The Disappearing Arctic Cat

Feb.22.08 | About: Arctic Cat (ACAT)

Arctic Cat could be an endangered company. I use the word "company" and not "species" as I am referring to Minnesota-based Arctic Cat Inc. (NASDAQ:ACAT), maker of snowmobiles and ATVs.

The company has a strong history of poaching its own shares. Here are the numbers:

Year Shares Outstanding (mm)
3/07 18.4
3/06 19.4
3/05 20.1
3/04 21.0
3/03 22.0
3/02 23.3
3/01 23.8
3/00 24.9
3/99 26.4
3/98 28.4

The trend continues with another $10 million buyback announced in January. Factor in a 3.2% dividend yield and a 2 year sell off which brought the stock from $26 to under $9 currently and you have the beginning of an investment thesis.

Of course there's also what to worry about regarding consumer spending on discretionary items, and the lack of cash on the company's balance sheet. With 34% of the float short, I don't doubt that there's a valid bear case here too.

Are there any snowmobilers out there to chime in?