Arctic Cat Reports 2005 Third-Quarter Results

THIEF RIVER FALLS, Minn.--Jan. 2, 20050, 2005--

  Earnings Per Share of $0.28 Exceed Expectations for the Quarter; Sales in-Line with Company's Guidance; Company Reiterates Outlook for Record Full-Year Sales and Increased Earnings  



Arctic Cat Inc. today reported net sales of $188.9 million for the fiscal 2005 third quarter ended December 31, 2004, down 3 percent compared to net sales of $194.6 million in the prior-year period. Third-quarter net earnings were $5.8 million, or $0.28 per diluted share, versus net earnings of $9.7 million, or $0.46 per diluted share, in the same period last year. The quarter's results reflect anticipated lower snowmobile sales and a less favorable Japanese foreign currency conversion.

Year-to-date, net sales grew 4 percent to $532.1 million compared to $509.5 million in the year-ago period. Net earnings totaled $25.6 million, or $1.22 per diluted share, versus $31.4 million, or $1.44 per diluted share, in the nine-month period last year.

"ATV sales continue to be our primary growth driver and we are successfully increasing our share of this market," said Christopher A. Twomey, Arctic Cat's chairman and chief executive officer. "During calendar year 2004, Arctic Cat's sales growth again outpaced the industry as we have every year since entering the ATV market."

Sales of all-terrain vehicles (ATVs) in the third quarter grew to $84.1 million, up from $67.1 million in the same period last year. The company's year-to-date ATV sales rose to $223.9 million compared to $190.2 million last year. Production of the first Arctic Cat-designed and built ATV engine, the new 650 H1, is proceeding. The company is currently taking orders for the 650 H1 ATV model and expects to begin shipping this product in the fourth quarter ending March 31, 2005.

Continuing a planned reduction in its fiscal 2005 snowmobile production after several seasons of poor snow conditions, Arctic Cat's snowmobile sales declined in the third quarter to $78.9 million versus $100.9 million in the prior-year quarter. Year-to-date snowmobile sales are on plan, totaling $241.6 million compared to $253.3 million during the same period last year. Arctic Cat has already unveiled its first 2006 model snowmobile, the Crossfire, a versatile hybrid machine designed for both mountain and trail riding.

Unseasonably warm weather through mid-December resulted in poor snow conditions in the East and Midwest, slowing industrywide retail snowmobile sales during the quarter. At the end of December and in early January, Arctic Cat's retail activity began gaining momentum due to snow accumulations in late December and retail sales programs announced earlier in the month. As a result of slightly lower wholesale and lower carryover inventory, overall inventory at the dealer level is manageable at this time.

Parts, garments and accessories (PG&A) sales were $25.8 million versus $26.6 million in the prior-year third quarter. Year-to-date PG&A sales grew to $66.7 million compared to $66.0 million in the year-ago period. These sales have also been adversely affected by the unseasonably warm weather through mid-December, but are expected to recover now that the weather has normalized.

Arctic Cat repurchased 190,000 shares of its common stock in the fiscal third quarter and has approximately $11.6 million remaining on its current share repurchase authorization. At the end of the third quarter ended December 31, 2004, the company reported $84.2 million in cash and no long-term debt.

Company Reiterates Outlook for 2005 Fiscal-Year Growth

"We expect higher sales of ATVs in our fiscal fourth quarter than in previous fourth-quarter periods, leading to record full-year sales and higher earnings," said Twomey.

Arctic Cat expects net sales for the fourth quarter ending March 31, 2005, to range between $155 million and $168 million, compared to $140.2 million for the same period last year. Net earnings for the quarter are estimated to be between $0.24 and $0.29 per diluted share versus a net loss of $0.05 per diluted share in the prior-year period.

For the fiscal year ending March 31, 2005, Arctic Cat anticipates that net sales will grow 5 percent to 8 percent and be in the range of $687 million to $700 million. Full-year diluted earnings per share are estimated to grow 4 percent to 8 percent and be in the range of $1.46 to $1.51.

Conference Call

Arctic Cat will host a conference call today to discuss the second-quarter results at 10:30 a.m. CT (11:30 a.m. ET). To access the replay, dial 800-405-2236 and enter conference call ID 11021926. The audio replay will be available beginning at approximately noon CT on Thursday, January 20, until 6 p.m. CT on Thursday, January 27.

The conference call also will be Webcast. To access the live Webcast, go to the corporate portion of the company's Web site at www.arcticcat.com, and click on the conference call icon.

About Arctic Cat

Arctic Cat Inc. designs, manufactures and markets world-class snowmobiles and all-terrain vehicles (ATVs) under the Arctic Cat(R) brand name, as well as related parts, garments and accessories. Its common stock is traded on the Nasdaq National Market under the ticker symbol "ACAT." More information about Arctic Cat and its products is available on the Internet at www.arcticcat.com.


ARCTIC CAT INC.
Financial Highlights
(000s omitted, except per share amounts) (Unaudited)

                               Three Months Ended   Nine Months Ended
                                  December 31,        December 31,
                               ---------------------------------------
                                 2004      2003      2004      2003
                               --------- --------- --------- ---------
Net Sales                      $188,855  $194,618  $532,122  $509,457
Cost of Goods Sold              151,006   150,637   422,705   390,778
                               --------- --------- --------- ---------
Gross Profit                     37,849    43,981   109,417   118,679
Selling, General and
  Administrative Expenses        29,712    29,945    72,602    73,186
                               --------- --------- --------- ---------
Operating Profit                  8,137    14,036    36,815    45,493
Other Income
  Interest Income                   380       279       783       690
                               --------- --------- --------- ---------
Earnings Before Income Taxes      8,517    14,315    37,598    46,183
Income Taxes                      2,725     4,582    12,031    14,779
                               --------- --------- --------- ---------
Net Earnings                     $5,792    $9,733   $25,567   $31,404
                               ========= ========= ========= =========
Net Earnings Per Share
  Basic                           $0.28     $0.46     $1.24     $1.46
                               ========= ========= ========= =========
  Diluted                         $0.28     $0.46     $1.22     $1.44
                               ========= ========= ========= =========

Weighted Average Shares
  Outstanding:
  Basic                          20,413    21,009    20,649    21,562
                               ========= ========= ========= =========
  Diluted                        20,679    21,316    20,928    21,855
                               ========= ========= ========= =========


                                                     December 31,
                                                 ---------------------
Selected Balance Sheet Data:                        2004       2003
----------------------------                     ---------- ----------
Cash and Short-term Investments                    $84,244    $64,642
Accounts Receivable, net                            42,215     43,066
Inventories, net                                    90,973    103,948
Total Assets                                       305,254    292,721
Current Liabilities                                 97,245     88,914
Long-term Debt                                           0          0
Shareholders' Equity                               190,828    190,674


                        Three Months Ended       Nine Months Ended
                           December 31,             December 31,
                     -------------------------------------------------

Product Line Sales:    2004     2003   Change   2004     2003   Change
----------------------------------------------------------------------

Snowmobiles           $78,891 $100,865   -22% $241,569 $253,293    -5%
All-terrain Vehicles   84,139   67,138    25%  223,869  190,184    18%
Parts, Garments &
 Accessories           25,825   26,615    -3%   66,684   65,980     1%
                     -------------------------------------------------
Total Sales          $188,855 $194,618    -3% $532,122 $509,457     4%
                     =================================================

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