UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the quarterly period ended     MARCH 31, 2002    

OR

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the transition period from _______________________________  to _______________________________

Commission File Number    1-11411   

Polaris Industries Inc.

(Exact Name of Registrant as Specified in its Charter)

Minnesota	41-1790959
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
2100 Highway 55, Medina, MN	55340
(Address of principal executive offices)	(Zip Code)

(763) 542-0500

(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes     X     No          

APPLICABLE ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

     As of May 3, 2002, 23,235,414 shares of Common Stock of the issuer were outstanding.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
	Item 1. - CONSOLIDATED FINANCIAL STATEMENTS
		CONSOLIDATED BALANCE SHEETS
		CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	Item 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
		Results of Operations
		Cash Dividends
		Liquidity and Capital Resources
		Inflation and Exchange Rates
		Item 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Note Regarding Forward Looking Statements
PART II. OTHER INFORMATION
	Item 1 — Legal Proceedings
	Item 2 — Changes in Securities
	Item 3 — Defaults upon Senior Securities
	Item 4 — Submission of Matters to a Vote of Security Holders
	Item 6 — Exhibits and Reports on Form 8-K
SIGNATURES

FORM 10-Q
For the Quarterly Period Ended
March 31, 2002

POLARIS INDUSTRIES INC.
FORM 10-Q
For Quarter Period Ended March 31, 2002

Table of Contents

			Page
Part I                      FINANCIAL INFORMATION
	Item 1 - Consolidated Financial Statements
		Consolidated Balance Sheets		3
		Consolidated Statements of Income		4
		Consolidated Statements of Cash Flows		5
		Notes to Consolidated Financial Statements		6
	Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations
		Results of Operations		13
		Cash Dividends		14
		Liquidity and Capital Resources		15
		Inflation and Exchange Rates		16
	Item 3 - Quantitative and Qualitative Disclosures on Market Risk			18
Note regarding forward-looking statements				18
Part II                      OTHER INFORMATION				19
	Item 1 Legal Proceedings
	Item 2 Changes in Securities
	Item 3 Defaults upon Senior Securities
	Item 4 Submission of Matters to a Vote of Security Holders
	Item 6 Exhibits and Reports on Form 8-K
SIGNATURE PAGE				20

2

FORM 10-Q
For the Quarterly Period Ended
March 31, 2002

POLARIS INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)

					March 31, 2002			December 31,
					(Unaudited)			2001
Assets
Current Assets
	Cash and cash equivalents				$	41,790		$	40,530
	Trade receivables					37,738			56,119
	Inventories					179,307			152,717
	Prepaid expenses and other					9,323			10,203
	Deferred tax assets					44,064			45,748
			Total current assets			312,222			305,317
Deferred tax assets						6,355			9,361
Property and equipment, net						171,665			170,323
Investments in finance affiliate and retail credit deposit						47,387			52,963
Goodwill, net						24,202			23,541
Intangible and other assets, net						3,603			3,658
			Total Assets		$	565,434		$	565,163
Liabilities and Shareholders’ Equity
Current Liabilities:
	Accounts payable				$	112,974		$	101,554
	Accrued expenses					145,716			190,911
	Income taxes payable					12,374			15,872
		Total current liabilities				271,064			308,337
Borrowings under credit agreement						51,039			18,043
		Total Liabilities				322,103			326,380
Shareholders’ Equity:
	Common stock					228			229
	Additional paid-in capital					0			0
	Deferred compensation					(3,822	)		(4,888	)
	Other Comprehensive Income					(4,199	)		(5,192	)
	Retained earnings					251,124			248,634
		Total shareholders’ equity				243,331			238,783
				Total Liabilities and Shareholders’ Equity	$	565,434		$	565,163

See Notes to Consolidated Financial Statements

3

FORM 10-Q
For the Quarterly Period Ended
March 31, 2002

POLARIS INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
Unaudited

			First Quarter Ended
			3/31/2002			3/31/2001
Sales			$	299,169		$	289,688
	Cost of Sales			241,409			230,568
		Gross profit		57,760			59,120
	Operating expenses
		Selling and marketing		20,691			22,199
		Research and development		9,486			8,478
		General and administrative		13,273			13,154
		Total operating expenses		43,450			43,831
		Operating Income		14,310			15,289
Non-operating Expense (Income):
	Interest expense			682			2,112
	Income from financial services			(3,192	)		(3,480	)
	Other (income) expense, net			(673	)		744
		Income before income taxes		17,493			15,913
Provision for Income Taxes				5,860			5,490
		Net Income	$	11,633		$	10,423
Net Income Per Share
		Basic	$	0.52		$	0.45
		Diluted	$	0.49		$	0.44
Weighted average shares outstanding:
		Basic		22,442			23,152
		Diluted		23,850			23,686

See Notes to Consolidated Financial Statements

4

FORM 10-Q
For the Quarterly Period Ended
March 31, 2002

POLARIS INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Unaudited

				First Quarter Ended
				3/31/2002			3/31/2001
Operating Activities:
	Net income			$	11,633		$	10,423
	Adjustments to reconcile net income to net cash used for operating activities
		Depreciation and amortization			12,803			11,520
		Noncash compensation			3,632			2,888
		Noncash income from financial services			(2,030	)		(3,414	)
		Deferred income taxes			4,690			(3,886	)
		Changes in current operating items
			Trade receivables		18,381			(17,198	)
			Inventories		(26,590	)		(67,708	)
			Accounts payable		11,420			40,469
			Accrued expenses		(45,195	)		(16,190	)
			Income taxes payable		(1,416	)		4,426
			Prepaid expenses and others, net		1,441			(6,738	)
	Net cash used for operating activities				(11,231	)		(45,408	)
Investing Activities:
	Purchase of property and equipment				(14,105	)		(15,325	)
	Investments in finance affiliate and retail credit deposit, net				7,620			10,133
	Acquisition of business				(661	)		0
	Net cash used for investing activities				(7,146	)		(5,192	)
Financing Activities:
	Borrowings under credit agreement				133,000			164,797
	Repayments under credit agreement				(100,003	)		(102,309	)
	Repurchase and retirement of common shares				(12,317	)		(7,410	)
	Cash dividends to shareholders				(6,297	)		(5,746	)
	Proceeds from the exercise of stock options				5,254			770
	Net cash provided from financing activities				19,637			50,102
Net increase (decrease) in cash and cash equivalents					1,260			(498	)
Cash and cash equivalents at beginning of period					40,530			2,369
Cash and cash equivalents at end of period				$	41,790		$	1,871

See Notes to Consolidated Financial Statements

5

FORM 10-Q
For the Quarterly Period Ended
March 31, 2002

POLARIS INDUSTRIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements and, therefore, do not include all information and disclosures of results of operations, financial position and changes in cash flow in conformity with accounting principles generally accepted in the United States for complete financial statements. Accordingly, such statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, previously filed with the Securities and Exchange Commission. In the opinion of management, such statements reflect all adjustments (which include only normal recurring adjustments) necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented. Due to the seasonality of the snowmobile, all terrain vehicle (ATV), personal watercraft (PWC), motorcycle and the parts, garments and accessories (PG&A) business, and to certain changes in production and shipping cycles, results of such periods are not necessarily indicative of the results to be expected for the complete year.

Polaris implemented two new accounting rules during the first quarter 2002. Floor plan financing expenses that previously were included in selling and marketing expenses are now recorded as an offset to sales to comply with the requirements of Emerging Issues Task Force Issue (EITF) 01-09. Cooperative advertising expenses that previously were included in selling and marketing expenses are now recorded in cost of sales to comply with Emerging Issues Task Force Issue (EITF) 00-25. Certain amounts in 2001 have been reclassified to conform to the new requirements. These changes had no impact on previously reported net income.

NOTE 2.  Inventories

The major components of inventories are as follows (in thousands):

	March 31, 2002		December 31, 2001
Raw materials and purchased components	$	24,913	$	22,107
Parts, garments and accessories		54,054		53,573
Finished goods		100,340		77,037
	$	179,307	$	152,717

6

FORM 10-Q
For the Quarterly Period Ended
March 31, 2002

NOTE 3.  Financing Agreement

Polaris has an unsecured bank line of credit arrangement with maximum available borrowings of $150,000,000 expiring on June 14, 2004. In addition, Polaris has entered into a 364-day unsecured bank line of credit arrangement expiring on June 13, 2002 with maximum available borrowing of $100,000,000. For both credit arrangements, interest is charged at rates based on LIBOR or “prime” (2.47 percent at March 31, 2002).

Polaris has entered into an interest rate swap agreement to manage exposures to fluctuations in interest rates. The effect of this agreement is to fix the interest rate at 7.21 percent for $18,000,000 of borrowings under the credit line until June 2007.

As of March 31, 2002, total borrowings under the bank line of credit arrangements were $51,039,000 and have been classified as long-term in the accompanying consolidated balance sheets.

NOTE 4.  Investments in Finance Affiliate and Retail Credit Deposit

In 1996, a wholly owned subsidiary of Polaris entered into a partnership agreement with a wholly owned subsidiary of Transamerica Distribution Finance (TDF) to form Polaris Acceptance. Polaris Acceptance provides floor plan financing to Polaris’ dealers in the United States. Polaris’ subsidiary has a 50 percent equity interest in Polaris Acceptance. The receivable portfolio is recorded on Polaris Acceptance’s books, which is consolidated onto TDF’s books and is funded 85 percent through a loan from an affiliate of TDF and 15 percent by cash investment shared equally between the two partners. Polaris has not guaranteed the outstanding indebtedness of Polaris Acceptance. Substantially all of Polaris’ U.S. sales are financed through Polaris Acceptance whereby Polaris receives payment within a few days of shipment of the product. The amount financed for dealers under this arrangement at March 31, 2002 was approximately $500,000,000.

Beginning in 1999, Polaris Acceptance entered into an Income Sharing Agreement with Transamerica Retail Financial Services (TRFS), a subsidiary of TDF. TRFS and its banking affiliate provide private label retail credit financing to Polaris consumers through Polaris dealers in the United States. In October 2001, TRFS sold a significant portion of the retail portfolio to Household Bank, N.A. (Household). The remaining amount financed by consumers through TRFS and its banking affiliate at March 31, 2002 was approximately $14,000,000. TRFS is in the process of liquidating this remaining portfolio, which is expected to be completed some time in 2002.

7

FORM 10-Q
For the Quarterly Period Ended
March 31, 2002

Polaris’ investment in Polaris Acceptance is accounted for under the equity method, and is recorded as a component of Investments in Finance Affiliate and Retail Credit Deposit in the accompanying consolidated balance sheets. The partnership agreement provides that all income and losses of the floor plan and retail credit portfolio are shared 50 percent to Polaris’ wholly owned subsidiary and 50 percent to TDF’s wholly owned subsidiary. Polaris’ allocable share of the income of Polaris Acceptance has been included as a component of Income from Financial Services in the accompanying consolidated statements of income.

In October 2001, a wholly owned subsidiary of Polaris entered into agreements with Household and an affiliate of Household to provide private label retail credit financing through installment and revolving loans to Polaris consumers through Polaris dealers in the United States. The amount financed by consumers under this arrangement at March 31, 2002 was approximately $168,000,000. The receivable portfolio is owned and managed by Household and is funded by Household and its affiliate except to the extent of a cash deposit by Polaris’ subsidiary equal to seven and one-half percent of the revolving credit portfolio balance. Polaris’ deposit with Household is reflected as a component of Investments in Finance Affiliate and Retail Credit Deposit in the accompanying consolidated balance sheet. Polaris’ subsidiary participates in fifty percent of the profits or losses of the revolving credit portfolio. Polaris’ allocable share of the income from the retail credit portfolio has been included as a component of Income from Financial Services in the accompanying consolidated statements of income. Under the terms of the agreements, either party has the right to terminate the agreements if profitability of the portfolio falls below certain minimum levels. Polaris’ financial exposure under this agreement is limited to its deposit plus an aggregate amount of not more than $15,000,000.

Polaris also provides extended service contracts to consumers and certain insurance contracts to dealers and consumers through various third-party suppliers. Polaris does not retain any warranty, insurance or financial risk in any of these arrangements. Polaris’ service fee income generated from these arrangements has been included as a component of Income from Financial Services in the accompanying consolidated statements of income.

NOTE 5.  Investment In Manufacturing Affiliate

Polaris is a partner with Fuji Heavy Industries Ltd. in Robin Manufacturing, U.S.A. (Robin). Polaris has a 40 percent ownership interest in Robin, which builds engines in the United States for recreational and industrial products. Polaris’ investment in Robin is accounted for under the equity method, and is recorded as a component of Intangible and other assets in the accompanying consolidated balance sheets. Polaris’ allocable share of the income of Robin has been included as a component of Other (income) expense in the accompanying consolidated statements of income.

8

FORM 10-Q
For the Quarterly Period Ended
March 31, 2002

NOTE 6.  Shareholder’s Equity

During the first three months of 2002, Polaris paid $12,317,000 to repurchase and retire 205,050 shares of its common stock with cash on hand and borrowings under its line of credit arrangements. Polaris had approximately 2,430,000 remaining shares available to repurchase under its current Board of Directors’ authorization as of March 31, 2002.

The Polaris Board of Directors voted to increase the regular quarterly cash dividend from $0.25 to $0.28 per share payable on February 15, 2002, to shareholders of record on February 1, 2002.

The Polaris Board of Directors also declared a regular cash dividend of $0.28 per share payable on or about May 15, 2002 to holders of record on May 1, 2002.

Net income per share for the periods ended March 31, 2002 and 2001 was calculated based on the weighted average number of common and potential common shares outstanding.

Basic earnings per share using SFAS No. 128 “Earnings Per Share” is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during each year, including shares earned under the Director Plan and the Employee Stock Ownership Plan (ESOP). Diluted earnings per share is computed under the treasury stock method and is calculated to reflect the dilutive effect of the Option Plan. A reconciliation of these amounts is as follows (in thousands):

	For Three Months
	Ended March 31,
	2002		2001
Weighted average number of common shares outstanding		22,248		22,952
Director Plan		24		30
ESOP		170		170
Basic weighted average shares outstanding		22,442		23,152
Net effect of dilutive stock options		1,408		534
Diluted weighted average shares outstanding		23,850		23,686

9

FORM 10-Q
For the Quarterly Period Ended
March 31, 2002

Comprehensive Income

Comprehensive income represents net income adjusted for foreign currency translation adjustments and the deferred gain (loss) on derivative instruments utilized to hedge Polaris’ interest and foreign exchange exposures. Comprehensive income is as follows (in thousands):

		For the Three Months
		Ended March 31,
		2002			2001
Net income		$	11,633		$	10,423
Other comprehensive income:
	Foreign currency translation adjustment		(128	)		(70	)
	Effect of SFAS 133 adoption		—			(2,544	)
	Unrealized gain (loss) on derivative instruments		1,121			(2,985	)
Comprehensive income		$	12,626		$	4,824

NOTE 7.  Commitments and Contingencies

Polaris is subject to product liability claims in the normal course of business and prior to June 1996 elected not to purchase insurance for product liability losses. Effective June 1996, Polaris purchased excess insurance coverage for catastrophic product liability claims for incidents occurring subsequent to the policy date that exceeds a self-insured retention. The estimated costs resulting from any losses are charged to expense when it is probable a loss has been incurred and the amount of the loss is reasonably determinable.

Polaris is a defendant in lawsuits and subject to claims arising in the normal course of business. In the opinion of management, it is not probable that any legal proceedings pending against or involving Polaris will have a material adverse effect on Polaris’ financial position or results of operations.

NOTE 8.  Accounting for Derivative Instruments and Hedging Activities

Polaris adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” on January 1, 2001. SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument, including certain derivative instruments embedded in other contracts, be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative’s fair value be recognized currently in earnings unless specific hedge criteria are met, and requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting.

Interest Rate Swap Agreements

Polaris has an interest rate swap agreement expiring in 2007 related to $18,000,000 of debt that has been designated and meets the criteria, as a cash flow hedge. At March 31, 2002, the interest rate swap’s fair market value was a liability of $1,681,000.

10

FORM 10-Q
For the Quarterly Period Ended
March 31, 2002

Foreign Exchange Contracts

Polaris enters into foreign exchange contracts to manage currency exposures of certain of its purchase commitments denominated in foreign currencies and transfers of funds from its Canadian subsidiary. Polaris does not use any financial contracts for trading purposes. These contracts have been designated as and meet the criteria for cash flow hedges.

At March 31, 2002, Polaris had open Japanese yen foreign exchange contracts with notional amounts totaling U.S. $54,291,000 and a net liability fair market value of $4,480,000. At March 31, 2002 there were no Canadian dollar foreign exchange contracts outstanding.

NOTE 9.  Goodwill and Intangible Assets

Effective January 1, 2002, the Company adopted SFAS 142 “Goodwill and Other Intangible Assets.” Statement 142 prohibits the amortization of goodwill and intangible assets with indefinite useful lives. Statement 142 requires that these assets be reviewed for impairment at least annually. An impairment charge is recognized only when the calculated fair value of a reporting unit, including goodwill, is less than its carrying amount. Polaris calculated the fair value of its reporting unit using a discounted cash flow model. The results of the analysis indicated that no goodwill impairment existed as of January 1, 2002. In accordance with SFAS 142 the Company will complete an impairment analysis on an annual basis.

Goodwill before accumulated amortization was $35,321,000 at March 31, 2002 and $34,660,000 at December 31, 2001. Accumulated amortization was $11,119,000 at March 31, 2002 and $11,119,000 at December 31, 2001.

As required by SFAS 142, intangibles with finite lives continue to be amortized. Included in intangibles assets are patents, trademarks, trade names, customer lists and technology. Intangible assets before accumulated amortization were $4,131,000 at March 31, 2002 and $4,123,000 at December 31, 2001. Accumulated amortization was $3,279,000 at March 31, 2001 and $3,230,000 at December 31, 2001. The net value of intangible assets is included as a component of Intangible and other assets in the accompanying consolidated balance sheets.

11

FORM 10-Q
For the Quarterly Period Ended
March 31, 2002

A reconciliation of reported net income adjusted to reflect the adoption of SFAS 142 is provided below (in thousands):

	For the Three Months
	Ended March 31,
	2002		2001
Reported net income	$	11,633	$	10,423
Add-back goodwill amortization, net of tax		—		118
Adjusted net income		11,633		10,541
Reported basic net income per share	$	0.52	$	0.45
Add-back goodwill amortization		—		0.01
Adjusted basic net income per share	$	0.52	$	0.46
Reported diluted net income per share	$	0.49	$	0.44
Add-back goodwill amortization		—		0.01
Adjusted diluted net income per share	$	0.49	$	0.45

12

FORM 10-Q
For the Quarterly Period Ended
March 31, 2002

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion pertains to the results of operations and financial position of Polaris Industries Inc., a Minnesota corporation (“Polaris” or the “Company”) for the quarter and year-to-date periods ended March 31, 2002 and 2001. Due to the seasonality of the snowmobile, all terrain vehicle (ATV), personal watercraft (PWC), parts, garments and accessories (PG&A) and motorcycle business, and to certain changes in production and shipping cycles, results of such periods are not necessarily indicative of the results to be expected for the complete year.

Results of Operations

Sales were $299.2 million in the first quarter of 2002, representing a three percent increase from $289.7 million in sales for the same period in 2001.

Sales of ATVs were $215.5 million in the first quarter of 2002, up 14 percent from first quarter 2001 sales of $189.3 million. This increase reflects continued strong ATV industry growth as well as market share expansion for Polaris from the first quarter of last year. This success results from the continued benefit of incremental promotional programs as well as market acceptance of new model introductions. The Polaris Professional Series line also began to contribute in the first quarter generating sales of $1.6 million, which are included within the ATV sales numbers. The average per unit sales price for the first quarter 2002 was higher than last year’s first quarter due to a mix change as more of the new higher priced Sportsman 700, Rangers, and Professional Series models were sold during the quarter.

Sales of snowmobiles were $5.5 million for the first quarter of 2002, and were 71 percent lower than the $19.3 million for the comparable period in 2001. The decrease is mainly due to timing of shipments in the first quarter 2002 compared to 2001. In the first quarter 2001, the company shipped several models of the new Snow Check Select™ custom-order snowmobiles to dealers earlier than normal to support the introduction of the new custom order option program. The 2002 first quarter sales are more normal from a historical standpoint. The average per unit sales price decreased slightly during the first quarter 2002 when compared to the prior year period due to a mix change.

Sales of PWC were $22.6 million for the first quarter of 2002, a decrease of 11 percent compared to first quarter 2001 sales of $25.4 million. The decrease is due to the continued soft economy and its effect on the overall watercraft market. The average per unit sales price for the first quarter 2002 increased slightly from the first quarter 2001 primarily as a result of a change in mix of models sold.

Sales of Victory motorcycles were $12.7 million for the first quarter 2002, an increase of 132 percent from $5.4 million for the comparable period in 2001. The increase is due to the strong retail sales activity for Victory in the first quarter driven by the positive impact of additional promotional and advertising activity implemented over the past several quarters and the success of the new touring cruiser model. The average per unit sales price for the first quarter 2002 increased due to lower promotional costs incurred during the first quarter 2002 compared to the prior year and, to a lesser extent, due to a change in mix of models sold.

13

FORM 10-Q
For the Quarterly Period Ended
March 31, 2002

Parts, garments and accessories sales were $42.9 million for the first quarter 2002, a decrease of 14 percent from $50.1 million for the first quarter of 2001. The decrease is the result of the poor snowmobile riding conditions due to below normal levels of snowfall in much of North America this past season, which had a negative impact on sales of all snow related PG&A products.

Gross profit for the first quarter 2002 decreased two percent to $57.8 million or 19.3 percent of sales compared to $59.1 million or 20.4 percent of sales for the first quarter 2001. The decrease in the gross profit, as a percent of sales, is due to the continued aggressive ATV promotional spending in the first quarter of 2002, which was up by an incremental $7.3 million compared to the first quarter a year ago. Additionally, the gross margin percent was negatively impacted by a sales mix change from the decline in high margin PG&A sales during the first quarter 2002. These declines were partially offset by improved margins generated from new model introductions, like the Sportsman 700 ATV, and to a lesser extent, efficiency benefits from the Roseau production facility redesign and other cost reduction efforts.

Operating expenses in the first quarter of 2002 decreased one percent to $43.5 million from $43.8 million in the comparable 2001 period. As a percentage of sales, operating expenses decreased to 14.5 percent for the first quarter of 2002 compared to 15.1 percent for the same period in 2001. The decrease in operating expenses as a percentage of sales is primarily the result of the ongoing overall cost reduction efforts across the company. However, the company continues to invest in new product development and new technologies.

Income from financial services decreased eight percent to $3.2 million in the first quarter 2002 compared to $3.5 million in the first quarter 2001. The decrease is due primarily to the lower interest rates in the first quarter 2002 compared to the prior year.

Interest expense decreased 68 percent to $0.7 million in the first quarter 2002 compared to $2.1 million in the first quarter 2001. The decrease relates primarily to lower interest rates and lower borrowing levels in the first quarter 2002 compared to the prior year period.

Other non-operating income increased to $0.7 million in the first quarter 2002 compared to $0.7 million expense in the first quarter 2001. The higher income in the first quarter 2002 was due to the impact of currency fluctuations in the remeasurement of the balance sheets of the foreign subsidiaries.

The income tax provision rate for the first quarter 2002 was recorded at 33.5 percent of sales, a reduction from 34.5 percent of sales in the first quarter last year. The revised rate is a result of tax planning activities and is the anticipated income tax provision rate for the full year 2002.

Cash Dividends

The Polaris Board of Directors voted to increase the regular cash dividend from $0.25 to $0.28 per share payable on February 15, 2002, to shareholders of record on February 1, 2002.

In April 2002, the Board of Directors declared a $0.28 per share dividend payable on or about May 15, 2002, to shareholders of record on May 1, 2002.

14

FORM 10-Q
For the Quarterly Period Ended
March 31, 2002

Liquidity and Capital Resources

Net cash of $11.2 million was used for operating activities during the first quarter ended March 31, 2002, a $34.2 million improvement over the first quarter of 2001 primarily resulting from lower inventory levels than a year ago. Net cash used for investing activities was $7.1 million during the first quarter ended March 31, 2002 and primarily represents the purchase of property and equipment offset somewhat by a seasonal reduction of the investment in finance affiliate and retail credit deposit. Net cash provided from financing activities was $19.6 million during the first quarter ended March 31, 2002, which primarily represents an increase in borrowings partially offset by dividends paid to shareholders and the repurchase of common shares. Cash and cash equivalents totaled $41.8 million at March 31, 2002.

The seasonality of production and shipments causes working capital requirements to fluctuate during the year. Polaris has unsecured bank line of credit arrangements with maximum available borrowings of $250.0 million. Interest is charged at rates based on LIBOR or “prime” (2.47 percent at March 31, 2002). As of March 31, 2002, total borrowings under these credit arrangements were $51.0 million and have been classified as long-term in the accompanying consolidated balance sheets.

In the past, Polaris has entered into interest rate swap agreements to manage exposures to fluctuations in interest rates. Currently the Company has one agreement in place. The effect of the agreement is to fix the interest rate at 7.21 percent for $18.0 million of borrowings under the credit line until June 2007.

During the first quarter of 2002, Polaris paid $12.3 million to repurchase and retire 205,050 shares of its common stock with cash on hand and borrowings under its line of credit arrangements. Approximately 7.1 million shares have been repurchased as of March 31, 2002 since the inception of the board authorization.

Management believes that existing cash balances and bank borrowings, cash flow to be generated from operating activities and available borrowing capacity under the line of credit arrangements will be sufficient to fund operations, regular dividends, share repurchases, and capital requirements for the remainder of 2002. At this time, management is not aware of any factors that would have a material impact in cash flow beyond 2002.

In 1996, a wholly owned subsidiary of Polaris entered into a partnership agreement with a wholly owned subsidiary of Transamerica Distribution Finance (TDF) to form Polaris Acceptance. Polaris Acceptance provides floor plan financing to Polaris’ dealers in the United States. Polaris’ subsidiary has a 50 percent equity interest in Polaris Acceptance. The receivable portfolio is recorded on Polaris Acceptance’s books, which is consolidated onto TDF’s books and is funded 85 percent with a loan from an affiliate of TDF and 15 percent by cash investment shared equally between the two partners. Polaris has not guaranteed the outstanding indebtedness of Polaris Acceptance. Substantially all of Polaris’ U.S. sales are financed through Polaris Acceptance whereby Polaris receives payment within a few days of shipment of the product.

15

FORM 10-Q
For the Quarterly Period Ended
March 31, 2002

Beginning in 1999, Polaris Acceptance entered into an Income Sharing Agreement with Transamerica Retail Financial Services (TRFS), a subsidiary of TDF. TRFS provides private label retail credit financing to Polaris consumers through Polaris dealers in the United States. In October 2001, TRFS sold a significant portion of the retail portfolio to Household Bank, N.A. (Household). The remaining amount financed by consumers through TRFS at March 31, 2002 was approximately $14.0 million. TRFS is in the process of liquidating this remaining portfolio, which is expected to be completed some time in 2002.

Polaris’ investment in Polaris Acceptance is accounted for under the equity method, and is recorded as a component of Investments in Finance Affiliate and Retail Credit Deposit in the accompanying consolidated balance sheets. The partnership agreement provides that all income and losses of the floor plan and retail credit portfolio are shared 50 percent to Polaris’ wholly owned subsidiary and 50 percent to TDF’s wholly owned subsidiary. Polaris’ allocable share of the income of Polaris Acceptance has been included as a component of Income from Financial Services in the accompanying consolidated statements of income.

In October 2001, a wholly owned subsidiary of Polaris entered into agreements with Household and an affiliate of Household to provide private label retail credit financing through installment and revolving loans to Polaris consumers through Polaris dealers in the United States. The receivable portfolio is owned and managed by Household and its affiliate and is funded by Household and its affiliate except to the extent of a cash deposit by Polaris’ subsidiary equal to seven and one-half percent of the revolving credit portfolio balance. Polaris’ deposit with Household is reflected as a component of Investments in Finance Affiliate and Retail Credit Deposit in the accompanying consolidated balance sheet. Polaris’ subsidiary participates in 50 percent of the profits or losses of the revolving credit portfolio. Polaris’ allocable share of the income from the retail credit portfolio has been included as a component of Income from Financial Services in the accompanying consolidated statements of income. Under the terms of the agreements, either party has the right to terminate the agreements if profitability of the portfolio falls below certain minimum levels. Polaris’ financial exposure under this agreement is limited to its deposit plus an aggregate amount of not more than $15.0 million.

As of March 31, 2002, the wholesale portfolio for dealers in the United States was approximately $500.0 million, a decrease from $547.0 million at December 31, 2001 and an increase of eighteen percent from March 31, 2001. Credit losses in this portfolio have been modest averaging less than three tenths of one percent of the portfolio over the six-year life of the partnership. The Household retail credit portfolio balance as of March 31, 2002, was approximately $168.0 million, up from $160.0 million at December 31, 2001. Receivable losses have averaged about three percent in the two-year life of this portfolio, in line with industry norms.

Inflation and Exchange Rates

Polaris does not believe that inflation has had a material impact on the results of its recent operations. However, the changing relationships of the U.S. dollar to the Japanese yen and Canadian dollar have had a material impact from time to time.

16

FORM 10-Q
For the Quarterly Period Ended
March 31, 2002

During calendar 2001, purchases totaling 12 percent of Polaris’ cost of sales were from yen-denominated suppliers. Polaris’ cost of sales in the first quarter ended March 31, 2002 was positively impacted by the Japanese yen-U.S. dollar exchange rate fluctuation when compared to the same period in 2001. In view of the foreign exchange hedging contracts currently in place, Polaris anticipates that the Japanese yen-U.S. dollar exchange rate will have a positive impact on cost of sales during the remainder of 2002 when compared to the same periods in 2001.

Polaris operates in Canada through a wholly owned subsidiary. The weakening of the Canadian dollar in relationship to the U.S. dollar has resulted in lower gross margin levels on a comparable basis in the first quarter 2002 when compared to the same period in 2001.

Currency remeasurement, translation and exchange gains and losses are reflected in the results of operations for the Canadian and Australian subsidiaries and are reflected as Other Comprehensive Income in the equity section of the balance sheet for the French subsidiary.

In the past, Polaris has been a party to, and in the future may enter into, foreign exchange hedging contracts for each of the Japanese yen, Euro, Taiwan dollar and Canadian dollar to minimize the impact of exchange rate fluctuations within each year. At March 31, 2002, Polaris had open Japanese yen foreign exchange hedging contracts with notional amounts totaling $54.3 million U.S. dollars that mature at various times throughout the remainder of 2002.

17

FORM 10-Q
For the Quarterly Period Ended
March 31, 2002

Item 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK

Refer to the Company’s annual report on Form 10-K for the year ended December 31, 2001 for a complete discussion on the Company’s market risk. There have been no material changes to the market risk information included in the Company’s 2001 annual report on Form 10-K.

Note Regarding Forward Looking Statements

Certain matters discussed in this report are “forward-looking statements” intended to qualify for the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These “forward-looking statements” can generally be identified as such because the context of the statement will include words such as the Company or management “believes”, “anticipates”, “expects”, “estimates” or words of similar import. Similarly, statements that describe the Company’s future plans, objectives or goals are also forward-looking. Shareholders, potential investors and others are cautioned that all forward-looking statements involve risks and uncertainty that could cause results to differ materially from those anticipated by some of the statements made herein. In addition to the factors discussed above, among the other factors that could cause actual results to differ materially are the following: product offerings and pricing strategies by competitors; future conduct of litigation or audit processes; warranty expenses; foreign currency exchange rate fluctuations; environmental and product safety regulatory activity; effects of weather; uninsured product liability claims; and overall economic conditions, including inflation and consumer confidence and spending.

18

FORM 10-Q
For the Quarterly Period Ended
March 31, 2002

PART II.	OTHER INFORMATION
	Item 1 — Legal Proceedings
	None
	Item 2 — Changes in Securities
	None
	Item 3 — Defaults upon Senior Securities
	None
	Item 4 — Submission of Matters to a Vote of Security Holders
	None
	Item 6 — Exhibits and Reports on Form 8-K

(a)	Exhibits
	None
(b)	Reports on Form 8-K
	During the quarter ended March 31, 2002 the Company:
	1.	filed a Current Report on Form 8-K on March 15, 2002, as amended on March 27, 2002, announcing the appointment of Ernst & Young LLP as its independent auditors for the year ending December 31, 2002; and
	2.	filed a Current report on Form 8-K on February 8, 2002 to furnish certain materials under Regulation FD that replaced and superceded all such materials included in any exhibit to a Form 8-K previously filed with the Commission.

19

FORM 10-Q
For the Quarterly Period Ended
March 31, 2002

Polaris Industries Inc.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	POLARIS INDUSTRIES INC. (Registrant)
Date: May      9    , 2002	/s/ Thomas C. Tiller Thomas C. Tiller President and Chief Executive Officer
Date: May       9    , 2002	/s/ Michael W. Malone Michael W. Malone Vice President, Finance, Chief Financial Officer, and Secretary (Principal Financial and Chief Accounting Officer)

20 GRAPHIC 3 c69436xbox.gif GRAPHIC begin 644 c69436xbox.gif M1TE&.#EA#``,`/?^``````$!`0("`@,#`P0$!`4%!08&!@<'!P@("`D)"0H* M"@L+"PP,#`T-#0X.#@\/#Q`0$!$1$1(2$A,3$Q04%!45%186%A<7%Q@8&!D9 M&1H:&AL;&QP<'!T='1X>'A\?'R`@("$A(2(B(B,C(R0D)"4E)28F)B7IZ>GM[>WQ\?'U]?7Y^?G]_?X"`@(&!@8*" M@H.#@X2$A(6%A8:&AH>'AXB(B(F)B8J*BHN+BXR,C(V-C8Z.CH^/CY"0D)&1 MD9*2DI.3DY24E)65E9:6EI>7EYB8F)F9F9J:FIN;FYRGI^?GZ"@ MH*&AH:*BHJ.CHZ2DI*6EI::FIJ>GIZBHJ*FIJ:JJJJNKJZRLK*VMK:ZNKJ^O MK["PL+&QL;*RLK.SL[2TM+6UM;:VMK>WM[BXN+FYN;JZNKN[N[R\O+V]O;Z^ MOK^_O\#`P,'!P<+"PL/#P\3$Q,7%Q<;&QL?'Q\C(R,G)RWM_?W^#@X.'AX>+BXN/CX^3DY.7EY>;FYN?GY^CHZ.GIZ>KJZNOK MZ^SL[.WM[>[N[N_O[_#P\/'Q\?+R\O/S\_3T]/7U]?;V]O?W]_CX^/GY^?KZ M^OO[^_S\_/W]_?[^_O___R'Y!`$``/X`+``````,``P`!PA>`/]%8T:PH,%_ M&0`H7,@0(3UF_R)&C*8N`T)P"O1(1"4@F$6+UB@0^H=*P2V$*/]94\!$P$F4 J%B/^`1!%XL>('#-EC'BSY,F0(S]& GRAPHIC 4 c69436box.gif GRAPHIC begin 644 c69436box.gif M1TE&.#EA#``,`/?^``````$!`0("`@,#`P0$!`4%!08&!@<'!P@("`D)"0H* M"@L+"PP,#`T-#0X.#@\/#Q`0$!$1$1(2$A,3$Q04%!45%186%A<7%Q@8&!D9 M&1H:&AL;&QP<'!T='1X>'A\?'R`@("$A(2(B(B,C(R0D)"4E)28F)B7IZ>GM[>WQ\?'U]?7Y^?G]_?X"`@(&!@8*" M@H.#@X2$A(6%A8:&AH>'AXB(B(F)B8J*BHN+BXR,C(V-C8Z.CH^/CY"0D)&1 MD9*2DI.3DY24E)65E9:6EI>7EYB8F)F9F9J:FIN;FYRGI^?GZ"@ MH*&AH:*BHJ.CHZ2DI*6EI::FIJ>GIZBHJ*FIJ:JJJJNKJZRLK*VMK:ZNKJ^O MK["PL+&QL;*RLK.SL[2TM+6UM;:VMK>WM[BXN+FYN;JZNKN[N[R\O+V]O;Z^ MOK^_O\#`P,'!P<+"PL/#P\3$Q,7%Q<;&QL?'Q\C(R,G)RWM_?W^#@X.'AX>+BXN/CX^3DY.7EY>;FYN?GY^CHZ.GIZ>KJZNOK MZ^SL[.WM[>[N[N_O[_#P\/'Q\?+R\O/S\_3T]/7U]?;V]O?W]_CX^/GY^?KZ M^OO[^_S\_/W]_?[^_O___R'Y!`$``/X`+``````,``P`!P@Z`/\)'$APX)L? M"!,J_/<#F;B'$!\:8"BNX,`#%"T*Q/BCHD:.'BV"U/AOY,>,)SN2Y&C@@,N7 &+@$$!``[ ` end -----END PRIVACY-ENHANCED MESSAGE-----