EDMONTON, Nov. 7, 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 September 30, 2019.
"We are very pleased to post another strong quarter, and this
accelerating momentum provides continued validation of the effort
we started over a year ago. Our same store metrics in Canada were once again up across the board,
while we made significant and continued progress in stabilizing our
U.S. operations. We achieved this while reducing our net debt by
$69.4 million in the quarter," said
Paul Antony, Executive Chairman.
Third Quarter 2019 Key Highlights (year-over-year
comparable basis)
The Company posted strong results for a
second consecutive quarter. Consolidated revenues of $ 981.9 million reflected growth of 13.3% over
the prior year; same store new retail unit sales growth was 9.1% as
compared to the Canadian market decrease of (3.0)%, for brands
represented by AutoCanada, as reported by DesRosiers Automotive
Consultants. Adjusted EBITDA of $32.5
million reflected an increase of 100.7% over the prior year.
Adjusting for the impact of IFRS 16 in 2019, Adjusted EBITDA of
$21.8 million in the quarter
reflected an increase of 34.9% over the prior year. Canadian
operations were buoyed by ongoing same store sales growth, combined
with increased traction with our Finance and Insurance (F&I)
service line and Business Development Centre (BDC) Go Forward initiatives. Our U.S. Operations
continued to show improvement in the quarter, coming in at near
breakeven Adjusted EBITDA performance at $(0.4) million. Management will close two U.S.
franchises in the fourth quarter, necessitating a non cash
restructuring charge of $13.4 million
in this quarter. Notably, the Company's net indebtedness (total
indebtedness less cash on hand) was reduced by $69.4 million, from $271.7
million to $202.3 million in
the quarter, driven primarily by effective working capital
management and a sale leaseback transaction for two dealership
facilities.
Consolidated AutoCanada Highlights (year-over-year comparable
basis) 1
SECOND CONSECUTIVE STRONG QUARTER
The Company performed well in the third quarter, building on the
momentum from our strong second quarter.
- Revenue was $981.9 million, an
increase of $115.0 million or
13.3%
- Total vehicles sold were 19,652, an increase of 533 units or
2.8%
-
- Same store (Canadian stores that have been owned for at least
two full years since acquisition) new retail unit sales growth was
9.1% as compared to the market decrease of (3.0)%, for brands
represented by AutoCanada, as reported by DesRosiers Automotive
Consultants
- Same store new and used retail unit sales increased 12.7% to
14,226
- Net (loss) income for the period was $(4.1) million (or $(0.15) per diluted share) versus $(15.0) million (or $(0.55) per diluted share). In the period,
restructuring charges of $(13.4)
million were incurred as compared to Impairment charges of
$(19.6) million in 2018. The adoption
of IFRS 16 resulted in additional total expenses, which negatively
affected the Company's net (loss) in the quarter by $1.7 million
- Adjusted EBITDA increased 100.7% to $32.5 million, an increase of $16.3 million; of the $16.3 million increase, $10.7 million was attributed to the impact of
IFRS 16. Adjusting for the impact of IFRS 16, Adjusted EBITDA was
$21.8 million, an increase of 34.9%
over the prior year
- Implementing working capital initiatives, combined with a sale
leaseback transaction for two dealership facilities and with
continued improvements in operational performance, allowed the
Company to reduce its net indebtedness by $69.4 million in the quarter
Canadian Operations Highlights (year-over-year
comparable basis) 1
SAME STORE UNIT GROWTH OF 12.7%
Management continued to focus on implementing and building upon
its Go Forward initiatives for
Canadian Operations during the quarter. Earnings performance was
driven by a combination of strong unit growth and the impact of
more notably our F&I and BDC initiatives. Same store new retail
unit sales growth was 9.1% as compared to the market decrease of
(3.0)%, for brands represented by AutoCanada. Sales growth and
gross profit improvement are supported by our continued focus on
OEM relationships, which includes achieving sales unit and customer
satisfaction targets and a number of other key measures as
reflected within the various OEM balanced scorecards. In line with
our initiative to sell more used vehicles through retail sales
rather than wholesaling, our used retail units to new retail units
ratio increased to 0.72 in the quarter, from 0.67. Our
Finance and insurance initiative helped increase gross profit per
retail unit average to $2,456, an
increase of 10.1%. Parts and service gross profit in the quarter
increased by $4.5 million, an
increase of 9.4%, attributed in large part to improving traction
with Dealermine and our BDC strategy.
- Revenue was $871.2 million, up
20.1%
- Total retail vehicles sold were 15,253, an increase of 1,628
units or 11.9%
-
- Same store new and used retail unit sales increased 12.7% to
14,226
- Used retail units to new retail units ratio increased to 0.72
from 0.67, an increase of 8.4%
- Net income for the period was $10.7
million ($0.38 per diluted
share), up 178.0% from a net loss of $(13.5)
million in 2018. Impairment charges of $(19.6) million was reflected in 2018 results.
The adoption of IFRS 16 resulted in additional total expenses,
which negatively affected the Canadian Operations segment net
income (loss) by $(1.7) million
- Adjusted EBITDA increased 86.7% to $30.9
million, an increase of $14.4
million; IFRS 16 resulted in an increase to Adjusted
EBITDA of $8.7 million. Adjusting for
the impact of IFRS 16 in 2019, Adjusted EBITDA was $22.2 million, an increase of 34.1% over the
prior year
U.S. Operations Highlights (year-over-year comparable basis)
1
GOOD PROGRESS - NEAR BREAKEVEN QUARTER / 2
FRANCHISES TO BE CLOSED IN Q4 2019
The U.S. Operations segment continued to see improvements as a
result of the focus on improving the expense structure which
included a reset of all vendor contracts and restructuring of
compensation towards performance-based rather than fixed
arrangements. Time in position for the new management team has
impacted the progress of operational performance, as indicated by
Adjusted EBITDA before the impact of IFRS 16 being near breakeven
at $(0.4) million. With an eye on
driving future profitability, a decision was made to close two loss
generating franchises in the fourth quarter of 2019. A non cash
restructuring charge of $13.4 million
was taken in the period related to the wind-down of these two
franchises, scheduled to occur in mid November.
- Revenue was $110.7 million, a
decrease of (21.9)%
-
- Retail unit sales decreased to 2,550, down 823 units or
(24.4)%
- Net (loss) income for the period was $(14.8) million versus $(1.5) million in 2018. 2019 results included a
non-cash restructuring charge of $13.4
million. IFRS 16 adjustments resulted in a decrease of total
expenses for the U.S. segmented operations for the period, which
had a positive contribution of $0.4
million
- Adjusted EBITDA was $1.5 million,
an increase of $1.9 million from
2018; IFRS 16 resulted in an increase to Adjusted EBITDA of
$2.0 million. Adjusting for
the impact of IFRS 16 in 2019, Adjusted EBITDA was $(0.4) million, near breakeven and a substantive
improvement over the previous two quarters
1
|
The Company
adopted IFRS 16 on January 1, 2019 but the comparatives for the
third quarter of 2018 have not been restated. Accordingly, 2018
comparatives for the third quarter of 2018 may not provide for a
meaningful comparison to the corresponding measures for the third
quarter of 2019.
|
Same store metrics
SAME STORE NEW UNIT SALES GROWTH OF
9.1%
Total same store new and used retail unit sales for Canadian
Operations increased 12.7% to 14,226, with new retail units
showing an increase of 9.1% and used retail units up 18.1%. The
increase of new retail units by 9.1% compares with a market
decrease of (3.0)% in the Canadian new vehicle market for the
brands represented by AutoCanada, as reported by DesRosiers
Automotive Consultants. The same stores metric includes only
Canadian dealerships which have been owned for at least two full
years since acquisition.
- Revenue increased to $818.6
million, an increase of 20.4%
- Gross profit increased by $15.3
million or 13.9%
- New vehicle gross profit per retail unit grew 12.1% or
$377 per unit
- Used to new units sold ratio increased to 0.73 from 0.67
- Parts, service and collision repair gross profit increased to
$48.7 million, an increase of
9.0%
- Finance and insurance gross profit per retail unit average
increased to $2,491, up 8.5% or
$195 per unit
Financing Activities and Other Recent Developments
NET INDEBTEDNESS REDUCED TO $202.3 MILLION
Total Funded Debt to Bank EBITDA - Effective July 1, 2019, the Credit Facility lenders granted
the Company an extension of the previously provided increase to its
Total Funded Debt to Bank EBITDA covenant. Under the terms of the
extension, the Company's Total Funded Debt to Bank EBITDA covenant
will be 4.50:1.00 until March 31,
2020 and will subsequently revert to 4.00:1.00 beginning
April 1, 2020.
Current ratio consent - In the quarter, the Company
requested and received lender consent to reduce the current ratio
covenant to 1.00 from 1.05 for the quarters ending September 30, 2019 and December 31, 2019. The Company is actively
undertaking initiatives to strengthen its balance sheet through
improved and more efficient working capital management with the
intention of generating additional cash flows which will be used to
reduce indebtedness under the Credit Facility. Modifying the
current ratio covenant requirement provides the Company with
additional headroom to pursue opportunities to better manage its
working capital.
Sale-leaseback transaction - On August 23, 2019, the Company executed an
agreement to sell and subsequently lease back two dealership
facilities with Capital Automotive Real Estate Services Inc. for a
purchase price of $20.0 million. On
the transaction, the Company recognized a pre-tax gain of
$0.6 million. Funds from this sale
were used to pay down our revolving credit facilities. Combined
with the impact of sale leaseback transactions completed over the
last 4 quarters, the Company will realize incremental cash lease
costs of approximately $2 million in
the fourth quarter, as compared to the same period last year.
Dealership divestiture - On July
2, 2019, the Company sold substantially all of the operating
and fixed assets of Calgary Hyundai, located in Calgary, Alberta, for cash consideration. Net
proceeds of $2.0 million resulted in
a net pre-tax gain on divestiture of $0.4
million, included in gain (loss) on disposal of assets, net
in the Canadian Operations segment.
Real estate - The Company continues to actively market
$23.0 million of unproductive real
estate.
Dealerships held for sale - As part of the plan to
optimize the U.S. dealership portfolio, the Company is actively
engaged in seeking buyers for four of its U.S. dealerships.
Wind-down of two U.S. franchises - In addition to the
four dealerships held for sale, the Company has committed to
voluntarily terminate two franchises in the fourth quarter of 2019.
A non-cash restructuring charge of $13.4
million was taken in the quarter to reduce the carrying
amount of tangible assets to their recoverable amount and to accrue
a provision related to future unavoidable premises
costs
Dividends
The Company has declared a quarterly
eligible dividend of $0.10 per common
share on AutoCanada's outstanding common shares, payable on
December 16, 2019 to shareholders of
record at the close of business on November
29, 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".
Third Quarter Financial Information
The following
table summarizes the Company's performance for the quarter:
|
|
|
Three Months Ended
September 30
|
Consolidated
Operational Data
|
2019
|
2018
|
%
Change
|
Revenue
|
981,870
|
866,918
|
13.3%
|
Gross
profit
|
150,754
|
134,835
|
11.8%
|
Gross profit
%
|
15.4%
|
15.6%
|
(0.2)%
|
Operating expenses
2
|
124,772
|
126,492
|
(1.4)%
|
Operating profit
2
|
16,695
|
(5,260)
|
417.4%
|
Net (loss) for the
period 2
|
(4,104)
|
(15,007)
|
72.7%
|
Basic net (loss) per
share attributable to AutoCanada shareholders
2
|
(0.15)
|
(0.56)
|
73.2%
|
Adjusted EBITDA
1, 2, 3
|
32,489
|
16,185
|
100.7%
|
New retail vehicles
sold (units)
|
10,419
|
10,353
|
0.6%
|
New fleet vehicles
sold (units)
|
1,849
|
2,121
|
(12.8)%
|
Total New vehicles
sold (units)
|
12,268
|
12,474
|
(1.7)%
|
Used retail vehicles
sold (units)
|
7,384
|
6,645
|
11.1%
|
Total vehicles
sold
|
19,652
|
19,119
|
2.8%
|
Same store new retail
vehicles sold (units)
|
8,245
|
7,560
|
9.1%
|
Same store new fleet
vehicles sold (units)
|
1,777
|
1,915
|
(7.2)%
|
Same store used
retail vehicles sold (units)
|
5,981
|
5,066
|
18.1%
|
Same store total
vehicles sold
|
16,003
|
14,541
|
10.1%
|
Same store
revenue
|
818,550
|
679,684
|
20.4%
|
Same store gross
profit
|
125,699
|
110,367
|
13.9%
|
Same store gross
profit %
|
15.4%
|
16.2%
|
(0.8)%
|
See the Company's
Management's Discussion and Analysis for the quarter ended
September 30, 2019 for complete
footnote disclosures
|
The following table shows the segmented operating results for
the Company for the three month periods ended September 30,
2019 and September 30, 2018.
|
|
|
|
|
Three Months
Ended
September 30, 2019
|
|
Three Months
Ended
September 30, 2018
|
|
Canada
$
|
U.S.
$
|
Total
$
|
|
Canada
$
|
U.S.
$
|
Total
$
|
New
vehicles
|
492,149
|
63,694
|
555,843
|
|
426,277
|
83,004
|
509,281
|
Used
vehicles
|
235,955
|
26,342
|
262,297
|
|
170,096
|
36,572
|
206,668
|
Parts, service and
collision repair
|
101,189
|
15,250
|
116,439
|
|
96,131
|
16,956
|
113,087
|
Finance, insurance
and other
|
41,885
|
5,406
|
47,291
|
|
32,670
|
5,212
|
37,882
|
Total
revenue
|
871,178
|
110,692
|
981,870
|
|
725,174
|
141,744
|
866,918
|
New
vehicles
|
35,035
|
1,720
|
36,755
|
|
25,908
|
3,242
|
29,150
|
Used
vehicles
|
9,690
|
2,041
|
11,731
|
|
11,962
|
993
|
12,955
|
Parts, service and
collision repair
|
52,150
|
7,491
|
59,641
|
|
47,690
|
9,516
|
57,206
|
Finance, insurance
and other
|
37,468
|
5,159
|
42,627
|
|
30,404
|
5,120
|
35,524
|
Total gross
profit
|
134,343
|
16,411
|
150,754
|
|
115,964
|
18,871
|
134,835
|
Employee
costs
|
65,478
|
8,934
|
74,412
|
|
63,731
|
10,449
|
74,180
|
Administrative
costs
|
33,568
|
5,621
|
39,189
|
|
32,049
|
7,321
|
39,370
|
Facility lease and
storage costs 2
|
60
|
508
|
568
|
|
5,696
|
1,452
|
7,148
|
Depreciation of
property and equipment
|
4,295
|
232
|
4,527
|
|
5,074
|
720
|
5,794
|
Depreciation of
right-of-use assets 2
|
5,518
|
558
|
6,076
|
|
—
|
—
|
—
|
Total operating
expenses
|
108,919
|
15,853
|
124,772
|
|
106,550
|
19,942
|
126,492
|
|
|
|
|
|
|
|
|
Operating profit
(loss) before other income
|
25,424
|
558
|
25,982
|
|
9,414
|
(1,071)
|
8,343
|
|
|
|
|
|
|
|
|
Operating
data
|
|
|
|
|
|
|
|
New retail vehicles
sold 1
|
8,855
|
1,564
|
10,419
|
|
8,176
|
2,177
|
10,353
|
New fleet vehicles
sold 1
|
1,815
|
34
|
1,849
|
|
2,114
|
7
|
2,121
|
Total New vehicles
sold 1
|
10,670
|
1,598
|
12,268
|
|
10,290
|
2,184
|
12,474
|
Used retail vehicles
sold 1
|
6,398
|
986
|
7,384
|
|
5,449
|
1,196
|
6,645
|
Total Vehicles sold
1
|
17,068
|
2,584
|
19,652
|
|
15,739
|
3,380
|
19,119
|
# of service and
collision repair orders completed 1
|
186,384
|
32,139
|
218,523
|
|
203,312
|
37,791
|
241,103
|
# of dealerships at
period end
|
50
|
14
|
64
|
|
54
|
14
|
68
|
# of service bays at
period end
|
886
|
200
|
1,086
|
|
906
|
200
|
1,106
|
See the Company's
Management's Discussion and Analysis for the quarter ended
September 30, 2019 for complete footnote disclosures
|
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
September 30, 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: Adjusted EBITDA; Free Cash Flow; Average
Capital Employed; Return on Capital Employed; and Net
Indebtedness.
Conference Call
A conference call to discuss the
results for the three months ended September 30, 2019 will be
held on November 8, 2019 at 9:00am Mountain (11:00am 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/Q32019
About AutoCanada
AutoCanada is a leading North
American multi-location automobile dealership group currently
operating 64 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 this press release 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" and similar expressions) are not
historical facts and are forward‑looking. Forward-looking
statements 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, actual results or
outcomes may 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 press
release. The Company's Annual Information Form and other
documents filed with securities regulatory authorities (accessible
through the SEDAR website at 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.