Polaris (PII) Q4 2000 earnings summary

Executive summary

• Record 2000 sales of $1.426B, up 7% YoY; net income rose 8% to $82.8M and diluted EPS increased 14% to $3.50.

• Growth initiatives contributed more than half of the year-over-year EPS increase; the $2B sales target was revised from 2002 to 2003 absent an acquisition.

Financial highlights

• Gross profit reached $328.1M, up 10%; gross margin expanded to 23.0% from 22.4%, reflecting volume, cost reductions and higher-margin PG&A mix.

• Operating income was $121.8M versus $113.6M; operating expenses rose 12% to $206.3M as a share of sales increased to 14.5% from 13.9%.

• Operating cash flow was $107.7M versus $124.4M in 1999; cash flow provided before changes in current operating items and deferred taxes was $127.3M, up 10%.

Outlook and guidance

• Management expected ATV industry growth to remain double-digit in 2001, with continued growth supported by new products, market niches and promotions.

• Snowmobile industry growth was expected to return to its long-term single-digit average after the 2000–01 season; the model-year 2002 range adds EDGE chassis models and engine improvements.

• PWC markets were expected to remain in transition during 2001, with moderate growth in 2002; low field inventories and DI models were positioned to support growth.

• Management expected Victory retail sales growth to continue in 2001 and PG&A to sustain strong double-digit growth.