Arctic Cat Announces Q4 Earnings

Arctic Cat Inc. announced May 15 net sales of $172.6 million for the fiscal fourth-quarter ended March 31, 2007, up 13 percent compared with net sales of $153.3 million in the same period last year.
Arctic Cat posted its seventh consecutive year of record sales, with full-year net sales increasing 7 percent to $782.4 million compared with $732.8 million last fiscal year.
“We succeeded in posting sales gains across all of our products lines in fiscal 2007 and achieved another year of record sales,” said Christopher A. Twomey, chairman and chief executive officer of Arctic Cat. “We are pleased that we gained further market share in our ATV and snowmobile businesses, as our retail sales continued to outpace these industries. However, challenging snowmobile market conditions caused by poor snow in the Midwest and East led to increased sales incentive programs on snowmobiles, which dampened our overall profitability.”
Business Line Results
All-terrain vehicle (ATV) sales grew 15 percent to $145.8 million in the 2007 fourth quarter versus $126.8 million in the same period last year. For fiscal 2007, the company’s ATV sales rose 9 percent to $431.5 million compared with $394.9 million last year. ATV revenues increased for the quarter and full-year due to strong contributions from the Prowler UTV. The company also benefited from increased international ATV sales.
“We succeeded in establishing our international dealer-direct distribution network in all major European markets during fiscal 2007, and we expect strong double-digit international growth in fiscal 2008,” said Twomey.
During the 2007 fourth quarter, Arctic Cat began full production of ATV engines at its new engine manufacturing facility in St. Cloud, Minn. This facility enables the company to increase its operational efficiency, profitability and manufacturing flexibility. Currently, the company is producing one ATV engine at this site, with plans to expand its engine production and add new ATV engines to its model line during the current fiscal year.
Snowmobile sales declined in the 2007 fourth quarter and were a negative $1.8 million, due to sales incentive accruals. In the prior-year quarter, snowmobile sales totaled $140,000. For the 2007 fiscal year, Arctic Cat’s snowmobile sales increased 4 percent to $247.0 million compared to $238.1 million in the prior year.
“As expected, our full-year snowmobile revenues were higher in fiscal 2007 than a year ago, fueled by the largest new model introduction in the company’s history,” said Twomey. “Arctic Cat’s retail snowmobile sales outpaced the industry’s overall retail sales in fiscal 2007 on the strength of our new products.”
Sales of parts, garments and accessories (PG&A) in the 2007 fourth quarter increased 9 percent to $28.6 million versus $26.4 million in the year-ago period, driven by increased sales of snow-related parts and accessories during the quarter.

Company Announces Growth and Profitability Initiatives
Arctic Cat is announcing three strategic initiatives designed to better position the company for future growth and profitability.
First, the company plans to reorganize its business into three separate units, encompassing ATVs, snowmobiles and PG&A. Each business unit will be led by a general manager with profit and loss responsibilities.
Second, Arctic Cat plans to relocate its headquarters, certain corporate executives, general managers, and sales and marketing personnel to the Minneapolis area by the fall of 2007. The company’s manufacturing operations will remain in their existing locations and will not be affected.
Third, during the current fiscal year ending March 31, 2008, Arctic Cat plans a one-time reduction in its snowmobile production of approximately 30 percent to help dealers lower their snowmobile inventory levels to more closely match anticipated consumer demand in the year ahead.

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