I would like to welcome everyone to the Polaris second quarter earnings results conference call. (Operator Instructions) At this time it is my pleasure to turn the conference over to Richard Edwards.

Good morning and thank you for joining us for our second quarter 2009 earnings conference call. As in past quarters we will be showing a slide presentation that is accessible at our website at www.polarisindustries.com/irhome which has additional information for this morning's call. The speakers today are Scott Wine, our Chief Executive Officer, Bennett Morgan, our President and Chief Operating Officer and Mike Malone, our Chief Financial Officer. During the call today we will be discussing certain topics including product demand and shipments, sales and margin trends, income and profitability levels and other matters including more specific guidance on our expectations for future periods which should be considered forward-looking for the purposes of the Private Securities Reform Act of 1995. Additional information regarding factors that may influence results can be found in Polaris' 2008 annual report and in the 2008 Form 10-K which are on file with the SEC. Now I'll turn it over to Scott.

Good morning. Thank you for joining us and for your interest in Polaris. Earlier today we reported results for the second quarter of 2009 that slightly exceeded our expectations. The results were primarily driven by the strong performance of the Polaris team and our dealer network as we continue to face significant headwinds in nearly every market we serve. Earnings per share came in at $0.53, down 26% from the prior year period. Sales for the quarter were down 24% to $345.9 million from the second quarter of 2008. We saw weak demand across almost all regions and markets with Canada being the one bright spot with sales to dealers down only 8%. Retail credit availability metrics actually improved in the quarter. The dealer floor traffic continues to be weak. Creating demand is one of key priorities for the remainder of the year and our dealer show next week here in St. Paul will feature a great deal of product news that we expect will once again lead the industry. I'll go ahead and cover one bit of product news that we announced this morning with the press release which is our entry into low emission vehicle space with our first electric neighborhood vehicle. This is the initial new product launch by our on-road division and is yet another example of Polaris innovation and product development capability. This product puts us into a small but growing market and also provides technology expertise that has many potential applications across our business. We will launch the new product, which will be named the Polaris Breeze with a small sample of unique dealers that have prime access to the important master plan communities where these products will be used. This is an attractive market expansion for Polaris, providing access to a new and…

I want to begin with operational excellence. Our focus on quality, costs and speed continue to pay dividends. Despite the challenging retail industry environment, our speed has allowed us to reduce both dealer and factory inventory significantly throughout the second quarter. Scott has already reported on the positive dealer inventory results, but in addition, factory inventory decreased year over year by $59 million or 21%. We were also able to further reduce supply chain lead times in our ORV business by another 13% this quarter and made even more significant reductions in snowmobile and Victory supply chain lead times. We expect to continue to reduce our factory and dealer inventory levels using our speed and flexible manufacturing capability to run Polaris at more efficient levels of system wide inventory as we move into the future. Our speed and cost reduction focus continue to drive gross margin percentage expansion, up 40 basis points in the second quarter of 2009. We're having good success in this environment in finding opportunities to reduce our costs and improve our quality simultaneously through the efforts of our engineering and supply chain partners. Commodity costs remain stable and improved from 2008. We remain confident in our guidance on gross margin expansion for full year 2009. As Scott noted, our focus on reducing waste resulted in operating expense reductions of 17% in the second quarter. We also continue to improve our speed to market in new product development. We are now 22% faster to market in new product development versus 2008 and we are over 40% faster than we were just three years ago. Our upcoming dealer meeting in St. Paul will showcase our again industry leading model year 10 new product news and innovation. While most of our competitors have cancelled their annual dealer meetings, and…

Thanks Bennett and good morning everyone. I'll begin with our financial services business. Income from financial services for the full year 2009 is expected to decline 20% to 30% from the full year 2008. This guidance has improved somewhat from the previously issued guidance expectations for financial services income. As discussed in previous calls, the decline in income for 2009 is primarily due to our revolving retail credit provider, HSBC eliminating the volume based fee income payment to Polaris in the first quarter of last year. No income is expected in 2009 from HSBC. For the full year 2009, our expectation for the wholesales financing generated from Polaris Acceptance has improved from prior guidance issued. I'll talk more about that a bit later. For the second quarter 2009, we financed through our retail credit programs, HSBC, GE and Sheffield combined, about 33% of Polaris products sold to consumers in the United States which is slightly better than the penetration rate we experienced the last few quarters. The approval rate in the second quarter of 2009 increased to 48% compared to 44% for the first quarter. Both the penetration rate and the approval rate are somewhat lower than historical levels and somewhat weaker than desirable due to the credit tightening by our retail credit providers. It is obviously having some dampening impact on our retail sales levels. We continue to feel our retail credit relationships are relatively stable given the overall uncertainty in the consumer retail credit markets. Our recently added retail installment credit provider, Sheffield Financial continues to increase its share of its installment financing provided to our consumers and GE has recently relaxed their down payment requirements. For the second quarter of 2009, the wholesale portfolio related to floor plan financing for dealers in the United States was approximately…

Overall, and hopefully as you gleaned from our comments this morning, we had a solid second quarter and I feel good about the way this Polaris team has navigated through the first half of 2009. We have taken significant costs out of our business, but also made investments to support our product innovation and strategic plans. The product news will be on full display next week at our dealer show, and we are poised to turn innovation into orders. The results of our operational excellence initiatives will continue to show up across our business not only in our P&L and balance sheet metrics, but also in our dealers as we expand our MVP in the months ahead. We will continue to exploit our flexible manufacturing systems to manage the uncertain demand environment and leverage our strong engineering team and processes to drive product results, cost reductions and product innovations. Both of these initiatives will be part of our Victory turn around effort. While we are confident in our ability to return to organic growth in the years ahead, we recently created a new corporate development officer role to lead our non organic growth effort. Todd Ballan brings significant experience in business and market development and will be a key resource to help us drive our strategic growth initiatives. Having and executing the right plan is very important, but it is results that matter. As Mike stated, we are narrowing our sales and earnings guidance and feel comfortable with our ability to deliver full year earnings per share of $2.70 to $2.90 and sales in the down 20% to 25% range. We remain focused on executing in 2009 and positioning the business to emerge from this economic downturn as a stronger, more profitable company. I look forward to speaking with you again next quarter to talk about our progress. That concludes our prepared remarks. Can you open up the line for questions.

(Operator Instructions) Your first question comes from Edward Aaron – RBC Capital Markets. Edward Aaron – RBC Capital Markets: On the new adjacencies, I understand the thought process behind that business opportunity, but I'm a little surprised that a product like that is going to have your brand name on it and be sold through your dealer network. I guess I kind of think of the Polaris brand as a little cooler and tougher than that. Can you just help me understand the thought process behind how you're positioning that from a distribution perspective?

I think I used the word unique distribution in my prepared remarks. This will not initially be sold through the Polaris dealer network. These products are designed for master plan communities and there are specific dealers that support those markets. We have a small sub set that we've been working with for the initial launch of the product and we actually feel like the Polaris brand name is a strength that we'd like to leverage and we'll play that out over the next several quarters as we launch the product. But that's the strategy. That's the reason we announced it today. We've got the dealer show next week where we'll announce most of our new product news, but because this is not specifically designed for our current Polaris dealer network, we thought it best to go ahead and announce it on the call today. Edward Aaron – RBC Capital Markets: Thanks for the clarity on that. To what extent have you challenged your commitment to the Victory business? The market's been cut in half and that's not necessarily unique to the motorcycle industry but the share kind of plateaued even while that was happening. Is there enough demand in that business over the next couple of year? Do you see it to be really sufficiently profitable there? And then also, as far as your dealers are concerned, they have to make a pretty big inventory commitment for that product to have the full line in their stores and perhaps right now the turns aren't enough to support that. Have you thought at all about potentially not staying with that business or what would you need to see to kind of change how you're positioned there?

Absolutely. We have taken an incredible sober look at it. It's one of the things about being new, you have a chance to look at everything and while it is a very difficult year, we still feel very good about the long term potential of Victory in our business. If you have a chance to come to St. Paul next week, I think we'll give you a lot of more clarity on both product strategy and execution strategy to see why we have that confidence. But we're not blindly committed to Victory. We are constantly analyzing the business to make sure that we see the potential there, and so far we do. Edward Aaron – RBC Capital Markets: On your current plan for the back half, do you expect that at the end of the year your inventory at the dealer level will be at a level where you would consider to be balanced?

We feel really good about in this environment where we are with dealer inventory. Dealer inventories will continue to come down throughout the second half of the year. When you see industries under the kind of pressure they are under right now, we'd love to move it even a little further, but you've seen us take inventory down consistently over the last three years. We're down almost 45% from where we were three years ago in the channel. We've taken it out each and every year even in declining markets and will continue to do so. And as we move towards MVP and as we continue to improve our speed and flexibility capability, our ability to drive further inventory reductions frankly is enhanced as we go forward. So we are feeling relatively speaking very good about our ability to deliver on that promise.

Your next question comes from Gregory Badishkanian – Citi. Gregory Badishkanian – Citi: I have a follow up question on the neighborhood electric car. I'm not very familiar with that segment and you might have talked about this in the earlier part of your call but I apologize I missed it. Market size kind of margins of that whole segment and just kind of looking at it and seeing how much you can actually move the needle.

The market size for this particular type product is about 35,000 units. We are not disclosing or analyzing margins or what we can do there. I will provide a little more clarity next week if you come out but it's an attractive space for us and we certainly like the technology applications across the portfolio. Gregory Badishkanian – Citi: Maybe just a little bit of color in terms of inventory levels, in terms of promotions. You gave some good color on what you're seeing out there for yourselves, but even just the competition and have there been any changes in terms of how they're approaching promotions in the marketplace.

As we said in the prepared remarks, and I think as we said really for the last couple of quarters, promotion levels in most of our industries are up or elevated. But they're within our expectations. You know some of the guys are doing the surveys. They seem to be picking up feedback from dealers and I think that's just stress in the marketplace. Frankly we've seen elevated competitive inventory levels for a number of quarters. Frankly going on for a number of years and we've seen aggressive promotion levels. So this phenomena for us is really within our expectations and isn't anything that is beyond our plan. And frankly, as we can continue to enhance our inventory levels and our innovation and our product line, we've actually been able to moderate our levels in ATV's and still gain market share which has us very encouraged even in an elevated promotion environment that the strategy we have is working and will continue to work as we go forward. Gregory Badishkanian – Citi: Across the board it's more promotional in every segment of leisure.

The other advantage that we have again is as you look at it, as you come to St. Paul and you see the amount of product news we'll have next week, which I don't want to get into details, but it's good. We're selling new product and other guys are selling fairly dated moldy products and that's an advantage for us, a significant advantage. Gregory Badishkanian – Citi: If you look at the product line up this year versus last year, are you a lot more excited about the new line this year as you were going into the dealer show last year?

I'm always excited about that. I would tell you in our humble opinion, and it's an internal view, is that we've had industry leading product news in model year '08. We had industry leading product news last year in model year '09 and again, based on the behaviors we're seeing from our competitors, the vast majority of them aren't having a dealer meeting and at least the news we're hearing so far is, is zero to very, very minimal product news. We clearly have industry leading news and it's again, I think if you get a chance to go to our show, you'll be amazed. I like the joke that somebody forgot to tell our engineers that there's a recession going on. You'll see the results of that next week.

Your next question comes from Hayley Wolff – Rockdale Securities. Hayley Wolff – Rockdale Securities: Can you talk a little bit about the investment you're going to put into the Breeze and then on distribution into these master plan communities, how does that work in the current real estate environment where you're not seeing many new communities popping up and distress real estate, and how does that all fit in, in that real estate backdrop?

We're not going to disclose our investment to get into this although it's certainly moderate in levels compared to our typical product launches. The master plan communities are, there's a demographic shift in the U.S. that's while the real estate markets in those areas are pretty weak, there's still a long term trend of migration to those areas and as I said in my remarks, we really believe this is an under served market. When you see the competitive advantages of our product, and that's why we were able to set up new dealers. If you think about this environment, asking a dealer to take on a new product line, they wouldn't do so if they didn't feel confident in their ability to retail it. And we've done quite well in getting the dealers that we wanted in the key master plan communities. Hayley Wolff – Rockdale Securities: Where are they priced vis a vis a golf cart or some other form?

Suggested retail is $7,499. Let me be clear, we are not competing with golf carts. This is an alternative neighborhood vehicle that can be used for golf, but we think the price is very competitive at $7,499. Hayley Wolff – Rockdale Securities: And it's a street legal vehicle that I can go to the supermarket with it?

In master plan communities it's street legal. We're at top speed less than 20 mph.

The other real key thing to understand about this product news is that it's our first entry into this low emission category. It's an electric vehicle. It's got different technology than what we've had before. We're excited about the opportunity to learn about the technology and learn about the market, and we see the opportunities in low emission and electric to go far beyond this one product that we're introducing today. Hayley Wolff – Rockdale Securities: Switching gears to motorcycles, why do you think the motorcycle market is so much weaker than some of the other power sport markets with the exception of boats maybe. And when you evaluate Polaris, initially when the product was developed, it was a much larger market and a rapidly growing market, and now you've had significant contraction, smaller market, less growth potential. What are some of the variables you used to consider whether you're going to stay with that business?

First of all, why the market's down, partly because if you go back a year, motorcycles were selling very rapidly with the higher gas prices. So part of the significant downturn is just really tough comparables. Also, it's a high ticket item and with many of our products, you can very legitimately argue there is a work use for it, a utilitarian use for it. You can't really do that with a motorcycle. It's just typically transportation if it's your only mean, but it's a little more discretionary we think than some of our other product offerings in the side by side space. How we look at the future potential is very clearly, do we see profitable growth, and if we see a path, a risk adjusted path to profitable growth, we'll continue to invest and drive the business forward. And that's where we stand today. Hayley Wolff – Rockdale Securities: Clearly you see that path.

We do.

Your next question comes from Robert Evans – Craig-Hallum Capital. Robert Evans – Craig-Hallum Capital: Can you give a little bit more granularity in terms of the ORV market in terms of what segments of core ATV and then the side by side did well, and what areas are struggling this quarter kind of looking forward to the second half.

Just to give you a little bit of detail. In general, surprising the higher CC segments are performing better for us, so 500 CC's and up are doing well. Our new sportsman XP's are doing very well. Anything in the market place where our sales or our competitors are able to play value, even relative value in the segment is doing well. The Canadian market place is generally out performing the U.S. market place. While we're not thrilled where we are in international, the international market place is relatively stronger still in ORV's than North America. With that said, the side by side segments continues to out perform the ATV segment and in general, Rangers relatively stable and things like our hot new products are still in high demand. Robert Evans – Craig-Hallum Capital: I think you gave us market data in terms of core ATV and side by side, can you give us relative to Polaris how trends were this quarter?

We gained market share in both core and side by side. Robert Evans – Craig-Hallum Capital: Is there one segment you're getting more share in than the other?

As we talked about, we don't get the same kind of monthly granularity in side by sides as we do with ATV's, but you know that we've been able to successfully gain a tremendous amount of market share in side by sides over the last couple of years and in all honesty, I think that trend is continuing. We'll continue to gain a reasonable amount of share in side by side. Robert Evans – Craig-Hallum Capital: Then on the warranty expense impact this quarter. I think you had mentioned it was a result of the snowmobile side and a little bit on Victory. Can you give us any sense of magnitude there? I was just wondering about a basis point impact, and just overall some color.

I'm not going to give specifics on that issue itself. That issue was disappointing to us. We hadn't necessarily planned for that as we had done our plans and budgets so that was a detriment to our gross margins. In total, the warranty expense that hit the P&L for the second quarter was about $9.6 million compared to $9.1 million a year ago, so it was somewhat higher than a year ago even though sales were down 24%, so you'd expect that number to be significantly less, and it wasn't and it wasn't primarily because of the snowmobile issue. Robert Evans – Craig-Hallum Capital: And was that a one time? We shouldn't see that going forward?

We believe so.

Your next question comes from Timothy Conder – Wells Fargo. Timothy Conder – Wells Fargo: On the MVP program, you said 50%. I think that was in dollar terms, a year end goal. Is that still year end or were you saying with the launch of the new model year products here in the third quarter; you'll have 50% in dollar sales.

Generally, just because of the timing on how we're executing that roll out of the program, we'll essentially go to 50% of our retail volume, is how we're describing that and that will be effective with this upcoming order period. That really essentially begins in August and September. Timothy Conder – Wells Fargo: So a little bit earlier than you originally planned then.

Maybe from what we communicated to you, this is what we had hoped we would be able to stand this plan was around the model year switch over, so we're essentially right on our plan. It's hard to do it in the middle of a traditional order period. You have to kind of break it based on when traditional order period end or begin. Timothy Conder – Wells Fargo: And the feedback we get from the dealer base on that is that they're just very ecstatic about it.

And I would tell you, I think we're optimistic. Again, we're still learning. We'll probably continue to get smarter and enhanced, but we believe the benefits will become even greater for some of those folks you're talking to six, twelve months from the line, because again, it's an evolution, it's a progress. So we're pretty excited about them. Timothy Conder – Wells Fargo: It's very good feedback. On the gross margin side, what do you see that progress potential carrying on into 2010 or should we maybe, when you been on the road a little bit here, you talked more about things in terms of a net margin goal. But directionally, looking at 10, obviously 130 basis points improvement year over year is not sustainable going into 10. How should we directionally think about that?

What I talked about before is that when we finished last year at net income margins at 6% and we think we've got long term potential to drive a couple hundred basis points in the bottom line and actually driving net income margin expansion. Part of that is going to come from gross margin expansion and then I'll let Mike talk about, we're not going to give 2010 guidance right now, but Mike, you want to provide anymore color on our ability to drive that?

As I said in the prepared comments, we've been working this for quite awhile. What we're seeing significant benefits in cost reductions activities that are going to play into model year 2010 product which obviously continues into calendar 2010. So we would expect that that can be helpful. We expect hopefully the currencies will be less harmful next year than they've been this year. We'll see. Who knows about that? It's hard to impossible for me anyway to predict what's going to happen there. The commodity cost situation, we're planning on escalating. It's at historical lows right now. We don't think that that can continue forever, so our plans right now are that we're going to have to deal with an escalating commodity cost structure going forward. So everything moves around and puts and takes, but at this point in time, Scott's right, we're not going to give guidance for gross margin for 2010, but I see no reason why we can't continue our trend of the last couple of years of expanding gross margins going forward. Timothy Conder – Wells Fargo: Along that line, have you hedged out for the model year, looking at currencies and then also the commodities?

We've actually been pretty active in that. The currencies as I said have been unfavorable from a year ago, but they've actually moved a little bit more favorable than they were a quarter or two ago. So we've leaned forward and hedged a fair amount as those moved more positive. So right now we're hedged 80% of our exposure for the balance of the year on the Canadian dollar. It's quite punitive to last year still, but a little bit better than what our earlier expectations were. The Yen, we're hedged only about 30% for the balance of the year. We started to hedge the Australian dollar and we're hedged about half right now of the balance of the year on the Australian dollar. On the commodities, we've also seen this favorability and have leaned forward with things like aluminum for instance where we've hedged quite a bit actually into 2010 of our aluminum exposure. Diesel fuel is another one that we've seen come down significantly from a year ago so we've hedge exposures on the diesel fuel as well throughout the balance of 2009. So we're trying to use opportunistic timing here to lock in where we can, some favorability. Timothy Conder – Wells Fargo: Could you give us a little more color again or just go over again the change you did in the dealer hold back during the quarter?

The idea there was, as you know our hold back is paid out to the dealers twice a year, in the first quarter and the third quarter. What we did was, we made an early payment in the second quarter of what normally gets paid in the third quarter to assist the dealers with improving their cash flow. We recognize they're under a lot of pressure with the market environment the way it is and so we thought is was appropriate to kind of do a one time assistance to pay out early.

Your next question comes from Craig Kennison – Robert Baird. Craig Kennison – Robert Baird: How are you thinking about the policy changes that you're seeing out of Washington relative to health care or cap in trade or potentially surcharge taxes on some of your customers? Is that something that may strategically affect you in any way?

We actually thought we were having a decent call until now. Are you trying to end it on a really bad note? On a serious note, it's very, very unhelpful. We're going through our strategic planning process now and part of the dampening down of our longer term outlook for demand that we don't create. We're confident in our ability to create demand, but for tailwinds coming back from an economic pickup, we are very concerned. We work closely with NAM on what's going to happen with the employee free trade act, which is a terrible name. The tax implications of the health care policy is horrible. It's very, very concerning.

Your next question comes from Joseph Hvorka – Raymond James. Joseph Hvorka – Raymond James: On your cost controls so far and operating expenses through the year and specifically in the quarter, your deepest cuts were in R&D which given that you're such a product driven company, why so deep and does this mean anything for products one year, two years, three years down the road?

I actually, thought in my formal remarks we talked about that. I think based on what you've seen in model year '08 and model year '09 and what you're seeing in '10, we're not off the gas one bit. One of the benefits of this operational excellence initiatives and all the speed that we're getting and the stabilization of our platforms, we're just way more efficient in what we're doing in engineering. So we're getting new products to market much, much quicker. So in essence, we're getting more for less or the same for less. So as I look at our product portfolio, what's in the pipeline, it feels good. There's not reductions. As much as we're trying to cut every penny, we're a product driven company and that's the last place we'll cut investment. So I would tell you that's really a benefit of efficiencies on operational excellence and our speed more so than we've cut our appetite in R&D.

That also applied not only to the R&D spend on the P&L but that also applies to the new product tooling investments that we'll make in Capex. Those investments are also coming down significantly year over year, but as Bennett said, we're not cutting to the bone there from a new product innovation perspective. We're just getting much more efficient with the operational excellence initiatives. Joseph Hvorka – Raymond James: If I look at the declines there versus selling and marketing and G&A, would it be fair to say there's more fat there? You've got almost a 20% decline versus an 8% decline in G&A or 12% decline in selling and marketing? Was there just more room for improvement?

There's some timing. I wouldn't necessarily say there's more room. It's timing related. Things tend to be a little lumpy quarter to quarter. Joseph Hvorka – Raymond James: This is a six month number. It was down 25% in the quarter. Is down 20% kind of the number we should look at for the full year then or no?

In that range. Joseph Hvorka – Raymond James: You made a comment about the side by side inventory being up on a year over year basis but down versus the first quarter. Seasonally we should see a decline from 1Q to 2Q, right, or am I thinking of core ATV's?

I think in general what we've seen historically is that you don't generally see a seasonal decline from Q1 to Q2. It's generally fairly flat. So we're encouraged by that trend and again, based on what you've seen what we've done with our shipments, that's in large part what's driving both of those sequential declines. Joseph Hvorka – Raymond James: I think you commented that the side by side industry looks like the rate of sales decline was a bit larger in the second quarter for the industry. Is that also true for your product?

No. Actually we saw sequential improvement in side by side sales from the second quarter versus the first quarter on a percentage basis for Polaris products. And again, as I said on the industry data, we all have to be pretty careful on that. We're trying to share information with you but in all honesty, it's not MIC level data or from a month to month basis, so we're getting directional feedback and that's why we tend to be a little bit broader in that range. To me the first quarter, the second quarter, we didn't see a dramatic differences in behavior that I would call from an industry standpoint. Joseph Hvorka – Raymond James: Or that the declines were similar?

Yes. I want to thank everybody. That's all the time we have this morning. We look forward to seeing many of you next week at our dealer meeting and the rest of you, we'll also talk to you again in our third quarter call. So thanks again for participating.