Arctic Cat Reports Results for Fiscal 2010 Fourth Quarter and Full Year

MINNEAPOLIS, May 13, 2010 — Arctic Cat Inc.  today reported improved fourth-quarter performance on anticipated lower revenues with a net loss of $9.6 million, or $0.52 per diluted share, on net sales of $84.0 million for the fourth quarter ended March 31, 2010. Arctic Cat reported a net loss in the prior-year fourth quarter of $16.7 million, or $0.93 per diluted share, on net sales of $90.7 million.

For the fiscal 2010 full year, Arctic Cat reported net earnings rose to $1.9 million, or $0.10 per diluted share, compared to a prior-year net loss of $9.5 million, or $0.53 per diluted share. Arctic Cat’s net sales for the fiscal 2010 full year totaled $450.7 million versus $563.6 million last fiscal year.

“We are very pleased that we achieved our goal to return the company to full year profitability on lower revenues,” said Arctic Cat’s chairman and chief executive officer Christopher A. Twomey. “Despite facing a challenging recreational vehicles market throughout the year, Arctic Cat delivered greatly improved operating results. We continued to lower the company’s cost structure through aggressive expense controls, manufacturing efficiencies and low-cost sourcing, which led to higher gross margins and operating profits in fiscal 2010. Our success in reducing inventories also has resulted in a stronger, more liquid balance sheet.”

Among the highlights of Arctic Cat’s fiscal 2010 fourth-quarter and full-year financial results versus the same periods last year:

— Gross margins rose 630 basis points for the quarter and 370 basis points for the year;

— Operating expenses declined 22 percent for the quarter and fell 16 percent for the full year;

— The company’s operating loss in the quarter narrowed to $12.5 million versus a loss of $23.4 million in the prior-year quarter, while the company swung to full-year operating profit of $1.3 million versus a prior-year operating loss of $14.9 million;

— Inventories declined 33 percent to $81.4 million from $120.8 million at the end of the fourth quarter;

— Total cash and short-term investments at quarter end rose to $71.1 million up from $11.4 million; and

— The company had no short- or long-term debt at quarter end.

Business Line Results

Arctic Cat continued its strategy to rescale the business, gain market share and reduce dealer inventories, in order to achieve improved profitability in a weak recreational products market. While the recession in the past year resulted in lower industry wide retail sales of all-terrain vehicles (ATVs) and snowmobiles, Arctic Cat’s retail sales in both of these product segments continued to outperform the industry and the company gained ATV and snowmobile market share.

ATV sales totaled $55.8 million in the fourth quarter versus $64.1 million in the prior-year quarter. Full year ATV sales were $188.0 million compared to $247.3 million in fiscal 2009. The company’s ATV sales benefited from its introduction of power steering on select ATV units in the 2010 fourth quarter. Arctic Cat also plans to introduce a new exciting 2011 model in the ATV product group during its fiscal 2011 first quarter.

Snowmobile sales increased to $597,000 in the 2010 fourth quarter. Arctic Cat’s prior-year fourth quarter snowmobile sales were a negative $3.4 million, mainly due to sales incentives. Full-year snowmobile sales were $162.9 million versus $207.3 million last year. Arctic Cat increased its North American market share by offering consumers leading-edge technologies, such as the new powered-up 800cc engine, that was introduced in 2010 models across all market segments. As a result, Arctic Cat’s new 2010 model M8 mountain snowmobile became the United States’ #1 selling sled in its class.

Sales of parts, garments and accessories (PG&A) in the fourth quarter totaled $27.6 million versus $30.0 million in the prior-year quarter. For fiscal 2010, PG&A sales were $99.9 million compared to $109.0 million in the prior year.

Outlook

“We are pleased with our progress in returning Arctic Cat to profitability in fiscal 2010, and we expect further improvement in fiscal 2011,” Twomey said. “Arctic Cat is better positioned today for long-term growth when the retail powersports market recovers.”

Arctic Cat remains focused on leveraging its operational efficiency and improving its profitability in a continued low-demand recreational vehicle market.

The company’s fiscal 2011 outlook includes the following assumptions: ATV industry retail sales declining approximately 10 to 12 percent; snowmobile industry retail sales in a range of up or down approximately 5 percent; Arctic Cat dealer inventories declining 25 to 30 percent; increasing gross margins between 100 to 200 basis points; achieving flat operating expense levels as a percent of sales; increasing cash flow from operations; and ending the year with more cash on the balance sheet.

Arctic Cat estimates sales for its fiscal year ending March 31, 2011, in the range of $447 million to $460 million. The company anticipates that fiscal 2011 earnings will be in the range of $0.18 to $0.33 per diluted share.

“We are confident that our strategies will enable Arctic Cat to deliver improved operating results again this fiscal year, despite what is expected to be a continued challenging retail marketplace,” said Twomey.

Conference Call

A conference call is scheduled for 10:30 a.m. CT (11:30 a.m. ET) today. To listen to the live webcast or replay of this call via the Internet, go to the corporate portion of the company’s website at www.arcticcat.com. To listen to a telephone replay of the conference call, dial 800-406-7325 and enter conference call passcode 4297340. The telephone replay will be available through Thursday, May 20, 2010.

About Arctic Cat

Arctic Cat Inc. designs, engineers, manufactures and markets all-terrain vehicles (ATVs) and snowmobiles under the Arctic Cat(R) 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 Report on Form 8-K 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. 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 and pricing; cost and availability of financing for the Company, our dealers and our suppliers; increase in material or production cost which cannot be recouped in product pricing; changes in the sourcing of snowmobile engines from Suzuki; warranty expenses; foreign currency exchange rate fluctuations; product liability claims and other legal proceedings in excess of insured amounts; environmental and product safety regulatory activity; effects of the weather; overall economic conditions; and consumer demand and confidence. 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.