Polaris Industries Inc. Forges Ahead With New Products While Competitors Retreat

Feb. 25, 2010
Cost-cutting initiatives along with aggressive growth plan leads to 21% profit gain in year-end quarter.

Economic slowdowns present major challenges for producers of goods that are considered luxury items by consumers. Known for off-road vehicles, including ATVs and snowmobiles, Polaris Industries Inc. is one such manufacturer that must fight to stay relevant as the average buyers seek ways to trim their budgets.

The company has more than held its own through a series of cost-cutting initiatives, including inventory reductions, and new investments. In the fourth quarter of 2009 Polaris realized a 21% profit increase over the year-earlier period. Net income totaled $43.9 million, up from $36.2 million recorded during the year-ago quarter.

"Our strategic decision to drive aggressive cost reductions, while continuing to invest in the highest return opportunities, has positioned us well as for 2010," said Scott Wine, Polaris CEO, in a Jan. 28 statement. "Our team and businesses effectively balanced significant cost reductions with a relentless focus on innovation and winning the competitive battle, which enabled us to exceed expectations and position the business well for 2010."

The company reduced plant inventory by 19% in the fourth quarter, which contributed to strong cash flow and a record year-end cash balance of $140.2 million compared with $27.1 million in the year-ago period. North American dealer inventories declined 24% in the year-end quarter. Polaris also consolidated its Victory motorcycles sales for to create dealer efficiencies, said Bennett Morgan, president and chief operating officer, in a Seeking Alpha earnings call transcript.

Despite the economy, the company launched 34 new products in 2009, while competitors retreated from new-product investments, said Wine in the transcript.

Polaris Industries Inc.
At A Glance

Polaris Industries Inc.
Medina, Minn.
Primary Industry: Railcars, Ships, & Other Transportation Equipment
Number of Employees: 3,300
2008 In Review
Revenue: $1.95 billion
Profit Margin: 6.03%
Sales Turnover: 2.59
Inventory Turnover: 6.82
Revenue Growth: 9.45%
Return On Assets: 15.25%
Return On Equity: 67.87%
In 2010 the company is pursuing cost and lead-time reductions to make itself more competitive and plans to release a new Victory brand position and marketing strategy that is more relevant to its target customers, Morgan said.

"A top priority for Polaris in 2010 will be to drive growth through the diversification of our business, while continuing to outperform and excel in our off-road vehicle business," Wine said. "International growth will be a primary focus, as we allocate more focus and resources to our opportunities outside the United States. We plan to expand our operational excellence initiatives, which will play a key role in our ongoing efforts to expand margins."

Wine said the company will take steps to accelerate growth in its Victory motorcycle business and new low-emission vehicle product line.

In July 2009 Polaris introduced an electric-powered neighborhood vehicle called the Polaris Breeze, the company's first entry into the electric-vehicle market. The Polaris Breeze is designed for multiple consumer uses including golfing or transporting light cargo loads. The vehicle is targeted for consumers living in master-planned communities.

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