AutoCanada Inc. Announces Q2, 2015 Quarterly Results

EDMONTON, Aug. 6, 2015 /CNW/ - AutoCanada Inc. (the "Company" or "AutoCanada") (TSX: ACQ) today announced financial results for the quarter ended June 30, 2015.

Second Quarter 2015 Highlights

• Revenue from existing and new dealerships increased by 75.6%, or $351.8 million, to $816.9 million in the second quarter of 2015 from $465.1 million in the same quarter in 2014.
  
  
• Gross profit from existing and new dealerships increased by 66.8%, or $52.0 million, to $129.7 million in the second quarter of 2015 from $77.7 million in the same quarter in 2014.
  
  
• Adjusted EBITDA attributable to AutoCanada shareholders increased by 24.2%, or $5.4 million, to $27.7 million in the second quarter of 2015 from $22.3 million in the same quarter in 2014.
  
  
• EBITDA attributable to AutoCanada shareholders increased by 26.3%, or $5.7 million, to $27.4 million in the second quarter of 2015 from $21.7 million in the same quarter in 2014.
  
  
• The Company generated net earnings attributable to AutoCanada shareholders of $13.5 million or basic earnings per share of $0.56 versus earnings per share of $0.59 in the second quarter of 2014. Pre-tax earnings attributable to AutoCanada shareholders increased by 10.4%, or $1.8 million, to $19.1 million in the second quarter of 2015 as compared to $17.3 million in the same period in 2014.
  
  
• The Company generated adjusted net earnings attributable to AutoCanada shareholders of $13.6 million from $13.3 million in the same quarter in 2014. Basic adjusted net earnings per share $0.56 versus earnings per share of $0.61 in the second quarter of 2014.
  
  
• Same store revenue decreased by 2.8% in the second quarter of 2015, compared to the same quarter in 2014. Same store gross profit decreased by 11.0% in the second quarter of 2015, compared to the same quarter in 2014.
  
  
• Free cash flow increased to $17.8 million in the second quarter of 2015 or $0.73 per share as compared to $9.9 million or $0.45 per share in the same quarter in 2014.
  
  
• Adjusted free cash flow increased to $19.2 million in the second quarter of 2015 or $0.79 per share as compared to $15.5 million or $0.71 per share in the same quarter in 2014.
  
  
• Same store new vehicle retail revenue decreased by 14.1%, or $28.5 million, to $173.7 million in the second quarter of 2015 from $202.2 million in the same quarter in 2014.
  
  
• Same store used vehicle retail revenue increased by 15.3%, or $9.3 million, to $70.0 million in the second quarter of 2015 from $60.7 million in the same quarter in 2014.
  
  
• Same store parts, service and collision repair revenue increased by 4.5%, or $1.6 million, to $35.6 million in the second quarter of 2015 from $34.0 million in the same quarter in 2014.
  
  
• The increase in the Alberta tax rate from 10% to 12%, effective July 1, 2015, has negatively impacted Net and comprehensive income for the period by $831 thousand, and basic and diluted earnings per share in the second quarter by $0.03, from $0.59 to $0.56.

"Although the second quarter and the Western Canadian economy in particular provided great challenges, as evidenced by declines in our gross margin percentages and earnings per share," said Mr Tom Orysiuk, President & CEO, "and same store sales revenues and gross margins were weaker than the previous quarter, we are determined to adjust to meet these challenges.  We were pleased to see that our efforts in the quarter resulted in same store gross margin growth in both used vehicles and parts and service operations as well as significant improvements in operating expenses relative to gross profit. These gains notwithstanding, we are not satisfied and are working closely on a dealership by dealership basis to make the appropriate market sensitive adjustments to maximize all volume, gross and expense reduction opportunities."

"We continue to follow a prudent course on acquisitions seeking to capitalize on those opportunities which provide the best long-term value," stated Mr Patrick Priestner, Executive Chairman. "We believe that the changed economic circumstances, particularly in the Alberta, demands an even more critical, and calculated approach, which we have adopted. Due to certain due diligence and related matters, we have not closed two acquisitions within our originally anticipated timeframe. Nevertheless we are very confident that we shall achieve our acquisition guidance of six to eight stores by May, 2016."

Dividends

On August 6, 2015, the Board declared a quarterly eligible dividend of $0.25 per common share on AutoCanada's outstanding shares, payable on September 15, 2015 to shareholders of record at the close of business on August 31, 2015.

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

Main drivers of AutoCanada's business are retail consumer credit access, commercial automotive financing, employment rates and consumer confidence. Despite the economic situation in Western Canada, the Company has not seen significant adverse changes in the availability of either consumer credit or to commercial automotive financing. Employment rates have declined but remain at acceptable levels throughout Alberta. However, consumer confidence continues to challenge the retail sector, especially for high priced retail goods including housing and vehicles and the Company believes that current West Texas Intermediate crude prices have negatively impacted consumer confidence and further reductions to employee base or capital spending in the oil & gas sector could potentially impact the Company. Consequently the economic climate in Western Canada continues to be a challenging environment.

As noted previously, the reduced sales volumes experienced in the first quarter of 2015 lead to an accumulation of new vehicle inventories. The accumulation of new vehicle inventory was directly correlated to the slowdown in sales throughput combined with the delivery of orders placed in late fiscal 2014. Excess inventories have negatively impacted the Company in the first half of 2015 due to heightened competition to clear out additional vehicle inventories leading to reduced gross margins and increased floorplan interest financing costs until new vehicle inventories are rightsized. This accumulation of new vehicle inventory is not expected to be a concern from a valuation perspective.

The Company remains well positioned to continue acquiring dealerships and consolidating the retail automotive industry. We have diversified in terms of manufacturer partners and geographic locations, and have a strong balance sheet with which to continue acquisitions. Previously, the Company provided guidance to the effect that it would add two dealerships by June 2015 and an additional four to six by May of 2016. Although a number of due diligence and related issues in respect of certain acquisitions have taken longer than anticipated, management is wholly confident that it shall meet its aggregate guidance of six to eight dealerships by May 2016. Furthermore, after closing several financing transactions in fiscal 2014, the Company has sufficient capital to execute on our acquisition strategy, capital expenditure requirements and adequate liquidity to continue to fund its cash dividend.

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 %, Earnings per share, and Operating Data)		Q2 2015	Q1 2015	Q4 2014	Q3 2014	Q2 2014	Q1 2014	Q4 2013	Q3 2013
Income Statement Data
	New vehicles	483,435	345,542	378,706	457,198	289,918	216,524	197,097	257,543
	Used vehicles	194,956	163,243	148,579	158,779	102,025	85,969	75,137	85,975
	Parts, service and collision repair	99,304	92,951	90,534	78,371	46,078	40,724	41,268	37,341
	Finance, insurance and other	39,182	31,671	34,620	39,002	27,038	20,713	20,271	22,676
Revenue		816,877	633,407	652,439	733,350	465,059	363,930	333,773	403,535
	New vehicles	34,861	25,765	28,700	35,711	23,792	17,799	18,326	20,510
	Used vehicles	11,000	8,354	7,808	9,637	6,505	5,551	4,450	6,242
	Parts, service and collision repair	49,859	43,913	45,658	38,942	23,373	20,593	20,822	20,113
	Finance, insurance and other	33,955	27,407	30,208	35,615	24,077	19,180	18,734	20,831
Gross profit		129,675	105,439	112,374	119,905	77,747	63,123	62,332	67,696
Gross Profit %		15.9%	16.6%	17.2%	16.4%	16.7%	17.3%	18.7%	16.8%
Operating expenses		100,568	93,175	91,265	89,713	59,227	50,699	48,447	51,080
Operating expenses as a % of gross profit		77.6%	88.4%	81.2%	74.8%	76.2%	80.3%	77.7%	75.5%
Income from investments in associates		-	-	-	359	2,238	893	837	555
Net earnings attributable to AutoCanada shareholders		13,523	4,969	14,240	17,765	12,831	8,296	9,553	10,968
EBITDA attributable to AutoCanada shareholders		27,397	12,687	24,605	28,674	21,702	14,453	14,754	16,607
Basic earnings per share		0.56	0.20	0.60	0.74	0.59	0.38	0.44	0.51
Diluted earnings per share		0.56	0.20	0.59	0.74	0.59	0.38	0.44	0.51
Operating Data
Vehicles (new and used) sold excluding GM		14,723	11,343	12,774	14,966	9,887	8,766	8,046	10,325
Vehicles (new and used) sold including GM		17,739	13,824	15,415	18,079	12,414	9,945	9,209	11,405
New vehicles sold including GM		12,296	8,933	10,570	12,821	8,658	6,570	6,090	8,023
New retail vehicles sold		9,929	7,393	8,907	10,686	5,980	4,773	4,932	5,986
New fleet vehicles sold		2,367	1,540	1,663	2,135	1,146	1,132	552	1,365
Used retail vehicles sold		5,443	4,891	4,845	5,258	2,761	2,861	2,562	2,974
# of service & collision repair orders completed		215,142	199,096	216,427	198,612	97,559	91,999	95,958	97,074
Absorption rate		94%	85%	85%	93%	92%	85%	90%	88%
# of dealerships at period end		49	48	48	45	34	28	28	29
# of same store dealerships		24	23	23	23	23	23	21	22
# of service bays at period end		842	822	822	734	516	406	406	413
Same store revenue growth		(2.8)%	(3.5)%	10.9%	8.9%	4.1%	13.0%	8.9%	19.9%
Same store gross profit growth		(11.0)%	(8.5)%	5.7%	11.4%	5.4%	8.1%	9.2%	18.5%
Balance Sheet Data
Cash and cash equivalents		77,676	66,351	72,462	64,559	91,622	41,541	35,113	37,970
Trade and other receivables		124,683	104,753	92,138	115,074	85,837	69,747	57,771	62,105
Inventories		620,837	625,779	563,277	471,664	324,077	261,764	278,091	236,351
Revolving floorplan facilities		607,694	601,432	527,780	437,935	313,752	261,263	264,178	228,526

*See the Company's Management's Discussion and Analysis for the period ended June 30, 2015 for complete footnote disclosures.

The following tables summarizes the results for the three and six month periods ended June 30, 2015 on a same store basis by revenue source and compares these results to the same period in 2014.

		Same Store Revenue and Vehicles Sold
		For the Three Months Ended			For the Six Months Ended
(in thousands of dollars)		June 30, 2015	June 30, 2014	% Change	June 30, 2015	June 30, 2014	% Change
Revenue Source
	New vehicles ‑ Retail	173,743	202,231	(14.1)%	309,902	356,037	(13.0)%
	New vehicles ‑ Fleet	45,953	37,534	22.4%	79,919	72,892	9.6%
New vehicles		219,696	239,765	(8.4)%	389,821	428,929	(9.1)%
	Used vehicles ‑ Retail	70,007	60,738	15.3%	128,296	117,505	9.2%
	Used vehicles ‑ Wholesale	26,433	24,947	6.0%	49,660	43,261	14.8%
Used vehicles		96,440	85,685	12.6%	177,956	160,766	10.7%
Finance, insurance and other		19,702	22,624	(12.9)%	36,610	41,034	(10.8)%
Subtotal		335,838	348,074	(3.5)%	604,387	630,729	(4.2)%
Parts, service and collision repair		35,569	34,026	4.5%	70,797	66,552	6.4%
Total		371,407	382,100	(2.8)%	675,184	697,281	(3.2)%
New retail vehicles sold		4,640	5,442	(14.7)%	8,293	9,586	(13.5)%
New fleet vehicles sold		1,431	1,109	29.0%	2,366	2,153	9.9%
Used retail vehicles sold		2,604	2,614	(0.4)%	4,992	5,082	(1.8)%
Total		8,675	9,165	(5.3)%	15,651	16,821	(7.0)%
Total vehicles retailed		7,244	8,056	(10.1)%	13,285	14,668	(9.4)%

		Same Store Gross Profit and Gross Profit Percentage
		For the Three Months Ended
		Gross Profit			Gross Profit %
(in thousands of dollars)		June 30, 2015	June 30, 2014	% Change	June 30, 2015	June 30, 2014	% Change
Revenue Source
	New vehicles ‑ Retail	15,467	20,048	(22.9)%	8.9%	9.9%	(1.0)%
	New vehicles ‑ Fleet	218	220	(0.9)%	0.5%	0.6%	(0.1)%
New vehicles		15,685	20,268	(22.6)%	7.1%	8.5%	(1.4)%
	Used vehicles ‑ Retail	4,718	4,470	5.5%	6.7%	7.4%	(0.7)%
	Used vehicles ‑ Wholesale	62	1,166	(94.7)%	0.2%	4.7%	(4.5)%
Used vehicles		4,780	5,636	(15.2)%	5.0%	6.6%	(1.6)%
Finance, insurance and other		17,942	20,684	(13.3)%	91.1%	91.4%	(0.3)%
Subtotal		38,407	46,588	(17.6)%	11.4%	13.4%	(2.0)%
Parts, service and collision repair		18,994	17,890	6.2%	53.4%	52.6%	0.8%
Total		57,401	64,478	(11.0)%	15.5%	16.9%	(1.4)%

		For the Six Months Ended
		Gross Profit			Gross Profit %
(in thousands of dollars)		June 30, 2015	June 30, 2014	% Change	June 30, 2015	June 30, 2014	% Change
Revenue Source
	New vehicles ‑ Retail	28,232	35,837	(21.2)%	9.1%	10.1%	(1.0)%
	New vehicles ‑ Fleet	332	239	38.9%	0.4%	0.3%	0.1%
New vehicles		28,564	36,076	(20.8)%	7.3%	8.4%	(1.1)%
	Used vehicles ‑ Retail	9,004	8,815	2.1%	7.0%	7.5%	(0.5)%
	Used vehicles ‑ Wholesale	67	1,847	(96.4)%	0.1%	4.3%	(4.2)%
Used vehicles		9,071	10,662	(14.9)%	5.1%	6.6%	(1.5)%
Finance, insurance and other		33,350	37,580	(11.3)%	91.1%	91.6%	(0.5)%
Subtotal		70,985	84,318	(15.8)%	11.7%	13.4%	(1.7)%
Parts, service and collision repair		36,158	34,493	4.8%	51.1%	51.8%	(0.7)%
Total		107,143	118,811	(9.8)%	15.9%	17.0%	(1.1)%

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 and six month periods ended June 30, 2015, 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 June 30, 2015 will be held on August 7, 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://event.on24.com/r.htm?e=999963&s=1&k=56686012CDC80723208E75928B5F84D2.

About AutoCanada

AutoCanada is one of Canada's largest multi‑location automobile dealership groups, currently operating 49 dealerships, comprised of 57 franchises, (see "GROWTH, ACQUISITIONS, RELOCATIONS AND REAL ESTATE") in 8 provinces and has over 3,500 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.

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 used vehicle sales, 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 management's discussion and analysis 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", "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.

Christopher Burrows, Vice-President & Chief Financial Officer, Phone: [phone], Email: [e-mail]