A variety of factors, economic, fiscal, and operational, have contributed to Uni-Select reporting a significant drop in earnings for the fourth quarter year ended December 31, 2012.
Uni-Select Inc. generated sales of $424.3 million in the fourth quarter of 2012, compared to $436.7 million over the same period in 2011. Adjusted EBITDA amounted to $13.1 million this quarter compared to $18.6 million in the fourth quarter of 2011.
Adjusted earnings stood at $5.9 million in the fourth quarter compared to $10.2 million for the same quarter in 2011.
The 2.8% decrease in sales for the quarter is mainly due to a temporary slowdown in the aftermarket, mainly in the Northeast of the United States and Eastern Canada. These negative factors were partially offset by the addition of the sales derived from the assets in Florida purchased in the fourth quarter of 2011 and an additional billing day. Sales of US operations totaled $298 million in the fourth quarter while sales of Canadian operations totaled $126 million.
The adjusted EBITDA margin stood at 3.1% in the fourth quarter of 2012 compared to 4.3% in the corresponding quarter of 2011. This decrease is mainly attributable to the rapid decline in sales while expenses could not be adjusted at the same rate. In addition, higher IT maintenance and support costs related to the transition to the new ERP system had an adverse effect on adjusted EBITDA margin. The savings derived from the optimization plan implemented during the third quarter of 2012 combined with improved purchasing conditions from suppliers helped to partially offset the items mentioned above and should have long term benefits.
For fiscal year ended December 31, 2012, sales increased 2.3% to $1.821 billion compared to $1.781 billion for the same period of the previous year. This increase in sales comes entirely from the United States and is mainly attributable to the business generated from the Florida assets purchased in the fourth quarter 2011 combined to an extra billing day in the United States.
The increase was to a degree offset by a decrease in Canadian sales impacted by unfavorable variations in the value of the Canadian dollar relative to the US dollar.
Sales in the United States totaled $1.301 billion for fiscal 2012 compared to $1.243 billion for the same period in 2011. Canadian operations generated sales of $520 million for fiscal 2012, compared to $538 million in 2011.
For the year ended December 31, 2012, the adjusted EBITDA margin amounted to 5.4% compared to 5.9% for 2011. The same factors as those mentioned for the quarter affected the adjusted EBITDA margin for the fiscal year. The adverse economic conditions that had prevailed since the second quarter were not as significant for the full year. These items were partially offset by the additional marginal contribution realized from acquisitions completed in 2011 and additional synergies.
“Economic conditions affecting the aftermarket combined with the challenges posed by the implementation of the enterprise resource planning software in addition to having incurred double IT cost due to the two systems operating in parallel have had a negative impact on the results of the fiscal year. These problems were resolved in the first quarter of 2013 but we expect lingering effects during the first half of 2013,” said Richard G. Roy, president and CEO of Uni-Select.
“We are committed to making our Corporation more efficient and effective. We will continue the implementation of our optimization plan that will, among other things, reduce our fixed costs and our working capital position. We will continue to focus our efforts on improving service and increasing recruitment of independent wholesalers and shops under Uni-Select’s banner programs to increase sales and profitability. We have launched several product initiatives that should bring positive developments” added Roy.
During the year, Uni-Select continued the implementation of its new ERP system; over 30 warehouses and 190 stores were converted. In addition, during the same period, 24 corporate stores and one warehouse were closed, five other warehouses were converted into hub warehouses, 10 new stores were added to the network of which 6 through acquisitions. Approximately 200 support positions were eliminated in 2012.
The reduction of some elements of working capital, including inventories, has reduced the total net indebtedness by $42 million.
Finally, the Board of Directors of Uni-Select declared a dividend of CAD$0.13 per share payable on April 19, 2013 to shareholders of record on March 31, 2013. This dividend is an eligible dividend for tax purposes.