Richelieu's sales increase by 17.2% and exceed $500 million for 2011

Solid fourth-quarter financial performance
  • Fourth-quarter consolidated sales increased by 14.8% and diluted earnings per share rose to $0.53, up by 10.4%.
  • For 2011, consolidated sales grew by 17.2% to $523.8 million, EBITDA rose 5.5% to  $67.3 million and diluted earnings per share amounted to $1.86, an increase of 2.8 %.
  • Sales in the United States increased by 52.9% (in US$), of which 12.8% from internal growth.
  • Excellent financial position with a positive net cash balance of $23.6 million and a working capital of $167.3 million as at November 30, 2011 - after an $18.6 million investment in acquisitions, the payment of $9.3 million in dividends to shareholders, and the repurchase of common shares for cancellation for $10.5 million.
  • Increase of 9.1% in the quarterly dividend which increased from $0.11 to $0.12 - a dividend of $0.12 per share has been declared and will be payable on February 23, 2012 to shareholders of record as at February 09, 2012.
TSX: RCH

MONTREAL, Jan. 26, 2012 /CNW Telbec/ - "2011 was a very good year for Richelieu, which distinguished itself with appreciable market share gains in North America despite the difficult economic climate, in addition to taking advantage of our 2010 and 2011 acquisitions. In particular in the United States affected by the persistent economic slowdown, we posted excellent internal growth and strong growth-by-acquisition, and thereby reached US$100 million in sales. Overall, this performance was achieved thanks to our customer service and quality execution oriented culture, the effectiveness of our business model, the dynamism and expertise of our sales force, the selling synergies with acquired companies, and our ability to market innovations that anticipate customers' needs and build upon our unequalled diversity of products," indicated Richard Lord, President and Chief Executive Officer of Richelieu.

ANALYSIS OF OPERATING RESULTS FOR THE YEAR ENDED NOVEMBER 30, 2011, COMPARED WITH THE YEAR ENDED NOVEMBER 30, 2010

Consolidated sales

Richelieu achieved consolidated sales of $523.8 million, an increase of $76.8 million or 17.2% over 2010, of which 1.2% from internal growth and 16.0% from the acquisitions closed in 2010 and 2011.

Sales to manufacturers grew to $446.6 million from $370.6 million in 2010, an increase of $76.0 million or 20.5%, of which 2.4% from internal growth and 18.1% from acquisitions. All the Company's customer segments and geographic markets made a solid contribution to this growth, with the strongest participation by the kitchen cabinet manufacturers and residential and commercial woodworking segments. In the hardware retailers and renovation superstores market, Richelieu recorded sales of $77.2 million, compared with $76.4 million for 2010. This 1.0% growth is attributable to the contribution of Gordonply and Madico in Canada, and to the retailers market in the United States, which Richelieu started to successfully penetrate, notably in the second half of the year. These contributions offset the 7.2% internal decrease in Canada caused by the adverse spring 2011 weather conditions and the economic uncertainty affecting consumer confidence, as indicated by retailers themselves.

In Canada, sales totalled $424.6 million, up from $379.1 million for 2010. This $45.5 million or 12.0% growth fully reflects the contribution of Gordonply, PJ White, Madico and Provincial. Sales to manufacturers grew to $350.7 million, compared with $303.8 million for 2010, an increase of $46.9 million or 15.4%, of which 1.8% from internal growth and 13.6% from acquisitions. Sales to retailers amounted to $73.9 million, compared with $75.3 million for 2010, a decrease of 1.9% caused by the two previously mentioned factors.

In the United States, sales were up by 52.9% or US$34.7 million to US$100.5 million. This strong increase came from an excellent internal growth of 12.8% plus 40.1% from the contribution of Raybern, New Century, E.Kinast and Outwater. In Canadian dollars, sales rose to $99.2 million from $67.9 million for 2010. They accounted for 18.9% of 2011 consolidated sales. Sales to manufacturers amounted to $95.9 million, compared with $66.8 million for 2010, an increase of $29.1 million or 43.6%. Sales to retailers more than tripled to reach $3.3 million.

Consolidated EBITDA and EBITDA margin

Earnings before income taxes, interest, amortization and non-controlling interest (EBITDA) totalled $67.3 million, up by 5.5% over 2010, due notably to the sales growth. The gross profit margin was brought down by certain acquisitions closed in 2010 and 2011 that yield lower profit margins than Richelieu because of their different product mix and the gross margin of operations in the United States where the current economic context exerted downward pressures on product selling prices. These two main factors, combined with higher marketing expenses for various product lines and the rise in operating costs related to the recent acquisitions, affected the EBITDA margin from continuing operations which stood at 12.9%, compared with 14.3% for 2010.

Income taxes increased by $0.7 million to $19.4 million on account of fluctuations in results by region where the Company and its subsidiaries are subject to tax authorities imposing tax rates differing from one another.

Consolidated net earnings

The Company posted net earnings from continuing operations of $39.5 million, up by 2.4% over $38.6 million for 2010, excluding a gain net of taxes of $0.7 million from discontinued operations or $0.03 per share that the Company had recognized in the first quarter of 2010. Earnings from continuing operations per share amounted to $1.88 (basic) and $1.86 (diluted), compared with $1.79 (basic) and $1.78 (diluted) for 2010, excluding the earnings per share from discontinued operations of $0.03, an increase of 5.0% and 4.5% respectively.

Comprehensive income stood at $39.4 million, on account of a negative adjustment of less than $0.1 million on translation of the financial statements of the subsidiary in the United States, compared with $38.0 million for 2010, on account of a negative adjustment of $1.2 million on translation of the financial statements of the subsidiary in the United States.

FOURTH QUARTER ENDED NOVEMBER 30, 2011

Consolidated sales totalled $135.3 million for the fourth quarter, up by $17.4 million over the corresponding quarter of 2010, an increase of 14.8%, of which 2.1% from internal growth and 12.7% from the contribution of PJ White (acquired on November 30, 2010), Outwater, Madico and Provincial Woodproducts (acquired during the first half of 2011).

In Canada, the Company's sales grew to $108.4 million, an increase of $9.8 million or 10.0% reflecting the contribution of the various segments of its primary market, namely manufacturers, where sales rose 14.4% to $91.8 million in the fourth quarter. Its three geographic markets (Eastern, Central and Western Canada) contributed to growth, with a greater increase in Western Canada due among others to the benefits of the PJ White acquisition. Sales decreased by $1.7 million in the retailers market due notably to the economic uncertainty affecting consumer confidence, as indicated by retailers themselves.

In the United States, sales totalled US$26.5 million, an increase of 40.0% over the fourth quarter of 2010, of which a strong internal growth of 15.0% and 25.0% from the contribution of Outwater. Considering the effect of exchange rates, sales expressed in Canadian dollars amounted to $26.9 million, up by 39.2% over $19.3 million for the corresponding quarter of 2010. In the manufacturers market, Richelieu recorded sales of $25.8 million, an increase of $6.8 million or 36.1%. Sales to retailers tripled to $1.1 million in the fourth quarter.

Earnings before income taxes, interest, amortization and non-controlling interest (EBITDA) grew to $18.9 million, up by 10.3% over $17.1 million for the fourth quarter of 2010, due notably to the sales growth. The gross profit margin remained at the same level as in the corresponding quarter of 2010 despite the lower gross margin of the recent acquisitions. Although these recent acquisitions contributed to results and represent a sound investment and a positioning for the future, the profit margins of some of them are lower than those of Richelieu because of their operating costs. The integration of these acquisitions aim to create synergies and gradually improve their profit margins. The fourth-quarter EBITDA margin stood at 14.0%, compared with 14.5% for the same quarter of 2010.

Net earnings totalled $11.2 million, up by 7.7% over the fourth quarter of 2010. The net profit margin stood at 8.3% as it was affected by the aforementioned factors, compared with 8.8% for the fourth quarter of the previous year. Earnings per share amounted to $0.53 (basic and diluted), compared with $0.49 (basic) and $0.48 (diluted) for the fourth quarter of 2010, an increase of 8.2% and 10.4% respectively.

Cash flows related to operating activities (before net change in non-cash working capital balances related to operations) were $14.7 million or $0.70 per share, up from $11.0 million or $0.51 per share for the fourth quarter of 2010, primarily reflecting the growth in net earnings and fluctuation in future income taxes. Net change in non-cash working capital balances related to operations represented a cash inflow of $3.9 million, as opposed to a cash outflow of $3.5 million for the corresponding quarter of 2010. Changes in accounts receivable, inventories and prepaid expenses represented a cash inflow of $6.1 million, whereas changes in accounts payable, income taxes payable and the derivative financial instruments represented a cash outflow of $2.2 million. Consequently, operating activities provided cash flows of $18.6 million, compared with $7.5 million for the corresponding quarter of the previous year.

Financing activities used net cash flows of $5.8 million, following the repurchase of common shares under the normal course issuer bid for a consideration of $3.9 million during the quarter, the payment of shareholder dividends for a total of $2.3 million and a repayment of long-term debt of $0.2 million. In addition, the exercise of options provided cash flows of $0.7 million, compared with $0.1 million for the corresponding quarter of 2010.

Investing activities used cash flows of $0.8 million, primarily for various capital expenditures during the quarter.

FINANCIAL POSITION

Analysis of principal cash flows

Operating activities

Cash flows related to operating activities (before net change in non-cash working capital balances related to operations) were $50.1 million or $2.35 per share, up from $45.1 million or $2.08 per share for 2010, primarily reflecting the increase of $0.9 million in net earnings from continuing operations, of $1.6 million in amortization of capital and intangible assets related to the recent acquisitions, and of $2.6 million in future income taxes. Net change in non-cash working capital balances related to operations used cash flows of $11.5 million, compared with $9.7 million for 2010. Changes in accounts receivable, prepaid expenses, accounts payable, income taxes payable and the derivative financial instruments represented a cash outflow of $14.3 million, whereas changes in inventories represented a total cash inflow of $2.8 million for 2011. Consequently, operating activities provided cash flows of $38.5 million, compared with $35.4 million for 2010.

Financing activities

For 2011, the Company paid shareholder dividends of $9.3 million, up by 19.3% over 2010. This growth primarily reflects the increase in the quarterly dividend from $0.09 to $0.11 announced on January 27, 2011. It also repaid $1.4 million in long-term debt, compared with $0.2 million in 2010. Common shares were issued for a consideration of $1.5 million upon the exercise of options under the share option plan, compared with $0.5 million for 2010, and shares were repurchased for cancellation under the normal course issuer bid for a consideration of $10.5 million, compared with $18.1 million in 2010. Therefore, financing activities represented a cash outflow of $19.7 million, compared with $25.6 million for 2010.

Investing activities

In 2011, the Company invested a total of $29.3 million, of which $18.6 million in the acquisition of the net assets of Outwater, the shares of Madico and 85% of the common shares of Provincial, as well as $10.7 million in capital assets, primarily the expansion of the Montreal and Laval distribution centres.

Sources of financing

As at November 30, 2011, cash and cash equivalents totalled $29.1 million, compared with $39.3 million a year earlier. The Company posted a working capital of $167.3 million for a current ratio of 4.0:1, compared with $162.7 million and a 3.7:1 ratio as at November 30, 2010.

Richelieu believes it has the capital resources to fulfill its ongoing commitments and obligations and to assume the funding requirements needed for its growth and the financing and investing activities planned for 2012. Furthermore, the Company continues to benefit from an authorized line of credit of $26 million, renewable annually and bearing interest at the bank's prime rate, as well as a line of credit of US$5 million bearing interest at prime rate plus 2%. In addition, the Company estimates it could obtain access to other outside financing if necessary.

Summary balance sheet (1)
(in thousands of $)

As at November 30 2011   2010
       
Current assets 223,016   222,752
Long-term assets 121,116   98,064
       
Total 344,132   320,816
Current liabilities 55,762   60,025
Long-term liabilities 12,736   6,922
Shareholders' equity 275,634   253,869
       
Total 344,132   320,816
(1) Foreign exchange rate of a self-sustaining
operation in the United States 
1.0203   1.0266


Assets

Total assets amounted to $344.1 million as at November 30, 2011, up from $320.8 million a year earlier, an increase of 7.3% primarily reflecting the effect of acquisitions closed during the period. Current assets were up by $0.3 million over November 30, 2010. This position notably reflects the $10.2 million decrease in cash and cash equivalents, whereas accounts receivable, prepaid expenses and income taxes receivable were up by $9.3 million and inventories by only $1.1 million due to the ongoing improvement initiatives at the level of the supply chain, which largely limited the increases arising from the acquisitions and the growth in demand.

Net cash
(in thousands of $)

As at November 30 2011 2010
     
Current portion of long-term debt 4,309 2,072
Long-term debt 1,235 786
     
Total 5,544 2,858
Cash and cash equivalents 29,095 39,289
Total net cash 23,551 36,431

The Company benefits from an excellent financial position to pursue its business strategy. Its total interest-bearing debt remained very low at $5.5 million, of which $1.2 million in long-term debt and a current portion of $4.3 million representing solely the balances payable on acquisitions. As at November 30, 2011, the Company therefore posted total net cash of $23.6 million.

As at November 30, 2011, shareholders' equity totalled $275.6 million, up from $253.9 million a year earlier, an increase of 8.6% mainly reflecting the $20.0 million growth in retained earnings which rose to $258.0 million and a $2.1 million increase in capital stock. The book value per share stood at $13.22 at 2011 year-end, compared with $12.01 as at November 30, 2010.

The total interest-bearing debt to equity ratio stood at 2.0% as at November 30, 2011, compared with 1.1% a year earlier.

Profile as at January 26, 2012

Richelieu is a leading North American distributor, importer and manufacturer of specialty hardware and complementary products. Its products are targeted to an extensive customer base of kitchen and bathroom cabinet, furniture, and window and door manufacturers plus the residential and commercial woodworking industry, as well as a large customer base of hardware retailers, including renovation superstores. Richelieu offers customers a broad mix of high-end products sourced from manufacturers around the world. Its product selection consists of more than 90,000 different items targeted to a base of some 70,000 customers who are served by 60 centres in North America - 34 distribution centres in Canada, 24 in the United States and two manufacturing plants in Canada, specifically Cedan Industries Inc. which specializes in the manufacture of a wide variety of veneer sheets and edgebanding products and Menuiserie des Pins Ltée which manufactures components for the window and door industry and a broad selection of decorative mouldings.

Notes to readers — Richelieu uses earnings before income taxes, interest, amortization and non-controlling interest ("EBITDA") because this measure enables management to assess the Company's operational performance. This measure is a widely accepted financial indicator of a company's ability to service and incur debt. However, EBITDA should not be considered by an investor as an alternative to operating income or net earnings, an indicator of operating performance or cash flows, or as a measure of liquidity. Because EBITDA is not a standardized measurement as prescribed by GAAP, it may not be comparable to the EBITDA of other companies. Certain statements set forth in this management's report, including statements relating to the expected sufficiency of cash flows to cover contractual commitments, to maintain growth and to provide for financing and investing activities, growth outlook, Richelieu's competitive position in its industry, Richelieu's ability to weather the current economic context and access other external financing, the closing of new acquisitions, the optimization of the synergies arising therefrom and their impact on sales and other statements not pertaining to past events, constitute forward-looking statements. In some cases, these statements are identified by the use of terms such as "may", "could", "might", "intend" "should", "expect", "project", "plan", "believe", "estimate" or the negative form of these expressions or other comparable variants. These statements are based on the information available at the time they are written, on assumptions made by management and on the expectations of management, acting in good faith, regarding future events, including the assumption that economic conditions and exchange rates will not significantly deteriorate, changes in operating expenses will not increase significantly, the Company's deliveries will be sufficient to fulfill Richelieu's needs, the availability of credit  will remain stable during the fiscal year and no extraordinary events will require supplementary capital expenditures. Although management considers these assumptions and expectations reasonable based on the information available at the time they are written, they could prove inaccurate. Forward-looking statements are also subject, by their very nature, to known and unknown risks and uncertainties such as those related to the industry, acquisitions, labour relations, credit, key officers, supply, product liability, and other factors set forth in the Management's Report included in the Company's 2010 Annual Report as well as its 2010 Annual Information Form, which are available on the System for Electronic Document Analysis and Retrieval (SEDAR) website at www.sedar.com. Richelieu's actual results could differ materially from those indicated or underlying these forward-looking statements. The reader is therefore recommended not to unduly rely on these forward-looking statements. Forward-looking statements do not reflect the potential impact of special items, any business combination or any other transaction that may be announced or occur subsequent to the date hereof. Richelieu undertakes no obligation to update or revise the forward-looking statements to account for new events or new circumstances, except where provided for by applicable legislation.

JANUARY 26, 2012 CONFERENCE CALL AT 2:30 P.M. (EASTERN TIME)

Financial analysts and investors interested in participating in the conference call on Richelieu's results to be held at 2:30 p.m. on January 26, 2012 can dial 1-800-731-5319 a few minutes before the start of the call. For those unable to participate, a taped rebroadcast will be available as of 5:30 p.m. on January 26, 2012 until midnight on February 2, 2012, by dialing 1-877-289-8525, access code: 4505983#. Members of the media are invited to listen in.

Photos are available under "About Richelieu" - "Media" section at www.richelieu.com

CONSOLIDATED BALANCE SHEETS      
       
As at November 30
[In thousands of dollars]
     
  2011   2010
  $   $
ASSETS      
Current assets      
Cash and cash equivalents 29,095   39,289
Accounts receivable 72,366   65,017
Income taxes receivable 1,645  
Inventories 118,753   117,609
Prepaid expenses 1,157   837
  223,016   222,752
Capital assets 25,399   19,132
Intangible assets 22,189   13,242
Future income taxes 2,658   2,327
Goodwill 70,870   63,363
  344,132   320,816
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
Current liabilities      
Accounts payable and accrued liabilities 51,453   54,212
Income taxes payable   3,741
Current portion of long-term debt 4,309   2,072
  55,762   60,025
Long-term debt 1,235   786
Future income taxes 6,160   2,706
Non-controlling interest 5,341   3,430
  68,498   66,947
       
Shareholders' equity      
Capital stock 19,714   17,623
Contributed surplus 3,586   3,906
Retained earnings 257,955   237,907
Accumulated other comprehensive income (5,621)   (5,567)
  275,634   253,869
  344,132   320,816
       
CONSOLIDATED STATEMENTS OF EARNINGS      
       
Years ended November 30
[In thousands of dollars, except earnings per share]
     
  2011   2010
  $   $
Sales 523,786   446,963
Cost of sales and warehouse, selling and administrative expenses 456,467   383,131
Earnings before the following 67,319   63,832
Amortization of capital assets 5,906   5,160
Amortization of intangible assets 2,139   1,303
Financial costs, net (13)   (201)
  8,032   6,262
Earnings before income taxes, non-controlling interest and discontinued operations 59,287   57,570
Income taxes 19,416   18,698
Earnings before non-controlling interest and discontinued operations 39,871   38,872
Non-controlling interest 379   298
Net earnings from continued operations 39,492   38,574
Net earnings from discontinued operations   659
Net earnings 39,492   39,233
       
Earnings per share      
Basic      
From continued operations 1.88   1.79
From discontinued operations   0.03
  1.88   1.82
Diluted      
From continued operations 1.86   1.78
From discontinued operations   0.03
  1.86   1.81
       
CONSOLIDATED STATEMENTS RETAINED EARNINGS      
       
Years ended November 30
[In thousands of dollars]
     
  2011   2010
  $   $
Net earnings 39,492   39,233
       
Retained earnings, beginning of year 237,907   223,986
Dividends (9,267)   (7,768)
Premium on redemption of common shares for cancellation (10,177)   (17,544)
Retained earnings, end of year 257,955   237,907
       
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME      
       
Years ended November 30
[In thousands of dollars]
     
  2011   2010
  $   $
Net earnings 39,492   39,233
Other comprehensive income      
Translation adjustment of the net investment in self-sustaining foreign operations (54)   (1,243)
Comprehensive income 39,438   37,990
       
CONSOLIDATED STATEMENTS OF CASH FLOWS      
       
Years ended November 30
[In thousands of dollars]
     
  2011   2010
  $   $
OPERATING ACTIVITIES      
Net earnings from continued operations 39,492   38,574
Non-cash items      
  Amortization of capital assets 5,906   5,160
  Amortization of intangible assets 2,139   1,303
  Future income taxes 1,573   (1,031)
  Non-controlling interest 379   298
  Stock-based compensation expense 568   755
  50,057   45,059
Net change in non-cash working capital balances related to operations (11,529)   (9,699)
  38,528   35,360
       
FINANCING ACTIVITIES      
Repayment of long-term debt (1,444)   (246)
Dividends paid (9,267)   (7,768)
Issue of common shares 1,538   500
Redemption of common shares for cancellation (10,517)   (18,107)
  (19,690)   (25,621)
       
INVESTING ACTIVITIES      
Business acquisition (18,575)   (17,684)
Additions to capital assets (10,720)   (3,422)
  (29,295)   (21,106)
       
Effect of exchange rate fluctuations on cash and cash equivalents 263   (41)
       
Net change in cash and cash equivalents (10,194)   (11,408)
Cash flows from discontinued operations   2,255
Cash and cash equivalents, beginning of year 39,289   48,442
Cash and cash equivalents, end of year 29,095   39,289
 
Supplemental information      
Income taxes paid 23,074   15,093
Interest received, net (24)   (179)

 

 

 

 

SOURCE RICHELIEU HARDWARE LTD.

For further information:

Richard Lord
President and Chief Executive Officer
Antoine Auclair
Vice-President and Chief Financial Officer
Tel: (514) 336-4144 www.richelieu.com

Profil de l'entreprise

RICHELIEU HARDWARE LTD.

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