AutoCanada : 2024 Annual Information Form

Published: 2025-04-01 12:20:07 ET ACQ.TO

2024

Annual Information Form

Table of Contents

GENERAL DISCLOSURE MATTERS

Certain References and Glossary

Date of Information

Forward Looking Information Documents Incorporated by Reference Non-GAAP and Other Financial Measures

CORPORATE STRUCTURE

Intercorporate Relationships

OVERVIEW AND DEVELOPMENT OF OUR BUSINESS

466

Three-Year History7

Overview 10

Sources of Revenue 11

Locations 15 Acquisitions, Divestitures, Investments and

Relocations 17

Competition 22

Inventories 22

Automobile Dealership Franchise Agreements 24

Financing 26

Marketing 29

Management Information Systems 30

Employees 30

Our Intellectual Property and Proprietary

Rights 30

Regulatory Matters and Policies 31

RISK FACTORS 33

Risks Related to our Business and the Industry

in which we Operate 33

CAPITAL STRUCTURE 47

AutoCanada Inc. 47

CREDIT RATINGS 48

DIVIDENDS/DISTRIBUTIONS 49

Dividend Policy 49

Historical Distributions 49

MARKET FOR SECURITIES 50

Trading Price and Volume 50

Prior Sales 50

DIRECTORS AND OFFICERS 51

Corporate Cease Trade Orders or Bankruptcies 52

Personal Bankruptcies 52

Conflicts of Interest 52

Charter of the Audit Committee 53

Composition of the Audit Committee 53

Relevant Education and Experience 53

External Auditor Service Fees (by category) 54

LEGAL PROCEEDINGS AND

REGULATORY ACTIONS 55

INTEREST OF MANAGEMENT AND

OTHERS IN MATERIAL

TRANSACTIONS 55

TRANSFER AGENT AND REGISTRAR 55

MATERIAL CONTRACTS 55

INTEREST OF EXPERTS 56

ADDITIONAL INFORMATION 56

SCHEDULE A - GLOSSARY OF TERMS 57

SCHEDULE B - AUDIT COMMITTEE

CHARTER 59

General Disclosure Matters

Certain References and Glossary

In this Annual Information Form ("AIF"), unless the context otherwise requires, references to "AutoCanada", "ACI", the "Company", "we", "us", "our" or similar terms refer to AutoCanada Inc. together with its subsidiaries.

The "Glossary of Terms" attached as Schedule A to this AIF contains definitions of terms used in this AIF.

Presentation of Continuing Operations and Discontinued Operation

As at December 31, 2024, the Company was engaged in an active program to locate buyers for its retail automobile dealerships in its U.S. Operations segment. The Company's retail automobile dealerships in its U.S. Operations segment represent a geographical area of the Company's operations, therefore, its results have been presented as a discontinued operation.

The Company's retail automobile dealerships and related businesses in its Canadian Operations and its collision repair services in its U.S. Operations are presented herein as continuing operations. The Company's retail automobile dealerships in its U.S. Operations have been classified and presented as a discontinued operation. Refer to Section 5 Acquisitions, Divestitures, and Other Recent Developments in the Annual MD&A and Note 18 in the Annual Financial Statements for further information.

Date of Information

The information in this AIF is presented as of December 31, 2024, unless otherwise indicated.

Forward Looking Information

Certain statements contained in this AIF are forward-looking statements and information (collectively "forward-looking statements"), within the meaning of the applicable Canadian securities legislation. We hereby provide cautionary statements identifying important factors that could cause actual results to differ materially from those projected in these forward-looking statements. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions, or future events or performance (often, but not always, through the use of words or phrases such as "will likely result", "are expected to", "will continue", "is anticipated", "projection", "vision", "goals", "objective", "target", "schedules", "outlook", "anticipate", "expect", "estimate", "could", "should", "plan", "seek", "may", "intend", "likely", "will", "believe", "shall" and similar expressions) and the financial outlook with respect to the transformation plan are not historical facts and are forward-looking and may involve estimates and assumptions and are subject to risks, uncertainties and other factors some of which are beyond our control and difficult to predict.

Accordingly, these factors could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements and financial outlook. Therefore, any such forward-looking statements and financial outlook are qualified in their entirety by reference to the factors discussed throughout this document.

In particular, material forward-looking statements and financial outlook in this AIF include, but are not limited to, statements on the following:

● intentions for future growth and its effect on financial operations;

● expectations regarding the future of the Canadian and U.S. automotive retail industry and consumer habits;

● expectations that an extended manufacturer's warranty will increase our potential to retain pre-owned vehicle purchasers as future parts and service customers;

● expectations regarding the accuracy of information from internal research, independent industry publications, government publications and reports by market research firms or other published independent sources;

● statements regarding the impact of cybersecurity incidents or other privacy incidents;

● expectations regarding macroeconomic factors including fuel prices, recessions, and interest rates;

● expectations regarding the imposition of tariffs and the resulting consequences;

● intentions to improve our used vehicle trade-in valuation process;

● expectations to improve used vehicle inventory turnover;

● intentions surrounding our incentive and compensation plans;

● future focus of marketing efforts;

● expectations of the effect of credit conditions on our future operations;

● expectations that a higher percentage of all repair work will be performed at dealerships;

● expectations on the retention of long-term customers;

● anticipation that lease options will be exercised for dealership land and buildings;

● statements regarding the acquisition of franchises in which we currently do not have a relationship;

● statements regarding the amount of time it takes for acquisitions and open points to achieve normalized performance;

● statements regarding our competitive strengths and their effect on operations in the future;

● expectations that our supply of vehicles will meet the demand in our markets;

● statements regarding acquisition opportunities and AutoCanada's acquisition plans;

● statements regarding the timing, cost, and structure of dealership acquisitions;

● statements regarding the timing and estimated construction costs of dealership relocations and reimagings;

● statements regarding the timing of open point franchises commencing operations, estimated construction costs, and sales targets;

● the impact of and estimates related to dealership real estate relocations and purchases and its impact on liquidity, financial performance and the Company's capital requirements;

● guidance with respect to the number of future acquisitions and open point opportunities;

● targets for inventory turnover and inventory management;

● targets for used vehicle sales and the used-to-new retail ratio and expectations with respect to the benefit of used vehicle sales;

● targets relating to our net debt leverage ratio;

● potential future impact of provisions in our credit agreements;

● the future impact of internet and e-commerce on the Company;

● anticipated compliance with governmental regulations and assumptions with respect to changes in regulations;

● statements we have made regarding future dividends of the Company including the effect of acquisitions on earnings of the Company and the payment of dividends;

● the impact of currency fluctuations on dealerships' performance;

● the trend of more expansive and stricter environmental legislation and regulations being likely to continue;

● statements regarding future environmental liabilities;

● expectations regarding seasonal variations in revenues;

● statements regarding S&P issuer credit ratings;

● expectations to incur additional administrative and legal costs as the Company adds additional dealerships;

● the impact of working capital requirements and its impact on future liquidity;

● the anticipated benefits of initiatives for the Company, including the initiatives that form part of Project Elevate and the Company's strategic transformation plan, and the impact of these initiatives on the Company's results of operations and leverage;

● expectations relating to the strategy, development and milestones of the Company's Used Digital Division, Service Bay Occupancy and Business Development Centre, Parts, Service and Collision Repair department, including the Direct Repair Program, collision centres and the Company's wholesale initiative;

● intentions regarding optimization of the Company's finance and insurance segment; and

● expectations regarding the impact of the Ukrainian and Middle East conflicts and the impact of global pandemics, and extreme weather events on vehicle production, shipping and parts shortages.

Forward-looking statements and financial outlook provide information about management's expectations and plans for the future and may not be appropriate for other purposes. Forward looking statements and financial outlook are based on various assumptions, and expectations that AutoCanada believes are reasonable in the circumstances. No assurance can be given that these assumptions and expectations will prove correct. Those assumptions and expectations are based on information currently available to AutoCanada, including information obtained from third-party consultants and other third-party sources, and the historic performance of AutoCanada's businesses. AutoCanada cautions that the assumptions used to prepare such forward-looking statements and financial outlook could prove to be incorrect or inaccurate.The following list of assumptions is not exhaustive. The material factors and assumptions used to develop the forward-looking statements and financial outlook include, but are not limited to, the following:

● no significant adverse changes to the automotive market, competitive conditions, the supply and demand of vehicles, parts and service, and finance and insurance products;

● stability of general domestic economic, market, and business conditions;

● no significant disruption of our operations such as may result from harsh weather, natural disaster, accident, civil unrest, epidemic, pandemic or other calamitous event;

● stability of our supply chain;

● demand for our products and our cost of operations;

● assumptions regarding stability of our automobile manufacturers and our platform agreements with automobile manufacturers;

● no significant unexpected technological events or commercial difficulties that adversely affect our operations, including any cybersecurity incidents;

● the market's ability to continue to adapt to the impacts of the Ukrainian and Middle East conflicts;

● the development of the Company's Used Digital Retail initiative and the future operating results of the Company's Used Digital Division;

● continuing availability of economical capital resources;

● staffing optimization, improved store efficiencies and productivity gains, and consolidation of operations will decrease labour and overhead costs within the transformation plan;

● our ability to maintain our credit rating and achieve our performance targets; and

● no significant construction delays that may adversely affect the timing of dealership relocations and renovations.

By their very nature, forward-looking statements and financial outlook involve numerous assumptions, risks and uncertainties, both general and specific. Should one or more of these risks and uncertainties materialize or should underlying assumptions prove incorrect, as many important factors are beyond our control, AutoCanada's actual performance and financial results may vary materially from those estimates and expectations contemplated, expressed or implied in the forward-looking statements and financial outlook. The forward-looking statements and financial outlook are subject, but not limited to, the following risks and uncertainties: The risks, uncertainties and other factors, many of which are beyond our control, that could influence actual results include, but are not limited to:

● levels of unemployment in our markets and other macroeconomic factors including fuel prices, recessions, and interest rates;

● a sustained downturn in consumer demand and economic conditions in key geographic markets;

● the impact of global pandemics, technological failures, fires, extreme weather conditions, including any impacts on the supply of vehicles, general economic conditions and local operations at the Company's dealerships or offices;

● successful execution of Project Elevate and the transformation plan;

● the impact of data protection breaches and cyber-attacks;

● rapid appreciation or depreciation of the Canadian dollar relative to the U.S. dollar;

● the ability to import vehicles and parts that are manufactured outside of Canada, including as a result of any instability to our supply chain or the imposition of any tariffs, duties or other trade restrictions;

● changes in consumer protection legislation impacting pricing, returns, warranties, data privacy, or other other compliance matters impacting automotive retailers or OEMs;

● adverse conditions affecting one or more automobile manufacturers, including but not limited to bankruptcies/insolvency proceedings, recalls or class actions;

● the ability of consumers to access automotive loans and leases;

● competitive actions of other companies and generally within the automotive industry;

● our dependence on sales of new and used vehicles to achieve sustained profitability;

● our OEMs ability to provide a desirable mix of popular new vehicles;

● our OEMs ability to produce cost-effective new vehicles under new laws and regulations designed to address climate change concerns;

● the impact of the conflicts in Ukraine and in the Middle East on, among others, vehicle production, parts shortages and shipping;

● the ability to continue financing inventory under similar interest rates;

● our OEMs ability to continue to provide manufacturer incentive programs;

● the loss of key personnel and limited management and personnel resources;

● the ability to refinance or renew credit agreements in the future;

● the ability to renew dealership properties and stand-alone collision centres leases in the future;

● changes in applicable environmental, taxation and other laws and regulations as well as how such laws and regulations are interpreted and enforced;

● fluctuations in foreign exchange rates and tax rates;

● fluctuating general economic cycles, consumer confidence, discretionary spending, fuel prices, interest rates and credit availability;

● risks inherent in the ability to generate sufficient cash flow from operations to meet current and future obligations;

● overruns in one-time restructuring costs incurred in connection with the transformation plan;

● the impact of manufacturers who sell vehicles direct-to-consumers;

● the impact of all-electric vehicles, autonomous vehicles, and ride-sharing services;

● the ability to renew automobile dealership franchise agreements;

● the ability to obtain OEM approvals for acquisitions, and the uncertainty related to the successful integration of such acquisitions; and

● the other risk factors set forth herein under the heading "Risk Factors" and elsewhere in this AIF and the documents incorporated by reference herein.

When relying on our forward-looking statements and financial outlook to make decisions with respect to AutoCanada, investors and others should carefully consider the preceding factors, other uncertainties and potential events. Any forward-looking statements and financial outlook are provided as of the date of this document and, except as required by law, AutoCanada does not undertake to update or revise such statements to reflect new information, subsequent or otherwise. For the reasons set forth above, investors should not place undue reliance on forward-looking statements or financial outlook.

Documents Incorporated by Reference

Information has been incorporated by reference in this AIF from documents filed with securities commissions or similar authorities in Canada. Copies of the documents incorporated herein by reference may be obtained on request without charge from the Chief Financial Officer of the Company at 200-15511 123 Avenue NW, Edmonton, Alberta T5V 0C3, telephone: (780) 732-3157. In addition, copies of documents incorporated by reference may be obtained from the securities commissions or similar authorities in Canada through the System for Electronic Document Analysis and Retrieval ("SEDAR+") website atwww.sedarplus.ca.

The following documents of AutoCanada are specifically incorporated by reference in this AIF:

(1) the Company's audited consolidated financial statements and the notes thereto as at and for the years ended December 31, 2024 and 2023, and the auditor's report thereon (the "Annual Financial Statements"); and

(2) the management's discussion and analysis of the financial condition and results of operations of the Company for the year ended December 31, 2024 (the "Annual MD&A").

Documents referenced in any of the documents incorporated by reference in this AIF but not expressly incorporated by reference therein or herein are not incorporated by reference in this AIF.

Non-GAAP and Other Financial Measures

Cautionary Note Regarding Non-GAAP Measures

Adjusted EBITDA is not an earnings measure recognized by GAAP and does not have a standardized meaning prescribed by GAAP. Investors are cautioned that this non-GAAP measure should not replace net earnings or loss (as determined in accordance with GAAP) as an indicator of the Company's performance, of its cash flows from operating, investing and financing activities, or as a measure of its liquidity and cash flows. The Company's methods of calculating the referenced non-GAAP measure may differ from the methods used by other issuers. Therefore, this measure may not be comparable to similar measures presented by other issuers. This measure is identified and described under section "13. Non-GAAP and Other Financial Measures" of the Annual MD&A. Refer to section "14. Non-GAAP and Other Financial Measure Reconciliations" of the Annual MD&A for reconciliations of non-GAAP and other financial measures.

Supplementary Financial Measures

This AIF contains "SUPPLEMENTARY FINANCIAL MEASURES". See Section "13. Non-GAAP and Other Financial Measures" of the Annual MD&A for further information regarding these measures.

Reader Advisory

This AIF typically refers to the operating results for the year ended December 31, 2024 of the Company and compares these to the operating results of the Company for previous years. All amounts presented in this AIF are reported in Canadian dollars and have been rounded to the nearest thousand dollars, unless otherwise stated.

Corporate Structure

AutoCanada Inc. was incorporated under the Canada Business Corporations Act ("CBCA") on October 29, 2009. ACI amalgamated with its wholly-owned subsidiary, AutoCanada GP Inc., on January 1, 2011 and continued under the name AutoCanada Inc.

The principal and head office of ACI is located at 200 - 15511 123 Avenue NW, Edmonton, Alberta T5V 0C3. The registered office of ACI is located at 1900, 520 3rd Avenue SW, Calgary, Alberta T2P 0R3.

Intercorporate Relationships

The significant subsidiaries of ACI are AutoCanada Holdings Inc., a wholly-owned subsidiary incorporated under the CBCA, and each of the Holding LPs and Dealer LPs. AutoCanada Holdings Inc. was incorporated under the CBCA on October 29, 2009.

Each of the Holding LPs and Dealer LPs is a limited partnership formed under the laws of the Province of Manitoba. Each Dealer LP had been formed to acquire the assets and undertaking relating to one of the franchised automobile dealerships. Each of the Holdings GPs and the Dealer GPs were incorporated under the CBCA.

The following chart illustrates our corporate structure as at December 31, 2024:

Overview and Development of Our Business

In 2001, the Company's predecessor entity (the "Fund") began to implement a strategy of becoming a national multi-location automobile dealership group in Canada, a strategy that had been successfully executed by that time by owners of several franchised automobile dealers in the United States. In 2006, the Fund completed an IPO on the TSX and continued to execute its business strategy.

Three-Year History

The following is a three-year business history of the Company's significant events, including acquisitions, dispositions, Open Points, and debt and equity offerings:

● January 2022 - S&P Global Ratings ("S&P") issued a research update and raised both the issuer credit rating and the rating of the Company's senior unsecured notes to 'B+'

● February 2022 - Entered into the first amending agreement which amended the third amended and restated credit agreement ("Third ARCA").

● February 2022 - Issued $350 million of Senior Unsecured Notes at 5.75%, due February 7, 2029, with the proceeds used to fund the redemption of the outstanding $250 million 8.75% senior notes due 2025, to reduce the outstanding balance under the Third ARCA and for general corporate purposes including acquisitions

● March 2022 - Michael Rawluk departed as President, Canadian Operations

● April 2022 - Jeff Thorpe joined as President, Canadian Operations

● May 2022 - Acquired substantially all of the assets used in or relating to the Audi Windsor and Porsche Centre London dealerships (Windsor and London, Ontario, respectively)

● May 2022 - Entered into an arrangement with the Bank of Nova Scotia to provide non-recourse mortgage financing for previously purchased properties

● May 2022 - Completed a normal course issuer bid, purchasing and cancelling 1,730,321 shares for an aggregate purchase price of $57 million over the preceding 12 months

● May 2022 - Maryann Keller retired from the Board of Directors

● May 2022 - Rhonda English was elected to the Board of Directors

● June 2022 - Executed $32 million of non-recourse mortgage financing with the Bank of Nova Scotia for previously purchased properties in Maple Ridge, British Columbia, and two locations in Ontario (London and Windsor)

● June 2022 - Acquired 100% of the shares in Burwell Auto Body Ltd., a luxury-brand focused collision centre located in London, Ontario

● August 2022 - Acquired 100% of the shares of Kelleher Ford Dealership and Collision Centre, a new and used vehicle Ford dealership and collision centre located in Brandon, Manitoba

● August 2022 - Acquired 100% of the shares of Velocity Auto Body Inc., a luxury-brand focused collision repair facility located in Markham, Ontario

● August 2022 - Completed a substantial issuer bid, purchasing and cancelling 1,159,707 shares for an aggregate purchase price of $33 million

● September 2022 - Acquired 100% of the shares of Auto Gallery of Winnipeg Inc., an independent used vehicle dealership located in Winnipeg, Manitoba

● September 2022 - Acquired 100% of the shares of Northern Auto Auctions of Canada Inc., an entity that operates North Toronto Auction, a fee-based used vehicle auction business, serving dealers and consumers located in Innisfil, Ontario

● October 2022 - Acquired 100% of the shares of Kavia Auto Body Inc., a collision centre located in Saskatoon, Saskatchewan

● November 2022 - Acquired 100% of the shares of Excellence Auto Collision Limited, two collision centres located in Scarborough, Ontario and Toronto, Ontario

● November 2022 - Announced the retirement of Mike Borys from the role of Chief Financial Officer

● December 2022 - Acquired substantially all of the assets used in or relating to the Sterling Honda dealership located in Hamilton, Ontario

● December 2022 - Completed a substantial issuer bid, purchasing and cancelling 1,851,851 shares for an aggregate purchase price of $50 million

● December 2022 - Announced that Azim Lalani will be appointed as AutoCanada's new Chief Financial Officer, effective in the first quarter of 2023

● December 2022 - Received TSX approval for renewal of its normal course issuer bid

● December 2022 - Entered into the second amending agreement, which amended the Third ARCA, and executed an accordion feature to increase its revolving credit limit by $50 million to $275 million from $225 million

● January 2023 - S&P issued a research update where the Company's Issuer Credit Rating remains unchanged at 'B+'

● February 2023 - The Company entered into the third amending agreement, which amended the Third ARCA, and amended and extended its existing credit facility to increase its total aggregate bank facilities to $1.6 billion (the "Existing Credit Facility"). This included increasing the Company's revolving credit limit to $375 million from $275 million. The Company maintained a three-year tenor by extending the maturity date to April 14, 2026

● February 2023 - Acquired 100% of the shares of 5121175 Manitoba Ltd. ("DCCHail"), a paintless dent repair business located in Calgary, Alberta. DCCHail operates with a national presence and specializes in the insurance claim management process and repair of hail damaged vehicles

● March 2023 - The Company announced the continuation of Kijiji's role as the Company's preferred online marketplace partner in Canada, as well as the integration of consumer solutions developed by the Company's Used Digital Division on Kijiji, including a solution to offer F&I products as well as an instant cash offer to Kijiji users

● April 2023 - Acquired substantially all of the assets of Premier Chevrolet Cadillac Buick GMC dealership and collision centre located in Windsor, Ontario

● May 2023 - Acquired 100% of the shares of London Auto Collision, a collision centre located in London, Ontario

● June 2023 - S&P issued a research update where the Company's Issuer Credit Rating remained unchanged at 'B+'

● September 2023 - The Company and CanadaOne Auto agreed to resolve their legal proceedings that were commenced in 2019. As part of this resolution, AutoCanada agreed to sell to CanadaOne Auto properties on which two of CanadaOne Auto's dealerships are located, and CanadaOne Auto agreed to amend the leases for two AutoCanada dealerships located on properties owned by CanadaOne Auto

● September 2023 - Announced that Jeff Thorpe, who joined the Company as President, Canadian Operations in April 2022, will have responsibility for all operations in North America as President, North American Operations and Brian Feldman, who joined as Senior Vice President, Canadian Operations and Disruptive Technologies in April 2022, was promoted to Chief Operating Officer of the Company

● October 2023 - Drew Forret joined the Company as Chief Administrative and Transformation Officer

● November 2023 - Received approval to open a Porsche Classic & Service Centre in Windsor, Ontario

● December 2023 - The Company announced the investment by iA Financial Group of $25 million for a 10% equity interest in AutoCanada's new business unit that will sell finance, insurance and warranty products to buyers of private owner-sold vehicles on Kijiji's online marketplaces (the "Online C2C F&I Business"). AutoCanada also announced the purchase of the minority 19.1% interest in its Used Digital Division that is owned by AutoCanada UD LP ("UDLP") from Paul Antony, the Executive Chair of the Company, and others for $23.9 million in cash, funded from the proceeds of the iA Financial Group investment, and $7.5 million in share units issuable to Paul Antony

● February 2024 - Entered into a $75 million interest rate swap with a fixed one-month Canadian Dollar Offered Rate ("CDOR") of 3.77%

● February 2024 - Completed the sale of two properties located in British Columbia and Alberta

● March 2024 - The newly built open point dealership, Maple Ridge GM, located in Maple Ridge, B.C., commenced operations

● April 2024 - Entered into an amended and restated credit agreement that matures on April 22, 2027 (the "Fourth ARCA"), which amended and restated the Third ARCA. The Fourth ARCA created a new $25 million capital expenditure term facility and a corresponding $25 million accordion facility, increased aggregate bank facilities from $1.610 billion to $1.635 billion with no changes to the revolving, wholesale flooring, and wholesale leasing facilities, included administrative enhancements to the Company's ability to floor more used vehicles, and transitioned from CDOR to the Canadian Overnight Repo Rate Average ("CORRA")

● May 2024 - Completed the sale of specific land and building in Alberta

● May 2024 - Dennis DesRosiers and Lee Matheson retired from the Board of Directors

● May 2024 - Steve Carlisle and Christopher Harris were elected to the Board of Directors

Disclaimer

AutoCanada Inc. published this content on April 01, 2025, and is solely responsible for the information contained herein. Distributed via , unedited and unaltered, on April 01, 2025 at 16:19 UTC.