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Press release from CNW Group

Richelieu's sales increase by 17.2% and exceed $500 million for 2011

Thursday, January 26, 2012

Richelieu's sales increase by 17.2% and exceed $500 million for 201110:15 EST Thursday, January 26, 2012Solid fourth-quarter financial performance Fourth-quarterconsolidated sales increased by 14.8% and diluted earnings per share rose to $0.53, up by 10.4%.For 2011, consolidated sales grew by 17.2% to $523.8 million, EBITDA rose 5.5% to  $67.3 million and diluted earnings per share amounted to $1.86, an increase of 2.8 %.Sales in the United Statesincreased by 52.9% (in US$), of which 12.8% from internal growth.Excellent financial position with a positive net cash balance of $23.6 million and a working capital of $167.3 million as at November 30, 2011 - after an $18.6 million investment in acquisitions, the payment of $9.3 million in dividends to shareholders, and the repurchase of common shares for cancellation for $10.5 million.Increase of 9.1% in the quarterly dividend which increased from $0.11 to $0.12 - a dividend of $0.12 per share has been declared and will be payable on February 23, 2012 to shareholders of record as at February 09, 2012.TSX: RCHMONTREAL, Jan. 26, 2012 /CNW Telbec/ - "2011 was a very good year for Richelieu, which distinguished itself with appreciable market share gains in North America despite the difficult economic climate, in addition to taking advantage of our 2010 and 2011 acquisitions. In particular in the United States affected by the persistent economic slowdown, we posted excellent internal growth and strong growth-by-acquisition, and thereby reached US$100 million in sales. Overall, this performance was achieved thanks to our customer service and quality execution oriented culture, the effectiveness of our business model, the dynamism and expertise of our sales force, the selling synergies with acquired companies, and our ability to market innovations that anticipate customers' needs and build upon our unequalled diversity of products," indicated Richard Lord, President and Chief Executive Officer of Richelieu.ANALYSIS OF OPERATING RESULTS FOR THE YEAR ENDED NOVEMBER 30, 2011, COMPARED WITH THE YEAR ENDED NOVEMBER 30, 2010Consolidated salesRichelieu achieved consolidated sales of $523.8 million, an increase of $76.8 million or 17.2% over 2010, of which 1.2% from internal growth and 16.0% from the acquisitions closed in 2010 and 2011.Sales to manufacturers grew to $446.6 million from $370.6 million in 2010, an increase of $76.0 million or 20.5%, of which 2.4% from internal growth and 18.1% from acquisitions. All the Company's customer segments and geographic markets made a solid contribution to this growth, with the strongest participation by the kitchen cabinet manufacturers and residential and commercial woodworking segments. In the hardware retailers and renovation superstores market, Richelieu recorded sales of $77.2 million, compared with $76.4 million for 2010. This 1.0% growth is attributable to the contribution of Gordonply and Madico in Canada, and to the retailers market in the United States, which Richelieu started to successfully penetrate, notably in the second half of the year. These contributions offset the 7.2% internal decrease in Canada caused by the adverse spring 2011 weather conditions and the economic uncertainty affecting consumer confidence, as indicated by retailers themselves.In Canada, sales totalled $424.6 million, up from $379.1 million for 2010. This $45.5 million or 12.0% growth fully reflects the contribution of Gordonply, PJ White, Madico and Provincial. Sales to manufacturers grew to $350.7 million, compared with $303.8 million for 2010, an increase of $46.9 million or 15.4%, of which 1.8% from internal growth and 13.6% from acquisitions. Sales to retailers amounted to $73.9 million, compared with $75.3 million for 2010, a decrease of 1.9% caused by the two previously mentioned factors.In theUnited States, sales were up by 52.9% or US$34.7 million to US$100.5 million. This strong increase came from an excellent internal growth of 12.8% plus 40.1% from the contribution of Raybern, New Century, E.Kinast and Outwater. In Canadian dollars, sales rose to $99.2 million from $67.9 million for 2010. They accounted for 18.9% of 2011 consolidated sales. Sales to manufacturers amounted to $95.9 million, compared with $66.8 million for 2010, an increase of $29.1 million or 43.6%. Sales to retailers more than tripled to reach $3.3 million.Consolidated EBITDA and EBITDA marginEarnings before income taxes, interest, amortization and non-controlling interest (EBITDA) totalled $67.3 million, up by 5.5% over 2010, due notably to the sales growth. The gross profit margin was brought down by certain acquisitions closed in 2010 and 2011 that yield lower profit margins than Richelieu because of their different product mix and the gross margin of operations in the United States where the current economic context exerted downward pressures on product selling prices. These two main factors, combined with higher marketing expenses for various product lines and the rise in operating costs related to the recent acquisitions, affected the EBITDAmargin from continuing operations which stood at 12.9%, compared with 14.3% for 2010.Income taxes increased by $0.7 million to $19.4 million on account of fluctuations in results by region where the Company and its subsidiaries are subject to tax authorities imposing tax rates differing from one another.Consolidated net earningsThe Company posted net earnings from continuing operations of $39.5 million, up by 2.4% over $38.6 million for 2010, excluding a gain net of taxes of $0.7 million from discontinued operations or $0.03 per share that the Company had recognized in the first quarter of 2010. Earnings from continuing operationsper share amounted to $1.88 (basic) and $1.86 (diluted), compared with $1.79 (basic) and $1.78 (diluted) for 2010, excluding the earnings per share from discontinued operations of $0.03, an increase of 5.0% and 4.5% respectively.Comprehensive income stood at $39.4 million, on account of a negative adjustment of less than $0.1 million on translation of the financial statements of the subsidiary in the United States, compared with $38.0 million for 2010, on account of a negative adjustment of $1.2 million on translation of the financial statements of the subsidiary in the United States.FOURTH QUARTER ENDED NOVEMBER 30, 2011Consolidated sales totalled $135.3 million for the fourth quarter, up by $17.4 million over the corresponding quarter of 2010, an increase of 14.8%, of which 2.1% from internal growth and 12.7% from the contribution of PJ White (acquired on November 30, 2010), Outwater, Madico and Provincial Woodproducts (acquired during the first half of 2011).In Canada, the Company's sales grew to $108.4 million, an increase of $9.8 million or 10.0% reflecting the contribution of the various segments of its primary market, namely manufacturers, where sales rose 14.4% to $91.8 million in the fourth quarter. Its three geographic markets (Eastern, Central and Western Canada) contributed to growth, with a greater increase in Western Canada due among others to the benefits of the PJ White acquisition. Sales decreased by $1.7 million in the retailers market due notably to the economic uncertainty affecting consumer confidence, as indicated by retailers themselves.In the United States, sales totalled US$26.5 million, an increase of 40.0% over the fourth quarter of 2010, of which a strong internal growth of 15.0% and 25.0% from the contribution of Outwater. Considering the effect of exchange rates, sales expressed in Canadian dollars amounted to $26.9 million, up by 39.2% over $19.3 million for the corresponding quarter of 2010. In the manufacturers market, Richelieu recorded sales of $25.8 million, an increase of $6.8 million or 36.1%. Sales to retailers tripled to $1.1 million in the fourth quarter.Earnings before income taxes, interest, amortization and non-controlling interest (EBITDA) grew to $18.9 million, up by 10.3% over $17.1 million for the fourth quarter of 2010, due notably to the sales growth. The gross profit margin remained at the same level as in the corresponding quarter of 2010 despite the lower gross margin of the recent acquisitions. Although these recent acquisitions contributed to results and represent a sound investment and a positioning for the future, the profit margins of some of them are lower than those of Richelieu because of their operating costs. The integration of these acquisitions aim to create synergies and gradually improve their profit margins. The fourth-quarter EBITDA margin stood at 14.0%, compared with 14.5% for the same quarter of 2010.Net earnings totalled $11.2 million, up by 7.7% over the fourth quarter of 2010. The net profit margin stood at 8.3% as it was affected by the aforementioned factors, compared with 8.8% for the fourth quarter of the previous year. Earnings per share amounted to $0.53 (basic and diluted), compared with $0.49 (basic) and $0.48 (diluted) for the fourth quarter of 2010, an increase of 8.2% and 10.4% respectively.Cash flows related to operating activities (before net change in non-cash working capital balances related to operations) were $14.7 million or $0.70 per share, up from $11.0 million or $0.51 per share for the fourth quarter of 2010, primarily reflecting the growth in net earnings and fluctuation in future income taxes. Net change in non-cash working capital balances related to operations represented a cash inflow of $3.9 million, as opposed to a cash outflow of $3.5 million for the corresponding quarter of 2010. Changes in accounts receivable, inventories and prepaid expenses represented a cash inflow of $6.1 million, whereas changes in accounts payable, income taxes payable and the derivative financial instruments represented a cash outflow of $2.2 million. Consequently, operating activities provided cash flows of $18.6 million, compared with $7.5 million for the corresponding quarter of the previous year.Financing activities used net cash flows of $5.8 million, following the repurchase of common shares under the normal course issuer bid for a consideration of $3.9 million during the quarter, the payment of shareholder dividends for a total of $2.3 million and a repayment of long-term debt of $0.2 million. In addition, the exercise of options provided cash flows of $0.7 million, compared with $0.1 million for the corresponding quarter of 2010.Investing activities used cash flows of $0.8 million, primarily for various capital expenditures during the quarter.FINANCIAL POSITIONAnalysis of principal cash flows Operating activitiesCash flows related to operating activities (before net change in non-cash working capital balances related to operations) were $50.1 million or $2.35 per share, up from $45.1 million or $2.08 per share for 2010, primarily reflecting the increase of $0.9 million in net earnings from continuing operations, of $1.6 million in amortization of capital and intangible assets related to the recent acquisitions, and of $2.6 million in future income taxes. Net change in non-cash working capital balances related to operations used cash flows of $11.5 million, compared with $9.7 million for 2010. Changes in accounts receivable, prepaid expenses, accounts payable, income taxes payable and the derivative financial instruments represented a cash outflow of $14.3 million, whereas changes in inventories represented a total cash inflow of $2.8 million for 2011. Consequently, operating activities provided cash flows of $38.5 million, compared with $35.4 million for 2010.Financing activitiesFor 2011, the Company paid shareholder dividends of $9.3 million, up by 19.3% over 2010. This growth primarily reflects the increase in the quarterly dividend from $0.09 to $0.11 announced on January 27, 2011. It also repaid $1.4 million in long-term debt, compared with $0.2 million in 2010. Common shares were issued for a consideration of $1.5 million upon the exercise of options under the share option plan, compared with $0.5 million for 2010, and shares were repurchased for cancellation under the normal course issuer bid for a consideration of $10.5 million, compared with $18.1 million in 2010. Therefore, financing activities represented a cash outflow of $19.7 million, compared with $25.6 million for 2010.Investing activitiesIn 2011, the Company invested a total of $29.3 million, of which $18.6 million in the acquisition of the net assets of Outwater, the shares of Madico and 85% of the common shares of Provincial, as well as $10.7 million in capital assets, primarily the expansion of the Montreal and Laval distribution centres.Sources of financingAs at November 30, 2011, cash and cash equivalents totalled $29.1 million, compared with $39.3 million a year earlier. The Company posted a working capital of $167.3 million for a current ratio of 4.0:1, compared with $162.7 million and a 3.7:1 ratio as at November 30, 2010.Richelieu believes it has the capital resources to fulfill its ongoing commitments and obligations and to assume the funding requirements needed for its growth and the financing and investing activities planned for 2012. Furthermore, the Company continues to benefit from an authorized line of credit of $26 million, renewable annually and bearing interest at the bank's prime rate, as well as a line of credit of US$5 million bearing interest at prime rate plus 2%. In addition, the Company estimates it could obtain access to other outside financing if necessary.Summary balance sheet (1)(in thousands of $)As at November 302011 2010    Current assets223,016 222,752Long-term assets121,116 98,064    Total344,132 320,816Current liabilities55,762 60,025Long-term liabilities12,736 6,922Shareholders' equity275,634 253,869    Total344,132 320,816(1) Foreign exchange rate of a self-sustaining operation in the United States 1.0203 1.0266AssetsTotal assets amounted to $344.1 million as at November 30, 2011, up from $320.8 million a year earlier, an increase of 7.3% primarily reflecting the effect of acquisitions closed during the period. Current assets were up by $0.3 million over November 30, 2010. This position notably reflects the $10.2 million decrease in cash and cash equivalents, whereas accounts receivable, prepaid expenses and income taxes receivable were up by $9.3 million and inventories by only $1.1 million due to the ongoing improvement initiatives at the level of the supply chain, which largely limited the increases arising from the acquisitions and the growth in demand.Net cash(in thousands of $)As at November 3020112010   Current portion of long-term debt4,3092,072Long-term debt1,235786   Total5,5442,858Cash and cash equivalents29,09539,289Total net cash23,55136,431The Company benefits from an excellent financial position to pursue its business strategy. Its total interest-bearing debt remained very low at $5.5 million, of which $1.2 million in long-term debt and a current portion of $4.3 million representing solely the balances payable on acquisitions. As at November 30, 2011, the Company therefore posted total net cash of $23.6 million.As at November 30, 2011, shareholders' equity totalled $275.6 million, up from $253.9 million a year earlier, an increase of 8.6% mainly reflecting the $20.0 million growth in retained earnings which rose to $258.0 million and a $2.1 million increase in capital stock. The book value per share stood at $13.22 at 2011 year-end, compared with $12.01 as at November 30, 2010.The total interest-bearing debt to equity ratio stood at 2.0% as at November 30, 2011, compared with 1.1% a year earlier.Profile as at January 26, 2012Richelieu is a leading North American distributor, importer and manufacturer of specialty hardware and complementary products. 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 90,000 different items targeted to a base of some 70,000 customers who are served by 60 centres in North America - 34 distribution centres in Canada, 24 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 Ltée which manufactures components for the window and door industry and a broad selection of decorative mouldings.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 management's report, including statements relating to the expected sufficiency of cash flows to cover contractual commitments, to maintain growth and to provide for financing and investing activities, growth outlook, Richelieu's competitive position in its industry, Richelieu's ability to weather the current economic context and access other external financing, the closing of new acquisitions, the optimization of the synergies arising therefrom and their impact on sales and other statements not pertaining to past events, 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, including the assumption that economic conditions and exchange rates will not significantly deteriorate, changes in operating expenses will not increase significantly, the Company's deliveries will be sufficient to fulfill Richelieu's needs, the availability of credit  will remain stable during the fiscal year and no extraordinary events will require supplementary capital expenditures. Although management considers these assumptions and expectations reasonable based on the information available at the time they are written, they could prove inaccurate. Forward-looking statements are also subject, by their very nature, to known and unknown risks and uncertainties such as those related to the industry, acquisitions, labour relations, credit, key officers, supply, product liability, and other factors set forth in the Management's Report included in the Company's 2010 Annual Report as well as its 2010 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.JANUARY 26, 2012 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 January 26, 2012 can dial 1-800-731-5319 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 January 26, 2012 until midnight on February 2, 2012, by dialing 1-877-289-8525, access code: 4505983#. Members of the media are invited to listen in.Photos are available under "About Richelieu" - "Media" section at www.richelieu.comCONSOLIDATED BALANCE SHEETS       As at November 30[In thousands of dollars]    2011 2010 $ $ASSETS   Current assets    Cash and cash equivalents29,095 39,289Accounts receivable72,366 65,017Income taxes receivable1,645 —Inventories118,753 117,609Prepaid expenses1,157 837 223,016 222,752Capital assets25,399 19,132Intangible assets22,189 13,242Future income taxes2,658 2,327Goodwill70,870 63,363 344,132 320,816    LIABILITIES AND SHAREHOLDERS' EQUITY   Current liabilities   Accounts payable and accrued liabilities51,453 54,212Income taxes payable— 3,741Current portion of long-term debt4,309 2,072 55,762 60,025Long-term debt1,235 786Future income taxes6,160 2,706Non-controlling interest5,341 3,430 68,498 66,947    Shareholders' equity   Capital stock19,714 17,623Contributed surplus3,586 3,906Retained earnings257,955 237,907Accumulated other comprehensive income(5,621) (5,567) 275,634 253,869 344,132 320,816    CONSOLIDATED STATEMENTS OF EARNINGS       Years ended November 30[In thousands of dollars, except earnings per share]    2011 2010 $ $Sales523,786 446,963Cost of sales and warehouse, selling and administrative expenses456,467 383,131Earnings before the following67,319 63,832Amortization of capital assets5,906 5,160Amortization of intangible assets2,139 1,303Financial costs, net(13) (201) 8,032 6,262Earnings before income taxes, non-controlling interest and discontinued operations59,287 57,570Income taxes19,416 18,698Earnings before non-controlling interest and discontinued operations39,871 38,872Non-controlling interest379 298Net earnings from continued operations39,492 38,574Net earnings from discontinued operations— 659Net earnings39,492 39,233    Earnings per share   Basic   From continued operations1.88 1.79From discontinued operations— 0.03 1.88 1.82Diluted   From continued operations1.86 1.78From discontinued operations— 0.03 1.86 1.81    CONSOLIDATED STATEMENTS RETAINED EARNINGS       Years ended November 30[In thousands of dollars]    2011 2010 $ $Net earnings39,492 39,233    Retained earnings, beginning of year237,907 223,986Dividends(9,267) (7,768)Premium on redemption of common shares for cancellation(10,177) (17,544)Retained earnings, end of year257,955 237,907    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME       Years ended November 30[In thousands of dollars]    2011 2010 $ $Net earnings39,492 39,233Other comprehensive income   Translation adjustment of the net investment in self-sustaining foreign operations(54) (1,243)Comprehensive income39,438 37,990    CONSOLIDATED STATEMENTS OF CASH FLOWS       Years ended November 30[In thousands of dollars]    2011 2010 $ $OPERATING ACTIVITIES   Net earnings from continued operations39,492 38,574Non-cash items    Amortization of capital assets5,906 5,160 Amortization of intangible assets2,139 1,303 Future income taxes1,573 (1,031) Non-controlling interest379 298 Stock-based compensation expense568 755 50,057 45,059Net change in non-cash working capital balances related to operations(11,529) (9,699) 38,528 35,360    FINANCING ACTIVITIES   Repayment of long-term debt(1,444) (246)Dividends paid(9,267) (7,768)Issue of common shares1,538 500Redemption of common shares for cancellation(10,517) (18,107) (19,690) (25,621)    INVESTING ACTIVITIES   Business acquisition(18,575) (17,684)Additions to capital assets(10,720) (3,422) (29,295) (21,106)    Effect of exchange rate fluctuations on cash and cash equivalents263 (41)    Net change in cash and cash equivalents(10,194) (11,408)Cash flows from discontinued operations— 2,255Cash and cash equivalents, beginning of year39,289 48,442Cash and cash equivalents, end of year29,095 39,289 Supplemental information   Income taxes paid23,074 15,093Interest received, net(24) (179)    For further information: Richard Lord President and Chief Executive OfficerAntoine Auclair Vice-President and Chief Financial Officer Tel: (514) 336-4144 www.richelieu.com