CALGARY — Rocky Mountain Dealerships Inc. (Rocky) reported its financial results for the quarter and year ended Dec. 31, 2015.
Summary of the Quarter Ended Dec. 31, 2015
- Total revenues decreased by 2.9% to $285.6 million.
- Used equipment sales increased by 16.1% to $92.7 million.
- Gross profit decreased by 4.9% to $37.5 million (13.1% of sales).
- Adjusted Diluted Earnings per Share(1) declined by 21.9% to $0.25.
- Adjusted EBITDA(1) declined 16.6% to $9 million.
- Inventory increased by $10.1 million to $499.8 million.
Summary of the Year Ended Dec. 31, 2015
- Total revenues increased by 1% to $975.5 million.
- Same-store agriculture sales held flat despite softer industry demand.
- Used equipment sales increased by 24.4% to $377.5 million.
- Gross profit decreased by 2.5% to $142 million (14.6% of sales).
- Adjusted Diluted Earnings per Share(1) declined by 26.8% to $0.71.
- Adjusted EBITDA(1) declined 18.9% to $28.6 million.
- Inventory decreased by $69.8 million to $499.8 million(2).
- Expanded sales territory through the acquisition of Chabot.
- Completed the construction of a new facility in Neepawa, Man.
(1) – See further discussion in "Non-IFRS Measures" and "Reconciliation of Non-IFRS Measures to IFRS" sections.
(2) – Excluding $43.6 million of inventory acquired through the Chabot acquisition.
During 2015, Rocky was able to deliver strong gains in several key areas in what was a challenging operating environment. Among other factors, the impact of the U.S. exchange rate on new equipment prices dictated a different approach to equipment purchasing in 2015, bolstering demand for used equipment and product support within Rocky's agriculture segment. Strategic initiatives undertaken by Rocky in response to these changes focused resources and efforts on these areas of demand, resulting in revenue growth and improved cash flow.
The continued demand for lightly-used equipment helped drive down inventory levels by $68.9 million during 2015, excluding inventory acquired through business combinations. On the industrials front, the persistence of the depression in oil prices continued to negatively impact economic activity in Alberta. Cost containment initiatives undertaken by Rocky in 2014 and 2015 helped to curtail losses in that regard during the year.
"Rocky was able to leverage the market conditions that prevailed in 2015 to further our existing initiatives to reduce inventory and build our product support business," remarked Garrett Ganden, president and CEO of Rocky. "As we continue to grow our installed-base of agriculture equipment and customers, we anticipate further demand for our product support business, which posted another strong year in 2015. We were also pleased to see the consistency in our same-store agriculture revenue year-over-year, despite softer overall equipment demand.
"In addition to these operational initiatives, Rocky was able to further grow its footprint in 2015 by acquiring Chabot Implements, a long-standing dealer of Case IH products in Manitoba. This strategic acquisition allowed us to further consolidate our position as a major equipment distributor in the Manitoba region. We were also able to enhance our product and service offering in the area of geomatics and precision farming through our acquisition of NGF Geomatics. As farms get larger and more technologically sophisticated, we feel that Rocky is well positioned to meet their equipment and technology demands.
"The cost containment strategies that we enacted during the year offset much of the incremental SG&A associated with our acquisitions. As part of this process, we undertook initiatives to reduce our fixed charges by amalgamating locations in certain regions. We believe that the steps taken in this regard will allow us to uphold the level of service and territory coverage that our customers expect, at a reduced cost. Due to investments we have made in process and efficiency, we were able to both grow our sales territory and shrink our 'bricks and mortar' footprint, with little interruption to our core business.
"Our industrial segment lost some of the traction that they had gained in 2014, due primarily to the precipitous drop in oil prices and its effect on the Alberta economy. While Rocky's Industrials segment is not reliant on doing business directly with Alberta's oil industry, we still are prone to the indirect effects that this downturn has created. We continue to work on initiatives to further our brand and ultimately achieve profitability despite these challenges."
Ganden concluded his comments by saying, "Our focus continues to be the safe, dependable equipment partner of choice for our agriculture and industrial customers. We continue to lay the groundwork for maintaining and growing customer relationships across our network. To that end, in 2015 we were pleased to open a new, state-of-the-art store in Neepawa, Manitoba, and we are looking forward to the completion of our new, larger store in Yorkton, Sask., in the coming weeks. Through these investments in our facilities and in the communities we operate, we hope to maintain the continued annuity of business that these relationships can create."
Annual Meeting of Shareholders
Rocky also announced today that its Annual Meeting of Shareholders ("AGM") will take place at 2:00 pm on Tuesday, May 3, 2016, in the showroom of Rocky Mountain Equipment, 260180 Writing Creek Crescent, Rocky View County, Alta. Materials related to the upcoming AGM will be sent in mid-April 2016 to shareholders of record at the close of business on March 29, 2016.
Quarterly Cash Dividend
On Feb. 2, 2016, Rocky's Board of Directors approved a quarterly dividend of $0.115 per common share on its outstanding common shares. The common share dividend is payable on March 31, 2016, to shareholders of record at the close of business on Feb. 29, 2016.
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."
Rocky is one of Canada's largest agriculture and industrial equipment dealership networks with branches located throughout Alberta, Saskatchewan and Manitoba. Through its network of Rocky Mountain Equipment locations, Rocky sells, rents and leases new and used agriculture and industrial equipment and offers product support and finance to its customers.