Polaris Industries Inc. Raymond James 30 th Annual Institutional Investors Conference Orlando, Florida March 11, 2009
Strong Business Foundation Percentage of Sales by Product line 2008 Snowmobile 10% ATVs Off-Road Vehicles (ORV) 67% Victory 5% Side-by-Sides PG&A 18% 1
Consistent Financial Performance Sales from Continuing Operations 1999-2008 10-year CAGR 5.8% 10-year CAGR 9.0% Net Income Per Share from Continuing Operations 1999-2008 Down 29% to 14% Dollars (in millions) $1,245 $1,327 $1,427 $1,468 $1,552 $1,773 $1,870 $1,657 $1,780 $1,984 Down 15% to 23% $1.64 Per Diluted Share $1.81 $1.99 $2.28 $2.58 $2.97 $3.15 $2.72 $3.10 $3.50 $2.50 to $3.00 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Cash Flow from Continuing Operations* Dividends (Per Share) 1999-2008 10-year CAGR 6.1% $211 10-year dividend payout $202 $198 $349 million Dollars (in millions) $151 $130 $120 $177 $179 $178 $189 $0.40 $0.44 $0.50 $0.56 $0.62 $0.92 $1.12 $1.24 $1.36 +3% $1.52 $1.56 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 * A reconciliation of the Company s calculation of cash flow provided to the most directly comparable cash flow measure, as required by Regulation G, appears in the appendix of this presentation. 2 Before Changes in Current Operating Items and Deferred Taxes
2008 Full Year Sales ($ in millions) 2007 $1,780.0 2007 Total Company Total Company Sales +9% ORV +15% -17% Geographic Sales +17% Snow Victory PG&A 2008 $1,948.3 2008 Total Company % Change in Total Company Sales -2% Volume +11% Product Mix & Price 0% Currency Sales by Product line +9% Total Int l +18% $304.2 Canada +18% $273.0 United States +6% $1,371.1 Victory $93.6-17% Snow +15% $205.3 PG&A +17% $343.6 ORV +9% $1,305.8 ORV (Off-Road Vehicles) = ATV & SxS Combined 3
2008 Full Year Earnings Net Income* Net Income as a Percent of Sales* $112.6 +4% $117.4 6.3% 0.8% Gross Margin 0.1% Op Expense -1.5% 0.4% -0.3% 0.2% 6.0% Financial Services Interest Expense Non-Op Income Income Taxes 2007 2008 2007 2008 Gross profit margins improved 80 basis points Financial Services income decreased $24.1 million Net margin expansion focal point for 2009 and beyond * From continuing operations. 4
2008 Summary Highlights: Record sales and EPS Sales up 9% EPS up 13% Share gains in every business International operations grew 18% Industry leading new products Sportsman XP; RZR S; RANGER HD; 800 Assault/Dragon Operational Excellence delivered Improved quality Increased speed to market MVP Dealer inventories declined by 7% Disappointments: Q4 retail sales decline Victory below expectations Credit environment Finance income down $24M Retail credit availability concerns Factory inventory Share price Gross profit margin expansion of 80 bpts 5
North American Retail Sales - 2008 ATVs, Side by sides, Motorcycle and Snowmobiles, combined % change from prior year Industry Polaris Units First nine months ended September 30 Fourth quarter Full Year -11% -6% -19% -16% -9% -25% North American retail sales deteriorated throughout Q4 International also declined in Q4 Polaris gained market share in all businesses in 2008 for 2 nd year in row Note: Side-by-side industry retail sales are Polaris estimates 6
Ready for 2009 Aligned Strategy & Structure Off-Road Vehicle Division International Team Adjacencies Attacked Costs Workforce reductions announced - 460 Operating Expense reductions > $10M Manufacturing/Production costs reduced with volume Accelerated Operational Excellence Speed / Factory Adjustments Q4 2008 production cuts Productivity +8% Value Engineering > $10M Focused on Dealers / Customers Product Innovation Process Innovation Rush, RZR 170, Much more MVP / Victory Go-to Market Prepared for a Tough Year Sales -15% to -23% Contingency Plans in place 7
2009 Full Year Total Company Sales Off Road Vehicles (ORV) Snowmobiles Victory Motorcycles PG&A Down 15% to 23% Down 17% to 25% Down 10% to 20% Down 25% to 40% Down 9% to 13% Gross Margins Up to 130 bpts improvement Operating expenses EPS Diluted from continuing operations Reduction > $10 million - up as a percent of sales $2.50 - $3.00 (-29% to -14%) 8
First Quarter 2009 Total Company Sales (in millions) Diluted EPS* (in millions) $388.7 $0.55 Actual Down 20% to 25% Down 73% to 55% $0.15 to $0.25 2008 2009 2008 2009 Actual * From continuing operations. 9
Gross Profit Margin Percentage Trends Q4 2008 Full Year 2008 2009 Prior Period 22.0% 22.1% 22.9% Production volume adjustments Product mix Commodity/transporation costs Currency rates Higher selling prices Warranty costs Tooling amortization Sales promotional costs Current period 22.8% 22.9% up to 24.2% Change +80 bpts +80 bpts up to +130 bpts Improvement to gross margin % Impairment to gross margin % Neutral to gross margin % Flexible variable cost structure and timely execution drives gross margin expansion 10
Balance Sheet and Liquidity Profile $ In millions (except per share data) Total Debt at Year-end Net Debt at Year-end (debt less cash balances) Credit Facility (expires December 2011) Average debt outstanding Maximum debt outstanding Capital Expenditures Depreciation and amortization Cash Provided by Continuing Operations Stock buyback Dividend 2008 Actual $200.0 $172.9 $450.0 $283.0 $345.0 $76.6 $66.1 $176.2 $107.2 (2.5 million shares) $1.52 per share 2009 Approximately flat Improving $450.0 Similar Similar $50 to $60 $60 to $65 Expected to decrease approximately in line with net income Much more modest share repurchase activity to approximate benefit plan share issuances $1.56 per share (+3%) 11
Research & Development / New Product Tooling % of Total Company Sales 4.6% 4.6% 5.0% 5.4% 5.0% 5.4% About 5.7% 5.5% Flat Recent New Product Introductions: 5.7% 5.5% RANGER RZR Sportsman XP 2004 2005 2006 2007 2008 2009 Research & Development New Product Tooling guidance RANGER HD Engineering and new product development is competitive advantage Objective: Best products and quality at the lowest cost Value engineering is key RUSH Victory Vision 12
Off-Road Vehicle Division Polaris Revenue ($000 s) +9% $1.306B $1.195B ATV -17% to -25% ATV ATV SXS SXS SXS 2007 2008 2009 67% of Total Polaris Sales #1 Market Share in ORV in N.A. & Europe New Sportsman XP & Ranger selling well Consolidated into ORV Division Improve cost synergies & market effectiveness Weak N.A. core ATV industry (-26%) in 2008 side-by-side industry continued to grow up 4% N.A. Off-Road Vehicle Industry ATV ATV ATV -22% ATV -20% to -35% ATV SxS SxS SxS SxS SxS 2005 2006 2007 2008E 2009 Projection Note: Side-by-side industry retail sales are Polaris estimates 13
Snowmobile Division Polaris Revenue ($000 s) +15% $179M $205M -10% to -20% 2007 2008 2009 10% of Total Polaris Sales Gained Share in 2008; #2 Significant Quality Improvement +20% Launched RUSH in 2009 Industries only progressive rate rear suspension Good snow conditions throughout NA Dealer Inventory down 4% STD N.A. Snowmobile Industry -11% -9% -7% +4% -20% 2005 2006 2007 2008 2009E For season ended March 31 14
Victory Division Polaris Revenue ($000 s) $113M -17% $94M Retail 0% to -10% -25% to -40% 5% of Total Polaris Sales Industry leader in ownership satisfaction Gained share for 5 th year in a row Aggressive supply reduction to improve dealer business model Global expansion Australia, Germany Focused on retail acceleration + share 2007 2008 2009 N.A. Motorcycle Industry 1400cc+ +4% +6% -4% -9% -15% to -25% 2005 2006 2007 2008 2009 Projection 15
PG&A Division Polaris Revenue ($000 s) $293M +17% $344M -9% to -13% 2007 2008 2009 18% of Total Polaris Sales Sales growth in all businesses; record sales Highest margin business Innovation continues: 260 new accessories in 2008 Expect to outperform WG sales in 2009 2008 PG&A Revenue by Business Unit Snow 19% Other 8% Off-Road Vehicles 67% Victory 6% 16
International Division Polaris Revenue ($000 s) +18% $304M $258M 2007 2008 2009 Asia Latin 1% America 7% ME/Africa 14% Aus/NZ 9% -10% to -20% Europe 69% 16% of Total Polaris Sales #1 market share in ORV for Europe & gaining share Europe markets weak in 2008; expect same in 2009 Gaining share in Snow in 2008 Increased direct presence 50% in 2008 Victory global expansion Australia, Germany New structure focused on global expansion and EMEA Victory 3% Snow 12% PGA 17% ORV 68% 2008 Revenue by Geography 2008 Revenue by Business Unit 17
Financial Services Income Financial Services Income by category $45.3 Retail Portfolio HSBC and GE combined $ in millions 2008 Wholesale income down 5% Retail credit income down 80% Other activities income down 29% $21.2 46% 53% 38% 39% Q4 2008 51% 31% Down 50% 2007 2008 2007 2008 Q4 Penetration Rate 2008 Approval Rate Q4 2008 2007 2008 2009 Retail Financing Wholesale Credit Other Activities Sheffield Financial added in February 2009 18
Adjacencies Polaris Defense Revenues +50% to 100% +42% 2007 2008 2009 Military: New customer penetration Global expansion / after sale support Expanded business development resources Additional adjacency opportunities to be announced On-road and/or outside powersports Q1 2009 Bobcat Alliance Q3 2009 Additional adjacency announcement Additional organic opportunities in pipeline Focus: Global Outside powersports On road 19
Bobcat Strategic Alliance #1 Off-road vehicle manufacturer #1 Compact construction equipment manufacturer Alliance will leverage complementary strengths Technology sharing Co-development and supply of highly differentiated work vehicles New Vehicles available mid to late 2010 20
Operational Excellence Units (all products) N.A. Dealer Inventory -11% Reduce -7% further in 2009 Continued dealer Inventory reduction in 2009 MVP go to market dealer business model Lean acceleration NPS improved in 3 of 4 - Industry-leading in Victory & SxS 2006 2007 2008 2009 Goal Quality - Net Promoter Score (NPS) MODEL YEAR 2008 MODEL YEAR 2009 GOAL NPS % NPS % Industry Industry Product Change Change Place Place 08 vs 07 09 vs 08 Snow Middle 20% 1st 5% ATV Middle - 7% 1st 10% SxS 1st 5% 1st 5% Victory 1st 6% 1st 5% Cost - Gross Profit Margin Expansion 22.9% 22.1% 21.7% Up to +130 bpts 2006 2007 2008 2009 21
Polaris 5-Year Strategic Objectives Best in Powersports PLUS 5-8% organic growth Growth through Adjacencies $100-300M growth Global Market Leadership >25% of Polaris Revenue Operations is a Competitive Advantage Op Ex drives >200bpts Operating Margin improvement Strong Financial Performance Sustainable, Profitable Growth A Great Future for All Stakeholders 22
Appendix Private Securities Litigation Reform Act of 1995 - Polaris Industries Inc. Disclosure Litigation Statement Our presentation and responses to your questions may contain certain statements which may be considered forward looking for the purposes of the Private Securities Litigation Reform Act of 1995. We caution you that actual results could differ materially from those projected in a forward looking statement which by their nature involve risk that results may differ from those anticipated. Additional information concerning the factors that could cause results to differ materially from those anticipated may be found in Polaris annual report, 10-K, 8-K, 10-Q and form S-3 registration statements. Regulation G Reconciliation Cash Flow Provided by operating activities from continuing operations (dollars in millions) Changes in current operating items Net cash provided by operating activities Year Cash Flow Provided Deferred income taxes 1999 119.8 2.8 11.9 134.5 2000 129.7 1.3 (25.9) 105.1 2001 150.8 (10.6) 51.8 192.0 2002 176.9 4.3 14.6 195.8 2003 179.1 (8.7) (7.9) 162.5 2004 202.3 (1.5) 36.3 237.1 2005 211.4 1.6 (50.5) 162.5 2006 177.8 1.3 (26.3) 152.8 2007 189.1 (10.3) 34.4 213.2 2008 197.6 (1.0) (20.4) 176.2 23
Polaris Industries Inc. Thank you. Q & A 24