Arctic Cat Reports Fiscal 2014 Second Quarter Results

  Arctic Cat Reports Fiscal 2014 Second Quarter Results

    Net sales rose to $238.5 million, up from $229.0 million in prior-year
                                   quarter;

                Sales driven by snowmobiles and side-by-sides;

  North American retail sales increased 17 percent versus year-ago quarter;

             $1.70 EPS in second quarter versus $1.80 a year ago;

    Company maintains full-year sales and earnings outlook for fiscal 2014

Business Wire

MINNEAPOLIS -- October 24, 2013

Arctic Cat Inc., (NASDAQ: ACAT) today reported net earnings of $23.4 million,
or $1.70 per diluted share, for the fiscal second quarter ended September 30,
2013, compared to prior-year net earnings of $25.0 million, or $1.80 per
diluted share. Net sales in the quarter were $238.5 million, up from net sales
of $229.0 million in the same quarter last year.

Commented Claude Jordan, Arctic Cat chairman and chief executive officer: “We
had strong double-digit sales gains in side-by-sides and snowmobiles that led
to record second-quarter sales, on top of a record prior-year period. However,
ATV sales in North America and Europe fell short of our expectations in the
quarter, and the lower volume reduced our profitability.”

Jordan added: “We are maintaining our full-year outlook for fiscal 2014, but
expect a challenging second half of the year. Arctic Cat posted outstanding
performance in the fiscal first quarter, which is reflected in first-half
sales growth of 6 percent and earnings up 7 percent. We anticipate continued
strong dealer demand for side-by-sides and snowmobiles, and the new Wildcat
models that we expect to introduce in our fiscal second half. In addition, we
continue to focus on operational excellence and cost controls that will
enhance our efficiency and profitability.”

Arctic Cat plans to introduce two new Wildcat pure-sport side-by-sides in
November, as well as the Wildcat 50 Trail model in the fiscal 2014 fourth
quarter.

Arctic Cat’s fiscal 2014 second-quarter financial results compared with the
prior-year quarter:

  *Net sales grew approximately 4 percent, led by contributions from the
    Wildcat and Prowler HDX side-by-sides, and snowmobiles.
  *North American retail sales increased 17 percent from the prior-year
    quarter, with retail sales gains in ATVs, side-by-sides and snowmobiles.
  *Gross profit margins were 25.9 percent compared to 28.0 percent in the
    prior-year quarter, due to product mix, Canadian currency impact, and
    increased sales incentives driven by double-digit retail sales increases
    in the ATV/side-by-side business. Including the lower-margin Yamaha sleds
    that Arctic Cat is supplying, combined with the Canadian currency impact,
    Arctic Cat expects fiscal 2014 gross margins to be approximately 80 basis
    points lower than the prior year.
  *Operating expenses rose slightly to $25.4 million versus $25.3 million.
    The company continued to increase investment in research and development,
    which was up 29 percent from the prior-year quarter, to ensure a strong
    pipeline of new products and technologies, while maintaining strict cost
    controls.
  *Operating profit was $36.3 million versus $38.8 million in the year-ago
    quarter.
  *Cash and short-term investments totaled $40.1 million, up $16.1 million
    versus the same quarter last year. The company had no debt.

For the six months ended September 30, 2013, Arctic Cat’s net earnings rose 7
percent to a record $28.8 million, or $2.10 per diluted share, compared to net
earnings of $27.0 million, or $1.95 per diluted share, in the prior-year
quarter. The company’s year-to-date net sales increased 6 percent to $359.3
million versus net sales of $340.3 million in the year-ago first six months.

Business Line Results

ATVs/Side-by-Sides – Sales of Arctic Cat’s all-terrain vehicles (ATVs) and
side-by-sides increased 4 percent to $72.7 million, up from $69.7 million in
the same period last year, primarily due to strong orders for the Wildcat X
and the four-seat Wildcat 4 pure sport side-by-sides.

Said Jordan: “Our side-by-side business performed well in the 2014 second
quarter, with continued strong growth in our Wildcat and Prowler HDX models in
North America and international markets outside of Europe. However,
second-quarter sales of ATVs in North America were lower than we anticipated,
combined with ongoing economic headwinds in Europe, both of which contributed
to single-digit increases in our ATV and side-by-side sales to dealers. On the
retail side, we saw strong double-digit sales gains for our ATV and
side-by-side business in the fiscal 2014 second quarter, due to consumer
demand for our new products. As a result of lower wholesale and higher retail
sales, our ATV dealers now have an improved inventory position that should
translate into increased dealer orders going forward. Additionally, with the
new side-by-side models that we intend to launch in our fiscal third and
fourth quarters, we anticipate solid performance in the second half of the
fiscal year.”

Arctic Cat remains focused on further increasing its ATV/side-by-side business
as a percent of total sales. The company anticipates that this business will
exceed 50 percent of total company sales for the fiscal 2014 full year. During
fiscal year 2013, 45 percent of sales were in the ATV/side-by-side segment, up
from 39 percent the previous year. The company continues to advance its growth
strategy through new product introductions and international expansion.

Since entering the sport side-by-side segment with the Wildcat only a year and
a half ago, Arctic Cat has rapidly extended its Wildcat line and now offers:
Base and Limited models; the four-seat Wildcat 4; and the high-horsepower
Wildcat X and Wildcat 4X. Further, the company has announced that it plans to
begin shipping a 50-inch wide, trail-legal Wildcat in late fiscal 2014. With a
narrower stance, the 50-inch Wildcat will allow riders access to authorized
ATV trails, making it a versatile option for consumers.

Snowmobiles – Snowmobile sales in the fiscal 2014 second quarter increased 5
percent to $135.4 million, up from $128.6 million in the prior-year quarter.

Commented Jordan: “We are pleased with consumers’ early season retail response
to our 2014 model year snowmobile line-up. In addition, our expanded
relationship with Yamaha continues to proceed smoothly. We expect to begin
shipping a larger number of snowmobiles to Yamaha in our 2014 fiscal third
quarter.”

For the 2014 model year, Arctic Cat launched 10 snowmobiles, including the
all-new ZR 6000 El Tigre high-performance sled, and new snowmobile engine
options from Arctic Cat and Yamaha through an engine supply agreement. Arctic
Cat also introduced its first designed and built snowmobile engine, the 6000
C-TEC2, which is a powerful, lightweight and fuel-efficient 2-stroke that
enables the company to enter the large 600cc snowmobile market segment that
now accounts for 18 percent of the snowmobile industry.

Parts, Garments & Accessories – Sales of parts, garments and accessories
(PG&A) in the fiscal 2014 second quarter totaled $30.4 million, down 1 percent
compared to $30.8 million in the prior-year quarter. Strong growth in parts
and accessories was offset by lower garment sales. Arctic Cat expects its PG&A
business to grow in the remainder of fiscal 2014 through further expansion of
its Wildcat accessories offerings.

Fiscal 2014 Full-Year Outlook

For the fiscal year ending March 31, 2014, Arctic Cat is maintaining its sales
and earnings guidance, but is targeting the lower end of the guidance range.
The company continues to expect earnings in the range of $3.27 to $3.37 per
diluted share, an increase of 13 percent to 17 percent over prior-year
earnings of $2.89 per diluted share. The company anticipates sales in the
range of $754 million to $768 million, an increase of approximately 12 percent
to 14 percent versus fiscal 2013.

Arctic Cat’s fiscal 2014 outlook includes the following assumptions versus the
prior fiscal year: core ATV North American industry retail sales flat to up 5
percent; side-by-side North American industry retail sales up 15 percent to 25
percent; snowmobile North American industry retail sales flat to up 3 percent;
Arctic Cat dealer inventories, excluding new products, flat to up 10 percent;
achieving slightly lower operating expense levels as a percent of sales; and
increasing cash flow from operations. The company expects gross margins to
decrease by approximately 80 basis points, due to additional Yamaha
snowmobiles that will be built in Arctic Cat’s factory and, to a lesser
extent, the Canadian currency impact. Most of the Yamaha gross margin impact
will be experienced in the fiscal 2014 third quarter, as Arctic Cat ships a
large number of Yamaha snowmobiles.

“Based on our first-half results and prospects for the balance of this fiscal
year, we remain confident that we will achieve another year of increased
sales, record earnings and enhanced shareholder value in fiscal 2014,” said
Jordan. “We continue to expect our growth to be fueled by a strong pipeline of
innovative new products and technologies, further market share gains in the
growing side-by-side segment and greater operating efficiencies.”

Conference Call

A conference call is scheduled for 9:30 a.m. CT (10:30 a.m. ET) today. To
listen to the live call, dial 877-941-9205. The webcast may be accessed
through the investor relations section of www.arcticcat.com/corporate. In
addition, a telephone replay will be available through October 31, 2013, by
dialing 800-406-7325, passcode 4646664#.

About Arctic Cat

Arctic Cat Inc. designs, engineers, manufactures and markets all-terrain
vehicles (ATVs), side-by-sides 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 Reports on Form 10-Q 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 including statements related to our
fiscal 2014 outlook, business strategy and product development. 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, pricing and sales
incentives; increase in material or production cost which cannot be recouped
in product pricing; unexpected delays in the introduction of new products;
changes in the sourcing of engines; interruption of dealer floorplan
financing; warranty expenses and product recalls; foreign currency exchange
rate fluctuations; product liability claims and other legal proceedings in
excess of reserves or insured amounts; environmental and product safety
regulatory activity; effects of the weather; general economic conditions and
political changes; interest rate changes; consumer demand and confidence; and
those set forth in the Company’s Annual Report on Form 10-K for the year ended
March 31, 2013, under heading “Item 1A. Risk Factors.” 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.

                           FINANCIAL TABLES FOLLOW


ARCTIC CAT INC.
Financial Highlights
(000s omitted, except per share amounts)
(Unaudited)
                 Three Months Ended            Six Months Ended
                   September 30,                 September 30,
                   2013          2012            2013          2012
Net Sales                                                     
Snowmobile &       $ 208,076       $ 198,274       $ 306,990       $ 289,227
ATV Units
Parts,
Garments &          30,449      30,756        52,303      51,114  
Accessories
Total Net            238,525         229,030         359,293         340,341
Sales
Cost of Goods
Sold
Snowmobile &         157,748         146,000         235,656         221,556
ATV Units
Parts,
Garments &          19,103      19,000        32,803      32,276  
Accessories
Total Cost of       176,851     165,000       268,459     253,832 
Goods Sold
Gross Profit         61,674          64,030          90,834          86,509
Operating
Expenses
Selling &            12,116          12,018          19,110          18,825
Marketing
Research &           6,286           4,867           11,568          9,345
Development
General &           7,019       8,391         15,430      16,465  
Administrative
Total
Operating           25,421      25,276        46,108      44,635  
Expenses
Operating            36,253          38,754          44,726          41,874
Profit
Other Income
(Expense)
Interest             7               4               16              17
Income
Interest            (37     )    (62     )      (40     )    (82     )
Expense
Total Other
Income              (30     )    (58     )      (24     )    (65     )
(Expense)
Earnings
Before Income        36,223          38,696          44,702          41,809
Taxes
Income Taxes        12,858      13,737        15,869      14,842  
Net Earnings       $ 23,365     $ 24,959       $ 28,833     $ 26,967  
Net Earnings
Per Share
Basic              $ 1.75       $ 1.90         $ 2.17       $ 2.06    
Diluted            $ 1.70       $ 1.80         $ 2.10       $ 1.95    
                                                                   
Weighted
Average Shares
Outstanding:
Basic               13,379      13,152        13,297      13,106  
Diluted             13,726      13,828        13,718      13,852  
                                                                   
                                   September 30,
Selected
Balance Sheet                      2013            2012
Data:
Cash and
Short-term                         $ 40,074        $ 23,993
Investments
Accounts
Receivable,                          105,071         88,640
net
Inventories                          171,174         144,736
Total Assets                         381,072         318,536
Short-term
Bank                                 0               0
Borrowings
Total Current                        174,739         152,181
Liabilities
Long-term Debt                       0               0
Shareholders'                        201,857         163,731
Equity
                                                                   

                                                                          
                Three Months Ended                     Six Months Ended
                September 30,                     September 30,             
Product       2013        2012        Change   2013        2012        Change
Line Data:
Snowmobiles     $ 135,425   $ 128,599     5   %      $ 157,999   $ 146,586     8   %
All-Terrain       72,651        69,675      4   %        148,991       142,641     4   %
Vehicles
Parts,
Garments &       30,449     30,756      -1  %       52,303     51,114      2   %
Accessories
Total Sales     $ 238,525   $ 229,030     4   %      $ 359,293   $ 340,341     6   %

Contact:

Arctic Cat Inc.
Timothy C. Delmore, 763-354-1800
Chief Financial Officer
or
PadillaCRT
Shawn Brumbaugh, 612-455-1754
shawn.brumbaugh@padillacrt.com