Rocky Mountain Dealerships Inc. (TSX:RME, OTCQX:RCKXF) announces third quarter 2015 results

CALGARY, Nov. 12, 2015 /CNW/ - Rocky Mountain Dealerships Inc. (hereinafter "Rocky") today reported its financial results for the quarter ended September 30, 2015.

SUMMARY OF FINANCIAL RESULTS FOR THE QUARTER ENDED SEPTEMBER 30, 2015

• Total revenues increased by 10.9% to $256.0 million from $230.8 million.
• Same store revenues increased by 6.5% to $245.7 million.
• Operating SG&A⁽¹⁾ declined by $2.2 million or 8.8%, excluding $1.9M of acquired expenses.
• Inventory decreased by $51.3 million or 9.5% to $489.7 million during the quarter.
• Product support revenues increased by 6.6% to $48.6 million from $45.6 million.
• Adjusted Diluted Earnings per Share⁽¹⁾ increased by $0.03 to $0.35. 
• Adjusted EBITDA⁽¹⁾ increased by 8.7% to $11.7 million from $10.8 million.
• Floor Plan Neutral Operating Cash Flow increased to $48.5 million from $10.6 million in Q3 2014.
• Amended the Syndicated Facility, positioning the Company for growth and providing additional headroom on the fixed charge coverage covenant.

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

Notwithstanding a decline in the overall market, Rocky's year-over-year market share gains delivered strong same-store revenue growth.  The successful implementation of cost containment measures realigned our resources deployed with industry demand, and facilitated the conversion of our revenue growth into improved profitability.

Across the Canadian Prairies, and particularly in Alberta and Saskatchewan, farmers contended with a warm and exceptionally dry growing season.  Late summer rainfalls provided a measure of relief to farmers as crop yields and overall production levels exceeded earlier expectations.  The precipitation also helped to restore groundwater levels, a welcome development for the 2016 agricultural outlook.

"The rainfall improved the outlook for agriculture production, increasing equipment demand during the third quarter", remarked Garrett Ganden, President and CEO of Rocky.  "Many customers continued the year-to-date trend of purchasing lightly-used equipment, helping Rocky to realize yet another quarter of meaningful inventory reduction, while generating both profit and free cash flow.

"Our product support momentum also carried through the third quarter, and I'm pleased to report that we have posted our tenth consecutive quarterly increase over the same period from the previous year.  If sustained, the shift in sales mix towards used equipment will continue to support strong demand in our parts and service departments, as our installed base ages. 

"In response to market conditions on both the agriculture and industrial fronts, we implemented several cost containment measures to better align our resource deployment.  It was these initiatives that allowed us to hold our Operating SG&A relatively flat, despite the addition of four new facilities, and translated into a $0.03 increase in Adjusted Diluted Earnings per Share over Q3 last year.

"Our focus for the balance of the year will be to continue to capitalize on the inventory reduction and product support opportunities presented in the agriculture segment as well as right-size our foot-print, cost structure and assets deployed across the business as a whole.  These areas of focus will be key drivers in both our cash generation and net earnings for the remainder of the year."

Quarterly Cash Dividend

Rocky also announced today that on November 10, 2015, its Board of Directors approved a quarterly dividend of $0.115 per common share on its outstanding common shares.  The common share dividend is payable on December 31, 2015, to shareholders of record at the close of business on November 30, 2015.

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.  Please consult with your own tax advisor for advice with respect to the income tax consequences to you from Rocky designating its dividends as "eligible dividends."

Conference Call

On Thursday, November 12, 2015, Rocky will discuss its results via live conference call and audio webcast, beginning at 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time).  Senior management of Rocky will provide remarks on the quarter, followed by a question and answer session with analysts and institutional investors.

Those interested in participating in the conference call may do so by calling 1-888-231-8191 (toll free) or 1-647-427-7450.  A live webcast of the conference call will also be accessible through Rocky's website at www.rockymtn.com.

An archived recording of the conference call will be available until Thursday, November 26, 2015 by dialing 1-855-859-2056 (toll free) or 1-416-849-0833, passcode: 53043761.  This archived recording will also be available via Rocky's website.

Caution regarding forward-looking statements

Certain information set forth in this news release, including, without limitation, statements that imply any future earnings, profitability, economic benefit or other financial results, statements about the shift in demand from new to used equipment having a positive effect on overall inventory levels, statements that this shift in demand from new to used equipment will result in a reduction in procurement, statements implying any continued or sustained demand for used equipment going forward both in Canada and the United States, statements that the reduction in new equipment sales is expected to translate into an aging installed base and increased product support opportunities, any implied economic or financial benefit arising from Rocky's headcount rationalization and other cost containment measures, and statements dealing with future headcount or cost rationalizations and the benefit of the same, statements discussing ongoing inventory reductions, product support improvements and cost rationalization creating or leading to cash generation and net earnings, and statements associating any amendments to Rocky's credit facilities with potential growth, are 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.  While this forward-looking information is based on information and assumptions that Rocky's management believes to be reasonable, 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 quarter ended March 31, 2015, and as discussed in Rocky's Annual Information Form dated March 10, 2015 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 industrial 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 agriculture and industrial 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
$ thousands			September 30, 2015		December 31, 2014		September 30, 2014
Assets
	Inventory		489,690		526,003		535,584
	Other current assets		83,380		69,049		55,837
	Total current assets		573,070		595,052		591,421
	Property and equipment		36,295		32,886		32,196
	Deferred tax asset		1,685		1,186		1,141
	Derivative financial assets		-		-		7
	Intangible assets		712		-		-
	Goodwill		18,910		14,692		14,692
Total assets			630,672		643,816		639,457
Liabilities and equity
	Floor plan payable		352,135		382,081		377,005
	Other current liabilities		65,859		57,261		60,872
	Total current liabilities		417,994		439,342		437,877
	Long-term debt		40,050		32,776		34,718
	Obligations under finance leases		-		9		97
	Derivative financial liabilities		4,765		3,282		2,695
			462,809		475,409		475,387
	Shareholders' equity		167,863		168,407		164,070
Total liabilities and equity			630,672		643,816		639,457

SELECTED FINANCIAL INFORMATION
$ thousands, except per share amounts			For the three months ended September 30,				For the nine months ended September 30,
			2015		2014		2015		2014
Sales
	New equipment		80,432	31.4%	81,837	35.5%	287,573	41.7%	339,192	50.5%
	Used equipment		125,534	49.0%	102,354	44.3%	284,806	41.3%	223,726	33.3%
	Parts		37,918	14.8%	35,568	15.4%	86,895	12.6%	80,302	12.0%
	Service		10,711	4.2%	10,041	4.4%	27,151	3.9%	25,495	3.8%
	Other		1,391	0.6%	995	0.4%	3,444	0.5%	2,600	0.4%
			255,986	100.0%	230,795	100.0%	689,869	100.0%	671,315	100.0%
Cost of sales			215,944	84.4%	191,680	83.1%	585,426	84.9%	565,162	84.2%
Gross profit			40,042	15.6%	39,115	16.9%	104,443	15.1%	106,153	15.8%
Selling, general and administrative			30,334	11.8%	27,165	11.8%	84,327	12.2%	78,208	11.6%
Interest on short-term debt			3,276	1.3%	2,903	1.3%	9,435	1.4%	8,527	1.3%
Interest on long-term debt			519	0.2%	558	0.1%	1,559	0.2%	1,658	0.3%
Earnings before income taxes			5,913	2.3%	8,489	3.7%	9,122	1.3%	17,760	2.6%
Provision for income taxes			1,561	0.6%	2,285	1.0%	2,409	0.3%	5,056	0.7%
Net earnings			4,352	1.7%	6,204	2.7%	6,713	1.0%	12,704	1.9%
Earnings per share
	Adjusted Diluted Earnings per Share^(1)		0.35		0.32		0.47		0.65
	Basic		0.23		0.32		0.35		0.66
	Diluted		0.23		0.32		0.35		0.66
Dividends per share			0.115		0.115		0.345		0.330
Adjusted EBITDA^(1)			11,707	4.6%	10,772	4.7%	19,656	2.8%	24,557	3.7%
Operating SG&A^(1)			25,059	9.8%	25,440	11.0%	75,352	10.9%	73,069	10.9%
Floor Plan Neutral Operating Cash Flow^(1)			48,534	19.0%	10,645	4.6%	85,349	12.4%	(30,815)	(4.6%)

(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:

• "Adjusted Diluted Earnings per Share" is calculated by eliminating from net earnings, the after-tax impact of the losses (gains) arising from the Company's derivative financial instruments and DSUs, as well as the expense (recovery) associated with its SARs.  These items arise from changes in the Company's share price as well as fluctuations in interest rates and are not reflective of the Company's core operations. 

The Company also adjusts for any non-recurring charges (recoveries) recognized in net earnings.  Management deems non-recurring charges (recoveries) to be unusual or infrequent items that the Company incurs outside of its common day-to-day operations.  Adjusting for these items allows management to isolate and analyze diluted earnings per share from core business operations.  For the periods presented, no non-recurring charges (recoveries) have been identified.

• "EBITDA" is a commonly used metric in the dealership industry.  EBITDA is calculated by adding interest on long-term debt, 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 related to the Company's capital structure.
  
  
• "Adjusted EBITDA" is calculated by eliminating from EBITDA, the impact of the losses (gains) arising from the Company's derivative financial instruments and DSUs, as well as the expense (recovery) associated with its SARs. These items arise from changes in the Company's share price as well as fluctuations in interest rates and are not reflective of the Company's core operations. 

The Company also adjusts for any non-recurring charges (recoveries) recognized in EBITDA.  Management deems non-recurring charges (recoveries) to be unusual or infrequent items that the Company incurs outside of its common day-to-day operations.  Adjusting for these items allows management to isolate and analyze EBITDA from core business operations.  For the periods presented, no non-recurring charges (recoveries) have been identified.

• "Operating SG&A" is calculated by eliminating from SG&A, the impact of the losses (gains) arising from the Company's derivative financial instruments and DSUs, as well as the expense (recovery) associated with its SARs. These items arise from changes in the Company's share price as well as fluctuations in interest rates and are not reflective of the Company's core operations. 

The Company also adjusts for depreciation of property and equipment and any non-recurring charges (recoveries) recognized in SG&A.  Management deems non-recurring charges (recoveries) to be unusual or infrequent items that the Company incurs outside of its common day-to-day operations.  Adjusting for these items allows management to assess discretionary expenses from ongoing operations.  For the periods presented, no non-recurring charges (recoveries) have been identified.  We target a sub-10% Operating SG&A as a percentage of total sales on an annual basis.  

During the quarter, the Company changed this metric such that the aforementioned charges (recoveries) on its derivative financial instruments, DSUs and SARs are also eliminated from SG&A in calculating Operating SG&A. 

• "Floor Plan Neutral Operating Cash Flow" is calculated by eliminating the impact of the change in floor plan payable (excluding floor plan assumed pursuant to business combinations) from cash flows from operating activities.  Adjusting cash flows from operating activities for changes in the balance of floor plan payable allows management to isolate and analyze operating cash flows during a period, prior to any sources or uses of cash associated with equipment financing decisions. 

RECONCILIATION OF NON-IFRS MEASURES TO IFRS

Adjusted Diluted Earnings per Share
$ thousands, except share and per share amounts		For the three months ended September 30,			For the nine months ended September 30,
		2015	2014		2015	2014
Earnings used in the calculation of diluted earnings per share		4,352	6,204		6,713	12,704
Loss (gain) on derivative financial instruments		3,438	(40)		3,274	(9)
Loss (gain) on DSUs		(155)	(14)		(158)	(96)
SAR expense (recovery)		(92)	-		18	-
Tax effect of adjustments (2015 - 27%, 2014 – 25%)		(862)	14		(846)	26
Earnings used in the calculation of Adjusted Diluted   Earnings per Share		6,681	6,164		9,001	12,625
Weighted average diluted shares used in the   calculation of diluted earnings per share (in   thousands)		19,299	19,273		19,334	19,332
Adjusted Diluted Earnings per Share		0.35	0.32		0.47	0.65

EBITDA and Adjusted EBITDA
$ thousands		For the three months ended September 30,			For the nine months ended September 30,
		2015	2014		2015	2014
Net earnings		4,352	6,204		6,713	12,704
Interest on long-term debt		519	558		1,559	1,658
Depreciation expense		2,084	1,779		5,841	5,244
Income taxes		1,561	2,285		2,409	5,056
EBITDA		8,516	10,826		16,522	24,662
Loss (gain) on derivative financial instruments		3,438	(40)		3,274	(9)
Loss (gain) on DSUs		(155)	(14)		(158)	(96)
SAR expense (recovery)		(92)	-		18	-
Adjusted EBITDA		11,707	10,772		19,656	24,557

Operating SG&A
$ thousands		For the three months ended September 30,			For the nine months ended September 30,
		2015	2014		2015	2014
SG&A		30,334	27,165		84,327	78,208
Depreciation expense		(2,084)	(1,779)		(5,841)	(5,244)
Gain (loss) on derivative financial instruments		(3,438)	40		(3,274)	9
Gain (loss) on DSUs		155	14		158	96
SAR (expense) recovery		92	-		(18)	-
Operating SG&A		25,059	25,440		75,352	73,069

Floor Plan Neutral Operating Cash Flow
$ thousands		For the three months ended September 30,			For the nine months ended September 30,
		2015	2014		2015	2014
Cash flows from operating activities		21,367	13,386		22,621	3,826
Net (increase) decrease in floor plan payable		27,167	(2,741)		29,946	(34,641)
Floor plan assumed pursuant to business combinations		-	-		32,782	-
Floor Plan Neutral Operating Cash Flow		48,534	10,645		85,349	(30,815)

SOURCE Rocky Mountain Dealerships Inc.

Rocky Mountain Dealerships Inc., Garrett Ganden, President and Chief Executive Officer; or, David Ascott, Chief Financial Officer, #301, 3345 - 8th Street S.E., Calgary, Alberta T2G 3A4, Telephone: [phone], Fax: [phone]