Rocky Mountain Dealerships Inc. Announces Third Quarter Results

CALGARY, Nov. 5, 2012 /CNW/ - Rocky Mountain Dealerships Inc. (TSX: RME, OTCQX: RCKXF, hereinafter "Rocky") today reported financial results for the three and nine months ended September 30, 2012.

HIGHLIGHTS FOR THE QUARTER ENDED SEPTEMBER 30, 2012:

• Increased revenues by 20.8% to $247.5 million (15.2% on a same store basis).
• Gross profit increased by 19.2% to $39.7 million (16.0% of sales).
• Normalized Diluted Earnings per Share⁽¹⁾ of $0.45, up from $0.35 in 2011.
• Generated Cash Flow from Net Earnings⁽¹⁾ of $10.3 million.
• EBITDA⁽¹⁾ increased by 12.6% to $13.5 million.
• Paid dividends of $0.0675 per share
• Completed the acquisition of Camrose Farm Equipment Ltd.

HIGHLIGHTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012:

• Increased revenues by 18.3% to $665.3 million (15.7% on a same store basis).
• Gross profit increased by 15.2% to $101.6 million (15.3% of sales).
• Normalized Diluted Earnings per Share⁽¹⁾ of $0.83, up from $0.81 in 2011.
• Generated Cash Flow from Net Earnings⁽¹⁾ of $17.4 million.

(1) See further discussion in "Non-IFRS Measures" and "Reconciliation of Non-IFRS Measures to IFRS" sections below.

Matt Campbell, CEO of Rocky, noted, "An excellent growing season translated into strong earnings for the period. The elimination of the dilution associated with the convertible debentures, coupled with these favourable results, generated record diluted earnings per share for our shareholders this quarter.

"As previously discussed, Rocky has made a significant investment over the last year in preparing our organization for the future.  We have initiated new training programs, new procedural and technological improvements and rationalized our stores under a single, strong brand.  The largest part of these costs has now been incurred, and we look forward to realizing their returns through improved operating efficiency, better brand recognition and, ultimately, an enhanced relationship with our customers.

"During the quarter, we acquired 100% of the outstanding common shares of Camrose Farm Equipment Ltd, a Case IH and New Holland Agriculture dealer with stores in Camrose and Killam, Alberta.  Subsequent to the quarter end, we purchased the Case IH Agriculture dealership assets of Houlder Automotive Ltd., with stores in Grimshaw and Falher, Alberta.  With these acquisitions, Rocky continues to expand its reach across the Alberta agriculture market.

"Overall, the continued strong economic conditions in both agriculture and construction have played a part in Rocky's success and growth, while at the same time our ability to be a partner of choice for equipment purchasers allowed us to expand our same store revenues. The impact of previously acquired dealerships and trade areas, along with our strong OEM relationships, position us well to pursue our revenue and earnings growth initiatives."

Quarterly Cash Dividend

On November 5, 2012, Rocky's Board of Directors declared a quarterly dividend of $0.0675 per common share on the Company's outstanding common shares.  The common share dividend is payable on December 31, 2012, to shareholders of record at close of business on November 30, 2012.

This dividend is designated by Rocky to be an eligible dividend for the purposes 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

Rocky will host a conference call to discuss its Q3 results on Tuesday, November 6, 2012, at 9:00 a.m. Mountain Time.  Investors interested in participating in the live call can dial 1-888-231-8191 (toll free) or 1-647-427-7450.  An archived recording of the call will be available approximately two hours after its completion on Rocky's website, or by calling 1-855-859-2056 (toll free) or 1-416-849-0833, passcode: 37830714.  The archive will remain available until Tuesday, November 20, 2012.

Caution regarding forward-looking statements

Certain information set forth in this news release, including, without limitation, information relating to any expected returns on recent investments in the organization, its processes and people, Rocky's ability to expand through acquisition, and Rocky's future earnings and growth potential, is considered forward-looking information within the meaning of applicable Canadian securities laws.  By its nature, forward-looking information is subject to numerous risks and uncertainties, some of which are beyond Rocky's control.  There is significant risk that the forward-looking statements will prove not to be accurate.  Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause actual future performance and events to differ materially from that expressed in the forward-looking statements.  Accordingly, this news release is subject to the disclaimer and qualified by risks and other factors discussed by Rocky in its management's discussion and analysis ("MD&A") for the period ended September 30, 2012, and as discussed in Rocky's Annual Information Form dated March 19, 2012 under the heading "Risk Factors."  Except as required by law, Rocky disclaims any intention or obligation to update or revise forward-looking statements, and further reserves the right to change, at any time, at its sole discretion, its current practice of updating its guidance and outlooks.

About Rocky

Rocky is one of Canada's largest agriculture and construction equipment dealership networks with branches located throughout Alberta, Saskatchewan and Manitoba. Through its network of Rocky Mountain Equipment locations, Rocky sells, rents, and leases new and used construction and agriculture equipment and offers product support and finance to its customers.

Additional information on Rocky is available at www.rockymtn.com and on SEDAR at www.sedar.com.

Consolidated Balance Sheet Summary
Expressed in thousands of Canadian Dollars (Unaudited)

			September 30, 2012	December 31, 2011
Assets
		Current assets	508,524	434,479
		Property and equipment	19,701	21,369
		Goodwill	12,720	9,961
Total assets			540,945	465,809
Liabilities and equity
		Current liabilities	362,327	286,175
		Long-term debt	39,588	11,701
		Obligations under finance leases	1,102	1,589
		Convertible debentures	-	28,761
		Deferred tax liability	3,464	8,283
		Derivative financial instruments	1,691	1,139
			408,172	337,648
		Shareholders' equity	132,773	128,161
Total liabilities and equity			540,945	465,809

SELECTED FINANCIAL INFORMATION

For the three and nine months ended September 30,
$ thousands, except per share amounts
			For the three months ended September 30,						For the nine months ended September 30,
			2012		2011				2012				2011
Sales
	New equipment		109,636	44.3%	90,523		44.2%		353,223		53.1%		291,221		51.8%
	Used equipment		96,653	39.0%	78,468		38.3%		217,767		32.7%		187,491		33.4%
	Parts		31,377	12.7%	26,757		13.1%		68,284		10.3%		59,376		10.6%
	Service		8,465	3.4%	8,034		3.9%		22,526		3.4%		20,569		3.7%
	Other		1,403	0.6%	1,073		0.5%		3,526		0.5%		3,517		0.5%
			247,534	100.0%	204,855		100.0%		665,326		100.0%		562,174		100.0%
Cost of sales			207,836	84.0%	171,556		83.7%		563,682		84.7%		473,951		84.3%
Gross profit			39,698	16.0%	33,299		16.3%		101,644		15.3%		88,223		15.7%
Selling, general and administrative			25,181	10.2%	20,915		10.2%		71,651		10.8%		60,037		10.7%
Loss on repurchase of convertible debentures			-	0.0%	-		0.0%		4,232		0.6%		-		0.0%
Interest on short-term debt			2,448	1.0%	2,099		1.0%		6,449		1.0%		6,284		1.1%
Interest on long-term debt			599	0.2%	870		0.5%		2,271		0.3%		2,670		0.5%
Earnings from operations			11,470	4.6%	9,415		4.6%		17,041		2.6%		19,232		3.4%
Provisions for income taxes			3,019	1.2%	2,294		1.1%		4,836		0.8%		4,984		0.9%
Net earnings			8,451	3.4%	7,121		3.5%		12,205		1.8%		14,248		2.5%
Earnings per share
	Basic		0.45		0.38				0.65				0.76
	Diluted		0.45		0.34				0.65				0.70
Dividends per share			0.0675		0.045				0.18				0.135
Non-IFRS Measures^(1)
EBITDA			13,504	5.5%	11,996		5.9%		23,451		3.5%		26,638		4.7%
Operating SG&A			23,900	9.7%	19,224		9.4%		67,720		10.2%		53,068		9.4%
Cash Flow from Net Earnings			10,318	4.2%	11,993		5.9%		17,403		2.6%		19,625		3.5%
Normalized Diluted Earnings per Share			0.45		0.35				0.83				0.81

(1) See further discussion in "Non-IFRS Measures" and "Reconciliation of Non-IFRS Measures to IFRS" sections below.

NON-IFRS MEASURES

We use terms which do not have standardized meanings under IFRS.  As these non-IFRS financial measures do not have standardized meanings prescribed by IFRS, they are unlikely to be comparable to similar measures presented by other issuers. Our definition for each term is as follows:

• "EBITDA" is a commonly used metric in the dealership industry.  EBITDA is calculated by adding long-term interest, income taxes and depreciation to net earnings.  Adding back non-operating expenses allows management to consistently compare periods by removing changes in tax rates, long-term assets and financing costs.
• "Cash Flow from Net Earnings" is calculated by adding back non-cash items such as depreciation of property and equipment, non-cash finance charges on the Debentures and long-term debt, deferred income taxes, share-based payment expense, losses (gains) on the disposal of property and equipment, losses (gains) on derivative financial instruments and the loss on the repurchase of the Debentures to net earnings.  Adding back these non-cash items allows management to isolate and analyze the operating cash flows generated through earnings, prior to any consideration of changes in working capital balances and the impact of acquisitions.
• "Operating SG&A" is calculated by adding back depreciation of property and equipment and any non-recurring charges incurred during the period to SG&A. Management deems non-recurring charges to be unusual and/or infrequent charges that the Company incurs outside of its common day-to-day operations.  For the three and nine months ended September 30, 2012 and 2011, the ineffective portion of hedged financial instruments and acquisition transaction costs are considered by management to be non-recurring charges in SG&A. Adding back these items allows management to assess the discretionary expenses from ongoing operations.  We target a sub-10% Operating SG&A as a percentage of total sales on an annual basis.
• "Normalized Diluted Earnings per Share" is calculated by adding back the after-tax impact of non-recurring charges to net earnings when calculating diluted earnings per share.  In addition to the non-recurring charges in SG&A, the loss on the repurchase of the Debentures is considered to be a non-recurring charge.  Adding back these non-recurring charges to net earnings allows management to assess the fully diluted earnings per share from ongoing operations.

RECONCILIATION OF NON-IFRS MEASURES TO IFRS

Reconciliation of Quarterly Net Earnings to EBITDA
$ thousands
	Q3 2012	Q2 2012	Q1 2012	Q4 2011	Q3 2011	Q2 2011	Q1 2011	Q4 2010	Q3 2010
Net earnings	8,451	1,595	2,159	8,961	7,121	4,464	2,663	6,345	3,702
Interest on long-term debt	599	802	870	917	870	933	867	943	662
Depreciation	1,435	1,271	1,433	1,604	1,711	1,663	1,362	1,517	1,468
Income taxes	3,019	937	880	3,105	2,294	1,750	940	2,564	1,745
EBITDA	13,504	4,605	5,342	14,587	11,996	8,810	5,832	11,369	7,577

Reconciliation of Year to Date Net Earnings to EBITDA

$ thousands	For the nine months ended September 30,
	2012	2011
Net earnings	12,205	14,248
Interest on long-term debt	2,271	2,670
Depreciation	4,139	4,736
Income taxes	4,836	4,984
EBITDA	23,451	26,638

Reconciliation of Cash Flow from Net Earnings

$ thousands	For the three months ended September 30,		For the nine months ended September 30,
	2012	2011	2012	2011
Net earnings	8,451	7,121	12,205	14,248
Depreciation expense	1,435	1,711	4,139	4,736
Accretion expense	-	88	123	259
Deferred tax expense (recovery)	66	2,280	(4,605)	(896)
Share-based payment expense	437	264	1,193	775
Non-cash impact - credit promissory note	4	6	16	(26)
Loss (gain) on disposal of property and equipment	(37)	-	(118)	6
Loss (gain) on derivative financial instruments	(38)	523	218	523
Loss on repurchase of convertible debentures	-	-	4,232	-
Cash Flow from Net Earnings	10,318	11,993	17,403	19,625

Reconciliation of Operating SG&A to selling, general and administrative expenses

$ thousands			For the three months ended September 30,		For the nine months ended September 30,
			2012	2011	2012	2011
Operating SG&A			23,900	19,224	67,720	53,068
Depreciation			1,289	1,165	3,683	3,699
Non-recurring charges
		Ineffective portion of derivative financial instruments	(38)	523	218	523
		Syndication charges	-	-	-	1,083
		Severance charges	-	-	-	1,634
		Acquisition transaction charges	30	3	30	30
SG&A			25,181	20,915	71,651	60,037

Reconciliation of Normalized Diluted Earnings per Share

$ thousands, except per share amounts	For the three months ended September 30,		For the nine months ended September 30,
	2012	2011	2012	2011
Earnings used in the calculation of diluted earnings  per share	8,451	7,617	12,205	15,719
After tax impact of non-recurring charges in  SG&A and loss on repurchase of Debentures^(1)	(6)	390	3,382	2,407
Earnings used in the calculation of Normalized  Diluted Earnings per Share	8,445	8,007	15,587	18,126
Weighted average diluted shares used in the  calculation of diluted earnings per share	18,895	22,556	18,888	22,458
Normalized Diluted Earnings per Share	0.45	0.35	0.83	0.81
^(1) - After applying statutory rate of 25% (2011 - 26.5%)

 

 

SOURCE: Rocky Mountain Dealerships Inc.

Rocky Mountain Dealerships Inc.
Matt Campbell, Chief Executive Officer; or
Garrett Ganden, Chief Operating Officer
#301, 3345 - 8^th Street S.E.
Calgary, Alberta T2G 3A4
Telephone: [phone], Fax [phone]