A conference call to discuss the results for the reporting period ended June 30, 2014 will be held on August 8, 2014 at 11:00 a.m. Eastern time (9:00 a.m. Mountain time).  To participate in the conference call, please dial 1-888-231-8191 or (647) 427-7450 approximately 10 minutes prior to the call.  A live and archived audio webcast of the conference call will also be available on the Company's website www.autocan.ca.

EDMONTON, Aug. 7, 2014 /CNW/ - AutoCanada Inc. (the "Company" or "AutoCanada") (TSX: ACQ) today announced financial results for the reporting period ended June 30, 2014.

 

In commenting on the second quarter of 2014, Pat Priestner, Chairman and Chief Executive Officer of AutoCanada Inc., stated that, "The second quarter of 2014 was productive, the Company having completed seven dealership acquisitions, as well as two additional acquisitions in early July.  We are pleased with the quality of dealerships we have acquired, which includes the Hyatt Group of Dealerships in Calgary, our largest acquisition to date; two new brands to our portfolio, being BMW and MINI, through our acquisition of BMW Canbec and MINI Mont Royal, located in Montreal, Quebec, which is also a new market for the Company; and an expansion of our Saskatoon platform with the addition of Dodge City; one of the highest volume Chrysler Dodge Jeep Ram stores in the prairies." 

Mr. Priestner further added, "Our experience over the past 18 months has made it clear to us that dealership succession has become a key issue in the Canadian automotive retail market, and, as a result, the Company increased its acquisition guidance in June of 2014. As the deal pipeline remains strong, Management maintains this guidance and is confident that, in addition to acquisitions completed to date, it shall add an additional 8 to 10 dealerships by May 31, 2015.  In order to fund the higher rate of growth, the Company successfully completed a $150 million bond offering in May, followed in early July by a $200 million equity offering providing the Company with the necessary liquidity to enable it to execute upon this increased guidance, which we believe will create substantial shareholder value in the future."

Commenting on the results for the second quarter of 2014, Mr. Priestner stated, "In addition to the acquisition activity, Management is pleased with second quarter operating performance.  In addition to revenues, gross profit and earnings each benefitting from our acquisitions over the past 12 months, Management is pleased to report further improved same store gross profit in all four operating departments, a testament to the hard work and commitment of our dealer principals, dealership staff, and our head office dealer support services team."

Regarding the increase in dividend, Mr. Priestner commented, "Since our IPO in 2006, the Company has not changed its philosophy of returning profits to our shareholders as a means of enhancing shareholder value.  With the continued strength of the Canadian auto retail market generally and the Company's strong performance, the Board decided to raise the quarterly dividend for the fourteenth consecutive quarter to $0.24 per share or $0.96 per share on an annualized basis."

Second Quarter 2014 Highlights

• The Company generated net earnings of $12.8 million or earnings per share of $0.588 versus earnings per share of $0.532 in the second quarter of 2013.  Pre-tax earnings increased by $2.5 million to $17.3 million in the second quarter of 2014 as compared to $14.8 million in the same period in 2013.
• Same store revenue increased by 4.1% in the second quarter of 2014, compared to the same quarter in 2013.  Same store gross profit increased by 5.4% in the second quarter of 2014, compared to the same quarter in 2013.
• Revenue from existing and new dealerships increased 19.8% to $465.3 million in the second quarter of 2014 from $388.4 million in the same quarter in 2013.
• Gross profit from existing and new dealerships increased 20.4% to $78.0 million in the second quarter of 2014 from $64.9 million in the same quarter in 2013.
• EBITDA increased 31.5% to $21.7 million in the second quarter of 2014 from $16.5 million in the same quarter in 2013.
• Free cash flow decreased to $9.9 million in the second quarter of 2014 or $0.45 per share as compared $13.5 million or $0.66 per share in the first quarter of 2013.
• Adjusted free cash flow increased to $15.5 million in the second quarter of 2014 or $0.71 per share as compared to $13.4 million or $0.66 per share in 2013.

Dividends

Management reviews the Company's financial results on a monthly basis.  The Board of Directors reviews the financial results on a quarterly basis, or as requested by Management, and determine whether a dividend shall be paid based on a number of factors. 

The following table summarizes the dividends declared by the Company in 2014:

 

On August 7, 2014, the Board declared a quarterly eligible dividend of $0.24 per common share on AutoCanada's outstanding Class A common shares, payable on September 15, 2014 to shareholders of record at the close of business on August 29, 2014.  The quarterly eligible dividend of $0.24 represents an annual dividend rate of $0.96 per share.  

Eligible dividend designation

For purposes of the enhanced dividend tax credit rules contained in the Income Tax Act (Canada) (the "ITA") and any corresponding provincial and territorial tax legislation, all dividends paid by AutoCanada or any of its subsidiaries in 2010 and thereafter are designated as "eligible dividends" (as defined in 89(1) of the ITA), unless otherwise indicated.  Please consult with your own tax advisor for advice with respect to the income tax consequences to you of AutoCanada Inc. designating dividends as "eligible dividends".

SELECTED QUARTERLY FINANCIAL INFORMATION

The following table shows the unaudited results of the Company for each of the eight most recently completed quarters.  The results of operations for these periods are not necessarily indicative of the results of operations to be expected in any given comparable period. 

 

 

 

The following table summarizes the results for the three and six month periods ended June 30, 2014 on a same store basis by revenue source and compares these results to the same period in 2013. 

 

The following table summarizes the results for the three and six month periods ended June 30, 2014 on a same store basis by revenue source and compares these results to the same period in 2013.

 

 

 

AutoCanada Inc.
Condensed Interim Consolidated Statements of Comprehensive Income
(Unaudited)
(in thousands of Canadian dollars except for share and per share amounts)

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Approved on behalf of the Company:

 

AutoCanada Inc.
Condensed Interim Consolidated Statements of Financial Position
(Unaudited)
(in thousands of Canadian dollars)

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

AutoCanada Inc.
Condensed Interim Consolidated Statements of Changes in Equity
For the Periods Ended
(Unaudited)
(in thousands of Canadian dollars)

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

 

AutoCanada Inc.
Interim Consolidated Statements of Cash Flows
For the Periods Ended
(Unaudited)
(in thousands of Canadian dollars)

 

 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

ABOUT AUTOCANADA

AutoCanada is one of Canada's largest multi-location automobile dealership groups, currently operating 36 franchised dealerships in eight provinces and has approximately 2,500 employees. AutoCanada currently sells Chrysler, Dodge, Jeep, Ram, FIAT, Chevrolet, GMC, Buick, Cadillac, Infiniti, Nissan, Hyundai, Subaru, Mitsubishi, Audi, Volkswagen, BMW and MINI branded vehicles. In 2013, our dealerships sold approximately 36,000 vehicles and processed approximately 364,000 service and collision repair orders in our 406 service bays during that time.

Our dealerships derive their revenue from the following four inter-related business operations: new vehicle sales; used vehicle sales; parts, service and collision repair; and finance and insurance. While new vehicle sales are the most important source of revenue, they generally result in lower gross profits than parts, service and collision repair operations and finance and insurance sales. Overall gross profit margins increase as revenues from higher margin operations increase relative to revenues from lower margin operations. We earn fees for arranging financing on new and used vehicle purchases on behalf of third parties.  Under our agreements with our retail financing sources we are required to collect and provide accurate financial information, which if not accurate, may require us to be responsible for the underlying loan provided to the consumer. 

FORWARD LOOKING STATEMENTS

Certain statements contained in this press release are forward-looking statements and information (collectively "forward-looking statements"), within the meaning of the applicable Canadian securities legislation.  We hereby provide cautionary statements identifying important factors that could cause our actual results to differ materially from those projected in these forward-looking statements.  Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as "will likely result", "are expected to", "will continue", "is anticipated", "projection", "vision", "goals", "objective", "target", "schedules", "outlook", "anticipate", "expect", "estimate", "could", "should", "expect", "plan", "seek", "may", "intend", "likely", "will", "believe" and similar expressions are not historical facts and are forward-looking and may involve estimates and assumptions and are subject to risks, uncertainties and other factors some of which are beyond our control and difficult to predict.  Accordingly, these factors could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements.  Therefore, any such forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this document.

The Company's Annual Information Form and other documents filed with securities regulatory authorities (accessible through the SEDAR website www.sedar.com describe the risks, material assumptions and other factors that could influence actual results and which are incorporated herein by reference.

Further, any forward-looking statement speaks only as of the date on which such statement is made, and, except as required by applicable law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.  New factors emerge from time to time, and it is not possible for management to predict all of such factors and to assess in advance the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

NON-GAAP MEASURES

This press release contains certain financial measures that do not have any standardized meaning prescribed by Canadian GAAP.  Therefore, these financial measures may not be comparable to similar measures presented by other issuers.  Investors are cautioned these measures should not be construed as an alternative to net earnings (loss) or to cash provided by (used in) operating, investing, and financing activities determined in accordance with Canadian GAAP, as indicators of our performance.  We provide these measures to assist investors in determining our ability to generate earnings and cash provided by (used in) operating activities and to provide additional information on how these cash resources are used.  We list and define these "NON-GAAP MEASURES" below:

EBITDA

EBITDA is a measure commonly reported and widely used by investors as an indicator of a company's operating performance and ability to incur and service debt, and as a valuation metric.  The Company believes EBITDA assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization and asset impairment charges which are non-cash in nature and can vary significantly depending upon accounting methods or non-operating factors such as historical cost.  References to "EBITDA" are to earnings before interest expense (other than interest expense on floorplan financing and other interest), income taxes, depreciation, amortization and asset impairment charges. 

Adjusted EBITDA

Adjusted EBITDA is an indicator of a company's operating performance and ability to incur and service debt prior to recognizing the portion of share‑based compensation related to changes in the share price and its impact on the Company's cash‑settled portions of its share‑based compensation programs. The Company considers this expense to be non-cash in nature as we maintain a share purchase trust in which we purchase shares on the open market as these units are granted to reduce the cash flow risk associated with fluctuations in the share price. Share‑based compensation, a component of employee remuneration, can vary significantly with changes in the price of the Company's common shares. The Company believes adjusted EBITDA provides improved continuity with respect to the comparison of our operating results over a period of time.

Adjusted net earnings and Adjusted net earnings per share

Adjusted net earnings and adjusted net earnings per share are measures of our profitability. Adjusted net earnings is calculated by adding back the after‑tax effect of impairment or reversals of impairment of intangible assets, impairments of goodwill, and the portion of share‑based compensation related to changes in the share price and its impact on the Company's cash‑settled portions of its share‑based compensation programs. The Company considers this expense to be non-cash in nature as we maintain a share purchase trust in which we purchase shares on the open market as these units are granted to reduce the cash flow risk associated with fluctuations in the share price. Share‑based compensation, a component of employee remuneration, can vary significantly with changes in the price of the Company's common shares. Adding back these amounts to net earnings allows management to assess the net earnings of the Company from ongoing operations. Adjusted net earnings per share is calculated by dividing adjusted net earnings by the weighted‑average number of shares outstanding.

EBIT

EBIT is a measure used by management in the calculation of Return on capital employed (defined below).  Management's calculation of EBIT is EBITDA (calculated above) less depreciation and amortization.

Free Cash Flow

Free cash flow is a measure used by management to evaluate its performance.  While the closest Canadian GAAP measure is cash provided by operating activities, free cash flow is considered relevant because it provides an indication of how much cash generated by operations is available after capital expenditures.  It shall be noted that although we consider this measure to be free cash flow, financial and non-financial covenants in our credit facilities and dealer agreements may restrict cash from being available for distributions, re-investment in the Company, potential acquisitions, or other purposes.  Investors should be cautioned that free cash flow may not actually be available for growth or distribution of the Company.  References to "Free cash flow" are to cash provided by (used in) operating activities (including the net change in non-cash working capital balances) less capital expenditures (not including acquisitions of dealerships and dealership facilities).

Adjusted Free Cash Flow

Adjusted free cash flow is a measure used by management to evaluate its performance.  Adjusted free cash flow is considered relevant because it provides an indication of how much cash generated by operations before changes in non-cash working capital is available after deducting expenditures for non-growth capital assets.  It shall be noted that although we consider this measure to be adjusted free cash flow, financial and non-financial covenants in our credit facilities and dealer agreements may restrict cash from being available for distributions, re-investment in the Company, potential acquisitions, or other purposes.  Investors should be cautioned that adjusted free cash flow may not actually be available for growth or distribution of the Company.  References to "Adjusted free cash flow" are to cash provided by (used in) operating activities (before changes in non-cash working capital balances) less non-growth capital expenditures.

Adjusted Average Capital Employed

Adjusted average capital employed is a measure used by management to determine the amount of capital invested in AutoCanada and is used in the measure of Adjusted Return on Capital Employed (described below).  Adjusted average capital employed is calculated as the average balance of interest bearing debt for the period (including current portion of long term debt, excluding revolving floorplan facilities) and the average balance of shareholders equity for the period, adjusted for impairments of intangible assets, net of deferred tax.  Management does not include future income tax, non-interest bearing debt, or revolving floorplan facilities in the calculation of adjusted average capital employed as it does not consider these items to be capital, but rather debt incurred to finance the operating activities of the Company.

Absorption Rate

Absorption rate is an operating measure commonly used in the retail automotive industry as an indicator of the performance of the parts, service and collision repair operations of a franchised automobile dealership. Absorption rate is not a measure recognized by GAAP and does not have a standardized meaning prescribed by GAAP. Therefore, absorption rate may not be comparable to similar measures presented by other issuers that operate in the retail automotive industry.  References to ''absorption rate'' are to the extent to which the gross profits of a franchised automobile dealership from parts, service and collision repair cover the costs of these departments plus the fixed costs of operating the dealership, but does not include expenses pertaining to our head office. For this purpose, fixed operating costs include fixed salaries and benefits, administration costs, occupancy costs, insurance expense, utilities expense and interest expense (other than interest expense relating to floor plan financing) of the dealerships only. 

Average Capital Employed

Average capital employed is a measure used by management to determine the amount of capital invested in AutoCanada and is used in the measure of Return on Capital Employed (described below).  Average capital employed is calculated as the average balance of interest bearing debt for the period (including current portion of long term debt, excluding revolving floorplan facilities) and the average balance of shareholders equity for the period.  Management does not include future income tax, non-interest bearing debt, or revolving floorplan facilities in the calculation of average capital employed as it does not consider these items to be capital, but rather debt incurred to finance the operating activities of the Company.

Return on Capital Employed

Return on capital employed is a measure used by management to evaluate the profitability of our invested capital.  As a corporation, management of AutoCanada may use this measure to compare potential acquisitions and other capital investments against our internally computed cost of capital to determine whether the investment shall create value for our shareholders.  Management may also use this measure to look at past acquisitions, capital investments and the Company as a whole in order to ensure shareholder value is being achieved by these capital investments.  Return on capital employed is calculated as EBIT (defined above) divided by Average Capital Employed (defined above).

Adjusted Return on Capital Employed

Adjusted return on capital employed is a measure used by management to evaluate the profitability of our invested capital.  As a corporation, management of AutoCanada may use this measure to compare potential acquisitions and other capital investments against our internally computed cost of capital to determine whether the investment shall create value for our shareholders.  Management may also use this measure to look at past acquisitions, capital investments and the Company as a whole in order to ensure shareholder value is being achieved by these capital investments.  Adjusted return on capital employed is calculated as EBIT (defined above) divided by Adjusted Average Capital Employed (defined above).

Cautionary Note Regarding Non-GAAP Measures

EBITDA, EBIT, Free Cash Flow, Adjusted Free Cash Flow, Absorption Rate, Average Capital Employed and Return on Capital Employed are not earnings measures recognized by GAAP and do not have standardized meanings prescribed by GAAP­.  Investors are cautioned that these non-GAAP measures should not replace net earnings or loss (as determined in accordance with GAAP) as an indicator of the Company's performance, of its cash flows from operating, investing and financing activities or as a measure of its liquidity and cash flows.­ The Company's methods of calculating EBITDA, EBIT, Free Cash Flow, Adjusted Free Cash Flow, Absorption Rate, Average Capital Employed and Return on Capital Employed may differ from the methods used by other issuers.­ Therefore, the Company's EBITDA, EBIT, Free Cash Flow, Adjusted Free Cash Flow, Absorption Rate, Average Capital Employed and Return on Capital Employed may not be comparable to similar measures presented by other issuers. 

Additional information about AutoCanada Inc. is available at the Company's website at www.autocan.ca and www.sedar.com.

SOURCE AutoCanada Inc.