Notes

Polaris Industries, Inc. (PII) engages in the design, engineering, and manufacture of all terrain vehicles (ATV), snowmobiles, and motorcycles in the United States, Canada and Europe.
http://www.polarisindustries.com

ATV's account for 67% of sales.

The company has a share repurchase program in effect, almost completed. It has bought back shares at an average price of $48.

8JUN07

RATINGS
Goldman-Sachs: Neutral
S&P: 1 star
Schwab: C

PEG: 1.2
Dividend: $0.34, 2.5%
Payout ratio: 50%

VALUE
Price/Earnings TTM: 20.2
P/B: 13 <-- BAD
P/CF: 12
P/S: 1.2

FINANCIAL STRENGTH
Current ratio: 1.3
Quick ratio: 0.2 <-- UGH, it must have a lot of excess inventory
Debt/equity 1.4 (from Yahoo)

GROWTH estimates
2008 sales: 5.6%
Next quarter earnings: 2%
Next year earnings: 11%

Quarterly report
"For the first quarter ended March 31, 2007, Polaris reported net income from continuing operations of $0.34 per diluted share, compared to net income from continuing operations of $0.26 per diluted share for the same period ended March 31, 2006. Net income from continuing operations was $12.6 million for the quarter ended March 31, 2007 compared to net income from continuing operations of $11.2 million for the comparable period in 2006. Sales for the first quarter 2007 totaled $317.7 million, a decrease of five percent compared to sales of $333.5 million for the first quarter 2006.

"Sales of ATVs were $222.5 million in the first quarter 2007, a decrease of nine percent from the first quarter 2006 sales of $243.6 million. As planned, shipments of core ATVs to dealers in North America decreased during the first quarter 2007 in response to elevated dealer inventory levels and weaker overall market conditions. The RANGER ª utility vehicle product line continued to experience double-digit growth in shipments and retail sales during the quarter. For the period ended March 31, 2007, the average ATV per unit sales price increased four percent over last year's comparable period primarily as a result of the increased sales of the higher priced RANGER ª product.

"Management believes that existing cash balances and bank borrowings, cash flow to be generated from operating activities and available borrowing capacity under the line of credit arrangement will be sufficient to fund operations, regular dividends, share repurchases, and capital requirements for the foreseeable future. At this time, management is not aware of any adverse factors that would have a material impact on cash flow.

Thoughts. It's a discretionary product at a time that is ripe a slow-down in consumer spending, due to decline in real estate and over a year of a negative saving rates and high credit card debt. A June 8 2007 report says credit card declined in April for the first time in a year: bad for things inevitably bought on credit, like ATV's and snowmobiles. The fundamentals are average, but analysts don't like it. Cash flow is good. Growth estimates are lame. There are many competitors; John Deere entered the market in 2004. The price is way over book value and the company has a fair amount of debt. Avoid, but probably not a good short candidate unless cash flow declines. A cute hedge would be to short PII and buy MLAN (MLAN sells specialty insurance for things like snowmobiles, ATV's and most of the products PII makes).

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