Dorel Reports Q4 and 2015 Year-End Results
- Home Furnishings excels with record year - Cash flow from operating activities of US$71 million in the quarter
(firmenpresse) - MONTREAL, QUEBEC -- (Marketwired) -- 03/10/16 -- Dorel Industries Inc. (TSX: DII.B)(TSX: DII.A) today announced results for the fourth quarter and full year ended December 30, 2015. Revenue for the fourth quarter was US$668.9 million down 4.6% from US$701.0 million a year ago. Organic revenue, adjusted for foreign exchange variation rates and business acquisitions, increased by approximately 4% in the quarter. Adjusted net income for the fourth quarter was US$14.1 million or US$0.43 per diluted share compared to adjusted net income of US$11.0 million or US$0.34 per diluted share in the fourth quarter of 2014. Adjusted net income increased despite a net negative after-tax impact of approximately US$9.0 million, or US$0.28 per diluted share, due to the effect of the appreciation of the US dollar versus the prior year. Reported net income for the quarter was US$6.6 million or US$0.20 per diluted share compared to a reported net loss of US$80.7 million or a net loss of US$2.50 per diluted share in 2014.
Revenue for the full year remained flat compared to the previous year at US$2.68 billion, with an organic revenue increase of approximately 4%. Adjusted net income for the year was US$58.0 million or US$1.78 per diluted share compared to adjusted net income of US$84.0 million or US$2.59 per diluted share in 2014. The net negative after-tax impact year-over-year of the appreciation of the US dollar versus the prior year was approximately US$35 million or US$1.08 per diluted share. Reported net income was US$25.7 million or US$0.79 per diluted share, compared to a reported net loss of US$21.3 million or a net loss of US$0.66 per diluted share a year ago.
As detailed below, the reported net income (loss) includes impairment losses on goodwill and intangible assets, restructuring and other costs and remeasurement of forward purchase agreement liabilities totalling US$32.3 million or US$0.99 per diluted share in 2015 and US$105.2 million or US$3.25 per diluted share in 2014. As such, the Company is presenting adjusted financial information as it believes that excluding these items is a more meaningful comparison of its core business performance between the periods presented. Contained within this press release are reconciliations of non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP.
"2015 was characterized by good performances in many of our markets overshadowed by challenging currency rates. Overall for the year, these adverse exchange rates impacted our earnings by approximately US$43 million pre-tax. Excluding this impact we would have exceeded prior year earnings for the year. Each of our foreign-based divisions responded to these currency challenges over the course of the year, as reflected in our fourth quarter results which exceeded last year. Our investments and success in becoming a true omni-channel supplier were evidenced by recent recognition from Wal-Mart in the U.S. where Dorel won the Wal-Mart Supplier of the year award specifically for Omni Channel excellence," commented Martin Schwartz, Dorel President and CEO.
Dorel Juvenile
Dorel Juvenile's fourth quarter revenue decreased by 12.5% or US$36.2 million to US$253.0 million from the prior year. Excluding the impact of foreign exchange and the acquisition of Dorel Juvenile China in late 2014, organic revenue increased approximately 1%. For the year, Dorel Juvenile's revenue declined by 2.9%, or US$30.6 million to US$1.04 billion from US$1.07 billion in 2014, with organic revenue increasing by approximately 1%. For both the quarter and the year, organic revenue growth was derived mainly from Latin American sales in local currency and renewed success in the sale of wooden juvenile furniture products.
For the quarter, operating profit amounted to US$3.0 million compared to a loss of US$130.9 million a year ago. After removing impairment losses and restructuring and other costs, adjusted operating profit increased by 15.5% or US$1.4 million, to US$10.2 million, from US$8.8 million in 2014. This was despite an approximate net negative impact of US$5 million due to adverse exchange rates. For 2015, operating profit increased by US$108.8 million to US$29.7 million compared to a loss of US$79.0 million a year ago. Excluding impairment losses and restructuring and other costs, adjusted operating profit declined by 29.5%, or US$18.3 million to US$43.7 million, principally due to foreign exchange pressures which had a net negative impact on operating profit of approximately US$20 million with Dorel Juvenile China operating losses accounting for the balance of the decline. This was partly offset by stronger margins related to the implementation of strategic price increases and to the introduction of new products.
Dorel Sports
For the fourth quarter, Dorel Sports revenue decreased by US$6.4 million or 2.5% to US$253.7 million compared to last year. Organic revenue increased approximately 3%, after removing the impact of varying foreign exchange rates year-over-year. For the year, Dorel Sports revenue decreased US$53.0 million or 5.0% to US$1.0 billion in 2015 compared to US$1.05 billion a year ago. Organic revenue increased by approximately 3%. For both the quarter and the year, organic revenue growth was primarily in the IBD channel due to increased demand of new model year 2016 bicycles and in the U.S. mass channel where sales of battery powered ride-ons also showed strong growth.
Operating profit for the quarter decreased US$1.2 million or 12.2% to US$8.4 million from US$9.6 million a year ago. Excluding restructuring and other costs, adjusted operating profit was US$9.2 million, down US$2.8 million or 23.8% from US$12.0 million. For the year, operating profit was US$10.9 million in 2015, down US$45 million from US$55.9 million the previous year. Excluding impairment losses and restructuring and other costs, adjusted operating profit was US$42.0 million, down US$25.5 million or 37.8% from US$67.5 million last year. All major divisions were negatively affected throughout the year by the strong US dollar and the net negative impact on the segment's operating profit was approximately US$5 million for the quarter and US$29 million for the year.
Expectations for the fourth quarter were for Dorel Sports to exceed prior year in both revenue and operating profit. A combination of unforeseen factors affected the quarter. Dorel's largest customer unexpectedly reduced purchases late in the year. In addition, while sales to IBD customers were up double digits in the second half, expectations were to do even better during the fourth quarter, but this did not materialize. As such, results for the quarter were below expectations.
Dorel Home Furnishings
Dorel Home Furnishings' fourth quarter revenue increased by US$10.5 million, or 6.9% to US$162.2 million compared to last year's US$151.7 million. For the year, revenue increased US$89.3 million or 16.1% to US$643.2 million compared to US$553.9 million in 2014. Revenue gains for both the quarter and the year were led by increases in e-commerce sales which accounted for 44% of total segment sales in the quarter and 37% of sales for the year.
Operating profit for the quarter was US$9.5 million, an increase of 81.7% from the US$5.2 million of the prior year and for the year, operating profit increased by US$13.8 million, or 57.6% which were both driven by the on-line sales. Investments in technology and infrastructure have allowed Dorel to become best in-class in servicing customers' and consumers' e-commerce needs. E-commerce is a crucial sales channel for furniture companies and Dorel's investment in enhanced technology, improvements in shipping and warehousing and superior customer service all support the e-commerce growth that the segment has delivered.
Details of the impairment losses, restructuring and other costs and remeasurement of forward purchase agreement liabilities:
The results include restructuring charges of US$7.1 million for the quarter and US$14.9 million for the year related to Dorel Juvenile and Dorel Sports and acquisition-related costs of US$0.8 million for the quarter and US$3.7 million for the year for Dorel Juvenile.
Dorel Juvenile is continuing its on-going transformation into a more fully integrated operation in its various markets. Cost savings opportunities will be pursued through 2016. In 2015, US$10.3 million was recorded during the year, the majority, US$7.2 million, in the fourth quarter. The remaining charges related to this restructuring plan will be mostly non-cash write-downs of assets to fair value less costs to sell of underutilized land, buildings and land use rights in China that will be made available for sale in 2016 and as well as severance costs. Annualized cost savings of at least US$9.0 million are expected once the restructuring is completed in late 2016.
Dorel Sports recorded US$0.7 million pre-tax in restructuring charges in the fourth quarter and US$4.6 million during the year, of which US$0.2 million and US$3.7 million, respectively is non-cash and is related to structural changes in both the Cycling Sports Group and SUGOI divisions. As announced during the third quarter, the SUGOI and Cannondale apparel product lines are now consolidated into a single global apparel portfolio with SUGOI as the primary brand. The SUGOI center of excellence has moved to a new location. The restructuring initiatives for Dorel Sports are completed and will deliver annual cost savings of an estimated US$4.0 million as of this year.
In Brazil, as a result of the challenging economy and local market conditions, the rising inflation and the devaluation of the Brazil Real, assumptions on projected earnings and cash flow growth were revised for Caloi resulting in US$26.5 million pre-tax non-cash impairment losses on goodwill and intangible assets recorded in Dorel Sports' third quarter results.
Other
For the quarter, Dorel delivered cash flow from operating activities of US$71 million with an inventory reduction of US$92 million from third quarter levels. With this reduction, inventory returned to 2014 third quarter levels at US$585 million. In 2015, the Company's effective tax rate was a recovery of 11.9% compared to an expense of 28.9% in 2014. Excluding the income taxes on impairment losses and restructuring and other costs in both 2015 and 2014, the Company's adjusted tax rate was 3.6% and 13.4% respectively. The main causes of the variations are changes in the jurisdictions in which the Company generated its income and the recognition of tax benefits as a result of a foreign reorganization.
Outlook
"Overall we finished 2015 with a quarter that exceeded prior year in both organic sales growth and pre-tax profit. We expect this to be the case for full year 2016 with all three segments showing earnings improvements assuming the global economy does not deteriorate any further.
"In Home Furnishings, we are seeing the momentum from 2015 carry over into 2016 and we expect to exceed our record 2015 results with strong earnings growth in 2016," stated Martin Schwartz, Dorel President & CEO.
"Dorel Juvenile as a segment exceeded prior year earnings in the fourth quarter as new products and selective price increases were implemented. As foreign currencies stabilize and with the benefits of our restructuring program and other operational improvements, we expect this to continue going forward.
"Dorel Sports' 2016 product line is exceptional. We expect to expand our market share in the IBD sales channel by leveraging the early sell-in success of the model year 2016 bikes and the expansive and exciting upgrade of our product line in model year 2017. This should help fuel sales in the second half. In an attempt to clear excessive inventory, some of Dorel's key IBD competitors have initiated early season discounting. We are taking the appropriate pricing measures within this environment. An early spring could also help mitigate the situation. Business is good in our mass and sporting goods channels and we anticipate surpassing last year's results in these channels. Despite significant economic and political challenges in Brazil, Caloi should see some year-over-year improvement," concluded Mr. Schwartz.
Conference Call
Dorel Industries Inc. will hold a conference call to discuss these results today, March 10, 2016 at 1:00 P.M. Eastern Time. Interested parties can join the call by dialling 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 30342037 on your phone. This recording will be available on Thursday, March 10, 2016 as of 4:00 P.M. until 11:59 P.M. on Thursday, March 17, 2016.
Complete consolidated financial statements 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 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, Bebe Confort and Tiny Love, complemented by regional brands such as Cosco and Infanti. In Dorel Sports, brands include Cannondale, Schwinn, GT, Mongoose, Caloi, IronHorse and SUGOI. Dorel Home Furnishings markets a wide assortment of both domestically produced and imported furniture products, principally within North America. Dorel Industries Inc. has annual sales of US$2.7 billion and employs approximately 10,450 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 few 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 and remeasurement of forward purchase agreement liabilities incurred in both 2015 and 2014, the Company is including in this press release the following non-GAAP financial measures: "adjusted total revenue", "adjusted cost of sales", "adjusted gross profit", "adjusted operating profit", "adjusted finance expenses", "adjusted income before income taxes", "adjusted income taxes", "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 are in thousands of US$, except per share amounts)
Contacts:
MaisonBrison Communications
Rick Leckner
(514) 731-0000
Dorel Industries Inc.
Jeffrey Schwartz
(514) 934-3034
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Datum: 10.03.2016 - 13:19 Uhr
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