08:29:31 EDT Sat 19 Sep 2020
Enter Symbol
or Name
USA
CA



Login ID:
Password:
Save
Uni-Select Inc
Symbol UNS
Shares Issued 42,387,300
Close 2020-07-30 C$ 7.86
Recent Sedar Documents

Uni-Select loses $24.16-million (U.S.) in Q2

2020-07-30 09:21 ET - News Release

Mr. Brent Windom reports

UNI-SELECT INC. REPORTS SECOND QUARTER 2020 FINANCIAL RESULTS AND HIGHLIGHTS

Uni-Select Inc. has released its financial results for the second quarter ended June 30, 2020. Unless otherwise indicated in this press release, all amounts are expressed in thousands of U.S. dollars, except per-share amounts and percentages.

"We are pleased with our second quarter results as they were better than we expected given the difficult operating environment caused by the pandemic. The temporary measures we put in place for business continuity, in response to COVID-19, better aligned our cost structure with the current state of the market while allowing us to continue to serve our customers with the highest standards. Furthermore, the execution of our cash preservation plan allowed us to successfully maximize our liquidity and financial flexibility," said Brent Windom, president and chief executive officer of Uni-Select.

"In the quarter, we implemented our continuous improvement plan to ensure that we are strategically positioned for recovery and growth post-COVID-19. Through this plan, we expect to generate annualized cost savings of about $28-million by the end of 2020, of which $14-million has been realized in the second quarter, mostly through head count reduction. It's important to note that these savings are measured against the first quarter of 2020. In addition, we renegotiated our debt, providing access to additional liquidity on more flexible financial terms and conditions; optimized our inventory levels; and reduced our debt on a sequential basis.

"We are confident in the sustainability of our business and our ability to maintain our market position in this challenging period. At this stage, we anticipate a faster recovery from the auto parts aftermarket and a slower recovery in the refinish market. While we are encouraged by month-over-month improvements, market conditions remain volatile. We have the financial flexibility to execute our business plan and will prioritize debt reduction in our capital allocation strategy," concluded Mr. Windom.

Update on the continuous improvement plan

The corporation is pursuing a continuous improvement plan, which is currently accelerated to allow the corporation to be strategically positioned for recovery and growth after COVID 19. This plan, announced on June 22, 2020, is based on a long-term approach to further improve the productivity and efficiency of all segments while ensuring that customer needs remain the focus. The main objectives of the plan are to ensure that customers are served to the highest standards, that operations and service model are positioned to meet the long-term demands and expectations of the markets in which they operate, and that the corporation continues to be a strong market leader while ensuring a safe and healthy environment for all parties. To accomplish these objectives, an in-depth review of operations was undertaken by each segment's respective team, resulting in a number of key initiatives, including the way customers are served, rightsizing where required, automation and optimizing supply chain logistics. The execution of the continuous improvement plan started in June, 2020, and will continue over the next several months.

Through this plan, the corporation expects to generate annualized cost savings of about $28-million to $30-million by the end of 2020, measured against the first quarter of 2020. As at June 30, 2020, $14-million has been realized, mostly from work force reduction, which occurred at the end of June, 2020.

The total cash cost of implementing the continuous improvement plan is expected to be $13.8-million, mainly for severance and closing costs as part of rightsizing activities. The corporation is also expecting to write down certain assets of approximately $6.2-million. During the current quarter of 2020, the corporation recognized restructuring and other charges in relation to the continuous improvement plan totalling $16.9-million, of which $6.2-million is non-cash for the writedown of assets.

                                  FINANCIAL RESULTS    
             (in thousands of U.S. dollars, except per-share amounts) 

                                             Second quarter      Six-month period
                                            2020       2019       2020       2019  
  
Sales                                   $302,534   $456,175   $710,218   $876,212
EBITDA                                    (2,674)    31,734     12,406     53,090
EBITDA margin                              (0.9%)      7.0%       1.7%       6.1%
Adjusted EBITDA                           14,841     35,808     31,627     64,259
Adjusted EBITDA margin                      4.9%       7.8%       4.5%       7.3%
EBT                                      (30,967)     8,540    (39,583)     7,243
EBT margin                                (10.2%)      1.9%      (5.6%)      0.8%
Adjusted EBT                             (12,449)    13,877    (18,324)    20,956
Adjusted EBT margin                        (4.1%)      3.0%      (2.6%)      2.4%
Special items                             17,515      4,074     19,221     11,169
Net earnings (loss)                      (24,169)     6,318    (30,910)     4,985
Adjusted earnings (loss)                  (9,655)    10,422    (13,956)    15,472
Earnings (loss) per share                  (0.57)      0.15      (0.73)      0.12
Adjusted earnings (loss) per share         (0.23)      0.25      (0.33)      0.37

Second quarter results

Consolidated sales of $302.5-million for the second quarter decreased by 33.7 per cent, when compared with the same quarter in 2019, reflecting negative organic growth of 31.9 per cent, unfavourable fluctuations of the Canadian and British currencies, as well as the expected erosion from the integration of company-owned stores over the last 12 months. The global spread of COVID-19 affected all segments. However, the corporation's sales performance was better than expected, with sales steadily increasing month after month during the quarter, with June sales closing at over 85 per cent compared with the same month last year. As a result, sales for the second quarter of 2020 exceeded the internal forecast set in late March in response to the uncertainty surrounding the pandemic.

The corporation generated an EBITDA (earnings before interest, taxes, depreciation and amortization) of negative $2.7-million and an EBT (earnings before taxes) of negative $31-million for the quarter, which were impacted by special items for restructuring and other charges related to the continuous improvement plan of $16.9-million as well as charges for the review of strategic alternatives of $600,000. Once adjusted, the EBITDA and the EBITDA margin were $14.8-million and 4.9 per cent, respectively, compared with $35.8-million and 7.8 per cent in 2019, whereas the EBT and the EBT margin were negative $12.4-million and negative 4.1 per cent, respectively, compared with $13.9-million and 3 per cent in 2019. These adjusted margins were mainly impacted by the lower volume of sales attributable to COVID-19, resulting in lower gross margins, reduced fixed costs absorption, and additional reserves totalling $6.3-million for obsolescence and bad debt. In addition, lower vendor incentives resulting from the optimization of inventory in all three segments, mainly in the FinishMaster U.S. segment, contributed to the decline of the adjusted margins. These elements were partially compensated by furloughs, reduction of working hours, cost control measures as well as overall savings realized from the performance improvement plan. In addition, the adjusted EBT margin was affected by a loss of $3.6-million on debt extinguishment.

The net loss and adjusted loss for the current quarter were respectively $24.2-million and $9.7-million, compared with net earnings and adjusted earnings of $6.3-million and $10.4-million in 2019. Adjusted earnings (loss) decreased by $20.1-million compared with the same quarter last year, due to lower adjusted EBT, as explained herein, and a different income tax rate.

Six-month period results

Consolidated sales of $710.2-million for the period decreased by 18.9 per cent when compared with the same period in 2019, mainly affected by negative organic growth of 18.3 per cent, unfavourable fluctuations of the Canadian and British currencies, as well as by the expected erosion from the integration of company-owned stores over the last 12 months. These items were partially compensated by one additional billing day and business acquisitions. The performance of the second quarter, affected by COVID-19, weighted on the six-month period. However, sales gradually recovered starting in May, permitting the corporation to reopen certain company-owned stores, with more than 80 per cent in operation as at June 30, 2020.

The corporation generated an EBITDA of $12.4-million and an EBT of negative $39.6-million for the period. These were impacted by special items for restructuring and other charges related to the improvement plan of $18.1-million as well as charges for the review of strategic alternatives of $1.1-million. Once adjusted, the EBITDA and the EBITDA margin were $31.6-million and 4.5 per cent, respectively, compared with $64.3-million and 7.3 per cent in 2019. The adjusted EBT and the adjusted EBT margin were negative $18.3-million and negative 2.6 per cent, respectively, compared with $21-million and 2.4 per cent in 2019. As was the case for the quarter, the six-month period reflects the effect of COVID-19 and lower vendor incentives resulting from the optimization of inventory. Additionally, the recognition of foreign exchange losses due to the depreciation of the Canadian and the British currencies as well as a one-time charge, both recognized during the first quarter of 2020, contributed to the decline of the adjusted EBITDA and EBT margins. These elements, combined with additional reserves for obsolescence and bad debt recorded during the second quarter of 2020, represent $11.2-million, or approximately 130 basis points. In addition, the adjusted EBT margin was affected by a loss on debt extinguishment recorded during the second quarter.

The net loss and adjusted loss for the period were respectively $30.9-million and $14-million, compared with net earnings and adjusted earnings of $5-million and $15.5-million in 2019. Adjusted earnings (loss) decreased by $29.4 million compared with the same period last year due to lower adjusted EBT, as explained herein, and a different income tax rate.

Conference call

Uni-Select will host a conference call to discuss its 2020 second quarter results on July 30, 2020, at 8 a.m. Eastern Time. To join the conference, dial 1-888-231-8191 (or 1-647-427-7450 for international calls).

A recording of the conference call will be available from 11:30 a.m. Eastern Time on July 30, 2020, until 11:59 p.m. Eastern Time on Aug. 30, 2020. To access the replay, dial 1-855-859-2056 followed by 8256416.

A live webcast of the quarterly results conference call will also be accessible through the investors section of the company's website, where a replay will also be archived. Listeners should allow ample time to access the webcast and supporting slides.

About Uni-Select Inc.

With over 5,000 employees in Canada, the United States and the United Kingdom, Uni-Select is a leader in the distribution of automotive refinish and industrial coatings and related products in North America as well as a leader in the automotive aftermarket parts business in Canada and in the United Kingdom. Uni-Select is headquartered in Boucherville, Que., Canada.

                             CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
                       (in thousands of U.S. dollars, except per-share amounts) 

                                                                 Quarter ended    Six-month period ended
                                                          June 30,    June 30,      June 30,     June 30,
                                                             2020         2019         2020         2019

Sales                                                    $302,534     $456,175     $710,218     $876,212
Purchases, net of changes in inventories                  216,579      310,759      501,486      595,251
Gross margin                                               85,955      145,416      208,732      280,961
Salaries and benefits                                      45,153       79,487      117,318      158,102
Other operating expenses                                   25,961       30,121       59,787       58,600
Special items                                              17,515        4,074       19,221       11,169
Earnings (loss) before finance costs, depreciation
and amortization and income taxes                          (2,674)      31,734       12,406       53,090
Finance costs, net                                         12,398        7,438       19,500       14,223
Depreciation and amortization                              15,895       15,756       32,489       31,624
Earnings (loss) before income taxes                       (30,967)       8,540      (39,583)       7,243
Income tax expense (recovery)                              (6,798)       2,222       (8,673)       2,258
Net earnings (loss)                                       (24,169)       6,318      (30,910)       4,985
Earnings (loss) per share (basic and diluted)               (0.57)        0.15        (0.73)        0.12

We seek Safe Harbor.

© 2020 Canjex Publishing Ltd. All rights reserved.