CALGARY, (March 15, 2017)
-- Cervus Equipment Corporation ("Cervus" or the "Company") (TSX: CERV) today announced its financial results and operational highlights for the year ended December 31, 2016.
"In 2016, Cervus delivered on key objectives to strengthen its balance sheet, reduce expenses, and improve service," said Graham Drake, President & CEO, Cervus Equipment. "These were achieved primarily through the reduction of excess inventories, the sale and leaseback of 11 properties, an 8% reduction in selling, general and administrative (SG&A) expenses, and the continued implementation of our service optimization program. Looking into 2017, our agriculture segment shows a positive outlook with strong farm income from the near-record 2016 crop yields. However, our transportation and commercial and industrial segments may continue to face challenges in 2017 as our customers grapple with strengthening but still uncertain economic conditions."
2016 YEAR END RESULTS
Highlights for the Year
2016 Financial Highlights
- The Company generated income of $23.5 million in 2016, compared to a loss of $27.4 million in the prior year.
- The Company generated adjusted earnings1 of $10.8 million for the year ended December 31, 2016, and adjusted basic earnings per share2 of $0.69. For the comparable period in 2015, the Company generated adjusted earnings of $13.3 million and adjusted basic earnings per share of $0.86.
- The Company generated $1.1 billion of revenue in 2016, consistent with 2015, while targeted cost reduction initiatives achieved a $15.2 million reduction in selling general and administrative expenses in the year.
- The service optimization initiatives that began in 2015, resulted in increased service gross profit margin of 1.1% compared to the year ended December 31, 2015, and a 6.6% increase in the fourth quarter of 2016 compared to the same period in 2015.
- The Company extended and amended its revolving credit facility for three years, extending maturity to December 2019. The facility provides stability for our existing operations and maintains capital flexibility for the future.
- The Company completed the long term sale and leaseback of eleven properties. The land and buildings were sold for net proceeds of $54.8 million for a gain on sale of $3.6 million. The Company has entered into operating leases for the eleven properties with initial terms ranging between 15-20 years.
- The Company sold its 21% interest in Maple Farms Partnership ("Maple") to the majority partner for gross proceeds of approximately $9.1 million resulting in a gain on sale of $4.1 million.
- The Company reduced term debt by $68.2 million (65%) compared to 2015.
- The Company achieved inventory reductions totaling $62.5 million (20%) and decreased floor plan payables by $82.6 million (49%) compared to 2015.
- Dividends of $0.28 per share were declared to shareholders during 2016.
- The Company climbed to #49 from #66 on the Alberta Venture's 2016 Venture 250 ranking.
- The Alberta John Deere dealerships were awarded John Deere's Leaders Club status for the second consecutive year, an award recognizing the top John Deere dealers in Canada.
Total 2016 income from operating activities increased $14.9 million compared to 2015, including a $4.1 million gain on the sale minority interest, a $5.3 million gain on sale of real estate, and a $6.3 million increase in unrealized foreign exchange gains. Excluding these gains, income from operating activities decreased by $0.8 million compared to 2015.
In 2016, Agriculture segment income from operating activities increased $7.6 million compared to 2015, and included a $4.1 million gain on sale of minority interests and a $3.4 million of gain on sale of real estate. Excluding these gains, income from operating activities was in line with 2015. Producers were successful in capturing 2016's near record crop yield despite a challenging and shortened harvest window, which shifted demand for both equipment and parts to later in the season compared to 2015.
In 2016, Transportation segment income from operating activities increased $8.4 million compared to 2015, and included a $6.3 million increase in unrealized foreign exchange gains and a $0.4 million gain on sale of real estate. Excluding these gains, income from operating activities increased $0.4 and $1.3 million in Ontario and Saskatchewan, respectively, on improved profitability in both geographies. Increased shop capacity and process improvements supported service revenues and gross profit margin in Ontario, while a slight recovery in energy market conditions increased equipment demand in Saskatchewan from near record lows.
In 2016, Construction and Industrial ("C&I") segment income from operating activities decreased $1.1 million compared to 2015, as the economic fallout of oil prices reduced revenues by $37.3 million, or 31%. Customers' reluctance to commit capital in light of continued uncertainty was most evident in equipment demand, which decreased 35% compared to 2015. Despite economic pressures, the segment achieved higher gross profit margins due to sales mix and service efficiency improvements.
Selected Financial Information
Conference Call Information
Cervus will host its 2016 year end results conference call on March 16, 2017 at 11:00 a.m. Eastern Time.
Interested parties may access the conference call by dialling (647) 427-7450 or 1-888-231-8191. Please connect approximately 10 minutes prior to the beginning of the call. The conference call will be archived for replay until Thursday, March 23, 2017 at midnight. To access the archived conference call, dial (416) 849-0833 or 1-855-859-2056 and enter the reservation number 81985491 followed by the number sign.
A live audio webcast of the conference call will be available at: http://event.on24.com/r.htm?e=1380483&s=1&k=BE8320EC3D84EB2E6E490DD47999BB59
Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived at the above website for 90 days.
About Cervus Equipment Corporation
Cervus acquires and operates authorized agricultural, construction, materials handling and transportation equipment dealerships. The Company has interests in 64 dealerships in Canada, New Zealand, and Australia, employing more than 1,500 people. The primary equipment brands represented by Cervus include John Deere agricultural equipment; Bobcat and JCB construction equipment; Clark, Sellick and Doosan material handling equipment; and Peterbilt transportation equipment. The common shares of Cervus are listed on the Toronto Stock Exchange and trade under the symbol "CERV".
For more information please contact:
Graham Drake – President & CEO
Randy Muth – Chief Financial Officer
Forward Looking Information
This press release contains certain forward‐looking information ("forward‐looking information") within the meaning of applicable Canadian securities laws. Forward‐looking information is often, but not always, identified by the use of words such as "anticipate", "believe", "plan", "intend", "objective", "continuous", "ongoing", "estimate", "expect", "may", "will", "project", "should" or similar words suggesting future outcomes. Forward‐looking information is not a guarantee of future performance and involves a number of assumptions and a number of risks and uncertainties some of which are described herein. These risks and uncertainties include the risks identified under the heading "Risk Factors – Risks Related to the Business" in the 2016 Annual Information Form of Cervus Equipment Corporation dated March 15, 2017, available electronically at www.sedar.com under Cervus' profile. Cervus believes the expectations reflected in such forward‐looking information are reasonable but no assurance can be given that these expectations will prove to be correct and such forward‐looking information should not be unduly relied upon. You are cautioned that the preceding list of assumptions and risks is not exhaustive. Any forward‐looking information is made as of the date hereof and, except as required by law, Cervus assumes no obligation to publicly update or revise such information to reflect new information, subsequent or otherwise