Costs piled high for Polaris Industries last year as it tackled recall after recall of its recreational vehicles due to fire hazards.
Polaris paid out $132 million in 2016 related to recalls
March 27, 2017 at 11:32PM
The $4.5 billion Medina-based maker of motorcycles, snowmobiles and off-road/all-terrain four wheelers (ATVs) updated shareholders on the costs in its annual report, saying it paid $132 million in warranty costs and bolstered warranty reserves by another $194 million in 2016 as it tried to address claims and fix machines with potential fire hazards.
Polaris and the Consumer Product Safety Commission have alerted customers that hundreds of thousands of vehicles had been recalled to date after reports of 207 fires, multiple injuries and at least one death.
In January, CEO Scott Wine told analysts during a conference call that Polaris was 70 to 80 percent done repairing 901,000 recalled Polaris RZR and RZR Turbo vehicles. Repairs on other models were also being worked on.
And the recalls continue. This month, Polaris recalled another 32,700 ATVs due to fire risks reported for the Sportsman, RZR, RZR Turbo, Turbo and General models.
Those recalls came after riders reported 62 fires, four minor burn injuries and numerous components that melted or warped — mostly involving side-panel heat shields or damaged exhaust springs and seals.
It is unclear how much the new recalls will cost or if more are coming.
Analysts said they expect Polaris to give investors updated warranty cost estimates for 2017 when the company reports first-quarter earnings results on April 25.
Polaris allocated significant sections of its 2016 annual report to explaining how hard it attacked its recall problems. The company said it sent engineers into the field across the U.S. and Canada to repair possible problem vehicles, re-evaluate designs and identify possible future hiccups.
Customers have been warned to stop riding recalled vehicles immediately and to take them into dealerships for free repairs.
After initial complaints about delayed parts shipments and repairs, Polaris doubled outreach efforts in the third quarter of last year. It reached out to customers directly, offering promotions and incentives designed to thank customers for their patience and loyalty.
Time will tell if it's enough. Polaris' recall problems hit at the same time the entire recreational vehicle industry is experiencing a slump in sales.
The timing of Polaris' woes has proved a one-two punch to a company that rode high for years among investors.
In January, company officials reported that full-year 2016 revenue fell 4 percent to $4.5 billion.
Adjusted full-year earnings fell 50 percent to $226 million, or $3.48 per share.
Wine told analysts previously that the company was doing all it could to return to growth mode. He forecast that 2017 sales would grow 10 to 13 percent to reach $4.97 billion to $5.1 billion. He also predicted that adjusted earnings would jump to $4.25 to $4.50 per share as recall woes subsided.
Polaris stock closed Monday at $83.27 compared to its $153 trading price in July 2015.
Dee DePass • 612-673-7725
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