Uni-Select Inc.
TSX : UNS

Uni-Select Inc.

July 27, 2016 19:16 ET

Uni-Select Reports Second Quarter Financial Results for 2016

BOUCHERVILLE, QUÉBEC--(Marketwired - July 27, 2016) -

  • $323.8 million in sales, up 14.6% in total (excluding divestitures);

  • EBITDA margin(1)(2) of 9.2%;

  • Net earnings(2) of $16.8 million;

  • EPS(2) of $0.40;

  • 5 business acquisitions completed in Q2, adding 18 stores to growing network.

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

Uni-Select Inc. (TSX:UNS), a leader in the distribution of automotive refinish and industrial paint and related products across North America, as well as in the automotive aftermarket parts business in Canada, today reported its financial results for the second quarter ended June 30, 2016.

"We made good progress in Q2 on the earnings and acquisition fronts. The organic growth for the quarter was less than anticipated, but the outlook remains positive for the balance of the year." said Henry Buckley, President and Chief Executive Officer of Uni-Select. "Our teams are doing a terrific job utilizing our standardized processes to successfully integrate our acquisitions and drive sustainable growth to achieve our goals. We welcome all our new team members to the Uni-Select family."

(The 2016 results in dollars vary compared to last year's figures, since the second quarter and the six-month period of 2015 included respectively two and five months of operations from the net assets of Uni-Select USA, Inc. and Beck/Arnley Worldparts, Inc., sold on June 1, 2015 ("sale of the net assets").

For further information about the Corporation's use of the non-IFRS measures identified in this press release, refer to "Non-IFRS financial measures" and "Reconciliation of non-IFRS measures" sections.

SECOND QUARTER SIX-MONTH PERIOD
(In thousands of US dollars, except per share amounts and percentages) 2016 2015 2016 2015
Sales 323,758 408,299 587,788 819,984
EBITDA(1) 29,739 19,035 51,442 (103,230 )
Adjusted EBITDA(1) 29,739 31,051 51,442 50,542
Adjusted EBITDA margin(1) 9.2% 7.6% 8.8% 6.2%
Net earnings (loss) 16,806 12,373 28,289 (69,909 )
Adjusted earnings(1) 16,806 19,954 28,289 29,987
Earnings (loss) per share(3) 0.40 0.29 0.66 (1.64 )
Adjusted earnings per share(1) (3) 0.40 0.47 0.66 0.70
(1) Non-IFRS financial measures. Refer to the "Non-IFRS financial measures" and the "Reconciliation of non-IFRS measures" sections for further details.
(2) No adjustment to EBITDA, net earnings and EPS in the current quarter.
(3) 2-for-1 stock split of common shares was effected on May 11, 2016 for shareholders of record as at May 6, 2016. To reflect the effect of the stock split, information pertaining to the number of common shares has been retroactively restated.

SECOND QUARTER RESULTS

(All percentage increases and decreases represent year-over-year changes for the second quarter of 2016 compared to the second quarter of 2015, unless otherwise noted.)

Consolidated sales for the second quarter were $323.8 million, a 20.7% decrease, mainly due to the sale of the net assets in 2015. Excluding sales from the net assets sold, consolidated sales grew 14.6% compared to the same period last year. Additional sales from recent business acquisitions combined with the effect of an additional billing day in Canada, and organic growth exceeded the impact of the declining Canadian dollar on its conversion to US dollar, which alone penalized sales by $5.7 million or 2.0%.

On an organic basis, consolidated sales grew by 0.1%, supported by the net customer recruitment and existing customer growth in the Paint and related products segment, which was offset by the Automotive products segment performance, mainly explained by the ongoing economic conditions prevailing in the Prairies.

The Corporation generated an EBITDA and an adjusted EBITDA of $29.7 million for the second quarter of 2016, compared to an EBITDA of $19.0 million and adjusted EBITDA of $31.1 million last year. The EBITDA margin and adjusted EBITDA margin grew to 9.2%, up 160 points when compared to the adjusted EBITDA margin of 2015. Adjusted EBITDA margin enhancement was driven by the sale of net assets bearing a lower margin compared to the ongoing operations, as well as by a combination of accretive business acquisitions and ongoing buying conditions improvement in the Paint and related products segment. These factors were partially offset by negative synergies following the sale of net assets, acquisition and integration related costs as well as stock-based compensation expenses.

Net earnings were $16.8 million compared to $12.4 million and to adjusted earnings of $20.0 million last year. Earnings per share and adjusted earnings per share were $0.40 compared to $0.29 and $0.47 respectively in 2015.

Segmented Results

The Paint and related products segment recorded sales of $196.5 million, up 26.5% from 2015, or up 2.1% organically, primarily from existing customer growth coupled with new customer recruitment. The segment EBITDA margin and adjusted EBITDA margin were 12.4%, down 20 points from last year's adjusted EBITDA margin. Accretive business acquisitions and improved buying conditions were mainly offset by acquisition and integration costs related to the recent business acquisitions that are temporarily affecting EBITDA until integrations and synergies are completed.

Sales for the Automotive products segment were $127.3 million, from $252.9 million in the prior year. Excluding the impact on sales related to the net assets sold, sales increased by 0.2% compared to 2015. Organic growth and sales from recent business acquisitions combined with the effect of an additional billing day exceeded the weaker Canadian dollar which had an impact, on conversion to US dollar, of $5.7 million on sales or 4.5%. Segment organic sales decreased by 2.3% in the second quarter due to performance mainly from the difficult economic conditions prevailing in the oil and gas industry in the Prairies. EBITDA and adjusted EBITDA for the Automotive products segment amounted to $8.9 million in the second quarter, compared to EBITDA of $4.0 million and adjusted EBITDA of $14.0 million last year. The adjusted EBITDA margin reached 7.0%, a 140 points increase from 5.6% in 2015, attributable to the weaker performance from the operations that were sold on June 1, 2015 and to accretive business acquisitions.

SIX-MONTH PERIOD RESULTS

(All percentage increases and decreases represent year-over-year changes for the second quarter of 2016 compared to the second quarter of 2015, unless otherwise noted.)

Consolidated sales for the six-month period were $587.8 million, a 28.3% decrease, mainly due to the sale of the net assets in 2015. Excluding sales from the net assets sold, consolidated sales grew 12.9% compared to the same period last year. Sales from recent business acquisitions combined with organic growth, and the effect of an additional billing day exceeded the impact of the declining Canadian dollar on its conversion to US dollar, which alone penalized sales by $14.3 million or 2.7%.

On an organic basis, consolidated sales grew by 1.5%, supported by the net customer recruitment and existing customer growth in the Paint and related products segment, which was offset by the Automotive products segment performance mainly explained by the ongoing difficult economic conditions prevailing in the Prairies.

The Corporation generated an EBITDA and an adjusted EBITDA of $51.4 million for the six-month period of 2016, compared to a negative EBITDA of $103.2 million and adjusted EBITDA of $50.5 million last year. The EBITDA margin and adjusted EBITDA margin grew to 8.8%, up 260 points when compared to the adjusted EBITDA margin of 2015. That enhancement was driven by the sale of net assets bearing a lower margin compared to the ongoing operations, as well as accretive business acquisitions, improved buying conditions in the Paint and related products segment and lower stock-based compensation expenses in relation to the stock price. These factors were partially offset by negative synergies following the sale of net assets, predominantly related to the enterprise resource planning system and by acquisition and integration costs.

Net earnings grew to $28.3 million from a net loss of $69.9 million last year, while adjusted earnings decreased by 5.7%. Earnings per share and adjusted earnings per share both were $0.66 compared to a loss per share of $1.64 and adjusted earnings per share of $0.70 in 2015.

Segmented Results

The Paint and related products segment recorded sales of $369.9 million, up 22.0% from 2015, or up 3.1% organically, namely as a result of the existing customer growth and net customer recruitment. The segment EBITDA margin reached 12.2%, up 40 points from last year. This performance is notably attributable to improved buying conditions and accretive business acquisitions, partially offset by acquisition and integration costs related to the recent business acquisitions that are temporarily affecting EBITDA until integrations and synergies are completed.

Sales for the Automotive products segment were $217.9 million, from $516.8 million in the prior year. Excluding the impact on sales related to the net assets sold, sales increased by 0.2% compared to 2015. Sales from recent business acquisitions combined with the effect of an additional billing day exceeded the weaker Canadian dollar which had an impact, on its conversion to US dollar, of $14.3 million on sales or 6.6%. Segment organic sales decreased by 0.7% in the six-month period due to performance mainly explained by the ongoing difficult economic conditions prevailing in the oil and gas industry in the Prairies. EBITDA and adjusted EBITDA for the Automotive products segment amounted to $13.5 million for the six-month period, compared to a negative EBITDA of $126.1 million and adjusted EBITDA of $20.7 million last year. The adjusted EBITDA margin reached 6.2%, a 220 points increase from 4.0% in 2015, a performance attributable to the weaker performance from the operations sold on June 1, 2015 and to accretive business acquisitions.

DIVIDENDS

On July 27, 2016, the Uni-Select Board of Directors declared a dividend of C$0.085 per share payable on October 18, 2016 to shareholders of record on September 30, 2016. This dividend is an eligible dividend for tax purposes.

CONFERENCE CALL

Uni-Select will host a conference call to discuss its second quarter and six-month period results for 2016 on July 28, 2016 at 8 AM (EDT). To join the conference, dial 1 866 696-5910 followed by 2686549.

A recording of the conference call will be available from 10 AM (EDT) on July 28, 2016 until 11:59 PM (EDT) on August 8, 2016. To access the replay, dial 1 800 408-3053 followed by 2596890.

ABOUT UNI-SELECT

Uni-Select is a leader in the distribution of automotive refinish and industrial paint and related products across North America, as well as in the automotive aftermarket parts business in Canada. Its over 3,000 team members, spread across a network of 13 distribution centres and over 255 corporate stores, are dedicated to supplying its customers the right products, at the right place, and when they need them. Uni-Select also offers advanced solutions and first-rate service to enable its customers' success. In the United States, FinishMaster, Inc., a subsidiary of Uni-Select, operates a network of automotive refinish corporate stores from coast to coast under the FinishMaster banner and supports more than 6,000 collision repair centre customers. Uni-Select's Canadian automotive aftermarket parts and automotive refinish business supports a growing national network of more than 1,150 independent customers and corporate stores, several of which operate under Uni-Select store banner programs including Auto Parts Plus®, Auto Plus® and Bumper to Bumper®. In Canada, Uni-Select supports over 3,900 shops and stores through its automotive repair/installer shop banners Auto Select®, Uni-Pro®, and SAXΓÇ"(Select Auto Xpert), as well as through its automotive refinish banner, Carrossier ProColor®. Uni-Select is headquartered in Boucherville, Québec, Canada, 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 may include some forward-looking information, which could include certain risks and uncertainties, which may cause the final results to be significantly different from those listed or implied within this news release. 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 Management's Discussion and Analysis (MD&A), interim consolidated financial statements and related notes for the second quarter and six-month period of 2016 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.

The information included in this press release contains certain measures that are inconsistent 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.

NON-IFRS FINANCIAL MEASURES

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, net assets sold, exchange-rate fluctuations and when necessary, the variance in the number of billing days. This measure enables Uni-Select to evaluate the intrinsic trend in the sales generated by its operational base in comparison with the rest of the market. Determining the rate of organic growth, based on findings that Management regards as reasonable, may differ from the actual rate of organic growth.

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.

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, restructuring and other charges, impairment and transaction charges related to the sale of net assets and costs related to the closure and disposal of stores. The exclusion of these items does not indicate that they are non‐recurring.

EBITDA margin and adjusted EBITDA margin - The EBITDA margin is a percentage corresponding to the ratio of the EBITDA to sales. The adjusted EBITDA margin is a percentage corresponding to the ratio of adjusted EBITDA to sales.

Total net debt - This measure consists of long‐term debt, including the portion due within a year, net of cash.

RECONCILIATION OF NON-IFRS MEASURES

The following table presents a reconciliation of organic growth.

Second quarterSix-month period
2016 2015 2016 2015
United States196,477 281,227 369,890 602,480
Canada127,281 127,072 217,898 217,504
Sales323,758 408,299 587,788 819,984
Sales from net assets sold- (125,873)- (299,267)
Sales net of sales from net assets sold323,758 282,426 587,788 520,717
% %
Sales variance41,332 14.6 67,071 12.9
Effect of declining Canadian dollar5,692 2.0 14,272 2.7
Number of billing days(2,044)(0.7)(4,812)(0.9)
Impact of net assets sold (1)1,177 0.4 944 0.2
Acquisitions and others(45,822)(16.2)(69,679)(13.4)
Consolidated organic growth335 0.1 7,796 1.5
(1) Represents sales variance from customers belonging to net assets sold that was eliminated for consolidation purposes before June 1, 2015.

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

Second quarter Six-month period
2016 2015 % 2016 2015 %
Net earnings (loss)16,806 12,373 28,289 (69,909)
Income tax expense (recovery)7,608 1,381 14,497 (44,730)
Equity loss (income)- 15 - (110)
Depreciation and amortization3,788 2,879 6,622 6,861
Finance costs, net1,537 2,387 2,034 4,658
EBITDA29,739 19,035 51,442 (103,230)
Restructuring and other charges- (1,730) - 3,296
Impairment and transaction charges related to the sale of net assets- 13,544 - 147,546
Expenses related to the network optimization and to the closure and disposal of stores (1)- 202 - 2,930
Adjusted EBITDA29,739 31,051 (4.2)51,442 50,542 1.8
Adjusted EBITDA margin9.2% 7.6% 8.8% 6.2%
(1) Consist primarily 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
20162015 %20162015 %
Net earnings (loss) attributable to shareholders, as reported16,80612,373 28,289(69,909)
Restructuring and other charges, net of taxes-(1,109) -2,559
Impairment and transaction charges related to the sale of net assets, net of taxes-8,911 -95,587
Expenses related to the network optimization and to the closure and disposal of stores, net of taxes-(221) -1,750
Adjusted earnings16,80619,954 (15.8)28,28929,987 (5.7)
Net earnings (loss) per share attributable to shareholders, as reported0.400.29 0.66(1.64)
Restructuring and other charges, net of taxes-(0.03) -0.06
Impairment and transaction charges related to the sale of net assets, net of taxes-0.21 -2.24
Expenses related to the network optimization and to the closure and disposal of stores, net of taxes-- -0.04
Adjusted earnings per share0.400.47 (14.9)0.660.70 (5.7)

The effect of the declining Canadian dollar on its conversion to US dollar was $0.01 on earnings per share for the quarter compared to the same period of 2015, while the effect for the six-month period was $0.01 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 June 30,
Six-month period
ended June 30,
20162015 20162015
Sales323,758408,299 587,788819,984
Purchases, net of changes in inventories227,668285,451 411,634573,382
Gross margin96,090122,848 176,154246,602
Employee benefits45,87562,532 85,584132,738
Other operating expenses20,47629,467 39,12866,252
Restructuring and other charges-(1,730)-3,296
Impairment and transaction charges related to the sale of net assets-13,544 -147,546
Earnings (loss) before finance costs, depreciation and amortization, equity income and income taxes29,73919,035 51,442(103,230)
Finance costs, net1,5372,387 2,0344,658
Depreciation and amortization3,7882,879 6,6226,861
Earnings (loss) before equity income and income taxes24,41413,769 42,786(114,749)
Equity income (loss)-(15)-110
Earnings (loss) before income taxes24,41413,754 42,786(114,639)
Income tax expense (recovery)7,6081,381 14,497(44,730)
Net earnings (loss) attributable to shareholders16,80612,373 28,289(69,909)
Earnings (loss) per share (basic and diluted)0.400.29 0.66(1.64)
Weighted average number of common shares outstanding (in thousands)
Basic42,27742,651 42,64742,545
Diluted42,54142,867 42,90442,545
UNI-SELECT INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of US dollars, unaudited)Quarter
ended June 30,
Six-month period
ended June 30,
2016 2015 2016 2015
Net earnings (loss)16,806 12,373 28,289 (69,909)
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 $8 and $29 in 2015 for the quarter and the six-month period)- (22)- (78)
Net change in the fair value of derivative financial instruments designated as cash flow hedges transferred to earnings (net of income tax of $123 and $167 in 2015 for the quarter and the six-month period)- 332 - 452
Unrealized exchange gains (losses) on the translation of financial statements to the presentation currency(271)(761)12,032 1,755
Unrealized exchange gains (losses) on the translation of debt designated as a hedge of net investments in foreign operations- 3,889 - (10,257)
(271)3,438 12,032 (8,128)
Items that will not subsequently be reclassified to net earnings (loss):
Remeasurements of long-term employee benefit obligations (net of income tax of $750 and $598 for the quarter and the six-month period ($834 and $599 in 2015))(1,954)2,256 (1,558)1,617
Total other comprehensive income (loss)(2,225)5,694 10,474 (6,511)
Comprehensive income (loss) attributable to shareholders14,581 18,067 38,763 (76,420)
UNI-SELECT INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of US dollars, unaudited)Quarter
ended June 30,
Six-month period
ended June 30,
2016 2015 2016 2015
OPERATING ACTIVITIES
Net earnings (loss)16,806 12,373 28,289 (69,909)
Non-cash items:
Restructuring and other charges- (1,730)- 3,296
Impairment and transaction charges related to the sale of net assets- 13,544 - 147,546
Finance costs, net1,537 2,387 2,034 4,658
Depreciation and amortization3,788 2,879 6,622 6,861
Income tax expense (recovery)7,608 1,381 14,497 (44,730)
Amortization of incentives granted to customers3,486 2,818 6,636 5,757
Other non-cash items103 1,222 (775)4,057
Changes in working capital items5,307 9,162 (23,253)(26,025)
Interest paid(1,162)(1,826)(1,436)(4,544)
Income taxes recovery (paid)666 (2,709)(2,116)(7,074)
Cash flows from operating activities38,139 39,501 30,498 19,893
INVESTING ACTIVITIES
Business acquisitions(89,442)(416)(140,385)(10,728)
Net cash proceeds from sale of net assets- 323,604 - 323,604
Net balance of purchase price(1,866)(7)(2,022)(282)
Cash held in escrow(13,641)- (14,489)-
Advances to merchant members and incentives granted to customers(5,247)(3,258)(9,812)(6,454)
Reimbursement of advances to merchant members436 988 909 2,109
Dividends received from equity investments- - - 401
Net acquisitions of property and equipment(1,841)(4,305)(3,439)(9,330)
Acquisitions and development of intangible assets(1,286)(1,677)(1,780)(2,958)
Cash flows from (used in) investing activities(112,887)314,929 (171,018)296,362
FINANCING ACTIVITIES
Increase in long-term debt111,050 11,493 120,733 96,425
Repayment of long-term debt(22,206)(294,346)(33,835)(295,453)
Convertible debenture redemption- - - (41,713)
Net increase (decrease) in merchant members' deposits in the guarantee fund80 119 (303)48
Repurchase of shares(8,893)- (21,681)-
Issuance of shares497 8,447 1,090 8,546
Dividends paid(2,659)(2,608)(5,037)(5,267)
Cash flows from (used in) financing activities77,869 (276,895)60,967 (237,414)
Effects of fluctuations in exchange rates on cash3 (381)507 (421)
Net increase (decrease) in cash3,124 77,154 (79,046)78,420
Cash, beginning of period9,262 1,373 91,432 107
Cash, end of period12,386 78,527 12,386 78,527
UNI-SELECT INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands of US dollars, unaudited)June 30, Dec. 31,
2016 2015
ASSETS
Current assets:
Cash12,386 91,432
Cash held in escrow18,279 3,790
Trade and other receivables155,933 123,612
Income taxes receivable19,684 11,053
Inventory290,859 269,900
Prepaid expenses8,347 12,671
Total current assets505,488 512,458
Investments and advances to merchant members22,166 14,082
Property and equipment35,246 30,304
Intangible assets90,340 65,355
Goodwill244,862 157,270
Deferred tax assets34,794 55,681
TOTAL ASSETS932,896 835,150
LIABILITIES
Current liabilities:
Trade and other payables243,240 267,995
Balance of purchase price, net28,785 6,517
Provision for restructuring and other charges2,399 3,983
Dividends payable2,763 2,485
Current portion of long-term debt and merchant members' deposits in the guarantee fund2,683 2,704
Total current liabilities279,870 283,684
Long-term employee benefit obligations20,118 18,033
Long-term debt176,065 87,722
Merchant members' deposits in the guarantee fund5,587 5,531
Deferred tax liabilities1,026 3,202
TOTAL LIABILITIES482,666 398,172
EQUITY
Share capital96,957 97,864
Contributed surplus3,993 3,588
Retained earnings373,719 371,997
Accumulated other comprehensive loss(24,439)(36,471)
TOTAL EQUITY450,230 436,978
TOTAL LIABILITIES AND EQUITY932,896 835,150

Contact Information