Rocky Mountain Dealerships Inc. (TSX:RME, OTCQX:RCKXF) Announces First Quarter 2014 Results and a 15% Increase in Annual Dividend

CALGARY, May 6, 2014 /CNW/ - Rocky Mountain Dealerships Inc. (hereinafter "Rocky") today reported its financial results for the three months ended March 31, 2014.


  • Inventory decreased over March 31, 2013 by $46.9 million to $516.4 million.
  • Total revenues declined by 4.0% to $198.2 million.
  • Product support revenues increased by 15.3% to $22.5 million.
  • Gross profit declined by 10.0% to $29.2 million (14.8% of sales).
  • Diluted earnings per share of $0.03.
  • EBITDA(1) of $3.2 million.
  • Successfully executed on previously announced strategy to dispose of rock trucks.

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

The first quarter of 2014 saw a number of successes as well as some continued challenges.  "Product support sales showed encouraging growth during the first quarter realizing a 15.3% increase over 2013.  Our construction segment has realized a net income improvement of $0.9 million over the prior year as a result of market penetration and operational efficiencies," Matt Campbell, CEO of Rocky noted.  He further added, "Agriculture equipment revenues were down as demand was affected by a backlog in grain haulage by rail affecting customer cash flow and record low temperatures affecting foot traffic in our dealership yards.

Further commenting on the quarter, Mr. Campbell stated, "In December of 2013, Rocky took an impairment charge against our articulated and rigid rock truck inventory in response to an OEM's announcement of its pending exit from that line of business.  During the first quarter of 2014, we were successful in our plan to divest ourselves of substantially all of these vehicles for proceeds which approximated our assessed valuation.

"The 2014 thaw is behind 2013 in many areas.  A shortage of rail cars to haul grain combined with 2013's bumper crop and softening in commodity prices resulted in an elevated retention of crop inventory as we entered 2014.  The impact of this has been felt within the agriculture segment, particularly with respect to used equipment sales which were down $20.1 million over the first quarter of last year.

"In the quarter, our winter service programs experienced solid uptake as more of our customers were approached with, and accepted, a preventative maintenance service offering.  As we spread our customers' service requirements more evenly throughout the year, we enable our service departments to be more flexible during peak times of the seasons.  Parts sales were further bolstered by improved penetration of certain product lines.  Overall, product support sales for the quarter grew by 15%.

"Through a combination of rationalizing new equipment purchases and sales initiatives aimed at moving equipment, we have reduced our overall inventory level by $46.9 million since this time last year.

"Despite the softness experienced in used agriculture equipment sales this past quarter, Canadian farmers continue to enjoy exceptionally strong balance sheets and early forecasts for the 2014 growing season are optimistic.

"As part of our prudent, conservative approach to running our business, we successfully executed our de-risking strategy within the construction segment related to the divestiture of the rock trucks.  Excluding the revenue associated with the rock truck sale, our construction segment grew its equipment revenues by 25%.  We are cautiously optimistic about the direction of this business segment under its new leadership.    

Mr. Campbell concluded his remarks by stating, "Historically, the first quarter of the year has been our weakest.  Notwithstanding our reported resulted for the quarter, we remain well positioned to deliver improved earnings over last year on an annual basis."

Quarterly Cash Dividend

On May 6, 2014, the Board of Directors (the "Board") of Rocky approved an increase in Rocky's annual dividend to $0.46 per common share. In conjunction with that increase, Rocky's Board also declared a dividend today of $0.115 per common share on its outstanding common shares. The common share dividend is payable on June 30, 2014, to shareholders of record at the close of business on May 30, 2014. Commenting on the dividend increase, Mr. Campbell noted, "Since going public in 2007, Rocky has paid a quarterly dividend without interruption. We continue on our stated path of driving excellence in operations and delivering value to our shareholders. The current dividend reflects a yield of 4.1% at today's closing market price."

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 year-end results on Wednesday, May 7, 2014, 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, or by calling 1-855-859-2056 (toll free) or 1-416-849-0833, passcode: 22210803.  The archive will remain available until Wednesday, May 21, 2014.

Caution regarding forward-looking statements

Certain information set forth in this news release, including, without limitation, statements that spreading service requirements more evenly throughout the year enables our service departments to be more flexible during peak times of seasons; discussions about inventory and/or inventory reductions; statements that forecasts for the 2014 growing season are optimistic, as well as any implied benefits for Rocky resulting from the same; statements that we are cautiously optimistic about the direction of the constriction segment of our business under its new leadership; statements that Rocky's first quarter is generally its weakest quarter and that annual earnings will improve over last year; statements discussing the dividend or any implication that said dividend will be sustained in future; and statements or discussion about, or implying, future profitability or economic impact on Rocky, is forward-looking information within the meaning of applicable Canadian securities laws.  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 year ended December 31, 2013, and as discussed in Rocky's Annual Information Form dated March 11, 2014 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 and on SEDAR at


  $ thousands    
  March 31,
December 31,
  Inventory       516,416 482,824
  Other current assets       57,719 74,520
  Property and equipment 29,880 30,860
  Deferred tax asset 939 -
  Goodwill 14,692 14,692
Total assets 619,646 602,896
Liabilities and equity    
  Floor plan payable 365,326 342,364
  Other current liabilities 56,425 56,607
  Long-term debt 39,112 41,681
  Obligations under finance leases 347 541
  Deferred tax liability - 2,576
  Derivative financial instruments 2,626 1,706
  463,836 445,475
  Shareholders' equity 155,810 157,421
Total liabilities and equity 619,646 602,896


For the quarter ended March 31,        
$ thousands, except per share amounts 2014 2013
  New equipment 124,269 62.7% 115,075 55.7%
  Used equipment 50,751 25.6% 71,305 34.5%
  Parts 15,518 7.8% 13,299 6.4%
  Service 6,976 3.5% 6,211 3.0%
  Other 652 0.4% 616 0.4%
  198,166 100.0% 206,506 100.0%
Cost of sales 168,934 85.2% 174,015 84.3%
Gross profit 29,232 14.8% 32,491 15.7%
Selling, general and administrative 25,058 12.6% 25,501 12.3%
Interest on short-term debt 2,677 1.4% 2,606 1.3%
Interest on long-term debt 532 0.3% 614 0.3%
Earnings from operations 965 0.5% 3,770 1.8%
Provision for income taxes 361 0.2% 932 0.4%
Net earnings 604 0.3% 2,838 1.4%
Earnings per share        
  Basic 0.03   0.15  
  Diluted 0.03   0.15  
Dividends per share 0.1000   0.0675  
Non-IFRS Measures(1)        
EBITDA 3,221 1.6% 6,001 2.9%
Operating SG&A 23,334 11.8% 23,884 11.6%
Floor Plan Neutral Operating Cash Flow (41,667) (21.0%) (49,057) (23.8%)

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


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 related to the Company's capital structure.
  • "Operating SG&A" is calculated by adding back depreciation of property and equipment 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. Adding back these items allows management to assess discretionary expenses from ongoing operations.  For the quarters ended March 31, 2014 and 2013, no non-recurring charges have been identified. We target a sub-10% Operating SG&A as a percentage of total sales on an annual basis.  Management has changed the calculation of Operating SG&A from previous disclosures by no longer adjusting SG&A for the ineffective portion of derivative financial instruments or acquisition transaction costs as these nature and amount of these costs in the periods presented are insignificant and recurring in nature.
  • "Floor Plan Neutral Operating Cash Flow" is calculated by eliminating the impact of the change in floor plan payable (excluding floor plan assumed pursuant to business combinations) from cash flow from operating activities.  Adjusting cash flow from operating activities for changes in the balance of floor plan payable allows management to isolate and analyze operating cash generated during a period, prior to any sources or uses of cash associated with equipment financing decisions.



For the quarter ended March 31,    
$ thousands    2014     2013  
Net earnings 604 2,838
Interest on long-term debt 532 614
Depreciation expense 1,724 1,617
Income taxes 361 932
EBITDA 3,221 6,001

Operating SG&A

For the quarter ended March 31,    
$ thousands    2014       2013  
SG&A 25,058 25,501
Depreciation expense (1,724) (1,617)
Operating SG&A 23,334 23,884

Floor Plan Neutral Operating Cash Flow

For the quarter ended March 31,    
$ thousands     2014        2013    
Cash flow from operating activities (18,705) (5,017)
Net increase in floor plan payable (22,962) (46,829)
Floor plan assumed pursuant to business combinations - 2,789
Floor Plan Neutral Operating Cash Flow (41,667) (49,057)


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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