Polaris (PII) Q4 1999 earnings summary

Executive summary

• 1999 sales reached a record $1.321B, up 12% YoY; adjusted net income rose 8% to $76.3M and adjusted diluted EPS increased 13% to $3.07.

• Growth priorities included product innovation and five initiatives: brand building, alliances, PG&A, financial services and international expansion.

Financial highlights

• Sales were $1.321B vs. $1.176B in 1998; gross profit was $328.3M vs. $278.3M.

• Operating income was $113.6M vs. $100.1M; net income was $76.3M vs. $31.0M reported in 1998, which included the litigation charge.

• Adjusted 1998 net income excluding the $61.4M litigation provision was $70.6M, making 1999 adjusted net income growth 8%; adjusted diluted EPS rose from $2.72 to $3.07.

• Operating cash flow was $124.4M; capital expenditures were $65.1M, dividends $19.7M and share repurchases $52.4M.

Outlook and guidance

• Targets: $2B sales by 2002 and $3B by 2007; grow EPS at least as fast as revenue, build a dominant brand and expand the P/E multiple to 20+.

• 2000 capital expenditures, including tooling, were forecast at $65M–$75M; cash, operating flows and available credit were expected to fund operations, dividends, repurchases and investment.

• ATV industry growth was expected to remain double-digit in 2000; snowmobile industry growth was expected to return to a 5%–7% annual trend after the 2000–01 season.

• PWC industry sales were expected to be slightly lower in 2000; Victory anticipated continued double-digit U.S. motorcycle market growth and expansion into Canada in spring 2000.