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Press release from Marketwire

Uni-Select Inc.: Increase of 7% in Adjusted Earnings in the Third Quarter

Wednesday, November 10, 2010

Uni-Select Inc.: Increase of 7% in Adjusted Earnings in the Third Quarter11:47 EST Wednesday, November 10, 2010BOUCHERVILLE, QUEBEC--(Marketwire - Nov. 10, 2010) - Uni-Select (TSX:UNS)3rd QUARTERYEAR-TO-DATE(in millions of dollars, except for per share)2010200920102009Sales348.6359.31,014.31,094.2Adjusted EBITDA from continuing operations26.328.867.781.3EBITDA from continuing operations24.127.263.179.6Adjusted earnings from continuing operations14.614.138.539.1Earnings from continuing operations13.213.035.538.0Net earnings13.27.935.531.3Adjusted earnings per share from continuing operations0.740.711.951.98Earnings per share from continuing operations0.670.661.801.93Net earnings per share0.670.401.801.59Adjusted earnings per share from continuing operations excluding foreign exchange variations0.760.712.081.98Uni-Select Inc. reported sales of $349 million for the third quarter of 2010, compared to $359 million in 2009. Despite the decrease in total sales, the Company benefitted from organic growth of 1.7% in the quarter; the conversion of the results of US operations into Canadian dollars had, due to the appreciation of the Canadian dollar, the effect of reducing sales by $12.1 million, while the sale and closure of non-strategic corporate stores during the course of previous quarters decreased sales by $5 million.Adjusted earnings from continuing operations reached $14.6 million in the third quarter of 2010 or $0.74 per share compared to $14.1 million or $0.71 per share last year. Notably, the effects of the fluctuation of the US dollar had an unfavourable impact of nearly $0.4 million or $0.02 per share on results for the quarter. Excluding this item, adjusted earnings from continuing operation for the quarter would have been $0.76 per share, 7% more than in 2009.Year-to-date, sales totalled $1,014 million compared to $1,094 in 2009. Uni-Select sales recorded an organic growth of 1.5%. However, the conversion of the results in Canadian dollars reduced sales by $80 million for the period. Adjusted earnings from continuing operations totalled $38.5 million or $1.95 per share compared to $39.1 million or $1.98 per share recorded for the same period of 2009. Variation in the US dollar had a $2.6 million negative impact on results for the period or more than $0.13 per share. Excluding this item, adjusted earnings per share from continuing operations would have been $2.08 per share for the period, a 5.1% increase over the same period last year.Results for the previous quarter include a non-recurring loss of $5.1 million for the disposal of the Heavy Duty Group. The loss was recorded under "Loss from discontinued operations" in the income statement.Sales for the US operations reached $213 million in the third quarter compared to $220 million in the third quarter of 2009. Excluding the effects of foreign exchange variations, US operations benefitted from an increase in organic growth of 3.5% in the third quarter. Year-to-date, sales were $622 million compared to $695 million a year earlier. Excluding the effects of the foreign exchange, organic growth of 2.3% was registered.The Canadian operations recorded a decrease in organic growth sof 1.2%. Sales totalled $136 million, a $3 million decrease compared to the corresponding period in 2009. Year-to-date, sales were $392 million compared to $400 million a year earlier. It is, however, notable that the decrease in Canada in 2010 is exclusively due to the closure of corporate stores during the preceding quarters. Canadian operations recorded a slight increase in organic growth for the period."Organic growth in sales is a reflection of the efforts made to improve customer loyalty, the contribution from national accounts and the increase in direct ship sales. We intend to pursue our development efforts which focus on the maximization of sales to independent jobbers and the improvement of operational efficiency for our corporate clientele" said Mr. Richard G. Roy, President and Chief Executive Officer of Uni-Select."Further, management is confident that, following the implementation of its growth strategies and cost and asset controls, the Company will continue to improve its profitability both in the short and long terms. We continue to be on the look out for opportunities which will allow us to grow in Canada as in the US. Lastly, as anticipated, during the quarter the Company proceeded with the conversion of its financial information system to the new enterprise resources planning software. In order to allow for testing on the operational interfaces, we will proceed with the gradual implementation of the operational modules in the beginning of 2011 and this conversion will continue, as foreseen, over the next two years", added Mr. Roy.In closing, the Board of Directors of Uni-Select Inc. declared a quarterly dividend (eligible dividend) of $0.1165 per common share payable on January 21, 2011, to shareholders of record as at December 31, 2010.Unless otherwise indicated, all amounts specified in this release are in Canadian dollars. EBITDA, as used by Uni-Select represents operating income before depreciation, amortization, interest, income taxes and non-controlling interest. Because EBITDA is not a measurement defined by Canadian GAAP, it may not be comparable to the EBITDA of other companies. In the Company's statement of earnings, EBITDA corresponds to "Earnings before the following items."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™ 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 result of new information, future events or other changes.Uni-Select Inc.Consolidated EarningsThree-month and nine-month periods ended September 30, 2010 and 2009(In thousands of dollars, except earnings per share, unaudited)3rd quarter9 months2010200920102009$$$$Sales348,605359,2361,014,3191,094,241Earnings before the following items:24,11027,15963,12879,636Interest (Note 3)2,3551,9295,5196,372Amortization (Note 3)3,2233,5909,84010,7115,5785,51915,35917,083Earnings before income taxes and non-controlling interest18,53221,64047,76962,553Income taxes (Note 4)Current3,3963,50116,69417,005Future1,9604,015(4,308)4,2005,3567,51612,38621,205Earnings before non-controlling interest13,17614,12435,38341,348Non-controlling interest(28)1,106(159)3,307Earnings from continuing operations13,20413,01835,54238,041Loss from discontinued operations (Note 8)–(5,117)–(6,719)Net earnings13,2047,90135,54231,322Basic and diluted earnings per share (Note 5)From continuing operations0.670.661.801.93From discontinued operations–(0.26)–(0.34)Net income0.670.401.801.59Weighted average number of outstanding shares19,720,15919,714,12819,719,63219,707,862Number of issued and outstanding shares19,709,23719,714,12819,709,23719,714,128The accompanying notes are an integral part of the consolidated financial statements.Uni-Select Inc.Consolidated Comprehensive IncomeConsolidated Retained EarningsThree-month and nine-month periods ended September 30, 2010 and 2009(In thousands of dollars, except for per share amounts, unaudited)3rd quarter9 months2010200920102009$$$$CONSOLIDATED COMPREHENSIVE INCOMENet earnings13,2047,90135,54231,322Other comprehensive incomeUnrealized losses on derivative financial instruments designated as cash flow hedges (net of income taxes of $250 and $932 respectively for the three-month and nine-month periods ($520 and $136 in 2009)(674)(1,003)(2,977)(288)Reclassification of realized losses to net earnings on derivative financial instruments designated as cash flow hedges (net of income taxes of $269 and $808 respectively for the three-month and nine-month periods (($292) and ($804) in 2009)7286412,2601,754Unrealized exchange gain on translation of long-term debt designated as a hedge of net investments in self-sustaining foreign subsidiairies5,2261,4922,8352,523Unrealized exchange losses on translating financial statements of self-sustaining foreign subsdiaries(10,836)(17,629)(5,480)(29,790)Other comprehensive income(5,556)(16,499)(3,362)(25,801)Comprehensive income7,648(8,598)32,1805,521CONSOLIDATED RETAINED EARNINGSBalance, beginning of year353,625324,241Net earnings35,54231,322389,167355,563Share redemption premium (a)305–Dividends6,8926,889Balance, end of year381,970348,674(a) The Company redeemed 13,100 common shares for a cash consideration of $338 for which $93 is still payable. A premium on redemption of $305 is presented in reduction of the retained earnings. The accompanying notes are an integral part of the consolidated financial statements.Uni-Select Inc.Consolidated Cash FlowsThree-month and nine-month periods ended September 30, 2010 and 2009(In thousands of dollars, except dividends paid per share, unaudited)3rd quarter9 months2010200920102009$$$$OPERATING ACTIVITIESNet earnings13,20413,01835,54238,041Non-cash itemsAmortization3,2233,5909,84010,711Amortization of deferred gain on a sale-leaseback arrangement(51)(47)(163)(169)Future income taxes1,9604,015(4,308)4,200Compensation cost relating to stock option plans20325996Pension expense in excess of contributions(190)196546590Non-controlling interest(28)1,106(159)3,30718,13821,91041,35756,776Changes in working capital items12,38018,787(13,289)(7,500)Cash flows from continuing operating activities30,51840,69728,06849,276Cash flows from discontinued operating activities13(6,597)(1,093)(9,471)Cash flows from operating activities30,53134,10026,97539,805INVESTING ACTIVITIESBusiness acquisitions (Note 6)––(1,074)(668)Disposal of assets (Note 7)162122,2581,061Balance of selling price60–1,214–Buy-back of non-controlling interest–––(196)Investments and advances to merchant members(815)(569)(1,876)(7,098)Receipts on advances to merchant members1,0841,1562,8563,430Fixed assets(584)(101)(6,449)(6,152)Disposal of fixed assets3581901,125621Intangible assets(13,434)(3,519)(28,915)(7,578)Cash flows from continuing investing activities(13,315)(2,631)(30,861)(16,580)Cash flows from discontinued investing activities–13,921–13,871Cash flows from investing activities(13,315)11,290(30,861)(2,709)FINANCING ACTIVITIESBank indebtedness(8,776)(4,956)600(398)Long-term debt251,101251,101Balance of purchase price–(6)–(691)Repayment of long-term debt(26)(79)(75)(1,578)Merchant members' deposits in guarantee fund146(728)391(546)Issuance of shares––90202Share redemption(245)–(245)Dividends paid(2,297)(2,297)(6,893)(6,710)Cash flows from continuing financing activities(11,173)(6,965)(6,107)(8,620)Cash flows from discontinued financing activities–2,617–4,243Cash flows from financing activities(11,173)(4,348)(6,107)(4,377)Effect of exchange rate changes on cash(324)(3,068)72(4,301)Increase (decrease) in cash5,71937,974(9,921)28,418Cash, beginning of period21012615,8509,682Cash, end of period5,92938,1005,92938,100Dividends paid per share0.1170.1170.3500.342The accompanying notes are an integral part of the consolidated financial statements.Uni-Select Inc. Consolidated Balance SheetsSeptember 30, 2010 and 2009(In thousands of dollars, unaudited)September 30September 30December 31201020092009$$$(audited)ASSETSCurrent assetsCash5,92938,10015,850Accounts receivable169,371175,428150,440Income taxes receivable––3,859Inventory (Note 9)402,927407,388402,550Prepaid expenses7,5075,3856,914Future income taxes10,6038,79610,065Assets from discontinued operations (Note 8)2,71420,0153,777599,051655,112593,455Investments and advances to merchant members16,19415,83516,831Fixed assets37,12238,42639,660Financing costs484518555Intangible assets52,71423,26227,836Goodwill92,86893,61793,961Future income taxes2,9533,8263,359801,386830,596775,657LIABILITIESCurrent liabilitiesBank indebtedness520–44Accounts payable187,973185,237181,773Income taxes payable2,3851,505–Dividends payable2,2972,2972,298Instalments on long-term debt and on merchant members' deposits in guarantee fund316128402Future income taxes7,1017,95711,192Liabilities from discontinued operations (Note 8)23112,4012,384200,823209,525198,093Deferred gain on a sale-leaseback arrangement1,8412,1422,036Long-term debt176,269183,549178,866Merchant members' deposits in guarantee fund7,7397,3287,288Derivative financial instruments6,0236,4875,182Future income taxes7,6386,1107,821Non-controlling interest3,03843,8243,453403,371458,965402,739SHAREHOLDERS' EQUITYCapital stock50,20850,04050,152Contributed surplus413323355Retained earnings381,970348,674353,625Accumulated other comprehensive income (Note 10)(34,576)(27,406)(31,214)398,015371,631372,918801,386830,596775,657The accompanying notes are an integral part of the consolidated financial statements.Uni-Select Inc.Notes to Consolidated Financial StatementsSeptember 30, 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.Uni-Select Inc.Notes to Consolidated Financial StatementsSeptember 30, 2010 and 2009(In thousands of dollars, except for per share amounts, unaudited)3 - INFORMATION INCLUDED IN CONSOLIDATED EARNINGS3rd quarter9 months2010200920102009$$$$Interest fromOther financial liabilitiesInterest on bank indebtedness228183483655Interest on long-term debt2,1501,7835,2085,889Interest on merchant members' deposits in guarantee fund2927861372,4071,9935,7776,681Held-for-trading financial assetsInterest income on cash-(1)(94)(6)Loans and receivablesInterest income from merchant members(52)(63)(164)(303)(52)(64)(258)(309)2,3551,9295,5196,372AmortizationAmortization of fixed assets2,0492,4097,2479,095Amortization of intangible assets and other assets1,1741,1812,5931,6163,2233,5909,84010,7114 - INCOME TAXESThe Company's effective income tax rate differs from the combined statutory rate in Canada. This difference arises from the following items:3rd quarter9 months2010200920102009%%%%Federal statutory rate18.0019.0018.0019.00Provinces' statutory tax rates11.2511.8611.2511.86Various tax rates applied in tax jurisdictions of foreign operations6.644.497.574.17Combined statutory rate of the Company35.8935.3536.8235.03Tax benefit from a financing structure(6.46)(1.57)(9.70)(1.42)Non-deductible tax expenses0.350.350.350.35Earnings taxable at lower rates in future years(0.64)(0.26)(0.51)(0.25)Losses at higher tax rates(0.82)–(0.90)–Other0.580.86(0.13)0.1928.9034.7325.9333.905 - EARNINGS PER SHAREWeighted average number of shares for the calculation of basic earnings per share is 19,720,159 for the three-month period ended September 30, 2010 (19,714,128 in 2009) and 19,719,632 for the nine-month period ended September 30, 2010 (19,707,862 in 2009). Impact of stock options exercised is 7,817 shares for the three-month period ended September 30, 2010 (10,881 in 2009) and 8,993 for the nine-month period ended September 30, 2010 (13,699 in 2009) which total a weighted average number of shares of 19,727,976 for the three-month period ended September 30, 2010 (19,725,009 in 2009) and 19,728,625 for the nine-month period ended September 30, 2010 (19,721,561 in 2009) for calculation of diluted earnings per share.6 - BUSINESS ACQUISITIONSDuring the first quarter, the 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 ASSETSDuring the second quarter, the Company sold some of the assets and liabilities of two stores for a cash consideration of $2,692 of which $434 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 September 30, 2010 and 2009 while the assets and liabilities of Palmar Inc. as of September 30, 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 September 30, 2010 and 2009: 3rd quarter9 months2010200920102009$$$$Sales–5,444–31,013Loss before the following items:–(632)–(2,831)Interests–46–128Amortization–37–171–83–299Loss before income taxes–(715)–(3,130)Income taxes–120–933Loss before non-recurring items–(595)–(2,197)Non-recurring items–(4,522)(4,522)Loss from discontinued operations–(5,117)–(6,719)The following table provides the assets and liabilities from discontinued operations as of September 30, 2010 and December 31, 2009:September 30December 3120102009Assets$$Cash203671Accounts receivable54646Income taxes receivable6568Future income taxes2,3922,392Assets from discontinued operations2,7143,777LiabilitiesAccounts payable2312,384Liabilities from discontinued operations2312,3849 - STOCKThe cost of inventory recognized as an expense is $247,316 for the three-month period ended September 30, 2010 ($255,246 in 2009) and $725,082 for the nine-month period ended September 30, 2010 ($773,619 In 2009).10 - ACCUMULATED OTHER COMPREHENSIVE INCOMESeptember 30December 3120102009$$Balance, beginning of year(31,214)(1,605)Other comprehensive income for the years3,362(29,609)Balance, end of year(34,576)(31,214)The components of other accumulated comprehensive income as at September 30, 2010 and December 31 2009, are as follows:Accumulated currency translation adjustments(30,179)(27,535)Cumulative changes in fair value of derivatives used as a hedge (net of future income taxes of $1,626 ($1,503 in 2009))(4,397)(3,679)(34,576)(31,214)11 - EMPLOYEE FUTURE BENEFITSAs at September 30, 2010, the Company's pension plans are defined benefit and contribution plans.For the three-month period ended September 30, 2010, the total expense for the defined contribution pension plans was $358 ($215 in 2009) and $661 ($618 in 2009) for the defined benefit pension plans.For the nine-month period ended September 30, 2010, the total expense for the defined contribution pension plans was $921 ($949 in 2009) and $1,985 ($1,920 in 2009) for the defined benefit pension plans.12 - GUARANTEESUnder inventory repurchase agreements, the Company has made a commitment to financial institutions to repurchase inventories from some of its customers at a rate of 60% to 75% of the cost of the inventories for a maximum amount of $65,176 ($64,269 in 2009). In the event of legal proceedings, the inventories would be liquidated in the normal course of the Company's operations. These agreements are for an undetermined period of time. In management's opinion, the likelihood of major payments being made and losses being absorbed is low, since the value of the assets held in guarantee is significantly greater than the Company's commitments.Uni-Select Inc.Notes to Consolidated Financial StatementsSeptember 30, 2010 and 2009(In thousands of dollars, except for per share amounts, unaudited)13 - GEOGRAPHICAL INFORMATION3rd quarter9 months2010200920102009$$$$Sales in Canada135,705139,105392,093399,633Sales in the United States212,900220,131622,226694,608348,605359,2361,014,3191,094,241September 30, 2010CanadaUnited StatesTotal$$$Fixed assets17,37419,74837,122Intangible assets23,33429,38052,714Goodwill40,58452,28492,868December 31, 2009CanadaUnited StatesTotal$$$Fixed assets15,39924,26139,660Intangible assets15,05612,78027,836Goodwill40,83553,12693,96114 - RELATED PARTY TRANSACTIONSDuring the period, the Company incurred rental expenses of $878 for the three-month period ended September 30, 2010 ($872 in 2009) and $2,548 for the nine-month period ended September 30, 2010 ($2,840 in 2009) from Clarit Realty Ltd, a company controlled by a member of the Board of Directors. These agreements are concluded in the normal course of business of the Company, are negotiated at fair market value, and consist of 3 to 5-year term periods.FOR FURTHER INFORMATION PLEASE CONTACT: President and Chief Executive OfficerMr. Richard G. Roy450-641-2440450-449-4908 (FAX)www.uniselect.comORVice President and Chief Financial OfficerMr. Denis Mathieu450-641-2440450-449-4908 (FAX)www.uniselect.com