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Press release from CNW Group

Rocky Mountain Dealerships Inc. (TSX:RME, OTCQX:RCKXF) announces second quarter 2013 results

Monday, August 12, 2013

Rocky Mountain Dealerships Inc. (TSX:RME, OTCQX:RCKXF) announces second quarter 2013 results

19:49 EDT Monday, August 12, 2013

CALGARY, Aug. 12, 2013 /CNW/ - Rocky Mountain Dealerships Inc. (hereinafter "Rocky") today reported its financial results for the quarter ended June 30, 2013.

HIGHLIGHTS FOR THE QUARTER ENDED JUNE 30, 2013

  • Increased revenues by 5.5% to $238.1 million
  • Gross profit increased by 5.0% to $35.9 million (15.1% of sales)
  • Normalized Diluted Earnings Per Share(1) of $0.22
  • Generated Cash Flow from Net Earnings(1) of $5.6 million
  • EBITDA(1) of $8.6 million
  • Increased quarterly dividend by 48.1% to $0.10 per share

(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, "Rocky delivered growth in both revenue and gross profit while retaining relatively consistent earnings on a normalized basis versus last year.  This despite weather related challenges and a disappointing performance from our construction stores.

"A late spring abbreviated the 2013 seeding window. The flooding in late June caused little damage to crops, but was enough to create some apprehension amongst some of our customers.  Weather conditions notwithstanding, the crops across the Canadian Prairies are maturing well and although commodity prices have softened as of late, they remain healthy and should contribute to strong crop receipts.

"Despite softer sales during the quarter, we achieved a $28 million sequential decrease in our inventory levels.  This remains an area of focus for Rocky going forward, and we expect this trend to continue throughout the balance of the year.

"The underlying business fundamentals of Rocky remain strong. We have exclusive distribution rights for some of the world's leading equipment brands in a vibrant agriculture and construction market.  Our installed base and customer relationships create an annuity of equipment sales and product support revenue, which help drive dependable earnings and cash flow. It is these strong fundamentals that continue to provide stability in our results and value to our shareholders."

Appointment of Lead Director

Rocky also announced today that it has appointed Paul Walters as its Lead Director.  Commenting on this appointment, Matt Campbell noted, "We are grateful that Mr. Walters has accepted this appointment as Lead Director of Rocky.  He possesses a wealth of experience, having chaired public company boards in the past, and is well suited to assist Rocky in this capacity."

Rocky Announces Quarterly Cash Dividend

The Board of Directors ("Board") of Rocky declared a dividend today of $0.10 per common share on its outstanding common shares.  The common share dividend is payable on September 30, 2013, to shareholders of record as of August 30, 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 Call

Rocky will host a conference call to discuss its quarter-end results on Tuesday, August 13, 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: 23143509.  The archive will remain available until Tuesday, August 27, 2013.

Caution regarding forward-looking statements

Certain information set forth in this news release, including, without limitation, discussion regarding crop conditions and commodity prices contributing to strong crop receipts, expectations that the trend in decreasing inventories will continue throughout the balance of the year, and discussion that Rocky's customer base will continue to provide ongoing, stable cash flow.  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 June 30, 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)

       
  June 30,
2013
December 31,
2012
     
Assets    
  Current assets       589,255 586,722
  Property and equipment 21,651 21,558
  Goodwill 14,692 13,884
Total assets 625,598 622,164
     
Liabilities and equity    
  Current liabilities 429,483 421,767
  Long-term debt 41,462 45,977
  Obligations under finance leases 977 1,379
  Deferred income taxes 630 7,042
  Derivative financial instruments 344 1,438
  472,896 477,603
  Shareholders' equity 152,702 144,561
Total liabilities and equity 625,598 622,164

SELECTED QUARTERLY FINANCIAL INFORMATION

$ thousands, except per share amounts (unaudited)            
  For the three months ended June 30, For the six months ended June 30,
  2013 2012 2013 2012
               
Sales                
  New equipment 131,534 55.2% 131,155 58.1% 246,609 55.5% 243,587 58.3%
  Used equipment 71,805 30.2% 63,110 28.0% 143,110 32.2% 121,114 29.0%
  Parts 26,667 11.2% 23,067 10.2% 39,966 9.0% 36,907 8.8%
  Service 7,310 3.1% 7,421 3.3% 13,521 3.0% 14,061 3.4%
  Other 790 0.3% 988 0.4% 1,406 0.3% 2,123 0.5%
  238,106 100.0%  225,741  100.0%  444,612  100.0%  417,792  100.0%
Cost of sales 202,166 84.9% 191,515 84.8% 376,181 84.6% 355,846 85.2%
Gross profit 35,940 15.1% 34,226 15.2% 68,431 15.4% 61,946 14.8%
                 
Selling, general and administrative 25,873 10.9% 24,386 10.8% 51,374 11.6% 46,470 11.1%
Loss on repurchase of convertible debentures - - 4,232 1.9% - - 4,232 1.0%
Interest on short-term debt 3,037 1.3% 2,274 1.0% 5,643 1.3% 4,001 1.0%
Interest on long-term debt 597 0.2% 802 0.4% 1,211 0.2% 1,672 0.4%
Earnings from operations 6,433 2.7% 2,532 1.1% 10,203 2.3% 5,571 1.3%
Provision for income taxes 1,939 0.8% 937 0.4% 2,871 0.7% 1,817 0.4%
Net earnings 4,494 1.9% 1,595 0.7% 7,332 1.6% 3,754 0.9%
Earnings per share                
  Basic 0.23   0.09   0.38   0.20  
  Diluted 0.23   0.08   0.38   0.20  
Dividends per share 0.1000   0.0675   0.1675   0.1125  
                 
Non-IFRS Measures(1)                
EBITDA 8,572 3.6% 4,605 2.0% 14,573 3.3% 9,947 2.4%
Normalized EBITDA 8,215 3.5% 9,111 4.0% 14,227 3.2% 14,435 3.5%
Operating SG&A 24,688 10.4% 22,904 10.1% 48,561 10.9% 43,820 10.5%
Cash Flow from Net Earnings 5,593 2.3% 4,775 2.1% 4,298 1.0% 7,085 1.7%
Normalized Diluted Earnings per Share 0.22   0.26   0.37   0.38  

(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 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.  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 and six months ended June 30, 2013 and 2012, the loss on the repurchase of the Debentures, the ineffective portion of derivative financial instruments and acquisition transaction costs are considered by management to be non-recurring charges.  Adding back these non-recurring charges allows management to assess EBITDA from ongoing operations.
  • "Cash Flow from Net Earnings" is calculated by adding back non-cash items such as depreciation expense, non-cash finance charges on the Debentures and long-term debt, deferred tax recovery, share-based payment expense, (gains) losses on the disposal of property and equipment, the ineffective portion of derivative financial instruments and the loss on the repurchase of the Debentures.  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 recognized in SG&A 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 and six months ended June 30, 2013 and 2012, the ineffective portion of derivative 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.
  • "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.  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 Net Earnings to EBITDA and Normalized EBITDA

         
$ thousands For the three months
ended June 30,
For the six months
ended June 30,
  2013 2012 2013 2012
         
Net earnings 4,494 1,595 7,332 3,754
Interest on long-term debt 597 802 1,211 1,672
Depreciation expense 1,542 1,271 3,159 2,704
Income taxes 1,939 937 2,871 1,817
EBITDA 8,572 4,605 14,573 9,947
Non-recurring charges        
  Loss on repurchase of Debentures - 4,232 - 4,232
  Ineffective portion of derivative financial instruments (359) 274 (382) 256
  Acquisition transaction charges 2 - 36 -
Normalized EBITDA 8,215 9,111 14,227 14,435

Reconciliation of Cash Flow from Net Earnings

         
$ thousands For the three months
ended June 30,
For the six months
ended June 30,
  2013 2012 2013 2012
         
Net earnings 4,494 1,595 7,332 3,754
Depreciation expense 1,542 1,271 3,159 2,704
Accretion expense - 31 - 123
Deferred tax recovery (572) (3,005) (6,600) (4,671)
Share-based payment expense 404 484 758 756
Non-cash impact of credit promissory note - 5 1 12
Loss (gain) on disposal of property and equipment 84 (112) 30 (81)
Loss (gain) on derivative financial instruments (359) 274 (382) 256
Loss on repurchase of Debentures - 4,232 - 4,232
Cash Flow from Net Earnings 5,593 4,775 4,298 7,085

Reconciliation of Operating SG&A to Selling, General and Administrative Expenses

         
$ thousands For the three months
ended June 30,
For the six months
ended June 30,
  2013 2012 2013 2012
         
SG&A 25,873 24,386 51,374 46,470
Depreciation expense (1,542) (1,208) (3,159) (2,394)
Non-recurring charges        
  Ineffective portion of derivative financial instruments 359 (274) 382 (256)
  Acquisition transaction charges (2) - (36) -
Operating SG&A 24,688 22,904 48,561 43,820

Reconciliation of Normalized Diluted Earnings per Share

         
$ thousands, except per share amounts For the three months
ended June 30,
For the six months
ended June 30,
  2013 2012 2013 2012
         
Earnings used in the calculation of diluted earnings per share 4,494 1,595 7,332 3,754
After tax impact of non-recurring charges in SG&A and loss on repurchase of Debentures(1) (268) 3,402 (260) 3,388
Earnings used in the calculation of Normalized Diluted Earnings per Share 4,226 4,997 7,072 7,142
Weighted average diluted shares used in the calculation of diluted earnings per share 19,260 18,874 19,195 18,880
Normalized Diluted Earnings per Share 0.22 0.26 0.37 0.38
(1) - After applying statutory rate of 25% (2012 - 25%)        
         

 

 

 

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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