BOUCHERVILLE, QUEBEC--(Marketwire - Feb. 23, 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 52-week periods ended December 25, 2011 and its 2012 business plan. All figures in this release are in Canadian dollars and presented according to IFRS accounting standards.
Highlights
- Fourth quarter and second-half results meet Corporation objectives.
- Substantial increase in free cash flow generation: from $78.1 million in 2010 to $170.2 million in 2011.
- Net income (excluding unusual items) of $19.7 million, or $0.15 per share diluted in the fourth quarter, and $86.9 million, or $0.66 per share diluted for fiscal 2011. Unusual items recorded in 2011 and estimated total in 2012 of $181.3 million for restructuring costs, $117 million for impairment of goodwill and $9.9 million for debenture repurchase.
- Redefining the customer experience: full review of the digital platform and part of the RONA store network in order to adapt to the new social and economic realities influencing the behaviour of Canadian consumers; increased the Corporation's return on capital.
- Roll-out of a new integrated digital platform, which includes the new Web site rona.ca,to help orient each different type of consumers with their renovation projects and support all our retail activities.
- Launch of a new proven proximity store concept with an average area of 35,000 square feet and deployment of the concept in 20% of the RONA corporate store network.
- Investments limited to $70 million and financed from the sale of non-strategic assets.
- Increases expected in sales per square foot, average basket and return on capital.
- Annualized contribution to EBITDA estimated at $10 million starting in fourth quarter 2012, to more than $30 million for fiscal 2013 and more than $40 million starting in 2014.
| Results vs Second Semester 2011 Objectives (excluding unusual items) |
||||
| Second Semester Objectives/Targets |
Q4-2011 Results |
Second Semester Results | In Line with Objectives |
|
| Adjusted gross margin | Up | Up 9 basis points |
Up 45 basis points | Yes |
| Selling and administrative expense (before acquisitions and new stores) | Down | Down $12.5 M or 4.7% |
Down $25.3 M or 4.7% |
Yes |
| EBITDA margin | S2-2011 almost equal to S2-2010 |
5.63% almost equal to 5.69% |
6.81% almost equal to 6.85% |
Yes |
| Diluted earnings per share | S2-2011= S2-2010 | $0.15 = $0.15 |
$0.51 = $0.51 | Yes |
| Investments in property, plant and equipment | = Amortization and Depreciation 2011 |
- | $109.4 M almost equal to $107.1 M for the fiscal year |
Yes |
| Comparable inventories (retail and distribution) | Down $100 M at end of 2011 |
- | Down $110 M at December 25, 2011 |
Yes |
| Capital | Disposal of non-strategic assets |
- | $10.2 M disposed in the fiscal year | yes |
As shown in the above summary, RONA's quarterly and semi-annual results before unusual items were in line with objectives announced for the second half of the year, even though same-store sales were down 2.3% in the fourth quarter and 3.8% in the second half.
"After a tougher start to the year than our industry expected, we took major steps to improve efficiency and optimize our capital structure during the second half of 2011. These initiatives have already enabled us to cut our selling and administrative expense for our existing operations by more than $25 million, or close to 5%, and will result in recurring annual and substantial interest savings of close to $10 million in coming years," said Robert Dutton, President and Chief Executive Officer of RONA.
"In the current market environment, operational efficiency and optimal utilization of capital are more vital than ever. We have already taken steps to address these areas and will continue such efforts. However, we will also be concentrating on our different clienteles to ensure we offer them products and services that are even better suited to their respective needs," noted Mr. Dutton.
Mr. Dutton added, "Today we are announcing a plan that will capitalize on the changes we have seen in the behaviours of Canadian consumers and will redefine the customer experience in our industry. This plan involves the roll-out of an all-new integrated digital platform, which includes the new Web site rona.ca, to help orient each different type of consumer with their renovation projects. It also involves redeploying part of our assets to a new type of proximity store which is ideally suited to the new social and economic realities that are influencing the behaviour of Canadian consumers. The primary objective of the New Realities, New Solutions plan is to bring us closer to consumers, which means being either just a click away, or no more than 10 minutes distance from a RONA store that perfectly meets their needs."
Luc Rodier, Executive Vice President, Retail, said "Using the same formula that has been so successful with our TOTEM stores in Alberta, and drawing on the best practices of RONA's proximity stores across the country, the new proximity store, with an average area of 35,000 square feet, will give consumers a completely new shopping experience. This model, which makes a positive contribution to earnings in the very first year, has been successfully tested over the past year in Edmonton in Alberta, Repentigny in Québec and St. John's in Newfoundland and Labrador."
"In response to consumer demand, these stores emphasize service, with more experienced staff and a central service counter that forms the heart of the store and is visible as soon as you enter, along with a more user-friendly layout, a regionally based offering and an optimal choice of products in key categories," added Mr. Rodier.
New Realities, New Solutions
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 the new expectations and changes in consumer 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 these stores have been a great success. This new plan capitalizes on our ongoing research into consumer expectations and behaviours, as well as our continual experimentation with new store formats and new retail sales approaches. It combines the best of these developments in a new proximity store format. The new approach brings us closer to Canadian consumers while taking into account the new social and economic realities they are facing.
Through the New Realities, New Solutions plan, we are further refining the proximity store concept, without having to make significant investments. Although renewing the proximity store concept is central to New Realities, New Solutions, this program has been launched after an exhaustive productivity improvement review of all RONA stores across the country. The program is composed of three major areas, and cross-functional teams are already working on them:
- Introducing, in Spring 2012, a new integrated digital platform, which includes the new Web site rona.ca, to orient each different type of consumer with their renovation projects and support all of our retail activities.
- Rolling out the new proximity store concept under the RONA banner, combining the strengths of the TOTEM model with best practices in RONA's proximity stores, in 20% of the RONA corporate store network.
- Adapting the 20 TOTEM stores in Alberta to the new RONA proximity store concept by the first quarter of 2013.
- In 2012 and 2013, turning 13 big-box stores into the new concept RONA proximity stores, which will involve decreasing the sales area by 30% - 50%. This area will then be rented.
- In 2012 and 2013, redeploying the sales volume of 10 big-box stores to 15 new proximity stores that have an average area of 35,000 square feet and to 10 new satellite stores of 5,000 to 20,000 square feet based on the model successfully tested in 2011 in Georgetown, Ontario and Granby, Quebec. These stores will be closed when the redeployment of the sales volume has been completed.
- Continued development of the commercial and professional segment by optimizing recent investments, opening 9 new complementary sales outlets and seeking out potential acquisitions in this still very fragmented market.
The new concept will also be applied to all future renovation, expansion and development projects for the proximity stores in the RONA corporate, franchise and affiliate network. The plan will also be important in recruiting dealers who will be able to benefit from RONA's expertise in applying the new proximity store and satellite store concept, as well as its succession program, which leads the way in the renovation and construction industry. Since these projects involve major changes, they will be completed in fiscal 2012 and 2013. The positive financial impacts should, however, start to materialize in fourth quarter 2012.
These projects will also be augmented by accelerated regional development through the investment of more than $60 million by our RONA dealer-owners. Such initiatives add more than 200,000 square feet to the RONA network. Five new affiliate and franchise stores of 25,000 - 50,000 square feet are already under construction.
A plan that addresses RONA's three major financial priorities
Dominique Boies, Executive Vice President and Chief Financial Officer, said: "In addition to positioning RONA in the forefront of its industry, the New Realities, New Solutions plan was designed to address our three main financial priorities announced in the last quarter: to improve efficiency, optimize our capital structure and increase our return on capital. It will increase the sales dollars generated per square foot, grow the average basket per customer and decrease the ratio of selling and administrative expense for existing operations."
Mr. Boies added "the plan will provide important leverage in improving our return on capital, as it will generate an estimated annualized contribution to EBITDA of $10 million starting in the fourth quarter 2012, more than $30 million for fiscal 2013, and will achieve its full potential of more than $40 million starting in 2014. The plan also calls for limited investment of close to $70 million over two years, which will be financed by selling non core assets." These projects meet our investment criteria. They will generate an internal rate of return of close to 20% and will significantly contribute to the improvement of RONA's consolidated return on capital toward the targeted double digit objective.
Unusual Items
As mentioned above, the New Realities, New Solutions plan will have a significant positive impact on RONA in the next few years. Implementation will, however, involve restructuring costs of $181.3 million, including $71.3 million recorded at year-end of which only $9.8 million required a cash outflow almost entirely disbursed in 2011 as well $110.0 million to be posted to 2012 results as initiatives are rolled out. Furthermore, the Corporation's annual goodwill impairment test led to a year-end write-down of $117.0 million due to the adverse impact of difficult market conditions on funds generated by the Corporation's retail assets. Unusual expenses of $9.9 million were also recorded at year-end for fees and premiums related to the $283 million repurchase of its debentures maturing in 2016. Note that the debenture repurchase will result in recurring annual interest savings of close to $10 million starting in 2012.
Changes in the Corporation's Management Committee
The Corporation today announces the retirement, after 24 years of service with RONA, of Claude Bernier, Executive Vice President, Marketing and Customer Innovations. Mr. Bernier's responsibilities will be transferred to Karim Salabi, who has 21 years of experience in sales and marketing and was hired a year ago in preparation for Mr. Bernier's retirement.
RONA also announces that Normand Dumont, Executive Vice President, Merchandising, who has been with RONA for 23 years, has agreed to take on another key area for RONA by becoming vice president of the new Sustainability Department. This is an area where RONA is a recognized leader, as it has implemented a number of major sustainability policies and initiatives in recent years. Mr. Dumont's duties will be taken on by Manon Bouchard, who has been with RONA for 11 years and has 27 years of experience in retail merchandising. Prior to this appointment, she headed RONA's sourcing office in Shanghai, China.
"First, I'd like to thank Claude for his loyal service to RONA and his important contribution to the deployment of the Corporation's development strategy. It is in great measure due to Claude's efforts that we have become the Canadian leader we are today and I am very grateful to him. I wish him all the best in his future projects. I'd also like to thank Normand for his major contribution to establishing a high-calibre merchandising service in our industry and for agreeing to head our sustainability initiative in order to strengthen our leading position in this increasingly strategic area for RONA," said Robert Dutton.
"I congratulate Manon and Karim on their appointments. I am always proud to see RONA employees make their way up the ladder as I was given the opportunity to do in the past. Finally, I would like to point out that with the arrival of Manon and Karim, the recent appointment of Luc Rodier as Executive Vice President, Retail and the naming of Dominique Boies as Executive Vice President and Chief Financial Officer, the Management Committee has been largely renewed over the past year. We have a dynamic team that has a new perspective on our operations and will ensure implementation of the plan presented today, which is designed to redefine the customer experience in our industry and grow our Corporation's return on capital."
CONSOLIDATED RESULTS FOR FOURTH QUARTER 2011
The results analyzed in this section are for the 13 weeks ended December 25, 2011 and, when compared, are compared to results for the 13 weeks ended December 26, 2010, unless otherwise indicated.
Consolidated revenues for fourth quarter 2011 amounted to $1,169.2 million, up $30.0 million or 2.6%, over the same quarter in 2010. The increase is due to acquisitions in the retail, commercial & professional and distribution segments, and to the opening of new stores in the retail segment and new outlets in the commercial & professional segment. It also stems from the recruitment of new RONA dealers and member buyers in the distribution segment.
These items were partly offset by a 2.3% decrease in same-store sales for our corporate and franchise stores. The drop in same-store sales is due to consumer caution in their discretionary spending and the decline in residential housing starts. Ontario, Quebec and the Atlantic provinces were less affected by the decline in sales, and Western Canada was more affected, particularly in British Columbia, where the referendum on the sale-tax harmonization delayed major capital projects. The decrease in same-store sales was, however, less pronounced than expected following strong demand late in the quarter, compared to last year, for construction materials, paint and installation services. Private and controlled brands continued to perform well during the quarter, with a penetration rate of 27% at the end of the quarter, compared to 24% a year ago. The Commercial and Professional Market division also continued to perform well, with revenues, including acquisitions, up almost 30%.
In the fourth quarter, the unusual items mentioned above in the "Unusual Items" section had an impact on EBITDA, with EBITDA dropping from $64.8 million in 2010 to $37.2 million in 2011. Excluding unusual items, EBITDA amounted to $65.9 million, up $1.1 million, or 1.6%, compared to $64.8 million in fourth quarter 2010. EBITDA margin excluding unusual items fell slightly, from 5.69% in fourth quarter 2010 to 5.63% in 2011, in line with the Corporation's objectives announced for the second half of fiscal 2011 as a whole. Growth in EBITDA stems mainly from acquisitions and the opening of new corporate stores which quickly reached the anticipated level of profitability, especially the proximity stores. Excluding acquisitions and new stores, net of closures and divestitures, the $12.5 million, or 4.7% reduction in organic selling and administrative expense was adversely offset by the impact on EBITDA of lower same-store sales.
As mentioned above, unusual items affected RONA's operating results and net income, with net income attributable to owners of RONA inc. going from $20.0 million in fourth quarter 2010 to a net loss of $151.2 million in 2011. Excluding unusual items, net income attributable to owners of RONA inc. amounted to $22.1 million, compared to $20.0 million in the fourth quarter 2010. The increase is due to higher operating profit. Net earnings excluding unusual items attributable to participating shares after the dividend on preferred shares amounted to $19.7 million, compared to $20.0 million, or $0.15 per share diluted, compared to $0.15 per share diluted in fourth quarter 2010. This result is in line with the objectives announced by the Corporation for the second half of fiscal 2011.
CONSOLIDATED RESULTS FOR FISCAL 2011
The results analyzed in this section are for the fiscal year ended December 25, 2011 and, when compared, are compared to results for the fiscal year ended December 26, 2010, unless otherwise indicated.
Consolidated revenues stood at $4,804.6 million, down $15.0 million, or 0.3% from 2010. This slight decrease is due to a decline of 7.3%, or close to $300 million in same-store sales, which was almost entirely offset by acquisitions, the opening of new corporate stores and the good performance of the Commercial and Professional Market division. In addition, existing dealer expansion projects and higher loyalty rates resulted in higher sales in the distribution segment, despite a decrease due to RONA's acquisition of some dealers and lower same-store sales for affiliate dealers, which however, was less pronounced than for the corporate stores.
The decrease in same-store sales stems from the poor weather conditions in the first half of the year, particularly in March, April and May all across the country, as well as the decline in housing starts, the absence of the home renovation tax credit in the first part of the year compared to last year, and consumers' careful approach to their renovation projects. Market conditions gradually improved starting in July, but the downward pressure on same-store sales continued. Ontario and the Atlantic provinces were least affected by the drop in sales, while Western Canada, and particularly British Columbia, were most affected; in British Columbia the referendum on the sales tax harmonization delayed major capital projects. Same-store sales were very good in December, and even grew. However, downward pressure returned in January 2012 given the low confidence levels of Canadian consumers, which was affected by the significant economic uncertainty which continued into the beginning of the year.
The unusual items mentioned above in "Unusual Items" also affected EBITDA for the fiscal year, with EBITDA dropping from $336.3 million in 2010 to $240.6 million in 2011. Excluding unusual items, EBITDA amounted to $269.2 million, compared to $336.3 million in 2010, down $67.1 million, or 20.0%. EBITDA margin excluding unusual items fell 138 basis points, to 5.60%, compared to 6.98% in 2010, translating into a decrease of 142 basis points for the retail and commercial segment and a decrease of 123 basis points for the distribution segment. In addition to the adverse impact of the decline in the gross profit in the first half and same-store sales throughout the year, the EBITDA margin was affected by acquisitions, as their EBITDA margins were lower than that of RONA's existing operations. Margins improved during the year with the implementation of the integration plan and are approaching RONA's consolidated margin. The abnormally high inventory levels supported following weak sales in the first part of the year also led to higher warehousing and transportation expenses, which had a negative impact on EBITDA and EBITDA margin.
As mentioned above, unusual items affected RONA's operating results and net income, such that net income attributable to owners of RONA inc. went from $137.4 million in 2010 to a loss of $78.4 million in 2011. Excluding unusual items, net income attributable to owners of RONA inc. amounted to $94.9 million, compared to $137.4 million in 2010. The drop is due to the decrease in operating profit. Net earnings excluding unusual items attributable to participating shares after the dividend on preferred shares stood at $86.9 million, compared to $137.4 million, or $0.66 per share diluted, compared to $1.05 per share diluted in 2010. This result is in line with the objectives announced by the Corporation for the second half of fiscal 2011.
CASH FLOWS AND FINANCIAL POSITION FOR FISCAL 2011
For fiscal 2011, cash flow from operating activities before net change in working capital, interest received and income taxes paid was $202.3 million compared to $311.0 million in 2010. The net change in working capital was $66.7 million in 2011, compared to a negative net change of $132.5 million in 2010. This improvement versus 2010 stems mainly from a $110 million decrease in comparable inventories for retail and distribution operations in 2011. After the net change in working capital, interest received and income taxes paid, operating activities generated $230.2 million in 2011, compared to $138.1 million for the same period of 2010, up $92.1 million.
The Corporation continued to exercise disciplined financial management and strictly monitored investments in property, plant and equipment. For fiscal 2011, RONA invested $109.4 million in property, plant and equipment and intangible assets, $36.9 million less than in 2010. These investments were used to expand operations in the Commercial and Professional Market division, to open new retail stores, to renovate existing retail stores, further improve information systems in order to improve operational efficiency, and for maintenance work. Note that the level of investment in tangible and intangible assets is at almost the same level as amortization and depreciation expense, which amounted to $107.1 million in 2011, excluding unusual items. Considering about $60.0 million for maintenance investments, RONA generated $170.2 million of free cash flow in 2011 compared to $78.1 million in 2010.
In the final quarter of the year, RONA implemented several measures to optimize its capital structure. The Corporation repurchased $283 million of its debentures bearing interest at 5.4% and maturing in 2016. 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 documents filed with the Toronto Stock Exchange with respect to the repurchase by writing to RONA's secretary. At year-end, 3,370,300 shares had been repurchased at an average price of $9.43 per share. These shares were cancelled. In December 2011, RONA renewed its existing credit facility for a period of five years. The facility, which matured in 2012 was renewed to 2016 and the total amount available was increased from $650 million to $950 million.
RONA's balance sheet remains strong. On December 25, 2011, the Corporation's total debt was $256.7 million and net indebtedness was $239.6 million. RONA thus has cash of $17.1 million. The ratio of total net debt to capital was 10.9%, compared to 17.0% in 2010; the ratio of equity to assets was 70.3%, compared to 65.4%. The ratio of total debt to EBITDA was 1.1 at December 25, 2011 compared to 1.4 in 2010.
DIVIDENDS ON PREFERRED SHARES
At its meeting on February 22, 2012, RONA's Board of Directors declared a quarterly dividend of $0.3227 per share on cumulative 5-year rate reset Class A preferred shares, series 6. The dividend will be paid on March 30, 2012, to holders of record on March 15, 2012.
DIVIDENDS ON COMMON SHARES
At its meeting on February 22, 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 March 26, 2012 to holders of record on March 9, 2012.
OUTLOOK FOR 2012
- Despite the recent bright spots, we expect the difficult market conditions to continue in fiscal 2012. A survey by Pollara (http://www.pollara.ca/ECLUB2012/) shows that Canadians are pessimistic about the economic outlook for Canada in 2012. It is to be expected that consumers will remain cautious.
- In the immediate future, we will benefit from the measures introduced in second quarter 2011, which will have a positive impact on efficiency and optimization of our capital structure. Note that the repurchase of debentures, in particular, will save close to $2.5 million in interest expense each quarter.
- The New Realities, New Solutions plan will have a positive impact on sales and operating efficiency. While it is harder to predict how soon it will affect sales, given consumer attitudes and caution, the impact on operating efficiency is more foreseeable, and will strengthen starting in 2012, with the major benefits recurring in 2013.
- There are also many opportunities for regional market consolidation. RONA has a unique distribution and affiliate dealer network that is very well positioned to take advantage of these opportunities. RONA dealers plan to invest more than $60 million in 2012. The offering for dealers who wish to join RONA is also very attractive given the roll-out of the new proximity store concept, excellent buying conditions, an experienced support team, an integrated and adaptable regional development strategy, and a pioneering succession program.
ADDITIONAL INFORMATION
The Management's Discussion and Analysis (MD&A), financial statements and notes for fiscal 2011 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 Report, along with other information about RONA, including its Annual Information Form, can also be found on the RONA and SEDAR websites.
TELEPHONE CONFERENCE WITH THE FINANCIAL COMMUNITY
On Thursday, February 23, 2012, at 10:00 a.m. (EST), 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/292/en/.
NON-GAAP PERFORMANCE MEASURES
In this report, as in our internal management, we use the concept of "earnings before interest, taxes, depreciation, amortization and non-controlling interest" (EBITDA). We also use 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 Corporation 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 tables show the reconciliation of these two measures to IFRS:
| Reconciliation of non-GAAP measures | |||||||||
| Quarters ended | |||||||||
(Unaudited, in thousands of dollars, except margins in %) |
December 25, 2011 | December 26 2010 | $ change from 2010 | % change from 2010 | |||||
| Revenues | 1,169,192 | 1,139,222 | 29,970 | 2.6 | % | ||||
| Cost of sales | (847,242 | ) | (810,796 | ) | (36,446 | ) | (4.5 | %) | |
| Gross profit | 321,950 | 328,426 | (6,476 | ) | (2.0 | %) | |||
| Gross margin (gross profit/revenues) | 27.54 | % | 28.83 | % | - | -129 p.b. | |||
| Adjustments for network support1 | 25,031 | 26,742 | (1,711 | ) | (6.4 | %) | |||
| Adjusted gross profit | 346,981 | 355,168 | (8,187 | ) | (2.3 | %) | |||
| Adjusted gross margin (adjusted gross profit/revenues) | 29.68 | % | 31.18 | % | - | -150 p.b. | |||
| Adjusted gross profit (excluding unusual items) | 365,646 | 355,168 | 10,478 | 3.0 | % | ||||
| Adjusted gross margin (adjusted gross profit/revenues) (excluding unusual items) | 31.27 |
% | 31.18 |
% | - |
9 p.b. |
|||
| Adjusted selling, general and administrative expenses | (309,792 | ) | (290,327 | ) | (19,465 | ) | (6.7 | %) | |
| Adjusted selling, general and administrative expenses (excluding unusual items) | (299,795 |
) | (290,327 |
) | (9,468 |
) | (3.3 |
%) | |
| Rent | 38,389 | 37,858 | 531 | 1.4 | % | ||||
| EBITDA before rent | 75,578 | 102,699 | (27,121 | ) | (26.4 | %) | |||
| EBITDA before rent (excluding unusual items) | 104,240 | 102,699 | 1,541 | 1.5 | % | ||||
| EBITDA margin before rent (EBITDA before rent/revenues) | 6.46 | % | 9.01 | % | - | -255 p.b. | |||
| EBITDA margin before rent (EBITDA before rent/revenues, excluding unusual items) | 8.92 |
% | 9.01 |
% | - |
-9 p.b. |
|||
| EBITDA | 37,189 | 64,841 | (27,652 | ) | (42.6 | %) | |||
| EBITDA (excluding unusual items) | 65,851 | 64,841 | 1,010 | 1.6 | % | ||||
| EBITDA margin (EBITDA/revenues) | 3.18 | % | 5.69 | % | - | -251 p.b. | |||
| EBITDA margin (EBITDA/revenues, excluding unusual items) | 5.63 |
% | 5.69 |
% | - |
-6 p.b. |
|||
| Finance income | (1,065 | ) | (1,143 | ) | 78 | 6.8 | % | ||
| Goodwill impairment | (117,000 | ) | - | (117,000 | ) | - | |||
| Amortization, depreciation and impairment of non-financial assets | (70,430 |
) | (28,236 |
) | (42,194 |
) | (149.4 |
%) | |
| Amortization, depreciation and impairment of non-financial assets (excluding unusual items) | (27,749 |
) | (28,236 |
) | 487 |
1.7 |
% | ||
| Operating profit | (151,306 | ) | 35,462 | (186,768 | ) | (526.7 | %) | ||
| Operating profit (excluding unusual items) | 37,037 | 35,462 | 1,575 | 4.4 | % | ||||
| 1 Corresponds to other costs incurred in bringing the inventory to its present location and condition. |
Reconciliation of non-GAAP measures |
|||||||||
| Fiscal years ended | |||||||||
(Unaudited, in thousands of dollars, except for margins in %) |
December 25, 2011 | December 26, 2010 | $ change from 2010 | % change from 2010 | |||||
| Revenues | 4,804,584 | 4,819,589 | (15,005 | ) | (0.3 | %) | |||
| Cost of sales | (3,455,301 | ) | (3,447,768 | ) | (7,533 | ) | (0.2 | %) | |
| Gross profit | 1,349,283 | 1,371,821 | (22,538 | ) | (1.6 | %) | |||
| Gross margin (gross profit/revenues) | 28.08 | % | 28.46 | % | - | -38 p.b. | |||
| Adjustments for network support1 | 102,668 | 109,050 | (6,382 | ) | (5.9 | %) | |||
| Adjusted gross profit | 1,451,951 | 1,480,871 | (28,920 | ) | (2.0 | %) | |||
| Adjusted gross margin (adjusted gross profit/revenues) | 30.22 | % | 30.73 | % | - | -51 p.b. | |||
| Adjusted gross profit (excluding unusual items) | 1,470,616 | 1,480,871 | (10,255 | ) | (0.7 | %) | |||
| Adjusted gross margin (adjusted gross profit/revenues) (excluding unusual items) | 30.61 |
% | 30.73 |
% | - |
-12 p.b. |
|||
| Adjusted selling, general and administrative expenses | (1,211,396 | ) | (1,144,553 | ) | (66,843 | ) | (5.8 | %) | |
| Adjusted selling, general and administrative expenses (excluding unusual items) | (1,201,399 |
) | (1,144,553 |
) | (56,846 |
) | (5.0 |
%) | |
| Rent | 159,741 | 147,006 | 12,735 | 8.7 | % | ||||
| EBITDA before rent | 400,296 | 483,324 | (83,028 | ) | (17.2 | %) | |||
| EBITDA before rent (excluding unusual items) | 428,958 | 483,324 | (54,366 | ) | (11.2 | %) | |||
| EBITDA margin before rent (EBITDA before rent/revenues) | 8.33 | % | 10.03 | % | - | -170 p.b. | |||
| EBITDA margin before rent (EBITDA before rent/revenues, excluding unusual items) | 8.93 |
% | 10.03 |
% | - |
-110 p.b. |
|||
| EBITDA | 240,555 | 336,318 | (95,763 | ) | (28.5 | %) | |||
| EBITDA (excluding unusual items) | 269,217 | 336,318 | (67,101 | ) | (20.0 | %) | |||
| EBITDA margin (EBITDA/revenues) | 5.01 | % | 6.98 | % | - | -197 p.b. | |||
| EBITDA margin (EBITDA/revenues, excluding unusual items) | 5.60 |
% | 6.98 |
% | - |
-138 p.b. |
|||
| Finance income | (5,262 | ) | (4,394 | ) | (868 | ) | (19.8 | %) | |
| Goodwill impairment | (117,000 | ) | - | (117,000 | ) | - | |||
| Amortization, depreciation and impairment of non-financial assets | (149,736 |
) | (108,718 |
) | (41,018 |
) | (37.7 |
%) | |
| Amortization, depreciation and impairment of non-financial assets (excluding unusual items) | (107,055 |
) | (108,718 |
) | 1,663 |
1.5 |
% | ||
| Operating profit | (31,443 | ) | 223,206 | (254,649 | ) | (114.1 | %) | ||
| Operating profit (excluding unusual items) | 156,900 | 223,206 | (66,306 | ) | (29.7 | %) | |||
| 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 February 23, 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 17 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 across the country.
In total, RONA supplies nearly 1,500 sales outlets, of which some 860 are under one of its banners, as well as more than 600 clients, independent dealers, in its distribution network. With more than 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.
| RONA inc. |
| Consolidated Income Statements and other Comprehensive Income |
| For the thirtheen and fifty-two week periods ended December 25, 2011 and December 26, 2010 |
| (unaudited, in thousands of Canadian dollars, except per share amounts) |
| Consolidated Income Statements |
| Fourth Quarter | Cumulative | |||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||
| Revenues | $ 1,169,192 | $ 1,139,222 | $ 4,804,584 | $ 4,819,589 | ||||||
| Operating profit before goodwill impairment, restructuring costs impairment of non-financial assets and other charges | 37,037 |
35,461 |
156,900 |
223,205 |
||||||
| Goodwill impairment | (117,000 | ) | - | (117,000 | ) | - | ||||
| Restructuring costs impairment of non-financial assets and other charges | (71,343 |
) | - |
(71,343 | ) | - | ||||
| Operating profit | (151,306 | ) | 35,461 | (31,443 | ) | 223,205 | ||||
| Finance income | 1,065 | 1,143 | 5,262 | 4,394 | ||||||
| Finance costs | (15,172 | ) | (6,217 | ) | (34,729 | ) | (24,061 | ) | ||
| (14,107 | ) | (5,074 | ) | (29,467 | ) | (19,667 | ) | |||
| Income (loss) before income tax expense | (165,413 | ) | 30,387 | (60,910 | ) | 203,538 | ||||
| Income tax expense | 15,397 | (9,031 | ) | (13,863 | ) | (60,717 | ) | |||
| Net income (loss) | $ (150,016 | ) | $ 21,356 | $ (74,773 | ) | $ 142,821 | ||||
| Net income (loss) attributable to: | ||||||||||
| Owners of RONA inc. | $ (151,230 | ) | $ 20,031 | $ (78,382 | ) | $ 137,356 | ||||
| Non-controlling interests | 1,214 | 1,325 | 3,609 | 5,465 | ||||||
| $ (150,016 | ) | $ 21,356 | $ (74,773 | ) | $ 142,821 | |||||
| Net income (loss) per share attributable to owners of RONA inc. | ||||||||||
| Basic | $ (1.19 | ) | $ 0.15 | $ (0.66 | ) | $ 1.06 | ||||
| Diluted | $ (1.19 | ) | $ 0.15 | $ (0.66 | ) | $ 1.05 | ||||
| Consolidated Statements of Other Comprehensive Income | ||||||||||
| Net income (loss) | $ (150,016 | ) | $ 21,356 | $ (74,773 | ) | $ 142,821 | ||||
| Other comprehensive income (loss) net of taxes : | ||||||||||
| Cash flow hedges | ||||||||||
| Loss for the period | (2,575 | ) | (557 | ) | (920 | ) | (1,490 | ) | ||
| Reclassification to income or loss | (759 | ) | 99 | 1,632 | 273 | |||||
| Actuarial losses | (2,775 | ) | (2,352 | ) | (2,775 | ) | (2,352 | ) | ||
| Total other comprehensive income (loss) | (6,109 | ) | (2,810 | ) | (2,063 | ) | (3,569 | ) | ||
| Total comprehensive income (loss) | $ (156,125 | ) | $ 18,546 | $ (76,836 | ) | $ 139,252 | ||||
| Total comprehensive income (loss) attributable to: | ||||||||||
| Owners of RONA inc. | $ (157,339 | ) | $ 17,221 | $ (80,445 | ) | $ 133,787 | ||||
| Non-controlling interests | 1,214 | 1,325 | 3,609 | 5,465 | ||||||
| $ (156,125 | ) | $ 18,546 | $ (76,836 | ) | $ 139,252 | |||||
| RONA inc. |
| Consolidated Statements of Cash Flows |
| For the thirteen and fifty-two week periods ended December 25, 2011 and December 26, 2010 |
| (unaudited, in thousands of Canadian dollars) |
| Fourth Quarter | Cumulative | ||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||
| Operating activities | |||||||||
| Income (loss) before income tax expense | $ (165,413 | ) | $ 30,387 | $ (60,910 | ) | $ 203,538 | |||
| Adjustments: | |||||||||
| Depreciation, amortization and impairment of non-financial assets | 70,430 | 28,236 | 149,736 | 108,718 | |||||
| Change in fair value of derivative financial instruments | 43 | 172 | (159 | ) | (1,078 | ) | |||
| Net losses (gains) on disposal of assets | 139 | (1,681 | ) | (1,123 | ) | (2,921 | ) | ||
| Goodwill impairment | 117,000 | - | 117,000 | - | |||||
| Stock-based compensation expense (recovery) | 537 | 1,681 | (2,684 | ) | 4,588 | ||||
| Difference between amounts paid for post-employment benefits and current period expenses | (1,236 | ) | (2,289 | ) | (2,855 | ) | (3,921 | ) | |
| Other | 1,949 | 762 | 3,308 | 2,078 | |||||
| 23,449 | 57,268 | 202,313 | 311,002 | ||||||
| Net change in working capital | 91,381 | 30,596 | 66,682 | (132,479 | ) | ||||
| 114,830 | 87,864 | 268,995 | 178,523 | ||||||
| Interest received | 817 | 834 | 3,898 | 2,819 | |||||
| Income taxes paid | (11,834 | ) | (10,448 | ) | (42,648 | ) | (43,270 | ) | |
| Cash flow from operating activities | 103,813 | 78,250 | 230,245 | 138,072 | |||||
| Investing activities | |||||||||
| Business acquisitions | (6,902 | ) | (68,124 | ) | (47,707 | ) | (80,275 | ) | |
| Acquisition of property, plant and equipment | (19,033 | ) | (37,867 | ) | (70,198 | ) | (104,924 | ) | |
| Acquisition of intangible assets | (15,536 | ) | (19,640 | ) | (39,225 | ) | (41,359 | ) | |
| Acquisition of other financial assets | 355 | 554 | (6,049 | ) | (2,527 | ) | |||
| Proceeds on disposal of property, plant and equipment | 405 | 3,249 | 10,216 | 4,950 | |||||
| Proceeds on disposal of other financial assets | 2,021 | 3,192 | 4,765 | 10,031 | |||||
| Interest received | 283 | 309 | 1,365 | 1,575 | |||||
| Cash flow from investing activities | (38,407 | ) | (118,327 | ) | (146,833 | ) | (212,529 | ) | |
| Financing activities | |||||||||
| Bank loans | 3,486 | (13,979 | ) | (326 | ) | (7,172 | ) | ||
| Other long-term debt | 91,240 | 1,249 | 92,112 | 1,899 | |||||
| Financing costs | (2,541 | ) | - | (2,541 | ) | - | |||
| Repayment of other long-term debt | (6,714 | ) | (20,285 | ) | (33,886 | ) | (30,433 | ) | |
| Repurchase of debentures | (283,171 | ) | - | (283,171 | ) | - | |||
| Proceeds from issue of common shares | 983 | 1,151 | 4,406 | 3,713 | |||||
| Proceeds from issue of preferred shares | - | - | 172,500 | - | |||||
| Fees related to issue of preferred shares | (5 | ) | - | (5,484 | ) | - | |||
| Repurchase of common shares | (31,768 | ) | - | (31,768 | ) | (31,609 | ) | ||
| Cash dividends by a subsidiary to non-controlling interests | (3,920 | ) | (2,450 | ) | (3,920 | ) | (2,450 | ) | |
| Dividends on common shares | (9,132 | ) | - | (18,253 | ) | - | |||
| Dividends on preferred shares | (2,282 | ) | - | (5,458 | ) | - | |||
| Interest paid | (741 | ) | (446 | ) | (26,051 | ) | (23,171 | ) | |
| Cash flow from financing activities | (244,565 | ) | (34,760 | ) | (141,840 | ) | (89 223 | ) | |
| Net decrease in cash | (179,159 | ) | (74,837 | ) | (58,428 | ) | (163,680 | ) | |
| Cash, beginning of period | 196,308 | 150,414 | 75,577 | 239,257 | |||||
| Cash, end of period | $ 17,149 | $ 75,577 | $ 17,149 | $ 75,577 | |||||
| RONA inc. |
| Consolidated Statements of Financial Position |
| As at December 25, 2011, December 26, 2010 and December 28, 2009 |
| (unaudited, in thousands of Canadian dollars) |
| 2011 | 2010 | 2009 | ||||
| December 25 | December 26 | December 28 | ||||
| Assets | ||||||
| Current | ||||||
| Cash | $ 17,149 | $ 75,577 | $ 239,257 | |||
| Trade and other receivables | 370,094 | 299,889 | 248,201 | |||
| Other financial assets | 1,468 | 2,245 | 2,644 | |||
| Current tax assets | 7,616 | - | 2,436 | |||
| Inventory | 840,287 | 905,467 | 725,810 | |||
| Prepaid expenses | 20,836 | 17,955 | 18,114 | |||
| Current assets | 1,257,450 | 1,301,133 | 1,236,462 | |||
| Non-current | ||||||
| Other financial assets | 13,617 | 9,644 | 11,118 | |||
| Property, plant and equipment | 874,246 | 885,044 | 827,883 | |||
| Non-current assets held for sale | 10,455 | 16,474 | 11,080 | |||
| Goodwill | 426,968 | 529,094 | 455,572 | |||
| Intangible assets | 126,968 | 128,223 | 106,157 | |||
| Other non-current assets | 5,435 | 3,245 | 4,406 | |||
| Deferred tax assets | 65,239 | 48,763 | 51,830 | |||
| Total assets | $ 2,780,378 | $ 2,921,620 | $ 2,704,508 | |||
| Liabilities | ||||||
| Current | ||||||
| Bank loans | $ 4,377 | $ 1,943 | $ 5,211 | |||
| Trade and other payables | 487,864 | 454,166 | 409,764 | |||
| Dividends payable | 2,527 | 9,119 | - | |||
| Current tax liabilities | - | 3,379 | - | |||
| Derivative financial instruments | 691 | 1,653 | 776 | |||
| Provisions | 6,947 | 4,625 | 7,002 | |||
| Instalments on long-term debt | 20,257 | 21,151 | 9,996 | |||
| Current liabilities | 522,663 | 496,036 | 432,749 | |||
| Non-current | ||||||
| Long-term debt | 232,073 | 444,333 | 430,524 | |||
| Other non-current liabilities | 33,653 | 30,601 | 27,859 | |||
| Provisions | 3,606 | 4,539 | 10,762 | |||
| Deferred tax liabilities | 32,759 | 34,314 | 27,724 | |||
| Total liabilities | 824,754 | 1,009,823 | 929,618 | |||
| Equity | ||||||
| Share capital | 793,416 | 632,614 | 603,756 | |||
| Retained earnings | 1,115,801 | 1,233,454 | 1,125,235 | |||
| Contributed surplus | 11,386 | 11,137 | 13,138 | |||
| Accumulated other comprehensive income | (505 | ) | (1,217 | ) | - | |
| Total equity attributable to owners of RONA inc. | 1,920,098 | 1,875,988 | 1,742,129 | |||
| Non-controlling interests | 35,526 | 35,809 | 32,761 | |||
| Total equity | 1,955,624 | 1,911,797 | 1,774,890 | |||
| Total liabilities and equity | $ 2,780,378 | $ 2,921,620 | $ 2,704,508 | |||
Contact Information:
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