2014

AutoCanada Inc. announces profit increase of 61.1% and raises its quarterly dividend:

A conference call to discuss the results for the reporting period ended September 30, 2013 will be held on November 8,  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, Nov. 7, 2013 /PRNewswire/ - AutoCanada Inc. (the "Company" or "AutoCanada") (TSX: ACQ) today announced financial results for the reporting period ended September 30, 2013.

                         2013 Third Quarter Operating Results 
  • Revenue increased 35.1% or $104.9 million to $403.5 million
  • Gross profit increased by 35.1% or $17.6 million to $67.7 million
  • Same store revenue increased by 19.9%
  • Same store gross profit increased by 18.5%
  • EBITDA was $16.6 million vs. $10.6 million in 2012, a 56.6% increase
  • Pre-tax earnings increased by $5.7 million or 62.1% to $14.9 million
  • Net earnings increased by $4.2 million or 61.1% to $11.0 million
  • Earnings per share increased by 47.8% to $0.507 from $0.343
  • Same store new vehicles retailed increased by 19.4%
  • Same store used vehicles retailed increased by 9.6%
  • Same store repair orders completed for the quarter were up 6.0%

In commenting on the financial results for the three month period ended September 30, 2013, Pat Priestner, Chairman and CEO of AutoCanada Inc. stated that, "We are very pleased with the results of the third quarter of 2013, in which we exceeded the $400 million mark in quarterly revenue for the first time 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 above 30% increases in each of our four business lines during the quarter, however much of the growth can be attributed to same store revenue and gross profit increases of 19.9% and 18.5%, respectively, during the quarter."

With respect to recently completed acquisitions and future growth opportunities, Mr. Priestner further stated, "We are very pleased to be able to further execute upon the acquisition guidance we released earlier in the year with the recent additions of Courtesy Chrysler located in Calgary, Alberta, and Eastern Chrysler located in Winnipeg, Manitoba.  These two stores are very well established and provide us with a strong foundation for building regional platforms in these two great cities."

Commenting on the announcement of an increase in its quarterly dividend, Mr. Priestner stated, "We are positive in our outlook for Canadian new vehicle sales for the remainder of 2013 and into the next year, which are factors in our decision to raise the dividend for the eleventh consecutive quarter.  Management believes that raising the quarterly dividend to an annual rate of $0.84 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."

Third Quarter 2013 Highlights

  • The Company generated net earnings of $11.0 million or earnings per share of $0.507 versus earnings per share of $0.344 in the third quarter of 2012.  Pre-tax earnings increased by $5.7 million to $14.9 million in the third quarter of 2013 as compared to $9.2 million in the same period in 2012.
  • Same store revenue increased by 19.9% in the third quarter of 2013, compared to the same quarter in 2012.  Same store gross profit increased by 18.5% in the third quarter of 2013, compared to the same quarter in 2012.
  • Revenue from existing and new dealerships increased 35.1% to $403.5 million in the third quarter of 2013 from $298.6 million in the same quarter in 2012.
  • Gross profit from existing and new dealerships increased 35.1% to $67.7 million in the third quarter of 2013 from $50.1 million in the same quarter in 2012.
  • EBITDA increased 56.6% to $16.6 million in the third quarter of 2013 from $10.6 million in the same quarter in 2012.
  • Free cash flow increased to $7.2 million in the third quarter of 2013 or $0.33 per share as compared $8.7 million or $0.44 per share in the third quarter of 2012.
  • Adjusted free cash flow increased to $14.6 million in the third quarter of 2013 or $0.68 per share as compared to $9.5 million or $0.48 per share in 2012.
  • Adjusted return on capital employed increased to 7.8% in the third quarter of 2013 as compared to 7.0% in 2012.
  • Adjusted return on capital employed on a trailing 12 month basis of 29.7% as compared to 22.8% at September 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
August 30, 2013
March 15, 2013
June 17, 2013
September 16, 2013
          3,579
3,777
4,344
3,579
3,777
4,344

On November 7, 2013, the Board declared a quarterly eligible dividend of $0.21 per common share on AutoCanada's outstanding Class A common shares, payable on December 16, 2013 to shareholders of record at the close of business on November 29, 2013.  The quarterly eligible dividend of $0.21 represents an annual dividend rate of $0.84 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 %)
               
  Q4
2011
Q1
2012
Q2
2012
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Income Statement Data                
  New vehicles   142,880   147,383   186,649   190,139   159,205   174,410   254,403   257,543
  Used vehicles 53,719 60,453 62,822 62,816 57,260 62,656 77,113 85,975
  Parts, service & collision repair 28,822 27,084 29,075 28,658 30,025 29,667 34,629 37,341
  Finance, insurance & other 12,974 13,556 16,386 17,023 15,156 17,551 22,620 22,676
Revenue 238,395 248,476 294,932 298,636 261,646 284,284 388,765 403,535
                 
  New vehicles 11,267 12,046 14,646 15,461 15,422 15,941 20,664  20,510
  Used vehicles 4,574 4,412 4,238 3,994 3,668 3,790 5,794    6,242 
  Parts, service & collision repair 14,588 14,057 15,299 15,144 15,386 15,231 17,586  20,113
  Finance, insurance & other 11,824 12,344 14,867 15,513 13,866 16,164 20,783  20,831
Gross profit 42,253 42,859 49,050 50,112 48,342 51,126 64,827 67,696
                 
Gross profit % 17.7% 17.2% 16.6% 16.8% 18.5% 18.0% 16.7% 16.8%
Operating expenses 34,086 35,381 37,659 38,361 37,739 40,353 48,639 51,080
Operating exp. as % of gross profit 80.7% 82.6% 76.8% 76.6% 78.1% 78.9% 75.0% 75.5%
Finance costs - floorplan 1,872 1,935 2,510 2,645 1,741 1,560 1,745 1,770
Finance costs - long-term debt 234 230 256 267 231 195 175 120
Reversal of impairment of intangibles (25,543) - - - (222) - - -
Income from investments in associates - - 83 130 255 201 648 555
Income taxes 8,144 1,441 2,216 2,379 2,540 2,309 3,976 3,920
Net earnings 4 23,608 4,113 6,712 6,807 6,605 6,822 10,823 10,968
EBITDA 1, 4
Basic earnings per share
Diluted earnings per share
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
16,607
0.507
0.507
                 
Operating Data
Vehicles (new and used) sold
6,313 6,836 8,154 8,087 6,703 7,341 10,062 10,325
Vehicles (new and used) sold including GM5 6,313 6,836 8,557 8,783 7,378 8,123 11,399 11,405
New vehicles sold including GM5 4,180 4,403 5,964 6,178 4,956 5,665 8,246 8,023
New retail vehicles sold 3,405 3,434 4,400 4,410 3,982 4,118 5,487 5,986
New fleet vehicles sold 775 969 1,313 1,265 549 1,036 1,923 1,365
Used retail vehicles sold 2,133 2,433 2,441 2,412 2,172 2,187 2,652 2,974
Number of service & collision repair orders completed 75,911 74,439 78,104 78,944 78,001 77,977 93,352 97,074
Absorption rate 2 91% 81% 89% 89% 85% 82% 90% 88%
# of dealerships at period end 24 24 24 24 24 25 27 29
# of same store dealerships 3 21 21 21 22 22 22 22 22
# of managed dealerships at period end 0 0 2 2 2 3 3 3
# of service bays at period end 333 333 333 333 333 341 368 388
Same store revenue growth 3 24.8% 20.2% 2.4% 8.0% 7.4% 12.9% 26.2% 19.9%
Same store gross profit growth 3 20.6% 18.3% 7.1% 7.9% 11.9% 16.9% 25.8% 18.5%
                 
Balance Sheet Data                
Cash and cash equivalents 53,641 53,403 51,198 54,255 34,471 41,975 35,058 37,940
Restricted cash - - - - 10,000 10,000 10,000 -
Accounts receivable 42,448 51,364 52,042 54,148 47,944 57,144 69,136 62,105
Inventories 137,017 155,694 201,188 194,015 199,117 217,246 232,249 236,351
Revolving floorplan facilities 150,816 178,145 221,174 212,840 203,525 225,387 246,325 228,526

EBITDA has been calculated as described under "NON-GAAP MEASURES".
Absorption has been calculated as described under "NON-GAAP MEASURES".
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.
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 Company has investments in General Motors dealerships that are not consolidated. This number includes 100% of vehicles sold by these dealerships in which we have less than 100% investment.

The following table summarizes the results for the three and nine month periods ended September 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 Nine Months Ended
(in thousands of dollars) September
30, 2013
September
30, 2012
% Change September
30, 2013
September
30, 2012
% Change
Revenue Source            
   New vehicles - retail       185,459        148,379        25.0%        508,888        410,588        23.9% 
   New vehicles - fleet       38,149        37,585        1.5%        122,724        101,267        21.2% 
New vehicles       223,608        185,964        20.2%        631,612        511,855        23.4% 
   Used vehicles - retail       55,845        47,722        17.0%        155,517        144,992        7.3% 
   Used vehicles - wholesale       19,232        12,680        51.7%        51,064        35,519        43.8% 
Used vehicles       75,077        60,402        24.3%        206,581        180,511        14.4% 
Finance, insurance and other       19,449        16,389        18.7%        56,791        45,542        24.7% 
Subtotal       318,134        262,755        21.1%        894,984        737,908        21.3% 
Parts, service and collision repair       30,459        27,891        9.2%        89,917        82,604        8.9% 
Total       348,593        290,646        19.9%        984,901        820,512        20.0% 
             
New retail vehicles sold       5,108        4,278        19.4%        14,144        11,866        19.2% 
New fleet vehicles sold       1,306        1,265        3.2%        4,255        3,547        20.0% 
Used retail vehicles sold       2,550        2,326        9.6%        7,114        7,063        0.7% 
Total       8,964        7,869        13.9%        25,513        22,476        13.5% 
Total vehicles retailed       7,658        6,604        13.8%        21,258        18,929        12.3% 


The following table summarizes the results for the three and nine month periods ended September 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 Nine Months Ended
  Gross Profit Gross Profit %   Gross Profit Gross Profit %
(In thousands of
dollars except %
change and gross
profit %)
September
30, 2013
September
30, 2012
%
Change
September
30, 2013
September
30, 2012
Change   September
30, 2013
September
30, 2012
%
Change
September
30, 2013
September
30, 2012
Change
  $ $               $ $        
Revenue Source                          
New vehicles -
retail
      17,404        14,874        17.0%        9.0%        10.0%        (1.0)%          51,596        40,446        27.6%        10.1%        9.9%        0.2% 
New vehicles -
fleet
      309        79        291.1%        1.0%        -%        1.0%          848        274        209.5%        0.7%        0.3%        0.4% 
                           
New vehicles       17,713        14,953        18.5%        8.0%       8.0%        - %          52,444        40,720        28.8%        8.3%        8.0%        0.3% 
                           
Used vehicles -
retail
      4,809        3,775        27.4%        9.0%       8.0%        1.0%          13,367        12,081        10.6%        8.6%        8.3%        0.3% 
                           
Used vehicles -
wholesale
      320        32        900.0%        2.0%       -%        2.0%          683        40        1,607.5%        1.3%        0.1%        1.2% 
                           
Used vehicles       5,129        3,807        34.7%        7.0%       6.0%        1.0%          14,050        12,121        15.9%        6.8%        6.7%        0.1% 
                           
Finance &
insurance and other
      17,851        14,958        19.3%        92.0%       91.0%        1.0%          52,365        41,482        26.2%        92.2%        91.1%        1.1% 
                           
Subtotal       40,693        33,718        20.7%        13.0%       13.0%  -%         118,859        94,323        26.0%        13.3%        12.8%        0.5% 
                           
Parts, service &
collision repair
      16,678        14,710        13.4%        55.0%       53.0%        2.0%          47,003        43,293        8.6%        52.3%        52.4%        (0.1)% 
                           
Total       57,371        48,428        18.5%        16.0%       17.0%        (1.0)%          165,862        137,616        20.5%        16.8%        16.8%  -% 


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
Nine month
period ended
Nine month
period ended
  September 30,
2013
$
September 30,
2012
$
September 30,
2013
$
September 30,
2012
$
  Revenue (Note 6)       403,535        298,636        1,076,584        842,045 
  Cost of sales (Note 7)       (335,839)        (248,525)        (892,935)        (700,023) 
  Gross profit       67,696        50,111        183,649        142,022 
  Operating expenses (Note 8)       (51,080)        (38,361)        (140,073)        (111,401) 
  Operating profit before other income (expense)       16,616        11,750        43,576        30,621 
  Loss on disposal of assets        (27)        (1)        (34)        (61) 
  Income from investments in associates (Note 12)       555        130        1,405        213 
  Operating profit       17,144        11,879        44,947        30,773 
  Finance costs (Note 9)       (2,477)        (3,143)        (6,754)        (8,464) 
  Finance income (Note 9)       221        449        625        1,357 
  Net comprehensive income for the period before
    taxation
      14,888        9,185        38,818        23,666 
  Income tax (Note 10)       3,920        2,379        10,205        6,036 
  Net comprehensive income for the period       10,968        6,806        28,613        17,630 
         
Earnings per share         
Basic        0.507        0.343        1.389        0.888 
Diluted        0.507        0.343        1.389        0.888 
         
Weighted average shares         
Basic        21,638,882        19,804,014        20,606,391        19,853,694 
Diluted        21,638,882        19,804,014        20,606,391        19,853,694 

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)

  September 30,
      2013 
(Unaudited)
$
December 31,
      2012 
(Audited)
$
ASSETS    
Current assets    
Cash and cash equivalents       37,940        34,471 
Restricted cash       -        10,000 
Trade and other receivables (Note 13)       62,105        47,944 
Inventories (Note 14)       236,351        199,117 
Other current assets       1,815        1,102 
        338,211        292,634 
Property and equipment (Note 15)       67,097        38,513 
Investments in associates (Note 12)       12,771        4,730 
Intangible assets (Note 16)       96,322        66,403 
Goodwill (Note 16)       8,645        380 
Other long-term assets       7,360        7,699 
        530,406        410,359 
Current liabilities    
Trade and other payables (Note 17)       52,139        35,587 
Revolving floorplan facilities (Note 18)       228,526        203,525 
Current tax payable       6,763        3,719 
Current lease obligations       1,611        1,282 
Current indebtedness (Note 18)       2,816        3,000 
        291,855        247,113 
Long-term indebtedness (Note 18)       33,647        23,937 
Deferred tax       19,843        14,809 
        345,345        285,859 
EQUITY       185,061        124,500 
        530,406        410,359 

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       -        -        -        -        28,613        28,613 
Dividends declared on common shares
(Note 20)
      -        -        -        -        (11,647)        (11,647) 
Common shares issued (Note 20)       43,811        -        -        43,811        -        43,811 
Common shares repurchased (Note 20)       -        (557)        -        (557)        -        (557) 
Restricted share units settled (Note 20)       -        202        -        202        -        202 
Share-based compensation - vested       -        -        378        378        -        378 
Share-based compensation - settled       -        -        (239)        (239)        -        (239) 
Balance, September 30, 2013       234,246        (1,290)        4,562        237,518        (52,457)        185,061 
             
             
  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       -        -        -        -        17,630        17,630 
Dividends declared on common shares
(Note 20)
      -        -        -        -        (8,935)        (8,935) 
Common shares repurchased (Note 20)       -        (910)        -        (910)        -        (910) 
Share-based compensation       -        -        475        475        -        475 
Balance, September 30, 2012       190,435        (910)        4,393        193,918        (72,663)        121,255 

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
September 30,
2013
Three month
period ended
September 30,
2012
Nine month
period ended
September 30,
2013
Nine month
period ended
September 30,
2012
Cash flows from operating activities:          
Net comprehensive income         10,968        6,807        28,613        17,630 
Income taxes (Note 10)         3,920        2,379        10,205        6,036 
Amortization of prepaid rent         113        113        339        339 
Amortization of property and equipment (Note 8)         1,599        1,140        4,278        3,193 
Loss on disposal of assets         27        1        34        61 
Share-based compensation         751        205        1,744        565 
Income from investments in associates (Note 12)         (555)        (130)        (1,405)        (213) 
Income taxes paid         (1,589)        (485)        (8,748)        (3,584) 
Net change in non-cash working capital (Note 22)         (7,447)        (795)        (6,748)        (4,710) 
          7,787        9,235        28,312        19,317 
Cash flows from investing activities:            
Business acquisitions (Note 11)           (38,756)        -        (65,368)        (4,154) 
Investments in associates (Note 12)           -        -        (7,057)        - 
Purchases of property and equipment (Note 15)           (677)        (9,161)        (7,437)        (13,150) 
Prepayments of rent           -        -        -        (540) 
Proceeds on sale of property and equipment           3,239        -        3,254        28 
Reduction in restricted cash           10,000        -        10,000        - 
Dividends received from investment in associate     421 - 421
            (25,773)        (9,161)        (66,187)        (17,816) 
Cash flows from financing activities:            
Proceeds from long-term debt           25,094        6,250        41,593        9,250 
Repayment of long-term indebtedness           (146)        (98)        (31,900)        (292) 
Common shares repurchased           -        -        (513)        (910) 
Dividends paid           (4,291)        (3,169)        (11,647)        (8,935) 
Proceeds from issuance of treasury shares (Note 20)           211        -        43,811        - 
            20,868        2,983        41,344        (887) 
Increase in cash           2,882        3,057        3,469        614 
Cash and cash equivalents at beginning of period           35,058        51,198        34,471        53,641 
Cash and cash equivalents at end of period           37,940        54,255        37,940        54,255 

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 32 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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