Polaris' first-quarter results are better than expected

Polaris Industries Inc. reported first-quarter results Tuesday that beat expectations despite weak market conditions and fresh expenses associated with terminating the company's lackluster Victory motorcycle division.

The Medina-based maker of all-terrain vehicles, snowmobiles and motorcycles also reiterated its prior forecast for the full-year 2017 and noted that sales of four-wheel products stabilized during the quarter, perhaps showing signs that its severe recall problem and troubles with the slow market are beginning to normalize.

CEO Scott Wine said in a statement that the company's work to address its massive recall problem has made strides and that it expects off-road vehicle sales to be down just slightly for the full year. The company has established baseline engineering metrics and is analyzing and measuring daily to improve safety and quality.

"We will face more quality and safety issues in the future, the economy won't grow as fast as many of us would like, the risk of currency fluctuations is high and competition will remain elevated," he said. "We do not expect it to be easy, but we do expect to be better."

The company posted a loss of $2.9 million, or 5 cents per share, in the quarter ended March 31.

Sapping profits: the ratcheting of research and development and promotional spending tied to new products and vehicle recalls; one-time costs from the November purchase of the Transamerican Auto Parts (TAP) retail chain; and expenses associated with exiting the Victory motorcycle line.

Transamerican is Polaris' first retail business and contributed $202 million worth of sales to the quarter. It is expected to help diversify Polaris during a critical time, while the termination of the Victory bike line should help the company refocus on higher growth products, executives have said. The company took an $11.6 million impairment charge to take care of an investment related to the Victory wind down.

Total sales grew 17 percent to $1.15 billion, beating analysts' consensus estimate of $1.11 billion. Revenue grew amid flat off-road vehicle sales and stronger demand for Indian motorcycles, parts/accessories and military vehicles, and despite falling sales of snowmobiles and Slingshot motorcycles.

Polaris spent $38.6 million to "wind down" the Victory brand during the quarter. Executives told analysts during a conference call Tuesday that they expect to sell most of Victory's inventory this year.

During the quarter, Indian Motorcycle sales rose 11 percent, a surge that will hopefully continue, officials said.

"We saw continued strong performance from Indian Motorcycle and our off-road vehicles business improved its performance in the face of heavy competition and a sluggish powersports environment," Wine said in a statement.

The company recalled 338,800 vehicles due to fire and other hazards over the last two years. Problems mostly affected ATV and side-by-side off-road products, though the company's Indian Motorcycles, Slingshot motorcycles and some snowmobile models were also recalled.

He reiterated Polaris' prior guidance Tuesday. In January, it forecast that 2017 earnings would reach $4.25 to $4.50 per share, up from $3.48 in 2016. It also had predicted that 2017 revenue would jump 10 to 13 percent from the $4.5 billion reported in 2016.

Polaris' stock price closed Tuesday at $83.58, up 44 cents.

Dee DePass • 612-673-7725