August 13, 2010
Boyd Group Income Fund Reports Second Quarter Results
- Fund Trustees approve eleventh consecutive increase to distributions -
Winnipeg, Manitoba - August 13, 2010 - Boyd Group Income Fund (TSX: BYD.UN) (“the Fund” or “the Boyd Group”) today reported its financial results for the three and six-month periods ended June 30, 2010. The Fund’s complete fiscal 2010 second quarter financial statements and MD&A have been filed on SEDAR (www.sedar.com). Boyd Group also announced that the Trustees of the Fund have approved a 4.5% increase in monthly distributions from $0.0275 per unit to $0.02875 per unit commencing October 2010 for unitholders of record on September 30, 2010.
Q2 2010 Highlights
- EBITDA1 totalled $3.5 million compared to Adjusted EBITDA1 of $3.7 million in Q2 2009 despite $0.7 million decline due to changes in the value of the U.S. dollar
- Adjusted distributable cash2 totalled $2.6 million compared to $3.5 million (including $1.4 million from working capital changes) in Q2 2009
- Payout ratio of 35.1% compared to 21.5% in Q2 2009
- Sales decreased by 5.1% to $52.3 million from $55.1 million in Q2 2009, primarily due to the weakness of the U.S. dollar
- Same-store sales declined by 1.3%, excluding the impact of foreign exchange translation
- Gross margin improved to 45.7% of sales compared to 43.9% of sales in Q2 2009
- Net earnings were $2.1 million, or 4.0% of sales, compared to $2.1 million, or 3.8% of sales, in Q2 2009
- Announced a definitive agreement to acquire a 37-location collision repair company in the U.S. The acquisition was completed subsequent to the end of the quarter.
“We are pleased to again report stable net earnings, EBITDA, and operating cash flow during the quarter, despite the negative impact of the weaker U.S. dollar on our U.S. operations, the continuing negative impact of the economy and the carry-over impact of extreme mild and dry winter months in many of our northern markets” said Brock Bulbuck, President and Chief Executive Officer of the Boyd Group. “As a result of our operational efficiencies and cash flow strength, we have announced a further 4.5% increase in our monthly distributions, which represents the eleventh consecutive quarterly increase.”
“In addition to posting good results in a challenging market environment this quarter, we are very excited to have recently completed the acquisition of True2Form Collision Repair Centers, Inc., one of the largest multi-location collision repair companies in the United States. It is expected that the acquisition will be immediately accretive to distributable cash. In addition, the acquisition will allow us to enhance our presence in the eastern United States with an additional 37 locations in states and markets that we did not previously operate in, thereby complementing our existing network. This has tremendous strategic value as insurance companies continue to consolidate repair revenues with a smaller number of larger collision repair companies. We are now positioned as the largest multi-site operator of automotive collision repair service centers in North America,” added Mr. Bulbuck.
Three Months Ended June 30, 2010
Sales for the three months ended June 30, 2010 decreased by 5.1% to $52.3 million, compared to sales of $55.1 million for the three months ended June 30, 2009, after adjusting for the effect of discontinued operations. The decrease consisted of $4.6 million due to a lower U.S. dollar translation rate on sales generated from Boyd Group’s U.S. operations and $0.7 million due to a 1.3% same-store sales decline, offset by sales generated from new collision repair start-ups of $2.5 million.
On a segmented basis, sales in Canada totalled $16.5 million for the three months ended June 30, 2010, a decrease of $2.1 million or 11.3%. Sales decreases in Canada were due to same-store sales declines as a result of softer market conditions, made worse by the carry-over effects of an extremely mild and dry winter.
Sales in the U.S. totalled $35.8 million in the second quarter of 2010, a decrease of $0.7 million, or 1.9%, over the same period in 2009. Translation of U.S. revenues at a weaker U.S. dollar exchange rate relative to the Canadian dollar resulted in a decrease of $4.6 million. Excluding the impact of currency translation, same-store sales in the U.S. increased by $1.4 million or 3.8% when compared to Q2 2009. Sales in the U.S. also included sales of $2.5 million from new locations in Glendale, Arizona; Anthem, Arizona; Rome, Georgia; Avondale, Arizona; and three new locations in Tucson, Arizona as well as Cartersville, Georgia; Owasso, Oklahoma; and Evanston, Illinois.
Earnings before interest, income taxes, depreciation and amortization (“EBITDA”)1 for the second quarter of 2010 totalled $3.5 million, or 6.6% of sales, compared to EBITDA adjusted for discontinued operations (“Adjusted EBITDA”)1 of $3.7 million, or 6.8% of sales, in the same period a year ago. Changes in the U.S. dollar negatively impacted EBITDA by $0.7 million. This decline as well as the impact of lower same-store sales, was almost entirely offset by lower operating costs and improvements in gross margin percentage.
For the three months ended June 30, 2010, net earnings after discontinued operations were $2.1 million or $0.176 per diluted unit and Class A common share, compared to net earnings of $2.1 million or $0.175 per diluted unit and Class A common share for the same period in 2009.
In the second quarter of 2010, the Fund generated adjusted distributable cash2 of $2.6 million, which includes adjustments for the collection of additional prepaid rebates, cash flow used in discontinued operations, proceeds on the sale of equipment, adjustments to reserves for working capital changes, and capital lease repayments. The Fund declared distributions of $0.9 million, representing a payout ratio of 35.1% for the quarter.
Six Months Ended June 30, 2010
Sales for the six months ended June 30, 2010 decreased by 9.6% to $107.0 million, compared to sales of $118.4 million for the six months ended June 30, 2009, after adjusting for the effect of discontinued operations. This decrease resulted from a lower U.S. dollar translation rate on sales generated from Boyd Group’s U.S. operations of $11.3 million and $4.6 million due to a 3.9% same-store sales decline, offset by sales generated from new collision repair start-ups of $4.5 million.
On a segmented basis, sales in Canada decreased by 7.8% to $35.4 million in the first half of 2010, compared to sales of $38.4 million a year ago. The decrease in sales was due entirely to same-store sales declines as a result of softer market conditions made worse by the carry-over impact of an extremely mild and dry winter, which continued to impact the second quarter.
Sales in the U.S. decreased by 10.5% to $71.6 million in the first half of 2010, from $80.0 million a year ago. The decrease resulted primarily from a lower U.S. dollar translation rate on sales generated from Boyd Group’s U.S. operations of $11.3 million. Excluding the impact of foreign currency translation, same-store sales in the U.S. decreased by $1.6 million or 2.0%, compared to the same period in the prior year. During the six-month period, $4.5 million of sales were generated from new locations in Glendale, Arizona; Anthem, Arizona; Rome, Georgia; Avondale, Arizona and three new locations in Tucson, Arizona as well as Cartersville, Georgia; Owasso, Oklahoma; and Evanston, Illinois.
Adjusted EBITDA1 for the six-month period ended June 30, 2010 decreased by 5.1% to $6.9 million, or 6.4% of sales, compared to Adjusted EBITDA1 of $7.3 million, or 6.2% of sales, in the same period a year ago. Changes in the U.S. dollar negatively impacted EBITDA by $1.0 million. This decline, as well as the impact of lower same-store sales, was mostly offset by lower operating costs and improvements in gross margin percentage.
For the six months ended June 30, 2010, net earnings from continuing operations were $4.2 million, or $0.362 per unit (basic) and $0.356 per unit (diluted), compared to net earnings of $4.3 million, or $0.362 per unit (basic) and $0.359 per unit (diluted), in the same period a year ago.
For the six months ended June 30, 2010, net earnings after discontinued operations were $4.0 million or $0.341 per unit (basic) and $0.335 per unit (diluted), compared to net earnings of $4.1 million or $0.348 per unit (basic) and $0.345 per unit (diluted), in the same period a year ago.
In the first half of 2010, the Fund generated adjusted distributable cash2 of $5.3 million, which includes adjustments for the collection of additional prepaid rebates, cash flow used in discontinued operations, proceeds on the sale of equipment, adjustments to reserves for working capital changes, and capital lease repayments. The Fund paid distributions of $1.8 million, representing a payout ratio of 33.2% for the period.
As at June 30, 2010, the Fund had total debt outstanding, net of cash, of $13.4 million, compared to $13.6 million at March 31, 2010, $16.7 million at December 31, 2009, $17.2 million at September 30, 2009 and $19.8 million at June 30, 2009. The change is due to reductions in bank indebtedness and the repayment of U.S. senior bank debt.
“We are very excited to have recently completed the acquisition of True2Form Collision Repair Centers, Inc., one of the largest multi-location collision repair companies in the United States with 37 locations in four states. As previously stated, the acquisition represents a unique strategic opportunity to expand our footprint, enhance our value proposition and accelerate our growth.”
“Despite our positive view on our industry positioning and opportunities as well as some sporadic signs of economic improvement, unemployment rates remain at high levels and our market conditions remain challenging. As such, until economic conditions stabilize and unemployment rates show steady and sustainable declines, we expect to continue seeing challenges in achieving same-store sales growth,” said Mr. Bulbuck. “Nonetheless, we believe that we have the management team, systems, experience and long-term market opportunity, along with a strong balance sheet, to continue to successfully grow our business. In fact, in addition to the True2Form acquisition, thus far in 2010 we have added four new locations in Tulsa, Oklahoma; Cartersville, Georgia; Evanston, Illinois as well as Las Vegas, Nevada and we are confident that we will achieve our unit growth expansion plan of adding eight to 10 locations in 2010,.”
“Our objective continues to be to gradually increase distributions over time. However, we are also 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 into 2011 despite any trust taxes that may be payable on distributions under the Tax Fairness Law,” Mr. Bulbuck added. “We will, therefore, continue our prudent approach in evaluating the appropriateness of distribution increases in the future.”
“Lastly, we would also like to again reiterate our plans for our structure with respect to the imminent 2011 Tax Fairness Law. At this time, the Fund does not intend to convert into a corporation. We believe that this decision is in the best interest of our unitholders for several reasons. First, we believe that the Fund will not achieve any net tax savings by converting. In fact, we are continuing to explore opportunities to utilize our current structure and significant base of U.S. operations to reduce tax paid on distributions. Second, we believe that the cost of conversion, which we estimate to be between $500,000 and $1 million, is not a prudent use of cash and is not justified by any perceived benefits from conversion for a fund of our size. Third, we believe that our taxable unitholders will benefit from the lower tax rate on distributions received, as we expect to be able to maintain our distributions, despite any trust tax that the Fund will incur. We would stress that there is no requirement for income trusts to convert into a corporation. However, we will continue to monitor the market and tax laws, and evaluate alternatives at the appropriate time if it becomes clear that a different structure would be in our unitholders’ best interest,” concluded Mr. Bulbuck.
On August 3, 2010, the Fund announced the completion of its acquisition of True2Form Collision Repair Centers, Inc. in the U.S.
On August 12, 2010, the Trustees of the Fund approved the eleventh consecutive quarterly increase in monthly distributions and dividends to $0.02875 per unit commencing October 2010, for unitholders and shareholders of record on September 30, 2010.
Q2 2010 Results Conference Call & Webcast
Management will hold a conference call on Friday, August 13, 2010, at 10:00 a.m. (ET) to review the Fund’s 2010 second 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, August 20, 2010, at midnight by calling 800-642-1687 or 416-849-0833, reference number 88041677.
(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 six-month periods ended June 30, 2010, which can be accessed via the SEDAR Web site (www.sedar.com).
About The Boyd Group Inc.
The Boyd Group Inc. is the largest operator of collision repair centres in Canada and among the largest 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
Caution concerning forward-looking statements
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 subsidiary 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.