2013 ANNUAL REPORT
GEARED FOR
GROWTH
BE A PART OF IT.
C O V E R I N G
A L L O F
N O R T H
A M E R I C A
Uni-Select distributes more than 2 million replacement parts for domestic and
foreign nameplate vehicles, equipment, tools and accessories. It also distributes over
30,000 automotive paint and related products.
Uni-Select is a leader in Canada automotive parts distribution and the fifth-largest
in North America. Uni-Select is also North America’s largest independent paint distributor.
It serves a continent-wide network of independent wholesalers as well as tens of
thousands of installers and collision repair shops. Our banner programs support the
growth of more than 1,200 independent wholesalers and over 5,400 repair shops.
Uni-Select’s 5,500 employees work each and every day to deliver first-rate customer
service and advanced solutions to our customers in 54 distribution centres and
412 corporate stores.
A large-scale corporation. Be a part of it!
CANADA
Distribution centres
and corporate stores
UNITED STATES
Distribution centres
and corporate stores
Independent wholesalers
Independent wholesalers
CANADA OF SALES
UNITED STATES OF SALES
72%
Table of contents
Message to shareholders 2 • Management discussion and analysis 16 • Consolidated financial statements 49
* Trademarks and registered trademarks of Uni-Select are identified throughout this Annual Report by the use of italic fonts.
28% Financial Highlights
Years Ended December 31 (in M of US$, except for per share amounts and percentages)
2013
2012 (3)
2011
2010 (2)
2009 (3) 4)
Operating results
Sales
Adjusted EBITDA from continuing operations (1) (2)
EBITDA from continuing operations
Restructuring charges, write-off of assets and others
Adjusted earnings from continuing operations (2)
Earnings from continuing operations
Net earnings
Free cash flow
1,788.1
101.2
92.4
35.2
50.7
21.3
21.3
65.6
1,797.6
94.8
87.0
18.5
45.9
29.4
29.4
57.3
1,780.6
105.8
101.1
3.3
57.8
53.9
53.9
66.6
1,285.4
1,236.6
80.6
75.1
–
48.5
45.1
44.2
43.7
83.9
77.3
–
41.9
37.9
33.7
54.8
Return on average shareholders’ equity
9.8 %
8.7 %
12.3 %
12.2 %
10.2 %
Financial position
Working Capital
Total assets
Total net debt
Shareholders’ equity
Long-term debt to total
shareholders’ equity ratio
Total net debt to total net debt and
shareholders’ equity ratio
Common share data
Book value
Adjusted earnings related to
continuing operations
Earnings related to continuing operations
Net earnings
Dividend (C$)
415.4
1,205.9
277.7
488.8
51.9 %
34.1 %
436.0
1,202.7
309.3
484.2
58.0 %
36.7 %
491.1
1,239.2
351.7
464.6
68.9 %
40.7 %
371.9
805.5
182.0
382.0
46.8 %
32.3 %
377.8
741.1
156.2
356.3
50.0 %
30.5 %
22.99
22.47
21.47
19.38
18.07
2.37
1.00
1.00
0.52
2.12
1.36
1.36
0.52
2.67
2.49
2.49
0.48
2.46
2.29
2.24
0.47
2.13
1.92
1.71
0.46
Number of shares issued at year end
21,263,669
21,551,170
21,636,767
19,707,637
19,716,357
Weighted average number of outstanding shares
21,411,277
21,623,300
21,645,664
19,716,731
19,709,642
(1) EBITDA represents operating profit before finance costs, depreciation and amortization, restructuring charges, write-off of assets and others, equity income, net gain
on disposal of property and equipment, income taxes and net earnings attributable to non-controlling interests. For more details, see the section on «Non-IFRS
financial measures».
(2) EBITDA, earnings from continuing operations and net earnings have been adjusted for costs that the Corporation views as uncharacteristic of normal operations. These
costs are excluded to provide comparable measurements. (For further details, see the sections on “Analysis of consolidated results” and “Non-IFRS financial measures”).
(3) 2012 has been restated to take into account the changes in accounting policies as per IFRS 11 – ”Joints Arrangements” and as per the amended IAS 19- “Employee
Benefits”. However, as the obligation to restate the financial statement bearing only to the preceding comparative year, 2011 and prior years have not been restated.
(For further details, see note 4 of the Consolidated Financial Statements.)
(4) The result of the year 2009 was not restated under IFRS. (The obligation to restate the financial statement bearing only to the preceding comparative year). However,
following the analysis of 2010, adjustments to earnings related to the IFRS conversion should be negligible, and therefore should not mislead the reader. (For further
details, see note 30 in the Consolidated Financial Statements fot the year ended December 31, 2011).
2013 ANNUAL REPORT UNI-SELECT 1
MESSAGE TO SHAREHOLDERS
Robert Chevrier, Chair of the Board
and Richard G. Roy, President and CEO.
WHEN
STRATEGY AND
COMMITMENT
PRODUCE
RESULTS
2013 ANNUAL REPORT UNI-SELECT 2
2013 marked an important step forward in the
implementation of Uni-Select’s long-term growth
strategy. The year began under less-than-
favourable market conditions and we faced a
number of challenges related to the deployment
of the enterprise resource planning system.
However, the end of 2013 saw a return to robust
operations on both sides of the border, paving
the way for promising growth opportunities.
In 2013, sales reached $1,788 million, compared with
$1,798 million in 2012. The adjusted EBITDA grew by 6.7%,
reaching $101 million compared with $95 million the previous
year. The adjusted earnings totalled $51 million, compared
with $46 million in 2012, an increase of 10.4%.
Over the past few quarters, our team has produced
positive organic sales growth of 4.1% in the second half
of the year and 1.9% for the overall fiscal year. During this
same period, the performance of our US and Canadian
operations showed steady improvement as we recruited
new customers, helped our existing customers grow their
businesses, and signed new paint product distribution
agreements with collision centres and repair chains.
We have diligently controlled operating costs, tightly
managed our working capital, and used our cash flow
judiciously. This has allowed us to reduce our debt levels
and proceed with share buybacks to increase the value
of our shareholders’ equity. Last year, our debt decreased
by 10.2%, or a total of $32 million.
Our accelerated growth in the second half of the year
underscore the soundness of our initiatives to increase
organic sales, boost efficiency and improve service rates
all the while carefully managing operating costs.
“Our optimized distribution
network will confirm our status
as a distribution leader and
strengthen our position as a
partner of choice among our
customers and suppliers.”
Richard G. Roy
President and CEO
GEARED FOR GROWTH
As a leading Canadian distributor of parts for imported and
domestic light vehicles and the fifth largest distributor in
North America, Uni-Select occupies an enviable position
with independent wholesalers. Thanks to our business
solutions, banner programs and technical support programs,
we are a partner of choice for entrepreneurs eager to tap
into the strength of a network. In 2013, we continued to
deploy these value-added programs and expand direct
shipping from the manufacturer—a service that gives our
customers a competitive advantage in the market.
We also continued to offer our banner programs and training
courses to independent installers, helping them manage
their shops and grow their businesses. At the start of 2014,
we launched an attractive new banner program in Canada
that offers solutions that can adapt to shop specific needs.
Improved service levels also played an important role
in our stronger results. We achieved better fill rates
by establishing new processes that improve the way we
handle orders and increase our ability to meet the needs
of our customers. At the same time, we kept a tight rein
on operating costs and stayed focused on managing
inventory efficiently. Everywhere we do business, Uni-Select
is determined to consistently offer the right products at the
right price and within the time frame required by customers.
In the paint and related products sector, our FinishMaster
subsidiary continued to grow and increase its market share
by recruiting more than 400 new customers. FinishMaster
sets itself apart with its high-quality distribution service
and the value-added information it provides to its partners.
2013 ANNUAL REPORT UNI-SELECT 3
our processes in order to improve our fill rates and pricing
strategy. We targeted markets with the biggest capacity for
growth and we withdrew from regions with lower potential.
This led us to close, sell or consolidate 40 stores in low-
performing markets.
We are now proceeding with the rationalization of our
warehouse network, focusing on the implementation of
a few major regional distribution centres that will carry our
entire product line. These centres will support a network
of local warehouses to meet our customers’ more urgent
needs. We will be making some major investments to
optimize 12 existing distribution centres and to establish
two new regional distribution centres, including the new
facility in Washington D.C. which opened in early 2014.
Once the Action Plan has been fully implemented, we
will close 12 other warehouses after having consolidated
their operations elsewhere within our network.
The changes made to the Management team of our
parts distribution activities in the United States also
had a positive impact. Our team’s motivation and their
commitment to excellence reached new heights which
made a big difference in the success of our Action
Plan’s execution. Among their notable achievements,
our team members maintained higher-than-anticipated
sales volumes following our various site closures and
they achieved savings that exceeded expectations.
We are confident that our optimized distribution network
will confirm our status as a distribution leader and
strengthen our position as a partner of choice among
our customers and suppliers.
AN EFFICIENT AND PRODUCTIVE SYSTEM
Last December, we successfully completed the deployment
of our enterprise resource planning system with our sixth
and final wave of implementation. This marked an important
milestone as this software will greatly enhance our present
and future operations.
The new system will help us manage every facet of our
organization, from taking orders to receiving payments
as well as warehouse and inventory management.
We have diligently controlled
operating costs, tightly managed our
working capital, and used our cash
flow judiciously. This has allowed
us to reduce our debt levels for
a second year.
The subsidiary has secured its position as an industry
leader and enjoys healthy organic growth. Its profitability
is attributable to excellent management and rigorous
cost control. When Uni-Select acquired FinishMaster in
January 2011, we anticipated the achievement of $10 million
in synergies. We have now far surpassed that number, and
this does not take into account profits generated through
improved management of the subsidiary’s working capital.
In 2013, Uni-Select set the stage for getting back on
the road to sustainable growth. This is primarily due to
the solid foundations on which the Corporation’s operations
rest which have allowed us to stand out in a constantly
growing market. We also kept our eyes out for new business
opportunities and were able to seize them with the use
of new tools. But without question, the biggest force
driving our vision for the future has been the Corporation’s
5,500 employees, who work day in and day out to achieve
tangible results for our customers, suppliers and
shareholders.
AN OPTIMIZED NETWORK
In the spring of 2013, we embarked on a detailed strategic
review of our operations. This led us to adopt a strategic
and operational action plan (“Action Plan”) which is forecast
to generate annualized savings of approximately $30 million
by 2015. This Action Plan has already yielded some positive
outcomes. Although we began its implementation only a
few months ago, we have already achieved close to half of
the Plan’s projected recurring annual savings. This confirms
the strength and value of this initiative as a long-term
engine of growth.
Under this Plan, we undertook a detailed review of our
distribution network to pinpoint any and all ways it could be
optimized and enhanced. We made the decision to refine
2013 ANNUAL REPORT UNI-SELECT 4
Our Beck/Arnley product line for foreign nameplate vehicles
continues to enjoy growing success. Beck/Arnley had a
remarkable year, boosting its profitability through increased
sales and tighter cost management. We improved access
to our network’s products through the BeckSelect sales
program for US independent wholesalers, and the success
of this program has inspired us to launch a similar campaign
in Canada in 2014.
A PROMISING FUTURE
The Do It For Me (DIFM) aftermarket sector will offer
considerable opportunities in the coming years, with annual
growth projections of 3.6% favouring sustainable growth
for Uni Select. As the supplier to the largest network of
independent wholesalers, we enjoy a unique position. We
stand to benefit significantly from the aftermarket sector’s
growth with our ability to meet the needs of tens of
thousands of repair and collision repair shops.
Uni-Select is in a healthy financial state. We are ready
to take advantage of acquisition opportunities in the
parts and paint distribution sectors. We will continue
to rigorously assess all potential acquisitions to make
sure each transaction contributes rapidly to our results
and complements our current offering. In accordance
with these principles, we completed two paint sector
acquisitions in early 2014 that will allow FinishMaster to
expand its service offering within the related markets.
Our industry continues to consolidate and we plan to
capitalize on this trend while delivering solid results.
Certain events over the past few months have generated
growth opportunities for Uni-Select which we are now
poised to seize. The new ERP software deployed in 2013
will allow for more efficient integration which means that
future acquisitions will yield positive impacts and synergies
more rapidly.
In 2014, we will pursue the objectives outlined in the
2012-2015 strategic plan and finish implementing the
Action Plan we announced this past July. We will continue
to improve our parts offering and pricing strategy,
aiming for a competitive pricing policy that takes
purchase prices into account and to make sure they
meet the real needs of the markets we serve to attract
more customers while also improving our margins.
“The past quarters results underscore
the soundness of our initiatives to
create value for our shareholders,
customers and suppliers.”
Robert Chevrier
Chair of the Board
Our goal was to implement a single-platform system
that would simplify business processes, increase our
distribution centres’ productivity and efficiency and facilitate
the integration of future acquisitions by establishing and
standardizing best practices. We only recently began using
this new system for our parts distribution activities and it
has already yielded positive results.
We now have real-time access to comprehensive data
on our products, logistics and finances. This gives us
more flexibility in setting prices and lets us account for
fluctuations in regional markets. The system has also
improved inventory management: we can now minimize
duplication and make sure we always have the right product
in the right location. In addition, our customers now have
quick and easy access to all of the products offered
throughout our network, which facilitates the ordering
process. Our customers will also benefit from our
warehouses’ increased productivity and greater
accuracy in deliveries.
Our ability to access information in real time
speeds up the decision-making process and helps
us improve service levels and boost our results.
AN EXTENSIVE RANGE OF PRODUCTS
Last year, we also reviewed and adapted our product
offering to better meet the needs of our customers and
consumers. We continued to maintain a wide range of
national brand products in our inventory while ramping up
promotional activities for our Auto Extra parts, making them
more accessible. We also introduced Worldparts, a new
high-end, competitively priced private label.
2013 ANNUAL REPORT UNI-SELECT 5
THANK YOU TO EVERYONE WHO CONTRIBUTES
TO UNI-SELECT’S SUCCESS
We would first like to thank our employees, whom we
acknowledge once again for their dedication and
commitment. We are grateful for their ongoing efforts and
daily collaboration and look forward to working closely with
them as we continue to build on our success.
We would also like to thank our customers, suppliers and
partners for their support and loyalty throughout the year.
Uni-Select will continue to do everything in its power to
offer them the best services and tools to foster their
growth.
To our shareholders, once again we express our sincere
gratitude. We are proud to work each and every day to earn
the trust you place this Corporation.
Lastly, we wish to thank the members of our Board of
Directors. The returning directors and three new members
are all making remarkable contributions toward achieving
our goals and we are grateful for their generous participation
and valued advice. We also wish to extend our sincere
thanks to those directors who are stepping down in 2014
for their many years of outstanding service.
In 2014, we will pursue the
objectives outlined in the 2012-2015
strategic plan and finish
implementing the Action Plan
announced this past July.
Optimizing our network also remains one of our top
priorities. As we implement our Action Plan we also intend
to refine our product offering and further streamline our
inventory in order to achieve higher service levels.
We are confident our margins will improve thanks to
our recent and ongoing initiatives. In 2014, we also
expect returns from the launch of new products tailored
to the specific needs of the market and we will take
advantage of the leverage gained from the increased
sales of products shipped directly to our wholesalers.
Lastly, we will continue to focus on engaging and
mobilizing our employees. They are the engine driving
our success and we are committed to providing them
with a stimulating work environment that fosters
communication and recognizes their talents.
Chair of the Board
Robert Chevrier, FCPA, FCA
President and CEO
Richard G. Roy, FCPA, FCA
2013 ANNUAL REPORT UNI-SELECT 6
Our values
O U R VA L U E S R E S T O N A C O M M I T M E N T
T O P R O V I D E E F F E C T I V E B U S I N E S S S O L U T I O N S
F O R A L L O U R PA R T N E R S .
Uni-Select’s corporate
values guide our day-
to-day activities
and help define our
strategies to ensure
the satisfaction and
support the development
of our customers,
employees, suppliers
and shareholders, as
well as the communities
in which we operate.
Our values support
the following
objectives:
• Provide competitive solutions
for our customers
• Establish winning relationships
with suppliers
• Provide employees with
a stimulating work environment
• Create value for our shareholders
• Be a respectful corporate citizen
V I S I O N
Uni-Select aims to
be the preferred
distributor in the
automotive aftermarket
and to create value
for customers,
employees, suppliers
and shareholders.
O U R A D D E D VA L U E
• 45 years of profitability
• Good cash flow
• 26 years of continuous dividends
Financial
strength
Stong
network
• North American
• Serving a large clientele
of independent wholesalers
• Wide range of products
Sound
management
• Entrepreneurial culture
• Expertise in logistics,
acquisitions and their integration
A Corporation guided by its values. Be a part of it!
2013 ANNUAL REPORT UNI-SELECT 7
A CULTURE OF SUCCESS ACROSS ALL LEVELS Our distribution network
We are constantly enhancing our network to better serve our customers.
Uni-Select is committed to delivering excellent fill rates by managing product
supply and inventory as efficiently as possible. We strive to improve logistics
in our warehouses by making sure their layout is optimal and our new
systems efficiently put to contribution..
C L O S E T O C U S T O M E R S
Our network of warehouses is well
positioned to support our corporate
stores and independent wholesalers
which offer a fast and efficient service
to repair and collision repair shops.
T H E A C T I O N P L A N
Term: December 2014
The execution of the 2013 Action Plan will bolster
Uni-Select’s distribution network, allowing us to provide
customers with the right products, at the right place,
at the right price and at the right time.
ANNOUNCED
In July 2013
COMPLETED TO DATE
Closure of 12 warehouses
7 warehouses
Opening of 2 distribution centres
1 regional distribution centre
in Washington, D.C.
Reconfiguration and optimization
of 12 warehouses
—
COMING
In 2014
5 warehouses
1 distribution centre
12 warehouses
Relocation of US national
distribution centre
Closure of 48 corporate stores*
Distribution centre relocated to Smyrna, TN —
34 stores closed
6 stores sold to certain customers
3 stores to be sold or closed
Inventory reduction
of $40 millions in 2015**
Cost reduction
of $30 million in 2015**
$4.2 million
$13.1 million
$25.8 million (+ $10 million in 2015)
$15 million
The number of stores and warehouses planned to close in 2014 could be revised upwards or downwards depending on the success of process
improvement plans and profitability.
* Total revised to 43 stores because of the marked improvement in the performance of 5 corporate stores.
** Some initiatives will materialize in 2015 which will lead to attaining forecasts.
A TA I L O R E D N O R T H -A M E R I C A N N E T W O R K
2
22
16
412 .3,200.
national distribution
centres strategically
located to efficiently
supply our network’s
warehouses
regional distribution
centres stocked with
all product lines and
an inventory of over
350,000 parts
local centres
and 14 satellites
to provide same-day
response to urgent
requests for essential
product lines
corporate
independent
stores
wholesalers
serving tens thousands of
installers and body shops
Uni-Select – the strength of a network! Be a part of it!
2013 ANNUAL REPORT UNI-SELECT 8
FOCUSED ON EFFICIENCY
Our systems
S I G N I F I C A N T M I L E S T O N E S
4 roll-out waves in
23 distribution centres
and 168 stores
2013
C O M P L E T I O N O F T H E
E N T E R P R I S E R E S O U R C E
P L A N N I N G S Y S T E M
D E P L O Y M E N T
This system integrates all aspects
of parts distribution operations
management on a single platform
allowing Uni-Select to streamline
its business operations. The system
allows management to make more
informed decisions in a timelier
manner, increase the efficiency and
productivity of distribution centres
and improve service levels.
ERP implemented in
7 distribution centres
and 22 stores
2012
Final implementation
in 6 warehouses
and 111 stores
2011
2013
Finance module
implemented
2010
2014
Opening of a new regional
distribution centre, decommissioning
of legacy systems and continuous
improvement in our use of available
business information
P O W E R F U L
S Y S T E M S
T H AT M A X I M I Z E
T H E S U C C E S S
O F O U R
C U S T O M E R S
One single platform
Management
made easier
Information quality
• Information available
• Integration of all
• Improved information
in real time
processes
management
• Better customer
• Order accuracy
• Faster delivery of
service
• Improved inventory
visibility and
management across
the network
• Better pricing policy
business information
• Faster decision making
at all levels of the
organization
A Corporation built for efficiency. Be a part of it!
2013 ANNUAL REPORT UNI-SELECT 9
SYSTEMS THAT ENABLE GROWTH Our products
National brand-name products
that perform like original equipment
and respond to our customers’ desire
to offer high-quality parts made by
the world’s leading manufacturers.
Private-label products that meet
the needs and budget of customers
who want excellent quality at
competitive pricing.
Fifth-largest distributor of replacement
parts in North America.
Uni-Select provides customers with:
• A wide range of high-quality under-the-
hood and under-the-car replacement parts
• A complete offering of tools and
equipment for installers
2013
A C H I E V E M E N T S
• Launch of Worldparts, our
competitively-priced high-quality
brand
• Improvement of our Auto Extra
product offering with faster
deployment to our customers
• Inventory reduction and improved
service levels through consolidation
of product lines
Beck/Arnley for imported vehicles
is the brand of choice for repair shops
looking for quality, appearance,
operation and ease of installation
on par with original equipment.
• A wide range of high-quality products
including steering and suspension,
filters, brakes, engine management,
fluids and more
• Over 27,000 available parts that
meet original equipment standards
• Strong market positioning of
the brand and products
2013 ANNUAL REPORT UNI-SELECT 10
• Growth in the crucial brakes sector
using an improved product offering
• Introduction of training and support
programs wholesalers as well as shop
incentives in the complex engine
management category
2013 A C H I E V E M E N T S
• Launch of the BeckSelect program
in the US that gives wholesalers
easier access to the complete line of
Beck/Arnley products
• Introduction of the new
TRUE | Braking packaging that allows
users to scan the back of the box with
the BeckSCAN application to download
videos and brochures. This initiative
won the best packaging award in 2013
from the Automotive Communications
Council (ACC)
• Large-scale launch of the OE Fluids
product offering including antifreeze,
coolants, motor oil and automatic
transmission and power steering fluids
AN EXCEPTIONAL PRODUCT OFFERING IN ITS QUALITY AND SCOPE Our paint distribution
1
I N T H E U N I T E D S TAT E S,
F I N I S H M A S T E R ’S
M A R K E T S H A R E I S
O N T H E R I S E
Our paint and related product
distribution activities are growing
steadily, continuing to be a big part
of Uni-Select’s success story and
securing our position as the country’s
leading distributor.
FinishMaster sets itself apart:
— Distribution of high-quality products
from leading manufacturers
— Offering of services and technology
that drive the success of its
customers
— High-quality accessories and products
at competitive prices under its own
SMART brand
Uni-Select is working toward a closer
integration of its paint and replace-
ment parts products:
— Cross-sales programs already provide
independent wholesalers with
FinishMaster paint products
— Merged stores offer paint products
and parts under one roof
2013
A C H I E V E M E N T S
• Recruited 416 new customers
• Grew sales in the National
Multi-Shop owners segment
• Solidified partnerships
with vendors
IN CA N A DA , UNI-SEL EC T
I S A L E A D E R I N PA I N T
A ND REL ATED PRODUCTS
D I S T R I B U T I O N
Uni-Select is a major supplier
of Canada’s leading paint products.
In 2013, we expanded our range
of paint products through a new
distribution agreement with a
well-known global manufacturer.
Uni-Select serves the largest
network of collision repair centres
in Canada.
• Alliance of the Pro Color and CSN
Collision & Glass network which
includes 290 shops specializing
in damaged vehicle repair
• Recruitment of new collision
repair centres
• Increased visibility through
a national advertising campaign
featuring ProColor shops
• Additional National agreements
signed with two leading insurance
providers, thanks to its alliance with
CSN, for a total of 11 agreements
2013 ANNUAL REPORT UNI-SELECT 11
UNI-SELECT IS THE LARGEST INDEPENDENT DISTRIBUTOR OF AUTOMOTIVE PAINT AND RELATED PRODUCTS IN NORTH AMERICA. Our independent wholesalers
Uni-Select is the preferred partner of
independent wholesalers, because
our tools and solutions make it
easier to run their businesses.
• Long-term supply agreements
with major accounts, resulting
in increased sales volumes
• Access to news and online
catalogues through UniForum
and UNIcentralpoint
• Advanced technological tools for
analyzing and managing inventory
• Advisory boards that tailor solutions
to customers’ needs and foster
growth strategies
• Assistance in pricing strategy
to ensure competitiveness and
sustainability
The Uni-Select advantage:
• The purchasing power of a North
America-wide network
• A service rate that meets
expectations
• An offer of customized services
• Marketing programs that raise
that meet each customer’s
specific needs
• Advantageous delivery options:
directly from the manufacturer
or from Uni-Select warehouses
visibility
• Loyalty programs
• Succession plans for business
handover
2013
A C H I E V E M E N T S
• Improved service level in warehouses
• Recruited 81 customers to our Auto-Plus, Auto Parts Plus
and Bumper to Bumper banners
• North American convention for Uni-Select’s wholesalers
and installers, attracting 1,000 participants
• Improved technology to make wholesalers more competitive
in managing inventory and determining pricing strategy
• Increased presence on social media
A comprehensive business solution. Be a part of it!
2013 ANNUAL REPORT UNI-SELECT 12
PARTNERS IN OUR CUSTOMERS’ SUCCESS Our installers
Uni-Select unveils
its new banner strategies
in Canada!
Uni-Select tailors its tools and solutions
to meet each installer’s individual needs.
• A diverse line of private and national
• Telematics solutions program
(SmartLink) that transmits information
to drivers and technicians on the
state of their vehicle, building
customer loyalty
• Outstanding training programs
including coaching on business
management
• Support for building a social media
presence
• Shop incentive programs
brand products
• Fast and effective product distribution
• Flexible banner programs able to
respond to specific needs
• Turnkey solutions featuring effective
marketing programs to accelerate
growth
• Loyalty programs that boost customer
retention
• Technology solutions at
ASPcentralpoint.com that facilitate
ordering and inventory visibility
• A range of diagnostic technologies
to facilitate repair
2013
A C H I E V E M E N T S
• Prepared Canadian installer
banner program repositioning to
offer a customized solution tailored
to individual needs and creating
a direct link with the Uni-Select
network for greater visibility and
name recognition
• Training of about 7,000 technicians
online and in person
• Recruited 379 customers to our
programs in the United States
and 53 in Canada
Uni-Select helps its customers grow their business. Be a part of it!
2013 ANNUAL REPORT UNI-SELECT 13
A CUSTOMIZED SOLUTION FOR REPAIR SHOPS OUR EMPLOYEES
E M P L O Y E E S C O M M I T T E D
T O G R O W T H
At Uni-Select, our
5,500 dedicated
employees are
instrumental to our
success and we
are committed to
providing a stimulating
workplace so they
can reach their
full potential.
Our leadership programs are an
essential part of our succession
planning. Uni-Select identifies
employees with outstanding abilities
and supports them in developing their
skills. Our leadership initiatives allow
us to prepare for succession and retain
our top talent.
Change management is important
to us because the result helps our
employees carry out their work more
effectively. These programs make it
easier for employees to integrate and
adapt to new tools and processes.
Our recognition programs encourage
employees to excel and contribute
to the Corporation’s growth.
• The Value Creators program highlights
the contributions of outstanding
employees
• The President’s Awards honour
exceptional managers
We are building new ways to communicate and exchange ideas.
• Our new Uni-Flash
newsletter delivers
important news items
and gives employees a
way to share their
achievements
• The “Word from the
President” informs
employees on the
Corporation’s main focus
and communicates our
results
• During regular Town Hall meetings, employees in
distribution centres get the chance to meet the
President and talk with him about the Corporation’s
objectives and strategies. These meetings foster
employee engagement and build good relationships
with management
Uni●flash
Spotlight on the aftermarket!
Las Vegas
in early November. More
This year's Automobile Aftermarket Industry Week unfolded
in
than
130,000 professionals from around the world took part in
our industry's biggest event. Attendees had the chance to
take in two major expos (AAPEX and SEMA Show), as well
as educational seminars, workshops, and a number of
product demos.
The Automotive Aftermarket Products Expo (AAPEX) allows
repair shops and collision centers, as well as jobbers and
distributors, to meet with manufacturers and suppliers of
product parts for light vehicles and heavy trucks of all
kinds. The Expo also features every type of tool and
equipment used by installers.
The SEMA Show is the world’s premier automotive specialty
products trade event. It brings the industry’s hottest
products together under one roof, including products for
light vehicles, SUVs and trucks, as well as powersport
vehicles and RVs.
Throughout the week, participants were able to attend training sessions to boost their business’ performance. They
could also take part in a number of seminars on industry trends.
Automobile Aftermarket Industry Week gives our team a chance to meet with our suppliers, identify the best
products, speak with industry movers and shakers, and meet with potential shareholders.
Our Beck/Arnley products were also showcased at AAPEX. We set up a great booth where the Blue Beast was
introduced, which attracted a number of potential customers and buyers.
Our President and CEO, Richard G. Roy, gave a presentation at Gabelli & Company’s 37th Annual Automotive
Aftermarket Symposium, which took place during both exhibitions.
We also met with several suppliers to give them an update on our action plan. Our message was clear: we are on the
right track and our quarterly results confirm that we're going
in the right direction. We also presented our 2014 sales and
marketing strategies to make it easier for manufacturers to
help us achieve our goals.
I enjoyed
plan with
sharing our vision and
the
"Personally,
the manufacturing
Automotive USA
community,"
said Mike Buzzard, Senior Director of
Marketing and Technology at Automotive USA, who was at this
year’s event. "It was very satisfying to show how our company
has changed, and how our initiatives will restore profitability
and foster a culture of success throughout the organization. It
was very rewarding to share some of our positive initiatives,
such as the new warehouse in the Washington DC area, our
approach to improving our banner programs for shops and
stores, and our sales force automation tool. I think a lot of
manufacturers left the meeting with a WOW factor for all our
great achievements”.
October 31, 2013
Dear colleagues,
Today we posted improved results for a second quarter in a row. The third quarter of 2013 saw organic growth of
2.8%, which can be attributed to our success in attracting new customers and supporting our jobbers. I am
particularly proud of the marked increase in sales in our US corporate stores. Our hard work has resulted in higher
sales figures than we reported for this same quarter last year.
We also boosted our operating margin during this past quarter, thanks to our efforts to reduce operating costs, rein
in spending and increase productivity. Thank you for all your hard work and for your commitment to delivering
these outstanding results. When we work together, we can achieve great things!
Sales
Operating income
Net earnings
(adjusted EBITDA)
(adjusted earnings)
3rd quarter
2013
$465 million
$30 million
$15 million
2012
$457 million
$25 million
$11 million
We also saw greatly improved service levels across all our operations. To stay competitive in our industry, we must
maintain our ability to deliver the right products to our customers the moment they need them. This efficiency
builds loyalty and helps us attract new customers. Our improved fill rates rest on a combination of factors,
including the better stability of our SAP system over the last few months, our close work with our suppliers, and our
consistent efforts to increase productivity. Once again, I can confidently say we are delivering good service.
An ongoing Action Plan
Over the past few months, we have continued to implement our Action Plan initiatives. We closed a total of
18 stores and three warehouses, and we announced the upcoming opening of a warehouse in Washington, DC. This
new regional distribution center will boast an improved design, allowing us to provide superior customer service. I
would like to welcome those employees who joined us at this new location. Soon, they will be working alongside
our employees from the distribution center in Hyattsville, MD, who will be transferred to Washington. During the
fourth quarter, we will also close our warehouses in Roanoke, VA and Victoria, BC. We would like to thank each and
every employee at these locations for their valuable contributions over the years.
Table of content, page 2
December 2013 Edition
A Corporation of mobilized individuals! Be a part of it!
2013 ANNUAL REPORT UNI-SELECT 14
OUR SOCIAL RESPONSIBILITY
PA R T O F
T H E C O M M U N I T Y
Concern for the environment
Uni-Select cares about sustainable development
and environmental issues
• Uni-Select recycles industry materials such
as used oil, filters, liquid refrigerant, batteries,
cores and packaging
• The very nature of the automotive aftermarket
is to supply replacement parts that keep vehicles
operating longer and more efficiently, increasing
their life cycle
I N 2013
• Our employees contributed
generously to the Calgary
and Lac-Mégantic disaster
relief funds in partnership
with the Canadian Red Cross
• Employees took part in
workplace fundraising
campaigns for the United
Way in Canada and the US
as well as Teach for America
• Many of our employees
volunteered for causes close
to their heart such as the
United Way Day of Caring
and Christmas Service
• Uni-Select organized golf
tournaments in many
regions. Our cutomers and
suppliers participated in
these events, supporting
various non-profit
organizations
• We also supported the
Heart and Stroke
Foundation and the Multiple
Sclerosis Society of Canada
• The Corporation gave a
number of model cars to
organizations working with
children. More than 100 cars
have been donated since
the launch of our internal
Build-A-Car training program
Our employees and
leaders participate in a
number of charities that
make a difference in their
communities.
Taking part in local development
Uni-Select contributes to the growth
and development of the communities
in which it operates. We support local
businesses and create numerous jobs
in every region we serve.
Logo
PMS 485
Coated C 0 M 95 Y 100 K 0
Uncoated C 0 M 73 Y 93 K 1
R 218 G 41 B 28
HTML DA291C
Logotype
PMS 425
Coated C 0 M 0 Y 0 K 77
Uncoated C 0 M 0 Y 0 K 77
R 112 G 115 B 114
HTML 54585A
Uni-Select, a good corporate citizen. Be a part of it!
2013 ANNUAL REPORT UNI-SELECT 15
Management
Discussion and
Analysis 2013
Highlights
Preliminary comments to the management discussion and analysis
Profile and description
Economic context
Operational review of the last 3 years
Analysis of consolidated results
Cash flows
Financing
Capital structure
Financial position
Related party transactions
Risk management
Accounting policies
Non-IFRS financial measures
Exchange rate data
Effectiveness of disclosure controls and procedures
and internal controls of financial reporting
Outlook
17
18
19
19
21
24
29
30
32
35
36
37
41
45
47
47
48
HIGHLIGHTS
(in US dollars)
Sales
$1.8 billion
Adjusted EBITDA
$101.2 million
Adjusted Earnings
$50.7 million
- Consolidated organic growth of 1.9% in 2013 (2.3% for the Canadian operations and 1.7% for the US operations),
exceeding sales lost from store closures. However, overall consolidated sales decreased by 0.5% mainly in relation to
the declining Canadian dollar.
- Adjusted EBITDA increased from $94.8 million (or 5.3% of sales) last year to $101.2 million (or 5.7% of sales), an
increase of 6.7%. EBITDA improvements are mainly related to savings generated by the strategic and operational
action plan (“Action Plan”).
- Adjusted earnings increased by 10.4% from $45.9 million last year to $50.7 million in 2013 and benefited from the
Action Plan savings.
- Net earnings were $21.3 million compared to $29.4 million last year. 2013 included $23.9 million of restructuring
charges, write-off of assets and others, net of taxes ($11.5 million in 2012).
- Total net debt decreased by $31.6 million to $277.7 million and the Corporation generated cash of $76.8 million from
its operations during the year.
- Free cash flows were $65.6 million compared to $57.3 million last year, a direct result of the EBITDA growth and
lower interests paid.
- Deployment of the enterprise resource planning (“ERP”) system completed with the final implementation wave in
early December 2013.
2013 ANNUAL REPORT UNI-SELECT 17
PRELIMINARY COMMENTS TO THE MANAGEMENT DISCUSSION AND ANALYSIS
B A S I S O F P R E S E N T A T I O N O F T H E M A N A G E M E N T D I S C U S S I O N A N D A N A L Y S I S
This management discussion and analysis discusses the Corporation’s operating results and cash flows for the periods
ended December 31, 2013 compared with those of the periods ended December 31, 2012, as well as its financial position as
at December 31, 2013 compared with its financial position as at December 31, 2012. This report should be read in
conjunction with the Audited Consolidated Financial Statements and accompanying notes included in the 2013 Annual
Report. The information contained in this management discussion and analysis takes into account all major events that
occurred up to February 27, 2014, the date at which the financial statements and management discussion and analysis
were approved by the Corporation’s Board of Directors. It presents the existing Corporation’s status and business as per
management’s best knowledge as at that date.
Additional information on Uni-Select, including the audited Consolidated Financial Statements and the Corporation’s Annual
Information Form, is available on the SEDAR website at sedar.com.
In this Management discussion and analysis, “Uni-Select” or the “Corporation” refers, as the case may be, to Uni-Select Inc.,
its subsidiaries, divisions and joint ventures. “Beck/Arnley” designates Beck/Arnley Worldparts, Inc. and “FinishMaster”
designates FinishMaster, Inc., both of which are wholly-owned subsidiaries.
Unless otherwise indicated, the financial data presented in this management discussion and analysis, including tabular
information, is expressed in thousands of US dollars. Comparisons are presented in relation to the comparable periods of
the prior year.
The financial statements contained in the present management discussion and analysis were prepared in accordance with
International Financial Reporting Standards (“IFRS”). These financial reports have been audited by the Corporation’s
external auditors.
F O R W A R D - L O O K I N G S T A T E M E N T S
The management discussion and analysis is intended to assist investors in understanding the nature and importance of the
results and trends, as well as the risks and uncertainties associated with Uni-Select’s operations and financial position.
Certain sections of this management discussion and analysis contain forward-looking statements within the meaning of
securities legislation concerning the Corporation’s objectives, projections, estimates, expectations or forecasts.
Forward-looking statements involve known and unknown risks and uncertainties, which may cause actual results in future
periods to differ materially from forecasted results. Risks that could cause the results to differ materially from expectations
are discussed in the “Risk Management” section of this annual management discussion and analysis. Those risks include,
among others, competitive environment, consumer purchasing habits, vehicle fleet trends, general economic conditions
and the Corporation’s financing capabilities.
There can be no assurance as to the realization of the results, performance or achievements expressed or implied by
forward-looking statements. Unless required to do so pursuant to applicable securities legislation, Management assumes
no obligation as to the updating or revision of forward-looking statements as a result of new information, future events or
other changes.
C O M P L I A N C E W I T H I F R S
The information included in this report contains certain measures that are inconsistent with IFRS. Non-IFRS financial
measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar
measures presented by other entities. The Corporation considers that users of its management discussion and analysis may
analyze its results based on these measurements. (Details in section “Non IFRS financial measures”.)
2013 ANNUAL REPORT UNI-SELECT 18
PROFILE AND DESCRIPTION
A M U L T I N A T I O N A L C O M P A N Y I N T H E A U T O M O T I V E A F T E R M A R K E T
automotive
Founded in 1968, Uni-Select is a major distributor of
replacement parts and paint products in the North
its
American
5,500 employees, 54 distribution centres and 409
corporate stores, the Corporation serves a
large
network of independent wholesalers and installers in
Canada and the United States.
aftermarket. With
Uni-Select’s clientele consists of 3,200 independent
wholesalers, tens of thousands of repair and collision
repair shops, national and regional accounts, and
consumers. A key
in the supply chain that
connects manufacturers, wholesalers and installers,
Uni-Select offers a vast selection of products that
includes 2 million replacement parts and accessories
for domestic vehicles and over 27,000 Beck/Arnley products for foreign nameplate vehicles. It also offers 30,000 paint and
related products, as well as equipment and tools for shops.
link
Uni-Select is a leader in Canada and the fifth-largest automotive parts distributor in North America. It is also the largest
independent paint distributor in North America. The Corporation generates 72% of its sales in the United States and 28% in
Canada.
A N O F F E R I N G T A I L O R E D T O I T S C L I E N T E L E
Uni-Select has an efficient distribution network that serves all of Canada and 47 US states. The Corporation meets its
customers’ varied needs by offering a wide range of renowned quality national brand products and a variety of
competitively priced private label parts. Customer-driven in both its parts and paint distribution activities, Uni-Select strives
to maintain a superior fill rate and a fast and efficient delivery.
Knowing that its customers are entrepreneurs, Uni-Select offers various business solutions, technological tools and banner
programs to help its wholesalers, installers and collision repair shops manage and grow their business. Its extensive market
knowledge, procurement expertise and its operational management approach, geared to achieving a high fill rate, make
Uni-Select a partner of choice.
ECONOMIC CONTEXT
From an economic standpoint, 2013 was characterized by a certain degree of economic recovery in the U.S., where the
Gross Domestic Product growth was substantial, unemployment fell slightly and disposable income grew. However, the
distance travelled did not increase, mainly due to the high price of gas and the low employment rate.
T H E A U T O M O T I V E A F T E R M A R K E T
Employing upwards of 4 million people in North America, the automotive aftermarket continues to expand, growing an
estimated 3.4% in 2013. Forecasts are encouraging, predicting an annualized growth rate of 3.3% until 2016. The average
age of vehicles on the road is increasing, clearly indicating improved durability. Consumers are holding onto their cars
longer, creating attractive opportunities for the industry.
2013 ANNUAL REPORT UNI-SELECT 19
Aftermarket Segmentation
13%
29%
25%
33%
DIFM
DIY
Dealers
Collision
In 2013, the North American automotive aftermarket was worth
roughly $260 billion. Distribution of replacement parts and related
products represents $102 billion of the total.
Replacement parts and accessories accounted for 87% of
distribution sales volume and are broken down into three
segments: professional installers (Do It For Me or “DIFM”),
dealerships, and consumers (Do It Yourself or “DIY”). The collision
repair market accounts for 13% of sales.
Although the number of independent jobbers serving repair shops
is decreasing slightly every year, the decline is offset by sales
growth among
shop
consolidation is continuing at a slow, steady pace but traffic is
growing substantially in service bays.
remaining. Collision
repair
those
N U M B E R O F V E H I C L E S O N T H E R O A D
There are approximately 271 million vehicles on the road in Canada and the United States. Consumers are holding onto
their cars longer, which is good news for the aftermarket. The average vehicle age is now 11.3 years, and those more than
11 years old account for a larger proportion of the on-road fleet, increasing faster than those less than 10 years old. This
explains the projected growth for the industry despite high prices at the pump and no change in distance travelled.
However, the number of vehicles between 5 and 10 years old that are not covered by a manufacturer’s warranty could
decline due to weak new car sales between 2008 and 2012. Uni-Select replacement parts meet the need for vehicles of all
ages, with a greater focus on vehicles not under manufacturer’s warrantee, while its paint and related product offerings
target vehicles aged less than 3 years.
The number of foreign nameplate vehicles continues to grow and now accounts for almost 41% of the North American
fleet.
The industry predicts that manufacturers will increasingly use global platforms in model design, which should reduce parts
proliferation and simplify distributors’ operations. Vehicles are also becoming ever more sophisticated and are equipped
with several technological components making repairs more complex. Owners will therefore have to turn to professionals
for repairs and maintenance. With the arrival of telematics within Uni-Select customers’ base, information can now be
relayed between car owners and their independent repair shops and could have a positive effect on customer loyalty.
The number of independent or dealer-operated repair shops continues to shrink in the collision repair segment. However,
multiple-location networks are growing in popularity and Uni-Select is building a reputation with these large companies due
to its wide network presence and quality products. The trend among insurers to favour multi-shop networks also bodes well
for business. The industry is still feeling the effects of a challenging economy in which car owners tend to cash their
insurance cheques rather than repair their cars. Moreover, technological advances, safety legislation and low mileage are
some of the reasons collisions are declining.
A M A R K E T W I T H G R O W T H O P P O R T U N I T I E S
The North American automotive aftermarket has reached maturity and should remain solid in the years ahead. Although
consolidated in Canada, the market still offers a few acquisition opportunities for independent distribution networks,
contrary to the Unites States, where there are abundant opportunities.
Uni-Select is positioning itself as a major player in this market, focusing on serving the commercial independent jobber,
repair shop and collision shop segments.
Sources: AAIA Digital Automotive Aftermarket Factbook 2014, IHS Automotive and AIA 2012 Outlook Study.
2013 ANNUAL REPORT UNI-SELECT 20
OPERATIONAL REVIEW OF THE LAST 3 YEARS
Over the past three years, the Corporation geared itself for future growth by introducing various initiatives
based on its different plans ensuring its continued growth and increased effectiveness and profitability.
The main initiatives included the following:
- Optimization and rightsizing of the distribution network with the 2013 Action Plan which complemented the
-
-
optimization plan announced in 2012;
Introduction of effective systems, with the development and deployment of the ERP system ; and
Targeted acquisitions and diversification of distribution channels with the acquisition of FinishMaster and certain
assets in Florida in 2011.
E L E C T E D C O N S O L I D A T E D I N F O R M A T I O N
(in thousands of US dollars, except per share amounts and percentages)
2013
2012(2)
2011(2)
OPERATING RESULTS
Sales
United States
Canada
Adjusted EBITDA(1)
EBITDA
Restructuring charges, write-off of assets and others
Adjusted earnings (1)
Net earnings
Free cash flows
FINANCIAL POSITION
Working capital
Total assets
Total net debt
Shareholder’s equity
COMMON SHARE DATA
Adjusted earnings (1)
Net earnings
Dividend (C$)
Weighted average number of outstanding shares
1,294,115
493,970
1,788,085
101,185
92,379
35,180
50,660
21,328
65,618
417,465
1,205,891
277,658
488,755
1,300,991
496,600
1,797,591
94,805
87,100
18,458
45,876
29,438
57,344
436,002
1,202,661
309,267
484,205
2.37
1.00
0.52
21,411,277
2.12
1.36
0.52
21,623,300
1,242,279
538,291
1,780,570
105,760
101,094
3,277
57,825
53,888
66,579
491,090
1,239,245
351,699
464,580
2.67
2.49
0.48
21,645,664
(1) EBITDA and earnings have been adjusted for costs that the Corporation views as uncharacteristic of normal operations. These costs are excluded to
provide comparable measurements. (For further details, see the sections on “Analysis of consolidated results” and “Non-IFRS financial measures”.)
(2) 2012 has been restated to take into account the changes in accounting policies as per IFRS 11 – ”Joints Arrangements” and as per the amended IAS
19- “Employee Benefits”. However, as the obligation to restate the financial statement bearing only to the preceding comparative year, 2011 has not
been restated. (For further details, see note 4 in the Consolidated Financial Statements.)
Detailed analysis of changes in operating results and the consolidated statements of financial position between 2013 and
2012 are provided in the following sections. Detailed analysis of changes in the operating results and the consolidated
statements of financial position between 2012 and 2011 are included in the management discussion and analysis in the
2012 Annual Report, available on the SEDAR website sedar.com.
2013 ANNUAL REPORT UNI-SELECT 21
F I N A N C I A L Y E A R 2 0 1 3
Strategic Alternatives and Restructuration
To unlock additional value for shareholders, the Corporation launched a formal review of strategic alternatives centred on its
US automotive operations during the year. As a result, the Board of Directors decided to expand the scope of the
optimization plan announced in 2012.
During the second quarter of 2013, the Corporation’s Board of Directors approved an Action Plan, which complements the
optimization plan announced in 2012. The Action Plan includes the closure and rightsizing of certain stores and warehouses,
as well as the addition of two new distribution centres, among other initiatives. The total cost of implementing the Action
Plan is expected to be approximately $45,000, of which $13,000 represents cash disbursements net of income tax
recoveries. The Action Plan is expected to be completed by the end of 2014.
The Corporation recognized restructuring charges of $31,680 in the second quarter of 2013 related to site closure and
consolidation costs, which include initiatives to liquidate redundant inventory of $10,423, site decommissioning costs of
$4,966, employee termination benefits of $4,254, the recognition of future lease obligations of $8,422 and write-downs of
certain assets to their net realizable value for $3,615. The Corporation also recorded a write-off of $3,500 in the value of
certain software which will no longer be used in its operations. The total restructuring charges, write-off of assets and
others amounts to $35,180.
The Action Plan is a complement of the optimization plan launched in August 2012 (rationalization and consolidation of the
distribution network). The annual savings of $20,000 expected from the optimization plan have been realized;
unfortunately, the cost reductions stemming from the these initiatives were largely offset by lower sales in the last
12 months as well as the unfavourable change in the distribution channel mix. These offsetting elements led Uni-Select to
implement additional initiatives to improve results.
As reported in July 2013, the Action Plan is expected to generate cost savings of $10,000 in 2013 of which $13,000 was
realized as of December 31, 2013. The Action Plan is also expected to generate an additional $15,000 in 2014 and $5,000 in
2015 for cumulative annualized amounts of $25,000 and $30,000 respectively.
The Action Plan is currently progressing as per the plan with the closure of 34 unprofitable stores and 5 warehouses, the
sale of 6 other stores and headcount reduction during the year. The following table summarizes the expected and realized
impacts of the various initiatives included in the Action Plan as of December 31, 2013:
(in thousands of US dollars)
Sales erosion
Cost savings
Restructuring charges and write-off of assets (1)
Recorded
As incurred
Inventory reduction
Capital expenditures
(1) Will represent a cash outlay of $13,000.
Expected
2013
20,000
10,000
40,000
36,000
4,000
8,000
7,000
2014
45,000
15,000
5,000
-
5,000
22,000
9,000
2015
5,000
5,000
-
-
-
10,000
-
Total
70,000
30,000
45,000
36,000
9,000
40,000
16,000
Realized
2013
13,100
13,000
39,323
35,180
4,143
4,200
2,357
As at December 31, 2013, $15,185 of these charges is presented as current liabilities within “Provision for restructuring and
others” in the Corporation’s Consolidated Statement of Financial Position. (Refer to Note 7 in the Consolidated Financial
Statements for further details.)
2013 ANNUAL REPORT UNI-SELECT 22
Technology
The year 2013 was marked by the completion of the ERP system deployment with the implementation of 2 final and
successful waves. Since 2011, the ERP software has been implemented in 37 distribution centres and more than 300 stores
across North America.
The ERP system allows improvement in customer service, accuracy of data information, harmonization and improvement of
operational processes and therefore the overall business. The success of the software implementation will support its
optimization, benefits and most importantly, the growth strategy of the Corporation and the ongoing enhancement of its
operations.
Debt reduction
One of the main 2013 objectives for the Corporation was to generate cash flows from its operations to reduce its debt. The
free cash flows generated by the EBITDA, combined with a sound working capital management permitted a reduction of the
debt of $31,609, after having repurchased shares of $6,408.
Geared for growth
With its optimized distribution network, its new ERP system, a reduced debt, a return to organic growth and an improved
EBITDA, the Corporation is now geared for growth to move forward with its growth strategy.
F I N A N C I A L Y E A R 2 0 1 2
Restructuration, Integration and Technology
The 2012 year has been marked by challenging economic conditions, mainly in the Northeastern region. The Corporation
established a distribution network consolidation plan to counteract the market conditions and to materialize synergies
related to past acquisitions.
The plan provided for a reduction of the Corporation's fixed costs by consolidating and optimizing the distribution network
while reducing its working capital requirements. As a result, restructuring charges, write-off of assets and other expenses of
$18,458 before taxes have been recorded.
Sound working capital management permitted a debt reimbursement of $47,705.
Finally, the Corporation carried on the implementation of its ERP system in 30 warehouses and more than 190 stores.
F I N A N C I A L Y E A R 2 0 1 1
Acquisitions, Integration and Technology
The acquisition of FinishMaster was a turning point and enabled the Corporation to increase its business, extend its
geographical presence and capture market share in the auto body and paints sector.
The Corporation set up a credit facility that included a $450,000 credit agreement, issued $49,700 in convertible debentures
and $49,400 in shares. The financing permitted the purchase of FinishMaster and automotive parts distribution assets in
Florida. Certain stores were merged with the dual purpose of identifying synergies and offering a more complete range of
products to customers.
In Canada, the Corporation completed a restructuring of its distribution network, closing three warehouses while expanding
another.
To optimize asset management, the Corporation also disposed of two buildings, one of which was subsequently leased.
Finally, the operational module of the enterprise resource planning system was successfully introduced in 7 warehouses
and 21 stores.
2013 ANNUAL REPORT UNI-SELECT 23
ANALYSIS OF CONSOLIDATED RESULTS
(in thousands of US dollars, except per share
amounts and percentages)
Sales
United States
Canada
EBITDA
EBITDA Margin
Expenses related to the development and
deployment of the enterprise resource
planning system (ERP) (1)
Expenses related to the network
optimization and to the closure and
disposal of stores (2)
Adjusted EBITDA
Adjusted EBITDA Margin
Fourth quarter
Year to date
2013
2012
%
2013
2012
%
304,907
120,673
425,580
19,818
4.7%
298,499
119,741
418,240
10,398
2.5%
2.1
0.8
1.8
90.6
1,294,115
493,970
1,788,085
1,300,991
496,600
1,797,591
92,379
5.2%
87,100
4.8%
(0.5)
(0.5)
(0.5)
6.1
2,226
1,747
4,663
7,540
2,431
4,657
24,475
5.8%
165
1,912
12,310
2.9%
98.8
4,143
8,806
101,185
5.7%
165
7,705
94,805
5.3%
6.7
Mainly include costs related to data conversion, employee training and deployment to various sites.
Primarily consist of expenses required to relocate inventory.
S A L E S
F O U R T H Q U A R T E R :
Y E A R T O D A T E :
Sales increased by 1.8% compared to the same period last
year and were driven by an overall organic growth of 5.5%.
The Canadian and US operations posted organic growth of
6.5% and 5.1% respectively.
Sales for the year 2013 decreased by 0.5% compared to
2012 and were affected by a decrease of 1.5% related to
the store closures in line with the Action Plan and the
impact of the declining Canadian dollar representing 0.8%.
Organic growth results from our successful sales initiatives
and the recruitment of new customers. It is also attributed
to improved service level permitted by a more stable ERP
system and improved efficiency.
Sales lost from store closures, in line with the Action Plan,
represented a decrease of 2.1% while the declining
Canadian dollar corresponded to a decrease of 1.6% and
were entirely compensated by the organic growth.
The decrease was partly compensated by an overall organic
growth of 1.9%. The Canadian and USA operations posted
an organic growth of 2.3% and 1.7% respectively. Sales
were also impacted by certain elements early in the year
such as softer demand on seasonal repairs reflecting
challenging economic conditions and extended winter
weather conditions.
In December 2012, the Corporation experienced business
disruptions created by the deployment of its ERP system,
impacting customer service. By the end of January 2013,
these issues were resolved and the warehouse operations
have since been improved, and the Corporation generated
an overall organic growth of 4.1% for the second semester.
2013 ANNUAL REPORT UNI-SELECT 24
A D J U S T E D E B I T D A
F O U R T H Q U A R T E R :
Y E A R T O D A T E :
The adjusted EBITDA margin was 5.8% of sales compared to
2.9% for the same quarter last year.
The adjusted EBITDA margin is 5.7% of sales compared to
5.3% for 2012.
The increase was mainly attributable to savings of $8,700
derived from the Action Plan, such as closure of unprofitable
locations and headcount reductions, while maintaining the
same level of service; the organic growth generating gross
profits and tighter control on expenses.
These positive items were partly offset by a negative
distribution channel mix resulting in lower gross profits.
The savings materialized from the Action Plan of $13,000
were partly offset by competitive pricing, negative
distribution channel mix combined with
lower price
protection, impacting gross profits. In addition, unexpected
maintenance costs to stabilize the ERP system were incurred
during the first quarter.
A N A L Y S I S O F O T H E R I T E M S A N D A M O U N T S R E L A T E D T O T H E C O N S O L I D A T E D R E S U L T S
F I N A N C E C O S T S , N E T
(in thousands of US dollars)
Fourth quarter
2013
2012
Year to date
2013
2012
Finance costs, net
3,604
4,602
15,654
19,541
F O U R T H Q U A R T E R :
Y E A R T O D A T E :
The decrease in finance costs for the quarter compared to
the same quarter of 2012 is due primarily to the following
items:
The decrease in finance costs for the year 2013 over 2012
reflects the same factors as those mentioned for the
quarter.
Reduction of interest rates resulting from the termination of
swap tranches bearing interest at higher rates; and
Reduction of debt.
(Refer to Note 5 in the Consolidated Financial Statements for further details.)
2013 ANNUAL REPORT UNI-SELECT 25
D E P R E C I A T I O N A N D A M O R T I Z A T I O N
(in thousands of US dollars)
Fourth quarter
2013
2012
Year to date
2013
2012
Depreciation and amortization
7,490
6,644
29,297
26,873
F O U R T H Q U A R T E R :
Y E A R T O D A T E :
The increase in depreciation and amortization for the
quarter over the same quarter of 2012 is mainly related to
the amortization of intangible assets related to the ERP
systems combined with the depreciation of the vehicle fleet
renewal and is partly compensated by certain property and
equipment and other intangible assets that have reached
the end of their useful life.
The increase in depreciation and amortization for the year
2013 over 2012 reflects the same factors as those
mentioned for the quarter.
(Refer to Note 6 in the Consolidated Financial Statements for further details.)
R E S T R U C T U R I N G C H A R G E S , W R I T E - O F F O F A S S E T S A N D O T H E R S
(in thousands of US dollars)
Restructuring charges, write-off of assets
and others
Fourth quarter
2013
2012
Year to date
2013
2012
-
-
35,180
18,458
Those charges, recorded in the second quarter of the year (third quarter in 2012), are related to the Optimization and
Action Plans as described in the section “Highlights of the last three years” above. (Refer to Note 7 in the Consolidated
Financial Statements for further details.)
E Q U I T Y I N C O M E
(in thousands of US dollars)
Fourth quarter
2013
2012
Year to date
2013
2012
Equity income
580
642
2,652
2,630
As at January 1, 2013, the Corporation applied IFRS 11 “Joint Arrangements” under which the equity method is required,
net earnings of joint ventures are now presented as a one-line item on the Consolidated Statement of Earnings. (Refer to
Note 4 in the Consolidated Financial Statements for further details.)
2013 ANNUAL REPORT UNI-SELECT 26
I N C O M E T A X E S
(in thousands of US dollars)
Fourth quarter
2013
2012
Year to date
2013
2012
Income taxes
(895)
(4,705)
(6,428)
(4,489)
F O U R T H Q U A R T E R :
Y E A R T O D A T E :
The income tax variance for the quarter is mainly related to
a different geographical distribution of the Corporation’s
results during the quarter compared to the same quarter
last year.
The income tax variance, when restructuring charges, write-
off of assets and others is excluded, is mainly related to a
different geographical distribution of the Corporation’s
results compared to 2012.
(Refer to Note 11 in the Consolidated Financial Statements for further details.)
E A R N I N G S A N D E A R N I N G S P E R S H A R E
The following table presents a reconciliation of adjusted earnings and adjusted earnings per share.
(in thousands of US dollars, except per share
amounts and percentages)
Fourth quarter
Year to date
2013
2012
%
2013
2012
%
Net earnings attributable to
shareholders, as reported
Restructuring charges and others, net
of taxes
Non-recurring items, net of taxes
Adjusted earnings
Net earnings per share attributable to
shareholders, as reported
Restructuring charges and others, net
of taxes
Non-recurring items, net of taxes
Adjusted earnings per share
10,199
4,499
126.7
21,328
29,438
(27.5)
-
2,918
13,117
-
1,209
5,708
23,926
5,406
11,543
4,895
129.8
50,660
45,876
10.4
0.48
-
0.14
0.62
0.21
128.6
-
0.06
0.26
138.5
1.00
1.12
0.25
2.37
1.36
(26.5)
0.53
0.23
2.12
11.8
2013 ANNUAL REPORT UNI-SELECT 27
C O N S O L I D A T E D Q U A R T E R L Y O P E R A T I N G R E S U L T S
The Corporation records earnings in each quarter; however, the second and third quarters have historically generated
higher sales than the first and fourth quarters. It should be noted that the net earnings were negatively impacted during the
third quarter of 2012 by restructuring charges and others in the amount of $18,458 ($11,543 net of income taxes), while
additional restructuring charges and others impacted the second quarter of 2013 of $35,180 ($23,926 net of income taxes).
The following table summarizes the main financial information drawn from the consolidated interim financial report for
each of the last eight quarters.
(in thousands of US dollars, except per
share amounts and percentages)
Fourth
quarter
Third
quarter
Second
quarter
First
quarter
Fourth
quarter
Third
quarter
Second
quarter
First
quarter
2013
2012 (1)
Sales
United States
Canada
Adjusted EBITDA
Adjusted EBITDA margin
EBITDA
Restructuring charges, write-off of
assets and others
Adjusted earnings
Net earnings
Adjusted basic earnings per share
Basic earnings per share
Diluted earnings per share
Dividends paid per share (C$)
Average exchange rate for
earnings
304,907
120,673
425,580
24,475
5.8%
19,818
334,090
130,419
464,509
30,079
6.5%
28,847
339,530
136,646
476,176
29,320
6.2%
27,786
315,588
106,232
421,820
17,311
4.1%
15,928
298,499
119,741
418,240
12,310
2.9%
10,398
330,095
127,248
457,343
24,672
5.4%
23,270
337,361
139,387
476,748
31,221
6.5%
29,524
335,036
110,224
445,260
26,602
6.0%
23,908
-
13,117
10,199
-
35,180
14,987
14,280
15,561
(9,295)
0.62
0.48
0.48
0.13
0.70
0.67
0.66
0.13
0.72
(0.43)
(0.43)
0.13
-
6,995
6,144
0.33
0.29
0.29
0.13
-
5,708
4,499
0.26
0.21
0.21
0.13
18,458
11,359
(1,078)
0.53
(0.05)
(0.05)
0.13
-
15,998
14,936
-
12,811
11,081
0.74
0.69
0.68
0.13
0.59
0.51
0.51
0.13
0.95: $1
0.96: $1
0.98: $1
0.99: $1
1.01: $1
1.00: $1
0.99: $1
1.01: $1
(1) 2012 has been restated to take into account the changes in accounting policies as per IFRS 11 – ”Joints Arrangements” and as per the amended
IAS 19- “Employee Benefits”
2013 ANNUAL REPORT UNI-SELECT 28
CASH FLOWS
C A S H F R O M O P E R A T I N G A C T I V I T I E S
(in thousands of US dollars)
Fourth quarter
2013
2012
Year to date
2013
2012
Cash flows from (used in) operating activities
(11,307)
22,078
76,812
102,397
F O U R T H Q U A R T E R :
Y E A R T O D A T E :
lower
in net earnings and
Increase
level of special
purchases in 2013 were offset by the reduction of accounts
payables combined with an increase of receivables in
relation to the sales activities during the quarter. For the
same quarter last year, the Corporation generated cash
flow by taking advantage of longer payment terms.
During 2013, the Corporation benefited from
longer
payment terms that were partly offset by higher receivables
due to increase in sales at year end. The Corporation
generated cash flows last year mostly due to inventory
reduction plan.
C A S H F R O M I N V E S T I N G A C T I V I T I E S
(in thousands of US dollars)
Fourth quarter
2013
2012
Year to date
2013
2012
Cash flows used in investing activities
(1,287)
(12,270)
(22,450)
(42,355)
F O U R T H Q U A R T E R :
Y E A R T O D A T E :
During the fourth quarter of 2013, cash generated from
disposals of assets in relation with the Action Plan and
repayment of the advances from merchant members offset
in part the other investments activities.
Compared to last year, the investment in the ERP system
has decreased since the transition is now completed. In
addition, in 2013, the Corporation disposed of certain
assets in relation with the Action Plan.
C A S H F R O M F I N A N C I N G A C T I V I T I E S
(in thousands of US dollars)
Fourth quarter
2013
2012
Year to date
2013
2012
Cash flows from (used in) financing activities
12,579
(9,763)
(54,421)
(60,987)
F O U R T H Q U A R T E R :
Y E A R T O D A T E :
The variance is explained by increased usage of the credit
facility during the last quarter of 2013 to support the
working capital.
During the last two years, the Corporation lower its net
debt by $74,000. The current year variance is explained by
lower net debt repayments in 2013.
2013 ANNUAL REPORT UNI-SELECT 29
F R E E C A S H F L O W S
(in thousands of US dollars)
EBITDA
Interest paid
Income taxes recovered (paid)
Acquisitions of property and equipment
Other non-cash items
Free cash flow
F O U R T H Q U A R T E R :
Fourth quarter
2013
2012
Year to date
2013
2012
19,818
(1,376)
(1,849)
(3,980)
(1,291)
11,322
10,398
(1,116)
234
(5,148)
1,010
5,378
92,379
(13,098)
899
(13,897)
(665)
65,618
87,100
(17,139)
(1,370)
(12,900)
1,653
57,344
Y E A R T O D A T E :
The increase in free cash flow is mainly due to increase in
EBITDA.
The increase in free cash flow is mainly explained by the
increase in EBITDA combined with lower interest payment
due to the lower level of debt.
FINANCING
S O U R C E S O F F I N A N C I N G
The Corporation is diversifying its sources of financing in order to manage and mitigate liquidity risk.
C R E D I T F A C I L I T I E S
During the first quarter, the Corporation amended the terms of its existing credit facility and extended its maturity by one
year to January 7, 2017. The total availability was subsequently reduced to $400,000. (For more information about the
credit facility, see Note 16 of the Consolidated Financial Statements.)
As at December 31, 2013, the unused portion amounts to $120,000 ($116,000 as at December 31, 2012).
V E N D O R F I N A N C I N G P R O G R A M
The Corporation benefits from a vendor financing program. Under this program, financial institutions make discounted
accelerated payments to suppliers, and the Corporation makes full payment to the financial institution according to the new
extended payment term agreements with the suppliers.
As at December 31, 2013, Uni-Select deferred payment of account payables in the amount of $122,696 ($76,264 as at
December 31, 2012). The authorized limit with the financial institutions is $175,000. These amounts are presented in the
trade and other payables in the consolidated statement of financial position. This program is available upon request and
may be modified by either party.
C O N V E R T I B L E D E B E N T U R E S
To finance the FinishMaster acquisition in 2011, the Corporation issued convertible unsecured subordinated debentures
bearing interest at a rate of 5.9% per annum. The convertible debentures are convertible at the holder's option into the
Corporation's common shares at a conversion rate of C$41.76 per share. (For more information on convertible debentures,
see Note 16 in the Consolidated Financial Statements)
2013 ANNUAL REPORT UNI-SELECT 30
F U N D R E Q U I R E M E N T S
The Corporation is able to meet both its operational and contractual fund requirements and support its various strategic
initiatives for future growth, by using the various financing tools mentioned above, as well as its capacity to generate cash
flows.
O P E R A T I O N A L N E E D S
Operational requirements that the Corporation will face in 2014 are summarized as follows:
-
-
-
The purchase of various capital assets, primarily the partial renewal of the vehicles fleet through finance leases
and hardware equipment for about $33,000;
The dividend payments of $12,000; and
The additional working capital to support organic sales’ growth will be partially offset by forecasted inventory
reduction as per the Action Plan.
C O N T R A C T U A L O B L I G A T I O N S
Operating leases
The Corporation has entered into long-term operating lease agreements expiring at various dates until 2024 for the rental
of buildings, vehicles and outsourcing of information technology services. Some of these lease agreements contain renewal
options for additional periods of one to five years which the Corporation may exercise by giving prior notice.
Finance leases
The Corporation uses finance leases to renew its vehicle fleet. The terms vary from 36 to 96 months depending on the
lease. As at December 31, 2013, the carrying values of the leased assets, which are presented under "automotive
equipment" along with "property and equipment", were $14,876 ($11,049 as at December 31, 2012).
The following table shows the various contractual obligations due by period:
(in thousands of US dollars)
2014
2015
2016
2017
2018 Thereafter
Long-term debt (1) (2)
Operating leases
Finance leases (3)
Total
5
39,528
4,545
44,078
5
31,999
4,261
36,265
46,834
27,965
3,454
78,253
262,751
19,880
1,884
284,515
5
14,340
691
15,037
14
13,694
95
13,803
Includes credit facility and convertible debentures
(1)
(2) Does not include obligations related to interest on the debt
(3)
Include obligations related to interest on finance leases
P O S T - E M P L O Y M E N T B E N E F I T O B L I G A T I O N S
The Corporation sponsors both defined benefit and defined contribution pension plans. The defined benefit plans include a
basic registered pension plan, a registered pension plan for senior management and a non-registered supplemental pension
plan for certain members of senior management. The benefits under the Corporation’s defined benefit plans are based on
years of service and final average salary. The two registered pension plans are funded by the Corporation and the members
of the plan. Employee contributions are determined according to the members’ salaries and cover a portion of the benefit
costs. The employer contributions are based on the actuarial evaluation which determines the level of funding necessary to
cover the Corporation’s obligations. The non-registered pension plan is non-funded and the Corporation makes payments
under this plan when the amounts become payable to the members.
For the year ended December 31, 2014, the Corporation expects to make contributions of approximately $4,235 for its
defined benefit plans. (For more information see note 20 in the Consolidated Financial Statements.)
2013 ANNUAL REPORT UNI-SELECT 31
O F F B A L A N C E S H E E T A R R A N G E M E N T S – G U A R A N T E E S
Under inventory repurchase agreements, the Corporation has made commitments to financial institutions to repurchase
inventory from some of its customers. In Management’s opinion and based on historical experience, the likelihood of
significant payments being required under these agreements and losses being absorbed is low as the value of the assets
held in guarantee is greater than the Corporation’s financial obligations.
Under the terms of its credit facility, the Corporation has issued letters of credit amounting to $13,720 as at
December 31, 2013 ($13,637 as at December 31, 2012). (For more information, see note 23 in the Consolidated Financial
Statements.)
CAPITAL STRUCTURE
Flexibility and returns to shareholders
The Corporation’s capital management strategy optimizes the capital structure to enable the Corporation to benefit from
strategic opportunities that may arise while minimizing related costs and maximizing returns to shareholders. The
Corporation adapts capital management to changing business conditions and the risks related to the underlying assets.
L O N G - T E R M F I N A N C I A L P O L I C I E S A N D G U I D E L I N E S
The strategy of the Corporation is to maintain the following policies and guidelines to ensure flexibility in the capital
structure:
- Total net debt to total net debt and total shareholders’ equity of less than 45%
- Long-term debt to total shareholders’ equity ratio of less than 125%
- Funded debt to EBITDA ratio at a maximum of 3.50
- Return on average total shareholders’ equity of at least 9% greater than the risk-free interest rate
- Dividend payout ratio target between 20% and 25% of the adjusted earnings of the previous year.
(in thousands of US dollars, except percentages)
Components of debt ratios:
Long-term debt
Total net debt
Total shareholders’ equity
(including convertible debentures)
Debt ratios (1):
Total net debt to total net debt and total shareholders’
equity ratio
Long-term debt to total shareholders’ equity ratio
Funded debt to EBITDA ratio
Adjusted return on average total shareholders’ equity
Dividend payout ratio
Objectives
Less than 45%
Less than 125%
Maximum 3.50
At least 9% greater than the
risk free interest rate
Between 20% and 25% of
the adjusted earnings of the
previous year
Dec. 31,
2013
Dec. 31,
2012
277,715
277,658
535,584
309,389
309,267
533,304
34.1%
36.7%
51.9%
3.01
58.0%
3.54
9.8%
8.7%
24.5%
19.5%
(1) These ratios do not constitute the calculations and ratios required in banking commitments but rather those that the Corporation considers pertinent
to follow as a way of ensuring flexibility in the capital structure.
2013 ANNUAL REPORT UNI-SELECT 32
The Corporation’s management continuously reviews its working capital items to eventually improve the funded debt to
EBITDA ratio under the level of 3.00.
The total net debt to total net debt and total shareholders equity ratio, as well as the long-term debt to total shareholders’
equity ratio, improved as the debt decreased.
The improvement in the funded debt to EBITDA ratio is attributed to a lower level of debt combined with an increase in
EBITDA.
The adjusted return on average total shareholders' equity increased as a direct effect of the Corporation's higher adjusted
net earnings.
(For further details on how the Corporation calculates those ratios, see the section on “Non-IFRS financial measures”.)
B A N K C O N V E N A N T S
For purposes of compliance, the Corporation regularly monitors the requirements of its bank credit to ensure they are met.
As at December 31, 2013, the Corporation met all the requirements. (For further details, see note 25 in the Consolidated
Financial Statements.)
D I V I D E N D S
The Corporation paid quarterly dividends to its shareholders for the 26th consecutive year. The Corporation maintained the
dividend at the same level as 2012, declaring C$0.52 per share or C$0.13 per share quarterly. The dividends are eligible for
income tax purposes.
On February 27, 2014, the Corporation also declared the first quarterly dividend of 2014 of C$0.13 per share, payable on
April 22, 2014 to shareholders of record at March 31, 2014.
Dividends are approved by the Board of Directors, which bases its decision on operating results, cash flows and other
relevant factors. There is no guarantee that dividends will be declared in the future.
I N F O R M A T I O N O N C A P I T A L S T O C K
(in thousands of shares)
Number of shares issued and outstanding
Weighted average number of outstanding shares
Fourth quarter
2013
21,264
21,279
2012
21,551
21,591
Year to date
2013
21,264
21,411
2012
21,551
21,623
At January 31, 2014, 21,263,669 shares of the Corporation were outstanding.
N O R M A L C O U R S E I S S U E R B I D
During the year 2013, the Corporation repurchased 287,501 common shares (87,366 in 2012) for cash considerations of
$6,408 ($2,096 in 2012) including a share repurchase premium of $5,116 ($1,690 in 2012) applied as a reduction of retained
earnings. The average purchase price was C$22.87 (C$23.74 in 2012).
I S S U A N C E O F S H A R E S
No shares were issued during the normal course of business in 2013 and in 2012. The last issuance of shares was in 2011 at
a price of C$26.10.
S T O C K - B A S E D C O M P E N S A T I O N
The Corporation’s stock-based compensation plan includes an equity-settled common share stock option plan and cash
settled plans consisting of a deferred share unit plan and a performance share unit plan.
2013 ANNUAL REPORT UNI-SELECT 33
Common share stock option plan for management employees and officers
In 2012, the Corporation amended and restated its common share stock option plan for management employees and
officers (the “Stock Option Plan”). A total of 1,700,000 shares have been reserved for issuance under the amended and
restated terms of the Stock Option Plan. The options are granted at the average closing price of the Corporation’s common
shares on the TSX for the five trading days preceding the grant date. Options granted under the amended plan vest over a
period of three years plus one day following the date of issuance and are exercisable over a period of no greater than seven
years. At December 31, 2013, options granted for the issuance of 320,823 common shares (60,000 at December 31, 2012)
were outstanding, and 1,377,408 common shares (1,638,231 at December 31, 2012) were reserved for additional options
under the Stock Option Plan. For the year ended December 31, 2013, 298,338 stock options (nil for 2012) were granted to
management employees and officers of the Corporation, 37,515 of which were subsequently forfeited or expired.
Deferred share unit plan
On February 28, 2013, the Corporation formally adopted its Deferred Share Unit Plan (“DSU Plan”) for directors, officers,
and management employees. Under the DSU Plan, the directors are required by the Board of Directors to receive a portion
of their remuneration in the form of deferred share units (“DSUs”) and at their discretion, they can make an election to
receive an additional portion of, or all their remuneration in DSUs, subject to the Board of Directors’ approval. The officers
and management employees are required to make an election to receive a portion of their annual bonus under the short-
term incentive plan (“Short-Term Bonus”) in the form of DSUs if they do not meet the minimum share ownership guidelines
(“SOG”) adopted by the Board of Directors. An election to receive an additional portion or all of their Short-Term Bonus in
the form of DSUs could be made by the officers and management employees.
A DSU is equal in value to one common share of the Corporation. The DSUs are issued on the basis of the average closing
price of Corporation’s common shares on the TSX for the five trading days preceding the date of issuance (“DSU Value”).
Dividend equivalents accrue on outstanding DSUs on the basis of dividends paid on the Corporation’s common shares. DSUs
are redeemed by the Corporation after the death, retirement or termination of a participant or in the event of a change in
control. The participant is then entitled to receive in cash for each DSU, the DSU Value calculated at the redemption date.
For the year ended December 31, 2013, the Corporation granted 34,976 DSUs (11,456 DSUs for 2012) and redeemed
1,839 DSUs. Compensation expense of $737 ($262 in 2012) was recorded during the year, and 44,593 DSUs were
outstanding at December 31, 2013.
Performance share unit plan
On February 28, 2013, the Corporation formally adopted a Performance Share Unit Plan (“PSU plan”) as part of its existing
long-term incentive plan. Under the amended terms of the Long-Term Incentive Plan, certain management employees
receive a portion of their annual incentives under the plan as a combination of common share stock options and
performance share units (“PSUs”). The value of each PSU is equal to the average closing price of one common share of the
Corporation listed on the TSX for the five consecutive trading days immediately preceding the day on which the value is to
be determined (“PSU value”). PSUs vest at the end of a three-year period following the date of issuance, after death,
retirement or in the event of a change of control (“redemption event”). The holder is entitled to receive in cash the PSU
value for each PSU vested multiplied by a performance factor (which may vary from 0% to 180%) based on the achievement
of selected financial targets. The Corporation granted 108,811 PSUs for the year ended December 31, 2013, 12,071 of which
were subsequently forfeited or redeemed. Compensation expense of $720 was recorded during the year, and 96,740 PSUs
were outstanding at December 31, 2013.
(For more information about stock-based compensation, see Note 19 in the Consolidated Financial Statements.)
2013 ANNUAL REPORT UNI-SELECT 34
FINANCIAL POSITION
During the year, there were no acquisitions that could significantly affect the financial position when compared to
December 31, 2012. Furthermore, the exchange rates have remained relatively stable compared to the same period last
year. As a result, there were no significant variances in the Corporation’s financial position related to these factors.
The following table shows an analysis of the main variances in the consolidated statement of financial position.
(in thousands of US
dollars)
Dec. 31,
2013
Dec. 31,
2012
Restructur-
ing
Impact of
business
acquisitions
or disposals
Exchange
rate
impact
Net
variance
Explanations for
net variance
Trade and other
receivables
220,942
203,186
(2,176)
1,213
(3,750)
22,469 Due to increase in sales
during the last quarter of
the year.
Inventory
532,045
528,634
(10,422)
(2,999)
(5,777)
22,609 Mainly due to increased
(341,429)
(309,104)
-
64
5,280
purchases for the last
wave of the ERP system,
new product lines and in
preparation to the
opening of a new
warehouse.
(37,669) The Corporation took an
increased advantage of
better payment terms.
10,517
32,237
(17,642)
(3)
161
(4,236)
422,075
454,953
(30,240)
(1,725)
(4,086)
3,173
Trade and other
payables
Other working
capital items
Working capital
excluding cash,
and instalments
on long-term debt
Intangibles assets
140,598
153,572
(3,500)
(15)
(1,169)
Long term debt
(including short-
term portion)
277,715
309,389
-
(3,574)
(85)
(8,290) Amortization exceeded
investments.
(28,015) Cash generated by
operating activities
permitted the
reimbursement.
2013 ANNUAL REPORT UNI-SELECT 35
RELATED PARTY TRANSACTIONS
For the years ended December 31, 2013 and 2012, shares of the Corporation were widely held and the Corporation did not
have an ultimate controlling party.
T R A N S A C T I O N S W I T H K E Y M A N A G E M E N T P E R S O N N E L
Key management includes directors (executive and non-executive) and members of the Executive Committee. For the years
ended December 31, 2013 and 2012, the compensation paid or payable to key management personnel was as follows:
(in thousands of US dollars)
Salaries and short-term employee benefits
Post-employment benefits (including contributions to defined benefit pension plans)
Other long-term benefits
Stock-based benefits
Total compensation paid or payable
2013
5,007
574
-
2,153
7,734
2012
3,657
653
930
347
5,587
The 2012 figures were modified to reflect the same number of key management personnel than reported in 2013.
Furthermore, the new programs, including the stock-based benefits, are accounted for on an accelerated basis compared
with the previous years’ programs.
There were no related party transactions with key management personnel for the years ended December 31, 2013 and
2012.
O T H E R T R A N S A C T I O N S
For the year ended December 31, 2013, the Corporation incurred rental expenses of $3,429 ($3,592 for 2012) to the benefit
of Clarit Realty Ltd., a company controlled by a related party. The associated lease payments were concluded in the
Corporation’s normal course of business for various terms of no more than five years.
Transactions with subsidiaries are eliminated on the Consolidated Financial Statements. The Corporation’s significant
ownership interests in subsidiaries of 100% at December 31, 2013 and 2012 are as follows:
Beck/Arnley Worldparts, Inc.
FinishMaster, Inc.
North Shore Parts & Industrial Supplies Ltd. Uni-Select Luxembourg S.à r.l.
Plastique Royal Inc.
Uni-Sélect Alberta Inc.
Uni-Sélect Eastern Inc.
Uni-Sélect Lux Holdco Inc.
Uni-Select Prairies Inc.
Uni-Select Pacific Inc.
Uni-Select Purchases Inc.
Uni-Select Purchases, G.P.
Uni-Sélect Québec Inc.
Uni-Select USA Holdings, Inc.
Uni-Select USA, Inc.
2013 ANNUAL REPORT UNI-SELECT 36
RISK MANAGEMENT
In the normal course of business, the Corporation is exposed to a variety of risks that may have a material impact on its
business activities, operating results, cash flows and financial position. Uni-Select continuously updates its system of
analysis and of operational, strategic and financial risk control to manage and implement activities with objectives to
mitigate the main risks mentioned below.
R I S K S A S S O C I A T E D W I T H T H E E C O N O M Y
Economic climate
The economic climate has a moderate impact on sales of automotive replacement parts and on the Corporation’s
operations. Although the automotive aftermarket industry is to some extent dependent on the sale of new cars, it is not
nearly as affected by the current economic situation, since deciding to make car repairs is less discretionary and less
expensive than the decision to buy a new vehicle.
Inflation
Management believes that inflation has little impact on the Corporation’s financial results, as any price increase imposed by
manufacturers is passed on to consumers. Nevertheless, low inflation or deflation in the value of replacement parts on the
market can have a negative impact on the profitability of its distribution centres. To reduce the risk of deflation in the value
of inventoried parts, the Corporation has compensation agreements with most of its suppliers.
Distance travelled
There is a direct link between unemployment, fuel prices and distance travelled and also between distance travelled and
the rate of vehicle wear and tear and repairs. Fuel prices are also affecting the Corporation’s delivery costs in the United
States. Uni-Select regularly reviews delivery routes in the United States to ensure that they are optimal and thus keep
delivery costs under control.
R I S K S A S S O C I A T E D W I T H T H E B U S I N E S S C O N T E X T
Growth in the vehicle fleet
Although growth in the number of registered vehicles in North America is relatively modest, the decline in sales for new
vehicles in 2008 and 2009 has resulted in an aging vehicle fleet, leading to an increase in demand for replacement parts.
The growing number of car models over the last few years, coupled with their longer lifespan, is resulting in a proliferation
of replacement parts, imposing financial constraints on distributors and merchants that must carry a greater selection of
parts to ensure adequate availability. This factor is partly offset by manufacturers putting increasingly sophisticated
technological components into their vehicles, resulting in each part serving more purposes and costing more to repair,
which is favourable to the replacement parts industry.
The rise in the number of foreign vehicle brands in North America is also responsible for the growing number of car models
and the proliferation of replacement parts. This situation, together with the use of this complex technology and the greater
number of electronic components being used in cars, are factors that tend to favour dealers when consumers are deciding
on a service supplier to perform their vehicle maintenance. On the other hand, any potential downsizing of automobile
dealers’ network could result in a move toward the aftermarket network for vehicle maintenance and repairs.
Products
Uni-Select primarily distributes parts and products from well-known and well-established North American manufacturers.
These manufacturers generally take responsibility for products that are defective, poorly designed or non-compliant with
their intended use.
Uni-Select imports various parts and products from foreign sources; the success of an eventual appeal against a supplier or
manufacturer is uncertain. The Corporation protects itself with liability insurance. In addition, transport logistics between
the country of origin and the markets supplied increase the risk of stock outages.
To ensure a continuous supply of its products, the Corporation examines the financial results of its main suppliers and
regularly reviews the diversification of its sources of supply.
2013 ANNUAL REPORT UNI-SELECT 37
Technology
Ongoing technological developments in recent years is requiring distributors and wholesalers to provide continuing training
programs to their employees and customers, along with access to new diagnostic tools. Uni-Select manages the potential
impact of these trends through the scope and quality of the training and support programs it provides to independent
wholesalers, their employees and their customers. It provides its customers with access to efficient and modern
technologies in the areas of data management, warehouse management and telecommunications.
Environmental risks
The industry of paint distribution involves a certain level of environmental risk. The damages or destruction by fire to
warehouses, specialised in the storage of such products, resulting in the discharge of paint, can cause environmental
consequences such as soil or air pollution. These specialised warehouses are generally well-equipped to reduce such risks.
This includes up-to-date sprinkler systems and retention basins in the event of an accidental discharge.
R I S K S A S S O C I A T E D W I T H T H E O P E R A T I O N A L C O N T E X T
Risks related to Uni-Select’s business model and strategy
In the automotive replacement parts market, Uni-Select’s business model, which is primarily focused on servicing
independent jobbers (rather than a network of corporate stores and independent installers), requires the Corporation to
take special measures to promote its merchant members’ loyalty and long-term survival. This is why Uni-Select’s
fundamental approach is to drive the growth, competitiveness and profitability of its customers by means of a total
business solution that incorporates good purchasing conditions, proactive management of product selection, highly
efficient distribution services, innovative marketing programs and various support services, such as training and financing.
In the context of industry consolidation, which is also occurring at the wholesale level, the Corporation has developed
programs designed to facilitate its merchants’ expansion through acquisitions.
Furthermore, considering that owners of replacement parts stores are generally aging, Uni-Select has also implemented
succession programs to enable merchants who wish to retire to sell their business to a family member, an employee or
another member of Uni-Select’s network. Where appropriate, Uni-Select may decide to purchase this merchant’s business
to protect its distribution network.
The Corporation’s growth-by-acquisition strategy, especially in the United States, carries its share of risks. Uni-Select has
developed solid know-how in this regard having successfully acquired and integrated several businesses in the last years. To
limit its risk, the Corporation has adopted a targeted and selective acquisition strategy, conducts strict due diligence and
develops detailed integration plans. Finally, Uni-Select relies on a multidisciplinary team that is able to accurately assess and
manage the risks specific to the markets where it does business, particularly in the United States.
Competition
The aftermarket industry in which the Corporation does business is highly competitive. Availability of parts, prices, quality
and customer service are critical factors. Uni-Select competes primarily in the DIFM (Do It For Me) segment of the industry
with national and regional retail chains, distributors and independent wholesalers as well as online suppliers. Competition
varies from market to market and some competitors may have superior advantages to Uni-Select, which may result in a
reduction in selling prices and an increase in marketing and promotional expenses, which would drive down the
Corporation's profitability. To reduce that risk, the Corporation regularly reviews its product and service offering to meet
the needs of its customer base as effectively as possible. In addition, the proliferation of parts in itself is a barrier to entry
into the market for new competitors.
2013 ANNUAL REPORT UNI-SELECT 38
Business and financial systems
In December 2013, the Corporation completed the deployment of its enterprise resource planning system started in 2010
and has therefore eliminated the risk of integration and change management related to this deployment.
The Corporation relies extensively on its computer systems and the systems of its business partners to manage inventory,
process transactions and report results. These systems are subject to damage or interruption from power outages,
telecommunications failures, computer viruses, security breaches and catastrophic events. If its computer systems or those
of its business partners fail to function properly, the Corporation may experience loss of critical data and interruptions or
delays in its ability to manage inventories or process transactions, potentially impacting revenue and results of the
operations.
To mitigate that risk, the Corporation implemented a comprehensive disaster recovery plans (DRP), which includes daily
backups, dual telecommunication lines, hardware redundancy and external hosting of equipment in specialized sites.
Human resources
During this period of active change, Uni-Select must attract, train and retain a large number of competent employees, while
controlling payroll. Labour costs are subject to numerous external factors, such as wage rates, fringe benefits and the
availability of timely local skilled resources. The inability to attract, train and retain employees could affect the
Corporation’s growth capacity as well as its financial performance. Over the years, the Corporation has introduced a
number of employee incentive programs and tools, including the following:
- The Build-A-Car workshops for change management;
-
- The "Value Creator" and "Performance" recognition prizes and the President's Award.
Leadership training and accelerated talent development programs;
Distribution network optimization plan
The Action Plan, announced in July 2013, encompasses a major optimization of the US distribution network and includes a
number of operational improvements which together are expected to improve profitability by approximately $30,000 on an
annualized basis (approximately $10,000 in 2013, an additional $15,000 in 2014 with full impact in 2015).
The plan includes store closures, divestitures or consolidations involving 43 stores to exit areas with less potential;
rightsizing of the distribution network with focus on select large distribution centres (closure of 12 warehouses and opening
of two regional distribution centres) and operational improvements (such as investment of $8,000 in a dozen distribution
centres to improve efficiency; process improvements focused on increasing fill rates and enhancing pricing strategy and
headcount and expense reductions.
Restructuring charges, write-off of assets and other actions related to the Action Plan is expected at approximately one-
time cost of $45,000 of which, $36,000 have been recorded during 2013, and the balance to be recorded as incurred. The
cash outlay after taxes is estimated at $13,000 and is expected to be fully offset by a $40,000 reduction in inventory.
Delays in execution, unfavourable changes in economic and/or market conditions could reduce the benefits or increase the
cash outlay stemming from the plan. To mitigate that risk, the Corporation dedicated resources and implemented processes
to closely monitor its realization. As at December 31, 2013, the implementation of the Action Plan was progressing as
expected and completion is scheduled for late 2014. (For further details, see note 7 in the Consolidated Financial
Statements.)
2013 ANNUAL REPORT UNI-SELECT 39
R I S K S A S S O C I A T E D W I T H F I N A N C I A L I N S T R U M E N T S
Fair value
The fair value of cash, trade receivables, trade and other payables, bank indebtedness and dividends payable approximate
their carrying amount given that they will mature shortly.
The fair value of long-term debt has been determined by calculating the present value of the interest rate spread that exists
between the actual credit facility and the rate that would be negotiated with the actual economic conditions.
Liquidity risk
This risk is dealt with in the section on "Sources of financing and fund requirements".
Credit risk
Credit risk stems primarily from the potential inability of customers to discharge their obligations. The maximum credit risk
to which the Corporation is exposed represents the carrying amount of cash and trade and other receivables and
investments and advances to merchant members. No account represents more than 5% of total accounts receivable. In
order to manage its risk, specified credit limits are determined for certain accounts and reviewed regularly by the
Corporation.
The Corporation holds in guarantee some personal property and some assets of certain customers. Those customers are
also required to contribute to a fund to guarantee a portion of their amounts due to the Corporation. The financial
condition of customers is examined regularly and monthly analysis are reviewed to ensure that past due amounts are
collectible and, if necessary, that measures are taken to limit credit risk.
Allowance for doubtful accounts and past due accounts receivable are reviewed at least quarterly and a bad-debt expense
is recognized only for accounts receivable for which collection is uncertain.
Foreign exchange risk
The Corporation is exposed to foreign exchange risk on its financial instruments mainly due to purchases in currencies other
than the respective functional currencies of the Corporation and its subsidiaries. Management considers that fluctuations in
the relative values of the US dollar and the Canadian dollar will not have a material impact on net earnings.
The most recent analysis of the Corporation shows that a $0.01 variation in the value of the Canadian dollar versus the US
dollar would have an impact of $0.01 per share on the Corporation’s results. This impact is purely on the books and does
not affect cash flows.
The Corporation has certain investments in foreign operations (United States of America) whose net assets are exposed to
foreign currency translation. The Corporation hedges the foreign exchange risk exposure related to those investments with
US dollar denominated debt instruments. (For further details, see note 16 in the Consolidated Financial Statements.)
Interest rates
The Corporation is exposed to interest rate fluctuations, primarily due to its variable rate debts. To mitigate those
fluctuations, the Corporation uses derivative financial instrument, i.e. swap contract designed to exchange variable rates for
fixed rates. The Corporation does not use financial instruments for trading or speculative purposes. This $80,000 contract
matures in 2016.
All things being equal, a favourable or unfavourable variation of 0.25% in the base rate would have an impact on results of
approximately $0.013 per share. (For more information on financial instruments, refer to Note 26 in the Consolidated
Financial Statements.)
2013 ANNUAL REPORT UNI-SELECT 40
ACCOUNTING POLICIES
A D O P T E D I N 2013
E M P L O Y E E B E N E F I T S
In June 2011, the International Accounting Standards Board (“IASB”) issued an amendment to IAS 19 “Employee Benefits”
relating to the accounting for defined benefit pension plans and termination benefits. This amendment eliminates certain
recognition and presentation choices previously permitted under IAS 19 and requires additional disclosures concerning the
risks stemming from defined benefit plans. The Corporation has applied this amendment as of January 1, 2013, on a
retrospective basis in accordance with its transitional provisions. The retrospective application of this amendment increased
employee benefits expense by $824 for the year ended December 31, 2012. Net earnings for the year ended December 31,
2012 decreased by $603, net of income taxes of $221. Basic and diluted earnings per share decreased by $0.03 for the year
ended December 31, 2012. The actuarial gain on defined benefit pension plans increased by $603 for the year ended
December 31, 2012.
In November 2013, the IASB also issued an amendment to IAS 19 “Employee Benefits”, providing relief so that entities are
allowed to deduct contributions that are not related to the number of years of service from the service cost in the period in
which the service is rendered. The amendment is effective for annual periods beginning on or after July 1, 2014, with earlier
adoption permitted. The Corporation has applied this amendment as of January 1, 2013 and this change had no impact on
the Corporation’s Consolidated Financial Statements.
J O I N T A R R A N G E M E N T S
In May 2011, the IASB issued IFRS 11 “Joint Arrangements” which supersedes IAS 31 “Interests in Joint Ventures” and SIC-13
“Jointly Controlled Entities – Non-monetary Contributions by Venturers”. IFRS 11 focuses on the rights and obligations of a
joint arrangement, rather than its legal form as was the case under IAS 31. The standard requires the use of the equity
method to account for interests in jointly controlled entities. Prior to the adoption of this standard, the Corporation used
the proportionate consolidation method to account for its interests in joint ventures, but now applies the equity method
under IFRS 11. Under the equity method, the Corporation’s share of net assets, net income and other comprehensive
income of joint ventures are presented as single line items in the Consolidated Statement of Financial Position, the
Consolidated Statement of Earnings and the Consolidated Statement of Comprehensive Income, respectively. The
Corporation has applied this standard as of January 1, 2013, on a retrospective basis in accordance with its transitional
provisions. The Corporation’s consolidated revenues, expenses and geographic information now exclude the financial
information of the joint ventures. The retrospective application had no impact on net earnings or earnings per share and
the disclosure requirements have been incorporated into the Corporation’s Consolidated Financial Statements.
F I N A N C I A L I N S T R U M E N TS – P R E S E N T A T I O N
In May 2012, the IASB issued an amendment to IAS 32 “Financial instruments: Presentation”. The amendment requires
entities to account for income taxes relating to distributions to holders of an equity instrument and to transaction costs of
an equity transaction in accordance with IAS 12 “Income Taxes”. The Corporation has applied this amendment as of
January 1, 2013, on a retrospective basis in accordance with its transitional provisions. There was no impact on the
Corporation’s Consolidated Financial Statements.
F I N A N C I A L I N S T R U M E N TS – D I S C L O S U R E S
In December 2011, the IASB issued an amendment to IFRS 7 “Financial instruments: Disclosures”, requiring disclosures
about all recognized financial instruments that are offset in accordance with IAS 32 or that are subject to enforceable
netting arrangements. The Corporation has applied this amendment as of January 1, 2013, on a retrospective basis. There
was no impact on the Corporation’s Consolidated Financial Statements.
2013 ANNUAL REPORT UNI-SELECT 41
C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
In May 2011, the IASB issued IFRS 10 “Consolidated Financial Statements”. IFRS 10 requires an entity to consolidate an
investee when it is exposed to, or has rights to variable returns from its involvement with the investee and has the ability to
affect those returns through its power over the investee. Under existing IFRS, consolidation is required when an entity has
the power to govern the financial and reporting policies of an entity as to obtain benefits from its activities. IFRS 10 replaces
SIC-12 “Consolidation – Special Purpose Entities”, and parts of IAS 27 “Consolidated and Separate Financial Statements”.
The Corporation has applied this amendment as of January 1, 2013. There was no impact on the Corporation’s Consolidated
Financial Statements.
D I S C L O S U R E O F I N T E R E S T S I N O T H E R E N T I T I E S
In May 2011, the IASB issued IFRS 12 “Disclosure of Interests in Other Entities”. IFRS 12 establishes disclosure requirements
for interests in other entities, such as joint arrangements, associates, special purpose vehicles and off balance sheet
vehicles. The standard confirms existing disclosures and introduces additional disclosure requirements that address the
nature of, and risks associated with, an entity’s interests in other entities. The Corporation has applied this standard as of
January 1, 2013. The disclosure requirements have been incorporated into the Corporation’s Consolidated Financial
Statements.
F A I R V A L U E M E A S U R E M E N T
In May 2011, the IASB issued IFRS 13 “Fair Value Measurement”. IFRS 13 is a comprehensive standard for fair value
measurements and disclosure requirements for use across all IFRS standards. The standard clarifies that fair value is the
price that would be received to sell an asset, or paid to transfer a liability in an orderly transaction between market
participants, and the measurement date. It also establishes disclosure requirements about fair value measurements. Under
existing IFRS, guidance on measuring and disclosing fair value is dispersed among the specific standards requiring fair value
measurements and in many cases does not reflect a clear measurement basis or consistent disclosures. The Corporation has
applied this standard as of January 1, 2013, on a prospective basis.
I M P A I R M E N T O F A S S E T S
In May 2013, the IASB issued amendments to IAS 36 “Impairment of Assets”, requiring additional disclosures about the
recoverable amount of impaired non-financial assets if that amount is based on fair value less costs to sell. These
amendments are effective for annual periods beginning on or after January 1, 2014, with earlier adoption permitted. The
Corporation has incorporated the disclosure requirements into its Consolidated Financing Statements.
F U T U R E A C C O U N T I N G P O L I C I E S
At the date of authorization of these consolidated financial statements, certain new standards, amendments and
interpretations to existing standards have been published by the IASB but are not yet effective, and have not been adopted
earlier by the Corporation.
Information on new standards, amendments and interpretations that are expected to be relevant to the Corporation’s
consolidated financial statements is provided below. Certain other new standards and interpretations have been issued but
are not expected to have a material impact on the Corporation’s consolidated financial statements.
F I N A N C I A L I N S T R U M E N TS – P R E S E N T A T I O N
In December 2011, the IASB issued an amendment to IAS 32 “Financial Instruments: Presentation”, focusing on the meaning
of “currently has a legally enforceable right of set-off” and the application of simultaneous realisation and settlement for
applying the offsetting requirements. This amendment is effective for annual periods beginning on or after January 1, 2014.
The Corporation does not expect the application of this amendment to have a significant impact on its 2014 Consolidated
Financial Statements.
2013 ANNUAL REPORT UNI-SELECT 42
F I N A N C I A L I N S T R U M E N TS – R E C O G N I T I O N A N D M E A S U R E M E N T
In June 2013, the IASB issued amendments to IAS 39 “Financial Instruments: Recognition and Measurement”, permitting
the continuation of hedge accounting in specific cases where a derivative instrument designed as a hedging instrument is
novated to a derivative instrument cleared through a central counterparty in order to comply with local laws or regulations.
These amendments are effective for annual periods beginning on or after January 1, 2014, with earlier adoption permitted.
The Corporation has not yet assessed the impact of this amendment.
F I N A N C I A L I N S T R U M E N TS
In November 2009, the IASB issued IFRS 9 “Financial Instruments”. It addresses classification and measurement of financial
assets and replaces measurement models in IAS 39 “Financial Instruments: Recognition and Measurement” for debt
instruments with a new mixed measurement model having only two categories: amortized cost and fair value through net
earnings.
IFRS 9 also replaces the models for measuring equity instruments and such instruments are either recognized at fair value
through net earnings or at fair value through other comprehensive income. Where such equity instruments are either
recognized at fair value through other comprehensive income, dividends, to the extent not clearly representing a return on
investment, are recognized in net earnings; however, other gains and losses (including impairments) associated with such
instruments remain in accumulated other comprehensive income indefinitely.
In November 2013, the IASB issued amendments to IFRS 9 “Financial Instruments”, including a new chapter on hedge
accounting replacing IAS 39 and improvements to the reporting of changes in the fair value of an entity’s own debt. The
mandatory effective date of January 1, 2015 was also removed and has yet to be determined, but earlier adoption is still
permitted.
The Corporation has not yet assessed the impact of this standard or determined whether it will adopt it earlier.
U S E O F A C C O U N T I N G E S T I M A T E S A N D J U D G M E N T S
The preparation of financial statements in accordance with IFRS requires management to apply judgment and to make
estimates and assumptions that affect the amounts recognized in the financial statements and notes to the financial
statements. Judgment is commonly used in determining whether a balance or transaction should be recognized in the
financial statements and estimates and assumptions are more commonly used in determining the measurement of
recognized transactions and balances. However, judgment and estimates are often interrelated.
Information about the Corporation’s accounting policies is provided in Note 3 to the Consolidated Financial Statements, and
the most significant uses of judgment, estimates and assumptions relate to the following:
E S T I M A T E S
Business combinations
Upon the recognition of a business combination, the Corporation records the assets acquired and liabilities assumed at their
fair values based on estimated future cash flows. The value of goodwill recognized is directly affected by the estimated
values of the assets and liabilities. Any change in the estimates used would result in an increase or decrease in the value of
goodwill at the date of acquisition, or in net earnings in subsequent years. (See Note 8 in the Consolidated Financial
Statements for details on the business acquisitions completed in the last two periods.)
Sales recognition
Estimates are used in determining the amounts to be recorded for rights of return, guarantees, and trade and volume
discounts. These estimates are based on the Corporation’s historical experience and Management’s assumptions about
future events, and are reviewed on a regular basis throughout the year.
2013 ANNUAL REPORT UNI-SELECT 43
Inventory valuation
The Corporation uses estimates in determining the net realizable value of its inventory, taking into consideration the
quantity, age and condition of the inventory at the time the estimates are made. These estimates also include assumptions
about future selling prices and selling costs, product demand and return fees. The Corporation also uses estimates in
determining the value of trade discounts, rebates and other similar items receivable from vendors. These estimates are
based on the Corporation’s historical experience and Management’s assumptions about future events, and are reviewed on
a regular basis throughout the year.
Allowance for surplus or obsolete inventory
The Corporation records an allowance for estimated obsolescence calculated on the basis of assumptions about the future
demand for its products and conditions prevailing in the markets where its products are sold. This allowance, which reduces
inventory to its net realizable value, is then entered as a reduction of inventory in the Consolidated Statement of Financial
Position. Management must make estimates when establishing such allowances. In the event that actual market conditions
are less favorable than the Corporation’s assumptions, additional allowances could prove necessary.
Property and equipment and intangible assets
Assumptions are required in determining the useful lives of property and equipment and intangible assets with finite useful
lives. (Refer to Note 3 in the Consolidated Financial Statements for further details.)
Impairments of non-financial assets
The Corporation uses estimates and assumptions based on historical experience and Management’s best estimates to
estimate future cash flows in the determination of the recoverable amounts of assets and the fair value of cash generating
units (“CGUs”). Impairment tests require Management to make significant assumptions about future events and operating
results. Significant estimates are also required in the determination of appropriate discount rates to apply the future cash
flows in order to adjust current market rates for assets and entity-specific risk factors. Revisions of these assumptions and
estimates, or variations between the estimated amounts and actual results may have a significant impact on the assets
recorded in the Consolidated Statement of Financial Position, and on the Corporation’s net earnings in future periods. For
the years ended December 31, 2013 and 2012, with the exception of the impairment losses recorded as part of the
Corporation’s distribution network consolidation plan described in Note 7, no impairment losses or reversals of previous
losses have been recorded on the Corporation’s long-term assets. (Refer to Notes 7 and 15 in the Consolidated Financial
Statements for further details.)
Deferred taxes
The Corporation estimates its deferred income tax assets and liabilities based on differences between the carrying amounts
and tax bases of assets and liabilities. They are measured by applying enacted or substantively enacted tax rates and laws at
the date of the financial statements for the years in which temporary differences are expected to reverse. Changes in the
timing of the reversals or the income tax rates applicable in future years could result in significant differences between
these estimates and the actual amounts realized which would affect net earnings in a subsequent period.
Post-employment benefit obligations
Significant assumptions and estimates are required in the measurement of the Corporation’s obligations under defined
benefit pension plans. Management estimates the defined benefit obligations annually with the assistance of independent
actuaries; however, the actual outcome may vary due to estimation uncertainties. The estimates of its defined benefit
obligations are based on inflation rates, discount rates and mortality rates that Management considers to be reasonable. It
also takes into account the Corporation’s specific anticipation of future salary increases and retirement ages of employees.
Discount rates are determined close to each year-end by reference to high quality corporate bonds that are denominated in
the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related
defined benefit obligations. Estimation uncertainties exist, which may vary significantly in future appraisals of the
Corporation’s defined benefit obligations. (Refer to Note 20 in the Consolidated Financial Statements for details on the
assumptions and estimates used for the years ended December 31, 2013 and 2012.)
2013 ANNUAL REPORT UNI-SELECT 44
Hedge effectiveness
The Corporation uses estimates and assumptions, based on external market trends and Management’s best estimates of
entity-specific risks, in assessing the hedge effectiveness prospectively throughout the hedging relationship. Hedge
accounting is terminated when a hedging relationship is no longer highly effective, or when a forecast transaction is no
longer probable. Differences in actual results may have an impact on the Corporation’s net earnings in subsequent periods.
The Corporation does not use derivative financial instruments for speculative purposes.
Provisions
The Corporation makes estimates of projected costs and timelines and the probability of occurrence of the obligations in
determining the amount for provisions. Provisions are reviewed at the end of each reporting period and are adjusted to
reflect the best estimates. (Refer to Note 3 in the Consolidated Financial Statements for further details.)
J U D G M E N T S
Leases
The Corporation uses judgment in determining the classification of its leased assets at inception of the lease. (Refer to Note
3 for further details.)
Evidence of asset impairment
The Corporation uses significant judgment in determining the existence of an event which indicates a negative effect on the
estimated future cash flows associated with an asset. If applicable, the Corporation performs impairment tests on its CGUs
to assess whether the carrying amounts of assets are recoverable. As described in the previous section, various estimates
made by management are used in the impairment tests.
Hedge accounting
At the inception of a hedging relationship, the Corporation uses judgment in determining the probability that a forecast
transaction will occur.
NON-IFRS FINANCIAL MEASURES
The information included in this report contains certain measures that are consistent with IFRS. Non-IFRS financial
measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar
measures presented by other entities. The Corporation is of the view that users of its Management Discussion and Analysis
may analyze its results based on these measurements.
The following table presents performance measures used by the Corporation which are not defined by IFRS.
Organic Growth
EBITDA
This measure consists of quantifying the increase in pro forma consolidated sales between
two given periods, excluding the impact of acquisitions, sales and disposals of stores,
exchange-rate fluctuations and, when necessary, the variance in the number of billing days.
This measure enables Uni-Select to evaluate the intrinsic trend in the sales generated by its
operational base in comparison with the rest of the market. Determining the rate of organic
growth, based on findings that Management regards as reasonable, may differ from the
actual rate of organic growth.
finance costs, depreciation and
This measure represents operating profit before
amortization, restructuring charges, write-off of assets and others, equity income, income
taxes and net earnings attributable to non-controlling interests. This measure is a financial
indicator of a corporation’s ability to service and incur debt. It should not be considered by
an investor as alternative to sales or net earnings, as an indicator of operating performance
or cash flows, or as a measure of liquidity, but as additional information.
EBITDA margin
The EBITDA margin is a percentage corresponding to the ratio of EBITDA to sales.
2013 ANNUAL REPORT UNI-SELECT 45
Adjusted EBITDA, adjusted
earnings and adjusted
earnings per share
Free cash flow
Management uses adjusted EBITDA, adjusted earnings and adjusted earnings per share to
assess EBITDA, net earnings and net earnings per share from operating activities, excluding
certain adjustments, net of income taxes (for adjusted earnings and adjusted earnings per
share), which may affect the comparability of the Corporation’s financial results.
Management considers that these measures are more representative of the Corporation’s
operational performance and more appropriate in providing additional information.
These adjustments include, amongst others, the non-capitalizable costs related to the
development and implementation of the ERP system, costs related to the closure and
disposal of stores, as well as restructuring charges, write-off of assets and others.
The exclusion of these items does not indicate that they are non-recurring.
This measure corresponds to EBITDA adjusted for the following items: other non-cash items
according to the statement of cash flows, interest paid, income taxes paid and acquisitions of
property and equipment. Uni-Select considers free cash flow to be a good indicator of
financial strength and of operating performance because it shows how much funds are
available to manage growth in working capital, pay dividends, repay debt, reinvest in the
Corporation and capitalize on various market opportunities that arise.
The free cash flow excludes certain variations in working capital items (such as trade and
other receivables, inventory and trade and other payables) and other funds generated and
used according to the statement of cash flows. Therefore, it should not be considered as an
alternative to the Consolidated Statement of Cash Flows, or as a measure of liquidity, but as
additional information.
Total net debt
This measure consists of long-term debt including the portion due within a year (as shown in
note 16 to the Consolidated Financial Statements) net of cash.
Total net debt to total net
debt and total
shareholders’ equity ratio
Long-term debt to total
shareholders’ equity ratio
This ratio corresponds to total net debt divided by the sum of total net debt, convertible
debentures and total shareholders’ equity.
This ratio corresponds to long-term debt including the portion due within a year (as shown in
note 16 to the Consolidated Financial Statements) divided by the sum of convertible
debentures and total shareholders’ equity.
Funded debt to EBITDA
This ratio corresponds to total net debt to EBITDA.
Adjusted return on
average total
shareholders’ equity
This ratio corresponds to net earnings adjusted for restructuring charges, write-off of assets
and others as well as the non-recurring expenses related to the network optimization and to
the closure and disposal of stores, divided by average total shareholders’ equity.
2013 ANNUAL REPORT UNI-SELECT 46
EXCHANGE RATE DATA
The following table sets forth information about exchange rates based upon rates expressed as US dollars per C$1.00:
Average for the period
For statement of earnings
Period end
For statement of financial position
Dec. 31,
2013
Dec. 31,
2012
Dec. 31,
2011
0.97
1.00
1.01
0.94
1.00
0.98
As the Corporation uses the US dollar as its reporting currency, in its consolidated financial statements and in this
document, unless otherwise indicated, results from its Canadian operations are translated into US dollars using the average
rate for the period. Variances and explanations related to variations in the foreign exchange rate and the volatility of the
Canadian dollar are therefore related to the translation in US dollars of the Corporation’s Canadian operations’ results and
do not have an economic impact on its performance since most of the Corporation’s consolidated sales and expenses are
received or denominated in the functional currency of the markets in which it does business. Accordingly, the sensitivity of
the Corporation’s results to variations in foreign exchange rates is economically limited.
EFFECTIVENESS OF DISCLOSURE CONTROLS AND PROCEDURES AND
CONTROLS OVER FINANCIAL REPORTING
INTERNAL
Management plans and performs an audit of the Corporation’s internal controls related to the Canadian Securities
Authorities National Instrument 52-109 “Certification of Disclosure in Issuer’s Annual and Interim Filings” (NI 52-109). These
audits are performed in accordance with the recognized original COSO (Committee of Sponsoring Organizations of the
Treadway Commission) control framework.
D I S C L O S U R E C O N T R O L S A N D P R O C E D U R E S
Uni-Select has pursued its evaluation of disclosure controls and procedures in accordance with the NI 52-109 guidelines. As
at December 31, 2013, the President and Chief Executive Officer and the Executive Vice President, Corporate Services and
Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures are properly designed and
effective.
I N T E R N A L C O N T R O L S O V E R F I N A N C I A L R E P O R T I N G
Uni-Select has continued its evaluation of the effectiveness of internal controls over financial reporting as at
December 31, 2013, in accordance with the NI 52-109 guidelines. This evaluation enabled the President and Chief Executive
Officer and the Executive Vice President, Corporate Services and Chief Financial Officer to conclude that internal controls
over financial reporting were designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements in accordance with IFRS. Over the years, a number of compensatory controls have
been added to the various automated controls over the systems in place to offset the risks that could be caused by
interfaces between systems that are being changed.
During the year ended December 31, 2013, no change in the Corporation’s internal control over financial reporting has
occurred that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over
financial reporting.
2013 ANNUAL REPORT UNI-SELECT 47
OUTLOOK
During 2014, Uni-Select will focus on its 2012-2015 Strategic Plan centred on customer service, sales, operations and
operating margin. More specifically, the Corporation will:
- Execute its 2013 Action Plan to optimize its operations by reducing its inventory level and achieving its cost
reduction objectives. The Action Plan is expected to be completed by the end of 2014;
- Pursue its organic growth by recruiting new customers, intensifying enrolment to its banner programs, leveraging
-
business opportunities in the paint distribution sector and improving its product offering;
Improve EBITDA margin by taking advantage of the Action Plan and the ongoing cost reduction initiatives,
leveraging its enterprise resource planning system and refining its pricing strategy.
Management is confident that these initiatives will contribute to improving its profitability, allowing further growth and
debt reduction.
Richard G. Roy, FCPA, FCA
Denis Mathieu, CPA, CA, MBA
President and Chief Executive Officer
Executive Vice President, Corporate Services and Chief
Financial Officer
Approved by the Board of Directors on February 27, 2014.
2013 ANNUAL REPORT UNI-SELECT 48
Consolidated
financial
statements
as December 31, 2013
Management’s Report
Independent Auditor’s Report
Consolidated Statement of Earnings
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Consolidated Statement of Financial Position
Notes to the Consolidated Financial Statements
50
5 1
52
53
54
55
56
57
MANAGEMENT’S REPORT
The Consolidated Financial Statements and other financial information included in this Annual Report are the responsibility of the Corporation’s
Management. The Consolidated Financial Statements have been prepared by Management in accordance with International Financial Reporting Standards
(“IFRS”) adopted by the International Accounting Standards Board (“IASB”) and have been approved by the Board of Directors on February 27, 2014.
Uni-Select Inc. maintains internal control systems which, according to Management, reasonably ensure the accuracy of the financial information and
maintain proper standards of conduct in the Corporation’s activities.
The Board of Directors fulfills its responsibility regarding the Consolidated Financial Statements included in this Annual Report, primarily through its Audit
Committee. This Committee, which meets periodically with the Corporation’s directors and external auditors, has reviewed the Consolidated Financial
Statements of Uni-Select Inc. and has recommended that they be approved by the Board of Directors.
The Consolidated Financial Statements have been audited by the Corporation’s external auditors, Raymond Chabot Grant Thornton LLP.
Richard G. Roy, FCPA, FCA
President and Chief Executive Officer
Denis Mathieu, CPA, CA, MBA
Executive Vice President, Corporate Services and
Chief Financial Officer
Boucherville
February 27, 2014
2013 ANNUAL REPORT UNI-SELECT 50
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of
Uni-Select Inc.
We have audited the accompanying consolidated financial statements of Uni-Select Inc., which comprise the consolidated statements of financial position
as at December 31, 2013 and 2012 and the consolidated statements of earnings, comprehensive income, changes in equity and cash flows for the years
ended December 31, 2013 and 2012, and a summary of significant accounting policies and other explanatory information.
Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial
Reporting Standards and for such internal control as Management determines is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with
Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The
procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by Management, as well as evaluating the overall presentation of the
consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Uni-Select Inc. as at December 31,
2013 and 2012 and its financial performance and its cash flows for the years ended December 31, 2013 and 2012 in accordance with International
Financial Reporting Standards.
/s/ Raymond Chabot Grant Thornton LLP1
Montréal (Canada)
February 27, 2014
1 CPA auditor, CA public accountancy permit no. A105359
2013 ANNUAL REPORT UNI-SELECT 51
CONSOLIDATED STATEMENT OF EARNINGS
(In thousands of US dollars, except per share amounts)
Sales
Earnings before the following items:
Finance costs, net (Note 5)
Depreciation and amortization (Note 6)
Restructuring charges, write-off of assets and others (Note 7)
Earnings before equity income and income taxes
Equity income (Note 13)
Earnings before income taxes
Income tax expense (recovery) (Note 11)
Current
Deferred
Net earnings
Attributable to shareholders
Attributable to non-controlling interests
Net earnings
Earnings per share basic and diluted (Note 9)
Weighted average number of common shares outstanding (in thousands) (Note 9)
Basic
Diluted
The Consolidated Statement of Earnings by nature is presented in Note 28.
The accompanying notes are an integral part of the Consolidated Financial Statements.
Year ended December 31,
2012
2013
1,788,085
1,797,591
92,379
87,100
15,654
29,297
35,180
12,248
2,652
14,900
4,627
(11,055 )
(6,428 )
21,328
21,328
-
21,328
19,541
26,873
18,458
22,228
2,630
24,858
2,772
(7,261 )
(4,489 )
29,347
29,438
(91 )
29,347
1.00
1.36
21,411
21,411
21,623
21,624
2013 ANNUAL REPORT UNI-SELECT 52
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(In thousands of US dollars)
Net earnings
Other comprehensive income
Items that will subsequently be reclassified to net earnings:
Effective portion of changes in the fair value of cash flow hedges
(net of income tax recoveries of $57 ($496 in 2012))
Net change in the fair value of derivative financial instruments designated as cash flow hedges
transferred to earnings (net of income tax expenses of $341 ($650 in 2012))
Year ended December 31,
2012
2013
21,328
29,347
(155 )
(1,330 )
873
1,790
Unrealized exchange gains (losses) on the translation of financial statements to the presentation currency
11,920
(4,916 )
Unrealized exchange gains (losses) on the translation of debt designated as a hedge of net investments in foreign
operations
Items that will not subsequently be reclassified to net earnings:
Remeasurements of long-term employee benefit obligations (net of income tax expenses of $1,617 ($422 in 2012))
(Note 20)
Total other comprehensive income (loss)
Comprehensive income
Attributable to shareholders
Attributable to non-controlling interests
Comprehensive income
(17,550 )
(4,912 )
6,888
2,432
4,283
1,151
(629 )
20,699
3,583
32,930
20,699
-
20,699
33,021
(91 )
32,930
The accompanying notes are an integral part of the Consolidated Financial Statements.
2013 ANNUAL REPORT UNI-SELECT 53
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(In thousands of US dollars)
Attributable to shareholders
Equity
component
of the
convertible
debentures
Accumulated
other
comprehensive
income
(Note 21)
Retained
earnings
Attributable
to non-
controlling
interests
Total
Total
equity
Share
capital
Contributed
surplus
Balance, December 31, 2011
88,940
452
1,687
367,272
6,229
464,580
1,033
465,613
Net earnings
Other comprehensive income
Comprehensive income
Contributions by and distributions to
shareholders:
Share issuances (Note 18)
Share repurchases (Note 18)
Dividends
Stock-based compensation (Note 19)
Changes in ownership interests in
subsidiaries that do not result in a loss of
control:
Repurchase of non-controlling interests
Foreign exchange translation adjustment
on non-controlling interests
-
-
-
29
(406 )
-
-
(377 )
-
-
-
-
-
-
38
38
-
-
(98 )
-
-
-
-
-
-
-
-
-
-
-
29,438
1,151
30,589
-
2,432
2,432
29,438
3,583
33,021
(91 )
-
(91 )
29,347
3,583
32,930
-
(1,690 )
(11,269 )
-
(12,959 )
-
-
-
-
-
-
-
-
-
29
(2,096 )
(11,269 )
38
(13,298 )
-
-
-
-
-
29
(2,096 )
(11,269 )
38
(13,298 )
(98 )
(955 )
(1,053 )
-
13
13
Balance, December 31, 2012
88,563
392
1,687
384,902
8,661
484,205
Net earnings
Other comprehensive income (loss)
Comprehensive income (loss)
Contributions by and distributions to
shareholders:
Share repurchases (Note 18)
Dividends
Stock-based compensation (Note 19)
-
-
-
(1,292 )
-
-
(1,292 )
-
-
-
-
-
940
940
-
-
-
-
-
-
-
21,328
4,283
25,611
-
(4,912 )
(4,912 )
21,328
(629 )
20,699
(5,116 )
(10,681 )
-
(15,797 )
-
-
-
-
(6,408 )
(10,681 )
940
(16,149 )
Balance, December 31, 2013
87,271
1,332
1,687
394,716
3,749
488,755
-
-
-
-
-
-
-
-
-
484,205
21,328
(629 )
20,699
(6,408 )
(10,681 )
940
(16,149 )
488,755
The accompanying notes are an integral part of the Consolidated Financial Statements.
2013 ANNUAL REPORT UNI-SELECT 54
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands of US dollars)
OPERATING ACTIVITIES
Net earnings
Non-cash items:
Finance costs, net (Note 5)
Depreciation and amortization (Note 6)
Restructuring charges, write-off of assets and others (Note 7)
Difference between amount paid for post-employment benefits and current year expenses
Income tax recovery (Note 11)
Other non-cash items
Changes in working capital items (Note 10)
Interest paid
Income taxes recovered (paid)
Cash flows from operating activities
INVESTING ACTIVITIES
Business acquisitions (Note 8)
Repurchase of non-controlling interests (Note 8)
Proceeds from business disposals (Notes 7, 13)
Balances of purchase price
Advances to merchant members
Receipts on investments and advances to merchant members
Dividends received from equity investments
Acquisitions of property and equipment
Disposals of property and equipment
Acquisitions and development of intangible assets
Cash flows used in investing activities
FINANCING ACTIVITIES
Increase in long-term debt
Repayment of long-term debt
Merchant members’ deposits in the guarantee fund
Share issuances (Note 18)
Share repurchases (Note 18)
Dividends paid
Cash flows used in financing activities
Effects of fluctuations in exchange rates on cash
Net decrease in cash
Cash, beginning of period
Cash, end of period
The accompanying notes are an integral part of the Consolidated Financial Statements.
2013 ANNUAL REPORT UNI-SELECT 55
Year ended December 31,
2012
2013
21,328
29,347
15,654
29,297
35,180
(982 )
(6,428 )
(665 )
(4,373 )
(13,098 )
899
76,812
(1,467 )
-
5,040
(508 )
(15,278 )
9,838
916
(13,897 )
1,828
(8,922 )
(22,450 )
236,669
(273,616 )
(329 )
-
(6,408 )
(10,737 )
(54,421 )
(6 )
(65 )
122
57
19,541
26,873
15,037
(584 )
(4,489 )
1,653
33,528
(17,139 )
(1,370 )
102,397
(6,346 )
(1,053 )
522
(596 )
(12,840 )
4,659
943
(12,900 )
680
(15,424 )
(42,355 )
54,949
(102,654 )
(152 )
29
(2,096 )
(11,063 )
(60,987 )
12
(933 )
1,055
122
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(In thousands of US dollars)
ASSETS
Current assets:
Cash
Trade and other receivables (Note 12)
Income taxes receivable
Inventory
Prepaid expenses
Total current assets
Equity investments and advances to merchant members (Note 13)
Property and equipment (Note 14)
Intangible assets (Note 15)
Goodwill (Note 15)
Deferred tax assets (Note 11)
TOTAL ASSETS
LIABILITIES
Current liabilities:
Trade and other payables
Provision for restructuring charges and others (Note 7)
Dividends payable
Current portion of long-term debt and merchant members’ deposits in the guarantee fund
Total current liabilities
Long-term employee benefit obligations (Notes 19 and 20)
Long-term debt (Note 16)
Convertible debentures (Note 16)
Merchant members’ deposits in the guarantee fund (Note 17)
Derivative financial instruments (Note 26)
Deferred tax liabilities (Note 11)
TOTAL LIABILITIES
EQUITY
Share capital (Note 18)
Contributed surplus
Equity component of the convertible debentures (Note 16)
Retained earnings
Accumulated other comprehensive income (Note 21)
TOTAL EQUITY
December 31,
2012
2013
57
220,942
16,883
532,045
11,417
781,344
36,855
49,494
140,598
184,449
13,151
1,205,891
122
203,186
27,917
528,634
11,527
771,386
36,249
49,731
153,572
187,081
4,642
1,202,661
341,429
15,185
2,598
4,667
363,879
19,561
273,165
46,829
6,988
890
5,824
717,136
87,271
1,332
1,687
394,716
3,749
488,755
309,104
4,392
2,815
19,073
335,384
26,903
290,476
49,099
7,768
1,891
6,935
718,456
88,563
392
1,687
384,902
8,661
484,205
TOTAL LIABILITIES AND EQUITY
1,205,891
1,202,661
The accompanying notes are an integral part of the Consolidated Financial Statements.
On behalf of the Board of Directors,
Robert Chevrier, FCPA, FCA
Director
John A. Hanna, FCPA, FCGA
Director
2013 ANNUAL REPORT UNI-SELECT 56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of US dollars, except per share amounts, percentages and otherwise specified)
1 - GOVERNING STATUTE AND NATURE OF OPERATIONS
Uni-Select Inc. (“Uni-Select”) is a corporation domiciled in Canada and duly incorporated and governed by the Business Corporations Act (Québec).
Uni-Select is the parent company of a group of entities which includes Uni-Select and its subsidiaries (collectively, the “Corporation”). The Corporation is a
major distributor of replacement parts, equipment, tools and accessories and paint and related products for motor vehicles. The Corporation’s registered
office is located at 170 Industriel Blvd., Boucherville, Québec, Canada.
These Consolidated Financial Statements present the operations and financial position of the Corporation and all of its subsidiaries as well as the
Corporation’s interests in jointly controlled entities.
The Corporation’s shares are listed on the Toronto Stock Exchange (“TSX”) under the symbol UNS.
2 - BASIS OF PRESENTATION
Statement of compliance
These Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”). These Consolidated
Financial Statements were approved and authorized for issuance by the Corporation’s Board of Directors on February 27, 2014.
Basis of measurement
These Consolidated Financial Statements have been prepared on the historical cost basis except for derivative financial instruments which are measured at
fair value, provisions which are measured based on the best estimates of the expenditures required to settle the obligation and the post-employment
benefit obligations which are measured at the present value of the defined benefit obligation, adjusted for unrecognized past service costs and reduced by
the net value of plan assets.
Functional and presentation currency
Items included in the financial statements of each of the Corporation’s entities are measured using the currency of the primary economic environment in
which the entity operates (the “functional currency”). The Corporation’s functional currencies are the Canadian dollar for entities located in Canada and
the US dollar for entities located in the United States. These Consolidated Financial Statements are presented in US dollars, which is the Corporation’s
presentation currency.
Use of accounting estimates and judgments
The preparation of financial statements in accordance with IFRS requires Management to apply judgment and to make estimates and assumptions that
affect the amounts recognized in the financial statements and notes to the financial statements. Judgment is commonly used in determining whether a
balance or transaction should be recognized in the financial statements and estimates and assumptions are more commonly used in determining the
measurement of recognized transactions and balances. However, judgment and estimates are often interrelated.
Information about the Corporation’s accounting policies is provided in Note 3 to the Consolidated Financial Statements, and the most significant uses of
judgment, estimates and assumptions relate to the following:
Estimates
Business combinations: Upon the recognition of a business combination, the Corporation records the assets acquired and liabilities assumed at their fair
values based on estimated future cash flows. The value of goodwill recognized is directly affected by the estimated values of the assets and liabilities. Any
change in the estimates used would result in an increase or decrease in the value of goodwill at the date of acquisition, or in net earnings in subsequent
years. See Note 8 for details on the business acquisitions completed in the last two periods.
Sales recognition: Estimates are used in determining the amounts to be recorded for rights of return, guarantees, and trade and volume discounts. These
estimates are based on the Corporation’s historical experience and Management’s assumptions about future events, and are reviewed on a regular basis
throughout the year.
Inventory valuation: The Corporation uses estimates in determining the net realizable value of its inventory, taking into consideration the quantity, age and
condition of the inventory at the time the estimates are made. These estimates also include assumptions about future selling prices and selling costs,
product demand and return fees. The Corporation also uses estimates in determining the value of trade discounts, rebates and other similar items
receivable from vendors. These estimates are based on the Corporation’s historical experience and Management’s assumptions about future events, and
are reviewed on a regular basis throughout the year.
2013 ANNUAL REPORT UNI-SELECT 57
2 -
BASIS OF PRESENTATION (CONTINUED)
Allowance for surplus or obsolete inventory: The Corporation records an allowance for estimated obsolescence calculated on the basis of assumptions
about the future demand for its products and conditions prevailing in the markets where its products are sold. This allowance, which reduces inventory to
its net realizable value, is then entered as a reduction of inventory in the Consolidated Statement of Financial Position. Management must make estimates
when establishing such allowances. In the event that actual market conditions are less favorable than the Corporation’s assumptions, additional
allowances could prove necessary.
Property and equipment and intangible assets: Assumptions are required in determining the useful lives of property and equipment and intangible assets
with finite useful lives. Refer to Note 3 for further details.
Impairments of non-financial assets: The Corporation uses estimates and assumptions based on historical experience and Management’s best estimates to
estimate future cash flows in the determination of the recoverable amounts of assets and the fair value of cash generating units (“CGUs”). Impairment
tests require Management to make significant assumptions about future events and operating results. Significant estimates are also required in the
determination of appropriate discount rates to apply the future cash flows in order to adjust current market rates for assets and entity-specific risk factors.
Revisions of these assumptions and estimates, or variations between the estimated amounts and actual results may have a significant impact on the assets
recorded in the Consolidated Statement of Financial Position, and on the Corporation’s net earnings in future periods. For the years ended December 31,
2013 and 2012, with the exception of the impairment losses recorded as part of the Corporation’s distribution network consolidation plan described in
Note 7, no impairment losses or reversals of previous losses have been recorded on the Corporation’s non-current assets. Refer to Notes 7 and 15 for
further details.
Deferred taxes: The Corporation estimates its deferred income tax assets and liabilities based on differences between the carrying amounts and tax bases
of assets and liabilities. They are measured by applying enacted or substantively enacted tax rates and laws at the date of the financial statements for the
years in which temporary differences are expected to reverse. Changes in the timing of the reversals or the income tax rates applicable in future years
could result in significant differences between these estimates and the actual amounts realized which would affect net earnings in a subsequent period.
Post-employment benefit obligations: Significant assumptions and estimates are required in the measurement of the Corporation’s obligations under
defined benefit pension plans. Management estimates the defined benefit obligations annually with the assistance of independent actuaries; however, the
actual outcome may vary due to estimation uncertainties. The estimates of its defined benefit obligations are based on inflation rates, discount rates and
mortality rates that Management considers to be reasonable. It also takes into account the Corporation’s specific anticipation of future salary increases
and retirement ages of employees. Discount rates are determined close to each year-end by reference to high quality corporate bonds that are
denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related defined benefit
obligations. Estimation uncertainties exist, which may vary significantly in future appraisals of the Corporation’s defined benefit obligations. Refer to
Note 20 for details on the assumptions and estimates used for the years ended December 31, 2013 and 2012.
Hedge effectiveness: The Corporation uses estimates and assumptions, based on external market trends and Management’s best estimates of entity-
specific risks, in assessing the hedge effectiveness prospectively throughout the hedging relationship. Hedge accounting is terminated when a hedging
relationship is no longer highly effective, or when a forecast transaction is no longer probable. Differences in actual results may have an impact on the
Corporation’s net earnings in subsequent periods. The Corporation does not use derivative financial instruments for speculative purposes.
Provisions: The Corporation makes estimates of projected costs and timelines and the probability of occurrence of the obligations in determining the
amount for provisions. Provisions are reviewed at the end of each reporting period and are adjusted to reflect the best estimates. Refer to Note 3 for
further details.
Judgments
Leases: The Corporation uses judgment in determining the classification of its leased assets at inception of the lease. Refer to Note 3 for further details.
Evidence of asset impairment: The Corporation uses significant judgment in determining the existence of an event which indicates a negative effect on the
estimated future cash flows associated with an asset. If applicable, the Corporation performs impairment tests on its CGUs to assess whether the carrying
amounts of assets are recoverable. As described in the previous section, various estimates made by Management are used in the impairment tests.
Hedge accounting: At the inception of a hedging relationship, the Corporation uses judgment in determining the probability that a forecast transaction
will occur.
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The accounting policies set out below have been applied consistently to all periods presented in these Consolidated Financial Statements, unless
otherwise indicated.
Basis of consolidation
(i) Business combinations
The Corporation applies the acquisition method in accounting for business acquisitions. The consideration transferred by the Corporation to obtain control
of a subsidiary is calculated as the sum of the fair values, at the acquisition date, of the assets transferred, liabilities incurred and equity interests issued by
the Corporation, which includes the fair value of any asset or liability arising from a contingent consideration arrangement.
The Corporation measures goodwill at the acquisition date as the fair value of the consideration transferred including the recognized amount of any non-
controlling interest in the acquiree, less the net recognized amount (generally the fair value) of the identifiable assets acquired and liabilities assumed.
When the net result is negative, a bargain purchase gain is recognized immediately in net earnings.
The Corporation elects on a transaction-by-transaction basis whether to measure non-controlling interest at its fair value, or at its proportionate share of
the recognized amount of the identifiable net assets, at the acquisition date.
Transaction costs, other than those associated with the issuance of debt or equity securities that the Corporation incurs in connection with business
acquisition efforts are expensed as incurred.
Contingent consideration is measured at fair value on the acquisition date, with subsequent changes in the fair value recorded through the Consolidated
Statement of Earnings.
(ii) Subsidiaries
Subsidiaries are entities controlled by the Corporation. Control exists when the Corporation is exposed, or has rights, to variable returns from its
involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. The Consolidated Financial Statements
include the accounts of the subsidiaries from the date that control commences until the date that control ceases. The accounting policies of subsidiaries
have been modified where necessary to align them with the policies adopted by the Corporation.
(iii) Equity investments (joint ventures)
Joint ventures are entities over whose activities the Corporation has joint control, established by contractual agreement. The Corporation’s pro-rata shares
of the net assets of joint ventures in which the Corporation holds an interest are recognized from the date that joint control commences until the date that
joint control ceases. Joint ventures are accounted for using the equity method. Dividends received from a joint venture are recognized as a reduction of
the investment. The Corporation’s pro-rata share of the joint ventures’ net earnings is recorded under “Equity income” in the Consolidated Statement of
Earnings.
(iv) Transactions eliminated on consolidation
Intra-group balances and transactions and any unrealized revenue and expenses arising from intra-group transactions are eliminated in preparing the
Consolidated Financial Statements.
Sales recognition
The Corporation recognizes sales upon shipment of goods at the fair value of the consideration received or receivable, net of right of return provisions and
guarantees and other trade and volume discounts, when the significant risks and rewards of ownership have been transferred to the buyer, there is no
continuing management involvement with the goods, recovery of the consideration is probable and the amount of revenue can be measured reliably.
The Corporation offers its customers a right of return on the sale of goods and certain guarantees. At the time of sales recognition, the Corporation
records provisions for the right of return and guarantees which are based on the Corporation’s historical experience and Management’s assumptions.
Inventory
Inventory consists of finished goods and is valued at the lower of cost and net realizable value. Cost is determined using the weighted average cost method
and includes expenditures incurred in acquiring the inventory, net of trade discounts, rebates and other similar items received or receivable from vendors.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated selling costs.
Investments in customers
The Corporation makes cash, inventory and equipment investments in certain customers as consideration for multi-year purchase commitments. These
investments are recorded at their net realizable value and are amortized as a reduction of sales on a straight-line basis over the duration of the purchase
commitment.
In the event that a customer breaches the commitment, the remaining unamortized investment net of liquidated damages received, is immediately
recorded as other expenses in net earnings.
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Property and equipment
Property and equipment is measured at its cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are
directly attributable to acquiring the asset and preparing the asset of its intended use. The cost less residual value of property and equipment is
depreciated over the estimated useful lives in accordance with the following methods and periods:
Paving
Buildings
Furniture and equipment
System software and automotive equipment
Computer equipment
Leasehold improvements
Vehicles under finance leases
Methods
Periods
Diminishing balance
Straight-line and diminishing balance
Straight-line and diminishing balance
Diminishing balance
Straight-line
Straight-line
Straight-line
12 years
20 to 40 years
5 to 10 years
3 to 5 years
5 years
Lease term
Lease term
Depreciation methods, useful lives and residual values are reviewed at each reporting date.
Intangible assets
The Corporation records as internally-generated intangible asset the costs directly attributable to the acquisition and development of an enterprise
resource planning software (“ERP”) and the corresponding borrowing costs. Any capitalized internally-generated intangible asset that is not yet complete
is subject to impairment testing as described in section “impairment of non financial assets” of the Note 2.
In order to accurately reflect the pattern of consumption of the expected benefits, the Corporation amortizes its software and related costs on a straight-
line basis over a 10-year period. The amortization period begins when the asset is available for its intended use and ceases when the asset is classified as
held for sale or is derecognized.
Trademarks, which were all acquired as a result of business acquisitions, are determined as having indefinite useful lives based on the prospects for long-
term profitability and the overall positioning of the trademarks on the market in terms of notoriety and sales volume. They are measured at cost less
accumulated impairment losses. They are not amortized but tested for impairment annually or more frequently if events or changes in circumstances
indicate that the carrying amount may not be recoverable.
Other intangible assets, including those acquired as a result of business acquisitions, are measured at cost less accumulated amortization and accumulated
impairment losses, and are amortized over their estimated useful lives according to the following methods and periods:
Customer relationships
Other software
Methods
Periods
Straight-line
Straight-line and diminishing balance
4 to 20 years
3 to 8 years
Amortization methods, useful lives and residual values are reviewed at each reporting date. All depreciation and amortization charges are included within
the Depreciation and amortization caption in the Corporation’s Consolidated Statement of Earnings.
Goodwill
Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately recognized. Refer
to business combinations (Note 3(i)) for information on how goodwill is initially determined. Goodwill is measured at cost less accumulated impairment
losses. Goodwill is not amortized.
Impairment of goodwill and other non-current assets
Property and equipment and intangible assets with finite lives are reviewed at each reporting date to determine whether events or changes in
circumstances indicate that the carrying amount of the asset or related CGU may not be recoverable. If any such indication exists, then the asset’s or CGU’s
recoverable amount is estimated. Goodwill, capitalized internally-generated intangible assets that are not yet complete and intangible assets with
indefinite lives are tested for impairment annually or more frequently if events or circumstances indicate that they are impaired.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money
and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest
group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets. For
the purposes of goodwill impairment testing, goodwill acquired in a business combination is allocated to the CGU, or the groups of CGUs, that is expected
to benefit from the synergies of the combination. This allocation is subject to an operating segment ceiling test and reflects the lowest level at which that
goodwill is monitored for internal reporting purposes.
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The Corporation’s corporate assets do not generate separate cash inflows. If there is an indication that a corporate asset may be impaired, then the
recoverable amount is determined for the CGU to which the corporate asset belongs.
An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its estimated recoverable amount. The data used for impairment
testing procedures are directly linked to the Corporation’s latest approved budget and strategic plan. Discount factors are determined individually for each
CGU and reflect their respective risk profiles as assessed by Management.
Impairment losses are recognized in net earnings. Impairment losses recognized with respect to a CGU are allocated first to reduce the carrying amount of
any goodwill, and then to reduce the carrying amounts of the other assets of a CGU on a pro-rata basis.
An impairment loss with respect to goodwill is not reversed. For other assets, impairment losses recognized in prior periods are assessed at each reporting
date for any indications that the loss has decreased or no longer exists. An impairment loss with respect to other assets is reversed if there has been a
change in the estimates used to determine the recoverable amount. An impairment loss with respect to other assets is reversed only to the extent that the
assets’ carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss
had been recognized.
Leases
Leases in terms of which the Corporation assumes substantially all the risks and rewards of ownership are classified as finance leases. On initial
recognition, assets acquired under finance leases are recorded in “Property and equipment” at the lower of the fair value of the asset and the present
value of the minimum lease payments. A corresponding liability is recorded as a finance lease obligation within “Long-term debt”. In subsequent periods,
the asset is depreciated over the lease term and interest on the obligation is recorded in “Finance costs, net” in the Consolidated Statement of Earnings.
Other leases are classified as operating leases and the leased assets are not recognized in the Corporation’s Consolidated Statement of Financial Position.
Payments made under operating leases are recognized in net earnings on a straight-line basis over the term of the lease.
Income taxes
Income tax expense comprises current and deferred tax. Current taxes and deferred taxes are recognized in net earnings except to the extent that they
relate to a business combination, or items recognized directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable with respect to previous years.
Deferred tax assets and liabilities for financial reporting purposes are determined according to differences between the carrying amounts and tax bases of
assets and liabilities. They are measured by applying enacted or substantively enacted tax rates and laws at the reporting date for the years in which the
temporary differences are expected to reverse.
However, deferred taxes are not recognized on the initial recognition of goodwill or on the initial recognition of an asset or liability unless the related
transaction is a business combination or affects tax or accounting profit. Deferred taxes on temporary differences associated with investments in
subsidiaries and joint ventures is not recognized if the reversal of these temporary differences can be controlled by the Corporation and it is improbable
that reversal will occur in the foreseeable future.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities, and they relate to income taxes
levied by the same tax authority on the same taxable entity, or on different tax entities that intend to settle current tax liabilities and assets on a net basis,
and their tax assets and liabilities will be realized simultaneously.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future
taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date. They are reduced to the extent
that it is no longer probable that the related tax benefit will be realized and previously unrecognized deferred tax assets are recognized to the extent that
it becomes probable that they will be recovered.
Changes in deferred tax assets or liabilities are recognized as a component of tax income or expense in net earnings, except where they relate to items
that are recognized in other comprehensive income or directly in equity, in which case the related deferred tax is also recognized in other comprehensive
income or equity, respectively.
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Foreign currency
(i) Foreign currency transactions and translation of financial statements
The financial statements of each of the Corporation’s subsidiaries are measured using the entity’s functional currency as described in Note 2. Foreign
currency transactions are translated into the entity’s functional currency using the exchange rate prevailing at the date of the transaction. Foreign
exchange gains or losses resulting from the settlement of such transactions and from the remeasurement of monetary assets and liabilities denominated
in currencies other than the functional currency of the entity at year-end exchange rates are recognized in the Consolidated Statement of Earnings, with
the exception of foreign exchange gains or losses on debt designated as a hedging instrument of a net investment in foreign operations which are included
in other comprehensive income and are transferred to net earnings only when a reduction in the net investment in these foreign subsidiaries is realized. A
foreign operation is an entity that is a subsidiary, associate or joint venture of the reporting entity with a functional currency differing from the reporting
entity’s functional currency.
The assets and liabilities, including goodwill and fair value adjustments arising on acquisition, are translated into the presentation currency at the exchange
rate prevailing at the reporting date upon consolidation. The revenues and expenses of Canadian operations are translated into the presentation currency
at the average exchange rates at the reporting date.
Exchange rate
Average exchange rate
Year ended December 31,
2013
C$1.064 for US$1
C$1.030 for US$1
2012
C$0.997 for US$1
C$1.000 for US$1
Foreign currency translation differences are recognized and presented in other comprehensive income and in the foreign currency translation reserve in
equity. For a non-wholly owned subsidiary, the relevant proportionate share of the translation difference is allocated to the non-controlling interests.
(ii) Hedge of net investments in foreign operations
The Corporation applies hedge accounting to foreign currency translation differences arising between the functional currency of the foreign operation and
the parent entity’s functional currency. Foreign currency differences arising on the translation of the debt designated as a hedge of net investments in
foreign operations are recognized in other comprehensive income to the extent that the hedge is effective, and are presented within equity in the
cumulative translation account balance. To the extent that the hedge is ineffective, such differences are recognized in net earnings. When the hedged
portion of a net investment is reduced, the relevant amount in the cumulative translation account is transferred to net earnings as part of the profit or loss
on disposal.
Foreign exchange gains or losses arising on a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned
nor likely to occur in the foreseeable future, and which in substance is considered to form part of the net investment in the foreign operation, are
recognized in other comprehensive income in the cumulative amount of foreign currency translation differences.
Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is
recognized for the amount expected to be paid under short-term cash bonus or incentive plans if the Corporation has a present legal or constructive
obligation to pay this amount as a result of past service provided by the employee, and the obligation can be reliably estimated.
Long-term employee benefit obligations
Long-term employee benefit obligations include post-employment benefit obligations, stock-based compensation obligations and other obligations related
to long-term employee remuneration or benefits.
(i) Post-employment benefit obligations
A defined contribution plan is a post-employment benefit plan under which an entity pays contributions into a separate entity and will have no legal or
constructive obligation to pay further amounts. The Corporation contributes to various plans that are accounted for as defined contribution plans.
Contributions to the plans are recognized as an expense in the period that employee services are rendered.
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The Corporation has adopted the following policies for defined benefit plans:
- The Corporation’s net obligation with respect to defined benefit pension plans is calculated by estimating the value of future benefits that
employees have earned in return for their service in the current and prior periods less the fair value of any plan assets;
- The cost of pension benefits earned by employees is actuarially determined using the projected unit credit method. The calculations reflect
Management’s best estimates of salary increases, retirement ages and mortality rates of members and discount rate;
- When the benefits of a plan are improved, the benefit relating to past service by employees is recognized immediately in net earnings;
- Actuarial gains or losses arise from the difference between the actual rate of return on plan assets for a period and the expected long-term rate of
return on plan assets for that period or from changes in actuarial assumptions used to determine the accrued benefit obligation.
- Remeasurements comprising of actuarial gains and losses, the effect of the limit of the asset, the effect of minimum funding requirements and the
return on plan assets in excess of interest income are recognized immediately in other comprehensive income and retained earnings in the
Consolidated Financial Statements.
The current and past service costs related to the defined benefit pension plans is recorded within “Employee benefits” in the Consolidated Financial
Statements. The net interest income or expense on the net surplus or obligation is recorded within “Finance costs, net”.
(ii) Stock-based compensation
The Corporation’s stock-based compensation includes an equity-settled common share stock option plan and cash-settled plans consisting of a deferred
share unit plan and a performance share unit plan.
The compensation expense for equity-settled plans is measured as the fair value at the grant date using the binomial option pricing model, and is
recognized over the vesting period, with a corresponding increase to contributed surplus within equity. Forfeitures and cancellations are estimated at the
grant date, and subsequently reviewed at each reporting date. The amount recognized as an expense is adjusted to reflect the number of awards for which
the related service conditions are expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that
are expected to meet the related service conditions at the vesting date. When the stock options are exercised, share capital is credited by the sum of the
consideration paid and the related portion previously recorded in contributed surplus.
For cash-settled stock-based compensation, the fair value of the expense is measured as the number of units expected to vest multiplied by the fair value
of one unit, which is based on the market price of the Corporation’s common shares. The compensation expense and corresponding liability are recognized
over the vesting period, if any, and are revalued at each reporting date until settlement, with any changes in the fair value recognized in the Consolidated
Statement of Earnings.
Provisions
A provision is recognized if, as a result of a past event, the Corporation has a present legal or constructive obligation that can be estimated reliably, and it
is probable that an outflow of economic benefits will be required to settle the obligation. The amount recognized as a provision is the best estimate of the
consideration required to settle the present obligation at the end of the reporting period. The Corporation’s provisions consist of restructuring charges
including the initiatives to liquidate redundant inventory, site decommissioning costs, employee termination benefits and recognition of future lease
obligations.
Restructuring charges are recognized when the Corporation has put in place a detailed restructuring plan which has been communicated in sufficient detail
to create an obligation. Restructuring charges include only costs directly related to the restructuring plan, and are measured at the best estimate of the
amount required to settle the Corporation’s obligations. Subsequent changes in the estimate of the obligation are recognized in the Corporation’s
Consolidated Statement of Earnings.
Financial instruments
(i) Non derivative financial instruments
Financial assets and liabilities are recognized when the Corporation becomes a party to the contractual provisions of the financial instrument. Financial
assets are derecognized when the contractual rights to the cash flows from the financial asset expires, or when the financial asset and all substantial risks
and rewards are transferred. A financial liability is derecognized when it is extinguished, discharged, cancelled or expired.
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Financial assets and liabilities are initially measured at fair value plus transaction costs except for financial assets and liabilities carried at fair value through
net earnings, which are initially measured at fair value and their subsequent measurement depends on their classification, as described below. The
classification depends on the objectives set forth when the financial instruments were purchased or issued, their characteristics and their designation by
the Corporation.
The Corporation has made the following classifications:
- Loans and receivables and advances to merchant members are financial assets with fixed or determinable payments that are not quoted on an
active market. Cash and trade receivables are classified as loans and receivables. After initial recognition, these are measured at amortized cost
using the effective interest method, less any impairment.
- Trade and other payables, dividends payable, long-term debt (except finance leases), convertible debentures and merchant members’ deposits in
the guarantee fund are classified as liabilities measured at amortized cost. Subsequent valuations are recorded at amortized cost using the
effective interest method.
(ii) Impairment of financial assets
A financial asset is impaired if objective evidence indicates that an event has occurred after the initial recognition of the asset having a negative effect on
the estimated future cash flows of that asset that can be reliably estimated.
Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an
amount due to the Corporation on terms that the Corporation would not consider otherwise, indications that a debtor or issuer may request bankruptcy
protection or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in
its fair value below its cost is objective evidence of impairment.
An impairment loss with respect to a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the
present value of the estimated future cash flows discounted at the asset’s original effective interest rate. The carrying amount of the financial asset is
reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the
use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of
amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance accounts are recognized in
net earnings. Interest on the impaired asset continues to be recognized through the unwinding of the discount. When a subsequent event causes the
amount of impairment loss to decrease, the impairment loss is reversed through net earnings.
(iii) Compound financial instruments
Compound financial instruments issued comprise of convertible debentures that can be converted into common shares of the Corporation at the option of
the holder, and the number of shares to be issued does not vary with changes in their fair value.
The liability component of a compound financial instrument is initially recognized at the fair value of a similar liability that does not have an equity
conversion option. The equity component is initially recognized as the difference, net of income taxes, between the fair value of the compound financial
instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity
components in proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest
method. The equity component of a compound financial instrument is not remeasured subsequent to initial recognition. When and if the conversion
option is exercised, the equity component of the convertible debentures will be transferred to share capital. If the conversion option expires without being
exercised, the equity component of the convertible debentures will be transferred to contributed surplus. No gain or loss is recognized upon conversion or
expiration of the conversion option.
Interest, dividends, gains and losses relating to the financial liability are recognized in net earnings.
(iv) Derivative financial instruments and hedge accounting
A specific accounting treatment is required for derivatives designated as hedge instruments in cash flow hedge relationships. To qualify for hedge
accounting, the hedging relationship must meet several strict conditions with respect to documentation, probability of occurrence of the hedged
transaction and hedge effectiveness. All other derivative financial instruments are accounted for at fair value through net earnings.
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On initial designation of the hedge, the Corporation formally documents the relationship between the hedging instruments and hedged items, including
the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness
of the hedging relationship. The Corporation makes assessments, both at the inception of the hedge relationship and on an ongoing basis, whether the
hedging instruments are expected to be “highly effective” in offsetting the changes in the cash flows of the respective hedged items during the period for
which the hedge is designated and whether the actual results of each hedge are within a range of 80 and 125%. For a cash flow hedge of a forecast
transaction, the transaction should be highly probable to occur and should present exposure to variations in cash flows that could ultimately affect
reported net earnings.
Derivative financial instruments are utilized to reduce interest rate risk on the Corporation’s debt. The Corporation does not use financial instruments for
trading or speculative purposes. Derivatives are recognized initially at fair value; attributable transaction costs are recognized in net earnings as incurred.
Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.
Cash flow hedges
The Corporation’s policy is to formally designate derivative financial instruments as hedging items of cash flow hedges of a highly probable forecast
interest expense. The effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and presented in the
accumulated changes in the fair value of derivative financial instruments designated as cash flow hedges in equity. The amount recognized in other
comprehensive income is removed and included in net earnings in the same period as the hedged cash flows affect net earnings, under the same line item.
Any ineffective portion of changes in the fair value of the derivative is recognized immediately in net earnings. The Corporation considers that its derivative
financial instruments are effective as hedges, both at inception and over the term inception and over the term of the instrument, as for the entire term to
maturity, the notional principal amount and the interest rate basis in the instruments all match the terms of the debt instrument being hedged.
Interest rate swap agreements are used to manage the floating interest rate of the Corporation’s total debt portfolio and related overall borrowing cost.
The interest rate swap agreements involve the periodic exchange of interest payments without the exchange of the notional principal amount upon which
the payments are based, and are recorded as an adjustment of hedged interest expense on debt. The related amount payable to or receivable from
counterparties is included as an adjustment to accrued interest.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, hedge
accounting is discontinued prospectively. The cumulative gain or loss previously recognized in other comprehensive income and presented in accumulated
changes in the fair value of derivative financial instrument designated as cash flow hedges remains in equity until the forecast interest expense affects net
earnings. If the forecast interest expense is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in net
earnings. In other cases, the amount recognized in other comprehensive income is transferred to net earnings in the same period that the hedged item
affects net earnings.
(v) Finance income and finance costs
Finance income comprises interest income on cash and on advances from merchant members. Finance income is recognized as it accrues in net earnings,
using the effective interest method.
Finance costs comprise interest on bank indebtedness, long-term debt and on merchant members’ deposits in the guarantee fund, nominal and accreted
interest on convertible debentures, amortization of transaction costs incurred in conjunction with debt transactions, reclassification of realized losses to
net earnings on derivative financial instruments, the unwinding of the discount on provisions as well as impairment losses on financial assets. Borrowing
costs that are not directly attributable to the acquisition or development of qualifying assets are recognized in net earnings using the effective interest
method. Borrowing costs directly attributable to the development of the enterprise resource planning software (i.e. qualifying asset) are capitalized as part
of the cost of that intangible asset until it is substantially ready for its intended use.
Share capital
Common shares are classified as equity. Incremental costs directly attributable to the issuance of common shares and stock options are recognized as a
deduction from share capital, net of any tax effects.
When share capital recognized as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax
effects, is recognized as a deduction from share capital and retained earnings. Repurchased shares are classified as treasury shares and are presented as a
deduction from share capital. When treasury shares are sold or subsequently reissued, the amount received is recognized as an increase in equity, and the
resulting surplus or deficit on the transaction is recognized in retained earnings.
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Accumulated other comprehensive income
Accumulated other comprehensive income is comprised of the following separate components of equity:
Cumulative translation account
The cumulative translation account comprises all foreign currency differences arising from the translation of the financial statements of Canadian
operations to the Corporation’s presentation currency, as well as from the translation of debt designated as a hedge of the Corporation’s net investment in
a foreign operation.
Accumulated changes in the fair value of derivative financial instrument designated as cash flow hedge
The hedge reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged
transactions that have not yet been settled.
Retained earnings
Accumulated actuarial gains and losses on defined benefit plans
The net accumulated actuarial gains and losses comprise all actuarial gains and losses, net of income taxes, on the defined benefit plans recorded after the
date of transition to IFRS. These gains and losses are applied as a reduction of retained earnings.
Contributed surplus
Contributed surplus includes charges related to stock options not yet exercised and premiums paid on the repurchase of the Corporation’s common
shares.
Earnings per share and information pertaining to the number of shares outstanding
Earnings per share is calculated by dividing net earnings available for common shareholders by the weighted average number of common shares
outstanding during the period. Diluted earnings per share are calculated by taking into account the dilution that would occur if the securities or other
agreements for the issuance of common shares were exercised or converted into common shares at the later of the beginning of the period or the
issuance date. The Corporation has two categories of dilutive potential common shares: convertible debentures and stock options. If, after applying the
treasury stock method, it is determined that the conversion has a dilutive effect, the convertible debentures are assumed to have been converted into
common shares and net earnings are adjusted to eliminate the interest charge net of taxes. For the stock options, the number of shares that could have
been acquired at fair value (at the average annual market share price of the Corporation’s shares) based on the monetary value of the subscription rights
attached to outstanding stock options is determined and is compared with the number of shares that would have been issued assuming the exercise of the
stock options. The number of dilutive potential common shares is determined independently for each period presented.
4 -
CHANGES IN ACCOUNTING POLICIES
Employee benefits
ADOPTED IN 2013
(i)
In June 2011, the International Accounting Standards Board (“IASB”) issued an amendment to IAS 19 “Employee Benefits” relating to the accounting for
defined benefit pension plans and termination benefits. This amendment eliminates certain recognition and presentation choices previously permitted
under IAS 19 and requires additional disclosures concerning the risks stemming from defined benefit plans. The Corporation has applied this amendment
as of January 1, 2013, on a retrospective basis in accordance with its transitional provisions. The retrospective application of this amendment increased
employee benefits expense by $824 for the year ended December 31, 2012. Net earnings for the year ended December 31, 2012 decreased by $603, net of
income taxes of $221. Basic and diluted earnings per share decreased by $0.03 for the year ended December 31, 2012. The actuarial gain on defined
benefit pension plans increased by $603 for the year ended December 31, 2012.
In November 2013, the IASB also issued an amendment to IAS 19 “Employee Benefits”, providing relief so that entities are allowed to deduct contributions
that are not related to the number of years of service from the service cost in the period in which the service is rendered. The amendment is effective for
annual periods beginning on or after July 1, 2014, with earlier adoption permitted. The Corporation has applied this amendment as of January 1, 2013 and
this change had no impact on the Corporation’s consolidated financial statements.
Joint arrangements
(ii)
In May 2011, the IASB issued IFRS 11 “Joint Arrangements” which supersedes IAS 31 “Interests in Joint Ventures” and SIC-13 “Jointly Controlled Entities –
Non-monetary Contributions by Venturers”. IFRS 11 focuses on the rights and obligations of a joint arrangement, rather than its legal form as was the case
under IAS 31. The standard requires the use of the equity method to account for interests in jointly controlled entities. Prior to the adoption of this
standard, the Corporation used the proportionate consolidation method to account for its interests in joint ventures, but now applies the equity method
under IFRS 11. Under the equity method, the Corporation’s share of net assets, net income and other comprehensive income of joint ventures are
presented as single line items in the Consolidated Statement of Financial Position, the Consolidated Statement of Earnings and the Consolidated Statement
of Comprehensive Income, respectively. The Corporation has applied this standard as of January 1, 2013, on a retrospective basis in accordance with its
transitional provisions. The Corporation’s consolidated revenues, expenses and geographic information now exclude the financial information of the joint
ventures.
2013 ANNUAL REPORT UNI-SELECT 66
4 -
CHANGES IN ACCOUNTING POLICIES (CONTINUE D)
The effects on the consolidated statement of earnings are:
Sales
Earnings before equity income and income taxes
Equity income
Income taxes
Change in net earnings
The effects on the consolidated statement of financial position at December 31, 2012 are:
Impact on current assets
Impact on non-current assets
Impact on current liabilities
Impact on non-current liabilities
Year ended December 31,
2012
(23,582 )
(3,110 )
2,630
480
-
December 31, 2012
(8,310 )
6,888
(1,011 )
(411 )
Financial instruments: Presentation
(iii)
In May 2012, the IASB issued an amendment to IAS 32 “Financial instruments: Presentation”. The amendment requires entities to account for income
taxes relating to distributions to holders of an equity instrument and to transaction costs of an equity transaction in accordance with IAS 12 “Income
Taxes”. The Corporation has applied this amendment as of January 1, 2013, on a retrospective basis in accordance with its transitional provisions. There
was no impact on the Corporation’s Consolidated Financial Statements.
Financial Instruments: Disclosures
(iv)
In December 2011, the IASB issued an amendment to IFRS 7 “Financial instruments: Disclosures”, requiring disclosures on all recognized financial
instruments that are offset in accordance with IAS 32 or that are subject to enforceable netting arrangements. The Corporation has applied this
amendment as of January 1, 2013, on a retrospective basis. There was no impact on the Corporation’s Consolidated Financial Statements.
Consolidated financial statements
(v)
In May 2011, the IASB issued IFRS 10 “Consolidated Financial Statements”. IFRS 10 requires an entity to consolidate an investee when it is exposed to, or
has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Under
existing IFRS, consolidation is required when an entity has the power to govern the financial and reporting policies of an entity as to obtain benefits from
its activities. IFRS 10 replaces SIC-12 “Consolidation – Special Purpose Entities”, and parts of IAS 27 “Consolidated and Separate Financial Statements”. The
Corporation has applied this amendment as of January 1, 2013. There was no impact on the Corporation’s Consolidated Financial Statements.
(vi) Disclosure of interests in other entities
In May 2011, the IASB issued IFRS 12 “Disclosure of Interests in Other Entities”. IFRS 12 establishes disclosure requirements for interests in other entities,
such as joint arrangements, associates, special purpose vehicles and off balance sheet vehicles. The standard confirms existing disclosures and introduces
additional disclosure requirements that address the nature of, and risks associated with, an entity’s interests in other entities. The Corporation has applied
this standard as of January 1, 2013. The disclosure requirements have been incorporated into the Corporation’s Consolidated Financial Statements.
(vii) Fair value measurement
In May 2011, the IASB issued IFRS 13 “Fair Value Measurement”. IFRS 13 is a comprehensive standard for fair value measurements and disclosure
requirements for use across all IFRS standards. The standard clarifies that fair value is the price that would be received to sell an asset, or paid to transfer a
liability in an orderly transaction between market participants, and the measurement date. It also establishes disclosure requirements about fair value
measurements. Under existing IFRS, guidance on measuring and disclosing fair value is dispersed among the specific standards requiring fair value
measurements and in many cases does not reflect a clear measurement basis or consistent disclosures. The Corporation has applied this standard as of
January 1, 2013, on a prospective basis.
Impairment of assets
(viii)
In May 2013, the IASB issued amendments to IAS 36 “Impairment of Assets”, requiring additional disclosures about the recoverable amount of impaired
non-financial assets if that amount is based on fair value less costs to sell. These amendments are effective for annual periods beginning on or after
January 1, 2014, with earlier adoption permitted. The Corporation has applied this amendment as of January 1, 2013 and this change had no impact on the
Corporation’s consolidated financial statements.
2013 ANNUAL REPORT UNI-SELECT 67
4 -
CHANGES IN ACCOUNTING POLICIES (CONTINUE D)
FUTURE ACCOUNTING CHANGES
At the date of authorization of these consolidated financial statements, certain new standards, amendments and interpretations to existing standards
have been published by the IASB but are not yet effective, and have not been adopted earlier by the Corporation.
Information on new standards, amendments and interpretations that are expected to be relevant to the Corporation’s consolidated financial statements is
provided below. Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Corporation’s
consolidated financial statements.
Financial instruments: Presentation
(i)
In December 2011, the IASB issued an amendment to IAS 32 “Financial Instruments: Presentation”, focusing on the meaning of “currently has a legally
enforceable right of set-off” and the application of simultaneous realisation and settlement for applying the offsetting requirements. This amendment is
effective for annual periods beginning on or after January 1, 2014. The Corporation does not expect the application of this amendment to have a
significant impact on its 2014 Consolidated Financial Statements.
Financial instruments: Recognition and measurement
(ii)
In June 2013, the IASB issued amendments to IAS 39 “Financial Instruments: Recognition and Measurement”, permitting the continuation of hedge
accounting in specific cases where a derivative instrument designed as a hedging instrument is novated to a derivative instrument cleared through a
central counterparty in order to comply with local laws or regulations. These amendments are effective for annual periods beginning on or after January 1,
2014, with earlier adoption permitted. The Corporation has not yet assessed the impact of this amendment.
Financial instruments
(iii)
In November 2009, the IASB issued IFRS 9 “Financial Instruments”. It addresses classification and measurement of financial assets and replaces
measurement models in IAS 39 “Financial Instruments: Recognition and Measurement” for debt instruments with a new mixed measurement model
having only two categories: amortized cost and fair value through net earnings.
IFRS 9 also replaces the models for measuring equity instruments and such instruments are either recognized at fair value through net earnings or at fair
value through other comprehensive income. Where such equity instruments are either recognized at fair value through other comprehensive income,
dividends, to the extent not clearly representing a return on investment, are recognized in net earnings; however, other gains and losses (including
impairments) associated with such instruments remain in accumulated other comprehensive income indefinitely.
In November 2013, the IASB issued amendments to IFRS 9 “Financial Instruments”, including a new chapter on hedge accounting replacing IAS 39 and
improvements to the reporting of changes in the fair value of an entity’s own debt. The mandatory effective date of January 1, 2015 was also removed and
has yet to be determined, but earlier adoption is still permitted.
The Corporation has not yet assessed the impact of this standard or determined whether it will adopt it earlier.
5 -
FINANCE COSTS, NET
Interest on long-term debt
Interest on convertible debentures
Accreted interest on convertible debentures
Amortization of financing costs
Interest on the net defined benefit obligation
Interest on merchant members’ deposits in the guarantee fund and others
Reclassification of realized losses to net earnings on derivative financial instruments designated as cash flow hedges
Total finance costs
Interest income from merchant members
Total finance costs, net
Year ended December 31,
2012
11,002
3,054
444
1,502
1,201
204
2,440
19,847
(306 )
19,541
2013
8,381
2,964
439
1,541
1,096
342
1,214
15,977
(323 )
15,654
2013 ANNUAL REPORT UNI-SELECT 68
6 - DEPRECIATION AND AMORTIZATION
Depreciation of property and equipment
Amortization of intangible assets
Total depreciation and amortization
Year ended December 31,
2012
12,840
14,033
26,873
2013
12,817
16,480
29,297
7 - RESTRUCTURING CHARGES, WRITE-OFF OF ASSETS AND OTHERS
2013
During the year 2013, the Corporation’s Board of Directors approved an internal strategic and operational plan (the “Action Plan”), which will complement
the optimization plan announced in 2012. The Action Plan includes the closure and rightsizing of certain stores and warehouses, as well as the addition of
two new facilities, among other initiatives. The total cost of implementing the Action Plan is expected to be approximately $45,000, of which $13,000
represents cash disbursements, net of income tax recoveries, and the plan is expected to be completed by the end of 2014.
The Corporation recognized restructuring charges of $31,680 for the year ended December 31, 2013 related to site closure and consolidation costs, which
include initiatives to liquidate redundant inventory of $10,423, site decommissioning costs of $4,966, employee termination benefits of $4,254, the
recognition of future lease obligations of $8,422 and write-downs of certain assets to their net recoverable amount for $3,615. The Corporation also
recorded a write-off of $3,500 in the value of certain software which will no longer be used in its operations.
In regards of the rightsizing portion of the plan, during the year ended December 31, 2013, the Corporation sold certain assets and liabilities of businesses
operating in the United States and in Canada. The net assets have been sold for a cash consideration of $6,555 of which $2,970 was receivable at
December 31, 2013.
2012
On August 7, 2012, the Corporation’s Board of Directors approved an optimization plan which also included a revision of the operating structure and the
reduction of administrative expenses. The optimization plan was expected to generate annual cost savings through the consolidation and optimization of
the Corporation’s distribution network. The implementation of the optimization plan, expected to be completed in phases, began in 2012. For the year
ended December 31, 2012, the Corporation recognized restructuring charges of $13,865 related to site closure and consolidation costs, which include
initiatives to liquidate redundant inventory, employee termination benefits, the recognition of future lease obligations and write-downs of certain
property and equipment to their net realizable value.
For the year ended December 31, 2012, the Corporation also recorded a write-off of $2,185 in the value of certain software which will no longer be used in
its operations.
Restructuring charges and others also includes acquisition-related costs stemming from business acquisition efforts undertaken by the Corporation. For
the year ended December 31, 2012, the Corporation recorded acquisition-related costs of $2,408 related to these activities.
At December 31, 2013 and 2012, the resulting provision for restructuring charges and others is presented as current liabilities in the Corporation’s
Consolidated Statement of Financial Position, the details of which are as follows:
Balance, January 1
Restructuring charges and others recognized during the year
Provision used during the year
Effects of fluctuations in exchange rates
Balance, December 31
2013
2012
4,392
17,642
(6,813 )
(36 )
15,185
-
7,254
(2,842 )
(20 )
4,392
2013 ANNUAL REPORT UNI-SELECT 69
8 - BUSINESS COMBINATIONS AND REPURCHASE OF NON-CONTROLLING INTERESTS
Business acquisitions
2013
In the normal course of business, the Corporation acquires the assets and liabilities of companies. During the year ended December 31, 2013, the
Corporation acquired the assets and liabilities of three companies operating in the United States. The total cost of these acquisitions of $1,467, of which no
amount was payable at December 31, 2013, was allocated to the assets and liabilities based on their fair values. The Corporation did not incur any
acquisition-related costs for these transactions, and the contributions to sales and net earnings were immaterial.
The fair value amounts recognized for the acquirees’ assets and liabilities at the acquisition date were $1,214 for the current assets, $210 for the non-
current assets, $7 for the current liabilities, and $50 for goodwill, all of which is expected to be deductible for tax purposes. These purchase price
allocations are preliminary. The final allocations of the purchase price could result in changes to the amounts recognized.
During the year ended December 31, 2013, the Corporation finalized the purchase price allocation of a company acquired in 2012 in Canada, which
resulted in a decrease of $76 in current assets.
2012
In the normal course of business, the Corporation acquires the assets and liabilities of companies. During the year ended December 31, 2012, the
Corporation acquired the assets and liabilities of three companies operating in the United States and three companies operating in Canada. The total cost
of these acquisitions of $6,152, of which $227 was payable at December 31, 2012, was allocated to the assets and liabilities based on their fair values. The
Corporation did not incur any acquisition-related costs for these transactions, and the contributions to sales and net earnings were immaterial.
The fair value amounts recognized for the acquirees’ assets and liabilities at the acquisition date were $6,926 for the current assets, $1,334 for the non-
current assets, $3,673 for the current liabilities, and $1,565 for goodwill, all of which is expected to be deductible for tax purposes. These purchase price
allocations are preliminary. The final allocations of the purchase price could result in changes to the amounts recognized.
During the year ended December 31, 2012, the Corporation finalized the purchase price allocation of a company acquired in 2011 in the United States,
which resulted in an increase of $421 in goodwill.
Repurchase of non-controlling interests
2012
During the year ended December 31, 2012, the Corporation repurchased the remaining non-controlling interests in its subsidiary Uni-Select Pacific Inc. The
total consideration of $1,053 was based on the carrying amounts in accordance with the shareholders’ agreement.
9 -
EARNINGS PER SHARE
The following table presents a reconciliation of basic and diluted earnings per share:
Net earnings attributable to shareholders considered for basic and diluted earnings per share(1)
Weighted average number of common shares outstanding for basic earnings per share
Impact of the stock options(2)
Weighted average number of common shares outstanding for diluted earnings per share
Earnings per share (basic and diluted)
Year ended December 31,
2012
29,438
21,328
2013
21,411,277
-
21,411,277
21,623,300
256
21,623,556
1.00
1.36
(1) The conversion impact of the convertible debentures was excluded from net earnings attributable to shareholders for the year ended December 31,
2013 and 2012 as the conversion impact was anti-dilutive.
(2) For the year ended December 31, 2013, 333,110 weighted average common shares issuable on the exercise of stock options (60,000 for the year
ended December 31, 2012) were excluded from the calculation of diluted earnings per share as the exercise price of the options was higher than the
average market price of the shares.
2013 ANNUAL REPORT UNI-SELECT 70
10 - INFORMATION INCLUDED IN CONSOLIDATED CASH FLOWS
a) The changes in working capital are detailed as follows:
Trade and other receivables
Inventory
Prepaid expenses
Restructuring charges and others
Trade and other payables
Total changes in working capital
Year ended December 31,
2012
(1,435 )
28,563
(189 )
(2,842 )
9,431
33,528
2013
(19,536 )
(23,732 )
57
(6,813 )
45,651
(4,373 )
b) At December 31, 2013, acquisitions of property and equipment and intangible assets of $296 and nil, respectively, ($1,986 and $732 at December 31,
2012) remained unpaid and did not have an impact on cash.
11 - INCOME TAXES
Income tax recovery
Current tax expense
Deferred tax recovery
Origination and reversal of temporal differences
Increase in tax rate
Change in unrecognized deductible temporary differences
Recognition of previously unrecognized tax losses
Total income tax recovery
Year ended December 31,
2012
2,772
2013
4,627
(10,968 )
(87 )
-
-
(11,055 )
(6,428 )
(7,031 )
-
125
(355 )
(7,261 )
(4,489 )
Reconciliation of the income tax recovery
The following table presents a reconciliation of income taxes at the combined Canadian statutory income tax rates applicable in the jurisdictions in which
the Corporation operates to the amount of reported income taxes in the Consolidated Statement of Earnings:
Income taxes at the Corporation’s statutory tax rate – 26.9% (26.74% in 2012)
Effect of tax rates in foreign jurisdictions
Tax benefit from a financing structure
Non-deductible expenses
Recognition of previously unrecognized temporary differences
Others
Income tax recovery reported in the Consolidated Statement of Earnings
Year ended December 31,
2012
6,647
(800 )
(9,410 )
743
(669 )
(1,000 )
(4,489 )
2013
4,008
(2,464 )
(9,555 )
177
-
1,406
(6,428 )
2013 ANNUAL REPORT UNI-SELECT 71
11 -
INCOME TAXES (CONTINUED)
Recognized deferred tax assets and liabilities
Non-capital loss carryforwards
Taxable income during the coming year
Allowances deductible during the coming year
Property and equipment
Pension plan allowance
Financing costs
Cash flow hedges
Allowance for performance incentives
Intangible assets and goodwill
Convertible debentures
Others
Income tax assets (liabilities)
Non-capital loss carryforwards
Taxable income during the coming year
Allowances deductible during the coming year
Property and equipment
Pension plan allowance
Financing costs
Cash flow hedges
Allowance for performance incentives
Intangible assets and goodwill
Convertible debentures
Others
Income tax assets (liabilities)
Consolidated Statement of Financial Position presentation
Deferred tax assets
Deferred tax liabilities
Opening
balance
16,252
(5,405 )
19,008
(15,368 )
6,292
(117 )
522
899
(23,854 )
(453 )
(69 )
(2,293 )
Opening
balance
2,454
(7,479 )
12,269
(5,778 )
6,357
(25 )
679
881
(18,577 )
(443 )
(173 )
(9,835 )
Recognized in
net earnings
1,301
(299 )
14,445
9,153
254
124
(341 )
144
(13,384 )
434
(776 )
11,055
Recognized
in net
earnings
13,845
1,988
6,738
(9,263 )
(161 )
(88 )
(650 )
18
(5,276 )
-
110
7,261
Recognized in
other
comprehensive
Recognized in
other
comprehensive
income
-
-
-
-
(1,617 )
-
57
-
-
-
-
(1,560 )
income
-
-
-
-
(422 )
-
496
-
-
-
-
74
December 31, 2013
Effects of
fluctuations
in exchange
rates
(191 )
349
(32 )
276
(311 )
5
17
(60 )
46
19
7
125
Closing
balance
17,362
(5,355 )
33,421
(5,939 )
4,618
12
255
983
(37,192 )
-
(838 )
7,327
December 31, 2012
Effects of
fluctuations
in exchange
rates
(47 )
86
1
(327 )
518
(4 )
(3 )
-
(1 )
(10 )
(6 )
207
Closing
balance
16,252
(5,405 )
19,008
(15,368 )
6,292
(117 )
522
899
(23,854 )
(453 )
(69 )
(2,293 )
December 31,
2012
4,642
6,935
(2,293 )
2013
13,151
5,824
7,327
The 2012 classification was amended, as previously reported deferred tax assets were compensated against deferred tax liabilities.
As of December 31, 2013, the Corporation has $6,371 of net capital losses carried forward for which deferred tax assets have not been recognized
(nil for 2012). Net capital losses can be carried forward indefinitely and can only be used against future capital gains. The unrecognized deferred tax assets
related to capital tax losses carried forward amounted to $1,714 as at December 31, 2013 (nil for 2012).
2013 ANNUAL REPORT UNI-SELECT 72
12 - TRADE AND OTHER RECEIVABLES
Trade receivables
Current portion of advances to merchant members (Note 13)
Total trade and other receivables
205,993
14,949
220,942
13 - EQUITY INVESTMENTS AND ADVANCES TO MERCHANT MEMBERS
2013
December 31,
2012
195,188
7,998
203,186
Preferred shares, interest rate at 3.12% (3.12% in 2012), receivable in quarterly instalments, redeemable at the option of
the holder and retractable by the issuer
Shares of companies and advances to merchant members, interest rates varying between 0% and 10.25%, receivable in
monthly instalments, maturing on various dates until 2020
Investments in customers, non-interest bearing
Total advances to merchant members
Current portion of advances to merchant members
Non-current portion of advances to merchant members
Equity investments
Non-current portion of the equity investments and advances to merchant members
December 31,
2012
2013
477
502
12,382
17,816
30,675
14,949
15,726
21,129
36,855
6,626
15,545
22,673
7,998
14,675
21,574
36,249
Interests in joint ventures
The carrying value amounts of the joint ventures that have been aggregated into the equity investment at January 1, 2012, were $8,165 for the current
assets, $1,509 for the non-current assets, $2,488 for the current liabilities and $1,204 for the non-current liabilities.
During the year, the Corporation sold its partnership in a joint venture for a cash consideration of $1,858, of which $403 was receivable as at
December 31, 2013.
The Corporation’s proportionate shares of its interests in joint ventures were as follows:
Sales
Earnings before finance costs and depreciation and amortization
Net earnings
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Year ended December 31,
2013
20,507
1,844
1,381
7,535
1,913
3,492
383
2012
23,582
1,746
1,569
8,310
1,680
2,688
569
2013 ANNUAL REPORT UNI-SELECT 73
14 - PROPERTY AND EQUIPMENT
Cost
Accumulated depreciation
Balance, January 1, 2012
Depreciation
Disposals
Acquisitions through business combinations
Other additions
Write-offs
Effects of fluctuations in exchange rates
Net changes
Cost
Accumulated depreciation
Balance, December 31, 2012
Depreciation
Disposals
Acquisitions through business combinations
Other additions
Write-offs
Effects of fluctuations in exchange rates
Net changes
Cost
Accumulated depreciation
Balance, December 31, 2013
Land and
paving
Buildings
Furniture and
equipment
Computer
equipment
and system
software
Automotive
equipment
Leasehold
improvements
1,336
(262 )
1,074
(11 )
-
60
1,254
-
16
1,319
2,671
(278 )
2,393
(11 )
(142 )
-
163
-
(118 )
(108 )
2,556
(271 )
2,285
15,854
(7,473 )
8,381
38,779
(27,374 )
11,405
26,788
(18,940 )
7,848
22,425
(12,822 )
9,603
(502 )
(12 )
200
130
-
87
(97 )
(2,571 )
(96 )
240
3,151
-
97
821
(3,642 )
(4 )
93
4,651
(87 )
32
1,043
(4,586 )
(309 )
150
9,566
-
15
4,836
16,375
(8,091 )
8,284
42,035
(29,809 )
12,226
27,999
(19,108 )
8,891
29,777
(15,338 )
14,439
(470 )
(175 )
-
181
(64 )
(255 )
(783 )
(2,521 )
(357 )
-
4,290
(925 )
(264 )
223
(3,261 )
(364 )
3
2,386
(267 )
(156 )
(1,659 )
(5,348 )
(432 )
72
8,535
-
(49 )
2,778
15,427
(7,926 )
7,501
40,520
(28,071 )
12,449
27,871
(20,639 )
7,232
34,572
(17,355 )
17,217
10,890
(7,020 )
3,870
(1,528 )
(18 )
5
1,155
-
14
(372 )
11,960
(8,462 )
3,498
(1,206 )
(33 )
-
783
(184 )
(48 )
(688 )
10,586
(7,776 )
2,810
Total
116,072
(73,891 )
42,181
(12,840 )
(439 )
748
19,907
(87 )
261
7,550
130,817
(81,086 )
49,731
(12,817 )
(1,503 )
75
16,338
(1,440 )
(890 )
(237 )
131,532
(82,038 )
49,494
At December 31, 2013, the carrying values of leased assets, which are presented under “Automotive equipment” were $14,876 ($11,049 at
December 31, 2012).
2013 ANNUAL REPORT UNI-SELECT 74
15 - INTANGIBLE ASSETS AND GOODWILL
Cost
Accumulated amortization
Balance, January 1, 2012
Amortization
Additions from internal development(1)
Other additions
Acquisitions through business combinations
Disposals
Write-offs
Effect of fluctuations in exchange rates
Net changes
Cost
Accumulated amortization
Balance, December 31, 2012
Amortization
Additions from internal development(1)
Other additions
Acquisitions through business combinations
Disposals
Write-offs
Effect of fluctuations in exchange rates
Net changes
Cost
Accumulated amortization
Balance, December 31, 2013
Intangible assets
Goodwill
Software
99,072
(19,648 )
79,424
Total
184,589
(27,631 )
156,958
184,222
-
184,222
Customer
relationships
Trademarks
and others
8,650
-
8,650
-
-
-
-
-
-
-
-
76,867
(7,983 )
68,884
(7,100 )
-
72
325
(4 )
-
26
(6,681 )
(6,933 )
8,125
3,804
-
(9 )
(2,098 )
406
3,295
8,650
-
8,650
76,692
(14,489 )
62,203
99,793
(17,074 )
82,719
-
-
-
-
-
-
-
-
(7,144 )
-
67
135
(150 )
-
(75 )
(7,167 )
(9,336 )
3,005
5,125
-
(21 )
(3,500 )
(1,080 )
(5,807 )
(14,033 )
8,125
3,876
325
(13 )
(2,098 )
432
(3,386 )
185,135
(31,563 )
153,572
(16,480 )
3,005
5,192
135
(171 )
(3,500 )
(1,155 )
(12,974 )
-
-
-
1,986
-
-
873
2,859
187,081
-
187,081
-
-
-
50
-
-
(2,682)
(2,632)
8,650
-
8,650
76,642
(21,606 )
55,036
102,654
(25,742 )
76,912
187,946
(47,348 )
140,598
184,449
-
184,449
(1) At December 31, 2013, software includes the capitalized portion of costs, amounting to $80,103 ($79,926 at December 31, 2012), related to the
acquisition and internal development of an ERP which was fully implemented and operational during the year.
Impairment testing for cash-generating units containing goodwill
For the purpose of impairment testing, goodwill is allocated to the Corporation’s two CGUs, Canada and United States, which represent the lowest level
within the Corporation at which the goodwill is monitored for internal management purposes.
The recoverable amounts of the Corporation’s CGUs were based on their value in use and were determined with the assistance of independent valuation
consultants. The carrying amounts of the units were determined to be lower than their recoverable amounts and no impairment losses were recognized.
2013 ANNUAL REPORT UNI-SELECT 75
15 -
INTANGIBLE ASSETS AND GOODWILL (CONTINUED)
Value in use was determined by discounting the future cash flows expected to be generated from the continuing use of the units. Value in use in 2013 was
determined similarly as in 2012. The calculation of the value in use was based on the following key assumptions:
- Cash flows were projected based on past experience, actual operating results and the five-year business plan in both 2013 and 2012. Cash flows
for a further five-year period were extrapolated using constant growth rates of 2.5% (2.2 % in 2012) for the Canadian operations and 3.1% (2.0%
in 2012) for the American operations, which do not exceed the long-term average growth rates for the industry.
- Pre-tax discount rates of 13.3% (12.0% in 2012) for the Canadian operations and 16.4% (14.2% in 2012) for the American operations were applied
in determining the recoverable amount of the units. The discount rates were estimated based on past experience and the industry’s weighted
average cost of capital, which was based on a possible range of debt leveraging of 30% at market interest rates of 4.2% (5.3% in 2012) for the
Canadian operations and 3.6% (5.5% in 2012) for the American operations.
The values assigned to the key assumptions represent Management’s assessment of future trends in the automotive aftermarket and are based on both
external and internal sources. The sensitivity analysis indicated that no reasonable possible changes in the assumptions would cause the carrying amount
of each CGU to exceed its recoverable amount.
16 - CREDIT FACILITIES, LONG-TERM DEBT AND CONVERTIBLE DEBENTURES
Credit facilities
On January 15, 2013, the Corporation amended the terms of its credit facility and extended its maturity by one year to January 7, 2017. The term loan for a
remaining amount of $177,500 was converted into an operating loan under the revolving loan portion of the credit facility, which was increased from
$427,500 to $435,000, and subsequently reduced to $400,000. The Corporation benefits from reduced interest rate margins under the amended terms of
the credit facility.
Subsequent to the amendment, the Corporation’s credit facility consists of a long-term revolving facility of $400,000 which is available in Canadian or US
dollars and can be repaid at any time without penalty. The variable interest rates are based on the LIBOR in US dollars, bankers’ acceptances and prime
rates plus the applicable margins.
At December 31, 2013, amounts drawn on the revolving facility and term loan totalled $265,888 ($297,850 at December 31, 2012). The Corporation also
issued letters of credit under its long-term revolving facility to guarantee the payment of certain liabilities by its subsidiaries. At December 31, 2013, the
outstanding letters of credit totalled $13,720 ($13,637 at December 31, 2012). Refer to Note 23 for further details.
Long-term debt
Revolving facility, variable rates, designated as a hedge of net investments in
foreign operations – $265,888 ($116,600 in 2012)
Term loan, variable rates, designated as a hedge of net investments in foreign
operations (1) – nil ($181,250 in 2012)
Finance leases, variable rates
Others
Instalments due within a year
Long-term debt
Maturity
2017
-
-
2021
Effective
interest rate
1.92% to
4.50%
1.97%
-
-
December 31,
Current
portion
2013
2012
-
262,747
119,098
-
4,545
5
4,550
-
14,930
38
277,715
4,550
273,165
179,380
10,864
47
309,389
18,913
290,476
(1) The interest rates reflect the derivative financial instruments designated as interest rate hedges as described in Note 26.
2013 ANNUAL REPORT UNI-SELECT 76
16 - CREDIT FACILITIES, LONG-TERM DEBT AND CONVERTIBLE DEBENTURES
(CONTINUED)
Convertible debentures
The Corporation issued convertible unsecured subordinated debentures which bear interest at a rate of 5.9% per annum, payable semi-annually on
January 31 and July 31 of each year. The debentures are convertible at the option of the holder into common shares of the Corporation at a price of
C$41.76 per share, representing a conversion rate of 23.9 common shares per C$1,000 principal amount of convertible debentures. The convertible
debentures will mature on January 31, 2016 and may be redeemed by the Corporation, in certain circumstances, after January 31, 2014. The equity
component of the debentures was determined as the difference between the fair value of the convertible debentures as a whole and the fair value of the
liability component.
Balance, December 31
Accreted interest
Amortization of financing costs
Effects of fluctuations in exchange rates
Balance, December 31
2013
49,099
439
431
(3,140 )
46,829
2012
47,225
444
434
996
49,099
Principal repayments due on long-term debt and convertible debentures, excluding finance leases, are presented as follows:
2014
2015
2016
2017
2018 Thereafter
5
5
46,834
262,751
5
14
The present value of minimum lease payments for finance leases are as follows:
Less than one year
Between one and five years
More than five years
Total present value of minimum lease payments
December 31, 2013
4,545
10,290
95
14,930
2013 ANNUAL REPORT UNI-SELECT 77
17 - MERCHANT MEMBERS’ DEPOSITS IN THE GUARANTEE FUND
Total merchant members’ deposits in the guarantee fund
Installments due within one year
Non-current portion of the merchant members’ deposits in the guarantee fund
December 31,
2012
7,928
160
7,768
2013
7,105
117
6,988
Merchant members are required to contribute to a fund to guarantee a portion of their amounts due to the Corporation. The deposit amounts are based
on each merchant member’s purchase volume, and bear interest at the prime rate less 1%. At December 31, 2013, the interest rate in effect was 2% (2% at
December 31, 2012).
18 - SHARE CAPITAL
Authorized
The Corporation’s capital structure includes an unlimited number of common shares, without par value, and an unlimited number of preferred shares,
without par value, issuable in series with the following characteristics:
-
-
Common shares:
Each common share entitles the holder thereof to one vote and to receive dividends in such amounts and payable at such time as the Board of
Directors shall determine after the payment of dividends to the preferred shares. In the event of a liquidation, dissolution or winding-up, the
holders shall be entitled to participate in the distribution of the assets after payment to the holders of the preferred shares.
Preferred shares:
The preferred shares are non-voting shares issuable in series. The Board of Directors has the right, from time to time, to fix the number of, and to
determine the designation, rights, privileges, restrictions and conditions attached to the preferred shares of each series. The holders of any series
of preferred shares are entitled to receive dividends and have priority over common shares in the distribution of the assets in the event of a
liquidation, dissolution or winding-up. There are no issued and outstanding preferred shares.
Issued and fully paid
Balance, beginning of period: 21,551,170 common shares (21,636,767 in 2012)
Issuance of nil common shares on the exercise of stock options (1,769 in 2012) (1)
Repurchase of 287,501 common shares (87,366 in 2012)
Balance, ending of period: 21,263,669 common shares (21,551,170 in 2012)
(1) The weighted average price of the exercise of stock options was C$16.25 for 2012.
December 31,
2012
2013
88,563
-
(1,292)
87,271
88,940
29
(406 )
88,563
Repurchase of Common Shares
On August 7, 2013, the Corporation announced that TSX approved the Corporation’s renewal of its normal course issuer bid (“NCIB”) to purchase for
cancellation up to 750,000 common shares over the twelve-month period ending on August 8, 2014. Previously, on August 7, 2012 the TSX had approved
its initial NCIB to purchase for cancellation up to 200,000 common shares over the twelve-month period ending on August 8, 2013.
During the year 2013, the Corporation repurchased 287,501 common shares (87,366 in 2012) for cash consideration of $6,408 ($2,096 in 2012) including a
share repurchase premium of $5,116 ($1,690 in 2012) applied as a reduction of retained earnings.
Dividends
Dividends of C$0.52 per common share were declared by the Corporation for the year ended December 31, 2013 (C$0.52 for 2012).
2013 ANNUAL REPORT UNI-SELECT 78
19 - STOCK-BASED COMPENSATION
The Corporation’s stock-based compensation plans includes an equity-settled common share stock option plan and cash settled plans consisting of a
deferred share unit plan and a performance share unit plan.
Common share stock option plan for management employees and officers
In 2012, the Corporation amended and restated its common share stock option plan for management employees and officers (the “Stock Option Plan”). A
total of 1,700,000 shares have been reserved for issuance under the amended and restated terms of the Stock Option Plan. The options are granted at the
average closing price of the Corporation’s common shares on the TSX for the five trading days preceding the grant date. Options granted under the
amended plan vest over a period of three years plus one day following the date of issuance and are exercisable over a period of no greater than seven
years. At December 31, 2013, options granted for the issuance of 320,823 common shares (60,000 at December 31, 2012) were outstanding, and
1,377,408 common shares (1,638,231 at December 31, 2012) were reserved for additional options under the Stock Option Plan. For the year ended
December 31, 2013, 298,338 stock options (nil for 2012) were granted to management employees and officers of the Corporation, 37,515 of which were
subsequently forfeited or expired.
A summary of the Corporation’s Stock option plan for the years ended December 31, 2013 and 2012 is presented as follows:
2013
2012
Outstanding, beginning of year
Granted
Exercised
Forfeited
Outstanding, end of year
Exercisable, end of year
Weighted
average
exercise
price
C$
30.63
22.90
-
22.90
24.35
26.61
Number of
options
60,000
298,338
-
(37,515 )
320,823
125,206
Number of
options
Weighted
average
exercise price
C$
30.22
-
16.25
-
30.63
30.80
61,769
-
(1,769 )
-
60,000
57,500
The range of exercise prices, the weighted average exercise price and the weighted average remaining contractual life of the Corporation’s options are as
follows:
Options outstanding
December 31, 2013
Options exercisable
Exercisable price
C$
26.70 – 31.42
22.90
Exercisable price
C$
26.70 – 31.42
Weighted
average
remaining
contractual
life (years)
Number
outstanding
60,000
260,823
320,823
4.50
6.01
5.72
Weighted
average
exercise
price
C$
30.63
22.90
24.35
Number
exercisable
60,000
65,206
125,206
Weighted
average
exercise price
C$
30.63
22.90
26.61
Options outstanding
December 31, 2012
Options exercisable
Weighted
average
remaining
contractual
life (years)
Number
outstanding
60,000
60,000
5.49
5.49
Weighted
average
exercise
price
C$
30.63
30.63
Number
exercisable
57,500
57,500
Weighted
average
exercise price
C$
30.80
30.80
Compensation expense of $940 ($38 for 2012) was recorded in the net earnings for the year ended December 31, 2013, with the corresponding amounts
recorded in “Contributed surplus”.
2013 ANNUAL REPORT UNI-SELECT 79
19 - STOCK-BASED COMPENSATION (CONTINUED)
The fair value of the stock options granted in the period and the assumptions used in the calculation of their fair value at the date of grant using the
Trinomial option pricing model were as follows:
Grant Date
Grant date fair value
Dividend yield
Expected volatility
Forfeiture rate
Risk-free interest rate
Expected life
Exercise price
Share price
January 2, 2013
22.90
1.66
25.39
5.55
1.61
6.99
22.90
22.90
C$
%
%
%
%
years
C$
C$
The expected volatility is estimated for each award tranche, taking into account the average historical volatility of the share price over the expected term
of the options granted.
Deferred share unit plan
On February 28, 2013, the Corporation formally adopted its Deferred Share Unit Plan (“DSU Plan”) for directors, officers, and management employees.
Under the DSU Plan, the directors are required by the Board of Directors to receive a portion of their remuneration in the form of deferred share units
(“DSUs”) and at their discretion, they can make an election to receive an additional portion of, or all their remuneration in DSUs, subject to the Board of
Directors’ approval. The officers and management employees are required to make an election to receive a portion of their annual bonus under the short-
term incentive plan (“Short-Term Bonus”) in the form of DSUs if they do not meet the minimum share ownership guidelines (“SOG”) adopted by the Board
of Directors. An election to receive an additional portion or all their Short-Term Bonus in the form of DSUs could be made by the officers and management
employees.
A DSU is equal in value to one common share of the Corporation. The DSUs are issued on the basis of the average closing price of Corporation’s common
shares on the TSX for the five trading days preceding the date of issuance (“DSU Value”). Dividend equivalents accrue on outstanding DSUs on the basis of
dividends paid on the Corporation’s common shares. DSUs are redeemed by the Corporation after the death, retirement or termination of a participant or
in the event of a change in control. The participant is then entitled to receive in cash for each DSU, the DSU Value calculated at the redemption date.
For the year ended December 31, 2013, the Corporation granted 34,976 DSUs (11,456 DSUs for 2012) and redeemed 1,839 DSUs. Compensation expense
of $737 ($262 in 2012) was recorded during the year, and 44,593 DSUs were outstanding at December 31, 2013.
Performance share unit plan
On February 28, 2013, the Corporation formally adopted a Performance Share Unit Plan (“PSU plan”) as part of its existing long-term incentive plan. Under
the amended terms of the Long-Term Incentive Plan, certain management employees receive a portion of their annual incentives under the plan as a
combination of common share stock options and performance share units (“PSUs”). The value of each PSU is equal to the average closing price of one
common share of the Corporation listed on the TSX for the five consecutive trading days immediately preceding the day on which the value is to be
determined (“PSU value”). PSUs vest at the end of a three-year period following the date of issuance, after death, retirement or in the event of a change of
control (“redemption event”). The holder is entitled to receive in cash the PSU value for each PSU vested multiplied by a performance factor (which may
vary from 0% to 180%) based on the achievement of selected financial targets. The Corporation granted 108,811 PSUs for the year ended December 31,
2013, 12,071 of which were subsequently forfeited or redeemed. Compensation expense of $720 was recorded during the year, and 96,740 PSUs were
outstanding at December 31, 2013.
2013 ANNUAL REPORT UNI-SELECT 80
20 - POST-EMPLOYMENT BENEFIT OBLIGATIONS
The Corporation sponsors both defined benefit and defined contribution pension plans. The defined benefit plans include a basic registered pension plan,
a registered pension plan for senior management and a non-registered supplemental pension plan for certain members of senior management. The
benefits under the Corporation’s defined benefit plans are based on years of service and final average salary. The two registered pension plans are funded
by the Corporation and the members of the plan. Employee contributions are determined according to the members’ salaries and cover a portion of the
benefit costs. The employer contributions are based on the actuarial evaluation which determines the level of funding necessary to cover the
Corporation’s obligations. The non-registered pension plan is non-funded and the Corporation makes payments under this plan when the amounts
become payable to the members.
The Corporation also contributes to various other plans that are accounted for as defined contribution plans. The total expense for the Corporation’s
defined contribution plan was $2,230 for the year ended December 31, 2013 ($2,509 for 2012).
Defined benefit pension plans
An actuarial valuation of the defined benefit pension plans is obtained at least every three years.
The defined benefit plans expose the Corporation to actuarial risks such as longevity risk, currency risk, interest rate risk and investment risk. The present
value of the defined benefit plan obligation is calculated by reference to the best estimate of the mortality of plan members. Longevity risk exists because
an increase in the life expectancy of plan members will increase the plan liability. A change in the valuation of the plans’ foreign assets due to changes in
foreign exchange rates exposes the plans to currency risk. A decrease in the bond interest rate used to calculate the present value of the defined benefit
obligation will increase the plan liability. This interest rate risk will be partially offset by an increase in return on the plans’ fixed income funds. Investment
risk occurs if the return on plan assets is lower than the corporate bond interest rate used to determine the discount rate. Currently the plans have a
balanced investment mix of 59.9% in equity funds, 22.8% in fixed income funds and 17.3% in other funds. Due to the long term nature of plans’ defined
benefit obligations, the Corporation considers to be appropriate that a reasonable portion of the plans’ assets should be invested in equity, fixed income
and other funds to generate additional long term return.
Information regarding the status of the obligation and plan assets of the defined benefit plans is as follows:
Defined benefit obligations
Balance, beginning of year
Current service cost
Employee contributions
Interest expense
Benefits paid
Remeasurement – actuarial losses from changes in demographic assumptions
Remeasurement – actuarial (gains) losses from changes in financial assumptions
Remeasurement – actuarial (gains) losses from experience adjustments
Effects of movements in exchange rates
Balance, end of year
2013
2012
Funded
pension plans
Non-funded
pension plan
Funded
pension plans
Non-funded
pension plan
44,881
2,619
1,025
2,029
(1,880 )
1,576
(4,067 )
(125 )
(2,881 )
43,177
9,433
394
-
410
(388 )
323
(601 )
155
(607 )
9,119
40,153
2,708
1,090
1,969
(1,778 )
-
229
(346 )
856
44,881
8,500
433
-
401
(362 )
-
69
219
173
9,433
2013 ANNUAL REPORT UNI-SELECT 81
20 - POST-EMPLOYMENT BENEFIT OBLIGATIONS (CONTINUED)
Plan assets
Fair value, beginning of year
Interest income
Employer contributions
Employee contributions
Benefits paid
Administration fees
Return on plan assets (excluding amounts included in interest income)
Effects of movements in exchange rates
Fair value, end of year
Components of plan assets
Investments in equity funds
Investments in fixed income funds
Investments in other funds
2013
2012
Funded
pension plans
Non-funded
pension plan
Funded
pension plans
Non-funded
pension plan
30,143
1,343
3,921
1,025
(1,880 )
(339 )
3,161
(2,141 )
35,233
-
-
-
-
-
-
-
-
-
24,063
1,169
3,668
1,090
(1,778 )
(305 )
1,744
492
30,143
-
-
-
-
-
-
-
-
-
December 31,
2012
%
2013
%
59.9
22.8
17.3
100.0
57.1
24.3
18.6
100.0
December 31,
The net obligation is presented in “Long-term employee benefit obligations” in the Corporation’s Statement of Financial Position.
Fair value of plan assets
Defined benefit obligations
Long-term employee benefit obligations
Funded
pension plans
35,233
(43,177 )
(7,944 )
2013
Non-funded
pension plan
-
(9,119 )
(9,119 )
Funded
pension plans
30,143
(44,881 )
(14,738 )
2012
Non-funded
pension plan
-
(9,433 )
(9,433 )
The expense for defined benefit plans recognized in “Employee benefits” in the Corporation’s Consolidated Statement of Earnings is as follows:
Year ended December 31,
Current service cost
Net interest expense
Administration fees
Defined benefit plans expense
Funded
pension plans
2,619
686
339
3,644
2013
Non-funded
pension plan
394
410
-
804
Funded
pension plans
2012
Non-funded
pension plan
433
401
-
834
2,708
800
305
3,813
2013 ANNUAL REPORT UNI-SELECT 82
20 - POST-EMPLOYMENT BENEFIT OBLIGATIONS (CONTINUED)
Remeasurement of long-term employee benefit obligations recognized in other comprehensive income is as follows:
Year ended December 31,
Actuarial losses from changes in demographic assumptions
Actuarial (gains) losses from changes in financial assumptions
Actuarial (gains) losses from changes in pension plan experience assumptions
Return on plan assets (excluding amounts included in interest income)
Funded
pension plans
1,576
(4,067 )
(125 )
(3,161 )
(5,777 )
2013
Non-funded
pension plan
323
(601 )
155
-
(123 )
Funded
pension plans
2012
Non-funded
pension plan
-
69
219
-
288
-
229
(346 )
(1,744 )
(1,861 )
The significant actuarial assumptions at the reporting date are as follows (weighted average assumptions at December 31):
December 31,
Discount rate
Rate of compensation increase
Average life expectancies
Male, 45 years of age at reporting date
Female, 45 years of age at reporting date
Male, 65 years of age at reporting date
Female, 65 years of age at reporting date
Funded
pension plans
4.95%
3.50%
2013
Non-funded
pension plan
4.95%
3.50%
Funded
pension plans
2012
Non-funded
pension plan
4.40%
3.50%
86.2
87.9
84.7
87.1
4.40%
3.50%
86.2
87.9
84.7
87.1
87.9
89.5
86.3
88.5
87.9
89.5
86.3
88.5
For the year ended December 31, 2014, the Corporation expects to make contributions of approximately $4,235 for its defined benefit pension plans.
The significant actuarial assumptions for the determination of the defined benefit obligation are the discount rate, the rate of compensation increase and
the average life expectancy. The calculation of the net defined benefit obligation is sensitive to these assumptions. The following table summarises the
effects of the changes in these actuarial assumptions on the defined benefit obligation at December 31, 2013:
Discount rate
Increase of 1%
Decrease of 1%
Rate of compensation
Increase of 0.5%
Decrease of 0.5%
Average life expectancies
Increase of 10%
Decrease of 10%
December 31, 2013
Funded
pension plans
%
Non-funded
pension plan
%
(14.5 )
18.9
2.3
(2.2 )
1.8
(1.6 )
(10.7 )
13.0
0.6
(0.6 )
1.8
(1.6 )
2013 ANNUAL REPORT UNI-SELECT 83
21 - ACCUMULATED OTHER COMPREHENSIVE INCOME
Unrealized exchange
gains (losses) on the
translation of debt
designated as a hedge of
net investments in
foreign operations
Cumulative
translation
account
Accumulated changes
in fair value of
derivative financial
instruments
designated as cash
flow hedges
5,446
(4,916 )
530
11,920
12,450
2,612
6,888
9,500
(17,550)
(8,050)
(1,829 )
460
(1,369 )
718
(651 )
Total
6,229
2,432
8,661
(4,912 )
3,749
Balance, December 31, 2011
Other comprehensive income (loss)
Balance, December 31, 2012
Other comprehensive income (loss)
Balance, December 31, 2013
22 - COMMITMENTS
The Corporation has entered into long-term operating lease agreements expiring at various dates until 2024 for the rental of buildings, vehicles and
outsourcing of information technology services. The rent expense recorded in the Consolidated Statement of Earnings was $34,689 for the year ended
December 31, 2013 ($36,362 for 2012). The committed minimum lease payments under these agreements are as follows:
Less than one year
Between one and five years
More than five years
Total minimum lease payments
December 31, 2013
39,528
94,184
13,694
147,406
Some of these lease agreements contain renewal options for additional periods of one to five years which the Corporation may exercise by giving prior
notice.
23 - GUARANTEES
Under inventory repurchase agreements, the Corporation has made commitments to financial institutions to repurchase inventory from some of its
customers at rates varying from 60% to 80% of the cost of the inventory for a maximum of $65,887 at December 31, 2013 ($67,316 at December 31, 2012).
In the event of a default by a customer, the inventory would be liquidated in the normal course of the Corporation’s operations. These agreements are for
undetermined periods of time. In Management’s opinion and based on historical experience, the likelihood of significant payments being required under
these agreements and losses are being absorbed is low as the value of the assets held in guarantee is greater than the Corporation’s financial obligations.
Under the terms of its credit facility, the Corporation has issued letters of credit amounting to $13,720 at December 31, 2013 ($13,637 at
December 31, 2012). These letters of credit have been issued to guarantee the payments of certain employee benefits and certain inventory purchases.
The letters of credit are not recorded in the Corporation’s long-term debt as the related amounts have been recorded directly in the Corporation’s
Consolidated Statement of Financial Position, if applicable.
2013 ANNUAL REPORT UNI-SELECT 84
24 - RELATED PARTIES
For the years ended December 31, 2013 and 2012, common shares of the Corporation were widely held and the Corporation did not have an ultimate
controlling party.
Transactions with key management personnel
Key management includes directors (executive and non-executive) and members of the Executive Committee. For the years ended December 31, 2013 and
2012, the compensation to key management personnel was as follows:
Salaries and short-term employee benefits
Post-employment benefits (including contributions to defined benefit pension plans)
Other long-term benefits
Stock-based benefits
Total compensation
Year ended December 31,
2012
3,657
653
930
347
5,587
2013
5,007
574
-
2,153
7,734
The 2012 figures were modified to reflect the same number of key management personnel than reported in 2013.
There were no other related party transactions with key management personnel for the years ended December 31, 2013 and 2012.
Other transactions
For the year ended December 31, 2013, the Corporation incurred rental expenses of $3,429 ($3,592 for 2012) to the benefit of Clarit Realty, Ltd., a
company controlled by a related party. The associated lease payments were concluded in the Corporation’s normal course of business for various terms of
no more than five years.
Transactions with subsidiaries are eliminated on the Consolidated Financial Statements. The Corporation’s significant ownership interests in subsidiaries of
100% at December 31, 2013 and 2012 are as follows:
Beck/Arnley Worldparts, Inc.
FinishMaster, Inc.
North Shore Parts & Industrial Supplies Ltd.
Plastique Royal Inc.
Uni-Sélect Alberta Inc.
Uni-Sélect Eastern Inc.
Uni-Sélect Lux Holdco Inc.
Uni-Select Luxembourg S.à r.l.
Uni-Select Prairies Inc.
Uni-Select Pacific Inc.
Uni-Select Purchases Inc.
Uni-Select Purchases, G.P.
Uni-Sélect Québec Inc.
Uni-Select USA Holdings, Inc.
Uni-Select USA, Inc.
2013 ANNUAL REPORT UNI-SELECT 85
25 - CAPITAL MANAGEMENT
Guided by its low-asset-base-high-utilization philosophy, the Corporation’s objectives for managing capital are as follows:
- Maintain a total net debt to total net debt and total shareholders’ equity of less than 45%;
- Maintain a long-term debt to shareholders’ equity ratio of less than 125%;
- Provide shareholders with growth in the value of their shares by maintaining a return on average total shareholders’ equity of at least 9% greater
than the risk-free interest rate on a long-term basis and paying an annual dividend representing approximately 20% to 25% of the net earnings
excluding the non-recurring items of the previous year; and
- Maintain a maximum funded debt on earnings before depreciation and amortization, restructuring charges, write-off of assets and others, finance
costs, equity income and income taxes ratio of 3.5.
In the management of capital, the Corporation includes total shareholders’ equity, convertible debentures, long-term debt, and bank indebtedness net of
cash.
The Corporation manages its capital structure and makes adjustments to it in light of the changes in economic conditions and the risk characteristics of the
underlying assets. In order to maintain or adjust the capital structure, the Corporation has several tools, notably a share repurchase-for-cancellation
program pursuant to normal course issuer bids and a flexible credit facility allowing it to react quickly to business opportunities. Also, the Corporation
constantly analyzes working capital levels, notably inventory, to ensure that the optimal level is maintained and regularly adjusts quantities to satisfy
demand as well as the level of diversification required by customers. In addition, the Corporation has put in place a vendor financing program under which
payments to certain suppliers are deferred.
The Corporation assesses its capital management on a number of bases, including: total net debt to total net debt and shareholders’ equity, long-term
debt to total shareholders’ equity ratio, return on average total shareholders’ equity ratio and funded debt on earnings before finance costs, depreciation
and amortization, restructuring charges, write-off of assets and others, net gain on the disposal of property and equipment, and income tax ratio.
The indicators used by the Corporation are as follows:
Total net debt to total net debt and total shareholders’ equity ratio
Long-term debt to total shareholders’ equity ratio
Return on average total shareholders’ equity ratio
Funded debt on earnings before depreciation and amortization, restructuring charges, write-off of assets and others,
finance costs, equity income and income tax ratio
December 31,
2013
34.1%
51.9%
4.4%
2012
36.7%
58.0%
6.2%
3.01
3.55
The interest rate applicable on the credit facility is contingent on the achievement of certain financial ratios such as funded debt on earnings before
depreciation and amortization, restructuring charges, write-off of assets and others, finance costs, equity income and income tax ratio, and total net debt
to total net debt and shareholders’ equity, which are the same ratios the Corporation is required to comply with. The Corporation was in compliance with
these covenants at December 31, 2013.
The Corporation’s overall strategy with respect to capital risk management remains unchanged from the prior year.
2013 ANNUAL REPORT UNI-SELECT 86
26 - FINANCIAL INSTRUMENTS
The classifications of financial instruments as well as their carrying amounts and fair values are summarized as follows:
Financial assets classified as loans and receivables
Cash
Trade receivables
Advances to merchant members (2)
Financial liabilities carried at amortized cost
Trade and other payables
Dividends payable
Long-term debt (except finance leases)
Convertible debentures (3)
Total before merchant members’ deposits in the guarantee fund
Merchant members’ deposits in the guarantee fund
Financial liabilities carried at fair value
Derivative financial instruments (4)
Other liabilities
Finance leases
December 31, 2013
December 31, 2012
Carrying
amount
Fair value
Carrying
amount
Fair value
Level 1
Level 1
Level 3
Level 2
Level 1
Level 2
Level 1
Level 3
57
205,993
30,675
236,725
336,120
2,598
262,785
46,829
648,332
7,105
655,437
57 Level 1
205,993 Level 1
30,675 Level 3
236,725
336,120 Level 2
2,598 Level 1
262,785 Level 2
49,577 Level 1
651,080
(1) Level 3
-
122
195,188
22,673
217,983
303,230
2,815
298,525
49,099
653,669
7,928
661,597
122
195,188
22,673
217,983
303,230
2,815
298,525
52,543
657,113
(1)
-
Level 2
890
890 Level 2
1,891
1,891
Level 2
14,930
14,930 Level 2
10,864
10,864
(1) The fair value of merchant members’ deposits in the guarantee fund could not be determined given that the deposits in the guarantee fund result
from transactions with merchant members.
(2) The fair value of advances to merchant members was determined based on discounted cash flows using effective interest rates available to the
Corporation at the end of the reporting period for similar instruments.
(3) The fair value of the convertible debentures, as set out above, was determined using their bid price at the end of the period.
(4) The fair value of the derivative financial instruments was determined using quoted prices for similar assets or liabilities.
The fair value of cash, trade receivables, trade and other payables, and dividends payable approximate their carrying amount given that they will mature
shortly.
The fair value of long-term debt has been determined by calculating the present value of the interest rate spread that exists between the actual credit
facility and the rate that would be negotiated with the economic conditions at the reporting date. At December 31, 2013, the fair value of long-term debt
approximates its carrying value as the effective interest rates applicable to the Corporation’s credit facility reflect current market conditions.
Fair value hierarchy
Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three levels of a fair value hierarchy.
The three levels are defined based on the observability of significant inputs to the measurement, as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, and
Level 3: unobservable inputs for the asset or liability.
Derivative financial instruments used in cash flow hedges
In 2011, the Corporation entered into swap agreements to hedge the variable interest cash flows related to forecast transactions beginning in 2012 on a
portion of the Corporation’s revolving credit (Note 16) for a nominal amount at inception and as at December 31, 2013 of $80,000. These interest rate
swaps fix the interest cash flows at 0.97% until their maturity in 2016. The cash flows related to the interest rate swaps are expected to occur in the same
periods as they are expected to affect the net earnings.
The fair values of the interest rate swaps are calculated using quotes for similar instruments at the reporting date and represent an amount payable by the
Corporation of $890 at December 31, 2013 ($1,891 at December 31, 2012).
2013 ANNUAL REPORT UNI-SELECT 87
26 - FINANCIAL INSTRUMENTS (CONTINUED)
Management of risks arising from financial instruments
In the normal course of business, the Corporation is exposed to risks that arise from financial instruments primarily consisting of credit risk, liquidity risk,
foreign exchange risk and interest rate risk. The Corporation manages these risk exposures on an ongoing basis.
(i) Credit risk
Credit risk stems primarily from the potential inability of clients to discharge their obligations. The maximum credit risk to which the Corporation is
exposed represents the carrying amount of cash and trade and other receivables and advances to merchant members. No account represents more than
5% of total accounts receivable. In order to manage its risk, specified credit limits are determined for certain accounts and reviewed regularly by the
Corporation.
The Corporation holds in guarantee some personal property and some assets of certain customers. Those customers are also required to contribute to a
fund to guarantee a portion of their amounts due to the Corporation. The financial condition of customers is examined regularly and monthly analysis are
reviewed to ensure that past-due amounts are collectible and, if necessary, that measures are taken to limit credit risk. Over the past few years, no
significant amounts have had a negative impact on the Corporation’s net earnings with the average bad debt on sales rate at 0.1% for the last three years.
At December 31, 2013, past-due accounts receivable represent $17,013 ($13,363 at December 31, 2012) and an allowance for doubtful accounts of $5,059
($4,732 at December 31, 2012) is provided.
Allowance for doubtful accounts and past-due accounts receivable are reviewed at least quarterly and a bad-debt expense is recognized only for accounts
receivable for which collection is uncertain. The variations in the allowance for doubtful accounts are as follows:
Balance, December 31
Currency translation adjustment
Bad-debt expense
Write-offs
Business combination
Balance, December 31
2013
4,732
(60 )
1,679
(1,292 )
-
5,059
2012
5,167
16
1,267
(1,840 )
122
4,732
Management considers that all of the above financial assets, that are not impaired or past due for each December 31 reporting dates under review, are of
good credit quality.
(ii) Liquidity risk
Liquidity risk is the risk that the Corporation will encounter difficulty in meeting its obligations on time and at a reasonable cost. The Corporation manages
its liquidity risk on a consolidated basis through its use of different capital markets in order to ensure flexibility in its capital structure. The Corporation
prepares budget and cash forecasts, taking into account its current and future cash requirements, to ensure that it has sufficient funds to meet its
obligations.
At December 31, 2013, the Corporation has a renewable credit facility in the amount of $400,000 ($431,250 at December 31, 2012) (Note 16).
At December 31, 2013, the Corporation benefits from available amount on its credit facility of approximately $120,000 ($116,000 at December 31, 2012).
2013 ANNUAL REPORT UNI-SELECT 88
26 - FINANCIAL INSTRUMENTS (CONTINUED)
Management is of the opinion that as a result of the cash flows generated by operations and the financial resources available, the liquidity risk of the
Corporation is appropriately mitigated.
The contractual maturities and estimated future interest payments of the Corporation’s financial liabilities are as follows:
Non-derivative financial instruments
Trade and other payables
Dividends payable
Long-term debt (except finance leases)
Convertible debentures
Interest payable
Merchant members’ deposits in the guarantee fund
Derivative financial instruments used for hedging
Non-derivative financial instruments
Trade and other payables
Dividends payable
Long-term debt (except finance leases)
Convertible debentures
Interest payable
Merchant members’ deposits in the guarantee fund
Derivative financial instruments used for hedging
December 31, 2013
Carrying
amount
Maturing
under one
year
One to three
years
Over three
years
340,085
2,598
262,785
46,829
1,344
7,105
660,746
890
661,636
340,085
2,598
5
2,869
1,344
117
347,018
-
347,018
-
-
262,780
52,937
-
-
315,717
890
316,607
-
-
-
-
-
6,988
6,988
-
6,988
December 31, 2012
Carrying
amount
Maturing
under one
year
One to three
years
Over three
years
307,100
2,815
298,525
49,099
2,004
7,928
667,471
1,891
669,362
307,100
2,815
24,285
3,064
2,004
322
339,590
497
340,087
-
-
303,448
59,583
-
158
363,189
1,394
364,583
-
-
-
-
-
7,924
7,924
-
7,924
Foreign exchange risk
The Corporation is exposed to foreign exchange risk on its financial instruments mainly due to purchases in currencies other than the respective functional
currencies of the Corporation. Management considers that fluctuations in the relative values of the US dollar and the Canadian dollar will not have a
material impact on net earnings.
The Corporation has certain investments in foreign operations (United States) whose net assets are exposed to foreign currency translation. The
Corporation hedges the foreign exchange risk exposure related to those investments with US dollar denominated debt instruments (Note 16).
Interest rate risk
The Corporation is exposed to interest rate fluctuations, primarily due to its variable rate debts. The Corporation manages its interest rate exposure by
maintaining an adequate balance of fixed versus variable rate debt and by concluding swap agreements to exchange variable rates for fixed rates. At
December 31, 2013, including the impact of interest rate swap agreements and convertible debentures, the fixed rate portion of financial debt represents
approximately 39%.
A 25-basis-point rise or fall in interest rates, assuming that all other variables remain the same, would have resulted in a $422 increase or decrease in the
Corporation’s net earnings for the year ended December 31, 2013, and a $295 increase or decrease in other comprehensive income. These changes are
considered to be reasonably possible based on an observation of current market conditions.
2013 ANNUAL REPORT UNI-SELECT 89
27 - GEOGRAPHIC INFORMATION
The Corporation assesses its performance using earnings before depreciation and amortization, restructuring charges, write-off of assets and others,
finance costs, equity income and income taxes.
The Corporation considers its distribution of replacement parts, equipment, tools and accessories and paint and related products for motor vehicles as a
single operating segment.
The Corporation operates in Canada and the United States. The primary financial information per geographic location is as follows:
Sales
United States
Canada
Total
Property and equipment
Intangible assets
Goodwill
Property and equipment
Intangible assets
Goodwill
Year ended December 31,
2013
2012
1,294,115
493,970
1,788,085
1,300,991
496,600
1,797,591
United States
36,674
124,544
144,807
December 31, 2013
Canada
12,820
16,054
39,642
Total
49,494
140,598
184,449
United States
35,278
134,323
144,756
December 31, 2012
Canada
14,453
19,249
42,325
Total
49,731
153,572
187,081
2013 ANNUAL REPORT UNI-SELECT 90
28 - CONSOLIDATED STATEMENT OF EARNINGS BY NATURE
Sales
Operating expenses
Employee benefits
Purchases, net of changes in inventories
Other expenses
Year ended December 31,
2012
2013
1,788,085
1,797,591
293,809
1,249,891
152,006
1,695,706
312,914
1,234,131
163,446
1,710,491
Earnings before depreciation and amortization, restructuring charges, write-off of assets and others, finance costs, equity
income and income taxes
Depreciation and amortization (Note 6)
Restructuring charges, write-off of assets and others (Note 7)
Operating profit
Finance costs, net (Note 5)
Equity income (Note 13)
Income tax expense (recovery) (Note 11)
Current
Deferred
Net earnings
Attributable to shareholders
Attributable to non-controlling interests
Net earnings
Earnings per share basic and diluted (Note 9)
Weighted average number of common shares outstanding (in thousands) (Note 9)
Basic
Diluted
92,379
87,100
29,297
35,180
64,477
26,873
18,458
45,331
27,902
41,769
15,654
12,248
19,541
22,228
2,652
2,630
4 627
(11 055 )
(6,428 )
2,772
(7,261 )
(4,489 )
21,328
29,347
21,328
-
21,328
29,438
(91 )
29,347
1.00
1.36
21,411
21,411
21,623
21,624
2013 ANNUAL REPORT UNI-SELECT 91
BOARD OF DIRECTORS
AND OFFICERS
B O A R D O F D I R E C T O R S
O F F I C E R S
Robert Chevrier, FCPA, FCA1,2
Chair of the Board
Corporate Director
Montréal, Québec
James E. Buzzard2,3
President
Clarit Realty, Ltd.
East Amherst, New York
Patricia Curadeau-Grou 3
Strategic Advisor to the President
and Chief Executive Officer
National Bank of Canada
Outremont, Québec
Pierre Desjardins2,4
Corporate Director
Austin, Québec
Jean Dulac4
President
M&M Nord Ouest Inc.
Amos, Québec
John A. Hanna, FCPA, FCGA 2,3
Corporate Director
Toronto, Ontario
Richard L. Keister 4
Corporate Director
Hollywood, Florida
Hubert Marleau 3
Corporate Director
Cornwall, Ontario
Richard G. Roy, FCPA, FCA
President and Chief Executive Officer
Uni-Select Inc.
Verchères, Québec
Dennis Welvaert2,4
Chair of the Board
Uni-Select USA, Inc.
Tulsa, Oklahoma
Richard G. Roy, FCPA, FCA5
President and Chief Executive Officer
Denis Mathieu, CPA, CA, MBA5
Executive Vice President, Corporate Services
and Chief Financial Officer
Guy Archambault, P. Eng.
Vice President, Corporate Development
Steven J. Arndt 5
President and Chief Operating Officer,
FinishMaster, Inc.
Robert Buzzard
Vice President, Information Technology
Annie Hotte 5
Vice President, Human Resources
Me Louis Juneau 5
Vice President, Legal Affairs and Secretary
Martin Labrecque, CPA, CMA
Vice President, Finance & Control
Michel Laverdure
Vice President, Corporate Purchasing
Gary O’Connor, MBA 5
President and Chief Operating Officer,
Automotive Canada
Michel Ravacley, P. Eng., MBA5
Senior Vice President,
Supply Chain & Integration
Jean Rivard, MBA
Vice President, Special Projects
and Vice President and General Manager,
Beck/Arnley Worlparts, Inc.
Anthony Brent Windom 5
President and Chief Operating Officer,
Automotive USA
1 Mr. Chevrier is an ex officio member of the Human Resources and Compensation Committee and of the Audit Committee.
2 Member of the Corporate Governance Committee, chaired by Mr. Chevrier.
3 Member of the Audit Committee, chaired by Mr. Hanna.
4 Member of the Human Resources and Compensation Committee, chaired by Mr. Desjardins.
5 Member of the Executive Management Committee
2013 ANNUAL REPORT UNI-SELECT 92
SHAREHOLDER AND INVESTOR
INFORMATION
Uni-Select Shares
Traded on the Toronto Stock Exchange (TSX)
under the symbol “UNS”.
Transfert Agent
Computershare Trust Company of Canada
1500 University, Suite 700
Montréal, Québec H3A 3S8
514 982.7555 or 1 800 564.6253
service@computershare.com
computershare.com
Filings
The Corporation files all mandatory information
with Canadian Securities Commissions.
sedar.com
Auditors
Raymond Chabot Grant Thornton (LLP)
Legal Counsel
McCarthy Tétrault LLP
Bankers
National Bank of Canada
Royal Bank of Canada
Bank of America
Bank of Montreal
Caisse Centrale Desjardins
JPMorgan Chase, N.A.
M&T Bank
Laurentian Bank of Canada
Dividends
On February 27, 2014, the Board of Directors
declared a quarterly dividend of C$0.13
per share payable on April 22, 2014 to
shareholders of record at March 31, 2014.
In 2012 and 2013, the Corporation declared
quarterly dividends of $0.13 per share.
All dividends paid by the Corporation in 2013
and, unless otherwise indicated, all dividends
to be paid by the Corporation subsequent
to 2013, are designated as eligible dividends
for tax purposes. The Corporation does
not have a dividend reinvestment plan.
Normal Course Issuer Bid
The Corporation has a normal course issuer
bid on the Toronto Stock Exchange.
Annual General and Special Meeting
of Shareholders
April 30, 2014 at 1:30 p.m.
Hôtel Mortagne
Conference Room Boucherville C
1228 Nobel Street
Boucherville, Québec J4B 5H1
Head Office
170 Industriel Blvd.
Boucherville, Québec J4B 2X3
450 641.2440
questions@uniselect.com
uniselect.com
Investor Relations
450 641.6972
investorrelations@uniselect.com
Ethics Line
As part of the Audit Committee whistle
blower procedures, this hotline allows team
members and others to anonymously and
confidentially raise accounting, internal
controls and ethical inquiries or complaints.
1 855.650.0998
whistleblower@uniselect.com
Trademarks
Trademarks and/or registered trademarks of
Uni-Select Inc. and/or its subsidiaries include
but are not limited to Uni-Select, Uni-Sélect,
Auto Extra, Auto Parts Plus, Auto-Plus,
Auto-Select, Auto Service Plus, Beck/Arnley,
Bumper to Bumper, ProColor, Select AutoXpert,
SmartLink, Uni-Pro and Worldparts. All other brands
and product names referred to are trademarks or
registered trademarks of their respective owners.
All logos, tradenames and trademarks referred
to and used herein remain the property of their
respective owners and may not be used, changed,
copied, altered, or quoted without the written
consent of the respective owner. All rights reserved.
This annual report is also available for download at
uniselect.com.
Pour obtenir une version française du rapport annuel,
veuillez communiquer avec les Relations aux investisseurs.
uniselect.com