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Press release from CNW Group

Rocky Mountain Dealerships Inc. (TSX:RME, OTCQX:RCKXF) Announces Annual and Fourth Quarter 2012 Results

Monday, March 11, 2013

Rocky Mountain Dealerships Inc. (TSX:RME, OTCQX:RCKXF) Announces Annual and Fourth Quarter 2012 Results22:55 EDT Monday, March 11, 2013Record earnings per share highlight strong fourth quarter and annual resultsCALGARY, March 11, 2013 /CNW/ - Rocky Mountain Dealerships Inc. (hereinafter "Rocky") today reported its financial results for the three and twelve months ended December 31, 2012.HIGHLIGHTS FOR THE QUARTER ENDED DECEMBER 31, 2012:Increased revenues by 25.0% to $300.8 million (17.6% on a same store basis)Gross profit increased by 24.1% to $45.9 million (15.2% of sales)Diluted Earnings per Share of $0.62, up from $0.42 in 2011EBITDA(1) increased by 27.2% to $18.6 millionPaid dividends of $0.0675 per share, an increase of 50% over the prior yearHIGHLIGHTS FOR THE YEAR ENDED DECEMBER 31, 2012:Increased revenues by 20.3% to $966.1 million (16.3% on a same store basis)Gross profit increased by 17.8% to $147.5 million (15.3% of sales)Normalized Diluted Earnings per Share(1) of $1.46, up from $1.22 in 2011Generated Cash Flow from Net Earnings(1) of $35.1 millionNormalized EBITDA(1) increased by 4.7% to $46.5 millionPaid dividends of $0.2475 per share after announcing a 50% dividend increase in Q1Repurchased all convertible debentures reducing interest exposure and shareholder dilutionAcquired and integrated four agriculture equipment dealerships in Alberta(1) See further discussion in "Non-IFRS Measures" and "Reconciliation of Non-IFRS Measures to IFRS" sections below.Matt Campbell, CEO of Rocky, noted "2012 saw us undertake a number of initiatives aimed at enhancing shareholder value.  We were able to repurchase our convertible debentures, resulting in considerable interest savings, as well as eliminating the dilutive effect the debentures created.  We increased our dividend by 50% in 2012.  We re-branded our entire dealership network, unifying it under the name "Rocky Mountain Equipment", and are working towards leveraging the benefits a single, strong brand can provide."In addition to those initiatives, our customers enjoyed favorable growing conditions across the network, strong commodity prices, and generally positive economic conditions in all industries that we service.  Consistent with our stated objective, Rocky continued to grow its footprint, market share and installed base during the fourth quarter of 2012. Those factors, combined with the success of our efforts to be the dependable equipment partner of choice for our customers, culminated in our delivering to our shareholders record results for both the fourth quarter and the year."2012 saw a significant increase in the amount of new and used inventory sold.  While this created some downward pressure on our gross margins during the year, we were able to increase our market share and our customer base.  We will now work towards translating this larger equipment base into increased product support revenues going forward.  In short, we feel we are well-positioned as a result of our 2012 initiatives and results to continue to grow well into the future."Annual & Special Meeting of ShareholdersRocky also announced today that its Annual & Special Meeting of Shareholders ("AGM") will take place at 2:00pm on Friday, May 10, 2013, in the showroom of Rocky Mountain Equipment, 260180 Writing Creek Crescent, Rocky View County, Alberta.  Materials related to the upcoming AGM will be sent in mid-April, 2013, to shareholders of record at the close of business on April 5, 2013.Quarterly Cash DividendOn February 11, 2013, Rocky's Board of Directors declared a quarterly dividend of $0.0675 per common share on Rocky's outstanding common shares.  The dividend is payable on March 28, 2013, to shareholders of record at the close of business on February 28, 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 CallRocky will host a conference call to discuss its year-end results on Tuesday, March 12, 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: 97869994.  The archive will remain available until Tuesday, March 26, 2013.Caution regarding forward-looking statementsCertain information set forth in this news release, including, without limitation, the information regarding the financial impact, future interest savings, and improved returns to shareholders resulting from Rocky's repurchase of its convertible debentures, any effects, financial or otherwise, of Rocky's re-branding initiatives in 2012 and Rocky's ability to increase its product support revenues going forward 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, 2012, 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 RockyRocky 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)      December 31,2012 December 31,2011Assets     Current assets 586,722 434,479 Property and equipment 21,558 21,369 Goodwill 13,884 9,961Total assets 622,164 465,809     Liabilities and equity     Current liabilities 421,767 286,175 Long-term debt (including convertible debentures) 45,977 40,462 Obligations under finance leases 1,379 1,589 Deferred income taxes 7,042 8,283 Derivative financial instruments 1,438 1,139  477,603 337,648 Shareholders' equity 144,561 128,161Total liabilities and equity 622,164 465,809     SELECTED QUARTERLY AND ANNUAL FINANCIAL INFORMATION$ thousands, except per share amounts (unaudited)                             For the quarter ended December 31, For the year ended December 31, 2012 2011 2012 2011Sales                New equipment195,813 65.1% 132,712 55.2% 549,036 56.8% 423,933 52.8% Used equipment79,709 26.5% 82,318 34.2% 297,476 30.8% 269,809 33.6% Parts16,369   5.4% 16,155 6.7% 84,653 8.8% 75,531 9.4% Service7,933 2.6% 7,459 3.1% 30,459 3.2% 28,028 3.5% Other956 0.4% 1,945 0.8% 4,482 0.4% 5,462 0.7% 300,780 100.0% 240,589 100.0% 966,106 100.0% 802,763 100.0%Cost of sales254,913 84.8% 203,620 84.6% 818,595 84.7% 677,571 84.4%Gross profit45,867 15.2% 36,969 15.4% 147,511 15.3% 125,192 15.6%                Selling, general and administrative26,060 8.7% 21,964 9.1% 97,711 10.1% 82,001 10.2%Loss on repurchase of convertible    debentures- 0.0% - 0.0% 4,232 0.4% - 0.0%Interest on short-term debt2,622 0.9% 2,022 0.8% 9,071 0.9% 8,306 1.0%Interest on long-term debt572 0.1% 917 0.5% 2,843 0.4% 3,587 0.5%Earnings before income taxes16,613 5.5% 12,066 5.0% 33,654 3.5% 31,298 3.9%Income taxes4,843 1.6% 3,105 1.3% 9,679 1.0% 8,089 1.0%Net earnings11,770 3.9% 8,961 3.7% 23,975 2.5% 23,209 2.9%Earnings per share                Basic0.63   0.48   1.28   1.24   Diluted0.62   0.42   1.28   1.12  Dividends per share0.0675   0.0450   0.2475   0.1800                  Non-IFRS Measures(1)               EBITDA18,557 6.2% 14,587 6.1% 42,008 4.3% 41,225 5.1%Normalized EBITDA18,579 6.2% 14,529 6.0% 46,510 4.8% 44,437 5.5%Operating SG&A24,671 8.2% 20,804 8.6% 92,391 9.6% 73,872 9.2%Cash Flow from Net Earnings17,717 5.9% 13,462 5.6% 35,120 3.6% 33,087 4.1%Normalized Diluted Earnings per Share0.62   0.42   1.46   1.22  (1) See further discussion in "Non-IFRS Measures" and "Reconciliation of Non-IFRS Measures to IFRS" sections below.NON-IFRS MEASURES Throughout this MD&A, we use terms which do not have standardized meanings under IFRS.  As these 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 long-term interest, 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.  In addition to the non-recurring charges in SG&A, the loss on the repurchase of the Debentures is considered to be a non-recurring charge.  Adding back these non-recurring charges to net earnings allows management to assess the EBITDA from ongoing operations."Cash Flow from Net Earnings" is calculated by adding back non-cash items such as depreciation of property and equipment, non-cash finance charges on the Debentures and long-term debt, deferred income taxes, share-based payment expense, losses (gains) on the disposal of property and equipment, losses (gains) on derivative financial instruments and the loss on the repurchase of the Debentures to net earnings.  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 included in SG&A, and any non-recurring charges incurred 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 years ended December 31, 2012 and 2011, the ineffective portion of hedged financial instruments, syndication charges, severance charges 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.  In addition to the non-recurring charges in SG&A, the loss on the repurchase of the Debentures is considered to be a non-recurring charge.  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 Quarterly Net Earnings to EBITDA and Normalized EBITDA                   $ thousands Q4 2012 Q3 2012 Q2 2012 Q1 2012 Q4 2011 Q3 2011 Q2 2011 Q1 2011 Q4 2010                   Net earnings 11,770 8,451 1,595 2,159 8,961 7,121 4,464 2,663 6,345Interest on long-term debt 572 599 802 870 917 870 933 867 943Depreciation expense 1,372 1,435 1,271 1,433 1,604 1,711 1,663 1,362 1,517Income taxes 4,843 3,019 937 880 3,105 2,294 1,750 940 2,564EBITDA 18,557 13,504 4,605 5,342 14,587 11,996 8,810 5,832 11,369Non-recurring charges                   Ineffective portion of derivative financial instruments (44) (38) 274 (18) (58) 523 - - - Syndication charges - - - - - - 1,083 - - Severance charges - - - - - - 1,634 - - Acquisition transaction charges 66 30 - - - 3 26 1 32 Loss on repurchase of convertible debentures - - 4,232 - - - - - -Normalized EBITDA 18,579 13,496 9,111 5,324 14,529 12,522 11,553 5,833 11,401                   Reconciliation of Annual Net Earnings to EBITDA and Normalized EBITDA         $ thousands   For the year ended December 31,    2012 2011 2010         Net earnings   23,975 23,209 14,899Interest on long-term debt   2,843 3,587 2,064Depreciation expense   5,511 6,340 5,280Income taxes   9,679 8,089 6,327EBITDA   42,008 41,225  28,570Non-recurring charges         Ineffective portion of derivative financial instruments   174 465 - Syndication charges   - 1,083 - Severance charges   - 1,634 - Acquisition transaction charges   96 30 270 Loss on repurchase of convertible debentures   4,232 - -Normalized EBITDA   46,510 44,437 28,840         Reconciliation of Cash Flow from Net Earnings              $ thousands For the quarter ended December 31, For the year ended December 31,  2012 2011 2010 2012 2011 2010             Net earnings 11,770 8,961 6,345 23,975 23,209 14,899Depreciation expense 1,372 1,604 1,517 5,511 6,340 5,280Accretion expense - 91 82 123 350 118Deferred tax expense (recovery) 3,525 2,551 2,633 (1,080) 1,655 5,013Share-based payment expense 420 312 386 1,613 1,087 1,643Non-cash impact - credit promissory note 2 8 - 18 (18) -Loss (gain) on disposal of property and equipment 672 (7) 42 554 (1) (229)Loss (gain) on derivative financial instruments (44) (58) - 174 465 -Loss on repurchase of convertible debentures - - - 4,232 - -Cash Flow from Net Earnings 17,717 13,462 11,005 35,120 33,087 26,724             Reconciliation of SG&A to Operating SG&A             $ thousands For the quarter endedDecember 31, For the year endedDecember 31,  2012 2011 2010 2012 2011 2010             SG&A 26,060 21,964 18,082 97,711 82,001 63,409Depreciation expense in SG&A (1,367) (1,218) (1,270) (5,050) (4,917) (4,444)Non-recurring charges             Ineffective portion of derivative financial instruments 44 58 - (174) (465) - Syndication charges - - - - (1,083) - Severance charges - - - - (1,634) - Acquisition transaction charges (66) - (32) (96) (30) (270)Operating SG&A 24,671 20,804 16,780 92,391 73,872 58,695              Reconciliation of Normalized Diluted Earnings per Share             $ thousands, except share and per share amounts For the quarter endedDecember 31, For the year endedDecember 31,  2012 2011 2010 2012 2011 2010             Earnings used in the calculation of diluted earnings per share 11,770 9,459 6,636 23,975 25,179 15,682After tax impact of non-recurring charges in SG&A and loss on   repurchase of Debentures(1) 17 (43) 23 3,399 2,361 194Earnings used in the calculation of Normalized Diluted Earnings   per Share 11,787 9,416 6,659 27,374 27,540 15,876Weighted average diluted shares used in the calculation of diluted   earnings per share 18,996 22,626 21,478 18,778 22,565 19,910Normalized Diluted Earnings per Share 0.62 0.42 0.31 1.46 1.22 0.80(1) After applying statutory rate of 25% (2011 - 26.5%)   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