Richelieu Hardware Ltd. — Earnings Release 2022

Oct 6, 2022

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Press release for immediate release

Ongoing growth and expansion for Richelieu Third quarter sales up 26.7%, of which 43.7% (US$) in the U.S. and 18.8% increase in net earnings per share

New acquisition and three indications of interest signed in Canada and the U.S.

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• For the third quarter ended August 31, 2022 , sales reached $472.9 million, up 26.7%, of which 15.8% from internal growth and 10.9% from acquisitions. In Canada, sales rose by 14.8% to $279.6 million. In the United States, sales climbed 43.7% (US$) to US$150.0 million, representing 41% of total sales.

• EBITDA increased by 23.8% to $79.2 million and the EBITDA margin stood at 16.7%.

• Net income attributable to shareholders rose 19.6% to $46.4 million, or $0.82 diluted per share, up 18.8%.

• For the first nine months, total sales increased to $1.3 billion, up 29.1%, of which 16.2% from internal growth and 12.9% from acquisitions. Net income attributable to shareholders was up 27.1% to $123.4 million, or $2.19 diluted per share, up 27.3%.

• The financial position remains sound and solid with a working capital of $525.7 million for a ratio of 2.8:1 and an average return on equity of 24.1% at August 31, 2022.

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Montreal, October 6, 2022 – “Richelieu (RCH : TSX) delivered a solid performance in the third quarter, in line with previous periods. Our steady growth and impeccable financial position attest to the efficiency of our business model, tailored to the specific needs of our diversified customer base, to our ability to react quickly and adapt to changing market conditions, as well as our resolute focus on customer service. Our results reflect the substantial impact of our acquisition, innovation and diversification strategies in specialized segments that are complementary to our operations. We continue to integrate our acquisitions in accordance with our criteria for optimizing performance while pursuing our strategies of expansion, innovation and market development in North America with a quality of service that sets us apart in our markets», indicated Richard Lord, President and Chief Executive Officer.

New developments in North America – Richelieu completed its fourth acquisition since the beginning of the fiscal year – the 80th since 1988 – Quincaillerie Deno is a distributor of specialty hardware products operating in Quebec. In addition, the Corporation signed indications of interest for three new acquisitions, two in Canada and one in the United States. Together, this recent acquisition and the three transactions in progress would represent sales of approximately $23 million on an annual basis. In order to further seize and create growth opportunities in the short and long term, Richelieu is pursuing several expansion projects in the United States where it currently operates 57 strategically located distribution centers. In addition to the expansion of its Fort Myers, Atlanta and Chicago centers, Richelieu has begun the expansion of its Pompano and Nashville centers, and is also planning to open new centers in Carlstadt and Minneapolis.

RICHELIEU – Press Release

3rd Quarter Results

Third-quarter consolidated sales reached $472.9 million, compared to $373.3 million for the corresponding quarter of 2021, an increase of $99.6 million or 26.7%, of which 15.8% from internal growth and 10.9% from acquisitions. At comparable exchange rates to the third quarter of 2021, the consolidated sales increase would have been 24.9% for the quarter ended August 31, 2022.

Richelieu achieved sales of $409.6 million in the manufacturers market, compared to $313.5 million for the third quarter of 2021, an increase of $96.1 million or 30.7%, of which 17.7% from internal growth and 13.0% from acquisitions. Sales to hardware retailers and renovation superstores stood at $63.3 million, up $3.5 million or 5.9% over the third quarter of 2021, entirely from internal growth.

In Canada , Richelieu recorded sales of $279.6 million, an increase of $36.2 million or 14.8% over the third quarter of 2021, of which 13.8% from internal growth and 1.0% from acquisitions. Sales to manufacturers amounted to $228.0 million, compared to $197.0 million in the third quarter of 2021, an increase of 15.7%, of which 14.5% from internal growth and 1.2% from acquisitions. Sales to hardware retailers and renovation superstores reached $51.6 million, up $5.2 million or 11.2% over the corresponding quarter of 2021, entirely from internal growth.

In the United States , sales totalled US$150.0 million, compared to US $104.3 million for the third quarter of 2021, up US$45.7 million or 43.7%, of which 15.3% from internal growth and 28.4% from acquisitions. Sales to manufacturers amounted to US$140.9 million, compared to US$93.5 million, an increase of 50.7% over the third quarter of 2021, of which 18.7% from internal growth and 32.0% from acquisitions. Sales in US$ to hardware retailers and renovation superstores reached $9.1 million. Total U.S. sales in Canadian dollars stood at $193.3 million, compared to $129.9 million in the third quarter of 2021, an increase of 48.9%. These sales accounted for 40.9% of consolidated sales for the third quarter of 2022, compared to 34.8% of consolidated sales for the third quarter of 2021.

Third quarter earnings before income taxes, interest and amortization ("EBITDA") reached $79.2 million and were up $15.2 million or 23.8% over the third quarter of 2021, resulting mainly from increased sales. Gross margin decreased slightly from the third quarter of 2021 and EBITDA margin stood at 16.7%, compared to 17.1% for the corresponding quarter of 2021. Net earnings grew 20.1%. Considering non-controlling interests, net earnings attributable to shareholders of the Corporation amounted to $46.4 million, up 19.6% over the third quarter of 2021. Net earnings per share rose to $0.83 basic and $0.82 diluted, compared to $0.69 basic and diluted for the third quarter of 2021, increases of 20.3% and 18.8%, respectively.

Third quarter cash flows from operating activities (before net change in non-cash working capital balances) amounted to $60.9 million or $1.08 diluted per share, an increase of 23.5%, compared to $49.3 million, or $0.87 diluted per share for the corresponding quarter of 2021, stemming primarily from the net earnings growth. Net change in non-cash working capital balances used cash flows of $58.2 million, reflecting the increase in inventories of $92.6 million, whereas change in accounts receivable and other items represented cash inflows of $34.4 million. Consequently, operating activities represented a cash inflow of $2.7 million, compared to a cash inflow of $34.5 million in the third quarter of 2021.

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RICHELIEU – Press Release

Nine-months Results

For the first nine months, consolidated sales reached $1.3 billion, an increase of $303.0 million or 29.1% over the first nine months of 2021, of which 16.2% from internal growth and 12.9% from acquisitions. At comparable exchange rates to the first nine months of 2021, the consolidated sales increase would have been 28.0%.

EBITDA totalled $210.8 million, up $47.7 million or 29.3% over the first nine months of 2021. Gross margin declined slightly over the corresponding nine-month period of 2021. As for EBITDA margin, it stood at 15.7%, compared to 15.6% for the first nine months of 2021. Net earnings increased 27.4%. Considering non-controlling interests, net earnings attributable to shareholders of the Corporation totalled $123.4 million, up 27.1% over the corresponding nine months of 2021. Net earnings per share amounted to $2.21 basic and $2.19 diluted, compared to $1.74 basic and $1.72 diluted for the first nine months of 2021, up 27.0% and 27.3%, respectively.

Assets

Total assets amounted to $1.2 billion as at August 31, 2022, compared with $964.2 million as at November 30, 2021, an increase of 23.0%. Current assets grew by 25.2% or $166.3 million over November 30, 2021. This increase stems from the addition of current assets following the business acquisitions made during the first quarter and from the rise in inventories resulting from the increase in demand and in supply costs. Non-current assets increased 18.2% mainly due to the addition of intangible assets and goodwill related to the business acquisitions.

The Corporation continues to benefit from a healthy and solid financial position. As at August 31, 2022, total debt was $5.4 million, mainly representing balances payable on acquisitions.

Dividends

On October 6, 2022, the Board of Directors approved the payment of a quarterly dividend of 0.13$ per share to shareholders of record as at October 20, 2022, payable on November 3, 2022. The declared dividend is designated as an eligible dividend within the meaning of the Income Tax Act (Canada).

PROFILE AS AT AUGUST 31, 2022

Richelieu is a leading North American distributor, manufacturer and importer 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 furniture manufacturers, residential and commercial woodworkers, door and window, and hardware retailers including renovation superstores. Richelieu offers customers a broad mix of high-end products sourced from manufacturers worldwide. Its product selection consists of over 130,000 different items targeted to a base of more than 100,000 customers who are served by 106 centers in North America – 47 distribution centers in Canada, 57 in the United States and two manufacturing plants in Canada, specifically Cedan Industries Inc. which specializes in the manufacturing of a wide variety of veneer sheets and edgebanding products and Menuiserie des Pins Ltée which manufactures components for the window and door industry and a broad selection of decorative mouldings.

Notes to readers — Richelieu uses earnings before interest, income taxes and amortization (“EBITDA”) because this measure enables management to assess the Corporation’s operational performance. This measure is a financial indicator of a corporation’s ability to service its debt. However, EBITDA should not be considered by an investor as an alternative to operating income, net earnings, cash flows or as a measure of liquidity. Because EBITDA is not a standardized measurement as prescribed by IFRS, it may not be comparable to the EBITDA of other companies. Richelieu also uses adjusted cash flows from operating activities, which are based on net earnings plus the amortization of property, plant and equipment, intangible assets and right-of-use asset, deferred tax expense (or recovery), share-based compensation expense and financial costs. These additional measures do not account for net change in non-cash working capital items to exclude seasonality effects and are used by management in its assessments of cash flows from long-term operations. Therefore, adjusted cash flows from operating activities may not be comparable to those of other companies. Certain statements set forth in this report (generally identified by terms such as “may”, “could”, “might”, “intend”, “expect”, “believe”, “estimate” or comparable variants) constitute forward-looking statements which, by their very nature, remain subject to other risks and uncertainties as set forth in the Corporation’s annual and quarterly reports. Although management considers these assumptions and expectations reasonable based on the information available at the time they are provided, such assumptions and

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RICHELIEU – Press Release

expectations could prove inaccurate and actual results could differ materially. Richelieu is under no obligation to update or revise any forward-looking statements made herein to account for future events or circumstances, except as required by applicable legislation. The unaudited interim consolidated financial statements, accompanying notes and interim MD&A for the third quarter and first nine months of 2022 will be available shortly on the website of the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com and on the Corporation's website at www.richelieu.com.

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For information:

Richard Lord, President and Chief Executive Officer

Antoine Auclair, Vice-President and Chief Financial Officer

Tel: (514) 336-4144 www.richelieu.com

OCTOBER 6, 2022, CONFERENCE CALL AT 2:30 P.M. (EASTERN TIME)

Financial analysts and investors interested in participating in the conference call on Richelieu’s results to be held at 2:30 p.m. on October 6, 2022, may dial 1-888-390-0620 a few minutes before the start of the call. For those unable to participate, a taped rebroadcast will be available as of 5:45 p.m. on October 6, 2022, until midnight on October 13, 2022, by dialling 1-888-390-0541, access code: 729037 #. Members of the media are invited to listen in.

Photos are available under “About Richelieu” – “Media” section at www.richelieu.com

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RICHELIEU – Press Release

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

[In thousands of dollars] [Unaudited]	As at August 31,	As at November 30,
	2022	2021
	$	$
ASSETS
Current assets
Cash and cash equivalents	—	58,707
Accounts receivable	214,359	199,585
Inventories	603,953	395,464
Prepaid expenses	7,170	5,423
	825,482	659,179
Non-current assets
Property, plant and equipment	52,328	46,239
Intangible assets	67,155	53,910
Right-of-use assets	108,192	87,013
Goodwill	125,093	110,776
Deferred taxes	7,669	7,063
	1,185,919	964,180
LIABILITIES AND EQUITY
Current liabilities
Bank overdraft	85,918	—
Accounts payable and accrued liabilities	169,454	155,009
Income taxes payable	12,134	21,281
Current portion of long-term debt	5,350	5,339
Currentportion of lease obligation	26,949	21,174
	299,805	202,803
Non-current liabilities
Long-term debt	95	1,100
Lease obligation	89,145	71,880
Deferred taxes	9,758	9,868
Other liabilities	9,926	9,592
	408,729	295,243
Equity
Share capital	61,680	54,610
Contributed surplus	7,787	7,046
Retained earnings	684,506	590,522
Accumulated other comprehensive income	20,252	14,264
Equity attributable to shareholders of the
Corporation	774,225	666,442
Non-controllinginterests	2,965	2,495
	777,190	668,937
	1,185,919	964,180

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RICHELIEU – Press Release

CONSOLIDATED STATEMENTS OF EARNINGS

CONSOLIDATED STATEMENTS OF		EARNINGS
[In thousands of dollars, except earnings per share] [Unaudited] Sales Operating expenses excluding amortization Earnings before amortization, financial costs and income taxes Amortization of property, plant and equipment and right-of-use assets Amortization of intangible assets Net financial costs and other Earnings before income taxes Income taxes Net earnings Net earnings attributable to: Shareholders of the Corporation Non-controlling interests Net earnings per share attributable to shareholders of the Corporation Basic Diluted CONSOLIDATED STATEMENTS OF [In thousands of dollars] [Unaudited] Net earnings Other comprehensive income that will be reclassified to net earnings Exchange differences on translation of foreign operations Comprehensive income Comprehensive income attributable to: Shareholders of the Corporation Non-controlling interests		For the three months ended August 31, For the nine months ended August 31, 2022 2021 2022 2021 $ $ $ $
		472,883 373,298 1,345,284 1,042,263 393,703 309,361 1,134,521 879,210
		79,180 63,937 210,763 163,053
		9,950 7,291 27,667 21,167 2,674 2,009 7,879 5,179 2,097 656 4,277 1,943
		14,721 9,956 39,823 28,289
		64,459 53,981 170,940 134,764 17,727 15,073 46,698 37,263
		46,732 38,908 124,242 97,501
		46,363 38,749 123,445 97,158 369 159 797 343
		46,732 38,908 124,242 97,501
		0.83 0.69 2.21 1.74 0.82 0.69 2.19 1.72 COMPREHENSIVE INCOME For the three months ended August 31, For the nine months ended August 31, 2022 2021 2022 2021 $ $ $ $
		46,732 38,908 124,242 97,501 8,479 6,540 5,988 (3,609)
		55,211 45,448 130,230 93,892
		54,842 45,289 129,433 93,549 369 159 797 343
		55,211 45,448 130,230 93,892

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RICHELIEU – Press Release

CONSOLIDATED STATEMENTS OF CASH FLOWS

[In thousands of dollars] [Unaudited] OPERATING ACTIVITIES Net earnings Items not affecting cash Amortization of property, plant and equipment and right-of-use assets Amortization of intangible assets Deferred taxes Share-based compensation expense Financial costs Net change in non-cash working capital balances FINANCING ACTIVITIES Repayment of long-term debt Dividends paid to Shareholders of the Corporation Payment of principal portion of lease obligations 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 (bank overdraft) Cash and cash equivalents (bank overdraft), beginning of period Cash and cash equivalents (bank overdraft) end of period	For the three months ended August 31, For the nine months ended August 31, 2022 2021 2022 2021 $ $ $ $
	46,732 38,908 124,242 97,501 9,950 7,291 27,667 21,167 2,674 2,009 7,879 5,179 (160) (78) (463) (209) 696 482 1,986 1,458 1,001 712 2,808 2,181
	60,893 49,324 164,119 127,277 (58,235) (14,857) (202,007) (36,928)
	2,658 34,467 (37,888) 90,349
	(3,135) — (4,393) (3,139) (7,267) (3,914) (21,823) (15,465) (6,893) (4,939) (18,864) (14,240) — — — (511) 128 718 6,054 4,643 — (9,837) (7,902) (13,094)
	(17,167) (17,972) (46,928) (41,806)
	— (34,387) (42,432) (44,229) (6,770) (5,191) (16,781) (12,077)
	(6,770) (39,578) (59,213) (56,306)
	(413) 179 (596) 517
	(21,692) (22,904) (144,625) (7,246)
	(64,226) 89,586 58,707 73,928
	(85,918) 66,682 (85,918) 66,682

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