RONA Inc.
TSX : RON
TSX : RON.PR.A

RONA Inc.

November 12, 2013 11:28 ET

RONA Announces its 2013 Third Quarter Results

Recovery Plan Eases Pressure on Results and Strengthens Financial Position

BOUCHERVILLE, QUEBEC--(Marketwired - Nov. 12, 2013) - RONA inc. (TSX:RON)(TSX:RON.PR.A) announces the results for its continuing operations for the third quarter of 2013 (13- and 39-week periods ended September 29, 2013), and provides follow-up on the main achievements of its recovery plan. All figures in this release are in Canadian dollars and presented according to IFRS accounting standards.

2013 THIRD QUARTER HIGHLIGHTS

  • Annualized cost savings of $63 million, in line with the $110 million year-end objective.

  • Sales of $1,169.2 million versus $1,221.7 million in 2012.

  • 2.4% decrease in same-store sales.

  • Net income of $30.0 million versus $5.5 million in 2012. Adjusted net income of $30.0 million versus $33.5 million in 2012.

  • Net income per share of $0.25, compared to $0.05 in 2012. Adjusted net income per share of $0.25, compared to $0.28 in 2012.

  • Strong financial position enhanced by generation of $151.3 million free cash flows.

  • $114.4 million year-over-year decrease in inventory.

  • Subsequent to quarter-end, usage under credit facility reduced to zero after closure of sale of the Commercial and Professional Market division for proceeds of $214 million on October 21.

  • Approval today of a normal course issuer bid on 8.6 million common shares, or 10% of the public float.

In the third quarter, RONA continued to generate annualized cost savings that are on track to achieve the recovery plan's objective of $110 million as announced on June 27, 2013. In the third quarter of 2013, annualized cost savings amounted to $63 million, increasing from $17 million in the first quarter to $30 million in the second. The cost savings are mainly related to workforce reductions, the renegotiation of major administrative services contracts and the closure of underperforming stores.

RONA reported revenues from continuing operations of $1,169.2 million in the third quarter of 2013, down $52.5 million, or 4.3%, from $1,221.7 million in 2012. The decrease stems mainly from $18.2 million in lost sales due to store closures over the last 12 months and a 2.4% decrease in same-store sales. The decrease was partially offset by new store openings, which added $3.5 million to the quarter's consolidated revenues. Market conditions remained relatively unfavorable during the quarter. Same-store sales were affected by a sharp drop in single-family housing starts in Canada, in particular in Quebec, where it declined by 31% during the quarter. It should be noted that RONA earns close to 50% of its revenues in Quebec.

The Corporation was able to reduce its adjusted selling, general and administrative expenses by $21 million in the third quarter of 2013 ($28.5 million since the start of the fiscal year). RONA management also reinvested in the sell- off of excess inventory, in price adjustments and in the banner repositioning.

"The $63 million in annualized cost-savings achieved year-to-date has allowed us to quickly roll out measures that will have an ongoing impact on RONA's financial performance. I am especially proud of the fact that we have reduced our inventory by a total of $114 million", said Robert Sawyer, President and Chief Executive Officer of RONA.

Also, given the challenging market and the increasingly competitive environment, RONA ramped up its promotional activities during the quarter. As all those actions resulted in investments in the gross margin greater than the SG&A savings, adjusted EBITDA from continuing operations stood at $70.7 million in the third quarter of 2013, down $5.0 million from $75.7 million in 2012. Adjusted net income from continuing operations was $30.0 million, or $0.25 per share, compared to $33.5 million, or $0.28 per share, in 2012.

"With more than $150 million of free cash flows generated in the third quarter of 2013 combined with the post quarter-end conclusion of the sale of our Commercial and Professional Market division for proceeds of $214 million, we are in an excellent financial position to launch a normal course issuer bid on 10% of our public float", added Mr. Sawyer.

RONA GENERATED SIGNIFICANT FREE CASH FLOWS AND STRENGTHENED ITS BALANCE SHEET

For the third quarter of 2013, cash flows from continuing operations totalled $161.0 million in 2013, up 5.1% from $153.2 million in 2012. The Corporation continued to exercise disciplined financial management and tightly controlled its investments in property, plant and equipment. For the third quarter of 2013, RONA invested $12.0 million in property, plant and equipment and intangible assets, compared to $16.8 million in 2012. These amounts were invested in the Corporation's information systems to increase operational efficiency, as well as in new store openings, existing store renovation and maintenance work.

The Corporation generated free cash flows of $151.3 million in the third quarter of 2013, compared to $144.4 million in 2012. These cash flows were used to pay the $8.5 million dividend on common shares and the $4.5 million investment in growth property, plant and equipment. The remainder was used to reduce the Corporation's debt.

RONA has a strong balance sheet. As at September 29, 2013, the Corporation's net debt amounted to $347.8 million, compared to $337.9 million in 2012. The ratio of net debt to total capital was 16.9%, compared to 15.1% in 2012. The ratio of debt to adjusted EBITDA (past 12 months) was 2.0 as at September 29, 2013, compared to 1.6 as at September 23, 2012. RONA has access to a credit facility of $950 million. At the end of the third quarter of 2013, $240.7 million had been drawn on this facility. RONA thus had access to $709.3 million at the end of the quarter, subject to maintaining certain financial ratios. These ratios were met during the third quarters of 2013 and 2012.

SUBSEQUENT EVENTS

On October 21, 2013, RONA completed the sale of its Commercial and Professional Market division. This disposal resulted in cash proceeds of $214 million, subject to working capital adjustments, which were used to reduce the Corporation's credit facility to zero. The ratio of debt to adjusted EBITDA (past 12 months at September 29, 2013) is currently 0.8, compared to 2.0 at the end of the third quarter 2013.

On November 12, 2013, the Corporation announced a normal course issuer bid under which it may purchase for cancellation, from November 18, 2013 to November 17, 2014, up to 8,578,384 common shares, representing 10% of its 85,783,842 public float, or 7.04% of its 121,905,319 common shares issued and outstanding as at October 31, 2013. Under this issuer bid, the purchases will be made at market prices through the facility of the Toronto Stock Exchange or alternative Canadian trading platforms, in accordance with the requirements of the Toronto Stock Exchange. This issuer bid is subject to the approval of the Toronto Stock Exchange. Shareholders may obtain a free copy of the documents filed with the Toronto Stock Exchange concerning this bid by writing to the Corporate Secretary of RONA, at 220 chemin du Tremblay, Boucherville, Quebec, J4B 8H7.

DIVIDEND ON PREFERRED SHARES

At its meeting on November 12, 2013, RONA's Board of Directors declared a quarterly dividend of $0.3308 per share on cumulative 5-year rate reset Class A preferred shares, series 6. The dividend will be paid on December 31, 2013 to shareholders of record on December 16, 2013.

ADDITIONAL INFORMATION

The Management's Discussion and Analysis (MD&A), financial statements and notes for the third quarter of 2013 can be found in the "Investor Relations" section of the Corporation's website at www.rona.ca and on the SEDAR website at www.sedar.com. The Corporation's Annual Information Form, along with other information about RONA, can also be found on the RONA and SEDAR websites.

CONFERENCE CALL WITH THE FINANCIAL COMMUNITY

On Tuesday, November 12, 2013, at 3:00 p.m. (EST), RONA will hold a conference call for the financial community. To join the conference, please call 514-392-1478 or 1 866-542-4146. To listen to the call online, please go to http://webcasts.pqm.net/client/rona/event/769/en/.

NON-GAAP PERFORMANCE MEASURES

RONA uses non-GAAP performance measures which are not defined by International Financial Reporting Standards ("IFRS"). Management is of the view that these measures are useful in the analysis of the Corporation's operational performance. These measures must not be considered separately or as a substitute for other performance measures calculated according to IFRS, but rather as additional information.

EBITDA, as defined by the Corporation, represents operating profit before finance costs, income tax expense and depreciation, amortization and impairment of non-financial assets. This measure is widely used in our industry and financial circles to measure the profitability of operations. Same-store sales is a metric used by management and is common throughout our industry. This metric identifies sales growth generated by the existing store network and removes the effect of acquisitions, store closures and openings.

Management also uses the following non-GAAP measures: adjusted EBITDA, adjusted gross margin, adjusted selling, general and administrative expenses, adjusted amortization, depreciation and impairment of non-financial assets, adjusted net income attributable to participating shares and adjusted diluted net income per share attributable to owners of RONA inc. These measures reflect the inclusion or exclusion of certain amounts that are viewed as not representative of the Corporation's sustainable financial performance. For more details on these measures, please see the MD&A for the third quarter of 2013.

FORWARD-LOOKING STATEMENTS

This Press Release includes "forward-looking statements" that involve risks and uncertainties. All statements other than statements of historical facts included in this Press Release, including statements regarding the prospects of the industry and prospects, plans, financial position and business strategy of the Corporation may constitute forward-looking statements within the meaning of the Canadian securities legislation and regulations. Investors and others are cautioned that undue reliance should not be placed on any forward-looking statements.

For more information on the risks, uncertainties and assumptions that would cause the Corporation's actual results to differ from current expectations please refer to the Corporation's public filings available at www.sedar.com and www.rona.ca. In particular, further details and descriptions of these and other factors are disclosed in the MD&A under the "Risks and uncertainties" section and in the "Risk factors" section of the Corporation's current Annual Information Form.

The forward-looking statements in this Press Release reflect the Corporation's expectations as at November 12, 2013, and are subject to change after this date. The Corporation expressly disclaims any obligation or intention to update or revise any forward- looking statements, whether as a result of new information, future events or otherwise, unless required by the applicable securities laws.

ABOUT RONA

RONA inc. is a major Canadian retailer and distributor of hardware, building materials and home renovation products. The Corporation operates a network of over 530 corporate, franchise and affiliate stores under several different banners, and in a number of complementary formats. With its 13 distribution centers and its specialized TruServ Canada wholesaler, RONA serves its network as well as many independent dealers operating under other banners. With some 25,000 employees, the Corporation generates annual consolidated sales of $4.2 billion. For more information, visit www.rona.ca.

Contact Information

  • Media
    Valerie Lamarre
    Senior Advisor
    Communications and Public Affairs
    514-599-5900, ext. 5271
    valerie.lamarre@rona.ca

    Financial Community
    Stephane Milot
    Vice President
    Finance and Investor Relations
    514-599-5951
    stephane.milot@rona.ca