Issue link: https://read.dmtmag.com/i/719034
FINANCIAL Arctic Cat Inc. (NASDAQ: ACAT) in late July reported a net loss of $10.6 million, or $0.81 per share, on net sales of $104.9 million for the fiscal 2017 first quarter ended June 30. The impact of unfavorable foreign currency exchange movements year-over-year was $0.20 per share. In the prior-year quarter, Arctic Cat reported a net loss of $1.1 million, or $0.08 per share, on net sales of $134.4 million. Christopher Metz, A r c t i c C a t ' s p r e s i - dent and chief execu- tive officer, stated: "As expected, Arctic Cat's first-quarter sales were lower compared to the year-ago quarter. Impor- tantly, we made prog- ress on reducing dealer inventory and further strengthened and expanded our dealer base, despite a weaker powersports market and continued foreign currency headwinds. However, the first-quarter per share loss was greater than anticipated, chiefly due to the timing of snowmobile shipments that shifted to the second quarter, as well as a more com- petitive retail environment that led to higher promotional spending than planned." Commenting further, Metz said: "We con- tinue to focus on implementing our strategies and are encouraged by the significant progress we are making to reposition the company for long-term growth. We anticipate reporting stronger financial results in the second half of this fiscal year, driven by planned new product launches and contributions from our other key strategic initiatives." The company's strategies to reinvigorate growth include: dramatically improving Arc- tic Cat's dealer network; ramping up end-user focused new products; pursuing strategic partnerships; and creating a brand marketing powerhouse. Arctic Cat's fiscal 2017 first quarter net sales were down 22.0 percent to $104.9 million versus $134.4 million in the prior-year quar- ter. Unfavorable foreign currency exchange reduced net sales in the quarter by approxi- mately 1.6 percent. Gross profit and gross profit margin in the 2017 first quarter were approximately $11.8 million and 11.2 percent, respectively, compared to $22.6 million and 16.8 percent, in the prior-year quarter. Lower sales volumes and unfavorable foreign currency exchange impact reduced gross profit by approximately $1.6 million, or $0.08 per share. Operating expenses in the fiscal 2017 first quarter were approximately $29.1 million com- pared to $24.1 million in the year-ago quar- ter. The year-over-year increase was chiefly attributable to unfavorable foreign currency exchange rates totaling $2.7 million, with the remainder primarily due to research and devel- opment investments. Operating loss in the 2017 first quarter was $17.3 million versus an operating loss of $1.5 million in the same quar- ter last year. Arctic Cat ended the 2017 first quarter with cash and cash equivalents totaling $13.5 million at June 30, compared to $20.3 million a year ago. The company continued to make investments in the business to lay the foundation for future growth and to improve efficiency. Sales of Arctic Cat's all-terrain vehicles (ATVs) and recreational off-highway vehi- cles (ROVs) in the 2017 first quarter totaled $43.7 million, down 17.3 percent compared to prior-year sales of $52.9 million. Snowmobile sales in the fiscal 2017 first quarter were down 30.4 percent to $40.5 million versus $58.2 mil- lion in the prior-year quarter, chiefly stemming from the timing of shipments. Sales of parts, garments and accessories (PG&A) in the fiscal 2017 first quarter were down 11.5 percent to $20.6 million versus $23.3 million in the prior-year quarter. The decline is primarily attributable to an over- all weakening of the powersports market, as well as lower pre-season sales of snow-related items, resulting from poor snowfall last winter in key geographies. PSB 8 • September 6, 2016 • Powersports Business www.PowersportsBusiness.com Arctic Cat reports another Q1 net loss STOCK MARKET WATCH Stock Price Percent Company Ticker 8/12/16 Change Spy Inc. XSPY $0.18 80.0% ArvinMeritor ARM $10.25 28.0% Cooper Tire & Rubber CTB $33.93 12.1% Honda Motor Corp. ADR HMC $29.15 8.4% Harley-Davidson, Inc. HOG $53.72 7.5% Polaris Industries, Inc. PII $94.84 -2.2% Assurant, Inc. AIZ $85.19 -2.8% ARI Network Services, Inc. ARIS $4.26 -14.6% Arctic Cat, Inc. ACAT $15.37 -15.2% Universal Technical Institute UTI $2.16 -16.3% POWERSPORTS BUSINESS WINNERS AND LOSERS MARKET WATCH Change 8/12/16 from 7/22 % Change Powersports Business Index 248.694 -4.43 -1.74% Dow Jones Index 161.575 0.05 0.03% S&P 500 Index 148.651 0.61 0.41% Source: Wells Fargo Securities LLC 0 50 100 150 200 250 300 12/31/15 1/22/16 2/19/16 3/1 1/16 4/8/16 4/29/16 5/20/16 6/17/16 7/22/16 8/12/16 PSB INDEXED VALUE DOW JONES INDEXED S&P 500 INDEXED STOCK MARKET ACTIVITY DEALER FINANCIAL SNAPSHOT JULY 2016 Same Store Sales for 1,590 CDK Global Recreation dealers were down 4.5 percent overall compared to July 2015 numbers. The Midwest saw the largest decrease in overall sales, down 6.7 percent, while the Northwest, down 4.7 percent, and West, down 4.6 percent, followed. The Northeast had the small- est decrease, down 2.9 percent overall. The West was the only region to experience no change in its service department sales. PARTS SALES In parts, 472 dealers were up, while 1,118 were down. SERVICE SALES Service saw 756 dealers increase and 809 decrease sales. MAJOR UNIT SALES 660 dealers were up, while 788 were down in major unit sales. NORTHWEST -8.4% Parts Department -5.4% Service Department -4.0% Major Units -4.7% Overall MIDWEST -15.3% Parts Department -2.9% Service Department -5.3% Major Units -6.7% Overall NORTHEAST -11.3% Parts Department -3.0% Service Department -1.6% Major Units -2.9% Overall SOUTH -11.5% Parts Department -0.4% Service Department -1.7% Major Units -3.4% Overall WEST -10.1% Parts Department 0.0% Service Department -4.2% Major Units -4.6% Overall UNITED STATES -11.8% Parts Department -1.8% Service Department -3.2% Major Units -4.5% Overall FOR MORE ON THE SAME STORE SALES DATA For more information on this report and other industry data, contact: cdkrecreation.com/dataservices CHRISTOPHER METZ