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| PII > SEC Filings for PII > Form 10-Q on 30-Oct-2009 | All Recent SEC Filings |
30-Oct-2009
Quarterly Report
Percent Change in Total Company Sales Compared to
2008 periods
Three Months Ended Nine months ended
September 30, 2009 September 30, 2009
Volume -35 % -33 %
Product mix and price 11 % 13 %
Currency -1 % -3 %
Total -25 % -23 %
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Volume for the 2009 third quarter and year-to-date periods decreased 35 percent and 33 percent, respectively, compared to the same periods last year, as the Company shipped significantly fewer ORVs, snowmobiles and Victory motorcycles to dealers given the weakening consumer retail environment in North America and internationally. Product mix and price increased for the 2009 third quarter and year-to-date periods compared to the same periods last year, primarily due to the positive benefit of a smaller decrease in shipments of side-by-side vehicles to dealers, which typically have a higher selling price than core ATVs. Unfavorable movements in currency rates for both the 2009 third quarter and year-to-date periods decreased sales one percent and three percent, respectively, compared to the same periods in 2008, due to the change in the currency rates and their effect on the Company's Canadian and other foreign subsidiaries when translated to U.S. dollars. Total Company sales by product line are as follows:
Three Months Ended September 30, Nine months ended September 30,
Percent Percent Dollar Percent Percent Dollar
of Total of Total Percent of Total of Total Percent
(in millions) 2009 Sales 2008 Sales Change 2009 Sales 2008 Sales Change
Off-Road Vehicles $ 261.1 60 % $ 371.2 64 % -30 % $ 738.3 67 % $ 986.0 69 % -25 %
Snowmobile 82.2 19 % 94.6 16 % -13 % 97.8 9 % 110.1 8 % -11 %
On-road/Victory 9.4 2 % 21.0 4 % -56 % 33.7 3 % 71.8 5 % -53 %
PG&A 83.5 19 % 93.5 16 % -11 % 224.3 21 % 256.8 18 % -13 %
Total Sales $ 436.2 100 % $ 580.3 100 % -25 % $ 1,094.1 100 % $ 1,424.7 100 % -23 %
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ORV (off-road vehicle) sales during the third quarter 2009, which included sales
of both core ATVs (all-terrain vehicles) and RANGER™ side-by-side vehicles,
decreased 30 percent from the strong comparables in the third quarter 2008. This
decrease reflects the ongoing weakness in the consumer retail environment and
Polaris' continued commitment to helping our dealers reduce their core ATV
inventory levels. ATV dealer inventory levels in North America finished the
third quarter 2009 32 percent lower than the end of the third quarter 2008.
Side-by-side retail sales were lower during the third quarter 2009 compared to
the third quarter 2008, but improved sequentially over the first six months of
2009 to down mid-single digit percentage for the 2009 third quarter. As a
result, Polaris shipped fewer side-by-side vehicles in the third quarter to help
dealers maintain inventories at acceptable levels. Although the ORV markets
remain weak, the Company continued to be aggressive in new product development
with the introduction of several new innovative model year 2010 products,
including:
• Several RANGER™ models with increased horsepower;
• A mid-sized value priced RANGER™;
• An electric version of the new midsized RANGER™, the RANGER™ EV, a quieter machine for operating inside barns or stealthy trips to the deer stand, which has many of the same features of the gasoline powered model;
• Two new Sportsman Touring ATV models built on the same award winning chassis as the Sportsman XP;
• Several other ATV models with enhancements including more horsepower, redesigned chassis and suspensions for better handling, and updated styling and new value priced models.
International ORV sales declined 25% in the third quarter 2009, when compared to
the third quarter 2008, as weak economic conditions in Europe and Russia reduced
demand for Polaris products. However, the Company continued to gain ORV market
share internationally during the 2009 third quarter. Year-to-date 2009 total ORV
sales decreased 25 percent from the same period in 2008 to a total of
$738.3 million. For the third quarter ended September 30, 2009, the average ORV
per unit sales price increased 11 percent over last year's comparable period
primarily as a result of the increased sales of the higher priced RANGER™
models.
Snowmobile sales totaled $82.2 million for the 2009 third quarter, a decrease of
13 percent compared to $94.6 million for the third quarter of 2008. The third
quarter decrease reflects the impact of the overall weak economic environment
offset somewhat by a product mix benefit related to the timing of shipments of
the new models. During the third quarter, the Company began initial shipments of
the new RUSH™ snowmobile, which was recently named snowmobile of the year by
SnowGoer magazine. For the year-to-date 2009 period, snowmobile sales were
$97.8 million, an 11 percent decrease compared to the same period last year. The
average snowmobile per unit sales price for the third quarter of 2009 increased
five percent compared to the same period last year primarily due to the mix of
products shipped.
Sales of the on-road division, which primarily consists of Victory motorcycles,
decreased 56 percent to $9.4 million during the third quarter of 2009 when
compared to the same period in 2008. Year-to-date 2009 On-road sales decreased
53 percent compared to the comparable period of 2008, to a total of
$33.7 million. The decrease reflects the continuing planned reduction in
shipments of Victory motorcycles to dealers in North America and increased
promotional activities during the third quarter to assist dealers' efforts in
further reducing their inventory levels. The overall motorcycle industry retail
sales environment continued to be weak during the third quarter 2009, with
industry wide North American retail sales of heavyweight cruiser and touring
motorcycles over 1400cc decreasing in the high twenty percent range compared to
the same period last year. Victory retail sales to consumers
declined more than the industry wide sales during the 2009 third quarter. The
Company has taken a number of proactive measures to reinvigorate sales in this
segment, including adding personnel and resources, streamlining the product
line-up, increasing promotions and expanding its international market presence.
To remain competitive in the market and further expand its product offerings,
the Company introduced two new touring motorcycles for model year 2010, the
Cross Country and Cross Roads models, both targeted at the large touring
motorcycle market segment. Additionally, several value oriented models were
added to the Victory line for model year 2010. During the 2009 third quarter the
on-road division began shipping a small quantity of the Polaris Breeze™, the
Company's first electric powered low emission vehicle, to a select number of
neighborhood vehicle dealerships. The average per unit sales price for the
on-road division decreased 31 percent during the third quarter 2009 compared to
the same period in 2008 primarily due to increased sales promotions and
incentives for Victory.
PG&A sales decreased 11 percent to $83.5 million during the third quarter 2009
compared to the same period of last year. Year-to-date sales decreased
13 percent compared to the same period last year to $224.3 million. The decrease
was driven primarily by the lower retail sales of Polaris vehicles during the
2009 third quarter and year-to-date periods; however, the decline in sales was
less than the overall Company sales decline as the large installed base of
Polaris owners remain loyal to the Polaris brand and continue to purchase PG&A
for their products.
Sales by geographic region for the third quarter and year-to-date periods were
as follows:
Three Months Ended September 30, Nine months ended September 30,
Percent Percent Percent Percent
of of Dollar of of Dollar
Total Total Percent Total Total Percent
($ in millions) 2009 Sales 2008 Sales Change 2009 Sales 2008 Sales Change
United States $ 295.7 68 % $ 408.0 70 % -28 % $ 751.1 69 % $ 987.8 69 % -24 %
Canada 81.2 19 % 94.2 16 % -14 % 171.6 16 % 201.1 14 % -15 %
Other foreign countries 59.3 13 % 78.1 14 % -24 % 171.4 15 % 235.8 17 % -27 %
Total Sales $ 436.2 100 % $ 580.3 100 % -25 % $ 1,094.1 100 % $ 1,424.7 100 % -23 %
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Significant regional trends were as follows:
United States:
Net sales in the United States for the third quarter 2009 decreased 28 percent
compared to the third quarter of 2008. Net sales in the United States during the
nine months ended September 30, 2009 decreased 24 percent compared to the same
period in 2008. A decline in shipments for all businesses accounted for the
decrease for the 2009 third quarter and year-to-date periods. The United States
represented 68 percent of total Company sales in the 2009 third quarter compared
to 70 percent of total Company sales for the 2008 third quarter. The United
States represented 69 percent of total Company sales for the first nine months
ended September 30, 2009 and 2008.
Canada:
Canadian sales decreased 14 percent and 15 percent for the 2009 third quarter
and year-to-date periods, respectively, as compared to the same periods in 2008.
Unfavorable currency rates accounted for five percent and ten percent of the
decrease for the 2009 third quarter and year-to-date periods, respectively, as
compared to the same periods in 2008. The remainder of the decrease in sales was
primarily driven by volume declines related to the globally weak economic
environment.
Other Foreign Countries:
Sales in other foreign countries, primarily in Europe, decreased 24 percent and
27 percent for the 2009 third quarter and year-to-date periods, respectively, as
compared to the same periods in 2008. Unfavorable currency rates accounted for
four percent and ten percent of the change for the 2009 third quarter and
year-to-periods, respectively, as compared to the same periods in 2008. The
remainder of the decrease in sales was primarily driven by volume declines
related to the globally weak economic environment.
Gross Profit:
The following table reflects the Company's gross profits in dollars and as a
percentage of sales for the third quarter and year-to-date periods:
Three Months Ended Nine months ended
September 30, September 30,
($ in millions) 2009 2008 Change 2009 2008 Change
Gross profit dollars $ 104.9 $ 130.3 -20 % $ 264.6 $ 326.5 -19 %
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Percentage of sales 24.1 % 22.5 % +160 basis points 24.2 % 22.9 % +130 basis points
Gross profit, as a percentage of sales, was 24.1 percent and 24.2 percent for
the 2009 third quarter and year-to-date periods, respectively, an increase of
160 basis points and 130 basis points from the same periods last year. Gross
profit dollars decreased 20 percent and 19 percent to $104.9 million and
$264.6 million for the 2009 third quarter and year-to-date periods compared to
the same periods in 2008, respectively. The increase in the gross profit margin
percentage during the 2009 third quarter and year-to-date periods resulted
primarily from continued product cost reduction efforts, lower commodity costs
and a favorable product mix given the relatively lower declines in shipments of
the higher-margin side-by-side vehicles and PG&A sales. The gross profit margin
percentage increase for both 2009 third quarter and year-to-date periods was
partially offset by an unfavorable movement in currency rates, increased
promotional costs for Victory motorcycles, and higher warranty costs compared to
the third quarter and year-to-date periods in 2008. Gross profit in absolute
dollars decreased for each of the 2009 periods due to lower sales.
Operating expenses:
The following table reflects the Company's operating expenses in dollars and as
a percentage of sales for the third quarter and year-to-date periods:
Three Months Ended Nine months ended
September 30, September 30,
($ in millions) 2009 2008 Change 2009 2008 Change
Selling and marketing $ 27.3 $ 39.7 -31 % $ 83.4 $ 104.1 -20 %
Research and development 15.3 19.6 -22 % 47.1 59.1 -20 %
General and administrative 20.6 19.7 4 % 50.9 52.7 -3 %
Total operating expenses $ 63.2 $ 79.0 -20 % $ 181.4 $ 215.9 -16 %
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Percentage of sales 14.5 % 13.6 % +90 basis points 16.6 % 15.2 % +140 basis points
Operating expenses for the 2009 third quarter and year-to-date periods decreased 20 percent and 16 percent to $63.2 million and $181.4 million, respectively, compared to $79.0 million and $215.9 million for the same periods in 2008. Operating expenses in absolute dollars for the third quarter and year-to-date periods decreased primarily due to operating cost control measures and the reduction in incentive compensation plan expenses resulting from the Company's expected lower profitability in 2009. Operating expenses as a percentage of sales increased to 14.5 percent and 16.6 percent for the 2009 third quarter and year to date periods, respectively, an increase from 13.6 percent and 15.2 percent for the same periods in 2008 due primarily to lower sales volume during the 2009 third quarter and year-to-date periods, which was partially offset by the implementation of operating expense control measures. Income from financial services:
Three Months Ended Nine months ended
September 30, September 30,
($ in millions) 2009 2008 Change 2009 2008 Change
Equity in earnings of
Polaris Acceptance $ 0.9 $ 1.0 -10 % $ 3.0 $ 3.4 -12 %
Income from
Securitization
Facility 2.3 2.2 5 % 7.0 6.8 3 %
Income from retail
credit agreements 0.3 0.9 -67 % 0.7 5.3 -87 %
Income from other
financial services
activities 0.4 0.4 - 1.6 1.7 -6 %
Total income from
financial services $ 3.9 $ 4.5 -13 % $ 12.3 $ 17.2 -28 %
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Income from financial services decreased 13 percent to $3.9 million in the 2009
third quarter compared to $4.5 million in the 2008 third quarter. Income from
financial services decreased 28 percent to $12.3 million for the nine months
ended September 30, 2009 from $17.2 million for the same period of 2008. The
decrease for the 2009 third quarter and year-to-date periods was primarily due
to the Company's revolving retail credit provider, HSBC, eliminating the
volume-based fee income payment to Polaris in the first quarter 2008 and lower
retail sales levels in 2009 (as discussed in more detail in the "Liquidity and
Capital Resources" section below).
Interest expense
Interest expense decreased to $1.1 million and $3.2 million for the three and
nine months ended September 30, 2009, respectively, compared to $2.6 million and
$7.8 million for the same periods of 2008, due to lower interest rates and, to a
lesser extent, lower borrowings on the Company's credit facility during the 2009
periods.
Noncash Impairment charge on securities available for sale
For the year-to-date period ended September 30, 2009, the Impairment charge on
securities available for sale was $9.0 million compared to $0.0 for the
comparable period in 2008. The noncash Impairment charge was recorded in the
first quarter 2009 and relates to the Company's KTM investment, which had a fair
value equal to the trading price of KTM shares on the Vienna stock exchange. The
total fair value of these securities as of March 31, 2009 was $8.8 million,
which was below the Company's cost basis for this investment at that time.
During the first quarter 2009, the Company determined that the decline in the
fair value of the KTM shares was other than temporary and therefore recorded the
unrealized non-cash impairment charge, net of tax benefit, in the income
statement.
Other expense/income, net
Non-operating other income was $1.3 million and $2.0 million for the third
quarter and year-to-date periods ended September 30, 2009, respectively,
compared to $0.2 million and $1.1 million of income for the same periods in
2008. The increase in income for the 2009 third quarter and year-to-date periods
was primarily due to the weakening U.S. dollar and the resulting effects on the
Canadian dollar and other international currency hedging activities and foreign
currency transactions related to the foreign subsidiaries. This currency related
income only partially offset the Company's overall negative impact of currency
movements in the 2009 third quarter and year-to-date periods.
Provision for income taxes
The income tax provision for the third quarter 2009 was recorded at a rate of
32.1 percent of pretax income compared to 29.3 percent of pretax income for the
third quarter 2008. Year-to-date the income tax provision for 2009 was recorded
at a rate of 33.1 percent of pretax income compared to 32.9 percent of pretax
income for the 2008 year-to-date period. The higher income tax rate for the 2009
third quarter and year-to-date periods is primarily due to a lower amount of
favorable tax events in the third quarter 2009 compared to the third quarter
2008.
Reported Net Income
Three Months Ended Nine months ended
September 30, September 30,
($ in millions except per share data) 2009 2008 Change 2009 2008 Change
Net Income $ 31.2 $ 37.7 -17 % $ 57.1 $ 81.2 -30 %
Diluted net income per share $ .94 $ 1.13 -17 % $ 1.73 $ 2.40 -28 %
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Reported net income for the third quarter 2009 was $31.2 million, or $0.94 per diluted share, compared to $37.7 million or $1.13 per diluted share for the third quarter 2008. Year-to-date 2009 reported net income was $57.1 million, or $1.73 per diluted share, compared to $81.2 million or $2.40 per diluted share for the 2008 period. The decrease for the 2009 third quarter and year-to-date periods is primarily due to lower sales volume.
Weighted Average Shares Outstanding
The weighted average diluted shares outstanding for the third quarter ended
September 30, 2009 of 33.2 million shares is approximately flat compared to the
comparable period in 2008. For the year-to-date 2009 period, the weighted
average diluted shares outstanding of 32.9 million shares is down three percent
compared to the comparable period in 2008.
Cash Dividends
Polaris paid a $0.39 per share dividend on August 17, 2009 to shareholders of
record on August 3, 2009. On October 22, 2009, the Polaris Board of Directors
declared a regular cash dividend of $0.39 per share payable on or about
November 16, 2009 to holders of record of such shares at the close of business
on November 2, 2009.
Liquidity and Capital Resources
Polaris' primary sources of funds have been cash provided by operating
activities and borrowings under its credit arrangements. Polaris' primary uses
of funds have been for repayments under the credit agreement, repurchase and
retirement of common stock, capital investments, cash dividends to shareholders
and new product development.
The following chart summarizes the cash flows from operating, investing and
financing activities for the nine months ended September 30, 2009 ($ in
millions):
For the Nine months ended September 30,
2009 2008 Change
Total cash provided by (used for):
Operating activities $ 102.4 $ 132.3 $ (29.9 )
Investing activities $ (21.5 ) $ (47.3 ) $ 25.8
Financing activities $ (35.3 ) $ (105.1 ) $ 69.8
Increase/(Decrease) in cash and cash equivalents $ 45.6 $ (20.1 ) $ 65.7
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Net cash provided by operating activities totaled $102.4 million for the nine months ended September 30, 2009, compared to $132.3 million cash provided in the same period of 2008. The $29.9 million decrease in net cash provided by operating activities for the nine months ended September 30, 2009 compared to . . .
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