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Nov. 30, 2009 – Arctic Cat back in the black

November 30, 2009
Filed under Features

Cost-cutting efforts and inventory reductions have allowed Arctic Cat to return to profitability.
The Minnesota manufacturer reported a net profit from its recently concluded fiscal first half after losing close to $6 million in its first quarter.
This comes despite the fact the OEM continues to see reduced sales. Arctic Cat recorded second-quarter sales of $166.3 million, a 19 percent drop from the year-ago period.
But thanks to cost cutting and inventory reductions, the company posted net earnings of $14.8 million. Claude Jordan, the company’s president and chief operating officer, said Arctic Cat’s goal was to reduce operating expenses by 12-17 percent and so far the company is on target to meet that goal.
“Operating expense reduction will continue to be a major focus for the business, and we will continue to identify new areas for further reduction without impacting our goal of becoming a stronger business as the economy recovers,” Jordan said in a conference call reporting the company’s second-quarter results.
Part of that expense cut has included a reduction in workforce — Artic Cat laid off 12 percent of its workforce and currently has a hiring freeze, Jordan said. The company also is working with its suppliers to find ways to trim commodity costs and has lowered both its factory and dealer inventories.
Jordan said the company has reduced its factory inventory by 23 percent over the year-ago period, with the biggest improvements coming in the engine and finished goods categories.
Dealer inventories are down more than 19 percent compared to the year-ago period, Jordan said. Dealer inventories for ATVs are down even more, the company said.
Artic Cat’s wholesale quad sales — both UTV and ATV — amounted to $83.8 million in its first half, a 33 percent reduction from a year ago.
However, CEO Christopher Twomey said the company is outperforming the industry in retail sales and thus far has picked up market share.
“Retail sales for Prowlers are down for the year, but not as much as core ATV,” Twomey said during the company’s earnings conference call. “We are seeing week over week positive (comparisons), which we believe is a sign that this market has bottomed out and is heading to a more normal retail sales pattern.”
Twomey said the company expects its year-end snowmobile sales to decline over last year, but they could be better than originally expected due to some early snowfall in different parts of the United States.“We’re encouraged by the earlier snows we’ve seen sporadically across much of North America,” he said, noting the company already has seen some positive effects from that early snowfall in retail sales.
The company’s PG&A sales through the first half totaled $48 million, a 9 percent reduction from a year ago. psb

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