Polaris Reports Record Third Quarter Results
20 October 1999
Polaris Reports Record Third Quarter Results; Third Quarter EPS Up an Adjusted 13 Percent on 8 Percent Sales Growth
MINNEAPOLIS--Oct. 20, 1999--Polaris Industries Inc. (NYSE/PSE: PII) today reported a 13 percent increase in net income per diluted share on an eight percent increase in sales for the third quarter ended September 30, 1999. Net income per diluted share for the 1999 third quarter totaled a record $1.10 compared to an adjusted $.97 in the comparable 1998 period.Net income for the 1999 third quarter totaled a record $27.2 million, up 9 percent from adjusted net income of $25.1 million in the 1998 third quarter. Third quarter 1999 sales grew 8 percent to a record $388.9 million from $359.9 million in the 1998 third quarter.
For the nine months ended September 30, 1999, net income per diluted share totaled $2.05, up 11 percent from adjusted net income per diluted share of $1.84 in the comparable 1998 period. Net income grew 7 percent to $51.4 million from adjusted net income of $48.0 million in the nine months ended September 30, 1998. Sales for the nine months ended September 30, 1999 were up 13 percent to $951.0 million from $844.6 million in the comparable 1998 period.
Adjusted net income and adjusted net income per diluted share for the 1998 third quarter and year-to-date periods exclude the effects of a one-time provision for litigation loss of $61.4 million which resulted in an after-tax charge of $39.6 million, or $1.53 per diluted share.
Polaris President and Chief Executive Officer Tom Tiller said the company's third quarter performance met expectations for growth in both sales and net income and that ongoing brand building and growth initiatives should drive sales and net income to record levels for the full year 1999. "We're pleased with our third quarter performance and believe we are well positioned to deliver yet another year of record results," said Tiller. "We have delivered an average sales and earnings per share growth of over 15% for the last six quarters and remain on target for our long term growth goals."
Sales of all-terrain vehicles (ATVs) continued to drive top-line growth at Polaris. Industry-wide, ATV retail sales have been growing in excess of 20 percent. "Our own ATV retail sales continue to grow at over 20 percent as well," said Tiller. "We're tapping into the overall strong demand for ATVs with new models for the year 2000, including a new 6x6 addition to the Sportsman line, our most popular ATV product family."
In August, the company introduced the second model in its Victory line of motorcycles, the Victory V92SC Sport Cruiser. The V92SC was unveiled at the Sturgis Rally and Races in Sturgis, South Dakota and via a live webcast. Shipments of the new model will begin in the fourth quarter. "Growth in the cruiser segment of the motorcycle market remains strong, in excess of 20 percent annually," said Tiller. "We're strongly positioned in the market with two distinct and very competitive models."
In personal watercraft (PWC), as expected, industry retail sales are down almost 20 percent from a year ago. Polaris PWC retail sales declined less than 10 percent, however, as the company gained market share on the strength of new models focusing on consumer preferences for larger and more stable units. "Our season-ending dealer inventory levels are once again at historically low levels, reflecting the improvements we have made in matching inventory with the declining demand," said Tiller.
"We remain optimistic about snowmobile sales for the coming season. The Polaris product line is being very well received by the enthusiast media and consumers attending fall snow shows. The 120 XCR model, designed for children, has been particularly popular," said Tiller.
Polaris continues to aggressively repurchase its common shares under an authorization from its Board of Directors permitting the cumulative repurchase of up to 5.0 million shares. Polaris repurchased 654,000 shares in the third quarter 1999. Year-to-date repurchases total nearly 1.3 million shares and cumulative repurchases total more than 4.3 million 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 and net income and long term growth goals, 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
Third Quarter Third Quarter
Ended Sept. 30, Ended Sept. 30,
--------------------------------------
1999 1998
---- ----
Sales $388,883 $359,861
Cost of Sales 287,595 273,431
-------- --------
Gross profit 101,288 86,430
Operating Expenses
Selling and marketing 40,698 35,015
Research and development 7,149 7,200
General and administrative 11,487 7,761
------- ------
Total Operating Expenses 59,334 49,976
Operating Income 41,954 36,454
Nonoperating Expense (Income)
Interest expense 1,188 787
Equity in income of affiliates (2,447) (2,043)
Other expense (income), net 968 (1,212)
Provision for litigation loss ---- 61,409
---- -------
Income (loss) before
income taxes 42,245 (22,487)
Provision for Income Taxes 14,996 (7,983)
------- -------
Net income (loss) $27,249 ($14,504)
Basic Net Income (loss)
Per Share $1.11 ($0.56)
Diluted Net Income
(loss) Per Share $1.10 ($0.56)
Weighted average number of
common and potential common
shares outstanding:
Basic 24,594 25,811
Diluted 24,707 25,811
----------------------------------------------------------------------
Pro Forma Results, Adjusted to
Exclude Provision for Litigation
Loss:
Income before income taxes $42,245 $38,922
Provision for Income Taxes 14,996 13,817
------- -------
Net income $27,249 $25,105
Basic Net Income Per Share $1.11 $0.97
Diluted Net Income Per Share $1.10 $0.97
For the Nine For the Nine
Months Ended Months Ended
Sept. 30, Sept. 30,
----------------------------------------
1999 1998
---- ----
Sales $950,960 $844,573
Cost of Sales 718,296 647,130
-------- -------
Gross profit 232,664 197,443
Operating Expenses
Selling and marketing 100,215 84,056
Research and development 22,715 20,472
General and administrative 32,049 23,719
------- ------
Total Operating Expenses 154,979 128,247
Operating Income 77,685 69,196
Nonoperating Expense (Income)
Interest expense 3,562 2,086
Equity in income of affiliates (6,380) (5,199)
Other expense (income), net 780 (2,308)
Provision for litigation loss ---- 61,409
---- ------
Income (loss) before
income taxes 79,723 13,208
Provision for Income Taxes 28,301 4,867
------- -----
Net income (loss) $51,422 $8,341
Basic Net Income
(loss) Per Share $2.06 $0.32
Diluted Net Income
(loss) Per Share $2.05 $0.32
Weighted average number
of common and potential
common shares outstanding:
Basic 24,923 26,059
Diluted 25,099 26,101
----------------------------------------------------------------------
Pro Forma Results, Adjusted to
Exclude Provision for Litigation
Loss:
Income before income taxes $79,723 $74,617
Provision for Income Taxes 28,301 26,667
------- ------
Net income $51,422 $47,950
Basic Net Income Per Share $2.06 $1.84
Diluted Net Income Per Share $2.05 $1.84