POLARIS Industries Inc. has reported record second quarter net income of $100.9 million for the quarter ended June 30, 2015, an increase of four percent from the prior year’s second quarter net income of $96.9 million.
Earnings per share were a record $1.49 per diluted share for the second quarter of 2015 compared to $1.42 per diluted share for the second quarter of 2014.
Polaris say their second quarter results included additional manufacturing costs and inefficiencies approximating $9.0 million, as the Company worked to scale-up production and add capacity to the paint system at the Company’s motorcycle facility in Spirit Lake, Iowa.
Sales for the second quarter 2015 totaled a record $1,124.3 million, an increase of 11 percent over last year’s second quarter sales of $1,014.0 million.
“In addition to reporting record second quarter sales and earnings, there are numerous positive undertones to our results this quarter. Motorcycle demand, notably including Slingshot, remains exceptionally high", stated Scott Wine, Polaris’ Chairman and Chief Executive Officer.
"Our Asia Pacific/Latin America business continues to grow, and we are encouraged by the favorable response to the Multix launch in India last month. Between ongoing improvements in our inventory management systems and North American retail sales growing 11 percent, dealer inventory growth moderately decelerated in the second quarter.
|Scott Wine, President & CEO of Polaris Industries|
“However, earnings were dampened by significant cost pressures and delayed shipments related to continued difficulties with our new motorcycle paint system in Spirit Lake, Iowa. We pulled out all the stops to increase throughput in an effort to meet the growing demand for our Indian, Victory and Slingshot customers, accepting the substantial costs commensurate with that push.
"Although production still cannot keep pace with demand, we are confident in our plans to further increase our motorcycle throughput in the second half of the year, and as such, are maintaining and narrowing full year guidance for sales and earnings per share.
“In spite of the short-term headwinds we are facing, both external and of our own making, I am confident this strong and talented Polaris team can continue to deliver industry-leading returns for our shareholders.”
For the full year 2015, the Company is narrowing its earnings guidance range to $7.32 to $7.42 per diluted share, an increase of 10 to 12 percent over full year 2014 earnings of $6.65 per diluted share. Full year 2015 sales are now expected to grow in the range of 10 to 12 percent when compared to 2014, narrowed slightly from previously issued sales guidance.
Motorcycle sales increased 57 percent to $162.1 million for the second quarter of 2015 compared to same period last year, due to continued strong demand for Indian motorcycles and the new Slingshot roadster. Victory, Indian Motorcycle and Slingshot North American retail sales increased over 80 percent during the second quarter of 2015 driven by Indian Motorcycle and Slingshot retail sales, while North American industry midsize and heavyweight motorcycle retail sales were flat compared with the second quarter of 2014.
Demand for the Indian Scout, Roadmaster and the new Indian Dark Horse drove an over 100 percent increase in retail sales for Indian Motorcycle during the quarter. Victory retail sales in the second quarter of 2015 were lower than the prior year largely due to poor product availability of the new Victory Magnum and Magnum X-1, a result of the paint capacity constraints in the Spirit Lake facility.
Slingshot retail sales continued to perform well ahead of expectations as consumer appeal for the new 3-wheeled roadster remained high. Polaris has increased production to meet the ongoing strong consumer demand for Slingshot.
International sales to customers outside of North America totaled $162.9 million for the second quarter of 2015, down four percent from the same period in 2014, driven by weak currencies.
The EMEA region’s sales declined 12 percent in the 2015 second quarter, partially offset by a 32 percent increase in Latin American sales and a 15 percent increase in sales in the Asia/Pacific region.
Gross profit increased five percent to $319.4 million in the second quarter of 2015, compared to $304.9 million in the second quarter of 2014. As a percentage of sales, gross profit margin declined 166 basis points to 28.4 percent of sales for the second quarter of 2015, compared to 30.1 percent of sales for the same period last year.
As expected, currency movements from a year ago, primarily the Canadian dollar, along with higher sales promotion costs negatively impacted gross margins during the second quarter of 2015. However, gross margins were further pressured by approximately $9.0 million of incremental costs associated with the Company’s efforts to correct manufacturing inefficiencies and add capacity to the paint system at the Spirit Lake motorcycle facility. These increased costs were partially offset by lower product costs and lower commodity costs.
Operating expenses grew five percent to $173.0 million or 15.4 percent of sales for second quarter of 2015, compared to $164.1 million or 16.2 percent of sales for the second quarter of 2014. Ongoing research and development investments and higher long-term incentive compensation expenses were largely offset by operating expense leverage from prior year’s infrastructure investments.