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Arctic Cat Inc. (ACAT)
F2Q 2013 Earnings Call
October 25, 2012 12:00 pm ET
Shawn Brumbaugh - Padilla Speer Beardsley
Claude Jordan - President and CEO
Tim Delmore - CFO
Scott Hamann - KeyBanc Capital Markets
Mark Smith - Feltl
Craig Kennison - Robert W. Baird
Joe Hovorka - Raymond James
James Hardiman - Longbow Research
Joe Gagan - Atlantic Equity Research
Gerrick Johnson - BMO Capital Markets
Previous Statements by ACAT
» Arctic Cat's CEO Discusses F1Q 2013 Results - Earnings Call Transcript
» Arctic Cat's CEO Discusses F4Q 2012 Results - Earnings Call Transcript
» Arctic Cat's CEO Discusses F3Q12 Results - Earnings Call Transcript
» Arctic Cat CEO Discusses Cash Buyback of 6.1 Million Class B Shares from Suzuki Motor Corporation (Transcript)
I will now hand the conference over to Shawn Brumbaugh. Please go ahead, madam.
Thank you, and thank you for joining us this morning. I am Shawn Brumbaugh with Padilla Speer Beardsley. Before the market opened this morning, Arctic Cat released results for fiscal 2013 second quarter ending September 30, 2012.
Participating in our call today to discuss the company's performance and outlook will be Chairman and Chief Executive Officer, Claude Jordan; and Chief Financial Officer, Tim Delmore. Following their remarks, we'll have time for your questions.
Before we begin please know that some of the comments made today will be foreword looking statements regarding the company's expectations of future performance. Such statements are subject to risk 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 for the Securities and Exchange Commission. We urge you to review these results for description of risk factors that may affect the results.
Now, I'll turn to 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 second quarter of fiscal 2013, as well as the progress we've made in the areas of sales, profitability and operational excellence. Following my comments, Tim Delmore, our CFO, will review our financial performance.
Overall, we are pleased with our financial performance for the second quarter. I would like to especially thank the entire Arctic Cat team for their hard work and dedication in delivering highest second quarter earnings in our 50-year history. As we mentioned in May, we set out to grow sales in all product categories, improve gross margins, increased earnings per share, generate additional cash and strength our balance sheet. Through the second quarter we are on track to accomplish each of these.
In regard to the individual businesses, Snowmobile sales were up 12% for the quarter primarily driven by increased international sales and to a lesser degree pricing and mix. Additionally, snowmobile dealer inventory for North America was flat the last year. With the dealer inventory in excellent condition and the increased orders we're seeing on the 23 ProCross and ProClimb snowmobile models we launched last year and the five new models we launched in March of this year, we are increasing our regional guidance to a revised higher guidance of flat to up 2%.
On the Retail side, we will not see any significant retail sales until our third and fourth quarter. However, we are once again targeting to gain market share this fiscal year and continue to expect the overall industry to grow in the low single-digits.
Regarding our new model year 2013 snowmobiles, we continue to be recognized by various industry trade magazines with numerous awards. Some of the awards we have received this year include Editors Choice for F1100 Turbo Race Replica, Best High Performance Snowmobile for F800 Sno Pro Race Replica. And finally, Best Crossover for our CrossTour 1100 Turbo. We also partnered with World Champion Snowmobile Racer Tucker Hibbert to create a limited edition Tucker Hibbert Race-Replica snowmobile, which was launched in August.
On the ATV business, sales increased 19% for the quarter. Key drivers for sales increased were North American and international sales of our Wildcat 1000 sport side-by-sides and North American CORE model ATVs.
Dealer inventory was again up, August and we were successful in lowering our North American dealer inventory of ATVs and Prowlers by 18%, excluding the Wildcat. Including the Wildcat, overall dealer inventory was lowered by 10%. As we move forward, we will continue to focus on matching wholesale sales with retail sales. With this in mind, we do not expect to see further significant decreases in overall dealer inventory.
For the quarter, North American ATV industry retail sales were down slightly by 1% and for our fiscal year industry retail sales were up 2%. Arctic Cat also saw a slight decline in second quarter retail sales. However, with the August launch of our five new ATV CORE models, we feel comfortable that we will see improved performance versus the market in our ATV business.
Our North American ROV retail sales experienced strong growth as sales increased over 50% for the quarter, and year-to-date our ROV sales have increased over 67%, driven by those are Wildcat and Prowlers HDX utility vehicle. Wildcat retail sales continue to be strong and match our expectations. In addition to our base Wildcat 1000 model, we also launched a Wildcat 1000 limited model in August that is also achieving strong sales. With a lower dealer inventory, increased focused on product development and the increased orders we are seeing for overall ATV business, we are continuing to expect our ATV business to grow sales 36% to 41%.