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

RONA Inc.

November 11, 2014 08:55 ET

RONA Announces Its 2014 Third Quarter Results

- Increase of 32% in adjusted net income per share for the quarter and 49% since the beginning of the fiscal year

- Increase of 2.0% in retail same-store sales

BOUCHERVILLE, QUÉBEC--(Marketwired - Nov. 11, 2014) - RONA inc. (TSX:RON)(TSX:RON.PR.A) ("RONA" or the "Corporation") announces the results for its continuing operations for the 13- and 39-week periods ended September 28, 2014. All figures in the press release are in Canadian dollars.

THIRD QUARTER HIGHLIGHTS

  • Adjusted net income per share up 32.0% to $0.33. Increase of 28.4% in adjusted net income attributable to participating shares, from $30.0 million in 2013 to $38.5 million in 2014.
  • Adjusted EBITDA of $83.8 million, up 18.5% from $70.7 million in 2013. Increase in adjusted EBITDA margin of 170 basis points, to 8.6%, in the Retail segment, and 110 basis points on a consolidated basis.
  • Same-store sales up 2.0% in the Retail segment, despite the stagnant economy and sustained pressure on housing starts in Quebec and the Atlantic provinces.
  • Increase of 8.3% in same-store sales in the Distribution segment due to the improvement of our merchandising strategy and the sales recovery following a late Spring.
  • Solid balance sheet with a ratio of net debt to adjusted EBITDA of 0.86x compared to 1.85x at the same date a year ago. Net debt of $188.4 million compared to $347.8 million a year earlier.
  • Purchase of 2.56 million shares in the third quarter for $35.2 million (6.1 million shares for $77.4 million to this date since the issuer bid was put in place) and approval by the Board of Directors of a new normal course issuer bid program subject to the approval of the Toronto Stock Exchange.

"The third quarter results demonstrate the positive impact of having our teams focused on optimizing store operations. Despite a slow economy and strong competition, our same-store sales in the Retail segment have grown by 2.0%. We are satisfied with the progress of our Réno-Dépôt banner and the performance of our converted TOTEM stores. Across the country, our various banners' merchandising programs are bearing fruit and the improved management of store operations is yielding the expected results," said Robert Sawyer, President and Chief Executive Officer of RONA.

"Given the positive trend in sales and profitability, and RONA's solid financial situation, we are in a position to start expanding again. In 2015, we will open five new stores, including two stores under the new Réno-Dépôt concept outside Québec. RONA's expansion will be disciplined and will take place in environments where we must protect and reinforce our market share or where the investment is justified by a strong growth potential and a good return on invested capital," said Robert Sawyer.


FINANCIAL HIGHLIGHTS FROM CONTINUING OPERATIONS
Quarters ended Nine months ended
(in millions of dollars, except per share data) Sept. 28 2014 Sept. 29 2013 Sept. 28 2014 Sept. 29 2013
Revenues 1,167.3 1,169.2 3,125.1 3,251.1
EBITDA 83.7 70.7 179.8 49.2
Adjusted EBITDA (1) 83.8 70.7 182.9 149.0
Net income (loss) attributable to participating shares 38.0 30.0 63.5 (44.8 )
Per share - basic and diluted ($) 0.32 0.25 0.53 (0.37 )
Adjusted net income attributable to participating shares (1) 38.5 30.0 66.1 45.3
Adjusted per share - basic and diluted ($) 0.33 0.25 0.55 0.37
Weighted average number of shares outstanding (in millions) 118.0 121.9 119.3 121.8
(1) See non-IFRS performance measures below.

2014 THIRD QUARTER RESULTS

Consolidated revenues from continuing operations amounted to $1,167.3 million, compared to revenues of $1,169.2 million in the third quarter of 2013. This stability is a result of a 3.0% growth in same-store sales across the network, despite the closure of underperforming stores. Same-store sales grew 2.0% in the Retail segment and 8.3% in the Distribution segment. The successful repositioning of the former TOTEM stores and the vigorous economy in Western Canada generated a strong increase in sales in in this region. In Québec, RONA's largest market, the contribution obtained from our strategy on lumber and building materials generated growth in same-store sales for the entire network during the quarter, while the redeployment of the Réno-Dépôt stores had a positive impact on the Retail segment performance.

Adjusted EBITDA for continuing operations totalled $83.8 million (7.2% margin), up 18.5% compared to $70.7 million (6.1% margin) in 2013. The increase reflects the $11.4 million contribution from RONA's organic operations, higher gross margin stemming from the increase in same-store sales, and lower selling, general and administrative expenses following the impact of our recovery plan. Furthermore, the closure of underperforming stores raised adjusted EBITDA by $2.8 million. In the Retail segment, the adjusted EBITDA margin is up 170 basis points to 8.6%.

For the third quarter of 2014, adjusted net income from continuing operations attributable to participating shares was $38.5 million, up 28.4% compared to $30.0 million. Adjusted net income per basic and diluted share is up 32% from $0.25 to $0.33.

RESULTS FOR THE FIRST NINE MONTHS OF 2014

HIGHLIGHTS

  • Adjusted net income attributable to participating shares of $66.1 million, up 45.8% compared to $45.3 million in 2013.
  • Increase of 48.9% in adjusted net income per basic and diluted share, from $0.37 in 2013 to $0.55 in 2014.
  • Adjusted EBITDA of $182.9 million, up 22.8% from $149.0 million in 2013.
  • Adjusted consolidated EBITDA margin up 130 basis points at 5.9%, versus 4.6%, and increase of 150 basis points in adjusted EBITDA margin in the Retail segment to 6.7%.

In the first nine months of 2014, consolidated revenues from continuing operations amounted to $3,125.1 million, compared to $3,251.1 million for the first nine months of 2013. RONA's organic revenues were up $7.4 million. This increase occurred mainly in the Retail segment and is due in part to the repositioning of the Réno-Dépôt and TOTEM stores, the strong advances in Western Canada, and the improved merchandising strategies for both contractors in Western Canada and Ontario and our dealer-owner network.

Adjusted EBITDA from continuing operations was $182.9 million (5.9% margin) up 22.8% compared to $149.0 million (4.6% margin) for the corresponding period in 2013. The increase includes $18.0 million from RONA's organic operations and a contribution of $11.5 million from the closure of underperforming stores.

Adjusted net income from continuing operations attributable to participating shares for the first nine months of 2014 amounted to $66.1 million, or $0.55 per basic and diluted share, up 45.8% compared to $45.3 million, or $0.37 per basic and diluted share, for the first nine months of 2013.

SOLID FINANCIAL SITUATION

At September 28, 2014, RONA was in a healthy financial situation with net debt of $188.4 million, down from $347.8 million at the end of the third quarter of fiscal 2013. On that same date, RONA had used only $66.8 million of its authorized credit facility of $700.0 million.

Reflecting this decreased debt level, the ratio of net debt to adjusted EBITDA for the past 12 months was 0.86x at the close of the third quarter of fiscal 2014, compared to 1.85x for the same period of fiscal 2013. The ratio of net debt to total capital was 10% at September 28, 2014, compared to 17% at September 29, 2013.

In the third quarter, RONA bought back 2,559,100 common shares for a total consideration of $35.2 million under its normal course issuer bid put in place on November 18, 2013. The arrangement authorizes RONA to purchase a maximum of 8,578,384 common shares until November 17, 2014. To this date, the Corporation has purchased 6,097,500 common shares for a total of $77.4 million since the bid took effect.

DIVIDEND ON PREFERRED SHARES

At its meeting on November 11, 2014, RONA's Board of Directors declared a quarterly dividend of $0.3282 per share on cumulative 5-year rate reset Class A preferred shares, Series 6. The dividend will be paid on December 31, 2014 to shareholders of record on December 15, 2014.

ADDITIONAL INFORMATION

The Management's Discussion and Analysis (MD&A), interim consolidated financial statements and notes for third quarter 2014 can be found on the SEDAR website at www.sedar.com and in the "Investor Relations" section of the Corporation's website at www.rona.ca. 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 11, 2014, at 3:00 p.m. (EST), RONA will hold a conference call for the financial community. To join the conference, please call 416-340-2216 or 1-866-223-7781. To listen to the call online, please go to: http://webcasts.pqm.net/client/rona/event/1166/en/.

A replay will be available from 7:00 p.m. on Tuesday, November 11, 2014 until November 18, 2014. It can be heard by dialing 905-694-9451 and entering the password 6731408 on the telephone keypad.

NON-IFRS PERFORMANCE MEASURES

RONA uses performance measures which are not prescribed by International Financial Reporting Standards ("IFRS"). Management's view is 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 in compliance with 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 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 is adjusted to reflect the effect of acquisitions, store closures and openings.

Management also uses the following non-IFRS performance measures: adjusted EBITDA; adjusted EBITDA margin; adjusted gross margin; adjusted selling, general and administrative expenses; adjusted depreciation, amortization and impairment of non-financial assets; adjusted finance costs; 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 2014.

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 sites 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 11, 2014, 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 500 corporate, franchise and independent affiliate stores of complementary formats. With its 8 distribution centers, RONA serves its own network as well as many independent dealers operating under different banners, including Ace for which RONA owns the licensing rights and is the exclusive distributor in Canada. With the help of its nearly 24,000 employees, the Corporation generates annual consolidated sales of $4.2 billion. For more information, visit rona.ca.

Contact Information

  • Media
    Valerie Gonzalo
    514-626-6976
    media@rona.ca

    Financial Community
    Andre Lavoie
    Vice President, Finance and Investor Relations
    514-599-5900, ext. 8356
    andre.lavoie@rona.ca