Arctic SALES, EARNINGS IMPROVE

Arctic Cat Inc. (Nasdaq:ACAT), Thief River Falls, Minn., reported record net sales of $194.6 million for the fiscal 2004 third quarter ended Dec. 31, 2003, up 10% from net sales of $176.2 million in the prior-year quarter.
Improved sales were driven by a strong performance from Arctic’s ATV business.

Third-quarter net earnings were $9.7 million, or 46 cents per diluted share, compared to net earnings of $11.9 million, or 53 cents per diluted share, in the same period last year.

However, excluding non-recurring items, net sales in the prior-year third quarter totaled $172.2 million and net earnings were $8.5 million, or 38 cents per diluted share.

For the 2004 nine-month period, net sales grew 9% to $509.5 million versus $465.7 million in the year-ago period. Net earnings were $31.4 million, or $1.44 per diluted share, compared to net earnings of $34.4 million, or $1.51 per diluted share, in the prior-year period.

Excluding non-recurring PWC items, net sales in the first nine months last year were $461.7 million and net earnings totaled $31.0 million, or $1.36 per diluted share.

Contributing to Arctic’s improved performance were increased snowmobile sales, and strong sales of both ATVs and parts, garments and accessories, said Christopher A. Twomey, Arctic Cat’s chairman and CEO.

Sales of ATVs in the third quarter grew to $67.1 million, up 28% from $52.3 million in the same period last year. The company’s year-to-date ATV sales increased 24% to $190.2 million compared to $153.2 million last year.

“We experienced growing demand for Arctic Cat’s award-winning ATVs and continued to gain ATV market share,” said Twomey. “With our current 2004 models, we expanded our ATV line to reach virtually all market segments, including the growing sport performance segment, the two rider ATV segment, and the large displacement engine segment.”

The company now offers an extended line of 28 ATV models, with engines ranging from 50cc to 650cc.

Arctic’s ATVs have won industry honors. Its most powerful ATV, the newly introduced 650 4X4 Automatic, was named 2004 ATV of the Year by both ATV Illustrated and ATV Guide. The company’s versatile MultiRack Platform (MRP) for ATVs also has been honored. The MRP system allows users to quickly customize their ATVs with more than 40 available attachments.

Snowmobile sales grew 5% in the third quarter to $100.9 million versus $96.0 million in the prior-year period. Year-to-date snowmobile sales also rose 4% to $253.3 million compared to $243.7 million during the same period last year.

Sales of parts, garments and accessories (PG&A) increased 12% to $26.6 million versus $23.9 million in the prior-year third quarter. Year-to-date PG&A sales rose 2% to $66.0 million compared to $64.9 million in the year-ago period.

In other news, Arctic Cat raised its quarterly cash dividend 17% to seven cents per share of common and Class B common stock during the third quarter. At the end of the third quarter ended Dec. 31, 2003, the company reported $64.6 million in cash and no long-term debt.

Arctic Cat said it anticipates record revenues for its 2004 fiscal year, ending March 31, 2004, primarily driven by higher ATV sales.

The company said it expects 2004 fourth-quarter net sales to be in the range of $120 million to $130 million, compared to $111.4 million for the same period last year. The net loss for the fourth quarter is estimated to be between three cents and five cents per diluted share versus a net loss of eight cents per diluted share in the prior-year quarter.

Due to the seasonal nature of Arctic Cat’s snowmobile and ATV products, the company sells the majority of its products during its second and third fiscal quarters, and typically reports a small loss in the fourth quarter.

For the fiscal year ending March 31, 2004, Arctic Cat anticipates net sales will grow 9% to 11% and be in the range of $629 million to $639 million. Full-year diluted earnings per share are estimated to be in the range of $1.39 to $1.41 versus diluted earnings per share of $1.45 last fiscal year, which included a benefit of 15 cents per diluted share from non-recurring PWC items.