EDMONTON, Nov. 6 /CNW/ -- AutoCanada Income Fund (the "Fund") (TSX: ACQ.UN) today announced financial results for the three-month period ended September 30, 2009.

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2009 Third Quarter Operating Results
-   Net earnings of $5.1 million
-   EBITDA of $6.7 million
-   Revenue of  $212.9 million
-   Gross profit of  $38.8 million
-   Same store revenue decreased by 3.9%
-   Same store gross profit decreased by 6.3%
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Third Quarter 2009 Summary
-   Adjusted distributable cash for the third quarter of 2009 decreased
by $1.7 million to $5.9 million from $7.6 million in 2008.
-   In the third quarter of 2009, the Fund generated net earnings of
$5.1 million or basic earnings per unit of $0.256, standardized
distributable cash of $0.463 per unit and adjusted distributable cash
of $0.297 per unit, and declared distributions of $nil per unit, for
a standardized payout ratio of 0.0% and an adjusted payout ratio of
0.0%.
-   Same store revenue decreased by $7.7 million and same store gross
profit decreased by $2.4 million in the third quarter of 2009,
compared to the results of the Fund for the same quarter in 2008.
-   Revenue from existing and new dealerships decreased by 1.8% to
$212.9 million in the third quarter of 2009 from the $216.7 million
in the same quarter in 2008.
-   Gross profit from existing and new dealerships decreased by 3.7% to
$38.8 million in the third quarter of 2009 from the $40.3 million in
the same quarter in 2008.
-   EBITDA decreased by 15.8% to $6.7 million in the third quarter of
2009 from the $8.0 million in the same quarter in 2008.
-   Net earnings increased to $5.1 million in the third quarter of 2009
from a $38.3 million loss in the same quarter in 2008.
-  Net earnings for the three months ended September 30, 2009, not
including the goodwill impairment charge and its related future
income tax recovery from the three month period ended
September 30, 2008, decreased by $1.6 million to $5.1 million from
$6.7 million.
-   Same store new vehicle unit sales decreased 1.7% in the third quarter
of 2009 as compared to the same quarter in 2008.
-  New vehicle unit sales in Canada decreased by 6.0% in the third
quarter of 2009 as compared to the same quarter in 2008.
-  New vehicles unit sales in British Columbia and Alberta (our
primary markets) decreased by 8.8% and 18.1% respectively in the
third quarter of 2009 as compared to the same quarter in 2009.
-   New vehicle units retailed in the third quarter of 2009 decreased by
9 units as compared to 2008. Used vehicle units retailed decreased by
125 units. Although sales volumes during the third quarter were down
slightly from the comparable period in 2008, EBITDA decreased by
15.8%. The Fund attributes the lower earnings, despite marginal
change in units retailed, to lower earnings in our finance and
insurance department. Tighter lending conditions due to the economic
downturn has negatively affected our finance and insurance revenue
per vehicle retailed, thus impacting our earnings.

In commenting on the results of the past quarter, Patrick Priestner, AutoCanada's Chief Executive Officer, noted that "Despite the prolonged economic downturn in Canada as well as the continued tightening of credit available to both business and consumers the Fund produced a very strong quarter and we are pleased with our results relative to the industry as a whole."

Mr. Priestner further noted that, "The Fund and the automotive retail industry still face significant challenges as a result of the decline in demand in Western Canada for new vehicles due to the global recession and credit crisis. Despite an industry-wide decline in retail sales, we are pleased that our relative market share has increased in most geographical markets in which we operate. As a result of the possibility that credit conditions will remain constrained for a protracted period as well as changes to the taxation of income trusts we have determined that it would be prudent to convert to a publicly traded corporation at the end of this year. By converting to a corporation a year early we can benefit from the lower tax rate that is available to corporations, retain cash and be in a much stronger position to execute our business plan and continue to grow our business which will add value for our unitholders."

Conversion to a Corporation

AutoCanada Income Fund is pleased to announce its plans to convert to a corporation (the "Reorganization") pursuant to a plan of arrangement transaction under the Business Corporations Act (Alberta). Pursuant to the Reorganization, holders of fund units ("Unitholders") of the Fund will receive common shares ("Common Shares") of a newly-formed corporation (AutoCanada Inc. "ACI") on a one-for-one basis (the "Exchange Ratio"). The Reorganization will result in ACI holding the assets and business operations previously held and operated by the Fund and its subsidiaries. All of the members of the Board of Trustees of the Fund and Board of Directors of AutoCanada GP Inc. will continue as directors of ACI and senior officers of the Fund will continue as directors of ACI. Also in the Reorganization, holders of exchangeable limited partnership units ("Exchangeable Units") of AutoCanada Limited Partnership (the "Partnership") will ultimately exchange their Exchangeable Units for Common Shares based on the Exchange Ratio. The Reorganization will result in ACI having approximately 19.9 million Common Shares issued and outstanding.

Since the October 31, 2006 announcement by the Federal government and subsequent legislation to impose income taxes on publicly traded income trusts and limited partnerships, the Fund's management and Board of Trustees have been continuously reviewing the Fund's strategic objectives and available options to ensure that the Fund's capital structure is efficient and that unitholder value is being maximized. Over the past year, management has carried out a more detailed analysis in relation to the growth opportunities and strategic direction for the business.

As a result of the analysis, the Board of Trustees of the Fund and the Board of Directors of AutoCanada GP Inc. have unanimously concluded that the proposed Reorganization best enables AutoCanada to execute its business and strategic plan and deliver strong growth and capital appreciation for unitholders of the Fund, and thus has unanimously resolved to recommend that unitholders of the Fund vote their Fund units and Exchangeable Units in favour of the Reorganization.

Officers and Directors of AutoCanada GP Inc. beneficially owning 46.89% of the issued and outstanding Fund units and Exchangeable Units of the Fund intend to vote their Fund units and Exchangeable Units in favour of the Reorganization. Given the diminished value of the income fund structure, management and the Board believe that the best opportunity for creating value is to reinvest a significant portion of overall funds from operations into the business and to focus on increasing overall earnings per share. At the same time, management and the Board recognize that many investors require or prefer an element of cash yield from their investment. By converting to a growth-orientated, dividend-paying corporation, management and the Board believe that AutoCanada will be best positioned to invest in attractive growth opportunities while at the same time potentially be in the position to provide income-orientated investors with an attractive cash yield through a dividend.

The Reorganization is subject to the receipt of all required regulatory, stock exchange and Court of Queen's Bench approvals as well as approval by at least 66 2/3% of the votes cast by Unitholders and the holders of Exchangeable Units present in person or by proxy at a duly convened special meeting (the "Unitholder Meeting") of securityholders of the Fund. It is anticipated that an information circular and proxy statement in connection with the Unitholder Meeting will be mailed to Unitholders and the holders of Exchangeable Units on or about November 18, 2009 and the Unitholders Meeting will be held on December 17, 2009. Subject to receiving all necessary approvals, closing of the Reorganization is expected to be on December 31, 2009.

Coinciding with the meeting to vote on the Reorganization, Unitholders will vote on amending the terms to the Partnership Agreement and the Option Plan. These items require amendment in order to facilitate, or as a result of the Reorganization.

The Reorganization has been structured to allow Unitholders resident in Canada to receive Common Shares on a tax-deferred basis.

Application will be made to list the public corporation's common shares on the Toronto Stock Exchange on a substitutional basis.

Gordon Barefoot, Chair of the Board of Trustees of AutoCanada Income Fund said, "We are undertaking this transaction to simplify the business structure, resulting in modest reductions in G&A, and position AutoCanada to pursue growth opportunities that should result in capital appreciation for securityholders. The income fund structure is a less desirable business organization for AutoCanada in the current market because the Fund is not paying distributions and the proposed corporate structure may allow for dividends to be declared and paid to securityholders in the future. The Board of Directors and management will continue to closely monitor the results of operations and our progress in achieving various business objectives for the balance 2009 and into 2010 and if we continue to meet these objectives we anticipate declaring, at an appropriate time, a dividend that would be competitive with other investment options that would be available to investors at that time."

Termination of a Special Committee

On May 13, 2009, the Fund announced the creation of a Special Committee of independent directors formed to review financing, restructuring and strategic alternatives at that time. Since this announcement, the Fund has been able to secure alternate floorplan financing for all owned and managed dealerships. In addition, the Fund recently refinanced its Non-Revolving Fixed Term Facility with Chrysler Financial Canada with a $20 million Revolving Loan from HSBC Bank Canada. The Fund confirms that the advance from HSBC Bank Canada was made on October 26, 2009 and the Chrysler Financial Canada facility was paid out in full. As a result of the significant progress made with respect to the Fund's financing and the proposed restructuring described above, the Board of Trustees has deemed the Special Committee to no longer be necessary.

Gordon Barefoot, Chair of the Special Committee stated, "We are pleased with management's progress with respect to financing. With the replacement of the Fund's floorplan and term financing, and the proposal to convert to a corporation, the Special Committee is satisfied that it has achieved its purpose. The Fund has developed a strategic plan to address the challenges faced earlier in the year and the Special Committee is satisfied with this plan."

Distributions to Unitholders

The Fund's policy is to distribute to Unitholders available cash provided by operations after cash required for capital expenditures, working capital reserves, growth of capital reserves and other reserves considered advisable by the Trustees of the Fund. The Board of Trustees approves all distributions and reviews the distribution levels on a periodic basis.

On February 13, 2009, in view of the continued market unpredictability, general economic deterioration both within the auto industry and generally, rising unemployment, and tight credit markets, the Board of Trustees had concluded that it was prudent to reduce monthly distribution from $0.0833 per unit ($1.00 per unit annually) to $0.0417 per unit ($0.50 per unit annually), commencing February 2009, in order to provide additional financial flexibility.

On March 14, 2009, in response to the continued deteriorating retail credit markets and continued economic decline, the Board of Trustees determined it would be prudent to temporarily suspend distributions until such time as market conditions stabilize.

The following table summarizes the distributions declared by the Fund for the period from January 1, 2009 to September 30, 2009.

(In thousands of dollars)
Exchangeable
Fund Units        Units           Total
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Record date  Payment date  Declared  Paid  Declared  Paid  Declared  Paid
$       $       $       $       $       $
January 30,   February 16,
2009           2009     881     881     775     775   1,656   1,656
February 27,  March 16,
2009       2009        441     441     388     388     829     829
N/A(1)        N/A(1)            -       -       -       -       -       -
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1,322   1,322   1,163   1,163   2,485   2,485
(1) No further distributions since those disclosed above have been
declared as at the date of this MD&A. No record date or payment date
is applicable.
Distributions are paid on Fund Units and Exchangeable Units. As of
September 30, 2009 the following numbers of units were outstanding:
Fund Units                                                    10,573,430
Exchangeable Units                                             9,307,500
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19,880,930
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During the three-month and nine-month periods ended September 30, 2009, the Fund declared distributions of $0.000 and $0.125 respectively per Fund Unit and Exchangeable Unit to Unitholders. The Fund reviews its distribution policy on a periodic basis.

SELECTED QUARTERLY FINANCIAL INFORMATION AND RESULTS FROM OPERATIONS

The following table shows the unaudited results of the Fund for each of the eight most recently completed quarters.