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Polaris Industries, Inc.

FOUNDED: 1954

Contact Information:

HEADQUARTERS: 2100 Hwy. 55
Medina, MN 55340-9770
PHONE: (763)542-0500
FAX: (763)542-0599
URL: http://www.polarisindustries.com

OVERVIEW

Polaris Industries is the largest snowmobile maker in the world. Snowmobiles account for 25 percent of the firm's sales. All-terrain vehicles (ATVs) bring in more than 50 percent of sales; parts, gear, and apparel, 13 percent; personal watercraft, 5 percent; and motorcycles, 1 percent. To sell its recreational and utility vehicles, Polaris uses roughly 2,000 North American dealers as well as 52 distributors across the world. The firm is listed on the Standard & Poor's SmallCap 600 stock index.

COMPANY FINANCES

The year 2001 marked the tenth consecutive year of sales growth for Polaris. Sales exceeded __BODY__ billion for the first time in 1995, having grown more than threefold since 1991. In 2000, revenues reached __BODY__.42 billion, and despite recessionary economic conditions, they grew 6.1 percent to __BODY__.51 billion in 2001. Net income growth during this time period was a bit less consistent. After peaking in 1994 at $129 million, net income fell to $60.8 million in 1995. After climbing to $65.4 million in 1997, net income fell to $31 million in 1998. By 2001, however, net income had recovered to $91.4 million. The firm's profit margin was 10.4 percent that year, second only to the 15.6 percent profit margin realized in 1994. Stock prices in 2000 ranged from a high of $42.06 per share to a low of $25.56 per share, resulting in earnings per share of $3.50 that year.

ANALYSTS' OPINIONS

Despite the economic slowdown in North America, sales of ATVs continued to grow in 2001. Healthy ATV sales helped to boost revenues for Polaris in a year that proved to be disastrous for many other businesses marketing recreational wares. However, analysts were mixed about the firm's outlook in 2002. Some believed that price cuts by rivals like Honda would undermine sales for Polaris, and that ATV sales, which reached 700,000 units industrywide in 2001, had peaked. Other analysts, however, predicted that the market would continue to grow and fuel revenues for ATV manufacturers like Polaris and Arctic Cat.

HISTORY

Edgar Hetteen and David Johnson created Hetteen Hoist & Derrick in 1945. Based in Roseau, Minnesota, the business focused on repairing farm machinery for nearby farmers. A gas-powered sled Johnson built to travel to various hunting spots during the winter months attracted the attention of a neighbor, who asked to buy the machine. Realizing that a market for a motorized sled existed, Hetteen Hoist & Derrick began to manufacture early snowmobiles. The company changed its name to Polaris Industries, Inc. in 1954. Polaris, another name for the North Star, reflected the firm's northern Minnesota location. That year, the number of snowmobiles manufactured reached five. In 1956, Polaris shipped its snow-mobiles to Canadian distributor H.C. Paul. The machines were dubbed "Autoboggans." By 1957, Polaris was manufacturing 300 snowmobiles each year.

In the late 1950s, Polaris distributed machines known as "Sno-Travelers" in Alaska, which proved to be a significant market for the firm's early snowmobiles. To generate publicity for Polaris machines, Edgar Hetteen and three companions rode three Sno-Tavelers from Bethel to Fairbanks, Alaska, covering 1,200 miles in three weeks. At the age of 31, Allan Hetteen, brother of Edgar, took over as president. In 1962, Polaris shipped its snowmobiles to dealers in Sweden for the first time. Two years later, the firm unveiled a sportier snowmo-bile, the Mustang, which helped to promote the recreational use of snowmobiles.

Textron acquired Polaris in 1968. That year, the firm began to make use of engines supplied by Fuji Heavy Industries. By the early 1970s, all Polaris snowmobiles were outfitted with Fuji engines. Sales in 1971 neared the 500,000-unit mark. Throughout the remainder of the decade, however, snowmobile sales began to wane despite attempts to spark interest with new model releases and sponsorships of snowmobile races. In 1979, Polaris developed the first independent front suspension (IFS) snowmobile, the TX-L Indy. When Textron revealed its plans to shutter its snowmobile subsidiary in 1981, several Polaris managers, led by president W. Hall Wendel, Jr., bought the firm back from Textron. Along with Hall Wendel, Jr., the new owners of Polaris included company chairman William H. Wendel, Sr. as well as several junior and senior executives.

In 1984, Polaris purchased the snowmobile operations of John Deere. The following year, the firm decided to reduce its reliance on snowmobiles by diversifying into all-terrain vehicles (ATVs). A limited partnership called Polaris Industries, L.P. acquired Polaris in 1987 and listed Polaris stock on the American Stock Exchange, using the symbol "SNO," for $20.00 per share. Eventually, the firm's stock was listed on the New York Stock Exchange as well as the Pacific Stock Exchange.

Ken Larson replaced Hall Wendel as President in 1988; however, Wendel remained chairman and CEO. Snowmobile magazine named the Polaris Indy 500 the "Snowmobile of the Decade" in 1989. Polaris expanded operations with a new production plant in Wisconsin in 1990. By then, the firm was the largest maker of snow-mobiles in the world. Polaris diversified into personal watercraft in 1991 with the launch of the SL 650. The firm opened a third plant in Spirit Lake, Iowa in 1994. Sales exceeded __BODY__ billion for the first time in 1995. That year, Fuji Heavy Industries and Polaris created Robin Manufacturing, a joint venture dedicated to engine manufacturing. In 1997, Polaris established a facility in Ver-million, South Dakota, to distribute parts, clothing, and gear. The firm also introduced its first motorcycle, the Victory, and full-scale production on Victory Cruisers began in 1998. CycleWorld magazine named the Victory V92C its "Cruiser of the Year" that year. Tom Tiller took over as president and CEO in 1999 and Wendel remained chairman. In 2001 Polaris developed the All Surface Loader, a landscaping machine.

STRATEGY

When Polaris entered the ATV market in the 1980s, it faced fierce competition from established players like Honda and Suzuki. However, the firm's strategy of marketing its ATVs as utility vehicles versus recreational vehicles helped to differentiate Polaris from the competition. As a result, the firm found itself second only to Honda in the U.S. ATV market in the late 1980s. The firm retained its position as leader in ATV sales into the early 2000s.

A marketing strategy employed by Polaris throughout its history was its intense promotion of new product releases. For example, to publicize its move into ATVs, Polaris asked the governor of Minnesota, Rudy Perpich, to ride the firm's first ATV as it exited the assembly line. When the firm unveiled its first motorcycle, the Victory, it hired famous race car driver Al Unser, Jr. to ride the first Victory into Planet Hollywood at the Mall of America.

In 2000, sluggish snowmobile sales prompted the company's founders, Edgar Hetteen and David Johnson, to plan a snowmobile trip across Alaska with company CEO Tiller. The trio hoped that the publicity surrounding the trip would spark increased interest in snowmobiling in the same way that Hetteen's 1,200-mile, three-week trip across Alaska had boosted sales in the early 1960s. The publicity generated did help to boost snowmobile sales from 22 percent of Polaris' revenues in 2000 to 25 percent of revenues in 2001. This growth took place despite a mild winter throughout most of the United States.

INFLUENCES

The firm's decision to diversify into ATVs in the mid-1980s was the result of its reliance on snowmobiles, which limited the lion's share of production and sales to the winter months. Later diversification moves into personal watercraft and motorcycles were also sparked by sluggish snowmobile sales and the goal of reducing Polaris' reliance on any single vehicle.

CURRENT TRENDS

According to a March 2002 issue of Business Wire, "Quality and reliability continue to be key factors in the success of the Polaris snowmobile line, but innovation plays an increasingly important role in this competitive market." To maintain its position as a pioneer of technological developments that enhance snowmobile performance, Polaris invests millions of dollars into new product development efforts. For example, in 2002, Polaris introduced a snowmobile with an engine that exceeded the Environmental Protection Agency standards scheduled to take effect in 2010. The new machine's lower center of gravity increased stability and handling for drivers. The firm also put in place a program called Snow Check, which allows customers visiting the firm's Web site to design a snowmobile with the features they want and order it from their local Polaris dealer.

PRODUCTS

The Polaris Indy 600 XC SP snowmobile was the world's bestseller in 2001. Along with 28 other snow-mobile models, Polaris sells a variety of four-wheel and six-wheel ATV models; a line of personal watercraft; two motorcycle models; apparel and gear including gloves, hats, helmets, jackets, sweaters, and boots; and accessories including tow hitches, hand warmers, lubricants, luggage, and cargo racks.

GLOBAL PRESENCE

While most of Polaris' engineering and manufacturing activities take place in the United States, the firm distributes its products in 121 countries. Polaris also operates subsidiaries in Canada, Australia, and New Zealand.

SOURCES OF INFORMATION

Bibliography

Black, Sam. "ATV Makers Predict Continued Growth; Analysts Take More Conservative Stance." Minneapolis-St. Paul City Business, 28 September 2001.

"Polaris Gives Snowmobile Dealers Reasons for Optimism." Business Wire, 25 March 2002.

Polaris Industries, Inc. Corporate History. Available at http://www.polarisindustries.com.

Polaris Industries, Inc. Home Page, 2002. Available at http://www.polarisindustries.com.

For additional industry research:

Investigate companies by their Standard Industrial Classification Codes, also known as SICs. Polaris Industries' primary SICs are:

3732 Boat Building and Repairing

3799 Transportation Equipment, Not Elsewhere Classified

Also investigate companies by their North American Industry Classification System Codes, also known as NAICS codes. Polaris Industries' primary NAICS codes are:

336120 Boat Building

336999 All Other Transportation Equipment Manufacturing