AutoCanada Inc. announces strong results for the quarter ended June 30, 2014:

A conference call to discuss the results for the reporting period ended June 30, 2014 will be held on August 8, 2014 at 11:00 a.m. Eastern time (9:00 a.m. Mountain time).  To participate in the conference call, please dial 1-888-231-8191 or [phone] approximately 10 minutes prior to the call.  A live and archived audio webcast of the conference call will also be available on the Company's website www.autocan.ca.

EDMONTON, Aug. 7, 2014 /CNW/ - AutoCanada Inc. (the "Company" or "AutoCanada") (TSX: ACQ) today announced financial results for the reporting period ended June 30, 2014.

2014 Second Quarter Highlights

• Revenue increased 19.8% or $76.9 million to $465.3 million
• Gross profit increased by 20.4% or $13.2 million to $78.0 million
• Adjusted EBITDA increased by 33.5% or $5.6 million to $22.3 million
• EBITDA increased 31.5% to $21.7 million from $16.5 million in Q2 of 2013
• Pre-tax earnings increased by $2.5 million or 16.9% to $17.3 million
• Adjusted net earnings increased by $2.3 million or 20.9% to $13.3 million
• Net earnings increased by $2.0 million or 18.5% to $12.8 million
• Adjusted net earnings per share increased by 12.5% to $0.61 from $0.54
• Earnings per share increased by 10.5% to $0.59 from $0.53
• Same store revenue increased by 4.1%
• Same store gross profit increased by 5.4%
• Same store new vehicle retail revenue increased by 8.4%
• Same store used vehicles retail revenue increased by 9.9%
• Same store parts, service and collision repair revenue increased by 8.2%

In commenting on the second quarter of 2014, Pat Priestner, Chairman and Chief Executive Officer of AutoCanada Inc., stated that, "The second quarter of 2014 was productive, the Company having completed seven dealership acquisitions, as well as two additional acquisitions in early July.  We are pleased with the quality of dealerships we have acquired, which includes the Hyatt Group of Dealerships in Calgary, our largest acquisition to date; two new brands to our portfolio, being BMW and MINI, through our acquisition of BMW Canbec and MINI Mont Royal, located in Montreal, Quebec, which is also a new market for the Company; and an expansion of our Saskatoon platform with the addition of Dodge City; one of the highest volume Chrysler Dodge Jeep Ram stores in the prairies." 

Mr. Priestner further added, "Our experience over the past 18 months has made it clear to us that dealership succession has become a key issue in the Canadian automotive retail market, and, as a result, the Company increased its acquisition guidance in June of 2014. As the deal pipeline remains strong, Management maintains this guidance and is confident that, in addition to acquisitions completed to date, it shall add an additional 8 to 10 dealerships by May 31, 2015.  In order to fund the higher rate of growth, the Company successfully completed a $150 million bond offering in May, followed in early July by a $200 million equity offering providing the Company with the necessary liquidity to enable it to execute upon this increased guidance, which we believe will create substantial shareholder value in the future."

Commenting on the results for the second quarter of 2014, Mr. Priestner stated, "In addition to the acquisition activity, Management is pleased with second quarter operating performance.  In addition to revenues, gross profit and earnings each benefitting from our acquisitions over the past 12 months, Management is pleased to report further improved same store gross profit in all four operating departments, a testament to the hard work and commitment of our dealer principals, dealership staff, and our head office dealer support services team."

Regarding the increase in dividend, Mr. Priestner commented, "Since our IPO in 2006, the Company has not changed its philosophy of returning profits to our shareholders as a means of enhancing shareholder value.  With the continued strength of the Canadian auto retail market generally and the Company's strong performance, the Board decided to raise the quarterly dividend for the fourteenth consecutive quarter to $0.24 per share or $0.96 per share on an annualized basis."

Second Quarter 2014 Highlights

• The Company generated net earnings of $12.8 million or earnings per share of $0.588 versus earnings per share of $0.532 in the second quarter of 2013.  Pre-tax earnings increased by $2.5 million to $17.3 million in the second quarter of 2014 as compared to $14.8 million in the same period in 2013.
• Same store revenue increased by 4.1% in the second quarter of 2014, compared to the same quarter in 2013.  Same store gross profit increased by 5.4% in the second quarter of 2014, compared to the same quarter in 2013.
• Revenue from existing and new dealerships increased 19.8% to $465.3 million in the second quarter of 2014 from $388.4 million in the same quarter in 2013.
• Gross profit from existing and new dealerships increased 20.4% to $78.0 million in the second quarter of 2014 from $64.9 million in the same quarter in 2013.
• EBITDA increased 31.5% to $21.7 million in the second quarter of 2014 from $16.5 million in the same quarter in 2013.
• Free cash flow decreased to $9.9 million in the second quarter of 2014 or $0.45 per share as compared $13.5 million or $0.66 per share in the first quarter of 2013.
• Adjusted free cash flow increased to $15.5 million in the second quarter of 2014 or $0.71 per share as compared to $13.4 million or $0.66 per share in 2013.

Dividends

Management reviews the Company's financial results on a monthly basis.  The Board of Directors reviews the financial results on a quarterly basis, or as requested by Management, and 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)
						Total
Record date	Payment date					Declared	Paid
						$	$
February 28, 2014	March 17, 2014					4,760	4,760
May 30, 2014	June 16, 2014					5,022	5,022

On August 7, 2014, the Board declared a quarterly eligible dividend of $0.24 per common share on AutoCanada's outstanding Class A common shares, payable on September 15, 2014 to shareholders of record at the close of business on August 29, 2014.  The quarterly eligible dividend of $0.24 represents an annual dividend rate of $0.96 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".

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 Operating Data and gross profit %)	Q3 2012	Q4 2012	Q1 2013	Q2 2013	Q3 2013	Q4 2013	Q1 2014	Q2 2014
Income Statement Data
New vehicles	190,065	159,026	174,279	254,261	257,222	197,097	216,524	289,918
Used vehicles	62,816	57,260	62,656	77,113	85,975	75,137	85,968	102,025
Parts, service and collision repair	28,488	29,920	29,515	34,455	37,104	41,267	40,724	46,078
Finance, insurance and other	16,783	14,931	17,604	22,557	22,533	20,276	21,050	27,304
Revenue	298,152	261,137	284,054	388,386	402,834	333,777	364,266	465,325
New vehicles	15,556	15,527	16,039	20,792	20,694	18,326	17,813	23,822
Used vehicles	4,004	3,637	3,789	5,795	6,240	4,450	5,550	6,506
Parts, service and collision	15,133	15,418	15,232	17,586	20,114	20,822	20,593	23,373
Finance and insurance	15,436	13,788	16,082	20,678	20,669	18,738	19,517	24,342
Gross profit	50,129	48,370	51,142	64,851	67,717	62,336	63,473	78,043
Gross Profit %	16.8%	18.5%	18.0%	16.7%	16.8%	18.7%	17.4%	16.8%
Operating expenses	38,361	37,739	40,353	48,639	51,080	48,447	50,402	58,920
Operating exp. as a % of gross profit	76.5%	78.0%	78.9%	75.0%	75.4%	77.7%	79.4%	75.5%
Finance costs ‑ floorplan	2,745	1,859	1,675	1,888	1,903	1,887	1,965	2,146
Finance costs ‑ long term debt	250	257	237	218	163	388	764	1,844
Reversal of impairment of intangibles	-	(222)	-	-	-	(746)	-	-
Income from investments in associates	130	255	201	648	555	836	893	2,238
Income tax	2,379	2,540	2,309	3,976	3,920	3,490	2,881	4,477
Net earnings (4)	6,803	6,607	6,821	10,823	10,966	9,553	8,296	12,831
EBITDA (1)(4)	10,575	10,299	10,557	16,507	16,626	14,754	14,453	21,702
Basic earnings (loss) per share	0.344	0.334	0.345	0.532	0.507	0.441	0.383	0.588
Diluted earnings per share	0.344	0.334	0.345	0.532	0.507	0.441	0.383	0.588
Operating Data
Vehicles (new and used) sold	8,087	6,703	7,341	10,062	10,325	8,046	8,766	9,887
Vehicles (new and used) sold including GM (5)	8,783	7,378	8,123	11,399	11,405	9,209	9,945	12,414
New vehicles sold including GM (5)	6,178	4,956	5,665	8,246	8,023	6,090	6,570	8,658
New retail vehicles sold	4,410	3,982	4,118	5,487	5,986	4,932	4,773	5,980
New fleet vehicles sold	1,265	549	1,036	1,923	1,365	552	1,132	1,146
Used retail vehicles sold	2,412	2,172	2,187	2,652	2,974	2,562	2,861	2,761
Number of service & collision repair orders completed	78,944	78,001	77,977	93,352	97,074	95,958	91,999	97,559
Absorption rate (2)	89%	85%	82%	90%	90%	90%	85%	92%
# of wholly‑owned dealerships at period end	24	24	25	27	29	28	28	34
# of wholly‑owned same store dealerships (3)	21	22	22	22	22	21	23	23
# of service bays at period end	333	333	341	368	413	406	406	516
Same store revenue growth (3)	8.0%	7.4%	12.9%	26.2%	19.9%	8.9%	13.0%	4.1%
Same store gross profit growth (3)	7.9%	11.9%	16.9%	25.8%	18.5%	9.2%	8.1%	5.4%
Balance Sheet Data
Cash and cash equivalents	54,255	34,471	41,991	35,058	38,034	35,113	41,541	91,622
Restricted cash	-	10,000	10,000	10,000	-	-	-	-
Trade and other receivables	54,148	47,993	64,719	69,714	62,098	57,662	69,747	85,837
Inventories	194,438	199,085	217,663	232,837	237,421	278,062	261,768	324,077
Revolving floorplan facilities	212,840	203,525	225,387	246,325	228,526	264,178	261,263	313,752

1	EBITDA has been calculated as described under "NON‑GAAP MEASURES".
2	Absorption has been calculated as described under "NON‑GAAP MEASURES".
3	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.
4	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 substantial fluctuations in operating results from quarter to quarter.
5	The Company has investments in General Motors dealerships that are not consolidated. This number includes 100% of vehicles sold by these dealerships in which we have less than 100% investment.

The following table summarizes the results for the three and six month periods ended June 30, 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			For the Six Months Ended
(in thousands of dollars)	June 30, 2014	June 30, 2013	% Change	June 30, 2014	June 30, 2013	% Change
Revenue Source
New vehicles ‑ retail	200,237	184,780	8.4%	353,000	325,599	8.4%
New vehicles ‑ fleet	37,534	54,704	(31.4)%	72,892	84,038	(13.3)%
New vehicles	237,771	239,484	(0.7)%	425,892	409,637	4.0%
Used vehicles ‑ retail	60,184	54,765	9.9%	116,503	101,083	15.3%
Used vehicles ‑ wholesale	24,875	17,584	41.5%	43,157	32,754	31.8%
Used vehicles	85,059	72,349	17.6%	159,660	133,837	19.3%
Finance, insurance and other	22,423	21,109	6.2%	40,701	38,153	6.7%
Subtotal	345,253	332,942	3.7%	626,253	581,627	7.7%
Parts, service and collision repair	33,539	30,993	8.2%	65,596	59,425	10.4%
Total	378,792	363,935	4.1%	691,849	641,052	7.9%
New retail vehicles sold	5,390	5,159	4.5%	9,505	9,177	3.6%
New fleet vehicles sold	1,109	1,906	(41.8)%	2,153	2,933	(26.6)%
Used retail vehicles sold	2,589	2,521	2.7%	5,036	4,666	7.9%
Total	9,088	9,586	(5.2)%	16,694	16,776	(0.5)%
Total vehicles retailed	7,979	7,680	3.7%	14,541	13,843	5.0%

The following table summarizes the results for the three and six month periods ended June 30, 2014 on a same store basis by revenue source and compares these results to the same period in 2013.

	Same Store Gross Profit and Gross Profit Percentage
	For the Three Months Ended
	Gross Profit			Gross Profit %
(in thousands of dollars)	June 30, 2014	June 30, 2013	% Change	June 30, 2014	June 30, 2013	Change
Revenue Source
New vehicles ‑ Retail	19,859	19,363	2.6%	9.9%	10.5%	(0.6)%
New vehicles ‑ Fleet	220	402	(45.3)%	0.6%	0.7%	(0.1)%
New vehicles	20,079	19,765	1.6%	8.4%	8.3%	0.1%
Used vehicles ‑ Retail	4,418	4,695	(5.9)%	7.3%	8.6%	(1.3)%
Used vehicles ‑ Wholesale	1,172	877	33.6%	4.7%	5.0%	(0.3)%
Used vehicles	5,590	5,572	0.3%	6.6%	7.7%	(1.1)%
Finance and insurance	20,508	19,338	6.1%	91.5%	91.6%	(0.1)%
Subtotal	46,177	44,675	3.4%	13.4%	13.4%	-%
Parts, service and collision	17,645	15,853	11.3%	52.6%	51.1%	1.5%
Total	63,822	60,528	5.4%	16.8%	16.6%	0.2%
	For the Six Months Ended
	Gross Profit			Gross Profit %
(in thousands of dollars)	June 30, 2014	June 30, 2013	% Change	June 30, 2014	June 30, 2013	Change
Revenue Source
New vehicles ‑ Retail	35,582	34,871	2.0%	10.1%	10.1%	-%
New vehicles ‑ Fleet	238	523	(54.5)%	0.3%	0.8%	(0.5)%
New vehicles	35,820	35,394	1.2%	8.4%	8.6%	(0.2)%
Used vehicles ‑ Retail	8,720	8,071	8.0%	7.5%	7.8%	(0.3)%
Used vehicles ‑ Wholesale	1,867	1,227	52.2%	4.3%	4.1%	0.2%
Used vehicles	10,587	9,298	13.9%	6.6%	6.9%	(0.3)%
Finance and insurance	37,289	34,922	6.8%	91.6%	91.5%	0.1%
Subtotal	83,696	79,614	5.1%	13.4%	13.7%	(0.3)%
Parts, service and collision	33,991	30,584	11.1%	51.8%	52.4%	(0.6)%
Total	117,687	110,198	6.8%	17.0%	17.2%	(0.2)%

AutoCanada Inc.
Condensed Interim Consolidated Statements of Comprehensive Income
(Unaudited)
(in thousands of Canadian dollars except for share and per share amounts)

	Three month period ended June 30, 2014 $	Three month period ended June 30, 2013 $	Six month period ended  June 30, 2014 $	Six month period ended June 30, 2013 $
Revenue (Note 7)	465,325	388,386	829,592	672,441
Cost of sales (Note 8)	(387,282)	(323,535)	(688,075)	(556,448)
Gross profit	78,043	64,851	141,517	115,993
Operating expenses (Note 9)	(58,920)	(48,639)	(109,323)	(88,992)
Operating profit before other income (expense)	19,123	16,212	32,194	27,001
Gain (loss) on disposal of assets, net	(1)	(1)	37	(7)
Income from investments in associates (Note 13)	2,238	648	3,131	850
Operating profit	21,360	16,859	35,362	27,844
Finance costs (Note 10)	(4,444)	(2,338)	(7,502)	(4,501)
Finance income (Note 10)	392	278	623	588
Net income for the period before taxation	17,308	14,799	28,483	23,931
Income tax (Note 11)	4,477	3,976	7,358	6,285
Net and comprehensive income for the period	12,831	10,823	21,125	17,646
Earnings per share (Note 21)
Basic	0.588	0.532	0.971	0.879
Diluted	0.588	0.532	0.971	0.879
Weighted average shares (Note 21)
Basic	21,832,777	20,346,713	21,759,732	20,075,885
Diluted	21,832,777	20,346,713	21,759,732	20,075,885

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Approved on behalf of the Company:

(Signed) "Gordon R. Barefoot", Director

(Signed) "Michael Ross", Director

AutoCanada Inc.
Condensed Interim Consolidated Statements of Financial Position
(Unaudited)
(in thousands of Canadian dollars)

	June 30, 2014 (Unaudited) $	December 31, 2013 (Audited) $
ASSETS
Current assets
Cash and cash equivalents	91,622	35,113
Trade and other receivables (Note 14)	85,837	57,662
Inventories (Note 15)	324,077	278,062
Other current assets	4,535	1,603
	506,071	372,440
Property and equipment (Note 16)	141,618	122,915
Investments in associates (Note 13)	67,777	13,131
Intangible assets (Note 17)	179,242	96,985
Goodwill (Note 17)	8,984	6,672
Other long‑term assets	7,023	6,797
	910,715	618,940
LIABILITIES
Current liabilities
Trade and other payables (Note 18)	65,565	50,469
Revolving floorplan facilities (Note 19)	313,752	264,178
Current tax payable	13,331	4,785
Current lease obligations	3,361	1,398
Current indebtedness (Note 19)	2,830	2,866
	398,839	323,696
Long‑term indebtedness (Note 19)	294,289	83,580
Deferred income tax	9,336	21,422
	702,464	428,698
EQUITY	208,251	190,242
	910,715	618,940

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

AutoCanada Inc.
Condensed Interim Consolidated Statements of Changes in Equity
For the Periods Ended
(Unaudited)
(in thousands of Canadian dollars)

	Share capital $	Contributed surplus $	Accumulated deficit $	Equity $
Balance,  January 1, 2014	232,938	4,758	(47,454)	190,242
Net and comprehensive income	-	-	21,125	21,125
Dividends declared on common shares (Note 21)	-	-	(9,782)	(9,782)
Common shares issued (Note 21)	9,073	-	-	9,073
Treasury shares acquired (Note 21)	(2,727)	-	-	(2,727)
Shares settled from treasury (Note 21)	755	(760)	-	(5)
Share‑based compensation	-	325	-	325
Balance, June 30, 2014	240,039	4,323	(36,111)	208,251

	Share capital $	Contributed surplus $	Accumulated deficit $	Equity $
Balance, January 1, 2013	189,500	4,423	(69,423)	124,500
Net and comprehensive income	-	-	17,645	17,645
Dividends declared on common shares (Note 21)	-	-	(7,326)	(7,326)
Common shares issued	43,599	-	-	43,599
Treasury shares acquired	(541)	-	-	(541)
Shares settled from treasury	202	-	-	202
Share‑based compensation	-	11	-	11
Balance, June 30, 2013	232,760	4,434	(59,104)	178,090

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

AutoCanada Inc.
Interim Consolidated Statements of Cash Flows
For the Periods Ended
(Unaudited)
(in thousands of Canadian dollars)

			Three month period ended June 30, 2014	Three month period ended June 30, 2013	Six month period ended June 30, 2014	Six month period ended June 30, 2013
Cash provided by (used in):
Operating activities
Net comprehensive income			12,831	10,823	21,125	17,645
Income taxes (Note 11)			4,477	3,976	7,358	6,285
Amortization of prepaid rent			113	113	226	226
Depreciation of property and equipment (Note 9)			2,550	1,490	5,061	2,679
Loss on disposal of assets			1	1	(37)	7
Share‑based compensation ‑ equity‑settled			169	113	326	250
Share‑based compensation ‑ cash‑settled			875	475	1,852	743
Income from investments in associates (Note 13)			(2,238)	(648)	(3,131)	(850)
Dividends received from investments in associates (Note 23)			200	-	1,458	-
Income taxes paid			(2,480)	(2,083)	(9,759)	(7,159)
Net change in non‑cash working capital			(5,580)	131	(4,712)	691
			10,918	14,391	19,767	20,517
Investing activities
Business acquisitions (Note 12)			(108,536)	(22,831)	(108,536)	(26,612)
Investment in associate (Note 13)			(11,322)	-	(43,900)	(7,057)
Purchases of property and equipment (Note 16)			(3,702)	(6,073)	(9,037)	(6,752)
Proceeds on sale of property and equipment			2	7	14	14
			(123,558)	(28,897)	(161,459)	(40,407)
Financing activities
Proceeds from long‑term debt			232,729	37,457	368,193	83,242
Repayment of long‑term indebtedness			(208,588)	(69,104)	(303,812)	(98,496)
Treasury shares purchased (Note 21)			(2,713)	(513)	(2,713)	(513)
Dividends paid			(5,022)	(3,778)	(9,782)	(7,356)
Proceeds from issuance of common shares			-	43,599	-	43,599
Proceeds from senior unsecured notes (Note 19)			146,315	-	146,315	-
			162,721	7,661	198,201	20,476
(Decrease) Increase in cash			50,081	(6,845)	56,509	586
Cash and cash equivalents at beginning of period			41,541	41,903	35,113	34,472
Cash and cash equivalents at end of period			91,622	35,058	91,622	35,058

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

ABOUT AUTOCANADA

AutoCanada is one of Canada's largest multi-location automobile dealership groups, currently operating 36 franchised dealerships in eight provinces and has approximately 2,500 employees. AutoCanada currently sells Chrysler, Dodge, Jeep, Ram, FIAT, Chevrolet, GMC, Buick, Cadillac, Infiniti, Nissan, Hyundai, Subaru, Mitsubishi, Audi, Volkswagen, BMW and MINI branded vehicles. In 2013, our dealerships sold approximately 36,000 vehicles and processed approximately 364,000 service and collision repair orders in our 406 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 about AutoCanada Inc. is available at the Company's website at www.autocan.ca and www.sedar.com.

SOURCE: AutoCanada Inc.