Quarterly earnings of $0.57 per diluted
share, or $0.68 as adjusted, on sales of $193.7 million;
Year-to-date sales increased 3 percent; Management resets full-year
sales and earnings outlook for fiscal 2015
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 SharesOutstanding:
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 %
PadillaCRTShawn Brumbaugh,
612-455-1754shawn.brumbaugh@padillacrt.com
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