Arctic Cat Inc. (NASDAQ:ACAT) today reported net earnings of $7.5
million, or $0.57 per diluted share, on net sales of $193.7 million for
the fiscal 2015 third quarter ended December 31, 2014. Arctic Cat’s
adjusted earnings totaled $0.68 per diluted share, excluding executive
transition costs of $0.11 per diluted share, in the 2015 third quarter.
In the prior-year quarter, Arctic Cat reported net earnings of $12.1
million, or $0.89 per diluted share, on net sales of $225.8 million.
Commented Christopher Metz, Arctic Cat’s president and chief executive
officer: “Since I joined the company as CEO in December, I have learned
a great deal about Arctic Cat’s strengths, opportunities and challenges.
My short time here has reinforced my belief that Arctic Cat is an iconic
brand in a growing industry, with significant potential to improve its
top- and bottom-line results. We currently are developing our strategic
growth plans. However, I can say with confidence that we will seek to
spur growth through additional OEM partnerships and small bolt-on
acquisitions that enable us to quickly expand our expertise and
capabilities, and drive even faster product innovation. We also will
assist our dealers in aggressively reducing non-current inventory and
providing marketing support, which in turn will accelerate wholesale and
retail growth of new, innovative products. Overall, I am excited about
the company’s long-term future.”
Operating Review
Arctic Cat’s fiscal 2015 third-quarter net sales were down 14 percent to
$193.7 million versus the prior-year quarter. The company continued to
see strong retail growth in sales of its Wildcat™ recreational
off-highway vehicle (ROV) line and gained further market share in this
category. Snowmobile sales in the quarter were negatively impacted by
the timing of shipments to Arctic Cat’s OEM partner that moved to the
fiscal 2015 first and second quarters. Following strong snowmobile
retail sales and market share gains in fiscal 2014, Arctic Cat will have
higher snowmobile sales to its dealers for the current full fiscal year.
Gross profit margin in the 2015 third quarter rose slightly to 18.0
percent compared to 17.8 percent in the prior-year quarter, primarily
due to improved product mix.
Operating profit in the 2015 third quarter was $5.9 million versus $18.4
million in the same quarter last year. Contributing to the decline was
the impact of unfavorable Canadian currency exchange, as approximately
30 percent of Arctic Cat’s annual sales are to Canada, and increased
general and administrative expenses, including executive management
transition and legal costs. The company also continued to increase
investment in research and development to ensure a strong pipeline of
new products and technologies.
Arctic Cat ended the 2015 third quarter with a strong balance sheet. The
company had cash and short-term investments totaling $67.5 million at
quarter end, up from $62.5 million in the year-ago quarter, and no
long-term debt.
For the nine months ended December 31, 2014, Arctic Cat’s net earnings
were $26.4 million, or $2.02 per diluted share, compared to $41.0
million, or $2.99 per diluted share, in the prior-year period. Arctic
Cat’s adjusted earnings totaled $2.47 per diluted share, excluding an
executive severance charge of $0.08 per diluted share in the 2015 first
quarter, a warranty expense charge of $0.26 per diluted share recorded
in the fiscal 2015 second quarter, and executive transition costs of
$0.11 per diluted share in the 2015 third quarter. Year to date, the
company’s net sales increased 3 percent to $599.9 million versus net
sales of $585.1 million in the year-ago first nine months.
Business Line Results
ATVs/Side-by-Sides – Sales of Arctic Cat’s all-terrain vehicles
(ATVs) and side-by-sides totaled $83.9 million, up 7 percent compared to
prior-year sales of $78.2 million. Contributing to sales was growth in
Wildcat ROVs, while core ATV sales were down. During the quarter, the
company continued its efforts to lower core ATV inventory at its North
America dealers.
“We are very pleased that retail sales of our side-by-side Wildcat ROVs
grew at twice the industry average in calendar 2014,” said Metz. “Dealer
and consumer response to our expanding Wildcat line is enthusiastic and
we expect further gains in the ROV segment, driven by new products and
technologies.” In early February, Arctic Cat plans to introduce a new
Prowler ROV for the 2016 model year.
Arctic Cat unveiled 15 new 2015 models of ATVs and ROVs. Adding to its
expanding line of side-by-sides, in mid-September Arctic Cat introduced
three Wildcat Sport models on a new 60-inch wide chassis. The new
chassis’ width offers consumers a mid-sized option between the original
Wildcat and the recently introduced Wildcat Trail model, with its
narrower 50-inch stance. Arctic Cat also debuted the Wildcat Trail
Limited EPS, which is a more fully featured version of the Wildcat Trail
with its 50-inch wide chassis, and the Prowler XT side-by-side
recreation model. In addition, new 2015 model year ATVs included the
all-new XR line designed for the sport utility segment and the TRV® 1000
XT EPS, with its two-person seating for the touring category.
Snowmobiles – Snowmobile sales in the fiscal 2015 third quarter
totaled $81.5 million versus $118.1 million in the prior-year quarter,
primarily due to the timing of OEM shipments, which moved to the 2015
first and second quarters.
Commented Metz: “We are very pleased with our continued OEM snowmobile
partnership. Sales of Arctic Cat’s snowmobiles and the parts, garments
and accessories business have grown under this partnership and
contributed to our operating income. We see long-term potential from
this and other future OEM and strategic alliances.”
For the 2015 model year, Arctic Cat introduced 15 new snowmobiles,
including the expanded model offering of Arctic Cat’s first designed and
built 2-stroke snowmobile engine, the 6000 C-TEC2. Since its
introduction, sales of this powerful, lightweight and fuel-efficient
engine have more than doubled for fiscal 2015. The 6000 C-TEC2 engine
contributed to SuperTrax Magazine naming Arctic Cat’s ZR 6000 LXR as the
winner of its Best-in-Class 600.
Parts, Garments & Accessories – Sales of parts, garments and
accessories (PG&A) in the fiscal 2015 third quarter were $28.3 million
versus $29.5 million in the prior-year quarter. All areas of the
company’s PG&A business performed well in the quarter with the exception
of snow-related parts, which were impacted by the lack of snow. Year to
date, Arctic Cat’s ATV/ROV accessories sales have increased 14 percent.
Fiscal 2015 Full-Year Outlook
Commented Metz: “Fiscal 2015 is a challenging year of transition where
we are resetting our strategic priorities to deliver improved long-term
performance. At this time, we are lowering our fiscal 2015 full-year
outlook for sales and earnings, as we work through existing challenges.
As we stated in the 2015 second quarter, one of our biggest challenges
is rightsizing our core North America ATV dealer inventory levels. Bold
actions are necessary to return to growth.”
To accelerate the company’s core ATV inventory reduction plan, Arctic
Cat will take a $7 million charge in the 2015 fourth quarter that will
enable it to reduce dealers’ non-current inventory at a much faster pace
than previously planned. Additionally, the company expects lower
international sales in fiscal 2015, including sales to Russia, due to
macroeconomic headwinds and reflecting the increased unfavorable
Canadian currency exchange, as approximately 30 percent of Arctic Cat’s
annual sales are to Canada.
Added Metz: “Looking ahead, an improved dealer inventory position will
allow us to launch more new products and increase sales. In addition,
our strong cash position gives us the flexibility to make investments to
grow the business through innovative products, strategic and OEM
partnerships, and bolt-on acquisitions. We believe the company has
terrific opportunities to return to growth and create shareholder value.”
For the fiscal year ending March 31, 2015, Arctic Cat now estimates
fiscal 2015 full-year sales in the range of $705 million to $715 million
and net earnings of $0.36 to $0.44 per diluted share. Arctic Cat’s
fiscal 2015 outlook includes: executive severance charge of $0.08 per
diluted share recorded in the first quarter; warranty expense charge of
$0.26 per diluted share recorded in the second quarter; executive
transition costs of $0.11 per diluted share in the 2015 third quarter
and about $0.03 per diluted share in the 2015 fourth quarter; estimated
dealer inventory reduction of $0.40 per diluted share; and the
anticipated unfavorable Canadian currency impact of up to $0.80 per
diluted share for the fiscal 2015 full year. Excluding the impact of the
recall, severance, inventory reduction and executive transition costs,
the company anticipates fiscal 2015 earnings in the range of $1.24 to
$1.32 per diluted share, as adjusted. The new earnings guidance excludes
any new CFO transition costs that could be incurred in fiscal 2015.
Previously, Arctic Cat anticipated full-year net earnings of $1.55 to
$1.65 per diluted share on net sales in the range of $745 million to
$755 million.
Conference Call
A conference call is scheduled for 10 a.m. CT (11 a.m. ET) today. To
listen to the live call, dial 1-800-768-6563, passcode 5885056. The
webcast may be accessed through the investor relations section of www.arcticcat.com/corporate.
In addition, a telephone replay will be available through February 4,
2015, by dialing 1-888-203-1112, passcode 5885056.
About Arctic Cat
Arctic Cat Inc. designs, engineers, manufactures and markets all-terrain
vehicles (ATVs), side-by-sides and snowmobiles under the Arctic Cat®
brand name, as well as related parts, garments and accessories. Its
common stock is traded on the Nasdaq Global Select Market under the
ticker symbol “ACAT.” More information about Arctic Cat and its products
is available at www.arcticcat.com.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for certain forward-looking statements. The Company’s Annual
Report, as well as the Report on Form 10-K, its Quarterly Reports on
Form 10-Q and other filings with the Securities and Exchange Commission,
the Company’s press releases and oral statements made with the approval
of an authorized executive officer, contain forward-looking statements
that reflect the Company’s current views with respect to future events
and financial performance. These forward-looking statements are subject
to certain risks and uncertainties that could cause actual results to
differ materially from historical results or those anticipated. The
words “aim,” “believe,” “expect,” “anticipate,” “intend,” “estimate” and
other expressions that indicate future events and trends identify
forward-looking statements including statements related to our fiscal
2015 outlook, business strategy, expected product introductions and
demand. Actual future results and trends may differ materially from
historical results or those anticipated depending on a variety of
factors, including, but not limited to: product mix and volume;
competitive pressure on sales, pricing and sales incentives; increase in
material or production cost which cannot be recouped in product pricing;
unexpected delays in the introduction of new products; changes in the
sourcing of engines; interruption of dealer floorplan financing;
warranty expenses and product recalls; foreign currency exchange rate
fluctuations; product liability claims and other legal proceedings in
excess of reserves or insured amounts; environmental and product safety
regulatory activity; effects of the weather; general economic conditions
and political changes; interest rate changes; consumer demand and
confidence; and those set forth in the Company’s Annual Report on Form
10-K for the year ended March 31, 2014, under heading “Item 1A. Risk
Factors.” The Company does not undertake any obligation to publicly
update or revise any forward-looking statement, whether as a result of
new information, future events or otherwise.
|
ARCTIC CAT INC.
|
Financial Highlights
|
(000s omitted, except per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2014
|
|
2013
|
|
|
2014
|
|
2013
|
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Snowmobile & ATV Units
|
|
|
$
|
165,453
|
|
|
$
|
196,295
|
|
|
|
$
|
512,813
|
|
|
$
|
503,285
|
|
Parts, Garments & Accessories
|
|
|
|
28,282
|
|
|
|
29,495
|
|
|
|
|
87,040
|
|
|
|
81,798
|
|
Total Net Sales
|
|
|
|
193,735
|
|
|
|
225,790
|
|
|
|
|
599,853
|
|
|
|
585,083
|
|
Cost of Goods Sold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Snowmobile & ATV Units
|
|
|
|
140,158
|
|
|
|
166,994
|
|
|
|
|
422,923
|
|
|
|
402,650
|
|
Parts, Garments & Accessories
|
|
|
|
18,664
|
|
|
|
18,583
|
|
|
|
|
56,135
|
|
|
|
51,386
|
|
Total Cost of Goods Sold
|
|
|
|
158,822
|
|
|
|
185,577
|
|
|
|
|
479,058
|
|
|
|
454,036
|
|
Gross Profit
|
|
|
|
34,913
|
|
|
|
40,213
|
|
|
|
|
120,795
|
|
|
|
131,047
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling & Marketing
|
|
|
|
11,757
|
|
|
|
9,726
|
|
|
|
|
30,812
|
|
|
|
28,836
|
|
Research & Development
|
|
|
|
6,496
|
|
|
|
5,723
|
|
|
|
|
18,463
|
|
|
|
17,291
|
|
General & Administrative
|
|
|
|
10,797
|
|
|
|
6,372
|
|
|
|
|
36,026
|
|
|
|
21,802
|
|
Total Operating Expenses
|
|
|
|
29,050
|
|
|
|
21,821
|
|
|
|
|
85,301
|
|
|
|
67,929
|
|
Operating Profit
|
|
|
|
5,863
|
|
|
|
18,392
|
|
|
|
|
35,494
|
|
|
|
63,118
|
|
Other Income (Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income
|
|
|
|
8
|
|
|
|
6
|
|
|
|
|
18
|
|
|
|
22
|
|
Interest Expense
|
|
|
|
(97
|
)
|
|
|
(96
|
)
|
|
|
|
(346
|
)
|
|
|
(136
|
)
|
Total Other Expense
|
|
|
|
(89
|
)
|
|
|
(90
|
)
|
|
|
|
(328
|
)
|
|
|
(114
|
)
|
Earnings Before Income Taxes
|
|
|
|
5,774
|
|
|
|
18,302
|
|
|
|
|
35,166
|
|
|
|
63,004
|
|
Income Tax Expense (Benefit)
|
|
|
|
(1,713
|
)
|
|
|
6,182
|
|
|
|
|
8,721
|
|
|
|
22,051
|
|
Net Earnings
|
|
|
$
|
7,487
|
|
|
$
|
12,120
|
|
|
|
$
|
26,445
|
|
|
$
|
40,953
|
|
Net Earnings Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
0.58
|
|
|
$
|
0.90
|
|
|
|
$
|
2.05
|
|
|
$
|
3.07
|
|
Diluted
|
|
|
$
|
0.57
|
|
|
$
|
0.89
|
|
|
|
$
|
2.02
|
|
|
$
|
2.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
12,941
|
|
|
|
13,420
|
|
|
|
|
12,920
|
|
|
|
13,338
|
|
Diluted
|
|
|
|
13,062
|
|
|
|
13,657
|
|
|
|
|
13,072
|
|
|
|
13,698
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
Selected Balance Sheet Data:
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
Cash and Short-term Investments
|
|
|
|
|
|
|
$
|
67,492
|
|
|
|
$
|
62,536
|
|
|
|
|
|
Accounts Receivable, net
|
|
|
|
|
|
|
|
59,102
|
|
|
|
|
74,123
|
|
|
|
|
|
Inventories
|
|
|
|
|
|
|
|
144,577
|
|
|
|
|
137,189
|
|
|
|
|
|
Total Assets
|
|
|
|
|
|
|
|
352,013
|
|
|
|
|
340,642
|
|
|
|
|
|
Short-term Bank Borrowings
|
|
|
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
Total Current Liabilities
|
|
|
|
|
|
|
|
136,891
|
|
|
|
|
120,456
|
|
|
|
|
|
Long-term Debt
|
|
|
|
|
|
|
|
0
|
|
|
|
|
0
|
|
|
|
|
|
Shareholders' Equity
|
|
|
|
|
|
|
|
206,196
|
|
|
|
|
211,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
December 31,
|
|
|
|
December 31,
|
|
|
Product Line Data:
|
|
|
2014
|
|
2013
|
|
Change
|
|
2014
|
|
2013
|
|
Change
|
Snowmobiles
|
|
|
$
|
81,523
|
|
$
|
118,061
|
|
-31
|
%
|
|
$
|
295,466
|
|
$
|
276,060
|
|
7
|
%
|
All-Terrain Vehicles
|
|
|
|
83,930
|
|
|
78,234
|
|
7
|
%
|
|
|
217,347
|
|
|
227,225
|
|
-4
|
%
|
Parts, Garments & Accessories
|
|
|
|
28,282
|
|
|
29,495
|
|
-4
|
%
|
|
|
87,040
|
|
|
81,798
|
|
6
|
%
|
Total Sales
|
|
|
$
|
193,735
|
|
$
|
225,790
|
|
-14
|
%
|
|
$
|
599,853
|
|
$
|
585,083
|
|
3
|
%
|
Copyright Business Wire 2015