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

CALGARY, Aug. 11, 2015 /CNW/ - Rocky Mountain Dealerships Inc. (hereinafter "Rocky") today reported its financial results for the quarter ended June 30, 2015.

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

• Used equipment sales increased by 6.9% to $75.5 million from $70.6 million. 
• New equipment sales decreased by 28.3% to $95.4 million from $133.1 million.
• Inventory decreased by $30.2 million or 5.7% (excluding $43.9 million of Chabot inventory acquired).
• Product support revenues increased by 9.8% to $41.4 million from $37.7 million.
• Diluted earnings per share were $0.10 as compared to $0.31 in 2014. 
• EBITDA⁽¹⁾ decreased to $5.2 million from $10.6 million in 2014.
• Completed the acquisition of Chabot.

A warm and exceptionally dry growing season across much of the prairies, combined with increased foreign exchange premiums on equipment manufactured in the U.S., has tempered demand for new agriculture equipment in Western Canada.  Although July brought with it some much needed rainfall, accumulated moisture levels across the Canadian Prairies remain well below historical averages.  These difficult climatic conditions, as well as sales activity pushed into the first quarter as a result of the early spring in 2015, precipitated a decline in new agriculture equipment sales and contributed to the decrease in EBITDA during the second quarter. 

"We are encouraged with the progress on a number of our key initiatives, notwithstanding the headwinds affecting our industry at present", remarked Garrett Ganden, President and CEO of Rocky. "The reduction of our overall inventory levels, and the deleveraging of our balance sheet, continue to be a top priority for us.  We view the shift in demand from new to used agriculture equipment as a positive development as it pertains to the reduction of inventory.  To the extent that our customers' demand is met with units already on hand, we are able to reduce procurement and consequently, overall inventory levels.  During the second quarter, we saw evidence of this in the $30.2 million reduction in inventory, excluding inventory acquired as part of the Chabot acquisition.

"As our currency continues to depreciate, we are also experiencing increased demand for used equipment from south of the border.  Again, this bodes well for our stated inventory reduction strategy and the deleveraging of our balance sheet.

"If sustained, the reduction of new equipment sales is expected to translate into an aging installed base and increased product support opportunities, providing additional momentum to these key areas of our business which have just posted a ninth consecutive quarterly sales increase over the same quarter in the prior year.  

"Low oil prices have continued to curtail activity in Alberta's industrial market and, as a consequence, our sales and profitability in the segment.  In response, we have implemented SG&A rationalization and other cost containment measures during the second quarter to better align our resources deployed with industry demand.  We continue to measure our work force and cost structure throughout the segment relative to market conditions and will adjust where appropriate. 

"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, to better reflect the changed market conditions.  These areas of focus will be key drivers in both our cash generation and net earnings for the remainder of the year."

The long-term outlook for the Western Canadian agriculture industry remains positive due in large part to several consecutive years of record crop receipts and the resulting strength in farmers' balance sheets.  Agriculture, as a whole, exhibits cyclical surges in demand and profitability driven by macroeconomic and other factors. 

Quarterly Cash Dividend

Rocky also announced today that on August 11, 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 September 30, 2015, to shareholders of record at the close of business on August 31, 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 Wednesday, August 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 Wednesday, August 26, 2015 by dialing 1-855-859-2056 (toll free) or 1-416-849-0833, passcode: 80767090.  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, and statements discussing ongoing inventory reductions, product support improvements and cost rationalization creating or leading to cash generation and net earnings, 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 

SELECTED FINANCIAL INFORMATION

^{(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 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.
  
  
• "Operating SG&A" is calculated by adding back depreciation of property and equipment and any non-recurring charges recognized in SG&A during the period to SG&A.  Management deems non-recurring charges to be unusual or infrequent charges that the Company incurs outside of its common day-to-day operations.  Adding back these items allows management to assess discretionary expenses from ongoing operations.  For the periods presented, no non-recurring charges have been identified.  We target a sub-10% Operating SG&A as a percentage of total sales on an annual basis. 
  
  
• "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

EBITDA

Operating SG&A

Floor Plan Neutral Operating Cash Flow

SOURCE Rocky Mountain Dealerships Inc.