MONTRÉAL, QUEBEC–(Marketwired – May 5, 2017) – Dorel Industries Inc. (TSX:DII.B)(TSX:DII.A) today released results for the first quarter ended March 31, 2017. Total revenue was US$646.7 million compared to US$645.9 million a year ago. Adjusted net income for the quarter increased 15.4% to US$22.7 million or US$0.69 per diluted share from US$19.7 million, or US$0.60 per diluted share in 2016. Reported net income decreased to US$8.8 million, or US$0.27 per diluted share, compared to US$16.7 million or US$0.51 per diluted share last year.
“Dorel’s adjusted operating profit improved by over 15% versus last year’s first quarter when excluding restructuring and other costs within our income statement. Of our three business segments, Dorel Home was again a standout with revenues increasing 9% and operating profit approaching 10% of revenues. Dorel Sports also improved earnings from prior year, leveraging better margins and its more efficient cost structure. Dorel Juvenile is benefitting from its strategic direction on improving gross margins, but faced challenges at its China facility with a large ramp up on new products and labour shortages around the Chinese New Year which delayed some scheduled launches. In our smaller Juvenile markets, Brazil and Australia performed exceptionally well and are now recognized as industry leaders. At the corporate level, with the support of our lenders, we successfully re-negotiated our credit facilities. This resulted in a first quarter pre-tax expense of US$10.2 million, or US$0.30 per diluted share, related to the extinguishment of existing debt. This change will allow for better management of our long-term capital needs and will decrease our financing costs going-forward. Interest costs are expected to be reduced by approximately US$4.0 million through the balance of 2017 and will continue annually going forward,” stated Martin Schwartz, Dorel President & CEO.
The Company is presenting adjusted financial information, excluding restructuring and other costs, remeasurement of forward purchase agreement liabilities and loss on early extinguishment of long-term debt as it believes this provides a more meaningful comparison of its core business performance between the periods presented. These previously announced items are detailed in the attached tables of this press release. Contained within this press release are reconciliations of non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP.
| Summary of Financial Information (unaudited) | |||||
| Three Months Ended March 31 | |||||
| All figures in thousands of US $, except per share amounts | |||||
| 2017 | 2016 | Change | |||
| $ | $ | % | |||
| Total revenue | 646,712 | 645,867 | 0.1 | % | |
| Net income | 8,841 | 16,734 | (47.2 | %) | |
| Per share – Basic | 0.27 | 0.52 | (48.1 | %) | |
| Per share – Diluted | 0.27 | 0.51 | (47.1 | %) | |
| Adjusted net income | 22,705 | 19,671 | 15.4 | % | |
| Per share – Basic | 0.70 | 0.61 | 14.8 | % | |
| Per share – Diluted | 0.69(1) | 0.60 | 15.0 | % | |
| Number of shares outstanding – | |||||
| Basic weighted average | 32,403,980 | 32,333,261 | |||
| Diluted weighted average | 32,654,173 | 32,545,454 | |||
| Adjusted diluted weighted average | 35,221,018 | 32,545,454 | |||
| (1) | As at March 31, 2017, the convertible debentures were included in the calculation of the adjusted diluted EPS by adjusting the adjusted net income attributable to equity holders as well as the adjusted diluted weighted average number of shares outstanding as these debentures were deemed to be dilutive. |
| Dorel Home | ||||||||
| All figures in thousands of US $ | ||||||||
| Three Months Ended March 31 (unaudited) | ||||||||
| 2017 | 2016 Restated* |
Change | ||||||
| $ | % of rev. | $ | % of rev. | % | ||||
| Total revenue | 204,038 | 187,471 | 8.8 | % | ||||
| Gross profit | 34,572 | 16.9 | % | 31,738 | 16.9 | % | 8.9 | % |
| Operating profit | 19,765 | 9.7 | % | 17,643 | 9.4 | % | 12.0 | % |
| * | During the fourth quarter of 2016, the Company changed its internal organization and the composition of its reportable segments. The design, sourcing, manufacturing, distribution and retail of the children’s furniture was transferred from Dorel Juvenile to Dorel Home. Accordingly, the Company has restated the segmented information for the three months ended March 31, 2016. |
First quarter revenue rose US$16.6 million, or 8.8% to US$204.0 million, representing the best quarter in the segment’s history. Growth was driven by increased sales to on-line retailers in all divisions, representing 46% of total segment sales compared to 42% in the first quarter of 2016. Brick and mortar sales remained flat compared with last year’s first quarter.
Gross profit, at 16.9%, remained comparable to last year’s first quarter as improved margins from increased on-line sales were offset by higher input and warehousing costs.
Operating profit for the quarter was also a record, at US$19.8 million, up 12.0% from US$17.6 million a year ago, driven by higher sales volumes, slightly offset by a modest increase in selling expenses in line with the sales growth.
| Dorel Juvenile | ||||||||
| All figures in thousands of US $ | ||||||||
| Three Months Ended March 31 (unaudited) | ||||||||
| 2017 | 2016 Restated* |
Change | ||||||
| $ | % of rev. | $ | % of rev. | % | ||||
| Total revenue | 228,658 | 241,899 | (5.5 | %) | ||||
| Gross profit | 69,885 | 30.6 | % | 70,817 | 29.3 | % | (1.3 | %) |
| Operating profit | 9,594 | 4.2 | % | 14,445 | 6.0 | % | (33.6 | %) |
| Adjusted gross profit | 71,102 | 31.1 | % | 70,817 | 29.3 | % | 0.4 | % |
| Adjusted operating profit | 15,342 | 6.7 | % | 17,410 | 7.2 | % | (11.9 | %) |
| * | During the fourth quarter of 2016, the Company changed its internal organization and the composition of its reportable segments. The design, sourcing, manufacturing, distribution and retail of the children’s furniture was transferred from Dorel Juvenile to Dorel Home. Accordingly, the Company has restated the segmented information for the three months ended March 31, 2016. |
Dorel Juvenile’s first quarter revenue decreased by US$13.2 million or 5.5% to US$228.7 million compared with US$241.9 million in 2016, which was mostly organic. The decline in revenue was mainly attributable to the European market and reduced sales by Dorel Juvenile China to non-domestic third-party customers. Certain scheduled product launches were delayed due to production issues at the China factory caused by labour shortages associated with the Chinese New Year and the large number of concurrent new products, placing additional strain on the factory’s ability to deliver on schedule. This also negatively impacted sales in several markets.
The benefits of a focused effort to improve sales mix, as well as cost savings and other operational efficiencies from our restructuring activities resulted in an adjusted gross profit of 31.1%. This represented a year-over-year improvement of 180 basis points on an adjusted basis and was in almost all markets. Adjusted operating profit decreased by US$2.1 million, or 11.9% to US$15.3 million from US$17.4 million in 2016 due to higher operating expenses.
| Dorel Sports | ||||||||
| All figures in thousands of US $ | ||||||||
| Three Months Ended March 31 (unaudited) | ||||||||
| 2017 | 2016 | Change | ||||||
| $ | % of rev. | $ | % of rev. | % | ||||
| Total revenue | 214,016 | 216,497 | (1.1 | %) | ||||
| Gross profit | 48,988 | 22.9 | % | 47,498 | 21.9 | % | 3.1 | % |
| Operating profit | 10,114 | 4.7 | % | 5,254 | 2.4 | % | 92.5 | % |
| Adjusted gross profit | 48,044 | 22.4 | % | 47,498 | 21.9 | % | 1.1 | % |
| Adjusted operating profit | 9,472 | 4.4 | % | 5,226 | 2.4 | % | 81.2 | % |
First quarter revenue decreased US$2.5 million or 1.1% to US$214.0 million and approximately 1.3% after removing the impact of varying exchange rates year-over-year. Organic revenue declined approximately 9.9% when removing foreign exchange fluctuations and the change in Cycling Sports Group (CSG) International’s business model for which the revenue recognition transitioned from a licensing model to a distribution platform. Part of the revenue shortfall in the mass channel was due to unfavourable North American weather and a shift in Easter holiday sales moving from the end of the first quarter to April 2017. Lower first quarter CSG sales volumes were also caused by inclement weather, lower discounted sales than prior year and continued reductions in IBD retailers’ inventories which reached historically low levels.
Dorel Sports initiated restructuring actions last year which are expected to result in annualized savings of US$5.0 million. First quarter operating profit rose by US$4.9 million, or 92.5% to US$10.1 million as a result of the restructuring plan, improved margins and cost control initiatives in almost all regions. A combination of less discounting and selective price increases in CSG as well as Pacific Cycle’s improved product mix also contributed to the improvement. Caloi achieved higher margins with its improved pricing and product mix as well as from the strengthening of the Brazilian Real.
Other
Effective March 24, 2017, the Company amended its Credit Agreement with respect to its revolving bank loans and secured a term loan of US$200.0 million with the same maturity date as its revolving bank loans. As such, the net proceeds from the term loan were used by the Company to repay its Series “B” and “C” Senior Guaranteed Notes, its Brazilian non-convertible debentures and to reduce bank indebtedness. Included in finance expenses for the three months ended March 31, 2017, is a cost of US$10.2 million or US$0.30 per diluted share for early extinguishment of long-term debt. With the lower average interest rates of the term loan facilities going forward, the Company expects to reduce its interest costs by approximately US$4.0 million in the balance of 2017.
During the first quarter of 2017, the Company’s effective tax rate was 35.7% versus 17.2% in the prior year. Excluding income taxes on restructuring and other costs, on remeasurement of forward purchase agreement liabilities and on loss on early extinguishment of long-term debt, the Company’s adjusted tax rate was 22.6% and 17.0% respectively. The main cause of the variation year-over-year of the adjusted tax rate is due to changes in the jurisdictions in which the Company generated its income. The Company has stated that for the full year it expects its annual adjusted tax rate to be between 15% and 20%. However, variations in earnings across quarters mean that this rate may vary significantly between quarters.
During the first three months of 2017, cash flow used in operating activities was US$17.5 million compared to US$5.9 million used in last year’s first quarter mainly explained by lower net income, increased inventories and product liability costs payments during the first quarter of 2017 related to settlements in 2016, partly offset by increases in trade and other receivables as well as trade and other payables.
Quarterly dividend
Dorel’s Board of Directors declared its regular quarterly dividend of US$0.30 per share on the outstanding number of the Company’s Class A Multiple Voting Shares, Class B Subordinate Voting Shares, Deferred Share Units and cash-settled Performance Share Units. The dividend is payable on June 2, 2017 to shareholders of record as at the close of business on May 19, 2017.
Outlook
“In the outlook provided with our year end results, we stated that for 2017 all three of our business segments were positioned to improve earnings. In the first quarter, both Dorel Home and Dorel Sports delivered on that expectation. Dorel Juvenile had a slower than anticipated start to the year as our factory in China faced challenges on new product launches, but we are proactively managing this and will see improvements through the year,” stated Martin Schwartz, Dorel President & CEO.
“We still expect all three segments to exceed prior year earnings. Dorel Home again demonstrated its ability to deliver an expanded product range to consumers with its industry leading e-commerce platform. This will continue to drive sales and earnings improvements for the balance of the year. We expect a strong second half at Dorel Juvenile due to multiple new product introductions and new local management in China delivering on needed improvements in operations. In addition, 2016’s abnormally high product liability costs will return to normal levels, contributing to the segment’s substantial earnings improvement. The bicycle industry is currently facing short-term challenges, therefore sales growth opportunities in 2017 could be limited. Dorel Sports has re-structured itself to increase earnings this year through improved margins and lower operating expenses, and we expect this to more than offset sales challenges.
In addition, we made the strategic decision to amend the Company’s Credit Agreement and the related costs impacted the quarter, but this will lower our finance expenses through the rest of the year,” concluded Mr. Schwartz.
Conference Call
Dorel Industries Inc. will hold a conference call to discuss these results today, May 5, 2017 at 1:00 P.M. Eastern Time. Interested parties can join the call by dialing 1-877-223-4471. The conference call can also be accessed via live webcast at http://www.dorel.com/eng/events. If you are unable to call in at this time, you may access a recording of the meeting by calling 1-800-585-8367 and entering the passcode 4696858 on your phone. This recording will be available on Friday, May 5, 2017 as of 4:00 P.M. until 11:59 P.M. on Friday, May 12, 2017.
Complete condensed consolidated interim financial statements as at March 31, 2017 will be available on the Company’s website, www.dorel.com, and will be available through the SEDAR website.
Profile
Dorel Industries Inc. (TSX:DII.B)(TSX:DII.A) is a world class juvenile products and bicycle company. The Company’s safety and lifestyle leadership is pronounced in both its Juvenile and Bicycle categories with an array of trend-setting, innovative products. Dorel Juvenile’s powerfully branded products include global juvenile brands Safety 1st, Quinny, Maxi-Cosi and Tiny Love, complemented by regional brands such as Cosco, Bébé Confort and Infanti. In Dorel Sports, brands include Cannondale, Schwinn, GT, Mongoose, Caloi, IronHorse and SUGOI. Dorel Home markets include a wide assortment of both domestically produced and imported furniture products, principally within North America. Dorel Industries Inc. has annual sales of US$2.6 billion and employs approximately 10,000 people in facilities located in over twenty-five countries worldwide.
Caution Regarding Forward-Looking Statements
Certain statements included in this press release may constitute “forward-looking statements” within the meaning of applicable Canadian securities legislation. Except as may be required by Canadian securities laws, Dorel does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking statements, by their very nature, are subject to numerous risks and uncertainties and are based on several assumptions which give rise to the possibility that actual results could differ materially from Dorel’s expectations expressed in or implied by such forward-looking statements and that the objectives, plans, strategic priorities and business outlook may not be achieved. As a result, Dorel cannot guarantee that any forward-looking statement will materialize, or if any of them do, what benefits Dorel will derive from them. Forward-looking statements are provided in this press release for the purpose of giving information about Management’s current expectations and plans and allowing investors and others to get a better understanding of Dorel’s operating environment. However, readers are cautioned that it may not be appropriate to use such forward-looking statements for any other purpose.
Forward-looking statements made in this press release are based on a number of assumptions that Dorel believed were reasonable on the day it made the forward-looking statements. Factors that could cause actual results to differ materially from Dorel’s expectations expressed in or implied by the forward-looking statements include: general economic conditions; changes in product costs and supply channels; foreign currency fluctuations; customer and credit risk, including the concentration of revenues with small number of customers; costs associated with product liability; changes in income tax legislation or the interpretation or application of those rules; the continued ability to develop products and support brand names; changes in the regulatory environment; continued access to capital resources and the related costs of borrowing; changes in assumptions in the valuation of goodwill and other intangible assets; and there being no certainty that Dorel’s current dividend policy will be maintained. These and other risk factors that could cause actual results to differ materially from expectations expressed in or implied by the forward-looking statements are discussed in Dorel’s annual Management Discussion and Analysis and Annual Information Form filed with the applicable Canadian securities regulatory authorities. The risk factors outlined in the previously-mentioned documents are specifically incorporated herein by reference.
Dorel cautions readers that the risks described above are not the only ones that could impact it. Additional risks and uncertainties not currently known to Dorel or that Dorel currently deems to be immaterial may also have a material adverse effect on Dorel’s business, financial condition or results of operations. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.
Non-GAAP financial measures
As a result of restructuring and other costs, remeasurement of forward purchase agreement liabilities and loss on early extinguishment of long-term debt incurred in 2017 and 2016, the Company is including in this press release the following non-GAAP financial measures: “adjusted cost of sales”, “adjusted gross profit”, “adjusted operating profit”, “adjusted finance expenses”, “adjusted income before income taxes”, “adjusted income taxes expense”, “adjusted tax rate”, “adjusted net income”, “adjusted earnings per basic and diluted share” and “adjusted diluted weighted average number of shares outstanding”. The Company believes that this results in a more meaningful comparison of its core business performance between the periods presented. These non-GAAP financial measures do not have a standardized meaning prescribed by GAAP and therefore are unlikely to be comparable to similar measures presented by other issuers. Contained within this press release are reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP.
(All figures in tables below are in thousands of US$, except per share amounts)
| Reconciliation of non-GAAP financial measures | |||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||
| 2017 | 2016 | ||||||||||||||||
| Reported | % of revenue |
Restructuring and other costs |
Adjusted | % of revenue |
Reported | % of revenue |
Restructuring and other costs |
Adjusted | % of revenue |
||||||||
| $ | % | $ | $ | % | $ | % | $ | $ | % | ||||||||
| TOTAL REVENUE | 646,712 | 100.0 | – | 646,712 | 100.0 | 645,867 | 100.0 | – | 645,867 | 100.0 | |||||||
| Cost of sales | 493,267 | 76.3 | (273 | ) | 492,994 | 76.2 | 495,814 | 76.8 | – | 495,814 | 76.8 | ||||||
| GROSS PROFIT | 153,445 | 23.7 | 273 | 153,718 | 23.8 | 150,053 | 23.2 | – | 150,053 | 23.2 | |||||||
| Selling expenses | 54,662 | 8.5 | – | 54,662 | 8.5 | 56,341 | 8.7 | – | 56,341 | 8.7 | |||||||
| General and administrative expenses | 52,494 | 8.1 | – | 52,494 | 8.1 | 51,620 | 8.0 | – | 51,620 | 8.0 | |||||||
| Research and development expenses | 7,523 | 1.2 | – | 7,523 | 1.2 | 8,269 | 1.3 | – | 8,269 | 1.3 | |||||||
| Restructuring and other costs | 4,833 | 0.7 | (4,833 | ) | – | – | 2,937 | 0.4 | (2,937 | ) | – | – | |||||
| OPERATING PROFIT | 33,933 | 5.2 | 5,106 | 39,039 | 6.0 | 30,886 | 4.8 | 2,937 | 33,823 | 5.2 | |||||||
| Finance expenses | 20,188 | 3.1 | (10,475 | ) | 9,713 | 1.5 | 10,678 | 1.7 | (561 | ) | 10,117 | 1.5 | |||||
| INCOME BEFORE INCOME TAXES | 13,745 | 2.1 | 15,581 | 29,326 | 4.5 | 20,208 | 3.1 | 3,498 | 23,706 | 3.7 | |||||||
| Income taxes expense | 4,904 | 0.7 | 1,717 | 6,621 | 1.0 | 3,474 | 0.5 | 561 | 4,035 | 0.7 | |||||||
| Tax rate | 35.7 | % | – | 22.6 | % | 17.2 | % | – | 17.0 | % | |||||||
| NET INCOME | 8,841 | 1.4 | 13,864 | 22,705 | 3.5 | 16,734 | 2.6 | 2,937 | 19,671 | 3.0 | |||||||
| EARNINGS PER SHARE | |||||||||||||||||
| Basic | 0.27 | 0.43 | 0.70 | 0.52 | 0.09 | 0.61 | |||||||||||
| Diluted | 0.27 | 0.42 | 0.69(1) | 0.51 | 0.09 | 0.60 | |||||||||||
| SHARES OUTSTANDING | |||||||||||||||||
| Basic – weighted average | 32,403,980 | 32,403,980 | 32,333,261 | 32,333,261 | |||||||||||||
| Diluted – weighted average | 32,654,173 | 35,221,018 | 32,545,454 | 32,545,454 | |||||||||||||
| (1) | As at March 31, 2017, the convertible debentures were included in the calculation of the adjusted diluted EPS by adjusting the adjusted net income attributable to equity holders as well as the adjusted diluted weighted average number of shares outstanding as these debentures were deemed to be dilutive. |
The details of restructuring and other costs, remeasurement of forward purchase agreement liabilities and loss on early extinguishment of long-term debt recorded are presented below:
| Three Months Ended March 31, | ||||
| 2017 | 2016 | |||
| $ | $ | |||
| Write-down of long-lived assets | 517 | – | ||
| Inventory markdowns (reversals) | (93 | ) | – | |
| Recorded within gross profit | 424 | – | ||
| Employee severance and termination benefits | 2,487 | 1,704 | ||
| Write-down of long-lived assets | – | 424 | ||
| Net losses from the remeasurement and disposals of assets held for sale | 712 | – | ||
| Other associated costs | 1,634 | 80 | ||
| Recorded within a separate line in the condensed consolidated interim income statements | 4,833 | 2,208 | ||
| Total restructuring costs | 5,257 | 2,208 | ||
| Other costs recorded within gross profit | (151 | ) | – | |
| Acquisition-related costs recorded within a separate line in the condensed consolidated interim income statements | – | 729 | ||
| Total other costs | (151 | ) | 729 | |
| Total restructuring and other costs | 5,106 | 2,937 | ||
| Loss on remeasurement of forward purchase agreement liabilities | 276 | 561 | ||
| Loss on early extinguishment of long-term debt | 10,199 | – | ||
| Total restructuring and other costs, remeasurement of forward purchase agreement liabilities and loss on early extinguishment of long-term debt before income taxes(1) | 15,581 | 3,498 | ||
| Total restructuring and other costs, remeasurement of forward purchase agreement liabilities and loss on early extinguishment of long-term debt after income taxes | 13,864 | 2,937 | ||
| Total impact on diluted earnings per share | (0.42 | ) | (0.09 | ) |
| (1)Includes non-cash amounts of: | 2,829 | 985 | ||
| Dorel Juvenile | |||||||||||||
| Reconciliation of non-GAAP financial measures | |||||||||||||
| Three Months Ended March 31, | |||||||||||||
| 2017 | 2016 Restated* |
||||||||||||
| Reported | % of revenue |
Restructuring and other costs |
Adjusted | % of revenue |
Reported | % of revenue |
Restructuring and other costs |
Adjusted | % of revenue |
||||
| $ | % | $ | $ | % | $ | % | $ | $ | % | ||||
| TOTAL REVENUE | 228,658 | 100.0 | – | 228,658 | 100.0 | 241,899 | 100.0 | – | 241,899 | 100.0 | |||
| Cost of sales | 158,773 | 69.4 | (1,217 | ) | 157,556 | 68.9 | 171,082 | 70.7 | – | 171,082 | 70.7 | ||
| GROSS PROFIT | 69,885 | 30.6 | 1,217 | 71,102 | 31.1 | 70,817 | 29.3 | – | 70,817 | 29.3 | |||
| Selling expenses | 28,153 | 12.3 | – | 28,153 | 12.3 | 28,082 | 11.6 | – | 28,082 | 11.6 | |||
| General and administrative expenses | 22,348 | 9.8 | – | 22,348 | 9.8 | 19,654 | 8.2 | – | 19,654 | 8.2 | |||
| Research and development expenses | 5,259 | 2.3 | – | 5,259 | 2.3 | 5,671 | 2.3 | – | 5,671 | 2.3 | |||
| Restructuring and other costs | 4,531 | 2.0 | (4,531 | ) | – | – | 2,965 | 1.2 | (2,965 | ) | – | – | |
| OPERATING PROFIT | 9,594 | 4.2 | 5,748 | 15,342 | 6.7 | 14,445 | 6.0 | 2,965 | 17,410 | 7.2 | |||
| * | During the fourth quarter of 2016, the Company changed its internal organization and the composition of its reportable segments. The design, sourcing, manufacturing, distribution and retail of the children’s furniture was transferred from Dorel Juvenile to Dorel Home. Accordingly, the Company has restated the segmented information for the three months ended March 31, 2016. |
| Dorel Sports | ||||||||||||||
| Reconciliation of non-GAAP financial measures | ||||||||||||||
| Three Months Ended March 31, | ||||||||||||||
| 2017 | 2016 | |||||||||||||
| Reported | % of revenue |
Restructuring and other costs |
Adjusted | % of revenue |
Reported | % of revenue |
Restructuring and other costs |
Adjusted | % of revenue |
|||||
| $ | % | $ | $ | % | $ | % | $ | $ | % | |||||
| TOTAL REVENUE | 214,016 | 100.0 | – | 214,016 | 100.0 | 216,497 | 100.0 | – | 216,497 | 100.0 | ||||
| Cost of sales | 165,028 | 77.1 | 944 | 165,972 | 77.6 | 168,999 | 78.1 | – | 168,999 | 78.1 | ||||
| GROSS PROFIT | 48,988 | 22.9 | (944 | ) | 48,044 | 22.4 | 47,498 | 21.9 | – | 47,498 | 21.9 | |||
| Selling expenses | 19,857 | 9.3 | – | 19,857 | 9.3 | 22,401 | 10.3 | – | 22,401 | 10.3 | ||||
| General and administrative expenses | 17,363 | 8.1 | – | 17,363 | 8.1 | 18,299 | 8.5 | – | 18,299 | 8.5 | ||||
| Research and development expenses | 1,352 | 0.6 | – | 1,352 | 0.6 | 1,572 | 0.7 | – | 1,572 | 0.7 | ||||
| Restructuring and other costs | 302 | 0.2 | (302 | ) | – | – | (28 | ) | – | 28 | – | – | ||
| – | – | – | – | |||||||||||
| OPERATING PROFIT | 10,114 | 4.7 | (642 | ) | 9,472 | 4.4 | 5,254 | 2.4 | (28 | ) | 5,226 | 2.4 | ||
| DOREL INDUSTRIES INC. | |||||||
| CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION | |||||||
| ALL FIGURES IN THOUSANDS OF US $ | |||||||
| (unaudited) | |||||||
| as at | as at | ||||||
| March 31, 2017 | December 30, 2016 | ||||||
| ASSETS | |||||||
| CURRENT ASSETS | |||||||
| Cash and cash equivalents | $ | 35,137 | $ | 31,883 | |||
| Trade and other receivables | 460,784 | 431,062 | |||||
| Inventories | 569,615 | 549,688 | |||||
| Other financial assets | 2,460 | 4,333 | |||||
| Income taxes receivable | 13,399 | 14,466 | |||||
| Prepaid expenses | 30,291 | 21,040 | |||||
| 1,111,686 | 1,052,472 | ||||||
| Assets held for sale | 4,397 | 20,017 | |||||
| 1,116,083 | 1,072,489 | ||||||
| NON-CURRENT ASSETS | |||||||
| Property, plant and equipment | 191,560 | 191,294 | |||||
| Intangible assets | 429,981 | 427,587 | |||||
| Goodwill | 438,354 | 435,790 | |||||
| Deferred tax assets | 36,302 | 39,324 | |||||
| Other assets | 7,692 | 6,148 | |||||
| 1,103,889 | 1,100,143 | ||||||
| $ | 2,219,972 | $ | 2,172,632 | ||||
| LIABILITIES | |||||||
| CURRENT LIABILITIES | |||||||
| Bank indebtedness | $ | 45,911 | $ | 49,490 | |||
| Trade and other payables | 471,999 | 437,009 | |||||
| Written put option and forward purchase agreement liabilities | – | 7,500 | |||||
| Other financial liabilities | 570 | 569 | |||||
| Deferred revenue | 4,960 | 6,475 | |||||
| Income taxes payable | 14,587 | 15,143 | |||||
| Long-term debt | 8,139 | 51,138 | |||||
| Provisions | 43,185 | 63,169 | |||||
| 589,351 | 630,493 | ||||||
| NON-CURRENT LIABILITIES | |||||||
| Long-term debt | 441,506 | 355,118 | |||||
| Net pension and post-retirement defined benefit liabilities | 34,341 | 35,206 | |||||
| Deferred tax liabilities | 51,493 | 53,293 | |||||
| Provisions | 1,784 | 1,681 | |||||
| Written put option and forward purchase agreement liabilities | 26,993 | 26,325 | |||||
| Other financial liabilities | 967 | 1,115 | |||||
| Other long-term liabilities | 9,846 | 13,302 | |||||
| 566,930 | 486,040 | ||||||
| EQUITY | |||||||
| Share capital | 202,400 | 202,400 | |||||
| Contributed surplus | 27,194 | 27,139 | |||||
| Accumulated other comprehensive loss | (104,691 | ) | (113,840 | ) | |||
| Other equity | 2,359 | 3,027 | |||||
| Retained earnings | 936,429 | 937,373 | |||||
| 1,063,691 | 1,056,099 | ||||||
| $ | 2,219,972 | $ | 2,172,632 | ||||
| DOREL INDUSTRIES INC. | ||||||
| CONDENSED CONSOLIDATED INTERIM INCOME STATEMENTS | ||||||
| ALL FIGURES IN THOUSANDS OF US $, EXCEPT PER SHARE AMOUNTS | ||||||
| (unaudited) | ||||||
| Three Months Ended | ||||||
| March 31, 2017 | March 31, 2016 | |||||
| Sales | $ | 646,425 | $ | 642,572 | ||
| Licensing and commission income | 287 | 3,295 | ||||
| TOTAL REVENUE | 646,712 | 645,867 | ||||
| Cost of sales(1) | 493,267 | 495,814 | ||||
| GROSS PROFIT | 153,445 | 150,053 | ||||
| Selling expenses | 54,662 | 56,341 | ||||
| General and administrative expenses | 52,494 | 51,620 | ||||
| Research and development expenses | 7,523 | 8,269 | ||||
| Restructuring and other costs(1) | 4,833 | 2,937 | ||||
| OPERATING PROFIT | 33,933 | 30,886 | ||||
| Finance expenses | 20,188 | 10,678 | ||||
| INCOME BEFORE INCOME TAXES | 13,745 | 20,208 | ||||
| Income taxes expense | 4,904 | 3,474 | ||||
| NET INCOME | $ | 8,841 | $ | 16,734 | ||
| EARNINGS PER SHARE | ||||||
| Basic | $ | 0.27 | $ | 0.52 | ||
| Diluted | $ | 0.27 | $ | 0.51 | ||
| SHARES OUTSTANDING | ||||||
| Basic – weighted average | 32,403,980 | 32,333,261 | ||||
| Diluted – weighted average | 32,654,173 | 32,545,454 | ||||
| (1)Restructuring and other costs charged to: | ||||||
| Cost of sales | $ | 273 | $ | – | ||
| Expenses | 4,833 | 2,937 | ||||
| $ | 5,106 | $ | 2,937 | |||
| DOREL INDUSTRIES INC. | ||||||
| CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME | ||||||
| ALL FIGURES IN THOUSANDS OF US $ | ||||||
| (unaudited) | ||||||
| Three Months Ended | ||||||
| March 31, 2017 | March 31, 2016 | |||||
| NET INCOME | $ | 8,841 | $ | 16,734 | ||
| OTHER COMPREHENSIVE INCOME: | ||||||
| Items that are or may be reclassified subsequently to net income: | ||||||
| Cumulative translation account: | ||||||
| Net change in unrealized foreign currency gains (losses) on translation of net investments in foreign operations, net of tax of nil | 9,576 | 21,996 | ||||
| Net gains (losses) on hedge of net investments in foreign operations, net of tax of nil | 930 | 6,576 | ||||
| 10,506 | 28,572 | |||||
| Net changes in cash flow hedges: | ||||||
| Net change in unrealized gains (losses) on derivatives designated as cash flow hedges | (199 | ) | (3,614 | ) | ||
| Reclassification to income | 99 | 183 | ||||
| Reclassification to the related non-financial asset | (1,643 | ) | (238 | ) | ||
| Deferred income taxes | 415 | 1,352 | ||||
| (1,328 | ) | (2,317 | ) | |||
| Items that will not be reclassified to net income: | ||||||
| Defined benefit plans: | ||||||
| Remeasurements of the net pension and post-retirement defined benefit liabilities | (37 | ) | (13 | ) | ||
| Deferred income taxes | 8 | 7 | ||||
| (29 | ) | (6 | ) | |||
| TOTAL OTHER COMPREHENSIVE INCOME | 9,149 | 26,249 | ||||
| TOTAL COMPREHENSIVE INCOME | $ | 17,990 | $ | 42,983 | ||
| DOREL INDUSTRIES INC. | ||||||||||||||||||||||||
| CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY | ||||||||||||||||||||||||
| ALL FIGURES IN THOUSANDS OF US $ | ||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||
| Attributable to equity holders of the Company | ||||||||||||||||||||||||
| Accumulated other | ||||||||||||||||||||||||
| comprehensive income (loss) | ||||||||||||||||||||||||
| Share Capital |
Contributed Surplus |
Cumulative Translation Account |
Cash Flow Hedges |
Defined Benefit Plans |
Other Equity |
Retained Earnings |
Total Equity |
|||||||||||||||||
| Balance as at December 30, 2015 | $ | 200,277 | $ | 26,480 | $ | (104,521 | ) | $ | 2,680 | $ | (12,115 | ) | $ | 1,527 | $ | 988,069 | $ | 1,102,397 | ||||||
| Total comprehensive income: | ||||||||||||||||||||||||
| Net income | – | – | – | – | – | – | 16,734 | 16,734 | ||||||||||||||||
| Other comprehensive income (loss) | – | – | 28,572 | (2,317 | ) | (6 | ) | – | – | 26,249 | ||||||||||||||
| – | – | 28,572 | (2,317 | ) | (6 | ) | – | 16,734 | 42,983 | |||||||||||||||
| Reclassification from contributed surplus due to settlement of deferred share units | 61 | (103 | ) | – | – | – | – | – | (42 | ) | ||||||||||||||
| Share-based payments | – | 113 | – | – | – | – | – | 113 | ||||||||||||||||
| Remeasurement of written put option liabilities | – | – | – | – | – | (1,890 | ) | – | (1,890 | ) | ||||||||||||||
| Dividends on common shares | – | – | – | – | – | – | (9,702 | ) | (9,702 | ) | ||||||||||||||
| Dividends on deferred share units | – | 62 | – | – | – | – | (62 | ) | – | |||||||||||||||
| Balance as at March 31, 2016 | $ | 200,338 | $ | 26,552 | $ | (75,949 | ) | $ | 363 | $ | (12,121 | ) | $ | (363 | ) | $ | 995,039 | $ | 1,133,859 | |||||
| Balance as at December 30, 2016 | $ | 202,400 | $ | 27,139 | $ | (102,629 | ) | $ | 2,852 | $ | (14,063 | ) | $ | 3,027 | $ | 937,373 | $ | 1,056,099 | ||||||
| Total comprehensive income: | ||||||||||||||||||||||||
| Net income | – | – | – | – | – | – | 8,841 | 8,841 | ||||||||||||||||
| Other comprehensive income (loss) | – | – | 10,506 | (1,328 | ) | (29 | ) | – | – | 9,149 | ||||||||||||||
| – | – | 10,506 | (1,328 | ) | (29 | ) | – | 8,841 | 17,990 | |||||||||||||||
| Share-based payments | – | (9 | ) | – | – | – | – | – | (9 | ) | ||||||||||||||
| Remeasurement of written put option liabilities | – | – | – | – | – | (668 | ) | – | (668 | ) | ||||||||||||||
| Dividends on common shares | – | – | – | – | – | – | (9,721 | ) | (9,721 | ) | ||||||||||||||
| Dividends on deferred share units | – | 64 | – | – | – | – | (64 | ) | – | |||||||||||||||
| Balance as at March 31, 2017 | $ | 202,400 | $ | 27,194 | $ | (92,123 | ) | $ | 1,524 | $ | (14,092 | ) | $ | 2,359 | $ | 936,429 | $ | 1,063,691 | ||||||
| DOREL INDUSTRIES INC. | |||||||
| CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS | |||||||
| ALL FIGURES IN THOUSANDS OF US $ | |||||||
| (unaudited) | |||||||
| Three Months Ended | |||||||
| March 31, 2017 | March 31, 2016 | ||||||
| CASH PROVIDED BY (USED IN): | |||||||
| OPERATING ACTIVITIES | |||||||
| Net income | $ | 8,841 | $ | 16,734 | |||
| Items not involving cash: | |||||||
| Depreciation and amortization | 12,017 | 13,045 | |||||
| Unrealized losses (gains) arising on financial assets and financial liabilities classified as held for trading | 72 | 746 | |||||
| Share-based payments | (9 | ) | 113 | ||||
| Defined benefit pension and post-retirement costs | 920 | 961 | |||||
| Loss on disposal of property, plant and equipment | 67 | 16 | |||||
| Restructuring and other costs | 1,136 | 424 | |||||
| Finance expenses | 20,188 | 10,678 | |||||
| Income taxes expense | 4,904 | 3,474 | |||||
| Net changes in balances related to operations(1) | (53,766 | ) | (48,864 | ) | |||
| Income taxes paid | (4,877 | ) | (3,440 | ) | |||
| Income taxes received | 3,039 | 4,790 | |||||
| Interest paid | (10,143 | ) | (4,679 | ) | |||
| Interest received | 119 | 86 | |||||
| CASH USED IN OPERATING ACTIVITIES | (17,492 | ) | (5,916 | ) | |||
| FINANCING ACTIVITIES | |||||||
| Bank indebtedness | (4,909 | ) | (11,632 | ) | |||
| Increase of long-term debt | 217,447 | 43,412 | |||||
| Repayments of long-term debt | (174,555 | ) | (4,309 | ) | |||
| Repayments of forward purchase agreement liabilities | (7,857 | ) | (4,414 | ) | |||
| Financing costs | (2,642 | ) | (1,740 | ) | |||
| Dividends on common shares | (9,721 | ) | (9,702 | ) | |||
| CASH PROVIDED BY FINANCING ACTIVITIES | 17,763 | 11,615 | |||||
| INVESTING ACTIVITIES | |||||||
| Acquisition of businesses | – | 5,475 | |||||
| Additions to property, plant and equipment | (6,321 | ) | (5,242 | ) | |||
| Disposals of property, plant and equipment | 72 | 113 | |||||
| Net proceeds from disposals of assets held for sale | 11,649 | – | |||||
| Additions to intangible assets | (3,454 | ) | (4,482 | ) | |||
| CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES | 1,946 | (4,136 | ) | ||||
| Effect of foreign currency exchange rate changes on cash and cash equivalents | 1,037 | 3,795 | |||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 3,254 | 5,358 | |||||
| Cash and cash equivalents, beginning of period | 31,883 | 33,182 | |||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 35,137 | $ | 38,540 | |||
| (1)Supplemental information on net changes in balances related to operations: | |||||||
| Trade and other receivables | $ | (23,009 | ) | $ | (29,981 | ) | |
| Inventories | (16,022 | ) | 33,018 | ||||
| Other financial assets | (137 | ) | (1,128 | ) | |||
| Prepaid expenses | (9,110 | ) | (11,967 | ) | |||
| Other assets | (76 | ) | (317 | ) | |||
| Trade and other payables | 21,297 | (37,202 | ) | ||||
| Net pension and post-retirement defined benefit liabilities | (1,978 | ) | (1,411 | ) | |||
| Provisions, other financial liabilities, deferred revenue and other long-term liabilities | (24,731 | ) | 124 | ||||
| $ | (53,766 | ) | $ | (48,864 | ) | ||
| DOREL INDUSTRIES INC. | |||||||||||||||||||
| SEGMENTED INFORMATION | |||||||||||||||||||
| THREE MONTHS ENDED MARCH 31 | |||||||||||||||||||
| ALL FIGURES IN THOUSANDS OF US $, EXCEPT PER SHARE AMOUNTS | |||||||||||||||||||
| (unaudited) | |||||||||||||||||||
| Total | Dorel Juvenile | Dorel Sports | Dorel Home | ||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Restated* | Restated* | ||||||||||||||||||
| Total revenue | $ | 646,712 | $ | 645,867 | $ | 228,658 | $ | 241,899 | $ | 214,016 | $ | 216,497 | $ | 204,038 | $ | 187,471 | |||
| Cost of sales (1) | 493,267 | 495,814 | 158,773 | 171,082 | 165,028 | 168,999 | 169,466 | 155,733 | |||||||||||
| Gross profit | 153,445 | 150,053 | 69,885 | 70,817 | 48,988 | 47,498 | 34,572 | 31,738 | |||||||||||
| Selling expenses | 54,159 | 55,878 | 28,153 | 28,082 | 19,857 | 22,401 | 6,149 | 5,395 | |||||||||||
| General and administrative expenses | 47,457 | 45,627 | 22,348 | 19,654 | 17,363 | 18,299 | 7,746 | 7,674 | |||||||||||
| Research and development expenses | 7,523 | 8,269 | 5,259 | 5,671 | 1,352 | 1,572 | 912 | 1,026 | |||||||||||
| Restructuring and other costs (1) | 4,833 | 2,937 | 4,531 | 2,965 | 302 | (28 | ) | – | – | ||||||||||
| Operating profit | 39,473 | 37,342 | $ | 9,594 | $ | 14,445 | $ | 10,114 | $ | 5,254 | $ | 19,765 | $ | 17,643 | |||||
| Finance expenses | 20,188 | 10,678 | |||||||||||||||||
| Corporate expenses | 5,540 | 6,456 | |||||||||||||||||
| Income taxes expense | 4,904 | 3,474 | |||||||||||||||||
| Net income | $ | 8,841 | $ | 16,734 | |||||||||||||||
| Earnings per share | |||||||||||||||||||
| Basic | $ | 0.27 | $ | 0.52 | |||||||||||||||
| Diluted | $ | 0.27 | $ | 0.51 | |||||||||||||||
| Depreciation and amortization included in operating profit | $ | 11,817 | $ | 12,844 | $ | 8,460 | $ | 8,890 | $ | 2,306 | $ | 2,838 | $ | 1,051 | $ | 1,116 | |||
| (1)Restructuring and other costs charged to: | |||||||||||||||||||
| Cost of sales | $ | 273 | $ | – | $ | 1,217 | $ | – | $ | (944 | ) | $ | – | $ | – | $ | – | ||
| Expenses | 4,833 | 2,937 | 4,531 | 2,965 | 302 | (28 | ) | – | – | ||||||||||
| $ | 5,106 | $ | 2,937 | $ | 5,748 | $ | 2,965 | $ | (642 | ) | $ | (28 | ) | $ | – | $ | – | ||
| * | During the fourth quarter of 2016, the Company changed its internal organization and the composition of its reportable segments. The design, sourcing, manufacturing, distribution and retail of the children’s furniture was transferred from Dorel Juvenile to Dorel Home. Accordingly, the Company has restated the segmented information for the three months ended March 31, 2016. |
Rick Leckner
(514) 731-0000
Dorel Industries Inc.
Jeffrey Schwartz
(514) 934-3034