Polaris Reports First Quarter 2007 Results



    MINNEAPOLIS, April 12 /CNW/ - Polaris Industries Inc. (NYSE:  PII)

    First Quarter Highlights:

    --  Reported earnings from continuing operations per diluted share of
$0.34, up 31 percent from $0.26 per diluted share last year

    --  Gain of $4.8 million, pretax, or approximately $0.09 per diluted
share, was realized on the sale of 1.11 million shares of Polaris' KTM
investment

    --  Operating cash flow used for continuing operations improved $28.3
million

    --  Guidance for full year 2007 earnings from continuing operations
remains unchanged at $2.91 to $3.03 per diluted share

    Polaris Industries Inc. (NYSE:  PII) today reported first quarter net
income from continuing operations of $12.6 million or $0.34 per diluted share
for the quarter ended March 31, 2007, in line with previously issued guidance.
By comparison, 2006 first quarter net income from continuing operations was
$11.2 million or $0.26 per diluted share. Sales from continuing operations for
the first quarter 2007 totaled $317.7 million, a decrease of five percent from
last year's first quarter sales from continuing operations of $333.5 million.
Reported net income for the 2007 first quarter, including discontinued
operations was $12.4 million, or $0.34 per diluted share compared to net
income of $11.5 million, or $0.27 per diluted share in the first quarter of
2006, which included $0.4 million or $0.01 per share of a cumulative effect of
adopting SFAS 123(R) in the first quarter 2006.

    "Our first quarter results were solid," commented Tom Tiller, Chief
Executive Officer. "Additionally, at the retail level we continue to see
progress in our dealers' efforts to lower their inventories for both ATVs and
snowmobiles due to the combination of a reduction of shipments to our North
American dealers and improved retail sales during the first quarter 2007. We
are on track for dealer ATV inventory to be at acceptable levels by mid year
2007 as we have previously indicated."

    Tiller added, "It has been almost two months since we unveiled three all
new products to consumers, the Victory Vision Street(TM), Victory Vision
Tour(TM) and the RANGER RZR(TM). Since introduction, the excitement about
these products has exceeded our expectations. We believe that our commitment
to lead in innovation as evidenced by these recent product introductions will
continue to differentiate Polaris from our competitors and provide sustainable
long-term growth opportunities to the Company."

    2007 Business Outlook

    Guidance for full year 2007 earnings from continuing operations remains
unchanged and is expected to be in the range of $2.91 to $3.03 per diluted
share compared to earnings from continuing operations of $2.72 per diluted
share for the full year 2006 on expected sales growth of one percent to three
percent for the full year 2007. During the second quarter of 2007, the Company
anticipates that North American ATV shipments will decrease once again as
dealers continue to manage their inventory to lower levels, resulting in total
sales expectations for second quarter 2007 to be lower than the second quarter
of 2006 in the range of down three to five percent. Second quarter 2007
earnings from continuing operations are expected to be in the range of $0.57
to $0.60 per diluted share, compared to earnings from continuing operations of
$0.53 per diluted share for the second quarter of 2006.

    
    Product line Information                 First Quarter Ended March 31,
    ----------------------------------------------------------------------
    (In millions)                              2007      2006    % change
    ----------------------------------------------------------------------
    Snowmobiles                                $2,913    $2,545        14%
    ----------------------------------------------------------------------
    All-terrain Vehicles                      222,487   243,601        -9%
    ----------------------------------------------------------------------
    Victory Motorcycles                        26,615    25,288         5%
    ----------------------------------------------------------------------
    Parts, Garments & Accessories              65,698    62,075         6%
    ----------------------------------------------------------------------
                  Total Sales                $317,713  $333,509        -5%
    ----------------------------------------------------------------------
    

    ATV (all-terrain vehicle) sales in the 2007 first quarter decreased nine
percent from the first quarter 2006. As planned, shipments of core ATVs to
dealers in North America decreased in response to dealer inventory levels and
weaker overall market conditions. The RANGER(TM) utility vehicle product line
continued to experience solid, double-digit growth in shipments and retail
sales during the quarter. The new RANGER RZR(TM) has been extremely well
received and will begin shipping to dealers in limited quantities in the
second quarter 2007.

    Sales of Victory motorcycles increased five percent during the 2007 first
quarter compared to the first quarter of 2006. The increase is driven by the
ongoing excitement around the Victory brand and the strengthening of the
dealer channel. The new 2008 Victory Vision(TM) models that were unveiled
during the first quarter have been very well received and shipments to dealers
are expected to begin in the second half of 2007.

    Parts, Garments, and Accessories sales increased six percent during the
2007 first quarter compared to last year's first quarter driven by increased
sales of ATV and utility vehicle related PG&A during the quarter.

    Snowmobile sales totaled $2.9 million for the 2007 first quarter compared
to $2.5 million for the prior year's first quarter. The first quarter is
historically a seasonally low quarter for snowmobile shipments. During the
first quarter of 2007 improved late season snowfall resulted in increased
retail sales which helped to further reduce dealers' snowmobile inventories.
However, retail sales for the full snowmobile riding season ended March 31,
2007 were lower than the previous season for both Polaris and the overall
snowmobile industry due in large part to poor snowfall for the majority of the
season in many regions of the country.

    Gross profit, as a percentage of sales, was 20.4 percent for the 2007
first quarter, an increase of 20 basis points from 20.2 percent for the first
quarter of 2006. Gross profit dollars decreased four percent to $64.9 million
for the 2007 first quarter compared to $67.4 million for the first quarter of
2006 due to the lower sales levels. The gross profit margin was positively
impacted by the mix of products sold as more utility vehicles and PG&A, which
typically have higher margins, were sold during the first quarter of 2007,
partially offset by increased sales promotion costs.

    For the first quarter of 2007, operating expenses increased one percent
to $61.5 million compared to $60.6 million for the first quarter of 2006.
Operating expenses as a percent of sales increased to 19.4 percent from 18.2
percent in the first quarter of 2006. Operating expenses increased from the
prior year primarily due to a twelve percent increase in research and
development expenses related to the exciting new products under development.

    Income from financial services increased 35 percent to $12.6 million in
the 2007 first quarter, up from $9.3 million in the first quarter of 2006
primarily as a result of the increased profitability generated from the retail
credit portfolio with HSBC.

    Interest expense increased to $4.8 million for the 2007 first quarter
compared to $1.5 million for the first quarter of 2006 due to higher debt
levels and increased interest rates during the current year period.

    Gain on sale of manufacturing affiliate shares was $4.8 million for the
first quarter of 2007 resulting from the first closing of the Company's sale
of its KTM Power Sports AG ("KTM") investment under the terms of a previously
announced agreement. In February, 2007 approximately 1.11 million shares were
sold at a price of approximately 47.0 million Euros. As a result, the Company
recorded a gain on the sale of the KTM investment due to the recognition of
previously unrealized translation gains recorded in accumulated other
comprehensive income, a component of shareholders' equity.

    Equity in income of manufacturing affiliates (which primarily represents
the Company's portion of income from the investment in KTM, net of tax), was
$0.0 for the first quarter 2007 compared to $1.2 million for the first quarter
2006. As has been previously disclosed, the Company no longer receives a net
benefit from its ownership percentage of KTM's income in Polaris' income
statement.

    Non-operating other income increased to $2.7 million in the first quarter
of 2007 compared to $0.7 million the first quarter of 2006. The increase is
primarily due to the weakening of the U.S. dollar and the resulting effects of
foreign currency transactions related to the international subsidiaries.

    Financial position and cash flow

    Polaris historically experiences the highest demand for cash during the
first quarter of each year. Net cash used for operating activities of
continuing operations totaled $14.8 million for the first quarter ended March
31, 2007, an improvement from $43.1 million used in the first quarter of 2006.
Lower accounts receivable, fewer cash payments against accrued expenses along
with reduced growth in factory inventories at March 31, 2007 compared to the
same time period last year were the primary reasons for the improvement.
Borrowings under the credit agreement were $243.0 million at March 31, 2007
primarily as a result of the term loan utilized to complete the accelerated
share repurchase transaction in the fourth quarter of 2006. The Company's
debt-to-total capital ratio was 58 percent at March 31, 2007, compared to 18
percent at the same time last year.

    Share Buyback Activity

    As previously announced, during the fourth quarter 2006 the Company
repurchased and retired 3.55 million shares of Polaris common stock through an
accelerated share repurchase agreement. During the first quarter 2007 the
Company repurchased and retired only a nominal number of shares related to
employee stock incentive plans. As of March 31, 2007, the Company has
authorization from its Board of Directors to repurchase up to an additional
4.8 million shares of Polaris stock. After the completion of the accelerated
share repurchase transaction which is anticipated to be no later than
September 2007, Polaris may repurchase the balance of the share authorization
from time to time in open market or privately negotiated transactions in
accordance with applicable federal securities laws.

    Conference Call to be Held

    Today at 9:00 AM (CDT) Polaris Industries Inc. will host a conference
call to discuss Polaris' first quarter 2007 earnings results released this
morning. The conference call is accessible by dialing 800-374-6475 in the U.S.
and Canada or 706-679-2596 for International calls or via the Investor
Relations page of the Company's web site, www.polarisindustries.com (click on
Our Company then Investor Relations). The conference call will be available
through Thursday, April 19, 2007 by dialing 800-642-1687 in the U.S. and
Canada, or 706-645-9291 for International calls and entering passcode 4153976,
and on Polaris' web site.

    About Polaris

    Information about the complete line of Polaris products is available from
authorized Polaris dealers or from the Polaris homepage at
www.polarisindustries.com.

    With annual 2006 sales of $1.7 billion, Polaris designs, engineers,
manufactures and markets snowmobiles, all-terrain vehicles (ATVs), Victory
motorcycles and the Polaris RANGER(TM) for recreational and utility use.

    Polaris is a recognized leader in the snowmobile industry and one of the
largest manufacturers of ATVs in the world. Victory motorcycles, established
in 1998 and representing the first all-new American-made motorcycle from a
major company in nearly 60 years, are rapidly making impressive in-roads into
the motorcycle cruiser marketplace. Polaris also enhances the riding
experience with a complete line of Pure Polaris apparel, accessories and
parts, available at Polaris dealerships. Consumers can also purchase apparel
and vehicle accessories anytime at www.polarisindustries.com.

    Polaris Industries Inc. trades on the New York Stock Exchange under the
symbol "PII," and the Company is included in the S&P Small-Cap 600 stock price
index.

    Except for historical information contained herein, the matters set forth
in this news release, including management's expectations regarding 2007
sales, shipments, net income and cash flow, are forward-looking statements
that involve certain risks and uncertainties that could cause actual results
to differ materially from those forward-looking statements. Potential risks
and uncertainties include such factors as product offerings, promotional
activities and pricing strategies by competitors; warranty expenses; foreign
currency exchange rate fluctuations; effects of the KTM relationship;
environmental and product safety regulatory activity; effects of weather;
commodity costs; uninsured product liability claims; and overall economic
conditions, including inflation and consumer confidence and spending.
Investors are also directed to consider other risks and uncertainties
discussed in documents filed by the Company with the Securities and Exchange
Commission.

    
                           POLARIS INDUSTRIES INC.
                      CONSOLIDATED STATEMENTS OF INCOME
                    (In Thousands, Except Per Share Data)
                                  UNAUDITED

                                             First Quarter Ended March 31,
                                             -----------------------------
                                                  2007           2006
                                             -------------- --------------
    Sales                                         $317,713       $333,509
    Cost of sales                                  252,778        266,117
                                             -------------- --------------
      Gross profit                                  64,935         67,392
    Operating expenses
      Selling and marketing                         27,475         28,320
      Research and development                      18,551         16,497
      General and administrative                    15,491         15,824
                                             -------------- --------------
           Total operating expenses                 61,517         60,641

    Income from financial services                  12,626          9,326
                                             -------------- --------------
           Operating Income                         16,044         16,077

    Non-operating Expense
      Interest expense                               4,780          1,513
      Equity in loss (income) of
       manufacturing affiliates                         34         (1,183)
      Gain on sale of manufacturing affiliate
       shares                                       (4,840)             -
      Other (income), net                           (2,744)          (717)
                                             -------------- --------------
           Income before income taxes               18,814         16,464

    Provision for Income Taxes                       6,263          5,271
                                             -------------- --------------
           Net Income from continuing
            operations                             $12,551        $11,193
           Loss from discontinued operations,
            net of tax                                (158)           (70)
                                             -------------- --------------
           Net income before cumulative
            effect of accounting change            $12,393        $11,123
           Cumulative effect of accounting
            change, net of tax                           -            407
                                             -------------- --------------
           Net Income                              $12,393        $11,530
                                             -------------- --------------

    Basic Net Income per share
           Continuing operations                     $0.35          $0.27
           Loss from discontinued operations        $(0.00)        $(0.00)
           Cumulative effect of accounting
            change                                       -           0.01
                                             -------------- --------------
           Net Income                                $0.35          $0.28
                                             -------------- --------------
           Cumulative effect of accounting
            change
    Diluted Net Income per share
           Continuing operations                     $0.34          $0.26
           Loss from discontinued operations        $(0.00)        $(0.00)
           Cumulative effect of accounting
            change                                       -           0.01
                                             -------------- --------------
           Net Income                                $0.34          $0.27
                                             -------------- --------------

    Weighted average shares outstanding:
           Basic                                    35,492         41,791
           Diluted                                  36,552         43,124


    All periods reflect the classification of the Marine Division results
     as discontinued operations.
    

    
                           POLARIS INDUSTRIES INC.
                         CONSOLIDATED BALANCE SHEETS

    Subject to Reclassification
    (In Thousands)
                                             March 31, 2007 March 31, 2006
                     ASSETS                   (Unaudited)    (Unaudited)
                                             -------------- --------------
    Current Assets
    Cash and cash equivalents                      $45,115        $10,913
    Trade receivables, net                          51,957         60,712
    Inventories, net                               236,739        220,005
    Prepaid expenses and other                      17,192         13,163
    Deferred income taxes                           55,927         55,430
    Current assets from discontinued
     operations                                         --              3
                                             -------------- --------------
    Total current assets                           406,930        360,226
    Property and equipment, net                    205,511        222,275
    Investments in Finance Affiliate                47,879         52,359
    Investments in Manufacturing Affiliates         43,097         90,583
    Deferred Income Taxes                            3,212          2,160
    Goodwill, net                                   25,082         25,029
    Intangibles and Other Assets, net                  110            198
                                             -------------- --------------
    Total Assets                                  $731,821       $752,830
                                             -------------- --------------

      LIABILITIES AND SHAREHOLDERS' EQUITY
    Current Liabilities:
    Accounts payable                              $105,795        $97,959
    Accrued expenses                               195,196        192,305
    Income taxes payable                               684          4,947
    Current liabilities from discontinued
     operations                                      4,290          4,688
                                             -------------- --------------
    Total current liabilities                      305,965        299,899
    Long term taxes payable                          5,440             --
    Borrowings under Credit Agreement              243,000         80,000
                                             -------------- --------------
    Total Liabilities                             $554,405       $379,899
    Shareholders' Equity:
    Preferred stock $0.01 par value, 20,000
     shares authorized, no shares issued and
     outstanding                                        --             --
    Common stock $0.01 par value, 80,000
     shares authorized, 35,618 and 41,513
     shares issued and outstanding                    $356           $415
    Additional paid-in capital                          --             --
    Retained earnings                              160,979        371,537
    Accumulated other comprehensive income          16,081            979
                                             -------------- --------------
    Total shareholders' equity                     177,416        372,931
                                             -------------- --------------
    Total Liabilities and Shareholders'
     Equity                                       $731,821       $752,830
                                             -------------- --------------


    All periods reflect the classification of the Marine Division results
     as discontinued operations.
    

    
                           POLARIS INDUSTRIES INC.
                    CONSOLIDATED STATEMENTS OF CASH FLOWS

    Subject to Reclassification
    (In Thousands)
    Unaudited
                                             First Quarter Ended March 31,
                                                  2007           2006
                                             -------------- --------------
    Operating Activities:
      Net income before cumulative effect of
       accounting change                           $12,393        $11,123
            Net loss from discontinued
             operations                                158             70
      Adjustments to reconcile net income to
       net cash used for operating
       activities:
           Depreciation and amortization            12,792         14,117
           Noncash compensation                      5,208          5,628
           Noncash (income) from financial
            services                                (1,231)        (3,845)
           Noncash loss (income) from
            manufacturing affiliates                    34         (1,183)
           Deferred income taxes                     1,562          4,411
           Changes in current operating
            items:
               Trade receivables                    11,858         17,638
               Inventories                          (6,205)       (17,984)
               Accounts payable                      5,124            895
               Accrued expenses                    (57,250)       (71,425)
               Income taxes payable                  2,184         (4,480)
               Prepaid expenses and others,
                net                                 (1,405)         1,948
                                             -------------- --------------
         Net cash used for continuing
          operations                               (14,778)       (43,087)
         Net cash flow used for discontinued
          operations                                  (229)          (665)
                                             -------------- --------------
         Net cash used for operating
          activities                               (15,007)       (43,752)

    Investing Activities:
      Purchase of property and equipment           (14,307)       (14,023)
      Investments in finance affiliate, net          8,980         11,087
      Proceeds from sale of shares of
       manufacturing affiliate                      61,723             --
                                             -------------- --------------
         Net cash provided by (used for)
          investing activities                      56,396         (2,936)

    Financing Activities:
      Borrowings under credit agreement            152,000        199,000
      Repayments under credit agreement           (159,000)      (137,000)
      Repurchase and retirement of common
       shares                                         (649)       (16,413)
      Cash dividends to shareholders               (11,922)       (12,807)
      Proceeds from stock issuances under
       employee plans                                3,280          1,121
      Tax effect of exercise of stock options          451          4,025
                                             -------------- --------------

         Net cash provided by (used for)
          financing activities                     (15,840)        37,926
                                             -------------- --------------

    Net increase (decrease) in cash and cash
     equivalents                                    25,549         (8,762)

    Cash and cash equivalents at beginning of
     period                                         19,566         19,675
                                             -------------- --------------

    Cash and cash equivalents at end of
     period                                        $45,115        $10,913
                                             -------------- --------------


    All periods reflect the classification of the Marine Division results
     as discontinued operations.
    




For further information:

For further information: Polaris Industries Inc. Richard Edwards,
763-542-0500

Organization Profile

POLARIS INDUSTRIES INC.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890