Shareholders' Equity

20 Months Ended

Dec. 31, 2011

Shareholders' Equity

Note 6. Shareholders’ Equity

Stock repurchase program: The Polaris Board of Directors authorized the cumulative repurchase of up to 75,000,000 shares of the Company’s common stock. As of December 31, 2011, 3,629,000 shares remain available for repurchases under the Board’s authorization. During 2011 Polaris paid $132,372,000 to repurchase and retire approximately 2,608,000 shares. During 2010 Polaris paid $27,486,000 to repurchase and retire approximately 1,202,000 shares and in 2009 Polaris paid $4,556,000 to repurchase and retire approximately 222,000 shares.

Shareholder rights plan: During 2000, the Polaris Board of Directors adopted a shareholder rights plan. Under the plan, a dividend of preferred stock purchase rights will become exercisable if a person or group should acquire 15 percent or more of the Company’s stock. The dividend will consist of one purchase right for each outstanding share of the Company’s common stock held by shareholders of record on June 1, 2000. The shareholder rights plan was amended and restated in April 2010. The amended and restated rights agreement extended the final expiration date of the rights from May 2010 to April 2020, expanded the definition of “Beneficial Owner” to include certain derivative securities relating to the common stock of the Company and increased the purchase price for the rights from $75 to $125 per share. The Board of Directors may redeem the rights earlier for $0.01 per right.

Accumulated other comprehensive income: Accumulated other comprehensive income consisted of $9,545,000 and $6,991,000 of unrealized currency translation gains (net of tax of $1,516,000 and $8,298,000) as of December 31, 2011 and 2010, respectively, and unrealized gains of $2,478,000 and unrealized losses of $1,093,000 (net of tax liability of $1,474,000 and tax benefit of $650,000) related to derivative instruments as of December 31, 2011 and 2010, respectively.

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

	Foreign Currency Items		Unrealized Gains (Losses) on Securities		Net Gains (Losses) on Cash Flow Hedging Derivatives			Accumulated  Other Comprehensive Income
Balance at December 31, 2010	$	6,991		—	$	(1,093	)	$	5,898
Reclassification to the income statement		—		—		(959	)		(959	)
Change in fair value		2,554		—		4,530			7,084
Balance at December 31, 2011	$	9,545		—	$	2,478		$	12,023

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 year, including shares earned under the Director Plan, ESOP and deferred stock units under the 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 and certain shares issued under the Restricted Plan and Omnibus Plan. A reconciliation of these amounts is as follows (in thousands):

	2011		2010		2009
Weighted average number of common shares outstanding		68,315		66,318		64,490
Director Plan and Deferred stock units		342		326		308
ESOP		135		256		—
Common shares outstanding—basic		68,792		66,900		64,798
Dilutive effect of Restricted Plan and Omnibus Plan		165		132		530
Dilutive effect of Option Plan and Omnibus Plan		2,100		1,733		820
Common and potential common shares outstanding—diluted		71,057		68,765		66,148

During 2011, 2010 and 2009, 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 was 131,000, 788,000, and 3,344,000, respectively.

Stock Purchase Plan: Polaris maintains an employee stock purchase plan (“Purchase Plan”). A total of 3,000,000 shares of common stock are reserved for this plan. The Purchase Plan permits eligible employees to purchase common stock at 95 percent of the average market price each month. As of December 31, 2011, approximately 1,198,000 shares had been purchased under the Purchase Plan.