Shareholders' Equity

9 Months Ended

Sep. 30, 2011

Shareholders' Equity

NOTE 8.  Shareholders’ Equity

During the first nine months of 2011, Polaris paid $62,462,000 to repurchase and retire approximately 1,442,000 shares (post-split) of its common stock related primarily to open market share repurchases. As of September 30, 2011, the Company has authorization from its Board of Directors to repurchase up to an additional 4,795,000 shares of Polaris stock. The repurchase of any or all such shares authorized for repurchase will be governed by applicable SEC rules and dependent on management’s assessment of market conditions. Polaris paid a regular cash dividend of $0.225 per share (post-split) on August 15, 2011 to holders of record on August 1, 2011. On October 20, 2011, the Polaris Board of Directors declared a regular cash dividend of $0.225 per share payable on November 15, 2011 to holders of record of such shares at the close of business on November 1, 2011. Cash dividends declared per common share for the third quarter and year-to-date periods is as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2011		2010		2011		2010
Cash Dividends Declared Per Common Share	$	0.225	$	0.20	$	0.675	$	0.60

Net Income per Share

Basic earnings per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during each period, including shares earned under the nonqualified deferred compensation plan (“Director Plan”), the ESOP and deferred stock units under the Omnibus Incentive Plan (“Omnibus Plan”). Diluted earnings per share is computed under the treasury stock method and is calculated to compute the dilutive effect of outstanding stock options issued under the 1995 Stock Option Plan and the 2003 Non-Employee Director Stock Option Plan (collectively, the “Option Plans”) and the Omnibus Plan and certain shares issued under the Restricted Stock Plan (“Restricted Plan”). A reconciliation of these amounts is as follows (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2011		2010		2011		2010
Weighted average number of common shares outstanding		68,449		66,251		68,284		65,886
Director plan and deferred stock units		349		313		339		328
ESOP		139		247		138		273
Common shares outstanding — basic		68,937		66,811		68,761		66,487
Dilutive effect of Restricted Plan and Omnibus Plan		186		135		178		127
Dilutive effect of Option Plans and Omnibus Plan		2,166		1,807		2,117		1,636
Common and potential common shares outstanding — diluted		71,289		68,753		71,056		68,250

During the third quarter and year-to-date periods ending September 30, 2011, the number of options that could potentially dilute earnings per share on a fully diluted basis that were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive were approximately 44,000 and 530,000, respectively, compared to 738,000 and 1,236,000, respectively, for the same periods in 2010.

Comprehensive Income

Comprehensive income represents net income adjusted for foreign currency translation adjustments, realized and unrealized gains or losses on available for sale securities and deferred gains or losses on derivative instruments utilized to hedge Polaris’ interest and foreign exchange exposures. Comprehensive income is as follows (in thousands):

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2011			2010			2011		2010
Net income	$	67,637		$	47,221		$	163,676	$	92,616
Other comprehensive income:
Foreign currency translation adjustments, net of tax benefit of $2,527 and $6,318 in 2011, and tax benefit of $383 and tax of $203 in 2010		(4,189	)		6,667			4,390		2,356
Reclassification of unrealized loss on available for sale securities to the income statement		—			(387	)		—		382
Unrealized loss on available for sale securities, net of tax		—			387			—		—
Unrealized (loss) gain on derivative instruments, net of tax of $7,063 and $5,105 in 2011 and tax benefit of $2,010 and tax of $256 in 2010		11,878			(3,335	)		8,588		426
Comprehensive income	$	75,326		$	50,553		$	176,654	$	95,780

Changes in the Accumulated other comprehensive income balances are as follows (in thousands):

	Foreign Currency Items		Cash Flow Hedging Derivatives			Accumulated Other Comprehensive Income
Balance at December 31, 2010	$	6,991	$	(1,093	)	$	5,898
Reclassification to the income statement		—		3,198			3,198
Change in fair value		4,390		5,390			9,780
Balance at September 30, 2011	$	11,381	$	7,495		$	18,876