AnnuAl RepoRt

Transcription

1 2007 Annual Report

2 CONTENTS 10. An Overview of Richelieu 12. Financial Highlights 16. Message to Shareholders 24. A Track Record of Growth 26. Directors and Officers 27. Management s Report 40. Management s and Auditors Report 41. Consolidated Balance Sheets 42. Consolidated Statements of Earnings and Retained Earnings 42. Consolidated Statements of Comprehensive Income 43. Consolidated Statements of Cash Flows 44. Notes to Consolidated Financial Statements THE ANNUAL GENERAL AND SPECIAL MEETING OF SHAREHOLDERS will be held on March 27, 2008 at 11:00 a.m. at the Sheraton Centre, Rooms A and B 1201 René Lévesque Boulevard West, Montreal, Quebec

3 ADDED VALUE THROUGH INNOVATION AS A DRIVER OF INNOVATIONS FROM LEADING SUPPLIERS WORLDWIDE, RICHELIEU ACKNOWLEDGES ALL THE LINKS IN THE CREATIVITY CHAIN ENGINEERS, DESIGNERS, ARCHITECTS, MANUFACTURERS A CHAIN TO WHICH IT IS COMMITTED AS AN IMPORTER/ DISTRIBUTOR WITH A PASSION FOR QUALITY AND SERVICE. WE BRING ADDED VALUE TO OUR CUSTOMERS MANUFACTURERS AND RETAILERS BY CONTSTANTLY ENHANCING OUR PRODUCT MIX THROUGH INNOVATIONS THAT CONTRIBUTE TO THEIR CREATIVITY AND HELP SET THEM APART. OVER THE YEARS, A PRODUCT S VISUAL APPEAL HAS EMERGED AS A TRUE VALUE AND AS- SET. DESIGN HAS BECOME A MANDATORY STEP IN MANUFACTURING FUNCTIONAL AND DEC- ORATIVE HARDWARE ASSERTING ITSELF EVERYWHERE, FROM A DOOR HANDLE, TO AN ASSEMBLY COMPONENT, TO ERGONOMIC WORKSTATION HARDWARE. THE SILENT AND AUTOMATIC SLIDING OF A DRAWER, THE ERGONOMICS OF A CLOSET SOLUTION, THE FUNCTIONALITY AND BEAUTY OF DESIGN ARE ALL CLOSELY TIED TO DE- SIGNERS CREATIVITY, THEIR KNOWLEDGE OF WHAT A FINISHED PRODUCT SHOULD BE AND MANUFACTURING REQUIREMENTS. THESE ALL FIT TOGETHER TO SHAPE AN EVER- EVOLVING TECHNOLOGY.

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5 Design and technology combine to make a product robust and give it its personality.

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7 bringing together traditional and INNOVATIVE materials.

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9 OUR PRODUCT VALUES: FUNCTIONALITY, ROBUSTNESS, ERGONOMICS AND DESIGN.

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11 A product s design is the result of teamwork between designers, engineers, ERGONOMISTS and manufacturers.

12 10/11 An Overview of RICHELIEU Our positioning Richelieu is a leading North American importer, distributor and manufacturer of specialty hardware and complementary products. Our mission Remain a top-quality customer-oriented company, respectful of the interests of our other three partners: our teams, our suppliers and our shareholders. Our roadmap is driven by results and long-term growth. It is built upon our vision as a leader, the core values of quality, loyalty, integrity and pragmatic management, providing us with a solid corporate culture and a unique organizational profile. Our customers We serve more than 38,000 customers in North America kitchen cabinet and bathroom furniture manufacturers, cabinet makers, residential and commercial woodworkers, office furniture and ready-to-assemble furniture manufacturers, home furnishing manufacturers, renovation superstore chains and buying groups including more than 6,000 hardware retailers. Our teams We rely on the professionalism and know-how of our 1,250 employees close to half working in sales and marketing and some 60% are Richelieu shareholders. At Richelieu, training is a priority to ensure our employees have the appropriate professional development in order to provide our customers with outstanding service and technical advice. Our products Innovation is instrumental to our product strategy, thanks to our long-term relationships with suppliers who are among the best worldwide. Our product offering consists of more than 55,000 stock-keeping units (SKUs) in a broad mix of categories: kitchen accessories, lighting systems, finishing and decorating products, functional hardware, ergonomic workstation components, closet solutions, sliding door systems, decorative and functional panels, ceramic tiles, high-pressure laminates... This offering is complemented by the specialty items manufactured by our two subsidiaries, Cedan Industries Inc. and Menuiserie des Pins Ltée. These include a wide range of veneer sheets and edgebanding products, a variety of decorative mouldings and components for the window and door industry. In addition, some of our products are manufactured in Asia according to our specifications and those of our customers. More than 50% of our overall offering is sold under our own or exclusive brands. Our distribution logistics Our North American distribution network extends from coast to coast, with 45 centres plus two manufacturing plants. Our network is supported by distribution logistics and showrooms tailored to our customers ever-evolving needs. We achieve an optimal customer service fill rate thanks to the unequalled diversity of our offering, our Everything under one roof approach, and our 24 hours following the receipt of an order delivery system. Our growth strategy We favour a balanced growth through acquisitions meeting highly selective criteria as well as market development, supported by our specialized sales force, distribution centre start-ups and ongoing enhancement of our offering. Our added value We aim to earn our customers loyalty by bringing them added value through quality service strategic selling tools that are unique in our market the purchasing power provided by our organization and the innovations integrated every year into our product offering to contribute to set them apart and give them a competitive edge.

13 30 DISTRIBUTION CENTRES AND 2 MANUFACTURING CENTRES IN CANADA DISTRIBUTION: HALIFAX, MONCTON (2), DRUMMONDVILLE, QUEBEC CITY (2), MontrEal (3), Longueuil, Laval (2), OTTAWA, TORONTO (3), BARRIE, WATERLOO, SUDBURY, THUNDER BAY, WINNIPEG, REGINA, SASKATOON, EDMONTON, CALGARY, KELOWNA, VANCOUVER (3), VICTORIA MANUFACTURING: LONGUEUIL, NOTRE-DAME-DES-PINS 15 DISTRIBUTION CENTRES IN THE UNITED STATES BOSTON, NEW YORK (2), CHARLOTTE, GREENVILLE, ATLANTA, COLUMBUS, DETROIT, SEATTLE, PORTLAND, POMPANO, RIVIERA BEACH, HIALEAH, DANIA, NASHVILLE

14 12/ Sales (in millions of $) Net earnings (in millions of $) Average annual growth Sales: 15.1% Net earnings: 18.7% Earnings per share (in $) Cash flows from operating activities (in millions of $) Shareholders equity (in millions of $) , Interest-bearing debt (in millions of $) Richelieu s shares (RCH) are listed on the Toronto Stock Exchange (TSX) (1993) Appreciation 80% over 5 years 978% since listing Annual return 12.5% OVEr the last 5 years (Dec to Nov. 30, 2007) RCH 02/03 06/03 01/04 08/04 03/05 10/05 05/06 12/06 07/07 02/08 Share price: $21.00 (February 12, 2008)

15 FINANCIAL HIGHLIGHTS Years ended November 30 (in thousands of $, except per-share amounts, number of shares and ratios) Results $ $ $ $ $ Sales 436, , , , ,375 EBITDA 57,101 53,059 45,785 43,367 38,902 (% of sales) Net earnings 33,954 31,931 27,688 26,150 22,556 Cash flows from operating activities* 39,244 36,400 31,923 29,823 25,909 Financial position $ $ $ $ $ Working capital 120, , ,927 82,364 64,665 Total assets 258, , , , ,220 Interest-bearing debt 6,971 13,635 3,499 7,019 10,745 Shareholders equity 209, , , , ,355 Weighted average number of shares outstanding (000) 23,080 23,136 23,165 23,049 22,866 Per share $ $ $ $ $ Net earnings Diluted net earnings Cash flows from operating activities* Book value Ratios $ $ $ $ $ Return on average equity 17.2% 18.3% 18.4% 20.5% 21.2% Interest-bearing debt to equity 3.3% 7.3% 2.2% 5.0% 9.2% * Before net change in non-cash working capital items MARKET CAPITALIZATION as at November 30, 2007 $532 million Growth: 83% over the last 5 years 815% since listing

16 14/15 COMMITTED TO OUR CORE VALUES Innovation and attention to customers needs were among our values back when the Company was founded. After 40 years, more than ever, Richelieu stands apart for the quality of its service and innovation at every level. Richelieu s management successfully put together an extraordinary team in order to achieve its objectives. I congratulate Richard Lord and his team and extend my wishes for continued success. Georges C. Forest Founder What energy, what enthusiasm, what results! In orchestrating the Company s development, Richard Lord has set standards of excellence in customer services, and ensured that its principles of efficiency and profitability were rigorously endorsed by a highly qualified and motivated team all while constantly raising performance and growth objectives. As a result, shareholders have been rewarded over the years. Richelieu s competitive edge and healthy financial position set the stage for many more years of success and exceeded expectations. The future looks bright... very bright. After Richelieu Hardware Ltd. was acquired by Schroders Acquisition Fund in October 1987, I was mandated to recruit a President and to finalize Richard Lord s hiring in June Invested with responsibility and authority and supported by his team, Mr. Lord successfully grew a modest $28 million business to a company with more than $400 million in revenues in a climate of harmony and respect for customers, suppliers, directors and shareholders. The energy and enthusiasm dedicated to objectives of growth, efficiency and customer satisfaction rank Richelieu among the top-performing public companies for the benefit of its customers and shareholders. I consider myself truly privileged to have sat on Richelieu s Board of Directors and, as a shareholder, I am pleased on the Company s 40 th anniversary to express my best wishes for continued success. Jean E. Douville Chairman of the Board Robert Chevrier Chairman of the Board

17 ... for decades WE ARE CONVINCED THAT OUR CORE VALUES OF QUALITY, INNO- VATION, LOYALTY, INTEGRITY AND RESPECT HAVE ENABLED US TO BECOME AND REMAIN A CUSTOMER-ORIENTED NORTH AMERICAN LEADER RESPECTFUL OF THE INTERESTS OF OUR EMPLOYEES, SHAREHOLDERS AND SUPPLIERS. OUR APPROACH TO CUSTOMER SERVICE IS A KEY STRENGTH SET- TING UP APART. IT IS BUILT ON THE VALUES SHARED BY OUR TEAMS AND FUNDAMENTAL TO OUR CORPORATE CULTURE. AT RICHELIEU, THE MEANS WE USE TO ACHIEVE OUR GOALS ARE AS IMPORTANT AS THE RESULTS THEMSELVES.

18 16/17 MESSAGE TO SHAREHOLDERS Richard Lord President and Chief Executive Officer Richelieu again achieved excellent results in 2007, which was our twelfth consecutive year of sales and net earnings growth. It was also highlighted by ongoing improvements at every level of our organization, a strong performance by our operations in the United States, and two new acquisitions, bringing to 33 our total number of business acquisitions in North America over the past 20 years. As we will celebrate Richelieu s 40 th anniversary in 2008, it is timely to point to the consistency our Company has shown in its vision and growth strategy focused on innovation, synergistic acquisitions, further market development and enhanced customer service. This consistency is fundamental to our lasting success. It reflects the quality and the dynamism of Richelieu s entire team and attests to our commitment to create value year after year.

19 When Richelieu was taken over from the founder in 1987, the Company had a business base in Quebec, from which we have built a North American organization. We have achieved this sustained growth while respecting our core values, every step of the way, and taking a structured approach to risk. Over the past 20 years, our sales have risen from some $30 million to $436.2 million, and our network has grown in size and gained in strength, from a single warehouse in Quebec to 45 distribution centres in North America, equipped with logistics tailored to customers evolving needs, along with two manufacturing plants. Prior to Richelieu s listing in 1993, we had already established our presence across the country and become the Canadian leader in our speciality, serving some 10,000 customers nationwide. Since then, we have broadened our client base which now includes more than 38,000 customers in different market segments in Canada and the United States whom we provide with access to an offering that has grown from 10,000 products to more than 55,000 today. Our net earnings have increased from $4.6 million in 1993 to $34.0 million in Our share price (RCH) has appreciated by an average of 18.5% annually, and our market capitalization has risen from $52 million in 1993 to $532 million as at november 30, While pursuing our growthby-acquisition strategy, we have paid quarterly dividends to our shareholders over the past five years, and in 2007 they represented 19.0% of the year s net earnings. Instrumental to our growth in recent years has been our market penetration in the United States, where we established our presence back in Today, our U.S. network includes 15 distribution centres following six strategic acquisitions and the opening of four centres in growth markets. In 2007, our sales in the United States increased by 72.5% to US$75.1 million. We remain in intensive development mode in this high-potential market, while continuing to improve our operating profitability. Thus, year after year, we have been able to make strategic investments to reinforce our organization, improve our efficiency and provide our customers with appreciable added value, while maintaining a healthy, almost debt-free balance sheet. As at November 30, 2007, we posted working capital of $121 million and cash and cash equivalents of $7.9 million, and had an available line of credit of $26 million. In 2007, we continued to focus on the strategic priorities of our action plan. Specifically: we integrated our 2006 acquisitions and created further selling synergies; we took advantage of new expansion opportunities, making two profitable acquisitions in the United States and Canada and opening our 30 th Canadian distribution centre; we added other quality innovations to our product mix; we optimized our logistics chain and our management information system; we carried on our centre and showroom improvement program to maintain high standards of service; we invested in the production of new strategic sales tools for our customers; we further enhanced our website, making it even more efficient; and we continued to concentrate on training, particularly for our frontline teams, so as to provide our customers with any technical advice about our products and solutions, and to deal with them as true business partners.

20 18/19 MESSAGE TO SHAREHOLDERS For us, business acquisitions are a major strategic driver, and we always base our decisions on solid fundamentals. Short and long-term profitability is our priority so quality assets and human resources are key criteria because we have to grow together and the goal of any acquisition is to foster a sharing of know-how as well as to add products and customers that is how we developed and consolidated our organization over the years. As for the start-up of distribution centres, we give priority to regions benefiting from a dynamic economy and where we have one or more nearby centres in order to favour selling and operating synergies. In 2007, we almost completed the integration of the five acquisitions closed in 2006 and acquired two new distributors in the second quarter. Thus, Village Square Cabinet Supply, a distributor of decorative and functional hardware, kitchen accessories and related products based in Nashville, Tennessee, gave us access to a new territory near several markets where we already operated. Through this compatible and profitable acquisition, we added a 15 th distribution centre to our network in the United States. By acquiring Sasco, a Dartmouth, Nova Scotia distributor of finishing products for a customer base of furniture manufacturers and kitchen cabinet makers, and integrating it with our Atlantic Countertops division, we achieved significant synergies in terms of operations and customers served, and secured a solid foothold in this niche market in the Atlantic Provinces. Today, this industrial product line is sold in almost all our markets across Canada. Together, these two acquisitions represent additional sales of approximately $10 million annually, not to mention the selling synergies we will develop according to our usual goal of significantly increasing sales in the three years following an acquisition. In the second quarter, we also opened our eighth Ontario-based distribution centre, in the central region of Barrie, which benefits from a strong industrial and export economy. Regardless of the positions and responsibilities throughout our organization, customer service is a concern for every member of Richelieu s team, starting with the management. Over our decades of growth, our approach has been perfected, but our initiatives have always been guided by a single priority: to meet and exceed the expectations of our manufacturer and retailer customers, who are entrepreneurs themselves and have to meet their own customers daily needs and be creative to maintain a competitive edge. Like them, we know how important a customer s loyalty and long-term value are, and that they arise directly from total customer satisfaction in regard to products, conditions and service. We spend much time in the field to better know our customers, and to develop and select value-added products from well-known manufacturers who, themselves, require the effective participation of designers to create unique products. For our offering to remain a key success factor, it must meet a wide variety of functional and decorative needs, from the traditional and classic to the most up-to-date. We add an average of more than 1,000 new products every year to our offering, including high-end solutions that combine innovative design with technological and ergonomic innovation products that truly stand apart as competitive advantages. We did so once again in 2007, launching exclusive new lines of decorative hardware, sliding door mechanisms that combine design and cutting-edge technology, new lighting systems and an innovative line of industrial supplies.

21 As a distributor committed to quality of service, our distribution logistics are governed by imperatives of precision in ordering data, reliability and just-in-time delivery. Over the years, we have constantly improved our logistics chain, enabling us to achieve a response rate unequalled in the industry. In 2007, we further enhanced our customer service by upgrading our warehouse management system. In addition to optimizing our distribution and lowering our operating costs, this provides us with a measurement tool to guide us in our decisions and our actions. We also continued to invest in expanding and modernizing our showrooms to make them more attractive for the growing number of customers who visit them and to provide easier access to our products. Planned improvements to our Boston, Calgary, Drummondville, Edmonton, Vancouver and Victoria centres have now been completed. Over the years, Richelieu has developed a proactive approach and a unique ability to market specialty AND INNOVATIVE products, so we go well beyond distribution in serving our customers. We give them access to programs and sales support tools that are unique in the market, such as high-end displays, targeted brochures, various catalogues and the most comprehensive website with a major transactional function. These marketing tools are a key component of the added value we bring to our customers being as important as innovation, product quality and diversity, the efficiency of our distribution logistics and the expertise provided by our sales force. In 2007, we published the Office Solutions, Lighting Solutions, Sliding Doors and Exclusive Collection catalogues, and re-edited the Richelieu Catalogue featuring all our products. As for our website at it undergoes constant improvements, incorporating the best tools to simplify its use, speed up product searches and make it more efficient, well documented and comprehensive. Our monthly online sales continued to increase to reach over $2 million in 2007, attesting to our customers appreciation. The yearly improvements made throughout our organization ensure we always have the right product, at the right time, in the right place, and can deliver it under the best conditions. This objective could not be achieved without the right people in the right positions with the proper qualifications. At Richelieu, training is a priority and at the root of our relationship with our employees. We encourage the taking of initiative, innovativeness and intrapreneurship, as well as rigorous management of detail. We also promote share ownership through our share purchase program, and we are proud of our employees participation as close to 60% of them are now Richelieu shareholders. We set up regular and one-time training programs for many levels of responsibility, including monthly training sessions for our sales teams to help them maintain technical know-how that is unique in the market and bring it on-site to our customers. For us, it is a simple mark of respect to be at our customers disposal and provide them with on-site expert information about our products.

22 20/21 MESSAGE TO SHAREHOLDERS Architects and designers are partners of choice for us, who are continually offered information sessions on our products and innovations. Furthermore, we contribute to training programs at design schools through product seminars. Our growth outlook is promising. We began 2008 with confidence, a clear strategy and an action plan drawing on our key success factors. We would like to express our thanks to all our partners, customers, employees, suppliers and shareholders. We also thank our Board members for their contribution to our solid corporate governance practices and their valuable advice. We acknowledge our employees for their dynamism, their outstanding participation and their endorsement of the core values that guide us in our growth. To all of you, we renew our commitment to continue creating value. The hardware products industry is one of the most creative and ever-evolving. We have developed lasting relationships with top suppliers worldwide. We serve a highly diversified customer base through a unique organization, and great development potential lies ahead of us in North America. (Signed) Richard Lord President and Chief Executive Officer In 2008, our growth will be driven primarily by: the benefits of our latest acquisitions, the new distribution centre opened in 2007, and the selling synergies we will build with them; the product mix innovations we will make available in our North American centres to further develop our customer accounts and intensify internal growth; the positive impact of medium and long-term business agreements signed in 2007 with major renovation chains; the opportunities arising from the new renovation superstores that are scheduled to open in Canada in 2008; the development of greater market share in the kitchen and bathroom cabinet making residential and commercial woodworking and home and office furniture segments; and as we do every year, we will carefully select the best acquisition opportunities according to our criteria of profitability and long-term growth.

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24 22/23 Testimonials ACKNOWLEDGING RICHELIEU S 40 TH ANNIVERSARY More than ever, business today has come to be based on relationships and trust. We are very pleased with the partnership we have developed with Richelieu. These people, from the local rep, the area manager, even to the president, have all contributed to the success of our relationship. We believe that passion and determination leads to mutual accomplishments. We strive to bring forth these values daily as we know the people at Richelieu do as well. E Paul Benson, President Benson Industries Limited Victoria, British Columbia Customer We are proud to be business partners with Richelieu. This relationship allows us to bring further added value to our customers through increasingly innovative designs and, thus, to pursue our growth. André Bruneau, President DENIS COUTURE Cuisine x espace d inspiration Montreal, Quebec Customer For many years Marana has benefited from strong relationships with our many suppliers. None has been stronger or more positive than our long-standing association with Richelieu Hardware. Richelieu has been there for Marana, providing not only excellent product, exactly suited to our varied needs, but with advice and technical support, that has for years kept us at the forefront of our trade. In the manufacture of fine cabinetry for a highly discerning clientele, being able to fully rely on a source to provide the right hardware item for every need has been of inestimable benefit, allowing us to boldly keep offering an ever-greater selection of quality, up-to-date, products to our customers. Whether by phone or through their remarkable website, orders are always processed promptly, and the product is on its way. I feel the staff really listens to our needs, and offers the appropriate response. This partnership has helped Marana develop over the many years we have worked together, allowing us to attend to business without needing to worry for a moment about the hardware products so essential to our business; and for this we are truly grateful! Mario Furtado, President Marana Kitchen & Home Design Toronto, Ontario Customer I have long felt that Richelieu s unmatched commitment to service has been part of Metropolitan s success. This philosophy should continue to keep you at the top of the industry for many years to come. It has made us feel more like a partner than a customer. Metropolitan is proud of our relationship with Richelieu. Stuart Elfland, President Metropolitan Cabinet & Countertops Boston, MA, USA Customer Richelieu Hardware has been our prime hardware supplier for over 20 years. We find Richelieu has a great selection of quality hardware and is able to supply us with most of our hardware needs. Richelieu usually has ample quantity of product with very few backorders which is important to us with our short lead time for orders. Our Richelieu sales rep is always available for us to talk to and has been quite helpful in finding us some specialized hardware for various custom projects. Overall we are quite happy with Richelieu. John Rose, Plant Manager Progressive Wood Inc. Stratford, Ontario Customer

25 We congratulate Richelieu for their 40 th anniversary and are very proud that we can look back at a successful partnership of more than 20 years. Together we have brought many innovative products and services to woodworkers in North America in our long relationship. Both companies have the desire to continuously improve the business of their customers and make them successful. Richelieu is an excellent partner for Blum. Their broad North American network, their well trained sales force, their ongoing commitment to superior customer service and the Company s drive to bring quality products with added value to their customers are a sound basis for success in the future. We want to thank the whole team at Richelieu for their trust in our company and hope that we can continue our successful partnership for a long time into the future. Gerhard E. Blum, President Blum GmbH Höchst, Austria Supplier It is not by accident that Richelieu has become a North American leader in its specialty. Richelieu s devotion to forging creative and lasting relationships with premier manufacturers has strongly contributed to its reputation as a superior source for functional hardware. With great excitement we look forward to continued success at collaboratively generating new means to serve and inspire our common customers. Scott Jordan, President & CEO Accuride International Inc. Los Angeles, California, USA Supplier Wilsonart International s relationship with Richelieu began nearly 20 years ago. Richelieu has a remarkable operating model and employs sound customer-first business principles. Richelieu weaves their superior product offerings and brands together with very effective marketing presentations at the point of sale. This all comes together with sound operating discipline and effective transaction management. Often we recommend Richelieu as a benchmark for some of our other global distributors who are looking for new ideas for improving their businesses. Bill DiGaetano, President North America Wilsonart International Temple, Texas, USA Supplier Our relationship with Richelieu goes back some 30 years ago with the founder, Georges Forest, when Specco was a five-member team! While Specco has grown three times over the years, Richelieu has expanded beyond scale under Richard Lord s leadership. Richard has done a great job in squeezing margin of Specco which is good news for shareholders of Richelieu. Despite that, I still enjoy and look forward to visiting Richelieu office every spring and enjoy the one treat of the year lobster dinner. May both Richelieu and Specco work tight together in the future, and celebrate many more anniversaries to come. Best wishes from Rocky & all at Specco Taipei, Taiwan Supplier With over 1700 distributors around the world, Richelieu definitely ranks number one for Fastcap. Why? Because they are driven. Driven to achieve the work ahead with no excuses. It is rare to come in contact with people who have the clarity and purpose that Richelieu has. It is also refreshing to see a company that values strategic relationships and invests the necessary time and resources to develop them. My experience with Richelieu has not only been gratifying from a business standpoint, but has also served as a great learning tool for me on the fundamentals of building a strong, solid company that pursues excellence at every turn. I know that ultimately all of this is the result of strong, determined leadership at all levels. I look forward to our continued relationship. Paul Akers, President FastCap, LLC Bellingham, Wa, USA Supplier

26 24/ A Track Record of Growth 1968 FOUNDING A warehouse in Dorval, Quebec Sale of hardware products to a customer base of kitchen cabinet makers and retailers in Quebec DEC Sales $30 M Schroder acquires Richelieu June 1988 Richard Lord is appointed President and Chief Executive Officer and becomes a major shareholder of Richelieu Implementation of a growth plan Vision and values: Acquisitions seize opportunities in a highly fragmented Canadian market using Schroder as leverage Internal growth Intensive market development Specialized sales force Diversification of product offering Centre start-ups Professional development programs Distribution logistics Development of a network of North American and European suppliers 1993 Within six years, Richelieu becomes Canada s leading importer, distributor and manufacturer of specialty hardware and related products Canadian network: 7 centres from coast to coast Customer base: 10,000 manufacturer and retailers Offering: 10,000 products Sales: $65 M Listing on TSX (RCH) Market capitalization: $52 M

27 share splits (RCH) (Two-for-one) Penetration of U.S. market 6 business acquisitions 4 centre start-ups 15 centres 33 acquisitions in North America Network: 47 centres Customer base: 38,000 manufacturers and retailers Further segmentation Offering: 55,000 products (SKUs) New niches Everything under one roof strategy Orders: 6,000 daily Employees: 1,250 Sales: $436 M Market capitalization: $532 M + 50% of the product mix: Richelieu s brands and exclusive products 12 years of uninterrupted growth (in millions of $) Sales Net earnings

28 26/27 DIRECTORS Robert Chevrier Chairman of the Board Richelieu Hardware Ltd. President Roche Management Company Inc. Director of Corporations Denyse Chicoyne (1) Director of Corporations Robert Courteau (1) President and Chief Executive Officer Courteau Mainville Management Jean Douville (2) Chairman of the Board UAP Inc. Chairman of the Board National Bank of Canada Mathieu Gauvin (1) Vice-President RSM Richter Inc. Richard Lord President and Chief Executive Officer Richelieu Hardware Ltd. Jocelyn Proteau (2) Director of Corporations Robert L. Trudeau (2) Chairman of the Board Trudeau Corporation (1) Member of the Audit Committee (2) Member of the Human Resources and Corporate Governance Committee OFFICERS Richard Lord President and Chief Executive Officer Marion Kloibhofer General Manager, Central Canada, Central and Eastern U.S. Guy Grenier Vice-President, Sales and Marketing Industrial Hardware Éric Daignault General Manager of Divisions Christian Dion Manager Human Resources Hélène Lévesque Corporate Secretary (not in the photo) John Statton General Manager, Western Canada and Western U.S. Alain Giasson Vice-President and Chief Financial Officer CORPORATE GOVERNANCE Shareholders will find a description of Richelieu s corporate governance practices in conformity with Form F1 of Regulation respecting Disclosure of Corporate Governance Practices, along with the mandate on its Board of Directors and Board Committees, in the Management Proxy Circular.

29 MANAGEMENT S REPORT MANAGEMENT S DISCUSSION AND ANALYSIS OF OPERATING RESULTS AND FINANCIAL POSITION (Year Ended November 30, 2007) Fiscal 2007 Highlights Consolidated sales exceeded $400 million to reach $436.2 million, an increase of 13.1% over 2006 and of 24.5% over Earnings before income taxes, interest, amortization and noncontrolling interest (EBITDA) totalled $57.1 million, up 7.6% over 2006 and up 24.7% over CONTENTS Highlights 28. Forward-Looking Statements 28. General Business Overview as at November 30, Mission and Strategy 29. Financial Highlights 30. Analysis of Operating Results 32. Summary of Quarterly Results and Fourth Quarter 33. Financial Position Analysis of Principal Cash Flows for 2007 Balance Sheet Analysis 35. Contractual Commitments 35. Financial Instruments 35. Internal Control over Financial Reporting 35. Disclosure Controls and Procedures 35. Principal Accounting Estimates 36. Accounting Policies Adopted in Recently Issued Accounting Policies 38. Risk Management 39. Share Price 39. Share Information as at January 31, Growth Outlook 39. Supplementary Information Net earnings amounted to $34.0 million, an increase of 6.3% over 2006 and of 22.6% over Earnings per share rose to $1.47 (basic) and $1.46 (diluted), up 6.5% over 2006 and up 22.5% over Return on average equity worked out to 17.2%, compared with 18.3% for the previous fiscal year and 18.4% for On January 26, 2007, the Board of Directors approved a 17% increase in the quarterly dividend, raising it from $0.06 to $0.07 per share. Acquisition of the principal net assets of Village Square Cabinet Supply, a Nashville, Tennessee based distributor of hardware and related products primarily serving a customer base of kitchen cabinet makers March 5, Acquisition of the principal net assets of Sasco Products Inc., a Dartmouth, Nova Scotia based distributor specializing in finishing products for furniture manufacturers and kitchen cabinet makers May 23, Opening of a new centre in Barrie, Ontario May 1, Medium and long-term business agreements with major Canadian renovation chains.

30 28/29 This management s report relates to Richelieu s consolidated operating results, comprehensive income and cash flows for the year ended November 30, 2007, in comparison with the year ended November 30, 2006, as well as its financial position at those dates. This report should be read in conjunction with the audited consolidated financial statements for 2007 and accompanying notes appearing in this Annual Report. In this management s report, Richelieu or the Company designates, as the case may be, Richelieu Hardware Ltd. and its subsidiaries and divisions, or one of its subsidiaries or divisions. Various supplementary documents, such as the Annual Information Form, interim management s reports, certificates and press releases issued by Richelieu, are available on SEDAR s website at The information contained in this management s report accounts for any major event occurring prior to January 31, 2008, on which date the audited consolidated financial statements and the management s report were approved by the Company 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 Canadian generally accepted accounting principles ( GAAP ). The consolidated financial statements for the fourth quarter ended November 30, 2007 have not been audited or reviewed by the Company s auditors. Richelieu uses earnings before income taxes, interest, amortization and non-controlling interest ( EBITDA ) because this measure enables management to assess the Company s operational performance. This measure is a widely accepted financial indicator of a company s ability to service and incur debt. However, EBITDA should not be considered by an investor as an alternative to operating income or net earnings, an indicator of operating performance or cash flows, or as a measure of liquidity. Because EBITDA is not a standardized measurement as prescribed by GAAP, it may not be comparable to the EBITDA of other companies. 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, growth outlook and other statements not pertaining to past events, constitute forward-looking statements. In some cases, these statements are identified by the use of terms such as may, could, might, intend should, expect, project, plan, believe, estimate or the negative form of these expressions or other comparable variants. These statements are based on the information available at the time they are written, on assumptions made by management and on the expectations of management, acting in good faith, regarding future events, including economic conditions, exchange rate fluctuations, changes in operating expenses, the sufficiency of the Company s deliveries and the absence of unusual events requiring supplementary capital expenditures. Although management believes these assumptions and expectations to be reasonable based on the information available at the time they are written, they could prove inaccurate. 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 herein (see the Risk Management section of this management s report and the Annual Information Form). Richelieu s actual results could differ materially from those indicated or underlying these forward-looking statements. The reader is therefore recommended not to unduly rely on these forward-looking statements. Forward-looking statements do not reflect the potential impact of special items, any business combination or any other transaction that may be announced or occur subsequent to the date hereof. Richelieu undertakes no obligation to update or revise the forward-looking statements to account for new events or new circumstances, except where provided for by applicable legislation. GENERAL BUSINESS OVERVIEW as at November 30, 2007 Richelieu is a leading North American importer, distributor and manufacturer of specialty hardware and complementary products. Its products are targeted to an extensive customer base of kitchen and bathroom cabinet, furniture, and window and door manufacturers plus the residential and commercial woodworking industry, as well as a large customer base of hardware retailers, including renovation superstores. The residential and commercial renovation industry is the Company 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 provide customers with the latest innovative products tailored to their business needs. The Company s product selection consists of more than 55,000 stock-keeping units (SKUs) targeted to a base of over 38,000 customers who are served by 47 centres in North America 30 distribution centres across Canada, 15 in the United States, and two manufacturing plants in Canada.

31 Main product categories include functional cabinet hardware and assembly products for the manufacture of furniture and kitchen cabinets, decorative hardware products, high-pressure laminates, decorative and functional panels, veneer sheets and edgebanding products, kitchen accessories, ergonomic workstation components, ceramic tiles, finishing products, whiteboards and tackboards. Richelieu also specializes in the manufacture of a wide variety of veneer sheets and edgebanding products through its subsidiary Cedan Industries Inc., and of components for the window and door industry and of mouldings through Menuiserie des Pins Ltée. In addition, some of the Company s products are manufactured in Asia according to its specifications and those of its customers. The Company employs over 1,250 people at its head office and throughout the network, close to half of whom work in marketing, sales and customer service. Some 60% of its employees are Richelieu shareholders. MISSION AND STRATEGY Richelieu s mission is to create shareholder value and contribute to its customers growth and success, while favouring a business culture focused on quality of service and results, partnership and entrepreneurship. To sustain its growth and remain the leader in its specialty market, the Company continues to implement the strategy that has benefited it until now, with a focus on: continuing to strengthen its product selection by introducing every year an average of over 1,000 diversified products that meet its market segment needs and position it as the specialist in functional and decorative hardware for manufacturers and retailers; further developing its current markets in Canada and the United States with the support of a specialized sales and marketing force capable of providing customers with personalized service; and expanding in North America through the opening of distribution centres and 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 who distribute a limited range of products. FINANCIAL HIGHLIGHTS Years ended November 30 (in thousands of $, except per-share amounts, number of shares and return on average equity) Sales 436, , ,177 EBITDA 57,101 53,059 45,785 Net earnings 33,954 31,931 27,688 basic earnings per share ($) diluted earnings per share ($) Cash dividends paid on shares 6,463 5,551 4,638 per share ($) Weighted average number of shares outstanding (in thousands) 23,080 23,136 23,165 As at November 30 Total assets 258, , ,971 Working capital 120, , ,927 Shareholders equity 209, , ,300 Return on average equity (%) Book value ($) Total interest-bearing debt 6,971 13,635 3,499 Cash and cash equivalents 7,879 6,964 20,103 Share closing price

32 30/31 ANALYSIS OF OPERATING RESULTS FOR THE YEAR ENDED NOVEMBER 30, 2007 Consolidated sales exceeded $400 million to reach $436.2 million in 2007, up by $50.5 million or 13.1% over This increase came from: 5.1% internal growth resulting from a combination of the initiatives taken by Richelieu all year long, specifically targeted marketing programs backed by perfected selling tools for customers use new product lines that diversified the Company s offering and enabled it to further develop its North American markets the optimization of its transactional website that contributed to raise its monthly online sales to over $2.0 million and its showroom expansion and modernization program to integrate its innovations and to fulfill the evolving needs of manufacturer and retailer customers and the information sessions of architects and designers. These initiatives allowed Richelieu to build further synergies with prior acquisitions, to optimize its North American network s potential and to better benefit from the prevailing favourable conditions in the renovation market; and 8.0% from the acquisition of Specialty Supplies Inc. (Florida) and L.B. Brass (New York) at the end of the previous year, specifically on October 17 and 30, 2006 as well as Village Square Cabinet Supply (Tennessee) and Sasco Products Inc. (Nova Scotia) in the second quarter of 2007, on March 5 and May 23. These last two acquisitions therefore contributed to the year s sales for nine and six months respectively. Sales Years ended November 30 (in thousands of $) % Canada 355, , United States (CA$) 81,145 49, (US$) 75,137 43, Consolidated sales 436, , Hardware retailers including renovation superstores benefited from strong sales growth in all product categories as well as the initial impact of the medium and long-term business agreements signed with major Canadian renovation chains. Sales to retailers thus totalled $72.2 million in 2007, up by $7.2 million or 11.1% over a year earlier, whereas in 2006, they had remained relatively stable compared with In Canada, sales totalled $355.0 million, an increase of $18.8 million or 5.6% resulting from 5.1% internal growth and Sasco s contribution for six months. It should be noted that the business of Sasco, a Dartmouth, N.S. based distributor of industrial finishing products, has been merged with Richelieu s Atlantic Countertops division. Canadian sales accounted for 81.4% of consolidated sales in All its markets contributed to this increase, with sales growth of 4.9% in Eastern Canada, of 3.4% in Ontario and stronger growth in Western Canada where sales grew by 9.7% over 2006, reflecting the efforts made to benefit from the particularly favourable economy in Western provinces. In the United States, Richelieu achieved a strong increase of 72.5% in its sales in U.S. dollars thanks to 57.3% growth-byacquisition (in U.S. dollars), to which was added an excellent internal growth of 15.2% (in U.S. dollars). U.S. sales totalled $81.1 million (US$75.1 million), compared with $49.4 million (US$43.5 million) for 2006, a increase of 64.4% in Canadian dollars. They accounted for 18.6% of consolidated sales in 2007, compared with 12.8% in The acquisition of Specialty Supplies and Village Square Cabinet Supply enabled the Company to broaden its network in the markets of Florida and Tennessee, whereas the acquisition of L.B. Brass increased its presence in the New York region; Richelieu now has 15 distribution centres in the United States. During the year, the Company almost finalized the integration of its recent acquisitions, while building greater selling synergies in its network and further developing its markets with new product lines, backed by enhanced marketing programs and a strengthened sales team. Sales to manufacturers amounted to $364.0 million, an excellent increase of $43.3 million or 13.5% over 2006, of which 4.1% came from internal growth and 9.4% from the aforementioned acquisitions such sales accounted for 83.4% of consolidated sales for Richelieu achieved most satisfactory advances in all its market segments, posting greater increases in the kitchen cabinet makers and commercial and residential woodworkers niches throughout 2007.

33 The average annual growth in consolidated sales was 11.0% for the last five years. Sales Geographic breakdown By market segment Consolidated net earnings Years ended November 30 (in thousands of $) EBITDA 57,101 53,059 Amortization of capital and intangible assets 4,685 3,975 Interest Income taxes 17,294 16,828 Non-controlling interest Net earnings 33,954 31,931 Net profit margin 7.8 % 8.3 % 68% Eastern Canada 40% 24% Ontario 22% 6% Western Canada 19% 2% United States 19% Manufacturers 83% Retailers 17% Consolidated EBITDA and EBITDA margin Years ended November 30 (in thousands of $) Sales 436, ,631 EBITDA 57,101 53,059 EBITDA margin 13.1 % 13.8 % Earnings before income taxes, interest, amortization and non-controlling interest (EBITDA) stood at $57.1 million, up by $4.0 million or 7.6% over The Company s EBITDA profit margin remained solid at 13.1%, despite a 0.7% decline from 2006 when this margin had been much higher than in previous years. The EBITDA margin has remained above 13% over the past five years. In 2007, the gross margin and the EBITDA margin were affected primarily by the major increase in raw material costs, the investments required to develop new sales in the retailers market, and the effect of the exchange rate on the profit margin on U.S. sales translated into Canadian dollars, as they represent a growing proportion of total sales. Activities in the United States are in intensive development mode, and although their performance is most satisfactory, they have not yet achieved the profitability level of Canadian operations. Interest was up by approximately $0.7 million as a result of the increase in the debt consisting primarily of balances of purchase price payable for the previous year s acquisitions. Amortization of intangible assets with limited useful lives accounted for in 2006 more than doubled to reach $0.9 million for 2007, due notably to the year s expansion. Income taxes totalled $17.3 million, up by approximately $0.5 million over 2006, mainly reflecting the increase in the year s earnings. Net earnings grew by 6.3% to $34.0 million, representing 7.8% of consolidated sales, compared with 8.3% in Earnings per share amounted to $1.47 basic and $1.46 diluted, up from $1.38 basic and $1.37 diluted the previous year. The number of shares and options did not vary significantly over the past 12 months. The average annual growth in consolidated net earnings was 11.9% for the last five years. Comprehensive income totalled $27.8 million, consisting primarily of latent foreign exchange losses of $1.9 million incurred in the fourth quarter on translation of the financial statements of Richelieu s subsidiary in the United States, and foreign exchange losses of $4.0 million due to the change in the method of translating the financial statements of this same subsidiary effective September 1, As indicated in the Accounting policies adopted in 2007 and Recently issued accounting policies sections of this management s report and note 2 to the financial statements appearing in this Annual Report, Richelieu changed the classification of its U.S. subsidiary effective September 1, This subsidiary was thereby changed from integrated to self-sustaining foreign operations because of the financial and operational autonomy noted in previous months following its growth through acquisitions and market development.