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 SAX (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 quarter				Six-month period
			2016		2015		2016		2015
United States			196,477		281,227		369,890		602,480
Canada			127,281		127,072		217,898		217,504
Sales			323,758		408,299		587,788		819,984
		Sales from net assets sold	-		(125,873	)	-		(299,267	)
Sales net of sales from net assets sold			323,758		282,426		587,788		520,717
					%				%
	Sales variance		41,332		14.6		67,071		12.9
		Effect of declining Canadian dollar	5,692		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 growth			335		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 amortization	3,788			2,879				6,622			6,861
	Finance costs, net	1,537			2,387				2,034			4,658
EBITDA		29,739			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 EBITDA		29,739			31,051		(4.2	)	51,442			50,542		1.8
Adjusted EBITDA margin		9.2	%		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
		2016	2015		%	2016	2015		%
Net earnings (loss) attributable to shareholders, as reported		16,806	12,373			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 earnings		16,806	19,954		(15.8)	28,289	29,987		(5.7)
Net earnings (loss) per share attributable to shareholders, as reported		0.40	0.29			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 share		0.40	0.47		(14.9)	0.66	0.70		(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,
		2016	2015		2016	2015
Sales		323,758	408,299		587,788	819,984
Purchases, net of changes in inventories		227,668	285,451		411,634	573,382
Gross margin		96,090	122,848		176,154	246,602
Employee benefits		45,875	62,532		85,584	132,738
Other operating expenses		20,476	29,467		39,128	66,252
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 taxes		29,739	19,035		51,442	(103,230	)
Finance costs, net		1,537	2,387		2,034	4,658
Depreciation and amortization		3,788	2,879		6,622	6,861
Earnings (loss) before equity income and income taxes		24,414	13,769		42,786	(114,749	)
Equity income (loss)		-	(15	)	-	110
Earnings (loss) before income taxes		24,414	13,754		42,786	(114,639	)
Income tax expense (recovery)		7,608	1,381		14,497	(44,730	)
Net earnings (loss) attributable to shareholders		16,806	12,373		28,289	(69,909	)
Earnings (loss) per share (basic and diluted)		0.40	0.29		0.66	(1.64	)
Weighted average number of common shares outstanding (in thousands)
	Basic	42,277	42,651		42,647	42,545
	Diluted	42,541	42,867		42,904	42,545

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 shareholders		14,581		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, net	1,537		2,387		2,034		4,658
	Depreciation and amortization	3,788		2,879		6,622		6,861
	Income tax expense (recovery)	7,608		1,381		14,497		(44,730	)
	Amortization of incentives granted to customers	3,486		2,818		6,636		5,757
	Other non-cash items	103		1,222		(775	)	4,057
Changes in working capital items		5,307		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 activities		38,139		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 members		436		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 debt		111,050		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 fund		80		119		(303	)	48
Repurchase of shares		(8,893	)	-		(21,681	)	-
Issuance of shares		497		8,447		1,090		8,546
Dividends paid		(2,659	)	(2,608	)	(5,037	)	(5,267	)
Cash flows from (used in) financing activities		77,869		(276,895	)	60,967		(237,414	)
Effects of fluctuations in exchange rates on cash		3		(381	)	507		(421	)
Net increase (decrease) in cash		3,124		77,154		(79,046	)	78,420
Cash, beginning of period		9,262		1,373		91,432		107
Cash, end of period		12,386		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:
	Cash	12,386		91,432
	Cash held in escrow	18,279		3,790
	Trade and other receivables	155,933		123,612
	Income taxes receivable	19,684		11,053
	Inventory	290,859		269,900
	Prepaid expenses	8,347		12,671
	Total current assets	505,488		512,458
Investments and advances to merchant members		22,166		14,082
Property and equipment		35,246		30,304
Intangible assets		90,340		65,355
Goodwill		244,862		157,270
Deferred tax assets		34,794		55,681
TOTAL ASSETS		932,896		835,150
LIABILITIES
Current liabilities:
	Trade and other payables	243,240		267,995
	Balance of purchase price, net	28,785		6,517
	Provision for restructuring and other charges	2,399		3,983
	Dividends payable	2,763		2,485
	Current portion of long-term debt and merchant members' deposits in the guarantee fund	2,683		2,704
	Total current liabilities	279,870		283,684
Long-term employee benefit obligations		20,118		18,033
Long-term debt		176,065		87,722
Merchant members' deposits in the guarantee fund		5,587		5,531
Deferred tax liabilities		1,026		3,202
TOTAL LIABILITIES		482,666		398,172
EQUITY
Share capital		96,957		97,864
Contributed surplus		3,993		3,588
Retained earnings		373,719		371,997
Accumulated other comprehensive loss		(24,439	)	(36,471	)
TOTAL EQUITY		450,230		436,978
TOTAL LIABILITIES AND EQUITY		932,896		835,150