AutoCanada Inc. Announces 2014 Annual Results with 26.2% Increase in Basic EPS

EDMONTON, March 19, 2015 /CNW/ - AutoCanada Inc. (the "Company" or "AutoCanada") (TSX: ACQ) today announced financial results for the quarter ended December 31, 2014 and the year ended December 31, 2014.

2014 Fourth Quarter Highlights

  • Revenue increased 95.8% or $319.7 million to $653.5 million
  • Gross profit increased by 80.4% or $50.1 million to $112.4 million
  • Adjusted EBITDA increased by 60.7% or $9.1 million to $24.1 million
  • EBITDA increased 65.5% to $24.5 million from $14.8 million in Q4 of 2013
  • Pre-tax earnings attributable to AutoCanada shareholders increased by $7.1 million or 54.6% to $20.1 million
  • Adjusted net earnings attributable to AutoCanada shareholders increased by $4.3 million or 47.8% to $13.3 million
  • Net earnings attributable to AutoCanada shareholders increased by $5.3 million or 55.2% to $14.9 million
  • Basic adjusted net earnings per share attributable to AutoCanada shareholders increased by 28.6% to $0.54 from $0.42
  • Basic earnings per share increased by 36.4% to $0.60 from $0.44
  • Same store revenue increased by 10.9%
  • Same store gross profit increased by 5.7%
  • Same store new vehicle retail revenue increased by 4.1%
  • Same store used vehicles retail revenue increased by 11.7%
  • Same store parts, service and collision repair revenue increased by 11.2%

2014 Annual Highlights

  • Revenue increased 57.2% or $805.7 million to $2,214.8 million
  • Gross profit increased by 51.7% or $127.1 million to $373.1 million
  • Adjusted EBITDA increased by 50.5% or $29.9 million to $89.1 million
  • EBITDA increased 52.8% to $89.4 million from $58.5 million in 2013
  • Pre-tax earnings attributable to AutoCanada shareholders increased by $19.7 million or 38.0% to $71.6 million
  • Adjusted net earnings attributable to AutoCanada shareholders increased by $13.6 million or 35.8% to $51.6 million
  • Net earnings attributable to AutoCanada shareholders increased by $14.9 million or 39.0% to $53.1 million
  • Basic adjusted net earnings per share attributable to AutoCanada shareholders increased by 23.1% to $2.24 from $1.82
  • Basic earnings per share increased by 26.2% to $2.31 from $1.83
  • Same store revenue increased by 8.9%
  • Same store gross profit increased by 7.9%
  • Same store new vehicle retail revenue increased by 7.3%
  • Same store used vehicles retail revenue increased by 11.2%
  • Same store parts, service and collision repair revenue increased by 10.5%

"We are proud of our annual 2014 results and our growth in units retailed, revenue, gross profit and net income are reflective of the 17 stores which we added to our family during the year.  The past year was a milestone for AutoCanada as we exceeded $2 billion in revenue and reached $89 million in EBITDA," stated Patrick Priestner, Executive Chairman.  "During the year we were entrusted by the manufacturers with four new brands including Cadillac, BMW, MINI and most recently, Kia in the form of an open point.  We now represent eight manufacturers and 19 different brands, operate in eight provinces and employee over 3,400 dedicated staff.  We are pleased with the dealerships we acquired this past year as they are integrating well into AutoCanada and we believe they will provide long-term value for our stakeholders."

"Our financial results indicate the size and strength of AutoCanada, with fiscal 2014 resulting in a 57% growth in revenues and a 26% increase in basic earnings per share," stated Tom Orysiuk, President & Chief Executive Officer.  "Same store gross profit grew by 7.9% year-over-year and we now operate 48 dealerships, encompassing 56 franchises, across the country.  We managed over 700,000 service repair work orders in our 822 service bays.  Also during the year we were successful in completing over $1 billion in financing transactions, including a $200 million equity offering and a $150 million debt issuance, complemented by new facilities of $550 million floorplan and $200 million revolving credit."

Mr. Priestner and Mr. Orysiuk further added, "We would like to sincerely thank our dealer partners, our dealership and dealer support services staff, and of course our customers for their dedication and loyalty to AutoCanada throughout 2014 and into the future."

Fourth Quarter 2014 Highlights

  • The Company generated net earnings attributable to AutoCanada shareholders of $14.9 million or basic earnings per share of $0.60 versus earnings per share of $0.44 in the fourth quarter of 2013.  Pre-tax earnings attributable to AutoCanada shareholders increased by $7.1 million to $20.1 million in the fourth quarter of 2014 as compared to $13.0 million in the same period in 2013.

  • Same store revenue increased by 10.9% in the fourth quarter of 2014, compared to the same quarter in 2013.  Same store gross profit increased by 5.7% in the fourth quarter of 2014, compared to the same quarter in 2013.

  • Revenue from existing and new dealerships increased 95.8% to $653.5 million in the fourth quarter of 2014 from $333.8 million in the same quarter in 2013.

  • Gross profit from existing and new dealerships increased 80.4% to $112.4 million in the fourth quarter of 2014 from $62.3 million in the same quarter in 2013.

  • EBITDA increased 65.5% to $24.5 million in the fourth quarter of 2014 from $14.8 million in the same quarter in 2013.

  • Free cash flow increased to $39.8 million in the fourth quarter of 2014 or $1.63 per share as compared to $8.4 million or $0.39 per share in the fourth quarter of 2013.

  • Adjusted free cash flow increased to $17.1 million in the fourth quarter of 2014 or $0.70 per share as compared to $11.9 million or $0.55 per share in the same quarter in 2013.

2014 Annual Highlights

  • The Company generated net earnings attributable to AutoCanada shareholders of $53.1 million or basic earnings per share of $2.31 versus earnings per share of $1.83 in 2013.  Pre-tax earnings attributable to AutoCanada shareholders increased by $19.7 million to $71.6 million in 2014 as compared to $51.9 million in 2013 year.

  • Same store revenue increased by 8.9% in 2014, compared to 2013.  Same store gross profit increased by 7.9% in 2014, compared to 2013.

  • Revenue from existing and new dealerships increased 57.2% to $2,214.8 million in 2014 from $1,409.0 million in 2013.

  • Gross profit from existing and new dealerships increased 51.7% to $373.1 million in 2014 from $246.0 million in 2013.

  • EBITDA increased 52.8% to $89.4 million in 2014 from $58.5 million in 2013.

  • Free cash flow increased to $63.7 million in 2014 as compared $34.6 million in 2013.

  • Adjusted free cash flow increased to $62.1 million in 2014 as compared to $44.9 million in 2013.

Dividends

Management reviews the Company's financial results on a monthly basis. The Board of Directors reviews the financial results periodically to determine whether a dividend shall be paid based on a number of factors. 

The following table summarizes the dividends declared by the Company in 2014 (in thousands of dollars):











Record date



Payment date



Per Share
$



Total
$

February 28, 2014



March 17, 2014



0.22



4,760

May 30, 2014



June 16, 2014 



0.23



5,022

August 29, 2014



September 15, 2014



0.24



5,858

November 28, 2014



December 15, 2014 



0.25



6,105







0.94



21,745











On February 17, 2015, the Board declared a quarterly eligible dividend of $0.25 per common share on AutoCanada's outstanding shares, payable on March 16, 2015 to shareholders of record at the close of business on February 28, 2015. The quarterly eligible dividend of $0.25 represents an annual dividend rate of $1.00 per share.

Eligible dividend designation

For purposes of the enhanced dividend tax credit rules contained in the Income Tax Act (Canada) (the "ITA") and any corresponding provincial and territorial tax legislation, all dividends paid by AutoCanada or any of its subsidiaries in 2010 and thereafter are designated as "eligible dividends" (as defined in 89(1) of the ITA), unless otherwise indicated.  Please consult with your own tax advisor for advice with respect to the income tax consequences to you of AutoCanada Inc. designating dividends as "eligible dividends".

Outlook

The outlook for the Canadian economy has softened with economists revising their previous estimates downward, especially affecting the West in general and Alberta in particular, much as a result of falling oil prices. Revised GDP growth forecasts for Canada presently sit at 1.9 percent for 2015, down from 2.4 percent in previous forecasts from November 2014. As a result, the economy, especially in Alberta, has observed a slowdown in capital spending and a reduction in employment levels. More importantly, there has been a significant reduction in consumer confidence with a recent study showing that 40% of Albertans are deferring major purchases of homes and automobiles (Source: ATB Financial, Economics and Research, Alberta Economic Outlook, Q1 2015, January 5, 2015).

The first two months of 2015, and the latter half of December 2014, have, however, proved very challenging for the Company. We note, for example, R.L. Polk reported a 9.4% decline in retail volumes in January 2015 compared to January 2014 in the Calgary area. Relating to brands which the Company operates in Calgary, this decline includes decreases in retail sales of 17.5%, 10.2%, and 33.3%, for FCA Canada (formerly Chrysler Canada), Japanese, and Korean manufacturers, respectively. Edmonton and Grande Prairie, markets where the Company also has significant market presence, have likewise proved challenging. Additionally, the Company has experienced volume and/or margin challenges at a number of its dealerships elsewhere in Canada. Consequently, the Company has experienced significantly lower than forecasted vehicle sales and margins with a corresponding decline in dealership profitability in early fiscal 2015, resulting in weak performance relative to the comparative results of 2014.

To the extent the challenges are related to the price of oil and its impact on consumer confidence, the Company is taking the necessary steps to reduce variable costs to mitigate the impact. The Company's ability to moderate the effect of reduced sales activity is encompassed in the variable cost structure. However, such reductions are not immediate for several reasons, including: (i) the acceptance of lower vehicle sales margins to stimulate unit sales to achieve manufacturer sales-based performance targets; (ii) higher than normal per unit advertising cost due to reduced volume; (iii) inventory carrying costs incurred to support forecasted stronger sales volumes in excess of actual sales volumes; and (iv) the industry practice of paying advances to top-up the incomes of front line key sales staff in order to retain key individuals. Other operational challenges incurred to date with respect to the first two months of 2015 would include record snowfall in the Maritimes and a more pronounced seasonality impact experienced by certain recently purchased dealerships compared to the Company's experience. The Company is aggressively taking the necessary steps to address these challenges at the individual dealership level.

Management remains fully confident in its model and that it can take full advantage of its variable cost structure should the period of reduced economic activity continue. Furthermore, the Company believes that the West and Alberta in particular shall continue to provide superior long-term shareholder returns. Further, should the Western economy continue for a period at a slower pace, Management anticipates that acquisition multiples for Western dealerships shall decline, thus providing more attractive buying opportunities, further enhancing long term shareholder value. Additionally, the Company shall continue to seek opportunities elsewhere in Canada so as to provide continued diversity where appropriate. With a strong balance sheet, available liquidity and cash flow, the Company has maintained the current quarterly dividend rate at $0.25, to allow it to be in a position to patiently pursue its acquisition strategy thereby maximizing its ability to take advantage of anticipated buying opportunities that times of economic uncertainty generally provide. Management believes the current acquisition guidance of 3-5 additional dealerships to be announced by the end of May 2015 is accurate and we are presently monitoring the impact current market conditions are having on acquisition multiples so that we can continue to grow the company through acquisitions at reasonable multiples.

During the second half of fiscal 2014, the Company was pleased to open its first Kia Canada store, an open point in Edmonton, Alberta. Although the store's performance is typical for most open points where losses in the first one or two years are common, the Company is pleased with its most recent progress and is very confident in its future. During fiscal 2015 and 2016, the Company also plans to open additional open points including a Nissan dealership in Calgary, a Volkswagen dealership in Sherwood Park (Edmonton), and a second Kia dealership in North Winnipeg. Management believes these stores will provide long term shareholder value.

The decline in the exchange rate of the Canadian dollar to the US dollar should have a limited impact on AutoCanada. All of its vehicle purchases and predominantly all of its automotive parts purchases are denominated in Canadian currency resulting in limited foreign exchange risk. Furthermore, the price of vehicles from the manufacturers are determined annually, in the first quarter, and typically do not move in close correlation with the spot market foreign exchange rates.

Finally, in early 2015, the Company filed for a normal course issuer bid in order to opportunistically repurchase our shares. Share purchases will only be conducted if, based on the Company's share price, Management believes it is the best use of its capital at that time to drive long term shareholder value.

By-Law No. 2

The Company also announces that the Board has approved and adopted an advance notice by-law ("By-Law No. 2") for the Company. Among other things, By-Law No. 2 fixes a deadline by which shareholders must submit a notice of director nominations to the Company prior to any annual or special meeting of shareholders where directors are to be elected. By-Law No. 2 also sets forth the information that a shareholder must include in the notice for it to be valid. Advance notice by-laws benefit shareholders by facilitating an orderly and efficient meeting process, ensuring that all shareholders receive adequate notice of director nominations and sufficient information with respect to all nominees. This allows the Company and shareholders to evaluate each nominee's qualifications and suitability as a director of Company in advance of a meeting, so that shareholders can cast an informed vote.

By-Law No. 2 is effective immediately, subject to confirmation by the shareholders. At the next meeting of shareholders of Company, scheduled to be held on May 8, 2015, shareholders will be asked to confirm By-Law No. 2. The full text of By-Law No. 2 has been filed under the Company's profile at www.sedar.com.

Conference Call

A conference call to discuss the results for the year ended December 31, 2014 will be held on March 20, 2015 at 11:00am Eastern time (9:00am Mountain time).  To participate in the conference call, please dial 1.888.231.8191 approximately 10 minutes prior to the call.  A live and archived audio webcast of the conference call will also be available at the following http://www.newswire.ca/en/webcast/detail/1473187/1639949.


SELECTED ANNUAL FINANCIAL INFORMATION

The following table shows the results of the Company for the years ended December 31, 2014, 2013, and 2012. The results of operations for these periods are not necessarily indicative of the results of operations to be expected in any given comparable period.

(in thousands of dollars, except Gross Profit %, Earnings per
share, and Operating Data) Income Statement Data


2014(1)


2013


2012


New vehicles


1,342,346


882,858


683,375


Used vehicles


495,352


300,881


243,351


Parts, service and collision repair


255,707


142,343


114,600


Finance, insurance and other


121,373


82,958


62,587

Revenue


2,214,778


1,409,040


1,103,913










New vehicles


106,002


75,835


57,575


Used vehicles


29,501


20,273


16,311


Parts, service and collision repair


128,566


73,755


59,643


Finance, insurance and other


109,080


76,172


56,836

Gross profit


373,149


246,035


190,365








Gross Profit %


16.8 %


17.5 %


17.2 %

Operating expenses


290,904


188,519


149,140

Operating expenses as a % of gross profit


78.0 %


76.6 %


78.3 %

Income from investments in associates


3,490


2,241


468

Net earnings attributable to AutoCanada shareholders


53,132


38,166


24,236

EBITDA(2)


89,434


58,469


37,885

Basic earnings per share


2.31


1.83


1.22

Diluted earnings per share


2.30


1.83


1.22

Operating Data

Vehicles (new and used) sold excluding GM


46,393


35,774


29,780

Vehicles (new and used) sold including GM (3)


52,147


40,136


31,554

New vehicles sold including GM (3)


36,422


28,024


21,501

New retail vehicles sold


30,346


20,523


16,226

New fleet vehicles sold


6,076


4,876


4,096

Used retail vehicles sold


15,725


10,375


9,458

Number of service & collision repair orders completed(4)


601,597


364,361


309,488

Absorption rate(2)


85 %


87 %


86 %

# of dealerships at year end(4)


48


28


24

# of same store dealerships


23


21


22

# of service bays at year end(4)


822


406


333

Same store revenue growth(5)


8.9 %


17.2 %


8.6 %

Same store gross profit growth(5)


7.9 %


17.5 %


10.9 %

Balance Sheet Data

Cash and cash equivalents


72,462


35,113


34,472

Restricted cash


-


-


10,000

Trade and other receivables


92,138


57,771


47,944

Inventories


563,277


278,091


199,226

Revolving floorplan facilities


527,780


264,178


203,525



1

In conjunction with the business combination under common control completed on July 11, 2014, the Selected Annual Financial Information for 2014 includes the consolidated results of the Company's GM stores from July 11, 2014. All 2014 financial information includes 100% of the results of the GM stores, except for Net earnings, EBITDA, and EPS amounts, which are presented net of non-controlling interests. Had the consolidation been effected for fiscal 2013, additional revenues of $205.6 million and gross profit of $33.1 million would have been recognized.

2

EBITDA and absorption rate have been calculated as described under "NON-GAAP MEASURES".

3

Until July 10, 2014, the Company had investments in General Motors dealerships that were not consolidated. In Q3 2014, these GM dealerships were consolidated. This number includes 100% of vehicles sold by these dealerships in which we have less than 100% investment.

4

The results presented for 2013 and 2012 do not include the GM stores and their associated service bays or repair orders.

5

Same store revenue growth & same store gross profit growth is calculated using franchised automobile dealerships that we have owned for at least 2 full years, excluding the GM stores, as these stores have been treated as acquisitions as at July 11, 2014.

SELECTED QUARTERLY FINANCIAL INFORMATION

The following table shows the unaudited results of the Company for each of the eight most recently completed quarters.  The results of operations for these periods are not necessarily indicative of the results of operations to be expected in any given comparable period.

(in thousands of dollars, except Gross Profit %,
Earnings per share, and Operating Data)

Q4
2014(1)

Q3
2014(1)

Q2
2014

Q1
2014

Q4
2013

Q3
2013

Q2
2013

Q1
2013

Income Statement Data










New vehicles

379,094

457,198

289,918

216,524

197,097

257,543

254,403

174,410


Used vehicles

148,579

158,779

102,025

85,969

75,137

85,975

77,113

62,656


Parts, service and collision repair

91,045

78,371

46,078

40,724

41,268

37,341

34,629

29,667


Finance, insurance and other

34,749

39,002

27,304

21,047

20,271

22,676

22,620

17,529

Revenue(7)

653,467

733,350

465,325

364,264

333,773

403,535

388,765

284,262











New vehicles

28,390

35,711

23,822

17,813

18,326

20,510

20,664

15,947


Used vehicles

7,817

9,637

6,506

5,551

4,450

6,242

5,795

3,789


Parts, service and collision repair

45,631

38,942

23,373

20,593

20,822

20,113

17,586

15,232


Finance, insurance and other

30,606

35,615

24,342

19,514

18,734

20,831

20,783

16,157

Gross profit(7)

112,444

119,905

78,043

63,471

62,332

67,696

64,828

51,125










Gross Profit %

17.2%

16.4%

16.8%

17.4%

18.7%

16.8%

16.7%

18.0%

Operating expenses

89,482

89,713

58,920

50,400

48,447

51,080

48,639

40,353

Operating expenses as a % of gross profit

79.6%

74.8%

75.5%

79.4%

77.7%

75.5%

75.0%

78.9%

Income from investments in associates

-

359

2,238

893

837

555

648

201

Net earnings attributable to AutoCanada shareholders(6)

14,918

17,765

12,831

8,296

9,553

10,968

10,823

6,822

EBITDA(2,6,7)

24,527

28,674

21,702

14,453

14,754

16,607

16,463

10,511

Basic earnings per share

0.60

0.74

0.59

0.38

0.44

0.51

0.53

0.35

Diluted earnings per share

0.59

0.74

0.59

0.38

0.44

0.51

0.53

0.35

Operating Data









Vehicles (new and used) sold excluding GM

12,774

14,966

9,887

8,766

8,046

10,325

10,062

7,341

Vehicles (new and used) sold including GM(3)

15,415

18,079

12,414

9,945

9,209

11,405

11,399

8,123

New vehicles sold including GM(3)

10,570

12,821

8,658

6,570

6,090

8,023

8,246

5,665

New retail vehicles sold

8,907

10,686

5,980

4,773

4,932

5,986

5,487

4,118

New fleet vehicles sold

1,663

2,135

1,146

1,132

552

1,365

1,923

1,036

Used retail vehicles sold

4,845

5,258

2,761

2,861

2,562

2,974

2,652

2,187

Number of service & collision repair orders completed (4)

214,077

198,612

97,559

91,999

95,958

97,074

93,352

77,977

Absorption rate(2)

85%

93%

92%

85%

90%

88%

90%

82%

# of dealerships at period end(4)

48

45

34

28

28

29

27

25

# of same store dealerships

23

23

23

23

21

22

22

22

# of service bays at period end(4)

822

734

516

406

406

413

368

341

Same store revenue growth(5)

10.9%

8.9%

4.1%

13.0%

8.9%

19.9%

26.2%

12.9%

Same store gross profit growth(5)

5.7%

11.4%

5.4%

8.1%

9.2%

18.5%

25.8%

16.9%

Balance Sheet Data









Cash and cash equivalents

72,462

64,559

91,622

41,541

35,113

37,940

35,058

41,991

Restricted cash

-

-

-

-

-

-

10,000

10,000

Trade and other receivables

92,138

115,074

85,837

69,747

57,771

62,105

69,656

57,663

Inventories

563,277

471,664

324,077

261,764

278,091

236,351

232,319

217,268

Revolving floorplan facilities

527,780

437,935

313,752

261,263

264,178

228,526

246,325

225,387



1

In conjunction with the business combination under common control completed on July 11, 2014, the Selected Quarterly Financial Information for Q3 2014 and Q4 2014 includes the consolidated results of the Company's GM stores from July 11, 2014. All Q3 2014 and Q4 2014 financial information includes 100% of the results of the GM stores, except for Net earnings, EBITDA, and EPS amounts, which are presented net of non-controlling interests.

2

EBITDA and absorption rate have been calculated as described under "NON-GAAP MEASURES".

3

Until July 10, 2014, the Company had investments in General Motors dealerships that were not consolidated. In Q3 2014, these GM dealerships were consolidated. This number includes 100% of vehicles sold by these dealerships in which we have less than 100% investment.

4

The results presented for all quarters prior to Q3 2014 do not include the GM stores and their associated service bays or repair orders.

5

Same store revenue growth & same store gross profit growth is calculated using franchised automobile dealerships that we have owned for at least 2 full years, excluding the GM stores, as these stores have been treated as acquisitions as at July 11, 2014.

6

The results from operations have been lower in the first and fourth quarters of each year, largely due to consumer purchasing patterns during the holiday season, inclement weather and the reduced number of business days during the holiday season. As a result, our financial performance is generally not as strong during the first and fourth quarters than during the other quarters of each fiscal year. The timing of acquisitions may have also caused significant fluctuations in operating results from quarter to quarter.

7

Due to the impact of financial rounding throughout the interim periods, the aggregate quarterly results may not equal the annual total for the corresponding year.

The following table summarizes the results for the year ended December 31, 2014 on a same store basis by revenue source and compare these results to the same period in 2013. 

Same Store Revenue and Vehicles Sold


For the Year Ended


(in thousands of dollars)

December 31,

2014

December 31,

2013

% Change

Revenue Source





New vehicles - Retail

711,924

663,665

7.3 %


New vehicles - Fleet

134,973

139,005

(2.9)%

New vehicles

846,897

802,670

5.5 %


Used vehicles - Retail

228,327

205,384

11.2 %


Used vehicles - Wholesale

97,180

69,961

38.9 %

Used Vehicles

325,507

275,345

18.2 %

Finance, insurance and other

81,867

75,561

8.3 %

Subtotal

1,254,271

1,153,576

8.7 %

Parts, service and collision repair

135,116

122,298

10.5 %

Total

1,389,387

1,275,874

8.9 %

(in number of units)

New retail vehicles sold

19,229

18,591

3.4 %

New fleet vehicles sold

4,264

4,756

(10.3)%

Used retail vehicles sold

9,888

9,457

4.6 %

Total

33,381

32,804

1.8 %

Total vehicles retailed

29,117

28,048

3.7 %









Same Store Gross Profit and Gross Profit Percentage


For the Year Ended









Gross Profit

Gross Profit %

(in thousands of dollars)

December
 31, 2014

December
 31, 2013

% Change

December
 31, 2014

December
 31, 2013

% Change

Revenue Source








New vehicles - Retail

71,869

68,037

5.6 %

10.1 %

10.3 %

(0.2)%


New vehicles - Fleet

1,272

1,171

8.6 %

0.9 %

0.8 %

0.1 %

New vehicles

73,141

69,208

5.7 %

8.6 %

8.6 %

- %


Used vehicles - Retail

17,569

16,044

9.5 %

7.7 %

7.8 %

(0.1)%


Used vehicles - Wholesale

1,288

2,830

(54.5)%

1.3 %

4.0 %

(2.7)%

Used Vehicles

18,857

18,874

(0.1)%

5.8 %

6.9 %

(1.1)%

Finance, insurance and other

75,267

69,115

8.9 %

91.9 %

91.5 %

0.4 %

Subtotal

167,265

157,197

6.4 %

13.3 %

13.6 %

(0.3)%

Parts, service and collision repair

71,536

64,020

11.7 %

52.9 %

52.3 %

0.6 %

Total

238,801

221,217

7.9 %

17.2 %

17.3 %

(0.1)%

The following table summarizes the results for the three month period and the year ended December 31, 2014 on a same store basis by revenue source and compares these results to the same period in 2013.

Same Store Revenue and Vehicles Sold


For the Three Months Ended


(in thousands of dollars)

December

 31, 2014

December

 31, 2013

% Change

Revenue Source





New vehicles - Retail

156,602

150,463

4.1 %


New vehicles - Fleet

24,748

16,767

47.6 %

New vehicles

181,350

167,230

8.4 %


Used vehicles - Retail

53,225

47,655

11.7 %


Used vehicles - Wholesale

23,410

17,031

37.5 %

Used vehicles

76,635

64,686

18.5 %

Finance, insurance and other

18,781

17,754

5.8 %

Subtotal

276,766

249,670

10.9 %

Parts, service and collision repair

35,889

32,271

11.2 %

Total

312,655

281,941

10.9 %





New retail vehicles sold

4,307

4,191

2.8 %

New fleet vehicles sold

896

515

74.0 %

Used retail vehicles sold

2,329

2,177

7.0 %

Total

7,532

6,883

9.4 %

Total vehicles retailed

6,636

6,368

4.2 %








Same Store Gross Profit and Gross Profit Percentage


For the Three Months Ended




Gross Profit

Gross Profit %

(in thousands of dollars)

December
 31, 2014

December
 31, 2013

% Change

December
 31, 2014

December
 31, 2013

Change

Revenue Source








New vehicles - Retail

14,626

15,563

(6.0)%

9.3 %

10.3 %

(1.0)%


New vehicles - Fleet

550

49

1,022.4 %

2.2 %

0.3 %

1.9 %

New vehicles

15,176

15,612

(2.8)%

8.4 %

9.3 %

(0.9)%


Used vehicles - Retail

3,759

2,230

68.6 %

7.1 %

4.7 %

2.4 %


Used vehicles - Wholesale

63

1,970

(96.8)%

0.3 %

11.6 %

(11.3)%

Used vehicles

3,822

4,200

(9.0)%

5.0 %

6.5 %

(1.5)%

Finance, insurance and other

17,283

16,017

7.9 %

92.0 %

90.2 %

1.8 %

Subtotal

36,281

35,829

1.3 %

13.1 %

14.4 %

(1.3)%

Parts, service and collision repair

19,069

16,550

15.2 %

53.1 %

51.3 %

1.8 %

Total

55,350

52,379

5.7 %

17.7 %

18.6 %

(0.9)%

Consolidated Statements of Comprehensive Income




For the Years Ended




(in thousands of Canadian dollars except for share and per share amounts)









December 31,

2014

$


December 31,

2013

$

Revenue

2,214,778


1,409,040

Cost of sales

(1,841,629)


(1,163,005)

Gross profit

373,149


246,035

Operating expenses

(290,904)


(188,519)

Operating profit before other income (expense)

82,245


57,516

Lease and other income, net

5,524


-

Loss on disposal of assets, net

(183)


(210)

Recovery of impairment of intangible assets

1,767


746

Income from investments in associates

3,490


2,241

Operating profit

92,843


60,293

Finance costs

(20,363)


(9,618)

Finance income

2,147


1,187

Net income for the year before taxation

74,627


51,862

Income tax

18,335


13,696

Net and comprehensive income for the year

56,292


38,166

Net and comprehensive income for the year attributable to:




AutoCanada shareholders

53,132


38,166

Non‑controlling interests

3,160


-


56,292


38,166

Net earnings per share attributable to AutoCanada shareholders




Basic                                                                                                                                            

2.31


1.83

Diluted                                                                                                                                        

2.30


1.83





Weighted average shares                                                                                                       




Basic                                                                                                                                            

23,018,588


20,868,726

Diluted                                                                                                                                        

23,139,403


20,934,828


Consolidated Statements of Financial Position

(in thousands of Canadian dollars)


December 31,
2014
$

December 31,
2013
$

ASSETS



Current assets



Cash and cash equivalents

72,462

35,113

Trade and other receivables

92,138

57,771

Inventories

563,277

278,091

Current portion of finance lease receivables

3,537

-

Other current assets

5,166

1,603


736,580

372,578

Property and equipment

214,938

122,915

Investments in associates

-

13,131

Intangible assets

356,612

96,985

Goodwill

29,620

6,672

Long‑term portion of finance lease receivables

10,292

-

Other long‑term assets

6,713

6,797


1,354,755

619,078

LIABILITIES



Current liabilities



Bank indebtedness

2,181

-

Trade and other payables 

82,670

50,428

Revolving floorplan facilities

527,780

264,178

Current tax payable

9,708

4,906

Vehicle repurchase obligations

1,539

1,398

Current indebtedness

4,651

2,866

Current portion of redemption liabilities

7,665

-


636,194

323,776

Long‑term indebtedness

223,009

83,580

Deferred income tax

24,963

21,480

Redemption liabilities

34,133

-


918,299

428,836

EQUITY



Attributable to AutoCanada shareholders

381,428

190,242

Attributable to Non‑controlling interests

55,028

-


436,456

190,242


1,354,755

619,078


Consolidated Statements of Changes in Equity

For the Years Ended

(in thousands of Canadian dollars)






Attributable to AutoCanada shareholders




Share
capital

$

Contributed
surplus

$

Accumulated
deficit

$

Total

$

Non‑controlling
interests

$

Total
Equity

$

Balance, January 1, 2014 

232,938

4,758

(47,454)

190,242

-

190,242

Net and comprehensive income

-

-

53,132

53,132

3,160

56,292

Dividends declared on common shares

-

-

(21,745)

(21,745)

-

(21,745)

Non‑controlling interests arising on business combinations and acquisitions

-

-

-

-

52,309

52,309

Recognition of redemption liability granted to non‑controlling interests

-

-

(41,798)

(41,798)

-

(41,798)

Dividends declared by subsidiaries to non‑controlling interests

-

-

-

-

(441)

(441)

Common shares issued

203,655

-

-

203,655

-

203,655

Treasury shares acquired

(2,776)

-

-

(2,776)

-

(2,776)

Shares settled from treasury

755

(760)

-

(5)

-

(5)

Share‑based compensation

-

723

-

723

-

723

Balance, December 31, 2014

434,572

4,721

(57,865)

381,428

55,028

436,456










Attributable to AutoCanada shareholders




Share
capital

$

Contributed
surplus

$

Accumulated
deficit

$

Total
capital

$

Non‑controlling
interests

$

Equity

$

Balance, January 1, 2013 

189,500

4,423

(69,423)

124,500

-

124,500

Net and comprehensive income

-

-

38,166

38,166

-

38,166

Dividends declared on common shares

-

-

(16,197)

(16,197)

-

(16,197)

Common shares issued

43,811

-

-

43,811

-

43,811

Treasury shares acquired

(579)

-

-

(579)

-

(579)

Shares settled from treasury

206

(240)

-

(34)

-

(34)

Share‑based compensation

-

575

-

575

-

575

Balance, December 31, 2013

232,938

4,758

(47,454)

190,242

-

190,242

Consolidated Statements of Cash Flows For the Years Ended (in thousands of Canadian dollars)




Cash provided by (used in):

December 31,

2014

$

December 31,

2013

$

Operating activities



Net and comprehensive income

56,292

38,166

Income taxes

18,335

13,696

Amortization of prepaid rent

452

452

Depreciation of property and equipment

13,624

6,346

Loss on disposal of assets

183

210

Recovery of impairment of intangible assets

(1,767)

(746)

Share‑based compensation ‑ equity‑settled

723

575

Share‑based compensation ‑ cash‑settled

(487)

2,054

Income from investment in associates

(3,490)

(2,241)

Income taxes paid

(16,824)

(10,559)

Gain on embedded derivative

(243)

-

Net change in non‑cash working capital

4,339

(9,968)


71,137

37,985

Investing activities



Business acquisitions, net of cash acquired

(269,983)

(65,368)

Investments in associates

(43,900)

(7,057)

Dividends received from investments in associates

1,458

897

Combination of entities under common control

4,699

-

Purchases of property and equipment

(23,441)

(67,105)

Proceeds on sale of property and equipment

32

3,304

Proceeds on divestiture of dealership

-

1,354

Reduction in restricted cash

-

10,000


(331,135)

(123,975)

Financing activities



Proceeds from long‑term indebtedness

770,449

241,287

Repayment of long‑term indebtedness

(787,945)

(181,757)

Common shares repurchased

(2,776)

(513)

Dividends paid

(21,745)

(16,197)

Dividends paid to non‑controlling interests by subsidiaries

(441)

-

Proceeds from issuance of common shares

191,262

43,811

Proceeds from senior unsecured notes

146,362

-


295,166

86,631

Increase in cash

35,168

641

Cash and cash equivalents at beginning of year

35,113

34,472

Cash and cash equivalents at end of year

70,281

35,113

ABOUT AUTOCANADA

AutoCanada is one of Canada's largest multi-location automobile dealership groups, currently operating 48 dealerships, comprised of 56 franchises, in eight provinces and has over 3,400 employees. AutoCanada currently sells Chrysler, Dodge, Jeep, Ram, FIAT, Chevrolet, GMC, Buick, Cadillac, Infiniti, Nissan, Hyundai, Subaru, Mitsubishi, Audi, Volkswagen, Kia, BMW and MINI branded vehicles. In 2014, our dealerships sold approximately 57,000 vehicles and processed approximately 786,000 service and collision repair orders in our 822 service bays during that time.

Our dealerships derive their revenue from the following four inter-related business operations: new vehicle sales; used vehicle sales; parts, service and collision repair; and finance and insurance. While new vehicle sales are the most important source of revenue, they generally result in lower gross profits than parts, service and collision repair operations and finance and insurance sales. Overall gross profit margins increase as revenues from higher margin operations increase relative to revenues from lower margin operations. We earn fees for arranging financing on new and used vehicle purchases on behalf of third parties.  Under our agreements with our retail financing sources we are required to collect and provide accurate financial information, which if not accurate, may require us to be responsible for the underlying loan provided to the consumer. 

FORWARD LOOKING STATEMENTS

Certain statements contained in this press release are forward-looking statements and information (collectively "forward-looking statements"), within the meaning of the applicable Canadian securities legislation.  We hereby provide cautionary statements identifying important factors that could cause our actual results to differ materially from those projected in these forward-looking statements.  Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as "will likely result", "are expected to", "will continue", "is anticipated", "projection", "vision", "goals", "objective", "target", "schedules", "outlook", "anticipate", "expect", "estimate", "could", "should", "expect", "plan", "seek", "may", "intend", "likely", "will", "believe" and similar expressions are not historical facts and are forward-looking and may involve estimates and assumptions and are subject to risks, uncertainties and other factors some of which are beyond our control and difficult to predict.  Accordingly, these factors could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements.  Therefore, any such forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this document.

The Company's Annual Information Form and other documents filed with securities regulatory authorities (accessible through the SEDAR website www.sedar.com describe the risks, material assumptions and other factors that could influence actual results and which are incorporated herein by reference.

Further, any forward-looking statement speaks only as of the date on which such statement is made, and, except as required by applicable law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.  New factors emerge from time to time, and it is not possible for management to predict all of such factors and to assess in advance the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

NON-GAAP MEASURES

This press release contains certain financial measures that do not have any standardized meaning prescribed by Canadian GAAP.  Therefore, these financial measures may not be comparable to similar measures presented by other issuers.  Investors are cautioned these measures should not be construed as an alternative to net earnings (loss) or to cash provided by (used in) operating, investing, and financing activities determined in accordance with Canadian GAAP, as indicators of our performance.  We provide these measures to assist investors in determining our ability to generate earnings and cash provided by (used in) operating activities and to provide additional information on how these cash resources are used.  We list and define these "NON-GAAP MEASURES" below:


EBITDA

EBITDA is a measure commonly reported and widely used by investors as an indicator of a company's operating performance and ability to incur and service debt, and as a valuation metric.  The Company believes EBITDA assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization and asset impairment charges which are non-cash in nature and can vary significantly depending upon accounting methods or non-operating factors such as historical cost.  References to "EBITDA" are to earnings before interest expense (other than interest expense on floorplan financing and other interest), income taxes, depreciation, amortization and asset impairment charges.

Adjusted EBITDA

Adjusted EBITDA is an indicator of a company's operating performance and ability to incur and service debt prior to recognizing the portion of share‑based compensation related to changes in the share price and its impact on the Company's cash‑settled portions of its share‑based compensation programs. The Company considers this expense to be non-cash in nature as we maintain a share purchase trust in which we purchase shares on the open market as these units are granted to reduce the cash flow risk associated with fluctuations in the share price. Share‑based compensation, a component of employee remuneration, can vary significantly with changes in the price of the Company's common shares. The Company believes adjusted EBITDA provides improved continuity with respect to the comparison of our operating results over a period of time.

Adjusted Net Earnings and Adjusted Net Earnings per Share

Adjusted net earnings and adjusted net earnings per share are measures of our profitability. Adjusted net earnings is calculated by adding back the after‑tax effect of impairment or reversals of impairment of intangible assets, impairments of goodwill, and the portion of share‑based compensation related to changes in the share price and its impact on the Company's cash‑settled portions of its share‑based compensation programs. The Company considers this expense to be non-cash in nature as we maintain a share purchase trust in which we purchase shares on the open market as these units are granted to reduce the cash flow risk associated with fluctuations in the share price. Share‑based compensation, a component of employee remuneration, can vary significantly with changes in the price of the Company's common shares. Adding back these amounts to net earnings allows management to assess the net earnings of the Company from ongoing operations. Adjusted net earnings per share is calculated by dividing adjusted net earnings by the weighted‑average number of shares outstanding.

EBIT

EBIT is a measure used by management in the calculation of Return on capital employed (defined below).  Management's calculation of EBIT is EBITDA (calculated above) less depreciation and amortization.

Free Cash Flow

Free cash flow is a measure used by management to evaluate its performance.  While the closest Canadian GAAP measure is cash provided by operating activities, free cash flow is considered relevant because it provides an indication of how much cash generated by operations is available after capital expenditures.  It shall be noted that although we consider this measure to be free cash flow, financial and non-financial covenants in our credit facilities and dealer agreements may restrict cash from being available for distributions, re-investment in the Company, potential acquisitions, or other purposes.  Investors should be cautioned that free cash flow may not actually be available for growth or distribution of the Company.  References to "Free cash flow" are to cash provided by (used in) operating activities (including the net change in non-cash working capital balances) less capital expenditures (not including acquisitions of dealerships and dealership facilities).


Adjusted Free Cash Flow

Adjusted free cash flow is a measure used by management to evaluate its performance.  Adjusted free cash flow is considered relevant because it provides an indication of how much cash generated by operations before changes in non-cash working capital is available after deducting expenditures for non-growth capital assets.  It shall be noted that although we consider this measure to be adjusted free cash flow, financial and non-financial covenants in our credit facilities and dealer agreements may restrict cash from being available for distributions, re-investment in the Company, potential acquisitions, or other purposes.  Investors should be cautioned that adjusted free cash flow may not actually be available for growth or distribution of the Company.  References to "Adjusted free cash flow" are to cash provided by (used in) operating activities (before changes in non-cash working capital balances) less non-growth capital expenditures.

Adjusted Average Capital Employed

Adjusted average capital employed is a measure used by management to determine the amount of capital invested in AutoCanada and is used in the measure of Adjusted Return on Capital Employed (described below).  Adjusted average capital employed is calculated as the average balance of interest bearing debt for the period (including current portion of long term debt, excluding revolving floorplan facilities) and the average balance of shareholders equity for the period, adjusted for impairments of intangible assets, net of deferred tax.  Management does not include future income tax, non-interest bearing debt, or revolving floorplan facilities in the calculation of adjusted average capital employed as it does not consider these items to be capital, but rather debt incurred to finance the operating activities of the Company.

Absorption Rate

Absorption rate is an operating measure commonly used in the retail automotive industry as an indicator of the performance of the parts, service and collision repair operations of a franchised automobile dealership. Absorption rate is not a measure recognized by GAAP and does not have a standardized meaning prescribed by GAAP. Therefore, absorption rate may not be comparable to similar measures presented by other issuers that operate in the retail automotive industry.  References to ''absorption rate'' are to the extent to which the gross profits of a franchised automobile dealership from parts, service and collision repair cover the costs of these departments plus the fixed costs of operating the dealership, but does not include expenses pertaining to our head office. For this purpose, fixed operating costs include fixed salaries and benefits, administration costs, occupancy costs, insurance expense, utilities expense and interest expense (other than interest expense relating to floor plan financing) of the dealerships only. 

Average Capital Employed

Average capital employed is a measure used by management to determine the amount of capital invested in AutoCanada and is used in the measure of Return on Capital Employed (described below).  Average capital employed is calculated as the average balance of interest bearing debt for the period (including current portion of long term debt, excluding revolving floorplan facilities) and the average balance of shareholders equity for the period.  Management does not include future income tax, non-interest bearing debt, or revolving floorplan facilities in the calculation of average capital employed as it does not consider these items to be capital, but rather debt incurred to finance the operating activities of the Company.

Return on Capital Employed

Return on capital employed is a measure used by management to evaluate the profitability of our invested capital.  As a corporation, management of AutoCanada may use this measure to compare potential acquisitions and other capital investments against our internally computed cost of capital to determine whether the investment shall create value for our shareholders.  Management may also use this measure to look at past acquisitions, capital investments and the Company as a whole in order to ensure shareholder value is being achieved by these capital investments.  Return on capital employed is calculated as EBIT (defined above) divided by Average Capital Employed (defined above).

Adjusted Return on Capital Employed

Adjusted return on capital employed is a measure used by management to evaluate the profitability of our invested capital.  As a corporation, management of AutoCanada may use this measure to compare potential acquisitions and other capital investments against our internally computed cost of capital to determine whether the investment shall create value for our shareholders.  Management may also use this measure to look at past acquisitions, capital investments and the Company as a whole in order to ensure shareholder value is being achieved by these capital investments.  Adjusted return on capital employed is calculated as EBIT (defined above) divided by Adjusted Average Capital Employed (defined above).

Cautionary Note Regarding Non-GAAP Measures

EBITDA, EBIT, Free Cash Flow, Adjusted Free Cash Flow, Absorption Rate, Average Capital Employed and Return on Capital Employed are not earnings measures recognized by GAAP and do not have standardized meanings prescribed by GAAP­.  Investors are cautioned that these non-GAAP measures should not replace net earnings or loss (as determined in accordance with GAAP) as an indicator of the Company's performance, of its cash flows from operating, investing and financing activities or as a measure of its liquidity and cash flows.­ The Company's methods of calculating EBITDA, EBIT, Free Cash Flow, Adjusted Free Cash Flow, Absorption Rate, Average Capital Employed and Return on Capital Employed may differ from the methods used by other issuers.­ Therefore, the Company's EBITDA, EBIT, Free Cash Flow, Adjusted Free Cash Flow, Absorption Rate, Average Capital Employed and Return on Capital Employed may not be comparable to similar measures presented by other issuers. 

Additional Information

Additional information about AutoCanada Inc. is available at the Company's website at www.autocan.ca and www.sedar.com.

SOURCE AutoCanada Inc.

For further information: Christopher Burrows, Vice-President & Chief Financial Officer, Phone: 780.509.2808, Email: cburrows@autocan.ca

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