EDMONTON, Aug. 4, 2016 /CNW/ - AutoCanada Inc. (the "Company" or "AutoCanada") (TSX: ACQ) today announced financial results for the quarter ended June 30, 2016.

• AutoCanada achieved basic earnings per share of $0.53 for the quarter, exceeding consensus estimates of $0.52.
  
  
• The Company generated net income of $16.7 million, exceeding net income achieved in Q2, 2015 of $15.8 million.
  
  
• The Company made improvements on the balance sheet, with inventory balances decreasing by $40.6 million from year-end, representing more efficient turnover, decreasing our carrying cost of inventory by $0.5 million compared to Q2, 2015.
  
  
• During the quarter we reduced our five year capital plan by 25% or $48.5 million from $193.8 million to $145.3 million. This reduction in future capital expenditures further allows us to implement our acquisition strategy while maintaining a strong balance sheet.

Second Quarter 2016 Financial Summary

• Revenue from existing and new dealerships increased by 3.1%, or $25.4 million, to $842.3 million in the second quarter of 2016 from $816.9 million in the same quarter in 2015.
  
  
• Gross profit from existing and new dealerships increased by 3.9%, or $5.0 million, to $134.7 million in the second quarter of 2016 from $129.7 million in the same quarter in 2015.
  
  
• EBITDA attributable to AutoCanada shareholders decreased by 1.2%, or $0.3 million, to $27.1 million in the second quarter of 2015 from $27.4 million in the same quarter in 2015.
  
  
• Adjusted EBITDA attributable to AutoCanada shareholders decreased by 4.7%, or $1.3 million, to $26.4 million in the second quarter of 2015 from $27.7 million in the same quarter in 2015.
  
  
• The Company generated net earnings attributable to AutoCanada shareholders of $14.2 million or basic earnings per share of $0.53. Pre-tax earnings attributable to AutoCanada shareholders decreased by 3.7%, or $0.7 million, to $18.4 million in the second quarter of 2016 as compared to $19.1 million in the same quarter in 2015.
  
  
• The Company generated adjusted net earnings attributable to AutoCanada shareholders of $13.5 million as compared to $14.0 million in the same quarter in 2015. Basic adjusted net earnings per share were $0.49.
  
  
• Free cash flow increased to $37.9 million in the second quarter of 2016 or $1.39 per share as compared to $17.8 million or $0.73 per share in the same quarter in 2015. Adjusted free cash flow increased to $21.6 million in the second quarter of 2016 or $0.79 per share as compared to $19.2 million or $0.79 per share in the same quarter in 2015.
  
  
• Same store revenue decreased by 3.2% in the second quarter of 2016, compared to the same quarter in 2015. Same store gross profit decreased by 5.3% in the second quarter of 2016, compared to the same quarter in 2015. Same store gross profit percentage decreased by 0.4% in the second quarter of 2016 compared to the same quarter in 2015.
  
  
• Same store new vehicle retail revenue decreased by 11.8%, or $23.2 million, to $174.0 million in the second quarter of 2016 from $197.2 million in the same quarter in 2015.
  
  
• Same store used vehicle retail revenue decreased by 4.4%, or $3.1 million, to $66.6 million in the second quarter of 2016 from $69.7 million in the same quarter in 2015.
  
  
• Same store parts, service and collision repair revenue decreased by 5.1%, or $2.2 million, to $40.6 million in the second quarter of 2016 from $42.8 million in the same quarter in 2015.

"Our focus on operational excellence, through both financial and sales metrics, and cost control at our current dealerships has achieved effective results in the quarter. Despite the economic slowdown in Western Canada, overall revenue and gross profit has increased from existing and new dealerships as compared to the same period in the prior year" said Chris Burrows, Chief Financial Officer. "Our focused effort on cost reduction has also began early in the year and has shown early success through the second quarter."

"Our acquisition strategy will be implemented during the remainder of the year. During a period of reduced economic activity, we have the ability to be opportunistic in our acquisition strategy and to focus on acquisitions that are accretive and grow our portfolio. We will diversify across Canada through the acquisition of flagship stores in major markets" said Steven Landry, Chief Executive Officer.

Dividends

On August 4, 2016, the Board declared a quarterly eligible dividend of $0.10 per common share on AutoCanada's outstanding shares, payable on September 15, 2016 to shareholders of record at the close of business on August 31, 2016.

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".

Outlook

While Management is satisfied with our results for the quarter, we look ahead to the rest of the year with further optimism.

Earlier this year, we implemented an action plan comprised of three levers: operational excellence, cost control and balance sheet strength, and acquisition strategy. These levers are the core of our 2016 action plan and will continue to shape our operations.

• Operational excellence, through both the financial and sales metrics, is important at each of our dealerships. During the quarter we saw growth in both revenue and gross profit. Going forward, we are looking to improve our margins at our dealerships and also focus on asset productivity, a key to our continued success.
  
  
• Cost control and balance sheet strength has been a focus throughout the year. Earlier this year we implemented a plan to reduce our costs throughout the company. With an annualized target of $15.0 million we expect operating expenses will decrease as a result of this initiative. In addition to decreasing operating expenses we are managing our interest expense on our inventories, managing our accounts receivables and accounts payables, and considering innovative ways we can save money through shared services and central purchasing. During the quarter, we have improved four of our seven key covenants as compared to the first quarter of 2016.
  
  
• Our acquisition strategy will be implemented during the remainder of the year. Over the past twelve months we have acquired five dealerships and have provided participatory loans for an additional two. During a period of reduced economic activity we have the ability to be opportunistic in our acquisition strategy and to focus on acquisitions that are accretive and grow our portfolio. Further diversification both geographically and through brand representation continues to drive our acquisition strategy.

Our focused effort on cost reduction began early in the year and has shown early success through the second quarter. Variable expenses, excluding $2.7 million in non-recurring senior management transition costs, as a percentage of gross profit has decreased by 1.3% in Q2 with total annual decrease of 2.2% year-to-date.

During the year-to-date, Alberta industry new vehicle sales decreased by 6.2% over the same quarter in 2015, while national industry new vehicles sales were up 6.0%. Industry experts expect 2016 Canadian new light vehicle unit sales to achieve 1.9 million units in 2016^1,2.

While our same store new vehicle metrics continue to lag the market in Alberta and British Columbia, we are pleased with our same store used vehicle sales for the quarter. Q2, 2016 represented an 8.1% increase in same store used car sales, and an increase of 23.9% in same store used car margins, as compared to Q2, 2015. This increase is due to the focus that management has had on improving used car inventory while increasing used vehicle sales in order to offset the decline in new vehicle sales.

We are optimistic that we are making headway in a difficult market and, over time, look to further improve our key metrics.

SELECTED QUARTERLY 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.

The following tables summarizes the results for the three and six month periods ended June 30, 2016 on a same store basis by revenue source and compares these results to the same period in 2015.

Same Store Revenue and Vehicles Sold

Same Store Gross Profit and Gross Profit Percentage

The following table summarizes the number of same stores for the period ended June 30, 2016 by Province:

Number of Same Stores by Province

Over the next two quarters, 17 additional stores will move from newly acquired stores and into same store designation and will be included in same store results.

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 three and six month periods ended June 30, 2016, 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 interim MD&A: EBITDA; Adjusted EBITDA; Adjusted Net Earnings and Adjusted Net Earnings per Share; EBIT; Free Cash Flow; Adjusted Free Cash Flow; Adjusted Average Capital Employed; Absorption Rate; Average Capital Employed; Return on Capital Employed; and Adjusted Return on Capital Employed.

Conference Call
A conference call to discuss the results for the reporting period ended June 30, 2016 will be held on August 5, 2016 at 11:00am Eastern time (9:00am Mountain time).  To participate in the conference call, please dial 1.888.231.8191 approximately 10 minutes prior to the call.  A live and archived audio webcast of the conference call will also be available at the following:

http://event.on24.com/r.htm?e=1138784&s=1&k=EE7FA7036CDA10AA13BB08D0140AA235.

About AutoCanada

AutoCanada is one of Canada's largest multi-location automobile dealership groups, currently operating 53 franchised dealerships, comprised of 60 franchises, in eight provinces and has over 3,700 employees. AutoCanada currently sells Chrysler, Dodge, Jeep, Ram, FIAT, Chevrolet, GMC, Buick, Cadillac, Infiniti, Nissan, Hyundai, Subaru, Mitsubishi, Audi, Volkswagen, KIA, BMW and MINI branded vehicles. In 2015, our dealerships sold approximately 62,800 vehicles and processed approximately 848,000 service and collision repair orders in our 912 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", "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 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.

SOURCE AutoCanada Inc.