American Motorcycle Dealer AMD 229 August 2018 - Page 22

U.S Indian Retail Demand Up Polaris has posted North American retail sales of +6% for the quarter, with ORV up midsingle digit % for both side-by-side and ATV vehicles and gaining market share for ORV vehicles and Indian motorcycles. The company has increased its full year 2018 sales guidance to be +11% to +12% taking into account improved volume expectations and the acquisition of Boat Holdings, LLC (Boat Holdings) – representing Polaris’ first foray into the marine market; the company has also raised the lower end of its earnings per share range and now expects adjusted net income to be in the range of $6.48 to $6.58 per diluted share, which includes the absorption of an estimated additional $40 million of tariff and related commodity cost increases anticipated in 2018. Motorcycle segment sales, including PG&A, totaled $171 million, a decrease of -13 percent compared to $198 million reported in the second quarter of 2017 due to a weak motorcycle industry and timing of shipments for Indian motorcycles year-over-year. Slingshot sales were also down due to the weak motorcycle industry. Gross segment profit for the second quarter of 2018 was $25 million compared to $21 million in the second quarter of 2017. Adjusted for the Victory winddown costs recorded in both the 2018 and 2017 second quarters, and restructuring and realignment costs, motorcycle gross profit was $25 million in the 2018 second quarter compared to $30 million for the 2017 second quarter. North American consumer retail demand for the Polaris motorcycle segment, including Indian Motorcycle and Slingshot, increased low-single digit percent during the 2018 second quarter. Indian Motorcycle retail sales increased mid-single digit percent. Slingshot's retail sales Scott Wine, Chairman and Chief Executive Officer of Polaris: “Between organic growth and considered acquisitions, Polaris’ underlying performance has significantly improved, but much of our success is being masked by substantial cost escalation driven by tariffs and commodities” were down mid-single digit percent during the quarter. Motorcycle industry retail sales, 900 cc and above, were down mid-single digit percent in the 2018 second quarter. Indian Motorcycle gained market share for the 2018 second quarter on a year-over-year basis in spite of an overall weak north American motorcycle market in the second quarter. Motorcycle dealer inventory was down low-single digit percent in the 2018 second quarter compared to the same period last year due to moderated shipments in an overall weak motorcycle market. Scott Wine, Chairman and Chief Executive Officer of Polaris Industries Inc., is quoted as saying: "I am very pleased with the Polaris team and the strong execution they delivered across the business during the 2nd Quarter. With solid retail growth and market share gains in both our Off-Road Vehicle business and Indian Motorcycle, we are clearly reaping the benefits of our safety and quality investments, new product innovations and improved delivery performance. “Consumer sentiment and dealer traffic improved throughout the Quarter, building momentum which will help offset the rising risk of tariffs in ‘Indian Motorcycle retail sales increased mid-single digit percent’ CONSOLIDATED STATEMENTS OF INCOME (LOSS) (in thousands US $) Three months ended June 30 Six months ended June 30 2018 2017 2018 2017 Sales 1,502,532 1,364,920 2,800,005 2,518,702 Cost of sales 1,117,356 1,014,534 2,091,348 1,925,825 Gross profit 385,176 350,386 708,657 592,877 Operating expenses: Selling and marketing 122,859 118,531 240,566 232,844 Research and development 68,330 60,753 133,560 112,758 General and administrative 92,874 91,063 171,567 166,577 Total operating expenses 284,063 270,347 545,693 512,179 Income from financial services 21,344 19,143 42,769 39,573 Operating income 122,457 99,182 205,733 120,271 Net income 92,540 62,041 148,254 59,130 Diluted Net income per share: $1.43 $0.97 $2.28 $0.92 ‘tariffs masking success’ the 2nd half. During the Quarter we were excited to announce another expansion of the Polaris powersports portfolio with the acquisition of Boat Holdings, the largest manufacturer of pontoon boats in the U.S. “Between organic growth and considered acquisitions, Polaris’ underlying performance has significantly improved, but much of our success is being masked by substantial cost escalation driven by tariffs and commodities.” Off-Road Vehicle (“ORV”) and Snowmobile segment sales, including PG&A, totaled $991 million for the second quarter of 2018, up +17 percent. ORV wholegood sales for the second quarter of 2018 increased +18 percent primarily driven by strong RANGER, RZR and ATV shipments. Global Adjacent Markets segment sales, including PG&A, increased +17 percent to $113 million in the 2018 second quarter compared to $97 million in the 2017 second quarter. Sales of Goupil and the Commercial, Government and Defense businesses drove most of the increase. Reported gross profit increased +32 percent to $28 million in the second quarter of 2018, compared to $21 million in the second quarter of 2017. Aftermarket segment sales increased one percent to $227 million in the 2018 second quarter compared to $224 million in the 2017 second quarter. TAP sales in the second quarter of 2018 were $210 million, which was up slightly compared to the second quarter of 2017. Growth at TAP's retail stores and online platforms were largely offset by lower accessory sales for the new Jeep Wrangler, which was available for sale later than anticipated. Gross profit decreased to $58 million in the second quarter of 2018, compared to $60 million in the second quarter of 2017. International sales to customers outside of North America, including PG&A, totaled $204 million for the second quarter of 2018, up +7 percent from the same period in 2017. Foreign exchange movements represented four percent of the sales increase for the quarter. The remaining increase was driven by strong sales in the company's EMEA business for ORV and motorcycles. During the second quarter of 2018, the company repurchased and retired 1,429,000 shares of its common stock for $177 million. Year-to-date through June 30, 2018, the company has repurchased and retired 1,562,000 shares of its common stock for $192 million. As of June 30, 2018, the company has authorization from its Board of Directors to repurchase up to an additional 4.9 million shares of Polaris common stock. 22 AMERICAN MOTORCYCLE DEALER - AUGUST 2018 www.AMDchampionship.com U.S Indian Retail Demand Up Polaris has posted North American retail sales of +6% for the quarter, with ORV up mid- single digit % for both side-by-side and ATV vehicles and gaining market share for ORV vehicles and Indian motorcycles. The company has increased its full year 2018 sales guidance to be +11% to +12% taking into account improved volume expectations and the acquisition of Boat Holdings, LLC (Boat Holdings) – representing Polaris’ first foray into the marine market; the company has also raised the lower end of its earnings per share range and now expects adjusted net income to be in the range of $6.48 to $6.58 per diluted share, which includes the absorption of an estimated additional $40 million of tariff and related commodity cost increases anticipated in 2018. Motorcycle segment sales, including PG&A, totaled $171 million, a decrease of -13 percent compared to $198 million reported in the second quarter of 2017 due to a weak motorcycle industry and timing of shipments for Indian motorcycles year-over-year. Slingshot sales were also down due to the weak motorcycle industry. Gross segment profit for the second quarter of 2018 was $25 million compared to $21 million in the second quarter of 2017. Adjusted for the Victory wind- down costs recorded in both the 2018 and 2017 second quarters, and restructuring and realignment costs, motorcycle gross profit was $25 million in the 2018 second quarter compared to $30 million for the 2017 second quarter. North American consumer retail demand for the Polaris motorcycle segment, including Indian Motorcycle and Slingshot, increased low-single digit percent during the 2018 second quarter. Indian Motorcycle retail sales increased mid-single digit percent. Slingshot's retail sales CONSOLIDATED STATEMENTS OF INCOME (LOSS) Scott Wine, Chairman and Chief Executive Officer of Polaris: “Between organic growth and considered acquisitions, Polaris’ underlying performance has significantly improved, but much of our success is being masked by substantial cost escalation driven by tariffs and commodities” were down mid-single digit percent during the quarter. Motorcycle industry retail sales, 900 cc and above, were down mid-single digit percent in the 2018 second quarter. Indian Motorcycle gained market share for the 2018 second quarter on a year-over-year basis in spite of an overall weak north American motorcycle market in the second quarter. Motorcycle dealer inventory was down low-single digit percent in the 2018 second quarter compared to the same period last year due to moderated shipments in an overall weak motorcycle market. Scott Wine, Chairman and Chief Executive Officer of Polaris Industries Inc., is quoted as saying: "I am very pleased with the Polaris team and the strong execution they delivered across the business during the 2nd Quarter. With solid retail growth and market share gains in both our Off-Road Vehicle business and Indian Motorcycle, we are clearly reaping the benefits of our safety and quality investments, new product innovations and improved delivery performance. “Consumer sentiment and dealer traffic improved throughout the Quarter, building momentum which will help offset the rising risk of tariffs in ‘Indian Motorcycle retail sales increased mid-single digit percent’ 22 AMERICAN MOTORCYCLE DEALER - AUGUST 2018 (in thousands US $) Three months ended June 30 Six months ended June 30 2018 2017 2018 Sales Cost of sales Gross profit 1,502,532 1,117,356 385,176 1,364,920 1,014,534 350,386 2,800,005 2,518,702 2,091,348 1,925,825 708,657 592,877 Operating expenses: Selling and marketing Research and development General and administrative Total operating expenses Income from financial services Operating income Net income 122,859 68,330 92,874 284,063 21,344 122,457 92,540 118,531 60,753 91,063 270,347 19,143 99,182 62,041 240,566 133,560 171,567 545,693 42,769 205,733 148,254 232,844 112,758 166,577 512,179 39,573 120,271 59,130 $0.97 $2.28 $0.92 Diluted Net income per share: $1.43 2017 ‘tariffs masking success’ the 2nd half. During the Quarter we were excited to announce another expansion of the Polaris powersports portfolio with the acquisition of Boat Holdings, the largest manufacturer of pontoon boats in the U.S. “Between organic growth and considered acquisitions, Polaris’ underlying performance has significantly improved, but much of our success is being masked by substantial cost escalation driven by tariffs and commodities.” Off-Road Vehicle (“ORV”) and Snowmobile segment sales, including PG&A, totaled $991 million for the second quarter of 2018, up +17 percent. ORV wholegood sales for the second quarter of 2018 increased +18 percent primarily driven by strong RANGER, RZR and ATV shipments. Global Adjacent Markets segment sales, including PG&A, increased +17 percent to $113 million in the 2018 second quarter compared to $97 million in the 2017 second quarter. Sales of Goupil and the Commercial, Government and Defense businesses drove most of the increase. Reported gross profit increased +32 percent to $28 million in the second quarter of 2018, compared to $21 million in the second quarter of 2017. Aftermarket segment sales increased one percent to $227 million in the 2018 second quarter compared to $224 million in the 2017 second quarter. TAP sales in the second quarter of 2018 were $210 million, which was up slightly compared to the second quarter of 2017. Growth at TAP's retail stores and online platforms were largely offset by lower accessory sales for the new Jeep Wrangler, which was available for sale later than anticipated. Gross profit decreased to $58 million in the second quarter of 2018, compared to $60 million in the second quarter of 2017. International sales to customers outside of North America, including PG&A, totaled $204 million for the second quarter of 2018, up +7 percent from the same period in 2017. Foreign exchange movements represented four percent of the sales increase for the quarter. 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