annual REPORT 2015
CrEativitYrigourdisciplineVision C2
Our vision as a customer and innovation
driven corporation is directed to growth
for the four pillars that are our customers,
employees, suppliers and shareholders –
a corporation leading its north american
market with values respected by all
its members.
Table of contents
Financial highlights
Profile
Message to shareholders
Directors and officers
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
The annual meeting of shareholders will be held on April 7, 2016 at 10:30 a.m.
at the omni Mont-Royal Hotel, 1050 sherbrooke street West, Montreal, Quebec.
3
4
5
9
24
36
37
38
38
39
40
41
Vision CREaTiviTY
RigOuR
rigOur is a value to which we give daily
priority to ensure quality execution, ethical
and transparent management, and our
social and environmental responsibility.
We incorporate crEativitY into every
aspect of our offering and service
as a key differentiation factor.
We exercise disciplinE as part
of our acquisition and integration
strategy to meet our goals of
creating long-term value.
annual REPORT 2015
1
discipline internal growth and
expansion-by-acquisition
SalES
(in millions of $)
nET E aRning S PER S haRE
aTTRibuTablE TO
ShaREhOldERS (diluTEd)
(in $)
CaSh flOWS f ROm
OPERaTing aCTivi TiES (1)
(in millions of $)
749.7
646.9
586.8
565.8
523.8
366.8
313.6
293.1
287.9
256.2
2015
2014
2013
2012
2011
EQuiTY / dEbT
(in millions of $)
EQuiT Y
dE bT
2015
2014
2013
2012
2011
3.6
5.4
1.4
2.6
5.5
(1) Cash flows from operating activities
is a non-ifRS measure, as indicated
on page 26 of this report.
2.97
2.63
2.22
2.15
1.87
2015
2014
2013
2012
2011
68.1
60.3
55.0
54.4
50.2
2015
2014
2013
2012
2011
2011-2015
13 acquisitiOns
2015
single source cabinet supplies (dallas, Texas)
cornerstone Hardware & supplies (houston, Texas)*
2014
procraft 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)
2013
Hi-tech glazing supplies (vancouver)
courterco savannah, llc (georgia)
2012
courterco inc. (indiana, Kentucky, north Carolina)
2011
Outwater Hardware (new Jersey)
Madico inc. (Quebec)
provincial Woodproducts ltd. (newfoundland)
* Subsequent to year-end (dec.14, 2015)
financial highlights
YEaRS EndEd nOvEmbER 30
(in thousands of $, except per share amounts, number of shares and data expressed as a %)
Sales
EbiTda (1)
EbiTda margin (%)
net earnings
net earnings attributable to shareholders of the Corporation
• basic per share ($)
• diluted per share ($)
net margin attributable to shareholders of the
Corporation (%)
Cash flows from operating activities (2)
• diluted per share ($)
dividends paid to shareholders
of the parent Corporation
• per share ($)
Weighted average number of shares
outstanding (diluted) (in thousands)
as at november 30
Total assets
Working capital
Current ratio
Equity
Return on average equity (%)
book value ($)
Total debt
Cash and cash equivalents
2015
$
2014
$
2013
$
2012
$
2011
$
749,646
646,909
586,775
565,798
523,786
87,681
11.7
58,878
58,739
3.01
2.97
7.8
68,052
3.44
11,717
0.60
77,417
12.0
52,573
52,393
2.67
2.63
8.1
60,253
3.03
11,023
0.56
70,373
12.0
46,657
46,403
2.25
2.22
7.9
54,978
2.63
10,768
0.52
71,163
12.6
45,909
45,404
2.17
2.15
8.0
54,403
2.57
10,026
0.48
67,149
12.8
40,105
39,726
1.89
1.87
7.6
50,183
2.36
9,267
0.44
19,781
19,918
20,930
21,137
21,262
449,792
260,579
4.4
366,807
17.5
18.56
3,580
29,454
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
(1) EbiTda is a non-ifRS measure, as indicated on page 26 of this report.
(2) Cash flows from operating activities and cash flows from operating activities per share are non-ifRS measures, as indicated on page 26 of
this report.
maRKET C aPiTalizaTiOn aS aT nO vEmbER 30, 2015: $1.4 billion
aPPRECiaTiOn in ShaRE PRi CE (RCh) SinCE iniTial STOCK li STing: 3,226%
TOTal RET uRn O n ShaRE /10 YE aRS*: 260%
avERagE annual RET uRn O n ShaRE /10 YE aRS*: 13.7%
ThREE-fOR-OnE COmmOn S haRE SPliT,
EffECTivE fE bRuaRY 29, 2016
*including dividend reinvestment
annual REPORT 2015
3
imPORTER, diSTRibuTOR and manufaCTuRER Of SPECialTY
haRdWaRE and COmPlEmEnTaRY PROduCTS —
North AmericAN leAder
Profile
We serve a diversified base of over 70,000 customers consisting of kitchen and
bathroom cabinet, storage and closet, home furnishing and office furniture manufacturers,
residential and commercial woodworkers, and hardware retailers including renovation
superstores.
more than 1,900 employees work at Richelieu, of whom close to half are dedicated
to sales and marketing, and over 50% are shareholders of the Corporation.
Our offering consists of over 110,000 products (SKus) in a wide variety of categories,
including furniture, glass and building decorative and functional hardware, lighting
systems, finishing and decorating products, ergonomic workstation components, kitchen
and closet storage solutions, sliding door systems, decorative and functional panels,
high-pressure laminates, window and door hardware, glass hardware and floor protection
products. This offering is completed by the Corporation’s subsidiaries, les industries
Cedan inc. and menuiserie des Pins ltée, which manufacture product lines with unique
features, including a variety of veneer sheets and edgebanding products, a broad selection
of decorative mouldings and components for the window and door industry. in addition,
many of our products are manufactured according to our specifications and those of our
customers.
We operate 66 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 time for our customers.
Our trilingual website richelieu.com is a tool unrivalled in the industry, designed to
facilitate customers’ projects and transactions and inform any visitor about the most
comprehensive and innovative product offering in north america.
4
annual REPORT 2015
2015
our 2015 performance was fuelled by the growth drivers enabling Richelieu to create
value over the past decades, specifically innovation, targeted market development,
well-integrated strategic acquisitions and operational efficiency.
at Richelieu, we have a deeply rooted innovation and service culture.
in 2015, through our team’s disciplined and coordinated actions,
we continued to lead the market evolution in north america with an
offering unique for its diversity and innovations and distinctive service.
We furthered our growth in Canada and the united States and we
entered the important Texas market by acquiring two distributors in
dallas and houston. We continued to invest in operational efficiency
and to assess our decisions in light of our results. This way, we can rely
on an effective business model well adapted to our customers’ needs.
looking to the future, we have ambitious goals for Richelieu.
RiChaRd lORd
President and
Chief Executive Officer
GroWiNG reSUltS ANd A SoUNd FiNANciAl FootiNG
to tAKe AdVANtAGe oF NeW oPPortUNitieS.
Our strategic decisions are geared to the achievement of a yearly financial
performance to ensure the Corporation’s solidity, enabling us to invest in
innovation, quality of service and acquisitions, with the support of a strong, expert
and committed team.
in our two key north american markets — manufacturers and retailers — our sales
grew by 15.6% and 17.2% respectively in 2015. in Canada, where our leadership
is well established and recognized, our sales increased by 9.1%, of which an
excellent internal growth of 8.5%. in the united States, our market development and
innovation strategies combined with further synergies through our acquisitions
raised our sales by 16.8% in uS$, of which 8.8% from internal growth and 8.0%
from acquisitions.
annual REPORT 2015
5
oUr AcQUiSitioN ANd iNteGrAtioN
StrAteGY iS KeY to oUr GroWth ANd
the SteAdY reiNForcemeNt oF oUr
PoSitioNiNG iN North AmericA.
The acquisitions of Single Source in dallas last June
and Cornerstone hardware in houston in december
– two distributors of specialty hardware for kitchen
cabinet manufacturers and residential and commercial
woodworkers – offer strong entry points to develop the
strategic Texas market. So far, most of our u.S. acquisitions
have been made in the high-potential eastern markets;
we now aim to extend our foothold into others, including
the Sun belt, as indicated by our most recent transactions.
We are proud to have closed nineteen acquisitions since
first entering the united States in 1999. They
have brought significant local skills and a diversified
customer base which we continue to grow. Our u.S.
customers know they can depend on our reliability and
diligence to provide them with innovative, top-performance
solutions for their residential and commercial projects.
Our 28 centres give them access to all our product
categories and a collaborative approach that sets us apart
in this market, which accounted for over 30% of our sales
in 2015.
We have completed 55 acquisitions thus far in north
america, always taking a patient, rigorous and disciplined
approach that we will continue to apply in the future. for
each of these transactions, we have carefully respected our
strategic criteria, including natural compatibility with
our operations, entrepreneurial spirit, the sharing of
our culture and the potential creation of sales and
operational synergies.
during the year, we paid 20% of 2015 net earnings in
dividends. adding the share repurchases of the first six
months, we thus distributed a total of $20.9 million to our
shareholders. We ended the year with an excellent balance
sheet, almost no debt, and the liquidity levels required to
respect our commitments and take advantage of growth
opportunities in the future.
Our market capitalization totalled $1.4 billion as at
november 30, 2015, whereas our share price appreciated
by 25.6% within a year, to close at $71. Over the past
decade, the share price has appreciated by an annual
average of 13.7%. On January 21, 2016, our board approved
the three-for-one split of all common shares. Effective
february 29, 2016, this share split is the third since
Richelieu’s initial listing. it is in line with our initiatives to
favour share ownership by enhancing our share liquidity
and affordability for shareholders.
$80
80 $
$70
70 $
$60
60 $
$50
50 $
$40
40 $
$30
30 $
$20
20 $
$10
10 $
$0
0 $
rcH compound annual
return: 18.3%
(20 years)
$71
11-30-2015
2-for-1
share splits
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
6
6
annual REPORT 2015
annual REPORT 2015
oUr cUStomerS chooSe richelieU
For itS diVerSiFied, comPreheNSiVe
ANd iNNoVAtiVe oFFeriNG.
Our leadership attests that we are in the right markets with
the right products and the right service. as a distributor and
leader, our challenge is to ensure that innovation remains
at the heart of our business strategy, as a steady source
of opportunities for customers. To maintain the north
american market at the world level, we take the risk of
innovation in order to provide our customers with the best-
performing solutions in the world. in 2015, our offering was
further enhanced with innovations selected from the most
creative suppliers, who invest in technology and design
R&d to ensure excellence and remain at the global forefront.
Our mission is to be a partner in our customers’ success
by understanding manufacturers’ and retailers’ challenges
and sustaining their creativity and differentiation. We are at
the forefront in many functional and decorative categories,
such as closet solutions and ergonomic storage spaces for
kitchens and offices, sliding door systems, an extensive
selection of decorative panels exceeding current industry
standards, a diversified offering for today’s small living
spaces, and a broad range of eco-responsible and fSC,
greengard and leed certified products.
We are proud to offer top-performing solutions that help
north american designers, architects and manufacturers
successfully execute even their most challenging
residential and commercial projects. We operate two plants
in Quebec which complete our offering with specialty
products. furthermore, with our website richelieu.com,
we support our customers by providing them with a wide
range of options in many product categories, according
to their specifications. We can also fill non-inventory
product orders in cooperation with our suppliers, allowing
outstanding service and leaner management of our own
inventories and those of our customers.
oUr cUStomerS AlSo chooSe
richelieU For itS eXPertiSe,
ProActiVe SerVice ANd WeBSite
richelieu.com.
Quality execution is a watchword at every level at
Richelieu since it is key to customer satisfaction and our
profitability. like each year, in 2015, we made various
upgrades to our multi-access service to remain tuned
into our customers’ evolving needs and anticipate their
expectations. The availability, the convenient access to our
products and the reliability and efficiency of our delivery
service are uncompromising – as are the listening skills
and collaborative spirit of our sales and service team, who
benefits from our training programs to support their degree
of expertise.
annual REPORT 2015
7
to PUrSUe oUr GroWth, We Will
coNtiNUe to creAte ANd SeiZe
oPPortUNitieS meetiNG oUr
StrAteGic criteriA.
during the year, we invested in remodelling several
showrooms adjoining our distribution centres to further
reflect ongoing innovations in a quality and modern setting.
Our montreal distribution centre was expanded to adapt
to our growing activities, and we also invested in various
building improvements to meet growth needs and respect
our standards of service.
adjusting to market challenges and changes is part of our
day-to-day management. great potential lies ahead of us,
and we have the strengths and resources to develop it.
Together, with our team, we will continue to work hard and
smart to further develop our markets in north america,
driven by our innovation strategy and the opportunity to
create sales synergies.
We use the most relevant technological tools for our
operations and our customers’ needs, in order to rigorously
manage, optimize the efficiency of our logistics chain,
further customize our service and target our development
initiatives. in 2015, we integrated new state-of-the-art
software and equipment into our technology platform
to sustain operational efficiency. Our management
information systems are designed to support our business
model over the long term.
While we focus on internal growth, we will continue to seek
and make further acquisitions to access new strategic
markets and reinforce our positioning in those where
we are present.
To maintain our level of efficiency and quality of service,
we will continue to wisely manage our distribution network
by way of operational synergies when they become
necessary.
The steady rise in our online sales shows that our
customers appreciate the exceptional versatility and scope
of our website richelieu.com, not only as a comprehensive
purchasing management tool, but also for the relevance
of the well-documented and structured information it
channels and the interactivity it provides. richelieu.com
optimizes our overall efficiency as well as that of our
customers, representing significant value-added service
and a solid pillar for future growth.
With the support of our expert and creative team committed
to the Corporation’s objectives and values, we will remain
firmly customer and innovation driven. We operate with an
effective business model that optimizes our customer and
supplier relationships and allows us to stay ahead of
the market.
We thank our customers, employees, suppliers,
shareholders and directors, with regard to whom
we are committed to create further value in the future.
(Signed) richard lord
President and Chief Executive Officer
8
8
annual REPORT 2015
annual REPORT 2015
directorS
Jocelyn Proteau
Chairman of the board
Richelieu hardware ltd.
director of Corporations
richard lord
President and Chief Executive Officer
Richelieu hardware ltd.
mathieu Gauvin (1)
Partner
Richter advisory group, inc.
Jean douville (2)
Chairman of the board
uaP inc.
director of Corporations
Sylvie Vachon (1)
President and Chief Executive Officer
montreal Port authority
denyse chicoyne (2)
director of Corporations
robert courteau (2)
President and Chief Executive Officer
SPi Santé Sécurité inc.
marc Poulin (1)
President and Chief Executive Officer
Empire Company limited
President and Chief Executive Officer
Sobeys inc.
(1) member of the audit Committee
(2) member of the human Resources
and Corporate governance Committee
oFFicerS
richard lord
President and Chief Executive Officer
Antoine Auclair
vice-President and
Chief financial Officer
Guy Grenier
vice-President, Sales and marketing
— industrial
Geneviève Quevillon
vice-President —
Supply Chain and logistics
Jeff crews
vice-President,
business development
— Retailers market, Canada
charles White
vice-President, general manager
— united States
Éric daignault
general manager of divisions
marion Kloibhofer
general manager
— Central Canada
John Statton
general manager
— Western Canada and
Western united States
christian dion
manager — human Resources
Yannick Godeau
Corporate Secretary
annual REPORT 2015
9
by observing society and its behaviours – listening
to our customers, suppliers, architects and designers
– we can anticipate trends. That is how our vision is
shaped and evolves into winning strategies.
10
annual REPORT 2015
Vision Our short and
long-term vision
ensures us of
flexibility and
stability.
annual REPORT 2015
11
Creativity at every level for
a win-win partnership with
our customers and suppliers.
12
annual REPORT 2015
crEativitY RigOuR and CREaTiviTY aRE aT ThE hEaRT Of
OuR KnOW-hOW and OuR SPECialTY PROduCT
maRKETing ExPERTiSE.
annual REPORT 2015
13
crEativitY Our everyday actions and our way
of addressing challenges with
creativity, rigour and discipline
are aligned with our vision.
it is by monitoring changes in our environment and by listening, combined
with rigorous analysis and interpretation of results, that we can implement
strategies making Richelieu a reliable top-quality innovative Corporation.
We are guided by solid core values: respect – integrity – innovative and
collaborative spirit – commitment to produce results – social involvement
and respect for the environment.
OuR CuSTOmERS and
SuPPliERS, aRChiTECTS
and dESignERS, aRE
COnSTanT SOuRCES Of
inSPiRaTiOn.
in turn, we do our utmost to sustain
our customers’ creativity and
competitiveness. as such, we focus
on our expert service and innovative
solutions resulting from our
collaboration with the most creative
suppliers who best understand our
market needs.
14
14
annual REPORT 2015
visitors are impressed when they come
into our showrooms. Our products are
very attractive thanks to technological
innovation, design and comfort — they
definitely meet their needs.
We sell happiness!
richelieu and panasonic recently entered into an exclusive partnership to bring
Panasonic engineered, manufactured, and branded storage and organization
solutions to the north american market. Soft down cabinet systems, revolving
shoe units, pull-down cabinets, clothes drying systems, revolving closets and
combination shelf systems, are among the key innovative space saving solutions.
a place for everything in the home.
OuR buSinESS mOdEl REQuiRES CREaTiviTY and diSCiPlinE
fROm uS TO KEEP iT alignEd WiTh OuR maRKET nEEdS and
aChiEvE OuR gROWTh ObJECTivES.
Simple and flexible, our business model is designed to:
• master the complexity of our supply chain,
• support our innovation and acquisition strategies,
• optimize operational efficiency, and
• continously improve the service level thanks to our logistics, our sales and
service team, our website richelieu.com and a unique marketing program for all
our markets allowing a regional offering, where necessary.
aT ThE baSE Of OuR
CORPORaTiOn iS OuR TEam
WhO iS an ESSEnTial
SOuRCE Of CREaTiviTY.
Our team knows our markets, our
customers and our suppliers. as
an employer, we are committed to
maintain a healthy workplace that
enhances job satisfaction, promotes
professional development and
creativity. Everyone is asked to take
initiative while remaining aligned with
the Corporation’s major objectives.
annual REPORT 2015
15
15
Quality execution and attention
to every detail to maintain our
customers’ trust.
1616
annual REPORT 2015
ThE gREaTEST aTTEnTiOn iS givEn TO RigOROuS mEThOdS
and PROCESSES, ThE COnTROl Of QualiTY Of SERviCE,
and EffiCiEnT lOgiSTiCS.
annual REPORT 2015
17
Rigour and discipline for
successful value creation
strategies.
1818
annual REPORT 2015
WE TaKE a diSCiPlinEd aPPROaCh fOR EaCh Of OuR
aCQuiSiTiOnS and WE RElY On a WEll-ESTabliShEd
inTEgRaTiOn PROCESS.
annual REPORT 2015
annual REPORT 2015
19
19
DISCIPLINE Our core purpose and values will not change in any way, but we
are often faced with changes in the marketplace. practical sense,
consistency and coordination are rooted in our practices and we
ensure that our operational rules are respected corporation-wide.
in order to achieve our operational and financial objectives and meet our
commitments, we prioritize a lean and flexible organizational structure.
We regularly review our practices and processes to ensure efficient
skills and performance management. Our responsibilities, objectives and
guidelines are clear and we measure our progress.
Once we have identified an
acquisition opportunity, we adopt a
cautious and disciplined approach
in complying with our specific
acquisition criteria. Only by doing
so can we ensure the success of
the transaction at the right price,
and the opportunity to add value
through sales and operational
synergies.
20
annual REPORT 2015
Our resources are efficiently deployed to provide our customers
with optimal service in terms of quality and costs. Our quality service
control measures are reliable and designed to identify the necessary
adjustments to be made to our service approach.
Our independent governance committees apply rigorous control
principles to guarantee our compliance with the current legislation
and to ensure fairness and transparency in our core obligations to our
customers, suppliers, employees and shareholders.
Mastering the risks underlying our
operations is critical. We rely on a
rigorous operational and financial
risk management policy that
enables us to assess, anticipate and
monitor them with the appropriate
procedures and the involvement of
each of relevant services.
annual REPORT 2015
21
richelieu.com
Efficiency • Creativity • Excellence
richelieu.com maKES OuR EnTiRE OffERing availablE TO OuR CuSTOmERS –
manufaCTuRERS and RETailERS – aRChiTECTS and dESignERS, WhilE alSO
PROviding viSiTORS WiTh ThE OPPORTuniTY TO diSCOvER OuR PROduCTS, anYWhERE
and anYTimE, On SmaRT COmmuniCaTiOn dEviCES. iT iS ThE OnlY TRilingual
TRanSaCTiOnal WEbSiTE in OuR induSTRY in nORTh amERiCa.
Several distinctive features set richelieu.com
apart worldwide:
• easy and friendly access to our complete
offering with outstanding product and
project search and design tools;
• options allowing the virtual design of
products and projects according to
specifications required by our customers in
many categories – those products are then
manufactured by outstanding suppliers
selected for their skills and efficiency; and
• assembly and use guidelines provided on
video, available at any time on demand.
richelieu.com is an efficient and creative tool,
ideal for automation of the entire purchasing
function, from product selection to delivery,
ensuring reliability and quality and allowing
customers to save time and money.
22
22
RaPPORTa annuEl 2015
annual REPORT 2015
The logistics partner
66 inter-connected centres
OnE-STOP ShOP aPPROaCh
dElivERY WiThin 24 hOuRS fOllOWing RECEiPT Of ThE ORdER
Canada – 36 diSTRibuTiOn CEnTRES
St. John’s, dartmouth, moncton, Quebec (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 CEnTRES
longueuil, notre-dame-des-Pins
uniTEd STaTES – 28 diSTRibuTiOn CEnTRES
boston, hartford, new York, lincoln Park, Syracuse, buffalo, detroit,
Cincinnati, greensboro, Charlotte, greenville, atlanta, Savannah,
Riviera beach, hialeah, dania, Pompano, Sarasota, Orlando, Tampa bay,
Jacksonville, nashville, Chicago, indianapolis, louisville, Seattle,
dallas, houston
annual REPORT 2015
annual REPORT 2015
23
23
management’s Report
managEmEnT’S diSCuSSiOn and analYSiS
Of OPERaTing RESulTS and finanCial POSiTiOn
Year Ended november 30, 2015
25
26
26
27
27
28
28
29
31
31
31
32
32
32
33
33
33
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35
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Contents
2015 highlights
forward-looking Statements
non-ifRS measures
general business Overview as at november 30, 2015
mission and Strategy
financial highlights
analysis of Operating Results
Summary of Quarterly Results and fourth Quarter
financial Position
analysis of Principal Cash flows
analysis of financial Position
Contractual Commitments
Events after the reporting date
financial instruments
internal Control over financial Reporting
Significant accounting Policies and Estimates
new accounting methods
Risk factors
Share information as at January 21, 2016
Outlook
Supplementary information
24
annual REPORT 2015
Faits saillants
HIgHLIgHTS OF THE yEAR
ENDED NOvEmBER 30, 2015
Richelieu recorded a very good performance and maintained
an impeccable financial position in 2015. The sales and
net earnings growth was achieved thanks to the sustained
innovation and market penetration strategies that distinguish
the Corporation and contribute to position it as a market leader
in North America. The strategic acquisitions concluded every
year leading to sales and operational synergies are another
key source of growth. In 2015, two acquisitions were closed
in the important Texas market, including one subsequent to
year-end, on December 14th. The growth posted during the
year further strengthened the Corporation for the future and
created shareholder value through stock market performance,
share repurchases and dividends. In 2015, Richelieu saw
its market capitalization rise to $1.4 billion. Its share price
(RCH/TSX) has appreciated by 25.6% within a year and by an
annual average of 13.7% over the last decade.
• Consolidated sales totalled $749.6 million, an increase of
15.9%, of which 13.1% from internal growth and 2.8% from
acquisitions.
• Earnings before income taxes, interest and amortization
(EBITDA) (1) grew by 13.3% to $87.7 million. The EBITDA
margin stood at 11.7%.
• Net earnings attributable to shareholders increased by
12.1% to $58.7 million or $3.01 per share (basic) and $2.97
(diluted), up by 12.7% and 12.9% respectively.
• Cash flows from operating activities (2) (before net change
in non-cash working capital balances) grew by 12.9% to
$68.1 million.
• Working capital increased by 21.3%, to $260.6 million –
a current ratio of 4.4:1.
• Cash and cash equivalents totalled $29.5 million.
• Total debt amounted to $3.6 million, including $2.2 million
in short-term debt.
• Repurchase of 150,600 common shares for $9.2 million
and payment of $11.7 million in dividends to shareholders
to
(representing 20% of net earnings attributable
shareholders for the year). Richelieu thereby distributed
$20.9 million to its shareholders in 2015, while retaining
the financial resources for its growth in 2016.
• Acquisition, effective June 18, 2015, of the principal net
assets of BD Enterprises, Inc. (doing business under the
name Single Source Cabinet Supplies), a Dallas, Texas
based specialty hardware distributor serving kitchen
cabinet manufacturers and residential and commercial
woodworkers.
• Events after November 30, 2015:
• Acquisition effective December 14, 2015 of all out-
standing common shares of Cabinetmakers Supply, Inc.
(doing business as Cornerstone Hardware & Supplies),
a Houston, Texas based specialty hardware distributor
serving kitchen cabinet manufacturers and residential and
commercial woodworkers. The two 2015 acquisitions in the
Texas market represent additional sales of approximately
$11 million on an annualized basis.
• Three-for-one share split of all common shares, approved
by the Board of Directors on January 21, 2016, effective on
February 29, 2016.
(1) (2) EBITDA and cash flows from operating activities are non-IFRS measures,
as indicated on page 26 of this report.
ANNUAL REPORT 2015
25
This management’s report relates to Richelieu Hardware Ltd.’s
consolidated operating results and cash flows for the year
ended November 30, 2015 in comparison with the year ended
November 30, 2014, 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 accom-
panying notes for the year ended November 30, 2015 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 Corpora-
tion’s President and Chief Executive Officer and vice-President
and Chief Financial Officer, as well as press releases issued dur-
ing the year ended November 30, 2015, is available on the web-
site of the System for Electronic Document Analysis and Retrieval
(“SEDAR”) at www.sedar.com.
The information contained in this management’s report accounts
for any major event occurring prior to January 21, 2016, on which
date the audited consolidated financial statements and annual
management’s report were approved by the Corporation’s Board
of Directors. Unless otherwise indicated, the financial information
presented below, including tabular amounts, is expressed in
Canadian dollars and prepared in accordance with International
Financial Reporting 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 activities,
growth outlook, Richelieu’s competitive position in its industry,
Richelieu’s ability to weather the current economic context and
access other external financing, the closing of new acquisitions,
and other statements not pertaining to past events, constitute
forward-looking statements. In some cases, these statements
are identified by the use of terms such as “may”, “could”, “might”,
“intend” “should”, “expect”, “project”, “plan”, “believe”, “estimate”
or the negative form of these expressions or other comparable
variants. These statements are based on the
information
available at the time they are written, on assumptions made by
management and on the expectations of management, acting
in good faith, regarding future events, including the assumption
that economic conditions and exchange rates will not significantly
deteriorate, the Corporation’s deliveries will be sufficient to
fulfill Richelieu’s needs, the availability of credit will remain
stable during the year and no extraordinary events will require
supplementary capital expenditures.
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. For-
ward-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 2015 Annual Report (see the “Risk
Factors” section of this management’s report and the 2015
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 amor-
tization (“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, net earnings
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 oper-
ating 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.
26
ANNUAL REPORT 2015
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 strategy that
has benefited it until now, with a focus on:
• continuing to strengthen its product selection by annually
introducing diversified products that meet its market segment
needs and position it as the specialist in functional and
decorative hardware for manufacturers and retailers;
•
further developing its current markets in Canada and the
United States with the support of a specialized sales and
marketing
force capable of providing customers with
personalized service; and
• expanding in North America through the opening of distribution
centres and
integrated, profitable
acquisitions made at the right price, offering high growth
potential and complementary to its product mix and expertise.
through efficiently
Richelieu’s solid and efficient organization, highly diversified
product selection and
leading
suppliers worldwide position it to compete effectively in a
fragmented market consisting mainly of a host of regional
distributors who distribute a limited range of products.
long-term relationships with
GENERAL BUSINESS OVERVIEW
as at November 30, 2015
Richelieu is a leading North American importer, distributor and
manufacturer of specialty hardware and related products.
Its products are targeted to an extensive customer base of
kitchen and bathroom cabinet, storage and closet, home fur-
nishing and office furniture manufacturers, residential and
commercial woodworkers, and hardware retailers including reno-
vation superstores. The residential and commercial renovation
industry is the Corporation’s major source of growth.
Richelieu offers customers a broad mix of products sourced from
manufacturers worldwide. The solid relationships Richelieu has
built with the world’s leading suppliers enable it to provide cus-
tomers with the latest innovative products tailored to their busi-
ness needs. The Corporation’s product selection consists of over
110,000 different items targeted to a base of more than 70,000
customers who are served by 66 centres in North America ─—
36 distribution centres in Canada, 28 in the United States and two
manufacturing plants in Canada.
main product categories include furniture, glass and building
decorative and functional hardware, lighting systems, finishing
and decorating products, ergonomic workstation components,
kitchen and closet storage solutions, sliding door systems,
decorative and functional panels, high-pressure
laminates,
window and door hardware, glass hardware and floor protection
products. This offering
is completed by the Corporation’s
subsidiaries, Les Industries Cedan inc. and menuiserie des Pins
Ltée, which manufacture product lines with unique features,
including a variety of veneer sheets and edgebanding products, a
broad selection of decorative mouldings and components for the
window and door industry. In addition, many of the Corporation’s
products are manufactured according to its specifications and
those of its customers.
Richelieu employs over 1,900 people at its head office and throu-
ghout the network, close to half of whom work in marketing,
sales and customer service. more than 50% of its employees are
Richelieu shareholders.
ANNUAL REPORT 2015
27
FINANCIAL HIGHLIGHTS
(in thousands of $, except per-share amounts, number of shares and data expressed as a %)
years ended November 30
Sales
EBITDA (1)
EBITDA margin (%)
Net earnings
Net earnings attributable to shareholders of the Corporation
• basic per share ($)
• diluted per share ($)
2015
$
2014
$
2013
$
2012
$
2011
$
749,646
646,909
586,775
565,798
523,786
87,681
11.7
58,878
58,739
3.01
2.97
77,417
12.0
70,373
12.0
52,573
46,657
52,393
2.67
2.63
46,403
2.25
2.22
71,163
12.6
45,909
45,404
2.17
2.15
8.0
54,403
2.57
10,026
0.48
67,149
12.8
40,105
39,726
1.89
1.87
7.6
50,183
2.36
9,267
0.44
Net margin attributable to shareholders of the Corporation (%)
7.8
8.1
7.9
Cash flows from operating activities (2)
• diluted per share ($)
Cash dividends paid to shareholders of the parent Corporation
• per share ($)
Weighted average number of shares outstanding (diluted)
68,052
3.44
11,717
0.60
60,253
3.03
11,023
0.56
54,978
2.63
10,768
0.52
(in thousands)
As at November 30
Total assets
Working capital
Current ratio
Equity
Return on average equity (%)
Book value ($)
Total debt
Cash and cash equivalents
19,781
19,918
20,930
21,137
21,262
449,792
260,579
4.4
366,807
17.5
18.56
3,580
29,454
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
(1) EBITDA is a non-IFRS measure, as indicated on page 26 of this report.
(2) Cash flows from operating activities and cash flows from operating activities per share are non-IFRS measures, as indicated on page 26 of this report.
ANALYSIS OF OPERATING RESULTS FOR THE YEAR ENDED NOVEMBER 30, 2015 COMPARED WITH THE YEAR ENDED
NOVEMBER 30, 2014
Thanks to the contribution of all market segments of the Corpora-
tion, sales to manufacturers amounted to $637.1 million, an in-
crease of 15.6% or $86.2 million over 2014, of which 12.4% from
internal growth and 3.2% from acquisitions. Sales to hardware
retailers and renovation superstores grew by 17.2% or $16.5 mil-
lion to $112.5 million for 2015. This increase is due primarily to
significant market share gains and improved market conditions.
In Canada, sales totalled $513.7 million, up from $471.1 million
for 2014, an increase of $42.6 million or 9.1%, of which 8.5%
from
internal growth and 0.6% from acquisitions. Sales to
manufacturers amounted to $416.8 million, an increase of
$30.0 million or 7.8%, of which 7.1% from internal growth and 0.7%
from acquisitions. Sales to hardware retailers and renovation
superstores grew by 14.9% to $96.9 million, up from $84.3 million
for 2014.
Consolidated sales
(in thousands of $, except exchange rate)
years ended November 30
Canada
United States (CA$)
(US$)
Average exchange rate
Consolidated sales
2015
$
2014
$
∆ %
471,082
+ 9.1
175,827 + 34.2
159,973 + 16.8
513,743
235,903
186,815
1.2628 1.0991
749,646
646,909 + 15.9
Richelieu achieved consolidated sales of $749.6 million, an
increase of 15.9% or $102.7 million over 2014, of which 13.1%
from internal growth and 2.8% from acquisitions. At comparable
exchange rates to 2014, the consolidated sales growth would
have been 11.2% for 2015.
28
ANNUAL REPORT 2015
In the United States, Richelieu recorded sales of US$186.8 million,
an increase of US$26.8 million or 16.8% over 2014, of which 8.8%
from internal growth and 8.0% from acquisitions. Sales to manu-
facturers reached US$174.6 million, an increase of $25.2 million
or 16.9%, of which 8.4% from internal growth and 8.5% from acqui-
sitions. Sales to hardware retailers and renovation superstores
grew by 15.7% (in US$). In Canadian dollars, U.S. sales amoun-
ted to $235.9 million, compared with $175.8 million for 2014, an
increase of 34.2%, of which 25.2% from internal growth and 9.0%
from acquisitions. They accounted for 31.5% of 2015 consolidated
sales, whereas in 2014, U.S. sales had represented 27.2% of the
year’s consolidated sales.
Consolidated EBITDA and EBITDA margin
(in thousands of $, unless otherwise indicated)
Net earnings grew by 12.0% over 2014. Considering non-
controlling interests, net earnings attributable to shareholders
of the Corporation totalled $58.7 million, up by $6.3 million or
12.1% over 2014 – equivalent to $3.01 basic per share and $2.97
diluted, compared with $2.67 basic and $2.63 diluted for 2014,
an increase of 12.7% and 12.9% respectively. The net margin
attributable to shareholders stood at 7.8%, compared with 8.1%
for 2014.
Comprehensive income amounted to $71.0 million, considering a
positive adjustment of $12.2 million on translation of the financial
statements of the subsidiary in the United States, compared
with $57.3 million for 2014, considering a positive adjustment
of $4.7 million on translation of the financial statements of the
subsidiary in the United States.
years ended November 30
Sales
EBITDA
EBITDA margin (%)
2015
$
2014
$
749,646
87,681
11.7
646,909
77,417
12.0
interest,
Earnings before
income taxes and amortization
(EBITDA) totalled $87.7 million, an increase of $10.3 million or
13.3% over 2014. The gross margin and EBITDA margin declined
slightly due to the higher proportion of sales in the United States
where the product mix is different, the lower margins of certain
acquisitions also having a different product mix, the effect of
introducing additional products, mainly in the Canadian retailers
market, and the appreciation of the U.S. dollar which had an
upward impact on the purchasing cost of certain products before
selling price adjustments. Consequently, the EBITDA margin
stood at 11.7%, compared with 12.0% for 2014.
Income taxes amounted to $20.5 million, an increase of $2.5 mil-
lion over 2014.
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
2015
$
2014
$
87,681
77,417
8,449
(149)
20,503
58,878
7,123
(294)
18,015
52,573
58,739
52,393
7.8
139
8.1
180
58,878
52,573
SUMMARY OF QUARTERLY RESULTS (unaudited)
(in thousands of $, except per-share amounts)
Quarters
2
1
3
4
2015
• Sales
• EBITDA
• Net earnings to
shareholders of the
Corporation
basic per share
diluted per share
2014
• Sales
• EBITDA
• Net earnings to
shareholders of the
Corporation
basic per share
diluted per share
2013
• Sales
• EBITDA
• Net earnings to
shareholders of the
Corporation
basic per share
diluted per share
159,319 190,801 199,457 200,069
25,703
15,706
24,394
21,878
10,216
0.52
0.51
14,653
0.75
0.74
16,340
0.84
0.83
17,530
0.90
0.89
136,108 165,155 167 809 177 837
23 474
13,704
21 054
19,185
8,859
0.44
0.44
13,036
0.67
0.66
14,554
0.74
0.73
15,944
0.82
0.80
126,084 156,240 149,163 155,288
20,223
12,893
19,050
18,207
8,158
0.39
0.39
12,140
0.59
0.58
12,821
0.62
0.62
13,284
0.65
0.64
ANNUAL REPORT 2015
29
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 performance in
the first, second and third quarters of 2015, the reader is referred to
the interim management’s reports available on SEDAR’s website at
www.sedar.com.
FOURTH QUARTER ENDED NOVEMBER 30, 2015
The Corporation achieved good fourth-quarter growth in consoli-
dated sales, which amounted to $200.1 million, an increase of
$22.2 million or 12.5% over the corresponding quarter of 2014,
of which 11.2% from internal growth and 1.3% from acquisitions.
At comparable exchange rates to the fourth quarter of 2014, the
consolidated sales growth would have been 7.1% for the quarter
ended November 30, 2015.
from
Sales to manufacturers totalled $172.0 million, up
$152.2 million for the corresponding period of 2014, an increase
of $19.8 million or 13.0%, of which 11.5% from internal growth and
1.5% from acquisitions. Sales to hardware retailers and renova-
tion superstores grew to $28.1 million, up by $2.4 million or 9.3%.
In Canada, the Corporation recorded sales of $136.5 million,
compared with $127.7 million for the fourth quarter of 2014, an
increase of $8.8 million or 6.9%, entirely from internal growth.
Sales to manufacturers amounted to $112.8 million, up from
$105.1 million for the fourth quarter of 2014, an increase of
$7.7 million or 7.3% from internal growth. Sales to hardware retailers
and renovation superstores grew by 5.1% to $23.7 million.
In the United States, sales totalled US$48.1 million, an increase
of 7.5%, of which 3.4% from internal growth and 4.1% from acqui-
sitions. Sales to manufacturers amounted to US$44.9 million,
an increase of 6.8%, of which 2.5% from internal growth and 4.3%
from acquisitions. Sales to hardware retailers and renovation
superstores rose 18.3%. In Canadian dollars, U.S. sales grew
to $63.6 million, up from $50.1 million for the corresponding
quarter of 2014, an increase of 26.9%, of which 22.1% from
internal growth and 4.8% from acquisitions. They accounted
for 31.8% of the quarter’s consolidated sales, whereas for the fourth
quarter of 2014, U.S. sales had represented 28.2% of the period’s
consolidated sales.
interest,
Earnings before
income taxes and amortization
(EBITDA) grew by 9.5% to $25.7 million, primarily reflecting the
sales growth. The gross margin and EBITDA margin declined
slightly due mainly to the lower gross margins of certain acqui-
sitions having a different product mix, the effect of introducing
additional products, and the appreciation of the U.S. dollar which
had an upward impact on the purchasing cost of certain prod-
ucts before selling price adjustments. Consequently, the EBITDA
margin stood at 12.8%, compared with 13.2% for the corres-
ponding quarter of 2014.
Income taxes amounted to $5.9 million, an increase of $0.2 mil-
lion over the fourth quarter of 2014.
Fourth-quarter net earnings rose 10.0%. Considering non-
controlling interests, net earnings attributable to shareholders
of the Corporation totalled $17.5 million, up by 9.9% over the
corresponding quarter of 2014. The net margin attributable to
shareholders grew to 8.8%. Net earnings per share amounted to
$0.90 basic and $0.89 diluted, compared with $0.82 basic and
$0.80 diluted for the fourth quarter of 2014, an increase of 9.8%
and 11.3% respectively.
Comprehensive income totalled $18.9 million, considering a posi-
tive adjustment of $1.3 million on translation of the financial
statements of the subsidiary in the United States, compared with
$19.4 million for the corresponding quarter of 2014, considering
a positive adjustment of $3.4 million on translation of the finan-
cial statements of the subsidiary in the United States.
Cash flows from operating activities (before net change in non-
cash working capital balances) amounted to $19.7 million or
$0.99 diluted per share, up by 9.7% and 10.0% over the fourth
quarter of 2014. Net change in non-cash working capital bal-
ances used cash flows of $5.8 million, reflecting net changes in
accounts receivable and other items ($3.4 million) as well as
changes in inventories ($2.4 million). Consequently, operating
activities provided cash flows of $13.8 million, compared with
$13.1 million for the fourth quarter of 2014.
Financing activities represented a cash outflow of $1.2 mil-
lion, compared with $2.5 million for the corresponding quarter of
2014. Richelieu paid shareholder dividends of $2.9 million, up by
6.6%, considering the dividend increase announced in January
2015. The Corporation issued common shares for $2.0 million
upon the exercise of options under its stock option plan, com-
pared with $0.4 million in the same quarter of 2014.
Investing activities represented a cash outflow of $4.0 million
for the fourth quarter of 2015, primarily for the expansion of the
montreal distribution centre, equipment for operational efficiency
and software, whereas the Corporation had invested $6.5 million
during the fourth quarter of 2014, of which $4.2 million in two
business acquisitions and $2.3 million in equipment needed for
operations.
30
ANNUAL REPORT 2015
FINANCIAL POSITION
Investing activities
Analysis of principal cash flows for the year ended
November 30, 2015
Change in cash and cash equivalents and capital
resources
(in thousands of $)
years ended November 30
Cash flows provided by (used for):
Operating activities
Financing activities
Investing activities
Effect of exchange rate fluctuations
Net change in cash and cash
equivalents
Cash and cash equivalents,
beginning of year
Cash and cash equivalents,
end of year
As at November 30
Working capital
Renewable line of credit (CA$)
Renewable line of credit (US$)
Operating activities
2015
$
2014
$
27,311
(19,467)
(11,497)
(614)
40,465
(37,413)
(15,433)
(85)
(4,267)
(12,466)
33,721
46,187
29,454
33,721
2015
2014
260,579
26,000
6,000
214,866
26,000
6,000
Cash flows from operating activities (before net change in non-
cash working capital balances) amounted to $68.1 million or
$3.44 diluted per share, compared with $60.3 million or $3.03
diluted per share for 2014, primarily reflecting the increase in net
earnings. Net change in non-cash working capital balances used
cash flows of $40.7 million, representing net changes in inven-
tories ($43.0 million) as well as in accounts receivable and other
items ($3.3 million), whereas accounts payable represented a
cash inflow of $5.6 million. Consequently, operating activities
provided cash flows of $27.3 million, compared with $40.5 million
for 2014.
Financing activities
Richelieu repurchased common shares under its normal course
issuer bid for $9.2 million, compared with $30.4 million in 2014.
The Corporation paid shareholder dividends of $11.7 million, up
by 6.3% over 2014, considering the dividend increase announced
in January 2015, and issued common shares for $3.1 mil-
lion upon the exercise of options under its stock option plan,
compared with $4.0 million in 2014. Consequently, financing
activities represented a cash outflow of $19.5 million, compared
with $37.4 million for 2014.
In 2015, Richelieu invested a total of $11.5 million, of which
$11.0 million in property, plant and equipment, primarily for the
expansion of the montreal distribution centre, building improve-
ments, equipment for operational efficiency, software and the
remodelling of certain showrooms, to which was added the
acquisition of the principal net assets of Single Source in the
third quarter of 2015. In 2014, Richelieu had invested a total of
$15.4 million, of which $9.9 million in business acquisitions and
$5.5 million in equipment needed for operations.
Sources of financing
As at November 30, 2015, cash and cash equivalents totalled
$29.5 million, compared with $33.7 million a year earlier. Working
capital stood at $260.6 million for a current ratio of 4.4:1, com-
pared with $214.9 million (4.0:1 ratio) as at November 30, 2014,
an increase of 21.3%.
Richelieu believes it has the capital resources to fulfill its ongoing
commitments and obligations and to assume the funding require-
ments needed for its growth and the financing and investing
activities planned for 2016. The Corporation continues to benefit
from an authorized line of credit of CA$26 million as well as a line
of credit of US$6 million renewable annually and bearing interest
respectively at prime and base rates. In addition, the Corpora-
tion estimates it could obtain access to other outside financing if
necessary.
The expectation set forth above consists of forward-looking informa-
tion based on the assumption that economic conditions and exchange
rates will not deteriorate significantly, operating expenses will not in-
crease considerably, deliveries will be sufficient to fulfill Richelieu’s re-
quirements, the availability of credit will remain stable in 2016, and no
unusual events will entail additional capital expenditures. This expecta-
tion also remains subject to the risks identified under the “Risk Factors”
section.
Analysis of financial position at as November 30, 2015
Summary of financial position
(in thousands of $, except exchange rate)
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
2015
$
337,308
112,484
449,792
76,729
6,256
362,885
3,922
449,792
2014
$
285,394
105,327
390,721
70,528
6,640
309,149
4,404
390,721
1.335
1.144
ANNUAL REPORT 2015
31
Assets
CONTRACTUAL COMMITMENTS
Summary of contractual financial commitments as at
November 30, 2015
(in thousands of $)
Less than
1 year
Between
1 and 5 years
More than
5 years
Long-term debt
Operating leases
Total
2,245
9,905
12,150
1,335
20,771
22,106
–
4,446
4,446
Total
3,580
35,122
38,702
For 2016 and the foreseeable future, the Corporation expects
cash flows from operating activities and other sources of finan-
cing 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 Richelieu’s
requirements, the availability of credit will remain stable in 2016,
and no unusual events will entail additional capital expenditures. This
expectation also remains subject to the risks identified under the “Risk
Factors” section.
EVENTS AFTER THE REPORTING DATE
Effective December 14, 2015, Richelieu acquired all the
outstanding common shares of Cabinetmakers Supply, Inc.
(doing business as Cornerstone Hardware & Supplies), a spe-
cialty hardware distributor located in Houston, Texas, that serves
a customer base of kitchen cabinet manufacturers and residen-
tial and commercial woodworkers.
On January 21, 2016, the Board of Directors approved a three-
for-one split of all common shares issued and outstanding of the
Corporation, effective on February 29, 2016.
FINANCIAL INSTRUMENTS
Richelieu periodically enters into foreign exchange forward con-
tracts 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 nego-
tiation purposes and to enter into these contracts only with major
financial institutions.
Richelieu also uses equity swaps to reduce the effect of fluc-
tuations 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 state-
ments for the year ended November 30, 2015, 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.
Total assets amounted to $449.8 million as at November 30,
2015, up from $390.7 million a year earlier, an increase of 15.1%
or $59.1 million. Current assets grew by 18.2% or $51.9 million
over November 30, 2014, due mainly to the following two factors
– the appreciation of the U.S. dollar which had an upward impact
on translation of the assets of the subsidiary in the United States
– and the increase in inventories resulting from the addition of
new products to meet demand subsequent to significant market
share gains during the year and the rise in supply costs due to the
appreciation of the U.S. dollar.
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
2015
$
2,245
1,335
3,580
29,454
25,874
2014
$
3,352
2,002
5,354
33,721
28,367
As at November 30, 2015, total debt amounted to $3.6 million,
representing balances payable on acquisitions, of which $2.2 mil-
lion in short-term debt. The Corporation benefits from an excel-
lent financial position to pursue its growth strategy in North
America.
Equity attributable to shareholders totalled $362.9 million as
at November 30, 2015, up from $309.1 million a year earlier, an
increase of 17.4% reflecting the growth of $3.8 million in share
capital, $38.1 million in retained earnings and $12.2 million in
accumulated other comprehensive income, less the change
of $0.3 million in contributed surplus. The positive variation of
38.1 million in retained earnings represents the effect of the
year’s net earnings, less share repurchases and dividends paid
during the year. As at November 30, 2015, the book value per
share was $18.56, up from $15.80 as at November 30, 2014, an
increase of 17.5%.
As at November 30, 2015, return on average equity stood
at 17.5%.
At 2015 year-end, the Corporation’s share capital consisted
of 19,547,869 common shares (19,566,286 shares as at
November 30, 2014). In 2015, upon the exercise of options under
the stock option plan, Richelieu issued 132,183 common shares
at an average price of $23.20 (187,825 in 2014 at an average
price of $21.16). In addition, 150,600 common shares were
repurchased for cancellation under the normal course issuer bid
for a cash consideration of $9.2 million (667,600 common shares
for a cash consideration of $30.4 million in 2014), resulting in a
redemption premium of $8.9 million recorded as a reduction
of retained earnings (premium of $29.5 million
in 2014).
Finally, the Corporation granted 82,300 stock options during
the year (64,100 in 2014). Consequently, as at November 30,
2015, 526,215 stock options were outstanding (587,198 as at
November 30, 2014).
32
ANNUAL REPORT 2015
INTERNAL CONTROL OVER FINANCIAL REPORTING
NEW ACCOUNTING METHODS
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, 2015. 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, 2015, 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 mis-
statements. 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 statements for
the year ended November 30, 2015 have been prepared by man-
agement in accordance with International Financial Reporting
Standards (IFRS). The preparation of the consolidated financial
statements requires management to make estimates and as-
sumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. These estimates
are based on management’s best knowledge of current events
and actions that the Corporation may undertake in the 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 valuation of inventory impairment, including loss and
obsolescence, goodwill and intangible assets with indefinite
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 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.
Recently Issued
IFRS 15, Revenue from Contracts with Customers
In may 2014, the International Accounting Standards Board (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, revenue is recognized
at the point in time when control of the goods or services trans-
fers to the customer rather than when the significant risks and
rewards are transferred. The new standard also requires addi-
tional disclosures through notes to financial statements. IFRS 15
shall be applied to fiscal years beginning on or after January 1st,
2018. Earlier application is permitted.
IFRS 16, Leases
In January 2016, the IASB has published a new standard,
IFRS 16 Leases. The new standard brings most leases on-
balance sheet for lessees under a single model, eliminating
the distinction between operating and finance
leases.
largely unchanged
Lessor accounting however
leases
and the distinction between operating and finance
is retained. IFRS 16 supersedes IAS 17 Leases and related
interpretations and is effective for periods beginning on or after
January 1st, 2019, with earlier adoption permitted if IFRS 15
Revenue from Contracts with Customers has also been applied.
remains
IAS 1, Presentation of Financial Statements
In December 2014, the IASB issued amendments to IAS 1,
Presentation of Financial Statements to clarify materiality, order
of notes to financial statements, disclosure of accounting policies
as well as aggregation and disaggregation of items presented
in the statement of financial position, statement of income and
statement of comprehensive income. These amendments shall
be applied to fiscal years beginning on or after January 1st, 2016.
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 depend
on general economic conditions and the economic factors
specific to the renovation and construction
industry. Any
economic downturn could lead to a decline in sales and have an
adverse impact on the Corporation’s financial performance.
ANNUAL REPORT 2015
33
Market and competition
Acquisitions
The specialty hardware and renovation products segment is
highly competitive. Richelieu has developed a business strategy
rooted in a diversified product offering in various targeted niche
markets in North America and sourced from suppliers around
the world, in creative marketing and in unparalleled expertise
and quality of service. Up to now, this strategy has enabled it
to benefit from a solid competitive 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.
Acquisitions in North America remain an important strategic
focus for Richelieu. The Corporation will maintain its strict acqui-
sition criteria and pay particular attention to the integration of
its acquisitions. Nevertheless, there is no guarantee that a busi-
ness 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 fi-
nancial and operational risks.
Foreign currency
Credit
Richelieu is exposed to the risks related to currency fluctuations,
primarily in regard to foreign-currency denominated purchases
and sales made abroad.
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 31% 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.
instruments, more specifically
To manage its currency risk, the Corporation uses derivative
financial
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’ supply needs.
To that end, Richelieu must maintain solid relationships with sup-
pliers respecting its supply criteria. The inability to maintain such
relationships or to efficiently manage the supply chain and inven-
tories could affect the Corporation’s financial position. Similarly,
Richelieu must track trends and its customers’ preferences and
maintain inventories that meet their needs, failing to do so could
adversely affect its financial performance.
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.
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 Corporation’s financial per-
formance.
Close to 16% of Richelieu’s workforce is unionized. The Corpora-
tion’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 inter-
ruption in operations as a result of a labour conflict could have an
adverse impact on the Corporation’s financial results.
Stability of key officers
Richelieu offers a stimulating working environment and a com-
petitive compensation plan, which help it retain a stable man-
agement 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 adjusts its organizational structure as
needed and 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.
34
ANNUAL REPORT 2015
SHARE INFORMATION AS AT JANUARY 21, 2016
Issued and outstanding common shares: 19,553,369
Stock options under stock option plan: 520,715
OUTLOOK
In 2016, as in the past, Richelieu will be customer-oriented,
focusing on quality of service and innovation. Its two major
sources of growth will
innovation and business
remain
acquisition strategies in its sector. The Corporation will pursue
its current market development
its
efforts to penetrate new territories, especially in the United
States. It remains on the lookout for strategic acquisitions to
further strengthen its positioning and create additional sales
and operational synergies, while giving priority to operational
efficiency and sound financial management.
in North America and
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
January 21, 2016
(Signed) Antoine Auclair
vice-President and
Chief Financial Officer
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 com-
puter systems, could affect its operations and financial perform-
ance, 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 busi-
ness 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 be-
come disabled, the Corporation could potentially lose control of
customer data and suffer financial loss, a disruption of our busi-
nesses, liability to clients, regulatory intervention or damage to
its reputation.
In addition, any issue of data privacy as it relates to unauthor-
ized access to, or loss of, customer and/or employee informa-
tion could result in the potential loss of business, damage to
Richelieu’s market reputation, litigation and regulatory investiga-
tion and penalties.
To reduce its risk, the Corporation continuously invests in the
security of its IT systems, business processes improvements
and enhancements to its culture of information security.
ANNUAL REPORT 2015
35
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.
The Corporation 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 Report, primarily
through its Audit Committee. This committee which meets periodically with the Corporation’s managers and external auditors, has reviewed
the consolidated financial statements of the Corporation 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 21, 2016
(Signed) Richard Lord
President and Chief Executive Officer
(Signed) Antoine Auclair
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, 2015 and 2014, and the consolidated statements of income, 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 mis-
statement 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 consoli-
dated 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, 2015 and 2014 and its financial performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards.
(Signed) Ernst & young LLP
montreal, Canada, January 21, 2016
36
ANNUAL REPORT 2015
1 CPA auditor, CA, public accountancy permit no. A120803
États consolidés de la situation financière
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS AT NOvEmBER 30
(In thousands of dollars)
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]
Events after the reporting date [note 17]
See accompanying notes to the consolidated financial statements.
On behalf of the Board:
N Notes
2015
$
2014
$
3
3
4
5
5
9
3
9
7
7
9
8
8
11
29,454
99,975
206,449
1,430
337,308
27,963
21,325
58,329
4,867
449,792
71,787
2,697
2,245
76,729
1,335
3,020
1,901
82,985
33,566
1,265
308,904
19,150
362,885
3,922
366,807
449,792
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
(Signed) Director
(Signed) Director
ANNUAL REPORT 2015
37
Comptes de résultats consolidés
États consolidés du résultat global
CONSOLIDATED STATEMENTS OF EARNINGS
yEARS ENDED NOvEmBER 30
(In thousands of dollars, except earnings per share)
Sales
Operating expenses excluding amortization and financial costs
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.
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
Comprehensive income
Comprehensive income attributable to:
Shareholders of the Corporation
Non-controlling interests
See accompanying notes to the consolidated financial statements.
38
ANNUAL REPORT 2015
N Notes
8, 12
9
8
N Notes
11
2015
$
2014
$
749,646
661,965
87,681
5,806
2,643
(149)
8,300
79,381
20,503
58,878
58,739
139
58,878
3.01
2.97
646,909
569,492
77,417
5,043
2,080
(294)
6,829
70,588
18,015
52,573
52,393
180
52,573
2.67
2.63
2015
$
2014
$
58,878
52,573
12,165
71,043
70,904
139
71,043
4,749
57,322
57,142
180
57,322
Attributable to shareholders of the Corporation
Contributed
surplus
$
Retained
earnings
$
Accumulated
other
comprehensive
income
$
Total
$
Non-controling
interests
$
Total
equity
$
Capitaux propres
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
yEARS ENDED NOvEmBER 30
(In thousands of dollars)
Notes
Balance as at November 30th, 2013
Net earnings
Other comprehensive incomes
Comprehensive income
Shares repurchased
Stock options exercised
Share-based compensation expense
Dividends [note 16]
Other liabilities
Balance as at November 30th , 2014
Net earnings
Other comprehensive incomes
Comprehensive income
Shares repurchased
Stock options exercised
Share-based compensation expense
Dividends [note 16]
Other liabilities
Share
capital
$
8
25 ,288
—
—
—
(856)
5,330
—
—
—
4,474
29,762
—
—
—
(236)
4,040
—
—
—
3,804
2,356
—
—
—
—
(1,355)
575
—
—
(780)
1,576
—
—
—
—
(973)
662
—
—
(311)
258,965
52 ,393
—
52,393
(29,509)
—
—
(11,023)
—
(40,532)
270,826
58,739
—
58,739
(8,944)
—
—
(11,717)
—
(20,661)
11
2,236
—
4,749
4,749
—
—
—
—
—
—
6,985
—
12,165
12,165
—
—
—
—
—
—
288,845
52,393
4,749
57,142
(30,365)
3,975
575
(11,023)
—
(36,838)
309,149
58,739
12,165
70,904
(9,180)
3,067
662
(11,717)
—
(17,168)
Balance as at November 30th, 2015
33,566
1,265
308,904
19,150
362,885
See accompanying notes to the consolidated financial statements.
4,269
180
—
180
—
—
—
—
(45)
(45)
4,404
139
—
139
—
—
—
(596)
(25)
(621)
3,922
293,114
52,573
4,749
57,322
(30,365)
3,975
575
(11,023)
(45)
(36,883)
313,553
58,878
12,165
71,043
(9,180)
3,067
662
(12,313)
(25)
(17,789)
366,807
ANNUAL REPORT 2015
39
Flux de trésorerie
CONSOLIDATED STATEMENTS OF CASH FLOWS
yEARS ENDED NOvEmBER 30
(In thousands of dollars)
OPERATING ACTIVITIES
Net earnings
Items not affecting cash
Amortization of property, plant and equipment
Amortization of intangible assets
Deferred taxes
Share-based compensation expense
Net change in non-cash working capital balances
FINANCING ACTIVITIES
Repayment of long-term debt
Dividends paid to shareholders of the parent Corporation
Other dividends paid
Common shares issued
Common shares repurchased for cancellation
INVESTING ACTIVITIES
Business acquisitions
Additions to property, plant and equipment and intangible assets
N Notes
2015
$
2014
$
58,878
52,573
5,806
2,643
(399)
1,124
68,052
(40,741)
27,311
(1,041)
(11,717)
(596)
3,067
(9,180)
(19,467)
(511)
(10,986)
(11,497)
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)
8
16
8
8
3
4, 5
Effect of exchange rate changes on cash and cash equivalents
(614)
(85)
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplementary information
Income taxes paid
Interest received, net
See accompanying notes to the consolidated financial statements.
(4,267)
33,721
29,454
20,721
(149)
(12,466)
46,187
33,721
16,871
(294)
40
ANNUAL REPORT 2015
Notes
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2015 and 2014 (amounts are in thousands of dollars, except per-share amounts or otherwise indicated)
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 woodworkers, 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 accordance
with International Financial Reporting Standards [“IFRS”].
The preparation of the consolidated financial statements requires man-
agement to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and accompanying
notes. These estimates are based on management’s best knowledge of
current events and actions that the Corporation may undertake in the
future and other factors deemed relevant and reasonable.
The judgments made by management in applying the accounting poli-
cies 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 ad-
justments to the carrying amount of assets and liabilities during the fol-
lowing period are the valuation of inventory impairment, including loss
and obsolescence, 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 per-
iods 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 amortized cost using the
effective interest method. For the Corporation, 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 inven-
tory obsolescence and loss. The quantity, age and condition of inven-
tory are measured and assessed regularly during the year.
Property, plant and equipment
Property, plant and equipment are recorded at cost and amortized on a
straight-line basis over their estimated useful lives. The main compon-
ents have different useful lives and are amortized separately. The amor-
tization 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 pur-
chased or internally developed software, customer relationships, non-
competition agreements and trademarks. Software and customer rela-
tionships 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 Corporation’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 determine
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 indi-
cators of impairment exist. Impairment tests are carried out on the
asset itself, the cash-generating unit [“CgU”] or group of CgUs as at
November 30. A CgU is the smallest identifiable group of assets that
generates cash inflows that are largely independent of the cash inflows
from other assets or groups of assets. goodwill and the supporting
assets that cannot be wholly allocated to a single CgU are tested for
impairment at the group of CgUs level.
Impairment tests consist in a comparison between the carrying and
recoverable amounts of an asset, CgU or group of CgUs. The recover-
able amount is the higher of value in use and fair value less costs to sell.
Where the carrying amount exceeds the recoverable amount, an impair-
ment 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.
ANNUAL REPORT 2015
41
Notes
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2015 and 2014 (amounts are in thousands of dollars, except per-share amounts or otherwise indicated)
1. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
Derivative financial instruments
Other than for goodwill, if a reversal of an impairment loss occurs, it
must be recognized immediately in net earnings. Reversals of impair-
ment losses related to a CgU or group of CgUs are allocated proportion-
ately to the assets of the CgU or group of CgUs. On reversal of an im-
pairment 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 indefinite
useful lives, value in use is estimated using a discounted future cash
flow model. The application of this method is based on different assump-
tions such as estimated future cash flows as described in note 5.
Other financial liabilities
Accounts payable and accrued liabilities and long-term debt are classi-
fied in “other financial liabilities” and are initially recorded at fair value.
They are subsequently measured at amortized cost using the effect-
ive interest method. For the Corporation, this measurement is usually
equivalent to cost. Options to purchase non-controlling interests that
correspond to the definition of a financial liability are measured at fair
value and presented under other liabilities.
Revenue recognition
Revenues are recognized when finished products are shipped to cus-
tomers. They are measured at the fair value of the consideration re-
ceived or receivable, net of returns and discounts granted.
Income taxes
The Corporation follows the liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are
accounted for based on estimated taxes recoverable or payable that
would result from the recovery or settlement of the carrying amount of
assets and liabilities. Deferred tax assets and liabilities are measured
using substantially enacted tax rates expected to be in effect in the
years in which the temporary differences are expected to reverse.
Changes in these balances are recognized in net earnings in the year in
which they arise.
Deferred tax assets are recognized when it is probable that the
Corporation will have future taxable income against which these
tax assets may be offset. In determining these deferred tax assets,
assumptions are considered, such as the period for tax loss carry
forwards to be completely used up and the level of future taxable
income in accordance with tax planning strategies.
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 earnings are trans-
lated 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 comprehensive income.
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 in 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 documentation cri-
teria are met. Derivative financial instruments designated as cash flow
hedges are classified as available-for-sale financial assets and liabilities
and are measured at fair value, which is the instruments’ approximate
settlement value at market rates. gains and losses on remeasurement
at each year-end are recorded in comprehensive income. If the instru-
ment is not designated and documented as a hedge, changes in fair
value are recognized in the statement of consolidated earnings for the
year. Assets or liabilities related to financial instruments are included in
Accounts receivable or Accounts payable and accrued liabilities in the
consolidated 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 categor-
ized 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 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.
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.
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 number of DSUs granted to a director
equals the compensation amount to be converted in DSUs divided by
the average closing price of the Shares on the Toronto Stock Exchange
for the five (5) business days immediately preceding the date of the
payment. The DSU liability is measured at fair value at each closing date
on the basis of the number of outstanding share units and the market
price of the Company’s common shares is included in 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 and is
included in the Operating expenses.
42
ANNUAL REPORT 2015
Notes
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2015 and 2014 (amounts are in thousands of dollars, except per-share amounts or otherwise indicated)
1. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
3. BUSINESS ACQUISITIONS
Net earnings per share
2015
Net earnings per share are calculated based on the weighted average
number of common shares outstanding during the year. Diluted earn-
ings per share are calculated using the treasury stock method and take
into account all the elements that have a dilutive effect.
2. CHANGES IN ACCOUNTING METHODS
Recently issued
IFRS 15, Revenue from contracts with customers
In may 2014, the International Accounting Standards Board (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 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 statements. IFRS 15 shall be applied to fiscal
years beginning on or after January 1st, 2018. Earlier application is
permitted.
IFRS 16, Leases
In January 2016, the IASB has published a new standard, IFRS 16
Leases. The new standard brings most leases on-balance sheet for
lessees under a single model, eliminating the distinction between
operating and finance leases. Lessor accounting however remains
largely unchanged and the distinction between operating and finance
leases is retained. IFRS 16 supersedes IAS 17 Leases and related
interpretations and is effective for periods beginning on or after
January 1st, 2019, with earlier adoption permitted if IFRS 15 Revenue
from Contracts with Customers has also been applied.
IAS 1, Presentation of Financial Statements
In December 2014, the IASB issued amendments to IAS 1 Presentation
of Financial Statements to clarify materiality, order of notes to financial
statements, disclosure of accounting policies as well as aggregation
and disaggregation of items presented in the statement of financial
position, statement of income and statement of comprehensive income.
These amendments shall be applied to fiscal years beginning on or after
January 1st, 2016. Earlier application is permitted.
The Corporation will assess the impact these new standards will have on
its consolidated financial statements.
On June 18, 2015, the Corporation purchased the net assets of
BD Enterprises, Inc. (doing business as Single Source Cabinet Supplies
[«Single Source»], a distributor of specialty hardware that serves a
customer base of kitchen cabinet manufacturers and residential and
commercial woodworkers in Dallas, Texas.
Since its acquisition Single Source generated sales of $2,000. If this
acquisition had been completed on December 1st 2014, management
estimates that generated sales would have been approximately $4,500.
2014
On October 27, 2014, the Corporation purchased the principal net assets
of Thruway Hardwood and Plywood Corp., 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 outstanding
common shares of Xm Export-Import Canada Inc., a distributor of
specialty hardware that operates in Quebec, Canada.
On June 30, 2014, the Corporation purchased the principal net assets
of CabinetWare Inc. This business serves a customer base of residential
and commercial woodworkers and kitchen, bathroom cabinet and furni-
ture manufacturers from its four locations in Florida, United States.
On may 5, 2014, the Corporation purchased the principal net assets of
Pleasantside distribution Ltd., a distributor of specialty hardware that
operates in the Western Canadian market.
On December 2, 2013, the Corporation acquired all of the outstanding
common shares of Procraft Industrial Ltd., a distributor of finishing
products serves a customer base of residential and commercial
woodworker’s and kitchen cabinet manufacturers, in the maritime
Provinces of Canada.
These transactions were accounted for using the acquisition method
and the results of operations are included in the consolidated financial
statements as of their respective acquisition date.
Summary of acquisitions
The purchase price allocations, at the transaction dates are summarized
as follows:
Current assets acquired
Non current assets acquired
Current liabilities assumed
Net assets acquired
Considerations
Cash, net of cash acquired
Considerations payable [note 7]
2015
$
977
511
1,488
932
556
2014
$
6,221
11,345
17,566
3,619
13,947
511
45
556
9,897
4,050
13,947
During the year ended November 30, 2015, balances of sale were redu-
ced by $1,297 as a result of purchase price adjustments on acquisitions
from previous years.
ANNUAL REPORT 2015
43
Notes
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2015 and 2014 (amounts are in thousands of dollars, except per-share amounts or otherwise indicated)
4. PROPERTY, PLANT AND EQUIPMENT
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
Net carrying amount as at
November 30th, 2014
Acquisitions
Acquisitions through business
combinations
Amortization
Effect of changes in foreign exchange
rates
Net carrying amount as at
November 30th, 2015
Cost
Accumulated amortization
Net carrying amount as at
November 30th, 2015
5. INTANGIBLE ASSETS AND GOODWILL
Buildings
$
Leasehold
improvements
$
Machinery
and
equipment
$
Rolling
stock
$
Furniture
and fixtures
$
Computer
equipment
$
Total
$
Land
$
3,652
—
—
—
—
3,652
3,652
—
9,230
529
—
(1,306)
—
8,453
22,496
(14,043)
716
126
13
(341)
26
540
4,000
2,074
52
(1,107)
1,835
918
345
(746)
2,280
954
45
(1,152)
578
405
22,291
5,006
26
(391)
481
(5,043)
35
17
77
5
160
5,054
2,369
4,434
(3,894)
26,013
(20,959)
8,393
(6,024)
2,204
14,329
(12,125)
623
22,895
10,207
(9,584)
89,524
(66,629)
3,652
8,453
540
5,054
2,369
2,204
623
22,895
Land
$
Buildings
$
Leasehold
improvements
$
Machinery
and
equipment
$
Rolling
stock
$
Furniture
and fixtures
$
Computer
equipment
$
Total
$
3,652
—
—
—
—
8,453
3,778
—
(1,383)
—
3,652
3,652
—
10,848
26,274
(15,426)
540
520
33
(405)
45
733
5,054
2,410
53
(1,111)
2,369
1,305
44
(998)
111
119
6,517
2,839
2,204
1,557
17
(1,459)
144
2,463
623
707
22,895
10,277
12
(450)
159
(5,806)
19
438
911
27,963
5,032
(4,299)
28,587
(22,070)
9,861
(7,022)
16,047
(13,584)
10,945
(10,034)
100,398
(72,435)
3,652
10,848
733
6,517
2,839
2,463
911
27,963
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
Net carrying amount as at November 30th, 2014
Acquisitions
Acquisitions through business combinations
Amortization
Effect of changes in foreign exchange rates
Net carrying amount as at November 30th, 2015
Cost
Accumulated amortization
Net carrying amount November 30th, 2015
44
ANNUAL REPORT 2015
Software
$
Non-competition
agreements
$
Customer
relationships
$
Trademarks
$
Total
$
Goodwill
$
615
530
—
(518)
—
627
5,740
(5,113)
627
627
709
—
(458)
—
878
6,451
(5,573)
878
586
—
801
(256)
4
1,135
2,552
(1,417)
1,135
1,135
—
—
(461)
86
760
2,632
(1,872)
760
10,794
—
4,872
(1,306)
442
14,802
28,416
(13,614)
14,802
14,802
—
352
(1,724)
1,480
14,910
31,789
(16,879)
14,910
3,666
—
631
—
126
4,423
4,423
—
4,423
4,423
—
—
—
354
4,777
4,777
—
4,777
15,661
530
6,304
(2,080)
572
20,987
41,131
(20,144)
20,987
20,987
709
352
(2,643)
1,920
21,325
45,649
(24,324)
21,325
52,788
—
4,560
—
321
57,669
57,669
—
57,669
57,669
—
—
—
660
58,329
58,329
—
58,329
Notes
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2015 and 2014 (amounts are in thousands of dollars, except per-share amounts or otherwise indicated)
5. INTANGIBLE ASSETS AND GOODWILL (cont’d)
Stock option plan
For impairment test purposes, the carrying value of goodwill and in-
tangible assets has been allocated to CgUs or groups of CgUs. The
carrying amounts of goodwill for the three CgUs that are significant in
comparison with the total carrying amount of goodwill are $14.4 mil-
lion, $11.8 million and $8.3 million respectively while $23.8 million is
allocated across multiple CgUs or groups of CgUs with carrying values
of goodwill that are not significant in comparison with total carrying
amount of goodwill. The carrying amounts of intangible assets with in-
definite useful lives is allocated across multiple CgUs or groups of CgUs
and the amount allocated is not individually significant in comparison
with the total carrying amount. The recoverable value of the CgUs or
groups of CgUs was determined on the basis of their value in use, which
was calculated using forecasted cash flows before taxes over a period
of five years, discount rates before taxes between 12.5% and 13% and a
terminal value calculated at a rate of 2%. main assumptions are based on
historical data. 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 $6 mil-
lion in US dollar, bearing interest at the bank’s prime and base rates,
which were respectively 2.7% and 3.75% as at November 30, 2015 [3%
and 3.75% in 2014]. The line of credit is renewable annually.
7. LONG-TERM DEBT
Business acquisition considerations payable
not bearing interests, including US$ 2,624
[US$ 2,714 in 2014];
Current portion of long-term debt
Long-term debt
2015
$
2014
$
3,580
5,354
2,245
1,335
3,352
2,002
Next years’ principal payments on long-term debt are $2,245 in 2016
and $1,335 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
2015
$
2014
$
Changes in stock options are summarized as follows:
Outstanding, November 30, 2013
granted
Exercised
Cancelled
Outstanding, November 30, 2014
Granted
Exercised
Cancelled
Outstanding, November 30, 2015
Number of
options
711,673
64,100
(187,825)
(750)
587,198
82,300
(132,183)
(11,100)
526,215
Exercise price
per share
$
15.89 to 38.14
43.51 to 47.98
15.89 to 38.14
38.14
16.72 to 47.98
56.49
16.72 to 43.51
22.31 to 56.49
16.72 to 56.49
As at November 30, 2015, 11,100 options [2014 – 82,300] were still
available to be granted.
The table below summarizes information regarding the stock options
outstanding as at November 30, 2015:
Range in
exercise price
(in dollars)
16.72 – 24.76
24.77 – 30.44
30.45 – 38.14
38.15 – 56.49
Options outstanding
Exercisable options
Weighted
average
remaining
period
(years)
Weighted
average
exercise
price
(in dollars)
Weighted
average
exercise
price
(in dollars)
Number of
options
2.17
6.16
6.83
8.74
4.91
21.00
27.43
36.73
51.70
32.12
269,590 21.00
24,844
27.43
48,425 35.76
15,213 45.35
358,072 24.48
Number of
options
269,590
33,125
81,850
141,650
526,215
During 2015, the Corporation granted 82,300 options [2014 – 64,100]
with an average exercise price of $56.49 per share [2014 – $45.26]
and an average fair value of $12.42 per option [2014 – $11.70] as
determined using the Black & Scholes option pricing model using an
expected dividend yield of 1.1% [2014 – 1.3%], a volatility of 21% [2014
– 25%], a risk free interest rate of 1.48% [2014 – 2.29%] and an expected
life of 7 years [2014 – 7 years]. The maximum term of options granted is
January 22, 2025. The compensation expense in 2015 related to stock
options amounted to $662 [2014 – $575] is recognized under Operating
expenses.
Deferred share unit plan
The financial liability resulting from the plan of $6,022 [2014 – $4,463]
is presented under the Accounts payable and accrued liabilities. As at
November 30, 2015, the fair value of the equity swaps amounted to an
asset of $57 [2014 – $400] 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 2015 amounted to $462 [2014 – $667] and is recognized
under Operating expenses.
19,547,869 common shares
[19,566,286 – 2014]
33,566
29,762
Number of DSUs
During 2015, the Corporation issued 132,183 common shares [2014
– 187,825] at an average price of $23.20 per share [2014 – $21.16]
pursuant to the exercise of options under the stock option plan. The
weighted average share price at the date of exercise of options was
$66.69 [$47.03 in 2014]. In addition, during 2015, the Corporation,
through a normal course issuer bid, purchased 150,600 common shares
for cancellation in consideration of $9,180 [2014 – 667,600 common
shares for consideration of $30,365] which resulted in a premium on
the redemption in the amount of $8,944 recorded in retained earnings
[premium of $29,509 in 2014].
Outstanding, beginning of year
granted
Outstanding, end of year
2015
2014
78,335
6,350
84,685
70,216
8,119
78,335
ANNUAL REPORT 2015
45
Notes
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2015 and 2014 (amounts are in thousands of dollars, except per-share amounts or otherwise indicated)
8. SHARE CAPITAL (cont’d)
Share purchase plan
The Corporation has a share purchase plan entitling any employees to
purchase shares up to a maximum percentage of their total compen-
sation in cash. The Corporation contributes an amount equivalent to a
percentage of any amounts invested by the employee to the purchase
of additional shares. The Corporation’s contribution is determined annu-
ally. Compensation expense related to the share purchase plan amount-
ed to $530 for 2015 [2014 – $461] and is recognized under Operating
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:
Weighted average number of shares
outstanding – Basic
Dilutive effect under stock option plan
Weighted average number of shares
outstanding – Diluted
2015
2014
19,520
261
19,654
264
19,781
19,918
The computation of diluted net earnings per share includes all outstanding
options as at November 30, 2015.
9. INCOME TAXES
The main components of the income taxes expense are as follows:
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 intangible
assets and goodwill over their tax value
Net amount
2015
$
2014
$
5,305
4,319
1,654
1,699
(5,112)
1,847
(5,004)
1,014
The net deferred taxes included the following as at November 30:
Deferred tax assets
Deferred tax liabilities
2015
$
4,867
(3,020)
1,847
2014
$
3,776
(2,762)
1,014
The net deferred taxes for the years ended November 30 is detailed as
follows:
Current
Deferred :
Related to temporary differences
Deferred tax assets not previously recognized
2015
$
2014
$
Balance at the beginning of the year, net
20,902
18,700
In net earnings
Other
Balance at the end of the year, net
1,698
(2,097)
20,503
907
(1,592)
18,015
2015
$
1,014
399
434
1,847
2014
$
88
685
241
1,014
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 $18,900 as at November 30, 2015
[$21,000 – 2014] of which $1,100 will expire in 2031.
10. COMMITMENTS AND CONTINGENCIES
[a] Leases
The Corporation has commitments under operating leases for ware-
house and office premises expiring on various dates up to 2025. The
future minimum payments, excluding incidental costs for which the
Corporation is responsible, are as follows:
Less than a year
Between 1 and 5 years
more than 5 years
$
9,905
20,771
4,446
35,122
The effective income tax rate differs from the combined statutory rates
for the following reasons:
Combined statutory rates
Income taxes at combined statutory rates
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
2015
$
2014
$
26.90%
21,353
26.90%
18,988
716
171
102
(2,097)
258
20,503
327
154
102
(1,592)
36
18,015
46
ANNUAL REPORT 2015
Notes
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2015 and 2014 (amounts are in thousands of dollars, except per-share amounts or otherwise indicated)
10. COMMITMENTS AND CONTINGENCIES (cont’d)
Market risks
[b] Foreign exchange forward contracts
As at November 30, 2015, the Corporation held the following foreign
exchange forward contracts having maturity dates in December 2015
and January 2016.
Type
Currency in thousands
Average exchange rate
Purchase
3,800 euros
1.44
[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
The variance in the accumulated other comprehensive income 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
2015
$
6,985
2014
$
2,236
12,165
19,150
4,749
6,985
12. FINANCIAL INSTRUMENTS AND OTHER INFORMATION
Fair values
The carrying value of long-term debt approximates their fair value be-
cause 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, 2015, the fair value of the foreign exchange
forward contracts amounted to a liability of $114 [an asset of $6 as at
November 30, 2014], representing the amount the Corporation would
collect on settlement of these contracts at spot rates. The Corporation
categorized the fair value measurement in Level 2, as it is derived from
observable market data.
Credit risks
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, 2015 and 2014 is acceptable given the
industry in which the Corporation operates.
The Corporation performs ongoing credit evaluations of customers
and generally does not require collateral. The allowance for doubtful
accounts for the years ended November 30 are as follows:
Balance, beginning of year
Allowance for doubtful accounts
Write-offs
Exchange rate variations and other
Balance, end of year
2015
$
5,935
689
(1,340)
570
5,854
2014
$
5,024
1,984
(1,536)
463
5,935
The balance of accounts receivable of the Corporation that are overdue
for more than 60 days, but which were not provided for, totals $568
[$930 in 2014].
As at November 30, 2015 and 2014, no customer accounted for more
than 10% of the total accounts receivable.
The Corporation’s foreign currency exposure arises from purchases and
sales transacted mainly in U.S. dollars and Euros. Operating expenses
included, for the year ended November 30, 2015, an exchange gain of
$1,460 [2014 – gain of $1,300].
The Corporation’s policy is to maintain its purchase 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, 2015, on translation of monetary assets and liabil-
ities, a decrease of 5% of the Canadian dollar against the U.S. dollar and
the Euro, all other variables remaining the same, would have had no sig-
nificant effect on consolidated net earnings and would have increased
the consolidated comprehensive income by $5,642 [a decrease of 1%
of the Canadian dollar against the U.S. dollar and the Euro, would have
had no significant effect on consolidated net earnings and would have
increased consolidated comprehensive income by $962 – 2014]. 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, 2015 and 2014.
Liquidity risk
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.
Operating expenses excluding amortization and financial charges
Inventories from the distribution, imports and
manufacturing activities
Salaries and related charges
Other charges
2015
$
2014
$
540,768
105,092
16,105
661,965
463,010
94,241
12,241
569,492
An expense of $2,776 [2014 – $2,483] for inventory obsolescence is
included in inventories from the distribution, imports and manufacturing
activities.
13. RELATED PARTY INFORMATION
Scope of consolidation
Names
Country of
incorporation
Equity interest
%
Voting rights
%
Richelieu America Ltd.
Richelieu Finances Ltd. (1)
Les Industries Cedan inc.
Distributions 20/20 inc.
Provincial Woodproducts Ltd.
menuiserie des Pins Ltd.
United States
Canada
Canada
Canada
Canada
Canada
100
100
100
100
85
75
100
100
100
100
85
75
(1) Richelieu Finance Ltd. is the owner of 100% of the shares of Richelieu
Hardware Canada Ltd.
ANNUAL REPORT 2015
47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2015 and 2014 (amounts are in thousands of dollars, except per-share amounts or otherwise indicated)
13. RELATED PARTY INFORMATIONS (cont’d)
17. EVENTS AFTER THE REPORTING DATE
Effective December 14, 2015, Richelieu acquired all the outstanding
common shares of Cabinetmakers Supply, Inc. (doing business as
Cornerstone Hardware & Supplies), a specialty hardware distributor
located in Houston, Texas, that serves a customer base of kitchen
cabinet manufacturers and residential and commercial woodworkers.
On January 21, 2016, the Board of Directors approved a three-for-one
split of all issued and outstanding common shares of the Corporation.
This share split will become effective on February 29, 2016 at the close
of trading on the Toronto Stock Exchange.
18. APPROVAL OF FINANCIAL STATEMENTS
The consolidated financial statements for the year ended November 30,
2015 [including the comparative figures] were approved for issue by the
Board of Directors on January 21, 2016.
19. COMPARATIVE FIGURES
Certain figures disclosed for the year ended November 30, 2014 have
been reclassified to conform to the presentation adopted during the year
ended November 30, 2015.
Executive officers’ compensation
Short-term employee benefits
Other long-term benefits
Share-based compensation
2015
$
3,360
560
440
4,360
2014
$
3,130
565
422
4,117
Accounts payable and accrued liabilities include a retirement allowance
amounting to $2,200 payable to an executive officer.
14. GEOGRAPHIC INFORMATION
During the year ended November 30, 2015, near 69% of sales had
been made in Canada [2014 – 73%]. The Corporation’s sales to foreign
countries, almost entirely directed to the United States, amounted
to $235,903 [2014 – $175,827] in Canadian dollars and to $186,815
[2014 – $159,973] in U.S. dollars.
As at November 30, 2015, out of a total amount of $27,963 in property,
plant and equipment [2014 – $22,895], $2,730 [2014 – $3,026] are
located in the United States. In addition, intangible assets located
in the United States amounted to $12,796 [2014 – $11,885] and
goodwill to $9,231 [2014 – $7,909] in Canadian dollars and to $9,581
[2014 – $10,389] and goodwill to $6,913 [2014 – $6,913] 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; and
• 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, 2015, the Corporation achieved the
following results regarding its capital management objectives:
• Debt/equity ratio: 1% [2014 – 1.7%] [Long-term debt/Equity]
• Return on average shareholder’s equity of 17.5% over the last 12
months [2014 – 17.5% over the last 12 months]
The Corporation’s capital management objectives remained unchanged
from the previous fiscal year.
16. CASH DIVIDENDS PAID TO SHAREHOLDERS OF THE PARENT
CORPORATION
For the year ended November 30, 2015, the Corporation paid dividends
of $11,717 to shareholders of the parent Corporation ($11,023 in 2014),
equivalent to a quarterly dividend of $0.15 per common share [2014 –
quarterly dividend of $0.14 per share]. The Board of Directors approved
on January 21, 2016 the payment of a quarterly dividend of $0.16 per
common share for the 1st quarter of 2016.
48
ANNUAL REPORT 2015
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
4
annual REPORT 2015