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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 December 31, 2002 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
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 12, 2003, 14,513,173 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.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
December 31, March 31,
ASSETS 2002 2002
CURRENT ASSETS ___________ ___________
Cash and equivalents $ 30,152,000 $ 43,466,000
Short-term investments 56,277,000 58,574,000
Accounts receivable, less allowances 42,074,000 23,819,000
Inventories 85,702,000 61,552,000
Prepaid expenses 1,780,000 3,395,000
Income taxes receivable - 3,937,000
Deferred income taxes 17,207,000 16,644,000
___________ ___________
Total current assets 233,192,000 211,387,000
PROPERTY & EQUIPMENT - at cost
Machinery, equipment and tooling 110,675,000 101,296,000
Land, buildings and improvements 19,435,000 19,257,000
__________ __________
130,110,000 120,553,000
Less accumulated depreciation 71,727,000 63,345,000
__________ __________
58,383,000 57,208,000
__________ __________
$291,575,000 $268,595,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 32,219,000 $ 27,788,000
Accrued expenses 51,358,000 49,814,000
Income taxes payable 5,819,000 -
__________ __________
Total current liabilities 89,396,000 77,602,000
DEFERRED INCOME TAXES 9,946,000 9,355,000
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY
Preferred stock, par value $1.00;
2,050,000 shares authorized; none issued - -
Preferred stock - Series B 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, 14,531,349 at December 31,
2002; 15,694,316 at March 31, 2002 145,000 157,000
Class B common stock, par value $.01;
7,560,000 shares authorized, issued,
and outstanding 76,000 76,000
Accumulated other comprehensive income (loss) 938,000 (122,000)
Retained earnings 191,074,000 181,527,000
___________ ___________
192,233,000 181,638,000
___________ ___________
$291,575,000 $268,595,000
=========== ===========
The accompanying notes are an integral part of these condensed statements.
Arctic Cat Inc.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Nine Months
Ended December 31, Ended December 31,
__________________________ ____________________
2002 2001 2002 2001
______ ______ ______ ______
Net sales $176,175,000 $167,917,000 $465,700,000 $456,819,000
Cost of goods sold 136,522,000 132,275,000 354,234,000 350,376,000
___________ ___________ ___________ ___________
Gross profit 39,653,000 35,642,000 111,466,000 106,443,000
Selling, general and
administrative expenses 24,595,000 24,345,000 63,952,000 63,570,000
Watercraft Exit Costs (2,404,000) - (2,404,000) -
___________ ___________ ___________ ___________
Operating profit 17,462,000 11,297,000 49,918,000 42,873,000
Other income
Interest income 452,000 690,000 1,068,000 1,892,000
___________ ___________ ___________ ___________
Earnings before
income taxes 17,914,000 11,987,000 50,986,000 44,765,000
Income tax expense 6,002,000 3,836,000 16,585,000 14,325,000
___________ ___________ ___________ ___________
Net earnings $ 11,912,000 $ 8,151,000 $ 34,401,000 $ 30,440,000
=========== =========== =========== ===========
Net earnings
per share
Basic $0.54 $0.35 $1.53 $1.29
Diluted $0.53 $0.34 $1.51 $1.27
=========== =========== =========== ===========
Weighted average
shares outstanding
Basic 22,099,000 23,335,000 22,505,000 23,676,000
Diluted 22,289,000 23,671,000 22,737,000 24,008,000
=========== =========== =========== ===========
The accompanying notes are an integral part of these condensed statements.
Arctic Cat Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended December 31,
_____________________________
2002 2001
Cash flows from operating activities ________ ________
Net earnings $34,401,000 $30,440,000
Adjustments to reconcile net earnings
to net cash provided by
operating activities
Depreciation 12,790,000 11,749,000
Deferred income taxes (596,000) (745,000)
Tax benefit from stock option exercises 1,121,000 902,000
Changes in operating assets
and liabilities:
Trading securities 1,319,000 (2,913,000)
Accounts receivable (18,220,000) (24,671,000)
Inventories (22,659,000) (17,858,000)
Prepaid expenses 1,615,000 162,000
Accounts payable 4,431,000 (1,068,000)
Accrued expenses 1,544,000 7,378,000
Income taxes 9,756,000 5,776,000
Net cash provided by __________ __________
operating activities 25,502,000 9,152,000
Cash flows from investing activities
Purchase of property and equipment (13,965,000) (14,885,000)
Sale and maturity of available-for-sale
securities 1,136,000 985,000
Net cash used in __________ __________
investing activities (12,829,000) (13,900,000)
Cash flows from financing activities
Proceeds from issuance of common stock 2,570,000 4,866,000
Dividends paid (4,058,000) (4,264,000)
Repurchase of common stock (24,499,000) (14,717,000)
Net cash used in __________ __________
financing activities (25,987,000) (14,115,000)
__________ __________
Net decrease in cash and equivalents (13,314,000) (18,863,000)
Cash and equivalents at the beginning
of period 43,466,000 42,881,000
__________ __________
Cash and equivalents at the end of
period $30,152,000 $24,018,000
========== ==========
Supplemental disclosure of cash payments
for income taxes $ 9,930,000 $ 7,905,000
========== ==========
The accompanying notes are an integral part of these condensed statements.
Arctic Cat Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of Arctic Cat Inc. (the "Company") 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 accounting
principles generally accepted in the United States of America 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, 2002, the results of operations for the three and nine month
periods ended December 31, 2002 and 2001 and cash flows for the nine month
periods ended December 31, 2002 and 2001. 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--NET EARNINGS PER SHARE
The Company's basic net earnings per share is computed by dividing net
earnings by the weighted average number of outstanding common shares. The
Company's diluted net earnings per share is computed by dividing net earnings
by the weighted average number of outstanding common shares and common share
equivalents relating to stock options, when dilutive. Options to purchase
400,486 and 154,123 shares of common stock with weighted average exercise
prices of $15.76 and $16.72 were outstanding during the three months ended
December 31, 2002 and 2001 and options to purchase 348,898 and 165,042 shares
of common stock with weighted average exercise prices of $15.69 and $16.70
were outstanding during the nine months ended December 31, 2002 and 2001, all
of which were excluded from the computation of common share equivalents because
they were anti-dilutive.
NOTE C--SHORT-TERM INVESTMENTS
Short-term investments consist of the following:
December 31, March 31,
2002 2002
___________ __________
Trading securities $46,777,000 $48,096,000
Available-for-sale debt securities 9,500,000 10,478,000
___________ __________
$56,277,000 $58,574,000
=========== ==========
NOTE D--INVENTORIES
Inventories consist of the following:
December 31, March 31,
2002 2002
___________ __________
Raw materials and sub-assemblies $20,137,000 $14,630,000
Finished goods 26,357,000 17,111,000
Parts, garments and accessories 39,208,000 29,811,000
___________ __________
$ 85,702,000 $61,552,000
=========== ==========
NOTE E--ACCRUED EXPENSES
Accrued expenses as of December 31, 2002 consisted of marketing,
$16,256,000, warranties, $18,943,000, PWC exit costs, $898,000 and other
$15,261,000. Accrued expenses as of December 31, 2001 consisted of marketing,
$15,531,000, warranties, $18,514,000, PWC exit costs, $7,827,000 and other
$15,091,000. Accrued expenses as of March 31, 2002 consisted of marketing,
$16,305,000, warranties, $12,937,000, PWC exit costs, $7,509,000 and other
$13,063,000. The change in the Company's accrued warranty from March 31, 2002
through December 31,2002 is a result of expense of $13,077,000 less cash
payments of $7,071,000.
NOTE F--DISCONTINUED PERSONAL WATERCRAFT BUSINESS AND RELATED COSTS
On October 7, 1999, the Company announced that it was exiting the
personal watercraft (PWC) business effective September 30, 1999. The Company
did not produce additional PWC units beyond the completed production of the
1999 models. The majority of the Company's PWC exit plan has concluded while
other insignificant aspects of the plan will extend beyond calendar 2002.
The Company had no significant sales related to the watercraft product
line for the three and nine month periods ended December 31, 2002 and 2001.
At December 31, 2002 $448,000 is accrued for estimated consumer
incentives and $450,000 for other exit costs in connection with this
discontinued product line. The Company analyzed current and future exit plan
cash payments, and reduced the initial recorded PWC exit plan accruals in the
amount of $6,404,000 during the three month period ending December 31, 2002.
NOTE G--SHAREHOLDERS' EQUITY
Dividend Declaration
On January 30, 2003, the Company announced that its Board of Directors
had declared a regular quarterly cash dividend of $0.06 per share, payable on
February 13, 2003 to shareholders of record on March 3, 2003.
Share Repurchase
During the nine months ended December 31, 2002 and 2001, the Company
invested $24,499,000 and $14,717,000 to repurchase and cancel 1,400,000 and
1,003,000 shares pursuant to Board of Directors' authorizations. On August 8,
2002, the Company's Board of Directors' authorized an additional repurchase of
$20 million of the Company's common shares.
Additional Paid in Capital
During the nine months ended December 31, 2002 and 2001, additional
paid in capital increases of $3,689,000 and $5,762,000 were offset by share
repurchases.
Accumulated Other Comprehensive Income
The components and changes in accumulated other comprehensive income
(loss), net of taxes, during the following periods were as follows:
Nine months ended
December 31, 2002 December 31, 2001
__________________ __________________
Total Accumulated Other Comprehensive
Income (Loss)
Balance at beginning of period $ (122,000) $ 320,000
Unrealized gain on securities available-
for-sale, net of tax 99,000 (8,000)
Effect of adoption of SFAS No. 133 - (741,000)
Unrealized gain on derivative instruments,
net of tax 961,000 186,000
------------- --------------
Balance at end of period $ 938,000 $ (243,000)
============= ==============
Other Comprehensive Income
Other comprehensive income was as follows:
Nine months ended
December 31, 2002 December 31, 2001
__________________ __________________
Net earnings $ 34,401,000 $ 30,440,000
Unrealized gain on securities available-
for-sale, net of tax 99,000 (8,000)
Effect of adoption of SFAS No. 133 - (741,000)
Unrealized gain on derivative instruments,
net of tax 961,000 186,000
------------- -------------
Total Other Comprehensive Income $ 35,461,000 $ 29,877,000
============= =============
NOTE H--COMMITMENTS AND CONTINGENCIES
Litigation
The Company is subject to legal proceedings and claims which arise
in the ordinary course of business. In the opinion of management, the
ultimate outcome of these matters will not be material to the Company's
consolidated financial position, results of operations or cash flows.
NOTE I--NEW PRONOUNCEMENTS
On December 31, 2002, the Financial Accounting Standards Board (FASB)
issued Statements of Financial Accounting Standards (SFAS) No. 148, Accounting
for Stock-Based Compensation--Transition and Disclosure (SFAS 148). SFAS 148
amends the disclosure and certain transition provisions of Statement 123,
Accounting for Stock-Based Compensation.
SFAS 148 permits entities changing to the fair value method of
accounting for employee stock compensation to choose from one of three
transition methods--the prospective method, the modified prospective method,
or the retroactive restatement method. The prospective transition method,
however, will not be available for entities that initially apply the fair value
method in fiscal years beginning after December 15, 2003. Management believes
the adoption of SFAS 148, if applicable, will not have a material effect on
the consolidated financial statements.
In November 2002, EITF 00-21, Revenue Arrangements with Multiple
Deliverables, was issued and addresses accounting for sales arrangements with
multiple deliverables that contain more than one product and, if so, how the
arrangement consideration should be measured and allocated to the separate
products. EITF 00-21 applies to all deliverables (products, services, or
rights to use assets) within contractually binding arrangements in all
industries under which a vendor will perform multiple revenue-generating
activities, except as defined within the EITF. The Company believes this
EITF will not have a material effect on the consolidated financial statements.
The FASB published FIN 45, Guarantor's Accounting and Disclosure
requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others, on November 25, 2002. The Interpretation
expands on the accounting guidance of Statements No. 5, 57, and 107
and incorporates without change the provisions of FIN 34, which is
being superseded.
The Interpretation elaborates on the existing disclosure requirements
for most guarantees, including loan guarantees such as standby letters
of credit. It also clarifies that at the time a company issues a
guarantee, the company must recognize an initial liability for the fair
value, or market value, of the obligations it assumes under that
guarantee and must disclose that information in its interim and annual
financial statements. The provisions related to recognizing a
liability at inception of the guarantee for the fair value of the
guarantor's obligations would not apply to product warranties or to
guarantees accounted for as derivatives.
The initial recognition and initial measurement provisions apply on a
prospective basis to guarantees issued or modified after December 31, 2002,
regardless of the guarantor's fiscal year-end. The disclosure requirements in
the Interpretation are effective for financial statements of interim or annual
periods ending after December 15, 2002. The Company believes FIN 45 will not
have a material impact on the consolidated financial statements.
In June 2002, FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 addresses
accounting and processing for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue 94-3. SFAS No. 146
requires the recognition of a liability for a cost associated with an exit
or disposal activity when the liability is incurred versus the date a
company commits to an exit plan. In addition, SFAS No. 146 states the
liability should be initially measured at fair value. The requirements of
SFAS No. 146 are effective for exit or disposal activities that are initiated
after December 31, 2002. The adoption of SFAS No. 146 will not have a
material effect on our consolidated financial position or results of
operations.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Arctic Cat Inc. (the "Company") designs, engineers, manufactures and
markets snowmobiles and all-terrain vehicles (ATVs) under the Arctic Cat brand
name, as well as related parts, garments and accessories principally through
its facilities in Thief River Falls, Minnesota. The Company markets its
products 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 40 years and is
among the most widely recognized and respected names in the snowmobile
industry. The Company trades on the Nasdaq National Market under the symbol
ACAT.
Results of Operations
THREE AND NINE MONTHS ENDED DECEMBER 31, 2002 COMPARED TO THE THREE
AND NINE MONTHS ENDED DECEMBER 31, 2001.
Net sales for the third quarter of fiscal 2003 increased 4.9% to
$176,175,000 from $167,917,000 for the third quarter of fiscal 2002 due to a
34.9% or $13,548,000 increase in ATV sales and a $4,000,000 reduction of
a restructuring accrual for estimated sales incentives related to Arctic Cat's
exit from the personal watercraft (PWC) business in September 1999. These
increases were offset by a 9.0% or $9,443,000 decrease in snowmobile sales.
Snowmobile unit volume decreased 19.8% and ATV unit volume increased 11.7% for
the third quarter of fiscal 2003 compared to the same quarter last year.
Quarter to quarter sales mix and units shipped are determined primarily by
production cycles for snowmobiles and by production cycles and orders received
for ATV sales. Year-to-date net sales increased 1.9% to $465,700,000 from
$456,819,000 for the first nine months of fiscal 2002 primarily due to a 13.2%
increase in ATV sales, a 4.5% decrease in snowmobile sales and a 2.4% decrease
in parts, garments and accessory sales. Year-to-date snowmobile unit volume
decreased 11.6% while ATV unit volume increased 13.1%. For fiscal 2003 the
Company expects snowmobile sales to decline by approximately 4 to 7 percent
due to last season's poor snow conditions that resulted in lower dealer orders.
However, the Company expects this decline to be offset by increased sales of
ATVs resulting in level or a modest increase in sales for fiscal year 2003.
Gross profits for the third quarter of fiscal 2003 increased 11.3% to
$39,653,000 from $35,642,000 for the same quarter in fiscal 2002. The
quarterly gross profit percentage was 22.5% compared to 21.2% for the third
quarter in fiscal 2002. Year-to-date gross profits increased 4.7% to
$111,466,000 from $106,443,000 for the same period last year. The year-to-date
gross profit percentage improved to 23.9% from 23.3% for the same period last
year. Both the quarterly and year-to-date improvement in the gross profit
percentages were primarily due to the aforementioned reduction of estimated PWC
restructuring accruals.
Operating expenses for the third quarter of fiscal 2003 decreased 8.8%
to $22,191,000 from $24,345,000 for the third quarter of last year due to a
$2,404,000 net reduction of estimated PWC restructuring accruals which was
offset by a $1,000,000 change in estimate for other non-exit PWC related
accruals. As a percent of sales, operating expenses were 12.6% for the third
quarter of fiscal 2003 versus 14.5% for the same quarter last year. Year-to-
date operating expenses for the period ended December 31, 2002 were $61,548,000
compared to $63,570,000 for the same period last year. As a percent of sales,
operating expenses were 13.2% for the first nine months of fiscal 2003 compared
to 13.9% for the first nine months of fiscal 2002. The year-to-date change in
operating expenses is primarily due to PWC related adjustments noted above.
Other income for the third quarter of fiscal 2003 decreased 34.5% to
$452,000 from $690,000 for the third quarter of last year. Year-to-date
other income decreased 43.6% to $1,068,0000 from $1,892,000. Both the
quarterly and year-to-date decreases resulted from lower interest income
earned on investments due to lower interest rates and lower average cash
balances.
Net earnings for the third quarter of fiscal 2003 increased 46.1% to
$11,912,000 from $8,151,000 for the same quarter last year. Diluted earnings
per share were $0.53 and $0.34 for the third quarter of fiscal 2003 and 2002.
Year-to-date net earnings increased 13.0% to $34,401,000 from $30,440,000.
Year-to-date diluted net earnings per share for the first nine months of fiscal
2003 increased 18.9% to $1.51 from $1.27 per share for the same period last
year. Both the quarterly and year-to-date increase in net earnings is mainly
due to $3,405,000 aftertax net reduction of the PWC related accruals.
Liquidity and Capital Resources
The seasonality of the Company's snowmobile production cycle and the
lead time between the commencement of snowmobile and ATV production in the
early spring 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 however, no borrowings occurred in fiscal year 2003 and
2002. The Company's cash balances traditionally peak early in the fourth
quarter and then decrease as working capital requirements increase when the
Company's snowmobile and spring ATV production cycles begin. During the nine
months ended December 31, 2002, the Company repurchased $24,499,000 of common
shares compared to $14,717,000 in the same period of the prior year.
In August 2002, the Board of Directors authorized the repurchase of an
additional $20 million of common shares. Cash and short-term investments were
$86,429,000 and $82,881,000 at December 31, 2002 and 2001. The Company's
investment objectives are first, safety of principal and second, rate of
return.
The Company believes that the cash generated from operations and
available cash will be sufficient to meet its working capital, regular
quarterly dividend, share repurchase program, and capital expenditure
requirements for the short and long-term basis.
Line of Credit
The Company has an unsecured credit agreement with banks for the
issuance of up to $45,000,000 of documentary and stand-by letters of credit and
for working capital and in addition has a $15,000,000 seasonal credit agreement
for the Company's peak production period. The letters of credit facilities are
primarily used to assist with the procurement of engines and other components
for ATVs and snowmobiles from foreign vendors.
New Pronouncements
On December 31, 2002, the Financial Accounting Standards Board (FASB)
issued Statements of Financial Accounting Standards (SFAS) No. 148, Accounting
for Stock-Based Compensation--Transition and Disclosure (SFAS 148). SFAS 148
amends the disclosure and certain transition provisions of Statement 123,
Accounting for Stock-Based Compensation.
SFAS 148 permits entities changing to the fair value method of
accounting for employee stock compensation to choose from one of three
transition methods--the prospective method, the modified prospective method,
or the retroactive restatement method. The prospective transition method,
however, will not be available for entities that initially apply the fair
value method in fiscal years beginning after December 15, 2003. Management
believes the adoption of SFAS 148, if applicable, will not have a material
effect on the consolidated financial statements.
In November 2002, EITF 00-21, Revenue Arrangements with Multiple
Deliverables, was issued and addresses accounting for sales arrangements with
multiple deliverables that contain more than one product and, if so, how the
arrangement consideration should be measured and allocated to the separate
products. EITF 00-21 applies to all deliverables (products, services, or
rights to use assets) within contractually binding arrangements in all
industries under which a vendor will perform multiple revenue-generating
activities, except as defined within the EITF. The Company believes this EITF
will not have a material effect on the consolidated financial statements.
The FASB published FIN 45, Guarantor's Accounting and Disclosure
requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others, on November 25, 2002. The Interpretation
expands on the accounting guidance of Statements No. 5, 57, and 107 and
incorporates without change the provisions of FIN 34, which is being
superseded.
The Interpretation elaborates on the existing disclosure requirements
for most guarantees, including loan guarantees such as standby letters
of credit. It also clarifies that at the time a company issues a
guarantee, the company must recognize an initial liability for the
fair value, or market value, of the obligations it assumes under that
guarantee and must disclose that information in its interim and annual
financial statements. The provisions related to recognizing a
liability at inception of the guarantee for the fair value of the
guarantor's obligations would not apply to product warranties or to
guarantees accounted for as derivatives.
The initial recognition and initial measurement provisions apply on a
prospective basis to guarantees issued or modified after December 31, 2002,
regardless of the guarantor's fiscal year-end. The disclosure requirements in
the Interpretation are effective for financial statements of interim or annual
periods ending after December 15, 2002. The Company believes FIN 45 will not
have a material impact on the consolidated financial statements.
In June 2002, FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 addresses
accounting and processing for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue 94-3. SFAS No. 146
requires the recognition of a liability for a cost associated with an exit
or disposal activity when the liability is incurred versus the date a
company commits to an exit plan. In addition, SFAS No. 146 states the
liability should be initially measured at fair value. The requirements of
SFAS No. 146 are effective for exit or disposal activities that are initiated
after December 31, 2002. The adoption of SFAS No. 146 will not have a
material effect on our consolidated financial position or results of
operations.
Forward Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for certain forward-looking statements. This 10-Q contains forward-
looking statements that reflect the Company's current views with respect to
future events and financial performance. These forward-looking statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from historical results or those anticipated. The words
"aim," "believe," "expect," "anticipate," "intend," "estimate," and other
expressions that indicate future events and trends identify forward-looking
statements. Actual future results and trends may differ materially from
historical results or those anticipated depending on a variety of factors,
including, but not limited to: product mix and volume; competitive pressure on
sales and pricing; increase in material or production cost which cannot be
recouped in product pricing; changes in the sourcing of engines from Suzuki;
warranty expenses; foreign currency exchange rate fluctuations; product
liability claims and other legal proceedings in excess of insured amounts;
environmental and product safety regulatory activity; effects of the weather;
overall economic conditions and consumer demand and confidence.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is subject to certain market risk relating to changes
in interest rates and foreign currency exchange rates. Information
regarding foreign currency exchange rates is discussed within
"Management's Discussion and Analysis -- Inflation and Exchange Rate"
in the 2002 Annual Report and 10-K. Interest rate market risk is
managed for cash and short-term investments by investing in a
diversified frequently maturing portfolio consisting of municipal
bonds and money market funds that experience minimal volatility and
is not deemed to be significant.
Item 4. Controls and Procedures
The Company's management, including the Chief Executive Officer and
Chief Financial Officer, have conducted an evaluation of the effectiveness
of the design and operation of the Company's disclosure controls and procedures
pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 (the "1934
Act") within 90 days prior to the filing date of this quarterly report. Based
on that evaluation, the Company's Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures are
effective in ensuring that information required to be disclosed by the Company
in the reports its files or submits under the 1934 Act is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules
and forms.
There have been no significant changes in internal controls, or in
other factors that could significantly affect internal controls, subsequent
to the date the Chief Executive Officer and Chief Financial Officer completed
their evaluation.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
________________________________________
Exhibit
Number Description
- ------- -----------
3(a) Amended and Restated Articles of Incorporation (3)
of Company
3(b) Restated By-Laws of the Company (1)
4(a) Form of specimen Common Stock Certificate (1)
4(b) Rights Agreement by and between the Company and (4)
Wells Fargo Bank Minnesota, N.A., dated September 17, 2001
10(a) 1989 Stock Option Plan, as amended (3)
10(b) 1995 Stock Option Plan, as amended (3)
10(c) Purchase/Supply Agreement dated as of (1)
March 1, 1985 between Suzuki Motor Co.,
Ltd. and the Company, and related Agreement
on Implementation of Warranty Provision.
10(d) Form of Employment Agreement between the (1)
Company and each of its executive officers
99.1 CEO Certification pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (2)
99.2 CFO Certification pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (2)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months
ended December 31, 2002.
(1) Incorporated herein by reference to the Company's Form S-1
Registration Statement (File Number 33-34984).
(2) Filed with this Form 10-K.
(3) Incorporated herein by reference to the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1997.
(4) Incorporated by reference to Exhibit 1 to the Company's
Registration on Form 8-A filed with the SEC on September 20, 2001.
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, 2003 /s/Christopher A. Twomey
__________________ _________________________
Christopher A. Twomey
Chief Executive Officer
Date: February 14, 2003 /s/Timothy C. Delmore
__________________ _________________________
Timothy C. Delmore
Chief Financial Officer
CERTIFICATIONS
I, Christopher A. Twomey, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Arctic Cat Inc,;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have;
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: February 14, 2003
/s/Christopher A. Twomey
_________________________
Christopher A. Twomey
President and Chief Executive Officer
I, Timothy C. Delmore, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Arctic Cat Inc,;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have;
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: February 14, 2003
/s/Timothy C. Delmore
______________________
Timothy C. Delmore
Chief Financial Officer