Sales and earnings growth at Richelieu in the first quarter of 2010
-------------------------------------------------------------------------
- Consolidated sales totalled $95.2 million, an increase of 3.5%.
- Net earnings grew by 61% to $7.0 million.
- Earnings per share rose to $0.32 per share, up by 60%.
- Earnings per share from continuing operations increased by 45% to
$0.29.
- Acquisition of Woodland Specialties (Syracuse, New York State) and
opening of a distribution centre in Raleigh, North Carolina.
-------------------------------------------------------------------------
</pre>
<p/>
<p> TSX: RCH</p>
<p/>
<p><span class="xn-location">MONTREAL</span>, <span class="xn-chron">March 25</span> /CNW Telbec/ - Richelieu started 2010 strongly, recording very satisfactory growth for its first quarter ended <span class="xn-chron">February 28</span>. This was achieved in its Canadian markets, especially Eastern and Central <span class="xn-location">Canada</span> which posted significant increases, whereas its U.S. markets are still in a slowdown. On <span class="xn-chron">December 1, 2009</span>, Richelieu acquired substantially all of the net assets of Woodland Specialties, a distributor of hardware products, high-pressure laminates and finishing products based in <span class="xn-location">Syracuse</span>, New York State.</p>
<p>"For a first quarter, which is usually the year's weakest period, we achieved excellent growth in <span class="xn-location">Canada</span> in our two major markets, manufacturers and retailers. We increased our sales to manufacturers by 8%, which reflects our ability to take advantage of market opportunities thanks to the innovation and enhancement of product offering, our representatives' presence, the availability of inventories and our superior-quality service, the contribution of our website richelieu.com and our capacity to target the sales potential by customer. In addition, we are pleased with the positive impact of the efforts we made last year to expand our offering to and presence in the retailers market; they gave rise to a 19% sales growth in this market in <span class="xn-location">Canada</span>. Last year, we increased our display floor space at retailers, which contributed to our sales growth in this market. Conversely, in the <span class="xn-location">United States</span>, our sales declined by 9.2% due to the economic context, but we are confident about our strategy and are pursuing our market penetration efforts. We discontinued our ceramic distribution activities, which no longer met our profit criteria and were not part of our core business; combined with the measures implemented in 2009 to mitigate the effects of the downturn, this decision will have a positive impact on our profit margins in upcoming periods," indicated <span class="xn-person">Richard Lord</span>, President and Chief Executive Officer.</p>
<p/>
<p>NEXT DIVIDEND PAYMENT</p>
<p/>
<p>At its meeting on <span class="xn-chron">March 25, 2010</span>, the Board of Directors approved the payment of a quarterly dividend of <span class="xn-money">$0.09</span> per share. This dividend is payable on <span class="xn-chron">April 22, 2010</span> to shareholders of record as at <span class="xn-chron">April 8, 2010</span>.</p>
<p/>
<p>ANALYSIS OF OPERATING RESULTS FOR THE FIRST QUARTER ENDED <span class="xn-chron">FEBRUARY 28, 2010</span> COMPARED WITH THE FIRST QUARTER ENDED <span class="xn-chron">FEBRUARY 28, 2009</span></p>
<p/>
<p>Consolidated sales totalled <span class="xn-money">$95.2 million</span>, compared with <span class="xn-money">$91.9 million</span> for the same period of 2009, an increase of 3.5%, of which 2.3% from internal growth and 1.2% from the acquisition of Paint Direct Inc. (<span class="xn-location">Calgary</span>, Alberta) and Woodland Specialties (<span class="xn-location">Syracuse</span>, New York) closed on <span class="xn-chron">November 4</span> and <span class="xn-chron">December 1, 2009</span> respectively. These represent sales from continuing operations because the Company decided to discontinue its ceramic distribution activities on <span class="xn-chron">December 29, 2009</span> and disposed of the inventories for a consideration of <span class="xn-money">$2.5 million</span> on <span class="xn-chron">January 29, 2010</span>. Accordingly, these activities are treated as discontinued operations in the statement of earnings for the first quarters ended <span class="xn-chron">February 28, 2010</span> and 2009.</p>
<p>The Company discontinued its ceramic sales activities as they no longer met its profit criteria and were not part of its core business. Consequently, consolidated sales for upcoming quarters will no longer reflect these activities' sales, which should result in improved profit margins.</p>
<p>Sales to manufacturers amounted to <span class="xn-money">$77.6 million</span>, a slight increase of 0.8% or <span class="xn-money">$0.6 million</span> over the corresponding quarter of 2009, thanks to a solid growth in Canadian markets which offset a major slowdown in the <span class="xn-location">United States</span>. Sales to hardware retailers including renovation superstores totalled <span class="xn-money">$17.6 million</span>, up by 18.0% or <span class="xn-money">$2.7 million</span> over the first quarter of the previous year. This growth reflects the benefits of the investments the Company made over the past year to increase its presence and product offering in the retailers including renovation superstores market in <span class="xn-location">Canada</span>.</p>
<p>Sales amounted to <span class="xn-money">$81.2 million</span> in <span class="xn-location">Canada</span>, up by 10.0% or <span class="xn-money">$7.4 million</span> over the corresponding quarter of 2009. Thus, Richelieu recorded 85.3% of the period's consolidated sales in its Canadian markets, up from 80.3% for the same quarter of the previous year. This increase stemmed mainly from the Eastern Canadian market which continued to post solid growth, to which were added a sharp rise in Central <span class="xn-location">Canada</span> reflecting renewed activity in Ontario and an appreciable growth in Western <span class="xn-location">Canada</span> achieved primarily in the retailers market.</p>
<p>Sales totalled US$13.3 million in the <span class="xn-location">United States</span>, down by 9.2% or US$1.3 million, of which 13.6% due to the internal decrease related to the economic context in this country, and a 4.4% growth-by-acquisition from the contribution of Woodland Specialties. Expressed in Canadian dollars, these sales amounted to <span class="xn-money">$14.0 million</span>, compared with <span class="xn-money">$18.1 million</span> for the first quarter of the previous year, thereby representing 14.7% of the period's consolidated sales.</p>
<p>Earnings before income taxes, interest, amortization and non-controlling interest (EBITDA) from continuing operations increased by 34.7% to <span class="xn-money">$10.9 million</span>. The gross profit margin improved thanks to a combination of positive factors, including the strengthening of the Canadian dollar (contrary to the corresponding period of 2009) and the fact that during the first quarter of the previous year, the Company assumed higher market penetration costs to increase its product offering and presence in the retailers market in <span class="xn-location">Canada</span>, whereas it is currently reaping the benefits of last year's efforts. The EBITDA margin improved to 11.4% from 8.8% for the first quarter of 2009; this improvement reflects the aforementioned factors and the sales growth.</p>
<p>Income taxes amounted to <span class="xn-money">$3.0 million</span>, compared with <span class="xn-money">$2.1 million</span> for the first quarter of 2009, reflecting the increase in earnings before income taxes and non-controlling interest.</p>
<p>Net earnings grew by 61.0% to <span class="xn-money">$7.0 million</span>. This growth reflects the aforementioned factors, to which was added a non-recurring gain net of taxes of <span class="xn-money">$0.7 million</span> on the disposal of the ceramics inventories. Earnings per share amounted to <span class="xn-money">$0.32</span> (basic and diluted), compared with <span class="xn-money">$0.20</span> (basic and diluted) for the first quarter of 2009, including the contribution of the discontinued operations of <span class="xn-money">$0.03</span> per share in 2010.</p>
<p>On account of a negative adjustment of <span class="xn-money">$0.1 million</span> on translation of the financial statements of the self-sustaining subsidiary in the <span class="xn-location">United States</span>, comprehensive income stood at <span class="xn-money">$6.9 million</span>.</p>
<p/>
<p>FINANCIAL POSITION</p>
<p/>
<p>Operating activities</p>
<p/>
<p>Cash flows provided by operating activities (before net change in non-cash working capital balances related to operations) increased by 24.2% to <span class="xn-money">$7.8 million</span> or <span class="xn-money">$0.36</span> per share, up from <span class="xn-money">$6.3 million</span> or <span class="xn-money">$0.29</span> per share for the first quarter of 2009, mainly reflecting the growth in net earnings. Net change in non-cash working capital items related to operations represented a cash outflow of <span class="xn-money">$1.1 million</span>, compared with <span class="xn-money">$6.7 million</span> in the first quarter of 2009. This variation is due primarily to a decrease of approximately <span class="xn-money">$5.0 million</span> in accounts receivable from <span class="xn-chron">November 30, 2009</span>, an equivalent increase in inventories and the variation in income taxes payable and receivable. Consequently, operating activities provided cash flows of <span class="xn-money">$6.7 million</span>, whereas they had used cash flows of <span class="xn-money">$0.4 million</span> in the first quarter of 2009.</p>
<p/>
<p>Financing activities</p>
<p/>
<p>Richelieu paid a total of approximately <span class="xn-money">$2.0 million</span> in shareholder dividends, an increase of 11.5% over the first quarter of 2009. The Company issued common shares for a consideration of <span class="xn-money">$0.1 million</span> subsequent to the exercise of options under the stock option plan. No common shares were purchased for cancellation during the period, compared to purchases of approximately <span class="xn-money">$0.1 million</span> in the first quarter of 2009. Consequently, financing activities used cash flows of <span class="xn-money">$1.8 million</span> during the first quarter of 2010, fairly equivalent to those for the corresponding quarter of 2009.</p>
<p/>
<p>Investing activities</p>
<p/>
<p>Richelieu invested <span class="xn-money">$1.4 million</span> during the first quarter, including <span class="xn-money">$0.6 million</span> for the acquisition of the principal net assets of Woodland Specialties and more than <span class="xn-money">$0.7 million</span> for various capital assets, mainly warehouse equipment and displays targeted to the retailers market.</p>
<p/>
<p>Sources of financing</p>
<p/>
<p>As at <span class="xn-chron">February 28, 2010</span>, cash and cash equivalents totalled <span class="xn-money">$54.4 million</span>, up from <span class="xn-money">$3.2 million</span> as at <span class="xn-chron">February 28, 2009</span>. The Company posted a working capital of <span class="xn-money">$156.1 million</span> for a current ratio of 4.8:1, compared with <span class="xn-money">$135.0 million</span> (4.9:1 ratio) as at <span class="xn-chron">February 28, 2009</span>, and <span class="xn-money">$150.5 million</span> (4.7:1 ratio) as at <span class="xn-chron">November 30, 2009</span>.</p>
<p>Richelieu believes that it has the capital resources needed to fulfill its ongoing commitments and obligations in 2010 and to assume the funding requirements needed for its growth and the financing and investing activities planned for the year. Furthermore, the Company has an authorized line of credit of <span class="xn-money">$26.0 million</span>, 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 could obtain access to other outside financing if necessary.</p>
<p/>
<pre>
Summary balance sheet
As at February 28 2010 2009
(in thousands of $)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Current assets 197,466 169,437
Long-term assets 94,209 103,172
-------------------------------------------------------------------------
Total 291,675 272,609
-------------------------------------------------------------------------
Current liabilities 41,379 34,432
Other liabilities 4,576 5,630
Shareholders' equity 245,720 232,547
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total 291,675 272,609
-------------------------------------------------------------------------
-------------------------------------------------------------------------
</pre>
<p/>
<p>Total assets amounted to <span class="xn-money">$291.7 million</span> as at <span class="xn-chron">February 28, 2010</span>, up 7.0% over <span class="xn-money">$272.6 million</span> a year earlier. Current assets grew by 16.5% or <span class="xn-money">$28.0 million</span> over <span class="xn-chron">February 28, 2009</span>; this growth notably reflects the <span class="xn-money">$50.6 million</span> increase in cash and cash equivalents and the decreases of <span class="xn-money">$2.3 million</span> in accounts receivable, of <span class="xn-money">$2.8 million</span> in income taxes receivable and of <span class="xn-money">$17.8 million</span> in inventories subsequent to the optimization of the supply chain management and a reduction in inventories in the context of the recession in 2009.</p>
<p/>
<pre>
TOTAL CASH
As at February 28 2010 2009
(in thousands of $)
-------------------------------------------------------------------------
Bank indebtedness - -
Current portion of long-term debt 351 283
Long-term debt 316 382
-------------------------------------------------------------------------
Total 669 665
-------------------------------------------------------------------------
less cash and cash equivalents 54,394 3,186
Net cash 53,727 2,521
-------------------------------------------------------------------------
-------------------------------------------------------------------------
</pre>
<p/>
<p>After deducting total interest-bearing debt of <span class="xn-money">$0.7 million</span>, the Company had a net cash position of <span class="xn-money">$53.7 million</span> as at <span class="xn-chron">February 28, 2010</span>. Richelieu continues to benefit from a healthy and solid financial position, enabling it to pursue its business strategy in its segment.</p>
<p>Shareholders' equity totalled <span class="xn-money">$245.7 million</span> as at <span class="xn-chron">February 28, 2010</span>, up from <span class="xn-money">$232.5 million</span> a year earlier; this 5.7% growth mainly reflects the increase of <span class="xn-money">$21.9 million</span> in retained earnings which amounted to <span class="xn-money">$229.0 million</span> as at <span class="xn-chron">February 28, 2010</span>, and the increase of approximately <span class="xn-money">$0.6 million</span> in contributed surplus, less a reduction in accumulated comprehensive income of <span class="xn-money">$9.5 million</span>. At the close of the first quarter, the book value per share stood at <span class="xn-money">$11.27</span>, compared with <span class="xn-money">$10.58</span> as at <span class="xn-chron">February 28, 2009</span>.</p>
<p/>
<p>Outlook</p>
<p/>
<p>"In upcoming quarters, we expect our intensive efforts to further develop the manufacturers and retailers markets to bear fruit, thanks notably to the new products and innovations we constantly add to our offering. We will also reap the benefits of the two acquisitions closed in November and <span class="xn-chron">December 2009</span> and the two new distribution centres opened in the <span class="xn-location">United States</span> during the previous year. We plan to pursue our expansion through acquisitions and opening new centres in <span class="xn-location">North America</span>," added <span class="xn-person">Mr. Lord</span>.</p>
<p/>
<pre>
Profile as at March 25, 2010
----------------------------
</pre>
<p/>
<p>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 65,000 different items targeted to a base of over 40,000 customers who are served by 50 centres in <span class="xn-location">North America</span> - 29 distribution centres across <span class="xn-location">Canada</span>, 19 in the <span class="xn-location">United States</span> and two manufacturing plants in <span class="xn-location">Canada</span>, 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.</p>
<p/>
<pre>
-------------------------------------------------------------------------
The Management's Report for the first quarter ended February 28, 2010,
along with the unaudited consolidated financial statements and
accompanying notes, are filed as of today on SEDAR (www.sedar.com).
-------------------------------------------------------------------------
</pre>
<p/>
<p>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, such as statements about the growth outlook, 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 those relating to economic conditions, fluctuations in exchange rates and operating expenses, and the absence of unusual events entailing supplementary 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 2008 Annual Report as well as its Annual Information Form, which are available on the System for Electronic Document Analysis and Retrieval (SEDAR) website at <a href="http://www.sedar.com">www.sedar.com</a>. 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.</p>
<p/>
<pre>
-------------------------------------------------------------------------
CONFERENCE CALL - MARCH 25, 2010 AT 3:00 P.M. (EASTERN TIME)
-------------------------------------------------------------------------
</pre>
<p/>
<p>Financial analysts and investors interested in participating in the conference call on Richelieu's results to be held at <span class="xn-chron">3:00 p.m.</span> on <span class="xn-chron">March 25, 2010</span> can 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 <span class="xn-chron">6:00 p.m.</span> on <span class="xn-chron">March 25, 2010</span> until midnight on <span class="xn-chron">April 1, 2010</span>, by dialing 1-800-642-1687, access code: 61254453. Members of the media are invited to listen in.</p>
<p/>
<pre>
-------------------------------------------------------------------------
Photos are available under "About Richelieu" - "Media" section at
www.richelieu.com.
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Consolidated statements of earnings (unaudited)
Periods ended February 28
(In thousands of dollars, except earnings per share)
2010 2009
(Adjusted)
$ $
---------------------------
Sales 95,183 91,124
Cost of sales and warehouse, selling and
administrative expenses 84,303 83,847
---------------------------
Earnings before the following 10,880 8,077
---------------------------
Amortization of capital assets 1,261 1,261
Amortization of intangible assets 325 356
Financial costs, net (22) 2
---------------------------
1,564 1,619
---------------------------
Earnings before income taxes, non-controlling
interest and discontinued operations 9,316 6,458
Income taxes 2,961 2,076
---------------------------
Earnings before non-controlling interest and
discontinued operations 6,355 4,382
Non-controlling interest 12 14
---------------------------
Net earnings from continued operations 6,343 4,368
---------------------------
Net profit (net loss) from discontinued
operations 659 (20)
---------------------------
Net earnings 7,002 4,348
---------------------------
---------------------------
Earnings per share
Basic
From continued operations 0.29 0.20
From discontinued operations 0.03 -
---------------------------
0.32 0.20
---------------------------
---------------------------
Diluted
From continued operations 0.29 0.20
From discontinued operations 0.03 -
---------------------------
0.32 0.20
---------------------------
---------------------------
Note: The comparative figures included in the consolidated statements of
earnings and cash flow have been adjusted to reflect the
classification of the results from the ceramic distribution
activities as discontinued operations.
Consolidated statements retained earnings (unaudited)
Periods ended February 28
(In thousands of dollars)
2010 2009
$ $
---------------------------
Net earnings 7,002 4,348
Retained earnings, beginning of period 223,986 204,591
Dividends (1,961) (1,758)
Premium on redemption of common shares
for cancellation - (57)
---------------------------
Retained earnings, end of period 229,027 207,124
---------------------------
---------------------------
Consolidated statements of comprehensive income (unaudited)
Periods ended February 28
(In thousands of dollars)
2010 2009
$ $
---------------------------
Net earnings 7,002 4,348
Other comprehensive income
Translation adjustment of the net investment
in self-sustaining foreign operations (133) 1,536
---------------------------
Comprehensive income 6,869 5,884
---------------------------
---------------------------
Consolidated statements of cash flows (unaudited)
Periods ended February 28
(In thousands of dollars)
2010 2009
(Adjusted)
$ $
---------------------------
OPERATING ACTIVITIES
Net earnings from continued operations 6,343 4,368
Non-cash items
Amortization of capital assets 1,261 1,261
Amortization of intangible assets 325 356
Future income taxes (291) 75
Non-controlling interest 12 14
Stock-based compensation expense 198 247
---------------------------
7,848 6,321
Net change in non-cash working capital
balances related to operations (1,104) (6,746)
---------------------------
6,744 (425)
---------------------------
FINANCING ACTIVITIES
Dividends paid (1,961) (1,758)
Issue of common shares 114 -
Redemption of common shares for cancellation - (60)
---------------------------
(1,847) (1,818)
---------------------------
INVESTING ACTIVITIES
Business acquisition (622) -
Additions to capital assets (733) (937)
---------------------------
(1,355) (937)
---------------------------
Effect of exchange rate fluctuations
on cash and cash equivalents 155 (159)
Net change in cash and cash equivalents
from continued operations 3,697 (3,339)
Cash flows from discontinued operations 2,255 399
---------------------------
Cash and cash equivalents, beginning of period 48,442 6,126
---------------------------
Cash and cash equivalents, end of period 54,394 3,186
---------------------------
---------------------------
Supplemental information
Income taxes paid 4,735 6,103
Interest paid (received), net (25) 15
---------------------------
Note: The comparative figures included in the consolidated statements
of earnings and cash flow have been adjusted to reflect the
classification of the results from the ceramic distribution
activities as discontinued operations.
Consolidated balance sheets (unaudited)
(In thousands of dollars)
As at As at As at
February 28, February 28, November 30,
2010 2009 2009
$ $ $
---------------------------------------------
ASSETS
Current assets
Cash and cash equivalents 54,394 3,186 48,442
Accounts receivable 50,951 53,292 55,793
Income tax receivable 550 3,357 -
Inventories 90,639 108,414 87,058
Prepaid expenses 932 1,188 327
---------------------------------------------
197,466 169,437 191,620
---------------------------------------------
Capital assets 19,037 21,547 19,569
Intangible assets 12,708 15,158 12,853
Goodwill 62,464 66,467 62,449
---------------------------------------------
291,675 272,609 286,491
---------------------------------------------
---------------------------------------------
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities
Accounts payable and
accrued liabilities 41,028 34,149 40,108
Income taxes payable - - 676
Current portion of long-
term debt 351 283 351
---------------------------------------------
41,379 34,432 41,135
---------------------------------------------
Long-term debt 316 382 317
Future income taxes 1,116 2,397 1,407
Non-controlling interest 3,144 2,851 3,132
---------------------------------------------
45,955 40,062 45,991
---------------------------------------------
Shareholders' equity
Capital stock 17,305 17,102 16,916
Contributed surplus 3,845 3,284 3,922
Retained earnings 229,027 207,124 223,986
Accumulated other
comprehensive income (4,457) 5,037 (4,324)
---------------------------------------------
245,720 232,547 240,500
---------------------------------------------
291,675 272,609 286,491
---------------------------------------------
---------------------------------------------
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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