Polaris Inc. (PII) Q1 2014 Earnings Report, Transcript and Summary

Good morning my name is Carl and I will be your conference operator today. This time I would like to welcome everyone for the Polaris first quarter earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. [Operator Instructions]. Thank you. Mr. Edwards you may begin your conference.

Thank you, Carl. Good morning and thank you for joining us for our first quarter 2014 earnings conference call. A slide presentation is accessible at our website at www.polaris.com/irhome which has additional information for this morning’s call. The speakers today are Scott Wine, our Chairman and Chief Executive Officer; Bennett Morgan, our President and Chief Operating Officer; and Mike Malone, our Chief Financial Officer. During today’s call we will be discussing certain topics, including product demand and shipments, sales and margin trends, income and profitability levels and other matters, including more specific guidance on our expectations for 2014, which should be considered forward-looking for the purposes of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those projections in the forward-looking statements. Now let’s turn it over to Scott Wine, our CEO. Scott?

Good morning and thank you for joining us. Two aspects of the Polaris culture, I particularly enjoy are the intense competitiveness and willingness our team has to take on stretch goals and objectives. These attributes have served us well and will certainly do so in the future. But recently when I found myself pushing for better performance for Motorcycle and Small Vehicle businesses, where sales were up in the quarter 52% and 248% respectively, I realize that it’s also important to remember that we last at ourselves. We value humility and enjoy self-deprecation as much as anyone, but we still prefer to get most of our fund from winning. We won our battles in the first quarter delivering a record performance to start 2014. Fueled again by industry leading innovation, Polaris first quarter sales increased 19% to $888 million. We were pleased with the retail and dealer demand for the RZR XP 1000 and the New Sportsman ACE which help to drive ongoing market share gains and 11% sales increase in off-road vehicles. Indian Motorcycles gain momentum and was a solid contributor to sales growth including at our international businesses with broad-based share gains and an excellent execution, Matt Homen’s EMEA business grew nearly 50% in the quarter. While we were aided by Aixam Mega’s incremental revenue, our core EMEA business grew an impressive 15%. Asia Pacific, Latin America also had an outstanding start to the year with Mike Dougherty’s teams in Australia and in developing market delivering 28% growth. Steve Eastman’s Parts, Garments and Accessories businesses extended their winning street posting 20% sales growth and boosting our profitability. First quarter net income increased 7% to $80.9 million yielding a record earnings per share of $1.19 up a 11% over the prior year period. We do not like to see our earnings growth rate coming lower than sales, but I will not complaint about the incremental tax benefits we received in the first quarter of 2013. Because of the tax impact, operating income which increased 24% may offer a better proxy of our earnings performance in the quarter. Gross profit margin increased slightly as pricing and mix came in better than expected, Mike Malone will give additional color on margin in a few minutes. Our first quarter and especially January and February are weak from a seasonality perspective, we do gain important inside throughout the quarter into consumer sentiment and dealer engagement not to mention the competitive landscape. Based on our findings and results we are modestly more optimistic about 2014 as we begin the second quarter. We are gaining market share even then our competitors remain very active and we see promotional activities elevating as they look to move not on current inventory. Retail demand is accelerating in April, and while this trend will not continue unabated, we do foresee another second half boost from our model year 2015 offerings. Between record earnings and expectations for a stronger second half, we are raising our full year 2014 sales and earnings guidance. Well we are maintaining our below consensus expectations for U.S. GDP growth and are only slightly more optimistic on the global economy at large. We believe our improving commercial execution at on coming product releases will again outpace the economy. We are homing our outlook for moderate mid-single digit growth in the overall Powersports industry and anticipated share gains will continue to drive growth across Polaris. We are increasing our full year sales guidance to up 14% to 16% over 2013 and raising full year earnings per share projections $6.30 to $6.45 per share is 17% and 18% increase. Polaris is a results oriented financially driven company, so we have key indicators and metrics for most everything we do. But unlike in our plants and business units there is no simple metric to communicate and measure our strategic progress towards building and becoming a highly profitable customer centric $8 billion global enterprise. However, a review of how we allocate capital provides a decent representation and our commitment to being the best in Powersports PLUS and achieving global market leadership is clearly on display as we enter our consecutive, second consecutive year of capital investments and growth capacity exceeding $200 million. The recent Kolpin purchase coupled with our previous acquisitions of Aixam Mega and KLIM demonstrate our ability to find go through adjacencies that is incremental to and off cycle from our core Powersports business. Studying our capital allocation provides inside into our progress, but the metric I find most useful for evaluating leaders and businesses is their say do ratio. At Polaris we see our high say do ratio as a key aspect end result of having hiring and developing the best people and best teams. We expect to reach our growth and margin expansion objectives by innovating and creating value for our customers and dealers. We have focused teams in Motorcycles and ATV’s working diligently to create a LEAN process that will provide significant improvements in quality and delivery. We’re on a long journey to become a LEAN enterprise that makes us better and stronger every year. And whether you calculated from our financial reports, read our press releases or ask customers, dealers, employee, suppliers or investors we expect our say do ratio to be high always. With that, I will turn it over to our President and Chief Operating Officer, Bennett Morgan, who will provide additional insights into our operations and business unit performance.

Thank you, Scott. Good morning everyone, Polaris again gained market share in Powersports. First quarter Polaris retail sales in North America increased 7% as a late spring in the Northern U.S. and Canada slowed March seasonality in both ORVs and Motorcycles. The overall North American Powersports industry grew at a 4% rate. North American dealer inventory is up 13% versus 2013. ORV inventory is up mid-teens percent primarily from new model introductions and our all new Sportsman ACE category. To put this into perspective ORV inventory of existing segments and models increased only 3%. Small vehicles and Motorcycles even with increased Indian shipments all rose just mid-single digits. Moving to our business unit performance, starting with off-road vehicles. Polaris first quarter ORV sales increased 11% the side-by-side ATVs defense and commercial all growing year-over-year. For the 28th consecutive quarter Polaris gained market share in ORVs as North American retail sales led by strong retail from our flagship RZR XP and XP 4 models increased upper single digits in an industry that grew mid-single digits. Our Sunbelt region significantly outperformed our Northern regions with retail sales up strong double-digits in every category ATV, Rangers and RZRs. Overall Polaris core ATV sales grew the North American industry that was flat while Polaris side-by-side retail grew upper single digits in a estimate, in an industry we estimate grew similarly. Our all new Sportsman ACE has gotten off to a very promising start, retail rates are accelerating, global dealer orders are better than we expected and early consumer buyer feedback is very encouraging. We are currently adding additional model year 2015 capacity for ACE in our new plant in Milford, Iowa. The ORV competitive environment particularly side-by-sides remains elevated with new products and non-current promotions from some key competitors. We expect to continue to outperform our competitors moving forward thanks to our compelling ever broadening armada of Polaris ORV products positions. Motorcycles, Polaris first quarter Motorcycle revenue gross stayed very healthy thanks primarily to the continued to success of the Indian re-launch in both North America and internationally. Revenue increased 52% for the quarter. Polaris Heavyweight Motorcycles continue to expand market share ahead of very nice clip, Polaris North American retail sales were up about 50% in a North American heavy weight industry that was up low single digits. Indians momentum remains excellent as new product quality, dealer sign ups and dealers retailing continue to increase as more Indian showroom constructions are completed. The global power of the Indian brand has been even better than we expected with international Indian sales to dealers and retail sales well above plan since our launch. We have over 70 international dealer signed and most of them are currently retailing. Victory retail sales declined mid-single digits but essentially outperformed pretty much all heavyweight brands in the first quarter other than Indian and Harley. Late in the quarter we launched the Victory Gunner bobber style cruiser with a MSRP of $12,999 in the U.S. We’ve received very good early dealer and consumer reaction to this model. Recent buyer trends are proving out that our differentiated two brand strategy with ND [phonetic] 0510 competing directly and favorably against Harley and Victory source of our customer volume being primarily from the metric brands. Snowmobiles. First quarter Snowmobiles revenue increased 6% driven by a small number of early model year 2015 shipments that received into North American dealers to increase visibility and awareness of our new consumer spring snowcheck pre-season order program and was offset by a lower first quarter dealer shipments in Scandinavia due to weak snow conditions. The North American snowmobile industry concluded its strongest season in 5 years with industry retail up just over 10% and industry dealer inventories in excellent shape down strong double-digits come off a very difficult comps from a year ago first quarter retail sales for the industry and Polaris were down slightly as we had expected. For the season Polaris’s retail grew mid-single digits, so we gave back a little of our significant share gains over the past five years to entirely to share losses in the mountains caused by weak pre-season sales last spring and prior year RMK quality hiccups. Despite our modest share erosion this season we are optimistic for the upcoming season. Our dealer inventory is in very good shape and is down year-over-year on model 2014. Our model year 2014 snowmobile quality was excellent and our model year 2015 snowmobile introductions were very significant and well received by both dealers and consumers. We introduced what we believe is the strongest product news in the industry lead by our all new AXYS next generation chassis which is featured by 9 RUSH performance and Switchback crossover segment products. AXYS is an unrivaled lightweight chassis the very first in the industry to offer perfectly balanced rider control, the progressive rate suspension with active pitch control for a smooth ride in the loops and the chatter bumps. On the strength of our new pre-season consumer snowcheck orders in North America have been significantly better than last season. Parts, Garments and Accessories. PG&A momentum remains very strong with first quarter sales up 20%, parts accessories and apparel all grew strong double-digits led by strength in both ORV and Motorcycle related products. KLIM had another strong quarter with year-over-year apparel growth at 47%. PG&A product introductions remain robust with over 300 new accessory and apparel items launched in the first quarter. Our acquisition of Kolpin which closed earlier this month has another quality aftermarket brand to our portfolio providing us access to new distribution channels and customers. We are investing in capacity and infrastructure with an $9.5 million project modernizing our material handling systems in our Wilmington distribution center and we continue to add significant talent and human capital to our most profitable business of the margin line through our category management initiative. Commercial. First quarter Polaris commercial revenues increased by over 60% thanks to our multi-pronged attack plan for the diverse commercial customer segments. Sales to Bobcat Polaris national accounts and BRUTUS all were up notably year-over-year in the first quarter. However, we have a lot of work to do as BRUTUS retail through our distribution is growing at a slower rate than we anticipated partly, because we are underestimated the time, effort and resources required to build this segment out quickly. Help address this we are adding a dedicated commercial field sales force to add expertise tools and peer commercial focus to our dealers and customers. We also launched a new range of branded Diesel HST with hydrostatic transmission into our core Ranger channel to appeal and better reach our agricultural and MAHO customer segments. Success may come more slowly than we are used to at Polaris, but the commercial market remains in appealing under index segment that Polaris ORVs and you can expect we will say focused on this opportunity to our own brand and team efforts and those of our strategy partners Bobcat and soon Ariens. Defense. Defense sales improved by over 50% in the first quarter driven by a strength in order book as our new product development innovation and business development began to show more traction. We executed our first significant deliver on our ATV contract that was awarded in late 2013 from RZRs our newly developed dagger vehicle design for special operations, global needs is receiving outstanding consumer acceptance. And sales international customers increased by over 200% and our overall defense order bank is growing. Small Vehicles. In our last quarter before Aixam revenue annualizes from last April’s purchase Small Vehicle first quarter revenue increased by 248% as all three brands, GEM, Goupil and Aixam grew year-over-year. Aixam expanded its market share lead in Q1 in the European quadricycle industry and realized both strong dealer orders and shipments as recently launched model year 2014 vehicle platform continues to be very well received in the marketplace. Gem orders improved by over 20% and LEAN initiatives continue to favorably impact the productivity and profitability of all three brands. International. Polaris’s international business had another strong quarter with sales increasing 44% led by nearly 50% and 60% growth in the EMEA and Asia Pacific regions respectively. Motorcycles, Small Vehicles, PG&A and side-by-side sales all grew over 30% offsetting some weakness in European snowmobiles and Latin America. Our EMEA region continues to deliver strong growth from market share gains in Aixam business, but even without Aixam EMEA sales increased 15%. We are seeing some encouraging early signs from the EMEA ORV and Motorcycle industries with ORV industry up modestly and Motorcycles up significantly year-to-date. Polaris’s gained significant share early notably through RZR and Indian. The first quarter European snow industry slowed due to poor snow was down double digits in Q1 and this was some impact on model year 2015 European snowmobile orders. Our Opole, Poland plant is right on schedule for start up later this year. Latin America sales were down 18% due entirely to timing from our transition from a distributor to dealer direct in a strategic Mexican market. As of April, our new sales subsidiary is now open in moderate Mexico. Brazil is off to a very good start with sales in dealer increases, Asia Pacific sales were driven by strong market share gains in Australian ORV and Motorcycle markets great start in our China subsidiary and India performing to plan. Our Eicher EPPL joint venture is progressing nicely, the Jaipur plant is almost complete, product validation is right on track and we expect to launch the new product very late this calendar year. LEAN Enterprise. We are ramping up LEAN initiatives focused on reducing ways to improve speed, quality and ultimately profitability both on Motorcycle and GEM businesses are being transformed into LEAN models for the rest of the company. Our retail flow management LEAN business model has improved Motorcycle order to ship lead times from over a 100 days to now less than 14. We’ve increased Motorcycle capacity by approximately 50% per day through manufacturing and process improvements and reduced downtime by over 20% and we are still very early in our journey. In our GEM business, we reduced work space needs by 31% and freed up 25% of our workforce to being production on our all new GEM eM1400 with zero headcount additions. Later in 2014 we planned to expand LEAN initiatives into OR – ATV business. Across Polaris gross margins expanded 10 basis points driven primarily by value engineering and purchasing cost reduction efforts and manufacturing and productivity improved by 6% in the first quarter. Factor inventory remains an opportunity including Aixam it was up 30% year-over-year due to product mix, acquisitions and a bunch of new products and locations. Polaris quality continues to improve with our most recent new promoter scores for Victory side-by-sides and now ATVs number one in our respective industries. We expect NPS and customer royal to improve even further in the future, thanks to our global customer excellence initiative which is already generating value for Polaris and our dealers. With that, I’ll turn it over to Mike Malone, our Chief Financial Officer.

Thanks Bennett and good morning to everyone. We are pleased to be able to report record results for our first quarter and based on product on strength for those results to raise our full year 2014 sales and earnings guidance as follows. Total company sales are now expected to increase 14% to 16% for the full year 2014, with the following sales expectation by business. ORV is now expected to grow 9% to 11% driven by ongoing product innovation and market share gains and increased from prior guidance. Our snowmobile guidance remains unchanged with expectations of mid-single digit percentage growth for the year. Motorcycles are expected to increase 65% to 75% also unchanged and driven primarily by Indian. Small Vehicles is unchanged up 25% to 30% which includes the full year of the Aixam acquisition. PG&A sales guidance has increased now up about 20% including the sales from the recently acquired Kolpin business. And the international sales are now expected to increase in the low double digits percentage range over the full year of 2013. Moving down to P&L, we continue to expect gross margins to decline 50 to 70 basis points in 2014 even though we showed a 10 basis point increase in the first quarter. I will provide more detail in my next slide on gross margins. Operating expenses as a percentage of sales are expected to decline about a 100 basis points for the full year 2014 compared to 2013 unchanged from prior guidance. We will continue to invest in sales, marketing, product development and distribution related to Indian Motorcycles and make numerous other global investments in future growth opportunities. As a percentage of sales these expenses are expected to be more than offset by the planned reduction in our incentive compensation expenses related to changes made to the long-term incentive compensation plan as we have previously discussed. Between our projections for gross margin and operating expenses for the full year of 2014, we expect to generate operating profit margin expansion in a ray in similar to what we achieved in 2013. However, as we have previously disclosed the recent acquisition of Kolpin is expected to be slightly dilutive to earnings for the full year 2014. Nearly all of this expected dilution will impact the second quarter of 2014, in gross margins and operating expenses, largely due to the purchase accounting implications of the transaction. The income tax provision rate for the full year 2014 is expected to in the range of 34.25%, the 34.5% of pre-tax income, unchanged from previously issued guidance and higher than the full year 2013 tax rate of 33.7%. As a reminder in calendar 2013 we had the benefit of two years of the research and development credit. The retroactive R&D credit along with favorable outcomes of tax audits generated a non-recurring $8.2 million to the first quarter of 2013 income tax expense a year ago. The 2014, the U.S. government has yet to renew the R&D tax credit today. This change in the income tax rate accounts for about 130 basis points negative impact for the net margin percentage in the first quarter of 2014 results. Earnings per share for the full year 2014 is now expected to be in a range of $6.30 to $6.45 up 17% to 19% compared to 2013 and net income for the full year 2014 is expected to increase 14% to 16%. For the full year 2014 the number of diluted shares outstanding is expected decrease between 2% and 3% compared to 2013 due to the Fuji share repurchase late last year. We are not planning to repurchase any significant number of shares in 2014 at this time, although there are 1.6 million shares remaining on the current share repurchase authorization. In the 2014 first quarter the gross profit margin percentage increased by 10 basis points to 29.1%. While we realize the small improvement in our gross margin percentage for the quarter, we anticipate gross profit margins will decline 50 to 70 basis points for the full year unchanged from prior guidance. We project that we will continue to benefit from higher selling prices and product cost reduction efforts as we have in the last few years. However, there are several pressure points on gross margin that we believe will intensify throughout the remainder of the year. For instance the impact from unfavorable currencies particularly the Canadian dollar is expected to increase for the balance of the year. In the first quarter, the Canadian dollar was negative to our reported sales and gross margins, but our Canadian sales are more skewed to the remaining three quarters putting greater pressure on gross margins for the balance of the year. Currently we have only about 15% of our remaining 2014 Canadian dollar exposure hedged at a rate of about $0.925 while the current spot rate is under $0.91. Product mix was neutral to gross margins in the first quarter of 2014 and benefited from a greater number of RZR XP 1000s and XP 4 passenger models sold in the quarter. However product mix is expected to have a negative impact to the gross margin percentage for the balance of the year as our ORV product mix changes and we shift relatively more Motorcycles and Small Vehicles which currently have lower gross margins. And our depreciation and amortization expenses, our anticipated increase to above 40% for the full year 2014 given our recent and continuing significant investments and product development tooling and capital expenditures putting purchase on the 2014 gross margin percentage. Moving now to our balance sheet and liquidity profile, which continues to be well positioned to support our strategic initiatives. Net cash provided by operating activities was $44.7 million for the first quarter, slightly less than a year ago in a seasonally low cash flow generation quarter. We continue to expect cash flow provided by operating activities for the full year to increase at a similar percentage rate as sales grow. At the end of the first quarter, our cash balance was $102 million lower than a year ago while our total debt increased to $332 million primarily due to the repurchase about $500 million of Polaris stock from Fuji in the fourth quarter of last year. For the first quarter our capital investments and capital – I’m sorry, our investments in capital expenditures and new product development tooling totaled $40 million above flat with the first quarter last year. For the full year, we anticipate capital expenditures will be lower than 2013, but still exceed $200 million. Polaris acceptance receivables from dealers in the U.S. were $958 million at the end of the quarter, an increase of 22% from a year ago, but only a 3% increase sequentially from year end. The year-over-year increase reflects the mix change of higher value side-by-sides and Motorcycles and increased PG&A sales. Retail credit environment remains scalable with approval rates near historical levels for the first quarter. However, the penetration rate declined 4 points due to more aggressive financing programs available to our consumers from alternative finance sources. In summary, our first quarter results are a good start to the year and we continue to have confidence the team can deliver another record year for Polaris. Now, I’ll turn it back over to Scott.

Thanks Mike. It has taken six years, but I’m finally learning that April is actually a winter month in Minnesota. Last week snow melted quickly and certainly reinforce the concept of a late spring, but it did not dampen our early momentum in the spring selling season. Positive trends are helpful, but we still expect the latter half of the year to be stronger than the first two quarters. We are not looking beyond the second quarter, but there is a great deal of planning and excitement around our upcoming 60th anniversary celebration to be held during our summer dealer show here in twin cities. Our company founders were leading innovators of their time and we are honoring and caring on their ingenuity with another record year for Polaris invention surpassing the high bar we just set in 2013. Designing and launching new products is what we do best, we are working hard to be excellent in many other areas. Tim Larson and his customer excellence team are improving our commercial execution everyday and complimenting the LEAN enterprise work that Jonathan Blaisdell is driving across the company. And while we are excited about new plants in Poland and India coming online later this year, we are also adding capacity and technology in every Polaris facility. As a committed capitalist I must acknowledge the benefit we get from our competitors. They have stepped up their game in volume, quality and performance and in this crucible of intense competition we are being challenged to report a better stronger off-road vehicle business. And for several years arising that is challenged David Longren’s off-road vehicle business is strong and getting better. The same is certainly true in snow, where Mike Jonikas and his team’s new AXYS sleds were specifically designed to surpass competitors and excite riders. And tough competition compels to be better than we are truly fortunate in the Heavyweight Motorcycle industry where the level of competition is nearly unmatched. Our Victory and Indian Motorcycles are winning accolades for their style and performance and generating energetic excitement around our Motorcycle business. While neither brand is new in many ways we are competing as adjure unburden new comers, it is exciting to watch Steve Menneto and his team accelerating growth and aggressively building on our number two position in the Heavyweight Motorcycle industry. We continue to track interesting opportunities for profitable growth in Small and Commercial Vehicles Polaris Defense, and other adjacent markets. Look for us to be more aggressive both with our investments and our pursuit of returns as we see to diversify and strengthen our portfolio. Looking at the external factors, we expect continued pressure from currencies and mediocre economy growth here in the U.S, but moderate improvements in the global Powersports industry. For the past 60 years Polaris has determinedly succeed through good time and bad. We have a responsibility to make the next 60 years better than the last and I have confidence in this team to do exactly that. I will now turn it over to Carl, to open up the line for questions.

[Operator Instructions] Your first question comes from the line of Robin Farley from UBS. Your line is open. Robin Farley – UBS: Great, thanks. I have two questions. First is trying to back into maybe what your Indian shipments were in the quarter versus Q4 and it looks like possibly they were flattish with the shipments for India in Q4. And I’m wondering if that was a capacity issue or that the dealers were not all up in retailing earlier in the quarter or that you were being cautious about if your dealers were opening in winter markets versus Sunbelt markets initially? And then my second question is trying to think about ACE and how that may be affecting where the cannibalization may be falling whether it’s ATVs or side by sides. And also one of your – the slides it looks like ATV shipments were slightly lower year over year and I’m wondering if ACE is included in that bar chart or if you’re [indiscernible] ATV shipments [indiscernible]?

Robin I’ll start with the Indian and obviously we’re probably not going to give you all of the detail you are looking for. But, it really it’s tough to struggle in these early, we’re explaining these early quarters exactly what’s going on with shipments, because the fourth quarter of last year was really our ramp up shipping out to all of our available dealers both internationally here in the U.S. And with not all that many retailing in the month of January and February we are very committed and when I talked about the reduction we had in our lead times and that’s not just with Victory, that’s with the Indian as well. So we’re very committed to only shipping in based on what’s retailing. So it was a, we did ramp up capability throughout the quarter, so by the end of the quarter we had much better and to more consistent shipping capability than we did at the start of the year, but I wouldn’t there is just really not that much colored off between comparing the fourth quarter and first quarter from a shipping perspective, just given the early stages of this product.

And Robin this is Scott, I’ll try to tackle the ACE question. From a cannibalization standpoint to start, as I commented we are very pleased with the start. We’re still actually filling the pipeline on ACE and global orders frankly both North America and internationally have been better than expected. So we’ve been chasing a little bit of capacity and still filling the pipeline with dealers. The early buyer trends, I think are very encouraging it looks, you know as again it’s the very early innings but, we’re not seeing any harsh cannibalization from either side-by-sides or ATVs at this point, but again I would – I would make the remarks that we’re only 90 days into it and as this new category builds out, we’ll see but it looks to be a largely incremental model and we’re getting from a consumer purchase patterns I mean we are seeing wide applications of number of buyers and we’re particularly thrilled that we also seem to be indexing well with some the areas that Dave and his team had targeted that maybe had been underserved customer segments. So that’s encouraging, as far as the shipment data that you saw on the chart, again we believe ACE is going to be an all new category and we’re trying to be fairly true if that’s to some degree how we reported, as you see it in the chart there it is ACE is included in ATVs, but our ATV shipments were not bound year-over-year. So that’s probably just a graphical thing on the bar is that only I can say, we’re actually up. Robin Farley – UBS: Okay great, thank you very much.

Next question.

Your next question comes from the line of Gerrick Johnson from BMO Capital Markets. Your line is open. Gerrick Johnson – BMO Capital Market: Hey good morning. Actually a couple questions on Snowmobiles. Curious as to how Snowmobile inventory was up at retail even modestly and will it cost you more in rebates to move those units now that AXYS renders many of those obsolete? And then the second part on Snowmobile, a snow check now is largely completed, I see no change in your Snowmobile guidance, so I’m wondering if you didn’t see out performance to your expectations owing to AXYS and how that played out? Thanks.

Yes, Gerrick. This is Bennett. I try to cover that in the remarks on the inventory there is little, there is a little unique, we’ve got a pretty interesting snowcheck program particularly with this customization and so we actually see to the number of model year 2015 shipments into the marketplace to accelerate snowchecks and frankly that that’s what drove the inventory up year-over-year. The- all the stuffs that’s existing inventory is actually down year-over-year, as I remarked our snowchecks actually were better than we expected considerably year-over-year, but we’re frankly holding guidance, frankly because, there has been some weakness in the European snow market in the first quarter and we think their orders are going to be impacted and tell that thus settles. We usually don’t modify our snowmobile guidance until all the orders are completed globally and that usually happens in our July call. Gerrick Johnson – BMO Capital Market: Okay and on that European aspect, how many of – or how much European snowmobile sales are to Russia? And any softness there from the economy or geopolitical concerns or anything like that outside of weather?

Yes. I mean obviously we’re watching lesser real closer the primary impact we’ve seen over the last 90, 120 days is really frankly bad and snow this has been weather there. They had a pretty lousy snow season didn’t have good snow coverage for most of the year and that’s affected the snowmobile orders. Again we’re going to be cautious and careful with Russia in general and in overall from a volume standpoint Scandinavia in Europe it’s probably a little less than half. Gerrick Johnson – BMO Capital Market: Great, thank you.

Your next question comes from the line of Scott Hamann from KeyBanc Capital Markets. Go ahead with your question. Scott Hamann – KeyBanc Capital Markets: I have few questions, first one wholesale inventory up 30% if you were to strip out the Aixam deal, how much would that be up? And then secondly just in terms of your ORV guidance that was one of the bright spots, you kind of talked about here as you see the retail trends, can you call out a few products or segments or geographies that’s driving you to be more optimistic in that guidance versus where we were a 90 days ago?

Yeah on the factory inventory number Aixam is about 4% of that increase year-over-year and again there is a number of contribution factors as we get a little bit bigger, broader and I don’t want to use the word more complex, but just the more diverse in that our locations in our businesses that are driving that. But certainly we think that’s an opportunity.

Yes. Another thing I would add to that is, it’s like we said in the dealer inventory increased whether as a number of new categories and new models, we have the same thing at the factory as well. We have those new categories that we have raw materials for and the inventory as far as well. So there is some impact to the plus 30% based on the overall growth of the company.

Yeah, but to be very clear we have an opportunity and responsibility to get our inventory better in line with where it should be for a LEAN company and we are certainly not LEAN with our inventory management today and we got a lot of work to do there and, we’ve not made the progress that certainly we would like, but it’s certainly an area that we continue to drive focus on and we expect our inventory returns to improve over the next several years probably not over the next quarters.

Yes. And then in relation to ORV retail trends and guidance I think as we look, I mean we’re seeing that the contribution from a number of factors, certainly the RZRs have been very strong ACE is off to a good start, we’re very optimistic about that going forward. International has been a little bit better than expected and again we remain very optimistic about the model year 2015 those will allow here and about 90 days. So it’s – it’s really a broad-based contribution Scott of where we’re seeing ORV strength. Scott Hamann – KeyBanc Capital Markets: All right, thanks.

Next question.

Your next question comes from the line of Greg Badishkanian from Citigroup. Go ahead with your question. Greg Badishkanian – Citigroup: Yeah, hey guys, great quarter. And just kind of wondering, qualitatively how what your dealers are telling in terms of how they feel about inventory and mix just kind of with their general senses?

Greg, this is Bennett. Again, I think as you guys continue doing your surveys, your capturing the tone reasonably, well I think our dealers generally feel pretty good about where our inventory is there is still a couple of areas we’re still chasing demand frankly ACE and some of the big RZRs most notably. And you know as this marketplace becomes more competitive and there is, a lot of these dealers don’t have the largest showroom and we have this broader portfolio of segments that they – they really need to cover to grow and competitors get more aggressive with new models. They have a lot of stress on their showrooms and so that really is in my mind about that right now and we’re seeing – feeling that virtually every day, but again with our amount of products and our leadership in those segments for the most part our dealer feedback has been with the RFM and MVP improvements and where we’re going with the ATVs, I think they feel pretty good about what we’re doing on inventory.

Yes. I think Greg, as you do the surveys at the end of the quarter, whenever you have high seasonality changes going from the winter months to the spring months and that final transition month at the end of the quarter doesn’t come out as robust it’s almost like, I’m sure there is some dealers that felt like, if the timing had been a little different they might have been better off, but I think by enlarge, as they still continue to see a retail moment of flow especially here in early April, it’s by enlarge about exactly where we want it. Greg Badishkanian – Citigroup: Good, yes that’s pretty consistent with what we’re seeing, I just wanted to get your take. Also with respect to the promotional environment, you mentioned that it remains elevated. Has that accelerated from late last year or is it consistently elevated?

Again, I think where we’re seeing the aggressive environment is generally in side-by-sides and it’s elevated it’s not insane. And what I would really tell you is it’s just a more crowded marketplace right now. You got a bunch of new products and competitors that really have entered with new products over the last 12 months and then you will have people responding to those competitive reads with new – more new products with elevated promotion. And so you get the confidence of both of those factors and so, we view the side-by-sides market is very competitive right now. And, but again we like our ability going forward. Greg Badishkanian – Citigroup: Right. Okay that’s helpful, thank you.

Next question.

Your next question comes from the line of James Hardiman from Longbow Research. Your line is open. James Hardiman – Longbow Research: Hi good morning. Thanks for taking my call, couple questions. Let’s start on ORV. So the current wholesale guide is up 9% to 11% for the year. How should I think about what level of retail you’re going to need to get to that number, even if you don’t quantify it I know you don’t give retail guidance? But if I think about the different puts and takes, it seems like inventory is going to be a positive, ASPs are going to be a positive, Defense and Commercial seem like they’re positives. It almost seems like even where we are today in the first quarter high-single digits type retail but that’s enough to get us to 9 % to 11%? How should I think about all that?

You should think about it that’s for sure. I would say it from a retail standpoint on ORVs, yes there is – yes it’s a pretty complex business, there is a lots of puts and takes in there and what you saw in the first quarter, some of our ASP trends are going to minimize in the future quarters as we start to – as that mix change little more pronounced, so I think we’ll lose some of those advantages. I would say to think about the retail rate, being at least similar to what you saw in the first quarter maybe a little better.

Just to set a bar of those, 7% for the year won’t do it.

Yes. I mean but he is talking the overall.

Make to the overall company though. James Hardiman – Longbow Research: That makes sense. And I guess along those same lines I thought one of the most significant parts of the presentation is where you point out that you expect retail sales and market share to accelerate as we move forward. Is that more a function of just warm weather climates doing better than cold weather climates or is it – is there something that’s happened so far in April that gives you a lot of confidence that that’s going to be the case?

Yes. Yeah I think that’s certainly, we’re very encouraged by our Sunbelt performance and everything we’ve seen frankly in Jan and Feb and frankly what we’ve seen in April, growing March out has been frankly pretty encouraging in the north as well. So, I think that improves and again we feel very good about that, a lot of the new products and the momentum we’re seeing with the models we introduced here over the last six months and the news we are coming, so you can well accelerate as we go into the last three quarters of the year.

And we’re just getting started with ACE, we didn’t have anywhere near a full quarter of ACE in that. James Hardiman – Longbow Research: Perfect and then last question for me on Indian. You had I guess a little over 60 dealers retail and coming out of Q4, it sounds like maybe 75, 80 coming out of the first quarter. Does that rate of dealers actually retailing accelerate at some point? It seems like it’s been a little bit slow to get these guys actually retailing some of these bikes rather than just signed on. At this rate it’s going to be awhile before we even get to that 120 number. How should I think about that pace of dealers getting actually retailing bikes as we move forward?

Well I mean obviously we’re quite cognizant of seasonality of Motorcycle sales. So there is rates both with Polaris and with those dealers to get up in retailing as fast as they can throughout the spring and summer session. So we’ll get to a 100 in the second quarter at some point, probably towards the end I suspect and then literally we’re building capability to help them get set up faster, but truly James its mostly an aspect of making changes to buildings getting approval codes from cities and municipalities and it’s not as easy as we had hope to just putting up the Indian side and start selling. So I think we’re learning as we go through this process, how to help them do that, but it’s not going to accelerate tremendously, but may pick up a little bit here as we just start to target more dealers retailing in the second quarter. James Hardiman – Longbow Research: Got it, very helpful. Thanks guys.

Next Question.

Your next question comes from the line of Jimmy Baker from B. Riley & Company. Your line is open. Jimmy Baker – B. Riley & Company: Hi good morning. So as we think about PG&A, can you give us any color on how PG&A attach rates on Indian and some of your newest offerings like the ACE are comparing to let’s say the prior corporate average? And then can you share any metrics regarding say any change in frequency, consumers or visiting dealers and if you’re seeing a repeat traffic benefit from an expanding PG&A portfolio?

Yeah Jimmy this is Bennett. I would you the examples to pull that out, most of the new products and new categories that were coming are their penetration rates and dollar per unit is very favorable to essentially what preceded them. So Indian has been significantly better than Victory and we expected that trend will continue and hopefully even accelerate as we continue to build out that PG&A, the Indian assortment. ACE has been a much, much better, but not yet at the side-by-side level which we expected. So we’ve been very pleased, data that’s which we data about frequency of store visits, be a little data starved in this business and that’s something that, long-term Steve Eastman and Tim Larson are working on how we can use data little bit better, but we’re going to need some system improvements both within that. Jimmy Baker – B. Riley & Company: Okay, great. And then just a follow-up question on Motorcycle dealer inventory up just mid-single digits, adding dealers in the 50% growth at retail I’m surprised it’s not up much higher than that. Is there a point at which your Motorcycle dealers can improve, cannot improve turns in perpetuity and will need to see Motorcycle inventory growth accelerate maybe similar to the dynamic we saw in ORV a couple years ago?

I don’t think it’s fair to compare to ORV several years ago, because, really two things happen in ORV that drove that with the proliferation of new models and a slight improvement in turn. What you are seeing in Motorcycles is a endemic spoke of the numbers; I mean a dramatic decrease in our orderly times. And that is going to give dealers that opportunity to custom order bikes it is going to really and I think you are seeing that I mentioned it’s a competition in this showroom for floor space. And we’re going to give the dealer an opportunity to have higher velocity and I we are seeing them take advantage of that. So obviously when we have 300 dealers it’s going to increase a little bit, but with that current run rate I don’t expect to see a dramatic increase, you’ll see some fluctuation as I mentioned earlier quarter-to-quarter, but by enlarge we are committed to running a LEAN inventory model on our Motorcycle business. Jimmy Baker – B. Riley & Company: Okay, thanks very much, Scott. Thanks, Bennett.

Next question.

Your next question comes from the line of Jaime Katz from Morningstar. Your line is open. Jaime Katz – Morningstar: Good morning guys, thanks for taking my questions. The first question I have is on Latin America and I know that part of the shortfall appeared to be from this dealer transition in Mexico. And I’m curious when that is completed and if there was anything else impacting that number because it sounded like you mentioned that Brazil was actually strong?

Yes, this is Bennett, Jaime. Mexico the pretty sizeable part of, what is a relatively small part of our business in Latin America, so when we want to transition in Mexico that’s pretty material and will be kind of, you’ll see some, I don’t say reseasonalization as we go in direct here year over the next 12 months and then I think from within a year you’ll start to see the numbers normalize. But I think you’ll see some wobble in Latin America based on this transition come distributor to dealer and what the significant market. And yes Brazil was up and so there really was no other material move other than just the Mexico timing issue on transition and has to do with buying back dealer inventory situations with the distributor buybacks that’s kind of make 2014 and the first quarter in particular a little bit hard. Jaime Katz – Morningstar: Okay and then for Brutus, it sounds like things are still not going exactly as expected. Has the change to the sales force helped or are there other steps that you guys are taking maybe to accelerate the growth in that business as far as getting on track to where you want it to be?

We’re taking, we had a number of counter measures going on – on Brutus, I would – I think as you saw from mu remarks, what we underestimated, how quickly we’re going to be able to be great at this business with our question that commercial sales force really has just gone in, in the last 90 days and we’re still building that out. So they are starting to make a modest impact, but I expect as we go over the course of the next 12 months you will see more. I mean again the part we that we are not a very patient company, the purchase cycle through the B-to-B and the B-to-G buyer is very long and frankly we still got to build some creditability with some pretty frankly and French competitors. So we got to work at it, for that I feel like we’re eating a little bit humble of pie and honestly and as we usually do we try to come very clean on, when we’re disappointed and I would tell you right now we’re disappointed with Brutus, but by no means that we’re given up and we’ve got a multi-facet approach to how we’re attacking this commercial customer segments between Bobcat and Ariens and what we’re doing in international accounts and what we’re going to do with our own channel and I take a little longer, but we’re going to win this battle. Jaime Katz – Morningstar: Okay. And lastly I know somebody on the call mentioned have capital allocation and I’d be curious to hear your thoughts on optimal capital structure and what you think about adding leverage to the balance sheet just because you obviously have the ability to do it and I know there was a new piece of debt recently issued. But how do you feel about that longer term maybe?

Well clearly we have the capacity to do it, but you use the word to just because we will not add to our balance sheet just because, I mean if there is a reason to do it and I think we’ll pursue it. And then we are – we’re still very bullish on, what the opportunities inorganically to accelerate profitable growth and, if we see great opportunities, we’ll add to the balance sheet as necessary. But there won’t be any just because interest rates are low we’re going to bulk up the balance sheet. Jaime Katz – Morningstar: Excellent, thank you so much.

Next question.

Your next question comes from the line of Michael Swartz from SunTrust. Your line is open. Michael Swartz – SunTrust: Hey good morning everyone. Just starting with the Off-Road Vehicle business if we look at that sales are up 11% during the quarter. How much of that would have been price mix versus units?

Specific to the ORV business in the quarter the plus 11% that we reported about 4% of that is ASP. Michael Swartz – SunTrust: Okay. Okay and then just thinking about how that plays out…

For the 11%. Michael Swartz – SunTrust: Okay. And then looking at how that plays out to the rest of the year I know you’ve got, ACE is seemingly doing better than you had anticipated and you’re also going to be lapping the initial sell in of RZR – or I guess the XP 1000 in the back-half of the year, so I mean is there a possibility that price mix actually turns negative at some point during the year?

Yes. We would not get the way I would answer that. We wouldn’t anticipate that it will be as healthy as four for the year, they – as the eights rolls out for the balance of the year and our mix of the products going forward will anniversary the big RZRs and those things. We would not anticipate that it’s healthy for the full year. Michael Swartz – SunTrust: Okay. And then just over to the Kolpin acquisition, I know you haven’t given revenue or any kind of financials, but it looks like just with the guidance raising, PG&A, I mean is it safe to assume it’s about $30 million business? And then if so, I mean, is the margin structure similar to the legacy PG&A business excluding some of the one-time in integration type cost?

Yes. I would tell you that last year for the full year and the Kolpin sales around $20 million, so albeit three quarters of whatever that is for 2014 that’s embedded into our guidance. As far as the margins are concerned, what we said is that the overall margins of the Kolpin business are about what our – they sell accessories and their margins on accessories are about what our accessory margins are, which is part of our overall parts, garments and accessories business. Michael Swartz – SunTrust: Okay. Great. Thanks for the color.

And as I said in the call that’s before the purchase accounting implications and all that. So going forward this will be accretive, then we have the second quarter issue where we – will be somewhat dilutive. Michael Swartz – SunTrust: Okay. Thanks a lot.

All right. Next question?

The next question comes from the line of Rommel Dionisio from Wedbush. Your line is open. Rommel Dionisio – Wedbush: Yes. Thanks. Good morning everyone. Just a couple of on the [indiscernible] production capacity expansion. First of all, I didn’t write down fast enough Bennett where you said that’s going to take place, is that Monterrey where you’re adding the capacity?

Well, Rommel, we are in capacity in lots of places right now. We are – I didn’t mention Monterrey, but we are adding some capacity there with third line and some additional just specifically what I was talking about was Milford, Iowa which is about 20 minutes from our Spirit Lake plant. As Spirit Lake becomes frankly really focused primarily on Motorcycles, we needed additional space and capacity to run all of our ORV product lines. And so we have secured about 360,000 square foot facility there and that’s where we are going to be doing some of the higher volume ACE stuff. Rommel Dionisio – Wedbush: Okay. And then just as you ramp up capacity on ACE, obviously that’s for the vehicles, but are you guys also increasing a line up for accessories that will go with ACE just going forward?

Yes. I think, again, we should think about ACE as very encouraging to start, very early innings, more to come. Rommel Dionisio – Wedbush: Fair enough. Thanks very much.

Thanks Rommel.

Next question?

Your next question comes from the line of Craig Kennison from Robert W. Baird & Company. Your line is open. Craig Kennison – Robert W. Baird & Company: Good morning. Thanks for taking my question. Bennett, wanted to follow up on that showroom space discussion you had earlier. To what extent is Polaris already the number one brand in your dealer base such that it’s going to be harder to grow inventory beyond retail because you’ve already established yourself within that dealership?

I want to make sure I understand the question Craig. But if I don’t answer you can jump in. Clearly with our move to leadership and with the amount of compelling product line, I mean in virtually every leadership we are in. We are probably the number one player in the vast of those. I can’t speak for all 1700 points. But vast majority of it. And once you have that share and your turning it as quickly as we are and you are being a responsive partner, it’s harder to take that space away from us. But, again, a lot of these guys carry other brands and a lot those brands have been fairly dormant and they are looking more active. Their people are in there saying you got to give space. So it’s about – but I expect it, it’s going to be much more difficult than maybe it wouldn’t have been 7, 8 years ago. Craig Kennison – Robert W. Baird & Company: So just following up on that, part of your inventory growth is really driven by the growth in the armada, not because inventory is not turning. Is there a limit to how much you can grow the armada within the existing footprint of your dealer network?

Craig that goes back to what we are doing with this lean enterprise approach. I mean our philosophy is to be able to put more variety of innovative products in that turns faster under the same floor space. And to the extent we can do that better than the competition it makes more money for the dealerships and increases our market share. It is not about asking them to add on to the building so we could put more products in there. Craig Kennison – Robert W. Baird & Company: Great. Thank you guys.

Next question?

And your next question comes from the line of Tim Conder from Wells Fargo Securities. Your line is open. Tim Conder – Wells Fargo Securities: Thank you. Just a couple here, gentlemen. On your ORV piece, you had mentioned last quarter, and a competitor even mentioned that also, that you felt that your dealers focused maybe a little excessively on the new products, not that they shouldn’t, but maybe to the neglect of let’s call it some of your legacy products and that you were taking steps to address that. Can you maybe give us an update on that? And then also the 570 engine products in the middle part of the ATV market and then also there in the RANGER product, just a little bit of color how those are doing relative to RZR and ACE and so forth.

Tim, this is Bennett. I would tell you as this particular side-by-side environment gets more competitive, I was the one that made the remarks and we made – we have taken a number of steps and over the last 90 days to show that up what’s been in the product and within the sales teams. And I think within the dealership. But, I think the honest answer at this point is, it’s still pretty early a number of the moves we can make. Some moves we can make getting just getting people to focus on it and bring their attention to it and sharpen up some quick things around, your market, your promo, and some of its a little longer term with product. And so expect more to come on that sharpening on that competitive edge in all of the segments. I think that’s going to take another six months to build out. As far as the 570s go, I would tell you the Sportsman 570 is picking up momentum. I mean now that the Sportsman 500 legacy all that – those inventories have cleared through. I mean we’re seeing very nice ramp rates in the first quarter on 570s. And frankly our RANGER 570 sales are quite good as well. So we are feeling really good about the 570s right now. Tim Conder – Wells Fargo Securities: Okay that engine will look great in an ACE product by the way. Looking at Motorcycles, I want to shift back to that. Any color as to how much Indian drove the overall increase in the Motorcycle segment, rough percentages? And then Scott, obviously you’re making a lot of investments here especially in capacity the last couple of years. Should we potentially see maybe a little bit of a pause button here on capacity type of investments and a little maybe of the harvesting type of mode as we move into 2015?

Yes. First on Indian, I mean, first time Indian I think are – our press release and our comments said that Indian drove almost all of the Motorcycle increase in the quarter. I mean Victory was down just slightly on retail and as I said we are basically shipping to retail. So I think that kind of speaks for itself. We are very, very pleased overall with the early momentum on Indian. I mean, I will tell you that, I can’t talk to a dealer and find them to be – I question their optimism sometimes. But, the early results that we are seeing are quite encouraging both not just here in North America. I mean Europe has been strong, Australia has been strong. So very good, very good early momentum with Indian and don’t let our comments on the Motorcycles steer you to the fact that we are going to neglect the Victory brand. I mean, we got, it’s a very innovative products with the Gunner coming to market. Just released new ads that I think is position that brand right away. So just overall, we are feeling good as we enter the spring selling season about where the Motorcycle business is. As far as capacity, we go to a little bit of ways here and we are in one of those investment waves. It’s going to – we are going to catch up and we are going to have a little bit of extra capacity for a little while and it will slow down and with any luck we will continue to drive retail globally and then we will have to make another round of investment. But, certainly this is one of those high points where we are adding international capacity with Poland and India. We did the Monterrey investment a couple of years ago. And quite honestly we are capped out on the benefits of that. So we are making the second round of investments here in North America. But certainly we are not going to be investing at this level in organic capability for years ahead and this is the high watermark and it will ramp down, we’ll harvest a little bit and then we’ll like I said with any luck we’ll drive retail and do it again in a few years, but not next year. Tim Conder – Wells Fargo Securities: And then finally there to clarify on the capacity on Motorcycles, Bennett, you mentioned in your preamble that you’re picking up some nice incremental volume capacity ability with some of the LEAN initiatives on the Motorcycles and yet you’re expanding also Iowa. Are we still looking, when everything gets all done there on Spirit Lake, Iowa, of about 60,000 to 70,000 unit annual capacity ability or is that now maybe a little bit higher?

There is two things Tim. Bennett was mostly speaking about the Milford facility, which is not going to be Motorcycle. So, we’re adding to our Spirit Lake capacity and I think we’re going to have plenty of capacity to build all the Motorcycle we’re going to need to build over the next three years. And a great new paint system that’s coming online later this year but it’s that Spirit Lake facility, that’s going to really be an on-road Motorcycle facility. And additional capacity coming online for some of our new products in Milford. Tim Conder – Wells Fargo Securities: Okay, great. Thank you, gentlemen.

Thanks. Next question.

Your next question comes from the line of Mark Smith from Feltl and Company. Your line is open. Mark Smith – Feltl and Company: Hi, guys. Probably just one, respect to Victory of Victory retail being down, can you point at all to cannibalization from Indian? And then second on that your guidance for Motorcycles I don’t know if you can break out for us what you have applied for Victory this year?

I’ll take the Victory cannibalization question. In all honestly, we have not seen a lot of cannibalization from Indian. Again as I put in my remarks the source of volume as we look at the purchases tends to be the trends we saw first 15 years in Victory are the same. We tended to get most of those people that are, they generally been metric people and on the – Indian folks are mostly Harley people and largely there is separate distributions and that just gives, then I would tell you, our Indian had a great first quarter and I think Harley had a pretty down first quarter and I think if you look at everybody else, Victory done well in the first quarter. So, I wouldn’t expect that we’re seeing big cannibalization right now.

As far as the guidance is concerned, Mark we’re not going to give any more specifics now 65 to 75, that includes Indian obviously which is a vast majority of that. It includes our Victory shipments that are expected and it also includes a little bit of Slingshot at the second half of the year. Mark Smith – Feltl and Company: And that was my second question was Slingshot will be classified under Motorcycle and not Small Vehicle?

Yes. Mark Smith – Feltl and Company: Okay, excellent. Thank you.

Okay. Last question.

Your last question comes from the line of Joe Hovorka from Raymond James. Your line is open. Joe Hovorka – Raymond James: Thanks guys. Couple quick questions. One is if we put 70 Indian dealers up there on the slides, are all those retailing or is it like North American dealers where it’s half of that?

No, it’s slightly more than 70 that are actually retailing right now but he was – I think he was talking about international.

International. Sorry. Joe Hovorka – Raymond James: Yes, you put up 150 International or domestic and you say half of this is retail and then there’s a second....

Yes. Our international, international as a percentage is much higher than our retailing. It’s not 70 but it’s pretty down close. Joe Hovorka – Raymond James: Okay.

On the international side. Joe Hovorka – Raymond James: How many International dealers does Victory have as a comp?

I know that number, but I got to look it up Joe. I don’t have that at the top of my head. Joe Hovorka – Raymond James: Okay. And then the dealer direct in Mexico, does that drive factory inventory as well? You got more inventory on the balance sheet at Polaris because of that as the transition goes on?

Yes, for – yes there is a little bit more incrementality there. What happens when we transition, the transition was in April. So, what happens as we transition this the distributor quit the ordering basically running up to that period and we have to supply inventory in Mexico when our subsidiary is ready to turn it on in April. So, in the short-term there is a little bit of subsidiary inventory build and a reduction in the actual revenue shift, which is what Bennett talked about in Q1. Joe Hovorka – Raymond James: Okay. Was that significant on the 30% increase of the inventory in the quarter or no?

No. Joe Hovorka – Raymond James: No. Okay.

And Joe, Steve Menneto just joined there and says we’ve got just little over 150 international dealers. Joe Hovorka – Raymond James: For Victory?

For Victory, yes. Joe Hovorka – Raymond James: Okay. And then last question, the ACE shipments in the quarter what was the progression? Were you shipping anything in January, were you at either 100% run rate by March or is it still ramping into April?

We started shipping right at the end of January and we’ve been plugging away, I would tell you we’re close to ramp that we had planned for the first half of the year, but again we’re planning on adding additional capacity to take those rates up in the second half of the year. Joe Hovorka – Raymond James: Okay. That’s it. Thanks, guys.

Thanks, Joe. Okay. Thanks. That’s all the questions there and the time we have for this morning. I’d like to thank everyone for participating and we look forward to talking to you again next quarter. Thanks again. Good bye.

This concludes today’s conference call. You may now disconnect.