EDMONTON, March 12, 2020 /PRNewswire/ - 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 and year ended December 31, 2019. All figures are in Canadian dollars, unless otherwise stated.

AutoCanada Inc. (CNW Group/AutoCanada Inc.)

"We've ended the year with a third consecutive strong quarter and a year marked by key wins and accomplishments", said Paul Antony, Executive Chairman. "We've proven out the Go Forward Plan in Canada and that we can build out a complete, stable and growth oriented business model for any economic environment. We've stabilized operations in the US and are moving towards positive contributions in 2020. We've fixed our balance sheet with our recent refinancing of the credit facility and the senior unsecured debentures, substantively improving upon our credit profile and financial flexibility. We enter 2020 on solid footing, with a proven business model, able to weather the current uncertainties associated with the COVID-19".

Consolidated AutoCanada 2019 Fourth Quarter Highlights 1

DEBT REFINANCING COMPLETED ON THE HEELS OF A THIRD CONSECUTIVE STRONG QUARTER

The Company performed well in the fourth quarter, building on the momentum from our strong second and third quarters.

  • Revenue was $809.1 million, an increase of $26.3 million or 3.4%

  • Total vehicles sold were 16,593, an increase of 317 units or 1.9%

  • Net income (loss) for the period was $(16.8) million (or $(0.61) per diluted share) versus $(36.0) million (or $(1.30) per diluted share). In the period, impairment charges of $(24.0) million were incurred as compared to impairment charges of $(23.8) 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 $(2.5) million

  • Total impairment charge of $(24.0) million is comprised of $18.2 million impairment of the U.S operating segment as management has taken a conservative view on the outlook of the U.S. platform, and a small recovery of $0.2 million related to the Canadian operating segment. There was an additional $6.0 million impairment charge to the redundant non-core asset portfolio

  • Adjusted EBITDA increased 236.1% to $21.1 million, an increase of $14.8 million; of the $14.8 million increase, $10.1 million was attributed to the impact of IFRS 16. Adjusting for the impact of IFRS 16, Adjusted EBITDA was $10.9 million, an increase of 74.3% over the prior year

  • Continued focus on working capital initiatives and continued improvements in operational performance allowed the Company to reduce its net indebtedness by $44.5 million in the quarter

Canadian Operations Highlights

SAME STORE UNIT GROWTH OF 10.5% DRIVES 31% NORMALIZED ADJUSTED EBITDA GROWTH

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, the impact of our F&I initiative and our focus on improving used retail vehicle sales. Same store new retail unit sales growth was 1.3% as compared to the market decrease of (1.2)%, 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.  Our F&I initiative helped increase gross profit per retail unit average to $2,475, an increase of 14.6%. In line with our initiative to sell more used vehicles through retail sales rather than wholesaling, our used to new retail units ratio increased to 0.84 in the quarter, from 0.69 .

  • Revenue was $698.3 million, up 6.9%

  • Total retail vehicles sold were 13,211, an increase of 1,024 units or 8.4%

    • Same store new and used retail unit sales increased 10.5% to 12,243
  • Used to new retail units ratio increased to 0.84 from 0.69, an increase of 20.6%

  • Net (loss) income for the period was $6.0 million, up 213.5% from a net loss of $(5.3) million in 2018. 2019 results included impairment charges of $5.8 million versus $0.4 million in 2018. The adoption of IFRS 16 resulted in additional total expenses, which negatively affected the Canadian Operations segment net income (loss) by $1.3 million

  • Adjusted EBITDA increased 93.3% to $22.1 million, an increase of $10.7 million; IFRS 16 resulted in an increase to Adjusted EBITDA of $9.2 million. Adjusting for the impact of IFRS 16 in 2019, Adjusted EBITDA was $12.9 million, an increase of 12.5% over the prior year

  • Sale and leaseback transactions executed from the beginning of 2019 to the end of Q3 2019 resulted in an increase of $2.1 million lease costs in the quarter in comparison to prior year. Normalizing prior year results for these sale-leaseback costs, Adjusted EBITDA reflected an increase of 31% over the prior year.

U.S. Operations Highlights

CONTINUED PROGRESS - BETTER THAN BREAK-EVEN RESULTS

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 being $(1.1) million, as compared to $(5.2) million in the prior year. The net assets and liabilities of four dealerships have been reclassified out of held for sale as at December 31, 2019.

  • Revenue was $110.8 million, a decrease of (14.6)%

  • Retail unit sales decreased to 2,542, down 430 units or (14.5)%

  • Net (loss) income for the period was $(22.8) million versus $(30.8) million in 2018. 2019 results included impairment charges of $18.2 million versus $23.4 million in 2018. IFRS 16 adjustments resulted in additional total expenses for the U.S. segmented operations for the period, which negatively affected the U.S. Operations segment net income (loss) by $0.7 million

  • Adjusted EBITDA was $(1.1) million, an increase of $4.1 million from 2018; IFRS 16 resulted in an increase to Adjusted EBITDA of $0.9 million. Adjusting for the impact of IFRS 16 in 2019, Adjusted EBITDA was $(2.0) million as compared to $(5.2) million in the prior year

  • Results for the quarter include the impact of $3.7 million in write-downs primarily associated with receivables and inventory in our U.S. segment. Adjusting for the impact of IFRS 16 in 2019, normalized Adjusted EBITDA would have been $1.8 million as compared to $(5.2) million in the prior year.

Same Store Metrics

SAME STORE USED RETAIL UNIT SALES GROWTH OF  23.6%

Total same store new and used retail unit sales for Canadian Operations increased 10.5% to 12,243, with new retail units showing an increase of 1.3% and used retail units up 23.6%. The increase of new retail units by 1.3% compares with a market decrease of (1.2)% 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 $647.9 million, an increase of 8.7%

  • Gross profit increased by $12.1 million or 11.8%

  • Used to new retail units ratio increased to 0.86 from 0.70

  • Finance and insurance gross profit per retail unit average increased to $2,512, up 15.8% or $343 per unit; Gross profit increased to $30.7 million as compared to $24.0 million in the prior year

  • Parts, service and collision repair gross profit increased to $49.3 million, an increase of 4.3%

Financing and Investing Activities and Other Recent Developments

 NET INDEBTEDNESS REDUCED TO $157.9 MILLION

In continuation of the Company's optimization of the balance sheet and operations, the following transactions occurred in the three-month period ended December 31, 2019:

  • A Canadian redundant property was sold for $2.7 million in proceeds, which resulted in a net loss of $(0.2) million

  • Ceased operations of two under-performing U.S. franchises, on November 11, 2019.

Subsequent to December 31, 2019, the Company completed the following financing transactions on February 11, 2020. The transactions improved the overall credit profile of the Company, increasing the average tenor as of December 31, 2019 of long-term debt from approximately 16 months to approximately 4 years:

  • Entered into an amended and restated $950 million syndicated credit facility (the "New Credit Facility"), with a maturity date of February 11, 2023

  • Closed $125 million of 8.75% senior unsecured notes due February 11, 2025

  • S&P Global Ratings ("S&P") revised the Company's outlook to stable, affirmed its 'B' issuer credit rating and assigned a 'B-' rating to the Company's $125 million senior unsecured notes

Dividends

On February 21, 2020, the Board of Directors of the Company declared a quarterly eligible dividend of $0.10 per common share on the Company's outstanding Class A common shares, payable on March 16, 2020 to shareholders of record at the close of business on March 2, 2020.

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".

Subsequent Events

Senior Unsecured Notes

The Company issued $125 million 8.75% Senior Unsecured Notes (the "New Notes") on February 11, 2020 to fund the Tender Offer for all the outstanding $150 million Notes. Through the Tender Offer, the Company redeemed $124 million of the outstanding $150 million Notes on February 13, 2020. Subsequent to the settlement of the Tender Offer, the Company issued a call notice for the remaining $26 million outstanding Notes with an expected settlement date of March 13, 2020 at which point the Company will extinguish the outstanding Notes using proceeds from the New Credit Facility. The New Notes hold a term of five-years and mature February 11, 2025.

The New Notes were issued at a discounted issue price of $990.11 per $1,000 principal amount of notes (99.011%) for an issue yield of 9.00%. Interest is payable semi-annually on February 11 and August 11 of each year the Notes are outstanding. The initial interest payment date for the New Notes will be August 11, 2020.

Amended and Restated Credit Facilities

On February 11, 2020, the Company entered into an amended and restated $950 million syndicated credit agreement ("New Credit Facility") with Scotiabank, CIBC, RBC, HSBC, ATB and the Bank of Montreal ("BMO"). The New Credit Facility has specified-use tranches and provides the Company with revolving credit capacity for operational and growth purposes as well as floorplan financing to assist with the purchasing of inventory. The maturity of the New Credit Facility is February 11, 2023.

The following table summarizes the Company's results for the quarter and year ended December 31, 2019:







Three Months Ended December 31


Year Ended December 31

Consolidated Operational Data

2019

2018


% Change


2019

2018

% Change

Revenue

809,103

782,790

3.4%


3,476,111

3,150,781

10.3

%

Gross profit

139,676

128,204

8.9%


570,495

507,963

12.3

%

Gross profit %

17.3%

16.4%

0.9%


16.4%

16.1%

0.3

%

Operating expenses

125,140

125,039

0.1%


499,768

474,804

5.3

%

Operating (loss) profit

(6,597)

(6,569)

(0.4)%


42,474

(38,642)

(209.9)

%

Net (loss) for the period

(16,786)

(36,013)

53.4%


(27,073)

(85,442)

(68.3)

%

Basic net (loss) per share attributable to
AutoCanada shareholders

(0.63)

(1.30)

51.5%


(1.03)

(3.14)

(67.2)

%

Adjusted EBITDA 1, 2

21,065

6,268

236.1%


97,203

50,673

91.8

%

















New retail vehicles sold (units)

8,796

9,214

(4.5)%


37,687

36,495

3.3

%

New fleet vehicles sold (units)

840

1,117

(24.8)%


5,547

6,956

(20.3)

%

Total new vehicles sold (units)

9,636

10,331

(6.7)%


43,234

43,451

(0.5)

%

Used retail vehicles sold (units)

6,957

5,945

17.0%


28,107

23,159

21.4

%

Total vehicles sold

16,593

16,276

1.9%


71,341

66,610

7.1

%

Same store new retail vehicles sold (units)

6,592

6,505

1.3%


28,678

28,171

1.8

%

Same store new fleet vehicles sold (units)

792

954

(17.0)%


5,098

6,134

(16.9)

%

Same store used retail vehicles sold (units)

5,651

4,571

23.6%


22,752

18,577

22.5

%

Same store total vehicles sold

13,035

12,030

8.4%


56,528

52,882

6.9

%

Same store revenue

647,885

595,984

8.7%


2,798,855

2,582,351

8.4

%

Same store gross profit

114,334

102,268

11.8%


471,726

430,724

9.5

%

Same store gross profit %

17.6%

17.2%

0.4%


16.9%

16.7%

0.2

%


See the Company's Management's Discussion and Analysis for the quarter and year ended December 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.











Q4
2019

Q3
2019

Q2
2019

Q1
2019

Q4
2018

Q3
2018

Q2
2018

Q1
2018

Income Statement Data









New vehicles

430,102

555,843

554,686

398,983

432,756

509,281

522,150

338,016

Used vehicles

217,063

262,297

223,258

188,619

192,988

206,668

198,597

157,901

Parts, service and collision repair

120,564

116,439

125,822

116,902

121,304

113,087

121,476

95,893

Finance, insurance and other

41,374

47,291

42,001

34,867

35,742

37,882

38,365

28,675

Revenue

809,103

981,870

945,767

739,371

782,790

866,918

880,588

620,485

New vehicles

29,570

36,755

36,645

27,527

25,861

29,150

30,648

23,473

Used vehicles

12,676

11,731

13,936

11,112

8,637

12,955

13,173

8,562

Parts, service and collision repair

58,763

59,641

64,518

55,744

60,380

57,206

60,868

45,533

Finance, insurance and other

38,667

42,627

38,267

32,316

33,326

35,524

35,891

26,776

Gross Profit

139,676

150,754

153,366

126,699

128,204

134,835

140,580

104,344

Gross profit %

17.3%

15.4%

16.2%

17.1%

16.4%

15.6%

16.0%

16.8%

Operating expenses 5, 8

125,140

124,772

128,190

121,666

125,039

126,492

127,492

95,781

Operating expenses as a % of gross profit 5, 9

89.6%

82.8%

83.6%

96.0%

97.5%

93.8%

90.7%

91.8%

Operating (loss) profit 5, 8

(6,597)

16,695

18,905

13,471

(6,569)

(5,260)

(42,719)

15,906

Impairment (recovery) of non-financial assets 5

24,001

12,574

23,828

19,569

58,097

Net (loss) income 5, 8

(16,786)

(4,104)

(3,512)

(2,671)

(36,013)

(15,007)

(39,426)

5,004

Basic net (loss) income per share attributable to AutoCanada shareholders 5

(0.63)

(0.15)

(0.15)

(0.10)

(1.30)

(0.56)

(1.47)

0.18

Diluted net (loss) income per share attributable to AutoCanada shareholders 5

(0.63)

(0.15)

(0.15)

(0.10)

(1.30)

(0.56)

(1.47)

0.18

Dividends declared per share

0.10

0.10

0.10

0.10

0.10

0.10

0.10

0.10

Adjusted EBITDA  2, 5, 6, 7, 8

21,065

32,489

32,100

11,549

6,268

16,185

16,814

11,406

Free cash flow 2, 5, 6, 9

65,825

53,527

(20,719)

155

(4,879)

6,105

(14,639)

(13,834)










Operating Data









New retail vehicles sold 3

8,796

10,419

10,310

8,162

9,214

10,353

10,264

6,664

New fleet vehicles sold 3

840

1,849

1,794

1,064

1,117

2,121

2,242

1,476

Total new vehicles sold 3

9,636

12,268

12,104

9,226

10,331

12,474

12,506

8,140

Used retail vehicles sold 3

6,957

7,384

7,249

6,517

5,945

6,645

6,042

4,527

Total vehicles sold 3

16,593

19,652

19,353

15,743

16,276

19,119

18,548

12,667

# of service and collision repair orders completed 3

225,595

218,523

242,134

213,672

245,682

241,103

248,167

180,429

# of dealerships at year end

63

64

65

66

68

68

68

54

# of same store dealerships 1

47

47

47

47

47

49

49

49

# of service bays at year end

1,047

1,086

1,097

1,113

1,157

1,106

1,106

906

Same stores revenue growth 1

8.7%

20.4%

4.7%

(1.6)%

(3.0)%

(3.0)%

(5.1)%

4.6%

Same stores gross profit growth 1

11.8%

13.9%

6.8%

1.9%

(3.0)%

(8.5)%

(4.3)%

1.0%

















See the Company's Management's Discussion and Analysis for the quarter ended December 31, 2019 for complete footnote disclosures

 

The following tables summarize the results for the quarter and year ended December 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 December 31


Year Ended December 31


2019

2018

% Change


2019

2018

% Change

Revenue source








New vehicles - Retail

305,882

276,374

10.7%


1,323,372

1,204,648

9.9%

New vehicles - Fleet

31,848

45,814

(30.5)%


205,409

260,457

(21.1)%

Total new vehicles

337,730

322,188

4.8%


1,528,781

1,465,105

4.3%

Used vehicles - Retail

140,980

116,082

21.4%


569,120

470,197

21.0%

Used vehicles - Wholesale

37,896

34,694

9.2%


178,255

154,829

15.1%

Total used vehicles

178,876

150,776

18.6%


747,375

625,026

19.6%

Parts, service and collision repair

97,953

97,385

0.6%


385,578

375,762

2.6%

Finance, insurance and other

33,326

25,635

30.0%


137,121

116,458

17.7%

Total

647,885

595,984

8.7%


2,798,855

2,582,351

8.4%

New retail vehicles sold (units)

6,592

6,505

1.3%


28,678

28,171

1.8%

New fleet vehicles sold (units)

792

954

(17.0)%


5,098

6,134

(16.9)%

Total new vehicles sold (units)

7,384

7,459

(1.0)%


33,776

34,305

(1.5)%

Used retail vehicles sold (units)

5,651

4,571

23.6%


22,752

18,577

22.5%

Total vehicles sold (units)

13,035

12,030

8.4%


56,528

52,882

6.9%

Total vehicles retailed (units)

12,243

11,076

10.5%


51,430

46,748

10.0%


 

Same Store Gross Profit and Profit Percentage




Three Months Ended December 31


Gross Profit


Gross Profit %


2019

2018

% Change


2019

2018

Revenue source







New vehicles - retail

21,926

22,020

(0.4)%


7.2%

8.0%

New vehicles - fleet

961

990

(2.9)%


3.0%

2.2%

Total new vehicles

22,887

23,010

(0.5)%


6.8%

7.1%

Used vehicles - retail

11,497

7,413

55.1%


8.2%

6.4%

Used vehicles - wholesale

(124)

560

(122.2)%


(0.3)%

1.6%

Total used vehicles

11,373

7,973

42.6%


6.4%

5.3%

Parts, service and collision repair

49,324

47,268

4.3%


50.4%

48.5%

Finance, insurance and other

30,750

24,017

28.0%


92.3%

93.7%

Total

114,334

102,268

11.8%


17.6%

17.2%


 

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 December 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: Adjusted EBITDA; Free Cash Flow; Average Capital Employed; Return on Capital Employed; Net Indebtedness and Lease Adjusted Leverage Ratio.

Conference Call

A conference call to discuss the results for the quarter and year ended December 31, 2019 will be held on March 13, 2020 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/Q42019/.

About AutoCanada

AutoCanada, a leading North American multi-location automobile dealership group currently operating 63 franchised dealerships, comprised of 26 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, BMW, MINI, Volvo, Toyota, Lincoln, and Honda branded vehicles. In 2019, our dealerships sold approximately 71,000 vehicles and processed approximately 900,000 service and collision repair orders in our 1,047 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", including "with respect to", "among other things", "future performance", "expense reductions" and the "Go Forward Plan"), 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 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.

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SOURCE AutoCanada Inc.

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