Polaris Reports Strong Third Quarter 2007 Results, Sales Grew 11 Percent to a Record $544 Million; Earnings Per Diluted Share from Continuing Operations Increased to $1.07




    Third Quarter Highlights:

    --  Results exceeded the Company's expectations driven by record sales
and improved gross margins

    --  Sales for the third quarter 2007 reached a record high of $544.0
million driven by ATV sales growth of 15%, primarily from growth in the
RANGER(TM) side by side business and PG&A sales growth of 13%

    --  Earnings per diluted share from continuing operations increased three
percent to $1.07, from $1.04 per diluted share last year

    --  Completed the accelerated share repurchase transaction and
repurchased 808,000 shares of Polaris common stock during the third quarter.
As a result, diluted weighted average shares outstanding for the third quarter
were 11 percent lower than last year

    --  Gross margin percentage for the third quarter 2007 improved 160 basis
points to 22.5% due primarily to positive product mix and currency impacts

    --  Raising full year 2007 earnings from continuing operations guidance
to $3.05 to $3.10 per diluted share, a 12% to 14% increase over 2006 on
expected full year 2007 sales growth of five to six percent

    MINNEAPOLIS, October 16 /CNW/ - Polaris Industries Inc. (NYSE:  PII) today
reported third quarter net income from continuing operations of $39.1 million,
or $1.07 per diluted share, for the quarter ended September 30, 2007. By
comparison, 2006 third quarter net income from continuing operations was $42.7
million, or $1.04 per diluted share. Sales from continuing operations for the
third quarter 2007 totaled a record $544.0 million, an increase of 11 percent
from last year's third quarter sales from continuing operations of $490.1
million. Reported net income for the 2007 third quarter, including
discontinued operations was $38.8 million, or $1.06 per diluted share compared
to net income of $42.5 million, or $1.03 per diluted share in the third
quarter of 2006.

    "We are pleased to report strong third quarter results, which we believe
clearly reflects our commitment to the operating plan we laid out at the
beginning of the year. Dealer ATV inventories are much lower than a year ago,
the benefit of our productivity and efficiency improvement programs are being
realized and many new products introduced this year are selling nicely,"
commented Tom Tiller, Chief Executive Officer of Polaris. "Demand continues to
outpace supply for our new RANGER RZR(TM) model, and the overall side by side
market continues to expand. Additionally, in the past few weeks we began
shipping the new Victory Vision(TM) model which was named motorcycle of the
year for its class by Motorcyclist(TM) magazine. We are very pleased with the
positive reception these and our other model year 2008 products have received
to date."

    Tiller continued, "While the recent macro economic environment has caused
some concern within the overall markets in which we compete, we are
continuously monitoring consumer spending and industry trends and are making
adjustments as appropriate. However, given the positive feedback we received
at our dealer meeting held in July, our continued productivity and efficiency
improvement efforts and the success of several of our new products, we are
optimistic about the future for Polaris. Accordingly, we are raising our
guidance for both full year 2007 sales and earnings per share, and now expect
sales to grow in the five to six percent range over 2006 and earnings per
diluted share from continuing operations to be in the range of $3.05 to $3.10,
a 12 to 14 percent increase over the full year 2006 earnings per diluted share
from continuing operations. As a result, we expect fourth quarter 2007 sales
growth in the range of 12 to 15 percent with earnings from continuing
operations in the range of $1.01 to $1.06 per diluted share for the fourth
quarter of 2007, a nine to 14 percent increase over the fourth quarter 2006
earnings per diluted share from continuing operations."

    
    Product line       Third Quarter ended         Nine Months ended
     Information          September 30,              September 30,
    ----------------------------------------------------------------------
    (in thousands)     2007     2006   Change    2007       2006    Change
    ----------------------------------------------------------------------
    Snowmobiles      $ 91,710 $ 87,195     5% $   99,042 $   95,009     4%
    ----------------------------------------------------------------------
    All-terrain
     Vehicles         353,262  308,286    15%    857,806    838,566     2%
    ----------------------------------------------------------------------
    Victory
     Motorcycles       21,431   25,806   -17%     77,029     78,938    -2%
    ----------------------------------------------------------------------
    Parts, Garments
     & Accessories     77,576   68,803    13%    204,717    195,421     5%
    ----------------------------------------------------------------------
      Total Sales    $543.979 $490,090    11% $1,238,594 $1,207,934     3%
    ----------------------------------------------------------------------
    

    ATV (all-terrain vehicle) sales in the 2007 third quarter increased 15
percent from the third quarter 2006. This increase reflects the new product
introduction success of the RANGER RZR(TM) side-by-side recreation vehicle in
the marketplace and the continued solid demand for the base RANGER(TM)
side-by-side utility vehicles during the quarter. This growth was offset
somewhat by the planned reduction in shipments of core ATVs to dealers during
the third quarter 2007 in the continued effort to assist dealers in reducing
their inventory levels and the ongoing impact of weak overall market
conditions. As a result of these efforts, core ATV dealer inventories for the
third quarter 2007 are significantly lower than the same period last year and
sequentially lower from the second quarter 2007 to the third quarter 2007.
Although shipments to dealers of core ATVs were once again lower during the
third quarter, the Company gained market share at retail during the third
quarter and year to date 2007 periods in a declining overall core ATV market.

    Sales of Victory motorcycles decreased 17 percent during the 2007 third
quarter compared to the third quarter of 2006. Although the overall motorcycle
industry in North America has slowed during the 2007 year-to-date period, the
Victory growth in retail sales to consumers continues to outpace the industry.
However, given the more challenged industry retail environment, the Company
shipped fewer cruiser motorcycles to the dealers during the third quarter 2007
than in the third quarter 2006. The Company remains optimistic about the
Victory business as the all-new 2008 Victory Vision(TM) touring models begin
to ship in greater quantities in the fourth quarter 2007. The Victory
Vision(TM) models have received very positive reviews by the motorcycle
enthusiast magazines and from consumers that have ridden the bike during
demonstration rides.

    Snowmobile sales increased five percent during the 2007 third quarter
compared to the prior year's third quarter. The third quarter increase
reflects a benefit of product mix related to the timing of shipments of the
new models as well as the positive impact of currency movements.

    Parts, Garments, and Accessories sales increased 13 percent during the
2007 third quarter compared to last year's third quarter driven primarily by
increased shipments of ATV and RANGER side-by-side related PG&A, particularly
accessories for the new RANGER RZR(TM), as well as the timing of delivery of
pre-season snowmobile related PG&A during the third quarter.

    Gross profit, as a percentage of sales, was 22.5 percent for the 2007
third quarter, an increase of 160 basis points from 20.9 percent for the third
quarter of 2006. Gross profit dollars increased 19 percent to $122.5 million
for the 2007 third quarter compared to $102.7 million for the third quarter of
2006. The improved gross profit margin and absolute dollar increase in gross
profit was primarily due to the positive impact of increased sales of higher
gross margin products, such as RANGER(TM) side-by-side vehicles and PG&A, and
favorable foreign currency fluctuations during the third quarter of 2007,
which were partially offset by increased sales promotion and warranty costs.

    Operating expenses for the third quarter 2007 increased 29 percent to
$71.2 million compared to $55.1 million for the third quarter of 2006.
Operating expenses as a percent of sales increased to 13.1 percent for the
third quarter 2007 from 11.2 percent in the third quarter of 2006. The
increased operating expenses during the third quarter are primarily attributed
to; a) additional selling and marketing expenses resulting from higher
advertising costs incurred to launch the new products and become more
competitive in the ATV industry, b) increased research and development costs
from continued emphasis on new product development and c) higher general and
administrative expenses due to more normalized performance based compensation
expenses as a result of the Company's improved financial performance in 2007
as compared to 2006.

    Income from financial services decreased 28 percent to $9.1 million in
the 2007 third quarter, down from $12.7 million in the third quarter of 2006.
As expected, Income from financial services decreased substantially as the
Company's revolving retail credit provider HSBC, discontinued the financing of
non-Polaris products at Polaris dealerships during the third quarter 2007.
Additionally, the income from wholesale financing was lower in the third
quarter 2007 due to lower dealer inventories.

    Interest expense increased to $3.7 million for the 2007 third quarter
compared to $2.6 million for the third quarter of 2006 due to higher debt
levels maintained during the third quarter 2007.

    Equity in (income) of manufacturing affiliates (which historically has
primarily represented the Company's portion of income from the investment in
KTM, net of tax), was less than $0.1 million for the third quarter 2007
compared to $2.7 million for the third quarter 2006. As has been previously
disclosed, during the first half of 2007 Polaris sold a majority of its
investment in KTM; therefore, the Company no longer receives a net benefit
from its ownership percentage of KTM's income in Polaris' income statement.

    The Income tax provision for the third quarter 2007 was recorded at a
rate of 30.8 percent of pretax income, compared to 28.4 percent in the third
quarter 2006. The higher income tax rate in the third quarter 2007 is
primarily due to lower dollar value of favorable tax events in the third
quarter 2007 compared to the third quarter 2006.

    Financial Position and Cash Flow

    Net cash provided by operating activities of continuing operations for
the third quarter of 2007 totaled $127.7 million compared to $83.5 million in
the third quarter of 2006. Year-to-date ended September 30, 2007, net cash
provided by operating activities of continuing operations totaled $149.4
million, an improvement of $56.9 million from the $92.5 million in the first
nine months of 2006. Increased accrued expenses primarily due to more
normalized compensation expenses accrued in 2007 and slower growth in factory
inventory compared to the same period last year were the primary contributing
factors for the increase in net cash provided by operating activities during
the nine months ended September 30, 2007. Outstanding borrowings under the
credit agreement were $200.0 million at September 30, 2007, due to the
utilization of a term loan to complete the accelerated share repurchase
transaction in the fourth quarter of 2006. The Company's debt-to-total capital
ratio was 52 percent at September 30, 2007, compared to 19 percent at the same
time last year. Cash and cash equivalents were $87.0 at September 30, 2007
compared to $9.1 million a year ago.

    Share Buyback Activity

    During the third quarter 2007 the Company paid $13.0 million to Goldman,
Sachs & Co. (Goldman) related to the purchase price adjustment that was
contemplated under the 3.55 million shares accelerated share repurchase
transaction with Goldman in December 2006. Additionally, during the third
quarter 2007 the Company repurchased and retired 808,000 shares of its common
stock bringing the total shares repurchased to 834,000 shares for the
year-to-date period ended September 30, 2007. The cost of repurchasing Polaris
common stock and the purchase price adjustment payment under the accelerated
share repurchase transaction for the year-to-date period ended September 30,
2007, totaled $51.5 million. As a result of the accelerated share repurchase
transaction completed in the fourth quarter of 2006 and the subsequent share
repurchases completed by the Company in the year-to-date period ended
September 30, 2007, the diluted weighted average shares outstanding for the
third quarter and year-to-date periods ended September 30, 2007 were 11
percent and 13 percent lower, respectively, than the comparable prior year
periods. As of September 30, 2007, the Company has authorization from its
Board of Directors to repurchase up to an additional 3.9 million shares of
Polaris stock. 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 its third quarter 2007 financial results. Tom Tiller, CEO,
Bennett Morgan, President and COO, and Mike Malone, Vice President Finance and
CFO, will host the conference call.

    To listen to the conference call by phone, dial 800-374-6475 in the U.S.
and Canada or 706-679-2596 internationally. The conference call will also be
broadcast live over the Internet at www.polarisindustries.com (click on Our
Company then Investor Relations).

    A replay of the conference call will be available approximately two hours
after the call concludes for a one-week period by accessing the same link on
our website, or by dialing 800-642-1687 in the U.S. and Canada or 706-645-9291
internationally. The Conference I.D. is 4158562.

    About Polaris

    With annual 2006 sales of $1.7 billion, Polaris designs, engineers,
manufactures and markets all-terrain vehicles (ATVs), including the Polaris
RANGER(TM), snowmobiles and Victory motorcycles 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 cruiser and touring motorcycle marketplace. Polaris also enhances the
riding experience with a complete line of Pure Polaris apparel, accessories
and parts, available at Polaris dealerships.

    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.

    Information about the complete line of Polaris products, apparel and
vehicle accessories is available from authorized Polaris dealers or anytime
from the Polaris homepage at www.polarisindustries.com.

    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)

                                For Three Months       For Nine Months
                               Ended September 30,   Ended September 30,
                               ------------------- -----------------------
                                 2007      2006       2007        2006
                               --------- --------- ----------- -----------
    Sales                      $543,979  $490,090  $1,238,594  $1,207,934
    Cost of sales               421,432   387,439     964,531     954,462
                               --------- --------- ----------- -----------
     Gross profit               122,547   102,651     274,063     253,472
    Operating expenses
     Selling and marketing       36,381    26,614      92,865      81,484
     Research and development    18,500    16,343      54,758      53,550
     General and
      administrative             16,274    12,132      48,820      38,250
                               --------- --------- ----------- -----------
       Total operating
        expenses                 71,155    55,089     196,443     173,284

    Income from financial
     services                     9,108    12,696      35,635      33,568
                               --------- --------- ----------- -----------
       Operating Income          60,500    60,258     113,255     113,756

    Non-operating Expense
     (Income):
     Interest expense             3,677     2,581      12,201       6,129
     Equity in (income) of
      manufacturing affiliates      (28)   (2,653)        (30)     (3,614)
     Gain on sale of
      manufacturing affiliate
      shares                          -         -      (6,222)          -
     Other expense (income),
      net                           352       652      (3,848)        751
                               --------- --------- ----------- -----------
       Income before income
        taxes                    56,499    59,678     111,154     110,490

    Provision for Income Taxes   17,379    16,935      36,557      33,825
                               --------- --------- ----------- -----------
       Net Income from
        continuing operations  $ 39,120  $ 42,743  $   74,597  $   76,665
       Loss from discontinued
        operations, net of tax     (294)     (259)       (658)       (466)
       Loss on disposal of
        discontinued
        operations, net of tax        -         -           -      (2,021)
       Cumulative effect of
        accounting change, net
        of tax                        -         -           -         407
                               --------- --------- ----------- -----------
       Net Income              $ 38,826  $ 42,484  $   73,939  $   74,585
                               --------- --------- ----------- -----------
    Basic Net Income per share
       Continuing operations   $   1.10  $   1.06  $     2.10  $     1.86
       Loss from discontinued
        operations             $  (0.01) $  (0.01) $    (0.02) $    (0.01)
       Loss on disposal of
        discontinued
        operations             $      -  $      -  $        -  $    (0.05)
       Cumulative effect of
        accounting change             -         -           -        0.01
                               --------- --------- ----------- -----------
       Net Income              $   1.09  $   1.05  $     2.08  $     1.81
                               --------- --------- ----------- -----------

    Diluted Net Income per
     share
       Continuing operations   $   1.07  $   1.04  $     2.04  $     1.81
       Loss from discontinued
        operations             $  (0.01) $  (0.01) $    (0.02) $    (0.01)
       Loss on disposal of
        discontinued
        operations             $      -  $      -  $        -  $    (0.05)
       Cumulative effect of
        accounting change             -         -           -        0.01
                               --------- --------- ----------- -----------
       Net Income              $   1.06  $   1.03  $     2.02  $     1.76
                               --------- --------- ----------- -----------

    Weighted average shares
     outstanding:
       Basic                     35,501    40,277      35,529      41,154
                               --------- --------- ----------- -----------
       Diluted                   36,572    41,257      36,626      42,319
                               --------- --------- ----------- -----------


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

    
                           POLARIS INDUSTRIES INC.
                         CONSOLIDATED BALANCE SHEETS

    Subject to Reclassification      September 30, 2007 September 30, 2006
    (In Thousands)                      (Unaudited)        (Unaudited)
                                     ------------------ ------------------

    Assets
    Current Assets:
      Cash and cash equivalents        $         86,967   $          9,086
      Trade receivables, net                     69,934             79,006
      Inventories, net                          257,776            243,936
      Prepaid expenses and other                 18,123             13,717
      Deferred tax assets                        65,940             55,259
                                     ------------------ ------------------
        Total current assets                    498,740            401,004

    Property and equipment, net                 203,479            207,909
    Investments in finance affiliate             45,173             53,106
    Investments in manufacturing
     affiliates                                  28,981             97,348
    Deferred income taxes                         5,416              1,172
    Goodwill, net                                26,255             25,387
    Intangible and other assets, net                 66                154
                                     ------------------ ------------------
        Total Assets                   $        808,110   $        786,080
                                     ------------------ ------------------

    Liabilities and Shareholders'
     Equity
    Current Liabilities:
      Accounts payable                 $        133,942   $        133,447
      Accrued expenses                          261,138            231,310
      Income taxes payable                       20,393              8,137
      Current liabilities of
       discontinued operations                    4,284              2,014
                                     ------------------ ------------------
        Total current liabilities               419,757            374,908

    Long term taxes payable                       5,095                  -
    Borrowings under credit
     agreement                                  200,000             78,000
                                     ------------------ ------------------
        Total liabilities              $        624,852   $        452,908
                                     ------------------ ------------------

    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,
       34,986 and 39,352 shares
       issued and oustanding
                                       $            350   $            394
      Additional paid-in capital                     --                 --
      Retained earnings                         164,008            324,322
      Accumulated other
       comprehensive income, net                 18,900              8,456
                                     ------------------ ------------------
        Total shareholders' equity     $        183,258   $        333,172
                                     ------------------ ------------------

        Total Liabilities and
         Shareholders' Equity          $        808,110   $        786,080
                                     ------------------ ------------------


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

    
                           POLARIS INDUSTRIES INC.
                    CONSOLIDATED STATEMENTS OF CASH FLOWS

    Subject to Reclassification                         For Nine Months
    (In Thousands)                                    Ended September 30,
                                                     ---------------------
    (Unaudited)                                         2007       2006
                                                     ---------- ----------

    Operating Activities:
      Net income before cumulative effect of
       accounting change                             $  73,939  $  74,178
           Net loss from discontinued operations           658      2,487
    Adjustments to reconcile net income to net cash
     provided by operating activities:
           Depreciation and amortization                44,197     52,280
           Noncash compensation                         15,798      9,690
           Noncash income from financial services       (3,844)   (12,708)
           Noncash income from manufacturing
            affiliates                                     (30)    (3,614)
           Deferred income taxes                       (10,654)     5,570
           Changes in current operating items:
              Trade receivables                         (6,118)      (657)
              Inventories                              (27,243)   (41,916)
              Accounts payable                          33,270     36,383
              Accrued expenses                           8,694    (32,419)
              Income taxes payable                      21,548     (1,291)
              Prepaid expenses and others, net            (851)     4,478
                                                     ---------- ----------
         Net cash provided by continuing operations    149,364     92,461
         Net cash flow (used for) discontinued
          operations                                      (736)    (5,753)
                                                     ---------- ----------
         Net cash provided by operating activities     148,628     86,708

    Investing Activities:
      Purchase of property and equipment               (44,660)   (38,073)
      Investments in finance affiliate, net             14,300     19,203
      Proceeds from sale of shares of manufacturing
       affiliate                                        77,086          -
                                                     ---------- ----------
         Net cash provided by (used for) investing
          activities                                    46,726    (18,870)

    Financing Activities:
      Borrowings under credit agreement                294,000    521,000
      Repayments under credit agreement               (344,000)  (461,000)
      Repurchase and retirement of common shares       (51,547)  (109,353)
      Cash dividends to shareholders                   (35,989)   (38,187)
      Tax effect of exercise of stock options            8,249      7,396
      Proceeds from stock issuances under employee
       plans                                             1,334      1,717
                                                     ---------- ----------

         Net cash used for financing activities       (127,953)   (78,427)
                                                     ---------- ----------

    Net increase (decrease) in cash and cash
     equivalents                                        67,401    (10,589)

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

    Cash and cash equivalents at end of period       $  86,967  $   9,086
                                                     ---------- ----------

    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