Arctic Cat Lowers Outlook

Arctic Cat Inc. revised its sales and earnings outlook for the fiscal 2008 fourth quarter ended March 31, 2008, on lower than anticipated all-terrain vehicles (ATV) sales, which the company attributed to three factors: continued weak retail sales; the reduction of a planned, large retail customer order; and a parts supply issue.

Arctic Cat's fourth quarter net sales are now estimated to be $167 million to $169 million compared to $172.6 million in the prior-year fourth quarter. Accordingly, the company revised its anticipated sales for the full year ended March 31, to be in the range of $620 million to $622 million, compared with record net sales in fiscal 2007 of $782.4 million. Arctic anticipates reporting a net loss per diluted share for the 2008 fiscal year in the range of $0.20 to $0.28 versus year-ago diluted earnings per share of $1.15.

"The headwind we saw in the retail ATV market at the end of calendar year 2007 continued to worsen in the first quarter of calendar 2008," said Christopher A. Twomey, Arctic Cat's chairman and CEO, "causing lower than anticipated wholesale sales to our dealers."

In addition, two other unforeseeable events occurred during the quarter, further impacting sales: First, one of Arctic Cat's large multi-store retailers decided to sell ATVs only in its largest footprint stores and, as a result, significantly reduced its planned order for the quarter; second, Arctic Cat experienced an ATV sourcing issue with a vendor supplying parts for the Prowler utility vehicle. A temporary supply interruption occurred while Arctic Cat was in the process of transitioning to a different supplier. "Unfortunately, because of the supply uncertainty, we stopped taking Prowler orders for a period of time, reducing ATV sales in the March quarter," said Twomey.

"We are very disappointed about the significant impact of these events on the quarter," Twomey said. The company had previously announced a reduction in fiscal 2008 production levels in response to the challenging retail climate for recreational vehicles. Twomey said Arctic Cat continues to focus on lowering costs through its strategic sourcing initiative and leveraging its efficiency, with the aim of returning the company to profitability.

Arctic Cat expects to report its actual fiscal 2008 fourth-quarter and year-end results in mid-May.