Mr. Richard Lord reports
RICHELIEU CONTINUES ITS GROWTH AND EXPANSION - INCREASE OF 17.7% IN THIRD-QUARTER NET EARNINGS PER SHARE - AN ACQUISITION IN CANADA AND AN AGREEMENT IN PRINCIPLE IN THE UNITED-STATES
Richelieu Hardware Ltd. has provided its third quarter financial results.
"We are most
satisfied with our third quarter results. All our market segments
contributed to strong internal growth of 6.7 per cent in Canada (Canadian dollars) and 8.1 per cent
in the United States (U.S. dollars), to which was added a growth of 4.0 per cent (Canadian dollars)
and 4.3 per cent (U.S. dollars), respectively, from our acquisitions. We recently closed
one new acquisition, specifically XM Export -- Import Canada Inc., a
distributor of specialty hardware in Canada, and signed an agreement in
principle to acquire a distributor of specialty panels and hardware
operating in the United States. Since the beginning of the year, we
have thus closed four acquisitions and signed a new agreement in
principle. Together, these five transactions could represent additional
sales of approximately $27-million on an annualized basis. We have also
paid dividends of $8.3-million and repurchased common shares for
$30.2-million, thereby distributing a total of $38.5-million to our
shareholders. We expect to close the year with a solid financial
position, so as to pursue our strategy of internal growth and
acquisitions," indicated Richard Lord, president and chief
executive officer of Richelieu.
Next dividend payment
At its meeting held on Oct. 2, 2014, the board of directors approved
the payment of a quarterly dividend of 14 cents per share. This dividend
is payable on Oct. 30, 2014, to shareholders of record as at Oct. 16, 2014.
Analysis of operating results for the third quarter and first nine
months ended Aug. 31, 2014, compared with the third quarter and first
nine months ended Aug. 31, 2013
Consolidated sales
Third quarter consolidated sales amounted to $167.8-million, up 12.5 per cent over the same quarter of 2013, of
which 8.4 per cent from internal growth and 4.1 per cent from acquisitions.
Richelieu recorded sales to manufacturers of $143.8-million, compared with $126.2-million for the third quarter
of 2013, an increase of $17.6-million or 14.0 per cent, of which 9.1 per cent was from
internal growth. All the corporation's market segments contributed to
this growth. Sales to hardware retailers and renovation superstores amounted to $24.0-million, up 4.4 per cent over
$23.0-million for the corresponding quarter of 2013.
In Canada, sales totalled $122.5-million, an increase of 10.7 per cent over
$110.6-million for the third quarter of 2013, of which 6.7 per cent from
internal growth and the balance from acquisitions. Sales to manufacturers amounted to $101.2-million, an increase of 12.7 per cent, of which 7.7 per cent was from
internal growth. Sales to hardware retailers and renovation superstores grew to $21.3-million, up 2.4 per cent over
$20.8-million for the corresponding quarter of 2013.
In the United States, Richelieu continued to achieve solid growth, driven by its dynamic and
effective development strategy, in addition to taking advantage of the
opportunities provided by more favourable economic conditions. Sales
totalled $41.7-million (U.S.), compared with $37.1-million (U.S.) for the
corresponding quarter of 2013, an increase of $4.6-million (U.S.) or 12.4 per cent,
of which 8.1 per cent from internal growth and 4.3 per cent from acquisitions. Sales to
manufacturers grew by 11.9 per cent to $39.2-million (U.S.), of which 7.4 per cent was from internal growth.
Sales to hardware retailers and renovation superstores grew by 20.7 per cent (in U.S. dollars). Considering exchange
rate fluctuations, total U.S. sales expressed in Canadian dollars
amounted to $45.3-million, an increase of 17.6 per cent. They accounted for
27.0 per cent of consolidated sales for the third quarter of 2014, whereas they
had represented 25.8 per cent of the period's consolidated sales for the third
quarter of 2013.
For the first nine months, consolidated sales totalled $469.1-million, an increase of $37.6-million or 8.7 per cent over the
first nine months of 2013, of which 6.0 per cent from internal growth and 2.7 per cent
from acquisitions.
Sales to manufacturers amounted to $398.6-million, compared with $362.8-million for the first
nine months of 2013, an increase of $35.8-million or 9.9 per cent, of which
6.6 per cent was from internal growth. Sales to hardware retailers and renovation superstores grew by 2.6 per cent over the corresponding period
of 2013, to $70.5-million.
In Canada, Richelieu recorded sales of $343.3-million, compared with
$324.0-million for the first nine months of 2013, an increase of 6.0 per cent
or $19.3-million, of which 3.0 per cent was from internal growth. The corporation's
sales to manufacturers amounted to $281.5-million, an increase of 7.1 per cent over the first nine
months of 2013, of which 3.4 per cent was from internal growth. Sales to hardware retailers and renovation superstores grew by 1.3 per cent over the corresponding period
of 2013, to total $61.8-million.
In the United States, Richelieu achieved sales of $115.2-million (U.S.), up from $105.4-million
(U.S.) for the first nine months of 2013, an increase of $9.8-million (U.S.) or
9.3 per cent, of which 7.4 per cent was from internal growth and 1.9 per cent was from acquisitions.
Sales to manufacturers totalled $107.3-million (U.S.), an increase of 9.6 per cent over the first nine
months of 2013, of which 7.5 per cent was from internal growth thanks primarily to
sustained market penetration efforts in addition to benefiting from
more favourable economic conditions. Sales to hardware retailers and renovation superstores grew by 5.5 per cent (in U.S. dollars) over the first nine
months of 2013. Considering exchange rate fluctuations, U.S. sales
expressed in Canadian dollars amounted to $125.7-million, compared with
$107.5-million for the first nine months of 2013, an increase of 16.9 per cent.
They accounted for 26.8 per cent of consolidated sales for the first nine
months of 2014, whereas they had represented 24.9 per cent of the period's
consolidated sales for the corresponding period of 2013.
Consolidated EBITDA and EBITDA margin
Third quarter earnings before income taxes, interest and amortization (EBITDA) grew to $21.1-million, an increase of 10.5 per cent over the corresponding
quarter of 2013. The gross margin remained stable with the third quarter of 2013. The EBITDA margin stood at 12.5 per cent, compared with 12.8 per cent for the corresponding quarter of
2013, down slightly due notably to the higher proportion of sales in
the United States and the lower margins on acquisitions.
Income taxes amounted to $4.7-million, an increase of $200,000 over
the third quarter of 2013.
For the first nine months, earnings before income taxes, interest and amortization (EBITDA) totalled $53.9-million, an increase of 7.6 per cent over the first nine months
of 2013. The gross margin and EBITDA margin remained stable with the corresponding period of 2013, despite the
lower profit margins of some prior acquisitions having a different
product mix and the higher proportion of sales in the United States
where the product mix is also different.
Income taxes amounted to $12.3-million, an increase of $600,000 over
the first nine months of 2013.
Net earnings
Third quarter net earnings increased by 14.2 per cent. Considering non-controlling interests, net earnings attributable to shareholders of the corporation amounted to $14.6-million, up 13.5 per cent over the third quarter of 2013. Net earnings per share rose to 74 cents basic and 73 cents diluted, compared with 62 cents basic and
diluted for the corresponding quarter of 2013, an increase of 19.4 per cent and
17.7 per cent, respectively.
Comprehensive income amounted to $14.9-million, considering a positive adjustment of
$200,000 on translation of the financial statements of the
subsidiary in the United States, compared with $13.7-million for the
third quarter of 2013, considering a positive adjustment of
$800,000 on translation of the financial statements of the
subsidiary in the United States.
For the first nine months, net earnings grew by 10.0 per cent. Considering non-controlling interests, net earnings attributable to shareholders of the corporation rose 10.1 per cent to $36.4-million for the first nine months of 2013. Net earnings per share amounted to $1.85 basic and $1.83 diluted, compared with $1.60 basic and
$1.58 diluted for the first nine months of 2013, an increase of 15.6 per cent
and 15.8 per cent, respectively.
Comprehensive income totalled $38.0-million, considering a positive adjustment of
$1.4-million on translation of the financial statements of the
subsidiary in the United States, compared with $36.1-million for the
corresponding period of 2013, considering a positive adjustment of
$2.8-million on translation of the financial statements of the
subsidiary in the United States.
Financial position
Operating activities
Third quarter cash flows from operating activities (before net change in non-cash working capital balances) amounted to
$16.5-million or 83 cents per share, compared with $14.9-million or 71
cents per share for the third quarter of 2013, an increase of 16.9 per cent per share
stemming mainly from the growth in net earnings. Net change in non-cash
working capital balances used cash flows of $1.1-million, representing
the variation in inventories ($6.5-million), whereas accounts
receivable, accounts payable and other items represented a cash inflow
of $5.4-million. Consequently, operating activities provided cash flows
of $15.4-million, compared with $24.7-million for the corresponding
quarter of 2013.
For the first nine months, cash flows from operating activities (before net change in non-cash working capital balances) totalled
$42.3-million or $2.12 per share, compared with $39.8-million or $1.90
per share for the first nine months ended Aug. 31, 2013, an increase
of 11.6 per cent per share stemming mainly from the growth in net earnings. Net
change in non-cash working capital balances used cash flows of
$15.0-million, representing the variations in inventories
($16.4-million) and accounts receivable ($5.7-million), whereas
accounts payable and other items represented a cash inflow of
$7.1-million. Consequently, operating activities provided cash flows of
$27.4-million, whereas they had provided cash flows of $28.9-million
for the first nine months of 2013.
Financing activities
Third quarter financing activities represented a cash outflow of $4.8-million, compared with $2.5-million
for the corresponding quarter of 2013. This change stems mainly from
the fact that the corporation repurchased common shares for
cancellation for $2.7-million during the third quarter of 2014, whereas
no shares were repurchased during the same quarter of 2013. The
corporation issued shares for $600,000 during the quarter, compared
with a $200,000 share issue in the third quarter of 2013. Richelieu
paid shareholder dividends of $2.7-million in the third quarter
of 2014, relatively equivalent to those paid in the corresponding
quarter of 2013.
For the first nine months, financing activities represented a cash outflow of $34.9-million, compared with
$21.1-million for the corresponding period of 2013. During the first
nine months of the year, Richelieu repurchased common shares for
cancellation for $30.2-million, compared with $14.6-million in the
corresponding period of 2013. The corporation paid shareholder
dividends of $8.3-million, up 2.3 per cent over the first nine months of 2013.
Furthermore, shares were issued for $3.6-million during the period,
compared with a $2.2-million share issue in the same period of 2013.
Investing activities
Third quarter investing activities totalled $4.0-million, of which $2.7-million for the acquisition of the
principal net assets of CabinetWare, and $1.3-million for equipment
needed for operations, including software.
For the first nine months, investing activities amounted to $9.0-million, of which $5.8-million for the acquisition of
Procraft, Pleasantside and CabinetWare, and $3.2-million for equipment
needed for operations, including software.
Sources of financing
As at Aug. 31, 2014, cash and cash equivalents totalled $29.7-million, compared with $46.2-million as at Nov. 30,
2013. This variation mainly reflects the significant share repurchases
during the first nine months of 2014 and the investments in the recent
acquisitions. The corporation posted a working capital of $203.8-million for a current ratio of 3.9:1, compared with
$204.1-million (4.5:1 ratio) as at Nov. 30, 2013.
Richelieu believes it has the capital resources to fulfill its continuing commitments and obligations, and to assume the financing requirements
needed for its growth and the financing and investing activities
planned between now and the end of 2014. The corporation continues to
benefit from an authorized line of credit of $26-million (Canadian) as well as a
line of credit of $6-million (U.S.) renewable annually and bearing interest
respectively at prime and base rates. In addition, the corporation
estimates it could obtain access to other outside financing if
necessary.
Assets
Total assets amounted to $373.0-million as at Aug. 31, 2014, compared with
$356.3-million as at Nov. 30, 2013, an increase of 4.7 per cent. Current assets were up by $11.5-million or 4.4 per cent over Nov. 30, 2013. This growth
stems mainly from the increase of $19.5-million in inventories and
$8.0-million in accounts receivable, whereas cash and cash equivalents
decreased by $16.5-million.
The total debt stood at $4.2-million, of which a current portion of long-term debt of
$2.3-million representing balances of sale payable on recent
acquisitions. Deducting this total debt, net cash amounted to $25.4-million as at Aug. 31, 2014. The corporation
continues to benefit from a healthy and solid financial position to
pursue its business strategy in this sector.
Equity attributable to shareholders of the corporation totalled $292.1-million
as at Aug. 31, 2014, compared with $288.8-million as at Nov. 30,
2013, an increase of $3.3-million or 1.1 per cent reflecting the growth of
$3.9-million in share capital and $1.4-million in accumulated other
comprehensive income, less the reduction of $800,000 in contributed
surplus and $1.2-million in retained earnings. At the close of the
first nine months of 2014, the book value per share was $14.94, up 3.7 per cent over $14.41 as at Nov. 30, 2013.
Oct. 2, 2014, conference call at 2:30 p.m. (Eastern Time)
Financial analysts and investors interested in participating in the
conference call on Richelieu's results to be held at 2:30 p.m. on
Oct. 2, 2014, may call 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 5:30 p.m. on
Oct. 2, 2014, until midnight on Oct. 9, 2014, by dialling 1-855-859-2056, access code: 4377084. Members of the media are invited to listen in.
CONSOLIDATED STATEMENTS OF EARNINGS
For the three- and nine-month periods ended Aug. 31
(In thousands of dollars, except earnings per share)
For the three months ended Aug. 31, For the nine months ended Aug. 31,
2014 2013 2014 2013
Sales $167,809 $149,163 $469,072 $431,487
Cost of goods sold, warehousing, selling and
administrative expenses 146,755 130,113 415,129 381,337
-------- -------- -------- --------
Earnings before amortization, financial costs
and income taxes 21,054 19,050 53,943 50,150
Amortization of property, plant and equipment 1,243 1,240 3,724 3,825
Amortization of intangible assets 473 544 1,514 1,670
Financial costs, net (62) (78) (215) (292)
-------- -------- -------- --------
1,654 1,706 5,023 5,203
-------- -------- -------- --------
Earnings before income taxes 19,400 17,344 48,920 44,947
Income taxes 4,703 4,479 12,315 11,680
-------- -------- -------- --------
Net earnings $14,697 $12,865 $36,605 $33,267
======== ======== ======== ========
Net earnings attributable to
Shareholders of the corporation $14,554 $12,821 $36,449 $33,119
Non-controlling interests 143 44 156 148
-------- -------- -------- --------
$14,697 $12,865 $36,605 $33,267
======== ======== ======== ========
Net earnings per share attributable to
shareholders of the corporation
Basic 0.74 0.62 1.85 1.60
Diluted 0.73 0.62 1.83 1.58
We seek Safe Harbor.
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