Sept. 5, 2005 – Finance Digest
BRP’s 2Q sales, Revenues Drop
Bombardier Recreational Products, Inc. (BRP), Valcourt, Québec, Canada, reported consolidated revenues of $467.3 million for its second quarter ended July 31, a decrease of $106.5 million when compared to consolidated revenues of $573.8 million for the second quarter of fiscal 2005.
(All numbers in this report are in Canadian dollars.)
Consolidated gross profit reached $80.1 million for quarter, down from consolidated gross profit of $97.2 million for the three-month period ended July 31, 2004.
Operating expenses, comprised of selling and marketing, research and development and general and administrative expenses, amounted to $97.4 million for the three-month period ended July 31, a $13.8 million increase compared to $83.6 million for the second quarter of fiscal 2005.
BRP’s 2005 six month consolidated adjusted EBITDA reached $19.8 million, down from $87.5 million during the same period last year.
The company posted a net loss of $1.7 million for the period, compared to net income of $28.5 million for the same period last year.
BRP operates in two segments: the Powersports segment includes snowmobiles, watercraft, all-terrain vehicles, sport boats and Rotax engines; the Marine Engines segment includes outboard engines.
Powersports segment revenues were $321.9 million for the three-month period ended July 31, 2005, as compared to $419 million for the second quarter of fiscal 2005. The decrease in revenues is primarily a result of lower number of units sold. The decreased number of ATVs and snowmobiles sold was partially offset by increased number of watercraft sold.
Powersports segment operating loss amounted to $13.7 million for the second quarter of fiscal 2006 as compared to an operating income of $22.1 million for the three-month period ended July 31, 2004. BRP says the reduction in operating income is due to the combination of reduced number of units sold of $15.9 million, unfavorable foreign exchange rate movements of approximately $9 million, higher operating expenses of $9.7 million and increased sales incentives and concessions of $10.6 million due to higher retail activity, all of which were partially offset by favorable product and pricing mix of $7.4 million and reduced production costs of $2.5 million.
Marine Engines segment revenues decreased to $152.9 million for the three-month period ended July 31 compared to $164.5 million for the second quarter of fiscal 2005, “Not withstanding the revenue decline in the Powersports segment during the second quarter, we continued to enjoy a strong leadership position in our traditional businesses,” said José Boisjoli, BRP’s president and CEO. “As for the Marine Engines segment, I am pleased with the turn around due to our decision to focus on E-TEC; it will bring a better balance between our two business segments. Going forward, I see progress and I remain confident to close the year with an improved overall adjusted EBITDA,” he concluded.
BRP’s portfolio of brands and products includes: Ski-Doo and Lynx snowmobiles, Sea-Doo watercraft and sport boats, Johnson and Evinrude outboard engines, direct injection technologies such as Evinrude E-TEC, Bombardier all-terrain vehicles, Rotax engines and karts.
Sparta Launches New Product
Sparta Commercial Services, Inc. recently launched new motorcycle financing and leasing products, including the Sparta Sport Loan, Sparta Flex Lease and Sparta Purchase Plus Lease.
Through the new products, Sparta will 1) purchase retail installment sales contracts from franchised and independent powersports dealers who qualify as Sparta Authorized Dealers; and 2) purchase qualified vehicles for lease to customers of its Sparta Authorized Dealers with no end of term recourse to the dealer.
Sparta’s retail installment sales contract and leasing programs are delivered through the company’s proprietary, web-based credit application processing and management system known as iPLUS (Internet Purchasing Leasing Underwriting Servicing). A major feature of iPLUS is its point of sale application processing, decision-making and contract generation, allowing dealers to track the entire funding process in real time.
For more information, call the Sparta Dealer Support Group, 888/439-0200, or visit www.spartacommercial.com.
Viper Powersports Secures $18.9 million
Viper Powersports Inc. (Pink Sheets:VPWS) announced $18.9 million in equity financing through two deals. The funding includes $3.9 million Private Investment in Public Equities (PIPE) financing completed by Bathgate Capital Partners and $15 million in the form of a Standby Equity Distribution Agreement (SEDA) with Cornell Capital Partners.
Viper Powersports develops, produces and markets a line of premium custom V-Twin cruiser motorcycles, aftermarket engines and other related aftermarket products through its subsidiaries, Viper Motorcycle Company and Viper Performance Inc. Product is distributed and sold through a nationwide independent dealer network.
“This financing provides the opportunity to launch our motorcycle product line and proprietary engines to the marketplace,” said John Lai, president of Viper Powersports, Inc.
To learn more, visit www.viperpowersports.com or www.cornellcapital.com.
Kymco, Sheffield Offer Customer Financing
Kymco USA, Inman, S.C., has partnered with Sheffield Financial Corporation to provide its dealer network with a new option for retail financing of Kymco ATVs, scooters and motorcycle. North Carolina-based Sheffield is associated with BB&T Bank and is an affiliate member of OPESSA. Kymco USA serves more than 500 retailers.
To kick off the new relationship, Sheffield and participating Kymco dealers will offer a promotion featuring No Down Payment, No Payment and No Interest for 90 Days, under certain restrictions. Sheffield promotes a “10 Minute Decision,” so customers can learn quickly if they qualify.
“We are very happy to have this new arrangement with Sheffield Financial,” said Bruce Ramsey, Kymco USA vice president for sales and marketing. “Quick response financing is just another way we can help our dealers serve our customers better.”
Kymco USA’s lineup now includes six ATVs from 50cc to 300cc, 10 scooters, and the Venox 250 motorcycle. New ATV models include the new MXU 300, the company’s first shaft-drive ATV, and the economy-minded MXU 150.
Rucker Taps GE Money Bank
GE Money Bank was tapped as the preferred financing source for Rucker Performance, a producer of V-twin custom motorcycles.
GE Money Bank allows enthusiasts to finance Rucker Performance motorcycles with a maximum loan limit of $50,000 on all new untitled models.
“We selected GE Money Bank because they are the number one national financing company with a consistent program that offers competitive rates for American-made v-twin motorcycles,” explained Bill Rucker, president of Rucker Performance. “Their financial instruments are designed to improve cash flow, fuel sales growth and deliver our high-performance motorcycles to our enthusiasts.”
Fort Worth-based Rucker Performance started production in 2004. The company’s product design features include soft-style suspension, high-performance V-twin 124 cubic inch show-polished engines, 6-speed transmissions, stretched tanks and fat tires.
Riddell Bell Holdings, Inc. (RBH), Dallas, reported increased earnings for the second quarter ended July 2, 2005, of $3.5 million on net sales of $103.78 million. This compares to earnings of $1.2 million on sales of $33.69 million for the second quarter 2004. Company officials said entry into the powersports industry was responsible for much of that growth.
For the six-month period ended July 2, 2005, the company reported earnings of $3.64 million on sales of $191.01, compared to earnings of $1.55 million on sales of $61.91 million in the first six months last year.
RBH is comprised of two formerly independent companies: Riddell Sports Group (Team Sports) and Bell Sports Corporation (Individual Sports). It produces more than eight million helmets annually.
Private investment firm Fenway Partners, Inc. completed its $240 million acquisition of Bell Sports in September 2004 and combined it with Riddell Sports Group, which it had acquired from Lincolnshire Management Inc. in 2003 in a transaction valued at more than $100 million.
Riddell Sports’ core business is designing, marketing and reconditioning helmets and other equipment used in team sports such as football, baseball, lacrosse and other team sports. Bell Sports designs and markets helmets and accessories for powersports, bicycling, action sports and snow sports.
Giant Motorsports 2Q Sales Up 57%
Giant Motorsports Inc., Salem, Ohio, reported net sales for its second quarter ended June 30, 2005, of $35.8 million, up from $22.7 million for the same period in 2004. Second quarter net income was $1.09 million, or 10 cents per diluted share, compared to net income of $206,119, or 2 cents per diluted share, for the second quarter 2004.
Giant has two wholly owned subsidiaries, Andrews Cycles in Salem and Chicago Cycles in Chicago.
The company acquired its Chicago store in May 2004 then moved it to a new 95,000 sq. ft. facility in April 2005.
The sales results reflect the acquisition of Chicago Cycle and the response to the new store location, Giant President Greg Haehn said in a prepared statement.
“Our new flagship superstore in Chicago continues to impress customers; and as we fine tune the merchandise mix with 800 motorcycles on display and enhance the showroom’s visual impact we see exciting growth opportunities.”
Giant Motorsports is a multi-brand retailer for motorcycles, ATVs, utility vehicles and scooters.
GE to Acquire E*TRADE Unit
GE Consumer Finance, the consumer lending unit of General Electric Company, said it plans to acquire E*TRADE Consumer Finance Corporation, an affiliate of E*TRADE FINANCIAL Corp., which provides consumer financing solutions for powersports vehicles, RVs and marine products.
The acquisition includes operations in Irvine, Calif., and Clearwater, Fla. and adds approximately 200 employees. It is expected to add $2 billion in annual loan volume to GE Consumer Finance’s Retail Sales Finance business, according to GE.
GE Retail Sales Finance, based in Kettering, Ohio, is part of GE Consumer Finance and provides private label credit card programs, marketing, installment lending and financial services to more than 200 regional and national clients in multiple industries.
With $150 billion in assets, GE Consumer Finance, Stamford, Conn., is a leading provider of credit services to consumers and retailers in 47 countries around the world.
The deal is subject to regulatory approval, but the companies expect to close the sale this year.
HSBC, Polaris Modify Relationship
Polaris Industries Inc., Medina, Minn., and HSBC Bank Nevada, (formerly Household Bank, N.A.) have negotiated a new multi-year contract.
Under the agreement, which took effect Aug.1, 2005, provides for income to be paid to HSBC will begin to manage the Polaris private label credit card program under the StarCard label.
“This new structure will allow Polaris to substantially reduce the risk associated with our retail credit program while maintaining the current income potential of the business,” said Mike Malone, Polaris CFO.
BMW Financial Lauded by J.D. Power
BMW Financial Services, a BMW Group company that provides financial services to buyers of BMW brand vehicles, including motorcycles, has been ranked highest in dealer satisfaction with both prime retail credit and retail leasing in the J.D. Power and Associates Dealer Financing Satisfaction Study. It is the second consecutive year BMW Financial Services has received the honor.
In the retail leasing category, the company placed at the top of all four retail leasing factors: offering, application/approval process, personnel, and lease-end termination.
In the prime retail credit category, BMW FS was highest on three of four prime retail credit factors and leads the industry on speed of funding and consistency of credit decisions.
Captives, in general showed improvement in this area due to strong performance in credit personnel, application/approval process and termination policy.
Cycle Country 3Q Earnings Drop
Cycle Country Accessories Corp., Milford, Iowa., manufacturer of ATV accessories, saw its earnings for the third quarter ended June 30, 2005, drop to $29,554 on sales of $3.3 million, compared to earnings of $195,407 on sales of $4,067,499 for the same period in 2004.
Company officials said the downturn in sales resulted from dealers returning to seasonal buying patterns and management’s increased inventories to meet anticipated demand for the fourth quarter.
The decrease in revenues during the third quarter was mainly attributable to a 19% decrease in sales for Cycle Country’s ATV accessories business, a 37% decrease in sales for its lawn and garden business, and a 16% decrease in its wheel cover business, compared to the same quarter last year, the company reported.
Cycle Country’s sales to U.S. distributors and OEM customers during the quarter were off 18.1% compared to the same period in 2004. Sales to its international distributors declined 22%.
While third quarter results of fiscal 2005 did not meet management’s baseline growth projections, Ron Hickman, president and CEO of Cycle Country, said that the integration of Simonsen Iron Works, Inc., Cycle Country’s largest supplier, is starting to show increases to gross profit due to more efficiency in the manufacturing process and better scheduling of production.
“A few of our largest distributors indicate that their July orders for Cycle Country product are up 40%-50% over last year,” Hickman said. “Distributors are indicating low levels of inventory of Cycle Country product at dealer and warehouse locations.” The company expects “very strong truckload orders from our distributors for August and September deliveries.”
For the nine-month period ended June 30, 2005, Cycle Country reported earnings of $575,960 on sales of $11.7 million, down from $1,064,530 on sales of $15.1 million last year.
