Good morning. My name is Sheena and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Polaris fourth quarter earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there'll be a question-and-answer-session. (Operator Instructions). Thank you, Mr. Richard Edwards; you may begin your conference.

Thank you, Sheena and good morning and thank you for joining us for our 2009 fourth quarter and full year earnings conference call. A slide presentation 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, we will be discussing certain topics including product demand and shipment, sales and margin trends, income and profitability levels and other matters including more specific guidance on our expectations for 2010, which should be considered forward-looking for the purposes of the Private Securities Reform Act of 1995. Actual results could differ materially from those projections in the forward-looking statements. Additional information concerning these factors can be found in Polaris' 2008 annual report and Form 10-K, which are on file with the SEC. Now I’ll turn it over to Scott. Scott?

Thanks Richard. Good morning and thank you for joining us. A year ago we used this call to issue an unprecedented wide range of guidance for 2009, and I spoke to the fact that we are prepared and ready for a tough year. It was no easy trail through last year's downturn, but I'm pleased with the way this Polaris team and business performed. Earlier today, we reported results for the fourth quarter and full year 2009, and the results were encouraging. For the fourth quarter, Polaris delivered earnings per share of a $1.31 an increase of 18% from the prior year period, and also a new Polaris record for quarterly earnings. Net income was up a strong 21% to $43.9 million. It is worth noting that 300 basis points of difference in the EPS and net income growth rates is attributable to the dilution in share count that occurred in the fourth quarter, and will continue to be a slight drag on earnings per share throughout 2010. With our focus on margin expansion and improving cash flow, we are very comfortable with the quality of our earnings growth. The strong increase in fourth quarter results represents the culmination of a tremendous team effort, diligent execution and the transition to favorable variances and currencies during the quarter. Margin expansion was the key driver behind our record earnings per share in the fourth quarter. Gross margins moved higher throughout the year and expanded an impressive 450 basis points in the quarter. More than half of our benefit came from pricing, cost reduction and lower promotions, and we also benefited from the currency tailwinds that I just mentioned. The resulting fourth quarter gross profit margin of 27.3% is a strong indicator of our longer-term margin potential. Importantly, we follow through on our…

Thanks, Scott. I'm going to begin with off-road vehicles. Our off-road vehicle wholesale sales were down 12% in the fourth quarter and 22% for the full-year 2009. The ORV industry improved modestly in the fourth quarter as we came up against weaker comparables. North American ATV industry retail sales were down low 20% in the fourth quarter and ended the year down 28%. While we don't have clear side-by-side industry data, we are estimating that the side-by-side industry was down about mid teens percent for the year. So we are seeing modest industry improvement, but not as much as we had expected or hoped for. Polaris fourth quarter retail sales, on the other hand, improved considerably with ATV sales down just mid single digits and side-by-side sales actually up double digits. We gained a significant amount of market share in the fourth quarter and for the full year 2009 in both ATVs and side-by- sides. Overall, we've extended our leadership as the number one ORV, OEM for 2009. The secret to our success is pretty simple in off-road vehicles. First, we have stayed on the gas while most others have not in product development and innovation. In 2009 alone, we introduced over 25 new ORV products. We have superior product advantage. Second, we have improved the ORV business model with our MVP program for dealers, by lowering inventories, reducing risk and increasing focus on retail. And we have worked extremely hard to drive synergies in non-value added cost out of the value chain through our now consolidated ORV division and value engineering cost reduction efforts. Polaris's new product innovation continues with our just recently announced Robby Gordon Edition RZR 4, the industry's first purpose built four-[seat] side-by-side product. Building on the tremendous success of the original RZR and the popular…

Thanks Bennett, and good morning to everyone. We are very proud of how the team navigated the company through the most difficult and uncertain economic conditions in recent history and generated the results announced this morning that exceeded our expectations. I'll begin my comments this morning with our 2010 guidance with some reference to 2009 results to highlight a few specific points. Guidance for the full year 2010 is as follows: Total company sales are expected to increase 1% to 3% for the full year 2010 with the individual businesses contributing as follows: Off-road vehicles are approximately flat to up slightly with the growth coming outside of North America and the adjacent military and Bobcat markets. Snowmobiles are expected to be down slightly to up slightly. We will know more as the season progresses. On-road vehicles will be up over 50%, and PG&A is expected to grow similar to the overall company growth. Gross margins for the full year 2010 are expected to expand again, up to a 100 basis points. I will give additional clarity on the regions for our continued confidence and expanding our gross margin shortly. Operating expenses are expected to increase in both dollar terms and as a percentage of sales for the full year 2010, primarily due to the incremental investments being made in our growth opportunities internationally as well adjacent market and business development. In addition, we expect increased incentive compensation plan expenses in 2010, resulting from the reinstatement of longer term plan expenses that were reduced or eliminated in 2009. The income tax provision for the full year 2010 was expected to be in the range of 33% to 33.5% of pretax income similar to the provision rate for the full year 2009. Earnings per share for the full year 2010 are expected…

Thanks Mike. To summarize, we had a darn good fourth quarter and a strong finish to 2009, which has us well positioned for 2010. We do not expect a strong recovery, and we are not planning on any tailwinds from the US economy or from our key international markets in 2010. We have a conservative outlook for the Power Sports industry and are predicting double digit retail sales declines in both North America and Europe with somewhat better performance in the brick countries. This outlook is primarily driven by expectations of continuing high unemployment after a long period of increased personal savings and a new era of tighter credit. We can react fast and will be poised and ready to aggressively take advantage of any improvements that materialize in our end markets. We will continue to diversify and seek growth outside of North America as we add more investment to our business in Europe, the Middle East and Africa as well as South America and China. We expect that the investments we are making in China and the infrastructure investments in Europe will gain traction in 2010. We anticipate continued growth in our military business as we further leverage the unique benefits, our products can provide to forward deployed forces. Our Bobcat relationship will begin to generate revenue and profit in the second half of 2010 with faster growth in 2011 and beyond. We will continue to devote energy and resources to business development and will likely complete at least one acquisition in our portfolio this year. We have a number of excellent opportunities in our funnel, but we'll maintain a strict discipline to ensure we generate incremental value for Polaris and our shareholders. 2010 will be an important year for our newly formed on-road business as we drive much…

(Operator Instructions). Okay. Your first question comes from the line of James Hardiman with FTN Equity Capital.

Congrats on a great quarter, a great year, and we certainly appreciate all the disclosure. A couple of questions for you, on Victory, you've given us all the numbers. Can you just run down one more time sort of what do you expect from the industry and then how you sort of get to your 50% plus growth? I think you said you felt the industry would be down at least in the US obviously international is a big piece of your growth. Can you just run through sort of the industry to your numbers once again?

Yeah James, this is Bennett. We think the heavyweight segment which we compete in, which may be different than from some of the others it's going to be down 10% to 15%. The reason, we are guiding in excess of 50% frankly is you saw we were down 44% this year. We dramatically [undershiped] retail this year even in a down market. We will do that again the in '10, but not to the same magnitude. We also have tremendous traction with global expansion, and that continues to get to be a bigger part of our mix. So we think we are going to accelerate retail gain, a lot of share. We want to have to undership retail by as much, but we expect the markets to still be down. It's still the law of relatively small numbers.

Right, but ultimately would you expect obviously international is going to be up huge, but you also expect your US business to be up at retail as well?

Absolutely.

This is Mike. The only thing I would add to that in addition is that the way we're communicating. This is non-road division number of about 50% which also includes a modest amount of LED products that will be incremental year-over-year in 2010 as well.

Great, and on the Snowmobile side, obviously there is a lot of snowfall in December, doesn't seem like it really moved the needle well really in terms of wholesale or retail. Is there the feeling that that snowfall may have helped January sort of what's the color on sort of the early January retail given how much snowfall we got in December?

We're seeing January retail not a trend like the fourth quarter, no major up or down movements. The snowfall we had in December, and was kind of contrasted with the rain and warmer weather in the last couple of weeks here in the Midwest. So we've not seen any major directional shifts in the trends that we saw in the fourth quarter.

Okay. And then just real quick on the MVP program, I think last update; you said you were about 50% rolled out. Should we expect that number to grow in the near term, and can you give us any color on how the MVP versus non-MVP dealers have performed?

Yeah James, this is Bennett again. We've talked about MVP, as we are still at 50%. We generally will make moves around the model year if we do that. We have the intent over time to expand the MVP as we continue to master and learn that. That would be our hope as we go forward. We're not going to be specific about exactly what that timetable is, but we would expect to continue to increase MVP dealer penetration as we move forward. From a performance standpoint, the MVP dealers are performing well. They gained a significant amount of share in the fourth quarter. We have some that have been on this for over a year or two now, we have some that are just getting on it so there is a learning curve. But they're performing very similar right now to our existing dealers from the retail standpoint, but I would tell you in general, their inventory metric and perhaps their profitability is a little, is more favorable.

Your next question comes from the line of Greg Badishkanian with Citi.

Obviously great job on the quarter, just a few questions; first seems like the credit environment has improved a little bit. What would you expect over the next three quarters? Just continuing sort of moderate improvements?

This is Mike. The way I would characterize that Greg is that, the retail credit environment is stabilized. It was very uncertain, very volatile a year ago and earlier this year, it's settled out. You can see by the metrics that we talked about; that it's in my view stabilizes. Going forward, I don't expect significant changes, although with new regulations coming out of Congress, there will probably be a mix change from less revolving credit and more installment credit going forward with some of the new rules and regulations. We are prepared for that. We have both GE and Sheffield doing our installment loans for our dealers. So we are very well prepared for that mix change if, in fact that happens. But other than that, I don't really anticipate any significant change in the retail credit environment.

And also on the side-by-side market, obviously excellent performance there, but what are you seeing from your competitors that you are taking share from? Are you seeing any new products that might create a threat? How are their inventory levels, and also just in terms of pricing on the side-by-sides?

I think Greg, the fact remains that side-by-sides have become the most profitable and then perhaps important part of the Power Sports industry, so we expect and we've seen lot of people to start to enter that market. Honda came in with a Big Red. We feel extremely good about our product portfolio about where we are positioned. We demonstrated that with a performance in 2009 from a share perspective. We do expect some of the key competitors to bring new products to market. Some will enter the market for the first time, and I suspect that we'll be well prepared and have another good year in side-by-sides. I think dealer inventory for everybody didn't make nearly the progress that was made on the ATV side of things, but we are comfortable with where we are positioned on side-by-side inventory, and I haven't heard of too many problems with the competitors to expect the high promotional pressure that we've seen in ATVs.

Your next question comes from the line of Ed Aaron with RBC Capital Markets.

So I never want to talk to you for conservatives in here, but as far as the guidance goes, you ran out of record level in the fourth quarter from an earnings perspective, and the 2010 guidance is still, these are not below the 2008 peak earnings year and just, is that just real conservatism, or are there some factors about Q4 relative to the forward outlook where maybe we shouldn't assume that, sort of that record quarterly earnings rate is achievable going forward?

Obviously as both Mike and I spoke to, we had some shift to favorable currencies and just had a year-over-year benefit. But overall the fourth quarter was about strong performance across the business, and we do expect 2010 to be a year of strong performance across our business. As we try to spell out, conservative outlook is based on what we expect in our core industries. There is only a limited amount that we believe we can do to outperform the industry, and with expectations for double digit decreases in Power Sports industry in North America, we think we are going to be fighting an uphill battle throughout the year. As I tried to indicate, if we see our end markets improve, we've proven we've got the speed to react and take advantage of it. But right now, our primary growth is coming outside of North America and in some of our new product adjacencies if you look at our core markets, they are essentially flat. If the industries improve we expect our results to improve.

Fair enough, and then from just a mixed standpoint, I think you kind of guided to 2010 as a mixed neutral year. I'm a bit surprised that mix wouldn't be a tailwind again in 2010 obviously in the ATV business side-by-side is expected to do better than they've been core ATVs, and then you have other businesses, higher margin businesses like military that are still ramping. What sort of weighs back down the other side of that from a mixed standpoint?

Ed, this is Mike. There is a number of factors in side-by- sides where growing a new product category of the midsize with our Ranger 400 line and that's a smaller price point, with modestly less margin percent than some of our bigger side-by-side products. So that impacts the mix a little bit. Some of our newer adjacency type things aren't quite to the margin percent that our other businesses are. For instance Bobcat, when we are going to source the product to them, our margins are good, but they are not as good as it would be if it was Polaris product that we were [sourcing]. So, some of those factors that weigh down a bit.

And then just, my last question if I could. Just on Victory, you tend not to talk about profitability levels there, but can you give us to some sense I know you have some initiatives in place on how to improve the performance of that business, and just what has to happen for that business to make money in terms of either kind of the internal operational stuff you are working on or the end market recovery? Just trying to get some context for, how far away we are from that business being economically a positive contributor?

I don't think we are too far away from that, Ed. I think it's pretty simple what we need to do. We need to sell more bikes, which Bennett talked about. We expect to do that. We need to bring down dealer inventories, so we don't have the overhang of non-current to drive high promotional cost and we need to take a little bit of cost out of the product. And we have very clear action plans to do all of those things throughout 2010. So, it's not years away, but as I've said several times, I am committed to a profitable Victory motorcycle business, and we still see that in our future.

And that being said, the improvement in Victory in 2010 will be incrementally beneficial to our margins in 2010.

Your next question comes from the line of Joe Mackey with Wells Fargo.

I guess quickly sticking with Victory's for a minute here. The retail sales increased in Q4, you were up significantly. I mean, how much of that was due to new product introductions, and how much of that was due to maybe closing out the non-current stuff?

About a third of the retail was represented by the Cross bikes. We expect if we ship more those into channel that may increase. But we had numerous initiatives underway from employee referrals and customer referrals, and it was a lot of energy and effort from the team, and I think that as much as anything drove it. But, this is an ongoing initiative that's going to require a lot of focus and effort, and I think you see what can happen when we provide that as we did in the fourth quarter.

On Victory's and core ATVs, you are still going to ship a lot, less into the channel than you are selling. How close are you to getting to the point where you are comfortable with channel inventories? And you know is it maybe sometime in '10 where we could see a pickup in production, so that at least you are producing as much as you are selling?

That's a good question. We've certainly been on that March for the last three years, significantly undership retail. We will do that again in '10; but to a lesser degree, we are much closer than we've been, and we are feeling decent about our inventory levels right now, and I guess we would hope that based on how we think the '10 plan goals, we would think that we would be at a balanced kind of flow through level by the end of '10 would be our hope.

And then last question here, you kind of hit on competitor inventory levels with the side- by-side, but on core ATVs, motorcycles, they seem to be a little bit behind the curve at least from where you guys are on inventory. Can we still expect to see some pricing pressure from competitors in those two segments, the core motorcycle ATV segment in order for them to kind of catch up to where you guys are?

I think that would be what we built into our plan essentially. I think that a number of the competitors did make progress, though in 2009, and I would tell you that while I don't know that they won't be considering themselves healthy and I think they are behind where we are, I think that they are arguably better than they were a year ago. And so we still expect promotion to remain aggressive in ATVs, and motorcycles, but most of them made progress because they did significant cuts to their build even though the retail wasn't very good. So it's still tough, but I don't know that it's as bad as it was a year ago.

Your next question comes from the line of Craig Kennison with Robert W. Baird.

Bennett, how has the MVP program impacted dealers that are not on it? And are they working harder to get on that program? Are they looking at other potential partners in the category?

Well I would tell you that as many dealers that are waiting (inaudible) for us to be ready to expand it into their area or to their dealership. They continued to run business as usual. We've made a number of improvements, Craig and how we run the business model with those folks as well even though they are not official MVP dealers, which I think has which has helped alleviate some of that pressure or have versus have not, and that's why we continue to go as fast as we can to expand the business model as we learned. So, I think there's certainly advantage for an MVP dealer, but we are trying to minimize those advantages and trying to get to as much of an MVP world as we can as we go forward.

And then Scott, as acquisitions potentially heat out, can you just reiterate the (inaudible) for Polaris? Thanks.

I think the (inaudible) enables us to drive profitable growth and value for share holders, and that is what we will strive to do with everything we do. Obviously, if you look at our stated strategy, we have opportunities for growth outside of North America and Europe. We have opportunities for growth outside of the Power Sports industry to give us a little bit of offset to the inevitable ebbs and flows of consumer demand there. And as we've looked at Todd Balan joined us the middle of the last year. We put a disciplined process in place to manage the funnels, and we see quite a few of interesting opportunities; but as you can tell by the last year and a half we haven't done anything. We're going to be very disciplined as we go through this. But I do suspect it will become an important part of our ongoing growth strategy. But again, it's all about profitable growth. We are not going to buy anything to get bigger. No interest in that at all.

Your next question comes from the line of (inaudible) Wedbush Morgan.

I wonder if you guys could just provide us an update on MVP. About how many of your dealers, or rather what percentage of your dealers are now on that, and as you look to expand that, what we might expect by the end of 2010? How many would be on that and also just a follow-up to that how much of the dealer reduction inventories is really coming as a result of MVP as opposed to just lowering inventories on the wake of a tough economy? Thanks

I'll try to take a crack at that. We kind of answered the first question. We have and what we stated and will continue to state as we have 50% of our North American ORV volume on MVP. It's slightly less than that from a dealer's standpoint, but close. We haven't quantified an expansion level other than we intend to be aggressive about that and continue to expand MVP as we continue to learn and master that. From a standpoint of the inventory levels, I think it's both. I mean, we are certainly rolling inventory levels across our channel, but MVP business model drives those reductions in a more accelerated manner. So certainly MVP is driving a lot of those reductions, but we are also lowering levels for all of our dealers across the channel. So it's both.

And just one last follow-up if I could, it wasn't that long ago when the motorcycle business was positive profit. If you were to achieve that 50% plus growth this year, would that get the motorcycle business back to profitability by year-end?

Ronald, as you know we don't really discuss profitability by product line in any specifics. We've said that we're disappointed with our Victory business this year, with sales down 44%. We are obviously not in a profitable perspective at the present time, but we expect to return to profitability. When and how, we get there and at what pace, we're just not going to talk about specifically.

Your last and final question comes from Bob Evans with Craig-Hallum Capital.

First can you comment on the Bobcat business? Can you give us any sense of magnitude of size for the business, maybe '010, '011, how big a business you think that could have become?

Bob, this is Mike. We're not prepared to talk in specific terms on dollar growth. What we have said is that this is going to ramp up starting in the second half of 2010, as we start to supply the source product to Bobcat. It obviously in 2011, while the full year of that relationship; and then, as we move forward beyond 2011, we'll continue to have that business as well as our core developed products that's coming in the future would more than likely start to ramp in. So there is some growth in the second half of this year, quite a bit more actually than in '011 and then it should go up from there.

Okay. Fair enough. And on the commodity cost side, I think you said it's going to be a bit of a headwind in '010: Can you give us a sense again of magnitude there?

No. We're guessing. We don't really know what's going to happen on commodity. We really don't know what's going to happen on currency. So we're looking at the trends that we're looking at most recently; and the price of fuel and the price of aluminum, the price of steel is higher today than it was six months ago. So we're expecting those trends to continue in 2010. We've got budgets built. We think conservatively that anticipate a higher-cost environment for commodities in 2010, and we're prepared for that, and we'll see how it plays out.

And that was my next question on currency. Can you give us a sense of how far out you're hedged?

So right now, we got a lot of currencies that we are down Canadian dollars was the biggest, and then we've got the Yen and some European currencies. Generally speaking, we are hedged about half of our exposure in the first half of 2010, and we are hedged, currently we are hedged favorable to the comparable 2009 periods.

And final question just on acquisitions again, I know you discussed this, but should we look for something, a smaller business that you're expecting to build versus something maybe more transformational, like KTM would have been?

We're not going to look to make a transformational acquisition. Those rarely work out welt, and given the risk involved in that size and the type of acquisition it wouldn't be a prudent place for us to start.

Okay, thanks. So that's all the time we have this morning. I want to thank everyone for participating in the call this morning and we look forward to talking to you next quarter. Thanks again good bye.

Thanks you. This concludes today's conference call. You may now disconnect.