Arctic Cat reports 49 percent growth in Q1 net sales

MINNEAPOLIS–Jul. 26, 2012– Arctic Cat Inc. (NASDAQ: ACAT) today reported the company swung to net earnings of $2.0 million, or $0.14 per diluted share, for the fiscal first quarter ended June 30, 2012, up from a prior-year net loss of $2.3 million, or a loss of $0.13 per diluted share. Arctic Cat’s net sales for the fiscal 2013 first quarter grew 49 percent to $111.3 million versus net sales of $74.9 million in the same quarter last year.
“We are very pleased to start our new fiscal year with another quarter of outstanding sales and earnings,” said Claude Jordan, Arctic Cat’s president and chief executive officer. “Sales rose across all product lines in the first quarter, led by strong contributions from our new Wildcat pure sport and Prowler side-by-side vehicles, and core ATVs. We continued to leverage higher sales volumes and a lower cost structure to deliver improved profitability in the first quarter.”

Among the highlights of Arctic Cat’s fiscal 2013 first-quarter financial results versus the prior-year quarter:

• Net sales grew 49 percent, chiefly driven by increased Wildcat and Prowler recreational off-highway vehicle (ROV) sales;
• Gross margins improved 114 basis points, due to higher volumes;
• Operating expenses as a percent of sales declined to 17 percent compared to 24 percent;
• The company reported operating profit of $3.1 million versus a loss of $3.6 million;
• The company had no long-term debt.

Business Line Results

Sales in Arctic Cat’s all-terrain vehicle (ATV) business rose 93 percent to $73.0 million, up from$37.9 million in the same period last year. The increase was primarily due to strong dealer and customer demand for the all-new Wildcat V-Twin 1000i H.O. pure-sport ROV, as well as Prowler side-by-side utility vehicles and core ATVs.

Commented Jordan: “Wildcat sales are on track to meet our high expectations this fiscal year for the growing ROV market. In addition, with the further reductions achieved in our ATV/ROV inventory in fiscal 2012, dealer inventory is now near optimum levels and we are starting to see increased demand from our dealers.”

In August 2012, Arctic Cat will begin shipping new model year 2013 ATVs/ROVs, including five ATV models and a new limited edition Wildcat 1000 ROV. The new limited Wildcat will offer upgraded styling features, as part of a standard package.

Arctic Cat’s snowmobile sales in the fiscal 2013 first quarter rose 4 percent to $18.0 million, up from$17.4 million in the prior-year quarter. For the 2013 model year, the company is building snowmobiles on its new ProCross™ performance and ProClimb™ mountain chassis platforms, introduced in fiscal 2012, and will continue offering innovative suspension, drive and braking technologies. Arctic Cat is committed to investing in research and development, in order to remain an industry innovation leader and in anticipation of manufacturing its own snowmobile engines in fiscal 2015.

Sales of parts, garments and accessories (PG&A) in the fiscal 2013 first quarter increased 3 percent to $20.4 million versus $19.7 million in the prior-year quarter. Contributing to the growth were accessory sales for the Wildcat ROV. Arctic Cat’s growing line of Wildcat accessories now includes 43 wide-ranging options for riding enjoyment and vehicle customization. Among the top-selling Wildcat accessories are front and rear bumpers, flip up windshields, skid plates and winches.

Company Raises Fiscal 2013 Sales and Earnings Outlook

“We are bullish about our future,” said Jordan. “We expect to generate further revenue and earnings growth by continuing our product development focus and entering new segments that we’re not in today. Our goal for fiscal 2013 is to deliver the highest net earnings in Arctic Cat’s 50-year history.”
In fiscal 2013, Arctic Cat anticipates continued gains in its ATV/ROV business, fueled by the growth potential for the Wildcat and Prowler ROV offerings, and many exciting new products being developed. Additionally, the company remains focused on further enhancing profitability through operational efficiencies and a continued focus on cost controls.

Arctic Cat’s fiscal 2013 outlook includes the following assumptions versus the prior fiscal year: ATV North America industry retail sales flat to up 5 percent; ROV North America industry retail sales up 10 to 20 percent; snowmobile North America industry retail sales flat to up 2 percent; Arctic Catdealer inventories flat to down 5 percent; operating expense levels that are flat to down slightly as a percent of sales; and increasing cash flow from operations. The company expects gross margins to improve between 20 and 60 basis points in fiscal 2013.


For the fiscal year ending March 31, 2013, Arctic Cat is raising its sales guidance to a range of $662 million to $682 million, an increase of approximately 13 percent to 17 percent versus fiscal 2012. Assuming diluted weighted average shares of 14 million, the company now estimates that fiscal 2013 earnings per diluted share will be in the range of $2.55 to $2.65, an increase of 48 percent to 54 percent compared to fiscal 2012. Previously, the company estimated fiscal 2013 earnings per diluted share of $2.40 to $2.50 on sales of $631 million to $650 million.

Financial Highlights
(000s omitted, except per share amounts)
Three Months Ended
June 30,
2012     2011
Net Sales
Snowmobile & ATV Units $ 90,953 $ 55,260
Parts, Garments & Accessories   20,358         19,670  
Total Net Sales 111,311 74,930
Cost of Goods Sold
Snowmobile & ATV Units 75,556 49,129
Parts, Garments & Accessories   13,276         11,526  
Total Cost of Goods Sold   88,832         60,655  
Gross Profit 22,479 14,275
Operating Expenses
Selling & Marketing 6,807 6,085
Research & Development 4,478 4,002
General & Administrative   8,074         7,784  
Total Operating Expenses   19,359         17,871  
Operating Profit(Loss) 3,120 (3,596 )
Other Income (Expense)
Interest Income 13 25
Interest Expense   (20 )       (2 )
Total Other Income (Expense)   (7 )       23  
Earnings (Loss) Before Income Taxes 3,113 (3,573 )
Income Tax Expense (Benefit)   1,105         (1,251 )
Net Earnings (Loss) $ 2,008       $ (2,322 )
Net Earnings (Loss) Per Share
Basic $ 0.15       $ (0.13 )
Diluted $ 0.14       $ (0.13 )
Weighted Average Shares Outstanding:
Basic   13,060         18,220  
Diluted   13,877         18,220  
June 30,
Selected Balance Sheet Data:       2012     2011
Cash and Short-term Investments $ 17,384 $ 99,294
Accounts Receivable, net 39,947 32,593
Inventories 140,776 86,521
Total Assets 258,735 282,850
Short-term Bank Borrowings 4,214
Total Current Liabilities 115,539 100,310
Long-term Debt
Shareholders’ Equity 140,430 180,494


Three Months Ended
June 30,
Product Line Data:           2012     2011     Change
All-Terrain Vehicles $ 72,966     $ 37,899     93 %
Snowmobiles 17,987 17,361 4 %
Parts, Garments & Accessories   20,358       19,670     3 %
Total Sales $ 111,311     $ 74,930     49 %

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