BOUCHERVILLE, Quebec – Uni-Select announced yesterday that the formal review of strategic alternatives the company initiated in April 2013 in an effort to "unlock additional value for its shareholders" has been completed.
In April, Uni-Select announced that it had retained RBC Capital Markets to assist the company in conducting this review. Uni-Select’s board said it considered a full range of strategic alternatives and has concluded that an internal strategic and operational plan (the "Action Plan") centered on its U.S. automotive operations, and designed to significantly improve profitability is the best way to maximize shareholder value. The corporation says it remains committed to the U.S. and Canadian automotive aftermarkets and expects to grow its presence in both the mechanical and collision repair sectors.
Over the past 10 years, Uni-Select has markedly expanded, completing more than 70 acquisitions. It allowed the corporation to increase its activities, improve its product offering, enhance its geographical presence and strengthen its operations. As a result, the company said the Uni-Select network now 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 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.
In a press released issued Monday, Uni-Select revealed several highlights of the action plan, including:
1. Closures, divestitures or consolidations involving 48 stores to exit areas with less potential.
2. Rightsizing of the distribution network, including optimization of its distribution network with a focus on select large distribution centers. This will results in the closure of 12 distribution centers and the opening of two regional distribution centers.
3. Operational improvements, including the investment of $8 million in a dozen distribution centers to improve efficiency; as well as process improvements focused on increasing fill rates and enhancing pricing strategy. This will also include headcount reductions and expense reductions.
The company estimates that these actions will result in 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. It will also result in the reduction in sales of approximately $70 million, on an annual basis, from store closures and warehouse relocations.
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 are expected to be recorded in the second quarter of 2013. The balance will be recorded as incurred, Uni-Select said. These charges will result in a cash outlay of $13 million that will be fully offset by a $40 million reduction in inventory.
Uni-Select said implementation of the Action Plan is in progress and completion is expected in late 2014.
To date, the following actions have already taken place:
1. Closure of 11 stores and one distribution center resulting in a headcount reduction of 58 people;
2. Completion of the relocation of U.S. national distribution center; and the
3. Restructuring of operations leading to the elimination of 156 positions.
During the past 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 said it also committed to close 30 stores, another distribution center and open a new regional distribution center 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 company says the cost reduction stemming from the Network Optimization Plan were largely offset by lower sales in the past three quarters as well as the unfavorable 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 advisers, 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 Roy, president and CEO, 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 focused 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," he added.
