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Arctic Cat Inc. Reports Fiscal 2013 Results


(5/15/2013)

Arctic Cat in Thief River Falls, MN, photo by ArcticInsider.com

*Fiscal 2013 sales increased 15% to $671.6 million, driven by strong ATV and Wildcat side-by-side sales;

*Full-year diluted EPS up 68% to record $2.89 versus $1.72 in prior year;

*Fiscal 2013 sales within company’s guidance range, while EPS exceeded it;

*Company expects fiscal 2014 EPS to increase 10% to 13% and be in the range of $3.17 to $3.27 per diluted share

Arctic Cat Inc. today reported record net earnings and earnings per diluted share for the fiscal year ended March 31, 2013. Net earnings rose 33 percent to $39.7 million, or $2.89 per diluted share, up from prior-year net earnings of $29.9 million, or $1.72 per diluted share. Arctic Cat’s net sales for the fiscal 2013 full year increased 15 percent to $671.6 million versus $585.3 million last fiscal year.

“We had another year of outstanding financial performance and are very pleased to report record net earnings and EPS for the fiscal 2013 full year,” said Claude Jordan, Arctic Cat’s chairman and chief executive officer. “Higher sales volumes, combined with our ongoing focus on operational excellence and cost control, again contributed to strong top- and bottom-line results for fiscal 2013.”

Among the highlights of Arctic Cat’s fiscal 2013 full-year financial results versus last fiscal year:

*Net sales grew 15 percent, fueled by increased side-by-side, all-terrain vehicle (ATV) and snowmobile sales;

*Gross profit margin improved to 22.5 percent from 22.3 percent, due to higher volumes and selling prices;

*Operating expenses as a percent of sales declined to 13.4 percent compared to 14.5 percent;

*Operating profit rose 32 percent to $60.7 million, up from $45.9 million;

*The company ended the fiscal 2013 year with cash and short-term investments totaling $112.8 million, nearly double the $62.6 million at the end of fiscal 2012;

*The company had no short- or long-term debt.

As expected, for the fiscal 2013 fourth quarter, Arctic Cat reported an improved net loss of $5.1 million, or a loss of $0.38 per diluted share, on 15 percent net sales growth to $113.2 million. In the prior-year fourth quarter, Arctic Cat reported a net loss of $6.2 million, or a loss of $0.49 per diluted share, on net sales of $98.5 million. Due to the seasonality of Arctic Cat’s business, the company typically reports lower results in its fiscal first and fourth quarters, while the fiscal second and third quarters are historically its strongest.

Commenting on the 2013 fourth quarter, Jordan said: “Our business performed well in the quarter, with sales increasing across all product lines. We continued to pursue our strategy to enter new growth segments and launch innovative new products, including two all-new Wildcat™ sport side-by-sides. As a result, we again had double-digit sales gains in our ATV and side-by-side segments in the 2013 fourth quarter.”

Based on the strength of the company’s performance, strong cash flow and future prospects, Arctic Cat’s board of directors has authorized the reinstatement of a quarterly cash dividend and a $30 million share repurchase program, which were announced separately today. “We are committed to enhancing shareholder value, and are pleased to reinstate a quarterly dividend and announce a new stock buyback program,” commented Jordan.

 

Business Line Results

ATVs and Side-by-Sides – Arctic Cat’s ATV/side-by-side sales increased 16 percent to $87.6 million in the fiscal 2013 fourth quarter, up from $75.8 million in the same period last year, chiefly due to strong dealer demand for Wildcat side-by-sides and North American ATVs and Prowlers. Full-year ATV/side-by-side sales rose 32 percent to $299.8 million, driven by ATV, Prowler and Wildcat sales.

“We remain focused on further increasing our ATV/side-by-side business as a percent of Arctic Cat’s total sales going forward,” said Jordan. “In the fourth quarter, we continued to advance this goal with the launch of two new Wildcat models. In addition, we have a robust new product pipeline for future growth.”

In the 2013 fourth quarter, Arctic Cat introduced two all-new Wildcats that both include industry leading rear travel of 18 inches and 13 inches of ground clearance:

*The Wildcat 4 1000 pure sport side-by-side seats four full-sized adults. Arctic Cat began shipping the Wildcat 4 to dealers in February 2013.

*The high horsepower Wildcat X 1000 pure sport side-by-side offers 90-plus horsepower, and enhanced acceleration and maneuverability to those seeking power, suspension and handling in an off-road vehicle. Arctic Cat began shipping the Wildcat X to dealers in March 2013.

 

In addition to the Wildcat 4 and the Wildcat X, Arctic Cat announced a new 50-inch wide, trail-legal Wildcat that will begin shipping in the latter part of fiscal 2014. Its narrower stance allows riders access to authorized ATV trails, making it a versatile option for consumers. The Wildcat trail-legal version builds on the success of the pure-sport Wildcat, which was recognized as the “Best-In-Class Extreme Performance ROV” by a prominent industry magazine.

The Wildcat is now available in: Base and Limited models; the four-seat Wildcat 4; and the high-horsepower Wildcat X.

 

Snowmobiles – In the 2013 fourth quarter, Arctic Cat’s snowmobile sales improved to a negative $5.3 million, primarily due to sales incentives, versus negative sales of $6.8 million in the prior-year quarter. Full-year snowmobile sales increased 5 percent to $263.7 million compared to $250.4 million last fiscal year.

As part of Arctic Cat’s snowmobile growth strategy, the company announced in February 2013 expanded engine supply and co-brand agreements with Yamaha Motor Corporation, beginning with the 2014 model year. The agreement gives Arctic Cat customers a broader range of snowmobile engine choices, including access to select 4-stroke engines from Yamaha. In addition, Arctic Cat will build select Yamaha snowmobiles in Arctic Cat’s Thief River Falls, Minn., factory according to Yamaha’s specifications.

In the quarter, Arctic Cat unveiled its new 2014 snowmobile model line-up, featuring 10 new models, including the all-new ZR 6000 El Tigre high-performance sled. The company also introduced two new available engines: a Yamaha 4-stroke 135 horse-power engine; and a clean 600cc 2-stroke 125 horse-power engine. The 600cc engine will be the first Arctic Cat-designed and built snowmobile engine and will be manufactured in the company’s engine facility in St. Cloud, Minn., beginning with the 2014 model year.

 

Parts, Garments & Accessories – Sales of parts, garments and accessories (PG&A) in the fiscal 2013 fourth quarter increased 5 percent to $31.0 million versus $29.5 million in the prior-year quarter. The growth was primarily due to snowmobile parts sales, reflecting improved snow conditions experienced in the northern United States. For the 2013 full year, PG&A sales were essentially flat, although Arctic Cat had significant year-over-year improvements in Wildcat parts and accessories.

 

Fiscal 2014 Full-Year Outlook

“We anticipate another year of increased sales and earnings in fiscal 2014, fueled by a strong pipeline of innovative new products and technologies, further market share gains in the growing side-by-side segment and continued leverage in our cost structure,” said Jordan. “We are excited about our future prospects and confident in our ability to deliver another year of enhanced shareholder value and record earnings.”

Arctic Cat’s fiscal 2014 outlook includes the following assumptions versus the prior fiscal year: core ATV North America industry retail sales flat to up 5 percent; side-by-side North American industry retail sales up 15 percent to 25 percent; snowmobile North America industry retail sales flat to up 3 percent; Arctic Cat dealer inventories excluding new products flat to up 10 percent; achieving slightly lower operating expense levels as a percent of sales; and increasing cash flow from operations. The company expects gross margins to decrease by approximately 80 basis points, due to additional Yamaha snowmobiles that will be built in Arctic Cat’s factory and, to a lesser extent, the Canadian currency impact.

For the fiscal year ending March 31, 2014, Arctic Cat anticipates sales in the range of $754 million to $768 million, an increase of approximately 12 percent to 14 percent versus fiscal 2013. Assuming diluted weighted average shares in the range of 13.5 million to 13.8 million, the company estimates that fiscal 2014 earnings per diluted share will be in the range of $3.17 to $3.27, an increase of 10 percent to 13 percent compared to fiscal 2013.

ARCTIC CAT INC.

Financial Highlights

(000s omitted, except per share amounts)

(Unaudited)


 


 


 

 


 




Three Months Ended



Years Ended



March 31,

 

 

March 31,



2013

 

2012



2013

 

2012

Net Sales










Snowmobile & ATV Units


$

82,251



$

68,951




$

563,464



$

477,329


Parts, Garments & Accessories


 

30,980

 

 

 

29,536

 



 

108,124

 

 

 

107,939

 

Total Net Sales



113,231




98,487





671,588




585,268


Cost of Goods Sold










Snowmobile & ATV Units



78,558




68,010





450,291




388,523


Parts, Garments & Accessories


 

21,084

 

 

 

19,059

 



 

70,401

 

 

 

66,126

 

Total Cost of Goods Sold


 

99,642

 

 

 

87,069

 



 

520,692

 

 

 

454,649

 

Gross Profit



13,589




11,418





150,896




130,619


Operating Expenses










Selling & Marketing



8,536




8,118





37,402




36,549


Research & Development



6,264




5,266





20,693




17,862


General & Administrative


 

7,620

 

 

 

7,654

 



 

32,087

 

 

 

30,318

 

Total Operating Expenses


 

22,420

 

 

 

21,038

 



 

90,182

 

 

 

84,729

 

Operating Profit



(8,831

)



(9,620

)




60,714




45,890


Other Income (Expense)










Interest Income



22




18





49




86


Interest Expense


 

-

 

 

 

(1

)



 

(84

)

 

 

(8

)

Total Other Income (Expense)


 

22

 

 

 

17

 



 

(35

)

 

 

78

 

Earnings Before Income Taxes



(8,809

)



(9,603

)




60,679




45,968


Income Taxes


 

(3,734

)

 

 

(3,428

)



 

20,934

 

 

 

16,027

 

Net Earnings


$

(5,075

)

 

$

(6,175

)



$

39,745

 

 

$

29,941

 

Net Earnings Per Share










Basic


$

(0.38

)

 

$

(0.49

)



$

3.02

 

 

$

1.79

 

Diluted


$

(0.38

)

 

$

(0.49

)



$

2.89

 

 

$

1.72

 










 

Weighted Average Shares Outstanding:










Basic


 

13,186

 

 

 

12,724

 



 

13,155

 

 

 

16,721

 

Diluted


 

13,186

 

 

 

12,724

 



 

13,761

 

 

 

17,458

 










 










 





March 31,



Selected Balance Sheet Data:




2013



2012



Cash and Short-term Investments




$

112,807




$

62,597




Accounts Receivable, Net





30,296





28,073




Inventories





96,389





98,702




Total Assets





306,258





255,416




Short-term Bank Borrowings





0





0




Total Current Liabilities





127,424





114,035




Long-term Debt





0





0




Shareholders' Equity





174,472





138,472

















 

 


 

Three Months Ended

 


 

Years Ended

 




March 31,

 

 

 

March 31,

 

 

Product Line Data:

 

2013

 

2012

 

Change

 

2013

 

2012

 

Change

Snowmobiles


$

(5,318

)

 

$

(6,820

)


22

%


$

263,693

 

$

250,438


5

%

All-Terrain Vehicles



87,569




75,771



16

%



299,771



226,891


32

%

Parts, Garments & Accessories


 

30,980

 

 

 

29,536

 


5

%


 

108,124

 

 

107,939


0

%

Total Sales


$

113,231

 

 

$

98,487

 


15

%


$

671,588

 

$

585,268


15

%

 

Source: Arctic Cat Inc.

 



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