2014

/R E P E A T -- AutoCanada Inc. reports its financial results for the quarter ended September 30, 2011 and announces an increase in its quarterly dividend/

A conference call to discuss the results for the reporting period ended September 30, 2011 will be held on November 7, 2011 at 11:00 a.m. Eastern time. To participate in the conference call, please dial 1-888-231-8191 or (647) 427-7450 approximately 10 minutes prior to the call. The conference ID number is 10371711.  A live and archived audio webcast of the conference call will also be available on the Company's website www.autocan.ca.

EDMONTON, Nov. 4, 2011 /PRNewswire/ - AutoCanada Inc. (the "Company" or "AutoCanada") (TSX: ACQ) today announced financial results for the reporting period ended September 30, 2011.


                        2011 Third Quarter Operating Results

  • Revenue increased 16.8% or $38.8 million to $270.1 million
  • Gross profit increased by 17.8% or $6.7 million to $44.7 million
  • Same store revenue increased by 21.6% or $46.5 million
  • Same store gross profit increased by 22.9% or $8.2 million
  • EBITDA increased by 104.8% to $8.2 million from $4.0 million
  • Pre-tax earnings increased by 155.6% to $6.9 million from $2.7 million
  • Net earnings increased by 163.7% to $5.2 million from $2.0 million
  • The number of new vehicles retailed increased by 16.3%
  • The number of used vehicles retailed increased by 11.2%
  • Repair orders completed for the quarter decreased by 1.4%
  • Parts, service and collision repair gross profit increased 3.5%

In commenting on the financial results for the three month period ended September 30, 2011, Pat Priestner, Chief Executive Officer of AutoCanada Inc. stated that, "We are pleased to announce the results of another great quarter.  New vehicle sales and the resulting finance and insurance product sales contributed to the significant increase in earnings.  We are also happy with the improvements made in used vehicle volumes and gross profit.  Management has been working on a number of initiatives to improve used vehicle sales and the improvement in the third quarter is encouraging."  Mr. Priestner also commented on the Board of Directors approval of an increase in the quarterly dividend. "The strong results in the third quarter and our outlook for the future were determining factors in the decision to increase the dividend to an annual rate of $0.48 per common share from $0.40 per share.  We have tripled the annual rate of our dividend since the beginning of the year and believe that providing significant value to our shareholders is our best use of capital at this time." 

Third Quarter 2011 Highlights

  • The Company generated net earnings of $5.2 million or basic and diluted earnings per share of $0.26.  Pre-tax earnings increased by $4.2 million or 155.6% to $6.9 million in the third quarter of 2011 as compared to $2.7 million for the same period in 2010.

  • Same store revenue increased by 21.6% and same store gross profit increased by 22.9% in the third quarter of 2011, compared to the same quarter in 2010.

  • Revenue from existing and new dealerships increased 16.8% to $270.1 million in the third quarter of 2011 from $231.3 million in the same quarter in 2010.

  • Gross profit from existing and new dealerships increased 17.8% to $44.7 million in the third quarter of 2011 from $38.0 million in the same quarter in 2010.

  • EBITDA increased by 104.8% to $8.2 million in the third quarter of 2011 from $4.0 million in the same quarter in 2010.

  • Adjusted free cash flow increased to $7.8 million in the third quarter of 2011 or $0.392 per share as compared to $3.5 million or $0.175 per share in 2010.

  • Free cash flow increased to $10.2 million in the third quarter of 2011 or $0.511 per share as compared to $4.4 million or $0.222 per share in the third quarter of 2010.

  • Adjusted return on capital employed for the trailing 12 months increased to 18.1% for the period ended September 30, 2011 as compared to 12.1% in same period of the prior year.

Dividends to Shareholders

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 or the Directors, 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 2011:

(In thousands of dollars)                  
            Total
Record date Payment date           Declared Paid
              $ $
February 28, 2011 March 15, 2011           795 795
May 31, 2011 June 15, 2011           995 995
August 31, 2011 September 15, 2011           1,988 1,988
November 30, 2011 December 15, 2011           2,386 -

On November 4, 2011 the Board declared a quarterly eligible dividend of $0.12 per common share on AutoCanada's outstanding Class A common shares, payable on December 15, 2011 to shareholders of record at the close of business on November 30, 2011.  The quarterly eligible dividend of $0.12 represents an annual dividend rate of $0.48 per share or a 20% increase in the dividend 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.  Columns marked "IFRS" represent financial information which has been restated for the Company's adoption of International Financial Reporting Standards ("IFRS") on January 1, 2010.  Columns marked "CGAAP" represent financial information which has not been restated for the Company's adoption of IFRS and readers are cautioned that these columns may not provide appropriate comparative information.

(In thousands of dollars except
Operating Data and gross profit %)
               
  Q4
2009
CGAAP
Q1
2010
IFRS
Q2
2010
IFRS
Q3
2010
IFRS
Q4
2010
IFRS
Q1
2011
IFRS
Q2
2011
IFRS
Q3
2011
IFRS
Income Statement Data                
  New vehicles 102,124 114,531 144,673 141,553 114,382 128,318 196,916 172,732
  Used vehicles 48,805 49,034 57,181 50,922 45,414 44,906 52,054 55,350
  Parts, service & collision repair 27,639 26,922 28,376 27,279 29,165 27,164 29,263 27,754
  Finance, insurance & other 10,069 10,275 12,663 11,536 10,771 11,255 13,775 14,250
Revenue 188,637 200,672 242,894 231,290 199,732 211,643 292,008 270,086
                 
  New vehicles 7,157 7,975 10,846 9,557 8,856 9,528 13,763 12,555
  Used vehicles 4,396 4,099 4,906 4,221 3,659 3,486 4,302 5,020
  Parts, service & collision repair 13,428 13,107 14,443 13,831 13,835 13,146 15,023 14,317
  Finance, insurance & other 9,150 9,300 11,376 10,351 9,689 10,133 12,329 12,817
Gross profit 34,131 34,481 41,571 37,960 36,038 36,293 45,417 44,709
                 
Gross profit % 18.1% 17.2% 17.1% 16.4% 18.0% 17.2% 15.6% 16.6%
Operating expenses 29,313 30,740 34,280 33,205 30,812 31,879 35,116 35,738
Operating exp. as % of gross profit 85.9% 89.2% 82.5% 87.5% 85.5% 87.8% 77.3% 79.9%
Finance costs - floorplan 1,382 1,670 2,230 2,042 1,556 1,685 2,311 2,190
Finance costs - long-term debt 552 236 230 278 534 283 323 296
Income taxes 248 516 1,330 692 2,404 690 2,029 1,646
Net earnings 4 1,675 1,414 3,624 1,983 7,585 1,995 5,949 5,230
EBITDA 1, 4 3,271 3,096 6,164 4,011 3,469 4,046 9,318 8,216
                 
Operating Data
Vehicles (new and used) sold
5,451 5,676 6,994 6,350 5,219 5,826 8,210 7,649
New retail vehicles sold 2,559 2,787 3,614 3,358 3,008 3,050 4,158 3,907
New fleet vehicles sold 695 661 919 831 306 796 1,900 1,340
Used retail vehicles sold 2,197 2,228 2,461 2,161 1,905 1,980 2,152 2,402
Number of service & collision repair orders completed 76,853 75,311 80,072 77,285 85,035 72,360 80,851 76,176
Absorption rate 2 91% 85% 87% 85% 86% 80% 91% 90%
# of dealerships at period end 22 22 23 23 23 23 22 22
# of same store dealerships 3 19 19 19 19 21 22 21 21
# of service bays at period end 331 331 339 339 339 339 322 322
Same store revenue growth 3 1.3% 16.9% 19.4% 6.7% 2.4% 2.7% 19.3% 21.6%
Same store gross profit growth 3 (1.1)% 11.1% 7.5% (4.0)% 2.9% 2.9% 8.2% 22.9%
                 
Balance Sheet Data                
Cash and cash equivalents 22,465 23,615 31,880 34,329 37,541 39,337 43,837 49,366
Accounts receivable 35,388 40,701 46,787 37,149 32,853 42,260 51,539 44,172
Inventories 108,324 153,847 177,294 137,507 118,365 134,865 149,481 159,732
Revolving floorplan facilities 102,650 160,590 194,388 145,652 124,609 152,075 172,600 175,291

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.

Company management considers same store gross profit and sales information to be an important operating metric when comparing the results of the Company to other industry participants.

     

Same Store Revenue and Vehicles Sold
               
  For the Three Months Ended    For the Nine Months Ended
(In thousands of dollars except % change and vehicle data) September 30,
2011
September 30,
2010
% Change   September 30,
2011
September 30,
2010
% Change
               
Revenue Source
New vehicles
166,873 130,291         28.1%  
  468,910

  376,045
     24.7%
Used vehicles       54,222       49,045
   10.6%
        147,133       151,473      (2.9)%
Finance & insurance and other 13,818       10,803             27.9%         37,353       32,819      13.8%
Subtotal 234,913 190,140               653,396       560,337    
Parts, service & collision repair   26,990   25,233   7.0%     79,726   76,780 3.8%
Total 261,903 215,373 21.6%   733,122 637,118 15.1%
New vehicles - retail sold       3,680       3,023     21.7%         10,189       9,051       12.6%
New vehicles - fleet sold       1,341       782       71.5%         3,931       2,295       71.3%
Used vehicles sold 2,330 2,063 12.9%   6,228 6,607 (5.7)%
Total 7,351 5,868 25.3%     20,348   17,953 13.3%
Total vehicles retailed 6,010 5,086 18.2%     16,417   15,658 4.8%

The following table summarizes the results for the three and nine month periods ended September 30, 2011 on a same store basis by revenue source, and compare these results to the same period in 2010.

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 %) Sept 30,
2011
Sept 30,
2010
%
Change
Sept 30,
2011
Sept 30,
2010
Change   Sept 30,
2011
Sept 30,
2010
%
Change
Sept 30,
2011
Sept 30,
2010
Change
                           
Revenue Source
New vehicles
12,245       9,040       35.5%      7.3%      6.9%       0.4%         34,346       27,071       26.9%   7.3%   7.2%   0.1%
Used vehicles       5,314       4,202       26.5%        9.8%        8.6%      1.2%         12,499       13,152       (5.0)% 8.5% 8.7% (0.2)%
Finance &
insurance and
other
      12,524       9,761 28.3%       90.6%       90.4%   0.2%         33,833       29,671       14.0% 90.6% 90.4%   0.2%
Subtotal       30,083       23,003 30.8%               80,678       69,894       15.4%      
Parts, service & collision repair 13,944 12,832 8.7% 51.7% 50.9% 0.8%   40,263 38,456 4.7% 50.5% 50.1% 0.4%
Total 44,027 35,835 22.9% 16.8% 16.6%   0.2%   120,940 108,350 11.6% 16.5% 17.0% (0.5)%

AutoCanada Inc.
Interim Consolidated Statement of Financial Position
(Unaudited)
(in thousands of Canadian dollars)
     
  September 30,
      2011 
$
December 31,
      2010 
$
January 1,
2010
$
ASSETS      
Current assets      
Cash and cash equivalents (Note 11) 49,366       37,541        21,528 
Trade and other receivables (Note 12) 44,172       32,854        35,323 
Inventories (Note 13) 159,732       118,262        108,324 
Other current assets 1,568       1,148        1,646 
  254,838       189,805        166,821 
Property and equipment (Note 14) 25,223       25,590        17,600 
Intangible assets (Note 15) 40,018       40,018        30,600 
Goodwill 309       309        - 
Other long-term assets (Note 17) 7,180       5,909        2,198 
Deferred tax -       -        3,492 
  327,568       261,631        220,711 
LIABILITIES      
Current liabilities      
Trade and other payables (Note 18) 30,204       26,818        24,831 
Revolving floorplan facilities (Note 19) 175,291       124,609        102,370 
Current tax payable 2,026       -        - 
Current lease obligations (Note 20) 1,291       907        175 
Current indebtedness (Note 19) 2,884       277        96 
  211,791       152,611        127,472 
Long-term lease obligations (Note 20) 51       120        289 
Long-term indebtedness (Note 19) 20,159       24,974        22,785 
Deferred tax 3,796       1,552        - 
  235,797       179,257        150,546 
EQUITY      
Share capital (Note 22) 190,435       190,435        190,435 
Contributed surplus 3,918       3,918        3,918 
Accumulated deficit (102,582)       (111,979)        (124,188) 
  91,711       82,374        70,165 
  327,568       261,631        220,711 

Approved on behalf of the Company:
 
(Signed) "Gordon R. Barefoot", Director                  (Signed) "Robin Salmon", Director

AutoCanada Inc.
Interim Consolidated Statement 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,
2011
$
September 30,
2010
$
September 30,
2011
$
September 30,
2010
$
Revenue (Note 4) 270,086 231,290 773,737 674,946
Cost of sales (Note 5) (225,377) (193,330) (647,318) (560,934)
Gross profit 44,709 37,960 126,419 114,012
Operating expenses (Note 6) (35,738) (33,205) (102,733) (98,227)
Operating profit before other income 8,971 4,755 23,686 15,785
Gain on disposal of assets 1 10 29 14
Operating profit 8,972 4,765 23,715 15,799
Finance costs (Note 8) (2,651) (2,464) (7,564) (7,127)
Finance income (Note 8) 555 374 1,388 886
Net comprehensive income for the period before taxation 6,876 2,675 17,539 9,558
Income tax (Note 9) 1,646 692 4,365 2,538
Net comprehensive income for the period 5,230 1,983 13,174 7,020
         
Earnings per share         
Basic        0.263        0.100        0.663        0.353 
Diluted        0.263        0.100        0.663        0.353
         
Weighted average shares         
Basic        19,880,930        19,880,930        19,880,930        19,880,930 
Diluted        19,880,930        19,880,930        19,880,930        19,880,930 

AutoCanada Inc.
Interim Consolidated Statement of Changes in Equity
(Unaudited)
(in thousands of Canadian dollars)
 
  Share
capital
$
Contributed
surplus
$
Total
capital
$
Accumulated
deficit
$
Total
$
Balance,  January 1, 2011        190,435        3,918        194,353        (111,979)        82,374 
Net comprehensive income       -        -        -        13,174        13,174 
Dividends declared on common shares       -        -        -        (3,777)        (3,777) 
Balance, September 30, 2011       190,435        3,918        194,353        (102,582)        91,771 
           
  Share
capital
$
Contributed
surplus
$
Total
capital
$
Accumulated
deficit
$
Total
$
Balance, January 1, 2010        190,435        3,918        194,353        (124,188)        70,165 
Net comprehensive income       -        -        -        7,020  7,020
Dividends declared on common shares       -        -        -        (1,590)        (1,590) 
Balance, September 30, 2010       190,435        3,918        194,353        (118,758)  75,595

AutoCanada Inc.
Interim Consolidated Statement of Cash Flows
(Unaudited)
(in thousands of Canadian dollars)
      Three month
period ended
September 30,
2011
Three month
period ended
September 30,
2010
Nine month
period ended
September 30,
2011
Nine month
period ended
September 30,
2010
Cash provided by (used in):            
Operating activities            
Net comprehensive income     5,230 1,983 13,174 7,020
Income taxes (Note 9)     1,646 692 4,365 2,538
Amortization of prepaid rent (Note 24)     113 113 339 339
Amortization of property and equipment     1,044 1,058 3,141 2,964
Gain on disposal of assets     (1) (11) (29) (14)
Net change in non-cash working capital     2,818 1,148 (681) 13,680
            10,850  4,983       20,309  26,527
Investing activities            
Business acquisitions           -        -        -        (3,550) 
Purchases of property and equipment           (694)        (6,660)        (2,236)        (8,358) 
Disposal of other assets           2        -        7        - 
Prepayments of rent (Note 24)           (540)        (540)        (1620)        (1,620) 
Proceeds on sale of property and equipment           -        23        -        94 
Proceeds on divestiture of subsidiary (Note 10)           -        -        1,464        - 
            (1,232)        (7,177)        (2,385)        (13,434) 
Financing activities            
Proceeds from long-term debt            - 5,510 - 5,510
Repayment of long-term indebtedness           (2,102)        (72)        (2,322)        (4,212) 
Dividends paid           (1,987)        (795)        (3,777)        (1,590) 
            (4,089)        4,643        (6,099)        (292) 
Increase in cash           5,529        2,449        11,825        12,801 
Cash and cash equivalents at beginning of period           43,837  31,880        37,541        21,528 
Cash and cash equivalents at end of period           49,366        34,329        49,366        34,329 

About AutoCanada

AutoCanada is one of Canada's largest multi-location automobile dealership groups, currently operating 22 franchised dealerships in British Columbia, Alberta, Manitoba, Ontario, New Brunswick and Nova Scotia. In 2010, our dealerships sold approximately 24,000 vehicles and processed approximately 317,000 service and collision repair orders in our 339 service bays at 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 foregoing factors are further discussed in the Company's Annual Information Form dated March 17, 2011 which is filed on SEDAR at www.sedar.com.

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.

TRANSITION TO IFRS

This press release contains information representing the interim consolidated financial statements of the Company prepared in accordance with IFRS, as issued by the IASB.  The Company's consolidated financial statements were previously prepared in accordance with Canadian GAAP.  The Company adopted IFRS in accordance with IFRS 1 - First-time Adoption of International Financial Reporting Standards.  The first date at which IFRS was applied was January 1, 2010.  For further detail regarding the transition to IFRS, readers may refer to Note 29 - Transition to IFRS of the interim consolidated financial statements of the Company for the period ended March 31, 2011.

NON-GAAP MEASURES

This press release contains certain financial measures that do not have any standardized meaning prescribed by 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 income (loss) or to cash provided by (used in) operating, investing, and financing activities determined in accordance with 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 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.

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.

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.

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, Absorption Rate, Adjusted Average Capital Employed and Adjusted 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, Absorption Rate, Adjusted Average Capital Employed and Adjusted Return on Capital Employed may differ from the methods used by other issuers. Therefore, the Company's EBITDA, EBIT, Free Cash Flow, Absorption Rate, Adjusted Average Capital Employed and Adjusted 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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