Richelieu achieves vigorous increase in sales and net earnings in the 1st quarter 2020 and makes three new acquisitions in Canada and the U.S.

Implementation of appropriate measures
related to COVID-19

• Total sales increased by 10.2% to $249.4 million for the first quarter ended February 29, 2020. In Canada and the U.S., the increases were 9.0% and 13.3% (US$) respectively.
• EBITDA grew by 18.9% to $24.9 million and net earnings attributable to the shareholders were up 18.4% to $11.8 million or $0.21 diluted per share, an increase of 23.5%.
• Three new acquisitions in Canada and the U.S. representing additional sales of approximately $60 million on an annual basis.
• Sound and solid financial position with working capital of $337.2 million (3.8:1 ratio).

MONTREAL, April 9, 2020 /CNW Telbec/ - "Richelieu (TSX: RCH) started 2020 on a strong note, as shown by the 10.2% increase in sales, 18.9% in EBITDA and 23.5% in diluted net earnings per share. Our innovation and acquisition strategies combined with our market development initiatives, our unique service concept and the depth of our product lines drove growth during the first quarter ended February 29. We are all the more satisfied given that the first three months are historically the weakest period of the fiscal year. In addition, we completed three new acquisitions in North America: two in Canada, Decotec and Mibro, acquired in December 2019, operating mostly in GTA and allowing us to strengthen our activities in markets where we already are and one in the United States, O'Harco, concluded on February 3, 2020, which operates three centres in Nebraska, Iowa and South Dakota, giving us access to these new geographic markets. The three acquisitions represent sales of approximately $60 million on an annual basis and should result in sales synergies across our network, which now totals 82 centres in North America." commented Richard Lord, President and Chief Executive Officer of Richelieu.

"However, this good first quarter precedes the COVID-19 crisis which has been affecting us since the end of March. In light of these unprecedented events, we reacted swiftly, continuing to provide our customers with the distinctive services they have come to expect, to meet their needs for essential products and services, and to anticipate their expectations, particularly in these highly challenging market conditions. We intend to continue pursuing the proven business strategies that have enabled us to build a large and diversified client base and to effectively support our customers in their development and projects. In order to ensure that all essential activities are conducted safely and effectively in the context of this COVID-19 situation, we will continue to comply with all applicable health and safety guidelines issued by our governments. All appropriate measures will be maintained to ensure the safety of our employees, suppliers, customers, families and visitors. As of today, and although most of our distribution centers remain operational, Richelieu has nonetheless taken a series of flexible measures to protect its financial position in response to the COVID-19 crisis and mitigate its impacts on its employees, including temporary layoffs, teleworking and reductions in Board and management remuneration, salaries and/or hours, as applicable and as appropriate, region by region. We have entered this crisis from a position of strength, with a leading market position and a solid financial position. We believe taking decisive yet flexible actions will help to protect our employees, operations and cash flows over the short-term and gives us the necessary agility to resume our long-term growth as soon as current confinement measures will be lifted" added Richard Lord.

ANALYSIS OF OPERATING RESULTS FOR THE FIRST QUARTER ENDED FEBRUARY 29, 2020, COMPARED WITH THE FIRST QUARTER ENDED FEBRUARY 28, 2019

For the quarter ended February 29, 2020, consolidated sales reached $249.4 million, compared with $226.4 million for the corresponding quarter of 2019, an increase of 10.2%, of which 3.5% from internal growth and 6.7% from acquisitions. At comparable exchange rates to the first quarter of 2019, the consolidated sales growth would have been 10.6% for the quarter ended February 29, 2020.

Richelieu achieved sales of $210.5 million in the manufacturers market, compared with $192.3 million for the first quarter of 2019, an increase of $18.2 million or 9.5% increase, of which 4.8% resulted from internal growth and 4.7% from acquisitions. Sales to hardware retailers and renovation superstores stood at $38.9 million, up $4.9 million or 14.4% of which 18.5% from acquisitions and an internal decrease of 4.1% caused by the decrease of sales in this market in the United States.

In Canada, Richelieu recorded sales of $156.7 million, an increase of $13.0 million or 9% over the first quarter of 2019, of which 3.0% from internal growth and 6.0% from acquisitions. Sales to manufacturers amounted to $127.6 million compared with $117.7 million, an increase of 8.4% of which 2.2% from internal growth and 6.2% from acquisitions. Sales to hardware retailers and renovation superstores grew to $29.1 million, up $3.1 million or 11.9% over the corresponding quarter of 2019, of which 3.7% from internal growth and 8.2% from acquisitions.

In the United States, sales totalled US$70.3 million, compared with US$62.1 million for the first quarter of 2019, an increase of US$8.2 million or 13.3%, of which 5.1% from internal growth and 8.2% from acquisitions. Sales to manufacturers amounted to US$62.8 million compared with US$56 million over the first quarter of 2019, an increase of 12.1%, of which 9.8% from internal growth and 2.3% from acquisitions. Sales to hardware retailers and renovation superstores were up 23.0% from the corresponding quarter of 2019, of which 61.3% from acquisitions and 38.3% of internal decrease caused by higher cyclical sales and initial sales in the corresponding quarter of 2019. Considering applicable exchange rates, total U.S. sales expressed in Canadian dollars stood at $92.7 million, compared with $82.6 million for the first quarter of 2019, an increase of 12.2%. They accounted for 37.2% of consolidated sales for the first quarter of 2020, whereas they represented 36.5% of the period's consolidated sales for the first quarter of 2019.

First-quarter earnings before income taxes, interest and amortization (EBITDA) amounted to $24.9 million, up $3.9 million or 18.9% over the first quarter of 2019. The gross margin remained relatively stable and the EBITDA margin improved due to the increase in sales and the continued control of expenses. It should also be noted that the EBITDA margin was impacted last year by market development costs in the retailer market in the United States. EBITDA margin stood at 10.0%, compared to 9.2% for the corresponding quarter of 2019.

Amortization expenses for the first quarter of 2020 amounted to $7.8 million compared with $6.7 million for the corresponding quarter of 2019, up $1.1 million, resulted from the increase in the amortization of intangibles and right-to-use asset relating mainly to business acquisitions made in fiscal 2019 and in the first quarter of 2020.

First-quarter net earnings grew by 18.7%. Considering non-controlling interests, net earnings attributable to shareholders of the Corporation amounted to $11.8 million, up by 18.4% over the first quarter of 2019. Net earnings per share rose to $0.21 basic and diluted, compared with $0.17 basic and diluted for the first quarter of 2019, an increase of 23.5%.

Comprehensive income amounted to $13.3 million, considering a positive adjustment of $1.5 million on translation of the financial statements of the subsidiary in the United States, compared with $8.5 million for the first quarter of 2019, considering a negative adjustment of $1.4 million on translation of the financial statements of the subsidiary in the United States.

FINANCIAL POSITION

First-quarter cash flows from operating activities (before net change in working capital balances) amounted to $20.1 million or $0.36 diluted per share, compared with $16.9 million or $0.29 diluted per share for the first quarter of 2019, an increase of 19.1% stemming primarily from the net earnings growth and increased amortization. Net change in non-cash working capital balances used cash flows of $11.4 million, reflecting the change in inventory ($6.2 million), whereas the change in other items used cash flows of $5.2 million. Consequently, operating activities represented a cash inflow of $8.8 million, whereas they had used cash flows of $10.6 million for the first quarter of 2019.

First-quarter cash flows from financing activities used cash flows of $6.9 million, compared with $6.5 million for the first quarter of 2019. The Corporation repaid long-term debt of $0.2 million and issued shares for $0.8 million, compared with no long-term debt repayment and a $0.3 million share issue in the first quarter of 2019. Dividends paid to shareholders of the Corporation amounted to $3.8 million, up 3.8% over the corresponding quarter of 2019.

First-quarter cash flows from investing activities represented a cash outflow of $26.5 million, of which $24.1 million for business acquisitions and $2.4 million primarily for the purchase of new equipment to improve operational efficiency.

Sources of financing

As at February 29, 2020, the bank overdraft amounted to $23 thousands, compared with cash of $24.7 million as at November 30, 2019. This change mainly results from the investing activities made during the first quarter of 2020. The Corporation posted a working capital of $337.2 million for a current ratio of 3.8:1, compared with $335.5 million (4.1:1 ratio) as at November 30, 2019.

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 expected financing and investing activities between now and the end of 2020. The Corporation continues to benefit from an authorized line of credit of $65 million as well as a line of credit of US$6 million renewable annually and bearing interest at prime and base rates respectively. In addition, Richelieu considers it could obtain access to other outside financing if necessary.

Summary financial position
(in thousands of $, except exchange rates)
As at	February 29,	November 30,
	2020	2019
		(Restated ^1)
Current assets	456,111	445,345
Non-current assets	239,900	226,801
Total	696,011	672,146
Current liabilities	118,896	109,878
Non-current liabilities	64,976	60,647
Equity attributable to shareholders of the Corporation	509,145	498,384
Non-controlling interests	2,994	3,237
Total	696,011	672,146
Exchange rates on translation of a subsidiary in the United States	1.343	1.330
(1) The comparative figures have been restated following the adoption of IFRS16 on December 1, 2019. Refer to note 2 of the interim consolidated financial statements for the period ended February 29, 2020 for more details on the adoption of this new standard.

Assets

Total assets amounted to $696.0 million as at February 29, 2020, compared with $672.1 million as at November 30, 2019, an increase of 3.6 %. Current assets grew by 2.4% or $10.8 million over November 30, 2019.

Cash position
(in thousands of $)
As at	February 29	November 30
	2020	2019
Current portion of long-term debt	9,427	5,659
Long-term debt	2,200	—
Total debt	11,627	5,659
Cash and cash equivalents (bank overdraft)	(23)	24,701

The Corporation continues to benefit from a healthy and solid financial position. As at February 29, 2020, total debt was $11.6 million, of which $2.2 million in long-term debt and $9.4 million in short-term debt representing balances payable on acquisitions.

Equity attributable to shareholders of the Corporation totalled $509.1 million as at February 29, 2020, compared with $498.4 million as at November 30, 2019, an increase of $10.8 million stemming primarily from a growth of $8.0 million in retained earnings which amounted to $439.3 million, and of $1.3 million in share capital and contributed surplus, whereas accumulated other comprehensive income increased by $1.5 million. As at February 29, 2020, the book value per share was $9.05, up by 2.1% over November 30, 2019.

As at February 29, 2020, at the close of markets, the Corporation's share capital consisted of 56,287,305 common shares (56,240,030 shares as at November 30, 2019). During the first quarter ended February 29, 2020, the Corporation issued 47,275 common shares at an average price of $16.84 (113,275 in 2019 at an average price of $10.92) upon the exercise of options under its stock option plan. As at February 29, 2020, 2,008,925 stock options were outstanding (1,770,700 as at November 30, 2019).

Dividends

In an effort to protect Richelieu's current cash position and mitigate financial impacts likely to result from the COVID-19 crisis, Richelieu's Board of Directors has elected not to declare any dividends for the 1st quarter of 2020.

Significant Accounting Standard Adopted - IFRS 16

The financial results and the Corporation's unaudited condensed interim consolidated financial statements reflect the adoption of IFRS 16, "Leases", on December 1, 2019, and all comparative figures for the corresponding period of the prior fiscal year have been restated (refer to the Corporation's unaudited interim consolidated financial statements for the three-month period ended February 29, 2020, for more information).

PROFILE AS AT FEBRUARY 29, 2020

Richelieu 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, storage and closet, home furnishing and office furniture manufacturers, door and window, residential and commercial woodworkers, and hardware retailers including renovation superstores. Richelieu offers customers a broad mix of high-end products sourced from manufacturers worldwide. Its product selection consists of over 130,000 different items targeted to a base of more than 90,000 customers who are served by 82 centers in North America – 40 distribution centers in Canada, 40 in the United States and two manufacturing plants in Canada, specifically Cedan Industries Inc. which specializes in the manufacturing 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 interest, income taxes and amortization ("EBITDA") because this measure enables management to assess the Corporation's operational performance. This measure is a financial indicator of a corporation's ability to service its debt. However, EBITDA should not be considered by an investor as an alternative to operating income, net earnings, cash flows or as a measure of liquidity. Because EBITDA is not a standardized measurement as prescribed by IFRS, it may not be comparable to the EBITDA of other companies. Richelieu also uses adjusted cash flows from operating activities, which are based on net earnings plus amortization, deferred tax expense (or recovery) and share-based compensation expense. These additional measures do not account for net change in non-cash working capital items to exclude seasonality effects and are used by management in its assessments of cash flows from long-term operations. Therefore, adjusted cash flows from operating activities may not be comparable to those of other companies. Certain statements set forth in this report (generally identified by terms such as "may", "could", "might", "intend", "expect", "believe", "estimate" or comparable variants) constitute forward-looking statements which, by their very nature, remain subject to other risks and uncertainties as set forth in the Corporation's annual and quarterly reports. Although management considers these assumptions and expectations reasonable based on the information available at the time they are provided, such assumptions and expectations could prove inaccurate and actual results could differ materially. Richelieu is under no obligation to update or revise any forward-looking statements made herein to account for future events or circumstances, except as required by applicable legislation.

COVID-19 Update — The following is an update to the risks or uncertainties the Corporation is facing since set forth in the Corporation's 2019 Annual Report. The Corporation is closely monitoring the evolution of the COVID-19 situation. Several provinces in Canada and States in the United States have instituted closures of non-essential businesses. The Corporation has suspended all travel and taken active steps to implement physical distancing and other measures recommended by public health agencies. The Corporation is updating employees and business partners on a frequent basis to provide information on the situation and on necessary precautions to take. It is too soon to gauge the impacts of the current outbreak, given the many unknowns related to COVID-19. These include the duration and severity of the outbreak. COVID-19 is altering business and consumer activity in affected areas and beyond. Additional measures may be implemented by one or more governments in jurisdictions where the Corporation operates. Labour shortages due to illness, Corporation or government imposed isolation programs, or restrictions on the movement of personnel or possible supply chain disruptions could result in a reduction or cessation of all or a portion of the Corporation's operations. The extent to which COVID-19 and any other pandemic or public health crisis impacts the Corporation's business, affairs, operations, financial condition, liquidity, availability of credit and results of operations will depend on future developments that are highly uncertain and cannot be predicted with any meaningful precision, including new information which may emerge concerning the severity of the COVID-19 virus and the actions required to contain the COVID-19 virus or remedy its impact, among others. Potential impacts include, but are not limited to, an impairment of long-lived assets and a change in the estimated credit loss on accounts receivable. Any of these developments, and others, could have a material adverse effect on our business, financial condition, operations and results of operations. The Corporation is constantly evaluating the situation and monitoring any impacts or potential impacts to its business.

April 9, 2020, 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 April 9, 2020, may dial 1-888-390-0546 a few minutes before the start of the call. For those unable to participate, a taped rebroadcast will be available as of 5:45 p.m. on April 9, 2020, until midnight on April 16, 2020 by dialling 1-888-390-0541, access code: 596802 #. Members of the media are invited to listen in.

Photos are available at www.richelieu.com

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
[In thousands of dollars] [Unaudited]
	As at February 29, 2020	As at November 30, 2019
	$	$ (Restated)
ASSETS
Current assets
Cash and cash equivalents	—	24,701
Accounts receivable	146,933	137,589
Income taxes receivable	3,840	1,336
Inventories	297,479	275,154
Prepaid expenses	7,859	6,565
	456,111	445,345
Non-current assets
Property, plant and equipment	41,412	41,309
Intangible assets	42,663	35,383
Right-of-use assets	64,618	63,642
Goodwill	84,864	80,164
Deferred taxes	6,343	6,303
	696,011	672,146
LIABILITIES AND EQUITY
Current liabilities
Bank overdraft	23	—
Accounts payable and accrued liabilities	95,309	90,140
Current portion of long-term debt	9,427	5,659
Current portion of lease obligation	14,137	14,079
	118,896	109,878
Non-current liabilities
Long-term debt	2,200	—
Lease obligation	54,461	53,274
Deferred taxes	6,507	5,553
Other liabilities	1,808	1,820
	183,872	170,525
Equity
Share capital	43,170	42,190
Contributed surplus	6,007	5,700
Retained earnings	439,331	431,313
Accumulated other comprehensive income	20,637	19,181
Equity attributable to shareholders of the Corporation	509,145	498,384
Non-controlling interests	2,994	3,237
	512,139	501,621
	696,011	672,146

CONSOLIDATED STATEMENTS OF EARNINGS
[In thousands of dollars, except earnings per share] [Unaudited]	For the three-month periods ended February 29 and  February 28,
	2020	2019
	$	$ (Restated)
Sales	249,401	226,351
Operating expenses excluding amortization	224,518	205,415
Earnings before amortization, financial costs and income taxes	24,883	20,936
Amortization of property, plant and equipment and right-to-use asset	6,411	5,659
Amortization of intangible assets	1,438	1,086
Financial costs, net	733	584
	8,582	7,329
Earnings before income taxes	16,301	13,607
Income taxes	4,507	3,673
Net earnings	11,794	9,934
Net earnings attributable to:
Shareholders of the Corporation	11,772	9,943
Non-controlling interests	22	(9)
	11,794	9,934
Net earnings per share attributable to shareholders of the Corporation
Basic	0.21	0.17
Diluted	0.21	0.17

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
[In thousands of dollars] [Unaudited]	For the three-month periods ended February 29 and  February 28,
	2020	2019
	$	$ (Restated)
Net earnings	11,794	9,934
Other comprehensive income that will be reclassified to net earnings
Exchange differences on translation of foreign operations	1,456	(1,408)
Comprehensive income	13,250	8,526
Comprehensive income attributable to:
Shareholders of the Corporation	13,228	8,535
Non-controlling interests	22	(9)
	13,250	8,526

CONSOLIDATED STATEMENTS OF CASH FLOWS
[In thousands of dollars] [Unaudited]
	For the three-month periods ended February 29 and  February 28,
	2020	2019
	$	$ (Restated)
OPERATING ACTIVITIES
Net earnings	11,794	9,934
Items not affecting cash
Amortization of property, plant and equipment and right-to-use asset	6,411	5,659
Amortization of intangible assets	1,438	1,086
Deferred taxes	—	(44)
Share-based compensation expense	491	266
	20,134	16,901
Net change in non-cash working capital balances	(11,352)	(27,507)
	8,782	(10,606)
FINANCING ACTIVITIES
Repayment of long-term debt	(174)	—
Dividends paid to shareholders of the Corporation	(3,754)	(3,617)
Payment of principal portion of lease obligation	(3,447)	(2,998)
Other dividends paid	(277)	(193)
Common shares issued	796	298
	(6,856)	(6,510)
INVESTING ACTIVITIES
Business acquisitions	(24,081)	(4,803)
Additions to property, plant and equipment and intangible assets	(2,427)	(1,837)
	(26,508)	(6,640)
Effect of exchange rate changes on cash and cash equivalents	(142)	(95)
Net change in cash and cash equivalents	(24,724)	(23,851)
Cash and cash equivalents, beginning of period	24,701	7,408
Cash and cash equivalents (bank overdraft), end of period	(23)	(16,443)

SOURCE Richelieu Hardware Ltd.

Richard Lord, President and Chief Executive Officer; Antoine Auclair, Vice-President and Chief Financial Officer, Tel: [phone] www.richelieu.com

Related Links

https://www.richelieu.com/