Edgar Filing: POLARIS INDUSTRIES INC/MN

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Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended September 30, 2011

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 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)		(I.R.S. 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 required 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 þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ 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 October 31, 2011, 69,032,758 shares of Common Stock of the issuer were outstanding.

POLARIS INDUSTRIES INC.

FORM 10-Q

For Quarterly Period Ended September 30, 2011


	Page
Part I FINANCIAL INFORMATION		3
Item 1 — Financial Statements		3
Consolidated Balance Sheets		3
Consolidated Statements of Income		4
Consolidated Statements of Cash Flows		5
Notes to Unaudited Consolidated Financial Statements		6
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview		15
Results of Operations		15
Liquidity and Capital Resources		19
Inflation and Foreign Exchange Rates		21
Critical Accounting Policies		22
Note Regarding Forward Looking Statements		22
Item 3 — Quantitative and Qualitative Disclosures About Market Risk		23
Item 4 — Controls and Procedures		23

Part II OTHER INFORMATION		23
Item 1A — Risk Factors		23
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds		23
Item 6 — Exhibits		24

SIGNATURE PAGE		25

Part I FINANCIAL INFORMATION

Item 1 — Financial Statements

POLARIS INDUSTRIES INC.

CONSOLIDATED BALANCE SHEETS

(In Thousands)


	September 30, 2011		December 31, 2010
	(Unaudited)
Assets
Current Assets:
Cash and cash equivalents	$	335,747	$	393,927
Trade receivables, net		108,889		89,294
Inventories, net		338,285		235,927
Prepaid expenses and other		37,762		21,628
Income taxes receivable		9,037		—
Deferred tax assets		62,269		67,369

Total current assets		891,989		808,145
Property and equipment, net		198,018		184,011
Investment in finance affiliate		37,273		37,169
Investments in manufacturing affiliates		882		1,009
Deferred tax assets		10,240		—
Goodwill and other intangible assets, net		59,658		31,313

Total Assets	$	1,198,060	$	1,061,647

Liabilities and Shareholders’ Equity
Current Liabilities:
Current portion of long-term borrowings under credit agreement	$	—	$	100,000
Accounts payable		187,780		113,248
Accrued expenses:
Compensation		160,414		126,781
Warranties		36,724		32,651
Sales promotions and incentives		80,234		75,494
Dealer holdback		61,196		79,688
Other		66,189		52,194
Income taxes payable		1,598		2,604
Current liabilities of discontinued operations		1,550		1,550

Total current liabilities		595,685		584,210
Long-term income taxes payable		7,156		5,509
Deferred income taxes		—		937
Long-term debt		100,000		100,000

Total liabilities		702,841		690,656

Shareholders’ Equity:
Preferred stock $0.01 par value, 20,000 shares authorized, no shares issued and outstanding		—		—
Common stock $0.01 par value, 160,000 shares authorized, 68,679 and 68,468 shares issued and outstanding	$	687	$	685
Additional paid-in capital		72,636		78,914
Retained earnings		403,020		285,494
Accumulated other comprehensive income, net		18,876		5,898

Total shareholders’ equity		495,219		370,991

Total Liabilities and Shareholders’ Equity	$	1,198,060	$	1,061,647

Shares outstanding and per share data have been adjusted to give effect to the two-for-one stock split declared on July 20, 2011, paid on September 12, 2011 to shareholders of record on September 2, 2011.

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

POLARIS INDUSTRIES INC.

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Data)

(Unaudited)


	For Three Months Ended September 30,					For Nine Months Ended September 30,
	2011		2010			2011		2010
Sales	$	729,861	$	580,082		$	1,874,980	$	1,372,697
Cost of Sales		523,025		429,383			1,338,705		1,014,000

Gross profit		206,836		150,699			536,275		358,697
Operating expenses
Selling and marketing		49,074		38,118			129,740		102,380
Research and development		25,750		22,257			74,248		59,507
General and administrative		28,049		26,764			92,632		66,872

Total operating expenses		102,873		87,139			296,620		228,759
Income from financial services		6,327		4,136			17,139		12,637

Operating Income		110,290		67,696			256,794		142,575
Non-operating expense (income):
Interest expense		1,270		721			2,766		2,149
Gain on securities available for sale, net		—		(1,594	)		—		(825	)
Other expense (income), net		5,480		(1,482	)		3,921		1,016

Income before income taxes		103,540		70,051			250,107		140,235
Provision for income taxes		35,903		22,830			86,431		47,619

Net Income	$	67,637	$	47,221		$	163,676	$	92,616

Basic Net Income per share	$	0.98	$	0.71		$	2.38	$	1.39

Diluted Net Income per share	$	0.95	$	0.69		$	2.30	$	1.36

Weighted average shares outstanding:
Basic		68,937		66,811			68,761		66,487
Diluted		71,289		68,753			71,056		68,250

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

POLARIS INDUSTRIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)


	For the Nine Months Ended September 30,
	2011			2010
Operating Activities:
Net income	$	163,676		$	92,616
Adjustments to reconcile net income to net cash provided by operating activities:
Noncash impairment charge on securities held for sale		—			(825	)
Depreciation and amortization		50,692			49,616
Noncash compensation		14,815			13,460
Noncash income from financial services		(3,398	)		(3,313	)
Noncash loss from manufacturing affiliates		127			1,203
Deferred income taxes		(6,404	)		(4,423	)
Changes in current operating items:
Trade receivables		(17,563	)		(7,745	)
Inventories		(96,474	)		(100,463	)
Accounts payable		73,207			62,387
Accrued expenses		27,243			52,031
Income taxes payable/receivable		(8,542	)		(3,086	)
Prepaid expenses and others, net		700			5,455

Net cash provided by operating activities		198,079			156,913
Investing Activities:
Purchase of property and equipment		(62,474	)		(35,040	)
Investments in finance affiliate, net		3,294			11,166
Proceeds from sale of securities available for sale		—			9,601
Acquisition of business, net of cash acquired		(27,960	)		(2,500	)

Net cash used for investing activities		(87,140	)		(16,773	)
Financing Activities:
Borrowings under senior notes		100,000			—
Repayments under credit agreement		(200,000	)		—
Repurchase and retirement of common shares		(62,462	)		(27,486	)
Cash dividends to shareholders		(46,147	)		(39,538	)
Tax effect of proceeds from share-based compensation exercises		13,361			7,502
Proceeds from stock issuances under employee plans		28,005			43,653

Net cash used for financing activities		(167,243	)		(15,869	)
Impact of currency translation on cash balances		(1,876	)		—

Net (decrease) increase in cash and cash equivalents		(58,180	)		124,271
Cash and cash equivalents at beginning of period		393,927			140,240

Cash and cash equivalents at end of period	$	335,747		$	264,511

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

POLARIS INDUSTRIES INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. Significant Accounting Policies

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, 2010 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 Snowmobiles; Off-Road Vehicles (“ORV”), which includes all-terrain vehicles (“ATV”) and side-by-side vehicles; On-Road Vehicles, which is comprised of motorcycles and electric vehicles; and Parts, Garments and Accessories (“PG&A”) businesses, 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.

During the third quarter, the Board of Directors declared a two-for-one split of the Company’s outstanding shares of Common Stock. On September 12, 2011, Polaris shareholders received one additional share of Common Stock for each share they held of record at the close of business on September 2, 2011.

Product Warranties

Polaris provides a limited warranty for ORVs for a period of six months and for a period of one year for its snowmobiles and motorcycles. Polaris may provide longer warranties related to certain promotional programs, as well as longer warranties in certain geographical markets as determined by local regulations and market conditions. Polaris’ standard warranties require the Company or its dealers to repair or replace defective product during such warranty period at no cost to the consumer. The warranty reserve is established at the time of sale to the dealer or distributor based on management’s best estimate using historical rates and trends. Adjustments to the warranty reserve are made from time to time as actual claims become known in order to properly estimate the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. Factors that could have an impact on the warranty accrual in any given period include the following: improved manufacturing quality, shifts in product mix, changes in warranty coverage periods, snowfall and its impact on snowmobile usage, product recalls and any significant changes in sales volume. The activity in Polaris’ accrued warranty reserve for the periods presented is as follows (in thousands):


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2011			2010			2011			2010
Accrued warranty reserve, beginning	$	31,862		$	24,661		$	32,651		$	25,520
Additions to warranty reserve through acquisitions		—			—			2,018			—
Additions charged to expense		13,155			11,689			29,672			32,567
Warranty claims paid		(8,293	)		(6,748	)		(27,617	)		(28,485	)

Accrued warranty reserve, ending	$	36,724		$	29,602		$	36,724		$	29,602

NOTE 2. Share-Based Employee Compensation

The amount of compensation cost for share-based awards to be recognized during a period is based on the portion of the awards that are ultimately expected to vest. The Company estimates option forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company analyzes historical data to estimate pre-vesting forfeitures and records share compensation expense for those awards expected to vest.

Total share-based compensation expenses are as follows (in thousands):


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2011		2010		2011		2010
Option plan	$	2,326	$	1,424	$	7,047	$	3,993
Other share-based awards		3,572		16,305		43,899		33,755

Total share-based compensation before tax		5,898		17,729		50,946		37,748
Tax benefit		2,243		6,883		19,338		14,742

Total share-based compensation expense included in net income	$	3,655	$	10,846	$	31,608	$	23,006

In addition to the above share-based compensation expense, Polaris sponsors a qualified non-leveraged employee stock ownership plan (“ESOP”). Shares allocated to eligible participants’ accounts vest at various percentage rates based on years of service and require no cash payments from the recipient.

At September 30, 2011 there was $23,995,000 of total unrecognized share-based compensation expense related to unvested share-based awards. Unrecognized share-based compensation expense is expected to be recognized over a weighted-average period of 1.8 years. Included in unrecognized share-based compensation is $16,721,000 related to stock options and $7,274,000 related to restricted stock.

NOTE 3. Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or market. The major components of inventories are as follows (in thousands):


	September 30, 2011			December 31, 2010
Raw materials and purchased components	$	69,521		$	35,580
Service parts, garments and accessories		70,883			60,813
Finished goods		213,825			155,744
Less: reserves		(15,944	)		(16,210	)

Inventories	$	338,285		$	235,927

NOTE 4. Financing Agreement

In August 2011, Polaris entered into a new $350,000,000 unsecured revolving loan facility. The new bank agreement expires in August 2016. There were no borrowings under this revolving loan facility at September 30, 2011. Prior to August 2011, Polaris was a party to an unsecured bank agreement comprised of a $250,000,000 revolving loan facility for working capital needs. As part of the previous bank agreement, the Company had a $200,000,000 term loan outstanding at December 31, 2010 and March 31, 2011, which was paid off in its entirety in May 2011 with the issuance of the Senior Notes described below and $100,000,000 of cash on hand. In anticipation of the Senior Notes being issued in May 2011, the Company classified $100,000,000 of the $200,000,000 term loan outstanding as of December 31, 2010 as a long-term liability in the respective consolidated balance sheet.

In December 2010, the Company entered into a Master Note Purchase Agreement to issue $25,000,000 of 3.81 percent unsecured Senior Notes due May 2018 and $75,000,000 of 4.60 percent unsecured Senior Notes due May 2021 (collectively, “The Senior Notes”). The Senior Notes were issued in May 2011.

The unsecured revolving loan facility and the Master Note Purchase Agreement require Polaris to maintain certain financial ratios including minimum interest coverage and a maximum leverage ratio. Polaris was in compliance with each of the covenants as of September 30, 2011.

NOTE 5. Financial Services Arrangements

In 1996, a wholly-owned subsidiary of Polaris entered into a partnership agreement with an entity that is now a subsidiary of GE Commercial Distribution Finance Corporation (“GECDF”) to form Polaris Acceptance. Polaris’ subsidiary has a 50 percent equity interest in Polaris Acceptance. In November 2006, Polaris Acceptance sold a majority of its receivable portfolio (the “Securitized Receivables”) to a securitization facility (“Securitization Facility”) arranged by General Electric Capital Corporation, a GECDF affiliate, and the partnership agreement was amended to provide that Polaris Acceptance would continue to sell portions of its receivable portfolio to the Securitization Facility from time to time on an ongoing basis. The sale of receivables from Polaris Acceptance to the Securitization Facility is accounted for in Polaris Acceptance’s financial statements as a “true-sale” under ASC Topic 860. Substantially all of Polaris’ U.S. sales are financed through Polaris Acceptance and the Securitization Facility whereby Polaris receives payment within a few days of shipment of the product. The net amount financed for dealers under this arrangement at September 30, 2011, including both the portfolio balance in Polaris Acceptance and the Securitized Receivables, was $535,058,000 which includes $203,549,000 in the Polaris Acceptance portfolio and $331,509,000 of Securitized Receivables. Polaris has agreed to repurchase products repossessed by Polaris Acceptance or the Securitization Facility up to an annual maximum of 15 percent of the aggregate average month-end balances outstanding during the prior calendar year with respect to receivables retained by Polaris Acceptance and Securitized Receivables. For calendar year 2011, the potential 15 percent aggregate repurchase obligation is approximately $74,073,000. Polaris’ financial exposure under this arrangement is limited to the difference between the amount paid to the finance company for repurchases and the amount received on the resale of the repossessed product. No material losses have been incurred under this agreement. Polaris’ total investment in Polaris Acceptance at September 30, 2011 of $37,273,000 is accounted for under the equity method, and is recorded as Investment in finance affiliate in the accompanying consolidated balance sheets. Polaris’ allocable share of the income of Polaris Acceptance and the Securitization Facility has been included as a component of Income from financial services in the accompanying consolidated statements of income. During February 2011, Polaris and GECDF amended and restated its Polaris Acceptance partnership agreement through February 2017 with similar terms to the previous agreement.

In August 2005, a wholly-owned subsidiary of Polaris entered into a multi-year contract with HSBC Bank Nevada, National Association (“HSBC”), formerly known as Household Bank (SB), N.A., under which HSBC manages the Polaris private label credit card program under the StarCard label, currently providing revolving retail credit for Polaris products. During the 2010 second quarter, Polaris and HSBC extended the agreement to October 2013. Polaris’ income generated from the HSBC agreement has been included as a component of Income from financial services in the accompanying consolidated statements of income.

In April 2006, a wholly-owned subsidiary of Polaris entered into a multi-year contract with GE Money Bank (“GE Bank”) under which GE Bank makes available closed-end installment consumer and commercial credit to customers of Polaris dealers for both Polaris and non-Polaris products. In November 2010, the Company extended its installment credit agreement to March 2016 under which GE Bank provides installment credit lending for motorcycles. Polaris’ income generated from the GE Bank agreement has been included as a component of Income from financial services in the accompanying consolidated statements of income.

In January 2009, a wholly-owned subsidiary of Polaris entered into a multi-year contract with Sheffield Financial (“Sheffield”) pursuant to which Sheffield agreed to make available closed-end installment consumer and commercial credit to customers of Polaris dealers for Polaris products. In October 2010, Polaris extended its installment credit agreement to February 2016 under which Sheffield provides installment credit lending for ORVs, Snowmobiles and certain other Polaris products. Polaris’ income generated from the Sheffield agreement has been included as a component of Income from financial services in the accompanying consolidated statements of income.

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 6. Investments in Manufacturing Affiliates

The caption Investments in manufacturing affiliates in the consolidated balance sheets represents Polaris’ 40 percent equity ownership investment in Robin Manufacturing, U.S.A. (“Robin”), which builds engines in the United States for recreational and industrial products. The Robin facility was closed during the third quarter 2011 as the production volume of engines made at the facility has declined significantly in recent years. Polaris expects to receive a payment for its equity investment during the 2011 fourth quarter. In the third quarter of 2010, the Company sold its remaining equity investment in the Austrian motorcycle company, KTM Power Sports AG (“KTM”) which manufactures off-road and on-road motorcycles. Prior to the sale of the KTM investment, the Company owned less than 5 percent of KTM’s outstanding shares. The KTM investment, prior to the sale, had been classified as available for sale securities under ASC Topic 320.

NOTE 7. Goodwill and Other Intangible Assets

Goodwill and other intangible assets, net, consist of $35,043,000 and $28,354,000 of goodwill and $24,615,000 and $2,959,000 of intangible assets, net of accumulated depreciation, for the periods ended September 30, 2011 and December 31, 2010, respectively.

Additions to goodwill and other intangible assets in the first nine months of 2011 relate to the acquisition of Indian Motorcycle Company during April 2011 and the acquisition of certain assets of Global Electric Motorcars LLC (GEM), a division of Chrysler, during June 2011. Goodwill associated with these acquisitions is tax deductible. Financial results for each of the above acquisitions are included in the Company’s consolidated results from the date of acquisition. Pro forma financial results are not presented as the acquisitions are not material, individually or in the aggregate.

The changes in the net carrying amount of goodwill for the three and nine months ended September 30, 2011 and 2010 were as follows (in thousands):

		00000000			00000000		00000000			00000000
	Three Months Ended September 30,					Nine Months Ended September 30,
	2011			2010		2011			2010
Goodwill, beginning	$	35,696		$	26,554	$	28,354		$	25,869
Goodwill acquired during the period		—			—		6,865			690
Translation and other adjustments		(653	)		230		(176	)		225

Goodwill, ending	$	35,043		$	26,784	$	35,043		$	26,784

For other intangible assets the changes in the net carrying amount for the three and nine months ended September 30, 2011 and 2010 were as follows (in thousands):

		00000000			00000000			00000000		00000000
	Three Months Ended September 30, 2011						Nine Months Ended September 30, 2011
	Gross Amount			Accumulated Amortization			Gross Amount		Accumulated Amortization
Other Intangible assets, beginning	$	25,665		$	(483	)	$	3,147	$	(188	)
Other Intangible assets acquired during the period		—			—			22,110		—
Amortization expense		—			(327	)		—		(599	)
Foreign currency translation effect on balances		(255	)		15			153		(8	)

Other Intangible assets, ending	$	25,410		$	(795	)	$	25,410	$	(795	)

		00000000		00000000			00000000		00000000
	Three Months Ended September 30, 2010					Nine Months Ended September 30, 2010
	Gross Amount		Accumulated Amortization			Gross Amount		Accumulated Amortization
Other Intangible assets, beginning	$	1,090	$	(65	)		—		—
Other Intangible assets acquired during the period		—		—		$	1,111		—
Amortization expense		—		(50	)		—	$	(115	)
Foreign currency translation effect on balances		121		—			100		—

Other Intangible assets, ending	$	1,211	$	(115	)	$	1,211	$	(115	)

The components of other intangible assets were as follows (in thousands):

		000000000000		000000000000		000000000000			000000000000
September 30, 2011	Estimated Life (Years)		Gross Carrying Amount		Accumulated Amortization			Net
Non-compete agreements		5	$	240	$	(12	)	$	228
Dealer/customer related		7		3,740		(151	)		3,589
Developed technology		7		4,700		(632	)		4,068

Total amortizable				8,680		(795	)		7,885

Non-amortizable — brand names				16,730		—			16,730

Total other intangible assets, net			$	25,410	$	(795	)	$	24,615

		000000000000		000000000000		000000000000			000000000000
September 30, 2010	Estimated Life (Years)		Gross Carrying Amount		Accumulated Amortization			Net
Developed technology		7	$	1,211	$	(115	)	$	1,096

Total other intangible assets, net			$	1,211	$	(115	)	$	1,096

Amortization expense for intangible assets during the first nine months of 2011 was $599,000. Estimated amortization expense for the remainder of 2011 and succeeding fiscal years is as follows: 2011 (remainder), $313,000; 2012, $1,254,000; 2013, $1,254,000; 2014, $1,254,000; 2015, $1,254,000; 2016, $1,229,000; and after 2016, $1,326,000.

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

NOTE 9. Commitments and Contingencies

Polaris is subject to product liability claims in the normal course of business. Polaris is currently self-insured for all product liability claims. The estimated costs resulting from any losses are charged to Operating expenses when it is probable a loss has been incurred and the amount of the loss is reasonably determinable. The Company utilizes historical trends and actuarial analysis tools to assist in determining the appropriate loss reserve levels.

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 10. Derivative Instruments and Hedging Activities

The Company is exposed to certain risks relating to its ongoing business operations. The primary risks managed by using derivative instruments are foreign currency risk, interest rate risk and commodity price fluctuations. Derivative contracts on various currencies are entered into in order to manage foreign currency exposures associated with certain product sourcing activities and intercompany sales. Interest rate swaps are entered into in order to manage interest rate risk associated with the Company’s variable-rate borrowings. Commodity hedging contracts are entered into in order to manage fluctuating market prices of certain purchased commodities and raw materials that are integrated into the Company’s end products.

The Company’s foreign currency management objective is to mitigate the potential impact of currency fluctuations on the value of its U.S. dollar cash flows and to reduce the variability of certain cash flows at the subsidiary level. The Company actively manages certain forecasted foreign currency exposures and uses a centralized currency management operation to take advantage of potential opportunities to naturally offset foreign currency exposures against each other. The decision of whether and when to execute derivative instruments, along with the duration of the instrument, can vary from period to period depending on market conditions, the relative costs of the instruments and capacity to hedge. The duration is linked to the timing of the underlying exposure, with the connection between the two being regularly monitored. Polaris does not use any financial contracts for trading purposes. At September 30, 2011, Polaris had the following open contracts (in thousands):


Foreign Currency	Notional Amounts (in US Dollars)		Unrealized Gain (Loss)
Australian Dollar	$	11,136	$	738
Canadian Dollar		246,403		10,786
Swedish Krona		2,327		80
Euro		1,439		(34	)

Total	$	261,305	$	11,570

These contracts, with maturities through December 2012, met the criteria for cash flow hedges and the unrealized gains or losses, after tax, are recorded as a component of Accumulated other comprehensive income in Shareholders’ Equity.

Polaris has entered into derivative contracts to hedge a portion of the exposure related to diesel fuel and aluminum for 2011 and 2012. These diesel fuel and aluminum derivative contracts did not meet the criteria for hedge accounting.

The table below summarizes the carrying values of derivative instruments as of September 30, 2011 and 2010 (in thousands):


	Carrying Values of Derivative Instruments as of September 30, 2011
	Fair Value— Assets		Fair Value— (Liabilities)			Derivative Net Carrying Value
Derivatives designated as hedging instruments
Foreign exchange contracts(1)		11,707	$	(137	)	$	11,570

Total derivatives designated as hedging instruments		11,707	$	(137	)	$	11,570

Commodity contracts(1)	$	—		(1,159	)	$	(1,159	)

Total derivatives not designated as hedging instruments	$	—		(1,159	)	$	(1,159	)

Total Derivatives	$	11,707	$	(1,296	)	$	10,411


	Carrying Values of Derivative Instruments as of September 30, 2010
	Fair Value— Assets		Fair Value— (Liabilities)			Derivative Net Carrying Value
Derivatives designated as hedging instruments
Interest rate contracts(1)		—	$	(253	)	$	(253	)
Foreign exchange contracts(1)	$	671		(785	)		(114	)

Total derivatives designated as hedging instruments	$	671	$	(1,038	)	$	(367	)

Commodity contracts(1)	$	2,144	$	(26	)	$	2,118

Total derivatives not designated as hedging instruments	$	2,144	$	(26	)	$	2,118

Total Derivatives	$	2,815	$	(1,064	)	$	1,751

(1)	Assets are included in Prepaid expenses and other and liabilities are included in Other accrued expenses on the accompanying consolidated balance sheets.

For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of Accumulated other comprehensive income and reclassified into the income statement in the same period or periods during which the hedged transaction affects the income statement. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in the current income statement. The table below provides data about the amount of gains and losses, net of tax, related to derivative instruments designated as cash flow hedges included in Accumulated other comprehensive income for the three and nine months ended September 30 (in thousands):


Derivatives in Cash Flow Hedging Relationships	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
Derivatives in Cash Flow Hedging Relationships	2011			2010			2011		2010
Interest rate contracts	$	(6	)	$	101		$	68	$	279
Foreign currency contracts		11,884			(3,436	)		8,520		147

Total	$	11,878		$	(3,335	)	$	8,588	$	426

The table below provides data about the amount of gains and losses, net of tax, reclassified from Accumulated other comprehensive income into income (loss) on derivative instruments designated as hedging instruments for the three and nine month periods ended September 30, 2011 and 2010 (in thousands):


Derivatives in Cash Flow Hedging Relationships	Location of Gain (Loss) Reclassified from Accumulated OCI Into Income	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
Derivatives in Cash Flow Hedging Relationships		2011		2010			2011			2010
Interest rate contracts	Interest expense	$	—	$	(278	)	$	(152	)	$	(866	)
Foreign currency contracts	Other expense (income) net		1,328		(1,695	)		3,350			(1,138	)
Foreign currency contracts	Cost of Sales		—		—			—			24

Total		$	1,328	$	(1,973	)	$	3,198		$	(1,980	)

The net amount of the existing gains or losses at September 30, 2011 that is expected to be reclassified into the income statement within the next 12 months is expected to not be material. The ineffective portion of foreign currency contracts was not material for the three and nine months ended September 30, 2011.

The Company recognized a loss of $1,342,000 and a loss of $681,000 in Cost of sales on commodity contracts not designated as hedging instruments for the three and nine month periods ended September 30, 2011, respectively, versus a gain of $1,071,000 and a loss of $1,367,000 for the three and nine month periods ended September 30, 2010.

NOTE 11. Fair Value Measurements

ASC Topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company utilizes the market approach to measure fair value for its non-qualified deferred compensation assets and the income approach for the interest rate swap agreements, foreign currency contracts and commodity contracts. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities and for the income approach the Company uses significant other observable inputs such as quotations from third parties, to value its derivative instruments used to hedge interest rate volatility and foreign currency and commodity transactions (see Note 10 for additional details). Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):

		00000000			00000000		00000000			00000000
	Fair Value Measurements as of September 30, 2011
	Total			Level 1		Level 2			Level 3
Non-qualified deferred compensation assets	$	3,257		$	3,257		—			—
Foreign exchange contracts, net		11,570			—	$	11,570			—
Commodity contracts		(1,159	)		—		(1,159	)		—

Total	$	13,668		$	3,257	$	10,411			—

NOTE 12. Manufacturing Realignment

In May 2010, the Company announced that it was realigning its manufacturing operations. The realignment will consolidate operations into existing operations in Roseau, MN and Spirit Lake, IA as well as establish a new facility in Monterrey, Mexico. The realignment will lead to the sale or closure of a portion of the Osceola, WI manufacturing operations by 2012. Due to the increased demand for Polaris product, in April 2011, the Company reconsidered its decision regarding the Osceola operations and announced that it would maintain its snowmobile and motorcycle engine assembly in Osceola, WI. The Company expects to record transition charges, including both exit costs and startup costs, over the 2010 to 2012 periods. The Company has reevaluated the total exit costs pertaining to the manufacturing realignment and, in light of maintaining certain operations in Osceola, WI, are now expected to total approximately $7,500,000 rather than the previous estimate of $10,000,000 over that time period. The exit costs are classified within Cost of sales in the consolidated statements of income. A summary of these exit costs follows (in thousands):


	Total Amount Expected to be Incurred		Amount Incurred during the Three Months Ended September 30, 2011		Cumulative Amounts Incurred through September 30, 2011
Employee termination benefits	$	6,400	$	111	$	6,152
Other associated costs		1,100		266		883

Total Exit Costs	$	7,500	$	377	$	7,035

Utilization of components of the accrued exit costs during the three months ended September 30, 2011 is as follows (in thousands):


	Balance June 30, 2011		Amount provided for during the Three Months Ended September 30, 2011		Amount Utilized during the Three Months Ended September 30, 2011			Balance September 30, 2011
Employee termination benefits	$	4,567	$	111	$	(1,101	)	$	3,577
Other associated costs		—		266		(266	)		—

Total Exit Costs	$	4,567	$	377	$	(1,367	)	$	3,577

Item 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

The following discussion pertains to the results of operations and financial position of Polaris Industries Inc., a Minnesota corporation, for the quarter and nine months ended September 30, 2011. The terms “Polaris,” the “Company,” “we,” “us,” and “our” as used herein refer to the business and operations of Polaris Industries Inc., its subsidiaries and its predecessors, which began doing business in the early 1950’s. Due to the seasonality of the Snowmobiles; Off-Road Vehicles (“ORV”), which includes all-terrain vehicles (“ATV”) and side-by-side vehicles; On-Road Vehicles, which is comprised of motorcycles and low emission vehicles (“LEV”); and Parts, Garments and Accessories (“PG&A”) businesses, 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.

For the third quarter ended September 30, 2011, we reported net income of $67.6 million, or $0.95 per diluted share, driven primarily by an increase in our gross profit margin percentage. By comparison, 2010 third quarter net income was $47.2 million, or $0.69 per diluted share. Sales for the third quarter 2011 totaled $729.9 million, an increase of 26 percent from last year’s third quarter sales of $580.1 million. The third quarter 2011 sales and earnings growth was driven by strong retail sales demand for our products and continued market share gains. Our unit retail sales to consumers in North America grew 16 percent during the third quarter of 2011 compared to the third quarter of 2010, with strong demand experienced for our off-road vehicles, Victory motorcycles and snowmobiles. We achieved market share improvements in ORV and motorcycles in North America as the retail sales performance was notably stronger than overall industry retail sales. Our sales to customers outside of North America grew 59 percent in the third quarter of 2011. All geographic regions experienced sales growth during the 2011 third quarter. As a result of continuous improvement efforts directed at cost reduction and profitability enhancements, we continued to generate significant margin expansion. In the third quarter 2011, the gross profit margin percentage improved by 230 basis points. The increase in gross margin contributed to a 9.3 percent net income margin for the 2011 third quarter, a 120 basis point increase from the third quarter last year. Our balance sheet remained healthy with $335.7 million in cash on hand and $100.0 million in long-term debt at September 30, 2011. During the 2011 third quarter, we entered into a new $350 million unsecured revolving loan facility. The new bank agreement runs through August 2016. There were no borrowings under this revolving loan facility at September 30, 2011.

Results of Operations

Sales: Sales were $729.9 million in the third quarter 2011, a 26 percent increase from $580.1 million in sales for the same period in 2010. Year-to-date, sales were $1,875.0 million, a 37 percent increase from $1,372.7 million for the year-to-date period last year.

The following table is an analysis of the percentage change in our sales for the 2011 and 2010 third quarter and year-to-date periods when compared to the same prior periods:


	Percent Change in Total Company Sales Compared to Corresponding Periods of the Prior Year Periods
	Three Months Ended			Nine Months Ended
	September 30, 2011			September 30, 2011
Volume		12	%		25	%
Product mix and price		12			9
Currency		2			3

Total		26	%		37	%

Volume for the 2011 third quarter and year-to-date periods increased 12 percent and 25 percent, respectively, compared to the same periods in 2010 as we shipped more off-road vehicles, Victory motorcycles, and snowmobiles to dealers given the strong consumer retail demand for our products both in North America and internationally and lower year over year dealer inventory levels. Product mix and price increased for the 2011 third quarter and year-to-date compared to the same periods in 2010, primarily due to the positive benefit of a greater number of higher priced side-by-side vehicles sold to dealers relative to our other businesses and select selling price increases on several of the new model year products. Favorable movements in currency rates for the 2011 third quarter and year-to-date periods increased sales two percent and three percent, respectively, compared to the same periods in 2010 due to the change in the currency rates and their effect on our Canadian and other foreign subsidiaries when translated to U.S. dollars.

Our sales by product line are as follows:


	Three Months Ended September 30,													Nine Months Ended September 30,
(in millions)	2011		Percent of Total Sales			2010		Percent of Total Sales			Dollar Percent Change			2011		Percent of Total Sales			2010		Percent of Total Sales			Dollar Percent Change
Off-Road Vehicles	$	486.2		67	%	$	389.4		68	%		25	%	$	1,356.6		72	%	$	981.8		72	%		38	%
Snowmobiles		95.1		13	%		77.3		13	%		23	%		110.9		6	%		84.8		6	%		31	%
On-Road/Victory Motorcycles		35.7		5	%		20.1		3	%		77	%		111.4		6	%		61.0		4	%		83	%
PG&A		112.9		15	%		93.3		16	%		21	%		296.1		16	%		245.1		18	%		21	%

Total Sales	$	729.9		100	%	$	580.1		100	%		26	%	$	1,875.0		100	%	$	1,372.7		100	%		37	%

ORV sales of $486.2 million in the 2011 third quarter increased 25 percent from the third quarter 2010. Year-to-date 2011 ORV sales increased 38 percent from the same period in 2010 to a total of $1,356.6 million. This increase for the quarter and year-to-date periods reflects continued significant North American market share gains for both ATVs and side-by-side vehicles. North American consumer ORV unit retail sales increased 16 percent for the 2011 third quarter from the third quarter last year, with side-by-side vehicle unit retail sales increasing significantly and ATV unit retail sales down mid-single digits percent. North American dealer inventories of ORVs for the 2011 third quarter were up modestly from the third quarter of 2010 with higher side-by-side inventory as retail sales continued very strong offset by lower ATV dealer inventory levels. Sales of ORVs outside of North America increased 59 percent in the third quarter 2011 when compared to the third quarter 2010, due to positive mix benefit from increased sales of higher priced side-by-side vehicles, and positive currency benefit from the weaker US dollar. For the 2011 third quarter, the average ORV per unit sales price increased 13 percent over last year’s comparable period primarily as a result of the increased sales of the higher priced side-by-side vehicle models and select selling price increases on several of the model year 2012 products.

Snowmobile sales increased 23 percent during the 2011 third quarter to $95.1 million compared to the third quarter of 2010. For the year-to-date period, snowmobile sales were $110.9 million, a 31 percent increase compared to the same period last year. These results reflect significantly reduced snowmobile dealer inventory levels entering the 2011 – 2012 selling season, compared to the prior year, and the benefit of improved product mix as more higher priced snowmobiles were shipped during the 2011 third quarter compared to the 2010 third quarter. The average snowmobile per unit sales price for the third quarter 2011 increased 19 percent compared to the same period last year primarily due to timing of shipments of certain higher priced models in the third quarter 2011 compared to 2010.

Sales of the On-Road Vehicles division, which consists of Victory motorcycles and low emission vehicles (“LEV”), increased 77 percent to $35.7 million during the third quarter of 2011 when compared to the same period in 2010 primarily due to the increase in sales of Victory motorcycles. Year-to-date 2011 On-Road Vehicle sales increased 83 percent compared to the comparable period of 2010, to a total of $111.4 million. Polaris sales of On-Road Vehicles to customers outside of North America increased 74 percent during the 2011 third quarter compared to the prior year’s third quarter. The North American heavyweight cruiser and touring motorcycle industry retail sales were up mid-single digits percent during the 2011 third quarter compared to the prior year’s third quarter, while Victory unit retail sales to consumers in North America increased upper-teens percent during the 2011 third quarter. A modest amount of On-Road Vehicle sales related to the GEM and Indian Motorcycle Company acquisitions were recorded in the third quarter 2011. The average per unit sales price for the On-Road Vehicles division in the 2011 third quarter increased ten percent compared to the third quarter 2010, primarily due to shipments of higher priced touring motorcycles during the 2011 third quarter.

PG&A sales increased 21 percent during the third quarter and year-to-date periods of 2011 compared to the same period in 2010, with PG&A sales increasing across all businesses and geographic regions.

Sales by geographic region were as follows:


	Three Months Ended September 30,													Nine Months Ended September 30,
($ in millions)	2011		Percent of Total Sales			2010		Percent of Total Sales			Dollar Percent Change			2011		Percent of Total Sales			2010		Percent of Total Sales			Dollar Percent Change
United States	$	519.2		71	%	$	429.2		74	%		21	%	$	1,309.7		70	%	$	968.8		70	%		35	%
Canada		112.8		15	%		89.5		15	%		26	%		272.0		14	%		189.9		14	%		43	%
Other foreign countries		97.9		14	%		61.4		11	%		59	%		293.3		16	%		214.0		16	%		37	%

Total Sales	$	729.9		100	%	$	580.1		100	%		26	%	$	1,875.0		100	%	$	1,372.7		100	%		37	%

Significant regional trends were as follows:

United States:

Net sales in the United States for the third quarter of 2011 increased 21 percent compared to the third quarter of 2010. Net sales in the United States during the nine months ended September 30, 2011 increased 35 percent compared to the same period in 2010. An increase in shipments of ORV and On-Road Vehicles and market share gains accounted for the increase for the third quarter and year-to-date periods. The United States represented 71 percent and 70 percent of total Company sales in the 2011 third quarter and year-to-date periods, respectively, compared to 74 percent and 70 percent of total Company sales for the 2010 third quarter and year-to-date periods, respectively.

Canada:

Canadian sales increased 26 percent for the 2011 third quarter compared to the same period in 2010. Year-to-date, sales in Canada increased 43 percent compared to the same period last year. Favorable currency rate movements accounted for seven percent and eight percent of the increase in sales for the 2011 third quarter and year-to-date periods, respectively, compared to the same periods in 2010. Increased volume was the primary contributor for the remainder of the increase in sales for the 2011 third quarter and year-to-date periods. Canada represented 15 percent and 14 percent of total Company sales for both the 2010 and 2011 third quarter and year-to-date periods, respectively.

Other Foreign Countries:

Sales in other foreign countries, primarily in Europe, increased 59 percent for the 2011 third quarter compared to the same period in 2010. Year-to-date, sales in other foreign countries increased 37 percent compared to the same period last year. Favorable currency rate movements accounted for nine percent and eight percent of the increase in sales for the 2011 third quarter and year-to-date periods, respectively, compared to the same periods in 2010. The remainder of the increase in the third quarter 2011 was primarily driven by volume increases in ORV and Victory motorcycles resulting from higher retail sales. Other foreign countries represented 14 percent and 16 percent of total Company sales for the 2011 third quarter and year-to-date periods, respectively, compared to 11 percent and 16 percent of total Company sales for the third quarter and year-to-date periods in 2010, respectively.

Cost of Sales:


	Three Months Ended September 30,															Nine Months Ended September 30,
($ in millions)	2011			Percent of Total Cost of Sales			2010			Percent of Total Cost of Sales			Change 2011 vs. 2010			2011			Percent of Total Cost of Sales			2010			Percent of Total Cost of Sales			Change 2011 vs. 2010
Purchased materials and services	$	450.8			86	%	$	354.2			82	%		27	%	$	1,142.4			86	%	$	828.7			82	%		38	%
Labor and benefits		45.1			9	%		47.6			11	%		(5	)%		125.0			9	%		110.4			11	%		13	%
Depreciation and amortization		13.9			3	%		15.9			4	%		(13	)%		41.6			3	%		42.3			4	%		(2	)%
Warranty costs		13.2			2	%		11.7			3	%		13	%		29.7			2	%		32.6			3	%		(9	)%

Total Cost of Sales	$	523.0			100	%	$	429.4			100	%		22	%	$	1,338.7			100	%	$	1,014.0			100	%		32	%

Percentage of Sales		71.7	%					74.0	%					-230 basis points			71.4	%					73.9	%					-250 basis points

For the 2011 third quarter and year-to-date periods, Cost of sales increased 22 percent and 32 percent to $523.0 million and $1,338.7 million, respectively, compared to $429.4 million and $1,014.0 million, respectively, in 2010. The increase in Cost of sales for the 2011 third quarter and year-to-date periods resulted primarily from the effect of increases in volume on purchased materials and labor costs and higher commodity costs offset somewhat by production efficiencies and labor and benefit savings from the new Monterrey, Mexico plant ramping up production.

Gross Profit:

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


	Three Months Ended September 30,									Nine Months Ended September 30,
($ in millions)	2011			2010			Change			2011			2010			Change
Gross profit dollars	$	206.8		$	150.7			37	%	$	536.3		$	358.7			50	%

Percentage of Sales		28.3	%		26.0	%		+230 basis points			28.6	%		26.1	%		+250 basis points

Gross profit, as a percentage of sales, was 28.3 percent and 28.6 percent for the 2011 third quarter and year-to-date periods, respectively, an increase of 230 basis points and 250 basis points from the same periods last year, respectively. Gross profit dollars increased 37 percent and 50 percent to $206.8 million and $536.3 million for the 2011 third quarter and year-to-date periods compared to the same periods in 2010, respectively. The increase in the gross profit dollars and margin percentage during the 2011 third quarter and year-to-date periods resulted primarily from continued product cost reduction efforts, production efficiencies on increased volumes and higher selling prices, partially offset by increasing commodity costs and unfavorable third quarter currency movements.

Operating expenses:

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


	Three Months Ended September 30,									Nine Months Ended September 30,
($ in millions)	2011			2010			Change			2011			2010			Change
Selling and marketing	$	49.1		$	38.1			29	%	$	129.8		$	102.4			27	%
Research and development		25.8			22.2			16	%		74.2			59.5			25	%
General and administrative		28.0			26.8			5	%		92.6			66.9			39	%

Total operating expenses	$	102.9		$	87.1			18	%	$	296.6		$	228.8			30	%

Percentage of Sales		14.1	%		15.0	%		-90 basis points			15.8	%		16.7	%		-90 basis points

Operating expenses for the 2011 third quarter and year-to-date periods increased 18 percent and 30 percent to $102.9 million and $296.6 million, respectively, compared to $87.1 million and $228.8 million for the same periods in 2010. Operating expenses in absolute dollars for the 2011 third quarter and year-to-date periods increased primarily due to continued investments being made in international and adjacent markets for future growth opportunities and acquisition integration; offset somewhat by lower share-based incentive compensation plan expenses in the third quarter 2011 primarily as a result of the lower stock price at September 30, 2011 versus June 30, 2011. Operating expenses as a percentage of sales was 14.1 percent and 15.8 percent for the 2011 third quarter and year to date periods, respectively, compared to 15.0 percent and 16.7 percent for the same periods in 2010, respectively.

Income from financial services:


	Three Months Ended September 30,									Nine Months Ended September 30,
($ in millions)	2011			2010			Change			2011			2010			Change
Income from financial services	$	6.3		$	4.1			53	%	$	17.1		$	12.6			36	%
Percentage of Sales		0.9	%		0.7	%		+20 basis points			0.9	%		0.9	%		0 basis points

Income from financial services increased 53 percent to $6.3 million in the 2011 third quarter compared to $4.1 million in the 2010 third quarter. Income from financial services increased 36 percent to $17.1 million for the nine months ended September 30, 2011 from $12.6 million for the same period of 2010. Income from financial services for the third quarter and year-to-date periods in 2011 increased primarily due to increased profitability generated from the retail credit portfolios with GE, HSBC and Sheffield. Further discussion can be found in the “Liquidity and Capital Resources” section below.

Interest expense:

Interest expense increased to $1.3 million and $2.8 million for the three and nine months ended September 30, 2011, respectively, compared to $0.7 million and $2.1 million for the same periods of 2010 due to higher interest rates on the long-term senior notes issued in May 2011.

Gain on securities held for sale

The gain on securities held for sale recorded in the third quarter 2010 of $1.6 million resulted from the sale of the Company’s remaining investment in KTM Power Sports AG during the 2010 third quarter.

Other expense/income, net:

Non-operating other expense/income was $5.5 million of expense in the third quarter of 2011 compared to $1.5 million of income for the same period in 2010. Year-to-date non-operating other expense was $3.9 million of expense compared to $1.0 million of expense for the same period in 2010. The decrease in profitability for the quarter and year-to-date periods was primarily due to foreign currency exchange rate movements and the resulting effects of foreign currency transactions and balance sheet positions related to the Company’s foreign subsidiaries.

Provision for income taxes:

The income tax provision for the third quarter 2011 was recorded at a rate of 34.7 percent of pretax income compared to 32.6 percent of pretax income for the third quarter 2010. Year-to-date the income tax provision for 2011 was recorded at a rate of 34.6 percent of pretax income compared to 34.0 percent of pretax income for the 2010 year-to-date period.

Reported Net Income:


	Three Months Ended September 30,							Nine Months Ended September 30,
($ in millions except per share data)	2011		2010		Change			2011		2010		Change
Net Income	$	67.6	$	47.2		43	%	$	163.7	$	92.6		77	%
Diluted Net Income per share	$	0.95	$	0.69		38	%	$	2.30	$	1.36		69	%

Reported net income for the third quarter 2011 was $67.6 million, or $0.95 per diluted share, compared to $47.2 million or $0.69 per diluted share for the third quarter 2010. Year-to-date 2011 reported net income was $163.7 million, or $2.30 per diluted share, compared to $92.6 million or $1.36 per diluted share for the 2010 period. The increase for the 2011 third quarter and year-to-date periods is primarily due to higher sales volume and higher gross profit margin percentage generated by the Company in 2011.

Weighted Average Shares Outstanding:

The weighted average diluted shares outstanding for the third quarter ended September 30, 2011 of 71.3 million shares is four percent higher than the comparable period in 2010. For the 2011 year-to-date period, the weighted average diluted shares outstanding of 71.1 million shares is four percent higher when compared to the same period in 2010. The increase in both periods is due to share issuances under employee plans.

Cash Dividends:

Polaris paid a $0.225 per share (post-split) dividend on August 15, 2011 to shareholders 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.

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, acquisitions, cash dividends to shareholders and new product development.

The following table summarizes the cash flows from operating, investing and financing activities for the nine months ended September 30, 2011 and 2010 ($ in millions):


	For the Nine Months Ended September 30,
	2011			2010			Change
Total cash provided by (used for):
Operating activities	$	198.1		$	156.9		$	41.2
Investing activities		(87.1	)		(16.8	)		(70.3	)
Financing activities		(167.2	)		(15.8	)		(151.4	)
Impact of currency translation on cash balances		(1.9	)		—			(1.9	)

Increase (decrease) in cash and cash equivalents	$	(58.1	)	$	124.3		$	(182.4	)

Operating activities:

Net cash provided by operating activities totaled $198.1 million for the nine months ended September 30, 2011, an increase of 26 percent from $156.9 million net cash provided in the first nine months of 2010. The $41.2 million increase in net cash provided by operating activities for the nine months ended September 30, 2011, compared to the same period in 2010, is primarily due to a $71.1 million increase in net income partially offset by a higher investment in working capital primarily related to the growth in the business.

Investing activities:

Net cash used for investing activities was $87.1 million for the nine months of 2011 compared to cash used of $16.8 million for the same period in 2010. The primary use of cash for the first nine months of 2011 and 2010 was the investment of $62.5 million and $35.0 million, respectively, for the purchase of property and equipment, including new product development tooling. In addition, we acquired Indian Motorcycle Company and GEM utilizing cash of $28.0 million during the nine months ended September 30, 2011.

Financing activities:

Net cash used for financing activities was $167.2 million for the first nine months of 2011 compared to cash used of $15.8 million for financing activities in the same period in 2010. In May 2011, we paid off the $200.0 million term loan with cash received from the issuance of $100.0 million of senior notes discussed below and $100.0 million of cash on hand. We paid cash dividends of $46.1 million and $39.5 million in the nine months ended September 30, 2011 and 2010, respectively. Common stock repurchased during the first nine months of 2011 and 2010 totaled $62.5 million and $27.5 million, respectively. Proceeds from the issuance of stock under employee plans were $28.0 million and $43.7 million for the nine months ended September 30, 2011 and 2010, respectively.

The seasonality of production and shipments causes working capital requirements to fluctuate during the year. Polaris is party to an unsecured variable interest rate bank lending agreement that expires in August 2016, comprised of a $350 million revolving loan facility. There were no borrowings under the revolving loan at September 30, 2011.

In December 2010, the Company entered into a Master Note Purchase Agreement to issue $25.0 million of 3.81 percent unsecured Senior Notes due May 2018 and $75.0 million of 4.60 percent unsecured Senior Notes due May 2021. The Senior Notes were issued in May 2011. Our debt to total capital ratio was 17 percent and 40 percent at September 30, 2011 and 2010, respectively.

Additionally, at September 30, 2011, Polaris had letters of credit outstanding of $10.8 million related to purchase obligations for raw materials.

The Polaris Board of Directors has authorized the cumulative repurchase of up to 75.0 million shares of the Company’s common stock. Of that total, approximately 70.2 million shares have been repurchased cumulatively from 1996 through September 30, 2011. Polaris repurchased 1.4 million shares of Polaris stock for $62.5 million during the first nine months of 2011, which increased reported earnings per share by approximately two cents.

The Company has authorization from its Board of Directors to repurchase up to an additional 4.8 million shares of Polaris stock as of September 30, 2011. The repurchase of any or all such shares authorized remaining for repurchase will be governed by applicable SEC rules.

Management believes that existing cash balances, and cash flow to be generated from operating activities and available borrowing capacity under the line of credit arrangement will be sufficient to fund operations, regular dividends, share repurchases, acquisitions, and capital requirements for the foreseeable future. At this time, management is not aware of any adverse factors that would have a material impact on cash flow.

In 1996, a wholly owned subsidiary of Polaris entered into a partnership agreement with an entity that is now a subsidiary of GE Commercial Distribution Finance Corporation (“GECDF”) 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. In November 2006, Polaris Acceptance sold a majority of its receivable portfolio (the “Securitized Receivables”) to a securitization facility (“Securitization Facility”) arranged by General Electric Capital Corporation, a GECDF affiliate, and the partnership agreement was amended to provide that Polaris

Acceptance would continue to sell portions of its receivable portfolio to the Securitization Facility from time to time on an ongoing basis. The sale of receivables from Polaris Acceptance to the Securitization Facility is accounted for in Polaris Acceptance’s financial statements as a “true-sale” under ASC Topic 860. Polaris Acceptance is not responsible for any continuing servicing costs or obligations with respect to the Securitized Receivables. The remaining portion of the receivable portfolio is recorded on Polaris Acceptance’s books, and is funded to the extent of 85 percent through a loan from an affiliate of GECDF.

We have not guaranteed the outstanding indebtedness of Polaris Acceptance or the Securitized Receivables. In addition, the two partners of Polaris Acceptance share equally an equity cash investment equal to 15 percent of the sum of the portfolio balance in Polaris Acceptance plus the Securitized Receivables. Our total investment in Polaris Acceptance at September 30, 2011 was $37.3 million. Substantially all of our U.S. sales are financed through Polaris Acceptance and the Securitization Facility whereby Polaris receives payment within a few days of shipment of the product. The partnership agreement provides that all income and losses of the Polaris Acceptance portfolio and income and losses realized by GECDF’s affiliates with respect to the Securitized Receivables are shared 50 percent by our wholly-owned subsidiary and 50 percent by GECDF’s subsidiary. Polaris’ exposure to losses associated with respect to the Polaris Acceptance Portfolio and the Securitized Receivables is limited to its equity in its wholly-owned subsidiary that is a partner in Polaris Acceptance. We have agreed to repurchase products repossessed by Polaris Acceptance or the Securitization Facility up to an annual maximum of 15 percent of the aggregate average month-end balances outstanding during the prior calendar year with respect to receivables retained by Polaris Acceptance and Securitized Receivables. For calendar year 2011, the potential 15 percent aggregate repurchase obligation is approximately $74.1 million. Our financial exposure under this arrangement is limited to the difference between the amount paid to the finance company for repurchases and the amount received on the resale of the repossessed product. No material losses have been incurred under this agreement. During February 2011, Polaris and GECDF amended and restated its Polaris Acceptance partnership agreement through February 2017 with similar terms to the previous agreement.

Our investment in Polaris Acceptance is accounted for under the equity method, and is recorded as Investments in finance affiliate in the accompanying consolidated balance sheets. Our allocable share of the income of Polaris Acceptance and the Securitized Receivables has been included as a component of Income from financial services in the accompanying consolidated statements of income. At September 30, 2011, Polaris Acceptance’s wholesale portfolio receivables from dealers in the United States (including the Securitized Receivables) was $535.1 million, a six percent increase from $502.7 million at September 30, 2010. Credit losses in the Polaris Acceptance portfolio have been modest, averaging less than one percent of the portfolio.

In April 2006, a wholly owned subsidiary of Polaris entered into a multi-year contract with GE Money Bank (“GE Bank”) under which GE Bank makes available closed-end installment consumer and commercial credit to customers of Polaris dealers for Polaris products. In November 2010, the Company extended its installment credit agreement to March 2016 under which GE Bank provides installment credit lending for motorcycles. Polaris’ income generated from the GE Bank agreement has been included as a component of Income from financial services in the accompanying consolidated statements of income.

In January 2009, a wholly owned subsidiary of Polaris entered into a multi-year contract with Sheffield Financial (“Sheffield”) pursuant to which Sheffield agreed to make available closed-end installment consumer and commercial credit to customers of Polaris dealers for Polaris products in the United States. In October 2010, the Company extended its installment credit agreement with Sheffield to February 2016 under which Sheffield provides exclusive installment credit lending for ORV, Snowmobiles and certain other Polaris products. Polaris’ income generated from the Sheffield agreement has been included as a component of Income from financial services in the accompanying consolidated statements of income.

In August 2005, a wholly owned subsidiary of Polaris entered into a multi-year contract with HSBC under which HSBC manages the Polaris private label revolving credit card program under the StarCard label. During the 2010 second quarter, Polaris and HSBC extended the term of the agreement on similar terms to October 2013. Polaris’ income generated from the HSBC agreement has been included as a component of Income from financial services in the accompanying consolidated statements of income. During the quarter it was announced that HSBC’s U.S. Credit Card and Retail Services business would be acquired by Capital One, subject to regulatory approval. The transaction is expected to close in the second quarter of 2012. At this time we do not expect any change in the contractual terms governing our StarCard program as a result of the sale, other than an assignment to Capital One.

Inflation and Foreign Exchange Rates

Commodity inflation has had an impact on the results of Polaris’ recent operations. The changing relationships of the U.S. dollar to the Japanese yen, the Canadian dollar, the Euro and other foreign currencies have also had a material impact from time to time.

During calendar year 2011, purchases totaling approximately five percent of our Cost of sales were from yen-denominated suppliers. Our Cost of sales in the third quarter ended September 30, 2011 was negatively impacted by the Japanese yen-U.S. dollar exchange rate fluctuation when compared to the same period in 2010. At September 30, 2011, we had no Japanese yen foreign exchange hedging contracts in place. In view of current exchange rates, we anticipate that the Japanese yen-U.S. dollar exchange rate will have a negative impact on Cost of sales for the remainder of 2011 when compared to the same period in the prior year.

We operate in Canada through a wholly owned subsidiary. The weakening of the U.S. dollar in relation to the Canadian dollar has resulted in higher sales and gross margin levels in the third quarter and nine months ended September 30, 2011 when compared to the same periods in 2010. At September 30, 2011, we had open Canadian dollar foreign exchange hedging contracts in place through December 2012. The notional amount for 2011 contracts total $89.5 million with an average exchange rate of approximately 0.98 U.S. dollar to Canadian dollar. The notional amount for 2012 contracts is $156.9 million at an average exchange rate of approximately 1.01 U.S. Dollar to Canadian dollar. In

view of current exchange rates and the foreign exchange hedging contracts currently in place, we anticipate that the Canadian dollar-U.S. dollar exchange rate will have a negative impact on sales and net income for the remainder of 2011 when compared to the same periods in the prior year.

We operate in various countries, principally in Europe, through wholly owned subsidiaries and also sell to certain distributors in other countries and purchase components from certain suppliers directly for our U.S. operations in transactions denominated in Euros and other foreign currencies. The fluctuation of the U.S. dollar in relation to the Euro has resulted in an approximately neutral impact on gross margins for the third quarter and nine month periods of 2011 when compared to the same period in 2010. At September 30, 2011 we had open Euro foreign exchange contracts in place through December 2011. The notional amounts totaled $1.4 million with an average exchange rate of 1.39 US Dollar to the Euro. We had open Swedish Krona and Australian Dollar foreign exchange hedging contracts in place through December 2011 and December 2012, respectively. The open Swedish Krona contracts through December 2011, had notional amounts totaling $2.3 million with an average exchange rate of approximately .15 U.S. dollar to the Swedish Krona. The open Australian Dollar contracts for 2011 had notional amounts totaling $2.8 million with an average exchange rate of approximately .95 U.S. dollar to the Australian Dollar. The open Australian Dollar contracts for 2012 had notional amounts totaling $8.3 million with an average exchange rate of approximately 1.04 U.S. dollar to Australian dollar. In view of the current exchange rates and the foreign exchange hedging contracts currently in place, we anticipate that the exchange rates for other foreign currencies will have a negative impact on sales and net income for the remainder of 2011 when compared to the same periods in the prior year.

The assets and liabilities in all Polaris foreign entities are translated at the foreign exchange rate in effect at the balance sheet date. Translation gains and losses are reflected as a component of Accumulated other comprehensive income, net in the Shareholders’ Equity section of the accompanying consolidated balance sheet. Revenues and expenses in all Polaris foreign entities are translated at the average foreign exchange rate in effect for each month of the quarter. Certain assets and liabilities related to intercompany positions reported on Polaris’ consolidated balance sheet that are denominated in a currency other than the entity’s functional currency are translated at the foreign exchange rate in effect at the balance sheet date and the associated gains and losses are included in net income.

We are subject to market risk from fluctuating market prices of certain purchased commodities and raw materials including steel, aluminum, diesel fuel, natural gas, and petroleum-based resins. In addition, we are a purchaser of components and parts containing various commodities, including steel, aluminum, rubber and others, which are integrated into the Company’s end products. While such materials are typically available from numerous suppliers, commodity raw materials are subject to price fluctuations. We generally buy these commodities and components based upon market prices that are established with the vendor as part of the purchase process and from time to time will enter into derivative contracts to hedge a portion of the exposure to commodity risk. At September 30, 2011, there were derivative contracts in place to hedge a portion of our aluminum and diesel fuel exposures during 2011 and 2012. Based on our current outlook for commodity prices, the total impact of commodities is expected to have a negative impact on our gross margins for the remainder of 2011 when compared to the same period in the prior year.

Critical Accounting Policies

See our most recent Annual Report on Form 10-K for the year ended December 31, 2010 for a discussion of our critical accounting policies.

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” including but not limited to the impact of foreign exchange rate movements on sales and net income, and commodity price changes on gross margins, 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. Forward-looking statements may also be made from time to time in oral presentations, including telephone, conferences and/or webcasts open to the public. Shareholders, potential investors and others are cautioned that all forward-looking statements involve risks and uncertainties that could cause results in future periods to differ materially from those anticipated by some of the statements made in this report, including the risks and uncertainties described under the heading entitled “Item 1A-Risk Factors” appearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. In addition to the factors discussed above, among the other factors that could cause actual results to differ materially are the following: product offerings, promotional activities and pricing strategies by competitors; acquisition integration costs; future conduct of litigation processes; warranty expenses; foreign currency exchange rate fluctuations; commodity and transportation costs; environmental and product safety regulatory activity; effects of weather; uninsured product liability claims; uncertainty in the retail and wholesale credit markets and relationships with HSBC, GE and Sheffield Financial; changes in tax policy; and overall economic conditions, including inflation and consumer confidence and spending. The Company does not undertake any duty to any person to provide updates to its forward-looking statements.

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, 2010 for a complete discussion on the Company’s market risk. There have been no material changes in market risk from those disclosed in the Company’s Form 10-K for the year ended December 31, 2010.

Item 4

CONTROLS AND PROCEDURES

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and its Vice President — Finance and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15) as of the end of the period covered by this report. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is (1) recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and (2) accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure. There have been no changes in the Company’s internal controls over financial reporting during the period covered by this quarterly report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1A — Risk Factors

In addition to the risk factors set forth in this report, please consider the factors discussed in “Part I, Item 1A. Risk Factors” in Polaris’ fiscal year 2010 Annual Report filed on Form 10-K, which could materially affect the Company’s business, financial condition, or future results.

Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program		Maximum Number of Shares That May Yet Be Purchased Under the Program (1)
July 1 — 31, 2011		—		—		—		5,400,000
August 1 — 31, 2011		605,000	$	48.93		605,000		4,795,000
September 1 — 30, 2011		—		—		—		4,795,000

Total		605,000	$	48.93		605,000		4,795,000

(1)

The Board of Directors has authorized the cumulative repurchase of up to an aggregate of 75.0 million shares of the Company’s common stock (the “Program”). Of that total, 70.2 million shares have been repurchased cumulatively from 1996 through September 30, 2011. This Program does not have an expiration date.

Item 6 — Exhibits

A list of exhibits to this Form 10-Q is set forth on the Exhibit Index and is incorporated herein by reference.

Exhibit Index


Exhibit Number		Description

3.a*		Restated Articles of Incorporation of Polaris Industries Inc. (the “Company”), effective October 24, 2011.

3.b		Bylaws of the Company, as amended and restated on April 29, 2010, incorporated by reference to Exhibit 3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010.

4.c*		First Amendment to Master Note Purchase Agreement effective as of August 18, 2011 filed herewith.

10.a		Credit Agreement, dated as of August 18, 2011, by and among Polaris Industries Inc., one or more of its foreign subsidiaries designated thereafter as foreign borrowers, the lenders identified therein, U.S. Bank National Association, as Administrative Agent, Lead Arranger and Lead Book Runner, RBC Capital Markets and Wells Fargo Securities, LLC, as Joint Lead Arrangers and Joint Book Runners, RBC Capital Markets and Wells Fargo Bank National Association, as Syndication Agents, and The Bank of Tokyo-Mitsubishi UFJ, LTD., as Documentation Agent, incorporated by reference to Exhibit 10.1 to the Company’s Report on Form 8-K filed on August 22, 2011.

31.a		Certification of Chief Executive Officer — Section 302

31.b		Certification of Chief Financial Officer — Section 302

32.a		Certification of Chief Executive Officer — Section 906

32.b		Certification of Chief Financial Officer — Section 906

101		The following financial information from Polaris Industries Inc.’s Quarterly Report on Form 10-Q for the period ended September 30, 2011, filed with the SEC on November 7, 2011, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets at September 30, 2011 and December 31, 2010, (ii) the Consolidated Statements of Income for the three and nine month periods ended September 30, 2011 and 2010, (iii) the Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2011 and 2010, and (iv) Notes to Consolidated Financial Statements.**

*	Filed herewith.

Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed part of a registration statement, prospectus or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filings.

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: November 7, 2011		/s/ SCOTT W. WINE
		Scott W. Wine Chief Executive Officer (Principal Executive Officer)

Date: November 7, 2011

/s/ MICHAEL W. MALONE

Michael W. Malone

Vice President — Finance and

Chief Financial Officer

(Principal Financial and Chief Accounting Officer)

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