AutoCanada Inc. Announces Q1, 2016 Quarterly Results

EDMONTON, May 5, 2016 /CNW/ - AutoCanada Inc. (the "Company" or "AutoCanada") (TSX: ACQ) today announced financial results for the quarter ended March 31, 2016.

First Quarter 2016 Highlights

• Revenue from existing and new dealerships increased by 5.3%, or $33.5 million, to $666.9 million in the first quarter of 2016 from $633.4 million in the same quarter in 2015.

• Gross profit from existing and new dealerships increased by 6.0%, or $6.3 million, to $111.7 million in the first quarter of 2016 from $105.4 million in the same quarter in 2015.

• Adjusted EBITDA attributable to AutoCanada shareholders increased by 52.7%, or $6.8 million, to $19.7 million in the first quarter of 2016 from $12.9 million in the same quarter in 2015.

• EBITDA attributable to AutoCanada shareholders increased by 44.1%, or $5.6 million, to $18.3 million in the first quarter of 2016 from $12.7 million in the same quarter in 2015.

• The Company generated net earnings attributable to AutoCanada shareholders of $7.3 million or basic earnings per share of $0.27 versus basic earnings per share of $0.20 in the first quarter of 2015. Pre-tax earnings attributable to AutoCanada shareholders increased by 44.8%, or $3.0 million, to $9.7 million in the first quarter of 2016 as compared to $6.7 million in the same period in 2015.

• The Company generated adjusted net earnings attributable to AutoCanada shareholders of $8.6 million compared to $5.3 million in the same quarter in 2015. Basic adjusted net earnings per share were $0.31 versus basic adjusted earnings per share of $0.22 in the first quarter of 2015.

• Same store revenue decreased by 3.1% in the first quarter of 2016, compared to the same quarter in 2015. Same store gross profit decreased by 5.5% in the first quarter of 2016, compared to the same quarter in 2015.
  Same store gross profit percentage increased by 0.4% in the first quarter of 2016, compared to the same quarter in 2015.

• Free cash flow increased to $4.0 million in the first quarter of 2016 or $0.15 per share as compared to $(3.2) million or $(0.13) per share in the same quarter in 2015.

• Adjusted free cash flow increased to $6.0 million in the first quarter of 2016 or $0.22 per share as compared to $(7.4) million or $(0.30) per share in the same quarter in 2015.

• Same store new vehicle retail revenue decreased by 6.3%, or $9.6 million, to $143.2 million in the first quarter of 2016 from $152.8 million in the same quarter in 2015.

• Same store used vehicle retail revenue increased by 12.9%, or $8.3 million, to $72.6 million in the first quarter of 2016 from $64.3 million in the same quarter in 2015.

• Same store parts, service and collision repair revenue decreased by 6.6%, or $2.8 million, to $39.8 million in the first quarter of 2016 from $42.6 million in the same quarter in 2015.

"The retail automotive industry continues to be challenging in many of the markets in which we operate. Our business model provides consistent profitability for AutoCanada and our dealerships. Going forward, our management team including our retailers will focus on operational excellence at our current dealerships to achieve positive same store metrics. We will also continue to seek regional diversity through acquisitions of flagship stores in major metropolitan markets" said Steven Landry, Chief Executive Officer. "I would like to thank all of our 3,700 employees for their hard work and efforts during this quarter."

"The quarter provided an increase in net earnings and gross profit. Our EPS also improved and beat consensus. However, a reduction in the dividend seems prudent and allows us to focus on growth. The $16.5 million in annualized savings will help fund future acquisitions while strengthening our balance sheet and increasing liquidity" said Chris Burrows, Chief Financial Officer. "AutoCanada continues to have significant earnings potential and we have the ability to generate increased cash-flow as the economy improves."

Dividends

On May 5, 2016, the Board declared a quarterly eligible dividend of $0.10 per common share on AutoCanada's outstanding Class A common shares, payable on June 15, 2016 to shareholders of record at the close of business on May 31, 2016.

In support of AutoCanada's continued growth, we have reduced the dividend, from $0.25 to $0.10 per quarter. This action will allow the Company to retain $16.5 million annually that can be used to support growth and fund acquisitions. The current economic conditions allows AutoCanada to be opportunistic in our due diligence around potential acquisitions. Our strategy is to acquire dealerships that provide accretive strong returns, focusing on large dealerships in major metropolitan markets. In addition to funding growth, the reduced dividend allows AutoCanada to further strengthen our balance sheet while also increasing liquidity.

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".

Outlook

The retail automotive industry is proven to provide consistent profitability in all market conditions, as all of our dealerships are profitable with the exception of one recently opened dealership. AutoCanada continues to have significant earnings potential and we have the ability to generate increased cash-flow when the economy improves in Western Canada where we have a heavy concentration of same stores.

Throughout the first quarter, and into the balance of 2016, Management continues to employ our five point strategy to deal with the current downward pressure we face in this economic environment:

• The Company continues to seek regional diversity through larger acquisitions in metropolitan markets. Management is pleased with the acquisition opportunities outside of Alberta and continues to explore and evaluate potential targets.
• The Company has directed resources to increase integration efforts for the dealerships recently acquired to support same store metric improvement year-over-year.
• The Company continues to manage the balance sheet as evidenced by the increase in free cash flow – 12 month trailing.
• The Company is rolling-out new sales process technologies to enhance the customer experience in each of our dealerships.
• The Company is reviewing all costs within the group to reduce or eliminate costs where possible. This focused effort on cost reduction is a project that began early in the first quarter and will continue throughout the calendar year. We have been able to decrease operating expenses as a percentage of gross profit from 88.4% in Q1, 2015 to 86.0% in Q1, 2016. Variable expenses have decreased by 3.3% compared to the first quarter of 2015.

Management is pleased with the progress made thus far on these strategies and we anticipate further success throughout 2016.

SELECTED QUARTERLY 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.

(in thousands of dollars, except Gross Profit %,		Q1	Q4	Q3	Q2	Q1	Q4	Q3	Q2
Earnings per share, and Operating Data)		2016	2015	2015	2015	2015	2014	2014	2014
Income Statement Data
	New vehicles	363,181	368,242	471,018	483,435	345,542	379,094	456,810	289,918
	Used vehicles	180,108	167,100	179,270	194,956	163,243	148,579	158,779	102,025
	Parts, service and collision repair	94,721	102,220	93,139	99,304	92,951	91,225	77,680	46,078
	Finance, insurance and other	28,862	34,752	37,778	39,182	31,671	36,355	37,267	27,038
Revenue		666,872	672,314	781,205	816,877	633,407	655,253	730,536	465,059
	New vehicles	27,267	27,482	34,300	34,861	25,765	29,325	35,086	23,792
	Used vehicles	10,420	10,326	10,949	11,000	8,354	7,808	9,637	6,505
	Parts, service and collision repair	47,669	51,760	48,336	49,859	43,913	45,687	38,913	23,373
	Finance, insurance and other	26,353	34,354	35,088	33,955	27,407	31,109	34,714	24,077
Gross profit		111,709	123,922	128,673	129,675	105,439	113,929	118,350	77,747
Gross Profit %		16.8%	18.4%	16.5%	15.9%	16.6%	17.4%	16.2%	16.7%
Operating expenses		96,047	101,310	100,824	100,568	93,175	90,283	90,695	59,227
Operating expenses as a % of gross profit		86.0%	81.8%	78.4%	77.6%	88.4%	79.2%	76.6%	76.2%
Income from investments in associates		-	-	-	-	-	-	359	2,238
Income from loan to associate		315	49	-	-	-	-	-	-
Impairment (recovery) of intangible assets and goodwill		-	18,757	-	-	-	(1,767)	-	-
Net earnings (loss) attributable to AutoCanada
	shareholders	7,272	(7,631)	11,690	13,523	4,969	14,240	17,765	12,831
EBITDA attributable to AutoCanada shareholders		18,312	23,353	26,379	27,397	12,687	24,605	28,674	21,702
Basic earnings per share		0.27	(0.29)	0.48	0.56	0.20	0.60	0.74	0.59
Diluted earnings per share		0.27	(0.29)	0.47	0.56	0.20	0.59	0.74	0.59
Basic adjusted earnings per share		0.31	0.34	0.51	0.56	0.22	0.52	0.71	0.61
Dividends declared per share		0.25	0.25	0.25	0.25	0.25	0.25	0.24	0.23
Operating Data
Vehicles (new and used) sold excluding GM		10,728	12,345	13,092	14,723	11,343	12,774	14,966	9,887
Vehicles (new and used) sold including GM		13,301	14,150	17,086	17,739	13,824	15,415	18,079	12,414
New vehicles sold including GM		8,502	9,210	12,018	12,296	8,933	10,570	12,821	8,658
New retail vehicles sold		7,078	8,016	9,985	9,929	7,393	8,907	10,686	5,980
New fleet vehicles sold		1,424	1,194	2,033	2,367	1,540	1,663	2,135	1,146
Used retail vehicles sold		4,799	4,940	5,068	5,443	4,891	4,845	5,258	2,761
# of service and collision repair orders completed		209,194	230,772	202,692	215,142	199,096	216,427	198,612	97,559
Absorption rate		83%	93%	91%	94%	85%	85%	93%	92%
# of dealerships at period end		53	54	50	49	48	48	45	34
# of same store dealerships		27	28	26	24	23	23	23	23
# of service bays at period end		898	912	862	842	822	822	734	516
Same store revenue growth^(4)		(3.1)%	(12.1)%	(6.9)%	(2.8)%	(3.5)%	10.9%	8.9%	4.1%
Same store gross profit growth^(4)		(5.5)%	(14.3)%	(14.1)%	(11.0)%	(8.5)%	5.7%	11.4%	5.4%
Balance Sheet Data
Cash and cash equivalents		72,878	62,274	77,071	77,676	66,351	72,462	64,559	91,622
Trade and other receivables		116,092	90,821	118,853	124,683	104,753	92,138	115,074	85,837
Inventories		628,641	596,542	581,258	620,837	625,779	563,277	471,664	324,077
Revolving floorplan facilities		600,578	548,322	550,857	607,694	601,432	527,780	437,935	313,752
*See the Company's Management's Discussion and Analysis for the period ended March 31, 2016 for complete footnote disclosures.

The following table summarizes the results for the three month period ended March 31, 2016 on a same store basis by revenue source and compares these results to the same period in 2015.

Same Store Revenue and Vehicles Sold
		For the Three Months Ended
Revenue Source (in thousands of dollars)		March 31,  2016	March 31, 2015	% Change
	New vehicles ‑ Retail	143,165	152,816	(6.3)%
	New vehicles ‑ Fleet	33,896	37,544	(9.7)%
Total New vehicles		177,061	190,360	(7.0)%
	Used vehicles ‑ Retail	72,586	64,299	12.9%
	Used vehicles ‑ Wholesale	26,271	25,453	3.2%
Total Used vehicles		98,857	89,752	10.1%
Finance, insurance and other		14,705	18,275	(19.5)%
Subtotal		290,623	298,387	(2.6)%
Parts, service and collision repair		39,802	42,605	(6.6)%
Total		330,425	340,992	(3.1)%
New retail vehicles sold		3,353	4,080	(17.8)%
New fleet vehicles sold		825	1,047	(21.2)%
Used retail vehicles sold		2,468	2,650	(6.9)%
Total		6,646	7,777	(14.5)%
Total vehicles retailed		5,821	6,730	(13.5)%

Same Store Gross Profit and Gross Profit Percentage
		For the Three Months Ended
		Gross Profit			Gross Profit %
Revenue Source (in thousands of dollars)		March 31, 2016	March 31, 2015	% Change	March 31, 2016	March 31, 2015	% Change
	New vehicles ‑ Retail	12,914	14,364	(10.1)%	9.0%	9.4%	(0.4)%
	New vehicles ‑ Fleet	270	167	61.7%	0.8%	0.4%	0.4%
Total New vehicles		13,184	14,531	(9.3)%	7.4%	7.6%	(0.2)%
	Used vehicles ‑ Retail	5,347	4,923	8.6%	7.4%	7.7%	(0.3)%
	Used vehicles ‑ Wholesale	275	79	248.1%	1.0%	0.3%	0.7%
Total Used vehicles		5,622	5,002	12.4%	5.7%	5.6%	0.1%
Finance, insurance and other		13,562	16,946	(20.0)%	92.2%	92.7%	(0.5)%
Subtotal		32,368	36,479	(11.3)%	11.1%	12.2%	(1.1)%
Parts, service and collision repair		21,498	20,512	4.8%	54.0%	48.1%	5.9%
Total		53,866	56,991	(5.5)%	16.3%	16.7%	(0.4)%

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 three month period ended March 31, 2016, 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 interim MD&A: EBITDA; Adjusted EBITDA; Adjusted Net Earnings and Adjusted Net Earnings per Share; EBIT; Free Cash Flow; Adjusted Free Cash Flow; Adjusted Average Capital Employed; Absorption Rate; Average Capital Employed; Return on Capital Employed; and Adjusted Return on Capital Employed.

Conference Call

A conference call to discuss the results for the reporting period ended March 31, 2016 will be held on May 6, 2016 at 10:00am Eastern time (8:00am Mountain time).  To participate in the conference call, please dial 1.888.231.8191 approximately 10 minutes prior to the call.  A live and archived audio webcast of the conference call will also be available at the following:

http://event.on24.com/r.htm?e=1138781&s=1&k=089ADF311C73AB1CEF1C32D7A2832166.

About AutoCanada

AutoCanada is one of Canada's largest multi-location automobile dealership groups, currently operating 53 franchised dealerships, comprised of 60 franchises, in eight provinces and has over 3,700 employees. AutoCanada currently sells Chrysler, Dodge, Jeep, Ram, FIAT, Chevrolet, GMC, Buick, Cadillac, Infiniti, Nissan, Hyundai, Subaru, Mitsubishi, Audi, Volkswagen, KIA, BMW and MINI branded vehicles. In 2015, our dealerships sold approximately 62,800 vehicles and processed approximately 848,000 service and collision repair orders in our 912 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.

Additional Information

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

SOURCE AutoCanada Inc.

Christopher Burrows, Vice-President & Chief Financial Officer, Phone: [phone], Email: [email protected]