Polaris reports big first quarter numbers

Polaris Industries Inc. of Medina, Minn. reports that its sales increased by 22% to US$388.7 million in the first quarter of 2008.

Polaris, which did $317.7 million in sales in the first quarter of 2007, says all its product lines experienced sales growth during the quarter. Improved performance from the company’s parts, garments and accessories (PG&A), side-by-side vehicle and snowmobile were largely responsible for the better than expected numbers.

“We are pleased to report our first quarter results that have exceeded our expectations despite the difficult macroeconomic environment,” says Polaris chief executive officer Tom Tiller.

Snowmobile sales made a huge jump of over 200% for the 2008 first quarter with $9.4 million in sales, compared to $2.9 million over the same period in 2007. Polaris says the first quarter is historically a seasonally low quarter for snowmobile shipments, but improved snowfall during the riding season helped to reduce Polaris dealers’ snowmobile inventories to their lowest levels in 10 years.

Lower dealer inventory levels in 2008 also contributed to lower promotional assistance needed to retail the product and lower floor plan interest expense paid by the company for its dealers in the first quarter 2008 compared to the first quarter of last year.

Polaris expects overall sales for the full year 2008 to grow in the range of five to seven per cent.

“Given our focused and dedicated employee owners, I am confident we can achieve our sales and earnings guidance for the balance of 2008 in spite of the challenging macroeconomic environment in the United States.”

All was not completely rosy for Polaris, however, as the company is having some trouble with HSBC, who is providing Polaris customers with revolving retail credit financing. HSBC, according to Tiller, is not longer satisfied with the agreement it has with Polaris.

“HSBC threatened to significantly tighten underwriting standards and this tightening would have reduced the number of qualified customers that would be able to obtain credit from HSBC to purchase our products,” says Tiller. “In order to ensure that our customers continue to be able to finance the purchase of our products, after March 1, 2008, we began forgoing the volume-based fee income we are owed under the 2005 contract which will be a significant income reduction in 2008. We were not obligated to forgo this income under the 2005 agreement with HSBC and have filed a legal complaint against HSBC.”