Issue link: https://read.dmtmag.com/i/592917
www.PowersportsBusiness.com ATV/UTV Powersports Business • November 9, 2015 • 31 Metz: Arctic Cat on plan with ATV dealer inventory Fiscal Q2 2016 net sales decline Arctic Cat Inc. (NASDAQ: ACAT) reported net earnings of $11.2 million, or $0.85 per diluted share, on net sales of $211.2 million for the fis- cal 2016 second quarter ended Sept. 30, 2015. In the prior-year quarter, Arctic Cat reported net earnings of $15.4 million, or $1.18 per diluted share, on net sales of $262.5 million. Christopher Metz, Arctic Cat's president and chief executive offi- cer, stated: "The com- pany executed well in the second quarter on our strategies to reposi- tion the business for a return to growth in fiscal 2017 and beyond. How- ever, sales and earn- ings in the quarter were dampened by a greater than anticipated Cana- dian currency exchange impact and a softer ATV/ROV retail market industry-wide." Commenting further, Metz said: "Dur- ing the second quarter, we introduced new ATV/ROV products to dealers in August and unveiled exciting product and marketing initia- tives, including our exclusive partnership with racer Robby Gordon and his SPEED brand. Under this agreement, we will bring innovative side-by-side and accessory products to market. "Additionally, our effort to right size our core North America ATV dealer inventory is on track through the first six months of this fiscal year. The significant reductions we achieved in the first quarter allowed us to introduce new products in the second quarter without increasing overall inventory levels. We remain committed to further reducing non-current inventory to enable a return to wholesale and retail growth of new products next fiscal year." The company's key strategies to reinvigo- rate growth under new management include: dramatically improving Arctic Cat's dealer network; ramping up end-user focused new products; pursuing OEM partnerships and bolt-on acquisitions; and creating a brand marketing powerhouse. OPERATING REVIEW Arctic Cat's fiscal 2016 second-quarter net sales of $211.2 million were down 19.6 percent com- pared to strong prior-year sales of $262.5 mil- lion. Unfavorable foreign currency exchange reduced net sales by approximately 6.7 percent. Slightly higher sales in the ATV/ROV segment during the quarter primarily were driven by demand for Wildcat side-by-sides; this was not enough to offset lower sales of snowmobiles, and parts, garments and accessories. Gross profit and gross profit margin in the fiscal 2016 second quarter were approximately $43.9 million and 20.8 percent, respectively, compared to $55.1 million and 21.0 percent, respectively, in the prior-year quarter, resulting mainly from lower sales volumes and foreign currency exchange impact. Approximately $14.1 million, or $0.64 per diluted share, of the year-over-year reduction in gross profit was due to unfavorable foreign currency exchange rates. Operating profit in the 2016 second quarter was $18.7 million versus operating profit of $24.1 million in the same quarter last year. Arctic Cat ended the fiscal 2016 second quarter with cash and cash equivalents total- ing $10.7 million, as planned, compared to $24.0 million a year ago. The company contin- ued to make investments in the business to lay the foundation for future growth and improve efficiency. For the six months ended Sept. 30, 2015, Arctic Cat's net earnings were $10.1 mil- lion, or $0.77 per diluted share, compared to $19.0 million, or $1.45 per diluted share, in the prior-year period. Year to date, the com- pany's net sales totaled $345.5 million versus $406.1 million in the year-ago first six months. BUSINESS LINE RESULTS Sales of Arctic Cat's all-terrain vehicles and side-by-side recreational off-road vehicles in the fiscal 2016 second quarter totaled $70.8 million, up 1.7 percent compared to See Arctic Cat, Page 32 Wholesale sales of the Wildcat lifted Arctic Cat's ATV and side-by-side business growth by 1.7 percent in the 2016 fiscal second quarter, compared to the year-ago quarter. CHRISTOPHER METZ