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Executives

Stephane Milot – Vice President-Finance and Investor Relations

Robert Sawyer – President and Chief Executive Officer

Dominique Boies – Executive Vice President and Chief Financial Officer

Analysts

Irene Nattel – RBC Capital Markets LLC

Anthony Zicha – Scotia Capital Markets

Vishal Shreedhar – National Bank Financial Brokers

Jim C. Durran – Barclays Capital Canada, Inc.

Mark Petrie – CIBC World Markets, Inc.

Keith Howlett – Desjardins Securities Inc.

Derek Dley – Canaccord Genuity Corp.

RONA Inc. (OTC:RONAF) Q2 2013 Earnings Conference Call August 14, 2013 11:00 AM ET

Operator

All participants please standby your conference is ready to begin.

[Foreign Language]

Good morning, ladies and gentlemen and welcome to the RONA 2013 Second Quarter Results Conference Call.

[Foreign Language]

During the presentation, all participants will be in a listen-only-mode. Afterwards, we will conduct a question-and-answer session and instructions will be provided at that time. As a reminder, this conference is being recorded.

[Foreign Language]

I would now like to turn the conference over to Mr. Stephane Milot, Vice President, Finance and Investor Relations. Mr. Milot, please go ahead.

Stephane Milot

Well, thank you, operator, and good morning, everyone. Welcome to RONA’s 2013 second quarter results conference call. With me today for the call are Robert Sawyer, President and CEO; and Dominique Boies, Executive Vice President and CFO. Here is today’s agenda; first, Robert will share his comments about our plan and business model; after that, Dominique will comment on our financial results, and then we will be available to answer your questions.

Before we begin, I would like to remind you that the information provided during this conference call may contain forward-looking statements reflecting RONA’s objectives, estimates and expectations. As you know, such statements involve risks and uncertainties. For information on the nature of these risks, please see our MD&A. Moreover, RONA undertakes no obligation to publically update the forward-looking information discussed during this conference call, unless otherwise required by the Securities Authorities.

I will now turn the call over to Robert Sawyer. Please go ahead, Robert.

Robert Sawyer

Thank you, Stephane. Good morning, everyone. I am very pleased to talk to you this morning to update you on our business and to give you some context around the decision we have made since I joined RONA four months ago. The first thing I did when I arrived was the assessment of our business model. As I said at our AGM in May, I believe, we have a great brand and business model and highly motivated merchant and employee. Our multi-format, multi-banner, multi-ownership model, makes us different from the competition and we will be leveraging the opportunity these difference create by setting up an effective organizational structure in order to get the full benefit of this model.

The second most important thing I did was set up an organizational structure that is focused on delivering result, which means making sure people are accountable. As we said on June 27, we have reorganized the commercial structure into four distinct group; RONA big-box, our Réno-Dépôt store concept, our RONA proximity store and contractor specialists. The process of building the team, putting the right person in the right place by shuffling internal experience and adding new blood from the outside is almost completed. By late August, after the summer holiday, the new commercial structure under the leadership of Alain Brisebois will be in full operation.

This bring me to the third most important thing I did after joining RONA, which was to put in place a recovery plan with short-term deliverable and long-term vision. This plan was presented to you on June 27. There are two main component to the plan; first, taking cost out of the system to give us some short-term profit growth and the room to maneuver while we are putting together the second part of our plan, which is the realignment of our commercial business model.

Our goal for the first component of that plan is $110 million in cost saving from streamlining and taking costs out of the system. As we mentioned in the last conference call, this saving come from the reduction in admin, marketing and distribution costs, a reduction of 325 full-time job in our four admin center in Canada since the beginning of the year, and the closure by the end of 2013 of 11 non-profitable store. As we report today, we are tracking well with the regard to the saving. We have reduced our SG&A by $4.2 million in the second quarter and $7.5 million year-to-date.

Our run rate annualized saving increased from $17 million, when we report our first quarter, to $30 million as of today. We are well on our way to achieving our target of $110 million of run rate cost saving by the end of the year. As we said in our previous call, a portion of this saving will be reinvested in our business to refine the positioning of our four distinct group. A new initiative is also underway in supply chain. Our inventory turns are currently below market standard and our objective is to improve rapidly and reduce our excess inventory by $100 million.

In the second quarter, we reduced excess inventory by $47 million compared to the same quarter last year. There is still room to cut further, but we will do it while making sure we are not affecting the service level by creating out of stock in the store. I would like to remind you that the restructuring of our marketing, merchandising and supply chain function is a major undertaking, but is crucial for the future of RONA. By implementing these changes, we are making sure that RONA will deliver on its full operational leverage. That’s our biggest growth opportunity in the medium-term.

This is a totally new RONA we are building. We need to change the culture to make RONA a leaner, more efficient and more agile organization. As I said in our AGM, my objective is to rapidly put in place a vision that will focus on four pillars. First, make the customer central to our decision. Second, provide the best in-store execution. Third, have the best team, and consequently, generate return and growth for our shareholder. As you can see from all of the changes and announcement we’ve made since my arrival on April 8, we are taking fast action to turn around our financial performance in a systematic way. Soon we will have the right team in place. It’s now a question of strategy, execution, discipline and time.

In closing, I would like to add that while I’m confident about the plan, I believe we may stay vigilant in short-term given the importance of the changes being implemented in a short period of time and the challenging market environment we are operating in. As Dominique will mention in a minute, market condition continue to be difficult with weak overall residential investment and strong competition across the country. This condition combined with unfavorable weather and restructuring charges affected our second quarter results, which came lower than expected excluding the restructuring charges.

We are managing the business to make sure that we are gradually improving our short-term and mid-term results, but as I just said, our objective is to rebuild RONA foundation and unlock it’s full value and it take more than one quarter to achieve.

This completes my part of the presentation. I will now ask Dominique to walk you through the numbers. Thank you.

Dominique Boies

Thank you, Robert. Good morning, everyone, and as we did in the MD&A and press release, my comments this morning will refer to the results from our continuing operations only. I invite you take a look at the slides on our webcast right now and we will post those slides on our Investors site later this morning, so that you can refer to them.

As you know, on June 20, we announced that we had signed an agreement to dispose off the assets of our Commercial and Professional Market division, to Talisker Plumbing Corporation, a subsidiary of EMCO Corporation. As a result of this agreement, effective the second quarter of 2013, this division has been classified as a discontinued operation. Results from these operations are presented separately in the financial statements and some financial information has been restated to take this change into account.

I’d like to start by explaining the environment we’ve been operating in, which affected our second quarter results. First, as much as I hate to say this, weather was really not favorable this quarter. We got a lot of rain across the country during our peak season. In addition, we had to deal with a strike in the construction industry in Quebec and at the end of the quarter and in early July.

And finally but not least, single unit housing starts continued to weak in the quarter, especially in Quebec at minus 25%, and we don’t see this trend drastically improving in the short-term. Overall, Canada was minus 12% in housing starts in June and minus 7% year-to-date. Most markets were down in July including Alberta, and Quebec was down at minus 38% in July.

As a result, same-store sales were under pressure during the quarter, but nevertheless, we achieved retail same-store sales in this context, better than last year at minus 0.7% versus minus 1.5% last year. Same-store sales in our distribution sector were minus 2.7%, the decrease is mainly related to timing of purchases from dealers. Year-to-date, distribution sales are up 2.5%. Same-store sales for our total network therefore decreased by 1%, compared to plus 0.4% last year, where we had two good months out of three in the second quarter.

Consolidated revenues from continuing operations were down $59.6 million or 4.6% in the quarter. The decrease stems mainly from $35.1 million in lost sales due to store closures to five big-box stores and a 1% decrease in same-store sales as I just mentioned for about $30 million. The decrease was however partially offset by new store opening, which added $7.7 million to the quarter’s revenue.

EBITDA from continuing operations amounted to $200,000 in the second quarter of 2013, down $84.5 million from 2012. $68.4 million or 80% of the decrease was due to restructuring charges. Total adjustments amounted to $76.4 million in the second quarter of 2013. Comparatively in 2012, we recorded a restructuring charge of $8 million for expenses incurred to close some store. Of the $76.4 million recorded in the second quarter of 2013.

Restructuring costs and other charges as presented in Note 3.4 of our consolidated financial statements, accounted for $64 million. Those charges were incurred for severances, provisions for onerous contracts and costs related to store closures. The remaining $12.4 million adjustment in the second quarter of 2013 was related to the recovery plan and includes costs incurred to convert the TOTEM banner and the costs of discontinuing inventory.

Excluding those adjustments, EBITDA from continuing operation amounted to $76.6 million, down $16 million from $92.7 million in 2012. The decrease was mainly in the retail segment and stemmed primarily from a lower gross margin due to high promotion and reduction of excess inventory as well as changes in the mix of product categories sold. In the second quarter of 2013, the net loss from continuing operations attributable to participating shares was therefore $38.7 million, compared to a profit of $35.6 million in 2012 for a variance of $74.3 million.

As explained for the EBITDA, about 85% of the decrease is related to adjustment. $53.7 million was recorded as restructuring costs, impairment of non-financial assets and other charges, as well as an adjustment of $9.1 million representing other costs in implementing our recovery plan.

Excluding these adjustments, net income attributable to participating share amounted to $33.6 million, compared to $45.1 million last year. Adjusted net income per diluted share from continuing operation attributable to owners of RONA, in other words, the EPS figure, you’re all following was $0.28 in the second quarter of 2013, compared to $0.37 in 2012. Again, the decrease is attributable mainly to retail segment and from a lower growth margin.

In terms of financial position, we continue to maintain a disciplined approach to capital investment by maintaining strict CapEx guidelines. Our balance sheet is still solid and as at June 30, 2013, the ratio of net debt to total cap was 23%, compared to 20% in 2012.

Our ratio of debt to adjusted EBITDA was at 2.5 times, compared to 1.7 times in 2012. The increase in the ratio is attributable to pressure on last 12 months’ EBITDA, which should change in the coming quarters with the expected benefits from our recovery plan as well as debt level, which is expected to reduce from current operation and asset disposition.

In closing, as we had highlighted during our call at the end of June, when we presented our recovery plan, our second quarter results were significantly affected by one-time adjustments and the disposition of our commercial and professional division.

Excluding those adjustments, our bottom line results are still lower than our expectation, given the unfavorable weather and challenging market condition. Looking ahead, we’re relatively confident that where we have control over, mainly the reduction in SG&A will contribute more in the coming quarters and will enable us to resume profitability growth.

This wraps up the financial section. and operator, we are now ready for the questions period.

Question-and-Answer Session

Operator

Thank you, Mr. Boies. We will now take questions from the telephone lines. (Operator Instructions) Our first question is from Irene Nattel from RBC Capital Markets. Please go ahead

Irene Nattel – RBC Capital Markets LLC

Thanks, and good morning, everyone. I think you are certainly looking at the retail segment in Q2. certainly, I think everyone understands the impact of weather and the slowing housing starts. But my question really is how is that spilling over into demand on the renovation side? With the slowdown in housing overall, are you seeing continuously more cautious on renovation, so that’s being negatively impacted. And also just to try and tease through the weather impact, when weather finally did get better; did you see positive traffic in the store?

Robert Sawyer

Good morning, Irene, this is Robert. There’s few answer to your question. Yes, the portion of housing really affects the certain category in our store. but at the same time, there was a big inflation on certain commodity. So I’m not saying that is a peak hole to zero, but this is a one portion of the answer. Secondly, the seasonal spot, definitively, we were stuck in terms of merchandise for better weather than that. And as of even though today, nice weather, it’s been difficult in certain provinces for all summers so to see.

So, we need definitively to reduce or to grow with a reduction program sooner than we did last year. So overall, when we’re looking at the consumer behavior, they come for great deals and they buy deals when it’s under reduction. So we put a lot of pressure on margin.

Dominique Boies

And as well, Irene, the last part of your question is, nice weather was really came very late, and therefore, very short period of time. So it still is very difficult and when we look at July, it was also relatively a difficult month. So as we look for the rest of the year, we still have this pretty cautious outlook for traffic for the rest of the year.

Irene Nattel – RBC Capital Markets LLC

That’s great. Thank you. And just another question if I may, Dominique, in your comments in the MD&A, you noted that new stores contributed $7.7 million in Q2. how did that compare to expectations?

Dominique Boies

New stores are slightly below our expectations. We have opened mainly satellite stores and some, two proximity stores. So in the current environment, it’s tough to get those stores to ramp up where we want them to be. So we’re still in early days, Irene, to measure the true sustainable performance of those stores. But we’re working on it; on the model and making sure we align everything and align the demand. Again, as Robert mentioned, we’re looking at our four categories of stores as we look forward and add a better aligned strategy for each of those store formats. So this should help also improve the performance and contribution from those stores.

Robert Sawyer

So these stores were proximity stores, Irene and definitively, it’s a lower cost operating store. So there are few adjustments to make, but we’re working on it right now.

Irene Nattel – RBC Capital Markets LLC

That’s great. Thank you.

Robert Sawyer

Thanks, Irene.

Operator

Thank you. Our next question is from Anthony Zicha from Scotiabank. Please go ahead.

Anthony Zicha – Scotia Capital Markets

Hi. Good morning.

Robert Sawyer

Hello, Anthony.

Anthony Zicha – Scotia Capital Markets

Robert, could you give us some more color on your repositioning of banners, could we see for instance a Réno-Dépôt outside of Quebec perhaps in Ontario? And also a follow-up, do you believe RONA is maintaining its market share in this competitive environment?

Robert Sawyer

Yes, the answer for Réno-Dépôt, in fact, it’s a question of timing, but definitively after tweaking the Réno-Dépôt model, we expect to rollout the Province with that model. And right now, it’s very difficult to measure market share in our industry, because when we look our competitor, it’s an overall report, but I don’t think we are losing market share. And that context right now of a difficult environment, the merchandising team is trying to attract consumer with all type of merchandise, which is not necessarily the regular stat that we’ve been using to do so. Hearing what’s going on in the market, I think, we are performing well and we are not losing market share.

Anthony Zicha – Scotia Capital Markets

Okay, and then, Dominique, Q2 was the implementation of the first phase to reduce inventories and I believe you reduced it by about $47 million, it looks like 5% from the year-end. How much more do you plan to go forward by and what kind of target if you have a specific target?

Dominique Boies

Yeah, we are aiming at roughly $100 million of inventory reduction initially and again, we have to be very careful on how we do it. So it’s really excess inventory and the way we do order in some cases and then maybe operate with less comfort and then making sure that our suppliers are there to support us as well with direct shift. So it’s really revisiting the model with Alain team. We aligned our supply chain. So it’s more of that exercise and really cutting inventory for the sake of cutting inventory and as we do, as Alain’s team will push further on the category review, this will also impact our inventory figures going forward. So there is definitively room for improvement. We are starting with $100 million, should help release some cash bill and make us more efficient.

Robert Sawyer

So…

Dominique Boies

And this, sorry, Robert,

Robert Sawyer

It’s okay.

Dominique Boies

And this will reduce the cost further as well in our distribution network. So that’s like basically will be more efficient as we get there.

Robert Sawyer

So just to add on that one, we have an office, buying office in Shanghai. Most of our excess inventory is coming from Shanghai, which is a lot of a private label. So we are revisiting completely our approach and the way we buy and the projection in terms of sales through. So the good news, it’s we’re going to reduce inventory and we’re going to have a better time in the total businesses.

Anthony Zicha – Scotia Capital Markets

Okay. Just to be clear, so you are definitely making a change in your private label strategy, like what’s the percentage of private label today and then where do you think it will go with that shift in mind of reducing inventories coming from Shanghai?

Dominique Boies

It’s roughly 28% to 30% right now in terms of…

Robert Sawyer

Penetration rate, that’s really, (inaudible) this is in categories where we sell private and commercial brand. We have penetration rates as Dominique mentioned. But that’s overall, this is not an important…

Dominique Boies

So the portfolio of private label is about around the 12 brands. So aligning with this new structure, we need to revisit completely our portfolio of all our private brands and to revise the category that we want to stay in and the one that we want to pull out. And on top of it, to see okay, the sell-through projection in terms how much quantity we need to buy. So, it’s a big, big thing that started about two weeks ago.

Anthony Zicha – Scotia Capital Markets

Okay. Well, thank you very much.

Robert Sawyer

And one thing on that Tony if I may, I may close on this is, in the past, the private label strategy was more about getting volumes. So now, we’re really looking at dollar contribution to the bottom line and this is what at your private label it should be doing, bringing incremental dollar margin and that’s a all focus, I think it’s putting on that and on those product categories. So if they are there it should bring more profitability to RONA and our dealers and if not we’re out at there.

Anthony Zicha – Scotia Capital Markets

Very, good. Thank you.

Operator

Thank you. Our next question is from Vishal Shreedhar from National Bank. Please go ahead.

Vishal Shreedhar – National Bank Financial Brokers

Thank you. Dominique, just a quick one here, on your restructuring charges that you noted, and you’re back there for the adjusted EPS, so what the other dollar volume what was cash about or is non-cash?

Dominique Boies

Yeah. So if you look at just the $98.7 million, which is the total restructuring charge for the ongoing operation. It’s roughly, I would say probably $10 million worth cash in the quarter. And then the remaining is, we just don’t know, so some of it maybe cash in the future like on onerous leases for example, but they will just know as time goes by. But the impact in the quarter was less than $10 million cash.

Vishal Shreedhar – National Bank Financial Brokers

Okay. And on the working capital swing, for Q2, it seems like a larger swing than it’s typical. Just hoping you could help me understand that a bit better?

Dominique Boies

Yeah. Working cap, I think in this case, our payables went down drastically versus last year, so that’s one explanation and probably one of the main explanation.

Vishal Shreedhar – National Bank Financial Brokers

Okay. And so we should see that reverse over the course and in subsequent quarters?

Robert Sawyer

None of it.

Dominique Boies

Yeah. But then it will be a play with inventories going down as well. So it will be a moving target as you move ahead.

Vishal Shreedhar – National Bank Financial Brokers

Okay.

Dominique Boies

But ICI, when you look at the inventories that you took, one thing, which is complicated this quarter is that the income statement was restated, but the balance sheet is not restated as per accounting rules. So when you look at the inventory figures and the payable in the balance sheet, those include ICI or the commercial portion of the business.

Vishal Shreedhar – National Bank Financial Brokers

Okay.

Dominique Boies

For last year, yeah.

Vishal Shreedhar – National Bank Financial Brokers

So going forward, so Q2 is typically a period where RONA generated a good cash flow. So I’m just trying to get a sense of what impacted the cash flow in the quarter. I noticed the working cap swing was a bit larger. And then just if you have comments on how the future might look in terms of cash flow generation?

Robert Sawyer

Vishal, so in Q2 release results, the decrease in the results that affect the cash flow and the other element is really timing in terms of the payables. So going forward, this should get better in Q3, Q4 and then resume to normal with the environmental cash flow generation.

Vishal Shreedhar – National Bank Financial Brokers

Thanks a lot.

Operator

Thank you. Our next question is from Jim Durran from Barclays. Please go ahead.

Jim C. Durran – Barclays Capital Canada, Inc.

I just wonder, if you could tell me on the gross margin, how much would it have been down if you excluded the inventory or clearing that you don’t intend to sell those product categories anymore?

Dominique Boies

Yeah, we have that number.

Robert Sawyer

Yeah. Probably half of…

Dominique Boies

Just stay with me for one second.

Robert Sawyer

Half of the reduction in gross margin is, you said if you exclude liquidation?

Jim C. Durran – Barclays Capital Canada, Inc.

Yes.

Robert Sawyer

So I would say two-thirds of the reduction in gross margin is related to make some promotion.

Jim C. Durran – Barclays Capital Canada, Inc.

Okay. That’s helpful. And as far as addressing your stores, both from a merchandise mix standpoint and whatever tweaks you’re going to make in terms of the presentation in the store. Where are you at on that front?

Robert Sawyer

Like I mentioned in the opening remark, I’m finalizing the team. Alain was hired in the second quarter. But the rest of the team that have announced all of that restructuring and the new team is not completely in place. So I know where I want to get, but I want these people to get in their new position and after that to finalize the strategy, so it’s a bit early to talk to you about it.

Jim C. Durran – Barclays Capital Canada, Inc.

So, do you feel that in terms of breadth of reach in terms of the customer experience that we’re really talking of being in fulsome presentation by spring?

Robert Sawyer

Spring of 2014, you’re talking?

Jim C. Durran – Barclays Capital Canada, Inc.

Yeah.

Robert Sawyer

Yeah, definitively.

Jim C. Durran – Barclays Capital Canada, Inc.

Okay, that’s great. Thank you.

Operator

Thank you. Our next question is from Mark Petrie from CIBC. Please go ahead.

Mark Petrie – CIBC World Markets, Inc.

.

Hey, good morning. Thank you. In terms of the $110 million of SG&A saving, are you still targeting 30% of that to be re-invested or is it a bit of a moving target.

Robert Sawyer

No I would say, we’re still aiming at that. As I mentioned we have many initiatives to reinvest in the network in terms of the merchandising strategies and the store strategy. So that’s the number you should keep in mind for the time being.

Mark Petrie – CIBC World Markets, Inc.

Okay and how long will it take for you guys to complete the inventory repositioning and the reduction of the $100 million.

Dominique Boies

But it’s going to take awhile, I would say I cannot tell you in terms of week but we are still in the exit, right now in the process of getting rid of some category and excess inventory, so it’s going to be done I would say in the third quarter.

Mark Petrie – CIBC World Markets, Inc.

Okay thanks. And then just in terms of the sales mix how much was related to intentional shift on your part and how much of it is lumber inflation and how much is sort of, by saying in promotional strategy.

Dominique Boies

I would say that the only thing that we’ve changed in the Q2 it’s the new approach on the flyer advertising approach. I would say most of it is because of the mix of item that we are using in our front page to attract customer.

Mark Petrie – CIBC World Markets, Inc.

And what was the impact of the commodity inflation in terms of sales margin.

Dominique Boies

Do we have it?

Robert Sawyer

We’ll get back to you Mark on this, now I have to look at …

Mark Petrie – CIBC World Markets, Inc.

Sure, it’s fine.

Robert Sawyer

Thanks, we’ll get back to you after the call.

Mark Petrie – CIBC World Markets, Inc.

Yes, sorry thank you.

Operator

Thank you. (Operator Instructions) Our next question is from Keith Howlett from Desjardins Capital Markets. Please go ahead.

Keith Howlett – Desjardins Securities Inc.

Yes, so with the end of the construction strike, that you get that business back or whether you lose it permanently?

Dominique Boies

It’s strange, because the way the construction strike started before the end of the second and that the almost at the end of the second, but we came back to work gradually depending which segment of that constructing business was done. So it’s difficult to see what we saw beginning of the third quarter, still our specialized division. We have the rough time double-digit negative because they didn’t came back to work. On top of it, difficult to measure because housing in Quebec and other provinces are really down compared to last year. So we can see that right now. The recent week, we are getting much closer to the last year number, but taking in consideration that housing is down, we are not positive in that segment of our business.

Keith Howlett – Desjardins Securities Inc.

And on the proximity segment, does that segment include the hardware stores and the sort of 20,000 to 50,000 foot stores or are both of them are in there?

Dominique Boies

Yes.

Keith Howlett – Desjardins Securities Inc.

And in terms of the leader stores, there is the 13 that will be closed, is there another category that sort of on the edge that you are monitoring closely or you’re pretty much done on after you closed it?

Dominique Boies

No, no, we’ve announced a closure of 11, not 13, and…

Keith Howlett – Desjardins Securities Inc.

Sorry.

Dominique Boies

…we are done with these bad news or sad news.

Keith Howlett – Desjardins Securities Inc.

Okay. So everything else is continuing forward?

Dominique Boies

The rest is adjustment with the strategy of the banner that we’re going to come forward.

Keith Howlett – Desjardins Securities Inc.

Great. Thank you.

Dominique Boies

Pleasure.

Operator

Thank you. There are no further questions registered. I do apologize. We do have a question from Derek Dley from Canaccord Genuity. Please go ahead.

Derek Dley – Canaccord Genuity Corp.

Yeah, hi, thanks. Can you guys just talk a little bit about the performance of your existing big-box locations perhaps recently as well, did the stores in Quebec outperform that out west or how did that shake out during the quarter?

Dominique Boies

I think the good news here is that the big-box across the country are performing well and anyway they are going in the right direction, so it’s not just in Quebec and we have some good results outside of Quebec as well.

Derek Dley – Canaccord Genuity Corp.

And can you just give us a breakdown and just remind us how many stores you have in Quebec and how many stores you have outside of Quebec in terms of big-box?

Robert Sawyer

Yeah. In total, we have 74 big-box right now, so that’s before the closure, 18 Réno-Dépôt store in Quebec, the rest are 50 others, we have RONA store, 25 in Quebec, 18 in Ontario and 13 out west.

Derek Dley – Canaccord Genuity Corp.

Great, thank you very much.

Operator

Thank you. We have a follow-up question from Keith Howlett from Desjardins Capital Markets. Please go ahead.

Keith Howlett – Desjardins Capital Markets

Yes, I was just wondering if you could update us on the TOTEM banner conversion to RONA and how that’s played out?

Dominique Boies

I did visit out west recently. I visited a few TOTEM store. It is over. The transformation from TOTEM to RONA is over. This is only the beginning because part of my plan is to regionalize the merchandising of all the region. Right now, it is centralized and soon we’re going to have a de-centralized merchandising in the area. And I guess, people will have a better sense of what the whole thing means compared to centralizing, which was done end of the transformation. So I think the transformation is over and there is more to come.

Keith Howlett – Desjardins Capital Markets

And then just perhaps finally, on the information systems in the company, are they adequate or sort of appropriate and relatively fast decision making or what’s the state of the information systems?

Robert Sawyer

What is very important is the weekly, daily, operational tools that we have in our hand and we do have in our hand the right tools to make decision.

Keith Howlett – Desjardins Capital Markets

Great. Thanks very much.

Robert Sawyer

Thank you.

Operator

Thank you. There are no further questions registered at this time. I would like to turn the meeting over back to Mr. Milot.

Stephane Milot

Well, thank you all for your participation in this call. We are looking forward to presenting more information on our next conference call for third quarter results, which will be held on Tuesday November 12 at 2:30 PM. Thanks a lot. Have a good day.

Operator: Thank you, gentlemen. This concludes today’s conference. Please disconnect your lines at this time and we thank for your participation.

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