Uni-Select Inc. reported financial results with increased adjusted earnings for the second quarter ended June 30, 2015.
Over the course of the second quarter, the Corporation completed the sale of substantially all the net assets of Uni-Select USA, Inc. and Beck/Arnley Worldparts, Inc. to affiliates of Icahn Enterprises L.P. for net cash proceeds of $324 million. The proceeds of the transaction were used by Uni-Select to repay its outstanding debt and to settle related transaction costs. Accordingly, the second quarter and six-month period results include respectively two and five months of operations from the net assets sold.
"I am very pleased by our solid performance in the second quarter and delighted by the balanced contribution of both our automotive products and paint and related products segments to our results. I am particularly delighted that we are starting to see Uni-Select emerge as a substantially more profitable operation featuring a very strong balance sheet, said Richard G. Roy, President and Chief Executive Officer of Uni-Select. "As I prepare to leave for retirement, I could not be prouder of what we have achieved as a team and I am confident that an exciting future awaits Uni-Select under the leadership of Henry Buckley as President and Chief Executive Officer effective August 1, 2015.”
Second quarter results
(All percentage increases and decreases represent year-over-year changes for the second quarter of 2015 compared to the second quarter of 2014, unless otherwise noted. The 2015 second quarter results include two months of operations from the net assets sold.)
The sales decrease of 14.7% in the second quarter, compared to last year, is due to the sale of net assets of Uni-Select USA, Inc. and Beck/Arnley Worldparts, Inc. and by the declining Canadian dollar, while partly compensated by additional sales from recent acquisitions. On an organic basis, consolidated sales grew 3.7%, namely driven by the recruitment of new customers in the paint and related products segment combined with the implementation of a customer centric strategy in the automotive products segment.
The Corporation generated $19.0 million of EBITDA (after impairment and transaction charges related to the sale of net assets of $13.5 million and a net reversal of restructuring and other charges of $1.7 million), compared to $29.7 million last year. Adjusted EBITDA reached $31.1 million, resulting in an adjusted EBITDA margin of 7.6%, up from 6.5% last year.
Net earnings declined to $12.4 million, from $15.5 million last year, mainly as a result of impairment and transaction charges related to the sale of net assets. Adjusted earnings grew 21.1% from $16.5 million last year ($0.77 on a per share basis) to $20.0 million ($0.94 on a per share basis), favorably impacted by improved EBITDA from remaining operations, financing costs for debt reimbursement as well as by the lower depreciation and amortization on net assets sold.
As indicated above, the Corporation’s results are presented in US dollars. Once converted to Canadian dollars, adjusted earnings per share reached C$1.16 for the second quarter of 2015, up 38.1% compared to C$0.84 in 2014.
Segmented results
Prior to their disposal, the net assets sold over the course of the second quarter were included until May 31, 2015, in the automotive products group for segmented reporting. Accordingly, sales of the automotive products segment declined to $252.9 million from $331.7 million in the prior year, mainly as a result of this disposition and the declining Canadian dollar. Segment organic sales grew 3.0% in the second quarter, driven by a successful ongoing regional strategy to better cater to customer needs through an enhanced product offering and pricing optimization adjustments. EBITDA for the automotive products segment decreased to $4.0 million in the second quarter, a decline mainly attributable to the impairment and transaction charges. Adjusted EBITDA decreased to $14.0 million, a performance attributable to the inclusion of only two months of operation of the US activities sold in Q2, as well as to lower productivity of these operations.
The paint and related products segment recorded sales of $155.4 million, up 5.7% from 2014, or 4.4% organically. Segment EBITDA reached $19.2 million, up 24.1% from $15.5 million last year. This performance is namely attributable to adjustments on sales programs, enhanced gross margins resulting from optimal inventory management, accretive business acquisitions that were partially offset by an unfavorable customer mix. The segment adjusted EBITDA margin reached 12.6%, compared to 10.5% last year.
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