All terrain and side-by-side vehicles manufacturer Polaris Industries Inc. (PII) reported Thursday a decline in third-quarter profit, reflecting a 25% decrease in sales. The results, however, came in above analyst estimates. For the fourth quarter, the company expects earnings above Street view. Polaris also raised its outlook for the full year, 2009.
For the third quarter, net income dropped to $31.17 million or $0.94 per share from $37.69 million or $1.13 per share in the previous year. On average, 11 analysts polled by Thomson Reuters expected the company to report earnings of $0.85 per share in the third quarter. Analysts' estimates typically exclude special items.
Operating income for the quarter dipped to $45.64 million from $55.79 million in the same period last year. Operating expenses came down 20% to $63.2 million from $79 million, chiefly because of cost control initiatives and the reduction in incentive compensation plan expenses.
Sales for the period decreased 25% to $436.19 million from $580.28 million in the third quarter of the prior fiscal year. Seven analysts were expecting revenue of $423.13 million in the third quarter.
Sales of off-road vehicles, including sales of both core all-terrain vehicles and Ranger side-by-side vehicles, dropped 30% to $261.11 million from $371.19 million, reflecting the ongoing weakness in the consumer retail environment and the company's commitment to helping its dealers reduce their core ATV inventory levels. Snowmobiles sales decreased 13% to $82.22 million from $94.62 million, attributable mainly to the economic downturn.
On-Road/Victory Motorcycles slid 56% to $9.34 million from $20.99 million, reflecting continuing planned reduction in shipments of Victory motorcycles to dealers in North America and increased promotional activities during the quarter to aid dealers in trimming inventory levels. Parts, Garments & Accessories sales dipped 11% to $83.53 million from $93.46 million, primarily affected by the decline in retail sales of Polaris vehicles.
Gross profit margin for the third quarter improved by 160 basis points to 24.1%, mainly attributable to product cost reductions, lower commodity costs and improved product mix.
Scott Wine, chief executive officer of Polaris, said, "Our operational excellence initiatives drove reductions in both total North American dealer inventory levels and total factory inventory levels compared to last year's third quarter."
For the nine-month period, net income declined to $57.11 million or $1.73 per share from $81.16 million or $2.40 per share in fiscal 2008. Sales declined sharply to $1.09 billion from $1.42 billion in the same period last year.
Looking ahead, the company expects fourth-quarter earnings to range between $1.19 and $1.25 per share and sales to dip 12% to17% from the prior-year period. Analysts estimate earnings per share of $1.13 per share and revenues of $448.10 million for the quarter.
For the full year, Polaris now forecast earnings to be in the range of $2.92 to $2.98 per share, compared with the earlier guidance of $2.70 to $2.90 per share. The company expects sales to decline in the range of 20% to 22%, compared to the previously projected drop of 20% to 25%. Analysts estimate earnings per share of $2.77 per share on revenues of $1.53 billion for the year.
PII closed Wednesday regular trading hours at $44.00 on the NYSE.
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