Polaris Reports Record Fourth Quarter and Year
1 February 2000
Polaris Reports Record Fourth Quarter and Year; Fourth Quarter EPS Up 16% on 12% Sales Growth; Polaris Posts 11th Consecutive Year of Record Net Income
MINNEAPOLIS--Feb. 1, 2000--Polaris Industries Inc. (NYSE/PSE: PII) today reported record sales and net income for both the fourth quarter and the year ended December 31, 1999. The company has now reported record adjusted net income for eleven consecutive years.Net income per diluted share for the 1999 fourth quarter totaled $1.02, up 16 percent from $.88 in the 1998 fourth quarter. Net income for the 1999 fourth quarter increased 10 percent to $24.9 million from $22.7 million in the 1998 fourth quarter. Fourth quarter sales grew 12 percent to $370.1 million from $330.9 million in the 1998 fourth quarter.
For year ended December 31, 1999, Polaris reported net income per diluted share of $3.07, up 13 percent from adjusted net income per diluted share of $2.72 for 1998. Net income for 1999 totaled $76.3 million, up eight percent from adjusted net income of $70.6 million for 1998. (Adjusted net income and adjusted net income per diluted share for 1998 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, in the 1998 third quarter.) Sales for 1999 totaled $1,321.1 million, up 12 percent from $1,175.5 million in 1998.
"Once again, the Polaris team fulfilled its promise to produce profitable growth," said Tom Tiller, Polaris president and chief executive officer. "We delivered real value to our shareholders in 1999 through several channels: a 13 percent increase in earnings per share resulting from an eight percent increase in net income; continuation of our aggressive share repurchase program in which nearly 1.5 million shares or more than six percent of total shares outstanding were repurchased; dividends for the full year of $.80 per share, representing in excess of a 2 percent yield on our average share price during the year, and continued investment in growth initiatives that position us to produce record sales and earnings again in 2000."
Tiller attributed the sales growth for the year primarily to the strong performance of the company's all-terrain vehicle (ATV) business. "Retail sales in the ATV industry continue to grow at double-digit rates as consumers find new utility and recreational uses for these products. Our sales to dealers increased 15 percent during 1999 thanks to our diverse, innovative product line -- broadened in 1999 to include our first manual transmission models. We have now posted 10 consecutive years of ATV sales growth," said Tiller.
Sales of the company's Victory motorcycles more than tripled in 1999, the first full year of production for the Victory V92C. During the year, the company introduced the Victory V92SC, a sport cruiser and the second model in the Victory line. "With two distinct and uniquely competitive models, we are well positioned in the cruiser segment of the heavyweight motorcycle market that continues to grow at a rate of nearly 20 percent annually," said Tiller. "Our focus now shifts to working with over 300 Victory dealers to increase retail sales activity for the upcoming prime selling season."
Tiller said year 2000 dealer orders for personal watercraft (PWC) are in line with the company's expectations. "We introduced a new line of PWC models this year, led by the mid-sized Virage," said Tiller. "Our conservative strategies for managing through the transition in the industry are being rewarded with modest market share gains and low dealer inventory levels that leave us well positioned for an eventual resumption in industry growth."
In snowmobiles, abnormally warm and dry winter weather in much of North America has resulted in slower than expected retail sales for both Polaris and the overall industry for the season to date. Tiller noted, however, that sales of the company's RMK and XCR 120 models have exceeded expectations this season.
Polaris continues to focus on its Parts, Garments and Accessories (PG&A) business as a profitable growth opportunity. In 1999, PG&A sales grew 13 percent from the comparable 1998 period and margins expanded as well. "We are investing heavily in PG&A with expanded marketing, advertising and product development efforts and are seeing good results," said Tiller. "This valuable part of our business helps build traffic at dealerships, extends the Polaris brand and adds a high-margin component to our overall sales," he said.
The company's gross margin percentage for the fourth quarter increased to 25.9 percent from 24.4 percent in the 1998 fourth quarter. For the full year, gross margin percentage increased to 24.9 percent from 23.7 percent. Tiller attributed the increase to improved production efficiency resulting in part from a consolidation in the number of models offered in the company's product lines, to improvements in purchasing practices and to ongoing cost-reduction initiatives across each of the product lines.
As planned, Polaris has also increased its participation in the financial services associated with the sale of its products. "During the fourth quarter, we generated record loan volume under a retail credit program delivered through our Polaris Acceptance joint venture," said Tiller. The company's equity interest in Polaris Acceptance is the primary component of the equity income in affiliates which delivered $9.7 million in non-operating income to 1999 financial results, up 24 percent from $7.8 million in 1998.
"We are very well positioned to continue all of our value-creating initiatives for shareholders," said Tiller. "These include investment in new products and our growth initiatives in PG&A, financial services and overall brand development, as well as the recently authorized ten percent increase in our dividend to $.22 per share per quarter and continuation of our aggressive share repurchase program."
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 2000 sales, shipments and earnings, 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)
Fourth Fourth For the For the
Quarter Quarter Year Year
Ended Ended Ended Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
--------- ---------- ---------- ----------
1999 1998 1999 1998
---- ---- ---- ----
Sales $370,116 $330,947 $1,321,076 $1,175,520
Cost of Sales 274,440 250,103 992,736 897,233
-------- -------- -------- -------
Gross profit 95,676 80,844 328,340 278,287
Operating Expenses
Selling &
marketing 42,191 34,632 142,406 118,688
Research &
development 8,596 7,915 31,311 28,387
General &
administrative 8,928 7,387 40,977 31,106
------ ------ ------- ------
Total operating
expenses 59,715 49,934 214,694 178,181
Operating Income 35,961 30,910 113,646 100,106
Nonoperating Expense
(Income)
Interest expense 723 873 4,285 2,959
Equity in income
of affiliates (3,365) (2,620) (9,745) (7,819)
Other expense
(income), net (9) (2,497) 771 (4,805)
Provision for
litigation loss 0 0 0 61,409
-- -- -- ------
Income before
income taxes 38,612 35,154 118,335 48,362
Provision for
Income Taxes 13,708 12,480 42,009 17,347
------- ------- ------- ------
Net income $24,904 $22,674 $76,326 $31,015
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Basic Net Income
Per Share $1.03 $0.89 $3.09 $1.20
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Diluted Net Income
Per Share $1.02 $0.88 $3.07 $1.19
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Weighted average
number of common
and common equivalent
shares outstanding:
Basic 24,159 25,492 24,732 25,917
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Diluted 24,300 25,641 24,900 25,986
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Pro Forma Results, Adjusted
to Exclude Provision for
Litigation Loss:
Income before income taxes 118,335 109,771
Provision for Income Taxes 42,009 39,147
------- ------
Net income $76,326 $70,624
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Basic Net Income Per Share $3.09 $2.73
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Diluted Net Income Per Share $3.07 $2.72
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