Polaris Reports 2005 Fourth Quarter and Full Year Results; Full Year 2005 Earnings Per Share Increased 8 Percent on 5 Percent Sales Growth

Polaris Industries Inc. (NYSE:PII)(PSE:PII):

Highlights:
-- 2005 represents the 24th consecutive year of record earnings per
share from continuing operations
-- Increased full year 2005 sales ---- ATVs up 7%; Victory
motorcycles up 34%; PG&A up 9% and International up 20%
-- Higher product sales and lower operating expenses coupled with
increased income from financial services contributed to 8%
earnings per share growth for the full year 2005
-- Polaris repurchased 2.4 million shares of its common stock during
2005, and has 4.7 million shares remaining under its current
repurchase authorization
-- On January 19, 2006 Polaris declared an 11% increase in the
regular quarterly cash dividend, marking the 11th consecutive year
of increased dividends
-- In 2006, Polaris expects modest growth in sales driven by strong
demand for Victory motorcycles, Utility Vehicles and an expanding
presence in international markets. Earnings are expected to be
positively affected by increased sales, higher gross margins,
internal productivity efforts and higher income from the Company's
KTM investment

Polaris Industries Inc. (NYSE:PII) (PSE:PII) today reported netincome from continuing operations of $1.03 per diluted share for thefourth quarter of 2005, a two percent decrease from $1.05 per dilutedshare for the prior year's fourth quarter. Reported net income fromcontinuing operations for the fourth quarter 2005 was $43.9 million, adecrease of eight percent from the prior year's fourth quarter netincome from continuing operations of $47.7 million. Sales fromcontinuing operations for the fourth quarter 2005 decreased twopercent to $526.1 million, compared to last year's fourth quartersales from continuing operations of $539.0 million.

Full Year results from continuing operations

For the full year ended December 31, 2005, Polaris reported recordnet income from continuing operations of $144.3 million or $3.29 perdiluted share compared to $136.8 million or $3.04 per diluted sharefor the year ended December 31, 2004, representing an increase ofeight percent on a per diluted share basis. Sales from continuingoperations for the full year ended December 31, 2005 totaled a record$1,869.8 million, up five percent compared to sales from continuingoperations of $1,773.2 million for the full year 2004.

Tom Tiller, Chief Executive Officer, stated, "As expected,operating conditions in the fourth quarter of 2005 remainedchallenging. In response to these challenges, our team made a numberof timely adjustments that enabled us to produce another record yearof earnings per share for our shareholders. In addition to effectivelymanaging our business through a difficult period, we made severalimportant moves during 2005 that will help to positively position ourCompany for the future including:

-- The successful introduction of several new ATVs, RANGERs and Victory motorcycles

-- The announcement of an exciting strategic partnership with KTM Power Sports AG (KTM), an Austrian-based motorcycle manufacturer with a strong international presence

-- The modification of our retail credit relationship with HSBC Bank, which contributed to improved earnings and cash flow in addition to removing all credit and funding risk to Polaris

-- Completion of the new research and development facility in Wyoming, Minnesota

Tiller continued: "We expect that many of the challenges weexperienced throughout 2005 will probably continue into the first halfof 2006. North American ATV retail sales for the industry are expectedto continue to be soft, commodity costs are expected to remain higherthan historical levels, and dealer and factory inventories remainhigher than desired given our view of current economic and industryconditions. However, once these near-term headwinds begin to abate, weare confident that we will be well-positioned to capitalize onstrengthening demand. Our underlying businesses are strong, we have adiverse portfolio of industry leading products, and we have made somevery strategic investments that will drive growth and increasedprofitability for many years to come."

2006 Business Outlook

Taking into account the current economic and industry environment,and including the impact of implementation of the Statement ofFinancial Accounting Standard 123(R) (SFAS 123), for the full year2006 the Company expects sales to be in the range of flat to up twopercent, resulting in full year 2006 earnings from continuingoperations of $3.23 to $3.38 per diluted share, which represents athree percent to seven percent growth in diluted earnings per sharewhen compared to the SFAS 123 pro forma net income from continuingoperations of $3.15 per diluted share for the full year 2005. Theadoption of SFAS 123 is expected to result in a charge to full year2006 earnings of approximately $0.12 to $0.14 per diluted share. Ifthe Company had adopted SFAS 123 for the 2005 fiscal year, incrementalpro forma stock-based compensation related costs would have totaled$0.14 per diluted share for the full year 2005 and $0.02 per share forthe first quarter of 2005. During the first quarter of 2006 theCompany expects that North American ATV shipments will decline fromthe first quarter of 2005, with the objective of reducing dealerinventories and expects first quarter 2006 total sales to be sixpercent to nine percent lower than the first quarter of 2005. Firstquarter 2006 earnings from continuing operations are expected to be inthe range of $0.25 to $0.27 per diluted share, including a charge ofapproximately $0.03 per diluted share for the impact of SFAS 123compared to the SFAS 123 pro forma net income from continuingoperations of $0.40 per diluted share for the first quarter 2005.

Discontinued Operations Results

The Company ceased manufacturing marine products on September 2,2004. As a result, the marine products division's financial resultsare being reported separately as discontinued operations for allperiods presented. The Company's fourth quarter 2005 loss fromdiscontinued operations was $0.3 million, net of tax, or $0.01 perdiluted share, compared to a loss of $0.5 million, net of tax, or$0.01 per diluted share in the fourth quarter 2004. Reported netincome for the fourth quarter 2005 including both continuing anddiscontinued operations was $43.6 million or $1.02 per diluted sharecompared to $47.2 million, or $1.04 per diluted share in the fourthquarter of 2004. For the full year ended December 31, 2005, the lossfrom discontinued operations was $1.0 million, after tax, or $0.02 perdiluted share, compared to a loss of $8.5 million or $0.19 per dilutedshare in 2004. Reported net income for the full year 2005, includingboth continuing and discontinued operations and the $23.9 million, netof tax, loss on disposal of discontinued operations in 2004, was$143.3 million or $3.27 per diluted share, compared to $104.5 million,or $2.32 per diluted share for the full year 2004.

(In millions except per share data)


4th Quarter ended Full Year ended
December 31, December 31,
-------------------------------------------------
2005 2004 Change 2005 2004 Change
----------------------------------------------------------------------
Sales from
continuing
operations $526.1 $538.9 (2)% $1,869.8 $1,773.2 5%
----------------------------------------------------------------------
Operating income
from continuing
operations $64.5 $76.3 (15)% $214.8 $211.6 1%
----------------------------------------------------------------------
Net Income from
continuing
operations $43.9 $47.7 (8)% $144.3 $136.8 5%
----------------------------------------------------------------------
Earnings per share
from continuing
operations
(diluted) $1.03 $1.05 (2)% $3.29 $3.04 8%
----------------------------------------------------------------------
Earnings per share
(diluted) $1.02 $1.04 (2)% $3.27 $2.32 41%
----------------------------------------------------------------------

ATV (all-terrain vehicle) sales in fourth quarter 2005 increasedone percent over the fourth quarter 2004 driven by the RANGER(TM)utility vehicle business. While ATV retail sales increased during thefourth quarter of 2005 compared to the fourth quarter of 2004, NorthAmerican ATV shipments declined from the fourth quarter 2004 in anattempt to reduce dealer inventories. Full year 2005 sales of ATVsincreased seven percent over last year, a direct result of new productintroductions and strong RANGER(TM) and international sales growthduring the year.

Snowmobile sales decreased 29 percent for the fourth quarter 2005compared to last year's fourth quarter primarily due to timing ofshipments and a difficult comparable, as the majority of new Fusionand RMK models were shipped to dealers during the third quarter 2005,and unusually high shipments in the fourth quarter of 2004. For thefull year 2005, snowmobile sales decreased 11 percent compared to theprior year reflecting lower dealer orders in 2005 following adisappointing selling season.

Sales of Victory motorcycles increased 56 percent during thefourth quarter 2005, as compared to the fourth quarter of 2004. Thisincrease is attributable to improved brand recognition, the success ofthe Hammer and Vegas Jackpot models, a more powerful 100 cubic inchengine and a new six speed transmission, and improvements in thedealer network. Full year 2005 Victory motorcycle sales increased 34percent over 2004, totaling $99.5 million.

Parts, Garments, and Accessories (PG&A) sales increased 12 percentduring the fourth quarter 2005 as compared to last year's fourthquarter, and increased nine percent for the full year 2005. For thefourth quarter 2005, sales for all product lines of the PG&A businessgrew compared to last year's fourth quarter.

Gross profit, as a percentage of sales, was 21.0 percent for thefourth quarter of 2005, down from 24.3 percent in the comparablequarter in 2004. For the full year 2005, gross margins were 22.3percent, compared to 23.9 percent for the full year 2004. As expected,gross profit margin for the fourth quarter and full year 2005 periodsdecreased primarily due to increased raw material costs, decliningsnowmobile gross margins, higher floor plan financing costs, higherwarranty expenses and incremental transportation and fuel costs. Thesehigher costs were partially offset by continued efficiency gains andsavings from various cost reduction initiatives.

For the fourth quarter 2005, operating expenses decreased both asa percent of sales and in actual dollars spent compared to the fourthquarter of 2004. Operating expenses for the fourth quarter 2005decreased to $57.4 million or 10.9 percent of sales compared to $64.0million or 11.9 percent of sales for the fourth quarter 2004. For thefull year 2005, operating expenses decreased to $241.7 million or 12.9percent of sales, compared to $244.7 million or 13.8 percent of salesfor the same period in 2004. Operating expenses decreased in thefourth quarter and full year 2005 periods primarily due to a lowerPolaris stock price that reduced stock based compensation planexpenses and operating cost control measures taken by the Company.These reductions were partially offset by higher research anddevelopment expenses incurred during the full year 2005 period for newproduct development and the new research and development facility inWyoming, Minnesota that opened in spring 2005.

Income from financial services increased 27 percent to $11.7million in the fourth quarter 2005, up from $9.2 million in the fourthquarter 2004, due to increased profitability generated from both thewholesale credit portfolio and increased income from the retail creditarrangement with HSBC Bank. Income from financial services for thefull year 2005 increased 21 percent to $38.6 million, compared to$32.0 million for the same period in 2004.

Equity in income of manufacturing affiliates (which primarilyrepresents the Company's portion of income from the investment in KTM,net of tax) totaled $1.4 million for the fourth quarter 2005 and $2.3million for the full year 2005. The Company purchased a 25 percentinterest in KTM in July 2005.

Non-operating other expense decreased $3.4 million in the fourthquarter 2005 when compared to the fourth quarter of 2004 primarily dueto the strength of the U.S. Dollar and the resulting effects offoreign currency hedging transactions related primarily to theCanadian dollar.

The Income tax provision for the fourth quarter 2005 was recordedat a rate of approximately 31.1 percent of Polaris' pretax income, areduction from 33.0 percent recorded in the fourth quarter of 2004,resulting from certain favorable income tax events.

Financial position and cash flow

Net cash provided by operating activities from continuingoperations totaled $177.6 million for the year ended December 31, 2005compared to net cash provided by operating activities from continuingoperations of $245.4 million for the full year 2004. An increase ininventory levels in 2005 compared to last year and more normalizedlevels of accounts payable growth in 2005 were the primary reasons forthe decrease in net cash provided by operating activities during 2005.The Company's debt-to-total capital ratio was five percent at December31, 2005, equal to the level a year ago. Cash and cash equivalentswere $19.7 million at December 31, 2005, compared to $138.5 million ayear ago. The decrease in cash position at year end 2005 is primarilythe result of the KTM investment, increased share repurchases, andhigher inventory levels during 2005.

Share Buyback Continues

During the fourth quarter 2005, the Company repurchased andretired 454,000 shares of its common stock for $21.0 million, bringingtotal share repurchases to 2.4 million shares, or $132.3 million forthe full year 2005. Since inception of the share repurchase program in1996, approximately 22.3 million shares have been repurchased at anaverage price of $26.01 per share. As of December 31, 2005, theCompany has authorization from its Board of Directors to repurchase upto an additional 4.7 million shares of Polaris stock.

Subsequent Event

On January 19, 2006, the Company announced that its Board ofDirectors approved an eleven percent increase in the regular quarterlycash dividend, the eleventh consecutive year of increased dividends,effective with the 2006 first quarter dividend payment. The firstquarter dividend of $0.31 per share will be payable on February 15,2006 to shareholders of record at the close of business on February 1,2006.

Conference Call to be Held

Today at 9:00 AM (central time) Polaris Industries Inc. will hostits quarterly earnings conference call. The conference call isaccessible by dialing 800-374-6475 in the U.S. and Canada, or706-634-4982 for International calls or via the Investor Relationspage of the Company's web site, www.polarisindustries.com. Iflistening to the web cast, please allow sufficient time to registerand download the latest version of Real Player audio software. Theconference call will be available for one week after the call bydialing 800-642-1687 in the U.S. and Canada, or 706-645-9291 forInternational calls and entering passcode 3753265, and on Polaris' website.

About Polaris

Information about the complete line of Polaris products isavailable from authorized Polaris dealers or from the Polaris homepageat www.polarisindustries.com.

With annual 2005 sales of $1.9 billion, Polaris designs,engineers, manufactures and markets snowmobiles, all-terrain vehicles(ATVs), Victory motorcycles and the Polaris RANGER(TM) forrecreational and utility use.

Polaris is a recognized leader in the snowmobile industry and oneof the largest manufacturers of ATVs in the world. Victorymotorcycles, established in 1998 and representing the first all-newAmerican-made motorcycle from a major company in nearly 60 years, arerapidly making impressive in-roads into the motorcycle cruisermarketplace. Polaris also enhances the riding experience with acomplete line of Pure Polaris apparel, accessories and parts,available at Polaris dealerships. Consumers can also purchase appareland vehicle accessories anytime at www.polarisindustries.com.

Polaris Industries Inc. trades on the New York Stock Exchange andPacific Stock Exchange under the symbol "PII," and the Company isincluded in the S&P Small-Cap 600 stock price index.

Except for historical information contained herein, the mattersset forth in this news release, including management's expectationsregarding 2006 sales, shipments, net income and cash flow, areforward-looking statements that involve certain risks anduncertainties that could cause actual results to differ materiallyfrom those forward-looking statements. Potential risks anduncertainties include such factors as product offerings, promotionalactivities and pricing strategies by competitors; warranty expenses;foreign currency exchange rate fluctuations; effects of the KTMrelationship; environmental and product safety regulatory activity;effects of weather; commodity costs; uninsured product liabilityclaims; and overall economic conditions, including inflation andconsumer confidence and spending. Investors are also directed toconsider other risks and uncertainties discussed in documents filed bythe Company with the Securities and Exchange Commission.
POLARIS INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF INCOME
and Other Selected financial Information
(In Thousands, Except Per Share Data)
(Unaudited)


For Three Months Ended For the Year Ended
December 31, December 31,
2005 2004 2005 2004
----------- ---------- ----------- -----------
Sales $526,087 $538,958 $1,869,819 $1,773,206
Cost of sales 415,839 407,867 1,451,927 1,348,943
----------- ---------- ----------- -----------
Gross profit 110,248 131,091 417,892 424,263
Operating expenses
Selling and marketing 24,859 26,419 105,114 105,984
Research and
development 16,661 16,676 68,146 60,700
General and
administrative 15,908 20,940 68,486 77,977
----------- ---------- ----------- -----------
Total operating
expenses 57,428 64,035 241,746 244,661

Income from financial
services 11,689 9,218 38,640 32,035

Operating Income 64,509 76,274 214,786 211,637

Non-operating Expense
(Income):
Interest expense 1,403 406 4,713 2,111
Equity in (income) of
manufacturing
affiliates (1,363) (6) (2,308) (6)
Other expense
(income)
net 1,345 4,720 3,748 5,333
----------- ---------- ----------- -----------
Income before
income
taxes 63,124 71,154 208,633 204,199

Provisions for Income
Taxes 19,219 23,481 64,348 67,386

Net Income from
continuing
operations $43,905 $47,673 $144,285 $136,813
----------- ---------- ----------- -----------

Loss from
discontinued
operations, net
of tax $(322) $(496) $(1,007) $(8,457)
Loss on disposal
of discontinued
operations, net
of tax - - - (23,852)
----------- ---------- ----------- -----------

Net Income $43,583 $47,177 $143,278 $104,504
=========== ========== =========== ===========

Basic Net Income per
share
Continued
operations $1.06 $1.13 $3.42 $3.23
Loss from
discontinued
operations (0.01) (0.01) (0.02) (0.20)
Loss on disposal
of discontinued
operations - - - (0.56)
----------- ---------- ----------- -----------
Net Income $1.05 $1.12 $3.40 $2.47
=========== ========== =========== ===========

Diluted Net Income per
share
Continuing
operations $1.03 $1.05 $3.29 $3.04
Loss from
discontinued
operations (0.01) (0.01) (0.02) (0.19)
Loss on disposal of
discontinued
operations - - - (0.53)
----------- ---------- ----------- -----------
Net Income $1.02 $1.04 $3.27 $2.32
=========== ========== =========== ===========
Weighted average shares
outstanding:

Basic 41,475 42,226 42,131 42,318

Diluted 42,725 45,154 42,881 45,035


Business Unit
---------------- For Three For the
Information Months Ended Year Ended
(in thousands) December 31, December 31,
2005 2004 %chg 2005 2004 %chg
--------- --------- ---- ----------- ----------- ----
All-terrain
Vehicles $320,033 $316,537 1% $1,239,452 $1,159,760 7%
Snowmobiles 93,350 131,575 -29% 256,655 288,404 -11%
Victory
Motorcycles 37,742 24,170 56% 99,478 74,005 34%
Parts, Garments
& Accessories 74,962 66,676 12% 274,234 251,037 9%
--------- --------- ---- ----------- ----------- ----
Total Sales $526,087 $538,958 -2% $1,869,819 $1,773,206 5%
========= ========= =========== ===========


All periods presented reflect the classification of the Marine
Division's financial results and the loss on disposal of the division
as discontinued operations.


POLARIS INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS

Subject to Reclassification
(In Thousands)
(Unaudited)

December 31,
2005 2004
---- ----
Assets
Current Assets
Cash and cash equivalents $19,675 $138,469
Trade receivables, net 78,350 71,172
Inventories 202,022 173,624
Prepaid expenses and other 13,330 12,090
Deferred tax assets 60,498 65,489
Current assets of discontinued operations 113 4,811
--------- ---------
Total current assets 373,988 465,655

Property and equipment, net 222,336 200,901
Investments in finance affiliate and retail
credit deposit 59,601 98,386
Investments in manufacturing affiliates 87,772 2,877
Goodwill, net 25,039 24,798
Intangible and other assets, net 220 308
--------- ---------
Total Assets $768,956 $792,925
========= =========

Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $97,065 $96,302
Accrued expenses 263,729 252,704
Income taxes payable 9,427 31,001
Current liabilities of discontinued operations 5,393 25,186
--------- ---------
Total current liabilities 375,614 405,193

Deferred income taxes 5,685 8,000
Borrowings under credit agreement 18,000 18,000
--------- ---------
Total liabilities $399,299 $431,193

Shareholders' Equity:
Preferred stock $0.01 par value, 20,000 shares
authorized, no shares issued and outstanding -- --

Common Stock $0.01 par value, 80,000 shares
authorized, 41,687 and 42,741 shares issued
and outstanding $417 $427
Additional paid-in capital -- --
Deferred compensation (3,523) (8,516)
Retained earnings 375,193 366,345
Accumulated other comprehensive income (loss) (2,430) 3,476
--------- ---------
Total shareholders' equity 369,657 361,732
--------- ---------

Total Liabilities and Shareholders' Equity $768,956 $792,925
========= =========

All periods reflect the classification of the Marine Division results
as discontinued operations.


POLARIS INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

Subject to Reclassification For the Year Ended
(In Thousands) December 31,
(Unaudited) 2005 2004
----------- ---------

Operating Activities:
Net income $143,278 $104,504
Net loss from discontinued
operations 1,007 32,309
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 67,936 59,339
Noncash compensation 12,404 16,480
Noncash income from financial services (14,174) (11,488)
Noncash income from manufacturing
affiliates (2,308) (6)
Deferred income taxes 2,676 (1,460)
Changes in current operating items:
Trade receivables (7,178) (20,598)
Inventories (28,396) (6,686)
Account payable 762 33,258
Accrued expenses 11,025 17,378
Income taxes payable (4,234) 17,882
Prepaid expenses and others, net (5,169) 4,444
----------- ---------
Net cash provided by continuing
operations 177,629 245,356
Net cash flow (used for) provided by
discontinued operations (16,101) 1,472
----------- ---------
Net cash provided by operating
activities 161,528 246,828

Investing Activities:
Purchase of property and equipment (89,770) (88,836)
Investments in finance affiliate and
retail credit deposit, net 52,959 (7,320)
Investment in manufacturing affiliates,
net (84,320) -
----------- ---------
Net cash used for continuing
operations investment activities (121,131) (96,156)
Net cash used for discontinued
operations investment activities - (1,091)
----------- ---------
Net cash used for investing activities (121,131) (97,247)

Financing Activities:
Borrowing under credit agreement 795,000 428,000
Repayments under credit agreement (795,000) (428,008)
Repurchase and retirement of common
shares (132,280) (66,830)
Cash dividends to shareholders (46,956) (38,856)
Proceeds from stock issuances under
employee plans 20,045 11,821
----------- ---------

Net cash used for financing activities (159,191) (93,873)

Net increase in cash and cash equivalents (118,794) 55,708
Cash and cash equivalents at beginning of
period 138,469 82,761
Cash and cash equivalents at end of
period $19,675 $138,469
=========== =========


All periods presented reflects the classification of the Marine
Division's financial results as discontinued operations.