-------------------------------------------------------------------------
- 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 RESOURCES
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 Ltee 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(number sign). 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.
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