AutoCanada Inc. Announces Q1, 2016 Quarterly Results

EDMONTON, May 5, 2016 /CNW/ - AutoCanada Inc. (the "Company" or "AutoCanada") (TSX: ACQ) today announced financial results for the quarter ended March 31, 2016.

First Quarter 2016 Highlights

  • Revenue from existing and new dealerships increased by 5.3%, or $33.5 million, to $666.9 million in the first quarter of 2016 from $633.4 million in the same quarter in 2015.
  • Gross profit from existing and new dealerships increased by 6.0%, or $6.3 million, to $111.7 million in the first quarter of 2016 from $105.4 million in the same quarter in 2015.
  • Adjusted EBITDA attributable to AutoCanada shareholders increased by 52.7%, or $6.8 million, to $19.7 million in the first quarter of 2016 from $12.9 million in the same quarter in 2015.
  • EBITDA attributable to AutoCanada shareholders increased by 44.1%, or $5.6 million, to $18.3 million in the first quarter of 2016 from $12.7 million in the same quarter in 2015.
  • The Company generated net earnings attributable to AutoCanada shareholders of $7.3 million or basic earnings per share of $0.27 versus basic earnings per share of $0.20 in the first quarter of 2015. Pre-tax earnings attributable to AutoCanada shareholders increased by 44.8%, or $3.0 million, to $9.7 million in the first quarter of 2016 as compared to $6.7 million in the same period in 2015.
  • The Company generated adjusted net earnings attributable to AutoCanada shareholders of $8.6 million compared to $5.3 million in the same quarter in 2015. Basic adjusted net earnings per share were $0.31 versus basic adjusted earnings per share of $0.22 in the first quarter of 2015.
  • Same store revenue decreased by 3.1% in the first quarter of 2016, compared to the same quarter in 2015. Same store gross profit decreased by 5.5% in the first quarter of 2016, compared to the same quarter in 2015.
    Same store gross profit percentage increased by 0.4% in the first quarter of 2016, compared to the same quarter in 2015.
  • Free cash flow increased to $4.0 million in the first quarter of 2016 or $0.15 per share as compared to $(3.2) million or $(0.13) per share in the same quarter in 2015.
  • Adjusted free cash flow increased to $6.0 million in the first quarter of 2016 or $0.22 per share as compared to $(7.4) million or $(0.30) per share in the same quarter in 2015.
  • Same store new vehicle retail revenue decreased by 6.3%, or $9.6 million, to $143.2 million in the first quarter of 2016 from $152.8 million in the same quarter in 2015.
  • Same store used vehicle retail revenue increased by 12.9%, or $8.3 million, to $72.6 million in the first quarter of 2016 from $64.3 million in the same quarter in 2015.
  • Same store parts, service and collision repair revenue decreased by 6.6%, or $2.8 million, to $39.8 million in the first quarter of 2016 from $42.6 million in the same quarter in 2015.

"The retail automotive industry continues to be challenging in many of the markets in which we operate. Our business model provides consistent profitability for AutoCanada and our dealerships. Going forward, our management team including our retailers will focus on operational excellence at our current dealerships to achieve positive same store metrics. We will also continue to seek regional diversity through acquisitions of flagship stores in major metropolitan markets" said Steven Landry, Chief Executive Officer. "I would like to thank all of our 3,700 employees for their hard work and efforts during this quarter."

"The quarter provided an increase in net earnings and gross profit. Our EPS also improved and beat consensus. However, a reduction in the dividend seems prudent and allows us to focus on growth. The $16.5 million in annualized savings will help fund future acquisitions while strengthening our balance sheet and increasing liquidity" said Chris Burrows, Chief Financial Officer. "AutoCanada continues to have significant earnings potential and we have the ability to generate increased cash-flow as the economy improves."

Dividends

On May 5, 2016, the Board declared a quarterly eligible dividend of $0.10 per common share on AutoCanada's outstanding Class A common shares, payable on June 15, 2016 to shareholders of record at the close of business on May 31, 2016.

In support of AutoCanada's continued growth, we have reduced the dividend, from $0.25 to $0.10 per quarter. This action will allow the Company to retain $16.5 million annually that can be used to support growth and fund acquisitions. The current economic conditions allows AutoCanada to be opportunistic in our due diligence around potential acquisitions. Our strategy is to acquire dealerships that provide accretive strong returns, focusing on large dealerships in major metropolitan markets. In addition to funding growth, the reduced dividend allows AutoCanada to further strengthen our balance sheet while also increasing liquidity.

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 retail automotive industry is proven to provide consistent profitability in all market conditions, as all of our dealerships are profitable with the exception of one recently opened dealership. AutoCanada continues to have significant earnings potential and we have the ability to generate increased cash-flow when the economy improves in Western Canada where we have a heavy concentration of same stores.

Throughout the first quarter, and into the balance of 2016, Management continues to employ our five point strategy to deal with the current downward pressure we face in this economic environment:

  • The Company continues to seek regional diversity through larger acquisitions in metropolitan markets. Management is pleased with the acquisition opportunities outside of Alberta and continues to explore and evaluate potential targets.
  • The Company has directed resources to increase integration efforts for the dealerships recently acquired to support same store metric improvement year-over-year.
  • The Company continues to manage the balance sheet as evidenced by the increase in free cash flow – 12 month trailing.
  • The Company is rolling-out new sales process technologies to enhance the customer experience in each of our dealerships.
  • The Company is reviewing all costs within the group to reduce or eliminate costs where possible. This focused effort on cost reduction is a project that began early in the first quarter and will continue throughout the calendar year. We have been able to decrease operating expenses as a percentage of gross profit from 88.4% in Q1, 2015 to 86.0% in Q1, 2016. Variable expenses have decreased by 3.3% compared to the first quarter of 2015.

Management is pleased with the progress made thus far on these strategies and we anticipate further success throughout 2016.

SELECTED QUARTERLY 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 %,

Q1

Q4

Q3

Q2

Q1

Q4

Q3

Q2

Earnings per share, and Operating Data)

2016

2015

2015

2015

2015

2014

2014

2014

Income Statement Data










New vehicles

363,181

368,242

471,018

483,435

345,542

379,094

456,810

289,918


Used vehicles

180,108

167,100

179,270

194,956

163,243

148,579

158,779

102,025


Parts, service and collision repair

94,721

102,220

93,139

99,304

92,951

91,225

77,680

46,078


Finance, insurance and other

28,862

34,752

37,778

39,182

31,671

36,355

37,267

27,038

Revenue

666,872

672,314

781,205

816,877

633,407

655,253

730,536

465,059


New vehicles

27,267

27,482

34,300

34,861

25,765

29,325

35,086

23,792


Used vehicles

10,420

10,326

10,949

11,000

8,354

7,808

9,637

6,505


Parts, service and collision repair

47,669

51,760

48,336

49,859

43,913

45,687

38,913

23,373


Finance, insurance and other

26,353

34,354

35,088

33,955

27,407

31,109

34,714

24,077

Gross profit

111,709

123,922

128,673

129,675

105,439

113,929

118,350

77,747

Gross Profit %

16.8%

18.4%

16.5%

15.9%

16.6%

17.4%

16.2%

16.7%

Operating expenses

96,047

101,310

100,824

100,568

93,175

90,283

90,695

59,227

Operating expenses as a % of gross profit

86.0%

81.8%

78.4%

77.6%

88.4%

79.2%

76.6%

76.2%

Income from investments in associates

-

-

-

-

-

-

359

2,238

Income from loan to associate

315

49

-

-

-

-

-

-

Impairment (recovery) of intangible assets and goodwill

-

18,757

-

-

-

(1,767)

-

-

Net earnings (loss) attributable to AutoCanada










shareholders

7,272

(7,631)

11,690

13,523

4,969

14,240

17,765

12,831

EBITDA attributable to AutoCanada shareholders

18,312

23,353

26,379

27,397

12,687

24,605

28,674

21,702

Basic earnings per share

0.27

(0.29)

0.48

0.56

0.20

0.60

0.74

0.59

Diluted earnings per share

0.27

(0.29)

0.47

0.56

0.20

0.59

0.74

0.59

Basic adjusted earnings per share

0.31

0.34

0.51

0.56

0.22

0.52

0.71

0.61

Dividends declared per share

0.25

0.25

0.25

0.25

0.25

0.25

0.24

0.23

Operating Data









Vehicles (new and used) sold excluding GM

10,728

12,345

13,092

14,723

11,343

12,774

14,966

9,887

Vehicles (new and used) sold including GM

13,301

14,150

17,086

17,739

13,824

15,415

18,079

12,414

New vehicles sold including GM

8,502

9,210

12,018

12,296

8,933

10,570

12,821

8,658

New retail vehicles sold

7,078

8,016

9,985

9,929

7,393

8,907

10,686

5,980

New fleet vehicles sold

1,424

1,194

2,033

2,367

1,540

1,663

2,135

1,146

Used retail vehicles sold

4,799

4,940

5,068

5,443

4,891

4,845

5,258

2,761










# of service and collision repair orders completed

209,194

230,772

202,692

215,142

199,096

216,427

198,612

97,559

Absorption rate

83%

93%

91%

94%

85%

85%

93%

92%

# of dealerships at period end

53

54

50

49

48

48

45

34

# of same store dealerships

27

28

26

24

23

23

23

23

# of service bays at period end

898

912

862

842

822

822

734

516

Same store revenue growth(4)

(3.1)%

(12.1)%

(6.9)%

(2.8)%

(3.5)%

10.9%

8.9%

4.1%

Same store gross profit growth(4)

(5.5)%

(14.3)%

(14.1)%

(11.0)%

(8.5)%

5.7%

11.4%

5.4%

Balance Sheet Data









Cash and cash equivalents

72,878

62,274

77,071

77,676

66,351

72,462

64,559

91,622

Trade and other receivables

116,092

90,821

118,853

124,683

104,753

92,138

115,074

85,837

Inventories

628,641

596,542

581,258

620,837

625,779

563,277

471,664

324,077

Revolving floorplan facilities

600,578

548,322

550,857

607,694

601,432

527,780

437,935

313,752

*See the Company's Management's Discussion and Analysis for the period ended March 31, 2016 for complete footnote disclosures.

The following table summarizes the results for the three month period ended March 31, 2016 on a same store basis by revenue source and compares these results to the same period in 2015.

Same Store Revenue and Vehicles Sold


For the Three Months Ended

Revenue Source

(in thousands of dollars)

March 31,

 2016

March 31,

2015

% Change


New vehicles ‑ Retail

143,165

152,816

(6.3)%


New vehicles ‑ Fleet

33,896

37,544

(9.7)%

Total New vehicles

177,061

190,360

(7.0)%


Used vehicles ‑ Retail

72,586

64,299

12.9%


Used vehicles ‑ Wholesale

26,271

25,453

3.2%

Total Used vehicles

98,857

89,752

10.1%

Finance, insurance and other

14,705

18,275

(19.5)%

Subtotal

290,623

298,387

(2.6)%

Parts, service and collision repair

39,802

42,605

(6.6)%

Total

330,425

340,992

(3.1)%





New retail vehicles sold

3,353

4,080

(17.8)%

New fleet vehicles sold

825

1,047

(21.2)%

Used retail vehicles sold

2,468

2,650

(6.9)%

Total

6,646

7,777

(14.5)%

Total vehicles retailed

5,821

6,730

(13.5)%

Same Store Gross Profit and Gross Profit Percentage


For the Three Months Ended


Gross Profit

Gross Profit %

Revenue Source

(in thousands of dollars)

March 31,

2016

March 31,

2015

% Change

March 31,

2016

March 31,

2015

% Change


New vehicles ‑ Retail

12,914

14,364

(10.1)%

9.0%

9.4%

(0.4)%


New vehicles ‑ Fleet

270

167

61.7%

0.8%

0.4%

0.4%

Total New vehicles

13,184

14,531

(9.3)%

7.4%

7.6%

(0.2)%


Used vehicles ‑ Retail

5,347

4,923

8.6%

7.4%

7.7%

(0.3)%


Used vehicles ‑ Wholesale

275

79

248.1%

1.0%

0.3%

0.7%

Total Used vehicles

5,622

5,002

12.4%

5.7%

5.6%

0.1%

Finance, insurance and other

13,562

16,946

(20.0)%

92.2%

92.7%

(0.5)%

Subtotal

32,368

36,479

(11.3)%

11.1%

12.2%

(1.1)%

Parts, service and collision repair

21,498

20,512

4.8%

54.0%

48.1%

5.9%

Total

53,866

56,991

(5.5)%

16.3%

16.7%

(0.4)%

MD&A and Financial Statements

Information included in this press release is a summary of results. It should be read in conjunction with AutoCanada's consolidated financial statements and management's discussion and analysis for the three month period ended March 31, 2016, which can be found on the company's website at www.autocan.ca or on www.sedar.com.

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. The following "Non-GAAP Measures" are defined in the interim MD&A: EBITDA; Adjusted EBITDA; Adjusted Net Earnings and Adjusted Net Earnings per Share; EBIT; Free Cash Flow; Adjusted Free Cash Flow; Adjusted Average Capital Employed; Absorption Rate; Average Capital Employed; Return on Capital Employed; and Adjusted Return on Capital Employed.

Conference Call

A conference call to discuss the results for the reporting period ended March 31, 2016 will be held on May 6, 2016 at 10:00am Eastern time (8:00am 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://event.on24.com/r.htm?e=1138781&s=1&k=089ADF311C73AB1CEF1C32D7A2832166.

About AutoCanada

AutoCanada is one of Canada's largest multi-location automobile dealership groups, currently operating 53 franchised dealerships, comprised of 60 franchises, in eight provinces and has over 3,700 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 2015, our dealerships sold approximately 62,800 vehicles and processed approximately 848,000 service and collision repair orders in our 912 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.

Additional Information

Additional information about AutoCanada 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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