Sales and Income Down in Polaris 4Q 2015 Financial Report

Bryan Harley | January 28, 2016

Polaris Industries financial prosperity has ridden a wave of momentum for quite some time. But that momentum has slowed in the fourth quarter of 2015, Polaris Q4 financial report revealing net income was down 18% compared to year-ago totals while sales were down 13%.

“Fourth quarter sales were down 13% to $1.1 billion with net income of $110.7 million, down 18%. Nearly every business and every region declined as Indian and Slingshot were the only two businesses that exceeded both our budget and prior year comparisons,” said Polaris Chairman and CEO Scott Wine in the Polaris Q4 and Full Year 2015 Earnings Conference Call.

Net income for the year was almost identical, $455.4 million for the full year 2015, incrementally better than the 4454.0 million reported in 2014. Fueled by its motorcycle sector, sales for the full year increased 5% in 2015 at $4,719.3 million compared to 2014’s $4,479.6 million totals. For the year, Polaris Industries Inc. (NYSE: PII) reported net income of $6.75 per-diluted-share, a 2% increase compared to $6.65 per diluted share in 2014.

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“The fourth quarter was difficult and disappointing. Results fell short of our original expectations as we delivered the worst year-over-year performance Polaris has had in any quarter since 2009. A statement that unfortunately holds true for our record full year numbers as well,” Wine said in the conference call. “We will neither sugarcoat our shortfalls this morning nor ignore the significant impact of currencies and oil related demand. Despite solid demand for the new GENERAL and improving interest in the RZR Turbo, we experienced a slight side-by-side market share loss in the fourth quarter, hurting our pride more than our P&L.”

On the positive side, Polaris’ motorcycle segment is thriving, with revenue up 33% in 2015’s fourth quarter as 162,558 motorcycles were sold. Overall motorcycle sales are up 67% for the year with 698,257 units sold in 2015 compared to 2014’s 418,546 total. As Wine mentioned, gains are primarily due to Indian and Slingshot sales. Indian recently released its lowest priced motorcycle to date, the $8999 Scout Sixty. Polaris was able to achieve this despite overall motorcycle industry retail sales reportedly declining in the 900cc and above segment in the 2015 fourth quarter, the decline ambiguously stated in the “high-single digits.” While Polaris didn’t release exact sales numbers for both its motorcycle companies, Victory Motorcycles retail sales were said to be down in the mid-teens percent in the 2015 fourth quarter.

Contrary to gains in the motorcycle sector, Polaris took a hit in what is usually one of its most profitable, as Off-Road Vehicle (ORV) sales were down. Cumulatively, ORV and Snowmobile sales were down 18% from the fourth quarter 2014.

With sales for 2015 falling short of expectations, Polaris tempered down outlooks for 2016.

“Polaris announced 2016 guidance reflecting continued currency market volatility and ongoing weak industry demand; expects full year 2016 net income to be in the range of $6.20 to $6.80 per diluted share, with sales in the range of down 2% to up 3% compared to 2015,” reported the official news release.

Reporting Segments* Three Months ended December 31,    Years ended December 31,
Sales     2015     2014     Change     2015     2014     Change
Off-Road Vehicles/Snowmobiles  $ 862,032  $ 1,051,801  (18%)  $ 3,708,933  $ 3,741,154  (1%)
Motorcycles  162,558  122,219  33%  698,257  418,546  67%
Global Adjacent Markets  81,028  100,980  (20%)  312,100  319,948  (2%)
Total Sales  $1,105,618  $1,275,000  (13%)  $4,719,290  $4,479,648  5%
Gross Profit  $310,274  $367,573  (16%)  $1,339,042  $1,319,178  2%
Gross profit as a % of sales  28.1%  28.8%  -77 bps  28.4%  29.4%  -108 bps
Operating Expenses  $169,072  $176,927  (4%)  $692,206  $666,155  4%
Operating expenses as a % of sales  15.3%  13.9%  141 bps  14.7%  14.9%  -20 bps
Operating Income  $159,160  $210,000  (24%)  $716,139  $714,690  0%
Operating Income as a % of sales  14.4%  16.5%  -207 bps  15.2%  16.0%  -78 bps
Net Income  $110,682  $135,397  (18%)  $455,361  $454,029  0%
Net income as a % of sales  10.0%  10.6%  -61 bps  9.6%  10.1%  -49 bps
Diluted Net Income per share  $1.66  $1.98  (16%)  $6.75  $6.65  2%
*Reporting Segment sales include their respective parts, garments and accessories (“PG&A”) related sales

Bryan Harley

Cruiser Editor |Articles | Our resident road warrior has earned his stripes covering the rally circuit, from riding the Black Hills of Sturgis to cruising Main Street in Daytona Beach. Whether it’s chopped, bobbed, or bored, metric to ‘Merican, he rides ‘em all.