Arctic Posts Q1 Loss, Again

Arctic Cat Inc. net sales, benefiting from snowmobile deliveries, were $93.9 million for the fiscal 2009 first quarter ended June 30, up 7 percent from net sales of $87.9 million for the same period last year. However, the company continued an earnings slump with a net loss of $7 million, or $0.39 per diluted share, for the quarter versus a net loss of $7.2 million, or $0.39 per diluted share, in the prior-year period.

Arctic Cat's ATV sales were down 10 percent to $53.8 million in the 2009 first quarter versus $59.7 million in the same period last year. In the current fiscal year, Arctic Cat anticipates that its ATV revenues will be flat. The company does not expect core ATV retail sales to pick up until the overall economy strengthens.

Snowmobile sales increased 80 percent to $21.4 million, up from $11.9 million in the prior-year first quarter, due to the timing of shipments.

Parts, garments and accessories (PG&A) sales grew 15 percent to $18.7 million versus $16.3 million in the year-ago period. Arctic says PG&A benefited from both ATV- and snowmobile-related sales; new products and lower dealer inventories generated increased orders.

Arctic says net sales benefited from the timing of snowmobiles and parts, garments and accessories shipments to dealers. Arctic Cat chairman and CEO Christopher A. Twomey says the OEM didn't plan to make the additional snow shipments. "There was interest on the dealers' part to get more inventory. We wanted to have some new products on showroom floors after we heard dealers had customers coming in and looking at product," he said.

Arctic Cat total inventories as of June 30 were $156 million, up from $150 million. Arctic dealer sled inventories at the end of the year were down more than 30%. Sled inventories as of June 30 were still down 24% compared to the year-ago first quarter. "ATV and side-by-side inventories are at or below last year's levels," Twomey says.

Arctic Cat's second-quarter net sales for the period ending Sept. 30, are estimated to be in the range of $189 million to $199 million versus net sales of $205.2 million in the same period last year. Second-quarter net earnings are estimated to be in the range of $0.60 to $0.70 per diluted share versus net earnings of $13.9 million, or $0.76 per diluted share, in the prior-year quarter. "Our September quarter is where we make a lot of, if not most of our, earnings," says CFO Tim Delmore.

For the fiscal year ending March 31, 2009, Arctic Cat expects net sales to grow between 5 percent and 8 percent, and be in the range of $650 million to $674 million, based on increased snowmobile revenues, anticipated ATV revenues and a better overall product mix. Full-year diluted earnings per share are anticipated to be in the range of $0.18 to $0.28.

"We continue to expect the company to return to profitability this fiscal year," Twomey says. "While our markets will remain challenging, due to persistent weakness in the economy, and higher commodity prices pose some risk to our outlook, we are better positioned to attain modest growth and profitability in the year ahead, due to the strategic actions we took last fiscal year."