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Arctic Cat Inc. (ACAT)
F3Q 2013 Earnings Conference Call
January 24, 2013 10:30 ET
Shawn Brumbaugh - Padilla Speer Beardsley
Claude Jordan - Chairman and Chief Executive Officer
Tim Delmore - Chief Financial Officer
Scott Hamann - KeyBanc Capital Markets
Mark Smith - Feltl & Company
James Hardiman - Longbow Research
Craig Kennison - Robert W. Baird
Previous Statements by ACAT
» Arctic Cat's CEO Discusses F2Q 2013 (Qtr End 9/30/12) Results - Earnings Call Transcript
» Arctic Cat's CEO Discusses F1Q 2013 Results - Earnings Call Transcript
» Arctic Cat's CEO Discusses F4Q 2012 Results - Earnings Call Transcript
I would now like to turn the conference over to Shawn Brumbaugh with Padilla Spear Beardsley. Please go ahead ma’am.
Thank you and thank you for joining us this morning. I am Shawn Brumbaugh with Padilla Speer Beardsley. Before the market opened this mooring, Arctic Cat released results for fiscal 2013 third quarter ended December 31, 2012. Participating in our call today to discuss the company’s performance and outlook will be the Chairman and Chief Executive Officer, Claude Jordan, and Chief Financial Officer, Tim Delmore. Following their remarks, we’ll have time for any questions.
Before we begin, please note that some of the comments made today will be forward-looking statements regarding the company’s expectations of future performance. Such statements are subject to risks and uncertainties and actual results may differ materially from those contained in the statements. These risks and uncertainties are described in today’s news release and in the company’s filings with the Securities and Exchange Commission. We encourage you to review these documents for a description of risk factors that may affect results.
Now, I’ll turn the call over to Arctic Cat CEO, Claude Jordan. Claude?
Thanks, Shawn. Good morning everyone and thanks for joining us today. This morning I will cover the individual performance of our three businesses during the third quarter as well as the progress we have made in the area of sales, profitability, and operational excellence.
Following my comments, Tim Delmore, our CFO will review our financial performance. Overall, we are pleased with our performance for the third quarter. As we mentioned at the beginning of the year, we set out the gross sales in all product categories, improved gross margins, increased earnings per share, generate additional cash, and strengthen our balance sheet. Through the third quarter, we are on track to accomplish each of these.
In regard to the individual businesses, snowmobile sales were down 2% for the quarter, primarily driven by the decision to ship snowmobiles early in the year, so that all dealers and distributions added snowmobiles products to December, which is the largest retail month. For the year, snowmobiles sales were up 5% primarily driven by increased sales in our international business. The 5% year-over-year growth exceeded our earlier guidance of flat to up 2% growth. Snowmobile dealer inventory for North America was up 14% for December, primarily due to decreased snow conditions in various parts of the U.S. However, January retail has started off strong and we expect snowmobile dealer inventory to be reduced during the fourth quarter and in the year up slightly from last year.
On the retail sale side, the overall North American industry experienced some difficult snow conditions for the second year in a row, which has led to the industry being down slightly from last year. We also saw our retail sales decrease cover a large part of the decrease was due to the strong comps we had last year. We also saw our retail sales decrease cover a large part of the decrease was due to the strong comps we had last year following the launch of 23 new ProCross and ProClimb snowmobile models. With the soft snow conditions we are seeing, we are revising our lower end guidance for the industry down slightly from the flat to up 2% to a revised down 2% to up 2%.
On the ATV business, sales increased 28% for the quarter. Key drivers for the sales increase were North American and international sales of our Wildcat 1000 sports side-by-side and North American ATVs and the Prowlers. Dealer inventory was again a focus and we were successful in reducing our North American dealer inventory in ATVs and Prowlers by 8%, excluding the Wildcat. Including the Wildcat, overall dealer inventory was down 1% from the last year. As we move forward, we will continue to focus on matching wholesale sales with retail sales. With this in mind, we expect dealer inventory to start growing slightly keep up with the growth of the business and the launch of new products.
For the quarter, North American core ATV retail sales were down 2%, and for our fiscal year, industry retail sales are up 1%. Arctic Cat also saw a decline in third quarter retail sales. However, we have seen positive gains with our five new core ATV models that were launched in August. Our North American side-by-side retail sales experienced strong growth as sales increased over 35% for the quarter and year-to-date retail sales have increased over 50% driven by both our Wildcat Sports side-by-side and Prowler HDX utility vehicle.
Wildcat retail sales continued to be strong and match our expectations. In addition to our base Wildcat 1000 model and Wildcat 1000 Limited, we also recently announced a new 4-seat Wildcat 1000 model and a new high performance 90-plus horsepower Wildcat model. Both of these will begin shipping in our fiscal fourth quarter. With the lower dealer inventory, increased focus on product development and strong orders we are seeing for our ATV and side-by-side business, we are continuing to expect this business to grow sales 36% to 41% for the full year.