Question-and-Answer Session
Operator
Your first question comes from the line of Edward Aaron - RBC Capital Markets.
Edward Aaron - RBC Capital Markets
Just a couple of questions. First, I wanted to ask just some clarification on the gross margin. I understand the factors that you mentioned, I was a little bit surprised by the change there just given the strong sales and the mix benefit that you would have had.
So, if I look at the impact from promotions, it seems like it would probably have to be as much as few hundred basis points to cause that much of a gross margin change? Can you help me understand that? That just seems like a bigger increase than I would have expected.
Michael W. Malone
The primary impact for the fourth quarter was our sales promotions environment, particularly in ATVs, as the market got significantly weaker, and we’re preparing for that both in our fourth quarter activity as well as our ending accruals left on the balance sheet for the remaining dealer inventory going into 2008, where we again expect the industry to be particularly weak early this year.
So that’s the primary impact on the gross margins. If you recall there was a positive impact a year ago in the fourth quarter with some recovery of duties in the EU that we booked in the fourth quarter last year, which created a fair amount of upside a year ago that obviously we didn’t have repeating this year.
Edward Aaron - RBC Capital Markets
That’s helpful. And then on the Victory business I think you said you had over 30% retail sales growth in Q4 which is in the context of the industry data a really good number. Just trying to understand a little bit more of where that came from? What drove it? Was it primarily the Vision or was it more dealers working through Cruiser inventory?
Bennett J. Morgan
It was primarily Vision sales. Base Cruisers were relatively flat for us and Vision was most of the upside.
Edward Aaron - RBC Capital Markets
And then moving just over to the RANGER business really quick, you said it was 40% of total ATV sales currently. Could you give us a number for 2007 as a whole? I’m assuming the 40% is a run rate.
Michael W. Malone
No, 40% is 2007 for the full year; approaching 40%, I think is what it is. About 40%.
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