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Press release from CNW Group

Rocky Mountain Dealerships Inc. (TSX:RME, OTCQX:RCKXF) Announces First Quarter 2013 Results and a 48% Increase in Annual Dividend

Monday, May 13, 2013

Rocky Mountain Dealerships Inc. (TSX:RME, OTCQX:RCKXF) Announces First Quarter 2013 Results and a 48% Increase in Annual Dividend

22:28 EDT Monday, May 13, 2013

CALGARY, May 13, 2013 /CNW/ - Rocky Mountain Dealerships Inc. (hereinafter "Rocky") today reported its financial results for the three months ended March 31, 2013.

HIGHLIGHTS FOR THE QUARTER ENDED MARCH 31, 2013

  • Increased revenues by 7.5% to $206.5 million.
  • Gross profit increased by 17.2% to $32.5 million (15.7% of sales).
  • Diluted Earnings per Share of $0.15, up from $0.11 in 2012.
  • EBITDA(1) increased by 12.3% to $6.0 million.
  • Paid dividends of $0.0675 per share
  • Completed the acquisition of Murray's Farm Supplies

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


Commenting on the quarterly results, Matt Campbell, CEO of Rocky, stated, "While this quarter presented some challenges for Rocky resulting from the late spring thaw, we were able to achieve improvements in top line revenues, gross margin, and earnings per share.  While inventory levels increased during the quarter, we believe that our current initiatives will reduce our overall inventories in upcoming quarters, while still providing the immediate access to necessary inventory that our customers expect."

Rocky Announces Dividend Increase

On May 13, 2013, the Board of Directors ("Board") of Rocky approved an increase in Rocky's annual dividend to $0.40 per common share.  In conjunction with that increase, Rocky's Board also declared a dividend today of $0.10 per common share on its outstanding common shares.  The common share dividend is payable on June 28, 2013, to shareholders of record as of May 31, 2013.  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.  Our revenue and earnings growth, coupled with a strong balance sheet created by these initiatives has enabled us to increase the dividend for a second consecutive year.  The current dividend reflects a yield of 3.0% at today's closing market price, and represents a conservative payout ratio of 27% of trailing earnings."

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 Tuesday, May 14, 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: 41610864.  The archive will remain available until Tuesday, May 28, 2013.

Report on Voting Results from the 2013 Annual & Special Meeting of Shareholders

Rocky held its Annual & Special Meeting of shareholders on May 10, 2013 (the "Meeting").  On a vote by ballot, each of the following six nominees was elected as a director of Rocky:

Nominee Votes For % For Votes Withheld % Withheld
Matthew C. Campbell 12,139,601 99.57 51,442 0.43
Dennis J. Hoffman 12,105,496 99.29 85,574 0.71
Derek I. Stimson 12,190,054 99.99 989 0.01
Patrick J. Priestner 12,109,969 99.32 81,074 0.68
Paul S. Walters 12,109,969 99.32 81,074 0.68
Keith E. Macdonald 5,756,637 46.39 6,434,386 53.61


The number of votes "withheld" in respect of the election of Mr. Macdonald to the Board was greater than the number of votes "for" his election.  Pursuant to Rocky's Majority Voting Policy (the "Policy"), Mr. Macdonald has tendered his resignation as a director.  As per the Policy, the Board shall consider the resignation and determine whether or not to accept the resignation.  The Board's determination (and the reasons for rejecting the resignation, if applicable) shall be made within 30 days following the date of the Meeting, following which Rocky will issue a press release disclosing the Board's determination.  Further details of the results of the Meeting have been posed on SEDAR at www.sedar.com.

Caution regarding forward-looking statements

Certain information set forth in this news release, including, without limitation, the information regarding inventory levels and initiatives related to inventory, information regarding shareholder value and statements discussing improving shareholder value in the future, and the timing and outcome of the Board's determination regarding the resignation of Mr. Macdonald 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 period ended March 31, 2013, 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 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 www.rockymtn.com and on SEDAR at www.sedar.com.

CONSOLIDATED BALANCE SHEET SUMMARY

$ thousands (unaudited)

    March 31,
2013
  December 31,
2012
         
Assets        
  Current assets         629,905   586,722
  Property and equipment   21,272   21,558
  Goodwill   14,692   13,884
Total assets   665,869   622,164
         
Liabilities and equity        
  Current liabilities   469,565   421,767
  Long-term debt   43,722   45,977
  Obligations under finance leases   1,187   1,379
  Deferred income taxes   1,003   7,042
  Derivative financial instruments   1,490   1,438
    516,967   477,603
  Shareholders' equity   148,902   144,561
Total liabilities and equity   665,869   622,164


SELECTED QUARTERLY FINANCIAL INFORMATION

For the three months ended March 31,    
$ thousands, except per share amounts (unaudited)    
  2013 2012
Sales              
  New equipment 115,075   55.7%   112,432   58.5%
  Used equipment 71,305   34.5%   58,004   30.2%
  Parts 13,299   6.4%   13,840   7.2%
  Service 6,211   3.0%   6,640   3.5%
  Other 616   0.4%   1,135   0.6%
  206,506   100.0%   192,051   100.0%
Cost of sales 174,015   84.3%   164,331   85.6%
Gross profit 32,491   15.7%   27,720   14.4%
               
Selling, general and administrative 25,501   12.3%   22,084   11.5%
Interest on short-term debt 2,606   1.3%   1,727   0.9%
Interest on long-term debt 614   0.3%   870   0.4%
Earnings before income taxes 3,770   1.8%   3,039   1.6%
Provisions for income taxes 932   0.4%   880   0.5%
Net earnings 2,838   1.4%   2,159   1.1%
Earnings per share              
  Basic 0.15       0.12    
  Diluted 0.15       0.11    
Dividends per share 0.0675       0.045    
               
Non-IFRS Measures(1)              
EBITDA 6,001   2.9%   5,342   2.8%
Operating SG&A 23,873   11.6%   20,916   10.9%
Cash Flow from Net Earnings (1,295)   (0.6%)   2,310   1.2%

(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 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 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.

  • "Cash Flow from Net Earnings" is calculated by adding back non-cash items such as depreciation expense, non-cash finance charges on the convertible debentures and long-term debt, deferred tax recovery, share-based payment expense, (gains) losses on the disposal of property and equipment and gains on derivative financial instruments.  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 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 three months ended March 31, 2013 and 2012, the ineffective portion of hedged financial instruments 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.

RECONCILIATION OF NON-IFRS MEASURES TO IFRS

Reconciliation of Quarterly Net Earnings to EBITDA

Three months ended March 31,  
$ thousands  
      2013   2012
           
Net earnings     2,838   2,159
Interest on long-term debt     614   870
Depreciation expense     1,617   1,433
Income taxes     932   880
EBITDA     6,001   5,342

Reconciliation of Cash Flow from Net Earnings

Three months ended March 31,          
$ thousands          
      2013   2012
           
Net earnings     2,838   2,159
Depreciation expense     1,617   1,433
Accretion expense     -   92
Deferred tax recovery     (6,028)   (1,666)
Share-based payment expense     354   272
Non-cash impact - credit promissory note     1   7
(Gain) loss on disposal of property and equipment     (54)   31
Gain on derivative financial instruments     (23)   (18)
Cash Flow from Net Earnings     (1,295)   2,310


Reconciliation of Operating SG&A to selling, general and administrative expenses

 

Three months ended March 31,
$ thousands      
  2013   2012
 
SG&A 25,501   22,084
Depreciation (1,617)   (1,186)
Non-recurring charges      
  Ineffective portion of derivative financial instruments 23   18
  Acquisition transaction charges (34)   -
Operating SG&A 23,873   20,916
         
         
       

 

 

 

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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