-------------------------------------------------------------------------
- Consolidated sales increase by 8.9% and net earnings by 10.0%.
- Sales in the United States post an increase of 23.0% (in U.S. dollars)
from internal growth and account for 12% of total sales.
- Three acquisitions close in the first quarter - two in Canada and one
on the U.S. East Coast.
- Richelieu ends the period with an excellent financial position, with
almost no debt, cash of $4.6 million and working capital of
$100.5 million.
- The quarterly dividend rises 20% to $0.06 per share as at January 25,
2006.
-------------------------------------------------------------------------
TSX: RCH
MONTREAL, March 29 /CNW Telbec/ - Richelieu announces its results for the
first quarter ended February 28, 2006. "The three acquisitions made at the
beginning of this year add about $20 million to our sales on an annualized
basis, and we will integrate them while leveraging their potential through our
network and organization. We are also pleased with our results, especially
since they reflect solid growth over the first three months of 2005 which had
posted a strong 17.6% increase in sales. The kitchen cabinet manufacturers and
residential and commercial woodworking segments yielded an excellent
contribution during the period. Although the first quarter is historically our
slowest because of the end-of-year holiday period, our North American
distribution operations achieved strong sales growth of 9.8% and their EBITDA
rose 13%. In the United States, our distribution sales grew by 26.5% (in U.S.
dollars) and their profitability is steadily improving," indicated Richard
Lord, President and Chief Executive Officer.
Consolidated sales totalled $82.9 million, up 8.9% over the corresponding
period of 2005. Of this increase, 5.7% was internal growth and 3.2% came from
the acquisitions made during the period, mainly Atlantic Countertops Limited
(Nova Scotia), which was acquired on December 5, 2005 and contributed to
results for 11 weeks.
Sales from distribution operations amounted to $79.2 million, up 9.8%
over $72.1 million in the equivalent period the previous year. Such operations
accounted for 95.6% of consolidated sales, compared with 94.8% for the
corresponding quarter of 2005. Cedan and Menuiserie des Pins, the two
manufacturing subsidiaries, generated total sales of $3.6 million, down 7.5%
from the first quarter the previous year, thereby accounting for 4.4% of the
period's consolidated sales, compared with 5.2% for the first quarter of 2005.
Whereas Menuiserie des Pins pursued its growth, Cedan recorded a decline in
sales to some customers who strategically refocused their operations. The
subsidiary's efforts are currently focused on developing new products and
customer accounts in order to return to satisfactory sales growth.
The Company made 81.6% of its sales to manufacturers and 18.4% to
hardware retailers including renovation superstores, compared with 79.6% to
manufacturers and 20.4% to retailers for the quarter ended February 28, 2005.
Sales to manufacturers increased by 11.5%, reflecting internal growth and
expansion-by-acquisition, whereas sales to retailers were relatively stable.
Canadian operations generated revenues of $72.6 million or 87.6% of the
period's consolidated sales, compared with $67.4 million or 88.6% of
consolidated sales for the first quarter of 2005. This 7.8% increase reflects
4.2% internal growth and 3.6% expansion-by-acquisition mainly from Atlantic
Countertops. Overall, Canadian markets achieved solid performances, primarily
in the kitchen cabinet and commercial and residential woodworking segments.
The Company thus recorded sales increases of 9.3% in Eastern Canada, of 5.6%
in Ontario and of 7.4% in Western Canada.
In the United States, where revenues currently come almost entirely from
sales to manufacturers, sales amounted to $10.3 million (US$8.9 million),
compared with $8.8 million (US$7.3 million) for the first quarter of 2005, an
increase of 17.8% in Canadian dollars and 23.0% in U.S. dollars (considering
the appreciation in the Canadian dollar in relation to the U.S. dollar).
Excluding the decline in the Cedan manufacturing subsidiary's sales in the
United States, this growth would have reached 26.5% in U.S. dollars, due
exclusively to internal growth.
Earnings before interest, amortization and non-controlling interest
(EBITDA)
Earnings before income taxes, interest, amortization and non-controlling
interest (EBITDA) totalled $9.1 million, reflecting a solid increase of 9.7%
over the corresponding quarter of 2005. EBITDA from distribution operations
grew by 13% to $8.4 million, up from $7.5 million for the first quarter of
2005, whereas EBITDA from manufacturing operations declined to $0.6 million,
down by $0.2 million.
Richelieu continues to post most satisfactory margins, as the gross
profit margin was up over the corresponding quarter of 2005, while the EBITDA
profit margin was unchanged at 10.9%, holding at the same level as the
comparable quarter of 2005. The EBITDA profit margin from distribution
operations improved over the equivalent period of 2005, from 10.3% to 10.6%.
Conversely, the EBITDA profit margin from manufacturing operations fell from
20.3% for the first quarter of 2005 to 17.3% as a result of the decline in
their sales.
Amortization of capital assets increased by 5.3% over the corresponding
quarter of 2005 as a result of the period's acquisitions and capital
expenditures.
Considering the increase in earnings, income taxes totalled $2.7 million,
up 9.9% over the first quarter of 2005.
Net earnings rose to a record high of $5.4 million for the first quarter,
an increase of 10%. Net earnings as a percentage of consolidated sales worked
out to 6.5%, up from 6.4% for the same quarter of 2005. Earnings per share
amounted to $0.23 ($0.23 diluted), up 9.5% over the first quarter of 2005,
whereas the number of outstanding shares and options did not vary
significantly over the past 12 months.
Liquidity and Financial Resources
Cash flows from operating activities (before net change in non-cash
working capital balances related to operations) grew by 11.1% to $6.5 million
from $5.8 million for the first quarter the previous year, reflecting
primarily the increase in net earnings. Cash outlays associated with net
change in non-cash working capital balances related to operations decreased by
$2.3 million from the first quarter of 2005 because inventories increased less
than in the corresponding period of 2005. Even so, in the first quarter of
2006 inventories increased over the same period of 2005 due to the
acquisitions made early in the year and in anticipation of the launch of the
Solutions lines.
Richelieu paid a total of $1.4 million in dividends to shareholders
during the first quarter, up from $1.2 million for the same quarter of 2005,
an increase of $0.2 million that reflects the 20% rise in the dividend
announced on January 25, 2006. During the period, the Company purchased shares
for a consideration of $0.3 million for cancellation purposes, compared with a
nil amount in the first quarter of 2005. The Company thereby returned a total
of $1.7 million to shareholders in the first quarter of 2006, while also
repaying $1.4 million in interest-bearing debt. Financing activities thus used
cash flows of $3.1 million, compared with $2.0 million for the equivalent
quarter of 2005.
Richelieu invested $14.9 million during the first quarter of 2006, up
from $0.8 million in the same period of 2005. A consideration of $0.6 million
was used for various equipment and $14.3 million was invested in three
acquisitions as follows:
- December 5, 2005 - the principal net assets of Atlantic Countertops
Limited, a distributor of hardware products and materials for furniture
and kitchen cabinet manufacturers that operates two distribution
centres in Dartmouth (Nova Scotia) and Moncton (New Brunswick);
- January 16, 2006 - the principal net assets of Kiika International LLC
(Pennsylvania, U.S.), a distributor specializing in ergonomic office
products; and
- February 8, 2006 - all the shares of Nystrom Group Inc. (Ontario), a
distributor of decorative products and bathroom accessories for the
retailers market, including renovation superstores.
Cash and cash equivalents totalled $4.6 million as at February 28, 2006.
Financial Position as at February 28, 2006
The Company's financial position remains healthy and solid, with a low
debt level and substantial cash flows generated regularly, enabling it to
easily meet its financial obligations and to pursue its expansion and growth.
Richelieu had excellent working capital of $100.5 million for a current
ratio of 3.9:1 as at February 28, 2006, compared with $105.9 million and an
identical ratio of 3.9:1 as at November 30, 2005.
Interest-bearing debt amounted to $3.2 million at the close of the
period, down from $3.5 million as at November 30, 2005. This debt included a
demand bank loan of $0.6 million bearing interest at the bank's prime rate and
long-term debt of $2.5 million (including a current portion of $1.3 million)
consisting mainly of bank loans and balances of sale on business acquisitions.
Shareholders' equity totalled $166.1 million as at February 28, 2006, up
from $162.3 million as at November 30, 2005. This variation is due to the
$3.8 million increase in retained earnings, which amounted to $148.1 million
at the end of the first quarter of 2006. The Company further improved its
interest-bearing debt/equity ratio to 1.9% as at February 28, 2006, compared
with 2.2% as at November 30, 2005.
As at February 28, 2006, 23,160,562 common shares were outstanding,
versus 23,170,362 common shares as at November 30, 2005.
Growth outlook
"In the next quarters, our priorities will be to efficiently integrate
the acquisitions made early this year, which will yield benefits for the full
periods, while leveraging their potential through our network and organization
- and to further develop our Canadian and U.S. markets through new product
launches and cross-selling, backed by our marketing programs and our
distinctive customer approach. We will continue to take advantage of the
opportunities in the residential renovation market which remains strong, along
with commercial renovation projects. We look forward to the coming periods
with confidence and optimism," added Mr. Richard Lord.
Profile
-------
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 more than 43,000 different items targeted to
a base of over 36,000 customers who are served by 40 centres in North America -
29 distribution centres across Canada and nine in the United States plus two
manufacturing plants, specifically Cedan Industries Inc. which specializes in
the manufacture of a wide variety of veneer sheets and edgebanding products,
and Menuiserie des Pins LtDee which manufactures components for the window and
door industry, a broad selection of mouldings, and various types of tackboards
and whiteboards.
The statements set forth in this press release, which describe
Richelieu's objectives, projections, estimates, expectations or forecasts, may
constitute forward-looking statements within the meaning of securities
legislation. Positive or negative verbs such as "plan", "evaluate",
"estimate", "believe" and other related expressions are used to identify such
statements. Richelieu would like to point out that, by their very nature,
forward-looking statements involve risks and uncertainties such that its
results, or the measures it adopts, could differ materially from those
indicated or underlying these statements, or could have an impact on the
degree of realization of a particular projection. We assume no obligation as
to the updating or revision of the forward-looking statements as a result of
new information, future events or other changes.
CONFERENCE CALL ON MARCH 29, 2006 AT 3:30 P.M.
----------------------------------------------
Financial analysts and investors interested in participating in the
conference call on Richelieu's results to be held at 3:30 p.m. on March 29,
2006, can dial 1-800-814-4860 a few minutes before the start of the call. For
those unable to participate, a taped re-broadcast will be available as of
6:30 p.m. on March 29, 2006, until midnight on April 5, 2006, by dialing
1-877-289-8525, access code: 21182020 (number sign). Members of the media are
invited to listen in.
<<
CONSOLIDATED STATEMENT OF EARNINGS AND RETAINED EARNINGS (Unaudited)
(in thousands of dollars, except per-share amounts)
-------------------------------------------------------------------------
For the three months
ended February 28,
2006 2005
-------------------------------------------------------------------------
$ $
Sales 82,862 76,056
Cost of sales, warehouse, selling
and administrative expenses 73,802 67,796
-------------------------------------------------------------------------
Earnings before the following 9,060 8,260
Interest on short-term debt, net 69 38
Interest on long-term debt 22 28
Amortization of capital assets 861 818
-------------------------------------------------------------------------
Earnings before income taxes and
non-controlling interest 8,108 7,376
Income taxes 2,716 2,471
-------------------------------------------------------------------------
Earnings before non-controlling interest 5,392 4,905
Non-controlling interest 32 31
-------------------------------------------------------------------------
Net earnings 5,360 4,874
Retained earnings, beginning of period 144,430 122,710
Premium on redemption of common shares
for cancellation (293) -
Dividends (1,390) (1,159)
-------------------------------------------------------------------------
Retained earnings, end of period 148,107 126,425
-------------------------------------------------------------------------
Earnings per share (note 4)
Basic 0.23 0.21
Diluted 0.23 0.21
See accompanying notes
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands of dollars)
-------------------------------------------------------------------------
For the three months
ended February 28,
2006 2005
-------------------------------------------------------------------------
$ $
OPERATING ACTIVITIES
Net earnings 5,360 4,874
Items not affecting cash
Amortization of capital assets 861 818
Non-controlling interest 32 31
Future income taxes 75 33
Stock-based compensation expense 134 58
-------------------------------------------------------------------------
6,462 5,814
Net change in non-cash working capital
balances related to operations (3,993) (6,339)
-------------------------------------------------------------------------
2,469 (525)
-------------------------------------------------------------------------
FINANCING ACTIVITIES
Issue of common shares (note 3) 35 722
Dividends paid (1,390) (1,159)
Purchase of shares for cancellation (304) -
Repayment of long-term debt (179) (1,537)
Increase (decrease) in bank loans (1,262) 14
-------------------------------------------------------------------------
(3,100) (1,960)
-------------------------------------------------------------------------
INVESTING ACTIVITIES
Business acquisitions (note 2) (14,252) -
Additions to capital assets (635) (774)
-------------------------------------------------------------------------
(14,887) (774)
-------------------------------------------------------------------------
Net change in cash and cash equivalent (15,518) (3,259)
Cash and cash equivalent at beginning of period 20,103 9,747
-------------------------------------------------------------------------
Cash and cash equivalents at the end of period 4,585 6,488
-------------------------------------------------------------------------
Supplemental information
Income taxes paid 3,605 4,198
Interest paid 99 66
See accompanying notes
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
-------------------------------------------------------------------------
As at As at As at
February February November
28, 2006 28, 2005 30, 2005
-------------------------------------------------------------------------
$ $ $
(unaudited) (unaudited) (audited)
ASSETS
Current assets
Cash and cash equivalents 4,585 6,488 20,103
Accounts receivable 51,035 45,714 49,837
Income taxes receivable 126 728 -
Inventories 78,242 69,834 71,636
Prepaid expenses 892 374 470
-------------------------------------------------------------------------
134,880 123,138 142,046
-------------------------------------------------------------------------
Capital assets 19,073 19,556 18,974
Goodwill 51,579 41,951 41,951
-------------------------------------------------------------------------
205,532 184,645 202,971
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Bank loans 648 2,617 1,910
Accounts payable and accrued
liabilities 32,418 32,197 32,718
Income taxes payable - - 751
Current portion of long term debt 1,344 1,559 740
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34,410 36,373 36,119
-------------------------------------------------------------------------
Long-term debt 1,177 1,320 849
Future income taxes 1,849 1,667 1,774
Non-controlling interest 1,961 1,626 1,929
-------------------------------------------------------------------------
39,397 40,986 40,671
-------------------------------------------------------------------------
Shareholders'equity
Capital stock (note 3) 17,410 17,113 17,386
Contributed surplus (note 3) 618 121 484
Retained earnings 148,107 126,425 144,430
-------------------------------------------------------------------------
166,135 143,659 162,300
-------------------------------------------------------------------------
205,532 184,645 202,971
-------------------------------------------------------------------------
See accompanying notes
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
February 28, 2006 and 2005 (in thousands of dollars, except
per-share amounts) (unaudited)
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 annual audited consolidated financial statements. In
the 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 2005.
2) BUSINESS ACQUISITIONS
On December 5, 2005, the Company acquired the principal net assets items
of Atlantic Countertops Limited, for a cash consideration of $10,016. This
business based in Dartmouth, Nova Scotia, specializes in the distribution of
specialty hardware products and materials for furniture and kitchen
manufacturers and operates two distribution centres, the main one located in
Dartmouth and the other in Moncton, New Brunswick.
On January 16, 2006, the Company acquired the principal net assets items
of Kiika International LLC in Pennsylvania, USA, a distributor specialized in
ergonomic office products, for a cash consideration of $486 and a balance of
sale of $257.
Finally, on February 8, 2006, the Company acquired all the oustanding
shares of Nystrom Group Inc., an Ontario distributor of decorative hooks and
bathroom hanging accessories selling to retailers, for a cash consideration of
$3,750 and a balance of sale of $855.
The purchase price allocation process is not completed as yet, and the
amounts assigned to the assets and liabilities may be adjusted at a later
date, mainly the identification of intangible assets, their evaluation and
consequently the determination of final amount to allocate to goodwill. The
allocation of the purchase price will be completed upon availability of this
information.
These transactions were accounted for by the purchase method and the
results of operations are included in the financial statements from the
purchase date.
Summary of acquisitions
-------------------------------------------------------------------------
2006 2005
$ $
-------------------------------------------------------------------------
Net assets acquired
Current assets 6,708 -
Capital assets 326 -
Provisional intangible assets - -
Provisional goodwill 9,628 -
-------------------------------------------------------------------------
16,662 -
Current liabilities assumed 1,299 -
-------------------------------------------------------------------------
Net assets acquired 15,363 -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consideration
Cash 14,252 -
Balances of sale payable 1,111 -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
3) CAPITAL STOCK
Issued
As at February 28, 2006, capital stock outstanding amounted to 23,160,562
common shares (23,170,362 common shares as at November 30, 2005).
During the period ended February 28, 2006, the Company issued 4,700
common shares (2005 - 105,300) at a weighted average price of $7.50 per share
(2005 - $6.86) under the share option plan. In addition, during the period
ended February 28, 2006, the Company, through a normal course issuer bid,
purchased for cancellation 14,500 common shares for a cash consideration of
$304.
Stock option plan
During the period, on January 25, 2006, the Company granted 80,000
options (215,000 on January 26, 2005) with an exercise price of $22.43 (2005 -
$22.13) and a fair value of $7.70 per option (2005 - $8.00) as determined
using the Black & Scholes option pricing model using an expected dividend
yield of 1% (2005 - 0.83%), a volatility of 25% (2005 - 25%), a risk free
interest rate of 4.15% (2005 - 4.40%) and an expected life of 8 years (2005 -
8 years). As at February 28, 2006, 552,450 share options were outstanding
(2005 - 534,550) with exercise prices varying from $4.26 to $22.43 (2005 -
$4.26 to $22.13) for a weighted average of $16.91 (2005 - $14.99).
For the 3-month period ended February 28, 2006, the stock-based
compensation expense amounted to $134 (2005 - $258).
4) EARNINGS PER SHARE
3-MONTH PERIOD ENDED FEBRUARY 28
2006 2005
----------------------------- -----------------------------
----------------------------- -----------------------------
Weighted Weighted
average Earnings average Earnings
number per number per
Earnings of share Earnings of share
$ shares $ $ shares
(in thou- (in thou-
sands) sands)
Basic net
earnings 5,360 23,169 0.23 4,874 23,102 0.21
Dilutive
effect of
stock
options - 136 (0.00) - 163 (0.00)
----------------------------- -----------------------------
Diluted net
earnings 5,360 23,305 0.23 4,874 23,265 0.21
----------------------------- -----------------------------
----------------------------- -----------------------------
For the period ended February 28, 2006, outstanding options to purchase
80,000 common shares with an exercise price of $22.43 were excluded from the
computation of diluted earnings because their effect would have been anti-
dilutive.
5) SEGMENTED INFORMATION
3-MONTH PERIOD ENDED FEBRUARY 28
Manu-
Distribution facturing Total
$ $ $
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2006
External sales 79,225 3,637 82,862
Inter-segment sales - 869 869
Earnings before taxes, interest
and amortization 8,429 631 9,060
Amortization of capital assets 631 230 861
Goodwill 49,579 2,000 51,579
Total assets 188,617 16,915 205,532
Additions to capital assets
and goodwill 10,170 420 10,590
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2005
External sales 72,124 3,932 76,056
Inter-segment sales - 1,149 1,149
Earnings before taxes, interest
and amortization 7,460 800 8,260
Amortization of capital assets 613 205 818
Goodwill (November 30, 2005) 39,951 2,000 41,951
Total assets (November 30, 2005) 187,118 15,853 202,971
Additions to capital assets and
goodwill 566 208 774
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>
During the period ended February 28, 2006, the Company's sales to foreign
countries, primarily directed to the United States, amounted to $10,307 (2005 -
$8,750) in Canadian dollars and to $8,918 (2005 - $7,258) in US dollars.
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