American LandMaster Announces New HQ & Manufacturing Facility

 American LandMaster LandStar LS670 utility vehicle

The LandStar LS670 from American LandMaster.

Utility vehicle manufacturer American LandMaster announced a new facility in Columbia City, IN that will become the company’s headquarters and consolidate manufacturing operations. The new facility will cost $4 million to lease and equip. Manufacturing operations from Roseland, LA and nearby Fort Wayne, IN will be moved to the new location. Nearly 70 jobs are expected to be created and production at the facility is scheduled to begin in September. The company can qualify for up to $420,00 in tax credits and another $70,000 in training grants from the Indiana Economic Development Corporation, based upon reaching certain employment targets. County officials are considering additional incentives.

The investment is another sign of the increasingly competitive utility vehicle market. A number of manufacturers across varied market segments have increased their investments in the market, while at the same time growth in the UTV market has moderated. Companies have introduced new product lines and, similar to American LandMaster expanded or developed new manufacturing facilities. Last April American Sportsworks announced the rebranding of the company as American LandMaster, as well as, a newly re-engineered vehicle lineup. According to management, the new facility will allow for greater efficiency, better customer service and product line expansion, while continuing to manufacture American made products.  Learn more:  Businessfacilities.com

Marc Cesare, Smallvehicleresource.com

Polaris Reports Q1 2017 Earnings

The General product line with models like the General 1000 EPS Hunter Edition in Polaris Pursuit Camo was a bright spot in Polaris’ Off-Road Vehicle business.

Polaris Industries reported adjusted sales of $1,158.9 for Q1 2017, an 18% increase from q1 2016. Management reported gains in the Off-Road Vehicle (ORV) business, large gains from Global Adjacent Markets and increased revenue from the recent TAP acquisition. In the ORV business Ranger and General product lines improved while the RZR line was down as expected. The side-by-side market continues to be highly competitive with elevated promotional costs. Management reported market share gains for Polaris ATVs. In the Global Adjacent Markets Aixam Mega was strong as well as the government defense business which helped increase revenue by 24%.

The following are highlights from the earnings call related to STOV markets. Figures are in comparison to Q1 2016 unless noted.

  • ORV retail sales were down 5% for the quarter.
  • ORV promotions were key as well as a targeted marketing campaign which showed results in March.
  • RFM inventory management system will be expanded for side-by-sides later this year.
  • Management reports an improved process for quickly tracking and identifying vehicle issues that will improve product safety and recall response.
  • Management did not change full year guidance for the ORV business and expects promotional costs to remain elevated and on par with 2016 levels.
  • ORV promotions are being matched by competitors.
  • Taylor-Dunn added to the significant increase in Global Adjacent Markets revenue.
  • Management expects RFM and a revamped marketing organization to create a more customer focused organization and improve sales.
  • ORV retail sales for the year are expected to be down slightly.
  • The ORV industry is expected to be flat to down for the year and was down mid-single digits in Q1 2017.
  • Continued poor performance in the oil and gas regions and the agriculture market are hurting sales.
  • The Multix launch was underwhelming, and a rapidly changing regulatory framework related to safety requirements and emission standards may provide significant obstacles.

Learn more:  Seekingalpha.com (Earnings call transcript)

 

Bad Boy Off Road Rebranded Textron Off Road

Vehicles like the gas powered Stampede 900 will now be sold under the Textron Off Road brand instead of Bad Boy Off Road.

Textron Specialized Vehicles recently announced the rebranding of their Bad Boy Off Road brand of vehicles to Textron Off Road. The rebranding is designed to take advantage of Textron’s association with strong engineering and manufacturing through their long established brands in aerospace, defense and automotive such as Bell Helicopter, Cessna, Beechcraft, Lycoming and Cushman.

The Textron Off Road brand of side-by-sides currently features the gas powered Stampede and Stampede XTR, the all-electric Recoil, Recoil iS and Recoil iS Crew and the hybrid Ambush iS.

“We are changing our brand from Bad Boy Off Road to Textron Off Road to better reflect the detailed design, precision engineering, manufacturing expertise and high performance for which Textron is known, across a number of major industries,” said John Collins, vice president, consumer for Textron Specialized Vehicles. “Our new name is more indicative of the level of performance, quality and innovation that we build into our side-by-sides, and demonstrates how serious Textron is about its future in the powersports market.”

The rebranding makes sense for Textron for a number of reasons. The Bad Boy name is fairly well known in the hunting segment of the utility vehicle market, but this is more of a niche market, and before being acquired in 2010 by Textron there were some quality issues associated with the brand. In 2016 Textron rebranded Bad Boy Buggies to Bad Boy Off Road so there has not been a lot of time to build brand value, and thus not as much to lose in rebranding at this time. While the Textron brand may not be as well known in the utility vehicle market, the company’s collection of more well known manufacturing brands generates higher brand awareness in general. In addition, utility vehicles from Cushman and E-Z-GO fall under the Textron umbrella and certainly are known in commercial UTV segments and, by association, Textron has some awareness there as well.

A bigger question than whether rebranding is good for business, is how the Textron Off Road product lines integrate with recently acquired Arctic Cat products. While their distribution networks are more likely complimentary than duplicative, the question is how their individual vehicles fit together. Textron Off Road’s electric UTVs are a nice compliment to Arctic Cat’s gas powered vehicles, but how does their Stampede line of UTVs fit with Arctic Cat’s Prowler, HDX and Wild Cat vehicles.

If you look at a comparison between the Stampede 900 EPS, Arctic Cat HDX 700 XT EPS and the Arctic Cat Prowler 1000 XT EPS, they have similar price points and features and specifications. One could imagine the Stampede line could be turned into more of a value-oriented brand with lower price points. Value UTVs have become a competitive segment of the market as better quality imported brands and lower priced offerings from established brands target value consumers. However, Stampede’s initial marketing campaigns have been aiming higher than value-oriented customers. Another option might be to target specific market sub-segments, perhaps, in conjunction with geographic targeting based on the Stampede’s distribution network. The greater the differentiation between the various Textron brands, the better chance Textron has of convincing dealers to carry several Textron UTV brands, and of leveraging the distribution channels of their different brands.

Vehicles under the Textron Off Road brand will be available in April, 2017.  Learn more:  Textron.com

How Will Textron’s Arctic Cat Acquisition Impact The STOV Market

Textron E-Z-GO Logo

Textron’s recent acquisition of Arctic Cat raises some interesting questions about the acquisition itself and how other companies in the market may react. In particular, what does the acquisition mean for Club Car.

One question is whether or not Textron will continue investing in the Bad Boy Off-Road brand. Except for the electric powered Bad Boy Off-Road UTVs the brand’s product offerings are redundant given the more popular Arctic Cat product lineup. One can argue that the dealer networks are sufficiently different that the brands can effectively reach different customer bases and not cannibalize each other’s sales.  A quick perusal of the Bad Boy dealer network indicates that most of their dealer s are golf car related with some power sports dealers. Moving forward, Bad Boy how much resources are put into product development, and what type of vehicles they develop should indicate the direction the brand will take in the context of Arctic Cat acquisition.

Another issue is the potential clash of corporate cultures between Textron Specialized Vehicles and Arctic Cat. Textron is a large conglomerate with over $13 billion in sales annually and a particular corporate culture while Arctic Cat is a much smaller company coming out of a powersports background. How well these companies will mesh will be interesting to see. Keeping Arctic Cat as a stand alone operating unit can mitigate any cultural problems to a certain degree. However, any future financial difficulties at Arctic Cat could generate more intrusion from Textron management regarding Arctic Cat operations.

Club Car is targeting the commercial market with the Carryall 700 and other vehicles.

A more intriguing question is how the acquisition of Arctic Cat might impact Club Car, which is now the only large stand alone fleet golf car manufacturer. While Yamaha Golf Cars are separate from their UTV and ATVs business, they are both part of their Power Products division. Similarly Textron has developed their Textron Specialty Vehicles division that combines a range of small, task-oriented vehicles from airport tugs, to fleet golf cars to off-road ATVs and UTVs.

Ingersoll-Rand and Club Car has taken a decidedly different approach. Rather than collecting other categories of vehicles, they have opted to focus on building out the sales of golf cars for personal/golf use and commercial oriented utility vehicles that are based off of their golf car platform. Management confirmed this approach when asked about the Arctic Cat acquisition during their recent fourth quarter earnings call.  According to recent financial results Club Car has been successful with positive growth in the commercial/utility segment while the fleet side continues to lag. However, the business is relatively small compared to the overall size of the company which had $13.5 billion in sales in 2016, and Club Car is part of their smaller Industrial segment.

This raises the possibility that Club Car may be an inviting candidate for divestiture. But who might be interested in buying Club Car? One possibility is Honda Motor. They already have a range of motorcycles, ATVs, UTVs and scooters. An acquisition of Club Car could further diversify their vehicle portfolio. In addition, golf is a popular sport in Japan so there could be some degree of personal affinity among the management towards owning a leading golf car company. Club Car would offer a premium brand and a different distribution channel that might be useful for moving other Honda products. It would also add some electric vehicle expertise to Honda as well as additional global manufacturing capabilities.

Another possibility is Polaris, which has been acquiring small vehicle brands over the past several years. Polaris tends to acquire leading brands in a particular segment and many consider Club Car to be the leading golf car brand. Besides the premium brand, Club Car would bring some other positives to the table:

  • Global brand and distribution
  • China based manufacturing facilities as well as Southeast US facilities and supplier network not far from Polaris’ new Huntsville, AL facility
  • Large volume of electric vehicle sales that can be used spread costs of new battery and electric powertrain development.
  • Entry into the golf car segment
  • Largely separate distribution channel from existing products but similar enough to cross-sell some other Polaris brands
  • Good presence in commercial small vehicle market that Polaris has been targeting

The one drawback is that, from previous presentations, Polaris management considers the golf car segment a low growth segment. In large part this is due to the stagnant fleet golf car market which is the major portion of the golf car segment. However, E-Z-GO’s recent introduction of lithium battery powered fleet golf cars represents a potentially significant shift in the market. If lithium battery golf cars can disrupt the fleet market, this might create a more appealing market to Polaris. Providing an opportunity to leverage their expertise in electric vehicles, increase electric vehicle unit volume to lower costs and find a growth avenue in an otherwise stagnant fleet market. Despite recent headwinds from recall issues, Polaris still has the financial resources for such an acquisition. It will be interesting to see if they move in this direction.

Marc Cesare, Smallvehicleresource.com

Textron Acquires Arctic Cat

Marc Cesare, Smallvehicleresource.com

Textron Specialized Vehicles will now compete in the recreational side-by-side market with vehicles like the 2017 Wildcat X from Arctic Cat with RG Pro suspension.

Textron is buying Arctic Cat for $247 million. Arctic Cat will become part of Textron’s Specialized Vehicle business and Textron’s management stated that the current manufacturing, distribution and operational facilities will be maintained. Arctic Cat employs about 1,600 people in production and management facilities mostly in Minnesota. Textron management remarked that the acquisition will allow for “…more aggressive investment in product development, dealer networks, marketing and customer service.” For the full fiscal year ended March 31, 2016, Arctic Cat reported a net loss of $9.2 million on net sales of $632.9 million. Sales are roughly split between ATVs/UTVs and snowmobiles. For fiscal year 2017 they were expecting similar sales.

This acquisition by Textron makes them much more of a direct competitor with Polaris. While Polaris has been expanding into more work and transportation related products with acquisitions of GEM, Aixam, Goupil and Taylor-Dunn, which puts it in direct competition with Textron’s Cushman, TUG and E-Z-GO vehicles, Textron has been expanding with their roll-out of the Bad Boy Off-Road brand of UTVs and ATVs. This acquisition significantly adds to the products and markets where they will be competing head to head.

This deal should provide the Arctic Cat brand with a lot more financial muscle to expand their dealer network and develop new products. For Textron there are a number of benefits:

  • In Arctic Cat they acquire a well established brand.
  • They acquire a power sports dealer network which is distinctly different then what they currently have.
  • They expand their reach in the UTV market, not only in terms of sales volume and distribution, but in the pure recreational market segment
  • They add a completely new type of vehicle to their portfolio with snowmobiles
  • They add geographic diversity to their manufacturing facility portfolio

It will be interesting to see what happens with the Bad Boy Off-Road brand. There is some overlap of product lines with Arctic Cat. A quick perusal of the Bad BoyOff-Road dealer network reveals that many or even most of the dealers are golf car related dealers with some power sports dealers. They could continue to develop the brand or fold some of the products into the Arctic Cat brand. Perhaps, lower than expected success of the Bad Boy Off-Road launch was one reason for acquiring Arctic Cat. Why spend a large amount of resources building a new brand in a very crowded market with no guarantee of success when they can acquire a well established brand such as Arctic Cat.

Learn more:  Arctic Cat

Arctic Cat Reports Q2 2017 Results

By Marc Cesare, Smallvehicleresource.com

The 2017 Wildcat X from Arctic Cat with RG Pro suspension.

The 2017 Wildcat X from Arctic Cat with RG Pro suspension is expected to help drive sales in the second half of the fiscal year.

Arctic Cat reported financial results for the fiscal 2017 second quarter ended September 30, 2016. The company reported a loss of $12.8 million on sales of $164.6 million compared to net earnings of $11.2 million and sales of $211.2 million in the prior-year quarter. Management pointed to a softer powersports market, as well as lower sales volume, unfavorable product mix and heightened promotional environment as factors. Sales of ATVs and side-by-sides totaled $44.0 million for the quarter, down 37.8 percent compared to prior-year sales of $70.8 million. Year-to-date sales totaled $87.8 million, down 29 percent from $123.6 million in the prior-year first half.

The following are some highlights from the earnings call related to side-by-sides:

  • Weakness in oil, gas and agriculture sectors contributed to softer sales
  • ATV and SxS retail sales decreased approximately 4% in the second quarter versus an industry that was down low single-digits. Wholesale sales decreased further as management is trying to reduce dealer inventory levels.
  • New products including those designed with Robby Gordon have been released, and a third wave of models this fiscal year will be introduced by late February
  • The company has added 28 top-tier dealers to their network but is likely to miss their target of 75 for the fiscal year. Net dealer add is flat.
  • For the short term management anticipates continued market softness, competitiveness and foreign currency headwinds
  • ATV/SxS sales are expected to be flat to down mid-single digits for the full year but up in the second half driven by new product introductions.
  • The company announced two new strategic partnerships for developing products for adjacent markets but cannot release more details, including whether they involve SxSs.

Learn more:  Seekingalpha.com (Earnings call transcript)

Polaris Announces Q3 2016 Results

The Polaris RXR XP Turbo is being recalled because of a potential fire hazard.

Recalls of vehicles like the Polaris RXR XP Turbo were a drag on the company’s financial performance for the quarter.

Polaris Industries announced their financial results for Q3 2016 with third quarter sales down 19% to $1.18 billion as impacts of massive vehicle recalls are still being felt. CEO Scott Wine stated that the company is prioritizing “…recall execution and quality validation and delay the launch of many of our model year 2017 Off-Road Vehicles.” The following are highlights from the earnings call as they relate to the small, task-oriented vehicle market.

  • Off-road vehicle industry retail declined modestly (down low single digits%) for the quarter with oil/gas and agriculture segments remaining weak
  • ORV and Snowmobile segment sales declined 23% in Q3 to $923.4 million driven by weak industry dynamics and delayed model year 2017 shipments as products were revalidated
  • RZR retail dropped precipitously in the first two months of the quarter but improved significantly in the third month along with overall side-by-side retail driven by promotions and better product availability
  • Management reports that RZR recalls have now passed the 50% penetration rate for both the RZR 900/RZR 1000 recall and the more recent Turbo recall and the majority of the recalls should be completed by year end
  • Gross margins were negatively impacted by higher promotional and customer appreciation costs to bolster confidence and credibility with our Off-Road Vehicle owners
  • The Ranger 1000 has shown good early signs for sales
  • Management reports that RZR market share is nearly 2.5 times all competitors combined and Ranger share over 2 times the next largest competitor
  • Global Adjacent Markets segment revenue increased 6% to $78.5 million in Q3 driven by the prior Taylor-Dunn acquisition
  • Sales in the Defense business and Work and Transportation businesses were lower quarter-over-quarter due to delayed military orders and weak rental and B2B sales
  • RFM inventory management system will be aggressively rolled out next year and should improve ORV dealer’s ability to replenish vehicles, manage inventory and make models available to customers
  • Guidance for full year 2016:
    • ORV and Snowmobile sales are expected to be down high single digits to low double digits percent but should show some retail growth in Q4
    • Defense and Work and Transportation segment sales are expected to be up high single digits for the year

Learn more:  Seekingalpha.com (earnings call transcript)

Arctic Cat Reports Q1 2017 Results

The new Arctic Cat HDX 700 Crew XT for model year 2017.

The new Arctic Cat HDX 700 Crew XT for model year 2017 helped drive sales for the quarter.

Arctic Cat recently reported financial results for fiscal year 2017 first quarter which ended June 30, 2016. Management reported sales of $104.9 million and a loss of $0.81 million for the quarter compared to $134.4 million and $1.1 million for the prior year quarter.

The following are highlights from the earnings call related to the utility vehicle market.

  • Management reported progress on expanding their dealer network, adding 17 top tier dealers in underrepresented territories during the quarter. The goal is to add 75 top-tier dealers for the FY.
  • Dealer inventory was reduced during the quarter
  • A new state-of-the-art R&D facility expansion in St. Cloud, Minnesota, which will become home for all new wheeled product development, was finished
  • Sales of ATVs and ROVs (side-by-sides) in the 2017 first quarter totaled $43.7 million, down 17.3% compared to prior-year sales of $52.9 million.
  • Sales of ROVs including Wildcat were strong while core ATV sales decreased
  • Arctic Cat ROV retail sales declined high single digits versus a ROV market up low single digits compared to prior year quarter that had tough comparables. ROV retail picked up towards the end of the quarter driven by new products.
  • New models were introduced including the 6-passenger HDX Crew UTV and the entry priced Prowler 500
  • Key marketing initiatives include Arctic Cat 360 where virtual reality headsets allow consumers visiting Arctic Cat event displays and dealerships to feel the thrill of riding an Arctic Cat Wildcat side-by-side in a realistic 360-degree world, and Wildcat stadium side-by-side races.
  • Management reports a strong rebate and incentive environment. Pricing is competitive unless you have a “hero” product that can sustain a premium price.
  • Product mix indicates some shifting to lower priced vehicles
  • Guidance for the full fiscal year includes sales of $635 million to $655 million with second half sales driven by new product launches.  ATV/ROV sales should be flat to up low single digits.

Learn more:  Seekingalpha.com (Earnings call transcript)

Polaris Reports 2016 2nd Quarter Earnings

2015-RZR-XP-4-1000-eps

The very large recall of RZR vehicles impacted Polaris 2nd quarter side-by-side revenue.

Polaris Industries reported fiscal year 2016 second quarter earnings with sales increasing 1% from the same quarter last year to reach $1,130.8 million. Net income was down 29% to $71.2 million, reflecting approximately $25 million in warranty, legal and recall costs. Here are some of the highlights of the earnings callrelated to small, task-oriented vehicles.

  • ORV (ATV and UTV) sales decreased 6% in the quarter with Ranger shipments flat and RZR/ATV shipments down
  • RZR retail was down significantly more than RANGER and that was anticipated given the impact from the recall
  • North American (NA) ORV inventory was down 8%
  • Demand for the new General line of UTVs is exceeding company expectations
  • The Huntsville, AL plant is ramping up Ranger and Slingshot production
  • NA retail market for side-by-sides was flat and declining for ATVs
  • Management reports losing a few points of side-by-side market share attributable more to their product lineup in the utility segment in a competitive environment
  • NA retail market for side-by-sides was flat and declining for ATVs
  • Polaris NA retail was down double digits for ORV for the quarter impacted by the large product recall as well as weakness in the oil  and ag markets with side-by-side retail down high single digits
  • Product recall costs have been approximately $27 million for the first half of the year. The company has had a 30% response rate so far and the Consumer Product Safety Commission is targeting a response rate close to 80%
  • Global adjacent market sales increased 14% in the second quarter to $91 million including PG&A, driven by market share gains in Aixam and the added sales from the Taylor-Dunn acquisition.
  • Management reports that Taylor-Dunn’s “performance out of the gate, it’s been one of our best acquisitions yet” and they like what is essentially a made to order model along with synergies for the people mover segment with other global adjacent brands
  • The defense business was up over 30% and our PG&A related sales for the global adjacent division increased 21%.
  • Defense sales were up with the DAGOR vehicle gaining traction
  • Multix early sales have been disappointing but transmission issues were fixed during the 2nd quarter and the distribution network is expanding
  • Polaris will begin transitioning their RZR and Ranger lines to their retail flow management system to improve lead times and inventory management
  • ORV and Snowmobile sales are expected to decrease mid-single digits
  • Global Adjacent markets which includes GEM, Aixam, Goupil, etc. is expected to be up mid teens for the year with strength across brands

Learn more:  Seekingalpha.com (Earnings call transcript)

Kawasaki Recalls 28,000 Mule UTVs

One of the Kawasaki Mule models being recalled.

One of the Kawasaki Mule models being recalled.

One of the Kawasaki Mule models being recalled.

One of the Kawasaki Mule models being recalled.

Kawasaki announced the recall of approximately 28,000 of their Mule UTVs because the front floor cover can be punctured by a foreign object, posing an injury hazard to riders. There has been one report of debris striking an operator’s leg. The recall covers a wide range of Mule models for model year 2015, 2016 and 2017 including the PRO-FX, PRO-FXT, PRO-DX and PRO-DXT models and related configurations. specific models affected are described below. Towards the end of last year Kawasaki recalled a large number of their Teryx recreational UTVs for a similar floor issue.

The following information is from the Consumer Product Safety Commission.

Recall Details

Units:  About 28,000

Description:  The recall involves 2015, 2016 and 2017 model year side-by-side recreational off-highway vehicles. The recalled models are 4-wheel side-by-side seating for three to six people and automotive style controls. The vehicles come in various colors. The model name is printed on the right and left front fender. The vehicle identification number (VIN) is located on the steel frame between the right front lower A-arm mounts.

Screen Shot 2016-07-08 at 9.33.55 AMScreen Shot 2016-07-08 at 9.34.21 AMIncidents/Injuries:  Kawasaki has received two reports of debris coming up from the floor cover, including one report of debris striking an operator’s leg.

Remedy:  Consumers should immediately stop using the recalled vehicles and contact their local authorized Kawasaki dealer to schedule a free repair.

Sold at:  Kawasaki dealers nationwide from July 2014 through June 2016 for between $12,000 and $16,900.

Manufacturer(s):  Kawasaki Motors Corp., U.S.A. of Foothill Ranch, CA.

U.S.

Learn more:  CPSC.gov

Comment:  This is a large recall and combined with the previous Teryx recall for the same reason brings the total number of vehicles involved to 47,500. What is disconcerting is that it seems to be a basic design flaw in that the company did not engineer the front floor boards to be strong enough to withstand normal use. On the heels of major recalls from Polaris, there are now almost a quarter million UTVs being recalled from two of the most prominent brands in the market, most from the last several model years.