Cervus Equipment Corp. announces first quarter 2016 results

CALGARY, May 11, 2016 /CNW/ - Cervus Equipment Corp. ("Cervus" or the "Company") (TSX: CVL) today announced its financial results and operational highlights for the quarter ended March 31, 2016.

"Given the headwinds experienced in the energy sector, I am pleased with the efforts and outcomes of the quarter, particularly when it comes to expense control and improvements in our parts and service departments.  Parts and service was a significant contributor to the positive year over year results experienced in our Ontario transportation dealerships, and will underpin our success in that region going forward," said Graham Drake, President and CEO of Cervus.  "Further, first quarter profitability in our Agricultural dealerships indicates a good start to the year, and net farm cash income leading into 2016 was amongst the highest on record for producers."

Highlights for the Quarter

• The Company generated net income of $1.7 million for the three months ended March 31, 2016, compared to a $3.0 million loss in the first quarter of 2015.
• The Company generated an adjusted loss¹ for the first quarter of 2016 of $2.4 million compared to a $1.3 million loss in the first quarter of 2015.
• Earnings before interest, taxes, depreciation, and amortization ("EBITDA") increased $5.9 million to $10.0 million from $4.1 million in 2015. Excluding unrealized foreign exchange gains and losses and gain on sale of land and building, EBITDA was $5.9 million compared to $5.5 million in 2015.
• Adjusted operating income in the Transportation segment increased $1.3 million, generating $0.8 million of operating profit in the quarter, compared to a $0.5 million operating loss in the first quarter of 2015.
• Cost saving initiatives resulted in a $6.0 million reduction in selling, general, and administrative ("SG&A") expenses quarter over quarter, decreasing SG&A as a percentage of revenue to 18.3% in the first quarter of 2016 from 18.6% in 2015.
• The Company sold land and building that was previously classified as held for sale for proceeds of $6.7 million resulting in a $1.5 million gain on sale, as we transition our Edmonton dealerships to more suitable leased premises.
• Dividends of $0.07 per share were declared to shareholders of record as at March 31, 2016.

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¹ The Company calculates adjusted loss as loss attributed to shareholders adjusted to exclude the impact of: unrealized foreign currency gains and losses, acquisition and integration costs, and gains and losses on the sale of real estate. For reconciliation to income (loss) attributed to shareholders for the period, refer to Cervus' Management's Discussion and Analysis for the quarter ended March 31, 2016, available at www.sedar.com.

Financial Highlights

Total EBITDA increased $5.9 million in the three months ended March 31, 2016 primarily due to $2.7 million of unrealized foreign exchange gains, and a $1.5 million gain on sale of real estate. Excluding unrealized foreign exchange and sale of real estate, EBITDA increased $0.6 million compared to $5.3 million in 2015 due to a $1.6 million increase in the Transportation segment and consistent quarter over quarter performance in the Agriculture segment, partially offset by a $1.2 million decrease in EBITDA from the Commercial and Industrial ("C&I") segment.

Total Agriculture EBITDA for the three month period ended March 31, 2016 was consistent with the same period in 2015. The $2.7 million decrease in SG&A expenses achieved through targeted expense control more than offset $2.0 million of reduced gross margin due to lower equipment sales. The decrease in SG&A expenses and a focus on capturing post-harvest equipment inspections and repairs resulted in a 66% increase in income from operating activities quarter over quarter.

Total Transportation EBITDA increased $5.6 million in the first quarter of 2016, and excluding the impact of unrealized foreign exchange gains, increased $1.6 million. The increase was a result of integration efforts driving efficiencies in parts and service departments despite a 17% decrease in total revenue.

Total C&I segment EBITDA increased by $0.3 million, and includes a $1.5 million gain on the sale of real estate as a result of transitioning dealerships to more suitable leased premises. Excluding the gain on sale of real estate, EBITDA decreased $1.2 million due to persistent pressures in the resource sector quarter over quarter, combined with a mild winter tempering demand during the historically active snow removal season.

Selected Quarterly Information

				Three months period ended March 31
($ thousands, except per share amounts)				2016	% Change Compared to 2015		2015
Revenue				208,542	(13%)		238,422
Cost of sales				(169,324)	(13%)		(194,110)
Gross profit				39,218	(11%)		44,312
Other income				1,484	870%		153
Unrealized foreign exchange gain (loss)				2,707	(304%)		(1,326)
Total other income (loss)				4,191	(457%)		(1,173)
Selling, general and administrative expense				(38,223)	(14%)		(44,271)
Income (loss) from operating activities				5,186	(558%)		(1,132)
Finance income				29	(49%)		57
Finance costs				(2,863)	8%		(2,643)
Share of (loss) profit of equity accounted investees,
net of income tax				(249)	(178%)		321
Income (loss) before income tax expense				2,103	(162%)		(3,397)
Income tax (expense) recovery				(370)	(188%)		422
Income (loss) for the period				1,733	(158%)		(2,975)
Income (loss) attributable to shareholders				1,733	(160%)		(2,896)
EBITDA^1				10,039	143%		4,128
EBITDA margin^1				4.8%			1.7%
Ratios as a percentage of revenue:
	Gross profit margin			18.8%			18.6%
	Selling, general and administrative			18.3%			18.6%
Earnings (loss) per share
	Basic - Adjusted^1			(0.16)	100%		(0.08)
	Basic			0.11	(158%)		(0.19)
	Diluted			0.11	(158%)		(0.19)

Notes: [1] These financial measures are identified and defined within Cervus' first quarter Management's Discussion and Analysis under the section "Non-IFRS Financial Measures".

Conference Call Information

Cervus will host its first quarter 2016 results conference call on May 12, 2016 at 11:00 a.m. Eastern Time. Interested parties may access the conference call by dialling [phone] or 1-888-231-8191. Please connect approximately 10 minutes prior to the beginning of the call. The conference call will be archived for replay until Thursday, May 19, 2016 at midnight. To access the archived conference call, dial [phone] or 1-855-859-2056 and enter the reservation number 97091293 followed by the number sign.

A live audio webcast of the conference call will be available at: http://event.on24.com/r.htm?e=1177845&s=1&k=655760C46B45E6E6B9DEA71B0F2B576E

Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived at the above website for 90 days.

About Cervus Equipment Corporation

Cervus acquires and operates authorized agricultural, construction, materials handling and transportation equipment dealerships. The Company has interests in 72 dealerships in Canada, New Zealand, and Australia. The primary equipment brands represented by Cervus include John Deere agricultural equipment; Bobcat and JCB construction equipment; Clark, Sellick and Doosan material handling equipment; and Peterbilt transportation equipment. The common shares of Cervus are listed on the Toronto Stock Exchange and trade under the symbol "CVL".

Forward Looking Information

This press release contains certain forward‐looking information ("forward‐looking information") within the meaning of applicable Canadian securities laws. Forward‐looking information is often, but not always, identified by the use of words such as "anticipate", "believe", "plan", "intend", "objective", "continuous", "ongoing", "estimate", "expect", "may", "will", "project", "should" or similar words suggesting future outcomes.  Forward‐looking information is not a guarantee of future performance and involves a number of assumptions and a number of risks and uncertainties some of which are described herein. These risks and uncertainties include the risks identified under the heading "Risk Factors – Risks Related to the Business" in the 2015 Annual Information Form of Cervus Equipment Corporation dated March 15, 2016, available electronically at www.sedar.com under Cervus' profile. Cervus believes the expectations reflected in such forward‐looking information are reasonable but no assurance can be given that these expectations will prove to be correct and such forward‐looking information should not be unduly relied upon. You are cautioned that the preceding list of assumptions and risks is not exhaustive. Any forward‐looking information is made as of the date hereof and, except as required by law, Cervus assumes no obligation to publicly update or revise such information to reflect new information, subsequent or otherwise.

The Toronto Stock Exchange does not accept responsibility for the adequacy or accuracy of this release.

SOURCE Cervus Equipment Corporation

Investor inquiries: Graham Drake - President & CEO, [phone], [email protected]; Randy Muth - Chief Financial Officer, [phone], [email protected]