Polaris Reports Record Second Quarter 2008 Results; Sales Grew by 21%; EPS Increased 16%; Company Raises 2008 Guidance

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MINNEAPOLIS–(EMWNews)–Polaris Industries Inc. (NYSE: PII) today reported record second quarter

net income from continuing operations of $24.4 million, or $0.72 per

diluted share for the quarter ended June 30, 2008 compared to $22.9

million, or $0.62 per diluted share for the same period last year. Sales

for the second quarter 2008 totaled $455.7 million, an increase of 21

percent over last year’s second quarter sales

of $376.9 million. The increase in second quarter 2008 sales and

earnings per diluted share is primarily attributable to increased

operating performance of the Company’s

side-by-side vehicles, international operations and parts, garments and

accessories businesses. The demand for the Company’s

RANGER™ side-by-side vehicles continued

to be strong and Polaris’ international

business experienced strong growth, particularly in side-by-side

vehicles as shipments to customers outside of North America of the

highly successful RANGER RZR™ increased

during the second quarter 2008. Second quarter 2008 results included

income from financial services of $5.2 million, which decreased $8.7

million compared to the second quarter of 2007 primarily due to the fee

income to Polaris being eliminated by the Company’s

revolving retail credit provider, HSBC. Additionally, second quarter

2007 included a pretax gain of $1.4 million from the sale of KTM Power

Sports AG (“KTM”)

shares.

“Our operating results this quarter are very

strong especially given the very challenging macroeconomic environment,”

commented Tom Tiller, Chief Executive Officer. “Eighteen

months ago, we laid out an aggressive plan to generate superior results

based on three pillars; winning in our core businesses, delivering

operational excellence and capitalizing on our growth businesses. Our

results this quarter and for the first half of 2008 clearly reflect the

commitment of our entire organization to achieving these goals. We

continue to be competitive in the more traditional core ATV and

snowmobile categories with innovative products and aggressive marketing;

our operational excellence objectives for quality, cost and speed are on

track; and we are leveraging our knowledge and experience in our growth

businesses, particularly in side-by-side vehicles and international.”

Tiller continued, “As a result of our

continued successes we are raising our full year 2008 guidance and now

expect earnings per diluted share to be in the range of $3.40 to $3.48,

which represents an increase of ten to twelve percent when compared to

earnings from continuing operations of $3.10 per diluted share for the

full year 2007. Sales for the full year 2008 are now expected to grow in

the range of nine to eleven percent over full year 2007 sales of $1.78

billion. During the third quarter of 2008, we expect total sales to

increase in the range of two to five percent over the third quarter 2007

which was the first quarter of the start of significant shipments of the RANGER

RZR™. Third quarter 2008 earnings are

expected to be in the range of $1.07 to $1.11 per diluted share, flat to

up four percent compared to earnings from continuing operations of $1.07

per diluted share for the third quarter of 2007. In the third quarter we

expect continued sales growth in side-by-side vehicles, PG&A and

international operations offset by a continued weak core ATV market,

higher commodity costs and significantly lower financial services income

due to the Company’s revolving retail credit

provider, HSBC, eliminating the volume-based fee income payment to

Polaris in March of this year.”

“Next week we will be unveiling our model

year 2009 products at our annual dealer meeting,”

Tiller explained. “Innovation has always been

a cornerstone of Polaris’ success and our new

model year 2009 products will reflect the high standards that our

customers have come to expect from Polaris. While we set the bar high in

model year 2008 with our innovative new products including the RANGER

RZR™, RANGER Crew™

and Victory Vision™, we similarly have high

expectations for our new model year 2009 products. Despite a tough

external environment that is not likely to improve in the near-term, we

expect the momentum that we generated in the first half of 2008 to carry

over into the second half of the year.”

ATV (all-terrain vehicle) sales of $350.3 million in the 2008

second quarter increased 24 percent from the second quarter 2007. The

new RANGER RZR™ side-by-side

recreation vehicles continued to sell well during the quarter along with

the new RANGER Crew™ six passenger

side-by-side utility vehicles. Sales growth outside North America was

also strong in the second quarter for both the Company’s

ATV and side-by-side vehicles. The overall market for more traditional

core ATVs sold in North America remained weak during the second quarter

resulting in fewer shipments of Polaris ATVs to North American dealers

as they continued to reduce their core ATV inventory levels. Currently

North American dealer ATV unit inventories are down ten percent from the

same time last year.

Sales of Victory motorcycles decreased 19 percent during the 2008

second quarter compared to the second quarter of 2007 as the North

American motorcycle industry retail sales for heavyweight cruiser and

touring motorcycles remained weak.

Parts, Garments, and Accessories sales increased 24 percent

during the second quarter 2008 when compared to last year’s

second quarter. This increase was driven primarily by increased sales of

ATV and side-by-side vehicles related PG&A.

Snowmobile sales totaled $6.0 million for the 2008 second quarter

compared to $4.4 million for the second quarter of 2007. The second

quarter is historically a seasonally low quarter for snowmobile

shipments with deliveries to dealers ramping up significantly in the

second half of the calendar year.

Gross profit, as a percentage of sales, was 23.7 percent for the

2008 second quarter, an increase of 70 basis points from 23.0 percent

for the second quarter of 2007. Gross profit dollars increased 25

percent to $108.0 million for the 2008 second quarter compared to $86.6

million for the second quarter of 2007. The gross profit margin and

absolute dollar increase in gross profit was due to the positive mix

impact of increased sales of higher gross margin products, such as RANGER

side-by-side vehicles and PG&A, and favorable foreign currency

fluctuations during the second quarter of 2008, which were partially

offset by significantly higher commodity and transportation costs.

Operating expenses for the second quarter 2008 increased 14

percent to $72.5 million compared to $63.8 million for the second

quarter of 2007. Operating expenses as a percent of sales decreased 100

basis points in the second quarter 2008 to 15.9 percent compared to 16.9

percent in the second quarter of 2007. Operating expenses in absolute

dollars increased due to higher selling and marketing expenses primarily

from higher advertising costs incurred around new products and to become

more competitive in certain segments of the ATV industry and increased

research and development expenses as the Company continues to accelerate

innovative new product development.

Income from financial services decreased 62 percent to $5.2

million in the 2008 second quarter compared to $13.9 million in the 2007

second quarter. The decrease was due to the Company’s

revolving retail credit provider, HSBC, discontinuing the financing of

non-Polaris products at Polaris dealerships in July 2007 and eliminating

the volume-based fee income payment to Polaris as of March 1, 2008.

Interest expense decreased to $2.5 million for the 2008 second

quarter compared to $3.7 million for the 2007 second quarter due to

lower interest rates during the 2008 period.

Non-operating other expense was $0.2 million in the second

quarter of 2008 compared to $1.5 million of income in the second quarter

of 2007. The change was primarily due to the weakening U.S. dollar and

the resulting effects on foreign currency transactions related to the

international subsidiaries.

Discontinued Operations Results

The Company ceased manufacturing marine products on September 2, 2004.

As a result, the marine products division’s

financial results have been reported separately as discontinued

operations for all periods presented. In 2007 the Company substantially

completed the exit of the marine products division, therefore in the

first half of 2008, there were no additional material charges incurred

related to this discontinued operations event and the Company does not

expect any additional material charges in the future. The Company’s

second quarter 2007 loss from discontinued operations was $0.2 million,

net of tax, or less than $0.01 per diluted share. Reported net income

for the second quarter 2008, including each of continuing and

discontinued operations was $24.4 million, or $0.72 per diluted share

compared to $22.7 million, or $0.62 per diluted share for the second

quarter 2007.

Financial Position and Cash Flow

Net cash provided by operating activities of continuing operations for

the second quarter of 2008 increased 46 percent, and totaled $53.3

million compared to $36.4 million in the second quarter of 2007.

Year-to-date ended June 30, 2008, net cash provided by operating

activities of continuing operations totaled $21.8 million compared to

$21.6 million in the first half of 2007. Borrowings under the credit

agreement were $261.0 million at June 30, 2008 compared to $200.0

million at June 30, 2007, which increase is primarily due to the

continued share repurchases in the first six months of 2008. The Company’s

debt-to-total capital ratio was 65 percent at June 30, 2008, compared to

51 percent at the same time last year. Cash and cash equivalents were

$21.9 million at June 30, 2008 compared to $33.8 million a year ago.

Share Buyback Activity

During the second quarter 2008 the Company repurchased and retired

811,000 shares of its common stock at a cost of $37.3 million. Since

inception of the share repurchase program in 1996, 33.1 million shares

have been repurchased at an average price of $32.54 per share. As of

June 30, 2008, the Company has authorization from its Board of Directors

to repurchase up to an additional 4.4 million shares of Polaris stock.

Polaris may repurchase the balance of the share authorization from time

to time in open market or privately negotiated transactions in

accordance with applicable federal securities laws.

Conference Call to be Held

Today at 9:00 AM (CDT) Polaris Industries Inc. will host a conference

call to discuss Polaris’ second quarter 2008

earnings results released this morning. The conference call is

accessible by dialing 800-374-6475 in the U.S. and Canada or

706-679-2596 for International calls or via the Investor Relations page

of the Company’s web site, www.polarisindustries.com

(click on Our Company then Investor Relations). The

conference call will be available through Tuesday, July 22, 2008 on

Polaris’ website or by dialing 800-642-1687

in the U.S. and Canada, or 706-645-9291 for International calls. The

conference I.D. is 42183267.

About Polaris

With annual 2007 sales of $1.8 billion, Polaris designs, engineers,

manufactures and markets all-terrain vehicles (ATVs), including the

Polaris RANGER™, snowmobiles and

Victory motorcycles for recreational and utility use.

Polaris is a recognized leader in the snowmobile industry, one of the

largest manufacturers of all-terrain recreational, utility and

side-by-side vehicles (ATVs) in the world, and rapidly making impressive

in-roads into the motorcycle cruiser and touring marketplace under the

Victory® brand. The Victory motorcycle

division was established in 1998 representing the first all-new

American-made motorcycle from a major company in nearly 60 years.

Polaris also enhances the riding experience with a complete line of Pure

Polaris apparel, accessories and parts, available at Polaris dealerships.

Polaris Industries Inc. trades on the New York Stock Exchange under the

symbol “PII,” and

the Company is included in the S&P Small-Cap 600 stock price index.

Information about the complete line of Polaris products, apparel and

vehicle accessories are available from authorized Polaris dealers or

anytime from the Polaris homepage at www.polarisindustries.com.

Except for historical information contained herein, the matters set

materially from those forward-looking statements. Potential risks

and spending. Investors are also directed to consider other risks

Securities and Exchange Commission.