2008-07-15 05:00:00
Side-by-Side Vehicles, International
and PG&A results were strong during the quarter
Second Quarter Highlights:
Second quarter results exceeded Company’s
expectations despite continued economic headwinds
Second quarter sales reached a record high of $455.7 million driven
by strong ATV sales growth of 24%, primarily attributable to growth in
the RANGER™ side-by-side vehicles and
international sales, and PG&A sales growth of 24%
Second quarter earnings from continuing operations per diluted
share increased 16% to $0.72 from $0.62 per diluted share for the same
period last year
Gross m
MINNEAPOLIS–(EMWPresswire)–Polaris Industries Inc. (NYSE: PII) today reported record second quarter
net income from continuing operations of $24.4 million, or $0.72 per
diluted share for the quarter ended June 30, 2008 compared to $22.9
million, or $0.62 per diluted share for the same period last year. Sales
for the second quarter 2008 totaled $455.7 million, an increase of 21
percent over last year’s second quarter sales
of $376.9 million. The increase in second quarter 2008 sales and
earnings per diluted share is primarily attributable to increased
operating performance of the Company’s
side-by-side vehicles, international operations and parts, garments and
accessories businesses. The demand for the Company’s
RANGER™ side-by-side vehicles continued
to be strong and Polaris’ international
business experienced strong growth, particularly in side-by-side
vehicles as shipments to customers outside of North America of the
highly successful RANGER RZR™ increased
during the second quarter 2008. Second quarter 2008 results included
income from financial services of $5.2 million, which decreased $8.7
million compared to the second quarter of 2007 primarily due to the fee
income to Polaris being eliminated by the Company’s
revolving retail credit provider, HSBC. Additionally, second quarter
2007 included a pretax gain of $1.4 million from the sale of KTM Power
Sports AG (“KTM”)
shares.
“Our operating results this quarter are very
strong especially given the very challenging macroeconomic environment,”
commented Tom Tiller, Chief Executive Officer. “Eighteen
months ago, we laid out an aggressive plan to generate superior results
based on three pillars; winning in our core businesses, delivering
operational excellence and capitalizing on our growth businesses. Our
results this quarter and for the first half of 2008 clearly reflect the
commitment of our entire organization to achieving these goals. We
continue to be competitive in the more traditional core ATV and
snowmobile categories with innovative products and aggressive marketing;
our operational excellence objectives for quality, cost and speed are on
track; and we are leveraging our knowledge and experience in our growth
businesses, particularly in side-by-side vehicles and international.”
Tiller continued, “As a result of our
continued successes we are raising our full year 2008 guidance and now
expect earnings per diluted share to be in the range of $3.40 to $3.48,
which represents an increase of ten to twelve percent when compared to
earnings from continuing operations of $3.10 per diluted share for the
full year 2007. Sales for the full year 2008 are now expected to grow in
the range of nine to eleven percent over full year 2007 sales of $1.78
billion. During the third quarter of 2008, we expect total sales to
increase in the range of two to five percent over the third quarter 2007
which was the first quarter of the start of significant shipments of the RANGER
RZR™. Third quarter 2008 earnings are
expected to be in the range of $1.07 to $1.11 per diluted share, flat to
up four percent compared to earnings from continuing operations of $1.07
per diluted share for the third quarter of 2007. In the third quarter we
expect continued sales growth in side-by-side vehicles, PG&A and
international operations offset by a continued weak core ATV market,
higher commodity costs and significantly lower financial services income
due to the Company’s revolving retail credit
provider, HSBC, eliminating the volume-based fee income payment to
Polaris in March of this year.”
“Next week we will be unveiling our model
year 2009 products at our annual dealer meeting,”
Tiller explained. “Innovation has always been
a cornerstone of Polaris’ success and our new
model year 2009 products will reflect the high standards that our
customers have come to expect from Polaris. While we set the bar high in
model year 2008 with our innovative new products including the RANGER
RZR™, RANGER Crew™
and Victory Vision™, we similarly have high
expectations for our new model year 2009 products. Despite a tough
external environment that is not likely to improve in the near-term, we
expect the momentum that we generated in the first half of 2008 to carry
over into the second half of the year.”
Product line Information |
Second Quarter ended |
Six Months ended |
||||||||||||||||
(in thousands) |
2008 |
2007 |
Change |
2008 |
2007 |
Change |
||||||||||||
All-terrain Vehicles |
$ |
350,280 |
$ |
282,057 |
24 |
% |
$ |
614,806 |
$ |
504,544 |
22 |
% |
||||||
Snowmobiles |
6,006 |
4,419 |
36 |
% |
15,441 |
7,332 |
111 |
% |
||||||||||
Victory Motorcycles |
23,409 |
28,983 |
-19 |
% |
50,755 |
55,598 |
-9 |
% |
||||||||||
Parts, Garments & Accessories |
75,991 |
61,443 |
24 |
% |
163,368 |
127,141 |
28 |
% |
||||||||||
Total Sales |
$ |
455,686 |
$ |
376,902 |
21 |
% |
$ |
844,370 |
$ |
694,615 |
22 |
% |
ATV (all-terrain vehicle) sales of $350.3 million in the 2008
second quarter increased 24 percent from the second quarter 2007. The
new RANGER RZR™ side-by-side
recreation vehicles continued to sell well during the quarter along with
the new RANGER Crew™ six passenger
side-by-side utility vehicles. Sales growth outside North America was
also strong in the second quarter for both the Company’s
ATV and side-by-side vehicles. The overall market for more traditional
core ATVs sold in North America remained weak during the second quarter
resulting in fewer shipments of Polaris ATVs to North American dealers
as they continued to reduce their core ATV inventory levels. Currently
North American dealer ATV unit inventories are down ten percent from the
same time last year.
Sales of Victory motorcycles decreased 19 percent during the 2008
second quarter compared to the second quarter of 2007 as the North
American motorcycle industry retail sales for heavyweight cruiser and
touring motorcycles remained weak.
Parts, Garments, and Accessories sales increased 24 percent
during the second quarter 2008 when compared to last year’s
second quarter. This increase was driven primarily by increased sales of
ATV and side-by-side vehicles related PG&A.
Snowmobile sales totaled $6.0 million for the 2008 second quarter
compared to $4.4 million for the second quarter of 2007. The second
quarter is historically a seasonally low quarter for snowmobile
shipments with deliveries to dealers ramping up significantly in the
second half of the calendar year.
Gross profit, as a percentage of sales, was 23.7 percent for the
2008 second quarter, an increase of 70 basis points from 23.0 percent
for the second quarter of 2007. Gross profit dollars increased 25
percent to $108.0 million for the 2008 second quarter compared to $86.6
million for the second quarter of 2007. The gross profit margin and
absolute dollar increase in gross profit was due to the positive mix
impact of increased sales of higher gross margin products, such as RANGER
side-by-side vehicles and PG&A, and favorable foreign currency
fluctuations during the second quarter of 2008, which were partially
offset by significantly higher commodity and transportation costs.
Operating expenses for the second quarter 2008 increased 14
percent to $72.5 million compared to $63.8 million for the second
quarter of 2007. Operating expenses as a percent of sales decreased 100
basis points in the second quarter 2008 to 15.9 percent compared to 16.9
percent in the second quarter of 2007. Operating expenses in absolute
dollars increased due to higher selling and marketing expenses primarily
from higher advertising costs incurred around new products and to become
more competitive in certain segments of the ATV industry and increased
research and development expenses as the Company continues to accelerate
innovative new product development.
Income from financial services decreased 62 percent to $5.2
million in the 2008 second quarter compared to $13.9 million in the 2007
second quarter. The decrease was due to the Company’s
revolving retail credit provider, HSBC, discontinuing the financing of
non-Polaris products at Polaris dealerships in July 2007 and eliminating
the volume-based fee income payment to Polaris as of March 1, 2008.
Interest expense decreased to $2.5 million for the 2008 second
quarter compared to $3.7 million for the 2007 second quarter due to
lower interest rates during the 2008 period.
Non-operating other expense was $0.2 million in the second
quarter of 2008 compared to $1.5 million of income in the second quarter
of 2007. The change was primarily due to the weakening U.S. dollar and
the resulting effects on foreign currency transactions related to the
international subsidiaries.
Discontinued Operations Results
The Company ceased manufacturing marine products on September 2, 2004.
As a result, the marine products division’s
financial results have been reported separately as discontinued
operations for all periods presented. In 2007 the Company substantially
completed the exit of the marine products division, therefore in the
first half of 2008, there were no additional material charges incurred
related to this discontinued operations event and the Company does not
expect any additional material charges in the future. The Company’s
second quarter 2007 loss from discontinued operations was $0.2 million,
net of tax, or less than $0.01 per diluted share. Reported net income
for the second quarter 2008, including each of continuing and
discontinued operations was $24.4 million, or $0.72 per diluted share
compared to $22.7 million, or $0.62 per diluted share for the second
quarter 2007.
Financial Position and Cash Flow
Net cash provided by operating activities of continuing operations for
the second quarter of 2008 increased 46 percent, and totaled $53.3
million compared to $36.4 million in the second quarter of 2007.
Year-to-date ended June 30, 2008, net cash provided by operating
activities of continuing operations totaled $21.8 million compared to
$21.6 million in the first half of 2007. Borrowings under the credit
agreement were $261.0 million at June 30, 2008 compared to $200.0
million at June 30, 2007, which increase is primarily due to the
continued share repurchases in the first six months of 2008. The Company’s
debt-to-total capital ratio was 65 percent at June 30, 2008, compared to
51 percent at the same time last year. Cash and cash equivalents were
$21.9 million at June 30, 2008 compared to $33.8 million a year ago.
Share Buyback Activity
During the second quarter 2008 the Company repurchased and retired
811,000 shares of its common stock at a cost of $37.3 million. Since
inception of the share repurchase program in 1996, 33.1 million shares
have been repurchased at an average price of $32.54 per share. As of
June 30, 2008, the Company has authorization from its Board of Directors
to repurchase up to an additional 4.4 million shares of Polaris stock.
Polaris may repurchase the balance of the share authorization from time
to time in open market or privately negotiated transactions in
accordance with applicable federal securities laws.
Conference Call to be Held
Today at 9:00 AM (CDT) Polaris Industries Inc. will host a conference
call to discuss Polaris’ second quarter 2008
earnings results released this morning. The conference call is
accessible by dialing 800-374-6475 in the U.S. and Canada or
706-679-2596 for International calls or via the Investor Relations page
of the Company’s web site, www.polarisindustries.com
(click on Our Company then Investor Relations). The
conference call will be available through Tuesday, July 22, 2008 on
Polaris’ website or by dialing 800-642-1687
in the U.S. and Canada, or 706-645-9291 for International calls. The
conference I.D. is 42183267.
About Polaris
With annual 2007 sales of $1.8 billion, Polaris designs, engineers,
manufactures and markets all-terrain vehicles (ATVs), including the
Polaris RANGER™, snowmobiles and
Victory motorcycles for recreational and utility use.
Polaris is a recognized leader in the snowmobile industry, one of the
largest manufacturers of all-terrain recreational, utility and
side-by-side vehicles (ATVs) in the world, and rapidly making impressive
in-roads into the motorcycle cruiser and touring marketplace under the
Victory® brand. The Victory motorcycle
division was established in 1998 representing the first all-new
American-made motorcycle from a major company in nearly 60 years.
Polaris also enhances the riding experience with a complete line of Pure
Polaris apparel, accessories and parts, available at Polaris dealerships.
Polaris Industries Inc. trades on the New York Stock Exchange under the
symbol “PII,” and
the Company is included in the S&P Small-Cap 600 stock price index.
Information about the complete line of Polaris products, apparel and
vehicle accessories are available from authorized Polaris dealers or
anytime from the Polaris homepage at www.polarisindustries.com.
Except for historical information contained herein, the matters set
forth in this news release, including management’s
expectations regarding 2008 sales, shipments, net income, earnings per
share and cash flow, are forward-looking statements that involve certain
risks and uncertainties that could cause actual results to differ
materially from those forward-looking statements. Potential risks
and uncertainties include such factors as product offerings, promotional
activities and pricing strategies by competitors; warranty expenses;
foreign currency exchange rate fluctuations; effects of the KTM
relationship; environmental and product safety regulatory activity;
effects of weather; commodity costs; uninsured product liability claims;
uncertainty in the retail credit markets and relationship with HSBC; and
overall economic conditions, including inflation and consumer confidence
and spending. Investors are also directed to consider other risks
and uncertainties discussed in documents filed by the Company with the
Securities and Exchange Commission.
POLARIS INDUSTRIES INC. |
|||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME |
|||||||||||||||
(In Thousands, Except Per Share Data) |
|||||||||||||||
(Unaudited) |
|||||||||||||||
For Three Months |
For Six Months |
||||||||||||||
Ended June 30, |
Ended June 30, |
||||||||||||||
2008 |
2007 |
2008 |
2007 |
||||||||||||
Sales |
$ |
455,686 |
$ |
376,902 |
$ |
844,370 |
$ |
694,615 |
|||||||
Cost of Sales |
347,643 |
290,321 |
648,232 |
543,099 |
|||||||||||
Gross profit |
108,043 |
86,581 |
196,138 |
151,516 |
|||||||||||
Operating expenses |
|||||||||||||||
Selling and marketing |
35,188 |
29,009 |
64,358 |
56,484 |
|||||||||||
Research and development |
20,236 |
17,707 |
39,493 |
36,258 |
|||||||||||
General and administrative |
17,108 |
17,055 |
33,031 |
32,546 |
|||||||||||
Total operating expenses |
72,532 |
63,771 |
136,882 |
125,288 |
|||||||||||
Income from financial services |
5,243 |
13,901 |
12,733 |
26,527 |
|||||||||||
Operating Income |
40,754 |
36,711 |
71,989 |
52,755 |
|||||||||||
Non-operating Expense (Income): |
|||||||||||||||
Interest expense |
2,482 |
3,744 |
5,207 |
8,524 |
|||||||||||
Equity in (income) loss of manufacturing affiliates |
4 |
(36 |
) |
(33 |
) |
(2 |
) |
||||||||
Gain on sale of manufacturing affiliate shares |
– |
(1,382 |
) |
– |
(6,222 |
) |
|||||||||
Other expense (income), net |
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