Rocky Mountain Dealerships Inc. (TSX:RME, OTCQX:RCKXF) announces first quarter 2015 results

CALGARY, May 5, 2015 /CNW/ - Rocky Mountain Dealerships Inc. (hereinafter "Rocky") today reported its financial results for the quarter ended March 31, 2015.

SUMMARY OF FINANCIAL RESULTS FOR THE QUARTER ENDED MARCH 31, 2015

• Total revenues increased by 11.2% to $220.4 million.
• Same store used agriculture equipment sales increased by $32.4 million to $82.8 million.
• Product support revenues increased by 6.9% to $24.0 million.
• Gross profit increased by 7.6% to $31.5 million (14.3% of sales).
• Diluted earnings per share were $0.02 as compared to $0.03 in 2014. On a comparable basis, earnings improved by $0.02 after adjusting for the prior year after-tax gain on the disposition of fixed assets.
• EBITDA⁽¹⁾ decreased to $2.8 million from $3.2 million in 2014.

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

A moderate winter and early spring in the majority of our dealership footprint resulted in an earlier start to the 2015 farming season.  The weather, combined with stable commodity prices and an increase in grain deliveries via rail, increased demand for used agriculture equipment sales during the first quarter.  The increase in used agriculture equipment sales and a decrease in new agriculture equipment procurement has enabled Rocky to avoid the build in equipment inventory traditionally experienced during the first quarter. 

Product support activity continued to benefit from improved market penetration and operational efficiencies which, when coupled with the early spring, translated into yet another quarter of parts and service sales growth.  

Operating SG&A as a percentage of sales decreased from 11.8% in 2014 to 11.7% in the current quarter.  The year-over-year increase in Operating SG&A from $23.3 million to $25.8 million is attributable, in part, to a $0.8 million gain on the disposition of fixed assets recognized during the first quarter of 2014 and $0.2 million in acquisition transaction costs and a $0.2 million increase in non-cash charges associated with marking our interest-rate swaps to market in the current quarter.

Commenting on the quarterly increase in sales, Garrett Ganden, President and CEO of Rocky, remarked, "We are pleased with our results in the first quarter of 2015.  We continue to make progress on a number of key initiatives including capitalizing on the declining U.S. dollar which, when combined with our targeted marketing efforts to U.S. customers, generated strong incremental sales activity.

"The increase in sales is also encouraging from the perspective of our current inventory levels, the reduction of which continues to be top priority for 2015.  Historically, Rocky has experienced seasonal increases in equipment inventory of between 5% - 15% during the first quarter.  The first quarter of 2015 however, saw Rocky maintain its level of equipment inventory thanks primarily to the significant growth in used agriculture equipment sales.  As it pertains to our overall inventory reduction efforts, our first quarter results are encouraging.

"Our parts and service business continued on its pattern of sales growth as we continue to realize our product support opportunities through being a dependable partner to the customers we serve.  These departments are critical to our business and provide stability in our overall earnings as equipment demand softens."       

Quarterly Cash Dividend

On May 5, 2015, the Board of Directors of Rocky approved a quarterly dividend of $0.115 per common share on its outstanding common shares.  The common share dividend is payable on June 30, 2015, to shareholders of record at the close of business on May 29, 2015.

Commenting on the dividend, Mr. Ganden noted, "Rocky endeavors to provide our shareholders with a dependable return on investment by balancing cash distributions and reinvestment in the business.  Following three consecutive years of dividend increases and a strong yield approximating 5%, we've elected to maintain our level of distribution.  We see accretive acquisitive growth opportunities for Rocky and our current capital allocation positions us well to pursue these opportunities."   

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

On May 6, 2015, Rocky will discuss its results via live conference call and audio webcast, beginning at 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time).  Senior management of Rocky will provide remarks on the quarter, followed by a question and answer session with analysts and institutional investors.

Those interested in participating in the conference call may do so by calling 1-888-231-8191 (toll free) or 1-647-427-7450.  A live webcast of the conference call will also be accessible through Rocky's website at www.rockymtn.com.

An archived recording of the conference call will be available until Wednesday, May 20, 2015 by dialing 1-855-859-2056 (toll free) or 1-416-849-0833, passcode: 22842668.  This archived recording will also be available via Rocky's website.

Caution regarding forward-looking statements

Certain information set forth in this news release, including, without limitation, statements that imply any future earnings, profitability, economic benefit or other financial results, statements discussing agriculture industry demand cycles, statements about Rocky's emphasis on improving and promoting its product support business and statement about any future benefits to be gained from said emphasis and statements about Rocky's inventory levels and future inventory levels are 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 quarter ended March 31, 2015, and as discussed in Rocky's Annual Information Form dated March 10, 2015 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 industrial 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 industrial 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		March 31, 2015	December 31, 2014	March 31, 2014
Assets
	Inventory	527,257	526,003	516,416
	Other current assets	67,048	69,049	57,719
	Property and equipment	24,789	32,886	29,880
	Deferred tax asset	1,852	1,186	939
	Goodwill	15,514	14,692	14,692
Total assets		636,460	643,816	619,646
Liabilities and equity
	Floor plan payable	381,898	382,081	365,326
	Other current liabilities	55,857	57,261	56,425
	Long-term debt	28,158	32,776	39,112
	Obligations under finance leases	-	9	347
	Derivative financial instruments	4,958	3,282	2,626
		470,871	475,409	463,836
	Shareholders' equity	165,589	168,407	155,810
Total liabilities and equity		636,460	643,816	619,646

SELECTED QUARTERLY FINANCIAL INFORMATION

For the quarter ended March 31,
$ thousands, except per share amounts		2015		2014
Sales
	New equipment	111,748	50.7%	124,269	62.7%
	Used equipment	83,785	38.0%	50,751	25.6%
	Parts	16,988	7.7%	15,518	7.8%
	Service	7,053	3.2%	6,976	3.5%
	Other	849	0.4%	652	0.4%
		220,423	100.0%	198,166	100.0%
Cost of sales		188,963	85.7%	168,934	85.2%
Gross profit		31,460	14.3%	29,232	14.8%
Selling, general and administrative		27,630	12.5%	25,058	12.6%
Interest on short-term debt		2,855	1.3%	2,677	1.4%
Interest on long-term debt		514	0.3%	532	0.3%
Earnings before income taxes		461	0.2%	965	0.5%
Provision for income taxes		129	0.0%	361	0.2%
Net earnings		332	0.2%	604	0.3%
Earnings per share
	Basic	0.02		0.03
	Diluted	0.02		0.03
Dividends per share		0.1150		0.1000
Non-IFRS Measures^(1)
EBITDA		2,775	1.3%	3,221	1.6%
Operating SG&A		25,830	11.7%	23,334	11.8%
Floor Plan Neutral Operating Cash Flow		3,472	1.6%	(41,667)	(21.0%)

^{(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 related to the Company's capital structure.
  
  
• "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 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 periods presented, 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. 
  
  
• "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 flows from operating activities.  Adjusting cash flows from operating activities for changes in the balance of floor plan payable allows management to isolate and analyze operating cash flows during a period, prior to any sources or uses of cash associated with equipment financing decisions. 

RECONCILIATION OF NON-IFRS MEASURES TO IFRS

EBITDA

For the quarter ended March 31,
$ thousands	2015	2014
Net earnings	332	604
Interest on long-term debt	514	532
Depreciation expense	1,800	1,724
Income taxes	129	361
EBITDA	2,775	3,221

Operating SG&A

For the quarter ended March 31,
$ thousands	2015	2014
SG&A	27,630	25,058
Depreciation expense	(1,800)	(1,724)
Operating SG&A	25,830	23,334

Floor Plan Neutral Operating Cash Flow

For the quarter ended March 31,
$ thousands	2015	2014
Cash flows from operating activities	3,289	(18,705)
Net (increase) decrease in floor plan payable	183	(22,962)
Floor plan assumed pursuant to business combinations	-	-
Floor Plan Neutral Operating Cash Flow	3,472	(41,667)

SOURCE Rocky Mountain Dealerships Inc.

Rocky Mountain Dealerships Inc., Garrett Ganden, President and Chief Executive Officer; or, David Ascott, Chief Financial Officer; #301, 3345 - 8th Street S.E., Calgary, Alberta T2G 3A4, Telephone: [phone], Fax: [phone]