SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarter ended September 30, 1996 or
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-18607
ARCTIC CAT INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1443470
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
601 Brooks Avenue South, Thief River Falls, Minnesota 56701
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (218) 681-8558
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.01 par value.
Indicate by check mark whether the registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
At November 14, 1996, 21,863,036 shares of Common Stock and 7,560,000 shares of
Class B Common Stock of the Registrant were outstanding.
Arctic Cat Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(unaudited)
September 30, March 31,
ASSETS 1996 1996
CURRENT ASSETS
Cash and cash equivalents $ 20,074,000 $ 9,032,000
Short-term investments 13,097,000 34,970,000
Accounts receivable, less allowances 78,184,000 36,465,000
Inventories 96,600,000 86,618,000
Prepaid expenses 1,709,000 2,404,000
Deferred income taxes 10,397,000 8,920,000
___________ ___________
Total current assets 220,061,000 178,409,000
PROPERTY, PLANT AND EQUIPMENT - at cost
Machinery, equipment and tooling 62,622,000 55,118,000
Buildings and improvements 7,741,000 6,191,000
Land 527,000 192,000
__________ __________
70,890,000 61,501,000
Less accumulated depreciation 37,235,000 31,914,000
__________ __________
33,655,000 29,587,000
__________ __________
$253,716,000 $207,996,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 38,998,000 $ 23,947,000
Accrued expenses 28,323,000 19,378,000
Income tax payable 10,811,000 4,942,000
__________ __________
Total current liabilities 78,132,000 48,267,000
DEFERRED INCOME TAXES 3,724,000 3,536,000
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY
Preferred stock, par value $1.00;
2,300,000 shares authorized; none issued - -
Preferred stock - Series A Junior
Participating, par value $1.00;
450,000 shares authorized; none issued - -
Common stock, par value $.01; 37,440,000
shares authorized; shares issued and
outstanding, 22,063,036 at September 30,
1996; 22,055,971 at March 31, 1996 221,000 221,000
Class B common stock, par value $.01;
7,560,000 shares authorized, issued,
and outstanding 76,000 76,000
Additional paid-in capital 22,132,000 22,502,000
Retained earnings 149,431,000 133,394,000
__________ ___________
171,860,000 156,193,000
__________ ___________
$253,716,000 $207,996,000
=========== ===========
The accompanying notes are an integral part of these statements.
Arctic Cat Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
Three Months Six Months
Ended September 30, Ended September 30,
__________________________ ______________________
1996 1995 1996 1995
______ ______ ______ ______
Net sales $177,925,000 $166,059,000 $267,051,000 $227,818,000
Cost of goods sold 128,536,000 122,764,000 199,123,000 172,717,000
___________ ___________ ___________ ___________
Gross profit 49,389,000 43,295,000 67,928,000 55,101,000
Selling, general and
administrative expenses 20,687,000 15,882,000 38,015,000 34,905,000
___________ ___________ ___________ ___________
Operating profit 28,702,000 27,413,000 29,913,000 20,196,000
Interest income 222,000 322,000 564,000 922,000
Interest expense (107,000) - (107,000) -
___________ ___________ ___________ ___________
115,000 322,000 457,000 922,000
Earnings before
income taxes 28,817,000 27,735,000 30,370,000 21,118,000
Income tax expense 10,230,000 9,847,000 10,781,000 7,498,000
___________ ___________ ___________ ___________
Net earnings $18,587,000 $17,888,000 $19,589,000 $13,620,000
=========== =========== =========== ===========
Net earnings
per share $0.63 $0.60 $0.66 $0.46
=========== =========== =========== ===========
Weighted average shares
outstanding 29,615,000 29,653,000 29,609,000 29,648,000
=========== =========== =========== ===========
The accompanying notes are an integral part of these statements.
Arctic Cat Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended September 30,
_____________________________
1996 1995
Cash flows from operating activities ________ ________
Net earnings $19,589,000 $13,620,000
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities
Depreciation 5,330,000 3,946,000
Deferred income taxes (1,289,000) (2,672,000)
Changes in operating assets
and liabilities:
Trading securities 20,014,000 29,448,000
Accounts receivable (41,719,000) (56,112,000)
Inventories ( 9,982,000) (12,285,000)
Prepaid expenses 695,000 (107,000)
Accounts payable 15,051,000 17,264,000
Accrued expenses 8,945,000 3,927,000
Income taxes 5,869,000 11,893,000
Net cash provided by (used in) __________ __________
operating activities 22,503,000 8,922,000
Cash flows from investing activities
Additions to property, plant and
equipment (9,398,000) (6,830,000)
Sales and maturities of available-for-sale
securities 2,274,000 1,771,000
Purchases of available-for-sale
securities (415,000) (251,000)
Net cash provided by (used in) __________ __________
investing activities (7,539,000) (5,310,000)
Cash flows from financing activities
Dividends paid (3,552,000) (3,558,000)
Proceeds from issuance of common stock - 135,000
Common stock retired (370,000) -
Net cash used in __________ __________
financing activities (3,922,000) (3,423,000)
__________ __________
Net increase (decrease) in cash and
equivalents 11,042,000 189,000
Cash and equivalents at the beginning
of period 9,032,000 5,632,000
__________ __________
Cash and equivalents at the end of
period $20,074,000 $5,821,000
========== ==========
Supplemental disclosure of cash payments
for income taxes $1,391,000 $ 277,000
The accompanying notes are an integral part of these statements.
Arctic Cat Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
(unaudited)
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with Regulation S - X pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although management believes
that the disclosures are adequate to make the information presented not
misleading.
In the opinion of management, the unaudited condensed consolidated
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position as of
September 30, 1996, the results of operations for the three and six month
periods ended September 30, 1996 and 1995 and cash flows for the six month
periods ended September 30, 1996 and 1995. Results of operations for the
interim periods are not necessarily indicative of results for the full year.
NOTE B--SHORT-TERM INVESTMENTS
Short-term investments consist of the following:
September 30, March 31,
1996 1996
___________ __________
Trading securities $ - $20,014,000
Available-for-sale debt securities 13,097,000 14,956,000
___________ __________
$13,097,000 $34,970,000
=========== ==========
NOTE C--INVENTORIES
Inventories consist of the following:
September 30, March 31,
1996 1996
___________ __________
Raw materials and sub-assemblies $40,929,000 $39,027,000
Finished goods 25,491,000 22,727,000
Parts, garments and accessories 30,180,000 24,864,000
___________ __________
$96,600,000 $86,618,000
=========== ==========
NOTE D--OTHER MATTERS
Dividend Declaration
On October 31, 1996, the Company announced that its Board of Directors
had declared a regular quarterly cash dividend of $0.06 per share, payable on
December 3, 1996 to shareholders of record on November 18, 1996.
Share Repurchase
During the fourth quarter of fiscal 1996, the Company's Board of
Directors authorized the repurchase of up to 1,500,000 shares of common stock.
Since the inception of the share purchase program, the Company has invested
$2,700,000 to repurchase and cancel 286,000 shares.
NOTE E--RECLASSIFICATIONS
Certain 1995 amounts have been reclassified to conform to the 1996
presentation.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Arctic Cat Inc., a Thief River Falls, Minnesota based company, designs,
engineers, manufactures and markets snowmobiles and all-terrain vehicles (ATV's)
under the Arctic Cat brand name, and personal watercraft (PWC) under the
Tigershark brand name, as well as related parts, garments and accessories. The
Company's products are currently sold through a network of independent dealers
located throughout the contiguous United States and Canada, and through
distributors representing dealers in Alaska, Europe, the Middle East, Asia, and
other international markets. The Arctic Cat brand name has existed for more than
30 years and is among the most widely recognized and respected names in the
snowmobile industry.
Results of Operations
THREE MONTHS AND SIX MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE
THREE MONTHS AND SIX MONTHS ENDED SEPTEMBER 30, 1995.
Net sales for the second quarter increased 7.1% to $177,925,000 from
$166,059,000 for the same quarter in fiscal 1996. The increase in net sales for
the quarter is primarily attributable to $14,897,000 of ATV sales as the Company
continued its entry into the ATV market. Year-to-date sales increased 17.2% to
$267,051,000 from $227,818,000 for the same period last year. The increase in
net sales results from year-to-date ATV sales of $30,620,000, a 29.8% increase
in personal watercraft unit volume as shipments of certain new models were
shifted from the fourth quarter of fiscal 1996 to the first quarter of fiscal
1997, and a 3% increase in snowmobile sales. These increases were offset to some
extent by a 12.1% decrease in year-to-date parts, garments and accessory sales
resulting from lower pre-season orders and a shift of certain garment shipments
to the third quarter of fiscal 1997.
Gross profits increased 14.0% to $49,389,000 from $43,295,000 for the
second quarter last year. The gross profit percentage for the quarter increased
to 27.7% from 26.0% for the same period last year. Year-to-date gross profits
were $67,928,000, compared to $55,101,000 for the first half of fiscal 1996.
The year-to-date gross profit percentage increased to 25.4% from 24.1%. The
quarterly and year-to-date increases in gross profit percentages were primarily
due to dealer direct shipments to Canada which yield higher margins than last
years shipments to Canadian distributors, and a favorable fluctuation in the
exchange rate between the U.S. dollar and the Japanese yen. The Company shares
exchange rate fluctuations with Suzuki Motor Corporation, its engine supplier.
Operating expenses in the second quarter increased 30.2% to $20,687,000
from $15,882,000 for the same quarter in fiscal 1996. Second quarter operating
expenses increased mainly because of the timing of certain marketing expenses as
well as increased ATV and PWC marketing expenses and increased selling and
administrative expenses due to going dealer direct in Canada. As a percent of
sales, operating expenses were 11.6% of second quarter fiscal 1997 sales
compared to 9.5% for the same period last year. Year-to-date operating expenses
increased 8.9% to $38,015,000 from $34,905,000 for the same period last year for
the reasons described above. As a percent, year-to-date operating expenses
decreased to 14.2% compared to 15.3% for the same period last year.
Net earnings for the second quarter in fiscal 1997 increased 3.9% to
$18,587,000 from $17,888,000 for the same period in fiscal 1996. Year-to-date
net earnings for the first six months of 1997 increased 43.8% to $19,589,000
compared to $13,620,000 for the same period last year. Net earnings per share
was $0.63 for the second quarter ended September 30, 1996 compared to $0.60 for
the second quarter ended September 30, 1995. Year-to-date net earnings per
share were $0.66 compared to $0.46 for the same period last year.
Liquidity and Capital Resources
The seasonality of the Company's snowmobile production cycle and the
lead time between the commencement of production in March and commencement of
shipments late in the first quarter have resulted in significant fluctuations in
the Company's working capital requirements during the year. Historically, the
Company has financed its working capital requirements out of available cash
balances at the beginning and end of the production cycle and with short-term
bank borrowings during the middle of the cycle. Cash and short-term investments
were $33,171,000 at September 30, 1996. The Company's cash balances
traditionally peak early in the fourth quarter and decrease as working capital
requirements increase when the Company's snowmobile production cycle begins.
The Company's investment objectives are first, safety of principal and second,
rate of return.
The Company believes that the cash generated from operations will be
sufficient to meet its working capital, regular quarterly dividend, share
repurchase program, and capital expenditure requirements, including requirements
for the foreseeable future.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders:
On August 8, 1996 the Company held its Annual Meeting of Shareholders.
At the meeting, the following actions were taken:
(a) (i) The following persons were elected to the Company's Board of
Directors:
Votes For Votes Withheld
Gregg A. Ostrander 19,332,051 132,224
Robert J. Dondelinger 19,274,371 189,904
William I. Hagen 19,268,905 195,370
Kenneth J. Roering 19,332,206 132,069
(ii) The following directors' term of office continued after the
meeting:
William G. Ness
Lowell T. Swenson
Christopher A. Twomey
Takeshi Natori
(b) The Company's shareholders approved an amendment to the
Company's Restated Articles of Incorporation to change the name
of the Company to "Arctic Cat Inc." by a vote of 19,382,419
shares voting in favor, 81,856 shares against, and 0 shares
abstaining or subject to broker non-votes.
Item 6. Exhibits and Report on Form 8-K
________________________________________
(a) Exhibits
27.1 Financial Data Schedule
(b) There were no reports on Form 8-K filed during the Quarter
ended September 30, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ARCTIC CAT INC.
Date: November 14, 1996 By s/Christopher A. Twomey
__________________ _________________________
Christopher A. Twomey
Chief Executive Officer
Date: November 14, 1996 By s/Timothy C. Delmore
__________________ _________________________
Timothy C. Delmore
Chief Financial Officer
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