CALGARY, Alta. — Cervus Equipment Corp. (“Cervus” or the “Company”) (TSX: CVL) today announced its financial results and operational highlights for the quarter ended Sept. 30, 2016.
‘‘I am very pleased with the results of the quarter, which generated record third quarter net income for the Company. All divisions showed improvement and our expense management and inventory reduction initiatives have good traction. The agriculture sector led the way, supported by this year’s bumper crops. Supporting our customers as they work through very difficult harvest conditions was reflected in strong demand for equipment and service,’’ said Graham Drake, president and CEO of Cervus.
Highlights for the Quarter
- The Company generated $10.5 million of net income for the third quarter of 2016 compared, to $3.9 million for the comparable period in 2015.
- Income from operating activities1 was $16.1 million, an increase of $5.6 million from the third quarter in 2015.
- Adjusted income for the third quarter of 2016 was $10.5 million with adjusted basic earnings per share1 of $0.66. For the comparable period in 2015, the Company generated adjusted income of $6.6 million and adjusted basic earnings per share of $0.43.
- Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) was $22.0 million compared to $14.9 million in 2015, an increase of $7.1 million.
- Cost reduction initiatives resulted in a $2.8 million reduction in selling, general, and administrative (“SG&A”) expenses quarter over quarter, decreasing SG&A as a percentage of revenue to 12.7% in the third quarter of 2016 from 13.5% in 2015.
- The Company achieved inventory reductions totaling $62.7 million (18.6%) compared to Sept. 30, 2015.
- Dividends of $0.07 per share were declared to shareholders of record as at Sept. 30, 2016.
Income before tax for the three months ended Sept. 30, 2016 increased $6.7 million, comprised of increases in all three operating segments compared to the same period in 2015. EBITDA increased $7.1 million: a $4.1 million increase in our Agricultural segment, a $2.4 million increase in our Transportation segment, and a $0.6 million EBITDA increase within the Commercial and Industrial (“C&I”) segment.
Agriculture income before tax increased $3.7 million for the 3month period ended Sept. 30, 2016 to $12.6 million, and EBITDA increased $4.1 million compared to the third quarter of 2015. The change in both EBITDA and income before tax was primarily due to improved gross profit margins, stable revenue, and a $0.7 million increase in income from equity investments.
Total Transportation income before tax increased $2.2 million and EBITDA increased $2.4 million compared to the three month period ended September 30, 2015. These results were generated by improvements in both Saskatchewan and Ontario geographies. Increased new truck sales in our Saskatchewan dealerships, combined with increased gross profit in Ontario’s parts and service generated an incremental $0.6 million of gross profit. Further, cost reductions resulted in $0.8 million of SG&A savings quarter over quarter.
Commercial and Industrial (C&I) segment income before tax improved $0.8 million for the three-month period ended September 30, 2016 to income of $0.4 million, compared to a loss of $0.4 million in the prior period. EBITDA also increased by $0.6 million in the third quarter of 2016 compared to the same period in 2015. The positive changes in both EBITDA and loss before tax were primarily due to SG&A expense reductions of $2.0 million (or 26%) which offset the $1.1 million decrease in gross profit.