Cycle Country Accessories Corp. (AMEX:ATC), announced its preliminary, unaudited financial results today for the quarter and year ended September 30, 2011.
For the full year, the Company announced a net loss of ($4,200,422) compared to a net loss in the prior fiscal year of ($2,023,903). Included in this year’s losses are non-recurring expenses of $2,554,245, made up significantly of non-cash charges to impair inventory and fixed assets as a result of the Company’s divestiture of its ATV Accessories and Perf-Form Oil Filter Product Lines.
As previously discussed in the Company's SEC filings, the Company has undergone a substantial restructuring of its business since January 1, 2011. The Company sold two of its reportable business segments, and mitigated its losses in one other by selling its plastic injection molding operations which were inefficient to operate. The Company now outsources the production of that business line. However, the company will continue to operate its metal manufacturing plant for all of its OEM and other contract metal fabrication clients.
The Company incurred a substantial impairment charge against inventory, fixed assets, and other intangible assets for the full year and for the fourth quarter, resulting primarily from the sale of the company's ATV Accessories Product Line to Kolpin Outdoors Inc. (“Kolpin”). This transaction was announced September 1, 2011, and closed on December 30, 2011. Because the Company will no longer control the production of that Product Line beyond March 31, 2012, the termination date of the current Master Supply Agreement between the Company and Kolpin, the Company felt it necessary to take a substantial charge against the inventories on hand that would be deemed to be excess or obsolete once the Kolpin transaction closes and the Company no longer controls the manufacturing of the Product Line. A portion of this charge of approximately$2,000,000 for inventory impairment and approximately $500,000 for fixed asset and other intangible asset impairment could potentially be recaptured in subsequent periods if the Company is able to successfully negotiate a continuation of the Master Supply Agreement with Kolpin.