Grouse if you must, but Medina-based Polaris Industries Inc. is grateful for each and every flake of fresh snow.
That's because this snowy winter and spring helped boost snowmobile sales 217 percent during the first quarter and helped Polaris beat Wall Street's earnings expectations by a stretch.
Polaris, which makes snowmobiles, ATVs and motorcycles, reported quarterly earnings Tuesday of $75.5 million, or $1.07 a share. That's up from $60 million from a year ago and 6 cents a share higher than the $1.01 analysts expected. A well-timed tax break also contributed to the earnings boost.
Total sales rose 11 percent to $745.9 million during the quarter thanks to strong sales of all-terrain vehicles (ATVs), accessories, and snowmobiles. Although revenue rose, they missed analysts' expectations of $751 million in sales. Analysts called the quarter OK and noted that the hefty snow boosted snowmobile sales but tempered some ATV and motorcycle sales.
CEO Scott Wine and President Bennett Morgan told analysts that "the North American snowmobile industry finished the season strong … due to more normal snowfall levels and later snow cover for this snowmobile riding season."
Morgan said snowmobile sales "were about triple the first quarter of 2012, driven primarily by sales to dealers by our Scandinavian subsidiaries.'' In addition, he said, retail sales were "particularly strong in U.S. mountain states.''
Morgan noted that while the big snowfall helped snowmobile sales, in some cases it hurt sales of ATVs and motorcycles.
"We are seeing a notable split between what we might call 'Sun versus Snowbelt,' " Morgan said.
Polaris got its start as a Minnesota company with snowmobiles. But today they are the smallest part of its business. First quarter snowmobile sales jumped from $4 million in 2012 to $14 million this year.
Meanwhile, first-quarter ATV sales grew 7 percent to $541.2 million. That compares to double-digit increases during the warmer and drier 2012. Still, the division avoided industrywide declines seen across North America.
Parts and garments grew 27 percent to $127 million. Motorcycles, electric vehicles and other "on-road" products fell 3 percent to $62.8 million due mainly to the messy weather.
Wine noted the recent purchase of Aixam Mega — the French maker of small cars and commercial vehicles — and raised his 2013 earnings guidance by 15 to 18 percent. Polaris now expects earnings of $5.05 to $5.20 a share. Revenue is forecast to grow 12 to 15 percent this year.
Adding to expectations was news that Polaris finally launched a line of utility vehicles that it has codeveloped with Bobcat. Shipments of the long awaited Polaris Brutus and Bobcat utility vehicles begin this month, Wine told investment analysts.
Wine also said Polaris' redesigned Indian motorcycle launches later this year, which should "enhance growth in the second half of the year."
Polaris also announced it has chosen Opole, Poland, as the site of its newest ATV factory. Construction begins this quarter, and the factory is expected to open in fall 2014.
Mark Smith, Feltl & Co. senior research analyst, noted the Poland expansion, plus factory expansions in Wyoming, Minn., and Mexico and a developing joint venture with India-based Eicher Motors.
"Just look at all the projects these guys have going on," Smith said. "They doubled capital expenditures this year to $200 million. This company is just growing up by leaps and bounds, and it is setting them for future growth."
However, Smith said that without the tax break, earnings would have been flat or lower than planned. Polaris' income tax rate fell from 35 percent to 26 percent during the quarter, resulting in a one-time $8.2 million benefit. The big tax return resulted from Congress reinstating an R&D tax credit for 2012 and because Polaris had several favorable tax audits.
CEO Wine also acknowledged some sales softness.
"We saw a degree of timidity in some customer segments that corresponded with the [U.S.] payroll tax increases that took effect at the start of the year,'' Wine said. "We remain cautious of the economic risks in both North America and Europe."
Polaris shares rose 0.8 percent, or 72 cents, to close at $85.96.