result of its continued strong retail sales growth, Polaris now expects full year 2010 earnings per diluted share to be in the range of $4.17 to $4.20, which represents an increase of 37 to 38 percent when compared to earnings of $3.05 per diluted share for the full year 2009. Sales for the full year 2010 are now expected to grow in the range of 24 to 25 percent over full year 2009 sales of $1.57 billion. During the fourth quarter of 2010, the Company expects total sales to increase in the range of 22 to 24 percent over the fourth quarter 2009. The fourth quarter 2010 expectations include incremental costs related to the manufacturing realignment and higher incentive compensation expenses compared to the 2009 fourth quarter. Fourth quarter 2010 earnings are expected to be in the range of $1.45 to $1.48 per diluted share, up 11 to 13 percent compared to earnings of $1.31 per diluted share for the fourth quarter of 2009.
Wine commented, “The positive feedback on our product introductions from our July dealer meeting, coupled with our continued margin expansion and encouraging results from our recently expanded Max Velocity Program (“MVP”) go-to-market process, gives us confidence in our ability to finish the year with strong operating results. While we remain focused on extending the momentum experienced in the first nine months through the end of the year, our initial thoughts on 2011 are also quite positive. Our new product pipeline is strong and operational excellence continues to be a priority. I am confident we can continue to drive profitability with the goal of generating industry leading returns for our shareholders in 2011 and beyond.”
Third Quarter Performance Summary (in thousands except per share data)
Three Months Ended September 30, Nine Months Ended September 30,
Product Line Sales 2010 2009 Change 2010 2009 Change
Off-Road Vehicles $389,349 $261,108 49% $981,823 $738,312 33%
Snowmobiles 77,285 82,218 -6% 84,804 97,797 -13%
On-Road/Victory Motorcycles 20,137 9,344 116% 60,984 33,672 81%
Parts, Garments & Accessories 93,311 83,527 12% 245,086 224,336 9%
Total Sales $580,082 $436,197 33% $1,372,697 $1,094,117 25%
Gross Profit $150,699 $104,911 44% $358,697 $264,609 36%
Gross Profit as a % of sales 26.0% 24.1% +190 bpts 26.1% 24.2% +190 bpts
Operating Expenses $87,139 $63,188 38% $228,759 $181,394 26%
Operating Expenses as a % of sales 15.0% 14.5% +50 bts 16.7% 16.6% +10 bts
Operating Income $67,696 $45,645 48% $142,575 $95,507 49%
Operating Income as a % of sales 11.7% 10.5% +120 bpts 10.4% 8.7% +170 bpts
Net Income $47,221 $31,171 51% $92,616 $57,107 62%
Net Income as a % of sales 8.1% 7.1% +100 bpts 6.7% 5.2% +150 bpts
Diluted net income per share $1.37 0.94 46% $2.71 1.73 57%
Off-Road vehicles (“ORV’) sales, which include sales of both ATVs (all-terrain vehicles) and RANGER™ side-by-side vehicles, increased 49 percent during the third quarter 2010 from the third quarter 2009. This increase reflects significant market share gains for both ATVs and side-by-side vehicles driven by industry leading product offerings and the success of the MVP retail go-to-market process. The MVP program was expanded and made available to all North American ORV dealers beginning in the 2010 third quarter. During the third quarter, the Company began shipping several new model year 2011 ORV products including a mid-sized RANGER side-by-side with increased power, a 4-person mid-sized RANGER Crew and a RANGER with the Company’s first 24 horsepower diesel engine. In addition, shipments to Bobcat of the differentiated utility vehicle, which began shipping in the second quarter, accelerated in the 2010 third quarter. Polaris’ North American ORV unit retail sales to consumers increased approximately 20 percent for the 2010 third quarter from the third quarter last year, with side-by-side vehicle retail sales increasing significantly and ATV retail sales up in the mid-single digit percent range. North American dealer inventories of ORVs declined 30 percent during the third quarter compared to 2009 third quarter levels. During the third quarter of 2010 the number of ORV units shipped to dealers approximated the number of units retailed from dealers to consumers in North America. As the Company had done for the past four years, during the 2009 third quarter Polaris shipped significantly fewer ORV units to dealers than what was retailed from dealers to consumers in North America.
Sales of the On-Road division, which primarily consists of Victory motorcycles, increased 116 percent during the third quarter of 2010 when compared to the same period in 2009. The North American heavyweight cruiser and touring motorcycle industry remained weak during the quarter, but Victory continued to benefit from the actions implemented over the past year to accelerate growth. Victory unit retail sales were very strong during the third quarter, increasing more than 50 percent in North America compared to the third quarter of 2009, resulting in market share gains and retail sales growth for the fourth consecutive quarter. Demand increased across the Victory product line-up, particularly the new Cross Country™ and Cross Roads™ touring models. North American dealer inventory of Victory motorcycles declined 32 percent in the 2010 third quarter compared to 2009 third quarter levels. The sale of Victory motorcycles in markets outside of North America also continues to increase, with sales up over 100 percent for the 2010 third quarter compared to the same period last year.
Parts, Garments, and Accessories (“PG&A”) sales increased 12 percent during the third quarter 2010 compared to the same period last year primarily due to increased RANGER™ side-by-side vehicle and Victory motorcycle related PG&A sales.
Snowmobile sales decreased six percent during the 2010 third quarter compared to the third quarter of 2009. The third quarter 2010 decrease reflects the impact of a modest delay in shipments of snowmobiles closer to expected consumer demand in the winter season compared to the same period last year.
Gross profit as a percentage of sales was 26.0 percent for the third quarter of 2010, an increase of 190 basis points from 24.1 percent for the third quarter of 2009. Gross profit dollars increased 44 percent to $150.7 million for the third quarter of 2010 compared to $104.9 million for the third quarter of 2009. The increase in gross profit dollars and the 190 basis points increase in the gross profit margin percentage in the third quarter 2010 resulted primarily from continued product cost reduction efforts, production volume increases, and favorable pricing and foreign currency movements compared to the third quarter of last year. These increases were partially offset by manufacturing realignment costs, an increase in commodity costs and higher sales promotion costs.
Operating expenses for the third quarter 2010 increased 38 percent to $87.1 million, or 15.0 percent of sales, compared to $63.2 million, or 14.5 percent of sales, for the third quarter of 2009. Operating expenses in absolute dollars for the third quarter 2010 increased primarily due to higher incentive compensation plan expenses driven by the higher expected profitability for 2010 and the recent higher stock price. Incremental investments in growth initiatives also contributed to higher operating expenses.
Income from financial services was $4.1 million during the third quarter 2010 compared to $3.9 million in the third quarter of 2009.
Gain on securities held for sale was $1.6 million for the third quarter of 2010 resulting from the sale of the Company’s remaining investment in KTM Power Sports AG during the quarter.
Non-operating other income was $1.5 million in the third quarter of 2010 compared to $1.3 million in the third quarter of 2009. The income is the result of foreign currency exchange rate movements and the resulting effects on foreign currency transactions related to the international subsidiaries.
Third Quarter 2010 Highlights:
•Sales grew 33% to $580.1 million and net income per share increased 46% to a record $1.37 per diluted share from last year’s third quarter, both exceeding Company expectations
•North American retail sales for the Company increased 21 percent for the third quarter compared to the same period last year
•Net income increased 51% to $47.2 million compared to the same period last year
•Gross margin percentage increased 190 basis points to 26.0%, driven by lower product costs, favorable currency movements and pricing
•Raising guidance for full year 2010 earnings to a record earnings per share range of $4.17 to $4.20 per diluted share, a 37% to 38% increase over full year 2009 on expected full year 2010 sales growth of 24% to 25%
MINNEAPOLIS (October 19, 2010) — Polaris Industries Inc. (NYSE: PII) today reported third quarter net income of $47.2 million, or a record $1.37 per diluted share, for the quarter ended September 30, 2010. By comparison, 2009 third quarter net income was $31.2 million, or $0.94 per diluted share. Sales for the third quarter 2010 totaled $580.1 million, an increase of 33 percent when compared to $436.2 million recorded in the year-earlier period.
“We are pleased with the execution of the Polaris team and our Company’s performance during the third quarter,” commented Scott Wine, Polaris’ Chief Executive Officer. “While the economy and overall consumer demand remains weak, our growth continues to be fueled by innovative new products and our strong dealer network. It is rewarding to see our hard work pay off and be able to report 33 percent sales growth and record earnings per share for the quarter. The momentum we experienced during the first half of 2010 accelerated during the third quarter, as we saw continued market share gains, retail sales growth and margin expansion.”
2010 Business Outlook
As a result of its continued strong retail sales growth, Polaris now expects full year 2010 earnings per diluted share to be in the range of $4.17 to $4.20, which represents an increase of 37 to 38 percent when compared to earnings of $3.05 per diluted share for the full year 2009. Sales for the full year 2010 are now expected to grow in the range of 24 to 25 percent over full year 2009 sales of $1.57 billion. During the fourth quarter of 2010, the Company expects total sales to increase in the range of 22 to 24 percent over the fourth quarter 2009. The fourth quarter 2010 expectations include incremental costs related to the manufacturing realignment and higher incentive compensation expenses compared to the 2009 fourth quarter. Fourth quarter 2010 earnings are expected to be in the range of $1.45 to $1.48 per diluted share, up 11 to 13 percent compared to earnings of $1.31 per diluted share for the fourth quarter of 2009.
Wine commented, “The positive feedback on our product introductions from our July dealer meeting, coupled with our continued margin expansion and encouraging results from our recently expanded Max Velocity Program (“MVP”) go-to-market process, gives us confidence in our ability to finish the year with strong operating results. While we remain focused on extending the momentum experienced in the first nine months through the end of the year, our initial thoughts on 2011 are also quite positive. Our new product pipeline is strong and operational excellence continues to be a priority. I am confident we can continue to drive profitability with the goal of generating industry leading returns for our shareholders in 2011 and beyond.”
Third Quarter Performance Summary (in thousands except per share data)
Three Months Ended September 30, Nine Months Ended September 30,
Product Line Sales 2010 2009 Change 2010 2009 Change
Off-Road Vehicles $389,349 $261,108 49% $981,823 $738,312 33%
Snowmobiles 77,285 82,218 -6% 84,804 97,797 -13%
On-Road/Victory Motorcycles 20,137 9,344 116% 60,984 33,672 81%
Parts, Garments & Accessories 93,311 83,527 12% 245,086 224,336 9%
Total Sales $580,082 $436,197 33% $1,372,697 $1,094,117 25%
Gross Profit $150,699 $104,911 44% $358,697 $264,609 36%
Gross Profit as a % of sales 26.0% 24.1% +190 bpts 26.1% 24.2% +190 bpts
Operating Expenses $87,139 $63,188 38% $228,759 $181,394 26%
Operating Expenses as a % of sales 15.0% 14.5% +50 bts 16.7% 16.6% +10 bts
Operating Income $67,696 $45,645 48% $142,575 $95,507 49%
Operating Income as a % of sales 11.7% 10.5% +120 bpts 10.4% 8.7% +170 bpts
Net Income $47,221 $31,171 51% $92,616 $57,107 62%
Net Income as a % of sales 8.1% 7.1% +100 bpts 6.7% 5.2% +150 bpts
Diluted net income per share $1.37 0.94 46% $2.71 1.73 57%
Off-Road vehicles (“ORV’) sales, which include sales of both ATVs (all-terrain vehicles) and RANGER™ side-by-side vehicles, increased 49 percent during the third quarter 2010 from the third quarter 2009. This increase reflects significant market share gains for both ATVs and side-by-side vehicles driven by industry leading product offerings and the success of the MVP retail go-to-market process. The MVP program was expanded and made available to all North American ORV dealers beginning in the 2010 third quarter. During the third quarter, the Company began shipping several new model year 2011 ORV products including a mid-sized RANGER side-by-side with increased power, a 4-person mid-sized RANGER Crew and a RANGER with the Company’s first 24 horsepower diesel engine. In addition, shipments to Bobcat of the differentiated utility vehicle, which began shipping in the second quarter, accelerated in the 2010 third quarter. Polaris’ North American ORV unit retail sales to consumers increased approximately 20 percent for the 2010 third quarter from the third quarter last year, with side-by-side vehicle retail sales increasing significantly and ATV retail sales up in the mid-single digit percent range. North American dealer inventories of ORVs declined 30 percent during the third quarter compared to 2009 third quarter levels. During the third quarter of 2010 the number of ORV units shipped to dealers approximated the number of units retailed from dealers to consumers in North America. As the Company had done for the past four years, during the 2009 third quarter Polaris shipped significantly fewer ORV units to dealers than what was retailed from dealers to consumers in North America.
Sales of the On-Road division, which primarily consists of Victory motorcycles, increased 116 percent during the third quarter of 2010 when compared to the same period in 2009. The North American heavyweight cruiser and touring motorcycle industry remained weak during the quarter, but Victory continued to benefit from the actions implemented over the past year to accelerate growth. Victory unit retail sales were very strong during the third quarter, increasing more than 50 percent in North America compared to the third quarter of 2009, resulting in market share gains and retail sales growth for the fourth consecutive quarter. Demand increased across the Victory product line-up, particularly the new Cross Country™ and Cross Roads™ touring models. North American dealer inventory of Victory motorcycles declined 32 percent in the 2010 third quarter compared to 2009 third quarter levels. The sale of Victory motorcycles in markets outside of North America also continues to increase, with sales up over 100 percent for the 2010 third quarter compared to the same period last year.
Parts, Garments, and Accessories (“PG&A”) sales increased 12 percent during the third quarter 2010 compared to the same period last year primarily due to increased RANGER™ side-by-side vehicle and Victory motorcycle related PG&A sales.
Snowmobile sales decreased six percent during the 2010 third quarter compared to the third quarter of 2009. The third quarter 2010 decrease reflects the impact of a modest delay in shipments of snowmobiles closer to expected consumer demand in the winter season compared to the same period last year.
Gross profit as a percentage of sales was 26.0 percent for the third quarter of 2010, an increase of 190 basis points from 24.1 percent for the third quarter of 2009. Gross profit dollars increased 44 percent to $150.7 million for the third quarter of 2010 compared to $104.9 million for the third quarter of 2009. The increase in gross profit dollars and the 190 basis points increase in the gross profit margin percentage in the third quarter 2010 resulted primarily from continued product cost reduction efforts, production volume increases, and favorable pricing and foreign currency movements compared to the third quarter of last year. These increases were partially offset by manufacturing realignment costs, an increase in commodity costs and higher sales promotion costs.
Operating expenses for the third quarter 2010 increased 38 percent to $87.1 million, or 15.0 percent of sales, compared to $63.2 million, or 14.5 percent of sales, for the third quarter of 2009. Operating expenses in absolute dollars for the third quarter 2010 increased primarily due to higher incentive compensation plan expenses driven by the higher expected profitability for 2010 and the recent higher stock price. Incremental investments in growth initiatives also contributed to higher operating expenses.
Income from financial services was $4.1 million during the third quarter 2010 compared to $3.9 million in the third quarter of 2009.
Gain on securities held for sale was $1.6 million for the third quarter of 2010 resulting from the sale of the Company’s remaining investment in KTM Power Sports AG during the quarter.
Non-operating other income was $1.5 million in the third quarter of 2010 compared to $1.3 million in the third quarter of 2009. The income is the result of foreign currency exchange rate movements and the resulting effects on foreign currency transactions related to the international subsidiaries.
