LEADING
THE MARKET
EVOLUTION
through innovation
and service
annual REPORT 2014
Table of contents
Financial highlights
Profile
Message to shareholders
Directors and officers
Leading the market evolution through innovation
and service
Management’s report
Management’s and independent auditors’ reports
Consolidated statements of financial position
Consolidated statements of earnings
Consolidated statements of comprehensive income
Consolidated statements of changes in equity
Consolidated statements of cash flows
Notes to consolidated financial statements
3
4
5
9
10
20
33
34
35
35
36
37
38
The annual general meeting of shareholders
will be held on April 2, 2015 at 10:30 a.m.,
at the Omni Mont-Royal Hotel,
1050 Sherbrooke Street West, Montreal, Quebec.
At RiCheLieu,
we ALwAys hAve
these questioNs iN MiND:
What creates value
for our manufacturer
and retailer customers?
How can we most effectively
contribute to the successful
development of their business?
We answer them by:
• understanding their priorities as entrepreneurs,
managers, manufacturers and retailers,
• giving them the best access to the most innovative
solutions and products worldwide and the
unmatched diversity of our offering,
• providing them with our expertise through
impeccable multi-access service so their
experience at Richelieu exceeds their
expectations of efficiency and creativity.
Richelieu annual REPORT 2014
1
1
A PROfITAbLE
GROWTH STRATEGy
internal growth and expansion-by-acquisition
Net eARNiNgs
PeR shARe At tRibutAbLe
to shARehoLDeRs (DiLuteD)
(in $)
CAsh F Lows
FRoM oPeRAtiNg
ACtivities
(in millions of $)
646.9
586.8
565.8
2.63
60.3
54.4
55.0
2.22
2.15
50.2
45.1
1.87
1.78
sALes
(in millions of $)
523.8
447.0
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
equit y/Debt
(in millions of $)
313.6
5.4
equit y
293.1
287.9
256.2
253.9
Debt
5.5
2.9
2.6
1.4
2010
2011
2012
2013
2014
2
. 2010-2014 17 acquisitions2014Procraft Industrial Ltd. (Maritime Provinces, Canada)Pleasantside Distribution Ltd. (Western Canada)CabinetWare, Inc. (Florida)XM Export-Import Canada Inc. (Quebec)Thruway Hardwood and Plywood Corp. (New York State)2013Hi-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. (Illinois)PJ White Hardwoods Ltd (Alberta, B.C.)
fINANcIAL
HIGHLIGHTS
Years ended November 30
(in thousands of $, except per share amounts, number of shares and data expressed as a %)
Richelieu annual REPORT 2014
3
20142013201220112010 (1)$$$$$Sales646,909 586,775 565,798523,786446,963EBITDA (2)77,41770,37371,16367,14963,832EBITDA margin (%)12.012.012.612.814.3Net earnings52,57346,65745,90940,10539,233Net earnings attributable to shareholders of the Corporation52,39346,40345,40439,72638,574• basic per share ($)2.672.252.171.891.79• diluted per share ($)2.632.222.151.871.78Net margin attributable to shareholders of the Corporation (%) 8.1 7.98.07.68.6Cash flows from operating activities (3) 60,253 54,97854,40350,18345,059• diluted per share ($)3.03 2.632.572.362.08Cash dividends paid on shares11,02310,76810,0269,2677,768• per share ($) 0.56 0.520.480.440.36Average number of shares outstanding (diluted) (in thousands) 19,91820,93021,13721,26221,705As at November 30Total assets390,721356,325349,869318,676320,816Working capital214,866204,117200,088166,897162,727Current ratio4.04.54.64.03.7Equity 313,553 293,114287,942256,187253,869Return on average equity (%)17.516.216.916.515.9Book value ($) 15.8014.4113.6512.1112.01Total debt 5,354 1,3542,5635,5442,858Cash and cash equivalents33,72146,18751,58729,09539,289(1) The financial statements for 2010 have been prepared in accordance with Canadian GAAP. Since 2011, financial statements are prepared in accordance with IFRS.(2) EBITDA is a non-IFRS measure, as described on page 22 of this report.(3) Cash flows from operating activities and cash flows per share are non-IFRS measures, as described on page 22 of this report.Market capitalization as at November 30, 2014: $1.1 billionAppreciation in share price (RCH) since initial stock listing: 2,548%Total return on share/10 years*: 216%Average annual return on share/10 years*: 12.2%*Including dividend reinvestment PROfILE
Importer, distributor and
manufacturer of specialty hardware
and complementary products —
NORTH AMERIcAN LEADER
Richelieu is:
OvER 70,000 cusTOmERs — kitchen and bathroom cabinet
manufacturers, kitchen designers, residential and commercial woodworkers,
home furnishing manufacturers, office furniture and ready-to-assemble
furniture manufacturers, renovation superstores and purchasing groups
including over 6,000 hardware retailers.
mORE Than 1,800 EmPlOyEEs, of whom close to half are dedi-
cated to sales and marketing, and over 50% are Richelieu shareholders.
OvER 100,000 PROducTs (sKus) in a wide variety of categories
including: kitchen accessories, lighting systems, finishing and decorating
products, functional hardware, ergonomic workstations, closet and kitchen
storage solutions, sliding door systems, decorative and functional panels,
high-pressure laminates, floor protection products and window and door
hardware. This offering is complemented by the specialty items manufactured
by our two subsidiaries cedan Industries Inc. and menuiserie des Pins ltée.
Those include a broad range of veneer sheets and edgebanding products,
along with an extensive selection of decorative moldings and components
for the window and door industry. many of our products are manufactured
according to our specifications and those of our customers.
66 dIsTRIbuTIOn cEnTREs IncludIng shOWROOms
and TWO manufacTuRIng PlanTs In nORTh
amERIca. Our diversified offering, one-stop shop service approach,
efficient logistics 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.
4
2014
Key creation
Of VALUE DRIVERS
Richelieu has always been customer-oriented and will remain that way. As a distributor
and manufacturer, our mission is to offer our customers the best hardware solutions and
products worldwide and to serve them as efficiently as possible. evolving technologies
and design create a steady flow of functional and decorative innovations and, as a
leader, Richelieu is at the core of this potential for the benefit of its customers. we are
proud of our relationship of trust and cooperation with the world’s top manufacturers
who are expertise partners. innovation is a growth driver and quality of service and
execution is the key to customer satisfaction. we work hard and invest in it every year.
we thereby lead the market’s evolution through innovation and service, while looking
to the future.
Our strategies aim to create value in order to further
innovate and provide customers with first-class
service − and to also benefit our other growth pillars,
our employees, suppliers and shareholders.
Profitability and financial solidity
To remain customer-centred, we must maintain the fundamental
conditions for the financial solidity of our corporation. We therefore
endeavour to keep a business model that allows us the optimal opera-
tional flexibility to best serve our customers. Efficient supply chain ma-
nagement and our innovation and acquisition strategies are essential.
Our 2014 results and financial position attest once again to the validity
and profitability of our business model along with the commitment
and competencies of our teams.
Richelieu annual REPORT 2014
5
Richard lord
President and
chief Executive Officer
creation of value through five
new strategic acquisitions
Our acquisition strategy aims for gains in market
share for the long term, the addition of expertise
and added value for our customers. It has always
been selective and rigorous. We target solid com-
panies in our field, with a complementary product
offering and customer base, and a local experi-
enced team ready to commit to our corporate cul-
ture. We look to close these acquisitions at a fair
price, and it is essential that we integrate them with
optimal efficiency while creating operational and
sales synergies through our network and richelieu.
com. In 2014, we continued to consolidate our pos-
itioning and expand our bases in canada and the
united states with five acquisitions that will
contribute to our future growth.
The three canadian distributors who joined us during
the year broadened our specialty products offering
and our customer base of manufacturers and
residential and commercial woodworkers, especially
in Eastern and Western canada. The acquisition of
Procraft, a diversified finishing products distributor
covering the maritime Provinces, positions us
as a major supplier for this product line in north
america, while also strengthening our presence in
a market where we were already well established.
Pleasantside, a distributor of specialty glass
hardware and other related products present in
saskatoon and Winnipeg, is a good fit with our
operations in Western canada. finally, Xm, an
architectural window and door hardware distributor
operating in Quebec, enhances our positioning in
this market segment and complements our line of
Onward products.
In the united states, the acquisition of cabinetWare,
a functional and decorative hardware distributor
operating centres in sarasota, Tampa bay, Orlando
and Jacksonville, increases our presence in the
important florida market with a broader customer
base. We are very proud of our coverage of the
florida market, where we operate eight distribution
centres.
all our market segments contributed to the year’s
strong performance. Our operations generated
solid growth, as total sales and net earnings rose
10.2% and 12.7% respectively. In canada, where
we enjoy a leading position, our sales increased
by 7.1%, of which 4.3% from internal growth. In the
united states, with the 17 acquisitions closed since
we first entered that market, including the two dis-
tributors acquired in florida and new york state in
2014, we further enhanced our positioning, sup-
ported by our innovation strategy and attention to
quality of service. Our sales grew by 11.6% in u.s.
dollars in 2014, of which 8.1% from internal growth
and 3.5% from acquisitions.
The growth generated every year by our operations
and our rigorous control of expenses and financial
discipline sustain Richelieu’s good level of liquidity
and robust financial bases. We thus assume our re-
sponsibility as a quality employer and we can count
on a strong dedicated team. To our shareholders,
of which over 50% of our employees, we distributed
a total of $41.4 million in share repurchases and
dividends during the year. In addition, our share
appreciated 26.7% in 2014. We are proud that our
market capitalization topped $1 billion.
RCH 1994-2014
$56.61
11-30-2014
RCH compound
annual return: 17 %
RCH
2 -for-1
share splits
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
60 S
$60
50 S
$50
40 S
$40
30 S
$30
$20
20 S
$10
10 S
$0
0 S
6
-
lastly, Thruway, a solidly positioned distributor
with a diversified offering of panels and specialty
hardware in new york state, gave us access to the
buffalo market and consolidated our positioning in
syracuse which we already served from a distribu-
tion centre.
Our product offering stands apart as the most
innovative, diversified and comprehensive in north
america. It currently far exceeds 100,000 different
products, to which are added the countless options
allowed by richelieu.com to meet our customers’
required specifications in many categories.
creation of value through sus-
tained innovation in the offering
creation of value through quality
of execution and service
serving over 70,000 manufacturers and retailers
through several channels in north america requires
that we pay systematic attention to managing our
relationship with customers, who are the actual
judges of the quality of our execution and service.
Our top priority
is always to understand our
customers’ needs. Our representatives have this
expertise and use the most appropriate sales analysis
and management tools for our market. Providing
the best customer service first entails giving them
easy, efficient and creative access to our products.
Our customer-centred multi-access service allows
personalized contact with our telephone agents,
our representatives, the personnel at our 66 one-
stop shop centres — or through our trilingual
website, easy to access by every electronic device.
for our customers, richelieu.com is a complete
ordering management tool that is of an exceptional
quality — while enabling us to efficiently fill non-
inventory product orders, in cooperation with our
suppliers. In 2014, we continued to reinforce our
sales teams and to optimize richelieu.com, which
now accounts for a large percentage of our sales.
Our customers rely on operational efficiency and
differentiation to compete, grow and prosper. We
face the same challenges. It is up to us to support
them in their business with the best offering, in-
cluding easy-to-install and use products, along
with differentiating innovations to optimize the
performance and durability of their projects.
With our acquired knowledge of our customers and
established cooperation with manufacturers who
are world leaders in technology and design, we
maintain the north american market at the world
level by offering the best-performing functional
and decorative products. To anticipate our cus-
tomers’ needs, we take the innovation risk because
waiting until we are certain of a product’s success
before bringing it to market is risking being left
behind. We also have products manufactured
according to our customers’ specific needs.
among the innovations we introduced in 2014, our
extensive selection of superior-quality decorative
panels, manufactured using advanced processes,
exceeds current industry standards and is at the
forefront of innovation in residential and com-
mercial interior design. similarly, we added many
functional and esthetic innovations to our offering
of hardware for glass and for retractable furniture
mechanisms, and sliding systems used in manu-
facturing furniture, closets and other kitchen and
office storage space. We continued to diversify our
offering of eco-responsible and fsc, greengard
and leed certified products.
Richelieu annual REPORT 2014
7
Our customers also assess our execution quality
based on the reliability and efficiency of our order
delivery system. Our control system is rigorous.
In 2014, we brought further
improvements to
our distribution logistics so they always remain
impeccable and well adapted to our customers’
needs throughout North America. We aim for an
optimal satisfaction rate.
At Richelieu, quality of service goes beyond a
innovative offering and excellent
diversified
integrated
customer response. We take an
approach to service, by providing customers
with a broad range of sales support tools, including
quality brochures on our products and their
applications, complete documentation catalogues
by category, displays for their points of sale, as well
as the modern welcoming showrooms next to our
distribution centres. In 2014, we invested in new
publications to cover the latest innovations and in
several showroom expansions and enhancements.
We will maintain our tradition of innovation and quality of service
that are fundamental to Richelieu’s dynamics and growth.
We will continue to apply the growth strategy that
has been successful over the decades, stimulating
internal growth through innovations and the de-
velopment of our two major markets – manufactur-
ers and retailers including renovation superstores
– seizing acquisition opportunities matching our cri-
teria, and enhancing our operational efficiency. Our
objective is to remain a quality profitable corpora-
tion with a first-class financial position and a good
level of liquidity generated by our operations.
There is still great potential in North America,
where our market remains fragmented and favour-
able for acquisitions. Furthermore, the residential
and commercial renovation and construction in-
dustry should continue to generate projects that
will necessitate our innovative solutions. Richelieu
is solidly positioned to remain a leader in regard to
products, quality of service and e-commerce with
richelieu.com.
8
We have strong fundamentals: an exceptional team,
a business model in step with our development,
for
cutting-edge management
our future growth, a unique product offering,
partnership
the best manufacturers
worldwide, a robust network of centres covering
strategic markets across the continent, and the
financial solidity to continue growing.
tools designed
ties with
The sustainability of our Corporation depends on
our ability to understand our customers’ needs and
to serve and surprise them with innovations and
strong reliable brands they trust. We will continue
to meet that commitment in the future.
We thank all our growth partners for their support,
and we assure them we are committed to produce
good results going forward.
(Signed) Richard Lord
President and Chief Executive Officer
Directors
officers
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 advisory group Inc.
Jean Douville (2)
chairman of the board
uaP Inc.
director of corporations
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
Jeff crews*
vice-President, business development,
Retailers market, canada
Éric Daignault
general manager of divisions
Pierre Bourgie (1)
President and chief Executive Officer
bourgie financial corporation
(1996) Inc.
President, Ipso facto
director of corporations
Denyse chicoyne (2)
director of corporations
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.
Marion Kloibhofer
general manager
— central canada
John statton
general manager
— Western canada
and Western united states
charles White
vice-President, general manager
— united states
christian Dion
manager — human Resources
Geneviève Quevillon
manager — logistics and
supply chain
Yannick Godeau
legal affairs and
corporate secretary
(1) member of the audit committee
* In charge since January 2015
(2) member of the human Resources
and corporate governance committee
Richelieu annual REPORT 2014
9
LEADING
THE MARKET EVOLUTION
through innovation
and service
all the product and concept illustrations contained in this report feature Richelieu’s offering.
10
WE INNOVATE
THROUGH OUR OPERATING PRAcTIcES
ouR CustoMeRs ARe At the CoRe
oF ouR stRAtegies
Our business model stems from the integrated
vision of our organizational systems and allows
sustained interaction between the corporation’s
key functions. It must always favour a good level of
operational efficiency, efficient market development,
the integration of our acquisitions and synergies,
the addition of product innovations and optimal
customer service. as a distribution and service
organization, it is essential that our business model
remain adapted to customers’ needs.
our business model is designed to
keep us at the forefront through our
product offering, quality of service
and our ability to give customers a
competitive edge.
We have a management information system tailored
to present and future growth that interconnects all
our centres. as part of this system, high-performance
market intelligence tools allow the most comprehensive
and mobile customer information management. Thus,
our managers and sales representatives can take targeted
initiative and we can efficiently bring new product and
innovations to market.
We continue to invest in technological tools and
methods that standardize and automate our logistics
to maximize our efficiency. With the optimal support of
technology and our website richelieu.com, our supply chain
integrates innovative methods fostering the management of
our inventories and those of our customers.
Our business model incorporates the top e-commerce
tool in our industry in north america: richelieu.com.
Richelieu annual REPORT 2014
11
WE INNOVATE
THROUGH OUR PRODUcT OffERING
ouR FuNCtioNAL AND DeCoRAtive hARDwARe iNNovAtioN
stRAtegy is LoNg stANDiNg.
it is based on:
• our determination to offer customers what is best worldwide and to invest
the needed resources in innovation, and
• the mutual relationship of trust and cooperation we have developed over
the years with manufacturers who are world leaders in their field.
it is modulated according to:
• manufacturers’ and retailers’ evolving needs, and
• technological advances combined with the worldwide evolution of design.
12
K+BB award Winner
decorative hardware
category
Reader survey
Kitchen and bathroom renovations remain a
smart investment for both quality of life and
reselling a home.
“WE aRE nOT In a KITchEn OuT Of
nEcEssITy, buT fOR PlEasuRE.”
according to renowned designer Terence conran
Our innovations are selected for their high
functionality and revolutionary design.
As project creators and developers, architects and
interior designers are expertise partners of influence
with whom we work together and keep informed
about our innovative solutions.
Richelieu annual REPORT 2014
13
OuR sOluTIOns aIm TO sImPlIfy and
EnhancE EvERyday lIfE.
through their easy use, technicity and esthetic features,
our products promote the development of the simplest
to most ambitious residential and commercial concepts.
they fully support urban trends, from the latest to most
traditional styles.
14
Our glass hardware products, extensive
selection of decorative panels and sliding
door systems are on the cutting-edge of
innovation in residential and commercial
interior design.
Product lines designed specifically
to favour layout concepts for small
spaces…
… and favour ergonomic work spaces
at home and at the office.
OuR PRIvaTE bRands and EXclusIvE PROducTs
accOunT fOR OvER 60% Of OuR OffERIng.
We are proud to provide manufacturers and retailers with strong
brands they can trust.
Standard
PMS
Variation
Black-Only
Reversed
Setup
OuR OffERIng Of EcO-REsPOnsIblE,
fsc and gREEnguaRd cERTIfIEd
PROducTs Is cOnsTanTly gROWIng
and IncludEs sEvERal ThOusand
PROducTs ThaT hElP REducE ThE
EnvIROnmEnTal fOOTPRInT.
We take an eco-responsible
approach in all regards at
Richelieu, from a streamlined
use of packaging, recycled
paper and vegetable inks,
to energy-efficiency in our
offices, warehouses and
showrooms, to the ecological
management of residual
materials and components of
out-of-date inventories.
Richelieu annual REPORT 2014
15
WE INNOVATE
THROUGH OUR MULTI-AccESS SERVIcE
AND SALES SUPPORT TOOLS fOR cUSTOMERS
quality execution is a strategic value that prevails throughout Richelieu.
the priority attention we bring to our product offering also encompasses
everything related to the offering, notably:
• ThE QualITy Of OuR RElaTIOnshIP WITh
cusTOmERs, which is no-compromise. First are the avail-
ability, listening skills and competencies of our representatives
and the people who work in our distribution centres and by
telephone. we ensure our management information system
provides them with all the data they need for effective follow-
up with the customer. training is one of our priorities and, in
2014, further importance was given to the various training
programs designed for the members of our sales and service
team, the quality of coaching and spirit of initiative. our sales
and service team is committed to Richelieu’s customer orienta-
tion and shares its objectives and values.
• ThE QualITy Of OuR lOgIsTIcs, dIsTRIbuTIOn
cEnTREs and shOWROOms. the essential logistical
functions are all automated. we aim for impeccable reliability
and delivery within 24 hours following the order. we have a
robust network of centres and modern spacious showrooms
that warmly welcome customers.
16
66 iNteR-CoNNeCteD
CeNtRes with A
oNe-stoP shoP APPRoACh
thAt CoveR stRAtegiC
MARKets iN
NoRth AMeRiCA
CANADA – 36 DistRibutioN CeNtRes
st. John’s, Dartmouth, Moncton, quebec City (3), Montreal, Longueuil (2), Laval (2), ottawa, toronto (2),
barrie, Kitchener, sudbury, thunder bay, winnipeg (2), Regina, saskatoon (2), edmonton (2),
Calgary (3), Kelowna, vancouver (5), victoria (2)
+ 2 MANuFACtuRiNg PLANts
Longueuil, Notre-Dame-Des-Pins
uNiteD stAtes – 28 DistRibutioN CeNtRes
boston, hartford, New york, Avenel, Lincoln Park, syracuse, buffalo, Detroit, Cincinnati, Raleigh,
greensboro, Charlotte, greenville, Atlanta, savannah, Riviera beach, hialeah, Dania, Pompano,
sarasota, orlando, tampa bay, Jacksonville, Nashville, Chicago, indianapolis, Louisville, seattle
Richelieu annual REPORT 2014
17
richelieu.com
ThE QualITy Of RIchElIEu.cOm
A large proportion of our customers use richelieu.com as a search
and selection tool for the full administration of their orders, and
many of them have adopted the mobile version. in 2014, we
further improved the site’s user-friendliness and added functional
features to reflect the recent growth of our offering and meet
our customers’ specific needs. richelieu.com is designed for
the easiest surfing, and content disposal for fast searches and
interfacing.
richelieu.com is the only trilingual transactional website in
our industry in North America. it stands out worldwide for the
unmatched number of well-documented products it features, as
well as for its creative dimension since our customers can virtually
create the products they seek according to their specifications in
many categories, using the various options. in addition, they can
find on-site installation and use videos for some of our products,
giving them immediate and efficient viewing information.
18
We can supply more than 200 linear feet of hardware displays
by store.
ThE QualITy Of salEs suPPORT TOOls fOR OuR cusTOmERs. Catalogues, brochures, displays,
exhibition booths at international trade fairs and showrooms are all information supports we make available
to our customers so they can better know our products and promote them to their customers. in 2014, we
spared no effort to continue providing them with effective sales support tools of the highest quality.
Richelieu annual REPORT 2014
19
MANAGEMENT’S
REPORT
Management’s Discussion and Analysis
of operating Results and Financial Position
year ended November 30, 2014
CoNteNts
2014 highlights
Forward-Looking statements
Non-iFRs Measures
general business overview as at November 30, 2014
Mission and strategy
Financial highlights
Analysis of operating Results
summary of quarterly Results
Fourth quarter 2014
Financial Position
Analysis of Principal Cash Flows
Analysis of Financial Position
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 22, 2015
outlook
supplementary information
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20
HigHligHts of tHe Year
ended november 30, 2014
Keeping up the momentum of previous years, in 2014 Richelieu benefited from its innova-
tion and acquisition strategies, its market penetration initiatives and the synergies cre-
ated with its acquisitions. The year was highlighted by strong growth in sales, net earnings
and earnings per share, as well as an impeccable financial position. The Corporation also
pursued its acquisition strategy by acquiring five distributors during the year − three in
Canada and two in the United States − for a total of 17 acquisitions in North America over
the past five years, thereby gaining access to new markets and reinforcing its positioning
where it was already well established. This solid financial performance yielded significant
increase in value for shareholders through share appreciation, share repurchases and divi-
dends. During the year, Richelieu saw its market capitalization rise from $895.6 million to
$1.1 billion, an appreciation of 23%.
• Consolidated sales totalled $646.9 million, an increase of 10.2% over 2013, of which
7.1% from internal growth and 3.1% from acquisitions.
• Earnings before income taxes, interest and amortization (EBITDA) amounted to
$77.4 million, up by 10.0%. The EBITDA margin remained stable at 12.0%.
• Net earnings attributable to shareholders grew by 12.9% to $52.4 million or $2.67 per
share (basic) and $2.63 (diluted), an increase of 18.7% and 18.5% respectively.
• Cash flows from operating activities (before net change in non-cash working capital
balances) increased by 9.6% to $60.3 million.
• Working capital totalled $214.9 million, up by 5.3% − a current ratio of 4.0:1.
• Cash and cash equivalents stood at $33.7 million.
• Total debt amounted to $5.4 million, including $3.4 million in short-term debt.
• Repurchase of 667,600 common shares for $30.4 million and payment of $11.0 million
in dividends to shareholders (representing 21.0% of net earnings attributable to
shareholders for the year). The Corporation thereby distributed $41.4 million to its
shareholders in 2014, while retaining the financial resources for its growth in 2015.
• Five acquisitions closed in 2014:
December 2, 2013 — All the outstanding common shares of Procraft Industrial Ltd
“Procraft”), a well-established finishing products distributor in Nova Scotia and
New Brunswick.
May 5, 2014 — The principal net assets of Pleasantside Distribution Ltd
(“Pleasantside”), a specialty hardware distributor primarily serving the Western
Canadian market.
June 30, 2014 — The principal net assets of CabinetWare, Inc. (“CabinetWare”), a
specialty hardware distributor operating four distribution centres in Florida (U.S.),
specifically in Sarasota, Tampa Bay, Orlando and Jacksonville, serving an extensive
customer base of kitchen cabinet manufacturers and residential and commercial
woodworkers.
September 22, 2014 — All the outstanding common shares of XM Export-Import
Canada Inc. (“XM”), a specialty hardware distributor based in Quebec.
October 27, 2014 — The principal net assets of Thruway Hardwood and Plywood
Corp. (“Thruway”), a distributor of specialty panels and hardware with operations
in New York State (U.S.). This acquisition gives Richelieu access to the Buffalo
market and strengthens its presence in Syracuse where it already operated a
distribution centre.
Richelieu ANNUAL REPORT 2014
2121
This management’s report relates to Richelieu Hardware
Ltd.’s consolidated operating results and cash flows for the
year ended November 30, 2014 in comparison with the year
ended November 30, 2013, 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, 2014 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, 2014,
is available on the website of the System for Electronic Docu-
ment 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 22,
2015, on which date the audited consolidated financial sta-
tements and annual management’s report were approved
by the Corporation’s Board of Directors. Unless otherwise
indicated, the financial information presented below, inclu-
ding tabular amounts, is expressed in Canadian dollars and
prepared in accordance with International Financial Repor-
ting Standards (“IFRS”).
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 activi-
ties, growth outlook, Richelieu’s competitive position in its
industry, Richelieu’s ability to weather the current econo-
mic 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.
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
uncertainties 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
Corporation’s 2014 Annual Report (see the “Risk Factors”
section of this management’s report and the 2014 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 attributable 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 measurement 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
intangible 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 management 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.
22
MiSSiON AND STRATeGY
Richelieu’s mission is to create shareholder value and
contribute 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 product selection by an-
nually introducing diversified products that meet its
market segment needs and position it as the specialist
in functional and decorative hardware for manufactu-
rers 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 pro-
duct mix and expertise.
Richelieu’s solid and efficient organization, highly diver-
sified product selection and long-term relationships with
leading suppliers worldwide position it to compete effec-
tively 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, 2014
Richelieu Hardware Ltd. is a leading North American
importer, distributor and manufacturer of specialty hard-
ware 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 sour-
ced from manufacturers worldwide. The solid relationships
Richelieu has built with the world’s leading suppliers ena-
ble it to provide customers with the latest innovative pro-
ducts tailored to their business needs. The Corporation’s
product selection consists of some 100,000 different
items targeted to a base of more than 70,000 customers
who are served by 66 centres in North America — 36 distri-
bution centres in Canada, 28 in the United States and two
manufacturing plants in Canada.
Main product categories include functional cabinet hard-
ware and assembly products for furniture and kitchen ca-
binets and for furniture and closet solutions, window and
door hardware, high-pressure laminates, decorative and
functional panels, ergonomic workstation components
and finishing products. Richelieu also specializes in the
manufacturing of a wide variety of veneer sheets and edge-
banding products through its subsidiary Cedan Industries
Inc., and of components for the window and door industry
and mouldings through Menuiserie des Pins Ltée. In addi-
tion, many of the Corporation’s products are manufactured
according to its specifications and those of its customers.
The Corporation employs over 1,800 people at its head
office and throughout the network, close to half of whom
work in marketing, sales and customer service. More than
50% of its employees are Richelieu shareholders.
Richelieu ANNUAL REPORT 2014
23
FiNANciAl hiGhliGhTS
(in thousands of $, except per share amounts, number of shares and data expressed as a %)
Years ended November 30
Sales
EBITDA (2)
EBITDA margin (%)
Net earnings
2014
$
2013
$
2012
$
2011
$
2010 (1)
$
646,909
586,775
565,798
523,786
446,963
77,417
12.0
70,373
12.0
71,163
12.6
67,149
12.8
63,832
14.3
52,573
46,657
45,909
40,105
39,233
Net earnings attributable to shareholders of the Corporation
• basic per share ($)
• diluted per share ($)
52,393
2.67
2.63
46,403
2.25
2.22
45,404
2.17
2.15
39,726
1.89
1.87
38,574
1.79
1.78
Net margin attributable to shareholders of the Corporation (%)
8.1
7.9
8.0
7.6
8.6
Cash flows from operating activities (3)
• diluted per share ($)
Cash dividends paid on shares
• per share ($)
60,253
3.03
11,023
0.56
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
Weighted average number of shares outstanding (diluted)
(in thousands)
19,918
20,930
21,137
21,262
21,705
As at November 30
Total assets
Working capital
Current ratio
Equity
Return on average equity (%)
Book value ($)
Total debt
Cash and cash equivalents
390,721
214,866
4.0
313,553
17.5
15.80
5,354
33,721
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
(1) The financial statements for the year 2010 have been prepared in accordance with Canadian GAAP. Since 2011, the financial statements are prepared in
accordance with IFRS.
(2) EBITDA is a non-IFRS measure as described on page 22 of this report.
(3) 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, 2014 cOMPAReD WiTh The YeAR
eNDeD NOVeMBeR 30, 2013
consolidated sales
(in thousands of $, except exchange rate)
Years ended November 30
Canada (CA$)
United States (CA$)
(US$)
Average exchange rate
Consolidated sales
2014
$
2013
$
∆ %
471,082
175,827
159,973
439,834 + 7.1
146,941 + 19.7
143,337 + 11.6
1.0991 1.0251
646,909
586,775 + 10.2
Consolidated sales reached $646.9 million, an increase of
$60.1 million or 10.2% over 2013, of which 7.1% from inter-
nal growth and 3.1% from acquisitions.
Sales to manufacturers amounted to $550.9 million, up
from $496.0 million for 2013, an increase of $54.9 million
or 11.1%, of which 7.4% from internal growth and 3.7% from
acquisitions. All the Corporation’s market segments con-
tributed to this improvement. Sales to hardware retailers
and renovation superstores grew to $96.0 million, up by
$5.2 million or 5.7%.
In Canada, Richelieu achieved sales of $471.1 million,
compared with $439.8 million for 2013, an increase of
$31.2 million or 7.1%, of which 4.3% from internal growth
and 2.8% from acquisitions. Sales to manufacturers
amounted to $386.8 million, an increase of $27.5 million
or 7.7%, reflecting 4.2% from internal growth and 3.5%
from acquisitions. Sales to hardware retailers and renova-
tion superstores grew by 4.7% to $84.3 million, up from
$80.5 million for 2013.
24
In the United States, sales totalled US$160.0 million, up by
US$16.6 million or 11.6% over 2013. To internal growth of
8.1% was added growth of 3.5% from acquisitions. Sales
to manufacturers amounted to US$149.3 million, an in-
crease of $16.0 million or 12.0%, of which 8.2% from inter-
nal growth and 3.8% from acquisitions. Sales to hardware
retailers and renovation superstores grew by 6.6% (in US$).
In Canadian dollars, U.S. sales grew to $175.8 million, com-
pared with $146.9 million for 2013, an increase of 19.7%,
of which 15.9% from internal growth and 3.8% from acqui-
sitions. They accounted for 27.2% of 2014 consolidated
sales, whereas in 2013, U.S. sales had represented 25.0% 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 (%)
2014
$
2013
$
646,909
77,417
12.0
586,775
70,372
12.0
Earnings before interest, income taxes and amortization
(EBITDA) amounted to $77.4 million, an increase of 10.0%
over 2013. The gross margin and EBITDA margin remained
stable in comparison with the 2013 margins despite the
lower margin of certain prior acquisitions having a dif-
ferent product mix and the higher proportion of sales in
the United States where the product mix also differs.
Income taxes amounted to $18.0 million, up by $1.1 million
over 2013.
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, net
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
2014
$
2013
$
77,417
70,373
7,123
(294)
18,015
52,573
7,278
(464)
16,902
46,657
52,393
46,403
8.1
180
52,573
7.9
254
46,657
Net earnings grew by 12.7% over 2013. Considering non-
controlling interests, net earnings attributable to share-
holders of the Corporation totalled $52.4 million, an in-
crease of $6.0 million or 12.9% over 2013 — equivalent to
$2.67 basic per share and $2.63 diluted, compared with
$2.25 basic and $2.22 diluted for 2013, up by 18.7% and
18.5% respectively. The net margin attributable to share-
holders rose to 8.1% from 7.9% in 2013.
Comprehensive income amounted to $57.3 million, consi-
dering a positive adjustment of $4.7 million on translation
of the financial statements of the subsidiary in the United
States, compared with $49.9 million for 2013, considering
a positive adjustment of $3.3 million on translation of the
financial statements of the subsidiary in the United States.
SuMMARY OF QuARTeRlY ReSulTS (unaudited)
(in thousands of $, except per-share amounts)
Quarters
1
2
3
4
2014
• Sales
• EBITDA
• Net earnings
attributable to
shareholders of
the Corporation
basic per share
diluted per share
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
136,108 165,155 167,809 177,837
13,704 19,185 21,054 23,474
8,859 13,036 14,554 15,944
0.82
0.80
0.74
0.73
0.44
0.44
0.67
0.66
126,084 156,240 149,163 155,288
20,223
19,050
18,207
12,893
8,158
0.39
0.39
12,140
0.59
0.58
12,821
0.62
0.62
13,284
0.65
0.64
124,083 147,107 148,782 145,826
19,630
18,617
19,636
13,280
8,004
0.38
0.38
11,997
0.57
0.57
12,761
0.61
0.60
12,642
0.61
0.60
Richelieu ANNUAL REPORT 2014
25
In Canadian dollars, U.S. sales grew to $50.1 million, up
from $39.4 million for the corresponding quarter of 2013,
an increase of 27.2%, of which 18.5% from internal growth
and 8.7% from acquisitions. They accounted for 28.2% of
fourth-quarter consolidated sales, whereas for the same
quarter of 2013, U.S. sales had represented 25.4% of the
period’s consolidated sales.
Earnings before interest, income taxes and amortization
(EBITDA) grew by 16.1% to $23.5 million, primarily reflect-
ing the sales growth. The gross margin remained stable
with the fourth quarter of 2013 and the EBITDA margin im-
proved to 13.2% from 13.0%.
Income taxes amounted to $5.7 million, up by $0.5 million
over the fourth quarter of 2013.
Fourth-quarter net earnings rose 19.3%. Considering non-
controlling interests, net earnings attributable to share-
holders of the Corporation grew to $15.9 million, up by
20.0% over the corresponding quarter of 2013. The net
margin attributable to shareholders improved to 9.0%
from 8.6% for the fourth quarter of 2013. Net earnings per
share rose to $0.82 basic and $0.80 diluted, up from $0.65
basic and $0.64 diluted for the fourth quarter of 2013, an
increase of 26.2% and 25.0% respectively.
Comprehensive income totalled $19.4 million, considering
a positive adjustment of $3.4 million on translation of the
financial statements of the subsidiary in the United States,
compared with $13.9 million for the corresponding quarter
of 2013, considering a positive adjustment of $0.5 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) amounted to
$17.9 million or $0.90 diluted per share, up by 17.9%
and 23.3% over the fourth quarter of 2013. Net change
in non-cash working capital balances used cash flows
of $4.8 million, reflecting net changes
in accounts
receivable ($5.8 million) and accounts payable and other
items ($1.9 million), whereas the change in inventories
represented a cash inflow of $2.9 million. Consequently,
operating activities provided cash flows of $13.1 million,
compared with $19.5 million for the fourth quarter of 2013.
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 fourth quarters respectively ending May 31 and
November 30 generally represent the year’s most active
periods.
Note: For further information about the Corporation’s perform-
ance in the first, second and third quarters of 2014, the reader is re-
ferred to the interim management’s reports available on SEDAR’s
website at www.sedar.com.
FOuRTh QuARTeR eNDeD NOVeMBeR 30, 2014
Richelieu achieved excellent growth in fourth-quarter con-
solidated sales which amounted to $177.8 million, an in-
crease of $22.5 million or 14.5% over the corresponding
quarter of 2013, of which 10.4% from internal growth and
4.1% from acquisitions.
Sales to manufacturers totalled $152.3 million, up from
$133.4 million for the corresponding period of 2013, an
increase of $18.9 million or 14.2%, of which 9.4% from
internal growth and 4.8% from acquisitions. Sales to
hardware retailers and renovation superstores amounted
to $25.5 million, compared with $21.9 million for the
corresponding quarter of 2013, an increase of $3.6 million
or 16.4%.
In Canada, Richelieu recorded sales of $127.7 million, com-
pared with $115.9 million for the fourth quarter of 2013, an
increase of $11.8 million or 10.2%, of which 7.7% from inter-
nal growth and 2.5% from acquisitions. Sales to manufac-
turers amounted to $105.3 million, up from $96.4 million
for the fourth quarter of 2013, an increase of $8.9 million
or 9.2%, of which 6.2% from internal growth and 3.0% from
acquisitions. Sales to hardware retailers and renovation
superstores grew to $22.4 million, up by $3.0 million or
15.4% due primarily to exceptional seasonal sales.
In the United States, sustained market penetration initiatives
and product innovations continued to yield benefits. Thus,
sales totalled US$44.8 million, compared with US$37.9 mil-
lion for the corresponding quarter of 2013, an increase
of US$6.9 million or 18.2%, of which 10.1% from internal
growth and 8.1% from acquisitions. Sales to manufacturers
amounted to US$42.0 million, an increase of $6.5 million or
18.3%, of which 9.7% from internal growth and 8.6% from ac-
quisitions. In the hardware retailers and renovation super-
stores market, Richelieu achieved a 15.1% growth in sales.
26
Financing activities represented a cash outflow of
$2.5 million, compared with $24.7 million for the corres-
ponding quarter of 2013. Richelieu repurchased common
shares under its normal course issuer bid for $0.2 mil-
lion, compared with $22.0 million in the fourth quarter of
2013. The Corporation also paid shareholder dividends of
$2.7 million, up by 2.6% on account of the dividend increase
announced in January 2014. In addition, it issued common
shares for $0.4 million upon the exercise of options under
its stock option plan, compared with $0.1 million in the
same quarter of 2013.
Investing activities represented a cash outflow of $6.5 mil-
lion for the fourth quarter, of which $4.2 million for the ac-
quisition of XM and Thruway and $2.3 million for equip-
ment needed for operations, whereas the Corporation had
invested $5.4 million in an acquisition as well as property,
plant and equipment during the same quarter of 2013.
FiNANciAl POSiTiON
Analysis of principal cash flows for the year ended
November 30, 2014
change in cash and cash equivalents and capital
resources
(in thousands of $)
Years ended November 30
Cash flows provided by
(used for):
Operating activities
Financing activities
Investing activities
Effect of exchange rate
fluctuations
Net change in cash and cash
equivalents
Cash and cash equivalents,
beginning of year
Cash and cash equivalents,
end of year
2014
$
2013
$
40,465
(37,413)
(15,433)
48,365
(45,816)
(7,898)
(85)
(51)
(12,466)
(5,400)
46,187
51,587
33,721
46,187
Financing activities
Richelieu repurchased common shares under its normal
course issuer bid for a total of $30.4 million, compared with
$36.6 million in 2013. In addition, it paid shareholder divi-
dends of $11.0 million, up by 2.4% over 2013, on account
of the dividend increase announced in January 2014. The
Corporation also issued common shares for $4.0 million
upon the exercise of options under its stock option plan,
compared with $2.3 million in 2013. Consequently, finan-
cing activities represented a cash outflow of $37.4 million,
compared with $45.8 million for 2013.
investing activities
In 2014, Richelieu invested a total of $15.4 million, of which
$9.9 million in the acquisition of the net assets of Pleasant-
side, CabinetWare and Thruway and all the common shares
of Procraft and XM, as well as $5.5 million in equipment
needed for operations.
Sources of financing
As at November 30, 2014, cash and cash equivalents to-
talled $33.7 million, compared with $46.2 million a year
earlier. The Corporation posted a working capital of
$214.9 million for a current ratio of 4.0:1, compared with
$204.1 million (4.5:1 ratio) as at November 30, 2013.
Richelieu believes it has the capital resources to fulfill its
ongoing commitments and obligations and to assume the
funding requirements needed for its growth and the finan-
cing and investing activities planned for 2015. The Corpor-
ation continues to benefit from an authorized line of credit
of CA$26 million as well as a line of credit of US$6 million
renewable annually and bearing interest respectively at
prime and base rates. In addition, the Corporation be-
lieves it could obtain access to other outside financing if
necessary.
The expectation set forth above consists of forward-looking
information based on the assumption that economic conditions
and exchange rates will not deteriorate significantly, operating
expenses will not increase considerably, deliveries will be sufficient
to fulfill Richelieu’s requirements, the availability of credit will
As at November 30
2014
2013
remain stable in 2015, and no usual events will entail additional
capital expenditures. This expectation also remains subject to the
risks identified under the “Risk Factors” section.
Working capital
Renewable line of credit (CA$)
Renewable line of credit (US$)
214,866
26,000
6,000
204,117
26,000
6,000
Operating activities
Cash flows from operating activities (before net change
in non-cash working capital balances) totalled $60.3 mil-
lion or $3.03 diluted per share, up from $55.0 million or
$2.63 diluted per share for 2013, primarily reflecting the
increase in net earnings. Net change in non-cash working
capital balances used cash flows of $19.8 million, reflect-
ing net changes in accounts receivable and inventories of
$25.0 million, whereas accounts payable and other items
represented a cash inflow of $5.2 million. Consequently,
operating activities provided cash flows of $40.5 million,
compared with $48.4 million for 2013.
Richelieu ANNUAL REPORT 2014
27
Equity attributable to shareholders totalled $309.1 mil-
lion as at November 30, 2014, up from $288.8 million as at
November 30, 2013, an increase of 7.0% stemming mainly
from the growth of $4.5 million in share capital, $11.9 mil-
lion in retained earnings and $4.7 million in accumulated
other comprehensive income, less the change of $0.8 mil-
lion in contributed surplus. The positive variation of
$11.9 million in retained earnings reflects the effect of the
year’s net earnings, less share repurchases and dividends
paid during the year. As at November 30, 2014, the book
value per share was $15.80, compared with $14.41 as at
November 30, 2013.
Return on average equity stood at 17.5% as at November 30,
2014, compared with 16.2% a year earlier.
At 2014 year-end, the Corporation’s share capital consisted
of 19,566,286 common shares (20,046,061 shares as at
November 30, 2013). The Corporation issued 187,825 com-
mon shares at an average price of $21.16 (124,577 in 2013
at an average price of $18.34) upon the exercise of options
under its stock option plan in 2014. In addition, 667,600
common shares were repurchased for cancellation under
the normal course issuer bid for a cash consideration of
$30.4 million (873,000 common shares for a cash consider-
ation of $36.6 million in 2013), resulting in a redemption
premium of $29.5 million recorded as a reduction of re-
tained earnings (premium of $35.4 million in 2013). Finally,
the Corporation granted 64,100 stock options during the
year (78,000 in 2013). Consequently, as at November 30,
2014, 587,198 stock options were outstanding (711,673 as
at November 30, 2013).
cONTRAcTuAl cOMMiTMeNTS
Less
than
a year
Between
1 and 5
years
More
than 5
years
Total
Long-term debt
Operating leases
Total
3,352
8,204
11,556
2,002
15,297
17,299
5,354
—
150
23,651
150 29,005
For 2015 and the foreseeable future, the Corporation ex-
pects cash flows from operating activities and other sources
of financing to meet its ongoing contractual commitments.
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 the Richelieu’s requirements, the availability of credit will
remain stable in 2015, and no usual events will entail additional
capital expenditures. This expectation also remains subject to the
risks identified under the “Risk Factors” section.
Analysis of financial position at as November 30, 2014
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
2014
$
2013
$
285,394
105,327
390,721
70,528
6,640
262,251
94,074
356,325
58,134
5,077
309,149
4,404
390,721
288,845
4,269
356,325
1.144
1.062
Total assets amounted to $390.7 million as at November
30, 2014, compared with 356.3 million a year earlier, up
by 9.7% or $34.4 million. This increase resulted from the
Corporation’s growth and the five acquisitions closed
in 2014. Current assets grew by 8.8% or $23.1 million
over November 30, 2013, notably reflecting increases
of $19.8 million in inventories, $15.5 million in accounts
receivable and $0.3 million in prepaid expenses, whereas
cash and cash equivalents decreased by $12.5 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
3,352
2,002
5,354
33,721
28,367
1,354
–
1,354
46,187
44,833
The Corporation benefits from an excellent financial
position to pursue its business strategy. As at November 30,
2014, total debt amounted to $5.4 million, representing
balances payable on acquisitions, of which $3.4 million in
short-term debt.
28
2014
$
2013
$
Summary of contractual financial commitments as
at November 30, 2014
(in thousands of $)
FiNANciAl iNSTRuMeNTS
into
Richelieu periodically enters
foreign exchange
forward contracts to fully or partially hedge the effects of
foreign currency fluctuations related to foreign-currency
denominated payables or to hedge forecasted purchase
transactions. 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.
Richelieu also uses equity swaps to reduce the effect of
fluctuations in its share price on net earnings in connection
with its deferred share unit plan.
In notes (1) and (12) of the audited consolidated financial
statements for the year ended November 30, 2014, 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, 2014.
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, 2014, management ensured
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.
SiGNiFicANT AccOuNTiNG POlicieS AND
eSTiMATeS
The Corporation’s audited consolidated financial state-
ments for the year ended November 30, 2014 have been
prepared by management in accordance with International
Financial Reporting Standards (IFRS). The preparation of
the consolidated financial statements requires manage-
ment 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 ac-
tions 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 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 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
obsolescence, goodwill and intangible assets with indefin-
ite useful lives and deferred tax assets 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 regu-
larly. 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 2014
IFRS 10, Consolidated Financial Statements
IFRS 10, Consolidated Financial Statements, was issued as
a replacement of 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 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.
Richelieu ANNUAL REPORT 2014
29
NeW AccOuNTiNG MeThODS (cont’d)
Market and competition
IFRS 12, Disclosure of Interests in Other Entities
IFRS 12, Disclosure of Interests in Other Entities, requires
that an entity disclose information on the nature of and risks
associated with interests in other entities (i.e. subsidiaries,
joint arrangements, associates and unconsolidated
structured entities) and the effect of those interests on its
financial statements.
IFRS 13, Fair Value Measurement
IFRS 13, Fair Value Measurement, establishes a single
framework for fair value measurement of financial 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 liabil-
ity in an orderly transaction between market participants at
the measurement date. It also requires disclosure of certain
information on fair value measurements.
IAS 32, Financial Instruments: Presentation
Amendments to IAS 32, Financial Instruments: Presentation,
clarify the requirements for offsetting financial assets and
liabilities. The IASB has also issued amendments to IFRS 7,
Financial Instruments: Disclosure, improving disclosure on
offsetting of financial assets and liabilities.
These amendments were applied on December 1st, 2013
and did not have any impact on the Corporation’s consoli-
dated financial statements.
Recently issued
IFRS 15, Revenue from Contracts with Customers
In May 2014, the IASB issued IFRS 15, Revenue from Con-
tracts with Customers, which is a replacement of IAS 18,
Revenue, IAS 11, Construction Contracts, and related in-
terpretations. Under IFRS 15, revenue is recognized at the
point in time when control of the goods or services transfers
to the customer rather than when the significant risks and
rewards are transferred. The new standard also requires
additional disclosures through notes to financial state-
ments. IFRS 15 shall be applied to fiscal years beginning on
or after January 1st, 2017. Earlier application is permitted.
The Corporation will assess the impact this new standard
will have on its consolidated financial statements.
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 indus-
try. Any economic downturn could lead to a decline in sales
and have an adverse impact on the Corporation’s financial
performance.
The specialty hardware and renovation products segment
is highly competitive. Richelieu has developed a business
strategy rooted in a diversified product offering in vari-
ous 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
fluctuations, primarily
foreign-currency
denominated purchases and sales made abroad.
in regard to
The Corporation’s products are regularly sourced from
abroad. Thus, any increase in foreign currencies (primarily
the U.S. dollar and 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 27% of Richelieu’s
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 assurance 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’ sup-
ply needs. To that end, Richelieu must maintain solid
relationships with suppliers respecting its supply cri-
teria. The inability to maintain such relationships or to
efficiently manage the supply chain and inventories
could affect the Corporation’s financial position. Simi-
larly, 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.
30
RiSK FAcTORS (cont’d)
Product liability
In the normal course of business, Richelieu is exposed to
various product liability claims that could result in major
costs and affect 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, iT contingency plan and data
security
The IT structure implemented by Richelieu enables it to
support its operations and contributes to ensure their
efficiency. As the occurrence of a disaster, including a
major interruption of its computer systems, could affect
its operations and financial performance, the Corporation
has implemented 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 disaster, generators in the event of power outages and
a relief computer as powerful as the central computer.
A breach of the Corporation’s IT security, loss of customer
data or system disruption could adversely affect its business
and reputation.
Richelieu’s business is dependent on its payroll, transaction,
financial, accounting and other data processing systems.
The Corporation relies on these systems to process, on a
daily basis, a large number of transactions. Any security
breach in its business processes and/or systems has the
potential to impact its customer information, which could
result in the potential loss of business. If any of these
systems fail to operate properly or become disabled, the
Corporation could potentially lose control of customer data
and suffer financial loss, a disruption of our businesses,
liability to clients, regulatory intervention or damage to its
reputation.
In addition, any issue of data privacy as it relates to
unauthorized access to, or loss of, customer and/or
employee information could result in the potential loss
of business, damage to Richelieu’s market reputation,
litigation and regulatory investigation and penalties.
To reduce its risk, the Corporation continuously invests in
the security of its IT systems, business processes improve-
ments, and enhancements to its culture of information.
Acquisitions
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 U.S.
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
defining 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 16% 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 oper-
ations 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
highly qualified management team could compromise the
success of Richelieu’s strategic execution and expansion,
which could have an adverse impact on its financial results.
To adequately manage its future growth, the Corporation
its organizational structure as needed and
adjusts
strengthens the teams at the various levels of its business.
It should be noted that more than 50% of its employees,
including senior officers, are Richelieu shareholders.
Richelieu ANNUAL REPORT 2014
31
SHARE PRICE
OUTLOOK
In 2014, the share price fluctuated between $42.01 and
$57.50, and the volume traded on the Toronto Stock
Exchange totalled approximately 3 million shares. The
closing price was $56.61 as at November 30, 2014, com-
pared with $44.68 as at November 30, 2013, reflecting a
26.7% appreciation. Richelieu’s share price has increased
by 2,548% since its listing on the stock market in 1993. It
should also be pointed out that the Corporation has paid
shareholder dividends since 2002 and that the dividends
paid in 2014 represented 21.0% of net earnings attribut-
able to shareholders.
SHARE INFORMATION AS AT JANUARY 22, 2015
Issued and outstanding common shares: 19,590,794
Stock options under stock option plan: 643,890
During 2015, Richelieu will pursue its market penetration
initiatives and its innovation strategy in North America so
as to continue driving its internal growth. It also remains
on the lookout for strategic acquisitions that could further
strengthen its positioning and yield new sales and oper-
ational synergies, consistent with its further earnings and
financial position improvement objectives.
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.
(Signed) Richard Lord
President and
Chief Executive Officer
(Signed) Antoine Auclair
Vice-President and
Chief Financial Officer
January 22, 2015
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 22, 2015
(Signed) Richard Lord
(Signed) Antoine Auclair
President and Chief Executive Officer Vice-President and Chief Financial Officer
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, 2014 and 2013 and the consolidated statements
of earnings, comprehensive income, changes in equity and cash flows for the years then 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, 2014 and 2013 and its financial performance and its cash flows for the years
then ended in accordance with International Financial Reporting Standards.
1
(Signed) Ernst & Young LLP, Montreal, Canada, January 22, 2015
1 CPA auditor, CA, public accountancy permit no. A120803
RICHELIEU ANNuAL REPORT 2014
33
ConsoLIdated stateMents oF FInanCIaL posItIon
As at November 30
(In thousands of dollars)
Notes
3
3, 4
3, 5
3, 5
9
3
9
7
7
9
8
8
11
2014
$
2013
$
33 721
93 874
156 488
1 311
285 394
22 895
20 987
57 669
3 776
390 721
64 437
2 739
3 352
70 528
2 002
2 762
1 876
77 168
29,762
1,576
270,826
6,985
309,149
4,404
313,553
390,721
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
ASSETS
Current assets
Cash and cash equivalents
Accounts 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
Equity attributable to shareholders of the Corporation
Non-controlling interests
Commitments and contingencies (note 10)
See accompanying notes to the consolidated financial statements.
On behalf of the Board:
(Signed) Director
(Signed) Director
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
2014
$
646,909
8, 12
569,492
77,417
5,043
2,080
(294)
6,829
70,588
18,015
52,573
52,393
180
52,573
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
2.67
2.63
2.25
2.22
Consolidated statements of CompreHensive inCome
Years ended November 30
(In thousands of dollars)
Net earnings
Other comprehensive income that will be reclassified
to net earnings
Exchange differences on translation of foreign operations
11
Notes
Comprehensive income
Comprehensive income attributable to:
Shareholders of the Corporation
Non-controlling interests
See accompanying notes to the consolidated financial statements.
2014
$
52,573
4,749
57,322
57,142
180
57,322
2013
$
46,657
3,286
49,943
49,689
254
49,943
Richelieu ANNUAL REPORT 2014
35
Consolidated statements of CHanges in eQuitY
Years ended November 30
(In thousands of dollars)
Attributable to shareholders of the Corporation
Contributed
surplus
$
Retained
earnings
$
Accumulated
other
comprehensive
income (loss)
$
11
Total
$
Non-controlling
interests
$
Total
equity
$
2,761
—
—
—
—
(805)
400
—
—
(405)
2,356
—
—
—
—
(1,355)
575
—
—
(780)
258,775
46,403
—
46,403
(35,445)
—
—
(10,768)
—
(46,213)
258,965
52,393
—
52,393
(29,509)
—
—
(11,023)
—
(40,532)
(1,050)
—
3,286
3,286
—
—
—
—
—
—
2,236
—
4,749
4,749
—
—
—
—
—
—
283,835
46,403
3,286
49,689
(36,596)
2,285
400
(10,768)
—
(44,679)
288,845
52,393
4,749
57,142
(30,365)
3,975
575
(11,023)
—
(36,838)
4,107
254
—
254
—
—
—
—
(92)
(92)
4,269
180
—
180
—
—
—
—
(45)
(45)
287,942
46,657
3,286
49,943
(36,596)
2,285
400
(10,768)
(92)
(44,771)
293,114
52,573
4,749
57,322
(30,365)
3,975
575
(11,023)
(45)
(36,883)
Share
capital
$
8
23,349
—
—
—
(1,151)
3,090
—
—
—
1,939
25,288
—
—
—
(856)
5,330
—
—
—
4,474
29,762
1,576
270,826
6,985
309,149
4,404
313,553
Notes
Balance as at
November 30th, 2012
Net earnings
Other comprehensive income
Comprehensive income
Shares repurchased
Stock options exercised
Share-based compensation
expense
Dividends (note 16)
Other liabilities
Balance as at
November 30th, 2013
Net earnings
Other comprehensive income
Comprehensive income
Shares repurchased
Stock options exercised
Share-based compensation
expense
Dividends (note 16)
Other liabilities
Balance as at
November 30th, 2014
See accompanying notes to the consolidated financial statements.
36
Consolidated statements of CasH floWs
Years ended November 30
(In thousands of dollars)
Notes
2014
$
8
16
8
8
3
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 the year
Cash and cash equivalents, end of the year
Supplementary information
Income taxes paid
Interest received, net
See accompanying notes to the consolidated financial statements.
52,573
5,043
2,080
(685)
1,242
60,253
(19,788)
40,465
—
(11,023)
3,975
(30,365)
(37,413)
(9,897)
(5,536)
(15,433)
(85)
(12,466)
46,187
33,721
16,871
(294)
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)
Richelieu ANNUAL REPORT 2014
37
NOTeS TO cONSOliDATeD FiNANciAl STATeMeNTS
November 30, 2014 and 2013 (amounts are in thousands of dollars, except per-share amounts)
NATuRe OF BuSiNeSS
Inventories
Richelieu Hardware Ltd. (the “Corporation”) is incorporated
under the laws of Quebec, Canada. The Corporation is a
distributor, importer, and manufacturer of specialty hardware
and complementary 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
Corporation’s head office is located at 7900 Henri-Bourassa Blvd.
West, Montreal, Quebec, Canada, H4S 1V4.
1. SiGNiFicANT AccOuNTiNG 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
accompanying notes. These estimates are based on manage-
ment’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 account-
ing policies that have the most significant effect on the amounts
recognized in the consolidated financial statements and the as-
sumptions about the future and other major sources of estima-
tion uncertainty 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 summar-
ized as follows:
Valuation of inventory impairment, including loss and obsoles-
cence, goodwill and intangible assets with indefinite useful lives
and deferred tax assets require the use of judgment and assump-
tions that may affect the amounts reported in the consolidated
financial statements. The underlying estimates and assumptions
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.
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
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 amor-
tized cost using the effective interest method. For the Corpora-
tion, this measurement is usually equivalent to cost due to their
short-term maturities.
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 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
goodwill and property, plant and equipment. Intangible assets
consist mainly of purchased or internally developed software,
customer relationships, non-competition agreements and trade-
marks. Software 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 and corresponds to the development
potential of the acquired businesses, combined with the Corpora-
tion’s operations and from the expected synergies and expanding
of the product offering and network. 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
tested for impairment. When the impairment test indicates that
the carrying amount of the tangible or intangible asset exceeds
its recoverable amount, 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. Impairment tests are car-
ried out on the asset itself, the cash-generating unit (“CGU”) or
group of CGUs as at November 30. A CGU is the smallest identifi-
able 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.
38
NOTeS TO cONSOliDATeD FiNANciAl STATeMeNTS
November 30, 2014 and 2013 (amounts are in thousands of dollars, except per-share amounts)
1. SiGNiFicANT AccOuNTiNG POlicieS (cont’d)
Derivative financial instruments
The Corporation periodically enters into foreign exchange forward
contracts with financial institutions to partially hedge the effects
of changes in foreign exchange rates related to foreign currency
liabilities, as well as to hedge anticipated purchase transactions.
The Corporation enters into equity swaps to reduce its exposure
on net earnings related to the fluctuations of the Corporation’s
share price relating to its deferred share unit.
The Corporation does not use derivatives for speculative
purposes.
The Corporation uses hedge accounting only when IFRS docu-
mentation criteria are met. Derivative financial instruments desig-
nated 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 record-
ed 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 con-
solidated statements of financial position.
Fair value measurements hierarchy
Fair value measurements of assets and liabilities recognized at fair
value in the consolidated statements of financial position or whose
fair value is presented in the notes to the financial statements are
categorized in accordance with the following hierarchy:
Level 1: quoted prices (unadjusted) in active markets for identical
assets or liabilities;
Level 2: inputs other than quoted prices included in Level 1 that
are observable for the asset or liability, either directly
(i.e., as prices) or indirectly (i.e., derived from prices);
Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
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.
Net earnings per share
Net earnings per share are calculated based on the weighted
average 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.
Impairment tests consist in a comparison between the carrying
and recoverable amounts of an asset, CGU or group of CGUs. The
recoverable amount is the higher of value in use and fair value
less costs to sell. Where the carrying amount exceeds the recover-
able 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
impairment losses related to a CGU or group of CGUs are alloc -
ated proportionately to the assets of the CGU or group of CGUs.
On reversal 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 recognized 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
described in notes 5.
Other financial liabilities
Accounts payable and accrued liabilities and long-term debt 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 fi-
nancial liability are measured at fair value and presented under
other liabilities.
Revenue recognition
Revenues are recognized when finished products are shipped to
customers. They are measured at the fair value of the consideration
received or receivable, net of returns and discounts granted.
Income taxes
The Corporation follows the liability method of accounting for in-
come taxes. Under this method, deferred tax assets and liabilities
are accounted for based on estimated taxes recoverable or pay-
able that would result from the recovery or settlement of the carry-
ing amount of assets and liabilities. Deferred tax assets and liabil-
ities 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.
Foreign currency translation
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 earn-
ings 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
reporting 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 com-
prehensive income.
Richelieu ANNUAL REPORT 2014
39
NOTeS TO cONSOliDATeD FiNANciAl STATeMeNTS
November 30, 2014 and 2013 (amounts are in thousands of dollars, except per-share amounts)
2. chANGeS iN AccOuNTiNG MeThODS
3. BuSiNeSS AcQuiSiTiONS
ADOPTED IN 2014
IFRS 10, Consolidated Financial Statements
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 consolida-
tion, irrespective of the nature of the investee, employing the fol-
lowing 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 12, Disclosure of Interests in Other Entities
The IASB published IFRS 12, Disclosure of Interests in Other Enti-
ties which requires that an entity disclose information on the na-
ture of and risks associated with its interests in other entities (i.e.,
subsidiaries, joint arrangements, associates and unconsolidated
structured entities) and the effects of those interests on its finan-
cial statements.
IFRS 13, Fair Value Measurement
The IASB published IFRS 13, Fair Value Measurement to establish a
single framework for fair value measurement of financial 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 information on fair value
measurements.
IAS 32, Financial Instruments: Presentation
The IASB issued amendments to IAS 32, Financial Instruments:
Presentation clarifying the requirements for offsetting financial
assets and liabilities. The IASB also issued amendments to
IFRS 7, Financial Instruments: Disclosure improving disclosure on
offsetting of financial assets and liabilities.
These amendments were applied on December 1st, 2013 and
did not impact the consolidated financial statements of the
Corporation.
RECENTLY ISSUED
IFRS 15, Revenue from contracts with customers
In May 2014, the IASB issued IFRS 15 Revenue from Contracts
with Customers which is a replacement of IAS 18 Revenue, IAS 11,
Construction Contracts and related interpretations. Under IFRS 15
standard, revenue is recognized at the point in time when con-
trol of the goods or services transfers to the customer rather than
when the significant risks and rewards are transferred. The new
standard also requires additional disclosures through notes to
financial statements. IFRS 15 shall be applied to fiscal years begin-
ning on or after January 1, 2017. Earlier application is permitted.
The Corporation will assess the impact this new standard will have
on its consolidated financial statements.
2014
On October 27, 2014, the Corporation purchased the principal net
assets of Thruway Hardwood and Plywood Corp. («Thruway») for
a cash consideration of $2,986 ($2,610 US), and a balance of sale
of $675 ($590 US). Thruway is a distributor of specialty panels and
hardware that operates two distribution centers in New York State,
United States.
On September 22, 2014, the Corporation acquired all of the out-
standing common shares of XM Export-Import Canada Inc. («XM»)
for a cash consideration of $1,163 and a balance of sale of $387.
XM is a distributor of specialty hardware that operates in Quebec,
Canada.
On June 30, 2014, the Corporation purchased the principal
net assets of CabinetWare Inc. (“CabinetWare”) for a cash con-
sideration of $2,860 (US$2,500), and a balance of sale of $2,288
(US$2,000). This business serves a customer base of residential
and commercial woodworkers and kitchen, bathroom cabinet
and furniture manufacturers from its 4 locations in Florida, United
States.
On May 5, 2014, the Corporation purchased the principal net
assets of Pleasantside distribution Ltd. («Pleasantside») for a cash
consideration of $1,850 and a balance of sale of $450. Pleasant-
side is a distributor of specialty hardware that operates in the
Western Canadian market.
On December 2, 2013, the Corporation acquired all of the out-
standing common shares of Procraft Industrial Ltd. (“Procraft”) for
a cash consideration of $1,350 and a balance of sale of $250. This
distributor of finishing products serves a customer base of resi-
dential and commercial woodworker’s and kitchen cabinet manu-
facturers, in the Maritime Provinces of Canada.
Since their acquisition, Thruway, XM, CabinetWare, Pleasantside
and Procraft jointly generated sales of $12,800. If these acquisi-
tions had been completed on December 1st 2013, management
estimates that generated sales would have been approximately
$27,000.
2013
On September 3, 2013, the Corporation purchased the principal
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, Canada, is a distributor of door
and window hardware, which serves the British Columbia market.
On March 21, 2013, the Corporation purchased the principal net
assets of CourterCo Savannah LLC (“Savannah”) for a cash con-
sideration of $297 ($290 US). This distributor of speciality and
decorative hardware product operates a distribution center
based in Savannah (Georgia, United States) and serves a base of
residential and commercial woodworkers customers and kitchen,
bathroom cabinet and furniture manufacturers.
These transactions were accounted for using the acquisition
method and the results of operations are included in the consoli-
dated financial statements as of their respective acquisition date.
40
NOTeS TO cONSOliDATeD FiNANciAl STATeMeNTS
November 30, 2014 and 2013 (amounts are in thousands of dollars, except per-share amounts)
3. BuSiNeSS AcQuiSiTiONS (cont’d)
Summary of acquisitions
The purchase price allocations, at the transaction dates of acquisitions closed in 2014 and 2013, are summarized as follows:
Net assets acquired
Accounts receivable
Inventories
Prepaid expenses
Property, plant and equipment
Customer relationships
Non-competition agreement
Trademark
Goodwill
Current liabilities assumed
Net assets acquired
Considerations
Cash, net of cash acquired
Considerations payable (note 7)
2014
$
2,594
3,619
8
6,221
481
4,872
801
631
4,560
17,566
3,619
13,947
9,897
4,050
13,947
2013
$
694
2,253
—
2,947
137
1,332
162
96
1,117
5,791
844
4,947
4,447
500
4,947
During the year ended November 30, 2014, balances of sale were reduced by $50 as a result of purchase price adjustments on acquisi-
tions from previous years. Goodwill deductible for tax purposes with regards to current year acquisitions amounts to $3,700.
4) PROPeRTY, PlANT AND eQuiPMeNT
Land
Buildings
$
$
Leasehold
improvements
Machinery
and
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
—
—
—
—
3,652
3,652
—
9,708
797
—
(1,275)
1,069
6
—
(395)
4,819
371
33
(1,267)
Rolling
stock
$
1,481
862
57
(586)
Furniture
and fixtures
Computer
equipment
$
2,289
879
47
(1,015)
Total
$
23,740
3,287
$
722
372
—
(522)
137
(5,060)
—
36
44
21
80
6
187
9,230
716
4,000
1,835
2,280
578
22,291
21,967
(12,737)
4,322
(3,606)
23,670
(19,670)
7,156
(5,321)
13,118
(10,838)
9,663
(9,085)
83,548
(61,257)
3,652
9,230
716
4,000
1,835
2,280
578
22,291
Richelieu ANNUAL REPORT 2014
41
NOTeS TO cONSOliDATeD FiNANciAl STATeMeNTS
November 30, 2014 and 2013 (amounts are in thousands of dollars, except per-share amounts)
4. PROPeRTY, PlANT AND eQuiPMeNT (cont’d)
Land
$
Buildings
$
Leasehold
improvements
$
Net carrying amount as at
November 30th, 2013
Acquisitions
Acquisitions through business
combinations
Amortization
Effect of changes in foreign
exchange rates
Net carrying amount as at
November 30th, 2014
Cost
Accumulated amortization
Net carrying amount as at
November 30th, 2014
3,652
—
—
—
—
3,652
3,652
—
Machinery
and
equipment
$
4,000
2,074
52
(1,107)
Rolling
stock
$
1,835
918
345
(746)
Furniture
and fixtures
Computer
equipment
$
$
Total
$
2,280
954
45
(1,152)
578
405
22,291
5,006
26
(391)
481
(5,043)
9,230
529
—
(1,306)
716
126
13
(341)
—
26
35
17
77
5
160
8,453
540
5,054
2,369
2,204
623
22,895
22,496
(14,043)
4,434
(3,894)
26,013
(20,959)
8,393
(6,024)
14,329
(12,125)
10,207
(9,584)
89,524
(66,629)
3,652
8,453
540
5,054
2,369
2,204
623
22,895
5. iNTANGiBle ASSeTS AND GOODWill
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
Net carrying amount as at November 30th, 2013
Acquisitions
Acquisitions through business combinations
Amortization
Effect of changes in foreign exchange rates
Net carrying amount as at November 30th, 2014
Cost
Accumulated amortization
Net carrying amount November 30th, 2014
Software
$
1,168
164
—
(717)
—
615
5,209
(4,594)
615
615
530
—
(518)
—
627
5,740
(5,113)
627
Non-competition
agreements
Customer
relationships
Trademarks
Total
Goodwill
$
542
—
162
(127)
9
586
1,697
(1,111)
586
586
—
801
(256)
4
1,135
2,552
(1,417)
1,135
$
10,425
—
1,332
(1,374)
411
10,794
22,494
(11,700)
10,794
$
3,466
—
96
—
104
3,666
$
$
15,601
164
1,590
(2,218)
524
51,405
—
1,117
—
266
15,661
52,788
3,666
33,066
52,788
—
(17,405)
—
3,666
15,661
52,788
10,794
3,666
15,661
52,788
—
4,872
(1,306)
442
14,802
28,416
(13,614)
14,802
—
631
—
126
530
6,304
(2,080)
572
—
4,560
—
321
4,423
20,987
57,669
4,423
41,131
57,669
—
(20,144)
—
4,423
20,987
57,669
42
NOTeS TO cONSOliDATeD FiNANciAl STATeMeNTS
November 30, 2014 and 2013 (amounts are in thousands of dollars, except per-share amounts)
5. iNTANGiBle ASSeTS AND GOODWill (cont’d)
Changes in stock options are summarized as follows:
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, dis-
count rates before taxes between 12.5% and 13% and a terminal
value calculated at a rate 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
institution with an authorized amount of $26 million in Canadian
dollar and $6 million in US dollar, bearing interest at the bank’s
prime and base rates, which were respectively 3% and 3.75% as at
November 30, 2014 and 2013. The line of credit is renewable
annually.
7. lONG-TeRM DeBT
Business acquisition considerations
payable not bearing interests, including
US$ 2,714 (US$181 in 2013);
Current portion of long-term debt
Long-term debt
2014
2013
$
$
5,354
1,354
3,352
2,002
1,354
—
Next years’ principal payments on long-term debt are $3,352 in
2015, $858 in 2016 and $1,144 in 2017.
8. ShARe cAPiTAl
Authorized
Unlimited number of:
Common shares, participating, entitling the holder to one vote
per share.
Non voting first and second ranking preferred shares issuable in
series, the characteristics of which are to be determined by the
Board of Directors.
Issued
19,566,286 common shares
(20,046,061 – 2013)
2014
2013
$
$
29,762
25,288
During 2014, the Corporation issued 187,825 common shares
(2013 – 124,577) at an average price of $21.16 per share (2013 –
$18.34) pursuant to the exercise of options under the stock option
plan. The weighted average share price at the date of exercise
of options was $47.03 ($39.17 in 2013). In addition, during 2014,
the Corporation, through a normal course issuer bid, purchased
667,600 common shares for cancellation in consideration of
$30,365 (2013 – 873,000 for a consideration of $36,596) which re-
sulted in a premium on the redemption in the amount of $29,509
recorded in retained earnings (premium of $35,445 in 2013).
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, 2014, 82,300 options (2013 – 145,650) were
still available to be granted.
Outstanding,
November 30, 2012
Granted
Exercised
Cancelled
Outstanding,
November 30, 2013
Granted
Exercised
Cancelled
Outstanding,
November 30, 2014
Number of
options
Exercise price
per share
$
762,000
14.50 to 30.68
78,000
(124,577)
38.14
14.50 to 30.45
(3,750)
27.43 to 38.14
711,673
64,100
15.89 to 38.14
43.51 to 47.98
(187,825)
15.89 to 38.14
(750)
38.14
587,198
16.72 to 47.98
The table below summarizes information regarding the stock op-
tions outstanding as at November 30, 2014:
Options outstanding
Exercisable options
Range in
exercise price
Number of
(in dollars)
options
16.72 – 24.76 388,973
37,500
24.77 – 30.44
30.45 – 38.14
38.15 – 47.98
96,625
64,100
587,198
Weighted
Weighted
average
remaining
period
(years)
2.70
7.14
7.74
9.20
4.52
average
exercise
price
(in dollars)
21.33
27.44
36.36
45.26
26.80
Weighted
average
exercise
price
Number of
options
(in dollars)
388,973
19,000
35,344
—
21.33
27.45
34.49
—
443,317
22.64
During 2014, the Corporation granted 64,100 options (2013 –
78,000) with an average exercise price of $45.26 per share (2013
– $38.14) and an average fair value of $11.70 per option (2013 –
$9.95) as determined using the Black & Scholes option pricing
model using an expected dividend yield of 1.3% (2013 – 1.34%),
a volatility of 25% (2013 – 25%), a risk free interest rate of 2.29%
(2013 – 2.04%) and an expected life of 7 years (2013 – 7 years). The
compensation expense in 2014 related to options amounted to
$575 (2013 – $400) is recognized under Cost of goods sold, ware-
housing, selling and administrative expenses.
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
director ceases to be a member of the Board. The financial liability
resulting from the plan of $4,463 (2013 – $3,156) is presented under
the Accounts payable and accrued liabilities. The Corporation has
entered into equity swaps to reduce its exposure on net earnings
related to the fluctuations of the Corporation’s share price. The
net effect of the equity swaps mostly offsets the impact of the
change in the Corporation’s share price. As at November 30, 2014,
the fair value of the equity swaps amounted to an asset of $400
(2013 – None) and is presented under Accounts receivable. The
Corporation categorized the fair value measurement in Level 2,
as it is derived from observable market data. The compensation
expense for the DSUs in 2014 amounted to $667 (2013 – $997) and
is recognized under Cost of goods sold, warehousing, selling and
administrative expenses.
Richelieu ANNUAL REPORT 2014
43
NOTeS TO cONSOliDATeD FiNANciAl STATeMeNTS
November 30, 2014 and 2013 (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 em-
ployees to purchase shares up to a maximum percentage of
their total compensation in cash. The Corporation contributes
an amount equivalent to a percentage of any amounts inves-
ted by the employee to the purchase of additional shares. The
Corporation’s contribution is determined annually. Compensa-
tion expense related to the share purchase plan amounted to $461
for 2014 (2013 – $413) and is recognized under Cost of goods sold,
warehousing, selling and administrative expenses.
Net earnings per share
Basic net earnings per share and diluted net earnings per share
were calculated based on the following number of shares:
Deferred taxes reflect the net tax impact of temporary differences
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, reserves recognized for tax
purposes only 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
2014
2013
$
$
4,319
3,080
1,699
1,593
(5,004)
(4,585)
1,014
88
2014
2013
intangible assets and goodwill over their
Weighted average number of shares
outstanding – Basic
Dilutive effect under stock option plan
Weighted average number of shares
outstanding – Diluted
19 654
20 632
264
298
19 918
20 930
tax value
Net amount
The net deferred taxes included the following as at November 30:
The computation of diluted net earnings per share includes all
outstanding options as at November 30, 2014 and 2013.
9. iNcOMe TAXeS
Deferred tax assets
Deferred tax liabilities
The main components of the income taxes expense are as follows:
2014
2013
$
$
3,776
(2,762)
1,014
3,334
(3,246)
88
Current
Deferred:
Related to temporary differences
Deferred tax assets not previously
recognized
2014
2013
$
$
18,700
17,256
The net deferred taxes for the years ended November 30 is
detailed as follows:
907
772
Balance at the beginning of the year, net
(1,592)
(1,126)
18,015
16,902
In net earnings
Other
Balance at the end of the year, net
2014
2013
$
88
685
241
1,014
$
(333)
354
67
88
The effective income tax rate differs from the combined statutory
rates for the following reasons:
2014
2013
$
$
Combined statutory rates
26.90 % 26.87 %
Income taxes at combined statutory rates
18,988
17,076
The amount of deductible temporary differences and unused
tax losses for which no deferred tax assets was recognised to
the consolidated statement of financial position is $21,000 as at
November 30, 2014 ($23,400 – 2013) of which $3,300 and $2,600
will expire respectively in 2030 and 2031.
10. cOMMiTMeNTS AND cONTiNGeNcieS
(a) Leases
The Corporation has commitments under operating leases for
warehouse and office premises expiring on various dates up to
2020. The future minimum payments, excluding incidental costs
for which the Corporation is responsible, are as follows:
327
154
102
353
108
115
(1,592)
(1,126)
36
376
Less than a year
18,015
16,902
Between 1 and 5 years
More than 5 years
$
8,204
15,297
150
23,651
Increase (decrease) resulting from:
Impact of statutory rates changes for the
subsidiary outside Canada
Share-based compensation
Non-deductible expenses
Deferred tax assets not previously
recognized
Other
44
NOTeS TO cONSOliDATeD FiNANciAl STATeMeNTS
November 30, 2014 and 2013 (amounts are in thousands of dollars, except per-share amounts)
10. cOMMiTMeNTS AND cONTiNGeNcieS (cont’d)
(b) Foreign exchange forward contracts
As at November 30, 2014, the Corporation held the following
foreign exchange forward contracts having maturity dates in
December 2014 and January 2015.
The balance of accounts receivable of the Corporation that are
overdue for more than 60 days, but which were not provided for,
totals $930 ($863 in 2013).
As at November 30, 2014 and 2013, no customer accounted for
more than 10% of the total accounts receivable.
Type
Currency in thousands Average exchange rate
Purchase
3,400 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
consolidated net earnings.
11. AccuMulATeD OTheR cOMPReheNSiVe
iNcOMe (lOSS)
The variance in the accumulated other comprehensive income
(loss) balances is as follows:
Balance at the beginning of the year
Exchange differences on translation of
foreign operations
Balance at the end of the year
2014
2013
$
$
2,236
(1,050)
4,749
6,985
3,286
2,236
Market risk
foreign currency exposure arises
from
The Corporation’s
purchases and sales transacted mainly in U.S. dollars and
Euros. Administrative charges included, for the year ended
November 30, 2014, an exchange gain of $1,300 (2013 – gain of
$600).
The Corporation’s policy is to maintain its purchase price and
selling 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 exchange risks are covered by a centralized cash flow
management. Exchange rate risks are managed in accordance
with the Corporation’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, 2014 and 2013, on translation of monetary
assets and liabilities, a decrease of 1% of the Canadian dollar
against the U.S. dollar and the Euro, all other variables remaining
the same, would have had no significant effect on consolidated
net earnings and would have
increased the consolidated
comprehensive income by $962 ($838 – 2013). The exchange
rate sensitivity is calculated by aggregation of the net foreign
exchange rate exposure of the Corporation’s financial instruments
as of November 30, 2014 and 2013.
12. FiNANciAl iNSTRuMeNTS AND OTheR
Liquidity risk
iNFORMATiON
Fair value
The carrying value of long-term debt approximates their fair value
because of the short maturity on balances of sale payable. The
Corporation categorized the fair value measurement in Level 2, as
it is derived from observable market data.
As at November 30, 2014, the fair value of the foreign exchange
forward contracts amounted to an asset of $6 (gain of approxi-
mately $75 as at November 30, 2013), representing the amount
the Corporation would collect on settlement of these contracts
at spot rates. The Corporation categorized the fair value measu-
rement in Level 2, as it is derived from observable market data.
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
assume their liabilities towards the Corporation. The average days
outstanding of accounts receivable, as at November 30, 2014 and
2013 is acceptable given the industry in which the Corporation
operates.
The Corporation performs ongoing credit evaluations of custo-
mers and generally does not require collateral. The allowance for
doubtful accounts for the years ended November 30, 2014 and
2013 is as follows:
Balance at the beginning of the year
Allowance for doubtful accounts
Write-offs
Exchange rate variations and other
Balance at the end of the year
2014
2013
$
$
5,024
1,984
(1,536)
463
5,935
5,032
1,797
(1,940)
135
5,024
The Corporation manages its risk of not being able to settle
its financial liabilities when required by taking into account
its operational 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, 2014, the amount relating to
inventories recorded as expenses from the distribution, imports
and manufacturing activities totals $463,010 (2013 – $419,846).
An expense of $2,483 (2013 – $1,750) for inventory obsolescence
is included in this amount. Salaries and related charges of
$94,241 (2013 – $85,984) are included in the Cost of goods sold,
warehousing, selling and administrative expenses.
13. RelATeD PARTY iNFORMATiONS
Scope of consolidation
Names
Country of
incorporation
Equity interest
%
Voting rights
%
Richelieu America Ltd.
Richelieu Finances Ltd. (1) Canada
Canada
Cedan Industries Inc.
U.S.
Distributions 20/20 inc.
Provincial Woodproducts
Ltd.
Menuiserie des Pins Ltd.
Canada
Canada
Canada
100
100
100
100
85
75
100
100
100
100
85
75
(1) Richelieu Finances Ltd. is the owner of 100% of the shares of Richelieu
Hardware Canada Ltd.
Richelieu ANNUAL REPORT 2014
45
NOTeS TO cONSOliDATeD FiNANciAl STATeMeNTS
November 30, 2014 and 2013 (amounts are in thousands of dollars, except per-share amounts)
13. RelATeD PARTY iNFORMATiONS (cont’d)
16. DiViDeNDS
Executive officers’ compensation
Short-term employee benefits
Other long-term benefits
Share-based compensation
2014
2013
$
$
3,026
2,473
565
18
509
16
3,609
2,998
For the year ended November 30, 2014, the Corporation paid a
quarterly dividend of $0.14 per common share (2013 – quarterly
dividend of $0.13 per share) for a total amount of $11,023 (2013
– $10,768). The Board of Directors approved on January 22, 2015
the payment of a quarterly dividend of $0.15 per common share
for the 1st quarter of 2015.
17. APPROVAl OF FiNANciAl STATeMeNTS
The consolidated financial statements for the year ended
November 30, 2014 (including the comparative figures) were
approved for issue by the Board of Directors on January 22, 2015.
Accounts payable and accrued liabilities include a retirement
allowance amounting to $2,100 payable to an executive officer.
14. GeOGRAPhic iNFORMATiON
During the year ended November 30, 2014, near 73% of sales had
been made in Canada (2013 – 75%). The Corporation’s sales to
foreign countries, almost entirely directed to the United States,
amounted to $175,827 (2013 – $146,941) in Canadian dollars and
to $159,973 (2013 – $143,337) in U.S. dollars.
As at November 30, 2014, out of a total amount of $22,895 in
property, plant and equipment (2013 – $22,291), $3,026 (2013 –
$3,019) are located in the United States. In addition, intangible
assets located in the United States amounted to $11,885 (2013 –
$7,841) and goodwill to $7,909 (2013 – $4,154) in Canadian dollars
and to $10,389 (2013 – $7,384) and goodwill to $6,913 (2013 –
$3,911) 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, 2014, the Corporation achieved
the following results regarding its capital management objectives:
• debt/equity ratio: 1.7% (2013 – 0.5%) (Long-term debt/Equity);
•
return on average shareholder’s equity of 17.5% over the last
12 months (2013 – 16.2% for the last 12 months).
The Corporation’s capital management objectives remained
unchanged 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
Printed in canada
www.richelieu.com