Jul. 16--The broader economy may be hurting, but Polaris Industries and its line of all-terrain vehicles are churning along nicely.

Led by sales of its Ranger RZR two-seater ATV, and a new, larger six-passenger utility model, Polaris' sales were up 21 percent over last year. Strong international sales also contributed to a 7 percent increase in profit in the second quarter.

The results were better than Wall Street analysts expected.

"Polaris' upside surprise remains all the more impressive given sluggish industry conditions and the conservative outlook dealers have undertaken," said Rommel Dionisio, an analyst with Wedbush Morgan Securities in Los Angeles, who follows Polaris.

Polaris CEO Tom Tiller said he likes the way the rest of the year is looking, too. Dealer inventories are down 8 percent overall from a year ago. For snowmobiles, dealer inventory levels are at their lowest level in 10 years, following a winter last year that actually produced some snow.

That leaves room for supply to come closer to matching consumer demand when fall approaches.

The Medina-based maker of ATVs, motorcycles and snowmobiles reported a quarterly profit of $24.4 million, or 72 cents per share. That was better than the 68 cents a share Wall Street was expecting, according to an analyst survey by Thomson Financial.

Polaris also improved its guidance for full-year 2008, calling for revenue growth of 9 to 11 percent, and earnings per share of $3.40 to $3.48, up from $3.36

to $3.46.

Several things fell into place to produce the company's second-quarter showing.

The RZR, a sporty, two-seat all-terrain vehicle is selling well in North America and overseas. Supply remains behind demand, and the company plans to raise RZR production a fifth time in coming months, Tiller told analysts Tuesday.

"We've proven that innovative products sell and sell well, even in this environment," he said.

And although Polaris' customers are sensitive to the ongoing credit crunch, that hasn't negatively affected the business.

In the second quarter, about 36 percent of Polaris buyers financed their purchase. In last year's second quarter, it was 39 percent. Customers still are able to get credit, said Mike Malone, Polaris' chief financial officer, though loan approval rates are lower in areas such as Florida, California and Arizona, which were hit hard by the housing market slump.

International sales were particularly strong, up 40 percent in the second quarter and 34 percent for the first half of this year. Polaris' international sales accounted for 19 percent of its total.

Not all parts of the business are performing well. Sales of "core" ATVs -- not the RZR-style models -- were down more than 23 percent. Sales of Polaris' line of Victory motorcycles declined 19 percent in the quarter, as the North American market for heavyweight cruisers is feeling the pinch.