June 4, 2007 – Arctic Cat reports rise in sales, drop in income

OEM reported a 9 percent increase for its ATV sales, which also include UTVs
Arctic Cat reported better-than-industry-average sale percentage gains in the ATV and snowmobile segments for its 2007 fiscal year but an overall drop in its net earnings compared to a year ago.
The Thief River Falls, Minn., manufacturer had nearly a 7 percent drop in its net earnings, which totaled $22.1 million in its fiscal year that ended March 31.
However, the company did continue its streak of record revenue years — it’s now at seven — and says it continues to take market share from its competitors.
“We are pleased that we gained further market share in our ATV and snowmobile businesses, as our retail sales continued to outpace these industries,” Christopher Twomey, Arctic Cat’s CEO, said in a released statement. “However, challenging snowmobile market conditions caused by poor snow in the Midwest and the East led to increased sales incentive programs on snowmobiles, which dampened our overall profitability.”
The sale incentive programs led to a $1.6 million net loss in the company’s fourth quarter. That’s almost three times the amount the company lost in the prior fiscal year’s final quarter. Still, Arctic Cat did report a 4 percent increase in sales in its snowmobile segment compared to a year ago. That comes during a period in which worldwide snowmobile sales reduced nearly 3 percent and U.S. sales plummeted 13 percent.
“As expected, our full-year snowmobile revenues were higher in fiscal 2007 than a year ago, fueled by the largest new model introduction in the company’s history,” Twomey said.
However, the company is reducing its snowmobile production in the coming fiscal year to ease dealer inventory. As a result, Arctic Cat is forecasting roughly a $15 million-$25 million drop in net sales in its 2008 first quarter. A shift in ATV shipments to future quarters also will impact first-quarter sales.
ATV sales remain on the upswing for Arctic Cat, however. The company, which includes its Prowler UTV sales in its ATV report, reported a 15 percent increase in quad sales in its fourth quarter and a 9 percent rise for its fiscal year. Arctic Cat’s year-end ATV sales amounted to $431.5 million, which represents a 26.5 percent increase from two years ago and a 46.5 percent rise from three years ago.
Part of the reason behind the increasing ATV revenue is healthy UTV sales and increasing worldwide sales.
“We succeeded in establishing our international dealer-direct distribution network in all major European markets during fiscal 2007,” Twomey said, “and we expect strong double-digit international growth in fiscal 2008.”
Arctic Cat also says it plans on expanding its ATV engine production at its new facility in St. Cloud, Minn. Currently, the company is producing one ATV engine at the site.
Besides ATVs, Arctic Cat also is reporting rising PG&A sales. Fourth-quarter PG&A sales increased 9 percent compared to the previous-year quarter and 4 percent in its fiscal year to $103.9 million.
Looking forward, however, the manufacturer expects its fiscal-year 2008 sales to decrease in the range of $45 million-$70 million.