CALGARY, Alta. — Rocky Mountain Dealerships Inc. (“Rocky” or the “Corporation”), Canada’s largest agriculture equipment dealer, today reported its financial results for the quarter ended Sep. 30, 2017. All financial figures are expressed in Canadian dollars.

“Our operations had a very strong quarter and delivered a 19% increase in Adjusted Diluted Earnings Per Share(1) through continued sales growth, operational efficiencies and lower finance costs. These results, the best that Rocky has posted since 2012, were achieved with all divisions contributing to a 7% year-over-year increase in sales which, coupled with our streamlined cost structure, allowed us to deliver a great quarter,” says Garrett Ganden, president and chief executive officer. “Our focus on sales and inventory management continues to allow us to reduce debt, contain costs, increase inventory turnover and, by extension, increase our return on assets.

“At a high level, the forward economic indicators for our sector are strong. There is mounting evidence that the Western Canadian market for agricultural equipment has turned around and is returning to normal levels after being depressed for a number of years.

“While one of our priorities is to return capital to our shareholders via dividends, we have decided to keep our annual dividend at its current level of $0.46 per share at this time. Our success is enabling us to consider a variety of strategic options such as dividend growth, accretive acquisitions or further debt reduction. To that end, we will continue to review our capital allocation strategies to strike the right balance between yield and growth.”

Summary of the Quarter Ended Sept. 30, 2017

Sales and Margins

  • Total sales increased $16.2 million or 7.3% to $238.9 million compared with the same period in 2016 due to growth across all revenue streams.
  • Gross profit for the three months ended Sep. 30, 2017 increased by $2.0 million or 5.3% to $38.8 million compared with the same period in 2016 due to increased sales.

Cost Structure and Earnings

Operating SG&A as a percent of sales declined to 9.2% from 9.6% a year ago due to continued cost containment while growing top-line sales.

In addition, a $0.6 million or 16.1% year-over-year decrease in finance costs this quarter (explained below) contributed to:

  • Adjusted EBITDA(1) that increased by $1.9 million or 15.7% to $14.1 million; and
  • Adjusted Diluted Earnings per Share(1) that increased by $0.07 to $0.44.

Balance Sheet and Inventory

Through targeted sales efforts and disciplined inventory practices, inventory turnover has improved, boosting the return on assets deployed.

Compared with the same period last year:

  • Inventory turnover increased 16% to 1.86 in the third quarter of 2017 compared with 1.60;
  • Total inventory decreased by $30.3 million or 6.8% to $415.4 million compared with $445.6 million; and
  • Floor plan payables decreased by $33.8 million or 11.3% to $265.6 or 72.4% of equipment inventory.

Rocky continued to apply cash generated by our operations to reduce interest-bearing debt, resulting in a $0.6 million or 16.1% year-over-year decrease in finance costs this quarter.

As at Sep. 30, 2017, the dealership’s equipment inventory declined by $36.1 million or 9.0% and $34.0 million or 8.5% compared with Dec. 31, 2016 and Sept. 30, 2016, respectively.

Market Fundamentals & Outlook


“In recent years, the number of new agriculture units delivered to Canadian farmers trailed historical levels as the market digested an elevated equipment population as well as price increases associated with new technology and a depreciating Canadian dollar.

“In recent quarters, we have begun to see signs that Western Canada’s agriculture equipment profile is reverting to a more typical composition, with customer demand for equipment beginning to pick up,” the company says.

Crop Outlook

“As is typical, harvest activities in Saskatchewan and Manitoba were both substantially completed during the third quarter of 2017. Alberta’s progress is relatively comparable to last year but trails historical averages as a result of the 2017 spring harvest of over-wintered crops in Northern Alberta, which delayed seeding. Alberta Agriculture and Forestry estimate that Alberta ended the third quarter with approximately 28% of the crop still in the fields.

“Agriculture and Agri-Food Canada estimates that the area seeded to field crops in Canada increased by 2.6% over last year. Reductions in yield estimates have, however, tempered their production expectations. Notwithstanding a 4.8% decline over last year, field crop production estimates from Agriculture and Agri-Food Canada and healthy commodity prices for key Western Canadian crops suggest another strong year for Canadian farmers.”