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Tuesday, 7 February 2017

Polaris Industries Inc.

Q4 Indian retail sales +20%; Victory, Slingshot down - Corp sales +10% Q4, -4 % full year

Polaris Industries Inc. has reported overall corporate fourth quarter 2016 sales of $1,217.8 million, up by +10 percent from $1,105.6 million for the fourth quarter of 2015; for the full year ended December 31, 2016 the Company reported sales of $4,516.6 million, a decrease of -4 percent versus $4,719.3 million in the prior year.

Motorcycle segment sales, including its PG&A related sales, decreased -35 percent in the 2016 fourth quarter to $105.7 million.  Both Indian and Victory reported lower sales in the fourth quarter due to difficult comparables as product availability for all brands improved significantly in the 2015 fourth quarter, and as the Company reduced motorcycle production in the 2016 fourth quarter to complete the final paint system upgrade in Spirit Lake, IA.
Slingshot sales were down due to low product availability related to recall activity.  Gross profit for the fourth quarter 2016 decreased -94 percent to $1.6 million compared to $24.0 million in the fourth quarter of 2015 due to lower production rates and higher warranty expense.
North American consumer retail demand for the Polaris motorcycle segment, including Victory, Indian Motorcycle and Slingshot, was down mid-single digits percent during the 2016 fourth quarter while the overall motorcycle industry retail sales, 900cc and above, declined low-single digits percent in the 2016 fourth quarter.
Indian Motorcycles retail sales increased about +20 percent while Victory retail sales were down mid-single digits percent during the quarter.  Slingshot retail sales were down significantly due to tough comparable in the fourth quarter last year as the Company experienced unseasonably strong retail sales in the initial year of Slingshot product availability in 2015.
“2016 was a difficult and challenging year for Polaris, but our culture is geared to deal head on with adversity and learn from it, and that’s what we did in 2016. In response to a series of recalls, we took the necessary steps to ensure that Polaris vehicles deliver the quality, safety and performance that our customers expect.  We are relying on these enhanced improvements, consistent execution, and aggressive innovation to regain our footing as the ‘Best in Powersports’,” commented Polaris Industries’ CEO Scott Wine.
“Our team worked incredibly hard in 2016 to serve our Off-Road Vehicle customers and dealers, and that work is accelerating into 2017.  It is a very competitive ORV market, and we will aggressively execute and revitalize our broad set of tools that built the most successful armada in powersports.
“Significant progress was made across our businesses, including mid-twenty percent growth in [annual] Indian Motorcycle retail sales and an eight percent reduction in dealer inventories year-over-year, while at the same time reducing factory inventory 16 percent, excluding acquisitions, and improving operating cash flow by 30 percent in 2016. 
Overall corporate international sales to customers outside of North America totaled $178.2 million for the fourth quarter of 2016, including PG&A, down two percent from the same period in 2015.  International sales on a constant currency basis were flat for the 2016 fourth quarter.
Gross profit increased one percent to $312.8 million for the fourth quarter of 2016 from $310.3 million in the fourth quarter of 2015, including the negative impact of $8.8 million in purchase accounting adjustments. As a percentage of sales, gross profit margin was 25.7 percent compared with 28.1 percent of sales for the fourth quarter of 2015. 
Off-Road Vehicle (“ORV”) and Snowmobile segment sales, including their respective PG&A related sales, were $905.0 million for the fourth quarter of 2016, compared with $862.0 million for the fourth quarter for the prior year.  Gross profit decreased one percent to $259.2 million, or 28.6 percent of sales, in the fourth quarter of 2016, compared to $262.8 million, or 30.5 percent of sales, in the fourth quarter of 2015.  Gross profit percentage declined primarily due to higher promotional spending and increased warranty expense.
CEO Wine went on to say: “We continued to enhance our quality and safety organization, production in our new facility in Huntsville, Alabama, is ramping up to become the enabler to our go to market Retail Flow Management (RFM) process, and lean initiatives across our network drove approximately $150 million in gross Value Improvement (“VIP”) savings during the year.
During the fourth quarter 2016, the Company repurchased and retired 1,105,500 shares of its common stock for $91.4 million, bringing total share repurchases to 2,908,000 shares, or $245.8 million for the full year 2016.  As of December 31, 2016 the Company currently has authorization from its Board of Directors to repurchase up to an additional 7.5 million shares of Polaris stock.
The Company says it expects full year 2017 adjusted net income to be in the range of $4.25 to $4.50 per diluted share, compared with adjusted net income of $3.48 per diluted share for 2016.  Full year 2017 sales are anticipated to increase in the range of 10 percent to 13 percent over 2016 sales of $4,516.6 million.