Uni-Select Announces Improved Q2 2014 Financial Results

BOUCHERVILLE, QUÉBEC--(Marketwired - July 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 continued sales, EBITDA and net earnings growth, along with improved profitability for the second quarter ended June 30, 2014.

Overall sales grew by 0.5% and 2.9% organically. EBITDA and net earnings came in well above last year as the second quarter of 2013 was impacted by restructuring charges of $35.2 million related to the implementation of the Action Plan. Notwithstanding those charges, adjusted EBITDA grew by 6.8% this quarter, resulting in an adjusted EBITDA margin of 6.5%, up 5% over the same period last year. Adjusted earnings also grew 6% over the corresponding period last year.

"While the sales growth recorded in the second quarter was softer than expected, we are pleased with our overall performance and more particularly with our continued ability to lower costs and improve profitability, which are key drivers of our long-term growth plans. The implementation of the Action Plan remains on schedule and continues to yield important benefits that will make Uni-Select an even more competitive and sought-after distributor across North America", said Richard G. Roy, President and Chief Executive Officer of Uni-Select.

"Looking ahead to the second half of Fiscal 2014, our primary focus will be on accelerating organic sales growth while maintaining or improving our momentum across all key performance metrics, including sales programs, supply chain, customer service and banner programs. We will also continue to focus on initiatives that will enable us to remain the partner of choice for independent wholesalers and strengthen our leadership position in the automotive aftermarket product distribution sector," added Mr. Roy.

"Also, I am pleased to announce that the Board of Directors approved a change in our organizational structure with the creation of a new position of Chief Operating Officer who will report to me. We will be able to introduce the new COO shortly," said Mr. Roy.

(In thousands of US dollars, except per share amounts)	SECOND QUARTER				SIX-MONTH PERIOD
	2014		2013		2014		2013
Sales	478,690		476,176		891,767		897,996
EBITDA	29,681		(7,394	)	48,283		8,534
Adjusted EBITDA	31,306		29,320		52,142		46,631
Adjusted EBITDA margin	6.5	%	6.2	%	5.8	%	5.2	%
Restructuring charges and others	-		35,180		-		35,180
Net earnings (loss)	15,532		(9,295	)	23,920		(3,151	)
Adjusted earnings	16,470		15,561		26,193		22,556
Earnings (loss) per share	0.73		(0.43	)	1.12		(0.15	)
Adjusted earnings per share	0.77		0.72		1.23		1.05

SECOND QUARTER RESULTS

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

Uni-Select recorded an increase in overall sales of 0.5% to $479 million in the second quarter of 2014, resulting from organic growth of 2.9% and revenue derived from recent acquisitions which offset sales lost from store closures, the impact of the declining Canadian dollar and one less billing day in Canada. Sales of the US operations reached $343 million, up 1.1% over last year, with an organic growth 1.3%. Canadian operations delivered $136 million in sales in the same period, a slight decrease over 2013 mainly due to the impact of a lower Canadian dollar. Canadian organic growth reached 6.8%, resulting from successful sales initiatives and the recruitment of new customers.

EBITDA for the second quarter reached $30 million, compared to negative $7 million last year. Results for the second quarter of 2013 included $35.2 million in restructuring charges and expenses related to the development and deployment of the enterprise resource planning system. Adjusted EBITDA grew by 6.8% while the adjusted EBITDA margin increased by 5% to 6.5% compared to 6.2% last year. The increase was mainly due to Action Plan related savings of $3.8 million. Organic growth improved fixed cost leverage whereas tighter control on expenses also contributed to the increase. These positive items were partially offset by unfavorable distribution channel and customer mix.

SIX-MONTH PERIOD RESULTS

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

Uni-Select recorded a decrease in overall sales of 0.7% to $892 million for the first six-month period of 2014. Sales lost from store closures, combined with the declining Canadian dollar exceeded the 2.3% organic growth and the impact of recent acquisitions.

Sales of the US operations reached $654 million, down 0.2% compared to last year, with an organic growth 1.1%. Canadian operations delivered $238 million in sales in the same period, a 2.0% decrease over 2013. Canadian organic growth reached 5.8%.

EBITDA reached $48 million, compared to $9 million last year. 2013 results were impacted by the items previously outlined. Adjusted EBITDA grew by 11.8% while the adjusted EBITDA margin increased by 11.5% to 5.8% compared to 5.2% last year. The increase was mainly attributable to the same factors as those mentioned in the quarter. Savings derived from the Action Plan accounted for $9.4 million and were partially offset by higher utilities caused by weather conditions across North America during the first quarter.

Since the beginning of the year, the Corporation generated $54 million in cash from operating activities, of which $38 million were used to reduce indebtedness. As of June 30, 2014, the Corporation's outstanding net debt stood at $260 million, down 6.5% from December 31, 2013.

As mentioned above our results are presented in US dollars. Once converted to Canadian dollars, adjusted earnings per share totals $0.84 for the 2014 second quarter, up 15% compared to $0.73 in 2013. For the six-month period ended June 30, adjusted earnings per share converted to Canadian dollars amounts to $1.35 compared to $1.07 in 2013, up 26%.

DIVIDEND

Uni-Select's Board of Directors declared a dividend of C$0.15 per share payable on October 21, 2014 to shareholders of record on September 30, 2014. This dividend is an eligible dividend for tax purposes.

CONFERENCE CALL

Uni-Select will host a conference call to discuss its 2014 second quarter results on July 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 on August 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 5,500 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 Second 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$)	2013		2014		2015		TOTAL		2013		1st quarter 2014		2nd quarter 2014		Since implementation (1) (June 30, 2014)
Sales erosion	$	20.0	$	45.0	$	5.0	$	70.0	$	13.1	$	11.7	$	10.9	$	35.7
Cost savings	$	10.0	$	15.0	$	5.0	$	30.0	$	13.0	$	5.6	$	3.8	$	22.4
Restructuring charges and others
Recorded		36.0		-		-		36.0		35.2		-		-		35.2
As incurred		4.0		5.0		-		9.0		4.1		1.8		1.7		7.6
Inventory reduction	$	8.0	$	22.0	$	10.0	$	40.0	$	4.2	$	9.0	$	5.4	$	18.6
Capital expenditures	$	7.0	$	9.0		-	$	16.0	$	2.4		-	$	0.2	$	2.6

(1) 13-month period

NON-IRFS 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.

(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.

Reconciliation of non-IFRS measures

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

		Second quarter					Six-month period
		2014		2013		%	2014		2013		%
Net earnings		15,532		(9,295	)		23,920		(3,151	)
Adjustments:
	Income tax expense (recovery)	3,968		(7,950	)		4,047		(9,221	)
	Equity income	(795	)	(949	)		(1,296	)	(1,507	)
	Depreciation and amortization	7,751		6,771			15,347		14,315
	Finance costs, net	3,225		4,029			6,265		8,098
EBITDA		29,681		(7,394	)		48,283		8,534
	Restructuring charges and others	-		35,180			-		35,180
	Expenses related to the development and deployment of the enterprise resource planning system (ERP) (1)	-		829			414		1,790
	Expenses related to the network optimization and to the closure and disposal of stores (2)	1,625		705			3,445		1,127
Adjusted EBITDA		31,306		29,320		6.8	52,142		46,631		11.8
Adjusted EBITDA Margin		6.5	%	6.2	%		5.8	%	5.2	%

(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.

		Second quarter				Six-month period
		2014	2013		%	2014	2013		%
Net earnings (loss) attributable to shareholders, as reported		15,532	(9,295	)		23,920	(3,151	)
	Restructuring charges and others, net of taxes	-	23,926			-	23,926
	Expenses related to the development and deployment of the enterprise resource planning system (ERP), net of taxes	-	511			247	1,107
	Expenses related to the network optimization and to the closure and disposal of stores, net of taxes	938	419			2,026	674
Adjusted earnings		16,470	15,561		5.8	26,193	22,556		16.1
Net earnings (loss) per share attributable to shareholders, as reported		0.73	(0.43	)		1.12	(0.15	)
	Restructuring charges and others, net of taxes	-	1.11			-	1.11
	Expenses related to the development and deployment of the enterprise resource planning system (ERP), net of taxes	-	0.02			0.01	0.05
	Expenses related to the network optimization and to the closure and disposal of stores, net of taxes	0.04	0.02			0.10	0.03
Adjusted earnings per share		0.77	0.72		6.9	1.23	1.05		17.1

The effect of the declining Canadian dollar was $0.02 on earnings per share for the quarter and $0.03 for the six-month period.

UNI-SELECT INC.

CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)

(In thousands of US dollars, except per share amounts, unaudited)		Three-month periods ended June 30,				Six-month periods ended June 30,
		2014		2013		2014		2013
Sales		478,690		476,176		891,767		897,996
Purchases, net of changes in inventories		338,174		333,910		626,610		625,679
Gross margin		140,516		142,266		265,157		272,317
Employee benefits		73,347		74,645		142,102		149,082
Other operating expenses		37,488		39,835		74,772		79,521
Restructuring charges and others		-		35,180		-		35,180
Earnings (loss) before finance costs, depreciation and amortization, equity income and income taxes		29,681		(7,394	)	48,283		8,534
Finance costs, net		3,225		4,029		6,265		8,098
Depreciation and amortization		7,751		6,771		15,347		14,315
Earnings (loss) before equity income and income taxes		18,705		(18,194	)	26,671		(13,879	)
Equity income		795		949		1,296		1,507
Earnings (loss) before income taxes		19,500		(17,245	)	27,967		(12,372	)
Income tax expense (recovery)
	Current	5,202		5,456		8,203		4,756
	Deferred	(1,234	)	(13,406	)	(4,156	)	(13,977	)
		3,968		(7,950	)	4,047		(9,221	)
Net earnings (loss) attributable to shareholders		15,532		(9,295	)	23,920		(3,151	)
Earnings (loss) per share basic		0.73		(0.43	)	1.12		(0.15	)
Earnings (loss) per share diluted		0.72		(0.43	)	1.12		(0.15	)
Weighted average number of common shares outstanding basic (in thousands)		21,264		21,465		21,264		21,482
Weighted average number of common shares outstanding diluted (in thousands)		22,573		21,465		22,566		21,482

UNI-SELECT INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands of US dollars, unaudited)		Three-month periods ended June 30,				Six-month periods ended June 30,
		2014		2013		2014		2013
Net earnings (loss)		15,532		(9,295	)	23,920		(3,151	)
Other comprehensive income (loss)
Items that will subsequently be reclassified to net earnings (loss):
	Effective portion of changes in the fair value of cash flow hedges (net of income tax of $35 and $59 for the three and six-month periods ($60 and $47 in 2013))	(85	)	(162	)	(158	)	129
	Net change in the fair value of derivative financial instruments designated as cash flow hedges transferred to earnings (net of income tax of $48 and $88 for the three and six-month periods ($97 and $195 in 2013))	116		215		238		481
	Unrealized exchange gains (losses) on the translation of financial statements to the presentation currency	(5,307	)	6,501		(37	)	11,320
	Unrealized exchange gains (losses) on the translation of debt designated as a hedge of net investments in foreign operations	9,497		(9,089	)	300		(15,862	)
		4,221		(2,535	)	343		(3,932	)
Items that will not subsequently be reclassified to net earnings (loss):
	Remeasurements of long-term employee benefit obligations (net of income tax of $529 and $1,193 for the three and six-month periods ($794 and $1,160 in 2013))	(829	)	2,157		(3,222	)	3,154
Total other comprehensive income (loss)		3,392		(378	)	(2,879	)	(778	)
Comprehensive income (loss) attributable to shareholders		18,924		(9,673	)	21,041		(3,929	)

UNI-SELECT INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Attributable to shareholders
(In thousands of US dollars, unaudited)		Share capital		Con- tributed 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 loss		-		-	-	(3,151	)	-		(3,151	)
Other comprehensive income (loss)		-		-	-	3,154		(3,932	)	(778	)
Comprehensive income (loss)		-		-	-	3		(3,932	)	(3,929	)
Contributions by and distributions to shareholders:
	Share repurchases	(397	)	-	-	(1,565	)	-		(1,962	)
	Dividends	-		-	-	(5,429	)	-		(5,429	)
	Stock-based compensation	-		835	-	-		-		835
		(397	)	835	-	(6,994	)	-		(6,556	)
Balance, June 30, 2013		88,166		1,227	1,687	377,911		4,729		473,720
Balance, December 31, 2013		87,271		1,332	1,687	394,716		3,749		488,755
Net earnings		-		-	-	23,920		-		23,920
Other comprehensive income (loss)		-		-	-	(3,222	)	343		(2,879	)
Comprehensive income		-		-	-	20,698		343		21,041
Contributions by and distributions to shareholders:
	Share repurchases	(25	)	-	-	(123	)	-		(148	)
	Dividends	-		-	-	(5,434	)	-		(5,434	)
	Stock-based compensation	-		674	-	-		-		674
		(25	)	674	-	(5,557	)	-		(4,908	)
Balance, June 30, 2014		87,246		2,006	1,687	409,857		4,092		504,888

UNI-SELECT INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of US dollars, unaudited)		Three-month periods ended June 30,				Six-month periods ended June 30,
		2014		2013		2014		2013
OPERATING ACTIVITIES
Net earnings (loss)		15,532		(9,295	)	23,920		(3,151	)
Non-cash items:
	Finance costs, net	3,225		4,029		6,265		8,098
	Depreciation and amortization	7,751		6,771		15,347		14,315
	Restructuring charges and others	-		35,180		-		35,180
	Income tax expense (recovery)	3,968		(7,950	)	4,047		(9,221	)
	Other non-cash items	1,490		(618	)	5,291		(147	)
Changes in working capital items		20,793		12,167		12,290		11,425
Interest paid		(2,164	)	(2,805	)	(5,287	)	(7,732	)
Income taxes recovered (paid)		(3,672	)	1,919		(7,708	)	1,187
Cash flows from operating activities		46,923		39,398		54,165		49,954
INVESTING ACTIVITIES
Net business acquisitions		2,209		(448	)	(17,577	)	(1,401	)
Balances of purchase price		198		(136	)	36		(252	)
Advances to merchant members		(6,728	)	(3,775	)	(10,496	)	(6,883	)
Receipts on investments and advances to merchant members		1,944		1,781		3,994		4,257
Acquisitions of property and equipment		(1,960	)	(2,056	)	(3,464	)	(6,508	)
Disposals of property and equipment		221		307		361		483
Acquisitions and development of intangible assets		(3,242	)	(3,281	)	(4,243	)	(4,009	)
Cash flows used in investing activities		(7,358	)	(7,608	)	(31,389	)	(14,313	)
FINANCING ACTIVITIES
Increase in long-term debt		11,621		4,752		44,034		201,691
Repayment of long-term debt		(48,659	)	(33,886	)	(61,714	)	(229,499	)
Merchant members' deposits in the guarantee fund		(21	)	36		95		(467	)
Share repurchases		(148	)	-		(148	)	(1,962	)
Dividends paid		(2,369	)	(2,704	)	(5,044	)	(5,443	)
Cash flows used in financing activities		(39,576	)	(31,802	)	(22,777	)	(35,680	)
Effects of fluctuations in exchange rates on cash		2		(3	)	-		(5	)
Net decrease in cash		(9	)	(15	)	(1)		(44	)
Cash, beginning of period		65		93		57		122
Cash, end of period		56		78		56		78

UNI-SELECT INC.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(In thousands of US dollars, unaudited)		June 30,	Dec. 31,
		2014	2013
ASSETS
Current assets:
	Cash	56	57
	Trade and other receivables	256,494	220,942
	Income taxes receivable	18,060	16,883
	Inventory	504,760	532,045
	Prepaid expenses	12,951	11,417
	Total current assets	792,321	781,344
Equity investments, other investments and advances to merchant members		24,834	36,855
Property and equipment		52,336	49,494
Intangible assets		134,303	140,598
Goodwill		195,906	184,449
Deferred tax assets		10,752	13,151
TOTAL ASSETS		1,210,452	1,205,891
LIABILITIES
Current liabilities:
	Trade and other payables	352,534	341,429
	Provision for restructuring charges and others	10,196	15,185
	Dividends payable	2,992	2,598
	Current portion of long-term debt and merchant members' deposits in the guarantee fund	5,012	4,667
	Total current liabilities	370,734	363,879
Long-term employee benefit obligations		24,651	19,561
Long-term debt		254,736	273,165
Convertible debentures		47,169	46,829
Merchant members' deposits in the guarantee fund		7,063	6,988
Derivative financial instruments		781	890
Deferred tax liabilities		430	5,824
TOTAL LIABILITIES		705,564	717,136
EQUITY
Share capital		87,246	87,271
Contributed surplus		2,006	1,332
Equity component of the convertible debentures		1,687	1,687
Retained earnings		409,857	394,716
Accumulated other comprehensive income		4,092	3,749
TOTAL EQUITY		504,888	488,755
TOTAL LIABILITIES AND EQUITY		1,210,452	1,205,891