Arctic Cat Inc (ACAT) F1Q11 (Qtr End 06/30/10) Earnings Call Jul 29, 2010 11:30 am ET Executives Shawn Brumbaugh - IR, Padilla Spear Beardsley Chris Twomey - Chairman and CEO Tim Delmore - CFO and Secretary Claude Jordan - President and COO Analysts Rommel Dionisio - Wedbush Securities Phil Anderson - Longbow Research Yasuna Murakami - MC2 Capital Management Steven Baughman - Divisar Capital Presentation Operator
Now, I will turn the call over to Arctic Cat's CEO, Chris Twomey. Chris?Chris Twomey Thanks, Shawn. Thanks, everyone for joining us today. This morning, I will cover the individual performance of our three businesses during the quarter. Claude Jordan, our President and CEO will review the progress we have made in the operations as we focus on improving profitability and Tim Delmore, our CFO will review the financial performance. Snowmobiles sales in the quarter are down 4% as we continue to match wholesale and retail sales seasons. It is safe to say that with the warm wet summer the country is experiencing there is no retail demand at this time and we have altered our production and sales activity accordingly. The North American Snowmobiles retail sales season begins in earnest in September and October and shipments to dealers have been shifted toward those months. For the year, we expect Snowmobile sales to be up 5% based primarily on the stronger orders from international distributors who were negatively impacted last year by currency changes. In spite of the overall weak European economy and as a result of favorable snow conditions, our distributors experienced good retail sales last year and are in a position to increase their orders this year. We continually monitor North American dealer inventories as one important measure of the overall health of our dealer network. At quarter end, dealer inventories were down 17% compared to the same quarter last year. Even with lower dealer inventories retail sales can increase this year and we will maintain our grow market share. Sales of ATVs for the quarter were down 13% again as we also shifted ATV sales to dealers later in the year, so that their inventories would continue to decline. Following the success we experienced last year taking ATV orders from our dealers at three separate times, which allowed us to more closely match dealer needs and retail sales, this year we will again visit each dealerships three times during the year to take the 2011 model year orders.
Again this approach will better match dealer orders with actual retail activity. Lower dealer inventory and reduced cost, so that more dollars will be available for retail programs if necessary. We will spread new model introductions over all three order cycles to generate increased retail interest. Our focus will to introduce new products in model segments, which currently show signs of improvement.Uncertainties in the economy, weak consumer confidence and unemployment figures at near historic levels continue to negatively affect ATV retail sales. The overall rate of decline this year has slowed. However, calendar year, today retail sales in North America for the industry are down about 20%. Arctic Cat retail sales were down only about half as much as the industry. So, we have gained market share. Retail sales of Prowler UTVs are also down for the year. Dealer inventories are down to a level, which could be negatively impacting retail sales. In July, we began shipping our all new Prowler XTX. This machine is configured for three passengers and is designed to be a heavy duty workhorse. It has a longer wheel base than the regular Prowler and is equipped with power steering and standard equipment. Although, shipments have only begun in the last month, dealers are already reporting good retail sales activity. We expect this model as well as the newly styled regular Prowler will drive increased sales for the remainder of this year. Overall, we expect ATV and Prowler sales to dealers and distributors to be down 3% to 6% for the fiscal year. Sales of parts, garments and accessories are down about 4% for the quarter. Sales of parts and accessories are up year-to-date, while we have delayed shipments of garments again to match the retail selling season. Read the rest of this transcript for free on seekingalpha.com