ACAT

Arctic Cat Inc. (ACAT)

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Arctic Cat Inc. (ACAT)

Cash Buyback of 6.1 Million Class B Shares from Suzuki Motor Corporation Conference Call

December 28, 2011 11:00 am ET

Executives

Shawn Brumbaugh – Investor Relations, Padilla Speer Beardsley

Claude J. Jordan – President and Chief Executive Officer

Timothy C. Delmore – Chief Financial Officer and Secretary

Analysts

Craig Kennison – Robert W. Baird & Company, Inc.

Mark Smith – Feltl and Company

James Hardiman – Longbow Research

Doug Thomas – JET Investment Research

Joe Hovorka – Raymond James

Beth Lilly – Gabelli Investments

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Arctic Cat Investors Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions) This conference is being recorded today, Wednesday, December 28, 2011.

I would now like to turn the conference over to Ms. Shawn Brumbaugh. Please go-ahead ma’am.

Shawn Brumbaugh

Thank you. And thank you for joining us this morning. I’m Shawn Brumbaugh with Padilla Speer Beardsley.

Participating in our call today to discuss Arctic Cat’s announcement of the buyback of shares from Suzuki Motor Corporation will be Arctic Cat’s President and Chief Executive Officer, Claude Jordan, and Chief Financial Officer, Tim Delmore. Following their remarks, we will have time for questions.

Before we begin, please note that some of the comments made today will be forward-looking statements regarding the company's expectations of 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 will turn the call over to Arctic Cat's CEO, Claude Jordan. Claude?

Claude J. Jordan

Thanks, Shawn. Good morning everyone and thanks for joining us today. This morning, we are pleased to announce the purchase from Suzuki a 6.1 million Class B shares of Arctic Cat stock for $79.3 million. With this purchase, Arctic Cat will lower our outstanding shares from 18.4 million to 12.3 million and increase our non-Suzuki shareholders’ ownership of outstanding common shares by 33%.

On previous calls, we have stated that we were looking at various options for using our excess cash. These options included a possible dividend reinstatement, a possible share repurchase and also possible internal and external uses. Given the various uses, we felt at this time that the purchase of Arctic Cat’s shares from Suzuki would create great value to our remaining shareholders.

The fact that we were able to accomplish this purchase without impacting our public share float made this an even better choice for our existing shareholders. Following the share purchase from Suzuki, we will continue to maintain our strong balance sheet. Given our current cash position and projected cash generation, we expect to end the current 2012 fiscal year with more than $60 million in cash and no debt.

In addition to our strong cash position, we have an existing credit line with Bank of America for up to $60 million. And historically, have had little, if any, direct borrowings under this credit facility and would expect to continue to meet most if not all of the needs of the business with the existing cash on our balance sheet.

Suzuki has been our major shareholder since 1988 and a valued engine supplier of the Arctic Cat brand since 1976. We have benefited significantly from this relationship and look forward to maintaining a strong relationship with Suzuki going forward. Suzuki will continue to provide snowmobile engines to Arctic Cat through December 2013. They will also continue to supply us with snowmobile engine parts for many more years after that.

As we have previously announced, we will be moving to snowmobile engine manufacturing to our St. Cloud engine facility where we currently manufacture our ATV and Side by Sides engines.

At this time, we will open up the call to any questions you may have regarding today’s announcement.

Question-and-Answer Session

Operator

Thank you, sir. We will now begin the question-and-answer session. (Operator Instructions) One moment please. And our first question comes from the line of Craig Kennison from Robert W. Baird. Please go ahead.

Craig Kennison – Robert W. Baird & Company, Inc.

Good morning. Thanks for taking my questions and congratulations on this transaction. The first question is, why there is significant discount, was this something that maybe had been negotiated over a period of time?

Claude J. Jordan

I think a couple of things. First of all, I think you are correct and this is something we’ve been negotiating over a period of time and obviously we’ve seen our stock price increase over the last handful of months. So there is no doubt that I think that played into it. The other thing I would say that played into it is the fact that Suzuki’s initial position was about $12.8 million.

Since then, they have received over $57 million in buybacks as well as dividends. So when you account the $57 million plus this $79.3 million today that they received for their shares, plus in the last 10 years alone we bought over $1 billion of engines and parts. So, I think when Suzuki looks at the total return to them over the initial investment, it’s has been a great run for them and certainly a great return.

Read the rest of this transcript for free on seekingalpha.com