Gerber Collision owner Boyd Group Services on Friday announced it would initiate “temporary staffing reductions” following a significant business slowdown likely related to the COVID-19 coronavirus response.
The publicly traded company said it “estimates demand to be down in the range of 40% to 50% from normal levels.”
All locations remain open, but this could change as a response to reduced demand or local government shutdown orders, the company said.
“While we cannot yet draw conclusions about the duration of this lower demand, the Company is responding by immediately beginning to implement temporary staffing reductions, which will take place over the next few weeks,” Boyd wrote in a news release Friday. “To the extent that demand changes, either positively or negatively, staffing levels will be adjusted accordingly.”
Besides Gerber Collision, Boyd’s interests in the U.S. and Canada also include Boyd Autobody, Assured Automotive, Glass America and Gerber National Claim Services. Its recent annual report describes nearly 700 Assured, Boyd and Gerber locations in both countries, including 567 in the U.S.
“Subject to the external environment, Boyd is committed to business continuity, both during the pandemic and in the recovery period that will follow,” the company wrote Friday.
Boyd also on Friday described its precautions to minimize the spread of the COVID-19 coronavirus.
“In order to address the health and safety of the workforce and broader community, Boyd has implemented measures aimed at preventing the spread of COVID-19 both at its operating locations as well as within its support services,” the company wrote. “These include stringent operating practices to ensure cleanliness and distancing and overall employee and customer safety, work from home protocols wherever possible, halting all non-essential travel, halting all cross-border travel, and following established guidelines in the event an infected employee is identified.”
Boyd said it had about $575 million CAD on hand. ($407.43 million USD.)
“As many other companies have done, and out of an abundance of caution, Boyd has fully drawn on available financing facilities,” the company wrote in a news release. Boyd said it could still tap swing lines of $40 million USD and another $275 million USD in a loan “accordion feature” if it wants.
“While events continue to unfold, we continue to adjust and adapt”, CEO Tim O’Day said in a statement. “We are closely monitoring the impact of this pandemic on our business.Recent ‘Shelter in Place’ and similar government orders as well as social distancing and self-isolation practices have resulted in a weakening of demand in recent days, which, in turn has resulted in the painful decision to temporarily layoff some of our workforce.These temporary layoffs are not expected to impact service levels, and they will help to preserve liquidity in this uncertain time period as well as assist in the more rapid recovery of our business.Although there will be near term pain, with our strong balance sheet, including cash balances of $575 million, and our ability to adjust expenses and capital spend, we are confident that we will ride out the COVID-19 storm and come out the other end of it preserving, and possibly even strengthening, our position as a strong industry leader. We are well positioned and we will continue to work to minimize the risk and impact of the COVID-19 pandemic to our employees, customers and shareholders.”
The Boyd Group spent $716.6 million CAD on operating expenses in 2019. ($820.9 million CAD under pre-2019 IFRS accounting rules on reporting leases.) It had $893.2 million CAD in debt under the new lease rules, or $379.8 million CAD under the old format.
Boyd had a “very strong balance sheet” and conservative leverage of 1.8 times adjusted earnings before interest, taxes depreciation and amortization, O’Day said on an earnings call earlier this month. The company has halted all merger and acquisition activity to preserve flexibility during the COVID-19 coronavirus issue.
Ironically given the announcement of “temporary staffing reductions,” Boyd had spent part of last week’s earnings call discussing its technician shortage. The company has on prior earnings calls suggested a dearth of staff has kept it from operating to its true potential, and O’Day said last week that technician capacity constraints were partly to blame for a same-store sales decline in the fourth quarter.
O’Day said technician capacity constraint in the fourth quarter of 2019 was “fairly similar” to the first nine months of the year. He said the company failed to achieve the same workforce development success it experienced in the first half of 2019, but he was “very pleased” with its technician development program. It helped increase capacity at a “reasonable” pace over several months, he said.
Boyd Group Services, March 27, 2020
Featured image: A Gerber Collision in Manistee, Mich., is shown. (Julie Dawes/Repairer Driven News)