Polaris EPS up 13% in Third Quarter, 14% Year to Date
17 October 2000
Polaris EPS up 13% in Third Quarter, 14% Year to Date; Third Quarter Sales and Net Income at Record Levels
MINNEAPOLIS--Oct. 17, 2000--Polaris Industries Inc. today reported a 13 percent increase in net income per diluted share for the third quarter ended September 30, 2000. Net income per diluted share in the third quarter totaled a record $1.24 compared to $1.10 in the third quarter of 1999. Net income rose 7 percent to a third quarter record of $29.3 million from $27.2 million in the comparable 1999 period. Sales for the third quarter were $397.0 million, also a record for the period, up from $388.9 million in the 1999 third quarter.For the nine months ended September 30, 2000, Polaris reported a 14 percent increase in net income per diluted share on a 6 percent increase in sales. Net income per diluted share for the first nine months of 2000 totaled $2.33 compared to $2.05 in the first nine months of 1999. Net income for the first nine months of 2000 grew 7 percent to $55.2 million from $51.4 million in the comparable 1999 period. Sales for the nine months ending September 30, 2000 totaled $1,010.7 million, up 6 percent from $951.0 million in the first nine months of 1999.
"These results were in line with management's expectations and reflect the company's continued ability to deliver profitable growth," said Thomas C. Tiller, Polaris President and Chief Executive Officer. Tiller added that the company remains on track to deliver a twelfth consecutive year of record sales and net income for the full year 2000. "Year to date, our financial performance has benefited from continuing strength in the all-terrain vehicle (ATV) business as well as sales and income contributions from growth areas such as parts, garments and accessories, international sales and financial services."
The sales growth in the 2000 third quarter resulted primarily from another strong performance in the company's ATV business, which increased sales 14% during the quarter. Industry-wide, retail sales of ATVs continued to grow at double-digit rates. Retail sales growth at Polaris approximated the industry growth rate, aided by initial shipments of the company's first ATVs for youths, which were well received by dealers and consumers. During the quarter, Polaris also began shipments of the Sportsman 500 HO, a higher-powered model of the world's best selling automatic ATV.
As expected, sales of snowmobiles during the third quarter 2000 declined by 13% reflecting a planned reduction in production this season to compensate for below average snowfall levels the past few seasons. Polaris is well positioned for future growth beyond 2000, according to Tiller. "Our product line is acknowledged to be industry leading, as evidenced by ten consecutive years of market leadership. This year is no exception with `Sled of the Year' awards for each of our 600 XCSP, 800 RMK and 800 LE models," said Tiller.
Tiller said Polaris gained a modest amount of market share in its personal watercraft (PWC) business during the 1999-2000 season ended September 30. "Our retail sales of PWC increased slightly this past season while overall industry retail sales were down slightly," said Tiller. He attributed the sales growth and share gains to consumer preference for the innovations in noise and emission reductions, fuel economy and overall design Polaris has introduced in its latest models. Tiller said season-ending dealer PWC inventories are at very manageable levels. "We remain optimistic about resumed growth in the PWC business," said Tiller.
For the year to date period, retail sales of Victory motorcycles are up nearly 60 percent compared to the first nine months of 1999. "Victory retail sales did accelerate during the third quarter as a result of our enhanced marketing, advertising and promotional activity," said Tiller. "However, as we have previously discussed, dealer inventories are higher than expected, so we are adjusting production levels accordingly," he added. A third model in the Victory line, the V92C Deluxe, was introduced at the Sturgis Rally during the quarter. The company has made more than 200 engineering improvements to its motorcycle product line for the 2001 model year.
"Polaris continued to receive solid contributions from its growth initiatives during the third quarter," Tiller continued. "Sales of parts, garments, and accessories (PG&A) increased at a 13% rate during the quarter. In addition, international sales increased 25% and the income from the financial services joint venture grew 62% during the third quarter 2000 compared to third quarter of 1999."
The gross margin percentage continued to expand in the third quarter driven by the acceleration of sales of PG&A. "The strong growth in this high margin product line, now the third largest component of sales at Polaris, helped improve gross margins in the quarter," said Tiller. He said the company is also benefiting from lower costs in its snowmobile business resulting from the adoption of the EDGE(TM) chassis on many of its models this season. "This new chassis offers snowmobile riders handling and performance advantages while providing us with the cost advantages resulting from a significantly lower parts count," he said. The EDGE chassis contains 150 fewer parts than predecessor snowmobile chassis.
The company repurchased 166,200 shares of its common stock during the third quarter, 2000. Year-to-date repurchases total nearly 900,000 shares and cumulative repurchases total more than 5.4 million shares under an existing authorization to repurchase up to 7.5 million shares.
(Summarized financial data follow)
POLARIS INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
Third Third For the For the
Quarter Quarter Nine Months Nine Months
Ended Ended Ended Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
-----------------------------------------------------
2000 1999 2000 1999
---- ---- ---- ----
Sales $396,962 $388,883 $1,010,738 $950,960
Cost of Sales 289,245 287,595 752,933 718,296
------- ------- --------- -------
Gross profit 107,717 101,288 257,805 232,664
Operating Expenses
Selling &
marketing 44,124 40,698 112,322 100,215
Research &
development 7,964 7,149 24,029 22,715
General &
administrative 11,618 11,487 38,651 32,049
------ ------ ------ ------
Total operating
expenses 63,706 59,334 175,002 154,979
Operating Income 44,011 41,954 82,803 77,685
Nonoperating Expense
(Income)
Interest expense 2,416 1,188 5,931 3,562
Equity in income
of affiliates (3,952) (2,447) (10,349) (6,380)
Other expense
(income), net 172 968 1,634 780
--- --- ----- ---
Income before
income taxes 45,375 42,245 85,587 79,723
Provision for
Income Taxes 16,109 14,996 30,384 28,301
------ ------ ------ ------
Net income $29,266 $27,249 $55,203 $51,422
======= ======= ======= =======
Basic Net Income
Per Share $1.25 $1.11 $2.34 $2.06
===== ===== ===== =====
Diluted Net Income
Per Share $1.24 $1.10 $2.33 $2.05
===== ===== ===== =====
Weighted average
number of common
and common equivalent
shares outstanding:
Basic 23,379 24,594 23,610 24,923
====== ====== ====== ======
Diluted 23,542 24,707 23,690 25,099
====== ====== ====== ======