Arctic Cat Inc. reported net earnings of $15.4 million on higher net sales of $262.5 million for the fiscal 2015 second quarter ended September 30, 2014. In the prior-year quarter, Arctic Cat reported net earnings of $23.4 million on net sales of $238.5 million.
Commented Christopher Twomey, Arctic Cat’s chairman and chief executive officer: “Solid sales increases in the second quarter were led by double-digit gains in our snowmobile product line, as well as parts, garments and accessories. We also saw continued strong sales of our Wildcat side-by-side models and excitement around new Wildcat models introduced to our line-up late in the second quarter. Gross margins, however, were impacted by the significant volume of OEM partner snowmobile models that shipped in the quarter. Looking ahead, we remain focused on maintaining a robust pipeline of innovative new products and improving the company’s long-term operating efficiency.”
Second-Quarter Operating Review
Arctic Cat’s fiscal 2015 second-quarter net sales rose approximately 10 percent to $262.5 million, due to higher snowmobile sales to its OEM partner and Arctic Cat’s dealers, strong Wildcat sales and double-digit sales gains in the parts, garments and accessories (PG&A) business.
Operating profit in the 2015 second quarter was $24.1 million compared to $36.3 million in the same quarter last year, chiefly due to lower gross margins, primarily as a result of the non-recurring warranty expense, and increased general and administrative expenses. The company continued to invest in research and development to ensure a strong pipeline of new products and technologies.
Arctic Cat ended the 2015 second quarter with cash and short-term investments totaling $24 million, and no long-term debt. During the quarter, Arctic Cat’s board of directors authorized a new share repurchase program for up to $25 million of common stock.
For the six months ended September 30, 2014, Arctic Cat’s net earnings were $19 million compared to $28.8 million in the prior-year period. Year to date, the company’s net sales increased 13 percent to $406.1 million versus net sales of $359.3 million in the year-ago first six months.
Business Line Results
ATVs/Side-by-Sides – Sales of Arctic Cat’s all-terrain vehicles (ATVs) and side-by-sides totaled $69.6 million, down 4 percent compared to prior-year sales of $72.7 million. During the quarter, the company unveiled 15 new 2015 models of all-terrain vehicles (ATVs) and recreational off-highway vehicles (ROVs) at its annual ATV/ROV dealer meeting in mid-September.
Snowmobiles – Snowmobile sales in the fiscal 2015 second quarter rose to $157.8 million, up from $135.4 million in the prior-year quarter. The increased snowmobile sales were largely due to Arctic Cat’s expanded OEM partnership. Following strong retail sales and market share gains in fiscal 2014, Arctic Cat anticipates higher snowmobile sales to its dealers in the current fiscal year.
Parts, Garments & Accessories – Sales of parts, garments and accessories (PG&A) in the fiscal 2015 second quarter grew 15 percent to $35.1 million, up from $30.4 million in the prior-year quarter. The increase was driven by sales of newly developed accessories for Arctic Cat’s expanding line of Wildcat models, as well as snowmobile parts, garments and accessories.
Fiscal 2015 Full-Year Outlook
Commented Twomey: “Fiscal 2015 remains a challenging year. We are working to further reduce dealer inventory levels by lowering the company’s previously planned core ATV sales to North America dealers in the current fiscal year. Similarly, we now expect lower international sales, including sales to Russia. As a result of these factors, combined with charges recorded in the first half, we are adjusting the company’s outlook for fiscal 2015 full-year sales and earnings. Going forward, we remain focused on positioning the company for improved long-term financial performance.”
For the fiscal year ending March 31, 2015, Arctic Cat now estimates fiscal 2015 full-year sales in the range of $745 to $755 million.