RONA INC.
TSX : RON

RONA INC.

November 07, 2006 07:00 ET

RONA on Track with its Objectives

BOUCHERVILLE, QUEBEC--(CCNMatthews - Nov. 7, 2006) - RONA Inc. (TSX:RON)



Table 1: Consolidated key figures, third quarter 2006

% change First nine % change
Third quarter over 2005 months over 2005
---------------------------------------------------------------------
Sales(1) $1,265.8 million 14.1% $3,410.6 million 13.0%
Operating
income
(EBITDA) $107.9 million 10.7% $294.5 million 13.9%
Net earnings $56.1 million 5.8% $152.5 million 10.8%
Earnings per
share $0.49 6.5% $1.33 9.9%
Diluted
earnings
per share $0.48 4.3% $1.31 11.0%

(1) The comparative figures have been adjusted to reflect the
application of EIC-156, Accounting by a Vendor for Consideration
Given to a Customer (volume rebates - see Table 2).


Highlights since August 9, 2006:

- Nine months into the two-year "7-07" Program, RONA has achieved 35%
of its objective.

- Third quarter consolidated organic growth was 7.2%. Same-store sales
advance 1.2% at constant lumber prices.

- RONA completes the acquisition of Mountain Building Centres Limited
("Mountain Building Centres") in British Columbia, a company with
annual sales of some $22 million, adding three points of sale to
its network. RONA's acquisitions since the beginning of the year
have boosted annual sales by more than $300 million.

- RONA has recruited 23 dealers since the beginning of 2006,
increasing annual retail sales by more than $136 million.

- In Quebec a RONA L'Entrepot opens in Charlemagne on November 1,
and a Reno-Depot will follow very shortly in Rimouski.

- RONA completes a $400 million debenture issue and repays most of
its long-term debt. RONA's first public debt issue is assigned an
investment grade rating.

- RONA renews, increases and secures more flexible credit facilities
with a bank syndicate. The Company now has a $500 million line of
credit (unused at the moment) that can be increased to $650 million
under certain conditions.

- RONA ends the quarter with a very solid balance sheet, enabling it
to continue its development plan on all fronts.


Conference call: Tuesday, November 7, 2006, at 11:00 a.m. (Eastern Time) Only institutional analysts will be invited to ask questions. To join the conference call: (514) 861-0443 or 1-866-696-5911. To listen to this call online, please go to: http://events.startcast.com/events/153/B0012

SUMMARY

For the third quarter ended September 24, 2006, RONA (or the "Company" or "we") achieved net earnings of $56.1 million, up 5.8% over the comparable period last year. Diluted earnings per common share reached $0.48, against $0.46 in the third quarter of 2005. This growth stems from the expansion of the corporate and franchised store network, dealer recruitment and the integration of Chester Dawe Limited, acquired in March 2006, Materiaux Coupal Inc., in which we acquired a 51% stake in early April 2006, and Curtis Lumber Co. Ltd. ("Curtis Lumber"), acquired in July.

After three quarters, RONA's net earnings reached $152.5 million, up 10.8% over the same period last year.

"Our development plan is being implemented as planned," said RONA President and CEO Robert Dutton. "We're right on target with our "7-07" Program, having achieved 35% of our objective thanks to a combination of same-store sales growth, store construction, acquisitions and recruitment. Our quarterly performance was solid despite the fact that our market environment is not as favourable as we would like, especially in Quebec and in Ontario. As a result of our continuously improving operating efficiency, we can channel resources to support our organic growth, which we are doing by investing more in sales efforts and store service quality. It bears mentioning that a more difficult market environment also means acquisition and recruitment opportunities. Thanks to our extremely solid balance sheet, we're well placed to seize any deals that come our way."



Table 2

RONA: Consolidated quarterly financial results (unaudited)
(In millions of dollars except for earnings per share)

---------------------------------------------------------------------
2006
---------------------------------------------------------------------
Q3 Q2 Q1
---------------------------------------------------------------------
Sales before application of EIC-156 1,277.7 1,359.1 807.8
---------------------------------------------------------------------
Impact of EIC-156 11.9 13.1 9.0
---------------------------------------------------------------------
Sales 1,265.8 1,346.0 798.8
---------------------------------------------------------------------
EBITDA 107.9 143.0 43.6
---------------------------------------------------------------------
Net earnings 56.1 80.0 16.4
---------------------------------------------------------------------
Earnings per share (1) ($) 0.49 0.70 0.14
---------------------------------------------------------------------
Diluted earnings per share (1) ($) 0.48 0.69 0.14
---------------------------------------------------------------------


---------------------------------------------------------------------
2005
---------------------------------------------------------------------
Q4 Q3 Q2 Q1
---------------------------------------------------------------------
Sales before application of EIC-156 1,017.4 1,120.6 1,210.2 716.9
---------------------------------------------------------------------
Impact of EIC-156 8.8 11.3 9.7 8.9
---------------------------------------------------------------------
Sales 1,008.6 1,109.3 1,200.5 708.0
---------------------------------------------------------------------
EBITDA 73.7 97.5 124.2 36.9
---------------------------------------------------------------------
Net earnings 37.6 53.0 70.4 14.2
---------------------------------------------------------------------
Earnings per share(1) ($) 0.33 0.46 0.62 0.12
---------------------------------------------------------------------
Diluted earnings per share (1) ($) 0.32 0.46 0.61 0.12
---------------------------------------------------------------------


---------------------------------------------------------------------
2004
---------------------------------------------------------------------
Q4 Q3 Q2 Q1
---------------------------------------------------------------------
Sales before application of EIC-156 932.7 1,013.1 1,077.1 657.1
---------------------------------------------------------------------
Impact of EIC-156 17.1 13.1 14.0 9.9
---------------------------------------------------------------------
Sales 915.6 1,000.0 1,063.1 647.2
---------------------------------------------------------------------
EBITDA 61.0 82.8 101.1 32.3
---------------------------------------------------------------------
Net earnings 29.8 43.5 53.7 11.2
---------------------------------------------------------------------
Earnings per share (1) ($) 0.26 0.38 0.47 0.10
---------------------------------------------------------------------
Diluted earnings per share (1) ($) 0.26 0.38 0.46 0.10
---------------------------------------------------------------------

(1) Earnings per share give retroactive effect to the two-for-one
stock split of March 22, 2005.


ADDITIONAL INFORMATION

RONA's unaudited interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") and are expressed in Canadian dollars. Unless otherwise indicated, the additional financial data appearing in this press release are also expressed in Canadian dollars. RONA has filed its interim financial statements for the third quarter of 2006 with the Canadian Securities Administrators. These financial statements can be viewed online at www.sedar.com or on the Company's Web site at www.rona.ca. This press release should be read in conjunction with these financial statements and related notes.

The Company's annual report and additional information, including the Company's Annual Information Form, are available on its Web site as well as from SEDAR online.

OPERATING RESULTS FOR THE QUARTER ENDED SEPTEMBER 24, 2006

Sales up 14.1%

Consolidated sales include sales generated by RONA's distribution centres and corporate stores, as well as the Company's share and royalties from franchised store sales.

RONA's sales are subject to seasonal variations (see Table 2). Spring to fall is typically busier than the winter months. The first quarter is therefore the weakest in terms of sales and even more so in terms of earnings given that operating costs remain fixed regardless of the time of year. Consequently, the first quarter operating ratio (EBITDA/sales) is usually lower than the annual average. The subsequent quarters are the strongest in terms of sales and especially earnings.

Consolidated sales in the third quarter amounted to $1,265.8 million, a 14.1% increase over last year. This growth was fuelled by corporate and franchised store sales, as well as by our distribution activities. Organic growth, that is, excluding the impact of major acquisitions, was 7.2%.

Operating income rises 10.7%

Third quarter EBITDA (which corresponds to "Earnings before the following items" in our financial statements) stood at $107.9 million, up 10.7% year-over-year.

EBITDA margin was 8.5% of quarterly sales, compared to 8.8% last year. The following factors explain this change:

- The distribution segment's EBITDA margin rose, due to a decrease in distribution operating costs;

- On the corporate and franchised store side, we invested more in store staffing so as to improve service quality, and by extension, traffic and customer loyalty;

- We acquired and integrated a few specialized stores that generate lower margins than our proximity or big-box stores. Notwithstanding this fact, all three types generate a comparable return on investment;

- A decrease in the price of materials and an increase in the price of fuel had a negative impact on the EBITDA margins in both our business segments.

Interest, depreciation and amortization

Quarterly interest expense rose 24.1% from $4.4 million last year to $5.4 million. Tempered by strict cash flow management, this increase is attributable to the Company's growth and to higher interest rates (the average prime bank rate climbed 167 basis points between the two quarters of comparison).

Depreciation and amortization rose from $13.7 million in the third quarter last year to $19.2 million for the quarter ended September 24, 2006 due to the acquisition of new points of sale, the opening of new corporate big-box and proximity stores, and ongoing investments in store renovations and information systems.

NINE-MONTH PERIOD ENDED SEPTEMBER 24, 2006

Sales increase 13.0%

Consolidated sales for the first three quarters advanced 13.0% over last year to $3,410.6 million, fuelled by corporate and franchised stores as well as by the distribution segment. Organic growth, i.e., excluding the impact of major acquisitions, was 6.0%.

Operating income rises 13.9%

Nine months into the year, EBITDA rose 13.9% year-over-year to $294.5 million, representing 8.6% of sales or the same as last year. The decrease in the third quarter was in fact preceded by an increase in our operating ratio for the first two quarters over the same period last year.

Interest, depreciation and amortization

Interest expense in the first nine months of 2006 was $16.8 million, compared to $12.3 million last year. Tempered by strict cash flow management, this increase is attributable to the Company's growth and to higher interest rates (the average prime bank rate climbed 147 basis points between the two periods of comparison).

Depreciation and amortization rose from $39.6 million to $52.3 million as a result of recent acquisitions, the opening of corporate and franchised stores, and ongoing investments in the continuous improvement of our information systems.

SEGMENT ANALYSIS

RONA has two distinct business segments: distribution and corporate and franchised stores.



Table 3
RONA: Key segment figures, third quarter 2006

---------------------------------------------------------------------
Corporate
and
franchised
Distribution stores Total
(thousands % change (thousands % change (thousands % change
of over of over of over
dollars) 2005 dollars) 2005 dollars) 2005
---------------------------------------------------------------------
Segment
sales 593,034 13.7 977,668 17.4 1,570,702 16.0
Intersegment
sales and
royalties (301,791) (3,108) (304,899)
Sales(1) 291,243 4.5 974,560 17.4 1,265,803 14.1
Operating
income
(EBITDA) 17,594 8.9 90,332 11.1 107,926 10.7
---------------------------------------------------------------------

(1) The comparative figures have been adjusted to reflect the
application of EIC-156, Accounting by a Vendor for Consideration
Given to a Customer (volume rebates) (See Table 2).


Table 4
RONA: Key segment figures, first nine months of 2006

---------------------------------------------------------------------
Corporate
and
franchised
Distribution stores Total
(thousands % change (thousands % change (thousands % change
of over of over of over
dollars) 2005 dollars) 2005 dollars) 2005
---------------------------------------------------------------------
Segment
sales 1,708,168 11.7 2,569,331 18.4 4,277,499 15.6
Interseg-
ment
sales
and
royalties (858,003) (8,898) (866,901)
Sales(1) 850,165 (0.5) 2,560,433 18.4 3,410,598 13.0
Operating
income
(EBITDA) 53,058 4.7 241,464 16.1 294,522 13.9
---------------------------------------------------------------------

(1) The comparative figures have been adjusted to reflect the
application of EIC-156, Accounting by a Vendor for Consideration
Given to a Customer (volume rebates) (See Table 2).


Distribution

Distribution segment sales comprise all sales by the RONA distribution infrastructure, whether to corporate, franchised or affiliated stores. Distribution sales are net of intersegment sales and encompass sales to affiliated and franchised stores, excluding RONA's share in these stores, where applicable.

Distribution sales in the third quarter of 2006 advanced 13.7% over the same period last year or 14.9% at constant lumber prices. Net of intersegment sales, the figure was $291.2 million, up 4.5% from 2005.

Between the two periods of comparison we acquired a controlling interest in some of our affiliates with a view to strengthening RONA's presence in certain Canadian regions. These acquisitions resulted in an increase in intersegment sales and a decrease in distribution sales net of intersegment sales. Excluding this impact, distribution sales to affiliated and franchised stores advanced 13.2%.

Third quarter growth was fuelled in large part by new affiliated stores and organic growth within existing affiliated stores, especially those that were renovated or enlarged. The renovation program for affiliated stores launched at the beginning of 2006 under which we have spent some $37 million to add 150,000 square feet of retail space, along with the 23 dealers recruited since the beginning of the year, also contribute to distribution sales in this and the coming quarters.

EBITDA from distribution activities was $17.6 million in the third quarter, representing 6.0% of distribution sales (net of intersegment sales), compared to 5.8% in 2005. As a result of more efficient use of the distribution infrastructure, quarterly operating expenses decreased in absolute terms. A decrease in the price of materials and an increase in the price of fuel reduced growth of the segment's EBITDA margin.

Net distribution sales for the first nine months slipped 0.5% to $850.2 million. Eliminating the accounting impact on sales of the acquisition of equity in affiliated stores, sales growth was 10.1%.

EBITDA advanced 4.7% to $53.1 million, representing 6.2% of distribution sales (net of intersegment sales), compared to 5.9% in the same year-ago period.

Corporate and franchised stores

Corporate and franchised store sales advanced 17.4% to $974.6 million in the third quarter of 2006. Organic growth (excluding the contribution of acquisitions) was 3.9%, driven by corporate stores opened in the last 12 months in the following locations: Penticton and Langford (British Columbia), Lloydminster, Spruce Grove and Leduc (Alberta), Winkler and Winnipeg (Manitoba) and Barrie (Ontario). Same-store sales were up 0.1%1 or 1.2% at constant lumber prices. Although transaction value fell somewhat in relation to the third quarter last year, the number of transactions per store increased. This is a promising development since it signals growing market penetration.



Table 5
RONA: Annual change in same-store sales,
last eight quarters

---------------------------------------------------------------------
Quarter Q3 - Q2 - Q1 - Q4 - Q3 - Q2 - Q1 - Q4 -
2006 2006 2006 2005 2005 2005 2005 2004
---------------------------------------------------------------------
Change in
same-store sales +0.1% +1.1% +1.0% -2.0% -0.3% +0.6% +4.8% +10.4%
---------------------------------------------------------------------
N.B. See note 1 below.


Retail EBITDA rose 11.1% in the third quarter to $90.3 million, representing 9.3% of sales, net of intersegment sales, compared to 9.8% in the comparable year-ago period. Three factors explain this change:

- We invested more in store staffing so as to improve service quality, and by extension, traffic and customer loyalty;

- We acquired and integrated a few specialized stores that generate lower margins than our proximity or big-box stores. Notwithstanding this fact, all three types generate a comparable return on investment;

- A decrease in the price of materials and an increase in the price of fuel had a negative impact on the EBITDA margin.

In the first nine months of the year, corporate and franchised store sales rose 18.4% to $2,560.4 million, net of intersegment activity. Organic growth (excluding the contribution of acquisitions) was 3.6%. Same-store sales, including TOTEM, advanced 1.1% or 2.1% at constant lumber prices. After three quarters, operating income for corporate and franchised stores was $241.5 million, up 16.1% over the same period last year. The EBITDA margin was 9.4% of sales, compared to 9.6% a year ago.

(1) In the second quarter 2006, we changed the same-store classification criteria. Whereas stores relocated within the same market were previously excluded, they are now included as is common industry practice. The figures have been restated retroactively.

CASH FLOWS AND FINANCIAL POSITION

Operations generated cash flows of $79.0 million in the third quarter of 2006, a 16.8% increase over the $67.6 million recorded in the same quarter last year.

Including changes in working capital items, operations provided net cash flows of $156.2 million, against $100.9 million a year ago.

Operations generated cash flows of $210.0 million in the first nine months of 2006 or 17.9% more than the $178.1 million generated at the same time last year.

Including changes in working capital items, operations provided net cash flows of $270.9 million in the first nine months of the year, against $126.1 million in 2005. Increases in working capital required an exceptional amount of cash in the first half of last year as the Calgary distribution centre had to build up sufficient inventory in anticipation of its first seasonal peak.

The Company's working capital requirements are subject to substantial seasonal variations. Given the need to acquire sufficient inventory for the spring and summer seasons, these requirements generally peak at the end of the first quarter and during the second quarter. Thus, RONA's working capital at September 24, 2006 amounted to $504.4 million, versus $483.8 million as at September 25, 2005. Thanks to the growing efficiency of our distribution infrastructure, inventory increased only 6.9% over the comparable year-ago quarter despite the expansion of the store network and acquisitions made between the two dates. On the basis of comparable retail and distribution networks, we trimmed inventory by $46 million in one year.

Capital investments in the third quarter of 2006 required $65.9 million in cash, compared to $36.5 million last year. These funds were spent to build, expand or renovate stores and on construction of a new distribution centre in Terrebonne, Quebec.

During the quarter, we spent $39.8 million on the eleventh and twelfth acquisitions of the year: assets of Curtis Lumber and Mountain Building Centres.

RONA's total debt load at the balance sheet date was $355.6 million, against $278.7 million a year ago. This increase was used to finance the expansion of the store network and to enlarge our distribution infrastructure by adding 250,000 sq. ft. to the Boucherville distribution centre and by building another one in Terrebonne. As at September 24, 2006, the total debt/capital employed ratio was 24.5%, in comparison with 23.7% at the same time last year.

The equity/assets ratio reached 53.8% in the third quarter of 2006, against 53.2% in the comparable year-ago period.

After the balance sheet date, we completed a $400 million debenture issue in Canada designated as "5.40% Debentures, due in 2016." The underwriters purchased the debentures at a price of 99.792%. The effective yield of the debentures, if held to maturity, is 5.429%. The debentures are direct unsecured obligations of the Company and rank pari passu to all other outstanding unsecured and unsubordinated indebtedness of RONA.

The debentures are rated BBB high (stable) by Dominion Bond Rating Service Limited and BBB- (positive) by Standard & Poor's.

Concurrent with this issue, we refinanced our credit facilities by way of a new agreement with a syndicate of lenders.

The new agreement provided for an unsecured, renewable credit facility of $600 million. Since our debenture issue was more successful than anticipated, we decided to bring our credit facility down to $500 million. Subject to certain conditions and at our discretion, we could increase this amount by up to $150 million. Compared to our previous credit facility, the new agreement reduces the cost of future borrowing. Borrowing costs will depend on the Standard & Poor's credit rating assigned to the unsecured debentures. The facility will be available for five years and may be extended for another two years. As of the date of writing, this facility was unused.

Thanks to our relatively low debt load, the 10-year rates on our long-term debt, good liquidity and access to some $650 million in additional credit at competitive rates, RONA has sufficient resources to pursue its four growth vectors: same-store sales growth, new corporate store construction, dealer recruitment, and acquisitions.

THE NETWORK

Since August 9, we recruited three new dealers in Manitoba, Ontario and Quebec, with combined annual sales of approximately $14 million. The Company has recruited 23 new dealers since the beginning of the year, boosting annual retail sales by more than $136 million. This bodes well for the coming months given that dealers usually prefer to wait until fall or winter before changing affiliation.

On July 24, we completed the Curtis Lumber acquisition announced on April 25 and integrated the company's results into our financial statements as of July 24. A leading supplier of building materials and home improvement and hardware products in British Columbia, Curtis Lumber provides us with six additional points of sale on the West Coast: four in Burnaby, one in Langley and one in Pender Harbour (Sunshine Coast). On August 18, we acquired Mountain Building Centres, an important supplier of building materials, home improvement and hardware products in the Sea to Sky corridor of British Columbia. This transaction added three points of sale and $22 million in annual sales.

On November 1, RONA opened a big-box store in Charlemagne, and will open another in Rimouski in a few days. Both stores are in Quebec and are part of some 15 new points of sale slated to open in the coming months. The others are mainly big-box stores in Scarborough, Flamborough, Whitby South and Bowmanville, Ontario; Halifax, Nova Scotia; Calgary North, Alberta; and Prince George, British Columbia. Construction of proximity hardware stores has begun in Edmunston, New Brunswick, and will begin shortly in Collingwood, Carleton Place, Leamington and Sudbury, Ontario, as well as in Valleyfield, Quebec.

Other construction projects will be forthcoming in keeping with our goal to open some 35 stores by the end of 2008. In the past 24 months, the Board of Directors has approved some 60 sites in various regions of Canada, particularly in the West, where the market is especially promising. Because these sites have already been approved, we will be able to time the openings with seasonal peaks.

We are adapting our distribution infrastructure with a view to improving the supply chain and supporting our growth. Thus, the construction of the 380,000-sq.-ft. trans-shipment facility in Terrebonne, north of Montreal, is proceeding on schedule. Already partially operational, it is slated to open early next year. The $25 million centre will be the seventh pillar in RONA's pan-Canadian distribution network. As a result of our growth pace in the West, we are planning to expand the Calgary distribution centre, opened in 2004.

CORPORATE DEVELOPMENT AND OUTLOOK

Our goal is still to see annual retail sales(2) break the $7 billion mark by the end of 2007. Since the 2005 figure was $5 billion, we must boost sales by $2 billion over two years.

We will achieve this goal by following four growth vectors: corporate and franchised store construction, acquisitions, dealer recruitment, and same-store sales growth.

Through these growth vectors, we have added more than 1.4 million square feet of retail space and increased the annual retail sales base by $700 million since the beginning of the year. This represents 35% of our two-year target, a pace that is on schedule.

While the Canadian economy is generally sound and growing, our market conditions have weakened somewhat. The Bank of Canada has revised its base-case projection downward, now calling for average annual growth of 2.8%, 2.5%, and 2.8% in 2006, 2007 and 2008 respectively. Overall, growth is stronger in the West than in Quebec and Ontario, both of which are still responsible for a sizable portion of our sales. We will continue to strengthen our network in western Canada through acquisitions, dealer recruitment and store construction. In fact, since early 2005, we have added 54 stores and almost 1.5 million square feet west of Ontario.

With regards to our line of business more specifically, the Canada Mortgage and Housing Corporation (CMHC) is projecting a slight slowdown in home resales and a slower increase in renovation expenditures than in the recent past.

Our market environment now requires us to work harder to maintain organic growth, particularly in central and eastern Canada. Should the weakened market environment persist, it will also mean many more acquisition and recruitment opportunities. We are currently studying or negotiating several potential acquisitions and recruitments. Because of our extremely sound balance sheet and access to abundant financial resources at a competitive rate, we are well placed to seize any quality opportunity that arises.

We are vigilant and can adapt our management to short-term swings in the economy. However, our development horizon is measured in years. Regardless of the outlook, it is important to remember that our line of business benefits first and foremost from favourable structural factors, namely, aging housing stock in Canada, the demographics of the Canadian population, and the strong and enduring interest of North American consumers in home improvement, do-it-yourself projects and gardening.

(2) "Retail sales" means the combined sales of corporate, franchised and affiliated RONA stores, all banners combined, regardless of ownership. They differ from consolidated sales, also discussed in this press release, which include corporate stores sales, RONA's share and royalties from franchised store sales, and distribution sales to affiliated stores.

FORWARD-LOOKING INFORMATION

This press release contains forward-looking statements reflecting RONA's objectives, estimates, and expectations. These statements are identified by the use of verbs such as "believe," "anticipate," "estimate" and "expect" as well as the use of the future or conditional tense. By their very nature, these types of statements involve risk and uncertainty. Consequently, results could differ materially from the Company's projections or expectations. The reader will find information about the nature of the risk factors in RONA's 2005 Annual Report under the heading "Risks and Uncertainties," page 3l.

ABOUT RONA

RONA is the largest Canadian distributor and retailer of hardware, home renovation and gardening products. RONA operates a network of more than 620 franchised, affiliated and corporate stores of various sizes and formats. With more than 25,000 employees working under its family of banners across Canada and more than 14 million square feet of retail space, the RONA store network generates $5.7 billion in annual sales.

FINANCIAL STATEMENTS FOLLOW



RONA inc.
Consolidated Earnings
For the thirteen-week and thirty-nine-week periods ended September
24, 2006 and September 25, 2005
(Unaudited, in thousands of dollars, except earnings per share)


3rd Quarter Year-to-date
---------------------------------------------------------------------
2006 2005 2006 2005
---------------------------------------------------------------------

Sales(a) $1,265,803 $1,109,292 $3,410,598 $3,017,820
---------------------------------------------------------------------
---------------------------------------------------------------------

Earnings before the
following items 107,926 97,460 294,522 258,601
---------------------------------------------------------------------

Interest on
long-term debt 4,399 3,557 14,021 9,962
Interest on bank loans 1,040 825 2,778 2,371
Depreciation and
amortization 19,183 13,713 52,252 39,580
---------------------------------------------------------------------
24,622 18,095 69,051 51,913
---------------------------------------------------------------------

Earnings before
income taxes 83,304 79,365 225,471 206,688
Income taxes 27,225 26,344 73,000 69,087
---------------------------------------------------------------------
Net earnings $56,079 $53,021 $152,471 $137,601
---------------------------------------------------------------------
---------------------------------------------------------------------

Earnings per share
(Note 10) $0.49 $0.46 $1.33 $1.21
---------------------------------------------------------------------
---------------------------------------------------------------------

Diluted earnings
per share (Note 10) $0.48 $0.46 $1.31 $1.18
---------------------------------------------------------------------
---------------------------------------------------------------------

(a) Refer to Note 2, Changes in accounting policies.

The accompanying notes are an integral part of the interim
consolidated financial statements.



RONA inc.
Consolidated Retained Earnings
Consolidated Contributed Surplus
For the thirty-nine-week periods ended September 24, 2006 and
September 25, 2005
(Unaudited, in thousands of dollars)


2006 2005
---------------------------------------------------------------------

Consolidated Retained Earnings
Balance, beginning of period $518,883 $343,673
Net earnings 152,471 137,601
---------------------------------------------------------------------
Balance, end of period $671,354 $481,274
---------------------------------------------------------------------
---------------------------------------------------------------------


Consolidated Contributed Surplus
Balance, beginning of period $6,618 $2,945
Compensation cost relating to stock-based
compensation plans 1,768 1,803
Exercise of stock options (168) (69)
Gain on disposal of the Company's common
shares by joint ventures and a subsidiary,
net of income taxes of $59 ($124 in 2005) 251 530
---------------------------------------------------------------------
Balance, end of period $8,469 $5,209
---------------------------------------------------------------------
---------------------------------------------------------------------

The accompanying notes are an integral part of the interim
consolidated financial statements.



RONA inc.
Consolidated Cash Flows
For the thirteen-week and thirty-nine-week periods ended September
24, 2006 and September 25, 2005
(Unaudited, in thousands of dollars)


3rd Quarter Year-to-date
---------------------------------------------------------------------
2006 2005 2006 2005
---------------------------------------------------------------------
Operating activities
Net earnings $56,079 $53,021 $152,471 $137,601
Non-cash items
Depreciation and
amortization 19,183 13,713 52,252 39,580
Future income taxes 290 1,300 (285) 2,839
Net gain on disposal
of assets (74) (1,060) (1,415) (3,182)
Compensation cost
relating to
stock-based
compensation plans 670 605 1,768 1,803
Other items 2,852 32 5,188 (508)
---------------------------------------------------------------------
79,000 67,611 209,979 178,133
Changes in working
capital items 77,221 33,264 60,968 (52,052)
---------------------------------------------------------------------
Cash flows from
operating activities 156,221 100,875 270,947 126,081
---------------------------------------------------------------------
Investing activities
Business acquisitions
(Note 3) (39,763) (25,691) (152,927) (121,123)
Advances to joint
ventures and other
advances (270) (94) (667) 733
Other investments (1,710) 6 (1,710) (3,212)
Fixed assets (65,915) (36,454) (152,402) (93,381)
Other assets (4,372) (2,739) (9,191) (4,454)
Disposal of assets 1,496 7,423 6,336 32,354
---------------------------------------------------------------------
Cash flows from
investing activities (110,534) (57,549) (310,561) (189,083)
---------------------------------------------------------------------
Financing activities
Bank loans and
revolving credit (57,317) (34,048) 51,915 108,498
Other long-term debt 1,954 4,239 3,617 4,896
Repayment of other
long-term debt
and redemption of
preferred shares (3,469) (2,537) (11,816) (23,669)
Issue of common shares 827 834 3,904 3,410
Issue of equity
securities to
non-controlling
interest 400 - 1,135 -
Redemption of
equity securities
from
non-controlling
interest (1,000) - (1,000) -
---------------------------------------------------------------------
Cash flows from
financing activities (58,605) (31,512) 47,755 93,135
---------------------------------------------------------------------
Net increase
(decrease) in cash (12,918) 11,814 8,141 30,133
Cash, beginning of
period 25,179 22,850 4,120 4,531
---------------------------------------------------------------------
Cash, end of period $12,261 $34,664 $12,261 $34,664
---------------------------------------------------------------------
---------------------------------------------------------------------
Supplementary
information
Interest paid $5,043 $3,069 $14,696 $8,882
Income taxes paid
(received) $(1,754) $13,048 $56,980 $74,630
---------------------------------------------------------------------

The accompanying notes are an integral part of the interim
consolidated financial statements.



RONA inc.
Consolidated Balance Sheets
September 24, 2006, September 25, 2005 and December 25, 2005
(In thousands of dollars)

2006 2005 2005
September 24 September 25 December 25
---------------------------------------------------------------------
(Unaudited) (Unaudited)
Assets
Current assets
Cash $12,261 $34,664 $4,120
Accounts receivable 275,262 211,553 181,707
Inventory 771,207 721,548 733,681
Prepaid expenses 26,985 18,119 14,083
Future income taxes 10,571 12,276 8,513
---------------------------------------------------------------------
1,096,286 998,160 942,104
Investments 18,678 20,017 18,505
Fixed assets 560,554 377,303 415,899
Goodwill 316,573 251,789 252,337
Other assets 21,432 16,697 17,190
Future income taxes 21,087 20,721 21,581
---------------------------------------------------------------------
$2,034,610 $1,684,687 $1,667,616
---------------------------------------------------------------------
---------------------------------------------------------------------

Liabilities
Current liabilities
Bank loans $35,618 $31,447 $25,276
Accounts payable and
accrued liabilities 501,299 465,734 412,964
Income taxes payable 20,994 3,048 5,444
Future income taxes 1,420 920 750
Instalments on long-term debt 32,599 13,253 11,789
---------------------------------------------------------------------
591,930 514,402 456,223
Long-term debt (Note 11) 287,348 233,970 230,300
Other long-term liabilities 18,819 16,258 15,736
Future income taxes 14,273 9,699 13,792
Non-controlling interest 27,505 14,126 15,381
---------------------------------------------------------------------
939,875 788,455 731,432
---------------------------------------------------------------------
Shareholders' equity
Capital stock (Note 4) 414,912 409,749 410,683
Retained earnings 671,354 481,274 518,883
Contributed surplus 8,469 5,209 6,618
---------------------------------------------------------------------
1,094,735 896,232 936,184
---------------------------------------------------------------------
$2,034,610 $1,684,687 $1,667,616
---------------------------------------------------------------------
---------------------------------------------------------------------

The accompanying notes are an integral part of the interim
consolidated financial statements.



RONA inc.
Notes to Interim Consolidated Financial Statements
September 24, 2006 and September 25, 2005
(Unaudited, in thousands of dollars, except amounts per share)


1. Basis of presentation

The accompanying unaudited interim consolidated financial statements are in accordance with Canadian generally accepted accounting principles for interim financial statements and do not include all the information required for complete financial statements. They are also consistent with the policies outlined in the Company's audited financial statements for the year ended December 25, 2005. The interim financial statements and related notes should be read in conjunction with the Company's audited financial statements for the year ended December 25, 2005. The interim operating results do not necessarily reflect the results for the full fiscal year. Accordingly, the comparative balance sheet as at September 25, 2005 is also included to reflect seasonal fluctuations that characterize the hardware, renovation and home garden industry. When necessary, the financial statements include amounts based on estimated information and management's best judgments.

2. Changes in accounting policies

Accounting by a vendor for consideration given to a customer (volume rebates)

At the beginning of fiscal year 2006, the Company adopted EIC-156 "Accounting by a Vendor for Consideration Given to a Customer (Including a Reseller of the Vendor's Products)", providing guidance as to the circumstances under which a consideration is an adjustment of the selling price of the vendor's products or services and under which it is a cost incurred by the vendor to sell his products. The EIC was applied retroactively, with restatement of prior periods. Volume rebates to customers, previously presented as a reduction of earnings before interest, depreciation and amortization and income taxes, will henceforth be presented as a reduction of sales. Following application of EIC-156, sales were reduced by $11,901 ($11,289 in 2005) and $34,010 ($29,892 in 2005) for the thirteen-week and thirty-nine-week periods ended September 24, 2006 and September 25, 2005.

Variable interest entities

Effective at the beginning of fiscal year 2005, the Company adopted prospectively the new accounting guideline on the consolidation of variable interest entities (VIEs), legal entities that are not controlled by shareholders with voting rights. The guideline provides guidance for determining when an enterprise must include the assets, liabilities and results of activities of such an entity and applies to annual and interim periods beginning on or after November 1, 2004. The application of this guideline did not have an impact on the Company's financial statements for the period ended September 25, 2005.

3. Business acquisitions

The Company acquired twelve companies, operating in the corporate and franchised stores segment, by way of share or asset purchase. Taking acquisition costs into account, these acquisitions were for a total cash consideration of $153,405. The Company financed these acquisitions from its existing credit facilities. The results of operations of these companies are consolidated from their date of acquisition.

The preliminary allocation of the purchase price of the acquisitions was established as follows:



Current assets $129,865
Fixed assets 34,502
Goodwill 64,236
Other assets 327
Future income taxes (141)
Current liabilities (57,804)
Long-term debt (8,831)
Non-controlling interest (8,749)
------------------------------------------------
153,405
Less : Accrued acquisition costs (478)
------------------------------------------------
Cash consideration paid $152,927
------------------------------------------------
------------------------------------------------


4. Capital stock

Common stock split

On March 10, 2005, the Board of Directors approved a two-for-one split of the Company's common shares. All share and per share data, the number of stock options and exercise prices have been adjusted to reflect the stock split, effective March 22, 2005.

Issued and fully paid:

The following tables present changes in the number of outstanding common shares and their aggregate stated value from December 26, 2004 to September 24, 2006:



September 24, 2006
---------------------------------------------------------------------
Number of shares Amount
---------------------------------------------------------------------
Balance, beginning of period 114,412,744 $408,943
Issuance in exchange for common
share subscription deposits 101,696 2,192
Issuance under stock-based
compensation plans 399,300 1,918
Issuance in exchange for cash 15,171 340
---------------------------------------------------------------------
Balance before elimination of
reciprocal shareholdings 114,928,911 413,393
Elimination of reciprocal
shareholdings (54,828) (299)
---------------------------------------------------------------------
Balance, end of period 114,874,083 413,094
---------------------------------------------------------------------
---------------------------------------------------------------------
Deposits on common share
subscriptions, net of eliminations
of subsidiaries and joint ventures(a) 1,818
---------------------------------------------------------------------
$414,912
---------------------------------------------------------------------
---------------------------------------------------------------------


September 25, 2005
---------------------------------------------------------------------
Number of shares Amount
---------------------------------------------------------------------
Balance, beginning of period 113,957,270 $404,927
Issuance in exchange for common
share subscription deposits 93,058 1,900
Issuance under stock-based
compensation plans 330,723 1,361
Issuance in exchange for cash 27,818 670
---------------------------------------------------------------------
Balance before elimination of
reciprocal shareholdings 114,408,869 408,858
Elimination of reciprocal
shareholdings (129,845) (595)
---------------------------------------------------------------------
Balance, end of period 114,279,024 408,263
---------------------------------------------------------------------
---------------------------------------------------------------------
Deposits on common share
subscriptions, net of eliminations
of subsidiaries and joint ventures(a) 1,486
---------------------------------------------------------------------
$409,749
---------------------------------------------------------------------
---------------------------------------------------------------------


December 25, 2005
---------------------------------------------------------------------
Number of shares Amount
---------------------------------------------------------------------
Balance, beginning of period 113,957,270 $404,927
Issuance in exchange for common
share subscription deposits 93,058 1,900
Issuance under stock-based
compensation plans 330,723 1,361
Issuance in exchange for cash 31,693 755
---------------------------------------------------------------------
Balance before elimination of
reciprocal shareholdings 114,412,744 408,943
Elimination of reciprocal shareholdings (76,351) (400)
---------------------------------------------------------------------
Balance, end of period 114,336,393 408,543
---------------------------------------------------------------------
---------------------------------------------------------------------
Deposits on common share
subscriptions, net of eliminations of
subsidiaries and joint ventures(a) 2,140
---------------------------------------------------------------------
$410,683
---------------------------------------------------------------------
---------------------------------------------------------------------

(a) Deposits on common share subscriptions represent amounts received
during the period from affiliated and franchised merchants in
accordance with commercial agreements. These deposits are
exchanged for common shares on an annual basis.


Stock-based compensation plan of May 1, 2002

The Company adopted a stock option purchase plan for designated senior executives which was approved by the shareholders on May 1, 2002. A total of 2,920,000 options were granted at that date. Options granted under the plan may be exercised since the Company made a public share offering on November 5, 2002. The Company can grant options for a maximum of 3,740,000 common shares. At September 24, 2006 the 2,920,000 options granted have an exercise price of $3.47 and of this number, 1,149,723 options (781,323 options at September 25, 2005) were exercised.

The fair value of each option granted was estimated at the grant date using the Black-Scholes option-pricing model. Calculations were based upon a market price of $3.47, an expected volatility of 30 %, a risk-free interest rate of 4.92%, an expected life of four years and 0% expected dividend. The fair value of options granted is $1.10 per option according to this method.

No compensation cost was expensed with respect to this plan for the thirty-nine-week periods ended September 24, 2006 and September 25, 2005.

Stock-based compensation plan of October 24, 2002

On October 24, 2002, the Board of Directors approved another stock-based compensation plan for designated senior executives of the Company and for certain unrelated outside directors. The total number of common shares which may be issued pursuant to the plan will not exceed 10% of the common shares issued and outstanding less the number of shares subject to options granted under a previous stock option plan. These options become vested at 25% per year, if the market price of the common share has traded, for at least 20 consecutive trading days during the twelve-month period preceding the grant anniversary date, at a price equal to or higher than the grant price plus a premium of 8% compounded annually.

At September 24, 2006, the 1,504,852 options (1,041,200 options at September 25, 2005) granted have exercise prices ranging from $14.29 to $23.73 and of this number, 44,300 options (13,400 options at September 25, 2005) have been exercised and 67,100 options (17,400 options at September 25, 2005) have been cancelled.

The fair value of each option granted was estimated at the grant date using the Black-Scholes option-pricing model. The fair value and assumptions used are as follows:



2006 2006 2005 2004 2003
Sept. 1 Feb. 24 April 5 Dec. 22 Dec. 16
---------------------------------------------------------------------

Fair value per option $7,80 $7.63 $8.25 $7.05 $5.14
Risk-free interest
rate 4.00% 4.07% 3.88% 3.88% 4.06%
Expected time until
complete exercise
of options 6 years 6 years 6 years 6 years 6 years
Expected volatility
in stock price 28% 28% 27% 27% 28%
Expected annual
dividend 0% 0% 0% 0% 0%

Compensation cost expensed with respect to this plan was $1,768 for
the thirty-nine-week period ended September 24, 2006 ($1,803 at
eptember 25, 2005).

A summary of the situation from December 26, 2004 to September 24,
2006 of the Company's stock option plans and the changes that
occurred during the periods then ended is presented below:


September 24, 2006
---------------------------------------------------------------------
Weighted average
Options exercise price
---------------------------------------------------------------------
Balance, beginning of period 3,131,327 $7.84
Granted 463,652 21.23
Exercised (399,300) 4.38
Cancelled (31,950) 18.34
---------------------------------------------------------------------
Balance, end of period 3,163,729 10.13
---------------------------------------------------------------------
---------------------------------------------------------------------
Options exercisable, end of period 2,109,527 $5.53
---------------------------------------------------------------------
---------------------------------------------------------------------


September 25, 2005
---------------------------------------------------------------------
Weighted average
Options exercise price
---------------------------------------------------------------------
Balance, beginning of period 3,486,200 $7.49
Granted 11,000 23.73
Exercised (330,723) 3.91
Cancelled (17,400) 14.29
---------------------------------------------------------------------
Balance, end of period 3,149,077 7.89
---------------------------------------------------------------------
---------------------------------------------------------------------
Options exercisable, end of period 2,262,327 $4.06
---------------------------------------------------------------------
---------------------------------------------------------------------


December 25, 2005
---------------------------------------------------------------------
Weighted average
Options exercise price
---------------------------------------------------------------------
Balance, beginning of period 3,486,200 $7.49
Granted 11,000 23.73
Exercised (330,723) 3.91
Cancelled (35,150) 15.65
---------------------------------------------------------------------
Balance, end of period 3,131,327 7.84
---------------------------------------------------------------------
---------------------------------------------------------------------
Options exercisable, end of period 2,508,827 $5.35
---------------------------------------------------------------------
---------------------------------------------------------------------


The following table summarizes information relating to stock options
outstanding at September 24, 2006:

Options Options
Exercise price Expiration date outstanding exercisable
---------------------------------------------------------------------
$3.47 December 31, 2012 1,770,277 1,770,277
$14.29 December 16, 2013 471,050 225,750
$20.27 December 22, 2014 450,250 113,500
$23.73 April 5, 2015 11,000 -
$21.21 February 24, 2016 443,576 -
$21.78 September 1, 2016 17,576 -
---------------------------------------------------------------------
3,163,729 2,109,527
---------------------------------------------------------------------
---------------------------------------------------------------------


5. Guarantees

In the normal course of business, the Company reaches agreements that could meet the definition of "guarantees" in AcG-14.

The Company guarantees mortgages for certain customers to an amount of $6,507. The terms of these loans extend until 2012 and the net carrying amount of the assets held as security, which mainly include land and buildings, is $15,336.

Pursuant to the terms of inventory repurchase agreements, the Company is committed towards financial institutions to buy back the inventory of certain customers at an average of 62% of the cost of the inventories to a maximum of $55,713. In the event of recourse, this inventory would be sold in the normal course of the Company's operations. These agreements have undetermined periods but may be cancelled by the Company with a 30-day advance notice. In the opinion of management, the likelihood that significant payments would be incurred as a result of these commitments is low.

6. Vendor rebates

In accordance with EIC-144 "Accounting by a customer (including a reseller) for certain consideration received from a vendor", the Company must disclose the amount recognized for which the full requirements for vendor rebate entitlement have not yet been met. For the thirty-nine-week period ended September 24, 2006, the Company recorded an amount of $7,205 ($6,570 at September 25, 2005) which was estimated based on the attainment of specified requirements to receive the rebates.

7. Employee future benefits

At September 24, 2006, the Company had nine defined contribution pension plans and four defined benefit pension plans. The net pension expense for the benefit plans is as follows:



3rd Quarter Year-to-date
---------------------------------------------------------------------
2006 2005 2006 2005
---------------------------------------------------------------------
Costs recognized for
defined contribution
pension plans $1,841 $1,484 $5,515 $4,449
Costs recognized for
defined benefit
pension plans 362 110 1,048 330
---------------------------------------------------------------------
Net employee future
benefit costs $2,203 $1,594 $6,563 $4,779
---------------------------------------------------------------------
---------------------------------------------------------------------


8. Contingencies

Various claims and litigation arise in the course of the Company's activities and its insurers have taken up the Company's defense in some of these cases. In addition, upon the acquisition of Reno-Depot Inc., the vendor committed to indemnify the Company for litigation which the Company assumed in the course of this acquisition.

Management does not expect that the outcome of these claims and litigation will have a material and adverse effect on the Company's results and deemed its allowances adequate in this regard.

9. Segmented information

The Company has two reportable segments: distribution and corporate and franchised stores. The distribution segment relates to the supply activities to affiliated, franchised and corporate stores. The corporate and franchised stores segment relates to the retail operations of the corporate stores and the Company's share of the retail operations of the franchised stores in which the Company has an interest.

The accounting policies that apply to the reportable segments are the same as those described in accounting policies. The Company evaluates performance according to earnings before interest, depreciation and amortization, rent and income taxes, i.e. sales less chargeable expenses. The Company accounts for intersegment operations at fair value.



3rd Quarter 2006
---------------------------------------------------------------------
Corporate and
Distribution franchised Total
stores
---------------------------------------------------------------------
Segment sales $593,034 $977,668 $1,570,702
Intersegment sales and
royalties (301,791) (3,108) (304,899)
---------------------------------------------------------------------
Sales 291,243 974,560 1,265,803
---------------------------------------------------------------------
---------------------------------------------------------------------
Earnings before interest,
depreciation and amortization,
rent and income taxes 23,092 120,847 143,939
Earnings before interest,
depreciation and amortization
and income taxes 17,594 90,332 107,926
Acquisition of fixed assets 2,698 71,747 74,445
Goodwill - 15,284 15,284


Year-to-date 2006
---------------------------------------------------------------------
Corporate and
Distribution franchised Total
stores
---------------------------------------------------------------------
Segment sales $1,708,168 $2,569,331 $4,277,499
Intersegment sales and
royalties (858,003) (8,898) (866,901)
---------------------------------------------------------------------
Sales 850,165 2,560,433 3,410,598
---------------------------------------------------------------------
---------------------------------------------------------------------
Earnings before interest,
depreciation and amortization,
rent and income taxes 71,105 317,126 388,231
Earnings before interest,
depreciation and amortization
and income taxes 53,058 241,464 294,522
Total assets 369,011 1,665,599 2,034,610
Acquisition of fixed assets 22,879 144,574 167,453
Goodwill - 64,236 64,236


3rd Quarter 2005
---------------------------------------------------------------------
Corporate and
Distribution franchised Total
stores
---------------------------------------------------------------------
Segment sales $521,440 $832,835 $1,354,275
Intersegment sales and
royalties (242,613) (2,370) (244,983)
---------------------------------------------------------------------
Sales(a) 278,827 830,465 1,109,292
---------------------------------------------------------------------
---------------------------------------------------------------------
Earnings before interest,
depreciation and
amortization, rent and
income taxes 21,871 102,192 124,063
Earnings before interest,
depreciation and
amortization and income
taxes 16,160 81,300 97,460
Acquisition of fixed assets 5,076 32,207 37,283
Goodwill - 11,590 11,590


Year-to-date 2005
---------------------------------------------------------------------
Corporate and
Distribution franchised Total
stores
---------------------------------------------------------------------
Segment sales $1,528,675 $2,170,603 $3,699,278
Intersegment sales and
royalties (674,166) (7,292) (681,458)
---------------------------------------------------------------------
Sales(a) 854,509 2,163,311 3,017,820
---------------------------------------------------------------------
---------------------------------------------------------------------
Earnings before interest,
depreciation and
amortization, rent and
income taxes 67,042 267,084 334,126
Earnings before interest,
depreciation and
amortization and income
taxes 50,692 207,909 258,601
Total assets 389,380 1,295,307 1,684,687
Acquisition of fixed assets 15,209 84,621 99,830
Goodwill - 88,889 88,889

(a) Refer to Note 2, Changes in accounting policies.


10. Earnings per share

The following tables present a reconciliation of earnings per share
and diluted earnings per share.

3rd Quarter 2006
---------------------------------------------------------------------
Weighted
average number
Earnings of shares EPS
---------------------------------------------------------------------
(in thousands)
Earnings per share:
Net earnings $56,079 114,838.1 $0.49
Diluted earnings per share:
Effect of dilutive securities
Impact of exercising
stock options(a) - 1,648.0 -
---------------------------------------------------------------------

Net earnings available
for common shareholders $56,079 116,486.1 $0.48
---------------------------------------------------------------------
---------------------------------------------------------------------


Year-to-date 2006
---------------------------------------------------------------------
Weighted
average number
Earnings of shares EPS
---------------------------------------------------------------------
(in thousands)
Earnings per share:
Net earnings $152,471 114,683.8 $1.33
Diluted earnings per share:
Effect of dilutive securities
Impact of exercising
stock options(a) - 1,780.8 -
---------------------------------------------------------------------

Net earnings available
for common shareholders $152,471 116,464.6 $1.31
---------------------------------------------------------------------
---------------------------------------------------------------------


3rd Quarter 2005
---------------------------------------------------------------------
Weighted
average number
Earnings of shares EPS
---------------------------------------------------------------------
(in thousands)
Earnings per share:
Net earnings $53,021 114,217.6 $0.46
Diluted earnings per share:
Effect of dilutive securities
Impact of exercising
stock options(a) - 2,056.8 -
---------------------------------------------------------------------

Net earnings available
for common shareholders $53,021 116,274.4 $0.46
---------------------------------------------------------------------
---------------------------------------------------------------------


Year-to-date 2005
---------------------------------------------------------------------
Weighted
average number
Earnings of shares EPS
---------------------------------------------------------------------
(in thousands)
Earnings per share:
Net earnings $137,601 114,092.5 $1.21
Diluted earnings per share:
Effect of dilutive securities
Impact of exercising
stock options(a) - 2,124.0 -
---------------------------------------------------------------------

Net earnings available
for common shareholders $137,601 116,216.5 $1.18
---------------------------------------------------------------------
---------------------------------------------------------------------

(a) At September 24, 2006, 922,402 common share stock options
(493,000 at September 25, 2005) were excluded from the calculation
of diluted earnings per share since the unrecognized future
compensation cost of these options has an antidilutive effect.


11. Subsequent events

On October 6, 2006, the Company completed the refinancing of its credit facilities by way of a new agreement with a syndicate of lenders. The agreement provides for an unsecured, renewable credit facility of $500,000 and subject to certain conditions, an additional amount of up to $150,000. The premium on the base rate and borrowing costs will depend on the credit rating assigned to the unsecured debentures. The facility will be available for five years and may be extended for a period of two years.

On October 13, 2006, the Company filed a final short form prospectus with the provincial securities regulatory authorities in connection with the issuance in Canada of debentures, with an interest rate of 5.40 % due in 2016 in the aggregate principal amount of $400,000, which was settled on October 20, 2006. The underwriters purchased the debentures at a price of 99.792%. These will be unsecured and will rank pari pasu with all other outstanding unsecured and unsubordinated indebtedness of the Company.

Contact Information

  • RONA inc.
    Claude Guevin CA
    Executive Vice-President and Chief Financial Officer
    514-599-5168
    or
    RONA inc.
    Stephane Prud'homme
    Public Relations Manager
    514-599-5114 or 514-258-2693
    prus@rona.ca