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Arctic Cat Has a Better 2nd Quarter in 2010


(10/28/2010)

I wouldn't call it a turn-around, but Arctic Cat's 2nd Quarter financial results for 2010 were better than last year, and better than expected.

Sales increased over last year's 2QTR for both snowmobile (7% increase) and ATV (9%), while parts/clothing/accessories declined 4%.

 

Here's the release -

Arctic Cat Reports Fiscal 2011 Second Quarter Results

Quarterly EPS up 20% on net sales increase of 6%;
Second quarter operating profit rose 25%;
Company raises annual revenue and earnings guidance

MINNEAPOLIS, Oct 28, 2010 (BUSINESS WIRE) -- Arctic Cat Inc. (NASDAQ: ACAT) today reported net earnings of $17.8 million, or $0.97 per diluted share, on net sales of $175.8 million for the fiscal 2011 second quarter ended September 30, 2010. Arctic Cat reported net earnings in the prior-year second quarter of $14.8 million, or $0.81 per diluted share, on net sales of $166.3 million.

For the six months ended September 30, 2010, Arctic Cat's net earnings were $13.3 million, or $0.72 per diluted share, on net sales of $239.2 million. In the first six months of last fiscal year, the company reported net earnings of $8.8 million, or $0.48 per diluted share, on net sales of $235.7 million.

Commented Arctic Cat's chairman and chief executive officer Christopher A. Twomey: "We are very pleased to report double-digit earnings gains on increased snowmobile and all-terrain vehicle sales in the second quarter. We made further progress on our goal to improve the company's profitability and strengthen the balance sheet."

Among the highlights of Arctic Cat's 2011 second quarter financial results versus the same quarter last year:

-Gross margins improved 200 basis points in the quarter and 350 basis points year to date;

-Operating profit rose 25 percent to $27.4 million from $21.9 million;

-Factory inventory declined 28 percent to $95.9 million from $133.6 million;

-Total cash and short-term investments at quarter end rose to $80.9 million from $11.2 million; and

-The company has no short- or long-term debt.

"Year to date, we have continued to execute against our objectives to improve gross margins, keep operating expenses flat as a percent of sales, while increasing market share and reducing dealer and factory inventory," said Twomey. "Our improved sales and earnings results in the fiscal 2011 first half demonstrate the traction we are gaining."

Business Line Results
Snowmobile sales grew 7 percent to $91.5 million in the second quarter compared to $85.7 million in the prior-year quarter, led by higher international sales to distributors. Year-to-date snowmobile sales increased 5 percent to $108.6 million versus $103.7 million in the same period last year.

All-terrain vehicle (ATV) sales rose 9 percent to $56.6 million in the second quarter versus $51.7 million in the prior-year quarter, chiefly driven by sales of the company's new Prowler HDX utility vehicle. Year to date ATV sales increased 1 percent to $84.5 million compared to $83.9 million in the first six months of fiscal 2010.

Sales of parts, garments and accessories (PG&A) in the second quarter declined 4 percent to $27.6 million versus $28.8 million in the prior-year quarter, primarily due to the timing of shipments. Year to date, PG&A sales totaled $46.1 million compared to $48.1 million in the year-ago period.

Outlook
"We remain on track to deliver improved operating results and increased profitability again this fiscal year," Twomey said. "Longer-term, Arctic Cat continues to be well-positioned for further growth when the retail power sports market recovers."

Arctic Cat is focused on improving its profitability in a continued low-demand recreational vehicle market. The company's fiscal 2011 outlook includes the following assumptions: ATV industry retail sales declining approximately 15 to 20 percent; snowmobile industry retail sales in a range of up or down approximately 5 percent; Arctic Cat dealer inventories declining 20 to 30 percent; improving gross margins between 200 to 300 basis points; achieving flat operating expense levels as a percent of sales; increasing cash flow from operations; and ending the year with more cash on the balance sheet.

Based on its year-to-date results and expectations of future performance, Arctic Cat is raising its full-year sales and earnings guidance for the current fiscal year ending March 31, 2011. Arctic Cat now estimates fiscal 2011 net sales in the range of $453 million to $463 million. The company now anticipates that fiscal 2011 earnings will be in the range of $0.40 to $0.55 per diluted share, driven by increased international revenue, as well as increased gross margins resulting from favorable commodity costs and lower sales incentives than planned. The company's previous guidance anticipated fiscal 2011 earnings of $0.18 to $0.33 per diluted share on net sales of $447 million to $460 million.

 

ARCTIC CAT INC.
Financial Highlights
(000s omitted, except per share amounts) (Unaudited)












Three Months Ended

Six Months Ended


September 30,

September 30,


2010
2009

2010
2009
Net Sales








Snowmobile & ATV Units
$ 148,166

$ 137,466


$ 193,104

$ 187,554
Parts, Garments & Accessories

27,646


28,834



46,114


48,116
Total Net Sales

175,812


166,300



239,218


235,670
Cost of Goods Sold








Snowmobile & ATV Units

107,280


103,748



149,529


154,090
Parts, Garments & Accessories

17,274


17,341



27,672


28,821
Total Cost of Goods Sold

124,554


121,089



177,201


182,911
Gross Profit

51,258


45,211



62,017


52,759
Operating Expenses








Selling & Marketing

10,405


9,619



16,471


16,041
Research & Development

3,185


3,028



6,410


6,198
General & Administrative

10,287


10,652



18,660


17,286
Total Operating Expenses

23,877


23,299



41,541


39,525
Operating Profit

27,381


21,912



20,476


13,234
Other Income (Expense)








Interest Income

26


-



44


4
Interest Expense

(7 )

(175 )


(10 )

(247 )
Total Other Income (Expense)

19


(175 )


34


(243 )
Earnings Before Income Taxes

27,400


21,737



20,510


12,991
Income Taxes

9,591


6,957



7,179


4,158
Net Earnings
$ 17,809

$ 14,780


$ 13,331

$ 8,833
Net Earnings Per Share








Basic
$ 0.98

$ 0.81


$ 0.73

$ 0.49
Diluted
$ 0.97

$ 0.81


$ 0.72

$ 0.48










Weighted Average Shares Outstanding:








Basic

18,214


18,227



18,202


18,212
Diluted

18,320


18,252



18,404


18,225





























September 30,

Selected Balance Sheet Data:





2010

2009
Cash and Short-term Investments



$ 80,867

$ 11,160
Accounts Receivable, net




70,502


68,286
Inventories




95,894


133,605
Total Assets




306,686


287,099
Short-term Bank Borrowings




0


0
Total Current Liabilities




121,770


103,999
Long-term Debt




0


0
Shareholders' Equity




182,062


177,426

















Three Months Ended



Six Months Ended



September30,



September 30,

Product Line Data:


2010
2009
Change

2010
2009
Change
Snowmobiles
$ 91,525
$ 85,739
7 %

$ 108,630
$ 103,656
5 %
All-terrain Vehicles

56,641

51,727
9 %


84,474

83,898
1 %
Parts, Garments & Accessories

27,646

28,834
-4 %


46,114

48,116
-4 %
Total Sales
$ 175,812
$ 166,300
6 %

$ 239,218
$ 235,670
2 %


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