2014

AutoCanada Inc. announces most profitable quarter in history with an increase in earnings of 61.2% and raises its quarterly dividend for the tenth consecutive quarter:

A conference call to discuss the results for the reporting period ended June 30, 2013 will be held on August 9,  2013 at 11:00 a.m. Eastern time (9:00 a.m. Mountain time). To participate in the conference call, please dial 1-888-231-8191 or (647) 427-7450 approximately 10 minutes prior to the call. A live and archived audio webcast of the conference call will also be available on the Company's website www.autocan.ca.

EDMONTON, Aug. 8, 2013 /PRNewswire/ - AutoCanada Inc. (the "Company" or "AutoCanada") (TSX: ACQ) today announced financial results for the reporting period ended June 30, 2013.


                        2013 Second Quarter Operating Results

  • Revenue increased 31.8% or $93.8 million to $388.8 million
  • Gross profit increased by 32.2% or $15.8 million to $64.8 million
  • Same store revenue increased by 26.2%
  • Same store gross profit increased by 25.8%
  • EBITDA was $16.5 million vs. $10.2 million in 2012, a 61.2% increase
  • Pre-tax earnings increased by $5.9 million or 65.8% to $14.8 million
  • Net earnings increased by $4.1 million or 61.2% to $10.8 million
  • Earnings per share increased by 57.4% to $0.532 from $0.338
  • Same store new vehicles retailed increased by 19.7%
  • Same store used vehicles retailed increased by 4.4%
  • Same store repair orders completed for the quarter were up 10.4%

In commenting on the financial results for the three month period ended June 30, 2013, Pat Priestner, Chairman and CEO of AutoCanada Inc. stated that, "We are very pleased with the results of the second quarter of 2013, our most profitable quarter in Company history. The strong growth during the quarter can be attributed to gross profit increases in all four of our business lines - new vehicles, used vehicles, finance and insurance, and parts, service and collision repair.  Recent acquisitions have contributed to the increases during the quarter, however much of the growth can be attributed to same store revenue and gross profit increases of 26.2% and 25.8% respectively during the quarter."

With respect to recently announced acquisitions and future growth opportunities, Mr. Priestner further stated, "We are very pleased to be able to further execute our previously announced acquisition strategy by the recent addition of Courtesy Chrysler located in Calgary, Alberta, and the recently announced acquisition of Eastern Chrysler located in Winnipeg, Manitoba. We are strong supporters of Chrysler Canada and look to build upon our excellent relationship with this very important partner, as well, in the case of Eastern Chrysler, of adding to our current dealership footprint of St. James Volkswagen and St. James Audi in the great City of Winnipeg, Manitoba."

Commenting on the announcement of an increase in its quarterly dividend, Mr. Priestner stated, "Our current fundamentals and positive outlook are primary factors in our decision to raise the dividend for the tenth consecutive quarter.  Management believes that raising the quarterly dividend to an annual rate of $0.80 per share shall continue to provide an attractive yield to investors and will continue to attract investors who seek a combination of both growth opportunity and a regular income stream."

Second Quarter 2013 Highlights

  • The Company generated net earnings of $10.8 million or earnings per share of $0.532 versus earnings per share of $0.338 in the second quarter of 2012.  Pre-tax earnings increased by $5.9 million to $14.8 million in the second quarter of 2013 as compared to $8.9 million in the same period in 2012.
  • Same store revenue increased by 26.2% in the second quarter of 2013, compared to the same quarter in 2012.  Same store gross profit increased by 25.8% in the second quarter of 2013, compared to the same quarter in 2012.
  • Revenue from existing and new dealerships increased 31.8% to $388.8 million in the second quarter of 2013 from $294.9 million in the same quarter in 2012.
  • Gross profit from existing and new dealerships increased 32.2% to $64.8 million in the second quarter of 2013 from $49.1 million in the same quarter in 2012.
  • EBITDA increased 61.2% to $16.5 million in the second quarter of 2013 from $10.2 million in the same quarter in 2012.
  • Free cash flow increased to $13.5 million in the second quarter of 2013 or $0.66 per share as compared $6.2 million or $0.31 per share in the second quarter of 2012.
  • Adjusted free cash flow increased to $13.4 million in the second quarter of 2013 or $0.66 per share as compared to $9.2 million or $0.47 per share in 2012.
  • Adjusted return on capital employed increased to 9.0% in the second quarter of 2013 as compared to 7.3% in 2012.
  • Adjusted return on capital employed on a trailing 12 month basis of 29.4% as compared to 22.2% at June 30, 2012.

Dividends

Management reviews the Company's financial results on a monthly basis.  The Board of Directors reviews the financial results on a quarterly basis, or as requested by Management, and determine whether a dividend shall be paid based on a number of factors.

The following table summarizes the dividends declared by the Company in 2013:

(In thousands of dollars)                  
            Total
    Record date Payment date           Declared Paid
              $ $
February 28, 2013
May 31, 2013
March 15, 2013
June 17, 2013
          3,579
3,777
3,579
3,777

On August 8, 2013, the Board declared a quarterly eligible dividend of $0.20 per common share on AutoCanada's outstanding Class A common shares, payable on September 16, 2013 to shareholders of record at the close of business on August 30, 2013.  The quarterly eligible dividend of $0.20 represents an annual dividend rate of $0.80 per share.

Eligible dividend designation
For purposes of the enhanced dividend tax credit rules contained in the Income Tax Act (Canada) (the "ITA") and any corresponding provincial and territorial tax legislation, all dividends paid by AutoCanada or any of its subsidiaries in 2010 and thereafter are designated as "eligible dividends" (as defined in 89(1) of the ITA), unless otherwise indicated.  Please consult with your own tax advisor for advice with respect to the income tax consequences to you of AutoCanada Inc. designating dividends as "eligible dividends".

SELECTED QUARTERLY FINANCIAL INFORMATION

The following table shows the unaudited results of the Company for each of the eight most recently completed quarters.  The results of operations for these periods are not necessarily indicative of the results of operations to be expected in any given comparable period.

(In thousands of dollars except
Operating Data and gross profit %)
               
  Q3
2011
Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Income Statement Data                
  New vehicles 172,688 142,881 147,383 186,649 190,139 159,204 174,410 254,403
  Used vehicles 55,351 53,719 60,453 62,822 62,816 57,260 62,656 77,113
  Parts, service & collision repair 26,980 28,980 27,085 29,075 28,593 30,247 29,667 34,629
  Finance, insurance & other 14,115 13,091 13,556 16,386 17,133 15,355 17,529 22,620
Revenue 269,134 238,671 248,477 294,932 298,681 262,066 284,262 388,765
                 
  New vehicles 12,740 11,267 12,046 14,646 15,461 15,421 15,947 20,664
  Used vehicles 5,020 4,574 4,412 4,238 3,994 3,668 3,789 5,795
  Parts, service & collision repair 14,492 14,551 14,058 15,299 15,078 15,333 15,232 17,586
  Finance, insurance & other 12,647 11,883 12,344 14,867 15,579 13,992 16,157 20,783
Gross profit 44,899 42,275 42,860 49,050 50,112 48,414 51,125 64,828
                 
Gross profit % 16.7% 17.7% 17.3% 16.6% 16.8% 18.5% 18.0% 16.7%
Operating expenses 35,742 34,086 35,381 37,659 38,361 37,737 40,353 48,639
Operating exp. as % of gross profit 79.6% 80.6% 82.5% 76.8% 76.6% 77.9% 78.9% 75.0%
Finance costs - floorplan 2,190 1,871 1,935 2,510 2,645 1,741 1,560 1,745
Finance costs - long-term debt 296 234 230 256 267 231 194 175
Reversal of impairment of intangibles - (25,543) - - - (222) - -
Income from investments in associates - - - 83 130 255 202 648
Income taxes 1,646 8,144 1,441 2,216 2,379 2,540 2,309 3,976
Net earnings 4 5,230 23,608 4,113 6,712 6,807 6,605 6,822 10,823
EBITDA 1, 4
Basic earnings per share
Diluted earnings per share
8,216
0.263
0.263
7,553
1.187
1.187
6,809
0.207
0.207
10,212
0.338
0.338
10,592
0.344
0.344
10,276
0.334
0.334
10,511
0.345
0.345
16,463
0.532
0.532
Operating Data
Vehicles (new and used) sold
7,649 6,313 6,836 8,154 8,087 6,703 7,341 10,062
New retail vehicles sold 3,886 3,405 3,434 4,400 4,410 3,982 4,118 5,487
New fleet vehicles sold 1,361 775 969 1,313 1,265 549 1,036 1,923
Used retail vehicles sold 2,402 2,133 2,433 2,441 2,412 2,172 2,187 2,652
Number of service & collision repair orders completed 76,176 75,911 74,439 78,104 78,944 78,001 77,977 93,352
Absorption rate 2 90% 91% 81% 89% 89% 85% 82% 90%
# of dealerships at period end 22 24 24 24 24 24 25 27
# of same store dealerships 3 21 21 21 21 22 22 22 22
# of managed dealerships at period end 0 0 0 2 2 2 3 3
# of service bays at period end 322 333 333 333 333 333 341 368
Same store revenue growth 3 21.6% 24.8% 20.2% 2.4% 8.0% 7.4% 12.9% 26.2%
Same store gross profit growth 3 22.9% 20.6% 18.3% 7.1% 7.9% 11.9% 16.9% 25.8%
                 
Balance Sheet Data                
Cash and cash equivalents 49,366 53,641 53,403 51,198 54,255 34,472 41,991 35,058
Restricted cash - - - - - 10,000 10,000 10,000
Accounts receivable 44,172 42,448 51,380 52,042 54,148 47,965 57,663 69,656
Inventories 159,732 136,869 155,778 201,302 193,990 199,226 217,268 232,319
Revolving floorplan facilities 175,291 150,816 178,145 221,174 212,840 203,525 225,387 246,325

1  EBITDA has been calculated as described under "NON-GAAP MEASURES".
2  Absorption has been calculated as described under "NON-GAAP MEASURES".
3  Same store revenue growth & same store gross profit growth is calculated using franchised automobile dealerships that we have owned for at least 2 full years.
4  The results from operations have been lower in the first and fourth quarters of each year, largely due to consumer purchasing patterns during the holiday season, inclement weather and the reduced number of business days during the holiday season. As a result, our financial performance is generally not as strong during the first and fourth quarters than during the other quarters of each fiscal year. The timing of acquisitions may have also caused substantial fluctuations in operating results from quarter to quarter.
   

The following table summarizes the results for the three and six month periods ended June 30, 2013 on a same store basis by revenue source and compares these results to the same period in 2012.

Same Store Revenue and Vehicles Sold

  For the Three Months Ended             For the Six Months Ended  
(In thousands of dollars except % change and vehicle data) June 30,
2013
$
June 30,
2012
$
% Change   June 30,
2013
$
June 30,
2012
$
% Change
               
Revenue Source              
  New vehicles - retail 183,818 146,432 25.5%   323,429 262,209 23.3%
  New vehicles - fleet 55,115 35,132 56.9%   84,575 63,683 32.8%
New vehicles 238,933 181,564 31.6%   408,004 325,892 25.2%
  Used vehicles - retail 53,998 48,455 11.4%   99,673 97,271 2.5%
  Used vehicles - wholesale 17,172 12,496 37.4%   31,832 22,839 39.4%
Used vehicles 71,170 60,951 16.8%   131,505 120,110 9.5%
Finance & insurance and other 20,735 15,908 30.3%   37,342 29,153 28.1%
Subtotal 330,838 258,423 28.0%   576,850 475,155 21.4%
Parts, service & collision repair 30,974 28,270 9.6%   59,458 54,712 8.7%
Total 361,812 286,693 26.2%   636,308 529,867 20.1%
               
New vehicles - retail sold 5,089 4,251 19.7%   9,036 7,588 19.1%
New vehicles - fleet sold 1,913 1,313 45.7%   2,949 2,282 29.2%
Used vehicles sold 2,468 2,363 4.4%   4,564 4,737 (3.7)%
Total 9,470 7,927 26.9%   16,549 14,607 13.3%
Total vehicles retailed 7,557 6,614 23.1%   13,600 12,325 10.3%
               

The following table summarizes the results for the three and six month periods ended June 30, 2013 on a same store basis by revenue source and compares these results to the same period in 2012.

Same Store Gross Profit and Gross Profit Percentage

  For the Three Months Ended   For the Six months Ended
  Gross Profit Gross Profit %   Gross Profit Gross Profit %
(In thousands of dollars except % change and gross profit %) June 30, 2013
$
June 30, 2012
$
%
Change
June 30, 2013 June 30, 2012 Change   June 30, 2013
$
June 30, 2012
$
%
Change
June 30, 2013 June 30, 2012 Change
Revenue Source                          
New vehicles - retail 19,022 13,952 36.3% 10.3% 9.5% 0.8%   34,193 25,571 33.7% 10.6% 9.8% 0.8%
New vehicles - fleet 414 136 204.4% 0.8% 0.4% 0.4%   539 195 176.4% 0.6% 0.3% 0.3%
New vehicles 19,436 14,088 38.0% 8.1% 7.8% 0.4%   34,732 25,766 34.8% 8.5% 7.9% 0.6%
Used vehicles - retail 4,974 4,066 22.3% 9.2% 8.4% 0.8%   8,559 8,307 3.0% 8.6% 8.5% 0.0%
Used vehicles - wholesale 378 (45) 937.8% 2.2% (0.4%) 2.6%   362 8 4,425.0% 1.1% 0.0% 1.1%
Used vehicles 5,352 4,021 33.1% 7.5% 6.6% 0.9%   8,921 8,315 7.3% 6.8% 6.9% (0.1%)
Finance & insurance and other 19,150 14,451 32.5% 92.4% 90.8% 1.5%   34,514 26,524 30.1% 92.4% 91.0% 1.4%
Subtotal 43,937 32,560 34.9% 13.3% 12.6% 0.7%   78,167 60,605 29.0% 13.6% 12.8% 0.8%
Parts, service & collision repair 15,714 14,862 5.7% 50.7% 52.6% (1.8%)   30,325 28,583 6.1% 51.0% 52.2% (1.2%)
Total 59,651 47,422 25.8% 16.5% 16.5% (0.0%)   108,492 89,188 21.6% 17.1% 16.8% 0.2%
                           

AutoCanada Inc.
Condensed Interim Consolidated Statements of Comprehensive Income
(Unaudited)

(in thousands of Canadian dollars except for share and per share amounts)

  Three month
period ended
Three month
period ended
      Six month
period ended
      Six month
period ended
  June 30,
2013
$
June 30,
2012
$
June 30,
2013
$
June 30,
2012
$
Revenue (Note 6)       388,765        294,932        673,049        543,408 
Cost of sales(Note 7)       (323,937)        (245,882)        (557,096)        (451,499) 
Gross profit       64,828        49,050        115,953        91,909 
Operating expenses (Note 8)       (48,639)        (37,659)        (88,993)        (73,040) 
Operating profit before other income (expense)       16,189        11,391        26,960        18,869 
Loss on disposal of assets       (1)        (39)        (7)        (59) 
Income from investment in associate (Note 12)       648        83        850        83 
Operating profit       16,836        11,435        27,803        18,893 
Finance costs (Note 9)       (2,195)        (2,943)        (4,238)        (5,274) 
Finance income (Note 9)       158        436        365        861 
Net comprehensive income for the period before taxation       14,799        8,928        23,930        14,480 
Income tax (Note 10)       3,976        2,216        6,285        3,658 
Net comprehensive income for the period       10,823        6,712        17,645        10,822 
         
Earnings per share         
Basic        0.532        0.338        0.879        0.544 
Diluted        0.532        0.338        0.879        0.544 
         
Weighted average shares         
Basic        20,346,713        19,876,139        20,075,885        19,878,535 
Diluted        20,346,713        19,876,139        20,075,885        19,878,535 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Approved on behalf of the Company:

(Signed) "Gordon R. Barefoot", Director    (Signed) "Michael Ross", Director

AutoCanada Inc.
Condensed Interim Consolidated Statements of Financial Position
(Unaudited)

(in thousands of Canadian dollars except for share and per share amounts)

  June 30,
      2013 
(Unaudited)
$
December 31,
      2012 
(Audited)
$
ASSETS    
Current assets    
Cash and cash equivalents       35,058        34,471 
Restricted cash       10,000        10,000 
Trade and other receivables (Note 13)       69,656        47,993 
Inventories (Note 14)       232,319        199,117 
Other current assets       2,441        1,102 
        349,474        292,683 
Property and equipment       56,645        38,513 
Investments in associates (Note 12)       12,637        4,730 
Intangible assets (Note 16)       74,737        66,403 
Goodwill (Note 16)       3,408        380 
Other long-term assets       7,473        7,699 
        504,374        410,408 
Current liabilities    
Trade and other payables (Note 17)       47,460        35,636 
Revolving floorplan facilities (Note 18)       246,325        203,525 
Current tax payable       8,937        3,719 
Current lease obligations       1,677        1,282 
Current indebtedness (Note 18)       2,955        3,000 
        307,354        247,162 
Long-term indebtedness (Note 18)       8,744        23,937 
Deferred tax       10,186        14,809 
        326,284        285,908 
EQUITY       178,090        124,500 
        504,374        410,408 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

AutoCanada Inc.
Condensed Interim Consolidated Statements of Changes in Equity
For the Periods Ended
(Unaudited)

(in thousands of Canadian dollars)

  Share
capital
$
Treasury
shares
$
Contributed
surplus
$
Total
capital
$
Accumulated
deficit
$
Equity
$
Balance,  January 1, 2013        190,435        (935)        4,423        193,923        (69,423)        124,500 
Net comprehensive income       -        -        -        -        17,645        17,645 
Common shares issued (Note 20)       43,599        -        -        43,599        -        43,599 
Dividends declared on common shares (Note 20)       -        -        -        -        (7,326)        (7,326) 
Common shares repurchased (Note 20)       -        (541)        -        (541)        -        (541) 
Restricted share units settled (Note 20)       -        202        -        202        -        202 
Share-based compensation - vested       -        -        250  250       -  250
Share-based compensation - settled       -        -        (239)        (239)        -  (239)
Balance, June 30, 2013       234,034        (1,274)        4,434        237,194        (59,104)        178,090 

  Share
capital
$
Treasury
shares
$
Contributed
surplus
$
Total
capital
$
Accumulated
deficit
$
Equity
$
Balance, January 1, 2012        190,435        -        3,918        194,353        (81,358)        112,995 
Net comprehensive income       -        -        -        -        10,822        10,822 
Dividends declared on common shares (Note 20)       -        -        -        -        (5,765)        (5,765) 
Common shares repurchased       -        (910)        -        (910)        -        (910) 
Share-based compensation       -        -        365        365        -        365 
Balance, June 30, 2012       190,435        (910)        4,283        193,808        (76,301)        117,507 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

AutoCanada Inc.
Condensed Interim Consolidated Statements of Cash Flows
For the Periods Ended
(Unaudited)

(in thousands of Canadian dollars)

    Three month
period ended
June 30, 2013
Three month
period ended
June 30, 2012
Six month
period ended
June 30, 2013
Six month
period ended
June 30, 2012
Cash provided by (used in):          
Operating activities          
Net comprehensive income         10,823        6,712        17,645        10,822 
Income taxes (Note 10)         3,976        2,216        6,285        3,658 
Amortization of prepaid rent         113        113        226        226 
Depreciation of property and equipment (Note 8)         1,489        1,028        2,678        2,053 
Loss on disposal of assets         1        39        7        59 
Share-based compensation         587        197        992        360 
Income from investments in associates (Note 12)         (648)        (83)        (850)        (83) 
Income taxes paid         (2,083)        (611)        (7,159)        (3,099) 
Net change in non-cash working capital (Note 22)         133        (3,042)        693        (3,920) 
          14,391        6,569        20,517        10,076 
Investing activities            
Business acquisitions (Note 11)           (22,831)        -        (26,612)        - 
Investment in associate (Note 12)           -        (4,154)        (7,057)        (4,154) 
Purchases of property and equipment (Note 15)           (6,073)        (3,624)        (6,752)        (3,985) 
Prepayments of rent           -        -        -        (540) 
Proceeds on sale of property and equipment           7        6        15        40 
            (28,897)        (7,772)        (40,406)        (8,639) 
Financing activities            
Proceeds from long-term debt           -        3,000        16,500        3,000 
Repayment of long-term indebtedness           (31,647)        (111)        (31,754)        (205) 
Common shares repurchased           (513)        (910)        (513)        (910) 
Dividends paid           (3,778)        (2,981)        (7,356)        (5,765) 
Proceeds from issuance of common shares (Note 20)           43,599        -        43,599        - 
            7,661        (1,002)        20,476        (3,880) 
(Decrease) Increase in cash           (6,845)        (2,205)        587        (2,443) 
Cash and cash equivalents at beginning of period           41,903        53,403        34,471        53,641 
Cash and cash equivalents at end of period           35,058        51,198        35,058        51,198 

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

ABOUT AUTOCANADA

AutoCanada is one of Canada's largest multi-location automobile dealership groups, currently operating 31 franchised dealerships in six provinces and has over 1,500 employees. AutoCanada currently sells Chrysler, Dodge, Jeep, Ram, FIAT, Chevrolet, GMC, Buick, Infiniti, Nissan, Hyundai, Subaru, Mitsubishi, Audi, and Volkswagen branded vehicles. In 2012, our dealerships sold approximately 30,000 vehicles and processed approximately 309,000 service and collision repair orders in our 333 service bays during that time.

Our dealerships derive their revenue from the following four inter-related business operations: new vehicle sales; used vehicle sales; parts, service and collision repair; and finance and insurance. While new vehicle sales are the most important source of revenue, they generally result in lower gross profits than parts, service and collision repair operations and finance and insurance sales. Overall gross profit margins increase as revenues from higher margin operations increase relative to revenues from lower margin operations. We earn fees for arranging financing on new and used vehicle purchases on behalf of third parties.  Under our agreements with our retail financing sources we are required to collect and provide accurate financial information, which if not accurate, may require us to be responsible for the underlying loan provided to the consumer.

FORWARD LOOKING STATEMENTS

Certain statements contained in this press release are forward-looking statements and information (collectively "forward-looking statements"), within the meaning of the applicable Canadian securities legislation.  We hereby provide cautionary statements identifying important factors that could cause our actual results to differ materially from those projected in these forward-looking statements.  Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as "will likely result", "are expected to", "will continue", "is anticipated", "projection", "vision", "goals", "objective", "target", "schedules", "outlook", "anticipate", "expect", "estimate", "could", "should", "expect", "plan", "seek", "may", "intend", "likely", "will", "believe" and similar expressions are not historical facts and are forward-looking and may involve estimates and assumptions and are subject to risks, uncertainties and other factors some of which are beyond our control and difficult to predict.  Accordingly, these factors could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements.  Therefore, any such forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this document.

The Company's Annual Information Form and other documents filed with securities regulatory authorities (accessible through the SEDAR website www.sedar.com describe the risks, material assumptions and other factors that could influence actual results and which are incorporated herein by reference.

Further, any forward-looking statement speaks only as of the date on which such statement is made, and, except as required by applicable law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.  New factors emerge from time to time, and it is not possible for management to predict all of such factors and to assess in advance the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

NON-GAAP MEASURES

This press release contains certain financial measures that do not have any standardized meaning prescribed by Canadian GAAP.  Therefore, these financial measures may not be comparable to similar measures presented by other issuers.  Investors are cautioned these measures should not be construed as an alternative to net earnings (loss) or to cash provided by (used in) operating, investing, and financing activities determined in accordance with Canadian GAAP, as indicators of our performance.  We provide these measures to assist investors in determining our ability to generate earnings and cash provided by (used in) operating activities and to provide additional information on how these cash resources are used.  We list and define these "NON-GAAP MEASURES" below:

EBITDA

EBITDA is a measure commonly reported and widely used by investors as an indicator of a company's operating performance and ability to incur and service debt, and as a valuation metric.  The Company believes EBITDA assists investors in comparing a company's performance on a consistent basis without regard to depreciation and amortization and asset impairment charges which are non-cash in nature and can vary significantly depending upon accounting methods or non-operating factors such as historical cost.  References to "EBITDA" are to earnings before interest expense (other than interest expense on floorplan financing and other interest), income taxes, depreciation, amortization and asset impairment charges.

EBIT

EBIT is a measure used by management in the calculation of Return on capital employed (defined below).  Management's calculation of EBIT is EBITDA (calculated above) less depreciation and amortization.

Free Cash Flow

Free cash flow is a measure used by management to evaluate its performance.  While the closest Canadian GAAP measure is cash provided by operating activities, free cash flow is considered relevant because it provides an indication of how much cash generated by operations is available after capital expenditures.  It shall be noted that although we consider this measure to be free cash flow, financial and non-financial covenants in our credit facilities and dealer agreements may restrict cash from being available for distributions, re-investment in the Company, potential acquisitions, or other purposes.  Investors should be cautioned that free cash flow may not actually be available for growth or distribution of the Company.  References to "Free cash flow" are to cash provided by (used in) operating activities (including the net change in non-cash working capital balances) less capital expenditures (not including acquisitions of dealerships and dealership facilities).

Adjusted Free Cash Flow

Adjusted free cash flow is a measure used by management to evaluate its performance. Adjusted free cash flow is considered relevant because it provides an indication of how much cash generated by operations before changes in non-cash working capital is available after deducting expenditures for non-growth capital assets.  It shall be noted that although we consider this measure to be adjusted free cash flow, financial and non-financial covenants in our credit facilities and dealer agreements may restrict cash from being available for distributions, re-investment in the Company, potential acquisitions, or other purposes.  Investors should be cautioned that adjusted free cash flow may not actually be available for growth or distribution of the Company.  References to "Adjusted free cash flow" are to cash provided by (used in) operating activities (before changes in non-cash working capital balances) less non-growth capital expenditures.

Adjusted Average Capital Employed

Adjusted average capital employed is a measure used by management to determine the amount of capital invested in AutoCanada and is used in the measure of Adjusted Return on Capital Employed (described below).  Adjusted average capital employed is calculated as the average balance of interest bearing debt for the period (including current portion of long term debt, excluding revolving floorplan facilities) and the average balance of shareholders equity for the period, adjusted for impairments of intangible assets, net of deferred tax.  Management does not include future income tax, non-interest bearing debt, or revolving floorplan facilities in the calculation of adjusted average capital employed as it does not consider these items to be capital, but rather debt incurred to finance the operating activities of the Company.

Absorption Rate

Absorption rate is an operating measure commonly used in the retail automotive industry as an indicator of the performance of the parts, service and collision repair operations of a franchised automobile dealership. Absorption rate is not a measure recognized by GAAP and does not have a standardized meaning prescribed by GAAP. Therefore, absorption rate may not be comparable to similar measures presented by other issuers that operate in the retail automotive industry.  References to ''absorption rate'' are to the extent to which the gross profits of a franchised automobile dealership from parts, service and collision repair cover the costs of these departments plus the fixed costs of operating the dealership, but does not include expenses pertaining to our head office. For this purpose, fixed operating costs include fixed salaries and benefits, administration costs, occupancy costs, insurance expense, utilities expense and interest expense (other than interest expense relating to floor plan financing) of the dealerships only.

Average Capital Employed

Average capital employed is a measure used by management to determine the amount of capital invested in AutoCanada and is used in the measure of Return on Capital Employed (described below).  Average capital employed is calculated as the average balance of interest bearing debt for the period (including current portion of long term debt, excluding revolving floorplan facilities) and the average balance of shareholders equity for the period.  Management does not include future income tax, non-interest bearing debt, or revolving floorplan facilities in the calculation of average capital employed as it does not consider these items to be capital, but rather debt incurred to finance the operating activities of the Company.

Return on Capital Employed

Return on capital employed is a measure used by management to evaluate the profitability of our invested capital.  As a corporation, management of AutoCanada may use this measure to compare potential acquisitions and other capital investments against our internally computed cost of capital to determine whether the investment shall create value for our shareholders.  Management may also use this measure to look at past acquisitions, capital investments and the Company as a whole in order to ensure shareholder value is being achieved by these capital investments.  Return on capital employed is calculated as EBIT (defined above) divided by Average Capital Employed (defined above).

Adjusted Return on Capital Employed

Adjusted return on capital employed is a measure used by management to evaluate the profitability of our invested capital.  As a corporation, management of AutoCanada may use this measure to compare potential acquisitions and other capital investments against our internally computed cost of capital to determine whether the investment shall create value for our shareholders.  Management may also use this measure to look at past acquisitions, capital investments and the Company as a whole in order to ensure shareholder value is being achieved by these capital investments.  Adjusted return on capital employed is calculated as EBIT (defined above) divided by Adjusted Average Capital Employed (defined above).

Cautionary Note Regarding Non-GAAP Measures

EBITDA, EBIT, Free Cash Flow, Adjusted Free Cash Flow, Absorption Rate, Average Capital Employed and Return on Capital Employed are not earnings measures recognized by GAAP and do not have standardized meanings prescribed by GAAP.  Investors are cautioned that these non-GAAP measures should not replace net earnings or loss (as determined in accordance with GAAP) as an indicator of the Company's performance, of its cash flows from operating, investing and financing activities or as a measure of its liquidity and cash flows. The Company's methods of calculating EBITDA, EBIT, Free Cash Flow, Adjusted Free Cash Flow, Absorption Rate, Average Capital Employed and Return on Capital Employed may differ from the methods used by other issuers. Therefore, the Company's EBITDA, EBIT, Free Cash Flow, Adjusted Free Cash Flow, Absorption Rate, Average Capital Employed and Return on Capital Employed may not be comparable to similar measures presented by other issuers.

Additional information about AutoCanada Inc. is available at the Company's website at www.autocan.ca and www.sedar.com.




 

 

 

SOURCE AutoCanada Inc.



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