One of the Polaris RZR models involved in the large first quarter vehicle recall.

Polaris reported earnings for the first quarter 2016 fiscal year with sales and earning declining for the second consecutive quarter. Revenue was down 5% to $983 million driven by inventory management and currency impacts. Earnings per share was down a significant 45% with currency, volume and mix and considerable legal and warranty costs more than offsetting leaner operations. The following are some of the highlights related to the small, task-oriented vehicle market.

• Polaris is recalling more than 160,000 RZR vehicles to address fire and other thermal risks. This figure appears to include vehicles outside the US as the CPSC reported a figure of 133,000.
• Management expects to “…address all of the recalled vehicles within the quarter…” and emphasized their commitment to resolving the issue quickly.
• Side-by-side dealer inventory declined upper single digit percent in the quarter.
• Year-over-year (YOY) North American side-by-side retail decreased slightly in an industry up mid to high single digits, so some market share was lost.
• Management is positive about the performance of the new GENERAL product line and reports cannibalization of Ranger and RZR lines is not significant.
• Side-by-side market remains weak in oil producing states but overall management is optimistic about the ORV (ATV & side-b-side) industry.
• Management reports higher variability from month to month and regionally in the ORV market.
• The Global Adjacent Markets business unit saw a 8% decrease in revenue with strength in Aixam, national accounts and GEM offset by weakness in Bobcat and Brutus. Defense business (MRZR and Dagor) declined “significantly” due to tough comparables but the order backlog is up.
• The European ORV industry grew low single digits in the first quarter, with Polaris retail outperforming, up mid-single digits.
• Multix retail and distribution, while still relatively small, are on plan through the first quarter. Multix is a small multi-purpose vehicle for the Indian market.
• Ranger production will begin in the second quarter at the new Huntsville, AL plant, which should provide significantly better operating efficiencies and better inventory and retail flow management.
• Management expects  Global Adjacent Markets to be up in the high single digits percent range, reflecting the recent acquisition of Taylor-Dunn and ORV/Snowmobile sales to be down low to mid single digits.

Learn more:  Seekingalpha.com (earnings call transcript)