Rocky Mountain Dealerships Inc. recently reported its financial results for the quarter ended June 30, 2016.
Financial Summary of 2Q16
- Total revenues increased by $19.1 million or 9%.
- Gross profit increased by $1.2 million or 3.7% (14.7% of sales, down from 15.4%).
- Inventory decreased by $14.5 million or 2.9% and $46.1 million or 8.5% over Q1 2016 and Q2 2015, respectively.
- Agriculture segment product support revenues reported an eleventh consecutive quarter of growth as compared to the same quarter in the prior year.
- Operating SG&A declined by $2.5 million or 10.2% (9.6% of sales, down from 11.7%).
- Adjusted Diluted Earnings per Share increased by $0.12 or 133.3% to $0.21.
- Adjusted EBITDA increased by $3.8 million or 79.3%.
- Amalgamation of industrial distribution facilities located in Calgary and Red Deer, Alberta into existing agriculture facilities located in those areas, incurring one-time costs of $2.2 million.
"Continued execution of our strategy resulted in a strong second quarter, with some significant year-over-year improvements in a number of our key financial metrics," remarked Garrett Ganden, president & chief executive officer of Rocky. "Our continuing focus on product support, combined with sales initiatives for new equipment, produced positive revenue and gross profit growth for the period. Product support sales in our agriculture segment have now experienced 11 consecutive quarters of growth, as compared to the prior year period. While sales mix and currency pressures resulted in lower gross margin for the quarter, our continued focus on cost containment allowed us to deliver significant bottom-line improvements over last year. Our operational performance also resulted in a strengthening of our balance sheet, as we were able to further reduce our inventory and related floor-plan payables in the quarter.
"The weather cooperated with farmers across much of our sales territory this quarter. Precipitation levels have returned to normal, or above-average, levels, and general crop conditions appear to be good. While commodity prices have softened somewhat in response to increased global supply, the prices for key Western Canadian crops remain healthy. Sentiment in the agriculture industry is very positive at present. With farmer balance sheets maintaining their record strength, the challenge before us is to continue presenting a compelling value proposition to our customers in all times and seasons. In this regard, I believe we have made significant inroads and are continuing on the right path.
"In May 2016, we announced significant changes to our industrial equipment distribution strategy. Since then, we have successfully amalgamated our Calgary store into our existing stores in High River, and Balzac, Alberta. We have also amalgamated our two Red Deer, Alberta stores. Our strategy with respect to this restructuring continues to proceed on time and on budget. Our territory coverage for our industrial product distribution remains unchanged. Furthermore, we believe that the visibility of our industrial offerings will increase as a result of this restructuring, as these products will now be in front of more potential customers in the agriculture sector. Having addressed the fixed-cost structure associated with this line of business, we are optimistic that our industrial sales will contribute positively to our bottom line in the coming quarters."
Quarterly Cash Dividend
On August 9, 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 September 30, 2016, to shareholders of record at the close of business on August 31, 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." Investors are cautioned that quarterly dividends remain subject to approval by Rocky's Board, and that the Board may, at any time, increase, decrease or suspend payment of the dividend.