For the six months ended September 30, 2009, Arctic Cat's net earnings were $8.8 million, or $0.48 per diluted share, on net sales of $235.7 million. In the first six months of last year, the company reported net earnings of $10.0 million, or $0.55 per diluted share, on net sales of $298.2 million.

Commented Arctic Cat's chairman and chief executive officer Christopher A. Twomey: "We continued to face difficult selling conditions during the second quarter, given the global economic environment. Despite this, we are pleased with the company's continued progress on our goals to reduce the company's cost structure and strengthen the balance sheet."

Among the highlights of Arctic Cat's 2010 second quarter financial results versus the same quarter last year:

Gross margins increased 410 basis points in the quarter and 230 basis points year to date;

Operating expenses declined 12 percent to $23.3 million from $26.6 million, and fell 17 percent year-to-date;

Operating profit rose 7 percent to $21.9 million from $20.5 million;

Inventories were reduced 23 percent to $133.6 million from $172.3 million;

Total cash and short-term investments at quarter end rose to $11.2 million from $3.7 million; and

The company had no short-term debt at quarter end compared to $14.8 million a year ago.

"Through strong inventory management, expense controls and a rescaled business, we continue to remain on track to deliver improved operating results this fiscal year on lower sales," said Twomey.

Arctic Cat announced on October 20, 2009 that the company has entered into an agreement for GE Capital, Commercial Distribution Finance to become the exclusive provider of floorplan financing for Arctic Cat's U.S. dealers. The new multi-year financing program will replace Arctic Cat's current financing agreement with Textron Financial Corporation, which had previously announced its intent to exit the dealer floorplan business. The new financing program is expected to begin December 1, 2009.

"We are very pleased to partner with GE Capital, and we expect that this agreement will continue to provide our ATV and snowmobile dealers with innovative financing programs and superior service," said Twomey.

Business Line Results "Our continued focus on achieving our operating efficiency initiatives has enabled Arctic Cat to increase our gross margin percentage, despite lower demand for recreational vehicle products at this time," said Twomey. "We expect that Arctic Cat will be well-positioned as a stronger, leaner company as our markets recover."

Snowmobile sales totaled $85.7 million in the second quarter compared to $98.4 million in the prior-year quarter. Year to date, snowmobile sales were $103.7 million versus $119.8 million in the same period last year. Although Arctic Cat continues to anticipate lower worldwide snowmobile orders in fiscal 2010 as a result of the recession, the company expects to maintain or increase its North American market share by offering consumers leading-edge technologies, such as the new powered up 800cc engine that is being used in its models across all market segments.

All-terrain vehicle (ATV) sales totaled $51.7 million in the second quarter versus $71.6 million in the prior-year quarter. Year to date ATV sales were $83.9 million compared to $125.4 million in the first six months of fiscal 2009. With retail industry ATV sales continuing to decline during the recession, Arctic Cat has worked to reduce dealer inventories and, at the same time, increase market share.

Sales of parts, garments and accessories (PG&A) in the second quarter totaled $28.8 million versus $34.3 million in the prior-year quarter. Year to date, PG&A sales were $48.1 million compared to $52.9 million in the year-ago period.

Outlook Arctic Cat is implementing operational efficiency initiatives aimed at returning the company to long-term profitability on lower anticipated sales volumes.