Parts, garments, and accessories sales were up 37 percent to $176 million during the third quarter compared to the same period last year. PG&A sales were up more than 20 percent in all product lines and categories during the quarter, driven by the addition of more than 300 new model year 2014 accessories, including additions to the family of Lock and Ride attachments. Additionally, the increase includes the incremental PG&A related sales from the Klim and Aixam acquisitions.
Sales of PG&A to customers outside of North America increased 44 percent during the quarter as compared to the same period last year.
International sales totaled $139.4 million for the quarter, an increase of 38 percent over the same period in 2012. The increase was driven by higher sales in ORVs and continued market share gains in all product lines and strong PG&A sales during the quarter. The recent acquisition of Aixam accounted for about half of the international sales increase.
Sales in the small vehicles division, comprising GEM and Goupil electric vehicles and Aixam Mega acquired in the second quarter, increased 188 percent to $31.7 million compared to the third quarter 2012. The incremental sales from the Aixam acquisition represented a significant portion of the 2013 third quarter sales growth for the small vehicles business.
"Though much of our effort was focused on successful product launches, we also achieved a number of financial milestones during the 2013 third quarter, including eclipsing the quarterly $1 billion sales mark for the first time in Polaris' history,” Wine said. “We continued to solidify our market share lead in off-road vehicles during the quarter and our relentless drive to enhance profitability paid dividends as gross profit margins climbed 90 basis points. Our international business performed exceptionally well, up 38 percent during the quarter despite a weak economic environment."
Full-year 2013 sales are expected to grow in the range of 15 percent to 16 percent as compared to full year 2012.Income from financial services was up 42 percent to $11.7 million during the third quarter, compared to $8.2 million in the third quarter of 2012, due to increased profitability generated from the retail credit portfolios with Sheffield, GE and Capital One and higher income from the dealer inventory financing through Polaris Acceptance.
"Our success over the past four years derives from our focused strategy - being the best in powersports plus delivering growth through adjacencies, maintaining global market leadership and demonstrating operational excellence and strong financial performance,” Wine said. “Thanks to our execution of that strategy, our sales growth continues to outpace our long-term projections and we now expect to achieve greater than $8 billion in sales by 2020, while our net income target remains at an industry-leading greater than 10 percent of sales by 2020. While we are obviously very bullish about Polaris' future, we remain focused on near-term execution and are confident in raising our sales and earnings expectations for 2013."
The company reported record third quarter net income from continuing operations of $116.9 million, or $1.64 per share, for the, up 24 percent and 23 percent, respectively, from the prior year's third quarter net income of $94.3 million, or $1.33 per share. Reported net income for the third quarter 2013, including both continuing and discontinued operations was $113.1 million, or $1.59 per share.
Operating expenses increased 31 percent to $165.2 million, or 15 percent of sales, in the quarter, compared to $126.4 million or 14.4 percent of sales for the same quarter last year. Operating expenses in absolute dollars and as a percentage of sales increased primarily due to higher sales and marketing costs, in part due to the Indian Motorcycle relaunch; increased general and administrative expenses, which includes expenses related to the continued investments in infrastructure aimed at supporting the company's growth initiatives, and higher accrued incentive compensation due to the higher stock price.
The company announced in late July that a jury returned an unfavorable verdict against Polaris in a lawsuit arising from a 2008 collision between a boat and a 2001 Polaris Virage personal watercraft. As a result of the jury verdict, during the 2013 third quarter, Polaris recorded a non-recurring loss from discontinued operations of $3.8 million. The company ceased manufacturing marine products in September 2004 and substantially completed the exit of the business in 2007. At this point in time, no additional charges are expected from discontinued operations, the company reported.