Richelieu achieves excellent first-quarter growth



    
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    - Increases of 14.1% in sales, 15.6% in EBITDA and 11.4% in net
      earnings - the first quarter ended February 28, 2007 marks the 45th
      consecutive quarter of sales and earnings growth (over comparable
      periods).
    - Excellent financial position - the interest-bearing debt/equity ratio
      stands at 7.1% and working capital at $108.2 million.
    - Next dividend payment ($0.07 per share) on April 26, 2007 to
      shareholders of record as at April 12, 2007.
    - Subsequent events: another U.S. acquisition in a new market and opening
      of a distribution centre in Ontario.
    -------------------------------------------------------------------------

    TSX: RCH

    MONTREAL, March 29 /CNW Telbec/ - For its first quarter ended February 28,
2007, Richelieu achieved record sales growth and a solid increase in net
earnings.
    "The acquisitions made in recent months brought a solid contribution in
the first quarter, combined with significant internal growth whereas this
period is generally the year's weakest. Our EBITDA posted a substantial
improvement of 15.6%. We are pleased with these results, which also reflect
the efficient integration of our prior acquisitions and the selling synergies
we are building with the acquired entities. Our latest acquisitions enhanced
our growth in the U.S., with a 74% increase in sales recorded primarily in the
cabinet makers and residential and commercial woodworking markets. We also
improved our sales in the Canadian retailers market thanks to solid internal
growth plus the contribution of Nystrom, acquired in 2006 and specializing in
this market. We ended the period in excellent financial health, positioning us
solidly to pursue our growth," indicated Richard Lord, President and Chief
Executive Officer.

    OPERATING RESULTS FOR THE FIRST QUARTER ENDED FEBRUARY 28, 2007 COMPARED
    TO THE FIRST QUARTER ENDED FEBRUARY 28, 2006

    Consolidated sales totalled $94.5 million, representing a first-quarter
record. They grew by 14.1%, of which 4.3% came from internal growth and 9.8%
from the acquisition of Nystrom Group (Ontario), Kiika International
(Pennsylvania), Specialty Supplies Inc. (Florida) and L.B. Brass (New York).
The period's internal growth is particularly satisfactory since the first
quarter is generally the weakest period of the year. It was fuelled among
others by the new marketing programs rolled out in Richelieu's markets over
the last two years.
    Sales to manufacturers posted an excellent increase of 14.6%, of which
3.7% was due to internal growth and 10.9% to the aforementioned acquisitions -
they accounted for 82.0% of the period's consolidated revenues. Sales to
hardware retailers including renovation superstores grew by 11.7%, of which
6.6% reflects internal growth and 5.1% the contribution of the February 2006
acquisition of Nystrom whose customers consist specifically of retailers and
renovation superstores operating in Ontario.
    Richelieu recorded sales of $76.6 million in Canada for the first quarter
of 2007. Of this 5.6% increase, 4.6% was due to internal growth and 1.0% to
the acquisition of Nystrom. They accounted for 81.1% of the period's
consolidated sales. This growth came mainly from sales to residential and
commercial woodworkers and furniture manufacturers.
    Thanks to its acquisitions in recent months, the Company achieved strong
first-quarter sales growth in the United States. U.S. sales totalled
$17.9 million (US$15.4 million), compared with $10.3 million (US$8.6 million)
for the first quarter of 2006, an increase of 73.7% in Canadian dollars and
78.9% in U.S. dollars, primarily in the cabinet makers and the residential and
commercial woodworking markets.
    Earnings before income taxes, interest, amortization and non-controlling
interest (EBITDA) totalled $10.5 million, a significant increase of 15.6%.
Profit margins remain most satisfactory. The gross profit margin improved over
the corresponding quarter of 2006, whereas the EBITDA profit margin rose to
11.1% from 10.9%, under the positive impact of the higher-margin product mix,
the acquisitions' contribution and a further improvement in the U.S.
operations' profitability.
    Interest was up by $0.2 million as a result of the increase in debt
consisting primarily of balances of purchase price payable on four
acquisitions closed during the previous year. Amortization of intagible assets
with limited useful lives accounted for last year, amounted to $0.2 million
for the first quarter.
    Income taxes totalled $3.2 million, up 16.0% due mainly to the increase in
earnings and the rise in income taxes related to Richelieu's growing U.S.
operations.
    Owing to the aforementioned factors, net earnings rose 11.4% to
$6.0 million; as a percentage of consolidated sales, they worked out to 6.3%,
compared with 6.5% for the first quarter of 2006. Earnings per share grew to
$0.26 ($0.26 diluted), up 13.0%, whereas the number of shares and options
outstanding did not vary significantly over the past 12 months.

    LIQUIDITY AND FINANCIAL RE

SOURCES Operating activities - Cash flows from operating activities (before net change in non-cash working capital balances related to operations) grew to $7.2 million or $0.31 per share, up from $6.5 million or $0.28 per share for the first quarter of the previous year, an increase of 11.3% reflecting primarily the growth in net earnings. Net change in non-cash working capital balances related to operations used cash flows of $9.7 million due primarily to a $5.9 million increase in inventories in anticipation of upcoming periods. Operating activities therefore used cash flows of $2.5 million, whereas they had provided cash flows of $2.5 million for the comparable period last year. Financing activities - Richelieu paid dividends totalling $1.6 million to shareholders in the first quarter, up from $1.4 million for the equivalent quarter of 2006. This $0.2 million growth reflects the 16.7% increase in the dividend rate announced on January 26, 2007. The Company also repaid $0.1 million in interest-bearing debt, compared with a total of $1.4 million in the first quarter of 2006. Richelieu did not purchase any common shares in the first quarter of 2007, as opposed to the first quarter of 2006 when it redeemed shares for an amount of $0.3 million. Thus, financing activities used cash flows of $1.7 million, compared with $3.1 million for the same quarter of 2006. Investing activities - The Company invested $1.4 million in various capital expenditures in the first quarter, specifically for the purchase of equipment and improvement of business premises, compared with $0.6 million for the same period last year. It should also be noted that during the first quarter of 2006, Richelieu had completed three acquisitions that represented a $14.3 million investment. Therefore, investing activities for the first quarter ended February 28, 2007 used cash flows of $1.4 million, compared with $14.9 million in 2006. Cash and cash equivalents totalled $1.3 million as at February 28, 2007. FINANCIAL POSITION AS AT FEBRUARY 28, 2007 The Company remains in an excellent financial position, with low indebtedness and substantial cash flows regularly generated by its operations, which should enable it to easily meet its financial obligations and to pursue its expansion and growth. Principal changes in balance sheet items between November 30, 2006 and February 28, 2007 reflect the quarter's internal growth. As at February 28, 2007, Richelieu had an excellent working capital of $108.2 million for a current ratio of 3.5:1, compared with $103.9 million and a ratio of 3.2:1 at the end of the previous year on November 30, 2006. Total interest-bearing debt amounted to $13.5 million as at February 28, 2007, compared with $13.6 million as at November 30, 2006. This debt consists primarily of balances payable on four business acquisitions completed in 2006, composed of a current portion of $6.7 million and a long-term debt of $6.6 million, bearing interest at rates of up to 7.25% and maturing on various dates until 2008. Shareholders' equity totalled $191.2 million at the end of the first quarter, up 2.5% from $186.6 million as at November 30, 2006, due mainly to the $4.4 million increase in retained earnings which amounted to $172.4 million as at February 28, 2007. The book value per share grew to $8.29 as at February 28, 2007, compared with $8.09 three months earlier. The interest-bearing debt/equity ratio improved to 7.1% from 7.3% as at November 30, 2006. As at February 28, 2007, Richelieu's share capital consisted of 23,067,862 common shares (23,052,612 common shares as at November 30, 2006) due to the issue of 15,250 common shares under the share option plan, and 688,500 options (783,200 options as at November 30, 2006) were outstanding. NEXT DIVIDEND PAYMENT At its meeting on March 29, 2007, the Board of Directors approved the payment of a quarterly dividend of $0.07 per share. This dividend is payable on April 26, 2007 to shareholders of record as at April 12, 2007. SUBSEQUENT EVENTS: NEW ACQUISITION IN THE UNITED STATES AND OPENING OF A DISTRIBUTION CENTRE IN ONTARIO On March 7, 2007, the Company acquired the operating assets of Village Square Cabinet Supply. Located in Nashville, Tennessee, this distributor of decorative and functional hardware, kitchen accessories and related products, primarily serves a customer base of cabinet makers. This acquisition raises Richelieu's annual sales by about US$7 million, immediately contributes to its earnings and adds a 15th distribution centre to its U.S. network. Richelieu is also opening a distribution centre in Barrie, Ontario, which has one of the fastest-growing populations in Canada. That will bring its network to 47 centres in North America. GROWTH OUTLOOK Richelieu continues to develop its North American markets, while pursuing the integration of its latest acquisitions and building selling synergies with these new operations. The Company will continue to expand and diversify its product offering by introducing additional innovations. It will reap the benefits of the acquisitions closed in recent months and expects to achieve solid internal growth. Richelieu is in an excellent financial position and remains on the lookout for acquisition opportunities in both Canada and the United States. This expectation is based on the assumptions that economic conditions and exchange rates will not deteriorate significantly, operating expenses will not increase considerably, deliveries will meet the Company's requirements and no unusual events will entail additional capital expenditures. This expectation also remains subject to the risks set forth in the "Risk Management" section of the management's report included in its 2006 Annual Report. PROFILE as at March 29, 2006 Richelieu Hardware Ltd. is Canada's leading distributor, importer and manufacturer of specialty hardware and complementary products. The Company also ranks among the top players in its specialty in North America. 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 close to 50,000 different items targeted to a base of over 37,000 customers who are served by 47 centres in North America - 30 distribution centres across Canada, 15 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, a broad selection of mouldings, and various types of tackboards and whiteboards. 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 press release 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 and relate, by their very nature, to known and unknown risks and uncertainties such as economic conditions, exchange rate fluctuations and other factors set forth in the Management's Report included in the Company's 2006 Annual Report as well as its 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. CONFERENCE CALL ON MARCH 29, 2007 AT 3:00 P.M. ---------------------------------------------- Financial analysts and investors interested in participating in the conference call on Richelieu's results to be held at 3:00 p.m. on March 29, 2007, can dial 1-800-590-1817 a few minutes before the start of the call. For those unable to participate, a taped rebroadcast will be available as of 5:00 p.m. on March 29, 2007, until midnight on April 5, 2007, by dialing 1-877-289-8525, access code: 21223599#. Members of the media are invited to listen in. Consolidated statements of earnings and retained earnings (unaudited) (in thousands of dollars, except per-share amounts) For the three months ended February 28, ------------------------------------------------------------------------- 2007 2006 ------------------------------------------------------------------------- ------------------------------------------------------------------------- $ $ Sales 94,509 82,862 Cost of sales, warehouse, selling and administrative expenses 84,039 73,802 ------------------------------------------------------------------------- Earnings before the following 10,470 9,060 Interest on short-term debt, net (12) 69 Interest on long-term debt 245 22 Amortization of capital assets 903 861 Amortization of intangible assets 201 - ------------------------------------------------------------------------- Earnings before income taxes and non-controlling interest 9,133 8,108 Income taxes 3,151 2,716 ------------------------------------------------------------------------- Earnings before non-controlling interest 5,982 5,392 Non-controlling interest 9 32 ------------------------------------------------------------------------- Net earnings 5,973 5,360 Retained earnings, beginning of period 168,020 144,430 Premium on redemption of common shares for cancellation - (293) Dividends (1,615) (1,390) ------------------------------------------------------------------------- Retained earnings, end of period 172,378 148,107 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Earnings per share (Note 4) Basic 0.26 0.23 Diluted 0.26 0.23 Consolidated statements of comprehensive income (unaudited) (in thousands of dollars) For the three months ended February 28, ------------------------------------------------------------------------- 2007 2006 ------------------------------------------------------------------------ ------------------------------------------------------------------------- $ $ Net earnings 5,973 5,360 Other comprehensive income, net of income tax Change in fair value of derivatives designated as cash flow edge (10) - ------------------------------------------------------------------------- Comprehensive income 5,963 5,360 ------------------------------------------------------------------------- See accompanying notes. Consolidated statements of cash flows (unaudited) (in thousands of dollars) For the three months ended February 28, ------------------------------------------------------------------------- 2007 2006 ------------------------------------------------------------------------- ------------------------------------------------------------------------- $ $ OPERATING ACTIVITIES Net earnings 5,973 5,360 Non-cash items Amortization of capital assets 903 861 Amortization of intangible assets 201 - Non-controlling interest 9 32 Future income taxes (75) 75 Stock-based compensation expense 184 134 ------------------------------------------------------------------------- 7,195 6,462 Net change in non-cash working capital balances related to operations (9,716) (3,993) ------------------------------------------------------------------------- (2,521) 2,469 ------------------------------------------------------------------------- FINANCING ACTIVITIES Issue of common shares (Note 3) 78 35 Dividends paid (1,615) (1,390) Redemption of common shares for cancellation - (304) Repayment of long-term debt (277) (179) Increase (decrease) in bank loans 138 (1,262) ------------------------------------------------------------------------- (1,676) (3,100) ------------------------------------------------------------------------- INVESTING ACTIVITIES Business acquisitions - (14,252) Additions to capital assets (1,432) (635) ------------------------------------------------------------------------- (1,432) (14,887) ------------------------------------------------------------------------- Net change in cash and cash equivalents (5,629) (15,518) Cash and cash equivalents at beginning 6,964 20,103 ------------------------------------------------------------------------- Cash and cash equivalents at the end 1,335 4,585 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Supplemental information Income taxes paid 6,455 3,605 Interest paid 155 99 See accompanying notes. Consolidated balance sheets (in thousands of dollars) As at As at As at February February November 28, 2007 28, 2006 30, 2006 ------------------------------------------------------------------------- ------------------------------------------------------------------------- $ $ $ (unaudited) (unaudited) (audited) ASSETS Current assets Cash and cash equivalents 1,335 4,585 6,964 Accounts receivable 56,134 51,035 57,443 Income taxes receivable 970 126 - Inventories 92,664 78,242 86,784 Prepaid expenses 535 892 541 ------------------------------------------------------------------------- 151,638 134,880 151,732 Capital assets 18,993 19,073 18,463 Intangible assets 13,026 - 13,227 Goodwill 61,580 51,579 61,580 ------------------------------------------------------------------------- 245,237 205,532 245,002 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Bank loans 138 648 - Accounts payable and accrued liabilities 36,594 32,418 38,425 Income taxes payable - - 2,334 Current portion of long term debt 6,721 1,344 7,064 ------------------------------------------------------------------------- 43,453 34,410 47,823 ------------------------------------------------------------------------- Long-term debt 6,637 1,177 6,571 Future income taxes 1,762 1,849 1,842 Non-controlling interest 2,191 1,961 2,182 ------------------------------------------------------------------------- 54,043 39,397 58,418 ------------------------------------------------------------------------- Shareholders' equity Capital stock (Note 3) 17,548 17,410 17,470 Contributed surplus (Note 3) 1,278 618 1,094 Retained earnings 172,378 148,107 168,020 Accumulated other comprehensive income (note 5) (10) - - ------------------------------------------------------------------------- 191,194 166,135 186,584 ------------------------------------------------------------------------- 245,237 205,532 245,002 ------------------------------------------------------------------------- ------------------------------------------------------------------------- See accompanying notes. NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS February 28, 2007 and 2006 (in thousands of dollars, except per-share amounts) (unaudited) NATURE OF BUSINESS Richelieu Hardware Ltd. (the "Company") acts as a distributor, importer, and manufacturer of specialty hardware and complementary products. These 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 retailers, including hardware and renovation products superstores. During the period ended February 28, 2007, the Company's sales to foreign countries, almost entirely directed to the United States, amounted to $17,901 (2006 - $10,307) in Canadian dollars and to $15,432 (2006 - $8,918) in US dollars. As at February 28, 2007, out of a total amount of $18,993 in capital assets ($18,463 as at November 30, 2006), $844 ($876 as at November 30, 2006) are located in the USA. In addition, intangible assets related to the USA amounted to $8,870 ($8,964 as at November 30, 2006) and goodwill at $20,528 stood at the same amount since November 30, 2006. 1) ACCOUNTING POLICIES The unaudited interim consolidated financial statements have been prepared by management in accordance with accounting principles generally accepted in Canada and follow the same accounting principles and methods of application as the recent audited annual consolidated financial statements, except for the new accounting policies described in note 2. In management opinion, these interim financial statements reflect all the adjustments required to fair presentation. These adjustments consist only of normal recurring adjustments. Operating results for the period are not necessarily indicative of the results that may be expected for the full year as the operating level of the Company is subject to seasonal fluctuations. These interim financial statements should be read in conjunction with the audited consolidated annual financial statements and the accompanying notes included in Company's annual report for the fiscal year 2006. 2) CHANGES IN ACCOUNTING POLICIES Since December 1st, 2006, the Company adopted the new recommendations of Section 3855, Financial Instruments - Recognition and Measurement, Section 3865, Hedges, and Section 1530, Comprehensive Income, issued by the Canadian Institute of Chartered Accountants (CICA). These new sections contain standards for recognition and measurement for financial instruments, establish standards for hedge accounting and introduce a new measurement of results - comprehensive income - which is the change in equity or net assets of an enterprise during a period from transactions from non-owner sources. The adoption of these standards requires classifying all financial assets, liabilities and derivatives of the Company for which clearly defined rules determine the standards to be applied. In accordance with the standards in these new CICA handbook sections, all derivative financial instruments used will be recorded in the balance sheet at their fair value. Depending on financial instruments' classification, specific standards are applied. The Company has implemented the following classifications: - Cash and cash equivalents are classified as "Financial Assets held for Trading". They are presented at their fair value and the gains/losses arising on the revaluation at each period end are included in consolidated income. The carrying value of cash and cash equivalents is a reasonable estimate of their fair value due to their short term maturity. - Accounts receivable are classified as "Loans and Receivables". After their initial fair value measurement, they are measured at amortized cost using the effective interest rate method. For the company, the measured amount generally corresponds to cost due to their short term maturity. - Derivative financial instruments that are designated as treasury hedges are included in "Assets and liabilities available for sale". They are presented at their fair value, representing the approximate amount the Company would receive or pay on settlement of these contracts at spot rates, and the gains/losses arising from the revaluation at the end of each period are included in comprehensive income. - Bank loan, accounts payable and accrued liabilities and long-term debt are classified as "Other financial liabilities". They are initially presented at their fair value. Subsequent measurements are at cost, net of amortization, using the effective interest rate method. For the company, that value corresponds to cost either as a result of their short term maturity or the floating rate nature of some loans or because management estimates that the loans payable with fixed interest rates have no significant difference between their fair value and their carrying value, based on rates currently available to the Company on loans with similar terms and remaining maturities. Retroactive adoption of these new standards without restating prior years involved no restatement of the opening balance of accumulated other comprehensive income relating to derivative financial instruments that are designated as treasury hedges. The financial liability relating to derivative financial instruments is included in "Accounts payable and accrued liabilities" in the consolidated balance sheet. 3) CAPITAL STOCK Issued As at February 28, 2007, capital stock outstanding amounted to 23,067,862 common shares (23,052,612 common shares as at November 30, 2006). During the period ended February 28, 2007, the Company issued 15,250 common shares (2006 - 4,700) at a weighted average price of $5.13 per share (2006 - $7.50) under the share option plan. Stock option plan During the period, on January 26, 2007, the Company granted 170,500 options (80,000 on January 25, 2006) with an exercise price of $24.76 (2006 - $22.43) and a fair value of $7.40 per option (2006 - $7.70) as determined using the Black & Scholes option pricing model using an expected dividend yield of 1% (2006 - 1%), a volatility of 22% (2006 - 25%), a risk free interest rate of 4.17% (2006 - 4.15%) and an expected life of 7 years (2006 - 8 years). As at February 28, 2007, 688,500 share options were outstanding (200 6- 552,450) with exercise prices varying from $4.26 to $24.76 (2006 - $4.26 to $22.43) for a weighted average of $19.24 (2006 - $16.91). For the 3-month period ended February 28, 2007, the stock-based compensation expense amounted to $184 (2006 - $134). 4) EARNINGS PER SHARE 3-MONTH PERIOD ENDED FEBRUARY 28 2007 2006 ----------------------------- ----------------------------- ----------------------------- ----------------------------- Weighted average Earnings Weighted number per average Earnings Earnings of share Earnings number per $ shares $ $ of share (in thou- shares $ sands) (in thou- sands) Basic net earnings 5,973 23,060 0.26 5,360 23,169 0.23 Dilutive effect of stock options - 146 - - 136 - ----------------------------- ----------------------------- Diluted net earnings 5,973 23,206 0.26 5,360 23,305 0.23 ----------------------------- ----------------------------- ----------------------------- ----------------------------- For the period ended February 28, 2007, outstanding options to purchase 170,500 common shares with an exercise price of $24.76 were excluded from the computation of diluted earnings because their effect would have been anti-dilutive. 5) ACCUMULATED OTHER COMPREHENSIVE INCOME Derivative financial instruments that are designated as treasury hedges constitute the sole item of Accumulated other Comprehensive Income. The change that occurred during the period was as follows: ------------------------------------------------------------------------- 2007 2006 ------------------------------------------------------------------------- Adjusted opening balance due to the new accounting policies regarding financial instruments, net of income taxes - - ------------------------------------------------------------------------- Change in fair value during the period, net of income taxes (10) - ------------------------------------------------------------------------- Balance - end of period (10) - ------------------------------------------------------------------------- 6) SUBSEQUENT EVENTS On March 7, 2007, the Company acquired the main operating assets of Village Cabinet Supply for a total consideration of US$4.3 millions, of which US$3.4 millions in cash and a balance of sale of US$0.9 millions. Based in Nashville, Tennessee, this distributor of hardware and related products mainly serves a customer base of kitchen cabinet manufacturers.

For further information:

For further information: Richard Lord, President and Chief Executive
Officer; Alain Giasson, Vice-President and Chief Financial Officer, (514)
336-4144; www.richelieu.com


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