Richelieu pursued its growth and expansion in 2013 - Good financial performance in the fourth quarter

• Fourth-quarter consolidated sales grew by 6.5% and net earnings attributable to shareholders per share diluted amounted to $0.64 diluted, up by 6.7%.
  
  
• For 2013, consolidated sales grew by 3.7% to $586.8 million and net earnings attributable to shareholders per share diluted amounted to $2.22, up 3.3%.
  
  
• U.S. sales increased by 19.0% (in US$) for 2013, of which 13.8% from internal growth.
  
  
• Excellent financial position with net cash of $44.8 million, practically no debt and working capital of $204.1 million for a current ratio of 4.5:1 as at November 30, 2013.
  
  
• Share repurchase during 2013: 873,000 shares ($36.6 million) for a net reduction of 748,423 in outstanding shares (issue of 124,577 shares).
  
  
• Subsequent event: acquisition in Eastern Canada on December 2, 2013, for additional sales of approximately $4 million.
  
  
• Increase of 7.7% in the quarterly dividend which was raised from $0.13 to $0.14 - a dividend of $0.14 per share has been declared and will be payable on February 20, 2014 to shareholders of record as at February 6, 2014.
  
  

MONTREAL, Jan. 23, 2014 /CNW Telbec/ - "Richelieu (TSX: RCH) pursued its growth and expansion and ended 2013 with an impeccable financial position. We remain well positioned to carry on our North American business strategy in 2014. During 2013, we repurchased common shares for $36.6 million and paid dividends of $10.8 million, thereby we distributed a total of $47.4 million to shareholders and closed the year with excellent liquidities. Our sales and net earnings were up over 2012 despite the slowdown in Canada. We continued to reinforce our positioning in the U.S. where growth was excellent all year-long. Also, our market penetration initiatives and sustained innovation strategy enabled us to further benefit from better economic conditions. Having closed two acquisitions in 2013, in December we acquired Procraft Industrial Ltd, a finishing products distributor with three distribution centres in the Maritime Provinces, thereby allowing us to consolidate our positioning in this market where we were already present," indicated Richard Lord, President and Chief Executive Officer of Richelieu.

ANALYSIS OF OPERATING RESULTS FOR THE YEAR ENDED NOVEMBER 30, 2013 COMPARED WITH THE YEAR ENDED NOVEMBER 30, 2012 

Consolidated sales

Consolidated sales totalled $586.8 million, an increase of $21 million or 3.7% over 2012, of which 2.3% from internal growth and 1.4% from acquisitions.

Richelieu achieved sales of $497.3 million in the manufacturers market, compared with $476.2 million for 2012, an increase of $21.1 million or 4.4%, of which 2.8% from internal growth and 1.6% from acquisitions. Most of the Corporation's market segments contributed to this growth. Sales to hardware retailers and renovation superstores remained relatively stable at $89.5 million, thanks notably to the U.S. retailers market, which compensated for the decline in this market in Canada.

In Canada, the Corporation witnessed a sustained market slowdown throughout the year, to which was added the negative effect of the strike in the Quebec construction industry last June. Sales amounted to $439.8 million, compared with $445.2 million for 2012, a decline of 1.2% reflecting an internal decrease of 1.6% and a growth of 0.4% stemming from Hi-Tech's contribution. In the manufacturers market, Richelieu recorded sales of $360.1 million, a decline of 0.9%, on account of an internal decrease of 1.3% and a growth of 0.4% from the aforementioned acquisition. Sales to hardware retailers and renovation superstores decreased to $79.7 million, down by 2.4% from $81.7 million for 2012.

In the United States, Richelieu continued to benefit from its positioning and its growth and innovation strategy, enabling it to take advantage of more favourable economic conditions. Sales grew to US$143.3 million, up by US$22.9 million or 19.0% over 2012. To an internal growth of 13.8% was added an increase of 5.2% from acquisitions. Sales to manufacturers amounted to US$133.8 million, an increase of 19.0%, of which 13.7% from internal growth and 5.3% from acquisitions. Sales to hardware retailers and renovation superstores grew by 21.0% (in US$). Expressed in Canadian dollars, U.S. sales totalled $146.9 million, compared with $120.7 million for 2012, an increase of 21.8%, of which 16.6% from internal growth and 5.2% from acquisitions. They accounted for 25.0% of 2013 consolidated sales, whereas in 2012, U.S. sales had represented 21.3% of the year's consolidated sales.

Consolidated EBITDA and EBITDA margin

Earnings before interest, income taxes and amortization (EBITDA) amounted to $70.4 million, down by 1.1% from 2012. The gross margin declined slightly from 2012 due primarily to the following factors: the more challenging economic context in Canada and competitive environment, the lower margins of certain prior acquisitions having a different product mix, the higher proportion of sales in the United States where the product mix also differs, and the increase in the supply costs of certain products stemming from the rapid appreciation of currencies before the adjustment of selling prices. To these factors were added the impact of the significant share price appreciation on the compensation expense related to the current deferred share unit plan and two less business days in the first and third quarters of 2013 than in 2012. Consequently, the EBITDA margin stood at 12.0%, which nevertheless reflected cost and expense control efforts throughout the year.

Income taxes amounted to $16.9 million, down by $1.0 million from 2012. This reduction is due to fluctuations in results by region where the Corporation and its subsidiaries are subject to tax rates and tax regulations differing from one another and to the use of operating losses carried forward.

Consolidated net earnings attributable to shareholders

Net earnings grew by 1.6% over 2012. Considering non-controlling interests, net earnings attributable to shareholders of the Corporation totalled $46.4 million, up by 2.2% over 2012. The net margin attributable to shareholders was 7.9%. Earnings per share rose to $2.25 basic and $2.22 diluted, compared with $2.17 basic and $2.15 diluted for 2012, an increase of 3.7% and 3.3% respectively.

Comprehensive income amounted to $49.9 million, considering a positive adjustment of $3.3 million on translation of the financial statements of the subsidiary in the United States, compared with $44.8 million for 2012, considering 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, 2013

During the fourth quarter, Richelieu achieved good growth in consolidated sales which totalled $155.3 million, an increase of $9.5 million or 6.5% over the corresponding quarter of 2012, including 5.1% from internal growth and 1.4% from acquisitions.

Sales to manufacturers amounted to $133.7 million, compared with $125.3 million for the corresponding period of 2012, an increase of $8.4 million or 6.7%, of which 5.1% from internal growth and 1.6% from acquisitions. Sales to hardware retailers and renovation superstores grew to $21.6 million, compared with $20.5 million for the same quarter of 2012, an increase of $1.1 million or 5.4%.

In Canada, the Corporation recorded sales of $115.9 million, compared with $114.6 million for the fourth quarter of 2012, an increase of $1.3 million or 1.1% stemming from the 1.4% contribution of Hi-Tech, whereas the internal decrease was 0.3%. Richelieu's sales to manufacturers grew by 0.3% to $96.6 million, compared with $96.3 million for the fourth quarter of 2012. Sales to hardware retailers and renovation superstores increased to $19.3 million, up by 5.5% over $18.3 million for the corresponding quarter of 2012.

In the United States, constant market penetration efforts and the launch of new product lines continued to pay off, thanks especially to more favourable economic conditions. The Corporation achieved sales of US$37.9 million, compared with US$31.6 million for the corresponding quarter of 2012, an increase of US$6.3 million or 20.0%, of which 18.7% from internal growth and 1.3% from Savannah's contribution. The Corporation's sales to manufacturers grew to US$35.2 million, an increase of 20.1%, of which 18.7% from internal growth and 1.4% from Savannah. Sales to hardware retailers and renovation superstores were stable with those for the same quarter of 2012; note that in 2012, the introduction of additional products in stores resulted in exceptional sales. In Canadian dollars, U.S. sales amounted to $39.4 million, compared with $31.2 million for the corresponding quarter of 2012, an increase of 26.3%, of which 25.0% from internal growth and 1.3% from the aforementioned acquisition. They accounted for 25.4% of the quarter's consolidated sales, whereas for the fourth quarter of 2012, U.S. sales had represented 21.4% of the period's consolidated sales.

Earnings before interest, income taxes and amortization (EBITDA) totalled $20.2 million, up by 3.0% over the corresponding quarter of 2012 due primarily to the sales growth. The gross margin was down slightly from the fourth quarter of 2012 due mainly to the competitive environment and the more difficult economic context in Canada, the appreciation of currencies which raised the supply costs of certain products before the adjustment of selling prices, and the higher proportion of U.S. sales. The EBITDA margin was therefore 13.0% for the fourth quarter of 2013.

Income taxes amounted to $5.2 million, an increase of $0.3 million over the fourth quarter of 2012.

Fourth-quarter net earnings rose 4.4%. Considering non-controlling interests, net earnings attributable to shareholders of the Corporation grew to $13.3 million, up by 5.1% over the corresponding quarter of 2012. The net margin attributable to shareholders remained relatively stable at 8.6%. Earnings per share amounted to $0.65 basic and $0.64 diluted, compared with $0.61 basic and $0.60 diluted for the fourth quarter of 2012, an increase of 6.6% and 6.7% respectively.

Comprehensive income totalled $13.9 million, considering a positive impact of $0.5 million on translation of the financial statements of the subsidiary in the United States, compared with $13.2 million for the corresponding quarter of 2012, considering a positive impact of $0.4 million on translation of the financial statements of the subsidiary in the United States.

Cash flows from operating activities (before net change in non-cash working capital balances) grew to $15.2 million or $0.73 diluted per share, up by 3.0% and 4.3% over the fourth quarter of 2012. Net change in non-cash working capital balances provided cash flows of $4.3 million, compared with $2.8 million in the fourth quarter of 2012. Changes in accounts payable and inventories represented a cash inflow of $4.9 million, whereas changes in accounts receivable represented a cash outflow of $0.6 million. Consequently, operating activities provided cash flows of $19.5 million, compared with $17.6 million for the fourth quarter of 2012.

Financing activities represented a cash outflow of $24.7 million, compared with $5.6 million for the corresponding quarter of 2012. Richelieu repurchased common shares under its normal course issuer bid for $22.0 million, compared with $3.1 million in the fourth quarter of 2012. The Corporation also paid shareholder dividends of $2.7 million, up by 6.8%, on account of the dividend increase announced in January 2013. In addition, it issued common shares for $0.1 million upon the exercise of options under its stock option plan, compared with $0.3 million in the same quarter of 2012.

Investing activities represented a cash outflow of $5.4 million for the fourth quarter, of which $4.2 million for the acquisition de Hi-Tech and $1.2 million for equipment needed for operations, whereas the Corporation had invested $2.3 million in property, plant and equipment during the same quarter of 2012.

FINANCIAL POSITION

Analysis of principal cash flows for the year ended November 30, 2013

Operating activities

Cash flows from operating activities (before net change in non-cash working capital balances) totalled $55.0 million or $2.63 diluted per share, compared with $54.4 million or $2.57 diluted per share for 2012, primarily reflecting the increase in net earnings. Net change in non-cash working capital balances used cash flows of $6.6 million, reflecting changes in accounts receivable, inventories, accounts payable and other items, compared with $8.8 million for 2012. Consequently, operating activities provided cash flows of $48.4 million, compared with $45.6 million for 2012.

Financing activities

Richelieu repurchased common shares under its normal course issuer bid for $36.6 million, compared with $5.9 million in 2012. In addition, it paid shareholder dividends of $10.8 million, up by 7.4% over 2012, on account of the dividend increase announced in January 2013, and issued common shares for $2.3 million upon the exercise of options under its stock option plan, compared with $2.6 million during 2012. The Corporation also repaid $0.7 million on its long-term debt, compared with $2.9 million in 2012. Consequently, financing activities represented a cash outflow of $45.8 million, compared with $16.2 million in 2012.

Investing activities

In 2013, the Corporation invested a total of $7.9 million, of which $4.4 million in the acquisition of the net assets of Savannah and Hi-Tech and $3.5 million in equipment needed for operations. Note that in 2012, the Corporation had invested $7.2 million, of which $2.4 million in the acquisition of the net assets of CourterCo and $4.8 million primarily in software and equipment needed for operations.

Sources of financing

As at November 30, 2013, cash and cash equivalents totalled $46.2 million, compared with $51.6 million a year earlier. The Corporation posted a working capital of $204.1 million for a current ratio of 4.5:1, compared with $200.1 million (4.6:1 ratio) as at November 30, 2012.

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 2014. The Corporation continues to benefit from an authorized line of credit of CA$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, the Corporation estimates it could obtain access to other outside financing if necessary.

Summary of financial position
(in thousands of $)

As at November 30		2013		2012
Current assets		262,251		256,210
Non-current assets		94,074		93,659
Total		356,325		349,869
Current liabilities		58,134		56,122
Non-current liabilities		5,077		5,805
Equity attributable to shareholders of the Corporation		288,845		283,835
Non-controlling interests		4,269		4,107
Total		356,325		349,869
Exchange rate on a translation of a subsidiary in the United States		1,062		0,9936

Assets

Total assets amounted to $356.3 million as at November 30, 2013, compared with $349.9 million a year earlier, up by 1.8% or $6.5 million. This increase resulted from the Corporation's growth and the two acquisitions closed in 2013. Current assets grew by 2.4% or $6.0 million over November 30, 2012, notably reflecting the increases of $9.1 million in inventories, $2.6 million in accounts receivable and $0.2 million in prepaid expenses, whereas cash and cash equivalents decreased by $5.4 million and income taxes receivable by $0.5 million.

Net cash
(in thousands of $)

As at November 30		2013		2012
Current portion of long-term debt		1,354		1,743
Long-term debt		-		820
Total		1,354		2,563
Cash and cash equivalents		46,187		51,587
Total cash net of debt		44,833		49,024

The Corporation benefits from an excellent financial position to pursue its business strategy. As at November 30, 2013, total debt, consisting entirely of the current portion of long-term debt, amounted to $1.4 million, representing balances payable on prior acquisitions.

Equity reached $293.1 million as at November 30, 2013, compared with $287.9 million as at November 30, 2012, an increase of 1.8% stemming mainly from the growth of $1.9 million in share capital and the change of $3.3 million in accumulated other comprehensive income, less the change of $0.4 million in contributed surplus. Retained earnings varied by $0.2 million, reflecting the effect of the year's net earnings, less share repurchases and dividends paid during the year. As at November 30, 2013, the book value per share was $14.41, compared with $13.65 as at November 30, 2012.

Return on average equity stood at 16.2% as at November 30, 2013, compared with 16.9% a year earlier.

EVENT SUBSEQUENT TO YEAR-END

On December 2, 2013, Richelieu acquired all of the outstanding common shares of Procraft Industrial Ltd, a distributor of finishing products serving a customer base of residential and commercial woodworkers and kitchen cabinet manufacturers in the Maritime Provinces from its three distribution centres located in Halifax (N.S.), Moncton and Fredericton (N.B.). This acquisition will add approximately $4 million to the Corporation's total sales.

Profile as at January 23, 2014

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 some 100,000 different items targeted to a base of some 70,000 customers who are served by 62 centres in North America - 35 distribution centres in Canada, 25 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 interest, income taxes and amortization ("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 revenues from operating activities or earnings, an indicator of earnings from operating activities operating performance or 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 continuing operations and cash flows from continuing operations per share. Cash flows from continuing operations are based on the net earnings attributable to shareholders of the Company 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 the cash flows from operating activities 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 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.

JANUARY 23, 2014 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 23, 2014 may call 1-866-865-3087 a few 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 23, 2014 until midnight on January 30, 2014, by dialing 1-855-859-2056, access code: 31042363. Members of the media invited to listen in.

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

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at November 30
[In thousands of dollars]

		2013		2012
		$		$
ASSETS
Current assets
Cash and cash equivalents		46,187		51,587
Accounts receivable		78,343		75,721
Income taxes receivable		—		514
Inventories		136,746		127,607
Prepaid expenses		975		781
		262,251		256,210
Non-current assets
Property, plant and equipment		22,291		23,740
Intangible assets		15,661		15,601
Goodwill		52,788		51,405
Deferred taxes		3,334		2,913
		356,325		349,869
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and accrued liabilities		56,462		54,379
Income taxes payable		318		—
Current portion of long-term debt		1,354		1,743
		58,134		56,122
Non-current liabilities
Long-term debt		—		820
Deferred taxes		3,246		3,246
Other liabilities		1,831		1,739
		63,211		61,927
Equity
Share capital		25,288		23,349
Contributed surplus		2,356		2,761
Retained earnings		258,965		258,775
Accumulated other comprehensive income (loss)		2,236		(1,050)
Equity attributable to shareholders of the Corporation		288,845		283,835
Non-controlling interests		4,269		4,107
		293,114		287,942
		356,325		349,869

CONSOLIDATED STATEMENTS OF EARNINGS

Years ended November 30
[In thousands of dollars, except earnings per share]

		2013		2012
		$		$
Sales		586,775		565,798
Cost of goods sold, warehousing, selling and administrative expenses		516,402		494,635
Earnings before amortization, financial costs and income taxes		70,373		71,163
Amortization of property, plant and equipment		5,060		5,162
Amortization of intangible assets		2,218		2,351
Financial costs, net		(464)		(198)
		6,814		7,315
Earnings before income taxes		63,559		63,848
Income taxes		16,902		17,939
Net earnings		46,657		45,909
Net earnings attributable to:
Shareholders of the Corporation		46,403		45,404
Non-controlling interests		254		505
		46,657		45,909
Net earnings per share attributable to shareholders of the Corporation
Basic		2.25		2.17
Diluted		2.22		2.15

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years ended November 30
[In thousands of dollars]

				2013		2012
		Notes		$		$
Net earnings				46,657		45,909
Other comprehensive income (loss)
Exchange differences on translation of foreign operations				3,286		(1,153)
Comprehensive income				49,943		44,756
Comprehensive income attributable to:
Shareholders of the Corporation				49,689		44,251
Non-controlling interests				254		505
				49,943		44,756

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended November 30
[In thousands of dollars]

			2013		2012
			$		$
OPERATING ACTIVITIES
Net earnings			46,657		45,909
Items not affecting cash
	Amortization of property, plant and equipment		5,060		5,162
	Amortization of intangible assets		2,218		2,351
	Deferred taxes		(354)		—
	Share-based compensation expense		1,397		981
			54,978		54,403
Net change in non-cash working capital balances			(6,613)		(8,781)
			48,365		45,622
FINANCING ACTIVITIES
Repayment of long-term debt			(737)		(2,909)
Dividends paid			(10,768)		(10,026)
Common shares issued			2,285		2,576
Common shares repurchased for cancellation			(36,596)		(5,855)
			(45,816)		(16,214)
INVESTING ACTIVITIES
Business acquisitions			(4,447)		(2,386)
Additions to property, plant and equipment and intangible assets			(3,451)		(4,797)
			(7,898)		(7,183)
Effect of exchange rate changes on cash and cash equivalents			(51)		267
Net change in cash and cash equivalents			(5,400)		22,492
Cash and cash equivalents, beginning of period			51,587		29,095
Cash and cash equivalents, end of period			46,187		51,587
Supplementary information
Income taxes paid			16,351		16,647
Interest received, net			(464)		(335)

SOURCE: Richelieu Hardware Ltd.

Richard Lord 
President and Chief Executive Officer
Antoine Auclair
Vice-President and Chief Financial Officer
Tel: [phone] www.richelieu.com