Exhibit 99.1

 

Unaudited Condensed Consolidated Interim Financial Statements

BRP Inc.

For the three- and nine-month periods ended October 31, 2020 and 2019

BRP Inc.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF NET INCOME

 

 

[Unaudited]

[in millions of Canadian dollars, except per share data]

 

						Three-month periods ended								Nine-month periods ended
		Notes				October 31, 2020				October 31, 2019				October 31, 2020				October 31, 2019
Revenues			15				$1,674.7				$1,643.6				$4,137.8				$4,436.8
Cost of sales							1,187.8				1,201.7				3,167.4				3,366.5
Gross profit							486.9				441.9				970.4				1,070.3
Operating expenses
Selling and marketing							84.6				104.6				230.3				293.6
Research and development							66.0				60.3				163.4				173.7
General and administrative							60.6				70.3				159.3				188.4
Other operating expenses (income)			18				(8.6	)			(1.3	)			23.8				7.7
Impairment charge			16				—				—				177.1				—
Total operating expenses							202.6				233.9				753.9				663.4
Operating income							284.3				208.0				216.5				406.9
Financing costs			19				28.0				24.1				93.8				66.0
Financing income			19				(2.0	)			(0.3	)			(17.1	)			(1.9	)
Foreign exchange (gain) loss on long-term debt							(9.4	)			—				(19.6	)			0.4
Income before income taxes							267.7				184.2				159.4				342.4
Income tax expense			20				69.0				48.9				60.7				90.0
Net income							$198.7				$135.3				$98.7				$252.4
Attributable to shareholders							$198.8				$135.6				$99.1				$253.0
Attributable to non-controlling interest							$(0.1)				$(0.3)				$(0.4)				$(0.6)
Basic earnings per share			14				$2.27				$1.51				$1.13				$2.69
Diluted earnings per share			14				$2.22				$1.49				$1.12				$2.66
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

 

2

BRP Inc.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME

 

 

[Unaudited]

[in millions of Canadian dollars]

 

		Three-month periods ended								Nine-month periods ended
		October 31, 2020				October 31, 2019				October 31, 2020				October 31, 2019
Net income			$198.7				$135.3				$98.7				$252.4
Other comprehensive income (loss)
Items that will be reclassified subsequently to net income
Net changes in fair value of derivatives designated as cash flow hedges			(1.1	)			2.5				(9.2	)			3.5
Net changes in unrealized gain (loss) on translation of foreign operations			(6.5	)			(0.2	)			21.6				(10.6	)
Income tax (expense) recovery			0.3				0.2				2.4				(0.8	)
			(7.3	)			2.5				14.8				(7.9	)
Items that will not be reclassified subsequently to net income
Actuarial gains (losses) on defined benefit pension plans			12.3				11.7				(4.1	)			(43.1	)
Gain (loss) on fair value of restricted investments			0.1				—				(0.1	)			0.7
Income tax (expense) recovery			(3.3	)			(3.2	)			1.1				10.9
			9.1				8.5				(3.1	)			(31.5	)
Total other comprehensive income (loss)			1.8				11.0				11.7				(39.4	)
Total comprehensive income			$200.5				$146.3				$110.4				$213.0
Attributable to shareholders			$200.7				$146.6				$110.6				$213.7
Attributable to non-controlling interest			$(0.2	)			$(0.3)				$(0.2)				$(0.7)
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

 

3

BRP Inc.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

 

 

[Unaudited]

[in millions of Canadian dollars]

As at

 

		Notes				October 31, 2020				January 31, 2020
Cash							$1,309.3				$42.5
Trade and other receivables							271.8				399.1
Income taxes and investment tax credits receivable							28.8				18.4
Other financial assets			3				39.9				19.1
Inventories			4				1,066.5				1,166.3
Other current assets							31.0				26.8
Total current assets							2,747.3				1,672.2
Investment tax credits receivable							17.6				12.1
Other financial assets			3				26.1				20.2
Property, plant and equipment			5				1,013.6				1,027.4
Intangible assets			6				460.8				610.1
Right-of-use assets							212.9				214.7
Deferred income taxes							242.7				206.6
Other non-current assets							2.8				3.8
Total non-current assets							1,976.5				2,094.9
Total assets							$4,723.8				$3,767.1
Trade payables and accruals							$1,183.6				$1,085.8
Provisions			8				344.2				426.7
Other financial liabilities			9				141.6				182.9
Income tax payable							32.0				67.4
Deferred revenues							73.8				71.8
Current portion of long-term debt			10				57.2				17.9
Current portion of lease liabilities							33.6				31.6
Total current liabilities							1,866.0				1,884.1
Long-term debt			10				2,487.4				1,627.5
Lease liabilities							208.1				209.3
Provisions			8				94.4				112.8
Other financial liabilities			9				35.7				47.0
Deferred revenues							130.5				140.3
Employee future benefit liabilities							313.0				301.2
Deferred income taxes							14.6				14.3
Other non-current liabilities							20.8				20.3
Total non-current liabilities							3,304.5				2,472.7
Total liabilities							5,170.5				4,356.8
Deficit							(446.7	)			(589.7	)
Total liabilities and deficit							$4,723.8				$3,767.1
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

 

4

BRP Inc.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY

 

 

[Unaudited]

[in millions of Canadian dollars]

 

For the nine-month period ended October 31, 2020
		Attributed to shareholders
		Capital Stock (Note 11)				Contributed surplus								Retained losses				Translation of foreign operations				Cash- flow hedges				Total				Non- controlling interests				Total deficit
Balance as at January 31, 2020			$190.6				$(32.6	)							$(757.0	)			$4.9				$0.3				$(593.8	)			$4.1				$(589.7	)
Net income (loss)			—				—								99.1				—				—				99.1				(0.4	)			98.7
Other comprehensive income (loss)			—				—								(3.1	)			21.4				(6.8	)			11.5				0.2				11.7
Total comprehensive income (loss)			—				—								96.0				21.4				(6.8	)			110.6				(0.2	)			110.4
Issuance of subordinate shares			26.4				(7.4	)							—				—				—				19.0				—				19.0
Repurchase of subordinate shares			(4.4	)			70.3								(63.4	)			—				—				2.5				—				2.5
Stock-based compensation			—				11.1				[a]				—				—				—				11.1				—				11.1
Balance as at October 31, 2020			$212.6				$41.4								$(724.4	)			$26.3				$(6.5	)			$(450.6	)			$3.9				$(446.7	)

^[a] Includes $0.3 million of income tax recovery.

 

For the nine-month period ended October 31, 2019
		Attributed to shareholders
		Capital Stock				Contributed surplus								Retained losses				Translation of foreign operations				Cash- flow hedges				Total				Non- controlling interests				Total deficit
Balance as at January 31, 2019, as previously reported			$217.8				$38.3								$(596.3	)			$17.0				$(4.8	)			$(328.0	)			$5.2				$(322.8	)
Adjustment for IFRS 16 (net of tax)			—				—								(16.7	)			—				—				(16.7	)			(0.1	)			(16.8	)
Balance as at February 1, 2019			$217.8				$38.3								$(613.0	)			$17.0				$(4.8	)			$(344.7	)			$5.1				$(339.6	)
Net income (loss)			—				—								253.0				—				—				253.0				(0.6	)			252.4
Other comprehensive income (loss)			—				—								(31.5	)			(10.5	)			2.7				(39.3	)			(0.1	)			(39.4	)
Total comprehensive income (loss)			—				—								221.5				(10.5	)			2.7				213.7				(0.7	)			213.0
Dividends			—				—								(28.3	)			—				—				(28.3	)			—				(28.3	)
Issuance of subordinate shares			10.4				(3.2	)							—				—				—				7.2				—				7.2
Repurchase of subordinate shares			(42.0	)			—								(379.0	)			—				—				(421.0	)			—				(421.0	)
Stock-based compensation			—				10.3				[a	]			—				—				—				10.3				—				10.3
Non-controlling interest arising on business combination			—				—								—				—				—				—				19.4				19.4
Obligation to repurchase a non-controlling interest			—				—								—				—				—				—				(19.4	)			(19.4	)
Balance as at October 31, 2019			$186.2				$45.4								$(798.8	)			$6.5				$(2.1	)			$(562.8	)			$4.4				$(558.4	)

^[a] Includes $0.8 million of income tax recovery.

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

 

5

BRP Inc.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

 

 

[Unaudited]

[in millions of Canadian dollars]

 

						Nine-month periods ended
		Notes				October 31, 2020				October 31, 2019
OPERATING ACTIVITIES
Net income							$98.7				$252.4
Non-cash and non-operating items:
Depreciation expense							192.8				170.9
Income tax expense			20				60.7				90.0
Foreign exchange (gain) loss on long-term debt							(19.6	)			0.4
Interest expense and transaction costs			19				85.4				58.3
Net (gain) loss on disposal of property, plant and equipment			18				(13.3	)			0.5
Impairment charge			16				177.1				—
Other							(3.3	)			9.5
Cash flows generated from operations before changes in working capital							578.5				582.0
Changes in working capital:
Decrease in trade and other receivables							130.3				7.4
(Increase) decrease in inventories							127.4				(309.3	)
Increase in other assets							(46.2	)			(7.5	)
Increase in trade payables and accruals							83.5				177.2
Increase in other financial liabilities							20.8				35.9
Increase (decrease) in provisions							(108.2	)			23.9
Increase (decrease) in other liabilities							(19.9	)			10.4
Cash flows generated from operations							766.2				520.0
Income taxes paid, net of refunds							(130.6	)			(103.3	)
Net cash flows generated from operating activities							635.6				416.7
INVESTING ACTIVITIES
Additions to property, plant and equipment			5				(146.3	)			(164.5	)
Additions to intangible assets			6				(13.0	)			(38.4	)
Proceeds on disposal of property, plant and equipment							19.2				0.2
Business combinations, net of acquired cash							—				(114.4	)
Other							(0.4	)			—
Net cash flows used in investing activities							(140.5	)			(317.1	)
FINANCING ACTIVITIES
Issuance of long-term debt			10				964.3				457.3
Long-term debt amendment fees			10				(41.9	)			(6.5	)
Repayment of long-term debt			10				(15.7	)			(12.9	)
Repayment of lease liabilities							(25.4	)			(23.0	)
Interest paid							(68.8	)			(56.5	)
Issuance of subordinate voting shares							19.0				7.2
Repurchase of subordinate voting shares			11				(59.6	)			(415.4	)
Dividends paid							—				(28.3	)
Other							(0.4	)			(2.3	)
Net cash flows generated from (used in) financing activities							771.5				(80.4	)
Effect of exchange rate changes on cash							0.2				4.7
Net increase in cash							1,266.8				23.9
Cash at the beginning of period							42.5				100.0
Cash at the end of period							$1,309.3				$123.9
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

 

6

BRP Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

 

For the three- and nine-month periods ended October 31, 2020 and 2019

[Unaudited]

[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 Luxembourg Investments S.à r.l. (“Bain Capital”) and La Caisse de dépôt et placement du Québec (“CDPQ”), (collectively, the “Principal Shareholders”) whereas 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 and personal watercraft; and “Powersports PA&A and OEM Engines” which consists of parts, accessories and apparel (“PA&A”), engines for karts, motorcycles and recreational aircraft and other services. Additionally, the Company’s “Marine” segment consists of outboard and jet boat engines, boats 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 and Australia.

The Company’s headquarters is located at 726 Saint-Joseph Street, Valcourt, Québec, J0E 2L0.

 

2.	BASIS OF PRESENTATION

These unaudited condensed consolidated interim financial statements for the three- and nine-month periods ended October 31, 2020 and 2019 have been prepared using accounting policies consistent with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”) and in accordance with IAS 34 “Interim Financial Reporting”. These unaudited condensed consolidated interim financial statements for the three- and nine-month periods ended October 31, 2020 and 2019 follow the same accounting policies as the audited consolidated financial statements for the year ended January 31, 2020 and, as such, should be read in conjunction with them.

The preparation of these unaudited condensed consolidated interim 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 including but not limited to the COVID-19 pandemic impact, as well as assumptions regarding probable future outcomes as the basis for determining estimates. Actual results could differ from the estimates used and such differences could be significant.

These unaudited condensed consolidated interim 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 Co. Ltd in China for which a non-controlling interest of 20% is recorded upon consolidation and Telwater Pty Ltd in Australia for which there is a non-controlling interest of 20%. BRP is also part of joint ventures located in Austria. All inter-company transactions and balances have been eliminated upon consolidation.

 

7

BRP Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

 

For the three- and nine-month periods ended October 31, 2020 and 2019

[Unaudited]

[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]

 

2.	BASIS OF PRESENTATION [CONTINUED]

The Company’s revenues and operating income experience substantial fluctuations from quarter to quarter. In general, wholesale of the Company’s products are higher in the period immediately preceding and during their particular 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.

On November 24, 2020, the Board of Directors of the Company approved these unaudited condensed consolidated interim financial statements for the three- and nine-month periods ended October 31, 2020 and 2019.

 

3.	OTHER FINANCIAL ASSETS

The Company’s other financial assets were as follows, as at:

 

		October 31, 2020				January 31, 2020
Restricted investments [a]			$15.3				$14.6
Derivative financial instruments			8.7				8.9
Advances to suppliers related to property, plant and equipment			32.4				0.4
Other			9.6				15.4
Total other financial assets			$66.0				$39.3
Current			39.9				19.1
Non-current			26.1				20.2
Total other financial assets			$66.0				$39.3

 

[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 the restricted investments.

 

4.	INVENTORIES

The Company’s inventories were as follows, as at:

 

		October 31, 2020				January 31, 2020
Materials and work in progress			$521.1				$429.5
Finished products			298.4				492.0
Parts, accessories and apparel			247.0				244.8
Total inventories			$1,066.5				$1,166.3

The Company recognized in the condensed consolidated interim statements of net income during the three- and nine-month periods ended October 31, 2020, a write-down on inventories of $7.9 million and $40.2 million respectively ($7.4 million and $15.0 million respectively during the three- and nine-month periods ended October 31, 2019). For the three- and nine-month periods ended October 31, 2020, the write-down on inventories includes amounts of $0.3 million and $17.1 million respectively related to the wind-down of the Evinrude outboard engines production (see Note 17).

 

8

BRP Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

 

For the three- and nine-month periods ended October 31, 2020 and 2019

[Unaudited]

[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]

 

5.	PROPERTY, PLANT AND EQUIPMENT

The Company’s property, plant and equipment were as follows, as at:

 

		October 31, 2020												January 31, 2020
		Cost				Accumulated depreciation				Carrying amount				Cost				Accumulated depreciation				Carrying amount
Tooling			$909.6				$627.2				$282.4				$936.2				$622.7				$313.5
Equipment			870.1				479.0				391.1				854.0				450.4				403.6
Building			413.1				165.1				248.0				399.2				151.8				247.4
Land			92.1				—				92.1				62.9				—				62.9
Total			$2,284.9				$1,271.3				$1,013.6				$2,252.3				$1,224.9				$1,027.4

The following table explains the changes in property, plant and equipment during the nine-month period ended October 31, 2020:

 

		Carrying amount as at January 31, 2020				Additions				Disposals				Depreciation				Impairment (Note 16)				Effect of foreign currency exchange rate changes				Carrying amount as at October 31, 2020
Tooling			$313.5				$56.4				$—				$(71.5	)			$(21.7)				$5.7				$282.4
Equipment			403.6				46.2				(0.1	)			(60.1	)			(8.8	)			10.3				391.1
Building			247.4				10.9				(0.4	)			(13.8	)			—				3.9				248.0
Land			62.9				32.8				(5.4	)			—				—				1.8				92.1
Total			$1,027.4				$146.3				$(5.9	)			$(145.4	)			$(30.5)				$21.7				$1,013.6

 

9

BRP Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

 

For the three- and nine-month periods ended October 31, 2020 and 2019

[Unaudited]

[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]

 

6.	INTANGIBLE ASSETS

The Company’s intangible assets were as follows, as at:

 

		October 31, 2020												January 31, 2020
		Cost				Accumulated depreciation				Carrying amount				Cost				Accumulated depreciation				Carrying amount
Goodwill			$116.0				$—				$116.0				$230.2				$—				$230.2
Trademarks			200.8				—				200.8				219.2				—				219.2
Software and licences			177.2				107.8				69.4				172.1				95.5				76.6
Patents			5.3				1.3				4.0				5.3				0.9				4.4
Dealer networks			136.9				68.6				68.3				137.3				61.1				76.2
Customer relationships			25.0				22.7				2.3				23.6				20.1				3.5
Total			$661.2				$200.4				$460.8				$787.7				$177.6				$610.1

The following table explains the changes in Company’s intangible assets during the nine-month period ended October 31, 2020:

 

		Carrying amount as at January 31, 2020				Additions				Disposals				Depreciation				Impairment (Note 16)				Effect of foreign currency exchange rate changes				Carrying amount as at October 31, 2020
Goodwill			$230.2				$—				$—				$—				$(114.3)				$0.1				$116.0
Trademarks			219.2				—				—				—				(20.2	)			1.8				200.8
Software and licences			76.6				13.0				—				(12.0	)			(8.9	)			0.7				69.4
Patents			4.4				—				—				(0.4	)			—				—				4.0
Dealer networks			76.2				—				—				(6.9	)			(3.2	)			2.2				68.3
Customer relationships			3.5				—				—				(1.3	)			—				0.1				2.3
Total			$610.1				$13.0				$—				$(20.6	)			$(146.6	)			$4.9				$460.8

 

10

BRP Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

 

For the three- and nine-month periods ended October 31, 2020 and 2019

[Unaudited]

[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]

 

7.	REVOLVING CREDIT FACILITIES

The Company has a total availability of $700.0 million under revolving credit facilities maturing in May 2024 (the “Revolving Credit Facilities”). As at October 31, 2020, the Company had no outstanding indebtedness under the 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:

(i)      U.S. dollars at either

(a)        LIBOR 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 Euro LIBOR 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 October 31, 2020, the cost of borrowing under the Revolving Credit Facilities was as follows:

(i)      U.S. dollars at either

(a)        LIBOR plus 1.70% per annum; or

(b)        U.S. Base Rate plus 0.70% per annum; or

(c)        U.S. Prime Rate plus 0.70% per annum;

(ii)     Canadian dollars at either

(a)        Bankers’ Acceptance plus 1.70% per annum; or

(b)        Canadian Prime Rate plus 0.70% per annum

(iii)    Euros at Euro LIBOR plus 1.70% per annum.

As at October 31, 2020, 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.

During the nine-month period ended October 31, 2019, the Company amended its $575.0 million revolving credit facilities to increase the availability by $125.0 million for a total availability of $700.0 million, to extend the maturity from May 2023 to May 2024 and to improve the pricing grid. The Company incurred transaction fees of $1.5 million related to this amendment.

 

11

BRP Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

 

For the three- and nine-month periods ended October 31, 2020 and 2019

[Unaudited]

[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]

 

8.	PROVISIONS

The Company’s provisions were as follows, as at:

 

		October 31, 2020				January 31, 2020
Product-related			$394.6				$519.4
Restructuring (Note 18)			18.5				1.7
Other			25.5				18.4
Total provisions			$438.6				$539.5
Current			344.2				426.7
Non-current			94.4				112.8
Total provisions			$438.6				$539.5

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.

The changes in provisions were as follows:

 

		Product-related				Restructuring				Other				Total
Balance as at January 31, 2020			$519.4				$1.7				$18.4				$539.5
Expensed during the period			394.8	[a]			37.4				21.7				453.9
Paid during the period			(526.1	)			(20.2	)			(10.7	)			(557.0	)
Reversed during the period			(3.4	)			—				(4.3	)  [b]			(7.7	)
Effect of foreign currency exchange rate changes			7.5				(0.4	)			0.4				7.5
Unwinding of discount and effect of changes in discounting estimates			2.4				—				—				2.4
Balance as at October 31, 2020			$394.6				$18.5				$25.5				$438.6

 

[a]

Includes $41.5 million related to the wind-down of the Evinrude outboard engines production (see Note 17).

 

[b]

Includes a reversal of $4.0 million related to the patent infringement litigation cases with one of the Company’s competitors (Note 18).

 

9.	OTHER FINANCIAL LIABILITIES

The Company’s other financial liabilities were as follows, as at:

 

		October 31, 2020				January 31, 2020
Dealer holdback programs and customer deposits			$109.6				$100.2
Due to Bombardier Inc.			22.3				22.3
Derivative financial instruments			7.1				5.2
Due to a pension management company			0.8				1.0
Non-controlling interest liability			20.1				19.0
Financial liability related to NCIB			—				70.3
Other			17.4				11.9
Total other financial liabilities			$177.3				$229.9
Current			141.6				182.9
Non-current			35.7				47.0
Total other financial liabilities			$177.3				$229.9

 

12

BRP Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

 

For the three- and nine-month periods ended October 31, 2020 and 2019

[Unaudited]

[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]

 

9.	OTHER FINANCIAL LIABILITIES [CONTINUED]

The non-current portion is mainly comprised of the amount due to Bombardier Inc. in connection with indemnification related to income taxes.

 

10.	LONG-TERM DEBT

As at October 31, 2020 and January 31, 2020, the maturity dates, interest rates, outstanding nominal amounts and carrying amounts of long-term debt were as follows:

 

October 31, 2020

Maturity date

Contractual interest rate

Effective interest rate

Outstanding nominal amount

Carrying amount

Term Facility

May 2027

2.15%

2.15%

U.S. $1,210.7

$1,614.3

May 2027

6.00%

6.77%

U.S. $598.5

766.2

[a]

Term Loans

Dec. 2021 to Dec. 2030

0.75% to 1.60%

1.00% to 4.67%

€112.8

164.1

Total long-term debt

$2,544.6

Current

57.2

Non-current

2,487.4

Total long-term debt

$2,544.6

 

[a]

Net of unamortized transaction costs of $31.8 million.

 

January 31, 2020

Maturity date

Contractual interest rate

Effective interest rate

Outstanding nominal amount

Carrying amount

Term Facility

May 2025

3.65%

3.65%

U.S. $886.5

$1,172.0

May 2025

4.15%

4.44%

U.S. $333.3

434.7

[a]

Term Loans

June 2020 to Dec. 2030

0.75% to 1.65%

1.00% to 4.67%

€ 29.7

38.7

Total long-term debt

$1,645.4

Current

17.9

Non-current

1,627.5

Total long-term debt

$1,645.4

 

[a]

Net of unamortized transaction costs of $6.0 million.

The following table explains the changes in long-term debt during the nine-month period ended October 31, 2020:

 

						Statements of cash flows								Non-cash changes
		Carrying amount as at January 31, 2020				Issuance				Repayment				Effect of foreign currency exchange rate changes				Other				Carrying amount as at October 31, 2020
Term Facility			$1,606.7				$835.0				$(14.4	)			$(19.6	)			$(27.2	)			$2,380.5
Term Loans			38.7				129.3				(1.3	)			3.1				(5.7	)			164.1
Total			$1,645.4				$964.3				$(15.7	)			$(16.5	)			$(32.9	)			$2,544.6

 

13

BRP Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

 

For the three- and nine-month periods ended October 31, 2020 and 2019

[Unaudited]

[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]

 

10. LONG-TERM DEBT [CONTINUED]

a)  Term Facility

On February 4, 2020, the Company amended its Term Facility to consolidate it into a single tranche which reduces the cost of borrowing by 0.50% for the previous U.S. $335.0 million tranche and extends the maturity from May 2025 to May 2027. The Company incurred transaction costs of $6.7 million, which have been recorded in financing costs. In addition, the unamortized transaction costs of $6.0 million were derecognized and recorded in financing costs.

On May 8, 2020, the Company entered into an incremental U.S. $600.0 million tranche under its Term Facility. This new tranche matures in May 2027 and, consistent with the existing tranche of the Term Facility, is exempt of financial covenants. The Company incurred transaction costs of $35.2 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.

As at October 31, 2020, the cost of borrowing under the initial tranche of the Term Facility was as follows:

(i)    LIBOR plus 2.00% per annum, with a LIBOR floor of 0.00%; or

(ii)   U.S. Base Rate plus 1.00%; or

(iii)  U.S. Prime Rate plus 1.00%

As at October 31, 2020, the cost of borrowing under the U.S. $600.0 million tranche of the Term Facility was as follows:

(i)    LIBOR plus 5.00% per annum, with a LIBOR floor of 1.00%; or

(ii)   U.S. Base Rate plus 4.00%; or

(iii)  U.S. Prime Rate plus 4.00%

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 LIBOR.

The Company is required to repay a minimum of 0.25% of the nominal amount each quarter. Consequently, the Company repaid an amount of U.S. $10.6 million ($14.4 million) during the nine-month period ended October 31, 2020. 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.

b)  Term Loans

During the nine-month period ended October 31, 2020, the Company entered into an unsecured loan agreement at favourable interest rates under an Austrian government COVID-19 program. Under this program, the Austrian government is partly guaranteeing the loan. The loan has a total nominal value of €75.0 million ($116.5 million), interest rates at 1.45% for the first year, 1.90% for the second and third years and 2.80% for the fourth and fifth years and matures in December 2024. The Company recognized a grant of €4.9 million ($7.6 million) representing the difference between the fair value of the term loans at inception and the cash received. The grant will be recorded as a reduction of expenses over the course of the loan. The Company may be required to repay a portion of the loan in the event that it has an excess cash position.

 

14

BRP Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

 

For the three- and nine-month periods ended October 31, 2020 and 2019

[Unaudited]

[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]

 

10. LONG-TERM DEBT [CONTINUED]

b)  Term Loans [continued]

During the nine-month period ended October 31, 2020, the Company entered into term loan agreements at favourable interest rates under Austrian government programs. These programs support research and development projects based on the Company’s incurred expenses in Austria. The term loans have a total nominal amount of €8.9 million ($13.8 million), interest rates between 0.80% and 1.12% and maturities between December 2024 and December 2030. The Company recognized a grant of €1.0 million ($1.5 million) as a reduction of research and development expenses representing the difference between the fair value of the term loans at inception and the cash received.

 

11.	CAPITAL STOCK

The changes in capital stock issued and outstanding were as follows:

 

		Number of shares				Carrying Amount
Subordinate voting shares
Balance as at January 31, 2020			42,410,974				$186.9
Issued upon exercise of stock options			622,785				26.4
Issued in exchange of multiple voting shares			2,000,000				0.1
Repurchased under the normal course issuer bid program			(1,005,300	)			(4.4	)
Balance as at October 31, 2020			44,028,459				$209.0
Multiple voting shares
Balance as at January 31, 2020			45,891,671				$3.7
Exchanged for subordinate voting shares			(2,000,000	)			(0.1	)
Balance as at October 31, 2020			43,891,671				$3.6
Total outstanding as at October 31, 2020			87,920,130				$212.6

a)  Normal course issuer bid program (“NCIB”)

During the nine-month period ended October 31, 2020, the Company continued the NCIB that was announced and started during the fiscal year ended January 31, 2020 and repurchased 1,005,300 subordinate voting shares for a total consideration of $55.6 million.

When the Company was not permitted to purchase subordinate voting shares due to regulatory restrictions or self-imposed blackout periods, an automatic share purchase plan with a designated broker allowed the purchase of subordinate voting shares under pre-set conditions. During the nine-month period ended October 31, 2020, the Company recognized a gain of $12.2 million in financing income related to the 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.

Of the total consideration of $55.6 million, $4.4 million represents the carrying amount of the shares repurchased, $63.4 million represents the amount charged to retained losses and $12.2 million represents the gain recognized in net income.

 

15

BRP Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

 

For the three- and nine-month periods ended October 31, 2020 and 2019

[Unaudited]

[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]

 

11. CAPITAL STOCK [CONTINUED]

 

b)	Secondary offering

On October 21, 2020, Bain Capital completed a secondary offering of 2,000,000 subordinate voting shares of the Company through an underwriter. Prior to such transaction, Bain Capital converted 2,000,000 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 $0.6 million of fees and expenses related to this secondary offering.

12. STOCK OPTION PLAN

During the nine-month periods ended October 31, 2020 and 2019, the Company granted respectively 1,658,100 and 1,184,200 stock options to eligible officers and employees to acquire subordinated voting shares at an average exercise price of $26.89 and $46.15 respectively. The fair value of the options at the grant date was respectively $9.12 and $13.36. 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.

13. SEGMENTED INFORMATION

Details of segment information were as follows:

 

For the three-month period ended October 31, 2020		Powersports segment				Marine     segment				Inter- segment eliminations				Total
Revenues			$1,571.2				$108.4				$(4.9	)			$1,674.7
Cost of sales			1,101.8				90.9				(4.9	)			1,187.8
Gross profit			469.4				17.5				—				486.9
Total operating expenses															202.6
Operating income															284.3
Financing costs															28.0
Financing income															(2.0	)
Foreign exchange gain on long-term debt															(9.4	)
Income before income taxes															267.7
Income tax expense															69.0
Net income															$198.7

 

16

BRP Inc.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

 

For the three- and nine-month periods ended October 31, 2020 and 2019

[Unaudited]

[Tabular figures are in millions of Canadian dollars, unless otherwise indicated]

 

13. SEGMENTED INFORMATION [CONTINUED]

 

For the three-month period ended October 31, 2019		Powersports segment				Marine     segment				Inter- segment eliminations				Total
Revenues			$1,506.4				$142.4				$(5.2	)			$1,643.6
Cost of sales			1,083.6				123.3				(5.2	)			1,201.7
Gross profit			422.8				19.1				—				441.9
Total operating expenses															233.9
Operating income															208.0
Financing costs															24.1
Financing income															(0.3	)
Income before income taxes															184.2
Income tax expense															48.9
Net income															$135.3

 

For the nine-month period ended October 31, 2020		Powersports segment				Marine     segment				Inter- segment eliminations				Total
Revenues			$3,844.6				$301.5				$(8.3	)			$4,137.8
Cost of sales			2,850.3				325.4				(8.3	)			3,167.4
Gross profit			994.3				(23.9	)			—				970.4
Total operating expenses															753.9			[a]
Operating income															216.5
Financing costs															93.8
Financing income															(17.1	)
Foreign exchange gain on long-term debt															(19.6	)
Income before income taxes															159.4
Income tax expense															60.7
Net income															$98.7

 

[a]

Including an impairment charge of $177.1 million related to the Marine segment.

 

17