Rocky Mountain Dealerships Inc. (TSX:RME, OTCQX:RCKXF) announces third quarter 2013 results

CALGARY, Nov. 12, 2013 /CNW/ - Rocky Mountain Dealerships Inc. (hereinafter "Rocky") today reported its financial results for the quarter ended September 30, 2013.

SUMMARY OF FINANCIAL RESULTS FOR THE QUARTER ENDED SEPTEMBER 30, 2013

  • Increased revenues by 10.1% to $272.6 million ($14.0 million from same store sales).
  • Equipment inventory decreased by $78.0 million.
  • Generated $20.1 million in cash resulting in an all-time high cash balance of $42.6 million.
  • Gross profit of $38.7 million (14.2% of sales).
  • Diluted Earnings per Share of $0.31.
  • EBITDA(1) of $10.3 million.
  • Paid dividend of $0.10 per share.

(1) See further discussion in "Non-IFRS Measures" and "Reconciliation of Non-IFRS Measures to IFRS" sections below.

Commenting on the quarterly results, Matt Campbell, CEO of Rocky, stated, "Our continued focus on moving our used equipment inventory enabled Rocky to increase top line revenues both organically and through acquisitions despite continued challenges on the construction side.  While these initiatives and the resulting sales mix have resulted in thinner margins for the quarter, they enabled us to draw down our overall equipment inventory levels by $78.0 million during the quarter, back in line with this time last year.

"A late spring thaw postponed seeding activity, getting the 2013 growing season off to a late start.  Warm temperatures throughout the third quarter, however, provided excellent growing conditions across the Canadian Prairies.  Despite the late start and a drawn-out, challenging harvest, 2013 yields exceeded typical levels and the overall quality of the crop is good. 

"On the construction side, new equipment sales continued to fall short of our expectations and were the primary cause of decreased earnings over the third quarter of last year. Through investment in our management and sales functions, we expect to see an increase in delivered units to correspond with market opportunity over the coming year.

"The underlying business fundamentals of Rocky remain strong. We have exclusive distribution rights, with significant barriers to entry, for some of the world's leading equipment brands.  Our installed base and customer relationships create an annuity of equipment sales and product support revenue, which help drive dependable earnings and cash flow. It is these strong fundamentals that continue to provide stability in our results and value to our shareholders."

Rocky Announces Quarterly Cash Dividend

The Board of Directors ("Board") of Rocky declared a dividend today of $0.10 per common share on its outstanding common shares.  The common share dividend is payable on December 31, 2013, to shareholders of record as of November 29, 2013.  This dividend is designated by Rocky to be an "eligible dividend" for the purposes of the Income Tax Act (Canada) and any similar provincial or territorial legislation.  An enhanced dividend tax credit applies to "eligible dividends" paid to Canadian residents.  Please consult with your own tax advisor for advice with respect to the income tax consequences to you from Rocky designating its dividends as "eligible dividends."

Conference Call

Rocky will host a conference call to discuss its quarter-end results on Wednesday, November 13, 2013, at 9:00 a.m. Mountain Time.  Investors interested in participating in the live call can dial 1-888-231-8191 (toll free) or 1-647-427-7450.  An archived recording of the call will be available approximately two hours after its completion on Rocky's website at www.rockymtn.com, or by calling 1-855-859-2056 (toll free) or 1-416-849-0833, passcode: 75494263.  The archive will remain available until Wednesday, November 27, 2013.

Caution regarding forward-looking statements

Certain information set forth in this news release, including, without limitation, discussion regarding the quality of crops, statements that we expect to see an increase in delivered construction equipment units over the coming year, and discussion that Rocky's business fundamentals and customer base will continue to provide ongoing, stable cash flow and ongoing value to shareholders.  By its nature, forward-looking information is subject to numerous risks and uncertainties, some of which are beyond Rocky's control.  While this forward-looking information is based on information and assumptions that Rocky's management believes to be reasonable, there is significant risk that the forward-looking statements will prove not to be accurate.  Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause actual future performance and events to differ materially from that expressed in the forward-looking statements.  Accordingly, this news release is subject to the disclaimer and qualified by risks and other factors discussed by Rocky in its management's discussion and analysis ("MD&A") for the period ended September 30, 2013, and as discussed in Rocky's Annual Information Form dated March 11, 2013 under the heading "Risk Factors."  Except as required by law, Rocky disclaims any intention or obligation to update or revise forward-looking statements, and further reserves the right to change, at any time, at its sole discretion, its current practice of updating its guidance and outlooks.

About Rocky

Rocky is one of Canada's largest agriculture and construction equipment dealership networks with branches located throughout Alberta, Saskatchewan, and Manitoba.  Through its network of Rocky Mountain Equipment locations, Rocky sells, rents, and leases new and used agriculture and construction equipment and offers product support and finance to its customers.

Additional information on Rocky is available at www.rockymtn.com and on SEDAR at www.sedar.com.

CONSOLIDATED BALANCE SHEET SUMMARY

$ thousands (unaudited)

       
  September 30,
2013
December 31,
2012
Assets    
  Current assets       538,209 586,722
  Property and equipment 27,550 21,558
  Deferred tax asset 78 -
  Goodwill 14,692 13,884
Total assets 580,529 622,164
     
Liabilities and equity    
  Current liabilities 379,037 421,767
  Long-term debt 42,501 45,977
  Obligations under finance leases 773 1,379
  Deferred tax liability - 7,042
  Derivative financial instruments 1,720 1,438
  424,031 477,603
  Shareholders' equity 156,498 144,561
Total liabilities and equity 580,529 622,164

 

SELECTED QUARTERLY FINANCIAL INFORMATION

$ thousands, except per share amounts

                             
  For the three months ended September 30, For the nine months ended September 30,
  2013 2012 2013 2012
         
Sales                
  New equipment 97,554 35.8% 109,636 44.3% 344,163 48.0% 353,223 53.1%
  Used equipment 130,826 48.0% 96,653 39.0% 273,936 38.2% 217,767 32.7%
  Parts 34,534 12.7% 31,377 12.7% 74,500 10.4% 68,284 10.3%
  Service 8,497 3.1% 8,465 3.4% 22,018 3.1% 22,526 3.4%
  Other 1,158 0.4% 1,403 0.6% 2,564 0.3% 3,526 0.5%
  272,569 100.0% 247,534 100.0% 717,181 100.0% 665,326 100.0%
Cost of sales 233,846 85.8% 207,836 84.0% 610,027 85.1% 563,682 84.7%
Gross profit 38,723 14.2% 39,698 16.0% 107,154 14.9% 101,644 15.3%
                 
Selling, general and administrative 26,827 9.8% 25,181 10.2% 78,201 10.9% 71,651 10.8%
Loss on repurchase of convertible debentures - 0.0% - 0.0% - 0.0% 4,232 0.6%
Interest on short-term debt 3,251 1.2% 2,448 1.0% 8,894 1.2% 6,449 1.0%
Interest on long-term debt 450 0.2% 599 0.2% 1,661 0.2% 2,271 0.3%
Earnings from operations 8,195 3.0% 11,470 4.6% 18,398 2.6% 17,041 2.6%
Provision for income taxes 2,280 0.8% 3,019 1.2% 5,151 0.8% 4,836 0.8%
Net earnings 5,915 2.2% 8,451 3.4% 13,247 1.8% 12,205 1.8%
Earnings per share                
  Basic 0.31   0.45   0.69   0.65  
  Diluted 0.31   0.45   0.69   0.65  
Dividends per share 0.1000   0.0675   0.2675   0.1800  
                 
Non-IFRS Measures(1)                
EBITDA 10,286 3.8% 13,504 5.5% 24,859 3.5% 23,451 3.5%
Normalized EBITDA 10,386 3.8% 13,496 5.5% 24,613 3.4% 27,931 4.2%
Operating SG&A 25,086 9.2% 23,900 9.7% 73,647 10.3% 67,720 10.2%
Cash Flow from Net Earnings 7,697 2.8% 10,318 4.2% 11,995 1.7% 17,403 2.6%
Normalized Diluted Earnings per Share 0.31   0.45   0.68   0.83  

(1) - See further discussion in "Non-IFRS Measures" and "Reconciliation of Non-IFRS measures to IFRS" sections below

NON-IFRS MEASURES

We use terms which do not have standardized meanings under IFRS.  As these non-IFRS financial measures do not have standardized meanings prescribed by IFRS, they are unlikely to be comparable to similar measures presented by other issuers.  Our definition for each term is as follows:

  • "EBITDA" is a commonly used metric in the dealership industry.  EBITDA is calculated by adding interest on long-term debt, income taxes and depreciation to net earnings.  Adding back non-operating expenses allows management to consistently compare periods by removing changes in tax rates, long-term assets and financing costs.
  • "Normalized EBITDA" is calculated by adding back non-recurring charges to EBITDA.  Management deems non-recurring charges to be unusual and/or infrequent charges that the Company incurs outside of its common day-to-day operations.  For the three and nine months ended September 30, 2013 and 2012, the loss on the repurchase of the Debentures, the ineffective portion of derivative financial instruments and acquisition transaction costs are considered by management to be non-recurring charges.  Adding back these non-recurring charges allows management to assess EBITDA from ongoing operations.
  • "Cash Flow from Net Earnings" is calculated by adding back non-cash items such as depreciation expense, non-cash finance charges on the Debentures and long-term debt, deferred tax recovery, share-based payment expense, (gains) losses on the disposal of property and equipment, the ineffective portion of derivative financial instruments and the loss on the repurchase of the Debentures.  Adding back these non-cash items allows management to isolate and analyze the operating cash flows generated through earnings, prior to any consideration of changes in working capital balances and the impact of acquisitions.
  • "Operating SG&A" is calculated by adding back depreciation of property and equipment and any non-recurring charges recognized in SG&A during the period to SG&A.  Management deems non-recurring charges to be unusual and/or infrequent charges that the Company incurs outside of its common day-to-day operations.  For the three and nine months ended September 30, 2013 and 2012, the ineffective portion of derivative financial instruments and acquisition transaction costs are considered by management to be non-recurring charges in SG&A.  Adding back these items allows management to assess the discretionary expenses from ongoing operations.  We target a sub-10% Operating SG&A as a percentage of total sales on an annual basis.
  • "Normalized Diluted Earnings per Share" is calculated by adding back the after-tax impact of non-recurring charges to net earnings when calculating diluted earnings per share.  Adding back these non-recurring charges to net earnings allows management to assess the fully diluted earnings per share from ongoing operations.

RECONCILIATION OF NON-IFRS MEASURES TO IFRS

Reconciliation of Net Earnings to EBITDA and Normalized EBITDA

         
$ thousands For the three months
ended September 30,
For the nine months
ended September 30,
  2013 2012 2013 2012
         
Net earnings 5,915 8,451 13,247 12,205
Interest on long-term debt 450 599 1,661 2,271
Depreciation expense 1,641 1,435 4,800 4,139
Income taxes 2,280 3,019 5,151 4,836
EBITDA 10,286 13,504 24,859 23,451
Non-recurring charges        
  Loss on repurchase of Debentures - - - 4,232
  Ineffective portion of derivative financial instruments 100 (38) (282) 218
  Acquisition transaction charges - 30 36 30
Normalized EBITDA 10,386 13,496 24,613 27,931

 

Reconciliation of Cash Flow from Net Earnings

         
$ thousands For the three months
ended September 30,
For the nine months
ended September 30,
  2013 2012 2013 2012
         
Net earnings 5,915 8,451 13,247 12,205
Depreciation expense 1,641 1,435 4,800 4,139
Accretion expense - - - 123
Deferred tax expenses (recovery) (381) 66 (6,981) (4,605)
Share-based payment expense 424 437 1,182 1,193
Non-cash impact of credit promissory note - 4 1 16
Loss (gain) on disposal of property and equipment (2) (37) 28 (118)
Loss (gain) on derivative financial instruments 100 (38) (282) 218
Loss on repurchase of Debentures - - - 4,232
Cash Flow from Net Earnings 7,697 10,318 11,995 17,403

 

Reconciliation of Operating SG&A to Selling, General and Administrative Expenses

         
$ thousands For the three months
ended September 30,
For the nine months
ended September 30,
  2013 2012 2013 2012
         
SG&A 26,827 25,181 78,201 71,651
Depreciation expense (1,641) (1,289) (4,800) (3,683)
Non-recurring charges        
  Ineffective portion of derivative financial instruments (100) 38 282 (218)
  Acquisition transaction charges - (30) (36) (30)
Operating SG&A 25,086 23,900 73,647 67,720

 

Reconciliation of Normalized Diluted Earnings per Share

         
$ thousands, except per share amounts For the three months
ended September 30,
For the nine months
ended September 30,
  2013 2012 2013 2012
         
Earnings used in the calculation of diluted earnings per share 5,915 8,451 13,247 12,205
After tax impact of non-recurring charges in SG&A and loss on repurchase of Debentures(1) 75 (6) (185) 3,382
Earnings used in the calculation of Normalized Diluted Earnings per Share 5,990 8,445 13,062 15,587
Weighted average diluted shares used in the calculation of diluted earnings per share 19,269 18,895 19,218 18,888
Normalized Diluted Earnings per Share 0.31 0.45 0.68 0.83

(1) - After applying statutory rate of 25% (2012 - 25%) 

SOURCE: Rocky Mountain Dealerships Inc.

For further information:

Rocky Mountain Dealerships Inc.
Matt Campbell, Chief Executive Officer;
Garrett Ganden, Chief Operating Officer; or,
David Ascott, Chief Financial Officer
#301, 3345 - 8th Street S.E.
Calgary, Alberta T2G 3A4
Telephone: (403) 265-7364
Fax: (403) 214-5644


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