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Press release from Marketwire

$7.6 Million in Net Earnings for Uni-Select in First Quarter of 2010

Tuesday, May 04, 2010

$7.6 Million in Net Earnings for Uni-Select in First Quarter of 201012:28 EDT Tuesday, May 04, 2010 BOUCHERVILLE, QUEBEC--(Marketwire - May 4, 2010) - Uni-Select Inc. (TSX:UNS) reported sales of $307 million for the first quarter of 2010, compared to sales of $351 million in 2009. The conversion of the results in Canadian dollars reduced the sales by $38.6 million as a consequence of the increased value of the Canadian dollar while the sale and closure of corporate stores during the previous quarters decreased the sales by $7.6 million. Net earnings were $7.6 million in the first quarter of 2010 or $0.39 per share compared to $8.0 million or $0.41 per share a year prior. It is notable that the exchange rate variation had an impact of almost $1.0 million on results for the quarter; excluding this item, results for the quarter would have exceeded those of 2009. 1st QUARTER ----------------------------------------------------------------------- (in millions of dollars, except for earnings per share) 2010 2009 ----------------------------------------------------------------------- Sales 307.0 350.8 ----------------------------------------------------------------------- Adjusted EBITDA from continuing operations 15.8 20.7 ----------------------------------------------------------------------- EBITDA from continuing operations 14.6 20.7 ----------------------------------------------------------------------- Adjusted earnings from continuing operations 8.4 9.0 ----------------------------------------------------------------------- Earnings from continuing operations 7.6 9.0 ----------------------------------------------------------------------- Net earnings 7.6 8.0 ----------------------------------------------------------------------- Adjusted earnings per share from continuing operations 0.43 0.46 ----------------------------------------------------------------------- Earnings per share from continuing operations 0.39 0.46 ----------------------------------------------------------------------- Net earnings per share 0.39 0.41 ----------------------------------------------------------------------- Excluding the effects of the foreign exchange variation and the impact from store closures in 2009, Uni- Select recorded close to 1% in organic sales growth. Excluding the effects of the foreign exchange, sales for US operations reached $193.2 million, a 0.9% increase compared to the previous period; Canadian operations recorded a slight decrease of 0.2% at $113.8 million.The operating margin, adjusted to exclude non-recurring expenses from the development of information technology, went from 5.9% in the first quarter of 2009 to 5.2% for the corresponding period this year. The gains derived from the cost reduction program partially compensated the decrease in margin resulting from pressure on prices and changes in the product lines sold."These results, while they include a non-recurring item, are below our expectations. As mentioned when we announced our fourth quarter results for 2009, significant efforts were made in 2009 to reduce excess assets and redistribute funds towards more profitable investments, such as the purchase of the minority shareholders' stake in Uni-Select USA and the development of an enterprise resource planning system which will be launched during the course of the year. Improvements in store performance, distribution optimisation and the use of technology in asset management are at the heart of our 2010 initiatives" said Mr. Richard G. Roy, President and Chief Executive Officer of Uni-Select."We maintain our focus and efforts in order to pursue our growth through acquisitions in the United States where development opportunities remain due to relative market fragmentation. Lastly, management is confident that, through the deployment of its growth strategy and strict expense and asset controls, it will improve profitability in the short and long run. We are positioning ourselves to fully benefit from existing business opportunities in our market segment" added Mr. Roy.In closing, the Board of Directors of Uni-Select Inc. declared a quarterly dividend of $0.1165 per common share payable on July 20, 2010, to shareholders of record as at June 30, 2010. This dividend is an eligible for tax purposes.Unless otherwise indicated, all amounts specified in this release are in Canadian dollars.Uni-Select is a Canadian leader in the distribution of automotive replacement parts, equipment, tools and accessories. Uni-Select USA, Inc., a subsidiary of the Company provides services to customers in the United States where it is the 7th largest distributor. The Uni-Select Network(TM)includes over 2,500 independent jobbers and services 3,500 points of sale in North America. Uni-Select is headquartered in Montreal. Uni-Select shares (UNS) are traded on the TSX.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 with the Canadian securities commissions. 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 resultof new information, future events or other changes. Uni-Select Inc. Consolidated Earnings Three-month periods ended March 31, 2010 and 2009 (In thousands of dollars, except earnings per share, unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- 3 months ------------------------- 2010 2009 ------------ ------------ $ $ Sales 306,964 350,844 ------------ ------------ ------------ ------------ Earnings before the following items: 14,614 20,709 ------------ ------------ Interest (Note 3) 1,618 2,292 Amortization (Note 3) 3,403 3,790 ------------ ------------ 5,021 6,082 ------------ ------------ Earnings before income taxes and non-controlling interest 9,593 14,627 ------------ ------------ Income taxes (Note 4) Current 11,024 8,142 Future (8,947) (3,480) ------------ ------------ 2,077 4,662 ------------ ------------ Earnings before non-controlling interest 7,516 9,965 Non-controlling interest (85) 971 ------------ ------------ Earnings from continuing operations 7,601 8,994 Loss from discontinued operations (Note 8) - (981) ------------ ------------ Net earnings 7,601 8,013 ------------ ------------ ------------ ------------ Basic and diluted earnings per share (Note 5) From continuing operations 0.39 0.46 From discontinued operations - (0.05) ------------ ------------ Net income 0.39 0.41 ------------ ------------ ------------ ------------ Weighted average number of outstanding shares 19,716,357 19,697,727 Number of issued and outstanding shares 19,722,337 19,708,796 ------------ ------------ ------------ ------------ ------------------------------------------------------------------------- ------------------------------------------------------------------------- The accompanying notes are an integral part of the consolidated financial statements. Uni-Select Inc. Consolidated Comprehensive Income Consolidated Retained Earnings Three-month periods ended March 31, 2010 and 2009 (In thousands of dollars, unaudited) --------------------------------------------------------------------------- --------------------------------------------------------------------------- 3 months --------------------------- 2010 2009 ------------- ------------- $ $ CONSOLIDATED COMPREHENSIVE INCOME Net earnings 7,601 8,013 ------------- ------------- Other comprehensive income Unrealized losses on derivative financial instruments designated as cash flow hedges (net of income taxes of $496 ($286 in 2009)) (1,158) (614) Reclassification of realized losses to net earnings on derivative financial instruments designated as cash flow hedges (net of income taxes of $267 ($219 in 2009)) 796 470 Unrealized exchange gain (loss) on translation of long-term debt designated as a hedge of net investments in self-sustaining foreign subsidiairies 5,295 (591) Unrealized exchange gains (losses) on translating financial statements of self- sustaining foreign subsdiaries (11,387) 6,265 ------------- ------------- Other comprehensive income (6,454) 5,530 ------------- ------------- Comprehensive income 1,147 13,543 ------------- ------------- ------------- ------------- CONSOLIDATED RETAINED EARNINGS Balance, beginning of year 353,625 324,241 Net earnings 7,601 8,013 ------------- ------------- 361,226 332,254 Dividends 2,298 2,295 ------------- ------------- Balance, end of year 358,928 329,959 ------------- ------------- ------------- ------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- The accompanying notes are an integral part of the consolidated financial statements. Uni-Select Inc. Consolidated Cash Flows Three-month periods ended March 31, 2010 and 2009 (In thousands of dollars, except dividends paid per share, unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- 3 months ------------------------- 2010 2009 ------------ ------------ $ $ OPERATING ACTIVITIES Earnings from continuing operations 7,601 8,994 Non-cash items Amortization 3,403 3,790 Amortization of deferred gain on a sale- leaseback arrangement (54) (67) Future income taxes (8,947) (3,480) Compensation cost relating to stock option plans 20 32 Pension expense in excess of contributions 341 197 Non-controlling interest (85) 971 ------------ ------------ 2,279 10,437 Changes in working capital items (34,007) (27,885) ------------ ------------ Cash flows from continuing operating activities (31,728) (17,448) Cash flows from discontinued operating activities (1,102) 1,428 ------------ ------------ Cash flows from operating activities (32,830) (16,020) ------------ ------------ INVESTING ACTIVITIES Business acquisitions (Note 6) (1,074) (668) Disposal of assets (Note 7) 1,417 - Balance of selling price 950 117 Buy-back of non-controlling interest - (37) Investments 17 - Advances to merchant members (729) (371) Receipts on advances to merchant members 1,094 1,248 Fixed assets (2,904) (2,179) Disposal of fixed assets 364 - Intangible assets (6,433) (1,195) ------------ ------------ Cash flows from continuing investing activities (7,298) (3,085) Cash flows from discontinued investing activities - (43) ------------ ------------ Cash flows from investing activities (7,298) (3,128) ------------ ------------ FINANCING ACTIVITIES Bank indebtedness 26,585 12,117 Repayment of long-term debt (26) (1,356) Merchant members' deposits in guarantee fund 64 61 Issuance of shares 90 202 Dividends paid (2,298) (2,118) ------------ ------------ Cash flows from continuing financing activities 24,415 8,906 ------------ ------------ Effect of exchange rate changes on cash (87) 757 ------------ ------------ Decrease in cash (15,800) (9,485) Cash, beginning of year 15,850 9,682 ------------ ------------ Cash, end of year 50 197 ------------ ------------ ------------ ------------ Dividends paid per share 0.117 0.108 ------------ ------------ ------------ ------------ ------------------------------------------------------------------------- ------------------------------------------------------------------------- The accompanying notes are an integral part of the consolidated financial statements. Uni-Select Inc. Consolidated Balance Sheets March 31, 2010 and 2009 (In thousands of dollars, unaudited) ------------------------------------------------------------------------- ------------------------------------------------------------------------- March 31 March 31 December 31 2010 2009 2009 -------- --------------------- $ $ $ (audited) ASSETS Current assets Cash 50 197 15,850 Accounts receivable 167,624 194,291 150,440 Income taxes receivable - 4,042 3,859 Inventory (Note 9) 402,455 495,280 402,550 Prepaid expenses 6,713 6,262 6,914 Future income taxes 10,189 10,390 10,065 Assets from discontinued operations (Note 8) 2,847 - 3,777 -------- --------------------- 589,878 710,462 593,455 Investments and volume discounts receivable, at cost 16,933 8,045 16,831 Fixed assets 39,415 47,800 39,660 Financing costs 525 733 555 Intangible assets 35,172 16,576 27,836 Goodwill 92,224 101,390 93,961 Future income taxes 3,151 3,632 3,359 -------- --------------------- 777,298 888,638 775,657 -------- --------------------- -------- --------------------- LIABILITIES Current liabilities Bank indebtedness 26,102 12,197 44 Accounts payable 172,775 199,447 181,773 Income taxes payable 1,737 - - Dividends payable 2,298 2,295 2,298 Instalments on long-term debt and on merchant members' deposits in guarantee fund 96 148 402 Future income taxes 2,201 2,148 11,192 Liabilities from discontinued operations (Note 8) 352 - 2,384 -------- --------------------- 205,561 216,235 198,093 Deferred gain on a sale-leaseback arrangement 1,922 2,651 2,036 Long-term debt 173,578 214,614 178,866 Merchant members' deposits in guarantee fund 7,623 8,027 7,288 Derivative financial instruments 5,773 8,831 5,182 Future income taxes 7,598 5,024 7,821 Non-controlling interest 3,367 49,073 3,453 -------- --------------------- 405,422 504,455 402,739 -------- --------------------- SHAREHOLDERS' EQUITY Capital stock 50,242 50,040 50,152 Contributed surplus 374 259 355 Retained earnings 358,928 329,959 353,625 Accumulated other comprehensive income (Note 10) (37,668) 3,925 (31,214) -------- --------------------- 371,876 384,183 372,918 -------- --------------------- 777,298 888,638 775,657 -------- --------------------- -------- --------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- The accompanying notes are an integral part of the consolidated financial statements. Uni-Select Inc. Notes to Consolidated Financial Statements March 31, 2010 and 2009 (In thousands of dollars, except for per share amounts, unaudited) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 1 - BASIS OF PRESENTATIONThe 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, 2009. 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, 2009. 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.These interim financial statements follow the same accounting policies as 2009. Certain comparative figures have been reclassified to conform with the presentation adopted in 2010. The Company now discloses one operating segment being the automotive parts distribution.2 - FUTURE ACCOUNTING CHANGESBusiness combinationsIn January 2009, the CICA issued Section 1582, Business Combinations, which supersedes the like-named Section 1581. This Section applies prospectively to business combinations for which the date of acquisition is in fiscal years beginning on or after January 1, 2011. The Section establishes standards for the recognition of a business combination. The Company will analyze the effects of the adoption of this Section together with the analysis of the International Financial Reporting Standards.Consolidated financial statementsIn January 2009, the CICA issued Section 1601, Consolidated Financial Statements, which supersedes the like-named Section 1600. This Section applies to interim and annual financial statements for fiscal years beginning on or after January 1, 2011. The Section establishes standards for the preparation of consolidated financial statements. The Company will analyze the effects of the adoption of this Section together with the analysis of the International Financial Reporting Standards.Non-controlling interestsIn January 2009, the CICA issued Section 1602, Non-controlling Interests, which supersedes Section 1600, Consolidated financial statements. This Section applies to interim and annual financial statements for fiscal years beginning on or after January 1, 2011. The Section establishes standards for the accounting of non-controlling interests in a subsidiary in the consolidated financial statements subsequent to a business combination. The Company will analyze the effects of the adoption of this Section together with the analysis of the International Financial Reporting Standards.3 - INFORMATION INCLUDED IN CONSOLIDATED EARNINGS 3 months --------------------- 2010 2009 ---------- ---------- $ $ Interest from Other financial liabilities Interest on bank indebtedness 98 323 Interest on long-term debt 1,576 2,044 Interest on merchant members' deposits in guarantee fund 29 67 ---------- ---------- 1,703 2,434 Held-for-trading financial assets Interest income on cash (25) (4) Loans and receivables Interest income from merchant members (60) (138) ---------- ---------- (85) (142) ---------- ---------- 1,618 2,292 ---------- ---------- ---------- ---------- Amortization Amortization of fixed assets 2,735 3,130 Amortization of intangible assets and other assets 668 660 ---------- ---------- 3,403 3,790 ---------- ---------- ---------- ---------- 4 - INCOME TAXES The Company's effective income tax rate differs from the combined statutory rate in Canada. This difference arises from the following items: 3 months ------------------- 2010 2009 --------- --------- % % Federal statutory rate 18.00 19.00 Provinces' statutory tax rates 11.25 11.86 Various tax rates applied in tax jurisdictions of foreign operations 9.68 4.69 --------- --------- Combined statutory rate of the Company 38.93 35.55 Tax benefit from a financing structure (18.02) (2.09) Non-deductible tax expenses 0.35 0.35 Earnings taxable at lower rates in future years (0.22) (0.21) Recognition of previously unrecorded tax benefits - (1.28) Other 0.61 (0.45) --------- --------- 21.65 31.87 --------- --------- --------- --------- 5 - EARNINGS PER SHAREWeighted average number of shares for the calculation of basic earnings per share is 19,716,357 for the three-month period ended March 31, 2010 (19,697,727 in 2009). Impact of stock options exercised is 11,574 shares for the three-month period ended March 31, 2010 (17,296 in 2009) which total a weighted average number of shares of 19,727,931 for the three-month period ended March 31, 2010 (19,715,023 in 2009) for calculation of diluted earnings per share.6 - BUSINESS ACQUISITIONSThe Company acquired the shares of a company for a cash consideration of $1,074 and a contingent consideration payable to the sellers based on the achievement of specific performance objectives. Purchase price allocation will be reviewed to consider the contingent consideration when it can be determined by the Company that the objectives will be achieved.7 - DISPOSAL OF ASSETSThe Company sold some of the assets and liabilities of a store for a cash consideration of $2,132 of which $715 is receivable.8 - DISCONTINUED OPERATIONSIn 2009, the Company has proceeded to the disposal of certain assets and liabilities of its Palmar Inc. subsidiary.Pursuant to Section 3475 of CICA Handbook, titled "Disposal of Long-Lived Assets and Discontinued Operations", the group's operating results and loss from discontinued operations have been reclassified and presented in the consolidated statement of earnings under "Loss from discontinued operations" for the periods ending March 31, 2010 and 2009 while the assets and liabilities of Palmar Inc. as of March 31, 2010 and December 31, 2009 have been reclassified and presented in the consolidated balance sheet under "Assets or liabilities from discontinued operations".The following table provides the discontinued operations results for the periods ended March 31, 2010 and 2009: 3 months ------------------------- 2010 2009 ------------------------- $ $ Sales - 11,896 ------------------------- Loss before the following items: - (1,304) ------------------------- Interests - 45 Amortization - 67 ------------------------- - 112 ------------------------- Loss before non-recurring items and income taxes - (1,416) Non-recurring items - (70) ------------------------- Loss before income taxes - (1,486) Income taxes - (505) ------------------------- Loss from discontinued operations - (981) ------------------------- ------------------------- The following table provides the assets and liabilities from discontinued operations as of March 31, 2010 and December 31, 2009: March 31 December 31 2010 2009 ------------------------------ Assets $ $ Cash 22 671 Accounts receivable 365 646 Income taxes receivable 68 68 Future income taxes 2,392 2,392 ------------------------------ Assets from discontinued operations 2,847 3,777 ------------------------------ ------------------------------ Liabilities Accounts payable 352 2,384 ------------------------------ Liabilities from discontinued operations 352 2,384 ------------------------------ ------------------------------ 9 - STOCKThe cost of inventory recognized as an expense is $219,003 for the three-month period ended March 31, 2010 ($239,378 in 2009).10 - ACCUMULATED OTHER COMPREHENSIVE INCOME March 31 December 31 2010 2009 ------------ ------------ $ $ Balance, beginning of year (31,214) (1,605) Other comprehensive income for the years (6,454) (29,609) ------------ ------------ Balance, end of year (37,668) (31,214) ------------ ------------ ------------ ------------ The components of other accumulated comprehensive income as at March 31, 2010 and December 31 2009, are as follows: Accumulated currency translation adjustments (33,627) (27,535) Cumulative changes in fair value of derivatives used as a hedge (net of future income taxes of $1,732 ($1,503 in 2009)) (4,041) (3,679) --------- --------- (37,668) (31,214) --------- --------- --------- --------- 11 - EMPLOYEE FUTURE BENEFITSAs at March 31, 2010, the Company's pension plans are defined benefit and contribution plans.For the three-month period ended March 31, 2010, the total expense for the defined contribution pension plans was $318 ($265 in 2009) and $653 ($663 in 2009) for the defined benefit pension plans.12 - GUARANTEESUnder 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 cost of the inventories for a maximum amount of $65,100 ($64,269 in 2009). In the event of legal 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 greater than the Company's commitments.13 - GEOGRAPHICAL INFORMATION 3 months ------------------------- 2010 2009 ------------------------- $ $ Sales in Canada 113,775 117,908 Sales in the United States 193,189 232,936 ------------------------- 306,964 350,844 ------------------------- ------------------------- March 31, 2010 -------------------------------------------- Canada United States Total -------------------------------------------- $ $ $ Fixed assets 17,078 22,337 39,415 Intangible assets 17,287 17,885 35,172 Goodwill 40,671 51,553 92,224 December 31, 2009 -------------------------------------------- Canada United States Total -------------------------------------------- $ $ $ Fixed assets 15,399 24,261 39,660 Intangible assets 15,056 12,780 27,836 Goodwill 40,835 53,126 93,961 10 FOR FURTHER INFORMATION PLEASE CONTACT: Uni-Select Inc. Mr. Richard G. Roy President and Chief Executive Officer 450-641-2440 450-449-4908 (FAX) www.uni-select.com or Uni-Select Inc. Mr. Denis Mathieu Vice President and Chief Financial Officer 450-641-2440 450-449-4908 (FAX) www.uni-select.com