Dorel Reports Third Quarter Results

- Organic revenue increases at Dorel Juvenile - Dorel Home maintains revenue and earnings growth - Dorel Sports impacted by weak bike market

ID: 1527033
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(businesspress24) - MONTREAL, QUEBEC -- (Marketwired) -- 11/02/17 -- Dorel Industries Inc. (TSX: DII.B)(TSX: DII.A) today announced results for the third quarter and nine months ended September 30, 2017. Third quarter revenue was US$642.6 million, down 4.3% from US$671.3 million. Adjusted net income was US$14.5 million or US$0.44 per diluted share, compared to US$20.6 million or US$0.63 per diluted share a year ago. Reported net income was US$13.3 million or US$0.41 per diluted share, compared to US$15.9 million or US$0.49 per diluted share last year.

For the nine months, revenue was US$1.90 billion, a decrease of 2.8% compared to US$1.95 billion last year. Adjusted net income was US$49.7 million or US$1.52 per diluted share, compared to US$50.5 million or US$1.55 per diluted share a year ago. Reported net income year-to-date was US$33.6 million or US$1.03 per diluted share, compared to a reported net loss of US$6.0 million or US$0.19 per diluted share in 2016.

"We are pleased with the third quarter progress at Dorel Home and Dorel Juvenile. Dorel Home''s positive revenue and earnings trend was maintained as on-line sales exceeded US$100 million for the quarter, again accounting for more than 50% of the segment''s total revenue. The segment''s focus on improving speed and efficiency of distribution continue to drive sales with major on-line retailers. Dorel Juvenile recorded its first quarter of organic revenue growth in several quarters. E-commerce growth is driving sales as Dorel Juvenile has adapted well to today''s consumer, and as a result is gaining market share in this channel. Results at Dorel Sports declined as the segment is caught in the on-going weakness in the global bicycle market and a very challenging North American brick and mortar environment. Although the bicycle industry environment remains difficult, we expect Dorel Sports'' fourth quarter to return to solid profitability. The Toys "R" Us situation resulted in an almost month-long sales disruption in all segments, but we have agreed on business terms with them going forward," stated Dorel President & CEO, Martin Schwartz.

The Company is presenting adjusted financial information, excluding impairment losses, 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.

Third quarter revenue rose US$2.6 million, or 1.3%, to US$201.4 million. For the nine months, revenue grew US$31.4 million, or 5.6%, to US$589.6 million from US$558.2 million in 2016. Improvements were driven by increased sales in all divisions to on-line retailers. In the third quarter and for the nine months, on-line sales represented 51% and 50% of total segment revenue respectively compared to 44% and 43% for the comparable periods in 2016. Brick and mortar sales were down due mainly to the planned reduced exposure to a major mass merchant customer.

Gross profit, at 17.6% in the third quarter and 17.4% for the nine months, improved by 90 and 60 basis points respectively over last year''s third quarter and year-to-date periods. The improved margins from increased on-line sales were partly offset by slightly higher input and warehousing costs.

Third quarter operating profit rose US$2.5 million, or 14.1%, to US$20.5 million from US$18.0 million a year ago which was driven by improved margins at several divisions from increased on-line sales, higher sales volumes and an overall net decrease in operating expenses. Year-to-date, operating profit increased US$6.6 million, or 13.1%, to US$57.0 million compared to US$50.4 million in the nine months of 2016.

Third quarter revenue increased US$13.9 million, or 6.3%, to US$235.6 million compared with US$221.7 million last year. Excluding the positive impact of foreign exchange rates, organic revenue increased by approximately 4%, the first growth quarter since the fourth quarter of 2015. Revenue increased in the U.S. by high single digits despite the Toys "R" Us disruption, driven by growing e-commerce sales. Dorel Juvenile China revenue also increased due to improved delivery performance which resulted in higher intercompany sales of travel systems and to strong car seat sales to a third-party customer. Sales in Brazil increased significantly, while sales in Europe decreased slightly in Euro in the face of competitive pressure and the timing of new product launches. Year-to-date revenue has decreased by US$10.2 million, or 1.5%, to US$682.4 million.

The Zhongshan factory manufacturing process has been stabilized and capacity constraints have been minimized. Investments are being made in automation and quality control to further bolster efficiencies. Going forward, the facility will be more focused on building ahead, rather than dealing with backorders. Dorel Juvenile participated in important industry shows during the quarter, including Cologne, Germany and the CBME fair in Shanghai, China. At both, more products were displayed and more innovation was featured than in recent years. Reaction was highly positive from trade and customers, demonstrating strong confidence in Dorel Juvenile''s brands and products.

The revolutionary Maxi-Cosi AxissFix Air, the world''s first child car seat with integrated airbags, was launched two weeks ago throughout Europe. The ground-breaking safety technology sets a new standard in child car seats and puts Dorel at the forefront of innovation. In the event of a collision, the airbags will deploy and reduce the forces on a child''s head and neck compared to standard forward-facing child car seats.

Last year''s third quarter operating profit included a net positive impact of US$2.0 million from the net effect of a curtailment gain recorded for post-retirement defined benefits in the U.S. offset by higher product liability costs. Adjusted operating profit for the quarter, excluding restructuring and other costs as well as the net positive impact of US$2.0 million in 2016, increased by US$1.2 million, or 11.8%, to US$11.4 million from US$10.2 million a year ago. Operating profit decreased US$0.9 million, or 8.5%, to US$10.2 million, compared to US$11.1 million a year ago. Year-to-date operating profit declined US$7.1 million, or 20.9%, to US$26.9 million from US$34.0 million last year. Adjusted operating profit declined US$3.7 million, or 9.6%, to US$34.8 million from US$38.5 million for the nine months a year ago.

Third quarter revenue decreased US$45.2 million, or 18.0%, to US$205.5 million from US$250.7 million last year. Excluding the positive impact of foreign exchange rates, organic revenue declined by approximately 19%. Nine-month revenue decreased US$75.1 million, or 10.7%, to US$628.6 million compared to US$703.7 million a year ago. Organic revenue for the nine-month period declined by approximately 14% 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 in the third quarter of 2016.

The revenue decline is attributed mainly to continued weakness in the global bicycle market, disruption in the North American retail environment and persistent inclement weather in the U.S. Pacific Cycle was affected by changing buying habits at certain major mass merchants, amidst a soft bicycle market and poor weather which began last spring, contributing to reduced consumer demand. As well, the September 2017 bankruptcy filing of Toys "R" Us halted shipments temporarily, pushing sales into the fourth quarter. Sales in CSG decreased on a continued reduction in discounted sales, as inventory management has improved significantly in 2017. CSG''s closeout sales in the quarter represented 11.6% of sales volume in 2017 compared to 16.3% in the prior year''s third quarter.

Versus prior year, third quarter operating profit declined by US$5.6 million to US$0.2 million and when excluding restructuring and other costs, adjusted operating profit declined by US$10.3 million to US$0.6 million. For the nine months, operating profit rose by US$54.1 million to US$15.2 million and when excluding impairment losses, restructuring and other costs, adjusted operating profit declined by US$5.7 million, or 26.5%, to US$15.7 million. The decline in adjusted operating profit for both the quarter and year-to-date when compared to 2016 are explained by lower revenue partly offset by improved margins which for the third quarter and year-to-date improved by 60 and 120 basis points to 22.4% and 22.6% respectively. This is due to continued inventory management improvement in terms of product mix and pricing actions in key markets.

Other

During the third quarter and nine months ended September 30, 2017, the Company''s effective tax rates were 21.3% and 27.6% respectively versus 18.7% and (35.5)% for the same periods in the prior year. Excluding income taxes on impairment losses, restructuring and other costs, remeasurement of forward purchase agreement liabilities and loss on early extinguishment of long-term debt, the Company''s third quarter adjusted tax rate was 21.4% in 2017 compared to 20.4% in 2016. The adjusted tax rate for the nine months was 23.8% in 2017 versus 18.1% in 2016. 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 is stating that for the full year it expects its annual adjusted tax rate to be between 20% and 25%. However, variations in earnings across quarters mean that this rate may vary significantly between quarters.

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, cash-settled Restricted Share Units and cash-settled Performance Share Units. The dividend is payable on November 30, 2017 to shareholders of record as at the close of business on November 16, 2017.

Outlook

"We are expecting a very good fourth quarter with all segments delivering improved adjusted operating profit versus last year. Dorel Home''s momentum is expected to continue with both higher sales and earnings expected, driven by on-line sales," stated Dorel President & CEO, Martin Schwartz.

"Dorel Juvenile is introducing several significant new products in the fourth quarter and this should translate into improved earnings, which will be similar to our third quarter performance. Revenue for the quarter is expected to be flat compared to prior year as the benefit of our enhanced product pipeline will be seen mostly in 2018.

"Dorel Sports is expected to rebound from its disappointing third quarter and we believe at this point that fourth quarter adjusted operating profit should be in line with the fourth quarter of last year. Therefore, for the second half, adjusted operating profit for Dorel Sports will not exceed prior year as previously announced," concluded Mr. Schwartz.

Conference Call

Dorel Industries Inc. will hold a conference call to discuss these results today, November 2, 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 . 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 82912829 on your phone. This recording will be available on Thursday, November 2, 2017 as of 4:00 P.M. until 11:59 P.M. on Thursday, November 9, 2017.

Complete condensed consolidated interim financial statements as at September 30, 2017 will be available on the Company''s website, , and will be available through the SEDAR website.

Profile

Dorel Industries Inc. (TSX: DII.B)(TSX: DII.A) is a global organization, operating three distinct businesses in juvenile products, bicycles and home products. Dorel''s strength lies in the diversity, innovation and quality of its products as well as the superiority of its brands. Dorel Juvenile''s powerfully branded products include global brands Safety 1st, Quinny, Maxi-Cosi and Tiny Love, complemented by regional brands such as Cosco, Bebe Confort and Infanti. Dorel Sports brands include Cannondale, Schwinn, GT, Mongoose, Caloi, IronHorse and SUGOI. Dorel Home, with its comprehensive e-commerce platform, markets a wide assortment of domestically produced and imported furniture. Dorel has annual sales of US$2.6 billion and employs approximately 10,000 people in facilities located in 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 impairment losses, 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" and "adjusted earnings per basic and diluted share". 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 the tables below are in thousands of US$, except per share amounts)

The details of impairment losses, restructuring and other costs, remeasurement of forward purchase agreement liabilities and loss on early extinguishment of long-term debt recorded are presented below:

Contacts:


MaisonBrison Communications
Rick Leckner
(514) 731-0000

Dorel Industries Inc.
Jeffrey Schwartz
(514) 934-3034



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Date: 11/02/2017 - 07:17
Language: English
News-ID 1527033
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Firma: Dorel Industries Inc.
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