May 12, 2003 – Finance Digest

Parts Garments and Accessories
Sales increased 12% over the first quarter 2002. The PG&A business was aided by significant snowfall in the eastern region of North America late in the riding season. Additionally, sales of ATV related PG&A items continued Sales of Victory motorcycles increased 17% during the first quarter 2003 from last year’s first quarter.

Polaris sets Dividend
Polaris Industries Inc. (NYSE:PII), Medina, Minn., has declared a regular quarterly 31 cents per share cash dividend payable on or about May 15, 2003, to shareholders of record on May 1, 2003.

Polaris’ Personal Watercraft (PWC)
Sales declined 49% during the first quarter 2003 compared to the first quarter 2002. Shipments of new products, particularly the new MSX personal watercraft platform, are occurring later in the season than in prior years as Polaris moves to a new high performance line of personal watercraft, featuring cleaner and quieter engine technology and a new hull design.
PWC sales for the full 2003 year are expected to improve over last year, Tiller said, as awareness of the new MSX platform continues to build.
Snowmobile sales increased $2.6 million for the first quarter 2003 compared to the first quarter 2002. Changes in the timing of shipments to international dealers resulted in the increase as the international operations in Sweden and Norway moved from distributor-based relationships in 2002 to selling direct to Scandinavian .
Retail sales of snowmobiles for the season ended March 31, 2003 were lower than a year ago for both the overall industry and Polaris, a result of yet another winter of little or no snowfall in the prime riding areas of North America. As a result, season ending snowmobile inventories for Polaris dealers are higher than normal, and Polaris snowmobile sales for the full year 2003 are once again expected to decline.

Income from financial services
Income from financial services increased 37% to $4.4 million in the first quarter 2003, up from $3.2 million in the first quarter 2002 primarily due to increases in the retail credit portfolio as the penetration rate of vehicles financed by consumers increased to approximately 34 percent in the first quarter 2003 compared to approximately 14 percent in the first quarter of 2002.
During the first quarter 2003 Polaris repurchased and retired 690,000 shares of its common stock at a cost of $34.0 million compared to 205,000 shares in the first quarter 2002. Since inception of the share repurchase program in 1996, 8.7 million shares have been repurchased at an average price of $39 per share. The board of directors has authorized a cumulative total of 9.5 million shares of Polaris stock to be repurchased, which leaves approximately 800,000 shares remaining to be repurchased.

Harley earns climb
Harley-Davidson, Inc. (NYSE: HDI), Milwaukee, Wis., posted record revenue and earnings for its first quarter ended March 30, 2003. Revenue for the quarter was $1.1 billion compared with $927.8 million in the year-ago quarter, a 20.0% increase. First quarter diluted earnings per share (EPS) were 61 cents, a 56.4% increase compared with last year’s 39 cents.
“While the long winter experienced by much of our nation has delayed some retail sales, dealer confidence and other measures that we use to track Harley-Davidson motorcycle demand remain strong,” said Jeffrey L. Bleustein, chairman and chief executive officer of Harley-Davidson, Inc. “With these indicators in mind and with construction of our new factory in York, Pa., proceeding to plan, we are raising our shipment target for 2003 from 289,000 to 290,000 Harley-Davidson motorcycles.” The company’s new target is a 10% increase over 2002.
First quarter revenue from Harley-Davidson motorcycles was $876.5 million, an increase of 17.2% over the first quarter last year. Shipments of Harley-Davidson motorcycles totaled 70,608 units, up 5,939 units or 9.2% over last year.
First quarter revenue from P&A totaled $159.8 million, a 21.9% increase over the year-ago quarter. Total P&A revenue includes $13.9 million from sales of 100th Anniversary P&A products sold during the quarter.
General Merchandise, which consists of MotorClothes apparel and collectibles, had first quarter revenue of $56.5 million, up 33.6% over the same period last year, with revenue from 100th Anniversary General Merchandise products accounting for $8.3 million. Shipments of 100th Anniversary products in this product line are now essentially complete, and therefore General Merchandise revenue for the remainder of the year is expected to be lower than in 2002.
Harley-Davidson retail motorcycle sales for the quarter were down 3.2% in the U.S., but up 15.7% in Europe and up 12.9% in Japan compared to the same period last year. By comparison, 2003 U.S. heavyweight motorcycle industry retail sales were off 6.6% through March, according to the Motorcycle Industry Council (MIC).
“While retail sales for the United States were lower in the first three months of the year, we and our dealer network believe that many customers have delayed purchasing their motorcycles until the weather improves,” said Bleustein.
Harley-Davidson Financial Services, Inc. (HDFS), a subsidiary of Harley-Davidson, Inc., reported operating income of $43.4 million, up $31.2 million compared to the year-ago quarter.
Based on anticipated interest rates and the competitive financial services environment, the company said it expects HDFS’ full year 2003 operating income to be approximately 25% higher than in 2002.
During the quarter, the company repurchased 500,000 shares of its common stock.

Polaris posts quarterly records
Polaris Industries Inc. (NYSE:PII)(PSE:PII), Medina, Minn., has reported record net income of 55 cents per diluted share for the first quarter ended March 31, 2003, a 12% increase over prior year first quarter net income of 49 cents per diluted share. Higher sales volume from ATVs and PG&A combined with expanded gross margins and positive currency fluctuations contributed to the first quarter earnings increase.
Net income for the first quarter 2003 was $12.4 million, a seven percent increase over prior year first quarter net income of $11.6 million. Sales for the first quarter 2003 were a record $313.9 million, up five percent from the prior year’s first quarter sales of $299.2 million.
It was the 20th consecutive quarter in which Polaris achieved increased sales and earnings
ATV sales in the first quarter 2003 increasing 7% over last year’s first quarter. New products continue to lead the growth in ATVs, said Tom Tiller, president and CEO.
Additionally, the Polaris Professional Series continues to develop with first quarter sales of $4.8 million. Sales of the RANGER line of utility vehicles continued its share gains over 2002 and international sales of Polaris ATVs grew 50% during the quarter. During the first quarter the company shipped the first units of a new military version ATV, specifically designed for the armed services. The introduction of new products, including the recently introduced Polaris ATP (all-terrain pickup) which allows the consumer to haul more, carry and dump loads and ride on all terrains from turf to rough terrain with the flip of a switch, will continue to help Polaris weather the current uncertainties in the economy, Tiller said.

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