ThankS To
Our strength
and our future
innovation
service
vaLUe creation
a n n u a l r eP
o r T 2 0 1 7
design novateur etdesign novateur et richeLieU tUrns
in 2018
50 yearS of progreSS and S ucceSS
ThankS To
our
employees
our
c u s t omer s
our
suppliers
our
shareholders
who are The pILLarS of The corporaTIon.
foundaTIon – LeaderShIp: fIrST fIve major mILeSToneS
1968
1988
1993
richelieu is legally incorporated on
october 8 with the aim of supplying
kitchen cabinet hardware products
to manufacturers and retailers in the
province of Quebec.
1987
Nearly twenty years later, Richelieu posts
about $27 million in sales.
the company is acquired by shroders.
richard lord takes over as president
and ceo of richelieu and becomes
a major shareholder.
A new vision of long-term growth based on
innovation, product diversity, quality of
service, growing customer segments, and
expansion is laid out to firmly establish
the company as a leader in Canada, before
targeting the United States market.
LeaderShIp baSed on a
cuSTomer- and InnovaTIon-
drIven approach.
In December, Richelieu makes its first
acquisition in Quebec. Others follow,
allowing the company to expand into
other Canadian provinces and achieve
steady growth.
From its network of eight Canadian centers,
Richelieu serves over 10,000 manufacturers
and retailers, who have access to a
diversified offering of about 10,000 products
and innovations from dozens of suppliers,
including world leaders. The company posts
$60 million in sales.
richelieu goes public, listing its shares
(rch) on the tsX. This sparks a new phase
of vigorous growth.
1999
after carving out a dominant position in
the canadian market, richelieu sets the
stage for expansion into the united states
with the opening of a distribution center
in Michigan.
innovation
service
vaLUe creation
design novateur et
north aMerican
Leader
in the iMport, distribUtion,
and ManUfactUring of speciaLty
hardware and coMpLeMentary prodUcts
over
80,000
cUstoMers
manufacturers of kitchen
and bathroom cabinets,
storage solutions and
closets, and home
and office furnishings;
residential and
commercial woodworkers.
hardware retailers
including renovation
superstores.
richelieu.com Our website, available in three
languages, is the leading tool
of its kind in the industry. It
was designed to facilitate
our customers’ projects and
transactions and provide
users with information on
our entire offering—the most
comprehensive and innovative
in North America.
69
distribUtion
centers
Our strong North American network includes
showrooms and two manufacturing plants in
Canada. Our diversified range of products,
one-stop shop service approach, and efficient
logistics for just-in-time deliveries, combined
with the multiple advantages of our transactional
website richelieu.com, optimize customer
response time.
Logistics
eXpertise
Our logistics expertise is a differentiation
lever. We ensure flawless management of our
supply chain so that it optimizes product and
information flow and brings added value to
our customers.
years
oUr innovation strategy
pUts Us at the Leading edge
of oUr Market.
greater freedoM of choice
for cUstoMers
we offer over 110,000 products (SKUs) in a
wide variety of categories, including decorative and functional hardware for furniture,
glass, and buildings; lighting systems; finishing and decorating products; ergonomic
workstations; kitchen and closet storage solutions; sliding door systems; decorative
panels; high-pressure laminates; and floor protection products.
Many of our products are manufactured according to our specifications and those
of our customers.
Unique innovations in
North America that generate
cross-selling opportunities
and access to new markets.
driver of change
in the north aMerican Market
Richelieu contributes to the market evolution by offering its customers the latest worldwide trends.
Partner suppliers
We have built relationships on co-operation and trust with world-leading partners known for
their technological skills and creativity.
2 manufacturing plants
les industries cedan inc.and menuiserie des Pins ltée manufacture products lines offering
distinctive features, including a variety of veneer sheets and edgebanding products, a wide
selection of decorative mouldings, and components for the window and door industry.
Over 2,100 employees
50% are dedicated
Over
to sales and
marketing.
50% are shareholders
of the Corporation.
Over
Outstanding expertise
provided to customers
With our proactive approach, Richelieu is much more than
an importer, distributor, and manufacturer: we are experts
at bringing innovative products to market.
60 successful acquisitions
24
36
in Canada
in the United States
An acquisition strategy tailored
to our company, our vision
and our market.
SHAREHOLDERS VALUE
Sales growth
Share performance
Market capitalization
$942.5 M
$33.85 NOV. 2017
$2 billion NOV. 2017
CAGR:
11.8%
Appreciation:
25.6%
in 2017
RCH compound
annual return:
17.5%
TSX compound
annual return:
6.0%
$60 M
$39 M
1993
2017
1993
2017
1993
2017
Richelieu
1
AnnUAl REpORT 2017
FINANCIAL HEALTH
THROUGH INTERNAL GROWTH AND ACQUISITIONS
SALES
(in millions $)
942.5
844.5
749.7
646.9
586.8
NEt EARNiNGS pER SHARE A ttRiButABLE
tO SHAREHOLDERS (D iLutED)
(in $)
1.15
1.07
0.99
0.88
0.74
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
CASH fLOwS fROM
OpERAtiNG ACtiVitiES (1)
(in millions $)
80.0
73.3
68.1
Equity AttRiButABLE
tO SHAREHOLDERS/DEBt
(in millions $)
434.1
394.3
362.9
60.3
55.0
309.2
288.9
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
3
1
0
2
1.4
5.4
4
1
0
2
5
1
0
2
3.6
4.9
6
1
0
2
7
1
0
2
4.3
(1) Cash flows from operating activities is a non-IFRS measure,
as indicated on page 26 of this report
Appreciation in share price (RCH)
since initial stock listing:
4,651%
Total return on share / 10 years
including dividend reinvestment:
392.3%
Average annual return on share / 10 years
including dividend reinvestment:
17.3%
TABLE OF CONTENTS
Message to shareholders: p. 5 – Directors and Officers: p. 11 – Management’s report: p. 25
Consolidated financial statements and related notes: p. 37
Richelieu
Richelieu
2
2
AnnUAl REpORT 2017
FINANCIAL HIGHLIGHTS
YEARS EndEd nOvEmbER 30
(in thousands of $, except per share amounts, number of shares and data expressed as a %)
Sales
EBITDA (1)
EBITDA margin (%)
Net earnings
Net earnings attributable to the
shareholders of the Corporation
• basic per share ($) (3)
• diluted per share ($) (3)
Net margin attribuable to the
Shareholders of the Corporation (%)
Cash flows from operating activities (2)
• diluted per share ($) (3)
Dividends paid to shareholders of the Corporation
• per share ($) (3)
Weighted average number of shares
outstanding (diluted) (in thousands) (3)
As at November 30
Total assets
Working capital
Current ratio
Equity attributable to shareholders
of the Corporation
Return on average equity (%)
Book value ($)
Total debt
Cash and cash equivalents
2 017
$
2 016
$
942,545
844,473
102,974
94,422
10.9
11.2
67,932
63,013
67,704
1.17
1.15
62,814
1.08
1.07
7.2
7.4
79,951
1.36
13,157
0.227
73,296
1.25
12,374
0.213
2 015
$
749,646
87,681
11.7
58,878
58,739
1.00
0.99
7.8
68,052
1.15
11,717
0.200
2 014
$
2 013
$
646,909
586,775
77,417
12.0
52,573
70,373
12.0
46,657
52,393
0.89
0.88
46,403
0.75
0.74
8.1
60,253
1.01
11,023
0.187
7.9
54,978
0.88
10,768
0.173
58,659
58,781
59,343
59,754
62,790
542,667
300,116
486,046
280,747
449,792
260,579
4.0
4.4
4.4
390,721
214,866
4.0
356,325
204,117
4.5
434,092
394,268
362,885
309,149
288,845
16.3
7.51
4,294
29,162
16.6
6.81
4,864
42,969
17.5
6.19
3,580
29,454
17.5
5.27
5,354
33,721
16.2
4.80
1,354
46,187
(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.
(3) All share data in this report have been restated to reflect the impact of the three-for-one split of all common shares effective February 29, 2016.
2017
Tamarack Distributors Inc. (Cincinnati, Ohio)
Weston Premium Woods Inc.
(Brampton, Ontario)
2016
Cabinetmakers Supply, Inc.
(Houston, Texas)
JFH Corporation (Memphis, Tennessee)
Eveready Hardware
Manufacturing Co, Inc.
(Long Island City, New York)
Neils Sorenson Hardware, Inc.
(Portland, Maine)
2015
BD Enterprises, Inc.
(Single Source Cabinet Supplies)
(Dallas, Texas)
2013-2017
14
ACquiSitiONS
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)
Richelieu
3
AnnUAl REpORT 2017
36
DiStRiButiON
CENtERS
31
DiStRiButiON
CENtERS
Barrie
Brampton
Calgary (2)
Dartmouth
Edmonton (2)
Kelowna
Kitchener
Laval (2)
Longueuil (2)
Moncton
Montreal
Ottawa
Quebec (3)
Regina
Saskatoon (2)
St. John’s
Sudbury
Thunder Bay
Toronto (2)
Vancouver (5)
Victoria (2)
Winnipeg (2)
2
MANufACtuRiNG
CENtERS
Longueuil
Notre-Dame-Des-Pins
Atlanta
Boston
Buffalo
Charlotte
Chicago
Cincinnati
Dallas
Dania
Detroit
Hartford
Hialeah
Greensboro
Indianapolis
Jacksonville
Lincoln Park
Louisville
Memphis
Nashville
New York (2)
Orlando
Pompano
Portland
Riviera Beach
Sarasota
Greenville
Houston
Savannah
Seattle
Syracuse
Tampa Bay
Richelieu
4
AnnUAl REpORT 2017
RiCHARD LORD
president and
Chief Executive Officer
tO OuR SHAREHOLDERS
AND pARtNERS
The yeaR 2017 was in line wiTh ouR yeaRs of pRogRess, expansion,
and gRowTh in which Richelieu has exTended iTs Reach in noRTh
ameRica and consolidaTed iTs leadeRship in The specialTy haRdwaRe
and complemenTaRy pRoducTs maRkeT. we aRe pRoud To celebRaTe
Richelieu’s 50Th anniveRsaRy in 2018, Thanks To ouR sTRong and
commiTTed Team and ouR effecTive business model designed accoRding
To ouR cusTomeR- and innovaTion-dRiven appRoach.
This important milestone is also an opportunity for me
to look back at the last three decades in which I have
served as President of Richelieu. I am pleased to point
out our leadership and growth which has made the
company strong and stable. I am proud of the team we
have built and our shared commitment to a corporate
vision of quality based on results and the values of
innovation, ethics, respect, and initiative.
We share a culture of continuous improvement. By
working together with the same drive and determination,
we will continue to lead Richelieu on the path of growth
and excellence. To succeed, we will uphold the strategies
that have proven effective and we will be proactive to
anticipate trends and adapt to shifting market conditions.
Richelieu
5
AnnUAl REpORT 2017
Richelieu
6
annual REpoRt 2017
“
With the performance of our main
Canadian and U.S. market
segments and the contribution
of our acquisitions, 2017 was
a successful year.
”
“
The acquisition strategy we
implemented three decades ago
is based on two objectives: optimize
potential and create long-term
value, that we pursued in 2017
and will continue in the future.
”
The 11.6% increase in total sales stemmed equally
from internal growth and acquisitions. Sales in Canada,
spurred by our innovation and market development
and expansion strategies and the synergies created by
our acquisitions, rose 13.7%, reflecting market share
gains and the addition of new customers in both the
manufacturer and retailer markets. In the United States,
where we are actively pursuing our market penetration
initiatives, sales increased by 9.7% (in U.S. dollars) —
a satisfactory result considering the temporary impact
of hurricanes in southeastern states in the fall. We were
able to maintain our profit margins at satisfactory levels,
given the investments made to intensify development of
the retailer market in Canada as well as the impact on
our margins of some of our recent acquisitions having
different product mixes.
After investing $43.3 million in business acquisitions and
equipment to improve operational efficiency, paying out
$13.2 million in dividends, and repurchasing $14.8 million
in shares, we ended the year with $29.2 million in
cash, $4.3 million in total debt, and working capital of
$300.1 million for a current ratio of 4.0:1.
Richelieu’s financial position remains healthy
and strong. Share prices rose 25.6% over the
year and have grown an average of 16% per year
over the last decade. Our market capitalization
stood at $2 billion at year-end, up 25.6% from
November 30, 2016.
The 60 acquisitions made over the past 30 years have
allowed us to stay competitive in a highly specialized
market while expanding our presence and giving us
access to complementary niche markets. By integrating
these acquisitions, we have
increased our sales,
bolstered our product offering, and broadened our talent
pool with new employees who know their local market,
and we are creating sales and operational synergies to
maximize return on investment.
The 69 interconnected distribution centers that
currently make up our North American network
give us footholds from coast to coast and a Pan-
canadian reach, plus a solid presence in the
United States.
During the year, we closed two acquisitions fully in line
with our objectives. In April, we acquired the principal
net assets of Weston Premium Woods Inc., an Ontario-
based distributor located in Brampton, on the outskirts
of Toronto. A leader in its field, Weston distributes a
diversified range of materials, decorative products, and
hardwoods. This acquisition represents additional sales
of approximately $60 million on an annual basis. Then
in August, we expanded our operations in the important
Ohio market by acquiring the principal net assets
of Tamarack Distributors Inc., a specialty products
distributor in Cincinnati, where we already operate a
distribution center. As with each of our acquisitions, we
will leverage these two opportunities to generate sales
and operational synergies.
Richelieu
7
AnnUAl REpORT 2017
“
Innovation is a continuous cycle,
and staying on top of it is key to
serve our customers with the
world’s leading technology and
product design applications.
The innovation strategy we
implemented thirty years ago
remains the spearhead of growth
and an important factor influencing
customer satisfaction.
“
Our ongoing priority is to provide a
first-rate customer experience. We
have unified criteria for providing
the same quality personalized
service at our sales counters, in
our showrooms, on the phone, at
the customer’s site, and online
at richelieu.com. The customer
is central to our multi-access
approach.
”
”
Every year, we stay on the cutting edge by offering a
wide variety of innovative, state-of-the-art ergonomic
products adapted to today’s needs. To that end, in 2017
we improved and expanded our offering in our main
categories. We continue to distinguish ourselves in
decorative hardware with the most comprehensive
product lines in North America – in a wide variety of
designs, for classic settings to high-end interiors, to
accommodate the most discerning tastes. We also
differentiate ourselves in the small spaces product
category, with the most advanced and extensive
range in North America, including a wide selection of
retractable products and sliding door systems. We give
our customers access to a variety of decorative panels
with some of the most outstanding textures and designs
in the world. Our selection of products and ergonomic
systems for the kitchen and office is unique in our
market. All these assets allow us to provide the North
American market with an incomparable offering and to
collaborate with the architects and designers who are
partners in expertise and innovation.
Our innovation strategy is clearly based on our ability
to take the risks that come with innovation. It requires
a real understanding of our customers’ expectations
and challenges and the ability to anticipate their needs.
It takes constant research to find the innovations most
appropriate to our markets, and lasting relationships of
trust with suppliers around the world known for their
performance in technology and design.
As an importer and distributor, Richelieu has built a solid
reputation over the years with supplier manufacturers,
both locally and around the world, that gives us better
access to the most compelling products. Working hand
in hand with our customers and suppliers is fundamental
and is an advantage for our customers who must achieve
specific goals and maintain their competitive edge.
In terms of service, our number one priority is making
sure our products are available anywhere at anytime
throughout our network of 69 centers and at richelieu.com.
We continued to invest in operational efficiency in 2017
to optimize the reliability of our supply chain as well as
our understanding of customer needs and predictive
analysis capabilities using the most appropriate
equipment and technology. This enables us to anticipate
our manufacturer and retailer customers’ needs so
we can provide them with the right products at the
right time under the best conditions, generally within
24 hours of an order.
In 2017 we continued investing in our sales and service
personnel, who represent over 50% of our team.
These well-trained resources put their expertise to
work for more than 80,000 active customers in North
America to provide them with the project-specific
answers and advice they need. Every year, we invest in
continuing training programs to maintain the expertise
and efficiency of our teams. We have performance
monitoring and management processes in place so we
can regularly assess the quality of our service.
In our ongoing effort to optimize our website, in 2017
we made new improvements and added specialized
sites, confirming richelieu.com as a comprehensive,
state-of-the-art, trilingual interactive tool for our
North American customers. Customers increasingly
appreciate our website, which gives them access to
our full offering, as well as tips on how to use our
products, answers to many of their specific needs, and
a complete and efficient order processing function.
For the public, our website is the most informative
and exhaustive showcase available in our field. New
products and innovations are constantly added to
richelieu.com to benefit our customers and major
external vendors. The site provides multichannel
information on our products, as well as product videos
and user instructions. In 2017, richelieu.com did very
well in terms of sales.
Richelieu
8
AnnUAl REpORT 2017
“
Anchored by strong foundations,
Richelieu sees a promising future.
We will stay true to our vision,
our values, and our reputation by
continuing to innovate, create,
and seize opportunities to further
provide value for our customers,
employees, suppliers, and
shareholders.
”
Richelieu will remain a dynamic customer- and
innovation-driven company. We will continue to work on
all of our skills and build on our past achievements. In
the last thirty years:
• Our sales have grown from about $30 million to
almost $1 billion.
• Our product lineup has increased from some
4,000 products to over 110,000, not including
the many options available on richelieu.com.
• Our network has grown from a single
distribution center to 69 strategically located
across North America.
• Our customer base has become significantly
more diversified, growing from approximately
4,000 to more than 80,000 today.
• Our outstanding team has grown from a
staff of a few dozen to over 2,100 employees,
more than 50% of whom are also Richelieu
shareholders.
Within our highly innovative industry, we stand as a major
driver of innovations in our North American market.
Our financial strength should allow us to pursue our
innovation strategy so we can continue to anticipate
new trends and customer needs and meet them with the
same commitment to excellence.
Our acquisition strategy remains our second major lever
for broad-based growth in North America. Canada and
the United-States still offer us excellent potential to
continue to expand and grow.
We endeavor to make 2018 another year of progress,
increased market share gains, and profitability.
Thank you to all our employees, customers, suppliers,
directors, shareholders, and business partners.
Richelieu
9
AnnuAl REpoRt 2017
Montego Resto-Club, Quebec City
Decorative panels
Richelieu
10
AnnUAl REpORT 2017
DiRECtORS
OffiCERS
Jocelyn Proteau
Chairman of the Board
Richelieu Hardware Ltd.
Corporate Director
Richard Lord
President and Chief
Executive Officer
Richelieu Hardware Ltd.
Denyse Chicoyne (2)
Corporate Director
Robert Courteau (2)
President
CM Management Inc.
Pierre Pomerleau (1)
President and Chief
Executive Officer
Pomerleau Group
Mathieu Gauvin (1)
Senior Vice-President
Investments-Private Equity
Quebec
Caisse de dépôt et
placement du Québec
Marc Poulin (1)
Corporate Director
Sylvie Vachon (2)
President and Chief
Executive Officer
Montreal Port Authority
(1) Member of the
Audit Committee
(2) Member of the Human
Resources and Corporate
Governance Committee
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
— Logistics and Supply Chain
Jeff Crews
Vice-President, Business
Development
— Retailers Market, Canada
Craig Ratchford
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
Legal Affairs and
Corporate Secretary
Richelieu
11
AnnUAl REpORT 2017
ARCHITECTS AND DESIGNERS
partners in expertise and innovation
a high peRcenTage of ouR sales come fRom ResidenTial and commeRcial
pRojecTs. we have a long-sTanding TRadiTion of collaboRaTion wiTh
aRchiTecTs and designeRs, whom we keep updaTe on ouR laTesT
innovaTions. The Technical and esTheTic appeal of ouR pRoducTs and
sysTems helps add value To TheiR pRojecTs. we suppoRT Them in The
design and space opTimizaTion pRocess To cReaTe qualiTy living and
woRking enviRonmenTs.
Our diversified offering of products and systems
meets a wide range of construction, transformation,
and renovation needs, whether for small spaces or
modern, timeless, ancestral homes or businesses
and offices.
Thanks to their innovative shapes and materials,
ergonomic designs, and respect for the environment,
our functional and decorative hardware products help
put well-being and quality of life front and center.
Richelieu
13
AnnUAl REpORT 2017
Glass Hardware
Increasingly used in residential and commercial
construction and renovation projects, glass presents
real benefits, thanks to its numerous properties. Beyond
its esthetics and transparency, it provides resistance,
security, and insulation. Our wide selection of specialty
and decorative glass hardware includes architectural
hardware, tools, and parts for doors, windows, furniture,
balustrades, and railings. Our high-tech products are
made from top quality raw materials and meet the most
exacting industry, domestic, and commercial standards.
Richelieu
14
AnnUAl REpORT 2017
ouR veRsaTile and adjusTable sysTems make iT possible To opTimize The layouT
in small spaces. They include haRdwaRe foR ReTRacTable Tables and benches,
compacT cabineTs, mulTifuncTional beds, eRgonomic sToRage uniTs, mechanisms
foR sliding dooRs, and oTheR ReTRacTable accessoRies.
Our diversified and
comprehensive offering
of decorative hardware
includes a wide selection
of designs, materials,
and finishes. It combines
state-of-the-art techno-
logy with innovative
design for a wide range
of architectural door
profiles, supports, and
specialty products and
handles and knobs of
all styles.
Richelieu
15
AnnUAl REpORT 2017
Our avant-garde kitchen
and storage solutions
are a perfect blend of
ergonomics, esthetics,
and space optimization.
A wide selection of
versatile and energy-
efficient light fixtures
is also available to add
light and refinement to
furniture, cabinets, and
storage units.
Richelieu
16
AnnUAl REpORT 2017
For residential, commercial, and
institutional construction and
renovation projects, our customers
have access to the widest range
of sliding door solutions in North
America, available in diverse
materials for a variety of needs.
Our veneer sheets, panels, and edgebanding
products—meticulously crafted using state-
of-the-art technology—add lasting beauty
and luster to residential, commercial, and
office projects, in addition to providing
soundproofing.
Richelieu
17
AnnUAl REpORT 2017
richelieu.com
TRILINGUAL – FRENCH, ENGLISH, SPANISH –
COMPREHENSIVE, USER-FRIENDLY, INTERACTIVE,
richelieu.com GIVES CUSTOMERS QUICK AND EASY
ACCESS TO OVER 110,000 PRODUCTS AND TIPS
ON HOW TO USE THEM AT ANY TIME.
Richelieu
18
AnnUAl REpORT 2017
A STRONG GROWTH DRIVER
A LEVER OF DIFFERENTIATION
A COMPREHENSIVE EFFICIENT TOOL
FOR CUSTOMERS
The number of customers using richelieu.com keeps
increasing. Online sales represent a high percentage
of our total sales attesting to the satisfaction of our
customers. In addition to making our entire range of
products available for online purchase, richelieu.com
has many features to facilitate product selection and
modify preconfigured products according to customer
project requirements.
Optimized in 2017, our website is remarkably efficient
and easy to use. It provides users with a source of
inspiration that is unparalleled in North America, as well
as time-saving solutions for their projects, no matter
how complex they may be.
Richelieu
19
AnnUAl REpORT 2017
iT is wiTh pRide and gReaT conceRn foR efficiency ThaT we seRve
seveRal Thousand independenT ReTaileRs and RenovaTion supeRsToRes.
we aRe commiTTed To giving Them fiRsT-RaTe seRvice. Thanks To ouR
logisTics expeRTise and Richelieu.com, we can pRovide Them wiTh
a Reliable, jusT-in-Time supply.
New store displays provided by Richelieu
Richelieu
20
20
AnnUAl REpORT 2017
The showrooms adjacent
to our distribution centers
welcome clients and
visitors in open, modern,
and easily-accessible
facilities that showcase our
product lines. Designed to
catch the eye, they offer a
convenient and pleasant
way for people to get
information and advice
before placing an order.
We do everything we can
to make sure our busy
showrooms, that receive
thousands of visitors, meet
the highest reception and
service standards.
Our customers also
benefit from Richelieu’s
unique sales tools such
as high-end displays
and quality brochures
illustrating products and
their specifications in most
of our categories,not to
mention richelieu.com
and all the visibility
and other benefits
it provides.
Richelieu
21
AnnUAl REpORT 2017
OUR PLANTS
manufactures a wide variety of veneer sheets and
edgebanding products compliant with high quality
standards and sold in all our North American markets.
Its offering
includes high definition engineering
veneers that meet the highest standards for large-
scale projects.
specializes in manufacturing wood and steel door
and window frames for commercial, industrial, and
institutional markets, and in a wide variety of decorative
moldings, baseboards, cornices, and plate rails.
Distribution logistics are
evolving and supply chain
efficiency is a fundamental
priority. AutoStoreTM, an
innovative and modular
storage and order picking
system that uses storage
robots, provides high
storage density and a lot
of flexibility for future
expansion. The system is
energy efficient, delivers
optimal reliability, and
eliminates the need for
employee movement,
making it profitable
and highly effective for
work organization and
quality control.
Richelieu
22
AnnUAl REpORT 2017
SOCIAL AND ENVIRONMENTAL
RESPONSIBILITY
In 2017, we continued our program to promote
sustainable development principles throughout our
organization and eco-friendly measures adapted to
our activities. As a distribution company, one of our
priorities is to make sure our supply chain integrates
environmental protection measures. Together with
our suppliers and distribution centers, we pay special
attention to product packaging in order to minimize
waste as much as possible while ensuring optimal
product transportation. In addition, our partnerships
with carriers help us minimize our carbon footprint.
Waste management is facilitated by analyzes conducted
at each of our sites according to type of waste and
reclamation and by using appropriate collection
equipment. We promote energy conservation through
various measures implemented across all our services
and centers. To minimize our impact on the environment,
waste, and printing costs, we eliminate paper reports,
optimize our printer fleet, and use videoconferences
wherever possible.
We provide support in the areas of education, culture,
youth sports, health care, and heritage conservation,
in particular in communities we have ties to. Every year,
we renew and diversify our commitment to community
and charity organizations that back these vital causes.
Each year we expand our offering of green products
to meet the needs of eco-friendly construction and
renovation projects. Several thousand high-quality
certified products and innovative solutions are available
at our distribution centers and on richelieu.com, including
laminates made entirely from natural materials, recycled
oak wood panels, revolutionary products providing
environmentally friendly alternatives to high-pressure
laminates, product lines made from recycled fibers,
handles and knobs, LED lighting, and finishing products
meeting the highest standards and specifications.
Pure acrylic panel -
highly resistant -
light and glass-like
material
LED light in-built
motion detector
Ecological veneers
Ecological finishing products
Wood edgebanding
Richelieu
23
23
AnnUAl REpORT 2017
MANAGEMENT’S
REPORT
managemenT’s discussion
and analysis of ope RaTing ResulTs
and financial posiTion
Year Ended November 30, 2017
CONTENTS
2017 Highlights
Forward-Looking Statements
Non-IFRS Measures
General Business Overview
as at November 30, 2017
Mission and Strategy
Financial Highlights
Analysis of Operating Results
Summary of Quarterly Results
Fourth Quarter
Financial Position
Analysis of Principal Cash Flows
Analysis of Financial Position
Contractual Commitments
Financial Instruments
Internal Control over Financial Reporting
Significant Accounting Policies and Estimates
New Accounting Methods
Risk Factors
Share Information
Outlook
Supplementary Information
25
26
26
27
27
28
28
29
30
31
31
31
32
32
32
33
33
34
35
35
35
Richelieu
24
AnnUAl REpORT 2017
HIGHLIGHTS OF THE YEAR
ENDED NOVEMBER 30, 2017
The year ended November 30, 2017, was one of further
growth and expansion during which Richelieu continued
to make investments to create long term-value. The
Corporation’s main market segments increased thanks
to its innovation strategy, stepped-up market develop-
ment efforts, and web strategy through richelieu.com,
in addition to its acquisitions. Apart from strengthening
Richelieu’s position in the Ohio and Ontario markets,
acquisitions completed in 2017 contributed to sales
growth and gave rise to new synergies. Richelieu ended
the year with an impeccable financial situation, enabling
it to continue its business strategy in North America
while remaining customer and innovation oriented and
maintaining its goals of profitability, strengthening its
foundations, and leadership. As at November 30, 2017,
the Corporation’s market capitalization stood at $1.96
billion, up 25.6% over 2016 year-end. Its share price
(RCH/TSX) rose 25.6% over the course of the year and
has increased by an annual average of 16% over the
last decade.
• Consolidated sales totalled $942.5 million, an increase of
11.6%, equally from internal growth and from acquisitions.
• Earnings before income taxes, interest and amortization
(EBITDA)(1) grew by 9.1% to $103 million. The EBITDA margin
stood at 10.9%.
• Net earnings attributable to shareholders increased by
7.8% to $67.7 million or $1.17 per share (basic) and $1.15
(diluted), up by 8.3% and 7.5% respectively.
• Cash flows from operating activities(1) (before net change
in non-cash working capital balances) grew by 9.1% to
$80.0 million.
• Working capital increased by 6.9% to $300.1 million, with a
current ratio of 4.0 : 1.
• Cash and cash equivalents totalled $29 million.
• Total debt was $4.3 million.
• Repurchase of 458,088 common shares for $14.8 million
and payment of $13.2 million in dividends to shareholders
(representing 19.5% of net earnings attributable to
shareholders for fiscal year 2017). Richelieu thus
distributed $28 million to shareholders in 2017 while
retaining the financial resources necessary for growth
in 2018.
Two (2) acquisitions during the year:
• August 1st, 2017 — Principal net assets of Tamarack
Distributors Inc., a specialty products distributor located in
Cincinnati, Ohio;
• April 18, 2017 — Principal net assets of Weston Premium
Woods Inc., a distributor of materials, decorative products
and hardwoods located in Brampton, Ontario.
(1) EBITDA and cash flows from operating activities are non-IFRS
measures, as indicated on page 26 of this report.
RIcHELIEu
25
annual REPORT 2017
This management’s report relates to Richelieu Hardware Ltd.’s
consolidated operating results and cash flows for the year
ended November 30, 2017, in comparison with the year ended
November 30, 2016, as well as the Corporation’s financial
position at those dates. This report should be read in conjunc-
tion with the audited consolidated financial statements and
accompanying notes for the year ended November 30, 2017,
appearing in the Corporation’s Annual Report. In this mana-
gement’s report, “Richelieu” or the “Corporation” designates,
as the case may be, Richelieu Hardware Ltd. and its subsidi-
aries and divisions, or one of its subsidiaries or divisions.
Supplementary information, such as the Annual Information
Form, interim management’s reports, Management Proxy
Circular, certificates signed by the Corporation’s President and
Chief Executive Officer and Vice-President and Chief Financial
Officer, as well as press releases issued during the year ended
November 30, 2017, is available on the website of the System
for Electronic Document Analysis and Retrieval (“SEDAR”) at
www.sedar.com.
information contained
in this management’s report
The
accounts for any major event occurring prior to January 25,
2018, on which date the audited consolidated financial state-
ments 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 indus-
try, Richelieu’s ability to weather the current economic context
and access other external financing, the closing of new acqui-
sitions, 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.
Assumptions are 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 avail-
able at the time they are written, they could prove inaccurate.
Forward-looking statements are also subject, by their very
nature, to known and unknown risks and uncertainties such
as those related to the industry, acquisitions, labour relations,
credit, key officers, supply and product liability, as well as
other factors set forth in the Corporation’s 2017 Annual Report
(see the “Risk Factors” section on page 34 of the 2017 Annual
Report 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 state-
ments 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
(“EBITDA”) because this measure enables
amortization
management
the Corporation’s operational
to assess
performance. This measure is a widely accepted financial
indicator of a Corporation’s ability to service and incur debt.
However, EBITDA should not be considered by an investor as
an alternative to operating income or the net earnings attrib-
utable to shareholders of the Corporation, as an indicator
of financial performance or cash flows, or as a measure of
liquidities. Since EBITDA is not a standardized measurement
as prescribed by IFRS, it may not be comparable to the EBITDA
of other companies.
Richelieu also uses cash flows from operating activities and
cash flows from operating activities per share. Cash flows from
operating activities are based on net earnings plus amortiza-
tion of property, plant and equipment and intangible assets,
deferred tax expense (or recovery) and share-based compen-
sation 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 assess-
ments 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.
RIcHELIEu
26
annual REPORT 2017
GENERAL BUSINESS OVERVIEW
as at November 30, 2017
Richelieu is a leading North American importer, distribu-
tor and manufacturer of specialty hardware and related
products.
MISSION AND STRATEGY
Richelieu’s mission is to create shareholder value and contrib-
ute 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 centers and through efficiently integrated,
profitable acquisitions made at the right price, offering high
growth potential and complementary to its product mix and
expertise.
Richelieu’s solid and efficient organization, highly diversified
product selection and long-term relationships with leading
suppliers worldwide position it to compete effectively in a
fragmented market consisting mainly of a host of regional
distributors offering a limited range of products.
Its products are targeted to an extensive customer base of
kitchen and bathroom cabinet, storage and closet, home
furnishing and office furniture manufacturers, residen-
tial and commercial woodworkers, and hardware retail-
ers including renovation superstores. The residential and
commercial renovation industry is the Corporation’s major
source of growth.
Richelieu offers customers a broad mix of products sourced
from manufacturers worldwide. The solid relationships
Richelieu has built with the world’s leading suppliers enable
it to provide customers with the latest innovative products
tailored to their business needs. The Corporation’s product
selection consists of over 110,000 different items targeted
to a base of more than 80,000 customers who are served by
69 centers in North America with 36 distribution centers in
Canada, 31 distribution centers 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
and floor protection products. This offering is completed by
the Corporation’s two subsidiaries, Les Industries Cedan
inc. and Menuiserie des Pins Ltée, which manufacture a
variety of veneer sheets and edgebanding products as well
as a broad selection of decorative mouldings and compon-
ents 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.
The Corporation employs over 2,100 people at its head office
and throughout the network, close to half of whom work in
marketing, sales and customer service. More than 50% of its
employees are Richelieu’s shareholders
RIcHELIEu
27
annual REPORT 2017
FINANCIAL HIGHLIGHTS
(in thousands of $, except per-share amounts, number of shares and data expressed as a %)
Years ended November 30
Sales
EBITDA(1)
EBITDA margin (%)
Net earnings
Net earnings attributable to shareholders of the Corporation
• basic per share ($)(3)
• diluted per share ($)(3)
Net margin attributable to the shareholders of the Corporation (%)
2017
$
2016
$
2015
$
2014
$
2013
$
942,545
844,473
749,646
646,909
586,775
102,974
94,422
87,681
77,417
70,373
10.9
67,932
67,704
1.17
1.15
7.2
11.2
63,013
62,814
1.08
1.07
7.4
11.7
12.0
12.0
58,878
58,739
52,573
52,393
46,657
46,403
1.00
0.99
7.8
0.89
0.88
8.1
0.75
0.74
7.9
Cash flows from operating activities(2)
79,951
73,296
68,052
60,253
54,978
• diluted per share ($)(3)
Dividends paid to Shareholders of the Corporation
• per share ($)(3)
Weighted average number of shares outstanding (diluted)
(in thousands)(3)
As at November 30
Total assets
Working capital
Current ratio
1.36
1.25
13,157
12,374
0.227
0.213
1.15
11,717
0.200
1.01
0.88
11,023
10,768
0.187
0.173
58,659
58,781
59,343
59,754
62,790
542,667
486,046
449,792
390,721
356,325
300,116
280,747
260,579
214,866
204,117
4.0
4.4
4.4
4.0
4.5
Equity attributable to shareholders of the Corporation
434,092
394,268
362,885
309,149
288,845
Return on average equity (%)
Book value ($)
Total debt
Cash and cash equivalents
16.3
7.51
4,294
29,162
16.6
6.81
4,864
42,969
17.5
6.19
3,580
29,454
17.5
5.27
5,354
33,721
16.2
4.80
1,354
46,187
(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.
(3) All share data in this report have been restated to reflect the impact of the three-for-one split of all common shares effective February 29, 2016.
ANALYSIS OF OPERATING RESULTS FOR THE YEAR ENDED NOVEMBER 30, 2017, COMPARED WITH
THE YEAR ENDED NOVEMBER 30, 2016
Consolidated sales
(in thousands of $, except exchange rates)
Years ended November 30
Canada
United States (CA$)
(US$)
Average exchange rates
2017
$
2016
$
635,498
559,137
307,047
285,336
235,873
215,028
1.3017
1.3270
∆ (%)
+13.7
+ 7.6
+ 9.7
Consolidated sales
942,545
844,473
+11.6
Consolidated sales reached $942.5 million, an increase of
$98.0 million or 11.6% over 2016, of which 5.8% from internal
growth and 5.8% from acquisitions. At comparable exchange
rates to 2016, the consolidated sales growth would have been
12.3% for the year ended November 30, 2017.
Sales to manufacturers grew to $799.9 million, compared with
$720.7 million for 2016, an increase of $79.2 million or 11.0%,
of which 4.2% from internal growth and 6.8% from acquisi-
tions. Sales to hardware retailers and renovation superstores
grew by 15.2% or $18.8 million to total $142.6 million.
RIcHELIEu
28
annual REPORT 2017
In Canada, Richelieu achieved sales of $635.5 million,
compared with $559.1 million for 2016, up by $76.4 million
or 13.7%, of which 7.3% from internal growth and 6.4% from
acquisitions. Sales to manufacturers rose to $507.9 million, up
by $57.4 million or 12.7%, of which 4.7% from internal growth
and 8.0% from acquisitions. Sales to hardware retailers and
renovation superstores reached $127.6 million, compared with
$108.6 million, up by $19.0 million or 17.5% over 2016. This
resulted primarily from market share gain, the addition of new
customers and to a lesser extent an increase in some selling
prices.
In the United States, the Corporation recorded sales of
US$235.9 million, compared with US$215.0 million for 2016, an
increase of US$20.9 million or 9.7%, of which 4.9% from internal
growth and 4.8% from acquisitions. Sales to manufacturers
totalled US$224.3 million, compared with US$203.6 million,
an increase of US$20.7 million or 10.2% over 2016, of which
5.1% from internal growth and 5.1% from acquisitions. Sales
to hardware retailers and renovation superstores were
up by 1.8% from the previous year. Considering exchange
rates, U.S. sales expressed in Canadian dollars amounted
to $307.0 million, compared with $285.3 million for 2016, an
increase of 7.6%. They accounted for 32.6% of consolidated
sales in 2017, whereas they had represented 33.8% of the
year’s consolidated sales in 2016.
Consolidated EBITDA and EBITDA margin
(in thousands of $, unless otherwise indicated)
Years ended November 30
Sales
EBITDA
EBITDA margin (%)
2017
$
2016
$
942,545
844,473
102,974
94,422
10.9
11.2
Earnings before income taxes, interest and amortization
(EBITDA) totalled $103.0 million, up by $8.6 million or 9.1%
over 2016. The gross margin was down from 2016 influenced
by the lower gross margins of some recent acquisitions due to
their different product mix as well as to investments in market
development and sales initiatives in the retailers market with
lower gross margins. The EBITDA margin stood at 10.9%,
compared with 11.2% for 2016.
Amortization expenses amounted to $11.5 million compared
with $9.6 million for the corresponding quarter of 2016, which
is up by $1.9 million, resulting mainly from investments made in
tangible and intangible assets in 2017. Income taxes amounted
to $23.8 million, an increase of $2.0 million over 2016.
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 the
shareholders of the Corporation (%)
Non-controlling interests
Net earnings
2017
2017
$
2016
$
102,974
94,422
11,454
9,601
(193)
23,781
67,932
31
21,777
63,013
67,704
62,814
7.2
228
7.4
199
67,932
63,013
Net earnings grew by 7.8%. Considering non-controlling
interests, net earnings attributable to shareholders of the
Corporation totalled $67.7 million, an increase of 7.8% over
2016. Net earnings per share amounted to $1.17 basic and
$1.15 diluted, compared with $1.08 basic and $1.07 diluted for
2016, an increase of 8.3% and 7.5% respectively.
Comprehensive income totalled $63.5 million, considering
a negative adjustment of $4.4 million on translation of the
financial statements of the subsidiary in the United States,
compared with $63.8 million for 2016, considering a positive
adjustment of $0.8 million on translation of the financial state-
ments of the subsidiary in the United States.
SUMMARY OF QUARTERLY RESULTS (unaudited)
(in thousands of $, except per-share amounts)
Quarters
1
2
3
4
2017
• Sales
• EBITDA
• Net earnings
attributable to
shareholders of
the Corporation
basic per share
diluted per share
2016
• Sales
• EBITDA
• Net earnings
attributable to
shareholders of
the Corporation
basic per share
diluted per share
2015
• Sales
• EBITDA
• Net earnings
attributable to
shareholders of
the Corporation
basic per share
diluted per share
195,909 243,269 253,190
27,924
26,648
18,341
250,177
30,061
11,998
0.21
0.20
17,587
0.30
0.30
18,135
0.31
0.31
19,984
0.34
0.34
188,909 217,413 220,155
25,942
23,074
16,710
217,996
28,696
10,861
0.19
0.18
15,408
0.27
0.26
17,331
0.30
0.30
19,214
0.33
0.33
159,319 190,801 199,457
24,394
21,878
15,706
200,069
25,703
10,216
0.17
0.17
14,653
0.25
0.25
16,340
0.28
0.28
17,530
0.30
0.30
RIcHELIEu
29
annual REPORT 2017
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.
Earnings before income taxes, interest and amortization
(EBITDA) amounted to $30.1 million, an increase of $1.4 million
or 4.8% over the fourth quarter of 2016. The gross margin and
the EBITDA margin were influenced by lower gross margins
of certain recent acquisitions due to their different product
mixes, seasonal sales initiatives in the retailer market with
lower gross margins, and lower revenues due to hurricanes
that impacted our customers in the south-east states. The
EBITDA margin stood at 12.0%, compared with 13.2% for the
fourth quarter of 2016.
Note: For further information about the Corporation’s performance
in the first, second and third quarters of 2017, the reader is referred
to the interim management’s reports available on SEDAR’s website at
www.sedar.com.
FOURTH QUARTER ENDED NOVEMBER 30, 2017
Fourth-quarter consolidated sales amounted to $250.2 mil-
lion, compared with $218.0 million for the corresponding
quarter of 2016, an increase of $32.2 million or 14.8%, of
which 6.8% from internal growth and 8.0% from acquisitions.
At comparable exchange rates to the fourth quarter of 2016,
the consolidated sales growth would have been 16.7% for the
quarter ended November 30, 2017.
Richelieu achieved sales of $214.2 million in the manufacturers
market, compared with $187 million for the fourth quarter of
2016, an increase of $27.2 million or 14.5%, of which 5.2% from
internal growth and 9.3% from acquisitions. Sales to hardware
retailers and renovation superstores stood at $36 million, up
by $5 million or 16.1% over the fourth quarter of 2016.
In Canada, Richelieu recorded sales of $174.5 million, an
increase of $29.8 million or 20.6% over the fourth quarter of
2016, of which 11.2% from internal growth and 9.4% from acqui-
sitions. Sales to manufacturers amounted to $141.4 million,
an increase of 20.2%, of which 8.7% from internal growth and
11.5% from acquisitions. Sales to hardware retailers and reno-
vation superstores grew to $33.1 million, up by $6.0 million or
22.1%, mainly due to market share gain and the addition of new
customers.
In the United States, sales totalled US$60.3 million, compared
with US$55.2 million for the fourth quarter of 2016, an increase
of US$5.1 million or 9.2%, of which 3.5% from internal growth
and 5.7% from acquisitions. Sales to manufacturers amounted
to US$58.0 million, an increase of US$5.7 million or 10.9%
over the fourth quarter of 2016, of which 4.9% from internal
growth and 6% from acquisitions. Sales to hardware retailers
and renovation superstores were down by 20.7% from the
corresponding quarter of 2016, mainly caused by initial sales
related to product introductions in stores in 2016. Considering
exchange rates, total U.S. sales expressed in Canadian dollars
stood at $75.7 million, an increase of 3.3%. They accounted
for 30.3% of consolidated sales for the fourth quarter of
2017, whereas they had represented 33.6% of the period’s
consolidated sales for the fourth quarter of 2016.
Income taxes amounted to $7.2 million, an increase of $0.1 mil-
lion over 2016.
Net earnings grew by 4.0%. Considering non-controlling
interests, net earnings attributable to shareholders of the
Corporation amounted to $20.0 million, up by 4.0% over the
fourth quarter of 2016. Net earnings per share rose to $0.34
basic and diluted, compared with $0.33 basic and diluted for
the fourth quarter of 2016, an increase of 3.0%.
Comprehensive income amounted to $22.8 million, consid-
ering a positive adjustment of $2.8 million on translation of
the financial statements of the subsidiary in the United States,
compared with $21.8 million for the fourth quarter of 2016,
considering a positive adjustment of $2.6 million on trans-
lation of the financial statements of the subsidiary in the
United States.
Cash flows from operating activities (before net change in
non-cash working capital balances) amounted to $22.2 million
or $0.38 per share, compared with $21.6 million or $0.37
per share for the fourth quarter of 2016, an increase of
2.9% stemming primarily from the net earnings growth. Net
change in non-cash working capital balances used cash
flows of $2.4 million, reflecting the change in inventory and
accounts receivables ($15.7 million), whereas the change in
accounts payable and other items represented a cash inflow
of $13.3 million. Consequently, operating activities provided
cash flows of $19.8 million, compared with $27.6 million for
the fourth quarter of 2016.
Financing activities used cash flows of $13.7 million, compared
with $2.9 million for the fourth quarter of 2016. This change
mainly reflects the significant common shares repurchased
issued of $10.6 million done in the fourth quarter of 2017.
Investing activities represented a cash outflow of $3.7 million
for equipment to improve operational efficiency, for IT equip-
ment, and for the design and manufacturing of new displays
for the retailers market.
RIcHELIEu
30
annual REPORT 2017
FINANCIAL POSITION
Investing activities
Analysis of principal cash flows for the year
ended November 30, 2017
Change in cash and cash equivalents and capital
resources
(in thousands of $, unless otherwise indicated)
Years ended November 30
Cash flows provided by (used for):
Operating activities
Financing activities
Investing activities
2017
$
2016
$
55,956
66,529
(26,547)
(33,431)
(43,324)
(19,749)
Effect of exchange rate fluctuations
108
166
Net change in cash and cash
equivalents
(13,807)
13,515
Cash and cash equivalents, beginning
of year
42,969
Cash and cash equivalents end of year
29,162
29,454
42,969
As at November 30
Working capital
300,116
280,747
Renewable line of credit (CA$)
50,000
26,000
Renewable line of credit (US$)
6,000
6,000
Operating activities
Cash flows from operating activities (before net change in
non-cash working capital balances) reached $80.0 million
or $1.36 diluted per share, compared with $73.3 million
or $1.25 diluted per share for 2016, an increase of 9.1%
stemming primarily from the net earnings growth. Net change
in non-cash working capital balances used cash flows of
$24.0 million, primarily representing changes in inventory and
accounts receivables ($37.9 million), whereas accounts payable
and other items represented a cash inflow of $13.9 million.
Consequently, operating activities provided cash flows of
$56.0 million, compared with $66.5 million for 2016.
Financing activities
Financing activities used cash flows of $26.5 million, compared
with $33.4 million for 2016. During the year, Richelieu repur-
chased common shares for cancellation for $14.8 million,
compared with $23.1 million in 2016. The Corporation paid divi-
dends to shareholders of $13.2 million, up by 6.3% over 2016.
Investing activities represented a total cash outflow of
$43.3 million, of which $30.2 million for business acquisitions
and $13.1 million for equipment to improve operational effi-
ciency, for IT equipment, and for the design and manufacturing
of new displays for the retailers market.
Sources of financing
As at November 30, 2017, cash and cash equivalents amoun-
ted to $29.2 million, compared with $43.0 million as at
November 30, 2016. The Corporation posted a working capi-
tal of $300.1 million for a current ratio of 4.0:1, compared with
$280.7 million (4.4:1ratio) as at November 30, 2016.
Richelieu believes it has the capital resources to fulfill its
ongoing commitments and obligations and to assume the
funding requirements needed for its growth and the financing
and investing activities between now and the end of 2018. The
Corporation continues to benefit from an authorized line of
credit of $50 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, Richelieu considers 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
increase considerably, deliveries will be sufficient to fulfill Richelieu’s
requirements, the availability of credit will remain stable in 2018, and
no unusual events will entail additional capital expenditures. This
expectation also remains subject to the risks identified under the
“Risk Factors” section.
Analysis of financial position as at
November 30, 2017
Summar y of financial position
(in thousands of $, except exchange rates)
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
2017
$
2016
$
399,187
362,803
143,480
123,243
542,667
486,046
99,071
82,056
5,392
5,679
434,092
394,268
4,112
4,043
542,667
486,046
Exchange rates on translation
of a subsidiary in the United States
1.289
1.343
RIcHELIEu
31
annual REPORT 2017
Assets
CONTRACTUAL COMMITMENTS
Total assets amounted to $542.7 million as at Novem-
ber 30, 2017, compared with $486.0 million as at November 30,
2016. Current assets increased by 10.0% or $36.4 million
from November 30, 2016. This increase resulted from the
Corporation’s growth and the acquisitions completed in 2017.
Cash position
(in thousands of $)
As at November 30
Current portion of long-term debt
Long-term debt
Total debt
2017
$
4,294
—
4,294
2016
$
4,336
528
4,864
Cash and cash equivalents
29,162
42,969
As at November 30, 2017, the Corporation continues to bene-
fit from a healthy and solid financial position. Total debt was
$4.3 million representing balances payable on acquisitions
and financing contracts for equipment.
Equity attributable to shareholders of the Corporation
totalled $434.1 million as at November 30, 2017, compared
with $394.3 million as at November 30, 2016, an increase of
$39.8 million stemming primarily from a growth of $40.1 million
in retained earnings which amounted to $376.9 million, and of
$4.1 million in share capital and contributed surplus, whereas
accumulated other comprehensive income were down by
$4.4 million. As at November 30, 2017, the book value per
share was $7.51, up by 10.3% over November 30, 2016, and the
return on average shareholders’ equity was 16.3%.
As at November 30, 2017, the Corporation’s share capital
consisted of 57,795,603 common shares (57,920,466 shares as
at November 30, 2016). In 2017, upon the exercise of options
under the stock option plan, Richelieu issued 333,225 common
shares at an average price of $8.34 (281,559 in 2016 at an aver-
age price of $8.42). In addition, 458,088 common shares were
repurchased for cancellation under the normal course issuer
bid for a cash consideration of $14.8 million (1,004,700 common
shares for a cash consideration of $23.1 million in 2016).
The Corporation granted 329,500 stock options during the
year (356,500 in 2016). Consequently, as at November 30, 2017,
1,637,361 stock options were outstanding (1,650,086 as at
November 30, 2016).
Summar y of contractual financial commitments
as at November 30, 2017
(in thousands of $)
Less than
1 year
Between
1 and 5 years
More than
5 years
Total
Long-term debt
Operating leases
Total
4 294
10 745
15 039
—
— 4 294
21 308
21 308
6 308 38 361
6 308 42 655
For 2018 and the foreseeable future, the Corporation expects
cash flows from operating activities and other sources of
financing to meet its ongoing contractual commitments.
The expectation set forth above consists of forward-looking
information based on the assumption that economic conditions and
exchange rates will not deteriorate significantly, operating expenses
will not increase considerably, deliveries will be sufficient to fulfill
Richelieu’s requirements, the availability of credit will remain
stable in 2018, and no unusual events will entail additional capital
expenditures. This expectation also remains subject to the risks
identified under the “Risk Factors” section.
FINANCIAL INSTRUMENTS
Richelieu periodically enters into foreign exchange forward
contracts to fully or partially hedge the effects of foreign
currency fluctuations related to foreign-currency denominated
payables or to hedge forecasted purchase transactions. The
Corporation has a policy of not entering into derivatives for
speculative or negotiation purposes and to enter into these
contracts only with major financial institutions.
Richelieu also uses equity swaps to reduce the effect of
fluctuations in its share price on net earnings in connection
with its deferred share unit plan.
In notes (1) and (12) of the audited consolidated financial
statements for the year ended November 30, 2017, the
Corporation presents the information on the classification and
fair value of its financial instruments, as well as on their value
and management of the risks arising from their use.
INTERNAL CONTROL OVER FINANCIAL
REPORTING
Management has designed and evaluated internal controls
over financial reporting (ICFR) and disclosure controls and
procedures (DC&P) to provide reasonable assurance that
the Corporation’s financial reporting is reliable and that
its publicly-disclosed financial statements are prepared in
accordance with IFRS. The President and Chief Executive
Officer and the Vice-President and Chief Financial Officer
have assessed, within the meaning of National Instrument
52-109 - Certification of Disclosure in Issuers’ Annual and
Interim Filings, the design and the effectiveness of internal
controls over financial reporting as at November 30, 2017. 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.
RIcHELIEu
32
annual REPORT 2017
During the year ended November 30, 2017, 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.
NEW ACCOUNTING METHODS
Recently issued
IFRS 9, Financial Instruments
Due to their intrinsic limits, internal controls over financial
reporting only provide reasonable assurance and may not
prevent or detect misstatements. In addition, projections of an
assessment of effectiveness in future periods carry the risk
that controls will become inappropriate as a result of changes
in conditions or if the degree of conformity with standards and
methods should deteriorate.
SIGNIFICANT ACCOUNTING POLICIES AND
ESTIMATES
The Corporation’s audited consolidated financial statements
for the year ended November 30, 2017, have been prepared
by management in accordance with International Financial
Reporting Standards (IFRS). The preparation of the consoli-
dated financial statements requires management to make
estimates and assumptions that affect the amounts reported
in the consolidated financial statements and accompany-
ing 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 account-
ing policies that have the most significant effect on the
amounts recognized in the consolidated financial statements
and the assumptions about the future and other major sources
of estimation uncertainty as at the end of the reporting period
that could potentially result in material adjustments to the
carrying amount of assets and liabilities during the following
period, are summarized as follows:
Valuation of inventory impairment, including loss and obso-
lescence, 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 esti-
mates are revised, as well as in the future periods affected by
the revisions. Actual results could differ from those estimates.
IFRS 9, Financial instruments replaces IAS 39 Financial instru-
ments: Recognition and Measurement and includes a single
approach to determine whether a financial asset is measured
at amortized cost or fair value, a new hedge accounting model
to enable financial statement users to better understand an
entity’s risk exposure and its risk management activities, and
a new impairment model for financial assets based on expec-
ted credit losses. IFRS 9 is effective for fiscal year beginning
on or after January 1st, 2018, thus for fiscal year beginning on
December 1st, 2018 for the Corporation. The Corporation has
made a preliminary assessment the adoption of this new stan-
dard will have on its consolidated financial statements and
does not anticipate any significant impact.
IFRS 15, Revenue from contracts with customers
IFRS 15 Revenue from Contracts with Customers replaces
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 year beginning
on or after January 1st, 2018, thus for fiscal year beginning
on December 1st, 2018 for the Corporation. The Corporation
has made a preliminary assessment the adoption of this new
standard will have on its consolidated financial statements and
does not anticipate any significant impact.
IFRS 16, Leases
IFRS 16 Leases replaces IAS 17 Leases and related interpreta-
tions. The new standard brings most leases on-balance sheet
for lessees under a single model, eliminating the distinc-
tion between operating and finance leases. Lessor account-
ing, 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,
thus for fiscal year beginning on December 1st, 2019 for the
Corporation. Earlier adoption is permitted if IFRS 15 Revenue
from Contracts with Customers has also been applied. The
Company is currently evaluating the impact of the new stan-
dard on its consolidated financial statements.
The Corporation being committed under operating leases for
warehouse and office premises, it expects that the adoption
of IFRS 16 will result in the recognition, in the consolidated
statement of financial position, of a related asset and a liability
and, in the consolidated statement of earnings, of a reduction
in rent expense and an increase in financial costs and amor-
tization of property, plant and equipment.
RIcHELIEu
33
annual REPORT 2017
RISK FACTORS
Supply and inventory management
Richelieu is exposed to different risks that can have a mate-
rial 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.
Market and competition
The specialty hardware and renovation products segment is
highly competitive. Richelieu has developed a business strategy
rooted in a diversified product offering in various targeted
niche markets in North America and sourced from suppliers
around the world, in creative marketing and in unparalleled
expertise and quality of service. Up to now, this strategy has
enabled it to benefit from a solid 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.
Foreign currency
Richelieu is exposed to the risks related to currency fluctua-
tions, primarily in regard to foreign-currency denominated
purchases and sales made abroad.
The Corporation’s products are regularly sourced from
abroad. 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 curren-
cies may have an adverse impact on its sales.
Sales made abroad are mainly recorded in the United States
and account for approximately 33% of Richelieu’s total sales.
Any volatility in the Canadian dollar therefore tends to affect
consolidated results. This risk is partially offset by the fact
that major purchases are denominated in U.S. dollars.
To manage its currency risk, the Corporation uses derivative
financial instruments, more specifically forward exchange
contracts in U.S. dollars and euros. There can be no assurance
that the Corporation will not sustain losses arising from these
financial instruments or fluctuations in foreign currency.
Richelieu must anticipate and meet its customers’ supply
needs. To that end, Richelieu must maintain solid relation-
ships with suppliers respecting its supply criteria. The inabil-
ity to maintain such relationships or to efficiently manage the
supply chain and inventories could affect the Corporation’s
financial position. Similarly, Richelieu must track trends and
its customers’ preferences and maintain inventories meeting
their needs, failing which its financial performance could be
adversely affected.
To mitigate its supply-related risks, Richelieu has built solid
long-term relationships with numerous suppliers on several
continents, most of whom are world leaders.
Acquisitions
Acquisitions in North America remain an important strategic
focus for Richelieu. The Corporation will maintain its strict
acquisition criteria and pay particular attention to the integra-
tion of its acquisitions. Nevertheless, there is no guarantee
that a business matching Richelieu’s acquisition criteria will be
available and there can be no assurance that the Corporation
will be able to make acquisitions at the same pace as in the
past. However, the fact that the U.S. market remains highly
fragmented and that acquisitions are generally of limited size
reduces the inherent financial and operational risks.
Credit
The Corporation is exposed to the credit risk related to its
accounts receivable. Richelieu has adopted a policy defining
the credit conditions for its customers to safeguard against
credit losses arising from doing business with them. For each
customer, the Corporation sets a specific limit that is regularly
reviewed. The diversification of its products, customers and
suppliers reasonably safeguards the Corporation against a
concentration of its credit risk. No customer of the Corporation
accounts for more than 10% of its revenues.
Labour relations and qualified employees
To achieve its objectives, Richelieu must attract, train and
retain qualified employees while controlling its payroll. The
inability to attract, train and retain qualified employees and to
control its payroll could have an impact on the Corporation’s
financial performance. Close to 15% of Richelieu’s workforce
is unionized. The Corporation’s policy is to negotiate collective
agreements at conditions enabling it to maintain its compe-
titive edge and a positive and satisfactory working environ-
ment for its entire team. Richelieu has not experienced any
major labour conflicts over the past five years. Any interrup-
tion in operations as a result of a labour conflict could have an
adverse impact on the Corporation’s financial results.
RIcHELIEu
34
annual REPORT 2017
Stability of key officers
SHARE INFORMATION AS AT JANUARY 25, 2018
Issued and outstanding common shares :
Outstanding stock options
57,836,214
1,961,375
OUTLOOK
In 2018, as in the past, Richelieu will be customer-oriented,
focusing on quality of service and innovation. Its two major
sources of growth will remain innovation and business acqui-
sition strategies in its sector. The Corporation will pursue its
current market development in North America and 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 effi-
ciency and sound financial management.
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
(Signed) Antoine Auclair
President and
Chief Executive Officer
Vice-President and
Chief Financial Officer
January 25, 2018
Richelieu offers a stimulating working environment and a
competitive compensation plan, which help it retain a stable
management team. Failure to retain the services of a highly
qualified management team could compromise the success
of Richelieu’s strategic execution and expansion, which could
have an adverse impact on its financial results. To adequately
manage its future growth, the Corporation adjusts its organ-
izational 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.
Product liability
In the normal course of business, Richelieu is exposed to vari-
ous product liability claims that could result in major costs and
affect the Corporation’s financial position. Richelieu has agree-
ments containing the usual limits with insurance companies to
cover the risks of claims associated with its operations.
Crisis management, IT contingency plan and data security
The IT structure implemented by Richelieu enables it to support
its operations and contributes to ensure their efficiency. As
the occurrence of a disaster, including a major interruption of
its computer systems, could affect its operations and finan-
cial performance, the Corporation has implemented a crisis
management and IT contingency plan to reduce the extent of
such a risk. This plan provides among others for an alternate
physical location in the event of a disaster, generators in the
event of power outages and a relief computer as powerful as
the central computer.
A breach of the Corporation’s IT security, loss of customer data
or system disruption could adversely affect its business and
reputation.
Richelieu’s business is dependent on its payroll, transaction,
financial, accounting and other data processing systems. The
Corporation relies on these systems to process, on a daily
basis, a large number of transactions. Any security breach
in its business processes and/or systems has the potential
to impact its customer information, which could result in the
potential loss of business. If any of these systems fail to oper-
ate properly or become disabled, the Corporation could poten-
tially lose control of customer data and suffer financial loss, a
disruption of our businesses, liability to customers, 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 inves-
tigation 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.
RIcHELIEu
35
annual REPORT 2017
Related to the consolidated financial statements
MANAGEMENT’S REpORT
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 25, 2018
(Signed) Richard Lord
(Signed) Antoine Auclair
President and Chief Executive Officer
Vice-President and Chief Financial Officer
To the shareholders of Richelieu Hardware Ltd.
INDEpENDENT AuDITORS’ REpORT
We have audited the accompanying consolidated financial statements of Richelieu Hardware Ltd., which comprise the
consolidated statements of financial position as at November 30, 2017 and 2016, and the consolidated statements of earnings,
comprehensive income, changes in equity and cash flows for the years then ended, and a summary of significant accounting
policies and other explanatory information.
Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance
with International Financial Reporting Standards, and for such internal control as management determines is necessary to
enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
Auditors’ responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted
our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with
ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the
auditors consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements
in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of
the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
Richelieu Hardware Ltd. as at November 30, 2017 and 2016 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 25, 2018
1 CPA auditor, CA, public accountancy permit no. A120803
RIcHELIEu
36
annual REPORT 2017
cONSOLIDATED STATEMENTS OF FINANcIAL pOSITION
As at November 30
[In thousands of dollars]
NO T E S
2 017
$
2 016
$
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 EQUIT Y
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
3
3
3
4
5
5
9
3
9
7
3
7
9
8
8
Accumulated other comprehensive income
11
Equity attributable to shareholders of the Corporation
Non-controlling interests
Commitments and contingencies [note 10]
See accompanying notes to the consolidated financial statements.
29,162
134,187
233,585
2,253
399,187
38,558
29,282
68,931
6,709
42,969
109,867
207,803
2,164
362,803
33,258
22,881
62,256
4,848
542 667
486,046
91,858
2,919
4,294
99,071
—
3,511
1,881
104,463
39,230
2,358
376,922
15,582
434,092
4,112
438,204
542,667
75,764
1,956
4,336
82,056
528
3,239
1,912
87,735
36,050
1,417
336,835
19,966
394,268
4,043
398,311
486,046
On behalf of the Board of Directors :
(Signed) Richard Lord
Director
(Signed) Mathieu Gauvin
Director
RIcHELIEu
37
annual REPORT 2017
cONSOLIDATED STATEMENTS OF EARNINGS
Years ended November 30
[In thousands of dollars, except earnings per share]
NO T E S
Sales
Operating expenses excluding amortization
8, 12
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
9
Net earnings per share attributable to shareholders of the Corporation
8
Basic
Diluted
See accompanying notes to the consolidated financial statements.
2 017
$
942,545
839,571
102,974
7,634
3,820
(193)
11,261
91,713
23,781
67,932
67,704
228
67,932
1.17
1.15
2 016
$
844,473
750,051
94,422
6,497
3,104
31
9,632
84,790
21,777
63,013
62,814
199
63,013
1.08
1.07
cONSOLIDATED STATEMENTS OF cOMpREHENSIVE INcOME
Years ended November 30
[In thousands of dollars]
NO T E S
Net earnings
Other comprehensive income that will be reclassified to net earnings
Exchange differences on translation of foreign operations
11
Comprehensive income
Comprehensive income attributable to:
Shareholders of the Corporation
Non-controlling interests
See accompanying notes to the consolidated financial statements.
2 017
$
67,932
(4,384)
63,548
63,320
228
63,548
2 016
$
63,013
816
63,829
63,630
199
63,829
RIcHELIEu
38
annual REPORT 2017
cONSOLIDATED STATEMENTS OF cHANGES IN EQuITY
Years ended November 30
[In thousands of dollars]
Attributable to shareholders of the Corporation
Share
capital
Contributed
surplus
Retained
earnings
Accumulated
other
comprehensive
income
$
8
$
8
$
$
11
Non-
controlling
interests
$
Total
equity
$
Total
$
Notes
Balance as at November 30, 2015
33,566
1,265
308,904
19,150
362,885
3,922
366,807
Net earnings
Other comprehensive income
Comprehensive income
Shares repurchased
Stock options exercised
Share-based compensation expense
Dividends [note 16]
Other liabilities
—
—
—
(578)
3,062
—
—
—
—
—
—
—
(692)
844
—
—
62,814
—
62,814
(22,509)
—
—
(12,374)
—
2,484
152
(34,883)
—
816
816
—
—
—
—
—
—
62,814
816
63,630
(23,087)
2,370
844
(12,374)
—
(32,247)
199
—
199
—
—
—
(67)
(11)
(78)
63,013
816
63,829
(23,087)
2,370
844
(12,441)
(11)
(32,325)
Balance as at November 30, 2016
36,050
1,417
336,835
19,966
394,268
4,043
398,311
Net earnings
Other comprehensive income
Comprehensive income
Shares repurchased
Stock options exercised
Share-based compensation expense
Dividends [note 16]
Other liabilities
—
—
—
(303)
3,483
—
—
—
—
—
—
—
(703)
1,644
—
—
67,704
—
67,704
—
(4,384)
(4,384)
67,704
(4,384)
63,630
228
—
228
—
—
—
67,932
(4,384)
63,548
(14,763)
2,780
1,644
(14,763)
2,780
1,644
—
—
—
—
—
—
(13,157)
(190)
(13,347)
—
31
31
(23,496)
(159)
(23,655)
(14,460)
—
—
(13,157)
—
3,180
941
(27,617)
Balance as at November 30, 2017
39,230
2,358
376,922
15,582
434,092
4,112
438,204
See accompanying notes to the consolidated financial statements.
RIcHELIEu
39
annual REPORT 2017
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 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
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplementary information
Income taxes paid
Interest paid (received), net
See accompanying notes to the consolidated financial statements.
NO T E S
2 017
$
2 016
$
67,932
63,013
9
8
16
8
8
3
4, 5
7,634
3,820
(1,700)
2,265
79,951
(23,995)
55,956
(1,217)
(13,157)
(190)
2,780
(14,763)
(26,547)
(30,203)
(13,121)
(43,324)
108
(13,807)
42,969
29,162
6,497
3,104
(525)
1,207
73,296
(6,767)
66,529
(273)
(12,374)
(67)
2,370
(23,087)
(33,431)
(9,294)
(10,455)
(19,749)
166
13,515
29,454
42,969
24,507
(193)
23,240
31
RIcHELIEu
40
annual REPORT 2017
NOTES TO cONSOLIDATED
FINANcIAL STATEMENTS
November 30, 2017 and 2016 (amounts are in thousands of dollars,
except per-share amounts or otherwise indicated)
NATURE OF BUSINESS
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, storage and closet, home furnishing and office furni-
ture manufacturers, residential and commercial woodworkers and
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
management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accom-
panying notes. These estimates are based on management’s best know-
ledge of current events and actions that the Corporation may undertake
in the future and other factors deemed relevant and reasonable.
The judgements 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 adjust-
ments to the carrying amount of assets and liabilities during the follow-
ing 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 judgement and assumptions
that may affect the amounts reported in the consolidated financial state-
ments. The underlying estimates and assumptions are reviewed regu-
larly. Revised accounting estimates, if any, are recognized in the period
in which the estimates are revised, as well as in future periods affected
by the revisions. Actual results could differ from those estimates.
The Corporation’s consolidated financial statements have been properly
prepared within the reasonable limits of materiality, in accordance with
the accounting policies summarized below :
Consolidation
The consolidated financial statements include the accounts of Richelieu
Hardware Ltd. and its subsidiaries described in note 13. All significant
intercompany balances and transactions have been eliminated upon
consolidation.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and highly liquid
investments with an initial term of three months or less. Cash and cash
equivalents were classified in “financial assets at fair value through
net earnings” and measured at fair value. Gains (losses) arising from
remeasurement at each period-end are recorded in the consolidated
statement of earnings.
Accounts receivable
Accounts receivable are classified in “loans and receivables” and
carried at cost, which is equivalent to fair market value on initial recog-
nition. Subsequent measurements are recorded at amortized cost using
the effective interest method. For the Corporation, this measurement is
usually equivalent to cost due to their short-term maturities.
Inventories
Inventories, which consist primarily of finished goods, are valued at the
lower of average cost and net realizable value. Net realizable value is the
expected selling price in the normal course of business, less estimated
costs to sell. The Corporation uses judgment when estimating the effect
of certain factors on the net realizable value of inventory, such as inven-
tory obsolescence and losses. 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
20 years
Leasehold improvements
Lease terms, maximum 5 years
Machinery and equipment
5-10 years
Rolling stock
Furniture and fixtures
Computer equipment
5 years
3-5 years
3-5 years
Intangible assets
Intangible assets are acquired assets that lack physical substance and
meet the specified criteria for recognition apart from goodwill and prop-
erty, plant and equipment. Intangible assets consist mainly of purchased
or internally developed software, customer relationships, non-competi-
tion agreements and trademarks. Software and customer relationships
are amortized on a straight-line basis over their useful lives of 3 and 8-20
years, respectively, while non-competition agreements are amortized
over the terms of the agreements. Trademarks have an indefinite useful
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 determines whether
indicators of impairment exist for its non-current assets, excluding
goodwill and intangible assets with indefinite useful lives. If such indica-
tors 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 useful lives for impairment at least once a year, whether or
not indicators 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.
RIcHELIEu
41
annual REPORT 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2017 and 2016 (amounts are in thousands of dollars, except per-share amounts or otherwise indicated)
1. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
Impairment tests consist in a comparison between the carrying and
recoverable amounts of an asset, CGU or group of CGUs. The recovera-
ble 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. Other than for goodwill, if a reversal of an
impairment loss occurs, it must be recognized immediately in net earn-
ings. Reversals of impairment losses related to a CGU or group of CGUs
are allocated proportionately to the assets of the CGU or group of CGUs.
On reversal of an impairment loss, the increased recoverable amount
of an asset must not exceed the carrying amount that would have been
determined, net of amortization, if no impairment loss had been recog-
nized 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 assumptions such as estimated future
cash flows as described in note 5.
Other financial liabilities
Accounts payable, accrued liabilities and long-term debt are classified
in “other financial liabilities” and are initially recorded at fair value. They
are subsequently measured at amortized cost using the effective inter-
est 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 products are shipped to customers. They
are measured at the fair value of the consideration received or receiv-
able, 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 at
the tax rates that are expected to apply in the years in which the tempor-
ary 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 to the extent that 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, assump-
tions are considered, such as the period for tax loss carrying forwards to
be completely used up and the level of future taxable income in accord-
ance with tax planning strategies.
Leases
Leases are classified as finance leases if substantially all risks and
rewards incidental to ownership are transferred to the lessee. At the
moment of initial recognition, the lessee records the leased item as an
asset at the lower of the fair value of the asset and the present value
of the minimum lease payments. A corresponding liability to the lessor
is recorded in the consolidated statement of financial position as a
finance lease obligation. In subsequent periods, the asset is depreciated
on a straight-line basis over the term of the lease and interest on the
obligation is expensed through net earnings. Leases are classified
as operating leases if substantially all risks and rewards incidental to
ownership are not transferred to the lessee. The lease payments are
recognized as an expense on a straight-line basis over the lease term.
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 translated
at the exchange rates in effect at the date of transaction. Foreign
exchange gains and losses are recognized in net earnings in the year in
which they arise.
The assets and liabilities of the U.S. subsidiary are translated into
Canadian dollars at the exchange rate in effect at the end of the reporting
period. Revenues and expenses are translated at the rate in effect at the
date of transaction. Foreign exchange gains and losses are recognized in
the consolidated statements of comprehensive income.
Derivative financial instruments
The Corporation periodically enters into foreign exchange forward
contracts with financial institutions to partially hedge the effects of
fluctuations 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 plan.
The Corporation does not use derivatives for speculative purposes.
The Corporation uses hedge accounting only when IFRS documentation
criteria are met. Derivative financial instruments designated as cash
flow hedges are classified as available-for-sale financial assets and
liabilities and are measured at fair value, which is the instruments’
approximate settlement value at market rates. Gains and losses on
remeasurement at each year-end are recorded in comprehensive
income. If the instrument is not designated and documented as a hedge,
changes in fair value are recognized in the statement of consolidated
earnings for the year. Assets or liabilities related to financial instruments
are included in Accounts receivable or Accounts payable and accrued
liabilities in the consolidated 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 consolidated financial statements
are categorized in accordance with the following hierarchy:
Level 1
Level 2
Level 3
quoted prices (unadjusted) in active markets for identical
assets or liabilities;
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);
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 weighted average market price of the shares five (5)
business 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 anniver-
sary of the grant date. The Corporation recognizes stock-based compen-
sation and other share-based payments in net earnings using the fair
value method for stock options granted with a corresponding increase
recorded in contributed surplus. 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.
RIcHELIEu
42
annual REPORT 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2017 and 2016 (amounts are in thousands of dollars, except per-share amounts or otherwise indicated)
1. SIGNIFICANT ACCOUNTING POLICIES (cont’d)
3. BUSINESS ACQUISITIONS
Deferred share unit plan
2017
The Corporation offers a deferred share unit [“DSU”] plan to its direc-
tors 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 direc-
tor 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 excluding amortization.
Net earnings per share
Net earnings per share are calculated based on the weighted average
number of common shares outstanding during the year. Diluted earnings
per share are calculated using the treasury stock method and take into
account all the elements that have a dilutive effect.
2. CHANGES IN ACCOUNTING METHODS
Recently issued
IFRS 9, Financial Instruments
IFRS 9, Financial instruments replaces IAS 39 Financial instruments :
Recognition and Measurement and includes a single approach to
determine whether a financial asset is measured at amortized cost
or fair value, a new hedge accounting model to enable financial state-
ment users to better understand an entity’s risk exposure and its risk
management activities, and a new impairment model for financial
assets based on expected credit losses. IFRS 9 is effective for fiscal year
beginning on or after January 1st, 2018, thus for fiscal year beginning on
December 1st, 2018 for the Corporation. The Corporation has made a
preliminary assessment the adoption of this new standard will have on
its consolidated financial statements and does not anticipate any signifi-
cant impact.
On August 1st, 2017, the Corporation purchased the principal net assets
of Tamarack Distributors Inc., a specialty product distributor located in
Cincinnati, Ohio.
On April 18, 2017, the Corporation purchased the principal net assets
of Weston Premium Woods Inc., a distributor of materials, decorative
products and hardwoods located in Brampton, Ontario.
Those acquisitions generated sales of $42 million since their acquisition.
If those acquisitions had been acquired on December 1st, 2016, manage-
ment believes that the sales included in the consolidated statement of
earnings would have been approximately $67 million.
2016
On August 18, 2016, the Corporation purchased the principal net assets
of Neils Sorenson Hardware, Inc., a specialty hardware distributor
located in Portland, Maine.
On May 16, 2016, the Corporation purchased the principal net assets
of Eveready Hardware Manufacturing Co., Inc., a specialty hardware
distributor located in Long Island City, New York.
On April 18, 2016, the Corporation purchased the principal net assets of
JFH Corporation, a specialty hardware distributor located in Memphis,
Tennessee.
On December 14, 2015, the Corporation acquired all outstanding common
shares of Cabinetmakers Supply, Inc. (doing business as Cornerstone
Hardware & Supplies), a specialty hardware distributor located in
Houston, Texas
Summary of acquisitions
The final purchase price allocations, at the transaction dates are
summarized as follows:
Accounts receivable
Inventories
Property, plant and equipment
Intangible assets
IFRS 15, Revenue from contracts with customers
Goodwill
IFRS 15 Revenue from Contracts with Customers replaces 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 year beginning on or after
January 1st, 2018, thus for fiscal year beginning on December 1st, 2018 for
the Corporation. The Corporation has made a preliminary assessment
the adoption of this new standard will have on its consolidated financial
statements and does not anticipate any significant impact.
Current liabilities assumed
Non-current liabilities assumed
Net assets acquired
Considerations
Cash, net of cash acquired
Considerations payable [note 7]
2017
2016
$
10,116
$
872
5,694
3,239
357
10,609
9,525
486
4,311
3,844
(2,297)
(1,574)
—
(784)
34,004
10,394
30,203
3,801
9,294
1,100
34,004
10,394
Goodwill deductible for tax purposes with regards to current year
acquisitions amounts to $9,525 [$1,660 in 2016]. During the year ended
November 30, 2017, business acquisitions considerations payable were
reduced by $2,334 as a result of purchase price adjustments on acqui-
sitions from previous years. The Corporation has deposited $2,500 in
trust following an acquisition. This amount is not available for use and is
presented in cash and cash equivalents as at November 30, 2017.
IFRS 16, Leases
IFRS 16 Leases replaces IAS 17 Leases and related interpretations. 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, thus for fiscal year
beginning on December 1st, 2019 for the Corporation. Earlier adoption is
permitted if IFRS 15 Revenue from Contracts with Customers has also
been applied.
The Company is currently evaluating the impact of the new standard
on
its consolidated financial statements. The Corporation being
committed under operating leases for warehouse and office premises,
it expects that the adoption of IFRS 16 will result in the recognition, in
the consolidated statement of financial position, of a related asset and
a liability and, in the consolidated statement of earnings, of a reduction
in rent expense and an increase in financial costs and amortization of
property, plant and equipment.
RIcHELIEu
43
annual REPORT 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2017 and 2016 (amounts are in thousands of dollars, except per-share amounts or otherwise indicated)
4. PROPERT Y, PL ANT AND EQUIPMENT
Cost
Lands Buildings
$
3,652
$
26,274
Leasehold
improvements
Machinery
and
equipment
Rolling
stock
Furniture and
fixtures
Computer
equipment
$
5,032
$
28,587
$
9,861
$
16,047
$
10,945
Total
$
100,398
Accumulated amortization
—
(15,426)
(4,299)
(22,070)
(7,022)
(13,584)
(10,034)
(72,435)
Net carrying amount as at November 30th, 2015
3,652
Acquisitions
Acquisitions through business combinations
(note 3)
Amortization
Effect of changes in foreign exchange rates
Net carrying amount as at November 30th, 2016
Cost
—
—
—
—
3,652
3,652
10,848
1,317
—
(1,462)
—
10,703
27,591
733
1,095
191
(441)
—
1,578
6,515
6,517
3,820
2,839
1,850
126
23
(1,545)
(1,185)
3
8,921
32,752
5
3,532
10,838
2,463
1,089
70
(1,226)
1
2,397
17,641
911
2,124
76
(638)
2
27,963
11,295
486
(6,497)
11
2,475
33,258
12,695
111,684
Accumulated amortization
—
(16,888)
(4,937)
(23,831)
(7,306)
(15,244)
(10,220)
(78,426)
Net carrying amount as at November 30th, 2016
3,652
10,703
Acquisitions
Acquisitions through business combinations
(note 3)
Amortization
Effect of changes in foreign exchange rates
Net carrying amount as at November 30th, 2017
Cost
—
—
—
—
3,652
3,652
510
—
(1,392)
—
9,821
28,101
1,578
524
—
(494)
(20)
1,588
6,945
8,921
6,017
3,532
2,409
72
250
(1,825)
(1,602)
(26)
(30)
13,159
38,574
4,559
13,246
2,397
1,799
10
(1,256)
(21)
2,929
19,266
2,475
1,423
33,258
12,682
25
357
(1,065)
(7,634)
(8)
(105)
2,850
38,558
14,094
123,878
Accumulated amortization
—
(18,280)
(5,357)
(25,415)
(8,687)
(16,337)
(11,244)
(85,320)
Net carrying amount as at November 30th, 2017
3,652
9,821
1,588
13,159
4,559
2,929
2,850
38,558
5. INTANGIBLE ASSETS AND GOODWILL
Software
Non-competition
agreements
Customer
relationships
Trademarks
Cost
Accumulated amortization
Net carrying amount as at November 30th, 2015
Acquisitions
Acquisitions through business combinations
(note 3)
Amortization
Effect of changes in foreign exchange rates
Net carrying amount as at November 30th, 2016
Cost
Accumulated amortization
Net carrying amount as at November 30th, 2016
Acquisitions
Acquisitions through business combinations
(note 3)
Write-off (note 3)
Amortization
Effect of changes in foreign exchange rates
Net carrying amount as at November 30th, 2017
Cost
Accumulated amortization
Net carrying amount as at November 30th, 2017
$
6,451
(5,573)
878
216
20
(495)
1
620
6,686
(6,066)
620
439
—
—
(486)
(1)
572
7,124
(6,552)
572
$
2 632
(1,872)
760
—
561
(602)
7
726
3,353
(2,627)
726
—
1,125
—
(788)
(15)
1,048
4,394
(3,346)
1,048
$
31,789
(16,879)
14,910
—
3,290
(2,007)
104
16,297
35,274
(18,977)
16,297
—
8,314
—
(2,546)
(450)
21,615
42,600
(20,985)
21,615
$
4,777
—
4,777
—
440
—
21
5,238
5,238
Total
$
45,649
(24,324)
21,325
216
4,311
(3,104)
133
22,881
50,551
—
(27,670)
5,238
—
1,170
(243)
—
(118)
6,047
6,047
—
6,047
22,881
439
10,609
(243)
(3,820)
(584)
29,282
60,165
(30,883)
29,282
Goodwill
$
58,329
—
58,329
—
3,844
—
83
62,256
62,256
—
62,256
—
9,525
(2,334)
—
(516)
68,931
68,931
—
68,931
For impairment test purposes, the carrying value of goodwill and
intangible 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 million,
$20.2 million and $9 million, respectively, while $25.3 million are allo-
cated 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
indefinite useful lives are allocated across multiple CGUs or groups of
CGUs and the amount allocated is not individually significant in compari-
son 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 12.3% and 12.5% 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.
RIcHELIEu
44
annual REPORT 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2017 and 2016 (amounts are in thousands of dollars, except per-share amounts or otherwise indicated)
6. BANK INDEBTEDNESS
The Corporation has lines of credit with a Canadian banking institution
with respective authorized amount of $50 million in Canadian dollar and
$6 million in US dollar, bearing interest at the bank’s prime and base
rates, which were respectively 3.20% and 5% as at November 30, 2017
[2.70% and 4% in 2016]. Those lines of credit are renewable annually.
7. LONG-TERM DEBT
2017
2016
$
$
484
1,056
3,810
4,294
4,294
—
3,808
4,864
4,336
528
Non-interest bearing financing contract,
repayable in equal installments
Business acquisitions considerations payable,
not bearing interests, including US$ 309
[US$ 2,835 in 2016]
Current portion of long-term debt
Long-term debt
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.
(in thousands)
Outstanding, November 30, 2015
Issued
Repurchased
Outstanding, November 30, 2016
Issued
Repurchased
Number
of shares
$
58,644
33,566
282
(1,005)
3,062
(578)
57,921
36,050
333
(458)
3,483
(303)
Outstanding, November 30, 2017
57,796
39,230
During 2017, the Corporation issued 333,225 common shares [281,559
in 2016] at an average price of $8.34 per share [$8.42 in 2016] pursuant
to the exercise of options under the share option plan. The weighted
average share price at the date of exercise of options was $29,72
[$25,60 in 2016]. In addition, during 2017, the Corporation, through a
normal course issuer bid, repurchased 458,088 common shares for
cancellation in consideration of $14,763 [1,004,700 common shares
in consideration of $23,087 in 2016], which resulted in a premium on
the redemption in the amount of $14,460 recorded in retained earnings
[premium of $22,509 in 2016].
Stock option plan
Changes in stock options are summarized as follows:
(in thousands)
Outstanding, November 30, 2015
Granted
Exercised
Cancelled
Outstanding, November 30, 2016
Granted
Exercised
Cancelled
Outstanding, November 30, 2017
Number of
options
Weighted average
share price
$
1,579
357
(282)
(4)
1,650
330
(333)
(9)
1,638
10.70
22.31
8.42
18.93
13.58
25.71
8.34
22.93
17.04
The table below summarizes information regarding the stock options
outstanding as at November 30, 2017:
Options outstanding
Exercisable options
Weighted
average
remaining
period
Weighted
average
exercise
price
Weighted
average
exercise
price
Number
of options
Range in
exercise price
Number
of options
(in dollars)
(in thousands)
(years)
(in dollars)
(in thousands)
(in dollars)
5.56 - 11.43
11.44 - 17.41
17.42 - 23.98
23.99 - 26.30
391
355
559
333
1,638
1.91
5.67
7.87
9.13
6.23
7.02
13.90
20.89
25.72
17.04
391
312
195
1
899
7.02
13.72
20.30
26.29
12.25
During 2017, the Corporation granted 329,500 options [356,500 in
2016] with an average exercise price of $25.71 per share [$22.31 in
2016] and an average fair value of $5.93 per option [$4.21 in 2016] as
determined using the Black & Scholes option pricing model using an
expected dividend yield of 0.9% [1.0% in 2016], a volatility of 20% [20% in
2016], a risk free interest rate of 1.86% [1.24% in 2016] and an expected
life of 7 years [7 years in 2016] and 9,000 options were cancelled. The
compensation expense related to stock options amounted to $1,644
[$844 in 2016] and is recognized under Operating expenses excluding
amortization.
Deferred share unit plan
The financial liability resulting from the DSU plan of $7,914 [$5,847 in
2016] is presented under the Accounts payable and accrued liabilities.
As at November 30, 2017, the fair value of the equity swaps amounted
to an asset of $157 [an asset of $467 as at November 30, 2016] 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 2017, amoun-
ted to $621 [$363 in 2016] and is recognized under Operating expenses
excluding amortization.
Number of DSUs
Outstanding, beginning of year
Settled
Granted
Outstanding, end of year
2017
2016
216,944
254,055
—
(53,676)
16,879
16,565
233,823
216,944
RIcHELIEu
45
annual REPORT 2017
2017
$
2016
$
6,301
5,835
1,296
1,459
(4,399)
(5,685)
3,198
1,609
2017
$
6,709
2016
$
4,848
(3,511)
(3,239)
3,198
1,609
2017
$
1,609
1,700
—
(111)
3,198
2016
$
1,847
525
(784)
21
1,609
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2017 and 2016 (amounts are in thousands of dollars, except per-share amounts or otherwise indicated)
8. SHARE CAPITAL (cont’d)
Share purchase plan
Deferred taxes reflect the net tax impact of temporary differences
between the value of assets and liabilities for accounting and tax purpo-
ses. The major components of deferred tax assets and liabilities of the
Corporation were as follows:
Compensation expense related to the share purchase plan amounted to
$697 for 2017 [$610 in 2016] and is recognized under Operating expenses
excluding amortization.
Net earnings per share
Basic net earnings per share and diluted net earnings per share were
calculated based on the following number of shares:
Deferred taxes
Translation of foreign exchange currencies,
reserve recognized for tax purposes only
upon disbursement and other tax attributes
Weighted average number of shares
outstanding – Basic
57,956
58,051
Dilutive effect under stock option plan
703
730
Weighted average number of shares
outstanding – Diluted
58,659
58,781
The computation of diluted net earnings per share includes all outstan-
ding options as at November 30, 2017.
2017
2016
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
9. INCOME TA XES
The main components of the income taxes expense are as follows:
Deferred tax assets
Deferred tax liabilities
The net deferred taxes included the following as at November 30:
Current
Deferred:
2017
$
2016
$
25,481
22,302
Changes in deferred taxes for the years ended November 30 are detailed
as follows:
Related to temporary differences
(147)
1,719
Deferred tax assets not previously
recognized
(1,553)
(2,244)
23,781
21,777
The effective income tax rate differs from the combined statutory rates
for the following reasons:
Balance at the beginning of the year, net
In net earnings
Business acquisitions
Other
Balance at the end of the year, net
Combined statutory rates
2017
$
2016
$
26.68%
26.90%
The amount of deductible temporary differences and unused tax losses
for which no deferred tax assets was recognized to the consolidated
statement of financial position is $8,900 as at November 30, 2017
[$14,700 in 2016] .
Income taxes at combined statutory rates
24,469
22,809
Increase (decrease) resulting from:
Impact of statutory rates changes for the
subsidiary outside Canada
Share-based compensation
Non-deductible expenses
402
352
143
506
191
141
Deferred tax assets not previously recognized
(1,553)
(2,244)
Other
(32)
374
23,781
21,777
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 2028. 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
$
10,745
21,308
6,308
38,361
RIcHELIEu
46
annual REPORT 2017
Type
Purchase
[c] Claims
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2017 and 2016 (amounts are in thousands of dollars, except per-share amounts or otherwise indicated)
10. COMMITMENTS AND CONTINGENCIES (cont’d)
[b] Foreign exchange forward contracts
The balance of accounts receivable of the Corporation that are overdue
for more than 60 days, but which were not provided for, totals $1,014
[$563 in 2016]. As at November 30, 2017 and 2016, no customer accoun-
ted for more than 10% of the total accounts receivable.
As at November 30, 2017, the Corporation held the following foreign
exchange forward contracts having maturity dates in December 2017
and January 2018.
Market risk
Currency in thousands
Average exchange rate
€3,750
1.51
The Corporation’s foreign currency exposure arises from purchases and
sales transacted mainly in US dollars and Euros. Operating expenses
included, for the year ended November 30, 2017, an exchange gain of
$888 [gain of $1,057 in 2016].
In the normal course of business, various proceedings and claims are
instituted against the Corporation. Management believes that any forth-
coming settlement in respect of these claims will not have a mate-
rial effect on the Corporation’s financial position or consolidated net
earnings.
11. ACCUMUL ATED OTHER COMPREHENSIVE
INCOME
The accumulated other comprehensive income, including the following
items and their variances, were as follows:
Balance at the beginning of the period
19,966
19,150
2017
$
2016
$
The Corporation’s policy is to maintain the purchase prices and selling
prices of its commercial activities by mitigating its exposure through
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 reducing the exposure
to exchange rate fluctuations. The Corporation’s policy does not allow
speculative trades.
As at November 30, 2017, a decrease of 5% of the Canadian dollar
against the US dollar and the euro on translation of monetary assets
and liabilities, all other variables remaining the same, would have had
no significant impact on consolidated net earnings [would have had no
significant impact on consolidated net earnings as at November 30, 2016]
and would have increased the consolidated comprehensive income by
$5,968 [$6,154 as at November 30, 2016]. The exchange rate sensitivity is
calculated by aggregation of the net foreign exchange rate exposure of
the Corporation’s financial instruments as at November 30, 2017.
Exchange differences on translation of
foreign operations
Balance at the end of the period
(4,384)
816
15,582
19,966
Liquidity risk
12. FINANCIAL INSTRUMENTS AND OTHER
INFORMATION
Fair value
The carrying value of long-term debt approximates their fair value
because of the short maturity on balances of sale payable. The
Corporation categorized the fair value measurement in Level 2, as it is
derived from observable market data.
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
As at November 30, 2017, the fair value of the foreign exchange
forward contracts amounted to a liability of $83 [an asset of $228 as
at November 30, 2016] 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.
Inventories from the distribution, imports and
manufacturing activities recognized as an
expense
Salaries and related charges
Other charges
2017
$
2016
$
691,782
614,003
128,113
117,965
19,676
18,083
839,571
750,051
An expense of $2,000 [$1,959 in 2016] for inventory obsolescence is
included in Inventories from the distribution, imports and manufactu-
ring activities.
Credit risk
The Corporation sells its products to numerous customers in Canada,
and in a lesser proportion in the United States. The credit risk refers
to the possibility that customers will be unable to assume their liabili-
ties towards the Corporation. The average days outstanding of accounts
receivable, as at November 30, 2017 and 2016 is deemed acceptable
given the industry in which the Corporation operates.
The Corporation performs ongoing credit evaluation 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
2017
$
6,323
1,352
2016
$
5,854
1,337
(1,254)
(1,118)
65
6,486
250
6,323
RIcHELIEu
47
annual REPORT 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2017 and 2016 (amounts are in thousands of dollars, except per-share amounts or otherwise indicated)
13. REL ATED PART Y INFORMATION
15. CAPITAL MANAGEMENT
Scope of consolidation
The Corporation’s objectives are:
Names
Country of
incorporation
Equity
interest
%
Voting
rights
%
• 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.
Richelieu America Ltd.
United States
Richelieu Finances Ltée (1)
Canada
Cedan industries Inc
Distributions 20/20 Inc.
Canada
Canada
Provincial Woodproducts Ltd.
Canada
Menuiserie des Pins Ltée
Canada
100
100
100
100
85
75
100
100
100
100
85
75
The Corporation manages and makes adjustments to its capital struc-
ture in light of changes in economic conditions and the risk character-
istics of underlying assets. To maintain or adjust its capital structure,
the Corporation may adjust the amount of dividends paid to sharehold-
ers, return capital to shareholders or issue new shares. For the year
ended November 30, 2017 the Corporation achieved the following results
regarding its capital management objectives:
(1) Richelieu Finances Ltée is the owner of 100% of Richelieu
Hardware Canada Ltd.
• Debt/equity ratio: 1.0% [1.2% in 2016] [Long-term debt/Equity]
Executive officers’ compensation
• Return on average shareholder’s equity of 16.3% over the last
12 months [16.6% as at November 30, 2016]
Short-term employee benefits
Other long-term benefits
Share-based compensation
2017
$
3,521
622
590
2016
$
3,501
557
458
4,733
4,516
Accounts payable and accrued liabilities include a retirement allo-
wance amounting to $2,520 payable to an executive officer.
14. GEOGRAPHIC INFORMATION
The Corporation’s capital management objectives remained unchanged
from the previous fiscal year.
16. DIVIDENDS PAID TO SHAREHOLDERS OF THE
CORPORATION
For the year ended November 30, 2017, the Corporation paid a quarterly
dividend of $0.0567 per share to common shareholders [quarterly
dividend of $0.0533 per share in 2016] for a total amount of $13,157
[$12,374 in 2016]. The Board of Directors approved on January 25, 2018
the payment of a quarterly dividend of $0.0600 per common share for the
1st quarter of 2018.
During the year ended November 30, 2017, nearly 67% of sales had
been made in Canada [66% in 2016]. The Corporation’s sales to foreign
countries, almost entirely directed to the United States, amounted
to $307,047 [$285,336 in 2016] in Canadian dollars and to $235,873
[$215,028 in 2016] in US dollars.
17. APPROVAL OF FINANCIAL STATEMENTS
The consolidated financial statements for the year ended Novem-
ber 30, 2017 (including the comparative figures) were approved for issue
by the Board of Directors on January 25, 2018.
As at November 30, 2017, out of the total amount in property, plant and
equipment, $3,830 [$3,080 in 2016] are located in the United States. In
addition, intangible assets located in the United States amounted to
$13,302 [$15,410 in 2016] and goodwill to $10,818 [$13,159 in 2016] in
Canadian dollars and to $10,321 [$11,476 in 2016] and goodwill to $8,394
[$9,799 in 2016] in US dollars.
RIcHELIEu
48
annual REPORT 2017
The annual general meeting of shareholders
will be held on April 5, 2018 at 10:30 a.m.,
at the Omni Mont-Royal Hotel,
1050 Sherbrooke Street West, Montreal, Quebec.
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
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