Arctic Cat Reports Fiscal 2010 Second Quarter Results

http://www.businesswire.com/news/home/20091029005197/en

Increased second quarter operating profit 7% on lower sales;
Continued to lower cost structure, improve gross margin percentage and
strengthen balance sheet;
Company maintains annual revenue guidance, remains focused on achieving
continued operational efficiencies

MINNEAPOLIS--(Business Wire)--
Arctic Cat Inc. (NASDAQ: ACAT) today reported net earnings of $14.8 million, or
$0.81 per diluted share, on net sales of $166.3 million for the second quarter
ended September 30, 2009. Arctic Cat reported net earnings in the fiscal 2008
second quarter of $16.9 million, or $0.93 per diluted share, on net sales of
$204.3 million.

For the six months ended September 30, 2009, Arctic Cat`s net earnings were $8.8
million, or $0.48 per diluted share, on net sales of $235.7 million. In the
first six months of last year, the company reported net earnings of $10.0
million, or $0.55 per diluted share, on net sales of $298.2 million.

Commented Arctic Cat`s chairman and chief executive officer Christopher A.
Twomey: "We continued to face difficult selling conditions during the second
quarter, given the global economic environment. Despite this, we are pleased
with the company`s continued progress on our goals to reduce the company`s cost
structure and strengthen the balance sheet."

Among the highlights of Arctic Cat`s 2010 second quarter financial results
versus the same quarter last year:

* Gross margins increased 410 basis points in the quarter and 230 basis points
year to date;
* Operating expenses declined 12 percent to $23.3 million from $26.6 million,
and fell 17 percent year-to-date;
* Operating profit rose 7 percent to $21.9 million from $20.5 million;
* Inventories were reduced 23 percent to $133.6 million from $172.3 million;
* Total cash and short-term investments at quarter end rose to $11.2 million
from $3.7 million; and
* The company had no short-term debt at quarter end compared to $14.8 million a
year ago.

"Through strong inventory management, expense controls and a rescaled business,
we continue to remain on track to deliver improved operating results this fiscal
year on lower sales," said Twomey.

Arctic Cat announced on October 20, 2009 that the company has entered into an
agreement for GE Capital, Commercial Distribution Finance to become the
exclusive provider of floorplan financing for Arctic Cat`s U.S. dealers. The new
multi-year financing program will replace Arctic Cat`s current financing
agreement with Textron Financial Corporation, which had previously announced its
intent to exit the dealer floorplan business. The new financing program is
expected to begin December 1, 2009.

"We are very pleased to partner with GE Capital, and we expect that this
agreement will continue to provide our ATV and snowmobile dealers with
innovative financing programs and superior service," said Twomey.

Business Line Results
"Our continued focus on achieving our operating efficiency initiatives has
enabled Arctic Cat to increase our gross margin percentage, despite lower demand
for recreational vehicle products at this time," said Twomey. "We expect that
Arctic Cat will be well-positioned as a stronger, leaner company as our markets
recover."

Snowmobile sales totaled $85.7 million in the second quarter compared to $98.4
million in the prior-year quarter. Year to date, snowmobile sales were $103.7
million versus $119.8 million in the same period last year. Although Arctic Cat
continues to anticipate lower worldwide snowmobile orders in fiscal 2010 as a
result of the recession, the company expects to maintain or increase its North
American market share by offering consumers leading-edge technologies, such as
the new powered up 800cc engine that is being used in its models across all
market segments.

All-terrain vehicle (ATV) sales totaled $51.7 million in the second quarter
versus $71.6 million in the prior-year quarter. Year to date ATV sales were
$83.9 million compared to $125.4 million in the first six months of fiscal 2009.
With retail industry ATV sales continuing to decline during the recession,
Arctic Cat has worked to reduce dealer inventories and, at the same time,
increase market share.

Sales of parts, garments and accessories (PG&A) in the second quarter totaled
$28.8 million versus $34.3 million in the prior-year quarter. Year to date, PG&A
sales were $48.1 million compared to $52.9 million in the year-ago period.

Outlook
Arctic Cat is implementing operational efficiency initiatives aimed at returning
the company to long-term profitability on lower anticipated sales volumes. The
company`s fiscal 2010 outlook includes the following assumptions: the
continuation of the weak global economic environment negatively impacting sales
of recreational products; increasing gross margins up to 300 basis points
through global low-cost sourcing, improved commodity pricing and greater
efficiencies from lean manufacturing; achieving a 12 percent to 17 percent
reduction in operating expenses; improving cash flow from operations; and ending
the year with more cash on the balance sheet by lowering inventory.

Arctic Cat continues to estimate sales for its fiscal year ending March 31, 2010
in the range of $425 million to $460 million, based on achieving ATV sales of
$188 million to $203 million, snowmobile sales in the range of $140 million to
$152 million and PG&A sales of $97 million to $105 million. Arctic Cat has not
provided fiscal 2010 earnings per share guidance, although the company expects
improved per share results compared with fiscal 2009.

Commenting on the company`s outlook, Twomey said: "This is a challenging year
for the recreational products industry. Near-term, we remain focused on
conservatively managing our business to meet lower anticipated demand. We are
continuing our efforts to improve the company`s operational performance. We also
are taking appropriate actions to preserve cash and maintain dealer health, as
well as developing select innovative products that position Arctic Cat to emerge
as a stronger company once the economy recovers."

Conference Call
A conference call is scheduled for 10:30 a.m. CT (11:30 a.m. ET) today. To
listen to the live webcast or replay of this call via the Internet, go to the
corporate portion of the company`s website at www.arcticcat.com. To listen to a
telephone replay of the conference call, dial 800-406-7325 and enter conference
call passcode 4175232. The telephone replay will be available through Thursday,
November 5, 2009.

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

Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
certain forward-looking statements. The Company`s Annual Report, as well as the
Report on Form 10-K, its Quarterly Report on Form 8-K and other filings with the
Securities and Exchange Commission, the Company`s press releases and oral
statements made with the approval of an authorized executive officer, contain
forward-looking statements that reflect the Company`s current views with respect
to future events and financial performance. These forward-looking statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from historical results or those anticipated. The words "aim,"
"believe," "expect," "anticipate," "intend," "estimate" and other expressions
that indicate future events and trends identify forward-looking statements.
Actual future results and trends may differ materially from historical results
or those anticipated depending on a variety of factors, including, but not
limited to: product mix and volume; competitive pressure on sales and pricing;
cost and availability of financing for the Company, our dealers and our
suppliers; increase in material or production cost which cannot be recouped in
product pricing; changes in the sourcing of snowmobile engines from Suzuki;
warranty expenses; foreign currency exchange rate fluctuations; product
liability claims and other legal proceedings in excess of insured amounts;
environmental and product safety regulatory activity; effects of the weather;
overall economic conditions; and consumer demand and confidence. The Company
does not undertake any obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future events
or otherwise.

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

Three Months Ended Six Months Ended
September 30, September 30,
2009 2008 2009 2008
Net Sales
Snowmobile & ATV Units $ 137,466 $ 170,025 $ 187,554 $ 245,216
Parts, Garments & Accessories 28,834 34,289 48,116 52,975
Total Net Sales 166,300 204,314 235,670 298,191
Cost of Goods Sold
Snowmobile & ATV Units 103,748 135,180 154,090 204,659
Parts, Garments & Accessories 17,341 22,012 28,821 33,533
Total Cost of Goods Sold 121,089 157,192 182,911 238,192
Gross Profit 45,211 47,122 52,759 59,999
Operating Expenses
Selling & Marketing 9,619 13,506 16,041 22,390
Research & Development 3,028 4,249 6,198 8,929
General & Administrative 10,652 8,847 17,286 16,314
Total Operating Expenses 23,299 26,602 39,525 47,633
Operating Profit 21,912 20,520 13,234 12,366
Other Income (Expense)
Interest Income - 27 4 99
Interest Expense (175 ) (414 ) (247 ) (618 )
Total Other Income (Expense) (175 ) (387 ) (243 ) (519 )
Earnings Before Income Taxes 21,737 20,133 12,991 11,847
Income Taxes 6,957 3,218 4,158 1,895
Net Earnings $ 14,780 $ 16,915 $ 8,833 $ 9,952
Net Earnings Per Share
Basic $ 0.81 $ 0.94 $ 0.49 $ 0.55
Diluted $ 0.81 $ 0.93 $ 0.48 $ 0.55

Weighted Average Shares Outstanding:
Basic 18,227 18,078 18,212 18,049
Diluted 18,252 18,091 18,225 18,056

September 30,
Selected Balance Sheet Data: 2009 2008
Cash and Short-term Investments $ 11,160 $ 3,733
Accounts Receivable, net 68,286 78,613
Inventories 133,605 172,320
Total Assets 286,900 343,755
Short-term Bank Borrowings 0 14,810
Total Current Liabilities 103,799 147,890
Long-term Debt 0 0
Shareholders' Equity 177,426 184,605

Three Months Ended Six Months Ended
September 30, September 30,
Product Line Data: 2009 2008 Change 2009 2008 Change
Snowmobiles $ 85,739 $ 98,379 -13 % $ 103,656 $ 119,795 -13 %
All-terrain Vehicles 51,727 71,646 -28 % 83,898 125,421 -33 %
Parts, Garments & Accessories 28,834 34,289 -16 % 48,116 52,975 -9 %
Total Sales $ 166,300 $ 204,314 -19 % $ 235,670 $ 298,191 -21 %

Arctic Cat Inc.
Timothy C. Delmore, 763-354-1800
Chief Financial Officer
or
Padilla Speer Beardsley Inc.
Shawn Brumbaugh, 612-455-1754

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