CALGARY, Alberta — Cervus Equipment Corp. yesterday announced its financial results and operational highlights for the quarter ended June 30, 2016.
“This quarter, Cervus realized the benefits of cost reductions initiated in 2015, as reduced expenses mitigated the impact of the challenging markets on our Western Canadian Commercial and Industrial and Saskatchewan transportation operations. Further, we remain disciplined in our inventory management, achieving a $52.3 million reduction in inventory year over year,” said Graham Drake, president and CEO of Cervus. “In Ontario, improved efficiencies in our parts and service departments continue to drive performance, while favorable crop conditions and record 2015 net cash farm income suggest a positive outlook for our agriculture segment leading into the second half of the growing season.”
Cervus Equipment is one of John Deere’s largest North American dealership groups.
Highlights for the Quarter
• The Company generated $2.5 million of net income for the second quarter of 2016 compared to a net loss of $32.2 million for the comparable period in 2015.
• Adjusted income for the second quarter of 2016 was $2.3 million with adjusted basic earnings per share of $0.15. For the comparable period in 2015, the company generated adjusted income of $2.9 million and adjusted basic earnings per share of $0.19.
• Earnings before interest, taxes, depreciation, and amortization (“EBITDA”)1 was $11 million compared to $12.3 million in 2015, a decrease of $1.3 million, primarily due to lower EBITDA realized within the commercial and industrial (“C&I”) segment.
• Cost reduction initiatives resulted in a $5.8 million reduction in selling, general, and administrative (SG&A) expenses quarter-over-quarter, decreasing SG&A as a percentage of revenue to 14.2% in the second quarter of 2016 from 15.7% in 2015.
• Income from operating activities increased $0.5 million within the transportation segment, primarily as a result of a $0.4 million increase in Ontario.
• Overall income from operating activities was $6.6 million, a decrease of $1 million from the second quarter in 2015.
• The company achieved inventory reductions of $52.3 million (14%) compared to June 30, 2015, primarily due to a 42% reduction in commercial and industrial inventories despite lower equipment demand in this segment.
• Dividends of $0.07 per share were declared to shareholders of record as at June 30, 2016.
Total EBITDA decreased $1.3 million in the three months ended June 30, 2016, comprised of a $0.8 million increase in EBITDA from the transportation segment, while continued economic pressures reduced EBITDA by $1.6 million in the C&I segment. EBITDA in the agriculture segment decreased by $0.5 million, primarily due to a $0.3 million decrease in income from equity investments.
Total agriculture income from operating activities for the 3 month period ended June 30, 2016 decreased slightly by $0.1 million compared to the second quarter of 2015. Revenues increased slightly with a significant shift in equipment demand from new to used, while targeted expense control achieved a $3.2 million reduction in SG&A compared to the second quarter of 2015.
Total transportation income from operating activities increased $0.5 million in the second quarter, primarily due to improved efficiencies in Ontario’s parts and service departments. The Saskatchewan dealerships’ income from operating activities improved slightly as SG&A cost reductions more than offset a decrease in gross profit.
Total C&I segment income from operating activities decreased $1.4 million, as overall industry activity remains muted due to the impact of resource prices within the broader Western Canadian economy. Expense reductions generated a 30% decrease in SG&A compared to the second quarter of 2015, partly offsetting the 45% decrease in gross profit.