Uni-Select Inc. reported its financial results for the fourth quarter and year ended Dec. 31, 2020.
“By and large, our fourth-quarter results were in line with those of the previous quarter, ending a difficult year with a degree of stability. Sales for 2020 were down 15%, impacted by the global pandemic, but mirrored the trend in our three markets with a trough in the second quarter and a sharp bounce back in the second half of the year. As expected, automotive aftermarket businesses fared better than the refinish business in the U.S.,” stated Brent Windom, president and CEO of Uni-Select Inc.
“While our adjusted EBITDA followed a similar path, our adjusted EBITDA margin returned to normalized levels in the second half of the year, with our two automotive aftermarket businesses reporting 2020 margins superior to last year. We were able to achieve this by implementing stringent cost control measures and leveraging our continuous improvement culture which, this year alone, allowed us to generate an additional $30 million in annualized cost savings. These actions, coupled with tight management of our working capital, translated into strong cash flow from operations of $133 million for the year, which we used primarily to reduce our total net debt, in line with our capital allocation strategy.
“Looking forward, there remains a great deal of uncertainty related to the global pandemic, the Brexit overhang and ongoing structural changes in the refinish market in the U.S. With the visibility we have as of today, we expect our 2021 consolidated sales and adjusted EBITDA to progressively improve over 2020. During the year, we expect to ramp up certain capital investments to pre-COVID levels. We continue to be confident in the sustainability of our business and have the financial flexibility to execute our business plan,” concluded Windom.
FOURTH QUARTER RESULTS
Consolidated sales of $366.2 million for the quarter decreased by 11.2% compared to the same quarter in 2019, impacted by COVID‑19, resulting in negative consolidated organic growth of 12%. Organic sales mirrored the industry in each respective segment market, and reflected a similar pattern as observed in the third quarter, where negative organic growth of 12.6% was reported. Furthermore, consolidated sales were affected by the expected erosion resulting from the company‑owned stores integrated over the last twelve months, as part of improvement plans. On the other hand, consolidated sales benefitted from favorable fluctuations of the British and the Canadian currencies, as well as from the contribution of business acquisitions.
The corporation generated an EBITDA of $21.5 million for the quarter which was impacted by special items for restructuring and other charges related to the CIP of $1.8 million, as well as charges for the review of strategic alternatives of $0.6 million. Once adjusted, the EBITDA and the EBITDA margin were $23.9 million and 6.5%, respectively, compared to $27.9 million and 6.8% in 2019. The decrease of 30 basis points of the adjusted EBITDA margin, compared to the same quarter in 2019, is mainly explained by a lower absorption of fixed costs, a direct effect of the decrease in volume of sales, and lower vendor incentives resulting from the optimization of inventory, mainly in the FinishMaster U.S. segment. These elements were partially compensated by savings realized as part of the CIP, from the workforce alignment and the integration of 45 company‑owned stores (39 from the CIP and six from the Performance Improvement Plan or PIP) over the last twelve months, as well as cost‑control measures put in place to face the pandemic and counteract the decrease in sales. Furthermore, the current quarter includes COVID‑19 U.K. ‑ specific government subsidies for occupancy costs of $1.0 million or about 20 basis points.
Net loss and adjusted loss for the current quarter were respectively $5.1 million and $1.4 million, compared to net loss of $49.4 million and adjusted earnings $4.6 million in 2019. Adjusted earnings (loss) decreased by $6 million compared to the same quarter last year, due to lower adjusted EBITDA and a different income tax rate.
TWELVE-MONTH PERIOD RESULTS
Consolidated sales of $1,471.8 million for the year decreased by 15.4% compared to 2019. This performance is largely attributable to negative organic growth of 15.3% impacted by COVID‑19 and, to a lesser extent, the expected erosion resulting from the integration of company-owned stores over the last twelve months, as well as the unfavorable fluctuation of the Canadian currency. These elements were partially compensated by the contribution of one additional billing day and business acquisitions.
The corporation generated an EBITDA of $64.6 million for the year, impacted by special items for restructuring and other charges related to the CIP of $21.5 million, as well as charges for the review of strategic alternatives of $2.7 million. Once adjusted, the EBITDA and the EBITDA margin were $88.8 million and 6.0%, respectively, compared to $129.9 million and 7.5% in 2019. The adjusted EBITDA margin decreased by 150 basis points, compared to 2019, affected by a lower absorption of fixed costs, a direct effect of the decrease in volume of sales, and lower vendor incentives resulting from the optimization of inventory, mainly in the FinishMaster U.S. segment. Furthermore, the twelve‑month period was impacted by additional reserves for inventory obsolescence and bad debt of $7.7 million. These elements were partially compensated by savings realized as part of the CIP, from the workforce alignment and the integration of company‑owned stores, as well as cost‑control measures put in place to face the pandemic and counteract the decrease in sales. Furthermore, the 2020 year benefitted from COVID‑19‑related governmental subsidies of $6 million.
Net loss and adjusted loss for the year were respectively $31.5 million and $7.8 million, compared to net loss and adjusted earnings of $19.8 million and $30.8 million in 2019. Adjusted earnings (loss) decreased by $38.6 million compared to last year, due to lower adjusted EBITDA, as explained above, higher interest rates, the loss on debt extinguishment of $3.1 million following the conclusion of a new credit agreement on May 29, 2020, as well as a different income tax rate.
