Polaris Reports First Quarter 2009 Results

MINNEAPOLIS, APril 16, 2009: Polaris Industries Inc. today reported net income of $8.5 million, or $0.26 per diluted share, for the first quarter ended March 31, 2009 driven by a 180 basis point increase in its gross profit margin percentage and after taking a $0.18 per diluted share non-cash impairment charge on its investment in KTM. By comparison, 2008 first quarter net income was $19.1 million, or $0.55 per diluted share. Sales for the first quarter 2009 totaled $312.0 million, a decrease of 20 percent from 2008 first quarter sales of $388.7 million.

“We are pleased to report first quarter 2009 results in-line with our expectations,” stated Scott Wine, Chief Executive Officer. “Despite a difficult retail sales environment throughout the quarter, our team performed exceptionally well in executing our plan which resulted in an increase in our gross profit margin percentage of 180 basis points while maintaining a strong balance sheet. We were able to expand our gross margin percentage in part through our flexible manufacturing and variable cost structures which helped offset the impact of the unit volume declines experienced during the quarter. We once again achieved market share growth in our off-road vehicle business, which contributed to our ability to further decrease dealer inventories for the quarter compared to the prior year first quarter. As we committed to do throughout the year, we continued to prudently manage operating expenses and adjust production levels to match retail demand. While net income for the quarter was negatively impacted by a non-cash impairment charge of $0.18 per share related to our KTM investment, operating income, before income from financial services, declined proportionately with sales demonstrating our ability to react nimbly to the weak economic environment.”

“While the outlook for the remainder of 2009 remains challenging, we continue to proactively take steps to streamline our business and optimize our cost structure. Moreover, our strategic initiatives are beginning to gain traction and positively impact our results,” continued Mr. Wine. “Going forward, our strategy remains unchanged; we will continue to leverage our innovation, speed to market and flexible manufacturing capabilities to gain market share while focusing on improving our operating margins. The economic climate remains uncertain and we are cautious about the near-term demand environment. As such, we are maintaining our full year 2009 sales and earnings per share guidance.”

2009 Business Outlook
Full year 2009 net income is expected to be in the range of $2.50 to $3.00 per diluted share, unchanged from previously issued guidance. Sales are expected to decline 15 to 23 percent for the full year 2009, also unchanged from previously issued guidance. During the second quarter 2009 the Company expects net income to be in the range of $0.40 to $0.50 per diluted share, down 31 to 44 percent from the second quarter of 2008. Retail sales for the 2009 second quarter are expected to remain weak for all product lines with total Company sales projected to decline 25 to 30 percent compared to the second quarter of 2008.

Retail credit financing availability for Polaris consumers
Availability of retail credit financing sources is important to Polaris customers' ability to purchase the Company’s products. Polaris has relationships with HSBC Bank (“HSBC”), GE Money Bank (“GE”) and more recently Sheffield Financial (“Sheffield”) to provide retail revolving and installment financing credit to United States consumers. During the first quarter 2009, 44 percent of consumer retail credit loan applications from Polaris customers were approved by either HSBC, GE or Sheffield, below the fourth quarter 2008 approval rate of 51 percent; and 31 percent of Polaris retail customers in the United States financed their Polaris product purchases through HSBC, GE or Sheffield, which is consistent with the fourth quarter 2008 penetration rate. While the first quarter 2009 approval rate declined from the fourth quarter 2008, the Company believes that the reduction in the general availability of retail consumer credit has not been the primary driver of the decrease in sales. The consistent availability of retail credit alternatives is expected to remain uncertain throughout 2009 but the Company remains optimistic that retail credit will be accessible for Polaris consumers with an acceptable credit history.