- Fourth quarter revenue increased over 50% year over year to $146.9
million
- Fourth quarter Earnings from Operations increased 51% year over year
to $7.5 million
- Full year 2008 Earnings from Operations increased 25% $18.4 million
- Full year 2008 EBITDA grew to $26.2 million
- Company incurs non-cash impairment charge of $102.8 million
- Declares quarterly cash dividend of $0.045 per share
CALGARY, March 10 /CNW/ - Rocky Mountain Dealerships Inc. ("Rocky Mountain" or the "Company"), a leading Canadian network of full service agricultural and construction equipment dealerships, today reported financial results for the three month and full year periods ended December 31, 2008. Rocky Mountain was formed on September 17, 2007 but did not carry on any business until it completed the acquisition of Hammer Equipment Sales Limited and the Hi-Way Service group on December 20, 2007.
For the fiscal 2008 fourth quarter, net sales increased 51.4% to $146.9 million, compared to net sales of $99.0 million for the fourth quarter of fiscal 2007. This growth in revenue was due to improved sales from all three of the Company's primary revenue sources. New equipment sales were $90.5 million in the fourth quarter of fiscal 2008 compared to $69.0 million in the prior year period. Used equipment sales were $32.8 million in the fourth quarter of 2008, up 175.6% compared to $11.9 million in the fourth quarter of fiscal 2007. Revenue generated from product support increased to $22.0 million in the fourth quarter of fiscal 2008 compared to $15.1 million in the fourth quarter of fiscal 2007.
Gross profit for the fiscal 2008 fourth quarter increased 42.0% to $24.6 million, compared to $17.4 million in the fourth quarter of the prior year. The Company's gross profit margin was 16.8% in the fiscal 2008 fourth quarter versus 17.6% in the fourth quarter of the prior year. The decrease in gross profit margin was due in part to a shift in sales mix to a higher percentage of revenue coming from agriculture equipment, which requires less high margin product support sales.
Selling, general, and administrative improved to 10.1% of sales, in the fiscal 2008 fourth quarter versus 10.3% of sales, in the fourth quarter of the prior year. This 20 basis point improvement was primarily due to the Company's ability to achieve the benefits of economies of scale following acquisitions completed in 2008 allowing expenses to be allocated over a larger group of dealerships and a reduction of expenses incurred to consolidate the acquired companies. Fourth quarter fiscal 2008 selling, general, and administrative include additional expenses the Company incurred associated with being a publicly traded company.
Operating income in the fourth quarter fiscal 2008 increased 51.3% to $7.5 million from $5.0 million in the prior year period due to strong organic and acquired revenue growth and improved operating efficiencies.
The Company believes EBITDA is a useful metric to monitor its operating performance on a year-over-year basis. Please see Table 3 below for reconciliation of Net Earnings to EBITDA. For the fourth quarter of fiscal 2008, EBITDA was $9.4 million, up 33% compared to EBITDA of $7.0 million in the fourth quarter of fiscal 2007.
Despite the strong fundamentals of the Company's business, the decline in the financial markets and the weakened consumer environment has resulted in a significant decline in the Company's market capitalization relative to its net book value. Due to this decline, the Company performed impairment analyses related to its goodwill and intangible assets and as a result of these analyses, the Company recorded a non-cash goodwill impairment charge of $84.8 million and a non-cash impairment of intangible assets of $18.0 million. This equates to an aggregate non-cash impairment charge of $102.8 million, $98.1 million after tax recovery of $4.7 million, or $7.42 per common share, in the fourth quarter and fiscal year ended December 31, 2008. The non-cash impairment charge does not affect the company's cash balances, liquidity or operating cash flows.
Net loss for the fourth quarter of fiscal 2008 was $93.5 million, or $7.07 per share, compared to net income of $3.1 million for the fourth quarter of fiscal 2007. Excluding the aforementioned non-cash impairment charge, the Company's fourth quarter fiscal 2008 net income was $4.6 million, or $0.35 per common share.
For the fiscal 2008 full year ended December 31, 2008, net sales increased $90.7 million, or 29.0%, to $404.1 million from net sales of $313.4 million for fiscal 2007. Net loss was $87.7 million, or $6.88 per share, for fiscal 2008, compared to earnings from operations of $14.8 million, in fiscal 2007. Excluding the aforementioned non-cash impairment charge, fiscal 2008 earnings from operations is $18.4 million, or $1.39 per common share.
Matt Campbell, Chairman and Chief Executive Officer of Rocky Mountain Dealerships, said, "We are pleased with the solid organic and acquired growth in our business during the fourth quarter and full year 2008, as we increased sales from all three of our primary revenue streams-new equipment sales, used equipment sales, and product support. Throughout the year, we made strategic acquisitions that meaningfully enhanced the Rocky Mountain brand, including the Miller acquisition. We also improved our operating efficiencies in the fourth quarter due to our integration initiatives. With agriculture sales now contributing approximately half of our total revenue, we are well-positioned to capitalize on favorable market conditions for Canadian farmers."
Mr. Campbell continued, "We ended 2008 with a strong balance sheet and generated EBITDA of $26.2 million for the full year. We will continue to use our strong cash flow to further invest in our business and make strategic selective acquisitions as we position ourselves for long-term growth and profitability."
Cash Flow & Liquidity
The Company ended fiscal 2008 in a very solid financial position. The Company's net debt to EBITDA ratio was 1.13x, which is comfortably within our goal of 1.0x - 1.5x. Working capital at the end of fiscal 2008 was $44.0 million. Inventory as of December 31, 2008, was $207.5 million, up from $176.4 million as the end of fiscal 2007. This increase in inventory is a result of the Miller acquisition and timing of deliveries at year-end. Management is comfortable with its inventory position.
In addition, to add additional security in these uncertain economic times, the Company increased its allowance for doubtful accounts from $0.6 million to $1.1 million and incurred an inventory write down of $2.7 million during 2008.
Quarterly Cash Dividend
The Company announces that the Board of Directors of Rocky Mountain declared a dividend of $0.045 per common share on the Company's outstanding common shares. The common share dividend is payable on March 31, 2009, to shareholders of record at close of business on March 19, 2009.
This dividend is designated by Rocky Mountain to be an eligible dividend for purpose 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
The Company will host a conference call to discuss their fourth quarter and full year results on Wednesday, March 11, 2009, at 12:00 Noon MT. Investors interested in participating in the live call can dial 1-800-732-6179. A telephone replay will be available approximately one hour after the call concludes and will be available through March 18, 2009, by dialing 416-640-1917 or 1-877-289-8525 and entering the passcode: 21299482 followed by the pound sign. A live webcast of the conference call will be accessible on Rocky Mountain's website at www.rockymtn.com.
About Rocky Mountain
Rocky Mountain represents one of Canada's largest agriculture and construction equipment dealerships with a total of 21 dealership branches throughout Alberta, Saskatchewan and Manitoba. Rocky Mountain sells, rents and leases new and used construction and agriculture equipment, including the Case Construction and Case IH Agriculture brands, as well as offering product support and finance and insurance products to its customers.
TABLE 1
ROCKY MOUNTAIN DEALERSHIPS INC.
Consolidated Balance Sheet
As at December 31,
-------------------------------------------------------------------------
2008 2007
$ $
---------------------------
(unaudited) (unaudited)
ASSETS
CURRENT
Cash and cash equivalents 492,740 16,955,704
Accounts receivable and other 40,613,535 28,253,856
Inventory 207,467,089 129,810,489
Prepaid expenses 392,050 1,387,767
---------------------------
248,965,414 176,407,816
Property, plant and equipment 21,457,648 26,721,740
Intangible assets - 20,982,197
Goodwill - 71,774,483
---------------------------
270,423,062 295,886,236
---------------------------
---------------------------
LIABILITIES
CURRENT
Bank indebtedness 5,222,652 458,465
Accounts payable and accrued liabilities 29,973,390 20,301,029
Floor plan payable 150,448,653 98,961,390
Deferred revenue 9,436,867 9,074,062
Due to related parties 3,690,738 9,825,449
Business purchase consideration payable - 10,269,000
Current portion of long-term 5,909,998 5,821,139
Current portion of obligations under capital
lease 299,927 104,301
---------------------------
204,982,225 154,814,835
Long-term debt 17,803,096 18,628,634
Obligations under capital lease 343,117 29,652
Future income taxes 1,126,555 6,858,097
---------------------------
224,254,993 180,331,218
---------------------------
SHAREHOLDERS' EQUITY
Common shares 133,878,817 115,198,821
Contributed surplus 1,405,657 28,247
(Deficit) retained earnings (89,116,405) 327,950
---------------------------
46,168,069 115,555,018
---------------------------
270,423,062 295,886,236
---------------------------
---------------------------
TABLE 2
ROCKY MOUNTAIN DEALERSHIPS INC.
Consolidated Statement of Net (Loss) Earnings and Comprehensive (Loss)
Year Ended December 31, 2008 and the Twelve-Day Period Ended December 31,
2007
-------------------------------------------------------------------------
2008 2007
$ $
---------------------------
(unaudited) (unaudited)
SALES
New units 240,363,421 8,721,193
Used units 79,908,250 1,175,807
Product support 75,726,186 1,630,577
Finance and insurance 2,404,048 144,252
Rental and leases 5,710,757 275,372
---------------------------
404,112,662 11,947,201
COST OF SALES (including amortization of
$4,363,360 for the year (2007 - $182,025)) 332,539,463 9,830,981
---------------------------
GROSS PROFIT 71,573,199 2,116,220
---------------------------
EXPENSES
Selling and administrative 45,272,917 1,198,729
Interest on short-term debt 4,440,819 231,544
Interest on long-term debt 1,388,980 57,180
Amortization of intangible assets 3,031,905 97,803
Amortization of property, plant and equipment 2,045,033 35,899
---------------------------
56,179,654 1,621,155
---------------------------
EARNINGS BEFORE OTHER ITEMS AND INCOME TAXES 15,393,545 495,065
---------------------------
OTHER ITEMS
Goodwill impairment (84,836,364) -
Intangible asset impairment (17,950,292) -
---------------------------
102,786,656 -
---------------------------
(LOSS) EARNINGS BEFORE INCOME TAXES (87,393,111) 495,065
---------------------------
PROVISION FOR (RECOVERY OF) INCOME TAXES
Current 6,346,218 121,395
Future (6,045,110) 45,720
---------------------------
301,108 167,115
---------------------------
NET (LOSS) EARNINGS AND COMPREHENSIVE (LOSS)
INCOME (87,694,219) 327,950
RETAINED EARNINGS, BEGINNING OF PERIOD 327,950 -
DIVIDENDS (1,750,136) -
---------------------------
(DEFICIT) RETAINED EARNINGS, END OF PERIOD (89,116,405) 327,950
---------------------------
---------------------------
EARNINGS PER SHARE
Basic and diluted $(6.88) $0.03
---------------------------
---------------------------
TABLE 3
RECONCILIATION OF NET (LOSS) EARNINGS TO EBITDA
3 Months 3 Months 12 Months 12 Months
ended ended ended ended
December 31, December 31, December 31, December 31,
2008 2007 2008 2007
(unaudited) (unaudited) (unaudited) (unaudited)
EBITDA $ $ $ $
Net (Loss)
Earnings (93,455,730) 3,079,371 (87,694,219) 10,732,563
Long-term interest 343,534 516,458 1,388,980 1,832,337
Depreciation 680,575 325,125 2,045,033 1,056,808
Amortization of
intangibles 757,978 97,803 3,031,905 97,803
Goodwill impairment 84,836,364 - 84,836,364 -
Impairment of
intangibles 17,950,292 - 17,950,292 -
Income taxes
(recovery) (2,542,294) 1,812,106 301,108 3,935,506
Rental depreciation 466,189 426,016 2,347,341 2,883,231
Lease depreciation 341,481 768,400 2,016,019 3,063,696
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EBITDA 9,378,389 7,025,279 26,222,823 23,601,944
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%SEDAR: 00026106E