AutoCanada Inc. reports all-time record quarterly profit and announces an increase in its quarterly dividend:

A conference call to discuss the results for the reporting period ended June 30, 2012 will be held on August 9, 2012 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. 9, 2012 /PRNewswire/ - AutoCanada Inc. (the "Company" or "AutoCanada") (TSX: ACQ) today announced financial results for the reporting period ended June 30, 2012

                                 
                         2012 Second Quarter Operating Results

  • Revenue increased 1.4% or $4.0 million to $294.8 million
  • Gross profit increased by 7.5% or $3.4 million to $49.0 million
  • Same store revenue increased by 2.4%
  • Same store gross profit increased by 7.1%
  • EBITDA was $10.2 million vs. $9.3 million in Q2 of 2011, a 9.7% increase
  • Pre-tax net earnings increased by $0.9 million or 11.3% to $8.9 million
  • Net earnings increased by $0.7 million or 11.7% to $6.7 million
  • The number of same store new vehicles retailed increased by 7.5%
  • The number of same store used vehicles retailed increased by 12.4%
  • Same store repair orders completed for the quarter went down by 1.8%

In commenting on the financial results for the three month period ended June 30, 2012, Pat Priestner, Chief Executive Officer of AutoCanada Inc. stated that, "The second quarter of 2012 was the Company's most profitable quarter in its history, exceeding our previously most profitable quarter by approximately 10% in terms of EBITDA and over 10% in terms of pre-tax earnings.  During the second quarter of 2012, we generated solid revenue and gross profit gains with strong retail sales volumes for both new and used vehicles.  The second quarter was also notable as we were able to secure three new dealerships, with the investments in two General Motors dealerships in Sherwood Park - the first dealerships we have secured with General Motors of Canada - and a third with Kia Canada, which is an open point dealership opportunity in Edmonton.  We are excited by the development of new relationships with two highly regarded manufacturers, as well as the potential to earn solid returns on these investments.  The three dealerships will be an excellent addition to our Edmonton area platform."

Commenting on the announcement of an increase in its quarterly dividend, Mr. Priestner stated, "Within the context of the continued strength of our operations, our financial performance, and our confidence in the outlook for the automotive retail market in Canada, the Board of Directors held its annual business review meeting on July 10, 2012.  The recent acquisition opportunities, along with the 2012 PwC Trendsetter Report which indicates a dealership succession issue within the coming years due to an aging dealer body and ever increasing facility capital requirements, have led the Board to believe that there will be greater opportunities in the coming years than had been previously considered as independent owners exit the business.  It is expected that the bulk of these growth opportunities will come in the latter two to five years, more so than in the short term.  As such, while the Board remains committed to a high dividend, the Board very much supports Management in actively seeking accretive growth opportunities as a means to provide superior long term shareholder value.  Without targeting a specific dividend payout ratio based on earnings, the Board of Directors will remain committed to a high dividend which it shall periodically review within the context of earnings growth, alternative strategic opportunities to re-invest in the business, and sustainability, as evidenced by its decision to raise the quarterly dividend to a rate of $0.16 per share or an annual rate of $0.64 per share."

Second Quarter 2012 Highlights

  • The Company generated net earnings of $6.7 million or earnings per share of $0.338 versus earnings per share of $0.299 in the second quarter of 2011.  Pre-tax earnings increased by $0.9 million to $8.9 million in the second quarter of 2012 as compared to $8.0 million in the same period in 2011.
  • Same store revenue increased by 2.4% in the second quarter of 2012, compared to the same quarter in 2011.  Same store gross profit increased by 7.1% in the second quarter of 2012, compared to the same quarter in 2011.
  • Revenue from existing and new dealerships increased 1.4% to $294.8 million in the second quarter of 2012 from $290.7 million in the same quarter in 2011.
  • Gross profit from existing and new dealerships increased 7.5% to $49.0 million in the second quarter of 2012 from $45.6 million in the same quarter in 2011.
  • EBITDA increased 9.7% to $10.2 million in the second quarter of 2012 from $9.3 million in the same quarter in 2011.
  • Free cash flow decreased to $2.9 million in the second quarter of 2012 or $0.15 per share as compared to $4.7 million and $0.24 per share in the second quarter of 2011, mainly due a land purchase in Q2 2012.
  • Adjusted free cash flow increased to $9.2 million in the second quarter of 2012 or $0.47 per share as compared to $8.9 million or $0.45 per share in 2011.
  • Return on capital employed on a trailing 12 month basis of 22.2% as compared to 16.0% at June 30, 2011.

Dividends

Management reviews the Company's financial results on a monthly basis.  The Board of Directors reviews the financial results periodically to determine whether a dividend shall be paid based on a number of factors.

The following table summarizes the dividends declared by the Company in 2012:

(In thousands of dollars)                  
        Total
Record date   Payment date           Declared   Paid
                $   $
February 28, 2012
May 31, 2012
August 31, 2012
  March 15, 2012
June 15, 2012
September 17, 2012
          2,783
2,982
3,181
  2,783
2,982
-

On August 9, 2012, the Board declared a quarterly eligible dividend of $0.16 per common share on AutoCanada's outstanding Class A common shares, payable on September 17, 2012 to shareholders of record at the close of business on August 31, 2012.  The quarterly eligible dividend of $0.16 represents an annual dividend rate of $0.64 per share or a 6.3% increase in the annual dividend rate from the prior quarter.

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
2010
  Q4
2010
  Q1
2011
  Q2
2011
  Q3
2011
  Q4
2011
  Q1
2012
  Q2
2012
Income Statement Data                                
  New vehicles   141,533   113,967   128,303   196,850   172,688   142,880   147,383   186,649
  Used vehicles   50,922   45,414   44,906   52,054   55,351   53,719   60,453   62,822
  Parts, service & collision repair   26,540   28,351   26,462   28,256   26,871   28,673   26,913   28,847
  Finance, insurance & other   11,060   10,151   11,113   13,577   14,109   13,046   13,648   16,451
Revenue   230,055   197,883   210,784   290,737   269,019   238,318   248,397   294,769
                                 
  New vehicles   9,983   9,023   9,725   13,974   12,740   11,267   12,046   14,647
  Used vehicles   4,221   3,659   3,486   4,301   5,020   4,573   4,412   4,237
  Parts, service & collision repair   14,031   13,994   13,277   15,159   14,493   14,551   14,004   15,228
  Finance, insurance & other   9,843   9,050   9,947   12,118   12,641   11,853   12,386   14,878
Gross profit   38,078   35,725   36,435   45,552   44,894   42,244   42,848   48,990
                                 
Gross profit %   16.6%   18.1%   17.3%   15.7%   16.7%   17.7%   17.2%   16.6%
Operating expenses   33,207   32,010   31,891   35,127   35,742   34,086   35,381   37,661
Operating exp. as % of gross profit   87.2%   89.6%   87.5%   77.1%   79.6%   80.7%   82.6%   76.9%
Finance costs - floorplan   2,042   1,594   1,685   2,311   2,190   1,871   1.935   2,510
Finance costs - long-term debt   278   332   283   323   296   234   230   256
Reversal of impairment of intangibles   -   (8,059)   -   -   -   (25,543)   -   -
Income taxes   692   2,418   690   2,029   1,646   8,144   1,441   2,216
Net earnings 4   1,983   7,575   1,994   5,950   5,230   23,608   4,113   6,711
EBITDA 1, 4   4,011   3,469   4,047   9,319   8,216   7,547   6,808   10,210
Basic earnings (loss) per share   0.100   0.381   0.100   0.299   0.263   1.187   0.207   0.338
Diluted earnings (loss) per share   0.100   0.381   0.100   0.299   0.263   1.187   0.207   0.338
                                 
Operating Data
Vehicles (new and used) sold
  6,350   5,219   5,826   8,210   7,649   6,313   6,836   8,154
New retail vehicles sold   3,358   3,008   3,050   4,158   3,907   3,405   3,434   4,400
New fleet vehicles sold   831   306   796   1,900   1,340   775   969   1,313
Used retail vehicles sold   2,161   1,905   1,980   2,152   2,402   2,133   2,433   2,441
Number of service & collision repair orders completed   77,285   77,037   72,360   80,851   76,176   75,911   74,439   78,104
Absorption rate 2   85%   86%   80%   91%   90%   91%   81%   89%
# of dealerships at period end   23   23   23   22   22   24   24   24
# of same store dealerships 3   19   21   22   21   21   21   21   21
# of service bays at period end   339   339   339   322   322   333   333   333
Same store revenue growth 3   6.7%   2.4%   2.7%   19.3%   21.6%   24.8%   20.2%   2.4%
Same store gross profit growth 3   (4.0)%   2.9%   2.9%   8.2%   22.9%   20.6%   18.3%   7.1%
                                 
Balance Sheet Data                                
Cash and cash equivalents   34,329   37,541   39,337   43,837   49,366   53,641   53,403   51,198
Accounts receivable   37,149   32,832   42,108   51,539   44,172   42,448   51,380   52,042
Inventories   137,507   118,088   134,710   149,481   159,732   136,869   155,778   201,302
Revolving floorplan facilities   145,652   124,609   152,075   172,600   175,291   150,816   178,145   221,174
(In thousands of dollars except Operating
Data and gross profit %)
                               
                                 
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, 2012 on a same store basis by revenue source and compare these results to the same periods in 2011.

       

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,
2012
  June 30,
2011
  % Change   June 30,
2012
  June 30,
2011
  % Change
                       
Revenue Source                      
New vehicles 176,520   183,504   (3.8)%   316,268   301,956   4.7%
Used vehicles 59,762   49,865   19.8%   117,861   92,911   26.9%
Finance & insurance and other 15,594   12,854   21.3%   28,579   23,335   22.5%
Subtotal 248,876   246,223       462,708   418,202      
Parts, service & collision repair 27,248   26,448   3.0%   52,802   51,070   3.4%
Total 279,124   272,671   2.4%   515,510   469,272   9.9%
                       
New vehicles - retail sold 4,052   3,769   7.5%   7,207   6,509   10.7%
New vehicles - fleet sold 1,313   1,832   (28.3)%   2,282   2,590   (11.9)%
Used vehicles sold 2,286   2,033   12.4%   4,591   3,898   17.8%
Total 7,651   7,634   0.2%   14,080   12,997   8.3%
Total vehicles retailed 6,338   5,921   9.2%   11,798   10,407   13.4%

The following table summarizes the results for the three and six month periods ended June 30, 2012 on a same store basis by revenue source and compare these results to the same periods in 2011.

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,
2012
  June 30,
2011
  %
Change
  June 30,
2012
  June 30,
2011
 
Change
  June 30,
2012
  June 30,
2011
  %
Change
  June 30,
2012
  June 30,
2011
  Change
                                                 
Revenue Source                                                
New vehicles   13,778   13,281   3.7%   7.8%   7.2%   0.6%   25,196   22,508   11.9%   8.0%   7.5%   0.5%
Used vehicles   3,932   4,165   (5.6)%   6.6%   8.4%   (1.8)%   8,107   7,594   6.8%   6.9%   8.2%   (1.3)%
Finance & insurance and other   14,200   11,579   22.6%   91.1%   90.1%   1.0%   26,092   21,050   24.0%   91.3%   90.2%   1.1%
Subtotal   31,910   29,025   9.9%               59,395   51,152   16.1%            
Parts, service & collision repair   14,408   14,231   1.2%   52.9%   53.8%   (0.9)%   27,707   26,566   4.3%   52.5%   52.0%   0.5%
Total   46,318   43,256   7.1%   16.6%   15.9%   0.7%   87,101   77,718   12.1%   16.9%   16.6%   0.3%
                                                 

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,
2012
$
  June 30,
2011
$
  June 30,
2012
$
  June 30,
2011
$
Revenue (Note 6)   294,769   290,737   543,165   501,521
Cost of sales(Note 7)   (245,779)   (245,185)   (451,327)   (419,535)
Gross profit   48,990   45,552   91,838   81,986
Operating expenses (Note 8)   (37,661)   (35,127)   (73,041)   (67,018)
Operating profit before other income (expense)   11,329   10,425   18,797   14,968
(Loss) Gain on disposal of assets   (39)   35   (66)   28
Income from investment in associate (Note 11)   83   -   83   -
Operating profit   11,373   10,460   18,814   14,996
Finance costs (Note 9)   (2,943)   (2,794)   (5,274)   (4,914)
Finance income (Note 9)   497   313   940   580
Net comprehensive income for the period before taxation   8,927   7,979   14,480   10,662
Income tax (Note 10)   2,216   2,029   3,658   2,719
Net comprehensive income for the period   6,711   5,950   10,822   7,943
                 
Earnings per share                 
Basic   0.338   0.299   0.544   0.400
Diluted   0.338   0.299   0.544   0.400
                 
Weighted average shares                 
Basic   19,876,139   19,880,930   19,878,535   19,880,930
Diluted   19,876,139   19,880,930   19,878,535   19,880,930

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) "Robin Salmon", 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,
      2012 
(Unaudited)
$
  December 31,
       2011 
(Audited)
$
ASSETS        
Current assets        
Cash and cash equivalents   51,198       53,641
Trade and other receivables (Note 12)   52,042       42,448
Inventories (Note 13)   201,302      137,016
Other current assets   2,763         1,120
    307,305      234,225
Property and equipment   28,035        25,975
Investment in associate (Note 11)   4,237         -
Intangible assets   66,181         66,181
Goodwill   380         380
Other long-term assets   7,923         7,609
    414,061      334,370
LIABILITIES        
Current liabilities        
Trade and other payables (Note 15)   33,769        32,279
Revolving floorplan facilities (Note 16)   221,174      150,816
Current tax payable   5,500         2,046
Current lease obligations (Note 17)   1,152         1,204
Current indebtedness (Note 16)   2,806         2,859
    264,401       189,204
Long-term indebtedness (Note 16)   23,027   20,115
Deferred tax   9,126   12,056
    296,554   221,375
EQUITY   117,507   112,995
    414,061   334,370

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, 2012        190,435        -        3,918        194,353        (81,358)        112,995 
Net comprehensive income       -        -        -        -        10,822        10,822 
Dividends declared on common shares       -        -        -        -        (5,765)        (5,765) 
Common shares repurchased (Note 20)       -        (910)        -        (910)        -        (910) 
Share-based compensation       -        -        365        365        -        365 
Balance, June 30, 2012       190,435        (910)        4,283        193,808        (76,301)        117,507 
             
             
  Share
capital
$
Treasury
shares
$
Contributed
surplus
$
Total
capital
$
Accumulated
deficit
$
Equity
$
Balance, January 1, 2011        190,435        -        3,918        194,353        (111,979)        82,374 
Net comprehensive income       -        -        -        -        7,943        7,943 
Dividends declared on common shares       -        -        -        -        (3,777)        (3,777) 
Balance, June 30, 2011       190,435        -        3,918        194,353        (107,813)        86,540 

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, 2012
Three month
period ended
June 30, 2011
Six month
period ended
June 30, 2012
Six month
period ended
June 30, 2011
Cash provided by (used in):            
Operating activities            
Net comprehensive income           6,711        5,950        10,822        7,943 
Income taxes           2,216        2,029        3,658        2,719 
Amortization of prepaid rent           113        113        226        226 
Amortization of property and equipment           1,027        1,017        2,051        2,097 
Loss (Gain) on disposal of assets           39        (35)        66        (28) 
Share-based compensation           197        -        360        - 
Income from investment in associate           (83)        -        (83)        - 
Income taxes paid           (611)        -        (3,099)        - 
Net change in non-cash working capital           (3,040)        (3,785)        (3,925)        (3,499) 
            6,569        5,289        10,076        9,458 
Investing activities            
Investment in associate           (4,154)        -        (4,154)        - 
Purchases of property and equipment (Note 14)           (3,624)        (612)        (3,985)        (1,542) 
Prepayments of rent           -        (540)        (540)        (1,080) 
Proceeds on sale of property and equipment           6        9        40        6 
Proceeds on divestiture of subsidiary           -        1,464        -        1,464 
            (7,772)        321        (8,639)        (1,152) 
Financing activities            
Proceeds from long-term debt           3,000        -        3,000        - 
Repayment of long-term indebtedness           (111)        (115)        (205)        (220) 
Treasury shares purchased           (910)        -        (910)        - 
Dividends paid           (2,981)        (995)        (5,765)        (1,790) 
            (1,002)        (1,110)        (3,880)        (2,010) 
(Decrease) Increase in cash           (2,205)        4,500        (2,443)        6,296 
Cash and cash equivalents at beginning of period           53,403        39,337        53,641        37,541 
Cash and cash equivalents at end of period           51,198        43,837        51,198        43,837 

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 24 wholly owned franchised dealerships and 2 dealership investments in British Columbia, Alberta, Manitoba, Ontario, New Brunswick and Nova Scotia. In 2011, our dealerships sold approximately 28,000 vehicles and processed approximately 300,000 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 used vehicle sales, 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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