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Arctic Cat Reports 2014 2nd QTR Financial Results


(10/24/2013)

Arctic Cat in Thief River Falls. Photo by ArcticInsider.com

Arctic Cat Reports Fiscal 2014 Second Quarter Results

*Net sales rose to $238.5 million, up from $229.0 million in prior-year quarter;

*Sales driven by snowmobiles and side-by-sides;

*North American retail sales increased 17 percent versus year-ago quarter;

*$1.70 EPS in second quarter versus $1.80 a year ago;

*Company maintains full-year sales and earnings outlook for fiscal 2014


Oct. 24, 2013-- Arctic Cat Inc., (NASDAQ: ACAT) today reported net earnings of $23.4 million, or $1.70 per diluted share, for the fiscal second quarter ended September 30, 2013, compared to prior-year net earnings of $25.0 million, or $1.80 per diluted share. Net sales in the quarter were $238.5 million, up from net sales of $229.0 million in the same quarter last year.

Commented Claude Jordan, Arctic Cat chairman and chief executive officer: “We had strong double-digit sales gains in side-by-sides and snowmobiles that led to record second-quarter sales, on top of a record prior-year period. However, ATV sales in North America and Europe fell short of our expectations in the quarter, and the lower volume reduced our profitability.”

Jordan added: “We are maintaining our full-year outlook for fiscal 2014, but expect a challenging second half of the year. Arctic Cat posted outstanding performance in the fiscal first quarter, which is reflected in first-half sales growth of 6 percent and earnings up 7 percent. We anticipate continued strong dealer demand for side-by-sides and snowmobiles, and the new Wildcat models that we expect to introduce in our fiscal second half. In addition, we continue to focus on operational excellence and cost controls that will enhance our efficiency and profitability.”

Arctic Cat plans to introduce two new Wildcat pure-sport side-by-sides in November, as well as the Wildcat 50 Trail model in the fiscal 2014 fourth quarter.

Arctic Cat’s fiscal 2014 second-quarter financial results compared with the prior-year quarter:

*Net sales grew approximately 4 percent, led by contributions from the Wildcat and Prowler HDX side-by-sides, and snowmobiles.

*North American retail sales increased 17 percent from the prior-year quarter, with retail sales gains in ATVs, side-by-sides and snowmobiles.

*Gross profit margins were 25.9 percent compared to 28.0 percent in the prior-year quarter, due to product mix, Canadian currency impact, and increased sales incentives driven by double-digit retail sales increases in the ATV/side-by-side business. Including the lower-margin Yamaha sleds that Arctic Cat is supplying, combined with the Canadian currency impact, Arctic Cat expects fiscal 2014 gross margins to be approximately 80 basis points lower than the prior year.

*Operating expenses rose slightly to $25.4 million versus $25.3 million. The company continued to increase investment in research and development, which was up 29 percent from the prior-year quarter, to ensure a strong pipeline of new products and technologies, while maintaining strict cost controls.

*Operating profit was $36.3 million versus $38.8 million in the year-ago quarter.

*Cash and short-term investments totaled $40.1 million, up $16.1 million versus the same quarter last year. The company had no debt.

 

For the six months ended September 30, 2013, Arctic Cat’s net earnings rose 7 percent to a record $28.8 million, or $2.10 per diluted share, compared to net earnings of $27.0 million, or $1.95 per diluted share, in the prior-year quarter. The company’s year-to-date net sales increased 6 percent to $359.3 million versus net sales of $340.3 million in the year-ago first six months.

Business Line Results

ATVs/Side-by-Sides – Sales of Arctic Cat’s all-terrain vehicles (ATVs) and side-by-sides increased 4 percent to $72.7 million, up from $69.7 million in the same period last year, primarily due to strong orders for the Wildcat X and the four-seat Wildcat 4 pure sport side-by-sides.

Said Jordan: “Our side-by-side business performed well in the 2014 second quarter, with continued strong growth in our Wildcat and Prowler HDX models in North America and international markets outside of Europe. However, second-quarter sales of ATVs in North America were lower than we anticipated, combined with ongoing economic headwinds in Europe, both of which contributed to single-digit increases in our ATV and side-by-side sales to dealers. On the retail side, we saw strong double-digit sales gains for our ATV and side-by-side business in the fiscal 2014 second quarter, due to consumer demand for our new products. As a result of lower wholesale and higher retail sales, our ATV dealers now have an improved inventory position that should translate into increased dealer orders going forward. Additionally, with the new side-by-side models that we intend to launch in our fiscal third and fourth quarters, we anticipate solid performance in the second half of the fiscal year.”

Arctic Cat remains focused on further increasing its ATV/side-by-side business as a percent of total sales. The company anticipates that this business will exceed 50 percent of total company sales for the fiscal 2014 full year. During fiscal year 2013, 45 percent of sales were in the ATV/side-by-side segment, up from 39 percent the previous year. The company continues to advance its growth strategy through new product introductions and international expansion.

Since entering the sport side-by-side segment with the Wildcat only a year and a half ago, Arctic Cat has rapidly extended its Wildcat line and now offers: Base and Limited models; the four-seat Wildcat 4; and the high-horsepower Wildcat X and Wildcat 4X. Further, the company has announced that it plans to begin shipping a 50-inch wide, trail-legal Wildcat in late fiscal 2014. With a narrower stance, the 50-inch Wildcat will allow riders access to authorized ATV trails, making it a versatile option for consumers.

Snowmobiles – Snowmobile sales in the fiscal 2014 second quarter increased 5 percent to $135.4 million, up from $128.6 million in the prior-year quarter.

Commented Jordan: “We are pleased with consumers’ early season retail response to our 2014 model year snowmobile line-up. In addition, our expanded relationship with Yamaha continues to proceed smoothly. We expect to begin shipping a larger number of snowmobiles to Yamaha in our 2014 fiscal third quarter.”

For the 2014 model year, Arctic Cat launched 10 snowmobiles, including the all-new ZR 6000 El Tigre high-performance sled, and new snowmobile engine options from Arctic Cat and Yamaha through an engine supply agreement. Arctic Cat also introduced its first designed and built snowmobile engine, the 6000 C-TEC2, which is a powerful, lightweight and fuel-efficient 2-stroke that enables the company to enter the large 600cc snowmobile market segment that now accounts for 18 percent of the snowmobile industry.

Parts, Garments & Accessories – Sales of parts, garments and accessories (PG&A) in the fiscal 2014 second quarter totaled $30.4 million, down 1 percent compared to $30.8 million in the prior-year quarter. Strong growth in parts and accessories was offset by lower garment sales. Arctic Cat expects its PG&A business to grow in the remainder of fiscal 2014 through further expansion of its Wildcat accessories offerings.

Fiscal 2014 Full-Year Outlook

For the fiscal year ending March 31, 2014, Arctic Cat is maintaining its sales and earnings guidance, but is targeting the lower end of the guidance range. The company continues to expect earnings in the range of $3.27 to $3.37 per diluted share, an increase of 13 percent to 17 percent over prior-year earnings of $2.89 per diluted share. The company anticipates sales in the range of $754 million to $768 million, an increase of approximately 12 percent to 14 percent versus fiscal 2013.

Arctic Cat’s fiscal 2014 outlook includes the following assumptions versus the prior fiscal year: core ATV North American industry retail sales flat to up 5 percent; side-by-side North American industry retail sales up 15 percent to 25 percent; snowmobile North American 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. Most of the Yamaha gross margin impact will be experienced in the fiscal 2014 third quarter, as Arctic Cat ships a large number of Yamaha snowmobiles.

“Based on our first-half results and prospects for the balance of this fiscal year, we remain confident that we will achieve another year of increased sales, record earnings and enhanced shareholder value in fiscal 2014,” said Jordan. “We continue to expect our growth to be fueled by a strong pipeline of innovative new products and technologies, further market share gains in the growing side-by-side segment and greater operating efficiencies.”


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

    Three Months Ended     Six Months Ended



September 30,     September 30,



2013     2012

2013     2012
Net Sales


   



   
Snowmobile & ATV Units

$ 208,076


$ 198,274


$ 306,990


$ 289,227
Parts, Garments & Accessories

  30,449         30,756  

  52,303         51,114  
Total Net Sales


238,525



229,030



359,293



340,341
Cost of Goods Sold











Snowmobile & ATV Units


157,748



146,000



235,656



221,556
Parts, Garments & Accessories

  19,103         19,000  

  32,803         32,276  
Total Cost of Goods Sold

  176,851         165,000  

  268,459         253,832  
Gross Profit


61,674



64,030



90,834



86,509
Operating Expenses











Selling & Marketing


12,116



12,018



19,110



18,825
Research & Development


6,286



4,867



11,568



9,345
General & Administrative

  7,019         8,391  

  15,430         16,465  
Total Operating Expenses

  25,421         25,276  

  46,108         44,635  
Operating Profit


36,253



38,754



44,726



41,874
Other Income (Expense)











Interest Income


7



4



16



17
Interest Expense

  (37 )       (62 )

  (40 )       (82 )
Total Other Income (Expense)

  (30 )       (58 )

  (24 )       (65 )
Earnings Before Income Taxes


36,223



38,696



44,702



41,809
Income Taxes

  12,858         13,737  

  15,869         14,842  
Net Earnings

$ 23,365       $ 24,959  

$ 28,833       $ 26,967  
Net Earnings Per Share











Basic

$ 1.75       $ 1.90  

$ 2.17       $ 2.06  
Diluted

$ 1.70       $ 1.80  

$ 2.10       $ 1.95  












 
Weighted Average Shares Outstanding:











Basic

  13,379         13,152  

  13,297         13,106  
Diluted

  13,726         13,828  

  13,718         13,852  












 






September 30,


Selected Balance Sheet Data:




2013

2012


Cash and Short-term Investments




$ 40,074


$ 23,993



Accounts Receivable, net





105,071



88,640



Inventories





171,174



144,736



Total Assets





381,072



318,536



Short-term Bank Borrowings





0



0



Total Current Liabilities





174,739



152,181



Long-term Debt





0



0



Shareholders' Equity





201,857



163,731



















 

   
   
   
   



Three Months Ended




Six Months Ended





September 30,           September 30,      
Product Line Data:     2013     2012     Change     2013     2012     Change
Snowmobiles

$ 135,425     $ 128,599

5 %

$ 157,999     $ 146,586

8 %
All-Terrain Vehicles


72,651


69,675

4 %


148,991


142,641

4 %
Parts, Garments & Accessories

  30,449       30,756

-1 %

  52,303       51,114

2 %
Total Sales

$ 238,525     $ 229,030

4 %

$ 359,293     $ 340,341

6 %

Source: Arctic Cat Inc.



Comments (20):

matt says:
10/24/2013 3:45:00 PM

with the quality of the 2014 snowmobile I just purchased I would of put a bag over my head for the picture that's shown shame on cat you guys are like a thief take money from us poor consumers and make a crap product I would like to know who the 5 year old kid is that used a hammer and chisel to install my vin number.
Jamie says:
10/24/2013 3:46:00 PM

The ATV Models are getting a little long in the tooth. It would be nice to see some new development from AC on the quads. Redesigned body work and racks with innovative storage options would be nice to see. Improved fit and finish is always a must. That is one of the reasons I think AC's ATV sales are down. It's time to give the quads some much needed new features. Look how creative Dodge got with thier Ram Trucks and ended up with Truck of the year two or three years in a row. AC should re-think the entire platform and get innovative with storage, ride comfort and ammenities.
Jamie says:
10/24/2013 3:52:00 PM

That is AC's biggest problem Matt. A lack of quality / fit and finish. I dont understand why everyone else in the biz can nail fit and finish and it seems to be so hard for AC? The biggest dissapointment is they never seem to address it or do anything about it. Every magazine out there rips on thier fit and finish so why dont they do something about it??? John, can you shed any light on this subject?
matt says:
10/24/2013 4:07:00 PM

If their quality was better they may bring in more customers from other brands they are the smallest of the four and have so much potential to become number one. I spent good money and worked very hard for it to purchase my new cat just to have fun this winter then I get a product like this. I rode cat for over 20 years had a issue with a sled they did nothing about and the rep who lived very close to me did not get anywhere switched to doo never had one issue rode doo for 7 years dealer got out of sleds couple friends had cats so I bought my 500 sno pro few issues with it but nothing major my 2012 turbo was great but my 14 rr turbo is terrible if the new rep lived close to me I would drive it up his ass cat has to get it together or they wont be bragging up sales.
Kevin Hooper says:
10/24/2013 5:30:00 PM

Their stock fell about $7/share today - so this report wasn't well received in the market.

I agree with the questions regarding quality and even innovation, but my biggest question right now is health of the dealerships. How are our dealerships doing? I'm guessing that some are really struggling for a number of reasons that go beyond the economy.
matt says:
10/24/2013 6:32:00 PM

I am sure dealers are hurting hope the dealer I deal with is around for years they are nice to deal with, family owned and its nice to deal with the owners not many family dealerships left has to be hard to make a living selling sleds.
jeff says:
10/25/2013 7:19:00 AM

late fiscal 2014 for the 50" wildcat? WTH? they gave a sneak peak to dealers months ago, and was supposed to be released fall 2013, they are missing the boat on this one. Polaris will just sell more RZR's in mean time.

Jamie says:
10/25/2013 8:07:00 AM

I would rather see them delay the release and put out a quality product that doesnt need a bunch of updates like my 2012 F8 does. At least they are offering a fix to the problems my sled has (blowing belts) at my cost but how could they test these machines and not experience any of the problems the consumers do? I hope Claude Jordan reads these posts and is busy working on fixing quality control in Theif River Falls. That in my opinion is the #1 problem with AC. They have a poor reputation for quality that needs to be addressed... ASAP!
kevin sebastian says:
10/25/2013 11:56:00 AM

After reading all these posts it's kinda hard not to get bummed out I bought a carryover 2013 xf 800 snopro and have really looked it over and it appears to be very well put together.Not really seeing any quality issues.Just talked to my dealer this morning and getting the new secondary and having it geared down.He said that should really help.He also said they have only had a small hand full of sleds go out that were blowing belts,the rest have been fine.Lets just hope Cat gets this stuff ironed out.May you all have a great riding season!!
JimR says:
10/25/2013 3:17:00 PM

Matt does not even own a cat. He is a disgruntled Polaris owner trying to stir it up here. Getting old. I have been looking at the fit and finish on the 014's and it is GREAT compared to just two years ago. Just as good as any other brand. Better than Matts Polaris.
#WeBArmchairQuarterbacks says:
10/25/2013 3:18:00 PM

@Matt - How can a 2014 Turbo RR be terrible when nobody's had a chance to ride one yet? Hoping that was a typo.

Lack of Innovation? You don't think AC engineers have been busy? First the Wildcat..Industrys first and only 5-link suspension with 18" of travel, then the Wildcat X that upped the ante with 93hp engine and clutching, then the Wildcat 4 and 4X, as well as a price point Prowler 500 HDX and a pricepoint 500 4x4 ATV. Now the 50" Wildcat is coming soon. That's a whole lot of new product to release in a 2yr span. Sounds to me, they've been busy. Didn't like seeing the Wildcat 50" sneak peek early? Nobody's hear *****ing that Can-Am introduced the Maverick 4 seater a year before it was ever launched.

ATVs long in the tooth? I wont disagree with that, but if UTVs are moving the heart of the market, dont you think focusing on development there first is smart on AC's part? Looks to me like theyve been busy releasing new UTV product, and my bet is theyll focus on revamping the ATV line soon.

KEEP KICKING ASS ARCTIC CAT!!!!!!!!!!
Scott says:
10/25/2013 4:17:00 PM

In regards to fit and finish!!! I hope you don't think the polaris RUSH is good looking!!!! It makes want to RUSH to the toilet and throw up!!!!!!!!!
matt says:
10/25/2013 5:40:00 PM

Never liked the rush since it came out but give Polaris credit for trying something new. If you read some of the other post cat fit and finish is the one everyone would like to see get better which over time I am sure it will they also have had great contributions to the industry that the other three have used my thing is the money we spend on these sleds I feel the quality could be better just imagine a new vehicle for 40 grand with rust brand new all of us would be in orbit.
Aaron says:
10/25/2013 8:40:00 PM

i agree that the fit and finish could be a little better, but i still love my 12 f8. im just puzzled at why all of the sleds don't get the updates for free. I've been a cat guy all my life and pre-ordered my sled, but don't get the updates for free. that's b.s. you can go buy a leftover 13 and get them. im just frustrated that i didn't get what i originally paid for. "a great snowmobile with improved belt life"
kevin sebastian says:
10/26/2013 7:18:00 AM

Just to clarify the 13 I bought was still in season when I got it,the 14's were just getting ready for release.There is a cut off date for warranty secondary replacement.The gear down I'm paying for and getting it on advice from my dealer.
Jamie says:
10/28/2013 9:02:00 AM

I currently own a 2005 650 V2 4 Wheeler, a 2010 CFR 800 HO, a 2012 F8 and a 1980 ElTigre 6000. I would have bought a 6000 ElTigre this year but with AC's recent problems releasing new sleds there was no way I was going to buy a first year motor from them. I like the recent innovation they have come out with it just seems the one area they are always really lacking is quality control / fit and finish. (And lets face it... the yellow team has been a little more innovative over tha last 10 years) This is not a bash. This is feedback from one of thier good customers. Please provide better Quality Control at the factory so we end up with better fit and finish at the dealership. Thank you.
Mitsunori says:
1/13/2015 7:14:00 AM

That's a sensible answer to a chnaelngilg question
Carla says:
1/14/2015 8:44:00 PM

Hi Barbara,Sure I will put you on the waiting list for the Sept. 14-16, 2012 Wildcat Studio Nude.Our next Wildcat Nude wohrskop will be in April 2013. The best way to find out about upcoming events is to sign up for my newsletter. Let me know if you would like too.I will contact you if there is a cancelation this year. Or you may be interested in signing up for a One on One Workshop with Kim. http://qdtsfvwzx.com [url=http://ouuyfkol.com]ouuyfkol[/url] [link=http://zsdoxgcbimh.com]zsdoxgcbimh[/link]
Reena says:
1/15/2015 5:07:00 AM

I liked this book more than you did, although I agree with all of your ponits. Especially the teen romance, which was kind of blah. However, I really liked how the author integrated Big Issues like death into the book and still made it a fun, entertaining read. I'm also really looking forward to the next installment! http://xsmfunf.com [url=http://qauugfma.com]qauugfma[/url] [link=http://cwunidnp.com]cwunidnp[/link]
Rhthrt says:
10/9/2015 1:13:00 AM

Hmmm... new titles to me. I like the crveos and that it is the same girl in both. This does sounds interesting but I would probably pass due to the unevenness and the choppiness you mention and of course the creepy shadow of Mt. TBR behind threatening my very existence.

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