Polaris (PII) Q4 2004 earnings summary

Executive summary

• FY04 continuing sales reached $1.773B, up 14% YoY; continuing net income rose 14% to $136.8M, with diluted continuing EPS of $3.04.

• Marine manufacturing ceased effective Sept. 2, 2004; a $35.6M pretax disposal loss contributed to reported FY04 net income of $104.5M, down from $110.9M in FY03.

• Growth across product lines was supported by new product launches, higher unit volumes and favorable currency movements; higher commodity, transport and fuel costs partially offset gains.

Financial highlights

• FY04 gross profit rose 17% to $424.3M; gross margin increased to 23.9% from 23.4% YoY.

• FY04 operating income was $211.6M; income from financial services rose 36% to $32.0M, while continuing net income margin held at 7.7%.

• Q4 FY04 sales were $539.0M, gross profit $131.1M, continuing net income $47.7M and diluted continuing EPS $1.05; reported net income was $47.2M, or $1.04 diluted EPS.

• Continuing sales growth was 14% for FY04; reported net income was $104.5M and diluted EPS $2.32, including discontinued-operation losses and the marine disposal charge.

Outlook and guidance

• FY05 capital expenditures, including tooling and R&D equipment and ~$18M to complete the Wyoming development facility, were expected at $85M–$95M.

• Commodity costs were expected to remain elevated through 2005; hedged yen rates were expected to modestly pressure cost of sales, while Canadian-dollar hedges were expected to benefit net income in hedged periods.

• Existing cash, operating cash generation and available credit were expected to support FY05 operations, regular dividends, repurchases and capital spending.