First quarter net sales totaled $104.9
million;Net loss $0.81 per share;Continued progress
made on strategies to reposition company;ATV/ROV dealer
inventory down 9 percent;Company maintains fiscal 2017
revenue outlook, lowers EPS guidance on a weaker powersports
market, increased promotional costs and unfavorable product
mix
Arctic Cat Inc. (NASDAQ: ACAT) today 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, 2016. 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, Arctic Cat’s president and chief executive
officer, stated: “As expected, Arctic Cat’s first-quarter sales
were lower compared to the year-ago quarter. Importantly, we made
progress 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 competitive retail environment that led to higher
promotional spending than planned.”
Commenting further, Metz said: “We continue 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 Arctic Cat’s dealer network; ramping up
end-user focused new products; pursuing strategic partnerships; and
creating a brand marketing powerhouse.
First-Quarter Operating
ReviewArctic 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 quarter. Unfavorable foreign currency exchange
reduced net sales in the quarter by approximately 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 compared to $24.1 million in the
year-ago quarter. 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 development investments. Operating loss in the 2017 first
quarter was $17.3 million versus an operating loss of $1.5 million
in the same quarter last year.
Arctic Cat ended the 2017 first quarter with cash and cash
equivalents totaling $13.5 million at June 30, 2016, 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.
Business Line
ResultsATVs/ROVs – Sales of Arctic Cat’s
all-terrain vehicles (ATVs) and recreational off-highway vehicles
(ROVs) in the 2017 first quarter totaled $43.7 million, down 17.3
percent compared to prior-year sales of $52.9 million. While sales
of Arctic Cat’s side-by-side ROVs remained strong, including the
Wildcat™, core ATV sales decreased as planned, as the company
continued to lower core ATV inventory at its North America dealers.
The company succeeded in decreasing ATV/ROV dealer inventory by
approximately 9 percent in the fiscal 2017 first quarter.
As part of Arctic Cat’s aggressive new product development
plans, the company introduced the first wave of its 2017 model year
ATVs and ROVs, including six all-new models and a total of 27
class-leading machines for all categories of off-road work and
play. These new 2017 models include the versatile and powerful HDX™
Crew six-passenger utility vehicle, the Prowler utility vehicle and
the Alterra™ TRV® with 2-up passenger seating.
Commented Metz: “Consumers are very enthusiastic about our
newest offerings, such as the HDX Crew and Prowler 500 utility
side-by-sides. These vehicles provide innovative features at a
great value. Our latest introductions are fueling sales and provide
an indicator of what launching exciting new products can do for our
business. Further, we continue to make progress on implementing our
new product roadmap. Within the current 2017 fiscal year, we expect
to unveil the first of these industry-leading new products, with
continued new product introductions thereafter.”
Snowmobiles – Snowmobile sales in the fiscal 2017 first
quarter were down 30.4 percent to $40.5 million versus $58.2
million in the prior-year quarter, chiefly stemming from the timing
of shipments. Commented Metz: “At our March dealer show, we
launched one of our most exciting snowmobile lines in years, with
many award-winning models. We believe we are well positioned for
retail growth in our snowmobile business this year.”
Parts, Garments & Accessories – 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 overall 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.
Fiscal 2017 Full-Year
OutlookCommenting on the company’s outlook, Metz stated:
“We face ongoing challenges in fiscal 2017, with a soft and
increasingly competitive powersports marketplace, and continued
foreign currency headwinds. Yet, we see tremendous growth
opportunities through new product innovation and strategic
partnerships. We are highly encouraged by the progress we are
making in these areas and we expect contributions from each in the
near future. As we invest to support our strategic initiatives, we
remain intensely focused on controlling costs.”
For the fiscal year ending March 31, 2017, Arctic Cat is
maintaining its estimated full-year net sales in the range of $635
million to $655 million, assuming a favorable foreign currency
exchange impact on sales in the range of $2 million to $5 million.
The company is lowering its anticipated fiscal 2017 full-year net
earnings to range from a loss of $0.70 per share to $1.00 per
share, due to a weaker powersports market, increased promotional
costs and unfavorable product mix. Previously, Arctic Cat estimated
its fiscal 2017 full-year net earnings to range from a loss of
$0.39 per share to earnings of $0.08 per diluted share. Continued
foreign currency exchange headwinds in fiscal 2017, driven by the
year-over-year impact of foreign currency exchange hedge losses,
are estimated to reduce net earnings in the range of $0.42 to $0.53
per share compared to fiscal 2016. The company expects to end
fiscal 2017 with little to no long-term debt. For the prior fiscal
2016 full year, the company’s loss per share totaled $0.71 on net
sales of $632.9 million.
“Excluding the impact of foreign currency headwinds, we expect
the company’s fiscal 2017 net loss to improve by approximately
$0.33 per share over fiscal 2016, at the mid-point of our earnings
guidance range, as we begin to grow sales and expand gross
margins,” Metz said. “Assuming macroeconomic conditions are stable,
we anticipate further accelerating sales, earnings and gross margin
expansion next fiscal year, as our strategic initiatives begin to
take hold.”
In the first half of fiscal 2017, Arctic Cat expects that its
net sales will be down 12 percent to 15 percent, as the company
continues efforts to improve dealer inventory and prepares to
launch new products and other strategic initiatives. Arctic Cat
expects stronger financial results in the second half of the year
to be driven by new product launches that will begin in the fiscal
2017 third quarter, with the majority of new products to be
launched in the fiscal 2017 fourth quarter.
Arctic Cat’s fiscal 2017 financial outlook includes the
following assumptions:
- ATV/ROV wholesale sales flat to up
low-single digits; snowmobile sales down low-single digits; and
PG&A sales flat to up low-single digits;
- Positive foreign currency impact on
sales for the full year in the range of $2 million to $5 million,
assuming a Canadian dollar at $1.29, compared to an average rate in
fiscal 2016 of $1.31;
- Negative foreign currency exchange
hedge losses for the full year in the range of $4 million to $6
million, versus foreign currency exchange hedge gains of $7.6
million in fiscal 2016, are expected to result in a net
year-over-year increase in operating expenses of $12 million to $14
million. The company estimates that 70 percent to 80 percent of the
net Canadian dollar exposure is hedged at an average rate of $1.34
in fiscal 2017;
- Gross margin in the range of
approximately 15.5 percent to 16.5 percent;
- R&D expense of approximately 4.5
percent of sales, as the company continues to ramp up its
investment in end-user focused new products; and
- Capital expenditures in the range of
$30 million to $35 million.
Added Metz: “Our focus this fiscal year is to continue to
rebuild and reposition the company for a return to long-term
growth. We remain confident in our strategic plans to turn the
business around and excited about Arctic Cat’s long-term
future.”
Conference CallA conference
call is scheduled for 10 a.m. CT (11 a.m. ET) today. To listen to
the conference call by phone, dial 888-438-5448 in the U.S. and
Canada, or 719-457-2645 internationally. The conference ID number
is 4889270. A telephone replay will be available until Friday,
August 5, 2016, at 888-203-1112. To access the live webcast or
webcast replay, go to www.arcticcat.com, investors, and click on
the webcast icon.
About Arctic CatThe Arctic
Cat brand is among the most widely recognized and respected in the
recreational vehicle industry. The company designs, engineers,
manufactures and markets all-terrain vehicles (ATVs), side-by-sides
and snowmobiles, in addition to related parts, garments and
accessories under the Arctic Cat® and Motorfist® brand names.
Arctic Cat Inc. is headquartered in Minneapolis, Minnesota. Its
common stock is traded on the NASDAQ Global Select Market under the
ticker symbol “ACAT.” More information about Arctic Cat and its
products is available at www.arcticcat.com.
Forward-Looking
StatementsThe Private Securities Litigation Reform Act
of 1995 provides a safe harbor for certain forward-looking
statements. The company’s Annual Report, as well as the Report on
Form 10-K, its Quarterly Reports on Form 10-Q and other filings
with the Securities and Exchange Commission, the company’s press
releases and oral statements made with the approval of an
authorized executive officer, contain 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 including statements related to our fiscal 2017 outlook,
business strategy, strategic partnerships, performance
opportunities, expected inventory reductions, product introductions
and demand, expected expenses, market position, and the impact of
foreign currency exchange rates. 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
those set forth in the company’s Annual Report on Form 10-K for the
year ended March 31, 2016, under heading “Item 1A. Risk Factors”
and factors described in the company’s subsequent filings with the
Securities and Exchange Commission. The company does not undertake
any obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise.
ARCTIC CAT INC. Financial Highlights ($ in thousands, except
per share amounts) (Unaudited and subject to reclassification)
Three Months Ended June 30,
Statements of Operations: 2016
2015 Net Sales Snowmobile and ATV/ROV units $ 84,277 $
111,105 Parts, garments and accessories 20,595
23,276 Total net sales 104,872 134,381 Cost of Goods Sold
Snowmobile and ATV/ROV units 80,678 96,957 Parts, garments and
accessories 12,437 14,862 Total cost of
goods sold 93,115 111,819 Gross Profit
11,757 22,562 Operating Expenses Selling and marketing 9,192 8,955
Research and development 7,858 6,003 General and administrative
12,015 9,151 Total operating expenses
29,065 24,109 Operating Loss (17,308 )
(1,547 ) Other Income (Expense) Interest income 2 - Interest
expense (212 ) (114 ) Total other expense (210
) (114 ) Loss Before Income Taxes (17,518 ) (1,661 ) Income
Tax Benefit (6,966 ) (605 ) Net Loss $ (10,552 ) $
(1,056 ) Net Loss Per Share Basic $ (0.81 ) $ (0.08 ) Diluted $
(0.81 ) $ (0.08 ) Weighted Average Shares Outstanding: Basic
13,047 12,958 Diluted 13,047
12,958
June 30, Selected
Balance Sheet Data: 2016 2015 Cash and
Short-term Investments $ 13,509 $ 20,278 Accounts Receivable, net
45,039 40,088 Inventories 179,556 169,543 Total Assets 355,491
333,499 Total Current Liabilities 134,347 108,394 Long-term Debt
50,047 30,877 Shareholders' Equity 157,887 179,501
Three Months Ended June 30, Product
Line Data: 2016 2015
Change
Snowmobiles $
40,537
$
58,231
(30.4)%
ATV/ROV Vehicles
43,740
52,874
(17.3)%
Parts, Garments & Accessories 20,595
23,276
(11.5)%
Total Sales $ 104,872 $
134,381
(22.0)%
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160729005109/en/
Arctic Cat Inc.Christopher Eperjesy, 763-354-1791Chief Financial
Officerceperjesy@arcticcat.comorPadillaCRTShawn Brumbaugh,
612-455-1754shawn.brumbaugh@padillacrt.com
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