AutoCanada Reports 2019 Fourth Quarter and Annual Results
EDMONTON, March 12, 2020 /PRNewswire/ - AutoCanada Inc. ("AutoCanada" or the "Company") (TSX: ACQ), a multi-location North American automobile dealership group, today reported its financial results for the three month period and year ended December 31, 2019. All figures are in Canadian dollars, unless otherwise stated.
"We've ended the year with a third consecutive strong quarter and a year marked by key wins and accomplishments", said Paul Antony, Executive Chairman. "We've proven out the Go Forward Plan in Canada and that we can build out a complete, stable and growth oriented business model for any economic environment. We've stabilized operations in the US and are moving towards positive contributions in 2020. We've fixed our balance sheet with our recent refinancing of the credit facility and the senior unsecured debentures, substantively improving upon our credit profile and financial flexibility. We enter 2020 on solid footing, with a proven business model, able to weather the current uncertainties associated with the COVID-19".
Consolidated AutoCanada 2019 Fourth Quarter Highlights (1)
DEBT REFINANCING COMPLETED ON THE HEELS OF A THIRD CONSECUTIVE STRONG QUARTER
The Company performed well in the fourth quarter, building on the momentum from our strong second and third quarters.
-- Revenue was $809.1 million, an increase of $26.3 million or 3.4%
-- Total vehicles sold were 16,593, an increase of 317 units or 1.9%
-- Net income (loss) for the period was $(16.8) million (or $(0.61) per
diluted share) versus $(36.0) million (or $(1.30) per diluted share). In
the period, impairment charges of $(24.0) million were incurred as
compared to impairment charges of $(23.8) million in 2018. The adoption
of IFRS 16 resulted in additional total expenses, which negatively
affected the Company's net (loss) in the quarter by $(2.5) million
-- Total impairment charge of $(24.0) million is comprised of $18.2 million
impairment of the U.S operating segment as management has taken a
conservative view on the outlook of the U.S. platform, and a small
recovery of $0.2 million related to the Canadian operating segment.
There was an additional $6.0 million impairment charge to the redundant
non-core asset portfolio
-- Adjusted EBITDA increased 236.1% to $21.1 million, an increase of $14.8
million; of the $14.8 million increase, $10.1 million was attributed to
the impact of IFRS 16. Adjusting for the impact of IFRS 16, Adjusted
EBITDA was $10.9 million, an increase of 74.3% over the prior year
-- Continued focus on working capital initiatives and continued
improvements in operational performance allowed the Company to reduce
its net indebtedness by $44.5 million in the quarter
Canadian Operations Highlights
SAME STORE UNIT GROWTH OF 10.5% DRIVES 31% NORMALIZED ADJUSTED EBITDA GROWTH
Management continued to focus on implementing and building upon its Go Forward initiatives for Canadian Operations during the quarter. Earnings performance was driven by a combination of strong unit growth, the impact of our F&I initiative and our focus on improving used retail vehicle sales. Same store new retail unit sales growth was 1.3% as compared to the market decrease of (1.2)%, for brands represented by AutoCanada. Sales growth and gross profit improvement are supported by our continued focus on OEM relationships, which includes achieving sales unit and customer satisfaction targets and a number of other key measures as reflected within the various OEM balanced scorecards. Our F&I initiative helped increase gross profit per retail unit average to $2,475, an increase of 14.6%. In line with our initiative to sell more used vehicles through retail sales rather than wholesaling, our used to new retail units ratio increased to 0.84 in the quarter, from 0.69 .
-- Revenue was $698.3 million, up 6.9%
-- Total retail vehicles sold were 13,211, an increase of 1,024 units or
8.4%
-- Same store new and used retail unit sales increased 10.5% to 12,243
-- Used to new retail units ratio increased to 0.84 from 0.69, an increase
of 20.6%
-- Net (loss) income for the period was $6.0 million, up 213.5% from a net
loss of $(5.3) million in 2018. 2019 results included impairment charges
of $5.8 million versus $0.4 million in 2018. The adoption of IFRS 16
resulted in additional total expenses, which negatively affected the
Canadian Operations segment net income (loss) by $1.3 million
-- Adjusted EBITDA increased 93.3% to $22.1 million, an increase of $10.7
million; IFRS 16 resulted in an increase to Adjusted EBITDA of $9.2
million. Adjusting for the impact of IFRS 16 in 2019, Adjusted EBITDA
was $12.9 million, an increase of 12.5% over the prior year
-- Sale and leaseback transactions executed from the beginning of 2019 to
the end of Q3 2019 resulted in an increase of $2.1 million lease costs
in the quarter in comparison to prior year. Normalizing prior year
results for these sale-leaseback costs, Adjusted EBITDA reflected an
increase of 31% over the prior year.
U.S. Operations Highlights
CONTINUED PROGRESS - BETTER THAN BREAK-EVEN RESULTS
The U.S. Operations segment continued to see improvements as a result of the focus on improving the expense structure which included a reset of all vendor contracts and restructuring of compensation towards performance-based rather than fixed arrangements. Time in position for the new management team has impacted the progress of operational performance, as indicated by Adjusted EBITDA being $(1.1) million, as compared to $(5.2) million in the prior year. The net assets and liabilities of four dealerships have been reclassified out of held for sale as at December 31, 2019.
-- Revenue was $110.8 million, a decrease of (14.6)%
-- Retail unit sales decreased to 2,542, down 430 units or (14.5)%
-- Net (loss) income for the period was $(22.8) million versus $(30.8)
million in 2018. 2019 results included impairment charges of $18.2
million versus $23.4 million in 2018. IFRS 16 adjustments resulted in
additional total expenses for the U.S. segmented operations for the
period, which negatively affected the U.S. Operations segment net income
(loss) by $0.7 million
-- Adjusted EBITDA was $(1.1) million, an increase of $4.1 million from
2018; IFRS 16 resulted in an increase to Adjusted EBITDA of $0.9
million. Adjusting for the impact of IFRS 16 in 2019, Adjusted EBITDA
was $(2.0) million as compared to $(5.2) million in the prior year
-- Results for the quarter include the impact of $3.7 million in
write-downs primarily associated with receivables and inventory in our
U.S. segment. Adjusting for the impact of IFRS 16 in 2019, normalized
Adjusted EBITDA would have been $1.8 million as compared to $(5.2)
million in the prior year.
Same Store Metrics
SAME STORE USED RETAIL UNIT SALES GROWTH OF 23.6%
Total same store new and used retail unit sales for Canadian Operations increased 10.5% to 12,243, with new retail units showing an increase of 1.3% and used retail units up 23.6%. The increase of new retail units by 1.3% compares with a market decrease of (1.2)% in the Canadian new vehicle market for the brands represented by AutoCanada, as reported by DesRosiers Automotive Consultants. The same stores metric includes only Canadian dealerships which have been owned for at least two full years since acquisition.
-- Revenue increased to $647.9 million, an increase of 8.7%
-- Gross profit increased by $12.1 million or 11.8%
-- Used to new retail units ratio increased to 0.86 from 0.70
-- Finance and insurance gross profit per retail unit average increased to
$2,512, up 15.8% or $343 per unit; Gross profit increased to $30.7
million as compared to $24.0 million in the prior year
-- Parts, service and collision repair gross profit increased to $49.3
million, an increase of 4.3%
Financing and Investing Activities and Other Recent Developments
NET INDEBTEDNESS REDUCED TO $157.9 MILLION
In continuation of the Company's optimization of the balance sheet and operations, the following transactions occurred in the three-month period ended December 31, 2019:
-- A Canadian redundant property was sold for $2.7 million in proceeds,
which resulted in a net loss of $(0.2) million
-- Ceased operations of two under-performing U.S. franchises, on November
11, 2019.
Subsequent to December 31, 2019, the Company completed the following financing transactions on February 11, 2020. The transactions improved the overall credit profile of the Company, increasing the average tenor as of December 31, 2019 of long-term debt from approximately 16 months to approximately 4 years:
-- Entered into an amended and restated $950 million syndicated credit
facility (the "New Credit Facility"), with a maturity date of February
11, 2023
-- Closed $125 million of 8.75% senior unsecured notes due February 11,
2025
-- S&P Global Ratings ("S&P") revised the Company's outlook to stable,
affirmed its 'B' issuer credit rating and assigned a 'B-' rating to the
Company's $125 million senior unsecured notes
Dividends
On February 21, 2020, the Board of Directors of the Company declared a quarterly eligible dividend of $0.10 per common share on the Company's outstanding Class A common shares, payable on March 16, 2020 to shareholders of record at the close of business on March 2, 2020.
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 designating dividends as "eligible dividends".
Subsequent Events
Senior Unsecured Notes
The Company issued $125 million 8.75% Senior Unsecured Notes (the "New Notes") on February 11, 2020 to fund the Tender Offer for all the outstanding $150 million Notes. Through the Tender Offer, the Company redeemed $124 million of the outstanding $150 million Notes on February 13, 2020. Subsequent to the settlement of the Tender Offer, the Company issued a call notice for the remaining $26 million outstanding Notes with an expected settlement date of March 13, 2020 at which point the Company will extinguish the outstanding Notes using proceeds from the New Credit Facility. The New Notes hold a term of five-years and mature February 11, 2025.
The New Notes were issued at a discounted issue price of $990.11 per $1,000 principal amount of notes (99.011%) for an issue yield of 9.00%. Interest is payable semi-annually on February 11 and August 11 of each year the Notes are outstanding. The initial interest payment date for the New Notes will be August 11, 2020.
Amended and Restated Credit Facilities
On February 11, 2020, the Company entered into an amended and restated $950 million syndicated credit agreement ("New Credit Facility") with Scotiabank, CIBC, RBC, HSBC, ATB and the Bank of Montreal ("BMO"). The New Credit Facility has specified-use tranches and provides the Company with revolving credit capacity for operational and growth purposes as well as floorplan financing to assist with the purchasing of inventory. The maturity of the New Credit Facility is February 11, 2023.
The following table summarizes the Company's results for the quarter and year ended December 31, 2019:
Three Months Ended December 31 Year Ended December 31
Consolidated
Operational Data 2019 2018 % Change 2019 2018 % Change
---
Revenue 809,103 782,790 3.4% 3,476,111 3,150,781 10.3
%
Gross profit 139,676 128,204 8.9% 570,495 507,963 12.3
%
Gross profit % 17.3% 16.4% 0.9% 16.4% 16.1% 0.3
%
Operating expenses 125,140 125,039 0.1% 499,768 474,804 5.3
%
Operating (loss) (6,597) (6,569) (0.4)% 42,474 (38,642) (209.9)
profit %
Net (loss) for the (16,786) (36,013) 53.4% (27,073) (85,442) (68.3)
period %
Basic net (loss) per (0.63) (1.30) 51.5% (1.03) (3.14) (67.2)
share attributable to %
AutoCanada
shareholders
---
Adjusted EBITDA 1, 2 21,065 6,268 236.1% 97,203 50,673 91.8
%
---
New retail vehicles 8,796 9,214 (4.5)% 37,687 36,495 3.3
sold (units) %
New fleet vehicles 840 1,117 (24.8)% 5,547 6,956 (20.3)
sold (units) %
---
Total new vehicles 9,636 10,331 (6.7)% 43,234 43,451 (0.5)
sold (units) %
Used retail vehicles 6,957 5,945 17.0% 28,107 23,159 21.4
sold (units) %
---
Total vehicles sold 16,593 16,276 1.9% 71,341 66,610 7.1
%
---
Same store new retail 6,592 6,505 1.3% 28,678 28,171 1.8
vehicles sold (units) %
Same store new fleet 792 954 (17.0)% 5,098 6,134 (16.9)
vehicles sold (units) %
Same store used retail 5,651 4,571 23.6% 22,752 18,577 22.5
vehicles sold (units) %
---
Same store total 13,035 12,030 8.4% 56,528 52,882 6.9
vehicles sold %
Same store revenue 647,885 595,984 8.7% 2,798,855 2,582,351 8.4
%
Same store gross 114,334 102,268 11.8% 471,726 430,724 9.5
profit %
Same store gross 17.6% 17.2% 0.4% 16.9% 16.7% 0.2
profit % %
===
See the Company's Management's
Discussion and Analysis for the
quarter and year ended December 31,
2019 for complete footnote
disclosures.
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.
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
2019 2019 2019 2019 2018 2018 2018 2018
Income Statement
Data
New vehicles 430,102 555,843 554,686 398,983 432,756 509,281 522,150 338,016
Used vehicles 217,063 262,297 223,258 188,619 192,988 206,668 198,597 157,901
Parts, service and
collision repair 120,564 116,439 125,822 116,902 121,304 113,087 121,476 95,893
Finance, insurance
and other 41,374 47,291 42,001 34,867 35,742 37,882 38,365 28,675
---
Revenue 809,103 981,870 945,767 739,371 782,790 866,918 880,588 620,485
---
New vehicles 29,570 36,755 36,645 27,527 25,861 29,150 30,648 23,473
Used vehicles 12,676 11,731 13,936 11,112 8,637 12,955 13,173 8,562
Parts, service and
collision repair 58,763 59,641 64,518 55,744 60,380 57,206 60,868 45,533
Finance, insurance
and other 38,667 42,627 38,267 32,316 33,326 35,524 35,891 26,776
---
Gross Profit 139,676 150,754 153,366 126,699 128,204 134,835 140,580 104,344
---
Gross profit % 17.3% 15.4% 16.2% 17.1% 16.4% 15.6% 16.0% 16.8%
Operating expenses
5, 8 125,140 124,772 128,190 121,666 125,039 126,492 127,492 95,781
Operating expenses
as a % of gross
profit 5, 9 89.6% 82.8% 83.6% 96.0% 97.5% 93.8% 90.7% 91.8%
Operating (loss)
profit 5, 8 (6,597) 16,695 18,905 13,471 (6,569) (5,260) (42,719) 15,906
Impairment
(recovery) of non-
financial assets 5 24,001 12,574 23,828 19,569 58,097
Net (loss) income
5, 8 (16,786) (4,104) (3,512) (2,671) (36,013) (15,007) (39,426) 5,004
Basic net (loss)
income per share
attributable to
AutoCanada
shareholders 5 (0.63) (0.15) (0.15) (0.10) (1.30) (0.56) (1.47) 0.18
Diluted net (loss)
income per share
attributable to
AutoCanada
shareholders 5 (0.63) (0.15) (0.15) (0.10) (1.30) (0.56) (1.47) 0.18
Dividends declared
per share 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10
---
Adjusted EBITDA 2,
5, 6, 7, 8 21,065 32,489 32,100 11,549 6,268 16,185 16,814 11,406
Free cash flow 2,
5, 6, 9 65,825 53,527 (20,719) 155 (4,879) 6,105 (14,639) (13,834)
---
Operating Data
New retail vehicles
sold (3) 8,796 10,419 10,310 8,162 9,214 10,353 10,264 6,664
New fleet vehicles
sold (3) 840 1,849 1,794 1,064 1,117 2,121 2,242 1,476
Total new vehicles
sold (3) 9,636 12,268 12,104 9,226 10,331 12,474 12,506 8,140
Used retail
vehicles sold (3) 6,957 7,384 7,249 6,517 5,945 6,645 6,042 4,527
---
Total vehicles sold
(3) 16,593 19,652 19,353 15,743 16,276 19,119 18,548 12,667
---
# of service and
collision repair
orders completed
(3) 225,595 218,523 242,134 213,672 245,682 241,103 248,167 180,429
# of dealerships at
year end 63 64 65 66 68 68 68 54
# of same store
dealerships (1) 47 47 47 47 47 49 49 49
# of service bays
at year end 1,047 1,086 1,097 1,113 1,157 1,106 1,106 906
Same stores revenue
growth (1) 8.7% 20.4% 4.7% (1.6)% (3.0)% (3.0)% (5.1)% 4.6%
Same stores gross
profit growth (1) 11.8% 13.9% 6.8% 1.9% (3.0)% (8.5)% (4.3)% 1.0%
===
See the Company's Management's
Discussion and Analysis for the
quarter ended December 31, 2019 for
complete footnote disclosures
The following tables summarize the results for the quarter and year ended December 31, 2019 on a same store basis by revenue source and compares these results to the same period in 2018.
Same Store Revenue and Vehicles Sold
Three Months Ended December 31 Year Ended December 31
2019 2018 % Change 2019 2018 % Change
Revenue source
New vehicles -
Retail 305,882 276,374 10.7% 1,323,372 1,204,648 9.9%
New vehicles -
Fleet 31,848 45,814 (30.5)% 205,409 260,457 (21.1)%
---
Total new
vehicles 337,730 322,188 4.8% 1,528,781 1,465,105 4.3%
Used vehicles -
Retail 140,980 116,082 21.4% 569,120 470,197 21.0%
Used vehicles -
Wholesale 37,896 34,694 9.2% 178,255 154,829 15.1%
---
Total used
vehicles 178,876 150,776 18.6% 747,375 625,026 19.6%
Parts, service
and collision
repair 97,953 97,385 0.6% 385,578 375,762 2.6%
Finance,
insurance and
other 33,326 25,635 30.0% 137,121 116,458 17.7%
---
Total 647,885 595,984 8.7% 2,798,855 2,582,351 8.4%
---
New retail
vehicles sold
(units) 6,592 6,505 1.3% 28,678 28,171 1.8%
New fleet
vehicles sold
(units) 792 954 (17.0)% 5,098 6,134 (16.9)%
---
Total new
vehicles sold
(units) 7,384 7,459 (1.0)% 33,776 34,305 (1.5)%
Used retail
vehicles sold
(units) 5,651 4,571 23.6% 22,752 18,577 22.5%
---
Total vehicles
sold (units) 13,035 12,030 8.4% 56,528 52,882 6.9%
---
Total vehicles
retailed (units) 12,243 11,076 10.5% 51,430 46,748 10.0%
===
Same Store Gross Profit and Profit Percentage
Three Months Ended December 31
Gross Profit Gross Profit %
2019 2018 % Change 2019 2018
Revenue source
New vehicles -
retail 21,926 22,020 (0.4)% 7.2% 8.0%
New vehicles -
fleet 961 990 (2.9)% 3.0% 2.2%
---
Total new
vehicles 22,887 23,010 (0.5)% 6.8% 7.1%
Used vehicles -
retail 11,497 7,413 55.1% 8.2% 6.4%
Used vehicles -
wholesale (124) 560 (122.2)% (0.3)% 1.6%
---
Total used
vehicles 11,373 7,973 42.6% 6.4% 5.3%
Parts, service
and collision
repair 49,324 47,268 4.3% 50.4% 48.5%
Finance,
insurance and
other 30,750 24,017 28.0% 92.3% 93.7%
---
Total 114,334 102,268 11.8% 17.6% 17.2%
===
MD&A and Financial Statements
Information included in this press release is a summary of results. It should be read in conjunction with AutoCanada's consolidated financial statements and management's discussion and analysis for the quarter ended December 31, 2019, which can be found on the Company's website at www.autocan.ca or on www.sedar.com.
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. The following "Non-GAAP Measures" are defined in the annual MD&A: Adjusted EBITDA; Free Cash Flow; Average Capital Employed; Return on Capital Employed; Net Indebtedness and Lease Adjusted Leverage Ratio.
Conference Call
A conference call to discuss the results for the quarter and year ended December 31, 2019 will be held on March 13, 2020 at 9:00am Mountain (11:00am Eastern). To participate in the conference call, please dial 1.888.231.8191 approximately 10 minutes prior to the call.
AutoCanada's presentation that will be discussed on the conference call is available at the Company's website at www.autocan.ca.
This conference call will also be webcast live over the internet and can be accessed by all interested parties at the following URL: https://www.autocan.ca/investors/Q42019/.
About AutoCanada
AutoCanada, a leading North American multi-location automobile dealership group currently operating 63 franchised dealerships, comprised of 26 brands, in eight provinces in Canada as well as a group in Illinois, USA and has over 4,200 employees. AutoCanada currently sells Chrysler, Dodge, Jeep, Ram, FIAT, Alfa Romeo, Chevrolet, GMC, Buick, Cadillac, Ford, Infiniti, Nissan, Hyundai, Subaru, Audi, Volkswagen, Kia, Mazda, Mercedes-Benz, BMW, MINI, Volvo, Toyota, Lincoln, and Honda branded vehicles. In 2019, our dealerships sold approximately 71,000 vehicles and processed approximately 900,000 service and collision repair orders in our 1,047 service bays generating revenue in excess of $3 billion.
Additional information about AutoCanada Inc. is available at www.sedar.com and the Company's website at www.autocan.ca.
Forward Looking Statements
Certain statements contained in this press release are forward-looking statements and information (collectively "forward-looking statements", including "with respect to", "among other things", "future performance", "expense reductions" and the "Go Forward Plan"), 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", "plan", "seek", "may", "intend", "likely", "will", "believe", "shall" 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 at 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.
Additional Information
Additional information about AutoCanada is available at the Company's website at www.autocan.ca and www.sedar.com.
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SOURCE AutoCanada Inc.
