Arctic Cat Reports 2009 Fourth-Quarter Results

MINNEAPOLIS — Arctic Cat Inc. reported a net loss of $16.7 million on net sales of $90.7 million for the fourth quarter ended March 31, 2009, which was within the company’s previously stated guidance range.

Arctic Cat’s 2009 fourth quarter results include a non-cash goodwill impairment charge of $1.75 million in accordance with Statement of Financial Accounting Standards (SFAS) No. 142. The non-cash goodwill write-down has no impact on Arctic Cat’s cash flow or liquidity.

Excluding the goodwill impairment charge, the fourth quarter net loss would have been $15.0 million. For the prior-year fourth quarter ended March 31, 2008, Arctic Cat reported net earnings of $424,000, on net sales of $168.9 million.

For the fiscal 2009 full year, Arctic Cat posted net sales of $563.6 million compared to $621.6 million last fiscal year. The company reported a fiscal 2009 net loss of $9.5 million, versus a net loss of $3.3 million in fiscal 2008.

“Arctic Cat was profitable through the first nine months of fiscal 2009, due to increased snowmobile sales to dealers and distributors and lower operating expenses, but overall retail demand for recreational products remained weak in the fourth quarter as expected,” said Christopher A. Twomey, Arctic Cat’s chairman and chief executive officer. “In light of the difficult retail environment, we continued our plan to further reduce dealer inventories during the quarter, resulting in lower inventory levels across all product lines. However, this necessary action negatively impacted the company’s revenue and profitability for the fourth quarter and full year.”

Business Line Results

All-terrain vehicle (ATV) sales totaled $64.1 million in the 2009 fourth quarter versus $142.9 million in the same period last year. For fiscal 2009, Arctic Cat’s ATV sales were $247.3 million compared with $350.3 million last fiscal year. ATV revenues were down for the quarter and full year due to lower ATV retail sales during the current economic downturn, and the company’s decision to lower production to reduce dealer inventory.

Snowmobile sales improved to a negative $3.4 million in the 2009 fourth quarter due to lower promotional sales incentives on dealer inventory compared with a negative $7.1 million in the prior-year quarter. For the 2009 fiscal year, Arctic Cat’s snowmobile sales rose to $207.3 million versus $161.9 million in the previous year. Contributing to the full-year snowmobile sales growth were innovative new products, lower North American dealer inventories and increased international sales.

Sales of parts, garments and accessories (PG&A) in the 2009 fourth quarter were $30.0 million versus $33.0 million in the prior-year quarter. For the full fiscal year, PG&A sales were essentially flat at $109.0 million versus $109.4 million in fiscal 2008.

Outlook

As part of the company’s efforts to reduce operating expenses and align production with anticipated product demand, Arctic Cat announced the elimination of 60 positions, or approximately 5 percent of its 1,200 employees. Arctic Cat does not expect to record a material charge for the workforce reduction.

Commenting on the company’s outlook, Twomey said: “We do not expect any meaningful recovery in the recreational products market in the year ahead. Near-term, we are focused on rescaling the business and conservatively managing it to meet anticipated demand. We also are taking appropriate actions to preserve cash for operations and maintain dealer health, as well as developing select innovative products that position Arctic Cat to emerge as a stronger company as the economy recovers.”