Polaris Industries reported a 33 percent increase in sales in the
third-quarter totaling $580.1 million compared to $436.2 million
recorded in the year-earlier period.
"We are pleased with the execution of the Polaris team and our Company’s performance during the third quarter," said Scott Wine, Polaris’ Chief Executive Officer. "While the economy and overall consumer demand remains weak, our growth continues to be fueled by innovative new products and our strong dealer network. It is rewarding to see our hard work pay off and be able to report 33 percent sales growth and record earnings per share for the quarter. The momentum we experienced during the first half of 2010 accelerated during the third quarter, as we saw continued market share gains, retail sales growth and margin expansion."
Sales for the full year 2010 are now expected to grow in the range of 24 to 25 percent over full year 2009 sales of $1.57 billion. During the fourth quarter of 2010, the Company expects total sales to increase in the range of 22 to 24 percent over the fourth quarter 2009. The fourth quarter 2010 expectations include incremental costs related to the manufacturing realignment and higher incentive compensation expenses compared to the 2009 fourth quarter.
Wine said, "The positive feedback on our product introductions from our July dealer meeting, coupled with our continued margin expansion and encouraging results from our recently expanded Max Velocity Program go-to-market process, gives us confidence in our ability to finish the year with strong operating results. While we remain focused on extending the momentum experienced in the first nine months through the end of the year, our initial thoughts on 2011 are also quite positive. Our new product pipeline is strong and operational excellence continues to be a priority. I am confident we can continue to drive profitability with the goal of generating industry leading returns for our shareholders in 2011 and beyond."
Off-Road vehicles sales, which include sales of both ATVs and Ranger side-by-side vehicles, increased 49 percent during the third quarter 2010 from the third quarter 2009. This increase reflects significant market share gains for both ATVs and side-by-side vehicles driven by product offerings and the success of the MVP retail go-to-market process. The MVP program was expanded and made available to all North American ORV dealers beginning in the 2010 third quarter. During the third quarter, the Company began shipping several new model year 2011 ORV products including a mid-sized Ranger side-by-side with increased power, a 4-person mid-sized Ranger Crew and a Ranger with the Company’s first 24 horsepower diesel engine. In addition, shipments to Bobcat of the differentiated utility vehicle, which began shipping in the second quarter, accelerated in the 2010 third quarter. Polaris’ North American ORV unit retail sales to consumers increased approximately 20 percent for the 2010 third quarter from the third quarter last year, with side-by-side vehicle retail sales increasing significantly and ATV retail sales up in the mid-single digit percent range. North American dealer inventories of ORVs declined 30 percent during the third quarter compared to 2009 third quarter levels. During the third quarter of 2010 the number of ORV units shipped to dealers approximated the number of units retailed from dealers to consumers in North America. As the Company had done for the past four years, during the 2009 third quarter Polaris shipped significantly fewer ORV units to dealers than what was retailed from dealers to consumers in North America.
Sales of the On-Road division, which primarily consists of Victory motorcycles, increased 116 percent during the third quarter of 2010 when compared to the same period in 2009. The North American heavyweight cruiser and touring motorcycle industry remained weak during the quarter, but Victory continued to benefit from the actions implemented over the past year to accelerate growth. Victory unit retail sales were very strong during the third quarter, increasing more than 50 percent in North America compared to the third quarter of 2009, resulting in market share gains and retail sales growth for the fourth consecutive quarter. Demand increased across the Victory product line-up, particularly the new Cross Country and Cross Roads touring models. North American dealer inventory of Victory motorcycles declined 32 percent in the 2010 third quarter compared to 2009 third quarter levels. The sale of Victory motorcycles in markets outside of North America also continues to increase, with sales up over 100 percent for the 2010 third quarter compared to the same period last year.
Parts, Garments, and Accessories sales increased 12 percent during the third quarter 2010 compared to the same period last year primarily due to increased Ranger side-by-side vehicle and Victory motorcycle related PG&A sales.
Snowmobile sales decreased 6 percent during the 2010 third quarter compared to the third quarter of 2009. The third quarter 2010 decrease reflects the impact of a modest delay in shipments of snowmobiles closer to expected consumer demand in the winter season compared to the same period last year.
Gross profit as a percentage of sales was 26.0 percent for the third quarter of 2010, an increase of 190 basis points from 24.1 percent for the third quarter of 2009. Gross profit dollars increased 44 percent to $150.7 million for the third quarter of 2010 compared to $104.9 million for the third quarter of 2009. The increase in gross profit dollars and the 190 basis points increase in the gross profit margin percentage in the third quarter 2010 resulted primarily from continued product cost reduction efforts, production volume increases, and favorable pricing and foreign currency movements compared to the third quarter of last year. These increases were partially offset by manufacturing realignment costs, an increase in commodity costs and higher sales promotion costs.
Operating expenses for the third quarter 2010 increased 38 percent to $87.1 million, or 15.0 percent of sales, compared to $63.2 million, or 14.5 percent of sales, for the third quarter of 2009. Operating expenses in absolute dollars for the third quarter 2010 increased primarily due to higher incentive compensation plan expenses driven by the higher expected profitability for 2010 and the recent higher stock price. Incremental investments in growth initiatives also contributed to higher operating expenses.
Income from financial services was $4.1 million during the third quarter 2010 compared to $3.9 million in the third quarter of 2009.
Gain on securities held for sale was $1.6 million for the third quarter of 2010 resulting from the sale of the Company’s remaining investment in KTM Power Sports AG during the quarter.
Non-operating other income was $1.5 million in the third quarter of 2010 compared to $1.3 million in the third quarter of 2009. The income is the result of foreign currency exchange
rate movements and the resulting effects on foreign currency transactions related to the international subsidiaries.
Execution of the previously announced manufacturing realignment is underway and remains on schedule. The realignment will consolidate manufacturing operations into existing operations in Roseau, Minn. and Spirit Lake, Iowa and a new facility in Monterrey, Mexico. Construction is underway on the new facility in Monterrey and the building is expected to be completed in the first half of 2011.
