8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 14, 2008

POLARIS INDUSTRIES INC.

(Exact name of Registrant as specified in its charter)

Minnesota	1-11411	41-1790959
(State of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

2100 Highway 55
Medina, Minnesota 55340
(Address of principal executive offices)
(Zip Code)

(763) 542-0500
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o   Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17 CFR 240.14a-12(b))

o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

     On October 14, 2008, Polaris Industries Inc. (the “Company”) issued a news release announcing the Company’s third quarter financial results for the reporting period ended September 30, 2008. A copy of the Company’s news release is furnished as Exhibit 99.1 to this Current Report on Form 8-K. On October 14, 2008, the Company also hosted its quarterly earnings conference call, which was accessible to the public. A recording of the conference call will be available through the end of the business day on October 21, 2008 by dialing 800-642-1687 in the U.S. and Canada or 706-645-9291 for international calls and entering passcode 42183560 and on the Company’s website, www.polarisindustries.com.

     The information contained in this Current Report is furnished and not deemed to be filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in this Current Report shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

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SIGNATURE

     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.

Date: October 14, 2008

POLARIS INDUSTRIES INC.
 

/s/ Michael W. Malone  

Michael W. Malone 

Vice President — Finance,
Chief Financial Officer and
Secretary of Polaris Industries Inc. 

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EXHIBIT INDEX

Exhibit Number	Description
99.1	News Release dated October 14, 2008 of Polaris Industries Inc.

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EX-99.1

Exhibit 99.1

News Release 2100 Highway 55
Medina, MN 55340-9770

Contact:  Richard Edwards
Polaris Industries Inc.
763-542-0500

POLARIS REPORTS THIRD QUARTER 2008 RESULTS, SALES GREW SEVEN
PERCENT TO A RECORD $580.3 MILLION; EARNINGS FROM CONTINUING
OPERATIONS INCREASED TO A RECORD $1.13 PER DILUTED SHARE

Third Quarter 2008 Highlights:

• Results exceeded the Company’s expectations driven by strong ATV sales primarily from growth in the RANGER™ side by side business, increased PG&A and International sales

• Sales reached a record of $580.3 million in the third quarter driven by a five percent increase in ATV sales, a 20 percent increase in PG&A sales and a 31 percent increase in International sales

• Earnings per diluted share from continuing operations increased six percent to $1.13, from $1.07 per diluted share last year

• During the quarter the Company unveiled significant new model year 2009 product news with the introduction of two all new Sportsman ATVs, an all new design for RANGER™ utility side-by-side vehicles and expanded the RZR side-by-side recreational product line with the new RZR S

• The availability of retail credit financing to Polaris consumers improved during third quarter 2008 as compared to third quarter 2007 levels with 41 percent of Polaris consumers in the United States financing purchases through the Company’s retail financing relationships with HSBC and GE and over 50 percent of consumer retail credit loan applications being approved by either HSBC or GE

• Raising and narrowing full year 2008 earnings from continuing operations guidance to $3.47 to $3.50 per diluted share, a 12 to 13 percent increase over 2007 on expected full year 2008 sales growth of 10 to 11 percent

     MINNEAPOLIS (October 14, 2008) — Polaris Industries Inc. (NYSE: PII) today reported third quarter net income from continuing operations of $37.7 million, or $1.13 per diluted share, for the quarter ended September 30, 2008. By comparison, 2007 third quarter net income from continuing operations was $39.1 million, or $1.07 per diluted share. Sales for the third quarter 2008 totaled a record $580.3 million, an increase of seven percent from last year’s third quarter sales of $544.0 million. Reported net income for the 2008 third quarter, including discontinued operations was $37.7 million, or $1.13 per diluted share compared to net income of $38.8 million, or $1.06 per diluted share in the third quarter of 2007.

     Scott Wine, Polaris’ new Chief Executive Officer commented, “The strong performance of Polaris in a difficult economic environment is impressive. We have a unique combination of great products, a strong brand and leading edge technology for which I credit our employees and management team. Their passion and commitment to this company is a key reason I was excited to join Polaris, and it is also what gives me confidence in our ability to outperform our peers in various market conditions. Our strong financial performance during the third quarter underscores

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the validity of the strategy Tom Tiller and Bennett Morgan, and their teams developed and have executed to date. We are appropriately adjusting to the challenging powersports industry, but will continue to drive operational excellence and product innovation to ensure that we maintain industry leading performance.”

2008 Business Outlook

While Polaris is not immune from the deteriorating macroeconomic environment and is continuously monitoring consumer spending and industry trends to detect any significant changes, the Company has confidence in its ability to continue to deliver solid operating results in the 2008 fourth quarter. Based on the orders received from dealers for model year 2009 products and the continued strength in several markets including the side-by-side market segment, along with ongoing productivity and efficiency improvement efforts through operational excellence, the Company is narrowing and raising guidance for full year 2008 earnings. The Company now expects sales growth in the range of ten to eleven percent for the full year 2008 with earnings from continuing operations to be in the range of $3.47 to $3.50 per diluted share, compared to earnings from continuing operations of $3.10 per diluted share for the full year 2007. As a result, the Company expects fourth quarter 2008 sales growth to be in the range of flat to up two percent over the fourth quarter of 2007, with earnings from continuing operations in the range of $1.07 to $1.10 per diluted share for the fourth quarter of 2008 compared to earnings of $1.07 per diluted share in the fourth quarter 2007.

Retail credit financing availability for Polaris consumers

Polaris has relationships with HSBC Bank (“HSBC”) and GE Money Bank (“GE”) to provide retail revolving and installment financing credit, respectively, to United States consumers to purchase Polaris products. The availability of retail credit to Polaris consumers remains at acceptable levels as measured by approval and penetration rates. During the third quarter 2008, over 50 percent of consumer retail credit loan applications from Polaris customers were approved by either HSBC or GE, and 41 percent of Polaris retail customers in the United States financed their Polaris product purchases through HSBC or GE. Both the approval rate and penetration rate increased during the 2008 third quarter compared to the 2007 third quarter despite turbulent credit markets.

	Third Quarter ended							Nine Months ended
Product line Information	September 30,							September 30,
(in thousands)	2008		2007		Change			2008		2007		Change
All-terrain Vehicles	$	371,194	$	353,262		5	%	$	986,000	$	857,806		15	%
Snowmobiles		94,624		91,710		3	%		110,065		99,042		11	%
Victory Motorcycles		20,998		21,431		-2	%		71,753		77,029		-7	%
Parts, Garments & Accessories		93,465		77,576		20	%		256,833		204,717		25	%
Total Sales	$	580,281	$	543,979		7	%	$	1,424,651	$	1,238,594		15	%

     ATV (all-terrain vehicle) sales of $371.2 million in the 2008 third quarter increased five percent from the third quarter 2007. The Company’s side-by-side business remained strong during the quarter with the RANGER RZR™ side-by-side recreation vehicles continuing to sell well along

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with the RANGER Crew™ six passenger side-by-side utility vehicles. During the third quarter, the Company also began shipping the new redesigned RANGER™ for model year 2009, which have a number of new and popular features including improved handling and suspension, a new rider ergonomics package, power steering and a dramatic new design. In addition, the Company complimented its industry leading recreation RZR side-by-side with the new RZR S, which added higher horsepower performance, a wider stance and more suspension travel. Sales growth outside North America was also strong in the quarter for both the Company’s core ATV and side-by-side vehicles. The overall market for more traditional core ATVs sold in North America remained very weak during the third quarter 2008 resulting in fewer shipments of Polaris ATVs to North American dealers as they continued to reduce their core ATV inventory levels in a tough economic environment. Although the core ATV market continued weak, the Company remained aggressive in new product development with the introduction of an all new Sportsman XP, in both 550 and 850 engine displacement sizes. The Company’s Sportsman line of ATVs has been the industry’s recognized leader in its category for 13 years and the all new Sportsman XPs are expected to build on that tradition.

     Snowmobile sales increased three percent to $94.6 million for the 2008 third quarter compared to $91.7 million for the third quarter of 2007. The third quarter increase reflects a benefit of product mix as more higher priced snowmobiles were shipped during the 2008 third quarter compared to the 2007 third quarter.

     Sales of Victory motorcycles decreased two percent during the 2008 third quarter compared to the third quarter of 2007 as weakness in the North American motorcycle industry retail sales for heavyweight cruiser and touring motorcycles continued.

     Parts, Garments, and Accessories (“PG&A”) sales increased 20 percent during the third quarter 2008 when compared to last year’s third quarter. The third quarter increase reflects strong PG&A related sales growth from all product lines and geographic regions. During the quarter, the Company introduced over 260 new accessory items for 2009 model year ATV, side-by-side and Victory motorcycle wholegood products. In addition, 2008 third quarter PG&A sales benefited from shipments of pre-season, snowmobile-related PG&A to dealers in preparation for the upcoming snowmobile riding season.

     Gross profit, as a percentage of sales, was 22.5 percent for the 2008 third quarter, unchanged from the third quarter of 2007. Gross profit dollars increased six percent to $130.3 million for the 2008 third quarter compared to $122.5 million for the third quarter of 2007. The gross profit margin was impacted by several factors including a positive mix impact of increased sales of higher gross margin products, such as RANGER side-by-side vehicles and PG&A, and lower warranty costs during the third quarter of 2008, offset by significantly higher commodity and transportation costs and increased sales promotion costs incurred during the 2008 third quarter.

     Operating expenses for the third quarter 2008 increased eleven percent to $79.0 million or 13.6 percent of sales compared to $71.2 million or 13.1 percent of sales for the third quarter of 2007. Operating expenses in absolute dollars and as a percent of sales increased due to higher selling and marketing expenses primarily from higher advertising and introduction costs incurred

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around new products, increased research and development expenses related to the Company’s continued emphasis on innovative new product development, and higher general and administrative expenses related to higher performance based incentive compensation expenses due to the Company’s improved financial performance.

     Income from financial services decreased 51 percent to $4.5 million in the 2008 third quarter compared to $9.1 million in the 2007 third quarter. The decrease was due to the Company’s revolving retail credit provider, HSBC, eliminating the volume-based fee income payment to Polaris as of March 1, 2008.

     Interest expense decreased to $2.6 million for the 2008 third quarter compared to $3.7 million for the 2007 third quarter due to lower interest rates during the 2008 period.

     The Income tax provision for the third quarter 2008 was recorded at a rate of 29.3 percent of pretax income, compared to 30.8 percent in the third quarter 2007. The lower income tax rate in the third quarter 2008 is primarily due to favorable tax events in the third quarter 2008 including the favorable settlement of certain income tax examinations.

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 and no additional material charges relating to this event were incurred for the first nine months of 2008. The Company does not expect any additional material charges in the future. The Company’s third quarter 2007 loss from discontinued operations was $0.3 million, net of tax, or $0.01 per diluted share. Reported net income for the third quarter 2008, including each of continuing and discontinued operations was $37.7 million, or $1.13 per diluted share compared to $38.8 million, or $1.06 per diluted share for the third quarter 2007.

Financial Position and Cash Flow

     Net cash provided by operating activities of continuing operations for the third quarter of 2008 totaled $110.5 million compared to $127.7 million in the third quarter of 2007. Year-to-date through September 30, 2008, net cash provided by operating activities of continuing operations decreased 11 percent and totaled $132.3 million compared to $149.4 million in the first nine months of 2007. The decrease in net cash provided by operating activities for the year to date 2008 period was primarily due to higher factory inventory, a result of the strong sales growth in PG&A and international operations, as well as the timing of estimated income tax payments compared to the same period in 2007. Borrowings under the Company’s $450.0 million credit agreement were $220.0 million at September 30, 2008 compared to $200.0 million at September 30, 2007, which increase is primarily due to the continued share repurchases in the first nine months of 2008. The Company’s debt-to-total capital ratio was 61 percent at September 30, 2008, compared to 52 percent at the same time last year. Cash and cash equivalents were $43.2 million at September 30, 2008 compared to $87.0 million a year ago.

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Share Buyback Activity

     During the third quarter 2008, the Company repurchased and retired 0.4 million shares of its common stock bringing the total shares repurchased to 2.4 million shares for the nine months ended September 30, 2008 at a total cost of $102.9 million. Since inception of the share repurchase program in 1996, 33.5 million shares have been repurchased at an average price of $32.68 per share. As of September 30, 2008, the Company has authorization from its Board of Directors to repurchase up to an additional 4.0 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’ third quarter 2008 earnings results released this morning. The conference call is accessible by dialing 800-374-6475 in the U.S. and Canada or 973-200-3967 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, October 21, 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 42183560.

About Polaris

     With annual 2007 sales of $1.8 billion, Polaris designs, engineers, manufactures and markets all-terrain vehicles, including the Polaris RANGER™ side-by-side vehicles (ATVs), 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 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 forth in this news release, including management’s expectations regarding 2008 sales, shipments, net income, earnings per share and cash flow, are forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. Potential risks and uncertainties include such factors as product offerings, promotional

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activities and pricing strategies by competitors; warranty expenses; foreign currency exchange rate fluctuations; effects of the KTM relationship; environmental and product safety regulatory activity; effects of weather; commodity costs; uninsured product liability claims; uncertainty in the retail credit markets and relationships with HSBC and GE; and overall economic conditions, including inflation and consumer confidence and spending. Investors are also directed to consider other risks and uncertainties discussed in documents filed by the Company with the Securities and Exchange Commission.

(Financial data follows)

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

	For Three Months						For Nine Months
	Ended September 30,						Ended September 30,
	2008			2007			2008			2007
Sales	$	580,281		$	543,979		$	1,424,651		$	1,238,594
Cost of Sales		449,956			421,432			1,098,188			964,531
Gross profit		130,325			122,547			326,463			274,063
Operating expenses
Selling and marketing		39,692			36,381			104,050			92,865
Research and development		19,638			18,500			59,131			54,758
General and administrative		19,674			16,274			52,705			48,820
Total operating expenses		79,004			71,155			215,886			196,443
Income from financial services		4,476			9,108			17,209			35,635
Operating Income		55,797			60,500			127,786			113,255
Non-operating Expense (Income):
Interest expense		2,617			3,677			7,824			12,201
Equity in (income) loss of manufacturing affiliates		107			(28	)		74			(30	)
Gain on sale of manufacturing affiliate shares		—			—			—			(6,222	)
Other expense (income), net		(257	)		352			(1,133	)		(3,848	)
Income before income taxes		53,330			56,499			121,021			111,154
Provision for Income Taxes		15,638			17,379			39,866			36,557
Net Income from continuing operations	$	37,692		$	39,120		$	81,155		$	74,597
Loss from discontinued operations, net of tax		—			(294	)		—			(658	)
Net Income	$	37,692		$	38,826		$	81,155		$	73,939
Basic Net Income per share
Continuing operations	$	1.16		$	1.10		$	2.46		$	2.10
Loss from discontinued operations	$	—		$	(0.01	)	$	—		$	(0.02	)
Net Income	$	1.16		$	1.09		$	2.46		$	2.08
Diluted Net Income per share
Continuing operations	$	1.13		$	1.07		$	2.40		$	2.04
Loss from discontinued operations	$	—		$	(0.01	)	$	—		$	(0.02	)
Net Income	$	1.13		$	1.06		$	2.40		$	2.02
Weighted average shares outstanding:
Basic		32,384			35,501			32,989			35,529
Diluted		33,275			36,572			33,865			36,626

The accompanying footnotes are an integral part of these consolidated statements.

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POLARIS INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS

Subject to Reclassification	September 30, 2008		September 30, 2007
(In Thousands)	(Unaudited)		(Unaudited)
Assets
Current Assets:
Cash and cash equivalents	$	43,162	$	86,967
Trade receivables, net		77,275		69,934
Inventories, net		268,319		257,776
Prepaid expenses and other		18,073		18,123
Deferred tax assets		70,457		65,940
Total current assets		477,286		498,740
Property and equipment, net		217,910		203,479
Investments in finance affiliate		45,532		45,173
Investments in manufacturing affiliates		28,244		28,981
Deferred tax assets		8,163		5,416
Goodwill, net		25,960		26,255
Intangible and other assets, net		—		66
Total Assets	$	803,095	$	808,110
Liabilities and Shareholders’ Equity
Current Liabilities:
Accounts payable	$	151,505	$	133,942
Accrued expenses:
Compensation		55,767		43,657
Warranties		27,654		31,823
Sales promotions and incentives		89,968		78,838
Dealer holdback		61,232		62,281
Other		39,135		44,539
Income taxes payable		12,117		20,393
Current liabilities of discontinued operations		2,242		4,284
Total current liabilities		439,620		419,757
Long term income taxes payable		4,581		5,095
Borrowings under credit agreement		220,000		200,000
Total liabilities	$	664,201	$	624,852
Shareholders’ Equity:
Preferred stock $0.01 par value, 20,000 shares authorized, no shares issued and outstanding		—		—
Common stock $0.01 par value, 80,000 shares authorized, 32,358 and 34,986 shares issued and outstanding	$	324	$	350
Additional paid-in capital		—		—
Retained earnings		117,281		164,008
Accumulated other comprehensive income, net		21,289		18,900
Total shareholders’ equity	$	138,894	$	183,258
Total Liabilities and Shareholders’ Equity	$	803,095	$	808,110

The accompanying footnotes are an integral part of these consolidated statements.

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POLARIS INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

Subject to Reclassification	For Nine Months
(In Thousands)	Ended September 30,
(Unaudited)	2008			2007
Operating Activities:
Net income	$	81,155		$	73,939
Net loss from discontinued operations		—			658
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		45,383			44,197
Noncash compensation		14,437			15,798
Noncash income from financial services		(3,346	)		(3,844	)
Noncash (income) loss from manufacturing affiliates		74			(30	)
Deferred income taxes		(7,642	)		(10,654	)
Changes in current operating items:
Trade receivables		5,609			(6,118	)
Inventories		(49,977	)		(27,243	)
Accounts payable		61,460			33,270
Accrued expenses		(17,337	)		8,694
Income taxes payable		3,238			21,548
Prepaid expenses and others, net		(746	)		(851	)
Net cash provided by continuing operations		132,308			149,364
Net cash flow (used for) discontinued operations		(60	)		(736	)
Net cash provided by operating activities		132,248			148,628
Investing Activities:
Purchase of property and equipment		(58,892	)		(44,660	)
Investments in finance affiliate, net		11,615			14,300
Proceeds from sale of shares of manufacturing affiliate		—			77,086
Net cash provided by (used for) investing activities		(47,277	)		46,726
Financing Activities:
Borrowings under credit agreement		584,000			294,000
Repayments under credit agreement		(564,000	)		(344,000	)
Repurchase and retirement of common shares		(102,871	)		(51,547	)
Cash dividends to shareholders		(37,449	)		(35,989	)
Tax effect of proceeds from stock based compensation exercises		2,883			1,334
Proceeds from stock issuances under employee plans		12,347			8,249
Net cash used for financing activities		(105,090	)		(127,953	)
Net increase (decrease) in cash and cash equivalents		(20,119	)		67,401
Cash and cash equivalents at beginning of period		63,281			19,566
Cash and cash equivalents at end of period	$	43,162		$	86,967

The accompanying footnotes are an integral part of these consolidated statements.

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