Uni-Sélect Inc.
TSX : UNS

Uni-Sélect Inc.

August 05, 2008 12:30 ET

Uni-Select Inc.: Sales Increased By 6.2% and Net Earnings Increased by 8.7% in the Second Quarter of 2008

BOUCHERVILLE, QUEBEC--(Marketwire - Aug. 5, 2008) - Uni-Select Inc. (TSX:UNS) reported sales of $332,631,000 in the second quarter of 2008, an increase of 6.2% compared to sales of $313,257,000 in 2007. The increase in sales for the Company is primarily due to the various acquisitions completed in recent quarters partially offset by the unfavorable US exchange rate compared to the Canadian dollar. The net earnings increased to $12,689,000 in the second quarter of 2008 or $0.64 per share compared to $11,675,000 or $0.59 per share last year. Excluding the impact of the exchange rate, sales for the Company would have increased 10.3% and earnings would have been $0.67 per share for the quarter, an increase of 13.6%.

For the first six months of 2008, sales were $614,329,000, an increase of $27,907,000 or 4.8% compared to the same period last year. The net earnings reached $18,750,000 or $0.95 per share compared to the net earnings of $17,503,000 or $0.89 per share attained in the first six months of 2007, an increase of 6.7%.


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2ND QUARTER 1ST SEMESTER
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(in millions except earnings per share) 2008 2007 2008 2007
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Sales 332.6 313.3 614.3 586.4
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Net earnings 12.7 11.7 18.7 17.5
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Earnings per share 0.64 0.59 0.95 0.89
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Sales for Automotive Group USA reached $168,181,000 in the second quarter compared to $158,813,000 in the second quarter of 2007. The acquisitions completed in recent quarters contributed $27,464,000 to the increase in sales of the second quarter; however, this increase was partially compensated by the impact of the variation in the exchange rate. Excluding the negative impact of the exchange rate, sales for the Group would have increased by 12.6%. The operating margin for the Group improved from 6.6% in the second quarter of 2007 to 7.2% this quarter as a result of continued improvement programs on margins and costs combined with the impact of recent acquisitions. For the first six months of 2008, sales were $318,100,000, an increase of 3.5% compared to the same period last year. The operating margin improved from 6.0% to 6.7% in 2008.

Automotive Group Canada reported an increase in sales of 7.3% in the second quarter of 2008 to reach $149,504,000 compared to $139,385,000 in the second quarter of 2007. The acquisitions completed in recent quarters contributed $13,560,000 to the increase in sales for the quarter. The operating margin of the Group was 8.7% compared to 9.5% in the second quarter last year. The economic slowdown has had an impact on product demand and contribution to earnings in Canada. For the first six months of 2008, sales were $268,269,000, an increase of 7.2% compared to the same period last year. The operating margin reached 7.2% in the first six months of the year compared to 7.9% in 2007.

Sales for the Heavy Duty Group decreased 0.8% in the second quarter of 2008 to reach $14,946,000 compared to $15,059,000 in 2007. The operating margin of the Group was negative at (3.8%) in the second quarter of 2008 compared to (4.4%) last year, primarily due to the decrease in sales. For the first six months of 2008, sales were $27,960,000, a decrease of 3.1% compared to the same period last year. The operating margin was negative at (6.0%) a slight improvement compared to (6.3%) in the first six months of 2007.

"Considering the current economic conditions in North America, we are pleased with the general performance of the Company during this quarter" said Mr. Richard G. Roy, President and Chief Executive Officer of Uni-Select. "The recent acquisitions contributed to a large extent to our improved quarterly results. The continued improvement, integration and reorganization programs put in place in 2007 should continue to improve our margins and our profitability during the next six months of 2008. We continue to seek expansion projects in Canada as well as in the United States. The strength of the Canadian dollar compared to the US dollar facilitates this expansion. The weakened demand in North America for automotive parts noted in the first quarter which was likely due to the increase in fuel prices. However, we believe that consumers should adapt to this situation."

Finally, the Board of Directors of Uni-Select Inc. declared a quarterly dividend of $0.1075 per common share payable on October 21, 2008 to shareholders of record as at September 30, 2008.

Uni-Select is Canada's second largest distributor of automotive replacement parts, equipment, tools and accessories and, through Uni-Select USA, Inc., the Company also provides services to customers in the United States where it is the 7th largest distributor. Its subsidiary, Palmar Inc., sells replacement parts, tools and accessories for heavy-duty vehicles and wheels in Canada. The Uni-Select Network includes over 2,000 independent jobbers and services over 3,100 points of sale in North America. Uni-Select is headquartered in Montreal. Uni-Select shares (UNS) are traded on the TMX.

Certain statements made in this press release contain forward-looking statements which, by their very nature, include risks and uncertainties, such that actual results could differ from those indicated in those forward-looking statements. For additional information with respect to the risks and uncertainties, refer to the Annual Report filed by Uni-Select and available on SEDAR. Unless required to do so pursuant to applicable securities legislation, Uni-Select assumes no obligation as to the updating or revision of the forward-looking statements as a result of new information, future events or other changes.



CONSOLIDATED EARNINGS
THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 2008 AND 2007
(in thousands of dollars, except earnings per share, unaudited)

2nd QUARTER 6 MONTHS
2008 2007 2008 2007
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$ $ $ $
SALES 332,631 313 257 614,329 586,422
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Earnings before the
following items 24,452 23 138 38,984 36,540
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Interest (Note 4) 1,591 1 618 3,490 2,955
Amortization (Note 4) 2,679 2 364 5,375 4,640
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4,270 3 982 8,865 7,595
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Earnings before income taxes
and non-controlling interest 20,182 19,156 30,119 28,945
Income taxes
Current 6,686 7,658 9,488 11,124
Future (104) (1,002) 291 (1,120)
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6,582 6,656 9,779 10,004
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Earnings before
non-controlling interest 13,600 12,500 20,340 18,941
Non-controlling interest 911 825 1,590 1,438
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Net earnings 12,689 11,675 18,750 17,503
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Basic earnings and diluted
earnings per share (Note 5) 0.64 0.59 0.95 0.89
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Number of issued and
outstanding shares 19,727,958 19,736,558 19,727,958 19,736,558
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The accompanying notes are an integral part of the interim consolidated
financial statements.



CONSOLIDATED RETAINED EARNINGS
THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 2008 AND 2007
(in thousands of dollars, unaudited)
6 MONTHS
2008 2007
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$ $
Balance, beginning of period 287,712 255,355
Net earnings 18,750 17,503
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306,462 272,858
Redemption of common shares(a) 176 -
Dividends 4,243 4,239
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Balance, end of period 302,043 268,619
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(a) During the period, the Company redeemed 8,600 common shares
for a cash consideration of $197 including a share redemption
premium of $176.



CONSOLIDATED COMPREHENSIVE INCOME
THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 2008 AND 2007
(in thousands of dollars, unaudited)

2nd QUARTER 6 MONTHS
2008 2007 2008 2007
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$ $ $ $
Net earnings 12,689 11,675 18,750 17,503
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Other comprehensive income:

Unrealized gains (losses) on
derivative financial instruments
designated as cash flow hedges,
net of income taxes of ($653)
and $6 for the three month and
the six-month periods respectively 1,401 - (13) -

Reclassification of realized gains
(losses) to net earnings on
derivative financial instruments
designated as cash flow hedges,
net of income taxes of ($46) and
($67) for the three-month and the
six-month periods respectively
($22 and $42 in 2007) 99 (46) 145 (89)

Unrealized gains (losses) on
translating financial statements
of self sustaining foreign
operations (1,261) (9,202) 4,569 (10,439)
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Other comprehensive income 239 (9,248) 4,701 (10,528)
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Comprehensive income 12,928 2,427 23,451 6,975
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The accompanying notes are an integral part of the interim consolidated
financial statements.



CONSOLIDATED CASH FLOWS
THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 2008 AND 2007
(in thousands of dollars, except dividends paid per share, unaudited)

2nd QUARTER 6 MONTHS
2008 2007 2008 2007
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$ $ $ $
OPERATING ACTIVITIES
Net earnings 12,689 11,675 18,750 17,503
Non-cash items
Amortization 2,679 2,364 5,375 4,640
Amortization of deferred gain
on a sale-leaseback arrangement (54) (52) (108) (65)
Future income taxes (104) (1,002) 291 (1,120)
Non-controlling interest 911 825 1,590 1,438
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16,121 13,810 25,898 22,396

Changes in working capital items 12,839 21,475 2,917 75
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CASH FLOWS FROM OPERATING
ACTIVITIES 28,960 35,285 28,815 22,471
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INVESTING ACTIVITIES
Temporary investments - 6,897 - 6,897
Business acquisitions (Note 6) (11,228) (12,459) (29,625) (16,056)
Non-controlling interest - (178) - (178)
Investments (325) - (325) -
Advances to joint ventures - -
Advances to merchant members (1,324) (511) (2,013) (1,147)
Receipts on advances to merchant
members 1,766 902 2,331 1,857
Fixed assets (3,798) (2,332) (6,166) (3,987)
Disposal of fixed assets 125 2,104 176 7,556
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CASH FLOWS FROM
INVESTING ACTIVITIES (14,784) (5,577) (35,622) (5,058)
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FINANCING ACTIVITIES
Bank indebtedness (25,252) (27,847) (1,257) (13,888)
Balance of purchase price 337 (505) - (898)
Financing costs - - (414) -
Long-term debt 13,617 1,346 13,628 1,818
Repayment of long-term debt (907) (778) (972) (1,486)
Merchant members' deposits in
guarantee fund 167 (25) 161 (314)
Issuance of shares - 161 - 528
Share redemption (197) - (197) -
Dividends paid (2,121) (2,119) (4,243) (4,089)
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CASH FLOWS FROM
FINANCING ACTIVITIES (14,356) (29,767) 6,706 (18,329)
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Decrease in cash and cash
equivalents (180) (59) (101) (916)
Cash and cash equivalents,
beginning of period 678 273 599 1,130
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Cash and cash equivalents,
end of period 498 214 498 214
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Dividends paid per share 0.108 0.108 0.215 0.208
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The accompanying notes are an integral part of the interim consolidated
financial statements.



CONSOLIDATED BALANCE SHEETS
JUNE 30, 2008 AND 2007 AND DECEMBER 31, 2007
(in thousands of dollars, unaudited)

JUNE 30, 2008 JUNE 30, 2007 DEC. 31, 2007
Audited
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$ $ $
ASSETS
CURRENT ASSETS
Cash and cash equivalents 498 214 599
Accounts receivable 170,067 150,245 141,043
Income taxes receivable 8,313 7,475 1,370
Inventory (Note 7) 367,136 298,534 341,545
Prepaid expenses 6,487 4,959 4,959
Derivative financial
instrument - 123 -
Future income taxes 8,756 7,039 8,671
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561,257 468,589 498,187
Investments and volume
discounts receivable 7,230 6,951 7,406
Fixed assets 44,187 35,998 41,526
Financing costs 795 660 488
Covenants not to compete 261 438 330
Derivative financial
instrument 193 - -
Goodwill 73,878 45,639 64,858
Future income taxes 2,711 1,685 2,778
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690,512 559,960 615,573
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LIABILITIES
CURRENT LIABILITIES
Bank indebtedness (Note 8) 35,611 12,002 35,887
Accounts payable 170,064 148,672 132,660
Dividends payable 2,122 2,120 2,122
Instalments on long-term debt
and on merchant
members' deposits in
guarantee fund 45 146 577
Future income taxes 61 39 -
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207,903 162,979 171,246
Deferred gain on a
sale-leaseback arrangement 2,302 2,650 2,338
Long-term debt 107,830 58,062 91,786
Merchant members' deposits in
guarantee fund 7,773 7,855 7,294
Future income taxes 3,951 4,856 3,838
Non-controlling interest 37,170 28,188 34,498
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366,929 264,590 311,000
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SHAREHOLDERS' EQUITY
Capital stock 49,850 49,872 49,872
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Retained earnings 302,043 268,619 287,712
Accumulated other
comprehensive income (Note 9) (28,310) (23,121) (33,011)
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273,733 245,498 254,701
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323,583 295,370 304,573
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690,512 559,960 615,573
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The accompanying notes are an integral part of the interim consolidated
financial statements.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2008 AND 2007

(in thousands of dollars, except for per share amounts, unaudited)

1. BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles for interim financial statements and do not include all disclosures required for complete financial statements. They are also consistent with the accounting policies outlined in the audited financial statements of the Company for the year ended December 31, 2007. The interim financial statements and related notes should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2007. When necessary, the financial statements include amounts based on informed estimates and the best judgment of management. The operating results for the interim periods reported are not necessarily indicative of results to be expected for the year.

2. CHANGES IN ACCOUNTING POLICIES

Financial instruments

On January 1, 2008, in accordance with the applicable transitional provisions, the Company adopted the new recommendations of the CICA Handbook included in Section 3862 Financial Instruments - Disclosures and Section 3863 Financial Instruments - Presentation . Section 3862 describes the required disclosures related to the significance of financial instruments on the financial position and performance of the Company and the nature and extent of risks arising from financial instruments to which the Company is exposed and how the Company manages those risks. Section 3863 establishes standards for presentation of financial instruments and non-financial derivatives.

The adoption of these Sections resulted in the Company presenting additional disclosure regarding risk management arising from financial instruments and a sensitivity analysis regarding interest rate risk. Comparative information about the nature and extent of risks arising from financial instruments is not required in the year those Sections are adopted.

Capital disclosures

On January 1, 2008, in accordance with the applicable transitional provisions, the Company adopted the new recommendations of the CICA Handbook included in Section 1535 Capital Disclosures . This Section establishes standards for disclosing information about the capital of the Company and how it is managed to enable users of financial statements to evaluate the objectives, policies and procedures of the Company for managing capital.

Inventories

On January 1, 2008, in accordance with the applicable transitional provisions, the Company adopted the new recommendations of the CICA Handbook included in Section 3031 Inventories . This Section provides new guidance on the determination of cost and its subsequent recognition as an expense, including any write-downs to the net realizable value as well as on the cost formulas that are used to assign costs to inventories. The Section also requires additional disclosure.

3. ACCOUNTING POLICIES

Cost of inventory

Cost of inventory recognized as an expense includes cost of goods sold for distribution centres and corporate stores and warehouse expenses, delivery expenses and occupancy costs for distribution centres.

Comparative figures

Certain comparative figures have been reclassified to conform with the presentation adopted in the current year.



4. INFORMATION INCLUDED IN THE CONSOLIDATED EARNINGS

2nd QUARTER 6 MONTHS
Interest 2008 2007 2008 2007
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$ $ $ $
Interest on bank indebtedness 699 912 1,525 1,386
Interest on long-term debt 964 961 2,078 1,972
Interest on merchant members'
deposits in guarantee fund 98 102 182 206
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1,761 1,975 3,785 3,564
Interest income on cash and
cash equivalents (11) (244) (21) (377)
Interest income from merchant members (159) (113) (274) (232)
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1,591 1,618 3,490 2,955
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Amortization
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Amortization of fixed assets 2,586 2,238 5,178 4,366
Amortization of other assets 93 126 197 274
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2,679 2,364 5,375 4,640
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5. EARNINGS PER SHARE

Weighted average number of shares for the calculation of basic earnings per share is 19,731,769 for the three-month period ended June 30, 2008 (19,725,562 in 2007) and 19,734,163 for the six-month period ended June 30, 2008 (19,718,736 in 2007). Impact of stock options exercised is 19,568 shares for the three-month period ended June 30, 2008 (33,484 in 2007) and 21,429 for the six-month period ended June 30, 2008 (36,647 in 2007) which total a weighted average number of shares of 19,751,337 for the three-month period ended June 30, 2008 (19,759,046 in 2007) and 19,755,593 for the six-month period ended June 30, 2008 (19,755,383 in 2007) for calculation of diluted earnings per share.

6. BUSINESS ACQUISITIONS

In 2008, the Company acquired the shares of two companies in the Automotive Canada segment as well as the assets and a portion of the liabilities of one company operating in the Automotive Canada segment and three companies in the Automotive USA segment.

In addition, the Company increased its interest by 3.85% in its joint venture, Uni-Select Pacific Inc. Following this transaction, the Company's interest in the joint venture increased from 65.38% to 69.23%. This transaction was carried out at the carrying amount.



The operating results are consolidated in the statement of
earnings since the acquisition date.
The preliminary purchase price is allocated as follows:
Total
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$
Current assets 35,108
Fixed assets 1,344
Other long-term assets 22
Goodwill 7,940
Current liabilities (11,836)
Long-term liabilities (48)
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32,530
Cash of companies acquired 249
Total consideration paid less cash acquired 29,625
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Balance of purchase price payable 2,656
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7. INVENTORY

Cost of inventory recognized as an expense for the three-month period ended June 30, 2008 is $255,692 ($244,772 in 2007) and $474,129 for the six-month period ended June 30, 2008 ($459,880 in 2007).

For the three-month and six-month periods ended June 30, 2008 and 2007, net earnings were not affected by write-downs of inventories.

8. CREDIT FACILITY

The Company has a credit facility in the amount of $325,000. This credit facility is composed of a $235,000 revolving credit expiring in October 2011 and, thereafter, renewable annually for additional one-year periods as well as a $90,000 operating credit which is also used for the issuance of letters of guarantee and is renewable annually. As at June 30, 2008, the issued letters of guarantee totalled $5,320 ($5,010 as at December 31, 2007).

The interest rates vary according to the type of loan and the financial ratios achieved by the Company and are set each quarter. As at June 30, 2008, interest rates vary between 3.39% and 5.50% (5.35% and 7.75% as at December 31, 2007).



9. ACCUMULATED OTHER COMPREHENSIVE INCOME

JUNE 30, 2008 DEC. 31, 2007
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$ $
Balance, beginning of period (33,011) -
Balance, as previously reported - (12,766)

Cumulative impact of accounting changes
relating to financial instruments (net of
income taxes of $81) - 173
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Balance, as restated (33,011) (12,593)
Other comprehensive income for the period 4,701 (20,418)
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Balance, end of period (28,310) (33,011)
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10. EMPLOYEE FUTURE BENEFITS

As at June 30, 2008, the Company's pension plans are defined benefit and contribution plans.

For the three-month period ended June 30, 2008, the total expense for the defined contribution pension plans was $260 ($520 in 2007) and $601 ($602 in 2007) for the defined benefit pension plans.

For the six-month period ended June 30, 2008, the total expense for the defined contribution pension plans was $517 ($911 in 2007) and $1,201 ($1,205 in 2007) for the defined benefit pension plans.

11. GUARANTEES

As per inventory repurchase agreements, the Company has made a commitment to financial institutions to repurchase inventories from some of its customers at a rate of 60% to 75% of the value of inventories for a maximum amount of $63,580 ($61,870 as at December 31, 2007). In the event of proceedings, the inventories would be liquidated in the normal course of the Company's operations. These agreements are for an undetermined period of time. In management's opinion, the likelihood of major payments being made and losses being absorbed is low, since the value of the assets held in guarantee is significantly higher than the Company's commitments.

12. CAPITAL MANAGEMENT

Guided by its low-asset-base-high-utilization philosophy, the Company's objectives when managing capital are:

- Maintain a maximum total net debt / invested capital ratio of 40% to 45%;

- Grant shareholders a growth of the value of their shares by maintaining a return on shareholders' equity of 15% on a long-term basis and paying an annual dividend representing about 20% of the net earnings of the previous year;

- Maintain a maximum funded debt / EBITDA ratio of 3.0 to 3.5.

In the management of capital, the Company includes shareholders' equity, long-term debt, merchant members deposits in guarantee funds and bank indebtedness net of cash and cash equivalents and temporary investment.

The Company manages the capital structure and makes adjustments to it in light of the changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company has several tools, notably a share repurchase-for-cancellation program pursuant to normal course issuer bids and a flexible credit facility allowing it to react quickly to business opportunities. Also, the Company constantly analyzes working capital levels, notably inventory, to ensure that the optimal level is maintained and regularly adjusts quantity to satisfy demand as well as the level of diversification required by customers.

The Company monitors capital on a number of bases, including: total net debt / invested capital ratio, long-term debt / equity ratio, funded debt / EBITDA ratio and return on shareholders' equity ratio.

For the first six months of 2008, the results of the Company regarding its objectives when managing capital are the following:



JUNE 30, 2008 DEC. 31, 2007
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Total net debt / invested capital ratio(2)(3) 31.8% 30.7%
Long-term debt / equity ratio(2)(3) 35.7% 32.7%
Funded debt / EBITDA ratio(1)(2)(3) 1.90 1.76
Return on shareholders' equity ratio(1)(3) 13.6% 13.9%
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(1) These ratios are calculated over the last 12 months.

(2) Increase in debt ratios comes directly from the increase of long-term
debt due to the acquisitions in the last quarters.

(3) Notably, acquisitions in the last quarters did not contribute to the
results of the last 12-month period ended June 30, 2008 proportionally
to the increase in long-term debt.


Regarding the credit facility, the Company is required to comply with certain financial ratios which it has done as at June 30, 2008 and December 31, 2007.

13. FINANCIAL INSTRUMENTS

Classification of financial instruments, carrying amount and fair value

Classification of financial instruments as well as their carrying amount and fair value at June 30, 2008 are summarized in the following table:


Carrying Fair
amount value
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Other
Derivative Held- Loans financial
financial for- and liabi-
instruments trading receivables(1) lities Total
$ $ $ $ $ $
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Financial Assets
Cash and cash
equivalents - 498 - - 498 498
Accounts
receivable - - 170,067 - 170,067 170,067
Investments and
volume discounts
receivable - - 7,230 - 7,230 7,230
Derivative
financial
instrument 193 - - - 193 193
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193 498 177,297 - 177,988 177,988
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Financial
Liabilities
Bank indebtedness - - - 35,611 35,611 35,611
Accounts payable - - - 170,064 170,064 170,064
Dividends payable - - - 2,122 2,122 2,122
Long-term debt - - - 107,875 107,875 107,875
Merchant members'
deposits in
guarantee fund - - - 7,773 7,773 7,773
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- - - 323,445 323,445 323,445
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(1) Interest income on loans and receivables for the three-month period
ended June 30, 2008 represents $324 ($286 in 2007) and $638 for the
six-month period ended June 30, 2008 ($615 in 2007).



The fair value of accounts receivable, volume discounts receivable, bank indebtedness, accounts payable and dividends payable approximates their carrying amount given the short-term nature of the instruments.

The fair value of investments, long-term debt and merchant members' deposits in guarantee fund is equivalent to their carrying amount since they substantially bear interest at a rate that fluctuates with changes in the prevailing rate.

Derivative financial instruments

During the first quarter of 2008, the Company entered into agreements to swap variable interest rates for a nominal amount of $60,000 for fixed rates ($0 at fixed rates against variable rates at December 31, 2007). The swap agreements, at a rate of 3.94%, expire in three equal portions of $20,000 on January 2011, 2012 and 2013. The fair value of the interest rate swaps is calculated using quotes for similar instruments on the balance sheet date obtained by the Company's financial institution and represents an amount receivable by the Company of $193 ($0 at December 31, 2007).

Management of risks arising from financial instruments

In the normal course of business, the Company has market exposure primarily consisting of credit risk, liquidity risk, foreign exchange risk and interest rate risk. The Company manages these risk exposures on a ongoing basis. In order to limit the effects of changes in interest rates on its revenues, expenses and cash flows, the Company avails itself of derivative financial instruments.

Credit risk

Credit risk stems primarily from the potential inability of clients to discharge their obligations. The maximum credit risk to which the Company is exposed as at June 30, 2008 represents the carrying amount of accounts receivable and investments and volume discounts receivable.

No account represents more than 10% of total accounts receivable. In order to manage its risk, specific credit limits are determined for certain accounts and reviewed regularly by the Company. Also, the Company holds in guarantee personal property as well as assets of certain customers and those customers are required to contribute to a fund to guarantee a portion of their amounts due to the Company, being the merchant members deposits in guarantee funds. Finally, customers' financial health is examined regularly and monthly analysis are presented to management to ensure that past due amounts are collectible and, if necessary, that measures are taken to limit credit risk. Historically, the Company has never made any significant write-off of its accounts receivable as proven by the average bad debt on sales rate of 0.1% for the last three years.

As at June 30, 2008, past-due accounts receivable represent $5,359 and an allowance for doubtful accounts of $3,840 is provided.

Allowance for doubtful accounts and accounts receivable are reviewed at least quarterly and a bad-debt expense is recognized only for accounts receivable for which collection is uncertain.




$
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Balance at December 31, 2007 2,924
Bad-debt expense 1,460
Write-off (544)
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Balance at June 30, 2008 3,840
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Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting its obligations on time or at a reasonable cost. The Company manages its liquidity risk on a consolidated basis by using financing sources to maintain its maneuverability, taking into account its operating needs, tax situation and capital requirements. The Company prepares budget cash forecasts to ensure that is has sufficient funds to meet its obligations.

The Company has a renewable credit facility in the amount of $325,000 (Note 8). As at June 30, 2008, the Company benefits from an unused credit facility of approximately $175,000.

Because of cash flows generated by operations and financial resources available, management believes that the liquidity risk is minimal.

Foreign exchange risk

The Company is exposed to foreign exchange risk due to cash held in currency other than that of the reporting entity and due to merchandise and equipment purchased in U.S. dollars. Management considers that fluctuations in the U.S. dollar versus the Canadian dollar will have a minimal impact on net earnings.

Interest rate risk

The Company is exposed to interest rate fluctuations, primarily due to its variable rate debts. The Company manages its interest rate exposure by maintaining an adequate balance of fixed versus variable rate debt by concluding swap agreements to exchange variable rates for fixed rates. As at June 30, 2008, the fixed rate portion of financial debt represents 43% of the total, while the variable rate portion represents 57%.

A 25 basis points rise or fall in interest rates, assuming that all other variables remain the same, would have resulted in a $37 decrease or increase, respectively, in the Company's net earnings for the three-month period ended June 30, 2008 and $85 for the six-month period, whereas other comprehensive income would have resulted in a $329 increase or decrease, respectively for both the three-month and six-month periods.



14. SEGMENTED INFORMATION
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2nd QUARTER
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Automotive Canada Automotive USA
2008 2007 2008 2007
$ $ $ $
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Sales 149 504 139 385 168 181 158 813
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Earnings before interests,
amortization, income taxes
and non-controlling interest 12 980 13 269 12 037 10 526
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Assets 264 143 229 451 391 102 295 460

Acquisition of fixed assets 2 087 1 505 2 536 1 284

Acquisition of goodwill 552 1 078 199 1 157
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2nd QUARTER
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Heavy Duty Consolidated
2008 2007 2008 2007
$ $ $ $
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Sales 14 946 15 059 332 631 313 257
-----------------------------------------------------------------------
Earnings before interests,
amortization, income taxes
and non- controlling interest (565) (657) 24 452 23 138
------------------------------------------------------------------------

Assets 35 267 35 049 690 512 559 960

Acquisition of fixed assets 61 53 4 684 2 842

Acquisition of goodwill - - 751 2 235
-----------------------------------------------------------------------

-----------------------------------------------------------------------
6 MONTHS
-----------------------------------------------------------------------
Automotive Canada Automotive USA
2008 2007 2008 2007
$ $ $ $
-----------------------------------------------------------------------
Sales 268,269 250,217 318,100 307,351
-----------------------------------------------------------------------
Earnings before interest,
amortization, income taxes
and non- controlling interest 19,448 19,887 21,214 18,458
-----------------------------------------------------------------------

Assets 264,143 229,451 391,102 295,460

Acquisition of fixed assets 3,403 1,928 4,025 2,762

Acquisition of goodwill 7,648 1,506 292 1,596
-----------------------------------------------------------------------

-----------------------------------------------------------------------
Heavy Duty Consolidated
2008 2007 2008 2007
$ $ $ $
-----------------------------------------------------------------------
Sales 27,960 28,854 614,329 586,422
-----------------------------------------------------------------------
Earnings before interest,
amortization, income taxes
and non-controlling interest (1,678) (1,805) 38,984 36,540
-----------------------------------------------------------------------

Assets 35,267 35,049 690,512 559,960

Acquisition of fixed assets 82 59 7,510 4,749

Acquisition of goodwill - - 7,940 3,102
-----------------------------------------------------------------------

The Automotive USA segment includes fixed assets for an amount of
$18,541 ($12,574 as at June 30, 2007) and goodwill for an amount of
$36,081 ($17,784 as at June 30, 2007).


15. FUTURE ACCOUNTING STANDARDS

International Financial Reporting Standards

In February 2008, the Canadian Accounting Standards Board confirmed that the use of International Financial Reporting Standards ("IFRS") established by the International Accounting Standards Board will be required for fiscal years beginning January 1st, 2011 for publicly accountable profit-oriented enterprises. IFRS will replace Canada's current GAAP for those enterprises.

The Company is currently establishing a convergence plan and evaluating the impact of the adoption of IFRS on its consolidated financial statements.

Goodwill and intangible assets

In February 2008, the CICA issued Handbook Section 3064 Goodwill and intangible assets in replacement of Section 3062 Goodwill and other intangible assets. Various changes have been made to other sections of the CICA Handbook for consistency purposes. This new standard is applicable to fiscal years beginning on or after October 1st, 2008. The new Section establishes standards for the recognition, measurement, presentation and disclosure of goodwill and intangible assets subsequent to their initial recognition. The Company will implement this standard in its first quarter of fiscal year 2009 and is currently evaluating the impact of its adoption on its consolidated financial statements.

Contact Information

  • Source:
    UNI-SELECT INC.
    or
    Mr. Richard G. Roy
    President and Chief Executive Officer
    450-641-2440
    or
    Mr. Denis Mathieu
    Vice President and Chief Financial Officer
    450-641-2440
    www.uni-select.com