Polaris 2016 Fourth Quarter Earnings And Full Year Results. Profits Slashed In Half By Lower Production And High Recalls.

This Tuesday morning January 24, Polaris Industries Inc. (NYSE: PII) reported fourth quarter 2016 sales of $1,217.8 million up 10 percent from $1,105.6 million for the fourth quarter of 2015. Fourth quarter 2016 reported net income was $62.6 million, or $0.97 per diluted share, compared with $110.7 million, or $1.66 per diluted share, for the 2015 fourth quarter.

For the full year ended December 31, 2016 the Company reported sales of $4,516.6 million, a decrease of 4 percent versus $4,719.3 million in the prior year. Reported net income was $212.9 million, or $3.27 per diluted share, compared with $455.4 million, or $6.75 per diluted share, for the full year 2015.

Motorcycle segment sales, including its PG&A related sales, decreased 35 percent in the 2016 fourth quarter to $105.7 million. Both Indian and Victory reported lower sales in the fourth quarter due to difficult comparables as product availability for all brands improved significantly in the 2015 fourth quarter, and as the Company reduced motorcycle production in the 2016 fourth quarter to complete the final paint system upgrade in Spirit Lake, IA. Slingshot® sales were down due to low product availability related to recall activity. Gross profit for the fourth quarter 2016 decreased 94 percent to $1.6 million compared to $24.0 million in the fourth quarter of 2015 due to lower production rates and higher warranty expense.

Fourth Quarter Segment Results (in thousands). Reporting segment sales includes their respective parts, garments and accessories (“PG&A”) related sales

North American consumer retail demand for the Polaris motorcycle segment, including Victory®, Indian Motorcycle® and Slingshot®, was down mid-single digits percent during the 2016 fourth quarter while the overall motorcycle industry retail sales, 900cc and above, declined low-single digits percent in the 2016 fourth quarter. Indian Motorcycles retail sales increased about 20 percent while Victory retail sales were down mid-single digits percent during the quarter. Slingshot retail sales were down significantly due to tough comparable in the fourth quarter last year as the Company experienced unseasonably strong retail sales in the initial year of Slingshot product availability in 2015.

The overall poor performance didn’t seem to surprise Wall Street. Shares in the company (PII) were down just 1.30 percent to $86.41.

“2016 was a difficult and challenging year for Polaris, but our culture is geared to deal head on with adversity and learn from it, and that’s what we did in 2016. In response to a series of recalls, we took the necessary steps to ensure that Polaris vehicles deliver the quality, safety and performance that our customers expect. We are relying on these enhanced improvements, consistent execution, and aggressive innovation to regain our footing as the ‘Best in Powersports’” commented Scott Wine.

2017 Business Outlook

The Company expects full year 2017 adjusted net income to be in the range of $4.25 to $4.50 per diluted share, compared with adjusted net income of $3.48 per diluted share for 2016. Full year 2017 sales are anticipated to increase in the range of 10 percent to 13 percent over 2016 sales of $4,516.6 million.

Wind down of Victory Motorcycles

Polaris announced on January 9, 2017 its intention to wind down its Victory® Motorcycles operations. The decision is expected to improve the long-term profitability of Polaris and its global motorcycle business, while materially improving the Company’s competitive position in the industry. The Company will record one-time costs associated with supporting Victory dealers in selling their remaining inventory, the disposal of factory inventory, tooling, and other physical assets, and the cancellation of various supplier arrangements. These one-time costs will be recorded in the 2017 income statement in respective sales, gross profit and operating expense beginning in the first quarter of 2017. These costs will be excluded from Polaris’ 2017 sales and earnings guidance on a non-GAAP basis.

19 Responses to “Polaris 2016 Fourth Quarter Earnings And Full Year Results. Profits Slashed In Half By Lower Production And High Recalls.”

  1. 1 Jan 24th, 2017 at 6:46 pm

    Polaris will be sadly missed, they made some of the best innovations in the industry in the last few years.

  2. 2 Highrider Jan 24th, 2017 at 9:03 pm

    Yes, it is time for a management shake up for sure, Wine & Menneto are not motorcycle men, and it shows!

  3. 3 Randy Jan 24th, 2017 at 9:56 pm

    I think Menneto has been a mc dealer.

  4. 4 Jeff Vita Jan 24th, 2017 at 10:03 pm

    I think that Victory failed because the suits were unable to find a good marketing strategy. Victory should have been only about baggers where they got a good reputation and were able to compete with several brands, not only Harley. Trying to make Victory an American muscle brand was a very stupid idea. Cruisers design was also very poor.

  5. 5 Thumper Jan 25th, 2017 at 1:17 am

    Steve Menudo was part of a family-owned Polaris powersports dealership on the East coast. I think they might have carried Yamaha bikes before he went to work for Polaris.

    Yeah, they have great bikes. Oddly, since the announcement of Victory shutting down, I’ve seen a lot of new bike sales for only marginally discounted prices.

  6. 6 seymour Jan 25th, 2017 at 8:21 am

    Now Victories will be much sought-after and everyone will wish they had bought one

  7. 7 JohnnySpeed Jan 25th, 2017 at 12:26 pm

    Seymour – Doubtful. They weren’t sought after enough to stay in business. It’s highly unlikely to change now.

  8. 8 x-HD Rider Jan 25th, 2017 at 1:24 pm

    polaris has bad management. Why make 11 different Vic’s and what 9 indians. You should of reduced the numbers. You should of put improvements in the Vic;s.
    polaris has proven its not a company to trust

  9. 9 Jan 25th, 2017 at 6:50 pm

    Polaris hasn’t invested a penny in Victory since 2010 release of Cross bikes. Indian has a 100% fresh line up in2014, and after, and the Polaris braintrust concluded that since Vic sales slowing and Indian sales growing, must be lack of interest in Vic, not customers waiting for updates. Magnums are just21″ wheel and radio upgrade. Where’s the liquid cooled motor, or saving that for the2 valve Indian. Vic was the modern, current tech v-twin, Indian is like Harley, afraid to let go of the past. Nothing wrong with that, but it’s not for all. Polaris brain trust could have at least absorbed Vic into Indian, used some model names, phased others out, that would have shown support for current customer base, instead Scott Wine went out of his way to alienate current loyal customers, so in honor of his wishes, I will ride Ski-doo snowmobile, Can-Am quads, Harley, all companies run by enthusiasts, not bottom ing bean counters

  10. 10 BM Jarvis Jan 26th, 2017 at 7:18 am

    Another one bites the dust. Indian is next.

    You can’t “out Harley” Harley.

  11. 11 BobS Jan 26th, 2017 at 10:09 am

    Polaris has lost me and I think incompetent management has seriously underestimated how many more like me are out there. Several previous comments are spot on. Thousands of us out there with 5-10 year old Vic’s (or older) that were just sitting on our hands waiting for some of the new tech in Indian, or better yet a true modern American muscle engine to show up in the Vic line. Victory didn’t die because of a lack of demand, Victory died because Polaris’ lack of competence in meeting that demand. Indian is already dead to me.

  12. 12 DJM Jan 26th, 2017 at 2:17 pm

    The Murder of Victory was planned by Scott Wine (and most likely Menetto too) the second they thought they had the chance to get Indian. Victory could have been a huge success story but the braintrust couldn’t see past their shiny new toy, Indian. Or shiny old toy if you will. I still think this will backfire on them, as Indians only appeal to a small niche audience and when saturation of that demographic occurs they will be finished. Any attempt to modernize the brand flies in the face of the core values of what Indian is supposed to stand for. It just makes no sense. Further, they let their focus slip and now every other product in the portfolio is now in trouble as well. Just bad management driven by bean counters. I share the feelings of others here. You couldn’t give me an Indian, or any other Polaris product for that matter.

  13. 13 Tony Presley Jan 26th, 2017 at 3:09 pm

    DJM. You are not an insider. You know nothing. Scott Wine nor anyone planned the demise of Victory.

  14. 14 GHR Jan 26th, 2017 at 4:06 pm

    I came to Victory in 2013 by stumbling on it in a Yamaha dealer. Before that I didn’t even know it existed. When I did my homework before purchase on one of the Victory forums I found enthusiastic owners who loved their bikes and spent tons of effort improving them with modifications of all kinds. I finally made a blind purchase of my Vision 3 months later and have been thrilled with it ever since. It performs well, runs faultlessly and will outrun the competitors at both HD and Indian on the straight path or on twisty roads.
    I must say that the way I found Victory is a study in how not to sell a new product like the Victory line was. I can name some even obscure brands of bikes like KTM and Aprillia but had never heard of Victory. How could any responsible company allow that to happen after over 10 years of manufacturing? The Indian has had ads on TV that I have seen so I really doubt that Victory was ever given the love that Indian has been by the corporate management. If it was not intentional I have to surmise that it was simple incompetence that led to falling Victory sales. As others have already mentioned, engineering was completely diverted from improving Victory, at least in any way that would sell bikes, since Indian hit the design teams.
    I came to Victory by accident but with a definite desire for a particular set of characteristics. When I find another bike that I like I will be buying it and now I am certain it will not be a Victory because the company dumped their best chance of having me make my next purchase another Victory. Indian is a nostalgia bike and I am a rider, not a nostalgia buff, so they hold no appeal for me. HD is a case of been there and learned my lesson so I won’t be going back there. There are still over a dozen of Indian’s competitors out there with decent bikes at lower costs for many of them so I will find a good bike again some day. If Victory had made any real improvements in the last 4 years and stayed in business that might have even been another of their models but they are gone.
    I need a SxS for various reasons but with the fire trap that the Rzr has been, it will not carry a Polaris emblem.

  15. 15 1550tc Jan 26th, 2017 at 4:42 pm

    It performs well, runs faultlessly and will outrun the competitors at both HD and Indian on the straight path or on twisty roads.

    “alternative facts”

    Trump is hiring for his “alternative facts” department!!

  16. 16 Felix Jan 27th, 2017 at 10:30 pm

    Hopefully, Trump will get news of this and Victory will be back in continuous production.

  17. 17 Jeff Vita Jan 28th, 2017 at 9:16 am

    Trump is just a bully, a clueless child.

  18. 18 Sam Jan 30th, 2017 at 11:20 am

    I sense a parallel to the K Car and Lee Iacocca cashing out of Chrysler. Good for Lee but not so much for Chrysler or their patrons.

  19. 19 Feb 1st, 2017 at 8:48 pm

    BobS and DJM really said it all having had stock and a Arlen Ness kingpin I found that the very little dealerships the chrome falling off the rust paper thin fenders and the cost of 20,000,00 and 3 years later being worth $4,000.00 is a very good reason to sell my stock get rid of the Kingpin and never looking back sorry I ever thought they made a bike better than Harley for me!

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