Summary of Financial Results
- Product support revenues increased by 6.0% to $45.6 million.
- Total revenues decreased by 15.3% to$230.8 million.
- Gross profit increased by 1.0% to $39.1 million (16.9% of sales).
- Diluted earnings per share increased by 3.2% to $0.32.
- EBITDA increased by 5.2% to $10.8 million.
- Inventory increased by $13.3 million to$535.6 million.
During the third quarter, Rocky experienced improvement in both gross profit and net earnings over the prior year. While softening market demand for agriculture whole goods led to a decrease in equipment sales, product support sales increased as farmers invested in the maintenance of their existing fleets.
Commenting on the quarter, Rocky's CEO Matt Campbell stated, "As expected, agriculture equipment demand continued to cycle to lower levels. However, as farm equipment is put to use every year, the softening of equipment purchases were offset by farmers making necessary product support investments in their existing fleets. Rocky has always placed great emphasis on improving and promoting its product support business, and we believe we are beginning to see the results of those efforts. We improved net income results on a relatively stable base of total service work. This was achieved through the combination of improved operational process, a shift to a higher proportion of customer work, and more focused marketing efforts. While improvements in our product support activities do not fully offset declines in equipment revenues, their increased profitability will act as a stabilizing influence on our gross margins, as evidenced by the increase in gross profit and net income for the quarter.
"We have always focused on operating our business in a conservative and prudent manner. That focus has enabled us to maintain our cost structure and generate improved earnings and EBITDA despite the decline in top-line revenue.
"We continue to closely monitor our equipment inventory profile and levels and remain committed to maintaining adequate inventories to service our customers while mitigating our business risk. During the quarter, we were able to reduce our used equipment inventory by $37.2 million, however this reduction was offset by the early arrival of pre-sell and other units, as well as our strategic investment in certain product lines and equipment categories."
Rocky is also pleased to announce that Tracey Zehl has been appointed to its Board of Directors.
Commenting on the appointment, Matt Campbell, CEO of Rocky, stated, "Tracey has a wealth of related industry experience and financial expertise. Having been a key advisor to Rocky throughout our history and a prominent business leader here in Calgary, I am confident that Tracey's experience and leadership will be a strong asset to our Board and our shareholders.
Ms. Zehl is a CA and CPA (IL, USA). She is an independent consultant having previously served as a partner at Deloitte & Touche LLP from 2007 until 2014. Ms. Zehl is also the President of the Board of Ronald McDonald House Southern Albertawhere she served previously as the Audit Committee Chair.
With this appointment, Rocky's Board of Directors now consists of eight directors, including six independent directors. In addition to her appointment as a Director of Rocky, Ms. Zehl was also appointed a member of Rocky's Audit Committee, as well as its Compensation, Governance and Nominating Committee.
Quarterly Cash Dividend
On November 11, 2014, the Board of Directors of Rocky approved a quarterly dividend of $0.115 per common share on its outstanding common shares. The common share dividend is payable on December 31, 2014, to shareholders of record at the close of business on November 28, 2014.
This dividend is designated by Rocky to be an "eligible dividend" for the purposes of the Income Tax Act (Canada) and any similar provincial or territorial legislation. An enhanced dividend tax credit applies to "eligible dividends" paid to Canadian residents. Please consult with your own tax advisor for advice with respect to the income tax consequences to you from Rocky designating its dividends as "eligible dividends."