The new RZR XP 1000 is the fastest-selling side-by-side in Polaris history.

Polaris reported another strong quarter of results for the Q4 2013 driven by off-road vehicles, motorcycles, PG&A and international sales. Overall, sales for the quarter were $1.08 billion, up 20% from the prior year period. Net income for the fourth quarter was up 23% to $108.7 million, yielding record earnings per share of $1.56, up 26%. Full year 2013 sales increased 18% to just under $3.8 billion. International and adjacent market businesses each grew 29% and 79%, respectively. Full year net income from continuing operations was $381 million. Some of the highlights of earnings report and conference call with a focus on small, task-oriented vehicles include:

• Off-Road Vehicles division which includes UTVs and ATVs increased in revenue in Q4 16% driven by strength in side-by-sides, particularly RZRs, Defense and Commercial.
• For calendar year 2013, ORV completed another strong year with revenue up 13%.
• Polaris gained market share again in the fourth quarter and for the full year 2013
• Polaris is #1 in the North American ATV industry, with 2013 retail sales up mid-single digits in an industry that was essentially flat.
• All Model Year ’14 new product introductions are selling extremely well and seasonality is now approaching.
• The new RZR XP 1000 is the fastest-selling side-by-side in company history and the XP 4 is built on that RZR XP sales momentum.
• Polaris ORV commercial revenues increased by over 120% in 2013.
• Both Bobcat and Brutus retail improved notably in the fourth quarter but management still sees significant missed opportunities in Polaris in dealer execution and customer development opportunities. To drive improvement in 2014, they added a dedicated infield commercial sales force to assist dealers in landing local B2B and B2G business and also initiated a partnership with Ariens.
• The Defense division, which sells mostly off-road ATVs and UTVs has momentum with a strong 4th quarter and an ongoing winning streak for recent contracts.
• Small vehicles, were up 25% to 30%, which includes a full year of Aixam acquisition.
• PG&A sales also rose 33%. Growth came from every category, with Accessories up 30%, Parts up 24% and apparel up over 150%, led by an outstanding first year from KLIM.
• 2013 industry conditions remained tepid with ORV industry down upper single digits.
• Polaris side-by-side retail sales growth moderated just a bit in the fourth quarter, but increased low double digits for 2013, outpacing the side-by-side industry which grew an estimated 10% for the year.
• ORV is expected to grow in the high single-digits percentage range in 2014.
• Management anticipates aggressive competition in the side-by-side market, with increased promotions possibly being more of a challenged than new products.
• The new Sportsman ACE is expected to add incremental revenues with a small amount of cannibalization of existing ORV sales.
• Management is very happy with how the numerous product introductions have been received in the market.

Learn more: Seekingalpha.com (earnings call transcript)

Comment:  Polaris continues to churn out new models and in general execute very well. It will be interesting to see how well the Sportsman ACE will sell, to whom and whether or not it will create a new category of vehicles. Management’s comments indicate that the side-by-side market may be slowing a little in the coming year. This could create a more competitive environment in the market as the pie will be growing at a slower pace than in the past few years and manufacturers recently added new offerings to go after key segments.