For the second quarter ended June 30, 2009, Polaris reported net income of $17.5 million, or $0.53 per diluted share, driven by a 40 basis point increase in its gross profit margin percentage. By comparison, 2008 second quarter net income was $24.4 million, or $0.72 per diluted share. Sales for the second quarter 2009 totaled $345.9 million, a decrease of 24 percent from second quarter 2008 sales of $455.7 million. For the year-to-date period ended June 30, 2009, Polaris reported net income of $25.9 million, or $0.79 per diluted share, compared to net income of $43.5 million, or $1.27 per diluted share for the same period last year. Sales for the 2009 year-to-date period totaled $657.9 million, a decrease of 22 percent from sales of $844.4 million during the same period last year.

While the challenging economic environment continued to be a headwind in the quarter, the Company remained on strategy and executed its business plans. The gross profit margin percentage expanded in the second quarter 2009 when compared to last year, primarily through lower commodity costs, product cost production activities, a flexible manufacturing process and highly variable cost structure. Polaris gained market share in the ORV business during the second quarter 2009, resulting in further decreases in ATV dealer inventories. The further weakness in the motorcycle industry retail sales put additional pressure on the Victory business, which performed below expectations for the second quarter in a row. The Company is taking significant steps which it anticipates will improve the Victory business and also announced the newest addition to its On-Road business with the introduction of Polaris' first low emission vehicle. This is an important step for Polaris in both broadening its product line and developing new technology offerings for the Company's future.

Results of Operations
Sales:

Sales were $345.9 million in the second quarter 2009, a 24 percent decrease from $455.7 million in sales for the same period in 2008. Sales for the year-to-date period ended June 30, 2009 were $657.9 million, a 22 percent decrease from $844.4 million in sales for the same period in 2008.

The following table is an analysis of the percentage change in total Company sales for the 2009 second quarter and year-to-date periods compared to the same periods of 2008:

                               Percent Change in Total Company Sales Compared to
                                                 2008 periods
                                Three Months Ended              Six Months Ended
                                  June 30, 2009                  June 30, 2009
    Volume                                   -34 %                            -33 %
    Product mix and price                     14 %                             15 %
    Currency                                  -4 %                             -4 %

    Total                                    -24 %                            -22 %

Volume for the 2009 second quarter and year-to-date periods decreased 34 percent and 33 percent, respectively, compared to the same periods last year, as the Company shipped significantly fewer ORVs, snowmobiles and Victory motorcycles to dealers given the weakening consumer retail environment in North America and internationally. Product mix and price increased for the 2009 second quarter and year-to-date periods compared to the same periods last year, primarily due to the positive benefit of a greater number of side-by-side vehicles sold to dealers, which typically have a higher selling price than core ATVs, and select selling

price increases on several of the model year 2009 products. Unfavorable movements in currency rates for both the 2009 second quarter and year-to-date periods decreased sales four percent compared to the same periods in 2008 due to the change in the currency rates and their effect on the Company's Canadian and other foreign subsidiaries when translated to U.S. dollars. Total Company sales by product line are as follows:

                                             Three Months Ended June 30,                                                 Six Months Ended June 30,
                                        Percent                       Percent         Dollar                       Percent                       Percent         Dollar
                                       of Total                      of Total        Percent                      of Total                      of Total        Percent
(in millions)             2009           Sales          2008           Sales          Change         2009           Sales          2008           Sales          Change
Off-Road Vehicles        $ 261.7              76 %     $ 350.3              77 %          -25 %     $ 477.2              73 %     $ 614.8              73 %          -22 %
Snowmobile                   7.4               2 %         6.0               1 %           23 %        15.6               2 %        15.4               2 %            1 %
Victory Motorcycles         10.5               3 %        23.4               5 %          -55 %        24.3               4 %        50.8               6 %          -52 %
PG&A                        66.3              19 %        76.0              17 %          -13 %       140.8              21 %       163.4              19 %          -14 %

Total Sales              $ 345.9             100 %     $ 455.7             100 %          -24 %     $ 657.9             100 %     $ 844.4             100 %          -22 %

ORV (off-road vehicle) sales, which included sales of both core ATVs (all-terrain vehicles) and RANGER™ side-by-side vehicles, during the second quarter 2009 decreased 25 percent from the second quarter 2008. This decrease reflects the continued weakness in the consumer retail environment, as dealers continued to reduce core ATV orders in an effort to reduce inventory levels. As a result, ATV dealer inventory levels in North America finished 18 percent lower at the end of the second quarter 2009 than at the end of the second quarter 2008. Although side-by-side vehicle retail sales, as expected, were also lower during the second quarter 2009 compared to the second quarter 2008, resulting in lower shipments of side-by-side vehicles, the decline was less than the core ATV retail sales declines. Dealer inventories for side-by-side vehicles are higher than a year ago, but lower than at the end of the first quarter 2009. International ORV sales also declined in the second quarter 2009, down 33 percent when compared to the second quarter 2008, as the weakening economic environment and currency rates negatively impacted Polaris sales in markets outside of North America. Year-to-date 2009 ORV sales decreased 22 percent from the same period in 2008 to a total of $477.2 million. For the second quarter ended June 30, 2009, the average ORV per unit sales price increased ten percent over last year's comparable period primarily as a result of the increased sales of the higher priced RANGER™ models and select selling price increases on several of the model year 2009 products.

Snowmobile sales totaled $7.4 million for the 2009 second quarter compared to $6.0 million for the second quarter of 2008. The second quarter is historically a seasonally low quarter for snowmobile shipments, as deliveries to dealers ramp up in the second half of the calendar year. For the year-to-date 2009 period, snowmobile sales were $15.6 million, a one percent increase compared to the same period last year. The average snowmobile per unit sales price for the second quarter of 2009 increased 37 percent compared to the same period last year primarily due to the mix of products shipped.

Sales of Victory motorcycles to dealers decreased 55 percent to $10.5 million during the second quarter of 2009 when compared to the same period in 2008. Year-to-date 2009 Victory motorcycle sales decreased 52 percent compared to the comparable period of 2008, to a total of $24.3 million. The decrease for the 2009 second quarter and year-to-date periods reflects the planned reduction in shipments of Victory motorcycles to dealers in North America in response to dealers' efforts to further reduce their inventory levels as well as the weakening North American motorcycle industry retail sales environment. Dealer inventory levels of Victory motorcycles are 24 percent lower at the end of the second quarter 2009 than at the end of the second quarter 2008. The average per unit sales price for Victory motorcycles decreased 15 percent during the second quarter 2009 compared to the same period in 2008 due to increased sales promotions and incentives.

PG&A (parts, garments, and accessories) sales decreased 13 percent to $66.3 million during the second quarter 2009 compared to the same period of last year. Year-to-date sales decreased 14 percent compared to the same period last year to $140.8 million. The decrease for the 2009 second quarter and year-to-date periods was driven primarily by the lower retail sales of Polaris vehicles during 2009.

Sales by geographic region for the second quarter and year-to-date periods were as follows:

                                                Three Months Ended June 30,                                                 Six Months Ended June 30,
                                           Percent                       Percent                                      Percent                       Percent
                                             of                            of            Dollar                         of                            of            Dollar
                                            Total                         Total         Percent                        Total                         Total         Percent
($ in millions)              2009           Sales          2008           Sales          Change         2009           Sales          2008           Sales          Change
United States               $ 232.6              67 %     $ 312.9              69 %          -26 %     $ 455.4              69 %     $ 579.8              68 %          -21 %
Canada                         54.6              16 %        59.0              13 %           -8 %        90.4              14 %       106.9              13 %          -15 %
Other foreign countries        58.7              17 %        83.8              18 %          -30 %       112.1              17 %       157.7              19 %          -29 %

Total Sales                 $ 345.9             100 %     $ 455.7             100 %          -24 %     $ 657.9             100 %     $ 844.4             100 %          -22 %

Significant regional trends were as follows:

Net sales in the United States for the second quarter 2009 decreased 26 percent compared to the second quarter of 2008. Net sales in the United States during the six months ended June 30, 2009 decreased 21 percent compared to the same period in 2008. A decline in shipments for all businesses accounted for the decrease for the 2009 second quarter and year-to-date periods. The United States represented 67 percent of total Company sales in the 2009 second quarter compared to 69 percent of total Company sales for the 2008 second quarter. The United States represented 69 percent of total Company sales for the first six months ended June 30, 2009 compared to 68 percent of total Company sales for the first six months of 2008.

Canadian sales decreased 8 percent and 15 percent for the 2009 second quarter and year-to-date periods, respectively, as compared to the same periods in 2008. Unfavorable currency rates accounted for 13 percent and 16 percent of the decrease for the 2009 second quarter and year-to-date periods, respectively, as compared to the same periods in 2008, offset by mix changes as more side- by-side vehicles were shipped in the 2009 second quarter and year-to-date periods than in the same periods last year.

Sales in other foreign countries, primarily in Europe, decreased 30 percent and 29 percent for the 2009 second quarter and year-to-date periods, respectively, as compared to the same periods in 2008. Unfavorable currency rates accounted for 12 percent of the change for both the 2009 second quarter and year-to-periods as compared to the same periods in 2008. The remainder of the decrease in sales was primarily driven by volume declines related to the globally weak economic environment.

Gross Profit:
     The following table reflects the Company's gross profits in dollars and as a
     percentage of sales for the second quarter and year-to-date periods:



                                         Three Months Ended                                     Six Months Ended
                                              June 30,                                              June 30,
   ($ in millions)           2009          2008              Change               2009           2008               Change
Gross profit dollars        $ 83.3        $ 108.0                    -23 %       $ 159.7        $ 196.1                      -19 %

Percentage of sales 24.1 % 23.7 % +40 basis points 24.3 % 23.2 % +110 basis points

Gross profit, as a percentage of sales, was 24.1 percent and 24.3 percent for the 2009 second quarter and year-to-date periods, respectively, an increase of 40 basis points and 110 basis points from the same periods last year. Gross profit dollars decreased 23 percent and 19 percent to $83.3 million and $159.7 million for the 2009 second quarter and year-to-date periods compared to the same periods in 2008, respectively. The increase in the gross profit margin percentage during the 2009 second quarter and year-to-date periods resulted primarily from lower commodity costs, a favorable product mix change given the relatively lower declines in shipments of higher-margin side-by-side vehicles, increased prices and lower core ATV promotional costs, partially offset by unfavorable currency rate movements. Gross profit in absolute dollars decreased for the 2009 periods due to lower sales.

Operating expenses:

The following table reflects the Company's operating expenses in dollars and as a percentage of sales for the second quarter and year-to-date periods:

                                             Three Months Ended                                     Six Months Ended
                                                  June 30,                                              June 30,
     ($ in millions)             2009          2008              Change               2009           2008               Change
Selling and marketing           $ 28.7        $ 35.2                      -18 %      $  56.0        $  64.4                      -13 %
Research and development          15.2          20.2                      -25 %         31.8           39.5                      -19 %
General and administrative        16.3          17.1                       -5 %         30.4           33.0                       -8 %

Total operating expenses        $ 60.2        $ 72.5                      -17 %      $ 118.2        $ 136.9                      -14 %

Percentage of sales 17.4 % 15.9 % +150 basis points 18.0 % 16.2 % +180 basis points

Operating expenses for the 2009 second quarter and year-to-date periods decreased 17 percent and 14 percent to $60.2 million and $118.2 million, respectively, compared to $72.5 million and $136.9 million for the same periods in 2008. Operating expenses in absolute dollars for the 2009 second quarter and year-to-date periods decreased due to operating cost control measures taken and the reduction in incentive compensation plan expenses resulting from the Company's lower stock price and expected lower profitability in 2009. Operating expenses as a percentage of sales increased to 17.4 percent and 18.0 percent for the 2009 second quarter and year to date periods, respectively, an increase from 15.9 percent and 16.2 percent for the same periods in 2008 due primarily to lower sales volume during the 2009 second quarter and year-to-date periods, which was partially offset by the implementation of operating expense control measures.

Income from financial services:

                                    Three Months Ended                            Six Months Ended
                                         June 30,                                     June 30,
   ($ in millions)          2009           2008          Change          2009          2008          Change
Equity in earnings of
Polaris Acceptance         $   0.9        $  1.0             -10 %      $  2.1        $  2.3              -9 %
Income from
Securitization
Facility                       2.2           2.3              -4 %         4.7           4.8              -2 %
Income from retail
credit agreements              0.3           1.2             -75 %         0.4           4.4             -91 %
Income from other
financial services
activities                     0.6           0.7             -14 %         1.2           1.2               -

Total income from
financial services         $   4.0        $  5.2             -24 %      $  8.4        $ 12.7             -34 %

Income from financial services decreased 24 percent to $4.0 million in the 2009 second quarter compared to $5.2 million in the 2008 second quarter. Income from financial services decreased 34 percent to $8.4 million for the six months ended June 30, 2009 from $12.7 million for the same period of 2008. The decrease for the 2009 second quarter and year-to-date periods was primarily due to the Company's revolving retail credit provider, HSBC, eliminating the volume-based fee income payment to Polaris in the first quarter 2008 and lower penetration levels in 2009 (as discussed in more detail in the "Liquidity and Capital Resources" section below).

Interest expense
Interest expense decreased to $1.1 million and $2.1 million for the three and six months ended June 30, 2009, respectively, compared to $2.5 million and $5.2 million for the same periods of 2008, due to lower interest rates on the Company's bank borrowings during the 2009 period.

Noncash Impairment charge on securities available for sale The noncash Impairment charge on securities available for sale recorded in the first quarter 2009 was $9.0 million, pretax, or $0.18 per diluted share. The securities available for sale relate to the Company's KTM investment which had a fair value equal to the trading price of KTM shares on the Vienna stock exchange (19.25 Euros at March 31, 2009). The total fair value of these securities as of March 31, 2009 was $8.8 million which was below the Company's cost basis for this investment at that time. During the first quarter 2009, the Company determined that the decline in the fair value of the KTM shares was other than temporary and therefore recorded the unrealized non-cash impairment charge in the income statement.

Other expense/income, net
Non-operating other expense/income was $0.7 million of income in the second quarter of 2009 compared to $0.2 million of expense for the same period in 2008. The change was primarily due to the movement of the U.S. dollar and the resulting effects of foreign currency transactions related to the international subsidiaries. Year-to-date non-operating other expense/income was $0.7 million of income compared to $0.9 million of income for the same period in 2008.

Provision for income taxes
The income tax provision for the second quarter 2009 was recorded at a rate of 34.4 percent of pretax income compared to 36.0 percent of pretax income for the second quarter 2008. Year-to-date the income tax provision for 2009 was recorded at a rate of 34.2 percent of pretax income compared to 35.8 percent of pretax income for the 2008 year-to-date period. The lower income tax rate for the 2009 second quarter and year-to-date periods resulted from the federal research and development tax credit, which had not been extended by the U.S. Congress until the fourth quarter 2008.

Reported Net Income

                                              Three Months Ended                Six Months Ended
                                                   June 30,                         June 30,
($ in millions except per share data)     2009       2008      Change      2009       2008      Change
Net Income                              $ 17.5     $ 24.4        -28 %   $ 25.9     $ 43.5        -40 %
Diluted net income per share            $ 0.53     $ 0.72        -26 %   $ 0.79     $ 1.27        -38 %

Reported net income for the second quarter 2009 was $17.5 million, or $0.53 per diluted share, compared to $24.4 million or $0.72 per diluted share for the second quarter 2008. Year-to-date 2009 reported net income was $25.9 million, or $0.79 per diluted share, compared to $43.5 million or $1.27 per diluted share for the 2008 period. The decrease for the 2009 second quarter and year-to-date periods is primarily due to lower sales volume.

Weighted Average Shares Outstanding
The weighted average diluted shares outstanding for the second quarter ended June 30, 2009 of 33.0 million shares is down two percent compared to the comparable period in 2008. For the year-to-date 2009 period, the weighted average diluted shares outstanding of 32.8 million shares is down four percent compared to the comparable period in 2008.

Cash Dividends
Polaris paid a $0.39 per share dividend on May 15, 2009 to shareholders of record on May 1, 2009. On July 17, 2009, the Polaris Board of Directors declared a regular cash dividend of $0.39 per share payable on or about August 17, 2009 to holders of record of such shares at the close of business on August 3, 2009.

Liquidity and Capital Resources
Polaris' primary sources of funds have been cash provided by operating activities and borrowings under its credit arrangements. Polaris' primary uses of funds have been for repayments under the credit agreement, repurchase and retirement of common stock, capital investments, cash dividends to shareholders and new product development.

The following chart summarizes the cash flows from operating, investing and financing activities for the six months ended June 30, 2009 ($ in millions):

                                                               For the Six Months Ended June 30,
                                                           2009                2008             Change
Total cash provided by (used for):
Operating activities                                    $      (8.7 )       $      21.7         $ (30.4 )
Investing activities                                          (14.9 )             (27.4 )          12.5
Financing activities                                           26.5               (35.7 )          62.2

Increase/(Decrease) in cash and cash equivalents        $       2.9         $     (41.4 )       $  44.3

Net cash used for operating activities totaled $8.7 million for the six months ended June 30, 2009, compared to $21.7 million cash provided in the same period of 2008. The $30.4 million decrease in net cash provided by operating activities for the six months ended June 30, 2009 compared to the same period in 2008 is primarily due to a $17.5 million decrease in net income offset by the non-cash impairment charge of $9.0 million and by the following changes in working capital:

• Trade receivables: Trade receivables were a source of cash totaling $44.6 million for the six months ended June 30, 2009 compared to a source of cash totaling $9.9 million in the same period of 2008. The increase in cash provided of $34.7 million was due to the timing of collections of the trade receivables and lower international sales in the first six months of 2009 compared to the first six months of 2008.

• Inventories: Inventories were a source of cash for the six months ended June 30, 2009 of $2.7 million compared to a use of cash of $60.1 million in the same period of 2008. The decrease in the net use of cash of $62.8 million was due to lower

factory inventory levels resulting from the lower production volume during the first six months of 2009 and improved supply chain and manufacturing flexibility compared to the same period last year.

• Accounts payable: Accounts payable were a use of cash totaling $58.7 million for the six months ended June 30, 2009 compared to a source of cash of $12.3 million in the same period of 2008. The increase in cash used of $71.0 million resulted from the timing of payments made for accounts payable for the first six months of 2009 compared to the same period last year and the lower factory production and inventory levels in the 2009 period.

• Accrued expenses: Accrued expenses were a use of cash for the six months ended June 30, 2009 totaling $74.5 million compared to cash used totaling $38.5 million in the same period of 2008. The increase in the net cash used of $36.0 million resulted from higher payments for the first six months of 2009 primarily for sales promotions and incentives, dealer holdback and incentive compensation plans.

Investing activities:

Net cash used for investing activities was $14.9 million for the six months ended June 30, 2009 compared to cash used of $27.4 million for the same period in 2008. The primary use of cash for the first six months of 2009 and 2008 was the investment of $25.2 million and $37.6 million, respectively, for the purchase of property and equipment, including new product development tooling.

Financing activities:

Net cash provided from financing activities was $26.5 million for the first six months of 2009 compared to $35.7 million net cash used for financing activities in the same period in 2008. The Company borrowed under the credit agreement net cash of $50.0 million and $61.0 million through the first six months of 2009 and 2008, respectively. The Company paid cash dividends of $25.0 million and $25.2 million through the second quarter of 2009 and 2008, respectively. Common stock repurchased for the first six months of 2009 and 2008 totalled $0.3 million and $85.9 million, respectively.

The seasonality of production and shipments causes working capital requirements to fluctuate during the year. Polaris is party to an unsecured bank variable interest rate lending agreement that matures on December 2, 2011, comprised of a $250 million revolving loan facility for working capital needs and a $200 million term loan. The $200 million term loan was utilized . . .