Arctic Cat Chairman and CEO Claude Jordan unexpectedly stepped down Monday and the company announced that former top executive Christopher Twomey will take over both leadership roles on an interim basis.
The management shake-up comes two weeks after the Plymouth-based maker of all-terrain vehicles and snowmobiles reported a third disappointing quarter and again lowered revenue expectations for the rest of the year.
In recent months, profits were clipped by unfavorable currency rates in Arctic Cat’s critical Canadian market and by costs associated with a new co-branding partnership with Yamaha Corp. Those problems hurt results just when it appeared the maker of ATVs and snowmobiles had recovered from a disastrous recession. In 2009, Arctic Cat’s stock traded for just $3.88. During the last year it catapulted to $61 a share, but sunk 9 percent Monday to close at $34.02 a share as investors digested the news of Jordan’s departure.
Robert W. Baird equity analyst Craig Kennison said the management change was unexpected, and he downgraded Arctic Cat’s stock to neutral. “Billed as a mutual decision, the development is a disappointment for investors that see value in the Arctic Cat franchise,” Kennison said. “We expect the stock to struggle until a succession plan is resolved.”
Jordan, a former Home Depot and General Electric executive, joined Arctic Cat in August 2008 as the company’s president and chief operating officer. He became CEO of Arctic Cat in January 2011, succeeding Twomey. In January 2012, Jordan added the chairman role while Twomey remained on the board. Now, Twomey’s retaking the helm.
“On behalf of the board, I want to thank Claude for nearly six years of services to Arctic Cat,” Twomey said in a statement. “During his tenure, Arctic Cat has grown from $465 million to over $700 million in annual sales, and the company entered the growing sports segment of the Recreational Off-Highway Vehicle market,” which involves increasingly popular “side-by-side” ATVs.
Twomey will become the interim chairman and CEO while the company begins a search for a permanent chief executive. In a related move, the company said its longtime chief financial officer, Timothy Delmore, has agreed to postpone his previously announced retirement and will stay on during the transition period.
Kennison at Robert W. Baird said he spoke to Twomey after the news and noted that “Mr. Twomey struck an energetic tone, noting a number of opportunities to build on the product momentum during the last couple of years” that includes new engines and side-by-side vehicles.
Twomey and Delmore’s longtime relationship with the company should “help during the transition,” but Kennison added “we believe a more orderly succession plan would have served the best interest of shareholders. ... After a turbulent few quarters, investors crave stability in our view.”
The company has hired an executive search firm and intends to fill both the CEO and president vacancies, company officials said.
Twomey, 66, served as CEO from January 1986 to December 2010 and has been a director of the company since 1987. He led the company through its initial public offering in 1990.
Twomey said in a statement that Arctic Cat plans to record a charge in the first quarter to cover severance-related costs. “Excluding the severance, we are maintaining our fiscal 2015 guidance,” Twomey said. “The company is in a strong financial shape and the board has every confidence in Arctic Cat’s long-term growth prospects.”
On Friday, the company released its preliminary proxy statement, which showed Jordan’s compensation for the year was $9.98 million, $8.8 million of which was from previously issued stock options that Jordan exercised last year. His annual bonus was 60.4 percent less than the previous year because the company’s financial performance was less than expected.
According to the proxy, Jordan will be eligible for approximately $3.8 million in involuntary, not-for-cause termination pay.