Thursday, vehicles manufacturer Polaris Industries Inc. (PII) reported a decline in second-quarter profit, reflecting a 24% fall in sales mainly due to the reduction in shipments of Victory motorcycles. The company provided earnings guidance for the third quarter and sees a 25% to 30% decrease in total sales. In addition, the company revised its forecast for the full year 2009.
The Medina, Minnesota-based company's net income for the quarter declined to $17.48 million or $0.53 per share from $24.38 million or $0.72 per share in the previous year. On average, 10 analysts polled by Thomson Reuters expected the company to report earnings of $0.47 per share for the quarter. Analysts' estimates typically exclude special items.
Sales for the quarter fell 24% to $345.9 million from $455.69 million in the earlier year. Six analysts had a consensus revenue estimate of $334.74 million for the quarter.
Off-Road Vehicles sales decreased 25% to $261.74 million from $350.28 million in the prior year, reflecting the continued weakness in the consumer retail environment, while Snowmobiles sales were up 23% to $7.41 million from $6 million a year earlier.
Sales of Victory Motorcycles dropped 55% to $10.49 million from $23.41 million in the previous year, due to the planned reduction in shipments to dealers in North America as the dealers further reduced their inventory levels. The weakening motorcycle industry retail sales environment also contributed to the decline in sales. Parts, Garments & Accessories sales reported a decline of 13%.
The company said it expanded gross margins from last year, primarily through lower commodity costs and flexible manufacturing and highly variable cost structure.
For the six-month period, Polaris posted net income of $25.94 million or $0.79 per share, compared to net income of $43.46 million or $1.27 per share in the preceding year. Sales for the period declined to $657.92 million from $844.37 million in the same period last year.
Looking ahead, the company expects third-quarter earnings to be in the range of $0.76 to $0.86 per share. Street analysts expect earnings of $0.95 per share. Polaris anticipates a decrease in total sales for the quarter between 25% and 30% from the prior-year quarter. Analysts look for revenues of $480.67 million for the third quarter.
Further, the company narrowed its full-year guidance to reflect actual results during the first half of the year and its current outlook for the remainder of 2009. For the full year, earnings are now expected to be in the range of $2.7 to $2.9 per share. Nine analysts currently estimate full-year earnings of $2.70 per share.
The company said it expects full year 2009 sales to decrease in the range of 20% to 25% from last year. Earlier, for the 12-month period, the company was looking for a 15% to 23% decline in sales. Seven analysts expect revenues of $1.58 billion for the fiscal. While announcing its first-quarter results in April, the company had projected full year net income to be in the range of $2.50 to $3.00 per share.
Commenting on the results, Scott Wine, chief executive officer said, "The accelerating weakness in the motorcycle industry retail sales put additional pressure on our Victory business, which performed below expectations for the second quarter in a row. We are taking important steps to improve our Victory business and also announced the newest addition to our On-Road business today with the introduction of Polaris' first low emission vehicle. This is an important step in both broadening our product and new technology offerings."
Separately, the company announced the introduction of a low emission electric powered Neighborhood Vehicle, the Polaris Breeze, which is the first new product to be launched by the recently announced On-Road Vehicle Division.
Earlier in May, Polaris had formed a new On-Road Vehicle Division to help continue its drive towards establishing a significant on-road presence.
"Today's announcement of the low emission Polaris Breeze represents our first entry into the emerging Neighborhood Vehicle category. This electric powered vehicle is a low-speed vehicle designed for multiple uses such as golfing, neighborhood riding, or carrying cargo primarily for consumers living in master planned communities," added Scott Wine.
PII closed Wednesday's regular trading at $33.62 on the NYSE.
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