BRP Reports Third-Quarter Results


Valcourt, Quebec-based BRP released its financial results for the three- and nine-month periods ended as of October 31, 2014.

"Building on the second-quarter momentum in Seasonal Products, third-quarter revenues grew by six percent and normalized net income increased by 22 percent compared to the same period last year,' said José Boisjoli, BRP President and CEO. "We started shipping new products, including the Can-Am Maverick X ds side-by-side model, during the last few weeks and with dealer inventories at healthy levels in North America, we expect a strong fourth quarter for Year-Round Products.'

Earlier this year, we identified a currency risk in Russia and the situation has deteriorated significantly with a steep decline in the value of the ruble since the end of October. The outcome is higher costs for imported products and this affects our distributor's sales to consumers. With six weeks remaining before the end of the fiscal year, we are adjusting our guidance to reflect the potential financial impact. I am nevertheless pleased with our results because the other main drivers of our earlier guidance are largely unchanged and this speaks volumes about the quality of our execution.'

Highlights for the Three- and Nine-Month Periods Ended October 31, 2014
Revenues increased by $52.0 million, or 6.0 percent, to $918.0 million for the three-month period ended October 31, 2014, compared with $866.0 million for the corresponding period ended October 31, 2013. The revenue increase was mainly due to higher wholesale in snowmobiles along with an increased wholesale of their related PAC. The increase was partially offset by lower wholesale in year-round products. The increase in revenues includes a favourable foreign exchange rate variation of $29 million mainly related to the strengthening of the US dollar and the euro against the Canadian dollar.

Revenues increased by $165.4 million, or 7.2 percent, to $2,456.6 million for the nine-month period ended October 31, 2014, compared with $2,291.2 million for the corresponding period ended October 31, 2013. The revenue increase was mainly due to higher wholesale in seasonal products and their related PAC, partially offset by lower wholesale and higher sales program costs in year-round products. The revenue increase includes a favourable foreign exchange rate variation of $113 million again mainly related to the strengthening of the US dollar and the euro against the Canadian dollar.

Quarterly Review by Categories

Seasonal Products
Revenues from seasonal products increased by $70.4 million, or 18.4 percent, to $452.9 million for the three-month period ended October 31, 2014, compared with $382.5 million for the corresponding period ended October 31, 2013. The increase resulted primarily from an increase in volume of snowmobiles sold for the upcoming season. The increase in revenues includes a favourable foreign exchange rate variation of $13 million.

Year-Round Products
Revenues from year-round products decreased by $22.1 million, or 8.9 percent, to $227.5 million for the three-month period ended October 31, 2014, compared with $249.6 million for the corresponding period ended October 31, 2013. The decrease resulted primarily from lower shipments of Can-Am Maverick models. The decrease in revenues includes a favourable foreign exchange rate variation of $9 million.

Propulsion Systems
Revenues from Propulsion Systems decreased by $6.3 million, or 7.0 percent, to $83.3 million for the three-month period ended October 31, 2014, compared with $89.6 million for the corresponding period ended October 31, 2013. The decrease in revenues was mainly attributable to a lower volume of outboard engines sold. The decrease includes a favourable foreign exchange rate variation of $3 million.

PAC (Parts, Accessories, Clothing and other services)
Revenues from PAC increased by $10.0 million, or 6.9 percent, to $154.3 million for the three-month period ended October 31, 2014, compared with $144.3 million for the corresponding period ended October 31, 2013. The increase is mainly attributable to a higher volume of Seasonal Products' PAC sold for the upcoming snowmobile season. The increase includes a favourable foreign exchange rate variation of $4 million.

Gross profit increased by $15.7 million, or 7.0 percent, to $239.6 million for the three-month period ended October 31, 2014, compared with $223.9 million for the corresponding period ended October 31, 2013. The foreign exchange rate negatively impacted gross profit by $1 million. Gross profit margin percentage increased by 20 basis points to 26.1 percent from 25.9 percent for the three-month period ended October 31, 2013. The increase in gross profit margin percentage was primarily due to a higher volume of snowmobiles sold, partially offset by unfavourable foreign exchange rate variations.

Operating expenses increased by $12.0 million, or 9.3 percent, to $140.9 million for the three-month period ended October 31, 2014, compared with $128.9 million for the three-month period ended October 31, 2013. This increase was driven by an unfavourable foreign exchange impact of $13 million mainly on working capital.

Normalized net income reached $71.9 million, an increase of $12.9 million, which resulted in a normalized diluted earnings per share of $0.60, an increase of $0.10 per share. The increase was primarily due to higher gross profit from a greater volume of snowmobiles sold partially offset by increased foreign exchange loss mainly on foreign-denominated working capital elements. The unfavourable foreign exchange rate variation amounted to $14 million.

BRP's portfolio includes Sea-Doo watercraft, Ski-Doo and Lynx snowmobiles, 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. The company supports its line of products with a dedicated parts, accessories and clothing business. With annual sales of over CA$3 billion from 105 countries, BRP employs approximately 7,100 people worldwide.