OUR
CORE
PURPOSE
IS TO
CREATE
VALUE
Annual Report
2013
TABLE OF CONTENTS
FINANCIAL HIGHLIGHTS
PROFILE
MESSAGE TO SHAREHOLDERS
DIRECTORS AND OFFICERS
SERVICE | PRODUCTS
MANAGEMENT’S REPORT
MANAGEMENT’S AND INDEPENDENT AUDITORS’ REPORTS
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
3
4
5
9
10
20
33
34
CONSOLIDATED STATEMENTS OF EARNINGS
35
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 35
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
36
CONSOLIDATED STATEMENTS OF CASH FLOWS
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
38
The annual general meeting of shareholders
will be held on April 3, 2014 at 10:30 a.m.,
at the Omni Mont-Royal Hotel,
1050 Sherbrooke Street West, Montreal, Quebec.
PRIORITY No. 1: UNDERSTAND CUSTOMER NEEDS 1968 2013
45 years serving our customers with
CoMMITMENT, QUALITY AND PRIDE
1988 2013
25 years of GRoWTH and EXPANSIoN
marked by 49 ACQUISITIoNS
in North America
1993 2013
20 years of SUCCESS
as a TSX-listed corporation
in which the share price (RCH)
appreciated 20-FoLD
$50
$40
$30
$20
$10
$0
$44.68
Compound annual
return ≈ 16%
RCH
2-for-1
share splits
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
RIChELIEU Annual Repor t 2013
1
A Profitable Growth Strategy
Internal growth and expansion-by-acquisition
SALES
(in millions of $)
Ventes
Ventes
Ventes
586.8
Ventes
565.8
523.8
447.0
415.6
Résultat net...
NET EARNIN gS
PER S hARE
ATTRIBUTABLE
TO S hAREhOLDERS
Résultat net...
(DILUTED)
(in $)
Résultat net...
Résultat net...
2.15
1.87
1.78
1.39
CASh FLOwS
FROM OPER ATIN g
ACTIVITIES
(in millions of $)
Flux monétaires
Flux monétaires
Flux monétaires
Flux monétaires
55.0
2.22
54.4
50.2
45.1
37.3
2009 2010
2011 2012 2013
2009 2010
2011 2012 2013
2009 2010
2011 2012 2013
Capitaux propres
Dette
Capitaux propres
EqUITY/DEBT
Capitaux propres
Dette
(in millions of $)
Capitaux propres
Dette
Dette
293.1
288.0
Equity
256.2
253.9
240.5
Debt
5.6
2.9
0.7
2.6
1.4
2009 2010
2011 2012 2013
2
Our latest acquisitions2013Hi-Tech Glazing Supplies (Vancouver)CourterCo Savannah LLC (Georgia)2012CourterCo Inc. (Indiana, Kentucky, North Carolina)2011Outwater Hardware (New Jersey)Madico Inc. (Quebec)Provincial Woodproducts Ltd (Newfoundland)2010Woodland Specialties Inc. (New York State)Raybern Company, Inc. (Connecticut)Gordon Industrial Materials Ltd. (Quebec, Ontario)New Century Distributors Group LLC (New Jersey)E. Kinast Distributors Inc. (Chicago region)PJ White Hardwoods Ltd (Alberta, B.C.) Financial Highlights
Years ended November 30 (in thousands of $, except per-share amounts, number of shares and ratios)
Sales
EBITDA (3)
EBITDA margin (%)
Net earnings
Net earnings attributable to shareholders
of the Corporation
■ basic per share ($)
■ diluted per share ($)
Net margin attributable to shareholders
of the Corporation (%)
Cash flows from operating activities (5)
■ diluted per share ($)
Cash dividends paid on shares
■ per share ($)
Average number of shares outstanding (diluted)
(in thousands)
As at November 30
Total assets
Working capital
Current ratio
Equity
Return on average equity (%)
Book value ($)
Total debt
Cash and cash equivalents
2013 (1)
2012 (1)
2011 (1)
2010 (2)
2009 (2)
$
$
$
$
$
586,775
565,798
523,786
446,963
415,592
70,373
12.0
46,657
46,403
2.25
2.22
7.9
54,978
2.63
10,768
0.52
71,163
12.6
45,909
45,404
2.17
2.15
8.0
54,403
2.57
10,026
0.48
67,149
12.8
40,105
39,726
1.89
1.87
7.6
50,183
2.36
9,267
0.44
63,832
14.3
39,233
38,574 (4)
1.79
1.78
8.6
45,059
2.08
7,768
0.36
51,588
12.4
30,404
30,605 (4)
1.39
1.39
7.4
37,310
1.69
7,032
0.32
20,930
21,137
21,262
21,705
22,019
356,325
204,117
4.5
293,114
16.2
14.41
1,354
46,187
349,869
200,088
4.6
287,942
16.9
13.65
2,563
51,587
318,676
166,897
4.0
256,187
16.5
12.11
5,544
29,095
320,816
162,727
3.7
253,869
15.9
12.01
2,858
39,289
286,928
150,485
4.7
240,500
13.0
11.04
668
48,442
(1) The financial statements for 2013, 2012 and 2011 have been prepared in accordance with IFRS.
(2) The financial statements for 2010 and 2009 have been prepared in accordance with GAAP.
(3) EBITDA is a non-IFRS measure, as described on page 22 of this report.
(4) Net earnings from continuing operations.
(5) Cash flows from operating activities and cash flows per share are non-IFRS measures, as described on page 22 of this report.
RIChELIEU Annual Repor t 2013
3
Market capitalization as at November 30, 2013: $896 millionAppreciation in share price (RCH) since initial stock listing: 1,990%Total return on share/10 years*: 186%Average annual return on share/10 years*: 11.1%*Including dividend reinvestment
Profile
Montego Club (Quebec City)
Importer, distributor and manufacturer
of specialty hardware and complementary products
— North american leader
Richelieu is:
44
Over 100,000 prOducts (SKUs) in a wide variety of categories including: kitchen accessories, lighting systems, finishing and decorating pro-ducts, functional hardware, ergonomic workstations, closet and kitchen sto-rage solutions, sliding door systems, decorative and functional panels, glass hardware, high-pressure laminates, floor protection products and window and door hardware. This offering is comple-mented by the specialty items manu-factured by our two subsidiaries Cedan Industries Inc. and Menuiserie des Pins Ltée. Those include a broad range of veneer sheets and edgebanding pro-ducts, along with an extensive selection of decorative moldings and compo-nents for the window and door industry. Many of our products are manufactured according to our specifications and tho-se of our customers.Some 70,000 cuStomerS — kitchen and bathroom cabinet manufacturers, kitchen designers, resi-dential and commercial woodworkers, home furnishing manufacturers, office and ready-to-assemble furniture manu-facturers, renovation superstore chains and purchasing groups including over 6,000 hardware retailers.cloSe to 1,700 employeeS of whom close to half are directly in-volved in sales and marketing, and nearly 65% are Richelieu shareholders.62 centres IncLUDInG 60 sHOWrOOMs AnD 2 MAnU-FActUrInG PLAnts In nOrtH AMerIcA Our wide array of products, one-stop shop service approach, efficient logis-tics and the many advantages of our transactional website richelieu.com translate into an optimal response rate for our customers.A trILInGUAL trAnsActIOnAL WebsIte richelieu.com unrivalled in the industry, designed to facilitate customers’ projects and transactions and inform any visitor about the most comprehensive functional and decorative hardware offering in North America.
Richard Lord
President and Chief Executive Officer
w
hen i joined Richelieu as President and chief executive
Officer and major shareholder, the company employed some
80 people and posted approximately $30 million in sales, oper-
ating from a single distribution centre in Quebec. 25 years
later, our sales stand at $586.8 million. We serve some 70,000
manufacturers and retailers in North America, whom we pro-
vide with easy access to an offering of over 100,000 products
thanks to the one-stop shop strategy in our centres and show-
rooms, and to richelieu.com — a trilingual website unique in
our market for its broad scope and convenience for customers.
We can count on a specialized team of nearly 1,700 people,
about 65% are also shareholders, and a reliable relationship
with many world leading manufacturers renowned for their
technological expertise and strong innovativeness.
2013 is also our 20th year as a TSX-listed company. Over the
course of these 20 years, our share has appreciated 20-fold,
yielding a 16% compound annual return. During these years of
growth, we focused primarily on Canada to establish and maintain
our leadership in that market, before successfully penetrating
the U.S. market in 1999. Through its vision and business model,
Richelieu has emerged as the leader in its specialty market in
North America. These achievements can be attributed to team
work and commitment, thanks to people whose expertise, quality
execution and outstanding service set us apart in our industry.
Together, we share the vision and core values of a customer-
oriented corporation resolutely focused on innovation, sustained
growth, respect, integrity and entrepreneurship. We are proud
of the steps taken thus far, with the trust and support of our
customers, suppliers, shareholders and all our business partners.
RIChELIEU Annual Repor t 2013
RIChELIEU Annual Repor t 2013
5
5
25 years of commitment and growth
In 2013, we created further value through initiatives
focused primarily on growth, expansion, innovation and
customer service.
In December 2013, we acquired Procraft Industrial
Ltd, a distributor of finishing products operating
three centres in the Maritime Provinces where we
were already present. These three acquisitions add
sales of approximately $11 million on an annualized
basis and will yield future synergies.
Over the past 25 years, we have thus closed
49 acquisitions in North America.
Use of funds for the
benefit of the Corporation
and its shareholders
Our financial position remains impeccable and
almost debt-free, posting cash of $46.2 million and
working capital of $204.1 million, for a current ratio
of 4.5:1.
We paid $10.8 million in dividends, equivalent to
23.2% of net earnings attributable to shareholders,
and repurchased common shares for $36.6 million
under our normal course issuer bid. As at Novem-
ber 30, 2013, our share price was up 33.2% over a
year earlier.
Thus, in 2013, we distributed a total of
$47.4 million to shareholders, while retaining
our flexibility and the financial resources to
pursue our growth and expansion in 2014.
Sustained growth
Our sales and our earnings diluted per share
attributable to shareholders increased by 3.7%
and 3.3% respectively. In the United States, where
we have closed 15 acquisitions since entering that
market, we maintained a dynamic and targeted
innovation and development strategy. We enjoy
a solid positioning and differentiating strengths
that enabled us to take advantage of more favour-
able economic conditions. In 2013, our sales in the
United States grew by 19% in U.S. dollars, of which
13.8% internal grow th, thereby of fset ting the
slowdown witnessed year-long in the Canadian
market. In Canada, our effective business model
and leadership were clear advantages in helping
us achieve a strong performance under challen-
ging market conditions. We intensified selling syn-
ergies and our operational efficiency, cost control
and expense reduction initiatives, while carrying
on our innovation strategy — so customers benefit
from enhanced service conditions and the best
offering of innovative products and solutions.
New strategic acquisitions
From the beginning, our acquisition strategy
has aimed to ensure that every company
acquired is fully compatible with our activ-
ities, and contributes to growth and optimal
customer service.
In 2013, we closed the acquisition of CourterCo
Savannah LLC, a distributor of specialt y and
decorative hardware active in the strategic Georgia
coas tal region, followed by Hi-Tech Glazing
Supplies, a distributor of window and door hard-
ware well established in British Columbia. This ac-
quisition strengthens our presence in a specialized
customer base and further expands our product
offering.
6
With creativity and dynamism, Richelieu contributes to
the evolution of the North American specialty hardware
market, and will continue to do so.
An ever-more
innovative offering
We do not wait for demand, we anticipate
and create it, and are always one step ahead
of the competition to provide better service.
innovation is a continuous cycle essential to
our growth and that of our customers.
Richelieu is a key specialty hardware products pro-
vider — diversified, innovative and one of the most
complete suppliers of functional and decorative
hardware in North America. In 2013, we further
enhanced our offering with a broad selection
of innovations, including a complete range of
weather-resistant materials and accessories for
outdoor solutions, a new line of decorative panels,
a complementary offering of sinks and faucets,
innovative sliding systems and new eco-friendly
products. Technology and design combine to
fuel innovations and improve existing products.
We are always on the lookout for new products
to introduce any that could drive our customers’
sales growth and differentiation.
Waiting until we are 100% certain of
a product’s success before bringing
it to market is to be 100% certain of
being left behind.
A unique evolving
service concept
In 2013, we continued to invest to enhance customer
service, in accordance with:
a product strategy promoting the most compre-
hensive, innovative and available offering;
an efficient logistics chain adapted to customer
needs;
multi-access service; and
a complete range of attractive selling tools for our
customers to facilitate their sales.
Our team of sales and service professionals com-
prises nearly 50% of our employees. With their ex-
pertise, we provide our customers with proximity
service including advice on the use of products. Our
strong sales force is backed by the most powerful
market intelligence tools, and we continuously work
to develop strategies and programs in order to pro-
vide our customers with the best possible support.
We consider it a must to offer the one-stop shop
advantage in all our product categories. As far
as possible, we expand our product lines by re-
sponding to orders for non-inventory items, by way
of our site at richelieu.com and the collaboration
we maintain with our suppliers.
By managing our offering that way, we are
able to provide unrivalled service meeting
our customers’ specific needs without burde-
ning inventories.
in 2013, our website gained further efficiency
and popularity. Much more than a trilingual
catalogue, it is an indispensable search, se-
lection, product configuration and complete
paperless transactional tool for our custom-
ers. An ever-increasing percentage of our B2B
sales now go through richelieu.com.
RIChELIEU Annual Repor t 2013
7
our customers, team, suppliers and shareholders
are the four growth pillars with and for whom we
create value.
We wish to thank all our par tners, customers,
employees, suppliers and shareholders for their
trust and support. We remain committed to and
passionate about achieving further advances in the
future.
Richard Lord
President and Chief Executive Officer
Opportunities to
create and seize
We remain firmly customer-oriented and make sure
our business model is always well adapted to customer
needs and our operational efficiency objectives.
We will continue to respect our principles and core
values, such as innovation as the spearhead of our
growth, quality execution and differentiation in
everything we do.
In Canada, we have the fundamentals and strengths
to maintain our leadership in a market that remains
a major source of growth — and the fragmentation
of which still holds acquisition opportunities. We
will continue to look for targets best matching our
operational and financial objectives.
In the United States where there is great potential
for us to pursue our growth, we are confident we
can take other steps forward and further consolidate
our positioning. We will do so through potential
acquisitions, innovations, synergies and dynamic
development of the manufacturers and retailers
markets.
8
Directors
Jocelyn Proteau
Chairman of the Board
Richelieu Hardware Ltd.
Director of Corporations
Richard lord
President and Chief Executive Officer
Richelieu Hardware Ltd.
Mathieu Gauvin (1)
Partner
Richter Groupe Conseil Inc.
Jean Douville (2)
Chairman of the Board
UAP Inc.
Chairman of the Board
National Bank of Canada
Director of Corporations
Pierre Bourgie (1)
President and Chief Executive Officer
Bourgie Financial Corporation
(1996) Inc.
President, Ipso Facto
Director of Corporations
Officers
Richard lord
President and Chief Executive Officer
Antoine Auclair
Vice-President and
Chief Financial Officer
Guy Grenier
Vice-President, Sales and Marketing
— Sales to Manufacturers Division
Éric Daignault
General Manager of Divisions
Marion Kloibhofer
General Manager
— Central Canada
John statton
General Manager
— Western Canada
and Western United States
charles White
General Manager
— United States
Denyse chicoyne (2)
Director of Corporations
christian Dion
Manager — Human Resources
Geneviève Quevillon
Manager — Logistics and Supply Chain
Yannick Godeau
Manager — Legal Affairs
and Corporate Secretary
Robert courteau (2)
President and Chief Executive Officer
SPI Health and Safety Inc.
Marc Poulin (1)
President and Chief Executive Officer
Empire Company Limited
President and Chief Executive Officer
Sobeys Inc.
(1) Member of the Audit Committee
(2) Member of the Human Resources
and Corporate Governance Committee
RIChELIEU Annual Repor t 2013
9
10
One of our priorities is to ensure that all our customers have the easiest, most practical access to our products, either through our on-site specialists, or in our centres and showrooms, by telephone or richelieu.com.Our quality service reflects the mutual trust we maintain with each customer. Whether they are manufacturers or retailers, we must know their business well, understand and exceed their expectations and, when needed, maintain specific collaboration to provide them with optimal support. expert Multi-access service Solutions search
and selection
Product
configuration
Paperless
transactional site
RIChELIEU Annual Repor t 2013
11
wE DO NOT wAIT FOR DEMAND, wE ANTICIPATE IT, wE CREATE IT.wELCOME TO richelieu.com efficient logistics
that coordinate
all purchasing and
distribution operations
and optimize customer
service.
12
CAnAdA
35 distRibution CentRes
St. John’s, Dartmouth, Moncton, Drummondville, Quebec City (3), Montreal,
Longueuil (2), Laval (2), Ottawa, Toronto (2), Barrie, Kitchener, Sudbury, Thunder Bay,
Winnipeg, Regina, Saskatoon, Edmonton (2), Calgary (3), Kelowna, Vancouver (5),
Victoria (2)
+ 2 mAnufACtuRing CentRes
Longueuil, Notre-Dame-Des-Pins
united stAtes
25 distRibution CentRes
Boston, Hartford, New York, Avenel, Lincoln Park, Syracuse, Detroit, Columbus,
Cleveland, Cincinnati, Raleigh, Greensboro, Charlotte, Greenville, Atlanta,
Savannah, Riviera Beach, Hialeah, Dania, Pompano, Nashville, Chicago, Indianapolis,
Louisville, Seattle
A NORTh AMERICAN NETwORk wITh ThE ONE-STOP ShOP ADVANTAgE In a strongly competitive context, our customers can
count on our PROACTIVE INNOVATION APPROACH for
their commercial and residential concepts.
Our decade-long relationships with the most reliable
and innovative manufacturers worldwide provide us with
a significant DIFFERENTIATION capacity that benefits
our customers.
Architects and designers are benchmark partners
we keep regularly up-to-date on our innovations.
RIChELIEU Annual Repor t 2013
13
ONgOINg INNOVATIONS TO DRIVE ThE MARkET Innovation gives us and our customers a
major competitive edge.
We understand the current challenges faced by entre-
preneurs and retailers. We are therefore present to as-
sist our customers in their competitiveness. Our role is
to support their business strategies by providing them
with the most appropriate cutting-edge products and
solutions, the top tools to favour their sales, and the best
service to facilitate their purchasing processes.
14
We offer the most diversified selection
of functional and decorative hardware in
North America.
For instance, we are distinguished by our offering of sli-
ding doors, which is the most innovative and complete in
North America by far, such as high-end design concepts,
closet solutions or storage furniture, and an incompara-
ble variety of functional and ergonomic office products.
RIChELIEU Annual Repor t 2013
RIChELIEU Annual Repor t 2013
15
15
We offer the most
complete range of closet
hardware products,
including integrated
LED lighting systems.
outdoor cooking and
entertainment areas
require a selection of
cutting-edge, functional
and esthetic weather-
resistant hardware
products. our new
offering launched in 2013
includes innovative and
sustainable solutions
combining easy-to-
maintain weather-
resistant materials
such as polymer
and stainless steel.
16
Private brands
and exclusive products
targeted to
manufacturers
and retailers comprise
some 60% of our offering
We are a frontline supplier for renovation
superstores and more than 6,000 independent
retailers operating under different banners
and purchasing groups.
Standard
PMS
Variation
Black-Only
Reversed
Setup
We can provide more than
200 linear feet of hardware
displays by store.
RIChELIEU Annual Repor t 2013
17
From the beginning, the principles of economic,
social and environmental responsibility have been
incorporated into our strategies and operations.
They contribute to improve our ways of doing busi-
ness, our responsible and sustainable integration
into communities and our overall efficiency.
18
CREATE VALUE wITh RIgOROUS ECO-RESPONSIBLE PRACTICES Honeycomb panels
LED lighting
our business model is one of proximity. The posi-
tive difference we aim for in the communities
where we operate is built on the competencies
and commitment of our local teams. They con-
tribute to an accurate understanding of the busi-
ness environment and community outreach. In
addition to the social and recreational activities
we organize locally, our commitment is targeted
primarily to educational institutions.
We take an eco-responsible approach
at every level of our organization.
Even though our distribution and manufacturing activities have no
material impact on the environment, we strive to incorporate eco-
responsible measures into our day-to-day operations. Considering
the significance of packaging in our distribution business, we use
as little paper as possible. Also, we regularly transmit our manage-
ment reports electronically, and our meetings and training ses-
sions are held by teleconference. The use of vegetable-based inks
and recycled paper is generalized organization-wide. Popular with
many customers, our website at richelieu.com is an efficient paper-
less administrative management tool. Furthermore, we aim con-
stantly to increase the energy-efficiency of our offices, warehouses
and showrooms.
We offer our customers a diversified
offering of FSC and Greenguard certified
eco-friendly products.
Our “green” product line continues to expand. We now offer
several thousand products that guarantee a sound environmental
performance, including water-based finishing products and
glues, formaldehyde-free decorative panels, items made from
recycled materials such as the sturdy lightweight honeycomb
panels used in the manufacturing of tables and storage furniture,
and LED-lighting systems.
RIChELIEU Annual Repor t 2013
19
Management’s Report
Management’s Discussion and Analysis
of operating Results and Financial Position
Year Ended November 30, 2013
Contents
2013 Highlights
Forward-Looking Statements
Non-IFRS Measures
General Business Overview as at November 30, 2013
Mission and Strategy
Financial Highlights
Analysis of Operating Results
Summary of Quarterly Results and 2013 Fourth Quarter
Financial Position
Analysis of Principal Cash Flows
Analysis of Financial Position
Event Subsequent to Year-End
Contractual Commitments
Financial Instruments
Internal Control over Financial Reporting
Significant Accounting Policies and Estimates
New Accounting Methods
Risk Factors
Share Price
Share Information as at January 23, 2014
Outlook
Supplementary Information
21
22
22
23
23
24
24
26
27
27
28
29
29
29
29
30
30
31
32
32
32
32
20
HigHligHts of tHe Year ended
november 30, 2013
Richelieu pursued its growth and expansion in 2013, ending the year with excellent
liquidities and an impeccable financial position. Sales and net earnings were
up over 2012 despite the market slowdown throughout 2013 in Canada. The
Corporation continued to reinforce its positioning in the United States, where it
achieved strong growth thanks to its market penetration initiatives and sustai-
ned innovation strategy, enabling it to take further advantage of more favourable
economic conditions. Two acquisitions were closed during the year, in the United
States and Canada respectively: CourterCo Savannah LLC (“Savannah”) and
Hi-Tech Glazing Supplies (“Hi-Tech”). Subsequent to year-end, Richelieu finalized
another acquisition in Canada, specifically Procraft Industrial Ltd (“Procraft”).
Thanks to its financial position, its effective business model and its specialized
team, the Corporation remains well positioned to carry on its North American
business strategy in 2014.
■ Consolidated sales totalled $586.8 million, up 3.7% over 2012.
■ U.S. sales grew by 19.0% (in US$) in 2013, of which 13.8% from internal growth.
■ Earnings before income taxes, interest and amortization (EBITDA) decreased
by 1.1% to $70.4 million. The EBITDA margin stood at 12.0%, compared with
12.6% in 2012.
■ Net earnings attributable to shareholders increased by 2.2% to $46.4 million.
Earnings per share amounted to $2.25 (basic) and $2.22 (diluted), up from $2.17
(basic) and $2.15 (diluted) in 2012, an increase of 3.7% and 3.3% respectively.
■ Cash flows from operating activities (before net change in non-cash working
capital balances) grew by 1.1% to $55.0 million.
■ As at November 30, 2013, working capital totalled $204.1 million for a current
ratio of 4.5:1, up by 2.0% over November 30, 2012.
■ Cash and cash equivalents stood at $46.2 million.
■ Total debt amounted to $1.4 million, consisting entirely of the current portion
of long-term debt.
■ Richelieu repurchased 873,000 outstanding common shares (RCH) under its
normal course issuer bid for a consideration of $36.6 million and paid dividends
of $10.8 million to its shareholders in 2013, an increase of 7.4%, representing
23.2% of net earnings attributable to shareholders for the year. While retaining
the financial resources needed to pursue its growth in 2014, the Corporation
thereby distributed a total of $47.4 million to its shareholders.
■ Effective March 21, 2013, the Corporation acquired the principal net assets of
Savannah (Georgia, U.S.), a distributor of specialty and decorative hardware
products.
■ Effective September 3, 2013, the Corporation acquired the principal net
assets of Hi-Tech, a distributor of window and door hardware located in
Vancouver (B.C.).
■ Event subsequent to year-end: On December 2, 2013, Richelieu acquired all the
outstanding common shares of Procraft, a finishing products distributor with
three distribution centres in the Maritime Provinces, specifically in Halifax, N.S.,
Moncton and Fredericton, N.B. This acquisition will add approximately
$4 million to the Corporation’s total sales.
Richelieu Annual Repor t 2013
21
Although management believes these assumptions and
expectations to be reasonable based on the information
available at the time they are written, they could prove
inaccurate. Forward-looking statements are also subject, by
their very nature, to known and unknown risks and uncer-
tainties such as those related to the industry, acquisitions,
labour relations, credit, key officers, supply and product
liability, as well as other factors set forth in the Corpora-
tion’s 2013 Annual Report (see the “Risk Factors” section of
this management’s report and the 2013 Annual Information
Form available on SEDAR at www.sedar.com).
Richelieu’s actual results could differ materially from those
indicated or underlying these forward-looking statements.
The reader is therefore recommended not to unduly rely
on these forward-looking statements. Forward-looking
statements do not reflect the potential impact of special
items, any business combination or any other transaction
that may be announced or occur subsequent to the date
hereof. Richelieu undertakes no obligation to update or
revise the forward-looking statements to account for new
events or new circumstances, except where provided for by
applicable legislation.
NON-iFRS MeASuReS
Richelieu uses earnings before interest, income taxes and
amortization (“EBITDA”) because this measure enables
management to assess the Corporation’s operational
performance. This measure is a widely accepted financial
indicator of a Corporation’s ability to service and incur debt.
However, EBITDA should not be considered by an investor
as an alternative to operating income or the net earnings at-
tributable to shareholders of the Corporation, as an indicator
of financial performance or cash flows, or as a measure of
liquidities. Because EBITDA is not a standardized measure-
ment as prescribed by IFRS, it may not be comparable to the
EBITDA of other companies.
Richelieu also uses cash flows from operating activities and
cash flows from operating activities per share. Cash flows
from operating activities are based on net earnings plus
amortization of property, plant and equipment and intan-
gible assets, deferred tax expense (or recovery) and share-
based compensation expense. These additional measures
do not account for net change in non-cash working capital
items to exclude seasonality effects and are used by man-
agement in its assessments of cash flows from long-term
operations. Therefore, cash flows from operating activities
may not be comparable to the cash flows from operating
activities of other companies.
This management’s report relates to Richelieu Hardware
Ltd.’s consolidated operating results and cash flows for the
year ended November 30, 2013 in comparison with the year
ended November 30, 2012, as well as the Corporation’s
financial position at those dates. This report should be
read in conjunction with the audited consolidated financial
statements and accompanying notes for the year ended
November 30, 2013 appearing in the Corporation’s Annual
Report. In this management’s report, “Richelieu” or the
“Corporation” designates, as the case may be, Richelieu
Hardware Ltd. and its subsidiaries and divisions, or one of
its subsidiaries or divisions. Supplementary information,
such as the Annual Information Form, interim management’s
reports, Management Proxy Circular, certificates signed by
the Corporation’s President and Chief Executive Officer
and Vice-President and Chief Financial Officer, as well as
press releases issued during the year ended November 30,
2013, is available on the website of the Sys tem for
Electronic Document Analysis and Retrieval (“SEDAR”) at
www.sedar.com.
The information contained in this management’s report
accounts for any major event occurring prior to January 23,
2014, on which date the audited consolidated financial
statements and annual management’s report were appro-
ved by the Corporation’s Board of Directors. Unless other-
wise indicated, the financial information presented below,
including tabular amounts, is expressed in Canadian dollars
and prepared in accordance with International Financial
Reporting Standards (“IFRS”). The consolidated financial
statements for the fourth quarter ended November 30,
2013 have not been audited or reviewed by the Corpora-
tion’s auditors.
FORWARD-lOOKiNG STATeMeNTS
Certain statements set forth in this management’s report,
including statements relating to the expected sufficiency of
cash flows to cover contractual commitments, to maintain
growth and to provide for financing and investing activities,
growth outlook, Richelieu’s competitive position in its in-
dustry, Richelieu’s ability to weather the current economic
context and access other external financing, the closing
of new acquisitions, and other statements not pertaining
to past events, constitute forward-looking statements. In
some cases, these statements are identified by the use of
terms such as “may”, “could”, “might”, “intend” “should”,
“expect”, “project”, “plan”, “believe”, “estimate” or the
negative form of these expressions or other comparable
variants. These statements are based on the information
available at the time they are written, on assumptions made
by management and on the expectations of management,
acting in good faith, regarding future events, including
the assumption that economic conditions and exchange
rates will not significantly deteriorate, the Corporation’s
deliveries will be sufficient to fulfill Richelieu’s needs, the
availability of credit will remain stable during the year
and no extraordinary events will require supplementary
capital expenditures.
22
MiSSiON AND STRATeGY
Richelieu’s mission is to create shareholder value and con-
tribute to its customers’ growth and success, while favouring
a business culture focused on quality of service and results,
partnership and entrepreneurship.
To sustain its growth and remain the leader in its specialty
market, the Corporation continues to implement the stra-
tegy that has benefited it until now, with a focus on:
■ continuing to strengthen its produc t selec tion by
annually introducing diversified products that meet its
market segment needs and position it as the specialist
in functional and decorative hardware for manufacturers
and retailers;
■
further developing its current markets in Canada and the
United States with the support of a specialized sales and
marketing force capable of providing customers with
personalized service; and
■ expanding in North America through the opening of
distribution centres and through efficiently integrated,
profitable acquisitions made at the right price, offering
high growth potential and complementary to its product
mix and expertise.
Richelieu’s solid and efficient organization, highly diversified
product selection and long-term relationships with leading
suppliers worldwide position it to compete effectively in a
fragmented market consisting mainly of a host of regional
distributors who distribute a limited range of products.
GeNeRAl BuSiNeSS OVeRVieW
as at November 30, 2013
richelieu Hardware ltd. is a leading north american im-
porter, distributor and manufacturer of specialty hardware
and related products.
Its products are targeted to an extensive customer base of
kitchen and bathroom cabinet, furniture, and window and
door manufacturers plus the residential and commercial
woodworking industry, as well as a large customer base
of hardware retailers, including renovation superstores.
The residential and commercial renovation industry is the
Corporation’s major source of growth.
Richelieu offers customers a broad mix of products sourced
from manufacturers worldwide. The solid relationships
Richelieu has built with the world’s leading suppliers enable
it to provide customers with the latest innovative products
tailored to their business needs. The Corporation’s product
selection consists of some 100,000 different items targeted
to a base of nearly 70,000 customers who are served by
62 centres in north america — 35 distribution centres in
Canada, 25 in the United States and two manufacturing
plants in Canada.
Main product categories include functional cabinet hard-
ware and assembly products for the manufacture of furni-
ture and kitchen cabinets, window and door hardware, de-
corative hardware products, glass hardware, sliding door
systems, high-pressure laminates, decorative and functional
panels, kitchen accessories, ergonomic workstation com-
ponents, finishing products, whiteboards and tackboards.
Richelieu also specializes in the manufacture of a wide var-
iety of veneer sheets and edgebanding products through
its subsidiary Cedan Industries Inc., and of components
for the window and door industry and mouldings through
Menuiserie des Pins Ltée. In addition, many of the Cor p-
oration’s products are manufactured according to its speci-
fications and those of its customers.
The Corporation employs about 1,700 people at its head
office and throughout the network, close to half of whom
work in marketing, sales and customer service. Approximately
65% of its employees are Richelieu shareholders.
Richelieu Annual Repor t 2013
23
FiNANciAl hiGhliGhTS
(in thousands of $, except per-share amounts, number of shares and data expressed as a %)
Years ended November 30
Sales
EBITDA (3)
EBITDA margin (%)
Net earnings
Net earnings attributable to shareholders
of the Corporation
■ basic per share ($)
■ diluted per share ($)
2013 (1)
2012 (1)
2011 (1)
2010 (2)
2009 (2)
$
$
$
$
$
586,775
565,798
523,786
446,963
415,592
70,373
12.0
71,163
12.6
67,149
12.8
63,832
14.3
51,588
12.4
46,657
45,909
40,105
39,233
30,404
46,403
2.25
2.22
45,404
2.17
2.15
39,726
1.89
1.87
38,574 (4)
1.79
1.78
30,605 (4)
1.39
1.39
Net margin attributable to shareholders of the Corporation (%)
7.9
8.0
7.6
8.6
7.4
Cash flows from operating activities (5)
■ diluted per share ($)
Cash dividends paid on shares
■ per share ($)
54,978
2.63
10,768
0.52
54,403
2.57
10,026
0.48
50,183
2.36
9,267
0.44
45,059
2.08
7,768
0.36
37,310
1.69
7,032
0.32
Weighted average number of shares outstanding (diluted)
(in thousands)
20,930
21,137
21,262
21,705
22,019
As at November 30
Total assets
Working capital
Current ratio
Equity
Return on average equity (%)
Book value ($)
Total debt
Cash and cash equivalents
356,325
204,117
4.5
293,114
16.2
14.41
1,354
46,187
349,869
200,088
4.6
287,942
16.9
13.65
2,563
51,587
318,676
166,897
4.0
256,187
16.5
12.11
5,544
29,095
320,816
162,727
3.7
253,869
15.9
12.01
2,858
39,289
286,928
150,485
4.7
240,500
13.0
11.04
668
48,442
(1) The financial statements for 2013, 2012 and 2011 have been prepared in accordance with IFRS.
(2) The financial statements for 2010 and 2009 have been prepared in accordance with GAAP.
(3) EBITDA is a non-IFRS measure, as described on page 22 of this report.
(4) Net earnings from continuing operations.
(5) Cash flows from operating activities and cash flows per share are non-IFRS measures, as described on page 22 of this report.
ANAlYSiS OF OPeRATiNG ReSulTS FOR The YeAR eNDeD
NOVeMBeR 30, 2013 cOMPAReD WiTh The YeAR eNDeD
NOVeMBeR 30, 2012
Consolidated sales
(in thousands of $ except exchange rate)
Years ended November 30
Canada
(CA$)
United States (CA$)
(US$)
Average exchange rate
Consolidated sales
2013
$
2012
$
∆ %
439,834 445,140
– 1.2
146,941 120,658 + 21.8
143,337 120,403 + 19.0
1.0251 1.0021
586,775 565,798
+ 3.7
Consolidated sales totalled $586.8 million, an increase of
$21 million or 3.7% over 2012, of which 2.3% from internal
growth and 1.4% from acquisitions.
Richelieu achieved sales of $497.3 million in the manufac-
turers market, compared with $476.2 million for 2012, an
increase of $21.1 million or 4.4%, of which 2.8% from inter-
nal growth and 1.6% from acquisitions. Most of the Corpo-
ration’s market segments contributed to this growth. Sales
to hardware retailers and renovation superstores remained
relatively stable at $89.5 million, thanks notably to the U.S.
retailers market, which compensated for the decline in this
market in Canada.
24
in Canada, the Corporation witnessed a sustained market
slowdown throughout the year, to which was added the
negative effect of the strike in the Quebec construction
industry last June. Sales amounted to $439.8 million,
compared with $445.2 million for 2012, a decline of 1.2%
reflecting an internal decrease of 1.6% and a growth of 0.4%
stemming from Hi-Tech’s contribution. In the manufacturers
market, Richelieu recorded sales of $360.1 million, a decline
of 0.9%, on account of an internal decrease of 1.3% and a
growth of 0.4% from the aforementioned acquisition. Sales
to hardware retailers and renovation superstores decreased
to $79.7 million, down by 2.4% from $81.7 million for 2012.
in the United states, Richelieu continued to benefit from its
positioning and its growth and innovation strategy, enabling
it to take advantage of more favourable economic conditions.
Sales grew to US$143.3 million, up by US$22.9 million or
19.0% over 2012. To an internal growth of 13.8% was added
an increase of 5.2% from acquisitions. Sales to manufactu-
rers amounted to US$133.8 million, an increase of 19.0%, of
which 13.7% from internal growth and 5.3% from acquisitions.
Sales to hardware retailers and renovation superstores
grew by 21.0% (in US$). Expressed in Canadian dollars, U.S.
sales totalled $146.9 million, compared with $120.7 million
for 2012, an increase of 21.8%, of which 16.6% from internal
growth and 5.2% from acquisitions. They accounted for 25.0%
of 2013 consolidated sales, whereas in 2012, U.S. sales had
represented 21.3% of the year’s consolidated sales.
Consolidated EBITDA and EBITDA margin
(in thousands of $, unless otherwise indicated
Years ended November 30
Sales
EBITDA
EBITDA margin (%)
2013
$
2012
$
586,775 565,798
71,163
12.6
70,373
12.0
earnings before interest, income taxes and amortization
(ebitda) amounted to $70.4 million, down by 1.1% from
2012. The gross margin declined slightly from 2012 due
primarily to the following factors: the more challenging
economic context in Canada and competitive environment,
the lower margins of certain prior acquisitions having a
different product mix, the higher proportion of sales in the
United States where the product mix also differs, and the
increase in the supply costs of certain products stemming
from the rapid appreciation of currencies before the
adjustment of selling prices. To these factors were added
the impact of the significant share price appreciation on
the compensation expense related to the current deferred
share unit plan and two less business days in the first and
third quarters of 2013 than in 2012. Consequently, the ebitda
margin stood at 12.0%, which nevertheless reflected cost
and expense control efforts throughout the year.
Income taxes amounted to $16.9 million, down by $1.0 million
from 2012. This reduction is due to fluctuations in results
by region where the Corporation and its subsidiaries are
subject to tax rates and tax regulations differing from one
another and to the use of operating losses carried forward.
Consolidated net earnings attributable to shareholders
(in thousands of $, unless otherwise indicated)
Years ended November 30
EBITDA
Amortization of property, plant and
equipment and intangible assets
Financial costs, nets
Income taxes
Net earnings
Net earnings attributable to
shareholders of the Corporation
Net margin attributable to
shareholders of the Corporation (%)
Non-controlling interests
Net earnings
2013
$
2012
$
70,373 71,163
7,278
(464)
16,902
7,513
(198)
17,939
46,657 45,909
46,403 45,404
7.9
254
8.0
505
46,657 45,909
net earnings grew by 1.6% over 2012. Considering non-
controlling interests, net earnings attributable to sharehol-
ders of the Corporation totalled $46.4 million, up by 2.2%
over 2012. the net margin attributable to shareholders
was 7.9%. earnings per share rose to $2.25 basic and $2.22
diluted, compared with $2.17 basic and $2.15 diluted for
2012, an increase of 3.7% and 3.3% respectively.
Comprehensive income amounted to $49.9 million, consi-
dering a positive adjustment of $3.3 million on translation
of the financial statements of the subsidiary in the United
States, compared with $44.8 million for 2012, considering
a negative adjustment of $1.2 million on translation of the
financial statements of the subsidiary in the United States.
Richelieu Annual Repor t 2013
25
FOuRTh QuARTeR eNDeD NOVeMBeR 30, 2013
During the fourth quarter, Richelieu achieved good growth
in consolidated sales which totalled $155.3 million, an
increase of $9.5 million or 6.5% over the corresponding
quarter of 2012, including 5.1% from internal growth and
1.4% from acquisitions.
Sales to manufacturers amounted to $133.7 million, com-
pared with $125.3 million for the corresponding period of
2012, an increase of $8.4 million or 6.7%, of which 5.1% from
internal growth and 1.6% from acquisitions. Sales to hardware
retailers and renovation superstores grew to $21.6 million,
compared with $20.5 million for the same quarter of 2012,
an increase of $1.1 million or 5.4%.
in Canada, the Corporation recorded sales of $115.9 million,
compared with $114.6 million for the fourth quarter of 2012,
an increase of $1.3 million or 1.1% stemming from the 1.4%
contribution of Hi-Tech, whereas the internal decrease was
0.3%. Richelieu’s sales to manufacturers grew by 0.3% to
$96.6 million, compared with $96.3 million for the fourth
quarter of 2012. Sales to hardware retailers and renovation
superstores increased to $19.3 million, up by 5.5% over
$18.3 million for the corresponding quarter of 2012.
in the United states, constant market penetration efforts
and the launch of new product lines continued to pay off,
thanks especially to more favourable economic condi-
tions. The Corporation achieved sales of US$37.9 million,
compared with US$31.6 million for the corresponding quar-
ter of 2012, an increase of US$6.3 million or 20.0%, of which
18.7% from internal growth and 1.3% from Savannah’s
contribution. The Corporation’s sales to manufacturers
grew to US$35.2 million, an increase of 20.1%, of which
18.7% from internal growth and 1.4% from Savannah. Sales
to hardware retailers and renovation superstores were
stable with those for the same quarter of 2012; note that in
2012, the introduction of additional products in stores
resulted in exceptional sales. In Canadian dollars, U.S. sales
amounted to $39.4 million, compared with $31.2 million for
the corresponding quarter of 2012, an increase of 26.3%, of
which 25.0% from internal growth and 1.3% from the afore-
mentioned acquisition. They accounted for 25.4% of the
quarter’s consolidated sales, whereas for the fourth quar-
ter of 2012, U.S. sales had represented 21.4% of the period’s
consolidated sales.
SUMMARY OF QUARTERLY RESULTS (unaudited)
(in thousands of $, except per-share amounts)
Quarters
1
2
3
4
2013
■ sales
■ ebitda
■ net earnings
attributable to
shareholders
of the Corporation
basic per share
diluted per share
2012
■ Sales
■ EBITDA
■ Net earnings
attributable to
shareholders
of the Corporation
basic per share
diluted per share
2011
■ Sales
■ EBITDA
■ Net earnings
attributable to
shareholders
of the Corporation
basic per share
diluted per share
126,084 156,240 149,163 155,288
12,893 18,207 19,050 20,223
8,158 12,140 12,821 13,284
0.65
0.64
0.62
0.62
0.59
0.58
0.39
0.39
124,083 147,107 148,782 145,826
13,280 18,617 19,636 19,630
8,004 11,997 12,761 12,642
0.61
0.60
0.61
0.60
0.38
0.38
0.57
0.57
113,192 139,178 136,132 135,284
12,018 17,075 19,153 18,903
6,989 10,015 11,411 11,311
0.54
0.54
0.54
0.54
0.33
0.33
0.48
0.47
Quarterly variations in earnings — The first quarter closed
at the end of February is generally the year’s weakest for
Richelieu in light of the smaller number of business days
due to the end-of-year holiday period and a wintertime
slowdown in renovation and construction work. The third
quarter ending August 31 also includes a smaller number
of business days due to the summer holidays, which can
be reflected in the period’s financial results. The second
and four th quar ters respec tively ending May 31 and
November 30 generally represent the year’s most active
periods.
Note: For further information about the Corporation’s performance in the
first, second and third quarters of 2013, the reader is referred to the interim
management’s reports available on SEDAR’s website at www.sedar.com.
26
earnings before interest, income taxes and amortization
(ebitda) totalled $20.2 million, up by 3.0% over the
corresponding quarter of 2012 due primarily to the sales
growth. The gross margin was down slightly from the fourth
quarter of 2012 due mainly to the competitive environment
and the more difficult economic context in Canada, the
appreciation of currencies which raised the supply costs
of certain products before the adjustment of selling prices,
and the higher proportion of U.S. sales. The ebitda margin
was therefore 13.0% for the fourth quarter of 2013.
inves ting ac tivities represented a c ash out f low of
$5.4 million for the fourth quarter, of which $4.2 million for
the acquisition de Hi-Tech and $1.2 million for equipment
needed for operations, whereas the Corporation had
invested $2.3 million in property, plant and equipment
during the same quarter of 2012.
FiNANciAl POSiTiON
Analysis of principal cash flows for the year ended
November 30, 2013
Income taxes amounted to $5.2 million, an increase of
$0.3 million over the fourth quarter of 2012.
change in cash and cash equivalents and capital
resources
Fourth-quarter net earnings rose 4.4%. Considering non-
controlling interes t s, net earnings at tribut able to
shareholders of the Corporation grew to $13.3 million, up
by 5.1% over the corresponding quarter of 2012. the net
margin attributable to shareholders remained relatively
stable at 8.6%. earnings per share amounted to $0.65 basic
and $0.64 diluted, compared with $0.61 basic and $0.60
diluted for the fourth quarter of 2012, an increase of 6.6%
and 6.7% respectively.
Comprehensive income totalled $13.9 million, considering
a positive impact of $0.5 million on translation of the
financial statements of the subsidiary in the United States,
compared with $13.2 million for the corresponding quarter
of 2012, considering a positive impact of $0.4 million on
translation of the financial statements of the subsidiary in
the United States.
Cash flows from operating activities (before net change in
non-cash working capital balances) grew to $15.2 million or
$0.73 diluted per share, up by 3.0% and 4.3% over the fourth
quarter of 2012. Net change in non-cash working capital
balances provided cash flows of $4.3 million, compared
with $2.8 million in the fourth quarter of 2012. Changes in
accounts payable and inventories represented a cash inflow
of $4.9 million, whereas changes in accounts receivable
represented a cash outflow of $0.6 million. Consequently,
operating activities provided cash flows of $19.5 million,
compared with $17.6 million for the fourth quarter of 2012.
financing ac tivities represented a c ash out f low of
$24.7 million, compared with $5.6 million for the corresponding
quarter of 2012. Richelieu repurchased common shares under
its normal course issuer bid for $22.0 million, compared with
$3.1 million in the fourth quarter of 2012. The Corporation
also paid shareholder dividends of $2.7 million, up by 6.8%,
on account of the dividend increase announced in January
2013. In addition, it issued common shares for $0.1 million
upon the exercise of options under its stock option plan,
compared with $0.3 million in the same quarter of 2012.
(in thousands of $)
Years ended November 30
Cash flows provided by (used for):
Operating activities
Financing activities
Investing activities
Effect of exchange rate changes
Net change in cash and cash
equivalents
Cash and cash equivalents,
beginning of year
Cash and cash equivalents,
end of year
As at November 30
Working capital
Renewable line of credit (CA$)
Renewable line of credit (US$)
Operating activities
2013
$
2012
$
48,365
(45,816)
(7,898)
(51)
45,622
(16,214)
(7,183)
267
(5,400)
22,492
51,587
29,095
46,187
51,587
2013
2012
204,117 200,088
26,000
6,000
26,000
6,000
Cash flows from operating activities (before net change in
non-cash working capital balances related to operations)
totalled $55.0 million or $2.63 diluted per share, compared
with $54.4 million or $2.57 diluted per share for 2012, pri-
marily reflecting the increase in net earnings. Net change
in non-cash working capital balances used cash flows of
$6.6 million, reflecting changes in accounts receivable,
inventories, accounts payable and other items, compared
with $8.8 million for 2012. Consequently, operating activi-
ties provided cash flows of $48.4 million, compared with
$45.6 million for 2012.
Richelieu Annual Repor t 2013
27
Financing activities
Analysis of financial position at as November 30, 2013
Richelieu repurchased common shares under its normal
course issuer bid for $36.6 million, compared with
$5.9 million in 2012. In addition, it paid shareholder divi-
dends of $10.8 million, up by 7.4% over 2012, on account
of the dividend increase announced in January 2013, and
issued common shares for $2.3 million upon the exerci-
se of options under its stock option plan, compared with
$2.6 million during 2012. The Corporation also repaid
$0.7 million on its long-term debt, compared with $2.9 million
in 2012. Consequently, financing activities represented a
cash outflow of $45.8 million, compared with $16.2 million
in 2012.
investing activities
In 2013, the Corporation invested a total of $7.9 million,
of which $4.4 million in the acquisition of the net assets of
Savannah and Hi-Tech and $3.5 million in equipment nee-
ded for operations. Note that in 2012, the Corporation had
invested $7.2 million, of which $2.4 million in the acquisi-
tion of the net assets of CourterCo and $4.8 million pri-
marily in software and equipment needed for operations.
Sources of financing
As at November 30, 2013, cash and cash equivalents totalled
$46.2 million, compared with $51.6 million a year earlier. The
Corporation posted a working capital of $204.1 million for
a current ratio of 4.5:1, compared with $200.1 million (4.6:1
ratio) as at November 30, 2012.
Richelieu believes it has the capital resources to fulfill its on-
going commitments and obligations and to assume the fun-
ding requirements needed for its growth and the financing
and investing activities planned for 2014. The Corporation
continues to benefit from an authorized line of credit of
CA$26 million as well as a line of credit of US$6 million re-
newable annually and bearing interest respectively at pri-
me and base rates. In addition, the Corporation estimates it
could obtain access to other outside financing if necessary.
The expectation set forth above consists of forward-looking information
based on the assumption that economic conditions and exchange rates
will not deteriorate significantly, operating expenses will not increase
considerably, deliveries will be sufficient to fulfill Richelieu’s requirements,
the availability of credit will remain stable in 2014, and no usual events will
entail additional capital expenditures. This expectation also remains subject
to the risks identified under “Risk Factors”.
Summary of financial position
(in thousands of $)
As at November 30
Current assets
Non-current assets
Total
Current liabilities
Non-current liabilities
Equity attributable to shareholders
of the Corporation
Non-controlling interests
Total
Exchange rate on a translation of
a subsidiary in the United States
Assets
2013
$
2012
$
262,251 256,210
93,659
349,869
56,122
5,805
94,074
356,325
58,134
5,077
288,845 283,835
4,107
349,869
4,269
356,325
1.062 0.9936
to t a l a s s e t s a m o u n t e d t o $ 3 5 6 . 3 m i l l i o n a s a t
November 30, 2013, compared with $349.9 million a year
earlier, up by 1.8% or $6.5 million. This increase resulted
from the Corporation’s growth and the two acquisitions
closed in 2013. Current assets grew by 2.4% or $6.0 million
over November 30, 2012, notably reflecting the increases of
$9.1 million in inventories, $2.6 million in accounts recei-
vable and $0.2 million in prepaid expenses, whereas cash
and cash equivalents decreased by $5.4 million and income
taxes receivable by $0.5 million.
Net cash
(in thousands of $)
As at November 30
Current portion of long-term debt
Long-term debt
total
Cash and cash equivalents
total cash net of debt
2013
$
1,354
—
1,354
46,187
44,833
2012
$
1,743
820
2,563
51,587
49,024
The Corporation benefits from an excellent financial position
to pursue its business strategy. As at November 30, 2013,
total debt, consisting entirely of the current portion of long-
term debt, amounted to $1.4 million, representing balances
payable on prior acquisitions.
28
equity reached $293.1 million as at November 30, 2013,
compared with $287.9 million as at November 30, 2012,
an increase of 1.8% stemming mainly from the growth of
$1.9 million in share capital and the change of $3.3 million in
accumulated other comprehensive income, less the change
of $0.4 million in contributed surplus. Retained earnings
varied by $0.2 million, reflecting the effect of the year’s net
earnings, less share repurchases and dividends paid during
the year. As at November 30, 2013, the book value per share
was $14.41, compared with $13.65 as at November 30, 2012.
For 2014 and the foreseeable future, the Corporation
expects cash flows from operating activities and other
sources of financing to meet its ongoing contractual com-
mitments.
The expectation set forth above consists of forward-looking information
based on the assumption that economic conditions and exchange rates will
not deteriorate significantly, operating expenses will not increase conside-
rably, deliveries will be sufficient to fulfill the Richelieu’s requirements, the
availability of credit will remain stable in 2014, and no usual events will entail
additional capital expenditures. This expectation also remains subject to
return on average equity stood at 16.2% as at November 30,
2013, compared with 16.9% a year earlier.
the risks identified under “Risk Factors”.
FiNANciAl iNSTRuMeNTS
At 2013 year-end, the Corporation’s share capital consisted
of 20,046,061 common shares (20,794,484 shares as at
November 30, 2012). The Corporation issued 124,577
common shares at an average price of $18.34 (121,375 in 2012
at an average price of $21.22) upon the exercise of options
under its stock option plan in 2013. Also during the year,
873,000 common shares were purchased for cancellation
under the Corporation’s normal course issuer bid for a cash
consideration of $36.6 million (173,600 common shares for
a cash consideration of $5.9 million in 2012), resulting in a
premium on the redemption of $35.4 million recorded as
a reduction in retained earnings (premium of $5.7 million
in 2012). Finally, the Corporation granted 78,000 stock
options during the year (41,000 in 2012). Consequently,
as at November 30, 2013, 711,673 stock options were out-
standing (762,000 as at November 30, 2012).
eVeNT SuBSeQueNT TO YeAR-eND
On December 2, 2013, Richelieu acquired all of the out-
standing common shares of Procraft, a distributor of fin-
ishing products serving a customer base of residential and
commercial woodworkers and kitchen cabinet manufac-
turers in the Maritime Provinces from its three distribution
centres located in Halifax (N.S.), Moncton and Fredericton
(N.B.). This acquisition will add approximately $4 million to
the Corporation’s total sales.
cONTRAcTuAl cOMMiTMeNTS
Summary of contractual financial commitments as at
November 30, 2013
(in thousands of $)
less
than
a year
1,354
7,265
8,619
1 to 5
years
—
15,292
15,292
more
than
5 years
total
—
1,354
469 23,026
469 24,380
Long-term debt
Operating leases
total
Richelieu periodically enters into for ward exchange
contracts to fully or partially hedge the effects of foreign
currency fluctuations related to foreign-currency denomi-
nated payables or to hedge forecasted purchase trans-
actions. The Corporation has a policy of not entering
into derivatives for speculative or negotiation purposes
and to enter into these contracts only with major financial
institutions.
In notes (1) and (12) of the audited consolidated financial
statements for the year ended November 30, 2013, the
Corporation presents the information on the classification
and fair value of its financial instruments, as well as on their
value and management of the risks arising from their use.
iNTeRNAl cONTROl OVeR FiNANciAl RePORTiNG
Management has designed and evaluated internal controls
over financial reporting (ICFR) and disclosure controls and
procedures (DC&P) to provide reasonable assurance that
the Corporation’s financial reporting is reliable and that
its publicly-disclosed financial statements are prepared in
accordance with IFRS. The President and Chief Executive
Officer and the Vice-President and Chief Financial Officer
have assessed, within the meaning of National Instrument
52-109 – Certification of Disclosure in Issuers’ Annual and
Interim Filings, the design and the effectiveness of internal
controls over financial reporting as at November 30, 2013.
In light of this assessment, they concluded that the design
and the effectiveness of internal controls over financial
reporting (ICFR and DC&P) were effective. During the year
ended November 30, 2013, management verified that there
were no material changes in the Corporation’s procedures
that were reasonably likely to have a material impact on its
internal control over financial reporting. No such changes
were identified.
Due to their intrinsic limits, internal controls over financial reporting only
provide reasonable assurance and may not prevent or detect misstatements.
In addition, projections of an assessment of effectiveness in future periods
carry the risk that controls will become inappropriate as a result of changes
in conditions or if the degree of conformity with standards and methods
should deteriorate.
Richelieu Annual Repor t 2013
29
SiGNiFicANT AccOuNTiNG POlicieS AND eSTiMATeS
The Corporation’s audited consolidated financial state-
ments for the year ended November 30, 2013 have been pre-
pared by management in accordance with IFRS. The prep-
aration of the consolidated financial statements requires
management to make estimates and assumptions that
affect the amounts reported in the consolidated financial
statements and accompanying notes. These estimates are
based on management’s best knowledge of current events
and actions that the Corporation may undertake in the fu-
ture and other factors deemed relevant and reasonable.
The judgments made by management in applying the ac-
counting policies that have the most significant effect on the
amounts recognized in the consolidated financial statements
and the assumptions about the future and other major sources
of estimation uncertainty as at the end of the reporting per-
iod that could potentially result in material adjustments to
the carrying amount of assets and liabilities during the fol-
lowing period, are summarized as follows:
Valuation of inventory impairment, including loss and ob-
solescence, customer rebates, contingent liabilities, allow-
ance for doubtful accounts, goodwill and intangible assets
with indefinite useful lives, deferred tax assets and stock
options requires the use of judgment and assumptions that
may affect the amounts reported in the consolidated fi-
nancial statements. The underlying estimates and assump-
tions are reviewed regularly. Revised accounting estimates,
if any, are recognized in the period in which the estimates
are revised, as well as in the future periods affected by the
revisions. Actual results could differ from those estimates.
NeW AccOuNTiNG MeThODS
Adopted in 2013
ias 1, Presentation of financial statements
In June 2011, the IASB issued amendments to IAS 1, Pres-
entation of Financial Statements. Items of other comprehen-
sive income and the corresponding tax are required to be
grouped into those that will and will not subsequently be
reclassified to earnings. These amendments are in effect
since July 1st, 2013 and had no impact on the presentation
of the consolidated financial statements of the Corporation.
Recently issued
The IASB recently issued new standards with effective dates
for fiscal years 2014 and thereafter, as presented below.
ifrs 9, financial instruments
In November 2009, the International Accounting Standards
Board [“IASB”] published IFRS 9, Financial Instruments. This
new standard simplifies the classification and measurement
of financial assets set out in IAS 39, Financial Instruments:
Recognition and Measurement. Financial assets are to be
measured at amortized cost or fair value. They are to be
measured at amortized cost if the following two conditions
are met:
(a) the assets are held within a business model whose ob-
jective is to collect contractual cash flows; and
(b) the contractual cash flows are solely payments of principal
and interest on the outstanding principal.
All other financial assets are to be measured at fair value
through earnings. The entity may, if certain conditions are
met, elect to use the fair value option instead of measurement
at amortized cost. As well, the entity may choose upon initial
recognition to measure non-trading equity investments at
fair value through comprehensive income. Such a choice is
irrevocable.
In October 2010, the IASB issued revisions to IFRS 9, add-
ing the requirements for classification and measurement of
financial liabilities contained in IAS 39. For financial liabilities
measured at fair value through earnings using the fair value
option, the amount of change in a liability’s fair value at-
tributable to changes in its credit risk is recognized directly
in other comprehensive income.
In December 2011, the IASB deferred the mandatory ef-
fective date of IFRS 9 to fiscal years beginning on or after
January 1st, 2015. Early adoption is permitted under certain
conditions. An entity is not required to restate comparative
financial periods for its first time application of IFRS 9, but
must comply with the new disclosure requirements.
ifrs 10, Consolidated financial statements
In May 2011, the IASB published IFRS 10, Consolidated
Financial Statements, which supersedes SIC-12, Consolida-
tion – Special Purpose Entities and certain parts of IAS 27,
Consolidated and Separate Financial Statements. IFRS 10
uses control as the single basis for consolidation, irrespec-
tive of the nature of the investee, employing the following
factors to identify control:
(a) power over the investee;
(b) exposure or rights to variable returns from involvement
with the investee; and
(c) the ability to use power over the investee to affect the
amount of the investor’s returns.
IFRS 10 is applied to fiscal years beginning on or after
January 1st, 2013.
30
ifrs 12, disclosure of interests in other entities
In May 2011, the IASB published IFRS 12, Disclosure of Inter-
ests in Other Entities, which requires that an entity disclose
information on the nature of and risks associated with its
interests in other entities (i.e., subsidiaries, joint arrange-
ments, associates and unconsolidated structured entities)
and the effects of those interests on its financial statements.
IFRS 12 is applied to fiscal years beginning on or after
January 1st, 2013.
ifrs 13, fair value measurement
In May 2011, the IASB published IFRS 13, Fair Value Meas-
urement to establish a single framework for fair value meas-
urement of financial and non-financial items. IFRS 13 de-
fines fair value as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. It
also requires disclosure of certain information on fair value
measurements. IFRS 13 is applied to fiscal years beginning
on or after January 1st, 2013.
ias 32, financial instruments: Presentation
In December 2011, the IASB issued amendments to IAS 32,
Financial Instruments: Presentation clarifying the require-
ments for offsetting financial assets and liabilities. The
amendments shall be applied to fiscal years beginning on or
after January 1st, 2014. The IASB also issued amendments to
IFRS 7, Financial Instruments: Disclosure improving disclo-
sure on offsetting of financial assets and liabilities. These
amendments shall be applied to annual and interim per-
iods beginning on or after January 1st, 2013.
ias 36, impairment of assets
In May 2013, the IASB issued amendments to IAS 36, Impair-
ment of Assets to require disclosures about assets or cash
generating units for which an impairment loss was recog-
nized or reversed during the period. IAS 36 will be applied
to fiscal years beginning on or after January 1st, 2014 with
earlier adoption permitted.
The Corporation assesses that the above-mentioned
amendments will not significantly impact its income, finan-
cial position and cash flows.
RiSK FAcTORS
Richelieu is exposed to different risks that can have a material
adverse effect on its profitability. To offset such risks, the
Corporation has adopted various strategies adapted to the
major risk factors below.
economic conditions
The Corporation’s business and financial results partly de-
pend on general economic conditions and the economic
factors specific to the renovation and construction industry.
Any economic downturn could lead to a decline in sales
and have an adverse impact on the Corporation’s financial
performance.
Market and competition
The specialty hardware and renovation products segment
is highly competitive. Richelieu has developed a business
strategy rooted in a diversified product offering in various
targeted niche markets in North America and sourced from
suppliers around the world, in creative marketing and in
unparalleled expertise and quality of service. Up to now,
this strategy has enabled it to benefit from a solid competi-
tive edge. However, if Richelieu were unable to implement
its business strategy with the same success in the future, it
could lose market shares and its financial performance could
be adversely affected.
Foreign currency
Richelieu is exposed to the risks related to currency fluctua-
tions, primarily in regard to foreign-currency denominated
purchases and sales made abroad.
The Corporation’s products are regularly sourced from
abroad through its import business. Thus, any increase
in foreign currencies (U.S. dollar and the Euro) compared
with the Canadian dollar tends to raise its supply cost and
thereby affect its consolidated financial results. These
currency fluctuations related risks are mitigated by the
Corporation’s ability to adjust its selling prices within a
relatively short timeframe so as to protect its profit margins
although significant volatility in foreign currencies may have
an adverse impact on its sales.
Sales made abroad are mainly recorded in the United States
and account for approximately 25% of total sales. Any
volatility in the Canadian dollar therefore tends to affect
consolidated results. This risk is partially offset by the fact
that major purchases are denominated in U.S. dollars.
To manage its currency risk, the Corporation uses derivative
financial instruments, more specifically forward exchange
contracts in U.S. dollars and Euros. There can be no assur-
ance that the Corporation will not sustain losses arising from
these financial instruments or fluctuations in foreign currency.
Supply and inventory management
Richelieu must anticipate and meet its customers’ supply
needs. To that end, Richelieu must maintain solid relation-
ships with suppliers respecting its supply criteria. The inabil-
ity to maintain such relationships or to efficiently manage the
supply chain and inventories could affect the Corporation’s
financial position. Similarly, Richelieu must track trends and
its customers’ preferences and maintain inventories meeting
their needs, failing which its financial performance could be
adversely affected.
To mitigate its supply-related risks, Richelieu has built solid
long-term relationships with numerous suppliers on several
continents, most of whom are world leaders.
Richelieu Annual Repor t 2013
31
Acquisitions
Product liability
Acquisitions in North America remain an important stra-
tegic focus for Richelieu. The Corporation will maintain its
strict acquisition criteria and pay particular attention to
the integration of its acquisitions. Nevertheless, there is no
guarantee that a business matching Richelieu’s acquisition
criteria will be available and there can be no assurance
that the Corporation will be able to make acquisitions at
the same pace as in the past. However, the fact that the
North American market remains highly fragmented and
that acquisitions are generally of limited size reduces the
inherent financial and operational risks.
credit
The Corporation is exposed to the credit risk related to its
accounts receivable. Richelieu has adopted a policy defin-
ing the credit conditions for its customers to safeguard
against credit losses arising from doing business with
them. For each customer, the Corporation sets a specific
limit that is regularly reviewed. The diversification of its
products, customers and suppliers reasonably safeguards
the Corporation against a concentration of its credit risk.
No customer of the Corporation accounts for more than
10% of its revenues.
labour relations and qualified employees
To achieve its objectives, Richelieu must attract, train and
retain qualified employees while controlling its payroll. The
inability to attract, train and retain qualified employees and
to control its payroll could have an impact on the Corpora-
tion’s financial performance.
Close to 20% of Richelieu’s workforce is unionized. The
Corporation’s policy is to negotiate collective agreements
at conditions enabling it to maintain its competitive edge
and a positive and satisfactory working environment for its
entire team. Richelieu has not experienced any major labour
conflicts over the past five years and expects to maintain
sound working relations. Any interruption in operations as
a result of a labour conflict could have an adverse impact
on the Corporation’s financial results.
Stability of key officers
Richelieu offers a stimulating working environment and a
competitive compensation plan, which help it retain a stable
management team. Failure to retain the services of a high-
ly qualified management team could compromise the suc-
cess of Richelieu’s strategic execution and expansion, which
could have an adverse impact on its financial results. To ad-
equately manage its future growth, the Corporation adjusts
its organizational structure as needed and strengthens the
teams at the various levels of its business. It should be noted
that approximately 65% of its employees, including senior
officers, are Richelieu shareholders.
In the normal course of business, Richelieu is exposed to
various product liability claims that could result in major
costs and af fec t the Corporation’s financial position.
Richelieu has agreements containing the usual limits with
insurance companies to cover the risks of claims associated
with its operations.
crisis management and iT contingency plan
The IT structure implemented by Richelieu enables it to
support its operations and contributes to ensure their effi-
ciency. As the occurrence of a disaster, including a major
interruption of its computer systems, could affect its oper-
ations and financial performance, the Corporation has im-
plemented a crisis management and IT contingency plan to
reduce the extent of such a risk. This plan provides among
others for an alternate physical location in the event of a dis-
aster, generators in the event of power outages and a relief
computer as powerful as the central computer.
BOOK VAlue
In 2013, the share price fluctuated between $33.75 and
$46.21, and the volume traded on the Toronto Stock
Exchange totalled approximately 4.8 million shares. The
closing price was $44.68 on November 30, 2013, compared
with $33.54 as at November 30, 2012. Richelieu’s share price
has increased by 1,990% since its 1993 listing on the stock
market. It should also be pointed out that the Corporation
has paid shareholder dividends since 2002 and that the
dividends paid in 2013 represented 23.2% of net earnings
attributable to shareholders.
ShARe iNFORMATiON AS AT JANuARY 23, 2014
Issued and outstanding common shares: 20,047,061
Stock options under stock option plan: 710,673
OuTlOOK
During 2014, Richelieu will pursue its growth initiatives
in accordance with its two strategic drivers, consisting of
acquisitions in North America and internal growth fuelled
by innovations, targeted market development, the creation
of synergies with its acquisitions, and further operating ef-
ficiency improvements.
SuPPleMeNTARY iNFORMATiON
Further information about Richelieu, including its latest
Annual Information Form, is available on the System for
Electronic Document Analysis and Retrieval (SEDAR) website
at www.sedar.com.
richard lord
President and Chief
Executive Officer
January 23, 2014
antoine auclair
Vice-President and Chief
Financial Officer
32
Management’s Report
Related to the consolidated financial statements
The consolidated financial statements of Richelieu Hardware Ltd. (the “Corporation”) and other financial information
included in this Annual Report are the responsibility of the Corporation’s management. These consolidated financial
statements have been prepared by management in accordance with IFRS and approved by the Board of Directors.
Richelieu Hardware Ltd. maintains accounting and internal control systems which, in management’s opinion,
reasonably ensure the accuracy of the financial information and maintain proper standards of conduct in the
Corporation’s activities.
The Board of Directors fulfills its responsibility regarding the consolidated financial statements included in the
Annual Repor t, primarily through its Audit Commit tee. This commit tee which meets periodically with the
Corporation’s managers and external auditors, has reviewed the consolidated financial statements of Richelieu
Hardware Ltd. and has recommended that they be approved by the Board of Directors.
The consolidated financial statements have been audited by the Corporation’s external auditors, Ernst & Young LLP,
Chartered Professional Accountants.
Montreal, Canada
January 23, 2014
richard lord
President and Chief Executive Officer Vice-President and Chief Financial Officer
antoine auclair
Independent Auditors’ Report
To the Shareholders of richelieu Hardware ltd.
We have audited the accompanying consolidated financial statements of Richelieu Hardware Ltd., which comprise
the consolidated statements of financial position as at November 30, 2013 and 2012 and the consolidated statements
of earnings, comprehensive income, changes in equity and cash flows for the years the ended, and a summary of
significant accounting policies and other explanatory information.
management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements
in accordance with International Financial Reporting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
auditors’ responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and
fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal
control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness
of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for
our audit opinion.
opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
Richelieu Hardware Ltd. as at November 30, 2013 and 2012 and its financial performance and its cash flows for the
years then ended in accordance with International Financial Reporting Standards.
1
Montreal, Canada
January 23, 2014
1 CPA auditor, CA, public accountancy permit no. A120803
Richelieu Annual Repor t 2013
33
Consolidated Statements of Financial Position
As at November 30
(In thousands of dollars)
Notes
3
3, 4
3, 5
3, 5
9
3
7
7
9
8
8
11
2013
$
2012
$
46,187
78,343
—
136,746
975
262,251
22 291
15 661
52 788
3 334
356 325
56,462
318
1,354
58,134
—
3,246
1,831
63,211
25,288
2,356
258,965
2,236
288,845
4,269
293,114
356,325
51,587
75,721
514
127,607
781
256,210
23 740
15 601
51 405
2 913
349 869
54,379
—
1,743
56,122
820
3,246
1,739
61,927
23,349
2,761
258,775
(1,050)
283,835
4,107
287,942
349,869
Director
Director
assets
Current assets
Cash and cash equivalents
Accounts receivable
Income taxes receivable
Inventories
Prepaid expenses
non-current assets
Property, plant and equipment
Intangible assets
Goodwill
Deferred taxes
liabilities and eQUitY
Current liabilities
Accounts payable and accrued liabilities
Income taxes payable
Current portion of long-term debt
non-current liabilities
Long-term debt
Deferred taxes
Other liabilities
equity
Share capital
Contributed surplus
Retained earnings
Accumulated other comprehensive income (loss)
Equity attributable to shareholders of the Corporation
Non-controlling interests
Commitments and contingencies [note 10]
Subsequent event [note 17]
See accompanying notes to the consolidated financial statements.
On behalf of the Board:
34
Consolidated Statements of Earnings
Years ended November 30
(In thousands of dollars, except earnings per share)
sales
Cost of goods sold, warehousing, selling
and administrative expenses
earnings before amortization, financial costs and income taxes
Amortization of property, plant and equipment
Amortization of intangible assets
Financial costs, net
earnings before income taxes
Income taxes
net earnings
net earnings attributable to:
Shareholders of the Corporation
Non-controlling interests
net earnings per share attributable to shareholders of the Corporation
Basic
Diluted
See accompanying notes to the consolidated financial statements.
Notes
9
8
2013
$
586,775
516,402
70,373
5,060
2,218
(464)
6,814
63,559
16,902
46,657
46,403
254
46,657
2.25
2.22
Consolidated Statements of Comprehensive Income
Years ended November 30
(In thousands of dollars, except earnings per share)
net earnings
other comprehensive income (loss)
Exchange differences on translation of foreign operations
Comprehensive income
Comprehensive income attributable to:
Shareholders of the Corporation
Non-controlling interests
See accompanying notes to the consolidated financial statements.
Notes
11
2013
$
46,657
3,286
49,943
49,689
254
49,943
2012
$
565,798
494,635
71,163
5,162
2,351
(198)
7,315
63,848
17,939
45,909
45,404
505
45,909
2.17
2.15
2012
$
45,909
(1,153)
44,756
44,251
505
44,756
Richelieu Annual Repor t 2013
35
Consolidated Statements of Changes in Equity
Years ended November 30
[In thousands of dollars]
attributable to shareholders of the Corporation
Notes
Balance as at November 30, 2011
Net earnings
Other comprehensive income
(loss)
Comprehensive income
Shares repurchased
Stock options exercised
Share-based compensation
expense
Dividends [note 16]
Other liabilities
balance as at november 30,
2012
Net earnings
Other comprehensive income
(loss)
Comprehensive income
Shares repurchased
Stock options exercised
Share-based compensation
expense
Dividends [note 16]
Other liabilities
share
capital
$
8
19,714
—
—
—
(188)
3,823
—
—
—
3,635
23,349
—
—
—
(1,151)
3,090
—
—
—
1,939
Contributed
surplus
$
retained
earnings
$
3,586
—
—
—
—
(1,247)
422
—
—
(825)
229,064
45,404
—
45,404
(5,667)
—
—
(10,026)
—
(15,693)
(1,153)
(1,153)
—
—
—
—
—
—
2,761
—
258,775
46,403
(1,050)
—
—
—
—
(805)
400
—
—
(405)
—
46,403
(35,445)
—
—
(10,768)
—
(46,213)
3,286
3,286
—
—
—
—
—
—
accumulated
other
comprehensive
income (loss)
$
11
103
—
non-
controlling
interests
$
total
equity
$
total
$
252,467
45,404
3,720
505
256,187
45,909
(1,153)
44,251
(5,855)
2,576
422
(10,026)
—
(12,883)
283,835
46,403
3,286
49,689
(36,596)
2,285
400
(10,768)
—
(44,679)
—
505
—
—
—
—
(118)
(118)
(1,153)
44,756
(5,855)
2,576
422
(10,026)
(118)
(13,001)
4,107
254
287,942
46,657
—
254
—
—
—
—
(92)
(92)
3,286
49,943
(36,596)
2,285
400
(10,768)
(92)
(44,771)
balance as at november 30, 2013
25,288
2,356
258,965
2,236
288,845
4,269
293,114
See accompanying notes to the consolidated financial statements.
36
Notes
8
16
8
8
3
Consolidated Statements of Cash Flows
Years ended November 30
[In thousands of dollars]
oPerating aCtivities
Net earnings
Items not affecting cash:
Amortization of property, plant and equipment
Amortization of intangible assets
Deferred taxes
Share-based compensation expense
Net change in non-cash working capital balances
finanCing aCtivities
Repayment of long-term debt
Dividends paid
Common shares issued
Common shares repurchased for cancellation
investing aCtivities
Business acquisitions
Additions to property, plant and equipment and intangible assets
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
supplementary information
Income taxes paid
Interest received, net
See accompanying notes to the consolidated financial statements.
2013
$
46,657
5,060
2,218
(354)
1,397
54,978
(6 613)
48 365
(737)
(10,768)
2,285
(36,596)
(45,816)
(4,447)
(3,451)
(7,898)
(51)
(5,400)
51,587
46,187
16,351
(464)
2012
$
45,909
5,162
2,351
—
981
54,403
(8 781)
45 622
(2,909)
(10,026)
2,576
(5,855)
(16,214)
(2,386)
(4,797)
(7,183)
267
22,492
29,095
51,587
16,647
(335)
Richelieu Annual Repor t 2013
37
NOTe S TO c ONSOliDATe D FiNANciAl STATe MeNTS
November 30, 2013 and 2012 (Amounts are in thousands of dollars, except per-share amounts)
NATuRe OF BuSiNeSS
Accounts receivable
Richelieu Hardware Ltd. [the “Company”] is incorporated under
the laws of Quebec, Canada. The Corporation is a distributor, im-
porter, and manufacturer of specialty hardware and complement-
ary products. Its products are targeted to an extensive customer
base of kitchen and bathroom cabinet, furniture, and window and
door manufacturers plus the residential and commercial woodwork-
ing industry, as well as a large customer base of hardware retailers,
including renovation superstores. The Corporation’s head office is
located at 7900 Henri-Bourassa Blvd, W., Saint-Laurent, Quebec,
Canada, H4S 1V4.
1. SiGNiFicANT AccOuNTi NG POlicieS
The Corporation’s consolidated financial statements, presented in
Canadian dollars, have been prepared by management in accord-
ance with International Financial Reporting Standards [“IFRS”].
The preparation of the consolidated financial statements requires
management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and ac-
companying notes. These estimates are based on management’s
best knowledge of current events and actions that the Corporation
may undertake in the future and other factors deemed relevant and
reasonable.
The judgments made by management in applying the accounting
policies that have the most significant effect on the amounts rec-
ognized in the consolidated financial statements and the assump-
tions about the future and other major sources of estimation uncer-
tainty as at the end of the reporting period that could potentially
result in material adjustments to the carrying amount of assets and
liabilities during the following period, are summarized as follows:
Valuation of inventory impairment, including loss and obsoles-
cence, customer rebates, contingent liabilities, allowance for
doubtful accounts, goodwill and intangible assets with indefinite
useful lives, deferred tax assets and stock options requires the use
of judgment and assumptions that may affect the amounts reported
in the consolidated financial statements. The underlying estimates
and assumptions are reviewed regularly. Revised accounting esti-
mates, if any, are recognized in the period in which the estimates
are revised, as well as in the future periods affected by the revisions.
Actual results could differ from those estimates.
The Corporation’s consolidated financial statements have been
properly prepared within the reasonable limits of materiality in
accordance with the accounting policies summarized below:
Consolidation
The consolidated financial statements include the accounts of
Richelieu Hardware Ltd. and its subsidiaries described in note 13.
All significant intercompany balances and transactions have been
eliminated upon consolidation.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and highly liquid
investments with an initial term of three months or less. Cash and
cash equivalents were classified in “financial assets at fair value
through net earnings” and measured at fair value. Gains (losses)
arising from remeasurement at each period-end are recorded in the
consolidated statement of earnings.
Accounts receivable are classified in “loans and receivables” and
carried at cost, which is equivalent to fair market value on initial
recognition. Subsequent measurements are recorded at amortized
cost using the effective interest method. For the Corporation, this
measurement is usually equivalent to cost due to their short-term
maturities.
Inventories
Inventories, which consist primarily of finished goods, are valued
at the lower of average cost and net realizable value. Net realizable
value is the expected selling price in the normal course of business,
less estimated costs to sell. The Corporation uses significant
judgment when estimating the effect of certain factors on the net
realizable value of inventory, such as inventory obsolescence and
loss. The quantity, age and condition of inventory are measured and
assessed regularly during the year.
Property, plant and equipment
Property, plant and equipment are recorded at cost and amor-
tized on a straight-line basis over their estimated useful lives. The
main components have different useful lives and are amortized
separately. The amortization method and useful life estimates are
reviewed annually.
Buildings
Leasehold improvements
Machinery and equipment
Rolling stock
Furniture and fixtures
Computer equipment
Intangible assets
20 years
Lease terms, maximum 5 years
5-10 years
5 years
3-5 years
3-5 years
Intangible assets are acquired assets that lack physical substance
and that meet the specified criteria for recognition apart from good-
will and property, plant and equipment. Intangible assets consist
mainly of purchased or internally developed software, customer
relationships, non-competition agreements and trademarks. Soft-
ware and customer relationships are amortized on a straight-line
basis over their useful lives of 3 and 10-20 years, respectively, while
non-competition agreements are amortized over the terms of the
agreements. Trademarks have an indefinite life and are therefore
not amortized.
Goodwill
Goodwill represents the excess of the purchase price over the fair
value of net assets acquired. The goodwill arising from the acquisi-
tions corresponds to the development potential of the acquired
businesses, combined with the Corporation’s operations. Goodwill
is not amortized.
Impairment of non-current assets
At the end of each reporting period, the Corporation must deter-
mine whether indicators of impairment exist for its non-current
assets, excluding goodwill and intangible assets with indefinite
useful lives. If such indicators exist, the non-current assets are test-
ed for impairment. When the impairment test indicates that the
carrying amount of the intangible asset exceeds its fair value, an
impairment loss is recognized in net earnings in an amount equal
to the excess.
The Corporation is required to test goodwill and intangible assets
with indefinite lives for impairment at least once a year, whether or
not indicators of impairment exist.
38
NOTe S TO c ONSOliDATe D FiNANciAl STATe MeNTS
November 30, 2013 and 2012 (Amounts are in thousands of dollars, except per-share amounts)
1. SiGNiFicANT AccOuNTi NG POlicieS [cont’d]
Foreign currency translation
Impairment tests are carried out on the asset itself, the cash-
generating unit [“CGU”] or group of CGUs as at November 30.
A CGU is the smallest identifiable group of assets that generates
cash inflows that are largely independent of the cash inflows from
other assets or groups of assets. Goodwill and the supporting
assets that cannot be wholly allocated to a single CGU are tested
for impairment at the group of CGUs level.
Impairment tests consist in a comparison between the carrying and
recoverable amounts of an asset, CGU or group of CGUs. The re-
coverable amount is the higher of value in use and fair value less
costs to sell. Where the carrying amount exceeds the recoverable
amount, an impairment loss equal to the excess is recognized in net
earnings. Impairment losses related to CGUs or groups of CGUs
are allocated proportionately to the assets of the CGU or group of
CGUs; however, the carrying amount of the assets is not reduced
below the higher of their fair value less costs to sell and their value
in use.
Other than for goodwill, if a reversal of an impairment loss occurs,
it must be recognized immediately in net earnings. Reversals of im-
pairment losses related to a CGU or group of CGUs are allocated
proportionately to the assets of the CGU or group of CGUs. On re-
versal of an impairment loss, the increased recoverable amount of
an asset must not exceed the carrying amount that would have been
determined, net of amortization, if no impairment loss had been rec-
ognized in respect of the asset in prior years.
In impairment testing of goodwill and intangible assets with in-
definite useful lives, value in use is estimated using a discounted
future cash flow model. The application of this method is based on
different assumptions such as estimated future cash flows as de-
scribed in notes 5.
Other financial liabilities
Accounts payable and accrued liabilities are classified in “other
financial liabilities” and are initially recorded at fair value. They
are subsequently measured at amortized cost using the effective
interest method. For the Corporation, this measurement is usually
equivalent to cost. Options to purchase non-controlling interests
that correspond to the definition of a financial liability are measured
at fair value and presented under other liabilities.
Revenue recognition
The consolidated financial statements are presented in the
Corporation’s functional currency, which is the Canadian dollar.
Monetary assets and liabilities of the Corporation are translated at
the exchange rate in effect at the end of the reporting period and the
other items in the statements of financial position and earnings are
translated at the exchange rates in effect at the date of transaction.
Foreign exchange gains and losses are recognized in net earnings
in the year in which they arise.
The assets and liabilities of the U.S. subsidiary are translated into
Canadian dollars at the exchange rate in effect at the end of the re-
porting period. Revenues and expenses are translated at the rate in
effect at the date of transaction. Foreign exchange gains and losses
are recognized in the consolidated statements of comprehensive
income.
Foreign exchange forward contracts
The Corporation periodically enters into foreign exchange forward
contracts with major financial institutions to partially hedge the ef-
fects of changes in foreign exchange rates related to foreign curren-
cy liabilities, as well as to hedge anticipated purchase transactions.
The Corporation does not use derivatives for speculative purposes.
The Corporation uses hedge accounting only when IFRS documen-
tation criteria are met. Derivative financial instruments designated
as cash flow hedges are classified as available-for-sale financial
assets and liabilities and are measured at fair value, which is the
instruments’ approximate settlement value at market rates. Gains
and losses on remeasurement at each year-end are recorded in
comprehensive income. If the instrument is not designated and
documented as a hedge, changes in fair value are recognized in the
statement of consolidated earnings for the year. Assets or liabilities
related to financial instruments are included in accounts receivable
or accounts payable and accrued liabilities in the consolidated state-
ments of financial position.
Share-based payment
The Corporation recognizes stock-based compensation and other
share-based payments in net earnings using the fair value method
for stock options granted. The Black & Scholes model is used to
determine the grant date fair value of stock options. The application
of this method is based on different assumptions such as risk free
interest rate, expected life, volatility and dividend yield as described
in note 8.
Revenues are recognized when finished products are shipped to
customers.
Net earnings per share
Income taxes
The Corporation follows the liability method of accounting for
income taxes. Under this method, deferred tax assets and liabilities
are accounted for based on estimated taxes recoverable or payable
that would result from the recovery or settlement of the carrying
amount of assets and liabilities. Deferred tax assets and liabilities
are measured using substantially enacted tax rates expected to be in
effect in the years in which the temporary differences are expected
to reverse. Changes in these balances are recognized in net earnings
in the year in which they arise.
Deferred tax assets are recognized when it is probable that the
Corporation will have future taxable income against which these
tax assets may be offset. In determining these deferred tax assets,
assumptions are considered, such as the period for tax loss carry
forwards to be completely used up and the level of future taxable
income in accordance with tax planning strategies.
Net earnings per share are calculated based on the weighted aver-
age number of common shares outstanding during the year. Diluted
earnings per share are calculated using the treasury stock method
and take into account all the elements that have a dilutive effect.
2. chANGeS iN A ccOuNTiNG MeThODS
Adopted in 2013
IAS 1, Presentation of Financial Statements
In June 2011, the IASB issued amendments to IAS 1, Presentation
of Financial Statements. Items of other comprehensive income and
the corresponding tax are required to be grouped into those that
will and will not subsequently be reclassified to earnings. These
amendments are in effect since July 1st 2013 and had no impact
on the presentation of the consolidated financial statements of the
Corporation.
Richelieu Annual Repor t 2013
39
NOTe S TO c ONSOliDATe D FiNANciAl STATe MeNTS
November 30, 2013 and 2012 (Amounts are in thousands of dollars, except per-share amounts)
2. chANGeS iN A ccOuNTiNG MeThODS [cont’d]
IFRS 13, Fair Value Measurement
In May 2011, the IASB published IFRS 13, Fair Value Measurement
to establish a single framework for fair value measurement of fi-
nancial and non-financial items. IFRS 13 defines fair value as the
price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at
the measurement date. It also requires disclosure of certain in-
formation on fair value measurements. IFRS 13 is applied to fis-
cal years beginning on or after January 1st, 2013.
IAS 32, Financial Instruments: Presentation
In December 2011, the IASB issued amendments to IAS 32, Financial
Instruments: Presentation clarifying the requirements for offsetting
financial assets and liabilities. The amendments shall be applied to
fiscal years beginning on or after January 1st, 2014. The IASB also
issued amendments to IFRS 7, Financial Instruments: Disclosure im-
proving disclosure on offsetting of financial assets and liabilities.
These amendments shall be applied to annual and interim periods
beginning on or after January 1st, 2013.
IAS 36, Impairment of Assets
In May 2013, the IASB issued amendments to IAS 36, Impairment of
Assets to require disclosures about assets or cash generating units
for which an impairment loss was recognized or reversed during the
period. IAS 36 will be applied to fiscal years beginning on or after
January 1st, 2014 with earlier adoption permitted.
The Corporation assesses the above-mentioned amendments will
not significantly impact its income, financial position and cash flows.
3. BuSiNeSS AcQuiSiTiONS
2013
On September 3, 2013, the Corporation purchased the net assets
of Hi-Tech Glazing Supplies [“Hi-Tech”] for a cash consideration of
$4,150 and a balance of sale of $500. This Corporation based in
Vancouver is a distributor of door and window hardware, which
serves the British Columbia market.
On March 21, 2013, the Corporation purchased the net assets of
CourterCo Savannah LLC [“Savannah”] for a cash consideration of
$297 [$290 US]. This distributor of speciality and decorative hard-
ware product operates a distribution center based in Savannah
[Georgia, United-States] and serves a base of residential and com-
mercial woodworkers customers and kitchen, bathroom cabinet and
furniture manufacturers.
Since their acquisition, Hi-Tech and Savannah jointly generated sales
of $2,700. If these acquisitions had been completed on December 1st
2012, management estimates that generated sales would have been
approximately $7,000.
2012
On May 1st, 2012, the Corporation purchased the net assets of
CourterCo Inc. [“CourterCo”] for a cash consideration of $2,386
[$2,415 US], and a balance of sale of $606 [$613 US]. From its 3
locations in the United States, Indianapolis [Indiana], Louisville
[Kentucky], and Greensboro [North Carolina], this business serves
a base of residential and commercial woodworkers customers and
kitchen, bathroom cabinet and furniture manufacturers.
Recently issued
The IASB recently issued new standards with effective dates for
fiscal years 2014 and thereafter, as presented below.
IFRS 9, Financial Instruments
In November 2009, the International Accounting Standard Board
[“IASB”] published IFRS 9, Financial Instruments. This new standard
simplifies the classification and measurement of financial assets set
out in IAS 39, Financial Instruments: Recognition and Measurement.
Financial assets are to be measured at amortized cost or fair va-
lue. They are to be measured at amortized cost if the two following
conditions are met:
[a] The assets are held within a business model whose objective is
to collect contractual cash flows; and
[b] The contractual cash flows are solely payments of principal and
interest on the outstanding principal.
All other financial assets are to be measured at fair value through
earnings. The entity may, if certain conditions are met, elect to use
the fair value option instead of measurement at amortized cost.
As well, the entity may choose upon initial recognition to measure
non-trading equity investments at fair value through comprehensive
income. Such a choice is irrevocable.
In October 2010, the IASB issued revisions to IFRS 9, adding the re-
quirements for classification and measurement of financial liabilities
contained in IAS 39. For financial liabilities measured at fair value
through earnings using the fair value option, the amount of change
in a liability’s fair value attributable to changes in its credit risk is re-
cognized directly in other comprehensive income.
In December 2011, the IASB deferred the mandatory effective date
of IFRS 9 to fiscal years beginning on or after January 1st 2015. Early
adoption is permitted under certain conditions. An entity is not
required to restate comparative financial periods for its first time
application of IFRS 9, but must comply with the new disclosure
requirements.
IFRS 10, Consolidated Financial Statements
In May 2011, the IASB published IFRS 10, Consolidated Financial
Statements, which supersedes SIC-12, Consolidation – Special
Purpose Entities and certain parts of IAS 27, Consolidated and
Separate Financial Statements. IFRS 10 uses control as the single
basis for consolidation, irrespective of the nature of the investee,
employing the following factors to identify control:
[a] Power over the investee;
[b] Exposure or rights to variables returns from involvement with the
investee;
[c] The ability to use power over the investee to affect the amount
of the investor’s returns.
IFRS 10 is applied to fiscal years beginning on or after January 1st,
2013.
IFRS 12, Disclosure of Interests in Other Entities
In May 2011, the IASB published IFRS 12, Disclosure of Interests in
Other Entities which requires that an entity disclose information on
the nature of and risks associated with its interests in other entities
(i.e., subsidiaries, joint arrangements, associates and unconsolida-
ted structured entities) and the effects of those interests on its fi-
nancial statements. IFRS 12 is applied to fiscal years beginning on
or after January 1st, 2013.
40
NOTe S TO c ONSOliDATe D FiNANciAl STATe MeNTS
November 30, 2013 and 2012 (Amounts are in thousands of dollars, except per-share amounts)
3. BuSiNeSS AcQuiSiTiONS [cont’d]
These transactions were accounted for using the acquisition method and the results of operations are included in the consolidated financial
statements as of the respective acquisition date for each acquisition.
Summary of acquisitions
The preliminary purchase price allocations for Hi-Tech and Savannah and the final purchase price allocation of CourterCo, at the transaction
dates, are summarized as follows:
net assets acquired
Accounts receivable
Inventories
Prepaid expenses
Property, plant and equipment
Customer relationships
Non-competition agreements
Trademark
Goodwill
Current liabilities assumed
net assets acquired
Considerations
Cash, net of cash acquired
Considerations payable
2013
$
694
2,253
—
2,947
137
1,332
162
96
1,117
5,791
844
4,947
4,447
500
4,947
2012
$
1,509
1,930
24
3,463
66
439
57
205
316
4,546
1,556
2,990
2,384
606
2,990
During the year ended November 30, 2013, the Corporation paid balances of sale amounting to $737 and reduced the balances of sales by
$972 as a result of purchase price adjustments on acquisitions from previous years.
4. PROPeRTY, PlANT AND eQuiPMeNT
land
buildings
leasehold
improvements
machinery
and
equipment rolling stock
furniture and
fixtures
Computer
equipment
$
$
$
$
$
3,652
10,702
281
—
(1,274)
(1)
1,310
181
31
(435)
(18)
5,302
1,070
9
(1,548)
(14)
1,469
605
—
(588)
(5)
$
1,565
1,507
26
(801)
(8)
total
$
24,927
3,956
66
$
927
312
—
(516)
(5,162)
(1)
(47)
Net carrying amount as at
November 30th 2011
Acquisitions
Acquisitions through business
combinations
Amortization
Effect of changes in foreign
exchange rates
Net carrying amount as at
November 30th, 2012
Cost
Accumulated amortization
Net carrying amount as at
November 30th, 2012
—
—
—
—
3,652
3,652
—
9,708
1,069
4,819
1,481
2,289
722
23,740
21,170
(11,462)
4,262
(3,193)
23,164
(18,345)
6,272
(4,791)
12,076
(9,787)
9,262
79,858
(8,540)
(56,118)
3,652
9,708
1,069
4,819
1,481
2,289
722
23,740
Richelieu Annual Repor t 2013
41
NOTe S TO c ONSOliDATe D FiNANciAl STATe MeNTS
November 30, 2013 and 2012 (Amounts are in thousands of dollars, except per-share amounts)
4. PROPeRTY, PlANT AND eQuiPMeNT [cont’d]
land
buildings
leasehold
improvements
machinery
and
equipment rolling stock
furniture and
fixtures
Computer
equipment
net carrying amount as at
november 30th 2012
acquisitions
acquisitions through business
combinations
amortization
effect of changes in foreign
exchange rates
net carrying amount as at
november 30th, 2013
Cost
accumulated amortization
net carrying amount as at
november 30th, 2013
$
$
$
$
$
$
3,652
9,708
1,069
4,819
1,481
—
—
—
—
797
—
(1,275)
—
6
—
371
33
(395)
36
(1,267)
44
862
57
(586)
21
2,289
879
47
(1,015)
80
total
$
23,740
3,287
137
$
722
372
—
(522)
(5,060)
6
187
3,652
9,230
716
4,000
1,835
2,280
578
22,291
3,652
21,967
4,322
23,670
—
(12,737)
(3,606)
(19,670)
7,156
(5,321)
13,118
(10,838)
9,663
83,548
(9,085)
(61,257)
3,652
9,230
716
4,000
1,835
2,280
578
22,291
Customer
relationships
trademarks
$
$
total
$
goodwill
$
11,421
3,295
16,639
50,748
33
439
—
(1,303)
(165)
10,425
20,288
(9,863)
10,425
—
205
—
—
(34)
3,466
815
701
—
(2,351)
(203)
15,601
3,466
30,144
—
(14,543)
—
316
396
—
(55)
51,405
51,405
—
3,466
15,601
51,405
10,425
3,466
15,601
—
1,332
(1,374)
411
10,794
22,494
(11,700)
10,794
—
96
—
104
3,666
164
1,590
(2,218)
524
15,661
51,405
—
1,117
—
266
52,788
3,666
33,066
52,788
—
(17,405)
—
3,666
15,661
52,788
5. iNTANGiBle ASSeTS AND GOODWill
Net carrying amount as at November 30th, 2011
Acquisitions
Acquisitions through business combinations
Adjustment for business combinations
Amortization
Effect of changes in foreign exchange rates
Net carrying amount as at November 30th, 2012
Cost
Accumulated amortization
Net carrying amount November 30th, 2012
net carrying amount as at november 30th, 2012
acquisitions
acquisitions through business combinations
amortization
effect of changes in foreign exchange rates
net carrying amount as at november 30th, 2013
Cost
accumulated amortization
net carrying amount november 30th, 2013
non-
competition
agreements
software
$
1,250
749
—
—
(831)
—
1,168
5,044
(3,876)
1,168
1,168
164
—
(717)
—
615
5,209
(4,594)
615
$
673
33
57
—
(217)
(4)
542
1,346
(804)
542
542
—
162
(127)
9
586
1,697
(1,111)
586
42
NOTe S TO c ONSOliDATe D FiNANciAl STATe MeNTS
November 30, 2013 and 2012 (Amounts are in thousands of dollars, except per-share amounts)
5. iNTANGiBle ASSeTS AND GOODWill [cont’d]
For impairment test purposes, the carrying value of goodwill and
intangible assets has been allocated to CGUs or groups of CGUs.
The recoverable value of the CGUs or groups of CGUs was deter-
mined on the basis of their value in use, which was calculated using
forecasted cash flows before taxes over a period of five years. The
discount rates before taxes used as at November 30, 2013 and 2012
are between 13% and 14%, considering a terminal value of 2%. No
reasonably possible change to the main assumptions used for the
impairment tests would result in a carrying amount higher than the
recoverable amount.
6. BANK iNDeBTeDNeSS
The Corporation has a line of credit with a Canadian banking insti-
tution with an authorized amount of $26 million in Canadian dollar
and $6 million in US dollar, bearing interest at the bank’s prime and
base rates, which were respectively 3% and 3.75% as at November 30,
2013 and 2012. The line of credit is renewable annually.
7. DeBT lONG-TeRM
Business acquisition considerations payable not
bearing interests, including US$181 [US$1,017
in 2012];
Current portion of long-term debt
Long-term debt
2013
2012
$
$
1,354
2,563
1,354
—
1,743
820
8. ShARe cAPiTAl
authorized
Unlimited number of:
Common shares.
Non voting first and second ranking preferred shares issuable in
series, the characteristics of which are to be determined by the
Board of Directors.
20,046,061 common shares
[2012 – 20,794,484]
issued
2013
2012
$
$
25,288
23,349
During 2013, the Corporation issued 124,577 common shares
[2012 – 121,375] at an average price of $18.34 per share [2012 –
$21.22] pursuant to the exercise of options under the stock option
plan. In addition, during 2013, the Corporation, through a normal
course issuer bid, purchased 873,000 common shares for cancel-
lation in consideration of $36,596 [2012 – 173,600 for a considera-
tion of $5,855] which resulted in a premium on the redemption in
the amount of $35,445 recorded in the consolidated statements
of retained earnings [premium of $5,667 in 2012].
Stock option plan
The Corporation offers a stock option plan to its directors, officers
and key employees. The subscription price of each share issuable
under the plan is equal to the market price of the shares five days
prior to the day the option was granted and must be paid in full at the
time the option is exercised. Options vest at a rate of 25% per year
starting one year after grant date and expire on the tenth anniversary
of the grant date.
As at November 30, 2013, 145,650 options [2012 – 219,900] were still
available to be granted.
Changes in stock options are summarized as follows:
number of
options
exercise price
per share
$
aggregate
$
883,000
11.35 to 30.68
41,000
27.43
(121,375)
11.35 to 30.68
(40,625)
15.89 to 30.68
762,000
14.50 to 30.68
78,000
38.14
(124,577)
14.50 to 30.45
(3,750)
27.43 to 38.14
18,759
1,125
(2,576)
(1,034)
16,274
2,975
(2,285)
(127)
711,673
15.89 to 38.14
16,837
Outstanding,
November 30, 2011
Granted
Exercised
Cancelled
outstanding,
november 30, 2012
granted
exercised
Cancelled
outstanding,
november 30, 2013
The table below summarizes information regarding the stock
options outstanding as at November 30, 2013 :
range in
exercise
price
[in dollars]
options outstanding
exercisable options
Weighted
Weighted
average
average
remaining
exercise
Weighted
average
exercise
number of
options
period
[years]
price
number of
price
[in dollars]
options
[in dollars]
15.89 – 21.69
286,500
21.70 – 24.76
287,173
24.77 – 30.44
30.45 – 38.14
38,500
99,500
711,673
3.83
2.32
8.14
8.73
4.14
19.18
23.25
27.44
36.32
286,500
285,298
9,875
11,750
19.18
23.25
27.46
30.45
23.67
593,423
21.50
During 2013, the Corporation granted 78,000 options [2012 –
41,000] with an average exercise price of $38.14 per share [2012 –
$27.43] and an average fair value of $9.95 per option [2012 – $6.56]
as determined using the Black & Scholes option pricing model
using an expected dividend yield of 1.34% [2012 – 1.75%], a volatility
of 25% [2012 – 25%], a risk free interest rate of 2.04% [2012 – 2.31%]
and an expected life of 7 years [2012 – 7 years]. The compensa-
tion expense charged to earnings for the options granted in 2013
amounted to $400 [2012 – $422].
Deferred share unit plan
The Corporation offers a deferred share unit (“DSU”) plan to its
directors who can elect to receive part or all of their compensation
in DSUs. The value of DSUs is redeemable for cash only when a di-
rector ceases to be a member of the Board. The financial liability re-
sulting from the plan of $3,156 [2012 – $2,159] is presented under the
Accounts payable and accrued liabilities. The compensation expense
charged to earnings for the DSU in 2013 amounted to $997 [2012 –
$559] and is recognized under Cost of goods sold, warehousing,
selling and administrative expenses.
Richelieu Annual Repor t 2013
43
NOTe S TO c ONSOliDATe D FiNANciAl STATe MeNTS
November 30, 2013 and 2012 (Amounts are in thousands of dollars, except per-share amounts)
8. ShARe cAPiTAl[cont’d]
Share purchase plan
The Corporation has a share purchase plan entitling any employees
to purchase shares up to a maximum percentage of their total com-
pensation in cash. The Corporation contributes an amount equiv-
alent to a percentage of any amounts invested by the employee
to the purchase of additional shares. The Corporation’s contribu-
tion is determined annually. Compensation expense related to the
share purchase plan amounted to $413 for 2013 [2012 – $391] and
is recognized under Cost of goods sold, warehousing, selling and
administrative expenses.
Earnings per share
Basic earnings per share and diluted earnings per share were calcu-
lated based on the following number of shares:
Deferred taxes reflect the net tax impact of temporary differ-
ences between the value of assets and liabilities for accounting
and tax purposes. The major components of deferred tax assets
and liabilities of the Corporation were as follows:
deferred taxes
Translation of foreign exchange currencies,
other reserves only recognized for tax
purposes upon disbursement and other tax
attributes
Excess of the tax value of Property, plant and
equipment over their net carrying value
Excess of the net carrying value of intangible
assets and goodwill over their tax value
2013
2012
$
$
3,080
2,545
1,593
1,607
(4,585)
(4,485)
88
(333)
2013
2012
net amount
Weighted average number of shares outstanding
– Basic
Dilutive effect under stock option plan
20,632
20,885
298
252
Weighted average number of shares outstanding
– Diluted
20,930
21,137
The computation of diluted net earnings per share includes all out-
standing options as at November 30, 2013 and 2012.
9. iNcOMe TAXeS
The main components of the provision for income taxes are as follows:
The net deferred taxes included the following as at November 30:
Deferred tax assets
Deferred tax liabilities
net amount
2013
2012
$
$
3,334
2,913
(3,246)
(3,246)
88
(333)
The variations of deferred taxes for the years ended November 30
are detailed as follows :
Current
Deferred
Temporary differences
772
Deferred tax assets not previously recognized
(1,126)
—
—
16,902
17,939
The effective income tax rate differs from the combined statutory
rates for the following reasons:
2013
2012
$
$
Balance at the beginning of the year, net
17,256
17,939
In net earnings
Other
Balance at the end of the year, net
2013
2012
$
(333)
354
67
88
$
(168)
—
(165)
(333)
The amount of deductible temporary differences and unused tax
losses for which no deferred tax assets is recognised in the state-
ment of financial position amounts to $29,600 as at November 30,
2013 [$31,900 – 2012].
Combined statutory rates
2013
2012
$
$
26.87% 26.96%
10. cOMMiTMeNTS AND cONTiNGeNcieS
[a] Leases
Income taxes at combined statutory rates
17,076
17,212
Increase (decrease) resulting from:
Impact of statutory rates changes for the
subsidiary outside Canada
Share-based compensation
Other non-deductible expenses
353
108
115
Deferred tax assets not previously recognized
(1,126)
Other
376
(21)
265
103
—
380
16,902
17,939
The Corporation has commitments under operating leases for ware-
house and office premises expiring on various dates up to 2019. The
future minimum payments, excluding incidental costs for which the
Corporation is responsible, are as follows:
Less than a year
Between 1 and 5 years
More than 5 years
$
7,265
15,292
469
23,026
44
NOTe S TO c ONSOliDATe D FiNANciAl STATe MeNTS
November 30, 2013 and 2012 (Amounts are in thousands of dollars, except per-share amounts)
10. cOMMiTMeNTS AND cONTiNGeNcieS [cont’d]
[b] Forward exchange contracts
The balance of accounts receivable of the Corporation that are
overdue for more than 60 days, but which were not provided for,
totals $863 [$1,513 in 2012].
As at November 30, 2013, the Corporation held the following ex-
change forward contracts having maturity dates in December 2013.
As at November 30, 2013 and 2012, no customer accounted for
more than 10% of the total accounts receivable.
Type
Currency in thousands
Average exchange rate
Market risk
Purchase
3,300 Euros
1.42
[c] Claims
In the normal course of business, various proceedings and claims
are instituted against the Corporation. Management believes that
any forthcoming settlement in respect of these claims will not have
a material effect on the Corporation’s financial position or net con-
solidated earnings.
11. AccuMulATeD OTheR cOMPReheNSiVe iNcOMe (lOSS)
The accumulated other comprehensive income, including the fol-
lowing items and the changes that occurred during the year, were
as follows:
Balance at the beginning of the year
Exchange differences on translation of foreign
operations
balance at the end of the year
2013
2012
$
(1,050)
$
103
3,286
2,236
(1,153)
(1,050)
The Corporation’s foreign currency exposure arises from purchases
and sales transacted mainly in U.S. dollars and Euros. Administra-
tive charges included, for the year ended November 30, 2013, an
exchange gain of $600 [2012 – loss of $9].
The Corporation’s policy is to maintain its purchase price and sell-
ing prices by mitigating its exposure by use of derivative financial
instruments. To protect its operations from exposure to exchange
rate fluctuations, foreign exchange contracts are used. Major ex-
change risks are covered by a centralized cash flow management.
Exchange rate risks are managed in accordance with the Corpora-
tion’s policy on exchange risk management. The goal of this policy
is to protect the Corporation’s profits by eliminating the exposure
to exchange rate fluctuations. The Corporation’s policy does not
allow speculative trades.
As at November 30, 2013 and 2012, a decrease of 1% of the Cana-
dian dollar against the U.S. dollar and the Euro, all other variables
remaining the same, would have had no significant effect on con-
solidated net earnings and would have increased the consolidat-
ed comprehensive income by $838 [$731 – 2012]. The exchange
rate sensitivity is calculated by aggregation of the net foreign ex-
change rate exposure of the Corporation’s financial instruments as of
November 30, 2013 and 2012.
12. FiNANciAl iNSTRuMeNTS AND OTheR iNFORMATiON
Liquidity risk
Fair values
The carrying value of the cash and cash equivalents, accounts
receivable and accounts payable and accrued liabilities are a rea-
sonable estimate of their fair value because of their short maturity.
The carrying value of long-term debt approximates their fair value
because of the short maturity on balances of sale payable.
As at November 30, 2013, the fair value of the forward exchange
contracts resulted in a gain of approximately $75 [gain of approx-
imately $25 as at November 30, 2012], representing the amount
the Corporation would collect on settlement of these contracts at
spot rates.
Credit risk
The Corporation sells its products to numerous customers in
Canada, and in a lesser proportion in the United States. The credit
risk refers to the possibility that customers will be unable to as-
sume their liabilities towards the Corporation. The average days
outstanding of accounts receivable, as at November 30, 2013 and
2012 is acceptable given the industry in which the Corporation
operates.
The Corporation performs ongoing credit evaluations of custom-
ers and generally does not require collateral. The allowance for
doubtful accounts for the years ended November 30, 2013 and
2012 is as follows:
2013
2012
$
5,032
1,797
$
5,006
2,152
(1,940)
(2,061)
135
5,024
(65)
5,032
Balance at the beginning of the year
Allowance for doubtful accounts
Write-offs
Exchange rate variations
Balance at the end of the year
Richelieu Annual Repor t 2013
The Corporation manages its risk of not being able to settle its
financial liabilities when required by taking into account its oper-
ational needs and by using different financing tools, if required.
During the previous years, the Corporation has financed its growth,
its acquisitions, and its payout to shareholders by using the cash
generated by the operating activities.
Current fiscal year expenses
During the year ended November 30, 2013, the amount relating to
inventories recorded as expenses from the distribution, imports
and manufacturing activities totals $419,846 [2012 – $398,957]. An
expense of $1,750 [2012 – $2,123] for inventory obsolescence is in-
cluded in this amount. Salaries and related charges of $85,984 [2012
– $81,992] are included in the Cost of goods sold, warehousing, sell-
ing and administrative expenses.
13. RelATeD PARTY iNFORMATiONS
Scope of consolidation
names
Country of
incorporation
equity interest
%
voting rights
%
Richelieu America Ltd.
U.S.
Richelieu Finances Ltd.
Canada
Richelieu Hardware
Canada Ltd.
Cedan Industries Inc.
Distributions 20/20 inc.
Provincial Woodproducts
Ltd.
Menuiserie des Pins Ltd.
Canada
Canada
Canada
Canada
Canada
100
100
100
100
100
85
75
100
100
100
100
100
85
75
45
NOTe S TO c ONSOliDATe D FiNANciAl STATe MeNTS
November 30, 2013 and 2012 (Amounts are in thousands of dollars, except per-share amounts)
13. RelATeD PARTY iNFORMATiONS [cont’d]
16. DiViDeNDS
For the year ended November 30, 2013, the Corporation paid a
quarterly dividend of $0.13 per common share [2012 – quarterly
dividend of $0.12 per share] for a total amount of $10,768
[2012 – $10,026]. For 2014, the Board of Directors approved on
January 23, 2014 the payment of a quarterly dividend of $0.14 per
common share.
17. SuBSeQueNT eVeNT
On December 2, 2013, the Corporation acquired all of the out-
standing common shares of Procraft Industrial Ltd., a distributor
of finishing products, serving a customer base of residential and
commercial woodworker and kitchen cabinet manufac turers
in the Maritimes Provinces from its three distribution centers.
This acquisition will add sales of approximately $4 million to the
Corporation’s total revenues.
18. APPROVAl OF FiNANciAl STATeMeNTS
The consolidated financial s tatement s for the year ended
November 30, 2013 (including the comparative figures) were
approved for issue by the Board of Directors on January 23, 2014.
Executive officers’ compensation
Short-term employee benefits
Other long-term benefits
Share-based compensation
2013
2012
$
$
2,473
2,669
509
16
228
17
2,998
2,914
Accounts payable include a retirement allowance amounting to
$2,000 payable to a senior executive officer.
14. GeOGRAPhic iNFORMATiON
During the year ended November 30, 2013, near 75% of sales had
been made in Canada [2012 – 79%]. The Corporation’s sales to
foreign countries, almost entirely directed to the United States,
amounted to $ 146,941 [2012 – $120,658] in Canadian dollars and to
$143,337 [2012 – $120,403] in U.S. dollars.
As at November 30, 2013, out of a total amount of $22,291 in capital
assets [2012 – $23,740], $3,019 [2012 – $3,301] are located in the
United States. In addition, intangible assets located in the United
States amounted to $7,841 [2012 – $7,996 ] and goodwill to $4,154
[2012 – $3,835] in Canadian dollars and to $7,384 [2012 – $8,047]
and goodwill to $3,911 [2012 – $3,860] in US dollars.
15. cAPiTAl MANAGeMeNT
The Corporation’s objectives are:
■ Maintain a low debt ratio to preserve its capacity to pursue its
growth both internally and through acquisitions;
■ Provide an adequate return to shareholders.
The Corporation manages and makes adjustments to its capital
structure in light of changes in economic conditions and the risk
characteristics of underlying assets. To maintain or adjust its capital
structure, the Corporation may adjust the amount of dividends paid
to shareholders, return capital to shareholders or issue new shares.
For the year ended November 30, 2013, the Corporation achieved
the following results regarding its capital management objectives:
■ Debt/equity ratio: 0.5% [2012 – 0.9%] [Long-term debt/Equity]
■ Return on average shareholder’s equity of 16.2% over the last
12 months [2012 – 16.9% for the last 12 months]
The Corporation’s capital management objectives remained un-
changed from the previous fiscal year.
46
Transfer Agent and Registrar
Computershare Trust Company of Canada
Auditors
Ernst & Young LLP
800 René-Lévesque Blvd. West
Suite 1900
Montreal, Quebec, H3B 1X9
head Office
Richelieu Hardware Ltd.
7900 Henri-Bourassa Blvd. West
Montreal, Quebec, H4S 1V4
Telephone: 514 336-4144
Fax: 514 832-4002
pour position
Printed in Canada
n
g
i
s
e
d
a
t
o
i
:
n
o
i
t
c
u
d
o
r
P
/
3
n
i
z
U
:
n
g
i
s
e
D
c
i
h
p
a
r
G
/
.
c
n
I
s
n
o
i
t
a
c
i
n
u
m
m
o
C
l
a
i
i
c
n
a
n
F
e
r
v
b
e
f
e
L
:
n
o
i
t
a
z
i
l
a
e
R
www.richelieu.com