RONA INC.
TSX : RON
TSX : RON.PR.A

RONA INC.

August 08, 2012 08:30 ET

RONA Increases Earnings per Share by 29% Before Unusual Items for Second Quarter 2012

RONA reports strong sales growth with building contractors and commercial and professional market specialists

BOUCHERVILLE, QUEBEC--(Marketwire - Aug. 8, 2012) - RONA inc. (TSX:RON)(TSX:RON.PR.A), the largest Canadian distributor and retailer of hardware, renovation and gardening products, today reported its financial results for the 13-week and 26-week periods ending June 24, 2012, and provided an update on the progress of its business plan. All figures in this release are in Canadian dollars and presented according to IFRS accounting standards.

Highlights of second quarter 2012 compared to second quarter 2011

  1. Net earnings before unusual items of $43.6 million, up 17.7%; net earnings per share before unusual items of $0.36, up 28.6%. Improvements due to:
    • Increase of 5.2% in EBITDA before unusual items
    • Decrease of 23.5% in financial costs
    • Decrease of 7.4% in amortization and depreciation expense excluding unusual items
  2. Consolidated sales of $1.4 billion, up 3.4%; increase stemming from:
    • Increase of 8.7% in distribution segment sales
    • Increase of 1.8% in retail and commercial segment sales
  3. Increase of 1% in same-store sales for RONA's network as a whole (retail, commercial and distribution) due to:
    • Increase of 11.4% in distribution sales to affiliate dealers
    • Decrease of 0.9% in retail and commercial segment sales
  4. Unusual items totalling $13 million ($9.5 million after tax) were recognized during the quarter out of $110 million expected for 2012 as part of the program to redeploy sales volume from the big-box store network to proximity and satellite stores, as announced when fiscal 2011 year-end results were released.
  5. Share repurchases in the normal course of business: 1.8 million shares repurchased and cancelled in the second quarter at an average price of $10.06 per share, for a total of $17.9 million; since the share repurchase program was implemented in November 2011, RONA has repurchased a total of 10.4 million shares at an average price of $9.47 per share, for a total of $98.5 million.
  6. Event subsequent to the reporting period of the quarter: the RONA Board of Directors received an unsolicited and non-binding proposal from U.S.-based Lowe's. In a press release dated July 31, 2012, the Board stated that the proposal was not in the best interests of RONA and its stakeholders; the press release also notes that the Corporation will remain focused on executing its business plan with a view to capturing significant opportunities that it sees for its business.

Robert Dutton, President and Chief Executive Officer of RONA said that "six months after the announcement of our New Realities, New Solutions plan, execution and results are consistent with our expectations and commitments. In the second quarter we continued our disciplined and rigorous management in line with our financial priorities, which are to improve efficiency, optimize the capital structure and increase the return on capital. This approach enabled us to grow earnings per share before unusual items by 29% while maintaining a solid balance sheet. We are thus excellently positioned to realize the expected benefits of our New Realities, New Solutions plan, which should increase EBITDA for 2012, 2013 and 2014 by $10, $30 and $40 million respectively on an annualized basis."

"The second quarter results again prove that RONA remains a preferred source for renovation and building contractors and specialists. We have, for example, seen 10.5% growth in sales to plumbing specialists, while our affiliate dealers, who count a high percentage of building contractors among their clientele, have increased same-store sales by 11.4%."

"In our retail operations, interest in proximity and service is strong all across the country, confirming our strategy, so central to our New Realties, New Solutions plan, of redeploying sales volume to our new proximity and satellite stores. Once again, our proximity stores outperformed our big-box stores during the quarter."

"What is more, our very first new-generation proximity store, which combines the best elements of RONA with those of our TOTEM specialty banner in Alberta, is officially opening on this very day in Edmonton West, Alberta. Even as we implement our redeployment plan, our big-box stores are evolving into a more inspiring model that more closely matches the needs of consumers in major urban areas. These stores will also play a pivotal role in RONA's overall and complementary service offering in major centres. Our offering will optimize a mix of consumer touch points, giving urban consumers access to an outstanding range of products and services: big-box stores and their satellites, proximity stores, outlets specializing in the commercial and professional segment, and online and mobile offerings. All these factors will enable RONA to again stand out in its industry for years to come," said Mr. Dutton.

As shown in the synopsis below, RONA's overall quarterly results were in line with the announced financial priorities.

Q2-2012 Achievements vs 2012 Financial Priorities (excluding unusual items)
Financial Priorities Q2-2012 Achievements In Line with Priorities
1. Improve efficiency
Improve same-store sales in the RONA network +1% Yes
Increase adjusted gross margin in dollars Up $3.9 M Yes
Reduce selling and administration expenses for comparable operations Down $6.2 M or 1.9% Yes
Increase EBITDA margin Up 11 b.p. (6.67% vs 6.56%) Yes
2. Optimize capital structure
Sell non-strategic assets $9.4 M Yes
Investments in property plant & equipment (excluding investments related to the New Realities, New Solutions plan) = amortization and depreciation $24.2 M vs $24.1 M Yes
Optimize working capital (reduction in comparable inventories) Up $6M No
Repurchase common shares 1.8 M or $17.9 M Yes
3. Increase return on capital
Increase after-tax operating income (EBIT) (past 4 quarters) Up $4.8 M or 3.9% vs Q1-2012 Yes
Disciplined capital management (average of past 5 quarters) 1 Down $25.4 M or 1.1% vs Q1-2012 Yes
Increase average return on capital (past 4 quarters), excluding unusual items 2 5.4% vs 5.1% at the end of Q1-2012 Yes
1 Capital equals net working capital plus property, plant and equipment and intangible assets plus non-current assets held for sale plus goodwill plus current projects plus other financial and non-current assets plus deferred income tax assets minus other non-current liabilities minus deferred tax liabilities.
2 Average return on capital equals after-tax EBIT, excluding unusual items/average capital.

Dominique Boies, Executive Vice President and Chief Financial Officer, added: "Our actions are still dictated by our three financial priorities. This disciplined approach, aimed at achieving a return on capital of more than 10% in the medium term, has borne fruit since the start of fiscal 2012. Moreover, in the second quarter, our EBITDA before unusual items is up 5.2% and our EBITDA margin has increased 11 basis points. At the same time, our finance costs have fallen by 23.5% and amortization and depreciation expense before unusual items by 7.4%. We have kept our investments in property, plant and equipment, excluding those related to our New Realities, New Solutions plan, similar to our amortization and depreciation expense. These results helped grow the return on capital, which rose from 5.1% for the 12 months ending at the close of the first quarter of 2012 to 5.4% for the 12 months ending at the close of the second quarter of 2012."

Quarterly update on the New Realities, New Solutions plan

As announced in February 2012, the theme of RONA's 2012 business plan is New Realities, New Solutions. It acknowledges the need to adapt the offering in our industry to new expectations and to changes in the behaviour of many consumers. For a number of years RONA has foreseen the emergence in the market of proximity stores that meet the demands of consumers who want a higher level of service. RONA pioneered in this area by reinventing the proximity store in the early 2000s, and the success of this new format confirms RONA's market analyses. The new plan capitalizes on our ongoing market research, including studies on consumer expectations and behaviours, as well as our continual experimentation with new store formats and new retail sales approaches.

"The execution of our New Realities, New Solutions business plan is consistent with our expectations and commitments. Five months after it was introduced, we have successfully inaugurated our new rona.ca website and the new RONA mobile app. We have also run advertising campaigns on multiple platforms. These new initiatives support the entire RONA network and our efforts to redeploy sales volume to smaller stores in some parts of the country. In June we opened a satellite store in the community of Douglasdale, southeast of Calgary, Alberta, and today we are officially opening our very first new-concept proximity store in Edmonton West, Alberta. Finally, we have gradually started redeploying sales volume from our stores in Peterborough, Whitby, Mississauga and Brampton, in Ontario, and in Calgary North and Edmonton West, in Alberta," said Mr. Dutton.


New Realities, New Solutions Plan
Update - as of August 8, 2012
1. Set up new integrated digital platform - Launch of the website rona.ca, consumers and businesses

- Marked increase in online sales to an average basket of more than $200

- Strong growth in traffic on the RONA digital platforms: rona.ca, online flyer, coupons.rona.ca, ronamag, Facebook, YouTube, etc.

- More than 1.2 million subscribers to the RONA email newsletter

- Launch of integrated pre-Olympic and Olympic advertising campaign on multiple platforms

- Launch of new RONA mobile app in early August
2. Redeployment of sales volume to proximity and satellite stores in close to 20% of the corporate-store network - Redeployment of the sales volume, in phases, of five of the ten big-box stores slated for closure in 2012: the stores in the Brampton, Mississauga and Whitby, in Ontario, and Calgary North and Edmonton West, in Alberta.

- Ongoing consolidation of the sales volume from our conventional store in Peterborough, Ontario, with that of the existing Millwork store recruited in this area.

- 9 prime sites being negotiated, 3 sites secured and 3 leases signed for the redeployment of sales volume from big-box stores to proximity and satellite stores.

- June opening of a satellite store in the community of Douglasdale, southeast of Calgary, Alberta.

- Early August opening of first new-concept proximity store in Edmonton West, Alberta.

- Expansion of satellite store in Georgetown, Ontario, from 4,800 square feet to 7,100 square feet, just one year after it opened.
3. Further development of the commercial and professional segment - Optimized recent investments: acquisitions of Don Park, MPH and Décoration 25 (20 outlets in total), addition of five outlets, 175,000-square-foot expansion of the Concord distribution centre in Ontario, and 23,000-square-foot expansion of the Montreal distribution centre, in Quebec.

- New outlets will be opened in coming quarters.

- Changed the management and operating structure and implemented an efficiency improvement plan.
Anticipated annual recurring benefit of $10 million in 2012, $30 million in 2013 and $40 million in 2014 - Excellently positioned to achieve anticipated annual benefits of $10 million in 2012, $30 million in 2013 and more than $40 million in 2014
Planned investment of $70 million in property, plant and equipment, financed from the sale of non-strategic assets - $1.5 million invested in property, plant and equipment in the second quarter

- Sale of $9.4 million in non-strategic assets in the second quarter
Planned restructuring costs of $110 million related to redeployment of the sales volume in 20% of the corporate-store network, as announced when 2011 year-end results were released - $13 million recognized since the plan was implemented last February

CONSOLIDATED RESULTS FOR SECOND QUARTER 2012

The results analyzed in this section are for the 13 weeks ended June 24, 2012 and, when compared, are compared to the results for the 13 weeks ended June 26, 2011, unless otherwise indicated.

Revenues

Consolidated revenues for second quarter 2012 rose to $1,417.1 million, up $47,1 million, or 3.4%, over the corresponding quarter in 2011. The increase stems from a 10.5% increase in sales in the Commercial and Professional Market Division, new store openings, the recruiting of new dealer-owners and higher same-store sales in the RONA network, particularly in distribution sales to affiliate dealers.

Same-store sales

To better represent the performance of the RONA network as a whole, the concept of same-store sales was revised during the quarter and now includes same-store distribution sales to RONA affiliate dealer-owners, who account for more than 25% of total sales. Note that same-store sales for the past nine quarters have been restated in Management's Discussion and Analysis for the second quarter. Same-store sales for the RONA network as a whole (retail, commercial and distribution) thus grew 1% in the second quarter. This increase is due to an 11.4% increase in same-store distribution sales to affiliate dealers. Same-store sales in the retail and commercial segment were down 0.9% due to the mix of products sold and the more cautious approach by Canadian consumers as of the end of May.

EBITDA

In the second quarter, EBITDA before unusual items rose to $94.6 million, compared to $89.9 million in the second quarter of 2011, an increase of $4.7 million, or 5.2%. The growth in EBITDA before unusual items stems mainly from higher sales volume and lower same-store selling and administration expense, which decreased due to the efficiency improvement measures put in place as of the second quarter of 2011.

The increase in EBITDA would have been higher were it not for the temporary rise of close to $6 million in operating costs in the Commercial and Professional Market Division due to network expansion for which sales have not yet been fully generated. A major efficiency improvement plan has been implemented in this division to quickly reduce operating costs to a level consistent with the division's historical performance.

EBITDA margin before unusual items rose by 11 basis points, from 6.56% in the second quarter of 2011 to 6.67% in 2012. Excluding the adverse impact of the Commercial and Professional Market Division on EBITDA, the EBITDA margin improved by 54 basis points. Still excluding this adverse impact, EBITDA margin for the retail and commercial sector increased by 43 basis points. EBITDA margin for the distribution segment rose by 98 basis points.

EBITDA after unusual items amounted to $86.6 million compared to $89.9 million in 2011. EBITDA margin after unusual items rose from 6.56% in the second quarter of 2011 to 6.11% in 2012.

Unusual items

Unusual items totalling $13 million were recognized during the quarter under the program to redeploy sales volume from the big-box store network to proximity and satellite stores, as announced upon release of fiscal 2011 year-end results. A portion of the unusual items, $8 million, represents the expenses incurred to close stores and sell off goods and was recognized in gross margin and the Corporation's selling and administration expense. The remaining $5 million represents an impairment charge for non-financial assets and was recognized in depreciation, amortization and impairment of non-financial assets. The total net after-tax amount for these items was $9.5 million.

Interest, amortization, depreciation and impairment

Interest expense on long-term debt and bank loans was down $1.6 million, or 23.5%, for the quarter. The decrease is due to the interest savings generated by the $283 million debenture repurchase at the end of 2011, and to strict management of the balance sheet and spending on property, plant and equipment, partially offset by greater use of credit facilities versus the corresponding quarter of 2011. Amortization and depreciation expenses before unusual items were also down for the quarter, from $26.1 million to $24.1 million, a reduction of $2.0 million, or 7.4%, stemming from a significant reduction in capital investments in 2011 and the first half of 2012 as well as the asset write-downs at the end of fiscal 2011. As mentioned above, an amount of $5 million representing an impairment charge for non-financial assets was recognized in depreciation, amortization and impairment of non-financial assets. Including this amount, amortization and depreciation expense rose from $24.1 million to $29.1 million.

Net earnings

Given the improvement in EBITDA and the decrease in amortization, depreciation and financial expense, net earnings before unusual items attributable to participating shares, after the dividend on preferred shares, rose $6.6 million or 17.7%, from $37.0 million to $43.6 million. Earnings per share before unusual items rose 28.6%, from $0.28 to $0.36.

After recognition of unusual items totalling $9.5 million after tax, net earnings attributable to participating shares after the dividend on preferred shares declined from $37.0 million to $34.1 million. Earnings per share remained stable at $0.28. Note that the average number of shares outstanding used to calculate net earnings per share decreased from 130.3 million shares in second quarter 2011 to 122.3 million shares in second quarter 2012 following the share repurchases made under the share repurchase in the normal course of business plan put in place by the Corporation in November 2011.

CONSOLIDATED RESULTS FOR THE FIRST SIX MONTHS OF 2012

The results analyzed in this section are for the 26-week period ending June 24, 2012 and, when compared, are compared to the results for the 26-week period ending June 26, 2011, unless otherwise indicated.

Revenues

Consolidated revenues for the first half of 2012 rose to $2,352.1 million, up $63.8 million or 2.8%, over the corresponding half in 2011. The increase is due to the 7.8% increase in sales in the Commercial and Professional Market Division, the opening of new stores, the recruiting of new RONA dealers, an increase in same-store sales in the RONA network, particularly distribution sales to affiliate dealers.

Same-store sales

Same-store sales for the RONA network as a whole (retail, commercial and distribution) grew 0.4% in the first half. This performance is due to a 7.3% increase in same-store distribution sales to affiliate dealers. Same-store sales in the retail and commercial segment were down 0.9% due to the negative impact of the mix of products sold and the more cautious approach by Canadian consumers as of the end of May.

EBITDA

In the first half of 2012, EBITDA before unusual items rose to $105.7 million, compared to $98.0 million in the first half of 2011, an increase of $7.7 million, or 7.9%. EBITDA margin before unusual items grew 21 basis points, from 4.28% in the first half of 2011 to 4.49% in 2012, despite an increase of only 0.4% in same-store sales during the period. Growth in EBITDA stems mainly from the efficiency improvement measures introduced in the second quarter de 2011, to a decrease in lease expense for temporary warehousing sites and shipping costs in the distribution segment, as well as the opening of new corporate stores, particularly the proximity stores, which quickly achieved the expected level of performance. Note that the EBITDA margin would have risen by 68 basis points, were it not for the additional operating costs of close to $11 million in major investments in the Commercial and Professional Market Division for which sales have not yet been fully generated. Excluding this item, EBITDA margin for the retail and commercial segment rose by 55 basis points. The distribution segment increased its EBITDA margin by 103 basis points.

After unusual items, EBITDA in the first half was down slightly, from $98.0 million in 2011 to $97.7 million in 2012. EBITDA margin was down 13 basis points, from 4.28% in 2011 to 4.15% in 2012.

Interest, amortization, depreciation and impairment

Interest expense on long-term debt and bank loans was down $3.4 million, or 26.2% in the first half. The decrease is due to interest savings generated by the $283 million debenture repurchase at the end of 2011, and to strict management of the balance sheet and spending on property, plant and equipment, partially offset by greater use of credit facilities compared to 2011. Amortization and depreciation expense before unusual items were down for the first half, from $52.4 million in 2011 to $47.5 million in 2012. As mentioned above, an amount of $5 million representing an impairment charge for non-financial assets was recognized in depreciation, amortization and impairment of non-financial assets in the second quarter. Including this amount, amortization and depreciation expense rose from $47.5 million to $52.5 million.

Net earnings

Given the improvement in EBITDA and the decrease in financial expense, net earnings before unusual items attributable to participating shares, after the dividend on preferred shares, rose $10.9 million or 55.9%, from $19.5 million in 2011 to $30.3 million in 2012. Earnings per share before unusual items rose 60%, from $0.15 to $0.24. After recognition of unusual items totalling $9.5 million after tax, net earnings attributable to participating shares after the dividend on preferred shares rose from $19.5 million to $20.8 million. Earnings per share rose from $0.15 to $0.17. Note that the average number of shares outstanding used to calculate net earnings per share decreased from 130.2 million shares in the first half of 2011 to 124.4 million shares in the first half of 2012, following the share repurchases made under the share repurchase in the normal course of business plan put in place by the Corporation in November 2011.

CASH FLOWS AND FINANCIAL POSITION FOR SECOND QUARTER 2012

For the second quarter of 2012, cash flows from operating activities before net change in working capital, interest received and income taxes paid was $80.0 million compared to $81.4 million in 2011. The net change in working capital was a negative $30.0 million in 2012, compared to a positive change of $134.1 million in 2011. This significant variation is due to changes in the product mix as well as higher inventories of certain products in order to take advantage of particularly attractive purchase conditions. The latter item should have a positive impact on sales and the Corporation's gross margin in coming months. After the net change in working capital, interest received and income taxes paid, operating activities thus generated $39.2 million in 2012, compared to $210.6 million for the same period in 2011.

The Corporation continued to exercise disciplined financial management and strictly monitored investments in property, plant and equipment. For the second quarter of 2012, RONA invested $25.7 million in property, plant and equipment and intangible assets, which was $1.2 million, or 4.6%, less than in 2011. This amount includes $1.5 million to redeploy sales volume, as indicated in the New Realities, New Solutions plan. These investments were used to expand operations in the Commercial and Professional Market Division, to upgrade its computer systems in order to augment operational efficiency and for major maintenance work. Note that the level of investment in property, plant and equipment and intangible assets -- excluding investments related to the New Realities, New Solutions plan, which will be financed through the sale of surplus assets -- remains similar to amortization and depreciation expense before unusual items, which amounted to $24.1 million in the second quarter of 2012.

In fiscal 2011 and the first half of 2012, RONA took a number of steps to optimize its capital structure. Also, in November 2011, the Corporation set up a program to repurchase, in the normal course of its activities between November 11, 2011 and November 10, 2012, up to 11,016,854 common shares, representing 10% of its 110,168,541 public float or 8.4% of its 130,520,489 common shares issued and outstanding on October 31, 2011. Shareholders may obtain, free of charge, copies of the repurchase documents filed with the Toronto Stock Exchange by writing to RONA's secretary. In the second quarter of 2012, RONA repurchased 1.8 million shares at an average price of $10.06 per share for a total of $17.9 million. Since the repurchase program was instituted in November 2011, the Corporation has bought back 10.4 million shares at an average price of $9.47 per share for a total of $98.5 million at August 8, 2012. These shares were cancelled.

RONA's balance sheet remains strong. On June 24, 2012, the Corporation's total debt was $467.2 million compared to $261.6 million at June 26, 2011. The ratio of total net debt to capital was 19.7%, compared to 11.1% in 2011. The ratio of total debt to EBITDA (past 12 months), excluding unusual items, was 1.7 at June 24, 2012 compared to 1.5 in 2011.

DIVIDENDS ON PREFERRED SHARES

At its meeting on August 7, 2012, RONA's Board of Directors declared a quarterly dividend of $0.3299 per share on cumulative 5-year rate reset Class A preferred shares, series 6. The dividend will be paid on October 1, 2012 to holders of record on September 14, 2012.

DIVIDENDS ON COMMON SHARES

At its meeting on August 7, 2012, RONA's Board of Directors declared a semi-annual dividend of $0.07 per share on the Corporation's common shares. This dividend will be paid on September 25, 2012 to holders of record on September 10, 2012.

SUBSEQUENT EVENT

On July 8, 2012, the Corporation received an unsolicited, non-binding proposal from U.S.-based Lowe's regarding the acquisition of all of RONA's issued and outstanding shares at a price of $14.50 per share. On July 26, 2012, RONA informed Lowe's that the RONA Board of Directors had unanimously determined that this proposal was not in the best interests of RONA and its stakeholders. The July 31, 2012 press release details these events and states that RONA's strategic focus is to execute its business plan with a view to capturing the significant opportunities it sees for the business.

Outlook for 2012:

  • In the coming quarters, we will pursue implementation of our New Realities, New Solutions plan and will continue our highly disciplined management in line with our three financial priorities, which are to improve efficiency, optimize the capital structure and increase the return on capital. Particular effort will be devoted to improving the efficiency of our Commercial and Professional Market Division and to redeploying the sales of several big-box stores in Ontario.
  • The market is still in a period of uncertainty and ambivalence. Although conditions have been favourable for renovation projects in recent months, we have seen that consumers have returned to a cautious approach since the end of May and the Consumer Confidence Index fell in June. Housing starts have also slowed in the past several months.
  • Despite this uncertainty, we are confident that our New Realities, New Solutions plan will achieve the $10 million increase in annualized EBITDA in 2012, as anticipated in February.

ADDITIONAL INFORMATION

The Management's Discussion and Analysis (MD&A), financial statements and notes for second quarter 2012 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.

TELEPHONE CONFERENCE WITH THE FINANCIAL COMMUNITY

On Wednesday, August 8, 2012, at 11:00 a.m. (EDST), RONA will hold a telephone conference for the financial community. To join the conference, please call 416-340-2216 or 1 866 226-1792. To listen to the call online, please go to http://webcasts.pqm.net/client/rona/event/422/en/.

Please note that due to the prominent role of the Board of Directors with respect to the unsolicited, non-binding acquisition proposal that RONA has received from U.S.-based Lowe's Companies Inc. ("Lowe's"), RONA executives will not discuss this proposal during the conference call. They will deal only with the analysis of the quarterly results being released. Call participants are therefore kindly requested to refrain from asking questions concerning the Lowe's proposal.

For this reason and on an exceptional basis, the RONA executive team will not be granting interviews to the media as part of the disclosure of the Corporation's quarterly results.

NON-GAAP PERFORMANCE MEASURES

In this Press Release as in our internal management, RONA uses the concept of "earnings before interest, taxes, depreciation, amortization and non-controlling interests" (EBITDA). RONA also uses the concept of "adjusted gross margin," which corresponds to revenues less the cost of goods sold, plus adjustments for network support.

While EBITDA does not have a definition that is standardized by IFRS, it is widely used in our industry and in financial circles to measure the profitability of operations, excluding tax considerations and the cost and use of capital. Adjusted gross margin is used by RONA's management to analyze the profitability of our network, after adjustments for network support. Given that these measures are not standardized, EBITDA and adjusted gross margin cannot be compared from one company to the next. Still, we establish them in the same way for each of the segments identified, and, unless expressly mentioned, our method does not change over time. EBITDA and adjusted gross margin must not be considered separately or as a substitute for other performance measures calculated according to IFRS, but rather as additional information.

The following table shows the reconciliation of these two measures to IFRS:

Reconciliation of non-GAAP measures
Quarters ended
(Unaudited, in thousands of dollars, except margins in %) June 24, 2012 June 26, 2011 $ change
from 2011
% change
from 2011
Revenues 1,417,137 1,370,046 47,091 3.4 %
Cost of sales (1,039,566 ) (989,779 ) (49,787 ) (5.0 %)
Gross profit 377,571 380,267 (2,696 ) (0.7 %)
Gross margin (gross profit/revenues) 26.64 % 27.76 % - - 112 b.p.
Adjustments for network support1 32,079 31,074 1,005 3.2 %
Adjusted gross profit 409,650 411,341 (1,691 ) (0.4 %)
Adjusted gross margin (adjusted gross profit/revenues) 28.91 % 30.02 % - - 111 b.p.
Adjusted gross profit (excluding unusual items) 415,218 411,341 3,877 0.9 %
Adjusted gross margin (adjusted gross profit/revenues) (excluding unusual items)
29.30
%
30.02
%
-

- 72 b.p.
Adjusted selling, general and administrative expenses (323,070 ) (321,454 ) (1,616 ) (0.5 %)
Adjusted selling, general and administrative expenses (excluding unusual items)
(320,638
)
(321,454
)
816

0.3
%
Rent 38,854 40,236 (1,382 ) (3.4 %)
EBITDA before rent 125,434 130,123 (4,689 ) (3.6 %)
EBITDA before rent (excluding unusual items) 133,434 130,123 3,311 2.5 %
EBITDA margin before rent (EBITDA before rent/revenues) 8.85 % 9.50 % - - 65 b.p.
EBITDA margin before rent (EBITDA before rent/revenues, excluding unusual items)
9.42
%
9.50
%
-

-8 b.p.
EBITDA 86,580 89,887 (3,307 ) (3.7 %)
EBITDA (excluding unusual items) 94,580 89,887 4,693 5.2 %
EBITDA margin (EBITDA/revenues) 6.11 % 6.56 % - - 45 b.p.
EBITDA margin (EBITDA/revenues, excluding unusual items)
6.67
%
6.56
%
-

11 b.p.
Finance income (1,369 ) (1,340 ) (29 ) (2.2 %)
Amortization, depreciation and impairment of non-financial assets (29,122 ) (26,062 ) (3,060 ) (11.7 %)
Amortization, depreciation and impairment of non-financial assets (excluding unusual items)
(24,136
)
(26,062
)
1,926

7.4
%
Operating profit 56,089 62,485 (6,396 ) (10.2 %)
Operating profit (excluding unusual items) 69,075 62,485 6,590 10.5 %
1 Corresponds to other costs incurred in bringing the inventory to its present location and condition.
Reconciliation of non-GAAP measures
Six months ended
(Unaudited, in thousands of dollars, except margins in %) June 24, 2012 June 26, 2011 $ change from 2011 % change from 2011
Revenues 2,352,071 2,288,257 63,814 2.8 %
Cost of sales (1,707,286 ) (1,641,866 ) (65,420 ) (4.0 %)
Gross profit 644,785 646,391 (1,606 ) (0.2 %)
Gross margin (gross profit/revenues) 27.41 % 28.25 % - -84 b.p.
Adjustments for network support1 51,444 50,216 1,228 2.4 %
Adjusted gross profit 696,229 696,607 (378 ) (0.1 %)
Adjusted gross margin (adjusted gross profit/revenues) 29.60 % 30.44 % - -84 b.p.
Adjusted gross profit (excluding unusual items) 701,797 696,607 5,190 0.7 %
Adjusted gross margin (adjusted gross profit/revenues) (excluding unusual items)
29.84
%
30.44
%
-

-60 b.p.
Adjusted selling, general and administrative expenses (598,536 ) (598,657 ) 121 0.0 %
Adjusted selling, general and administrative expenses (excluding unusual items)
(596,104
)
(598,657
)
2,553

0.4
%
Rent 79,364 81,816 (2,452 ) (3.0 %)
EBITDA before rent 177,057 179,766 (2,709 ) (1.5 %)
EBITDA before rent (excluding unusual items) 185,057 179,766 5,291 2.9 %
EBITDA margin before rent (EBITDA before rent/revenues) 7.53 % 7.86 % - -33 b.p.
EBITDA margin before rent (EBITDA before rent/revenues, excluding unusual items)
7.87
%
7.86
%
-

1 b.p.
EBITDA 97,693 97,950 (257 ) (0.3 %)
EBITDA (excluding unusual items) 105,693 97,950 7,743 7.9 %
EBITDA margin (EBITDA/revenues) 4.15 % 4.28 % - -13 b.p.
EBITDA margin (EBITDA/revenues, excluding unusual items)
4.49
%
4.28
%
-

21 b.p.
Finance income (2,473 ) (2,711 ) 238 8.8 %
Amortization, depreciation and impairment of non-financial assets
(52,528
)
(52,359
)
(169
)
(0.3
%)
Amortization, depreciation and impairment of non-financial assets (excluding unusual items)
(47,542
)
(52,359
)
4,817

9.2
%
Operating profit 42,692 42,880 (188 ) (0.4 %)
Operating profit (excluding unusual items) 55,678 42,880 12,798 29.8 %
1 Corresponds to other costs incurred in bringing the inventory to its present location and condition.

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 also 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 August 8, 2012, 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 is the largest Canadian distributor and retailer of hardware, home renovation and gardening products. The Corporation operates a network of close to 800 corporate, franchise and affiliate stores of various sizes and formats under several banners, and a network of 14 hardware and construction materials distribution centres which are flexible and perfectly adapted to the diverse needs of its clientele. RONA is also a leader in the specialized plumbing and HVAC market, primarily serving commercial and professional customers with a network of close to 60 sales outlets and four distribution centres across the country.

In total, RONA supplies nearly 1,500 sales outlets, of which more than 830 are under one of its banners, as well as close to 600 clients, independent dealers, in its distribution network. With close to 30,000 employees working under its family of banners in every region of Canada, the RONA store network generates consolidated sales of $4.8 billion and over $6 billion taking into account the total impact of the retail sales of franchise dealers, affiliates and other independent dealers who buy their supplies at RONA. For more information, please visit www.rona.ca.

Contact Information

  • Media
    Nadia Goyer, Senior Advisor
    Communications and Public Affairs
    RONA inc.
    514-599-5900, ext. 5271
    nadia.goyer@rona.ca

    Financial Community
    Stephane Milot, Senior Director
    Investor Relations
    RONA inc.
    514-599-5951
    stephane.milot@rona.ca