BRP reports second-quarter results for fiscal year 2015

Highlights:

  • Revenues of $780 million, a 25.6% increase compared to the same period last year;
  • Normalized EBITDA[1] of $31.3 million;
  • Net loss of $3.6 million compared to a net loss of $7.9 million for the same period last year, which resulted in a diluted loss per share of $0.03 compared to a diluted loss per share of $0.07;
  • Normalized net loss[1] of $8.8 million that resulted in a normalized diluted loss[1] per share of $0.07;
  • 19% increase in retail sales of Seasonal Products and Year-Round Products in North America when compared to the same period last year;
  • The Evinrude E-TEC G2 outboard engine received positive feedback from dealers, boat builders and trade media; and
  • Revealed today the industry's first turbocharged side-by-side vehicle, the 121-hp-rated Can-Am Maverick X ds.

VALCOURT, QC, Sept. 12, 2014 /CNW Telbec/ - BRP Inc. (TSX: DOO) today reported its financial results for the three- and six-month periods ended July 31, 2014. All financial information is in Canadian dollars unless otherwise noted. The complete financial results are available at www.sedar.com.

"After a soft start into Fiscal Year 2015, Revenues growth accelerated meaningfully in the second quarter with solid performance in Seasonal Products," said José Boisjoli, president and CEO. "Our second quarter is typically seasonally weaker and our gross margins were affected by higher costs resulting from sales programs and an unforeseen foreign exchange impact."  

Commenting on the outlook for the second half of Fiscal Year 2015, Boisjoli added: "We had strong retail in North America for both Seasonal and Year-Round Products when compared to the second quarter of last year driven by the commercial success of the Sea-Doo Spark watercraft, Can-Am Spyder and side-by-side vehicles. Our inventories in the channel are in good shape and this bodes well for the second half of the year. As such, we are reaffirming our guidance for Fiscal Year 2015 with expected continued acceleration of Revenues and a strong finish in the fourth quarter driven by sales of snowmobiles and deliveries of new products."

Highlights for the Three- and Six-Month Periods Ended July 31, 2014

Revenues increased by $159.1 million, or 25.6%, to $780.0 million for the three-month period ended July 31, 2014, compared with $620.9 million for the corresponding period ended July 31, 2013. The revenue increase was mainly due to higher wholesale in Seasonal Products and in Year-Round Products along with an increased wholesale of their related parts, accessories and clothing (PAC). The increase was partially offset by increased sales program costs relating to Year-Round Products. The increase in revenues included a favourable foreign exchange rate variation of $35 million mainly related to the strengthening of the Euro and the U.S. dollar against the Canadian dollar.

Revenues increased by $113.4 million, or 8.0%, to $1,538.6 million for the six-month period ended July 31, 2014, compared with $1,425.2 million for the corresponding period ended July 31, 2013. The revenue increase was mainly due to higher wholesale in Seasonal Products and their related PAC, partially offset by lower wholesales and higher sales program costs in Year-Round Products. The revenue increase included a favourable foreign exchange rate variation of $84 million mainly related to the strengthening of the U.S. dollar and the Euro against the Canadian dollar.

NET INCOME DATA



Three-month periods ended


Six-month periods ended

(in millions of Canadian dollars)

July 31,
2014

July 31,
2013


July 31,
2014

July 31,
2013







Revenues by category







Seasonal Products

$ 259.8

$ 140.6


$ 444.4

$ 347.3


Year-Round Products

297.4

278.1


662.8

682.8


Propulsion Systems

84.4

85.9


181.7

178.8


PAC

138.4

116.3


249.7

216.3

Total Revenues

780.0

620.9


1,538.6

1,425.2

Cost of sales

637.1

478.3


1,222.3

1,064.6

Gross profit

142.9

142.6


316.3

360.6


As a percentage of revenues

18.3%

23.0%


20.6%

25.3%

Operating expenses







Selling and marketing

66.0

53.2


133.3

118.5


Research and development

36.3

30.5


77.9

67.8


General and administrative

35.2

33.7


72.0

68.7


Other operating expenses (income)

1.8

(10.6)


1.1

(16.3)

Total operating expenses

139.3

106.8


284.3

238.7

Operating income

3.6

35.8


32.0

121.9


Net financing costs

14.3

15.0


27.9

31.9


Foreign exchange (gain) loss on long-term debt

(5.1)

24.3


(17.4)

32.6


Increase in fair value of common shares


19.6

Income (loss) before income taxes

(5.6)

(3.5)


21.5

37.8

Income taxes expense (recovery)

(2.0)

4.4


(2.9)

20.0

Net income (loss)

$ (3.6)

$ (7.9)


$ 24.4

$ 17.8


Attributable to shareholders

$ (3.5)

$ (7.8)


$ 24.5

$ 17.9


Attributable to non-controlling interest

(0.1)

(0.1)


(0.1)

(0.1)







Normalized EBITDA [1]

$ 31.3

$ 47.4


$ 87.9

$ 155.2

Normalized net income (loss) [1]

(8.8)

7.6


7.8

61.0

Normalized earnings (loss) per share – basic [2]

(0.07)

0.07


0.07

0.57

Normalized earnings (loss) per share – diluted [2]

(0.07)

0.07


0.07

0.57

[1] For a reconciliation of net income to EBITDA, Normalized EBITDA and Normalized net income (loss), see the Reconciliation Tables included in the MD&A.


[2] Normalized EBITDA and Normalized net income (loss) are non-IFRS measures that the Company uses to assess its operating performance. Normalized EBITDA is defined as net income before financing costs, financing income, income taxes expense (recovery), depreciation expense and normalized elements. Normalized net income (loss) is defined as net income before normalized elements adjusted to reflect the tax effect on these elements. See "Non-IFRS Measures" section.


As per IFRS requirements, the weighted average number of shares outstanding for the three- and six-month periods ended July 31, 2013 has been calculated taking into account the consolidation of the outstanding shares on 3.765 to one basis that occurred on May 29, 2013, as part of the initial public offering of the Company's subordinate voting shares (the "IPO").

 

QUARTERLY REVIEW BY CATEGORIES

Seasonal Products

Revenues from Seasonal Products increased by $119.2 million, or 84.8%, to $259.8 million for the three-month period ended July 31, 2014, compared with $140.6 million for the corresponding period ended July 31, 2013. The increase resulted primarily from an increase of volume of PWC sold driven by the new entry-level Sea-Doo Spark model and an increase in volume of snowmobiles sold for the upcoming season. The increase in revenues included a favourable foreign exchange rate variation of $10 million.

Year-Round Products

Revenues from Year-Round Products increased by $19.3 million, or 6.9%, to $297.4 million for the three-month period ended July 31, 2014, compared with $278.1 million for the corresponding period ended July 31, 2013. The increase resulted primarily from higher shipments of Can-Am side-by-side vehicles reflecting the industry growth in North America and to a lower extent from Can-Am all-terrain vehicles. The increase was mitigated by higher sales program costs. The increase in revenues included a favourable foreign exchange rate variation of $13 million.

Propulsion Systems

Revenues from Propulsion Systems decreased by $1.5 million, or 1.7%, to $84.4 million for the three-month period ended July 31, 2014, compared with $85.9 million for the corresponding period ended July 31, 2013. The decrease in revenues was mainly attributable to a lower volume of outboard engines sold, partially offset by a favourable mix. The decrease included a favourable foreign exchange rate variation of $5 million.

PAC (Parts, Accessories, Clothing and other services)

Revenues from PAC increased by $22.1 million, or 19.0%, to $138.4 million for the three-month period ended July 31, 2014, compared with $116.3 million for the corresponding period ended July 31, 2013. The increase was mainly attributable to a higher volume of Seasonal Products' PAC sold due to the good performance of the Sea-Doo Spark model and higher deliveries of snowmobiles' PAC for the upcoming season. The increase included a favourable foreign exchange rate variation of $7 million.

Gross profit remained stable to $142.9 million for the three-month period ended July 31, 2014, compared with $142.6 million for the corresponding period ended July 31, 2013. Gross profit margin percentage decreased by 470 basis points to 18.3% from 23.0% for the three-month period ended July 31, 2013. The decrease in gross profit margin percentage was primarily due to higher sales programs costs in Year-Round Products, absorption of overhead costs stemming from the reduction of finished goods inventory, unfavourable foreign exchange rate variations and expenses related to the production ramp-up at the Querétaro, Mexico facility and to the transfer of PAC distribution to third-party logistics providers. The foreign exchange rate negatively impacted the gross profit by $4 million.

Operating expenses increased by $32.5 million, or 30.4%, to $139.3 million for the three-month period ended July 31, 2014, compared with $106.8 million for the three-month period ended July 31, 2013. This increase was driven by increased marketing expenses in relation with the Sea-Doo Spark model and the launch of the new Evinrude E-TEC G2 outboard engine and by increased research and development costs. The increase included an unfavourable foreign exchange impact of $6 million.

Normalized net loss of $8.8 million, a decrease of $16.4 million, which resulted in normalized diluted loss per share of $0.07, a decrease of $0.14 per share. The decrease in normalized net income was primarily due to increased sales program costs, costs related to the production ramp-up at the Querétaro facility and to the transfer of PAC distribution and increased marketing costs, offset by an increase of products sold. The decrease included an unfavourable foreign exchange rate variation of $10 million.

Fiscal Year 2015 Guidance

BRP's financial guidance targets as presented on June 12, 2014 are revised as follows (no change unless otherwise noted):



Financial Metric

FY15 Guidance vs FY14 Results

Revenues



Seasonal Products

Up 12% to 16%  (Increased from Up 9% to 13%)


Year-Round Products

Up 6% to 10%    (Lowered from Up 9% to 13%)


Propulsion Systems

Up 7% to 10%


PAC

Up 10% to 15%

Total Company Revenues

Up 9% to 13%

Normalized EBITDA

Up 11% to 15%

Effective Tax Rate[1]

26% - 27%

Normalized Net Income[2]

Up 10% to 17%

Normalized Earnings per Share – Diluted

$1.55 - $1.65 (Up 10% to 17%)[3]

Capital Expenditures

$165M to $175M

[1] Effective tax rate based on Normalized Earnings before Income Tax.

[2] Assuming $116M of depreciation expense.

[3] The 10% to 17% increase assumes a constant weighted average number of diluted shares of 118.9 million for both Fiscal Year 2015 and Fiscal Year 2014.

 

The above targets are based on a number of economic and market assumptions the Company has made in preparing its Fiscal Year 2015 financial guidance, including assumptions regarding the performance of the economies in which it operates, foreign exchange currency fluctuations, market competition and tax laws applicable to its operations. The Company cautions that the assumptions used to prepare the forecasts for Fiscal Year 2015, although reasonable at the time they were made, may prove to be incorrect or inaccurate. In addition, the above forecasts do not reflect the potential impact of any non-recurring or other special items or of any new material commercial agreements, dispositions, mergers, acquisitions, other business combinations or other transactions that may be announced or that may occur after September 11, 2014. The financial impact of such transactions and non-recurring and other special items can be complex and depends on the facts particular to each of them. We therefore cannot describe the expected impact in a meaningful way or in the same way we present known risks affecting our business. Accordingly, our actual results could differ materially from our expectations as set forth in this news release. The outlook provided constitutes forward-looking statements within the meaning of applicable securities laws and should be read in conjunction with the "Caution Concerning Forward-Looking Statements" section.

Conference Call and Webcast Presentation

Today at 9 a.m. (EDT), BRP Inc. will host a conference call and webcast to discuss BRP's FY2015 second-quarter results released this morning. The call will be hosted by José Boisjoli, president and CEO and Sébastien Martel, CFO. A slide presentation and link to the audio webcast will be posted at http://investors.brp.com in the Event Calendar section.

To listen to the second-quarter conference call by phone, for the English integral version (event number 4197660), please dial 1-514-861-1681 or 1-800-766-6630 (toll-free in North America), or 00 800 2787-2090 for overseas callers. For the French version (event number 4197659), please dial 1-514-392-1478 or 1-866-542-4146 (toll-free in North America), or 00 800 7701 8886 for overseas calls.

A replay of the conference call will be available two hours after the call for 30 days following the original broadcast.

To listen to an instant replay of the call, please dial 514-861-2272 or 1-800-408-3053. For the English integral version, please enter the pass code 2533401. For the French translation, enter 6927817. The instant replay will be available 30 days following the call.

About BRP
BRP (TSX: DOO) is a global leader in the design, development, manufacturing, distribution and marketing of powersports vehicles and propulsion systems. Its portfolio includes Ski-Doo and Lynx snowmobiles, Sea-Doo watercraft, Can-Am all-terrain and side-by-side vehicles, Can-Am Spyder roadsters, Evinrude and Rotax marine propulsion systems as well as Rotax engines for karts, motorcycles and recreational aircraft. BRP supports its line of products with a dedicated parts, accessories and clothing business. With annual sales of over CA$3 billion from 105 countries, the Company employs approximately 7,100 people worldwide.

www.brp.com
@BRPNews

Ski-Doo, Lynx, Sea-Doo, Evinrude, Rotax, Can-Am, Spyder, E-TEC, G2, Spark and the BRP logo are trademarks of Bombardier Recreational Products Inc. or its affiliates.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

Certain information included in this release, including, but not limited to, statements relating to our Fiscal Year 2015 financial outlook (including revenues, gross profit margin, operating expenses, Normalized EBITDA, Effective Tax Rate, Normalized net income and Normalized earnings per share), and other statements that are not historical facts, are "forward-looking statements" within the meaning of Canadian securities laws. Forward-looking statements are typically identified by the use of terminology such as "may", "will", "would", "should", "could", "expects", "forecasts", "plans", "intends", "trends", "indications", "anticipates", "believes", "estimates", "outlook", "predicts", "projects", "likely" or "potential" or the negative or other variations of these words or other comparable words or phrases. Forward looking statements, by their very nature, involve inherent risks and uncertainties and are based on several assumptions, both general and specific. BRP cautions that its assumptions may not materialize and that current economic conditions render such assumptions, although reasonable at the time they were made, subject to greater uncertainty. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results or performance of the Company or the power sports industry to be materially different from the outlook or any future results or performance implied by such statements. Key assumptions used in determining forward-looking information are set forth below.

 

Key Assumptions

The Company made a number of economic and market assumptions in preparing its 2015 financial guidance, including assumptions regarding the performance of the economies in which it operates, market competition, tax laws applicable to its operations and foreign exchange currency fluctuation. In addition, many factors could cause the Company's actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the following: impact of adverse economic conditions on consumer spending; decline in social acceptability of the Company's products; fluctuations in foreign currency exchange rates; high levels of indebtedness; unavailability of additional capital; unfavourable weather conditions; seasonal sales fluctuations; the Company's ability to comply with product safety, health, environmental and noise pollution laws; dependence on dealers, distributors, suppliers, financing sources and other strategic partners who may be sensitive to economic conditions; large fixed cost base; inability of dealers and distributors to secure adequate access to capital; supply problems, termination or interruption of supply arrangements or increases in the cost of materials; restrictive covenants in the Company's financing and other material agreements; competition in product lines; loss of members of management team or employees who possess specialized market knowledge and technical skills; inability to maintain and enhance reputation and brands; adverse determination in any significant product liability claim against the Company; significant product repair and/or replacement due to product warranty claims or product recalls; reliance on a network of independent dealers and distributors to manage the retail distribution of products; dependence on customer relationships for the sale of original equipment manufacturer products; unsuccessful management of inventory; risks associated with international operations; inability to enhance existing products and develop and market new products; protection of intellectual property; failure of information technology systems; declining prices for used versions of products and oversupply by competitors; unsuccessful execution of manufacturing strategy; changes in tax laws and unanticipated tax liabilities; higher fuel costs; deterioration in relationships with employees; pension plan liabilities; natural disasters; failure to carry proper insurance coverage; public company expenses; conduct of business through subsidiaries; and significant influence by our principal shareholders holding multiple voting shares.

 

BRP undertakes no obligation to update or revise forward-looking statements to reflect future events, changes in circumstances, or changes in beliefs, unless required by applicable Canadian securities laws. In the event that BRP does update any forward-looking statement, no inference should be made that BRP will make additional updates with respect to that statement, related matters, or any other forward-looking statement.

 

Caution regarding non-IFRS measures

This press release makes reference to financial results in accordance with IFRS, and also makes reference to certain non-IFRS measures. Normalized EBITDA, normalized net income (loss), normalized basic earnings (loss) per share and normalized diluted earnings (loss) per share are measures that are not defined by the IFRS. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the Company's results of operations from the management's perspective. BRP believes non-IFRS measures are important supplemental measures of operating performance because they eliminate items that have less bearing on the Company's operating performance and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS measures. Management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets and assess the Company's ability to meet its future debt service, capital expenditure and working capital requirements.

 

SOURCE: BRP

For further information: Pascal Bossé, Corporate Director, Communications, Public Affairs and Investor Relations, Tel: +1.450.532.6466, pascal.bosse@brp.com

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