PowerSports Business

November 27, 2017

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FINANCE 10 • November 27, 2017 • Powersports Business www.PowersportsBusiness.com Polaris Industries Inc. reported third quarter 2017 sales of $1,478.7 million, up 25 percent from $1,185.1 million for the third quarter of 2016. Adjusted sales, which exclude the impact from Victory Motorcycles net sales for the third quarter of 2017, were $1,480.3 million for the 2017 third quarter, up 25 percent. The company reported third quarter 2017 net income of $81.9 million, or $1.28 per diluted share, compared with net income of $32.3 mil- lion, or $0.50 per diluted share, for the 2016 third quarter. The reported net income includes costs related to the wind down of Victory Motorcycles, certain Transamerican Auto Parts ("TAP") inte- gration costs, and manu- facturing network realignment costs. Adjusted net income for the quarter ended September 30, 2017, excluding these costs, was $93.5 million, or $1.46 per diluted share. "Our emphatic return to profitable growth in the third quarter was a testament to the power of the Polaris brand, the strength of our dealer network and the competitive drive of the Polaris team. During the quarter, strong retail growth in both North America and nearly all of our International markets drove record sales and highlighted our ongoing product innovation, improving product qual- ity and sharpened execution. We delivered North American unit retail sales growth of 13 percent and overall company sales growth of 25 percent, about half of which was organic, while lowering North American dealer inven- tory seven percent year-over-year. Results were strong throughout our portfolio, led by Indian Motorcycles' exceptional performance as they accelerated share gains and outpaced a declining North American motorcycle mar- ket while also delivering strong growth in Europe, Australia and Asia. I am particularly proud of the improved performance from our Off-Road Vehicle business, which was fueled by a well-planned and executed Fac- tory Authorized Clearance sale and the strong reception of our model year 2018 introduc- tions. Encouragingly, RZR retail sales were especially strong in the quarter, and we had our best ATV retail quarter in two years. Delivering such strong results, while also launching the all new RANGER XP1000, the best utility side-by-side ever built, is a fitting way for Matt Homan to wrap up his influen- tial 15-year run with Polaris. I want to thank Matt for his significant contribution and wish him continued success in his career. Welcom- ing Chris Mussoearlier this month was also a major victory and we are excited to have him grab the reins of our industry-leading ORV business," said Scott Wine, chairman and CEO of Polaris Industries. "Most importantly, strong total company sales growth translated to bottom-line improve- ment. Despite higher than expected costs for warranty and re-work and complications from Hurricanes Harvey and Irma, we delivered significant operating profit growth and earn- ings per share expansion for the quarter. With strong growth in revenue, profitability and cash flow I feel very good about the performance of the Polaris team and our improved outlook for the fourth Quarter and beyond," said Wine. Off-Road Vehicle (ORV) and Snowmobile segment sales, including their respective PG&A related sales, were $1,007.4 million for the third quarter of 2017, up 12 percent over $895.6 million for the third quarter of the prior year driven primarily by improved side- by-sides shipments. PG&A sales for ORV and Snowmobiles combined, increased five percent in the 2017 third quarter compared to the third quarter last year. Gross profit increased 34 percent to $296.9 million, or 29.5 percent of sales, in the third quarter of 2017, compared to $221.6 million, or 24.7 percent of sales, in the third quarter of 2016. Gross profit percentage increased primarily due to product mix as well as lower year-over-year warranty costs. ORV wholegood sales for the third quarter of 2017 increased 13 percent primarily driven by strong RZR shipments. Polaris North Ameri- can ORV unit retail sales for the third quarter of 2017 were up mid-teens percent from the 2016 third quarter, with both side-by-side vehicles and ATVs up mid-teens percent. The North American ORV industry was up high-single digits percent compared to the third quarter last year. ORV dealer inventory was down 12 percent in the 2017 third quarter compared to the same period last year. Snowmobile wholegood sales in the third quarter of 2017 increased 20 percent to Polaris reports 25 percent sales increase in Q3 Stock Price Percent Company Ticker 11/3/17 Change Spy Inc. XSPY $0.08 24.6% MarineMax, Inc. HZO $20.35 21.9% Polaris Industries, Inc. PII $116.74 13.3% Carlisle Companies CSL $109.73 10.2% TCF Financial Corporation TCB $18.64 9.7% Intl. Speedway Corp. Cl. A ISCA $38.50 -2.0% Brunswick Corp. BC $51.56 -10.3% General Electric Co. GE $20.14 -12.4% Cooper Tire & Rubber CTB $32.00 -12.7% Speedway Motorsports, Inc. TRK $19.47 -14.8% POWERSPORTS BUSINESS WINNERS AND LOSERS MARKET WATCH Change 11/3/17 from 10/13 % Change Powersports Business Index 331.746 1.01 0.30% Dow Jones Index 203.826 0.91 0.45% S&P 500 Index 175.673 0.46 0.26% Source: Wells Fargo Securities LLC NORTHWEST p9.3% Parts Department p6.8% Service Department p0.8% Major Units p2.7% Overall WEST p0.8% Parts Department q-1.1% Service Department q-2.4% Major Units q-1.8% Overall MIDWEST p0.9% Parts Department p1.7% Service Department p2.8% Major Units p2.6% Overall NORTHEAST q-2.9% Parts Department p1.5% Service Department p10.7% Major Units p7.9% Overall SOUTH q-1.1% Parts Department q-0.3% Service Department q-1.3% Major Units q-0.9% Overall UNITED STATES p.04% Parts Department p0.7% Service Department p0.8% Major Units p0.9% Overall p p DEALER FINANCIAL SNAPSHOT See Polaris, Page 13 STOCK MARKET WATCH OCTOBER 2017 Same Store Sales for 1,665 CDK Global Recreation dealers were up 0.9 percent overall in October, in comparison to the same period in 2016. The Northeast saw the largest increase in overall sales, up 7.9 percent from 2016. Both the Northwest and Midwest experienced increases in all four categories. The West and South decreased in overall sales since 2016. PARTS SALES Parts sales saw 751 dealers up and 914 down. SERVICE SALES In service, 836 dealers were up and 776 were down. MAJOR UNIT SALES 739 dealers were up in major unit sales and 747 were down. FOR MORE ON THE SAME STORE SALES DATA For more information on this report and other industry data, contact: cdkrecreation.com/dataservices 0 50 100 150 200 250 300 350 3/10/17 4/7/17 5/4/17 5/19/17 6/16/17 7/21/17 8/11/17 9/8/17 10/13/17 11/3/17 PSB INDEXED DOW JONES INDEXED S&P 500 INDEXED STOCK MARKET ACTIVITY SCOTT WINE p

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