Arctic Cat Inc. (NASDAQ:ACAT) today reported a net loss of $1.1 million, or $0.08 per diluted share, on net sales of $134.4 million for the fiscal 2016 first quarter ended June 30, 2015. In the prior-year quarter, Arctic Cat reported net earnings of $3.6 million, or $0.27 per diluted share, on net sales of $143.6 million.
Commented Christopher Metz, Arctic Cat’s president and chief executive officer: “We made continued progress in the first quarter against our stated goals to reposition the business for growth and clean up the inventory overhang. In particular, we saw encouraging trends in the company’s core North America ATV dealer inventory levels and gained further market share. We remain focused on partnering with our dealers to aggressively reduce non-current inventory and provide marketing support, enabling a return to wholesale and retail growth of new, innovative products.”
Added Metz: “During the first quarter, we implemented initiatives to fuel product innovation and growth, speed organizational change and leverage our efficiency. We are confident that we have the strategy and a talented team to execute. We remain on track with our stated long-range plan.”
The company’s key strategies under new leadership aim to: dramatically improve its dealer network; ramp up end-user focused new products; pursue OEM partnerships and bolt-on acquisitions; and create a brand marketing powerhouse.
Arctic Cat’s fiscal 2016 first quarter net sales were down 6 percent to $134.4 million and in line with the company’s expectations versus $143.6 million in the prior-year quarter. Contributing to the 2016 first quarter sales were OEM snowmobile shipments and the Wildcat™ recreational off-highway vehicle (ROV) line, led by the Wildcat Trail side-by-side model.
Gross profit and gross profit margin in the 2016 first quarter were approximately $22.6 million and 16.8 percent, respectively, compared to $30.8 million and 21.4 percent, respectively, in the prior-year quarter, primarily due to anticipated lower sales volumes and foreign currency exchange impact. Approximately $6.6 million, or $0.33 per diluted share, of the year-over-year reduction in gross profit was due to unfavorable foreign currency exchange rates. Operating loss in the 2016 first quarter was $1.5 million versus operating profit of $5.6 million in the same quarter last year.
Arctic Cat ended the 2016 first quarter with cash and cash equivalents totaling $20.3 million at June 30, 2015, compared to $24.3 million a year ago.
Business Line Results
ATVs/Side-by-Sides – Sales of Arctic Cat’s ATVs and side-by-side ROVs in the 2016 first quarter totaled $52.9 million, down 17 percent compared to prior-year sales of $63.8 million. While sales of Wildcat ROVs remained strong, core ATV sales decreased as planned, as the company continued to lower core ATV inventory at its North America dealers.
“Exciting new product development plans are on track,” said Metz. “In addition, we will be unveiling key initiatives to our wheeled product dealers at our dealer show in August.”
Snowmobiles – Snowmobile sales in the fiscal 2016 first quarter totaled $58.2 million, up 4 percent versus $56.2 million in the prior-year quarter, chiefly due to the timing of OEM shipments.
Parts, Garments & Accessories – Sales of parts, garments and accessories (PG&A) in the fiscal 2016 first quarter were down 2 percent to $23.3 million versus $23.7 million in the prior-year quarter. In March 2015, Arctic Cat announced it completed the acquisition of privately held MotorFist, LLC, a manufacturer of high-performance technical riding gear. The acquisition complements Arctic Cat’s garment and riding-gear business.
Commented Metz: “The integration of our MotorFist acquisition is proceeding smoothly. We expect sales of MotorFist branded products to contribute to our PG&A business in fiscal 2016.”
Fiscal 2016 Full-Year Outlook
Arctic Cat is maintaining its fiscal 2016 full-year guidance. For the fiscal year ending March 31, 2016, Arctic Cat estimates full-year net sales in the range of $690 million to $705 million, assuming an unfavorable foreign currency exchange impact on sales in the range of $12 million to $15 million pre-tax. Arctic Cat expects fiscal 2016 full-year net earnings to increase and be in the range of $0.80 to $0.95 per diluted share, after reflecting unfavorable foreign currency exchange rates. Foreign currency exchange headwinds are estimated to negatively impact gross profit and reduce net earnings in the range of $0.60 to $0.70 per diluted share, which will only partially be offset by the company’s hedging strategy.
Stated Metz: “As we’ve said, our focus over the next year is to rebuild and reposition the company for a return to long-term growth in fiscal 2017 and beyond. To achieve this, a key priority remains rightsizing our core North America ATV dealer inventory levels during fiscal 2016. We believe that we have strong strategic plans to turn the business around. Our strong balance sheet gives us the flexibility to make investments to grow the business through innovative products, strategic and OEM partnerships, and bolt-on acquisitions. Although we face significant challenges in fiscal 2016, including continued foreign currency headwinds, we see tremendous opportunities to improve the company’s operations, expand gross margins and enhance financial performance over time. We are excited about Arctic Cat’s long-term future.”Click here for reuse options!
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