Issue link: https://read.dmtmag.com/i/458425
10 • January 26, 2015 • Powersports Business FINANCIAL www.PowersportsBusiness.com Wells Fargo Securities analyst Tim Conder initiated coverage of Arctic Cat stock last month with a "Market Perform" rating, according to a research note provided to Powersports Business. Conder reports that concerns include "(1) elevated Off-Road Vehicle (ORV) chan- nel inventory, (2) weakened dealer relations, (3) quality issues, (4) outstanding litigation/ regulation, and (5) int'l/FX headwinds." Conder adds that new CEO Christopher Metz "is undertaking a broad reassessment of the company's strategy and approach to execution issues, with detail expected early in April 2015. Top priorities include (1) mending strained dealer relations and the channel inventory approach, (2) reinvent- ing the product development process, and (3) improving working capital. Longer term, we believe ACAT will focus on expanding its product coverage, further penetrating existing and new markets and executing on operational excellence initiatives to drive longer-term profitable growth." AFC PARENT GROWS SECURITIZATION FACILITY Carmel, Ind.-based KAR Auction Services, Inc. announced last month that its subsid- iaries Automotive Finance Corporation (AFC) and AFC Funding Corporation (AFC Funding), have entered into Amend- ment No. 3 to the Fifth Amended and Restated Receivables Purchase Agreement by and among AFC; AFC Funding; Fairway Finance Company, LLC; Chariot Fund- ing LLC; Deutsche Bank AG, New York Branch; BMO Harris Bank N.A.; Fifth Third Bank; JPMorgan Chase Bank, N.A.; and BMO Capital Markets Corp. The amendment increases AFC Funding's U.S. committed liquidity from $800 million to $950 million. Commenting upon the amendment to the securitization agreement, John Ham- mer, CEO and president of AFC, said, "I'm extremely grateful to our banking partners for their confidence in AFC as demonstrated by this larger securitization facility, secured through June 2016. Not only does this amend- ment to our securitization facility strengthen AFC's capabilities as a premier floorplan fund- ing source throughout the United States, but more importantly, it underscores our commit- ment to all our dealer customers." ANALYST OFFERS 2015 VIEWS ON SLINGSHOT, INDIAN In a research note titled "Leisure, Gaming & Lodging: Our Top 10 Predictions for 2015," UBS Investment Research analyst Robin Farley provides a look at the lodging, gam- ing, cruise lines and powersports sectors. Powersports garnered the No. 8, 9 and 10 spots in the lineup. Here's how Farley assessed the coming year: "8. Indian motorcycles will continue to grow share in the U.S. superheavyweight market, following around 1 percent, we esti- mate that Indian achieved in its first full year in 2014, in our view. 9. We estimate shipments of Polaris' Slingshot will ramp significantly from Q4 levels of around 800 est. units, as we move through 2015E. 10. We believe Polaris' ACE vehicle, which could be described as an ATV with side-by- side features, or like a single-seat version of a SSV, will catch on with the consumer. While ACE may not have been an out-of-the-gate hit like Slingshot, we believe as customer aware- ness ramps up, this vehicle will benefit from some of the same demographic trends that have driven SSV sales." PSB DIGEST Arctic Cat stock added to Wells Fargo Securities coverage lineup The Polaris Sportsman Ace figures to find success similar to Polaris side-by-sides in 2015, according to a UBS Investment Research analyst. Arctic Cat's "elevated ORV channel inventory" was noted as a concern by Wells Fargo Securities analyst Tim Conder in his initiation of Arctic Cat stock coverage.