Hardwoods Announces Acquisition of Hardwoods of Michigan and Amendment to US Credit Facility
TRADING SYMBOL: Toronto Stock Exchange - HWD
LANGLEY, BC, April 28, 2014 /CNW/ - Hardwoods Distribution Inc. ("Hardwoods" or the "Company") announced today the acquisition of the business operations (the "Transaction") of Hardwoods of Michigan, Inc. ("HMI"). HMI is a fully integrated producer of high quality hardwood lumber from its sawmill and kiln drying operations located on 23 acres in Clinton, Michigan. HMI has been in business for over 40 years and has a broad and diverse customer base throughout North America as well as in Europe and Asia. HMI sells hardwood lumber to customers that manufacture cabinets, flooring, furniture, mouldings, doors, windows and other custom millwork products.
- The Transaction is structured as an asset acquisition with a purchase price of US$15.4 million (subject to final working capital adjustments to be calculated after closing).
- The acquired assets consist of accounts receivable, prepaid assets, inventory, machinery and equipment, and land and buildings. Hardwoods also hired all employees of HMI.
- Hardwoods credit facilities were utilized to finance the purchase price. Hardwoods US operating subsidiary amended its credit facility to increase maximum borrowings available under its credit facility from US$50 million to US$79.1 million, and extended the term of the credit facilities to April 27, 2017.
- After financing the Transaction, Hardwoods expects to have sufficient unused borrowing availability under the credit facilities to continue to pursue its growth strategy.
"With this accretive Transaction, Hardwoods continues to grow its business with an attractively priced acquisition that is well-timed to the ongoing recovery in the US housing market," said Lance Blanco, President and CEO of Hardwoods. "Forecasters continue to predict a multi-year strengthening trend in US residential construction, suggesting a sustainable replacement level for US housing of 1.3 to 1.5 million new homes constructed per year. With the annual rate of US housing starts currently below one million, we believe there is considerable room for additional expansion of the US market. The addition of HMI further positions us to benefit from the expected recovery," said Mr. Blanco.
"HMI is our third completed acquisition in the past two and a half years, and is expected to bring approximately $33 million in additional revenues per year. When combined with our previous purchases of a lumber importer in North Carolina in May 2013, and the Frank Paxton Lumber Company ("Paxton") in September 2011, we have added an estimated $100 million in additional annual sales from acquired businesses to complement our organic market growth opportunities."
"We believe that the addition of HMI fits well with the Company's existing operations and strategy," commented Mr. Blanco. "HMI is a well-run company that comes with a strong management team. The acquisition of HMI builds upon the expertise in value-added manufacturing that we have developed since acquiring Paxton in 2011. Access to HMI's high quality manufactured products will also allow us more flexibility through our entire branch network to meet the evolving product needs of Hardwoods customers. In addition, HMI has a significant customer base of production cabinet manufacturers which represents an attractive potential segment for Hardwoods to sell its well established import products into."
"Although quarter-to-quarter fluctuations may arise, we continue to have a positive outlook for our industry and the Company's ability to incrementally improve its financial performance," added Mr. Blanco. "We will continue to pursue our strategy of leveraging our import product sourcing capabilities, growing our commercial business, and pursuing select acquisition opportunities that support our objectives."
About Hardwoods Distribution Inc.
Hardwoods Distribution Inc. (TSX: HWD) is one of North America's largest wholesale distributors of hardwood lumber and related sheet good products, operating a network of 32 distribution centres in the US and Canada.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
This news release includes forward-looking statements. These involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are identified by the use of terms and phrases such as "anticipate", "believe", "estimate", "expect", "may", "plan", "will", and similar terms and phrases, including references to assumptions. Such statements may involve, but are not limited to: that after financing the Transaction, Hardwoods expects to have sufficient unused borrowing availability under the credit facilities to continue to pursue its growth strategy; that with the annual rate of US housing starts currently below one million, the Company believes there is considerable room for additional expansion of the US market and that the addition of HMI further positions the Company to benefit from the expected recovery; that the Company estimates it has added an estimated $100 million in additional annual sales from acquired businesses to complement its organic market growth opportunities; that HMI is a well-run company that comes with a strong management team; that Hardwoods believes the addition of HMI fits well with the Company's existing operations and strategy by building upon its expertise in value-added manufacturing developed since acquiring Paxton in 2011, providing access to HMI's high quality manufactured products to allow the Company more flexibility through its entire branch network to meet the evolving product needs of Hardwoods customers, and to access HMI's significant customer base of production cabinet manufacturers which represents an attractive potential segment for Hardwoods to sell its well established import products into; that although quarter-to-quarter fluctuations may arise, the Company continues to have a positive outlook for its industry and the Company's ability to incrementally improve its financial performance; that Hardwoods will continue to pursue its strategy of leveraging its import product sourcing capabilities, growing its commercial business, and pursuing select acquisition opportunities that support its objectives; and that the acquisition is expected to be accretive.
These forward-looking statements reflect current expectations of management regarding future events and operating performance as of the date of this news release. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to: national and local business conditions; political or economic instability in local markets; competition; consumer preferences; spending patterns and demographic trends; legislation or governmental regulation.
Although the forward-looking statements contained in this news release are based upon what management believes to be reasonable assumptions, management cannot assure investors that actual results will be consistent with these forward-looking statements. The forward-looking statements reflect management's current beliefs and are based on information currently available. All forward-looking information in this news release is qualified in its entirety by this cautionary statement and, except as may be required by law, Hardwoods undertakes no obligation to revise or update any forward looking information as a result of new information, future events or otherwise after the date hereof.
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