Mr. Robert Sawyer reports

RONA ANNOUNCES ITS THIRD QUARTER 2015 RESULTS

Rona Inc. has provided the results for its operations for the 13- and 39-week periods ended Sept. 27, 2015. All figures in this press release are in Canadian dollars.

Third quarter highlights

• Increase of 21.2 per cent in adjusted net income per share, which rose to 40 cents, compared with 33 cents in the third quarter of 2014;
• Adjusted net income up by 11.5 per cent year over year to $42.9-million;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) up 7.4 per cent to $90.0-million compared with last year and adjusted EBITDA margin up 61 basis points;
• Increase of 1.1 per cent in retail segment same-store sales;
• Purchase of 1.15 million shares in the third quarter, completing the current share repurchase program; the board of directors approved a new normal course issuer bid program of common shares subject to the approval of the Toronto Stock Exchange.

"Rona's same-store retail segment sales were up 1.1 per cent in the third quarter of 2015. This makes it the fifth consecutive quarter in which Rona's same-store sales have grown, and have done so despite the economic slowdown, ongoing competition and difficult market conditions in some regions. The measures taken in recent quarters, including the repositioning of Reno-Depot and Totem, the various merchandising strategies, the opening of several new stores to develop the network, converting the Coupal banner to Marcil and, most recently, acquiring the 20 franchised stores, all show that we have taken concrete actions to improve growth and profitability, both short term and long term, and to simplify our business model," said Robert Sawyer, president and chief executive officer of Rona.

                            FINANCIAL HIGHLIGHTS
                          (in millions of dollars)

                                    Quarters ended       Nine months ended
                               Sept. 27,   Sept. 28,   Sept. 27,   Sept. 28,
                                    2015        2014        2015        2014

Revenues                        $1,156.2    $1,167.3    $3,198.5    $3,125.1
Adjusted EBITDA                     90.0        83.8       199.1       182.9
Adjusted net income                                                         
attributable to                                                            
participating shares                42.9        38.5        81.7        66.1
Per share -- basic and                                                       
diluted ($)                         0.40        0.33        0.75        0.55

"The sustained increase in profitability stems from organic sales growth and sales growth in categories that generate higher margins, as well as strict management of operating costs. This performance has resulted in the seventh consecutive quarterly increase in adjusted EBITDA and adjusted net income per share. Furthermore, Rona is continuing its disciplined capital management, focusing on initiatives that achieve superior returns. The board of directors has approved a new normal course issuer bid program and we believe that this use of our available funds, paired with the steady increase in profitability, will further improve the return on investment and create value for our shareholders. Under the new program, Rona plans to buy back near 8.0 per cent of its equity which will result in an aggregate share purchase of 25.0 per cent over a five-year period," added Dominique Boies, executive vice-president and chief financial officer of Rona.

Third quarter 2015 results

Consolidated revenues totalled $1.16-billion, compared with $1.17-billion in the third quarter of 2014. This slight dip results from a 6.9-per-cent decrease in distribution segment sales partly related to an early slowdown in purchases by the 20 franchised stores acquired by Rona. Retail segment sales were up 1.3 per cent, due to the 1.1-per-cent growth in same-store sales and the net contribution from network development activities. The increase in same-store sales reflects the success of the Reno-Depot banner, a strong performance in Ontario and British Columbia, partly offset by difficult market conditions in Alberta and Quebec.

Adjusted EBITDA rose to $90.0-million, or 7.8 per cent of revenues, compared with $83.8-million, or 7.2 per cent of revenues in the third quarter of 2014. The increase reflects organic growth in retail segment sales, including higher sales in categories with a higher margin, as well as strict control over store operating costs. These items more than offset the impact on profitability of the key product categories review and higher marketing expenses. Adjusted EBITDA margin in the retail segment was up 16 basis points due to the positive impact of same-store sales, partly offset by the optimization measures. The distribution segment margin was up 156 basis points mainly because of higher sales in products with higher margins.

As announced in its press release on Oct. 7, 2015, Rona recorded a one-time pretax expense of $48.5-million related to the acquisition of the franchised stores. This amount, included in the total consideration of $193-million, represents the settlement of a pre-existing relationship between the corporation and the sellers. It also accounts for almost the entire adjustment required to reconcile EBITDA with adjusted EBITDA. The third quarter management's discussion and analysis illustrates in detail the effect of this expense.

Adjusted net income attributable to participating shares for the third quarter of 2015 amounted to $42.9-million, or 40 cents per share basic and diluted compared with $38.5-million, or 33 cents per share basic and diluted, in the third quarter of 2014.

Highlights of the first nine months of 2015

• Improvement of 36.4 per cent in adjusted net income per share, or 75 cents compared with 55 cents in 2014;
• Increase of $15.6-million in adjusted net income, to $81.7-million, compared with $66.1-million a year ago;
• Increase of 8.9 per cent in adjusted EBITDA compared with last year, to $199.1-million, and increase of 38 basis points in adjusted EBITDA margin;
• Retail same-store sales up 3.7 per cent.

Results for the first nine months of 2015

Consolidated revenues amounted to $3.20-billion, up 2.3 per cent, compared with $3.13-billion for the first nine months of 2014. The change reflects a 4.4-per-cent increase in the retail segment, including growth of 3.7 per cent in same-store sales.

Adjusted EBITDA rose 8.9 per cent to $199.1-million, or 6.23 per cent of revenues, compared with $182.9-million, or 5.85 per cent of revenues last year. The retail segment margin grew by 28 basis points, driven by organic growth in sales; the distribution segment margin grew by 45 basis points.

Adjusted net income attributable to participating shares for the first nine months of 2015 amounted to $81.7-million, or 75 cents per share basic and diluted, compared with $66.1-million, or 55 cents per share basic and diluted, for the same period in 2014.

Strong financial position

As at Sept. 27, 2015, Rona's financial position remained healthy, with a net debt of $279.0-million, which includes $196.6-million drawn on the authorized credit facility of $700.0-million. The ratio of net debt to adjusted EBITDA for the last 12 months was 1.11 times as at Sept. 27, 2015, compared with 0.86 times as at Sept. 28, 2014. The ratio of net debt to total capital was 0.15 times as at Sept. 27, 2015, up from 0.10 times as at Sept. 28, 2014.

The increase of the ratios since the same period a year ago reflects use of the credit facility to repurchase more than 9.2 million common shares in the 12-month period, for a consideration of $126.3-million under normal course issuer bids and to a lesser extent, from a part of the acquisition of the franchised stores.

In the third quarter, Rona purchased 1.15 million common shares for a consideration of $16.0-million, thereby reaching the maximum 9.2 million shares authorized under the program initiated in November, 2014, for a total consideration of $125.7-million, or $13.65 per share. The corporation's board of directors approved a new normal course issuer bid program in which Rona may purchase 8,496,028 shares between Nov. 18, 2015, and Nov. 17, 2016; this program is subject to the approval of the Toronto Stock Exchange.

Dividend on preferred shares

At its meeting on Nov. 9, 2015, Rona's board of directors declared a quarterly dividend of 32.82 cents per share on cumulative five-year rate reset Series 6 Class A preferred shares. The dividend will be paid on Dec. 31, 2015, to shareholders of record on Dec. 16, 2015.

Dividend on common shares

At its meeting on Nov. 9, 2015, the board of directors declared a quarterly dividend of four cents per share on the corporation's common shares. The dividend will be paid on Dec. 29, 2015, to shareholders of record on Dec. 14, 2015.

Additional information

The management's discussion and analysis (MD&A), financial statements, and related notes for the third quarter of 2015 can be found in the investor relations section of the corporation's website and on the SEDAR website. The corporation's annual information form, along with other information about Rona, can also be found on the Rona and SEDAR websites.

Conference call with the financial community

On Tuesday, Nov. 10, 2015, at 3 p.m. (EST), Rona will hold a conference call for the financial community. To join the conference, please call 416-340-2217 or 1-866-696-5910.

A replay will be available from 7 p.m. on Tuesday, Nov. 10, 2015, until Nov. 17, 2015. It can be heard by dialling 905-694-9451 or 1-800-408-3053 and entering the password 2498940 on the telephone keypad.

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