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Big drop in snow revenue hits Arctic Cat – June 5, 2006

June 5, 2006
Filed under Features

Lower than anticipated sales of snowmobiles and snow-related parts, garments and accessories, coupled with increased sales incentive programs on snowmobiles and ATVs, impacted Arctic Cat Inc.’s revenue and earnings in the fourth quarter and year-ended March 31.
Arctic Cat reported a net loss of $592,000, or $0.03 per diluted share, for its fiscal fourth quarter ended March 31, down from net earnings of $2.7 million, or $0.13 per diluted share, in the same three-month period last year. The company’s fourth quarter net sales were $153.3 million, down from sales of $157 million in the prior year fourth quarter.
Arctic Cat’s fourth-quarter results were severely impacted by a drop in snowmobile sales, which totaled $140,000 versus $10.9 million in the prior-year quarter. Fourth-quarter ATV sales were $126.8 million, up from $117.1 million in the same period last year, and sales of parts, garments and accessories were $26.4 million versus $29 million in the year-ago period.
For the year ended March 31, Arctic Cat net earnings totaled $23.7 million, or $1.20 per diluted share, down from $28.3 million, or $1.36 per diluted share, for fiscal 2005.
However, the company posted its sixth consecutive year of record sales with consolidated net sales of $732.8 million, up from $689.1 million last fiscal year.
Arctic Cat’s 2006 fiscal year snowmobile sales totaled $238.1 million, down from $252.5 million in the prior year. ATV sales reached $394.9 million, up from $341 million last year, and sales of parts, garments and accessories totaled $99.8 million, up from $95.7 million last year.
“Our performance in fiscal 2006 was mixed, despite the fact that we posted another year of record sales,” said Christopher Twomey, chairman and chief executive officer of Arctic Cat. “While our ATV sales grew, our fourth-quarter results were negatively affected by poor snowfall in the East and Midwest that reduced sales of snowmobiles and snow-related parts, garments and accessories, coupled with increased sales incentive programs on snowmobiles and ATVs.
“We remain excited about our ATV business for several reasons, chief among them is the fact that we continue to gain market share, as we have every year since we entered the ATV business.”
During the quarter, Arctic Cat announced a partnership with the Piaggio Group, a move expected to expand Arctic Cat’s international distribution capabilities and open new growth channels for ATVs.
Also, Twomey said Arctic Cat remains on track to open an ATV engine manufacturing facility in St. Cloud, Minn., and said construction on the plant is under way, with production of Arctic Cat’s 650 H1 ATV engine slated to begin there this fall.
“We expect to improve Arctic Cat’s efficiency and profitability, once we begin producing more of our own ATV engines and leveraging that investment,” he said. “We also anticipate that the Piaggio partnership will enhance our penetration of the European market over the long term.”

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