Arctic Cat CEO hope s new HQ, new products ignite turnaround

CEO Chris Metz has checked another item off the to-do list for a successful turnaround of the recreational vehicle maker Arctic Cat.

Employees have started moving into the company's new North Loop headquarters.

Also in the "done" or almost-done category is $27 million in renovations to the company's Minnesota facilities, including a research-and-development center and racing track at its St. Cloud engine plant and a new paint line at the ATV factory in Thief River Falls.

The 2017 lineup includes a new "snow bike" SVX 450, which Metz calls an "industry first," and other advances that answer critics who crowed that the company used to only chase competitors, including Polaris Industries.

Slowly, progress is being made. Still, the struggling company that Metz took over 18 months ago hasn't beaten several factors plaguing the industry as a whole: anemic winters the past few years, the steep drop of the Canadian dollar and a dial-back in demand for recreational vehicles.

"Those three factors have hurt our progress. It has not deterred our spirit," Metz said. "We know we will have a couple of more years where it's going to be hard. But we are sticking to the course. We are sticking to the plan. You will see a lot from us over four years."

Some 40 percent of Arctic Cat's $632 million in sales come from Canada. About 40 percent of sales are from snowmobiles.

A year ago, Metz said he wanted to transform the company image and to drive sales from 2015's $630 million to $1.15 billion by 2020.

The revenue goal will be pushed to 2021. The company lost $9.2 million last fiscal year and another $10.6 million during the first fiscal quarter ended June 30, 2016. Executives insist the drop couldn't be helped. But analysts point out that shareholders are impatient: The stock is now trading at levels not seen since 2011. Shares closed Tuesday at $15.49, compared with $55 in 2014.

Metz expects the move of 85 employees to the newly renovated 108-year-old building at 500 N. 3rd St., which overlooks Target Field, will inject new enthusiasm into the turnaround effort.

"It's a rugged outdoor feel with a lot of concrete, iron and reclaimed wood. This serves as a great recruiting tool for us," Metz said, giving much credit to Latitude, the north Minneapolis design firm that transformed much of the guts of the former Western Container warehouse. Fluid Interiors designed many furniture pieces.

The old warehouse, which now sports a fifth and sixth floor made of glass walls, is owned by Ned Abdul's Swervo Development Corp. and leased to Arctic Cat under a 13-year agreement.

The site, which features giant racing graphics on tall, first-floor windows, is a far cry from the nondescript office tower that Arctic Cat left in Plymouth.

On a tour, Metz pointed to the 15-foot ceilings, caged lights, steel barn doors and the open staircase made of reclaimed wood and steel where a giant freight elevator once stood.

Old Arctic Cat logos decorate the building's original freight doors, which now serve as massive wall hangings. A large snowmobile hangs suspended above the open staircase from the fifth floor. A beefy off-road vehicle graces the landing along with a giant rock. Big open windows stream in light and give full views of downtown's northern skyline.

"It's just bigger and cool. The light gives good energy," said executive assistant Theresa Pappas, pointing out the future product showroom, part of which will be visible from the street along with large video screens featuring Arctic Cat races.

Sitting in the sprawling new conference room adjacent to his office, Metz shows a visitor why he remains enthused and convinced that Arctic Cat can go the distance. It's all about new products, he said.

With a smile, Metz hit the play button Tuesday to show footage of a professional driver bounding effortlessly over snowbanks in that new SVX 450 snow bike.

"It's an industry first in which the rear of the machine is pure snowmobile track. [The front sports a single thick] ski and the middle of it is like a dirt bike," he said, adding that it rides a lot like a motorcycle.

"No one has ever delivered a trail-legal manufactured snow bike. We took the best of a dirt bike and a snowmobile and married them together. It's smaller and more nimble," Metz said. "This is a hero product that will make people look at us differently."

It ships to dealers in December.

Arctic Cat's other "hero" new product, Metz said, is a redesigned Wildcat X four-wheeler. It features more horsepower and a new bounding suspension system designed by NASCAR racer Robby Gordon. The shock-absorbing suspension makes wheels angle upward instead of stressing outward with each heavy landing.

"This hugs the surface of the ground, makes it more stable and avoids the 'tire scrubbing' " that riders despise, Metz said. Shipments begin next year.

"I would fully expect that as we start [delivering] our new products this spring, you will begin to see the beginning of our growth," Metz said. "I love what we are working on. I can't wait to get some of it to market and share the excitement."

Dee DePass • 612-673-7725