Uni-Sélect Inc.
TSX : UNS

Uni-Sélect Inc.

November 11, 2008 13:00 ET

Uni-Select Inc.: 20.4% Increase in Net Earnings in the Third Quarter of 2008

BOUCHERVILLE, QUEBEC--(Marketwire - Nov. 11, 2008) - Uni-Select Inc. (TSX:UNS) reported sales of $328,728,000 in the third quarter of 2008, an increase of 10.0% compared to sales of $298,756,000 in 2007. The increase in sales for the Company is primarily due to the various acquisitions completed in recent quarters. Net earnings increased to $12,354,000 in the third quarter of 2008 or $0.63 per share compared to $10,258,000 or $0.52 per share last year which represents a 20.4% increase over last year. Contrary to the situation prevalent in the first semester, the fluctuations in the exchange rates had no significant impact on results for the quarter.

For the nine-month period ended September 30, 2008, sales were $943,057,000, an increase of $57,879,000 or 6.5% compared to the same period last year. Net earnings, increased 12.0%, to reach $31,104,000 or $1.58 per share compared to the net earnings of $27,761,000 or $1.41 per share attained in the first nine months of 2007.



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3rd QUARTER 9-MONTH PERIOD
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(in millions except earnings per share) 2008 2007 2008 2007
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Sales 328.7 298.8 943.1 885.2
Net earnings 12.4 10.3 31.1 27.8
Earnings per share 0.63 0.52 1.58 1.41
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Sales for Automotive Group USA reached $172,092,000 in the third quarter compared to $150,077,000 in the third quarter of 2007, an increase of 14.7%. The acquisitions completed in recent quarters contributed $31,584,000 to the increase in sales of the third quarter. The operating margin for the Group improved from 6.2% in the third quarter of 2007 to 7.0% this quarter as a result of continued improvement programs on margins and cost reduction.

For the nine-month period ended September 30, 2008, sales were $490,192,000, a 7.2% increase over the same period a year earlier. The fluctuation in exchange rates had a negative impact on the year-to-date sales (whereas there was no impact for the third quarter). Excluding this item, sales for the Group increased by 14.7%. As for the operating margin, it increased from 6.1% to 6.8% in 2008.

Automotive Group Canada reported an increase in sales of 1.9% in the third quarter of 2008 to reach $136,070,000 compared to $133,571,000 in the third quarter of 2007. The acquisitions completed in recent quarters contributed $8,427,000 to the increase in sales for the quarter. The operating margin of the Group was 8.1% compared to 7.9% in the third quarter last year.

For the nine-month period ended September 30, 2008, sales were $404,339,000, an increase of 5.4% over the same period of last year. The operating margin reached 7.5% in 2008 compared to 7.9% in 2007.

Sales for the Heavy Duty Group increased by 36.1% in the third quarter of 2008 to reach $20,566,000 compared to $15,108,000 in 2007. The operating margin of the Group was recorded at 4.7% in the third quarter of 2008 compared to 0.6% last year, primarily due to the significant increase in sales which is explained by a new supply agreement with a national retail chain.

For the nine-month period ended September 30, 2008, sales were $48,526,000, an increase of 10.4% over the same period of last year. The operating margin was negative at (1.5%), an improvement compared to (3.9%) in 2007.

"The continued improvement, integration and reorganization programs put in place in 2007, combined with the contribution of recently-acquired businesses, allow us to counter the effects of the economic environment currently prevailing in North America" said Richard G. Roy, President and Chief Executive Officer of Uni-Select. "We are confident that these programs, together with sales efforts, will continue to improve our margins and profitability during the fourth quarter of 2008. The fourth quarter will also benefit from the contribution of the assets acquired from Parts Depot at the end of the third quarter."

Finally, the Board of Directors of Uni-Select Inc. declared a quarterly dividend of $0.1075 per common share payable on January 20, 2009 to shareholders of record as at December 31, 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 NetworkTM includes over 2,400 independent jobbers and services over 3,500 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 NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2008 AND 2007
(in thousands of dollars, except earnings per share, unaudited)

3rd QUARTER 9 MONTHS
2008 2007 2008 2007
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$ $ $ $

SALES 328,728 298 756 943,057 885,178
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Earnings before the following
items 24,160 19 965 63,144 56,505

Interest (Note 4) 1,672 1 390 5,162 4,345
Amortization (Note 4) 2,587 2 332 7,962 6,972
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4,259 3 722 13,124 11,317
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Earnings before income taxes
and non-controlling interest 19,901 16,243 50,020 45,188
Income taxes
Current 1,983 4,750 11,471 15,874
Future 4,588 584 4,879 (536)
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6,571 5,334 16,350 15,338
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Earnings before
non-controlling interest 13,330 10,909 33,670 29,850
Non-controlling interest 976 651 2,566 2,089
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Net earnings 12,354 10,258 31,104 27,761
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Basic earnings and diluted
earnings per share (Note 5) 0.63 0.52 1.58 1.41
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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 NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2008 AND 2007
(in thousands of dollars, unaudited)

9 MONTHS
2008 2007
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$ $

Balance, beginning of period 287,712 255,355
Net earnings 31,104 27,761
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318,816 283,116

Redemption of common shares(a) 176 -
Dividends 6,364 6,363
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Balance, end of period 312,276 276,753
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(a) During the second quarter, 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 NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2008 AND 2007
(in thousands of dollars, unaudited)

3rd QUARTER 9 MONTHS
2008 2007 2008 2007
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$ $ $ $
Net earnings 12,354 10,258 31,104 27,761
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Other comprehensive income:

Unrealized losses on derivative
financial instruments designated
as cash flow hedges, net of
income taxes of $218 and $224
for the three-month and the
nine-month periods respectively (468) - (481) -

Reclassification of realized
gains (losses) to net earnings
on derivative financial
instruments designated as
cash flow hedges, net of income
taxes of ($53) and ($120) for
the three-month and the
nine-month periods respectively
($20 and $62 in 2007) 113 (45) 257 (134)

Unrealized gains (losses) on
translating financial statements
of self sustaining foreign
operations 5,413 (8,440) 10,206 (18,879)
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Other comprehensive income 5,058 (8,485) 9,982 (19,013)
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Comprehensive income 17,412 1,773 41,086 8,748
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The accompanying notes are an integral part of the interim consolidated
financial statements



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

3rd QUARTER 9 MONTHS
2008 2007 2008 2007
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$ $ $ $
OPERATING ACTIVITIES
Net earnings 12,354 10,258 31,104 27,761
Non-cash items
Amortization 2,587 2,332 7,962 6,972
Amortization of deferred gain on a
sale-leaseback arrangement (61) (57) (169) (122)
Future income taxes 4,588 584 4,879 (536)
Non-controlling interest 976 651 2,566 2,089
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20,444 13,768 46,342 36,164
Changes in working capital items (5,517) (10,622) (2,600) (10,547)
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CASH FLOWS FROM OPERATING
ACTIVITIES 14,927 3,146 43,742 25,617
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INVESTING ACTIVITIES
Temporary investments - - - 6,897
Business acquisitions (Note 6) (87,844) (55,279) (117,469) (71,335)
Non-controlling interest - - - (178)
Investments (1,094) - (1,419) -
Advances to merchant members (679) (388) (2,692) (1,535)
Receipts on advances to merchant
members 890 938 3,221 2,795
Fixed assets (3,129) (2,656) (9,295) (6,643)
Disposal of fixed assets 121 27 297 7,583
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CASH FLOWS FROM INVESTING
ACTIVITIES (91,735) (57,358) (127,357) (62,416)
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FINANCING ACTIVITIES
Bank indebtedness 7,348 16,913 6,091 3,025
Balance of purchase price 837 (108) 837 (1,006)
Financing costs - - (414) -
Long-term debt 71,349 39,890 84,977 41,708
Repayment of long-term debt (615) (321) (1,587) (1,807)
Merchant members' deposits in
guarantee fund (19) (19) 142 (333)
Issuance of shares - - - 528
Share redemption - - (197) -
Dividends paid (2,121) (2,122) (6,364) (6,211)
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CASH FLOWS FROM FINANCING
ACTIVITIES 76,779 54,233 83,485 35,904
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Increase (decrease) in cash and
cash equivalents (29) 21 (130) (895)
Cash and cash equivalents,
beginning of period 498 214 599 1,130
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Cash and cash equivalents,
end of period 469 235 469 235
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Dividends paid per share 0.108 0.108 0.323 0.315
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The accompanying notes are an integral part of the interim consolidated
financial statements.



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

SEPT. 30, 2008 SEPT. 30, 2007 DEC. 31, 2007
Audited
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$ $ $

ASSETS
CURRENT ASSETS
Cash and cash equivalents 469 235 599
Accounts receivable 187,540 151,831 141,043
Income taxes receivable 8,526 7,533 1,370
Inventory (Note 7) 429,756 325,496 341,545
Prepaid expenses 5,382 5,705 4,959
Derivative financial
instrument - 58 -
Future income taxes 6,122 6,628 8,671
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637,795 497,486 498,187
Investments and volume
discounts receivable 8,431 6,311 7,406
Fixed assets 49,372 40,033 41,526
Financing costs 759 560 488
Covenants not to compete 230 372 330
Goodwill 86,907 59,301 64,858
Future income taxes 2,781 1,806 2,778
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786,275 605,869 615,573
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LIABILITIES
CURRENT LIABILITIES
Bank indebtedness (Note 8) 43,823 27,097 35,887
Accounts payable 163,181 146,105 132,660
Dividends payable 2,122 2,122 2,122
Instalments on long-term debt
and on merchant members'
deposits in guarantee fund 36 101 577
Future income taxes 1,275 501 -
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210,437 175,926 171,246
Deferred gain on a
sale-leaseback arrangement 2,339 2,429 2,338
Long-term debt 182,152 92,854 91,786
Merchant members' deposits in
guarantee fund 7,783 7,783 7,294
Derivative financial instrument 328 - -
Future income taxes 4,470 4,817 3,838
Non-controlling interest 39,669 27,041 34,498
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447,178 310,850 311,000

SHAREHOLDERS' EQUITY
Capital stock 49,850 49,872 49,872
Retained earnings 312,276 276,753 287,712
Accumulated other
comprehensive income (Note 9) (23,029) (31,606) (33,011)
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289,247 245,147 254,701
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339,097 295,019 304,573
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786,275 605,869 615,573
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The accompanying notes are an integral part of the interim consolidated
financial statements.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 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



3rd QUARTER 9 MONTHS
Interest 2008 2007 2008 2007
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$ $ $ $
Interest on bank indebtedness 553 628 2,078 2,013
Interest on long-term debt 1,183 1,070 3,261 3,042
Interest on merchant members' deposits
in guarantee fund 86 91 268 298
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1,822 1,789 5,607 5,353
Interest income on cash and cash
equivalents (11) (226) (32) (603)
Interest income from merchant members (139) (173) (413) (405)
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1,672 1,390 5,162 4,345
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Amortization
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Amortization of fixed assets 2,485 2,206 7,663 6,572
Amortization of other assets 102 126 299 400
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2,587 2,332 7,962 6,972
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5. EARNINGS PER SHARE

Weighted average number of shares for the calculation of basic earnings per share is 19,727,958 for the three-month period ended September 30, 2008 (19,736,558 in 2007) and 19,732,080 for the nine-month period ended September 30, 2008 (19,724,742 in 2007). Impact of stock options exercised is 18,644 shares for the three-month period ended September 30, 2008 (27,346 in 2007) and 20,554 for the nine-month period ended September 30, 2008 (33,533 in 2007) which total a weighted average number of shares of 19,746,602 for the three-month period ended September 30, 2008 (19,763,904 in 2007) and 19,752,634 for the nine-month period ended September 30, 2008 (19,758,275 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 a portion of the assets and liabilities of one company operating in the Automotive Canada segment and four companies in the Automotive USA segment, one of which is Parts Depot.

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, including acquisition costs of $361:



Parts Depot(1) Other Total
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$
Current assets 72,010 32,388 104,398
Fixed assets 4,288 1,178 5,466
Other long-term assets 676 22 698
Goodwill 11,423 8,217 19,640
Current liabilities (914) (11,488) (12,402)
Long-term liabilities - (48) (48)
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87,483 30,269 117,752
Cash of companies acquired 31 249 280
Total consideration paid less cash
acquired 87,452 30,017 117,469
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Balance of purchase price payable - 3 3
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(1) Acquisition of a portion of the assets on September 15, 2008.


7. INVENTORY

Cost of inventory recognized as an expense for the three-month period ended September 30, 2008 is $248,619 ($234,679 in 2007) and $722,748 for the nine-month period ended September 30, 2008 ($694,559 in 2007).

For the three-month and nine-month periods ended September 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. The credit facility also includes a $90,000 operating credit which is also used for the issuance of letters of guarantee and is renewable annually in October. As at September 30, 2008, the issued letters of guarantee totalled $5,639 ($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 September 30, 2008, interest rates vary between 3.81% and 5.50% (5.35% and 7.75% as at December 31, 2007).

9. ACCUMULATED OTHER COMPREHENSIVE INCOME



SEPTEMBER 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 9,982 (20,418)
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Balance, end of period (23,029) (33,011)
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10. EMPLOYEE FUTURE BENEFITS

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

For the three-month period ended September 30, 2008, the total expense for the defined contribution pension plans was $241 (($33) in 2007) and $601 ($575 in 2007) for the defined benefit pension plans.

For the nine-month period ended September 30, 2008, the total expense for the defined contribution pension plans was $758 ($879 in 2007) and $1,802 ($1,780 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 $66,751 ($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.

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



SEPTEMBER 30, 2008 DEC. 31, 2007
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Total net debt / invested capital ratio(2)(3) 40.8% 30.7%
Long-term debt / equity ratio(2)(3) 56.0% 32.7%
Funded debt / EBITDA ratio(1)(2)(3) 2.77 1.76
Return on shareholders' equity ratio(1)(3) 13.9% 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. Further to the
acquisition of a portion of the assets of Parts Depot, the debt has
increased temporarily until current liabilities have rebuilt.

(3) Notably, acquisitions in the last quarters such as the acquisition of
a portion of the assets of Parts Depot did not contribute to the
results of the last 12-month period ended September 30, 2008
proportionnally 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 September 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 September 30, 2008 are summarized in the following table:



Carrying Fair
amount value
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Other
Derivative Loans and financial
financial Held-for- recei- liabi-
instruments trading vables(1) lities Total
$ $ $ $ $ $
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Financial
Assets
Cash and cash
equivalents - 469 - - 469 469
Accounts
receivable - - 187,540 - 187,540 187,540
Investments and
volume
discounts
receivable - - 8,431 - 8,431 8,431
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- 469 195,971 - 196,440 196,440
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Financial
Liabilities
Bank
indebtedness - - - 43,823 43,823 43,823
Accounts
payable - - - 163,181 163,181 163,181
Dividends
payable - - - 2,122 2,122 2,122
Derivative
financial
instrument 328 - 328 328
Long-term debt - - - 182,188 182,188 182,188
Merchant
members'
deposits in
guarantee fund - - - 7,783 7,783 7,783
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328 - - 399,097 399,425 399,425
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(1) Interest income on loans and receivables for the three-month period
ended September 30, 2008 represents $385 ($364 in 2007) and $1,023 for
the nine-month period ended September 30, 2008 ($979 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 $328 ($0 at December 31, 2007) (see Note 16).

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 September 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 September 30, 2008, past-due accounts receivable represent $11,521 and an allowance for doubtful accounts of $3,882 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 1,652
Write-off (694)
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Balance at September 30, 2008 3,882
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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 September 30, 2008, the Company benefits from an unused credit facility of approximately $95,000.

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 September 30, 2008, the fixed rate portion of financial debt represents 29% of the total, while the variable rate portion represents 71% (see Note 16).

A 25 basis points rise or fall in interest rates, assuming that all other variables remain the same, would have resulted in a $38 decrease or increase, respectively, in the Company's net earnings for the three-month period ended September 30, 2008 and $125 for the nine-month period, whereas other comprehensive income would have resulted in a $311 increase or decrease, respectively for both the three-month and nine-month periods.

14. SEGMENTED INFORMATION



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3rd QUARTER
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Automotive Canada Automotive USA
2008 2007 2008 2007
$ $ $ $
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Sales 136 070 133 571 172 092 150 077
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Earnings before interests,
amortization, income taxes and
non-controlling interest 11 071 10 531 12 124 9 336
-------------------------------------------------------------------------
Assets 260 679 230 637 483 676 339 029

Acquisition of fixed assets 1 037 1 720 6 184 5 380

Acquisition of goodwill 103 (42) 11 597 15 720
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-------------------------------------------------------------------------
3rd QUARTER
-------------------------------------------------------------------------
Heavy Duty Consolidated
2008 2007 2008 2007
$ $ $ $
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Sales 20 566 15 108 328 728 298 756
-------------------------------------------------------------------------

Earnings before interests,
amortization, income taxes and
non-controlling interest 965 98 24 160 19 965
-------------------------------------------------------------------------
Assets 41 920 36 203 786 275 605 869

Acquisition of fixed assets 30 22 7 251 7 122

Acquisition of goodwill - - 11 700 15 678
-------------------------------------------------------------------------

-------------------------------------------------------------------------
9 MONTHS
-------------------------------------------------------------------------
Automotive Canada Automotive USA
2008 2007 2008 2007
$ $ $ $
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Sales 404,339 383,788 490,192 457,428
-------------------------------------------------------------------------

Earnings before interest,
amortization, income taxes and
non-controlling interest 30,519 30,418 33,338 27,794
-------------------------------------------------------------------------
Assets 260,679 230,637 483,676 339,029

Acquisition of fixed assets 4,440 3,648 10,209 8,142

Acquisition of goodwill 7,751 1,464 11,889 17,316
-------------------------------------------------------------------------

-------------------------------------------------------------------------
9 MONTHS
-------------------------------------------------------------------------
Heavy Duty Consolidated
2008 2007 2008 2007
$ $ $ $
-------------------------------------------------------------------------
Sales 48,526 43,962 943,057 885,178
-------------------------------------------------------------------------

Earnings before interest,
amortization, income taxes and
non-controlling interest (713) (1,707) 63,144 56,505
-------------------------------------------------------------------------
Assets 41,920 36,203 786,275 605,869

Acquisition of fixed assets 112 81 14,761 11,871

Acquisition of goodwill - - 19,640 18,780
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The Automotive USA segment includes fixed assets for an amount of $23,818
($16,273 as at September 30, 2007) and goodwill for an amount of $49,006
($31,487 as at September 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.

16. SUBSEQUENT EVENT

On October 27, 2008, the Company entered into two interest rate swap agreements for the nominal amount of $30,000 each as part of the Company's program to manage the floating interest rate, the whole as set out in Note 13. These agreements bear interest at rates of 3.50% and 3.35% and expire in three equal portions of $20,000 in 2011, 2012 and 2013.

Contact Information

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