Mr. Robert Sawyer reports
RONA ANNOUNCES ITS 2016 FIRST QUARTER RESULTS
Rona Inc. has released the results for its operations for the 13-week period ended March 27, 2016.
First quarter highlights:
-
Increase of 3.1 per cent in retail segment same-store sales;
- Increase of 28.1 per cent in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), compared with last year, to $15.6-million and up 37 basis points in adjusted EBITDA margin;
- Improvement of 20 per cent in adjusted net loss per share, to eight cents, compared
with 10 cents in the first quarter of 2015;
- Solid financial position with a ratio of net debt to adjusted EBITDA of
1.86 times.
"The same-store sales in our retail network grew 3.1 per cent. This seventh consecutive quarter of growth reflects the excellent performance of our stores in Ontario and British Columbia, as well as sustained growth in the Reno-Depot banner in Quebec. Rona has pursued its strategy of simplifying its business model and improving the products and services it offers. As we did successfully with Reno-Depot, we have begun redefining our big box stores experience to offer our customers a revitalized image and a unique shopping experience through the introduction of new product lines. The new image will soon be unveiled at our Anjou store, in the Montreal area. Rona remains focused on executing its business plan and continuing its disciplined capital management in order to achieve the corporation's sales growth and profitability objectives," said Robert Sawyer, president and chief executive officer of Rona.
FINANCIAL HIGHLIGHTS
(in millions of dollars, except per-share data)
First quarters ended
March 27, 2016 March 29, 2015
Consolidated revenues $819.2 $778.8
Adjusted revenues 805.4 778.8
Adjusted EBITDA 15.6 12.2
Adjusted net (loss) attributable to participating shares (9.0) (11.2)
Per share -- basic and diluted ($) (0.08) (0.10)
2016 first quarter results
Consolidated revenues were $819.2-million, up 5.2 per cent from $778.8-million in the first quarter of 2015. On an adjusted basis, that is, with the adjustment of franchised store sales in order to compare them with those of the previous fiscal year, sales grew 3.4 per cent to $805.4-million. The increase reflects a 3.1-per-cent increase in same-store sales in the Rona retail network, resulting from a strong performance in Ontario and British Columbia, and by the Reno-Depot banner in Quebec, which more than offset a decline in same-store sales in the Prairie provinces.
Adjusted EBITDA rose to $15.6-million, or 1.94 per cent of adjusted revenues, compared with $12.2-million, or 1.57 per cent of revenues, in the first quarter of 2015. The increase reflects the positive impact of organic sales growth in the retail segment and the improved adjusted gross margin, which grew 42 basis points over the same period in 2015. Furthermore, adjusted selling, general and administrative expenses expressed as a percentage of adjusted revenues remained relatively stable. In the retail segment, the adjusted EBITDA margin was up 48 basis points; in the distribution segment, it was up 21 basis points.
Adjusted net loss attributable to participating shares for the first quarter of 2016 was $9-million, or eight cents per share basic and diluted, compared with $11.2-million, or 10 cents per share basic and diluted, in the first quarter of 2015.
Strong financial position
As at March 27, 2016, Rona's financial position remained healthy, with a net debt of $494-million and $348.9-million available on its authorized credit facility of $700-million. The ratio of net debt to adjusted EBITDA for the last 12 months was 1.86 times as at March 27, 2016, compared with 1.71 times as at March 29, 2015. The ratio of net debt to total capital was 0.24 times as at March 27, 2016, up from 0.21 times as at March 29, 2015.
The increase in the ratios compared with last year reflects use of the credit facility to repurchase common shares in the last 12-month period and to acquire the franchised stores. The corporation did not repurchase any common shares in the first quarter of 2016.
Dividends on preferred shares
At its meeting on May 9, 2016, Rona's board of directors declared a quarterly dividend of 20.775 cents per share on cumulative and fixed five-year rate-reset Series 6 Class A preferred shares, as well as a quarterly dividend of 19.384 cents per share on cumulative and variable five-year rate-reset Series 7 Class A preferred shares. The dividends will be paid on June 30, 2016, to shareholders of record on June 15, 2016.
Dividend on common shares
At its meeting on May 9, 2016, Rona's board of directors declared a quarterly dividend of four cents per share on the corporation's common shares. The dividend will be paid on June 23, 2016, to shareholders of record on June 8, 2016. Note that, as indicated in the plan arrangement with Lowe's, this dividend will not be payable if the transaction with Lowe's closes before June 8, 2016.
Events after the reporting period
Conversion privilege of cumulative five-year rate-reset preferred shares
On March 1, 2016, the corporation confirms that it does not intend to exercise its right to redeem all or any part of its currently outstanding 6.9 million cumulative five-year rate-reset series 6 Class A preferred shares on March 31, 2016. As a result, the holders of the Series 6 shares have the right, at their option, to convert all or any of their Series 6 shares into cumulative floating-rate Series 7 Class A preferred shares of Rona on March 31, 2016.
With respect to any Series 6 shares that remain outstanding after March 31, 2016, the dividend rate for the five-year period is 3.324 per cent per annum. With respect to any Series 7 shares issued on March 31, 2016, the dividend rate for the floating-rate period is 3.11 per cent per annum.
The holders of its cumulative five-year rate-reset Series 6 Class A preferred shares have elected to convert 2,222,137 of the 6.9 million Series 6 shares currently outstanding, on a one-for-one basis, into cumulative floating-rate Series 7 Class A preferred shares of Rona on March 31, 2016. The Series 6 shares continue to be listed, and the Series 7 shares have been listed and started trading at market open on March 31, 2016, on the Toronto Stock Exchange under the symbols RON.PR.A and RON.PR.B, respectively.
Arrangement with Lowe's
On March 31, 2016, the holders of record of Rona's common shares approved the statutory plan of arrangement at the special meeting of shareholders pursuant to the arrangement agreement that Rona entered into on Feb. 2, 2016. The arrangement was approved by 99.92 per cent of the 75,067,870 votes cast by common shareholders, representing 70.22 per cent of the total 106,904,501 common shares outstanding.
On April 11, 2016, the Quebec Superior Court issued a final order approving the previously announced statutory arrangement under the Business Corporations Act (Quebec) with respect to Rona's common shares pursuant to the arrangement that Rona entered into on Feb. 2, 2016. The completion of the arrangement remains subject to regulatory approvals and the satisfaction or waiver of the other customary closing conditions. Until completion of the arrangement, Rona's common shares will continue to be listed for trading on the Toronto Stock Exchange.
Holders of record of Rona's cumulative five-year rate-reset Series 6 Class A preferred shares did not approve the arrangement, which required the approval of 66-2/3rds of the votes cast by such shareholders.
As the completion of the arrangement is not conditional on approval by the preferred shareholders and given that the requisite approval of the preferred shareholders was not obtained, Rona's cumulative five-year rate-reset Series 6 Class A preferred shares and cumulative floating-rate Series 7 Class A preferred shares will be excluded from the arrangement. Following completion of the arrangement, the preferred shares will remain outstanding in accordance with their terms and will continue to be listed for trading on the Toronto Stock Exchange.
Additional information
The management's discussion and analysis, financial statements, and related notes for the first quarter of 2016 can be found in the investor relations section of the corporation's website and on SEDAR. The corporation's annual information form, along with other information about Rona, can also be found on Rona's website and on SEDAR.
2016 FIRST QUARTER HIGHLIGHTS
(in thousands of dollars, unless otherwise indicated)
Restructuring
costs and
other Acquisition of
Quarter ended charges and franchised
March 27, 2016 finance costs stores
Revenues $819,216 $- $13,854
Gross margin 243,011 - 22,609
Selling, general and
administrative expenses 233,809 4,271 24,753
EBITDA 9,202 (4,271) (2,144)
Depreciation and amortization
of non-financial assets 23,591 - 2,011
Finance costs 5,255 437 1,406
------- ----- ------
(Loss) before income taxes (19,644) (4,708) (5,561)
------- ----- ------
Income tax recovery (5,276) (1,264) (1,494)
Non-controlling interests (184) - -
------- ----- ------
Net (loss) attributable to owners
of Rona (14,184) (3,444) (4,067)
------- ----- ------
Dividends on preferred shares 2,318 - -
------- ----- ------
Net (loss) attributable to
participating shares (16,502) (3,444) (4,067)
------- ----- ------
Basic and diluted net (loss) per
share (in dollars) (0.15) (0.03) (0.04)
2015 FIRST QUARTER HIGHLIGHTS
(in thousands of dollars, unless otherwise indicated)
Restructuring
costs and
other Acquisition of
Quarter ended charges and franchised
March 29, 2015 finance costs stores
Revenues $778,770 $- $-
Gross margin 209,856 - -
Selling, general and
administrative expenses 197,735 74 -
EBITDA 12,121 (74) -
Depreciation and amortization
of non-financial assets 21,247 - -
Finance costs 4,096 640 -
------- --- -
(Loss) before income taxes (13,222) (714) -
------- --- -
Income tax recovery (3,515) (190) -
Non-controlling interests (319) - -
------- --- -
Net (loss) attributable to owners
of Rona (9,388) (524) -
------- --- -
Dividends on preferred shares 2,317 - -
------- --- -
Net (loss) attributable to
participating shares (11,705) (524) -
------- --- -
Basic and diluted net (loss) per
share (in dollars) (0.11) (0.01) -
We seek Safe Harbor.
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