Polaris has announced that their first quarter 2016 North American retail unit sales increased 6 percent in the quarter with Indian Motorcycle up over 50 percent.
Motorcycle segment sales, including their respective PG&A related sales, increased 18 percent in the 2016 first quarter to $188.2 million "primarily due to continued strong retail sales for Indian motorcycles."
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| Scott Wine, Polaris’ Chairman and Chief Executive Officer, stated that "our first quarter results were in line with our projections ... our North American retail was +6 percent. During the quarter, we improved shipment lead-times and met retail demand from our Spirit Lake motorcycle facility" |
North American consumer retail demand for the Polaris motorcycle segment, including Victory, Indian Motorcycle and Slingshot, "was up low-teens percent during the 2016 first quarter, while the overall motorcycle industry retail sales of 900cc and above was about flat in the 2016 first quarter."
During the 2016 first quarter, the company began retailing two new additions to its Victory and Indian Motorcycle line-up with the introduction of the Octane and the new Indian Springfield. Product availability for Victory, Indian Motorcycle and Slingshot "improved considerably" in the 2016 first quarter and dealer inventories "are essentially at targeted stocking levels at quarter-end."
First quarter net income was $46.9 million compared to $88.6 million in the first quarter of 2015, which is said to have been in line with company expectations. Total sales revenue for the first quarter 2016 was $983.0 million, down five percent compared to last year’s first quarter sales of $1,033.3 million.
Scott Wine, Polaris’ Chairman and Chief Executive Officer, stated that "our first quarter results were in line with our projections, in spite of increased expenses for warranty and product liability. Our Customer Excellence initiatives and new products drove a six percent increase in North American retail, and in conjunction with shipment reductions, better demand forecasting and process control improvements, enabled us to continue reducing dealer inventory levels year-over-year.
"During the quarter, we improved shipment lead-times, met retail demand from our Spirit Lake motorcycle facility, and completed the acquisition of Taylor-Dunn. I still believe 2016 is likely to be another volatile year in powersports, but we are seeing pockets of strength. The North American ORV industry was up in the first quarter, with March experiencing the strongest improvement.
"We remain focused on an all-out assault on costs and re-dedicating the business to drive growth, not only for this year, but as part of a renewed commitment to achieving our 2020 objectives. The entire Polaris team is united, and determined, to grow sales and expand margins."
In terms of the 2016 business outlook, Polaris state that "while the powersports industry was slightly better than anticipated in the 2016 first quarter, the company is keeping its guidance range unchanged for the full year 2016, with earnings expected to be in the range of $6.20 to $6.80 per diluted share, with sales in the range of down two percent to up three percent due to the persistent unpredictability around overall economic trends and more specifically powersports industry trends for the remainder of 2016."
Off-Road Vehicle (ORV) and snowmobile segment sales, including their respective PG&A related sales, decreased nine percent from the first quarter of 2015 to $720.6 million. ORV vehicle sales decreased 12 percent, snowmobile vehicle sales were up two percent and ORV and snowmobile related PG&A sales, combined, increased two percent in the 2016 first quarter compared to the same period last year.
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| "During the first quarter Polaris started selling its new Victory 'Octane' (seen here), described by Victory as their first mid-sized cruiser, and the new Indian 'Springfield' |
Global Adjacent Markets segment sales, along with their respective PG&A related sales, decreased five percent to $74.1 million in the 2016 first quarter compared to the 2015 first quarter. Work and Transportation group wholegood sales were up low single digit percent during the first quarter of 2016 primarily due to growth in the Aixam business. Sales for the company’s defense business were down significantly due to U.S. military budget spending patterns pushing orders into the future.
International sales to customers outside of North America totaled $162.6 million for the first quarter of 2016, including PG&A, up six percent from the same period in 2015. International sales on a constant currency basis were up 12 percent in the 2016 first quarter. Europe, Middle East and Africa ("EMEA") reported sales increased six percent in the 2016 first quarter and Asia Pacific reported sales were down seven percent, while Latin American reported sales were up 29 percent. International motorcycles segment sales were up 42 percent.
Gross profit decreased 16 percent to $247.6 million in the first quarter of 2016, compared to $293.7 million in the first quarter of 2015. As a percentage of sales, gross profit declined 324 basis points to 25.2 percent of sales for the first quarter of 2016, compared to 28.4 percent of sales for the same period last year. Negative currency movements, along with increased warranty and promotional costs and negative product mix, were partially offset by lower commodity costs and cost savings from product cost reduction efforts.
Operating expenses increased 20 percent to $189.9 million or 19.3 percent of sales for the first quarter of 2016, compared to $158.1 million or 15.3 percent of sales for the first quarter of 2015 - largely driven by increased research and development expense, higher selling and marketing spending and an increase in general and administrative expense due to higher product liability, severance and acquisition related costs incurred during the quarter.
The company’s debt-to-total capital ratio was 36 percent at March 31, 2016, compared to 27 percent a year ago. Cash and cash equivalents were $145.8 million at March 31, 2016, up from $111.0 million for the same period in 2015.
During the first quarter 2016, the company repurchased and retired 1,040,000 shares of its common stock for $84.9 million. As of March 31, 2016, the company currently has authorization from its Board of Directors to repurchase up to an additional 9.3 million shares of Polaris stock.
