HispanicBusiness

RONA's fourth quarter and year-end results include unusual and non-recurring items which had a one-time impact on the Corporation's financial performance. As announced at the beginning of the fiscal year, the unusual items are related to the implementation of our plan. Most of the non-recurring costs were, for their part, incurred following the unsolicited, non-binding expression of interest from Lowe's, severance payments stemming from an administrative services reorganization, the temporary increase in advertising expense for the 2012 Summer Olympic campaign and the impairment of long-term assets. These unusual and non-recurring items represented $24.5 million after-tax in the fourth quarter and $62.0 million after-tax for the full year 2012. In 2011, unusual items totalling $173.3 million after-tax in the fourth quarter and full year were recorded for restructuring costs relating to the New Realities, New Solutions plan, fees and premium related to the $283 million repurchase of debentures maturing in 2016 and goodwill impairment. For ease of comparison and in order to highlight the operational performance of the Corporation, the following presentation of annual and quarterly results excludes these elements. Reconciliation with GAAP measures is provided at pages 6 and 7 of this document.

For fiscal year 2012, RONA posted sales of $4.9 billion, a 1.7% increase over 2011. This growth is mainly attributable to the recording of a 53rd week, growth in the Commercial and Professional Market division and the opening of new proximity and satellite stores. Comparable sales across the RONA network were up 0.7% and at the same level as last year when excluding the 53rd week. For the retail and commercial segment alone, same-store sales were down 0.3%, while same-store distribution sales to all RONA dealers grew 6.4%. Sales of lumber and building materials in corporate stores and to RONA dealers were particularly strong this year. EBITDA excluding unusual and non-recurring items went from $269.2 million in 2011 to $229.5 million in 2012. EBITDA margin decreased by 90 basis points, from 5.60% to 4.70%. Change in product mix impacted our margin. In fact, lumber and building products generated a gross margin of about 30% less than the margin generated on hardware products and, the growth in sales of these products and the increase in sales to contractors negatively impacted the overall profitability of RONA over the year. In addition, EBITDA and EBITDA margin were affected by heightened competition. Although the decrease in EBITDA was partially offset by the decrease in financial expenses and amortization and depreciation expense, net income before unusual and non-recurring items attributable to participating shares after the dividend on preferred shares was down from $86.9 million, or $0.66 per share (diluted) in 2011 to $70.0 million, or $0.57 per share (diluted).

In the fourth quarter of 2012, RONA posted sales of $1.2 billion, a 2.2% increase over 2011. This growth is mainly attributable to the recording of an extra week, double digit growth in sales of the Commercial and Professional Market division and the opening of new proximity and satellite stores. Comparable sales across the RONA network were up 2.9% and up 0.2% when excluding the 14th week. For the retail and commercial segment alone, same-store sales were up 2.4% (down 0.7% excluding the extra week), while comparable distribution sales to all RONA dealers grew 5.9% (up 5.2% excluding the extra week). As explained for full year results, sales of lumber and building materials in corporate stores and to RONA dealers were particularly strong this year. This growth was however offset by cost inflation and more intense competition. As a result, EBITDA excluding unusual and non-recurring items went from $65.9 million in 2011 to $44.1 million in 2012. EBITDA margin decreased by 194 basis points, from 5.63% to 3.69%. Although the decrease in EBITDA was partially offset by lower financial expenses and amortization and depreciation expense, net income before unusual and non-recurring items attributable to participating shares after the dividend on preferred shares was down from $19.7 million, or $0.15 per share (diluted) in 2011 to $6.6 million, or $0.05 per share (diluted).