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RONA Announces its 2012 Fourth Quarter and Year-End Results


RONA Announces its 2012 Fourth Quarter and Year-End Results

- Disciplined management of capital and strong balance sheet maintained

- Sales initiatives and $10.5M run rate benefits of 2012 New Realities, New Solutions partially mitigate the negative impact of change in product and customer mix and increased competition

BOUCHERVILLE, QUEBEC -- (Marketwire) -- 02/21/13 -- 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 14-week and 53-week periods ending December 30, 2012. All figures in this release are in Canadian dollars and presented according to IFRS accounting standards.

Highlights


 
--  Sales of $4.9 billion in 2012, a 1.7% increase over 2011. Growth is
    mainly attributable to the recording of a 53rd week, increased sales in
    the Commercial and Professional Market division and the opening of new
    proximity and satellite stores. 
--  Comparable sales across the RONA network were up 0.7% and stable versus
    last year when excluding the 53rd week. For the retail and commercial
    segment alone, same-store sales were down 0.3% (down 1.1% excluding the
    53rd week), while comparable distribution sales to all RONA dealers grew
    6.4% (up 6.2% excluding the 53rd week). 
--  New Realities, New Solutions plan generated $10.5 million of annual
    recurring benefits surpassing the announced target of $10 million.
    Related one-time costs of $44.3 million. Capital expenditures of $10
    million financed through $16.5 million in disposal of assets.  
--  Net income before unusual and non-recurring items attributable to
    participating shares after the dividend on preferred shares down from
    $86.9 million, or $0.66 per share (diluted) in 2011 to $70.0 million, or
    $0.57 per share (diluted) in 2012. Decrease attributable to an important
    change in the mix of product sold and to the inflation in commodities in
    a highly competitive environment. 
--  Disciplined management of capital with investments in property, plant
    and equipment and intangibles representing 0.9 times depreciation level
    and reduction of 3.6% in total capital employed. 
--  Strong balance sheet with net debt at $307.0 mi
llion, or 1.3 times
    EBITDA and net debt to capital ratio of 14.0%. 

"In 2012, our management team and employees focused on the execution of our New Realities, New Solutions plan and initiatives to improve our performance in line with our three financial priorities. While financial results fell short of our expectations, we maintained a disciplined management of our capital structure and generated free cash flow. Building on the assessment undertaken when we launched our plan at the beginning of the year, which was addressing only 20% of our network, we undertook a complete re-assessment of all parts of our business in order to identify additional value creation opportunities to rapidly turnaround our financial performance," said Dominique Boies, Acting Chief Executive Officer and Executive Vice President and Chief Financial Officer of RONA.

"The results of this complete re-assessment were presented in a separate press release issued today in which we unveiled our 2013-2015 transformational plan. The overall objective of this plan is to become the best distributor for dealers across the country, optimize our retail and contractor proximity models across Canada and strengthen our leadership position in Quebec. In each of these three areas, RONA holds a leading position and the transformational plan seeks to further reinforce this. While we expect significant near-term benefits, it will take a certain time to implement the necessary actions to address a number of strategic and financial priorities. The management team, supported by the Board, is working aggressively to build on the Corporation's solid financial position and transform many aspects of our operations that have held back our overall performance" added Mr. Boies.

RONA's fourth quarter and year-end results include unusual and non-recurring items which had a one-time impact on the Corporation's financial performance. As announced at the beginning of the fiscal year, the unusual items are related to the implementation of our plan. Most of the non-recurring costs were, for their part, incurred following the unsolicited, non-binding expression of interest from Lowe's, severance payments stemming from an administrative services reorganization, the temporary increase in advertising expense for the 2012 Summer Olympic campaign and the impairment of long-term assets. These unusual and non-recurring items represented $24.5 million after-tax in the fourth quarter and $62.0 million after-tax for the full year 2012. In 2011, unusual items totalling $173.3 million after-tax in the fourth quarter and full year were recorded for restructuring costs relating to the New Realities, New Solutions plan, fees and premium related to the $283 million repurchase of debentures maturing in 2016 and goodwill impairment. For ease of comparison and in order to highlight the operational performance of the Corporation, the following presentation of annual and quarterly results excludes these elements. Reconciliation with GAAP measures is provided at pages 6 and 7 of this document.

For fiscal year 2012, RONA posted sales of $4.9 billion, a 1.7% increase over 2011. This growth is mainly attributable to the recording of a 53rd week, growth in the Commercial and Professional Market division and the opening of new proximity and satellite stores. Comparable sales across the RONA network were up 0.7% and at the same level as last year when excluding the 53rd week. For the retail and commercial segment alone, same-store sales were down 0.3%, while same-store distribution sales to all RONA dealers grew 6.4%. Sales of lumber and building materials in corporate stores and to RONA dealers were particularly strong this year. EBITDA excluding unusual and non-recurring items went from $269.2 million in 2011 to $229.5 million in 2012. EBITDA margin decreased by 90 basis points, from 5.60% to 4.70%. Change in product mix impacted our margin. In fact, lumber and building products generated a gross margin of about 30% less than the margin generated on hardware products and, the growth in sales of these products and the increase in sales to contractors negatively impacted the overall profitability of RONA over the year. In addition, EBITDA and EBITDA margin were affected by heightened competition. Although the decrease in EBITDA was partially offset by the decrease in financial expenses and amortization and depreciation expense, net income before unusual and non-recurring items attributable to participating shares after the dividend on preferred shares was down from $86.9 million, or $0.66 per share (diluted) in 2011 to $70.0 million, or $0.57 per share (diluted).

In the fourth quarter of 2012, RONA posted sales of $1.2 billion, a 2.2% increase over 2011. This growth is mainly attributable to the recording of an extra week, double digit growth in sales of the Commercial and Professional Market division and the opening of new proximity and satellite stores. Comparable sales across the RONA network were up 2.9% and up 0.2% when excluding the 14th week. For the retail and commercial segment alone, same-store sales were up 2.4% (down 0.7% excluding the extra week), while comparable distribution sales to all RONA dealers grew 5.9% (up 5.2% excluding the extra week ). As explained for full year results, sales of lumber and building materials in corporate stores and to RONA dealers were particularly strong this year. This growth was however offset by cost inflation and more intense competition. As a result, EBITDA excluding unusual and non-recurring items went from $65.9 million in 2011 to $44.1 million in 2012. EBITDA margin decreased by 194 basis points, from 5.63% to 3.69%. Although the decrease in EBITDA was partially offset by lower financial expenses and amortization and depreciation expense, net income before unusual and non-recurring items attributable to participating shares after the dividend on preferred shares was down from $19.7 million, or $0.15 per share (diluted) in 2011 to $6.6 million, or $0.05 per share (diluted).

For fiscal 2012, cash flow from operating activities before net change in working capital, interest received and income taxes paid was $159.7 million compared to $202.3 million in 2011. The net change in working capital was negative and amounted to $14.9 million in 2012, compared to a net change of $66.7 million in 2011. This significant variation is due to higher inventories of certain products in order to take advantage of particularly attractive purchase conditions and the abnormally low level of comparable inventories in 2011. After the net change in working capital, interest received and income taxes paid, operating activities thus generated $125.5 million in 2012, compared to $230.2 million for the same period of 2011.

The Corporation continued to exercise disciplined financial management and strictly controlled its investments in property, plant and equipment. For fiscal 2012, RONA invested $86.4 million in property, plant and equipment and intangible assets, which was $23.0 million, or 21.1% less than in 2011. Investments were concentrated in continuous improvement of the Corporation's information systems to increase operational efficiency, and in maintenance. The level of investment in property, plant and equipment and intangible assets -- excluding investments related to the New Realities, New Solutions plan, which will be financed through the sale of surplus assets -- remains similar to amortization and depreciation expense, which amounted to $96.4 million in 2012.

Since 2011, RONA has taken a number of steps to optimize its capital structure. Also, in November 2011, the Corporation set up a program to repurchase, in the normal course of its activities between November 11, 2011 and November 10, 2012, up to 11,016,854 common shares, representing 10% of its 110,168,541 public float or 8.4% of its 130,520,489 common shares issued and outstanding on October 31, 2011. Since the repurchase program was instituted in November 2011, the Corporation has bought back 10.4 million shares at an average price of $9.47 per share for a total of $98.5 million at November 10, 2012. These shares were cancelled. RONA did not renew its normal course issuer bid following the expiration of the previous program on November 10, 2012.

Despite a slight increase in leverage, RONA's balance sheet remains strong. As at December 30, 2012, the Corporation's total debt was $328.0 million compared to $256.7 million in 2011. The Corporation's net debt amounted to $307.0 million, compared to $239.6 million at December 25, 2011. The ratio of total net debt to capital was 14.0%, compared to 10.9% in 2011. The ratio of total debt to EBITDA before unusual items remained stable at 1.6.

Achievements with regards to financial priorities

"Our actions are always dictated by our three financial priorities, added Dominique Boies. This disciplined approach is focused on achieving a medium term return on capital greater than 10%. We have made steady progress in this area during the four consecutive quarters ending on June 24, 2012. This upward trend was interrupted in the last two quarters, as a more competitive environment and a change in our sales mix in favour of lower-margin products affected our operating income. However, the continuation of our capital structure optimization initiatives, namely disciplined investment management, allowed us to mitigate the impact of the decrease on our return on capital and protect our strong balance sheet."

The following table shows quarterly achievements since the Corporation's three financial priorities were adopted in the third quarter of 2011.


 
----------------------------------------------------------------------------
FINANCIAL                             ACHIEVEMENTS VS PRIORITIES            
 PRIORITIES                  (excluding unusual and non-recurring items)    
----------------------------------------------------------------------------
                 Q3-  Q4-  Q1-  Q2-                  Q4-2012   Q4-2012      
                2011 2011 2012 2012        Q3-2012(14 weeks)(13 weeks)      
               -------------------------------------------------------------
1. IMPROVE                                                                  
 EFFICIENCY                                                                 
 Same-store                                                                 
  sales                                                                     
  trending                                                                  
  upward         yes  yes  yes  yes     -1%     no     +2.9%     +0.2%   yes
 Increase in                                                                
  adjusted                                                                  
  gross margin                                                              
  in dollars     yes  yes  yes  yes -$20.3M     no   -$10.0M   -$17.8M    no
 Decrease in                                                                
  comparable                                                                
  SG&A           yes  yes  yes  yes  +$2.2M     no   +$16.4M    +$4.1M    no
 Increase in                           -187                                 
  EBITDA margin  yes  yes  yes  yes    b.p.     no -194 b.p. -157 b.p.    no
                                                                            
2. OPTIMIZE                                                                 
 CAPITAL                                                                    
 STRUCTURE                                                                  
 Sale of assets  yes  yes  yes  yes   $0.0M     no     $5.6M     $5.6M   yes
 CAPEX /                                                                    
  Amortization                                                              
  and                                                                       
  depreciation   yes  yes  yes  yes    0.8X    yes      0.9X      0.9X   yes
 Inventory                          3.54 vs          3.54 vs   3.54 vs      
  turnover       yes  yes  yes  yes    3.39    yes      3.42      3.42   yes
 Share                                                                      
  repurchase     yes  yes  yes  yes  n/a(i) n/a(i)    n/a(i)    n/a(i)n/a(i)
                                                                            
3. INCREASE                                                                 
 RETURN ON                                                                  
 CAPITAL                                                                    
 After-tax EBIT  yes  yes  yes  yes -$15.9M     no  - $13.9M  - $10.6M    no
 Disciplined                                                                
  capital                                                                   
  management                                                                
  (1)            yes  yes  yes  yes -$24.1M    yes  - $43.1M  - $43.1M   yes
 Return on                          4.8% vs          4.2% vs   4.4% vs      
  capital (2)    yes  yes  yes  yes    5.4%     no      4.8%      4.8%    no
----------------------------------------------------------------------------
(1)   Capital equals net working capital plus property, plant and equipment 
      and intangible assets plus non-current assets held for sale plus      
      goodwill plus current projects plus other financial and non-current   
      assets plus deferred income tax assets minus other non-current        
      liabilities minus deferred tax liabilities.                         
  
(2)   Average return on capital equals after-tax EBIT, excluding unusual and
      non-recurring items/average capital.                                  
(i)   The Corporation was prohibited from trading for most of these         
      quarters.                                                             

Achievements under the New Realities, New Solutions plan

Announced in February 2012, the theme of RONA's 2012 business plan was New Realities, New Solutions. The plan addressed the need to adapt the offering in our industry to new expectations and changes in the behaviour of many consumers. It was also aimed at improving the performance of our bottom performing stores. The new store formats are generating promising results in line with the favourable trend observed in recent quarters for smaller stores; the performance of the new stores is already better than that of the big-box stores they replaced.

Early in the fourth quarter, we postponed the roll-out of the plan until we finalized the review undertaken under the Corporation's three strategic priorities that were announced in early December. Accordingly, we deliberately postponed the closing of five big-box stores. With the exception of the transformation of TOTEM stores into the new RONA proximity model, which is almost completed, all other initiatives under the New Realities, New Solutions plan have been re-evaluated and incorporated into RONA's new transformational plan announced earlier today.

New Realities, New Solutions Plan

Achievements - Fiscal year 2012

1. Set up new integrated digital platform


 
--  Launch of rona.ca for consumers and businesses. 
--  Strong growth in traffic on digital platforms: rona.ca, online flyer,
    coupons.rona.ca, ronamag, RONA's Facebook page, RONA's YouTube channel,
    etc. 
--  Launch of new RONA mobile app in early August, with over 100,000
    downloads to date. 

2. Redeployment of sales volume to proximity and satellite stores in close to 20% of the corporate-store network


 
--  Closure of five of the ten big-box stores slated for closure in 2012:
    the stores in Brampton, Mississauga and Whitby, in Ontario, and Calgary
    North and Edmonton West in Alberta. The process of transferring
    customers and sales volume to other stores in the network went as
    planned. 
--  Opening of first new-concept proximity store in Edmonton, Alberta in
    early August. This store is generating an average basket that is 20%
    higher than that of the big-box store it replaces. Transformation of
    TOTEM store network into RONA's new proximity concept. 

3. Further development of the commercial and professional segment


 
--  Optimized recent investments: acquisitions of Don Park, MPH and
    Decoration 25 (20 outlets in total), addition of five outlets, 175,000-
    square-foot expansion of the Concord distribution centre in Ontario, and
    23,000-square-foot expansion of the Montreal distribution centre, in
    Quebec. 
--  Changed the management and operating structure and implemented an
    efficiency improvement plan. 

4. Ongoing development of the RONA dealer-owner network


 
--  Recruitment of two important dealers in Ontario: Kemptville Building
    Center in November and Millwork in May and expansion projects of more
    than $40 million in 2012. 
--  New dealer support team that combines the best aspects of RONA and
    TruServ Canada. 

5. Anticipated annual recurring benefit of $10 million in 2012, $30 million in 2013 and $40 million in 2014


 
--  Annual recurring benefit of $10.5 million achieved in 2012 relating to
    stores closed and partial transformation of TOTEM store network into
    RONA's new proximity store concept. 
--  Deliberate postponement of the closure of five big-box stores, to ensure
    closures are aligned with the opening of new proximity and satellite
    stores delays expected benefits for 2013. 
--  2013 and 2014 benefits will depend on decisions resulting from RONA's
    transformational plan unveiled today. We will not report on these
    targets anymore, as these initiatives are now included in RONA's
    transformational plan. 

6. Planned investment of $70 million in property, plant and equipment, financed from the sale of non-strategic assets over 2012 and 2013


 
--  Investments of $10 million in property, plant and equipment in 2012. 
--  Sale of $16.5 million in non-strategic assets in 2012. 
--  Additional investments will depend on decisions to be taken in RONA's
    transformational plan unveiled today. We will not report on these
    targets anymore, as these initiatives are now included in RONA's
    transformational plan. 

7. Planned restructuring costs of $110 million related to redeployment of the sales volume in 20% of the corporate-store network


 
--  $44.3 million in restructuring costs recognized since the plan was put
    in place in February 2012. 
--  Future restructuring costs will depend on decisions to be taken in
    RONA's transformational plan unveiled today. We will not report on these
    targets anymore, as these initiatives are now included in RONA's
    transformational plan. 

DIVIDENDS ON PREFERRED SHARES

At its meeting on February 20, 2013, RONA's Board of Directors declared a quarterly dividend of $0.3237 per share on cumulative 5-year rate reset Class A preferred shares, series 6. The dividend will be paid on April 1, 2013 to holders of record on March 15, 2013.

DIVIDENDS ON COMMON SHARES

At its meeting on February 20, 2013, 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 25, 2013 to holders of record on March 11, 2013.

ADDITIONAL INFORMATION

The Management's Discussion and Analysis (MD&A), financial statements and notes for fiscal-year 2012 can be found in the "Investor Relations" section of the Corporation's website at www.rona.ca and on the SEDAR website at www.sedar.com. The Corporation's Annual Information form, along with other information about RONA, can also be found on the RONA and SEDAR websites.

TELEPHONE CONFERENCE WITH THE FINANCIAL COMMUNITY

On Thursday, February 21, 2013, 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/607/en/.

NON-GAAP PERFORMANCE MEASURES

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

While EBITDA does not have a definition that is standardized by IFRS, it is widely used in our industry and in financial circles to measure the profitability of operations, excluding tax considerations and the cost and use of capital. Adjusted gross margin is used by RONA's management to analyze the profitability of our network, after adjustments for network support. Given that these measures are not standardized, EBITDA and adjusted gross margin cannot be compared from one company to the next. Still, we establish them in the same way for each of the segments identified, and, unless expressly mentioned, our method does not change over time. EBITDA and adjusted gross margin must not be considered separately or as a substitute for other performance measures calculated according to IFRS, but rather as additional information. Also disclosed as additional information is the impact of unusual items and non-recurring items on 2012 and 2011 results (refer to sections "Unusual items" and "Non-recurring items" in the MD&A for more details).

The following tables show the reconciliation of these two measures:


 
Reconciliation of non-GAAP measures                                         
                             Fiscal years ended                             
----------------------------------------------------------------------------
(Unaudited) (in                                                             
 thousands of                                                               
 dollars, except     December 30,  December 25, $ change from    % change   
 margins in %)               2012          2011          2011    from 2011  
----------------------------------------------------------------------------
Revenues                4,884,016     4,804,584        79,432          1.7% 
Cost of sales          (3,552,340)   (3,455,301)      (97,039)        (2.8%)
                    --------------------------------------------------------
Gross profit            1,331,676     1,349,283       (17,607)        (1.3%)
  Gross margin                                                              
   (gross              
                                                     
   profit/revenues)         27.27%        28.08%                  -81 b.p.  
Adjustments for                                                             
 network support(1)       106,331       107,931        (1,600)        (1.5%)
                    --------------------------------------------------------
Adjusted gross                                                              
 profit                 1,438,007     1,457,214       (19,207)        (1.3%)
  Adjusted gross                                                            
   margin (adjusted                                                         
   gross                                                                    
   profit/revenues)         29.44%        30.33%                  -89 b.p.  
Adjusted gross                                                              
 profit (excluding                                                          
 unusual items)         1,445,514     1,475,879       (30,365)        (2.1%)
  Adjusted gross                                                            
   margin (adjusted                                                         
   gross                                                                    
   profit/revenues)                                                         
   (excluding                                                               
   unusual items)           29.60%        30.72%                 -112 b.p.  
Adjusted gross                                                              
 profit (excluding                                                          
 unusual items and                                                          
 non-recurring                                                              
 items)                 1,448,014     1,475,879       (27,865)        (1.9%)
  Adjusted gross                                                            
   margin (adjusted                                                         
   gross                                                                    
   profit/revenues)                                                         
   (excluding                                                               
   unusual items and                                                        
   non-recurring                                                            
   items)                   29.65%        30.72%                 -107 b.p.  
                                                                            
Adjusted selling,                                                           
 general and                                                                
 administrative                                                             
 expenses              (1,275,644)   (1,216,659)      (58,985)        (4.8%)
Adjusted selling,                                                           
 general and                                                                
 administrative                                                             
 expenses (excluding                                                        
 unusual items)        (1,245,137)   (1,206,662)      (38,475)        (3.2%)
Adjusted selling,                                                           
 general and                                                                
 administrative                                                             
 expenses (excluding                                                        
 unusual items and                                                          
 non-recurring                                                              
 items)                (1,218,544)   (1,206,662)      (11,882)        (1.0%)
                                                                            
Rent                     (130,740)     (134,189)        3,449          2.6% 
                                                                            
EBITDA before rent        293,103       374,744       (81,641)       (21.8%)
EBITDA before rent                                                          
 (excluding unusual                                                         
 items)                   331,117       403,406       (72,289)       (17.9%)
EBITDA before rent                                                          
 (excluding unusual                                                         
 items and non-                                                             
 recurring items)         360,210       403,406       (43,196)       (10.7%)
  EBITDA margin                                                             
   before rent                                                              
   (EBITDA before                                                           
   rent/revenues)            6.00%         7.80%                 -180 b.p.  
  EBITDA margin                                                             
   before rent                                                              
   (EBITDA before                                                           
   rent/revenues,                                                           
   excluding unusual                                                        
   items)                    6.78%         8.40%                 -162 b.p.  
  EBITDA margin                                                             
   before rent                                                              
   (EBITDA before                                                           
   rent/revenues,                                                           
   excluding unusual                                                        
   items and non-                                                           
   recurring items)          7.38%         8.40%                 -102 b.p.  
                                                                            
EBITDA                    162,363       240,555       (78,192)       (32.5%)
EBITDA (excluding                                                           
 unusual items)           200,377       269,217       (68,840)       (25.6%)
EBITDA (excluding                                                           
 unusual items and                                                          
 non-recurring                                                              
 items)                   229,470       269,217       (39,747)       (14.8%)
  EBITDA margin                                                             
   (EBITDA/revenues)         3.32%         5.01%                 -169 b.p.  
  EBITDA margin                                                             
   (EBITDA/revenues,                                                        
   excluding unusual                                                        
   items)                    4.10%         5.60%                 -150 b.p.  
  EBITDA margin                                                             
   (EBITDA/revenues,                                                        
   excluding unusual                                                        
   items and non-                                                           
   recurring items)          4.70%         5.60%                  -90 b.p.  
                                                                            
Finance income             (5,333)       (5,262)          (71)        (1.3%)
Goodwill impairment             -      (117,000)      117,000        100.0% 
Amortization,                                                               
 depreciation and                                                           
 impairment of non-                                                         
 financial assets        (115,735)     (149,736)       34,001         22.7% 
Amortization,                                                               
 depreciation and        
                                                   
 impairment of non-                                                         
 financial assets                                                           
 (excluding unusual                                                         
 items)                  (109,481)     (107,055)       (2,426)        (2.3%)
Amortization,                                                               
 depreciation and                                                           
 impairment of non-                                                         
 financial assets                                                           
 (excluding unusual                                                         
 items and non-                                                             
 recurring items)         (98,196)     (107,055)        8,859          8.3% 
Operating profit           41,295       (31,443)       72,738        231.3% 
Operating profit                                                            
 (excluding unusual                                                         
 items)                    85,563       156,900       (71,337)       (45.5%)
Operating profit                                                            
 (excluding unusual                                                         
 items and non-                                                             
 recurring items)         125,941       156,900       (30,959)       (19.7%)
                                                                            
Net income                                                                  
 attributable to                                                            
 participating                                                              
 shares                     8,029       (86,367)       94,396        109.3% 
Net income                                                                  
 attributable to                                                            
 participating                                                              
 shares (excluding                                                          
 unusual items)            40,455        86,948       (46,493)       (53.5%)
Net income                                                                  
 attributable to                                                            
 participating                                                              
 shares (excluding                                                          
 unusual items and                                                          
 non-recurring                                                              
 items)                    70,032        86,948       (16,916)       (19.5%)
                                                                            
Diluted net income                                                          
 (loss) per share $          0.07         (0.66)         0.73        110.6% 
Diluted net income                                                          
 (loss) per share $                                                         
 (excluding unusual                                                         
 items)                      0.33          0.66         (0.33)       (50.0%)
Diluted net income                                                          
 (loss) per share $                                                         
 (excluding unusual                                                         
 items and non-                                                             
 recurring items)            0.57          0.66         (0.09)       (13.6%)
                                                                            
(1) Corresponds to other costs incurred in bringing the inventory to its    
present location and condition.                                             
 

 
                                                                            
                                                                            
Reconciliation of non-GAAP measures                                         
                                 Quarters ended                             
----------------------------------------------------------------------------
(Unaudited) (in                                                             
 thousands of                                                               
 dollars, except     December 30,  December 25, $ change from    % change   
 margins in %)               2012          2011          2011    from 2011  
----------------------------------------------------------------------------
Revenues                1,195,385     1,169,192        26,193          2.2% 
Cost of sales            (868,222)     (844,739)      (23,483)        (2.8%)
                    --------------------------------------------------------
Gross profit              327,163       324,453         2,710          0.8% 
  Gross margin                                                              
   (gross                                                                   
   profit/revenues)         27.37%        27.75%                  -38 b.p.  
Adjustments for                                                             
 network support(1)        25,266        23,865         1,401          5.9% 
                    --------------------------------------------------------
Adjusted gross                                                              
 profit                   352,429       348,318         4,111          1.2% 
  Adjusted gross                                                            
   margin (adjusted                                                         
   gross                                                                    
   profit/revenues)         29.48%        29.79%                  -31 b.p.  
Adjusted gross                                                              
 profit (excluding                                                          
 unusual items)           351,688       366,983       (15,295)        (4.2%)
  Adjusted gross                                                            
   margin (adjusted                                                         
   gross                                                                    
   profit/revenues)                                                         
   (excluding                                                               
   unusual items)           29.42%        31.39%                 -197 b.p.  
Adjusted gross                                                              
 profit (excluding                                                          
 unusual items and                                                          
 non-recurring                                                              
 items)                   354,188       366,983       (12,795)        (3.5%)
  A
djusted gross                                                            
   margin (adjusted                                                         
   gross                                                                    
   profit/revenues)                                                         
   (excluding                                                               
   unusual items and                                                        
   non-recurring                                                            
   items)                   29.63%        31.39%                 -176 b.p.  
                                                                            
Adjusted selling,                                                           
 general and                                                                
 administrative                                                             
 expenses                (329,278)     (311,129)      (18,149)        (5.8%)
Adjusted selling,                                                           
 general and                                                                
 administrative                                                             
 expenses (excluding                                                        
 unusual items)          (324,193)     (301,132)      (23,061)        (7.7%)
Adjusted selling,                                                           
 general and                                                                
 administrative                                                             
 expenses (excluding                                                        
 unusual items and                                                          
 non-recurring                                                              
 items)                  (310,076)     (301,132)       (8,944)        (3.0%)
                                                                            
Rent                      (12,406)      (12,837)          431          3.4% 
                                                                            
EBITDA before rent         35,557        50,026       (14,469)       (28.9%)
EBITDA before rent                                                          
 (excluding unusual                                                         
 items)                    39,901        78,688       (38,787)       (49.3%)
EBITDA before rent                                                          
 (excluding unusual                                                         
 items and non-                                                             
 recurring items)          56,518        78,688       (22,170)       (28.2%)
  EBITDA margin                                                             
   before rent                                                              
   (EBITDA before                                                           
   rent/revenues)            2.97%         4.28%                 -131 b.p.  
  EBITDA margin                                                             
   before rent                                                              
   (EBITDA before                                                           
   rent/revenues,                                                           
   excluding unusual                                                        
   items)                    3.34%         6.73%                 -339 b.p.  
  EBITDA margin                                                             
   before rent                                                              
   (EBITDA before                                                           
   rent/revenues,                                                           
   excluding unusual                                                        
   items and non-                                                           
   recurring items)          4.73%         6.73%                 -200 b.p.  
                                                                            
EBITDA                     23,151        37,189       (14,038)       (37.7%)
EBITDA (excluding                                                           
 unusual items)            27,495        65,851       (38,356)       (58.2%)
EBITDA (excluding                                                           
 unusual items and                                                          
 non-recurring                                                              
 items)                    44,112        65,851       (21,739)       (33.0%)
  EBITDA margin                                                             
   (EBITDA/revenues)         1.94%         3.18%                 -124 b.p.  
  EBITDA margin                                                             
   (EBITDA/revenues,                                                        
   excluding unusual                                                        
   items)                    2.30%         5.63%                 -333 b.p.  
  EBITDA margin                                                             
   (EBITDA/revenues,                                                        
   excluding unusual                                                        
   items and non-                                                           
   recurring items)          3.69%         5.63%                 -194 b.p.  
                                                                            
Finance income             (1,379)       (1,065)         (314)       (29.5%)
Goodwill impairment             -      (117,000)      117,000        100.0% 
Amortization,                                                               
 depreciation and                                                           
 impairment of non-                                                         
 financial assets         (37,983)      (70,430)       32,447         46.1% 
Amortization,                                                               
 depreciation and                                                           
 impairment of non-                                                         
 financial assets                                                           
 (excluding unusual                                                         
 items)                   (36,758)      (27,749)       (9,009)       (32.5%)
Amortization,                                                               
 depreciation and                                                           
 impairment of non-                                                         
 financial assets                                                           
 (excluding unusual                                                         
 items and non-                                                             
 recurring items)         (25,473)      (27,749)        2,276          8.2% 
Operating profit          (16,211)     (151,306)      135,095         89.3% 
Operating profit                                                            
 (excluding unusual                                                         
 items)                   (10,642)       37,037       (47,679)      (128.7%)
Operating profit                                                            
 (excluding unusual                                                         
 items and non-                                                             
 recurring items)          17,260        37,037       (19,777)       (53.4%)
                                                                            
Net income                                                                  
 attributable to                                                            
 participating                                                              
 shares                   (17,934)     (153,576)      135,642         88.3% 
Net income                                                                  
 attributable to                                                            
 participating                                                              
 shares (excluding                                                          
 unusual items)           (13,836)       19,739       (33,575)      (170.1%)
Net income                                                                  
 attributable to                                                            
 participating                                                              
 shares (excluding                                                          
 unusual items and                                                          
 non-recurring                                                              
 items)                     6,602        19,739       (13,137)       (66.6%)
                                                                            
Diluted net inc
ome                                                          
 (loss) per share $         (0.15)        (1.19)         1.04         87.4% 
Diluted net income                                                          
 (loss) per share $                                                         
 (excluding unusual                                                         
 items)                     (0.11)         0.15         (0.26)      (173.3%)
Diluted net income                                                          
 (loss) per share $                                                         
 (excluding unusual                                                         
 items and non-                                                             
 recurring items)            0.05          0.15         (0.10)       (66.7%)
                                                                            
(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 21, 2013, 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 over 800 corporate, franchise and affiliate retail stores of various sizes and formats under different banners, and a network of 14 hardware and construction materials distribution centres. RONA is also a leader in the specialized plumbing and HVAC market, primarily serving commercial and professional customers with a network of close to 60 sales outlets and four distribution centres across the country. With close to 30,000 employees, the RONA store network generates consolidated sales of $4.9 billion. For more information, please visit www.rona.ca.


 
RONA inc.                                                                   
Consolidated Income Statements and Other Comprehensive Income               
Years ended December 30, 2012 and December 25, 2011                         
(unaudited) (in thousands of Canadian dollars, except per share amounts)    
                                                                            
Consolidated Income Statements                                              
                                                                            
                                 Fourth quarter         For the years ended 
                             2012          2011          2012          2011 
                    --------------------------------------------------------
                                                                            
Revenues              $ 1,195,385   $ 1,169,192   $ 4,884,016   $ 4,804,584 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Operating profit                                                            
 before goodwill                                                            
 impairment,                                                                
 restructuring                                                              
 costs, impairment                                                          
 of non-financial                                                           
 assets and other                                                           
 charges                  (10,642)       37,037        85,563       156,900 
 Goodwill impairment            -      (117,000)            -      (117,000)
 Restructuring                                                              
  costs, impairment                                                         
  of non-financial                                                          
  assets and other                                                          
  charges                  (5,569)      (71,343)      (44,268)      (71,343)
                    --------------------------------------------------------
Operating profit                                                            
 (loss)                   (16,211)     (151,306)       41,295       (31,443)
                                                                            
Finance income              1,379         1,065         5,333         5,262 
Finance costs              (5,858)      (15,172)      (20,576)      (34,729)
                    --------------------------------------------------------
                        
   (4,479)      (14,107)      (15,243)      (29,467)
                    --------------------------------------------------------
                                                                            
Income (loss) before                                                        
 income tax expense       (20,690)     (165,413)       26,052       (60,910)
Income tax expense          5,534        15,397        (6,969)      (13,863)
                    --------------------------------------------------------
Net income (loss)     $   (15,156)  $  (150,016)  $    19,083   $   (74,773)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income (loss)                                                           
 attributable to:                                                           
 Owners of RONA inc.  $   (15,445)  $  (151,230)  $    17,297   $   (78,382)
 Non-controlling                                                            
  interests                   289         1,214         1,786         3,609 
                    --------------------------------------------------------
                      $   (15,156)  $  (150,016)  $    19,083   $   (74,773)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income (loss) per share                                                 
 attributable to owners of RONA                                             
 inc                                                                        
 Basic                $     (0.15)  $     (1.19)  $      0.07   $     (0.66)
 Diluted              $     (0.15)  $     (1.19)  $      0.07   $     (0.66)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Consolidated                                                                
 Statements of Other                                                        
 Comprehensive                                                              
 Income                                                                     
Net income (loss)     $   (15,156)  $  (150,016)  $    19,083   $   (74,773)
Other comprehensive                                                         
 income (loss) net                                                          
 of taxes :                                                                 
Items that will be                                                          
 reclassified to net                                                        
 income                                                                     
 Cash flow hedges                                                           
  - Loss for the                                                            
   year                      (695)       (2,575)       (2,666)         (920)
  - Reclassification                                                        
   to income                 (212)         (759)          574         1,632 
                    --------------------------------------------------------
                             (907)       (3,334)       (2,092)          712 
Items that will not                                                         
 be reclassified to                                                         
 net income                                                                 
  Actuarial losses          1,153          (394)       (2,703)       (2,775)
                    --------------------------------------------------------
Total other                                                                 
 comprehensive                                                              
 income (loss)                246        (3,728)       (4,795)       (2,063)
                    --------------------------------------------------------
Total comprehensive                                                         
 income (loss)        $   (14,910)  $  (153,744)  $    14,288   $   (76,836)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total comprehensive                                                         
 income (loss)                                                              
 attributable to:                                                           
 Owners of RONA inc.  $   (15,199)  $  (154,958)  $    12,502   $   (80,445)
 Non-controlling                                                            
  interests                   289         1,214         1,786         3,609 
                    --------------------------------------------------------
                      $   (14,910)  $  (153,744)  $    14,288   $   (76,836)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
RONA inc.                                                                   
Consolidated Statements of Cash Flows                                       
Years ended December 30, 2012 and December 25, 2011                         
(unaudited) (in thousands of Canadian dollars)                              
                                                                            
                                 Fourth quarter         For the years ended 
                             2012          2011          2012          2011 
                    --------------------------------------------------------
Operating activities                                                        
Income (loss) before                                                        
 income tax expense   $   (20,690)  $  (165,413)  $    26,052   $   (60,910)
Adjustments:                                                                
  Depreciation,                                                             
   amortization and                                                         
   impairment of                                                            
   non-financial                                                            
   assets                  37,983        70,430       115,735       149,736 
  Change in                                                                 
   provision for                                                            
   restructuring                                                            
   costs                      108             -        23,135             - 
  Change in fair                                                            
   value of                                                                 
   derivative                                                               
   financial                                                                
   instruments               (612)           43          (628)         (159)
  Net gains on                                                              
   disposal of                                                              
   assets                    (789)          139        (3,973)       (1,123)
  Goodwill                                                                  
   impairment                   -       117,000             -       117,000 
  Stock-based                                                               
   compensation                                                             
   expense                                                                  
   (recovery)                 954           537         3,676        (2,684)
  Difference between                                                        
   amounts paid for                                                         
   post-employment                                                          
   benefits and                                                             
   current year                                                             
   expenses                (6,394)       (1,236)       (3,036)       (2,855)
Other                         297         1,949        (1,223)        3,308 
                    --------------------------------------------------------
                           10,857        23,449       159,738       202,313 
Net change in                                                               
 working capital           64,520        91,381       (14,877)       66,682 
                    --------------------------------------------------------
                           75,377       114,830       144,861       268,995 
Interest received             856           817         3,825         3,898 
Income taxes paid             386       (11,834)      (23,139)      (42,648)
                    --------------------------------------------------------
Cash flow from                                                              
 operating                                                                  
 activities                76,619       103,813       125,547       230,245 
                    --------------------------------------------------------
Investing activities                                                        
Business                                                                    
 acquisitions              (7,811)       (6,902)      (11,808)      (47,707)
Acquisition of                                                              
 property, plant and                                                        
 equipment                (12,479)      (19,033)      (37,971)      (70,198)
Acquisition of                                                              
 intangible assets        (11,859)      (15,53
6)      (48,403)      (39,225)
Acquisition of other                                                        
 financial assets           1,178           355        (2,968)       (6,049)
Proceeds on disposal                                                        
 of property, plant                                                         
 and equipment              5,551           405        16,498        10,216 
Proceeds on disposal                                                        
 of other financial                                                         
 assets                       242         2,021         2,612         4,765 
Interest received             184           283           813         1,365 
                    --------------------------------------------------------
Cash flow from                                                              
 investing                                                                  
 activities               (24,994)      (38,407)      (81,227)     (146,833)
                    --------------------------------------------------------
Financing activities                                                        
Bank loans                    249         3,486         4,073          (326)
Net change in credit                                                        
 facilities               (59,716)       91,249        80,651        91,249 
Other long-term debt            -            (9)          261           863 
Financing costs                 -        (2,541)          (80)       (2,541)
Repayment of other                                                          
 long-term debt            (8,264)       (6,714)      (19,991)      (33,886)
Repurchase of                                                               
 debentures                     -      (283,171)            -      (283,171)
Proceeds from issue                                                         
 of common shares             622           983         5,676         4,406 
Proceeds from issue                                                         
 of preferred shares            -             -             -       172,500 
Fees related to                                                             
 issue of preferred                                                         
 shares                         -            (5)            -        (5,484)
Repurchase of common                                                        
 shares                         -       (31,768)      (66,767)      (31,768)
Cash dividends paid                                                         
 by a subsidiary to                                                         
 non-controlling                                                            
 interests                      -        (3,920)            -        (3,920)
Dividends on common                                                         
 shares                    (8,499)       (9,132)      (17,191)      (18,253)
Dividends on                                                                
 preferred shares          (2,277)       (2,282)       (9,062)       (5,458)
Interest paid              (3,144)         (741)      (18,033)      (26,051)
                    --------------------------------------------------------
Cash flow from                                                              
 financing                                                                  
 activities               (81,029)     (244,565)      (40,463)     (141,840)
                    --------------------------------------------------------
                                                                            
Net increase                                                                
 (decrease) in cash       (29,404)     (179,159)        3,857       (58,428)
Cash, beginning of                                                          
 year                      50,410       196,308        17,149        75,577 
                    --------------------------------------------------------
Cash, end of year     $    21,006   $    17,149   $    21,006   $    17,149 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
RONA inc.                                                                   
Consolidated Statements of Financial Position                               
as at December 30, 2012 and December 25, 2011                               
(Unaudited) (in thousands of Canadian dollars)                              
                                                                            
                                                       2012            2011 
                                                December 30     December 25 
                                            --------------------------------
Assets                                                                      
Current                                                                     
  Cash                                        $      21,006   $      17,149 
  Trade and other receivables                       363,152         370,094 
  Other financial assets                              1,440           1,468 
  Current tax assets                                 15,145           7,616 
  Inventory                                         890,437         840,287 
  Prepaid expenses                                   20,162          20,836 
                                            --------------------------------
Current assets                                    1,311,342       1,257,450 
                                            --------------------------------
Non-current                                                                 
  Other financial assets                             15,045          13,617 
  Property, plant and equipment                     813,901         874,246 
  Non-current assets held for sale                   22,898          10,455 
  Goodwill                                          428,180         426,968 
  Intangible assets                                 143,725         126,968 
  Other non-current assets                            5,114           5,435 
  Deferred tax assets                                66,253          65,239 
                                            --------------------------------
Total assets                                  $   2,806,458   $   2,780,378 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities                                                                 
Current                                                                     
  Bank loans                                  $      11,332   $       4,377 
  Trade and other payables                          495,698         487,864 
  Dividends payable                                   2,258           2,527 
  Derivative financial instruments                    3,553             691 
  Provisions                                         16,335           6,947 
  Instalments on long-term debt                      11,683          20,257 
                                            --------------------------------
Current liabilities                                 540,859         522,663 
                                            --------------------------------
Non-current                                                                 
  Long-term debt                                    305,020         232,073 
  Other non-current liabilities                      34,741          33,653 
  Provisions                                         17,712           3,606 
  Deferred tax liabilities                           24,550          32,759 
                                            --------------------------------
Total liabilities                                   922,882         824,754 
                                            --------------------------------
Equity                                                                      
  Share capital                                     764,882         793,416 
  Retained earnings                               1,071,426       1,115,801 
  Contributed surplus                                12,521          11,386 
  Accumulated other comprehensive income             (2,597)           (505)
                                            --------------------------------
Total equity attributable to owners of RONA                                 
 inc.                                             1,846,232       1,920,098 
Non-controlling interests                            37,344          35,526 
                                            --------------
------------------
Total equity                                      1,883,576       1,955,624 
                                            --------------------------------
Total liabilities and equity                  $   2,806,458   $   2,780,378 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Contacts: Media Valerie Lamarre Senior Advisor, Communications and Public Affairs RONA Inc. 514-599-5900, ext. 5271 valerie.lamarre@rona.ca

Financial Community Stephane Milot Vice President, Finance and Investor Relations RONA Inc. 514-599-5951 stephane.milot@rona.ca

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