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 December 31, 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 February 14, 1997, 21,750,311 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)
December 31, March 31,
ASSETS 1996 1996
CURRENT ASSETS
Cash and cash equivalents $ 7,475,000 $ 9,032,000
Short-term investments 56,352,000 34,970,000
Accounts receivable, less allowances 46,093,000 36,465,000
Inventories 73,718,000 86,618,000
Prepaid expenses 1,417,000 2,404,000
Deferred income taxes 12,240,000 8,920,000
___________ ___________
Total current assets 197,295,000 178,409,000
PROPERTY, PLANT AND EQUIPMENT - at cost
Machinery, equipment and tooling 66,129,000 55,118,000
Buildings and improvements 9,865,000 6,191,000
Land 527,000 192,000
__________ __________
76,521,000 61,501,000
Less accumulated depreciation 40,627,000 31,914,000
__________ __________
35,894,000 29,587,000
__________ __________
$233,189,000 $207,996,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 14,134,000 $ 23,947,000
Accrued expenses 34,739,000 19,378,000
Income tax payable 6,167,000 4,942,000
__________ __________
Total current liabilities 55,040,000 48,267,000
DEFERRED INCOME TAXES 3,729,000 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, 21,851,461 at December 31,
1996; 22,055,971 at March 31, 1996 218,000 221,000
Class B common stock, par value $.01;
7,560,000 shares authorized, issued,
and outstanding 76,000 76,000
Additional paid-in capital 20,441,000 22,502,000
Retained earnings 153,685,000 133,394,000
__________ ___________
174,420,000 156,193,000
__________ ___________
$233,189,000 $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 Nine Months
Ended December 31, Ended December 31,
__________________________ ______________________
1996 1995 1996 1995
______ ______ ______ ______
Net sales $133,877,000 $123,623,000 $400,928,000 $351,441,000
Cost of goods sold 98,162,000 91,831,000 297,285,000 264,548,000
___________ ___________ ___________ ___________
Gross profit 35,715,000 31,792,000 103,643,000 86,893,000
Selling, general and
administrative expenses 26,916,000 23,091,000 64,931,000 57,996,000
___________ ___________ ___________ ___________
Operating profit 8,799,000 8,701,000 38,712,000 28,897,000
Interest income 536,000 623,000 1,100,000 1,545,000
Interest expense (2,000) - (109,000) -
___________ ___________ ___________ ___________
534,000 623,000 991,000 1,545,000
Earnings before
income taxes 9,333,000 9,324,000 39,703,000 30,442,000
Income tax expense 3,313,000 3,309,000 14,094,000 10,807,000
___________ ___________ ___________ ___________
Net earnings $ 6,020,000 $ 6,015,000 $25,609,000 $19,635,000
=========== =========== =========== ===========
Net earnings
per share $0.20 $0.20 $0.87 $0.66
=========== =========== =========== ===========
Weighted average shares
outstanding 29,452,000 29,674,000 29,556,000 29,657,000
=========== =========== =========== ===========
The accompanying notes are an integral part of these statements.
Arctic Cat Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended December 31,
_____________________________
1996 1995
Cash flows from operating activities ________ ________
Net earnings $25,609,000 $19,635,000
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities
Depreciation 8,727,000 5,609,000
Deferred income taxes (3,127,000) (5,897,000)
Changes in operating assets
and liabilities:
Trading securities (23,120,000) 116,000
Accounts receivable ( 9,628,000) (21,099,000)
Inventories 12,900,000 7,818,000
Prepaid expenses 987,000 110,000
Accounts payable (9,813,000) (5,474,000)
Accrued expenses 15,361,000 12,553,000
Income taxes 1,225,000 9,037,000
Net cash provided by (used in) __________ __________
operating activities 19,121,000 22,408,000
Cash flows from investing activities
Additions to property, plant and
equipment (15,034,000) (11,073,000)
Sales and maturities of available-for-sale
securities 2,899,000 1,784,000
Purchases of available-for-sale
securities (1,161,000) (894,000)
Net cash provided by (used in) __________ __________
investing activities (13,296,000) (10,183,000)
Cash flows from financing activities
Dividends paid (5,318,000) (5,338,000)
Proceeds from issuance of common stock 292,000 253,000
Common stock retired (2,356,000) -
Net cash used in __________ __________
financing activities (7,382,000) (5,085,000)
__________ __________
Net increase (decrease) in cash and
cash equivalents (1,557,000) 7,140,000
Cash and cash equivalents at the beginning
of period 9,032,000 5,632,000
__________ __________
Cash and cash equivalents at the end of
period $7,475,000 $12,772,000
========== ==========
Supplemental disclosure of cash payments
for income taxes $11,185,000 $ 7,667,000
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
December 31, 1996, the results of operations for the three and nine month
periods ended December 31, 1996 and 1995 and cash flows for the nine month
periods ended December 31, 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:
December 31, March 31,
1996 1996
___________ __________
Trading securities $43,134,000 $20,014,000
Available-for-sale debt securities 13,218,000 14,956,000
___________ __________
$56,352,000 $34,970,000
=========== ==========
NOTE C--INVENTORIES
Inventories consist of the following:
December 31, March 31,
1996 1996
___________ __________
Raw materials and sub-assemblies $28,776,000 $39,027,000
Finished goods 20,056,000 22,727,000
Parts, garments and accessories 24,886,000 24,864,000
___________ __________
$73,718,000 $86,618,000
=========== ==========
NOTE D--OTHER MATTERS
Dividend Declaration
On January 30, 1997, the Company announced that its Board of Directors
had declared a regular quarterly cash dividend of $0.06 per share, payable on
March 03, 1997 to shareholders of record on February 17, 1997.
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 repurchase program, through February 13, 1997,
the Company has invested $4,244,000 to repurchase and cancel 437,000 shares.
NOTE E--RECLASSIFICATIONS
Certain Fiscal 1996 amounts have been reclassified to conform to the
Fiscal 1997 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 NINE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO THE
THREE MONTHS AND NINE MONTHS ENDED DECEMBER 31, 1995.
Net sales for the third quarter increased 8.3% to $133,877,000 from
$123,623,000 for the same quarter in fiscal 1996. The increase in net sales for
the quarter is primarily attributable to $9.1 million of ATV sales and a $5
million increase in PWC shipments. Also affecting net sales was a 38.2%
increase in parts, garments and accessories sales due to in-season sales
resulting from the plentiful snow fall in the midwest and western United States
. These increases were offset to some extent by a 6% decrease in snowmobile
unit volume. Year-to-date sales increased 14.1% to $400,928,000 from
$351,441,000 for the same period last year. The increase in year-to-date net
sales results from ATV sales of $39.7 million, a 40.8% increase in PWC sales,
mainly due to first quarter PWC shipments, a 3.0% increase in parts, garments
and accessories, and was offset by a 1.4% decrease in snowmobile sales.
Gross profits increased 12.3% to $35,715,000 from $31,792,000 for the
third quarter last year. The gross profit percentage for the quarter increased
to 26.7% from 25.7% for the same period last year. Year-to-date gross profits
increased 19.3% to $103,643,000, from $86,893,000 for the same period in Fiscal
1996. The year-to-date gross profit percentage increased to 25.8% from 24.7%.
The quarterly and year-to-date increases in gross profit percentages were
primarily due to the positive affect of the weaker yen (the Company shares
exchange rate fluctuations with Suzuki Motor Corporation, its engine supplier)
and dealer direct snowmobile shipments to Canada which yield higher margins
than last year's distributor shipments. The aforementioned increases were
mitigated to some extent by the increased percentage of ATVs and personal
watercraft in the Company's sales mix which yield lower margins than
snowmobiles.
Operating expenses in the third quarter increased 16.6% to $26,916,000
from $23,091,000 last year. Third quarter operating expenses increased mainly
due to ATV, PWC and snowmobile marketing expenses. As a percent of net sales,
operating expenses were 20.1% for the third quarter compared to 18.7% for the
same period last year. Year-to-date operating expenses increased 12.0% to
$64,931,000 from $57,996,000 for the same reasons described above. As a percent
of net sales, year-to-date operating expenses decreased to 16.2% compared to
16.5% for the same period last year.
Net earnings for the third quarter of Fiscal 1997 were $6,020,000
compared to $6,015,000 for the same period in Fiscal 1996. Year-to-date net
earnings for the first nine months of 1997 increased 30.4% to $25,609,000 from
$19,635,000 for the same period last year. Net earnings per share for the
third quarter ended December 31, 1996 and December 31, 1995 were $0.20.
Year-to-date net earnings per share were $0.87 compared to $0.66 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 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 $7,475,000 at December 31, 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 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 6. Exhibits and Report 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
December 31, 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: February 14, 1997 By s/Christopher A. Twomey
__________________ _________________________
Christopher A. Twomey
Chief Executive Officer
Date: February 14, 1997 By s/Timothy C. Delmore
__________________ _________________________
Timothy C. Delmore
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1996
<CASH> 7,475,000
<SECURITIES> 56,352,000
<RECEIVABLES> 46,593,000
<ALLOWANCES> 500,000
<INVENTORY> 73,718,000
<CURRENT-ASSETS> 197,295,000
<PP&E> 76,521,000
<DEPRECIATION> 40,627,000
<TOTAL-ASSETS> 233,189,000
<CURRENT-LIABILITIES> 55,040,000
<BONDS> 0
0
0
<COMMON> 294,000
<OTHER-SE> 174,126,000
<TOTAL-LIABILITY-AND-EQUITY> 233,189,000
<SALES> 400,928,000
<TOTAL-REVENUES> 400,928,000
<CGS> 297,285,000
<TOTAL-COSTS> 297,285,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 109,000
<INCOME-PRETAX> 39,703,000
<INCOME-TAX> 14,094,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,609,000
<EPS-PRIMARY> $0.87
<EPS-DILUTED> 0
</TABLE>
