Rocky Mountain Dealerships Inc. (TSX: RME), a leading Canadian network of full service agricultural and construction equipment dealerships, today reported financial results for the periods ended June 30, 2009.
For the fiscal 2009 second quarter, net sales increased 64.5% to $155.1 million, compared to net sales of $94.3 million for the second quarter of fiscal 2008. This growth in revenue was due to improved sales from all three of the Company's primary revenue sources.
New equipment sales were $90.6 million in the second quarter of fiscal 2009 compared to $61.7 million in the prior year period. Used equipment sales were $38.8 million in the second quarter of 2009, up 188% compared to $13.5 million in the second quarter of fiscal 2008.
Revenue generated from product support increased to $24.4 million in the second quarter of fiscal 2009 compared to $16.8 million in the second quarter of fiscal 2008.
Gross profit for the fiscal 2009 second quarter increased 35% to $21.8 million, compared to $16.1 million in the second quarter of the prior year. The Company's gross profit margin was 14% in the fiscal 2009 second quarter versus 17.1% in the second quarter of the prior year.
The decrease in gross profit margin was due primarily to a higher percentage of agriculture sales that requires less product support and some lower-margin, highly competitive sales. In addition, during the first six months of 2009 the Company maintained a strong focus on the reduction of aged construction equipment inventory which put pressure on the margins.
Selling, general and administrative expenses improved to 8.6% of sales, in the fiscal 2009 second quarter versus 10.3% of sales, in the second quarter of the prior year. This 170 basis point improvement was due to the Company's ability to achieve the benefits of economies of scale following acquisitions completed in 2008 and 2009 allowing expenses to be allocated over a larger group of dealerships. In addition, synergies obtained through systems integration and cost cutting measures positively impacted the Company's results.
Operating income in the second quarter fiscal 2009 increased to $3.8 million from $2.7 million as a result of the increased sales and reduction in operating expenses over the period. The Company increased earnings 41% notwithstanding the reduction in gross profit as management continued to focus on reducing aged construction equipment inventory.
For the second quarter of fiscal 2009, EBITDA was $7.2 million compared to $6.6 million in the second quarter of fiscal 2008. EBITDA was negatively impacted by the reduction in both the rental and leasing depreciation, of approximately $1.5 million, as a result of management's commitment to reducing the size of the rental and lease fleet over the next few years. The impact from deprecation was offset by the increase in net earnings of approximately $1.1 million over the quarter.
Net income for the second quarter of fiscal 2009 was $3.8 million, or $0.28 per share, compared to net income of $2.7 million, or $0.21 per basic share, for the second quarter of fiscal 2008, which is an increase of approximately 33%.
Cash Flow & Liquidity
The Company ended the second quarter fiscal 2009 in a very solid financial position. The Company's net debt to EBITDA ratio was 1.27, which is within the Company's goal of 1.0x - 1.5x. Working capital at the end of the second quarter fiscal 2009 was $46.9 million. Inventory as of June 30, 2009, was $215.2 million compared to $207.5 million at the end of fiscal 2008. The current inventory reflects increases in new agricultural and parts inventory as a result of increased demand in that segment of the market. New and used construction inventory was down from the end of fiscal 2008.
Quarterly Cash Dividend
The Company announces that the Board of Directors of Rocky Mountain declared a dividend of $0.045 per common share on the Company's outstanding common shares. The common share dividend is payable on September 30, 2009, to shareholders of record at close of business on August 31, 2009.
This dividend is designated by Rocky Mountain to be an eligible dividend for purpose 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.