Third Quarter Highlights:

• Results exceeded the Company’s expectations driven by record sales and improved gross margins
• Sales for the third quarter 2007 reached a record high of $544.0 million driven by ATV sales growth of 15%, primarily from growth in the RANGER side by side business and PG&A sales growth of 13%
• Earnings per diluted share from continuing operations increased three percent to $1.07, from $1.04 per diluted share last year
• Completed the accelerated share repurchase transaction and repurchased 808,000 shares of Polaris common stock during the third quarter. As a result, diluted weighted average shares outstanding for the third quarter were 11 percent lower than last year
• Gross margin percentage for the third quarter 2007 improved 160 basis points to 22.5% due primarily to positive product mix and currency impacts
• Raising full year 2007 earnings from continuing operations guidance to $3.05 to $3.10 per diluted share, a 12% to 14% increase over 2006 on expected full year 2007 sales growth of five to six percent

Polaris Industries Inc. (NYSE: PII) recently reported third quarter net income from continuing operations of $39.1 million, or $1.07 per diluted share, for the quarter ended September 30, 2007. By comparison, 2006 third quarter net income from continuing operations was $42.7 million, or $1.04 per diluted share. Sales from continuing operations for the third quarter 2007 totaled a record $544.0 million, an increase of 11 percent from last year’s third quarter sales from continuing operations of $490.1 million. Reported net income for the 2007 third quarter, including discontinued operations was $38.8 million, or $1.06 per diluted share compared to net income of $42.5 million, or $1.03 per diluted share in the third quarter of 2006.

“We are pleased to report strong third quarter results, which we believe clearly reflects our commitment to the operating plan we laid out at the beginning of the year. Dealer ATV inventories are much lower than a year ago, the benefit of our productivity and efficiency improvement programs are being realized and many new products introduced this year are selling nicely,” commented Tom Tiller, Chief Executive Officer of Polaris. “Demand continues to outpace supply for our new RANGER RZR model, and the overall side by side market continues to expand. Additionally, in the past few weeks we began shipping the new Victory Vision model which was named motorcycle of the year for its class by Motorcyclist magazine. We are very pleased with the positive reception these and our other model year 2008 products have received to date.”

Tiller continued, “While the recent macro economic environment has caused some concern within the overall markets in which we compete, we are continuously monitoring consumer spending and industry trends and are making adjustments as appropriate. However, given the positive feedback we received at our dealer meeting held in July, our continued productivity and efficiency improvement efforts and the success of several of our new products, we are optimistic about the future for Polaris. Accordingly, we are raising our guidance for both full year 2007 sales and earnings per share, and now expect sales to grow in the five to six percent range over 2006 and earnings per diluted share from continuing operations to be in the range of $3.05 to $3.10, a 12 to 14 percent increase over the full year 2006 earnings per diluted share from continuing operations. As a result, we expect fourth quarter 2007 sales growth in the range of 12 to 15 percent with earnings from continuing operations in the range of $1.01 to $1.06 per diluted share for the fourth quarter of 2007, a nine to 14 percent increase over the fourth quarter 2006 earnings per diluted share from continuing operations.”

ATV (all-terrain vehicle) sales in the 2007 third quarter increased 15 percent from the third quarter 2006. This increase reflects the new product introduction success of the RANGER RZR side-by-side recreation vehicle in the marketplace and the continued solid demand for the base RANGER side-by-side utility vehicles during the quarter. This growth was offset somewhat by the planned reduction in shipments of core ATVs to dealers during the third quarter 2007 in the continued effort to assist dealers in reducing their inventory levels and the ongoing impact of weak overall market conditions. As a result of these efforts, core ATV dealer inventories for the third quarter 2007 are significantly lower than the same period last year and sequentially lower from the second quarter 2007 to the third quarter 2007. Although shipments to dealers of core ATVs were once again lower during the third quarter, the Company gained market share at retail during the third quarter and year to date 2007 periods in a declining overall core ATV market.

Sales of Victory motorcycles decreased 17 percent during the 2007 third quarter compared to the third quarter of 2006. Although the overall motorcycle industry in North America has slowed during the 2007 year-to-date period, the Victory growth in retail sales to consumers continues to outpace the industry. However, given the more challenged industry retail environment, the Company shipped fewer cruiser motorcycles to the dealers during the third quarter 2007 than in the third quarter 2006. The Company remains optimistic about the Victory business as the all-new 2008 Victory Vision touring models begin to ship in greater quantities in the fourth quarter 2007. The Victory Vision models have received very positive reviews by the motorcycle enthusiast magazines and from consumers that have ridden the bike during demonstration rides.

Snowmobile sales increased five percent during the 2007 third quarter compared to the prior year’s third quarter. The third quarter increase reflects a benefit of product mix related to the timing of shipments of the new models as well as the positive impact of currency movements.

Parts, Garments, and Accessories sales increased 13 percent during the 2007 third quarter compared to last year’s third quarter driven primarily by increased shipments of ATV and RANGER side-by-side related PG&A, particularly accessories for the new RANGER RZR, as well as the timing of delivery of pre-season snowmobile related PG&A during the third quarter.

Gross profit, as a percentage of sales, was 22.5 percent for the 2007 third quarter, an increase of 160 basis points from 20.9 percent for the third quarter of 2006. Gross profit dollars increased 19 percent to $122.5 million for the 2007 third quarter compared to $102.7 million for the third quarter of 2006. The improved gross profit margin and absolute dollar increase in gross profit was primarily due to the positive impact of increased sales of higher gross margin products, such as RANGER side-by-side vehicles and PG&A, and favorable foreign currency fluctuations during the third quarter of 2007, which were partially offset by increased sales promotion and warranty costs.

Operating expenses for the third quarter 2007 increased 29 percent to $71.2 million compared to $55.1 million for the third quarter of 2006. Operating expenses as a percent of sales increased to 13.1 percent for the third quarter 2007 from 11.2 percent in the third quarter of 2006. The increased operating expenses during the third quarter are primarily attributed to; a) additional selling and marketing expenses resulting from higher advertising costs incurred to launch the new products and become more competitive in the ATV industry, b) increased research and development costs from continued emphasis on new product development and c) higher general and administrative expenses due to more normalized performance based compensation expenses as a result of the Company’s improved financial performance in 2007 as compared to 2006.

Income from financial services decreased 28 percent to $9.1 million in the 2007 third quarter, down from $12.7 million in the third quarter of 2006. As expected, Income from financial services decreased substantially as the Company’s revolving retail credit provider HSBC, discontinued the financing of non-Polaris products at Polaris dealerships during the third quarter 2007. Additionally, the income from wholesale financing was lower in the third quarter 2007 due to lower dealer inventories.

Interest expense increased to $3.7 million for the 2007 third quarter compared to $2.6 million for the third quarter of 2006 due to higher debt levels maintained during the third quarter 2007.

Equity in (income) of manufacturing affiliates (which historically has primarily represented the Company’s portion of income from the investment in KTM, net of tax), was less than $0.1 million for the third quarter 2007 compared to $2.7 million for the third quarter 2006. As has been previously disclosed, during the first half of 2007 Polaris sold a majority of its investment in KTM; therefore, the Company no longer receives a net benefit from its ownership percentage of KTM’s income in Polaris’ income statement.

The income tax provision for the third quarter 2007 was recorded at a rate of 30.8 percent of pretax income, compared to 28.4 percent in the third quarter 2006. The higher income tax rate in the third quarter 2007 is primarily due to lower dollar value of favorable tax events in the third quarter 2007 compared to the third quarter 2006.

Financial Position and Cash Flow
Net cash provided by operating activities of continuing operations for the third quarter of 2007 totaled $127.7 million compared to $83.5 million in the third quarter of 2006. Year-to-date ended September 30, 2007, net cash provided by operating activities of continuing operations totaled $149.4 million, an improvement of $56.9 million from the $92.5 million in the first nine months of 2006. Increased accrued expenses primarily due to more normalized compensation expenses accrued in 2007 and slower growth in factory inventory compared to the same period last year were the primary contributing factors for the increase in net cash provided by operating activities during the nine months ended September 30, 2007. Outstanding borrowings under the credit agreement were $200.0 million at September 30, 2007, due to the utilization of a term loan to complete the accelerated share repurchase transaction in the fourth quarter of 2006. The Company’s debt-to-total capital ratio was 52 percent at September 30, 2007, compared to 19 percent at the same time last year. Cash and cash equivalents were $87.0 at September 30, 2007 compared to $9.1 million a year ago.

Share Buyback Activity
During the third quarter 2007 the Company paid $13.0 million to Goldman, Sachs & Co. (Goldman) related to the purchase price adjustment that was contemplated under the 3.55 million shares accelerated share repurchase transaction with Goldman in December 2006. Additionally, during the third quarter 2007 the Company repurchased and retired 808,000 shares of its common stock bringing the total shares repurchased to 834,000 shares for the year-to-date period ended September 30, 2007. The cost of repurchasing Polaris common stock and the purchase price adjustment payment under the accelerated share repurchase transaction for the year-to-date period ended September 30, 2007, totaled $51.5 million. As a result of the accelerated share repurchase transaction completed in the fourth quarter of 2006 and the subsequent share repurchases completed by the Company in the year-to-date period ended September 30, 2007, the diluted weighted average shares outstanding for the third quarter and year-to-date periods ended September 30, 2007 were 11 percent and 13 percent lower, respectively, than the comparable prior year periods. As of September 30, 2007, the Company has authorization from its Board of Directors to repurchase up to an additional 3.9 million shares of Polaris stock. Polaris may repurchase the balance of the share authorization from time to time in open market or privately negotiated transactions in accordance with applicable federal securities laws.