Polaris Industries Inc. (NYSE: PII) reported record third quarter net income of $1.33 per diluted share for the quarter ended September 30, 2012, up 40 percent from the prior year’s third quarter net income of $0.95 per diluted share. Reported net income was $94.3 million for the 2012 third quarter, up 39 percent from the previous third quarter net income of $67.6 million. Sales for the third quarter 2012 totaled a record $879.9 million, an increase of 21 percent over last year’s third quarter sales of $729.9 million. Scott Wine, Polaris’ Chief Executive Officer, commented, “We began the third quarter with significant momentum, and thanks to broad based consumer demand and market share gains for our RANGER ® and RZR ® side-by-side vehicles, we positioned the company for a strong finish to the year. This Polaris team again demonstrated the power of our combined focus on product innovation and execution by driving a greater than ten percent increase in Polaris North American unit retail sales in the third quarter. The growth in retail sales along with increased market share drove double digit sales growth in each of our product lines during the quarter. The innovation goes beyond just products – our Retail Flow Management pull process for motorcycles and enhanced MVP process for ORV has dramatically improved product availability and delivery for our dealers. Our ongoing operational excellence initiatives helped to ensure this growth was even more profitable, as the manufacturing realignment, along with numerous cost management programs, led to significant gross profit and net income margin improvements over the prior year period. These strong earnings enabled us to continue strategically spending in support of future growth across our portfolio.” “Looking forward, we are very encouraged by the strong dealer and consumer reception to our new industry leading model year 2013 products. Our evolving and expanding product line-up reflects our continued focus on innovation as well as our sustained commitment to profitable growth. With three outstanding quarters behind us and the demonstrated ability of our team to identify and execute on new growth opportunities, 2012 is shaping up to be another record year for Polaris. Though we remain vigilant regarding economic developments and their impact on our customers, we are confident in our strategic direction and implementation and are raising our full year 2012 sales and earnings projections.”
2012 Business Outlook
The Company is increasing its previously issued sales and earnings guidance and now expects full year 2012 earnings in the range of $4.32 to $4.37 per diluted share, an increase of 35 to 37 percent over full year 2011 earnings of $3.20 per diluted share. Full year 2012 sales are now expected to grow in the range of 19 to 20 percent from 2011.Third Quarter Performance Summary (in thousands except per share data) | |||||||||||||
Three Months ended September 30, | Nine Months ended September 30, | ||||||||||||
Product line sales | 2012 | 2011 | Change | 2012 | 2011 | Change | |||||||
Off-Road Vehicles | $ 573,020 | $ 486,243 | 18% | $ 1,658,730 | $ 1,356,566 | 22% | |||||||
Snowmobiles | 114,885 | 95,102 | 21% | 128,405 | 110,865 | 16% | |||||||
On-Road Vehicles | 63,396 | 35,655 | 78% | 192,789 | 111,449 | 73% | |||||||
Parts, Garments & Accessories | 128,638 | 112,861 | 14% | 329,211 | 296,100 | 11% | |||||||
Total Sales | $ 879,939 | $ 729,861 | +21% | $ 2,309,135 | $ 1,874,980 | +23% | |||||||
Gross profit | $ 259,785 | $ 206,836 | +26% | $ 671,497 | $ 536,275 | +25% | |||||||
Gross profit as a % of sales | 29.5% | 28.3% | +120 bpts | 29.1% | 28.6% | +50 bpts | |||||||
Operating expenses | $ 126,445 | $ 102,873 | +23% | $ 351,574 | $ 296,620 | +19% | |||||||
Operating expenses as a % of sales | 14.4% | 14.1% | +30 bpts | 15.2% | 15.8% | -60 bpts | |||||||
Operating Income | $ 141,567 | $ 110,290 | +28% | $ 343,548 | $ 256,794 | +34% | |||||||
Operating Income as a % of sales | 16.1% | 15.1% | +100 bpts | 14.9% | 13.7% | +120 bpts | |||||||
Net Income | $ 94,345 | $ 67,637 | +39% | $ 224,246 | $ 163,676 | +37% | |||||||
Net income as a % of sales | 10.7% | 9.3% | +140 bpts | 9.7% | 8.7% | +100 bpts | |||||||
Diluted Net Income per share | $ 1.33 | $ 0.95 | +40% | $ 3.16 | $ 2.30 | +37% | |||||||
Conference Call and Webcast Presentation
Today at 9:00 AM (CT) Polaris Industries Inc. will host a conference call and webcast to discuss Polaris’ 2012 third quarter earnings results released this morning. The call will be hosted by Scott Wine, 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 www.polarisindustries.com/irhome . 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 # 65258311. 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 2011 sales of $2.7 billion. Polaris designs, engineers, manufactures and markets innovative, high quality off-road vehicles, including all-terrain vehicles (ATVs) and the Polaris RANGER ® 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 brands. Additionally, Polaris continues to invest in the global on-road small electric/hybrid powered vehicle industry with Global Electric Motorcars (GEM) and Goupil Industrie SA, and internally developed vehicles. Polaris 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 Mid-Cap 400 stock price index.Information about the complete line of Polaris products, apparel and vehicles accessories are available from authorized Polaris dealers or anytime at www.polarisindustries.com.
Except for historical information contained herein, the matters set forth in this news release, including management’s expectations regarding 2012 sales, shipments, net income, net income per share, manufacturing realignment transition costs and savings in logistical and production costs, 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 realignment 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; 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) | ||||||||||||||
For Three MonthsEnded September 30, | For Nine MonthsEnded September 30, | |||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||
Sales | $ | 879,939 | $ | 729,861 | $ | 2,309,135 | $ | 1,874,980 | ||||||
Cost of sales | 620,154 | 523,025 | 1,637,638 | 1,338,705 | ||||||||||
Gross profit | 259,785 | 206,836 | 671,497 | 536,275 | ||||||||||
Operating expenses | ||||||||||||||
Selling and marketing | 57,211 | 49,074 | 152,899 | 129,740 | ||||||||||
Research and development | 32,352 | 25,750 | 94,034 | 74,248 | ||||||||||
General and administrative | 36,882 | 28,049 | 104,641 | 92,632 | ||||||||||
Total operating expenses | 126,445 | 102,873 | 351,574 | 296,620 | ||||||||||
Income from financial services | 8,227 | 6,327 | 23,625 | 17,139 | ||||||||||
Operating income | 141,567 | 110,290 | 343,548 | 256,794 | ||||||||||
Non-operating expense (income): | ||||||||||||||
Interest expense | 1,465 | 1,270 | 4,443 | 2,766 | ||||||||||
Other (income) expense, net | (3,989 | ) | 5,480 | (6,356 | ) | 3,921 | ||||||||
Income before income taxes | 144,091 | 103,540 | 345,461 | 250,107 | ||||||||||
Provision for income taxes | 49,746 | 35,903 | 121,215 | 86,431 | ||||||||||
Net Income | $ | 94,345 | $ | 67,637 | $ | 224,246 | $ | 163,676 | ||||||
Basic net income per share | $ | 1.37 | $ | 0.98 | $ | 3.26 | $ | 2.38 | ||||||
Diluted net income per share | $ | 1.33 | $ | 0.95 | $ | 3.16 | $ | 2.30 | ||||||
Weighted average shares outstanding: | ||||||||||||||
Basic | 68,692 | 68,937 | 68,761 | 68,761 | ||||||||||
Diluted | 70,883 | 71,289 | 70,956 | 71,056 | ||||||||||
POLARIS INDUSTRIES INC. CONSOLIDATED BALANCE SHEETS (In Thousands) (Unaudited) | ||||||
Subject to Reclassification | September 30, 2012 | September 30, 2011 | ||||
Assets | ||||||
Current Assets: | ||||||
Cash and cash equivalents | $ | 412,898 | $ | 335,747 | ||
Trade receivables, net | 136,346 | 108,889 | ||||
Inventories, net | 410,034 | 338,285 | ||||
Prepaid expenses and other | 43,576 | 37,762 | ||||
Income taxes receivable | 7,936 | 9,037 | ||||
Deferred tax assets | 80,040 | 62,269 | ||||
Total current assets | 1,090,830 | 891,989 | ||||
Property and equipment, net | 230,605 | 198,018 | ||||
Investment in finance affiliate | 47,521 | 37,273 | ||||
Investment in other affiliates | 12,000 | 882 | ||||
Deferred tax assets | 13,768 | 10,240 | ||||
Goodwill and other intangible assets, net | 76,704 | 59,658 | ||||
Total Assets | $ | 1,471,428 | $ | 1,198,060 | ||
Liabilities and Shareholders’ Equity | ||||||
Current Liabilities: | ||||||
Current portion of capitalized lease obligations | $ | 2,607 | $ | - | ||
Accounts payable | 228,332 | 187,780 | ||||
Accrued expenses: | ||||||
Compensation | 159,637 | 160,414 | ||||
Warranties | 41,571 | 36,724 | ||||
Sales promotions and incentives | 105,340 | 80,234 | ||||
Dealer holdback | 75,983 | 61,196 | ||||
Other | 84,150 | 67,739 | ||||
Income taxes payable | 3,286 | 1,598 | ||||
Total current liabilities | 700,906 | 595,685 | ||||
Long-term income taxes payable | 6,749 | 7,156 | ||||
Capital lease obligations | 4,692 | - | ||||
Long-term debt | 100,000 | 100,000 | ||||
Total liabilities | 812,347 | 702,841 | ||||
Shareholders’ Equity: | ||||||
Total shareholders’ equity | 659,081 | 495,219 | ||||
Total Liabilities and Shareholders’ Equity | $ | 1,471,428 | $ | 1,198,060 | ||
POLARIS INDUSTRIES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited) | ||||||||
Subject to Reclassification | For Nine Months | |||||||
Ended September 30, | ||||||||
2012 | 2011 | |||||||
Operating Activities: | ||||||||
Net income | $ | 224,246 | $ | 163,676 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 51,489 | 50,692 | ||||||
Noncash compensation | 26,964 | 14,815 | ||||||
Noncash income from financial services | (2,479 | ) | (3,398 | ) | ||||
Deferred income taxes | (5,277 | ) | (6,404 | ) | ||||
Tax effect of share-based compensation exercises | (17,810 | ) | (13,361 | ) | ||||
Changes in current operating items: | ||||||||
Trade receivables | (20,272 | ) | (17,563 | ) | ||||
Inventories | (109,912 | ) | (96,474 | ) | ||||
Accounts payable | 81,489 | 73,207 | ||||||
Accrued expenses | (451 | ) | 27,243 | |||||
Income taxes payable/receivable | 36,185 | 4,819 | ||||||
Prepaid expenses and others, net | (9,684 | ) | 827 | |||||
Net cash provided by operating activities | 254,488 | 198,079 | ||||||
Investing Activities: | ||||||||
Purchase of property and equipment | (65,804 | ) | (62,474 | ) | ||||
Investment in finance affiliate, net | (2,790 | ) | 3,294 | |||||
Investment in other affiliates | (7,000 | ) | - | |||||
Acquisition of businesses, net of cash acquired | (383 | ) | (27,960 | ) | ||||
Net cash used for investing activities | (75,977 | ) | (87,140 | ) | ||||
Financing Activities: | ||||||||
Borrowings under senior notes/capital lease obligations | 2,232 | 100,000 | ||||||
Repayments under credit agreement/capital lease obligations | (2,137 | ) | (200,000 | ) | ||||
Repurchase and retirement of common shares | (58,978 | ) | (62,462 | ) | ||||
Cash dividends to shareholders | (76,009 | ) | (46,147 | ) | ||||
Tax effect of proceeds from share-based compensation exercises | 17,810 | 13,361 | ||||||
Proceeds from stock issuances under employee plans | 25,458 | 28,005 | ||||||
Net cash used for financing activities | (91,624 | ) | (167,243 | ) | ||||
Impact of currency translation on cash balances | 675 | (1,876 | ) | |||||
Net decrease in cash and cash equivalents | 87,562 | (58,180 | ) | |||||
Cash and cash equivalents at beginning of period | 325,336 | 393,927 | ||||||
Cash and cash equivalents at end of period | $ | 412,898 | $ | 335,747 |