EDMONTON, Nov. 7, 2019 /CNW/ - AutoCanada Inc. ("AutoCanada" or the "Company") (TSX: ACQ), a multi-location North American automobile dealership group, today reported its financial results for the three month period ended September 30, 2019.

"We are very pleased to post another strong quarter, and this accelerating momentum provides continued validation of the effort we started over a year ago. Our same store metrics in Canada were once again up across the board, while we made significant and continued progress in stabilizing our U.S. operations. We achieved this while reducing our net debt by $69.4 million in the quarter," said Paul Antony, Executive Chairman.

Third Quarter 2019 Key Highlights  (year-over-year comparable basis)
The Company posted strong results for a second consecutive quarter. Consolidated revenues of $ 981.9 million reflected growth of 13.3% over the prior year; same store new retail unit sales growth was 9.1% as compared to the Canadian market decrease of (3.0)%, for brands represented by AutoCanada, as reported by DesRosiers Automotive Consultants. Adjusted EBITDA of $32.5 million reflected an increase of 100.7% over the prior year. Adjusting for the impact of IFRS 16 in 2019, Adjusted EBITDA of $21.8 million in the quarter reflected an increase of 34.9% over the prior year. Canadian operations were buoyed by ongoing same store sales growth, combined with increased traction with our Finance and Insurance (F&I) service line and Business Development Centre (BDC) Go Forward initiatives. Our U.S. Operations continued to show improvement in the quarter, coming in at near breakeven Adjusted EBITDA performance at $(0.4) million. Management will close two U.S. franchises in the fourth quarter, necessitating a non cash restructuring charge of $13.4 million in this quarter. Notably, the Company's net indebtedness (total indebtedness less cash on hand) was reduced by $69.4 million, from $271.7 million to $202.3 million in the quarter, driven primarily by effective working capital management and a sale leaseback transaction for two dealership facilities.

Consolidated AutoCanada Highlights (year-over-year comparable basis) ¹

SECOND CONSECUTIVE STRONG QUARTER

The Company performed well in the third quarter, building on the momentum from our strong second quarter.

• Revenue was $981.9 million, an increase of $115.0 million or 13.3%
  
  
• Total vehicles sold were 19,652, an increase of 533 units or 2.8%
  
  
• Same store (Canadian stores that have been owned for at least two full years since acquisition) new retail unit sales growth was 9.1% as compared to the market decrease of (3.0)%, for brands represented by AutoCanada, as reported by DesRosiers Automotive Consultants
  
  
• Same store new and used retail unit sales increased 12.7% to 14,226
  
  
• Net (loss) income for the period was $(4.1) million (or $(0.15) per diluted share) versus $(15.0) million (or $(0.55) per diluted share). In the period, restructuring charges of $(13.4) million were incurred as compared to Impairment charges of $(19.6) million in 2018. The adoption of IFRS 16 resulted in additional total expenses, which negatively affected the Company's net (loss) in the quarter by $1.7 million
  
  
• Adjusted EBITDA increased 100.7% to $32.5 million, an increase of $16.3 million; of the $16.3 million increase, $10.7 million was attributed to the impact of IFRS 16. Adjusting for the impact of IFRS 16, Adjusted EBITDA was $21.8 million, an increase of 34.9% over the prior year
  
  
• Implementing working capital initiatives, combined with a sale leaseback transaction for two dealership facilities and with continued improvements in operational performance, allowed the Company to reduce its net indebtedness by $69.4 million in the quarter
  

Canadian Operations  Highlights (year-over-year comparable basis) ¹

SAME STORE UNIT GROWTH OF 12.7%

Management continued to focus on implementing and building upon its Go Forward initiatives for Canadian Operations during the quarter. Earnings performance was driven by a combination of strong unit growth and the impact of more notably our F&I and BDC initiatives. Same store new retail unit sales growth was 9.1% as compared to the market decrease of (3.0)%, for brands represented by AutoCanada. Sales growth and gross profit improvement are supported by our continued focus on OEM relationships, which includes achieving sales unit and customer satisfaction targets and a number of other key measures as reflected within the various OEM balanced scorecards. In line with our initiative to sell more used vehicles through retail sales rather than wholesaling, our used retail units to new retail units ratio increased to 0.72  in the quarter, from 0.67. Our Finance and insurance initiative helped increase gross profit per retail unit average to $2,456, an increase of 10.1%. Parts and service gross profit in the quarter increased by $4.5 million, an increase of 9.4%, attributed in large part to improving traction with Dealermine and our BDC strategy.

• Revenue was $871.2 million, up 20.1%
  
  
• Total retail vehicles sold were 15,253, an increase of 1,628 units or 11.9%
  
  
• Same store new and used retail unit sales increased 12.7% to 14,226
  
  
• Used retail units to new retail units ratio increased to 0.72 from 0.67, an increase of 8.4%
  
  
• Net income for the period was $10.7 million ($0.38 per diluted share), up 178.0% from a net loss of $(13.5) million in 2018. Impairment charges of $(19.6) million was reflected in 2018 results. The adoption of IFRS 16 resulted in additional total expenses, which negatively affected the Canadian Operations segment net income (loss) by $(1.7) million
  
  
• Adjusted EBITDA increased 86.7% to $30.9 million, an increase of $14.4 million; IFRS 16 resulted in an increase to Adjusted EBITDA of $8.7 million. Adjusting for the impact of IFRS 16 in 2019, Adjusted EBITDA was $22.2 million, an increase of 34.1% over the prior year

U.S. Operations Highlights (year-over-year comparable basis) ¹

GOOD PROGRESS - NEAR BREAKEVEN QUARTER / 2 FRANCHISES TO BE CLOSED IN Q4 2019

The U.S. Operations segment continued to see improvements as a result of the focus on improving the expense structure which included a reset of all vendor contracts and restructuring of compensation towards performance-based rather than fixed arrangements. Time in position for the new management team has impacted the progress of operational performance, as indicated by Adjusted EBITDA before the impact of IFRS 16 being near breakeven at $(0.4) million. With an eye on driving future profitability, a decision was made to close two loss generating franchises in the fourth quarter of 2019. A non cash restructuring charge of $13.4 million was taken in the period related to the wind-down of these two franchises, scheduled to occur in mid November.

• Revenue was $110.7 million, a decrease of (21.9)%
  
  
• Retail unit sales decreased to 2,550, down 823 units or (24.4)%
  
  
• Net (loss) income for the period was $(14.8) million versus $(1.5) million in 2018. 2019 results included a non-cash restructuring charge of $13.4 million. IFRS 16 adjustments resulted in a decrease of total expenses for the U.S. segmented operations for the period, which had a positive contribution of $0.4 million
  
  
• Adjusted EBITDA was $1.5 million, an increase of $1.9 million from 2018; IFRS 16 resulted in an increase to Adjusted EBITDA of $2.0 million. Adjusting for the impact of IFRS 16 in 2019, Adjusted EBITDA was $(0.4) million, near breakeven and a substantive improvement over the previous two quarters

Same store metrics

SAME STORE NEW UNIT SALES GROWTH OF  9.1%

Total same store new and used retail unit sales for Canadian Operations increased 12.7% to 14,226, with new retail units showing an increase of 9.1% and used retail units up 18.1%. The increase of new retail units by 9.1% compares with a market decrease of (3.0)% in the Canadian new vehicle market for the brands represented by AutoCanada, as reported by DesRosiers Automotive Consultants. The same stores metric includes only Canadian dealerships which have been owned for at least two full years since acquisition.

• Revenue increased to $818.6 million, an increase of 20.4%
  
  
• Gross profit increased by $15.3 million or 13.9%
  
  
• New vehicle gross profit per retail unit grew 12.1% or $377 per unit
  
  
• Used to new units sold ratio increased to 0.73 from 0.67
  
  
• Parts, service and collision repair gross profit increased to $48.7 million, an increase of 9.0%
  
  
• Finance and insurance gross profit per retail unit average increased to $2,491, up 8.5% or $195 per unit

Financing Activities and Other Recent Developments

NET INDEBTEDNESS REDUCED TO $202.3 MILLION

Total Funded Debt to Bank EBITDA - Effective July 1, 2019, the Credit Facility lenders granted the Company an extension of the previously provided increase to its Total Funded Debt to Bank EBITDA covenant. Under the terms of the extension, the Company's Total Funded Debt to Bank EBITDA covenant will be 4.50:1.00 until March 31, 2020 and will subsequently revert to 4.00:1.00 beginning April 1, 2020.

Current ratio consent - In the quarter, the Company requested and received lender consent to reduce the current ratio covenant to 1.00 from 1.05 for the quarters ending September 30, 2019 and December 31, 2019. The Company is actively undertaking initiatives to strengthen its balance sheet through improved and more efficient working capital management with the intention of generating additional cash flows which will be used to reduce indebtedness under the Credit Facility. Modifying the current ratio covenant requirement provides the Company with additional headroom to pursue opportunities to better manage its working capital.

Sale-leaseback transaction - On August 23, 2019, the Company executed an agreement to sell and subsequently lease back two dealership facilities with Capital Automotive Real Estate Services Inc. for a purchase price of $20.0 million. On the transaction, the Company recognized a pre-tax gain of $0.6 million. Funds from this sale were used to pay down our revolving credit facilities. Combined with the impact of sale leaseback transactions completed over the last 4 quarters, the Company will realize incremental cash lease costs of approximately $2 million in the fourth quarter, as compared to the same period last year.

Dealership divestiture - On July 2, 2019, the Company sold substantially all of the operating and fixed assets of Calgary Hyundai, located in Calgary, Alberta, for cash consideration. Net proceeds of $2.0 million resulted in a net pre-tax gain on divestiture of $0.4 million, included in gain (loss) on disposal of assets, net in the Canadian Operations segment.

Real estate - The Company continues to actively market $23.0 million of unproductive real estate.

Dealerships held for sale - As part of the plan to optimize the U.S. dealership portfolio, the Company is actively engaged in seeking buyers for four of its U.S. dealerships.

Wind-down of two U.S. franchises - In addition to the four dealerships held for sale, the Company has committed to voluntarily terminate two franchises in the fourth quarter of 2019. A non-cash restructuring charge of $13.4 million was taken in the quarter to reduce the carrying amount of tangible assets to their recoverable amount and to accrue a provision related to future unavoidable premises costs

Dividends
The Company has declared a quarterly eligible dividend of $0.10 per common share on AutoCanada's outstanding common shares, payable on December 16, 2019 to shareholders of record at the close of business on November 29, 2019.

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 designating dividends as "eligible dividends".

Third Quarter Financial Information
The following table summarizes the Company's performance for the quarter:

The following table shows the segmented operating results for the Company for the three month periods ended September 30, 2019 and September 30, 2018.

MD&A and Financial Statements
Information included in this press release is a summary of results. It should be read in conjunction with AutoCanada's Consolidated Financial Statements and Management's Discussion and Analysis for the quarter ended September 30, 2019, which can be found on the Company's website at www.autocan.ca or on www.sedar.com.

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. The following "Non-GAAP Measures" are defined in the annual MD&A and quarterly report: Adjusted EBITDA; Free Cash Flow; Average Capital Employed; Return on Capital Employed; and Net Indebtedness.

Conference Call
A conference call to discuss the results for the three months ended September 30, 2019 will be held on November 8, 2019 at 9:00am Mountain (11:00am Eastern). To participate in the conference call, please dial 1.888.231.8191 approximately 10 minutes prior to the call.

AutoCanada's presentation that will be discussed on the conference call is available at the Company's website at www.autocan.ca.

This conference call will also be webcast live over the internet and can be accessed by all interested parties at the following URL: https://www.autocan.ca/investors/Q32019

About AutoCanada
AutoCanada is a leading North American multi-location automobile dealership group currently operating 64 franchised dealerships, comprised of 27 brands, in eight provinces in Canada as well as a group in Illinois, USA and has over 4,200 employees. AutoCanada currently sells Chrysler, Dodge, Jeep, Ram, FIAT, Alfa Romeo, Chevrolet, GMC, Buick, Cadillac, Ford, Infiniti, Nissan, Hyundai, Subaru, Audi, Volkswagen, Kia, Mazda, Mercedes-Benz, Smart, BMW, MINI, Volvo, Toyota, Lincoln, and Honda branded vehicles. In 2018, our dealerships sold approximately 66,000 vehicles and processed approximately 915,000 service and collision repair orders in our 1,157 service bays generating revenue in excess of $3 billion.

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

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", "plan", "seek", "may", "intend", "likely", "will", "believe" and similar expressions) are not historical facts and are forward‑looking. Forward-looking statements 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, actual results or outcomes may 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 press release.  The Company's Annual Information Form and other documents filed with securities regulatory authorities (accessible through the SEDAR website at 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.

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

SOURCE AutoCanada Inc.