Uni-Select Inc.
TSX : UNS

Uni-Select Inc.

October 30, 2014 10:38 ET

Uni-Select Announces Improved Profitability in Q3 2014

- $465 million in sales (up 0.2% and 1.3% organically)

- $30 million in EBITDA ($31 million in adjusted EBITDA, up 4.5%)

- 6.4% EBITDA margin (6.8% adjusted EBITDA margin, up 30 bps)

- $0.70 in EPS ($0.74 in adjusted EPS, up 5.7% or C$0.80 in adjusted EPS, up 9.6% when converted into Canadian dollars)

- $49 million in cash flow from operations (up 30% or $11 million)

BOUCHERVILLE, QUÉBEC--(Marketwired - Oct. 30, 2014) -

Unless otherwise indicated in this press release, all amounts are expressed in US dollars.

Uni-Select Inc. (TSX:UNS), a major automotive aftermarket product distributor with activities across North America, today reported EBITDA, EBITDA margin and net earnings growth for the third quarter ended September 30, 2014.

Overall sales grew by 0.2% or 1.3% organically. EBITDA grew 3.7%, while net earnings increased by 3.9% in the third quarter as a result of savings derived from the Corporation's Action Plan. Notwithstanding expenses related to the network optimization, adjusted EBITDA grew by 4.5% this quarter, resulting in an adjusted EBITDA margin of 6.8%.

"I am overall pleased by our third quarter results and the stronger profitability margins we have systematically been recording quarter after quarter since the implementation of our Action Plan. Through our healthier distribution network, we are now able to offer an increasingly more flexible, sustainable and customer-centric solutions," said Richard G. Roy, President and Chief Executive Officer of Uni-Select.

"The Uni-Select team remains committed towards our Action Plan which is mainly completed and will be finalized during the first half of 2015. We now turn to the quarters ahead with the objective of converting aggressive new sales initiatives, higher fill rates and optimal product assortment into a renewed sales momentum across the entire organization," added Mr. Roy.

(In thousands of US dollars, except per share amounts) THIRD QUARTER NINE-MONTH PERIOD
2014 2013 2014 2013
Sales 465,408 464,509 1,357,175 1,362,505
EBITDA 29,906 28,847 78,189 37,381
Adjusted EBITDA 31,434 30,079 83,576 76,710
Adjusted EBITDA margin 6.8 % 6.5 % 6.2 % 5.6 %
Restructuring charges and others - - - 35,180
Net earnings 14,842 14,280 38,762 11,129
Adjusted earnings 15,755 14,987 41,948 37,543
Earnings per share 0.70 0.67 1.82 0.52
Adjusted earnings per share 0.74 0.70 1.97 1.75

THIRD QUARTER RESULTS

(All percentage increases and decreases represent year-over-year changes for the third quarter of 2014 compared to the third quarter of 2013, unless otherwise noted.)

Uni-Select recorded an overall sales increase of 0.2% to $465 million in the third quarter of 2014. Organic growth of 1.3% and revenue derived from recent acquisitions were largely offset by the impact of the declining Canadian dollar and sales lost from store closures under the Corporation's Action Plan. Sales of the US operations reached $340 million, up 1.6% over last year, with an organic growth of 1.3%. Canadian operations reported $126 million in sales in the same period, down 3.5% over 2013 mainly due to the impact of a lower Canadian dollar, partially compensated by a 1.2% organic growth.

EBITDA for the third quarter reached $30 million, compared to $29 million last year, representing a 3.6% increase. Adjusted EBITDA grew by 4.5% while the adjusted EBITDA margin increased to 6.8% compared to 6.5% last year. The increase is mainly attributable to Action Plan related savings of $3.3 million and tight control over expenses. These favourable items were partially offset by unfavorable distribution channel and customer mix.

As indicated above, the Corporation's results are presented in US dollars. Once converted to Canadian dollars, adjusted earnings per share reached $0.80 for the third quarter, up a strong 9.6% compared to $0.73 in 2013.

Over the course of the third quarter, net debt decreased by $38 million, mainly due to an increase in cash from operations generated by additional earnings and improved working capital.

Subsequently to the end of the third quarter, the Corporation amended the terms of its existing credit facility and extended its maturity to June 30, 2018. The Corporation will benefit from reduced interest rates under the amended terms of the credit facility that reflect current market conditions.

NINE-MONTH PERIOD RESULTS

(All percentage increases and decreases represent year-over-year changes for the nine-month period of 2014 compared to the nine-month period of 2013, unless otherwise noted.)

Uni-Select recorded an overall 0.4% decline in sales for the first nine months of 2014 to $1,357 million. Sales lost from store closures, combined with the declining Canadian dollar more than offset the combined favourable impact of the 2.2% organic growth and additional revenue derived from recent acquisitions.

Sales of the US operations reached $993 million, up 0.4% compared to last year, with a 1.4% organic growth. Canadian operations recorded $364 million in sales in the same period, down 2.5% over 2013. Canadian organic growth reached 4.2%.

EBITDA more than doubled this year to $78 million compared to $37 million last year. 2013 results included $35.2 million in restructuring charges in relation to its Action Plan and expenses related to the development and deployment of the enterprise resource planning system. Adjusted EBITDA grew by 9.0% while the adjusted EBITDA margin after nine months increased to 6.2% from 5.6% last year. Savings derived from the Action Plan accounted for $12.7 million.

Since the beginning of the year, the Corporation generated $104 million in cash from operating activities, of which $57 million were used to reduce indebtedness. As of September 30, 2014, the Corporation's outstanding net debt stood at $221 million, down 20.3% from December 31, 2013, while its funded debt to EBITDA ratio reached 2.05 times, down notably from 2.75 times last year.

For the nine-month period ended September 30, 2014 adjusted earnings per share converted to Canadian dollars amount to $2.16 compared to $1.79 in 2013, a robust 20.7% increase.

DIVIDEND

Uni-Select's Board of Directors declared a dividend of C$0.15 per share payable on January 21, 2015 to shareholders of record on December 31, 2014. This dividend is an eligible dividend for tax purposes.

CONFERENCE CALL

Uni-Select will host a conference call to discuss its 2014 third quarter results on October 30, 2014 at 3 PM (EDT). To join the conference, dial 1 866 696-5910 followed by 4101473.

A replay of the conference call will be available until 11:59 PM (EST) on November 6, 2014. To access the replay, dial 1 800 408-3053 followed by 8003408.

ABOUT UNI-SELECT

Founded in 1968, Uni-Select is a major distributor of replacement parts, equipment, tools, accessories, paint and related products for motor vehicles in North America. Leader in the Canadian industry, Uni-Select is the 5th largest distributor and the leading independent distributor of automotive paint and related products in North America. With its 5,400 employees, Uni-Select efficiently services a wide network of independent installers and wholesalers, including over 6,600 which operate under one of its banner programs in North America. Uni-Select is headquartered in Boucherville, QC and its shares are traded on the Toronto Stock Exchange (TSX) under the symbol UNS.

FORWARD-LOOKING INFORMATION

The information provided in this press release includes some forward-looking information, which includes certain risks and uncertainties, including risks relating to the implementation of the Action Plan resulting from the strategic review process, which may cause the final results to be significantly different from those listed or implied within this news release. For example, the foregoing estimates of cost and inventory reductions may be considered forward-looking information and are based upon certain key assumptions, including (i) the closure, sale or consolidation of the number of stores and distribution centres, and related reduction of headcounts, as planned and within the timeframe contemplated by the Action Plan and (ii) the timely completion of all other components of the Action Plan as planned. Uni-Select cautions that assumptions used to prepare the foregoing estimates, although reasonable at the time they were made, may prove to be incorrect or inaccurate. The foregoing factors could therefore cause the actual cost and inventory reductions to be derived under the Action Plan to differ materially from the amounts set forth in the foregoing estimates. For additional information with respect to risks and uncertainties, refer to the Annual Report filed by Uni-Select with the Canadian securities commissions. The forward-looking information contained herein is made as of the date of this press release, and Uni-Select does not undertake to publicly update such forward-looking information to reflect new information, subsequent or otherwise, unless required by applicable securities laws.

ADDITIONAL INFORMATION

The Interim Management's Discussion and Analysis, the unaudited interim financial statements and the accompanying notes for the Third Quarter of 2014 are available in the "Investors" section on the Corporation's website at uniselect.com as well as on SEDAR at sedar.com. The Corporation's Annual Report may also be found on these websites as well as other information related to Uni-Select, including its Annual Information Form.

Action Plan Financial Executive Summary

Internal strategic and operational plan (Action Plan) announced on July 11, 2013

Announced on July 11, 2013 Realized
(in millions of US dollars) 2013 2014 2015 TOTAL 2013 1st and 2nd
quarters
2014
3rd
quarter
2014
Since
implementation
(1)
(September 30,
2014)
Sales erosion $ 20.0 $ 45.0 $ 5.0 $ 70.0 $ 13.1 $ 22.6 $ 11.6 $ 47.3
EBITDA improvement $ 10.0 $ 15.0 $ 5.0 $ 30.0 $ 13.0 $ 9.4 $ 3.3 $ 25.7
Restructuring charges and others
Recorded $ 36.0 - - $ 36.0 $ 35.2 - - $ 35.2
As incurred $ 4.0 $ 5.0 - $ 9.0 $ 4.1 $ 3.5 $ 1.5 $ 9.1
Inventory reduction $ 8.0 $ 22.0 $ 10.0 $ 40.0 $ 4.2 $ 14.4 - $ 18.6
Capital expenditures $ 7.0 $ 9.0 - $ 16.0 $ 2.4 $ 0.2 $ 0.5 $ 3.1
(1) 16-month period

NON-IFRS FINANCIAL MEASURES

The information included in this press release contains certain measures that are consistent with IFRS. Non-IFRS financial measures do not have any standardized meaning prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other entities.

(1) Organic growth - This measure consists of quantifying the increase in pro forma consolidated sales between two given periods, excluding the impact of acquisitions, sales and disposals of stores, exchange-rate fluctuations and when necessary, the variance in the number of billing days. Determining the rate of organic growth, based on findings that Management regards as reasonable, may differ from the actual rate of organic growth.

(2) EBITDA - This measure represents net earnings excluding finance costs, depreciation and amortization, equity income and income taxes. This measure is a financial indicator of a corporation's ability to service and incur debt. It should not be considered by an investor as an alternative to sales or net earnings, as an indicator of operating performance or cash flows, or as a measure of liquidity, but as additional information.

(3) Adjusted EBITDA margin - The adjusted EBITDA margin is a percentage corresponding to the ratio of adjusted EBITDA to sales.

(4) Adjusted EBITDA, adjusted earnings and adjusted earnings per share - Management uses adjusted EBITDA, adjusted earnings and adjusted earnings per share to assess EBITDA, net earnings and net earnings per share from operating activities, excluding certain adjustments, net of income taxes (for adjusted earnings and adjusted earnings per share), which may affect the comparability of the Corporation's financial results. Management considers that these measures are more representative of the Corporation's operational performance and more appropriate in providing additional information. These adjustments include, among other things, the non-capitalizable costs related to the development and implementation of the ERP system, costs related to the closure and disposal of stores, as well as restructuring charges and others. The exclusion of these items does not indicate that they are non-recurring.

(5) Free cash flow - This measure corresponds to the cash flow from operating activities according to the statement of cash flows adjusted for the following items: changes in working capital items, equity income and acquisitions of property and equipment. The free cash flow excludes certain variations in working capital items (such as trade and other receivables, inventory and trade and other payables) and other funds generated and used according to the statement of cash flows. Therefore, it should not be considered as an alternative to the Consolidated Statement of Cash Flows, or as a measure of liquidity, but as additional information.

(6) Total net debt - This measure consists of long-term debt, including the portion due within a year (as shown in note 12 to the Interim Consolidated Financial Statements) net of cash. Debentures are excluded from the long-term debt.

(7) Funded debt to adjusted EBITDA - This ratio corresponds to total net debt to adjusted EBITDA. Debentures are excluded from the total net debt.

Reconciliation of non-IFRS measures

The following table presents a reconciliation of EBITDA and adjusted EBITDA.

Third quarter Nine-month period
2014 2013 % 2014 2013 %
Net earnings 14,842 14,280 38,762 11,129
Adjustments:
Income tax expense (recovery) 4,482 3,688 8,529 (5,533 )
Equity income (433 ) (565 ) (1,729 ) (2,072 )
Depreciation and amortization 7,983 7,492 23,330 21,807
Finance costs, net 3,032 3,952 9,297 12,050
EBITDA 29,906 28,847 78,189 37,381
Restructuring charges and others - - - 35,180
Expenses related to the development and deployment of the enterprise resource planning system (ERP) (1) - 647 414 2,437
Expenses related to the network optimization and to the closure and disposal of stores (2) 1,528 585 4,973 1,712
Adjusted EBITDA 31,434 30,079 4.5 83,576 76,710 9.0
Adjusted EBITDA Margin 6.8 % 6.5 % 6.2 % 5.6 %
(1) Mainly include costs related to data conversion, employee training and deployment to various sites. Last deployment was made in December 2013.
(2) Primarily consist of handling and freight expenses required to relocate inventory.

The following table presents a reconciliation of adjusted earnings and adjusted earnings per share.

Third quarter Nine-month period
2014 2013 % 2014 2013 %
Net earnings attributable to shareholders, as reported 14,842 14,280 38,762 11,129
Restructuring charges and others, net of taxes - - - 23,926
Expenses related to the development and deployment of the enterprise resource planning system (ERP), net of taxes - 411 247 1,518
Expenses related to the network optimization and to the closure and disposal of stores, net of taxes 913 296 2,939 970
Adjusted earnings 15,755 14,987 5.1 41,948 37,543 11.7
Net earnings per share attributable to shareholders, as reported 0.70 0.67 1.82 0.52
Restructuring charges and others, net of taxes - - - 1.12
Expenses related to the development and deployment of the enterprise resource planning system (ERP), net of taxes - 0.02 0.01 0.07
Expenses related to the network optimization and to the closure and disposal of stores, net of taxes 0.04 0.01 0.14 0.05
Adjusted earnings per share 0.74 0.70 5.7 1.97 1.75 12.6

The effect of the declining Canadian dollar was $0.01 on earnings per share for the quarter compared to the same quarter in 2013, while the effect for the nine-month period was $0.04 compared to the same period last year.

UNI-SELECT INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands of US dollars, except per share amounts, unaudited) Quarter
ended Sept. 30,
Nine-month period
ended Sept. 30,
2014 2013 2014 2013
Sales 465,408 464,509 1,357,175 1,362,505
Purchases, net of changes in inventories 328,743 326,113 955,353 951,792
Gross margin 136,665 138,396 401,822 410,713
Employee benefits 70,293 73,413 212,395 222,495
Other operating expenses 36,466 36,136 111,238 115,657
Restructuring charges and others - - - 35,180
Earnings before finance costs, depreciation and amortization, equity income and income taxes 29,906 28,847 78,189 37,381
Finance costs, net 3,032 3,952 9,297 12,050
Depreciation and amortization 7,983 7,492 23,330 21,807
Earnings before equity income and income taxes 18,891 17,403 45,562 3,524
Equity income 433 565 1,729 2,072
Earnings before income taxes 19,324 17,968 47,291 5,596
Income tax expense (recovery)
Current 1,686 3,851 9,889 8,607
Deferred 2,796 (163 ) (1,360 ) (14,140 )
4,482 3,688 8,529 (5,533 )
Net earnings attributable to shareholders 14,842 14,280 38,762 11,129
Earnings per share basic 0.70 0.67 1.82 0.52
Earnings per share diluted 0.69 0.66 1.81 0.52
Weighted average number of common shares outstanding (in thousands)
Basic 21,258 21,404 21,262 21,456
Diluted 22,544 22,643 22,557 21,456
UNI-SELECT INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of US dollars, unaudited) Quarter
ended Sept. 30,
Nine-month period
ended Sept. 30,
2014 2013 2014 2013
Net earnings 14,842 14,280 38,762 11,129
Other comprehensive income (loss)
Items that will subsequently be reclassified to net earnings:
Effective portion of changes in the fair value of cash flow hedges (net of income tax of $3 and $56 for the quarter and nine-month period ($30 and $78 in 2013)) 8 83 (150 ) 212
Net change in the fair value of derivative financial instruments designated as cash flow hedges transferred to earnings (net of income tax of $46 and $134 for the quarter and nine-month period ($86 and $281 in 2013)) 124 232 362 713
Unrealized exchange gains (losses) on the translation of financial statements to the presentation currency 6,371 (4,194 ) 6,334 7,126
Unrealized exchange gains (losses) on the translation of debt designated as a hedge of net investments in foreign operations (11,728 ) 5,430 (11,428 ) (10,432 )
(5,225 ) 1,551 (4,882 ) (2,381 )
Items that will not subsequently be reclassified to net earnings:
Remeasurements of long-term employee benefit obligations (net of income tax of $39 and $1,232 for the quarter and nine-month period ($458 and $1,618 in 2013)) (107 ) 1,245 (3,329 ) 4,399
Total other comprehensive income (loss) (5,332 ) 2,796 (8,211 ) 2,018
Comprehensive income attributable to shareholders 9,510 17,076 30,551 13,147
UNI-SELECT INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attributable to shareholders
(In thousands of US dollars, unaudited) Share
capital
Contributed
surplus
Equity
component
of the
convertible
debentures
Retained
earnings
Accumulated
other
comprehensive
income (loss)
Total
equity
Balance, December 31, 2012 88,563 392 1,687 384,902 8,661 484,205
Net earnings - - - 11,129 - 11,129
Other comprehensive income (loss) - - - 4,399 (2,381 ) 2,018
Comprehensive income (loss) - - - 15,528 (2,381 ) 13,147
Contributions by and distributions to shareholders:
Share repurchases (1,187 ) - - (4,584 ) - (5,771 )
Dividends - - - (8,099 ) - (8,099 )
Stock-based compensation - 838 - - - 838
(1,187 ) 838 - (12,683 ) - (13,032 )
Balance, September 30, 2013 87,376 1,230 1,687 387,747 6,280 484,320
Balance, December 31, 2013 87,271 1,332 1,687 394,716 3,749 488,755
Net earnings - - - 38,762 - 38,762
Other comprehensive income (loss) - - - (3,329 ) (4,882 ) (8,211 )
Comprehensive income (loss) - - - 35,433 (4,882 ) 30,551
Contributions by and distributions to shareholders:
Share repurchases (33 ) - - (159 ) - (192 )
Dividends - - - (8,332 ) - (8,332 )
Stock-based compensation - 883 - - - 883
(33 ) 883 - (8,491 ) - (7,641 )
Balance, September 30, 2014 87,238 2,215 1,687 421,658 (1,133 ) 511,665
UNI-SELECT INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of US dollars, unaudited) Quarter
ended Sept. 30,
Nine-month period
ended Sept. 30,
2014 2013 2014 2013
OPERATING ACTIVITIES
Net earnings 14,842 14,280 38,762 11,129
Non-cash items:
Finance costs, net 3,032 3,952 9,297 12,050
Depreciation and amortization 7,983 7,492 23,330 21,807
Restructuring charges and others - - - 35,180
Income tax expense (recovery) 4,482 3,688 8,529 (5,533 )
Other non-cash items 3,795 773 9,086 626
Changes in working capital items 19,836 10,410 32,126 21,835
Interest paid (2,899 ) (3,990 ) (8,186 ) (11,722 )
Income taxes recovered (paid) (1,572 ) 1,561 (9,280 ) 2,748
Cash flows from operating activities 49,499 38,166 103,664 88,120
INVESTING ACTIVITIES
Net business acquisitions (40 ) (31 ) (17,617 ) (1,432 )
Balances of purchase price (19 ) (138 ) 17 (390 )
Advances to merchant members (1,854 ) (3,272 ) (12,350 ) (10,155 )
Receipts on advances to merchant members and dividends received from equity investments 1,856 1,772 5,850 6,029
Net acquisitions of property and equipment (5,237 ) (3,162 ) (8,340 ) (9,187 )
Net acquisitions and development of intangible assets (1,305 ) (2,019 ) (5,548 ) (6,028 )
Cash flows used in investing activities (6,599 ) (6,850 ) (37,988 ) (21,163 )
FINANCING ACTIVITIES
Increase in long-term debt 14,825 - 58,859 201,691
Repayment of long-term debt (54,618 ) (24,906 ) (116,332 ) (254,405 )
Merchant members' deposits in the guarantee fund (135 ) 94 (40 ) (373 )
Share repurchases (44 ) (3,809 ) (192 ) (5,771 )
Dividends paid (2,954 ) (2,700 ) (7,998 ) (8,143 )
Cash flows used in financing activities (42,926 ) (31,321 ) (65,703 ) (67,001 )
Effects of fluctuations in exchange rates on cash (1 ) 1 (1 ) (4 )
Net decrease in cash (27 ) (4 ) (28 ) (48 )
Cash, beginning of period 56 78 57 122
Cash, end of period 29 74 29 74
UNI-SELECT INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands of US dollars, unaudited) Sept. 30, Dec. 31,
2014 2013
ASSETS
Current assets:
Cash 29 57
Trade and other receivables 246,869 220,942
Income taxes receivable 15,607 16,883
Inventory 508,475 532,045
Prepaid expenses 14,712 11,417
Total current assets 785,692 781,344
Equity investments, other investments and advances to merchant members 21,305 36,855
Property and equipment 52,374 49,494
Intangible assets 131,115 140,598
Goodwill 194,203 184,449
Deferred tax assets 12,191 13,151
TOTAL ASSETS 1,196,880 1,205,891
LIABILITIES
Current liabilities:
Trade and other payables 373,680 341,429
Provision for restructuring charges and others 8,059 15,185
Dividends payable 2,862 2,598
Current portion of long-term debt and merchant members' deposits in the guarantee fund 5,142 4,667
Total current liabilities 389,743 363,879
Long-term employee benefit obligations 24,529 19,561
Long-term debt 216,226 273,165
Convertible debentures 45,344 46,829
Merchant members' deposits in the guarantee fund 6,626 6,988
Derivative financial instruments 601 890
Deferred tax liabilities 2,146 5,824
TOTAL LIABILITIES 685,215 717,136
EQUITY
Share capital 87,238 87,271
Contributed surplus 2,215 1,332
Equity component of the convertible debentures 1,687 1,687
Retained earnings 421,658 394,716
Accumulated other comprehensive income (1,133 ) 3,749
TOTAL EQUITY 511,665 488,755
TOTAL LIABILITIES AND EQUITY 1,196,880 1,205,891

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