Canada Markets closed

Edited Transcript of UNS.TO earnings conference call or presentation 20-Feb-19 1:00pm GMT

Q4 2018 Uni-Select Inc Earnings Call

Boucherville Mar 5, 2019 (Thomson StreetEvents) -- Edited Transcript of Uni-Select Inc earnings conference call or presentation Wednesday, February 20, 2019 at 1:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* André Courville

Uni-Select Inc. - Interim President & CEO and Director

* Brent Windom

Uni-Select Inc. - President & COO of Canadian Automotive Group

* Eric Bussieres

Uni-Select Inc. - CFO

* Me Louis Juneau

Uni-Select Inc. - Chief Legal Officer & Corporate Secretary

* Neil Croxson

The Parts Alliance Ltd. - CFO

================================================================================

Conference Call Participants

================================================================================

* Benoit Poirier

Desjardins Securities Inc., Research Division - VP and Industrials, Transportation, Aerospace, Industrial Products & Special Situation Analyst

* Daryl Young

TD Securities Equity Research - Mining Research Associate

* Elizabeth Johnston

Laurentian Bank Securities, Inc., Research Division - Analyst

* Jonathan Lamers

BMO Capital Markets Equity Research - Analyst

* Michael W. Glen

Macquarie Research - Analyst

* Zachary Evershed

National Bank Financial, Inc., Research Division - Associate

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(spoken in French) Good morning. My name is Jessa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Uni-Select Inc. fourth quarter results conference call. (Operator Instructions)

Mr. Louis Juneau, Chief Legal Officer and Corporate Secretary, you may begin your conference.

--------------------------------------------------------------------------------

Me Louis Juneau, Uni-Select Inc. - Chief Legal Officer & Corporate Secretary [2]

--------------------------------------------------------------------------------

Thank you, Jessa. Good morning, everyone, and thank you for joining us for the Uni-Select fourth quarter conference call. Presenting this morning are Andre Courville, Interim President and Chief Executive Officer, and Eric Bussieres, Chief Financial Officer. Following their comments we will open the call for questions. Joining us today for your questions are Chris Adams, President & COO of FinishMaster, USA; Brent Windom, President and COO of Automotive Canada; and Neil Croxson, Chief Financial Officer of The Parts Alliance.

Please note that all documents referred to in today's conference call, including this webcast presentation, can be found on our website at uniselect.com in the Investors section. As noted on Slide 2, I would like to remind you about the caution regarding forward-looking statements, which is applied to our presentation and comments. All amounts are expressed in U.S. dollars, except as otherwise specified.

With that, let me turn the call over to Andre.

--------------------------------------------------------------------------------

André Courville, Uni-Select Inc. - Interim President & CEO and Director [3]

--------------------------------------------------------------------------------

(spoken in French) Good morning, everyone. I hope everybody has a good coffee. It's cold again this morning in Montreal but we are going to try to warm you up through this call. So this morning I want to place some emphasis on the fact that Uni-Select's board and management are clearly aligned with shareholders in the common goal of enhancing long-term value. Over the past year, we have pursued and delivered several parallel initiatives to build value for our shareholders. These initiatives included our 25/20 plan which has provided favorable results to date. Going forward, we intend to build on this success.

Our revenues for the year were up 21% to $1.8 billion compared to $1.4 billion in 2017 primarily due to the TPA acquisition. Organic sales growth was 1.5% positive organic growth in all these 3 segments. Adjusted EBITDA stood at $120 million or 6.8% of sales compared to $118 million or 8.1% of sales in 2017, mainly due to pricing and competitive pressures at FinishMaster. Adjusted net earnings stood at $51 million or $1.22 per share versus $55 million or $1.30 per share.

Here are a few operational highlights for 2018. During the year we opened 15 greenfields, integrated 14 stores, sold 1 store, and acquired 21 stores. At the end of the year, we had a consolidated network of 468 company-owned stores. In addition during the year, the Corporation amended and extended its credit agreement by 1 year providing for $100 million upsize in the unsecured long-term revolving credit facility to the conversion and immediate cancellation of unsecured term facility outstanding balance. The facility has now a 5-year maturity.

Please turn to Page 5. Recall that we launched the 20/20 initiative in Q3 '17 to generate annual recurring savings of $20 million. The focus was on reducing our cost to serve by accelerating the capture of search and synergies leading to the various acquisitions, improved transit duty levels and bring more variability in our cost structure. Last quarter as you recall, we increased our accelerated -- the program by an additional $5 million in annualized cost savings bringing the total recurring savings to at least $25 million by 2020. We call the program the 25/20 plan. As of December 31, 2018, we have realized $18.7 million in annualized savings under the plan.

Turning to Page 6, please. In January, building on the work of the 25/20 plan, we initiated an in-depth review of U.S. operations with the objective of identifying specific performance improvements and rightsizing actions to address the changing market conditions and to position the FinishMaster US segment for the future. The 4 key elements of the plan consist of company-owned consolidation, optimization, margin recovery and obviously spending reductions. The development and implementation are being led by Rob Molenaar, who has significant industry-specific and ascertained expertise including deep knowledge of the automobile -- automotive, I am sorry -- revenue space from over 25 years of experience at one of the largest global paint manufacturers. He also have been a Uni-Select board member since 2017.

Chris Adams, President and CEO of FinishMaster US, will continue to focus on sales and marketing as well as day-to-day operation of the FinishMaster US segment. Both Rob and Chris report directly to me. The 25/20 plan and the FinishMaster US segment's rightsizing plans combined together will now be referred to as the Performance Improvement Plan. The combined Performance Improvement Plan is now expected to generate a total of $35 million in annualized cost savings by 2020 and incur restructuring and other charge in the range of $14 million to $18 million. In sum, since the start of these activities in Q3 '17, we realized $18.7 million in annualized cost savings and $7.6 million in restructuring and other charges.

Turn to Page 7, please. In September 2018, the board made management changes and announced the formation of a special committee of independent members of the Board of Directors to oversee a review of strategic alternatives and appointed JP Morgan as its advisor. The Board of Directors and the management team continue to review, analyze and evaluate a comprehensive range of alternatives with the goal of maximizing value to -- for our shareholders. Given the process, the Corporation does not intend to provide further updates until the Board of Directors approve a definite sale transaction or strategic alternative or otherwise determines that further disclosure is appropriate. There are no guarantees that the review of strategic alternatives will result in a transaction or if a transaction is undertaken as at to its terms or timing.

As the Corporation progresses in the strategic alternatives review, the board has initiated a search for a new President and CEO of Uni-Select and mandated the firm Egon Zehnder International Inc. to lead the search. The search is being performed in parallel with the strategic alternatives review and all scenarios relative to that process remain under consideration. During this period I will continue to act as the Interim President and CEO. On that note, I would like to turn the call over to Eric to review the fourth quarter results.

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [4]

--------------------------------------------------------------------------------

Thank you, Andre. Bonjour, and good morning, everyone. Please turn to Page 9. Before I comment on the results I would like to remind you about the impact of seasonality on Uni-Select's results. As you can see the fourth quarter is generally a soft quarter in the year. Let me begin with our consolidated fourth quarter results on Page 10. Overall, our fourth quarter results were disappointing and we're not satisfied with them. There are 3 subjects that I will enter -- address in more details. First, the very low margin at FinishMaster and what we are doing about it. Second, the lower sales and higher EBITDA margin at our Canadian operations and finally, softer sales and margin at TPA.

For the fourth quarter, on a consolidated basis, sales increased 1.1% to $420 million, primarily driven by organic growth and acquisition, partly offset by foreign exchange. Adjusted EBITDA decreased 23% to $21 million or a margin of 5.1% primarily explained by pricing pressure at FinishMaster, partly offset by the Canadian operations benefiting from annual performance rebates and the 25/20 plan and the overall superior absorption of fixed costs from an increased volume of sales. In the quarter we took $7.6 million in restructuring and other charges related to our 25/20 plan. Finally, we acquired 21 stores, integrated 2, opened 3 greenfields, and sold 1 store.

Let me go through each business segment in more details. Please turn to Page 11 for FinishMaster. Revenue increased to $203 million up 2.3% from last year driven by organic growth of 3.9% partly offset by the number of billing days. We are encouraged by the top line performance at FinishMaster as it is the third consecutive quarter of positive organic growth. These factors are attributable to the sales team efforts on driving growth by developing business volume and onboarding new customers.

However, the adjusted EBITDA margin fell sharply to 6.6% from 9.9% last year as a result of pricing pressure in the various refinish activities including but not limited to the evolving customer mix, to a greater exposure to multi-shop operators and national accounts. More specifically, manufacturers are increasing prices and our ability to pass on the price increase to our customers has been reduced more so in the second half of 2018 in light of competitive pressure. In addition, the percentage of MSOs and national accounts in our customer mix continue to grow in the fourth quarter resulting in incremental discounts.

In the fourth quarter, our margin was impacted by approximately 50 basis points of a one time costs due to inventory cost adjustments and legal fees. Furthermore, we estimate that refinished paint volume in the U.S. has declined 2% to 4% in 2018 and we do not expect volume growth in 2019. In fact, we expect 2019 paint volume to slightly decline from 2018 level. Therefore, the refinish market is undergoing changes we believe are structural in nature and we need to adjust our cost base and our cost to serve model accordingly. Recall that we started to address these issues in the third quarter 2017 when we launched the 20/20 initiative.

We accelerated the program in the last quarter with the 25/20 plan as we saw more incremental opportunity to reduce expenses. The poor performance of FinishMaster in the fourth quarter required further action from our part. As a result, we developed a broad plan to rightsize the business model while enhancing and accelerating the optimization of our cost to serve model. Andre described the highlights of the Performance Improvement Plan early. By the end of 2019 we expect the rightsizing plan of FinishMaster to generate $10 million in cost savings on an annualized basis. To put this in perspective the plan is back loaded -- back ended loaded with benefits expected to start in the second half of the year.

Turning now to Page 12 for Canada, our fourth quarter results and sales were down -- sorry, our fourth quarter sales were down 0.5% to $123 million primarily driven by foreign exchange, the timing of holiday seasons, which resulted in jobbers and installers closing for different period versus last year, as well as advanced sales in the third quarter due to announced price increase. Also this year the weather, when compared to last year, was not conducive for collision repairs. These factors were partly offset by acquisition and the number of billing days.

As a result organic growth was negative 0.5% in the quarter and positive 0.5% for the year, in line with expectations. However, our adjusted EBITDA margin increased to 7.6% from 5.1% last year driven by annual performance rebates and margin improvement from all 3 network channels.

It is important to highlight that the annual performance rebates are normally spread out during the year. This year more rebates were accounted for in the fourth quarter versus last year. Excluding these rebates, our margin would have been higher than last year but not in the same order of magnitude. Furthermore, I wanted to point out that our paint blending equipment segment performed very well in the quarter, despite the paint volume being down 6% to 8% in 2018 in Canada, according to our own estimates. In that context, our team did a phenomenal job of growing sales and managing costs.

As we mentioned last quarter, we also started to focus on optimizing our network. In the quarter we sold 1 store and are in the process of merging 2 distribution centers in the West into 1 new large center in Calgary. Also, we have other logistic opportunities to improve our network that we will be evaluating with the scope of the Performance Improvement Plan. I do however want to be clear that when we are consolidating stores, in most cases we are not losing volume but reducing our cost to serve model providing better service to our customer and ultimately improving margins. In addition, in the quarter we continued to roll out the Bumper to Bumper and to deploy the point-of-sale systems PartsWatch.

Finally, in November, we made a strategic acquisition of Autochoice Parts & Paints with 18 stores in the Atlantic region. With this transaction, we added a solid team and a stable base -- business organization carrying diverse product category, including automotive parts, paint blender supplies to the Uni-Select family. These Atlantic stores are a very nice addition to our corporate stores network in Canada and they complement our strong network of independent jobber customers.

For 2019, we would like to highlight that we have some customers in the oil and gas business out west that are experiencing some difficulties. This turbulence could result in lower volume for us in the year. We will provide with you -- or to you more information when it is available.

Now turning to our Parts Alliance UK segment on Page 13. Our fourth quarter revenue were $93.6 million, up slightly versus last year primarily due to organic growth of 2.8% partly offset by foreign exchange. The organic growth was driven by recent opening of greenfields. In fact, during the quarter, we opened 3 greenfields for a total of 13 in 2018, and 15 since its acquisition, expanding the footprint in the UK.

Sales in the quarter were also impacted by the loss of a sales contract mainly for the supply of batteries. While we worked diligently to replace volume it will put some pressure on our organic growth and margin for the next 3 quarters. Just to put this in perspective, no one customer represent more than 3% of sales at TPA. Recall as well that sales in December are seasonally soft and the loss of battery volume was exacerbated by the mild weather compared to last year.

Adjusted EBITDA margin was slightly down from 4% to 3.8%, primarily due to recent investment in greenfields. In fact, greenfield opening negatively impacted the margin by 75 basis point in the quarter. Therefore, excluding this impact, margin would have been at approximately 4.6%. This factor was partly compensated by higher volume and increased absorption of fixed costs.

In the quarter TPA executed its Performance Improvement Plan, reviewed its supply chain and closed 1 store, reduced its workforce and inaugurated a new national distribution center situated in the heart of the UK. This will allow us with the ability to grow while improving efficiencies. TPA has also acquired 3 stores in the quarter expanding its network.

The integration of TPA in Uni-Select's family went smoothly in 2018 and we are happy with the first full year of performance of TPA. As a part of this process information technology solutions were either standardized, deployed or integrated over 20 company-owned stores of TPA and TPA is now 52-109 compliant. For 2019, TPA will continue to open greenfield and execute its Performance Improvement Plan. While the first quarter is typically a strong quarter for TPA we expect somewhat slower growth considering the loss of a sales contract, the uncertainty regarding Brexit, the decrease in the UK pound, and the strong quarter reported last year.

Turning to Page 17 for consolidated profit. With the fourth quarter we incurred net loss of $2.4 million or $0.06 per share versus net earnings of $8.7 million or $0.21 per share last year. Adjusted earnings for the quarter totaled $5.4 million or $0.13 per share versus $11.6 million or $0.27 per share last year. The decrease in adjusted earnings was mainly attributable to lower adjusted EBITDA as well as additional financial costs and depreciation and amortization related to capital investment.

Now let me comment on our quarterly cash flow on Page 18. In the fourth quarter cash flow from operating activities provided $13 million in liquidity versus $46 million last year. This variation was negatively impacted by change in working capital items. Notably investment in inventory to benefit from annual performance rebate, to prevent logistical issues with Brexit, and to fill new distribution centers as part of the Performance Improvement Plan. These factors were partly offset by reduction in receivable due to improved collection. As a result the lower cash flow from operations and higher CapEx generated $14 million of free cash flow from the quarter compared to $17 million last quarter -- last year, sorry.

For the year we generated $94.6 million in cash flow from operations and $80 million of free cash, representing a cash conversion of 66% -- 67%, sorry -- due to interest on debt to finance acquisition, income tax installment, and CapEx related to the opening of new distribution centers. In 2018 we used $107 million for a combination of acquisition, net customer investment, CapEx, leases and dividends.

Turning to Page 19. At the end -- at the year-end our outstanding total debt remained stable versus last year at $419 million. As a result, the funded debt to adjusted EBITDA ratio stood at 3.5x at the end of the year. We were not in the position to reduce our debt in the fourth quarter, considering that we made acquisition, invested in our inventory, incurred special items, cash disbursement and generated lower than expected EBITDA.

Now let me turn to the outlook on Page 21. Given the market reality and the challenges in the company that are -- is facing, it is difficult to provide specific guidance by segment. As a result, we are providing guidance on a consolidated basis. We expect to be able to narrow the range as we progress the year. One important point to keep in mind is that the guidance that we are providing is based on pre-IFRS 16. During our Q1 2019 call, we will adjust our guidance to post-IFRS implementation.

For 2019, we expect organic growth to be in the range of 1.25% to 3.25% and adjusted EBITDA margin to be in the range of 5.75% to 6.75%. We also expect CapEx to be in the range of $25 million to $30 million. Recall that our CapEx includes investment for capital leases, vehicle fleet, hardware equipment, software and others. We also expect tax rate to be in the range of 22% to 24%.

Turning to Page 22. Last quarter, we informed the market that one of our large supplier was changing its payment terms in 2019. As a result, in 2019, we will have a cash outflow of approximately $55 million, which will likely be spread throughout the year. Although this is a one-time impact, it will have an impact on our cash position. Therefore given this one-time cash outflow and the ongoing Performance Improvement plan and the associated rightsizing plan at FinishMaster, we do not expect to reduce our leverage in 2019. Based on the foregoing, we are on track to reach 2.5x funded debt to adjusted EBITDA in 2021, excluding any potential acquisition.

A few points to keep in mind for the first quarter. For the Canadian operations, the first quarter is typically soft and this year will be no exception. In addition, while TPA first quarter is typically strong, it will be softer than the norm this year. With the challenges we are facing at FinishMaster, you can expect the first quarter margin to be lower than the same period last year. Given the seasonal cash flow pattern, expect our leverage to increase in the first quarter.

Finally, I will briefly discuss IFRS 16, which is the new accounting standard for leases. For Uni-Select it will be essentially affect the accounting for the corporate real estate operating leases. We will provide more color on this in Q1 2019, but wanted to give you a heads up on certain financial impacts. On a pro forma basis for 2018, our analysis suggests that our EBITDA would have increased by about $25 million, our earnings per share would have decreased by about $0.03 per share. Our cash flow from our operating activities would have increased by $25 million, while our cash outflow for financing activities would increase by a similar amount.

All this being equal, the EPS impact for 2019 is currently estimated to be approximately $0.02 per share. We will be adopting this new standard based on the application with a modified retrospective transition approach selected by the Corporation starting in the first quarter. However, we will not restate prior year. As I mentioned earlier, we will be adjusting our guidance to the new standard next quarter. I will now pass the call back to Andre.

--------------------------------------------------------------------------------

André Courville, Uni-Select Inc. - Interim President & CEO and Director [5]

--------------------------------------------------------------------------------

(spoken in French) I would just like to conclude by saying that we are not satisfied with the FinishMaster results obviously and we are taking concrete actions with the Performance Improvement Plan to generate an additional $7 million of annualized savings. In parallel, we continue to progress well in our strategic alternative review. The total Performance Improvement Plan is expected now to generate $35 million of annualized savings by the end of 2020.

Take note that our first quarter results will be softer than last year and our leverage will remain at current levels by the end of 2019 as Eric explained. Finally, we thank all stakeholders for their ongoing support in these challenging times.

This concludes our presentation and we are now ready for questions. Thank you, everyone.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(spoken in French) (Operator Instructions) Your first question comes from the line of Benoit Poirier from Desjardins Capital.

--------------------------------------------------------------------------------

Benoit Poirier, Desjardins Securities Inc., Research Division - VP and Industrials, Transportation, Aerospace, Industrial Products & Special Situation Analyst [2]

--------------------------------------------------------------------------------

My first question is on FinishMaster. Could you talk about the pricing pressure and the evolving customer say -- mix and how it has evolved over the last quarter? It seems that there has been some changes overall from a quarter ago, so if you could quantify? And also the exposure to national accounts, how it has been increasing over the last year?

--------------------------------------------------------------------------------

André Courville, Uni-Select Inc. - Interim President & CEO and Director [3]

--------------------------------------------------------------------------------

Eric will do and then Chris can add to the point, Benoit.

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [4]

--------------------------------------------------------------------------------

So I think where we're seeing, Benoit, is that there is a shift towards the national accounts, where, as you know, we sort of described the segments in 3 different or 4 components. You got the national accounts, the MSOs, the traditional segment and the industrial segment, right? So focusing on the refinish aspect, therefore, excluding the industrial segment. The way you should think about it is -- with the ongoing consolidation and the announcement, for instance, of the Calgary acquisition with [Abra]. Those factors are bringing a higher percentage of national accounts to us. There is also a movement of some MSOs being purchased by national accounts, which also is putting pressure on margins. And there is some traditional accounts that are being purchased by MSOs and national accounts. So you have an industry that is actually shifting and bringing more consolidation, right. And our plan and our cost-cutting exercise that we are launching is to address those changes.

--------------------------------------------------------------------------------

Benoit Poirier, Desjardins Securities Inc., Research Division - VP and Industrials, Transportation, Aerospace, Industrial Products & Special Situation Analyst [5]

--------------------------------------------------------------------------------

Okay. And what would be your exposure to national accounts right now as opposed to a year ago, Eric?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [6]

--------------------------------------------------------------------------------

Well, it has increased by about 5% to 6%, Benoit, if I recall correctly between Q4 and -- Q4 '17 versus Q4 '18. But what you have to understand is that the margins are quite different when we do business with national accounts. The reality is it remains the fastest growing segment and we took a view of, there's a long-term benefit for the business that we need to be involved in that business.

--------------------------------------------------------------------------------

André Courville, Uni-Select Inc. - Interim President & CEO and Director [7]

--------------------------------------------------------------------------------

And there's also a part, Benoit, that that's why the cost to serve model and this plan of NOI savings will be to address how we serve those clients in the future, so we can increase the margin.

--------------------------------------------------------------------------------

Benoit Poirier, Desjardins Securities Inc., Research Division - VP and Industrials, Transportation, Aerospace, Industrial Products & Special Situation Analyst [8]

--------------------------------------------------------------------------------

Yes, and when we look at the U.K., it seems also that you're increasing your exposure to national accounts. So could it lead also to some margin erosion over time with The Parts Alliance?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [9]

--------------------------------------------------------------------------------

No, I wouldn't be willing to say that, Benoit. I think in reality I would say that they our exposure to national account it has diminished a little bit. When we refer to the battery contract that we talked about, that was more sort of national type contract. So I wouldn't be willing to say that.

--------------------------------------------------------------------------------

Benoit Poirier, Desjardins Securities Inc., Research Division - VP and Industrials, Transportation, Aerospace, Industrial Products & Special Situation Analyst [10]

--------------------------------------------------------------------------------

Okay. And with respect to your Canadian Automotive business, what is your exposure to oil and gas right now and how big it could be down? It seems that it could materially impact your outlook, your growth -- organic growth outlook for the Canadian Automotive business in 2019. So I'm just curious to get more color about the expectation.

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [11]

--------------------------------------------------------------------------------

Yes. So look, I'll ask Brent to complement, but I would tell you the reason why we wanted to mention that on the call, you will remember in 2014, 2015, we had some impact with what happened in the oil patch at the time with the Canadian business. And I wouldn't be willing to say that our exposure has increased or decreased to that market, it's pretty stable since '15. The question becomes more about how the operators of the oil and gas patch will react to the current pricing pressure that they are experiencing in the market and I'll let Brent maybe complement.

--------------------------------------------------------------------------------

Brent Windom, Uni-Select Inc. - President & COO of Canadian Automotive Group [12]

--------------------------------------------------------------------------------

No, Benoit, I would say that we right now we're studying it, we know that it potentially could have impacts and that's the reason we forecasted; we will sort of give the color as we get through the first quarter, we'll have a better feel for it. But right now it's not material to our -- at this point, but we believe it could be. So more to come on that.

--------------------------------------------------------------------------------

Benoit Poirier, Desjardins Securities Inc., Research Division - VP and Industrials, Transportation, Aerospace, Industrial Products & Special Situation Analyst [13]

--------------------------------------------------------------------------------

Okay, okay. And with respect to free cash flow, could you provide some color on how -- what your leverage could be to throughout the 2019? And also what is your cushion with respect to the current covenants you have in place? We understand that the leverage ratio will go up, but this is also on the fact that there is a (technical difficulty) to be made to your supplier, but also the fact that EBITDA is going to decline. So I'm just curious if you could elaborate about the cushion you have and your -- the expectation there?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [14]

--------------------------------------------------------------------------------

Yes, well look, currently Benoit, we expect our leverage to be similar at the end of 2019 than it was in 2018, right as I said, we unfortunately don't expect to deleverage in the year. As it relates to the seasonality we will be managing our expenses and our working capital accordingly to better address the seasonality of our cash flow and ensure that we are in compliance with our financial obligations.

--------------------------------------------------------------------------------

Benoit Poirier, Desjardins Securities Inc., Research Division - VP and Industrials, Transportation, Aerospace, Industrial Products & Special Situation Analyst [15]

--------------------------------------------------------------------------------

Okay, and then last one for me, I will get back on the queue after. But in terms of the strategic review, I understand if you cannot give a lot of color, but any details about the timing or the level of interest you have seen so far?

--------------------------------------------------------------------------------

André Courville, Uni-Select Inc. - Interim President & CEO and Director [16]

--------------------------------------------------------------------------------

Well, as we said in the text, there is no additional news on that side. The committee -- select committee, the board and management are still looking to all of the possibilities. After 5 months we obviously are more advanced than when we started. And we are expecting to move this forward in the next coming months. But I'm not going to give you a final date. But we are working diligently with the committee, the advisors and still looking to -- all those different rocks that needs to be aligned. But the progress is very good and I don't think I can say more at this point in time.

--------------------------------------------------------------------------------

Operator [17]

--------------------------------------------------------------------------------

Your next question comes from Michael Glen from Macquarie.

--------------------------------------------------------------------------------

Michael W. Glen, Macquarie Research - Analyst [18]

--------------------------------------------------------------------------------

Just to understand a little bit more, the commentary in the remarks indicated that for FinishMaster manufacturers are increasing price but your ability to pass through the price is a little bit more difficult. I'm just having a little bit of difficulty understanding exactly why that might be occurring for you guys?

--------------------------------------------------------------------------------

Brent Windom, Uni-Select Inc. - President & COO of Canadian Automotive Group [19]

--------------------------------------------------------------------------------

Yes. Mike, I would just say it depends on the volume of the customer, the market, the competition within the market. So there are certainly markets where we experience the ability to pass on increases but it just depends on a number of competitive factors. Certainly one being there is more and more -- as the customers grow and we see the consolidation, there is more customers working directly with the manufacturers as well.

--------------------------------------------------------------------------------

Michael W. Glen, Macquarie Research - Analyst [20]

--------------------------------------------------------------------------------

But for you -- like for guys you got -- you work so closely with the suppliers, I mean why -- can't the conversation simply turn around and say, "Look, we can't pass this through, we need to rethink this." Is it -- can't you push back on them?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [21]

--------------------------------------------------------------------------------

Well, look, we are obviously having conversations with our customers and the manufacturers on a broad-based basis, Michael. The reality is this segment has become more competitive with the consolidation happening in the industry. And the fact that the national accounts are presenting a bigger share of the wallet for us has put further burden on it. But make no mistake, there is a lot of competition on the traditional segments which is historically the most profitable segment. There are a lot of players and the distribution segments are fighting for those customers. And that's really what's happening in the background.

--------------------------------------------------------------------------------

Michael W. Glen, Macquarie Research - Analyst [22]

--------------------------------------------------------------------------------

Okay. And are you seeing any paint -- other paint manufacturers increase market share or trying to disrupt the market right now in a meaningful way?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [23]

--------------------------------------------------------------------------------

Well look, it's no question it's competitive out there as it was before. But I think that's -- each manufacturers are -- have a strategy of their own and they are trying to execute on those strategies but it is a competitive landscape. Not sure I could describe it as more competitive or less competitive. I think certain manufacturers have decided to focus more on certain segments of the refinish business.

--------------------------------------------------------------------------------

Michael W. Glen, Macquarie Research - Analyst [24]

--------------------------------------------------------------------------------

Okay. And then just to circle back on your covenants. I mean, can you review what your covenants are? And if you were to reach your covenants is there any repercussions that we should think about?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [25]

--------------------------------------------------------------------------------

Well, first of all we are not saying or signaling that we would be in breach. All I'm saying is will manage our spend and manage our working capital accordingly, Michael, so that's all I'm going to say.

--------------------------------------------------------------------------------

Michael W. Glen, Macquarie Research - Analyst [26]

--------------------------------------------------------------------------------

Okay. I mean, I'm just -- you have a $55 million outflow in Q2 that we need to take into consideration, and I think you're negative working capital in Q1. So can you give an idea of sort of where (multiple speakers)

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [27]

--------------------------------------------------------------------------------

First of all, as I stated in my remarks, the $55 million will be spread throughout the year. And we have a good comfort that we will be able to spread those payments over a period of time. So it's not just on Q2. And you're correct that in the last call that we had, we indicated that the major cash out was expected to be in Q2. We have been able to make some decisions and payment terms agreements with various suppliers. So it will be spread out throughout the year, which will alleviate some of the pressure.

--------------------------------------------------------------------------------

Michael W. Glen, Macquarie Research - Analyst [28]

--------------------------------------------------------------------------------

Okay. And finally, the $18.7 million that you highlighted, that is -- if we think about that -- if you had not undergone the initiatives, would we then -- your EBITDA would have been $18.7 million lower this year then?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [29]

--------------------------------------------------------------------------------

Well, I wouldn't say this year. But just to be clear, keep in mind that this is a annualized run rate, so obviously if I take the equivalent of -- I'll take an example just for discussion purposes, right, if I take cost out in November 2018 of $1 million, I obviously don't have the $1 million benefit in '18. It's $1 million of cost that I'm pulling out that will be a reduction over 12 months. So when we say $18.7 million I want to be clear that this is on an annualized run rate basis. Which means that if I do nothing else and I let the operation run for the next 12 months, I will have reduced over that 12 months period $18.7 million of cost. So the timing, you need to keep in mind there is a timing element. But prudently speaking, yes, we took $18.7 million of costs and this mainly through people and facilities.

--------------------------------------------------------------------------------

Operator [30]

--------------------------------------------------------------------------------

Your next question comes from the line of Jonathan Lamers from BMO Capital Markets.

--------------------------------------------------------------------------------

Jonathan Lamers, BMO Capital Markets Equity Research - Analyst [31]

--------------------------------------------------------------------------------

Just picking up on that last question, Eric, do you have the number for how much of the $18.7 million benefited the 2018 results?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [32]

--------------------------------------------------------------------------------

So what I will tell you is for the '18 results, it's roughly -- we incurred about $8.6 million of annualized savings during the year, right. So at the start of 2017 -- sorry, at the end of 2017, we had about $10 million of annualized savings realized. So we've increased our ability to those saving by about $8.6 million during the year. Now, all that $8.6 million did not fall as of Jan 1, 2017. I just gave you some guidance in terms of -- that $10 million secured at the end of '17. $10.1 million actually, and we realized an additional $8.6 million during the 2018 exercise, to finish at $18.7 million.

--------------------------------------------------------------------------------

Jonathan Lamers, BMO Capital Markets Equity Research - Analyst [33]

--------------------------------------------------------------------------------

Okay. And of that $10 million of incremental cost savings that were identified today, will those fully benefit the 2020 earnings?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [34]

--------------------------------------------------------------------------------

That is definitely what the expectations are from the management's perspective and that's definitely the way the plans have been structured.

--------------------------------------------------------------------------------

Jonathan Lamers, BMO Capital Markets Equity Research - Analyst [35]

--------------------------------------------------------------------------------

Okay. And on FinishMaster's margin, can you just remind us the gross margin difference between your sales to the MSOs and to the traditional independents?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [36]

--------------------------------------------------------------------------------

Well, look, on a broad basis, I'm not going to get into the numbers per se, there's competitive elements in that. But obviously, we have always said that MSO business was at a lower end of the spectrum of margins. And you would expect a customer with a smaller volume purchase don't get those same -- the same type of incentives.

--------------------------------------------------------------------------------

Jonathan Lamers, BMO Capital Markets Equity Research - Analyst [37]

--------------------------------------------------------------------------------

Right, so I'm not sure if you can answer this, but I think the question on peoples' minds would be where could EBITDA margins for FinishMaster trough? Assuming the industry continues to consolidate and you are able to reduce your cost to serve model. I know you are not providing guidance on that. But if you had any color that would help that question that would be helpful.

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [38]

--------------------------------------------------------------------------------

Well look, what I can tell you is that the margins that we've experienced in Q4, we would expect similar margin, maybe slightly better in Q1 but we expect margin improvements thereafter with the cost actions that we are taking and the volume growth that we expect. As you know there is some seasonality albeit less than the Canadian or the U.K. business, but there is some level of seasonality in the FinishMaster business. Q1 and Q4 at FinishMaster tend to be the slower quarters. And therefore we expect margin expansion in Q2, Q3 fueled by -- partly by the volume but also with the cost actions that we are taking.

--------------------------------------------------------------------------------

Jonathan Lamers, BMO Capital Markets Equity Research - Analyst [39]

--------------------------------------------------------------------------------

Okay. And I just have a couple of questions on The Parts Alliance business if I can.

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [40]

--------------------------------------------------------------------------------

Sure.

--------------------------------------------------------------------------------

Jonathan Lamers, BMO Capital Markets Equity Research - Analyst [41]

--------------------------------------------------------------------------------

What was the contribution of greenfields to the organic sales comp for Q4?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [42]

--------------------------------------------------------------------------------

Bear with me for a second, Jonathan, I have had -- readily available. Let me just check to be sure. For the quarter or for the year, Jonathan, just to make to make sure that I'm not --?

--------------------------------------------------------------------------------

Jonathan Lamers, BMO Capital Markets Equity Research - Analyst [43]

--------------------------------------------------------------------------------

For Q4?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [44]

--------------------------------------------------------------------------------

For Q4? The greenfield gave about 2.8% on a standalone basis of organic growth.

--------------------------------------------------------------------------------

Jonathan Lamers, BMO Capital Markets Equity Research - Analyst [45]

--------------------------------------------------------------------------------

So does that mean that the underlying organic sales growth was flat?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [46]

--------------------------------------------------------------------------------

Sorry, let me rephrase this. It's about 3.5% on the organic growth of the greenfield for the quarter and 2.8% as a whole. So basically, what I'm saying is there was slight negative organic growth in the non-greenfield stores in Q4 at Parts Alliance.

--------------------------------------------------------------------------------

Jonathan Lamers, BMO Capital Markets Equity Research - Analyst [47]

--------------------------------------------------------------------------------

And I'm not quite clear what happened with the loss of the sales contract related to batteries. Could you just explain what that was?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [48]

--------------------------------------------------------------------------------

I'll let Neil modify the answer.

--------------------------------------------------------------------------------

Neil Croxson, The Parts Alliance Ltd. - CFO [49]

--------------------------------------------------------------------------------

Yes. So we had a contract with a customer that was predominantly the sale of batteries and lost that contract during the last quarter.

--------------------------------------------------------------------------------

Jonathan Lamers, BMO Capital Markets Equity Research - Analyst [50]

--------------------------------------------------------------------------------

How many -- can you give us a sense of what that represents in terms of sales?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [51]

--------------------------------------------------------------------------------

Less than 2%.

--------------------------------------------------------------------------------

Jonathan Lamers, BMO Capital Markets Equity Research - Analyst [52]

--------------------------------------------------------------------------------

Okay. And how many greenfield stores do you plan to open for Parts Alliance this year?

--------------------------------------------------------------------------------

Neil Croxson, The Parts Alliance Ltd. - CFO [53]

--------------------------------------------------------------------------------

We will continue with our branch opening program. It's been very successful for this year. And we will continue with that. We're targeting 5 to 7 at this stage but as the opportunities develop, we will keep reviewing that.

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [54]

--------------------------------------------------------------------------------

If you recall, Jonathan, last year, we started with a lower number of greenfields than we expected at the beginning of 2018. And with the success that the U.K. had with those greenfields, we actually increased and fueled that growth and we were able to open 13 greenfields during the year. So this year, we're taking a little bit of more conservative approach. We're starting with 5 to 7, but we will adjust if we feel that the business opportunities are there.

--------------------------------------------------------------------------------

Operator [55]

--------------------------------------------------------------------------------

Your next question comes from the line of Daryl Young from TD Securities.

--------------------------------------------------------------------------------

Daryl Young, TD Securities Equity Research - Mining Research Associate [56]

--------------------------------------------------------------------------------

Can we talk quickly about the industry volume declines that you're seeing at FinishMaster for paint?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [57]

--------------------------------------------------------------------------------

Sure.

--------------------------------------------------------------------------------

Daryl Young, TD Securities Equity Research - Mining Research Associate [58]

--------------------------------------------------------------------------------

So just specifically, is that a reflection of a change in the paint products or is that an industrywide -- we're seeing lower volumes all over?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [59]

--------------------------------------------------------------------------------

Yes, well, I'll tell you there's a couple of things, right. The volume of paint historically in the paint business has been fairly stable, it's not a -- the volume per se hasn't grown that much in the last 10 years. That's the first thing I would say. And why is that despite the fact that the car park has increased quite a bit from 2008 to today. Part of it is technology improvements, part of it is body shops are more efficient and technology on the actual paint from the manufacturer has evolved, where the thickness of the coating and the number of coating that you need to put is not as much as it was 10 years ago. So those factors all are have -- had an impact on the volume.

Car sales in the U.S. in 2018 were good but they were not -- it wasn't a record year compared to the other years before that. So there is clearly some technological advancement. I personally believe -- and this is more an Eric observation -- that the efficiency that you see in the collision repair industry is having an impact also, right. I think that the body shops are just more streamlined and performing. So it's a combination of factors. And we don't really expect that to change materially in the short-term. And as I put in my remarks, we also saw some contraction of volume in the Canadian business. Now price increase have overcome a lot of those volume reduction in the past. And we're hopeful that we'll be able to do so in the future also.

--------------------------------------------------------------------------------

Brent Windom, Uni-Select Inc. - President & COO of Canadian Automotive Group [60]

--------------------------------------------------------------------------------

I think I would just add very similar comments much more efficient. We're seeing much greater efficiencies with the number of repairs. They're measuring things like cost per labor hour. We see a higher water based paint products today much, much lower consumption rates. So, but more and more repairs are certainly becoming more efficient.

--------------------------------------------------------------------------------

Daryl Young, TD Securities Equity Research - Mining Research Associate [61]

--------------------------------------------------------------------------------

Okay, perfect. And then, in terms of the incentives that you guys are providing, where do you see incentives as a percent of revenue going forward?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [62]

--------------------------------------------------------------------------------

You are talking about customer investment?

--------------------------------------------------------------------------------

Daryl Young, TD Securities Equity Research - Mining Research Associate [63]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [64]

--------------------------------------------------------------------------------

Just a -- yes. So customer investment historically has a ranged at about 2.5% of sales. I would tell you that we expect probably 2% to 2.5% of sales, and that's certainly something that we're paying attention to make sure that we get the proper return on those incentives.

--------------------------------------------------------------------------------

Daryl Young, TD Securities Equity Research - Mining Research Associate [65]

--------------------------------------------------------------------------------

Okay, excellent. And then, the -- shifting -- well, actually directionally in terms of the margin improvement that you hope to see at FinishMaster, are we thinking we'll start the year at a lower margin and finish the year at a higher margin once some of the cost cutting initiatives come in?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [66]

--------------------------------------------------------------------------------

That is certainly the plan that we're drafting and we've been working on and we'll be executing in the foreseeable future. That is correct.

--------------------------------------------------------------------------------

Daryl Young, TD Securities Equity Research - Mining Research Associate [67]

--------------------------------------------------------------------------------

So maybe not as dependent on seasonality as historical results? More dependent on when the cost savings come through?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [68]

--------------------------------------------------------------------------------

Yes, look, the reality is, we will get the benefit, start to see the benefit in the second half of 2019.

--------------------------------------------------------------------------------

Daryl Young, TD Securities Equity Research - Mining Research Associate [69]

--------------------------------------------------------------------------------

Okay, perfect. And then in terms of the Canadian business and the acquisition in the quarter on the East Coast, do we have a sense of what kind of revenue that business generates?

--------------------------------------------------------------------------------

Brent Windom, Uni-Select Inc. - President & COO of Canadian Automotive Group [70]

--------------------------------------------------------------------------------

So that will, from a Canadian dollar standpoint, that'll actually be about $20 million accretive to the organization and for the business.

--------------------------------------------------------------------------------

Operator [71]

--------------------------------------------------------------------------------

Your next question comes from the line of Elizabeth Johnston from Laurentian Bank Securities.

--------------------------------------------------------------------------------

Elizabeth Johnston, Laurentian Bank Securities, Inc., Research Division - Analyst [72]

--------------------------------------------------------------------------------

I just want to go back to the Canada segment. Eric, I think you made comments earlier about the vendor rebates in the quarter and the timing issue or not issue but the change in timing. Could you just clarify if typically, these vendor rebates -- do we see them through the year and this year we saw them backend loaded, is that what happened here?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [73]

--------------------------------------------------------------------------------

Not really, Elizabeth. What happened is we're opening up a new DC in Calgary as we mentioned. And if you'll recall in the Q3 call I also mentioned that there was a bit of a variation possible on our spend of CapEx depending on the activities that we are undergoing and milestones that we needed to hit. Obviously, if you're opening a DC you need to put products in that DC, but you can put the product only when the DC is ready to accommodate that -- those products. So there was uncertainty for us throughout the year as to -- at what point the DC would be sufficiently ready to accommodate for additional inventory. So from an accounting perspective, not having clarity in terms of volume that we would be able to purchase and house and we took a conservative approach during the first 3 quarters as it relates to those rebates that are more annualized -- annual type rebates, right? Normally, we sort of make an accrual on those annual rebates because we have a fairly high degree of certainty if we're going to hit or not. In this case, there was an element of uncertainty linked to will we be -- there's no point of buying stuff if you can't house it, right? That would be the wrong approach for us. So that's why there was a little bit more rebates hitting the bottom line at -- in the Canadian operations in Q4.

--------------------------------------------------------------------------------

Elizabeth Johnston, Laurentian Bank Securities, Inc., Research Division - Analyst [74]

--------------------------------------------------------------------------------

So it's a matter of catching up then?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [75]

--------------------------------------------------------------------------------

Well, you can see it as catching up. But I would also argue when you're opening a DC, you've got to on purpose have more inventory because you're in a transition phase, right? You're going to have the new a DC that needs to have inventory, you have to empty your existing DCs, you're going to do that as orderly as possible to minimize cost. The last thing you want is to start moving products from one DC to the other when it's sold the day after, right? I would rather sell it from my existing DC, reduce inventory level there, have more inventory in my new DC and enable -- over time sort of moved the remainder of the inventory from those 2 legacy DCs that are being consolidated. So that's really what's been happening.

--------------------------------------------------------------------------------

Elizabeth Johnston, Laurentian Bank Securities, Inc., Research Division - Analyst [76]

--------------------------------------------------------------------------------

Okay, that's great. And just going back to FinishMaster as it pertains to margin. I mean, given your comments about the expectation for margin improvement really the second half of 2019. I understand all that. But I look at your outlook for 2019 and on a consolidated basis, it's -- points to lower than 2018 actual results. So I'm trying to understand if the guidance is for a lower margin next year, but the outlook is for a higher margin within FinishMaster, I'm just trying to reconcile those 2 comments, is there something that I'm missing there?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [77]

--------------------------------------------------------------------------------

No, look, I'm providing the guidance on a consolidated basis as what we see coming from the 3 businesses, each businesses have a different contribution throughout the year. There's no question that in FinishMaster we have a pressure on margins and the cost actions that we are taking, as I mentioned, will benefit more the second half of 2019. So I think that's -- that gives you some appreciation of what we expect in the year.

--------------------------------------------------------------------------------

Elizabeth Johnston, Laurentian Bank Securities, Inc., Research Division - Analyst [78]

--------------------------------------------------------------------------------

Okay. So I'm just trying to get -- what I'm trying to get at here is if there's an expectation for further margin declines in Canada, particularly given your comments with respect to oil and gas regions?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [79]

--------------------------------------------------------------------------------

No. What we've indicated is there's uncertainty on the Canadian side that could have an impact on the organic growth and to a lesser extent on the margins. And that has been signaled. It's not like something material has happened and we see it as we speak. But we're cautious about it for the simple reason that we've experienced that back in 2014-2015. And I think it's important for the investors to understand that that component that is affecting the Canadian business.

--------------------------------------------------------------------------------

Elizabeth Johnston, Laurentian Bank Securities, Inc., Research Division - Analyst [80]

--------------------------------------------------------------------------------

Okay. And just finally for me, in terms of the announcement of the executive search for a permanent CEO and President, just wondering if you can comment on the timing of that, given that it started in January as opposed to when the strategic review was first announced, or anything else you can share with respect to that process?

--------------------------------------------------------------------------------

André Courville, Uni-Select Inc. - Interim President & CEO and Director [81]

--------------------------------------------------------------------------------

Yes well, we have announced that we've signed up an agreement with Egon Zehnder to start the search, the mandate is given. And as you know it takes a couple of months to find the right CEO. This will be done in parallel to -- on the -- in continuation with the strategic review, but we felt that at this point of time, we have sufficiently advanced that and taking the time it takes to get the right candidate, we should start now, and that's what we're doing. The mandate is given, so it's -- and in the next coming weeks and months, we will find the right person in due course. So I think it was the right decision for the board to start that at this point in time. Because if we wait that everything is over at some point in time, this will take another so many months. So I think we're moving forward and the board is sensible to the fact that shareholders are expecting at some point in time to have a full-time CEO instead of an interim CEO like me. So we -- I think that's what is happening, so.

--------------------------------------------------------------------------------

Operator [82]

--------------------------------------------------------------------------------

(spoken in French) (Operator Instructions) Your next question comes from the line of Zachary Evershed from National Bank Financial.

--------------------------------------------------------------------------------

Zachary Evershed, National Bank Financial, Inc., Research Division - Associate [83]

--------------------------------------------------------------------------------

So with the shift to national accounts at FinishMaster dealing with manufacturers directly, is there at all a concern being just intermediated?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [84]

--------------------------------------------------------------------------------

Well, look, it's not necessarily qualified these in material -- but we've talked about the fact that those national accounts due contract directly with the manufacturer. And then the distributors are invited thereafter to work on the service level with the manufacturer and the customer. So that's not new. What's different is that the size of national accounts and the consolidation by the national players has accelerated, and you saw the significant merger at Calgary [Abra]. That's just a testimony of what's going on in the industry. We happen to be a key player in the national account, and we intend to remain a key player in the national account distribution. What we need to do is adjust our service offering and our cost to serve model to better manage that process, so to speak. And we will streamline the operation and that's what -- that's the plan for 2019.

--------------------------------------------------------------------------------

Brent Windom, Uni-Select Inc. - President & COO of Canadian Automotive Group [85]

--------------------------------------------------------------------------------

Eric, I would add that we have relationships directly with those accounts as well and our network and consistency is certainly worth something to -- of value to those national accounts.

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [86]

--------------------------------------------------------------------------------

On the manufacturer and the customer side.

--------------------------------------------------------------------------------

Zachary Evershed, National Bank Financial, Inc., Research Division - Associate [87]

--------------------------------------------------------------------------------

And is there any estimate of the impact of the greenfield dilution for the, I believe, you said it was 5 to 7 that you're targeting for 2019?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [88]

--------------------------------------------------------------------------------

Yes so, if you factor in the 2018 greenfield because the way we look at those is that we're keeping track of those for 12 to 18 months of the existing greenfield that we did in '18 because obviously, we opened 3 I believe in Q4. There you can understand that that will be some impact on margins linked to those 3 stores throughout or most part of 2019. Neil, I think you may have a rough estimates of what you expect of dilution.

--------------------------------------------------------------------------------

Neil Croxson, The Parts Alliance Ltd. - CFO [89]

--------------------------------------------------------------------------------

Well, those 13 sites had an impact of about 40 basis...

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [90]

--------------------------------------------------------------------------------

40 bps in 2018.

--------------------------------------------------------------------------------

Neil Croxson, The Parts Alliance Ltd. - CFO [91]

--------------------------------------------------------------------------------

On full year 2018. And obviously, on average, there will be an (inaudible) for about half a year. So if we continue with that investment at a similar rate, then you could expect a similar rate going forward.

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [92]

--------------------------------------------------------------------------------

Although I would -- I would probably think it will be less than 18 in terms of overall dilution, but I think you could estimate something between 20 and 30 basis point impact on margins linked to those greenfield. The one that we did in '18 plus the one that we intend to do in '19.

--------------------------------------------------------------------------------

Operator [93]

--------------------------------------------------------------------------------

Your last question comes from the line of Daryl Young from TD Securities.

--------------------------------------------------------------------------------

Daryl Young, TD Securities Equity Research - Mining Research Associate [94]

--------------------------------------------------------------------------------

Just following up on Elizabeth's question with regards to FinishMaster margins, when we say that they're going to go higher, we're referring to Q4, not the full year 9.1%, correct?

--------------------------------------------------------------------------------

Eric Bussieres, Uni-Select Inc. - CFO [95]

--------------------------------------------------------------------------------

Yes, we're referring to this Q4. And I -- as I alluded, Q1 margins are expected to be somewhat in line with the Q4 margins.

--------------------------------------------------------------------------------

Operator [96]

--------------------------------------------------------------------------------

(spoken in French) No further questions at this time. I turn the call back over to management for closing remarks.

--------------------------------------------------------------------------------

André Courville, Uni-Select Inc. - Interim President & CEO and Director [97]

--------------------------------------------------------------------------------

Okay. Thank you, everyone, and I hope you have a great day. And if ever you have other questions, I know -- you know that Eric and I are available. So have a good day and thank you, and talk to you soon in the next quarter. Bye.

--------------------------------------------------------------------------------

Operator [98]

--------------------------------------------------------------------------------

(spoken in French) This concludes today's conference call. You may now disconnect.