Continued Sales growth in the second quarter
CALGARY, Aug. 13, 2012 /CNW/ - Rocky Mountain Dealerships Inc. (TSX:RME, hereinafter "Rocky") today reported financial results for the three and six months ended June 30, 2012.
HIGHLIGHTS FOR THE QUARTER ENDED JUNE 30, 2012:
- Increased revenues by 8.8% to $225.7 million.
- Gross profit increased to $34.2 million (15.2% of sales) from $31.1 million (15.0% of sales).
- Normalized Diluted Earnings per Share(1) of $0.26, as compared to $0.30 in 2011.
- Generated Cash Flow from Net Earnings(1) of $4.8 million.
- Increased annual dividend by 50% to $0.27 per common share.
- Repurchased all 7% convertible unsecured subordinated debentures.
- Entered into an agreement to purchase Camrose Farm Equipment Ltd.
HIGHLIGHTS FOR THE SIX MONTHS ENDED JUNE 30, 2012:
- Increased revenues by 16.9% to $417.8 million.
- Gross profit increased to $61.9 million (14.8% of sales) from $54.9 million (15.4% of sales).
- Normalized Diluted Earnings per Share(1) of $0.38, as compared to $0.43 in 2011.
- Generated Cash Flow from Net Earnings(1) of $7.1 million.
(1) See further discussion in "Non-IFRS Measures" and "Reconciliation of Non-IFRS Measures to IFRS" sections below.
Matt Campbell, CEO of Rocky, noted "The second quarter saw our revenues and gross profits grow. Initiatives we announced in previous quarters, such as the repurchase of our debentures, our system-wide rebranding efforts and initiatives to monitor and improve our used inventory profile, impacted our net profitability as expected. We are confident in our long term gross margin targets.
"SG&A as a percentage of revenue increased in the six months ended June 30, 2012 due to our previously announced system-wide rebranding effort and organizational development costs. Our initiatives of having a strong market and brand position, increasing our operating efficiencies and enhancing the relationships we have with our customers are moving as planned and will yield results for many years to come.
"During the quarter, we also took up and paid for all of our 7.00% convertible unsecured subordinated debentures for total consideration of $37.8 million.
"Subsequent to the quarter end, we acquired 100% of the outstanding common shares of Camrose Farm Equipment Ltd. ("CFE"), a Case IH and New Holland Agriculture dealer with stores in Camrose and Killam, Alberta. This acquisition expands our access into the central Alberta agriculture market which continues to offer a strong outlook with a growing economy, solid commodity prices and exceptional growing conditions.
"Overall, the continued strong economic conditions in both agriculture and construction have played a part in Rocky's success and growth, while at the same time our ability to be a partner of choice for equipment purchasers allowed us to expand our same store revenues. The impact of previously acquired dealerships and trade areas, along with the number of available acquisition targets remaining in our core operating regions, create an environment for strong revenue and earnings growth potential into the future."
Quarterly Cash Dividend
On August 10, 2012, Rocky's Board of Directors declared a quarterly dividend of $0.0675 per common share on Rocky's outstanding common shares. The common share dividend is payable on September 28, 2012, to shareholders of record at close of business on August 31, 2012.
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.
Conference Call
Rocky will host a conference call to discuss Q2 results on Monday, August 13, 2012, 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 or by calling 1-855-859-2056 (toll free) or 1-416-849-0833, passcode: 10476462. The archive will remain available until Monday, August 27, 2012.
Caution regarding forward-looking statements
Certain information set forth in this news release, including, without limitation, the results of Rocky's rebranding, operations, used inventory and other initiatives, Rocky's ability to remain a partner of choice for equipment purchasers, the anticipated benefit of CFE acquisition, and other statements regarding anticipated revenue and earnings growth, is forward-looking information within the meaning of applicable Canadian securities laws. By its nature, forward-looking information is subject to numerous risks, uncertainties and assumptions, some of which are beyond Rocky's control. 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 in its entirety by risks and other factors discussed by Rocky in its management's discussion and analysis for the period ended June 30, 2012, and as discussed in Rocky's Annual Information Form dated March 19, 2012 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 Western Canada's largest agriculture and construction equipment dealerships with 38 branches throughout Alberta, Saskatchewan and Manitoba. Rocky sells, rents, and leases new and used construction and agriculture 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
| Expressed in thousands of Canadian Dollars (Unaudited) | ||
|
June 30, 2012 |
December 31, 2011 |
|
| Assets | ||
| Current assets | 486,869 | 434,479 |
| Property and equipment | 18,324 | 21,369 |
| Goodwill | 9,961 | 9,961 |
| Total assets | 515,154 | 465,809 |
| Liabilities and equity | ||
| Current liabilities | 342,574 | 286,175 |
| Long-term debt | 41,325 | 11,701 |
| Obligations under finance leases | 1,137 | 1,589 |
| Convertible debenture | - | 28,761 |
| Deferred income taxes | 3,193 | 8,283 |
| Derivative financial instruments | 1,936 | 1,139 |
| 390,165 | 337,648 | |
| Shareholders' equity | 124,989 | 128,161 |
| Total liabilities and equity | 515,154 | 465,809 |
SELECTED FINANCIAL INFORMATION
| For the three and six months ended June 30, | ||||||||||
| $ thousands, except per share amounts | ||||||||||
| For the three months ended June 30, | For the six months ended June 30, | |||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||
| Sales | ||||||||||
| New equipment | 131,155 | 58.1% | 115,974 | 55.9% | 243,587 | 58.3% | 200,698 | 56.2% | ||
| Used equipment | 63,110 | 28.0% | 62,481 | 30.1% | 121,114 | 29.0% | 109,023 | 30.5% | ||
| Parts | 23,067 | 10.2% | 20,714 | 10.0% | 36,907 | 8.8% | 32,619 | 9.1% | ||
| Service | 7,421 | 3.3% | 6,885 | 3.3% | 14,061 | 3.4% | 12,535 | 3.5% | ||
| Other | 988 | 0.4% | 1,438 | 0.7% | 2,123 | 0.5% | 2,444 | 0.7% | ||
| 225,741 | 100.0% | 207,492 | 100.0% | 417,792 | 100.0% | 357,319 | 100.0% | |||
| Cost of sales | 191,515 | 84.8% | 176,405 | 85.0% | 355,846 | 85.2% | 302,395 | 84.6% | ||
| Gross profit | 34,226 | 15.2% | 31,087 | 15.0% | 61,946 | 14.8% | 54,924 | 15.4% | ||
| Selling, general and administrative | 24,386 | 10.8% | 21,299 | 10.3% | 46,470 | 11.1% | 39,122 | 10.9% | ||
| Loss on repurchase of convertible debentures | 4,232 | 1.9% | - | 0.0% | 4,232 | 1.0% | - | 0.0% | ||
| Interest on short-term debt | 2,274 | 1.0% | 2,641 | 1.3% | 4,001 | 1.0% | 4,185 | 1.2% | ||
| Interest on long-term debt | 802 | 0.4% | 933 | 0.4% | 1,672 | 0.4% | 1,800 | 0.6% | ||
| Earnings from operations | 2,532 | 1.1% | 6,214 | 3.0% | 5,571 | 1.3% | 9,817 | 2.7% | ||
| Provisions for income taxes | 937 | 0.4% | 1,750 | 0.8% | 1,817 | 0.4% | 2,690 | 0.7% | ||
| Net earnings | 1,595 | 0.7% | 4,464 | 2.2% | 3,754 | 0.9% | 7,127 | 2.0% | ||
| Earnings per share | ||||||||||
| Basic | 0.09 | 0.24 | 0.20 | 0.38 | ||||||
| Diluted | 0.08 | 0.23 | 0.20 | 0.37 | ||||||
| Dividends per share | 0.0675 | 0.045 | 0.1125 | 0.09 | ||||||
| Non-IFRS Measures(1) | ||||||||||
| EBITDA | 4,605 | 2.0% | 8,810 | 4.2% | 9,947 | 2.4% | 14,642 | 4.1% | ||
| Operating SG&A | 22,904 | 10.1% | 17,297 | 8.3% | 43,820 | 10.5% | 33,777 | 9.5% | ||
| Cash Flow from Net Earnings | 4,775 | 2.1% | 7,912 | 3.8% | 7,085 | 1.7% | 7,632 | 2.1% | ||
| Normalized Diluted Earnings per Share | 0.26 | 0.30 | 0.38 | 0.43 | ||||||
(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, depreciation and amortization 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 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 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 and six months ended June 30, 2012 and 2011, the ineffective portion of hedged financial instruments is considered by management to be a non-recurring charge in SG&A. Adding back this item 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
| $ thousands | |||||||||
| Q2 2012 | Q1 2012 | Q4 2011 | Q3 2011 | Q2 2011 | Q1 2011 | Q4 2010 | Q3 2010 | Q2 2010 | |
| Net earnings | 1,595 | 2,159 | 8,961 | 7,121 | 4,464 | 2,663 | 6,345 | 3,702 | 3,096 |
| Interest on long-term debt | 802 | 870 | 917 | 870 | 933 | 867 | 943 | 662 | 231 |
| Depreciation | 1,271 | 1,433 | 1,604 | 1,711 | 1,663 | 1,362 | 1,517 | 1,468 | 1,234 |
| Income taxes | 937 | 880 | 3,105 | 2,294 | 1,750 | 940 | 2,564 | 1,745 | 1,196 |
| EBITDA | 4,605 | 5,342 | 14,587 | 11,996 | 8,810 | 5,832 | 11,369 | 7,577 | 5,757 |
Reconciliation of Year to Date Net Earnings to EBITDA
| $ thousands |
For the six months ended June 30, |
|
| 2012 | 2011 | |
| Net earnings | 3,754 | 7,127 |
| Interest on long-term debt | 1,672 | 1,800 |
| Depreciation | 2,704 | 3,025 |
| Income taxes | 1,817 | 2,690 |
| EBITDA | 9,947 | 14,642 |
Reconciliation of Cash Flow from Net Earnings
| $ thousands |
For the three months ended June 30, |
For the six months ended June 30, |
||
| 2012 | 2011 | 2012 | 2011 | |
| Net earnings | 1,595 | 4,464 | 3,754 | 7,127 |
| Depreciation expense | 1,271 | 1,663 | 2,704 | 3,025 |
| Accretion expense | 31 | 86 | 123 | 171 |
| Deferred tax expense (recovery) | (3,005) | 1,494 | (4,671) | (3,176) |
| Share-based payment expense | 484 | 190 | 756 | 511 |
| Non-cash impact - credit promissory note | 5 | 15 | 12 | (32) |
| Loss (gain) on disposal of property and equipment | (112) | - | (81) | 6 |
| Loss on derivative financial instruments | 274 | - | 256 | - |
| Loss on repurchase of convertible debentures | 4,232 | - | 4,232 | - |
| Cash Flow from Net Earnings | 4,775 | 7,912 | 7,085 | 7,632 |
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 |
|||
| 2012 | 2011 | 2012 | 2011 | ||
| Operating SG&A | 22,904 | 17,297 | 43,820 | 33,777 | |
| Depreciation | 1,208 | 1,259 | 2,394 | 2,534 | |
| Non-recurring charges | |||||
| Ineffective portion of derivative financial instrument | 274 | - | 256 | - | |
| Syndication charges | - | 1,083 | - | 1,083 | |
| Severance charges | - | 1,634 | - | 1,634 | |
| Acquisition transaction charges | - | 26 | - | 94 | |
| SG&A | 24,386 | 21,299 | 46,470 | 39,122 | |
Reconciliation of Normalized Diluted Earnings per Share
| $ thousands, except share and per share amounts |
For the three months ended June 30, |
For the six months ended June 30, |
|||
| 2012 | 2011 | 2012 | 2011 | ||
| Earnings used in the calculation of diluted earnings per share | 1,595 | 4,464 | 3,754 | 7,127 | |
| After tax impact of non-recurring charges on earnings(1) | 3,402 | 2,057 | 3,388 | 2,108 | |
| Earnings used in the calculation of Normalized Diluted Earnings per Share | 4,997 | 6,521 | 7,142 | 9,235 | |
| Weighted average diluted shares used in the calculation of diluted earnings per share | 18,874 | 21,527 | 18,880 | 21,642 | |
| Normalized Diluted Earnings per Share | 0.26 | 0.30 | 0.38 | 0.43 | |
(1) - Non-recurring charges after applying statutory rate of 25% (2011 - 26.5%).
SOURCE: Rocky Mountain Dealerships Inc.
Rocky Mountain Dealerships Inc.
Matt Campbell, Chief Executive Officer; or
Garrett Ganden, Chief Operating Officer
#301, 3345 - 8th Street S.E.
Calgary, Alberta T2G 3A4
Telephone: (403) 265-7364, Fax (403) 214-5644