40-F
BRP Inc. (DOO)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 40-F
| REGISTRATION STATEMENT<br> PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934 |
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OR
| ANNUAL REPORT PURSUANT<br> TO SECTION 13(a) OR | |
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| 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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| For the fiscal year ended <br>January 31, 2024 | Commission File Number: <br>001-38648 |
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BRP Inc.
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant’s name into English (if applicable))
Quebec, Canada
(Province or other jurisdiction of incorporation or organization)
3799
(Primary Standard Industrial Classification Code Number (if applicable))
N/A
(I.R.S. Employer Identification Number (if applicable))
726 Saint-Joseph Street
Valcourt, Quebec
Canada, J0E 2L0
(450) 532-6154
(Address and telephone number of Registrant’s principal executive offices)
BRP US Inc.
10101 Science Drive
Sturtevant, WI 53177
(262) 884-5000
(Name, address (including zip code) and telephone number
(including area code) of agent for service in the United States)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
| Title of each class | Trading<br><br>Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Subordinate Voting Shares | DOOO | The Nasdaq Stock Market LLC |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
(Title of Class)
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
For annual reports, indicate by check mark the information filed with this Form:
[ x ] Annual information form [
x ] Audited annual financial statements
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
34,808,553 Subordinate Voting Shares and 40,147,916 Multiple Voting Shares
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
[ x ] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
[ x ] Yes [ ] No
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 12b-2 of the Exchange Act.
Emerging growth company [ ]
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [ x ]
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. [ ]
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). [ ]
| Auditor Firm Id: 1208 | Auditor Name: Deloitte LLP | Auditor Location: Montreal, Canada |
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PRINCIPAL DOCUMENTS
The following documents have been filed as part of this Annual Report on Form 40-F:
A. Annual Information Form
The Registrant’s Annual Information Form for the year ended January 31, 2024 is attached as Exhibit 99.1 to this Annual Report on Form 40-F and is incorporated by reference herein.
B. Audited Annual Financial Statements
The Registrant’s audited annual consolidated financial statements for the year ended January 31, 2024, including the reports of the independent registered public accounting firm with respect thereto, are attached as Exhibit 99.2 to this Annual Report on Form 40-F and are incorporated by reference herein.
C. Management’s Discussion and Analysis
The Registrant’s Management’s Discussion and Analysis for the year ended January 31, 2024 is attached as Exhibit 99.3 to this Annual Report on Form 40-F and is incorporated by reference herein.
CONTROLS AND PROCEDURES
The Company’s President and Chief Executive Officer and the Chief Financial Officer are responsible for establishing and maintaining the Company’s disclosure controls and procedures as well as its internal control over financial reporting, as those terms are defined in National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings of the Canadian securities regulatory authorities, Rule 13a-15(e) and Rule 15d-15(e) under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act.
Disclosure controls and procedures
The President and Chief Executive Officer and the Chief Financial Officer have designed, or caused to be designed under their supervision, disclosure controls and procedures in order to provide reasonable assurance that:
| • | material information relating to the Company has been made known to them; and |
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| • | information required to be disclosed in the Company’s filings is recorded, processed, summarized and reported within the time periods specified in securities legislation. |
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An evaluation of the design and effectiveness of the Company’s disclosure controls and procedures was carried out under the supervision of the President and Chief Executive Officer and the Chief Financial Officer. Based on this evaluation, the President and Chief Executive Officer and the Chief Financial Officer concluded, as of January 31, 2024, that the Company’s disclosure controls and procedures were effective.
Management’s Report on Internal Control over Financial Reporting
The President and Chief Executive Officer and the Chief Financial Officer have designed, or caused to be designed under their supervision, such internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Management’s projections of any evaluation of the effectiveness of internal control over financial reporting as to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
An evaluation of the design and effectiveness of the Company’s internal controls over financial reporting was carried out under the supervision of the President and Chief Executive Officer and the Chief Financial Officer. In making this evaluation, the President and Chief Executive Officer and the Chief Financial Officer used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission Internal Control – Integrated Framework (2013). Based on this evaluation, the President and Chief Executive Officer and the Chief Financial Officer concluded, as of January 31, 2024, that the Company’s internal controls over financial reporting were effective.
Our internal control over financial reporting as of January 31, 2024 has been audited by Deloitte LLP, independent registered public accounting firm, who also audited our consolidated financial statements for the year ended January 31, 2024. Deloitte LLP issued an unqualified opinion, as stated in their report, on the effectiveness of our internal control over financial reporting as of January 31, 2024.
Changes in internal control over financial reporting
There were no changes in the Company’s internal control over financial reporting during the three- and twelve-month periods ended January 31, 2024, that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.
Attestation report of registered public accounting firm
The attestation report of Deloitte LLP on management’s internal control over financial reporting is filed in Exhibit 99.2 to this Annual Report on Form 40-F, and is incorporated herein by reference.
NOTICES PURSUANT TO REGULATION BTR
There were no notices required by Rule 104 of Regulation BTR that the Registrant sent during the year ended January 31, 2024 concerning any equity security subject to a blackout period under Rule 101 of Regulation BTR.
AUDIT COMMITTEE FINANCIAL EXPERT
The Registrant’s board of directors (the “Board of Directors”) has determined that it has at least one audit committee financial expert (as such term is defined in item 8(a) of General Instruction B to Form 40-F) serving on its audit committee (the “Audit Committee”). Michael Ross has been determined by the Board of Directors to be such audit committee financial expert and is independent (as such term is defined by the Nasdaq Stock Market’s corporate governance standards applicable to the Registrant).
Mr. Ross is a corporate director. He was Chief Financial Officer of Sesami Cash Management Technologies Corporation (“Sesami”) from 2022 to 2023. In this role, he was responsible for all financial activities, corporate development, and strategic planning. Prior to joining Sesami, Mr. Ross was Chief Financial Officer of Dollarama Inc. for over a decade. Prior to that, Mr. Ross was CFO of Sanimax Industries, a rendering services company, and spent over 20 years in senior financial roles in the television and broadcasting industry. He began his career as an auditor with Ernst & Young. Mr. Ross is a member of the board of directors of Pixcom Inc., the Fondation CHU Saint Justine and FEI – Quebec Chapter. He was previously a member of the board of directors of Investissement Québec, la Fondation Marie-Vincent, Fondation Dr Clown and Muscular Dystrophy Canada. Mr. Ross holds a bachelor’s degree in commerce and a graduate diploma in accounting from Concordia University. He received the Fellow of the Order distinction (FCPA) in 2012.
The SEC has indicated that the designation of Michael Ross as an audit committee financial expert does not make him an “expert” for any purpose, impose on him any duties, obligations or liability that are greater than the duties, obligations or liability imposed on him as a member of the Audit Committee and the Board of Directors in absence of such designation, or affect the duties, obligations or liability of any other member of the Audit Committee or Board of Directors.
CODE OF ETHICS
The Registrant has adopted a Code of Ethics that applies to all directors, officers and employees of the Registrant and its subsidiaries (collectively, “covered persons”). A copy of the Code of Ethics can be obtained, free of charge, on the Registrant’s website (www.brp.com) or by contacting the Registrant at (450) 532-6154.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets out the fees billed to the Registrant by Deloitte LLP for professional services rendered for the fiscal period ended January 31, 2024 and January 31, 2023. During this period, Deloitte LLP was the Registrant’s only external auditor.
| (in Canadian dollars) | Year ended<br> January 31, 2024 | Year ended<br> January 31, 2023 | ||
|---|---|---|---|---|
| Audit Fees^(1)^ | $ | 5,515,701 | $ | 4,541,500 |
| Audit-Related Fees^(2)^ | 1,165,189 | 772,597 | ||
| Tax Fees^(3)^ | 124,674 | 126,429 | ||
| All Other Fees^(4)^ | 1,196 | - | ||
| Total Fees Paid | $ | 6,806,760 | $ | 5,440,526 |
Notes:
| 1. | “Audit Fees” include fees necessary to perform the annual audit or reviews of the consolidated financial statements. |
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| 2. | “Audit-Related Fees” include fees for assurance and related services by the independent auditor that are reasonably related to the performance of statutory audit or review of the Company’s financial statements other than those included in “Audit Fees,” such as consultation on accounting and reporting matters. |
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| 3. | “Tax Fees” include fees for all tax services other than those included in “Audit Fees” and “Audit-Related Fees.” This category includes fees for tax compliance, tax advice and tax planning. |
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| 4. | “Other Fees” include fees for products and services provided by the independent auditor other than those included above, including consulting services. |
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The Registrant’s Audit Committee is responsible for pre-approval of all audit services and permitted non-audit services provided to the Registrant or its subsidiaries by Deloitte LLP. The Audit Committee has delegated to the Chair of the Audit Committee, who is independent, the authority to act on behalf of the Audit Committee with respect to the pre-approval of all audit and permitted non-audit services provided by its external auditors from time to time. Any approvals by the Chair are reported to the full Audit Committee at its next meeting. All of the services described in footnotes 2, 3 and 4 under “Principal Accountant Fees and Services” above were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
IDENTIFICATION OF THE AUDIT COMMITTEE
The Registrant has a separately designated standing Audit Committee established in accordance with section 3(a)(58)(A) of the Exchange Act. The members of the Audit Committee are Ernesto M. Hernández, Katherine Kountze, Estelle Métayer, Nicholas Nomicos and Michael Ross.
CORPORATE GOVERNANCE
The Registrant is a “foreign private issuer” as defined in Rule 3b-4 under the Exchange Act and its Subordinate Voting Shares are listed on the Toronto Stock Exchange (“TSX”) and The Nasdaq Global Select Market (“Nasdaq”). Nasdaq Listing Rule 5615(a)(3) permits a foreign private issuer to follow its home country practices in lieu of certain requirements in the Nasdaq Listing Rules. The following is a summary of the significant ways in which the Registrant’s corporate governance practices differ from those required to be followed by U.S. domestic issuers under Nasdaq’s corporate governance standards. In addition, the Registrant is currently a “controlled company” as defined in the Nasdaq Listing Rules. Upon ceasing to be a “controlled company”, as a foreign private issuer, the Registrant intends to continue to follow Canadian corporate governance practices and TSX rules in lieu of the corporate governance requirements of Nasdaq. Except as described below, the Registrant is in compliance with the Nasdaq corporate governance standards in all significant respects.
| • | Quorum Requirements. Rule 5620(c) of the Nasdaq Listing Rules requires that the minimum quorum requirement for a meeting of shareholders is 33.33% of the outstanding shares of its common voting stock. In addition, Rule 5620(c) requires that an issuer listed on Nasdaq state its quorum requirement in its by-laws. The Registrant follows the requirements of the Canada Business Corporations Act with respect to quorum requirements. The quorum requirement for a meeting of shareholders is set forth in the Registrant’s by-laws, which require not less than 25% of the issued and outstanding shares entitled to vote at the meeting to be present in person or represented by proxy and at least two persons entitled to vote at the meeting actually present. |
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| • | Shareholder Approval. Sections 5635(a) through (d) of the Nasdaq Listing Rules require an issuer to obtain shareholder approval prior to certain issuances of securities, including (i) the acquisition of the stock or assets of another company; (ii) equity-based compensation of officers, directors, employees or consultants; (iii) a change of control; and (iv) private placements. The Registrant does not follow this rule. Instead, the Registrant complies with applicable TSX rules. Such rules require issuers to obtain shareholder approval prior to a distribution of common shares (other than in respect of public offerings) that involve the sale of more than 25% of the issuer’s outstanding common shares prior to the transaction. In addition, under TSX rules (1) the creation of, or certain material amendments to, equity compensation plans require shareholder approval and (2) the sale of common shares at a discount to officers and directors requires shareholder approval in specified circumstances. |
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| • | Compensation Committee. The Registrant follows applicable Canadian laws with respect to compensation consultants, legal counsel and other advisers to our Human Resources & Compensation Committee. Applicable Canadian securities legislation does not specifically require consideration of potential conflicts of interest on the part of compensation consultants, legal counsel and other advisers to the compensation committee, but best practices dictate disclosure of any such conflicts in the Registrant’s management information circular. |
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| • | Independent Directors. Nasdaq Listing Rule 5605(b) requires that a majority of a listed issuer’s board of directors be independent directors as defined in Nasdaq Listing Rule 5605(a)(2) for companies that are not controlled. Applicable TSX rules require only that listed issuers have at least two independent directors. Although the Registrant is a “controlled company” under Nasdaq rules, we follow applicable TSX requirements with respect to director independence. |
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UNDERTAKING AND CONSENT TO SERVICE OF PROCESS
A. Undertaking
Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to: the securities registered pursuant to Form 40-F, the securities in relation to which the obligation to file an annual report on Form 40-F arises, or transactions in said securities.
B. Consent to Service of Process
The Registrant has previously filed with the SEC an Appointment of Agent for Service of Process and Undertaking on Form F-X in connection with its Subordinate Voting Shares.
SIGNATURE
Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereto duly authorized.
| BRP INC. | ||
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| Date: March 28, 2024 | By: | /s/ Sébastien Martel |
| Name | Sébastien Martel | |
| Title: | Chief Financial Officer |
EXHIBIT INDEX
EX-97
Exhibit 97
CLAWBACK POLICY
(the “Policy”)
PURPOSE
This Policy provides for BRP Inc.’s (“BRP” or the “Company”) recoupment of certain incentive-based compensation paid to Covered Executives in the event that (A) the Company is required to prepare a Financial Restatement; or (B) a Covered Executive engaged in a Misconduct Event.
Administration and enforcement of this Policy are delegated by the Board of Directors (the “Board”) to the Nominating, Governance and Social Responsibility Committee (the “Committee”). The Board and the Committee are committed to fulfilling their responsibility for the governance of the Company and the enhancement of shareholder value, and believe that this Policy is in the best interest of the Company.
SCOPE
This Policy applies to each current or former executive officer of the Company, including the Company’s Chief Executive Officer, Chief Financial Officer, corporate controller, and each other current or former employee of the Company at the level of vice president or above (the “Covered Executives” and each, a “Covered Executive”).
“Covered Compensation” means any cash-based and equity-based incentive compensation, bonuses, and awards granted, paid, earned or vested, which is tied in whole or in part upon the attainment of any financial reporting measure to Covered Executives. For the avoidance of doubt, for the purposes of this Policy, Covered Compensation shall also include any payout from BRP’s short-term incentive plan (“STIP”) and long-term incentive plan (“LTIP”).
The Policy applies to any Covered Compensation received by an employee who served as a Covered Executive at any time during the three-year period preceding the applicable triggering event:
| (a) | in the event of recoupment for a Financial Restatement, the Required Financial Restatement Date as well as any<br>transition period that results from a change in the Company’s fiscal year within or immediately following those three completed fiscal years; or |
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| (b) | in the event of a recoupment for a Misconduct Event, the determination by the Committee that the Covered Executive has<br>engaged in a Misconduct Event |
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(each, a “Covered Period”).
| APPROVED BY:<br><br><br>Nominating, Governance<br> <br>& Social Responsibility<br><br><br>Committee of the Board of<br> <br>Directors | EFFECTIVE DATE:<br><br><br>December 1, 2023 | REVISION NO.: 4.0 | PAGE NO: 1 of 5 |
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GENERAL POLICY
Recoupment
| A. | Financial Restatements |
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In the event that the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period (such an accounting restatement, a “Financial Restatement”), the Committee shall review the Covered Compensation received by a Covered Executive during the Covered Period.
For purposes hereof, the “Required Financial RestatementDate” is the earlier to occur of:
| a) | the date the Board, a committee of the Board, or any officer or officers authorized to take such action if Board<br>action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare a Restatement; or |
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| b) | the date a court, regulator, or other legally authorized body directs the Company to prepare a Restatement.<br> |
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Regardless of whether the Company filed the restated financial statements, the Committee shall, to the full extent permitted by governing law, seek recoupment of any Covered Compensation, whether in the form of cash or equity, awarded or paid to a Covered Executive (computed without regard to any taxes paid), if and to the extent:
| a) | the amount of the Covered Compensation was calculated based upon the achievement of certain financial results that<br>were subsequently the subject of a Financial Restatement; and |
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| b) | the amount of the Covered Compensation that would have been awarded to the Covered Executive had the financial results<br>been properly reported would have been lower than the amount actually awarded. |
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If the achievement of a certain financial result was considered in determining the Covered Compensation awarded or paid, but the Covered Compensation is not awarded or paid on the basis of a formula, the Committee shall determine in its sole discretion the amount, if any, by which the payment or award should be reduced or recouped.
For the avoidance of doubt, a Covered Executive will be deemed to have received Covered Compensation in the Company’s fiscal period during which the financial reporting measure specified in the award is attained, even if the Covered Executive remains subject to additional payment conditions with respect to such award.
| APPROVED BY:<br><br><br>Nominating, Governance<br> <br>& Social Responsibility<br><br><br>Committee of the Board of<br> <br>Directors | EFFECTIVE DATE:<br><br><br>December 1, 2023 | REVISION NO.: 4.0 | PAGE NO: 2 of 5 |
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The Committee shall not seek recoupment of any erroneously awarded Covered Compensation to the extent it determines that:
| a) | the direct expense paid to a third party to assist in enforcing this Policy would exceed the amount of erroneously<br>awarded Covered Compensation to be recovered; |
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| b) | recovery would violate home country law where that law was adopted prior to November 28, 2022; and/or<br> |
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| c) | recovery would likely cause an otherwise tax-qualified retirement plan, under<br>which benefits are broadly available to Company employees, to fail to meet the requirements of Sections 401(a)(13) and 411(a) of the Internal Revenue Code of 1986, as amended, and the regulations thereunder. |
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| B. | Misconduct Event |
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In the event that a Covered Executive engaged in a Misconduct Event, the Company shall determine in its sole discretion the amount, if any, of the Covered Compensation that should be recouped.
“Misconduct Event” means any of the following circumstances, it being understood that in all cases, the Misconduct Event must have caused material financial or reputational harm to the Company:
| a) | a material violation of the Company’s Code of Ethics; |
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| b) | gross negligence, willful misconduct or fraud in the performance of a person’s duties; and/or<br> |
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| c) | other events as may be determined by the Committee in its sole discretion from time to time. |
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Method of Recoupment
The Committee will determine, in its sole discretion, the method for recouping Covered Compensation which may include, without limitation:
| a) | requiring reimbursement of cash incentive compensation previously paid; | ||
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| b) | seeking recovery of any Equity Proceeds; | ||
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| c) | cancelling or rescinding some or all outstanding vested or unvested equity (and/or equity-based) awards;<br> | ||
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| d) | adjusting or withholding from unpaid compensation or other set-off to the<br>extent permitted by applicable law; and/or | ||
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| APPROVED BY:<br><br><br>Nominating, Governance<br> <br>& Social Responsibility<br><br><br>Committee of the Board of<br> <br>Directors | EFFECTIVE DATE:<br><br><br>December 1, 2023 | REVISION NO.: 4.0 | PAGE NO: 3 of 5 |
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| e) | reducing or eliminating future salary increases, cash-based or equity-based incentive compensation, bonuses, awards or<br>severance. | ||
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“Equity Proceeds” means all proceeds realized by a Covered Executive from the sale of shares of Company common stock previously obtained as incentive compensation, any unrealized gain from the exercise of Company stock options previously obtained as incentive compensation and any outstanding shares of Company common stock held by the Covered Executive that were received upon the exercise of Company stock options or stock appreciation rights or in connection with the vesting or settlement of restricted stock or restricted stock units of the Company, in each case previously obtained as incentive compensation, including for the avoidance of doubt, any performance awards (or, with respect to any vested Company stock options or stock appreciation rights that have not yet been exercised, payment of the value thereof).
No Indemnification
For the avoidance of doubt, the Company shall not indemnify any Covered Executive against the loss of any erroneously awarded Covered Compensation or any Covered Compensation that is recouped pursuant to the terms of this Policy, or any claims relating to the Company’s enforcement of its rights under this Policy.
EFFECTIVE DATE
This Policy shall be effective as of December 1, 2023 (the “Effective Date”), and shall apply only to Covered Compensation that is approved, awarded or granted to Covered Executives on or after the Effective Date. Covered Compensation that was approved, awarded or granted to Covered Executives prior to the Effective Date remains covered by previous versions of this Policy.
POLICY REVIEW
The Committee may, at any time in its sole discretion, review, assess the adequacy and recommend proposed changes to this Policy to the Board for consideration, and the Board may adopt such rules and procedures that it deems necessary or appropriate to implement this Policy or to comply with applicable laws and regulations.
GUIDANCE
Covered Executives who have questions regarding this Policy should contact the Chief Legal Officer.
| APPROVED BY:<br><br><br>Nominating, Governance<br> <br>& Social Responsibility<br><br><br>Committee of the Board of<br> <br>Directors | EFFECTIVE DATE:<br><br><br>December 1, 2023 | REVISION NO.: 4.0 | PAGE NO: 4 of 5 |
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REVISION HISTORY
| Date | Version | Revisions Made | Approvedby |
|---|---|---|---|
| 1.0 | Initial version | ||
| 22-Janv-2015 | 2.0 | Board of<br>Directors | |
| 29-Nov-2021 | 3.0 | Board of<br>Directors | |
| 06-Sept-2023 | 4.0 | Board of<br>Directors | |
| APPROVED BY:<br><br><br>Nominating, Governance<br> <br>& Social Responsibility<br><br><br>Committee of the Board of<br> <br>Directors | EFFECTIVE DATE:<br><br><br>December 1, 2023 | REVISION NO.: 4.0 | PAGE NO: 5 of 5 |
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EX-99.1
Exhibit 99.1
TABLE OF CONTENTS
| EXPLANATORY NOTES | 1 |
|---|---|
| CORPORATE STRUCTURE | 6 |
| GENERAL DEVELOPMENT OF THE BUSINESS | 7 |
| BUSINESS OF THE COMPANY AND ITS INDUSTRY | 9 |
| RISK FACTORS | 31 |
| DIVIDENDS | 31 |
| DESCRIPTION OF THE CAPITAL STRUCTURE | 32 |
| MARKET FOR SECURITIES AND TRADING PRICE AND VOLUME | 38 |
| DIRECTORS AND OFFICERS | 39 |
| LEGAL PROCEEDINGS AND REGULATORY ACTIONS | 49 |
| INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS | 49 |
| INDEPENDENT AUDITOR, TRANSFER AGENT AND REGISTRAR | 49 |
| MATERIAL CONTRACTS | 50 |
| INTEREST OF EXPERTS | 52 |
| AUDIT COMMITTEE | 52 |
| ADDITIONAL INFORMATION | 55 |
| GLOSSARY OF TERMS | 55 |
| APPENDIX A CHARTER OF THE AUDIT COMMITTEE | A-1 |
EXPLANATORY NOTES
The information in this annual information form (the “Annual Information Form”) is stated as at January 31, 2024, unless otherwise indicated.
Unless otherwise noted or required by the context, the “Company” and “BRP” refer to BRP Inc. and its direct and indirect subsidiaries and predecessors or other entities controlled by them.
Unless otherwise indicated, all references to “$” or “dollars” are to Canadian dollars, references to “US$” or “U.S. dollars” are to United States dollars and references to “AUD$” are to Australian dollars. Amounts are stated in Canadian dollars unless indicated to the contrary.
All references to “Fiscal 2025” are to the Company’s fiscal year ended January 31, 2025, to “Fiscal 2024” are to the Company’s fiscal year ended January 31, 2024, to “Fiscal 2023” are to the Company’s fiscal year ended January 31, 2023 and to “Fiscal 2022” are to the Company’s fiscal year ended January 31, 2022.
All references to “season” throughout this Annual Information Form have different meanings depending on the applicable type of vehicle and region. Please refer to the following table for a description of such meanings:
| Australia | |
|---|---|
| Boats | 12 months ended September 30 |
| All other Regions andTerritories | |
| ATVs and SSVs | 12 months ended June 30 |
| Three-wheeled on-road vehicles | 12 months ended October 31 |
| Snowmobiles | 12 months ended March 31 |
| PWCs and Sea-Doo Switch pontoons | 12 months ended September 30 |
| Outboard engines | 12 months ended July 31 |
| Boats and pontoons | 12 months ended July 31 |
Any references to seasonal data for multiple products refer to each product’s respective season for the specific year indicated. In Fiscal 2023, the Company stopped all sales, shipments and exports intended for Russia and stopped operating in the Russian market. Therefore, the data relating to the number of units sold in FY2024 presented in this Annual Information Form does not include any units sold in Russia.
Certain capitalized terms and phrases used in this Annual Information Form are defined in the “Glossary of Terms” beginning on page 55.
Forward-Looking Statements
Certain statements in this Annual Information Form about the Company’s current and future plans, including statements relating to its 5-year plan referred to as “Mission 2025”, prospects, expectations, anticipations, estimates and intentions, results, levels of activity, performance, objectives, targets, goals, achievements, including the Company’s environmental, social and governance targets, goals and initiatives set forth under the Company’s CSR25 program, and those related to its electrification journey, such as its intention to electrify its existing product lines and launch new electric product lines, priorities and strategies, financial position, market position, capabilities, competitive strengths and beliefs, the prospects and trends of the industries in which the Company operates, the expected demand for products and services in the markets in which the Company competes, research and product development activities, including projected design, characteristics, capacity or performance
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of future products and their expected scheduled entry to market, expected financial requirements and the availability of capital resources and liquidities, or any other future events or developments and other statements in this Annual Information Form that are not historical facts constitute forward-looking statements within the meaning of applicable securities laws. The words “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, are intended to identify forward-looking statements.
Forward-looking statements are presented for the purpose of assisting readers in understanding certain key elements of the Company’s current objectives, goals, targets, strategic priorities, expectations and plans, and in obtaining a better understanding of the Company’s business and anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes; readers should not place undue reliance on forward-looking statements contained herein. Forward-looking statements, by their very nature, involve inherent risks and uncertainties and are based on a number of assumptions, both general and specific. The Company cautions that its assumptions may not materialize and that the currently challenging macroeconomic and geopolitical environments in which it evolves may render such assumptions, although believed 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 industry to be materially different from the outlook or any future results or performance implied by such statements.
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 factors, which are discussed in greater detail under the heading “Risk Factors” of the Company’s MD&A for the fiscal year ended on January 31, 2024 and in other continuous disclosure materials filed from time to time with Canadian securities regulatory authorities and the Securities and Exchange Commission: the impact of adverse economic conditions including in the context of recent significant increases of interest and inflation rates; any decline in social acceptability of the Company and its products, including in connection with the broader adoption of electrical or low-emission products; high levels of indebtedness; any unavailability of additional capital; any supply problems, termination or interruption of supply arrangements or increases in the cost of materials, including as a result of the ongoing military conflict between Russia and Ukraine; the inability to attract, hire and retain key employees, including members of the Company’s management team or employees who possess specialized market knowledge and technical skills; any failure of information technology systems, security breach or cyber-attack, or difficulties with the implementation of new systems, including the difficulties in the continued implementation of its ERP system; the Company’s reliance on international sales and operations; the Company’s inability to successfully execute its growth strategy; fluctuations in foreign currency exchange rates; unfavourable weather conditions and climate change more generally; the Company’s seasonal nature of its business and some of its products; the Company’s reliance on a network of independent dealers and distributors; any inability of dealers and distributors to secure adequate access to capital; any inability to comply with product safety, health, environmental and noise pollution laws; the Company’s large fixed cost base; any failure to compete effectively against competitors or any failure to meet consumers’ evolving expectations; any failure to maintain an effective system of internal control over financial reporting and to produce accurate and timely financial statements; any inability to maintain and enhance the Company’s reputation and brands; any significant product liability claim; any significant product repair and/or replacement due to product warranty claims or product recalls; any failure to carry proper insurance coverage; the Company’s inability to successfully manage inventory levels; any intellectual property infringement and litigation; the Company’s inability to successfully execute its manufacturing strategy or to meet customer demand as a result of manufacturing capacity constraints; increased freight and shipping costs or disruptions in transportation and shipping infrastructure; any failure to comply with covenants in financing and other material agreements; any changes in tax laws and unanticipated tax liabilities; any impairment in the carrying value of goodwill
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and trademarks; any deterioration in relationships with employees; pension plan liabilities; natural disasters; volatility in the market price for the Subordinate Voting Shares; the Company’s conduct of business through subsidiaries; the significant influence of Beaudier Group and Bain Capital; and future sales of Subordinate Voting Shares by Beaudier Group, Bain Capital, directors, officers or senior management of the Company. **** These factors are not intended to represent a complete list of the factors that could affect the Company; however, these factors should be considered carefully.
Unless otherwise stated, the forward-looking statements contained in this Annual Information Form are made as of the date of this Annual Information Form, and the Company has no intention and undertakes no obligation to update or revise any forward-looking statements, including to reflect future events, changes in circumstances, or changes in beliefs, unless required by applicable securities regulations. In the event that the Company does update any forward-looking statements contained in this Annual Information Form, no inference should be made that the Company will make additional updates with respect to that statement, related matters or any other forward-looking statement.
IFRS and Non-IFRS Measures
The Company’s financial statements, available under the Company’s profiles on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov, have been prepared in accordance with International Financial Reporting Standards (“IFRS”).
This Annual Information Form makes reference to certain non-IFRS financial measures. 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 IFRS measures by providing further understanding of the Company’s results of operations from management’s perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under IFRS.
The Company believes non-IFRS measures are important supplemental measures of financial performance because they eliminate items that have less bearing on the Company’s financial performance and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS measures. The Company also believes that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of companies, many of which present similar metrics when reporting their results. Management also uses non-IFRS measures in order to facilitate financial performance comparisons from period to period, prepare annual operating budgets, assess the Company’s ability to meet its future debt service, capital expenditure and working capital requirements, and also, as a component in the determination of the short-term incentive compensation for the Company’s employees. A detailed description of the usefulness of each non-IFRS measure can be found in the 2024 MD&A. Because other companies may calculate these non-IFRS measures differently than the Company does, these metrics are not comparable to similarly titled measures reported by other companies. “Normalized EBITDA” is defined as net income before financing costs, financing income, income tax expense (recovery), depreciation expense and normalized elements described in the 2024 MD&A (as defined below), such as transaction costs, restructuring costs and impairment charges. “Normalized net income” is defined as net income before normalized elements described in the 2024 MD&A, such as foreign exchange gain on long-term debt and lease liabilities, transaction costs and restructuring costs, and adjusted to reflect the tax effect on these elements. The Company refers the reader to the “Non-IFRS Measures” and **“**Selected Consolidated Financial Information” sections of the Company’s management’s discussion and analysis for Fiscal 2024 (the “2024 MD&A”), which are incorporated by reference herein, for definitions and reconciliations of Normalized EBITDA and Normalized net income presented by the Company to the most directly comparable IFRS measure. The Company’s 2024 MD&A is available under the Company’s profiles on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov.
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Market and Industry Data
The Company has obtained the market and industry data presented in this Annual Information Form from a combination of internal surveys, third-party information and the estimates of the Company’s management. There are limited sources that report on the Company’s markets and industries and some of the sources do not include certain markets where the Company operates. As such, much of the market and industry data presented in this Annual Information Form is based on internally generated management estimates, including estimates based on extrapolations from third-party surveys of the industries in which the Company competes, to the extent available. While the Company believes internal surveys, third-party information and estimates of the Company’s management are reliable, the Company has not verified them, nor have they been verified by any independent sources and the Company has no assurance that the information contained in third-party websites is current, complete and up-to-date. While the Company is not aware of any material misstatements regarding the market and industry data presented in this Annual Information Form, such data involves risks and uncertainties and is subject to change based on various factors, including those factors discussed under “Forward-Looking Statements” and “Risk Factors”.
Trademarks and Tradenames
This Annual Information Form refers to trademarks, including Alumacraft^®^, BRP^®^, Can-Am^®^, Lynx^®^, Manitou^®^, Quintrex^®^, Rotax^®^, Sea-Doo^®^ and Ski-Doo^®^^^in respect of its main brands*,* which trademarks are protected under applicable intellectual property laws and are the property of the Company. Solely for convenience, the Company’s trademarks and tradenames referred to in this Annual Information Form may appear without the ^®^ or ^™^ symbol, but such references are not intended to indicate, in any way, that the Company will not assert, to the fullest extent under applicable law, its rights to these trademarks and tradenames. All other trademarks used in this Annual Information Form are the property of their respective owners.
Corporate Social Responsibility
The Company is committed to Corporate Social Responsibility (CSR) and more specifically to the environment, product safety, health and safety, social well-being and economic prosperity everywhere it operates. The Company recognizes that these factors are fundamental to its growth and success. In April 2022, the Company announced its commitment to take CSR even further with the launch of its CSR25 program, which fosters value creation around three main pillars: Environment, Social and Governance (ESG). The CSR25 program includes objectives that focus on the Company’s employees, communities, operations and products, which have been specifically assigned to senior executives to make optimal use of their unique expertise.
The Board of Directors of the Company is the ultimate steward of ESG matters (including climate-related matters such as greenhouse gases emissions) and it has established clear lines of authority and oversight at the committee levels, as detailed below:
| ● | The Nominating, Governance and Social Responsibility committee has been delegated the authority to annually review and<br>assess the Company’s policies and practices with respect to its CSR program; and |
|---|---|
| ● | The Audit committee has been delegated the authority to oversee any<br>CSR/ESG-related disclosure documents and the controls in place to assess the adequacy and completeness of the financial information contained therein. |
| --- | --- |
In addition to the oversight by the Board and its committees, the Executive Management team along with the dedicated team of CSR professionals (CSR team) have established in 2023 a CSR
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governance framework which engages proactively and regularly with relevant stakeholders at all levels of the organization.
Specifically, a CSR Steering Committee composed of members with ownership over each pillar of our CSR25 framework has been created. To ensure smooth collaboration throughout its CSR journey, a Coordinating Committee was also formed, bringing together leaders of key functions delivering on key CSR25 pillar projects.
The CSR team receives updates on the advancement of the work against the program’s priorities from the senior executives and internal working groups to whom such priorities were assigned, and it has the responsibility to report regularly on such progress to the Executive Management team as well as quarterly to the Board.
The Company published its first comprehensive report compiling its CSR performance for Fiscal 2022 and has been reporting its progress annually ever since. The CSR report provides an overview of the Company’s CSR framework and the priority issues relevant to its business and stakeholders – customers, employees, suppliers, shareholders and community partners. Additional information regarding the Company’s CSR program and progress can be found in the CSR reports made available on the Company’s website at www.brp.com concurrently with the annual general meeting of the shareholders of the Company. For greater certainty, the CSR reports and any information therein as well as any information on the CSR program available on the Company’s website are not part of this Annual Information Form and are not incorporated by reference herein.
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CORPORATE STRUCTURE
Incorporation and Office
The Company was incorporated under the Canada Business Corporations Act on May 1, 2003 under the name J.A. Bombardier (J.A.B.) Inc. On June 28, 2006, the Company was amalgamated with 4308042 Canada Inc., a wholly-owned subsidiary of the Company. On April 12, 2013, the Company filed articles of amendment to change its name to BRP Inc. Immediately prior to the closing of its initial public offering on May 29, 2013 (the “IPO”), the Company filed articles of amendment to reorganize its authorized and issued share capital as described under “Description of the Capital Structure”.
The Company’s head and registered office is located at 726 Saint-Joseph Street, Valcourt, Québec, J0E 2L0.
Intercorporate Relationships
The following organization chart indicates the inter-corporate relationships of the Company and its material subsidiary entities together with the jurisdiction of incorporation or constitution of each such entity as at the date hereof:
Certain subsidiaries of the Company, each of which represented not more than 10% of the consolidated assets and not more than 10% of the consolidated revenue of the Company, and all of which, in the aggregate, represented not more than 20% of the total consolidated assets and the total consolidated revenue of the Company as at the date hereof, have been omitted.
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GENERAL DEVELOPMENT OF THE BUSINESS
General
BRP’s origins date back to 1937 when founder Joseph-Armand Bombardier obtained his first patent for a tracked vehicle used for travelling on snow. In 1959, the Company gave birth to the recreational snowmobile by introducing the first lightweight single-track two-passenger snowmobile under the Ski-Doo brand.
In 1968, the Company launched the industry’s first personal watercraft under the Sea-Doo brand, and in 1970, the Company acquired the maker of Rotax engines. In 1989, the Company acquired the Finnish company Nordtrac Oy, the maker of the Lynx brand of snowmobiles. A decade later, the Company entered a new powersports category when it began selling all-terrain vehicles (“ATVs”), which are now branded Can-Am.
In 2003, while operating as a division of Bombardier Inc., the Company was sold by Bombardier Inc. to an investor group including an affiliate of Bain Capital Investors, LLC **** (“Bain Capital”), members of the Bombardier and Beaudoin families and Caisse de dépôt et placement du Québec (“CDPQ”).
In 2007, the Company entered the on-road market and created a new on-road product category with the introduction of the Spyder three-wheeled vehicle (“3WV”). In 2010, the Company added another product to its portfolio with the introduction of its first recreational side-by-side vehicle (“SSV”) under the Can-Am brand. In 2012, BRP decided to cease the manufacturing of sport boats and announced that it would offer its jet boat propulsion technology to boat builders.
In June 2018, the Company completed the acquisition of Alumacraft Boat Co. (“Alumacraft”), a recreational boat manufacturer located in the United States, thereby establishing a Marine Group and creating two operating and reportable segments: Powersports and Marine. The Powersports segment includes Year-Round Products, Seasonal Products and Powersports PA&A and OEM engines. The Marine segment includes outboard and jet boat engines, boats and related PA&A and other services. In August 2018, the Company completed the acquisition of Triton Industries, Inc. (“Triton”), a manufacturer of pontoon boats under the Manitou brand located in the United States.
In August 2019, the Company completed the acquisition of 80% of the outstanding shares of Telwater Pty, Ltd (“Telwater”), a manufacturer of aluminum boats and trailers under the brands Quintrex, Stacer, and Yellowfin located in Australia. Telwater’s majority owner and managing director before BRP’s acquisition held the other 20% until September 1^st^, 2021, when the Company completed the repurchase, at fair value, of the remaining 20% non-controlling interest.
In May 2020, in the context of the COVID-19 pandemic, the Company announced that it reoriented its marine business by focusing on the growth of its boat brands with new technology and innovative Marine Products, and by discontinuing the Evinrude E-TEC outboard engines production in its Sturtevant facility (United States), which facility has been repurposed for new projects. In an effort to consolidate the Alumacraft operations into one site, the Company’s facility in Arkadelphia (United States) was closed, its operations related to welded boats were transferred to the Company’s facility in St. Peter (United States), and have been discontinued since the end of September 2021.
In 2020, in an effort to go beyond a product-based offering and to promote access to its products and allow more people to enjoy unique recreational experiences, the Company launched its Uncharted Society program (“Uncharted Society”) in the United States, offering packaged adventures using Powersports Products in several locations in the United States through partnerships with local “outfitters”.
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In March 2021, the Company announced its entry into the world of electrification, with the intention to introduce electric models for each of its existing product lines. In 2022, the Company reaffirmed its commitment towards electrification by setting ambitious targets as part of its CSR25 program, by announcing the launch of an all-electric lineup of Can-Am motorcycles, and of a completely new electric hydrofoil board referred to as the Sea-Doo Rise as well as of a new e-powertrain, the Rotax E10, thereby bolstering its electric offering for karting. The Company also completed three acquisitions in line with its global electrification strategy. In July 2022, the Company completed the acquisition of Great Wall Motor Austria GmbH, a leading electric vehicule (“EV”) R&D centre based in Kottingbrunn (Austria) that specializes in e-drive systems and transmissions and employs highly skilled individuals. In August 2022, the Company completed the acquisition of an 80% stake in Pinion GmbH (“Pinion”), a pioneer in gearbox technology based in Denkendorf (Germany), solidifying the Company’s expertise in electric powertrain technology for existing product lines and upcoming product introductions. The remaining 20% ownership in Pinion is held by members of the management at Pinion, who also remain as employees and managing directors of Pinion. In August 2022, the Company completed the acquisition of substantially all the assets related to the powersports business of Kongsberg Automotive ASA and its subsidiary Kongsberg Inc. located in Shawinigan, Quebec (“KA Shawinigan”). In connection with these acquisitions, the Company established a new business unit known as Low-Voltage & Human-Assisted Group (“LVHA Group”), with the goal to develop new markets and untapped product categories such as urban mobility and services.
In August 2021, the Company introduced the Switch pontoons as a new product offering under the Sea-Doo brand of products.
In August 2022, BRP introduced the newRotax S outboard engine with Stealth Technology, which the Company offers as fully integrated into its fully redesigned Manitou, Alumacraft and Quintrex boats, allowing for stunning designs and additional usable space at the stern.
In February 2023, the Company launched the new Can-Am Outlander platform for recreational and utility models with class leading power and towing capabilities. In August 2023, BRP introduced the Can-Am Maverick R. Boasting a 240-horsepower engine, Dual Clutch Transmission (DCT) and a new heavy duty tall-knuckle suspension design, the Maverick R lineup sets a new standard for off-road performance.
In 2023, the Company also celebrated two significant milestones: its 20th anniversary as an independent company and its 10th year as a publicly traded entity on the Toronto Stock Exchange (“TSX”).
In February 2023, BRP introduced two new electric snowmobiles – the Ski-Doo Grand Touring Electric model and the Lynx Adventure Electric model – being the first products commercialized as part of its CSR25 program commitment.
Effective as of January 1, 2024, Alumacraft and Triton were merged to form BRP Marine US Inc. to streamline processes and set the foundation for further integration.
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Public Offerings and Other Transactions
The Company completed its IPO in 2013. Since then, the Company’s subordinate voting shares (the “Subordinate Voting Shares”) have been listed on the TSX under the symbol “DOO”. On September 14, 2018, the Company completed the listing of its Subordinate Voting Shares on the Nasdaq Global Select Market (“Nasdaq”) under the symbol “DOOO”.
Over the last three financial years, the Company repurchased for cancellation, 989,150 (from December 3, 2021 to February 9, 2022), 3,519,398 (from December 5, 2022 to October 30, 2023) and 885,200 (from December 5, 2023 to January 22, 2024)^1^ of its outstanding Subordinate Voting Shares through normal course issuer bids. On June 15, 2021, the Company announced a substantial issuer bid (the “2021 SIB”) pursuant to which it completed on July 27, 2021 the purchase for cancellation of a total of 3,381,641 Subordinate Voting Shares (representing approximately 4% of the total number of Shares issued and outstanding as of such date) at a price of $103.50 per Share for an aggregate consideration of approximately $350.0 million. Prior to the completion of the 2021 SIB, Beaudier Group converted 936,692 Multiple Voting Shares into an equivalent number of Subordinate Voting Shares. These converted shares were repurchased as part of the 2021 SIB.
On March 30, 2022, the Company announced a substantial issuer bid (the “2022 SIB”) pursuant to which it completed on May 10, 2022 the purchase for cancellation of a total of 2,427,184 Subordinate Voting Shares (representing approximately 3% of the total number of Shares issued and outstanding as of such date, before giving effect to the 2022 SIB) at a price of $103.00 per Share for an aggregate consideration of approximately $250.0 million. Prior to the completion of the 2022 SIB, Beaudier Group converted 570,779 Multiple Voting Shares into an equivalent number of Subordinate Voting Shares. These converted shares were repurchased as part of the 2022 SIB.
On January 26, 2024, Bain Capital completed a bought deal secondary offering (the “2024 Secondary Offering”) pursuant to which it sold 2,000,000 Subordinate Voting Shares at a price of $91.00 per Subordinate Voting Share for gross proceeds of $182,000,000. The Company did not receive any of the proceeds from the 2024 Secondary Offering.
As at March 26, 2024, 34,808,553 Subordinate Voting Shares and 40,147,916 Multiple Voting Shares of the Company were issued and outstanding.
BUSINESS OF THE COMPANY AND ITS INDUSTRY
Overview of the Company
BRP is a global leader in the design, development, manufacturing, distribution and marketing of Powersports Products and Marine Products. The Company is a diversified manufacturer of Powersports Products, propulsion systems and Marine Products, providing enthusiasts with a variety of exhilarating, stylish and powerful products for all year-round use on a variety of terrains and providing access to adventures and experiences across different playgrounds.
The Company is a brand of choice for true powersports and boating enthusiasts. BRP’s products are recognized by stunning designs, powerful and efficient engines, and the incorporation of advanced technologies that drive industry-leading performance. BRP aims to continuously enhance the consumer experience through new features and models in a variety of ways, including enhancing rider
^1^ The current normal course issuer bid of the Company, renewed on November 30, 2023, entitles the Company to purchase for cancellation up to 3,231,999 Subordinate Voting Shares over the twelve-month period commencing on December 5, 2023 and ending on no later than December 4, 2024. As at March 26, 2024, the Company did not repurchase for cancellation any of its outstanding Subordinate Voting Shares under its normal course issuer bid.
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ergonomics, adding safety features, enhancing engine performance and reducing environmental impact.
The Company’s diversified portfolio of brands and products includes, under the Powersports segment, Year-Round Products such as Can-Am ATVs, SSVs and 3WVs, Seasonal Products such as Ski-Doo and Lynx snowmobiles, Sea-Doo PWCs and pontoons, Rotax engines for karts and recreational aircraft and Pinion gearboxes with Smart Shift system, and under the Marine segment, Alumacraft, Manitou, Quintrex, Stacer and Yellowfin boats, Rotaxengines for jet boats and Rotax S outboard engine with Stealth Technology. Additionally, the Company supports its line of products with a dedicated PA&A business to fully optimize the riding experience.
As at the end of Fiscal 2024, the Company employed close to 20,000 people worldwide. It sells its products in over 130 countries. In Fiscal 2024, BRP achieved revenues, Normalized EBITDA, net income and Normalized net income of $10,367 million, $1,699,6 million, $744.5 million, and $873.4 million, respectively. Normalized EBITDA and Normalized net income are not standardized financial measures and might not be comparable to similar financial measures used by other issuers. See “IFRS and Non-IFRS Measures”. The Company also refers the reader to the “Non-IFRS Measures” and “Selected Consolidated Financial Information” sections of the 2024 MD&A, which are incorporated by reference herein, for a reconciliation of Normalized EBITDA and Normalized net income presented by the Company to the most directly comparable IFRS measure. The Company’s 2024 MD&A is available under the Company’s profiles on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov.
The following charts set forth the percentage of the Company’s revenues generated by each of its product category in Fiscal 2024 and Fiscal 2023, respectively:
The powersports industry is comprised of several product categories. The majority of powersports products are used for recreational purposes. Certain products, primarily ATVs and SSVs,
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are also used for utility purposes, such as for agriculture, construction, and other commercial applications. BRP competes in the ATV, SSV, snowmobile and PWC categories (which includes the Sea-Doo Switch pontoons), in the three-wheeled vehicles category of motorcycles with the Can-Am Spyder and Ryker 3WVs and their respective PA&A businesses, as well as Rotax engines for karts and recreational aircraft and Pinion gearboxes which are intended to be leveraged to power low voltage and human-assisted products. BRP’s competition primarily comes from North American and Asian manufacturers.
The marine industry is composed of boats, marine engines and their respective PA&A businesses. BRP competes in the boat product category with the Alumacraft, Manitou, Quintrex, Stacer and Yellowfin boats and in the marine engine product category with the Rotax engines for jet boats and the Rotax Soutboard engine with Stealth Technology.
The markets for BRP’s products are highly competitive based on a number of factors, including innovation, performance, price, technology, product features, design and ergonomics, fit and finish, brand loyalty, quality, warranties and distribution. Management believes consumer demand for Powersports Products and Marine Products is mostly influenced by macroeconomic conditions, product life cycles, the introduction of new features, technologies and products, brand recognition and the maintenance of extensive and engaged distribution networks. In the last years, the level of social acceptability of products has also progressively become a more relevant factor, with a greater push for electric offerings.
Powersports and Marine Products are sold in more than 130 countries either directly to an established network of independent dealers or through independent distributors who act as intermediaries with their own dealers. Dealers and distributors are typically provided with marketing and after-sale service support as well as training for service technicians. At the dealer/distributor level, competition is based on a number of factors, including sales and marketing support efforts such as dealer/distributor inventory financing arrangements, dealer/distributor training, store redesign initiatives, flexible ordering systems, advertising and diversity in product offerings. Management believes that BRP’s Powersports and Marine Products, covering all seasons and, in the case of Powersports Products, multiple terrain applications, provide a compelling value proposition for its dealer/distributor network.
BRP Brands and Products
The Company has 4 main product categories:
| Product Category | Segment | Type of Products |
|---|---|---|
| Year-Round Products | Powersports | Can-Am ATVs, SSVs and 3WVs |
| Seasonal Products | Powersports | Ski-Doo and Lynx snowmobiles,<br>Sea-Doo PWCs **** and **** Sea-Doo Switch pontoons |
| PA&A, OEM engines and gearboxes | Powersports | PA&A and Rotax OEM engines for karts and recreational aircraft, and Pinion gearboxes |
| Marine Products | Marine | Alumacraft, Manitou, Quintrex, Stacer and Yellowfin boats*.* Rotax jet propulsion engines for jet boats and<br>Rotax S outboard engine with Stealth Technology |
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Powersports - Year-Round Products
Year-Round Products consist of BRP vehicles that are sold and used throughout the year in most climates and include the ATV, SSV and 3WV product lines. All products within the Year-Round Product category are sold under the Can-Am brand. Can-Am ATVs, SSVs and 3WVs all leverage BRP’s renowned Rotax engines.
ATVs
ATVs are four-wheel vehicles used for recreational and utility purposes in all four seasons of the year. Seats are designed to be straddled by the rider who steers using handlebars. ATVs can be broken down into four main categories: sport, recreational-sport, recreational-utility and youth.
The primary manufacturers of ATVs include BRP, CF Moto, Honda, Kawasaki, Polaris, Suzuki, Textron and Yamaha. Certain Chinese and Taiwanese manufacturers also produce ATVs, but primarily focus on entry-level products, which are not included in the industry data.
Management estimates that the global ATV market represented approximately 331,000 units in season 2023, down 11%, due in part to a shift of sales from ATV to SSVs, from approximately 373,000 units in season 2022, which was down 19% from approximately 460,000 units in season 2021. Management estimates that the Company’s global ATV market share in season 2023 reflected a number two position.
The Can-Am ATV line-up targets a broad range of consumers within the recreational-utility, recreational-sport, sport and youth sectors. The Company offers **** a total of 68 models, including youth models and six-wheel ATVs.
For season 2024, the manufacturer suggested retail prices (“MSRPs”)^2^ for the Company’s ATV models (excluding youth models) range from approximately US$6,349 to US$18,049 in the United States. For ATV youth models, the MSRP range from approximately US$3,099 to US$4,899 in the United States.
SSVs
An SSV is driven much like a car, using a steering wheel and pedals, is equipped with seat belts and rollover protection bars and sits the driver and passenger side-by-side. Certain models also include one or two rows of additional seats to accommodate up to six passengers. SSVs can be divided into three categories: Utility Recreational, Recreational Utility and Sport. Powersports consumers are drawn to recreational SSVs in large part by their enhanced functionality, innovation and differentiated riding experience. In recent years, several consumers have shifted from ATVs to SSVs.
The primary manufacturers of recreational SSVs are BRP, Honda, John Deere, Kawasaki, Polaris, Textron and Yamaha. Management estimates that the global recreational SSV market represented approximately 365,000 units for season 2023, an increase of 2% from approximately 357,000 units in season 2022, which was down 20% from approximately 444,000 units in season 2021^3^. The Company’s share of the global recreational SSV market in season 2023 reflected a number two market share position based on management’s estimates.
^2^ MSRPs stated herein are for the entry package of the products and exclude freight, delivery charge, taxes and registration fees. Accessory installation costs might not be included. Certain additional fees might also be applicable. Dealers may sell for a different price.
^3^ The approximate numbers of the SSV units in season 2023, 2022 and 2021 was calculated without considering the number of vehicles sold by John Deere in North America as this information was not available.
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The primary manufacturers of utility SSVs are Bobcat, John Deere, Kawasaki, Kubota and Polaris.
The Company offers one of the widest and deepest line-ups of the SSV market with 88 models.
For season 2024, MSRPs for the Company’s SSV models range from approximately US$12,899 to US$44,499 in the United States.
3WVs
BRP’s Can-Am Spyder and Ryker vehicles are non-traditional three-wheeled vehicles (with two wheels in the front and one in the back) designed to be driven on paved roads, highways and gravel roads. While many jurisdictions have implemented distinct licensing requirements for three-wheeled vehicles that are generally less expensive, demanding and lengthy to obtain than for traditional motorcycles, certain jurisdictions still apply the same licensing requirement for the Spyder and Ryker 3WVs as for traditional motorcycles. Other jurisdictions require only an automobile driver’s license.
BRP’s Can-Am Spyder and Ryker 3WVs compete for consumers against three-wheeled vehicle manufacturers such as Harley Davidson, Polaris, Piaggio and Yamaha. Management believes that, in addition to the traditional motorcycle consumer, the Spyder and Ryker 3WVs open-air experience, styling, performance and stability appeal to consumers that would not have considered buying a motorcycle. With their Y-shape architecture, vehicle stability system (“VSS”) and semiautomatic or automatic transmission, management believes that the Spyder and Ryker 3WVs offer greater stability and overall ease of use for a broad range of riders of all skill levels.
The Can-Am 3WV line-up is comprised of 11 models. Management estimates that the global market for three-wheeled vehicles represented approximately 38,000 units in season 2023, down 10% from approximately 42,000 units in season 2022, which was down 21% from **** approximately 53,000 units in season 2021, due in part to global supply chain issues^4^. Management estimates that the Company holds the leading market-share position of the global 3WV market.
For season 2024, MSRPs for the Company’s Spyder models range from approximately****US$22,099 to US$32,999 in the United States. In September 2018, the Company introduced the Ryker 3WVs, with MSRP for season 2024 ranging from approximately US$9,599 to US$14,599 in the United States.
Powersports - Seasonal Products
Seasonal Products consist of BRP products that are mostly used in specific seasons. These products include snowmobiles, which are mainly used during the winter season with sales to dealers concentrated in the months of September to January, PWCs and pontoons, which are mainly used during the summer season with sales to dealers concentrated in the months of January to June in North America. BRP leverages its Rotax E-TEC, ACE and E-Power engine technologies to produce snowmobiles and watercraft that are recognized as being among the most fuel-efficient in the market.
^4^ The number of units presented in this paragraph for the 2022 and 2021 seasons exclude the Piaggio MPR model, which is no longer included as a result of changes in the inclusion rules for the 3WV EMEA industry.
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2024 Annual Information Form ****
Snowmobiles
Snowmobiles are used in various snow-covered riding environments, including on- and off-trail for deep snow, trail, performance, touring and utility purposes. On-trail models have high engine displacement and are generally used on groomed trails. Off-trail models such as cross-over and deep snow snowmobiles have high engine displacement and are known for their lighter weight and longer tracks. Utility snowmobiles are easier to handle and are generally used for work-related purposes. The primary manufacturers of snowmobiles are BRP, Polaris and Textron. Management estimates that the Company holds the leading market-share position of the global snowmobile market.
The global snowmobile market is highly concentrated in North America, Scandinavia and Russia, with North America accounting for an estimated 86% of global unit sales in season 2023. Management estimates that the global snowmobile market represented approximately 119,000 units for season 2023, down 6% from approximately 126,000 units in season 2022, which was down 5% from approximately 133,000 units in season 2021.
The Company produces 160 **** different key models of snowmobiles, including youth models, categorized as (i) on-trail models (touring, sport, cross-country and youth), (ii) on/off-trail models (cross-over) and (iii) off-trail models (mountain, utility). These models, addressing the needs of all consumer sectors, are grouped into 19 product families and marketed under two different brand names, Ski-Doo and Lynx. BRP snowmobiles are sold primarily in North America under the Ski-Doo brand and in Europe under the Lynx and Ski-Doo brands. In 2021, the Company started selling snowmobiles under the Lynx brand in North America.
For season 2024, MSRPs for BRP snowmobiles (excluding youth models) range from approximately US$6,749 to US$23,349 in the United States. For snowmobiles youth models, the MSRP range from approximately US$4,149 to US$5,549 in the United States.
PWCs
PWCs include sit-down and stand-up models and are used on lakes, rivers or oceans. PWCs are designed to accommodate one to three riders and are used primarily for recreational purposes, with a small proportion being used for utility purposes such as marine patrol and rescue. PWCs can be divided into eight primary categories: Rec-Lite, Recreation, Touring, Performance, Tow Sports, Sport Fishing, Adventure and Stand-up.
The primary manufacturers in the PWC market are BRP, Kawasaki and Yamaha. Management estimates that the Company holds the leading market-share position of the global PWC market.
In season 2023, the global PWC market represented approximately 140,000 units, up 23%, from approximately 114,000 units in season 2022, which was down 17% from approximately 137,000 units in season 2021.
The Company produces a full line of PWCs consisting of **** 40 **** models marketed under the Sea-Doo brand name, which allows it to compete in the main PWC product categories.
For season 2024, MSRPs for BRP’s PWC models range from approximately US$6,999 to US$20,499 in the United States.
In Fiscal 2022, the Company introduced Switch pontoons as a new product offering under the Sea-Doo brand. The Sea-Doo Switch offers a modular design made of tiles that can be re-configured easily; it is powered by a Rotax jet propulsion engine and is maneuvered by a handlebar steering system, and is sold via Sea-Doo dealers. The Sea-Doo Switch comes in two upgrade package options: the Cruise and the Sport, with lengths ranging from 13 to 21 feet. The Company offers a total of 12 models.
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2024 Annual Information Form ****
For season 2024, MSRP for Sea-DooSwitch pontoons models range from approximately US$23,699 to US$51,699 in the United States. This represents a significant increase in MSRP from season 2023, resulting in most part from including in the price the surcharge that was separately charged during COVID as well as the price point of the new Cruise Limited model, which is a more luxurious and expensive package.
Powersports - PA&A, Rotax engines and Pinion gearboxes
Powersports PA&A
BRP sells a broad range of Powersports PA&A to complement each of its product lines, providing a stable revenue stream with high profit margins, along with increased brand exposure. PA&A products enhance the overall consumer experience and lifestyle associated with powersports products.
The parts sold by BRP include consumables (e.g. oils, lubricants and cleaning products), wearable components (e.g. brake pads, tires and transmission belts) and replacement parts (e.g. pistons, clutches and suspension components). BRP’s expertise also served to develop some of the lubricant and care products that it sells, including the XPS line of products, which have been engineered to prolong the life of vehicles and are tested on engine platforms and other applicable components of powersport vehicles.
The accessories include, for example, bumpers, windshields, rims, winches, passenger seats, covers, racks and cargo boxes. Certain accessories sold by BRP have also been designed and developed by BRP, including a tool-less system for near-instant installation of accessories named LinQ, which management believes is a first in the industry. The accessories designed with the LinQ system offer a sturdy and easy installation experience.
BRP aims to create an unparalleled riding experience by delivering technical riding gear and sportswear that promote its Lynx, Sea-Doo, Ski-Doo and Can-Ambrands, among others, and enhances the adventure of riding. BRP’s riding gear and sportswear portfolio includes a range of products such as shell jackets, insulated jackets, technical riding pants, gloves, boots, helmets as well as hoodies, t-shirts and caps.
In Fiscal 2024, BRP introduced the Advex helmet to its protective gear line-up and the Vibe communication system, both of which interface with the BRP GO! application and are powered by the E LinQ connection.
The competitive landscape for PA&A is composed mainly of companies specialized in parts, accessories and apparel ranging from multi-brand distributors to smaller single-brand companies. Aftermarket parts and accessories are generally of universal design and can be installed on the Company’s vehicles as much as on the competitors’ vehicles.
BRP designs the vast majority of its PA&A. The parts and accessories are developed alongside the vehicles. They are subject to the same testing and validation processes as the vehicles, resulting in superior assembly, installation and fit. The Company’s apparel line-up prominently features its brands. Management believes that BRP’s PA&A offering is a key influencer in the consumer’s purchase decision of a new vehicle, thus providing the Company with a competitive advantage.
In February 2024, BRP expanded its omnichannel strategy with a new direct-to-consumer (D2C) program, selling Ski-Doo, Sea-Doo, and Can-Am PA&A on brand websites directly to consumers in Canada and the United States. The D2C program seamlessly complements the existing PA&A sales network of authorized dealers, providing an additional and convenient shopping option for customers.
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2024 Annual Information Form ****
Rotax Engines
With their recognized performance, fuel efficiency and emissions profile, Rotax engines represent a core component of BRP’s industry-leading product performance. They power Can-Am ATVs, SSVs and 3WVs, Ski-Doo and Lynx snowmobiles, Sea-Doo PWCs and pontoons. Rotax engines are also sold to distributors and OEMs that manufacture products to be used for civilian recreational purposes and that are not in direct competition with BRP products. When sold to such third parties, the engines are used to power karts, small recreational aircraft and fire pumps. BRP has developed a comprehensive line-up of compact Rotax engines and gearbox systems with engine specifications varying from one to four cylinders, 2-stroke and 4-stroke and gearboxes varying from reduction gearbox, CVT, shifting gear, semi-automatic to double-clutch-transmission.
Most of BRP’s powersports competitors power their vehicles with engines they manufacture themselves. For kart engines, the main competitors are IAME, TM Racing and Vortex Engines. For small recreational aircraft engines, the main competitors are Continental Motors and Lycoming.
Pinion Gearboxes
Pinion gearboxes are primarily used in high-performance bicycles and e-bikes by over 100 international manufacturers, and are intended to be leveraged in the Company’s low-voltage and human-assisted products to be developed. These gearboxes are currently sold through bike manufacturers and frame builders. The technology is based on sophisticated vehicle transmission technology and is designed to last. In contrast to conventional derailleur gears with external cassettes, the Pinion gearboxes are installed centrally in the bike and protected from the weather, resulting in a longer product life, minimal maintenance and unique riding dynamics. Pinion offers two different gearbox lines: the powerful P-Line with 18 or 12 gears in a robust aluminum housing and the lightweight C-Line with 12, 9 or 6 gears in a lightweight magnesium housing. The C-Line with electronic shifting completes the gearbox portfolio. In Fiscal 2024, Pinion introduced the innovative motor-gearbox-unit (MGU) combining motor and gearbox in a single unit. Pinion’s main competitors are all conventional types of drive trains, which do not appear to be designed for the demands of today’s bicycles and the challenges of modern electric mobility.
Marine – Boats and Engines
Boats
Recreational boats include rigid inflatable boats, pontoon, deck, bowrider, cruiser and fishing boats. The Company competes in the recreational boats segment with recreational fishing boats, pontoons and bowriders and also offers PA&A to complement these products.
Recreational fishing boats can be divided in two categories: (i) fishing boats mostly used in offshore salt water, that are generally at least 25 feet long; and (ii) fishing boats mostly used in fresh water, that are generally less than 23 feet long. The vast majority of fishing boats are powered by outboard engines. Fishing boats mostly used in fresh water are made of either fiberglass or aluminum. The Company’s Alumacraft fishing boats are of 21 feet or less, generally used in fresh water, in aluminum and are generally outboard powered. The Company’s Quintrex, Stacer and Yellowfin fishing boats range from 7 to 23 feet long, used in offshore salt water and made of aluminum.
Pontoons are leisure boats made in aluminum, almost exclusively used in North America on fresh water, and are generally outboard powered. The Company’s Manitou pontoons compete in that category of recreational boats.
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Bowriders are generally designed for recreational use such as day cruising or watersports, and come in a variety of styles. They range between 16 to 28 feet long, use jet propulsion, stern drive, outboard or inboard engines and carry anywhere from 6 to 10 passengers. The Company’s bowriders, which are made of aluminum only, are sold under the Quintrex, Stacer and Yellowfin brands.
BRP’s competition in the boat industry primarily comes from North American manufacturers such as Bass Pro Shops, Brunswick, and Polaris. For season 2024, MSRPs for the Company’s Alumacraft aluminum fishing boats range from approximately US$8,056 to US$72,777 (including the engine), MSRPs for Manitou range from approximately US$47,400 to US$332,575 (including the engine and joystick steering) in the United States, and MSRPs for Quintrex, Stacer and Yellowfin boats range from approximately AUD$2,250 to AUD$165,000 (including the engine) in Australia.
Marine Engines
Marine propulsion systems for recreational power boats are comprised of outboard engines and inboard engines. They are generally sold to independent boat builders that in turn resell the engines and related rigging as part of a boat package, and to independent dealers and distributors. Outboard engines are designed to be affixed to the outside of a boat transom and tend to be lighter, less expensive and more easily replaceable than inboard engines. Inboard engines are designed to be integrated within the boat by the boat builder as part of the production of the boat.
For inboard engines, the primary manufacturers are Brunswick and Volvo Penta for stern drive and direct drive propulsion systems, and BRP and Yamaha for jet propulsion systems. Management estimates that demand experienced some growth in recent years for inboard engines.
BRP manufactures Rotax inboard jet propulsion engines, which offer boat builders an alternative for traditional inboard sterndrives and other inboard engines.
Since May 2020, the Company has discontinued its production of Evinrude E-TEC outboard engines, but it continues to sell Evinrude service parts. However, it continues to sell boat packages to its dealers and distributors, through arrangements and relationships with outboard engine providers, including Mercury Marine, Yamaha, Suzuki and Honda. In August 2022, BRP introduced the new Rotax S outboard engine with Stealth Technology, which the Company offers as fully integrated into its Manitou, Alumacraft and Quintrex boats, allowing for stunning designs.
Strategic Priorities
In Fiscal 2020, the Company announced a strategic 5-year plan referred to as Mission 2025, which was implemented in Fiscal 2021. The goal of Mission 2025 was to set the course for BRP 2.0 by creating and establishing the winning conditions for the Company continue to evolve as a global leader. The main objectives and priorities of Mission 2025 consist of building an improved lean enterprise model focused on efficiency, integration and smart solutions, placing the customers at the heart of all aspects of the Company and delivering excellent employee experiences. The fundamentals of Mission 2025 remain unchanged and continue to play a key role in the Company’s strategy, especially with respect to the efficiency of its operations and the satisfaction of its customers. See “Forward-Looking Statements” and “Risk Factors”.
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2024 Annual Information Form ****
Manufacturing Facilities and Operations
The Company manufactures its products at 14 facilities^5^: one in Australia, one in Austria, two in Canada, one in Finland, one in Germany, four in Mexico and four in the United States. All of the Company’s facilities are owned by the Company except for the Rovaniemi (Finland) and Denkendorf (Germany) plants, which are leased.
The following table presents the location, size and products manufactured at the Company’s current manufacturing facilities.
| Location | Approx. Size (sq. ft.) | Products Manufactured |
|---|---|---|
| Juárez, Mexico (“Juárez 3”) | 930,000 | Can-Am SSVs |
| Valcourt, Canada | 825,000 | Ski-Doo snowmobiles and Can-Am Spyder 3WVs |
| Querétaro, Mexico | 805,000^6^ | Rotax engines, Sea-Doo PWCs and Sea-Doo Switch |
| Juárez, Mexico (“Juárez 2”) | 680,000 | Can-Am SSVs |
| Gunskirchen, Austria | 471,000^7^ | Rotax engines |
| Sturtevant, United States | 465,000 | Assembly of Sea-Doo Switch, Rotax outboard engines and Rotax jet propulsion systems |
| Juárez, Mexico (“Juárez 1”) | 430,000 | Can-Am ATVs and Can-Am Ryker 3WVs |
| Coomera, Australia | 310,000 | Quintrex, Stacer and Yellowfin aluminum boats and trailers |
| Rovaniemi, Finland | 244,000 | Ski-Doo and Lynx snowmobiles and certain specialized Can-Am ATVs |
| Lansing, United States | 150,000 | Manitou pontoon boats |
| St. Peter, United States | 135,000 | Alumacraft aluminum fishing boats |
| Spruce Pine, United States | 100,000 | Mainly components for Rotax engines |
| Shawinigan, Canada | 32,000 | Existing and new mechatronic components |
| Denkendorf, Germany | 4,000 | Mechanical gearboxes for traditional and electric bicycles |
The Company’s manufacturing strategy, including the products manufactured and the operational activities carried on in each manufacturing facility, is based on a variety of factors such as the proximity to key retail markets, the presence and cost of skilled labour, production capacity, international and local laws, rules and regulations (including custom duties, tariffs and free-trade arrangements) as well as social and political conditions. ~~~~
The Company’s Juárez 3 facility (Mexico) assembles Can-Am SSVs, manufactures related components and produces SSV accessories such as bumpers, racks and brackets. Phase 2 of Juárez 3 was implemented in Fiscal 2023 to include certain SSV models (Maverick Sport, Maverick Trail and Commander) on a second assembly line.
^5^ This list does not include certain sites, including small sites where the products or services are only offered in a capacity as internal supplier to BRP, such as the St. Johns (United-States) site where service parts and wall painting and sequencing take place. ****
^6^ The current square footage does not include the expansion for the Can-Am electric motorcycles operations, which will start in Fiscal 2025.
^7^ The current square footage does not include the Logistics section of the premises.
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2024 Annual Information Form ****
The Company’s facility in Valcourt (Canada) assembles Ski-Doo snowmobiles, and Can-Am Spyder 3WVs and manufactures components of such vehicles.
The Company’s facility in Querétaro (Mexico) assembles Sea-Doo Spark PWCs, Sea-Doo Switch and Rotax engines for Can-Am ATVs, SSVs and Can-Am Ryker 3WVs. The facility in Querétaro also assembles the entire Sea-Doo PWC line-up and Sea-Doo PWC engines, which are partially manufactured in the Gunskirchen (Austria) facility and subsequently completed in the Querétaro facility, with the exception of the Spark PWC engines, which are completely produced in Querétaro. In addition, the facility manufactures composite components for Sea-Doo PWCs. Moreover, the Company machines Rotax engine components for Can-Am ATVs and SSVs and for Sea-Doo PWCs, motorized hulls for the Sea-Doo Switch as well as Rotax engine components for Can-Am Ryker 3WVs in its Querétaro facility. The construction of a new EV manufacturing plant in Querétaro (Mexico), which was announced in October 2022 has now been completed. The plant is now going through assembly validations to allow for the start of production of the all new lineup of Can-Am electric 2-wheel motorcycles in Fiscal 2025.
The Company’s Juárez 2 facility (Mexico) assembles Can-Am SSVs, manufactures related components and produces SSV accessories such as bumpers, racks and brackets.
The Company’s Gunskirchen (Austria) facility assembles Rotax engines for the Company’s Ski-Doo and Lynx snowmobiles and Can-Am 3WVs, as well as for third-party OEMs for use in karts, boats, recreational and small aircraft and fire pumps. Sea-Doo PWC engines are partially manufactured in the Gunskirchen (Austria) facility and subsequently completed in the Querétaro facility, with the exception of the Sea-Doo Spark PWC engines, which are entirely produced in Querétaro (Mexico).
The Company’s facility in Sturtevant (United States) assembles Sea-Doo Switch pontoons and Rotax S outboard engines with Stealth technology, performs precise machining operations for Rotax and build service parts for Outboard Engines. Rotax jet propulsion systems are also manufactured as a complete power-pack kit which are sold to boat manufacturers.
The Company’s Juárez 1 facility (Mexico) assembles Can-Am ATVs and Can-Am Ryker 3WVs. The facility also manufactures components for Can-Am off-road vehicles and Can-Am Ryker 3WVs and produces ATV, SSV and Ryker 3WV accessories such as bumpers, racks, steering columns and brackets.
The Company’s facility in Coomera (Australia) manufacturesQuintrex, Stacer and Yellowfin aluminum boats and trailers.
The Company’s facility in Rovaniemi (Finland) assembles Lynx and Ski-Doo snowmobiles and completes the assembly of certain models of specialized Can-Am ATVs. The Company also manufactures components for snowmobiles and ATVs in Rovaniemi.
The Company’s facility in Lansing (United States) assembles Manitou pontoons and performs aluminum transformation such as blanking, forming and aluminum welding.
The Company’s facility in St. Peter (United States) assembles Alumacraft aluminum fishing boats and performs aluminum transformation such as blanking, forming and riveting.
The Company’s facility in Spruce Pine (United States) provides lost foam aluminum casted parts for Rotax branded engines as well as other OEM customers serving the automotive, rail and construction equipment industries.
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2024 Annual Information Form ****
The Company’s facility in Shawinigan (Canada) develops and manufactures electronic and mechatronic products.
The Company’s facility in Denkendorf (Germany) serves for the development, construction, design, production and sale of Pinion gearboxes.
The Company is vertically integrated with respect to those manufacturing processes that represent its core competencies, such as surface treatment, painting, high precision machining and honing, aluminum fabrication and forming, riveting and welding, steel forming and welding and engine component manufacturing. For other product components, the Company relies on external suppliers. The Company uses contract carriers to ship its products to its customers and maintains international distribution centers to allow for its products to be shipped to international customers with shorter lead-times. For boats, shipping is also performed by the Company in North America.
In January 2023, the Company announced an additional boat manufacturing plant in Chihuahua City (Mexico), intended to increase its manufacturing capacity and capabilities to meet demand for its Marine Products. In September 2023, in connection with its revised guidance for Marine and the continuously changing retail environment resulting in softening industry demand, the Company announced some adjustments to its manufacturing strategy and optimization of its investments to better align supply to demand, which notably led to the announcement of its decision to postpone the construction of its manufacturing plant in Chihuahua City, Mexico.
Research andDevelopment
BRP relies heavily on research and development to sustain its reputation towards innovation and high performance products, build strong consumer loyalty and reduce production costs. In Fiscal 2024, investments by the Company in research and development activities represented approximately $441.5 million, or approximately 4.3% of the Company’s annual revenues. BRP’s significant research and development efforts have materialized into several innovations, including the following recent examples:
| ● | new industry-leading platforms (e.g. the all-new Can-Am Maverick R, setting a new benchmark in the high-end SSV Sport segment, the all-new<br>Can-Am Outlander ATV, the next generation of its iconic Sea-Doo Spark and the new class-leading 325 hp Sea-Doo RXP-X/RXT-X and the all-new Manitou Explore MAX Dual Engine model, featuring dual Rotax S150 outboard engines, a<br>larger MAX Deck and the iDock intuitive piloting system); |
|---|---|
| ● | new segments (e.g. the Can-Am Pulse and Origin electric motorcycle<br>concepts, the Sea-Doo Rise electric foil board concept and the first ever electric snowmobiles with the Ski-Doo Grand Touring Electric model and the<br>Lynx Adventure Electric model); |
| --- | --- |
| ● | new design features (e.g. Pinion Smart.Shift with the advantages of pushbutton electric shifting, the first PWC<br>with direct access to front storage from the driver’s seat, Sea-Doo FishPro Trophy, Sea-Doo Switch modular funiture and tile system and the marine<br>MAX Deck platform); |
| --- | --- |
| ● | new engine technologies (e.g. Pinion’s award-winning motor-gearbox-unit (MGU) combining motor and gearbox in<br>a single unit; Rotax 916 iS recreational aircraft engine, Rotax S115 and S150 outboard engines with Stealth Technology, Ski-Doo SHOT engine starting system, the first factory<br>produced 2-stroke turbocharged engine referred to as the Ski-Doo 850 E-TEC Turbo); |
| --- | --- |
| ● | new ergonomic features (e.g. the ErgoPrint seat base concept to enhance comfort and stability while reducing the<br>quantity of foam used in the seats on several products, and enhanced |
| --- | --- |
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2024 Annual Information Form ****
| <br>proxemics to optimize riders and passengers circulation on Switch and Manitou pontoons by optimizing seat dimensions and locations); | |
|---|---|
| ● | new safety features (e.g. the Sea-Doo speed-limiting Learning Key<br>or the Can-Am Off-Road work key); |
| --- | --- |
| ● | new features enhancing the customer’s experience, including digital products and services, business models or<br>functionalities (e.g. the new PA&A e-commerce store which enables direct-to-consumer sales; an<br>all-new 10.25-inch color touchscreen with Apple CarPlay enhancing the rider connectivity experience on all Can-Am Spyder F3 and<br>RT models and the industry’s largest 10.25-inch color digital display with the BRP Connect connectivity platform); and |
| --- | --- |
| ● | new accessories (e.g. the Advex helmet with the expanded Vibe communication system, 25 new on-water accessories added for the Sea-Doo and Manitou product lineups, including action camera holders to capture the riding experience,<br>Ski-Doo 1+1 seat, the Sea-Doo LinQ cooler and the Sea-Doo Switch Premium Audio System).<br> |
| --- | --- |
BRP’s research and development activities are spread across its seven research and development sites, sometimes also referred to as design & innovation centers, located in Canada, Austria, the United States, Finland and France.
The Product Development Centre in Valcourt is the hub for BRP’s Ski-Doo, Sea-Doo and Can-Am products. Established in 2008, the Laurent Beaudoin Design & Innovation Centre serves as the home to BRP’s design and advanced concept teams, working to create revolutionary products and develop new product lines and categories.
The R&D center in Rovaniemi (Finland) is responsible for the Lynx snowmobile development.
In December 2022, BRP opened a Design Studio in the South of France, which facility is located near major European markets, and reflects the Company’s commitment to design excellence and innovation as engines for growth.
More recently, in January 2023, BRP also opened a Design & Innovation Center in Palm Bay, Florida to conduct advanced concepts studies for all on-water products, and bring innovations to the marine industry.
In addition to the EV R&D centre based in Kottingbrunn (Austria) that specializes in e-drive systems and transmissions, which was acquired as part of the acquisition of Great Wall Austria GmbH. In October 2023, a new research and development facility was also built in the Gunskirchen area, which is dedicated to powertrain development.
Research and development activities are organized around centers of expertise, with each facility focused primarily on certain specific activities.
BRP also believes in partnerships to fuel innovation: BRP is a partner of the Centre de technologies avancéesBRP - Université de Sherbrooke, which has the mandate of developing specialized vehicles and advanced technologies. BRP also partners with the Austrian government in the Regionales Innovations Centrum in Austria, focusing on the design and development of efficient powertrain technologies.
BRP’s Design & Innovation team received significant recognition in 2023, garnering 12 prestigious awards across diverse design competitions, further showcasing the Company’s strength in innovation. Notably, the Sea-Doo Explorer Pro garnered widespread acclaim, receiving accolades from
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2024 Annual Information Form ****
Good Design USA, Good Design Japan, Good Design Australia, and the National Marine Manufacturers Association’s Innovation Award (NMMA). Those various recognitions showcase its exceptional design and innovation. Additionally, the Rotax S outboard engine received recognitions from both the NMMA and Marine Power Innovation, further solidifying BRP’s leadership in cutting-edge technology. Another example of awards received in 2023 is the Quintrex Freestyler X, which received a Good Design Australia award, again demonstrating BRP’s commitment to design excellence. Also, Pinion won the innovation of the year for the introduction of the MGU at the Design & Innovation Awards in 2023.
Distribution, Sales and Marketing
Distribution and Sales
BRP has established an extensive global distribution network selling products, directly or indirectly, in over 130 countries. As of the date hereof, BRP sells products directly to approximately 2,450 dealers in 22 countries. In certain geographic markets, the Company prefers to leverage a network of distributors acting as intermediaries with dealers. Through its network of approximately 150 distributors, BRP sells **** products to approximately 360 additional dealers. In China, the Company distributes products through a joint venture with Smooth Marine Equipment Ltd., its long-time distributor in China, and BRP has a majority ownership stake in this joint venture. The Company also has an office in Texas, U.S. for management and staff forming part of the sales, marketing, dealer services, finance and human resources functions of the Company.
In Fiscal 2024, 24.3% of the Company’s revenues were generated outside of North America. In addition to reducing the Company’s reliance on any single geographic market, management believes that the breadth of BRP’s distribution network positions it favorably to capture future growth opportunities in emerging powersports markets.
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The Company typically enters into agreements with dealers, pursuant to which they are authorized to market specific product lines and are required to stock service parts and perform warranty and out-of-warranty repairs and other services. Most of these contracts do not require a dealer to market the Company’s products on an exclusive basis. Based on various business criteria, dealers can become entitled to discounts, co-operative advertising subsidies and inventory financing. The Company also enters into agreements with distributors covering specific territories.
The Company delivers its products to dealers, distributors and Uncharted Society rental operators directly from strategically located distribution centers and warehouses, which are operated either by the Company itself or by third-party logistics providers. Uncharted Society boasts a global presence with destinations in 13 countries, offering over 650 unique experiences across 205 locations. The Company collaborates with a network of 160 partners (outfitters) around the world to deliver its unmatched adventure experiences.
The Company operates a build-to-order process under which it manufactures products based on orders from dealers, distributors and Uncharted Society rental operators. It also manages a sales and operations process through which it adjusts production schedules on a weekly or monthly basis to precisely tailor production to incoming orders and market conditions. The Company measures the success of its global production scheduling based on its order fill rate and finished product inventory. The Company produces its Powersports Seasonal Products, namely its snowmobiles and PWCs and Sea Doo pontoons, before and early in their respective seasons of use, while it produces its Powersports Year-Round Products and Marine Products, namely its ATVs, SSVs, 3WVs and boats, year-round. Due to the supply chain lead-time for Seasonal Products, flexibility in adjusting production volumes to meet changes in anticipated demand is limited.
The Company regularly holds dealer, distributor and Uncharted Society rental operators meetings to introduce new products and register pre-season orders. Dealers, distributors and Uncharted Society rental operators also have the opportunity to modify their orders during the season, either quarterly, monthly or on an ongoing basis, depending on the product line and the geography. The distribution network for Seasonal and Year-Round Products is relatively stable and consists of a majority of dealers, distributors and Uncharted Society rental operators with whom BRP has enjoyed a longstanding relationship. The Rotax inboard jet propulsion engines are distributed exclusively through boat builders. The Alumacraft and Manitou boats are distributed mainly through a network of dealers in the United States and in Canada while the Quintrex, Stacer and Yellowfin boats are distributed through a network of dealers in Australia.
See “Risk Factors — The Company’s international sales and operations subject it to additional risks, which risks may differ in each country in which the Company operates” in the 2024 MD&A.
Dealers’ and Distributors’ Inventory Financing Arrangements
BRP has agreements with large financing companies in North America, Europe, Australia and New Zealand to provide third-party inventory financing to its dealers and distributors in order to facilitate their purchase of the Company’s products. These agreements improve BRP’s liquidity by financing dealer and distributor purchases of products without requiring substantial use of the Company’s working capital. A significant percentage of BRP’s sales are made under such arrangements. The total amount of financing provided under such financing agreements totaled approximately $9.8 billion **** for Fiscal 2024 compared to approximately $8.3 billion for Fiscal 2023. Under the dealer and distributor financing agreements, in the event of a default of a dealer or distributor, the Company may be required to purchase, from the finance companies, repossessed new and unused products at the total unpaid principal balance of the dealer or distributor to the finance companies. During the three-month period ended July 31, 2021, the Company renegotiated and regrouped some of its repurchase obligations for obligations that are held with the same third-party financing providers. Henceforth, the obligations are generally within a range of US$14.0 million ($18.7 million) or 15% of the calendar year twelve-month
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2024 Annual Information Form ****
average amount of financing outstanding under the financing agreements (19.3 million as at January 31, 2024), and US$25.0 million ($33.5 million) or 10% of the last twelve-month average amount of financing outstanding under the financing agreements ($284.7 million as at January 31, 2024). See “Risk Factors — The inability of the Company’s dealers and distributors to secure adequate access to capital could materially adversely affect the Company’s business, results of operations or financial condition” in the 2024 MD&A.
Marketing
BRP aims to unleash the power of its iconic brands to win the hearts and minds of consumers, while driving positive business outcomes. The Company’s Marketing team is focused on creating and deploying full-funnel marketing plans for all BRP brands to connect with consumers in a consistent and meaningful way, ensure they enjoy best-in-class experiences, and drive consumer loyalty. BRP invests in building global brand equity through creative platforms and compelling storytelling anchored in the reality of its communities, namely by leveraging social media, public relations, and its network of brand ambassadors worldwide.
The Company also builds consumer engagement plans to deliver on its regional business targets and convert leads into retail sales, in collaboration with its dealers and distributors. BRP strives to target the right consumers at the right time, providing them with the content and information they are looking for to drive traffic to dealerships, and to its new PA&A e-commerce store which enables direct-to-consumer sales. BRP’s marketing channels and tactics include experiential marketing and high-quality product trials, retail sales promotions, paid media and a solid digital experience across its websites and Customer Relationship Management platforms. The Company is leveraging actionable consumer insights to maximize marketing efforts and spend.
To expose more people to the Powersports and Marine community, BRP provides access to experiences across different playgrounds through its network of Uncharted Society outfitters. BRP’s strategy of moving from selling products to enabling its riders through experiences has earned the Company the “Brand of the Year” award by Strategy magazine in 2022.
Suppliers
BRP’s primary purchases from its suppliers include raw materials, tooling, parts and systems, information technology (“IT”) services, marketing and transportation services. Parts, components and systems are subject to an extensive validation process in order to ensure their reliability and durability. Raw materials or standard parts are generally readily available from multiple sources for the products manufactured by BRP. Furthermore, whenever possible, BRP tries to identify potential substitute supply arrangements for components. BRP strives to obtain the lowest total costs of supply and manufacturing while ensuring high quality, and regularly seeks alternative sources of supply outside its current network of suppliers. ****
The Company is vertically integrated with respect to core manufacturing processes. For product components, other than those resulting from the core manufacturing processes, the Company generally establishes long-term relationships with external suppliers. The Company has implemented a certification process to evaluate the suitability of potential suppliers, which includes a review of suppliers’ financial condition and their capacity to produce components in conformity with BRP’s requirements and specifications as well as with applicable labour and environmental standards. Additionally, the Company performs both laboratory and field testing of components before using them in its products. All suppliers must comply with applicable trade sanctions and the BRP Supplier Code of Conduct, which outlines a clear set of standards on ethical matters such as health & safety, environment as well as prevention of child labor and modern slavery. In addition, the Company has
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initiated in the last two years an analysis with an aim to reduce its carbon footprint throughout its supply chain.
The manufacturing of the Company’s youth Can-Am ATVs and youth Ski-Doo snowmobiles as well as the production of most of its accessories and apparel is outsourced.
Seasonality
Some of BRP’s product lines, such as snowmobiles, PWCs and boats, are seasonal. However, certain of these products are also sold during offsetting seasons, reducing the overall seasonal impact on the Company. Additionally, BRP’s 3WV, jet boat engines, ATV and SSV products are less subject to seasonal weather patterns than snowmobiles, PWCs and boats.
The following table reflects the seasonality of revenues for each of the quarters in the three most recent fiscal years. The variations in revenues for Fiscal Year 2024 are due in part to global supply chain issues impacting the revenue distribution.
| (in % of annual revenues) | FirstQuarter | SecondQuarter | ThirdQuarter | FourthQuarter | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Fiscal 2024 | 23.4 | % | 26.8 | % | 23.8 | % | 26.0 | % | ||||
| Fiscal 2023 | 18.0 | % | 24.3 | % | 27.0 | % | 30.7 | % | ||||
| Fiscal 2022 | 23.6 | % | 24.9 | % | 20.8 | % | 30.7 | % |
Employees
As at the end of Fiscal 2024, the Company employed close to 20,000 **** employees of whom approximately **** 5,800 were covered by collective arrangements, either through an association, a joint company-employee relations committee, or a certified union/works council. The decrease in the number of employees since Fiscal 2023 is aligned with the corresponding reduction in production volumes announced by the Company at Q3 of Fiscal 2024, in light of the currently challenging macroeconomic and geopolitical environments. In Valcourt (Canada), the Company has employee relations committees to ensure joint company-employee discussions addressing employee matters and business challenges in an open and transparent context. These employee relations committees also serve as a channel of communication between the Company and all related employees in order to foster a culture of collaboration and mutual trust. Employee relations committee meetings are held on a regular basis.
In Shawinigan (Canada), the employees of BRP Megatech Industries Inc. (“Megatech”), a wholly owned subsidiary of the Company, are represented by a union (Syndicat des Métallos, Section locale 9472). Work conditions are governed by a collective bargaining agreement that will remain in force until April 30, 2024.
In the United States, employees are not unionized.
Employees in Austria, Finland and Germany are represented by these countries’ respective national works councils that supervise labour law compliance. The members of the respective local works councils meet with management on a regular basis and also participate in social, employment and, to a lesser extent, economic and financial decisions. In general, the Company representatives and works councils’ members meet on a regular basis to discuss specific work conditions and other normative elements. The Company and local works councils also hold annual formal negotiations to
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2024 Annual Information Form ****
discuss overall work conditions. By law, certain employee-related topics must be negotiated with the works councils and the outcome must be documented in writing and signed by both parties.
Employees in Juárez (Mexico) are not represented by any association. Manufacturing employees in Querétaro (Mexico) are represented by a union; wages are agreed upon yearly and other benefits every other year.
In addition, employees in non-manufacturing sites located in Germany, Belgium, Brazil, France, Italy, Norway, Spain, and Sweden are represented by their respective national collective agreements. Employees in Switzerland and Russia are not governed by any type of collective arrangement.
Employees in New Zealand, China and Japan are non-manufacturing workers. They are not unionized, but they can be represented by their respective local or national work councils. Their employment rights and conditions are regulated and protected under agreement and national employment law.
In Australia, employees are not unionized.
Intellectual Property
The Company has an extensive portfolio of intellectual property, including patents, trademarks, copyrights and trade secrets that protect its brands, products, designs and technologies.
Patents
As at **** January 31, 2024, the Company held more than 2,050 issued patents and pending patent applications to protect its products, designs and technologies, in jurisdictions including the United States, the European Union, Canada, China and Russia, among others. The Company diligently seeks to protect its key innovations through patent filings. The Company determines jurisdictions in which it files patent applications based on strategic considerations and the availability of patent protection in such jurisdictions. As it continues to develop new products, manufacturing processes and technologies the Company plans to apply for patents to protect such innovations.
As an example, the Company’s intellectual property portfolio includes patents and applications relating to Can-Am’s on road modular vehicle platform, Sea-Doo’s adjustable Ergolock-R cockpit design, Sea-Doo Switch modular seating and floor tiles system, Maverick R DCT hydraulic control functions; Ski-Doo’s 850 E-TEC Turbo R with Water Injection System and Rotax’s aircraft engine propeller drive hydraulic damper assembly.
Trademarks
In addition to protecting its technical innovations, the Company relies on a combination of registered and unregistered trademarks to protect its position as a branded company with strong brand name recognition. It holds numerous registered trademarks in respect of its brands, including Alumacraft^®^, BRP^®^, Can-Am^®^, Lynx^®^, Manitou^®^, Quintrex^®^, Rotax^®^, Sea-Doo^®^, Ski-Doo^®^ and Stacer ^®^. It also holds registered trademarks with respect to its various model lines, including Aurora^®^, Commander^®^, Defender^®^, Expedition^®^, Fish Pro^®^, Freeride^®^, G2^®^, Maverick^®^, MX-Z^®^, Renegade^®^, Rave^®^, Ryker^®^, RXP^®^, RXT^®^, Skandic^®^, Spark^®^, Spyder^®^, Summit^®^, Switch^®^ and Traxter^®^^,^and additional registered trademarks with respect to certain of its technologies, including 4-TEC^®^, BRP Connect ^®^, BRP GO ^®^, BV2S ^®^ , E-TEC^®^, iBR^®^, iCatch^®^, iControl^®^, iS^®^, Learning Key^®^, LinQ^®^, Radien^®^, REV^®^, V-Toon^®^, and XPS^®^. The Company determines the jurisdictions in which it registers its trademarks based on strategic considerations and on the availability of trademark registration in such jurisdictions. As it
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continues to develop and introduce new brands, models and technologies, the Company plans to register new trademarks to protect its strong name recognition.
Licenses
In the ordinary course of business, the Company enters into license agreements for intellectual property held by suppliers, competitors and other third parties with respect to parts, components and other systems used in the Company’s products.
ProductWarranties
The Company’s manufacturer product warranties generally cover periods from six months to five years for most products. In certain circumstances, the Company provides extended warranty coverage as a result of sales programs, under certain commercial accounts, or as required by local regulations. During the warranty period, the Company reimburses dealers and distributors the entire cost of repair or replacement performed on the products (mainly composed of parts or accessories provided by the Company and labour costs incurred by dealers or distributors). In addition, the Company sells in the normal course of business and provides under certain sales programs, extended product warranties.
Information Technology
The Company leverages a mix of industry-leading IT platforms in the operation of its business. For example, the Company uses SAP (enterprise system), SalesForce (sales and after-sale), Adobe (computer software), Cognos (finance) and certain applications developed in-house to manage its relationship with dealers, to trouble-shoot problems with its products in the field, and to enhance standard software capabilities. All such platforms support specific functions of the Company.
The Company has deployed the first phase of its new ERP system and continues to deploy subsequent phases throughout the organization.
Regulatory Matters
The Company is subject to extensive laws and regulations at many steps in its chain of conception, production and distribution of products. Above and beyond the laws and regulations applicable to any business, there are certain requirements applicable only to Powersports Products or recreational products such as those manufactured by the Company. These regulations include standards related to safety, construction rules, sound and gaseous emissions, and the sale and marketing of products, and have generally become stricter in recent years.
The Company is taking appropriate measures to ensure that its products will be compliant with anticipated more stringent regulations as they become effective from time to time. Such measures include the development of new engines and vehicle design, as well as the development of new energy-efficiency related technologies. While these efforts require substantial expenditures, it is impractical at this time to isolate these specific compliance costs from total project costs. See “Risk Factors — The Company is subject to laws, rules and regulations regarding product safety, health, environmental and noise pollution and other issues that could cause the Company to incur fines or penalties or increase its capital or operating costs” in the 2024 MD&A.
Safety Regulation
The Company’s products are subject to extensive laws, rules and regulations relating to product safety promulgated by the governments or regulatory authorities of Canada, individual Canadian provinces,
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the United States, individual American states or other countries. These requirements pertain to the conception, production and distribution of BRP’s products.
In addition, the Company is a member of several industry and trade associations in Canada, the United States, and other countries whose mandate is to promote safety in the manufacture and use of powersports products. Some of those trade associations promulgate voluntary industry product safety standards with which the Company complies.
Use Regulation
In Canada, the United States and other countries, laws, rules and regulations have been promulgated or are under consideration relating to the use of Powersports Products and boats. Some countries, provinces, states, municipalities and local regulatory bodies have adopted, or are considering the adoption of, legislation and local ordinances that restrict the use of snowmobiles, PWCs, ATVs, SSVs, boats and outboard engines to specified hours and locations. The use of said products has been restricted in some national parks and federal lands in Canada, the United States and other countries. In some instances, this restriction has consisted of a ban on the recreational use of these vehicles in specific locations.
Emissions Regulation
The Company’s products are subject to sound and gaseous emissions laws, rules and regulations promulgated by the governments and regulatory authorities of Canada (Environment and Climate Change Canada), the United States (Environmental Protection Agency), individual American states (such as the California Air Resources Board), the European Union **** and other jurisdictions. Such laws, rules and regulations may require the development of new engines and vehicle design, as well as the development of new energy-efficient technologies. In the last year, there has been an array of new and developing sustainability-related rules that have been adopted and proposed by various regulators and jurisdictions, including the Corporate Sustainability Reporting Directive (CSRD) issued by the European parliament and the Canadian Securities Administrators’ (CSA) proposed National Instrument 51-107 Disclosure of Climate-related Matters, which would require consistent and comparable disclosure for investors and support a comprehensive global baseline of sustainability disclosures, thereby increasing the regulatory pressure faced by the Company in this respect. See “Risk Factors—The Company is subject to laws, rules and regulations regarding product safety, health, environmental and noise pollution and other issues that could cause the Company to incur fines or penalties or increase its capital or operating costs” in the 2024 MD&A.
Environmental Regulation Applicable to Facilities
The Company is also subject to environmental laws, rules and regulations pursuant to which, among other things, it may become liable for the costs of investigating, removing and monitoring any hazardous substances found in its manufacturing and other facilities.
Insurance
The Company carries various insurance coverage policies to protect against certain risks of loss consistent with the exposures associated with the nature and scope of its operations. The most significant insurance policies that the Company carries include:
| ● | commercial general liability insurance for bodily injury and property damage resulting from its operations and its<br>products; |
|---|
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| ● | property insurance covering the replacement value of all real and personal property damage, including damages arising<br>from fire, earthquake, flood damage and business interruption; |
|---|---|
| ● | cargo insurance to protect against loss or damage to goods while in transit; |
| --- | --- |
| ● | workers’ compensation coverage in the United States to required statutory limits; |
| --- | --- |
| ● | automobile liability insurance for all owned, non-owned and hired vehicles<br>covering liabilities to third parties for bodily injury and property damage; |
| --- | --- |
| ● | aviation insurance for bodily injury and property damage resulting from the Company’s small recreational aircraft<br>engines; |
| --- | --- |
| ● | directors and officers insurance and other executives programs; and |
| --- | --- |
| ● | cyber insurance to mitigate risk exposure by offsetting recovery costs following a cyber-related security breach or<br>similar event. |
| --- | --- |
All policies are subject to certain deductibles, limits or sub-limits and policy terms and conditions.
RISK FACTORS
A description of the risks and uncertainties faced by the Company and its businesses can be found in the “Risk Factors” section on pages 46 to 73 of the 2024 MD&A. The 2024 MD&A is available under the Company’s profiles on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov. The Company currently believes that those are the risks and uncertainties that are material, but they are not the only ones it faces. If any of those risks, or any other risks and uncertainties that the Company has not yet identified or that it currently considers not to be material, actually occur or become material, the Company’s business, guidance, prospects, financial condition, results of operations and cash flows and consequently the price of the Subordinate Voting Shares could be materially and adversely affected.
DIVIDENDS
The following table sets out the cash dividends declared and paid during Fiscal 2022, Fiscal 2023 and Fiscal 2024.
| Date of Declaration | Date of Payment | Amount of Dividend<br><br><br>per Share |
|---|---|---|
| March 24, 2021 | April 19, 2021 | $0.13 |
| June 2, 2021 | July 16, 2021 | $0.13 |
| September 1, 2021 | October 14, 2021 | $0.13 |
| November 30, 2021 | January 14, 2022 | $0.13 |
| March 24, 2022 | April 18, 2022 | $0.16 |
| June 2, 2022 | July 14, 2022 | $0.16 |
| September 13, 2022 | October 14, 2022 | $0.16 |
| November 29, 2022 | January 13, 2023 | $0.16 |
| March 22, 2023 | April 17, 2023 | $0.18 |
| May 31, 2023 | July 14, 2023 | $0.18 |
| September 6, 2023 | October 13, 2023 | $0.18 |
| November 29, 2023 | January 12, 2024 | $0.18 |
| March 27, 2024 | April 22, 2024 | $0.21 |
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The Board of Directors has determined that each of the foregoing quarterly dividends was, at the time of declaration, appropriate based on the Company’s results of operations, current and anticipated cash requirements and surplus, financial condition, contractual restrictions and financing agreement covenants, solvency tests imposed by corporate law and upon other relevant factors. The payment of each future quarterly dividend remains subject to the declaration of such dividend by the Board of Directors. The actual amount, the declaration date, the record date and the payment date of each quarterly dividend are subject to the discretion of the Board of Directors, and, at this time, no assurance can be given as to the declaration of any future dividend by the Company and, if a dividend is declared, the timing, frequency or amount of any such future dividend. See “Risk Factors” in the 2024 MD&A.
DESCRIPTION OF THE CAPITAL STRUCTURE
The Company’s authorized share capital consists of an unlimited number of Multiple Voting Shares and Subordinate Voting Shares and an unlimited number of preferred shares (the “Preferred Shares”), issuable in series. As at March 26, 2024, 34,808,553 Subordinate Voting Shares, 40,147,916 Multiple Voting Shares and no Preferred Shares were issued and outstanding.
The Subordinate Voting Shares are “restricted securities” within the meaning of such term under applicable Canadian securities laws.
Shares
Except as described herein, the Subordinate Voting Shares and the Multiple Voting Shares have the same rights, are equal in all respects and are treated by the Company as if they were shares of one class only.
Rank
The Subordinate Voting Shares and Multiple Voting Shares rank pari passu with respect to the payment of dividends, return of capital and distribution of assets in the event of the liquidation, dissolution or winding up of the Company. In the event of the liquidation, dissolution or winding-up of the Company or any other distribution of its assets among its shareholders for the purpose of winding-up its affairs, whether voluntarily or involuntarily, the holders of Multiple Voting Shares and the holders of Subordinate Voting Shares are entitled to participate equally, share for share, subject always to the rights of the holders of any Preferred Shares, in the remaining property and assets of the Company available for distribution to the holders of Shares, without preference or distinction among or between the Subordinate Voting Shares and the Multiple Voting Shares.
Dividends
The holders of outstanding Shares are entitled to receive, subject always to the rights of the holders of any Preferred Shares, dividends on a share for share basis out of assets legally available therefore at such times and in such amounts and form as the Board of Directors may from time to time determine, without preference or distinction among or between the Subordinate Voting Shares and the Multiple Voting Shares. In the event of a payment of a dividend in the form of Shares, holders of Subordinate Voting Shares shall receive Subordinate Voting Shares and holders of Multiple Voting Shares shall receive Multiple Voting Shares.
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2024 Annual Information Form ****
Voting Rights
Under the Company’s articles, the Subordinate Voting Shares carry one vote per share and Multiple Voting Shares carry six votes per share. Based on the number of shares issued and outstanding as at March 26, 2024, the Subordinate Voting Shares represented 46.4% of the Company’s total issued and outstanding Shares and 12.6% of the voting power attached to all of the Shares.
Conversion
The Subordinate Voting Shares are not convertible into any other class of shares. Each outstanding Multiple Voting Share may at any time, at the option of the holder, be converted into one Subordinate Voting Share. Upon the first date that any Multiple Voting Share is held other than by a Permitted Holder (as defined below), such holder, without any further action, shall automatically be deemed to have exercised his, her or its rights to convert all of the Multiple Voting Shares held by such holder into fully paid and non-assessable Subordinate Voting Shares, on a share for share basis.
In addition, all Multiple Voting Shares, regardless of the holder thereof, will convert automatically into Subordinate Voting Shares at such time as Permitted Holders that hold Multiple Voting Shares no longer hold and own, collectively, directly or indirectly, more than 15% of the beneficial ownership interests in the aggregate number of outstanding Multiple Voting Shares and Subordinate Voting Shares (it being understood that the number of Multiple Voting Shares shall be added to the number of Subordinate Voting Shares for the purposes of such calculation).
For the purposes of the foregoing:
“Affiliate” means, with respect to any specified Person (as defined below), any other Person that directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person;
“Members of the Immediate Family” means with respect to any individual, each spouse (whether by marriage or civil union) or common law partner (as defined in the Income Tax Act (Canada) (the “Tax Act”)) or child or other descendants (whether by birth or adoption) of such individual, each spouse (whether by marriage or civil union) or common law partner (as defined in the Tax Act) of any of the aforementioned Persons, each trust created solely for the benefit of such individual and/or one or more of the aforementioned Persons, and each legal representative of such individual or of any aforementioned Persons (including without limitation a tutor, curator, mandatary due to incapacity, custodian, guardian or testamentary executor), acting in such capacity under the authority of the law, an order from a competent tribunal, a will or a mandate in case of incapacity or similar instrument. For the purposes of this definition, a Person shall be considered the spouse of an individual if such Person is legally married to such individual, lives in a civil union with such individual or is the common law partner (as defined in the Tax Act as amended from time to time) of such individual. A Person who was the spouse of an individual within the meaning of this paragraph immediately before the death of such individual shall continue to be considered a spouse of such individual after the death of such individual.
“Permitted Holders” means (i) Janine Bombardier, Claire Bombardier Beaudoin, Laurent Beaudoin, Huguette Bombardier Fontaine, Jean-Louis Fontaine and J.R. André Bombardier, and the Members of the Immediate Family of each such individual; (ii) any Person controlled, directly or indirectly, by one or more of the Persons referred to in clause (i) above; (iii) Bain Capital and any of its Affiliates; and (iv) CDPQ and any of its Affiliates;
“Person” means any individual, partnership, corporation, company, association, trust, joint venture or limited liability company; and
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2024 Annual Information Form ****
A Person is “controlled” by another Person or other Persons if: (i) in the case of a company or other body corporate wherever or however incorporated: (A) securities entitled to vote in the election of directors carrying in the aggregate at least 66^2^⁄3% of the votes for the election of directors and representing in the aggregate at least 66^2^⁄3% of the participating (equity) securities are held, other than by way of security only, directly or indirectly, by or solely for the benefit of the other Person or Persons; and (B) the votes carried in the aggregate by such securities are entitled, if exercised, to elect a majority of the board of directors of such company or other body corporate; or (ii) in the case of a Person that is not a company or other body corporate, at least 66^2^⁄3% of the participating (equity) and voting interests of such Person are held, directly or indirectly, by or solely for the benefit of the other Person or Persons; and “controls”, “controlling” and “under common control with” shall be interpreted accordingly.
Subscription Rights
In the event of any distribution or issuance, including by way of a share dividend (a “Distribution”) of voting shares of the Company (other than Multiple Voting Shares, Subordinate Voting Shares issued upon the conversion of Multiple Voting Shares or voting shares issued pursuant to the exercise of a right attached to any security of the Company issued prior to the Distribution) (the “Voting Shares”) or of securities convertible or exchangeable into Voting Shares or giving the right to acquire Voting Shares (other than options or other securities issued under compensatory plans or other plans to purchase Voting Shares or any other securities in favour of the management, directors, employees or consultants of the Company) (the “Convertible Securities” and, together with the Voting Shares, the “Distributed Securities”), the Company shall issue to the holder(s) of Multiple Voting Shares rights to subscribe for that number of Multiple Voting Shares, or, as the case may be, for securities convertible or exchangeable into or giving the right to acquire, on the same terms and conditions, including subscription or exercise price, as applicable, mutatis mutandis (except for the ultimate underlying securities that shall be Multiple Voting Shares), as those stipulated in the Convertible Securities, that number of Multiple Voting Shares, respectively, which carry, in the aggregate, a number of voting rights sufficient to fully maintain the proportion of total voting rights (on a fully diluted basis) associated with the then outstanding Multiple Voting Shares (the “Rights to Subscribe”).
The Rights to Subscribe shall be issued to the holder(s) of Multiple Voting Shares in a proportion equal to their respective holdings of Multiple Voting Shares and shall be issued concurrently with the completion of the Distribution of the applicable Distributed Securities. To the extent that any such Rights to Subscribe are exercised, in whole or in part, the securities underlying such Rights to Subscribe (the “Subscription Securities”) shall be issued and must be paid for concurrently with the completion of the Distribution and payment to the Company of the issue price for the Distributed Securities, at the lowest price permitted by the applicable securities and stock exchange regulations and subject (as to such price) to the prior consent of the exchanges but at a price not lower than (i) if the Distributed Securities are Subordinate Voting Shares, the price at which Subordinate Voting Shares are then being issued or distributed, (ii) if the Distributed Securities are Convertible Securities, the price at which the applicable Convertible Securities are then being issued or distributed, and (iii) if the Distributed Securities are Voting Shares other than Subordinate Voting Shares, the higher of (a) the weighted average price of the transactions on the Subordinate Voting Shares on the TSX (or such other primary stock exchange on which they are listed, as the case may be) for the 20 trading days preceding the Distribution of such Voting Shares or of (b) the weighted average price of transactions on the Subordinate Voting Shares on the TSX (or such other primary stock exchange on which they are listed, as the case may be), the trading day before the Distribution of such Voting Shares.
The privileges attached to Subscription Securities that are securities convertible or exchangeable into or giving the right to acquire Multiple Voting Shares shall only be exercisable if and whenever the same privileges attached to the Convertible Securities are exercised and shall not result in the issuance of a number of Multiple Voting Shares that increases the proportion (as in effect immediately prior to giving effect to the completion of the Distribution) of total voting rights associated
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2024 Annual Information Form ****
with the Multiple Voting Shares after giving effect to the exercise by the holder(s) of the privileges attached to such Convertible Securities.
The right to receive Rights to Subscribe as described above, and the legal or beneficial ownership of the Rights to Subscribe, may be assigned in whole or in part among Permitted Holders, provided that written notice of any such assignment shall be sent promptly to the other holders of Multiple Voting Shares and the Company.
Subordinate Voting Shares have no pre-emptive or subscription rights to purchase any securities of the Company. An issuance of participating (equity) securities will not be rendered invalid due to a failure by the Company to comply with the foregoing.
Subdivision or Consolidation
No subdivision or consolidation of the Subordinate Voting Shares or the Multiple Voting Shares may be carried out unless, at the same time, the Multiple Voting Shares or the Subordinate Voting Shares, as the case may be, are subdivided or consolidated in the same manner and on the same basis.
Certain Amendments
In addition to any other voting right or power to which the holders of Subordinate Voting Shares shall be entitled by law or regulation or other provisions of the Articles of the Company from time to time in effect, but subject to the provisions of Articles of the Company, holders of Subordinate Voting Shares shall be entitled to vote separately as a class, in addition to any other vote of shareholders that may be required, in respect of any alteration, repeal or amendment of the Articles of the Company that would adversely affect the powers, preferences or rights of the holders of Subordinate Voting Shares, including an amendment to the terms of the Articles of the Company that provide that any Multiple Voting Shares sold or transferred to a Person that is not a Permitted Holder shall be automatically converted into Subordinate Voting Shares.
Certain Class Votes
Without limiting other rights at law of any holders of Multiple Voting Shares or Subordinate Voting Shares to vote separately as a class or the terms of the following paragraph, neither the holders of the Multiple Voting Shares nor the holders of the Subordinate Voting Shares shall be entitled to vote separately as a class upon a proposal to amend the Articles of the Company in the case of an amendment of the kind referred to in paragraph (a) of subsection 176(1) of the Canada Business Corporations Act and, as regards the creation of additional classes of preferred shares that are non-voting, paragraph I of subsection 176(1) of the Canada Business Corporations Act.
The holders of the Subordinate Voting Shares shall be entitled to vote separately as a class (but will not have any dissent rights) in respect of any amalgamation, arrangement, business combination or sale, lease, exchange or transfer of all or substantially all the property of the Company (as such expressions are interpreted for the purposes of the Canada Business CorporationsAct) in connection with which or following which any holder of Multiple Voting Shares would, directly or indirectly, receive or be entitled to receive consideration, money, property or securities of greater value per share or different in kind than the consideration or distribution available to holders of Subordinate Voting Shares, unless the holders of Subordinate Voting Shares are otherwise already entitled to vote separately as a class in respect of such transaction under any applicable law (including, without limitation, securities laws in any jurisdiction, together with the rules, regulations, orders and notices made thereunder and the local, uniform and national published instruments and policies adopted by the securities regulatory authority in such jurisdiction, as applied and interpreted by such securities
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2024 Annual Information Form ****
regulatory authority) or the rules, notices, policies and procedures or any decision of any applicable stock exchange.
Issuance of Additional Multiple Voting Shares
Subject to the provisions of the Articles of the Company, the Company may not issue Multiple Voting Shares without the approval of at least 66^2^⁄3% of the votes cast at a meeting of the holders of Subordinate Voting Shares duly held for that purpose. However, approval is not required in connection with a subdivision or conversion on a pro rata basis as between the Subordinate Voting Shares and the Multiple Voting Shares or the issuance of Multiple Voting Shares upon the exercise of the Rights to Subscribe.
Take-Over Bid Protection
Under applicable Canadian law, an offer to purchase Multiple Voting Shares would not necessarily require that an offer be made to purchase Subordinate Voting Shares. In accordance with the rules of the TSX designed to ensure that, in the event of a take-over bid, the holders of Subordinate Voting Shares will be entitled to participate on an equal footing with holders of Multiple Voting Shares, the Beaudier Group, Bain Capital and CDPQ, as the owners of all the outstanding Multiple Voting Shares, entered into a coattail agreement dated May 29, 2013 with the Company and Computershare Trust Company of Canada (the “Coattail Agreement”). The Coattail Agreement contains provisions customary for dual class, TSX-listed companies designed to prevent transactions that otherwise would deprive the holders of Subordinate Voting Shares of rights under applicable provincial take-over bid legislation to which they would have been entitled if the Multiple Voting Shares had been Subordinate Voting Shares.
The undertakings in the Coattail Agreement do not apply to prevent a sale of Multiple Voting Shares by any of Beaudier Group, Bain Capital or CDPQ if concurrently an offer is made to purchase Subordinate Voting Shares that:
| ● | offers a price per Subordinate Voting Share at least as high as the highest price per share paid pursuant to the<br>take-over bid for the Multiple Voting Shares; |
|---|---|
| ● | provides that the percentage of outstanding Subordinate Voting Shares to be taken up (exclusive of shares owned<br>immediately prior to the offer by the offeror or persons acting jointly or in concert with the offeror) is at least as high as the percentage of Multiple Voting Shares to be sold (exclusive of Multiple Voting Shares owned immediately prior to the<br>offer by the offeror and persons acting jointly or in concert with the offeror); |
| --- | --- |
| ● | has no condition attached other than the right not to take up and pay for Subordinate Voting Shares tendered if no<br>shares are purchased pursuant to the offer for Multiple Voting Shares; and |
| --- | --- |
| ● | is in all other material respects identical to the offer for Multiple Voting Shares. |
| --- | --- |
In addition, the Coattail Agreement does not prevent the transfer of Multiple Voting Shares by Beaudier Group, Bain Capital or CDPQ to a Permitted Holder, provided such transfer is not or would not have been subject to the requirements to make a take-over bid (if the vendor or transferee were in Canada) or constitutes or would constitute an exempt take-over bid (as defined in applicable securities legislation). The conversion of Multiple Voting Shares into Subordinate Voting Shares, whether or not such Subordinate Voting Shares are subsequently sold, would not constitute a disposition of Multiple Voting Shares for the purposes of the Coattail Agreement.
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2024 Annual Information Form ****
Under the Coattail Agreement, any disposition of Multiple Voting Shares (including a transfer to a pledgee as security) by a holder of Multiple Voting Shares party to the agreement is conditional upon the transferee or pledgee becoming a party to the Coattail Agreement, to the extent such transferred Multiple Voting Shares are not automatically converted into Subordinate Voting Shares in accordance with the Articles of the Company.
The Coattail Agreement contains provisions for authorizing action by the trustee to enforce the rights under the Coattail Agreement on behalf of the holders of the Subordinate Voting Shares. The obligation of the trustee to take such action is conditional on the Company or holders of the Subordinate Voting Shares providing such funds and indemnity as the trustee may require. No holder of Subordinate Voting Shares will have the right, other than through the trustee, to institute any action or proceeding or to exercise any other remedy to enforce any rights arising under the Coattail Agreement unless the trustee fails to act on a request authorized by holders of not less than 10% of the outstanding Subordinate Voting Shares and reasonable funds and indemnity have been provided to the trustee. The Company agreed to pay the reasonable costs of any action that may be taken in good faith by holders of Subordinate Voting Shares pursuant to the Coattail Agreement.
The Coattail Agreement provides that it may not be amended, and no provision thereof may be waived, unless, prior to giving effect to such amendment or waiver, the following have been obtained: (a) the consent of the TSX and any other applicable securities regulatory authority in Canada and (b) the approval of at least 66^2^⁄3% of the votes cast by holders of Subordinate Voting Shares excluding votes attached to Subordinate Voting Shares held by Beaudier Group, Bain Capital, CDPQ, their affiliates and any persons who have an agreement to purchase Multiple Voting Shares on terms that would constitute a sale or disposition for purposes of the Coattail Agreement other than as permitted thereby.
No provision of the Coattail Agreement limits the rights of any holders of Subordinate Voting Shares under applicable law.
Preferred Shares
The Company is authorized to issue an unlimited number of Preferred Shares, issuable in series. Each series of Preferred Shares shall consist of such number of shares and having such rights, privileges, restrictions and conditions as may be determined by the Board of Directors prior to the issuance thereof. Holders of Preferred Shares, except as otherwise provided in the terms specific to a series of Preferred Shares or as required by law, will not be entitled to vote at meetings of holders of Shares. With respect to the payment of dividends and distribution of assets in the event of liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the Preferred Shares are entitled to preference over the Shares and any other shares ranking junior to the Preferred Shares from time to time and may also be given such other preferences over Shares and any other shares ranking junior to the Preferred Shares as may be determined at the time of creation of such series.
Advance Notice Requirements for Director Nominations
The Company’s by-laws provide that shareholders seeking to nominate candidates for election as directors must provide timely written notice to the Company’s secretary at its principal executive offices. To be timely, a shareholder’s notice must be received (i) in the case of an annual meeting of shareholders, not less than 30 days nor more than 65 days prior to the date of the annual meeting; provided, however, that in the event that the annual meeting of shareholders is to be held on a date that is less than 50 days after the date on which the first public announcement of the date of the annual meeting was made, notice by the shareholder may be received not later than the close of business on the 10^th^ day following the date of such public announcement; and (ii) in the case of a special meeting (which is not also an annual meeting) of shareholders called for the purpose of electing directors, not
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2024 Annual Information Form ****
later than the close of business on the 15^th^ day following the day on which the first public announcement of the date of the special meeting was made. The Company’s by-laws also prescribe the proper written form for a shareholder’s notice. The Board of Directors may, in its sole discretion, waive any requirement under these provisions. These provisions shall be automatically repealed and cease to have effect upon the termination of the Nomination Rights Agreement entered into between the Company and the Beaudier Group, Bain Capital and CDPQ. See “Material Contracts — Securityholders Agreement — Nomination Rights Agreement”.
MARKET FOR SECURITIES AND TRADING PRICE AND VOLUME
The Subordinate Voting Shares are listed for trading on the TSX and Nasdaq under the symbols “DOO” and “DOOO”, respectively.
The following table sets forth, for the periods indicated, the monthly range of highs and lows trading closing prices of the Subordinate Voting Shares, as well as total monthly volumes and average daily volumes of the Subordinate Voting Shares traded on the TSX:
| Month | Price perSubordinateVoting Share ($)Monthly Low | Price perSubordinateVoting Share ($)Monthly High | Subordinate<br> <br>VotingSharesTotal MonthlyVolume | SubordinateVoting SharesAverage DailyVolume |
|---|---|---|---|---|
| February<br>2023 | 111.38 | 120.51 | 2,635,953 | 138,734 |
| March<br>2023 | 99.05 | 118.88 | 4,526,673 | 196,812 |
| April<br>2023 | 96.10 | 106.06 | 3,881,671 | 204,298 |
| May<br>2023 | 95.44 | 104.55 | 3,856,551 | 175,298 |
| June<br>2023 | 91.32 | 112.46 | 4,866,509 | 221,205 |
| July<br>2023 | 107.00 | 122.41 | 3,761,028 | 188,051 |
| August<br>2023 | 103.10 | 122.08 | 3,628,916 | 164,951 |
| September 2023 | 97.19 | 109.00 | 4,423,211 | 221,161 |
| October<br>2023 | 92.72 | 108.01 | 3,509,397 | 167,114 |
| November<br>2023 | 80.53 | 105.27 | 3,656,585 | 166,208 |
| December<br>2023 | 77.42 | 96.67 | 6,754,406 | 355,495 |
| January<br>2024 | 84.51 | 96.25 | 5,046,084 | 229,367 |
The following table sets forth, for the periods indicated, the monthly range of highs and lows trading closing prices of the Subordinate Voting Shares, as well as total monthly volumes and average daily volumes of the Subordinate Voting Shares traded on Nasdaq:
| Month | PriceperSubordinateVoting Share(US$) Monthly<br> <br>Low | PriceperSubordinateVoting Share(US$) Monthly<br> <br>High | SubordinateVoting SharesTotal MonthlyVolume | SubordinateVoting SharesAverage DailyVolume |
|---|---|---|---|---|
| February<br>2023 | 83.45 | 90.42 | 972,854 | 51,203 |
| March<br>2023 | 72.79 | 87.26 | 1,402,591 | 60,982 |
| April<br>2023 | 71.41 | 78.66 | 1,133,530 | 59,659 |
| May<br>2023 | 70.15 | 76.97 | 1,047,966 | 47,635 |
| June<br>2023 | 67.42 | 84.92 | 1,381,549 | 65,788 |
| July<br>2023 | 79.95 | 92.74 | 1,000,697 | 50,035 |
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2024 Annual Information Form ****
| August<br>2023 | 75.66 | 91.86 | 1,335,520 | 58,066 |
|---|---|---|---|---|
| September 2023 | 72.13 | 79.84 | 1,762,301 | 88,115 |
| October<br>2023 | 66.79 | 79.41 | 1,697,228 | 77,147 |
| November<br>2023 | 59.40 | 77.12 | 2,282,460 | 108,689 |
| December<br>2023 | 57.15 | 73.06 | 2,800,961 | 140,048 |
| January<br>2024 | 62.87 | 72.32 | 2,940,618 | 140,029 |
The Multiple Voting Shares are not listed for trading on any stock exchange.
DIRECTORS AND OFFICERS
The following tables set out for each of the Company’s directors and executive officers as of the date hereof, the person’s name, province or state, and country of residence, position with the Company, principal occupation during the five preceding years and, if a director, the date on which the person became a director. The Company’s directors are expected to hold office until the Company’s next annual general meeting of shareholders. The Company’s directors are elected annually and, unless re-elected, retire from office at the end of the next annual meeting of shareholders. As a group, the directors and executive officers beneficially owned, or controlled or directed, directly or indirectly, a total of 1,172,279 Subordinate Voting Shares, representing in the aggregate 3.4% of all of the Company’s issued and outstanding Subordinate Voting Shares, 1.6% of all of the Company’s issued and outstanding Shares and 0.4% of the total voting power attached to all of the Company’s issued and outstanding Shares as at March 26, 2024.
Directors
| Name and Province or State and Country of<br><br><br>Residence | Age | Position(s)/Title | Director<br>Since | Principal Occupation |
|---|---|---|---|---|
| ÉLAINE BEAUDOIN<br> <br><br><br><br>Québec, Canada | 60 | Director | 2023 | Vice-President and director of Beaudier Inc. |
| PIERRE BEAUDOIN^(1)(2)^<br><br><br><br> <br>Québec, Canada | 61 | Director | 2019 | Corporate Director |
| JOSHUA<br><br><br>BEKENSTEIN^(1)(2)^<br><br><br><br> <br>Massachusetts, U.S. | 65 | Director | 2003 | Senior Advisor at Bain Capital Investors, LLC (a private equity fund) |
| JOSÉ BOISJOLI^(3)^<br><br><br><br> <br>Québec, Canada | 66 | Chair of the Board, President and Chief Executive Officer | 2011 | President and Chief Executive Officer of the Company |
| CHARLES<br><br><br>BOMBARDIER^(3)^<br><br><br><br> <br>Québec, Canada | 50 | Director | 2020 | Corporate Director |
| ERNESTO M.<br><br><br>HERNÁNDEZ^(3) (4)^<br><br><br><br> <br>State of Mexico,<br><br><br>Mexico | 66 | Director | 2020 | Corporate Director |
| KATHERINE<br><br><br>KOUNTZE^(4)^<br><br><br><br> <br>Massachusetts, U.S. | 61 | Director | 2020 | Chief Information Officer of Bose Corporation |
| ESTELLE MÉTAYER^(2)(4)^<br><br><br><br> <br>Québec, Canada | 53 | Director | 2014 | President of EM Strategy Inc. (a strategy consulting firm) and adjunct professor at McGill<br>University |
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2024 Annual Information Form ****
| NICHOLAS<br><br><br>NOMICOS^(3)(8)^<br><br><br><br> <br>Massachusetts, U.S. | 61 | Director | 2016 | Senior Advisor of Nonantum Capital Partners, LLC (a middle market private equity firm) |
|---|---|---|---|---|
| EDWARD PHILIP^(5)(6)^<br><br><br><br> <br>Florida, U.S. | 58 | Director | 2005 | Corporate Director |
| MICHAEL ROSS^(4)^<br><br><br><br> <br>Québec, Canada | 64 | Director | 2022 | Corporate Director |
| BARBARA J.<br><br><br>SAMARDZICH^(1)(7)(9)^<br><br><br><br> <br>Michigan, U.S. | 65 | Director | 2017 | Corporate Director |
(1) Member of the Human Resources & Compensation Committee.
(2) Member of the Nominating Governance and Social Responsibility Committee.
(3) Member of the Investment and Risk Committee.
(4) Member of the Audit Committee.
(5) Chair of the Human Resources & Compensation Committee.
(6) Chair of the Nominating, Governance and Social Responsibility Committee.
(7) Chair of the Investment and Risk Committee.
(8) Chair of the Audit Committee.
(9) Lead Director.
Executive Officers
| Name and Province or State and<br><br><br>Country of Residence | Age | Position(s)/Title |
|---|---|---|
| STÉPHANE BILODEAU<br> <br><br><br><br>Québec, Canada | 57 | Chief Information Officer |
| JOSÉ BOISJOLI<br> <br><br><br><br>Québec, Canada | 66 | Chief Executive Officer and President |
| PATRICK DUSSAULT<br> <br><br><br><br>Québec, Canada | 54 | Executive Vice-President, Global Manufacturing Operations, Powersports and Marine |
| BERNARD GUY<br> <br><br><br><br>Québec, Canada | 59 | Executive Vice-President, Global Product Strategy |
| MARTIN LANGELIER<br> <br><br><br><br>Québec, Canada | 53 | Chief Legal Officer and Corporate Services |
| DENYS LAPOINTE<br> <br><br><br><br>Québec, Canada | 62 | Chief Design Officer |
| ANNE LE BRETON<br> <br><br><br><br>Québec, Canada | 52 | Executive Vice-President, People and Culture |
| SÉBASTIEN MARTEL<br> <br><br><br><br>Québec, Canada | 52 | Chief Financial Officer |
| JOSÉE PERREAULT<br> <br><br><br><br>Québec, Canada | 61 | Chief Marketing Officer |
| SANDY SCULLION<br> <br><br><br><br>Québec, Canada | 56 | President, Powersports and Marine |
| MINH THANH TRAN<br> <br><br><br><br>Québec, Canada | 40 | Executive Vice-President, Corporate Strategy & LVHA Group |
| THOMAS UHR<br> <br><br><br><br>Québec, Canada | 59 | Chief Technology Officer |
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2024 Annual Information Form ****
Biographies
The following are brief profiles of the directors and executive officers of the Company, including a description of each individual’s principal occupation within the past five years.
Non-ExecutiveDirectors
Élaine Beaudoin, Director
Ms. Élaine Beaudoin is Vice-President and director of Beaudier, a private holding company which holds Multiple Voting Shares, since 2019. She is a member of several other boards of directors, including Armtex Inc., Hebdo-litho, Bodycad Inc. and the J.Armand Bombardier Foundation. She also sat on the board of directors of Canam Inc. from 2000 to 2017 and chaired its Human Resources Committee and served as a member of its Audit Committee. From 1989 to 1998, she acted as Chief Executive Officer of Unifix Inc., a company specializing in the manufacturing of light-weight concrete panels. Ms. Élaine Beaudoin is a graduate of McGill University and a member of the Ordre des comptables professionnels agréés du Québec (Québec CPA Order). She holds the ICD.D designation from the Institute of Corporate Directors.
Pierre Beaudoin, Director
Mr. Beaudoin is a corporate director. Mr. Beaudoin joined the Marine Products division of Bombardier Inc. in 1985. In October 1990, he was appointed Vice-President, Product Development of the Sea-Doo/Ski-Doo division. In 1992, he was appointed Executive Vice-President of the Sea-Doo/Ski-Doo division and became President of Bombardier Inc. in January 1994. In April 1996, he was promoted to President and Chief Operating Officer of Bombardier Recreational Products. In February 2001, he was appointed President of Bombardier Aerospace Services Limited, Business Aircraft and he became President and Chief Operating Officer of Bombardier Aerospace Services Limited in October of the same year. On December 13, 2004, in addition to his duties as President and Chief Operating Officer of Bombardier Aerospace Services Limited, he was appointed Executive Vice-President of Bombardier Inc. and became a member of the board of directors of Bombardier Inc. On June 4, 2008, he was appointed President and Chief Executive Officer of Bombardier Inc. and served until 2015. He became Executive Chairman of the board of directors of Bombardier Inc. in February 2015 and Chairman of the board of directors in July 2017. He has also been a member of the board of directors of Power Corporation of Canada since 2005.
JoshuaBekenstein, Director
Mr. Bekenstein is a Senior Advisor at Bain Capital Investors, LLC. (“BCI”) Prior to joining BCI in 1984, Mr. Bekenstein spent several years at Bain & Company, Inc., where he was involved with companies in a variety of industries. Mr. Bekenstein is a member of the board of directors and the Human Resources and Compensation Committee of Dollarama Inc. He also serves as a director of Bright Horizons Family Solutions Inc., for which he is a member of the Compensation Committee. He was a member of the board of directors and the Nominating and Governance Committee of Canada Goose Holdings Inc. until 2023. Mr. Bekenstein received a Bachelor of Arts from Yale University and a Master of Business Administration (MBA) from Harvard Business School.
Charles Bombardier, Director
Mr. Bombardier is a corporate director. He was hired by BRP in 1989, and he later joined the R&D team to develop advanced vehicle concepts (Can-Am, Ski-Doo & Spyder). In 2006, he left the family business and created Jophem Holdings to finance startups, design new vehicle concepts and
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2024 Annual Information Form ****
build prototypes in collaboration with universities. For 10 years, Mr. Bombardier also operated two BRP dealerships in Quebec. Between 2017 and 2019, he was hired as a senior consultant for the International Civil Aviation Organization (ICAO). He is also a member of the board of directors of Bombardier Inc. since 2019. Mr. Bombardier is a Canadian engineer and holds a bachelor’s and a master’s of science degrees from the École de Technologie Supérieure and a certificate in board governance from Université Laval.
Ernesto M. Hernández, Director
Mr. Hernández is a corporate director who has over 40 years of engineering sales, marketing and operations experience in the automotive industry. After starting his career at General Motors (Mexico) in 1980 as a Development Engineer, he worked in several positions including Engineering Manager, Executive Engineer, and Marketing Director. In 2003, he was appointed Vice-President of General Motors de México and Executive Director of Sales, Service and Marketing, where he successfully led the commercial operations of various brands including Chevrolet, Buick, GMC and Cadillac. In 2011, he took the helm as the first Mexican national to be appointed President and Managing Director. He held this role until September 2019 and retired in January 2020. During his tenure, Ernesto M. Hernández managed both the commercial and manufacturing sides of General Motors’ operations in Mexico, Central America and the Caribbean. He sits on the board of directors of Constellation Brands, Inc. and is a member of its Human Resources Committee and its Governance, Nominating and Responsibility Committee. He also sits on the board of directors of Dana Incorporated and is a member of its Audit Committee as well as its Technology and Sustainability Committee. He currently serves in various Chambers of Commerce and Business Councils. Mr. Hernández was an independent director on the board of directors of Grupo KUO, S.A.B. de C.V., DINE, S.A.B. de C.V., and Corporación Zapata, S.A. de C.V. He obtained a Bachelor of Science from InstitutoPolitécnico Nacional and he has also completed a Master of Science in Administration and a Master of Science in Management from the Instituto Tecnológico Autónomo de México and the Massachusetts Institute of Technology, respectively.
Katherine Kountze, Director
Ms. Kountze is the Chief Information Officer (CIO) for Bose Corporation, a consumer retail company that develops sound solutions for entertainment, home audio, aviation, and automotive industries. She has held other various senior IT leadership positions across her 25+ years working in the technology field. Before joining Bose Corporation, Ms. Kountze was the Chief Information Officer for DentaQuest, a company that provides oral health care benefits and delivers oral care, from 2021 to 2022. Between 2012 and 2021, Ms. Kountze was also Senior Vice-President and Chief Information Officer (CIO) for Eversource Energy, the largest provider of electric, gas and water services in the New England area of the United States, where she held that position for 11 years and prior to that Ms. Kountze spent 2 years as the Vice-President and CIO for United Illuminating Company, an electric utility company in Connecticut. She is the Chair for the Boston CIO Leadership Council and a member of the Massachusetts Cybersecurity Council, a cybersecurity advisory group for the Governor of Massachusetts. Ms. Kountze serves on the board of The Children’s Place Inc. and is a member of its Audit Committee since November 2021. She has won several awards including: 2021 Top Women in Energy, 2021 Diversity Women Elite 100, Most Impactful Black Women in Boston 2021, 2017 CIO of the Year, and 2015 Women Leading Stem Award. Ms. Kountze holds a bachelor’s degree in actuarial Math and Science and a master’s degree in Computer Science. She also received a certification in Risk and Information Security Controls (CRISC) in 2023.
Estelle Métayer, Director
Ms. Métayer is the president of EM Strategy Inc. and an adjunct professor at McGill University. Prior to that, she worked at the ING Bank (Netherlands, Poland), Bouygues Group (France, UK), and in Canada at McKinsey & Company, CAE Inc., and Competia Inc. which she founded and sold in 2004.
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2024 Annual Information Form ****
She currently serves on the board of directors, sits on the Governance, Compensation and Human Resources Committee, the Strategy and Innovation Committee and chairs the Audemars Piguet Private Investment Committee of Audemars Piguet Holding S.A. (Switzerland). She also serves on the board of directors of Martur Fompak International (Republic of Türkiye) for which she is a member of the Audit Committee. Ms. Métayer joined the board of directors of Nortera Foods Inc. (Canada, U.S.A.) in December 2022 and chairs its Human Resources and Governance Committee as well as being chair of the board. In the last few years, she served on various advisory boards and boards of directors, including the board of directors of Ivanhoe Cambridge Inc. (Canada) for which she was a member of the Human Resources and Compensation Committee and chaired its Governance and Ethics Committee and Agropur Cooperative (Canada) where she was a member of the technology committee, the Governance Committee and the Sustainable Development Committee. Ms. Métayer is a certified director of the Institut Fran ç ais des Administrateurs and attended the High Performing Boards Program at Harvard Business School. She was trained in the Netherlands, where she obtained her MBA and Drs. from the University of Nijenrode. Ms. Métayer has also developed an expertise in ESG, including climate-related issues, notably through having chaired on several board committees overseeing ESG strategy, and having obtained a certificate on Sustainable Real Estate from Cambridge University in 2021.
Nicholas Nomicos, Director
Mr. Nomicos is a Senior Advisor of Nonantum Capital Partners, LLC, a middle market private equity firm that he founded with other executives in 2018. Prior to that, Mr. Nomicos was at Bain Capital Investors, LLC where he worked from 1999 to 2016 as an Operating Partner focused on investments in the manufacturing and consumer product sectors and as a Managing Director of Bain Capital Credit, LP, the credit arm of Bain Capital Investors, LLC. Previously, Mr. Nomicos was a senior corporate development and manufacturing executive at Oak Industries Inc., and he spent several years at Bain & Company, Inc. where he was an engagement manager. Mr. Nomicos serves on the board of directors and is a member of the Audit Committee of Dollarama Inc. He received a Master of Business Administration (MBA) from Harvard Business School and a Bachelor of Science in Engineering from Princeton University.
Edward Philip, Director
Mr. Philip is a corporate director. He served as the Chief Operating Officer of Partners in Health (a non-profit health care organization) from 2013 until 2017. In addition, Mr. Philip was a Special Partner at Highland Consumer Fund (consumer-oriented private equity fund), serving in this role from 2013 until 2017. He served as Managing General Partner at Highland Consumer Fund from 2006 to 2013. Prior thereto, Mr. Philip served as President and Chief Executive Officer of Decision Matrix Group, Inc. (research and consulting firm) from 2004 to 2005. Prior to joining Decision Matrix Group, Inc., he held several positions at Terra Networks, S.A. (global Internet company), Lycos, Inc. (an Internet service provider and search company), The Walt Disney Company, and prior thereto Mr. Philip spent a number of years in investment banking. He recently retired from the board of directors of Hasbro, Inc., of which he was a director from 2002 until 2023. Mr. Philip is also the Non-Executive Chairman of United Airlines Holdings, Inc. and sits on its Audit Committee, and is also Chairman of its Executive Committee and of its Nominating and Governance Committee. In addition, he is on the board of directors, a member of the Compensation Committee and Chairman of the Audit Committee of Blade Air Mobility, Inc., a technology-powered, global air mobility platform. Mr. Philip received a B.S. in Economics and Mathematics from Vanderbilt University and holds a Master of Business Administration from Harvard Business School.
Michael Ross, Director
Mr. Ross is a corporate director. He was Chief Financial Officer of Sesami Cash Management Technologies Corporation (“Sesami”) from 2022 to 2023. In this role, he was responsible for all financial
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2024 Annual Information Form ****
activities, corporate development, and strategic planning. Prior to joining Sesami, Mr. Ross was Chief Financial Officer of Dollarama Inc. for over a decade. Prior to that, Mr. Ross was CFO of Sanimax Industries, a rendering services company, and spent over 20 years in senior financial roles in the television and broadcasting industry. He began his career as an auditor with Ernst & Young. Mr. Ross is a member of the board of directors of Pixcom Inc., the Fondation CHU Saint Justine and FEI – Quebec Chapter. He was previously a member of the board of directors of Investissement Québec, la Fondation Marie-Vincent, Fondation Dr Clown and Muscular Dystrophy Canada. Mr. Ross holds a bachelor’s degree in commerce and a graduate diploma in accounting from Concordia University. He received the Fellow of the Order distinction (FCPA) in 2012.
Barbara J. Samardzich, Director
Ms. Samardzich is a corporate director. Ms. Samardzich previously held various senior leadership positions across her 26-year career with Ford Motor Company. Before retiring in 2016, she was the Vice-President and Chief Operating Officer of Ford Europe leading a team of over 30,000 employees. In previous years, she served as Vice-President, Product Development; Vice-President, Global Powertrain Engineering and held various roles in powertrain and vehicle engineering within Ford. She has also worked in various engineering roles at Westinghouse Electric Corporation. Ms. Samardzich sits on the board of directors of Adient plc (Ireland) and chairs its Human Capital and Compensation Committee and is a member of its Corporate Governance and Executive Committees. She also serves as a director of Amogy Inc. (a privately-held clean energy company) and is a member of its Compensation Committee and Audit Committee. She served as a director of Velodyne LiDAR and as a member of its Audit Committee and chair of its Compensation Committee until 2021 and as a director of AB SKF until 2022. She has won many awards including CBTNews “Leading Women in Automotive in 2019” and 2016 Automotive News Europe “25 Leading Women in the European Auto Industry”. Ms. Samardzich holds a Bachelor of Science in Mechanical Engineering from the University of Florida, a Master of Science in Mechanical Engineering from Carnegie Mellon University, and a Master of Science in Engineering Management from Wayne State University.
Executive Officer Who Also Serves as Director
José Boisjoli, Chair of the Board of Directors, President and Chief Executive Officer
Mr. Boisjoli is Chair of the Board of Directors of BRP since 2019 and President and Chief Executive Officer of BRP since December 2003, when BRP became a standalone company. In October 1998, Mr. Boisjoli was named President of the Snowmobile and Watercraft division, the largest division of Bombardier Recreational Products Inc. In April 2001, he was given the added responsibility of managing the ATV division. Mr. Boisjoli joined Bombardier Recreational Products Inc. in 1989, after eight years in the pharmaceutical and road safety equipment industries. Mr. Boisjoli served on the board of directors of McCain Foods Group Inc. from January 2018 to February 2022. In April 2005, Mr. Boisjoli received the prestigious titles of Executive of the Year by Powersports Magazine, the most important powersports magazine in the United States, as Entrepreneur of the Year, Québec, by EY in 2014, was named CEO of the year 2017 by the Canadian business newspaper Les Affaires and was also named Global Visionary of the Year in 2023 by the Globe and Mail. Mr. Boisjoli received a Bachelor of Engineering from the Université de Sherbrooke.
Executive Officers Who Do Not Serve asDirectors
Stéphane Bilodeau, Chief Information Officer
Mr. Bilodeau joined BRP in 2022 as Chief Information Officer (CIO). Previously, he was CIO at the Business Development Bank of Canada (BDC) from 2017. Mr. Bilodeau began his career in information technology at Desjardins bank in 1988, and first became a Senior Vice-President at DMR
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2024 Annual Information Form ****
Consulting, a subsidiary of Fujitsu, in 2000. More recently, he has occupied roles as Executive Vice-President of Operations (COO) at the Montreal Exchange (2007-2009), and joined the National Bank of Canada in 2010, where he headed the Bank’s entire operations as COO from 2012 to 2015. He also led the development of the 2015 and 2016 editions of the FinTech Canada Forum, presented by Finance Montreal. Chairman of the Board of La Maison du Père, a foundation dedicated to helping Montreal’s homeless, since 2015, he holds an Advanced Management degree from Harvard Business School, an MBA from HEC Montréal, and a bachelor’s in IT Management from the Université du Québec à Montréal.
Patrick Dussault, Executive Vice-President, Global ManufacturingOperations, Powersports and Marine
In 2024, Mr. Dussault was named Executive Vice-President, Global Manufacturing Operations. This appointment added Marine manufacturing to his oversight of Powersports manufacturing operations in Canada, Mexico, and Finland, which he had taken on as Vice-President and General Manager, Manufacturing Operations in 2022. Mr. Dussault joined BRP in 1996 as Manager, Industrial Engineering, Internal Fabrication, gaining a wide range of experience in the fields of manufacturing and logistics over the next decade. He first became a director in 2006, responsible for leading the establishment of BRP’s first plant in Mexico, then for global manufacturing strategy and supply chain optimization in 2008. This led him to become a vice-president in 2014. Mr. Dussault obtained a bachelor’s in Mechanical Engineering from the École Polytechnique de Montréal and an MBA from the Université de Sherbrooke.
Bernard Guy, Executive Vice-President, Global Product Strategy
Mr. Guy was appointed Executive Vice-President, Global Product Strategy in 2022, after having previously held the position of Senior Vice-President, Global Product Strategy for both Powersports and Marine Products since 2017. During 2023, he also held the presidency of the Marine Group. Mr. Guy joined BRP in 1987 as a Project Engineer for Ski-Doo R&D, and gained in-depth experience within the company, including in procurement, product planning, process reengineering, sales, marketing, and business strategy. He became a director in 2006, of Can-Am marketing, rising to vice-president in 2009 and adding Can-Am sales to his responsibilities. This led him to head sales and network development for all of North America in 2012, before becoming general manager of the region in 2014. Mr. Guy holds a bachelor’s in Mechanical Engineering, as well as a Master of Business Administration, from the Université de Sherbrooke.
Martin Langelier, Chief Legal Officer and Corporate Services
Appointed Chief Legal Officer and Corporate Services in 2024, Mr. Langelier was named Chief Legal Officer in 2022, previously holding the title of Senior Vice-President, General Counsel & Public Affairs from 2014. He joined BRP in 2000 as a legal counsel for commercial transactions, rising to the position of Vice-President, General Counsel and Secretary in 2008. Previously, he worked in private practice for a major legal firm in Montreal. He currently serves on the board of directors of Manufacturiers et Exportateurs du Québec, a manufacturing trade association. Mr. Langelier has been recognized with an appointment to the Legal 500’s GC Powerlist – Canada (2016), and a Lexpert Zenith award (2018), as a change agent in the field of law. He holds a Bachelor of Laws from the Université de Sherbrooke, and a Master of Business Administration in International Business from the Birmingham Business School, England.
Denys Lapointe, Chief Design Officer
Appointed Chief Design Officer in 2022, Mr. Lapointe was previously Senior Vice-President, Design, Innovation and Creative Services, from 2019. He joined the company as a junior product
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designer for Sea-Doo in 1985, and became Vice-President, Design for Sea-Doo and Ski-Doo in 1995. In 2001, he took on company-wide responsibility as Vice-President, Design and Innovation, then as Executive Vice-President in 2008. He is a board member of the Centre de technologiesavancées (CTA) BRP – Université de Sherbrooke, and of La Factry, a school of creativity sciences in Montreal. A recipient of many international design awards, he was inducted into the National Marine Manufacturers Association Canada Hall of Fame for his contributions to the marine industry, in 2017, and named an emeritus member of the Association des designers industriels du Québec (ADIQ) in 2022. He holds a bachelor’s in Environmental Design from the Université du Québec à Montréal.
Anne Le Breton, Executive Vice-President, People and Culture
Ms. Le Breton was named Executive Vice-President, People and Culture in 2022, after having previously held the position of Senior Vice-President, Human Resources, from 2016. She joined BRP in 2002, from Bombardier Aerospace, to head human resources for BRP’s International division, based in the company’s offices in Lausanne. In 2014, she took on worldwide responsibility for BRP people as Vice-President, Human Resources, for Global Sales and Consumer Experience, Product Engineering and Manufacturing Operations. She currently serves on the board of directors of Savaria Corporation, a global leader in the accessibility industry, and was on the board of Barrette Outdoor Living, North American leader in the outdoor product industry, from 2021 to 2022. Ms. Le Breton obtained a bachelor’s in Industrial Relations from the Université de Montréal.
Sébastien Martel, Chief Financial Officer
Chief Financial Officer since 2014, Mr. Martel was previously Senior Vice-President, Strategy and Business Development from 2011. He joined BRP in 2004, as Director, Financial Information, and became Vice-President, Finance and Control, in 2007. In 2013, Mr. Martel piloted the company’s first public offering, on the Toronto Stock Exchange, which earned BRP the title of IPO of the year. In 2018, he successfully introduced BRP to a second stock exchange when the company was listed on NASDAQ in the USA. Prior to joining BRP, Mr. Martel was a senior manager in audit at a major international accounting firm. He sits on the board of directors of TFI International, and is a CPA with a bachelor’s degree and a diploma in Public Accountancy from McGill University.
Josée Perreault, Chief Marketing Officer
Appointed Chief Marketing Officer in 2024, Ms. Perreault was named Executive Vice-President, Omnichannel, in 2022, having previously held the position of Senior Vice-President, Omnichannel Experience & Apparel from 2021. Omnichannel remains part of her portfolio. Ms. Perreault joined BRP in 2016 as Senior Vice-President, Can-Am On-Road. Prior to BRP, she worked at Oakley for over 20 years, beginning as a brand manager in 1994, and occupying a number of leadership positions in sales, marketing and general management, culminating in Senior Vice-President, World Business, from 2010. She has been a board member of ESG UQAM, a Montreal public French-language university since 2020. Previously, she served on the boards of Lumenpulse (2015-2017), WSP Global (2015-2018), and BonLook (2015-2022). Ms. Perreault holds a bachelor’s in Urban Planning from the Universit é du Qu é bec à Montr é al, and a Master of Business Administration in Marketing from Concordia University.
Sandy Scullion, President,Powersports and Marine
In 2024, Mr. Scullion was appointed President, Powersports and Marine, adding the Marine Group to the responsibilities he assumed in 2022. Previously, he had held the position of Senior Vice-President, Global Retail and Services for the Powersports Group from 2016. Mr. Scullion joined BRP in 1994 as a District Sales Manager. In the following years, he held various positions of increasing responsibility, becoming Vice-President in 2012, of Parts, Accessories and Clothing (now Apparel) and Global Distribution, followed by Vice-President and Regional Manager of BRP’s Western Europe,
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Middle East and Africa (WEMEA) region in 2014. He has wide experience in management within the company, both in Europe and North America, including sales and network management, marketing, product development, and distribution and operations. Mr. Scullion obtained a bachelor’s in Finance from Université Laval (Canada).
Minh Thanh Tran, Executive Vice-President, Corporate Strategy & LVHA Group
In 2022, Mr. Tran was appointed Executive Vice-President, Corporate Strategy and LVHA Group. With this new position, he added the recently created Low-Voltage & Human-Assisted (LVHA) Group to the global corporate strategy and transformation responsibilities he had undertaken from 2019, first as Vice-President, Corporate Strategy & Development and Global Transformation, then as Senior Vice-President. In the latter role, he successfully accomplished the implementation of the new North American ERP system. Mr. Tran joined BRP in 2017 as Director, Strategy and Mergers & Acquisitions, and spearheaded the acquisitions behind the Marine Group and EV Program. He began his career in the world of investment and corporate banking and worked at BMO Capital Markets, where he was involved in BRP’s initial public offering in 2013. Prior to that, he was at Lazard Frères in New York. He holds a bachelor’s in Finance from HEC Montréal.
Thomas Uhr, Chief Technology Officer
In 2022, Mr. Uhr was appointed to the newly created role of Chief Technology Officer (CTO). Since 2018, he had been Senior Vice-President, Product Engineering & Manufacturing Operations for the Powersports Group. He joined BRP’s European operations in 2014, as General Manager of BRP-Rotax in Austria, as well as Vice-President, Powertrain, and took on the additional responsibility of Vice-President, R&D/Operations for Lynx snowmobiles in 2017. Mr. Uhr began his career at Mercedes-Benz in Germany in 1992, becoming Director of Manufacturing at Ballard Power Systems, Canada, in 1998 (part-acquired by Daimler-Benz in 1997). He served as founding General Manager of MDC Power GmbH in 2001 – a Mercedes-Mitsubishi joint venture, and served as plant manager of Mercedes’s Berlin operation from 2007. From 2011, he headed R&D prototyping and testing activities for Mercedes Cars. Mr. Uhr holds a degree (Dipl.-Ing.) in Production Technology Engineering from the University of Aachen (RWTH), Germany.
Corporate Cease Trade Orders
None of the Company’s directors or executive officers is, as at the date of this Annual Information Form, or has been, within the 10 years prior to the date of this Annual Information Form, a director, chief executive officer or chief financial officer of any company (including the Company) that, while such person was acting in that capacity (or after such person ceased to act in that capacity but resulting from an event that occurred while that person was acting in such capacity), was the subject of a cease trade order, an order similar to a cease trade order, or an order that denied the company access to any exemption under securities legislation, in each case, for a period of more than 30 consecutive days.
Bankruptcies
None of the Company’s directors or executive officers is, as at the date of this Annual Information Form, or has been, within the 10 years prior to the date of this Annual Information Form, a director or executive officer of any company (including the Company), that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or comprise with creditors or had a receiver, receiver manager or trustee
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appointed to hold its assets, except for (i) Élaine Beaudoin who is a board member of Bodycad Laboratories Inc., since 2013, which was under the protection of the Companies’ Creditors Arrangement Act (“CCAA”) between December 22, 2022 and April 28, 2023, (ii) Joshua Bekenstein who was a director of Toys “R” Us, Inc. from 2005 to 2019, which filed for bankruptcy in September 2017, and who was from 2010 to 2017 a director of The Gymboree Corporation, which filed for bankruptcy in June 2017.
None of the Company’s directors or executive officers has, within the 10 years prior to the date of this Annual Information Form, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or comprise with creditors, or had a receiver, receiver manager or trustee appointed to hold its assets. ****
Shareholder Bankruptcies
No shareholder holding a sufficient number of securities to affect materially the control of the Company is, as at the date of this Annual Information Form, or has been within 10 years before the date of this Annual Information Form, a director or executive officer of any company (including the Company) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets.
No shareholder holding a sufficient number of securities to affect materially the control of the Company, nor any personal holding company of any such person, has, within the 10 years before the date of this Annual Information Form, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the shareholder.
Securities Penalties or Sanctions
No director or executive officer of the Company or shareholder holding a sufficient number of securities of the Company to affect materially the control of the Company, nor any personal holding company of any such person, has:
| ● | been subject to any penalties or sanctions imposed by a court relating to securities legislation or by a securities<br>regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or |
|---|---|
| ● | been subject to any other penalties or sanctions imposed by a court or regulatory body that would likely be considered<br>important to a reasonable investor in making an investment decision. |
| --- | --- |
Conflicts of Interest
To the best of the Company’s knowledge, there are no known existing or potential conflicts of interest among the Company and its directors, officers or other members of management as a result of their outside business interests except that certain of the Company’s directors and officers serve as directors and officers of other companies, and therefore it is possible that a conflict may arise between their duties to the Company and their duties as a director or officer of such other companies. See “Directors and Officers” and “Interest of Management and Others in Material Transactions”.
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Indemnification and Insurance
The Company has implemented a director and officer insurance program and has entered into indemnification agreements with each of its directors and executive officers. The indemnification agreements generally require that the Company indemnify and hold the indemnitees harmless to the greatest extent permitted by law for liabilities arising out of the indemnitees’ service to the Company as directors and executive officers, provided that the indemnitees acted honestly and in good faith and in a manner the indemnitees reasonably believed to be in or not opposed to the Company’s best interests and, with respect to criminal and administrative actions or proceedings that are enforced by monetary penalty, the indemnitees had no reasonable grounds to believe that his or her conduct was unlawful. The indemnification agreements also provide for the advancement of defense expenses to the indemnitees by the Company. The indemnification provisions do not however apply to any amounts that may be clawed back in accordance with the Company’s Clawback Policy, which allows the Company to recover certain compensation or benefits from directors and officers under specific circumstances.
LEGAL PROCEEDINGS AND REGULATORY ACTIONS
The Company is involved from time to time in legal proceedings and regulatory actions in the normal course of business and operations. As at January 31, 2024, the Company had approximately **** 223 pending litigation cases. See “Risk Factors — The Company may be unable to protect its intellectual property or it may incur substantial costs as a result of litigation or other proceedings relating to protection of its intellectual property” in the 2024 MD&A.
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
Other than as set out below or as described elsewhere in this Annual Information Form, none of (i) the directors or executive officers of the Company, (ii) the shareholders who beneficially own or control or direct, directly or indirectly, more than 10% of the voting shares of the Company, or (iii) any associate or affiliate of the persons referred to in (i) and (ii), has or has had any material interest, direct or indirect, in any transaction within the three most recently completed financial years or during the current financial year that has materially affected or is reasonably expected to materially affect the Company.
Reimbursement to Bombardier Inc., a company related to Beaudier Group
Pursuant to the purchase agreement entered into in 2003 in connection with the acquisition of the recreational products business of Bombardier Inc., the Company is required to reimburse to Bombardier Inc. income taxes that amounted to $22.4 million **** as of January 31, 2024. The reimbursement will begin when Bombardier Inc. starts making any income tax payments in Canada and/or the United States.
In addition, in connection with the above-mentioned transaction, the Company entered into a trademark license agreement whereby it has the right to continue to use certain trademarks of Bombardier Inc. that were not otherwise assigned to the Company in connection with such transaction, subject to certain conditions. The license allows the Company to use “Bombardier” in the corporate name of certain subsidiaries of the Company as long as, among other things, Beaudier Group maintains at least a 10% voting or equity interest in the Company.
INDEPENDENT AUDITOR, TRANSFER AGENT AND REGISTRAR
The independent auditor of the Company is Deloitte LLP, 1190 avenue des Canadiens-de-Montréal, Suite 500, Montreal, Québec, H3B 0M7.
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The transfer agent and registrar for the Subordinate Voting Shares and Multiple Voting Shares is Computershare Investor Services Inc. at their offices in Montreal and Toronto.
MATERIAL CONTRACTS
The following are the only material contracts, other than those contracts entered into in the ordinary course of business, which the Company has entered into since the beginning of the last financial year ended January 31, 2024, or entered into prior to such date, but which are still in effect and that are required to be filed with Canadian securities regulatory authorization in accordance with Section 12.2 of National Instrument – 51-102 Continuous DisclosureObligations. Each of the summaries below describes certain material provisions of the relevant material contract and is subject to, and qualified in its entirety by reference to, the relevant material contract, a copy of which is available on the SEDAR+ website at www.sedarplus.ca.
Underwriting Agreements
On January 26, 2024, Bain Capital entered into an underwriting agreement with a syndicate of underwriters and the Company pursuant to which it sold 2,000,000 Subordinate Voting Shares of the Company at a price of $91.00 per Subordinate Voting Sharegross proceeds of $182,000,000. The Company did not receive any of the proceeds from the 2024 Secondary Offering.
Term Facility
Pursuant to a fourth amended and restated credit agreement entered into between a syndicate of lenders and subsidiaries of the Company on May 23, 2018, term facilities in the aggregate principal amount of US$900.0 million maturing on May 23, 2025 were made available to Bombardier Recreational Products Inc. in U.S. dollars (as amended from time to time, the “Term Facility”).
On July 23, 2019, the Company amended the Term Facility to add a new US$335.0 million tranche for a total principal amount of US$1,235.0 million.
On February 4, 2020, the Company amended the Term Facility whereby the Term Facility was consolidated into a single tranche, the cost of borrowing was reduced by 0.50% for the previous US$335.0 million tranche and the maturity was extended from May 2025 to May 2027 (then referred to as the “Term Loan B-1”).
On May 8, 2020, the Company entered into an amendment to the Term Facility which provided for an incremental US$600.0 million tranche under its Term Facility (then referred to as the “Term Loan B-2”). This new tranche had a May 2027 maturity and, consistent with the existing tranche of the Term Facility, was not subject to any financial covenants.
On February 16, 2021, the Company amended the Term Facility by increasing the amount outstanding under its Term Loan B-1 by US$300 million (then referred to as the **** “Term Loan B-1”); the proceeds therefrom, along with cash from its balance sheet, were used to repay, in full, the then outstanding Term Loan B-2, which had less favourable terms.
On June 10, 2022, the Company entered into an amendment to the Term Facility which provided for an incremental US$100.0 million tranche under its Term Facility (then referred to as the **** “Term Loan B-2”). This new tranche had a June 2024 maturity and, consistent with the existing tranche of the Term Facility, was not subject to any financial covenants.
On December 13, 2022, the Company entered into an amendment to the Term Facility which provided for an incremental US$500.0 million tranche under its Term Facility (then referred to as the
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“Term Loan B-2”). This new tranche had a December 2029 maturity and, consistent with the existing tranche of the Term Facility, was not subject to any financial covenants. The proceeds therefrom, along with cash from its balance sheet, were used to repay, in full, the then outstanding US$100.0 million Term Loan B-2 as well as outstanding borrowings under the Revolving Credit Facilities.
On October 4, 2023, the Company entered into an amendment to the Term Facility whereby it refinanced the then outstanding US$496 million Term Loan B-2 due December 2029, going from a rate of Term SOFR plus 3.50% to a rate of Term SOFR plus 2.75% (the current “Term Loan B-2”), effectively reducing its cost of borrowing by 0.75%, with all other terms remaining unchanged.
On January 22, 2024, the Company entered into an amendment to the Term Facility providing for a US$1,000.0 million tranche under its Term Facility, bearing interest at a rate of Term SOFR plus 2.75% with a Term SOFR floor of 0.0% (the “Term Loan B-3”). The existing holders of US$954 million principal amount of the then outstanding US$1,465 million Term Loan B-1 due May 2027 agreed to exchange their debt for debt under this new tranche, and an incremental loan of US$45.8 million was extended under that new tranche. The new tranche has a January 2031 maturity and, consistent with the existing tranches of the Term Facility, is not subject to any financial covenants. Other than the outstanding amount of the Term Loan B-1, which decreased from US$1,466 million to US$466 million, all other terms of the Term Loan B-1 remained unchanged including the applicable interest of 200 basis points over Term SOFR with a Term SOFR floor of 0.0% (the current “Term Loan B-1”).
Security holders Agreements
In connection with the IPO on May 29, 2013, the Beaudier Group, Bain Capital, CDPQ and the Company entered into a nomination rights agreement (the “Nomination Rights Agreement”), an amended and restated registration rights agreement (the “Registration Rights Agreement”) and the Coattail Agreement.
Nomination Rights Agreement
The Nomination Rights Agreement provides that Beaudier Group, Bain Capital and CDPQ shall cast all votes to which they are entitled to fix the size of the Board of Directors at 13 members and to elect members of the Board in accordance with the provisions thereof. The Beaudier Group, Bain Capital and CDPQ have certain rights to designate members of the Board of Directors. As of the date of this Annual Information Form, Bain Capital, Beaudier Group and CDPQ are entitled to designate three, three and one member(s) of the Board of Directors, respectively, under the terms of the Nomination Rights Agreement.
Registration Rights Agreement
The Registration Rights Agreement provides for demand registration rights in favour of the parties to the Registration Rights Agreement that enable them to require the Company to qualify by prospectus in Canada or, following the one-year anniversary of the closing of the IPO and subject to certain conditions, the United States, all or any portion of the Shares held by them for a distribution to the public, provided such demand will result in a minimum offering size of $50 million.
The Registration Rights Agreement also provides for incidental registration rights allowing the parties to the Registration Rights Agreement to include their Subordinate Voting Shares in certain public offerings of Subordinate Voting Shares, subject to certain underwriters’ cutback rights.
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Coattail Agreement
See “Description of the Capital Structure — Shares — Take-Over Bid Protection” for a description of the Coattail Agreement.
INTEREST OF EXPERTS
The current independent auditor of the Company, Deloitte LLP, who has issued an auditor’s report dated March 27, 2024 **** in respect of the Company’s consolidated financial statements, which comprise the consolidated statements of financial position as at January 31, 2024 and January 31, 2023 and the consolidated statements of net income, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for the years then ended, has informed the Company that it is independent with respect to the Company within the meaning of the Code of Ethics of the Ordre des comptables professionnels agr é é s du Qu é bec.
AUDIT COMMITTEE
Charter of the Audit Committee
The Board has adopted a written charter (the “Charter of the Audit Committee”) describing the mandate of the audit committee of the Company (the “Audit Committee”). The Charter of the Audit Committee reflects the purpose of the Audit Committee, which is to assist the Board of Directors in fulfilling its oversight responsibilities with respect to ensuring the effectiveness and adequacy of the disclosure of controls and procedures over financial reporting and non-financial reporting, ensuring that adequate procedures are in place for the review of the Company’s public disclosure documents that contain financial information, including CSR-ESG-related disclosure documents, ensuring that an effective internal audit process has been implemented, ensuring that an effective risk management and financial control framework has been implemented and tested by the Company’s management, providing better communication between directors, management, internal auditors and external auditors, overseeing the work and reviewing the independence of the external auditors, and reporting to the Board of Directors on any outstanding issue. The Audit Committee also reviews significant accounting and reporting issues, including unusual or sensitive matters such as disclosure of related party transactions, and has oversight of information technology security and control, as well as of cybersecurity and data protection as a whole, and not just with respect to internal controls. The text of the Charter of the Audit Committee is attached to this Annual Information Form as Appendix A.
Compositionof the Audit Committee
As set forth in the Charter of the Audit Committee, the Audit Committee must be composed of a minimum of three directors, each of whom needs to be independent and to meet the criteria for financial literacy established by applicable laws, including National Instrument 52-110 – Audit Committees. As of the date hereof, the Audit Committee is composed of Mses. Métayer and Kountze and Messrs. Hernández, Ross and Nomicos, all of whom are independent and meet the criteria for financial literacy established by applicable laws, including National Instrument 52-110 – Audit Committees. Mr. Nomicos is the Chair of the Audit Committee.
Relevant Education and Experience of the Audit Committee Members
Each of the Audit Committee members has an understanding of the accounting principles used by the Company to prepare its financial statements and varied experience as to the general application of such accounting principles, as well as an understanding of the internal controls and procedures necessary for financial reporting.
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The education and experience of each Audit Committee member that is relevant to the performance of his responsibilities as an Audit Committee member is as follows:
Mr. ***Nicholas Nomicos (Chair)***is a Senior Advisor of Nonantum Capital Partners, LLC, a middle market private equity firm that he founded with other executives in 2018. Prior to that, Mr. Nomicos was at Bain Capital Investors, LLC where he worked from 1999 to 2016 as an Operating Partner focused on investments in the manufacturing and consumer product sectors and as a Managing Director of Bain Capital Credit, LP, the credit arm of Bain Capital Investors, LLC. Previously, Mr. Nomicos was a senior corporate development and manufacturing executive at Oak Industries Inc., and he spent several years at Bain & Company, Inc. where he was an engagement manager. Mr. Nomicos serves on the board of directors and is a member of the Audit Committee of Dollarama Inc. He received a Master of Business Administration (MBA) from Harvard Business School and a Bachelor of Science in Engineering from Princeton University.
Mr. Ernesto M. Hernández is a corporate director who has over 40 years of engineering sales, marketing and operations experience in the automotive industry. After starting his career at General Motors (Mexico) in 1980 as a Development Engineer, he worked in several positions including Engineering Manager, Executive Engineer, and Marketing Director. In 2003, he was appointed Vice-President of General Motors de México and Executive Director of Sales, Service and Marketing, where he successfully led the commercial operations of various brands including Chevrolet, Buick, GMC and Cadillac. In 2011, he took the helm as the first Mexican national to be appointed President and Managing Director. He held this role until September 2019 and retired in January 2020. During his tenure, Ernesto M. Hernández managed both the commercial and manufacturing sides of General Motors’ operations in Mexico, Central America and the Caribbean. He sits on the board of directors of Constellation Brands, Inc. and is a member of its Human Resources Committe and the Governance, Nominating and Responsibility Committee. He also sits on the board of directors of Dana Incorporated and is a member of its Audit Committee as well as its Technology and Sustainability Committee. He currently serves in various Chambers of Commerce and Business Councils. Mr. Hernández was an independent director on the board of directors of Grupo KUO, S.A.B. de C.V., DINE, S.A.B. de C.V., and Corporación Zapata, S.A. de C.V. He obtained a Bachelor of Science from Instituto Politécnico Nacional and he has also completed a Master of Science in Administration and a Master of Science in Management from the Instituto Tecnológico Autónomo de México and the Massachusetts Institute of Technology, respectively.
Ms. Katherine Kountze is the Chief Information Officer (CIO) for Bose Corporation, a consumer retail company that develops sound solutions for entertainment, home audio, aviation, and automotive industries. She has held other various senior IT leadership positions across her 25+ years working in the technology field. Before joining Bose Corporation, Ms. Kountze was the Chief Information Officer for DentaQuest, a company that provides oral health care benefits and delivers oral care, from 2021 to 2022. Between 2012 and 2021, Ms. Kountze was also Senior Vice-President and Chief Information Officer (CIO) for Eversource Energy, the largest provider of electric, gas and water services in the New England area of the United States, where she held that position for 11 years and prior to that Ms. Kountze spent 2 years as the Vice-President and CIO for United Illuminating Company, an electric utility company in Connecticut. She is the Chair for the Boston CIO Leadership Council and a member of the Massachusetts Cybersecurity Council, a cybersecurity advisory group for the Governor of Massachusetts. Ms. Kountze serves on the board of The Children’s Place Inc. and is a member of its Audit Committee since November 2021. She has won several awards including: 2021 Top Women in Energy, 2021 Diversity Women Elite 100, Most Impactful Black Women in Boston 2021, 2017 CIO of the Year, and 2015 Women Leading Stem Award. Ms. Kountze holds a bachelor’s degree in actuarial Math and Science and a master’s degree in Computer Science. She also received a certification in Risk and Information Security Controls (CRISC) in 2023.
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Ms. Estelle Métayer
Ms. Métayer is the president of EM Strategy Inc. and an adjunct professor at McGill University. Prior to that, she worked at the ING Bank (Netherlands, Poland), Bouygues Group (France, UK), and in Canada at McKinsey & Company, CAE Inc., and Competia Inc. which she founded and sold in 2004. She currently serves on the board of directors, sits on the Governance, Compensation and Human Resources Committee, the Strategy and Innovation Committee and chairs the Audemars Piguet Private Investment Committee of Audemars Piguet Holding S.A. (Switzerland). She also serves on the board of directors of Martur Fompak International (Republic of Türkiye) for which she is a member of the Audit Committee. Ms. Métayer joined the board of directors of Nortera Foods Inc. (Canada, U.S.A.) in December 2022 and chairs its Human Resources and Governance Committee as well as being chair of the board. In the last few years, she served on various advisory boards and boards of directors, including the board of directors of Ivanhoe Cambridge Inc. (Canada) for which she was a member of the Human Resources and Compensation Committee and chaired its Governance and Ethics Committee and Agropur Cooperative (Canada) where she was a member of the technology committee, the Governance Committee and the Sustainable Development Committee. Ms. Métayer is a certified director of the Institut Français des Administrateurs and attended the High Performing Boards Program at Harvard Business School. She was trained in the Netherlands, where she obtained her MBA and Drs. from the University of Nijenrode. Ms. Métayer has also developed an expertise in ESG, including climate-related issues, notably through having chaired on several board committees overseeing ESG strategy, and having obtained a certificate on Sustainable Real Estate from Cambridge University in 2021.
Mr. MichaelRoss is a corporate director. He was Chief Financial Officer of Sesami Cash Management Technologies Corporation (“Sesami”) from 2022 to 2023. In this role, he was responsible for all financial activities, corporate development, and strategic planning. Prior to joining Sesami, Mr. Ross was Chief Financial Officer of Dollarama Inc. for over a decade. Prior to that, Mr. Ross was CFO of Sanimax Industries, a rendering services company, and spent over 20 years in senior financial roles in the television and broadcasting industry. He began his career as an auditor with Ernst & Young. Mr. Ross is a member of the board of directors of Pixcom Inc., the Fondation CHU Saint Justine and FEI – Quebec Chapter. He was previously a member of the board of directors of Investissement Québec, la Fondation Marie-Vincent, Fondation Dr Clown and Muscular Dystrophy Canada. Mr. Ross holds a bachelor’s degree in commerce and a graduate diploma in accounting from Concordia University. He received the Fellow of the Order distinction (FCPA) in 2012
IndependentAuditor Fees
In Fiscal 2024 and Fiscal 2023, the Company was invoiced the following fees by its independent auditor, Deloitte LLP:
| Fiscal 2024 | |||
|---|---|---|---|
| Audit Fees^(1)^ | **** | 5,515,701 | $4,541,500 |
| Audit Related Fees^(2)^ | **** | 1,165,189 | 772,597 |
| Tax Fees^(3)^ | **** | 124,674 | 126,429 |
| All Other Fees^(4)^ | **** | 1,196 | - |
| Total Fees Paid | 6,806,760 | 5,440,526 |
All values are in US Dollars.
| (1) | “Audit Fees” include fees necessary to perform the annual audit or reviews of the consolidated financial<br>statements. |
|---|---|
| (2) | “Audit Related Fees” include fees for assurance and related services by the independent auditor that are<br>reasonably related to the performance of statutory audit or review of the Company’s financial statements other than those included in “Audit Fees,” such as consultation on accounting and reporting matters. |
| --- | --- |
| (3) | “Tax Fees” include fees for all tax services other than those included in “Audit Fees” and<br>“Audit-Related Fees”. This category includes fees for tax compliance, tax advice and tax planning. |
| --- | --- |
| (4) | “Other Fees” include fees for products and services provided by the independent auditor other than those<br>included above. |
| --- | --- |
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2024 Annual Information Form ****
The Audit Committee is responsible for the pre-approval of all and any non-audit services to be provided to the Company or its subsidiary entities by the independent auditor. At least annually, the Audit Committee shall review and confirm the independence of the independent auditor.
ADDITIONAL INFORMATION
Additional information relating to the Company may be found on the Company’s website at www.brp.com, on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov.
Additional information, including, without limitation, directors’ and officers’ remuneration and indebtedness, principal holders of the Company’s securities and securities authorized for issuance under equity compensation plans, will be contained in the Company’s information circular for its annual meeting of shareholders.
Additional information is provided in the audited consolidated financial statements and management’s discussion and analysis of the Company for Fiscal 2024.
GLOSSARY OF TERMS
“2024 Secondary Offering” has the meaning set out under the heading “General Development of the Business”.
“2021 SIB” has the meaning set out under the heading “Public Offerings and Other Transactions”.
“2022 SIB” has the meaning set out under the heading “Public Offerings and Other Transactions”.
“2024 MD&A” has the meaning set out under the heading “Explanatory Notes – IFRS and Non-IFRS Measures”.
“3WV” means three-wheeled vehicle.
“Alumacraft” has the meaning set out under the heading “General Development of the Business”.
“Annual Information Form” means this annual information form of the Company dated March 27, 2024.
“ATV” means all-terrain vehicle.
“Audit Committee” means the audit committee of the Company.
“Bain Capital” referred to certain investment funds affiliated with Bain Capital Investors, LLC. Any references to Bain Capital after December 21, 2021, shall mean Bain Capital Integral Investors II, L.P.
“Beaudier Group” means, collectively, Beaudier Inc. and 4338618 Canada Inc.
“Board” or “Board of Directors” means the board of directors of the Company.
“CDPQ” means the Caisse de dépôt et placement du Québec, and includes any of its affiliates.
“Charter of the Audit Committee” means the written charter describing the mandate of the Audit Committee, as adopted and amended by the Board of Directors upon the recommendation of the Audit Committee.
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2024 Annual Information Form ****
“Coattail Agreement” means the coattail agreement entered into by the Beaudier Group, Bain Capital and CDPQ, as the owners of all the outstanding Multiple Voting Shares, the Company and a trustee on May 29, 2013.
“Code” has the meaning set out under the heading “Corporate Social Responsibility”.
“Company” means BRP Inc. and its direct and indirect subsidiaries and predecessors or other entities controlled by them, unless otherwise noted or the context otherwise requires.
“Convertible Securities” has the meaning set out under the heading “Description of the Capital Structure — Shares — Subscription Rights”.
“Distributed Securities” has the meaning set out under the heading “Description of the Capital Structure — Shares — Subscription Rights”.
“Distribution” has the meaning set out under the heading “Description of the Capital Structure — Shares — Subscription Rights”.
“ESG” has the meaning set out under the heading “Explanatory Notes — Corporate Social Responsibility”.
“EV” has the meaning set out under the heading “General Development of the Business”.
“Fiscal 2020” means the Company’s fiscal year ending January 31, 2020.
“Fiscal 2021” means the Company’s fiscal year ending January 31, 2021.
“Fiscal 2022” means the Company’s fiscal year ending January 31, 2022.
“Fiscal 2023” means the Company’s fiscal year ending January 31, 2023.
“Fiscal 2024” means the Company’s fiscal year ending January 31, 2024.
“Fiscal 2025” means the Company’s fiscal year ending January 31, 2025.
“hp” means horsepower.
“IFRS” means the International Financing Reporting Standards.
“International” means all jurisdictions other than Canada and the United States.
“Investment and Risk Committee” means the investment and risk committee of the Company.
“IPO” means the initial public offering of the Company which closed on May 29, 2013.
“IT” has the meaning set out under the heading “Business of the Company and its industry — Marketing”.
“Juárez 1” **** has the meaning set out under the heading “Business of the Company and its industry — Manufacturing Facilities and Operations”.
“Juárez 2” has the meaning set out under the heading “Business of the Company and its industry — **** Manufacturing Facilities and Operations”.
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2024 Annual Information Form ****
“Juárez 3” has the meaning set out under the heading “Business of the Company and its industry — Manufacturing Facilities and Operations”.
“LVHA Group” has the meaning set out under the heading “General Development of the Business”.
“Marine Products” means Alumacraft, Manitou, Quintrex, Stacerand Yellowfin boats, Rotax engines for jet boats and the Rotax S outboard engine with Stealth Technology.
“Megatech” has the meaning set out under the heading “Overview of the Company — Employees”.
“Multiple Voting Shares” means multiple voting shares in the capital of the Company.
“MSRP” means manufacturer suggested retail price as set out under the heading “Business of the Company and its industry – BRP Brands and Products – Powersport — Year-Round Products”.
“Nasdaq” has the meaning set out under the heading “Public Offerings and Other Transactions”.
“Nomination Rights Agreement” means the nomination rights agreement entered into by the Company and the Beaudier Group, Bain Capital and CDPQ on May 29, 2013.
“North America” means Canada and the United States, and excludes Mexico.
“OEM” means original equipment manufacturer.
“PA&A” means parts, accessories and apparel and other services sold to third parties.
“Person” means any individual, partnership, corporation, company, association, trust, joint venture or limited liability company.
“Pinion” has the meaning set out under the heading “General Development of the Business”.
“Powersports Products” means Year-Round Products, Seasonal Products and Powersports PA&A, OEM engines and gearboxes.
“Preferred Shares” means preferred shares in the capital of the Company.
“PWC” means personal watercraft.
“Registration Rights Agreement” means the amended and restated registration rights agreement entered into by the Company and the Beaudier Group, Bain Capital and CDPQ on May 29, 2013.
“Revolving Credit Facilities” means the third amended and restated credit agreement entered into by subsidiaries of the Company on May 23, 2018 (as amended on March 14, 2019, May 4, 2021, February 16, 2022 and June 14, 2022) pursuant to which credit facilities in the aggregate principal amount of $1.5 billion have been made available to Bombardier Recreational Products Inc. and BRP Inc.
“Rights toSubscribe” has the meaning set out under the heading “Description of the Capital Structure — Shares — Subscription Rights”.
“Seasonal Products” means Ski-Doo and Lynx snowmobiles, Sea-Doo PWCs and Sea-Doo Switch pontoons.
“Shares” means, collectively, the Subordinate Voting Shares and the Multiple Voting Shares.
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2024 Annual Information Form ****
“SSV” means side-by-side vehicle.
“Subordinate Voting Shares” means subordinate voting shares in the capital of the Company.
“Subscription Securities” has the meaning set out under the heading “Description of the Capital Structure — Shares — Subscription Rights”.
“Tax Act” means the Income Tax Act (Canada) and the regulations thereunder, as amended.
“Telwater” has the meaning set out under the heading “General Development of the Business”.
“Term Facility” has the meaning set out under the heading “Material contracts — Term Facility”.
“Term Loan B-1” has the applicable meaning set out under the heading “Material Contracts – Term Facility”, as amended from time to time.
“Term Loan B-2” has the applicable meaning set out under the heading “Material Contracts – Term Facility”, as amended from time to time.
“Term Loan B-3” has the applicable meaning set out under the heading “Material Contracts – Term Facility”, as amended from time to time.
“Triton” has the meaning set out under the heading “General Development of the Business”.
“TSX” means the Toronto Stock Exchange.
“Uncharted Society” has the meaning set out under the heading “General Development of the Business”.
“Voting Shares” has the meaning set out under the heading “Description of the Capital Structure — Shares — Subscription Rights”.
“VSS” has the meaning set out under the heading “Business of the Company and its Industry — BRP Brands and Products — Powersports - Year-Round Products”.
“Year-Round Products” means Can-Am ATVs, SSVs and 3WVs.
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2024 Annual Information Form ****
APPENDIX A
CHARTER OF THE AUDIT COMMITTEE
1.0 Introduction
This charter (the “Charter”) sets forth the purpose, composition, responsibilities and authority of the Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of BRP Inc. (the “Company”).
2.0 Purpose
The purpose of the Committee is to assist the Board in fulfilling its oversight responsibilities with respect to:
| • | Financial reporting and disclosure requirements; |
|---|---|
| • | Ensuring that an effective risk management and financial control framework has been implemented and tested by management<br>of the Company; |
| --- | --- |
| • | External and internal audit processes; |
| --- | --- |
| • | Helping directors meet their responsibilities; |
| --- | --- |
| • | Providing better communication between directors and the external auditor as well as between directors and the internal<br>audit function; |
| --- | --- |
| • | Ensuring the independence of the external auditor and the internal audit function; |
| --- | --- |
| • | Increasing the credibility and objectivity of financial reports; and |
| --- | --- |
| • | Strengthening the role of directors by facilitating in-depth discussions among<br>directors, management, the external auditor and the internal audit function regarding significant issues involving judgment and impacting quality controls and reporting. |
| --- | --- |
3.0 Composition and Membership
(a) The Board will appoint the members (“Members”) of the Committee. The Members will be appointed at the first meeting of the Board following the election of directors by the shareholders of the Company to hold office until the next annual meeting of shareholders of the Company or until their successors are appointed. The Board may remove a Member at any time and may fill any vacancy occurring on the Committee. A Member may resign at any time and a Member will automatically cease to be a Member upon ceasing to be a director.
(b) The Committee will consist of at least three directors. Each Member will meet the criteria for independence established by applicable laws, including sections 1.4 and 1.5 of National Instrument 52-110 – Audit Committees. All members shall be financially literate or shall become financially literate within a reasonable period of time after their appointment to the Committee; a member of the Committee is financially literate if he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Company’s financial statements.
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(c) The Board will appoint one of the Members to act as the chair of the Committee (the “Chair”). The secretary of the Company (the “Secretary”) will be the secretary of all meetings and will maintain minutes of all meetings and deliberations of the Committee. If the Secretary is not in attendance at any meeting, the Committee will appoint another person who may, but need not, be a Member to act as the secretary of that meeting.
4.0 Meetings
(a) Meetings of the Committee will be held at such times and places as the Chair may determine, but in any event not less than four (4) times per year. The Committee should meet within the 45 days following the end of the first three fiscal quarters of the Company and within 90 days following the end of the fiscal year of the Company. Members may attend all meetings either in person, by videoconference or by telephone. The Committee shall keep minutes of each meeting.
(b) At the request of the external auditor of the Company, the Chief Executive Officer, the Chief Financial Officer, the Chief Audit Executive, the General Counsel, the Chair of the Investment and Risk Committee or any Member, the Chair will convene a meeting of the Committee. Any such request will set out in reasonable detail the business proposed to be conducted at the meeting so requested.
(c) The Chair, if present, will act as the chair of meetings of the Committee. If the Chair is not present at a meeting of the Committee the Members in attendance may select one of their members to act as chair of the meeting.
(d) A majority of Members will constitute a quorum for a meeting of the Committee. Each Member will have one vote and decisions of the Committee will be made by an affirmative vote of the majority. The Chair will not have a deciding or casting vote in the case of an equality of votes. Powers of the Committee may also be exercised by written resolutions signed by all Members.
(e) The Chief Financial Officer and the Chief Audit Executive shall have direct access to the Committee and shall attend all meetings of the Committee, and the Chief Executive Officer and the Chair of the Board shall receive notice of and have the right to attend all meetings of the Committee, except in each case such part of the meeting, if any, which is a private session not involving all or some of these officers as determined by the Committee. The external auditor shall receive notice of and have the right to attend any meetings of the Committee, at the Company’s expense, except such part of the meeting, if any, which is a private session not involving the external auditor.
(f) The Committee shall maintain a free and open line of communication with management, the Chief Financial Officer, the Chief Audit Executive and the external auditor. The Committee may invite directors, officers, consultants and employees of the Company or any other person to attend meetings of the Committee to assist in the discussion and examination of the matters under consideration by the Committee. The Committee shall meet in camera without members of management in attendance or with the Chief Financial Officer or the Chief Audit Executive on a regular basis and as appropriate or required.
(g) In advance of every meeting of the Committee, the Chair, with the assistance of the Secretary, the Chief Financial Officer and the Chief Audit Executive, should prepare and distribute to the Members and others as deemed appropriate by the Chair, an agenda of matters to be addressed at the meeting together with appropriate briefing materials.
5.0 Duties and Responsibilities
The Committee will carry out, among other things, the following responsibilities:
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5.1 Financial Statements and Reporting
• Assist the Board in the discharge of its oversight responsibilities to the shareholders, potential shareholders, the investment community, and others relating to the Company’s financial statements and its financial reporting practices and system of internal accounting and financial controls, the corporate audit and risk assessment function, the management information systems, the annual external audit of the Company’s financial statements and the compliance by the Company with laws and regulations and its own Code of Ethics.
• Review significant accounting and reporting issues, including complex or unusual material transactions and highly judgmental areas, unusual or sensitive matters such as disclosure of related party transactions, significant non-recurring events, significant risks and changes in provisions, estimates or provisions included in any financial statements, and recent professional and regulatory pronouncements, and understand their impact on and presentation in the financial statements.
• Review and discuss with management and the external auditor the results of the audit, including any difficulties encountered and follow-up in that context and ensure that the external auditor is satisfied that the accounting estimates and judgments made by management’s selection of accounting principles reflect an appropriate application of generally accepted accounting principles.
• Review the financial statements, and consider whether they are complete, adequate, consistent with information known to the Members, and reflect appropriate accounting principles and, if appropriate, recommend to the Board their approval and disclosure.
• Review the Company’s management discussion and analysis, and other financial information provided by the Company to any governmental body or the public and, if appropriate, recommend to the Board their approval and disclosure.
• Review the Company’s annual information form and related regulatory filings before release to the extent that same include financial information, and consider the accuracy and completeness of the financial information contained therein and, if appropriate, recommend to the Board their approval and disclosure.
• Review the Company’s CSR/ESG related reports and disclosure documents before being publicly released or provided by the Corporation to any governmental or regulatory body, and consider the adequacy and completeness of the financial information contained therein and, if appropriate, recommend to the Board their approval and disclosure.
• Review the Company’s press releases containing financial information before the Company publicly discloses this information and, if appropriate, recommend to the Board their approval and disclosure.
• Review and discuss with management any litigation matters which could significantly affect the financial statements, and review the manner in which these matters are disclosed in the financial statements.
• Review and discuss any regulatory compliance issues which could significantly affect the financial statements.
• Review and discuss any corporate governance issues which could significantly affect the financial statements.
• Review with management and the external auditor all matters required to be communicated to the Committee under generally accepted auditing standards.
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• Understand how management develops interim financial information, and the nature and extent of internal and external auditor involvement.
• Review interim financial reports with management and the external auditor before disclosure and filing with regulators, and consider whether they are complete and consistent with the information known to the Members and reflect appropriate accounting principles and, if appropriate, recommend to the Board their approval and disclosure.
• To the extent not previously reviewed by the Committee, review and, if appropriate, recommend to the Board the approval of all financial statements included in any prospectus or other offering memoranda and all other financial reports required by regulatory authorities and requiring approval by the Board.
• Review the statement of management’s responsibility for the financial statements as signed by the management of the Company and included in any published document.
• Obtain explanations for communication to the Board for all significant variances between comparable reporting periods.
• Ensure that adequate procedures are in place for the review of the Company’s public disclosure of financial information extracted or derived from the Company’s financial statements and periodically assess the adequacy of those procedures.
• Monitor the application and update, as necessary, of the Company’s Disclosure Policy.
5.2 Internal Control
• With the assistance of the external auditor, the Chief Financial Officer and the Chief Audit Executive, consider the effectiveness and the adequacy of the Company’s internal control systems.
• Take all reasonable measures to ensure that the Board and management comply with all of the Company’s policies or practices relating to business ethics and integrity (including the Authorities and Limits Policy and the Segregation of Duties Policy).
• Understand the scope of internal and external auditor’s review of internal control over financial reporting, and obtain reports on any identified weaknesses, deficiencies or significant findings and recommendations, together with management’s responses and actions taken to remedy the issues identified.
• Review and discuss with the Chief Executive Officer and Chief Financial Officer the process for the certifications to be provided in the Company’s public disclosure documents.
• Review, monitor, report, and assess the effectiveness and adequacy of, and, where appropriate, provide recommendations to the Board of Directors on the Company’s disclosure controls and procedures over financial reporting as well as non-financial reporting.
5.3 External Audit
• Manage the relationship between the Company and the external auditor.
• Recommend to the Board the appointment or discharge and compensation of the Company’s external auditor.
• Fill the role as the direct contact for the external auditor.
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• Oversee the work of the external auditor, including the resolution of disagreements between the external auditor and management.
• Review any suggestions made by the external auditor for improvement of the Company’s operations or internal control.
• Pre-approve all non-audit services (or delegating such pre-approval if and to the extent permitted by law to one or more Committee members) to be provided to the Company or its subsidiary entities by the Company’s external auditor, which services shall not be covered by the prohibited non-audit services listed in Annex 1 hereto.
• At least annually, review and approve the terms of the external auditor’s (i) annual audit services engagement letter and (ii) the quarterly review services engagement letter; each of these letters shall be signed by the Chair of the Committee.
• At least annually, review the external auditor’s proposed audit scope and approach, including coordination of audit effort with internal audit function, and pre-approve all related audit fees.
• To the extent practicable, at least annually, review the performance of the external auditor.
• At least annually, review and confirm the independence of the external auditor by obtaining statements from the auditor on relationships between the auditor and the Company, including non-audit services, discussing the relationships with the auditor and discussing any restrictions placed on them or other difficulties encountered in the course of the audit.
• At least annually, meet separately with the external auditor to discuss the access to requested information and level of cooperation from management during the performance of their work.
• On a regular basis, the Chief Executive Officer, the Chief Financial Officer, the Chief Audit Executive, the Chair of the Investment and Risk Committee or any other representative of management whose presence is requested by the Chair of the Committee or any of the Members, and the external auditor shall meet separately with the Committee, in a private session held during the course of a meeting.
• On a regular basis, review and approve the Company’s hiring policies regarding partners, employees and former employees of the present and former external auditor of the Company.
• Periodically rotate the lead partner for the external auditor.
5.4 Internal Audit Function
• Review and approve the charter, nature, scope of work and organizational structure of the internal audit function as well as the annual audit plan and any major changes thereon.
• Ensure that the internal audit function has the necessary resources to fulfill its mandate and responsibilities.
• Approve the appointment and dismissal of the Chief Audit Executive, as well as approve his/her performance evaluation and compensation. The Chief Audit Executive shall report directly to the Committee.
• Periodically review the audit plan status, including a progress report on the internal audit mandates and a follow-up on past due recommendations.
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• Review internal audit reports, including management responses, and ensure that the necessary steps are taken to follow up on important report recommendations.
• Review with the assistance of the Chief Audit Executive the internal audit budget, resource plan, activities, and organizational structure of the internal audit function.
• Ensure the independence and effectiveness of the internal audit function, including by requiring that the function be free of any influence that could adversely affect its ability to objectively assume its responsibilities, by ensuring that it reports to the Committee, and by meeting regularly with the Chief Audit Executive without management being present in order to discuss, among others, the questions he/she raises regarding the relationship between the internal audit function and management and access to the information required.
5.5 Compliance
• Establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal controls or auditing matters, and for the confidential, anonymous submission by employees of the Company or its subsidiaries of concerns regarding questionable accounting or auditing matters (the “Complaints of Illegal or Unethical Conduct Policy”).
• Review the effectiveness of the Complaints of Illegal or Unethical Conduct Policy and follow-up (including disciplinary action) of any instances of non-compliance.
• Review the findings of any examinations by regulatory agencies, and any auditor observations.
• Obtain regular updates from management and the Company’s legal counsel regarding compliance matters in respect of the Complaints of Illegal or Unethical Conduct Policy.
5.6 Information technology and information security
• On a regular basis, review with the assistance of the Chief Information Officer or his delegate, the information technology and information security strategies and related matters, including the effectiveness and adequacy of computerized accounting systems, the protections against damage and disruption, and security of confidential information through information systems reporting as well as the Corporation’s information security and cybersecurity policies, guidelines, controls, initiatives and incident response plans and procedures.
5.7 Other Responsibilities
• Perform other activities related to this Charter as requested by the Board.
• Investigate and assess any issue that raises significant concern to the Committee, with the assistance, if so required by the Committee, of the Chief Financial Officer, the Chief Audit Executive and/or the external auditor.
• Evaluate the Committee’s and individual members’ performance on a regular basis.
• Communicate and collaborate with other committees of the Board of Directors to ensure coordination in the fulfillment of any responsibilities of the Committee which may overlap with the responsibilities of other committees.
6.0 Oversight Function
While the Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Committee to plan or conduct audits or to determine that the Company’s financial statements are
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complete and accurate or comply with applicable accounting standards, as applicable, and other applicable requirements. These are the responsibilities of management and the external auditor.
7.0 Limitation on Committee’s Duties
Notwithstanding the foregoing and subject to applicable law, nothing contained in this Charter is intended to require the Committee to ensure the Company’s compliance with applicable laws or regulations.
In contributing to the Committee’s discharge of its duties under this Charter, each Member shall be obliged only to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Nothing in this Charter is intended or may be construed as imposing on any Member a standard of care or diligence that is in any way more onerous or extensive than the standard to which the member of the Board are subject.
The Committee is a committee of the Board and is not and shall not be deemed to be an agent of the Company’s shareholders for any purpose whatsoever. The Board may, from time to time, permit departures from the terms hereof, either prospectively or retrospectively. The terms contained herein are not intended to give rise to civil liability on the part of the Company or its directors or officers to shareholders, security holders, customers, suppliers, competitors, employees or other persons, or to any other liability whatsoever on their part.
8.0 Reporting
The Chair should report to the Board at each Board meeting on the Committee’s activities since the last Board meeting. As required by applicable rules and regulations, the Committee should report annually to shareholders, describing the Committee’s composition, responsibilities and how they were discharged, and any other information required by law. The Committee should also review any other report the Company issues that relates to the Committee’s responsibilities. The Secretary should circulate the minutes of each meeting of the Committee to the members of the Board.
9.0 Access to Information and Authority
The Committee will be granted access to all information regarding the Company that is necessary or desirable to fulfill its duties and all directors, officers and employees will be directed to cooperate as requested by Members. The Committee has the authority to retain, at the Company’s expense, independent legal, financial and other advisors, consultants and experts, to assist the Committee in fulfilling its duties and responsibilities, including sole authority to retain and to approve and pay any such firm’s fees and other retention terms without prior approval of the Board. The Committee also has the authority to communicate directly with the external auditor, the Chief Financial Officer, the Chief Audit Executive as well as any other employee of the Company as it deems necessary.
10.0 Review of Charter
The Committee will, from time to time, review and assess the adequacy of this Charter and recommend any proposed changes to the Board for consideration. The Board may, amend this Charter (as required).
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Annex 1
Prohibited Non-Audit Services
| • | Bookkeeping or other services related to the accounting records or financial statement |
|---|---|
| • | Expert services unrelated to the audit |
| --- | --- |
| • | Financial information systems design and implementation |
| --- | --- |
| • | Appraisal or valuation services, fairness opinions or<br>contribution-in-kind reports |
| --- | --- |
| • | Actuarial services |
| --- | --- |
| • | Internal audit outsourcing services |
| --- | --- |
| • | Broker-dealer, investment adviser or investment banking services |
| --- | --- |
| • | Legal services |
| --- | --- |
| • | Tax services to officers and directors of BRP |
| --- | --- |
| • | Financial statements, note disclosures and MD&A compilation |
| --- | --- |
| • | Regulatory filing preparation |
| --- | --- |
| • | Design and implementation of internal controls, policies and procedures |
| --- | --- |
| • | Services performed on a success or contingent fee basis |
| --- | --- |
| • | Temporary personnel assignments |
| --- | --- |
| • | Certain tax services such as tax provision assistance |
| --- | --- |
| • | Project management services |
| --- | --- |
| • | Vendor procurement and selection services |
| --- | --- |
| • | Incident response services |
| --- | --- |
| • | Data management or hosting services |
| --- | --- |
| • | Translation services of the Company’s disclosures |
| --- | --- |
| • | Personnel immigration services |
| --- | --- |
| • | Serving as a member of a supervisory body |
| --- | --- |
| • | Marketplace business relationships |
| --- | --- |
| • | Cash and investment management |
| --- | --- |
| • | Forecasting, projections, analytics |
| --- | --- |
| • | Policy and standards development and selection |
| --- | --- |
| • | Setting strategic direction |
| --- | --- |
| • | Hiring or dismissing employees |
| --- | --- |
| • | Authorizing transactions |
| --- | --- |
| • | Employee oversight |
| --- | --- |
| • | Ongoing monitoring services |
| --- | --- |
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| • | Current and future state business decisions and deciding on/implementing third-party recommendations<br> |
|---|---|
| • | Acting as Director or Officer |
| --- | --- |
| • | Representation with tax authorities and at courts or public tribunals |
| --- | --- |
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EX-99.2
Exhibit 99.2
Consolidated Financial Statements
BRP Inc.
For the years ended January 31, 2024 and 2023
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of BRP Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of BRP Inc. and subsidiaries (the “Company”) as of January 31, 2024, and 2023, the related consolidated statements of net income, comprehensive income, changes in equity, and cash flows, for each of the two years in the period ended January 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of January 31, 2024, and 2023, and its financial performance and its cash flows for each of the two years in the period ended January 31, 2024, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 31, 2024, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 27,2024, expressed an unqualified opinion on the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Table of Contents
Revenue – Refer to Notes 2n and 23 to the Financial Statements
Critical Audit Matter description
The Company’s revenue consists of transactions sourced from multiple order entry systems and databases. The Company’s information technology (IT) environment, including the new ERP system, is complex and includes multiple IT systems that are used to process revenue-related data and the Company relies on the output of these systems to process and record its revenue transactions.
Given the Company’s systems to process and record revenue are highly automated, there are potential risks arising from the capture, processing and transfer of data accurately and completely between the various IT systems. As such, auditing revenue resulted in an increased extent of audit effort and the nature of audit procedures were designed to include information outside of the IT systems.
How the Critical Audit Matter was addressed in the audit
Our audit procedures related to the Company’s IT systems, software applications and automated controls used to process revenue transactions included the following, among others:
| • | With the assistance of IT specialists, |
|---|---|
| • | Assessed the general computer and automated controls for relevant IT systems used to process revenue transactions, including controls related to the monitoring of access rights to applications, operating systems and databases; |
| --- | --- |
| • | Assessed the interface configuration between certain relevant IT systems to determine that information transferred is accurate and complete; and |
| --- | --- |
| • | Evaluated the service auditor reports on which the Company relies. |
| --- | --- |
| • | Selected a sample of revenue transactions and performed the following: |
| --- | --- |
| • | Compared revenue from the IT system to the customer confirmation and cash receipts; |
| --- | --- |
| • | Matched revenues from the IT system to the approved pricing outside of the IT system; |
| --- | --- |
| • | Compared revenue selections to the third-party bill of lading; and |
| --- | --- |
| • | Evaluated the reasonableness of manual journal entries posted to revenues in the general ledger. |
| --- | --- |
/s/ Deloitte LLP
Chartered Professional Accountants
Montreal, Canada
March 27, 2024
We have served as the Company’s auditor since 2006.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of BRP Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of BRP Inc. and subsidiaries (the “Company”) as of January 31, 2024, based on criteria established in
Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2024, based on criteria established in
Internal Control—Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended January 31, 2024, of the Company and our report dated March 27, 2024, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte LLP
Chartered Professional Accountants
Montreal, Canada
March 27, 2024
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BRP Inc.
CONSOLIDATED STATEMENTS OF NET INCOME
[in millions of Canadian dollars, except per share data]
| Years ended | ||||
|---|---|---|---|---|
| Notes | January 31,<br><br> <br>2024 | January 31, 2023 | ||
| Revenues | 23 | $10,367.0 | 10,033.4 | |
| Cost of sales | 7,765.7 | 7,534.0 | ||
| Gross profit | 2,601.3 | 2,499.4 | ||
| Operating expenses | ||||
| Selling and marketing | 480.0 | 433.8 | ||
| Research and development | 441.5 | 367.7 | ||
| General and administrative | 380.2 | 341.1 | ||
| Other operating expenses (income) | 2<br>7 | 26.3 | (10.3 | |
| Impairment charge | 26 | 116.3 | — | |
| Total operating expenses | 1,444.3 | 1,132.3 | ||
| Operating income | 1,157.0 | 1,367.1 | ||
| Financing costs | 2<br>8 | 209.3 | 114.8 | |
| Financing income | 2<br>8 | (16.6) | (6.0 | |
| Foreign exchange loss on long-term debt | 10.2 | 92.4 | ||
| Income before income taxes | 954.1 | 1,165.9 | ||
| Income tax expense | 2<br>9 | 209.6 | 300.5 | |
| Net income | $744.5 | 865.4 | ||
| Attributable to shareholders | $743.4 | 863.9 | ||
| Attributable to <br>non-controlling<br> interest | $1.1 | 1.5 | ||
| Basic earnings per share | 22 | $9.63 | 10.88 | |
| Diluted earnings per share | 22 | $9.47 | 10.67 |
All values are in US Dollars.
The accompanying notes are an integral part of these consolidated financial statements.
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BRP Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
[in millions of Canadian dollars]
| Years ended | |||||
|---|---|---|---|---|---|
| January 31,<br> <br>2024 | January 31,<br> <br>2023 | ||||
| Net income | 744.5 | 865.4 | |||
| Other comprehensive income | |||||
| Items that will be reclassified subsequently to net income | |||||
| Net changes in fair value of derivatives designated as cash flow hedges | 10.7 | 31.6 | |||
| Net changes in unrealized gain (loss) on translation of foreign operations | (8.1 | 11.5 | |||
| Income tax expense | (3.2 | (8.4 | |||
| (0.6 | 34.7 | ||||
| Items that will not be reclassified subsequently to net income | |||||
| Actuarial gains (losses) on defined benefit pension plans | 18 | (2.1 | 63.8 | ||
| Gain (loss) on fair value of restricted investments | 0.5 | (1.6 | |||
| Income tax (expense) recovery | 0.3 | (15.7 | |||
| (1.3 | 46.5 | ||||
| Total other comprehensive income | (1.9 | 81.2 | |||
| Total comprehensive income | 742.6 | 946.6 | |||
| Attributable to shareholders | 742.8 | 944.2 | |||
| Attributable to <br>non-controlling<br> interest | (0.2 | 2.4 |
All values are in US Dollars.
The accompanying notes are an integral part of these consolidated financial statements.
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BRP Inc.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
[in millions of Canadian dollars]
As at
| Notes | January 31,<br><br>2024 | ||||
|---|---|---|---|---|---|
| Cash and cash equivalents | 491.8 | $202.3 | |||
| Trade and other receivables | 6 | 656.3 | 655.0 | ||
| Income taxes and investment tax credits receivable | 60.8 | 43.9 | |||
| Other financial assets | 7 | 106.6 | 122.6 | ||
| Inventories | 8 | 2,155.6 | 2,290.1 | ||
| Other current assets | 9 | 57.7 | 66.7 | ||
| Total current assets | 3,528.8 | 3,380.6 | |||
| Investment tax credits receivable | 19.0 | 21.5 | |||
| Other financial assets | 7 | 49.6 | 69.3 | ||
| Property, plant and equipment | 10 | 2,004.3 | 1,810.4 | ||
| Intangible assets | 11 | 665.1 | 741.3 | ||
| Right-of-use<br> assets | 12 | 169.7 | 180.3 | ||
| Deferred income taxes | 2<br>9 | 337.5 | 257.9 | ||
| Other <br>non-current<br> assets | 9 | 1.5 | 3.3 | ||
| Total <br>non-current<br> assets | 3,246.7 | 3,084.0 | |||
| Total assets | 6,775.5 | $6,464.6 | |||
| Bank overdraft | — | $29.0 | |||
| Trade payables and accruals | 14 | 1,450.4 | 1,548.2 | ||
| Provisions | 15 | 766.7 | 544.7 | ||
| Other financial liabilities | 16 | 45.8 | 90.7 | ||
| Income tax payable | 47.9 | 81.3 | |||
| Deferred revenues | 89.9 | 85.3 | |||
| Current portion of long-term debt | 17 | 58.1 | 59.4 | ||
| Current portion of lease liabilities | 12 | 46.3 | 44.7 | ||
| Total current liabilities | 2,505.1 | 2,483.3 | |||
| Long-term debt | 17 | 2,705.0 | 2,730.8 | ||
| Lease liabilities | 12 | 142.0 | 152.2 | ||
| Provisions | 15 | 148.5 | 120.5 | ||
| Other financial liabilities | 16 | 65.1 | 59.8 | ||
| Deferred revenues | 113.2 | 141.5 | |||
| Employee future benefit liabilities | 18 | 156.3 | 158.0 | ||
| Deferred income taxes | 2<br>9 | 105.9 | 58.9 | ||
| Other <br>non-current<br> liabilities | 20.5 | 19.5 | |||
| Total <br>non-current<br> liabilities | 3,456.5 | 3,441.2 | |||
| Total liabilities | 5,961.6 | 5,924.5 | |||
| Equity | 813.9 | 540.1 | |||
| Total liabilities and equity | 6,775.5 | $6,464.6 |
All values are in US Dollars.
The accompanying notes are an integral part of these consolidated financial statements.
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BRP Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
[in millions of Canadian dollars]
For the year ended January 31, 2024
| Attributed to shareholders | ||||||||
|---|---|---|---|---|---|---|---|---|
| CapitalStock (Note 19) | Contributedsurplus | Retainedearnings | Translationof foreignoperations | Cash-<br>flow<br>hedges | Total | Non- controllinginterests | Totalequity | |
| Balance as at January 31, 2023 | 255.8 | 58.8 | 175.5 | 7.4 | $37.4 | 534.9 | 5.2 | 540.1 |
| Net income | — | — | 743.4 | — | — | 743.4 | 1.1 | 744.5 |
| Other comprehensive income (loss) | — | — | (1.3 | (6.8 | 7.5 | (0.6 | (1.3 | (1.9 |
| Total comprehensive income (loss) | — | — | 742.1 | (6.8 | 7.5 | 742.8 | (0.2 | 742.6 |
| Dividends (Note 19) | — | — | (55.6 | — | — | (55.6 | — | (55.6 |
| Issuance of subordinate shares | 24.8 | (6.6 | — | — | — | 18.2 | — | 18.2 |
| Repurchase of subordinate shares (Note 19) | (32.1 | — | (418.9 | — | — | (451.0 | — | (451.0 |
| Stock-based compensation | — | 19.6 | — | — | — | 19.6 | — | 19.6 |
| Balance as at January 31, 2024 | 248.5 | 71.8 | 443.1 | 0.6 | $44.9 | 808.9 | 5.0 | 813.9 |
All values are in US Dollars.
[a] Includes $1.1 million of income tax expense.
For the year ended January 31, 2023
| Attributed to shareholders | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Capital<br>Stock<br> <br>(Note 19) | Contributed<br> <br>surplus | Retained<br>earnings<br> <br>(losses) | Translation<br>of foreign<br>operations | Cash-<br>flow<br>hedges | Non-<br> <br>controlling<br>interests | Total<br>equity<br>(deficit) | |||||||||
| Balance as at January 31, 2022 | 260.6 | (3.2 | (404.3 | (2.9 | 14.2 | (135.6 | 2.8 | (132.8 | |||||||
| Net income | — | — | 863.9 | — | — | 863.9 | 1.5 | 865.4 | |||||||
| Other comprehensive income | — | — | 46.5 | 10.6 | 23.2 | 80.3 | 0.9 | 81.2 | |||||||
| Total comprehensive income | — | — | 910.4 | 10.6 | 23.2 | 944.2 | 2.4 | 946.6 | |||||||
| Dividends (Note 19) | — | — | (50.8 | — | — | (50.8 | — | (50.8 | |||||||
| Issuance of subordinate shares | 15.4 | (4.6 | — | — | — | 10.8 | — | 10.8 | |||||||
| Repurchase of subordinate shares (Note 19) | (20.2 | 47.2 | (279.8 | — | — | (252.8 | — | (252.8 | |||||||
| Stock-based compensation | — | 19.4 | — | — | — | 19.4 | — | 19.4 | |||||||
| Non-controlling<br> interest arising on business<br> <br>combination (Note 5) | — | — | — | — | — | — | 20.4 | 20.4 | |||||||
| Obligation to repurchase a <br>non-controlling<br> <br>interest (Note 5) | — | — | — | — | — | — | (20.4 | (20.4 | |||||||
| Other | — | — | — | (0.3 | — | (0.3 | — | (0.3 | |||||||
| Balance as at January 31, 2023 | 255.8 | 58.8 | 175.5 | 7.4 | 37.4 | 534.9 | 5.2 | 540.1 |
All values are in US Dollars.
[a] Includes
$ 0.1 million of income tax expense.
The accompanying notes are an integral part of these consolidated financial statements.
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BRP Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
[in millions of Canadian dollars]
| Years ended | |||||
|---|---|---|---|---|---|
| Notes | January 31,<br> <br>2024 | January 31,<br> <br>2023 | |||
| OPERATING ACTIVITIES | |||||
| Net income | 744.5 | 865.4 | |||
| Non-cash<br> and <br>non-operating<br> items: | |||||
| Depreciation expense | 391.7 | 310.4 | |||
| Income tax expense | 2<br>9 | 209.6 | 300.5 | ||
| Foreign exchange loss on long-term debt | 10.2 | 92.4 | |||
| Interest expense and transaction costs | 2<br>8 | 197.3 | 110.7 | ||
| Impairment charge | 26 | 116.3 | — | ||
| Other | 16.5 | 8.0 | |||
| Cash flows generated from operations before changes in working capital | 1,686.1 | 1,687.4 | |||
| Changes in working capital: | |||||
| (Increase) decrease in trade and other receivables | 3.7 | (166.3 | |||
| (Increase) decrease in inventories | 122.6 | (513.9 | |||
| Decrease (increase) in other assets | (18.6 | 43.2 | |||
| Decrease in trade payables and accruals | (96.1 | (108.2 | |||
| Decrease in other financial liabilities | (6.2 | (35.7 | |||
| Increase in provisions | 250.9 | 239.5 | |||
| Decrease in other liabilities | (28.1 | (147.9 | |||
| Cash flows generated from operations | 1,914.3 | 998.1 | |||
| Income taxes paid, net of refunds | (256.2 | (348.6 | |||
| Net cash flows generated from operating activities | 1,658.1 | 649.5 | |||
| INVESTING ACTIVITIES | |||||
| Additions to property, plant and equipment | 10 | (548.4 | (601.0 | ||
| Additions to intangible assets | 11 | (37.4 | (58.4 | ||
| Business combinations, net of acquired cash | 5 | — | (208.2 | ||
| Other | 10.9 | 14.2 | |||
| Net cash flows used in investing activities | (574.9 | (853.4 | |||
| FINANCING ACTIVITIES | |||||
| Increase (decrease) in bank overdraft | (29.0 | 29.0 | |||
| Issuance of long-term debt | 17 | 3.3 | 920.9 | ||
| Long-term debt amendment fees | 17 | (10.9 | (22.0 | ||
| Repayment of long-term debt | 17 | (58.2 | (251.9 | ||
| Repayment of lease liabilities | 12 | (48.6 | (35.4 | ||
| Interest paid | (167.6 | (100.7 | |||
| Issuance of subordinate voting shares | 18.2 | 10.8 | |||
| Repurchase of subordinate voting shares | 19 | (446.2 | (305.5 | ||
| Dividends paid | 19 | (55.6 | (50.8 | ||
| Other | (2.2 | (4.1 | |||
| Net cash flows generated from (used in) financing activities | (796.8 | 190.3 | |||
| Effect of exchange rate changes on cash and cash equivalents | 3.1 | (49.9 | |||
| Net increase (decrease) in cash and cash equivalents | 289.5 | (63.5 | |||
| Cash and cash equivalents at the beginning of year | 202.3 | 265.8 | |||
| Cash and cash equivalents at the end of year | 491.8 | 202.3 |
All values are in US Dollars.
The accompanying notes are an integral part of these consolidated financial statements.
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 1. | NATURE OF OPERATIONS |
|---|
BRP Inc. (“BRP”) is incorporated under the laws of Canada. BRP’s multiple voting shares are owned by Beaudier Inc. and 4338618 Canada Inc. (collectively, “Beaudier Group”), Bain Capital Integral Investors II, L.P. (“Bain Capital”) and La Caisse de dépôt et placement du Québec (“CDPQ”), (collectively, the “Principal Shareholders”). BRP’s subordinate voting shares are listed in Canada on the Toronto Stock Exchange under the symbol DOO and in the United States on the Nasdaq Global Select Market under the symbol DOOO.
BRP and its subsidiaries (the “Company”) design, develop, manufacture and sell powersports vehicles and marine products. The Company’s Powersports segment comprises “Year-Round Products” which consists of all-terrain vehicles, side-by-side vehicles and three-wheeled vehicles; “Seasonal Products” which consists of snowmobiles, personal watercraft and pontoons; and “Powersports PA&A and OEM Engines” which consists of parts, accessories and apparel (“PA&A”), engines for karts and recreational aircraft, Pinion gearboxes and other services. Additionally, the Company’s “Marine” segment consists of boats, pontoons, jet boat and outboard engines and related PA&A and other services.
The Company’s products are sold mainly through a network of independent dealers, independent distributors and to original equipment manufacturers (the “Customers”). The Company distributes its products worldwide and manufactures them in Mexico, Canada, Austria, the United States, Finland, Australia and Germany.
The Company’s headquarters is located at 726 Saint-Joseph Street, Valcourt, Québec, J0E 2L0.
| 2. | SIGNIFICANT ACCOUNTING POLICIES |
|---|---|
| a) | Basis of presentation |
| --- | --- |
These consolidated financial statements for the years ended January 31, 2024 and 2023 have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”).
These consolidated financial statements have been prepared on a historical cost basis except for certain transactions that are measured using a different basis as explained below in the significant accounting policies section.
On March 2 7 , 2024, the Board of Directors of the Company approved these consolidated financial statements for the years ended January 31, 2024 and 2023.
| b) | Basis of consolidation |
|---|
These consolidated financial statements include the financial statements of BRP and its subsidiaries. BRP controls all of its subsidiaries that are wholly owned through voting equity interests, except for Regionales Innovations Centrum GmbH in Austria for which a non-controlling interest of 25% is recorded upon consolidation, BRP Commerce & Trade Shanghai Co. Ltd in China for which a non-controlling interest of 20% is recorded upon consolidation and Pinion GmbH in Germany for which there is a non-controlling interest of 20%. BRP is also part of a joint venture located in Austria.
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 2. | SIGNIFICANT ACCOUNTING POLICIES [CONTINUED] |
|---|---|
| b) | Basis of consolidation [continued] |
| --- | --- |
The most significant subsidiaries of BRP included in these consolidated financial statements are as follows:
| · | Bombardier Recreational Products Inc., located in Canada; |
|---|---|
| · | BRP US Inc., located in the United States; |
| --- | --- |
| · | BRP-Rotax GmbH & Co. KG, located in Austria; |
| --- | --- |
| · | BRP European Distribution SA, located in Switzerland; |
| --- | --- |
| · | BRP Finland Oy, located in Finland; and |
| --- | --- |
| · | BRP Mexico S.A de C.V, located in Mexico. |
| --- | --- |
All inter-company transactions and balances have been eliminated upon consolidation.
| c) | Foreign currencies |
|---|
The consolidated financial statements of the Company are presented in Canadian dollars, the currency of the primary economic environment (“functional currency”) in which it operates. The functional currency of foreign operations is their local currency, corresponding to the currency in which the majority of their third-party transactions are denominated.
Transactions in foreign currency
For the purpose of preparing consolidated financial statements, the Company applies the following procedures on transactions and balances in currencies other than their functional currency. Monetary items are translated using exchange rates in effect at the consolidated statement of financial position date and non-monetary items are translated using exchange rates prevailing at the transaction date. Revenues and expenses (other than depreciation, which is translated at the same exchange rates as the related assets) are translated using exchange rates in effect on the transaction dates or at the average exchange rates of the period. Translation gains or losses are recorded in the consolidated statement of net income.
Consolidation of foreign operations
All assets and liabilities of foreign operations are translated into Canadian dollars at exchange rates in effect at the consolidated statement of financial position date. Revenues and expenses are translated at the average exchange rates for the period. The Company’s gains and losses on translation of foreign operations are recognized in other comprehensive income and accumulated in equity until the Company no longer controls the foreign operation. At that time, gains or losses on translation accumulated in equity are entirely reclassified to net income.
| d) | Inventory valuation |
|---|
Materials and work in progress, finished products and parts, accessories and apparel are valued at the lower of weighted average cost or net realizable value. The cost of work in progress and finished products manufactured by the Company includes the cost of materials, direct labour and directly attributable manufacturing overhead. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to complete the sale.
Inventories are written down to net realizable value when the cost of inventories is determined to be not fully recoverable. When the circumstances that previously caused inventories to be written down no longer exist or when there is clear evidence of an increase in net realizable value because of changed economic circumstances, the amount of write-down is reversed.
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 2. | SIGNIFICANT ACCOUNTING POLICIES [CONTINUED] |
|---|---|
| e) | Property, plant and equipment |
| --- | --- |
Property, plant and equipment includes land, building, equipment and tooling held for use in the development, production and distribution activities or for administrative purposes. They are stated at cost less accumulated depreciation and accumulated impairment charges.
The cost of an item of property, plant and equipment includes its purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating, which also includes the borrowing costs incurred during the construction.
Property, plant and equipment is depreciated, with the exception of land, using the straight-line method over their estimated useful lives. If an item of property, plant and equipment is composed of significant components having different estimated useful lives, depreciation is calculated on a component basis using the straight-line method over their respective useful lives. The Company’s estimated useful lives per category are the following:
| Tooling | 3 to 7 years |
|---|---|
| Equipment | 3 to 20 years |
| Building | 10 to 60 years |
Depreciation of assets under development begins when they are ready for their intended use.
The estimated useful lives, residual values and depreciation methods are reviewed at each year-end, with the effect of any changes in estimates accounted for on a prospective basis.
Fully depreciated building, equipment and tooling are retained in the cost and accumulated depreciation accounts until such assets are removed from service. In the case of disposals, cost and related accumulated depreciation amounts are removed from the consolidated statement of financial position, and the net amounts, less proceeds from disposal, is recorded in the consolidated statement of net income.
At the end of each reporting period, the Company reviews the carrying amounts of its property, plant and equipment in order to determine if there is any indication that those assets may be impaired. If any such indication exists, an impairment test is performed as described below in paragraph h).
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 2. | SIGNIFICANT ACCOUNTING POLICIES [CONTINUED] |
|---|---|
| f) | Intangible assets |
| --- | --- |
Goodwill represents the excess of the purchase price of businesses acquired over the fair value of the net assets acquired. Goodwill is systematically tested for impairment as at January 31 or more frequently if events or circumstances indicate that it might be impaired. Goodwill is tested for impairment at the cash generating unit (“CGU”) level representing the lowest level at which management monitors it.
Trademarks are carried at cost and are not depreciated due to their indefinite expected useful lives for the Company. The assessment of indefinite expected useful lives is reviewed at each year-end. Trademarks are systematically tested for impairment as at January 31 or more frequently if events or circumstances indicate that they might be impaired. Trademarks are tested for impairment with the CGU to which they relate.
Software and licences, patents, dealer networks and customer relationships are carried at cost and are depreciated on a straight-line basis over their estimated useful lives, which are as follows:
| Software and licences | 3 to 5 years |
|---|---|
| Patents | 10 years |
| Dealer networks | 5 to 20 years |
| Customer relationships | 10 to 15 years |
At the end of each reporting period, the Company reviews the carrying amounts of its software and licences, dealer networks and customer relationships in order to determine if there is any indication that those assets may be impaired. If any such indication exists, an impairment test is performed as described below in paragraph h).
Expenditures related to research and development activities are recognized as expense in the period in which they are incurred, except for development activities if specific criteria for capitalization as intangible assets are met.
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 2. | SIGNIFICANT ACCOUNTING POLICIES [CONTINUED] |
|---|---|
| g) | Leases |
| --- | --- |
At inception, the Company assesses whether the contract is or contains a lease. Leases are recognized as right-of-use assets and lease liabilities at the lease commencement date. Payments associated with short-term leases and leases of low-value assets are recognized as an expense.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the Company’s incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. Lease liabilities include the net present value of the following lease payments (when applicable):
| · | Fixed payments (including <br>in-substance<br> fixed payments), less any lease incentives; |
|---|---|
| · | Variable lease payments that are based on an index or a rate; |
| --- | --- |
| · | Amounts expected to be payable under residual value guarantees; |
| --- | --- |
| · | Exercise price of purchase options if the Company is reasonably certain to exercise that option; and |
| --- | --- |
| · | Penalties for early termination of a lease, except if the Company is reasonably certain not to terminate early. |
| --- | --- |
The lease liability is subsequently measured at amortized cost using the effective interest rate method. The lease liability is remeasured, and a corresponding adjustment is made to the carrying amount of the right-of-use assets, when there is a change in future lease payments arising from a change in an index or rate, from a change in the estimation of a residual value guarantee or from a change in the assumption of purchase, extension or termination option. The lease liability is also remeasured when the underlying lease contract is amended.
The Company accounts for each lease component and any associated non-lease components as a single lease component.
The right-of-use asset is initially measured at cost, which includes the initial measurement of the corresponding lease liability, lease payments made at or before the commencement date and any initial direct costs, less any incentives received. The right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. The depreciation starts at the commencement date of the lease. In addition, the right-of-use asset is reduced by impairment losses resulting from impairment tests as described below in paragraph h), if any, and adjusted for certain remeasurements of the lease liability.
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 2. | SIGNIFICANT ACCOUNTING POLICIES [CONTINUED] |
|---|---|
| h) | Impairment of property, plant and equipment, intangible assets and <br>right-of-use<br> assets |
| --- | --- |
An asset is impaired when its carrying amount is above its recoverable amount. The recoverable amount is determined for each individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. In that case, the asset is assessed for impairment within a CGU, representing the lowest level of assets for which there are separately identifiable cash inflows. The recoverable amount of an asset or a CGU is the higher of its fair value less costs to sell and its value in use. Value in use is determined using a discounted future net cash flows approach. Fair value less costs to sell reflects the amount the Company could obtain from the asset’s disposal in an arm’s length transaction between knowledgeable, willing parties, after deducting the costs of disposal. If there is no active market for the asset, the fair value is assessed by using appropriate valuations models dependent on the nature of the asset or CGU, such as discounted cash flow models. The impairment charge recorded in the consolidated statement of net income is the difference between the carrying amount and the recoverable amount.
At the end of each reporting period, the Company reviews the carrying amount of assets (excluding goodwill) or CGUs impaired in previous periods in order to determine if there is any indication that its recoverable amount has increased. If any such indication exists, an impairment test is performed and the impairment recovery is recorded in the consolidated statement of net income up to the carrying amount that would have existed had the impairment charge never been recorded in prior years.
| i) | Financial instruments |
|---|
A financial instrument is any contract that gives rise to a financial asset for one party and a financial liability or equity for another party. Financial instruments are initially recorded at fair value when the Company becomes a party to the transaction and are subsequently revalued at fair value or amortized cost at the end of each reporting period depending on their classification.
When the Company acquires or issues a financial instrument that is not recorded at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issuance are incorporated in the carrying amount and amortized in the consolidated statement of net income using the effective interest rate method. When the Company acquires or issues a financial instrument measured at fair value through profit or loss, all transaction costs are expensed as incurred.
A modification of financial liabilities that includes a prepayment option at par with no break costs is equivalent to an extinguishment. When a modification is accounted for as an extinguishment, the original financial instrument is derecognized, including any unamortized transaction costs and any costs or fees incurred related to the modification, and the new instrument arising from the modification is recognized at fair value.
15
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 2. | SIGNIFICANT ACCOUNTING POLICIES [CONTINUED] |
|---|---|
| i) | Financial instruments [continued] |
| --- | --- |
Financial assets and financial liabilities other than derivatives
At the end of each reporting period, financial assets and financial liabilities that are not derivatives are measured at fair value or amortized cost using the effective interest method depending on the following classification:
| · | Restricted investments are measured at fair value through other comprehensive income at the end of each reporting period. |
|---|---|
| · | Cash and cash equivalents and trade and other receivables are measured at amortized cost at the end of each reporting period. |
| --- | --- |
| · | Non-controlling<br> interest liability is measured at fair value through profit and loss at the end of each reporting period. |
| --- | --- |
| · | Revolving credit facilities, trade payables and accruals, other financial liabilities, long-term debt and lease liabilities are measured at amortized cost at the end of each reporting period. |
| --- | --- |
Derivative financial instruments
Derivative financial instruments are financial assets or financial liabilities recorded at fair value through profit or loss. They are measured at fair value at the end of each reporting period including those derivatives that are embedded in financial and non-financial contracts that are not closely related to the host contract.
In the consolidated statement of net income, changes in fair value of derivatives used to manage foreign exchange exposure on working capital elements are recorded in o ther operating expenses (income).
Derivative financial instruments under cash flow hedge accounting
The Company applies cash flow hedge accounting when forecasted cash flows are highly probable to occur and all other cash flow hedge criteria are met. The effective portion of the change of fair value of derivative financial instruments designated as hedging items under the cash flow hedge model is recorded in other comprehensive income and accumulated in equity until the hedged transaction is recognized in the consolidated statement of net income. The ineffective portion is recognized in the consolidated statement of net income at each period end. The Company makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to be effective in offsetting the cash flows of the respective hedged items during the period for which the hedge is designated.
If a derivative financial instrument accounted for using the cash flow hedge model has been settled prior to maturity or the hedge relationship is no longer meeting cash flow hedge criteria, accumulated gains or losses associated with the derivative financial instrument remain in equity as long as the underlying hedged transaction is expected to occur and are recognized in the consolidated statement of net income in the period in which the underlying hedged transaction is recognized in the consolidated statement of net income. In the event that the underlying hedged transaction is settled prior to maturity or is not expected to occur anymore, gains or losses accumulated in equity at this date are immediately reclassified in the consolidated statement of net income. Gains or losses related to derivative financial instruments accounted for using the cash flow hedge model are recorded in the same category as the hedged item in the consolidated statement of net income.
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 2. | SIGNIFICANT ACCOUNTING POLICIES [CONTINUED] |
|---|---|
| j) | Derecognition of receivables |
| --- | --- |
Receivables are derecognized from the consolidated statement of financial position only when the Company’s contractual rights to the cash flows expire or when the Company has transferred to a third party substantially all the risks and rewards on receivables sold.
| k) | Dealer holdback programs |
|---|
The Company provides dealer incentive programs whereby at the time of shipment, the Company invoices an amount to the dealer that is reimbursable upon ultimate sale and warranty registration of the product. The Company presents the amounts due to dealers in other current financial liabilities in the consolidated statement of financial position.
| l) | Provisions |
|---|
Provisions represent liabilities for which the amount or timing of payment is uncertain. Provisions are recorded in the consolidated statement of financial position when the Company has a legal or constructive obligation as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation. Additionally, provisions are recorded for contracts under which the unavoidable costs of meeting the obligations exceed the economic benefits expected to be received.
Provisions are measured at each period end at the best estimate of the expenditure required to settle the obligation. To account for the effect of the time value of money, provisions are measured at the present value of the outflows required to settle the obligation using a risk free rate adjusted to the specific risk of the obligation. They are re-measured at each consolidated statement of financial position date using interest rates prevailing at this date and an interest expense is recorded to reflect the passage of time.
The main provisions of the Company are described in more detail below:
Products related provisions
When the products are sold, the Company records a provision related to limited product warranties generally covering periods from six months to five years.
The Company records a provision for product liability claims or possible claims incurred but not reported at the end of each reporting period.
The Company provides for estimated sales promotions at time of revenue recognition. Examples of these costs include product rebates given to clients, volume discounts and retail financing programs. In the consolidated statement of net income, cash sales promotions are recorded as a reduction of revenues whereas non-cash sales promotions, such as delivery of free products, are included in cost of sales.
17
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 2. | SIGNIFICANT ACCOUNTING POLICIES [CONTINUED] |
|---|---|
| m) | Employee benefits |
| --- | --- |
Current benefits
The Company records an expense in the consolidated statement of net income for wages, salaries, bonuses, share-based compensations and social security contributions of employees in the period the services are rendered. Current benefit associated with manufacturing employees is included in the cost of inventory produced as described above in paragraph d).
Future benefits
The Company sponsors several Canadian and foreign funded and unfunded defined benefit and defined contribution pension plans covering most of its employees. The Company also provides other post-retirement benefit plans to certain employees.
Defined benefit plans and other post-retirement benefit plans
Annual costs of defined benefit pension plans and other post-retirement benefit plans, which include current service costs, net interest costs and past service costs, is actuarially determined using the projected unit credit method based on management’s best estimate of discount rates, salary escalation, retirement ages of employees, life expectancy, inflation and health care costs.
Current service costs are recorded in the consolidated statement of net income when employees are rendering the services to the Company. For manufacturing employees, current service costs are included in the cost of inventory produced as described above in paragraph d).
Net interest costs are recorded in the consolidated statement of net income at each period following the passage of time.
Past service costs (gains) arising from the change in the present value of the defined benefit obligation resulting from a plan amendment or a curtailment are recorded in the consolidated statement of net income when the plan amendment or the curtailment occurs. A curtailment arises from a transaction that significantly reduces the number of employees covered by a plan.
In the consolidated statement of net income, costs related to defined benefit pension plans and other post-retirement benefit plans are classified separately depending on their nature. Current service costs and past service costs (gains) are presented within operating income whereas the net interest expense on the employee future benefit liability is presented in financing costs.
The liability recognized in the consolidated statement of financial position is the present value of the plan obligations less the fair value of the plan assets at that date. Plan obligations are determined based on expected future benefit payments discounted using market interest rates prevailing as at January 31 and plan assets are stated at their fair value at that date. Actuarial gains and losses that arise in calculating the present value of plan obligations and the fair value of plan assets are recorded in other comprehensive income and accumulated directly in retained earnings (losses).
Defined contribution plans
Defined contribution plan expenses are recorded in the consolidated statement of net income when employees are rendering the services to the Company. Expenses associated with manufacturing employees are included in the cost of inventory produced as described above in paragraph d). Defined contribution plan expenses are entirely presented within operating income.
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 2. | SIGNIFICANT ACCOUNTING POLICIES [CONTINUED] |
|---|---|
| n) | Revenue recognition |
| --- | --- |
The Company’s revenues are derived primarily from the sale of products and related parts and accessories. Each sale is considered as a single performance obligation and revenues are recognized when products are shipped, which corresponds to the point in time when the Customers have obtained control of the asset and the Company has satisfied its performance obligation. Revenues are measured at an amount equal to the consideration to which the Company expects to be entitled, which takes into account sales promotions and expected returns to occur after the shipment date. A deferred revenue is recognized if the Company receives consideration, or has an unconditional right to receive consideration, prior to the completion of its performance obligation.
When, in addition to the regular warranty coverage, an extended warranty coverage is given with the purchase of the product, a portion of the revenue representing the value of the extended warranty is deferred. The value deferred is based on the stand-alone selling price of both the unit sold and the extended warranty given. The deferred revenue is then recognized over the extended warranty coverage period.
| o) | Government assistance |
|---|
Government assistance, including research and development tax credits, is recorded when the Company is complying with the assistance program requirements and the recovery is reasonably assured. Government assistance received but contingently repayable is recorded in the consolidated statement of net income as long as it is probable that the conditions for repayment will not be met. Government assistance granted to compensate expenses are presented in the consolidated statement of net income as a reduction of the expense they relate to, whereas assistance granted for the acquisition of property, plant and equipment and intangibles is deducted from the cost of the related asset.
| p) | Stock-based compensation |
|---|
The Company grants stock options to officers and employees that are settled by the issuance of common shares. The Company establishes compensation expense for those grants based on the fair value of each tranche of option at the grant date. The compensation expense is recognized in the consolidated statement of net income over the vesting period of each tranche based on the number of options that are ultimately expected to vest. The Company estimates stock option forfeitures at time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The corresponding amount is recorded in contributed surplus within equity.
| q) | Income taxes |
|---|
The Company’s income tax expense represents the sum of the taxes currently payable based on taxable income of the year, deferred taxes, and tax credits. Deferred income tax assets and liabilities are determined based on the differences between the carrying amounts and tax bases of assets and liabilities using enacted or substantively enacted tax rates and laws expected to be in effect when the differences reverse. Current and deferred income taxes are recognized in the consolidated statement of net income except to the extent it relates to items recognized in other comprehensive income or directly in equity, in which case the related tax is recognized in other comprehensive income or in equity.
Amendments to
IAS 12 – Income taxes
On May 23, 2023, the IASB issued International Tax Reform – Pillar Two Model Rules, which amends IAS 12 – Income Taxes . These amendments apply to income taxes arising from tax law enacted or substantively enacted to implement the Pillar Two model rules of the Organisation for Economic Co-operation and Development (“OECD”). The amendments also introduce a temporary exception to the accounting of deferred tax assets and liabilities arising from the implementation of these rules as well as related disclosures. These amendments apply immediately upon issuance and retrospectively in accordance with IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors . During the year ended January 31, 2024, the Company applied the exception to the recognition and disclosure of information about deferred tax assets and liabilities arising from the Pillar Two rules in the jurisdictions where they have
been adopted.
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 2. | SIGNIFICANT ACCOUNTING POLICIES [CONTINUED] |
|---|---|
| r) | Earnings per share |
| --- | --- |
Basic earnings per share is calculated by dividing the net income attributable to equity holders of the Company by the weighted average number of common shares outstanding during the year.
Diluted earnings per share is calculated by adjusting the weighted average number of common shares outstanding to assume conversion of all dilutive potential common shares from stock option plans. For the stock options, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual share price of the Company’s shares) based on the monetary value of the subscription rights attached to outstanding stock options.
| s) | Business combinations |
|---|
Business combinations are recorded by using the acquisition method. Under this method, the purchase consideration is allocated to identifiable assets acquired, liabilities assumed and contingent liabilities (“Net assets”) based on the fair value at the acquisition date, with the excess of the purchase consideration amount allocated to goodwill. Provisional fair values allocated at a reporting date are finalized as soon as the relevant information is available, which period shall not exceed twelve months from the acquisition date and are adjusted to reflect the transaction as of the acquisition date.
The results of the acquired businesses are included in the consolidated financial statements from the date of the acquisition. Acquisition costs are expensed as incurred.
Intangible assets and goodwill arising from business combinations are accounted for by applying the acquisition method of accounting to these transactions. In measuring the fair value of the assets acquired and the liabilities assumed and estimating their useful lives, the Company uses significant estimates and assumptions regarding cash flow projections, economic risk, and weighted average cost of capital. These estimates and assumptions determine the amount allocated to intangible assets and goodwill, as well as the amortization period for intangible assets with finite lives.
| t) | Segmented information |
|---|
Operating segments are components of an entity that engage in business activities from which they earn revenues and incur expenses (including revenues and expenses related to transactions with the other components of the entity). The related operations can be clearly distinguished and the revenues and gross profit are regularly reviewed by a chief operating decision-maker to make resource allocation decisions and to assess performance.
The Company has two operating and reportable segments: Powersports and Marine. The Powersports segment includes Year-Round Products, Seasonal Products and Powersports PA&A and OEM Engines. The Marine segment includes boats, jet boat and outboard engines and related PA&A and other services.
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 3. | SIGNIFICANT ESTIMATES AND JUDGMENTS |
|---|
The preparation of these consolidated financial statements in accordance with the Company’s accounting policies requires management to make estimates and judgments that can affect the reported amounts of assets and liabilities, related amounts of revenues and expenses, other comprehensive income and disclosures made.
| a) | Significant estimates in applying the Company’s accounting policies |
|---|
The Company’s best estimates are based on the information, facts and circumstances available at the time estimates are made. Management uses historical experience and information, general economic conditions and trends, as well as assumptions regarding probable future outcomes as the basis for determining estimates. Estimates and their underlying assumptions are reviewed periodically and the effects of any changes are recognized immediately. Actual results could differ from the estimates used and such differences could be significant.
The Company’s annual operating budget and operating budget revisions performed during the year (collectively “Budget”) and the Company’s strategic plan comprise fundamental information used as a basis for some significant estimates necessary to prepare these consolidated financial statements. Management prepares the annual operating budget and strategic plan each year using a process whereby a detailed one-year budget and three-year strategic plan are prepared by each entity and then consolidated.
Cash flows and profitability included in the Budget are based on the existing and future expected sales orders, general market conditions, current cost structures, anticipated cost variations and current agreements with third parties. Management uses the annual operating budget information as well as additional projections or assumptions to derive the expected results for the strategic plan and periods thereafter.
The Budget and the strategic plan are approved by management and the Board of Directors. Management then tracks performance as compared to the Budget. Significant variances in actual performance are a key trigger to assess whether certain estimates used in the preparation of financial information must be revised.
Management needs to rely on estimates in order to apply the Company’s accounting policies and considers that the most critical ones are the following:
Estimating the net realizable value of inventory
The net realizable value of materials and work in progress is determined by comparing inventory components and value with production needs, current and future product features, expected production costs to be incurred and the expected profitability of finished products. The net realizable value of finished products and parts, accessories and apparel is determined by comparing inventory components and value with expected sales prices, sales programs and new product features.
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 3. | SIGNIFICANT ESTIMATES AND JUDGMENTS [CONTINUED] |
|---|---|
| a) | Significant estimates in applying Company’s accounting policies [continued] |
| --- | --- |
Estimating impairment on property, plant and equipment, intangible assets and right-of-use assets
Management assesses the value in use of property, plant and equipment, intangible assets and right-of-use assets mainly based on a group of CGUs level using a discounted cash flow approach by product line based on annual budget and strategic plan process. When the Company acquired the recreational products business from Bombardier Inc. in 2003, trademarks and goodwill were recorded as part of the business acquisition. Trademarks of $122.6 million and goodwill of $114.7 million were related to this transaction as at January 31, 2024 ($122.6 million and $114.7 million respectively as at January 31, 2023). In addition, trademarks of $42.0 million and goodwill of $137.6 million were recorded as at January 31, 2024 following various business combinations that occurred after 2003 ($93.7 million and $137.6 million respectively as at January 31, 2023).
Trademarks and goodwill impairment test
For the purpose of impairment testing, trademarks are allocated to their respective CGU. As at January 31, 2024, the carrying amount of trademarks amounting to $164.6 million is related to Ski-Doo , Sea-Doo , Manitou, Quintrex, Stacer and Pinion for $63.5 million, $59.1 million, $8.3 million,
$13.9 million, $4.4 million and $15.4 million respectively. As at January 31, 2023, the carrying amount of trademarks amounting to $216.3 million was related to Ski-Doo , Sea-Doo , Alumacraft, Manitou, Quintrex, Stacer and Pinion for $63.5 million, $59.1 million, $20.1 million, $38.8 million, $14.8 million, $4.6 million and $15.4 million respectively.
Following the creation of the Powersports and Marine segments during the year ended January 31, 2019, the Company has fully allocated the goodwill of $114.7 million created in 2003 to the Powersports segment. Goodwill of $63.7 million on the acquisition of substantially all the assets related to the powersports business of Kongsberg Inc. in Shawinigan, Quebec (“KA Shawinigan”), a subsidiary of Kongsberg Automotive ASA, and $ 72.7 million related to the Pinion acquisition were allocated to their respective CGUs as at January 31, 2023.
Recoverable amount (see Note 26 for more details on impairment testing)
The recoverable amount for the group of CGUs is based on a value in use calculation using cash flow projections, which takes into account the Company’s one-year budget and three-year strategic plan, with a terminal value calculated by discounting the final year in perpetuity. The figures used as the basis for the key assumptions in the value in use calculation includes sales volume, sales price, production costs, distribution costs and operating expenses as well as discount rates. This information represents the best available information as at the date of impairment testing. The estimated future cash flows are discounted to their present value using a pre-tax discount rate of 9.5% to 14.1%. These discount rates were calculated by adding to the Company’s weighted average cost of capital the risk factor associated with the product line tested. In assessing value in use, growth rates between 0.0% and 2.0% were used to calculate the terminal value. In addition, a market approach was performed to assess the reasonability of the conclusions reached.
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Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 3. | SIGNIFICANT ESTIMATES AND JUDGMENTS [CONTINUED] |
|---|---|
| a) | Significant estimates in applying Company’s accounting policies [continued] |
| --- | --- |
Estimating impairment on property, plant and equipment, intangible assets and right-of-use assets [continued]
Sensitivity analysis
The Company performs sensitivity analysis on the cash flows and discount rates in order to confirm the trademarks, goodwill and property, plant and equipment recoverable amounts. Holding all other variables constant, a 5
% decrease in the estimated cash flows or an increase of 100
basis points in the discount rates used would not have resulted in an additional impairment charge as at January 31, 2024.
Estimating recoverability of deferred tax assets
Deferred tax assets are recognized only if management believes it is probable that they will be realized based on the annual budget, strategic plan and additional projections to derive the expected results for the periods thereafter.
Estimating provisions for product regular warranty, product liability and sales program
The regular warranty cost is established by product line and recorded at the time of sale based on management’s best estimate, using historical cost rates and trends. Adjustments to the regular warranty provision are made when the Company identifies a significant and recurring issue on products sold or when costs and trend differences are identified in the analysis of warranty claims.
The product liability provision at period end is based on management’s best estimate of the amounts necessary to resolve existing claims. In addition, the product liability provision at the end of the reporting period includes incurred, but not reported claims based on average historical cost information.
Sales program provision is estimated based on current program features, historical data and expected retail sales for each product line.
Estimating the discount rates used in assessing defined benefit plan expenses and liability
In order to select the discount rates used to determine defined benefit plan expenses and liabilities, management consults with external actuarial firms to provide commonly used and applicable discount rates that are based on the yield of high quality corporate fixed income investments with cash flows that match expected benefit payments for each defined benefit plan. Management uses its knowledge and comprehension of general economic factors in order to conclude on the accuracy of the discount rates used.
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 3. | SIGNIFICANT ESTIMATES AND JUDGMENTS [CONTINUED] |
|---|---|
| a) | Significant estimates in applying Company’s accounting policies [continued] |
| --- | --- |
Estimating the lease term
On commencement date, when determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option or not exercise a termination option. Extension options or periods subject to termination options are only included in the lease term if the lease is reasonably certain to be extended or not terminated. This assessment is reviewed if a significant change in circumstances occurs within the Company’s control.
| b) | Significant judgments in applying the Company’s accounting policies |
|---|
Management needs to make certain judgments in order to apply the Company’s accounting policies and the most significant ones are the following:
Impairment of property, plant and equipment, intangible assets and right-of-use assets
The Company operates using a high level of integration and interdependency between design, development, manufacturing and distribution operations. The cash inflows generated by each product line require the use of various assets of the Company, limiting the impairment testing to be done for a single asset. Therefore, management performs impairment testing by grouping assets into CGUs.
Functional currency
The Company operates worldwide, but its design, development, manufacturing and distribution operations are highly integrated, which require significant judgements from management in order to determine the functional currency of each entity using factors provided by IAS
21 The Effects of Changes in Foreign Exchange Rates (“IAS 21”). Management established the functional currency of each entity as its local currency unless the assessment of the criteria established by IAS 21 to assess the functional currency leads to the determination of another currency. IAS 21 criteria are reviewed annually for each entity.
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Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 4. | FUTURE ACCOUNTING CHANGES |
|---|
Non-current liabilities with covenants (amendments to IAS 1)
In January 2020, the IASB issued an amendment to IAS 1 – Presentation of Financial Statements to clarify its requirements for the presentation of liabilities in the statement of financial position. The amendment clarified that the classification of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period and that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability. It also introduced a definition of settlement to make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services. On October 31, 2022, the IASB issued Non-Current Liabilities with Covenants (amendments to IAS 1 ). These amendments specify that covenants to be complied with after the reporting date do not affect the classification of debt as current or non-current at the reporting date.
The amendments will become effective for the Company’s fiscal year beginning on February 1, 2024.
The Company is assessing the potential impact of these amendments.
Lack of exchangeability (amendments to IAS 21)
In August 2023, the IASB published amendments to IAS 21 – The Effects of Changes in Foreign Exchange Rates that contains guidance to specify when a currency is exchangeable and how to determine the exchange rate when it is not. The amendment provides further clarity on the specific indicators for when a currency is exchangeable or not, which exchange rate should be applied when a currency is not exchangeable and requires disclosures of additional information when a currency is not exchangeable.
The amendments will become effective for the Company’s fiscal year beginning on February 1, 2025. The Company is assessing the potential impact of these amendments.
Other standards or amendments
The IASB has issued other standards or amendments to existing standards that are not expected to have a significant impact on the Company’s consolidated financial statements.
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 5. | BUSINESS COMBINATIONS |
|---|
Transactions for the year ended January 31, 2023
On August 5, 2022, the Company completed the acquisition of 80% of the outstanding shares of Pinion for a consideration of $81.4 million ( € 61.9 million) paid in cash. Pinion is located in Denkendorf, Germany and designs, develops, assembles, and sells mechanical gearboxes for traditional and electric bicycles.
On October 3, 2022, the Company completed the acquisition of substantially all the assets related to the powersports business of KA Shawinigan for a consideration of $127.2 million paid in cash. KA Shawinigan is a leading player in electronic and mechatronic product development and manufacturing and a long-standing supplier of BRP.
The value of the assets acquired, liabilities assumed, and non-controlling interest were as follows, as at the acquisition date:
| Pinion | KA Shawinigan | Total | ||
|---|---|---|---|---|
| Assets acquired | ||||
| Current assets | 7.8 | [a] | 25.9 | 33.7 |
| Non-current<br> assets | 5.3 | 4.5 | 9.8 | |
| Property, plant and equipment | 1.3 | 9.5 | 10.8 | |
| Patents | 16.2 | 28.3 | 44.5 | |
| Trademarks | 15.4 | — | 15.4 | |
| Customer relationships | 13.0 | — | 13.0 | |
| Goodwill <br>[b] [c] | 72.7 | 63.7 | 136.4 | |
| Total assets acquired | 131.7 | 131.9 | 263.6 | |
| Liabilities assumed | ||||
| Current liabilities | (11.1 | (3.8 | (14.9 | |
| Non-current<br> liabilities | (18.8 | (0.9 | (19.7 | |
| Total liabilities assumed | (29.9 | (4.7 | (34.6 | |
| Non-controlling<br> interest <br>[d] | (20.4 | — | (20.4 | |
| Total consideration paid in cash | 81.4 | 127.2 | 208.6 |
All values are in US Dollars.
[a] Including $0.4 million ( € 0.3 million) of cash.
[b] Goodwill arises principally from expected synergies and future growth.
[c] Goodwill is deductible for tax purposes only for KA Shawinigan.
[d]
Non-controlling interest is measured at fair value as at the acquisition date.
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Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 6. | TRADE AND OTHER RECEIVABLES |
|---|
The Company’s trade and other receivables were as follows, as at:
| January 31,<br><br> <br>2024 | January 31,<br><br>2023 | |
|---|---|---|
| Trade receivables | $538.5 | $493.7 |
| Allowance for doubtful accounts | (5.5) | (3.6) |
| 533.0 | 490.1 | |
| Sales tax and other government receivables | 107.2 | 140.8 |
| Other | 16.1 | 24.1 |
| Total trade and other receivables | $656.3 | $655.0 |
| 7. | OTHER FINANCIAL ASSETS | |
| --- | --- |
The Company’s other financial assets were as follows, as at:
| January 31,<br><br> <br>2024 | January 31,<br><br>2023 | |
|---|---|---|
| Restricted investments <br>[a] | $13.4 | $12.9 |
| Derivative financial instruments | 79.0 | 106.5 |
| Advances to suppliers related to property, plant and equipment | 22.2 | 36.2 |
| Other | 41.6 | 36.3 |
| Total other financial assets | $156.2 | $191.9 |
| Current | 106.6 | 122.6 |
| Non-current | 49.6 | 69.3 |
| Total other financial assets | $156.2 | $191.9 |
[a] The restricted investments are publicly traded bonds that can only be used for severance payments and pension costs associated with Austrian pension plans, and are not available for general corporate use.
The non-current portion is mainly attributable to derivative financial instruments and restricted investments.
27
Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 8<br>. | INVENTORIES |
|---|
The Company’s inventories were as follows, as at:
| January 31,<br><br> <br>2024 | January 31,<br><br>2023 | |
|---|---|---|
| Materials and work in progress | $834.9 | $1,175.5 |
| Finished products | 929.7 | 746.1 |
| Parts, accessories and apparel | 391.0 | 368.5 |
| Total inventories | $2,155.6 | $2,290.1 |
The Company recognized in the consolidated statements of net income during the year ended January 31, 2024, a write-down on inventories of $55.6 million ($43.3 million for the year ended January 31, 2023) , reversed previously recorded write-downs of $14.9 million ($11.8 million for the year ended January 31, 2023) and recognized an impairment charge on inventories of $2.5 million for the Marine segment (nil for the year ended January 31, 2023).
| 9. | OTHER ASSETS |
|---|
The Company’s other assets were as follows, as at:
| January 31,<br> <br>2024 | January 31,<br><br>2023 | |
|---|---|---|
| Prepaids | $47.9 | $45.3 |
| Deferred financing cost | 3.1 | 4.9 |
| Other | 8.2 | 19.8 |
| Total other assets | $59.2 | $70.0 |
| Current | 57.7 | 66.7 |
| Non-current | 1.5 | 3.3 |
| Total other assets | $59.2 | $70.0 |
28
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 10. | PROPERTY, PLANT AND EQUIPMENT |
|---|
The Company’s property, plant and equipment were as follows, as
at:
| January 31, 2024 | |||||||
|---|---|---|---|---|---|---|---|
| Cost | Carrying<br>amount | ||||||
| Tooling | 1,247.4 | 787.8 | 459.6 | 1,127.4 | $700.4 | $427.0 | |
| Equipment | 1,461.9 | 726.2 | 735.7 | 1,278.3 | 606.3 | 672.0 | |
| Building | 860.9 | 247.7 | 613.2 | 755.5 | 210.8 | 544.7 | |
| Land | 195.8 | — | 195.8 | 166.7 | — | 166.7 | |
| Total | 3,766.0 | 1,761.7 | 2,004.3 | 3,327.9 | $1,517.5 | $1,810.4 |
All values are in US Dollars.
As
at January 31, 2024 and 2023, assets under development amounted to $ 217.3 million and $ 199.7 million respectively and were included in the cost of property, plant and equipment.
The following table explains the changes in property, plant and equipment during the year ended January 31, 2024:
| Carrying amount<br>as at January 31,<br>2023 | Depreciation <br>[b] | Impairment<br>(Note 26) | Effect of foreign<br>currency<br>exchange rate<br>changes | Carrying amount<br>as at January 31,<br>2024 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Tooling | 427.0 | 166.6 | $(0.1 | ) | $(120.4 | ) | $(16.5 | ) | 3.0 | $459.6 | ||||
| Equipment | 672.0 | 234.7 | (1.3 | ) | (142.0 | ) | (26.8 | ) | (0.9 | 735.7 | ||||
| Building | 544.7 | 107.4 | — | (37.9 | ) | — | (1.0 | 613.2 | ||||||
| Land | 166.7 | 29.9 | — | — | — | (0.8 | 195.8 | |||||||
| Total | 1,810.4 | 538.6 | $(1.4 | ) | $(300.3 | ) | $(43.3 | ) | 0.3 | $2,004.3 |
All values are in US Dollars.
[a
] Government assistance of $9.8 million has been recorded against the additions.
[b] An amount of $236.2 million included in cost of sales.
The following table explains the changes in property, plant and equipment during the year ended January 31,
2023:
| Carrying<br>amount as at<br>January 31,<br>2022 | Depreciation <br>[b] | Effect of<br>foreign<br>currency<br>exchange<br>rate changes | Carrying<br>amount as at<br>January 31,<br>2023 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Tooling | 360.0 | 165.6 | — | $(0.1 | ) | $(101.9 | ) | $3.4 | $427.0 | |||
| Equipment | 513.3 | 260.0 | 10.8 | (0.6 | ) | (115.1 | ) | 3.6 | 672.0 | |||
| Building | 418.7 | 152.5 | — | (0.1 | ) | (29.7 | ) | 3.3 | 544.7 | |||
| Land | 149.9 | 8.8 | — | (0.1 | ) | — | 8.1 | 166.7 | ||||
| Total | 1,441.9 | 586.9 | 10.8 | $(0.9 | ) | $(246.7 | ) | $18.4 | $1,810.4 |
All values are in US Dollars.
[a
] Government assistance of $14.1 million has been recorded against the additions.
[b] An amount of $198.7 million is included in cost of sales.
29
Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 11. | INTANGIBLE ASSETS |
|---|
The Company’s intangible assets were as follows, as at:
| January 31, 2024 | |||||||
|---|---|---|---|---|---|---|---|
| Cost | Carrying<br>amount | ||||||
| Goodwill | 252.3 | — | 252.3 | 252.3 | $— | $252.3 | |
| Trademarks | 164.6 | — | 164.6 | 216.3 | — | 216.3 | |
| Software and licenses | 322.9 | 149.3 | 173.6 | 308.4 | 143.5 | 164.9 | |
| Patents | 48.3 | 8.1 | 40.2 | 48.8 | 3.8 | 45.0 | |
| Dealer networks | 115.8 | 92.8 | 23.0 | 136.5 | 86.3 | 50.2 | |
| Customer relationships | 36.5 | 25.1 | 11.4 | 36.3 | 23.7 | 12.6 | |
| Total | 940.4 | 275.3 | 665.1 | 998.6 | $257.3 | $741.3 |
All values are in US Dollars.
The following table explains the changes in Company’s intangible assets during the year ended January 31,
2024:
| Carrying amount<br>as at January 31,<br>2023 | Carrying amount<br>as at January 31,<br>2024 | ||||||
|---|---|---|---|---|---|---|---|
| Goodwill | 252.3 | — | — | — | $— | $252.3 | |
| Trademarks | 216.3 | — | — | (50.9) | (0.8) | 164.6 | |
| Software and licenses | 164.9 | 37.4 | (28.4) | (0.3) | — | 173.6 | |
| Patents | 45.0 | — | (4.3) | — | (0.5) | 40.2 | |
| Dealer networks | 50.2 | — | (6.8) | (19.3) | (1.1) | 23.0 | |
| Customer relationships | 12.6 | — | (1.3) | — | 0.1 | 11.4 | |
| Total | 741.3 | 37.4 | (40.8) | (70.5) | $(2.3) | $665.1 |
All values are in US Dollars.
[a] Government assistance of nil has been recorded against the additions.
[b] An amount of $12.2 million is included in cost of sales.
The following table explains the changes in Company’s intangible assets during the year ended January 31,
2023:
| Carrying<br>amount as at<br>January 31,<br>2022 | Carrying<br>amount as at<br>January 31,<br>2023 | ||||||
|---|---|---|---|---|---|---|---|
| Goodwill | 115.9 | — | 136.4 | — | $— | $252.3 | |
| Trademarks | 197.2 | — | 15.4 | — | 3.7 | 216.3 | |
| Software and licenses | 123.8 | 57.4 | 0.8 | (17.0) | (0.1) | 164.9 | |
| Patents | 3.2 | 0.5 | 44.5 | (2.0) | (1.2) | 45.0 | |
| Dealer networks | 54.5 | — | — | (6.7) | 2.4 | 50.2 | |
| Customer relationships | 0.3 | — | 13.0 | (0.8) | 0.1 | 12.6 | |
| Total | 494.9 | 57.9 | 210.1 | (26.5) | $4.9 | $741.3 |
All values are in US Dollars.
[a] Government assistance of $0.5 million has been recorded against the additions.
[b] An amount of $11.0 million included in cost of sales.
30
Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 12. | LEASES |
|---|
The main leasing activities of the Company are attributable to the Company’s manufacturing facility located in Finland, to offices located in Canada and to warehouses used for the distribution of parts, accessories and apparel.
The following table explains the changes in right-of-use assets during the year ended January 31, 2024:
| Additions | Depreciation <br>[a] | Effect of foreign<br>currency<br>exchange rate<br>changes | Termination,<br>remeasurement<br>and other | Carrying<br>amount as at<br>January 31,<br>2024 | |
|---|---|---|---|---|---|
| Building & land | $19.0 | $(43.0) | $0.7 | $12.5 | $152.4 |
| Equipment | 8.6 | (7.6) | (0.9) | 0.1 | 17.3 |
| Total | $27.6 | $(50.6) | $(0.2) | $12.6 | $169.7 |
| [a] An amount of 26.2 million included in cost of sales. | |||||
| The following table explains the changes in right-of-use assets during the year ended January 31, 2023: | |||||
| Additions | Depreciation <br>[a] | Effect of foreign<br>currency<br>exchange rate<br>changes | Termination,<br>remeasurement<br>and other <br>[b] | Carrying<br>amount as at<br>January 31,<br>2023 | |
| Building & land | $59.2 | $(30.7) | $2.0 | $15.0 | $163.2 |
| Equipment | 7.0 | (6.5) | 0.7 | 1.0 | 17.1 |
| Other | — | — | (0.1) | — | — |
| Total | $66.2 | $(37.2) | $2.6 | $16.0 | $180.3 |
All values are in US Dollars.
[a] An amount
of $21.4 million included in cost of sales.
[ b ] Includes $3.4 million related to business combinations.
The following table explains the changes in lease liabilities during the year ended January 31, 2024:
| Issuance | Interest | Repayment [a] | Termination,<br>remeasurement<br>and other | Carrying<br>amount as<br>at January<br>31, 2024 | ||
|---|---|---|---|---|---|---|
| Lease liabilities | $27.3 | $7.7 | (56.3) | $0.3 | $12.4 | $188.3 |
| [a] Includes 7.7 million of interest paid. | ||||||
| The following table explains the changes in lease liabilities during the year ended January 31, 2023: | ||||||
| Issuance | Interest | Repayment [a] | Termination,<br>remeasurement<br>and other <br>[b] | Carrying<br>amount as<br>at January<br>31, 2023 | ||
| Lease liabilities | $60.4 | $5.4 | (40.8) | $3.1 | $21.9 | $196.9 |
All values are in US Dollars.
[a] Includes $5.4 million of interest paid.
[b] Includes $3.4 million related to business combinations.
31
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 13. | REVOLVING CREDIT FACILITIES |
|---|
On February 16, 2022, the Company amended its $800.0 million revolving credit facilities to increase the availability to $1,100.0 million and replace LIBOR with the Secured Overnight Financing Rate (‘‘SOFR’’) as the benchmark interest rate. Subsequently, on June 14, 2022, the Company further added to its available commitment under its revolving credit facilities by $400 million the availability increasing to $1,500.0 million the “Revolving Credit Facilities”). The pricing grid and other conditions remained unchanged for both increases.
The applicable interest rates vary depending on a leverage ratio. The leverage ratio is defined in the Revolving Credit Facilities agreement by the ratio of net debt to consolidated cash flows of the Company (the “Leverage ratio”). As at January 31, 2024, the applicable interest rates are as follows:
| (i) | U.S. dollars at either |
|---|---|
| (a) | Term SOFR (defined as the forward-looking term rate based on SOFR plus a customary credit spread adjustment) plus 1.45% to 3.00% per annum; or |
| --- | --- |
| (b) | U.S. Base Rate plus 0.45% to 2.00% per annum; or |
| --- | --- |
| (c) | U.S. Prime Rate plus 0.45% to 2.00% per annum; |
| --- | --- |
| (ii) | Canadian dollars at either |
| --- | --- |
| (a) | Bankers’ Acceptance plus 1.45% to 3.00% per annum; or |
| --- | --- |
| (b) | Canadian Prime Rate plus 0.45% to 2.00% per annum |
| --- | --- |
| (iii) | Euros at EURIBOR plus 1.45% to 3.00% per annum. |
| --- | --- |
In addition, the Company incurs commitment fees of 0.25% to 0.40% per annum on the undrawn amount of the Revolving Credit Facilities.
As at January 31, 2024, the cost of borrowing under the Revolving Credit Facilities was as follows:
| (i) | U.S. dollars at either |
|---|---|
| (a) | Term SOFR plus 1.45% per annum; or |
| --- | --- |
| (b) | U.S. Base Rate plus 0.45% per annum; or |
| --- | --- |
| (c) | U.S. Prime Rate plus 0.45% per annum; |
| --- | --- |
| (ii) | Canadian dollars at either |
| --- | --- |
| (a) | Bankers’ Acceptance plus 1.45% per annum; or |
| --- | --- |
| (b) | Canadian Prime Rate plus 0.45% per annum |
| --- | --- |
| (iii) | Euros at Euro LIBOR plus 1.45% per annum. |
| --- | --- |
As at January 31, 2024, the commitment fees on the undrawn amount of the Revolving Credit Facilities were 0.25% per annum.
The Company is required to maintain, under certain conditions, a minimum fixed charge coverage ratio. Additionally, the total available borrowing under the Revolving Credit Facilities is subject to a borrowing base calculation representing 75% of the carrying amount of trade and other receivables plus 50% of the carrying amount of inventories.
As at January 31, 2024, the Company had no outstanding indebtedness under the Revolving Credit Facilities (nil as at January 31, 2023). The Company had issued letters of credit under the revolving credit facilities for an amount of $33.8 million as at January 31, 2024 ($33.5 million as at January 31, 2023) and, in addition, $5.8 million of letters of credit were outstanding under other bank agreements as at January 31, 2024 ($6.0 million as at January 31, 2023).
32
Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 14. | TRADE PAYABLES AND ACCRUALS |
|---|
The Company’s trade payables and accruals were as follows, as at:
| January 31,<br><br> <br>2024 | January 31,<br><br>2023 | |
|---|---|---|
| Trade payables | $1,026.8 | $943.7 |
| Wages and related employee accruals | 128.2 | 203.5 |
| Other accruals | 295.4 | 401.0 |
| Total trade payables and accruals | $1,450.4 | $1,548.2 |
| 15. | PROVISIONS | |
| --- | --- |
The Company’s provisions were as follows, as at:
| January 31,<br><br> <br>2024 | January 31,<br><br>2023 | |
|---|---|---|
| Product-related | $863.9 | $620.9 |
| Other | 51.3 | 44.3 |
| Total provisions | $915.2 | $665.2 |
| Current | 766.7 | 544.7 |
| Non-current | 148.5 | 120.5 |
| Total provisions | $915.2 | $665.2 |
Product -related provisions include provisions for regular warranty coverage on products sold, product liability provisions and provisions related to sales programs offered by the Company to its Customers in order to support the retail activity.
The non-current portion of provisions is mainly attributable to product-related provisions. As at January 31, 2024, the Company estimates that cash outflows related to those non-current provisions could occur from February 1, 2025 to January 31, 2029.
The changes in provisions were as follows:
| Product-related | Other | Total | |
|---|---|---|---|
| Balance as at January 31, 2023 | $620.9 | $44.3 | $665.2 |
| Expensed during the period | 1,315.1 | 40.2 | 1,355.3 |
| Paid during the period | (1,072.5) | (31.9) | (1,104.4) |
| Reversed during the period | (2.5) | (1.4) | (3.9) |
| Effect of foreign currency exchange rate changes | 5.0 | 0.1 | 5.1 |
| Unwinding of discount and effect of changes in discounting estimates | (2.1) | — | (2.1) |
| Balance as at January 31, 2024 | $863.9 | $51.3 | $915.2 |
33
Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 16. | OTHER FINANCIAL LIABILITIES |
|---|
The Company’s other financial liabilities were as follows, as at:
| January 31,<br><br>2024 | |||
|---|---|---|---|
| Dealer holdback programs and customer deposits | 40.1 | $48.0 | |
| Due to Bombardier Inc. (Note 30) | 22.4 | 22.7 | |
| Derivative financial instruments | 7.8 | 41.2 | |
| Non-controlling<br> interest liability (Note 5) | 26.4 | 20.8 | |
| Other | 14.2 | 17.8 | |
| Total other financial liabilities | 110.9 | $150.5 | |
| Current | 45.8 | 90.7 | |
| Non-current<br> <br>[a] | 65.1 | 59.8 | |
| Total other financial liabilities | 110.9 | $150.5 |
All values are in US Dollars.
[a] The non-current portion is mainly comprised of the amount due to Bombardier Inc. in connection with indemnification related to income taxes and the amount of the non-controlling interest liability.
| 17. | LONG-TERM DEBT |
|---|
As at January 31, 2024 and 2023, the maturity dates, interest rates, outstanding nominal amounts and carrying amounts of long-term debt were as follows:
| January 31, 2024 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Maturity date | Contractual<br><br>interest rate | Effective<br><br>interest rate | Outstanding<br><br>nominal amount | Carrying<br><br>amount | |||||
| Term Facility | |||||||||
| Term Loan <br>B-1 | May 2027 | 7.43% | 7.71% | U.S. $465.7 | $623.4<br><br>[a] | ||||
| Term Loan <br>B-2 | December 2029 | 8.08% | 8.41% | U.S. $493.8 | 661.0<br><br>[a] | ||||
| Term Loan B-3 | January 2031 | 8.08% | 8.23% | U.S. $997.5 | 1,325.3<br><br>[a] | ||||
| Term Loans | Mar. 2024 to Dec. 2030 | 0.87% to 5.14% | 1.90% to 6.28% | €<br>109.1 | 153.4 | ||||
| Total long-term debt | $2,763.1 | ||||||||
| Current | 58.1 | ||||||||
| Non-current | 2,705.0 | ||||||||
| Total long-term debt | $2,763.1 |
[a] Net of unamortized
transaction costs of nil for Term Loan B-1, nil for Term Loan B-2 and $ 10.0 million for Term
Loan B-3.
| January 31, 2023 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Maturity date | Contractual<br><br>interest rate | Effective<br><br>interest rate | Outstanding<br><br>nominal amount | Carrying<br><br>amount | |||||
| Term Facility | |||||||||
| Term Loan <br>B-1 | May 2027 | 6.57% | 6.61% | U.S. $1,477.2 | $1,966.4<br>[a] | ||||
| Term Loan <br>B-2 | December 2029 | 8.06% | 8.66% | U.S. $498.8 | 645.0<br>[a] | ||||
| Term Loans | Mar. 2023 to Dec. 2030 | 0.87% to 3.41% | 1.90% to 3.81% | €<br>128.6 | 178.8 | ||||
| Total long-term debt | $2,790.2 | ||||||||
| Current | 59.4 | ||||||||
| Non-current | 2,730.8 | ||||||||
| Total long-term debt | $2,790.2 |
[a] Net of unamortized transaction costs of $3.1 million for Term Loan B-1 and $20.1 million for Term Loan B-2.
34
Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 17. | LONG-TERM DEBT [CONTINUED] |
|---|
The following table explains the changes in long-term debt during the year ended January 31, 2024:
| Carrying<br> amount as at<br> January 31,<br> 2023 | Carrying<br> amount as at<br> January 31,<br> 2024 | ||||||
| Term Facility | 2,611.4 | — | (25.5) | 10.2 | $13.6 | $2,609.7 | |
| Term Loans | 178.8 | 3.3 | (32.7) | 0.6 | 3.4 | 153.4 | |
| Total | 2,790.2 | 3.3 | (58.2) | 10.8 | $17.0 | $2,763.1 |
All values are in US Dollars.
The following table explains the changes in long-term debt during the year ended January 31, 2023:
| Carrying<br> amount as at<br> January 31,<br> 2022 | |||||||
| Term Facility | 1,891.2 | 804.4 | (157.0) | 92.4 | (19.6) | $2,611.4 | |
| Term Loans | 149.3 | 116.5 | (94.9) | 6.1 | 1.8 | 178.8 | |
| Total | 2,040.5 | 920.9 | (251.9) | 98.5 | (17.8) | $2,790.2 |
All values are in US Dollars.
Under security arrangements, amounts borrowed under the Revolving Credit Facilities and the term facility (the “Credit Facilities”) are secured by substantially all the assets of the Company.
| a) | Term Facility |
|---|
On March 10, 2023, the Company amended its Term Loan B-1 by replacing the LIBOR references with SOFR references, with all other conditions remaining the same. On October 4, 2023, the Company repriced its Term Loan B-2, which reduced the cost of borrowing by 0.75%, with all other conditions remaining the same. The Company incurred transactions costs of $0.9 million, which have been recorded in financing costs. In addition, the previous unamortized transaction costs of $19.1 million were derecognized and recorded in financing costs.
On January 22, 2024 , the Company refinanced its Term Loan B-1, reducing the outstanding amount to U.S. $465.7 million and taking on a new Term Loan B-3 of U.S $1,000 million. This new tranche has an extended maturity date of January 22, 2031 and a cost of borrowing of Term SOFR plus 2.75%. The Company incurred transactions costs of $10.0 million, which have been incorporated into the carrying amount of the Term Loan B-3 and are amortized over its expected life using the effective interest rate method. In addition, the previous unamortized transaction costs on Term Loan B-1 of $2.7 million were derecognized and recorded in financing costs.
35
Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 17. | LONG-TERM DEBT [CONTINUED] |
|---|---|
| a) | Term Facility [continued] |
| --- | --- |
On June 10, 2022, the Company entered into an incremental U.S. $100.0 million tranche under its Term Facility with a maturity in June 2024 and, was exempt of financial covenants, then referred to as the Term Loan B-2. The Company incurred transaction costs of $1.1 million, which have been incorporated in the carrying amount of this new tranche of the Term Facility and are amortized over its expected life using the effective interest rate method.
On December 13, 2022, the Company entered into an incremental U.S. $500.0 million tranche under its Term Facility. This new tranche matures on December 13, 2029 , and, consistent with the existing tranche of the Term Facility, is exempt of financial covenants (the current “Term Loan B-2”). The Company incurred transaction costs of $20.9 million, which have been incorporated in the carrying amount of this new tranche of the Term Facility and are amortized over its expected life using the effective interest rate method. On the same date, the Company fully repaid the then outstanding U.S. $100 million Term Loan B-2 for repayment of $135.0 million. In addition, unamortized transaction costs of $0.9 million were derecognized and recorded in financing costs. The Company is using the SOFR as the benchmark interest rate for the Term B-2, as part of the transition plan that was announced by the Alternative Reference Rates Committee (“ARRC”).
As at January 31, 2024, the cost of borrowing under the Term Loan B-1 was as follows:
| (i) | Term SOFR plus 2.00% per annum, with a Term SOFR floor of 0.00%; or |
|---|---|
| (ii) | U.S. Base Rate plus 1.00%; or |
| --- | --- |
| (iii) | U.S. Prime Rate plus 1.00% |
| --- | --- |
As at January 31, 2024, the cost of borrowing under the Term Loan B-2 was as follows:
| (i) | Term SOFR, plus 2.75% per annum, with a Term SOFR floor of 0.50% |
|---|
As at January 31, 2024, the cost of borrowing under the Term Loan B-3 was as follows:
| (i) | Term SOFR, plus 2.75% per annum, with a Term SOFR floor of 0.00% |
|---|
Under the Term Facility, the cost of borrowing in U.S. Base Rate or U.S. Prime Rate cannot be lower than the cost of borrowing in SOFR.
The Company is required to repay a minimum of 0.25% of the nominal amount each quarter, less any voluntary prepayments done to date. Consequently, the Company repaid an amount of U.S. $18.9 million ($25.5 million) during the year ended January 31, 2024. Also, the Company may be required to repay a portion of the Term Facility in the event that it has an excess cash position at the end of the fiscal year and its leverage ratio is above a certain threshold level. As at January 31, 2024 and 2023, the Company was not required to repay any portion of the Term Facility under this requirement.
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Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 17. | LONG-TERM DEBT [CONTINUED] |
|---|---|
| b) | Term Loans |
| --- | --- |
During the year ended January 31, 2024, the Company entered into term loan agreements at favourable interest rates under an Austrian government program. This program supports research and development projects based on the Company’s incurred expenses in Austria. The term loans have a nominal amount of € 2.3 million ($3.3 million) with an interest rate varying between 1.00% and 4.53% with maturity dates varying from March 2027 to December 2027. The Company recognized a grant of € 0.1 million ($0.2 million) as a reduction of research and development expenses representing the difference between the fair value of the term loan at inception and the cash received.
During the year ended January 31, 2023, these term loans had a nominal amount of € 86.8 million ($116.5 million) with an interest rate varying between 2.90% and 3.41% with maturity dates varying from June 2025 to June 2029. The Company recognized a grant of € 4.6 million ($6.2 million) as a reduction of research and development expenses representing the difference between the fair value of the term loan at inception and the cash received.
On May 5, 2022, the Company fully repaid the balance of its € 55.0 million ($74.2 million) unsecured loan contracted under an Austrian government COVID-19 program in Fiscal 2021.
37
Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 18. | EMPLOYEE BENEFITS |
|---|
Employee benefits expenses, which represent the expenses related to all forms of consideration provided by the Company in exchange for services rendered by its employees, were as follows:
| Years ended | |||
|---|---|---|---|
| January 31,<br><br> <br>2024 | January 31,<br><br>2023 | ||
| Current remuneration | $1,403.7 | $1,261.9 | |
| Post-employment defined benefit plans | 10.6 | 14.4 | |
| Post-employment defined contribution plans | 55.5 | 48.2 | |
| Termination benefits | 6.1 | 1.0 | |
| Stock-based compensation (Note 20) | 20.7 | 19.5 | |
| Other long-term benefits | 2.8 | 0.4 | |
| Total <br>[a] | $1,499.4 | $1,345.4 |
[a] An amount of $881.5 million included in cost of sales for period ended January 31, 2024 ($806.2 million for period ended January 31, 2023)
| a) | Post-employment benefits |
|---|
The Company sponsors defined contribution retirement plans and non-contributory defined benefit plans that provide for pensions and other post-retirement benefits to a majority of its employees.
Canadian employees
The Company sponsors defined benefit pension plans and other post-retirement benefit plans for its Canadian executive employees and defined contribution plans for executive and non-executive employees. Additionally, the Company retained defined benefit obligations with certain active and former employees for services rendered prior to 2005.
The Company’s other post-retirement benefit plans provide, during retirement, non-contributory life insurance benefits and healthcare benefits to eligible employees that are funded on a pay-as-you-go basis. The healthcare benefits are payable from retirement to age 65.
38
Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 18. | EMPLOYEE BENEFITS [CONTINUED] |
|---|---|
| a) | Post employment benefits [continued] |
| --- | --- |
Canadian employees [continued]
The defined benefit plans are registered with the governments and follow their applicable laws. The plans are governed by a retirement committee composed of representatives from the employer and the employees. The retirement committee delegated its responsibilities to the investment committee, which is responsible for the investment policy with regard to the assets of the fund. This committee is composed of representatives from the employer. The plans have a strategy to decrease the risk level by increasing progressively, when the solvency of the plans will improve, the part of the plan assets in long-term fixed income securities. The Company contributes to the plans the minimum funding obligations required under the current regulations. The weighted average duration of the defined benefit obligations is approximately 14 years. As at January 31, 2024, the Company expects that 50% of the future payments associated with its Canadian defined benefit obligations will be paid in the next 16 years.
In addition, the Company sponsors a defined benefit retirement plan to provide supplemental pension benefits to its executives (“SERP”).
United States employees
In the United States, the Company offers a defined contribution plan to its employees as well as a defined benefit final average earnings non-registered supplementary executive retirement plan for its executive employees (“SERP”).
European employees
The Company’s sponsors defined contribution plans to its employees in most of its European entities. In addition, the Company maintains an unfunded defined benefit plan and sponsors a lump sum retirement indemnity plan in Austria. Under the defined benefit plan, the benefits are based on such employees’ length of service, applicable pension accrual rates and compensation at retirement. Under the lump sum retirement indemnity plan, the benefits are based on the length of service and compensation at retirement. These plans are regulated by the applicable Austrian laws. The weighted average duration of the defined benefit obligation is approximately 11 years. As at January 31, 2024, the Company expects that 50% of the future payments associated with its Austrian defined benefit obligations will be paid in the next 13 years.
39
Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 18. | EMPLOYEE BENEFITS [CONTINUED] |
|---|---|
| b) | Defined benefit plans |
| --- | --- |
Actuarial risks
The significant actuarial risks to which the plans expose the Company are as follows:
Market related risks
Investment risk
The present value of the defined benefit obligation is calculated using a discount rate determined by reference to high quality corporate fixed income investments. If the return on plan assets is below this rate, it will increase the plan liability. Currently, the funded plans have investments in equity securities and fixed income securities. Due to the long-term nature of the plan liabilities, the Company considers it appropriate that a reasonable portion of the plan assets should be invested in equity securities and income securities to leverage the return generated by the fund.
Interest risk
A decrease in the fixed income investments interest rate will increase the plans’ liabilities. However, for funded plans, this will be partially offset by an increase in the fair value of the plans’ fixed income securities.
Employee related risks
Longevity risk
The present value of the defined benefit obligation is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plans’ liabilities.
Salary risk
The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plans’ liabilities.
40
Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 18. | EMPLOYEE BENEFITS [CONTINUED] |
|---|---|
| b) | Defined benefit plans [continued] |
| --- | --- |
Actuarial assumptions
The weighted average of the significant actuarial assumptions adopted to determine the defined benefit cost and the defined benefit obligation were as follows:
| Years ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| January 31, 2024 | January 31, 2023 | |||||||
| Canada | Foreign | Canada | Foreign | |||||
| Benefit cost actuarial assumptions <br>[a] | ||||||||
| Discount rates used to determine: | ||||||||
| Current service cost | 4.95% | 3.61% | 3.60% | 1.29% | ||||
| Net interest cost | 4.95% | 3.56% | 3.50% | 1.21% | ||||
| Expected rate of compensation increase | 3.00% | 3.00% | 3.00% | 3.00% | ||||
| Mortality table | CPM 2014<br> Private | AVOE 2018 | CPM 2014<br> Private | AVOE 2018 | ||||
| Defined benefit obligation actuarial assumptions <br>[b] | ||||||||
| Discount rate | 5.05% | 3.48% | 4.95% | 3.56% | ||||
| Rate of compensation increase | 3.00% | 3.00% | 3.00% | 3.00% | ||||
| Mortality table | CPM 2014<br> Private | AVOE 2018 | CPM 2014<br> Private | AVOE 2018 |
[a] Determined as at beginning of the reporting periods.
[b] Determined as at end of the reporting periods.
The discount rate represents the market rate for high quality corporate fixed income investments consistent with the currency and the estimated term of the defined benefit plan obligation. The expected rate of compensation increase is determined considering the current salary structure, historical and anticipated wage increases.
Health care cost trend
The health care cost is assumed to be a rate of 4.5 % in fiscal year 2025 and to a rate that will gradually decline to reach 3.3
% in fiscal year 2034. After this date, the rate is assumed to remain at 3.3
%. An increase of
1 %
of the health care cost trend rate would not have a significant impact on the defined benefit cost and on the defined benefit obligations for the years ended January 31, 2024 and 2023.
41
Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 18. | EMPLOYEE BENEFITS [CONTINUED] |
|---|---|
| b) | Defined benefit plans [continued] |
| --- | --- |
Employee future benefit liabilities
The amounts arising from the Company’s obligations under defined benefit obligations were as follows, as at:
| January 31, 2024 | |||||
|---|---|---|---|---|---|
| Canada | |||||
| Defined benefit obligation of funded plans | (306.0) | (2.3) | (307.6) | $(1.4) | |
| Fair value of plans assets | 269.6 | 1.7 | 266.1 | 1.5 | |
| (36.4) | (0.6) | (41.5) | 0.1 | ||
| Defined benefit obligation of unfunded plans | (13.8) | (105.5) | (13.6) | (103.0) | |
| Employee future benefit liabilities | (50.2) | (106.1) | (55.1) | $(102.9) |
All values are in US Dollars.
The following table provides a reconciliation of the changes in the pension plans’ defined benefit obligations (funded and unfunded) as at the consolidated statement of financial position dates:
| January 31, 2024 | January 31, 2023 | ||||
|---|---|---|---|---|---|
| Canada | |||||
| Defined benefit obligation at beginning of year | (321.2) | (104.4) | (381.6) | $(131.5) | |
| Current service cost | (2.0) | (1.8) | (2.8) | (2.4) | |
| Interest cost | (15.7) | (3.8) | (13.2) | (1.5) | |
| Past service cost (gain) <br>[a] | — | — | (4.3) | — | |
| Actuarial gains (losses) from changes in financial assumptions | 3.9 | (1.7) | 65.2 | 29.5 | |
| Actuarial losses from experience adjustments | (0.7) | (1.5) | — | (4.8) | |
| Benefits paid | 15.9 | 5.9 | 15.5 | 5.4 | |
| Effect of foreign currency exchange rate changes | — | (0.5) | — | 0.9 | |
| Defined benefit obligation at end of year | (319.8) | (107.8) | (321.2) | $(104.4) |
All values are in US Dollars.
[a] Effective December 31, 2022, BRP approved an ad-hoc adjustment to be granted to retirees and surviving spouses of the Pension Plan for Employees of BRP (Canada) who retired prior to 2017. The impact of this ad-hoc increase is recognized as a past service cost during the year ended January 31, 2023.
The following table provides a reconciliation of the changes in the pension plans’ fair value of assets as at consolidated statement of financial position dates:
| January 31, 2024 | |||||
|---|---|---|---|---|---|
| Canada | |||||
| Assets fair value at beginning of year | 266.1 | 1.5 | 291.6 | $1.3 | |
| Interest income | 13.0 | — | 10.1 | — | |
| Administration costs | (0.3) | — | (0.3) | — | |
| Actuarial losses from return on plan assets | (2.1) | — | (26.1) | — | |
| Employer contributions | 8.8 | 6.1 | 6.3 | 5.6 | |
| Benefits paid | (15.9) | (5.9) | (15.5) | (5.4) | |
| Assets fair value at end of year | 269.6 | 1.7 | 266.1 | $1.5 |
All values are in US Dollars.
In accordance with the minimum funding obligations required under the current regulations, the Company expects to contribute $ 15.2 million to all defined benefit pension plans for the year ending January 31, 2025.
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Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 18. | EMPLOYEE BENEFITS [CONTINUED] |
|---|---|
| b) | Defined benefit plans [continued] |
| --- | --- |
Employee future benefit liabilities [continued]
The actual return (loss) on plan assets was as follows:
| Years ended | |||||
|---|---|---|---|---|---|
| January 31, 2024 | January 31, 2023 | ||||
| Canada | Foreign | ||||
| Actual return (loss) on plan assets | 10.6 | — | $(16.3) | $— |
All values are in US Dollars.
The fair value of the plan assets for each category was as follows, as at:
| January 31,<br> <br>2024 | January 31,<br> <br>2023 | ||
|---|---|---|---|
| Publicly traded Canadian equity securities | $25.7 | $15.9 | |
| Publicly traded foreign equity securities | 41.4 | 24.4 | |
| Publicly traded fixed income securities | 6.2 | 7.5 | |
| Insurance contracts <br>[a] | 147.2 | 150.5 | |
| Other | 50.8 | 69.3 | |
| Total | $271.3 | $267.6 |
[a] On December 8, 2022, the Company purchased $155.1 million of qualifying annuity buy-in insurance contracts on behalf of certain defined benefit plans as a mechanism to reduce pension plan risk. The resulting actuarial loss was recognized in other comprehensive income. The fair value of annuity buy-in insurance contracts fluctuates based on changes in the associated defined benefit obligation. These values are unquoted due to the use of the significant unobservable inputs used in deriving these assets’ fair values.
The fair values of the above equity and fixed income securities were determined based on quoted market prices in active markets.
Defined benefit costs
Components of the total defined benefit costs recognized in the consolidated statement of net income were as follows:
| Years ended | |||||
|---|---|---|---|---|---|
| January 31, 2024 | |||||
| Canada | Foreign | ||||
| Current service cost | 2.0 | 1.8 | $2.8 | $2.4 | |
| Net interest on the future employee benefit liabilities | 2.7 | 3.8 | 3.1 | 1.5 | |
| Administration costs | 0.3 | — | 0.3 | — | |
| Past service cost | — | — | 4.3 | — | |
| Defined benefit costs | 5.0 | 5.6 | $10.5 | $3.9 |
All values are in US Dollars.
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Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 18. | EMPLOYEE BENEFITS [CONTINUED] |
|---|---|
| b) | Defined benefit plans [continued] |
| --- | --- |
Sensitivity analysis
Actuarial assumptions that influence significantly the determination of the defined benefit obligations of the Company are the discount rate, the expected rate of compensation increase and the participants’ longevity. The sensitivity analyses below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.
The impact on employee future benefit liabilities would be the following as at January 31, 2024:
| Increase (Decrease) of the liabilities | |
|---|---|
| Discount rate | |
| Impact of a 0.5% increase | $(23.9) |
| Impact of a 0.5% decrease | 26.2 |
| Expected rate of compensation increase | |
| Impact of a 0.5% increase | $4.6 |
| Impact of a 0.5% decrease | (4.3) |
| Participant longevity | |
| Impact of a 1 year increase | $7.4 |
| Impact of a 1 year decrease | (7.2) |
The sensitivity analysis presented above may not be representative of the potential change in the employee future benefit liabilities as it is unlikely that the change in assumptions would occur in isolation from one another as some of the assumptions may be correlated.
| 19. | CAPITAL STOCK |
|---|
The authorized capital stock of the Company is comprised of an unlimited number of multiple voting shares carrying six votes per share with no par value, an unlimited number of subordinate voting shares carrying one vote per share with no par value, and an unlimited number of non-voting preferred shares issuable in series with no par value.
44
Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 19. | CAPITAL STOCK [CONTINUED] |
|---|
The changes in capital stock issued and outstanding were as follows:
| Number of shares | Carrying Amount | ||
|---|---|---|---|
| Subordinate voting shares | |||
| Balance as at February 1, 2022 | 38,543,761 | $257.1 | |
| Issued upon exercise of stock options | 299,102 | 15.4 | |
| Issued in exchange of multiple voting shares | 570,779 | 0.1 | |
| Repurchased under the SIB | (2,427,184) | (17.1) | |
| Repurchased under the NCIB | (463,950) | (3.1) | |
| Balance as at January 31, 2023 | 36,522,508 | 252.4 | |
| Issued upon exercise of stock options | 454,359 | 24.8 | |
| Issued in exchange of multiple voting shares <br>[a] | 2,236,284 | 0.2 | |
| Repurchased under the NCIB | (4,404,598) | (32.1) | |
| Balance as at January 31, 2024 | 34,808,553 | $245.3 | |
| Multiple voting shares | |||
| Balance as at February 1, 2022 | 42,954,979 | $3.5 | |
| Exchanged for subordinate voting shares | (570,779) | (0.1) | |
| Balance as at January 31, 2023 | 42,384,200 | $3.4 | |
| Exchanged for subordinate voting shares <br>[a] | (2,236,284) | (0.2) | |
| Balance as at January 31, 2024 | 40,147,916 | $3.2 | |
| Total outstanding as at January 31, 2024 | 74,956,469 | $248.5 |
[a] Amount of 2,171,428 related to secondary offering (described below) and 64,856 related to a Beaudier Inc. donation.
| a) | Normal course issuer bid program (“NCIB”) |
|---|
On November 30, 2023, the Company announced the renewal of its NCIB to repurchase for cancellation up t o 3,231,999 of its outstanding subordinate voting shares over a twelve-month period commencing on December 5, 2023, and ending no later than December 4, 2024 (the “Current NCIB”). During the year ended January 31, 2024, the Company repurchased for cancellation 885,200 subordinate voting shares for a total consideration of $ 79.1
million under the Current NCIB.
In addition, during the same period, the Company continued its share repurchases under the NCIB that was announced and started during the fiscal year ended January 31, 2023 (“Previous NCIB”, as defined hereafter). The Company repurchased for cancellation 3,519,398
subordinate voting shares, the total allowable under the program, for a total consideration of
$ 367.1 million
.
During the year ended January 31, 2024, the Company recognized a gain of
$ 4.8
million in financing income (gain of
$ 1.8
million in financing income for the year ended January 31, 2023) related to an automatic share purchase plan. The gain represents the difference between the share price used to establish the financial liability at the end of each quarter and the amount actually paid to repurchase shares during the regulatory restrictions or self-imposed blackout periods.
For the year ended January 31, 2024, of the total consideration of $ 446.2
million,
$ 32.1
million represents the carrying amount of the shares repurchased,
$ 418.9
million represents the amount charged to retained losses and
$ 4.8
million represents the gain recognized in net income.
45
Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 19. | CAPITAL STOCK [CONTINUED] |
|---|---|
| a) | Normal course issuer bid program (“NCIB”) [continued] |
| --- | --- |
On November 30, 2022, the Company announced the renewal of its NCIB to repurchase for cancellation up to 3,519,398 of its outstanding subordinate voting shares (“Previous NCIB”) and no shares were purchased during the year ended January 31, 2023 under the Previous NCIB.
For the year ended January 31, 2023, of the total consideration of $47.2 million, $3.1 million represents the carrying amount of the shares repurchased, $45.9 million represents the amount charged to retained losses and $1.8 million represents the gain recognized in net income.
| b) | Secondary offering |
|---|
On January 26, 2024, Bain Capital Integral Investors II, L.P. (“Bain Capital”) completed a secondary offering of 2,000,000 subordinate voting shares of the Company through an underwriter and a distribution in kind of 171,428 subordinate voting shares to certain affiliates and limited partners. Prior to such transaction, Bain Capital converted 2,171,428 multiple voting shares into an equivalent number of subordinate voting shares. The Company did not receive any of the proceeds of the secondary offering. In accordance with the terms of the registration rights agreement entered into in connection with the initial public offering of the Company’s subordinate voting shares, the Company incurred approximately $0.9 million of fees and expenses related to this secondary offering.
| c) | Substantial issuer bid offer (“SIB”) |
|---|
For the year ended January 31, 2024, the company did no t repurchase for cancellation subordinate shares under a SIB.
On May 11, 2022, the Company repurchased for cancellation 2,427,184 subordinate voting shares following the completion of a SIB for a total consideration of $250.0 million, of which $16.1 million represents the carrying amount of the shares repurchased and $233.9 million represents the amount charged to retained losses. Prior to the completion of the SIB, Beaudier group converted 570,779 of multiple voting shares into an equivalent number of subordinate voting shares. These converted shares were repurchased and cancelled as part of the SIB. The Company incurred $1.0 million of fees and expenses relating to the SIB, which were recorded in capital stock.
| d) | Dividend |
|---|
During the year ended January 31, 2024, the Company declared four quarterly dividends of $0.18 per share for holders of its multiple voting shares and subordinate voting shares. The dividends were paid on April 17, 2023, July 14, 2023, October 13, 2023 and January 12, 2024 for a total consideration of $55.6 million to shareholders.
During the year ended January 31, 2023, the Company declared four quarterly dividends of $0.16 per share for holders of its multiple voting shares and subordinate voting shares. The dividends were paid on April 18, 2022, July 14, 2022, October 14, 2022 and January 13, 2023 for a total consideration of $50.8 million to shareholders.
46
Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 20. | STOCK OPTION PLAN |
|---|
A reserve of 10,814,828 subordinate voting shares are available to be granted in stock options to officers and employees under the Company’s stock option plan. Such stock options are time vesting and 25% of the options will vest on each of the first, second, third and fourth anniversary of the grant. The stock options have a ten-year term at the end of which the options expire.
Under the stock option plan existing prior to the initial public offering of the Company’s subordinate voting shares, the options vested or were eligible to vest in equal annual instalments on each of the five anniversary dates of the date of grant and were exercisable for a period of up to ten years from the grant date.
The following table summarizes the weighted-average fair value of options granted and the main assumptions that were used to calculate the fair value during the years ended January 31, 2024 and 2023:
| January 31,<br><br>2024 | January 31,<br><br>2023 | ||
|---|---|---|---|
| Weighted-average fair value at grant date | $42.02 | $40.67 | |
| Weighted average assumptions used in the fair value models | |||
| Share price | $103.07 | $101.47 | |
| Risk-free interest rate | 3.53% | 2.47% | |
| Expected life | 5.00 year<br>s | 6.33 years | |
| Expected volatility | 44.66% | 40.28% | |
| Expected annual dividend per share | 0.70% | 0.63% |
The Company uses the Black-Scholes option-pricing model to estimate the fair value of options granted. The expected volatility used in option pricing models is calculated based on historical volatility of similar listed entities.
The number of stock options varied as follows:
| Number of options | Weighted average<br> exercise price | |||
|---|---|---|---|---|
| Balance as at February 1, 2022 | 3,310,040 | $48.90 | ||
| Granted | 589,500 | 103.15 | ||
| Forfeited/Cancelled | (53,775 | ) | 61.53 | |
| Exercised <br>[a] | (299,102 | ) | 38.47 | |
| Balance as at January 31, 2023 | 3,546,663 | $58.60 | ||
| Granted | 590,700 | 103.74 | ||
| Forfeited/Cancelled | (134,500 | ) | 90.94 | |
| Exercised <br>[b] | (454,359 | ) | 38.52 | |
| Balance as at January 31, 2024 | 3,548,504 | $67.46 |
[
a] The weighted average stock price on these exercised stock options was $101.46.
[b] The weighted average stock price on these exercised stock options was $104.48 .
47
Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 20. | STOCK OPTION PLAN [CONTINUED] |
|---|
The following table summarizes information about stock options outstanding and exercisable, as at January 31, 2024:
| Exercisable | ||||||||
|---|---|---|---|---|---|---|---|---|
| Exercise price range | Weighted-<br>average<br> <br>exercise<br> <br>price | Weighted-<br>average<br>remaining life<br>(years) | Number of<br>options | Weighted-<br>average<br> <br>exercise<br> <br>price | ||||
| 20 to 24 | 17,350 | 20.33 | 2.4 | 17,350 | 20.33 | |||
| 24 to 28 | 1,032,151 | 26.67 | 6.1 | 667,476 | 26.67 | |||
| 36 to 40 | 79,500 | 39.45 | 3.4 | 79,500 | 39.45 | |||
| 40 to 44 | 29,975 | 40.44 | 4.5 | 29,975 | 40.44 | |||
| 44 to 48 | 555,005 | 46.15 | 5.4 | 555,005 | 46.15 | |||
| 60 to 64 | 253,048 | 62.69 | 4.4 | 253,048 | 62.69 | |||
| 64 to 68 | 13,325 | 64.15 | 5.9 | 13,325 | 64.15 | |||
| 68 to 72 | 8,100 | 69.50 | 6.6 | 5,850 | 69.50 | |||
| 88 to 92 | 39,400 | 90.31 | 8.7 | 9,850 | 90.31 | |||
| 100 to 104 | 566,100 | 103.74 | 9.2 | — | — | |||
| 104 to 108 | 496,900 | 104.07 | 8.2 | 114,800 | 104.07 | |||
| 108 to 112 | 451,050 | 109.66 | 7.2 | 206,100 | 109.66 | |||
| 120 to 124 | 6,600 | 123.03 | 7.6 | 3,300 | 123.03 | |||
| Balance as at January 31, 2024 | 3,548,504 | $ | 67.46 | 6.7 | 1,955,579 | $51.69 |
All values are in US Dollars.
The following table summarizes information about stock options outstanding and exercisable, as at January 31, 2023:
| Exercisable | |||||||
|---|---|---|---|---|---|---|---|
| Exercise price range | Weighted-<br>average<br> <br>exercise<br> <br>price | Number of<br>options | Weighted-<br>average<br> <br>exercise<br> <br>price | ||||
| 20 to 24 | 34,025 | 20.38 | 3.3 | 34,025 | $20.38 | ||
| 24 to 28 | 1,249,101 | 26.67 | 7.1 | 479,201 | 26.69 | ||
| 36 to 40 | 126,350 | 39.45 | 4.4 | 126,350 | 39.45 | ||
| 40 to 44 | 36,650 | 40.50 | 5.4 | 36,650 | 40.50 | ||
| 44 to 48 | 683,375 | 46.15 | 6.4 | 421,526 | 46.15 | ||
| 60 to 64 | 308,562 | 62.69 | 5.4 | 308,562 | 62.69 | ||
| 64 to 68 | 22,700 | 64.15 | 6.9 | 14,000 | 64.15 | ||
| 68 to 72 | 8,700 | 69.50 | 7.6 | 4,200 | 69.50 | ||
| 88 to 92 | 39,400 | 90.31 | 9.7 | — | — | ||
| 104 to 108 | 542,600 | 104.07 | 9.2 | — | — | ||
| 108 to 112 | 488,100 | 109.66 | 8.2 | 108,175 | 109.66 | ||
| 120 to 124 | 7,100 | 123.03 | 8.6 | 1,775 | 123.03 | ||
| Balance as at January 31, 2023 | 3,546,663 | 58.60 | 7.2 | 1,534,464 | $46.94 |
All values are in US Dollars.
Share based compensation expense of $18.7 million for the year ended January 31, 2024 ($19.5 million for the year ended January 31, 2023) has been recorded in general and administrative expenses in the consolidated statements of net income.
As at January 31, 2024, the total unrecognized compensation cost related to unvested share-based payments totalled $21.7 million ($22.0 million as at January 31, 2023).
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 21. | SEGMENTED INFORMATION |
|---|
Details of segment information were as follows:
| For the year ended January 31, 2024 | Powersports<br>segment | ||||
|---|---|---|---|---|---|
| Revenues | 9,934.7 | 446.0 | (13.7) | 10,367.0 | |
| Cost of sales | 7,298.7 | 480.7 | (13.7) | 7,765.7 | |
| Gross profit (loss) | 2,636.0 | (34.7) | — | 2,601.3 | |
| Total operating expenses | 1,444.3 | ||||
| Operating income | 1,157.0 | ||||
| Financing costs | 209.3 | ||||
| Financing income | (16.6) | ||||
| Foreign exchange loss on long-term debt | 10.2 | ||||
| Income before income taxes | 954.1 | ||||
| Income tax expense | 209.6 | ||||
| Net income | 744.5 |
All values are in US Dollars.
[a] Including an impairment charge of $116.3 million related to the Marine segment.
| For the year ended January 31, 2023 | Powersports<br>segment | ||||
|---|---|---|---|---|---|
| Revenues | 9,544.8 | 518.9 | (30.3) | $10,033.4 | |
| Cost of sales | 7,087.7 | 476.6 | (30.3) | 7,534.0 | |
| Gross profit | 2,457.1 | 42.3 | — | 2,499.4 | |
| Total operating expenses | 1,132.3 | ||||
| Operating income | 1,367.1 | ||||
| Financing costs | 114.8 | ||||
| Financing income | (6.0) | ||||
| Foreign exchange loss on long-term debt | 92.4 | ||||
| Income before income taxes | 1,165.9 | ||||
| Income tax expense | 300.5 | ||||
| Net income | $865.4 |
All values are in US Dollars.
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 21. | SEGMENTED INFORMATION [CONTINUED] |
|---|
The following table provides geographic information on Company’s revenues, property, plant and equipment, intangible assets and right-of-use assets. The attribution of revenues was based on customer locations.
| Revenues | |||||
|---|---|---|---|---|---|
| Years ended | |||||
| January 31,<br><br>2024 | |||||
| United States | 6,242.2 | 6,029.7 | 336.9 | $388.7 | |
| Canada | 1,609.8 | 1,556.4 | 901.0 | 912.0 | |
| Europe | 1,236.6 | 1,238.9 | 222.5 | 223.2 | |
| Asia Pacific | 658.0 | 738.1 | 118.4 | 122.6 | |
| Mexico | 228.2 | 167.8 | 920.0 | 799.9 | |
| Austria | 29.9 | 23.4 | 326.6 | 283.0 | |
| Other | 362.3 | 279.1 | 13.7 | 2.6 | |
| 10,367.0 | 10,033.4 | 2,839.1 | $2,732.0 |
All values are in US Dollars.
| 22. | EARNINGS PER SHARE |
|---|---|
| a) | Basic earnings per share |
| --- | --- |
Details of basic earnings per share were as follows:
| Years ended | |||
|---|---|---|---|
| January 31,<br><br> <br>2024 | January 31,<br><br> <br>2023 | ||
| Net income attributable to shareholders | $743.4 | $863.9 | |
| Weighted average number of shares | 77,166,505 | 79,382,008 | |
| Earnings per share - basic | $9.63 | $10.88 | |
| b) | Diluted earnings per share | ||
| --- | --- |
Details of diluted earnings per share were as follows:
| Years ended | |||
|---|---|---|---|
| January 31,<br><br>2024 | |||
| Net income attributable to shareholders | 743.4 | $863.9 | |
| Weighted average number of shares | 77,166,505 | 79,382,008 | |
| Dilutive effect of stock options | 1,357,285 | 1,564,094 | |
| Weighted average number of diluted shares | 78,523,790 | 80,946,102 | |
| Earnings per share - diluted | 9.47 | $10.67 |
All values are in US Dollars.
The average market value of the Company’s shares for purposes of calculating the dilutive effect of stock options was based on share value on the Toronto Stock Exchange for the period during which the options were outstanding.
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 23. | REVENUES |
|---|
Details of revenues were as follows:
| Years ended | |||
|---|---|---|---|
| January 31,<br><br>2024 | January 31,<br><br>2023 | ||
| Powersports | |||
| Year-Round Products | $5,339.4 | $4,827.1 | |
| Seasonal Products | 3,410.7 | 3,440.3 | |
| Powersports PA&A and OEM Engines | 1,184.6 | 1,276.4 | |
| Marine | 432.3 | 489.6 | |
| Total | $10,367.0 | $10,033.4 | |
| 24. | COST OF SALES | ||
| --- | --- |
Cost of sales comprise costs of inventories sold, production overheads unallocated to inventories, warranty and distribution costs, costs related to sales programs that involve a free product or service delivered to clients, write-down of inventories, reversal of write-down of inventories, depreciation of property, plant and equipment, intangible assets, right-of-use assets used to manufacture and net insurance gains related to inventory.
During the year ended January 31, 2024, the Company recorded $6,913.0 million of inventories in cost of sales ($6,664.6 million for the year ended January 31, 2023).
| 25. | GOVERNMENT ASSISTANCE |
|---|
The Company’s government assistance, including tax credits, was as follows:
| Years ended | |||
|---|---|---|---|
| January 31,<br><br>2024 | January 31,<br><br>2023 | ||
| Recorded against research and development expense | $40.6 | $40.5 | |
| Recorded against other elements of operating income | 4.7 | 4.2 | |
| $45.3 | $44.7 | ||
| Recorded against the cost of property, plant and equipment | $9.8 | $14.1 | |
| Recorded against the cost of intangibles | $— | $0.5 | |
| 26. | IMPAIRMENT CHARGE | ||
| --- | --- |
During the twelve-month period ended January 31, 2024, as a result of softening consumer demand for the boating industry and related decrease in financial performance, the Company determined that some of its cash-generating units (“CGU”) were impaired and recorded an impairment charge of $25.0 million related to intangible assets of Alumacraft Boat Co. CGU and $45.5 million related to Triton Industries, Inc. CGU. The Company also recorded an impairment charge of $17.8 million to property, plant and equipment of Alumacraft Boat Co. CGU and $25.5 million related to Triton Industries, Inc. CGU. The charges were determined by comparing the carrying amount of each CGU to its recoverable amount, which is the higher of the fair value less costs of disposal or the value in use. The recoverable amount for the impaired CGUs was based on a value in use (“VIU”) calculation using entity-based measurement. The Company has determined that the discounted cash flow (“DCF”) technique provided the best assessment of what each impaired CGU could be exchanged for in an arm’s length transaction. Fair value is represented by the present value of expected future cash flows of the business together with the residual value of the business at the end of the forecast period. The DCF technique was applied on an enterprise-value basis, where the after-tax cash flows prior to interest expense are discounted using a weighted average cost of capital. This approach requires assumptions regarding revenue growth rates, sustainable results, level of working capital, capital expenditures, tax rates and discount rates. The assumptions used in the DCF are Level 3 inputs (as defined thereafter in Note 31). The estimated future cash flows are discounted to their present value using a pre-tax discount rate ranging from 12.9% to 13.1%. These discount rates were calculated by adding to the Company’s weighted average cost of capital the risk factor associated with the product line tested. A growth rate of 1.5% was used to calculate the terminal value.
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 27. | OTHER OPERATING EXPENSES (INCOME) |
|---|
Details of other operating expenses (income) were as follows:
| Years ended | |||
|---|---|---|---|
| January 31,<br> <br>2024 | January 31,<br> <br>2023 | ||
| Foreign exchange (gain) loss on working capital elements | $9.4 | $(28.6) | |
| Loss on forward exchange contracts | 11.7 | 22.7 | |
| Other | 5.2 | (4.4) | |
| Total | $26.3 | $(10.3) | |
| 28. | FINANCING COSTS AND INCOME | ||
| --- | --- |
Details of financing costs and financing income were as follows:
| Years ended | |||
|---|---|---|---|
| January 31,<br><br> <br>2024 | January 31,<br> <br>2023 | ||
| Interest on long-term debt | $159.7 | $83.2 | |
| Transaction costs on long-term debt | 22.7 | 1.1 | |
| Interest on lease liabilities | 7.7 | 5.4 | |
| Net interest on employee future benefit liabilities | 6.5 | 4.6 | |
| Interest and commitment fees on revolving credit facilities | 7.2 | 21.0 | |
| Other | 5.5 | (0.5) | |
| Financing costs | 209.3 | 114.8 | |
| Financing income | (16.6) | (6.0) | |
| Net financing costs | $192.7 | $108.8 |
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 29. | INCOME TAXES |
|---|---|
| a) | Income tax expense |
| --- | --- |
Details of income tax expense were as follows:
| Years ended | |||
|---|---|---|---|
| January 31,<br><br> <br>2024 | January 31,<br> <br>2023 | ||
| Current income tax expense | |||
| Related to current year | $246.2 | $345.0 | |
| Related to prior years | (1.6) | (11.0) | |
| 244.6 | 334.0 | ||
| Deferred income tax recovery | |||
| Temporary differences | (36.1) | (49.1) | |
| Effect of income tax rate changes on deferred income taxes | (0.3) | (0.1) | |
| Increase in valuation allowance | 1.4 | 15.7 | |
| (35.0) | (33.5) | ||
| Income tax expense | $209.6 | $300.5 |
The reconciliation of income taxes computed at the Canadian statutory rates to income tax expense recorded was as follows:
| Years ended | |||||||
|---|---|---|---|---|---|---|---|
| January 31,<br><br> <br>2024 | January 31,<br><br> <br>2023 | ||||||
| Income taxes calculated at statutory rates | $ | 252.8 | 26.5% | $ | 309.0 | 26.5% | |
| Increase (decrease) resulting from: | |||||||
| Income tax rate differential of foreign subsidiaries | (2.9 | ) | (1.8) | ||||
| Effect of income tax rate changes on deferred income taxes | (0.3 | ) | (0.1) | ||||
| Increase in valuation allowance | 1.4 | 15.7 | |||||
| Recognition of income taxes on foreign currency translation | (15.7 | ) | (12.5) | ||||
| Recognition of income taxes on inflation | (7.0 | ) | (9.4) | ||||
| Permanent differences | (0.6 | ) | 10.2 | ||||
| Recognition of tax incentives | (20.5 | ) | (10.1) | ||||
| Other | 2.4 | (0.5) | |||||
| Income tax expense | $ | 209.6 | $ | 300.5 |
The income tax statutory rate is 26.5% for the year ended January 31, 2024 and 2023. The income tax statutory rate is the Bombardier Recreational Products Inc. combined rate applicable in jurisdictions in which it operates.
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 2<br>9<br>. | INCOME TAXES [CONTINUED] |
|---|---|
| b) | Deferred income taxes |
| --- | --- |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred income tax assets (liabilities) were as follows, as at:
| January 31,<br><br> <br>2024 | January 31,<br><br> <br>2023 | |
|---|---|---|
| Related to current assets and liabilities | ||
| Inventories | $77.5 | $75.3 |
| Income taxes and related receivables | (3.9) | (3.1) |
| Trade payables and accruals | 18.7 | 16.3 |
| Provisions | 143.9 | 98.7 |
| Other financial liabilities | 5.1 | 13.2 |
| Lease liabilities | 12.6 | 10.8 |
| Deferred revenues | 21.9 | 18.4 |
| Other financial asset | (15.4) | (15.8) |
| Other | (4.6) | (5.6) |
| 255.8 | 208.2 | |
| Related to <br>non-current<br> assets and liabilities | ||
| Property, plant and equipment | $(73.2) | $(71.5) |
| Intangible assets | (55.6) | (71.3) |
| Right-of-use<br> assets | (47.5) | (43.1) |
| Provisions | 33.2 | 26.7 |
| Long-term debt | 2.6 | 8.8 |
| Lease liabilities | 39.9 | 36.6 |
| Deferred revenues | 23.4 | 32.1 |
| Employee future benefit liabilities | 30.3 | 32.1 |
| Other <br>non-current<br> liabilities | (6.9) | (7.7) |
| Other | 12.6 | 2.4 |
| (41.2) | (54.9) | |
| Related to <br>non-capital<br> losses carried forward | 40.7 | 63.3 |
| Related to capital losses carried forward | 29.2 | 25.4 |
| 284.5 | 242.0 | |
| Unrecognized tax benefits | (52.9) | (43.0) |
| Total | $231.6 | $199.0 |
As at January 31, 2024, non-capital losses amounted to $162.1 million ($256.9 million as at January 31, 2023), of which $125.9 million ($220.3 million as at January 31, 2023) is available to reduce future federal taxable income in the United States and $36.2 million ($36.6 million as at January 31, 2023) is available to reduce future taxable income in other tax jurisdictions.
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 2<br>9<br>. | INCOME TAXES [CONTINUED] |
|---|---|
| b) | Deferred income taxes [continued] |
| --- | --- |
As at January 31, 2024, the balance of deductible capital losses amounted to $110.1 million ($95.9 million as at January 31, 2023) and are available to offset future taxable capital gains in Canada for an unlimited period of time.
As at January 31, 2024, the Company has $57.6 million in investment tax credits receivable, of which $50.3 million is refundable and $7.3 million is available to reduce future income taxes in the United States (respectively $61.4 million, $51.0 million and $10.4 million as at January 31, 2023).
As at January 31, 2024 and 2023, deferred income taxes assets have been entirely recognized except for certain elements, consisting mainly of deductible capital losses carried forward, as the Canadian and Quebec taxation laws required those losses to be offset with available capital gains in order to be deductible.
In addition, deferred income taxes have not been provided for the undistributed earnings of foreign subsidiaries since either income taxes would not be applicable upon distribution of earnings or the Company determined that such earnings will be indefinitely reinvested. However, distribution in the form of dividends or otherwise from countries where earnings are indefinitely reinvested may be subject to income taxes.
| c) | International Tax Reform – Pillar Two model rules |
|---|
In December 2021, the Organisation for Economic Co-operation and Development published the Global Anti-Base Erosion Model Rules (“GloBE Rules”) designed to ensure that a multinational enterprise is subject to tax at an effective minimum tax rate of 15% calculated under the GloBE Rules regardless of the jurisdictions where it operates. The GloBE Rules have been enacted or are in process of being enacted into the domestic law of many jurisdictions where the Company operates. Based on a preliminary assessment, the Company’s financial results should not be materially impacted.
| 30. | RELATED PARTY TRANSACTIONS |
|---|
The Company had related party transactions during the years ended January 31, 2024 and 2023. The most significant transactions are described below and were made on an arm’s length basis, unless otherwise indicated.
| a) | Transactions with key management personnel |
|---|
Key management personnel of the Company, defined as employees with authority and responsibility for planning, directing and controlling the activities of the Company, are considered related parties to the Company. The key management personnel of the Company are its directors and the executive officers.
The Company incurred the following benefit expenses in relation with key management personnel:
| Years ended | |||
|---|---|---|---|
| January 31,<br><br> <br>2024 | January 31,<br><br> <br>2023 | ||
| Current remuneration | $8.2 | $19.4 | |
| Post-employment benefits | 1.0 | 1.4 | |
| Stock-based compensation expense | 8.9 | 9.7 | |
| Total | $18.1 | $30.5 |
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 30. | RELATED PARTY TRANSACTIONS [CONTINUED] |
|---|---|
| b) | Due to Bombardier Inc., a company related to Beaudier group |
| --- | --- |
Pursuant to the purchase agreement entered into in 2003 in connection with the acquisition of the recreational product business of Bombardier Inc., the Company is committed to reimburse to Bombardier Inc. income taxes amounting to $22.4 million as at January 31, 2024 ($22.7 million as at January 31, 2023). The payments will begin when Bombardier Inc. starts making income tax payments in Canada and/or in the United States.
| 31. | FINANCIAL INSTRUMENTS |
|---|---|
| a) | Fair value |
| --- | --- |
The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair values of the Company’s financial instruments take into account the credit risk embedded in the instrument. For financial assets, the credit risk of the counterparty is considered whereas for financial liabilities, the Company’s credit risk is considered.
In order to determine the fair value of its financial instruments, the Company uses, when active markets exist, quoted prices from these markets (“Level 1” fair value). When public quotations are not available in the market, fair values are determined using valuation techniques. When inputs used in the valuation techniques are only inputs directly and indirectly observable in the marketplace, fair value is presented as “Level 2” fair value. If fair value is assessed using inputs that require considerable judgment from the Company in interpreting market data and developing estimates, fair value is presented as “Level 3” fair value. For Level 3 fair value, the use of different assumptions and/or estimation methodologies may have a material effect on the estimated fair values.
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Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 31. | FINANCIAL INSTRUMENTS [CONTINUED] |
|---|---|
| a) | Fair value [continued] |
| --- | --- |
The fair value, fair value level and valuation techniques and inputs were as follows:
| As at | As at | |||||
|---|---|---|---|---|---|---|
| January 31, 2024 | ||||||
| Fair value<br>level | Carrying<br>amount | Fair value | Carrying<br>amount | Fair value | ||
| Restricted investments<br><br>(Note 7) | Level 2 | $13.4 | 13.4 | $12.9 | 12.9 | |
| Non-controlling<br> interest liability<br><br>(Note 16) | Level 3 | $(26.4) | (26.4) | $(20.8) | (20.8) | |
| Derivative financial<br><br>instruments | ||||||
| Forward exchange contracts | ||||||
| Favourable (Note 7) | Level 2 | $ 19.6 | 19.6 | $16.1 | 16.1 | |
| (Unfavourable) (Note 16) | Level 2 | (7.8) | (7.8) | (41.2) | (41.2) | |
| Interest rate cap (Note 7) | Level 2 | $59.4 | 59.4 | $90.4 | 90.4 | |
| Total derivative financial<br><br>instruments | Level 2 | $71.2 | 71.2 | $65.3 | 65.3 | |
| Term Facility (Note 17) | Level 1 | $(2,609.7) | (2,614.0) | $(2,611.4) | (2,600.7) | |
| Term Loans (Note 17) | Level 2 | $(153.4) | (158.3) | $(178.8) | (184.2) |
All values are in US Dollars.
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Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 31. | FINANCIAL INSTRUMENTS [CONTINUED] |
|---|---|
| a) | Fair value [continued] |
| --- | --- |
For cash and cash equivalents, trade and other receivables, Revolving Credit Facilities, trade payables and accruals, dealer holdback programs and customer deposits, the carrying amounts reported on the consolidated statements of financial position or in the notes approximate the fair values of these items due to their short-term nature. During the years ended January 31, 2024 and 2023, no changes in fair value level classifications occurred.
Cash includes $5.4 million held by BRP Saint Petersburg LLC ($10.2 million as at January 31, 2023). This cash is subject to regulatory restrictions and is therefore not available for general use by the other entities within the group.
| b) | Foreign exchange risk |
|---|
The foreign exchange risk associated with financial instruments is defined by the risk that the future cash flows of a recorded financial instrument will fluctuate because of changes in foreign exchange rates. Foreign exchange risk associated with financial instruments arises from financial instruments denominated in a currency other than the functional currency of the Company.
The Company’s significant foreign exchange risk exposure associated with financial instruments are with Credit Facilities, trade and other receivables, trade payables and accruals, lease liabilities and derivative financial instruments.
The table below presents the impact on consolidated net income and consolidated other comprehensive income of a variation of foreign exchange rates on financial instruments subject to foreign exchange risks as at January 31, 2024 and 2023:
| As at January 31, 2024 | As at January 31, 2023 | |||||
|---|---|---|---|---|---|---|
| Percentage of<br> Variation <br>[a] | Impact on Net<br> income | Impact on Other<br> comprehensive<br> income | Percentage of<br> Variation <br>[a] | Impact on Net<br> income | Impact on Other<br> comprehensive<br> income | |
| USD / CAD | 5% | $127.6<br>[b] | $76.1 | 5% | $129.4 <br>[b] | $79.9 |
| Euro / CAD | 5% | $1.9 | $— | 5% | $3.5 | $— |
| Other | 3% | $3.0 | $3.1 | 3% | $2.9 | $3.3 |
[a] Based on variations that might exist at the closing dates.
[b] Mainly from the long-term debt denominated in U.S. dollars.
The Company uses foreign exchange contracts to manage its foreign currency risks mainly in U.S. dollars and the Company uses short-term foreign exchange contracts to manage its daily cash position.
For currencies over which the Company cannot achieve an offset through its recurring business transactions, the Company uses foreign exchange contracts according to the Company’s hedging strategy. Management periodically reviews the relevant hedging position and may hedge at any level within the authorized parameters of the policy, up to the maximum percentage allowed.
As at January 31, 2024, the maximum length of time over which the Company is hedging its exposure to variability in future cash flow from anticipated sales is 36 months. All foreign exchange contracts used to hedge highly probable anticipated sales are recorded under the cash flow hedge model. The Company does not trade in derivative financial instruments for speculative purposes.
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BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 31. | FINANCIAL INSTRUMENTS [CONTINUED] |
|---|---|
| b) | Foreign exchange risk [continued] |
| --- | --- |
The following tables set out the notional amounts outstanding under hedging foreign exchange contracts, the carrying amount, the average contractual exchange rates and the settlement periods of these contracts:
| As at January 31, 2024 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Carrying amount | |||||||||
| Sell<br>currency | Buy<br>currency | Average<br>rate | Notional amount | Canadian<br>equivalent<br>notional<br>amount <br>[a] | Other<br>financial<br>assets | Other<br>financial<br>liabilities | |||
| Less than 12 months | |||||||||
| AUD | CAD | 0.9008 | AUD | 98.3 | 86.9 | $1.4 | $— | ||
| NZD | AUD | 0.9246 | NZD | 32.7 | 26.9 | — | — | ||
| GBP | Euro | 1.1255 | GBP | 18.3 | 31.1 | — | 1.0 | ||
| NOK | Euro | 0.0862 | NOK | 514.0 | 65.8 | — | 1.1 | ||
| SEK | Euro | 0.0880 | SEK | 645.9 | 83.5 | — | 0.9 | ||
| USD | CAD | 1.3492 | USD | 510.0 | 682.7 | 8.6 | 2.4 | ||
| Between 12 and 24 months | |||||||||
| AUD | CAD | 0.8918 | AUD | 26.1 | 23.0 | 0.1 | — | ||
| NZD | AUD | 0.9122 | NZD | 7.5 | 6.2 | — | 0.1 | ||
| GBP | Euro | 1.1098 | GBP | 6.5 | 11.1 | — | 0.3 | ||
| NOK | Euro | 0.0845 | NOK | 140.4 | 18.0 | — | 0.4 | ||
| SEK | Euro | 0.0863 | SEK | 202.8 | 26.2 | — | 0.7 | ||
| USD | CAD | 1.3475 | USD | 549.6 | 735.7 | 6.5 | 0.2 | ||
| Between 24 and 36 months | |||||||||
| USD | CAD | 1.3501 | USD | 155.5 | 208.2 | 2.3 | — |
[a] Exchange rates as at January 31, 2024 were used to translate notional amounts denominated in foreign currencies into Canadian dollars.
| As at January 31, 2023 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Sell<br>currency | Buy<br>currency | Average<br>rate | Notional amount | Canadianequivalentnotionalamount [a] | Other<br>financial<br>assets | Other<br>financial<br>liabilities | ||
| Less than 12 months | ||||||||
| AUD | CAD | 0.9161 | AUD | 176.2 | 165.6 | $— | $4.9 | |
| GBP | Euro | 1.1401 | GBP | 28.0 | 46.1 | 0.5 | — | |
| NOK | Euro | 0.0936 | NOK | 469.0 | 62.5 | 1.1 | — | |
| SEK | Euro | 0.0897 | SEK | 786.2 | 100.2 | 2.0 | — | |
| USD | CAD | 1.3333 | USD | 841.6 | 1,122.1 | 2.6 | 35.9 | |
| Between 12 and 24 months | ||||||||
| USD | CAD | 1.3460 | USD | 405.0 | 540.0 | 8.1 | — |
All values are in US Dollars.
[a] Exchange rates as at January 31, 2023 were used to translate notional amounts denominated in foreign currencies into Canadian dollars.
59
Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 3<br>1<br>. | FINANCIAL INSTRUMENTS [CONTINUED] |
|---|---|
| b) | Foreign exchange risk [continued] |
| --- | --- |
The following tables set out the notional amounts outstanding under foreign exchange contracts, the average contractual exchange rates and the settlement periods of these contracts:
| As at January 31, 2024 | ||||||
|---|---|---|---|---|---|---|
| Sell currency | Buy currency | Average rate | Notional amount | Canadian equivalent notional amount <br>[a] | ||
| Less than 12 months | ||||||
| AUD | CAD | 0.8936 | AUD | 219.9 | $194.2 | |
| CAD | JPY | 109.2804 | JPY | 308.5 | 2.8 | |
| Euro | CAD | 1.4565 | Euro | 160.5 | 233.2 | |
| Euro | CHF | 0.9327 | CHF | 0.6 | 1.0 | |
| Euro | GBP | 0.8539 | GBP | 0.4 | 0.7 | |
| Euro | NOK | 11.4161 | NOK | 27.0 | 3.5 | |
| Euro | SEK | 11.2400 | SEK | 2.3 | 0.3 | |
| USD | CAD | 1.3473 | USD | 806.9 | 1,080.1 | |
| CAD | AUD | 1.1289 | AUD | 0.3 | 0.2 | |
| NZD | AUD | 0.9246 | NZD | 32.7 | 26.9 | |
| CAD | Euro | 0.6885 | Euro | 35.3 | 51.3 | |
| GBP | Euro | 1.1266 | GBP | 18.7 | 31.8 | |
| NOK | Euro | 0.0870 | NOK | 871.1 | 111.5 | |
| SEK | Euro | 0.0882 | SEK | 1,307.3 | 169.1 | |
| CAD | USD | 0.7420 | USD | 194.3 | 260.1 | |
| Between 12 and 24 months | ||||||
| AUD | CAD | 0.8918 | AUD | 26.1 | 23.0 | |
| USD | CAD | 1.3475 | USD | 549.6 | 735.7 | |
| NZD | AUD | 0.9122 | NZD | 7.5 | 6.2 | |
| GBP | Euro | 1.1098 | GBP | 6.5 | 11.1 | |
| NOK | Euro | 0.0845 | NOK | 140.4 | 18.0 | |
| SEK | Euro | 0.0863 | SEK | 202.8 | 26.2 | |
| Between 24 and 36 months | ||||||
| USD | CAD | 1.3501 | USD | 209.9 | 281.0 |
[a] Exchange rates as at January 31, 2024 were used to translate notional amounts denominated in foreign currencies into Canadian dollars.
60
Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 31. | FINANCIAL INSTRUMENTS [CONTINUED] | |||||
|---|---|---|---|---|---|---|
| b) | Foreign exchange risk [continued] | |||||
| --- | --- | |||||
| As at January 31, 2023 | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| Sell currency | Buy currency | Average rate | Notional amount | Canadian<br><br>equivalent<br><br>notional<br><br>amount <br>[a] | ||
| Less than 12 months | ||||||
| AUD | CAD | 0.9161 | AUD | 176.2 | $165.6 | |
| CAD | Euro | 1.4554 | Euro | 14.4 | 20.8 | |
| CAD | MXN | 0.0710 | MXN | 111.1 | 7.9 | |
| CAD | USD | 1.3001 | USD | 143.8 | 191.8 | |
| Euro | CAD | 1.4572 | Euro | 261.9 | 379.1 | |
| Euro | NOK | 0.0930 | NOK | 99.9 | 13.3 | |
| Euro | SEK | 0.0893 | SEK | 102.0 | 13.0 | |
| GBP | Euro | 1.1401 | GBP | 28.0 | 46.1 | |
| CAD | NZD | 0.8606 | NZD | 1.2 | 1.0 | |
| NOK | Euro | 0.0936 | NOK | 606.0 | 80.8 | |
| SEK | Euro | 0.0895 | SEK | 1,057.8 | 134.8 | |
| USD | CAD | 1.3001 | USD | 1,098.0 | 1,464.0 | |
| Between 12 and 24 months | ||||||
| USD | CAD | 1.3460 | USD | 405.0 | 540.0 |
[a] Exchange rates as at January 31, 2023 were used to translate notional amounts denominated in foreign currencies into Canadian dollars.
| c) | Liquidity risk |
|---|
Liquidity risk is defined as the Company’s exposure to the risk of not being able to meet its financial obligations. The Company manages its liquidity risk by continuously monitoring its operating cash requirements and by the use of its funding sources to ensure its financial flexibility and mitigate its liquidity risk (see Note 31).
The following table summarizes the contractual maturities of the Company’s financial liabilities as at January 31, 2024:
| Less than<br>1 year | 1-3 years | 4-5 years | More than<br>5 years | Total<br> amount | |
|---|---|---|---|---|---|
| Trade payables and accruals | $1,450.4 | $— | $— | $— | $1,450.4 |
| Long-term debt (including interest) | 218.7 | 492.1 | 1,035.7 | 2,176.4 | 3,922.9 |
| Lease liabilities (including interest) | 52.6 | 82.2 | 40.0 | 36.2 | 211.0 |
| Derivative financial instruments | 6.1 | 1.7 | — | — | 7.8 |
| Other financial liabilities | 39.8 | 31.2 | 1.1 | 31.0 | 103.1 |
| Total | $1,767.6 | $607.2 | $1,076.8 | $2,243.6 | $5,695.2 |
61
Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 31. | FINANCIAL INSTRUMENTS [CONTINUED] |
|---|---|
| d) | Interest risk |
| --- | --- |
The Company is exposed to the variation of interest rates on financial instruments mainly on its Credit Facilities. As at January 31, 2024, an increase of a 0.25 percentage base point would have resulted in an unfavourable impact of $6.9 million on consolidated net income and consolidated comprehensive income for the year ended January 31, 2024 (unfavorable $7.6 million as at January 31, 2023) while a decrease of a 0.25 percentage base point would have resulted in a favourable impact of $6.9 million (favourable $7.6 million as at January 31, 2023) on consolidated net income and consolidated comprehensive income for the year ended January 31, 2024 without considering the effects of hedging instruments. Percentage increases or decreases of interest rates above are based on changes that might exist at the consolidated statement of financial position dates and have been applied on the Company’s financial instruments subject to interest rate changes. To limit its exposure to interest rate increase, the Company entered into interest rate cap contracts.
| e) | Credit risk |
|---|
The Company could be exposed, in the normal course of business, to the potential inability of dealers, distributors and other business partners to meet their contractual obligations on financial assets and on amounts guaranteed under dealer and distributor financing agreements.
The Company considers that its credit risk associated with its trade receivables and its limited responsibilities under dealer and distributor financing agreements does not represent a significant concentration of risk and loss due to the large number of dealers, distributors and other business partners and their dispersion across many geographic areas. Moreover, the Company mitigates such risk by doing business through its own distribution channels and by monitoring its independent dealers’ and distributors’ credit.
The following table provides further details on receivables for which the Company considers to be exposed to credit risk as at January 31, 2024 and 2023:
| January 31,<br> <br>2024 | January 31,<br> <br>2023 | |
|---|---|---|
| Trade and other receivables | $656.3 | $655.0 |
| Sales tax and other government receivables | (107.2) | (140.8) |
| Total exposed to credit risk | $549.1 | $514.2 |
| Not past due | $527.9 | $501.3 |
| Past due | ||
| Under 60 days | 13.4 | 10.6 |
| From 60 to 90 days | 2.5 | 1.0 |
| Over 90 days | 10.8 | 4.9 |
| Allowance for doubtful accounts | (5.5) | (3.6) |
| Total exposed to credit risk | $549.1 | $514.2 |
The counterparties to the derivative financial instruments and restricted investments are all investment grade financial institutions, which the Company anticipates will satisfy their obligations under these contracts. Over the past years, the Company has not incurred significant losses related to credit risk on its financial assets.
As described in Note 33 a), the Company has provided financial guarantees to third party financing companies in case of dealers’ inability to meet their obligations under their financing agreements with the financing companies.
62
Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 32. | CAPITAL MANAGEMENT |
|---|
The Company’s primary uses of capital are for capital investments and working capital. Based on the current level of operations, management believes that cash on hand, cash flows from operations and available borrowings under the Credit Facilities will enable the Company to meet its working capital, capital expenditure, debt service and other funding requirements.
The Company’s capital is composed of long-term debt and shareholders’ equity. The Company’s aim is to maintain a level of capital that is adequate to meet several objectives, including an acceptable Leverage ratio in order to provide access to adequate funding sources to support current operations, pursue its internal growth strategy and maintain capital flexibility. The Company may repurchase subordinate voting shares for cancellation pursuant to a NCIB or SIB, issue capital stock, or vary the amount of dividends paid to shareholders.
The Company’s objective is to maintain a Leverage ratio of 3.5 or less, which was continuously achieved during the years ended January 31, 2024 and 2023.
| 33. | COMMITMENTS AND CONTINGENCIES |
|---|
In addition to the commitments and contingencies described elsewhere in these consolidated financial statements, the Company is subject to the following (all amounts presented are undiscounted):
| a) | Dealer and distributor financing arrangements |
|---|
The Company, most of its independent dealers and some of its independent distributors are parties to agreements with third-party financing service providers. These agreements provide financing to facilitate the purchase of the Company’s products and improve the Company’s working capital by allowing an earlier collection of accounts receivable from dealers and distributors.
The outstanding financing between the Company’s independent dealers and distributors and third-party finance companies amounted to $3,469.2 million and $2,674.0 million as at January 31, 2024 and 2023, respectively. The breakdown of outstanding amounts by country and local currency between the Company’s independent dealers and distributors with third-party finance companies was as follows:
| Currency | January 31,<br><br> <br>2024 | January 31,<br><br> <br>2023 | |
|---|---|---|---|
| Total outstanding as at | CAD | $3,469.2 | $2,674.0 |
| United States | USD | $1,877.6 | $1,480.6 |
| Canada | CAD | $727.1 | $472.1 |
| Europe | Euro | € 66.1 | €<br> 63.3 |
| Australia and New Zealand | AUD | $150.1 | $145.0 |
63
Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 33. | COMMITMENTS AND CONTINGENCIES [CONTINUED] |
|---|---|
| a) | Dealer and distributor financing arrangements [continued] |
| --- | --- |
Under the dealer and distributor financing agreements, in the event of default, the Company may be required to purchase, from the finance companies, repossessed new and unused products at the total unpaid principal balance of the dealer or distributor to the finance companies.
The combined maximum obligation is generally within a range of:
i) U.S. $ 14.0 million ($ 18.7 million) or 15 % of the calendar year twelve-month average amount of financing outstanding under the financing agreements ($ 19.3 million as at January 31, 2024) and;
ii) U.S. $25.0 million ($33.5 million) or 10% of the last twelve-month average amount of financing outstanding under the financing agreements ($284.7 million as at January 31, 2024).
As such, the maximum amount subject to the Company’s obligation to purchase repossessed new and unused products from the finance companies was $304.0 million as at January 31, 2024 and $186.4 million as at January 31, 2023.
For the year ended January 31, 2024, the Company incurred a loss of
$ 0.9
million related to new and unused products repossessed by the finance companies (did not incur losses for the year ended January 31, 2023).
Substantially completed units financing
The Amended Financing Program provides for the financing of the substantially completed units shipped at the Company’s dealers (“Substantially Completed Units”). The financing of those Substantially Completed Units is limited by certain financial thresholds. Under this program, the Company’s dealers are required to comply with thresholds regarding the Substantially Completed Units shipped at the Company’s dealers.
The Company did not have any Substantially Completed Units in its network as at January 31, 2024, in compliance with its requirements.
64
Table of Contents
BRP Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended January 31, 2024 and 2023
[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]
| 33. | COMMITMENTS AND CONTINGENCIES [CONTINUED] |
|---|---|
| b) | Guarantees under various agreements |
| --- | --- |
In the normal course of business, the Company has entered into agreements that include indemnities in favour of third parties and which are customary in the industry, such as purchase and sale agreements, confidentiality agreements, engagement letters with advisors and consultants, outsourcing agreements, leasing contracts, underwriting and agency agreements, information technology agreements, and service agreements. These indemnification agreements may require the Company to compensate counterparties for losses they incurred as a result of breaches in representation and regulations or as a result of litigation claims or statutory sanctions that may be suffered as a consequence of the transaction.
The nature of these indemnification agreements prevents the Company from making a reasonable estimate of the maximum exposure due to the difficulties in assessing the amount of liability that stems from the unpredictability of future events and the unlimited coverage offered to counterparties. Historically, the Company has not made any significant payments under such or similar indemnification agreements.
The Company shall indemnify directors and officers of the Company for various losses including, but not limited to, all costs to settle suits or actions due to association with the Company, subject to certain restrictions. The Company has purchased directors’ and officers’ liability insurance to mitigate the cost of any potential future suits or actions. The term of the indemnification is not explicitly defined, but is limited to acts taking place during the period over which the indemnified party served as a trustee, director or officer of the Company. The maximum amount of any potential future payment cannot be reasonably estimated.
| c) | Litigation |
|---|
The Company intends to vigorously defend its position in litigation matters to which it is a party. Management believes the Company has recorded adequate provisions to cover potential loss es in relation to pending legal actions. Additionally, the Company has a general liability insurance coverage for claims relating to injuries or damages incurred with the Company’s products. This insurance coverage limits the potential losses associated with legal claims related to product usage.
While the final outcome with respect to actions pending as at January 31, 2024 cannot be predicted with certainty, it is the management’s opinion that their resolution will not have material effects on the Company’s future results of operations or cash flows.
65
EX-99.3
Exhibit 99.3
BRP INC.
MANAGEMENT’S
DISCUSSION AND
ANALYSIS
FOR THE THREE- AND TWELVE-MONTH PERIODS
ENDED JANUARY 31, 2024
Table of contents
| Glossary | 2 | |
|---|---|---|
| Basis of Presentation | 3 | |
| Forward-Looking Statements and Non-IFRS Measures | 3 | |
| Business Overview | 5 | |
| Reporting Segments | 5 | |
| Factors Affecting the Company’s Results of Operations | 6 | |
| Executive Summary | 9 | |
| Retail Performance & Market Statistics | 10 | |
| Results of Operations | 11 | |
| Analysis of Results for the Fourth Quarter of Fiscal 2024 | 11 | |
| Analysis of Segment Results for the Fourth Quarter of Fiscal 2024 | 13 | |
| Geographical Trends for the Fourth Quarter of Fiscal 2024 | 14 | |
| Analysis of Results for the twelve-month period ended January 31, 2024 | 15 | |
| Analysis of Segment Results for the twelve-month period ended January 31, 2024 | 17 | |
| Geographical Trends for the twelve-month period ended January 31, 2024 | 18 | |
| Assessment of the Company’s performance against its Fiscal 2024 guidance | 19 | |
| Foreign Exchange | 20 | |
| Liquidity and Capital Resources | 21 | |
| Contractual Obligations | 23 | |
| Capital Resources | 24 | |
| Consolidated Financial Position | 27 | |
| Post-Employment Benefits | 28 | |
| Off-Balance Sheet Arrangements | 29 | |
| Transaction Between Related Parties | 31 | |
| Financial Instruments | 31 | |
| Non-IFRS Measures and Reconciliation Tables | 33 | |
| Reconciliation Tables | 34 | |
| Summary of Consolidated Quarterly Results | 37 | |
| Reconciliation Table for Consolidated Quarterly Results | 38 | |
| Selected Consolidated Financial Information | 39 | |
| Critical Accounting Estimates | 41 | |
| Future Accounting Changes | 43 | |
| Environmental, Social and Governance | 44 | |
| Controls and Procedures | 45 | |
| Risk Factors | 46 | |
| Disclosure of Outstanding Shares | 73 | |
| Additional Information | 73 | |
| BRP Inc. | Management’s Discussion and Analysis | 1 |
| --- | --- | --- |
Glossary
| Abbreviations | Description | Abbreviations | Description |
|---|---|---|---|
| 3WV | Three-Wheeled<br>Vehicles | LIBOR | London<br>Interbank Offered Rate |
| ATV | All-Terrain Vehicles | NCIB | Normal<br>Course Issuer Bid |
| BPS | Basis points | MD&A | Management’s Discussion & Analysis |
| DB | Defined Benefits | OEM | Original<br>Equipment Manufacturer |
| DC | Defined<br>Contribution | ORV | Off-Road Vehicles |
| CAPEX | Capital<br>Expenditure | PA&A | Parts,<br>Accessories & Apparel |
| CGU | Cash Generating<br>Unit | PP&E | Property, Plant & Equipment |
| EBITDA | Earnings Before Interest,<br>Taxes, Depreciation & Amortization | PWC | Personal<br>Watercraft |
| EPS | Earnings Per Share | R&D | Research & development |
| ESG | Environmental, Social and<br>Governance | SIB | Substantial Issuer Bid |
| EURIBOR | Euro Interbank Offered<br>Rate | SOFR | Secured<br>Overnight Financing Rate |
| G&A | General &<br>Administrative | TermSOFR | Defined<br>as the forward-looking term rate based on SOFR plus a customary credit spread adjustment, when applicable |
| IAS | International Accounting<br>Standards | SSV | Side-by-Side Vehicles |
| IFRS | International Financial<br>Reporting Standards | Working<br> <br>Capital | Current<br>assets less current liabilities |
| International | All regions except United<br>States & Canada | LVHA | Low<br>Voltage & Human Assisted Group |
| BRP Inc. | Management’s Discussion and Analysis | 2 | |
| --- | --- | --- |
Basis of Presentation
The following management’s discussion and analysis (“MD&A”) provides information concerning the financial condition and results of operations of BRP Inc. (the “Company” or “BRP”) for the year ended January 31, 2024. This MD&A should be read in conjunction with the audited consolidated financial statements for the years ended January 31, 2024 and January 31, 2023. Some of the information included in this discussion and analysis contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from underlying forward-looking statements as a result of various factors, including those described in the “Forward-Looking Statements” section of this MD&A. This MD&A reflects information available to the Company as at March 27, 2024.
The audited consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). All amounts presented are in Canadian dollars unless otherwise indicated. All references in this MD&A to “Fiscal 2024”, “Fiscal 2023” and “Fiscal 2022” are to the Company’s fiscal year ended January 31, 2024, 2023 and 2022 respectively.
This MD&A, approved by the Board of Directors on March 27, 2024, is based on the Company’s audited consolidated financial statements and accompanying notes thereto for the years ended January 31, 2024 and 2023.
Forward-Looking Statements andNon-IFRS Measures
Forward-Looking Statements
Certain statements in this MD&A about the Company’s current and future plans, prospects, expectations, anticipations, estimates and intentions, results, levels of activity, performance, objectives, targets, goals or achievements, including the Company’s environmental, social and governance targets, goals and initiatives set forth under its CSR25 program and announced intention to electrify its existing product lines and launch new electric product lines, priorities and strategies, financial position, market position, capabilities, competitive strengths, beliefs, the prospects and trends of the industries in which the Company operates, the expected growth in demand for products and services in the markets in which the Company competes, research and product development activities, including projected design, characteristics, capacity or performance of future products and their expected scheduled entry to market, expected financial requirements and the availability of capital resources and liquidity or any other future events or developments and other statements that are not historical facts constitute forward-looking statements within the meaning of applicable securities laws. The words “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, are intended to identify forward-looking statements.
| BRP Inc. | Management’s Discussion and Analysis | 3 |
|---|
Forward-looking statements are presented for the purpose of assisting readers in understanding certain key elements of the Company’s current objectives, goals, targets, strategic priorities, expectations and plans, and in obtaining a better understanding of the Company’s business and anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes; readers should not place undue reliance on forward-looking statements contained herein. Forward-looking statements, by their very nature, involve inherent risks and uncertainties and are based on a number of assumptions, both general and specific. The Company cautions that its assumptions may not materialize and that the currently challenging macroeconomic and geopolitical environments in which it evolves may render such assumptions, although believed 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 industry to be materially different from the outlook or any future results or performance implied by such statements. 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 risk factors discussed in greater detail under the heading “Risk Factors” in this MD&A.
The forward-looking statements contained in this MD&A are made as of the date of this MD&A, and the Company has no intention and undertakes no obligation to update or revise any forward-looking statements to reflect future events, changes in circumstances, or changes in beliefs, unless required by applicable securities regulations. In the event that the Company does update any forward-looking statements contained in this MD&A, no inference should be made that the Company will make additional updates with respect to that statement, related matters or any other forward-looking statement.
The Company made a number of economic, market and operational assumptions in preparing and making certain forward-looking statements contained in this MD&A, including without limitation, the assumptions underlying the Company’s environmental, social and governance targets, goals and initiatives under its CSR25 program, which are set out in the “Forward-Looking Statements” section of its Corporate Social Responsibility report (it being understood that this reference is limited to the “Forward-Looking Statements” section, and shall not be deemed to incorporate by reference the content of the Corporate Social Responsibility report in this MD&A), as well as the following assumptions: reasonable industry growth ranging from down to slightly up; market share will remain constant or moderately increase; slowing global economic growth; limited impact from the ongoing military conflict between Russia and Ukraine; no further deterioration of the conflict in the Middle-East; main currencies in which the Company operates will remain at near current levels; easing, but still elevated, levels of inflation; there will be no significant changes in tax laws or free trade arrangements or treaties applicable to the Company; the Company’s margins are expected to be pressured by lower volumes; the supply base will remain able to support product development and planned production rates on commercially acceptable terms in a timely manner; no new trade barriers will be imposed amongst jurisdictions in which the Company carries operations; the absence of unusually adverse weather conditions, especially in peak seasons. BRP cautions that its assumptions may not materialize, and that the currently challenging macroeconomic and geopolitical environment in which it evolves may render such assumptions, although believed reasonable at the time they were made, subject to greater uncertainty.
Fiscal 2025 Guidance
A presentation of our Fiscal 2025 guidance is contained in our earnings press release dated March 28th, 2024 under the section entitled “Fiscal Year 2025 Guidance”. Such press release is available under the Company’s profile on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov.
Non-IFRS Measures
This MD&A makes reference to certain non-IFRS measures. 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 management’s perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under IFRS.
The Company defines and reconciles these measures in the “Non-IFRS Measures and Reconciliation Tables” section of this MD&A.
| BRP Inc. | Management’s Discussion and Analysis | 4 |
|---|
Business Overview
BRP Inc. is a global leader in the world of powersports products, propulsion systems and boats built on 80 years of ingenuity and intensive consumer focus. Through its portfolio of industry-leading and distinctive brands featuring Ski-Doo and Lynx snowmobiles, Sea-Doo watercraft and pontoons, Can-Am on- and off-road vehicles, Alumacraft and Quintrex boats, Manitou pontoons and Rotax marine propulsion systems, Rotax engines for karts and recreational aircraft and Pinion gearboxes, BRP unlocks exhilarating adventures and provides access to experiences across different playgrounds. The Company completes its lines of products with a dedicated parts, accessories and apparel portfolio to fully optimize the riding experience. Committed to growing responsibly, BRP is developing electric models for its existing product lines and exploring new low voltage and human assisted product categories.
The Company employs close to 20,000 people mainly in manufacturing and distribution sites in Mexico, Canada, Austria, the United States, Finland, Australia and Germany as at January 31, 2024. The Company sells its products in over 130 countries. The products are sold directly through a network of approximately 2,450 dealers in 22 countries, as well as through approximately 150 distributors serving approximately 360 additional dealers.
Reporting Segments
BRP and its subsidiaries (the “Company”) design, develop, manufacture and sell powersports and marine products. The Company has two operating and reportable segments consisting of Powersports (Year-Round Products, Seasonal Products and PA&A and OEM engines) and Marine Products.
Following the acquisitions of Pinion GmbH (“Pinion”) and of substantially all the assets related to the powersports business of Kongsberg Automotive ASA and its subsidiary Kongsberg Inc. located in Shawinigan, Quebec (“KA Shawinigan”) in Fiscal 2023, the Company created a new Low Voltage & Human Assisted Group (“LVHA”). The creation of LVHA is intended to allow the Company to pursue its growth strategy with low voltage and human assisted product categories at the intersection of mobility, recreation and utility.
Powersports
Year-Round Products
Year-Round Products consist of BRP vehicles that are sold and used throughout the year in most climates and include ATVs, SSVs and 3WVs product lines. All products within the Year-Round Product category are sold under the Can-Am brand. Can-Am ATVs, SSVs and 3WVs all leverage BRP’s Rotax engines.
Seasonal Products
Seasonal products consist of BRP products that are mostly used in specific seasons. These products include snowmobiles, which are mainly used during the winter season with sales to dealers concentrated in the months of September to January, as well as PWC and Sea-Doo pontoons, which are mainly used during the summer season, with sales to dealers concentrated in the months of January to April. All these products leverage BRP’s Rotax engines.
Parts, Accessories & Apparel andOEM engines
PA&A and Rotax engines consist of parts, accessories and apparel (referred to as “PA&A”), engines for karts and recreational aircraft, Pinion gearboxes and other services.
Marine
Marine consists of boats, pontoons, jet boat and outboard engines and related PA&A and other services. BRP competes in the boat product category with Alumacraft and Quintrex boats, Manitou pontoons and in the marine engine product category with the Rotax engines for jet boats and outboard engine with Stealth Technology.
| BRP Inc. | Management’s Discussion and Analysis | 5 |
|---|
The following table shows the percentage of total revenues for each segment:
| Proportion of Total Revenues<br><br><br>(in percentages) | Three-month periods ended | Twelve-month periods ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| January 31,<br><br><br>2024 | January 31,<br><br><br>2023 | January 31,<br><br><br>2024 | January 31,<br><br><br>2023 | January 31,<br><br><br>2022 | ||||||
| Year-Round Products | **** | 50.7% | 40.8% | **** | 51.5% | 48.1% | 45.3% | |||
| Seasonal Products | **** | 35.4% | 42.9% | **** | 32.9% | 34.3% | 33.0% | |||
| Powersports PA&A and OEM Engines | **** | 10.8% | 12.3% | **** | 11.4% | 12.7% | 15.0% | |||
| Total Powersports | **** | 96.9% | 96.0% | **** | 95.8% | 95.1% | 93.3% | |||
| Marine | **** | 3.1% | 4.0% | **** | 4.2% | 4.9% | 6.7% | |||
| Total Revenues | **** | 100.0% | 100.0% | **** | 100.0% | 100.0% | 100.0% |
Factors Affecting the Company’s Results of Operations
Revenues and Sales Program Costs
The Company’s revenues are primarily derived from the wholesale activities to dealers and distributors of the Company’s manufactured vehicles, including Year-Round Products, Seasonal Products, Powersports PA&A and OEM Engines, as well as Marine Products. Revenue recognition normally occurs when products are shipped to dealers or distributors from the Company’s facilities.
In order to support the wholesale activities of the Company and the retail activities of dealers and distributors, the Company may provide support in the form of various sales programs consisting of cash and non-cash incentives. The cash incentives consist mainly of rebates and volume discounts given to dealers and distributors, free or extended coverage period under dealer and distributor inventory financing programs, and retail financing programs. The cost of these cash incentives is recorded as a reduction of revenues. The non-cash incentives mainly consist of extended warranty coverage or free PA&A. When an extended warranty coverage is given with the purchase of a product, a portion of the revenue recognized upon the sale of that product is deferred and recognized during the extended warranty coverage period. The cost of the free PA&A is recorded in cost of sales.
The support provided to dealers, distributors and consumers tends to increase when general economic conditions are difficult, when changing market conditions require the launch of new or more competitive programs, or when dealer and distributor inventory is above appropriate levels.
Under dealer and distributor inventory financing arrangements, the Company could be required to purchase repossessed new and unused products in certain cases of default by dealers or distributors. The cost of repossession tends to increase when dealers or distributors are facing challenging and prolonged difficult retail conditions and when their non-current inventory level is high. During the current fiscal year and previous fiscal year, the Company did not experience significant repossessions under its dealer and distributor inventory financing arrangements. Refer to the “Off-Balance Sheet Arrangements” section of this MD&A for more information on dealer and distributor inventory financing arrangements.
Commodity Costs
Approximately 75% of the Company’s cost of sales consists of material used in the manufacturing process. Therefore, the Company is exposed to the fluctuation of prices of certain raw materials such as aluminum, steel, plastic, resins, stainless steel, copper, rubber and certain rare earth metals. Additionally, the Company is exposed to fuel price fluctuations related to its procurement and distribution activities. The Company does not hedge its long-term exposure to such price fluctuations. Therefore, an increase in commodity prices could negatively impact the Company’s operating results if it is not able to transfer these cost increases to dealers, distributors or consumers.
| BRP Inc. | Management’s Discussion and Analysis | 6 |
|---|
Warranty Costs
The Company’s regular warranty generally covers periods ranging from six months to five years for most products. In certain circumstances, the Company provides extended warranty coverage as a result of sales programs, under certain commercial accounts, or as required by local regulations. During the warranty period, the Company reimburses dealers and distributors for the entire cost of repair or replacement performed on the products (mainly composed of parts or accessories provided by the Company and labour costs incurred by dealers or distributors). In addition, the Company sells in the normal course of business and provides under certain sales programs extended product warranties.
During its product development process, the Company ensures that high quality standards are maintained at each development stage of a new product. This includes the development of detailed product specifications, the evaluation of the quality of the supply chain and the manufacturing methods and detailed testing requirements over the development stage of the products. Additionally, product quality is ensured by quality inspections during and after the manufacturing process.
The Company records a regular warranty provision when products are sold. Management believes that, based on available information, the Company has adequate provisions to cover any future warranty claims on products sold. However, future claim amounts can differ significantly from provisions that are recorded in the consolidated statements of financial position. For extended warranty, the claims are recorded in cost of sales as incurred.
Foreign Exchange
The Company’s revenues are reported in Canadian dollars but are mostly generated in U.S. dollars, Canadian dollars and euros. The Company’s revenues reported in Canadian dollars are to a lesser extent exposed to foreign exchange fluctuations with the Australian dollar, Brazilian real, Swedish krona, Norwegian krone, British pound, New Zealand dollar, Mexican peso, Chinese yuan and Japanese yen. The costs incurred by the Company are mainly denominated in Canadian dollars, U.S. dollars and euros and, to a lesser extent in Mexican pesos. Therefore, recorded revenues, gross profit and operating income in Canadian dollars are exposed to foreign exchange fluctuations. The Company’s facilities are located in different countries, which helps mitigate some of its foreign currency exposure.
As of January 31, 2024, the Company had an outstanding balance of U.S. $1,957.0 million ($2,609.7 million) under its U.S. $1,965.8 million ($2,631.5 million) term facility agreement (the “Term Facility”), which results in a gain or loss in net income when the U.S. dollar/Canadian dollar exchange rate at the end of the period varies from the opening period rate. Additionally, the Company’s interest expense on the Term Facility is exposed to U.S. dollar/Canadian dollar exchange rate fluctuations. The Company does not currently hedge the U.S. dollar/Canadian dollar exchange rate fluctuation exposures related to its Term Facility, and therefore, an increase in the value of the U.S. dollar against the Canadian dollar could negatively impact the Company’s net income.
For further detail relating to the Company’s exposure to foreign currency fluctuations, see “Financial Instruments – Foreign Exchange Risk” section of this MD&A.
| BRP Inc. | Management’s Discussion and Analysis | 7 |
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Net Financing Costs (Financing Costs less Financing Income)
Net financing costs are incurred principally on long-term debt, defined benefit pension plan liabilities and revolving credit facilities. As at January 31, 2024, the Company’s long-term debt of $2,763.1 million was mainly comprised of the Term Facility (B-1, B-2 and B-3), which bears interest at Term SOFR plus 2.00%, Term SOFR plus 2.75% and Term SOFR plus 2.75%, respectively. The Company entered into interest rate cap contracts, which limit its exposure to interest rates increases.
Income Taxes
The Company is subject to federal, state and provincial income taxes in jurisdictions in which it conducts business. The Canadian income tax statutory rate was 26.5% for the three- and twelve-month periods ended January 31, 2024. However, the Company’s effective consolidated tax rate is influenced by various factors, including the mix of accounting profits or losses before income tax among tax jurisdictions in which it operates and the foreign exchange gain or loss on the Term Facility. The Company expects to pay cash taxes in all tax jurisdictions for Fiscal 2024.
Seasonality
The Company’s revenues and operating income experience substantial fluctuations from quarter to quarter. In general, wholesale sales of the Company’s products are highest in the period immediately preceding their respective season and during the said season of use. However, the mix of product sales may vary considerably, from time to time, as a result of changes in seasonal and geographic demand, the introduction of new products and models, and production scheduling for particular types of products. As a result, the Company’s financial results are likely to fluctuate significantly from period to period.
| BRP Inc. | Management’s Discussion and Analysis | 8 |
|---|
Executive Summary
The Company’s three-month period ended January 31, 2024 was marked by a decrease in the volume of shipments and revenues compared to the three-month period ended January 31, 2023. The results of the fourth quarter of this fiscal year were mainly driven by a decrease in Seasonal Products deliveries, as the fourth quarter of this fiscal year compares unfavourably to a strong fourth quarter last fiscal year, where Seasonal Products shipments were completed after peak retail season due to supply chain issues last year. Revenues were also negatively impacted by higher sales incentives and unfavourable winter conditions, primarily in North America, where the short riding season reduced the demand for PA&A compared to the fourth quarter of last fiscal year. The Company’s North American quarterly retail sales were down for all product lines except SSV, resulting in an overall decrease in retail when compared to the same period last year. While the Company continues to demonstrate production efficiencies due to supply chain improvements, the reduction in volume and increase in sales programs have led to a decrease in the profit margin percentage for the three-month period ended January 31, 2024, compared to the same period last year.
The Company’s market share gains and favourable product mix contributed to an increase in revenues of 3% for the twelve-month period ended January 31, 2024 compared to the same period last fiscal year. Finally, the Company’s North American retail sales for Powersports Products increased by 8% for the twelve-month period ended January 31, 2024, compared to the same period last year.
Financial Highlights
| (in millions of Canadian<br><br><br>dollars, except per<br><br><br>share data and margin) | Three-month periods ended | Twelve-month periods ended | ||||||
|---|---|---|---|---|---|---|---|---|
| January 31,<br><br><br>2024 | January 31,<br><br><br>2024 | |||||||
| Income Statement | ||||||||
| Revenues | **** | 2,691.8 | 3,076.3 | (12.5%) | **** | 10,367.0 | 10,033.4 | 3.3% |
| Gross Profit | **** | 652.8 | 787.6 | (17.1%) | **** | 2,601.3 | 2,499.4 | 4.1% |
| Gross Profit margin (%) | **** | 24.3% | 25.6% | (130bps) | **** | 25.1% | 24.9% | 20bps |
| Operating income | **** | 178.5 | 436.9 | (59.1%) | **** | 1,157.0 | 1,367.1 | (15.4%) |
| Normalized EBITDA^[1]^ | **** | 404.5 | 528.0 | (23.4%) | **** | 1,699.6 | 1,706.3 | (0.4%) |
| Net income | **** | 188.2 | 365.1 | (48.5%) | **** | 744.5 | 865.4 | (14.0%) |
| Normalized net income^[1]^ | **** | 188.0 | 309.2 | (39.2%) | **** | 873.4 | 976.7 | (10.6%) |
| EPS – diluted | **** | 2.46 | 4.54 | (45.8%) | **** | 9.47 | 10.67 | (11.2%) |
| Normalized EPS – diluted ^[1]^ | **** | 2.46 | 3.85 | (36.1%) | **** | 11.11 | 12.05 | (7.8%) |
All values are in US Dollars.
^[1]^ See “Non-IFRS Measures” section.
| BRP Inc. | Management’s Discussion and Analysis | 9 |
|---|
Retail Performance & Market Statistics
North American retail sales - for the Fourth Quarter of Fiscal 2024
The Company’s North American retail sales for Powersports Products decreased by 10% for the three-month period ended January 31, 2024 compared to the same period last fiscal year. This was mainly driven by lower retail sales of Snowmobile and PWC for the three-month period ended January 31, 2024 compared to the same period last fiscal year, due to late shipments that occurred after peak retail season during the three-month period ended January 31, 2023. In addition, unfavourable winter conditions impacted our Snowmobile season this fiscal year. The decrease was partially offset by increased retail sales of SSV for the three-month period ended January 31, 2024.
| ● | North American Year-Round Products retail sales increased on a percentage basis in the<br>low-teens range compared to the three-month period ended January 31, 2023. The Year-Round Products industry increased on a percentage basis in the mid-single digits<br>over the same period. |
|---|---|
| ● | North American Seasonal Products retail sales decreased on a percentage basis in the<br>low-twenties range, even when excluding Sea-Doo pontoon, compared to the three-month period ended January 31, 2023. The Seasonal Products industry decreased<br>on a percentage basis in the high-teens range over the same period. |
| --- | --- |
The Company’s North American retail sales for Marine Products decreased by 14% compared to the three-month period ended January 31, 2023 as a result of softening consumer demand in the boating industry.
North American retail sales - for the twelve-month period ended January 31, 2024
The Company’s North American retail sales for Powersports Products increased by 8% for the twelve-month period ended January 31, 2024 compared to the twelve-month period ended January 31, 2023, which was mainly driven by an increase in retail sales of SSV, PWC, Sea-Doo pontoon and ATV. The increase was partially offset by a decrease in retail sales of Snowmobile and 3WV.
| ● | North American Year-Round Products retail sales increased on a percentage basis in the high-single digits compared to<br>the twelve-month period ended January 31, 2023. The Year-Round Products industry increased in the low-single digits over the same period. |
|---|---|
| ● | North American Seasonal Products retail sales increased on a percentage basis in the<br>mid-single digits, and in the low-single digits when excluding Sea-Doo pontoon, compared to the twelve-month period ended<br>January 31, 2023. The Seasonal Products industry remained flat over the same period. |
| --- | --- |
The Company’s North American retail sales for Marine Products decreased by 39% compared to the twelve-month period ended January 31, 2023 as a result of softening consumer demand in the boating industry and lower product availability of newly introduced products.
North American dealer inventories
As at January 31, 2024, North American dealer inventories for Powersports Products increased by 36% compared to January 31, 2023. The increase is across most product lines and mainly due to low levels of inventory during the fourth quarter of Fiscal 2023, driven by supply chain disruptions that, while improving, were still felt across the industry at that time.
| BRP Inc. | Management’s Discussion and Analysis | 10 |
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Results of Operations
Analysis of Results for the Fourth Quarter of Fiscal 2024
The following section provides an overview of the financial performance of the Company for the three-month period ended January 31, 2024 compared to the same period ended January 31, 2023.
| (in millions of Canadian dollars, except margin data) | Three-month periods ended | |||||
|---|---|---|---|---|---|---|
| January 31,<br> <br>2024 | Variance (%) | |||||
| Income Statement | ||||||
| Revenues | **** | 2,691.8 | 3,076.3 | ) | (12.5%) | |
| Gross Profit | **** | 652.8 | 787.6 | ) | (17.1%) | |
| Gross Profit margin (%) | **** | 24.3% | 25.6% | (130bps) | ||
| Operating Expenses | **** | 474.3 | 350.7 | 35.2% | ||
| Normalized EBITDA^[1]^ | **** | 404.5 | 528.0 | ) | (23.4%) | |
| Net Financing Costs | **** | 47.0 | 36.0 | 30.6% | ||
| Income Taxes | **** | 40.4 | 92.0 | ) | (56.1%) | |
| Net income | **** | 188.2 | 365.1 | ) | (48.5%) |
All values are in US Dollars.
^[1]^ See “Non-IFRS Measures” section.
Revenues
The decrease in revenues was primarily due to a lower volume across most product lines, explained by late shipments of Seasonal Products for the same period last fiscal year, softening consumer demand, primarily in International markets, higher sales programs across most product lines and unfavourable winter conditions, which impacted our Snowmobile season for PA&A. The decrease was partially offset by favourable product mix in Year-Round products and favourable pricing across most product lines. The decrease includes a favourable foreign exchange rate variation of $4 million.
Gross Profit
The decrease in gross profit and gross profit margin percentage were the result of a lower volume sold, as highlighted above, and higher sales programs. The decrease was partially offset by favourable pricing and product mix across most product lines and a decrease in material and logistics costs due to more efficiencies in the supply chain. The decrease in gross profit includes an unfavourable foreign exchange rate variation of $12 million.
Operating Expenses
The following table provides a breakdown of the Company’s Operating Expenses for the three-month period ended January 31, 2024 compared to the three-month period ended January 31, 2023:
| (in millions of Canadian dollars) | Three-month periods ended | |||
|---|---|---|---|---|
| January 31,<br> <br>2024 | ||||
| Selling and marketing | **** | 117.6 | 117.8 | (0.2%) |
| Research and development | **** | 122.7 | 121.0 | 1.4% |
| General and administrative | **** | 114.9 | 121.8 | (5.7%) |
| Other operating expenses (income) | **** | 2.8 | (9.9) | NM^[1]^ |
| Impairment charge | **** | 116.3 | — | NM^[1]^ |
| Operating Expenses | **** | 474.3 | 350.7 | 35.2% |
All values are in US Dollars.
[1] NM - Not Meaningful
The increase in operating expenses was mainly attributable to the impairment charge recorded during the fourth quarter of Fiscal 2024 for the Marine segment. The increase in operating expenses includes an unfavourable foreign exchange rate variation of $6 million.
| BRP Inc. | Management’s Discussion and Analysis | 11 |
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Normalized EBITDA ^[1]^
The decrease in normalized EBITDA ^[1]^ was primarily due to lower gross profit and higher operating expenses, even when excluding the impairment charge related to the Marine segment.
Net Financing Costs
The increase in net financing costs primarily resulted from higher interest expense on the Term Facility due to a higher average interest rate, as well as higher transaction costs on long-term debt due to the derecognition of unamortized transaction costs on the refinancing of the Company’s Term Loan B-1.
Income Taxes
The decrease in income tax expense was primarily due to lower operating income which includes an impairment charge related to the Marine segment and by higher deductible financing costs. The decrease was partially offset by lower benefits related to tax incentives and by an unfavourable mix of accounting profits and losses between tax jurisdictions. The effective income tax rate amounted to 17.7% for the three-month period ended January 31, 2024 compared to 20.1% for the three-month period ended January 31, 2023. The decrease resulted primarily from the tax and accounting treatment of the foreign exchange (gain) loss on the Term Facility. The decrease was partially offset by lower benefits related to tax incentives and by an unfavourable mix of accounting profits and losses between tax jurisdictions.
Net Income
The decrease in net income was primarily due to a lower operating income, resulting from the impairment charge related to the Marine segment recorded during the fourth quarter of Fiscal 2024, and an increase in financing costs, partially offset by a favourable foreign exchange rate variation on the U.S. denominated long-term debt, a lower income tax expense and an increase in financing income.
^[1]^See “Non-IFRS Measures” section.
| BRP Inc. | Management’s Discussion and Analysis | 12 |
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Analysis of Segment Results for the Fourth Quarter of Fiscal 2024
The following section provides an overview of the financial performance of the Company’s segments for the three-month period ended January 31, 2024 compared to the same period ended January 31, 2023. The inter-segment transactions are included in the analysis.
| Segment results<br><br><br>(in millions of Canadian dollars) | Three-month periods ended | Variance () | Variance (%) | |||
|---|---|---|---|---|---|---|
| January 31, 2024 | ||||||
| Revenues ^[1]^ | ||||||
| Powersports | ||||||
| Year-Round | **** | 1,363.9 | 1,254.8 | 8.7% | ||
| Seasonal | **** | 952.6 | 1,319.5 | (27.8%) | ||
| Powersports PA&A and OEM Engines | **** | 291.0 | 378.3 | (23.1%) | ||
| Marine | **** | 90.1 | 128.5 | (29.9%) | ||
| Gross profit (loss) | ||||||
| Powersports | **** | 657.9 | 790.6 | (16.8%) | ||
| As a percentage of revenues | **** | 25.2% | 26.8% | (160bps) | ||
| Marine | **** | (5.1) | (3.0 | (70.0%) | ||
| As a percentage of revenues | **** | -5.7% | -2.3% | NM ^[2]^ |
All values are in US Dollars.
^[1]^Including inter-segment transactions.
^[2]^ NM - Not Meaningful.
Powersports
Revenues
Year-Round Products
The increase in revenues from Year-Round Products was primarily attributable to a favourable product mix due to the introduction of new models and higher volume of 3WV, due to timing of shipments between the third and fourth quarter of Fiscal 2024. The increase in revenues was partially offset by higher sales programs and a lower volume of ATV and SSV sold. The increase includes an unfavourable foreign exchange rate variation of $1 million.
Seasonal Products
The decrease in revenues from Seasonal Products was primarily attributable to a lower volume of products sold and higher sales programs, mainly on Snowmobile due to unfavourable winter conditions. The decrease in volume is mostly explained by late shipments in the three-month period ended January 31, 2023, compared to this year. The decrease was partially offset by favourable pricing across all product lines. The decrease also includes a favourable foreign exchange rate variation of $2 million.
Powersports PA&A and OEM Engines
The decrease in revenues was attributable to a lower volume of PA&A sold, which was mainly attributable to lower dealer orders due to a higher level of stock remaining in dealer inventory and unfavourable winter conditions primarily in North America, which impacted the Snowmobile riding season and the related PA&A revenues. The decrease also includes a favourable foreign exchange rate variation of $4 million.
Gross Profit
The decrease in gross profit and gross profit margin percentage were the result of a lower volume sold, as highlighted above, and higher sales programs. The decrease was partially offset by favourable pricing and product mix across most product lines and a decrease in material and logistics costs due to more efficiencies in the supply chain. The decrease in gross profit includes an unfavourable foreign exchange rate variation of $11 million.
| BRP Inc. | Management’s Discussion and Analysis | 13 |
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Marine
Revenues
The decrease in revenues from the Marine segment was primarily attributable to a lower volume of products sold, higher sales programs, and an unfavourable product mix. The decrease in volume is mainly explained by softer consumer demand in the industry. The decrease was partially offset by favourable pricing across most product lines. The decrease includes an unfavourable foreign exchange rate variation of $1 million.
Gross Profit (loss)
The decrease in gross profit and gross profit margin percentage were the result of a lower volume sold, as highlighted above, and higher sales programs. The decrease was partially offset by production efficiencies.
Geographical Trends for the Fourth Quarter of Fiscal 2024
Revenues
| Revenues by geography<br> (in millions of Canadian dollars) | Variance (%) | |||
|---|---|---|---|---|
| Revenues () | ||||
| United States | 1,508.8 | 1,764.9 | (14.5%) | |
| Canada | 398.5 | 478.5 | (16.7%) | |
| International | 784.5 | 832.9 | (5.8%) | |
| Total Revenues () | 2,691.8 | 3,076.3 | ||
| Revenues (%) | ||||
| United States | 56.1% | 57.3% | (120bps) | |
| Canada | 14.8% | 15.6% | (80bps) | |
| International | 29.1% | 27.1% | 200bps | |
| Total Revenues (%) | 100.0% | 100.0% |
All values are in US Dollars.
United States
The decrease in revenues from the United States was primarily due to the lower volume of Seasonal Products sold and higher sales programs, partially offset by a higher volume of Year-Round Products sold, favourable product mix across most product lines and favourable pricing. The decrease includes a favourable foreign exchange impact of $19 million.
Canada
The decrease in revenues from Canada was primarily due to the lower volume of Seasonal Products sold and higher sales programs, partially offset by a higher volume of Year-Round Products sold, favourable product mix and pricing across most product lines.
International
The decrease in revenues from International was primarily due to lower volume across most product lines and higher sales programs. The decrease was partially offset by favourable product mix and pricing across most product lines. The decrease includes an unfavourable foreign exchange variation of $15 million.
| BRP Inc. | Management’s Discussion and Analysis | 14 |
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Analysis of Results for the twelve-month period ended January 31, 2024
The following section provides an overview of the Company’s financial performance for the twelve-month period ended January 31, 2024 compared to the same period ended January 31, 2023.
| ****(in millions of Canadian dollars, except margindata) | Twelve-month periods ended | ||||
|---|---|---|---|---|---|
| January 31,<br> <br>2024 | Variance (%) | ||||
| Income Statement | |||||
| Revenues | **** | 10,367.0 | 10,033.4 | 3.3% | |
| Gross Profit | **** | 2,601.3 | 2,499.4 | 4.1% | |
| Gross Profit margin (%) | **** | 25.1% | 24.9% | 20bps | |
| Operating Expenses | **** | 1,444.3 | 1,132.3 | 27.6% | |
| Normalized EBITDA^[1]^ | **** | 1,699.6 | 1,706.3 | (0.4%) | |
| Net Financing Costs | **** | 192.7 | 108.8 | 77.1% | |
| Income Taxes | **** | 209.6 | 300.5 | (30.2%) | |
| Net income | **** | 744.5 | 865.4 | (14.0%) |
All values are in US Dollars.
^[1]^ See “Non-IFRS Measures” section.
Revenues
The increase in revenues was primarily due to a higher volume of SSV and ATV sold, increased deliveries of Sea-Doo pontoon, favourable product mix across most product lines, as well as favourable pricing across all product lines. The increase was partially offset by higher sales programs, which are mostly due to retail incentives, and a lower volume across the remaining product lines. The increase includes a favourable foreign exchange rate variation of $187 million.
Gross Profit
The increase in gross profit and gross profit margin percentage were the result of a higher volume sold, as highlighted above, along with favourable pricing across all product lines, favourable product mix across most product lines and a decrease in material and logistics costs due to more efficiencies in the supply chain. The increase was partially offset by higher sales programs. The increase in gross profit includes an unfavourable foreign exchange rate variation of $41 million.
Operating Expenses
The following table provides a breakdown of the Company’s Operating Expenses for the twelve-month period ended January 31, 2024 compared to the twelve-month period ended January 31, 2023:
| (in millions of Canadian dollars) | Twelve-month periods ended | |||
|---|---|---|---|---|
| January 31,<br> <br>2024 | ||||
| Selling and marketing | **** | 480.0 | 433.8 | 10.7% |
| Research and development | **** | 441.5 | 367.7 | 20.1% |
| General and administrative | **** | 380.2 | 341.1 | 11.5% |
| Other operating expenses (income) | **** | 26.3 | (10.3) | NM^[1]^ |
| Impairment charge | **** | 116.3 | — | NM^[1]^ |
| Operating Expenses | **** | 1,444.3 | 1,132.3 | 27.6% |
All values are in US Dollars.
^[1]^ NM - Not Meaningful.
The increase in operating expenses was mainly attributable to the impairment charge recorded during the fourth quarter of Fiscal 2024 for the Marine segment, an increase in R&D expenses to support future growth as well as higher selling and marketing expenses, which are mainly due to continued product investment. The increase was also attributable to higher G&A expenses mainly related to the modernization of the Company’s software infrastructure. The increase in operating expenses includes an unfavourable foreign exchange rate variation of $56 million.
| BRP Inc. | Management’s Discussion and Analysis | 15 |
|---|
Normalized EBITDA ^[1]^
The decrease in normalized EBITDA ^[1]^ was primarily due to higher operating expenses, even when excluding the impairment charge related to the Marine segment, partially offset by higher gross profit.
Net Financing Costs
The increase in net financing costs primarily resulted from higher interest expense on the Term Facility due to a higher average interest rate, and a higher outstanding nominal amount, as well as higher transaction costs on long-term debt due to the derecognition of unamortized transaction costs on the repricing of the Company’s Term Loan B-2 and on the refinancing of the Company’s Term Loan B-1.
Income Taxes
The decrease in income tax expense was primarily due to a lower operating income which includes an impairment charge related to the Marine segment, by higher deductible financing costs and by higher benefits related to tax incentives. The effective income tax rate amounted to 22.0% for the twelve-month period ended January 31, 2024 compared to 25.8% for the twelve-month period ended January 31, 2023. The decrease resulted primarily from the tax and accounting treatment of the foreign exchange (gain) loss on the Term Facility and by higher benefits related to tax incentives.
Net Income
The decrease in net income was primarily due to a lower operating income, resulting from the impairment charge related to the Marine segment recorded during the fourth quarter of Fiscal 2024, and an increase in financing costs, partially offset by a favourable impact of the foreign exchange rate variation on the U.S. denominated long-term debt, a lower income tax expense and an increase in financing income.
^[1]^See “Non-IFRS Measures” section.
| BRP Inc. | Management’s Discussion and Analysis | 16 |
|---|
Analysis of Segment Results for the twelve-month period ended January 31, 2024
The following section provides an overview of the financial performance of the Company’s segments for the twelve-month period ended January 31, 2024 compared to the same period ended January 31, 2023. The inter-segment transactions are included in the analysis.
| Segment results<br><br><br>(in millions of Canadian dollars) | Twelve-month periods ended | |||
|---|---|---|---|---|
| January 31, 2024 | ||||
| Revenues ^[1]^ | ||||
| Powersports | ||||
| Year-Round | **** | 5,339.4 | 4,827.1 | 10.6% |
| Seasonal | **** | 3,410.7 | 3,440.3 | (0.9%) |
| Powersports PA&A and OEM Engines | **** | 1,184.6 | 1,277.4 | (7.3%) |
| Marine | **** | 446.0 | 518.9 | (14.0%) |
| Gross profit (loss) | ||||
| Powersports | **** | 2,636.0 | 2,457.1 | 7.3% |
| As a percentage of revenues | **** | 26.5% | 25.7% | 80bps |
| Marine | **** | (34.7) | 42.3 | (182.0%) |
| As a percentage of revenues | **** | -7.8% | 8.2% | NM ^[2]^ |
All values are in US Dollars.
^[1]^Including inter-segment transactions.
^[2]^ NM – Not Meaningful.
Powersports
Revenues
Year-Round Products
The increase in revenues from Year-Round Products was primarily attributable to a higher volume of SSV and ATV sold, driven by continued gains in market share, as well as favourable product mix and pricing across all product lines, which were partially offset by a lower volume of 3WV sold and higher sales programs. The increase includes a favourable foreign exchange rate variation of $107 million.
Seasonal Products
The decrease in revenues from Seasonal Products was primarily attributable to a lower volume of PWC and Snowmobile sold, mostly explained by dealer network inventory replenishment in Fiscal 2023, as well as higher sales programs across all product lines. The decrease was partially offset by a favourable volume of Sea-Doo pontoon sold and favourable pricing and product mix across all product lines. The decrease includes a favourable foreign exchange rate variation of $41 million.
Powersports PA&A and OEM Engines
The decrease in revenues from Powersports PA&A and OEM Engines was mainly attributable to a lower volume of sales. The decrease in sales volume was mainly attributable to lower dealer orders due to a higher level of stock remaining in dealer inventory and unfavourable winter conditions, which impacted the Snowmobile riding season and the related PA&A revenues. The decrease was partially offset by higher pricing, favourable product mix and the acquisition of Pinion. The decrease includes a favourable foreign exchange rate variation of $31 million.
Gross Profit
The increase in gross profit and gross profit margin percentage were the result of a higher volume sold, as highlighted above, along with favourable pricing across all product lines, favourable product mix across most product lines and a decrease in material and logistics costs due to more efficiencies in the supply chain. The increase was partially offset by higher sales programs. The increase in gross profit includes an unfavourable foreign exchange rate variation of $38 million.
| BRP Inc. | Management’s Discussion and Analysis | 17 |
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Marine
Revenues
The decrease in revenues from the Marine segment was mainly attributable to a lower volume due to softening consumer demand, a longer production ramp-up following the introduction of new products and supply chain issues, as well as higher sales programs. The decrease was partially offset by favourable pricing. The decrease includes a favourable foreign exchange rate variation of $8 million.
Gross Profit
The decrease in gross profit and gross profit margin percentage were the result of a lower volume sold, as highlighted above, higher commodities and labour costs due to production inefficiencies, and higher sales programs. The decrease was partially offset by favourable pricing.
Geographical Trends for the twelve-month period ended January 31, 2024
Revenues
| Revenues by geography<br> (in millions of Canadian dollars) | |||
|---|---|---|---|
| Revenues () | |||
| United States | 6,242.2 | 6,029.7 | 3.5% |
| Canada | 1,609.8 | 1,556.4 | 3.4% |
| International | 2,515.0 | 2,447.3 | 2.8% |
| Total Revenues () | 10,367.0 | 10,033.4 | |
| Revenues (%) | |||
| United States | 60.2% | 60.1% | 10bps |
| Canada | 15.5% | 15.5% | - |
| International | 24.3% | 24.4% | (10bps) |
| Total Revenues (%) | 100.0% | 100.0% |
All values are in US Dollars.
United States
The increase in revenues from the United States was primarily due to the higher volume of Year-Round Products sold, as well as favourable product mix and pricing across all product lines, partially offset by a lower volume of Seasonal Products sold and higher sales programs. The increase includes a favourable foreign exchange impact of $137 million.
Canada
The increase in revenues from Canada was primarily due to a higher volume of Year-Round Products sold, as well as favourable product mix and pricing across all product lines, partially offset by a lower volume of Seasonal Products sold and higher sales programs.
International
The increase in revenues from International was primarily due to a favourable product mix and pricing across all product lines, partially offset by a lower volume sold and higher sales programs. The increase includes a favourable foreign exchange impact of $50 million.
| BRP Inc. | Management’s Discussion and Analysis | 18 |
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Assessment of the Company’s performance against its Fiscal 2024 guidance
On March 23, 2023, the Company issued its full annual guidance for the year ending January 31, 2024. The guidance was revised quarterly, with the Company’s final guidance being issued on November 30, 2023, to adjust the revenues, the normalized EBITDA ^[1]^, the normalized effective tax rate ^[1]^, the normalized earnings per share – diluted ^[1]^ and the net income. The following table provides a comparison of the Company’s performance reported for the year ended January 31, 2024, against the issued and revised guidance for this year:
| Target for Fiscal 2024 (compared to Fiscal 2023 | ||||
|---|---|---|---|---|
| As issuedon<br> <br>March 23, 2023 | As revisedon<br> <br>November 30, 2023 | Results for Fiscal 2024 (compared to<br> <br>Fiscal 2023) | ||
| Revenues | Increase 9% to 12% | Increase 4% to 5% | Increase of 3% | Slightly below |
| Normalized EBITDA ^[1]^ | Increase 9% to 13% | Flat to 2% | Decrease of 0.4% | Slightly below |
| Normalized effective tax rate ^[1]^ | 24.5% to 25.5% | 24.0% to 24.5% | 23.6% | Slightly below |
| Normalized earnings per share - diluted<br>^[1]^ | $12.25 to $12.75 | $11.10 to $11.35 | $11.11 | As expected |
| Net income | $985 million to<br><br><br>$1,025 million | $740 million to<br><br><br>$765 million | $745 million | As expected |
^[1]^ See “Non-IFRS Measures” section.
| BRP Inc. | Management’s Discussion and Analysis | 19 |
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Foreign Exchange
The key average exchange rates used to translate foreign-denominated revenues and expenses, excluding any effect of the Company’s hedging program for the three- and twelve-month periods ended January 31, 2024, were as follows:
| Twelve-month periods ended | |||||||
|---|---|---|---|---|---|---|---|
| January 31,<br><br><br>2023 | January 31,<br><br><br>2024 | January 31,<br><br><br>2023 | |||||
| U.S. dollars (CA/US) | 1.3524 | 1.3485 | 1.3495 | 1.3083 | |||
| Euro<br>(CA/) | 1.4702 | 1.4191 | 1.4608 | 1.3720 | |||
| The key<br>period-end exchange rates used to translate foreign-denominated assets and liabilities were as follows: | |||||||
| January 31,<br><br><br>2024 | January 31,<br><br><br>2023 | ||||||
| U.S. dollars (CA/US) | 1.3387 | 1.3333 | |||||
| Euro<br>(CA/) | 1.4530 | 1.4476 |
All values are in US Dollars.
When comparing the operating income and the income before income tax for the three- and twelve-month periods ended January 31, 2024, the impacts of foreign exchange fluctuations were as follows:
| (in millions of Canadian dollars) | Foreign exchange (gain) loss | ||
|---|---|---|---|
| Three-month period | |||
| Revenues | (4.0) | $(186.7) | |
| Cost of sales | 16.3 | 227.2 | |
| Impact of foreign exchange fluctuations on gross profit | **** | 12.3 | 40.5 |
| Operating expenses | 5.9 | 56.4 | |
| Impact of foreign exchange fluctuations on operating income | **** | 18.2 | 96.9 |
| Long-term debt | (40.9) | (82.2) | |
| Net financing costs | 0.2 | 6.0 | |
| Impact of foreign exchangefluctuations on income before income taxes | **** | (22.5) | $20.7 |
All values are in US Dollars.
| BRP Inc. | Management’s Discussion and Analysis | 20 |
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Liquidity and Capital Resources
Liquidity
The Company’s primary sources of cash consist of existing cash balances, operating activities and available borrowings under the Revolving Credit Facilities, Term Facility, Term Loans and Bank Overdraft.
The Company’s primary use of cash is to fund operations, working capital requirements and capital expenditures in connection with product development and manufacturing infrastructure. The fluctuation of working capital requirements is primarily due to the seasonality of the Company’s production schedule and product shipments.
A summary of net cash flows by activity for the twelve-month periods ended January 31, 2024 and 2023 is presented below:
| Twelve-month periods ended | |||
|---|---|---|---|
| (in millions of Canadian dollars) | January 31,<br><br><br>2024 | ||
| Net cash flows generated from operating activities | **** | 1,658.1 | $649.5 |
| Net cash flows used in investing activities | **** | (574.9) | (853.4) |
| Net cash flows generated from (used in) financing activities | **** | (796.8) | 190.3 |
| Effect of exchange rate changes on cash and cash<br>equivalents | **** | 3.1 | (49.9) |
| Net increase (decrease) in cash and cash equivalents | **** | 289.5 | (63.5) |
| Cash and cash equivalents at beginning of period | **** | 202.3 | 265.8 |
| Cash and cash equivalents at end of period | **** | 491.8 | $202.3 |
| Free cash<br>flow^[1]^ | **** | 1,072.3 | $(9.9) |
All values are in US Dollars.
Net Cash Flows Generated from Operating Activities
A summary of cash flows from operating activities for the twelve-month periods ended January 31, 2024 and 2023 is presented below:
| Twelve-month periods ended | |||
|---|---|---|---|
| (in millions of Canadian dollars) | January 31,<br><br><br>2024 | ||
| Net income | **** | 744.5 | $865.4 |
| Non-cash and<br>non-operating items | **** | 941.6 | 822.0 |
| Changes in working capital | **** | 228.2 | (689.3) |
| Income taxes paid, net of refunds | **** | (256.2) | (348.6) |
| Net cash flows generated from operating activities | **** | 1,658.1 | $649.5 |
All values are in US Dollars.
Net cash flows generated from operating activities totalled $1,658.1 million for the twelve-month period ended January 31, 2024 compared to $649.5 million for the twelve-month period ended January 31, 2023. The $1,008.6 million increase in net cash flows generated was mainly due to favourable changes in working capital and lower income taxes paid. The lower investment in working capital was primarily attributable to the significant investments in working capital that were required during Fiscal 2023 to maintain production levels as a result of challenges in the supply chain, which were no longer necessary during Fiscal 2024. The increase in net cash flows generated were partially offset by lower profitability.
^[1^^]^ See “Non-IFRS Measures” section.
| BRP Inc. | Management’s Discussion and Analysis | 21 |
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Net Cash Flows Used in Investing Activities
A summary of cash flows from investing activities for the twelve-month periods ended January 31, 2024 and 2023 is presented below:
| Twelve-month periods ended | |||
|---|---|---|---|
| (in millions of Canadian dollars) | January 31,<br><br><br>2024 | ||
| Additions to property, plant and equipment | **** | (548.4) | $(601.0) |
| Additions to intangible assets | **** | (37.4) | (58.4) |
| Business combinations, net of acquired cash | **** | — | (208.2) |
| Other | **** | 10.9 | 14.2 |
| Net cash flows used in investing activities | **** | (574.9) | $(853.4) |
All values are in US Dollars.
Net cash flows used in investing activities totalled $574.9 million for the twelve-month period ended January 31, 2024 compared to $853.4 million for the twelve-month period ended January 31, 2023. The $278.5 million decrease in net cash flows used was mostly explained by lower investments in business combinations and property, plant and equipment compared to the twelve-month period ended January 31, 2023.
Net Cash Flows Generated from (Used in) Financing Activities
A summary of cash flows from financing activities for the twelve-month periods ended January 31, 2024 and 2023 is presented below:
| Twelve-month periods ended | |||
|---|---|---|---|
| (in millions of Canadian dollars) | January 31,<br><br><br>2024 | ||
| Repurchase of subordinate voting shares | **** | (446.2) | $(305.5) |
| Dividends paid | **** | (55.6) | (50.8) |
| Repayment of long-term debt | **** | (58.2) | (251.9) |
| Interest paid | **** | (167.6) | (100.7) |
| Issuance of long-term debt | **** | — | 920.9 |
| Increase (decrease) in bank overdraft | **** | (29.0) | 29.0 |
| Other | **** | (40.2) | (50.7) |
| Net cash flows generated from (used in) financing<br>activities | **** | (796.8) | $190.3 |
All values are in US Dollars.
Net cash flows used in financing activities totalled $796.8 million for the twelve-month period ended January 31, 2024 compared to net cash flows generated from financing activities in the amount of $190.3 million for the twelve-month period ended January 31, 2023. The $987.1 million increase in net cash flows used was mainly attributable to the issuance of new long-term debt in the twelve-month period ended January 31, 2023, a repayment of the amount drawn on bank overdraft, an increase in the interest paid and an increase in the repurchases of subordinate voting shares. The increase was partially offset by a reduction in the repayment of long-term debt for the twelve-month period ended January 31, 2024.
| BRP Inc. | Management’s Discussion and Analysis | 22 |
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Contractual Obligations
The following table summarizes the Company’s significant contractual obligations as at January 31, 2024:
| (in millions of Canadian dollars) | Less than<br><br><br>1 year | |||||
|---|---|---|---|---|---|---|
| Trade payables and accruals | 1,450.4 | — | — | — | $1,450.4 | |
| Long-term debt (including interest) | 218.7 | 492.1 | 1,035.7 | 2,176.4 | 3,922.9 | |
| Lease liabilities (including interest) | 52.6 | 82.2 | 40.0 | 36.2 | 211.0 | |
| Derivative financial instruments | 6.1 | 1.7 | — | — | 7.8 | |
| Other financial liabilities | 39.8 | 31.2 | 1.1 | 31.0 | 103.1 | |
| Total | **** | 1,767.6 | 607.2 | 1,076.8 | 2,243.6 | $5,695.2 |
All values are in US Dollars.
The Company enters into purchasing agreements with suppliers related to material used in production. These agreements are usually entered into before production begins and may specify a fixed or variable quantity of material to be purchased. Due to the uncertainty as to the amount and pricing of material that may be purchased, the Company is not able to determine with precision its commitments in connection with these supply agreements.
Management believes that the Company’s operating activities and available financing capacity will provide adequate sources of liquidity to meet its short-term and long-term needs.
| BRP Inc. | Management’s Discussion and Analysis | 23 |
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Capital Resources
Revolving Credit Facilities
The applicable interest rates vary depending on a leverage ratio. The leverage ratio is defined in the Revolving Credit Facilities agreement by the ratio of net debt to consolidated cash flows of the Company (the “Leverage ratio”). The applicable interest rates are as follows:
| Currency | Applicable Interest Rates |
|---|---|
| U.S. dollars at either | ◾ Term SOFR plus 1.45% to 3.00% per annum;<br>or<br> <br>◾ U.S. Base Rate plus 0.45% to 2.00% per<br>annum; or<br> <br>◾ U.S. Prime Rate plus 0.45% to<br>2.00% per annum; |
| Canadian dollars at either | ◾ Bankers’ Acceptance plus 1.45% to<br>3.00% per annum; or<br> <br>◾ Canadian Prime Rate<br>plus 0.45% to 2.00% per annum |
| Euros | ◾ EURIBOR plus 1.45% to 3.00% per<br>annum |
In addition, the Company incurs commitment fees of 0.25% to 0.40% per annum on the undrawn amount of the Revolving Credit Facilities.
As at January 31, 2024, the cost of borrowing under the Revolving Credit Facilities was as follows:
| Currency | Cost of Borrowing |
|---|---|
| U.S. dollars at either | ◾ Term SOFR plus 1.45% per annum; or<br><br><br>◾ U.S. Base Rate plus 0.45% per annum; or<br><br><br>◾ U.S. Prime Rate plus 0.45% per<br>annum; |
| Canadian dollars at either | ◾ Bankers’ Acceptance plus 1.45% per annum;<br>or<br> <br>◾ Canadian Prime Rate plus 0.45% per<br>annum |
| Euros | ◾ EURIBOR plus 1.45% per annum |
As at January 31, 2024, the commitment fees on the undrawn amount of the Revolving Credit Facilities were 0.25% per annum.
Under certain conditions, the Company is required to maintain a minimum fixed charge coverage ratio in order to have full access to its Revolving Credit Facilities. Additionally, the total available borrowing under the Revolving Credit Facilities is subject to a borrowing base calculation representing 75% of the carrying amount of trade and other receivables plus 50% of the carrying amount of inventories.
As at January 31, 2024 and January 31, 2023, the Company had contracted the following indebtedness:
| (in millions of Canadian dollars) | January 31,<br><br><br>2024 | ||
|---|---|---|---|
| Bank overdraft | **** | — | $29.0 |
| Issued letters of credit under the Revolving Credit Facilities | **** | 33.8 | 33.5 |
| Other outstanding letters of credit | **** | 5.8 | 6.0 |
All values are in US Dollars.
| BRP Inc. | Management’s Discussion and Analysis | 24 |
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Term Facility
On March 10, 2023, the Company amended its Term Loan B-1 by replacing the LIBOR references with SOFR references, with all other conditions remaining the same. On October 4, 2023, the Company repriced its Term Loan B-2, which reduced the cost of borrowing by 0.75%, with all other conditions remaining the same. The Company incurred transactions costs of $0.9 million, which have been recorded in financing costs.
On January 22, 2024, the Company refinanced its Term Loan B-1, reducing the outstanding amount to U.S. $465.7 million and taking on a new Term Loan B-3 of U.S $1,000 million. This new tranche has an extended maturity date of January 22, 2031 and a cost of borrowing of Term SOFR plus 2.75%. The Company incurred transactions costs of $10.0 million, which have been incorporated into the carrying amount of the Term Loan B-3 and are amortized over its expected life using the effective interest rate method.
As at January 31, 2024, the cost of borrowing under the Term Loan was as follows:
| Loan | Cost of Borrowing |
|---|---|
| Term Loan B-1 | ◾ Term SOFR plus 2.00% per annum, with a Term SOFR<br>floor of 0.00%; or<br> <br>◾ U.S. Base Rate plus 1.00%;<br>or<br> <br>◾ U.S. Prime Rate plus 1.00% |
| Term Loan B-2 | ◾ Term SOFR plus 2.75% per annum, with a Term SOFR<br>floor of 0.50% |
| Term Loan B-3 | ◾ Term SOFR plus 2.75% per annum, with a Term SOFR<br>floor of 0.00% |
Under the Term Facility, the cost of borrowing in U.S. Base Rate or U.S. Prime Rate cannot be lower than the cost of borrowing in SOFR.
The Company is required to repay a minimum of 0.25% of the nominal amount each quarter, less any voluntary prepayments done to date. Consequently, the Company repaid an amount of U.S. $18.9 million ($25.5 million) during the twelve-month period ended January 31, 2024. Also, the Company may be required to repay a portion of the Term Facility in the event that it has an excess cash position at the end of the fiscal year and its leverage ratio is above a certain threshold level. As at January 31, 2024 and 2023, the Company was not required to repay any portion of the Term Facility under this requirement.
Austrian Term Loans
During the twelve-month period ended January 31, 2024, the Company entered into an unsecured loan agreement at a favourable interest rate under an Austrian government program. This program supports research and development projects based on the Company’s incurred expenses in Austria. The term loans have a nominal amount of €2.3 million ($3.3 million) with an interest rate varying between 1.00% to 4.53% with maturity dates varying from March 2027 to December 2027.
As at January 31, 2024, the Company had €109.1 million ($153.4 million) outstanding under its Austrian term loans bearing interest at a range between 0.87% to 5.14% and maturing between March 2024 to December 2030.
Lease Liabilities
As at January 31, 2024, the contractual obligations in relation to assets recognized under lease agreements amounted to $211.0 million ($219.7 million as at January 31, 2023).
| BRP Inc. | Management’s Discussion and Analysis | 25 |
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Normal Course Issuer Bid Program
On November 30, 2023, the Company announced the renewal of its NCIB to repurchase for cancellation up to 3,231,999 of its outstanding subordinate voting shares over a twelve-month period commencing on December 5, 2023 and ending no later than December 4, 2024 (the “Current NCIB”).
During the twelve-month period ended January 31, 2024, the Company repurchased for cancellation 885,200 subordinate voting shares for a total consideration of $79.1 million under the Current NCIB. In addition, during the same period, the Company continued its share repurchases under the NCIB that was announced and started during the fiscal year ended January 31, 2023 (the “Previous NCIB” as defined hereafter) and repurchased for cancellation 3,519,398 subordinate voting shares, the total allowable under the program, for total consideration of $367.1 million. For the twelve-month period ended January 31, 2024, the Company repurchased a total of 4,404,598 subordinate voting shares for a total consideration of $446.2 million.
On November 30, 2022, the Company announced the renewal of its NCIB to repurchase for cancellation up to 3,519,398 of its outstanding subordinate voting shares (“Previous NCIB”) and no shares were purchased during the year ended January 31, 2023 under the Previous NCIB.
Secondary offering
On January 26, 2024, Bain Capital Integral Investors II, L.P. (“Bain Capital”) completed a secondary offering of 2,000,000 subordinate voting shares of the Company through an underwriter and a distribution in kind of 171,428 subordinate voting shares to certain affiliates and limited partners. Prior to such transaction, Bain Capital converted 2,171,428 multiple voting shares into an equivalent number of subordinate voting shares. The Company did not receive any of the proceeds of the secondary offering. In accordance with the terms of the registration rights agreement entered into in connection with the initial public offering of the Company’s subordinate voting shares, the Company incurred approximately $0.9 million of fees and expenses related to this secondary offering.
Dividend
On March 27, 2024, the Company’s Board of Directors declared a quarterly dividend of $0.21 per share for holders of its multiple and subordinate voting shares. The dividend will be paid on April 22, 2024 to shareholders of record at the close of business on April 8, 2024.
The Board of Directors has determined that this quarterly dividend is appropriate based on several relevant factors, including, without limitation, the Company’s results of operations, current and anticipated cash requirements and surplus, financial condition, contractual restrictions and financing agreement covenants (including restrictions in the Term Facility and the Revolving Credit Facilities or other material agreements) and solvency tests imposed by corporate law.
The payment of each quarterly dividend remains subject to the declaration of that dividend by the Board of Directors. The actual amount, the declaration date, the record date and the payment date of each quarterly dividend are subject to the discretion of the Board of Directors.
| BRP Inc. | Management’s Discussion and Analysis | 26 |
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Consolidated Financial Position
The following table reflects the main variances that have occurred in the Company’s audited consolidated statements of financial position between January 31, 2024 and January 31, 2023, the impact of the fluctuation of exchange rates on such variances, the related net variance (excluding the impact of the fluctuation of exchange rates on such variances) as well as explanations for the net variance:
| (in millions of<br><br><br>Canadian dollars) | January 31,<br><br><br>2024 | Exchange<br><br><br>Rate<br><br><br>Impact | Net<br><br><br>Variance | Explanation of Net Variance | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Trade and other receivables | **** | 656.3 | 655.0 | 1.3 | $(7.4 | ) | $(6.1 | ) | Variance is not material. | ||
| Inventories | **** | 2,155.6 | 2,290.1 | (134.5 | (0.3 | ) | (134.8 | ) | Mostly explained by a lower work in progress inventory and raw material, partially offset by higher finished product inventory for upcoming deliveries. | ||
| Property, plant and equipment | **** | 2,004.3 | 1,810.4 | 193.9 | (0.3 | ) | 193.6 | Mostly explained by continued capacity investments in property, plant and equipment. | |||
| Trade payables and accruals | **** | 1,450.4 | 1,548.2 | (97.8 | (0.8 | ) | (98.6 | ) | Mostly explained by improvements in supplier payments and by lower compensation benefits. | ||
| Provisions | **** | 915.2 | 665.2 | 250.0 | (5.1 | ) | 244.9 | Mostly explained by higher sales programs. | |||
| Deferred revenues | **** | 203.1 | 226.8 | (23.7 | (0.4 | ) | (24.1 | ) | Mostly explained by recognition of revenue. | ||
| Long-term debt, including current portion | **** | 2,763.1 | 2,790.2 | (27.1 | (10.8 | ) | (37.9 | ) | Mostly explained by repayments of long-term debt. | ||
| Employee future benefit liabilities | **** | 156.3 | 158.0 | (1.7 | (0.5 | ) | (2.2 | ) | Variance is not material. |
All values are in US Dollars.
| BRP Inc. | Management’s Discussion and Analysis | 27 |
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Post-Employment Benefits
The Company sponsors defined contribution retirement plans to a majority of its employees and sponsors non-contributory defined benefit plans that provide for pensions and other post-retirement benefits to certain employees mainly located in Canada and Austria.
In Canada, the Company’s defined benefit pension plans coverage are mainly related to pension benefits for its executive employees and life insurance benefits and healthcare benefits to executive and certain eligible employees. Additionally, the Company retained defined benefit obligations with certain active and former Canadian employees for services rendered prior to 2005.
In Austria, the Company’s defined benefit pension plan coverage is related to a lump sum retirement indemnity plan and a defined benefit plan.
A summary of the carrying amounts of employee future benefit liabilities and the discount rates used to establish their carrying amounts for the last two fiscal years were as follows, as at:
| (in millions of Canadian dollars) | January 31, 2024 | ||||||
|---|---|---|---|---|---|---|---|
| Canada | |||||||
| Employee future benefit liabilities | **** | 50.2 | 106.1 | 156.3 | 55.1 | 102.9 | $158.0 |
| Discount rate | **** | 5.05% | 3.48% | 4.95% | 3.56% | ||
| Compensation increase | **** | 3.00% | 3.00% | 3.00% | 3.00% |
All values are in US Dollars.
The Company’s liabilities related to defined benefit obligations are highly dependent on prevailing actual and future discount rates, future compensation increases and participant longevity. An increase or decrease of those factors could increase or decrease significantly the employee future benefit liabilities and future cash contributions. In Fiscal 2023, the Company purchased qualifying annuity buy-in insurance contracts on behalf of certain defined benefit plans as a mechanism to reduce pension plan risk. The following table presents the impact on the employee future benefit liabilities as at January 31, 2024 of reasonable possible changes of the respective assumptions, while holding all other assumptions constant:
| Increase (Decrease) of the employee<br><br><br>future benefit liabilities | ||
|---|---|---|
| Discount rate | ||
| Impact of a 0.5% increase | **** | $(23.9) |
| Impact of a 0.5% decrease | **** | 26.2 |
| Expected rate of compensation increase | ||
| Impact of a 0.5% increase | **** | 4.6 |
| Impact of a 0.5% decrease | **** | (4.3) |
| Participant longevity | ||
| Impact of a 1 year increase | **** | 7.4 |
| Impact of a 1 year decrease | **** | (7.2) |
The sensitivity analysis presented above may not be representative of the potential change in the employee future benefit liabilities as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
In accordance with the minimum funding obligations required under the current regulations, the Company expects to contribute $15.2 million to all defined benefit pension plans for the year ending January 31, 2025.
The pension expense incurred by the Company for its defined benefit and defined contribution pension plans was $66.1 million and $62.6 million for the years ended January 31, 2024 and January 31, 2023, respectively, of which 5.7% and 8.3% is related to current service costs under defined benefit plans.
| BRP Inc. | Management’s Discussion and Analysis | 28 |
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Off-Balance Sheet Arrangements
Dealer and Distributor Financing Arrangements
The Company, most of its independent dealers and some of its independent distributors are parties to agreements with third-party financing service providers. These agreements provide financing to facilitate the purchase of the Company’s products and improve the Company’s working capital by allowing an earlier collection of accounts receivable from dealers and distributors. Approximately three-quarters of the Company’s sales are made under such agreements. The parties listed above have agreements with Huntington Distribution Finance, Inc., Huntington Commercial Finance Canada Inc., Huntington Commercial Finance LLC and Huntington Commercial Finance New Zealand Ltd (collectively, “Huntington”), to provide financing facilities in North America, Australia and New Zealand, and with Wells Fargo Commercial Distribution Finance, Wells Fargo Bank International, Wells Fargo International Finance LLC and Wells Fargo International Finance (New Zealand) Limited (collectively “Wells Fargo”) for financing facilities in North America, Europe and Australia. In the second quarter of the fiscal year ending January 31, 2024, the Company and Huntington entered into the “Second Amended and Restated Wholesale Financing Program Agreement for Canada and the United States” (Amended Financing Program), which extended the term of their original agreement until January 31, 2028, under similar pricing terms and conditions, as well as consolidated all recent amendments in one agreement. For most of the contracts with Wells Fargo, the maximum commitment period was up to March 26, 2025, but on November 21, 2023 the Company signed an extension to January 31, 2026. On October 23, 2023, Wells Fargo announced that they were discontinuing operations in Australia and New Zealand, and would not continue with the dealer financing agreement in Australia and New Zealand. However, Wells Fargo will continue to honor the agreement until October 23, 2024, at which point the Company will need to find another financing partner. At this time, the Company has identified potential financing partners for that region and has initiated discussions to replace Wells Fargo in a timely manner.
The total amount of financing provided to the Company’s independent dealers and distributors totalled $2,394.0 million and $9,820.2 million for the three- and twelve-month periods ended January 31, 2024, compared to $2,486.7 million and $8,349.6 million for the three- and twelve-month periods ended January 31, 2023. The outstanding financing between the Company’s independent dealers and distributors and third-party finance companies amounted to $3,469.2 million and $2,674.0 million as at January 31, 2024, and January 31, 2023, respectively.
The breakdown of outstanding amounts by country and local currency between the Company’s independent dealers and distributors with third-party finance companies were as follows, as at:
| (in millions) | Currency | |||
|---|---|---|---|---|
| Total outstanding | **** | CAD | 3,469.2 | $2,674.0 |
| United States | 1,877.6 | $1,480.6 | ||
| Canada | CAD | 727.1 | $472.1 | |
| Europe | 66.1 | € 63.3 | ||
| Australia and New Zealand | AUD | 150.1 | $145.0 |
All values are in US Dollars.
The costs incurred by the Company under the dealers’ and distributors’ financing agreements totalled $75.3 million and $217.6 million for the three- and twelve-month periods ended January 31, 2024 compared to $11.4 million and $67.4 million for the three- and twelve-month periods ended January 31, 2023. The increase was mainly due to higher dealer inventory, combined with higher interest rates.
Under the dealer and distributor financing agreements, in the event of default, the Company may be required to purchase, from the finance companies, repossessed new and unused products at the total unpaid principal balance of the dealer or distributor to the finance companies.
| BRP Inc. | Management’s Discussion and Analysis | 29 |
|---|
The combined maximum obligation is generally within a range of:
i) U.S. $14.0 million ($18.7 million) or 15% of the calendar year twelve-month average amount of financing outstanding under the financing agreements ($19.3 million as at January 31, 2024) and;
ii) U.S. $25.0 million ($33.5 million) or 10% of the last twelve-month average amount of financing outstanding under the financing agreements ($284.7 million as at January 31, 2024).
As such, the maximum amount subject to the Company’s obligation to purchase repossessed new and unused products from the finance companies was $304.0 million as at January 31, 2024 and $186.4 million as at January 31, 2023.
The Company did not incur significant losses related to new and unused products repossessed by the finance companies for the three- and twelve-month periods ended January 31, 2024 and 2023.
Substantially completed units financing
The Amended Financing Program provides for the financing of the substantially completed units shipped at the Company’s dealers (“Substantially Completed Units”). The financing of those Substantially Completed Units is limited by certain financial thresholds. Under this program, the Company’s dealers are required to comply with thresholds regarding the Substantially Completed Units shipped at the Company’s dealers.
The Company did not have any Substantially Completed Units in its network as at January 31, 2024, in compliance with its requirements.
Consumer Financing Arrangements
The Company has contractual relationships with third-party financing companies in order to facilitate consumer credit for the purchase of its products in North America. The agreements generally allow the Company to offer a subsidized interest rate to consumers for a certain limited period under certain sales programs. In Canada, the Company has agreements with TD Financing Services and the Fédération des caisses Desjardins du Québec for such purposes. In the United States, the Company has agreements with Sheffield Financial, Citi Retail Services and Roadrunner Financial. Under these contracts, the Company’s financial obligations are related to the commitments made under certain sales programs.
| BRP Inc. | Management’s Discussion and Analysis | 30 |
|---|
Transaction Between Related Parties
Transactions with Key Management Personnel
Key management personnel of the Company, defined as employees with authority and responsibility for planning, directing and controlling the activities of the Company, are considered related parties to the Company. The key management personnel of the Company are the directors and the executive officers listed in the Annual Information Form of the Company dated March 27, 2024, and available on SEDAR+ at www.sedarplus.ca.
The Company incurred the following benefit expenses in relation with key management personnel:
| Twelve-month periods ended | |||
|---|---|---|---|
| (in millions of Canadian dollars) | January 31,<br><br><br>2024 | ||
| Current remuneration | **** | 8.2 | $19.4 |
| Post-employment benefits | **** | 1.0 | 1.4 |
| Termination benefits | **** | — | — |
| Stock-based compensation expense | **** | 8.9 | 9.7 |
| Total | **** | 18.1 | $30.5 |
All values are in US Dollars.
Transactions with a Principal Shareholder
On January 26, 2024, Bain Capital completed a secondary offering of 2,000,000 subordinate voting shares of the Company through an underwriter and a distribution in kind of 171,428 subordinate voting shares to certain affiliates and limited partners. Prior to such transaction, Bain Capital converted 2,171,428 multiple voting shares into an equivalent number of subordinate voting shares. The Company did not receive any of the proceeds of the secondary offering. In accordance with the terms of the registration rights agreement entered into in connection with the initial public offering of the Company’s subordinate voting shares, the Company incurred approximately $0.9 million of fees and expenses related to this secondary offering.
Transactions with BombardierInc., a Company Related to Beaudier Group
Pursuant to the purchase agreement entered into in 2003 in connection with the acquisition of the recreational product business of Bombardier Inc., the Company committed to reimburse to Bombardier Inc. income taxes amounting to $22.4 million as at January 31, 2024 and $22.7 million as at January 31, 2023, respectively. The payments will begin when Bombardier Inc. starts making income tax payments in Canada and/or in the United States. The Company does not expect to make any payments to Bombardier Inc. in relation to that obligation for Fiscal 2024.
Financial Instruments
The Company’s financial instruments, divided into financial assets and financial liabilities, are measured at the end of each period at fair value or amortized costs using the effective interest method depending on their classification determined by IFRS. By nature, financial assets are exposed to credit risk whereas financial liabilities are exposed to liquidity risk. Additionally, the Company’s financial instruments and transactions could be denominated in foreign currency creating a foreign exchange exposure that could be mitigated by the use of derivative financial instruments. The Company is to a lesser extent exposed to interest risk associated to its Revolving Credit Facilities, Term Facility and Austrian term loans.
| BRP Inc. | Management’s Discussion and Analysis | 31 |
|---|
Foreign Exchange Risk
The elements reported in the consolidated statements of net income, in the consolidated statements of financial position, and in the consolidated statements of cash flows presented in the Company’s audited consolidated financial statements in Canadian dollars are significantly exposed to the fluctuation of exchange rates, mainly the Canadian dollar/U.S. dollar rate and the Canadian dollar/euro rate.
The Company’s cash inflows and outflows are mainly comprised of Canadian dollars, U.S. dollars and euros. The Company intends to maintain, as a result of its business transactions, a certain offset position on U.S. dollar and euro denominated cash inflows and outflows.
For some currencies over which the Company cannot achieve an offset through its recurring business transactions, the Company uses foreign exchange contracts according to the Company’s hedging strategy. Management periodically reviews the relevant hedging position and may hedge at any level within the authorized parameters of the policy, up to the maximum percentage allowed. Those contracts are accounted for under the cash flow hedge model covering highly probable forecasted sales in these currencies, and the gains or losses on those derivatives are recorded in net income only when the forecasted sales occur.
Finally, the Company reduces the exposure on its net income arising from the revaluation at period-end of monetary items denominated in a different functional currency by using foreign exchange contracts. Those contracts are recorded in net income at each period end in order to mitigate the gains or losses resulting from the revaluation at spot rate of these foreign-denominated positions.
While the Company’s operating income is protected, to a certain extent, from significant fluctuations of foreign exchange rates resulting from the application of the Company’s hedging strategy, the net income is significantly exposed to Canadian dollar/U.S. dollar rate fluctuations due to the U.S. dollar-denominated long-term debt. However, there is a monetary impact for the Company only to the extent the Term Facility is repaid.
Liquidity Risk
The Company is exposed to the risk of encountering difficulty in meeting obligations related to its financial liabilities. In order to manage its liquidity risk accurately, the Company continuously monitors its operating cash requirements taking into account the seasonality of the Company’s working capital needs, revenues and expenses. The Company believes the cash flows generated from operations combined with its cash on hand and the availability of funds under its credit facilities ensures its financial flexibility and mitigates its liquidity risk. ****
Credit Risk
The Company could be exposed, in the normal course of business, to the potential inability of dealers, distributors and other business partners to meet their contractual obligations on financial assets and on amounts guaranteed under dealer and distributor financing arrangements with Huntington and Wells Fargo.
The Company considers that its credit risk associated with its trade receivables and its limited responsibilities under the dealer and distributor financing agreements with Huntington and Wells Fargo does not represent a significant concentration of risk and loss due to the large number of dealers, distributors and other business partners and their dispersion across many geographic areas. Moreover, the Company mitigates such risk by doing business through its own distribution channels and by monitoring the creditworthiness of the dealers and distributors in the different geographic areas.
Interest Rate Risk
The Company is exposed to the variation of interest rates mainly resulting from the Term SOFR on its Term Facility. However, the Company entered into interest rate cap contracts, which limit its exposure to interest rate increase.
| BRP Inc. | Management’s Discussion and Analysis | 32 |
|---|
Non-IFRS Measures and Reconciliation Tables
The Company uses non-IFRS measures and ratio, including the following:
| Non-IFRS<br> <br>measures | Definition | Reason for use |
|---|---|---|
| Normalized EBITDA | Net income before financing<br>costs, financing income, income tax expense (recovery), depreciation expense and normalized elements | Assist<br>investors in determining the financial performance of the Company’s operating activities on a consistent basis by excluding certain non-cash elements such as depreciation expense, impairment charge,<br>foreign exchange gain or loss on the Company’s long-term debt denominated in U.S. dollars and foreign exchange gain or loss on certain of the Company’s lease liabilities. Other elements, such as restructuring and wind-down costs, non-recurring gain or loss and acquisition-related costs, may be excluded from net income in the determination of Normalized EBITDA as they are considered not being reflective of the operational performance of the<br>Company |
| Normalized netincome | Net income before<br>normalized elements adjusted to reflect the tax effect on these elements | In<br>addition to the financial performance of operating activities, these measures consider the impact of investing activities, financing activities and income taxes on the Company’s financial results |
| Normalized income taxexpense | Income tax expense adjusted<br>to reflect the tax effect on normalized elements and to normalize specific tax elements | Assist<br>investors in determining the tax expense relating to the normalized items explained above, as they are considered not being reflective of the operational performance of the Company |
| Normalized effective taxrate | Based on Normalized net<br>income before Normalized income tax expense | Assist<br>investors in determining the effective tax rate including the normalized items explained above, as they are considered not being reflective of the operational performance of the Company |
| Normalized earnings per share– diluted | Calculated by dividing the<br>Normalized net income by the weighted average number of shares – diluted | Assist<br>investors in determining the normalized financial performance of the Company’s activities on a per share basis |
| Free cash flow | Cash flows from operating<br>activities less additions to PP&E and intangible assets | Assist<br>investors in assessing the Company’s liquidity generation abilities that could be available for shareholders, debt repayment and business combination, after capital expenditure |
The Company believes non-IFRS measures are important supplemental measures of financial performance because they eliminate items that have less bearing on the Company’s financial performance and thus highlight trends in its core business that may not otherwise be apparent when relying solely on IFRS measures. The Company also believes that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of companies, many of which present similar metrics when reporting their results. Management also uses non-IFRS measures in order to facilitate financial performance comparisons from period to period, prepare annual operating budgets, assess the Company’s ability to meet its future debt service, capital expenditure and working capital requirements and also as a component in the determination of the short-term incentive compensation for the Company’s employees. Because other companies may calculate these non-IFRS measures differently than the Company does, these metrics are not comparable to similarly titled measures reported by other companies.
| BRP Inc. | Management’s Discussion and Analysis | 33 |
|---|
Reconciliation Tables
The following table presents the reconciliation of Net income to Normalized net income^[1]^ and Normalized EBITDA ^[1]^.
| Three-month periods ended | Twelve-month periods ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (in millions of Canadian dollars) | January 31,<br> <br>2024 | January 31,<br><br><br>2023 | January 31,<br><br><br>2024 | January 31,<br><br><br>2023 | January 31,<br><br><br>2022 | |||||
| Net income | **** | 188.2 | 365.1 | **** | 744.5 | 865.4 | 794.6 | |||
| Normalized elements | ||||||||||
| Foreign exchange (gain) loss on long-term debt and lease liabilities | **** | (97.5 | (56.6 | **** | 10.8 | 92.4 | (13.3 | |||
| Cybersecurity incident costs ^[2]^ | **** | — | 2.2 | **** | — | 25.5 | — | |||
| (Gain) loss on NCIB | **** | — | — | **** | (4.8 | (1.8 | 21.3 | |||
| Past service costs ^[3]^ | **** | — | 4.3 | **** | — | 4.3 | — | |||
| Impairment charge ^[4]^ | **** | 116.3 | — | **** | 116.3 | — | — | |||
| Costs related to business combinations ^[5]^ | **** | 3.8 | 2.6 | **** | 15.6 | 8.3 | 9.9 | |||
| Border crossing costs ^[6]^ | **** | — | — | **** | 6.2 | — | — | |||
| Evinrude outboard engine exit costs ^[7]^ | **** | — | — | **** | 15.0 | — | 0.4 | |||
| Gain on lease termination ^[8]^ | **** | — | — | **** | — | — | (8.7 | |||
| Transaction costs on long-term debt^[9]^ | **** | 2.7 | 1.0 | **** | 22.7 | 1.0 | 44.3 | |||
| Other elements ^[10]^ | **** | 5.8 | (5.1 | **** | 7.4 | (3.2 | 3.8 | |||
| Income tax adjustment ^[1] [11]^ | **** | (31.3 | (4.3 | **** | (60.3 | (15.2 | (5.8 | |||
| Normalized net income ^[1]^ | **** | 188.0 | 309.2 | **** | 873.4 | 976.7 | 846.5 | |||
| Normalized income tax expense ^[1]^ | **** | 71.7 | 96.3 | **** | 269.9 | 315.7 | 287.9 | |||
| Financing costs adjusted ^[1]^ | **** | 47.2 | 36.5 | **** | 186.4 | 113.9 | 63.4 | |||
| Financing income adjusted^[1]^ | **** | (2.9 | (1.4 | **** | (11.8 | (4.2 | (3.8 | |||
| Depreciation expense adjusted ^[1]^ | **** | 100.5 | 87.4 | **** | 381.7 | 304.2 | 268.1 | |||
| Normalized EBITDA ^[1]^ | **** | 404.5 | 528.0 | **** | 1,699.6 | 1,706.3 | 1,462.1 |
All values are in US Dollars.
| ^[1]^ | See “Non-IFRS Measures” section. | |
|---|---|---|
| ^[2]^ | During Fiscal 2023, the Company incurred costs related to a cybersecurity incident. These costs are mainly comprised of<br>recovery costs, idle costs such as direct labor during shutdown period, etc. | |
| --- | --- | |
| ^[3]^ | Effective December 31, 2022, BRP approved an ad-hoc adjustment to be<br>granted to retirees and surviving spouses of the Pension Plan for Employees of BRP (Canada) who retired prior to 2017. The impact of this ad-hoc increase is recognized as a past service cost during the year<br>ended January 31, 2023. | |
| --- | --- | |
| ^[4]^ | During the twelve-month period ended January 31, 2024, the Company recorded an impairment charge of<br>$116.3 million related to its Marine segment. | |
| --- | --- | |
| ^[5]^ | Transaction costs and depreciation of intangible assets related to business combinations. | |
| --- | --- | |
| ^[6]^ | During Fiscal 2024, the Company incurred incremental transport and idle costs such as direct labor, which were related<br>to mitigation strategies implemented to handle the border crossing slowdown between Juarez, Mexico, where the Company has three factories, and El Paso, Texas, USA. | |
| --- | --- | |
| ^[7]^ | The Company incurred idle costs, other exit costs and impaired service parts inventory related to its Evinrude outboard<br>engine production. | |
| --- | --- | |
| ^[8]^ | During Fiscal 2022, the Company acquired its two leased facilities in Mexico. The derecognition of related right-of-use assets and corresponding lease liabilities generated a $8.7 million gain on lease termination. | |
| --- | --- | |
| ^[9]^ | Derecognition of unamortized transaction costs related to the repricing of Term Loan<br>B-2 and refinancing of Term Loan B-1 in Fiscal 2024, and prepayment premium of $15.1 million and derecognized unamortized transaction costs of $29.2 million<br>related to the full repayment of its outstanding U.S. $597.0 million Term Loan B-2 in Fiscal 2022. | |
| --- | --- | |
| ^[10]^ | Other elements include insurance recovery on destroyed equipment related to the Juarez 2 fire recorded in Fiscal 2023<br>and costs associated with restructuring and reorganization activities to gain flexibility and improve efficiency which are mainly composed of severance costs and retention salaries. | |
| --- | --- | |
| ^[11]^ | Income tax adjustment is related to the income tax on Normalized elements subject to tax and for which income tax has<br>been recognized and to the adjustment related to the impact of foreign currency translation from Mexican operations. | |
| --- | --- | |
| BRP Inc. | Management’s Discussion and Analysis | 34 |
| --- | --- | --- |
The following table presents the reconciliation of net cash flows generated from operating activities to free cash flow ^[1]^.
| (millions of Canadian dollars) | Twelve-month periods ended | ||
|---|---|---|---|
| January 31,<br><br><br>2024 | |||
| Net cash flows generated from operating activities | **** | 1,658.1 | $649.5 |
| Additions to property, plant and equipment | **** | (548.4) | (601.0) |
| Additions to intangible assets | **** | (37.4) | (58.4) |
| Free cash flow^[1]^ | **** | 1,072.3 | $(9.9) |
All values are in US Dollars.
^[1]^See “Non-IFRS Measures” section.
| BRP Inc. | Management’s Discussion and Analysis | 35 |
|---|
The following table presents the reconciliation of items as included in the Normalized net income ^[1]^ and Normalized EBITDA ^[1]^ compared to respective IFRS measures as well as the Normalized EPS – basic and diluted ^[1]^ calculation.
| (millions of Canadian dollars, except per share data) | Three-month periods ended | Twelve-month periods ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| January 31,<br><br><br>2024 | January 31,<br><br><br>2023 | January 31,<br><br><br>2024 | January 31,<br><br><br>2023 | January 31,<br><br><br>2022 | ||||||
| Depreciation expense reconciliation | ||||||||||
| Depreciation expense | **** | 103.1 | 90.0 | **** | 391.7 | 310.4 | 273.6 | |||
| Depreciation of intangible assets related to business combinations | **** | (2.6 | (2.6 | **** | (10.0 | (6.2 | (4.1 | |||
| Evinrude outboard engine wind-down ^[2]^ | **** | — | — | **** | — | — | (1.4 | |||
| Depreciation expense adjusted | **** | 100.5 | 87.4 | **** | 381.7 | 304.2 | 268.1 | |||
| Income tax expense reconciliation | ||||||||||
| Income tax expense | **** | 40.4 | 92.0 | **** | 209.6 | 300.5 | 282.1 | |||
| Income tax adjustment ^[3]^ | **** | 31.3 | 4.3 | **** | 60.3 | 15.2 | 5.8 | |||
| Normalized income tax expense ^[1]^ | **** | 71.7 | 96.3 | **** | 269.9 | 315.7 | 287.9 | |||
| Financing costs reconciliation | ||||||||||
| Financing costs | **** | 49.9 | 37.5 | **** | 209.3 | 114.8 | 128.9 | |||
| Transaction costs on long-term debt ^[4]^ | **** | (2.7 | (1.0 | **** | (22.7 | (0.9 | (44.3 | |||
| Loss on NCIB | **** | — | — | **** | — | — | (21.3 | |||
| Other | **** | — | — | **** | (0.2 | — | 0.1 | |||
| Financing costs adjusted | **** | 47.2 | 36.5 | **** | 186.4 | 113.9 | 63.4 | |||
| Financing income reconciliation | ||||||||||
| Financing income | **** | (2.9 | (1.4 | **** | (16.6 | (6.0 | (3.8 | |||
| Gain on NCIB | **** | — | — | **** | 4.8 | 1.8 | — | |||
| Financing income adjusted | **** | (2.9 | (1.4 | **** | (11.8 | (4.2 | (3.8 | |||
| Normalized EPS - basic ^[1]^calculation | ||||||||||
| Normalized net income ^[1]^ | **** | 188.0 | 309.2 | **** | 873.4 | 976.7 | 846.5 | |||
| Non-controlling interests | **** | 0.3 | 0.2 | **** | (1.1 | (1.5 | (0.7 | |||
| Weighted average number of shares - basic | **** | 75,475,831 | 78,812,364 | **** | 77,166,505 | 79,382,008 | 82,973,284 | |||
| Normalized EPS - basic ^[1]^ | **** | 2.50 | 3.93 | **** | 11.30 | 12.29 | 10.19 | |||
| Normalized EPS - diluted ^[1]^calculation | ||||||||||
| Normalized net income ^[1]^ | **** | 188.0 | 309.2 | **** | 873.4 | 976.7 | 846.5 | |||
| Non-controlling interests | **** | 0.3 | 0.2 | **** | (1.1 | (1.5 | (0.7 | |||
| Weighted average number of shares - diluted | **** | 76,667,383 | 80,402,213 | **** | 78,523,790 | 80,946,102 | 85,259,520 | |||
| Normalized EPS - diluted ^[1]^ | **** | 2.46 | 3.85 | **** | 11.11 | 12.05 | 9.92 |
All values are in US Dollars.
| ^[1]^ | See “Non-IFRS Measures” section. | |
|---|---|---|
| ^[2]^ | The Company incurred costs related to the wind-down of the outboard engine production such as, but not limited to, idle<br>costs and other exit costs. | |
| --- | --- | |
| ^[3]^ | Income tax adjustment is related to the income tax on Normalized elements subject to tax and for which income tax has<br>been recognized and to the adjustment related to the impact of foreign currency translation from Mexican operations. | |
| --- | --- | |
| ^[4]^ | Derecognition of unamortized transaction costs related to the repricing of Term Loan<br>B-2 and refinancing of Term Loan B-1 in Fiscal 2024, and prepayment premium of $15.1 million and derecognized unamortized transaction costs of $29.2 million<br>related to the full repayment of its outstanding U.S. $597.0 million Term Loan B-2 in Fiscal 2022. | |
| --- | --- | |
| BRP Inc. | Management’s Discussion and Analysis | 36 |
| --- | --- | --- |
Summary of Consolidated Quarterly Results
| Three-month periods ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| January | |||||||||
| 31, | |||||||||
| 2024 | |||||||||
| (millions of Canadian dollars,<br><br><br>except per share and gross profit<br> <br>data) | Fiscal<br><br><br>2024 | ||||||||
| Revenues by category | |||||||||
| Powersports | |||||||||
| Year-Round Products | **** | 1,363.9 | 1,180.6 | 1,461.6 | 1,333.3 | 1,254.8 | 1,279.8 | 1,358.1 | $934.4 |
| Seasonal Products | **** | 952.6 | 868.7 | 897.5 | 691.9 | 1,319.5 | 1,020.9 | 691.2 | 408.7 |
| Powersports PA&A and OEM Engines | **** | 291.0 | 314.5 | 294.2 | 284.9 | 378.1 | 297.5 | 257.3 | 343.5 |
| Marine | **** | 84.3 | 104.0 | 124.7 | 119.3 | 123.9 | 111.1 | 131.9 | 122.7 |
| Total Revenues | **** | 2,691.8 | 2,467.8 | 2,778.0 | 2,429.4 | 3,076.3 | 2,709.3 | 2,438.5 | 1,809.3 |
| Gross profit | **** | 652.8 | 627.4 | 697.6 | 623.5 | 787.6 | 654.7 | 602.7 | 454.4 |
| As a percentage of revenues | **** | 24.3% | 25.4% | 25.1% | 25.7% | 25.6% | 24.2% | 24.7% | 25.1% |
| Net income | **** | 188.2 | 63.1 | 338.7 | 154.5 | 365.1 | 141.6 | 237.7 | 121.0 |
| Normalized EBITDA ^[1]^ | **** | 404.5 | 444.9 | 473.1 | 377.1 | 528.0 | 487.9 | 418.3 | 272.1 |
| Normalized net income ^[1]^ | **** | 188.0 | 238.0 | 255.4 | 192.0 | 309.2 | 292.5 | 237.9 | 137.1 |
| Basic EPS | **** | 2.50 | 0.82 | 4.34 | 1.96 | 4.64 | 1.79 | 3.00 | $1.49 |
| Diluted EPS | **** | 2.46 | 0.81 | 4.26 | 1.92 | 4.54 | 1.76 | 2.94 | 1.46 |
| Normalized EPS - basic ^[1]^ | **** | 2.50 | 3.11 | 3.27 | 2.43 | 3.93 | 3.71 | 3.00 | 1.69 |
| Normalized EPS - diluted ^[1]^ | **** | 2.46 | 3.06 | 3.21 | 2.38 | 3.85 | 3.64 | 2.94 | 1.66 |
All values are in US Dollars.
^[^^1]^ See “Non-IFRS Measures” section.
| BRP Inc. | Management’s Discussion and Analysis | 37 |
|---|
Reconciliation Table for Consolidated Quarterly Results
| Three-month periods ended | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| January | October | July | April | January | October | July | April | |||||||||
| 31, | 31, | 31, | 30, | 31, | 31, | 31, | 30, | |||||||||
| 2024 | 2023 | 2023 | 2023 | 2023 | 2022 | 2022 | 2022 | |||||||||
| (millions of Canadian dollars) | Fiscal<br><br><br>2024 | Fiscal<br><br><br>2024 | Fiscal<br><br><br>2024 | Fiscal<br><br><br>2024 | Fiscal<br><br><br>2023 | Fiscal<br><br><br>2023 | Fiscal<br><br><br>2023 | Fiscal<br><br><br>2023 | ||||||||
| Net income | **** | 188.2 | 63.1 | 338.7 | 154.5 | 365.1 | 141.6 | 237.7 | 121.0 | |||||||
| Normalized elements | ||||||||||||||||
| Foreign exchange (gain) loss on long-term debt and lease liabilities | **** | (97.5 | 142.1 | (77.6 | 43.8 | (56.6 | 133.0 | (0.1 | 16.1 | |||||||
| Cybersecurity incident costs ^[2]^ | **** | — | — | — | — | 2.2 | 23.3 | — | — | |||||||
| Gain on NCIB | **** | — | (1.6 | (3.2 | — | — | — | — | (1.8 | |||||||
| Past service costs ^[3]^ | **** | — | — | — | — | 4.3 | — | — | — | |||||||
| Impairment charge ^[4]^ | **** | 116.3 | — | — | — | — | — | — | — | |||||||
| Costs related to business combinations ^[5]^ | **** | 3.8 | 5.2 | 1.7 | 4.9 | 2.6 | 3.6 | 1.0 | 1.1 | |||||||
| Border crossing crisis ^[6]^ | **** | — | 6.2 | — | — | — | — | — | — | |||||||
| Exit costs ^[7]^ | **** | — | 15.0 | — | — | — | — | — | — | |||||||
| Transaction costs on long-term debt ^[8]^ | **** | 2.7 | 20.0 | — | — | — | — | — | — | |||||||
| Other elements ^[9]^ | **** | 5.8 | 1.4 | — | 0.2 | (4.1 | 0.8 | (0.2 | 1.3 | |||||||
| Income tax adjustment^[1][10]^ | **** | (31.3 | (13.4 | (4.2 | (11.4 | (4.3 | (9.8 | (0.5 | (0.6 | |||||||
| Normalized net income ^[1]^ | **** | 188.0 | 238.0 | 255.4 | 192.0 | 309.2 | 292.5 | 237.9 | 137.1 | |||||||
| Normalized income tax expense ^[1]^ | **** | 71.7 | 65.4 | 80.2 | 52.6 | 96.3 | 87.6 | 82.5 | 49.3 | |||||||
| Financing costs adjusted ^[1]^ | **** | 47.2 | 47.9 | 47.2 | 44.1 | 36.5 | 33.3 | 27.6 | 16.5 | |||||||
| Financing income adjusted ^[1]^ | **** | (2.9 | (4.5 | (2.9 | (1.5 | (1.4 | (0.3 | (1.5 | (1.0 | |||||||
| Depreciation expense adjusted ^[1]^ | **** | 100.5 | 98.1 | 93.2 | 89.9 | 87.4 | 74.8 | 71.8 | 70.2 | |||||||
| Normalized EBITDA ^[1]^ | **** | 404.5 | 444.9 | 473.1 | 377.1 | 528.0 | 487.9 | 418.3 | 272.1 |
All values are in US Dollars.
| ^[1]^ | See “Non-IFRS Measures” section. | |
|---|---|---|
| ^[2]^ | During Fiscal 2023, the Company incurred costs related to a cybersecurity incident. These costs are mainly comprised of<br>recovery costs, idle costs such as direct labor during shutdown period, etc. | |
| --- | --- | |
| ^[3]^ | Effective December 31, 2022, BRP approved an ad-hoc adjustment to be<br>granted to retirees and surviving spouses of the Pension Plan for Employees of BRP (Canada) who retired prior to 2017. The impact of this ad-hoc increase is recognized as a past service cost during the year<br>ended January 31, 2023.^^ | |
| --- | --- | |
| ^[4]^ | During the twelve-month period ended January 31, 2024, the Company recorded an impairment charge of<br>$116.3 million related to its Marine segment. | |
| --- | --- | |
| ^[5]^ | Transaction costs and depreciation of intangible assets related to business combinations. | |
| --- | --- | |
| ^[6]^ | During Fiscal 2024, the Company incurred incremental transport and idle costs such as direct labor, which were related<br>to mitigation strategies implemented to handle the border crossing slowdown between Juarez, Mexico, where the Company has three factories, and El Paso, Texas, USA. | |
| --- | --- | |
| ^[7]^ | The Company impaired service parts inventory related to its Evinrude outboard engine production. | |
| --- | --- | |
| ^[8]^ | Derecognition of unamortized transaction costs related to the repricing of Term Loan<br>B-2 and refinancing of Term Loan B-1. | |
| --- | --- | |
| ^[9]^ | Other elements include insurance recovery on destroyed equipment related to the Juarez 2 fire recorded in Fiscal 2023<br>and costs associated with restructuring and reorganization activities to gain flexibility and improve efficiency which are mainly composed of severance costs and retention salaries. | |
| --- | --- | |
| ^[10]^ | Income tax adjustment is related to the income tax on Normalized elements subject to tax and for which income tax has<br>been recognized and to the adjustment related to the impact of foreign currency translation from Mexican operations. | |
| --- | --- | |
| BRP Inc. | Management’s Discussion and Analysis | 38 |
| --- | --- | --- |
Selected Consolidated Financial Information
The selected consolidated financial information set out below for the twelve-month periods ended January 31, 2024, and January 31, 2023, has been determined based on the audited consolidated financial statements and related notes issued on March 27, 2024. The selected consolidated financial information set out below for the twelve-month period ended January 31, 2022, has been determined based on the audited consolidated financial statements and related notes issued on March 22, 2023. The selected quarterly consolidated financial information set out below has been determined based on the annual audited consolidated financial statements and related notes issued on March 27, 2024 and from the third-quarter unaudited consolidated financial statements and related notes issued on November 29, 2023. All of these documents are available on SEDAR+ at www.sedarplus.ca.
Net Income Data
| (in millions of Canadian dollars) | Three-month periods ended | |||||
|---|---|---|---|---|---|---|
| January 31,<br><br><br>2024 | ||||||
| Revenues by category | ||||||
| Powersports | ||||||
| Year-Round Products | **** | 1,363.9 | 1,254.8 | 5,339.4 | 4,827.1 | $3,467.5 |
| Seasonal Products | **** | 952.6 | 1,319.5 | 3,410.7 | 3,440.3 | 2,524.1 |
| Powersports PA&A and OEM Engines | **** | 291.0 | 378.1 | 1,184.6 | 1,276.4 | 1,143.5 |
| Marine | **** | 84.3 | 123.9 | 432.3 | 489.6 | 512.8 |
| Total Revenues | **** | 2,691.8 | 3,076.3 | 10,367.0 | 10,033.4 | 7,647.9 |
| Cost of sales | **** | 2,039.0 | 2,288.7 | 7,765.7 | 7,534.0 | 5,515.7 |
| Gross profit | **** | 652.8 | 787.6 | 2,601.3 | 2,499.4 | 2,132.2 |
| As a percentage of revenues | **** | 24.3% | 25.6% | 25.1% | 24.9% | 27.9% |
| Operating expenses | ||||||
| Selling and marketing | **** | 117.6 | 117.8 | 480.0 | 433.8 | 393.9 |
| Research and development | **** | 122.7 | 121.0 | 441.5 | 367.7 | 289.8 |
| General and administrative | **** | 114.9 | 121.8 | 380.2 | 341.1 | 271.0 |
| Other operating expenses (income) | **** | 2.8 | (9.9) | 26.3 | (10.3) | (9.5) |
| Impairment charge | **** | 116.3 | — | 116.3 | — | — |
| Total operating expenses | **** | 474.3 | 350.7 | 1,444.3 | 1,132.3 | 945.2 |
| Operating income | **** | 178.5 | 436.9 | 1,157.0 | 1,367.1 | 1,187.0 |
| Net financing costs | **** | 47.0 | 36.0 | 192.7 | 108.8 | 125.1 |
| Foreign exchange (gain) loss on long-term debt | **** | (97.1) | (56.2) | 10.2 | 92.4 | (14.8) |
| Income before income taxes | **** | 228.6 | 457.1 | 954.1 | 1,165.9 | 1,076.7 |
| Income tax expense | **** | 40.4 | 92.0 | 209.6 | 300.5 | 282.1 |
| Net income | **** | 188.2 | 365.1 | 744.5 | 865.4 | $794.6 |
| Attributable to shareholders | **** | 188.5 | 365.3 | 743.4 | 863.9 | $793.9 |
| Attributable to<br>non-controlling interest | **** | (0.3) | (0.2) | 1.1 | 1.5 | $0.7 |
| Normalized EBITDA ^[1]^ | **** | 404.5 | 528.0 | 1,699.6 | 1,706.3 | $1,462.1 |
| Normalized net income ^[1]^ | **** | 188.0 | 309.2 | 873.4 | 976.7 | $846.5 |
All values are in US Dollars.
| ^[1^^]^ | See “Non-IFRS Measures” section. | |
|---|---|---|
| BRP Inc. | Management’s Discussion and Analysis | 39 |
| --- | --- | --- |
Other Financial Data
| (in millions of Canadian dollars, except per share data) | Three-month periods ended | |||||
|---|---|---|---|---|---|---|
| January 31,<br><br><br>2024 | ||||||
| Weighted average number of shares – basic | **** | 75,475,831 | 78,812,364 | 77,166,505 | 79,382,008 | 82,973,284 |
| Weighted average number of shares – diluted | **** | 76,667,383 | 80,402,213 | 78,523,790 | 80,946,102 | 85,259,520 |
| EPS - basic | **** | 2.50 | 4.64 | 9.63 | 10.88 | $9.57 |
| EPS - diluted | **** | 2.46 | 4.54 | 9.47 | 10.67 | 9.31 |
| Normalized EPS – basic ^[1]^ | **** | 2.50 | 3.93 | 11.30 | 12.29 | 10.19 |
| Normalized EPS – diluted ^[1]^ | **** | 2.46 | 3.85 | 11.11 | 12.05 | 9.92 |
| Declared dividends per share | **** | 0.18 | 0.16 | 0.72 | 0.64 | $0.52 |
All values are in US Dollars.
^[^^1]^See “Non-IFRS Measures” section.
Financial Position data
| As at<br> <br>(in millions of Canadian dollars) | January 31,<br><br><br>2024 | |||
|---|---|---|---|---|
| Cash and cash equivalents | **** | 491.8 | 202.3 | $265.8 |
| Working capital | **** | 1,023.7 | 897.3 | 48.7 |
| Property, plant and equipment | **** | 2,004.3 | 1,810.4 | 1,441.9 |
| Total assets | **** | 6,775.5 | 6,464.6 | 5,030.9 |
| Total non-current financial liabilities | **** | 2,912.1 | 2,942.8 | 2,088.9 |
| Total liabilities | **** | 5,961.6 | 5,924.5 | 5,163.7 |
| Total equity | **** | 813.9 | 540.1 | (132.8) |
| Long-term debt | **** | 2,763.1 | 2,790.2 | 2,040.5 |
All values are in US Dollars.
| BRP Inc. | Management’s Discussion and Analysis | 40 |
|---|
Critical Accounting Estimates
Significant Estimates and Judgments
The preparation of the consolidated financial statements in accordance with the Company’s accounting policies requires management to make estimates and judgments that can affect the reported amounts of assets and liabilities, related amounts of revenues and expenses, other comprehensive income and disclosures made.
The Company’s best estimates are based on the information, facts and circumstances available at the time estimates are made. Management uses historical experience and information, general economic conditions and trends, as well as assumptions regarding probable future outcomes as the basis for determining estimates. Estimates and their underlying assumptions are reviewed periodically and the effects of any changes are recognized immediately. Actual results could differ from the estimates used and such differences could be significant.
The Company’s annual operating budget and operating budget revisions performed during the year (collectively “Budget”) and the Company’s strategic plan comprise fundamental information used as a basis for some significant estimates necessary to prepare these consolidated financial statements. Management prepares the annual operating budget and strategic plan each year using a process whereby a detailed one-year budget and three-year strategic plan are prepared by each entity and then consolidated.
Cash flows and profitability included in the Budget are based on the existing and future expected sales orders, general market conditions, current cost structures, anticipated cost variations and current agreements with third parties. Management uses the annual operating budget information as well as additional projections or assumptions to derive the expected results for the strategic plan and periods thereafter.
The Budget and the strategic plan are approved by management and the Board of Directors. Management then tracks performance as compared to the Budget. Significant variances in actual performance are a key trigger to assess whether certain estimates used in the preparation of financial information must be revised.
Management needs to rely on estimates in order to apply the Company’s accounting policies and considers that the most critical ones are the following:
Estimating the net realizable value of inventory
The net realizable value of materials and work in progress is determined by comparing inventory components and value with production needs, current and future product features, expected production costs to be incurred and the expected profitability of finished products. The net realizable value of finished products and parts, accessories and apparel is determined by comparing inventory components and value with expected sales prices, sales programs and new product features.
Estimating Recoverability of Deferred Tax Assets
Deferred tax assets are recognized only if management believes it is probable that they will be realized based on the annual budget, strategic plan and additional projections to derive the expected results for the periods thereafter.
| BRP Inc. | Management’s Discussion and Analysis | 41 |
|---|
Estimating Provisions for Regular Product Warranty, Product Liability and Sales Program
The regular warranty cost is established by product line and recorded at the time of sale based on management’s best estimate, using historical cost rates and trends. Adjustments to the regular warranty provision are made when the Company identifies a significant and recurring issue on products sold or when costs and trend differences are identified in the analysis of warranty claims.
The product liability provision at period end is based on management’s best estimate of the amounts necessary to resolve existing claims. In addition, the product liability provision at the end of the reporting period includes incurred, but not reported claims based on average historical cost information.
Sales program provision is estimated based on current program features, historical data and expected retail sales for each product line.
Estimating the Discount Rates Used in Assessing Defined Benefit Plan Expenses and Liability
In order to select the discount rates used to determine defined benefit plan expenses and liabilities, management consults with external actuarial firms to provide commonly used and applicable discount rates that are based on the yield of high quality corporate fixed income investments with cash flows that match expected benefit payments for each defined benefit plan. Management uses its knowledge and comprehension of general economic factors in order to conclude on the accuracy of the discount rates used.
Estimating the lease term
On commencement date, when determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option or not exercise a termination option. Extension options or periods subject to termination options are only included in the lease term if the lease is reasonably certain to be extended or not terminated. This assessment is reviewed if a significant change in circumstances occurs within the Company’s control.
Significant Judgments in Applying theCompany’s Accounting Policies
Management needs to make certain judgments in order to apply the Company’s accounting policies and the most significant ones are the following:
Impairment of Property, Plant and Equipment, Intangible Assets and Right-of-Use Assets
The Company operates using a high level of integration and interdependency between design, development, manufacturing and distribution operations. The cash inflows generated by each product line require the use of various assets of the Company, limiting the impairment testing to be done for a single asset. Therefore, management performs impairment testing by grouping assets into CGUs.
Functional Currency
The Company operates worldwide, but its design, development, manufacturing and distribution operations are highly integrated, which require significant judgments from management in order to determine the functional currency of each entity using factors provided by IAS 21 The Effects of Changes in Foreign Exchange Rates (“IAS 21”). Management established the functional currency of each entity as its local currency unless the assessment of the criteria established by IAS 21 to assess the functional currency leads to the determination of another currency. IAS 21 criteria are reviewed annually for each entity.
| BRP Inc. | Management’s Discussion and Analysis | 42 |
|---|
Future Accounting Changes
Non-current liabilities with covenants (amendments to IAS 1)
In January 2020, the IASB issued an amendment to IAS 1 - Presentation of Financial Statements to clarify its requirements for the presentation of liabilities in the statement of financial position. The amendment clarified that the classification of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period and that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability. It also introduced a definition of settlement to make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services. On October 31, 2022, the IASB issued Non-Current Liabilities with Covenants (amendments to IAS 1). These amendments specify that covenants to be complied with after the reporting date do not affect the classification of debt as current or non-current at the reporting date.
The amendments will become effective for the Company’s fiscal year beginning on February 1, 2024. The Company is assessing the potential impact of these amendments.
Lack of exchangeability (amendments to IAS 21)
In August 2023, the IASB published amendments to IAS 21 – The Effects of Changes in Foreign Exchange Rates that contains guidance to specify when a currency is exchangeable and how to determine the exchange rate when it is not. The amendment provides further clarity on the specific indicators for when a currency is exchangeable or not, which exchange rate should be applied when a currency is not exchangeable and requires disclosures of additional information when a currency is not exchangeable.
The amendments will become effective for the Company’s fiscal year beginning on February 1, 2025. The Company is assessing the potential impact of these amendments.
Other standards or amendments
The IASB has issued other standards or amendments to existing standards that are not expected to have a significant impact on the Company’s consolidated financial statements.
| BRP Inc. | Management’s Discussion and Analysis | 43 |
|---|
Environmental, Social and Governance
The Company is committed to Corporate Social Responsibility (“CSR”) and more specifically to the environment, product safety, health and safety, social well-being and economic prosperity everywhere it operates. The Company recognizes that these factors are fundamental to its growth and success.
In April 2022, the Company announced its commitment to take CSR even further with the launch of its new CSR25 program, which fosters value creation around three main pillars: Environment, Social and Governance. The CSR25 Program includes objectives that focus on the Company’s employees, communities, operations and products, which have been specifically assigned to senior executives to make optimal use of their unique expertise, and are broken down as follows:
| ● | Reduce the carbon footprint relating to products and operations. |
|---|---|
| ● | Ensure a positive and sustainable impact in communities and the daily lives of employees. |
| --- | --- |
| ● | Continue to make sound strategic decisions, maintain high ethical standards and conduct operations in a sustainable<br>manner. |
| --- | --- |
The Board of Directors of the Company is the ultimate steward of ESG matters and it has established clear lines of authority and oversight at the committee levels, as detailed below:
| ● | The Nominating, Governance and Social Responsibility Committee (“NGSRC”) has been delegated the authority to<br>annually review and assess the Company’s policies and practices with respect to its CSR25 Program; and |
|---|---|
| ● | The Audit committee has been delegated the authority to oversee any<br>CSR/ESG-related disclosure documents and the controls in place to assess the adequacy and completeness of the financial information contained therein. |
| --- | --- |
In addition to the oversight by the Board and its committees, the Executive Management team along with the dedicated team of CSR professionals (“CSR team”) have established a CSR governance framework which engages proactively and regularly with relevant stakeholders at all levels of the organization. They have also implemented internal working groups aimed at overseeing specific elements of the CSR strategy and at deploying efficient programs and initiatives within various business units. The CSR team receives updates on the advancement of the work against the program’s priorities from the senior executives and internal working groups to whom such priorities were assigned, and it has the responsibility to report regularly on such progress to the Executive Management team as well as quarterly to the Board.
On June 26, 2023, the International Sustainability Standards Board (“ISSB”) issued its inaugural standards - IFRS S1 “General Requirements for Disclosure of Sustainability-related Financial Information” and IFRS S2 “Climate Related Disclosures”. IFRS S1 sets out overall disclosure requirements that have been designed to help guide companies in disclosing information about their sustainability-related risks and opportunities in a way that is useful for investors. IFRS S2 sets out specific climate-related disclosures and is to be used in tandem with IFRS S1. The Company is currently in the process of assessing the impacts of these standards on its external disclosures.
For full details about BRP’s CSR25 program, its initiatives, and the most recent CSR report please visit the Corporate Social Responsibility section at (www.brp.com). For greater certainty, the CSR reports and any information therein as well as any information on the CSR program available on the Company’s website are not part of this MD&A and are not incorporated by reference herein.
| BRP Inc. | Management’s Discussion and Analysis | 44 |
|---|
Controls and Procedures
The Company’s President and Chief Executive Officer and the Chief Financial Officer are responsible for establishing and maintaining the Company’s disclosure controls and procedures as well as its internal control over financial reporting, as those terms are defined in National Instrument 52-109 – Certification ofDisclosure in Issuers ’ Annual and Interim Filings of the Canadian securities regulatory authorities and Rule 13a-15(e) and Rule 15d-15(e) under the U.S. Securities Exchange Act of 1934, as amended.
Disclosure controls and procedures
The President and Chief Executive Officer and the Chief Financial Officer have designed, or caused to be designed under their supervision, disclosure controls and procedures in order to provide reasonable assurance that:
| ● | material information relating to the Company has been made known to them; and |
|---|---|
| ● | information required to be disclosed in the Company’s filings is recorded, processed, summarized and<br>reported within the time periods specified in securities legislation. |
| --- | --- |
An evaluation of the design and effectiveness of the Company’s disclosure controls and procedures was carried out under the supervision of the President and Chief Executive Officer and the Chief Financial Officer. Based on this evaluation, the President and Chief Executive Officer and the Chief Financial Officer concluded, as of January 31, 2024, that the Company’s disclosure controls and procedures were effective.
Management’s report on internal control over financial reporting
The President and Chief Executive Officer and the Chief Financial Officer have designed, or caused to be designed under their supervision, such internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.
Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Management’s projections of any evaluation of the effectiveness of internal control over financial reporting as to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
An evaluation of the design and effectiveness of the Company’s internal controls over financial reporting was carried out under the supervision of the President and Chief Executive Officer and the Chief Financial Officer. In making this evaluation, the President and Chief Executive Officer and the Chief Financial Officer used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal Control – Integrated Framework (2013). Based on this evaluation, the President and Chief Executive Officer and the Chief Financial Officer concluded, as of January 31, 2024, that the Company’s internal control over financial reporting was effective.
Our internal control over financial reporting as of January 31, 2024 has been audited by Deloitte LLP, an independent registered public accounting firm, who also audited our consolidated financial statements for the year ended January 31, 2024. Deloitte LLP issued an unqualified opinion, as stated in their report, on the effectiveness of our internal control over financial reporting as of January 31, 2024.
Changes in internal control over financial reporting
There were no changes in the Company’s internal control over financial reporting during the three- and twelve-month periods ended January 31, 2024, that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.
| BRP Inc. | Management’s Discussion and Analysis | 45 |
|---|
RISK FACTORS
The risks and uncertainties described in this MD&A are those the Company currently believes to be material, but they are not the only ones it faces. If any of the following risks, or any other risks and uncertainties that the Company has not yet identified or that it currently considers not to be material, actually occur or become material, the Company’s business, guidance, prospects, financial condition, results of operations and cash flows and consequently the price of the Subordinate Voting Shares could be materially and adversely affected.
Economic conditions that impact consumer spending may have a material adverse effect on the Company’s business, results ofoperations or financial condition
The Company’s business is cyclical in nature, and the Company’s products compete with a variety of other recreational products and activities for consumers’ discretionary income and leisure time. The Company’s results of operations are sensitive to changes in overall economic conditions, primarily in North America and Europe, that impact consumer spending and particularly discretionary spending. Volatility in economic conditions may negatively affect disposable consumer income such as personal income levels, the availability of consumer credit, employment levels, consumer confidence, business conditions, changes in housing market conditions, capital markets, inflation, tax rates, savings rates, interest rates, exchange rates, fuel and energy costs, tariffs. Natural disasters, acts of terrorism, epidemic or pandemic outbreaks, or other similar events, could also reduce consumer spending generally or discretionary spending in particular. Such reductions could materially adversely affect the Company’s business, results of operations or financial condition. Changes in economic conditions could also result in a deterioration or increased volatility in the credit and lending markets, which could adversely impact the consumers who purchase the Company’s products from dealers and rely upon financing for such purchases as well as the availability of financing arrangements for dealers and distributors to finance their inventory. If financing is not available to consumers or dealers and distributors on satisfactory terms, the Company’s business, results of operations or financial condition could be materially adversely affected. Further, continued macroeconomic uncertainties may cause declines in the price of the Subordinate Voting Shares or result in shareholder grievance or activism. Finally, the risk of recession in one or several of the countries where the Company operates remains, notably in light of elevated interest rates and heightened inflation, and could have an adverse impact on the Company’s net earnings, financial position or cash flows.
Any decline in the social acceptability of the Company or of the Company’sproducts or any increased restrictions on the access or the use of the Company’s products in certain locations could materially adversely affect its business, results of operations or financial condition
Demand for the Company’s products depends in part on their social acceptability and that of the Company as a whole. Public concerns about the environmental impact of the Company’s products or their perceived safety could result in diminished social acceptance. Circumstances outside the Company’s control, such as social action to reduce the use of fossil fuels, could also negatively impact consumers’ perceptions of the Company’s products. Any decline in the social acceptability of the Company’s products could negatively impact their sales or lead to changes in laws, rules and regulations that prevent their access to certain locations, including trails and lakes, or restrict their use or manner of use in certain areas or during certain times. Additionally, while the Company has implemented various initiatives to address these risks, including the improvement of the environmental footprint and safety of its products, there can be no assurance that the perceptions of the Company’s customers will not change. Consumers’ attitudes towards the Company’s products and the activities in which they are used also affect demand. Any failure by the Company to maintain the social acceptability of its products could impact its ability to retain existing customers or attract new ones which, in turn, could have a material adverse effect on its business, results of operations or financial condition.
| BRP Inc. | Management’s Discussion and Analysis | 46 |
|---|
Other factors may impact the Company’s reputation, including the perception held by the Company’s stakeholders and the industries in which it does business, which can be influenced by the new and evolving set of compliance risks it has been subject to. Indeed, in the last several years, there has been increased scrutiny related to ESG performance requirements, standards and reporting and a corresponding increase in the risk of damage to the Company’s reputation and the value of its brands if the Company fails to act responsibility or comply with regulatory requirements in several areas, such as safety and security, environmental stewardship and sustainability, climate-change mandated disclosure, diversity, philanthropy and support for local communities and human rights. For instance, in Australia and in Canada, regulations such as the Modern Slavery Act 2018 (Cth) (Commonwealth Act) and the recently adopted Bill S-211, An act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains, require the Company to file public reports on measures they have taken to identify, address and prevent the use of forced labour, prison labour and child labour in their supply chains. Such new regulation illustrates how human rights are increasingly considered as a priority, including from a reporting standpoint, and could expose the Company’s reputation if its disclosure is not at par with its peers. Similarly, with respect to ESG, while the Company has in place programs and commitments and has in the past years publicly announced ambitious ESG goals and commitments as part of its broader CSR25 program, there is no assurance that it will be able to adequately address all ESG pressures and potential requirements to maintain stakeholder confidence and its ability to implement its programs and commitments with respect to ESG is likely to be compared against its peers. In addition, in the last year, there has been an array of new and developing sustainability-related rules that have been adopted and proposed by various regulators and jurisdictions, including the Corporate Sustainability Reporting Directive (CSRD) issued by the European parliament and the Canadian Securities Administrators’ (CSA) proposed National Instrument 51-107 Disclosure of Climate-related Matters, which makes it more complex for the Company to ensure compliance with multiple requirements that may not perfectly converge and to dedicate resources accordingly. Such regulations will also subject the Company to new disclosure requirements, which could result in risks to our reputation or consumer demand for our products if we do not meet the increasingly demanding stakeholder expectations and standards. Further, the Company’s ability to achieve these goals depends on many factors and is subject to many risks, that could cause the Company’s assumptions or estimates to be inaccurate and cause actual results or events to differ materially from those expressed in, or implied by, those goals. The failure to achieve its ESG targets, effectively manage and sufficiently report ESG matters, or a perception among key stakeholders that its ESG targets are insufficient, could adversely affect the Company’s reputation and its ability to attract capital from financial institutions and investors incorporating sustainability and ESG considerations as a part of their portfolios or adopting restrictive decarbonization policies (see “Risk Factors — The Company’s success depends upon the continued strength of its reputation and brands”).
The Company has, and is expected to continue to have and incur, indebtedness and there can be no assurance that it will be able topay its indebtedness as it becomes due
The Company has, and is expected to continue to have and incur, indebtedness, including obligations under the Revolving Credit Facilities as well as obligations under the Term Facility. In addition, the Company may incur greater levels of indebtedness as a result of challenging economic or other conditions affecting the Company, including as a result of the seasonality of its business or due to supply chain related disruptions increasing its working capital needs. The amount of indebtedness that the Company has from time to time may, among other things, limit the Company’s ability to obtain additional financing, require the Company to dedicate a substantial portion of its cash flow generated from operations to payments on its indebtedness or fixed costs (thereby reducing the funds available for other purposes), make the Company more vulnerable to economic downturns, or limit the Company’s flexibility in planning for, or reacting to, competitive pressures or changes in its business environment, any of which could, in turn, have a material adverse effect on its business, results of operations or financial condition. The Company did however proactively extend the maturity of U.S. $1,000 million of its Term Loan B on January 22, 2024 by 7 years, further increasing its flexibility to operate and invest for the long-term growth of the Company.
| BRP Inc. | Management’s Discussion and Analysis | 47 |
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The ability of the Company to make scheduled payments under its indebtedness will depend on, among other things, its future operating performance and its ability to refinance its indebtedness, if necessary. In addition, as the Company incurs indebtedness that mainly bears interest at fluctuating interest rates and is mainly denominated in U.S. dollars, to the extent that interest rates increase or the U.S. dollar appreciates relative to the Canadian dollar, its interest expense will increase, as has been experienced over the last year with the significant increase of interest rates which have not yet been reduced. While the Company actively manages its exposure to interest rate fluctuations and enters into interest rate **** derivatives from time to time, such contracts could limit the exposure to the interest rate increase. Furthermore, the Company does not have interest rate derivative contracts in place for all of its debt instruments and covering their entire maturity profile. As a result, there can be no assurance that the Company’s approach to managing its exposure to interest rate fluctuations will be effective in the future or that the Company will be able to enter into interest rate derivative contracts as deemed necessary on satisfactory terms. Each of these factors is, to a large extent, subject to economic, financial, competitive, regulatory, operational and other factors, many of which are beyond the Company’s control. Any failure by the Company to generate sufficient cash from its operations to pay its debt and other financial obligations could have a material adverse effect on its business, results of operations and financial condition.
TheCompany uses cash generated from its operating activities to fund its business and execute its growth strategy and may require additional capital that may not be available to the Company
The Company relies on net cash generated from its operating activities as its primary source of liquidity. To support the Company’s business and execute its growth strategy as planned, the Company will need to continue to generate significant amounts of cash from operations, including funds to pay personnel, invest further in its infrastructure and facilities and invest in research and development (see “Risk Factors — The Company may be unable to successfully execute its growth strategy”). In case of decreasing capacity of the Company to generate cash from operations, the eventual recovery of the Company may be delayed due to factors such as the cyclical nature of the Company’s business, the seasonality of certain of its products, and the inventory levels of the Company, and that of its distributors and dealers. If the Company’s business does not generate cash flow from operating activities sufficient to fund these activities, and if sufficient funds are not otherwise available from its credit facilities, the Company may need to seek additional capital, through debt or equity financings, to fund its business or execute its growth strategy. Conditions in the credit markets (such as availability of financing, fluctuations in interest rates and deterioration of the global economic condition, the impact of global supply chain disruptions, the presence of global tensions and political conflicts, and other macroeconomic conditions) may make it difficult for the Company to obtain such financing on attractive terms, or even at all. Additional debt financing that the Company may undertake may be expensive and might impose on it covenants that restrict the Company’s operations and strategic initiatives, including limitations on its ability to incur liens or additional debt, pay dividends, repurchase its capital shares, make investments or engage in merger, consolidation and asset purchase transactions. Any equity financing may also be on terms that are dilutive to the Company’s shareholders, and the prices at which new investors would be willing to purchase equity securities may be lower than the price per share of the Company’s Subordinate Voting Shares. If new sources of financing are required, but are unattractive, insufficient, or unavailable, then the Company could be required to modify its business plans or growth strategy based on available funding, if any, which, in turn, could have a material adverse effect on the Company’s business, results of operations or financial condition.
Supply problems, termination or interruption of supply arrangements or increases in the cost of materials, including as a result ofthe military conflict between Russia and Ukraine, could have a material adverse effect on the Company’s business, results of operations or financial condition
The primary raw materials used in manufacturing the Company’s products are aluminum, steel, plastic, resins, stainless steel, copper, rubber and certain rare earth metals. Certain suppliers provide the Company with certain product parts and components. In some instances, the Company also purchases systems, components, raw materials and parts that are derived from a single source, which may represent an increased risk of supply disruptions. The Company cannot be certain that it will not experience supply problems, such as the untimely delivery of, or defects or variations in, raw materials, parts or components.
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Shortages of key components, such as semiconductors, can also disrupt the Company’s production. For example, the Powersports Products and Marine Products industry faced in the last two years, and continue to face to a lesser extent, a shortage of semiconductors, which has a complex supply chain with long lead times required to increase production and capacity. Such supply chain related disruptions resulted in larger than usual production of substantially completed units awaiting missing components. Moreover, the Company faced, and could continue to face, a risk of production stoppages and slowdowns in several jurisdictions where the Company operates, which could lead to further supply disruptions and delivery delays for the Company. Given this context, the Company was forced to, and expects to continue to a lesser degree, take additional measures to secure its supply chain and maintain its production, including the use of expedited freight or air freight, resulting in additional costs for the Company. Additionally, various sources of supply-chain risk, including strikes or shutdowns at delivery ports, disruptions or shutdowns caused by health crises, or loss of or damage to goods while they are in transit or storage, could limit the supply of these raw materials and components. Any prolonged disruption in the supply chain could have a material adverse effect on the Company’s operations or profitability and the insolvency, bankruptcy, financial restructuring or force majeure event of any critical suppliers could result in the Company incurring unrecoverable costs related to the financial work-out or resourcing costs of such suppliers and/or increased exposure for product liability, warranty or recall costs relating to the components supplied by such suppliers to the extent such supplier is not able to assume responsibility for such amounts.
As well, the Company obtains certain of the raw materials, parts and components it uses from either sole suppliers or a limited number of suppliers, exposing it to concentration risks. If these supply arrangements were terminated or interrupted for reasons such as supplied goods not meeting the Company’s quality or safety standards or the suppliers’ operations being disrupted as a result of a variety of internal or external risks, including the continuing deterioration in general economic conditions in Canada, the U.S. and certain other regions where the Company operates, it could have difficulty establishing substitute supply arrangements on satisfactory terms. Problems with the Company’s supplies could have a material adverse effect on the Company’s business, results of operations or financial condition.
Moreover, the Company’s profitability is affected by significant fluctuations in the prices of the raw materials, parts and components it uses, including as experienced as a result of the sustained inflationary environment. **** In addition, although most of the shortages of key components experienced over the last two years have improved, they have led to, and could continue to lead to, increases in the costs of materials and related price pressures, thereby potentially impacting the Company’s margins. **** Further, higher energy costs and fuel increases, notably in light of the ongoing military conflict between Russia and Ukraine, can adversely affect the pricing and availability of petroleum-based raw materials such as resins and rubber used in many of the Company’s products. The Company may not be able to pass along price increases in raw materials, parts or components to its customers. As a result, an increase in the cost of raw materials, parts and components used in the manufacturing of the Company’s products could reduce its profitability and have a material adverse effect on its business, results of operations or financial condition.
If the Company is unable to attract, hire andretain the services of key employees, including members of its management team, or qualified employees, including employees who possess specialized market knowledge and technical skills, the Company’s ability to compete, to manage itsoperations effectively, or to develop new products could be materially adversely affected
The Company’s success depends to a large extent upon its ability to attract and retain skilled employees. There is intense competition for qualified and skilled employees in the labour markets in which the Company operates. The Company must attract, train, and retain many qualified employees while controlling related labour costs and while continuing to promote DE&I principles and practices into its core values. Tighter labour markets, such as those experienced in the previous years **** and to a lesser extent last year, may continue to make it even more difficult for the Company to hire and retain qualified employees and control labour costs. The Company’s ability to attract qualified employees and control labor costs is subject to numerous external factors, including prevailing wage rates, employee preferences, employment law and regulation, labour relations and immigration policy. The Company’s
| BRP Inc. | Management’s Discussion and Analysis | 49 |
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ability to reward its employees through bonuses and other incentive programs also depend on the Company’s financial performance, such that it if decreases, employee turnover may increase and be more significant in sectors that have already experienced a decrease in bonuses and other incentive programs due to their past performance. The shift to a hybrid work environment may also negatively impact the Company’s ability to hire, retain and motivate talent and will depend on employee preferences and relative choices of other employers. The ability to retain workforce is also dependent on the Company’s ability to foster an environment that is sustainably safe, respectful, fair and inclusive of everyone and promotes DE&I inside and outside of the business. The Company has been dedicating time and resources to continue to progress on its DE&I journey, which falls within its broader CSR25 Program. The Company’s failure to recruit, train and retain such employees could have a material adverse effect on its business, results of operations or financial condition.
In addition, many members of the Company’s management team have extensive experience in the Company’s industry and with its business, products and customers. The loss of the technical, management and operational knowledge and expertise of one or more members of the management team could result in a diversion of management resources, as the remaining members of management would need to cover the duties of any senior executive who leaves the Company and would need to spend time usually reserved for managing the Company’s business to search for, hire and train new members of management. The loss of some or all of the members of Company’s management team, particularly if combined with difficulties in finding qualified substitutes, including notably as a result of the failure to establish, or improper implementation of, an effective succession plan for the CEO, could negatively affect the Company’s ability to develop and pursue its business strategy, or create such perception among key stakeholders, which could materially adversely affect the Company’s business, results of operations or financial condition.
To implement and manage the Company’s business and operating strategies effectively, the Company must maintain a high level of efficiency, performance and content quality, continue to enhance its operational and management systems and continue to effectively attract, train, motivate and manage its employees. If the Company is not successful in doing so, it may have a material adverse effect on its business, results of operations or financial condition.
The risks to the Company of a pandemic, epidemic or other public health crisis, include risks to employee health and safety, prolonged restrictive measures put in place in order to control the outbreak and limitations on travel, which may result in temporary shortages of staff or unavailability of certain employees or consultants with key expertise or knowledge of the Company, impact on workforce productivity and increased medical costs/insurance premiums.
The failure of the Company’s information technology systems, difficulties in the continued implementation of its ERP system or asecurity breach or cyber-attack could materially adversely affect the Company’s business, results of operations or financial condition
The Company’s global business operations are managed through a variety of information technology systems. These systems govern all aspects of the Company’s operations around the world. The Company is dependent on these systems for all commercial transactions, financial reporting, dealership and distributorship interactions, and supply chain and inventory management. Certain of the Company’s key IT systems are dated and require, or are in the process of, modernization. The Company’s information technology systems may also be vulnerable to damage or interruption from circumstances beyond the Company’s control, including fire, flood, natural disasters, systems failures, network or communications failures, power outages, public health emergencies, security breaches, cyber-attacks and terrorism. If one of the Company’s key IT systems were to suffer a failure, no assurance can be given that the Company’s backup systems or contingency plans will sustain critical aspects of the Company’s operations, and the Company’s business, results of operations or financial condition **** could be materially adversely affected. Further, the Company relies on large outsourcing contracts for IT services with major third-party service providers, and if such service providers were to fail or the relationships with the Company were to end, and the Company were unable to find suitable replacements in a timely manner, the Company’s business, results of operations or financial condition could be materially adversely affected. The Company also
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depends on security measures that these third-party service providers are taking to protect their own systems and infrastructure. If such third-party service providers do not maintain adequate security measures in accordance with contractual requirements, the Company may experience operational difficulties and increased costs, and/or may be the subject of a malware infiltration coming through such third-party service providers. On August 8, 2022, the Company discovered and publicly reported that it was the target of malicious cybersecurity activity, which came through a third-party service provider and resulted in temporary suspensions of the operations (the “August 2022 Breach”). The Company launched an investigation and promptly put in place appropriate measures to ensure the integrity of systems and data, allowing to limit the incident from a data privacy perspective, as well as a recovery plan to minimize the financial consequences of the cyberattack. The Company was able to restore a vast majority of its internal systems from its back-up repositories and precautionary measures were adopted with respect to the limited information that was compromised, including the availability of credit monitoring services. Even if the August 2022 Breach’s impact was ultimately contained, future similar incidents could have an adverse material impact on the Company’s business, operations, and reputation.
The Company is continually modifying and enhancing its IT systems and technologies to increase productivity, efficiency and security**.** As new systems and technologies are implemented, the Company could experience unanticipated difficulties resulting in unexpected costs and adverse impacts to its financial reporting and manufacturing and other business processes. When implemented, the systems and technologies may not provide the benefits anticipated and could add costs and complications to ongoing operations, which may have a material adverse effect on the Company’s business, results of operations or financial condition. The Company implemented a new ERP system last year, which replaced its previous financial and operating systems in its main operations. The design and implementation of this new ERP system required an investment of significant personnel and financial resources, including substantial expenditures for outside consultants, system hardware and software in addition to other expenses in connection with the transformation of the Company’s organizational structure and financial and operating processes, and will continue to do so, to a lesser extent, as subsequent phases of the ERP continue to be implemented throughout the organization. The Company may not be able to continue its implementation of its ERP system successfully without experiencing delays, increased costs and other difficulties, including potential design defects, miscalculations, testing requirements, and the diversion of management’s attention from day-to-day business operations**.** If it is unable to continue the implementation of its ERP system as planned, the effectiveness of the internal control over financial reporting could be adversely affected, the ability to assess those controls adequately and to disseminate its financial documents could be delayed, the operations can be affected and the financial condition, results of operations and cash flows could be negatively impacted. **** Similarly, as the Company integrates emerging and rapidly evolving technologies such as artificial intelligence (AI) and machine learning into its services or products, it may not be able to anticipate or identify vulnerabilities, design flaws or security threats resulting from the use of such technology and develop adequate protection measures, which could result in financial loss, poor customer experiences and damage to the Company’s reputation. At this time, the Company recognizes the potential of AI if approached with care and security boundaries, and will focus on the opportunities it presents, including system automation and forecasting capabilities, to become a key enabler of future operating efficiencies, while ensuring that it remains within a safe and confined environment and under a specific governance framework with proper policies in place. The Company and its dealers and distributors receive and store personal information in connection with their human resources operations, credit operations, warranty management, marketing efforts and other aspects of their businesses. Additionally, the Company maintains financial information in its IT system and exchanges electronically information with a large number of trading partners across all aspects of its commercial operations. The Company makes significant investments in research and development each year and data from such activities is maintained in the Company’s IT systems. Any security breach of the Company’s IT systems could result in disruptions to its operations, as was the case with the August 2022 Breach, erroneous transactions or reporting, loss of data from research and development activities or the devaluation of intellectual property. The Company has security measures and controls in place to protect personal and business information, and on an ongoing basis, continues to make investments to reinforce secure access to the Company’s information technology network. In addition, despite the Company’s preventive efforts to address cybersecurity threats, these threats are increasingly complex and can change frequently such that the Company may be unable to proactively address those threats or
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implement adequate preventive measures. With the increased use of technologies such as the internet to conduct business, the Company is susceptible to operational, information security and related risks. In general, cyber incidents can result from deliberate attacks or unintentional events. Cyber-attacks include, but are not limited to, gaining unauthorized access to digital systems (e.g., through hacking or malicious software coding) for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption. Cyber-attacks may also be carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service attacks on websites (i.e., efforts to make network services unavailable to intended users). Further, the work-from-home measures implemented in the last few years present cybersecurity challenges, as the Company’s security and control measures might fail to adapt to a hybrid work environment. While the Company has deployed additional protective measures including advanced threat hunting, real time response and Operational Technology (OT) surveillance services, it is not completely immune from these increasing cybersecurity threats. To the extent that a cybersecurity breach results in a loss or damage to the Company’s data, or in inappropriate disclosure of confidential or personal information, it could cause significant damage to the Company’s reputation, affect its relationships with its customers, lead to violations of applicable privacy and other laws, regulatory fines, penalties, additional compliance costs, claims against the Company and ultimately materially adversely affect its business, results of operations or financial condition.
The Company’s international sales and operations subject it to additional risks, which risks may differ in each country in whichthe Company operates
The Company manufactures its products in Australia, Austria, Canada, Finland, Germany, Mexico and the United States and maintains sales and administration facilities in approximately 20 countries. The Company’s primary distribution centers distribute the Company’s products to its North American dealers; the Company relies on various other locations around the world, including in Australia, Belgium and Finland to serve its international dealers and distributors. The Company’s total sales outside Canada and the United States represented 24.3% **** of the Company’s total sales in Fiscal 2024 and the Company intends to continue to expand its international operations by investing in developing its dealer network and promoting the Company’s brands and products in international markets, which are expected to continue generating sales growth. Several factors could adversely affect sales growth, including weakened international economic conditions, an outbreak of infectious disease, a pandemic or similar public health threat or the introduction of new trade restrictions such as increased protectionism, changes in free-trade arrangements or retaliatory tariffs and geopolitical events (including the ongoing military conflict between Russia and Ukraine, the Middle-East conflict increasing tensions in the region, the risk that the systematic cargo inspections that were carried out at the U.S.-Mexico border resume, and the potential impacts of the upcoming presidential election in the United States). Pandemics, epidemics, disease outbreaks and other public health crises, such as the COVID-19 pandemic, have disrupted and could disrupt the Company’s business and operations, including as a result of restrictions imposed by several international jurisdictions such as quarantines, business closures and travel restrictions, causing the Company to take temporary measures to suspend or reduce operations at its manufacturing plants and distribution facilities. In Fiscal 2024, the Company did not take additional measures with respect to COVID-19 or any new variants or resurgences of COVID-19 through subsequent waves, other diseases that give rise to similar effects could emerge and cause the introduction of similar restrictions or impositions of new restrictions that could be onerous and although the measures can vary in each jurisdiction where the Company operates, they could still impact the Company’s business and operations given its international scale.
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Additionally, the expansion of the Company’s existing international operations and entry into additional international markets require significant management attention and financial resources. The risks inherent in having sales or operations in foreign countries include:
| ● | increased costs of adapting and certifying products to foreign countries’ laws, rules and regulations;<br> |
|---|---|
| ● | limited acceptability of the Company’s products due to cultural preferences or societal trends (see “Risk<br>Factors — Any decline in the social acceptability of the Company or of the Company’s products or any increased restrictions on the access to, or the use of, the Company’s products in certain locations could materially adversely affect<br>its business, results of operations or financial condition”); |
| --- | --- |
| ● | difficulties in managing and staffing international operations and increased infrastructure and operational costs;<br> |
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| ● | different employee/employer relationships and labor legislation including the existence of work councils and labor<br>unions and statutory equity requirements and other challenges caused by distance, language, and cultural differences, making it harder to do business in certain jurisdictions; |
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| ● | restricted access to and/or lower levels of use of the internet, or limitations on technology infrastructure, both of<br>which could limit the Company’s ability to migrate international operations to its existing systems, which could result in increased costs; |
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| ● | risk of travel advisories or travel restrictions related to the outbreak of contagious illnesses, which could impact the<br>Company’s ability to operate in certain markets and/or manage the Company’s operations in those markets; |
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| ● | market fluctuations in regions impacted by or surrounding a zone of military conflict, such as the Russia-Ukraine or<br>Middle-East conflicts, mostly due to local military operations, but also political and social unrest and trade restrictions; |
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| ● | imposition of Canadian and/or international sanctions against a country, company, person, or entity with whom the<br>Company does business which restricts or prohibits the Company’s continued business with the sanctioned country, company, person, or entity (including the sanctions imposed by foreign governments on Russia); |
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| ● | adoption of additional restrictions to global trade from the Canadian or foreign governments, including increased<br>customs duties, retaliatory tariffs or non-tariff barriers to trade, and new Canadian or foreign export control regulations impacting the Company’s products, such as the introduction of new import and<br>export licensing requirements; |
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| ● | shipping and freight disruptions subsequent to, for example, enhanced border crossing procedures (including for instance<br>the systematic cargo inspections that were carried out at the U.S.-Mexico border during a few weeks of the Company’s third quarter) or the impact of geopolitical developments on global trade routes (including for example the Red Sea shipping<br>crisis); |
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| ● | breaches or violation of any anti-corruption laws, rules or regulations by any of the Company’s employees,<br>consultants, dealers or distributors; |
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| ● | new and different sources of competition; |
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| ● | international pricing pressures; |
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| ● | laws and business practices favouring local companies; |
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| ● | governmental expropriation; |
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| ● | adverse currency exchange rate fluctuations; |
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| ● | longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal<br>systems; and |
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| ● | difficulties and inconsistencies relating to the enforcement of laws, rules, and regulations, including rules relating<br>to environmental, health, safety and intellectual property matters. |
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The Company has four operating manufacturing facilities in Mexico, and it recently completed the construction of an electric vehicles (EV) manufacturing plant in Querétaro.. These facilities could be impacted by changes in economic, regulatory, social or political conditions affecting the country. In the past, Mexico has been subject to political instability, changes and uncertainties and there can be no assurance that similar events will not occur again in the future. In addition, the impact of any changes in
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economic, regulatory, social and political conditions affecting Mexico would be beyond the Company’s control, and there can be no assurance that any mitigating actions by the Company would be effective. As a result, the Company’s business, results of operations or financial condition could be materially adversely affected by any significant change in economic, regulatory, social and political conditions affecting Mexico, such as drastic changes in the Mexican labor law to increase minimum salary or vacation entitlements or reduce weekly working hours. Moreover, tensions relating to immigration at the US-Mexico border have led to heightened trade border restrictions including the systematic cargo inspections that were carried out during a few weeks of the Company’s third quarter, negatively impacting its Off-Road Vehicles deliveries for that period of time. Further, most goods produced in Mexico and Canada and sold to the United States benefit from the Canada-United States-Mexico Agreement (“CUSMA”), which has been signed and ratified by all three countries and implemented on July 1, 2020. Disputes between the three countries in relation to the interpretation of certain provisions contained in CUSMA have already taken place, and there can be no assurance that the Company’s operations will not be impacted by other such disputes in the future.
The global snowmobile market is highly concentrated in North America, Russia and Scandinavia, and the Company has an office in Russia. On February 24, 2022, a military conflict started between Russia and Ukraine, which resulted in heightened tensions between Russia, the United States, Canada and a number of European states. Given this context and the government sanctions that were imposed in connection with this crisis, the Company decided to stop all sales, shipments and exports intended for Russia, thereby negatively impacting the Company’s business and financial results. A continuation, or any further deterioration, of the situation could lead to additional geopolitical implications, including further economic, social and political repercussions on a number of regions that may impact the Company and its customers. Additionally, further impositions of sanctions and export controls, as well as any responses from Russia, could adversely affect the Company’s supply chain, business partners or customers. The Russia/Ukraine conflict and its political and legal consequences have led the Company to adjust its operations in Russia in the past two years and could cause further changes in the future, which could increase its costs of operations. The conflict in Ukraine also led, and could continue to lead, to volatility in the global markets, increase inflation and further disrupt supply chains, worsen the semiconductor chip shortage (since Russia and Ukraine are global suppliers of neon gas and palladium used in chip production), exacerbate energy shortages and drive energy prices higher and increase cybersecurity threats, all of which could further reduce the Company’s profitability and have a material adverse effect on its business, results of operations or financial condition. Similar deterioration in trade relations between the U.S. and one or more other countries, including possibly as a result of the upcoming presidential election in the U.S., could have a material adverse impact on the Company’s financial position, results of operations and/or cashflows. For instance, although the Company does not have manufacturing operations in China, the continued U.S.-China trade tensions and potential restrictive measures to be imposed against China could exacerbate a number of risks described elsewhere in these Risk Factors, including by creating additional instability to the surrounding region, thereby limiting some potential growth opportunities for the Company. The Company may also be subject to the Uyghur Forced Labor Prevention Act, which presumes that goods produced in the Xinjiang Uyghur Autonomous Region of China have been made with forced labor, thereby resulting in an import prohibition in the U.S. Although the Company has not had a material impact to date, there is no assurance that it will be able to provide clear and convincing evidence of the absence of forced labor throughout its supply chain, notably with respect to its PA&A, failing which the U.S. Customs & Border Protection may detain, exclude or seize its goods and assess monetary penalties, thereby potentially resulting in a material adverse effect on the Company’s supply chain, results of operations or financial condition.
The Company may be unable to successfully execute its growth strategy
The Company’s strategic plan established by management includes an organic growth strategy, which is focused mainly on the development of new products and features, including more recently the expansion to new industries with its global electrification plan and the creation of its new business unit targeting low voltage and human assisted product categories, and may involve from time to time growth through strategic acquisitions, investments, alliances, joint ventures and similar transactions. Moreover, in the past few years, the Company decided to venture beyond a product-based offering, with the launch of its Uncharted Society program and the opening of the BRP Experience Center, offering experiences to
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make powersports accessible to all through partnerships with service providers. If the Company is unable to secure appropriate locations and reputable service providers, to effectively manage its relationships with its service providers and monitor their adherence to the Company’s operating standards, trainings and compliance procedures, and to anticipate demand and address related impact on inventory levels, it could impact its reputation and increase its risk of litigation.
While the Company makes significant investments in research and development and emerging product lines, there can be no assurance that it will be able to continue to successfully enhance its existing products, develop new innovative products and distinguish its products from its competitors’ products through innovation and design. Product improvements and new product introductions also require significant planning, design, development and testing at the technological, product and manufacturing process levels and the Company may not be able to develop product improvements or new products in a timely manner. The new products of the Company’s competitors may access the market more rapidly, be more effective with better features and/or less expensive than the Company’s products, obtain better market acceptance, or render the Company’s products obsolete. The Company may therefore not be able to satisfy the needs and preferences of customers and compete effectively with its competitors. Product development requires significant financial, technological and other resources. The Company expended approximately $441.5 million **** in research and development in Fiscal 2024. There can be no assurance that the Company will be able to sustain this level of investment or that this level of investment in research and development will be sufficient to successfully maintain the Company’s competitive advantages in product innovation and design in the future (see “Risk Factors — The Company uses cash generated from its operating activities to fund its business and execute its growth strategy and may require additional capital that may not be available to the Company”). Further, the sales of any new products are expected to decline over such new products’ life cycle, with sales being higher early in the life cycle of the new products and sales decreasing over time as the new products age. The Company cannot predict the length of the life cycle for any new product. Any failure by the Company to continue to enhance existing products and develop and market new products that respond to customer needs and preferences and achieve market acceptance could have a material adverse effect on the Company’s business, results of operations or financial condition. In addition, even if the Company is able to successfully develop improvements to existing products and develop new products, there is no guarantee that the markets for the Company’s existing products and new products will evolve as anticipated. If any of the markets in which the Company’s existing products compete do not develop as expected, the Company’s business, results of operations or financial condition could be materially adversely affected. The risks described in this section may be amplified with respect to the new business unit created by the Company, which will focus on product categories that fall outside its historical core business and may present additional complexities.
Given the Company’s plan to electrify its existing product lines, its long-term growth may also be dependent to some extent upon its ability to profitably deliver such broad portfolio of electric products. The EV strategy depends on the Company’s ability to deliver a broad portfolio of high-quality EVs that are competitive and meet consumer demands; reduce the costs associated with the manufacture of EVs, particularly with respect to batteries; increase vehicle range and the energy density of the batteries; license and monetize innovations; successfully invest in new technologies relative to its peers; develop new software and services; and leverage its scale, manufacturing capabilities and synergies with existing product lines. The Company’s ability to invest the capital and resources needed to bring its electrification strategy to completion may also be impacted by the continuing deterioration of the macroeconomic and geopolitical environment, which could result in adjustments of initial targets over longer periods of time (see “Risk Factors — Economic conditions that impact consumer spending may have a material adverse effect on the Company’s business, results of operations or financial condition”).
The Company is exposed to increased competition in attracting, recruiting, and retaining the key talent and skills that it needs for its development and growth. It regularly reviews its organizational structure to remain competitive, and in the last in the last quarter it announced some changes to its leadership structure designed to maximize efficiencies and operational excellence and to better position the Company for long-term growth. Despite making significant efforts, the Company may be unsuccessful or delayed in realizing the expected benefits of its new leadership structure, or unable to recruit and retain
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the key talent and skills it needs, which could impair its ability to develop and innovate and could as a result cause a slowdown in its growth (see “Risk Factors — If the Company is unable to attract, hire and retain the services of key employees, including members of its management team, or qualified employees, including employees who possess specialized market knowledge and technical skills, the Company’s ability to compete, to manage its operations effectively, or to develop new products could be materially adversely affected”).
The Company has completed several acquisitions in the past years, and it may also consider pursuing acquisitions, investments, alliances, joint ventures or similar transactions in the future. Any such transactions would involve a number of risks, including:
| ● | difficulties in integrating the operations of any acquired or new businesses with the Company’s existing operations<br>and the failure by management to accomplish such integration successfully; |
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| ● | the necessity to raise additional capital, through debt or equity, or use cash that would otherwise have been available<br>to support the Company’s existing business operations and research and development activities to finance the transaction (see “Risk Factors — The Company uses cash generated from its operating activities to fund its business and<br>execute its growth strategy and may require additional capital that may not be available to the Company”); |
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| ● | the diversion of management’s attention; |
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| ● | difficulties in realizing projected efficiencies, cost savings and synergies; |
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| ● | the potential loss of key employees or customers of an acquired business or adverse effects on existing business<br>relationships with suppliers and customers (see “Risk Factors — If the Company is unable to attract, hire and retain the services of key employees, including members of its management team, or qualified employees, including employees who<br>possess specialized market knowledge and technical skills, the Company’s ability to compete, to manage its operations effectively, or to develop new products could be materially adversely affected”); |
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| ● | unforeseen costs and liabilities, including litigation or other claims arising in connection with the acquired company<br>or investment; |
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| ● | difficulties in integrating the information technology systems, applications and databases of any acquired or new<br>businesses with the Company’s existing systems and related difficulties in the implementation of the Company’s disclosure controls and procedures, internal controls over financial reporting as well as procedures relating to cybersecurity<br>and compliance with applicable regulations, or deficiencies in connection thereto, which could affect the Company’s compliance with its obligations under applicable laws, regulations, rules and listing standards or may require the Company to<br>avail itself of scope limitations with respect to certifications required thereunder (see “Risk Factors — The failure of the Company’s information technology systems, difficulties in implementing its new ERP system or a security<br>breach could materially adversely affect the Company’s business, results of operations or financial condition”); |
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| ● | a negative impact on overall profitability if any acquired or new businesses do not achieve the financial results<br>projected in the Company’s valuation models; |
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| ● | dilution to existing shareholders if securities of the Company are issued as part of transaction consideration or to<br>fund the transaction consideration; and |
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| ● | the inability to direct the management and policies of any acquired business, joint venture, strategic alliance, or<br>partnership, particularly in circumstances where other participants may be able to take action contrary to the Company’s instructions or requests and against its policies and objectives. |
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The Company’s ability to grow through strategic acquisitions, investments, alliances, joint ventures or other similar transactions will depend, among other things, on the availability of such strategic opportunities, their cost, their terms and conditions, the Company’s ability to compete effectively for such strategic opportunities and the availability to the Company of required capital and personnel. The Company may also be precluded from pursuing such transactions as a result of financial or other covenants in agreements to which it is a party. The Company’s inability to take advantage of future strategic opportunities, or its failure to successfully address the risks associated with any strategic opportunities that is completed, could have a material adverse effect on the Company’s business, results of operations or financial condition.
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The rapid growth of the Company over the last few years, whether through organic growth, entry into new markets or acquisitions, presents additional organizational challenges associated with becoming a larger global organization: the culture, standards, core values, internal controls and policies need to be instilled across newly acquired or developed businesses as well as maintained within existing operations. To effectively communicate and manage these standards throughout a large global organization is both challenging and time consuming. Cultural differences in various countries may also present barriers to introducing new ideas or aligning the Company’s vision and strategy with the rest of the organization. If the Company cannot overcome these obstacles in maintaining a strategic bond throughout the Company worldwide, it may not be able to achieve its growth and profitability objectives.
Fluctuations in foreign currency exchange rates couldresult in declines in reported sales and net earnings
The Company reports its financial results in Canadian dollars and the majority of its sales and operating costs are realized in currencies other than the Canadian dollar. In Fiscal 2024, 60.2% of the Company’s revenues were realized in the United States. The Company is also exposed to other currencies such as the Australian dollar, Brazilian real, Swedish krona, Norwegian krone, British pound, New Zealand dollar, Mexican peso, Chinese yuan and Japanese yen. If the value of any currencies in which sales are realized depreciate relative to the Canadian dollar, the Company’s foreign currency revenue will decrease when translated to Canadian dollars for reporting purposes. In addition, any depreciation in foreign currencies could result in higher local prices, which may negatively impact local demand and have a material adverse effect on the Company’s business, results of operations or financial condition. Alternatively, if the value of any of the currencies in which operating costs are realized appreciate relative to the Canadian dollar, the Company’s operating costs will increase when translated to Canadian dollars for reporting purposes. Although these risks may sometimes be naturally hedged by a match in the Company’s sales and operating costs denominated in the same currency, fluctuations in foreign currency exchange rates could create discrepancies between the Company’s sales and its operating costs in a given currency that could have a material adverse effect on its business, results of operations or financial condition. Fluctuations in foreign currency exchange rates could also have a material adverse effect on the relative competitive position of the Company’s products in markets where they face competition from manufacturers who are less affected by such fluctuations in exchange rates.
In addition, the Company’s indebtedness under its Term Facility and a portion of the Revolving Credit Facilities are denominated in U.S. dollars. As a result, any strengthening of the U.S. dollar versus the Canadian dollar or any revaluation of the denomination of the Term Facility into Canadian dollars at the end of each reporting period can result in significant fluctuations of net income, which could have a material adverse effect on the Company’s business, results of operations or financial condition.
While the Company actively manages its exposure to foreign-exchange rate fluctuations and enters into hedging contracts from time to time, such contracts hedge foreign-currency denominated transactions and any change in the fair value of the contracts could be offset by changes in the underlying value of the transactions being hedged. Furthermore, the Company does not have foreign exchange hedging contracts in place for some currencies in which it does business. As a result, there can be no assurance that the Company’s approach to managing its exposure to foreign-exchange rate fluctuations will be effective in the future or that the Company will be able to enter into foreign-exchange hedging contracts as deemed necessary on satisfactory terms.
Unfavourable weather conditions, and climate change more generally, may reduce demand and negatively impact sales and production ofcertain of the Company’s products
The sales of the Company’s products are affected by unfavourable weather conditions and 2024 was a year where the number of global extreme weather events significantly increased, and unfavourable weather conditions were more frequent and notable in many regions of the world (wildfires, floods, tornadoes, heat and cold waves and cyclones), including some regions where the Company operates. Unfavourable weather in any particular geographic region may have a material adverse effect on sales of the Company’s products in that region. In particular, lack of snowfall during winter may materially
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adversely affect snowmobile sales, while excessive rain before and during spring and summer may materially adversely affect sales of off-road vehicles, three-wheeled vehicles, PWCs, boats and marine propulsion systems. To the extent that unfavourable weather conditions continue to be exacerbated by global climate change or otherwise, the Company’s sales may be affected to a greater degree than previously experienced. There is no assurance that unfavourable weather conditions could not affect the Company’s sales for any of its products, which, in turn, could have a material adverse effect on the Company’s business, results of operations or financial condition.
Furthermore, any of the Company’s manufacturing facility may be vulnerable to the adverse effects of climate change. Changing market dynamics, global policy developments, and the increasing frequency and impact of extreme weather events on critical infrastructure in Canada, the U.S., Mexico and elsewhere have the potential to disrupt the Company’s business and the business of its third-party suppliers, and may cause the Company to experience higher attrition, losses and additional costs to maintain or resume operations.
The Company’s results of operations fluctuate from quarter to quarter and from year to year as they are affected, among otherthings, by the seasonal nature of its business
The Company’s results of operations experience substantial fluctuations from quarter to quarter and year to year. In general, retail sales of the Company’s products are highest in their particular season of use and in the immediately preceding period. For example, retail sales for snowmobiles will be highest in fall and winter, retail sales for PWCs will be highest in spring and summer and retail sales for boats will be highest in winter and spring. Revenues in the first half of the fiscal year have generally been lower than those in the second half. However, the mix of product sales may vary considerably from time to time as a result of changes in seasonal and geographic demand, production scheduling for particular types of products and the introduction of new products and models. For instance, in the first quarter of its Fiscal year 2024, as a result of supply chain disruptions and a longer production ramp-up related to the introduction of new products in the Marine segment, those products were ready and delivered to the dealers too late in the season, resulting in a decrease in revenues. Any negative economic conditions that occur during the months of traditionally higher sales of a given product could have a disproportionate effect on the Company’s results of operations for the entire fiscal year. In addition, the Company’s dealers and distributors may modify orders, change delivery schedules or change the mix of products ordered. The Company may also make strategic decisions to deliver and invoice products at certain dates in order to lower costs or improve supply chain efficiencies or may be forced to do so because of supply chain issues or disruption. As a result, the Company’s results of operations are likely to fluctuate significantly from period to period such that any historical results should not be considered indicative of the results to be expected for any future period. In addition, the Company incurs significant additional expenses in the periods leading up to the introduction of new products which may also result in fluctuations in the Company’s results of operations, and which may be exacerbated further with the Company’s creation of a new business unit two years ago, that will focus on product categories that fall outside its historical core business. The Company’s annual and quarterly gross profit margins are also sensitive to a number of factors, many of which are beyond its control, including shifts in product sales mix, geographic sales trends, and currency exchange rate fluctuations, all of which the Company expects will continue. This seasonality in revenues, expenses and margins, along with other factors that are beyond the Company’s control, including general economic conditions, changes in consumer preferences, weather conditions, tariffs, free-trade arrangements, geopolitical uncertainty, the cost or availability of raw materials or labour, discretionary spending habits and currency exchange rate fluctuations, could materially adversely affect the Company’s business, results of operations or financial condition.
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The Company relies on a network of independent dealers and distributors to managethe retail distribution of its products and failure to establish or maintain the appropriate level of dealers and distributors may negatively impact its business
The Company depends on the capability of its independent dealers and distributors to develop and implement effective retail sales plans to create demand among retail purchasers for its products. If the Company’s independent dealers and distributors are not successful in these endeavours, the Company will be unable to maintain or grow its sales. In the past few years, there was added pressure on the operations of dealers and distributors caused by several situations, such as the shipment by the Company of some substantially completed units and higher level of inventory as a result of certain product deliveries having been made late in the season due to supply chain disruptions and longer production ramp-up related to the introduction of new Marine products as well as a result of softening industry demand, which, if it were to continue, could lead to some level of dissatisfaction or inability for such dealers to maintain their usual level of efficiency in carrying out their operations.
Further, independent dealers and distributors may experience difficulty in funding their day-to-day cash flow needs and paying their obligations resulting from adverse business conditions, including weakened consumer spending or tightened credit, as experienced in the last two years in light of the high interest rates and sustained inflation. Inability to fund operations can force dealers and distributors to cease business, and the Company may not be able to obtain alternate distribution in the vacated market, which could negatively impact the Company’s sales through reduced market presence or inadequate market coverage. In the event of a dealer or distributor default under any financing arrangement, the Company may also be required to repurchase such dealer’s or distributor’s inventory from the financing company. (See “Risk Factors — The inability of the Company’s dealers and distributors to secure adequate access to capital could materially adversely affect the Company’s business, results of operations or financial condition”). Additionally, weak demand for the Company’s products, or a softening in industry demand as has been witnessed in the Company’s third quarter and which is expected to continue for the next few quarters, may cause dealers and distributors to voluntarily or involuntarily reduce or terminate their business with the Company. In addition to dealers or distributors ceasing business, in some cases, the Company may seek to terminate relationships with some dealers or distributors leading to a reduction in the number of its dealers or distributors. Being forced to liquidate a former dealer’s or distributor’s inventory of the Company’s products could add downward pressure on such products’ prices. Ultimately, if the Company fails to establish or maintain an appropriate level of dealers and distributors for each of its products, the Company may not obtain adequate market coverage for the desired level of retail sales of its products.
Moreover, the unplanned loss of any of the Company’s independent dealers or distributors may create negative impressions of the Company with its retail customers and have a material adverse impact on the Company’s ability to collect wholesale receivables that are associated with that dealer or distributor. **** Also, if the Company’s dealer and distributor base were to consolidate, competition for the business of fewer dealers and distributors would intensify. **** If the Company does not provide product offerings and pricing that meet the needs of its dealers and distributors, or if the Company loses a substantial amount of its dealer and distributor base or is not able to expand in certain key regions, its business, results of operations or financial condition could be materially adversely affected.
The Company sells a majority of its products through dealer and distributor agreements. In general, distributors are contractually obligated to offer the Company’s products on an exclusive basis. However, many of the dealers through which the Company sells its products also carry competing product offerings and most dealers who sell the Company’s products exclusively are not contractually obligated to continue to do so and may choose to sell competing products at any time. If certain dealers or distributors decide to emphasize products from the Company’s competitors or to otherwise reduce their purchase of the Company’s products, it may lower the Company’s sales. The Company also relies on its dealers and distributors to service and repair its products. The addition of several new technologies in the Company’s products increases their complexity which in turn requires additional skills and knowledge from its dealers and distributors to service and repair these products. There can be no assurance that the Company’s dealers and distributors will provide high quality repair services to the Company’s customers. If dealers or
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distributors fail to provide quality service during either trial, delivery or after-sales service to the Company’s customers, the Company’s brand identity and reputation may be damaged, which could have a material adverse effect on the Company’s business, results of operations or financial condition.
In order to remain competitive, the Company recently launched a Direct-to-Consumer platform allowing it to sell certain PA&A directly to its consumers in Canada and the U.S. through an online shopping experience. The Company may continue to leverage other sales strategies, which could include further changes to its existing distribution model. The Company’s ability to explore alternative models may depend on laws that could be interpreted to impose limitations on the direct-to-consumer sales model and on actions and efforts of its dealers and distributors against such changes. Any such attempt by the Company may also negatively impact its relationships with its existing dealers and distributors and limit its ability to develop relationships with new dealers and distributors, thereby potentially having a material adverse effect on the Company’s business, results of operations or financial condition.
The inability of the Company’s dealersand distributors to secure adequate access to capital could materially adversely affect the Company’s business, results of operations or financial condition
The Company’s dealers and distributors require adequate liquidity to finance their operations and to purchase the Company’s products. Dealers and distributors are subject to numerous risks and uncertainties that could unfavourably affect their liquidity positions, including, among other things, continued access to adequate financing sources on a timely basis and on reasonable terms. The Company currently has agreements in place with large financing companies to provide inventory financing to its dealers and distributors to facilitate their purchase of the Company’s products. These sources of financing are instrumental to the Company’s ability to sell products through the Company’s distribution network, as a significant percentage of the Company’s sales are done under such arrangements. See “Business of the Company — Distribution, Sales and Marketing — Distribution and Sales — Dealers’ and Distributors’ Inventory Financing Arrangements”. The Company’s business, results of operations or financial condition could be materially adversely affected if a decline in financing availability to the Company’s dealers and distributors occurs, or if financing terms change unfavourably, or become too costly, as is the case to some extent in light of the interest rate environment that continues to be elevated. This could require the Company to find alternative sources of financing, including the Company potentially providing financing directly to dealers and distributors, which could require additional capital to fund the associated receivables. In the event of a dealer or distributor default, the Company may be required to purchase new and unused products at the total unpaid principal balance to the finance company from financing companies providing inventory financing to the Company’s dealers and distributors, subject to certain caps as described under “Business of the Company – Distribution, Sales and Marketing”. Any requirement of the Company to purchase the inventory of several of its dealers or distributors could result in a material adverse effect on the Company’s business, results of operations or financial condition.
The Company is subject to laws, rules and regulations regarding product safety, health, environmental and noise pollution and otherissues that could cause the Company to incur fines or penalties or increase its capital or operating costs
The Company is subject to federal, provincial/state and local/municipal laws, rules and regulations in Canada, the United States, Europe and other countries regarding product safety, health, environmental and noise pollution, human rights and other issues that could cause the Company to incur fines or penalties or increase the Company’s capital or operating costs, all of which could have a material adverse effect on the Company’s business, results of operations or financial condition. **** A failure to comply with, or compliance with, any such requirements or any new requirements could result in increased expenses to modify the Company’s products, or harm to its reputation, which could have a material adverse effect on the Company’s business, results of operations or financial condition. For instance, the rule on safety standard for debris penetration proposed by the Consumer Product Safety Commission in 2022, would require the side-by-sides to pass a new debris penetration test in order to be manufactured or imported. If it is adopted as currently proposed, it could have a material adverse effect on the Company’s business, results of operations and financial condition, notably by forcing the Company to stop using its existing designs and suspend sales of those models, and to redesign and retest completely new components in
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the frames of its side-by-side vehicles, which could be quite costly and would require additional time and resources. Another consideration in terms of regulations impacting the Company is with respect to the jurisdictions that require or are considering requiring a license to operate the Company’s products. While such licensing requirements are not expected to be unduly restrictive, they may deter potential customers, thereby reducing the Company’s sales. The Company’s products are also subject to laws, rules and regulations imposing environmental, noise emission, zoning and permitting restrictions, which laws, rules and regulations are subject to change and may limit the locations where the Company’s products may be sold or used or restrict their use during certain times or on certain conditions (see “Risk Factors — Any decline in the social acceptability of the Company or of the Company’s products or any increased restrictions on the access or the use of the Company’s products in certain locations could materially adversely affect its business, results of operations or financial condition”). In the event of pandemics, epidemics, disease outbreaks and other public health crises , the Company may have to adapt its health and safety measures throughout its facilities to comply with changing local regulations, resulting in incremental costs to the Company, as was the case in connection with the COVID-19 pandemic.
Climate change is receiving increasing attention worldwide. A perceived consensus among scientists, legislators and others regarding the impact of increased levels of greenhouse gases, including carbon dioxide, on climate change has led to significant legislative and regulatory efforts to limit greenhouse gas emissions. Greenhouse gas regulations are likely to require the Company to purchase allowances to offset the Company’s own emissions or result in an overall increase in costs of raw materials or operating expenses, any of which could reduce competitiveness in a global economy or otherwise have a material adverse effect on the Company’s business, results of operations or financial condition. Many of the Company’s suppliers face similar circumstances. Moreover, the Company is already facing greater regulatory or customer pressure to develop products that generate less emissions. This is likely to require the Company to spend additional funds on research and development and implementation and subject the Company to the risk that the Company’s competitors may respond to these pressures in a manner that gives them a competitive advantage. The development of such products may also present challenges in maintaining the look, sound and feel of the Company’s products. In light of the recent adoption of the CSRD and the issuance of the IFRS Sustainability Disclosure Standards – IFRS S1 & IFRS S2 by the International Sustainability Standards Board, the Company expects to have to dedicate significant resources to reduce, measure and report on greenhouse gas emissions and is currently completing its assessment of any other potential impact of such regulations on its business, results of operations or financial condition. Additional regulations of emissions are also expected in a near future but it is too early to predict whether they could ultimately have a material adverse effect on the Company (see “Risk Factors — Any decline in the social acceptability of the Company or of the Company’s products or any increased restrictions on the access or the use of the Company’s products in certain locations could materially adversely affect its business, results of operations or financial condition”). The pressure for decarbonization also materializes itself through the emergence of circular economy policies worldwide, which translate into legal requirements and obligations extending producers’ responsibilities, thereby shifting responsibilities towards the producers (manufacturers and importers of products) to manage products’ life-cycle from design up to the post-consumer stage (i.e. ecodesign, reporting, taxes to recycling, customer information and labelling), as well as policies and obligations requiring producers to take actions to ensure the durability, repairability and maintenance of goods, in order to protect consumers from planned obsolescence. Part of the Company’s strategy to address these risks includes the initiatives and targets detailed in the Company’s CSR25 Program as well as the Company’s commitment to offer electric models in each of its product lines and to expand its product lines into low voltage and human assisted products, This strategy itself presents additional risks, including with respect to the Company’s ability to ensure compliance with rules, laws and regulations applicable to the EV industry, as well as exposure to the increasing government enforcement actions and civil suits alleging “greenwashing”, which call for increased vigilance when it comes to ESG reporting and communication. The Company is also subject to environmental laws, rules and regulations pursuant to which, among other things, current or previous owners or occupants of property may become liable for the contamination of such property and, as a result, may be liable for the costs of investigating, removing and monitoring any hazardous substances found on the property. Given the nature of the Company’s manufacturing activities and the fact that certain of its facilities have been in operation for many years, the Company and the prior owners or occupants of its property may have generated and disposed of materials that are or may be
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considered hazardous. The Company is aware of certain current environmental liabilities in relation to certain of its property and it is possible that additional environmental liabilities may arise in the future as a result of any prior or future generation or disposal of hazardous materials. The Company may therefore incur material costs and obligations related to environmental compliance and remediation matters in the future. Any failure to comply with, or the compliance with, any applicable environmental laws, rules or regulations, could have a material adverse effect on the Company’s business, results of operations or financial condition.
The Company has a relatively large fixed cost base that can affect its profitability in a declining sales environment
The fixed costs involved in owning and operating the Company’s facilities can reduce the Company’s gross profit margins when sales and production decline, such as could be the case as a result of the sustained inflationary environment. The Company’s profitability is dependent, in part, on its ability to spread fixed costs over an increasing number of products sold and shipped, and if the Company is required to reduce its rate of production, gross profit margins could be negatively affected. Consequently, decreased demand can lower the Company’s ability to absorb fixed costs, which could have a material adverse effect on its business, results of operations or financial condition.
The Company faces intense competition in allproduct lines and any failure to compete effectively against competitors or any failure to meet consumers’ evolving expectations could materially adversely impact the Company’s business, results of operations or financial condition
The powersports and marine industries are highly competitive. Competition in these industries is based upon a number of factors, including price, quality, reliability, styling, product features, warranties, overall consumer experience and the ability to constantly innovate. At the dealer and distributor level, factors impacting competition include sales and marketing support programs such as retail sales promotions, dealer and distributor performance bonuses, and dealer and distributor inventory financing. Some of the Company’s competitors are more diversified and have financial and marketing resources that are greater than the Company’s, which allow these competitors to invest more heavily in intellectual property, product development, sales and marketing support and innovative consumer offers. The Company is also subject to competitive pricing, notably in the face of emerging competitors with lower costs of operations. Such pricing pressure may limit the Company’s ability to maintain prices or to increase prices for its products in response to raw material, component and other cost increases, and therefore negatively affect the Company’s profit margins.
In addition, the industries in which the Company does business may experience significant change in the coming years. Participants are disrupting, and could continue to disrupt, the historic business model of such industries through the introduction of new technologies, products, business models or services as well as by establishing alternative sales channels. The Company expects to face increased pressure in the future to develop new products and services, including products and services that could be viewed as falling outside its historical core business such as EVs and digital services. The industry may also be impacted as a result of cross-border consolidation of competition, thereby adding pressure on the Company and its ability to remain competitive without itself proceeding with similar acquisitions or consolidations.
With the demand for digital capabilities further enhanced in the last few years, a failure to keep pace with customer demands or to react to or anticipate changing trends in a timely and cost-efficient manner could affect the Company’s customer base and limit the Company’s ability to attract new customers. Although the Company accelerated its digital transformation in the last few years and increased customer demands, its competitors may adapt their customer experience more rapidly or in a more cost-efficient manner, which could adversely affect the Company’s business, results of operations or financial condition, reputation and brand value.
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The process of designing and developing new technologies, products and services is complex, costly and uncertain, requires extensive capital investment and is dependent upon the ability to recruit and retain talent. There can be no assurance that future innovation is achievable or will occur in a timely manner, or that competitors of the Company will not be able to develop new technologies, products and services before the Company does or that it will acquire technologies on an exclusive basis or at a significant price advantage. In this context, the Company is also exposing itself to the risks associated with expanding into new markets and industries, which success may be adversely affected by a number of factors, including the potential need for greater investments than originally planned in advertising and promotional activity to build brand awareness, the difficulties in predicting consumer tastes and discretionary spending patterns which may differ from its existing markets, and the complexities related to sourcing new materials, processes and technologies and adopting entirely new business models. If the Company is not able to compete with new products, product features, models or product prices of its competitors, to attract new dealers and distributors and retain existing ones, to adapt to changing consumer habits or disruption in historical business models, or to successfully execute its plans to enter new markets and industries, the Company’s business, results of operations or financial condition could be materially adversely affected.
If the Company fails to maintain an effective system of internal control over financial reporting, theCompany may not be able to produce accurate and timely financial statements
Ensuring that the Company has adequate internal financial and accounting controls and procedures in place so that it can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be evaluated frequently. If the Company fails to correct any material weakness it may have in its internal controls, or having corrected such material weakness, thereafter, fails to maintain the adequacy of its internal controls, the Company may be unable to report its financial results accurately, which could increase operating costs and harm its business, including investors’ perception of its business and the price of its Subordinate Voting Shares. Any continued or future failure to maintain adequate internal controls over financial reporting could materially adversely affect the Company’s business, results of operations or financial condition.
TheCompany’s success depends upon the continued strength of its reputation and brands
The Company’s well-established brands include Ski-Doo and Lynx snowmobiles, Sea-Doo watercraft and pontoons, Can-Am on and off-road vehicles, Alumacraft and Quintrex boats, Manitou pontoons and Rotax marine propulsion systems as well as Rotax engines for karts and recreational aircraft. The Company believes that its reputation and brands are significant contributors to the success of its business. Any negative publicity about the Company’s products could diminish customer trust, do significant damage to the Company’s reputation and brands and negatively impact sales. As the Company expands into new geographical markets, including through acquisitions, maintaining and enhancing its brands may become increasingly difficult and expensive, as consumers in these markets may not accept its brand image. Failure to maintain and enhance the Company’s brands in any of its markets may materially adversely affect the Company’s business, results of operations or financial condition.
The Company’s brands and branded products could also be adversely impacted by incidents that reflect negatively on the Company. Moreover, the negative impact of these events may be aggravated by their coverage in media and on social media, over which the Company has no control. For instance, there had been increased media attention in 2022 with respect to the unauthorized use by third parties of Rotax engines in military drones, and in 2023 with respect to the alleged workplace violations filed by the Commission des normes, de l’ é quit é , de lasant é et de la s é curit é du travail (CNESST) relating to the Company’s Mexican workers temporarily located in its Canadian facilities, which allegations could potentially impact the Company’s reputation. The increasing use of social media has also heightened the need for reputational risk management. Any actions the Company take that cause negative public opinion have the potential to negatively impact the Company’s reputation, which may materially adversely affect its business, results of operations or financial condition (see “Risk Factors — Any decline in the social acceptability of the Company or of the Company’s products or any increased restrictions on the access or the use of the Company’s products in certain locations could materially adversely affect its business, results of operations or financial condition”).
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An adverse determination in any significant product liability claim against theCompany could materially adversely affect its business, results of operations or financial condition
The development, manufacturing, sale and usage of the Company’s products expose the Company to significant risks associated with product liability claims. If the Company’s products are defective, malfunction or are used incorrectly by its consumers, it may result in bodily injury, property damage or other injury, including death, which could give rise to product liability claims against the Company. Changes to the Company’s manufacturing processes and the production of new products could result in product quality issues, thereby increasing the risk of litigation and potential liability. Any losses that the Company may suffer from any liability claims and the effect that any product liability litigation may have upon the brand image, reputation and marketability of the Company’s products could have a material adverse impact on its business, results of operations or financial condition.
The Company does not believe the outcome of any pending product liability claim could have a material adverse effect **** on its business, results of operations or financial condition, **** and the Company has insurance with respect to future claims in amounts it believes to be appropriate. However, no assurance can be given that the Company’s historical claims record will not change, that material product liability claims will not be made in the future against the Company, or that claims will not arise in the future in excess or outside the coverage of the Company’s indemnities and insurance. The Company records provisions for known potential liabilities, but there is the possibility that actual losses may exceed these provisions and therefore negatively impact earnings. The amount covered by insurance is also reducing , and the cost of adequate product liability insurance continues to increase, and as such the Company may not be able to obtain in the future product liability insurance at reasonable costs or on acceptable terms, especially in light of the increase in the number of product quality cases combined with the nuclear verdict trend in the U.S., which can result in excessive verdicts with grossly disproportionate damages, thereby impacting the results of insurers’ risk assessments. Adverse determinations of material product liability claims made against the Company could also harm the Company’s reputation and cause it to lose customers and could have a material adverse effect on its business, results of operations or financial condition (see “Risk Factors — The Company’s success depends upon the continued strength of its reputation and brands). ****
Significantproduct repair and/or replacement due to product warranty claims or product recalls could have a material adverse impact on the Company’s business, results of operations or financial condition
The Company provides a limited warranty against defects for all of its products for a period generally varying from six months to five years. The Company may provide extended warranty coverage related to certain promotional programs, as well as extended warranty coverage in certain geographical markets as determined by local laws, rules or regulations and market conditions. The Company also provides a limited emissions warranty for certain emissions related parts in its products as required by the United States Environmental Protection Agency and the California Air Resources Board. Although the Company employs quality control procedures, it happens that a product manufactured by the Company needs repair or replacement or is recalled. The Company’s standard warranties require that dealers repair or replace defective products during such warranty periods at no cost to the consumer. The Company records provisions based on an estimate of product warranty claims, but there is the possibility that actual claims may exceed these provisions, especially if it relates to new products that bring additional complexities and for which the Company does not have the same historical knowledge, such as EVs, therefore negatively impacting earnings. The Company could make major product recalls or could be held liable in the event that some of its products do not meet safety standards or statutory requirements on product safety or consumer protection. In addition, the risks associated with product recalls may be aggravated if production volumes increase significantly, as it has been the case in the last years; or if supplied goods do not meet the Company’s standards, or the Company fails to perform its risk analysis systematically or product-related decisions are not fully documented. Historically, product recalls have been administered through the Company’s dealers and distributors. The repair and replacement costs that the Company could incur in connection with a recall could have a material adverse effect on the Company’s business, results of operations or financial condition. Product recalls could also harm the Company’s reputation and cause it
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to lose customers, particularly if recalls cause consumers to question the safety or reliability of the Company’s products, which could have a material adverse effect on the Company’s business, results of operations or financial condition (see “Risk Factors — The Company’s success depends upon the continued strength of its reputation and brands).
Failure to carry adequate insurance coverage may have a material adverse effect on the Company
The Company maintains liability insurance, property and business interruption insurance, cyber liability insurance, cargo insurance, workers’ compensation coverage in the United States to the required statutory limits, automotive liability insurance, aviation insurance and directors and officers insurance, and its insurance coverage reflects deductibles, self-insured retentions, limits of liability and similar provisions. However, there is no guarantee that insurance proceeds will be paid to it in a timely manner or that the Company’s insurance coverage will be sufficient. The Company has manufacturing sites that are the exclusive source of some of its materials, such that if these sites were subject to disruptive events outside of its control, it could have a material effect on the Company’s supply chain logistics and operations’ interdependencies and could result in losses in excess of its insurance coverage. Any uninsured loss or claim (including a loss that is less than the applicable deductible or that is not covered by insurance, such as, in certain cases, losses due to acts of war and certain natural disasters), or a loss or claim in excess of insured limits, in full or in part, may result in significant expenditures by the Company. Moreover, the Company may not be able to maintain insurance policies in the future at reasonable costs, on acceptable terms or at all, which may adversely affect its business, financial condition and results of operations. The successful assertion of one or more large claims against the Company that exceed available insurance coverage, or the occurrence of changes in the Company’s insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could adversely affect its business, financial condition and results of operations.
Among other factors, national security concerns, acts of war, certain natural disasters, pandemics, or any changes in any applicable statutory requirement binding insurance carriers to offer certain types of coverage could also adversely affect available insurance coverage and result in, among other things, increased premiums on available coverage (which may cause the Company to elect to reduce its policy limits or not renew its coverage) and additional exclusions from coverage. As cyber incidents and threats continue to increase in frequency and evolve in complexity, the Company may also be required to expend additional, perhaps significant, resources to continue to update, modify or enhance its protective measures or to investigate and remediate any vulnerability to cyber incidents.
The Company depends upon the successful management of the inventory levels, both at the Company’s and the dealers’ anddistributors’ levels, and any failure to successfully manage inventory levels could have a material adverse effect on the Company’s business, results of operations or financial condition
The Company must maintain sufficient inventory levels to operate its business successfully. However, the Company must also guard against accumulating excess inventory as it seeks to minimize lost sales. The nature of the Company’s product lines requires the Company to purchase supplies and manufacture products well in advance of the time these products are offered for sale. As a result, the Company may experience difficulty in responding to a changing retail environment, such as the one experienced over the last two years with continuing concerns of a potential recession in Canada, the U.S. and other regions where the Company operates, which have led to some extent, and may continue to lead, to softening consumer demand and to excess inventory.
| BRP Inc. | Management’s Discussion and Analysis | 65 |
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Sales for certain product lines are managed through longer term purchase commitments, and the Company plans annual production levels and long-term product development and introduction based on anticipated demand, as determined by the Company in reliance on its own market assessment and regular communication with its dealers, distributors and other customers. If the Company does not accurately anticipate the future demand for a particular product or the time it will take to adjust inventory, its inventory levels will not be appropriate and its results of operations may be negatively impacted, including through lower gross profit margins due to greater than anticipated discounts and markdowns that might be necessary to reduce inventory levels. On the other hand, the sales of certain other product lines are managed through shorter-term purchase commitments, and the Company has introduced a flexible order management system for some of its products, which inability to function or to be flexible enough could have a material impact on the Company’s management of such commitments. Further, any failure by the Company to maintain adequate inventory levels for such products, which the Company experienced in the past few years due mainly to shortages of key components, supply chain disruptions and labour shortages resulted in undesirable delivery delays for its customers or in the loss of certain sales, which could, in turn, have a material adverse effect on the Company’s business, results of operations or financial condition. Alternatively, if the Company has excess inventory, as has been the case in the last few quarters as a result of certain product deliveries having been made late in the season due to supply chain disruptions and longer production ramp-up related to the introduction of new Marine products as well as a result of softening industry demand, it could lead to lost or discounted sales, which could, in turn, have a material adverse effect on the Company’s business, results of operations or financial condition.
Additionally, the Company’s dealers and distributors could decide to reduce the number of units of the Company’s products they hold. Such a decision would likely require the Company to reduce its production levels, thus resulting in lower rates of absorption of fixed costs in the Company’s manufacturing facilities and lower gross profit margins. If the Company’s dealers and distributors then placed additional orders for the Company’s products, this could impair the Company’s ability to respond rapidly to these demands and adequately manage its inventory levels, which could materially adversely affect its business, results of operations or financial condition.
The Company may be unable to protect its intellectual property, or it may incur substantial costs as a result of litigation or otherproceedings relating to protection of its intellectual property
Following its innovation-focused strategy, the Company’s success depends in part on its ability to protect its patents, trademarks, copyrights and trade secrets from unauthorized use by others. If substantial unauthorized use of the Company’s intellectual property rights occurs, the Company may incur significant costs in enforcing such rights by prosecuting actions for infringement of its rights, particularly taking into account that policing unauthorized use of the Company’s intellectual property may be more difficult outside North America and Europe and that the laws in those jurisdictions may not protect intellectual property rights to the same extent as the laws in North America and Europe, or may be more difficult to carry out enforcement actions. Such unauthorized use could also result in the diversion of engineering and management resources to these matters at the expense of other tasks related to the business. Also, because of the rapid pace of technological change in the Company’s industry, aspects of its business and products rely on technologies developed or licensed by third parties, and the Company may not be able to obtain or continue to obtain licenses and technologies from these third parties on reasonable terms or at all. Others may initiate litigation to challenge the validity of the Company’s patents, trademarks, copyrights and trade secrets or those of third parties on which the Company relies through licenses or otherwise, or allege that the Company or such third parties infringe their patents, trademarks, copyrights or trade secrets. If the Company’s competitors initiate litigation to challenge the validity of the Company’s patents, trademarks, copyrights and trade secrets, or those of third parties on which the Company relies through licenses or otherwise, or allege that the Company or such third parties infringe theirs, the Company may incur substantial costs to defend its rights or may not be able to obtain or continue to obtain licenses from these third parties. If the outcome of any such litigation is unfavourable to the Company or these third parties, its business, results of operations or financial condition could be materially adversely affected. The Company also cannot be sure that the patents it has obtained, or other protections such as confidentiality and trade secrets, will be adequate to prevent imitation of its products
| BRP Inc. | Management’s Discussion and Analysis | 66 |
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and technology by others. If the Company is unable to protect its technology through the enforcement of intellectual property rights, its ability to compete based on technological advantages may be harmed. If the Company fails to prevent substantial unauthorized use of its trade secrets, it risks the loss of certain competitive advantages, which could have a material adverse effect on its business, results of operations or financial condition.
Some of the Company’s direct and indirect competitors may have significantly more resources to direct toward developing and patenting new technologies. It is possible that the Company’s competitors will develop and patent equivalent or superior engine and motor technologies and other products that compete with the Company’s products. They may assert these patents against the Company and the Company may be required to license these patents on unfavourable terms or cease using the technology covered by these patents, either of which could harm the Company’s competitive position and may materially adversely affect its business, results of operation or financial condition.
Additionally, the Company has been and could in the future be a defendant in patent proceedings or similar actions and if it is unsuccessful in its defense of any of these actions, there could be material adverse consequences including payment of monetary damages, licensing of patents on unfavourable terms, limitations on its ability to use certain technology and removal of desirable features from the Company’s products. Even if the Company was able to defeat such claims, the allegation that it is infringing on others’ intellectual property rights could harm its reputation and cause it to incur significant costs in connection with its defense of these actions. Also, from time to time, third parties have challenged, and may in the future try to challenge, the Company’s trademark rights and branding practices. The Company may be required to institute or defend litigation to enforce its trademark rights, which, regardless of the outcome, could result in substantial costs and diversion of resources and could have a material adverse effect on the Company’s business, results of operations or financial condition. If the Company loses the use of a product name, its efforts spent building that brand will be lost and it will have to rebuild a brand for that product, which it may or may not be able to do.
The Company may not be able to successfully execute its manufacturingstrategy or to meet customer demand as a result of manufacturing capacity constraints
One of the priorities of the strategic plan established by management consists of sustained efforts in the areas of cost reduction and operational efficiencies. This priority aims in part at leveraging the strength of the Company’s established manufacturing centers. In addition, in order to help the Company respond to ongoing changes in the marketplace and reduce inventory across the supply chain, the Company’s cost reduction and operational efficiencies efforts focus on further implementing model mix production on its assembly lines, which allows the Company to produce a greater range of models on a weekly and daily basis, without expensive set-up costs or production downtime. The Company believes that flexible manufacturing is the key element to enable improvements in the Company’s ability to respond to customers in a cost-effective manner. The success of the Company in implementing this priority of its strategic plan is dependent on the involvement of management, production employees and suppliers. Any failure to achieve this cost reduction and operational efficiencies priority (including the anticipated levels of productivity and operational efficiencies) in the Company’s manufacturing facilities, could materially adversely impact the Company’s business, results of operations or financial condition and its ability to deliver the right product at the right time to the customer.
A significant increase in demand for its products, the development of new products or the enhancement of existing products or models could require the construction, improvement, re-configuration, relocation or expansion of the Company’s existing production facilities, as was the case over the past few years. Any such development of new manufacturing operations inherently involves a number of risks and uncertainties, including ongoing compliance with regulatory requirements, procurement and maintenance of construction, procurement of building materials and equipment, environmental and operational licenses and approvals for additional expansion, potential supply chain constraints, hiring, training and retaining qualified employees, receipt of the expected subsidies and ability to realize on the expected synergies and related delays in operating facilities at a maximum production level while manufacturing high-quality units at scale. There can be no assurance that the Company’s
| BRP Inc. | Management’s Discussion and Analysis | 67 |
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current or future manufacturing capabilities will be sufficient to meet customer demand in the future or that the Company will be able to successfully expand its manufacturing capabilities, or do so in a timely manner, to meet demand, which could result in loss of revenue and market share. Similarly, the competitive real estate landscape continues to evolve and there can be no assurance that the Company will be able to identify and to secure, in a timely manner, through long-term leases or acquisitions, lands and buildings that offer optimal location and meet the other business and operational requirements, while also being on acceptable pricing terms and conditions.
Conversely, given the continuously changing retail environment, which has recently resulted in softening industry demand, the Company may have to adjust its manufacturing strategy and optimize some of its investments to better align supply to demand, which notably led to its decision to postpone the construction of its boat manufacturing plant in Mexico. The Company’s ability to adjust its manufacturing strategy and expansion plans in an agile manner may depend on the terms of the applicable agreements, the current status of some of its projects and plans, and other factors that may not be in its control, and which may result in some costs and inefficiencies for the Company.
Increased freight and shipping costs or disruptions in transportationand shipping infrastructure could adversely impact the Company’s business, results of operations or financial condition
The Company uses external freight shipping and transportation services to transport and deliver products and raw materials. Adverse fluctuations in freight costs, limitations on shipping and receiving capacity, and other disruptions in the transportation and shipping infrastructure at important geographic points of exit and entry for the Company’s products and raw materials, as was the case for a few weeks during the Company’s third quarter in connection with the systematic cargo inspections carried out at the US-Mexico border, could adversely affect its business and results of operations. For example, delivery delays or increases in transportation costs (including through increased fuel costs, increased carrier rates or driver wages as a result of driver shortages, a decrease in transportation capacity for overseas shipments, work stoppages or slowdowns, or alternative shipping arrangements) could significantly decrease the Company’s ability to make sales and earn profits. Labour shortages or work stoppages in the transportation industry or long-term disruptions to the national and international transportation infrastructure that lead to delays or interruptions of deliveries or which would necessitate the Company securing alternative shipping suppliers could also increase its costs or otherwise negatively affect its business, results of operations or financial condition. The Company’s inbound shipping costs are also impacted by changing dynamics in the ocean shipping industry, most notably by the wave of market consolidation observed in container shipping in recent years. In the last few years, the Company experienced, and may in the future continue to experience but to a lesser extent, higher freight costs, which could have an impact on the Company’s results of operations. Disruptions in the movement of freight are also impacting the Company’s freight costs and ultimately its revenues, notably by forcing the Company to resort to expedited freight or air freight in order to secure its supply to maintain production and mitigate delays].
Covenants contained in agreements to which the Company is a party affect and, in somecases, significantly limit or prohibit the manner in which the Company operates its business
Some of the financing and other major agreements to which the Company is a party, including the Term Facility and the Revolving Credit Facilities, contain certain covenants that affect and, in some cases, significantly limit, among other things, the activities in which the Company may engage, the ability of the Company to incur debt, grant liens over its assets, engage in lines of business different from its own, consummate asset sales, pay dividends or make other distributions, redeem or otherwise retire shares or make other restricted payments, make loans, advances and other investments, and merge, consolidate or amalgamate with another person. Under the Revolving Credit Facilities, the Company is bound by a fixed charge coverage ratio applicable if excess availability under its Revolving Credit Facilities is less than $100.0 million for seven consecutive business days (until such time as such excess availability exceeds $100.0 million for seven consecutive business days). These covenants may prevent the Company from pursuing certain business opportunities or taking certain actions that may be in the best interest of the business, which could materially adversely affect its business and financial results.
| BRP Inc. | Management’s Discussion and Analysis | 68 |
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A failure by the Company to comply with such contractual obligations or to pay amounts due under financing and other major agreements could result in an acceleration of the debt incurred under such agreements, a termination of the commitments made thereunder, as well as an exercise of remedies provided therein by the creditors of the Company (including foreclosure over substantially all of the assets of the Company). In such a situation, the Company may not be able to repay the accelerated indebtedness, fulfill its obligations under certain contracts or otherwise cover its fixed costs, which could result in a material adverse effect on the Company’s business, results of operations or financial condition.
Tax matters and changes in tax laws could materially adversely affect the Company’s business, results of operations or financialcondition
The Company, as an international company conducting operations through subsidiaries in multiple jurisdictions, is subject to income taxes in Canada, the United States and numerous other foreign jurisdictions. The Company’s effective income tax rate in the future could be adversely affected as a result of a number of factors, including acquisitions, changes in the mix of earnings in countries with different statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws and the outcome of income tax audits in various jurisdictions around the world. The Company regularly assesses all of these matters to determine the adequacy of its tax liabilities. If any of the Company’s assessments turn out to be incorrect, the Company’s business, results of operations or financial condition could be materially adversely affected.
The Company’s Canadian and foreign subsidiaries undertake certain operations with other currently existing or new subsidiaries in different jurisdictions, including Canada, the United States, Mexico, Finland, Austria and Switzerland. The tax laws of these jurisdictions, including Canada, have detailed transfer pricing rules that require that all transactions with non-resident related parties be priced using arm’s length pricing principles. Although the Company believes that its transfer pricing policies have been reasonably determined in accordance with arm’s length principles, the taxation authorities in the jurisdictions where the Company carries on business could challenge its arm’s length related party transfer pricing policies. International transfer pricing is a subjective area of taxation and generally involves a significant degree of judgment. If any of these taxation authorities were to successfully challenge the Company’s transfer pricing policies, its income tax expense may be adversely affected and the Company could also be subjected to interest and penalties. Any such increase in the Company’s income tax expense and related interest and penalties could have a material adverse effect on its business, results of operations or financial condition.
Additionally, unanticipated changes in effective tax rates or adverse outcomes from tax return examinations, including potential disputes, could adversely impact the Company’s operating results and financial conditions. In recent years, major developments in tax policy have emerged, notably the Organization for Economic Co-operation and Development’s (OECD), which represents a coalition of member countries, including Canada, who are employing a multijurisdictional approach to address issues in existing tax systems, particularly associated with “base erosion and profit shifting” (BEPS). As part of this initiative, the OECD has finalized Pillar Two guidelines, featuring a global minimum corporate tax rate of 15% and the application of a top-up tax. These proposals, effective in 2024, are anticipated to be enacted in a number of OECD member countries, potentially affecting the Company’s Fiscal 2025 and future effective tax rates in jurisdictions where the Company operates. A number of jurisdictions, including Canada and the E.U., have announced or begun implementing plans for the adoption of this new global minimum tax regime as soon as 2024. This increases tax uncertainty and may adversely impact the Company’s business, results of operations or financial condition.
The Company’s Canadian and foreign entities are entitled to claim certain expenses, deductions, and tax credits, including research and development expenses and Scientific Research and Experimental Development tax credits. Although the Company believes that its claims or deductions have been reasonably determined, there can be no assurance that the Canadian (federal or provincial) or the relevant foreign taxation authorities will agree. If a taxation authority were to successfully challenge the correctness of such expenses, deductions, or tax credits claimed, or if a taxation authority were to reduce any tax credit either by reducing the rate of the grant or the eligibility of some research and development
| BRP Inc. | Management’s Discussion and Analysis | 69 |
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expenses in the future, the Company’s business, results of operations or financial condition could be materially adversely affected.
An impairment in the carrying value of goodwill and intangibles could negatively impact the Company’s consolidated results ofoperations and net worth
Goodwill and intangible assets, such as the Company’s trademarks, are recorded at fair value at the time of acquisition and are not amortized but are reviewed for impairment annually or more frequently if impairment indicators arise. The determination of whether goodwill impairment has occurred is based on a comparison of each of the Company’s reporting units’ fair market value with its carrying value. Significant and unanticipated changes in circumstances, such as significant and long-term adverse changes in business climate, unanticipated competition, changes in technology or markets, and/or acquisitions not yielding expected returns could require a provision for impairment in a future period that could negatively impact the Company’s business, results of operations or financial condition, and reduce the Company’s consolidated net worth and shareholders’ equity.
Deterioration in relationships with the Company’s non-unionized and unionized employees could have a material adverse effect on the business, results of operations or financial condition
A majority of the Company’s employees are non-unionized, including in facilities in Canada and the United States. The maintenance of a productive and efficient labour environment and, in the event of unionization of these employees, the successful negotiation of a collective bargaining agreement, cannot be assured. A deterioration in relationships with employees or in the labour environment could result in work interruptions or other disruptions, or cause management to divert time and resources from other aspects of the Company’s business, which could have a material adverse effect on the Company’s business, results of operations or financial condition.
Some of the Company’s subsidiaries are party to collective bargaining arrangements that expire at various times in the future, namely (i) BRP-Rotax GmbH & Co KG in Gunskirschen, Austria, (ii) BRP Finland Oy in Rovaniemi, Finland, (iii) BRP Queretaro S.A. de C.V. in Queretaro, Mexico (iv) BRP Megatech Industries Inc. in Shawinigan, Canada and (v) BRP Brazil Motorsports Ltd. in Campinas, Brazil. As the Company is dependent on unions to renew these agreements on terms that are satisfactory as they become subject to renegotiation from time to time, the outcome of these labour negotiations could have a material adverse effect on the Company’s business, results of operations or financial condition. Such could be the case if current or future labour negotiations or contracts were to further restrict its ability to maximize the efficiency of its operations. In addition, the Company’s ability to make short-term adjustments to control compensation and benefit costs is limited by the terms of the applicable collective arrangements.
The Company cannot predict the outcome of any current or future negotiations relating to labour disputes, union representation or the renewal of the collective arrangements, nor can the Company assure that it will not experience work stoppages, strikes, property damage or other forms of labour protests pending the outcome of any current or future negotiations. If its unionized workers engage in a strike or any other form of work stoppage, or if non-unionized employees wish to unionize, the Company could experience a significant disruption to its operations, damage to its property and/or interruption to its services, which could have a material adverse effect on the Company’s business, results of operations or financial condition.
Pension plan liability may have a material adverse effect on the Company ****
Economic cycles can have a negative impact on the funding of the Company’s remaining defined benefit pension obligations and related expenditures. In particular, a portion of the Company’s pension plan assets are invested in equity securities, which can experience significant declines if financial markets weaken**.** A portion of the Company’s pension plan assets are invested in debt securities, which can experience significant declines if interest rates rise. **** The Company’s latest actuarial valuation reports show that the defined benefit components of the Company’s registered pension plans present a combined
| BRP Inc. | Management’s Discussion and Analysis | 70 |
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surplus when evaluated on a going-concern basis. However not all plans are in a surplus position. The Company is required to make additional contributions to fund any plan that is in deficit as well as to fund plan modifications**.** There is no guarantee that the expenditures and contributions required to fund these defined benefit pension obligations will not increase in the future and therefore negatively impact the Company’s operating results, liquidity and financial position. Risks related to the funding of defined benefit pension plans may materialize if total obligations with respect to such a pension plan exceed the total value of the plan fund’s assets. Shortfalls may arise due to lower-than-expected returns on investments, changes in the discount rate used to assess the pension plan’s obligations, and actuarial losses, as well as changes to existing federal pension laws and regulations. Any of these risks could result in a material adverse effect on the Company’s business, results of operations or financial condition.
Natural disasters, unusually adverse weather, epidemic or pandemic outbreaks, boycotts andgeo-political events could materially adversely affect the Company’s business, results of operations or financial condition
The occurrence of one or more natural disasters, such as hurricanes and earthquakes, unusually adverse weather, as has been witnessed in 2023 with significant increase in global extreme weather events and more frequent unfavourable weather conditions, epidemic or pandemic outbreaks, boycotts and geo-political events, such as the military conflict between Russia and Ukraine, the Middle-East conflict increasing tensions in the region, or civil unrest and acts of terrorism, or similar disruptions could materially adversely affect the Company’s business, results of operations or financial condition. These events could result in physical damage to one or more of the Company’s properties, increases in fuel or other energy prices, temporary or permanent closure of one or more of the Company’s facilities, temporary lack of an adequate workforce in a market, temporary or long-term disruption in the supply of raw materials, product parts and components, temporary disruption in transport to and from overseas, disruption in the Company’s distribution network and disruption to the Company’s information systems. The Company may incur expenses or delays relating to such events outside of its control, which could have a material adverse impact on its business, operating results and financial condition.
Volatility in the market price of the Subordinate Voting Shares
The market price of the Company’s Subordinate Voting Shares has fluctuated in the past and it is reasonable to expect it to fluctuate in the future. In addition to the other risks described herein, the market price of the Subordinate Voting Shares may be influenced by many factors, many of which are beyond the Company’s control, including:
| ● | actual or anticipated fluctuations in the Company’s quarterly results of operations; | |
|---|---|---|
| ● | changes in estimates of the Company’s future results of operations by the Company or changes in accounting<br>policies; | |
| --- | --- | |
| ● | changes in forecasts, estimates or recommendations of securities research analysts regarding the Company’s future<br>results of operations or financial performance, or publication of research reports or news stories about the Company, its competitors or its industry; | |
| --- | --- | |
| ● | changes in the economic performance or market valuations of other companies that investors deem comparable to the<br>Company; | |
| --- | --- | |
| ● | changes in overall economic conditions, primarily in North America and Europe, including changes that impact consumer<br>spending and discretionary spending, as currently experienced in light of the high interest rates and sustained inflation; | |
| --- | --- | |
| ● | additions or departures of the Company’s board members, senior management team or other key employees;<br> | |
| --- | --- | |
| ● | sales or perceived sales of additional Subordinate Voting Shares, and short-sales, hedging and other derivative<br>transactions in the Subordinate Voting Shares; | |
| --- | --- | |
| ● | litigation or regulatory action against the Company; | |
| --- | --- | |
| ● | breaches of security or privacy incidents, and the costs associated with any such breaches and remediation;<br> | |
| --- | --- | |
| ● | significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or<br>involving the Company or its competitors; and | |
| --- | --- | |
| BRP Inc. | Management’s Discussion and Analysis | 71 |
| --- | --- | --- |
| ● | news reports relating to trends, concerns or competitive developments, regulatory changes and other related issues in<br>the Company’s industry or target markets. | |
| --- | --- |
Financial markets have in the past experienced significant price and volume fluctuations that have particularly affected the market prices of equity securities of companies. Such fluctuations have also, in many cases, been unrelated to the operating performance, underlying asset values or prospects of such companies. Accordingly, the market price of the Subordinate Voting Shares may decline even if the Company’s operating results, financial condition or prospects have not changed. As well, certain institutional investors may base their investment decisions on consideration of the Company’s environmental, governance and social practices and performance against such institutions’ respective investment guidelines and criteria, and failure to meet such criteria may result in a limited or no investment in the Subordinate Voting Shares by those institutions, which could materially adversely affect the trading price of the Subordinate Voting Shares. If such increased levels of volatility and market turmoil resume, as could be the case in light of some continuing concerns of a potential recession in Canada, the U.S. and other regions where the Company operates, the Company’s business, results of operations or financial condition could be materially adversely impacted and the trading price of the Subordinate Voting Shares could be materially adversely affected. Unstable market conditions have in the past caused, and may cause in the future, a slowdown in the global economy as well as volatility in global financial markets and may adversely affect the market price of the Subordinate Voting Shares.
BRP Inc. is a holding company and itsfinancial performance and results are dependent on the earnings of its subsidiaries and the distribution of those earnings to BRP Inc.
BRP Inc. is a holding company and a substantial portion of its assets consists in the shares of its direct and indirect subsidiaries. As a result, BRP Inc. is subject to the risks attributable to its subsidiaries. As a holding company, BRP Inc. conducts substantially all of its business through its subsidiaries, which generate substantially all of its revenues. Consequently, BRP Inc.’s cash flows and ability to complete current or desirable future enhancement opportunities are dependent on the earnings of its subsidiaries and the distribution of those earnings to BRP Inc. The ability of these entities to pay dividends and other distributions will depend on their operating results and will be subject to applicable laws and regulations that require that solvency and capital standards be maintained by such companies and contractual restrictions contained in the instruments governing their debt. In the event of a bankruptcy, liquidation or reorganization of any of its subsidiaries, holders of indebtedness and trade creditors will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to BRP Inc. As at January 31, 2024, the Shares were effectively junior to approximately $6,684.8 million of indebtedness of BRP Inc.’s subsidiaries.
Beaudier Group and Bain Capital have significant influence with respect to matters put before the shareholders, which may have anegative impact on the trading price of the Subordinate Voting Shares
As at March 26, 2024, Beaudier Group and Bain Capital owned 21,709,901 and 13,625,187 Multiple Voting Shares, respectively, which represented approximately 47.3% and 29.7%, respectively, of the combined voting power of the Company’s outstanding Shares. Accordingly, Beaudier Group and Bain Capital have significant influence with respect to all matters submitted to the Company’s shareholders for approval, including without limitation the election and removal of directors, amendments to the articles of incorporation and by-laws of the Company and the approval of certain business combinations. Holders of Subordinate Voting Shares have a limited role in the Company’s affairs. This concentration of voting power may impact the market price of the Subordinate Voting Shares, delay or prevent any acquisition or delay or discourage take-over attempts that shareholders may consider to be favourable, or make it more difficult or impossible for a third party to acquire control of the Company or effect a change in the Company’s Board of Directors and management. Any delay or prevention of a change of control transaction could deter potential acquirors or prevent the completion of a transaction in which the Company’s shareholders could receive a substantial premium over the then current market price for their Subordinate Voting Shares.
| BRP Inc. | Management’s Discussion and Analysis | 72 |
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In addition, Beaudier Group’s and Bain Capital’s interests may not in all cases be aligned with interests of the other shareholders of the Company. Beaudier Group and Bain Capital may have an interest in pursuing acquisitions, divestitures and other transactions that, in the judgment of their management, could enhance their equity investment, even though such transactions might involve risks to the shareholders of the Company and may ultimately affect the market price of the Subordinate Voting Shares.
Future sales of Subordinate Voting Shares by Beaudier Group, Bain Capital or the Company’s directors and officers
As at March 26, 2024, Beaudier Group owned 21,709,901 Multiple Voting Shares, which in the aggregate represented approximately 54.1% of the issued and outstanding Multiple Voting Shares of the Company, and Bain Capital owned 13,625,187 Multiple Voting Shares, which in the aggregate represented approximately 33.9% of the issued and outstanding Multiple Voting Shares of the Company. Each outstanding Multiple Voting Share may at any time, at the option of the holder, be converted into one Subordinate Voting Share. However, the future sale of a substantial number of Subordinate Voting Shares by Beaudier Group, Bain Capital, the Company’s directors and officers, or the perception that such sales could occur, could materially adversely affect prevailing market prices for the Subordinate Voting Shares. See “Description of the Capital Structure”.
Subject to compliance with applicable securities laws, Beaudier Group, Bain Capital or the Company’s directors and officers may sell some or all of their Subordinate Voting Shares in the future. No prediction can be made as to the effect, if any, such future sales of Subordinate Voting Shares will have on the market price of the Subordinate Voting Shares prevailing from time to time. However, the future sale of a substantial number of Subordinate Voting Shares by Beaudier Group, Bain Capital or the Company’s directors and officers or the perception that such sales could occur, could materially adversely affect prevailing market prices for the Subordinate Voting Shares.
Pursuant to the Registration Rights Agreement, each of Beaudier Group and Bain Capital is granted certain registration rights. See “Material Contracts — Securityholders Agreements — Registration Rights Agreement”.
Disclosure of Outstanding Shares
As at March 26, 2024, the Company had:
| Issued and outstanding shares and stock options | |
|---|---|
| Multiple voting shares with no par value | 40,147,916 |
| Subordinate voting shares with no par value | 34,808,553 |
| Stock options to acquire subordinate voting shares | 3,537,929 |
Additional Information
Additional information relating to BRP Inc. is available on SEDAR+ at www.sedarplus.ca.
| BRP Inc. | Management’s Discussion and Analysis | 73 |
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EX-99.4
Exhibit 99.4
EIGHTH AMENDMENT TO
FOURTH AMENDED AND RESTATED TERM LOAN CREDIT AGREEMENT
EIGHTH AMENDMENT TO FOURTH AMENDED AND RESTATED TERM LOAN CREDIT AGREEMENT (this “Eighth Amendment”), dated as of October 4, 2023, among BRP INC., a corporation existing under the laws of Canada (“Holdings”), BOMBARDIER RECREATIONAL PRODUCTS INC., a corporation existing under the laws of Canada (the “Borrower”), each Guarantor party hereto, BANK OF MONTREAL (“Bank of Montreal”), as administrative agent (in such capacity, including any permitted successor and assigns, the “Administrative Agent”), and the 2023 Replacement Term Loan Lenders (as defined below). All capitalized terms used herein (including in this preamble) and not otherwise defined herein shall have the respective meanings provided such terms in the Term Credit Agreement referred to below.
PRELIMINARY STATEMENTS
WHEREAS, the Borrower has entered into that certain Fourth Amended and Restated Term Loan Credit Agreement, dated as of May 23, 2018, among Holdings, the Borrower, the other Guarantors from time to time party thereto, the Lenders party thereto from time to time and Bank of Montreal, as the Administrative Agent (as amended, restated, amended and restated, supplemented and/or otherwise modified from time to time to, but not including, the date hereof, the “Term Credit Agreement”);
WHEREAS, on the date hereof (but prior to giving effect to this Eighth Amendment), there are outstanding 2022-2 Incremental Loans under the Term Credit Agreement (the “Existing 2022-2 Incremental Loans”) in an aggregate principal amount of $496,250,000.
WHEREAS, in accordance with the provisions of Section 10.01 of the Term Credit Agreement, the Borrower wishes to amend the Term Credit Agreement to enable the Borrower to refinance in full the outstanding Existing 2022-2 Incremental Loans with the proceeds of 2023 Replacement Term Loans (as defined below), as more fully provided herein;
WHEREAS, the Borrower, the Administrative Agent and the 2023 Replacement Term Loan Lenders wish to amend the Term Credit Agreement to provide for the refinancing in full of all outstanding Existing 2022-2 Incremental Loans with the 2023 Replacement Term Loans on the terms and subject to the conditions set forth herein (which, pursuant to Section 1.12 of the Term Credit Agreement may be facilitated by a cashless settlement mechanism approved by the Borrower, the Administrative Agent and the relevant Lenders); and
WHEREAS, pursuant to that certain engagement letter, dated as of September 24, 2023, among BMO CAPITAL MARKETS CORP. (“BCM”), RBC CAPITAL MARKETS (“RBCCM”), ROYAL BANK OF CANADA (“Royal Bank” and together with RBCCM, “RBC”), TD SECURITIES (USA) LLC (“TD”) and the Borrower (the “Eighth Amendment Engagement Letter”), BCM, RBCCM and TD shall act as joint lead arrangers and joint bookrunners (with BCM to have “left” placement in any and all marketing materials and have the leading roles and responsibilities conventionally associated with such “left” placement) with respect to this Eighth Amendment and the 2023 Replacement Term Loans provided for hereunder.
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which is acknowledged by each party hereto, it is agreed that:
| SECTION 1. | RULES OF CONSTRUCTION. The rules of construction specified in Section 1.02 of the Term Credit<br>Agreement shall apply to this Eighth Amendment, including the terms defined in the preamble and recitals hereto. |
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SECTION 2. AMENDMENTS TO CREDIT AGREEMENT.
(a) (i) Subject to the satisfaction of the conditions set forth in Section 5, the 2023 Replacement Term Loan Lenders hereby severally agree to make 2023 Replacement Term Loans to the Borrower on the Eighth Amendment Closing Date (as defined below) in the aggregate principal amount of $496,250,000 to refinance all outstanding Existing 2022-2 Incremental Loans in accordance with the relevant requirements of the Term Credit Agreement (as modified hereby) and this Eighth Amendment. It is understood and agreed that the 2023 Replacement Term Loans being made pursuant to this Eighth Amendment and the Term Credit Agreement (as modified hereby) shall constitute “Replacement Term Loans” as defined in, and pursuant to, Section 10.01 of the Term Credit Agreement and the Existing 2022-2 Incremental Loans being refinanced shall constitute “Replaced Term Loans” as defined in, and pursuant to, Section 10.01 of the Term Credit Agreement. Except as expressly provided in this Eighth Amendment (including, without limitation, as to the Applicable Rate) and the Term Credit Agreement (as modified hereby), the 2023 Replacement Term Loans shall be on terms identical to the Existing 2022-2 Incremental Loans (including, without limitation, as to Guarantors, Collateral (and ranking) and payment priority).
(ii) On the Eighth Amendment Closing Date, all then outstanding Existing 2022-2 Incremental Loans shall be refinanced in full as follows:
(w) the outstanding principal amount of the Existing 2022-2 Incremental Loan of each Lender which (i) is an existing 2022-2 Incremental Lender under the Term Credit Agreement prior to giving effect to this Eighth Amendment (each, an “Existing 2022-2 Incremental Lender”) and (ii) is not party hereto as a “New 2023 Replacement Term Lender” or a “2023 Converting Incremental Lender” (a Lender meeting the requirements of clauses (i) and (ii), each, a “Non-Converting Incremental Lender”) shall be repaid in full in cash;
(x) to the extent any Existing 2022-2 Incremental Lender has a 2023 Replacement Incremental Loan Conversion Amount (as defined in the Term Credit Agreement, as amended hereby) that is less than the full outstanding principal amount of the Existing 2022-2 Incremental Loan of such Existing 2022-2 Incremental Lender, such Existing 2022-2 Incremental Lender shall be repaid in cash in an amount equal to the difference between the outstanding principal amount of the Existing 2022-2 Incremental Loan of such Existing 2022-2 Incremental Lender and such Existing 2022-2 Incremental Lender’s 2023 Replacement Incremental Loan Conversion Amount (the “Non-Converting Incremental Portion”);
(y) the outstanding principal amount of the Existing 2022-2 Incremental Loan of each Existing 2022-2 Incremental Lender which has executed this Eighth Amendment as a “2023 Converting Incremental Lender” (each, a “2023 Converting Incremental Lender”) shall automatically be converted into a term loan (each, a “Converted 2023 Replacement Incremental Loan”) in a principal amount equal to such 2023 Converting Incremental Lender’s 2023 Replacement Incremental Loan Conversion Amount (each such conversion, a “2023 Replacement Incremental Loan Conversion”); and
(z) each Person that has executed this Eighth Amendment as (i) a “New 2023 Replacement Term Loan Lender” (each, a “New 2023 Replacement Term Loan Lender” and, together with the 2023 Converting Incremental Lenders, collectively, the “2023
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Replacement Term Loan Lenders”) or (ii) a 2023 Converting Incremental Lender with a 2023 Replacement Term Loan Commitment (as a result of such 2023 Converting Incremental Lender’s total allocation of 2023 Replacement Term Loans exceeding its Converted 2023 Replacement Incremental Loans), in each case, severally agrees to make a new term loan to the Borrower, on the Eighth Amendment Closing Date (each such new term loan, a “New 2023 Replacement Term Loan” and, collectively, the “New 2023 Replacement Term Loans” and, together with the Converted 2023 Replacement Incremental Loans, the “2023 Replacement Term Loans”) in a principal amount equal to the amount opposite such New 2023 Replacement Term Loan Lender’s name on Schedule I hereto (as to any New 2023 Replacement Term Loan Lender, its “2023 Replacement Term Loan Commitment”).
(iii) On the Eighth Amendment Closing Date, each 2023 Replacement Term Loan Lender hereby agrees to “fund” its 2023 Replacement Term Loan as follows: (x) each 2023 Converting Incremental Lender shall “fund” its 2023 Replacement Term Loan to the Borrower by converting all or a portion of its then outstanding principal amount of Existing 2022-2 Incremental Loan into a 2023 Replacement Term Loan in a principal amount equal to such 2023 Converting Incremental Lender’s 2023 Replacement Incremental Loan Conversion Amount as provided in preceding clause (ii)(y) (which, for the avoidance of doubt, shall be accomplished by a cashless settlement mechanism) and (y) each New 2023 Replacement Term Loan Lender (or any 2023 Converting Incremental Lender with an additional 2023 Replacement Term Loan Commitment) shall fund in cash to the Borrower an amount equal to such New 2023 Replacement Term Loan Lender’s (or 2023 Converting Incremental Lender’s) 2023 Replacement Term Loan Commitment.
(iv) The Converted 2023 Replacement Incremental Loans subject to the 2023 Replacement Incremental Loan Conversion shall be allocated ratably to the outstanding Borrowings of Existing 2022-2 Incremental Loans (in the case of SOFR Existing 2022-2 Incremental Loans, subject to different Interest Periods immediately prior to giving effect thereto). Each resulting “borrowing” of Converted 2023 Replacement Incremental Loans shall constitute a new “Borrowing” under the Term Credit Agreement and shall (x) with respect to SOFR Converted 2023 Replacement Incremental Loans, be subject to the same Interest Period (and the same Adjusted Term SOFR) applicable to the Borrowing of SOFR Existing 2022-2 Incremental Loans to which it relates, which Interest Period shall continue in effect until such Interest Period expires and a new type of Borrowing is selected in accordance with the provisions of Section 2.02 of the Term Credit Agreement or (y) with respect to Base Rate Converted 2023 Replacement Incremental Loans, continue as Base Rate Loans until a new type of Borrowing is selected in accordance with the provisions of Section 2.02 of the Term Credit Agreement. New 2023 Replacement Term Loans shall be allocated ratably to repay outstanding Borrowings of Existing 2022-2 Incremental Loans that are not subject to a 2023 Replacement Incremental Loan Conversion (in the case of SOFR Existing 2022-2 Incremental Loans, subject to different Interest Periods immediately prior to giving effect thereto), and shall be (x) with respect such SOFR Existing 2022-2 Incremental Loans, initially incurred as SOFR Borrowings which shall be allocated ratably to such outstanding “deemed” Borrowings of SOFR Converted 2023 Replacement Incremental Loans on the Eighth Amendment Closing Date (subject to different Interest Periods on the Eighth Amendment Closing Date after giving effect to the foregoing provisions of this clause (iv)) and (y) with respect to such Base Rate Existing 2022-2 Incremental Loans, initially incurred as Base Rate Loans which shall be allocated to such outstanding “deemed” Borrowings of Base Rate Converted 2023 Replacement Incremental Loans on the Eighth Amendment Closing Date. Each such “borrowing” of SOFR New 2023 Replacement Term Loans shall (A) be added to (and made a part of) the related deemed Borrowing of SOFR Converted 2023 Replacement Incremental Loans, as the case may be, and (B) be subject to (x) an Interest Period which commences on the Eighth Amendment Closing Date and ends on the last day
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of the Interest Period applicable to the related deemed Borrowing of SOFR Converted 2023 Replacement Incremental Loans, as the case may be, to which it is added and (y) the same Adjusted Term SOFR applicable to such deemed Borrowing of SOFR Converted 2023 Replacement Incremental Loans, as the case may be.
(v) On the Eighth Amendment Closing Date, the Borrower shall pay in cash (a) all accrued and unpaid interest on the Existing 2022-2 Incremental Loans through, but not including, the Eighth Amendment Closing Date and (b) to each Non-Converting Incremental Lender and each 2023 Converting Incremental Lender with a Non-Converting Incremental Portion (solely with respect to such Non-Converting Incremental Portion), any breakage loss or expenses due under Section 3.05 of the Term Credit Agreement (it being understood that existing Interest Periods of the Existing 2022-2 Incremental Loans held by 2023 Replacement Term Loan Lenders prior to the Eighth Amendment Closing Date shall continue on and after the Eighth Amendment Closing Date pursuant to preceding clause (iv) and shall accrue interest in accordance with Section 2.08 of the Term Credit Agreement on and after the Eighth Amendment Closing Date as if the Eighth Amendment Closing Date were a new Borrowing date). Notwithstanding anything to the contrary herein or in the Term Credit Agreement, each 2023 Converting Incremental Lender agrees to waive any entitlement to any breakage loss or expenses due under Section 3.05 of the Term Credit Agreement with respect to the repayment of any of its Existing 2022-2 Incremental Loans by way of the 2023 Replacement Incremental Loan Conversion on the Eighth Amendment Closing Date.
(vi) Promptly following the Eighth Amendment Closing Date, all Notes, if any, evidencing the Existing 2022-2 Incremental Loans shall be cancelled, and any 2023 Replacement Term Loan Lender may request that its 2023 Replacement Term Loan be evidenced by a Note pursuant to Section 2.11(a) of the Term Credit Agreement.
(vii) Notwithstanding anything to the contrary contained in the Term Credit Agreement, all proceeds of the New 2023 Replacement Term Loans (if any) will be used solely to repay outstanding Existing 2022-2 Incremental Loans of Non-Converting Incremental Lenders (if any) and outstanding Existing 2022-2 Incremental Loans of 2023 Converting Incremental Lenders in an amount equal to the Non-Converting Incremental Portion (if any) of such 2023 Converting Incremental Lenders’ Existing 2022-2 Incremental Loans, in each case, on the Eighth Amendment Closing Date.
(b) Subject to the satisfaction of the conditions set forth in Section 5, upon the making of the 2023 Replacement Term Loans, the Term Credit Agreement is hereby amended to delete the stricken text (indicated textually in the same manner as the following example: ~~stricken text~~) and to add the underlined text (indicated textually in the same manner as the following example: underlined text) as set forth in the pages of the Term Credit Agreement attached as Exhibit A hereto.
SECTION 3. REFERENCE TO AND EFFECT ON THE TERM CREDIT AGREEMENT. On and after the Eighth Amendment Closing Date, (i) each reference in the Term Credit Agreement to “this Agreement,” “hereunder,” “hereof” or text of like import referring to the Term Credit Agreement shall mean and be a reference to the Term Credit Agreement as amended by this Eighth Amendment, (ii) the 2023 Replacement Term Loans shall constitute “Loans” and “Term Loans”, in each case, under and as defined in the Term Credit Agreement, (iii) the 2023 Replacement Term Loan Lenders shall each constitute a “Lender” and a “Term Lender”, (other than for purposes of Section 2.01(a)(i) of the Term Credit Agreement), in each case, under and as defined in the Term Credit Agreement, (iv) the 2023 Replacement Term Loan Commitments shall constitute, “Commitments” under and as defined in the Term Credit Agreement. On and after the effectiveness of this Eighth Amendment, this Eighth Amendment shall for all purposes constitute a “Loan Document” under and as defined in the Term Credit Agreement and the other Loan Documents.
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SECTION 4. REPRESENTATIONS & WARRANTIES. In order to induce the 2023 Replacement Term Loan Lenders and the Administrative Agent to enter into this Eighth Amendment and to induce the 2023 Replacement Term Loan Lenders to make the 2023 Replacement Term Loans hereunder, each Loan Party hereby represents and warrants to the 2023 Replacement Term Loan Lenders and the Administrative Agent on and as of the Eighth Amendment Closing Date, that:
(a) The execution, delivery and performance by such Loan Party of this Eighth Amendment will not (i) contravene the terms of any of such Person’s Organization Documents, (ii) conflict with or result in any breach or contravention of, or the creation of any Lien under (other than as permitted by Section 7.01 of the Term Credit Agreement), or require any payment to be made under (x) any Contractual Obligation to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (y) any material order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject or (iii) violate any Law; except with respect to any conflict, breach or contravention or payment (but not creation of Liens) referred to in clauses (ii) and (iii), to the extent that such violation, conflict, breach, contravention or payment could not reasonably be expected to have a Material Adverse Effect.
(b) Each Loan Party party hereto has the requisite power and authority to execute, deliver and perform the terms and provisions of this Eighth Amendment and has taken all necessary corporate or other organizational action to authorize the execution, delivery and performance by it of this Eighth Amendment. Each Loan Party has duly executed and delivered this Eighth Amendment, and this Eighth Amendment, the Term Credit Agreement as amended hereby and each other Loan Document to which such Loan Party is a party constitutes its legal, valid and binding obligation enforceable in accordance with its terms, except as such enforceability may be limited by (i) Debtor Relief Laws and by general principles of equity principles of good faith and fair dealing, and (ii) the need for filings and registrations necessary to create or perfect the Liens on the Collateral granted by the Loan Parties in favor of the Secured Parties and (iii) the effect of foreign Laws, rules and regulations as they relate to pledges of Equity Interests in Foreign Subsidiaries.
(c) Each of the representations and warranties set forth in the Term Credit Agreement and in the other Loan Documents is true and correct in all material respects on and as of the Eighth Amendment Closing Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date; provided, however, that, any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language shall be true and correct (after giving effect to any qualification therein) in all respects on such respective dates.
(d) All proceeds of the 2023 Replacement Term Loans will be used for the purposes set forth in Section 2(a)(vii) hereof.
SECTION 5. CONDITIONS PRECEDENT. This Eighth Amendment shall become effective as of the first date (the “Eighth Amendment Closing Date”) when each of the conditions set forth in this Section 5 shall have been satisfied:
(a) The Administrative Agent shall have received a duly authorized, executed and delivered counterpart of the signature page to this Eighth Amendment from each Loan Party named on the signature pages hereto, the Administrative Agent and each of the 2023 Replacement Term Loan Lenders.
(b) (i) All fees and expenses (including all invoiced reasonable out-of-pocket costs, fees and expenses (including invoiced reasonable and out-of-pocket legal fees and expenses reimbursable hereunder)) shall have been paid to the extent earned, due and owing and otherwise payable or reimbursable
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pursuant to the terms of the Loan Documents and, in the case of expenses, otherwise invoiced prior to the Eighth Amendment Closing Date, (ii) fees and expenses incurred by or on behalf of the 2023 Replacement Term Loan Lenders in connection with the funding of the 2023 Replacement Term Loans in the amounts agreed between the 2023 Replacement Term Loan Lenders and the Borrower, shall be due and payable on the Eighth Amendment Closing Date to the extent, in the case of expenses, invoiced at least three (3) business days prior to the Eighth Amendment Closing Date (provided that legal expenses payable pursuant to this clause (ii) shall be limited to the reasonable and documented fees and expenses of White & Case LLP and Davies Ward Phillips & Vineberg LLP, in each case, as counsel to the 2023 Replacement Term Loan Lenders) and (iii) all accrued and unpaid interest on the Existing 2022-2 Incremental Loans through, but not including, the Eighth Amendment Closing Date shall have been paid to the Administrative Agent for the ratable account of each Existing 2022-2 Incremental Lender, respectively.
(c) Both immediately before and after giving effect to this Eighth Amendment, (i) no Default or Event of Default shall have occurred or be continuing and (ii) all representations and warranties contained in this Eighth Amendment, the Term Credit Agreement and in the other Loan Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on the date hereof (except to the extent such representations and warranties expressly relate to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date; provided, however, that, any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language shall be true and correct (after giving effect to any qualification therein) in all respects on such respective dates).
(d) The Administrative Agent shall have received a Committed Loan Notice meeting the requirements of Section 2.02(a) of the Term Credit Agreement for the 2023 Replacement Term Loans.
(e) The Administrative Agent shall have received an officer’s certificate of the Borrower, dated the Eighth Amendment Closing Date, executed by a Responsible Officer of the Borrower certifying to the best of such officer’s knowledge, compliance with the requirements set forth in preceding clause (c) of this Section 5.
(f) On the Eighth Amendment Closing Date, the Administrative Agent shall have received a customary opinion of Ropes & Gray LLP, U.S. counsel to the Loan Parties and Stikeman Elliott, Canadian counsel to the Loan Parties, in each case, (i) in form and substance consistent with the legal opinion delivered on the Closing Date with such changes as shall be reasonably satisfactory to the Administrative Agent, (ii) addressed to the Administrative Agent and the 2023 Replacement Term Loan Lenders and (iii) dated the Eighth Amendment Closing Date.
(g) The Administrative Agent shall have received a customary certificate from each Loan Party, dated the Eighth Amendment Closing Date, signed by a Responsible Officer of such Loan Party, and attested to by the secretary or any assistant secretary of such Loan Party, with appropriate insertions, together with (i) certified copies of the certificate or articles of incorporation and by-laws (or other equivalent organizational documents), as applicable, of such Loan Party, (ii) customary resolutions of such Loan Party referred to in such certificate, (iii) incumbency or specimen signatures which identify by name and title the Responsible Officer or authorized signatory of such Loan Party authorized to sign this Eighth Amendment, and (iv) a good standing certificate from the applicable Governmental Authority of such Loan Party’s jurisdiction of incorporation, organization or formation, each dated a recent date prior to the Eighth Amendment Closing Date and certifying as to the good standing of such Loan Party (but only if the concept of good standing exists in the applicable jurisdiction); provided that in the case of preceding clause (i), such documents shall not be required to be delivered if such certificate includes a certification by such officer that the applicable organizational documents delivered to the Administrative Agent in connection with the initial
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funding of Term B Loans on the Closing Date (or any date thereafter) remain in full force and effect and have not been amended, modified, revoked or rescinded since the Closing Date (or such date thereafter).
(h) The Administrative Agent shall have received a solvency certificate from the chief financial officer (or other officer with reasonably equivalent duties) of the Borrower substantially in the form of Exhibit D-2 to the Term Credit Agreement and dated the Eighth Amendment Closing Date certifying that the Borrower and its Restricted Subsidiaries are Solvent (after giving effect to the incurrence of the 2023 Replacement Term Loans and the application of the proceeds thereof).
SECTION 6. REAFFIRMATION.
(a) To induce the 2023 Replacement Term Loan Lenders and Administrative Agent to enter into this Eighth Amendment, each of the Loan Parties hereby acknowledges and reaffirms its obligations under each Loan Document to which it is a party, including, without limitation, any grant, pledge or collateral assignment of a lien or security interest, as applicable, contained therein, in each case, as amended, restated, supplemented or otherwise modified prior to or as of the date hereof (collectively, the “Reaffirmed Documents”). The Borrower acknowledges and agrees that each of the Loan Documents to which it is a party or otherwise bound shall continue in full force and effect, that all of its obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of this Eighth Amendment.
(b) In furtherance of the foregoing Section 6(a), each Loan Party, in its capacity as a Guarantor under any Guaranty to which it is a party (in such capacity, each a “Reaffirming Loan Guarantor”), reaffirms its guarantee of the Guaranteed Obligations under the terms and conditions of such Guaranty and agrees that such Guaranty remains in full force and effect to the extent set forth in such Guaranty and after giving effect to this Eighth Amendment. Each Reaffirming Loan Guarantor hereby confirms that it consents to the terms of this Eighth Amendment and the Term Credit Agreement and that the principal of, the interest and premium (if any) on, and fees related to, the 2023 Replacement Term Loans constitute “Obligations” under the Loan Documents. Each Reaffirming Loan Guarantor hereby (i) confirms that each Loan Document to which it is a party or is otherwise bound will continue to guarantee to the fullest extent possible in accordance with the Loan Documents, the payment and performance of the Guaranteed Obligations, including, without limitation, the payment and performance of all such applicable Guaranteed Obligations that are joint and several obligations of each Guarantor now or hereafter existing; (ii) acknowledges and agrees that its Guaranty and each of the Loan Documents to which it is a party or otherwise bound shall continue in full force and effect and that all of its obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of this Eighth Amendment; and (iii) acknowledges, agrees and warrants for the benefit of the Administrative Agent, each other Agent and each Secured Party that there are no rights of set-off or counterclaim, nor any defenses of any kind, whether legal, equitable or otherwise, that would enable such Reaffirming Loan Guarantor to avoid or delay timely performance of its obligations under the Loan Documents.
(c) In furtherance of the foregoing Section 6(a), each of the Loan Parties that is party to any Collateral Document, in its capacity as a Grantor (as defined in such Collateral Document) under such Collateral Document (in such capacity, each a “Reaffirming Grantor”), hereby acknowledges that it has reviewed and consents to the terms and conditions of this Eighth Amendment and the transactions contemplated hereby, including the extension of credit in the form of the 2023 Replacement Term Loans. In addition, each Reaffirming Grantor reaffirms the security interests granted by such Reaffirming Grantor under the terms and conditions of the Security Agreement and each other Loan Document (in each case, to the extent a party thereto) to secure the Obligations and agrees that such security interests remain in full force and effect. Each Loan Party hereby confirms that the security interests granted by such Reaffirming Grantor under the terms and conditions of the Loan Documents secure the 2023 Replacement Term Loans
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as part of the Obligations. Each Reaffirming Grantor hereby (i) confirms that each Collateral Document to which it is a party or is otherwise bound and all Collateral encumbered thereby will continue to secure, to the fullest extent possible in accordance with the Collateral Documents, the payment and performance of the Obligations, as the case may be, including, without limitation, the payment and performance of all such applicable Obligations that are joint and several obligations of each Guarantor and Grantor now or hereafter existing, (ii) confirms its respective grant to the Administrative Agent for the benefit of the Secured Parties of the security interest in and continuing Lien on all of such Grantor’s right, title and interest in, to and under all Collateral, in each case, whether now owned or existing or hereafter acquired or arising and wherever located, as collateral security for the prompt and complete payment and performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, of all applicable Obligations (including all such Obligations as amended, reaffirmed and/or increased pursuant to this Eighth Amendment), subject to the terms contained in the applicable Loan Documents, and (iii) confirms its respective pledges, grants of security interests and other obligations, as applicable, under and subject to the terms of each of the Collateral Documents to which it is a party.
(d) Each Guarantor acknowledges and agrees that (i) notwithstanding the conditions to effectiveness set forth in this Eighth Amendment, such Guarantor is not required by the terms of the Term Credit Agreement or any other Loan Document to consent to this Eighth Amendment and (ii) nothing in the Term Credit Agreement, this Eighth Amendment or any other Loan Document shall be deemed to require the consent of such Guarantor to any future amendment, consent or waiver of the terms of the Term Credit Agreement.
SECTION 7. CONSENT. The Borrower and the Administrative agent hereby consent to the assignment of any 2023 Replacement Term Loans to any Lender (other than a Disqualified Institution) which is not an existing Lender or an Approved Fund in respect of an existing Lender, in each case, to the extent disclosed to the Borrower and the Administrative Agent prior to the date hereof. The Borrower hereby consents to the Administrative Agent’s use of the signature page attached hereto as Exhibit B in connection with the assignments to institutions previously disclosed to the Borrower in accordance with the immediately preceding sentence and the Administrative Agent may affix such signature page to each Assignment and Assumption that relates to such assignments.
SECTION 8. MISCELLANEOUS PROVISIONS.
(a) Ratification. This Eighth Amendment is limited to the matters specified herein and shall not constitute a modification, acceptance or waiver of any other provision of the Term Credit Agreement or any other Loan Document. Nothing herein contained shall be construed as a substitution or novation of the obligations outstanding under the Term Credit Agreement or any other Loan Document or instruments securing the same, which shall remain in full force and effect as modified hereby or by instruments executed concurrently herewith.
(b) Governing Law; Submission to Jurisdiction, Etc. This Eighth Amendment shall be governed by, and construed in accordance with, the law of the State of New York. Sections 10.15(b) and 10.16 of the Term Credit Agreement are incorporated by reference herein as if such Sections appeared herein, mutatis mutandis.
(c) Severability. Section 10.14 of the Term Credit Agreement is incorporated by reference herein as if such Section appeared herein, mutatis mutandis.
(d) Counterparts; Headings. This Eighth Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and
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the same instrument. Delivery by telecopier, .pdf or other electronic imaging means of an executed counterpart of a signature page to this Eighth Amendment shall be effective as delivery of an original executed counterpart of this Eighth Amendment. The Administrative Agent may also require that signatures delivered by telecopier, .pdf or other electronic imaging means be confirmed by a manually signed original thereof; provided that the failure to request or deliver the same shall not limit the effectiveness of this Eighth Amendment or signature delivered by telecopier, .pdf or other electronic imaging means. Section headings herein are included for convenience of reference only and shall not affect the interpretation of this Eighth Amendment.
[Remainder of page intentionally blank; signatures begin nextpage]
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IN WITNESS WHEREOF, the parties hereto have caused their duly Responsible Officers to execute and deliver this Eighth Amendment as of the date first above written.
| BOMBARDIER RECREATIONAL PRODUCTS INC. | |
|---|---|
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person | |
| BRP INC. | |
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person |
[BRP – Signature Page to Eighth Amendment to Fourth Amended and Restated Term Loan Credit Agreement (2023)]
| BRP R&D SERVICES INC. | |
|---|---|
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person | |
| BRP US INC. | |
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person | |
| BRP US MANAGEMENT SERVICES, INC. | |
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person | |
| BRP QUERETARO S.A. DE C.V. | |
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person |
[BRP – Signature Page to Eighth Amendment to Fourth Amended and Restated Term Loan Credit Agreement (2023)]
| BRP MEXICO S.A. DE C.V. | |
|---|---|
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person | |
| BRP MEXICAN DISTRIBUTION S.A. DE C.V. | |
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person | |
| ALUMACRAFT HOLDINGS, LLC | |
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person | |
| ALUMACRAFT BOAT CO. | |
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person |
[BRP – Signature Page to Eighth Amendment to Fourth Amended and Restated Term Loan Credit Agreement (2023)]
| TRITON INDUSTRIES, INC. | |
|---|---|
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person | |
| BRP LOGISTICS N.A. INC. / BRP LOGISTIQUE N.A. INC. | |
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person | |
| BRP LOGISTICS MANAGEMENT ULC | |
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person |
[BRP – Signature Page to Eighth Amendment to Fourth Amended and Restated Term Loan Credit Agreement (2023)]
| BRP GLOBAL DISTRIBUTION INC. | |
|---|---|
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person | |
| BRP MEGATECH INDUSTRIES INC. | |
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person | |
| BRP US SERVICES LLC | |
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person |
[BRP – Signature Page to Eighth Amendment to Fourth Amended and Restated Term Loan Credit Agreement (2023)]
| BRP CHIHUAHUA S.A. DE C.V. | |
|---|---|
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person |
[BRP – Signature Page to Eighth Amendment to Fourth Amended and Restated Term Loan Credit Agreement (2023)]
| BANK OF MONTREAL, as Administrative Agent and as a New 2023 Replacement Term Lender | |
|---|---|
| By: | /s/ Aaron Weigel |
| Name: Aaron Weigel | |
| Title: Managing Director |
Schedule I
2023 Replacement Term Loan Commitment
| 2023<br><br><br>Replacement<br> <br>TermLoan<br> <br>Lender | 2023<br> <br>Replacement<br><br><br>Term Loan<br><br><br>Commitment |
|---|---|
| Bank of Montreal | $64,189,256.27 |
| 2023 Converting Incremental Lenders** | $432,060,743.73 |
| Total 2023 Replacement Term Loan Commitments | $496,250,000.00 |
** SIGNATURE PAGES FOR 2023 REPLACEMENT TERM LOAN LENDERS ARE ON FILE WITH THE ADMINISTRATIVE AGENT.
EXHIBIT A
Amended Credit Agreement
[Attached.]
EXHIBIT B
Borrower Signature Page to Assignment and Assumption
[Attached.]
EX-99.5
Exhibit 99.5
NINTH AMENDMENT TO
FOURTH AMENDED AND RESTATED TERM LOAN CREDIT AGREEMENT
NINTH AMENDMENT TO FOURTH AMENDED AND RESTATED TERM LOAN CREDIT AGREEMENT (this “Ninth Amendment”), dated as of January 22, 2024, among BRP INC., a corporation existing under the laws of Canada (“Holdings”), BOMBARDIER RECREATIONAL PRODUCTS INC., a corporation existing under the laws of Canada (the “Borrower”), each Guarantor party hereto, BANK OF MONTREAL (“Bank of Montreal”), as administrative agent (in such capacity, including any permitted successor and assigns, the “Administrative Agent”), the 2024 Extending Term Lenders (as defined below) and the 2024 Incremental Lender (as defined below). All capitalized terms used herein (including in this preamble) and not otherwise defined herein shall have the respective meanings provided such terms in the Term Credit Agreement referred to below.
PRELIMINARY STATEMENTS
WHEREAS, the Borrower has entered into that certain Fourth Amended and Restated Term Loan Credit Agreement, dated as of May 23, 2018, among Holdings, the Borrower, the other Guarantors from time to time party thereto, the Lenders party thereto from time to time and Bank of Montreal, as the Administrative Agent (as amended, restated, amended and restated, supplemented and/or otherwise modified from time to time to, but not including, the date hereof, the “Term Credit Agreement”);
WHEREAS, pursuant to the Term Credit Agreement, certain Lenders (the “Existing 2020 Replacement Term Lenders”) have extended 2020 Replacement Term Loans (the “Existing 2020 Replacement Term Loans”) to the Borrower and as of the date hereof (but prior to giving effect to this Ninth Amendment), the aggregate outstanding principal balance of such Existing 2020 Replacement Term Loans is $1,465,748,228.70.
WHEREAS, in accordance with Section 2.16 of the Term Credit Agreement, the Borrower has requested (which request hereunder shall serve as notice pursuant to Section 2.16 of the Term Credit Agreement) an Extension Amendment to extend the maturity date of all or a portion of the Existing 2020 Replacement Term Loans on the terms set forth herein (the “2024 Extension”);
WHEREAS, in accordance with Section 2.16 of the Term Credit Agreement and this Ninth Amendment, each Existing 2020 Replacement Term Lender that executes and delivers a counterpart signature page of this Ninth Amendment (such consenting Lenders, the “2024 Extending Term Lenders”) will be deemed (i) to have agreed to the terms of this Ninth Amendment and the Term Credit Agreement as amended by this Ninth Amendment, (ii) to have agreed to exchange (as further described herein) its Existing 2020 Replacement Term Loans for Extended Term Loans (such exchanged Term Loans, the “2024 Extended Term Loans”) in an equal principal amount, and (iii) upon the Ninth Amendment Closing Date to have exchanged (as further described herein) its Existing 2020 Replacement Term Loans for 2024 Extended Term Loans in an equal principal amount, which will be effectuated by cashless exchange;
WHEREAS, pursuant to Section 2.14 of the Term Credit Agreement, the Borrower has delivered an Incremental Loan Request to the Administrative Agent requesting that Bank of Montreal (the “2024 Incremental Lender”) make Incremental Loans to the Borrower on the Ninth Amendment Closing Date in an aggregate principal amount of $45,861,735.18 (the “2024 Incremental Loans” and the Incremental Commitments under this Ninth Amendment of the 2024 Incremental Lender with respect to the 2024 Incremental Loans, the “2024 Incremental Commitments”), which will be used by the Borrower to fund the 2024 Refinancing (as defined below);
WHEREAS, the Borrower has delivered a notice to the Administrative Agent (the “Prepayment Notice”) to voluntarily prepay Existing 2020 Replacement Term Loans in a principal amount of $45,861,735.18 (together with accrued and unpaid interest and premium) immediately after the consummation of the 2024 Extension with the proceeds of the 2024 Incremental Loans (the “2024 Refinancing”);
WHEREAS, as contemplated by Section 2.14 of the Term Credit Agreement, (x) the parties hereto have agreed, subject to the satisfaction of the conditions precedent to effectiveness set forth in Section 5 hereof, to amend certain terms of the Term Credit Agreement as hereinafter provided to give effect to the incurrence of the 2024 Incremental Loans and (y) this Ninth Amendment shall constitute an Incremental Amendment;
WHEREAS, the 2024 Incremental Lender is prepared to provide the 2024 Incremental Loans in an amount equal to its 2024 Incremental Commitment set forth on Schedule 1 hereto subject to the terms and conditions set forth herein; and
WHEREAS, pursuant to that certain amended and restated engagement letter, dated as of January 9, 2024, among BMO CAPITAL MARKETS CORP. (“BCM”), RBC CAPITAL MARKETS (“RBCCM”), ROYAL BANK OF CANADA (“Royal Bank” and together with RBCCM, “RBC”), TD SECURITIES (USA) LLC (“TD”), CITIGROUP GLOBAL MARKETS INC. (“Citi”), NATIONAL BANK OF CANADA FINANCIAL INC. (“NBC”), CIBC WORLD MARKETS CORP. (“CIBC”) and TRUIST SECURITIES, INC. and the Borrower (the “Ninth Amendment Engagement Letter”), BCM, RBCCM, TD and Citi shall act as joint lead arrangers and joint bookrunners, NBC and CIBC shall act as joint bookrunners and Truist shall act as a co-manager (with BCM to have “left” placement in any and all marketing materials and have the leading roles and responsibilities conventionally associated with such “left” placement), in each case, with respect to this Ninth Amendment, the 2024 Extension and the 2024 Incremental Loans.
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which is acknowledged by each party hereto, it is agreed that:
| SECTION 1. | RULES OF CONSTRUCTION. The rules of construction specified in Section 1.02 of the Term Credit<br>Agreement shall apply to this Ninth Amendment, including the terms defined in the preamble and recitals hereto. |
|---|
SECTION 2. EXTENSION, INCREMENTAL LOANS AND AMENDMENTS TO CREDIT AGREEMENT.
(a) Extension. Subject to the satisfaction of the conditions set forth in Section 5, on and as of the Ninth Amendment Closing Date:
(i) Each 2024 Extending Term Lender agrees that, immediately prior to the amendments in clause (b) below taking effect, the aggregate principal amount of its Existing 2020 Replacement Term Loans indicated on such 2024 Extending Term Lender’s signature page to this Ninth Amendment will be exchanged for an equal amount of 2024 Extended Term Loans through a cashless exchange as permitted by Section 1.12 of the Term Credit Agreement.
(ii) The 2024 Extended Term Loans established pursuant to this Ninth Amendment shall have the “Applicable Margin,” “Interest Period,” “Maturity Date,” amortization and prepayment premium, in each case, as set forth in the Term Credit Agreement as amended by this Ninth Amendment, and all other terms and
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conditions applicable to the 2024 Extended Term Loans shall be the same as the corresponding terms and conditions applicable to the 2020 Replacement Term Loans, as set forth in the Term Credit Agreement as amended by this Ninth Amendment.
(iii) The 2024 Extended Term Loans shall constitute a separate tranche of Term Loans and a separate “Class” from the 2020 Replacement Term Loans for all purposes of the Term Credit Agreement (as amended by this Ninth Amendment) and the other Loan Documents.
(iv) The Existing 2020 Replacement Term Loans of each Existing 2020 Replacement Term Lender that does not deliver an executed signature page to this Ninth Amendment (each such Lender, a “Non-Extending Lender”) shall continue as and shall be deemed to constitute 2020 Replacement Term Loans on and after the Ninth Amendment Closing Date.
(v) As of the Ninth Amendment Closing Date, after giving effect to the 2024 Extension and the cashless exchange described in sub-clause (i) above, (1) the aggregate outstanding principal amount of 2020 Replacement Term Loans (for the avoidance of doubt, which shall be held by Non-Extending Lenders that shall have elected not to participate in the 2024 Extension) shall be $511,609,963.88 and (2) the aggregate outstanding principal amount of 2024 Extended Term Loans held by 2024 Extending Term Lenders shall be $954,138,264.82.
(vi) This Ninth Amendment shall constitute an Extension Request to the Existing 2020 Replacement Term Lenders and an Extension Amendment pursuant to Section 2.16 of the Term Credit Agreement.
(b) Incremental Loans. Subject to the satisfaction of the conditions set forth in Section 5, on and as of the Ninth Amendment Closing Date, immediately after the consummation of the transactions described in clause (a) above, pursuant to Section 2.14 of the Term Credit Agreement:
(i) The 2024 Incremental Lender hereby agrees to provide to the Borrower its 2024 Incremental Commitment set forth opposite its name under the heading “2024 Incremental Commitment” on Schedule 1 to this Ninth Amendment. The full amount of the 2024 Incremental Loans shall be drawn by the Borrower in a single drawing on the Ninth Amendment Closing Date and amounts paid or prepaid in respect of the 2024 Incremental Loans may not be reborrowed. The 2024 Incremental Loans (x) shall be made pursuant to (and form part of) the existing Class of 2024 Extended Term Loans and (y) shall be subject to the interest rates (including Applicable Rates), amortization, voluntary prepayment terms and mandatory prepayment terms applicable to the 2024 Extended Term Loans as set forth in the Credit Agreement (as amended by this Ninth Amendment). The 2024 Incremental Term Loans shall be subject to scheduled amortization set forth in the Credit Agreement (as amended by this Ninth Amendment) and with the remaining outstanding principal amount due and payable in full on the Maturity Date for the existing 2024 Extended Term Loans.
(ii) The 2024 Incremental Lender, the Administrative Agent and the Loan Parties party hereto agree that this Ninth Amendment shall constitute an Incremental Amendment pursuant to and in accordance with Section 2.14(f) of the Term Credit Agreement.
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(iii) Immediately upon the incurrence of the 2024 Incremental Loans on the Ninth Amendment Closing Date, (i) the 2024 Incremental Term Loans shall be added to (and form part of) each Borrowing of existing 2024 Extended Term Loans outstanding under the Credit Agreement immediately after the consummation of the transactions described in clause (a) above but prior to the consummation of the transactions described in this clause (b) on a pro rata basis (based on the relative sizes of the various outstanding Borrowings), so that each Lender with outstanding 2024 Extended Term Loans (including each 2024 Incremental Lender with outstanding 2024 Incremental Loans) will participate proportionately in each then outstanding Borrowing of 2024 Extended Term Loans with the same Interest Period as the existing 2024 Extended Term Loans, (ii) the 2024 Incremental Term Loans shall constitute a single Class of Term Loans with the 2024 Extended Term Loans (and shall be fully fungible with the existing 2024 Extended Term Loans), (iii) the 2024 Incremental Term Loans shall constitute “2024 Extended Term Loans” for all purposes under, and subject to the provisions of, the Loan Documents, and (iv) the 2024 Incremental Term Loans shall be secured by the same Collateral and guarantied on identical terms as the existing 2024 Extended Term Loans in each case pursuant to the respective Loan Documents.
(iv) The 2024 Incremental Commitment of the 2024 Incremental Lender shall automatically terminate upon the funding of the 2024 Incremental Loans on the Ninth Amendment Closing Date.
(v) The proceeds of the 2024 Incremental Loans shall be used by the Borrower to fund the 2024 Refinancing.
(vi) The Borrower hereby designates that the full principal amount of 2024 Incremental Loans is being incurred in reliance on clause (d)(iii)(A) of Section 2.14 of the Term Credit Agreement.
(c) Subject to the satisfaction of the conditions set forth in Section 5, upon the consummation of the 2024 Extension and the making of the 2024 Incremental Term Loans, the Term Credit Agreement is hereby amended to delete the stricken text (indicated textually in the same manner as the following example: ~~stricken text~~) and to add the underlined text (indicated textually in the same manner as the following example: underlined text) as set forth in the pages of the Term Credit Agreement attached as Exhibit A hereto.
SECTION 3. REFERENCE TO AND EFFECT ON THE TERM CREDIT AGREEMENT. On and after the Ninth Amendment Closing Date, (i) each reference in the Term Credit Agreement to “this Agreement,” “hereunder,” “hereof” or text of like import referring to the Term Credit Agreement shall mean and be a reference to the Term Credit Agreement as amended by this Ninth Amendment, (ii) the 2024 Extended Term Loans (including the 2024 Incremental Term Loans) shall constitute “Loans” and “Term Loans”, in each case, under and as defined in the Term Credit Agreement, (iii) the 2024 Extending Term Lenders and the 2024 Incremental Lender shall each constitute a “Lender” and a “Term Lender”, (other than for purposes of Section 2.01(a)(i) of the Term Credit Agreement), (iv) the 2024 Incremental Commitments shall constitute, “Commitments” and “Incremental Commitments”, in each case, under and as defined in the Term Credit Agreement, (v) the Ninth Amendment Closing Date shall constitute the “Incremental Facility Closing Date” under and as defined in the Term Credit Agreement with respect to the 2024 Incremental Loans and (vi) this Ninth Amendment shall constitute an “Incremental Amendment” under and as defined in the Term Credit Agreement, in each case, under and as defined in the Term Credit Agreement. On and after the effectiveness of this Ninth Amendment, this Ninth Amendment shall for all purposes
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constitute a “Loan Document” under and as defined in the Term Credit Agreement and the other Loan Documents.
SECTION 4. REPRESENTATIONS & WARRANTIES. In order to induce the 2024 Extending Term Lenders, the 2024 Incremental Lender and the Administrative Agent to enter into this Ninth Amendment, to induce the 2024 Extending Term Lenders to consent to the 2024 Extension and to induce the 2024 Incremental Lender to make the 2024 Incremental Loans hereunder, each Loan Party hereby represents and warrants to the 2024 Extending Term Lenders, the 2024 Incremental Lender and the Administrative Agent on and as of the Ninth Amendment Closing Date, that:
(a) The execution, delivery and performance by such Loan Party of this Ninth Amendment will not (i) contravene the terms of any of such Person’s Organization Documents, (ii) conflict with or result in any breach or contravention of, or the creation of any Lien under (other than as permitted by Section 7.01 of the Term Credit Agreement), or require any payment to be made under (x) any Contractual Obligation to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (y) any material order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject or (iii) violate any Law; except with respect to any conflict, breach or contravention or payment (but not creation of Liens) referred to in clauses (ii) and (iii), to the extent that such violation, conflict, breach, contravention or payment could not reasonably be expected to have a Material Adverse Effect.
(b) Each Loan Party party hereto has the requisite power and authority to execute, deliver and perform the terms and provisions of this Ninth Amendment and has taken all necessary corporate or other organizational action to authorize the execution, delivery and performance by it of this Ninth Amendment. Each Loan Party has duly executed and delivered this Ninth Amendment, and this Ninth Amendment, the Term Credit Agreement as amended hereby and each other Loan Document to which such Loan Party is a party constitutes its legal, valid and binding obligation enforceable in accordance with its terms, except as such enforceability may be limited by (i) Debtor Relief Laws and by general principles of equity principles of good faith and fair dealing, and (ii) the need for filings and registrations necessary to create or perfect the Liens on the Collateral granted by the Loan Parties in favor of the Secured Parties and (iii) the effect of foreign Laws, rules and regulations as they relate to pledges of Equity Interests in Foreign Subsidiaries.
(c) Each of the representations and warranties set forth in the Term Credit Agreement and in the other Loan Documents is true and correct in all material respects on and as of the Ninth Amendment Closing Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date; provided, however, that, any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language shall be true and correct (after giving effect to any qualification therein) in all respects on such respective dates.
(d) All proceeds of the 2024 Incremental Loans will be used for the purposes set forth in Section 2(b)(v) hereof.
SECTION 5. CONDITIONS PRECEDENT. This Ninth Amendment shall become effective as of the first date (the “Ninth Amendment Closing Date”) when each of the conditions set forth in this Section 5 shall have been satisfied:
(a) The Administrative Agent shall have received a duly authorized, executed and delivered counterpart of the signature page to this Ninth Amendment from each Loan Party named on the
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signature pages hereto, the Administrative Agent, each of the 2024 Extending Term Lenders and the 2024 Incremental Lender.
(b) (i) All fees and expenses (including all invoiced reasonable out-of-pocket costs, fees and expenses (including invoiced reasonable and out-of-pocket legal fees and expenses reimbursable hereunder)) shall have been paid to the extent earned, due and owing and otherwise payable or reimbursable pursuant to the terms of the Loan Documents and, in the case of expenses, otherwise invoiced prior to the Ninth Amendment Closing Date, (ii) fees and expenses incurred by or on behalf of (1) the 2024 Extending Term Lenders in connection with the 2024 Extension in the amounts agreed between the 2024 Extending Term Lenders and the Borrower and (2) the 2024 Incremental Lender in connection with the funding of the 2024 Incremental Loans in the amounts agreed between the 2024 Incremental Lender and the Borrower, in each case, shall be due and payable on the Ninth Amendment Closing Date to the extent, in the case of expenses, invoiced at least three (3) business days prior to the Ninth Amendment Closing Date (provided that legal expenses payable pursuant to this clause (ii) shall be limited to the reasonable and documented fees and expenses of White & Case LLP and Davies Ward Phillips & Vineberg LLP, in each case, as counsel to the 2024 Extended Term Lenders and the 2024 Incremental Lender) and (iii) all accrued and unpaid interest on the Existing 2020 Replacement Term Loans through, but not including, the Ninth Amendment Closing Date shall have been paid to the Administrative Agent for the ratable account of each Existing 2020 Replacement Term Lender, respectively.
(c) Both immediately before and after giving effect to this Ninth Amendment, (i) no Default or Event of Default shall have occurred or be continuing and (ii) all representations and warranties contained in this Ninth Amendment, the Term Credit Agreement and in the other Loan Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on the date hereof (except to the extent such representations and warranties expressly relate to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date; provided, however, that, any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language shall be true and correct (after giving effect to any qualification therein) in all respects on such respective dates).
(d) After giving effect to the Extension, the making of all Incremental Loans on such date and the 2024 Refinancing, the Borrower’s Secured Net Leverage Ratio shall not exceed 3.75:1.00 on the Ninth Amendment Closing Date determined on a Pro Forma Basis as of the last day of the Test Period most recently ended prior to the date of the incurrence of such 2024 Incremental Loans for which internal financial statements are available (as determined in good faith by the Borrower), as if all such 2024 Incremental Loans had been incurred on the last day of such Test Period.
(e) The Administrative Agent shall have received a Committed Loan Notice meeting the requirements of Section 2.02(a) of the Term Credit Agreement for the 2024 Incremental Loans.
(f) The Administrative Agent shall have received a Prepayment Notice meeting the requirements of Section 2.05(a) of the Term Credit Agreement for the prepayment of Existing 2020 Replacement Term Loans in a principal amount of $45,861,735.18.
(g) The Administrative Agent shall have received an officer’s certificate of the Borrower, dated the Ninth Amendment Closing Date, executed by a Responsible Officer of the Borrower certifying to the best of such officer’s knowledge, compliance with the requirements set forth in preceding clauses (c) and (d) of this Section 5.
(h) On the Ninth Amendment Closing Date, the Administrative Agent shall have received a customary opinion of Ropes & Gray LLP, U.S. counsel to the Loan Parties and Stikeman Elliott,
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Canadian counsel to the Loan Parties, in each case, (i) in form and substance consistent with the legal opinion delivered on the Closing Date with such changes as shall be reasonably satisfactory to the Administrative Agent, (ii) addressed to the Administrative Agent, the 2024 Extending Term Lenders and the 2024 Incremental Lender and (iii) dated the Ninth Amendment Closing Date.
(i) The Administrative Agent shall have received a customary certificate from each Loan Party, dated the Ninth Amendment Closing Date, signed by a Responsible Officer of such Loan Party, and attested to by the secretary or any assistant secretary of such Loan Party, with appropriate insertions, together with (i) certified copies of the certificate or articles of incorporation and by-laws (or other equivalent organizational documents), as applicable, of such Loan Party, (ii) customary resolutions of such Loan Party referred to in such certificate, (iii) incumbency or specimen signatures which identify by name and title the Responsible Officer or authorized signatory of such Loan Party authorized to sign this Ninth Amendment, and (iv) a good standing certificate from the applicable Governmental Authority of such Loan Party’s jurisdiction of incorporation, organization or formation, each dated a recent date prior to the Ninth Amendment Closing Date and certifying as to the good standing of such Loan Party (but only if the concept of good standing exists in the applicable jurisdiction); provided that in the case of preceding clause (i), such documents shall not be required to be delivered if such certificate includes a certification by such officer that the applicable organizational documents delivered to the Administrative Agent in connection with the initial funding of Term B Loans on the Closing Date (or any date thereafter) remain in full force and effect and have not been amended, modified, revoked or rescinded since the Closing Date (or such date thereafter).
(j) The Administrative Agent shall have received a solvency certificate from the chief financial officer (or other officer with reasonably equivalent duties) of the Borrower substantially in the form of Exhibit D-2 to the Term Credit Agreement and dated the Ninth Amendment Closing Date certifying that the Borrower and its Restricted Subsidiaries are Solvent (after giving effect to the 2024 Extension, the incurrence of the 2024 Incremental Loans and the application of the proceeds thereof).
SECTION 6. REAFFIRMATION.
(a) To induce the 2024 Extending Term Lenders, the 2024 Incremental Lender and Administrative Agent to enter into this Ninth Amendment, each of the Loan Parties hereby acknowledges and reaffirms its obligations under each Loan Document to which it is a party, including, without limitation, any grant, pledge or collateral assignment of a lien or security interest, as applicable, contained therein, in each case, as amended, restated, supplemented or otherwise modified prior to or as of the date hereof (collectively, the “Reaffirmed Documents”). The Borrower acknowledges and agrees that each of the Loan Documents to which it is a party or otherwise bound shall continue in full force and effect, that all of its obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of this Ninth Amendment.
(b) In furtherance of the foregoing Section 6(a), each Loan Party, in its capacity as a Guarantor under any Guaranty to which it is a party (in such capacity, each a “Reaffirming Loan Guarantor”), reaffirms its guarantee of the Guaranteed Obligations under the terms and conditions of such Guaranty and agrees that such Guaranty remains in full force and effect to the extent set forth in such Guaranty and after giving effect to this Ninth Amendment. Each Reaffirming Loan Guarantor hereby confirms that it consents to the terms of this Ninth Amendment and the Term Credit Agreement and that the principal of, the interest and premium (if any) on, and fees related to, the 2024 Extended Term Loans (including the 2024 Incremental Loans) constitute “Obligations” under the Loan Documents. Each Reaffirming Loan Guarantor hereby (i) confirms that each Loan Document to which it is a party or is otherwise bound will continue to guarantee to the fullest extent possible in accordance with the Loan Documents, the payment and performance of the Guaranteed Obligations, including, without limitation, the payment and performance of all such applicable Guaranteed Obligations that are joint and several obligations of each Guarantor now or hereafter existing;
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(ii) acknowledges and agrees that its Guaranty and each of the Loan Documents to which it is a party or otherwise bound shall continue in full force and effect and that all of its obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of this Ninth Amendment; and (iii) acknowledges, agrees and warrants for the benefit of the Administrative Agent, each other Agent and each Secured Party that there are no rights of set-off or counterclaim, nor any defenses of any kind, whether legal, equitable or otherwise, that would enable such Reaffirming Loan Guarantor to avoid or delay timely performance of its obligations under the Loan Documents.
(c) In furtherance of the foregoing Section 6(a), each of the Loan Parties that is party to any Collateral Document, in its capacity as a Grantor (as defined in such Collateral Document) under such Collateral Document (in such capacity, each a “Reaffirming Grantor”), hereby acknowledges that it has reviewed and consents to the terms and conditions of this Ninth Amendment and the transactions contemplated hereby, including the extension of credit in the form of the 2024 Extended Term Loans (including the 2024 Incremental Loans). In addition, each Reaffirming Grantor reaffirms the security interests granted by such Reaffirming Grantor under the terms and conditions of the Security Agreement and each other Loan Document (in each case, to the extent a party thereto) to secure the Obligations and agrees that such security interests remain in full force and effect. Each Loan Party hereby confirms that the security interests granted by such Reaffirming Grantor under the terms and conditions of the Loan Documents secure the 2024 Extended Term Loans (including the 2024 Incremental Loans) as part of the Obligations. Each Reaffirming Grantor hereby (i) confirms that each Collateral Document to which it is a party or is otherwise bound and all Collateral encumbered thereby will continue to secure, to the fullest extent possible in accordance with the Collateral Documents, the payment and performance of the Obligations, as the case may be, including, without limitation, the payment and performance of all such applicable Obligations that are joint and several obligations of each Guarantor and Grantor now or hereafter existing, (ii) confirms its respective grant to the Administrative Agent for the benefit of the Secured Parties of the security interest in and continuing Lien on all of such Grantor’s right, title and interest in, to and under all Collateral, in each case, whether now owned or existing or hereafter acquired or arising and wherever located, as collateral security for the prompt and complete payment and performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, of all applicable Obligations (including all such Obligations as amended, reaffirmed and/or increased pursuant to this Ninth Amendment), subject to the terms contained in the applicable Loan Documents, and (iii) confirms its respective pledges, grants of security interests and other obligations, as applicable, under and subject to the terms of each of the Collateral Documents to which it is a party.
(d) Each Guarantor acknowledges and agrees that (i) notwithstanding the conditions to effectiveness set forth in this Ninth Amendment, such Guarantor is not required by the terms of the Term Credit Agreement or any other Loan Document to consent to this Ninth Amendment and (ii) nothing in the Term Credit Agreement, this Ninth Amendment or any other Loan Document shall be deemed to require the consent of such Guarantor to any future amendment, consent or waiver of the terms of the Term Credit Agreement.
SECTION 7. CONSENT. The Borrower and the Administrative agent hereby consent to the assignment of any 2024 Incremental Loans to any Lender (other than a Disqualified Institution) which is not an existing Lender or an Approved Fund in respect of an existing Lender, in each case, to the extent disclosed to the Borrower and the Administrative Agent prior to the date hereof. The Borrower hereby consents to the Administrative Agent’s use of the signature page attached hereto as Exhibit B in connection with the assignments to institutions previously disclosed to the Borrower in accordance with the immediately preceding sentence and the Administrative Agent may affix such signature page to each Assignment and Assumption that relates to such assignments.
SECTION 8. POST-CLOSING COVENANT.
8
Within one hundred twenty (120) days of the Ninth Amendment Closing Date, unless waived or extended by the Administrative Agent in its sole discretion, the Administrative Agent shall have received either the items listed in the following clause (a) or the items listed in the following clause (b) with respect to any existing Mortgaged Property located in the United States:
(a) written confirmation from local counsel to the applicable Loan Party and the title insurance company confirming that no mortgage amendment, title datedown endorsement or other action is required to such Mortgage in connection with this Ninth Amendment in order to ensure and insure the continued validity, perfection and priority of the Liens and security interests granted to the Administrative Agent under such Mortgage and insured by the title insurance company for the benefit of the Administrative Agent to secure the payment of the Secured Obligations (as defined in such Mortgage), as amended by this Ninth Amendment (it being understood that such confirmation shall be in form and substance reasonably acceptable to the Administrative Agent); together with a title search to the applicable Mortgaged Property demonstrating that such Mortgaged Property is free and clear of all Liens, except Permitted Liens; or
(b) (i) an amendment to each Mortgage encumbering Mortgaged Property (each a “MortgageAmendment”) duly executed and acknowledged by the applicable Loan Party, and in form for recording in the recording office where each Mortgage was recorded, together with such certificates, affidavits, questionnaires or returns as shall be required in connection with the recording or filing thereof under applicable law, in each case in form and substance reasonably satisfactory to the Administrative Agent and otherwise approved by the applicable local counsel for filing in the appropriate jurisdiction;
| (ii) | with respect to each Mortgage Amendment, a datedown endorsement to the existing mortgage title insurance<br>policies (each, a “Mortgage Policy,” collectively, the “Mortgage Policies”) relating to the Mortgage encumbering the Mortgaged Property subject to such Mortgage insuring the Administrative Agent that such Mortgage,<br>as amended by such Mortgage Amendment is a valid and enforceable lien on such Mortgaged Property in favor of the Administrative Agent for the benefit of the Secured Parties free and clear of all defects, encumbrances and liens except for Permitted<br>Liens, and such Mortgage Policy shall otherwise be in form and substance reasonably satisfactory to the Administrative Agent; |
|---|---|
| (iii) | with respect to each Mortgaged Property, such affidavits, certificates, information (including financial<br>data) and instruments of indemnification (including without limitation, a so-called “gap” indemnification) as shall be required to induce the title company to issue the Mortgage Policies;<br> |
| --- | --- |
| (iv) | evidence acceptable to the Administrative Agent of payment by the Borrower of all applicable title insurance<br>premiums, search and examination and related charges, mortgage recording taxes, fees, charges, costs and expenses required for the recording of the Mortgage Amendments and the issuance of the Mortgage Policies. |
| --- | --- |
SECTION 9. MISCELLANEOUS PROVISIONS.
(a) Ratification. This Ninth Amendment is limited to the matters specified herein and shall not constitute a modification, acceptance or waiver of any other provision of the Term Credit Agreement or any other Loan Document. Nothing herein contained shall be construed as a substitution or novation of the obligations outstanding under the Term Credit Agreement or any other Loan Document or instruments securing the same, which shall remain in full force and effect as modified hereby or by instruments executed concurrently herewith.
9
(b) Governing Law; Submission to Jurisdiction, Etc. This Ninth Amendment shall be governed by, and construed in accordance with, the law of the State of New York. Sections 10.15(b) and 10.16 of the Term Credit Agreement are incorporated by reference herein as if such Sections appeared herein, mutatis mutandis.
(c) Severability. Section 10.14 of the Term Credit Agreement is incorporated by reference herein as if such Section appeared herein, mutatis mutandis.
(d) Counterparts; Headings. This Ninth Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery by telecopier, .pdf or other electronic imaging means of an executed counterpart of a signature page to this Ninth Amendment shall be effective as delivery of an original executed counterpart of this Ninth Amendment. The Administrative Agent may also require that signatures delivered by telecopier, .pdf or other electronic imaging means be confirmed by a manually signed original thereof; provided that the failure to request or deliver the same shall not limit the effectiveness of this Ninth Amendment or signature delivered by telecopier, .pdf or other electronic imaging means. Section headings herein are included for convenience of reference only and shall not affect the interpretation of this Ninth Amendment.
[Remainder of page intentionally blank;signatures begin next page]
10
IN WITNESS WHEREOF, the parties hereto have caused their duly Responsible Officers to execute and deliver this Ninth Amendment as of the date first above written.
| BOMBARDIER RECREATIONAL PRODUCTS INC. | |
|---|---|
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person | |
| BRP INC. | |
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person |
[BRP – Signature Page to Ninth Amendment to Fourth Amended and Restated Term Loan Credit Agreement (2024)]
| BRP R&D SERVICES INC. | |
|---|---|
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person | |
| BRP US INC. | |
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person | |
| BRP US MANAGEMENT SERVICES, INC. | |
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person | |
| BRP QUERETARO S.A. DE C.V. | |
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person |
[BRP – Signature Page to Ninth Amendment to Fourth Amended and Restated Term Loan Credit Agreement (2024)]
| BRP MEXICO S.A. DE C.V. | |
|---|---|
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person | |
| BRP MEXICAN DISTRIBUTION S.A. DE C.V. | |
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person | |
| BRP MARINE US INC. | |
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person | |
| BRP LOGISTICS N.A. INC. / BRP LOGISTIQUE N.A. INC. | |
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person |
[BRP – Signature Page to Ninth Amendment to Fourth Amended and Restated Term Loan Credit Agreement (2024)]
| BRP LOGISTICS MANAGEMENT ULC | |
|---|---|
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person |
[BRP – Signature Page to Ninth Amendment to Fourth Amended and Restated Term Loan Credit Agreement (2024)]
| BRP GLOBAL DISTRIBUTION INC. | |
|---|---|
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person | |
| BRP MEGATECH INDUSTRIES INC. | |
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person | |
| BRP US SERVICES LLC | |
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person |
[BRP – Signature Page to Ninth Amendment to Fourth Amended and Restated Term Loan Credit Agreement (2024)]
| BRP CHIHUAHUA S.A. DE C.V. | |
|---|---|
| By: | /s/ Martin Langelier |
| Name: Martin Langelier | |
| Title: Authorized Person | |
| By: | /s/ Sebastien Martel |
| Name: Sebastien Martel | |
| Title: Authorized Person |
[BRP – Signature Page to Ninth Amendment to Fourth Amended and Restated Term Loan Credit Agreement (2024)]
| BANK OF MONTREAL,<br><br><br>as Administrative Agent | |
|---|---|
| By: | /s/ Aaron Weigel |
| Name: Aaron Weigel | |
| Title: Managing Director |
[BRP – Signature Page to Ninth Amendment to Fourth Amended and Restated Term Loan Credit Agreement (2024)]
** SIGNATURE PAGES FOR 2024 EXTENDING TERM LENDERS ARE ON FILE WITH THE ADMINISTRATIVE AGENT.
[BRP – Signature Page to Ninth Amendment to Fourth Amended and Restated Term Loan Credit Agreement (2024)]
| BANK OF MONTREAL,<br><br><br>as the 2024 Incremental Lender | |
|---|---|
| By: | /s/ Aaron Weigel |
| Name: Aaron Weigel | |
| Title: Managing Director |
[BRP – Signature Page to Ninth Amendment to Fourth Amended and Restated Term Loan Credit Agreement (2024)]
SCHEDULE 1
| 2024Incremental Lender | 2024Incremental Commitment |
|---|---|
| Bank ofMontreal | $45,861,735.18 |
| Total: | $45,861,735.18 |
EXHIBIT A
Amended Credit Agreement
[Attached.]
EXHIBIT B
Borrower Signature Page to Assignment and Assumption
[Attached.]
EX-23.1
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement No. 333-269945 on Form F-10 and to the use of our reports dated March 27, 2024, relating to the financial statements of BRP Inc. (the “Company”) and the effectiveness of the Company’s internal control over financial reporting appearing in this Annual Report on Form 40-F for the year ended January 31, 2024.
/s/ Deloitte LLP
Chartered Professional Accountants
Montréal, Canada
March 28, 2024
EX-31.1
Exhibit 31.1
CERTIFICATIONS
I, José Boisjoli, certify that:
| 1. | I have reviewed this annual report on Form 40-F of BRP Inc.<br> |
|---|---|
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a<br>material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| --- | --- |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report,<br>fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report; |
| --- | --- |
| 4. | The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure<br>controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have: |
| --- | --- |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be<br>designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being<br>prepared; |
| --- | --- |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial<br>reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting<br>principles; |
| --- | --- |
| c. | Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this<br>report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| --- | --- |
| d. | Disclosed in this report any change in the issuer’s internal control over financial reporting that<br>occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and |
| --- | --- |
| 5. | The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of<br>internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions): |
| --- | --- |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over<br>financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and |
| --- | --- |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in<br>the issuer’s internal control over financial reporting. |
| --- | --- |
Date: March 28, 2024
| /s/ José Boisjoli |
|---|
| Name: José Boisjoli |
| Title: President and Chief Executive Officer |
EX-31.2
Exhibit 31.2
CERTIFICATIONS
I, Sébastien Martel, certify that:
| 1. | I have reviewed this annual report on Form 40-F of BRP Inc.<br> |
|---|---|
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a<br>material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| --- | --- |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report,<br>fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report; |
| --- | --- |
| 4. | The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure<br>controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have: |
| --- | --- |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be<br>designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being<br>prepared; |
| --- | --- |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial<br>reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting<br>principles; |
| --- | --- |
| c. | Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this<br>report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| --- | --- |
| d. | Disclosed in this report any change in the issuer’s internal control over financial reporting that<br>occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and |
| --- | --- |
| 5. | The issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of<br>internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent functions): |
| --- | --- |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over<br>financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and |
| --- | --- |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in<br>the issuer’s internal control over financial reporting. |
| --- | --- |
Date: March 28, 2024
| /s/ Sébastien Martel |
|---|
| Name: Sébastien Martel |
| Title: Chief Financial Officer |
EX-32.1
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Annual Report of BRP Inc. (the “Company”) on Form 40-F for the fiscal year ended January 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, José Boisjoli, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act<br>of 1934, as amended; and |
|---|---|
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and<br>results of operations of the Company. |
| --- | --- |
Date: March 28, 2024
| /s/ JoséBoisjoli |
|---|
| Name: José Boisjoli |
| Title: President and Chief Executive Officer |
EX-32.2
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this Annual Report of BRP Inc. (the “Company”) on Form 40-F for the fiscal year ended January 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sébastien Martel, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act<br>of 1934, as amended; and |
|---|---|
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and<br>results of operations of the Company. |
| --- | --- |
Date: March 28, 2024
| /s/ Sébastien Martel |
|---|
| Name: Sébastien Martel |
| Title: Chief Financial Officer |