First Quarter 2015 Highlights:
Sales increased 16% to $1,033.3 million, setting a new record for the
first quarter.
North American retail sales increased 8% in the first quarter.
Operating income increased 19% to $150.3 million during the 2015
first quarter.
Narrowing guidance range for full year 2015 earnings to $7.27 to
$7.42 per diluted share, an increase of 9% to 12% based on sales growth
of 9% to 12% for the full year 2015.
MINNEAPOLIS--
Polaris Industries Inc. (NYSE: PII) today reported record first quarter
net income of $88.6 million, or $1.30 per diluted share, for the quarter
ended March 31, 2015, an increase of nine percent from the 2014 first
quarter net income of $80.9 million, or $1.19 per diluted share. Sales
for the first quarter 2015 totaled $1,033.3 million, which represents an
increase of 16 percent from last year’s first quarter sales of $888.3
million.
“I am pleased to report record sales and earnings for our 2015 first
quarter, with sales up 16 percent, operating income up 19 percent and
net income up nine percent, our 22
nd consecutive quarter of
record earnings performance,” commented
Scott Wine
, Polaris’ chairman
and chief executive officer.
“We outperformed the market again in most
of our businesses in spite of increased competitive promotional
pressures, weakening global markets and the corresponding negative
effect from currencies. While we are justifiably proud of these
accomplishments, we remain focused on seizing the numerous opportunities
we missed to perform better. From factory inventory being too high to
ongoing production inefficiencies, particularly in motorcycles, we did
not perform to our capabilities or our expectations. However, we are
making great strides towards addressing these issues, and I am confident
those efforts will allow us to continue outperforming our markets.”
Wine continued, “My confidence comes first and foremost from the skill
and passion of Polaris’ 8,000 team members. Our team has never been
stronger or deeper, demonstrated by the recent internal promotions of
Chris Wolf
and
Craig Scanlon
, both 10+ year Polaris veterans, to run our
Snowmobile and Slingshot
® businesses, respectively, following
Mike Jonikas’s retirement. Second, product innovation remains a
significant growth driver.
During the quarter, we added to our stable of
innovative motorcycles with the introduction of the Indian Chief Dark
Horse
®, the Victory Magnum X-1
®, and a limited
edition Slingshot SL. Additionally, we unveiled seven new mountain
snowmobiles incorporating our award winning Axys
® chassis,
making the best mountain sled, the Polaris RMK
®, even better.
And we expanded our manufacturing footprint to China, while extending
the breadth and reach of our ORV business, with the acquisition of
Hammerhead Off-Road
®, which produces light gas and electric
utility vehicles and gasoline powered go-karts.”
Wine concluded, “We suspected 2015 would have its share of challenges
and the first quarter confirmed our suspicions. Nevertheless, we
continue to see another year of solid growth and market share gains,
which gives us confidence in achieving our sales and earnings guidance
for the full year.”
2015 Business Outlook
For the full year 2015, the Company is narrowing its guidance range and
now expects earnings to be in the range of $7.27 to $7.42 per diluted
share, an increase of 9 to 12 percent over full year 2014 earnings of
$6.65 per diluted share. Full year 2015 sales are expected to grow in
the range of 9 to 12 percent over full year 2014 sales, unchanged from
previous issued sales guidance.
|
|
|
First Quarter Performance Summary
(in thousands except per share data)
|
|
|
|
Three Months ended March 31,
|
|
Sales Components
|
|
2015
|
|
2014
|
|
Change
|
|
Off-Road Vehicles
|
|
$
|
645,413
|
|
|
$
|
580,113
|
|
|
11
|
%
|
|
Snowmobiles
|
|
|
14,496
|
|
|
|
15,586
|
|
|
-7
|
%
|
|
Motorcycles
|
|
|
137,417
|
|
|
|
78,867
|
|
|
74
|
%
|
|
Global Adjacent Markets
|
|
|
65,397
|
|
|
|
61,213
|
|
|
7
|
%
|
|
Parts, Garments & Accessories
|
|
|
170,622
|
|
|
|
152,567
|
|
|
12
|
%
|
|
Total Sales
|
|
$
|
1,033,345
|
|
|
$
|
888,346
|
|
|
16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
$
|
293,731
|
|
|
$
|
258,417
|
|
|
14
|
%
|
|
Gross profit as a % of sales
|
|
|
28.4
|
%
|
|
|
29.1
|
%
|
|
-66 bps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
$
|
158,087
|
|
|
$
|
142,375
|
|
|
11
|
%
|
|
Operating expenses as a % of sales
|
|
|
15.3
|
%
|
|
|
16.0
|
%
|
|
-73 bps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
$
|
150,286
|
|
|
$
|
126,682
|
|
|
19
|
%
|
|
Operating Income as a % of sales
|
|
|
14.5
|
%
|
|
|
14.3
|
%
|
|
+28 bps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
88,563
|
|
|
$
|
80,901
|
|
|
9
|
%
|
|
Net income as a % of sales
|
|
|
8.6
|
%
|
|
|
9.1
|
%
|
|
-54 bps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Net Income per share
|
|
$
|
1.30
|
|
|
$
|
1.19
|
|
|
9
|
%
|
|
|
|
|
|
|
|
|
Off-Road Vehicle (“ORV”) sales increased eleven percent from the
first quarter 2014 to $645.4 million. This increase reflects ongoing
market acceptance of our industry leading brands, particularly the
RANGER®
and RZR
® side-by-side brands, during the 2015 first quarter.
Polaris’ North American ORV unit retail sales were up mid-single digits
percent from the first quarter of last year, with consumer purchases of
RANGER’s
and
RZR’s each increasing from the first quarter last year. North
American ATV retail sales decreased low-single digits percent due to
heavy competitive promotional spending during the 2015 first quarter
with ACE up significantly. The Company estimates North American industry
ORV retail sales in the first quarter 2015 increased mid-single digits
percent. Polaris ORV dealer inventory was higher in the 2015 first
quarter compared to a year ago reflecting new segments and models added,
an increase in dealer count and the change to the ATV RFM sales order
process. Sales of ORVs outside of North America decreased ten percent in
the first quarter 2015 when compared to the first quarter 2014,
primarily due to weak economic conditions, primarily in the Europe,
Middle East and Africa (“EMEA”) region, as well as the currency impact
of a strengthening U.S. dollar.
Snowmobile sales totaled $14.5 million for the 2015 first quarter
compared to $15.6 million for the first quarter of 2014. Historically,
the first quarter is a slow quarter for snowmobile shipments to dealers.
The North American snowmobile industry finished the season strong with
industry retail sales up mid-single digits percent for the entire season
ending March 31, 2015 due to favorable early snowfall levels in parts of
the North American snowmobile riding areas and strong new product
introductions. Polaris’ North American retail snowmobile sales were up
high-single digits percent for the full 2014-2015 season resulting in an
increase in market share. Polaris dealer inventories, while elevated
from the prior season-end, remain at acceptable levels for the 2014-2015
season-end. Sales to customers outside North America decreased 12
percent in the first quarter 2015 primarily due to the currency impact
of a strengthening U.S. dollar. During the quarter, the Company
introduced its model year 2016 snowmobile lineup highlighted by the
all-new 408-pound 800 PRO-RMK
®, the industry’s lightest and
strongest sled designed to deliver the ultimate deep snow and mountain
riding experience.
Motorcycle sales increased 74 percent in the 2015 first quarter
to $137.4 million. All three brands, Victory, Indian Motorcycle
®
and Slingshot, increased sales in the first quarter. Consumer retail
demand for Victory and Indian Motorcycles during the 2015 first quarter,
was up nearly 40 percent over last year’s first quarter, driven
primarily by strong Indian Motorcycle retail sales, while first quarter
North American industry heavyweight cruiser and touring motorcycle
retail sales were up low-single digits percent from 2014. Slingshot
retail sales were ahead of expectations. All three brands added to their
product portfolios during the quarter with Indian Motorcycle introducing
the Indian Chief Dark Horse, which is built upon the successful and
award-winning Indian Chief
® platform with only a flash of
chrome and a heavy dose of matte black paint; Victory showcased the new
Magnum X-1, a new bagger with a 200-watt, 10 speaker audio system and
custom factory paint; and Slingshot adding a limited edition model
packed with head-turning features, including striking Nuclear Sunset
Orange coloring, dual windscreens and an interior LED lighting package.
Sales of Polaris motorcycles outside of North America decreased 12
percent in the first quarter of 2015 as compared to a year ago due to
the currency impact of a strengthening U.S. dollar.
Global Adjacent Markets’ sales increased seven percent to $65.4
million compared to the first quarter of 2014. The Company’s
government/military group experienced double digit percent sales growth
during the 2015 first quarter. Work and Transportation (“W&T”) group
sales increased mid-single digits percent during the 2015 first quarter
with North American W&T sales increasing double digits percent while W&T
outside North America declined partly resulting from lower Aixam sales
in EMEA due to the impact of negative currencies.
Parts, Garments and Accessories (“PG&A”) sales increased 12
percent during the first quarter 2015 to $170.6 million compared to the
same period last year. The Company experienced sales increases in ORV,
Motorcycles and Global Adjacent Markets driven by continued product
innovation, increased integration of accessories, improved product
availability and an ongoing focus on apparel sales through the Klim
business, offset somewhat by weak snowmobile parts sales due to poor
snowfall levels in key riding areas during the 2015 first quarter.
International sales to customers outside of North America totaled
$153.1 million for the 2015 first quarter, down seven percent from the
same period in 2014. The decrease in first quarter sales was due to a 15
percent decline in sales in the EMEA region, partially offset by a 75
percent increase in Latin American sales and a six percent increase in
sales in Asia/Pacific.
Gross profit increased 14 percent to $293.7 million in the 2015
first quarter compared to $258.4 million in the first quarter of 2014.
As a percentage of sales, gross profit margin declined 66 basis points
to 28.4 percent of sales for the first quarter of 2015, compared to 29.1
percent of sales for the same period last year. As expected, negative
currency movements, primarily the Canadian dollar, along with
unfavorable product mix, pressured gross margins during the 2015 first
quarter, which was somewhat offset by lower product costs and higher
pricing.
Operating expenses for first quarter 2015 grew 11 percent to
$158.1 million or 15.3 percent of sales, compared to $142.4 million or
16.0 percent of sales for the first quarter of 2014. The Company began
to realize operating expense leverage from prior year’s research and
development and infrastructure investments offset somewhat by higher
long-term incentive compensation expenses.
Income from financial services was $14.6 million during first
quarter 2015, an increase of 38 percent compared to $10.6 million in the
first quarter of 2014 due to higher income from increased profitability
of the retail credit portfolio as well as higher income from Polaris
Acceptance’s dealer inventory financing.
Equity in loss of affiliates was $1.6 million for the first
quarter 2015 compared to $0.9 million last year, which represents the
Company’s portion of the start-up costs related to the Polaris/Eicher
joint venture in India established in 2012.
Non-operating other expense (income) net, which primarily relates
to foreign currency exchange rate movements and the corresponding
effects on foreign currency transactions related to the Company’s
foreign subsidiaries,
was $7.4 million of expense in the first
quarter of 2015 compared to $2.1 million of income in the first quarter
of 2014.
The
provision for income taxes for the first quarter 2015 was
$49.8 million or 36.0 percent of pretax income compared to $44.2 million
or 35.3 percent of pretax income for the first quarter 2014. The higher
income tax rate for the first quarter 2015 is primarily due to lower
income from the Company’s international operations in the 2015 first
quarter compared to the same period last year and the income tax rate in
the first quarter 2014 reflecting favorable outcomes of income tax
audits.
Financial Position and Cash Flow
Net cash provided by operating activities was $4.2 million for the first
quarter ended March 31, 2015 compared to net cash provided by operating
activities of $44.7 million for the first quarter of 2014. The decline
in net cash provided by operating activities in the 2015 first quarter
was the result of increased working capital requirements primarily from
higher factory inventory, decreased accounts payable and lower accrued
expenses offset somewhat by higher net income. Total debt, including
capital lease obligations and notes payable, at the end of the first
quarter 2015 was $329.1 million. The Company increased its quarterly
dividend payment for the 20
th consecutive year by ten percent
to $0.53 per share and paid a total of $35.1 million in dividends to
shareholders, and repurchased 571,000 shares for $86.3 million during
the 2015 first quarter. The Company’s debt-to-total capital ratio was 28
percent at March 31, 2015, compared to 35 percent a year ago. Cash and
cash equivalents were $111.0 million at March 31, 2015, compared to
$101.8 million for the same period in 2014.
Conference Call and Webcast Presentation
Today at 9:00 AM (CDT) Polaris Industries Inc. will host a conference
call and webcast to discuss Polaris’ 2015 first quarter earnings results
released this morning. The call will be hosted by
Scott Wine
, Chairman
and CEO,
Bennett Morgan
, President and COO, and
Mike Malone
, Vice
President – Finance and CFO.
A slide presentation and link to the
audio webcast will be posted on the Investor Relations page of the
Polaris web site at http://ir.polaris.com.
To listen to the conference call by phone, dial 877-706-7543 in the U.S.
and Canada, or 973-200-3967 internationally. The Conference ID is #
61972568.
A replay of the conference call will be available approximately two
hours after the call for a one-week period by accessing the same link on
our website, or by dialing 855-859-2056 in the U.S. and Canada, or
404-537-3406 internationally.
About Polaris
Polaris is a recognized leader in the powersports industry with annual
2014 sales of $4.5 billion. Polaris designs, engineers, manufactures and
markets innovative, high quality off-road consumer and military
vehicles, including all-terrain vehicles (ATVs) and the Polaris
RANGER®
and
RZR® side-by-side vehicles, snowmobiles,
motorcycles and on-road electric/hybrid powered vehicles.
Polaris is among the global sales leaders for both snowmobiles and
off-road vehicles and has established a presence in the heavyweight
cruiser and touring motorcycle market with the Victory
®
and Indian Motorcycle
® and Slingshot
®
brands. Additionally, Polaris continues to invest in the global Work and
Transportation vehicle industry with Global Electric Motorcars (GEM),
Goupil Industrie SA, Aixam Mega S.A.S., and internally developed
vehicles. Polaris enhances the riding experience with a complete line of
Polaris Engineered Parts, Accessories and Apparel, Klim branded apparel
and ORV accessories under the Kolpin
®, Cycle Country
®
and Pro Armor
® brands.
Polaris Industries Inc. trades on the New York Stock Exchange under the
symbol “PII”, and the Company is included in the S&P Mid-Cap 400 stock
price index.
Information about the complete line of Polaris products, apparel and
vehicle accessories are available from authorized Polaris dealers or
anytime at
www.polaris.com.
Except for historical information contained herein, the matters set
forth in this news release, including management’s expectations
regarding 2015 sales, shipments, net income, and net income per share
from continuing operations 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 the Company’s ability to
successfully implement its manufacturing operations expansion
initiatives, product offerings, promotional activities and pricing
strategies by competitors; acquisition integration costs; warranty
expenses; impact of changes in Polaris stock price on incentive
compensation plan costs; foreign currency exchange rate fluctuations;
environmental and product safety regulatory activity; effects of
weather; commodity costs; uninsured product liability claims;
uncertainty in the retail and wholesale credit markets; performance of
affiliate partners; changes in tax policy and overall economic
conditions, including inflation, consumer confidence and spending and
relationships with dealers and suppliers. Investors are also directed to
consider other risks and uncertainties discussed in documents filed by
the Company with the Securities and Exchange Commission. The Company
does not undertake any duty to any person to provide updates to its
forward-looking statements.
(summarized financial data follows)
|
|
|
POLARIS INDUSTRIES INC.
|
|
CONSOLIDATED STATEMENTS OF INCOME
|
|
(In Thousands, Except Per Share Data)
|
|
(Unaudited)
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2015
|
|
2014
|
|
Sales
|
|
$
|
1,033,345
|
|
|
$
|
888,346
|
|
|
Cost of sales
|
|
739,614
|
|
|
629,929
|
|
|
Gross profit
|
|
293,731
|
|
|
258,417
|
|
|
Operating expenses:
|
|
|
|
|
|
Selling and marketing
|
|
69,685
|
|
|
65,570
|
|
|
Research and development
|
|
38,863
|
|
|
35,513
|
|
|
General and administrative
|
|
49,539
|
|
|
41,292
|
|
|
Total operating expenses
|
|
158,087
|
|
|
142,375
|
|
|
Income from financial services
|
|
14,642
|
|
|
10,640
|
|
|
Operating income
|
|
150,286
|
|
|
126,682
|
|
|
Non-operating expense (income):
|
|
|
|
|
|
Interest expense
|
|
2,910
|
|
|
2,812
|
|
|
Equity in loss of other affiliates
|
|
1,623
|
|
|
896
|
|
|
Other expense (income), net
|
|
7,440
|
|
|
(2,105
|
)
|
|
Income before income taxes
|
|
138,313
|
|
|
125,079
|
|
|
Provision for income taxes
|
|
49,750
|
|
|
44,178
|
|
|
Net income
|
|
$
|
88,563
|
|
|
$
|
80,901
|
|
|
|
|
|
|
|
|
Basic net income per share
|
|
$
|
1.33
|
|
|
$
|
1.23
|
|
|
Diluted net income per share
|
|
$
|
1.30
|
|
|
$
|
1.19
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
Basic
|
|
66,429
|
|
|
65,833
|
|
|
Diluted
|
|
68,146
|
|
|
67,958
|
|
|
|
|
POLARIS INDUSTRIES INC.
|
|
CONSOLIDATED BALANCE SHEETS
|
|
(In Thousands)
|
|
(Unaudited)
|
|
|
|
Subject to Reclassification
|
|
March 31, 2015
|
|
March 31, 2014
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
111,005
|
|
|
$
|
101,789
|
|
Trade receivables, net
|
|
173,199
|
|
|
150,464
|
|
Inventories, net
|
|
629,285
|
|
|
482,874
|
|
Prepaid expenses and other
|
|
70,964
|
|
|
59,326
|
|
Income taxes receivable
|
|
5,308
|
|
|
3,030
|
|
Deferred tax assets
|
|
112,494
|
|
|
93,024
|
|
Total current assets
|
|
1,102,255
|
|
|
890,507
|
|
Property and equipment, net
|
|
558,753
|
|
|
495,053
|
|
Investment in finance affiliate
|
|
96,247
|
|
|
71,439
|
|
Deferred tax assets
|
|
35,656
|
|
|
20,048
|
|
Goodwill and other intangible assets, net
|
|
210,451
|
|
|
226,461
|
|
Other long-term assets
|
|
77,421
|
|
|
60,941
|
|
Total assets
|
|
$
|
2,080,783
|
|
|
$
|
1,764,449
|
|
Liabilities and Shareholders' Equity
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
Current portion of capital lease obligations
|
|
$
|
2,203
|
|
|
$
|
3,076
|
|
Accounts payable
|
|
304,656
|
|
|
257,795
|
|
Accrued expenses:
|
|
|
|
|
|
Compensation
|
|
56,583
|
|
|
50,870
|
|
Warranties
|
|
48,634
|
|
|
47,224
|
|
Sales promotions and incentives
|
|
136,653
|
|
|
133,058
|
|
Dealer holdback
|
|
107,087
|
|
|
90,374
|
|
Other
|
|
74,543
|
|
|
77,284
|
|
Income taxes payable
|
|
19,698
|
|
|
27,333
|
|
Total current liabilities
|
|
750,057
|
|
|
687,014
|
|
Long-term income taxes payable
|
|
10,091
|
|
|
13,405
|
|
Capital lease obligations and notes payable
|
|
35,174
|
|
|
28,723
|
|
Long-term debt
|
|
291,688
|
|
|
300,000
|
|
Deferred tax liabilities
|
|
15,719
|
|
|
24,067
|
|
Other long-term liabilities
|
|
101,081
|
|
|
85,369
|
|
Total liabilities
|
|
$
|
1,203,810
|
|
|
$
|
1,138,578
|
|
Deferred compensation
|
|
14,695
|
|
|
10,022
|
|
Shareholders’ equity:
|
|
|
|
|
|
Total shareholders’ equity
|
|
862,278
|
|
|
615,849
|
|
Total liabilities and shareholders’ equity
|
|
$
|
2,080,783
|
|
|
$
|
1,764,449
|
|
|
|
POLARIS INDUSTRIES INC.
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(In Thousands)
|
|
(Unaudited)
|
|
|
|
Subject to Reclassification
|
|
Three months ended March 31,
|
|
|
|
2015
|
|
2014
|
|
Operating Activities:
|
|
|
|
|
|
Net income
|
|
$
|
88,563
|
|
|
$
|
80,901
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
37,081
|
|
|
28,069
|
|
|
Noncash compensation
|
|
17,094
|
|
|
12,785
|
|
|
Noncash income from financial services
|
|
(6,794
|
)
|
|
(1,543
|
)
|
|
Deferred income taxes
|
|
5,868
|
|
|
(2,262
|
)
|
|
Tax effect of share-based compensation exercises
|
|
(27,476
|
)
|
|
(8,884
|
)
|
|
Other, net
|
|
3,090
|
|
|
896
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Trade receivables
|
|
26,749
|
|
|
36,037
|
|
|
Inventories
|
|
(66,063
|
)
|
|
(63,210
|
)
|
|
Accounts payable
|
|
(40,433
|
)
|
|
19,727
|
|
|
Accrued expenses
|
|
(59,831
|
)
|
|
(81,942
|
)
|
|
Income taxes payable/receivable
|
|
33,241
|
|
|
35,312
|
|
|
Prepaid expenses and others, net
|
|
(6,864
|
)
|
|
(11,139
|
)
|
|
Net cash provided by operating activities
|
|
4,225
|
|
|
44,747
|
|
|
Investing Activities:
|
|
|
|
|
|
Purchase of property and equipment
|
|
(30,784
|
)
|
|
(39,703
|
)
|
|
Investment in finance affiliate, net
|
|
(346
|
)
|
|
(678
|
)
|
|
Investment in other affiliates
|
|
(10,049
|
)
|
|
—
|
|
|
Net cash used for investing activities
|
|
(41,179
|
)
|
|
(40,381
|
)
|
|
Financing Activities:
|
|
|
|
|
|
Borrowings under debt arrangements / capital lease obligations
|
|
817,324
|
|
|
652,838
|
|
|
Repayments under debt arrangements / capital lease obligations
|
|
(723,306
|
)
|
|
(633,887
|
)
|
|
Repurchase and retirement of common shares
|
|
(86,267
|
)
|
|
(244
|
)
|
|
Cash dividends to shareholders
|
|
(35,114
|
)
|
|
(31,719
|
)
|
|
Proceeds from stock issuances under employee plans
|
|
19,010
|
|
|
9,365
|
|
|
Tax effect of proceeds from share-based compensation exercises
|
|
27,476
|
|
|
8,884
|
|
|
Net cash provided by financing activities
|
|
19,123
|
|
|
5,237
|
|
|
Impact of currency exchange rates on cash balances
|
|
(8,764
|
)
|
|
(62
|
)
|
|
Net increase (decrease) in cash and cash equivalents
|
|
(26,595
|
)
|
|
9,541
|
|
|
Cash and cash equivalents at beginning of period
|
|
137,600
|
|
|
92,248
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
111,005
|
|
|
$
|
101,789
|
|
Source: Polaris Industries Inc.©
Polaris Industries Inc.
Richard Edwards, 763-542-0500
