Polaris Reports 2014 Q4 Earnings

The new four passenger RZR 4 EPS in Havasu Red Pearl from Polaris.

A constant stream of new models like the new four passenger RZR 4 EPS in Havasu Red Pearl help keep Polaris growing.

Polaris continued on the path of strong growth with another record quarter. Managment reported net income was $135.4 million for the fourth quarter of 2014, up 25 percent from the previous fourth quarters net income of $108.7 million. Sales for the fourth quarter of 2014 totaled a record $1,275.0 million, an increase of 18 percent over last years fourth quarter sales of $1,083.7 million.

For the full year ended December 31, 2014, Polaris reported net income from continuing operations of $454.0 million for the full year 2014, up 19 percent from the previous years net income from continuing operations of $381.1 million. Sales for the full year 2014 totaled a record $4,479.6 million, an increase of 19 percent compared to sales of $3,777.1 million for the full year 2013. Some of the highlights related to small, task-oriented vehicles follow.

  • Off-Road Vehicle??sales??, which includes ATVs and UTVs or side-by-sides, increased 19%??from the fourth quarter 2013 to $781.5 million. This increase reflects continued market share gains on strong demand for both ATVs and side-by-sides.
  • Polaris North American ORV unit retail sales were up low-double digits percent from the 2013 fourth quarter with consumer purchases of side-by-side vehicles up double-digits percent and ATV retail sales up high-single digits percent for the 2014 fourth quarter.
  • Polaris introduced over twenty new MY14.5 and MY15 ORV models in 2014, including the all-new RZR?? XP 900 trail and RZR?? XP4 900 trail, several new value models, and two models in a newly defined category of single-seat, ride-in ATVs, the Polaris ACE.
  • Polaris extended their market share lead in the North American ATV industry for the fourth straight year with retails up mid-single digits in an industry that only rose slightly.
  • ACE sales accelerated notably in the fourth quarter as marketing and the new 570 model began to impact the marketplace.
  • Four recent model year ’15??introductions include the new electronically fuel-injected RZR 170 and the new RZR 900S4, both of which have already begun to ship.
  • Commercial. Sales increased by over 80% in the fourth quarter driven by initial Ariens-Gravely supply vehicle shipments, strong national accounts growth and notably improved BRUTUS and Bobcat retail performance.
  • In the Small Vehicle division which includes GEM, Aixam and Goupil, fourth quarter revenue declined 11% due to the weak French economy afflicting both Aixam and Goupil. For the full year 2014, sales increased 28% fueled by Aixam market share gains and increased sales from both our GEM and Goupil businesses.
  • Polaris significantly outperformed in the ORV market in Europe.
  • For 2015 management expects ORV is expected to grow mid-single digits, driven by new products but offset by further implementation of RFM, their new inventory management program, and slower international demand.

Learn more: ??Seekingalpha.com (earnings call transcript)

Comment:?? Polaris continues to dominate the market, although like other manufacturers they have been hurt by slower sales in Europe and in countries like Russia. Expect more of the same in 2015 as they continue to rollout products to segment the market and cover a range of price points. They are likely to add more models for their push into the commercial segment as well.

Arctic Cat Announces FY2015 Q3 Earnings

The 2015 Wildcat Sport XT, a recent addition to the Arctic Cat side-by-side lineup.

The 2015 Wildcat Sport XT, a recent addition to the Arctic Cat side-by-side lineup.

Last week Arctic Cat reported on their third quarter earnings for fiscal year 2015. For the quarter ending on December 31, 2014 net sales for the third quarter decreased to $193.7 million from $225.8 million for the same quarter last year and net earnings decreased to $7.5 million or $8.9 million as adjusted from $12.1 million.??Year-to-date net sales increased 2.5% to $599.9 million from $585.1 million a year ago and net earnings decreased to $26.4 million or $32.3 million as adjusted from $41 million. Here are some highlights of the earnings call as it relates to utility vehicles.

  • ATV and UTV sales for the quarter??increased 7.3% to $83.9 million from $78.2 million as growth in Wildcat side-by-sides were offset by decreases in core ATVs.
  • For the first three quarters to date sales of ATVs and UTVs decreased 4.3% to $217.3 million from $227.2 million. Strong sales of Wildcat side-by-side models were offset by lower than planned sales of core ATV sales to dealers in North America and international regions, including Russia.
  • A $7 million charge in the 4th quarter will be taken related to reducing core ATV inventory.
  • Wildcat models gained further market share in this category during the third quarter this year.
  • For the calendar year sales of side-by-side Wildcats grew 34% versus the industry???s 17%.
  • Three new Wildcat Sport models on a new 60-inch wide chassis were introduced. The new chassis??? width is a mid-sized option between the original Wildcat and the recently successfully introduced Wildcat Trail model, which has a narrower 50-inch stance.
  • A new 2016 model year HDX Prowler will be announced in early February
  • Arctic Cat signed an OEM agreement with a terrain company during the third quarter to build private label side-by-side vehicles for the commercial line equipment business. They expect to begin shipping products to this customer in March.

Learn more: ??Seekingalpha.com (earnings call transcript)

Comment: ??In search of growth many UTV manufacturers are looking to enter into other market segments either by adding new product lines or developing partnerships. Arctic Cat’s new Sport line and OEM agreement are more examples of this trend. From comments during the earnings call, the OEM agreement is with Toro. This will give Arctic Cat a distribution network into the commercial and turf markets. Their current powersports network of dealers is not the best match for tapping into the commercial market. For Toro, UTVs are a relatively small part of their business and development resources are probably better spent their core products, while they take advantage of Arctic Cat’s engineering expertise in the UTV market.

GPS Industries Introduces New Fleet Management System

GPS Industries has introduced their Visage Resort Edition fleet management system for golf car fleets. The Visage Resort Edition includes navigation tools, maps and two-way communication capabilities, and the recently-launched Visage Media Network. The Visage Media Network consists of 10-inch color touchscreens affixed to guest-assigned cars and can deliver a range of content such as resort news, internal promotions for resort restaurants, special events like concerts and off-site excursions and information on resort real estate for sale. Sponsored content provides an additional revenue opportunity for the resort or golf course, and access to an affluent audience for advertisers. The Visage Resort Edition was launched at the high end??Casa de Campo Resort in the Dominican Republic.??According to management Visage ??is installed in 900-plus golf-car fleets, primarily in North America, Europe and the Middle East for 80% global market share, GPSI predicts 35% annual growth over 2014.????Learn more: ??Worldgolf.com

 

Comment:?? Golf courses are still experiencing a tough market and the net number of golf courses in the US are expected to decline slightly over the next few years. Products like Visage help course managers squeeze some more revenue out of their existing base of participating golfers. The fleet data can also help them manage their fleet more efficiently. The market for these type of products has grown significantly in the last few years.

Michelin Launches Non-Pneumatic Wheel For Mowers

The Michelin X Tweel non-pneumatic tire on a John Deere mower.

The Michelin X Tweel non-pneumatic tire on a John Deere mower.

Michelin recently launched their X Tweel non-pneumatic tire for some of their commercial mowers. ??The airless tire and wheel??uses

“…a combination of deformable polyurethane spokes, a steel-and-rubber outer rim, and rigid metal hub. The outer rim???called a shear beam???carries most of the load. The spokes and hub distribute the load across different parts of the shear beam as the tire rolls over objects.”

The tire is available for their ZTrak series of mowers and according to John Deere lasts two to three times longer than other tires. The X Tweel are only being used on slow-moving vehicles currently because at??high speeds, airless tires tend to vibrate and make lots of noise. The company sees golf cars and small utility vehicles as the next likely market. The reported cost is $749 for a pair of tires.??Learn more: ??Popsci.com

Comment:?? Non-pneumatic tires are a likely to become more prevalent in the next three to five years. Polaris has also recently began selling their non-pneumatic wheel into commercial markets after first being used for some of their military vehicles. While it would seem ideal for high end side-by-sides being used on rough trails, Polaris has noted that the wheels have to be in effect “tuned” for a model’s and suspension, so it is likely that commercial users will be the first to use the wheels. Currently a set of four of the Polaris Terrainarmor wheels costs $4,000 and includes a speed key to limit vehicle speed to 25 mph.

What’s Cooking On The STOV

Highlighting some of the many applications for small, task-oriented vehicles

This Polaris UTV is being used to create a skate path on Mirror Lake in Lake Placid, NY.

This Polaris UTV is being used to create a skate path on Mirror Lake in Lake Placid, NY.

A new winter time use for utility vehicles: ??clearing skating paths. In Lake Placid,??North Elba Park District employees recently plowed a skating path around Mirror Lake using a newly purchased utility vehicle. The idea was first tried last year, but this year the community, led by a local resort owner, raised funds to buy a utility vehicle expressly for the purpose of building the skating path. The lighter utility vehicle allowed employees to safely get onto the ice earlier than heavier alternatives. The community raised around $32,000 for the Polaris UTV which they accessorized with a cab, plow and broom attachment. Donors included local resorts, foundations and citizens as well as a number of private donors from different states. ??Learn more: ??Lakeplacidnews.com

Research Demonstrates Effectiveness of Solar Panels For Vehicle Range Extension

University of Windsor associate professor Narayan Kar, left, and Unconquered Sun founder and CEO Sean Moore, in front of a electric powered shuttle outfitted with solar panels. (Photo:  Julie Kotsis/The Windsor Star)

University of Windsor associate professor Narayan Kar, left, and Unconquered Sun founder and CEO Sean Moore, in front of a electric powered shuttle outfitted with solar panels. (Photo: Julie Kotsis/The Windsor Star)

Researchers from the University of Windsor have conducted testing that show the effectiveness of solar panels to extend the range of electric vehicles. The research was performed in collaboration with Unconquered Sun Solar Technologies, a solar panel company based in Ontario with manufacturing facilities in Windsor. According to the company’s management, the testing showed that driving range could be extended 45% on average. Unconquered Sun is planning on launching a line of low-speed vehicles with rooftop solar panels in the Spring. For the testing, the solar panels used Lexan rather than heavier glass for the lamination of the solar cells. Learn more: ??Windsorstar.com

Comment:?? There are a number of companies in the market that provide electric STOVs with solar panel options. For example, some of Polaris’ GEM as well as Club Car provide a solar panel option from Solardrive for some of their electric vehicles. This research is just one more sign that this trend is likely to continue and even gain more momentum. The college/university market which has a strong interest in building green and sustainable fleets are a likely target for this type of vehicle option.

Kulan Electric UTV Concept Vehicle

The Kulan electric UTV concept vehicle designed for farm use.

The Kulan electric UTV concept vehicle designed for farm use.

The Kulan electric UTV is a concept vehicle designed for use on farms. Kulan derives its’ name from a Central Asian donkey. The uniquely designed vehicle is made to be a beast of burden for payloads up to 1,000 kg. The vehicle is powered by a lithium ion battery pack paired with two 2KW electric motors on the rear wheels which generate 5 hp and a top speed of 50km/hr. The body panels are plastic and the frame is made of tubular steel. The stated range is up to six hours of run time or 300 km depending on load and driving conditions. The vehicle is being developed by Poly-Lab.net, a consortium of 14 companies based in Germany. The consortium is looking to move the vehicle from concept into production. ??Learn more: ??Greencarreports.com

Comment:?? A unique and “bare bones” design. I’m curious to see if the Kulan will move into the production phase. While the design appears to lend itself to low-priced production costs, the lithium battery pack could prove to be expensive given the reported vehicle range. Nevertheless, the focus on farm application is another indication of how UTVs are becoming more specialized for specific end-user segments.

CPSC Moves Ahead On Mandatory Side-by-Side Standards

Picture of roll simulator testing performed on behalf of the CPSC.

Picture of roll simulator testing performed on behalf of the CPSC.

The Consumer Product Safety Commission(CPSC) has voted to move ahead with mandatory product safety standards for recreational off-highway vehicles (ROVs), also known as side-by-sides. The UTV industry is vigorously protesting and the industry trade association,??Recreational Off-Highway Vehicle Association (ROHVA) issued a statement stating…

The Recreational Off-Highway Vehicle Association is extremely disappointed that the U.S. Consumer Product Safety Commission today voted 3 – 2 to begin the process for a rule imposing a mandatory product standard for recreational off-highway vehicles (ROVs), commonly referred to as side-by-sides.
The proposed rule relies heavily on CPSC assumptions, rather than on scientific conclusions drawn from relevant testing or incident data….The proposed rule, if ultimately approved, would limit the ability of ROV manufacturers to design vehicles to safely provide the level of performance that is expected by OHV enthusiasts.?? (Full Statement)

The CPSC’s draft proposed rules includes:

??(1) lateral stability and vehicle handling requirements that specify a minimum level of rollover resistance for ROVs and require that ROVs exhibit sub-limit understeer characteristics; and (2) occupant retention requirements
that would limit the maximum speed of an ROV to no more than 15 miles per hour (mph), unless ??the seat belts of the driver and front passengers are fastened; and the rule would require ROVs to ??have a passive means, such as a barrier or structure, to limit further the ejection of a belted
occupant in the event of a rollover.

The CPSC makes a distinction between low speed UTVs that have a top speed of 30 mph and higher speed UTVs which the rule is targeting. There will be a 75 day comment period regarding the new rules and the industry is encouraging side-by-side enthusiasts to make their voices heard on this issue. Polaris has created a website where people can contact their Congress member. As of this posting over 12,000 people have used the website to contact over 500 members of Congress.

The industry is arguing that CPSC’s methodology in developing the standards is flawed because it is “…inappropriately apply design- restrictive standards developed for on-highway vehicles, without ensuring that those principles apply in off-highway environments.” In the CPSC’s briefing package they state

ROVs obey the same principles of motion as automobiles because ROVs and automobiles share key characteristics, such as pneumatic tires, a steering wheel, and spring-damper suspension that contribute to the dynamic response of the vehicle.11 Thus, the test procedures to measure the vehicle handling properties of passenger cars and light trucks are also applicable to ROVs.

What is not mentioned as a common key characteristic between the vehicle types is the type of ground upon which they operate and this appears to be a critical distinction. The CPSC??reports 335 deaths involving ROVs from 2003 through April 2013 and estimates that ROV accidents cause more than 11,000 medically treated injuries every year. The CPSC calculated the cost of the changes at $61 to $94 per vehicle and the societal benefits at $2,200 per vehicle. While the industry has developed voluntary standards over the last several years, the CPSC does not believe that these are enough. Those in favor of the ruling believe the industry is exaggerating the negative impacts of the standards.

A video on the Polaris website mentioned above makes a few points about why they believe the standards are a bad idea.

  1. Steering changes proposed would make vehicle steering less predictable and responsive.
  2. Proposed stability changes would require manufacturers to lower and widen vehicles, which would reduce ground clearance and prohibit trail access, or require stiffer tires which would result in less traction on hills, longer stopping distance and more spin-outs in corners. In addition the standards would eliminate factory installed cabs and doors. (This is not explained but I assume it has to do with the vehicle’s center of gravity)
  3. The seat belt interlock could lead to unintended high-speed vehicle decelerations, rely on sensors that could be unreliable in harsher off-road environments and would eliminate under seat storage.
  4. The passive restraints would make vehicle entry and exit more difficult.

Learn more: ??Farmfutures.com

Comments:?? If what the industry says is true then these standards could be in direct conflict with some of the recent trends in the market, namely increased ground clearance and narrower vehicles to access ATV trails. In addition, marketing content for some vehicles has been touting improved designs for better vehicle entry and exit. I would like to hear from some engineers or those similarly informed on the applicability of the testing standards and how big an impact the standards would have on vehicle design.

Tata Motors Showcases 2 New Ace Mini-Truck Variants

Tata-Motors-Municipalika-2014

Tata Motors vehicles display at Municipalika-2014

India-based Tata Motors used the Municipalika 2014 international conference to showcase their??Tata ACE Hopper Tipper BS IV ??? Waste Segregation and??Super ACE Suction Machine BS III mini suction vehicle. The??ACE Hopper Tipper BS IV??is suited for door-to-door garbage collection and the Super ACE Suction Machine BS III mini suction vehicle for door-to-door sewage cleaning. According to the company the “Tata ACE Hopper Tipper BS IV ??? Waste Segregation fully- built Mini Garbage Tipper is available in BS III & BS IV variants, suitable for hilly terrains, and uses cathodic Electro Deposition (CED) treated body for corrosion prevention. Super ACE Suction Machine BS III is equipped for high pressure suction operation for a depth of upto 25 feet and diameter upto 75 mm ??? to clean thick sludge, and offers 39% vehicle gradeability making it suitable for hilly terrains” Both vehicles are small enough to operate in narrow lanes found in the dense urban areas of India.

Municipalika is an international conference and exhibition that focuses on emerging trends in sustainable habitat and integrated cities. India has experienced rapid population growth in urban areas in recent years and that is expected to continue for some time. ??Learn more: ??Rushlane.com

Comment: ??These products are a good example of the differences between the US and other markets such as Asia when it comes to small, task-oriented vehicles. The US cities are neither as physically cramped or densely populated as some of the “mega” cities in other parts of the world. The characteristics of these cities create a greater demand for smaller vehicles that require lower speeds and smaller dimensions.

 

Arctic Cat Reports Earnings For Fiscal 2015 2Q

Despite weak ATV sales, side-by-side revenue increased as Arctic Cat Wildcat Trail models continued to sell well.

Despite weak ATV sales, side-by-side sales increased as demand for Arctic Cat Wildcat Trail models remained strong.

Arctic Cat reported revenue of $262.5 million for the fiscal 2015 second quarter, an increase of about 10% from last year. Sales were driven by their snowmobile and parts, garments and accessories (PG&A) divisions which offset weakness in their ATV business that includes ATVs and side-by-sides. The ATV business declined 4% from the previous year’s quarter and 10% year to date. The company fell short of their expectations for ATV sales but strong sales continued for their Wildcat side-by-side models. There was also a significant charge for a recall of some of their older ATVs. Some highlights of the earnings call as it relates to utility vehicles/side-by-sides include:

  • 15 new 2015 model year ATVs and side-by-sides were unveiled in the quarter
  • Demand for their side-by-side products remains strong driven by the Wildcat Trail line and recently introduced Wildcat Sport
  • Wildcat sales also helped generate revenue for the PG&A business
  • Management reports Arctic Cat is outperforming the overall side-by-side market

Learn more: ??Seekingalpha.com (earnings call transcript)

Comment:?? Despite weakness in their ATV business Arctic Cat remains a strong competitor to Polaris in the high performance segment of the side-by-side market. They are particularly strong in the trail sub-segment where the vehicles are narrower to allow access to legacy ATV trails.