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June 6, 2005 – Finance Digest

June 6, 2005
Filed under Features

Arctic Cat Inc., Thief River Falls, Minn., says net earnings for its fourth quarter ended March 31, 2005, were $2.7 million, or $0.13 per diluted share, compared to a net loss of $1.0 million, or $0.05 per diluted share, in the prior-year fourth quarter. Sales for the quarter were $157.0 million, up 12% from $140.2 million in the same period last year.
Arctic Cat net sales for the fiscal year ending March 31 were $689.1 million, up 6% from sales of $649.6 million last fiscal year. Net earnings totaled $28.3 million, or $1.36 per diluted share, compared to net earnings of $30.4 million, or $1.40 per diluted share, for fiscal 2004.
Sales of ATVs grew 12% in the 2005 fourth quarter to $117.1 million versus $104.2 million in the same period last year. During the quarter, Arctic Cat shipped its first 1,000 ATVs featuring the new 650 H1 engine. The H1 is the first ATV engine designed and assembled by Arctic Cat. For fiscal 2005, the company’s ATV sales rose to $341.0 million, up 16% compared to last year.
Arctic Cat’s snowmobile sales in the 2005 fourth quarter rose to $10.9 million versus $5.1 million in the prior-year quarter. However, full-year snowmobile sales were $252.5 million, down 2% from $258.4 million in the prior year.
Sales of parts, garments and accessories in the 2005 fourth quarter were $29.0 million versus $30.8 million in the year-ago period. For the fiscal year, sales of parts, garments and accessories were $95.7 million, down 1% from $96.8 million last year. Arctic says fourth quarter and full-year parts, garments and accessories sales were lower than anticipated due to the mild winter season in key regions across the United States.
“Although I’m pleased that the company posted another year of record sales, our fourth- quarter performance was not as strong as we had anticipated,” said Christopher A. Twomey, chairman and chief executive officer of Arctic Cat, Inc. “Our results were impacted by rapidly escalating raw material surcharges during the quarter, as well as another mild winter across much of the United States that produced lower than projected sales of snow-related parts, garments and accessories.”
Twomey said Arctic announced a snowmobile promotion late in the quarter to assist brand dealers.
During the 2005 fourth quarter, Arctic Cat repurchased 242,000 shares of its common stock. The company’s board of directors also provided a new authorization for the company to repurchase up to $20 million additional shares of its common stock from time to time in open market transactions.
“The share-repurchase program increases shareholder value for investors,” said Twomey. “Our board of directors believes that the repurchase of Arctic Cat’s shares is an excellent use of the company’s cash.”
At the end of the 2005 fourth quarter, Arctic Cat reported $88.4 million in cash and no long-term debt.

OUTLOOK
Arctic Cat anticipates fiscal 2006 first-quarter net sales for the period ending June 30, 2005, will be in the range of $100 million to $105 million compared to $102.6 million in the prior-year period. Net earnings for the first quarter are estimated between breakeven to a loss of 5 cents per diluted share versus earnings of $0.01 per diluted share in the prior-year quarter.
For the fiscal year ending March 31, 2006, Arctic Cat anticipates net sales will grow 3 percent to 5 percent and be in the range of $710 million to $723 million. Arctic Cat is forecasting lower margins in fiscal 2006, due to increased raw material costs, lower snowmobile sales and a less favorable Japanese yen/dollar exchange rate, resulting in estimated full-year diluted earnings per share in the range of $1.31 to $1.40.
“Although we expect further sales growth in the year ahead, led by continued ATV market share gains, we believe that high raw material costs, lower snowmobile sales and an unfavorable Japanese yen/dollar exchange rate will impact the company’s earnings potential in fiscal 2006,” Twomey said. “To address these factors, we are aggressively pursuing a variety of cost-reduction initiatives, and continue our emphasis on producing best-in-class products in order to enhance customer satisfaction and drive shareholder value.”

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