ANNUAL REPORT 2014
ROCKY MOUNTAIN DEALERSHIPS INC.
ANNUAL REPORT 2014
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WE WERE ABLE TO
MAINTAIN OUR
PROFITABILITY
YEAR-OVER-YEAR, AND
SAW SIGNIFICANT
IMPROVEMENTS IN
SEVERAL KEY ASPECTS
OF OUR BUSINESS
TABLE OF CONTENTS
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MESSAGE TO SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
MANAGEMENT'S DISCUSSION & ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
MANAGEMENT'S REPORT TO SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . 60
CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
CORPORATE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
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Rocky Mountain Dealerships Inc. | Annual Report | 2014
CAUTIONARY STATEMENTS REGARDING
FORWARD-LOOKING INFORMATION
This Annual Report contains certain statements or
disclosures relating to Rocky Mountain Dealerships Inc.
and its subsidiaries (hereinafter collectively “Rocky”)
that are based on the estimates or expectations of its
management as well as assumptions made by and
information currently available to Rocky, which may
constitute forward-looking statements or information
under applicable securities laws. All such statements
and disclosures, other than those of historical fact,
which address activities, events, outcomes, results or
developments that Rocky anticipates or expects may,
or will occur in the future (in whole or in part) should
be considered forward-looking statements. In most
cases, forward-looking statements can be identified by
terms such as “forecast”, “future”, “may”, “will”, “expect”,
“anticipate”, “believe”, “hope”, “potential”, “enable”,
“plan”, “continue”, “contemplate”, “pro-forma”, “should”,
“intend”, or other comparable terminology suggesting
future outcomes or events. Forward-looking statements
may, among other things, relate to: Discussion
contained in the Message to Shareholders, including
statements about providing return on investment
that shareholders deserve, statements discussing or
implying any future benefit, success, or profitability
of Rocky, discussions about driving better results in
product support for shareholders, discussions about
maintaining and controlling costs, discussions about
inventory and Rocky’s efforts to reduce its inventory
levels, discussions about improvement in business
prospects or results, statements that Rocky can grow
and integrate acquisitions simultaneously, that the
integration process will be streamlined, as well as
statements that the acquisitions of NGF Geomatics Inc.
or Chabot Implements will be accretive. Rocky cannot
assure investors that Rocky’s actual performance or
results will be consistent with these forward-looking
statements. Rocky’s actual results could differ
materially from those anticipated in the forward-
looking statements contained in this Annual Report as
a result of the risk factors set forth in Rocky's annual
information form dated March 10, 2015, available
on SEDAR at www.sedar.com. All forward-looking
statements in this Annual Report are qualified in
their entirety by the cautionary statements herein, in
addition to the cautionary statements on forward-
looking information set forth in the Management’s
Discussion and Analysis contained in this Annual Report.
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Rocky Mountain Dealerships Inc. | Annual Report | 2014 CAUTIONARY STATEMENTS MESSAGE TO SHAREHOLDERS
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MESSAGE TO SHAREHOLDERS
During the past year, Rocky has accomplished more than ever before on our brand acceptance, operational
excellence and continuing to be a dependable partner to the customers and communities we serve. Our operations
are focused within the strong Agriculture marketplace of the Western Canadian Prairies where farm incomes have
hit record levels over the past few years. Notwithstanding the strength in our marketplace, 2014 began with several
factors that negatively influenced equipment demand including a difficult and prolonged winter, commodity prices
that dropped from their historical highs and challenges for many farmers of getting their crops to market. However,
despite the decrease in equipment demand, we were able to maintain our profitability year-over-year, and saw
significant improvements in several key aspects of our business. This truly is a testament of the hard work and
dedication of the nearly 1,000 Rocky employees across our network. Rocky’s mission is to be the safe, expert and
dependable equipment partner for our customers. I commend our team in their commitment to this mission, as we
work to build and maintain long-term relationships with the communities and businesses we serve.
2014 saw a dramatic improvement in our product support revenues, realizing an increase of 12.0% over 2013. As
our customers elected to invest more into their existing equipment fleets, we were able to leverage our strong network
of stores, our increased buying power, and improved procurement strategies to not only improve our top-line revenue,
but also the profitability in our product support business. In our drive to be dependable, we undertook a number
of customer-facing initiatives in 2014, to ensure a more streamlined and consistent customer experience, which we
believe has translated into better profitability within these segments. Product support, while not a major contributor
to top-line revenue, is a significant driver of our overall profitability as a company. As such, we will continue to refocus
our efforts in this area of the business, working to drive even better results for our shareholders.
Another area in which we saw significant improvement was our construction segment. Pricing disparities
created by the transition to Tier-4 compliant engines continues to ebb, and Rocky started to enjoy a more level
playing field for pricing against its peers. In 2014, we focused much of our efforts on servicing our core businesses
in construction, being “lite” equipment such as skid steers and loaders, as well as road building equipment and
aggregates. With a more specific product offering, we were able to better maintain our costs in this segment, while
offering improved consistency and expertise to the end user.
We recognize we still have to make progress for our construction segment to return to the level of profitability
deserving of the operations. We also recognize the recent drop in oil prices will likely have a negative impact on this
segment, at least in the short term. That said, with the progress made to date, our people enter 2015 with renewed
confidence both in Rocky and the excellent brands we represent. Continued investment in our people is another key
to improvement in our business. In so doing, we made Rocky a better place to work and earn a living. We gave them
the tools, knowledge, and processes to deal with the challenges that we are presented with each day. As a result, our
people were more empowered to manage the headwinds that our industry faced throughout 2014. We maintained
our overall profitability and managed costs, despite a 4.2% decrease in top-line revenues. Our people are proud to
be a part of Rocky, and their dedication to their work translated into increased and improved opportunities with our
customers.
Inventory continued to be top-of-mind in 2014, as elevated inventory levels remain across much of our network.
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The success or failure of our inventory reduction initiative hinges on our ability to forecast overall demand for
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MESSAGE TO SHAREHOLDERS equipment, lead times from manufacturers and trade in activity, all of which are tied to macroeconomic factors and,
of course, the weather. The combination of the late spring, reductions in crop production and softening commodity
prices, tempered equipment sales and impeded our inventory reduction efforts during 2014. That said, we are
not making excuses. We are not satisfied with our progress on this task to date and we are committing ourselves
to correcting this issue in a way that improves our balance sheet, while not causing significant cuts to our overall
profitability.
I would be remiss if I did not comment on the changes that have taken place in early 2015. First and foremost,
our two founders, Matt Campbell and Derek Stimson, retired on February 2, 2015. I would like to wish them well in
their retirements, and would also like to thank them for their willingness to remain on our Board of Directors. Their
knowledge of this business is second-to-none and will be invaluable to Rocky going forward.
On that same date, I was appointed President and Chief Executive Officer of Rocky. Our message over the
years has been consistent – we will be prudent, responsible managers of our business. We have had periods of rapid
expansion, followed by periods of integration. Going forward, I believe we can maintain the same steady course, with
one key difference – I believe growth and integration in our business are not mutually exclusive, but can happen at
simultaneously. Since 2012, we have been working on simplifying, streamlining, and unifying our network through a
rebranding campaign and a corporate restructuring. Thanks largely to these efforts, as well as our seasoned team of
employees and professionals, we believe that integration of future acquisitions can happen on a more efficient basis,
and we look forward to making this happen.
On the acquisition front, in early 2015 we announced two acquisitions. Firstly, we acquired NGF Geomatics Inc.,
based in Ottawa, Ontario. Now re-branded as RME Geomatics, this acquisition addresses the fact that technology
continues to play an ever-increasing role in our business. The technology involves the use of unmanned aerial
vehicles, or “drones”, in doing digital surveys and analysis of lands and vegetation. We believe this will have significant
application both to our agriculture and construction customers, as the needs of the farmer in this regard are not
all that different from the needs of the oil producer or contractor. While it will be some time before we can truly
see this acquisition bear fruit, we are nonetheless excited about the impacts advanced technology may have in our
line of business. Then, on March 10, 2015, we announced that we had entered into an agreement to acquire Chabot
Implements. Chabot is a long-standing, family-owned Case IH dealer in Manitoba. With this acquisition, we add
another four established branches to our already-vast and strong network. Additionally, the territory we ultimately
acquire gives us exclusive Case IH sales and service rights over the majority of Manitoba.
The team here at Rocky has the confidence, knowledge, dedication and effort to help us succeed as an
organization. On behalf of all our management and employees, I would like to thank you, our shareholders, for your
support of Rocky. We here at Rocky are dedicated to providing you with the return on investment that you expect and
deserve. WE ARE ROCKY MOUNTAIN EQUIPMENT. DEPENDABLE IS WHAT WE DO.
Garrett Ganden
President & Chief Executive Officer
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Rocky Mountain Dealerships Inc. | Annual Report | 2014 MESSAGE TO SHAREHOLDERS
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ROCKY'S MISSION
IS TO BE THE
SAFE, EXPERT AND
DEPENDABLE
EQUIPMENT
PARTNER FOR
OUR CUSTOMERS
MANAGEMENT’S DISCUSSION & ANALYSIS
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ROCKY MOUNTAIN DEALERSHIPS INC.
MANAGEMENT’S DISCUSSION & ANALYSIS
FOR THE YEAR ENDED DECEMBER 31, 2014
This Management Discussion and Analysis
(“MD&A”) was prepared as of March 10, 2015 and is
provided to assist readers in understanding Rocky
Mountain Dealerships Inc.’s financial performance
for the year ended December 31, 2014. It should be
read in conjunction with the audited consolidated
financial statements for the years ended December
31, 2014 and 2013 together with the notes thereto
and the auditor’s report thereon. The results reported
herein have been derived from consolidated financial
statements prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by
the International Accounting Standards Board and are
presented in Canadian dollars.
Unless the context otherwise requires, use in this
MD&A of “Rocky”, “the Company”, “we”, “us”, or “our”
means Rocky Mountain Dealerships Inc. and its wholly
owned subsidiaries including Hammer Equipment Ltd.
(“Hammer”), Hi-Way Service Ltd. (“Hi-Way”), Miller
Equipment Ltd. (“Miller”), Rocky Mountain Equipment
Canada Ltd. (“RME Canada”), Rocky Mountain Dealer
Acquisition Corp. (“RMDAC”) and Rocky Mountain
Dealer Group Partnership (the “Partnership”).
Rocky’s common shares trade on the Toronto
Stock Exchange under the symbol ‘RME’ and on
the OTCQX under the symbol ‘RCKXF’. Additional
information relating to Rocky, including the Company’s
Annual Information Form, dated March 10, 2015 (“AIF”),
is available on the System for Electronic Document
Analysis and Retrieval (“SEDAR”) website at
www.sedar.com.
This MD&A contains forward-looking statements
(“FLS”). Please see the section “Caution Regarding
Forward-Looking Information and Statements” for a
discussion of the risks, uncertainties and assumptions
relating to those statements.
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Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS COMPANY OVERVIEW
Headquartered in Calgary, Alberta, Rocky is one
of Western Canada’s largest equipment dealers with
a network of full-service agriculture and construction
equipment stores across the Canadian Prairie Provinces
operating under the name Rocky Mountain Equipment.
Rocky is Canada’s largest retail dealer of CNH
Industrial N.V. (“CNH”) equipment, which includes Case
IH, New Holland, and Case Construction. We are also a
major independent dealer of equipment from a number
of other manufacturers, including, but not limited to,
Bourgault, Seed Hawk, Dynapac, Leeboy and Metso.
We offer our customers a one-stop solution
for their equipment needs through new and used
equipment sales, parts sales, repairs and maintenance
services, and third-party equipment financing
and insurance services. In addition, we provide or
arrange other ancillary services such as equipment
transportation and GPS signal subscriptions.
Historically, our business had been carried on
through the Partnership doing business as Rocky
Mountain Equipment. Effective January 2, 2014,
the Company effected a restructuring whereby the
business assets, liabilities, and all other operations of
the Partnership were rolled into RME Canada pursuant
to an asset transfer agreement. All the Company’s
operations in Alberta, Saskatchewan and Manitoba are
conducted through RME Canada as of January 2, 2014.
On February 27, 2014, the Partnership was dissolved.
All our equipment dealership locations continue to
operate under the name Rocky Mountain Equipment.
On January 1, 2015, Hammer, Hi-Way and Miller were
amalgamated to form RMDAC.
SUMMARY OF FINANCIAL RESULTS
FOR THE YEAR ENDED
DECEMBER 31, 2014
SUMMARY OF FINANCIAL RESULTS
FOR THE QUARTER ENDED
DECEMBER 31, 2014
■
■
■
■
■
■
Product support revenues increased by 12.0% to
$136.7 million.
Total revenues decreased by 4.2% to $965.4 million.
Gross profit increased by 3.7% to $145.6 million
(15.1% of sales).
Diluted earnings per share increased to $0.98.
EBITDA(1) increased to $35.4 million.
Inventory increased by $46.7 million to $526.0
million.
■
■
■
■
■
■
Product support revenues increased by 21.1% to
$30.9 million.
Total revenues increased by 1.2% to $294.1 million.
Gross profit increased by 18.7% to $39.5 million
(13.4% of sales).
Diluted earnings per share increased to $0.32.
EBITDA(1) increased to $10.8 million.
Inventory decreased by $9.6 million to $526.0
million.
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(1) See further discussion in “Non-IFRS Measures” and “Reconciliation of Non-IFRS Measures to IFRS” sections below
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS MARKET FUNDAMENTALS AND OUTLOOK
AGRICULTURE MARKET
Our agriculture equipment sales are made
primarily to grain and oilseed crop farmers in Western
Canada. Commodity prices, input costs, regulatory
factors and weather are key demand drivers for
equipment among these customers.
Agriculture, as a whole, exhibits cyclical surges
in demand and profitability. For several consecutive
years leading up to 2013, the industry had been on an
upswing driven by rising commodity prices, increasing
yield per acre and the application of new technology
that has reduced input costs. Abundant global
crop supplies have, however, reduced agricultural
commodity prices throughout 2014. Despite some
strengthening during the fourth quarter, the decrease in
crop prices year-over-year softened overall agriculture
equipment demand. We expect this pricing pressure
to continue for the short-term, as the industry as a
whole remains at the low end of the cycle. The recent
weakening in the Canadian dollar is, however, expected
to continue to provide some support to grain prices in
Canada as agricultural commodities are largely priced
in US dollars.
The 2014 growing season began with a prolonged
winter and cool, wet weather during seeding which
pushed back the harvest and led to a modest reduction
in seeded acres across Canada, as compared to 2013.
Throughout the Canadian Prairies, both yields and
overall production receded back in line with historical
averages. With this decrease in production, crop
inventory levels are down relative to this time last year,
and transportation bottlenecks are not anticipated to
impede the conversion of the 2014 harvest into cash to
the same extent as the prior year.
Early forecasts for the 2015 growing season are
calling for moderate increases in seeded and harvested
acres of both wheat and canola with reasonably flat
yields per acre as compared to 2014. These increases
are largely predicated on recovering lost seeded
acreage caused by excessive moisture in eastern
Saskatchewan and western Manitoba during the spring
of 2014.
As part of the drive to improve productivity,
farmers are continually investing in new equipment to
drive better results on both the input cost and output
efficiency sides of their business. New equipment
technology enables lower input costs by reducing the
number of field passes, per hour fuel consumption and
overlapping seed and spray patterns. New equipment
technology on the harvest side of the business also
reduces fuel consumption, increases the speed
per acre harvested and reduces process waste on
the field. The emergence of GPS-enabled precision
farming techniques acts as a multiplier for all of these
advantages as well as a driver of demand and total
spend. Within the Canadian agriculture sector, the
trend towards larger farms is further benefiting farm
equipment sales. According to its most recent census
data, Statistics Canada reported a 31.2% increase in the
number of Canadian farms managing operations with
crop receipts in excess of $1.0 million. These operators
require larger, more productive equipment and they
tend to replace their equipment more frequently to
capitalize on the latest technological advances and
equipment efficiencies.
Demand from China and India, crop land
dedicated to bio-fuel production, and general
GDP growth are all putting pressure on worldwide
production. Overall, the fundamentals underpinning
agriculture equipment demand remain healthy.
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Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS CONSTRUCTION MARKET
OVERALL
Our construction equipment sales are balanced
through residential construction, roadwork (including
paving and aggregate production), and commercial,
industrial, and municipal construction in the Alberta
market. Housing starts, oil rig count, vehicle sales, and
GDP growth are all factors that influence construction
equipment purchases in Alberta.
The success of Rocky’s construction segment is
largely correlated to overall infrastructure spending
in Alberta. The recent decline in oil prices has already
begun to temper spending, particularly in the oil and
gas sector. If sustained, it is anticipated that overall
infrastructure spending will be negatively impacted
which, in turn, is likely to negatively impact our
construction segment results.
However, given the reduction in inventory during
2014, we are satisfied with the profile and levels of
inventory within our construction segment as we
prepare to face these potential headwinds.
We remain committed to succeeding in the
construction market and management has made
significant changes to restore our construction results.
We intend to leverage our successes during 2014 to
gain market acceptance and rebuild our presence in the
province.
In response to the emission standards recently
put in place in Canada and the United States,
equipment manufacturers have incorporated Tier
4 engines into their equipment lines in order to
comply with the new regulations. The full adoption
of Tier 4 compliant equipment has been achieved
in stages with new iterations of Tier 4 compliant
machinery being mandated annually, each with
incremental improvements over previous models.
These improvements generally resulted in significant
increases in manufacturing costs and, in turn, selling
prices for these units. The disparity in pricing
between tiers, and iterations within tiers, can result
in competitive advantages or disadvantages in the
marketplace, depending on the overall inventory
profiles in the area as compared to individual dealers’
profiles. To date, this disparity has been more prevalent
on construction equipment which has constrained our
construction sales over the past several quarters. We
have recently complimented our equipment offering
with certain competitively priced units with transition
engines in advance of anticipated price increases on
the final Tier 4 compliant machines. These pricing
disparities will ultimately unwind as the industry
progresses through inventory acquired during the
transition period, which is now substantially complete.
The valuation of equipment in the North
American market is largely dictated in U.S. dollars.
Recent fluctuations in the Canadian dollar relative
to the U.S. dollar are expected to increase pricing on
much of the Company’s new equipment inventory. As
most equipment inventory throughout the industry
is purchased in U.S. dollars, the price disparity within
Canadian dealers’ equipment profiles results from the
timing of orders and the foreign exchange rates which
prevailed at the time of the transaction. As a result of
this increased pricing, used equipment may become
comparatively more cost effective.
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Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS Rocky’s success and growth, while predicated on
the larger economic conditions and factors discussed
above, is also affected by our ability to be a partner
of choice for equipment purchasers. To that end, we
continue to invest in our people, through training
and employee engagement programs and in the
communities that we serve.
The outlook for our end-markets, long-term
health in commodity prices, the impact of previously
acquired dealerships and trade areas and our strong
original equipment manufacturer (“OEM”) relationships,
position us well to pursue our longer-term revenue and
earnings growth initiatives.
Our underlying business fundamentals remain
strong. We have exclusive distribution rights for some of
the world’s leading equipment brands, with significant
barriers to entry into this market. Our installed base
and customer relationships create an annuity of
equipment sales and product support revenue, which
help drive dependable earnings and cash flow. It is
these strong fundamentals that continue to provide
stability in our results and value to our shareholders.
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Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS SELECTED ANNUAL FINANCIAL INFORMATION
$ THOUSANDS, EXCEPT
PER SHARE AMOUNTS
2014
2013
2012
Sales
New equipment
Used equipment
Parts
Service
Other
Cost of sales
Gross profit
Selling, general and administrative
Loss on repurchase of convertible
debentures
Interest on short-term debt
Interest on long-term debt
Earnings before income taxes
Provision for income taxes
Net earnings
Earnings per share
Basic
Diluted
Dividends per share
Non-IFRS Measures(1)
EBITDA
Operating SG&A
521,747
303,536
101,622
35,064
3,438
54.0%
31.4%
10.5%
3.6%
0.5%
523,522
358,861
92,599
29,421
3,359
51.9%
35.6%
9.2%
2.9%
0.4%
965,407
100.0% 1,007,762
100.0%
819,785
145,622
105,756
-
11,483
2,182
26,201
7,276
18,925
0.98
0.98
0.4450
35,440
98,699
84.9%
15.1%
11.0%
0.0%
1.2%
0.2%
2.7%
0.7%
2.0%
3.7%
10.2%
867,356
140,406
105,450
-
11,696
2,233
21,027
5,714
15,313
0.80
0.80
0.3675
29,731
98,979
86.1%
13.9%
10.5%
0.0%
1.2%
0.1%
2.1%
0.6%
1.5%
3.0%
9.8%
549,036
297,476
84,653
30,459
4,482
966,106
818,595
147,511
97,711
4,232
9,071
2,843
33,654
9,679
23,975
1.28
1.28
0.2475
42,008
92,661
56.8%
30.8%
8.8%
3.2%
0.4%
100.0%
84.7%
15.3%
10.1%
0.4%
0.9%
0.4%
3.5%
1.0%
2.5%
4.3%
9.6%
Floor Plan Neutral Operating
Cash Flow
(22,993)
(2.4%)
42,342
4.2%
(82,824)
(8.6%)
(1) – See further discussion in “Non-IFRS Measures” and “Reconciliation of Non-IFRS Measures to IFRS” sections below
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Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS SEGMENTED FINANCIAL REPORTING
The Company’s branches have been aggregated on the basis of the primary industry which they serve, being
agriculture or construction. Certain branches serve both industries. In cases where branches distribute both
agriculture and construction equipment, the primary industry served is agriculture and, therefore, these facilities
have been categorized as such. As a result, certain construction related results are included in the agriculture segment
for the purposes of segmented financial reporting.
$ THOUSANDS
Sales
New equipment
Used equipment
Parts
Service
Other
Gross profit
Gross margin
Net income (loss)
2014
2013
AGRICULTURE CONSTRUCTION
TOTAL
AGRICULTURE CONSTRUCTION
TOTAL
473,715
300,277
87,387
29,478
2,731
893,588
132,430
14.8%
20,430
48,032
3,259
14,235
5,586
707
71,819
13,192
18.4%
(1,505)
521,747
303,536
101,622
35,064
3,438
965,407
145,622
15.1%
18,925
484,046
354,043
79,210
24,050
2,574
943,923
135,078
14.3%
23,979
39,476
4,818
13,389
5,371
785
523,522
358,861
92,599
29,421
3,359
63,839
1,007,762
5,328
8.3%
(8,666)
140,406
13.9%
15,313
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Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS
REVENUE AND GROSS PROFIT
The Company uses the terms “acquired” versus “same store” in assessing its revenue and gross profit. Each
acquired store has an average historical level of sales and gross profit prior to being acquired by Rocky. When the
Company discusses “acquired” results, it is referring to these average historical levels. This base level of activity
continues to be classified as acquired until such time as the acquired store has been included in our dealership
network for a complete calendar year after which point, all activity is classified as same store. For the year ended
December 31, 2014, all acquired growth pertains to the agriculture segment of the Company.
Agriculture Segment
$ THOUSANDS
2014
2013
CHANGE
TOTAL
ACQUIRED
SAME STORE
Sales
New equipment
Used equipment
Parts
Service
Other
Gross profit
Gross margin
473,715
300,277
87,387
29,478
2,731
893,588
132,430
14.8%
484,046
354,043
79,210
24,050
2,574
943,923
135,078
14.3%
(10,331)
(53,766)
8,177
5,428
157
(50,335)
(2,648)
0.5%
517
259
1,465
26
3
2,270
(10,848)
(54,025)
6,712
5,402
154
(52,605)
For the year ended December 31, 2014, total sales for the agriculture segment were $893.6 million representing
a decrease of $50.3 million or 5.3% over the same period in 2013.
Equipment sales decreased by $64.1 million or 7.6%. The majority of the decrease is attributable to a reduction
in used equipment sales. A late and tentative start to seeding and suboptimal growing conditions reduced overall
optimism amongst farmers who also contended with reduced commodity prices. Transportation constraints in the
first half of the year also delayed the conversion of 2013’s bumper crop into cash, deferring cash flows necessary for
equipment purchases.
17
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS Generally, demand for used equipment is
Service sales have also benefitted from increased
management focus on product support activities.
Through the successful implementation and execution
of strategic initiatives, our service departments have
increased their technician efficiency, which is a key
driver of profitability and a strategy to deal with a
constrained market for qualified service technicians.
At the same time, the reduction in equipment sales
translated into fewer trades taken in which helped to
facilitate the shift in mix from internal to external work.
Gross profit for the year ended December 31,
2014 decreased by $2.6 million or 2.0% over 2013. The
aforementioned headwinds faced in the agriculture
segment during 2014 reduced equipment sales and
gross profits during the year.
The decline in new equipment sales during the
year, as well as a shift in sales mix away from incentive
eligible equipment also caused the Company to
decrease its estimate of annual market share for the
purposes of accruing manufacturer incentives. The
combination of these two factors contributed to a $2.8
million decline in manufacturer incentives recognized
during the year.
With the reduction in equipment sales activity,
the demand for product support increased. The
increase in this higher-margin business helped to offset
gross profit lost due to reduced equipment sales and
manufacturer incentives. As a result of this shift in mix,
gross profit as a percentage of sales increased by 0.5%
to 14.8%.
considerably more susceptible to changes in these
short-term factors than new equipment. This is due
largely to the lead-time associated with presale
arrangements commonly entered into on new unit
sales. New sales are also disproportionately made to
larger operators whose scale and diversity reduce the
volatility of their equipment investment decisions.
As a result, the decline in new equipment
sales year-over-year amounted to $10.3 million,
considerably less than the decline in used. In addition
to the aforementioned economic and environmental
factors, a portion of the decrease in new equipment
demand is the result of price increases associated with
the transition to Tier 4 which has resulted in some
customers electing to flip their fleets bi-annually rather
than annually.
Parts sales for the year ended December 31,
2014 increased by $8.2 million or 10.3% with acquired
parts sales contributing $1.5 million of this increase.
Service sales for the year increased $5.4 million or
22.6%. Our product support sales increases for the year
are attributable in part to general demand increases
stemming from farmers electing to service their existing
fleets in lieu of replacing them. The late harvest
brought with it some weather related challenges
which interrupted and prolonged the harvest. These
harvesting conditions call for incremental machine
hours, which in turn, fueled our product support
business most notably in the third quarter of the year.
During the year, we also continued to bolster
our parts sales through improved market penetration,
primarily of non-captive product lines. Efforts
undertaken by Rocky’s management, including
procurement synergies and sales training, have
continued to have a positive effect.
18
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS
Construction Segment
$ THOUSANDS
2014
2013
CHANGE
Sales
New equipment
Used equipment
Parts
Service
Other
Gross profit
Gross margin
48,032
3,259
14,235
5,586
707
71,819
13,192
18.4%
39,476
4,818
13,389
5,371
785
63,839
5,328
8.3%
8,556
(1,559)
846
215
(78)
7,980
7,864
10.1%
For the year ended December 31, 2014, total sales for the construction segment were $71.8 million representing
an increase of $8.0 million or 12.5% over the same period in 2013.
Equipment sales increased by $7.0 million or 15.8% as compared to the same period last year. The increase
is attributable to the disposition of the Company’s Terex trucks during the first quarter of 2014 for proceeds of $7.0
million.
Product support increased by $1.1 million to $19.8 million. Through investment in our departmental
management and sales processes, we have been successful in gaining greater “share-of-wallet” from our existing
customer base. The combination of targeted marketing initiatives and improved technician efficiency further drove
increased service revenues, offsetting a $0.3 million reduction in service sales as a result of the closure of our Fort
McMurray store in 2013.
Gross profit for the year ended December 31, 2014 increased by $7.9 million or 147.6% over 2013. As a
percentage of sales, gross profit increased by 10.1% to 18.4%. During the fourth quarter of 2013, the Company
recorded a $5.0 million impairment charge against its inventory of Terex trucks, reducing its 2013 gross profit and
gross margin. This charge was in response to the announcement of the OEM that it had reached a deal to dispose
of its truck business to a competitor. The resulting uncertainty around the Terex line and the future availability of OEM
support had a negative impact on the valuation of our Terex articulated and rigid-framed trucks.
The remainder of the increase in gross profit is attributable to margin improvement in all sales categories and
increased product support sales.
19
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS PRODUCT SUPPORT REVENUES
Certain product support activity is performed for the benefit of other departments. This activity is excluded
from reported parts and service revenues. Management assesses overall product support activity to ensure that the
resources deployed are adequate in light of total activity. Total parts and service activity is reconciled to our reported
revenues for the respective departments as follows:
$ THOUSANDS
2014
2013
Parts activity
Total activity
Internal activity eliminated
Reported revenues
Service activity
Total activity
Internal activity eliminated
Reported revenues
116,283
(14,661)
101,622
57,613
(22,549)
35,064
106,709
(14,110)
92,599
56,830
(27,409)
29,421
While parts activity eliminated was relatively flat year-over-year, the proportion of service activity eliminated
decreased from 48.2% to 39.1%. This reduction is due in part to fewer trades taken in as a result of lower equipment
sales. Trades consume service resources as such equipment requires inspection and repair to be brought to a saleable
condition.
20
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS
SELLING, GENERAL AND
ADMINISTRATIVE
INTEREST
Selling, general and administrative (“SG&A”)
The majority of the Company’s short-term interest
expenses include sales and marketing expenses,
sales commissions, payroll and related benefit costs,
insurance expenses, professional fees, rent and other
facility costs and administration overhead including
depreciation of property and equipment. The majority
of these costs are fixed. As we acquire new stores, these
costs will increase as we incur additional expenditures
related to the direct selling, general and administrative
functions. Over time, as these acquisitions are
amalgamated into the business, the costs will
generally decrease as we incorporate their finance and
administrative functions into our corporate resources.
Similarly, costs will increase as we add direct customer
related resources such as equipment specialists, but
will normalize as those positions drive sales and
increase the customer base.
Fixed costs are subject to price increases driven
primarily by real estate and labour demand in Western
Canada. Variable costs included within SG&A expenses
consist primarily of sales commissions.
The Company assesses its Operating SG&A
relative to total sales in analyzing its results. See the
definition and reconciliation of Operating SG&A in the
“Non-IFRS Measures” and “Reconciliation of Non-IFRS
Measures to IFRS” sections below. The Company targets
a sub-10% Operating SG&A as a percentage of sales on
an annual basis.
For the year ended December 31, 2014, Operating
SG&A was $98.7 million or 10.2% of sales compared to
$99.0 million or 9.8% of sales in 2013. The increase in
Operating SG&A as a percentage of sales is attributable
to lower equipment sales activity during
the year.
Depreciation included in SG&A amounted to
$7.1 million for the year ended December 31, 2014 as
compared to $6.5 million for the same period last year.
expense is attributable to the floor plan financing
associated with our new and used equipment inventory.
Interest on long-term debt pertains primarily to the
Company’s Debenture Repayment, Acquisition and
Fleet Facilities. During the year ended December 31,
2014, overall interest expense was relatively flat as
compared to 2013.
NET EARNINGS
For the year ended December 31, 2014, we
generated net earnings of $18.9 million ($0.98 per
diluted share), up from $15.3 million ($0.80 per diluted
share) in 2013. The increase in net earnings and diluted
earnings per share are primarily attributable to the
after-tax impact of the Terex truck impairment recorded
during the fourth quarter of 2013. Overall, management
is satisfied with the execution of our strategic initiatives
during this period of reduced equipment sales, as we
were able to maintain our net profitability
year-over-year.
21
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS SUMMARY OF QUARTERLY RESULTS
$ THOUSANDS,
EXCEPT PER
SHARE AMOUNTS
Sales
Q4
2014
Q3
2014
Q2
2014
Q1
2014
Q4
2013
Q3
2013
Q2
2013
Q1
2013
Q4
2012
New equipment
182,555
81,837
133,086
124,269
179,359
97,554
131,534
115,075
195,813
Used equipment
79,810
102,354
Parts
Service
Other
21,320
9,569
838
35,568
10,041
995
70,621
29,216
8,478
953
50,751
15,518
6,976
652
84,925
130,826
18,099
34,534
7,403
795
8,497
1,158
71,805
26,667
7,310
790
71,305
13,299
6,211
616
79,709
16,369
7,933
956
Cost of sales
Gross profit
SG&A
Interest and taxes
Net earnings
EPS – basic
EPS – diluted
294,092
230,795
242,354
198,166
290,581
272,569
238,106
206,506
300,780
254,623
191,680
204,548
168,934
257,329
233,846
202,166
174,015
254,913
39,469
39,115
37,806
29,232
33,252
38,723
35,940
32,491
45,867
27,548
27,165
25,985
25,058
27,249
26,827
25,873
25,501
26,060
5,700
6,221
0.32
0.32
5,746
6,204
0.32
0.32
5,925
5,896
0.31
0.31
3,570
604
0.03
0.03
3,937
2,066
0.11
0.11
5,981
5,915
0.31
0.31
5,573
4,494
0.23
0.23
4,152
2,838
0.15
0.15
8,037
11,770
0.63
0.62
Fluctuating seasonal revenue cycles are common in both the agriculture and construction industries as a result
of weather conditions, the timing of crop receipts and farming cycles and the timing of infrastructure expenditures. As
a result, our financial results typically vary between quarters. The first calendar quarter is generally the weakest due
to the lack of agriculture activity and winter shutdowns, while the fourth quarter is the strongest due to conversions of
equipment on rent with purchase options, and the post-harvest purchases that are typical in the agriculture sector.
Over time, we expect second and third quarter sales activity to increase relative to the fourth quarter as our
increased installed base drives more parts and service activity and our customers decide to trade their equipment
earlier in the year to take advantage of advancements in technology before the harvest season.
Weather conditions, such as a late spring, may positively or negatively impact sales activity for any given period.
22
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS BALANCE SHEET SUMMARY
$ THOUSANDS
Assets
Inventory
Other current assets
Property and equipment
Deferred tax asset
Goodwill
Total assets
Liabilities and equity
Floor plan payable
Other current liabilities
Long-term debt
Obligations under finance leases
Deferred tax liability
Derivative financial instruments
Shareholders’ equity
Total liabilities and equity
DECEMBER 31,
2014
DECEMBER 31,
2013
DECEMBER 31,
2012
526,003
69,049
32,886
1,186
14,692
643,816
382,081
57,261
32,776
9
-
3,282
475,409
168,407
643,816
479,330
74,520
30,860
-
14,692
599,402
342,364
53,113
41,681
541
2,576
1,706
441,981
157,421
599,402
495,151
91,571
21,558
-
13,884
622,164
351,812
69,955
45,977
1,379
7,042
1,438
477,603
144,561
622,164
Current assets at December 31, 2014 consist primarily of new and used equipment inventory of approximately
$213.7 million and $273.3 million, respectively (December 31, 2013 – $211.2 million and $230.4 million, respectively).
The Company’s new and used equipment inventory is comprised predominantly of agriculture equipment. The
Company has a diverse customer base for its agriculture equipment and strives to carry an appropriate mix of
both new and used equipment to best serve its customers. Typically, our agriculture customers trade in their used
equipment when purchasing new equipment. Construction equipment, by contrast, is generally utilized to the end
of its useful life by one owner. Trades of used construction equipment are less common and as such, the Company
carries less used construction equipment relative to new.
23
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS Total inventories have increased by $46.7 million over December 31, 2013 primarily as a result of increases in
used equipment inventory. In recent quarters, increased supply of agricultural commodities put downward pressure
on grain and oilseed prices which, in turn, softened equipment demand. As discussed, used equipment sales are
generally more susceptible to changes in these short-term factors than new equipment sales. The increase in used
equipment over December 31, 2013 is primarily the result of the reduction in used equipment sales during the year.
During the year, the Company took delivery of certain Tier 4B compliant units in advance of the introduction of
Tier 4B Final equipment, which is expected to carry with it an additional pricing increase. These units should help to
secure competitive equipment pricing into the spring of 2015 and come with favourable carrying terms from our OEMs.
The Company also took early delivery of application equipment to meet the spring 2015 demand; and some
large category tractors, to align our inventory of these units with customer demand.
Throughout the past several quarters, the Company implemented a number of sales initiatives to reduce its
equipment inventory. As previously discussed, the realization of such reduction is not expected to occur in a linear
manner. Inventory balances will fluctuate period-over-period, based on several factors including, but not limited to,
the timing of new equipment deliveries from OEMs to coincide with farming cycles and overall customer demand.
The Company continues to closely manage its inventory and remains committed to its stated objective of inventory
reduction in the coming quarters and years by maintaining an appropriate range of units at responsible values.
Current liabilities consist predominantly of floor plan payable for financed inventory of approximately $382.1
million as at December 31, 2014, up from $342.4 million at December 31, 2013. The increase in floor plan payable
corresponds with the increase in equipment inventory carried by the Company. As a percentage of equipment
inventory, floor plan payable is 78.5% up 1.0% from December 31, 2013.
24
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS LIQUIDITY AND CAPITAL RESOURCES
We assess liquidity in terms of our ability to generate sufficient cash flow, along with other sources of liquidity
including cash and borrowings, to fund our operations and growth in operations. Net cash flow is affected by the
following items:
■
■
■
Operating activities, including, the levels of accounts receivable, inventory, accounts payable and floor plan
payable;
Financing activities, including bank credit facilities, long-term debt and other capital market activities providing
both short- and long-term financing; and,
Investing activities, including capital expenditures, dispositions of fixed assets and acquisitions of
complementary businesses.
SUMMARY OF CASH INFLOWS (OUTFLOWS)
$ THOUSANDS
Net earnings
Effect of non-cash items in
net earnings and changes in
working capital
Cash flows from operating activities
Cash flows from financing activities
Cash flows from investing activities
Net increase (decrease) in cash
Cash, beginning of period
Cash, end of period
Floor Plan Neutral Operating
Cash Flow(1)
2014
18,925
(2,201)
16,724
(17,589)
(10,905)
(11,770)
34,722
22,952
2013
15,313
14,792
30,105
(8,459)
(21,101)
545
34,177
34,722
2012
23,975
(1,972)
22,003
(4,450)
(14,408)
3,145
31,032
34,177
(22,993)
42,342
(82,824)
(1) – See further discussion in “Non-IFRS Measures” and “Reconciliation of Non-IFRS Measures to IFRS” sections below
25
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS CASH FLOWS FROM OPERATING
ACTIVITIES
The Company assesses its Floor Plan Neutral
During 2014, the Company generated $16.7
Operating Cash Flow in analyzing its cash flows
from operating activities. See the definition and
reconciliation of Floor Plan Neutral Operating Cash
Flow in the “Non-IFRS Measures” and “Reconciliation
of Non-IFRS Measures to IFRS” sections below.
Rocky is eligible to finance its equipment
inventory using its various floor plan facilities. Floor
plan facilities are asset-backed lending arrangements
whereby each draw is associated with a specific piece
of equipment. The Company is under no obligation to
finance any of its equipment inventory and, as a general
rule, financed units can be paid out for a period of time
and refinanced at a later date. Adjusting cash flows
from operating activities for changes in the balance of
floor plan payable allows management to isolate and
analyze cash flows from operating activities, prior to
any sources or uses of cash associated with equipment
financing decisions.
For the year ended December 31, 2014, Floor Plan
Neutral Operating Cash Flow was a net use of cash of
$23.0 million as compared to $42.3 million generated
in 2013. The change in cash generated year-over-year
pertains largely to a $46.7 million dollar investment in
inventory as compared to a $15.8 million reduction of
inventory last year. The Company also entered 2014
with less in accounts receivable, and therefore collected
less cash during the 2014, as compared to last year.
million in cash flow from operating activities, $13.4
million less than was generated in the same period of
2013. The decrease is largely attributable to increased
inventory, net of floor plan payable.
CASH FLOWS FROM FINANCING
ACTIVITIES
Cash flows from financing activities during 2014
and 2013 pertained primarily to scheduled debt and
dividend payments, offset by draws on our various
credit facilities and proceeds received from the issuance
of common shares pursuant to the exercise of stock
options.
We utilized an additional $9.1 million for financing
activities due largely to $3.9 million and $2.8 million
reductions in proceeds from long-term debt and the
exercise of stock options, respectively, as compared to
2013.
26
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS CASH FLOWS FROM INVESTING
ACTIVITIES
Cash utilized for investing activities was the result
We utilized $10.9 million for investing activities,
of our normal capital expenditures, the acquisition
of real estate and the net cash consideration paid
pursuant to business combinations, offset by proceeds
on the disposition of property and equipment.
down from $21.1 million in 2013. The decrease pertains
to a $4.4 million decrease in the purchase of property
and equipment as well as $4.1 million less spend on
business acquisitions.
ADEQUACY OF CAPITAL RESOURCES
We use operating cash flows to finance the purchase of inventory, service our debt requirements, pay dividends,
and fund our operating activities, including working capital, both operating and finance leases and floor plan payable.
Our ability to service our debt and distribute dividends to shareholders will depend upon our ability to generate cash,
which depends on our future operating performance, general economic conditions, availability of adequate credit
facilities, compliance with debt covenants, as well as other factors, some of which are beyond our control. Based on
our current operational performance, we believe that cash flows from operations, along with existing credit facilities,
will provide for our capital needs.
FINANCE FACILITIES
The Company has a credit facility with a syndicate of lenders (the “Syndicated Facility”). The Syndicated Facility
is secured in favour of the syndicate by a general security agreement. Advances under the Syndicated Facility may
be made based on our lenders’ prime rate or the US base rate plus 1.0% – 2.5% or based on the banker’s acceptance
(“BA”) rate plus 2.0% – 3.5%. The Company pays standby fees of between 0.4% and 0.7% per annum on any undrawn
portion of the Syndicated Facility. The standby fees and premiums on base interest rates within the respective ranges
are determined based on the Company’s covenant compliance. The Syndicated Facility matures on June 1, 2017. It is,
however, the Company’s intention to renew this facility prior to its maturity date.
27
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS The Syndicated Facility consists of:
■
■
■
■
■
■
The “Operating Facility” – which may be utilized to advance up to the lesser of 50% of eligible inventory plus
75% of eligible accounts receivable or $30.0 million and may be used to finance general corporate operating
requirements.
The “Flooring Facility” – which may be used to finance up to 75% of the value of eligible equipment inventory.
Draws against the Flooring Facility are repayable over a term of 24 months however; they become due in full upon
the sale of the associated equipment.
The “Acquisition Facility” – which may be used to finance up to 60% of the cost of future acquisitions with
tranches repayable in monthly installments over an amortization period of 60 months.
The “Fleet Facility” – which may be used to finance the Company’s fleet of vehicles with draws repayable in
monthly installments over an amortization period ranging from 36-60 months.
The “Debenture Repayment Facility” – which was used to finance the repurchase of the debentures. This facility is
repayable with quarterly installments of $0.9 million plus interest with the remaining principal to be paid out on
September 30, 2017.
The “Real Estate Facility” – which may be used to finance 65% of the lesser of the purchase price and appraised
value of eligible real estate, with draws repayable over an amortization period of 15 years.
Including the Syndicated Flooring Facility, we have total floor plan facilities of approximately $537.0 million
(inclusive of seasonal increases) from various lending institutions for the purpose of financing inventory. Our
equipment inventory is financed by way of floor plan financing, which is made available to Rocky by the equipment
manufacturers’ captive finance companies or divisions (such as CNH Capital), as well as by banks and specialty
lenders. The Company also has an additional $75.0 million of floor plan availability with its OEMs, to be made
available to the Company if required as a result of business combinations.
28
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS In addition to our available cash balance of $23.0 million as at December 31, 2014, we have approximately
$223.1 million available on our various credit facilities.
$ MILLIONS
FACILITY LIMIT
AMOUNT DRAWN
AVAILABLE
Operating Facility
Acquisition Facility
Fleet Facility
Debenture Repayment Facility
Real Estate Facility
Various floor plan facilities
OEM floor plan facilities
Syndicated Flooring Facility
Other floor plan facilities
30.0
30.0
10.0
26.3
15.0
175.0
125.0
237.0
648.3
-
11.8
5.0
26.3
-
117.7
82.2
182.2
425.2
30.0
18.2
5.0
-
15.0
57.3
42.8
54.8
223.1
FINANCIAL COVENANTS
Pursuant to agreements with lenders, the Company is required to monitor and report certain financial ratios on
a quarterly basis. The extent to which the Company is able to draw on its available credit facilities may be limited by
these financial covenants. These measures and the applicable compliance ranges as at December 31 are as follows:
Fixed charge coverage of at least
Debt to tangible net worth less than
Current ratio of at least
2014
2013
1.25-1.50:1
4.00-5.00:1
1.15-1.20:1
1.25-1.50:1
4.00-5.00:1
1.15-1.20:1
29
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS Each lender has its own definition of which account balances are to be included in these computations. Failing
to meet these covenants would constitute a default event which may result in, among other restrictions and remedies,
the associated debt becoming due and restrictions on the Company’s ability to draw on its facilities or make
distributions to shareholders.
As at December 31, 2014 and December 31, 2013, the Company was in compliance with all externally imposed
capital requirements. As at December 31, 2014, the Company’s compliance with the fixed charge coverage ratio on the
Syndicated Facility is however, marginal. Based on our projected results, we expect to remain in compliance with this,
and other covenants, however, our estimated results are subject to numerous risks and uncertainties, some of which
are beyond our control. The Company will continue to closely monitor its financial covenants accordingly.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company utilizes derivative financial instruments to hedge its exposure to changes in interest rates and
fluctuations in the valuation of its common shares. We do not use derivatives to speculate, but rather as a risk
management tool. The Company’s portfolio of derivative financial instruments consists of interest rate and total
return swaps.
Gains (losses) on derivative financial instruments are as follows:
$ THOUSANDS
Gain (loss) recognized in net earnings
Loss recognized in accumulated other
comprehensive loss – net of tax
Tax on loss recognized in accumulated other
comprehensive loss
2014
(68)
(1,122)
(386)
2013
225
(365)
(128)
30
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS INTEREST RATE SWAPS
The Company has four separate interest rate swaps (the “Swaps”) related to portions of its Acquisition and
Flooring Facilities as well as the Debenture Repayment Facility (collectively the “Hedged Facilities”).
The Hedged Facilities each bear interest at a floating rate based on the prevailing one-month BA rate plus 2.0% –
3.5%. The Swaps hedge our exposure to fluctuations in the BA rate.
$ THOUSANDS
DECEMBER 31,
2014
DECEMBER 31,
2013
HEDGE
TYPE
MATURITY
EFFECTIVE
RATE
NOTIONAL
AMOUNT
EFFECTIVE
RATE
NOTIONAL
AMOUNT
Current debt
Flooring Facility # 1
Non-amortizing
August, 2018
Flooring Facility # 2
Non-amortizing
September, 2020
Long-term debt
Acquisition Facility
Debenture Facility
Amortizing
Amortizing
May, 2016
April, 2017
4.2%
5.1%
3.5%
4.1%
25,000
35,000
60,000
4,642
26,250
30,892
90,892
4.5%
5.3%
3.7%
4.3%
25,000
35,000
60,000
7,918
29,750
37,668
97,668
At inception, these instruments were designated as hedges and were accounted for using hedge accounting
in our consolidated financial statements. During 2014, the interest rate swaps on the Acquisition and Debenture
Facilities no longer remained effective and as such, we have discontinued hedge accounting. The accumulated
amounts recognized within accumulated comprehensive loss will be reversed into net earnings over the remainder of
term of the derivatives. Future changes in the fair value of these derivatives will be recognized within net earnings in
the period in which they arise.
31
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS The two interest rate swaps on the Flooring Facility continue to remain effective and as such, we continue to
account for these cash flows hedges using hedge accounting. If we sell or terminate a hedged item, or it matures
before the related hedging instrument is terminated, we recognize in income any realized or unrealized gain or loss
on the derivative instrument. In accounting for these cash flow hedges, changes in fair value of the swaps are included
in the consolidated statement of other comprehensive income to the extent the hedge continues to be effective. The
related other comprehensive amounts are allocated to net earnings in the same period in which the hedged item
affects net earnings. For all these hedges, to the extent the change in fair value of the derivative is not completely
offset by the change in the fair value of the hedged item, the ineffective portion of the hedging relationship is recorded
immediately in net earnings.
TOTAL RETURN SWAPS
During the year, the Company entered into two total return swap transactions to hedge the exposure associated
with increases in its share value on its outstanding Director Share Units (DSUs) and Share Appreciation Rights (SARs).
The Company does not apply hedge accounting to these relationships and as such, gains and losses arising from
marking these derivatives to market are recognized in net earnings in the period in which they arise.
As at December 31, 2014, the Company had built a hedged position of 290.5 thousand shares at a weighted
average price of $9.87. As at December 31, 2014, the Company’s outstanding DSUs and SARs amounted to 74.9
thousand and 550.0 thousand units, respectively. During the year, the Company recognized $0.1 million in expense
related to the total return swaps.
DIVIDENDS
On January 26, 2015, the Board of Directors of Rocky approved a quarterly dividend of $0.115 per common share
on its outstanding common shares. The common share dividend is payable on March 31, 2015, to shareholders of
record at the close of business on February 27, 2015.
32
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS SHARE CAPITAL – OUTSTANDING SHARES
THOUSANDS
Opening balance
Shares issued upon exercise of stock options
Closing balance
2014
19,313
71
19,384
2013
18,993
320
19,313
As at March 10, 2015, there were 19,384,086 shares outstanding.
The options outstanding at December 31, 2014 are as follows (expressed in thousands except per option and
average life amounts):
GRANT DATE
March 11, 2011
August 11, 2011
March 28, 2012
March 13, 2013
March 13, 2014
OPTIONS
OUTSTANDING
(THOUSANDS)
OPTIONS
EXERCISABLE
(THOUSANDS)
WEIGHTED AVERAGE
EXERCISE PRICE
($)
WEIGHTED AVERAGE
CONTRACTUAL LIFE
(YEARS)
38
142
256
387
413
1,236
38
142
169
129
-
478
10.39
8.71
11.96
12.89
11.52
11.68
1.2
1.6
2.2
3.2
4.2
3.1
As at March 10, 2015, there were 1,236,167 options outstanding.
33
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS CONTRACTUAL OBLIGATIONS
The Company’s contractual obligations consist primarily of its floor plan payable used to finance the purchase
of new, and to a lesser extent, used equipment. The Company has classified its floor plan payable as current as the
corresponding inventory to which it relates has also been classified as current.
Floor plan payable as well as trade payables, accruals and other form the majority of the Company’s contractual
obligations which will be discharged within the next 12 months.
Other significant contractual obligations outstanding as at December 31, 2014 include long-term debt consisting
predominantly of the Debenture Repayment, Acquisition and Fleet Facilities and operating lease commitments which
relate primarily to the Company’s facilities. Lease terms are between one and eleven years and most building leases
contain five-year renewal options.
The Company assesses its liquidity based on the expected period in which cash flows will occur. The following
table summarizes the Company’s expected undiscounted cash flows as at December 31, 2014 assuming the
Syndicated Facility is renewed prior to maturity on June 1, 2017. The analysis is based on foreign exchange rates and
interest rates in effect at the consolidated balance sheet date, and includes both principal and interest cash flows.
$ THOUSANDS
TOTAL
2015
2016-2017
2018-2019
Trade payables, accruals and other
Floor plan payable
Long-term debt
Obligations under finance leases
Operating lease obligations
Derivative financial instruments
34,409
395,375
46,408
501
34,308
3,592
34,409
395,375
12,074
492
8,018
1,150
Total contractual obligations
514,593
451,518
-
-
32,427
9
13,506
1,453
47,395
-
-
1,893
-
6,487
799
9,179
THERE-
AFTER
-
-
14
-
6,297
190
6,501
In the event that the Syndicated Facility is not renewed prior to its maturity, the cash outflow for the long-term
debt outstanding as at December 31, 2014 would be $34.0 million in 2016-2017 and $Nil in 2018-2019 and thereafter.
34
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS RELATED PARTY TRANSACTIONS
During the year ended December 31, the Company entered into the following transactions with related parties:
$ THOUSANDS
Equipment sales
Expenditures
Rental payments on Company facilities
Equipment purchases
Flight costs
Other expenses
2014
6,921
5,435
3,846
191
70
2013
4,476
5,280
4,206
183
406
All related parties are either directly or indirectly owned by a member of senior management of the Company
and/or a close family member thereof. These transactions were made on terms equivalent to those that prevail in
arm’s length transactions and are made only if such terms can be substantiated.
The remuneration of the directors and officers of the Company is determined by the Compensation, Governance
and Nominating Committee of the Board of Directors based on performance and is consistent with market trends. The
remuneration of directors and officers of the Company identified as key management is as follows for the respective
years ended:
$ THOUSANDS
Salary and short-term benefits
Post-retirement benefits
Share-based payments
2014
2,061
33
769
2,863
2013
1,984
36
1,054
3,074
35
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS Amounts due from (to) related parties are included in the consolidated balance sheet under trade receivables
and other (trade payables, accruals and other) and are as follows:
$ THOUSANDS
Due from related parties
Due to related parties
2014
61
(112)
2013
141
(39)
The amounts due from related parties are not secured and are to be settled in cash. As at December 31, 2014 and
2013, the amounts due from related parties are considered collectible and therefore have not been provided for in
the allowance for doubtful accounts. During the year ended December 31, 2014, $Nil has been recognized in bad debt
expenses with respect to related party transactions (2013 – $Nil).
The Company has contractual obligations to related parties in the form of facility leases. As at December 31,
2014, these contractual obligations and due dates are as follows:
$ THOUSANDS
TOTAL
2015
2016-2017
2018-2019
THERE-
AFTER
Operating lease obligations
26,583
5,396
9,998
4,911
6,278
36
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS OFF-BALANCE SHEET ARRANGEMENTS
We use off-balance sheet financing in connection with numerous operating leases. These leases relate to the
Company’s buildings and certain vehicles with lease terms of between one and eleven years. Most building leases
contain renewal options for periods of three to five years. We have paid monthly amounts under these operating
leases ranging from $0.1 thousand to $64.2 thousand. In some instances, the counterparty to the Company’s
operating lease obligations is a related party. Refer to the “Related Party Transactions” section of this MD&A for a
discussion of the terms and amounts of such arrangements. The current operating leases expire between January
2015 and July 2023.
37
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS SELECTED FOURTH QUARTER FINANCIAL
INFORMATION
$ THOUSANDS, EXCEPT
PER SHARE AMOUNTS
2014
2013
2012
Sales
New equipment
Used equipment
Parts
Service
Other
Cost of sales
Gross profit
Selling, general and administrative
Interest on short-term debt
Interest on long-term debt
Earnings before income taxes
Provision for income taxes
Net earnings
Earnings per share
Basic
Diluted
Dividends per share
Non-IFRS Measures(1)
EBITDA
Operating SG&A
Floor Plan Neutral Operating
Cash Flow
182,555
79,810
21,320
9,569
838
62.1%
27.1%
7.2%
3.3%
0.3%
179,359
84,925
18,099
7,403
795
61.7%
29.2%
6.2%
2.5%
0.4%
294,092
100.0%
290,581
100.0%
254,623
39,469
27,548
2,956
524
8,441
2,220
6,221
0.32
0.32
0.1150
10,778
25,735
86.6%
13.4%
9.4%
1.0%
0.1%
2.9%
0.8%
2.1%
3.7%
8.8%
257,329
33,252
27,249
2,802
572
2,629
563
2,066
0.11
0.11
0.1000
4,872
25,578
88.6%
11.4%
9.4%
1.0%
0.1%
0.9%
0.2%
0.7%
1.7%
8.8%
195,813
79,709
16,369
7,933
956
300,780
254,913
45,867
26,060
2,622
572
16,613
4,843
11,770
0.63
0.62
0.0675
18,557
24,693
65.1%
26.5%
5.4%
2.6%
0.4%
100.0%
84.8%
15.2%
8.7%
0.9%
0.1%
5.5%
1.6%
3.9%
6.2%
8.2%
7,822
2.7%
(19,916)
(6.9%)
(27,449)
(9.1%)
(1) – See further discussion in “Non-IFRS Measures” and “Reconciliation of Non-IFRS Measures to IFRS” sections below
38
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS Segmented Financial Reporting
$ THOUSANDS
2014
2013
AGRICULTURE CONSTRUCTION
TOTAL
AGRICULTURE CONSTRUCTION
TOTAL
Sales
New equipment
173,023
Used equipment
Parts
Service
Other
Gross profit (loss)
Gross margin
Net income (loss)
78,304
17,659
8,044
617
277,647
36,255
13.1%
6,695
9,532
1,506
3,661
1,525
221
16,445
3,214
19.5%
(474)
182,555
168,771
10,588
179,359
79,810
21,320
9,569
838
83,952
15,166
6,293
610
294,092
274,792
39,469
13.4%
6,221
37,769
13.7%
8,357
973
2,933
1,110
185
15,789
(4,517)
(28.6%)
(6,291)
84,925
18,099
7,403
795
290,581
33,252
11.4%
2,066
39
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS Agriculture Segment Revenue and Gross Profit
$ THOUSANDS
2014
2013
CHANGE
TOTAL
ACQUIRED
SAME STORE
Sales
New equipment
173,023
Used equipment
Parts
Service
Other
Gross profit
Gross margin
78,304
17,659
8,044
617
277,647
36,255
13.1%
168,771
83,952
15,166
6,293
610
274,792
37,769
13.7%
4,252
(5,648)
2,493
1,751
7
2,855
(1,514)
(0.6%)
-
-
512
-
-
512
4,252
(5,648)
1,981
1,751
7
2,343
For the quarter ended December 31, 2014, total sales for the agriculture segment were $277.6 million, an
increase of $2.9 million or 1.0% over the same period in 2013. Acquired stores contributed $0.5 million of this increase
with the remainder coming primarily from same store product support sales growth.
Equipment sales for the quarter ended December 31, 2014 were relatively flat. A $4.3 million increase in same
store new equipment sales was offset by a $5.6 million reduction in same store used equipment sales.
Parts sales for the quarter ended December 31, 2014 increased by $2.5 million or 16.4% with acquired parts
sales contributing $0.5 million of this increase. Service sales for the quarter increased $1.8 million or 27.8%. Our
parts sales increase for the quarter is due, in part, to improved market penetration, primarily of non-captive product
lines. In addition, efforts undertaken by Rocky’s management around procurement synergies and sales training have
continued to have a positive effect. On the service side, reduced equipment sales translated into fewer trades taken
in which, in turn, enabled our service departments to perform additional external work. We also continued to realize
improvements in our technician efficiency during the quarter, further bolstering service revenues.
Gross profit for the quarter ended December 31, 2014 decreased by $1.5 million or 4.0% over the same period
in 2013. As a percentage of sales, gross profit declined by 0.6% to 13.1% during the fourth quarter. These decreases
are primarily attributable to equipment pricing increases which we were unable to pass on in their entirety to our
customers.
40
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS
Construction Segment Revenue and Gross Profit
$ THOUSANDS
2014
2013
CHANGE
Sales
New equipment
Used equipment
Parts
Service
Other
Gross profit (loss)
Gross margin
9,532
1,506
3,661
1,525
221
16,445
3,214
19.5%
10,588
973
2,933
1,110
185
15,789
(4,517)
(28.6%)
(1,056)
533
728
415
36
656
7,731
48.1%
For the quarter ended December 31, 2014, total sales for the construction segment were $16.4 million
representing an increase of $0.7 million or 4.2% over the same period in 2013.
Equipment sales for the quarter ended December 31, 2014 decreased by $0.5 million or 4.5% over the same
period in 2013.
Parts and service sales for the quarter ended December 31, 2014 increased by $0.7 million and $0.4 million
or 24.8% and 37.4%, respectively. As discussed, our investment in departmental management and sales processes
combined with expanding our product offering of non-captive items has enabled us to expand our parts business with
our existing customer base. We have also seen improvements in our technician efficiency as a result of management’s
focus on product support activities and have improved the visibility of certain service programs through targeted
marketing efforts.
Gross profit for the quarter ended December 31, 2014 increased by $7.7 million over 2013, to $3.2 million. As a
percentage of sales, gross profit increased to 19.5% from a loss in 2013 of 28.6%. During the fourth quarter of 2013,
the Company recognized a $5.0 million impairment charge on its Terex truck inventory accounting for the majority of
the increase in both gross profit dollars and gross margin percentage. The remainder of the increase is attributable to
additional product support business and margin improvement in both our equipment and product support revenue
streams.
41
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS
SELLING, GENERAL AND
ADMINISTRATIVE
The Company assesses its Operating SG&A
relative to total sales in analyzing its results. See the
definition and reconciliation of Operating SG&A in the
“Non-IFRS Measures” and “Reconciliation of Non-IFRS
Measures to IFRS” sections below.
For the three months ended December 31, 2014,
Operating SG&A was $25.7 million, relatively flat
compared to $25.6 million in 2013. Operating SG&A as a
percentage of sales was flat at 8.8% as compared to the
fourth quarter last year.
Depreciation included in SG&A amounted to $1.8
million in the fourth quarter of 2014 versus $1.7 million
in the same period in 2013.
NET EARNINGS
For the three months ended December 31, 2014,
we generated net earnings of $6.2 million, up from $2.1
million in the same period in 2013. The Company’s
diluted earnings per share for the three months ended
December 31, 2014 was $0.32 compared to $0.11 for the
fourth quarter of 2013. The increases in net earnings
and diluted earnings per share are predominantly the
result of the $5.0 million impairment charge on our
Terex truck inventory during the fourth quarter of 2013.
42
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS CRITICAL ACCOUNTING ESTIMATES
The preparation of the consolidated financial statements requires that certain estimates and judgments be
made with respect to the reported amounts of sales and expenses and the carrying amounts of assets and liabilities.
These estimates are based on historical experience and management’s judgment. Anticipating future events involves
uncertainty and consequently, the estimates used by management in the preparation of the consolidated financial
statements may change as future events unfold, additional information is acquired or the Company’s operating
environment changes. Management considers the following to be the most significant of these estimates.
ALLOWANCE FOR
DOUBTFUL ACCOUNTS
The allowance for doubtful accounts is reviewed
by management on a monthly basis. Accounts
receivable are considered for impairment on a case-by-
case basis when they are past due or when objective
evidence is received that a customer will default. The
Company takes into consideration the customer’s
payment history, their creditworthiness and the current
economic environment in which the customer operates
to assess impairment. The Company’s historical bad
debt expenses have not been significant and are usually
limited to specific customer circumstances.
NET REALIZABLE VALUE
OF INVENTORY
Equipment is valued at the lower of cost and
net realizable value, with cost being determined on
a specific item, actual cost basis, and net realizable
value being determined by the recent sales of the same
or similar equipment inventory or market values as
established by industry publications, less the costs to
sell. Parts inventory is recorded at the lower of cost and
net realizable value, with cost being determined
on an average cost basis and net realizable value being
determined by recent sales of the same or similar parts
inventory, less the costs to sell. Work-in-progress is
valued on a specific item, actual cost basis.
NET RECOVERABLE AMOUNT
OF GOODWILL
For the purposes of impairment testing, goodwill
is allocated to the Company’s CGUs. The recoverable
amount of each CGU is determined using a value in
use calculation. The key assumptions for the value
in use calculations are those regarding discount and
growth rates. These key assumptions are based on past
experience, which has been adjusted for anticipated
changes in future periods.
43
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS MANUFACTURER INCENTIVES
DERIVATIVE FINANCIAL
INSTRUMENTS
Certain manufacturers offer annual performance
The Company utilizes floating-to-fixed interest
incentives which are linked to the Company’s market
share achievement and annual sales volumes. The
Company uses estimated annual market share statistics
derived from historical results which have been
adjusted for any anticipated changes in the current
year, as well as eligible sales volume to date to accrue
the proportion of these annual manufacturer incentives
earned during the period. The manufacturer incentives
received by the Company are primarily associated with
agriculture equipment and as such, the majority of such
incentives are accrued within the financial results of the
agriculture segment.
rate swaps to manage its interest rate exposure.
These derivatives are initially recognized on the date
the contract is entered into and are subsequently
re-measured at their fair value. The fair values of the
interest rate swaps are calculated as the net present
value of the estimated future cash flows expected
to arise on the variable and fixed legs, determined
using applicable yield curves at each measurement
date. Swap curves, which incorporate credit spreads
applicable to large commercial banks, are typically
used to calculate expected future cash flows and the
present values thereof. Adjustments are also made to
reflect the Company’s own credit risk and the credit risk
of the counterparty, if different from the spread implicit
in the swap curve.
44
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS KEY FINANCIAL STATEMENT COMPONENTS
EQUIPMENT SALES
COST OF SALES
Equipment revenues are derived from the sale of
new and used construction and agriculture equipment.
Revenue is recognized when the customer has signed
the sales agreement, has paid or is credit-approved,
and title to and risk of loss for the piece of equipment
have transferred. New equipment sales also include
certain rental revenues.
PARTS SALES
Revenue from parts sales is recognized when
title to the product has transferred to the customer
and collection is reasonably assured. This is evidenced
by the goods being shipped or physically taken by the
customer, or in the case of parts drawn to complete
service work, when the service work order is completed.
SERVICE REVENUE
Revenue from service is recognized by reference
to the stage of completion of the contract when the
outcome can be estimated reliably.
Cost of sales is the accumulation of the costs
attributable to the sources of revenue set forth in the
financial statements. Revenues are matched to cost of
sales attributable to specific revenue sources.
The cost of equipment sales is determined based on the
actual cost of the equipment. The cost of parts sales is
determined based on the average actual cost for those
parts. The cost of service revenues is determined based
on actual costs to complete the service job, which
include, without limitation, wages paid to service
technicians and the actual cost of externally sourced
labour, plus applicable overheads.
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
SG&A expenses include sales and marketing
expenses, sales commissions, payroll, and related
benefit costs, insurance expenses, professional
fees, rent, and other facility costs and administrative
overhead including depreciation of property and
equipment.
INTEREST EXPENSE
Short-term interest includes the aggregate
expense for interest under the current floor plan
financing programs associated with financing
equipment inventory through numerous creditors,
and existing credit facilities. Short-term interest also
includes charges related to credit and financing.
Long-term interest includes the aggregate expense for
interest associated with the Company’s various long-
term credit facilities and obligations under finance leases.
45
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS
RISKS AND UNCERTAINTIES
Risk factors faced by Rocky are listed in the
Company’s AIF, which can be found on SEDAR. These
risk factors include industry risks associated with
construction and agriculture equipment dealerships
and others, including but not limited to: economic
conditions; weather and climate conditions; commodity
prices; inventory risks; industry oversupply; the
seasonality and cyclicality of the industries we service;
interest rate changes; government regulations in the
areas we operate; competition within our industry;
credit facilities; foreign exchange exposure; reliance on
key manufacturers; consolidation within the equipment
manufacturing industry; the nature of our dealership
agreements; the non-exclusive nature of key geographic
markets; customer credit risks; our information
systems; the availability of floor plan financing and
other forms of credit to the Company; unfavorable
conditions (economic, weather or otherwise) in key
geographic markets; our continued ability to pay our
dividend; import restrictions and foreign trade risks;
insurance matters; branch leases; the retention of key
personnel; labour costs and shortages; labour relations;
freight costs; future warranty claims; product liability
risks; restrictions on and impediments on acquisitions;
growth risks; our ability to successfully integrate our
acquisitions and aviation risks.
Our success largely depends on the abilities
and experience of our senior management team
and other key personnel. These employees carry a
significant amount of the management responsibility
of our business and are important for setting strategic
direction and dealing with certain significant customers.
Our future performance will also depend on our
ability to attract, develop, and retain highly qualified
employees in all areas of our business. We face
significant competition for individuals with the skills
required to develop, market and support our products
and services. If we fail to recruit and retain sufficient
numbers of these highly skilled employees, we may
not be able to achieve our growth objectives and our
business may be adversely affected.
46
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS RISKS RELATED TO FINANCIAL INSTRUMENTS
Through its financial instruments, the Company has exposure to the following risks: credit risk, market risk
(consisting of foreign currency exchange risk, interest rate risk and equity price risk), and liquidity risk.
CREDIT RISK
MARKET RISK
Credit risk refers to the risk that a counterparty
will default on its contractual obligations resulting in
a financial loss to the Company. The Company has a
policy of only dealing with creditworthy counterparties
and obtaining sufficient collateral, where appropriate,
as a means of mitigating the risk of financial loss from
defaults. The creditworthiness of counterparties is
determined using information supplied by independent
rating agencies where available and, if not available,
the Company uses other publicly available financial
information and its own trading records to rate its
major customers. The Company’s exposure and the
credit ratings of its counterparties are continuously
monitored and the aggregate value of transactions
concluded is spread amongst approved counterparties.
Credit exposure is controlled by counterparty limits that
are reviewed regularly.
The Company’s exposure to credit risk on its cash
balance is mitigated as these financial assets are held
with major financial institutions with strong credit
ratings.
During the year ended December 31, 2014, the
Company increased its allowance for doubtful accounts
by $0.5 million (2013 – decreased by $0.3 million) and
wrote-off $0.5 million (2013 – $0.3 million). Changes
in the carrying amount of the allowance for doubtful
accounts, including write-offs, are recognized in selling,
general and administrative expenses.
Market risk is the risk from changes in market
prices, such as changes in foreign currency exchange
rates, interest rates and the market price of the
Company’s common shares, which will affect the
Company’s earnings or the value of the financial
instruments held.
Foreign Currency Exchange Risk
The OEMs we do business with are geographically
diversified, requiring us to conduct business in two
currencies: U.S. dollars and Canadian dollars. As a
result, we have foreign currency exposure with respect
to purchases of U.S. dollar denominated products
(inventory) and we experience foreign currency gains
and losses thereon. The nature of exposure to foreign
exchange fluctuations differs between equipment
manufacturers and the various dealer agreements with
them.
A weakening of the U.S. dollar in comparison to
the Canadian dollar will generally have a positive effect
on our performance by lowering our cost of goods
sold. However, as the markets in which we operate
are highly competitive, a declining U.S. dollar also has
the effect of reducing sales prices in Canadian dollars
and, as a consequence, we cannot capture the entire
potential benefit of a declining U.S. dollar environment.
By contrast, a strengthening U.S. dollar will increase
the cost of equipment purchases. If we are unable
to fully offset the increase in cost of goods through
price increases, our financial results will be negatively
affected. We mitigate some of this risk by occasionally
47
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS
purchasing forward contracts for U.S. dollars on large
transactions to cover the period from the time the
equipment is ordered from the manufacturer to the
payment date.
Included in selling, general and administrative
expenses are gains recognized due to foreign currency
translation for transactions and balances aggregating
$0.2 million for the year ended December 31, 2014 (2013
- $0.5 million).
Interest Rate Risk
We finance our purchases of new and, to a lesser
extent, used equipment inventory through floor plan
borrowing arrangements, under which we are charged
interest at floating rates. As a result, rising interest rates
have the effect of increasing our overall costs. To the
extent that we cannot pass on such increased costs
to our customers, our net earnings or cash flow may
decrease. In addition, some of our customers finance
the equipment they purchase through us. A customer’s
decision to purchase may be affected by interest rates
available to finance the purchase.
The Company manages its interest rate risk
by using floating-to-fixed interest rate swaps when
appropriate. Generally, the Company will obtain floor
plan financing and long-term debt at floating rates.
When the Company enters into a floating-to-fixed
interest rate swap, it agrees with a third party to
exchange the difference between the fixed and floating
contract rates based on agreed notional amounts.
Refer to “Derivative Financial Instruments”
section of this MD&A for gains (losses) on derivative
financial instruments.
48
Equity Price Risk
As part of its overall compensation of directors,
officers and employees, the Company has issued
cash-settled share-based payments in the form of DSUs
and SARs. The DSUs are valued on a per DSU basis
at an amount equal to the volume weighted average
trading price of the Company’s common shares over
the immediately preceding 20 day trading period.
The SARs are revalued at each reporting date using
the Black-Scholes option pricing model. Increases
in the Company’s share value result in additional
compensation expense to the Company. As cash-settled
share-based payments, the DSUs and SARs are not
accounted for as financial instruments.
During the year, the Company entered into two
total return swaps to hedge the exposure associated
with increases in its share value on its outstanding
DSUs and SARs. The total return swaps are classified
as derivative financial instruments. The intent of these
derivatives is to offset the incremental cost to the
Company associated with increases in its common
share price on its cash-settled share-based payments.
Refer to “Derivative Financial Instruments”
section of this MD&A for gains (losses) on derivative
financial instruments.
LIQUIDITY RISK
The Company’s objective is to have sufficient
liquidity to meet its liabilities when due. The Company
monitors its cash balance and cash flows generated
from operations as well as available credit facilities to
meet its requirements.
Refer to the “Finance Facilities” section of this
MD&A for details on the Company’s various credit
facilities.
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS SUBSEQUENT EVENTS
On February 12, 2015, the Company acquired 100% of the outstanding common shares of NGF Geomatics Inc.
(“NGF”), a geomatics company specializing in the collection of geospatial survey data using unmanned aerial vehicles.
The purchase price was $0.8 million and was funded with cash. The Company is in the process of determining the
purchase price allocation.
On March 10, 2015, the Company announced that it had entered into an agreement to purchase 100% of the
issued and outstanding shares of the entities forming Chabot Implements (“Chabot”). Chabot is a Manitoba-based
dealer of Case IH agriculture equipment with locations in Portage La Prairie, Steinbach and Elie. Chabot also sells
Kubota equipment through its Neepawa, Manitoba location. The purchase consideration of $6.8 million is subject
to a minimum working capital requirement and will be adjusted based on actual working capital delivered. The
acquisition is expected to close effective April 1, 2015.
49
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS NON-IFRS MEASURES
Throughout this MD&A, we use terms which do
not have standardized meanings under IFRS. As these
non-IFRS financial measures do not have standardized
meanings prescribed by IFRS, they are unlikely to be
comparable to similar measures presented by other
issuers. Our definition for each term is as follows:
“EBITDA” is a commonly used metric in the dealership
industry. EBITDA is calculated by adding interest on
long-term debt, income taxes and depreciation to
net earnings. Adding back non-operating expenses
allows management to consistently compare periods
by removing changes in tax rates, long-term assets
and financing costs related to the Company’s capital
structure.
“Operating SG&A” is calculated by adding back
depreciation of property and equipment and
any non-recurring charges recognized in SG&A
during the period to SG&A. Management deems
non-recurring charges to be unusual or infrequent
charges that the Company incurs outside of its
common day-to-day operations. Adding back these
items allows management to assess discretionary
expenses from ongoing operations. Management
has changed the calculation of Operating SG&A from
previous disclosures by no longer considering the
ineffective portion of derivative financial instruments
or acquisition transaction costs to be non-recurring
charges. For the periods presented, these costs are
insignificant in amount and recurring in nature. For the
periods presented, no non-recurring charges have been
identified. We target a sub-10% Operating SG&A as a
percentage of total sales on an annual basis.
“Floor Plan Neutral Operating Cash Flow” is
calculated by eliminating the impact of the change
in floor plan payable (excluding floor plan assumed
pursuant to business combinations) from cash flows
from operating activities. Adjusting cash flows from
operating activities for changes in the balance of
floor plan payable allows management to isolate and
analyze operating cash flows during a period, prior to
any sources or uses of cash associated with equipment
financing decisions.
50
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS
RECONCILIATION OF NON-IFRS
MEASURES TO IFRS
EBITDA
$ THOUSANDS
Net earnings
Interest on
long-term debt
Depreciation
expense
Income taxes
EBITDA
FOR THE QUARTER ENDED
DECEMBER 31,
FOR THE YEAR ENDED
DECEMBER 31,
2014
6,221
524
1,813
2,220
10,778
2013
2,066
572
1,671
563
4,872
2012
2014
2013
2012
11,770
18,925
15,313
23,975
572
2,182
2,233
2,843
1,372
4,843
18,557
7,057
7,276
35,440
6,471
5,714
29,731
5,511
9,679
42,008
OPERATING SG&A
$ THOUSANDS
SG&A
Depreciation
expense
Operating SG&A
FOR THE QUARTER ENDED
DECEMBER 31,
FOR THE YEAR ENDED
DECEMBER 31,
2014
2013
2012
2014
2013
2012
27,548
27,249
26,060
105,756
105,450
97,711
(1,813)
25,735
(1,671)
25,578
(1,367)
24,693
(7,057)
98,699
(6,471)
98,979
(5,050)
92,661
51
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS FLOOR PLAN NEUTRAL OPERATING CASH FLOW
$ THOUSANDS
Cash flow from
operating
activities
Net decrease
(increase) in floor
plan payable
Floor plan
assumed pursuant
to business
combinations
Floor Plan Neutral
Operating Cash
Flow
FOR THE QUARTER ENDED
DECEMBER 31,
FOR THE YEAR ENDED
DECEMBER 31,
2014
2013
2012
2014
2013
2012
12,898
(221)
19,487
16,724
30,105
22,003
(5,076)
(19,695)
(50,565)
(39,717)
9,448
(124,949)
-
-
3,629
-
2,789
20,122
7,822
(19,916)
(27,449)
(22,993)
42,342
(82,824)
52
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS INTERNAL CONTROLS OVER FINANCIAL
REPORTING AND DISCLOSURE CONTROLS
AND PROCEDURES
The Chief Executive Officer (“CEO”) and the
Chief Financial Officer (“CFO”) are responsible for
establishing and maintaining the Company’s disclosure
controls and procedures, (“DC&P”), to provide
reasonable assurance that material information
related to the Company is made known. In addition,
internal controls over financial reporting (“ICFR”)
have been designed by or have been caused to be
designed under the supervision of the CEO and CFO to
provide reasonable assurance regarding the reliability
of financial reporting and preparation of financial
statements for external purposes in accordance
with IFRS.
The CEO and CFO have evaluated the
effectiveness of our DC&P and assessed the design
of our ICFR, as of December 31, 2014, pursuant to the
requirements of National Instrument 52-109, and have
concluded that:
(i) The DC&P are effective to provide reasonable
assurance that all material or potentially
material information about activities of the
Company are made known to them; and
(ii) Information required to be disclosed by the
Company in its annual filings, interim filings
or other reports filed or submitted by it under
securities legislation is recorded, processed,
summarized and reported within the time
periods specified in securities legislation.
Management has concluded that, as of December
31, 2014, the Company has sufficiently documented and
tested the effectiveness of the ICFR for the Company
and can conclude that these controls are working
effectively. It should be noted that while the Company’s
management believes that the Company’s ICFR and
DC&P provide a reasonable level of assurance that they
are effective, they do not expect these controls will
prevent all errors or fraud. A control system, no matter
how well conceived or operated, can provide only
reasonable, not absolute, assurance that the objectives
of the control system are met.
On May 14, 2013, the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”)
published an updated Internal Control – Integrated
Framework and related illustrative documents,
which will supersede the 1992 COSO Framework
as of December 15, 2014. As of December 31, 2014,
the Company was utilizing the original framework
published in 1992, but is transitioning to the 2013
COSO Framework as it relates to its internal controls
over financial reporting. In 2014 there was no change
in the Company’s internal controls over financial
reporting that materially affected or is reasonably likely
to materially affect its internal controls over financial
reporting.
53
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS
CAUTION REGARDING FORWARD-LOOKING
INFORMATION AND STATEMENTS
This MD&A contains FLS within the meaning of
applicable securities legislation which involve known
and unknown risks, uncertainties and other factors
which may cause the actual results, performance
or achievements of Rocky or industry results, to be
materially different from any future results, events,
expectations, performance or achievements expressed
or implied by such FLS. FLS typically contain words or
phrases such as “may”, “outlook”, “objective”, “intend”,
“estimate”, “anticipate”, “should”, “could”, “would”, “will”,
“expect”, “believe”, “plan”, “predict” and other similar
terminology suggesting future outcomes or events. FLS
involve numerous assumptions and should not be read
as guarantees of future performance or results. Such
statements will not necessarily be accurate indications
of whether or not such future performance or results
will be achieved. Readers of this MD&A should not
unduly rely on FLS as a number of factors, many of
which are beyond the control of Rocky, could cause
actual performance or results to differ materially from
the performance or results discussed in the FLS.
In particular, FLS in this MD&A include, but are
not limited to, the following: (i) disclosure under the
heading “Market Fundamentals and Outlook”, (ii)
continuing demand for Rocky’s products and services,
and the cyclical nature of agriculture equipment
demand and any revenue or inventory statements or
forecasts attributed thereto, (iii) statements concerning
expected pricing pressure resulting from abundant
global crop supplies (iv) statements pertaining to
the growth of Rocky’s business and operations, (v)
assertions concerning crop forecasts for the 2015
growing season and the expectation that there will be
moderate increases in seeded and harvested acreage
of what and canola with reasonably flat yields per acre
as compared with 2014, (vi) statements that declines
in oil prices have impacted spending, which may also
impact the Company’s results, (vii) statements that
recent fluctuations in the Canadian dollar relative
to the U.S. dollar are expected to increase pricing on
much of the Company’s new equipment inventory,
(viii) the effect on customer buying patterns due to
price increases associated with the transition to Tier 4
and Tier 4B compliant machinery, (ix) that legislative
compliance with Tier 4 and Tier 4B regulations will
ultimately remove pricing disparities between tiers as
the industry progresses through the transition period,
(x) statements that the Company’s Tier 4B compliant
units delivered during the year should help secure
competitive equipment pricing into the spring of 2015,
(xi) discussion on the fundamentals of Rocky’s business,
including discussion that growth in GDP, farmers’ crop
receipts, increases in global food demand, bio-fuel
production, and a decrease in crop land will require
farmers to increase productivity, thereby maintaining
or improving future demand for agricultural equipment,
(xii) any statements or discussions regarding Rocky’s
inventory management and any expected increases or
decreases in Rocky’s inventory levels and associated
financial results, (xiii) statements that any anticipated
reduction in inventories are not expected to occur in a
54
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS linear manner, (xiv) discussions regarding initiatives to
restore our construction results, including statements
regarding our intention to leverage our recent successes
to gain market acceptance and better market presence
within the territories we operate, (xv) discussions
that the impact of previously acquired dealerships
and trade areas, coupled with our OEM relationships,
position us well to pursue our longer-term revenue and
earnings growth initiatives, (xvi) statements that we
believe cash flow from operations, along with existing
credit facilities, will provide for our capital needs,
(xvii) discussion around SG&A expenses including the
seasonal variances and expectations in operating SG&A,
(xviii) discussion that our first quarter is generally the
weakest financial quarter due to lack of agricultural
activity and winter shutdowns, that the fourth quarter
is generally our strongest quarter financially, and
discussion that we expect our second and third quarter
sales activity to increase as our installed equipment-
and customer-base increases, (xix) statements that
as acquisitions are integrated into the business, the
associated SG&A costs for Rocky will generally decrease,
(xx) statements that our installed base and customer
relationships create an annuity of equipment sales and
product support revenue, which help drive dependable
earnings and cash flow, thereby driving shareholder
value, (xxi) statements that weather conditions
may impact sales activity for any given period, (xxii)
statements that a decrease in crop supply year-over-
year should ease transportation bottlenecks and
facilitate the conversion of farmers’ crops into cash,
(xxiii) statements of the Company’s intention to
continue to build its hedged position to cover its
exposure on its outstanding DSUs, (xxiv) statements
concerning the Company’s intention to renew its
credit facility; and (xxv) statements concerning the
Company’s ongoing compliance with its covenants
under its credit facility.
With respect to the FLS listed above and
contained in this MD&A, Rocky has made assumptions
regarding, among other things: (i) expectations for
commodity prices will continue to remain above
historical levels, (ii) increasing global food demand
over the next 25 years in response to a growing world
population and a decrease in arable land per capita,
(iii) rising demand for agriculture commodities and
insufficient investment in productive capacity and
infrastructure, especially in developing countries, (iv)
increasing food demand, including increasing demand
from China and India for grain and oilseed products,
as well as increasing crop land dedicated to bio-fuel
production, will cause producers to improve their
productivity, and as a result invest in new equipment,
(v) expectations that increases in farmer liquidity
would generally correlated to farmers making capital
re-investments in their business, so as to increase
their productivity and lower their input costs, which
investments may include Rocky’s products and services,
(vi) inventory levels will fluctuate during a year, both
positively and negatively, based on timing of equipment
deliveries, and volume of whole-good sales involving
55
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS contained in this MD&A are based upon what
management of Rocky believes are reasonable
assumptions, Rocky cannot assure investors that
actual performance or results will be consistent with
these forward-looking statements. These statements
reflect current expectations regarding future events and
operating performance and are based on information
currently available to Rocky’s management. There
can be no assurance that the plans, intentions or
expectations upon which these forward-looking
statements are based will occur. All forward-looking
statements in this MD&A are qualified in their entirety
by the cautionary statements herein and those set forth
in Rocky’s AIF available on SEDAR at www.sedar.com.
These forward-looking statements and outlook are
made as of the date of this document and, except
as required by applicable law, Rocky assumes no
obligation to update or revise them to reflect new
events or circumstances.
a unit taken in on trade, (vii) the general GDP growth
and/or relative economic stability in the markets we
operate in, (viii) the trend towards larger farms in
the agriculture sector will continue to benefit further
farm equipment sales as larger farm operations tend
to replace their equipment more frequently, (ix)
the Company’s cash flow will remain sufficient to, in
connection with its credit facilities, adequately finance
its capital needs, (x) as stores are consolidated, certain
functions can be centralized thereby reducing SG&A
costs as a result, (xi) the anticipated improvement in
ongoing revenue and cash-flow, including parts and
service revenue, as our installed base increases, (xii)
price increases associated to the transition to Tier 4
equipment will eventually normalize as the market
accepts these price changes and price disparities
between manufacturers becomes less apparent, (xiii)
expectations that no material change will happen to our
OEM relationships and related contractual agreements,
(xiv) expectations that customers who purchase their
equipment from the Company will, generally, return to
the Company for their product support needs, and (xv)
the recovery of lost seeded acreage caused by excessive
moisture in eastern Saskatchewan and western
Manitoba during 2014.
Rocky’s actual results could differ materially from
those anticipated in the FLS in this MD&A as a result
of the risk factors set forth herein under the heading
“Risks and Uncertainties” and the risk factors set forth in
Rocky’s AIF. Although the forward-looking statements
56
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S DISCUSSION & ANALYSIS r
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THE TEAM HERE
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KNOWLEDGE,
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EFFORT TO HELP
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MANAGEMENT’S REPORT TO SHAREHOLDERS
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MANAGEMENT'S REPORT TO SHAREHOLDERS
The accompanying Consolidated Financial
Statements of Rocky Mountain Dealerships Inc. (the
“Company”) are the responsibility of management.
The financial statements have been prepared by
management in Canadian dollars in accordance with
International Financial Reporting Standards (IFRS) and
include certain estimates that reflect management’s
best judgments.
The Board of Directors of the Company (the
“Board”) has approved the information contained in the
financial statements. The Board fulfills its responsibility
regarding the financial statements mainly through its
Audit Committee which has a written mandate that
complies with the current requirements of Canadian
securities legislation. The Audit Committee meets at
least on a quarterly basis.
Management has overall responsibility for
internal controls and has developed and maintains a
system of internal controls that provides reasonable
assurance that all transactions are accurately recorded,
that the financial statements realistically report the
Company’s operating and financial results and that the
Company’s assets are safeguarded. The policy of the
Company is to maintain the highest standard of ethics
in all its activities and it has a written business conduct
and ethics policy.
PricewaterhouseCoopers LLP, an independent
firm of chartered accountants, was appointed by the
shareholders to audit the Consolidated Financial
Statements and provide an independent opinion.
60
Rocky Mountain Dealerships Inc. | Annual Report | 2014 MANAGEMENT’S REPORT TO SHAREHOLDERS CONSOLIDATED FINANCIAL STATEMENTS
i
l
d
e
F
t
a
e
h
W
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|
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March 10, 2015
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Rocky Mountain Dealerships Inc.
We have audited the accompanying consolidated financial statements of Rocky Mountain Dealerships Inc. and its
subsidiaries, which comprise the consolidated balance sheets as at December 31, 2014 and December 31, 2013
and the consolidated statements of net earnings, comprehensive income, changes in equity and cash flows for the
years then ended, and the related notes, which comprise a summary of significant accounting policies and other
explanatory information.
Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements
in accordance with International Financial Reporting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the consolidated financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements.
We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for
our audit opinion.
62
Rocky Mountain Dealerships Inc. | Annual Report | 2014 INDEPENDENT AUDITOR'S REPORTPricewaterhouseCoopers LLP Suite 3100, 111 5 Avenue SW, Calgary, Alberta, Canada T2P 5L3T: +1 403 509 7500, F: +1 403 781 1825, www.pwc.com/ca"PwC" refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership. Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position
of Rocky Mountain Dealerships Inc. and its subsidiaries as at December 31, 2014 and December 31, 2013 and their
financial performance and their cash flows for the years then ended in accordance with International Financial
Reporting Standards.
Chartered Accountants
63
Rocky Mountain Dealerships Inc. | Annual Report | 2014 INDEPENDENT AUDITOR'S REPORT CONSOLIDATED BALANCE SHEETS
Expressed in Thousands of Canadian Dollars
Assets
Current
Cash
Restricted cash
Trade receivables and other
Inventory
Income taxes receivable
Prepaid expenses
Assets held for sale
Non-current
Property and equipment
Deferred tax asset
Goodwill
NOTE
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
6
7
8
9
10
20.2
11
22,952
4,560
33,807
526,003
-
5,478
2,252
595,052
32,886
1,186
14,692
48,764
643,816
34,722
-
29,368
479,330
4,887
5,543
-
553,850
30,860
-
14,692
45,552
599,402
64
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS, CONTINUED
Expressed in Thousands of Canadian Dollars
NOTE
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
Liabilities
Current
Trade payables, accruals and other
Income taxes payable
Floor plan payable
Deferred revenue
Current portion of long-term debt
Current portion of obligations under finance leases
Liabilities associated with assets held for sale
Non-current
Long-term debt
Obligations under finance leases
Deferred tax liability
Derivative financial instruments
12
13
14
15
9
14
15
20.2
25.6
Commitments, contingencies and guarantees
16, 25.3
Shareholders’ Equity
Common shares
Contributed surplus
Accumulated other comprehensive loss
Retained earnings
34,409
6,661
382,081
4,925
10,560
453
253
439,342
32,776
9
-
3,282
36,067
475,409
87,709
5,429
(2,084)
77,353
168,407
643,816
35,276
-
342,364
6,358
10,656
823
-
395,477
41,681
541
2,576
1,706
46,504
441,981
86,695
4,662
(962)
67,026
157,421
599,402
APPROVED BY THE BOARD
“Signed” Dennis Hoffman
Dennis Hoffman, Director
“Signed” M.C. (Matt) Campbell
M.C. (Matt) Campbell, Director
65
Rocky Mountain Dealerships Inc. | Annual Report | 2014 The accompanying notes are an integral part of these consolidated financial statementsCONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF NET EARNINGS
Years Ended
Expressed in Thousands of Canadian Dollars Except Per Share Amounts
NOTE
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
521,747
303,536
101,622
35,064
3,438
965,407
819,785
145,622
105,756
11,483
2,182
26,201
10,652
(3,376)
7,276
18,925
0.98
0.98
18
8
19
20.2
20.1
21
21
523,522
358,861
92,599
29,421
3,359
1,007,762
867,356
140,406
105,450
11,696
2,233
21,027
10,060
(4,346)
5,714
15,313
0.80
0.80
Sales
New equipment
Used equipment
Parts
Service
Other
Cost of sales
Gross profit
Selling, general and administrative
Interest on short-term debt
Interest on long-term debt
Earnings before income taxes
Income taxes
Current
Deferred
Net earnings
Earnings per share
Basic
Diluted
66
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSThe accompanying notes are an integral part of these consolidated financial statements CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended
Expressed in Thousands of Canadian Dollars Except Per Share Amounts
NOTE
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
18,925
15,313
Net earnings
Other comprehensive loss
Items which will subsequently be reclassified
to net earnings:
Unrealized loss on derivative financial instruments,
net of tax
25.6
(1,122)
Total other comprehensive loss for the year, net of
tax
Comprehensive income
(1,122)
17,803
(365)
(365)
14,948
67
Rocky Mountain Dealerships Inc. | Annual Report | 2014 The accompanying notes are an integral part of these consolidated financial statementsCONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Expressed in Thousands of Canadian Dollars and Thousands of Common Shares
COMMON SHARES
NOTE
NUMBER OF SHARES
Balance, December 31, 2013
Shares issued upon exercise of stock options
Share-based payment expense
Net earnings
Other comprehensive loss
Dividends paid
Balance, December 31, 2014
17.3
17.2
17.1
19,384
87,709
COMMON SHARES
NOTE
NUMBER OF SHARES
AMOUNT
$
86,695
1,014
-
-
-
-
AMOUNT
$
81,947
4,748
-
-
-
-
19,313
71
-
-
-
-
18,993
320
-
-
-
-
19,313
86,695
Balance, December 31, 2012
Shares issued upon exercise of stock options
Share-based payment expense
Net earnings
Other comprehensive loss
Dividends paid
Balance, December 31, 2013
17.3
17.2
17.1
68
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSThe accompanying notes are an integral part of these consolidated financial statements CONTRIBUTED
SURPLUS
$
ACCUMULATED
OTHER
COMPREHENSIVE
LOSS
$
RETAINED EARNINGS
$
TOTAL EQUITY
$
4,662
(355)
1,122
-
-
-
5,429
(962)
67,026
-
-
-
(1,122)
-
(2,084)
-
-
18,925
-
(8,598)
77,353
157,421
659
1,122
18,925
(1,122)
(8,598)
168,407
CONTRIBUTED
SURPLUS
$
ACCUMULATED
OTHER
COMPREHENSIVE
LOSS
$
RETAINED EARNINGS
$
TOTAL EQUITY
$
4,435
(1,321)
1,548
-
-
-
4,662
(597)
-
-
-
(365)
-
(962)
58,776
-
-
15,313
-
(7,063)
67,026
144,561
3,427
1,548
15,313
(365)
(7,063)
157,421
69
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended
Expressed in Thousands of Canadian Dollars
NOTE
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
Operating activities
Net earnings
Adjustments for:
Depreciation expense
Deferred tax recovery
Share-based payment expense
Non-cash impact of credit promissory note
(Gain) loss on disposal of property and equipment
Loss (gain) on derivative financial instruments
Changes in non-cash working capital
Financing activities
Repayment of long-term debt
Proceeds from long-term debt
Net change in obligations under finance leases
Dividends paid
Proceeds from issuance of common shares
Investing activities
Purchase of property and equipment
Disposal of property and equipment
Purchase of equipment dealerships,
net of cash acquired
Net (decrease) increase in cash
Cash, beginning of year
Cash, end of year
Taxes (received) paid
70
Interest paid
10
20.2
19
10
25.6
22
17.2
10
10
5
18,925
7,057
(3,376)
1,122
-
(995)
68
22,801
(6,077)
16,724
(10,958)
2,210
(902)
(8,598)
659
(17,589)
(11,906)
2,265
(1,264)
(10,905)
(11,770)
34,722
22,952
(896)
13,665
The accompanying notes are an integral part of these consolidated financial statements
15,313
6,471
(4,346)
1,548
1
150
(225)
18,912
11,193
30,105
(9,940)
6,140
(1,023)
(7,063)
3,427
(8,459)
(16,263)
541
(5,379)
(21,101)
545
34,177
34,722
18,201
13,928
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTS 2.2. Adoption of new and revised standards and
interpretations
The IASB issued a number of new and revised
International Accounting Standards, International
Financial Reporting Standards, amendments and
related interpretations which are effective for the
Company’s financial year beginning on January 1,
2014. For the purpose of preparing and presenting
the consolidated financial statements for the relevant
periods, the Company has consistently adopted all of
these new standards for the relevant reporting periods.
Amendment to IAS 32, ‘Financial Instruments:
Presentation’
This amendment clarifies that the right to offset
must be available on the current date and cannot be
contingent on a future event. The adoption of this
amendment had no material impact to the Company’s
financial statements.
IFRIC 21, ‘Levies’, which is an interpretation of IAS 37,
‘Provisions, Contingent Liabilities and Contingent Assets’
IAS 37 sets out criteria for the recognition of a
liability to pay a levy imposed by government, other
than an income tax. The interpretation requires the
recognition of a liability when, the event identified by
the legislation as triggering the obligation to pay the
levy, occurs. The adoption of IFRIC 21 had no material
impact to the Company’s financial statements.
1. GENERAL INFORMATION
Rocky Mountain Dealerships Inc. (the “Company”)
was incorporated under the Business Corporations Act
(Alberta). Through its wholly-owned subsidiaries, the
Company sells, leases and provides support for a wide
variety of agriculture and construction equipment in
Western Canada. All of the Company’s subsidiaries are
incorporated in Alberta, Canada.
Historically, our business has been carried on
through Rocky Mountain Dealer Group Partnership
(the “Partnership”) doing business as Rocky Mountain
Equipment. Effective January 2, 2014, the Company
affected a restructuring whereby the business assets,
liabilities, and all other operations of the Partnership
were rolled over to Rocky Mountain Equipment Canada
Ltd. (“RME Canada”) pursuant to an asset transfer
agreement. All the Company’s operations in Alberta,
Saskatchewan and Manitoba are conducted through
RME Canada as of January 2, 2014. On February 27,
2014, the Partnership was dissolved. All our equipment
dealership locations continue to operate under the
name “Rocky Mountain Equipment”.
The head office, principal address and registered
and records office of the Company are located at Suite
301, 3345 8th Street S.E., Calgary, Alberta, T2G 3A4.
2. BASIS OF PREPARATION
2.1. Statement of compliance
The Company prepares its consolidated financial
statements in accordance with International Financial
Reporting Standards. These consolidated financial
statements were authorized for issue by the Board of
Directors on March 10, 2015.
71
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts Other standards and interpretations issued or
amended which are effective for the first time for fiscal
year ends beginning on or after January 1, 2014 but
which did not have a material impact on the Company’s
consolidated financial statements or note disclosures
as currently presented include:
The underlying principle is that an entity will recognise
revenue to depict the transfer of goods or services to
customers at an amount that the entity expects to be
entitled to in exchange for those goods or services. This
standard is effective for fiscal periods beginning on or
after January 1, 2017.
Amendments to existing standards and interpretations
IFRS 9, ‘Financial instruments’
■
■
■
■
■
■
IAS 39, ‘Financial instruments: Recognition and
measurement’
IAS 36, ‘Impairment of assets’
IFRS 10.’Consolidated financial statements’
IFRS 12, ‘Disclosure of interest in other entities’
IAS 27, ‘Consolidated and separate financial
statements’
IAS 19, ‘Employee benefits’
At the date of authorization of these
consolidated financial statements, the IASB and
the IFRS Interpretations Committee (IFRIC) have
issued the following new and revised standards
and interpretations which are not yet effective for
the relevant reporting periods. The Company has
not early adopted these standards, amendments
or interpretations, however the Company is
currently assessing what impact the application of
these standards or amendments will have on the
consolidated financial statements.
IFRS 15, ‘Revenue from contracts with customers’
IFRS 15 provides a single, comprehensive
revenue recognition model for all contracts with
customers to improve comparability within industries,
across industries, and across capital markets.
72
IFRS 9 retains but simplifies the mixed
measurement model and establishes two primary
measurement categories for financial assets: amortized
cost and fair value. The basis of classification depends
on the entity’s business model and the contractual cash
flow characteristics of the financial asset. The guidance
in IAS 39 on impairment of financial assets and hedge
accounting continues to apply. This standard is effective
for fiscal periods beginning on or after January 1, 2018.
Amendment to IFRS 7, ‘Financial instruments: Disclosures
on derecognition’
In conjunction with the transition from IAS 39 to
IFRS 9 for fiscal years beginning on or after January 1,
2018, IFRS 7 will also be amended to require additional
disclosure in the year of transition.
3. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
3.1. Basis of measurement
The fundamental valuation method applied in
the consolidated financial statements is historical
cost except for certain financial instruments and
cash-settled share-based payments which are
measured at fair value as explained below. Historical
cost is generally based on the fair value of the
consideration given in exchange for assets.
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts
These consolidated financial statements are
presented in Canadian dollars, which is the Company’s
functional and presentation currency. All financial
information presented in Canadian dollars has been
rounded to the nearest thousand, except per share and
per option amounts or unless otherwise stated.
3.2. Basis of consolidation
The consolidated financial statements include the
financial statements of the Company and its wholly-
owned subsidiaries. Subsidiaries are entities controlled
by the Company. Control exists when the Company has
the power over the investee; is exposed, or has rights, to
variable returns from its involvement with the investee;
and has the ability to use its power to affect its returns,
to an extent generally accompanying a shareholding
that confers more than half of the voting rights.
Subsidiaries are included in the consolidated financial
statements of the Company from the date control of
the subsidiary commences until the date that control
ceases. Intercompany transactions and balances are
eliminated on consolidation.
3.3. Business combinations
Acquisitions of subsidiaries and businesses
are accounted for using the acquisition method. The
consideration for each acquisition is measured at the
aggregate of the fair values (at the acquisition date)
of assets given, liabilities incurred or assumed, and
equity instruments issued by the Company in exchange
for control of the acquiree. Acquisition-related costs
incurred have been included in selling, general and
administrative expenses in the period in which they are
incurred.
Where applicable, the consideration for the
acquisition may include any asset or liability resulting
from a contingent consideration arrangement,
measured at its acquisition-date fair value. Subsequent
changes in fair values of contingent consideration are
adjusted against the cost of the acquisition where they
qualify as measurement period adjustments. All other
subsequent changes in the fair value of contingent
consideration classified as an asset or liability are
accounted for in accordance with relevant IFRS.
Goodwill is measured as the excess of the
consideration transferred over the net of the
acquisition-date fair value of the identifiable assets
acquired and the liabilities assumed. If the net of the
acquisition-date amounts of the identifiable assets
acquired and liabilities assumed exceeds the sum of
the consideration transferred, the excess is recognized
immediately in net earnings as a bargain purchase gain.
The measurement period is the period from the
date of acquisition to the date the Company obtains
complete information about facts and circumstances
that existed as of the acquisition date and is subject to a
maximum of one year.
3.4. Segment reporting
The Company has identified two operating
segments, an agriculture segment and a construction
segment. These segments are managed separately
and strategic decisions are made on the basis of their
respective operating results. All business segments’
operating results are reviewed regularly by the
Company’s CEO to make decisions about resources to
be allocated to the segment and assess its performance,
and for which discrete financial information is available.
3.5. Cash
Cash consists of cash on hand and bank
indebtedness.
73
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts 3.6. Restricted cash
Restricted cash consist of a cash equivalents
for a specific purpose and therefore not available for
immediate and general use by the Company.
3.7. Property and equipment
All items in property and equipment are recorded
at cost less accumulated depreciation and any
accumulated impairment losses.
Each part of an item of property and equipment
with a useful life that is significantly different from the
useful lives of other parts is depreciated separately.
Items of property and equipment are depreciated
commencing on the date they are ready for use using
the following methods and rates:
Land
Not depreciated
Buildings
Straight-line over 20 years
Computer
equipment
Furniture
and fixtures
Straight-line over 3 – 6 years
Straight-line over 5 – 10 years
Leasehold
improvements
Straight-line over the lesser of
the lease term and useful life
Shop tools
and equipment
Straight-line over 5 – 10 years
Vehicles
Straight-line over 3 – 5 years
An item of property and equipment is
derecognized upon disposal or when no future
economic benefits are expected to arise from the
continued use of the asset. Any gain or loss arising on
the disposal or retirement of an item of property and
equipment is determined as the difference between
the sale proceeds and the carrying amount of the asset
and is recognised in net earnings. Items of property and
equipment are tested for impairment as discussed in
Note 3.10.
3.8.
Key estimates and judgements
The preparation of financial statements in
accordance with IFRS requires management to make
estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of
contingent assets and liabilities as at the date of the
consolidated financial statements and the reported
amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
By nature, asset valuations are subjective and
do not necessarily result in precise determinations.
Should underlying assumptions change, estimated net
recoverable values could change by a material amount.
Balances in these consolidated financial
statements that are subject to estimation include
the allowance for doubtful accounts (Note 7), the
net realizable value of inventory (Note 3.13), the
depreciation periods and methods applied to items of
property and equipment (Note 3.7), the net recoverable
value of goodwill (Note 11), the fair value of derivative
financial instruments (Note 3.20.10) and impairment of
goodwill and other assets (Note 3.9, Note 3.10).
74
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts of the time value of money and the risks specific to the
asset. Any impairment loss for goodwill is recognized in
net earnings. Such impairment losses are not reversed
in subsequent periods.
3.10. Impairment of assets other than goodwill
At the end of each reporting period, the Company
reviews the carrying amounts of its tangible assets to
determine whether there is any indication that those
assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the assets
is estimated in order to determine the extent of the
impairment loss, if any. Where it is not possible to
estimate the recoverable amount of an individual asset,
the Company estimates the recoverable amount of
the CGU to which the asset belongs. Corporate assets
are also allocated to individual CGUs on the basis of
distribution of assets deployed in the CGU.
The recoverable amount is the higher of fair value
less cost to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that
reflects current market assessments of the time value of
money and the risks specific to the asset for which the
estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or CGU)
is estimated to be less than its carrying amount, the
carrying amount of the asset (or CGU) is reduced to its
recoverable amount. An impairment loss is recognized
immediately in net earnings.
Management also makes certain estimates
with respect to manufacturer incentives. Certain
manufacturers offer annual performance incentives
which are linked to the Company’s market share
achievement and annual sales volumes. The Company
uses estimated annual market share statistics derived
from current and historical results which have been
adjusted for any anticipated changes in the current year,
as well as annual sales volume to accrue manufacturer
incentives earned during the year.
3.9. Goodwill and impairment of goodwill
Goodwill represents the excess of the cost of an
acquisition over the fair value of the Company’s share
of the net identifiable assets of the acquiree at the
date of acquisition. Goodwill arising on an acquisition
of a business is carried at cost as established at the
date of acquisition of the business less accumulated
impairment losses, if any. Goodwill generated on initial
recognition is not deductible for tax purposes and has
an indefinite useful life.
For the purposes of impairment testing, goodwill
is allocated to each of the Company’s cash-generating
units (“CGUs”) (or groups of CGUs) which are expected
to benefit from the synergies of the combination.
A CGU to which goodwill has been allocated is
tested for impairment annually, or more frequently
when there is indication that the unit may be impaired.
If the recoverable amount of the CGU is less than its
carrying amount, the impairment loss is allocated first
to reduce the carrying amount of any goodwill allocated
to the unit and then to the other assets of the unit
pro-rata based on the carrying amount of each asset in
the unit. The recoverable amount of a CGU is the greater
of its value in use and its fair value less costs to sell. In
assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax
discount rate that reflects current market assessments
75
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts Where an impairment loss subsequently reverses,
the carrying amount of the assets (or CGU) is increased
to the revised estimate of its recoverable amount, but
so that the increased carrying amount does not exceed
the original carrying amount. A reversal of impairment
loss is recognized immediately in net earnings.
3.11. Earnings per share
Basic earnings per share is computed by
dividing net earnings by the weighted average
number of common shares outstanding during the
period. Diluted earnings per share amounts reflect
the potential dilution that could occur if options to
purchase common shares were exercised. The treasury
stock method is used to determine the dilutive effect
of options, whereby any proceeds received by the
Company from their exercise are assumed to be used to
purchase common shares at the average market price
during the period.
Operating lease payments are recognised as
an expense on a straight-line basis over the lease
term, except where another systematic basis is more
representative of the time pattern in which economic
benefits from the leased asset are consumed.
3.13. Inventory
Equipment inventory is valued at the lower of cost
and net realizable value, with cost being determined on
a specific item, actual cost basis. Net realizable value
is estimated using recent sales of the same or similar
equipment inventory or market values as established
by industry publications less the costs to sell. Parts
inventory is recorded at the lower of cost and net
realizable value, with cost being determined on an
average cost basis. Net realizable value is estimated
using recent sales of the same or similar parts inventory
less the costs to sell. Work-in-progress is valued on a
specific item, actual cost basis.
The average market price of the Company’s shares
3.14. Revenue recognition
for the purposes of calculating the dilutive effect of
options is based upon quoted market prices for the
periods during which the options are outstanding.
Sales are measured at the fair value of the
consideration received or receivable.
3.12. Leases
Assets held under finance leases are initially
recognized as assets of the Company at their fair
value at the inception of the lease or, if lower, at the
present value of the minimum lease payments. The
corresponding liability to the lessor is included in the
consolidated balance sheet as an obligation under
finance lease.
Lease payments are apportioned between interest
expense and reductions of the lease obligation so as
to achieve a constant rate of interest on the remaining
balance of the liability. Interest expense is recognized
immediately in net earnings.
76
3.14.1. Sale of goods
Revenue from the sale of goods including new and
used equipment and parts is recognized when all the
following conditions are satisfied:
■
■
■
■
the Company has transferred to the buyer the
significant risks and rewards of ownership of the
goods;
the Company retains neither continuing managerial
involvement to the degree usually associated with
ownership nor effective control over the goods sold;
the amount of revenue can be measured reliably;
it is probable that the economic benefits associated
with the transaction will flow to the Company; and
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts ■
the costs incurred or to be incurred in respect of the
transaction can be measured reliably.
3.14.2. Rendering of services
Revenue derived from the rendering of services is
recognized when:
■
■
■
■
the amount of revenue can be measured reliably;
it is probable that the economic benefits associated
with the transaction will flow to the Company;
the stage of completion of the transaction at the
end of the reporting period can be measured
reliably; and
the costs incurred for the transaction and the costs
to complete the transaction can be measured
reliably.
3.14.3. Other revenue
Other revenue consists of commission revenue
from finance and insurance, recognized when the
finance contract is signed.
3.15. Deferred revenue
Deferred revenue comprises equipment sales in
which cash has been received but not all terms and
conditions have been fulfilled to meet the requirements
of revenue recognition, and maintenance plans sold
to customers in which all services have not yet been
provided.
3.16. Share-based transactions
Equity-settled share-based payments to
employees and others providing similar services are
measured at the fair value of the equity instruments
at the grant date. The Company follows the fair value
based method of accounting, using the Black-Scholes
option pricing model, whereby compensation expense
is recognized over the vesting period and is based on
the Company’s estimate of awards that will ultimately
vest, with a corresponding increase to contributed
surplus. Details regarding the determination of the fair
value of equity-settled share-based transactions are set
out in Note 17.3.
Cash-settled share-based payments are recorded
as liabilities and are measured initially at their fair
values. At the end of each reporting period and at
the date of settlement, the fair value of the liability is
remeasured, with any changes in fair value recognized
in net earnings for the period. Details regarding
the determination of the fair value of cash-settled
share-based payments are set out in Note 17.4 and Note
17.5.
3.17. Employee Share Ownership Plan
The Company has an Employee Share Ownership
Plan (“ESOP”). Under the ESOP, employees can
contribute a percentage of their annual gross salary
by way of payroll deductions. For employees with 3
years or less of service, the Company matches up to
2% of earnings, to a maximum of $2 per annum. For
employees with more than 3 years of service, the
Company matches up to 5% of earnings, to a maximum
of $5 per annum or an amount modified and approved
by the Company’s Compensation, Governance and
Nominating Committee. The Company’s contributions
vest to the employee on December 31 of the
contribution year and are expensed as incurred.
ESOP shares are purchased on the open market.
The weighted average unvested shares held in the
ESOP during the period are excluded from the earnings
per share calculations as they are not considered to
be outstanding. Dividends paid on the Company’s
common shares held for the ESOP are used to purchase
additional common shares on the open market.
77
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts 3.18. Income taxes
3.19. Foreign currency translation
Current tax is the expected tax payable or
recoverable on the taxable income or loss for the year,
using tax rates enacted or substantively enacted at the
reporting date.
Deferred tax is recognized using the asset and
liability method on temporary differences between the
carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation
purposes. Deferred tax is not recognized if it arises from
goodwill generated on a business combination or an
asset or liability in a transaction other than a business
combination that, at the time of the transaction, affects
neither accounting net earnings nor taxable income.
Deferred tax is determined using tax rates and laws
that have been enacted or substantively enacted at
the reporting date and are expected to apply when the
related deferred tax asset is realized or deferred tax
liability is settled.
A deferred tax asset is recognized to the extent
that it is probable that future taxable income will be
available against which the temporary difference can
be utilized. Deferred tax assets are reviewed at each
reporting date and are reduced to the extent that it is
no longer probable that the related tax benefit will be
realized.
Current tax and deferred tax are recognized in
net earnings except when they relate to items that are
recognized in other comprehensive income or directly
in equity, in which case, the current and deferred tax
are also recognized in other comprehensive income
or directly in equity, respectively. Where current tax
or deferred tax arises from the initial accounting for a
business combination, the tax effect is included in the
accounting for the business combination.
78
Transactions in currencies other than the
Company’s functional currency are recorded at the rates
of exchange prevailing on the dates of the transactions.
At each balance sheet date, monetary assets and
liabilities denominated in foreign currencies are
retranslated at prevailing rates.
3.20. Financial instruments
Financial assets and liabilities are recognized
when the Company becomes party to the contractual
provisions of the instrument.
On initial recognition, financial instruments
are measured at fair value. Transaction costs that
are directly attributable to the acquisition or issue of
financial instruments, other than financial instruments
at fair value through profit or loss (“FVTPL”), are added
to or deducted from the fair value of the financial
instrument, as appropriate. Transaction costs directly
attributable to the acquisition of financial instruments
at FVTPL are recognized immediately in net earnings.
3.20.1. Classification of financial instruments
Financial instruments are classified into the
following specified categories: financial assets at
FVTPL, held-to-maturity investments, available-for-sale
(“AFS”) financial assets, loans and receivables, financial
liabilities at FVTPL and other financial liabilities. The
classification depends on the nature and purpose of the
financial instrument and is determined at the time of
initial recognition. The Company has no financial assets
classified as held-to-maturity or AFS.
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts 3.20.2. Effective interest method
The effective interest method is a method of
calculating the amortized cost of a debt instrument
and of allocating interest over the relevant period.
The effective interest rate is the rate that discounts
estimated future cash receipts (including all fees,
transaction costs and other premiums or discounts)
through the expected life of the debt instrument, or,
where appropriate, a shorter period, to the net carrying
amount on initial recognition.
■
■
3.20.3. Financial instruments at FVTPL
Financial instruments are classified as at FVTPL
when the instrument is either held for trading or it is
designated as at FVTPL.
A financial asset (liability) is classified as held for
trading if:
■
■
■
it has been acquired principally for the purpose of
selling (repurchasing) it in the near term;
on initial recognition, it is part of a portfolio of
identified financial instruments that the Company
manages together and has a recent actual pattern
of short-term profit-taking; or
it is a derivative that is not designated and effective
as a hedging instrument.
A financial instrument other than one held for
trading may be designated as at FVTPL upon initial
recognition if:
■
such designation eliminates or significantly reduces
a measurement or recognition inconsistency that
would otherwise arise;
the financial instrument forms part of a group
of financial assets or financial liabilities or both,
which is managed and its performance is evaluated
on a fair value basis, in accordance with the
Company’s documented risk management or
investment strategy, and information about the
grouping is provided internally on that basis; or
it forms part of a contract containing one or more
embedded derivatives, and IAS 39, ‘Financial
instruments: Recognition and measurement’
permits the entire combined contract (asset or
liability) to be designated as at FVTPL.
Financial assets classified as at FVTPL are
stated at fair value, with any gains or losses arising on
remeasurement recognized in net earnings. The net
gain or loss recognised in net earnings incorporates
any dividends or interest earned on the financial asset
and is included in selling, general and administrative
expenses. The Company has designated its derivative
financial instruments as at FVTPL. Fair value is
determined in the manner described in Notes 3.20.10
and 25.6.
3.20.4. Loans and receivables
Loans and receivables are non-derivative financial
assets with fixed or determinable payments that are not
quoted in an active market. Loans and receivables are
measured at amortized cost using the effective interest
method, less any impairment.
The Company has classified its cash, restricted
cash, and trade receivables and other as loans and
receivables.
79
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts 3.20.5. Other financial liabilities
Other financial liabilities are measured at
amortized cost using the effective interest method.
the cumulative gain or loss that had been recognized in
other comprehensive income and accumulated equity
is recognized in net earnings.
The Company has classified its trade payables,
The Company derecognizes a financial liability
accruals and other (with the exception of DSUs
and SARs), floor plan payable, long-term debt, and
obligations under finance leases as other financial
liabilities.
3.20.6.
Impairment of financial assets
Financial assets, other than those at FVTPL, are
assessed for indicators of impairment at the end of
each reporting period. For financial assets carried
at amortized cost, the amount of the impairment
loss, if any, is the difference between the asset’s
carrying amount and the present value of estimated
future cash flows, discounted at the financial asset’s
original effective interest rate. As indicated above, the
Company’s financial assets carried at amortized cost
consist only of cash and trade receivables and other.
Any impairment determined on trade receivables and
other reduces their carrying amount through the use of
an allowance account and is recorded when an account
is considered uncollectible. Subsequent recoveries of
amounts previously provided for are credited against
the allowance. Changes in the carrying amount of
the allowance are recognized in selling, general and
administrative expenses.
3.20.7.
Derecognition of financial instruments
The Company derecognizes a financial asset
when the contractual rights to the cash flows from the
asset expire, or when it transfers the financial asset and
substantially all the risks and rewards of ownership of
the asset to another entity.
On derecognition of a financial asset, the
difference between the asset’s carrying amount and the
sum of the consideration received and receivable and
80
when the Company’s obligations are discharged,
cancelled or they expire. The difference between the
carrying amount of the financial liability derecognized
and the consideration paid and payable is recognized in
net earnings.
3.20.8. Classification as debt or equity
Debt and equity instruments issued by the
Company are classified as either financial liabilities
or as equity in accordance with the substance of the
contractual arrangement and the definitions of a
financial liability and equity instrument.
3.20.9. Equity instruments
An equity instrument is any contract that
evidences a residual interest in the assets of the
Company after deducting all of its liabilities. Equity
instruments issued by the Company are recognized
at the proceeds received, net of direct issue costs.
Repurchases of the Company’s own equity instruments
are recognized and deducted directly in equity. No gain
or loss is recognized in net earnings on the purchase,
sale, issuance or cancellation of the Company’s own
equity instruments.
3.20.10. Derivative financial instruments and hedging
activities
Derivatives are initially recognized on the date a
derivative contract is entered into and are subsequently
re-measured at their fair values. The fair values of
interest rate swaps are calculated as the net present
value of the estimated future cash flows expected to
arise on the variable and fixed streams, determined
using applicable yield curves at each measurement
date. Swap curves, which incorporate credit spreads
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts applicable to large commercial banks, are typically used
to calculate expected future cash flows and the present
values thereof. Adjustments are also made to reflect
the Company’s own credit risk and the credit risk of the
counter party, if different from the spread implicit in the
swap curve.
The method of recognizing the resulting gain or
loss depends on whether the derivative is designated as
a hedging instrument, and if so, the nature of the item
being hedged. The Company may designate derivatives
of a particular risk associated with a recognized asset or
liability or highly probable forecast transaction as cash
flow hedges.
The Company documents at the inception of
the transaction, the relationship between hedging
instruments and hedged items, as well as its risk
management objectives and strategy for undertaking
various hedging transactions.
The Company uses the regression method to
determine whether the interest rate swaps that are
used in hedging transactions are highly effective in
offsetting changes in fair values or cash flows of hedged
items and uses the cumulative dollar offset method to
measure the ineffective portion. The documentation
identifies the anticipated cash flows being hedged,
the risk that is being hedged, and the type of hedging
instrument used and how effectiveness will be assessed.
The hedging instrument must be highly effective in
accomplishing the objective of offsetting changes in
anticipated cash flows attributable to the risk being
hedged both at inception and throughout the life of the
hedge. Hedge accounting is discontinued prospectively
when it is determined that the hedging instrument is
no longer effective as a hedge, the hedging instrument
is terminated, or upon early settlement of the hedged
item.
Where hedge accounting can be applied, a hedge
relationship is designated and documented at inception
to detail the particular risk management objective and
the strategy for undertaking the hedge transaction.
In a cash flow hedging relationship, the
effective portion of the change in the fair value of
the hedging derivative, net of taxes, is recognized in
other comprehensive income while the ineffective
portion is recognized in the consolidated statement
of net earnings. Amounts in accumulated other
comprehensive loss are reclassified to profit or loss in
the periods when the hedged item affects profit or loss.
Gains or losses on derivatives not designated as
hedges are recognized in the consolidated statement of
net earnings.
When a hedging instrument expires or no longer
meets the criteria for hedge accounting, any cumulative
gain or loss existing in equity remains in equity and is
recognized when the forecast transaction is ultimately
recognized in the consolidated statement of net
earnings.
The Company uses interest rate swaps to hedge
the variability in cash flows related to variable rate debt.
4. PRIOR YEAR COMPARATIVE
DISCLOSURES
Certain prior period comparative information has
been revised to conform to current period presentation.
81
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts
5.
ACQUISITIONS
During the years ended December 31, 2014 and 2013, the Company completed two business acquisitions. Over
time, we expect these acquisitions to offer synergies in the forms of cost reduction, an expanded market to distribute
used inventory and an expanded territory for sales and product support. Acquisitions completed during these periods
are as follows:
2014 ACQUISITIONS
York Auto Supply
2013 ACQUISITIONS
Murray’s Farm Supplies
On June 2, 2014, the Company purchased the
net assets of York Auto Supply (“YAS”), a distributor
of automotive and agricultural parts, body shop
and industrial supplies, with a store in Yorkton,
Saskatchewan. The operating results of the business
acquired are consolidated from June 2, 2014, the
acquisition’s closing date.
On February 1, 2013, the Company acquired 100%
of the outstanding common shares of Murray’s Farm
Supplies (“MFS”). The operating results of the business
acquired are consolidated from February 1, 2013, the
acquisition’s closing date.
82
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts The business combinations completed during the years ended December 31, 2014 and 2013 are summarized as
follows:
Purchase price allocation
Purchase consideration
Net working capital
Cash
Trade receivables and other
Inventory
Trade payables, accruals and other
Floor plan payable
Current portion of obligations under finance leases
Property and equipment
Deferred taxes
Obligations under finance leases
Goodwill
Net assets acquired
Cash consideration paid, net of cash acquired
York Auto Supply
Murray’s Farm Supplies
Camrose Farm Equipment(1)
Houlder Automotive Ltd.(1)
Total
2014
YAS
1,264
-
226
339
-
-
-
565
699
-
-
-
1,264
1,264
-
-
-
1,264
2013
MFS
3,272
405
474
4,803
(598)
(2,789)
(13)
2,282
201
(8)
(11)
808
3,272
-
2,867
290
2,222
5,379
(1) These acquisitions occurred in 2012 and the amounts shown above represents the final payment made in 2013.
83
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts The Company incurred $18 of acquisition related
costs during the year ended December 31, 2014 (2013
– $36). These costs are recognized as administrative
expenses within selling, general and administrative
expenses in the period in which they are incurred.
In determining these amounts, management has
assumed that the fair value adjustments, determined
provisionally, that arose on the date of acquisition
would have been the same had these acquisitions
occurred on January 1 of the acquisition year.
The acquisition effected during the year ended
Goodwill arose on the MFS acquisition due to the
December 31, 2014, generated revenue of $958
during the year of acquisition (2013 – $11,080) and
net loss of $120 (2013 – net earnings of $280). Had
this business combination been effected at January
1 of the acquisition year, the Company estimates
that consolidated revenue and net earnings for the
year ended December 31, 2014 would have been
$967,563 and $18,655, respectively (2013 – $1,008,553
and $15,333, respectively). The pro forma revenues
and earnings are not necessarily indicative of the
results that actually would have occurred had these
acquisitions taken place on January 1, or of the results
which may be obtained in the future.
potential future revenue growth and synergies expected
to occur. This amount is not recognized separately as it
does not meet the recognition criteria for identifiable
intangible assets. Goodwill generated on acquisition is
not deductible for tax purposes.
6. RESTRICTED CASH
Restricted cash as at December 31, 2014 is
comprised of $4,560 related to the issuance of treasury
bills. The treasury bills are pledged as security for the
hedged position on the total return swap (Note 25.6).
84
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts 7. TRADE RECEIVABLES AND OTHER
Trade receivables
Current
Aged between 61 – 120 days
Aged greater than 120 days
Allowance for doubtful accounts
Net trade receivables
Contracts in transit
Warranty receivables
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
15,552
2,065
2,024
19,641
(1,745)
17,896
13,683
2,228
33,807
11,209
1,775
2,095
15,079
(1,272)
13,807
14,576
985
29,368
The Company considers its trade receivables and other which are neither past due nor impaired to be of good
credit quality. Contracts in transit and warranty receivables are due from retail finance institutions and original
equipment manufacturers, respectively.
85
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts The allowance for doubtful accounts can be reconciled as follows:
As at January 1,
Provided for during the year, net of recoveries
Written-off during the year
As at December 31,
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
1,272
1,021
(548)
1,745
1,573
(17)
(284)
1,272
The allowance for doubtful accounts is reviewed by management on a monthly basis. Accounts receivable are
considered for impairment on a case-by-case basis when they are past due or when objective evidence is received that
a customer will default. The Company takes into consideration the customer’s payment history, their creditworthiness
and the current economic environment in which the customer operates to assess impairment. The Company’s
historical bad debt expenses have not been significant and are generally limited to specific customer circumstances.
86
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts 8.
INVENTORY
New equipment
Used equipment
Parts
Work-in-progress
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
213,685
273,306
36,455
2,557
526,003
211,246
230,349
35,095
2,640
479,330
For the year ended December 31, 2014, inventory recognized as an expense amounted to $804,693 (2013
– $846,652), which is included in cost of sales in the consolidated statement of net earnings. For the year ended
December 31, 2014, there were net write downs of inventory to net realizable value of $3,177 (2013 – $5,957) in cost
of sales in the consolidated statement of net earnings. The Company’s inventory has been pledged as security for its
bank indebtedness, floor plan payable and long-term debt.
9. ASSETS HELD FOR SALE
As at December 31, 2014, a parcel of land with a net book value of $2,252 is classified as held for sale. The
mortgage associated with the land is $253 and has been classified as a current liability
87
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts 10. PROPERTY AND EQUIPMENT
Cost
January 1, 2013
Additions
Business combinations (Note 5)
Disposals
December 31, 2013
Additions
Business combinations (Note 5)
Assets held for sale (Note 9)
Disposals
December 31, 2014
Accumulated depreciation
January 1, 2013
Depreciation charge
Disposals
December 31, 2013
Depreciation charge
Disposals
December 31, 2014
Net book value
January 1, 2013
December 31, 2013
December 31, 2014
LAND
$
2,252
8,272
-
-
10,524
2,492
145
(2,252)
-
10,909
-
-
-
-
-
-
-
2,252
10,524
10,909
BUILDINGS
$
COMPUTER
EQUIPMENT
$
475
7
-
-
482
3,138
359
-
-
3,979
226
90
-
316
50
-
366
249
166
3,613
6,537
1,351
20
(78)
7,830
1,169
38
-
(95)
8,942
2,803
1,335
(78)
4,060
1,524
(26)
5,558
3,734
3,770
3,384
Included in selling, general and administrative expenses for the year ended December 31, 2014 is depreciation
expense of $7,057 (2013 – $6,471) and a gain on the disposal of property and equipment of $995 (2013 – loss of $150).
88
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts FURNITURE AND
FIXTURES
$
LEASEHOLD
IMPROVE-MENTS
$
SHOP TOOLS AND
EQUIPMENT
$
VEHICLES
$
2,997
186
27
(78)
3,132
440
36
-
-
3,608
1,531
515
(61)
1,985
452
-
2,437
1,466
1,147
1,171
3,158
2,091
-
(564)
4,685
692
-
-
(22)
5,355
1,024
441
(276)
1,189
661
(9)
1,841
2,134
3,496
3,514
7,885
640
44
(156)
8,413
1,437
86
-
(90)
9,846
4,425
1,404
(104)
5,725
1,409
(62)
7,072
3,460
2,688
2,774
15,873
3,716
110
(919)
18,780
2,538
35
-
(3,741)
17,612
7,610
2,686
(585)
9,711
2,961
(2,581)
10,091
8,263
9,069
7,521
TOTAL
$
39,177
16,263
201
(1,795)
53,846
11,906
699
(2,252)
(3,948)
60,251
17,619
6,471
(1,104)
22,986
7,057
(2,678)
27,365
21,558
30,860
32,886
As at December 31, 2014, assets under finance leases included in computer equipment and vehicles have net
carrying amounts of $440 and $199 (2013 – $609 and $852), respectively. Certain items of property and equipment
have been pledged as security for liabilities as disclosed in Notes 14 and 15.
89
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTS 11. GOODWILL
Opening balance
Recognized on business acquisitions (Note 5)
Ending balance
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
14,692
-
14,692
13,884
808
14,692
Goodwill recognized pursuant to a business combination is allocated, at the time of acquisition, to the
Company’s CGU that is expected to benefit from that business combination. As at December 31, 2014 and 2013, the
Company has identified two CGU’s, agriculture and construction. All goodwill has been allocated to the agriculture
CGU.
The recoverable amount of the CGUs was determined from value in use calculations. The key assumptions made
for the value in use calculations are those regarding the discount and growth rates. These key assumptions are based
on past experience which has been adjusted for expected changes in future conditions.
As at December 31, 2014 and 2013, the Company prepared cash flow forecasts derived from the most recent
financial plans prepared by management and extrapolated these cash flows into perpetuity using growth assumptions
relevant to the business sector. The growth rate used for the purposes of these analyses was 2.0%.
As at December 31, 2014, the rate used to discount the forecasted cash flows was 11.7% (2013 – 11.9%), and
represents the Company’s estimate of the pre-tax discount rate reflecting current market assessments of the time
value of money and the risks specific to the particular CGU. The recoverable amount of each CGU to which goodwill
has been allocated exceeded its carrying value at the impairment test dates.
The Company has conducted a sensitivity analysis based on reasonable possible changes in the key assumptions
used for the impairment tests. Had the estimated cost of capital used in determining the pre-tax discount rates been
1% higher than management’s estimates or the estimated growth rate used in extrapolating forecasted results been
1% lower, the recoverable amount of the CGU would continue to exceed its carrying amount for the respective periods.
90
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts 12. TRADE PAYABLES, ACCRUALS AND OTHER
Trade payables and accruals
Directors’ share units (Note 17.4)
Share appreciation rights (Note 17.5)
13. FLOOR PLAN PAYABLE
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
33,711
680
18
34,409
34,620
656
-
35,276
The Company utilizes floor plan financing arrangements with various suppliers and creditors to finance
whole-good inventory on hand. The terms of these arrangements may include up to a twelve month interest-free
period followed by a fixed or variable interest rate term ranging from 0.0% to the bank’s prime rate plus 4.3% at
December 31, 2014 (2013 – ranging from 0.0% to the bank’s prime rate plus 4.3%). At December 31, 2014, the Company
had unused floor plan of approximately $154,919 available (2013 – $245,736). The amounts due are secured by
specific new and used equipment inventories and the payments are due when the equipment is sold or transferred,
up to a maximum term of 48 months. At December 31, 2014, the Company had $2,911 of floor plan outstanding in US
currency (2013 – $1,348). The entire amount of floor plan payable has been classified as current, as the corresponding
inventory to which it relates has also been classified as current.
Pursuant to agreements with lenders, the Company is required to monitor and report certain non-IFRS measures
(Note 26).
91
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts 14. LONG-TERM DEBT
The following table summarizes the Company’s long-term debt. The Debenture Repayment, Acquisition and
Fleet Facilities are governed by a syndicate credit agreement which, if not renewed, will mature on June 1, 2017. It is
management’s intention to renew this credit agreement before its maturity date. The table presented below assumes
the agreement is renewed prior to maturity.
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
Debenture Repayment Facility, amortized with quarterly
principal instalments of $875 plus interest with the remaining
principal due on September 30, 2017. The effective interest
rate at December 31, 2014 was 3.3% (2013 – 3.5%).
26,250
29,750
Acquisition Facility, revolving facility payable in monthly
principal instalments over 60 months plus interest.
The effective interest rate at December 31, 2014 was 3.3%
(2013 – 3.5%).
Fleet Facility, revolving facility payable in monthly principal
instalments over 36 – 60 months plus interest. The effective
interest rate at December 31, 2014 was 3.6% (2013 – 3.7%).
Various other facilities
Current portion
Long-term portion
11,782
17,232
4,957
347
43,336
10,560
32,776
4,248
1,107
52,337
10,656
41,681
92
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts 15. OBLIGATIONS UNDER FINANCE LEASES
Finance leases relate primarily to vehicles with lease terms ranging from three to five years. The Company has
options to purchase many of these vehicles for a nominal amount at the conclusion of the lease terms. The lessors’
title to the leased assets provides security for the Company’s obligations under finance leases.
Interest rates underlying all obligations under finance leases are fixed at the respective contract dates ranging
from 3.4% to 7.6% at December 31, 2014 (2013 – 3.4% – 7.6%).
The fair values of the obligations under finance leases approximate their carrying amounts as interest rates are
consistent with market rates for similar debt.
Future minimum payments under finance leases along with the balance of the obligations under finance leases
are as follows:
Due within one year
Due later than one year and not later than five years
Due later than five years
Total future minimum lease payments
Less future finance charges
Present value of future minimum lease payments
Current portion of obligations under finance leases
Long-term portion of obligations under finance leases
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
492
9
-
501
(39)
462
453
9
850
556
-
1,406
(42)
1,364
823
541
93
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts In respect of the fourth quarter of 2014, the
Board of Directors declared a dividend of $0.115 per
common share on the Company’s outstanding common
shares. The dividend is payable on March 31, 2015, to
shareholders of record at the close of business on
February 27, 2015. The payment of this dividend will not
have any tax consequences for the Company.
17.3.
Stock options
The Company has a stock option plan under which
the Board of Directors may grant options to directors,
officers, and employees of the Company at an exercise
price equal to the market price of the Company’s
common shares at the time of the grant. The plan is
limited to 10% of the issued and outstanding common
shares. Options granted carry neither voting rights nor
rights to dividends.
The general terms of stock options granted under
the plan include a maximum exercise period of five
years and a vesting period of three years with one-third
of the grant vesting on each anniversary date.
16. CONTINGENCY AND GUARANTEE
The Company is subject to various degrees of
recourse, arising in the ordinary course of business,
by assisting its customers in financing the sale of
equipment. The Company is exposed to potential losses
arising from the difference between the assessed value
of the underlying security and the loan balance, if
certain customers default on their loan. Any resulting
losses are recorded as soon as the amount of the loss
can be reasonably estimated. It is management’s
opinion that there is an insignificant risk of loss
from these guarantees, as the assessed value of the
underlying security generally exceeds the loan balance.
Accordingly, management believes that the exposure on
these guarantees is not significant.
17. SHARE CAPITAL
17.1.
Common shares
The Company is authorized to issue an unlimited
amount of common shares with no par value. As at
December 31, 2014, 19,384 thousand shares were
issued and outstanding (December 31, 2013 – 19,313).
All issued and outstanding shares were fully paid as at
December 31, 2014 and 2013.
17.2. Dividends paid
Dividends paid during the year ended December
31, 2014 were $8,598 or $0.445 per share (2013 – $7,063
or $0.3675 per share).
94
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts The fair value of the options granted using the Black-Scholes option pricing model and assumptions used in their
determination during the years ended December 31 are as follows:
Risk-free interest rate
Expected option life (years)
Expected volatility(1)
Expected annual dividend per share
Exercise price
Share price on grant date
Fair value
DECEMBER 31,
2014
DECEMBER 31,
2013
1.5%
3.8
27.1%
$0.40
$11.52
$11.52
$1.81
1.2%
4.0
50.6%
$0.27
$12.89
$12.89
$4.46
(1) Expected volatility has been based on the historical volatility of the Company’s publicly traded shares
The reconciliation of options outstanding during the years ended December 31 is as follows:
2014
2013
NUMBER OF
OPTIONS
(THOUSANDS)
WEIGHTED AVERAGE
EXERCISE PRICE
$
NUMBER OF
OPTIONS
(THOUSANDS)
WEIGHTED AVERAGE
EXERCISE PRICE
$
January 1,
Granted
Exercised
Forfeited
Expired
945
432
(71)
(70)
-
December 31,
1,236
11.61
11.52
9.26
12.15
-
11.68
1,112
452
(320)
(78)
(221)
945
11.04
12.89
10.72
12.35
12.40
11.61
The weighted average share price at the date of exercise for the options exercised during the year ended
December 31, 2014 was $10.00 (2013 – $12.75).
95
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts Options outstanding at December 31, 2014 are summarized as follows:
GRANT DATE
March 11, 2011
August 11, 2011
March 28, 2012
March 13, 2013
March 13, 2014
OPTIONS
OUTSTANDING
(THOUSANDS)
OPTIONS
EXERCISABLE
(THOUSANDS)
WEIGHTED AVERAGE
EXERCISE PRICE
($)
WEIGHTED AVERAGE
CONTRACTUAL
LIFE (YEARS)
38
142
256
387
413
1,236
38
142
169
129
-
478
10.39
8.71
11.96
12.89
11.52
11.68
1.2
1.6
2.2
3.2
4.2
3.1
17.4. Directors’ share unit plan
The Company has instituted a Directors’ share unit plan (“DSU”). Under this plan, the Board of Directors may
grant DSUs to non-officer Directors of the Company as they determine to be appropriate for their services rendered.
The DSUs are notional grants of shares and are to be settled in cash within 30 days of a Director’s termination date.
Additional DSUs are credited to the Directors’ accounts when cash dividends are paid to the common shareholders
of the Company. Such amount of additional DSUs is determined by dividing the dividends which would have been
paid on the DSUs had they been common shares of the Company by the volume weighted average trading price of the
Company’s shares over the 20 day trading period immediately preceding the date the dividends are paid.
Upon redemption and at each reporting period, the DSUs are valued on a per DSU basis at an amount equal
to the volume weighted average trading price of the Company’s shares over the immediately preceding 20 day
trading period. At December 31, 2014, $680 was included in trade payables, accruals and other with respect to the
DSUs (December 31, 2013 – $656). During the year ended December 31, 2014, Nil DSU’s were redeemed (2013 – 14 for
proceeds of $193).
96
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts DSUs granted and redeemed and the unrealized losses recognized on the DSUs during the years ended
December 31 are as follows:
2014
2013
DSUS
(THOUSANDS)
January 1,
Granted(1)
Redeemed
Loss on mark to market revaluation(1)
December 31,
53
22
-
-
75
(1) Included in selling general and administrative expenses.
$
656
247
-
(223)
680
DSUS
(THOUSANDS)
50
17
(14)
-
53
$
571
221
(193)
57
656
17.5. Share appreciation rights plan
In November 2014, the Company introduced a share appreciation rights (“SAR”) plan as a component of overall
compensation of directors, officers and employees. These SAR’s vest after a three year period, are exercisable for two
years thereafter and will be settled in cash. During the vesting period, the SARs are revalued at each reporting period
using the Black-Scholes option pricing model. The Company recognizes a liability to the extent that the fair value of
the SARs has been earned by the holder, with the coinciding expense being recognized within selling, general and
administrative expense.
In November 2014, the Company granted 550,000 SARs with an exercise price of $10.93. As at December 31, 2014,
550,000 SARs were outstanding. As at December 31, 2014, the Company recognized a liability and expense of $18.
97
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts The fair value of the SARs granted using the Black-Scholes option pricing model and assumptions used in their
determination as at December 31 are as follows:
Risk-free interest rate
Expected option life (years)
Expected volatility(1)
Expected annual dividend per share
Exercise price
Share price
Fair value
DECEMBER 31,
2014
1.4%
3.8
25.6%
$0.46
$10.93
$9.50
$0.83
(1) Expected volatility has been based on the historical volatility of the Company’s publicly traded shares
In 2014, the Company has entered into a two total return swap contracts as an economic hedge, covering 291 of
the Company’s underlying common shares, which represents a portion of its outstanding DSUs, and all of its SARs. For
the year ended, December 31, 2014, the Company recognized a loss of $108 in general and administrative expenses
(see note 25.6).
17.6. Employee share ownership plan
During the year ended December 31, 2014, the Company recognized $1,040 in selling, general and administrative
expenses in respect of employee contributions to the ESOP plan which were matched by the Company (2013 – $1,050).
98
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts
18. SALES
The Company’s annual sales consist of the following for the respective years ended:
Agriculture equipment sales
Construction equipment sales
Parts sales
Sale of goods
Rendering of services
Total sales
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
737,220
88,063
101,622
926,905
38,502
965,407
806,966
75,417
92,599
974,982
32,780
1,007,762
19. SELLING, GENERAL AND ADMINISTRATIVE
The Company’s selling, general and administration expenses consist of the following for the respective years
ended:
Compensation and related expenses
Administrative expenses
Rent and other facility expenses
Depreciation expense
Share-based payment expense
Total selling, general and administrative expenses
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
65,052
18,744
13,781
7,057
1,122
105,756
65,541
17,121
14,769
6,471
1,548
105,450
Included in compensation and related expenses as at December 31, 2014 are variable sales commissions
of $14,658 (2013 – $16,448). Costs included in administrative expenses are marketing, training, insurance, travel,
professional fees and other miscellaneous expenses.
99
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts 20. INCOME TAXES
20.1. Income tax recognized in net earnings
Total taxes recognized in net earnings were different than the amount computed by applying the combined
statutory Canadian and Provincial tax rates to income before taxes. The difference resulted from the following:
Earnings before income taxes
Computed tax at statutory tax rate of 25% (2013 – 25%)
Non-deductible expenses
Adjustment from prior year income tax expenses
Other
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
26,201
6,550
411
246
69
7,276
21,027
5,257
526
(116)
47
5,714
100
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts 20.2. Deferred tax liability (asset)
SHARE ISSUE
COSTS
$
CUMULATIVE
ELIGIBLE
CAPITAL
$
PROPERTY
AND
EQUIPMENT
$
PARTNER-
SHIP
DEFERRAL
$
DSUS
$
INTEREST
RATE SWAPS
$
TOTAL
$
January 1, 2013
(571)
(85)
262
7,944
(143)
(365)
7,042
Acquired
pursuant to
business
combinations
Recognized
in net earnings
Recognized
in equity
-
242
-
December 31, 2013
(329)
Recognized
in net earnings
Recognized in
equity
142
-
-
(86)
-
(171)
32
-
December 31, 2014
(187)
(139)
8
-
-
(167)
(4,372)
(21)
-
103
44
-
147
-
3,572
(3,572)
-
-
-
(164)
(6)
-
(170)
-
58
(128)
(435)
8
(4,346)
(128)
2,576
(16)
(3,376)
(386)
(837)
(386)
(1,186)
The Company also has an unrecognized deferred tax asset of $788 related to the capital loss on the repurchase of
its convertible debentures.
101
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts 21. EARNINGS PER SHARE
Both basic and diluted earnings per share have been calculated using net earnings for the respective periods.
The weighted average number of ordinary shares used in the calculations of basic and diluted EPS for the respective
years ended, are as follows:
DECEMBER 31,
2014
DECEMBER 31,
2013
Weighted average number of ordinary shares used in the
calculation of basic EPS
Dilutive impact of stock options
Weighted average number of ordinary shares used in the
calculation of diluted EPS
19,280
29
19,309
19,167
57
19,224
For the year ended December 31, 2014, 1,056 stock options were anti-dilutive (2013 – 693).
102
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts 22. CHANGES IN NON-CASH WORKING CAPITAL
The net change in non-cash working capital for the years ended December 31 is comprised of the following
sources (uses) of cash:
Restricted cash
Trade receivables and other
Income taxes receivable
Inventory
Prepaid expenses
Trade payables, accruals and other
Income taxes payable
Floor plan payable
Deferred revenue
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
(4,560)
(4,213)
4,887
(46,334)
65
(867)
6,661
39,717
(1,433)
(6,077)
-
23,834
(4,623)
20,624
(1,073)
(12,936)
(3,518)
(12,237)
(1,122)
11,193
23. OPERATING LEASE ARRANGEMENTS
Operating leases relate primarily to the Company’s facilities with lease terms of between one and eleven years.
Most building leases contain five-year renewal options. During the year ended December 31, 2014, the Company
recognized $8,973 of operating lease payments as expenses (2013 – $9,000).
Non-cancellable operating lease commitments at December 31 are due as follows:
Not later than one year
Later than one year and not later than five years
Later than five years
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
8,018
19,993
6,297
34,308
8,491
21,076
8,787
38,354
103
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts 24. RELATED PARTY TRANSACTIONS
The Company entered into the following transactions with related parties for the respective years ended:
Equipment sales
Expenditures
Rental payment on Company facilities
Equipment purchases
Flight costs
Other expenses
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
6,921
5,435
3,846
191
70
4,476
5,280
4,206
183
406
All related parties are either directly or indirectly owned by a member of senior management of the Company
and/or a close family member thereof. These transactions were made on terms equivalent to those that prevail in
arm’s length transactions and are made only if such terms can be substantiated.
The remuneration of the directors and officers of the Company is determined by the Compensation, Governance
and Nominating Committee of the Board of Directors based on performance and is consistent with market trends. The
remuneration of directors and officers of the Company identified as key management is as follows for the respective
years ended:
Salary and short-term benefits
Post-retirement benefits
Share-based payment
104
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
2,061
33
769
2,863
1,984
36
1,054
3,074
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts Amounts due from (to) related parties are included in the consolidated balance sheets under trade receivables
and other (trade payables, accruals and other) and are as follows:
Due from related parties
Due to related parties
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
61
(112)
141
(39)
The amounts due from related parties are not secured and are to be settled in cash. As at December 31, 2014 and
2013, the amounts due from related parties are considered collectible and therefore have not been provided for in
the allowance for doubtful accounts. During the year ended December 31, 2014, $Nil has been recognized in bad debt
expenses with respect to related party transactions (2013 – $Nil).
Key management personnel are comprised of the Company’s officers. As at December 31, 2014, there is a $2,640
commitment (2013 – $2,944) relating to change of control or termination of employment of the key management
personnel.
The Company has contractual obligations to related parties in the form of facility leases. As at December 31,
2014, these contractual obligations and due dates are as follows:
$ THOUSANDS
TOTAL
2015
2016-2017
2018-2019
THERE-
AFTER
Operating lease obligations
26,583
5,396
9,998
4,911
6,278
105
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts spread across diverse industries and geographic areas.
On-going credit evaluation is performed on the financial
condition of trade receivables.
25.2. Market risk
Market risk is the risk from changes in market
prices, such as changes in foreign currency exchange
rates and interest rates which will affect the Company’s
earnings or the value of the financial instruments held.
25.2.1. Foreign currency exchange risk and sensitivity
analysis
Certain of the Company’s financial instruments
are exposed to fluctuations in the U.S. dollar (“USD”).
When considered appropriate, the Company purchases
forward contracts for USD as means of mitigating this
risk.
The following tables detail the Company’s
exposure to currency risk at December 31, 2014 and
2013 and a sensitivity analysis to changes in currency
(a 5.0% change in currency was used for obligations
that would be retired in 30 days or less and a 10.0%
change in currency for obligations that would be retired
within one year). The sensitivity analysis includes
USD denominated monetary items and adjusts their
translation at year end for their respective change
in the USD. For the respective weakening of the USD,
there would be an equal and opposite impact on the
Company’s net earnings.
25. FINANCIAL INSTRUMENTS AND
FINANCIAL RISK MANAGEMENT
The Company, through its financial assets and
liabilities, has exposure to the following risks from its
use of financial instruments: credit risk, market risk
(consisting of foreign currency exchange risk, interest
rate risk and equity price risk), and liquidity risk. The
following analysis provides a measurement of risks as at
December 31, 2014 and 2013.
25.1. Credit risk
Credit risk refers to the risk that a counterparty
will default on its contractual obligations resulting in
a financial loss to the Company. The Company has a
policy of only dealing with creditworthy counterparties
and obtaining sufficient collateral, where appropriate,
as a means of mitigating the risk of financial loss from
defaults. The creditworthiness of counterparties is
determined using information supplied by independent
rating agencies where available and, if not available,
the Company uses other publicly available financial
information and its own trading records to rate its major
customers. The Company’s exposure and the credit
ratings of its counterparties are continuously monitored
and the aggregate value of transactions concluded
is spread amongst approved counterparties. Credit
exposure is controlled by counterparty limits that are
reviewed regularly.
The Company’s exposure to credit risk on its cash
balance is mitigated as these financial assets are held
with major financial institutions with strong credit
ratings.
The aging of the Company’s trade receivables is
disclosed in Note 7. Contracts in transit and warranty
receivables are due from counterparties who maintain
strong credit ratings and the Company has a history of
collecting on these accounts. Trade receivables consist
of amounts due from a large number of customers,
106
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts CHANGE IN
CURRENCY
RATES
%
DENOMINATED
IN USD
$
EFFECT ON
NET EARNINGS
YEAR ENDED
DECEMBER 31,
2014 $
DENOMINATED
IN USD
$
EFFECT ON
NET EARNINGS
YEAR ENDED
DECEMBER 31,
2013 $
Cash
Trade payables,
accruals and other
5.0
5.0
Floor plan payable
10.0
2,284
(481)
(2,911)
(1,108)
86
(18)
(218)
(150)
928
(807)
(1,348)
(1,227)
35
(30)
(101)
(96)
Included in selling, general and administrative expenses are gains recognized due to foreign currency translation
for transactions and balances aggregating $169 for the year ended December 31, 2014 (2013 – $482).
25.2.2. Interest rate risk and sensitivity analysis
The Company’s financial liabilities are exposed to fluctuations in interest rates with respect to certain of its
long-term liabilities, line of credit and floor plan payable.
The Company manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps when
appropriate. Generally, the Company will raise floor plan financing and/or long-term debt at floating rates. When
the Company enters into a floating-to-fixed interest rate swap, it agrees with a third party to exchange the difference
between the fixed and floating contract rates based on agreed notional amounts.
107
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts The following table details the Company’s exposure to interest rate risk as at December 31, 2014 and 2013 and
a sensitivity analysis to an increase of interest rates by 0.5% on net earnings. The sensitivity includes floating rate
financial liabilities and adjusts their effect at period end for a 0.5% increase in interest rates. A decrease of 0.5% would
result in an equal and opposite effect on net earnings. This analysis excludes floating rate financial liabilities for which
the Company has hedged its exposure to interest rate fluctuations though the use of floating-to-fixed interest rate
swaps, as well as interest rate swaps themselves.
CHANGE IN
INTEREST
RATES
%
FLOATING RATE
FINANCIAL
LIABILITIES
$
EFFECT ON
NET EARNINGS
YEAR ENDED
DECEMBER 31,
2014 $
FLOATING RATE
FINANCIAL
LIABILITIES
$
EFFECT ON
NET EARNINGS
YEAR ENDED
DECEMBER 31,
2013 $
Floor plan payable
Acquisition Facility
Fleet Facility
Other long-term
debt(1)
0.5
0.5
0.5
0.5
265,883
7,140
4,957
253
278,233
997
27
19
1
1,044
212,980
9,313
4,248
422
226,963
799
35
16
2
852
(1) 2014 includes debt associated with assets held for sale
108
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts 25.2.3. Equity price risk and sensitivity analysis
The Company’s financial liabilities are exposed to fluctuations in stock price with respect to the total return
swaps.
The following table details the Company’s exposure to equity rate risk as at December 31, 2014 and a sensitivity
analysis to a decrease of the Company’s stock price by 5% on net earnings. The sensitivity includes the total return
swaps financial liabilities and adjusts the effect at period end for a 5% decrease in the stock price. An increase of 5%
would result in an equal and opposite effect on net earnings.
CHANGE IN
STOCK PRICE
%
TOTAL RETURN SWAP
FINANCIAL LIABILITY
$
EFFECT ON NET
EARNINGS YEAR
ENDED
DECEMBER 31,
2014 $
Total return swaps
5
(108)
(103)
25.3. Liquidity risk
The Company’s objective is to have sufficient liquidity to meet its liabilities when due. The Company monitors its
cash balance and cash flows generated from operations as well as available credit facilities to meet its requirements.
The Company has credit facilities with a syndicate of lenders to help finance the general day-to-day cash
requirements of its operations (the “Operating Facility”), to finance its inventory (the “Flooring Facility”), to make
acquisitions (the “Acquisition Facility”), to finance the Company’s fleet of vehicles (the “Fleet Facility”) and to finance
the repurchase of the Debentures (the “Debenture Repayment Facility”) (collectively the “Syndicated Facility”).
The Syndicated Facility is a revolving facility secured in favour of the syndicate by a general security agreement.
Advances under the Syndicated Facility may be made based on our lender’s prime rate or the US base rate plus 1.0%
– 2.5% or based on the banker’s acceptance (“BA”) rate plus 2.0% – 3.5%. The Company pays standby fees of between
0.4% and 0.7% per annum (2013 – 0.5% and 0.8%) on any undrawn portion of the Syndicated Facility. The Syndicated
Facility matures on June 1, 2017 however, it is the Company’s intention to renew this facility prior to its maturity date.
109
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts The facilities included in the Syndicated Facility have the following limits:
Operating Facility
Flooring Facility
Acquisition Facility
Fleet Facility
Debenture Repayment Facility
Real Estate Facility
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
30,000
125,000
30,000
10,000
26,250
15,000
30,000
100,000
30,000
10,000
29,750
-
In addition to the Flooring Facility, the Company has additional floor plan facilities of approximately $412,000 as
at December 31, 2014 (2013 – $488,100).
The Company assesses its liquidity based on the expected period in which cash flows will occur. The following
tables summarize the Company’s undiscounted cash flows expected for its financial liabilities as at December 31. The
analysis is based on foreign exchange rates and interest rates in effect at the consolidated balance sheet date, and
includes both principal and interest cash flows.
110
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts AS AT DECEMBER 31, 2014
INTEREST AND
PRINCIPAL
OUTSTANDING
$
2015
$
2016-2017
$
2018-2019
$
Trade payables, accruals and other1
Floor plan payable
Long-term debt2
Obligations under finance leases
Derivative financial instruments
33,711
395,375
46,408
501
3,592
33,711
395,375
12,074
492
1,150
479,587
442,802
-
-
32,427
9
1,453
33,889
-
-
1,893
-
799
2,692
AS AT DECEMBER 31, 2013
INTEREST AND
PRINCIPAL
OUTSTANDING
$
2014
$
2015-2016
$
2017-2018
$
Trade payables, accruals and other1
Floor plan payable
Long-term debt
Obligations under finance leases
Derivative financial instruments
34,620
355,853
56,187
1,406
2,442
34,620
355,853
12,159
850
1,197
450,508
404,679
-
-
20,339
556
1,245
22,140
-
-
23,655
-
-
23,655
1 -Trade payables, accruals and other excludes DSUs and SARs which are not financial instruments.
2 -Includes long-term debt associated with assets held for sale
THERE-
AFTER
$
-
-
14
-
190
204
THERE-
AFTER
$
-
-
34
-
-
34
In the event that the Syndicated Facility is not renewed prior to its maturity, the cash outflow for the long-term
debt outstanding as at December 31, 2014 would be $34,040 in 2015-2016 and $Nil in subsequent periods (December
31, 2013 – $42,895 for 2014-2015 and $Nil in subsequent periods).
111
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts 25.4. Fair value of financial instruments carried at
amortized cost
The carrying amounts of cash, trade receivables
and other, bank indebtedness and trade payables,
accruals and other (excluding DSUs and SARs)
approximate their fair values because of the short-term
maturities of these items. The carrying amounts of
floor plan payable, long-term debt and obligations
under finance leases approximate their fair values as
the interest rates are consistent with market rates for
similar debt. Substantially all short- and long-term
interest expense pertains to financial liabilities that are
not at FVTPL.
25.5. Fair value measurements recognized in the
consolidated balance sheet
The financial instruments of the Company are
measured subsequent to initial recognition at fair value
and are grouped into categories accordingly:
■
■
Level 1 financial instruments are those which can
be derived from quoted market prices (unadjusted)
in active markets for similar financial assets or
liabilities. The Company does not have any Level 1
financial instruments.
Level 2 financial instruments are those whose
fair value can be derived from inputs that are
observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
The Company’s Level 2 financial instruments
consist of derivatives in the form of interest
rate swaps and total return swaps, which had a
fair value of $3,282 at December 31, 2014 (2013
– $1,706).
■
Level 3 financial instruments are those derived
from valuation techniques that include inputs for
the financial asset or liability which are not based
on observable market data (unobservable inputs).
The Company has no Level 3 financial instruments.
There were no transfers between Level 1 and 2
during the year 2014 and 2013.
25.6. Derivative financial instruments and hedges
The Company has long and short-term debt
raised at floating interest rates and hedges a portion
of this risk by using floating-to-fixed interest rate
swaps. Under the interest rate swaps, the Company
hedges interest rate risk by exchanging, at monthly
intervals, the difference between fixed contract rates
and floating-rate interest amounts calculated by
reference to the agreed notional amounts. The interest
rate swaps hedge the Company’s exposure to interest
rate fluctuations on the Debenture Repayment Facility
as well as portions of the Acquisition and Flooring
Facilities. Interest rate swaps outstanding at December
31, 2014 mature between May 2016 and September
2020 (2013 – between May 2016 and August 2020).
During 2014, the Debenture and Acquisition Facility
interest rate swaps were no longer effective and as such,
hedge accounting was discontinued. The accumulated
amounts recognized within accumulated other
comprehensive loss will be reversed into net earnings
over the remainder of the term of the derivatives.
Future charges in fair value will be recognized within net
earnings in the period in which they arise.
The combined notional principal amounts of
interest rate swaps outstanding at December 31, 2014
was $90,892 (2013 – $97,668). At December 31, 2014, the
effective fixed interest rate on the underlying debt was
4.5% (2013 – 4.7%) and the effective floating rate using
the Bankers’ Acceptance rate was 3.3% (2013 – 3.5%).
112
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts During the year, the Company entered into two total return swaps to hedge the exposure associated with
increases in its share value on its outstanding DSUs and SARs. The DSUs are notional grants of shares and are to be
settled in cash within 30 days of a Director’s termination date. The Company does not apply hedge accounting to this
relationship and as such, gains and losses arising from marking the derivative to market are recognized in earnings in
the period in which they arise.
Derivative financial instruments recognized as liabilities are as follows:
Total return swaps
Interest rate swaps
Derivative financial instruments
Losses (gains) on derivative financial instruments are as follows:
Opening derivative financial instruments
Loss (gain) recognized in net earnings
Loss recognized in accumulated other
comprehensive loss – net of tax
Tax on loss recognized in accumulated other
comprehensive loss
Ending derivative financial instruments
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
108
3,174
3,282
-
1,706
1,706
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
1,706
68
1,122
386
3,282
1,438
(225)
365
128
1,706
These accumulated losses will be continuously released to the consolidated statement of net earnings within
interest on short-term and long-term debt until full repayment of the underlying debt.
During the years presented and cumulatively to date, changes in counterparty credit risk have not significantly
contributed to the overall changes in the fair value of these derivative financial instruments.
113
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts 26. MANAGEMENT OF CAPITAL
The Company’s objectives when managing
capital are:
(a) To maintain a flexible capital structure
which optimizes the cost of capital at
acceptable risk; and
(b) To maintain capital in a manner which
balances the interests of equity and debt
holders.
In the management of capital, the Company
includes shareholders’ equity, long-term debt and
obligations under finance leases (including current
portions thereof), and floor plan payable.
The Company manages its capital structure
and makes adjustments due to changes in economic
conditions and the risk characteristics of the underlying
assets. In order to maintain or adjust the capital
structure, the Company may adjust the amount of
dividends paid to shareholders, purchase shares
for cancellation pursuant to normal course issuer
bids, issue new shares, issue new debt, and/or issue
new debt to replace existing debt with different
characteristics.
The Company monitors debt to equity
capitalization. This ratio is a non-IFRS measure which
does not have a standardized meaning prescribed by
IFRS and therefore may not be comparable to similar
measures presented by other issuers.
The Company calculates debt to equity
capitalization including and excluding floor plan
payable. Debt to equity capitalization (excluding floor
plan payable) is calculated as total long-term debt
including obligations under finance leases, (both
current and long-term portions), divided by total equity,
(common shares, contributed surplus, accumulated
other comprehensive loss and retained earnings). Debt
to equity capitalization (including floor plan payable)
includes the balance of floor plan payable in the
calculation of the numerator.
114
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts
The debt to equity ratio target excluding floor plan payable is between 0.3 and 0.5 to 1. As at December 31, 2014,
the Company is lower than its target range due to deleveraging of the balance sheet. The debt to equity ratio target for
the Company including floor plan payable is debt between 2.5 and 3.0 to 1.0. As at December 31, 2014 and 2013, the
Company was within its target range. The components of debt to equity ratios are as follows:
Current portion of long-term debt
Current portion of obligations under finance leases
Liabilities associated with assets held for sale
Long-term debt
Obligations under finance leases
Total debt excluding floor plan payable
Floor plan payable
Total debt including floor plan payable
Shareholders’ equity
Debt equity ratios
- excluding floor plan payable
- including floor plan payable
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
10,560
453
253
32,776
9
44,051
382,081
426,132
10,656
823
-
41,681
541
53,701
342,364
396,065
168,407
157,421
0.26
2.53
0.34
2.52
115
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts Pursuant to agreements with lenders, the Company is also required to monitor and report certain non-IFRS
measures on a quarterly basis. These measures and the applicable compliance ranges are as follows:
Fixed charge coverage of at least
Debt to tangible net worth less than
Current ratio of at least
DECEMBER 31,
2014 $
DECEMBER 31,
2013 $
1.25-1.50:1
4.00-5.00:1
1.15-1.20:1
1.25-1.50:1
4.00-5.00:1
1.15-1.20:1
Each lender has its own definition of which account balances are to be included in these computations. As at
December 31, 2014 and 2013, the Company was in compliance with all externally imposed capital requirements. As
at December 31, 2014, the Company’s compliance with the fixed charge coverage ratio on the Syndicated Facility is
however, marginal. Based on our projected results, we expect to remain in compliance with this, and other covenants,
however, our estimated results are subject to numerous risks and uncertainties, some of which are beyond our control.
The Company will continue to closely monitor its financial covenants accordingly.
27. SEGMENTED REPORTING
The company has two reportable operating segments, the agriculture segment and the construction segment,
which are both supported by the corporate office. The business segments are strategic business units that offer
different products and services and are managed separately. The corporate office provides finance, treasury, human
resource, legal and other administrative support to the business segments. Corporate expenditures are allocated and
absorbed in each individual segment on the basis of distribution of assets deployed in the segment.
The agriculture segment primarily includes sales of agricultural equipment, parts and services and the
construction segment includes sales of construction equipment, parts and services. The Company’s branches have
been aggregated based on the primary industry which they serve. In the case where certain branches serve both
industries, the primary industry served is agriculture and therefore, these facilities have been categorized as such. As
a result, certain construction related results are included in the agriculture segment for the purposes of segmented
financial reporting shown below.
Comparative information presented for 2013 has been derived using allocations and estimated made by
management.
The accounting policies of the reportable operating segments are the same as those described in Note 3 –
116
Summary of significant accounting policies.
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts DECEMBER 31, 2014
Sales
New equipment
Used equipment
Parts
Service
Other
Cost of sales
Gross profit
Selling, general and administrative
Interest on short-term debt
Interest on long-term debt
Earnings (loss) before income taxes
Income taxes
Net earnings (loss)
AGRICULTURE
$
CONSTRUCTION
$
TOTAL
$
473,715
300,277
87,387
29,478
2,731
893,588
761,158
132,430
91,837
10,346
1,963
28,284
7,854
20,430
48,032
3,259
14,235
5,586
707
71,819
58,627
13,192
13,919
1,137
219
(2,083)
(578)
(1,505)
521,747
303,536
101,622
35,064
3,438
965,407
819,785
145,622
105,756
11,483
2,182
26,201
7,276
18,925
117
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts DECEMBER 31, 2013
Sales
New equipment
Used equipment
Parts
Service
Other
Cost of sales
Gross profit
Selling, general and administrative
Interest on short-term debt
Interest on long-term debt
Earnings (loss) before income taxes
Income taxes
Net earnings (loss)
AGRICULTURE
$
CONSTRUCTION
$
TOTAL
$
484,046
354,043
79,210
24,050
2,574
943,923
808,845
135,078
90,823
9,355
1,973
32,927
8,948
23,979
39,476
4,818
13,389
5,371
785
63,839
58,511
5,328
14,627
2,341
260
(11,900)
(3,234)
(8,666)
523,522
358,861
92,599
29,421
3,359
1,007,762
867,356
140,406
105,450
11,696
2,233
21,027
5,714
15,313
118
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts Balance Sheet Information:
DECEMBER 31, 2014
AGRICULTURE
$
CONSTRUCTION
$
Inventory
Goodwill
Other assets
Total assets
480,320
14,692
83,525
578,537
45,683
-
19,596
65,279
DECEMBER 31, 2013
AGRICULTURE
$
CONSTRUCTION
$
Inventory
Goodwill
Other assets
Total assets
425,038
14,692
93,679
533,409
54,292
-
11,701
65,993
TOTAL
$
526,003
14,692
103,121
643,816
TOTAL
$
479,330
14,692
105,380
599,402
119
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts 28. ECONOMIC DEPENDENCE
The Company is the holder of authorized dealerships granted by the CNH group of companies whereby it has
the right to act as an authorized dealer for Case equipment. The dealership authorizations and floor plan facilities
can be cancelled by the CNH group of companies if the Company does not observe certain established guidelines and
covenants, which is common for this industry.
29. SUBSEQUENT EVENT
On February 12, 2015, the Company acquired 100% of the outstanding common shares of NGF Geomatics Inc.
(“NGF”), a geometrics company specializing in the collection of geospatial survey data using unmanned aerial vehicles.
The purchase price was $840 and was funded with cash. The Company is in the process of determining the purchase
price allocation.
On March 10, 2015, the Company announced that it had entered into an agreement to purchase 100% of the
issued and outstanding shares of the entities forming Chabot Implements (“Chabot”). Chabot is a Manitoba-based
dealer of Case IH agriculture equipment with locations in Portage La Prairie, Steinbach and Elie. Chabot also sells
Kubota equipment through its Neepawa, Manitoba location. The purchase consideration of $6,790 is subject to a
minimum working capital requirement and will be adjusted based on actual working capital delivered. The acquisition
is expected to close effective April 1, 2015.
120
Rocky Mountain Dealerships Inc. | Annual Report | 2014 CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSYears Ended December 31, 2014 and 2013Expressed in Thousands of Canadian Dollars Except Per Share and Per Option Amounts CORPORATE INFORMATION
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CORPORATE INFORMATION(1)
OFFICERS
GARRETT A.W. GANDEN
President and Chief Executive Officer
DAVID J. ASCOTT
Chief Financial Officer
JERALD D. PALMER JR.
General Counsel & Corporate Secretary
AUDITOR
PricewaterhouseCoopers LLP
Calgary, Alberta
EXTERNAL LEGAL COUNSEL
Dentons Canada LLP
Calgary, Alberta
BANKER
HSBC Bank Canada
STOCK EXCHANGE LISTING
Toronto Stock Exchange
Symbol RME (RCKXF on the OTCQX)
TRANSFER AGENT
Computershare Trust Company of Canada
Calgary, Alberta
DIRECTORS
MATTHEW C. CAMPBELL
Calgary, Alberta
DEREK I. STIMSON
Coaldale, Alberta
PAUL S. WALTERS(2)(3)(4)
Toronto, Ontario
DENNIS J. HOFFMAN(2)(3)
Calgary, Alberta
PATRICK J. PRIESTNER(2)(3)
Edmonton, Alberta
ROBERT K. MACKAY(3)
Vancouver, British Columbia
SCOTT A. TANNAS(2)
High River, Alberta
TRACEY L. ZEHL(2)(3)
Calgary, Alberta
(1) Information provided as at April 1, 2015
(2) Audit Committee Member
(3) Compensation, Governance and Nominating Committee Member
(4) Lead Independent Director
HEAD OFFICE
#301, 3345 8th Street S.E.
Calgary, Alberta T2G 3A4
TEL 403.265.7364
FAX 403.214.5644
www.rockymtn.com
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Rocky Mountain Dealerships Inc. | Annual Report | 2014
Layout and Design | Kristin Knudson, B. Des.; RME Marketing
DEALERSHIP LOCATIONS
ALBERTA
BALZAC
BARRHEAD
BOW ISLAND
CALGARY
CAMROSE
DRUMHELLER
EDMONTON
EDMONTON
FALHER
GRANDE PRAIRIE
GRIMSHAW
HIGH RIVER
KILLAM
LETHBRIDGE
MEDICINE HAT
MILK RIVER
OYEN
PICTURE BUTTE
RED DEER
RED DEER
TABER
VEGREVILLE
VERMILION
WESTLOCK
WESTLOCK
CASE IH
NEW HOLLAND
CASE IH
CASE CE
CASE IH | NEW HOLLAND
CASE IH
CASE CE
METSO
CASE IH
CASE IH | CASE CE
CASE IH | NEW HOLLAND
CASE IH
CASE IH
CASE IH | CASE CE
CASE IH | CASE CE
CASE IH
CASE IH
CASE IH
CASE CE
NEW HOLLAND
CASE IH | CASE CE
CASE IH
CASE IH
CASE IH
NEW HOLLAND
SASKATCHEWAN
KINDERSLEY
MOOSOMIN
PREECEVILLE
YORKTON
YORKTON
CASE IH
CASE IH
CASE IH
CASE IH
UNI-SELECT
MANITOBA
BOISSEVAIN
BRANDON
DAUPHIN
ELIE
KILLARNEY
NEEPAWA
NEEPAWA
PORTAGE LA PRAIRIE
RUSSELL
SHOAL LAKE
STEINBACH
WINKLER
CASE IH
CASE IH
CASE IH
CASE IH
CASE IH
CASE IH
SHORT LINES
CASE IH
CASE IH
CASE IH
CASE IH
CASE IH
Dealership Locations as of April 1st, 2015