A bump in the road is big business for Polaris Industries. The company is one of the world's top makers of off-road vehicles, comprising all-terrain vehicles (ATVs) and side-by-side recreational and utility RANGER-brand vehicles. It also manufactures snowmobiles, on-road vehicles, such as the Victory brand motorcycle, and small electric vehicles (SEVs). Offerings include replacement parts, accessories (covers, windshields, backrests), and riding gear (bags and helmets). Polaris' lineup is sold through dealers and distributors in North America and Europe. The US represents more than 70% of sales.
The off-road vehicles (ORVs) segment, 69% of sales, includes all-terrain vehicles (ATVs) and Ranger side-by-side vehicles for recreational and utility use. ORVs are popular for such recreational pursuits as hunting and fishing as well for performing work on farms, ranches, construction sites, and for military operations. Sales of ATVs have been falling in favor of side-by-side vehicles, which can carry up to six passengers as well as cargo. Parts, garments, & accessories, (PG&A) 15% of sales, includes products that are custom made for the company by third parties and marketed through dealers and distributors and through the company's e-Commerce site. PG&A products includes winches, mowers, and racks for ORVs; handlebars and chrome accessories for motorcycles; and reverse kits and electric starters for snowmobiles.
Snowmobiles, 11% of sales, have been made by Polaris since 1954 as a utility vehicle that later found traction in the recreational market. The company now produces more than 25 snowmobile models that sell at retail prices ranging from $2,600 to $12,000. The company makes its own engines for some of those models. The motorcycles of the on-road vehicles segment, 5% of sales, include the Victory and Indian brands and are grouped into four categories -- cruisers, touring, sport bikes, and standard motorcycles. Polaris launched the other major product in this segment, the SEV, in 2009 as a method of transport in master planned communities.
Sales rose 33% in 2011 compared with 2010 thanks to growing consumer demand for just about all the company's products. Also contributing was a sales increase for side-by-side vehicles, which cost more than ORVs. Victory motorcycles also performed well for the company. By segment, off-road vehicles zoomed up 32% in 2011 compared with 2010 to meet strong demand from the military and Bobcat, which buys utility vehicles from Polaris. PG&A dressed for the success of a 19% increase in 2011 compared with 2010. The segment enjoyed demand for ORV and Victory related items and strong sales in the international market.
The popularity of new models helped snowmobiles head up 48% year-over-year in 2011 compared with 2010. Demand from Russia and Scandinavia also contributed to the uptick. The on-road vehicles segment surged 79% in 2011 vs. 2010 as a result in part of demand for two new Victory models, the Cross Country Tour and the Victory Hard-Ball. The 2011 acquisitions of two SEV makers, Global Electric Motorcars (GEM) and Goupil Industries, also benefited the segment. For the company as a whole, healthy sales and margin growth nudged the company's net income up about 55% in 2011 vs. 2010 to more than $227 million. Net income had weighed in at more than $147 million in 2010.
Acquisitions, as well as internal investments and business alliances, are fundamental to Polaris' strategy for building its portfolio and market presence. In 2011 Polaris purchased two SEV firms, France-based Goupil Industries, which makes SEVs for light duty hauling, and GEM, a Fargo, North Dakota, manufacturer of electric-powered vehicles that was a subsidiary of Chrysler. The deals mark Polaris' commitment to penetrating the on-road market and fits with the 2011 acquisition of Indian Motorcycle, one of the first motorcycle manufacturers in the US.
In 2012 Polaris agreed to acquire Teton Outfitters, an Idaho-based company which makes KLIM Technical Riding Gear. KLIM Technical Riding Gear makes powersports apparel for snowmobile and motorcycle riders. The acquisition adds KLIM to Polaris' growing parts, garments, and accessories (PG&A) business. Polaris will maintain the KLIM brand name.
Internal investments have included optimizing the company's manufacturing footprint in Roseau, Minnesota, and Spirit Lake, Iowa. The company also opened a new facility in Monterrey, Mexico, in 2011. It sold part of its Osceola, Wisconsin, manufacturing facility the same year. Meanwhile, the company has continued to invest about 4% of its sales in research and development. It lays claim to a slew of first-to-market performance-enhancing products. Among the firsts -- at least for wide commercial use -- claimed by Polaris are independent front suspensions for snowmobiles and electronic fuel injection for ORVs. Before the acquisitions of Goupil and GEM, Polaris had rolled out its own electric-powered low-emission vehicle, the Polaris Breeze in 2009. However, in 2011 Polaris discontinued the Breeze, but kept its hand on the SEV steering wheel with the acquisitions of GEM and Goupil.
Pursuing geographic growth, Polaris recently selected two experienced executives to lead expansion in Africa, Asia/Pacific, Europe, Latin America, and the Middle East. Sales outside of the US increased almost 39% in 2011 over 2010. The company had partnered with Fuji Heavy Industries on building Polaris engines for recreational and industrial products, but it closed the facility it owned with Fuji in 2011 after production at the plant declined. Fuji now makes these engines at a Japanese facility. In 2012 Polaris entered into a joint venture with Indian commercial vehicle and motorcycle maker Eicher Motors to market products in India and other emerging markets. The Polaris-Eicher JV will build a new factory that will open for production in 2015. – less