RONA INC.

TSX : RON
TSX : RON.PR.A


RONA INC.

February 18, 2014 12:00 ET

RONA Announces its Fiscal and Fourth Quarter 2013 Results

Achievement within the announced time frame of $110 million annualized cost savings

BOUCHERVILLE, QUEBEC--(Marketwired - Feb. 18, 2014) - RONA inc. (TSX:RON)(TSX:RON.PR.A) ("RONA" or the "Corporation") announces the results for its continuing operations for the 13- and 52-week periods ended December 29, 2013, and the achievements of its recovery plan. All figures in this release are in Canadian dollars. Note that comparison fiscal year and fourth quarter ending December 30, 2012 had an additional week of business operations.

Fiscal year 2013 highlights

  • Annualized cost savings of $110 million achieved within the announced time frame.
  • Revenues from continuing operations of $4,192.2 million, compared to $4,444.2 million in 2012. Same-store sales down 1.9%.
  • Adjusted net income from continuing operations attributable to participating shares of $49.9 million, or $0.41 per share in 2013, versus $73.5 million, or $0.60 per share in 2012.
  • Solid financial situation with usage at year-end of only $45.0 million on credit facilities of $700 million, compared to usage of $171.9 million in 2012.

Fourth quarter 2013 highlights

  • Closing for $214 million of the disposal of the assets of the Commercial and Professional Market division.
  • Revenues from continuing operations of $941.1 million, compared to $1,071.5 million in 2012. Same-store sales down 3.5%.
  • Adjusted net income from continuing operations attributable to participating shares of $4.6 million, or $0.04 per share in 2013, versus $6.4 million, or $0.05 per share in 2012.
  • Repurchase of 1,177,300 common shares in the normal course of business for a consideration of $15.4 million.

"Fiscal 2013 was a year of profound organizational change at RONA, against the backdrop of a difficult market context for our industry. Although consolidated results are down, we are satisfied with the progress made in the implementation of the restructuring measures and the team reorganizations. We are particularly proud to have achieved our primary objective of $110 million in cost savings on an annualized basis," said Robert Sawyer, President and Chief Executive Officer of RONA.

"In 2014, we will focus on deploying the new positioning of some banners and stabilizing our profit margins after having revised the pricing strategy and disposed of some excess inventory in 2013. Most importantly, we will concentrate on meeting the needs of our target customers so that we can increase our market share in an industry that is experiencing a cyclical slowdown," added Mr. Sawyer.

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FINANCIAL HIGHLIGHTS Fourth quarters ending Fiscal years ending
(for continuing operations in millions of dollars, except per share data) Dec. 29, 2013
(13 weeks)
Dec.30, 2012
(14 weeks)
Dec. 29, 2013
(52 weeks)
Dec. 30, 2012
(53 weeks)
Revenues 941.1 1,071.5 4,192.2 4,444.2
EBITDA 30.0 19.4 79.2 151.4
Adjusted EBITDA 1 36.1 39.4 185.1 217.5
Net income (loss) attributable to participating shares (1.1 ) (17.3 ) (45.9 ) 12.3
Per share - basic and diluted ($) (0.01 ) (0.14 ) (0.38 ) 0.10
Adjusted net income attributable to participating shares 1 4.6 6.4 49.9 73.5
Per share - basic and diluted ($) 0.04 0.05 0.41 0.60
Weighted average number of shares outstanding (in thousands) 121,693 121,405 121,779 122,932
1 See Non-GAAP Performance Measures below

Fiscal 2013 results

Consolidated revenues from continuing operations for fiscal 2013 stood at $4,192.2 million, down 5.7% from $4,444.2 million in fiscal 2012, which had an additional week of business operations. Excluding the variance due to the absence of the extra week, the decrease reflects the closure of underperforming stores and the difficult market conditions throughout the industry, primarily due to lower housing starts across the country. Same-store sales declined by 1.9% in fiscal 2013.

Adjusted EBITDA from continuing operations totalled $185.1 million, or 4.4% of revenues, compared to $217.5 million, or 4.9% of revenues in 2012. The difference reflects the decrease in revenues as well as initiatives to stimulate sales through greater promotional activity, the sell-off of excess inventory, and new pricing policies. The effect these initiatives had on gross margin was partially offset by a significant decrease in selling, general and administrative expenses.

On an adjusted basis, the recovery plan including the effect of the additional week of activity in 2012, resulted in a reduction of selling, general and administrative expenses by $67.2 million, mainly through the closure of underperforming stores. Net of the gross margin lost following the closure of these stores, the recovery plan had a favourable impact of $34.2 million on adjusted EBITDA in 2013.

Net loss attributable to participating shares was $163.3 in fiscal 2013 compared to net income of $7.2 million in 2012. Net loss from discontinued operations, which represent the activities of the Commercial and Professional Market division until the assets were sold in the fourth quarter of 2013, was $117.4 million in 2013 compared to a net loss of $5.1 million in 2012. Net loss from continuing operations attributable to participating shares was $45.9 million in 2013 compared to net income of $12.3 million in 2012. Excluding adjustments relating to restructuring costs and other costs related to the implementation of the recovery plan, adjusted net income from continuing operations attributable to participating shares was $49.9 million or $0.41 per basic and diluted share in 2013, compared to $73.5 million, or $0.60 per basic and diluted share, in 2012.

Fourth quarter results

For the 13-week period ending December 29, 2013, consolidated revenues from continuing operations amounted to $941.1 million, compared to revenues of $1,071.5 million for the 14-week period ending December 30, 2012. Same-store sales were down 3.5% due to poor weather in Ontario and Quebec in December and a decline in housing starts.

Adjusted EBITDA from continuing operations amounted to $36.1 million, or 3.8% of revenues, compared to $39.4 million, or 3.7% of revenues a year earlier. While the difference in monetary terms reflects the decrease in revenues, the increase as a percentage of revenue is due to the negative impact of the extra week in 2012. The decrease in EBITDA attributable to the reduction in same-store sales was partially offset by the positive impact from the recovery plan.

Net loss attributable to participating shares was $3.5 million in the fourth quarter of 2013 compared to a net loss of $18.1 million in 2012. Net loss from discontinued operations, which represent the activities of the Commercial and Professional Market division until the assets were sold in the fourth quarter of 2013, was 2.4 million in the fourth quarter of 2013 compared to a net loss of $0.8 million in 2012. Net loss from continuing operations attributable to participating shares was $1.1 million in the fourth quarter of 2013 compared to a net loss of $17.3 million in 2012. Excluding adjustments relating to restructuring costs and other costs related to the implementation of the recovery plan, the adjusted net income from continuing operations attributable to participating shares was $4.6 million, or $0.04 per basic and diluted share, compared to $6.4 million, or $0.05 per basic and diluted share a year earlier.

Solid financial situation

As at December 29, 2013, RONA was in an excellent financial situation with cash on hand in the amount of $8.2 million and usage of only $45.0 million on its authorized credit facility of $700.0 million. As of the same date, the net debt amounted to $167.2 million versus $299.9 million at the 2012 year-end.

In the fourth quarter, the Corporation concluded the sale of its Commercial and Professional Market division. The $214.0 million in cash proceeds from the disposal were used to reduce the balance on the credit facility. Reflecting this decreased debt, the ratio of net debt to adjusted EBITDA for the past 12 months was 0.9 at the close of fiscal 2013, compared to 2.0 at the close of the third quarter and 1.4 at the close of fiscal 2012. The ratio of net debt to total capitalization was 9.1% at December 29, 2013, compared to 16.9% at September 29, 2013 and 13.7% at the close of fiscal 2012.

Under its normal course issuer bid initiated on November 18, 2013, the Corporation purchased 1,177,300 common shares in the fourth quarter for a consideration of $15.4 million. RONA has been authorized to purchase a maximum of 8,578,384 common shares by November 17, 2014.

Dividend on preferred shares

At its meeting on February 18, 2014, RONA's Board of Directors declared a quarterly dividend of $0.3281 per share on cumulative 5-year rate reset Class A preferred shares, series 6. The dividend will be paid on March 31, 2014 to shareholders of record on March 17, 2014.

Dividend on common shares

At its meeting on February 18, 2014, the Board declared a semi-annual dividend of $0.07 per share on the Corporation's common shares. The dividend will be paid on March 25, 2014 to shareholders of record on March 10, 2014.

Additional information

The Management's Discussion and Analysis (MD&A), financial statements and notes for fiscal 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, February 18, 2014, 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/918/en/.

A replay of the call will be available as of 7:00 p.m., Tuesday, February 18, 2014, until February 25, 2014. To listen to the replay, call 905-694-9451 or 1 800-408-3053 and enter 9942682 on the telephone keypad.

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 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 and a reconciliation with GAAP measures, please see the MD&A for fiscal 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 February 18, 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 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 rona.ca.

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