Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
ACAT > SEC Filings for ACAT > Form 10-Q on 9-Aug-2013All Recent SEC Filings

Show all filings for ARCTIC CAT INC | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for ARCTIC CAT INC


9-Aug-2013

Quarterly Report


MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Arctic Cat Inc. (the "Company" or "Arctic Cat," or "we," "our" or "us") is a Minnesota corporation with principal executive offices in Plymouth, Minnesota. We design, engineer, manufacture and market snowmobiles, all-terrain vehicles ("ATVs") and recreational off-highway vehicles ("side-by-sides" or "ROVs") under the Arctic CatŪ brand name, as well as related parts, garments and accessories ("PG&A"). We market our products through a network of independent dealers located throughout the United States, Canada, and Europe and through distributors representing dealers in Europe, Russia, South America, the Middle East, Asia and other international markets. The Arctic Cat brand name has existed for more than 50 years and is among the most widely recognized and respected names in the snowmobile, ATV and side-by-side industry. We were incorporated in 1982. Our common stock trades on the NASDAQ Global Select Market under the symbol ACAT.

Executive Overview

The following discussion pertains to our results of operations and financial position for the quarter ended June 30, 2013. Due to the seasonality of the snowmobile, ATV and PG&A businesses, and due to certain changes in production and shipping cycles, results of such periods are not necessarily indicative of the results to be expected for the full year.

For the first quarter ended June 30, 2013, we reported net sales of $120.8 million and a net earnings of $5.5 million, or $0.40 per diluted share, compared to first quarter ended June 30, 2012 net sales of $111.3 million and net earnings of $2.0 million, or $0.14 per diluted share. An increase in net sales for all product lines, a 395 basis point gross margin improvement and lower operating expenses as a percent of sales contributed to improved quarterly results compared to the same period in the prior year.

Our snowmobile sales in the fiscal 2014 first quarter increased 26% to $22.6 million, up from $18.0 million in the prior-year quarter. For the 2014 model year, Arctic Cat launched 10 new snowmobile models, 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. Of these, Arctic Cat's first designed and built snowmobile engine - the 6000 C-Tec2 - 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% of the snowmobile industry. We are committed to investing in research and development in order to remain an industry innovation leader. We expect fiscal 2014 North American industry retail snowmobile sales to continue their growth and expect the market will grow up to 3%.

Our ATV sales for the first quarter increased 5% to $76.3 million versus $73.0 million in the prior-year quarter, led by strong contributions from our Wildcat X and the four-seat Wildcat 4 pure sport side-by-side vehicles, which are the Company's two newest Wildcat offerings. We expect fiscal 2014 North American core ATV industry retail sales will grow up to 5%, and the side-by-side industry will continue to show strong growth in the 15 to 25% range.

Sales of parts, garments and accessories in the fiscal 2014 first quarter increased 7% to $21.9 million versus $20.4 million in the prior-year quarter. Arctic Cat's growing line of Wildcat accessories now includes more than 79 wide-ranging options for riding enjoyment and vehicle customization.

For the fiscal year ending March 31, 2014, based on results year-to-date and expected performance, we now anticipate sales in the range of $754 million to $768 million, an increase of 12 percent to 14 percent versus fiscal 2013. We estimate that fiscal 2014 earnings per diluted share will be in the range of $3.27 to $3.37, an increase of 13 percent to 17 percent over fiscal 2013.


Results of Operations

Product Line Sales



                                                                Three Months Ended June 30,
                                                    Percent of                        Percent of            Change
($ in thousands)                      2013          Net Sales           2012          Net Sales          2013 vs. 2012
Snowmobile                          $  22,574              18.7 %     $  17,987              16.2 %                25.5 %
ATV                                    76,340              63.2 %        72,966              65.5 %                 4.6 %
Parts, garments & accessories          21,854              18.1 %        20,358              18.3 %                 7.3 %

Net Sales                           $ 120,768             100.0 %     $ 111,311             100.0 %                 8.5 %

During the first quarter of fiscal 2014, net sales increased 8.5% to $120.8 million from $111.3 million in the first quarter of fiscal 2013 due to sales increases for all product lines. Snowmobile unit volume increased 24.2% and; net sales increased 25.5% due to a richer product mix and lower sales incentives. ATV unit volume increased 3.0% and net sales increased 4.6%, and parts, garments and accessories sales increased $1,496,000. The increase in snowmobile unit volume was driven by a planned increase in first quarter shipments. Increased ATV unit volume for the quarter resulted from shipments of our Wildcat X and the four-seat Wildcat 4 pure sport side-by-side vehicles.

Cost of Goods Sold



                                                                Three Months Ended June 30,
                                                    Percent of                      Percent of            Change
($ in thousands)                        2013         Net Sales          2012         Net Sales         2013 vs. 2012
Snowmobile & ATV units                $ 77,908             64.5 %     $ 75,556             67.9 %                 3.1 %
Parts, garments & accessories           13,700             11.3 %       13,276             11.9 %                 3.2 %

Total Cost of Goods Sold              $ 91,608             75.8 %     $ 88,832             79.8 %                 3.1 %

During the first quarter of fiscal 2014, cost of sales increased 3.1% to $91.6 million from $88.8 million for the first quarter of fiscal 2013. Fiscal 2014 snowmobile and ATV unit cost of sales increased 3.1% to $77.9 million from $75.6 million directionally in line with increases in unit sales during the first quarter of fiscal 2014 compared to the first quarter of fiscal 2013. The first quarter of fiscal 2014 cost of sales for PG&A increased 3.2% to $13.7 million from $13.3 million for the first quarter of fiscal 2013, due to increased sales.

Gross Profit



                                            Three Months Ended June 30,
                                                                     Change
         ($ in thousands)             2013           2012         2013 vs. 2012
         Gross Profit Dollars      $   29,160      $ 22,479                 29.7 %
         Percentage of Net Sales         24.1 %        20.2 %                3.9 %

Gross profit increased 29.7% to $29.2 million in the first quarter of fiscal 2014 from $22.5 million in the first quarter of fiscal 2013. The gross profit percentage for the first quarter of fiscal 2014 increased to 24.1% versus 20.2% in fiscal 2013. The increases in the first quarter of fiscal 2014 gross profit percentages were primarily due to higher volumes, product mix and improved efficiency.


Operating Expenses



                                            Three Months Ended June 30,
                                                                     Change
        ($ in thousands)              2013           2012         2013 vs. 2012
        Selling & Marketing        $    6,994      $  6,807                  2.7 %
        Research & Development          5,282         4,478                 18.0 %
        General & Administrative        8,411         8,074                  4.2 %

        Total Operating Expenses   $   20,687      $ 19,359                  6.9 %

        Percentage of Net Sales          17.1 %        17.4 %

Selling and Marketing expenses increased 2.7% to $7.0 million in the first quarter of fiscal 2014 from $6.8 million in the first quarter of fiscal 2013, primarily due to increased advertising expenses. Research and Development expenses increased 18.0% to $5.3 million in the first quarter of fiscal 2014 compared to $4.5 million in the first quarter of fiscal 2013 due primarily to higher product development expenses. General and Administrative expenses increased 4.2% to $8.4 million in the first quarter of fiscal 2014 from $8.1 million in the first quarter of fiscal 2013 primarily due to higher compensation expenses.

Other Income / Expense

We had $9,000 in interest income in the first quarter of fiscal 2014 compared to $13,000 in the first quarter of fiscal 2013. Interest expense decreased to $3,000 in the first quarter of fiscal 2014 from $20,000 in the first quarter of fiscal 2013. Interest expense was lower due to decreased borrowing levels owing primarily to higher cash levels at the beginning of the fiscal year compared to last year.

Liquidity and Capital Resources

The seasonality of our snowmobile production cycle and the lead time between the commencement of snowmobile and ATV production and commencement of shipments late in the first quarter have resulted in significant fluctuations in our working capital requirements. Historically, we have financed our working capital requirements out of available cash balances at the beginning and end of the production cycle and with short-term bank borrowings during the middle of the cycle. Our cash balances traditionally peak early in the fourth quarter and then decrease as working capital requirements increase when our snowmobile and ATV production cycles begin in the spring. Accounts receivable increased to $43.7 million at June 30, 2013 from $39.9 million at June 30, 2012. The accounts receivable balance at March 31, 2013 was $30.3 million. Inventory was $149.7 million at June 30, 2013 compared to $140.8 million at June 30, 2012 and $96.4 million at March 31, 2013. The increases in our accounts receivable and inventory balances as of June 30, 2013 compared to March 31, 2013 are due to the seasonality of our snowmobile, ATV and PG&A businesses. During the three months ended June 30, 2013, we repurchased 31,364 shares of our common stock at a total cost of $1.4 million, including shares purchased under the share repurchase program previously approved by the Board of Directors in May 2013. Cash and short-term investments were $48.9 million and $17.4 million at June 30, 2013 and 2012, respectively, and $112.8 million at March 31, 2013. Cash and short-term investments decreased from March 31, 2013, due to the seasonality of our business. Our investment objectives are first, safety of principal, and second, rate of return. No short-term bank borrowings were outstanding at June 30, 2013 and March 31, 2013, compared to $4.2 million at June 30, 2012.

We believe current available cash and cash generated from operations together with working capital financing through our available line of credit will provide sufficient funds to finance operations on a short and long-term basis.

Line of Credit

We have operated since November 2009 under a $60,000,000 secured bank credit agreement for the documentary and stand-by letters of credit and for working capital purposes. We may borrow up to $60,000,000 during June through November and up to $45,000,000 during all other months of the fiscal year. We were in compliance with the terms of the credit agreement as of June 30, 2013.


Dealer Floorplan Financing

We have agreements with GE Commercial Distribution Finance in the United States and TCF Commercial Finance Canada in Canada to provide snowmobile, ATV and ROV floorplan financing for our dealers. These agreements improve our liquidity by financing dealer purchases of products without requiring substantial use of our working capital. We are paid by the floorplan companies shortly after shipment and as part of our marketing programs, we pay the floorplan financing of our dealers for certain set time periods depending on the size of a dealer's order.

Certain Information Concerning Off-Balance Sheet Arrangements

As of June 30, 2013, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We are, therefore, not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

Significant Accounting Policies

See our most recent Annual Report on Form 10-K for the year ended March 31, 2013 for a discussion of our critical accounting policies.

Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for certain forward-looking statements. This Quarterly Report on Form 10-Q, and future filings with the Securities and Exchange Commission, our press releases and oral statements made with the approval of an authorized executive officer, contain forward-looking statements that reflect our 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 2014 outlook. In particular, these include, among others, statements relating to our anticipated capital expenditures, research and development expenditures, product introductions, the effect of weather conditions and dealer ordering processes on our net sales, legal proceedings, our expectations regarding material weakness remediation, our expectations regarding financing arrangements, our wholesale and retail sales and market share expectations, inventory levels, industry wholesale and retail sales expectations, depreciation and amortization expense, dividends, sufficiency of funds to finance our operations and capital expenditures, raw material and component supply expectations, adequacy of insurance, and the effect of regulations on us and our industry and our compliance with such regulations. 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 the following: product mix and volume; competitive pressure on sales, pricing and sales incentives; increases in material or production cost which cannot be recouped in product pricing; 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 factors set forth in the Company's Annual Report on Form 10-K for the year ended March 31, 2013, under heading "Item 1A. Risk Factors." We do not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

  Add ACAT to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for ACAT - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial      Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.