UNITED STATES
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 June 30, 1997 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 August 12, 1997, 21,635,309 shares of Common Stock and 7,560,000 shares of
Class B Common Stock of the Registrant were outstanding.
Part I - Financial Information
Arctic Cat Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(unaudited)
June 30, March 31,
ASSETS 1997 1997
CURRENT ASSETS
Cash and equivalents $ 715,000 $ 5,540,000
Short-term investments 13,009,000 45,200,000
Accounts receivable, less allowances 50,092,000 27,393,000
Inventories 111,040,000 86,502,000
Prepaid expenses 1,454,000 1,618,000
Income tax receivable 1,154,000 3,838,000
Deferred income taxes 7,573,000 8,369,000
___________ ___________
Total current assets 185,037,000 178,460,000
PROPERTY, PLANT AND EQUIPMENT - at cost
Machinery, equipment and tooling 63,410,000 60,534,000
Buildings and improvements 11,903,000 11,244,000
Land 527,000 527,000
__________ __________
75,840,000 72,305,000
Less accumulated depreciation 35,496,000 32,798,000
__________ __________
40,344,000 39,507,000
__________ __________
$225,381,000 $217,967,000
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 38,052,000 $ 21,586,000
Accrued expenses 16,986,000 25,270,000
___________ __________
Total current liabilities 55,038,000 46,856,000
DEFERRED INCOME TAXES 4,373,000 4,373,000
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY
Preferred stock, par value $1.00;
2,050,000 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, 21,635,309 at June 30, 1997;
21,533,136 at March 31, 1997 216,000 215,000
Class B common stock, par value $.01;
7,560,000 shares authorized, issued,
and outstanding 76,000 76,000
Additional paid-in capital 17,179,000 17,069,000
Retained earnings 148,499,000 149,378,000
____________ ___________
165,970,000 166,738,000
____________ ___________
$225,381,000 $217,967,000
============ ===========
The accompanying notes are an integral part of these statements.
Arctic Cat Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
Three Months Ended June 30,
___________________________
1997 1996
_______ ______
Net sales $85,467,000 $89,126,000
Cost of goods sold 64,075,000 70,587,000
__________ __________
Gross profit 21,392,000 18,539,000
Selling, general and
administrative expenses 20,374,000 17,328,000
__________ __________
Operating profit 1,018,000 1,211,000
Other income
Interest income 381,000 342,000
Interest expense (47,000) -
__________ __________
334,000 342,000
Earnings before income taxes 1,352,000 1,553,000
Income tax expense 480,000 551,000
__________ __________
Net earnings $ 872,000 $1,002,000
========== ==========
Net earnings per share $0.03 $0.03
========== ==========
Weighted average common and common 29,178,000 29,603,000
equivalent shares outstanding ========== ==========
The accompanying notes are an integral part of these statements.
Arctic Cat Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended June 30,
___________________________
1997 1996
Cash flows from operating activities ________ _______
Net earnings $ 872,000 $1,002,000
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities
Depreciation and amortization 2,698,000 2,267,000
Deferred income taxes 796,000 (66,000)
Changes in operating assets
and liabilities:
Trading securities 19,481,000 3,418,000
Accounts receivable (22,699,000) (7,858,000)
Inventories (24,538,000) (14,325,000)
Prepaid expenses 164,000 (115,000)
Accounts payable 16,466,000 17,780,000
Accrued expenses (8,284,000) (2,592,000)
Income taxes 2,684,000 -
Net cash provided by (used in) __________ __________
operating activities (12,360,000) (489,000)
Cash flows from investing activities
Additions to property, plant and
equipment (3,535,000) (4,436,000)
Sales and maturities of
available-for-sale securities 12,710,000 1,874,000
Net cash provided by (used in) __________ __________
investing activities 9,175,000 (2,562,000)
Cash flows from financing activities
Dividends paid (1,751,000) (1,781,000)
Proceeds from issuance of common stock 1,385,000 -
Common stock retired (1,274,000) (158,000)
Net cash used in __________ __________
financing activities (1,640,000) (1,939,000)
__________ __________
Net increase (decrease) in cash and
equivalents (4,825,000) (4,990,000)
Cash and equivalents at the beginning
of period 5,540,000 9,032,000
__________ __________
Cash and equivalents at the end of
period $ 715,000 $4,042,000
========== ==========
Supplemental disclosure of cash payments
for income taxes $ 71,000 $ 617,000
The accompanying notes are an integral part of these statements.
Arctic Cat Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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
June 30, 1997, and the results of operations and the cash flows for the three
month periods ended June 30, 1997 and 1996. Results of operations for the
interim periods are not necessarily indicative of results for the full year.
Preparation of the Company's consolidated financial statements requires
management to make estimates and assumptions that affect reported amounts of
assets and liabilities and related revenues and expenses. Actual results could
differ from those estimates.
NOTE B--SHORT-TERM INVESTMENTS
Short-term investments consist of the following:
June 30, March 31,
1997 1997
___________ __________
Trading securities $13,009,000 $32,490,000
Available-for-sale debt securities - 12,710,000
___________ __________
$13,009,000 $45,200,000
=========== ==========
NOTE C--INVENTORIES
Inventories consist of the following:
June 30, March 31,
1997 1997
___________ __________
Raw materials and sub-assemblies $37,458,000 $32,784,000
Finished goods 41,047,000 32,573,000
Parts, garments and accessories 32,535,000 21,145,000
___________ __________
$111,040,000 $86,502,000
=========== ==========
NOTE D--OTHER MATTERS
Dividend Declaration
On August 1, 1997, the Company announced that its Board of Directors
had declared a regular quarterly cash dividend of $0.06 per share, payable on
September 3, 1997 to shareholders of record on August 20, 1997.
Share Repurchase
The Company's Board of Directors has authorized the repurchase of up to
1,500,000 shares of common stock. Since the inception of the share repurchase
program, through August 12, 1997, the Company has invested $7,091,406 to
repurchase and cancel 720,000 shares.
NOTE E--NEW ACCOUNTING PRONOUNCEMENT
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share, which is effective
for financial statements issued after December 15, 1997. Early adoption of the
new standard is not permitted. The new standard eliminates primary and fully
diluted earnings per share and requires presentation of basic and diluted
earnings per share together with disclosure of how the per share amounts were
computed. The effect of adopting this new standard would not be material for
three months ended June 30, 1997 and 1996.
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 (ATVs)
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. The Company trades on the Nasdaq Stock Market under
the symbol ACAT.
Results of Operations
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THE THREE MONTHS ENDED
JUNE 30, 1996.
Net sales for the first quarter decreased 4.1% to $85,467,000 from
$89,126,000 for the same quarter in fiscal 1997. However, overall unit volume
increased 2.6%. Snowmobile unit volume increased 38.6%, ATV unit volume
increased 3.0% and PWC volume decreased 72.6% as a higher percentage of the
seasons PWC build was shipped prior to the start of the first quarter this PWC
season. Parts, garments and accessory sales decreased 28.5% to $4,730,000, as
the Company executed a planned shift in shipments of snowmobile garments from
the first quarter to the second quarter to link supply more closely to dealer
and consumer demand.
Gross profits increased 15.4% to $21,392,000 from $18,539,000 for the
first quarter of fiscal 1997. The gross profit percentage for the quarter
increased to 25.0% from 20.8% for the same period last year. This increase
was primarily due to increased shipments of snowmobiles which yield higher
margins than PWC and ATVs. In addition, the Company experienced improved
margins on ATVs.
Operating expenses increased 17.6% to $20,374,000 from $17,328,000.
First quarter operating expenses increased mainly due to the PWC marketing
expenses and research and development costs for all product lines. As a
percent of net sales, operating expenses were 23.8% for the first quarter
compared to 19.4% for the same period last year.
Net earnings for the first quarter of fiscal 1998 were $872,000, or
$0.03 per share, as compared to net earnings of $1,002,000, or $0.03 per share
, for the first quarter of fiscal 1997.
Liquidity and Capital Resources
The seasonality of the Company's snowmobile production cycle and the
lead time between the commencement of production in February 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 $13,724,000 at June 30, 1997. 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 cash generated from operations and cash
availability under its credit facility will be sufficient to meet its working
capital, regular quarterly dividend, share repurchase program, and capital
expenditure requirements in the forseeable future.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
________________________________________
(a) Exhibits
27.1 financial data schedule
(b) There are no reports on Form 8-K filed during the Quarter ended
June 30, 1997.
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: August 12, 1997 By s/Christopher A. Twomey
________________ _________________________
Christopher A. Twomey
Chief Executive Officer
Date: August 12, 1997 By s/Timothy C. Delmore
________________ _________________________
Timothy C. Delmore
Chief Financial Officer
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