Arctic Cat Reports 2006 Third-Quarter Results

THIEF RIVER FALLS, Minn.--Jan. 24, 2006--Arctic Cat Inc. today reported net sales of $195.3 million for the fiscal 2006 third quarter ended December 31, 2005, up 3 percent compared to net sales of $188.9 million in the prior-year period. Third-quarter net earnings were $4.7 million, or $0.24 per diluted share, versus net earnings of $5.8 million, or $0.28 per diluted share, in the same period last year.

Year-to-date, net sales grew 9 percent to $579.5 million compared to $532.1 million in the year-ago period. Net earnings totaled $24.3 million, or $1.22 per diluted share, versus net earnings of $25.6 million, or $1.22 per diluted share, in the nine-month period last year.

"Despite increased raw material costs, we were pleased to report a solid performance during the quarter and first nine months, and we remain on track to post our 6th consecutive year of record revenues," said Christopher A. Twomey, Arctic Cat's chairman and chief executive officer. "Our results have been driven by increased ATV sales and further ATV market share gains for the quarter and year-to-date. We are very pleased that Arctic Cat's ATV sales continue to outpace the industry. We attribute our success to growing recognition of our best-in-class products, and Arctic Cat's reputation for innovation and technology leadership."

Product Line Results

Sales of all-terrain vehicles (ATVs) in the third quarter grew to $90.8 million, up 8 percent from $84.1 million in the same period last year. The company's year-to-date ATV sales rose 20 percent to $268.1 million compared to $223.9 million in the same period last year.

Demand for the company's new Prowler utility vehicle has exceeded expectations and contributed to Arctic Cat's ATV sales growth. The Prowler UTV was introduced in June 2005, marking the company's first entry into the growing utility vehicle category. The Prowler features side-by-side bucket seats and a functional, rear cargo bed.

"We continue to benefit from our commitment to drive growth through new product introductions," said Twomey. As an example of this, Arctic Cat plans an early 2007 model introduction of its most powerful ATV yet with a 700cc electronic fuel injection engine. The 700 EFI, announced in December, will begin shipping to dealers in Arctic Cat's fiscal fourth quarter ending March 31, 2006.

Added Twomey: "Large displacement engines are the fastest-growing segment in the ATV industry. We are excited about the potential for our new 700 EFI model."

As anticipated, Arctic Cat reported snowmobile sales in the third quarter of $74.5 million versus $78.9 million in the prior-year quarter. Year-to-date snowmobile sales are on plan, totaling $238.0 million compared to $241.6 million during the same period last year.

"Snowmobile sales are tied to snow conditions," said Twomey. "When it snows, our customers buy sleds. While the market for snowmobiles remains strong among enthusiasts, this industry remains challenged by mild winter-weather conditions in key regions."

Parts, garments and accessories (PG&A) sales were $30.0 million, up 16 percent versus $25.8 million in the prior-year third quarter. Contributing to the quarter's PG&A results were increased sales of ATV-related parts and accessories. In areas with ample early snowfall, Arctic Cat also saw increases in snowmobile parts sales. Year-to-date PG&A sales grew 10 percent to $73.4 million compared to $66.7 million in the year-ago period.

Arctic Cat repurchased 140,000 shares of its common stock in the fiscal third quarter and has approximately $10.5 million remaining on its current share repurchase authorization. As of December 31, 2005, the company had $63.7 million in cash and no long-term debt.

Outlook

Arctic Cat currently anticipates fiscal 2006 fourth-quarter net sales for the period ending March 31, 2006, to range between $160 million and $170 million, up from $157.0 million for the same period last year. Net earnings for the quarter are estimated to be between $0.09 and $0.13 per diluted share versus earnings of $0.13 per diluted share in the prior-year quarter.

For the fiscal year ending March 31, 2006, Arctic Cat now anticipates record net sales in the range of $740 million to $750 million. The company is continuing to forecast lower margins in fiscal 2006, due to increased raw material costs, lower snowmobile sales and a less favorable yen/dollar exchange rate, resulting in estimated full-year diluted earnings per share in the range of $1.31 to $1.35. Fiscal 2005 earnings per diluted share totaled $1.36.

About Arctic Cat

Arctic Cat Inc. designs, manufactures and markets world-class all-terrain vehicles (ATVs) and snowmobiles 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.

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


                               Three Months Ended  Nine Months Ended
                                  December 31,        December 31,
                               ---------------------------------------
                                 2005      2004      2005      2004
                               --------- --------- --------- ---------
Net Sales                      $195,301  $188,855  $579,495  $532,122
Cost of Goods Sold              159,229   151,006   466,061   422,705
                               --------- --------- --------- ---------
Gross Profit                     36,072    37,849   113,434   109,417
Selling, General and
  Administrative Expenses        29,754    29,712    78,512    72,602
                               --------- --------- --------- ---------
Operating Profit                  6,318     8,137    34,922    36,815
Other Income
  Interest Income                   553       380       869       783
                               --------- --------- --------- ---------
Earnings Before Income Taxes      6,871     8,517    35,791    37,598
Income Taxes                      2,198     2,725    11,453    12,031
                               --------- --------- --------- ---------
Net Earnings                     $4,673    $5,792   $24,338   $25,567
                               ========= ========= ========= =========
Net Earnings Per Share
  Basic                           $0.24     $0.28     $1.23     $1.24
                               ========= ========= ========= =========
  Diluted                         $0.24     $0.28     $1.22     $1.22
                               ========= ========= ========= =========

Weighted Average Shares
  Outstanding:
  Basic                          19,378    20,413    19,722    20,649
                               ========= ========= ========= =========
  Diluted                        19,520    20,679    19,893    20,928
                               ========= ========= ========= =========

                                                       December 31,
                                                     -----------------
Selected Balance Sheet Data:                           2005     2004
----------------------------                         -------- --------
Cash and Short-term Investments                      $63,717  $84,244
Accounts Receivable, net                              47,141   42,215
Inventories                                          103,266   90,973
Total Assets                                         314,753  303,646
Current Liabilities                                  112,034  100,613
Long-term Debt                                             0        0
Shareholders' Equity                                 188,974  190,828



                        Three Months Ended          Nine Months Ended
                            December  31,             December 31,
                            ------------------------------------------
Product Line Data:  2005     2004    Change   2005      2004    Change
----------------------------------------------------------------------
All-terrain
 Vehicles         $90,806   $84,139      8% $268,075  $223,869     20%
Snowmobiles        74,519    78,891     -6%  237,973   241,569     -1%
Parts, Garments
 & Accessories     29,976    25,825     16%   73,447    66,684     10%
                 -----------------------------------------------------
Total Sales      $195,301  $188,855      3% $579,495  $532,122      9%
                 =====================================================

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