Richelieu pursues its growth in 3rd quarter of 2016 - New acquisition in the United States

  • In the third quarter ended August 31, 2016, sales amounted to $220.2 million, an increase of 10.4%, of which 7.9% from internal growth. For the first nine months, sales totalled $626.5 million, up by 14.0% (11.8% from internal growth).
  • Diluted net earnings per share increased by 7.1% in the third quarter to $0.30 and were up 7.2% to $0.74 for the first nine months.
  • Repurchase of 1,004,700 shares in the first nine months for a total of $23.1 million, including $5.3 million in the third quarter.
  • Fourth acquisition in the U.S. since the beginning of fiscal year 2016: a specialty hardware distributor in Portland, Maine.

MONTREAL, Oct. 6, 2016 /CNW Telbec/ - "Richelieu (RCH: TSX) continued to grow in the third quarter with total sales up by 10.4%, reflecting our solid performance in the manufacturers market where sales rose 9.9% (7.0% from internal growth), as well as in the retailers market, where they grew 12.9%. Our market development and innovation strategies continued to drive sales growth both in Canada where we achieved internal growth of 7.5%, and the U.S. where sales increased 14.8% in U.S. dollars (7.0% from internal growth and 7.8% from acquisitions). We posted diluted net earnings per share of $0.30, up 7.1% over the same quarter in 2015.  After making acquisitions in Texas, Tennessee, and New York in the first semester, on August 18 we acquired the principal net assets of Neils Sorenson Hardware in Portland, Maine, a specialty hardware distributor serving kitchen cabinetmakers, furniture manufacturers and woodworkers. We ended the period with $263.7 million in working capital, almost no debt, and $20.9 million in cash. We are pursuing our strategies focused on innovation, internal growth, and acquisitions and expect to end fiscal year 2016 with good results," said Richard Lord, president and CEO of Richelieu.

NEXT DIVIDEND PAYMENT

On October 6, 2016, the board of directors approved payment of a quarterly dividend of 5.33¢ per share. This dividend is payable on November 3, 2016, to shareholders of record as at October 20, 2016.

ANALYSIS OF OPERATING RESULTS FOR THE THIRD QUARTER AND FIRST NINE MONTHS ENDED AUGUST 31, 2016 COMPARED WITH THE THIRD QUARTER AND FIRST NINE MONTHS ENDED AUGUST 31, 2015

Third-quarter consolidated sales amounted to $220.2 million, compared with $199.5 million for the corresponding quarter of 2015, an increase of $20.7 million or 10.4%, of which 7.9% from internal growth and 2.5% from acquisitions. At comparable exchange rates to the third quarter of 2015, the consolidated sales growth would have been 9.8% for the quarter ended August 31, 2016.

Richelieu achieved sales of $186.9 million in the manufacturers market, compared with $170 million for the third quarter of 2015, an increase of $16.9 million or 9.9%, of which 7.0% from internal growth and 2.9% from acquisitions. Sales to hardware retailers and renovation superstores stood at $33.3 million, up by $3.8 million or 12.9% over the third quarter of 2015.

In Canada, Richelieu recorded sales of $146.2 million, an increase of $10.2 million or 7.5% over the third quarter of 2015, entirely  from internal growth, resulting primarily from market development efforts and, to a lesser extent, from the increase in selling prices to mitigate the impact of the appreciation in the U.S. dollar and the euro. Sales to manufacturers amounted to $116.8 million, an increase of 6.0%. Sales to hardware retailers and renovation superstores grew to $29.4 million, up by $3.6 million or 14.0% over the corresponding quarter of 2015.

In the United States, sales totalled US$57.0 million, compared with US$49.7 million for the third quarter of 2015, an increase of US$7.3 million or 14.8%, of which 7.0% from internal growth and 7.8% from acquisitions. Sales to manufacturers amounted to US$54.0 million, an increase of US$7.2 million or 15.4% over the third quarter of 2015, of which 7.1% from internal growth and 8.3% from acquisitions. Sales to hardware retailers and renovation superstores were up by 3.4% from the corresponding quarter of 2015. Considering exchange rates, total U.S. sales expressed in Canadian dollars stood at $74.0 million, an increase of 16.5%. They accounted for 33.6% of consolidated sales for the third quarter of 2016, whereas they had represented 31.8% of the period's consolidated sales for the third quarter of 2015.

For the first nine months, consolidated sales reached $626.5 million, an increase of $76.9 million or 14.0% over the first nine months of 2015, of which 11.8% from internal growth and 2.2% from acquisitions. At comparable exchange rates to the first nine months of 2015, the consolidated sales growth would have been 11.5% for the nine-month period ended August 31, 2016.

Sales to manufacturers grew to $534.1 million, compared with $466.2 million for the first nine months of 2015, an increase of $67.9 million or 14.6%, of which 12.0% from internal growth and 2.6% from acquisitions. Sales to hardware retailers and renovation superstores grew by 10.8% or $9.0 million to total $92.4 million.

In Canada, Richelieu achieved sales of $414.5 million, compared with $377.2 million for the first nine months of 2015, up by $37.3 million or 9.9% from internal growth resulting primarily from market development efforts and, to a lesser extent, from the increase in selling prices to mitigate the impact of the appreciation in the U.S. dollar and the euro. Sales to manufacturers rose to $333.0 million, up by $28.8 million or 9.5% from internal growth. Sales to hardware retailers and renovation superstores reached $81.5 million, compared with $73.0 million, up by $8.5 million or 11.6% over the first nine months of 2015.

In the United States, the Corporation recorded sales of US$159.7 million, compared with US$138.7 million for the first nine months of 2015, an increase of US$21.0 million or 15.2%, of which 8.6% from internal growth and 6.6% from acquisitions. Sales to manufacturers totalled US$151.5 million, compared with US$130.4 million, an increase of US$21.1 million or 16.2% over the first nine months of 2015, of which 9.2% from internal growth and 7.0% from acquisitions. Sales to hardware retailers and renovation superstores were down by 1.2% from the corresponding period of 2015. Considering exchange rates, U.S. sales expressed in Canadian dollars amounted to $212.0 million, compared with $172.4 million for the corresponding nine months of 2015, an increase of 23.0%. They accounted for 33.8% of consolidated sales for the first nine months of 2016, whereas they had represented 31.4% of the period's consolidated sales for the first nine months of 2015.

Third-quarter earnings before income taxes, interest and amortization (EBITDA) amounted to $25.9 million, up by $1.5 million or 6.3% over the third quarter of 2015. The gross margin and the EBITDA margin were affected by the following factors: the higher purchasing costs of certain products attributable to the appreciation of the U.S. dollar and the euro, the higher proportion of sales in the United States where the product mix is different and the lower margins of certain acquisitions also having a different product mix. The EBITDA margin stood at 11.8%, compared with 12.2% for the third quarter of 2015.

For the first nine months, earnings before income taxes, interest and amortization (EBITDA) totalled $65.7 million, up by $3.7 million or 6.0% over the first nine months of 2015. The gross margin and the EBITDA margin were mainly affected by the higher purchasing costs of certain products attributable to the appreciation of the U.S. dollar and the euro, the higher proportion of sales in the United States where the product mix is different, and the lower margins of certain acquisitions also having a different product mix. The EBITDA margin stood at 10.5%, compared with 11.3% for the first nine months of 2015.

Third-quarter net earnings grew by 6.2%. Considering non-controlling interests, net earnings attributable to shareholders of the Corporation amounted to $17.3 million, up by 6.1% over the third quarter of 2015. Net earnings per share rose to $0.30 basic and diluted, compared with $0.28 basic and diluted for the third quarter of 2015, an increase of 7.1%.

Comprehensive income amounted to $17.5 million, considering a positive adjustment of $0.1 million on translation of the financial statements of the subsidiary in the United States, compared with $21.1 million for the third quarter of 2015, considering a positive adjustment of $4.7 million on translation of the financial statements of the subsidiary in the United States.

For the first nine months, net earnings grew by 6.0%. Considering non-controlling interests, net earnings attributable to shareholders of the Corporation totalled $43.6 million, up by 5.8% over the corresponding nine months of 2015. Net earnings per share amounted to $0.75 basic and $0.74 diluted, compared with $0.70 basic and 0.69 $ diluted for the first nine months of 2015, an increase of 7.1% and 7.2% respectively.

Comprehensive income totalled $42.1 million, considering a negative adjustment of $1.7 million on translation of the financial statements of the subsidiary in the United States, compared with $52.2 million for the first nine months of 2015, considering a positive adjustment of $10.9 million on translation of the financial statements of the subsidiary in the United States.

FINANCIAL POSITION

Third-quarter cash flows from operating activities (before net change in working capital balances) amounted to $20.2 million or $0.35 per share, compared with $18.9 million or $0.32 per share for the third quarter of 2015, an increase of 6.9% stemming primarily from the net earnings growth. Net change in non-cash working capital balances represented a cash inflow of $9.3 million, reflecting the change in accounts receivable and payable ($10.7 million), whereas the change in inventories and other items used cash flows of $1.4 million. Consequently, operating activities provided cash flows of $29.6 million, compared with $16.8 million for the third quarter of 2015.

For the first nine months, cash flows from operating activities (before net change in working capital balances) reached $51.7 million or $0.88 per share, compared with $48.4 million or $0.81 per share for the first nine months of 2015, an increase of 6.8% stemming primarily from the net earnings growth. Net change in non-cash working capital balances used cash flows of $12.7 million, primarily representing changes in accounts receivable and inventories. Consequently, operating activities provided cash flows of $39.0 million compared with $13.5 million for the first nine months of 2015.

Third-quarter financing activities used cash flows of $6.7 million, compared with $2.8 million for the third quarter of 2015. This change mainly reflects the Corporation's repurchase of common shares for cancellation for $5.3 million during the third quarter of 2016 . 

For the first nine months, financing activities used cash flows of $30.5 million, compared with $18.3 million for the first nine months of 2015. During the first nine months of the year, Richelieu repurchased common shares for cancellation for $23.1 million, compared with $9.2 million in the first nine months of 2015. The Corporation paid dividends to shareholders of $9.3 million, up by 5.6% over the first nine months of 2015.

Third-quarter investing activities represented a cash outflow of $2.2 million, of which $0.6 million for business acquisition and $1.6 million for equipments to improve operational efficiency.

For the first nine months, investing activities represented a total cash outflow of $17.1 million, of which $9.4 million for business acquisitions and $7.7 million for the expansion of some distribution centres, computer hardware and equipment to improve operational efficiency.

As at August 31, 2016, cash and cash equivalents amounted to $20.9 million, compared with $29.5 million as at November 30, 2015. This change primarily reflects the major share repurchases during the first nine months, the business acquisitions, the investments in property, plant and equipment and the increase in inventories during the period. The Corporation posted a working capital of $263.7 million for a current ratio of 4.2:1, compared with $260.6 million (4.4:1 ratio) as at November 30, 2015.

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 between now and the end of 2016. The Corporation continues to benefit from an authorized line of credit of $26 million as well as a line of credit of US$6 million renewable annually and bearing interest respectively at prime and base rates. In addition, Richelieu considers it could obtain access to other outside financing if necessary.

 

Summary financial position

(in thousands of $, except exchange rate)

As at

August 31

November 30


2016

2015

Current assets

346,201

337,308

Non-current assets

120,510

112,484

Total

466,711

449,792

Current liabilities

82,470

76,729

Non-current liabilities

5,037

6,256

Equity attributable to shareholders of the Corporation

375,150

362,885

Non-controlling interests

4,054

3,922

Total

466,711

449,792

Exchange rate on translation of a subsidiary in the United States

1.311

1.335

 

Assets

Total assets amounted to $466.7 million as at August 31, 2016, compared with $449.8 million as at November 30, 2015. Current assets increased by 2.6% or $8.9 million from November 30, 2015.

 

Cash position



(in thousands of $)



As at

August 31

November 30


2016

2015

Current portion of long-term debt

3,702

2,245

Long term-debt

112

1,335

Total debt

3,814

3,580

Cash and cash equivalents

20,925

29,454

 

The Corporation continues to benefit from a healthy and solid financial position. Total debt was $3.8 million, of which $0.1 million in long-term debt and $3.7 million in short-term debt representing balances payable on acquisitions.

Equity attributable to shareholders of the Corporation totalled $375.2 million as at August 31, 2016, compared with $362.9 million as at November 30, 2015, an increase of $12.3 million stemming primarily from a growth of $11.8 million in retained earnings which amounted to $320.7 million, and of $2.2 million in share capital and contributed surplus, whereas accumulated other comprehensive income were down by $1.7 million. As at August 31, 2016, the book value per share was $6.48,  up by 4.7% over November 30, 2015. 

PROFILE AS AT AUGUST 31, 2016
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, storage and closet, home furnishing and office furniture manufacturers, residential and commercial woodworkers, and hardware retailers including renovation superstores. Richelieu offers customers a broad mix of high-end products sourced from manufacturers worldwide. Its product selection consists of over 110,000 different items targeted to a base of more than 70,000 customers who are served by 69 centres in North America – 36 distribution centres in Canada, 31 in the United States and two manufacturing plants in Canada, specifically Cedan Industries Inc. which specializes in the manufacturing 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 interest, income taxes and amortization("EBITDA") because this measure enables management to assess the Corporation's operational performance. This measure is a financial indicator of a corporation's ability to service its debt. However, EBITDA should not be considered by an investor as an alternative to operating income, net earnings, cash flows or as a measure of liquidity. Because EBITDA is not a standardized measurement as prescribed by IFRS, it may not be comparable to the EBITDA of other companies. Richelieu also uses cash flows from operating activities, which are based on net earnings plus amortization of property, plant and equipment and intangible assets, deferred tax expense (or recovery) and share-based compensation expense. These additional measures do not account for net change in non-cash working capital items to exclude seasonality effects and are used by management in its assessments of cash flows from long-term operations. Therefore, cash flows from operating activities may not be comparable to those of other companies. Certain statements set forth in this report (generally identified by terms such as "may", "could", "might", "intend", "expect", "believe", "estimate" or comparable variants) constitute forward-looking statements which, by their very nature, remain subject to other risks and uncertainties as set forth in the Corporation's annual and quarterly reports. Although management considers these assumptions and expectations reasonable based on the information available at the time they are provided, such assumptions and expectations could prove inaccurate and actual results could differ materially. Richelieu is under no obligation to update or revise any forward-looking statements made herein to account for future events or circumstances, except as required by applicable legislation.

 

OCTOBER 6, 2016 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 October 6, 2016, may dial 1-866-865-3087 a few minutes before the start of the call. For those unable to participate, a taped rebroadcast will be available as of 5:15 p.m. on October 6, 2016 until midnight on October 13, 2016, by dialing 1-855-859-2056, access code: 84413139. Members of the media are invited to listen in.

 


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

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

[In thousands of dollars]
[Unaudited]


As at
August 31,
2016

As at
November 30,
2015


$

$

ASSETS



Current assets



Cash and cash equivalents

20,925

29,454

Accounts receivable

108,563

99,975

Inventories

214,326

206,449

Prepaid expenses

2,387

1,430


346,201

337,308

Non-current assets



Property, plant and equipment

31,114

27,963

Intangible assets

23,324

21,325

Goodwill

61,950

58,329

Deferred taxes

4,122

4,867


466,711

449,792

LIABILITIES AND EQUITY



Current liabilities



Accounts payable and accrued liabilities

78,569

71,787

Income taxes payable

199

2,697

Current portion of long-term debt

3,702

2,245


82,470

76,729

Non-current liabilities



Long-term debt

112

1,335

Deferred taxes

3,023

3,020

Other liabilities

1,902

1,901


87,507

82,985

Equity



Share capital

35,805

33,566

Contributed surplus

1,234

1,265

Retained earnings

320,705

308,904

Accumulated other comprehensive income

17,406

19,150

Equity attributable to shareholders of the Corporation

375,150

362,885

Non-controlling interests

4,054

3,922


379,204

366,807


466,711

449,792

 

CONSOLIDATED STATEMENTS OF EARNINGS
[In thousands of dollars, except earnings per share]
[Unaudited]



For the three
months ended
August 31,

For the nine
months ended
August 31,


2016

2015

2016

2015


$

$

$

$

Sales

220,155

199,457

626,477

549,577

Operating expenses excluding amortization and financial costs

194,213

175,063

560,751

487,599

Earnings before amortization, financial costs and income taxes

25,942

24,394

65,726

61,978

Amortization of property, plant and equipment

1,665

1,507

4,818

4,281

Amortization of intangible assets

806

685

2,277

1,957

Financial costs, net

5

(16)

93

(143)


2,476

2,176

7,188

6,095

Earnings before income taxes

23,466

22,218

58,538

55,883

Income taxes

5,987

5,757

14,738

14,571

Net earnings

17,479

16,461

43,800

41,312

Net earnings attributable to:





Shareholders of the Corporation

17,331

16,340

43,600

41,209

Non-controlling interests

148

121

200

103


17,479

16,461

43,800

41,312

Net earnings per share attributable to shareholders of the Corporation





Basic

0.30

0.28

0.75

0.70

Diluted

0.30

0.28

0.74

0.69

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
[In thousands of dollars]
[Unaudited]



For the three
months ended

August 31,

For the nine
months ended
August 31,


2016

2015

2016

2015


$

$

$

$

Net earnings

17,479

16,461

43,800

41,312






Other comprehensive income that will be reclassified to net earnings





Exchange differences on translation of foreign operations

65

4,663

(1,744)

10,872

Comprehensive income

17,544

21,124

42,056

52,184

Comprehensive income attributable to:





Shareholders of the Corporation

17,396

21,003

41,856

52,081

Non-controlling interests

148

121

200

103


17,544

21,124

42,056

52,184

 

CONSOLIDATED STATEMENTS OF CASH FLOWS
[In thousands of dollars]
[Unaudited]


For the three months
ended August 31,

For the nine months
ended August 31,


2016

2015

2016

2015


$

$

$

$

OPERATING ACTIVITIES





Net earnings

17,479

16,461

43,800

41,312

Items not affecting cash






Amortization of property, plant and equipment

1,665

1,507

4,818

4,281


Amortization of intangible assets

806

685

2,277

1,957


Deferred taxes

(69)


Share-based compensation expense

296

295

851

852


20,246

18,948

51,677

48,402

Net change in non-cash working capital balances

9,306

(2,132)

(12,715)

(34,927)


29,552

16,816

38,962

13,475

FINANCING ACTIVITIES





Repayment of long-term debt

(166)

(221)

(766)

Dividends paid to Shareholders of the Parent Corporation

(3,078)

(2,918)

(9,290)

(8,796)

Other dividends paid

(67)

(596)

Common shares issued

1,696

261

2,180

1,068

Common shares repurchased for cancellation

(5,348)

(23,087)

(9,180)


(6,730)

(2,823)

(30,485)

(18,270)






INVESTING ACTIVITIES





Business acquisitions

(558)

(556)

(9,417)

(556)

Additions to property, plant and equipment and intangible assets

(1,623)

(2,535)

(7,664)

(7,004)


(2,181)

(3,091)

(17,081)

(7,560)

Effect of exchange rate changes on cash and cash equivalents

56

(120)

75

(501)






Net change in cash and cash equivalents

20,697

10,782

(8,529)

(12,856)

Cash and cash equivalents, beginning of period

228

10,083

29,454

33,721

Cash and cash equivalents, end of period

20,925

20,865

20,925

20,865

 

 

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


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