Boucherville, July 11, 2013 - Uni-Select Inc., a major distributor of replacement parts, equipment, tools, accessories, paint and related products for motor vehicles in North America, announces that the formal review of strategic alternatives initiated in April 2013 to unlock additional value for its shareholders has been completed enhancing the strategic direction for the Corporation. The Board of Directors considered a full range of strategic alternatives and has concluded that an internal strategic and operational plan (the “Action Plan”) centered on the US automotive operations designed to significantly improve profitability is the best way to maximize shareholder value. The Corporation remains committed to the US and Canadian automotive aftermarkets and expects to grow its presence in both the mechanical and collision repair sectors.
Over the past ten years, Uni-Select has markedly expanded completing over 70 acquisitions. It allowed the Corporation to increase its activities, improve its product offering, enhance its geographical presence and strengthen its operations. In this regard, Uni-Select’s network needs to be optimized to eliminate some redundancy. The Action Plan is the result of a comprehensive review of Uni-Select’s distribution operations. The adopted strategy will allow Uni-Select to improve efficiency and profitability by increasing its focus on markets with growth opportunities and exit areas with less potential. The Action Plan encompasses a major optimization of the U.S. distribution network and includes a number of operational improvements which together are expected to improve profitability.
Highlights of the Action Plan
1. Store Closures
Closures, divestitures or consolidations involving 48 stores to exit areas with less potential
2. Rightsizing of the distribution network
Optimization of distribution network with focus on select large distribution centres
Closure of 12 distribution centres
Opening of two regional distribution centres
3. Operational Improvements
Investment of $8 million in a dozen distribution centres to improve efficiency
Process improvements focused on increasing fill rates and enhancing pricing strategy
4. Estimated cost savings of approximately $30 million on an annual run-rate basis
Approximately $10 million in 2013, an additional $15 million in 2014 and full impact in 2015
5. Reduction in sales of approximately $70 million, on an annual basis, resulting from store closures and warehouse relocations
6. Restructuring charges, write-off of assets and other actions related to the Action Plan will result in an approximate one-time cost of $45 million
Restructuring charges of approximately $36 million to be recorded in the second quarter of 2013. The balance will be recorded as incurred.
These charges will result in a cash outlay of $13 million that will be fully offset by a $40 million reduction in inventory.
Implementation of the Action Plan is in progress and completion is expected in late 2014.
Progress of the Action Plan to Date
1. Closure of 11 stores and one distribution centre resulting in an headcount reduction of 58 people
2. Completion of the relocation of US national distribution centre
3. Restructuring of operations leading to the elimination of 156 positions
During the last few weeks the Corporation reduced its expenses through these initiatives by approximately $10 million, on an annual basis, of which $5 million will positively affect 2013 results.
Uni-Select is also committed to close 30 stores, another distribution centre and open a new regional distribution centre in the third quarter of 2013.
The Action Plan is in addition to the Network Optimization Plan launched in August 2012 (rationalization and consolidation of distribution network). The annual savings of $20 million expected from the Network Optimization Plan have been realized; unfortunately, the cost reduction stemming from the Network Optimization Plan were largely offset by lower sales in the past three quarters as well as the unfavourable change in the distribution channel mix. These offsetting elements led Uni-Select to implement additional initiatives to improve results.
“With the support of our strong and dedicated team and the help of our advisors, we were able to assess our operations and assets, as well as our potential for growth. We have concluded that the Action Plan is the best alternative to create additional value for our shareholders and offer continued excellent service to our customers.” said Richard G. Roy, President and Chief Executive Officer, Uni-Select.
“As we implement these initiatives, we still intend to achieve previously stated goals such as the reduction of indebtedness and carry-out our sales strategy to diversify our market, increase market share and execute accretive acquisitions. FinishMaster and Beck/Arnley are delivering good results on which we plan to capitalize. We are focussed and convinced that we will be able to deliver on expectations and generate beneficial value to all stakeholders. Our search for a new President and COO for our U.S. automotive business is progressing according to our plan and we shortly should be able to make an announcement” added Mr. Roy.
Uni-Select will host a conference call to discuss today’s announcement at 1:30 p.m. on July 11, 2013. To join the conference, dial 1 866 696-5910 followed by 5805675.
The information provided in this press release includes some forward-looking information, which includes certain risks and uncertainties, including risks relating to the implementation of the Action Plan resulting from the strategic review process, which may cause the final results to be significantly different from those listed or implied within this news release. For example, the foregoing estimates of cost and inventory reductions may be considered forward-looking information and are based upon certain key assumptions, including (i) the closure, sale or consolidation of the number of stores and distribution centres, and related reduction of headcounts, as planned and within the timeframe contemplated by the Action Plan and (ii) the timely completion of all other components of the Action Plan as planned. Uni-Select cautions that assumptions used to prepare the foregoing estimates, although reasonable at the time they were made, may prove to be incorrect or inaccurate. The foregoing factors could therefore cause the actual cost and inventory reductions to be derived under the Action Plan to differ materially from the amounts set forth in the foregoing estimates. 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.
Unless otherwise indicated in this press release, all amounts are expressed in US dollars.
Founded in 1968, Uni-Select is a major distributor of replacement parts, equipment, tools, accessories, paint and related products for motor vehicles in North America. Leader in the Canadian industry, Uni-Select is the 6th largest distributor in the United States and the leading independent distributor of automotive paint and related products in the country. With its 5,800 employees, Uni-Select efficiently services a wide network of independent installers and wholesalers, including over 6,200 that operate under one of its banner programs in North America. Uni-Select is headquartered in Boucherville and its shares are traded on the Toronto Stock Exchange (TSX) under the symbol UNS.
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Investor Relations and Communications Manager
Financial Executive Summary
I. Network Optimization Plan announced in August 2012
|(in millions of US$)||ANNOUNCED||ACTUAL|
|Cost reduction||$ 20.0||$ 19.8|
|Restructuring Charges and write-off of assets||$ 22.0||$ 15.6|
|Inventory reduction||$ 24.0||$ 6.0|
Short-term cost reduction materialized but mostly offset by the decrease in sales recorded in the past three quarters.
II. Action Plan announced in July 2013
|(in millions of US$)||2013||2014||2015||TOTAL|
|Cost reduction||$ 10.0||$ 15.0||$ 5.0||$ 30.0|
|Restructuring charges and write-off of assets||$ 40.0||$ 5.0||$ -||$ 45.0 (1)|
|Inventory reduction||$ 8.0||$ 22.0||$ 10.0||$ 40.0|
|Capex||$ 7.0||$ 9.0||-||$ 16.0|
(1) Results in cash outlay of $13 million.
The foregoing estimates of cost and inventory reductions may be considered forward-looking information and are based upon certain key assumptions. See the caution about “forward-looking statements” elsewhere in this press release.