Valcourt, Québec, June 9, 2016 – BRP Inc. (TSX:DOO) today reported its financial results for the three-month period ended April 30, 2016. All financial information is in Canadian dollars unless otherwise noted. The complete financial results are available at www.sedar.com.
“Our financial results for the first quarter were delivered in line with our expectations and are consistent with our outlook,” said José Boisjoli, president and CEO. “We had solid retail momentum worldwide in the first quarter of fiscal year 2017, where we significantly outpaced the industry. We also recorded the highest North American market share in Ski-Doo snowmobile retail sales during the 2016 season ended in March.”
In closing, Boisjoli added: “The BRP team is aligned in its focus on our strategic priorities of growth, agility and Lean enterprise, our R&D projects are on track and we have exciting product introductions coming up in the next few months. I consider that we are currently in an excellent position and confident that we will achieve our guidance.”
Highlights for the Three-Month Period Ended April 30, 2016
Revenues increased by $31.8 million, or 3.5%, to $929.9 million for the three-month period ended April 30, 2016, compared with $898.1 million for the corresponding period ended April 30, 2015. The revenue increase was attributable to a favourable foreign exchange rate variation of $40 million mainly due to the strengthening of the U.S. dollar and the euro against the Canadian dollar.
Revenues from Year-Round Products increased by $2.1 million, or 0.5%, to $400.2 million for the three-month period ended April 30, 2016, compared with $398.1 million for the corresponding period ended April 30, 2015. The increase was primarily attributable to a higher wholesale in ATV, a favourable product mix in roadsters and a favourable foreign exchange rate variation of $16 million. The increase was mostly offset by lower wholesale in roadsters.
Revenues from Seasonal Products increased by $15.6 million, or 5.8%, to $286.8 million for the three-month period ended April 30, 2016, compared with $271.2 million for the corresponding period ended April 30, 2015. The increase resulted primarily from a higher volume and a favourable mix of PWC sold and from a favourable foreign exchange rate variation of $12 million. The increase was partially offset by additional sales program costs for snowmobile in North America as a result of poor snow conditions and an economic slowdown experienced in Western Canada.
Revenues from Propulsion Systems increased by $8.6 million, or 8.4%, to $111.1 million for the three-month period ended April 30, 2016, compared with $102.5 million for the corresponding period ended April 30, 2015. The increase in revenues was primarily attributable to a favourable foreign exchange rate variation of $6 million and to a higher volume of aircraft engines sold.
PAC (Parts, Accessories, Clothing and other services)
Revenues from PAC increased by $5.5 million, or 4.4%, to $131.8 million for the three-month period ended April 30, 2016, compared with $126.3 million for the corresponding period ended April 30, 2015. The increase was mainly attributable to a favourable foreign exchange rate variation of $6 million and a higher volume of ATV and SSV PAC sold. The increase was partially offset by a lower volume of snowmobile PAC sold resulting from poor snow conditions.
Gross profit decreased by $18.8 million, or 8.8%, to $194.1 million for the three-month period ended April 30, 2016, compared with $212.9 million for the corresponding period ended April 30, 2015. The gross profit decrease includes an unfavourable foreign exchange rate variation of $11 million. Gross profit margin percentage decreased by 280 basis points to 20.9% from 23.7% for the three-month period ended April 30, 2015. The decrease in gross profit margin percentage was primarily due to higher sales programs in snowmobiles and unfavourable foreign exchange variation, partially offset by favourable product mix in PWC and roadsters and general price increases.
Operating expenses increased by $38.5 million, or 25.8%, to $187.6 million for the three-month period ended April 30, 2016, compared with $149.1 million for the three-month period ended April 30, 2015. This increase was mainly attributable to higher general and administrative costs due to an unfavourable litigation verdict recorded this quarter and, to a lesser extent, higher research and development costs. The increase includes an unfavourable foreign exchange rate variation of $5 million.
The Company is involved in multiple lawsuits with one of its competitors whereby each party is claiming damages for the alleged infringement of some of its patents. On June 1, 2016, a verdict was rendered in one of those lawsuits against the Company for an amount of US$15.5 million (CA$19.5 million) in compensatory damages. As the verdict concluded to a willful infringement by the Company, the trial judge will be required to make the determination on potential punitive damages, which could lead to a maximum total amount in damages of US$46.5 million (CA$58.4 million). For the three-month period ended April 30, 2016, the Company recorded as an expense the preliminary compensatory damages of $19.5 million. Management believes that the verdict is unfounded and unsupported by either law or evidence and intends to file an appeal.
Normalized net income stood at $4.8 million, a decrease of $32.4 million, which resulted in a normalized diluted earnings per share of $0.04, a decrease of $0.27 per share. The decrease was primarily due to lower gross profit, mainly explained by higher sales programs, and higher operating expenses.
 See “Non-IFRS Measures” section.
Fiscal Year 2017 Guidance
BRP’s financial guidance targets as presented on March 18, 2016 are adjusted upward as follows:
 See “Non-IFRS Measures” section.
 Effective tax rate based on Normalized Earnings before Normalized Income Tax.
 Assuming a $145M depreciation expense (down from $150M) compared to $126M in FY16, $62M Net Financing Costs and 114.7M shares (down from 115.4M shares).
The above targets are based on a number of economic and market assumptions the Company has made in preparing its Fiscal Year 2017 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 2017, 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 June 8, 2016. 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 FY2017 first-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 in the Event Calendar section.
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 800-408-3053, and enter the pass code 9551372.
Ski-Doo, Lynx, Sea-Doo, Evinrude, Rotax, Can-Am, Spyder, Defender and the BRP logo are trademarks of Bombardier Recreational Products Inc. or its affiliates. All other trademarks are the property of their respective owners.