Arctic Cat Reports Fiscal 2014 Third Quarter Results

  Arctic Cat Reports Fiscal 2014 Third Quarter Results

  Net sales rose to $225.8 million compared to $218.0 million in prior-year
                                   quarter;

      Double-digit sales gains in ATV/Side-by-Side and PG&A businesses;

   EPS of $0.89 in third quarter versus record $1.30 in prior-year quarter;

     Company lowers full-year sales and earnings outlook for fiscal 2014

Business Wire

MINNEAPOLIS -- January 23, 2014

Arctic Cat Inc., (NASDAQ:ACAT) today reported net earnings of $12.1 million,
or $0.89 per diluted share, for the fiscal third quarter ended December 31,
2013, compared to prior-year record net earnings of $17.9 million, or $1.30
per diluted share. Net sales in the third quarter were $225.8 million, up from
net sales of $218.0 million in the same quarter last year.

Commented Claude Jordan, Arctic Cat chairman and chief executive officer: “The
company posted solid revenue growth in the third quarter that met our
expectations, as we achieved double-digit sales gains in our ATV/Side-by-Side
and our Parts, Garments and Accessories businesses. As we stated last quarter,
however, we expected the second half of our fiscal year to be challenging.
Profitability in the 2014 third quarter was reduced, chiefly due to
anticipated lower gross margins on snowmobile models built for Yamaha, as part
of our new partnership this year, and ATV product mix. The Yamaha gross margin
impact was primarily absorbed in the fiscal 2014 third quarter compared to
record earnings in the prior-year third quarter.”

Jordan added: “We are expecting strong fourth-quarter sales and earnings,
which will be driven by the launch of our new Wildcat™ Trail model.
Additionally, we continue to focus on operational excellence and cost controls
to maximize our efficiency and profitability.”

Highlights of Arctic Cat’s fiscal 2014 third-quarter and year-to-date
financial results compared with the prior-year periods:

  *Net sales grew approximately 4 percent for the quarter, primarily led by
    contributions from the new Wildcat X and Wildcat X Limited side-by-sides,
    and parts, garments and accessories.
  *North American retail sales increased 15 percent from the prior-year
    quarter, with double digit retail sales gains in ATVs, Wildcat
    side-by-sides and snowmobiles. Year to date, these retail gains have
    allowed Arctic Cat’s ATV business to gain market share for the 2014 fiscal
    year and its snowmobile business to gain the most market share in the
    industry for the 2014 fiscal year.
  *Gross profit margins were 17.8 percent compared to 23.3 percent in the
    prior-year quarter due to several factors, most notably lower-margin
    Yamaha snowmobiles supplied in the quarter and product mix. Previously,
    Arctic Cat expected 2014 full-year gross margins to be lower by 80 basis
    points. The company now anticipates that fiscal 2014 gross margins will be
    approximately 190 basis points lower than the prior year, primarily due to
    product mix and Canadian currency impact.
  *Operating expenses declined to $21.8 million versus $23.1 million. The
    company continued to increase investment in research and development,
    which was up 13 percent in the third quarter and 20 percent year to date,
    to ensure a strong pipeline of new products and technologies while
    maintaining strict cost controls.
  *Operating profit was $18.4 million versus $27.7 million in the year-ago
    quarter.
  *Cash and short-term investments totaled $62.5 million. The company had no
    debt.

For the nine months ended December 31, 2013, Arctic Cat’s net earnings were
$41.0 million, or $2.99 per diluted share, compared to record net earnings of
$44.8 million, or $3.25 per diluted share, in the prior-year period. The
company’s year-to-date net sales rose 5 percent to $585.1 million versus net
sales of $558.4 million in the year-ago first nine months. Year to date,
Arctic Cat has repurchased approximately 96,000 shares of its common stock
under its current share repurchase authorization.

Business Line Results

ATVs/Side-by-Sides – Sales of Arctic Cat’s all-terrain vehicles (ATVs) and
side-by-sides increased 12 percent to $78.2 million, up from $69.6 million in
the same period last year. Contributing to sales were orders for the new
Wildcat X Limited pure-sport side-by-side model that began shipping in the
2014 third quarter and continued success of the four-seat Wildcat 4X, which
began shipping in late September. Both of these models feature Arctic Cat’s
high horsepower X engine, as well as enhanced ride and performance
technologies.

Said Jordan: “Our side-by-side business again performed well in the 2014 third
quarter, with strong contributions from Wildcat sales. Including the new
Wildcat Trail side-by-side model that we just launched, Arctic Cat now offers
10 different Wildcat models. We anticipate continued strong performance in our
side-by-side business during the fourth quarter of this fiscal year, led by
sales of the new Wildcat Trail.”

Arctic Cat began shipping a few of the new Wildcat Trail models in December;
however, most orders will be filled in the 2014 fourth quarter. This model
offers a narrower 50-inch wide, trail-legal platform that allows riders access
to authorized ATV trails, making it a versatile option for consumers. In
addition to its trail legal capabilities, the Wildcat Trail also offers
industry-leading horsepower and suspension, coupled with the lowest price in
the 50-plus horsepower segment.

Arctic Cat remains focused on further increasing its ATV/side-by-side business
as a percent of total sales. The company anticipates that this business will
be approximately 50 percent of total company sales for the fiscal 2014 full
year. During fiscal year 2013, 45 percent of sales were in the
ATV/side-by-side segment, up from 39 percent the previous year. The company
continues to advance its growth strategy through new product introductions and
international expansion.

Snowmobiles – Snowmobile sales in the fiscal 2014 third quarter decreased 4
percent to $118.1 million versus $122.4 million in the prior-year quarter.

Commented Jordan: “We remain pleased with consumers’ retail response to our
2014 model year snowmobile line-up and engine choices. Year to date, we have
gained the most market share in the industry and lowered dealer inventory by
14 percent, which positions us well for future snowmobile sales.”

For the 2014 model year, Arctic Cat introduced 10 snowmobiles, including the
all-new ZR 6000 El Tigre performance sled, and new snowmobile engine options
from Arctic Cat and Yamaha through an engine supply agreement. Arctic Cat also
introduced its first designed and built snowmobile engine, the 6000 C-TEC2.
This powerful, lightweight and fuel-efficient 2-stroke engine enables the
company to enter the large 600cc snowmobile market segment that now accounts
for 18 percent of the snowmobile industry.

Added Jordan: “Our strategic partnership with Yamaha continues to proceed
smoothly. As part of our expanded relationship, Yamaha supplies Arctic Cat
with their industry leading four-stroke engine, and we build snowmobiles for
Yamaha with our industry leading chassis. This agreement provides Arctic Cat
with the opportunity to expand our engine line-up and offer best-in-class
snowmobiles, without investing in additional research and developments costs.”

Parts, Garments & Accessories – Sales of parts, garments and accessories
(PG&A) in the fiscal 2014 third quarter totaled $29.5 million, up 13 percent
compared to $26.0 million in the prior-year quarter. Contributing to increased
PG&A sales in the third quarter were strong sales of snow-related parts and
accessories, due to favorable winter snowmobile riding conditions, and Arctic
Cat’s expanded line of side-by-sides, which led to higher sales of
side-by-side accessories. Arctic Cat continues to expect its PG&A business to
grow in fiscal 2014 through the expansion of its Wildcat accessories and
continued growth of the parts business.

Fiscal 2014 Full-Year Outlook

For the fiscal year ending March 31, 2014, Arctic Cat is lowering its sales
and earnings guidance. The company now estimates full-year earnings to be in
the range of $2.90 to $3.00 per diluted share on anticipated sales in the
range of $740 million to $750 million. Previously, the company estimated
full-year earnings in the range of $3.27 to $3.37 per diluted share on sales
in the range of $754 million to $768 million.

Arctic Cat’s fiscal 2014 outlook includes the following assumptions versus the
prior fiscal year: core ATV North American industry retail sales flat to up 5
percent; side-by-side North American industry retail sales up 15 percent to 25
percent; snowmobile North American industry retail sales up 5 percent to 8
percent; Arctic Cat dealer inventories, excluding new products, flat to up 10
percent; achieving slightly lower operating expense levels as a percent of
sales; and increasing cash flow from operations. The company expects full-year
gross margins to decrease by approximately 190 basis points, due to Yamaha
snowmobiles built by Arctic Cat, the Canadian currency impact and product mix.

Commented Jordan: “With the launch of the Wildcat Trail, we expect strong
fourth-quarter sales and earnings versus last year. And we are confident that
we will achieve another year of increased sales in fiscal 2014. Looking
forward, we continue to expect our growth to stem from a strong pipeline of
innovative new products and technologies, further market share gains in the
growing side-by-side segment and greater operating efficiencies.”

Conference Call

A conference call is scheduled for 10 a.m. CT (11 a.m. ET) today. To listen to
the live call, dial 866-225-8754. The webcast may be accessed through the
investor relations section of www.arcticcat.com/corporate. In addition, a
telephone replay will be available through January 30, 2014, by dialing
800-406-7325, passcode 4662831#.

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 2014 outlook, business strategy and product development. 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, 2013, 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,
                   2013          2012            2013          2012
Net Sales                                                     
Snowmobile &       $ 196,295       $ 191,986       $ 503,285       $ 481,213
ATV Units
Parts,
Garments &          29,495      26,030        81,798      77,144  
Accessories
Total Net            225,790         218,016         585,083         558,357
Sales
Cost of Goods
Sold
Snowmobile &         166,994         150,177         402,650         371,733
ATV Units
Parts,
Garments &          18,583      17,041        51,386      49,317  
Accessories
Total Cost of       185,577     167,218       454,036     421,050 
Goods Sold
Gross Profit         40,213          50,798          131,047         137,307
Operating
Expenses
Selling &            9,726           10,041          28,836          28,866
Marketing
Research &           5,723           5,084           17,291          14,429
Development
General &           6,372       8,002         21,802      24,467  
Administrative
Total
Operating           21,821      23,127        67,929      67,762  
Expenses
Operating            18,392          27,671          63,118          69,545
Profit
Other Income
(Expense)
Interest             6               10              22              27
Income
Interest            (96     )    (2      )      (136    )    (84     )
Expense
Total Other
Income              (90     )    8             (114    )    (57     )
(Expense)
Earnings
Before Income        18,302          27,679          63,004          69,488
Taxes
Income Taxes        6,182       9,826         22,051      24,668  
Net Earnings       $ 12,120     $ 17,853       $ 40,953     $ 44,820  
Net Earnings
Per Share
Basic              $ 0.90       $ 1.35         $ 3.07       $ 3.41    
Diluted            $ 0.89       $ 1.30         $ 2.99       $ 3.25    
                                                                   
Weighted
Average Shares
Outstanding:
Basic               13,420      13,220        13,338      13,144  
Diluted             13,657      13,684        13,698      13,796  
                                                                             

                                 
                                    December 31,
Selected Balance Sheet Data:        2013        2012
Cash and Short-term Investments     $ 62,536      $ 96,621
Accounts Receivable, net              74,123        50,769
Inventories                           137,189       97,027
Total Assets                          340,642       308,189
Short-term Bank Borrowings            0             0
Total Current Liabilities             120,456       125,061
Long-term Debt                        0             0
Shareholders' Equity                  211,914       179,733

                                                                          
                Three Months Ended                     Nine Months Ended
                December 31,                      December 31,              
Product       2013        2012        Change   2013        2012        Change
Line Data:
Snowmobiles     $ 118,061   $ 122,425     - 4  %     $ 276,060   $ 269,011     3   %
All-Terrain       78,234        69,561      12   %       227,225       212,202     7   %
Vehicles
Parts,
Garments &       29,495       26,030      13   %      81,798       77,144      6   %
Accessories
Total Sales     $ 225,790     $ 218,016     4    %     $ 585,083     $ 558,357     5   %
                                                                                       

Contact:

Arctic Cat Inc.
Timothy C. Delmore, 763-354-1800
Chief Financial Officer
or
PadillaCRT
Shawn Brumbaugh, 612-455-1754
shawn.brumbaugh@padillacrt.com
 
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