Declares Quarterly Dividend of $0.045 per share
TRADING SYMBOL: Toronto Stock Exchange – HWD
LANGLEY, BC, March 26, 2015 /CNW/ - Hardwoods Distribution
Inc. ("Hardwoods" or the "Company") today announced its financial
results for the three and twelve-month periods ended December 31, 2014. Hardwoods is one of
North America's largest wholesale
distributors of hardwood lumber and related sheet good products,
operating a network of 32 distribution centres across North America, as well as a hardwood sawmill
and kiln drying operation in the United
States.
Highlights
(For the three and twelve months ended
December 31, 2014)
- Revenue increased 25.5% in the fourth quarter and 22.8% for the
full year, compared to the same periods in 2013.
- The Company increased gross profit by 19.4% in the fourth
quarter and by 16.5% in the twelve-month period, compared to the
same periods in 2013.
- Fourth quarter EBITDA climbed 24.2% to $5.2 million, and full-year EBITDA increased
19.2% to $25.5 million.
- Fourth quarter profit increased 18.2% to $2.8 million, while full-year profit climbed 7.3%
to $14.0 million.
Subsequent to year end:
- The Board of Directors approved a quarterly dividend of
$0.045 per share, payable on
April 30, 2015 to shareholders of
record as at April 20, 2015.
- On March 18, 2015, Hardwoods
announced that Lance Blanco was
resuming his duties as the President and Chief Executive Officer of
the Company.
- On March 18, 2015, Hardwoods
announced an expansion of its executive capacity.
Rob Brown, formerly Chief Financial
Officer, was appointed to the newly created position of Chief
Operating Officer. Faiz Karmally,
formerly Hardwoods' Corporate Controller, has succeeded
Rob Brown as Chief Financial
Officer.
"Hardwoods achieved the best revenue and EBITDA in our history
in 2014 as we implemented our "leverage import" and "strengthen
commercial" business strategies and capitalized on US market
growth," said Hardwoods' CEO Lance
Blanco.
The record 2014 results reflect a combination of organic growth,
including increased sales of import products, together with
acquisition-based growth following the April
28, 2014 purchase of HMI, an integrated, high-quality
hardwood lumber producer and exporter. The acquired business
contributed US$21.8 million to sales
in 2014.
"HMI is the third acquisition we have completed since late 2011
and consistent with the acquisitions of Olam Wood Products and the
Frank Paxton Lumber Company before it, has integrated seamlessly
and proved well timed with the recovery of the US housing market,"
said Mr. Blanco.
Hardwoods' results also benefited from the increase in the
value of the US dollar relative to the Canadian dollar.
A stronger US dollar benefits the Company by: i)
increasing the value of sales and profits earned in the US
operations when translated into Canadian dollars for financial
reporting purposes; ii) increasing the selling price of US
dollar-denominated products sold to Hardwoods' Canadian customers;
and iii) improving the export competitiveness of the Company's
Canadian industrial customers, many of whom have the capability to
sell their manufactured products in the US.
On the market front, US housing starts increased 8.2% to 1.0
million, from 927,000 in 2013 according to the US Census Bureau.
With a growing US sales capability, established supply lines and a
strong geographic network, Hardwoods was and is well positioned to
capitalize on this growth. The Company also continued to build its
presence in the large US commercial market, where Hardwoods is
focused on building market share. Product prices increased on
average, with higher prices for hardwood lumber offsetting a
year-over-year decline in panel product prices.
The Company reported a full-year gross profit margin of 17.3%, a
level viewed as sustainable based on current market conditions and
business mix. Expenses were well controlled across the organization
with sales and administrative costs continuing to decline as a
percentage of revenue.
"It was an excellent year for Hardwoods and going forward, our
outlook remains positive," said Mr. Blanco. "The US residential
market continues to recover, we see significant opportunities to
grow our import product and commercial market sales, and we are
also well positioned for acquisition-based growth. Thanks to strong
cash generation in 2014, we were able to finance the US$15.0 million HMI acquisition and support our
internal growth while limiting our increase in debt. As at
December 31, 2014, our net
debt-to-EBITDA ratio was a conservative 1.5 times, our
debt-to-capital ratio was just 26.3% and we had $36.9 million of unused borrowing capacity.
Hardwoods is in excellent shape financially and positioned for
continued growth in 2015. We are pleased to declare another
quarterly dividend of $0.045 per
share."
Summary of Results
|
|
12 months
ended
December
31
|
|
12 months
ended
December
31
|
|
3 months ended December
31
|
|
3 months ended December
31
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
Total
sales
|
$
|
455,694
|
|
$
|
371,215
|
|
$
|
114,324
|
|
$
|
91,069
|
|
Sales in the US
(US$)
|
|
318,089
|
|
|
268,307
|
|
|
78,872
|
|
|
64,779
|
|
Sales in
Canada
|
|
104,334
|
|
|
94,912
|
|
|
24,716
|
|
|
23,056
|
Gross
profit
|
|
78,767
|
|
|
67,616
|
|
|
19,087
|
|
|
15,988
|
|
Gross profit
%
|
|
17.3%
|
|
|
18.2%
|
|
|
16.7%
|
|
|
17.6%
|
Operating
expenses
|
|
(55,427)
|
|
|
(47,690)
|
|
|
(14,452)
|
|
|
(12,168)
|
Profit from operating
activities
|
|
23,340
|
|
|
19,926
|
|
|
4,635
|
|
|
3,820
|
Add:
Depreciation
|
|
2,138
|
|
|
1,442
|
|
|
603
|
|
|
396
|
Earnings before
interest, taxes, depreciation and
|
|
|
|
|
|
|
|
|
|
|
|
|
amortization
("EBITDA")
|
$
|
25,478
|
|
$
|
21,368
|
|
$
|
5,238
|
|
$
|
4,216
|
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
(2,138)
|
|
|
(1,442)
|
|
|
(603)
|
|
|
(396)
|
|
|
Net finance
cost
|
|
(381)
|
|
|
(178)
|
|
|
(39)
|
|
|
(75)
|
|
|
Income tax
expense
|
|
(8,944)
|
|
|
(6,681)
|
|
|
(1,788)
|
|
|
(1,370)
|
Profit for the
period
|
$
|
14,015
|
|
$
|
13,067
|
|
$
|
2,808
|
|
$
|
2,375
|
Basic profit per
share/unit
|
$
|
0.85
|
|
$
|
0.80
|
|
$
|
0.17
|
|
$
|
0.14
|
Fully diluted profit
per share/unit
|
|
0.84
|
|
|
0.79
|
|
|
0.17
|
|
|
0.14
|
Average Canadian
dollar exchange rate for one US dollar
|
|
1.10
|
|
|
1.03
|
|
|
1.14
|
|
|
1.05
|
Results from Operations – Three Months Ended December 31, 2014
For the three months ended December 31,
2014, total sales increased by 25.5% to $114.3 million, from $91.1
million in the fourth quarter of 2013. Hardwoods' US
operations increased sales by US $14.1
million, or 21.8%, to US $78.9
million. Organic growth accounted for US $6.6 million or 10.2% of the percentage increase
and the addition of the HMI business contributed US $7.5 million, or 11.6% of the percentage
increase.
Fourth quarter sales in Canada
grew by $1.7 million to $24.7 million, a year-over-year increase of
7.2%. The improvement reflects successes in winning new
business, as well as overall stronger product prices and the
positive impact of a weaker Canadian dollar.
Fourth quarter gross profit increased to $19.1 million, up 19.4% from $16.0 million during the same period in 2013.
This improvement reflects the higher sales revenue, partially
offset by a lower gross profit margin. As a percentage of sales,
fourth quarter gross profit margin was 16.7%, compared to 17.6% in
the comparative period. The year-over-year reduction reflects
competitive conditions, as well as the impact of the acquired HMI
manufacturing business, which generates a slightly lower gross
profit percentage than does Hardwoods' traditional distribution
business. Entry into targeted commercial market segments also
affected margins with the Company offering competitive introductory
pricing to some of its new accounts.
Operating expenses for the three-months ended December 31, 2014 were $14.5 million, compared to $12.2 million in the fourth quarter of
2013. This increase primarily reflects incremental costs from
the acquired HMI business and $0.8
million of higher expenses due to the impact of a weaker
Canadian dollar on translation of US operating expenses. As a
percentage of sales, operating expenses improved to 12.6% of sales
from 13.4% in the same period last year.
Fourth quarter EBITDA increased 24.2% to $5.2 million, from $4.2
million in Q4 2013. The EBITDA gain reflects the increase in
gross profit, partially offset by higher operating expenses, before
depreciation and amortization. Profit for the period
increased to $2.8 million, from
$2.4 million in 2013. The
year-over-year increase reflects the higher EBITDA, partially
offset by a $0.4 million increase in
income tax expense and a $0.2 million
increase in depreciation and amortization.
Results from Operations – 12 Months Ended December 31, 2014
For the year ended December 31,
2014, total sales increased by 22.8% to $455.7 million, from $371.2 million in 2013. Hardwoods' US operations
increased sales by US$49.8 million,
or 18.6%, reflecting US $28.0 million
of organic growth and US $21.8
million in incremental revenue from the acquired HMI
business. Full-year 2014 sales in Canada increased by $9.4 million, or 9.9%, year-over-year, reflecting
higher product prices, partially offset by weaker volume demand in
the Canadian market.
Gross profit increased 16.5% to $78.8
million in 2014, from $67.6
million in 2013. This gain reflects the increased sales,
partially offset by a lower gross margin of 17.3%, compared to
18.2% a year earlier.
Full-year operating expenses were $55.4
million in 2014, compared to $47.7
million in 2013. The increase primarily reflects incremental
costs related to the acquired HMI businesses and higher expense due
to the impact of a weaker Canadian dollar on translation of US
operating expenses. As a percentage of sales, annual operating
expenses were 12.2% of sales, down from 12.8% in 2013.
EBITDA for 2014 increased to $25.5
million, from $21.4 million in
2013. The 19.2% increase primarily reflects higher gross
profit, partially offset by increased operating expenses, before
depreciation and amortization. Profit for the year increased to
$14.0 million, from $13.1 million in 2013, reflecting the
$4.1 million improvement in EBITDA,
partially offset by a $2.3 million
increase in income tax expense, $0.7
million increase in depreciation and $0.2 million increase in net finance
cost.
Outlook
Economic forecasters continue to predict a multi-year
strengthening of the US residential construction market. With
approximately 75% of its business in the US, and approximately 60%
of its products going to the residential construction market,
Hardwoods is well positioned to capitalize on the market recovery
underway.
The outlook for the US repair and remodeling market, as provided
by Harvard's Joint Center for Housing
Studies, anticipates modest growth in 2015. The US commercial
market, meanwhile, is expected to achieve steady mid-single digit
growth.
The outlook for the Canadian market remains neutral, with 2015
housing starts expected to remain unchanged from 2014 levels.
Growth in the Canadian renovation and commercial construction
markets is expected to be in line with inflation.
Hardwoods' focus in 2015 will be on further expanding its US
market share. The Company is actively pursuing its "Leverage
Imports" and "Strengthen Commercial" strategies which focus on:
- growing sales of Hardwoods' high-quality, proprietary import
lines, supported both by the Company's established quality
assurance team in Asia and new
international sourcing initiatives designed to bring world-wide
product solutions to Hardwoods' customers; and
- capitalizing on significant opportunities in the commercial
market. In particular, Hardwoods is actively growing its supply of
first-tier product supply for commercial customers and capitalizing
on its import capabilities to offer commercial customers an
attractive and differentiated line-up of products.
Hardwoods will also continue to pursue well-priced acquisition
opportunities that support its objectives.
Hardwoods' Board of Directors will continue to review financial
performance and assess distribution levels on a regular basis,
however the primary focus in 2015 will be on retaining the
financial flexibility to finance the significant market growth
opportunity in the US and to keep the Company's balance sheet
strong to support strategic acquisitions.
A more detailed discussion of the Company's financial
performance can be found in Hardwoods' 2014 Management's Discussion
and Analysis (MD&A). The MD&A will be posted, along with
the Company's annual audited financial statements on SEDAR
(www.sedar.com) and on the Company's website
(www.hardwoods-inc.com).
About Hardwoods Distribution Inc.
Hardwoods is one of North
America's largest distributors of high-grade hardwood
lumber, sheet goods and architectural millwork to the cabinet,
moulding, millwork, furniture and specialty wood products
industries. The Company also creates custom moulding
and millwork packages for customers and produces and exports
high quality lumber through its HMI business. Hardwoods operates 33
facilities located across the United
States and Canada.
Non-GAAP Measures
References to "EBITDA" are to earnings before interest, income
taxes, depreciation and amortization, where interest is defined as
net finance costs as per the consolidated statement of
comprehensive income. References to "debt-to-EBITDA" and
"debt-to-capital" are defined as debt divided by EBITDA and debt
divided by shareholders' equity respectively. In
addition to profit or loss, the Company considers EBITDA,
debt-to-EBITDA and debt-to-capital and comparisons of these
measures to other measures to be a useful supplemental measure of
the Company's ability to meet debt service and capital expenditure
requirements, and the Company interprets trends in EBITDA,
debt-to-EBITDA and debt-to-capital as an indicator of relative
operating performance and financial leverage.
EBITDA, debt-to-EBITDA and debt-to-capital are not earnings
measures recognized by IFRS and they do not have a standardized
meaning prescribed by IFRS. Investors are cautioned that
EBITDA should not replace profit or loss or cash flows (as
determined in accordance with IFRS) as an indicator of our
performance. Investors are also cautioned that debt-to-EBITDA
and debt-to-capital should not replace debt, shareholder's equity
or cash flows as an indicator of our performance. The
Company's method of calculating EBITDA, debt-to-EBITDA and
debt-to-capital may differ from the methods used by other issuers.
Therefore, the Company's EBITDA, debt-to-EBITDA and debt-to-capital
may not be comparable to similar measures presented by other
issuers. For a reconciliation between EBITDA, debt-to-EBITDA and
debt-to-capital to profit or loss, debt and shareholders' equity
respectively as determined in accordance with IFRS, please
refer to the discussion of Results of Operations described in
section 3.0 and section 5.3 of Management's Discussion and Analysis
(MD&A) for the years ended December 31,
2014 and 2013.
Forward-Looking Statements
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
This news release includes forward-looking statements. These
involve known and unknown risks, uncertainties and other factors
that may cause actual results, performance or achievements or
industry results to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. These forward-looking statements are
identified by the use of terms and phrases such as "anticipate",
"believe", "estimate", "expect", "may", "plan", "will", and similar
terms and phrases, including references to assumptions.
These forward-looking statements reflect current expectations of
management regarding future events and operating performance as of
the date of this news release. Forward-looking statements involve
significant risks and uncertainties, should not be read as
guarantees of future performance or results, and will not
necessarily be accurate indications of whether or not such results
will be achieved. A number of factors could cause actual results to
differ materially from the results discussed in the forward-looking
statements, including, but not limited to: We benefit from a
decline in the value of the Canadian dollar relative to the US
dollar as a weaker Canadian dollar i) increases the value of sales
and profits earned in the US operations when translated into
Canadian dollars for financial reporting purposes; ii) increasing
the selling price of US dollar-denominated products sold to
Hardwoods' Canadian customers; and iii) improving the export
competitiveness of the Company's Canadian industrial customers,
many of whom have the capability to sell their manufactured
products in the US; we have a growing US sales capability,
established supply lines and a strong geographic network, and
believe we are positioned to capitalize on this growth; We reported
a full-year gross profit margin of 17.3%, a level viewed as
sustainable based on current market conditions and business mix;
the US residential market continues to recover and we see
significant opportunities to grow our import product and commercial
market sales, and we are also well positioned for acquisition-based
growth; as at December 31, 2014, our
net debt-to-EBITDA ratio was a 1.5 times and we think this is a
conservative number, we are in excellent shape financially and
positioned for continued growth in 2015; with approximately 75% of
our business in the US, and approximately 60% of our products going
to the residential construction market, we are well positioned to
capitalize on the market recovery underway; The outlook for the US
repair and remodeling market anticipates modest growth in 2015; the
US commercial market is expected to achieve steady mid-single digit
growth; the outlook for the Canadian market remains neutral, with
2015 housing starts expected to remain unchanged from 2014 levels;
growth in the Canadian renovation and commercial construction
markets is expected to be in line with inflation; our focus in 2015
will be on further expanding its US market share; Our primary focus
in 2015 will be on retaining the financial flexibility to finance
the significant market growth opportunity in the US and to keep the
Company's balance sheet strong to support strategic
acquisitions.
Although the forward-looking statements contained in this news
release are based upon what management believes to be reasonable
assumptions, management cannot assure investors that actual results
will be consistent with these forward-looking statements. The
forward-looking statements reflect management's current beliefs and
are based on information currently available.
All forward-looking information in this news release is
qualified in its entirety by this cautionary statement and, except
as may be required by law, HDI undertakes no obligation to revise
or update any forward looking information as a result of new
information, future events or otherwise after the date
hereof.
SOURCE Hardwoods Distribution Inc.