CALGARY, Alberta--(BUSINESS WIRE)--Mar 13, 2019--Rocky Mountain Dealerships Inc. (TSX:RME, and hereinafter " RME "), Canada's largest agriculture equipment dealer, today reported its financial results for the three and twelve months ended December 31, 2018. Unless otherwise stated, all amounts are expressed in Canadian dollars.

Garrett Ganden, President and Chief Executive Officer of RME, commented on the year's results by stating, “The execution of our strategic plan helped RME deliver a strong 2018. In addition to record revenue and used equipment sales, we added two stores in the heartland of Saskatchewan, as well as another location in Alberta. We were able to return more capital to our shareholders by increasing our dividend by 6.5%. Since 2012, RME's dividend has risen from $0.18 to $0.49 annually, an increase of more than 170%. In 2018 we implemented a Normal Course Issuer Bid that has, at present, resulted in our purchasing and cancelling 400,000 shares. We were also able to open our used equipment outlet in Kansas early in 2019, and have been encouraged with the initial activity within that store so far."

"Canadian agriculture continues to be a steady business, with a stable base of customers that continue the demand for our products and services. With our strong sales culture, excellent cost structure and solid balance sheet, RME is ready to seize the opportunities that 2019 will bring."

SUMMARY OF THE YEAR ENDED DECEMBER 31, 2018

  • Increased the annual dividend by 6.5% to $0.49 per common share representing a current yield of approximately 5.6%;
  • Reported record sales of $1.05 billion, a 9.6% increase year-over-year, reflecting growth in both same store and acquired sales;
  • Executed strategic acquisitions in the year, increasing our footprint in Saskatchewan and further solidifying our position in Alberta;
  • Commenced a Normal Course Issuer Bid (“NCIB”) in the fourth quarter to repurchase up to 1.6 million shares. As at December 31, 2018 RME had repurchased and cancelled 0.4 million shares, representing approximately 2% of the total shares outstanding;
  • Maintained a solid balance sheet position – with net debt of $26.6 million and net debt to Adjusted EBITDA ratio of 0.77x.

CALGARY, Alberta--(BUSINESS WIRE)--Mar 13, 2019--SELECTED FINANCIAL INFORMATION

   Quarter ended December 31,   Year ended December 31,
$ thousands   2018   2017   Change   % Change   2018   2017   Change   % Change
                     
Sales295,421273,69921,7227.91,051,088959,34191,7479.6
Cost of sales   255,257   235,378   19,879   8.4   909,626   819,917   89,709   10.9
Gross profit   40,164   38,321   1,843   4.8   141,462   139,424   2,038   1.5
Gross profit as a % of sales13.6%14.0%(0.4%)13.5%14.5%(1.0%)
 
Selling, general and administrative26,59527,251(656)(2.4)100,12999,7543750.4
Loss (gain) on derivative financial instruments821(3,131)3,952(126.2)3,587(4,578)8,165(178.4)
Loss on vacant land   -   -   -   -   -   641   (641)   (100.0)
Earnings before finance costs and income taxes12,74814,201(1,453)(10.2)37,74643,607(5,861)(13.4)
Finance costs   3,559   2,799   760   27.2   13,093   11,921   1,172   9.8
Earnings before income taxes9,18911,402(2,213)(19.4)24,65331,686(7,033)(22.2)
Income taxes   2,557   3,134   (577)   (18.4)   6,771   8,777   (2,006)   (22.9)
Net earnings   6,632   8,268   (1,636)   (19.8)   17,882   22,909   (5,027)   (21.9)
 
Net earnings as a % of sales2.2%3.0%(0.8%)1.7%2.4%(0.7%)
 
Earnings per share
Basic0.340.42(0.08)(19.0)0.901.18(0.28)(23.7)
Diluted0.340.42(0.08)(19.0)0.901.18(0.28)(23.7)
Dividends per share0.12250.11500.00756.50.47500.46000.01503.3
Book value / share – Dec 3110.4610.050.414.1
 
Non-IFRS Measures(1)
Adjusted Diluted Earnings per Share0.330.40(0.07)(17.5)0.951.16(0.21)(18.1)
Adjusted EBITDA11,28512,886(1,601)(12.4)34,81640,176(5,360)(13.3)
Operating SG&A25,72923,0422,68711.795,15989,0976,0626.8
Operating SG&A as a % of sales8.7%8.4%0.3%9.1%9.3%(0.2%)
Operating Cash Flow before Changes in Floor Plan   (34,858)   (36,367)   1,509   (4.1)   (50,509)   (720)   (49,789)   6,915.1

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

GROWTH PLAN UPDATE

On May 30, 2018, RME launched its growth plan that aims to grow revenues to at least $1.5 billion in 2023. RME intends to do this through a combination of revenue sources including:

Category   Revenue Objective ($ millions)   Progress-To-Date ($ millions)
Organic Growth   $200   $64
Acquisitions$200$28
Synergies   $100   -
Total   $500   $92

As part of this plan, during fiscal 2023 RME is targeting Adjusted Earnings of $33.8 million, an increase of $11.3 million relative to 2017. In addition, RME is also targeting Adjusted EBITDA of $60.0 million for 2023, a $19.8 million increase relative to 2017.

While encouraging, our growth in revenues has yet to translate into progress against our Adjusted Earnings and Adjusted EBITDA targets.

Competitive market pressures have weighed on margins during the TTM ended December 31, 2018. Meanwhile, costs associated with acquired locations as well as investment in our sales force have contributed to increased operating costs and resulted in reductions in both Adjusted Earnings and Adjusted EBITDA relative to their respective 2017 benchmark values.

RESULTS FOR THE QUARTER ENDED DECEMBER 31, 2018

While early snowfalls in mid-to-late September across the Canadian Prairies delayed harvest, more normal weather for the remainder of the year allowed for essentially all crops to be harvested in most areas. Despite an uncertain start, RME demonstrated strong sales in the face of equipment pricing headwinds.

SALES AND MARGINS

Sales increased 7.9% or $21.7 million to $295.4 million compared with $273.7 million for the same period in 2017 due primarily to $16.0 million of acquired sales for the quarter.

Gross profit increased by 4.8% or $1.8 million to $40.2 million from $38.3 million for the same period in 2017.

COST STRUCTURE

As a percentage of sales, Operating SG&A for the fourth quarter of 2018 increased by 0.3% to 8.7% compared with 8.4% for the same period in 2017. The modest increase is due largely to the fixed nature of the costs associated with the recently acquired stores.

Finance costs for the quarter ended December 31, 2018 increased 27.2% or $0.8 million to $3.6 million compared with $2.8 million during the same period in 2017 due primarily to an increase in the average level of interest-bearing floor plan.

EARNINGS

Adjusted EBITDA for the quarter ended December 31, 2018 decreased by 12.4% or $1.6 million to $11.3 million compared with $12.9 million for the same period in 2017.

Adjusted Diluted Earnings per Share decreased by 17.5% or $0.07 to $0.33 for the fourth quarter of 2018, compared with $0.40 for the same period of 2017.

RESULTS FOR THE YEAR ENDED DECEMBER 31, 2018

RME hit a significant milestone in 2018 reporting record revenues of over $1.05 billion, up 9.6% year-over-year. This increase in revenue reflects growth in both same store and acquired sales and is in line with our growth plan that was announced in May of 2018.

SALES AND MARGINS

Sales increased 9.6% or $91.7 million to $1,051.1 million compared with $959.3 million for the same period in 2017. The increase is largely due to a $65.4 million increase in same store new equipment sales, reflecting both stronger market demand and out-of-season deliveries of harvest equipment.

Gross profit increased by 1.5% or $2.0 million to $141.5 million from $139.4 million for the same period in 2017.

COST STRUCTURE

As a percentage of sales, Operating SG&A for the year ended December 31, 2018 decreased by 0.2% to 9.1% compared with 9.3% for the same period in 2017 due to increased sales.

Finance costs for the year ended December 31, 2018 increased 9.8% or $1.2 million to $13.1 million compared with $11.9 million during the same period in 2017 due primarily to an increase in the average level of interest-bearing floor plan.

EARNINGS

Adjusted EBITDA for the year ended December 31, 2018 decreased by 13.3% or $5.4 million to $34.8 million compared with $40.2 million for the same period in 2017.

Adjusted Diluted Earnings per Share decreased by 18.1% or $0.21 to $0.95 for the year ended December 31, 2018, compared with $1.16 for the same period of 2017.

BALANCE SHEET AND INVENTORY

For the year ended December 31, 2018, inventory turns were 1.73 times, down from 1.81 times for fiscal 2017. Used equipment inventories increased as a result of trades taken on increased new equipment sales as well as business acquisitions. The increase in used equipment inventory also reflects an increase in the average cost per unit.

During the fourth quarter of 2018, RME also repurchased 400 thousand of its outstanding common shares pursuant to a normal course issuer bid ("NCIB").

FINANCIAL STATEMENTS AND MANAGEMENT’S DISCUSSION AND ("MD&A")

The MD&A as well as the audited financial statements and notes to the financial statements for the years ended December 31, 2018 and 2017, are available online at www.rockymtn.com and www.sedar.com.

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 RME’s derivative financial instruments and DSUs, as well as the expense (recovery) associated with its SARs. These items arise primarily from changes in RME’s share price as well as fluctuations in interest rates and are not reflective of RME’s core operations.

RME 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 RME 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, losses recognized on the impairment and subsequent disposition of vacant land and costs associated with the acquisition and integration of complimentary business have been classified as non-recurring charges. The losses on the sale of vacant land are not expected to give rise to a reduction in our tax provision.

  • “Adjusted EBITDA” is derived by eliminating the following items from net earnings: finance costs associated with long-term debt; income taxes; depreciation and amortization; the impact of the losses (gains) arising from derivative financial instruments and DSUs; and the expense (recovery) associated with SARs. Adjusting net earnings for these items allows management to consistently compare periods by removing the impact of fluctuations in tax rates, long-term assets, financing costs related to RME’s capital structure and RME’s share price.

RME also adjusts for any non-recurring charges (recoveries) recognized in Adjusted EBITDA. Management deems non-recurring charges (recoveries) to be unusual or infrequent items that RME 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, losses recognized on the impairment and subsequent disposition of vacant land and costs associated with the acquisition and integration of complimentary business have been classified as non-recurring charges.

  • “Operating SG&A” is calculated by eliminating from SG&A, depreciation and amortization expense as well as the impact of the losses (gains) arising from RME’s DSUs and the expense (recovery) associated with its SARs. These items arise primarily from changes in RME’s share price and are not reflective of RME’s core operations.

RME also adjusts for any non-recurring charges (recoveries) recognized in SG&A. Management deems non-recurring charges (recoveries) to be unusual or infrequent items that RME incurs outside of its common day-to-day operations. For the periods presented, costs associated with the acquisition and integration of complimentary business have been classified as non-recurring charges. The assessment of Operating SG&A facilitates the evaluation of discretionary expenses from ongoing operations. We target a sub-10% Operating SG&A as a percentage of total sales on an annual basis.

  • “Operating Cash Flow before Changes in Floor Plan” 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   Quarter ended   Year ended
December 31,   December 31,
$ thousands   2018   2017   2018   2017
      
Earnings used in the calculation of diluted earnings per share6,6328,26817,88222,909
Loss (gain) on derivative financial instruments821(3,131)3,587(4,578)
(Gain) loss on DSUs(125)162(354)245
SAR (recovery) expense(841)2,231(2,443)2,995
Acquisition and integration costs6-541-
Non-deductible loss on sale of vacant land---641
Tax effect of adjustments (27%)   38   199   (359)   361
Earnings used in the calculation of Adjusted Diluted Earnings per Share6,5317,72918,85422,573
Weighted average diluted shares used in the calculation of diluted earnings per share (in thousands)   19,793   19,515   19,862   19,413
Adjusted Diluted Earnings per Share   0.33   0.40   0.95   1.16
 
ADJUSTED EBITDA   Quarter ended   Year ended
December 31,   December 31,
$ thousands   2018   2017   2018   2017
      
Net earnings6,6328,26817,88222,909
Finance costs associated with long-term debt4094061,6061,770
Depreciation and amortization expense1,8261,8167,2267,417
Income taxes   2,557   3,134   6,771   8,777
EBITDA11,42413,62433,48540,873
Loss (gain) on derivative financial instruments821(3,131)3,587(4,578)
(Gain) loss on DSUs(125)162(354)245
SAR (recovery) expense(841)2,231(2,443)2,995
Acquisition and integration costs6-541-
Loss on sale of vacant land   -   -   -   641
Adjusted EBITDA   11,285   12,886   34,816   40,176
 
OPERATING SG&A   Quarter ended   Year ended
December 31,   December 31,
$ thousands   2018   2017   2018   2017
      
SG&A26,59527,251100,12999,754
Depreciation and amortization expense(1,826)(1,816)(7,226)(7,417)
Gain (loss) on DSUs125(162)354(245)
SAR recovery (expense)841(2,231)2,443(2,995)
Acquisition and integration costs   (6)   -   (541)   
Operating SG&A   25,729   23,042   95,159   89,097
Operating SG&A as a % of sales   8.7%   8.4%   9.1%   9.3%
 
OPERATING CASH FLOWS BEFORE CHANGES IN FLOOR PLAN   Quarter ended   Year ended
December 31,   December 31,
$ thousands   2018   2017   2018   2017
      
Cash flow from operating activities11,2283,42425,5876,955

CALGARY, Alberta--(BUSINESS WIRE)--Mar 13, 2019--Net increase in floor plan payable 1

(46,061)(39,791)(97,838)(7,675)
Floor plan assumed pursuant to business combinations   (25)   -   21,742   
Operating Cash Flow before Changes in Floor Plan   (34,858)   (36,367)   (50,509)   (720)
1 Includes change in floor plan payable classified as liabilities associated with assets held for sale.
 

CONFERENCE CALL

RME will host a conference call and webcast to discuss the quarter at 9:00 a.m. MT (11:00 a.m. ET) today. Please note that the format of the webcast incorporates a visual presentation for investors and analysts. To listen to the live webcast and watch the presentation please use the following link:

Within 24 hours of the event, the webcast will be available for replay at the link above until August 28, 2019.

Those interested in participating in the conference call may do so by calling 1-866-521-4909 (toll free) or (647) 427-2311.

An archived recording of the conference call will be available until March 28, 2019 by dialing 1-800-585-8367 (toll free) or 1-416-621-4642, Conference ID: 9599469. This archived recording will also be available at www.rockymtn.com.

2019 ANNUAL MEETING OF SHAREHOLDERS

RME also announced today that its Annual Meeting of Shareholders (the "Meeting") will take place at 11:00 a.m. on Wednesday, May 1, 2019, in the showroom of Rocky Mountain Equipment, 260180 Writing Creek Crescent, Rocky View County, Alberta. Material related to the AGM will be sent in due course to shareholders of record as at the close of business on March 22, 2019.

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 discussing or implying future payments of RME's dividend; statements discussing or implying future share purchases pursuant to RME's NCIB; statements discussing or implying any future benefit of our Kansas operations; statements discussing future demand for RME's products and services; statements discussing opportunities in 2019; and statements regarding our scheduled earnings conference call and annual meeting of shareholders, 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 RME's control. While this forward-looking information is based on information and assumptions that RME'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 RME in its MD&A for the quarter ended December 31, 2018, and as discussed in RME's Annual Information Form dated March 13, 2019 under the heading "Risk Factors." Except as required by law, RME 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.

In addition to the foregoing, certain measures set forth in this news release may be considered to be future-oriented financial information or a financial outlook within the meaning of applicable securities legislation. Financial outlook and future-oriented financial information contained in this news release are based on assumptions about future events based on management's assessment of the relevant information currently available. In particular, this news release contains RME's projected revenue growth as at 2023, which is based on, among other things, the various assumptions as to RME's increased revenue sources through 2023 as disclosed in this news release; RME's ability to find parties willing to sell their dealership operations at reasonable prices; RME's ability to obtain and/or maintain OEM approval for its acquisitive growth strategy; the products RME sells (and by implication, the products RME's OEMs manufacture) continue to meet the ever-evolving needs of RME's customer base; that demand drivers including, but not limited to, weather, foreign exchange or government regulation will not materially impact customer demand; and that farmer cash receipts and balance sheets remain strong. The future-oriented financial information in financial outlook contained in this news release is included to provide readers with information regarding RME's current expectations and plans regarding its future operations. Readers are cautioned that any such financial outlook and future-oriented financial information contained herein may not be appropriate for other purposes and therefore should not be used for purposes other that those for which it is disclosed herein.

ABOUT ROCKY MOUNTAIN DEALERSHIPS INC. (TSX:RME)

RME is Canada's largest agriculture equipment dealer with branches located throughout Alberta, Saskatchewan, and Manitoba. Through its dealer network, RME sells, rents, and leases new and used agriculture equipment and offers product support and financing to its customers.

Additional information on RME is available at www.rockymtn.com and on SEDAR at www.sedar.com.

CONTACT: Investor and Media Inquiries:

Rocky Mountain Dealerships Inc.

Clayton Paradis, 403-999-7658

KEYWORD: NORTH AMERICA CANADA

INDUSTRY KEYWORD: MANUFACTURING OTHER MANUFACTURING NATURAL RESOURCES AGRICULTURE

SOURCE: Rocky Mountain Dealerships Inc.

Copyright Business Wire 2019.

PUB: 03/13/2019 06:00 AM/DISC: 03/13/2019 06:01 AM

Copyright Business Wire 2019.

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