March 25, 2011
Boyd Group Income Fund Reports Record Year
Winnipeg, Manitoba — March 25, 2011 — Boyd Group Income Fund (TSX: BYD.UN) (“the Fund” or “the Boyd Group”) today reported its financial results for the three and twelve-month periods ended December 31, 2010. The Fund’s complete fiscal 2010 financial statements and MD&A have been filed on SEDAR (www.sedar.com). This news release is not in any way a substitute for reading the Boyd Group’s financial statements including notes to the financial statements and Management’s Discussion & Analysis.
- Record sales, Adjusted EBITDA1, net earnings and distributable cash2
- Sales increased by 14.8% to $256.8 million from $223.7 million in 2009, impacted by five months of sales contribution from True2Form Collision Repair Centers, Inc. (“True2Form”), acquired at the end of July
- Same-store sales increased by 3.1 million, or 1.4%, excluding the impact of foreign exchange translation
- Gross margin improved to 45.3% compared with 44.2% in 2009
- Adjusted EBITDA1 totalled $18.9 million compared with Adjusted EBITDA1 of $15.0 million in 2009
- Adjusted distributable cash2 totalled $15.1 million compared with $12.6 million in 2009
- Payout ratio of 24.7% compared with 24.4% in 2009
- Net earnings were $17.6 million compared with $8.9 million in 2009
“We are very pleased to report record sales, net earnings, Adjusted EBITDA, and distributable cash for the year,” said Brock Bulbuck, President and Chief Executive Officer of the Boyd Group. “Market conditions improved significantly as the year progressed, especially during the fourth quarter, which was very favorable. In particular, the Fund benefited from a significant and unusual hail storm in the Arizona market, which alone added between $1.1 million and $1.3 million of EBITDA1 to our fourth quarter results.”
“In addition, we continued to make progress in integrating True2Form. As a result of this acquisition, we are now the largest multi-site operator of automotive collision repair service centers in North America by number of locations, currently with 134 locations. We believe we are well positioned to capitalize on our size as the collision repair industry continues to consolidate repair volume with a fewer number of large collision repair companies,” added Mr. Bulbuck.
“We can also report progress in advancing both operational and growth initiatives during the year, and we believe that our business is well positioned for the future,” continued Mr. Bulbuck. “We are confident that we have gained market share, as many automobile insurers consolidate Direct Repair Program revenues with fewer auto collision repairers. In 2010, we opened eight new collision repair centers in line with our growth plan to add eight to ten locations per year. We believe we have the management team, systems, experience and the market opportunity, along with a strong balance sheet, to continue to successfully grow our business.”
The Fund also actively investigated and evaluated structuring alternatives during 2010 in preparation for the Specified Investment Flow-Through (“SIFT”) rules with a view of preserving and maximizing unitholder value. In December 2010, the Fund announced an internal capital restructuring plan that better reflects its significant U.S. base of business and its expected source of future growth. The capital restructuring results in distributions to unitholders now being funded almost entirely by the Fund’s U.S. operations. Fund distributions that are sourced from U.S. business earnings are not subject to SIFT tax. With the resulting cash flow savings, the Trustees of the Fund approved in December an increase in distributions to $0.42 per unit annually ($0.035 per month) from $0.36 per unit annually ($0.03 per month) beginning with the January 2011 distribution.
Three Months Ended December 31, 2010
Sales for the three months ended December 31, 2010 increased by 52.3% to $80.8 million, compared with sales of $53.0 million for the three months ended December 31, 2009, after adjusting for the effect of discontinued operations. The increase consisted of $23.7 million in sales generated from True2Form and other new collision repair start-ups, and $5.7 million, or 10.7%, in same-store sales growth offset by $1.6 million due to a lower U.S. dollar translation rate on sales generated from Boyd Group’s U.S. operations.
On a segmented basis, sales in Canada totalled $18.8 million for the three months ended December 31, 2010, an increase of $0.2 million or 1.1%. Sales growth in Canada was due entirely to same-store sales increases.
Sales in the U.S. totalled $62.0 million in the fourth quarter of 2010, an increase of $27.6 million, or 80.1%, over the same period in 2009. Sales in the U.S. included sales of $20.2 million from True2Form as well $3.5 million from new locations in Glendale, Arizona; Anthem, Arizona; Rome, Georgia; Avondale, Arizona; three new locations in Tucson, Arizona; Cartersville, Georgia; Owasso, Oklahoma; Evanston, Illinois; Las Vegas, Nevada; Bellingham, Washington; Yuma, Arizona; and two new locations in the Atlanta, Georgia area. Translation of U.S. revenues at a weaker U.S. dollar exchange rate relative to the Canadian dollar resulted in a decrease of $1.6 million. Excluding the impact of currency translation, same-store sales in the U.S. increased by $5.5 million or 16.0% when compared with Q4 2009. An unusual and significant hail storm experienced in the Arizona market positively affected fourth quarter sales by approximately $3.5 million to $3.9 million. Same-store sales growth in the U.S., excluding Arizona, was 5.0%.
Earnings before interest, income taxes, depreciation and amortization (“EBITDA”) for the fourth quarter of 2010 totalled $7.0 million, or 8.7% of sales, compared with Adjusted EBITDA (EBITDA adjusted for discontinued operations “Adjusted EBITDA” of $3.9 million, or 7.3% of sales, during the same period a year ago. The unusually strong EBITDA for the fourth quarter was the result of an improved gross margin percentage, same-store-sales growth, contributions from new locations, along with the impact of the Arizona hail storm mentioned previously, which we estimate increased EBITDA by approximately $1.1 million to $1.3 million. In addition, fourth quarter Adjusted EBITDA was also positively impacted by lower operating costs in comparison to prior quarters, related to certain employee payroll taxes that had reached their maximums prior to or during the fourth quarter. These costs in Q4 were approximately $0.6 million lower than their comparable Q1 2010 amounts, after adjusting Q1 2010 to include True2Form. Changes in the U.S. dollar negatively impacted Adjusted EBITDA by $0.3 million compared with the same quarter last year.
During the fourth quarter, the Fund determined that it now expects to be able to fully utilize its non-capital loss carryforward amounts and other tax assets that had previously been offset with a valuation allowance. As a result, during the quarter, the Company increased net earnings by $6.7 million by recording the future tax benefit of loss carryforwards and other tax assets. These tax benefits are not expected to recur in future periods. In addition, with the full benefit of these tax loss carryforwards and other tax assets now being fully recognized, the Fund’s reported net earnings in the future will be subject to a charge for corporate income tax expense, notwithstanding that such expense will be mostly sheltered or satisfied by using its tax loss carry-forwards to the extent available and not by way of payment of cash.
Net earnings after discontinued operations were $10.5 million, or $0.90 per diluted unit and Class A common share, compared with net earnings of $2.5 million, or $0.21 per diluted unit and Class A common share, for the same period in 2009. Net earnings were impacted positively by the tax benefits described above and negatively by a fourth quarter write down of $1.1 million of goodwill related to a small glass business in B.C.
During the fourth quarter, the Fund generated adjusted distributable cash of $4.1 million, which includes adjustments for the collection of additional prepaid rebates, cash flow used in discontinued operations, proceeds on the sale of equipment, and capital lease repayments. The Fund paid distributions of $1.0 million, representing a payout ratio of 24.5% for the quarter.
Twelve Months Ended December 31, 2010
Sales for the year ended December 31, 2010 increased by 14.8% to $256.8 million, compared with $223.7 million for 2009, after adjusting for the effect of discontinued operations. The increase consisted of $45.4 million in sales generated from True2Form and other new collision repair start-ups as well as $3.1 million due to a 1.4% same-store sales increase, partially offset by the impact of a lower U.S. dollar translation rate on sales generated from Boyd Group’s U.S. operations of $15.4 million.
On a segmented basis, sales in Canada for 2010 decreased by 3.2% to $72.1 million compared to sales of $74.4 million a year ago. The decrease in sales was due to same-store sales declines in the first half of the year, partially offset by same-store sales increases in the third and fourth quarters.
Sales in the U.S. increased by 23.8% to $184.7 million for the year ended December 31, 2010 compared with $149.2 million a year ago. Sales in the U.S. included sales of $33.6 million from True2Form as well as $11.8 million from 15 other new locations. Translation of U.S. revenues at a weaker U.S. dollar exchange rate relative to the Canadian dollar resulted in a decrease of $15.4 million. Excluding the impact of foreign currency translation, same-store sales in the U.S. increased by $5.5 million, or 3.7%, compared to 2009.
Adjusted EBITDA for the year ended December 31, 2010 increased by 26.0% to $18.9 million, or 7.4% of sales, compared with Adjusted EBITDA of $15.0 million, or 6.7% of sales, in the prior year. Changes in the U.S. dollar negatively impacted EBITDA by $2.2 million, which was more than offset by the impact of sales from new locations, improvements in gross margin percentage, and the impact of a significant hail storm experienced in the Arizona market during the fourth quarter.
For the year ended December 31, 2010, net earnings after discontinued operations were $17.6 million or $1.51 per unit (basic) and $1.48 per unit (diluted), compared with net earnings of $8.9 million or $0.76 per unit (basic) and $0.75 per unit (diluted), a year ago. As noted in the discussion of fourth quarter results, net earnings benefited from the recording of substantial future tax benefits of $6.7 million, offset by a goodwill write down of $1.1 million which are both not expected to recur in future periods.
In the twelve months ended December 31, 2010, adjusted distributable cash, which includes adjustments for the collection of additional prepaid rebates, cash flow used in discontinued operations, proceeds on the sale of equipment, and capital lease repayments, increased to $15.1 million from $12.6 million a year ago.
As at December 31, 2010, the Fund had total debt outstanding, net of cash, of $16.0 million and a cash position, net of bank indebtedness, of $9.4 million. This compares with total debt, net of cash, of $16.7 million and a cash position, net of bank indebtedness, of $3.0 million at December 31, 2009. Increases in net debt during the year as a result of the acquisition of True2Form were more than offset by scheduled repayments of debt and growth in cash balances.
“We continue to be pleased with the progress of our business and we continue to be confident in our positioning to achieve both our performance and growth goals into the future,” added Mr. Bulbuck. “Our integration of True2Form continues to go well, and the improvements in same-store sales growth rates in both the U.S. and Canada are very encouraging. We are also raising the upper end of our target range for number of new locations to eight to 13 locations annually, from eight to 10 previously, and we continue to be on the lookout for opportunities for accelerated growth through the acquisition of other multi-location businesses. Our objective continues to be to gradually increase distributions to unitholders over time; however, we remain committed to a conservative distribution policy that will provide us financial flexibility, the ability to support our growth initiatives, and the ability to maintain distribution levels despite any cash taxes that may be payable in the future once our loss carryforward balances are utilized,” Mr. Bulbuck concluded.
2010 Year End Results Conference Call & Webcast
Management will hold a conference call on Friday, March 25, 2011, at 10:00 a.m. (ET) to review the Fund’s 2010 fourth quarter financial results. You can join the call by dialling 888-231-8191 or 647-427-7450. A live audio webcast of the conference call will be available through www.boydgroup.com. An archived replay of the webcast will be available for 90 days. A taped replay of the conference call will also be available until Friday, April 1, 2011, at midnight by calling 800-642-1687 or 416-849-0833, reference number 39457668.
(¹)(²) EBITDA, Adjusted EBITDA, distributable cash and adjusted distributable cash are not recognized measures under Canadian generally accepted accounting principles (GAAP). Management believes that in addition to revenue, net earnings and cash flows, the supplemental measures of distributable cash, adjusted distributable cash, EBITDA and Adjusted EBITDA are useful as they provide investors with an indication of earnings from operations and cash available for distribution, both before and after debt management, productive capacity maintenance and non-recurring and other adjustments. Investors should be cautioned, however, that EBITDA, Adjusted EBITDA, distributable cash and adjusted distributable cash should not be construed as an alternative to net earnings determined in accordance with GAAP as an indicator of the Fund’s performance. Boyd’s method of calculating distributable cash and adjusted distributable cash may differ from other public issuers and, accordingly, may not be comparable to similar measures used by other issuers. For a detailed explanation of how the Fund’s distributable cash and adjusted distributable cash is calculated, please refer to the Fund’s MD&A filing for the three- and twelve-month periods ended December 31, 2010, which can be accessed via the SEDAR Web site (www.sedar.com).
To view Boyd Group Income Fund’s Fiscal 2010 financial statements and notes, please click here:http://files.newswire.ca/698/Boyd_Group.pdf
About The Boyd Group Inc.
The Boyd Group Inc. is the largest operator of collision repair centres in North America. The Company operates locations in the four Western Canadian provinces under the trade name Boyd Autobody & Glass, as well as in eleven U.S. states under the trade names Gerber Collision & Glass and True2Form. The Company also operates Gerber National Glass Services, an auto glass repair and replacement referral business with approximately 3,000 affiliated service providers throughout the United States. For more information on The Boyd Group Inc. or Boyd Group Income Fund, please visit our website at www.boydgroup.com.
About The Boyd Group Income Fund
The Boyd Group Income Fund is an unincorporated, open-ended mutual fund trust created for the purposes of acquiring and holding certain investments, including a majority interest in The Boyd Group Inc. and its subsidiaries. The Boyd Group Income Fund units trade on the Toronto Stock Exchange (TSX) under the symbol BYD.UN.
For further information, please contact:
President & CEO
Tel: (204) 895-1244
Tel: (416) 815-0700 or toll free 1-800-385-5451 (ext. 242)
Chief Financial Officer
Tel: (204) 895-1244
Statements made in this press release, other than those concerning historical financial information, may be forward-looking and therefore subject to various risks and uncertainties. Some forward-looking statements may be identified by words like “may”, “will”, “anticipate”, “estimate”, “expect”, “intend”, or “continue” or the negative thereof or similar variations. Readers are cautioned not to place undue reliance on such statements, as actual results may differ materially from those expressed or implied in such statements. Factors that could cause results to vary include, but are not limited to: the economic downturn; loss of key customers; fluctuations in cash distributions; dependence on the Fund’s operating subsidiaries to pay its interest obligations; loss of services of key senior management personnel; damage to the Company’s brand; variation in the number of insurance claims; margin pressure; management of credit and refinancing risks; responding to changes in the market environment; technology risks; the management of key supplier relationships; capital expenditures; competition from established competitors and new entrants in the businesses in which the Company operates; employee relations; the ability to complete acquisitions of collision repair facilities and other businesses and to integrate these acquisitions successfully; the ability to identify start-up locations and reach anticipated profitability levels; potential discovery of undisclosed liabilities associated with acquisitions; energy costs; weather conditions; operational and infrastructure risks including possible equipment failure and performance of information technology systems; fluctuations in operating results and seasonality; ability to expand into the United States; insurance coverage of sufficient scope to satisfy any liability claims; environmental, health & safety risk; interest rate fluctuations and general economic conditions; quality of corporate governance; pending and proposed legislative or regulatory developments including the impact of changes in laws, regulations and the enforcement thereof; quality of internal control systems; fluctuations in foreign currencies; fluctuations in the cost of benefit plans; impact of government owned insurance; and the possible impacts from public health emergencies, international conflicts and other developments including those relating to terrorism; and the Fund’s success in anticipating and managing the foregoing risks.
We caution that the foregoing list of factors is not exhaustive and that when reviewing our forward-looking statements, investors and others should refer to the “Risk Factors” section of the Fund’s Annual Information Form, the “Risks and Uncertainties” and other sections of our Management’s Discussion and Analysis of Operating Results and Financial Position and our other periodic filings with Canadian securities regulatory authorities. All forward-looking statements presented herein should be considered in conjunction with such filings.