Highlights:
Motorcycle retail sales increased high-single digits percent, and as expected, ORV retail sales were down high-single digits during the quarter. Total Company North American retail sales were down nine percent for the quarter, in-line with expectations.
ORV dealer inventory was down 16%, year-over-year. Total dealer inventory was down 10%.
Third quarter results included expenses totaling approximately $65 million for increased warranty, legal and other costs associated with product recall activity.
Announced acquisition of Transamerican Auto Parts (“TAP”) to bolster leadership position in a growing off-road aftermarket space.
Narrowing full year 2016 guidance of $3.40 to $3.60 per diluted share, on total Company sales declines of mid- to high-single digits.
MINNEAPOLIS, MN (October 25, 2016) — Polaris Industries Inc. (NYSE: PII) today reported third quarter net income of $32.3 million, or $0.50 per diluted share, for the quarter ended September 30, 2016 compared to $155.2 million, or $2.30 per diluted share reported in the third quarter of 2015. Sales for the third quarter of 2016 totaled $1,185.1 million, down 19 percent from last year’s third quarter sales of $1,456.0 million.
“Our third quarter results, while discouraging, were in line with our revised guidance and reflect our ongoing execution of the RZR® recalls and significant quality and safety improvement initiatives. During the past three months, we have accelerated our efforts to get our loyal owners back to riding safely, and are now over 50 percent complete with the RZR® 900/1000 recalls and slightly below 50 percent on the more recent RZR® Turbo recall notice. In addition to these recall challenges, we continued to face a weak overall Powersports industry, but were encouraged by continued retail strength for Indian and our overall motorcycle business, and the return to growth for side-by-sides in September,” commented Scott Wine, Polaris’ Chairman and Chief Executive Officer.
“We remain committed to improving our fundamentals and executing our long-term strategy to be the ‘Best in Powersports, Plus’. Our recent announcement to acquire Transamerican Auto Parts, a $740 million, vertically integrated multi-channel leader in the $10+ billion Jeep and truck aftermarket accessory space, is consistent with our strategy and exciting due to its growth potential. This transaction provides us an immediate leadership position in a growing market, while allowing us to accelerate growth and profitability for Polaris,” continued Mr. Wine. “We are making the necessary investments, both internally and externally, to realize the true potential of our organization. Along with improvements in product safety and quality, we are using Huntsville and our go to market Retail Flow Management (“RFM”) process to establish Lean as a competitive advantage, we are bringing technology to the forefront of our industry with Ride Command™, and we are working to transform the customer experience, from purchase to service, to enhance profitability. This commitment to improving our execution and our overall performance will drive a steadier cadence of growth and profitability in the future.”
| Third Quarter Segment Results(in thousands) | |||||||||||||||||||||
| Includes respective parts, garments and accessories (“PG&A”) related sales | |||||||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||
| 2016 | 2015 | Change | 2016 | 2015 | Change | ||||||||||||||||
| Sales | |||||||||||||||||||||
| Off-Road Vehicles/Snowmobiles | $ | 923,389 | $ | 1,193,514 | (23 | )% | $ | 2,452,525 | $ | 2,846,901 | (14 | )% | |||||||||
| Motorcycles | 183,193 | 188,679 | (3 | )% | 602,762 | 535,699 | 13 | % | |||||||||||||
| Global Adjacent Markets | 78,485 | 73,807 | 6 | % | 243,553 | 231,072 | 5 | % | |||||||||||||
| Total Sales | $ | 1,185,067 | $ | 1,456,000 | (19 | )% | $ | 3,298,840 | $ | 3,613,672 | (9 | )% | |||||||||
| Gross profit | |||||||||||||||||||||
| Off-Road Vehicles/Snowmobiles | $ | 231,323 | $ | 388,542 | (40 | )% | $ | 670,982 | $ | 927,803 | (28 | )% | |||||||||
| % of sales | 25.1 | % | 32.6 | % | -750 bps | 27.4 | % | 32.6 | % | -523 bps | |||||||||||
| Motorcycles | 21,164 | 28,424 | (26 | )% | 89,841 | 73,236 | 23 | % | |||||||||||||
| % of sales | 11.6 | % | 15.1 | % | -351 bps | 14.9 | % | 13.7 | % | +123 bps | |||||||||||
| Global Adjacent Markets | 21,828 | 21,200 | 3 | % | 66,163 | 61,987 | 7 | % | |||||||||||||
| % of sales | 27.8 | % | 28.7 | % | -91 bps | 27.2 | % | 26.8 | % | +34 bps | |||||||||||
| Corporate | (13,545 | ) | (22,543 | ) | (34,135 | ) | (34,258 | ) | |||||||||||||
| Total gross profit | $ | 260,770 | $ | 415,623 | (37 | )% | $ | 792,851 | $ | 1,028,768 | (23 | )% | |||||||||
| % of sales | 22.0 | % | 28.5 | % | -655 bps | 24.0 | % | 28.5 | % | -444 bps | |||||||||||
Motorcycle segment sales, including its respective PG&A sales, decreased three percent in the 2016 third quarter to $183.2 million. Victory® and Indian® motorcycles reported increased vehicle sales growth, while Slingshot® sales were down during the quarter due to shipment timing. Gross profit decreased 26 percent to $21.2 million, or 11.6 percent of sales in the third quarter of 2016, compared to $28.4 million, or 15.1 percent of sales, in the third quarter of 2015 due to higher warranty expense related to recent safety and service bulletins, primarily for Slingshot®.
North American consumer retail demand for the Polaris motorcycle segment, including Victory®, Indian Motorcycle® and Slingshot®, increased high-single digits percent during the 2016 third quarter with Indian Motorcycle® and Victory® increasing low-teens percent combined, while overall motorcycle industry retail sales 900cc and above was down high-single digits percent in the 2016 third quarter. Product availability for all three motorcycle brands remained adequate throughout the quarter as both the Company’s Spirit Lake, Iowa motorcycle plant and the new Slingshot®production line in Huntsville, Alabama are producing at retail demand levels.
The full 3rd Quarter report can be found here:
http://cdn.polarisindustries.com/pressrelease/3q16-pii-earnings-press-release-f.pdf
