Polaris (PII) Q4 2003 earnings summary

Executive summary

• FY2003 record sales of $1.606B, up 6% YoY; record net income of $110.9M and diluted EPS of $2.46, up 7% and 12%, respectively.

• ATV growth and stronger Victory motorcycle and PG&A sales offset lower snowmobile sales; gross margin rose to 22.4% from 21.8%.

Financial highlights

• Sales $1,605.9M vs. $1,521.3M; gross profit $360.0M vs. $332.3M; operating income $166.7M vs. $152.9M.

• Net income $110.9M vs. $103.6M; diluted EPS $2.46 vs. $2.19; net income margin 6.9% vs. 6.8%.

• Q4 sales $467.1M, gross profit $108.5M, net income $38.0M and diluted EPS $0.84, compared with $431.5M, $97.7M, $35.0M and $0.75 in Q4 2002.

• Operating cash flow $155.8M, down 19% YoY; year-end cash $82.8M.

Outlook and guidance

• 2004 capital expenditures, including tooling, R&D equipment and ~$22M for the Wyoming R&D facility, expected at $85M–$95M.

• Existing cash, operating cash flow and credit capacity expected to fund 2004 operations, regular dividends, repurchases and capex; management saw no known material cash-flow headwind beyond 2004.

• Yen exchange rates expected to pressure 2004 cost of sales during hedged periods; Canadian dollar hedges expected to benefit 2004 net income during hedged periods.