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Polaris Reports Record Third Quarter 2015 Results; EPS Increased 12% to $2.30 on 12% Sales Growth

MINNEAPOLIS--(BUSINESS WIRE)--Polaris Industries Inc. (NYSE: PII) today reported record third quarter net income of $155.2 million for the quarter ended September 30, 2015, an increase of ten percent from the prior year’s third quarter net income of $140.8 million. Earnings per share were a record $2.30 per diluted share for the third quarter of 2015 compared to $2.06 per diluted share for the same period in 2014. Sales for the third quarter 2015 totaled a record $1,456.0 million, an increase of 12 percent over last year’s third quarter sales of $1,302.3 million.

“After our people, arguably our strongest asset is our innovative culture, which spurred the delivery of 15 new vehicles to our unsurpassed ORV armada and drove the introduction of hundreds of new PG&A items. We remain committed to being the leading innovator in our space.”

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“Our record third quarter results continue to reflect the efficacy of our long-term strategy and the resiliency of the Polaris organization, as motorcycle growth accelerated, ORV share gains continued and our developing adjacencies built momentum. We accomplished this in a difficult environment, with the combination of weakening currencies and softening economies adding to the pressure we face from the sluggish oil and agriculture markets, all in the midst of the most competitive powersports landscape we have seen in nearly a decade. It is encouraging to see our Polaris team use these challenging times to get better and stronger, while displaying renewed determination to win across all our markets,” stated Scott Wine, Polaris’ Chairman and Chief Executive Officer. “After our people, arguably our strongest asset is our innovative culture, which spurred the delivery of 15 new vehicles to our unsurpassed ORV armada and drove the introduction of hundreds of new PG&A items. We remain committed to being the leading innovator in our space.”

Wine continued, “Successful innovation requires agility, in order to react quickly to ever-changing market conditions. This applies not only to product design but also to our internal organization, which we demonstrated in the third quarter by realigning our international business structure to become more efficient and effective in response to challenging markets outside North America. Quick reactions demand excellent execution, and Ken Pucel and his Global Operations and Engineering teams continue to build momentum and gain traction in our efforts to improve throughput, quality and cost. Throughout the third quarter we made consistent enhancements to our Spirit Lake paint system, which helped us stabilize our operations and, by improving production output each week of September, outpace shipment goals for the first time this year. We have a clear plan to further optimize and upgrade that system over the next six months, and with the recently acquired paint facility in Spearfish, South Dakota, we will further augment paint capacity in the latter part of the fourth quarter.”

“Polaris has delivered solid financial performance in the first nine months of 2015, and despite facing stiff headwinds that show little sign of abating in the near term, our financial position remains robust and our growth opportunities plentiful.”

2015 Business Outlook
For the full year 2015, the Company is narrowing its earnings guidance range to $7.37 to $7.42 per diluted share, an increase of 11 to 12 percent over full year 2014 earnings of $6.65 per diluted share. Full year 2015 sales are now expected to grow in the range of 10 to 11 percent when compared to 2014.

Third Quarter Performance Summary(in thousands, except per share data)

Three Months ended September 30,

Nine Months ended September 30,

Sales Components

2015

2014

Change

2015

2014

Change

Off-Road Vehicles $ 822,894 $ 801,919 3% $ 2,157,068 $ 2,058,673 5%
Snowmobiles 185,477 162,652 14% 219,317 184,379 19%
Motorcycles 160,437 63,263 154% 459,976 245,258 88%
Global Adjacent Markets 60,845 55,453 10% 192,801 185,013 4%
Parts, Garments & Accessories 226,347 219,056 3% 584,510 531,325 10%
Total Sales $ 1,456,000 $ 1,302,343 12% $ 3,613,672 $ 3,204,648 13%
Gross Profit $ 415,623 $ 388,274 7% $ 1,028,768 $ 951,605 8%
Gross profit as a % of sales 28.5% 29.8% -126 bps 28.5% 29.7% -122 bps
Operating Expenses $ 192,012 $ 182,749 5% $ 523,134 $ 489,228 7%
Operating expenses as a % of sales 13.2% 14.0% -84 bps 14.5% 15.3% -79 bps
Operating Income $ 242,676 $ 222,573 9% $ 556,979 $ 504,690 10%
Operating Income as a % of sales 16.7% 17.1% -42 bps 15.4% 15.7% -34 bps
Net Income $ 155,173 $ 140,826 10% $ 344,679 $ 318,632 8%
Net income as a % of sales 10.7% 10.8% -15 bps 9.5% 9.9% -40 bps
Diluted Net Income per share $ 2.30 $ 2.06 12% $ 5.09 $ 4.68 9%

Off-Road Vehicle (“ORV”) sales increased three percent to $822.9 million in the third quarter of 2015 compared to the third quarter of 2014. Polaris North American ORV unit retail sales increased low-single digits percent during the 2015 third quarter compared to strong prior year third quarter retail sales growth of high-single digits percent. Consumer purchases of both side-by-side vehicles and ATVs increased at similar rates during the 2015 third quarter. The Company estimates North American industry ORV retail sales in the third quarter of 2015 increased low-single digits percent year-over-year, resulting in Polaris market share gains for both ATVs and side-by-side vehicles. During the 2015 third quarter, the Company introduced new ORV models in the value and premium segments including the Company’s first full-sized value RANGER® priced below $10,000 and the clear leader in the high-performance segment, the RZR® XP Turbo, delivering more horsepower and torque than any other high-performance side-by-side on the market today. Polaris North American ORV dealer inventories during the third quarter of 2015 increased about ten percent year-over-year, in line with Company expectations, as the Company began shipping the new 2016 model-year products.

Snowmobile sales increased 14 percent to $185.5 million for the third quarter of 2015 compared to $162.7 million for the third quarter of 2014. The increase is due to an increased quantity and richer mix of snowmobiles being shipped in the 2015 third quarter compared to the same period a year ago. While the snowmobile retail selling season is just beginning, Polaris’ market share performance season-to-date through the 2015 third quarter is pacing with the Company’s expectations, led by the award-winning model year 2016 PRO-RMK, the lightest mountain sled on the market. As planned, Polaris North American snowmobile dealer inventories during the third quarter of 2015 increased significantly year-over-year in preparation for the upcoming snowmobile retail selling season.

Motorcycle sales increased 154 percent to $160.4 million for the third quarter of 2015 compared to same period last year due to continued strong demand for Indian motorcycles and the new Slingshot® roadster. Victory, Indian Motorcycle and Slingshot North...


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