Arctic Cat Reports Record Earnings in Fiscal 2013 Second Quarter
EPS up 57 percent to $1.80 versus $1.15 in prior-year quarter;
Net earnings in the quarter rose 17 percent to $25.0 million;
Net sales increased 12 percent to $229.0 million, driven by strong Wildcat ROV sales;
Operating profit up 18 percent to $38.8 million compared to $32.9 million;
Company raises full-year sales and earnings outlook for fiscal 2013
Oct. 25, 2012– Arctic Cat Inc. today reported that net earnings increased 17 percent to a record $25.0 million, or $1.80 per diluted share, for the fiscal second quarter ended September 30, 2012, compared to prior-year net earnings of $21.4 million, or $1.15 per diluted share. Net sales in the quarter rose 12 percent to $229.0 million versus net sales of $204.8 million in the same quarter last year.
“We are very pleased to report record earnings and EPS on double-digit sales gains in the fiscal 2013 second quarter, on top of a strong quarter last year,” said Claude Jordan, Arctic Cat’s chairman and chief executive officer. “We are beginning to benefit from our growth strategy to enter new market segments with innovative new products, such as our Wildcat pure sport side-by-side, while focusing on operational excellence and cost control. As a result, we continued to leverage higher sales volumes and a lower cost structure to again deliver profitability gains in the second quarter.”
Among the highlights of Arctic Cat’s fiscal 2013 second-quarter financial results versus the prior-year quarter:
*Net sales grew 12 percent, chiefly fueled by sales of Wildcat recreational off-highway vehicles (ROVs);
*The company reported record net earnings and earnings per diluted share, up 17 percent and 57 percent, respectively;
*Operating expenses as a percent of sales declined to 11 percent versus 12 percent;
*Operating profit rose 18 percent to $38.8 million, up from $32.9 million;
*The company had no long-term debt.
For the six months ended September 30, 2012, Arctic Cat’s net earnings rose 41 percent to a record $27.0 million, or $1.95 per diluted share, compared to net earnings of $19.1 million, or $1.02 per diluted share, in the prior-year period. The company’s year-to-date net sales increased 22 percent to $340.3 million versus net sales of $279.8 million in the first six months last year.
Business Line Results
Sales in Arctic Cat’s all-terrain vehicle (ATV) business rose 19 percent to $69.7 million, up from $58.8 million in the same period last year. The increase was primarily due to strong global demand from dealers and customers for the Wildcat side-by-side.
During the fiscal 2013 second quarter, Arctic Cat began shipping its new 2013 model year ATVs/ROVs. In addition to offering the Wildcat V-Twin 1000i H.O., the company introduced the new Wildcat 1000 Limited side-by-side, which offers upgraded styling features as part of a standard package. Arctic Cat’s new 2013 models also include five value-priced ATVs, such as the new 500 Core ATV. Additionally, the company introduced three new ATV packages – Limited, XT and CORE – to provide more optional features.
Commented Jordan: “Our entry into the growing sport ROV segment has gone exceptionally well with the Wildcat side-by-side. It is being well-received by enthusiasts and Wildcat sales year to date continue to meet our high expectations. We now have two Wildcat offerings in our portfolio and anticipate launching additional innovative products into this market segment.”
Jordan added: “In August, we were excited to see the Wildcat 1000 named as the top pure sport ROV by a leading industry magazine, after the editors conducted a head-to-head ‘shootout’ comparison against the only competing pure sport side-by-side in the market.”
Arctic Cat’s snowmobile sales in the fiscal 2013 second quarter rose 12 percent to $128.6 million, up from $114.7 million in the prior-year quarter. The company’s new 2013 model year snowmobiles have received numerous industry awards, including: Editor’s Choice for the F1100 Turbo RR (race-replica); Best High Performance for the F800 Sno Pro RR; and Best Crossover for the CrossTour 1100 Turbo.
Arctic Cat is building its 2013 model year snowmobiles on the new ProCross™ performance and ProClimb™ mountain chassis platforms, both of which offer innovative suspension, drive and braking technologies. In addition, during the fiscal 2013 second quarter, the company partnered with world champion snowmobile racer Tucker Hibbert to create a limited edition Tucker Hibbert race-replica model honed to high performance excellence and available to snowmobilers whose passion reflects the same race-winning attitude shared by Tucker Hibbert and Arctic Cat.
Arctic Cat’s new 2013 model year snowmobiles also include:
*ProCross F Sno Pro RR (race-replica) sled, which features high-performance trail racing suspension and styling.
*ProCross XF CrossTour, a crossover model that combines the best of snowmobile touring, trail and deep-snow capabilities. The CrossTour is available in either the 800 2-stroke, or the 1100 turbo and non-turbo 4-stroke engine. It offers riders trail performance and touring comfort with its wide ski stance, ample storage and a heavy-duty rear bumper that easily accepts accessories, such as an optional passenger seat.
*Arctic Cat’s ProClimb M Series mountain snowmobiles also received further enhancements to performance and handling. The turbocharged M1100 four-stroke mountain model has 177 horsepower, making it the industry’s most powerful production engine available.
Arctic Cat remains committed to investing in research and development across its product lines, 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 second quarter were down 2 percent to $30.8 million versus $31.4 million in the prior-year quarter. While sales of Wildcat accessories and parts grew significantly in the quarter, snowmobile garment sales were down versus the prior-year period. Arctic Cat continues to anticipate increased PG&A sales for the fiscal 2013 full year.
Company Raises Fiscal 2013 Sales and Earnings Outlook
“Our strategies are working and we are on track to deliver the highest net earnings in Arctic Cat’s 50-year history for fiscal 2013,” said Jordan. “We expect to continue generating higher revenue and earnings by developing innovative new products and entering new segments. We remain focused on new product development as an important catalyst to achieving our future growth goals.”
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 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 Cat dealer 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 full-year sales guidance to a range of $664 million to $684 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 $2.65 to $2.75, an increase of 54 percent to 60 percent compared to fiscal 2012. Previously, the company estimated fiscal 2013 earnings per diluted share of $2.55 to $2.65 on sales of $662 million to $682 million.
Conference Call
Arctic Cat will host a conference call to discuss the fiscal 2013 second quarter results today, October 25, 2012, at 11 a.m. CT (12 p.m. ET). To listen to the live call dial 1-800-762-8908. The live webcast and replay also may be accessed through the investor relations section of www.arcticcat.com/corporate. In addition, a telephone replay will be available through November 1, 2012, by dialing 1-800-406-7325, pass code 4571213.
| ARCTIC CAT INC. | ||||||||||||||||||||
| Financial Highlights | ||||||||||||||||||||
| (000s omitted, except per share amounts) | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||||||
| Net Sales | ||||||||||||||||||||
| Snowmobile & ATV Units | $ | 198,274 | $ | 173,459 | $ | 289,227 | $ | 228,719 | ||||||||||||
| Parts, Garments & Accessories | 30,756 | 31,370 | 51,114 | 51,040 | ||||||||||||||||
| Total Net Sales | 229,030 | 204,829 | 340,341 | 279,759 | ||||||||||||||||
| Cost of Goods Sold | ||||||||||||||||||||
| Snowmobile & ATV Units | 146,000 | 128,843 | 221,556 | 177,972 | ||||||||||||||||
| Parts, Garments & Accessories | 19,000 | 18,837 | 32,276 | 30,363 | ||||||||||||||||
| Total Cost of Goods Sold | 165,000 | 147,680 | 253,832 | 208,335 | ||||||||||||||||
| Gross Profit | 64,030 | 57,149 | 86,509 | 71,424 | ||||||||||||||||
| Operating Expenses | ||||||||||||||||||||
| Selling & Marketing | 12,018 | 12,160 | 18,825 | 18,245 | ||||||||||||||||
| Research & Development | 4,867 | 3,821 | 9,345 | 7,823 | ||||||||||||||||
| General & Administrative | 8,391 | 8,245 | 16,465 | 16,029 | ||||||||||||||||
| Total Operating Expenses | 25,276 | 24,226 | 44,635 | 42,097 | ||||||||||||||||
| Operating Profit | 38,754 | 32,923 | 41,874 | 29,327 | ||||||||||||||||
| Other Income (Expense) | ||||||||||||||||||||
| Interest Income | 4 | 20 | 17 | 45 | ||||||||||||||||
| Interest Expense | (62 | ) | (4 | ) | (82 | ) | (6 | ) | ||||||||||||
| Total Other Income (Expense) | (58 | ) | 16 | (65 | ) | 39 | ||||||||||||||
| Earnings Before Income Taxes | 38,696 | 32,939 | 41,809 | 29,366 | ||||||||||||||||
| Income Taxes | 13,737 | 11,529 | 14,842 | 10,278 | ||||||||||||||||
| Net Earnings | $ | 24,959 | $ | 21,410 | $ | 26,967 | $ | 19,088 | ||||||||||||
| Net Earnings Per Share | ||||||||||||||||||||
| Basic | $ | 1.90 | $ | 1.18 | $ | 2.06 | $ | 1.05 | ||||||||||||
| Diluted | $ | 1.80 | $ | 1.15 | $ | 1.95 | $ | 1.02 | ||||||||||||
| Weighted Average Shares Outstanding: | ||||||||||||||||||||
| Basic | 13,152 | 18,220 | 13,106 | 18,220 | ||||||||||||||||
| Diluted | 13,828 | 18,668 | 13,852 | 18,654 | ||||||||||||||||
| September 30, | ||||||||||||||||||||
| Selected Balance Sheet Data: | 2012 | 2011 | ||||||||||||||||||
| Cash and Short-term Investments | $ | 23,993 | $ | 96,564 | ||||||||||||||||
| Accounts Receivable, net | 88,640 | 96,030 | ||||||||||||||||||
| Inventories | 144,736 | 103,649 | ||||||||||||||||||
| Total Assets | 318,536 | 357,162 | ||||||||||||||||||
| Short-term Bank Borrowings | 0 | 0 | ||||||||||||||||||
| Total Current Liabilities | 152,182 | 150,393 | ||||||||||||||||||
| Long-term Debt | 0 | 0 | ||||||||||||||||||
| Shareholders’ Equity | 163,731 | 204,913 | ||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| Product Line Data: | 2012 | 2011 | Change | 2012 | 2011 | Change | ||||||||||||||||||
| Snowmobiles | $ | 128,599 | $ | 114,670 | 12 | % | $ | 146,586 | $ | 132,031 | 11 | % | ||||||||||||
| All-Terrain Vehicles | 69,675 | 58,789 | 19 | % | 142,641 | 96,688 | 48 | % | ||||||||||||||||
| Parts, Garments & Accessories | 30,756 | 31,370 | -2 | % | 51,114 | 51,040 | 0 | % | ||||||||||||||||
| Total Sales | $ | 229,030 | $ | 204,829 | 12 | % | $ | 340,341 | $ | 279,759 | 22 | % | ||||||||||||
Source: Arctic Cat Inc.