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Polaris EPS Up 13% in Second Quarter, 14% for Six Months

21 July 2000

Strength in ATVs Drives Record Results

    MINNEAPOLIS - Polaris Industries Inc. today reported a 13 percent increase in net income per diluted share on a 6 percent increase in sales for the second quarter ended June 30, 2000. Net income per diluted share in the second quarter totaled a record $.68 compared to $.60 in the second quarter of 1999. Net income rose 7 percent to $16.2 million from $15.1 million in the comparable 1999 period. Second quarter sales grew 6 percent to a record $342.8 million, compared to $324.3 million in the second quarter of 1999.

    For the six months ended June 30, 2000, Polaris reported a 14 percent increase in net income per diluted share on a 9 percent increase in sales. Net income per diluted share for the first six months of 2000 totaled $1.09 compared to $.96 in the first six months of 1999. Net income for the first half of 2000 grew 7 percent to $25.9 million compared to $24.2 million in the same period the prior year. Sales for the six months ending June 30, 2000 totaled $613.8 million, up 9 percent from $562.1 million in the comparable period of 1999.

    "These results are in line with management's expectations and reflect continuing progress in our efforts to grow sales and improve profitability," said Thomas C. Tiller, Polaris President and Chief Executive Officer. "We continue to project record sales and a twelfth consecutive year of record net income for the full year 2000."

    Sales growth in the second quarter once again benefited from ongoing strength in the all-terrain vehicle (ATV) business. Polaris ATV retail sales kept pace with the industry growth rate as ATV retail sales industry-wide continued to grow at approximately 20 percent for the year-to-date period. "We introduced our first line of three youth ATV models in the second quarter and expect to begin shipments to dealers in the third quarter," said Tiller. "The youth ATV line capitalizes on the growing popularity of riding ATVs as a form of family recreation and on our reputation for quality and safety. The introduction was enthusiastically received by our dealers."

    As anticipated, dealer orders for 2001 model snowmobiles are modestly below last year's levels. Season-ending inventories of snowmobiles at Polaris dealers are comparable with levels at the end of the 1999 season. "After another season of light snowfall throughout much of North America, dealers are understandably reluctant to increase their commitments," said Tiller. "However, many of our 2001 models incorporate our new EDGE(TM) chassis for better handling, and we expect sales to benefit from aggressive promotion and the power of our new branding campaign."

    Polaris' personal watercraft (PWC) retail sales are essentially flat compared to the 1999 season-to-date period, in line with the industry as a whole. "We are hopeful that the industry has bottomed out and that Polaris will outperform the industry on the strength of our design innovations that have reduced noise and emissions, boosted fuel economy and added ergonomic design improvements."

    Retail sales of the company's Victory motorcycles were nearly 40 percent higher for the year-to-date period compared to the 1999 period. However, Victory retail sales are below the company's expectations for growth. "The acceleration of Victory retail sales is taking somewhat longer than we originally expected," commented Tiller. "As we have previously stated, we are taking a long-term approach to the motorcycle business and are aggressively advertising and promoting Victory to build brand recognition and drive sales. We recently introduced Victory motorcycles to the U.K. market, and will introduce a third model in the Victory line to dealers later this month as we continue to expand our product line to cover additional segments of the motorcycle market. These actions are further steps in executing our strategy of growth through both product line expansion and broader geographic reach."

    "Other areas of our growth strategy are performing extremely well," continued Tiller. "Sales of parts, garments and accessories (PG&A) increased 20 percent in the second quarter of 2000 over the comparable 1999 period. PG&A represents our third largest business on a sales basis, and generates the highest margin of any of our products. In addition, international sales increased 24 percent, and the income from our financial services joint venture increased 70 percent during the second quarter of 2000 compared to the second quarter of 1999. The performance of these initiatives is allowing us to continue our profitable growth in spite of the slower snowmobile and PWC markets."

    In the second quarter of 2000, the company repurchased 168,000 shares of its common stock. Cumulative repurchases now total just under 5.3 million shares. Approximately 2.2 million authorized shares remain to be repurchased.

    Polaris Industries Inc. designs, engineers, manufactures and markets snowmobiles, all-terrain vehicles, motorcycles, personal watercraft, the Polaris Ranger and related parts, garments and accessories for recreational and utility use. Polaris is the world's largest snowmobile manufacturer and one of the largest U.S. manufacturers of ATVs and personal watercraft. Polaris Industries Inc. trades on the New York Stock Exchange and the Pacific Stock Exchange under the symbol "PII" and is included in the S&P SmallCap 600 stock price index.

                        POLARIS INDUSTRIES INC.
                 (In Thousands, Except Per Share Data)

                                                   For the    For the
                        2nd Quarter  2nd Quarter   6 Months   6 Months
                           Ended        Ended       Ended      Ended
                          June 30,     June 30,    June 30,   June 30,
                            2000         1999        2000       1999
                            ----         ----        ----       ----

Sales                    $342,785     $324,308    $613,776   $562,077
Cost of Sales             257,291      249,405     463,688    430,701
                          -------      -------     -------    -------

 Gross profit              85,494       74,903     150,088    131,376

Operating Expenses
 Selling & marketing       40,057       31,619      68,198     59,517
 Research & development     8,101        8,233      16,065     15,566
 General & admini-
  strative                 13,852       11,631      27,033     20,562
                           ------       ------      ------     ------
  Total operating
   expenses                62,010       51,483     111,296     95,645

 Operating Income          23,484       23,420      38,792     35,731

Nonoperating Expense
 Interest expense           2,164        1,551       3,515      2,374
 Equity in income of
  affiliates               (3,272)      (1,928)     (6,397)    (3,933)
 Other expense (income),
  net                        (505)         376       1,462       (188)
                             ----          ---       -----       ----

 Income before income
  taxes                    25,097       23,421      40,212     37,478

Provision for Income
 Taxes                      8,909        8,315      14,275     13,305
                            -----        -----      ------     ------

 Net income               $16,188      $15,106     $25,937    $24,173
                          =======      =======     =======    =======

Basic Net Income
 Per Share                  $0.69        $0.60       $1.09      $0.96
                            =====        =====       =====      =====

Diluted Net Income
 Per Share                  $0.68        $0.60       $1.09      $0.96
                            =====        =====       =====      =====

Weighted average number
 of common and common
 equivalent shares
  Basic                    23,586       24,989      23,726     25,088
                           ======       ======      ======     ======

  Diluted                  23,642       25,368      23,764     25,296
                           ======       ======      ======     ======