EDMONTON, May 2, 2019 /CNW/ - AutoCanada Inc. ("AutoCanada" or the "Company") (TSX: ACQ), a multi-location North American automobile dealership group, today reported its financial results for the three month period ended March 31, 2019.
"We are now in full swing with the Go Forward Plan in Canada and we are excited about the results that we are starting to see. We are encouraged that our Canadian new unit sales outperformed the overall Canadian market in the first quarter of 2019 as compared to the first quarter of 2018, with our new unit sales remaining flat in a market that contracted. In addition, our Go Forward Plan has resulted in a material increase in our Canadian used unit sales in the first quarter of 2018 over the first quarter of 2018," said Paul Antony, Executive Chair of the Company. "We have designed a go forward plan for our U.S. operations focusing on reducing the operating expenses in our U.S. dealerships and optimizing our U.S. portfolio with a view to creating a sustainable platform in the U.S."
2019 First Quarter Highlights
- Total revenue was $739.4 million, up 19.2% compared with the first quarter of 2018. The U.S. Operations revenue contribution was $103.9 million, representing 14% of total revenue.
- Gross profit was $126.7 million, which includes $13.7 million gross profit from U.S. Operations. As a percentage of revenue, gross profit increased to 17.1% from 16.8%. Same store gross profit was $97.7 million, up 1.9% from the same quarter in 2018.
- Operating expenses were $122.8 million, up 28.2% or $27.0 million from the same period last year. A large contributor to the increase was the addition of the U.S. Operations as operating expenses in the U.S. Operations amounted to $21.0 million in the current period.
- Operating expenses as a percentage of gross profit were up to 96.9% from 91.8% in the same period in 2018. Operating expenses in the U.S. Operations exceeded gross profit by $7.2 million. In addition, the Canadian operating expenses include approximately $1.3 million of management transition costs.
- New vehicle retail sales, which included 1,511 U.S. retail sales, was 8,002, up 20.1% from the same period in 2018. Revenue from the sale of new retail and fleet vehicles was $399.0 million, up 18.0% from the same period in 2018. The sale of new retail and fleet vehicles accounted for 54.0% of the Company's total revenue and 21.7% of gross profit, versus 54.5% of revenue and 22.5% of gross profit in the first quarter of 2018.
- Used retail vehicle sales were 5,650, up 24.8% compared with the same quarter last year - 889 of those sales were in our U.S. Operations. Total revenue from the sale of used vehicles was $188.6 million, up 19.5% from the same quarter last year. The sale of used vehicles accounted for 25.5% of the Company's total revenue and 8.8% of gross profit, versus 25.4% of revenue and 8.2% of gross profit in the first quarter of 2018.
- Total parts, service and collision repair generated $116.9 million of revenue, up 21.9% from the same period in 2018. This accounted for 13.0% of the Company's total revenue and 44.0% of its gross profit, down from 15.5% of revenue and up from 43.6% of gross profit in the same quarter of 2018. The U.S. Operations parts, service and collision repair revenue was $16.2 million.
- Total finance and insurance revenue was $34.9 million, an increase of 21.6% from the same period in 2018. This accounted for 4.7% of the Company's total revenue and 25.5% of its gross profit, in line with 4.6% of revenue and 25.7% of gross profit in the same quarter of 2018. The U.S. Operations finance and insurance revenue was $4.4 million.
- EBITDA attributable to AutoCanada shareholders was $16.5 million. The adoption of IFRS 16 has resulted in an increase to EBITDA attributable to AutoCanada shareholders compared to last year as we have not restated 2018 comparatives as discussed below under "Adoption of IFRS 16"; this contributed $9.6 million.
- Adjusted EBITDA attributable to AutoCanada shareholders was $17.8 million. The adoption of IFRS 16 has resulted in an increase to adjusted EBITDA attributable to AutoCanada shareholders compared to last year as we have not restated 2018 comparatives as discussed below under "Adoption of IFRS 16"; this contributed $9.6 million.
- The Company generated a net loss attributable to AutoCanada shareholders of $4.1 million (Adjusted net loss attributable to AutoCanada shareholders of $3.2 million), or $(0.15) per share (Adjusted net loss per share attributable to AutoCanada shareholders $(0.12)) versus net income of $4.8 million in 2018 ($4.8 million on an adjusted basis) or $0.18 per share ($0.18 on an adjusted basis).
- The adoption of IFRS 16 has resulted in an increase to the net loss attributable to AutoCanada shareholders and Adjusted net loss attributable to AutoCanada shareholders compared to last year as we have not restated 2018 comparatives; this contributed $(0.8) million to the net loss in 2019.
- Included in EBITDA and net earnings is a gain of $2.7 million from a sale-leaseback transaction in respect of two dealership properties, as well as, a pre-tax gain of $4.3 million from the sale of Toronto Dodge.
- Adjusted EBITDA attributable to AutoCanada shareholders from the Canadian operations without the pre-tax gains from the sale-leaseback transactions and the sale of Toronto Dodge was $16.2 million. The adoption of IFRS 16 has resulted in an increase to adjusted EBITDA attributable to AutoCanada shareholders from Canadian operations compared to last year as we have not restated 2018 comparatives; this contributed $7.6 million.
- Adjusted EBITDA attributable to AutoCanada shareholders from the U.S. operations was negative at $(5.5) million. The adoption of IFRS 16 has resulted in an increase to adjusted EBITDA attributable to AutoCanada shareholders from U.S. Operations compared to last year as we have not restated 2018 comparatives; this contributed $2.0 million.
First Quarter Business Highlights
- The Company completed a sale-leaseback transaction with Automotive Properties Real Estate Investment Trust for a purchase price of $24.0 million. On the transaction, the Company recognized a pre-tax gain of $2.7 million. Funds from this sale were used to pay down our revolving credit facilities.
- On March 3, 2019, the Company sold substantially all of the operating and fixed assets of Toronto Dodge, located in Toronto, Ontario, for cash consideration. Net proceeds of $6,785 resulted in a pre-tax gain on divestiture of $4,320, included in gain on disposal of assets in the Condensed Interim Consolidated Statement of Comprehensive (Loss) Income.
The following table summarizes the Company's results for the quarter ended March 31, 2019:
| Three Months Ended March 31
|
Consolidated Operational Data
| 2019
|
| 2018
|
| % Change
|
EBITDA attributable to AutoCanada shareholders 1, 2, 4
| 16,518
|
| 15,694
|
| 5.2%
|
Adjusted EBITDA attributable to AutoCanada shareholders 1, 2, 4
| 17,808
|
| 15,689
|
| 13.5%
|
Net (loss) income attributable to AutoCanada shareholders 1
| (4,127)
|
| 4,832
|
| (185.4)%
|
Adjusted net earnings attributable to AutoCanada shareholders 1, 2
| (3,185)
|
| 4,832
|
| (165.9)%
|
Basic EPS
| (0.15)
|
| 0.18
|
| (183.3)%
|
Adjusted diluted EPS 2
| (0.12)
|
| 0.18
|
| (166.7)%
|
Weighted average number of shares - Basic
| 27,418,197
|
| 27,388,859
|
| 0.1%
|
Weighted average number of shares - Diluted 3
| 27,418,197
|
| 27,475,458
|
| (0.2)%
|
New retail vehicles sold (units)
| 8,002
|
| 6,664
|
| 20.1%
|
New fleet vehicles sold (units)
| 1,064
|
| 1,476
|
| (27.9)%
|
New vehicles sold (units)
| 9,066
|
| 8,140
|
| 11.4%
|
Used retail vehicles sold (units)
| 5,650
|
| 4,527
|
| 24.8%
|
Total vehicles sold (units)
| 14,716
|
| 12,667
|
| 16.2%
|
Revenue
| 739,371
|
| 620,485
|
| 19.2%
|
Gross profit
| 126,699
|
| 104,344
|
| 21.4%
|
Gross profit %
| 17.1%
|
| 16.8%
|
| 1.9%
|
Operating expenses
| 122,827
|
| 95,781
|
| 28.2%
|
Operating expenses as % of gross profit
| 96.9%
|
| 91.8%
|
| 5.6%
|
Operating (loss) profit
| 12,310
|
| 15,906
|
| (22.6)%
|
Free cash flow 2
| 881
|
| (14,388)
|
| (106.1)%
|
Adjusted free cash flow 2
| 4,269
|
| 3,721
|
| 14.7%
|
See the Company's Management's Discussion and Analysis for the quarter ended March 31, 2019 for complete footnote disclosures.
|
Outlook
Macroeconomic factors create a degree of uncertainty for AutoCanada's business. Central banks in Canada and the United States have recently held key interest rates flat but there is a possibility of future interest rate hikes over the next year. Higher rates will adversely impact borrowing expenses on variable interest rate debt such as vehicle floorplan financing, which would increase our costs. Monthly loan payments for new and used vehicles are also typically linked to market interest rates, meaning rising interest rates will likely make vehicle ownership less affordable at the same time as other household debt becomes more expensive.
The auto industry in North America is coming off several record-setting years and the sale of new vehicles is beginning to trend downwards. While many analysts expect sales to remain healthy, most expect a decline in volume in 2019. Over the last few months, there has been greater concern over the strength of the economy in both Canada and the United States. If these concerns materialize, the volume of vehicle sales could decrease more than analysts expect. New car sales in the U.S. and Canada dropped more than expected during the first quarter of 2019 and many dealers are reacting by shifting to used cars and cutting costs. Some of the blame for the reduction of new car sales over the first quarter is being placed on a severe winter and delayed emergence of spring weather across Canada. While vehicle leasing and manufacturer incentives remain at high levels, if those incentives are scaled back, it could impact sales volumes.
While macroeconomic factors determine total vehicle demand, we expect to deliver materially better results in our Canadian operations as we continue to implement our Go Forward Plan, even if the broader industry faces varying headwinds. This will come through a combination of focusing on less cyclical parts of our business and on lines of our business that generate higher margins. As part of our Go Forward Plan, we expect to materially increase the number of used vehicles we retail. Margins on used vehicles tend to be higher than new vehicles and retailing more vehicles will increase our returns from our finance and insurance and our parts and service lines of business.
We are also optimizing our finance and insurance offerings for used vehicles at our dealerships. We expect to earn a material profit share on these new offerings. We have also created a new special finance division and a new wholesale division. Our new special finance division arranges loans for customers who cannot qualify for traditional loans offered by banks and affiliates of vehicle manufacturers. We expect that our special finance division will continue to increase both new and used vehicle sales at our dealerships and through a recently launched online site (www.rightride.ca). We expect that our new wholesale division will be accretive by taking advantage of the arbitrage opportunities with the sale of used vehicles in different geographical locations. Other aspects of the Company's Go Forward Plan are expected to continue to decrease operational expenses at our dealerships and at our collision centers, as we better leverage our buying power to achieve meaningful cost reductions in our Canadian operations.
The key issue with our U.S. Operations in 2018 and the first quarter of 2019 was the high cost structure. We have designed a go forward plan for our U.S. Operations focusing on reducing the operating expenses in our U.S. dealerships and optimizing our U.S. portfolio with a view to creating a sustainable platform in the U.S.
The fragmented nature of the automotive dealership sector will provide us with the opportunity to diversify our geographical presence and drive earnings growth through accretive acquisitions. While our principal focus at this time is to continue executing our Go Forward Plan and optimizing all of our lines of business, we expect to grow our business by making accretive acquisitions as opportunities may arise.
Dividends
Management reviews the Company's financial results on a monthly basis. The Board of Directors reviews the financial results periodically to determine whether a dividend is to be paid based on a number of factors with a goal to efficiently allocate capital to fuel AutoCanada's future growth while also rewarding and sharing the Company's success with our shareholders.
On May 2, 2019, the Board declared a quarterly eligible dividend of $0.10 per common share on AutoCanada's outstanding common shares, payable on June 15, 2019 to shareholders of record at the close of business on May 31, 2019.
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 designating dividends as "eligible dividends".
Segmented Operations
The following table shows the segmented operating results for the Company for the three months ended March 31, 2019. Figures for the three months ended March 31, 2018 include only results from Canada as the Company did not have U.S. Operations at that time.
| Three Months Ended March 31, 2019
|
| Three Months Ended
March 31, 2018
- Canada only
|
| Canada
$
| U.S.
$
| Total
$
| $
| Total
$
|
New vehicles
| 340,161
| 58,822
| 398,983
|
| 338,016
|
Used vehicles
| 164,061
| 24,558
| 188,619
|
| 157,901
|
Parts, service and collision repair
| 100,739
| 16,163
| 116,902
|
| 95,893
|
Finance, insurance and other
| 30,476
| 4,391
| 34,867
|
| 28,675
|
Total revenue
| 635,437
| 103,934
| 739,371
|
| 620,485
|
New vehicles
| 27,667
| (140)
| 27,527
|
| 23,473
|
Used vehicles
| 10,068
| 1,044
| 11,112
|
| 8,562
|
Parts, service and collision repair
| 47,052
| 8,692
| 55,744
|
| 45,533
|
Finance, insurance and other
| 28,180
| 4,136
| 32,316
|
| 26,776
|
Total gross profit
| 112,967
| 13,732
| 126,699
|
| 104,344
|
Employee costs
| 58,844
| 10,590
| 69,434
|
| 57,294
|
Administrative costs
| 33,556
| 8,382
| 41,938
|
| 27,522
|
Facility lease costs 2
| —
| —
| —
|
| 5,923
|
Depreciation of property and equipment
| 4,472
| 442
| 4,914
|
| 5,042
|
Depreciation of right-of-use assets 2
| 4,987
| 1,554
| 6,541
|
| —
|
Total operating expenses
| 101,859
| 20,968
| 122,827
|
| 95,781
|
|
|
|
|
|
|
Operating profit (loss) before other income
| 11,108
| (7,236)
| 3,872
|
| 8,563
|
|
|
|
|
|
|
Operating data
|
|
|
|
|
|
Vehicles (new and used) sold 1
| 12,311
| 2,405
| 14,716
|
| 12,667
|
New vehicles sold 1
| 7,550
| 1,516
| 9,066
|
| 8,140
|
New retail vehicles sold 1
| 6,491
| 1,511
| 8,002
|
| 6,664
|
New fleet vehicles sold 1
| 1,059
| 5
| 1,064
|
| 1,476
|
Used retail vehicles sold 1
| 4,761
| 889
| 5,650
|
| 4,527
|
# of service and collision repair orders completed 1
| 174,482
| 39,190
| 213,672
|
| 180,429
|
# of dealerships at period end
| 52
| 14
| 66
|
| 54
|
# of service bays at period end
| 913
| 200
| 1,113
|
| 906
|
See the Company's Management's Discussion and Analysis for the quarter ended March 31, 2019 for complete footnote disclosures.
|
SELECTED QUARTERLY FINANCIAL 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 %, Earnings per share, and
Operating Data)
| Q1
2019
| Q4
2018
| Q3
2018
| Q2
2018
| Q1
2018
| Q4
2017
| Q3
2017
| Q2
2017
|
Income Statement Data
|
|
|
|
|
|
|
|
|
New vehicles
| 398,983
| 432,756
| 509,281
| 522,150
| 338,016
| 417,626
| 497,711
| 558,682
|
Used vehicles
| 188,619
| 192,988
| 206,668
| 198,597
| 157,901
| 175,251
| 192,473
| 182,913
|
Parts, service and collision repair
| 116,902
| 121,304
| 113,087
| 121,476
| 95,893
| 107,156
| 104,816
| 113,983
|
Finance, insurance and other
| 34,867
| 35,742
| 37,882
| 38,365
| 28,675
| 33,027
| 39,571
| 39,324
|
Revenue
| 739,371
| 782,790
| 866,918
| 880,588
| 620,485
| 733,060
| 834,571
| 894,902
|
New vehicles
| 27,527
| 25,861
| 29,150
| 30,648
| 23,473
| 30,033
| 36,806
| 38,555
|
Used vehicles
| 11,112
| 8,637
| 12,955
| 13,173
| 8,562
| 7,563
| 11,140
| 13,095
|
Parts, service and collision repair
| 55,744
| 60,380
| 57,206
| 60,868
| 45,533
| 56,915
| 53,805
| 56,306
|
Finance, insurance and other
| 32,316
| 33,326
| 35,524
| 35,891
| 26,776
| 30,699
| 36,218
| 35,867
|
Gross Profit
| 126,699
| 128,204
| 134,835
| 140,580
| 104,344
| 125,210
| 137,969
| 143,823
|
Gross profit %
| 17.1%
| 16.4%
| 15.6%
| 16.0%
| 16.8%
| 17.1%
| 16.5%
| 16.1%
|
Operating expenses 7
| 122,827
| 125,039
| 126,492
| 127,492
| 95,781
| 104,626
| 110,560
| 112,897
|
Operating expenses as a % of gross profit 7
| 96.9%
| 97.5%
| 93.8%
| 90.7%
| 91.8%
| 83.6%
| 80.1%
| 78.5%
|
Operating (loss) profit 7
| 12,310
| (576)
| (5,259)
| (42,719)
| 15,906
| 26,505
| 30,287
| 46,539
|
Impairment (recovery) of non-financial
|
|
|
|
|
|
|
|
|
assets 7
| —
| 23,828
| 19,569
| 58,097
| —
| (816)
| —
| —
|
Net (loss) income attributable to
|
|
|
|
|
|
|
|
|
AutoCanada shareholders 7
| (4,127)
| (32,886)
| (15,563)
| (40,458)
| 4,832
| 17,089
| 12,100
| 24,978
|
Adjusted net earnings attributable to
|
|
|
|
|
|
|
|
|
AutoCanada shareholders 2, 4, 6, 7, 8
| (3,185)
| (9,299)
| 333
| 5,298
| 4,832
| 8,935
| 13,581
| 15,547
|
EBITDA attributable to AutoCanada
|
|
|
|
|
|
|
|
|
shareholders 2, 7, 8
| 16,518
| 16,521
| 11,972
| 12,042
| 15,694
| 28,127
| 25,827
| 43,722
|
EBITDA attributable to AutoCanada
|
|
|
|
|
|
|
|
|
shareholders as a % of sales 2, 7, 8
| 2.2%
| 2.1%
| 1.4%
| 1.4%
| 2.5%
| 3.8%
| 3.1%
| 4.9%
|
Free cash flow 2, 7
| 881
| (9,677)
| 6,993
| (11,731)
| (14,388)
| 29,496
| 31,114
| 10,982
|
Adjusted free cash flow 2, 7
| 4,269
| 12,573
| (965)
| (5,672)
| 3,721
| 15,996
| 23,296
| 36,277
|
Basic earnings per share 7
| (0.15)
| (0.98)
| (0.57)
| (1.48)
| 0.18
| 0.62
| 0.44
| 0.91
|
Diluted earnings per share 7
| (0.15)
| (0.98)
| (0.57)
| (1.48)
| 0.18
| 0.62
| 0.44
| 0.91
|
Basic adjusted earnings per
share2, 4, 6, 7, 8
| (0.12)
| (0.34)
| 0.01
| 0.19
| 0.18
| 0.33
| 0.50
| 0.57
|
Diluted adjusted earnings per
share 2, 4, 6, 7, 8
| (0.12)
| (0.34)
| 0.01
| 0.19
| 0.18
| 0.33
| 0.50
| 0.57
|
Dividends declared per share
| 0.10
| 0.10
| 0.10
| 0.10
| 0.10
| 0.10
| 0.10
| 0.10
|
Operating Data
|
|
|
|
|
|
|
|
|
Vehicles (new and used) sold 3
| 14,716
| 16,024
| 18,863
| 18,519
| 12,667
| 14,475
| 17,132
| 18,490
|
New vehicles sold 3
| 9,066
| 10,331
| 12,474
| 12,506
| 8,140
| 9,822
| 12,014
| 13,429
|
New retail vehicles sold 3
| 8,002
| 9,214
| 10,353
| 10,264
| 6,664
| 8,444
| 10,334
| 10,545
|
New fleet vehicles sold 3
| 1,064
| 1,117
| 2,121
| 2,242
| 1,476
| 1,378
| 1,680
| 2,884
|
Used retail vehicles sold 3
| 5,650
| 5,693
| 6,389
| 6,013
| 4,527
| 4,653
| 5,118
| 5,061
|
# of service and collision repair orders
|
|
|
|
|
|
|
|
|
completed 3
| 213,672
| 245,682
| 241,103
| 248,167
| 180,429
| 224,006
| 220,669
| 228,872
|
Absorption rate 2
| 86%
| 87%
| 82%
| 88%
| 84%
| 90%
| 87%
| 87%
|
# of dealerships at period end
| 66
| 68
| 63
| 63
| 54
| 58
| 57
| 57
|
# of same stores dealerships 1
| 48
| 47
| 49
| 49
| 49
| 49
| 48
| 47
|
# of service bays at period end
| 1,113
| 1,157
| 1,106
| 1,106
| 906
| 999
| 977
| 977
|
Same stores revenue growth 1
| (1.6)%
| (3.0)%
| (3)%
| (5.1)%
| 4.6%
| 11.1%
| 2.9%
| 0.1%
|
Same stores gross profit growth 1
| 1.9%
| (3.0)%
| (8.5)%
| (4.3)%
| 1.0%
| 1.4%
| 6.3%
| 1.1%
|
See the Company's Management's Discussion and Analysis for the quarter ended March 31, 2019 for complete footnote disclosures.
|
The following tables summarize the results for the three months ended March 31, 2019 on a same store basis by revenue source and compares these results to the same period in 2018.
Same Store Revenue and Vehicles Sold
|
|
|
| Three Months Ended March 31
|
(in thousands of dollars)
| 2019
| 2018
| % Change
|
Revenue Source
|
|
|
|
New vehicles - Retail
| 247,000
| 247,310
| (0.1)%
|
New vehicles - Fleet
| 42,366
| 53,829
| (21.3)%
|
Total New vehicles
| 289,366
| 301,139
| (3.9)%
|
Used vehicles - Retail
| 118,814
| 103,262
| 15.1%
|
Used vehicles - Wholesale
| 26,165
| 41,411
| (36.8)%
|
Total Used vehicles
| 144,979
| 144,673
| 0.2%
|
Finance, insurance and other
| 27,801
| 26,703
| 4.1%
|
Subtotal
| 462,146
| 472,515
| (2.2)%
|
Parts, service and collision repair
| 87,038
| 85,651
| 1.6%
|
Total
| 549,184
| 558,166
| (1.6)%
|
New retail vehicles sold (units)
| 5,669
| 5,981
| (5.2)%
|
New fleet vehicles sold (units)
| 963
| 1,305
| (26.2)%
|
Used retail vehicles sold (units)
| 4,100
| 4,053
| 1.2%
|
Total
| 10,732
| 11,339
| (5.4)%
|
Total vehicles retailed (units)
| 9,769
| 10,034
| (2.6)%
|
Same Store Gross Profit and Profit Percentage
|
|
|
| Three Months Ended March 31
|
| Gross Profit
|
| Gross Profit %
|
(in thousands of dollars)
| 2019
| 2018
| % Change
|
| 2019
| 2018
|
Revenue Source
|
|
|
|
|
|
|
New vehicles - Retail
| 18,150
| 19,885
| (8.7)%
|
| 7.3%
| 8.0%
|
New vehicles - Fleet
| 1,249
| 1,126
| 10.9%
|
| 2.9%
| 2.1%
|
Total New vehicles
| 19,399
| 21,011
| (7.7)%
|
| 6.7%
| 7.0%
|
Used vehicles - Retail
| 9,927
| 8,295
| 19.7%
|
| 8.4%
| 8.0%
|
Used vehicles - Wholesale
| 783
| 780
| 0.4%
|
| 3.0%
| 1.9%
|
Total Used vehicles
| 10,710
| 9,075
| 18.0%
|
| 7.4%
| 6.3%
|
Finance, insurance and other
| 25,673
| 24,841
| 3.3%
|
| 92.3%
| 93.0%
|
Subtotal
| 55,782
| 54,927
| 1.6%
|
| 12.1%
| 11.6%
|
Parts, service and collision repair
| 41,871
| 40,934
| 2.3%
|
| 48.1%
| 47.8%
|
Total
| 97,653
| 95,861
| 1.9%
|
| 17.8%
| 17.2%
|
Adoption of IFRS 16
The Company has adopted IFRS 16 retrospectively on January 1, 2019, but has not restated comparatives for the 2018 reporting period, as permitted under the specific provisions in the new standard. The cumulative effect of initially applying the new standard is recognized on January 1, 2019. The standard introduces a single lessee accounting model and requires a lessee to recognize a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. The impact on the Company's net income is the recognition of depreciation related to the recorded right-of-use-assets, an interest charge on the lease liability and the reversal of the operating lease expense. Refer to Note 4 of the Condensed Interim Consolidated Financial Statements for the period ended March 31, 2019 regarding the Company's adoption of IFRS 16 Leases on January 1, 2019.
The adoption of IFRS 16 results in a significant increase in EBITDA in 2019 which may not provide for a meaningful comparison to 2018 given that the comparatives for 2018 have not been restated. The adoption of IFRS 16 resulted in the recognition of depreciation expense related to right-of-use-assets of $6.5 million, lease liability interest charge of $4.5 million and a reduction to rent expense of $9.7 million, for the three month period ended March 31, 2019.
Depreciation expense related to right-of-use-assets and lease liability interest are included in the reconciliations presented in Section 6 the Management Discussion and Analysis for EBITDA attributable to AutoCanada shareholders and Adjusted EBITDA attributable to AutoCanada shareholders.
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 quarter ended March 31, 2019, 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 annual MD&A and quarterly report; Operating (loss) profit; EBITDA; Adjusted EBITDA; Adjusted Net Earnings, Adjusted Net Earnings per Share and Adjusted Diluted Net Earnings Per Share; EBIT; Free Cash Flow; Adjusted Free Cash Flow; Absorption Rate; Average Capital Employed; Adjusted Average Capital Employed; Return on Capital Employed; and Adjusted Return on Capital Employed.
Conference Call
A conference call to discuss the results for the three months ended March 31, 2019 will be held on May 3 at 7:00am Mountain (9:00am Eastern). To participate in the conference call, please dial 1.888.231.8191 approximately 10 minutes prior to the call.
AutoCanada's presentation that will be discussed on the conference call is available at the Company's website at www.autocan.ca.
This conference call will also be webcast live over the internet and can be accessed by all interested parties at the following URL: https://www.autocan.ca/investors/Q12019/
About AutoCanada
AutoCanada, a leading North American multi-location automobile dealership group currently operating 66 franchised dealerships, comprised of 27 brands, in eight provinces in Canada as well as a group in Illinois, USA and has over 4,200 employees. AutoCanada currently sells Chrysler, Dodge, Jeep, Ram, FIAT, Alfa Romeo, Chevrolet, GMC, Buick, Cadillac, Ford, Infiniti, Nissan, Hyundai, Subaru, Audi, Volkswagen, Kia, Mazda, Mercedes-Benz, Smart, BMW, MINI, Volvo, Toyota, Lincoln, and Honda branded vehicles. In 2018, our dealerships sold approximately 66,000 vehicles and processed approximately 915,000 service and collision repair orders in our 1,157 service bays generating revenue in excess of $3 billion.
Additional information about AutoCanada Inc. is available at www.sedar.com and the Company's website at www.autocan.ca.
Forward Looking Statements
Certain statements contained in management's discussion and analysis 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", "plan", "seek", "may", "intend", "likely", "will", "believe", "shall" 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.
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Kevin McPherson, Director of Finance, Phone: 780.509.1677, Email: kmcpherson@autocan.caCopyright CNW Group 2019