Polaris Reports Record Sales And EPS For Second Quarter
22 July 1999
Polaris Reports Record Sales And EPS For Second Quarter; Polaris Second Quarter Net Income Per Share Up 9 Percent On 18 Percent Sales Growth
MINNEAPOLIS--July 21, 1999--Polaris Industries Inc. today reported a 9 percent increase in net income per diluted share on an 18 percent increase in sales for the second quarter ended June 30, 1999.Net income per diluted share in the second quarter totaled a record $.60 compared to $.55 in the 1998 second quarter. Net income rose 4 percent to $15,106,000 from $14,484,000 in the comparable 1998 period. Second quarter sales grew 18 percent to a record $324,308,000 compared to $274,711,000 in the second quarter of 1998.
For the six months ended June 30, 1999, Polaris reported a 10 percent increase in net income per diluted share on a 16 percent increase in sales. Net income per diluted share for the first six months of 1999 totaled $.96 compared to $.87 in the first six months of 1998. Net income for the 1999 first half grew 6 percent to $24,173,000 from $22,845,000 in the 1998 first half. Sales for the six months ending June 30, 1999 totaled $562,077,000, up 16 percent from $484,712,000 in the comparable 1998 period.
Tom Tiller, Polaris President and Chief Executive Officer, said the company's second quarter results were in line with management's expectations and that Polaris remains on track to deliver record sales and net income in 1999. "Polaris is performing very well overall. During the second quarter, sales increased across all of our product lines except snowmobiles and we remain confident our brand building and growth initiatives will drive further profitable growth," said Tiller.
The growth in second quarter sales is primarily attributed to a 26% increase in all-terrain vehicle (ATV) sales during the quarter compared to the comparable 1998 period. Tiller said that both the industry and company's ATV retail sales continue to grow at rates in excess of 20%. "We continue to grow our ATV business due to our innovative product line and our overall product quality," said Tiller.
Tiller noted that approximately 1,200 Victory motorcycles were shipped in the second quarter and reaffirmed that production levels have become consistent and predictable. "Demand in the motorcycle industry overall and the cruiser segment in particular remains strong, with year-to-date retail sales for the industry up 25 percent," said Tiller. He added that Polaris will introduce the second model in the Victory line of motorcycles on August 10 at the annual Sturgis motorcycle rally in South Dakota.
In personal watercraft (PWC), Polaris is modestly increasing its market share in a down year for the industry overall. "While industry retail sales are down more than 20 percent year-to-date, our retail sales are reflecting the benefits of actions taken in 1998 to better match inventory with demand. We will continue to run this business on a conservative basis," said Tiller.
Tiller said season-ending snowmobile dealer inventories were approximately flat with the 1998 season-ending level. "As expected, dealer orders for 2000 model year snowmobiles are comparable to those for 1999," said Tiller. As previously announced, Polaris has recalled approximately 67,000 snowmobiles to replace the brake disc and brake pads. The anticipated cost of this voluntary recall, designed to maximize the safety of consumers, has been accounted for in the results of operations for the 1999 second quarter.
Tiller attributed the slight decline in second quarter gross margin percentage to a shift in the sales mix toward increased shipments of Victory motorcycles and ATVs, while reducing shipments of the higher gross margin snowmobile product line.
"Our brand building and growth initiatives are on track with our plans and expectations and we will continue to invest in them prudently but aggressively," said Tiller. He noted that the company has increased its advertising spending, particularly in connection with its NASCAR sponsorship. The company also is funding growth initiatives in its PG&A business, which showed a 22% increase in sales for the second quarter 1999, and is extending the range of financial services offered to its retail customers.
Polaris continues to repurchase its common shares under an authorization from its Board of Directors permitting the cumulative repurchase of up to 5,000,000 shares. Year-to-date, the company has repurchased 599,500 shares for a cumulative repurchase total of more than 3,660,000 shares.
Polaris Industries Inc. designs, engineers, manufactures and markets snowmobiles, all-terrain vehicles, motorcycles, personal watercraft, the Polaris Ranger and related parts, garments and accessories for recreational and utility use. Polaris is the world's largest snowmobile manufacturer and one of the largest U.S. manufacturers of ATVs and personal watercraft. Polaris Industries Inc. trades on the New York Stock Exchange and the Pacific Stock Exchange under the symbol "PII" and is included in the S&P SmallCap 600 stock price index.
Except for historical information contained herein, the matters set forth in this news release, including management's expectations regarding 1999 sales, shipments and net income, 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 and pricing strategies by competitors; warranty expenses; foreign currency exchange rate fluctuations; environmental and product safety regulatory activity; effects of weather; uninsured product liability claims; 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.
(Summarized financial data follow)
POLARIS INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
UNAUDITED
Second Second
Quarter Quarter
Ended June 30, Ended June 30,
1999 1998
-------------- --------------
Sales $324,308 $274,711
Cost of Sales 249,405 210,502
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Gross profit 74,903 64,209
Operating Expenses
Selling and marketing 31,619 27,958
Research and development 8,233 6,829
General and administrative 11,631 8,305
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Total Operating Expenses 51,483 43,092
Operating Income 23,420 21,117
Non-operating Expense (Income)
Interest expense 1,551 820
Equity in income of affiliates (1,928) (1,607)
Other expense (income), net 376 (727)
---- -----
Income before income taxes 23,421 22,631
Provision for Income Taxes 8,315 8,147
------ ------
Net income $15,106 $14,484
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Basic and Diluted Net
Income Per Share $0.60 $0.55
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Weighted average number of
common and potential common
shares outstanding:
Basic 24,989 26,128
Diluted 25,368 26,206
For the Six For the Six
Months Months
Ended June 30, Ended June 30,
1999 1998
--------------- --------------
Sales $562,077 $484,712
Cost of Sales 430,701 373,699
-------- -------
Gross profit 131,376 111,013
Operating Expenses
Selling and marketing 59,517 49,041
Research and development 15,566 13,272
General and administrative 20,562 15,958
------- ------
Total Operating Expenses 95,645 78,271
Operating Income 35,731 32,742
Non-operating Expense (Income)
Interest expense 2,374 1,299
Equity in income of affiliates (3,933) (3,156)
Other expense (income), net (188) (1,096)
Income before income taxes 37,478 35,695
Provision for Income Taxes 13,305 12,850
------- ------
Net income $24,173 $22,845
======== =======
Basic and Diluted Net
Income Per Share $0.96 $0.87
====== =====
Weighted average number of
common and potential common
shares outstanding:
Basic 25,088 26,183
Diluted 25,296 26,246