1 acquisition closed during the quarter,
2 acquisitions closed subsequently to quarter-end and
2 agreements in principle, including a new one in the U.S.,
totalling potential sales of $ 73 million annually

• Total sales for the second quarter ended May 31, 2021 reached $371.4 million, up 49.6% (46.8% from organic growth and 2.8% from acquisitions). In Canada and the United States, the increases were 59.8% and 49.5% respectively (US$). For the first half, sales totalled $669.0 million, up 34.4%.
  
  
• EBITDA amounted to $61.0 million, up 80.5%, and the EBITDA margin increased to 16.4%, compared to 13.6% in Q2 2020.
  
  
• Net earnings attributable to shareholders more than doubled to $37.4 million, or $0.66 per diluted share, up 112.9%. For the first half, it reached $1.03 per diluted share, up 98.1%.
  
  
• Closing of three acquisitions, including two following quarter-end and signing of an agreement in principle for an acquisition in the United States.
  
  
• Sound and solid financial position with cash of $89.6 million, total debt of $2.6 million, working capital of $416.3 million for a ratio of 3.7:1 and a return on average equity of 20.4%.

MONTREAL, July 8, 2021 /CNW Telbec/ - "Richelieu (TSX: RCH) achieved strong growth in the second quarter, attesting to the strength of its business model and the agility of the organization to adapt to market conditions as well as the success of recent investments in new specialized markets. The second quarter sales growth, to which all our markets contributed, was fueled by the momentum of our market penetration, innovation, acquisition, and geographic and sectoral diversification strategies, allowing us to create opportunities and seize those offered by the healthy renovation market.  It should be noted, however, that the comparable quarter of 2020 had experienced a negative internal growth due to the pandemic. With an increase of 52.6%, including 50.5% from internal growth, the manufacturers' market contributed $311.3 million to total sales, including $203.7 million in Canada, up 63.5%, and US$86.7 million in the United States, up 52.6% (US$). Very good progress was also made in the retailer and renovation superstore market, where sales amounted to $60.1 million, up 35.7%, including 29.8% from internal growth," commented Richard Lord, President and Chief Executive Officer of Richelieu.

"Our acquisition strategy remains very active. On April 5, we acquired Task Tools, a distributor of power tool accessories and related products serving the retailer market in Canada and the United States. We also signed two agreements in principle, one of which was completed on June 1 with the acquisition of Uscan Industrial Fasteners Ltd., a leading importer and distributor of screws, bolts and industrial fasteners. Founded in Montreal in 1970, the Company operates a distribution center from which it serves a clientele of retailers, mainly in Eastern Canada. Then on July 5, we acquired 75% of the shares of Inter-Co Inc. a distributor of Division 10 products for the construction industry in Canada and the United States, operating two centers in Ontario and two in the United Sates (Ohio and Arizona). It will be amalgamated to one of our divisions already operating in this sector of activity covering Western Canada. In addition, we signed a new agreement in principle for an acquisition in the United States. Together, these transactions would represent additional sales of $73 million on an annual basis.  Furthermore, in anticipation of solid future growth in the United States, we are currently working on several expansion projects in some of our centers, such as Detroit, Atlanta, Dallas, Boston and Orlando, as well as the opening of a new center in Pennsylvania." added Mr. Richard Lord.

ANALYSIS OF OPERATING RESULTS FOR THE SECOND QUARTER AND FIRST SIX MONTHS ENDED MAY 31, 2021, COMPARED WITH THE SECOND QUARTER AND FIRST SIX MONTHS ENDED MAY 31, 2020

Second-quarter consolidated sales reached $371.4 million, compared to $248.3 million for the corresponding quarter of 2020, an increase of $123.1 million or 49.6%, of which 46.8% from internal growth and 2.8% from acquisitions. At comparable exchange rates to the second quarter of 2020, the consolidated sales increase would have been 56.0% for the quarter ended May 31, 2021.

Richelieu achieved sales of $311.3 million in the manufacturers market, compared to $204 million for the second quarter of 2020, an increase of $107.3 million or 52.6%, of which 50.5% from internal growth and 2.1% from acquisitions. Sales to hardware retailers and renovation superstores stood at $60.1 million, up $15.8 million or 35.7% over the second quarter of 2020, of which 29.8% from internal growth and 5.9% from acquisitions. Note that in the second quarter of 2020, the Corporation suffered a significant drop in sales due to the slowdown in business resulting from the pandemic.

In Canada, Richelieu recorded sales of $248.1 million, an increase of $92.9 million or 59.8% over the second quarter of 2020, of which 56.7% from internal growth and 3.1% from acquisitions. Sales to manufacturers amounted to $203.7 million, compared to $124.6 million in the second quarter of 2020, an increase of 63.5%, of which 61.7% from internal growth and 1.8%  from acquisitions. Sales to hardware retailers and renovation superstores reached $44.4 million, up $13.8 million or 45.1% over the corresponding quarter of 2020, of which 37.4% from an internal growth and 7.7% from acquisitions. The significant increase in internal growth in these two markets was influenced by strong demand in the renovation market.

In the United States, sales totalled US$99.4 million, compared to US$66.5 million for the second quarter of 2020, up US$32.9 million or 49.5%, of which 47.0% from internal growth and 2.5% from acquisitions. Sales to manufacturers amounted to US$86.7 million, compared to US$56.8 million, an increase of 52.6% over the second quarter of 2020, of which 50.1% from internal growth and 2.6% from acquisitions. Sales in US$ to hardware retailers and renovation superstores reached $12.7 million, compared to $9.7 million for the corresponding quarter of 2020, an increase of $3.0 million, up 30.9% from the corresponding quarter of 2020, including 29.5% from internal growth and 1.4% from acquisitions. As in Canada, the renovation market in the United States has been growing strongly, driving up sales in these markets. Total U.S. sales in Canadian dollars stood at $123.3 million, compared to $93 million year over year, an increase of 32.6%. They accounted for 33.2% of consolidated sales for the second quarter of 2021, compared to 37.5% of consolidated sales for the second quarter of 2020.

First-half consolidated sales reached $669.0 million, an increase of $171.3 million or 34.4% over the first six months of 2020, of which 31.9% from internal growth and 2.5% from acquisitions. At comparable exchange rates to the first half of 2020, consolidated sales increase would have been 38.1%. Sales to manufacturers reached $553.4 million, compared to $412.3 million for the first six months of 2020, an increase of $141.1 million or 34.2%, of which 31.9% from internal growth and 2.3% from acquisitions. Sales to hardware retailers and renovation superstores grew by 35.4% or $30.2 million to total $115.6 million.

In Canada, Richelieu recorded sales of $441.3 million, compared to $311.9 million for the first six months of 2020, up by $129.4 million or 41.5%, of which 39.5% from internal growth and 2.0% from acquisitions. Sales to manufacturers reached $357.3 million, up $104.8 million or 41.5%, of which 40.1% from internal growth and 1.4% from acquisitions. Sales to hardware retailers and renovation superstores reached $84.0 million, compared to $59.4 million, up $24.6 million or 41.4% over the first half of 2020.

In the United States, the Corporation recorded sales of US$181.3 million, compared to US$136.8 million for the first six months of 2020, an increase of US$44.5 million or 32.5%, of which  28.8% from internal growth and 3.7% from acquisitions. Sales to manufacturers totalled US$156.1 million, compared to US$117.6 million, an increase of US$38.5 million or 32.7% over the first half of 2020, of which 28.5% from internal growth and 4.2% from acquisitions. Sales to hardware retailers and renovation superstores were up 31.3% from the corresponding period of 2020. Total U.S. sales in Canadian dollars amounted to $227.7 million, compared to $185.7 million for the corresponding six months of 2020, an increase of 22.6%. They accounted for 34.0% of consolidated sales for the first half of 2021, compared to 37.3% of the period's consolidated sales for the first six months of 2020.

Second quarter earnings before income taxes, interest and amortization ("EBITDA") reached $61.0 million and were up $27.2 million or 80.5% over the second quarter of 2020, resulting from a significant increase in sales as well as continued rigorous cost control. Gross margin also improved slightly from the second quarter of 2020. EBITDA margin stood at 16.4%, compared to 13.6% for the corresponding quarter of 2020.

Amortization expense for the second quarter of 2021 amounted to $8.5 million, down $0.1 million compared to the corresponding quarter of 2020. Income tax expense amounted to $14.2 million, up $7.6 million from the second quarter of 2020. Financial costs amounted to $0.6 million.

First-half earnings before income taxes, interest and amortization ("EBITDA") totalled $99.1 million, up $40.5 million or 69.0% over the first six months of 2020.  The gross margin improved slightly over the corresponding six-month period of 2020. As for the EBITDA margin, it stood at 14.8%, compared to 11.8% for the first six months of 2020 resulting from increased sales and expense control.

Amortization expense for the first half of 2021 amounted to $17.0 million, up $0.5 million compared to the same period of 2020. Income tax expense amounted to $22.2 million, up $11.0 million from the first half of 2020. Financial costs amounted to $1.3 million for the first half of 2021.

Second quarter net earnings grew 111.2%. Considering non-controlling interests, net earnings attributable to shareholders of the Corporation amounted to $37.4 million, up 111.4% over the second quarter of 2020. Net earnings per share rose to $0.67 basic and $0.66 diluted, compared to $0.31 basic and diluted for the second quarter of 2020, an increase of 116.1% and 112.9% respectively.

Comprehensive income amounted to $30.5 million, considering a negative adjustment of $7.1 million on translation of the financial statements of the subsidiary in the United States, compared to $21.4 million for the second quarter of 2020, considering a positive adjustment of $3.6 million on translation of the financial statements of the subsidiary in the United States.

First-half net earnings increased 98.1%. Considering non-controlling interests, net earnings attributable to shareholders of the Corporation totalled $58.4 million, up 98.1% over the corresponding six months of 2020. Net earnings per share amounted to $1.04 basic and $1.03 diluted, compared to $0.52 basic and diluted for the first half of 2020.

Comprehensive income totalled $48.4 million, considering a negative adjustment of $10.1 million on translation of the financial statements of the subsidiary in the United States, compared to $34.7 million for the first half of 2020, considering a positive adjustment of $5.1 million on translation of the financial statements of the subsidiary in the United States.

FINANCIAL POSITION

Analysis of principal cash flows for the second quarter and first six months ended May 31, 2021

Operating activities

Second quarter cash flows from operating activities (before net change in non-cash working capital balances) amounted to $46.5 million or $0.82 diluted per share, an increase of 74.0%, compared to $26.7 million, or $0.47 for the corresponding quarter of 2020, stemming primarily from the net earnings growth. Net change in non-cash working capital balances represented a cash inflow of $0.9 million, reflecting the change in accounts receivable of $18.0 million, whereas the change in accounts payable  and other items represented cash inflows of $18.9 million. Consequently, operating activities provided cash flows of $47.4 million, compared to $49.4 million in the second quarter of 2020.

First-half cash flows from operating activities (before net change in non-cash working capital balances) reached $76.5 million or $1.36 per share diluted, compared to $46.9 million or $0.83 per share diluted for the first six months of 2020, an increase of 63.2%. Net change in non-cash working capital balances used cash flows of $22.0 million, primarily representing changes in accounts receivable and inventories that used cash flows of $28.5 million whereas accounts payable and other items represented a cash inflow of $6.5 million. Consequently, operating activities provided cash flows of $54.4 million, compared to $58.2 million for the first six months of 2020.

Financing activities

Second quarter cash flows from financing activities used cash flows of $6.7 million, compared to $3.8 million for the second quarter of 2020. The Corporation repaid long-term debt of $1.8 million, paid lease obligations of $4.0 million and issued shares for $3.1 million, compared to a long-term debt repayment of $0.3 million, lease obligation payments of $3.7 million and a share issuance for $0.3 million in the second quarter of 2020. Dividends paid to shareholders of the Corporation amounted to $3.9 million while no dividend was paid in the corresponding quarter of 2020.

First-half cash flows from financing activities used cash flows of $22.4 million, compared to $10.6 million in the first half of 2020. The Corporation repaid long-term debt of $3.2 million, paid lease obligations of $7.8 million and issued shares for $3.9 million, compared to a long-term debt repayment of $0.5 million, lease obligations payments of $7.2 million and a $1.0 million share issue in 2020. Dividends paid to shareholders of the Corporation amounted to $11.6 million compared to $3.8 million in the same period of 2020. Note that the Corporation paid a special dividend of $0.0667 per share in addition to a dividend of $0.07 per share in the first quarter of 2021. The Corporation also repurchased common shares for an amount of $3.3 million in the first half of 2021, while it did not make any share repurchases in 2020.

Investing activities

Second quarter cash flows from investing activities represented a cash outflow of $13.9 million, including $9.8 million for business acquisitions made during the current quarter and $4.0 million primarily for the purchase of new equipment to maintain and improve operational efficiency, including the addition of IT licenses.

First-half cash flows from investing activities represented a total cash outflow of $16.7 million, comprising $9.8 million for the business acquisitions made during the current period and $6.9 million primarily for the purchase of new equipment to maintain and improve operational efficiency.

Sources of financing

As at May 31, 2021, the cash and cash equivalents amounted to $89.6 million, compared with $73.9 million as at November 30, 2020. The Corporation posted a working capital of $416.3 million for a current ratio of 3.7:1, compared with $377.4 million (current ratio of 3.6:1) as at November 30, 2020.

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 2021. 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 additional external financing if necessary.

Analysis of financial position as at May 31, 2021

Assets

Total assets amounted to $811.5 million as at May 31, 2021, compared with $771.1 million as at November 30, 2020, an increase of 5.2%. Current assets grew by 8.7% or $45.6 million over November 30, 2020. Non-current assets were down by 2.1%, resulting from the lower exchange rate used for the translation of the financial statements of the subsidiary in the United States.

The Corporation continues to benefit from a healthy and solid financial position. As at May 31, 2021, total debt was $2.6 million, representing mainly balances payable on acquisitions.

Equity attributable to shareholders of the Corporation totalled $589.6 million as at May 31, 2021, compared with $551.1 million as at November 30, 2020, an increase of $38.5 million stemming primarily from a growth of $43.8 million in retained earnings which amounted to $524.6 million, and of $4.8 million in share capital and contributed surplus, whereas accumulated other comprehensive income was down by $10.1 million. As at May 31, 2021, the book value per share was $10.53, up by 6.8% over November 30, 2020.

As at May 31, 2021, at the close of markets, the Corporation's share capital consisted of 56,009,606 common shares [55,893,568 shares as at November 30, 2020]. Weighted average of diluted outstanding shares for the three- and six-month periods ended May 31, 2021, were 56,539,960 and 56,442,680 [2020 - 56,538,290 and 56,579,600]. During the first half of 2021, the Corporation issued 198,600 common shares at an average exercise price of $19.76 [331,900 in fiscal 2020 at an average exercise price of $16.92] upon the exercise of stock options under its stock option plan. In addition, the Corporation repurchased for cancellation 82,562 common shares in the normal course of operations for a cash consideration of $3.3 million (678,362 common shares for a cash consideration of $25.0 million in fiscal 2020). During the six -month period ended May 31, 2021, the Corporation granted 289,000 stock options (300,500 in fiscal 2020) and cancelled 12,750 stock options. As at May 31, 2021, 1,775,575 stock options were outstanding [1,697,925 as at November 30, 2020].

Dividends

On July 8, 2021, the Board of Directors approved the payment of a quarterly dividend of 0.07$ per share to shareholders of record as at July 22, 2021, payable on August 5, 2021. The declared dividend is designated as an eligible dividend within the meaning of the Income Tax Act (Canada).

PROFILE AS AT MAY 31, 2021
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, residential and commercial woodworkers, door and window, 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 87 centers in North America – 43 distribution centers in Canada, 42 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.

Financial analysts and investors interested in participating in the conference call on Richelieu's results to be held at 2:30 p.m. on July 8, 2021, 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 July 8, 2021, until midnight on July 15, 2021, by dialling 1-888-390-0541, access code: 229862 #. Members of the media are invited to listen in.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

CONSOLIDATED STATEMENTS OF EARNINGS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF CASH FLOWS

SOURCE Richelieu Hardware Ltd.

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