reuters news service reports arctic cat loss affects stock

It's no secret that the snowmobile industry is coming off a particulary poor winter for snowmobile sales, especially in the key sales areas of Michigan, Wisconsin and Minnesota. That sales region historically represents more than half of all US sled sales.

This past Wednesday, after announcing a loss for its fiscal fourth quarter, Arctic Cat saw its publicly traded shares fall more than 4 percent.

For the quarter ended March 31, the company reported a net loss of $1.8 million, or 8 cents per diluted share, compared with a net loss of $1.0 million, or 4 cents per diluted share, a year earlier.

In late Wednesday afternoon trading on Nasdaq, Arctic Cat shares were at $19.03, down 76 cents, or almost 4 percent, after dipping as low as $18.65.

Net sales in the quarter rose 24 percent to $99.3 million from $80.2 million a year earlier, driven by a 55 percent increase in ATV sales. Sales of ATVs totaled $71.6 million, up from $46.3 million a year ago. The company said the rise was primarily due to the timing of shipments. ATV sales for the full year rose 12 percent, to $205.2 million.

"Industry-wide ATV retail sales in the United States grew at double-digit rates for the ninth consecutive year, and Arctic Cat again outpaced the industry growth, as we have done every year since entering the ATV market in 1996," President and Chief Executive Christopher Twomey said in a statement.

Snowmobile sales in the fourth quarter fell to $4.7 million from $6.4 million a year ago because of poor snow conditions across much of the East and Midwest, the company said. For the full year, however, snowmobile sales increased 14 percent to $262.9 million.

Arctic Cat forecast snowmobile sales would decline by 7 percent to 10 percent in the current fiscal year, and that outlook might have contributed to the share price drop.

In a Reuters news report, analyst Joe Hovorka of Raymond James and Associates was quoted saying, "The quarter was OK, but they(Arctic Cat) said snowmobiles for next year are going to be soft."

Reuters reported that Robert Evans, an analyst with ThinkEquity Partners, felt the snowmobile forecast could have been worse.

"I was pleasantly surprised that their snowmobile guidance was only down 7 to 10 percent given the poor snowfall last year," he said. "Others in the industry have given guidance worse than that."

The lack of snow also contributed to a 17 percent drop in sales of parts, garments and accessories in the fourth quarter, to $22.9 million.

Fellow Minnesota snowmobile manufacturer and the industry leader in snowmobiles, Polaris Industries Inc. has indicated its earnings per share in 2002 would rise 10 percent to 13 percent despite the warmest winter in 30 years. Polaris, which is Number 2 in ATV sales behind Honda, expects strong sales of ATVs to help offset weak snowmobile sales.

Arctic Cat, the No. 2 snowmobile maker, said it expects net sales in the range of $556 million to $570 million, and earnings per share of $1.30 to $1.34, up 10 percent from last year.