fbpx

Polaris Reports 18 Percent Fourth Quarter Increase in ’17

Polaris Industries Inc. has reported record fourth quarter 2017 sales of $1.431 billion, up 18 percent from $1.218 billion for the fourth quarter of 2016.

Polaris Industries Inc. has reported record fourth quarter 2017 sales of $1.431 billion, up 18 percent from $1.218 billion for the fourth quarter of 2016.

“I am proud of the Polaris team and excited to see their dedication and hard work pay off as we returned the company to sustainable profitable growth in 2017. Indian Motorcycles massively outperformed the motorcycle industry, building on its existing momentum with a flood of product news and a very successful year on the race track. We accelerated North American demand for side-by-sides throughout the year led by strong retail sales of RANGER and Polaris GENERAL along with increased international sales growth in all regions outside North America. Additionally, we made significant investments and improvements in our people, processes, product innovation and quality, which led to notable execution improvements in our Off-Road Vehicle business, marked progress on the TAP integration, and a substantial upgrade of our quality control systems and infrastructure,” commented Scott Wine, Chairman and CEO of Polaris Industries.

Adjusted sales for the fourth quarter of 2017 was $1.430 billion, up 17 percent from the prior year period. The company reported Q4 net income of $31 million compared with net income of $63 million for the 2016 fourth quarter. The reported net income includes costs related to the wind down of Victory Motorcycles, Transamerican Auto Parts (TAP) integration costs, restructuring and realignment costs and impacts from U.S. tax reform. Adjusted net income for the quarter ended December 31, 2017, excluding these costs, was $95 million.

“Between strong demand and our intense focus on delivering high-quality products, in the fourth quarter we experienced some delays in getting certain model year 2018 Off-Road vehicles into showrooms, which ultimately affected our North American retail sales velocity. We are implementing corrective actions to ensure our dealers have the appropriate mix of inventory on hand as we approach the upcoming peak retail selling season,” commented Wine.

“Looking forward, I could not be more excited about the momentum we have built. Dealer inventory is approaching optimal levels, our delivery issues are being addressed, and our product innovation, which continues to resonate well with consumers, will receive an added boost from increased engineering spend. Furthermore, today we are unveiling our revised strategic framework, reaffirming our dedication to bolstering our market leadership position through a focus on superior productivity, safety, quality, and customer service. These updated goals and objectives emphasize top-line growth and margin expansion, which translates to greater than five percent compound annual sales growth and 15 percent compound annual net income growth over the next five years. The entire Polaris team is energized and committed to being the Best in Powersports Plus, growing adjacencies and global markets while simultaneously improving the safety and quality of our products. Ultimately we are striving to build a productivity powerhouse, driving accelerated earnings leverage and asset utilization, that delivers consistently increasing value for our stakeholders,” Wine concluded.

Polaris announced on April 24, 2017 that it was making changes to its network to consolidate production of like products and better leverage plant capacity. Changes include discontinuing manufacturing at its plant in Milford, Iowa, and transferring Milford production to existing Polaris facilities in Huntsville, Ala.; Roseau, Minn.; and Anaheim, Calif. Additionally, the company has transferred fabrication operations for its Pro Armor aftermarket products from its facility in Riverside, Calif., to its Transamerican Auto Parts facility in Chula Vista, Calif.

On January 9, 2017 the company announced its intention to wind down Victory Motorcycles operations. The company will record costs, anticipated to be in the range of $80 million to $90 million through 2018, associated with supporting Victory dealers in selling their remaining inventory, the disposal of factory inventory, tooling, and other physical assets, and the cancellation of various supplier arrangements.

Off-Road Vehicle (ORV) and Snowmobile segment sales, including their respective PG&A related sales, were $994 million for the fourth quarter of 2017, up 13 percent over $881 million for the fourth quarter of 2016 driven primarily by improved side-by-side shipments. PG&A sales for ORV and Snowmobiles combined, increased nine percent in the 2017 fourth quarter compared to the fourth quarter last year. Gross profit increased 11 percent to $279 million, or 28.0 percent of sales, in the fourth quarter of 2017, compared to $252 million, or 28.6 percent of sales, in the fourth quarter of 2016. Gross profit percentage decreased primarily due to higher warranty and negative product mix offset somewhat by lower promotional costs.

ORV wholegood sales for the fourth quarter of 2017 increased 14 percent primarily driven by strong RZR and RANGER shipments. Polaris North American ORV unit retail sales for the fourth quarter of 2017 were down low-single digits percent from the 2016 fourth quarter, with side-by-side vehicles down low-single digits percent and ATVs flat. The North American ORV industry was up low-single digits percent compared to the fourth quarter last year. ORV dealer inventory was down 6 percent in the 2017 fourth quarter compared to the same period last year.

Snowmobile wholegood sales in the fourth quarter of 2017 increased 11 percent to $131 million, due to the timing of shipments. Polaris snowmobile retail sales were down low double digits percent during the fourth quarter due to low snowfall levels across the snowbelt regions in North America.

Motorcycle segment sales, including PG&A, totaled $103 million, saw a decrease of two percent compared to $104 million reported in the fourth quarter of 2016 which included $25 million of Victory Motorcycle wholegood, accessory and apparel sales. Indian Motorcycles wholegood sales increased in the high-single digit percent range in the fourth quarter, while Slingshot sales more than doubled. Gross profit for the fourth quarter of 2017 was $5 million compared to $1 million in the fourth quarter of 2016. Adjusted for the Victory Motorcycles wind-down costs of $3 million, motorcycle gross profit was $8 million, up from the fourth quarter last year due to higher sales volume for both Indian Motorcycles and Slingshot and lower warranty costs.

North American consumer retail demand for the Polaris motorcycle segment, including Indian Motorcycle and Slingshot, increased about 30 percent during the 2017 fourth quarter. Indian Motorcycle retail sales increased about 17 percent, with both heavyweight and mid-sized motorcycles increasing at similar mid-teens percent levels. Indian Motorcycle continued to gain significant market share for the 2017 fourth quarter and full year on a year-over-year basis. Slingshot’s retail sales were up significantly due to improved product availability compared to the fourth quarter last year. Motorcycle industry retail sales, 900cc and above, were down high-single digits percent in the 2017 fourth quarter.

Global Adjacent Markets segment sales along with its PG&A related sales, increased 19 percent to $117 million in the 2017 fourth quarter compared to $98 million in the 2016 fourth quarter. Reported gross profit increased two percent to $30 million, or 25.4 percent of sales, in the fourth quarter of 2017, compared to $29 million, or 29.5 percent of sales, in the fourth quarter of 2016. Adjusted gross profit, excluding the manufacturing realignment costs, increased four percent to $30 million, or 25.8 percent of sales for the fourth quarter 2017. Commercial/Government/Defense group wholegood sales were up 24 percent during the fourth quarter of 2017 primarily due to an increase in sales in the Company’s Goupil light-utility business and military sales.

Aftermarket segment sales, which include TAP, along with the company’s other aftermarket brands of Klim, Kolpin, Pro Armor, Trail Tech® and 509, increased 62 percent to $218 million in the 2017 fourth quarter compared to $134 million in the 2016 fourth quarter. TAP sales increased $83 million to $192 million in the fourth quarter of 2017. Gross profit increased significantly to $61 million, or 27.9 percent of sales in fourth quarter of 2017, compared to $28 million, or 20.9 percent of sales, in the fourth quarter of 2016. Adjusted gross profit in Q4 2016 was $37 million, or 27.4 percent of sales, adjusted for a $9 million TAP inventory step-up charge. Sales and gross profit dollars were up primarily due to the addition of TAP for the entire fourth quarter of 2017 as TAP was acquired in November of 2016. TAP sales grew four percent in the fourth quarter of 2017 compared to last year on a proforma basis, had Polaris owned TAP for the full year 2016.

PG&A sales, excluding Aftermarket segment sales, increased eight percent for the 2017 fourth quarter. Excluding Victory Motorcycles, all segments and categories increased sales during the quarter.

International sales to customers outside of North America, including PG&A, totaled $211 million for the fourth quarter of 2017, up 18 percent, from the same period in 2016. In the fourth quarter, sales in EMEA grew low-twenties percent, Asia Pacific increased high-single digits percent, and Latin America sales rose mid-teens percent.

Gross profit increased 18 percent to $368 million for the fourth quarter of 2017 from $313 million in the fourth quarter of 2016. As a percentage of sales, reported gross profit margin was 25.7 percent of sales for the fourth quarter of both 2017 and 2016. Gross profit for the fourth quarter of 2017 includes the negative impact of $3 million of Victory Motorcycles wind down costs and $2 million of realignment costs. Excluding these items, fourth quarter 2017 adjusted gross profit was $373 million, or 26.1 percent of sales. For the fourth quarter of 2016 adjusted gross profit of $322 million, or 26.4 percent of sales, excludes the negative impact of a $9 million purchase accounting adjustment related to the TAP acquisition acquired in the 2016 fourth quarter. Gross profit margins on an adjusted basis decreased due to negative product mix, higher incentive compensation expenses and increased commodity costs offset somewhat, by increased volume, lower promotional costs and ongoing gross VIP cost savings.

Operating expenses increased 13 percent for the fourth quarter of 2017 to $264 million from $233 million in the same period in 2016, which included $1 million in Victory Motorcycles wind down costs, $3 million of TAP integration expenses and $9 million of corporate restructuring charges. Excluding these costs, operating expenses increased primarily due to the addition of operating expenses from TAP, higher variable compensation expenses, as well as increased research and development expenses and increased selling and marketing costs related to new products, offset somewhat by lower legal related expenses.

Income from financial services was $19 million for the fourth quarter of 2017, down four percent compared with $19 million for the fourth quarter of 2016. The decrease is attributable to lower income generated from the wholesale portfolio due to the lower dealer inventory levels.

The 2018 full-year guidance takes into account the impact of the corporate tax adjustments included in the recently passed Tax Cuts and Jobs Act by the U.S. Congress. Full-year 2018 adjusted sales are anticipated to increase in the range of three percent to five percent over 2017 adjusted sales of $5.428 billion.

Links:

Polaris Industries

You May Also Like

Free Dirt Bike, ATV, Side-by-Side Training in California

Off-Highway Vehicle Safety Week is March 23-31.

ATV, dirt bike, side-by-side training, off-road trails

Spring is here, and for many it’s time to head back to the trails. To ensure you get the most fun out of the new riding season, the ATV Safety Institute (ASI), Motorcycle Safety Foundation (MSF) and Recreational Off-Highway Vehicle Association (ROHVA) have teamed up with California State Parks to offer free training for ATVs, dirt bikes and side-by-sides. 

Alterra Mountain Co. Adds Taiga Snowmobiles to Its Fleets

The fleets cover 15 ski mountain destinations.

Taiga Nomad snowmobile at an Alterra Mountain Co. ski resort
Boundless Rider Expands Footprint to Illinois

Coverage is available for direct purchase or through agents.

Boundless Rider logo
Royal Enfield’s BTR Flat Track Program Kicks Off 2024 at Daytona Short Track

The BTR season opener brought thrilling competition over two days of racing.

Build. Train. Race., BTR, Daytona Short Track, 2024
Dave McMahon Named Interim Executive Director of the NPDA    

The newest member of the team has been moved into the top spot.

Dave McMahon

Other Posts

Maximize Every Sale With F&I and PG&A

This recorded AIMExpo education track discusses how the bike is just the start of the sale.

MPN F&I panel, AIMExpo 2024
Elevating Your Sales Game Through Parts Packaging

Breaking down the art and science of a well-designed, customer-focused, profit-friendly parts package.

MIC, MSF, SVIA, ROHVA Appoint Interim Leadership

Scott Schloegel has been named acting president and CEO.

MIC, MSF, SVIA, ROHVA logos
Sumitomo Rubber North America Hires New Dunlop Motorcycle Tires Regional Sales Manager

Jeff Botsford began his career in the motorcycle industry in 1991.

Jeff Botsford