American Motorcycle Dealer AMD 233 December 2018 | Page 12

NEWS
BRIEFS
Yamaha is to exhibit five new
models, including four new
concepts (among them the
Tritown Leaning Multi
Wheeler/LMW) at CES 2019 at
Las Vegas in January - the
world’s largest consumer
electronics show. The Niken
LMW will also been seen, along
with the company’s Public
Personal Mobility (PPM) concept
- a people service system based
on low-speed autonomous
driving.
Driven primarily by a decline in
exports, US GDP growth slowed in
the third quarter to an annualized
rate of 3.5% (second quarter had
been 4.2%) - that is still better than
many had been expecting, driven
primarily by consumer spending -
with inflation moderating to 1.6%
(compared to 2% earlier in the year).
Italian motorcycle and scooter
brand Malaguti was relaunched
at EICMA by the Austrian KSR
Group, saying it will “offer a full
range of dynamic and reliable
motorcycles and scooters for a
young, urban audience” starting
with water-cooled Aprilia 125cc
engines. Malaguti was founded
in 1930 by Antonino Malaguti,
with production finishing in
2011. KSR is making a habit of
acquiring and relaunching
moribund brands - most
famously Lambretta.
Metisse Motorcycles owner Gerry Lisi
is to build a new 1,850 sq m factory
and museum at his present
Oxfordshire headquarters in the UK.
Industry icons Don and Derek
Rickman broke ground on the new
facility at a ceremony in November.
The plan is for the licensed McQueen
replicas to be handbuilt alongside the
recently announced MK5 framed
1000cc parallel twin.
Italian motorcycle brand Moto
Morini has been sold to the
Zhongneng Vehicle Group. The
Jannuzzelli family took over
ownership in 2015 and moved
Moto Morini from Bologna
Trivolzio, south of Milan, to a
3,500 sq m facility where each
Morini is assembled by hand,
starting with its engine - each
model is built on request.
Zhongneng is based in South
West China and produces some
500,000 small cc scooters
annually and makes engines for
other manufacturers and its own
Zhen Motor brand. Founder and
President Chen Huanneng says
he has “great plans” for the
brand and that “it will remain
on Italian soil”.
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Continued from page 64
confident in our ability to deliver strong
financial and operational performance
in the quarter and years ahead.”
Corporately, third quarter 2018 sales
were reported at $1,651 million, up
+12 percent from $1,479 million for
the third quarter of 2017. The Boat
Holdings, LLC acquisition added $134
million of sales in the third quarter.
Gross profit increased +10 percent to
$401 million for the third quarter of
2018 from $364 million in the third
quarter of 2017. Reported gross profit
margin was 24.3 percent of sales for
the third quarter of 2018 compared to
24.6 percent of sales for the third
quarter of 2017. Gross profit for the
third quarter of 2018 includes the
negative impact of $8 million of Victory
Motorcycles wind-down costs,
acquisition-related costs for the
acquisition of Boat Holdings and
realignment and restructuring costs.
Gross profit margins on an adjusted
basis were down slightly primarily due
to mix and the impact of tariff,
commodity and freight cost pressures
during the quarter, partially offset by
lower warranty and promotional costs.
The company reported third quarter
2018 net income of $96 million, or
$1.50 per diluted share, compared
with net income of $82 million, or
$1.28 per diluted share, for the 2017
third quarter.
Operating expenses increased seven
percent for the third quarter of 2018 to
$284 million, or 17.2 percent of sales,
from $265 million, or 17.9 percent of
sales, in the same period in 2017.
Operating expenses in dollars
increased primarily due to the Boat
Holdings acquisition completed during
the quarter and investments in
strategic projects. Operating expenses
as a percentage of sales improved as
the company realized efficiencies
through its selling, marketing and
general and administrative spend
along with the addition of Boat
Holdings, which inherently has a lower
operating expense to sales ratio.
Income from financial services was $21
million for the third quarter of 2018, up
+18 percent compared with $18
million for the third quarter of 2017.
The increase is attributable to higher
retail demand and penetration rates
along with increased income from
Polaris Acceptance as dealer
inventories were at more appropriate
levels to meet demand.
Off-Road Vehicle (“ORV”) and
Snowmobile segment sales, including
PG&A, totaled $1,036 million for the
third quarter of 2018, up three percent
over $1,007 million for the third
quarter of 2017, driven by growth
across most categories. PG&A sales for
ORV and Snowmobiles combined
increased +12 percent in the 2018
AMERICAN MOTORCYCLE DEALER - DECEMBER 2018
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(in thousands US $)
Three months ended September 30 Six months ended September 30
2018 2017 2018
Sales
Cost of sales
Gross profit 1,651,415
1,250,145
401,270 1,478,726
1,114,764
363,962 4,451,420 3,997,428
3,341,493 3,040,589
1,109,927 956,839
Operating expenses:
Selling and marketing
Research and development
General and administrative
Total operating expenses
Income from financial services
Operating income
Net income 128,929
64,181
90,639
283,749
21,348
138,869
95,529 122,642
63,129
79,421
265,192
18,138
116,908
81,888 369,495
197,741
262,206
829,442
64,117
344,602
243,783
355,486
175,887
245,998
777,371
57,711
237,179
141,018
$1.28 $3.78
$2.21
Diluted Net income per share: $1.50
third quarter compared to the third
quarter last year. Gross profit
decreased two percent to $291 million
in the third quarter of 2018, compared
to $297 million in the third quarter of
2017.
ORV wholegood sales for the third
quarter of 2018 increased +12
percent, primarily driven by strong
RANGER and ATV shipments. Polaris
North American ORV retail sales
increased low-single digits percent for
the quarter, with side-by-side vehicles
up low-single digits percent and ATV
vehicles down low-single digits
percent. ATVs again gained market
share during the quarter. The company
experienced a modest amount of
market share loss for side-by-sides due
to a very difficult comparable in the
third quarter of 2017. The North
American ORV industry was up low-
single digits percent compared to the
third quarter last year.
Snowmobile wholegood sales in the
third quarter of 2018 were $69 million
compared to $144 million in the third
quarter last year. Snowmobile sales are
expected to be more heavily weighted
towards the fourth quarter of 2018 due
to the timing of shipments for the
company's pre-season snowmobile
orders.
Global Adjacent Markets segment
sales, including PG&A, increased five
percent to $96 million in the 2018 third
quarter compared to $92 million in the
2017 third quarter. Reported gross
profit increased +51 percent to $24
million in the third quarter of 2018,
compared to $16 million in the third
quarter of 2017.
Aftermarket segment sales increased
two percent to $230 million in the
2018 third quarter compared to $225
million in the 2017 third quarter, driven
by the company's powersports
aftermarket brands. Gross profit
increased to $66 million in the third
quarter of 2018, compared to $63
million in the third quarter of 2017.
2017
Boats segment sales, which consist of
the Boat Holdings acquisition that
closed July 2, 2018, were $134 million
in the 2018 third quarter, slightly better
than expectations. Reported gross
profit was $20 million or 15.1 percent
of sales in the third quarter of 2018.
Parts, Garments and Accessories
(“PG&A”) sales increased eight
percent for the 2018 third quarter,
primarily driven by growth in ORV.
International sales to customers
outside of North America, including
PG&A, totaled $172 million for the
third quarter of 2018, up +10 percent
from the same period in 2017. Foreign
exchange movements reduced sales by
three percent for the quarter. The
increase was driven by strong sales in
snowmobiles and motorcycles.
Total debt at September 30, 2018,
including capital lease obligations and
notes payable, was $1,864 million. The
company’s debt-to-total capital ratio
was 67 percent at September 30, 2018
compared to 51 percent at September
30, 2017. Cash and cash equivalents
were $183 million at September 30,
2018, up from $132 million at
September 30, 2017.
During the third quarter of 2018, the
company repurchased 507,000 shares
of its common stock for $55 million.
Year-to-date through September 30,
2018, the company has repurchased
2,069,000 shares of its common stock
for $247 million.
The company is maintaining its
adjusted sales and earnings guidance
for the full year 2018 and its current
sales and earnings per share guidance
ranges, given the fluid nature of tariffs
and the potential impact of trade
negotiations and a more difficult
motorcycle environment, which is
impacting growth and profitability for
that segment. The full year earnings
guidance includes approximately $40
million of tariff cost increases before
counter-measures, as the company
understands them today.
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