Arctic Cat Inc. (ACAT)
F4Q10 (Qtr End 03/31/10) Earnings Call Transcript
May 13, 2010 11:30 am ET
Shawn Brumbaugh – IR, Padilla Spear Beardsley
Chris Twomey – Chairman and CEO
Claude Jordan – President and COO
Tim Delmore – CFO and Secretary
Brian Freckmann – LimeStreet Capital
Joe Hovorka – Raymond James
Lisa Brozewicz – KeyBanc Capital Markets
Rommel Dionisio – Wedbush Capital
Steve Bowman [ph] – DB Shaw Capital [ph]
Previous Statements by ACAT
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I would now hand the conference over to Ms. Shawn Brumbaugh. Please go ahead, ma’am.
Thank you. Thank you for joining us this morning. I’m Shawn Brumbaugh with Padilla Spear Beardsley. Before the market opened this morning Arctic Cat released results for its fiscal fourth quarter and full year ended March 31, 2010.
Participating in our call today to review the company’s performance will be Chairman and Chief Executive Officer, Chris Twomey; President and Chief Operating Officer, Claude Jordan; and Chief Financial Officer, Tim Delmore. Following their remarks, we will 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 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 will turn the call over to Arctic Cat’s CEO, Chris Twomey. Chris?
Thanks, Shawn. Thanks, everyone for joining us this morning. Fiscal '10 was another challenging year for the power sports industry including Arctic Cat. However, in spite of the challenges we’re that we’re able to greatly improve operating results and return the company to profitability on a significantly lower sales level. Besides these operating improvements which Claude will review in-depth in a moment, we also set out to improve our market share in both product lines and to improve the financial health by dealer network by continuing to help them reduce their dealer inventories. Both of these initiatives were accomplished.
During this fiscal year our ATV business gained one point of market share in North America and our dealer inventories declined by 24% over the prior year. Industry-wide retail sales of ATVs again declined every month throughout the year driven by continued uncertainties in the economy, relatively weak consumer confidence and unemployment figures at year historic levels.
We expect the same factors to impact retail sales of ATVs throughout this fiscal year as well. However, by year-end we expect enough change in the overall economic environment so that retail sales declines was slow to about half the level experienced in the 2010 fiscal year. Again, this year we will focus on gaining market share and reducing dealer inventories.
As we’ve always said introducing new models especially in segments where we underperformed is an important factor in helping us increase sales and grow market share. In fiscal 2011, we will introduce five new ATV models along with three new side-by-side UTVs, all in segments where we believe we can gain market share.
In addition, we will expand the number of models utilized in our new power steering feature which has sold well since its way 2010 model year introduction. Also, numerous features will be added to many of our models. All designed to enhance the rider experience. Overall, two-thirds of our 2011 ATV models will be new within the last three years.
In times of constantly declining markets it is imperative that investments in new models be made carefully. We understand this well, but also realize that wise investments in strategically important models and segments are important to establish our position in the market and provide for future growth.
After a 15% sales increase last year, sales of our European ATVs subsidiary declined 21% this fiscal year generally in line with what we believe happened in the entire European market.
While this is not surprising given the overall developments in the European economy during the last year we are still a relatively small player in this market and we continue to look for opportunities to grow our sales in spite of the market.
As always we believe this growth will come from new products which excite and satisfy the demands of our customers as well as improved distribution. For fiscal 2011, we have a number of new products for the European market similar to the North America market which will excite our customers, help strengthen our distribution, improve sales and increase market share.
Industry-wide retail sales of Snowmobiles in North America also declined this year. However, like last year, Snowmobiles retail sales outperformed every other recreation of vehicle category in North America. While retail sales of Snowmobiles are certainly affected by the economic environment they are also impacted by snow conditions.
In the U.S. snow conditions were generally good for the third year in a row which helps Snowmobiles retail sales outperform the other recreation of vehicle categories. Canada, on the other hand, experienced very poor snow conditions throughout most of the eastern half of the country, which had a significant negative impact on retail sales.