Dorel Industries Inc.
TSX : DII.A
TSX : DII.B

Dorel Industries Inc.

November 05, 2015 08:05 ET

Dorel Reports Third Quarter Results

- Home Furnishings ecommerce growth drives segment operating profit up 85%

- Dorel Sports to turn the corner in Q4

MONTREAL, QUEBEC--(Marketwired - Nov. 5, 2015) - Dorel Industries Inc. (TSX:DII.B)(TSX:DII.A) today announced results for the third quarter and nine months ended September 30, 2015. Revenue for the quarter was US$679.3 million compared to US$673.0 million a year ago. Adjusted net income was US$15.5 million or US$0.48 per diluted share versus adjusted net income of US$23.8 million or US$0.73 per diluted share last year. Reported net loss for the period was US$8.8 million or US$0.27 per diluted share compared to a net income of US$19.5 million or US$0.60 per diluted share in 2014. The net negative impact of foreign exchange on the third quarter 2015 operating profit was approximately US$12 million of which about US$14 million was in the Juvenile and Sports segments offset by a net positive impact of US$2 million in corporate expenses. After tax, this net negative impact on the diluted EPS for the third quarter represented US$0.28.

Total revenue for the nine months was US$2.01 billion compared to US$1.98 billion a year ago. Adjusted net income was US$43.9 million or US$1.35 per diluted share compared to adjusted net income of US$73.0 million or US$2.25 per diluted share last year. Reported net income year-to-date was US$19.1 million or US$0.59 per diluted share compared to US$59.5 million or US$1.83 per diluted share. The appreciation of the US dollar had a net negative impact of US$39 million on the operating profit of the Juvenile and Sports segments and a US$6 million net positive effect at the corporate level for a consolidated net negative impact of US$33 million or US$0.81 per diluted share.

The reported net (loss) income for the quarter and the nine months ended September 30, 2015 include impairment losses on goodwill and customer relationships related to Caloi in Brazil, restructuring and other costs. As such, the Company is presenting adjusted financial information in this press release as it believes that excluding these items is a more meaningful comparison of its core business performance between the periods presented. Please refer to the Non-GAAP financial measures section for the reconciliation to the most directly comparable financial measures calculated in accordance with GAAP.

Summary of Financial Information
Third Quarters Ended September 30
All figures in thousands of US $, except per share amounts
2015 2014 Change %
Total revenue 679,287 673,020 0.9 %
Adjusted net income 15,469 23,771 (34.9 %)
Per share - Basic 0.48 0.74 (35.1 %)
Per share - Diluted 0.48 0.73 (34.2 %)
Net income (loss) (8,757 ) 19,480 (145.0 %)
Per share - Basic (0.27 ) 0.60 (145.0 %)
Per share - Diluted (0.27 ) 0.60 (145.0 %)
Number of shares outstanding -
Basic weighted average 32,322,011 32,305,379
Diluted weighted average 32,322,011 32,493,300
Summary of Financial Information
Nine Months Ended September 30
All figures in thousands of US $, except per share amounts
2015 2014 Change %
Total revenue 2,014,419 1,976,552 1.9 %
Adjusted net income 43,889 72,975 (39.9 %)
Per share - Basic 1.36 2.27 (40.1 %)
Per share - Diluted 1.35 2.25 (40.0 %)
Net income 19,090 59,480 (67.9 %)
Per share - Basic 0.59 1.85 (68.1 %)
Per share - Diluted 0.59 1.83 (67.8 %)
Number of shares outstanding -
Basic weighted average 32,321,887 32,180,681
Diluted weighted average 32,522,810 32,417,922

"The third quarter was characterized by another exceptional performance in our Dorel Home Furnishings business as well as continued currency headwinds which affected both Dorel Juvenile and Dorel Sports. To mitigate the currency issues, which amounted to approximately US$14 million in the quarter, both segments are successfully implementing selective price increases and are introducing new products at better margins. Dorel Juvenile continues to make significant changes at our factories in China and one year after the acquisition, senior management is pleased with the pace of progress, although more needs to be done. This investment in Dorel Juvenile China has become even more meaningful with last week's announcement that China is ending its one child rule. Despite current conditions in Brazil, we remain solidly committed to Dorel Sports' Caloi business. There is excellent market potentia l with our portfolio of bicycle brands to serve the world's fifth largest population. Our plan is to maximize cash flow while the economy recovers, placing us in an excellent position to benefit once things return to normal," stated Dorel President & CEO, Martin Schwartz.

Dorel Juvenile

All figures in thousands of US $
Third Quarters Ended September 30
2015 2014
$ % of rev. $ % of rev. Change %
Total revenue 247,296 260,723 (5.1 %)
Adjusted gross profit 65,067 26.3 % 73,165 28.1 % (11.1 %)
Adjusted operating profit 7,852 3.2 % 17,145 6.6 % (54.2 %)
Gross profit 64,200 26.0 % 73,165 28.1 % (12.3 %)
Operating profit 2,802 1.1 % 16,112 6.2 % (82.6 %)

All figures in thousands of US $
Nine Months Ended September 30
2015 2014
$ % of rev. $ % of rev. Change %
Total revenue 786,910 781,277 0.7 %
Adjusted gross profit 209,497 26.6 % 222,356 28.5 % (5.8 %)
Adjusted operating profit 33,497 4.3 % 53,123 6.8 % (36.9 %)
Gross profit 208,630 26.5 % 222,356 28.5 % (6.2 %)
Operating profit 26,732 3.4 % 51,855 6.6 % (48.4 %)

Dorel Juvenile third quarter revenue decreased 5.1% to US$247.3 million from US$260.7 million a year ago. Organic revenue declined approximately 4% after removing the effect of the Dorel Juvenile China acquisition and the impact of varying exchange rates year-over- year. The decrease was mainly attributable to reduced sales in the United States and Canada where certain retailers reduced orders to lower their in-stock levels. This was partly offset by several Latin American divisions which posted double digit sales growth. Nine month revenue totalled US$786.9 million, compared to US$781.3 million last year. Year-to-date, organic revenue increased by approximately 2% led by Latin America, partly offset by slight declines in North America.

Adjusted operating profit for the quarter, excluding restructuring and other costs, was US$7.9 million compared to US$17.1 million last year, and included a full quarter of Dorel Juvenile China. This decline of 54.2% was principally due to Dorel Juvenile China and currency pressures as non-US based divisions saw their currencies weaken significantly against the US dollar, creating a net negative impact on operating profit of approximately US$4 million. Year-to-date adjusted operating profit, excluding restructuring and other costs was US$33.5 million, a decline of 36.9% from US$53.1 million in 2014. This was mainly due to foreign exchange which has had a nine month negative impact of approximately US$15 million.

In Europe, the Maxi-Cosi Pebble Plus baby car seat has emerged as the winner following October tests conducted by ADAC, TCS and ÖAMTC, Europe's major independent automobile clubs. The Pebble Plus received a rare 5 star rating in the safety category and finished with the top score overall in the group 0 category. This underlines Dorel Juvenile's expertise and leading position in the i-Size category and will resonate well with consumers across Europe. To further support the premium Quinny and Maxi-Cosi brands, a new designer line from reality TV star and stylist, Rachel Zoe, was unveiled and enthusiastically received by retailers at the recent ABC juvenile products show in Las Vegas.

The pace of change at Dorel Juvenile China is proceeding well, and more is being done to bring the factories to a best-in-class status. Experienced Asian managers have replaced most of the acquired management team and there has been a material change to a more performance-based culture for all employees.

Dorel Sports

All figures in thousands of US $
Third Quarters Ended September 30
2015 2014
$ % of rev. $ % of rev. Change %
Total revenue 266,499 266,503 (0.0 %)
Adjusted gross profit 53,466 20.1 % 62,556 23.5 % (14.5 %)
Adjusted operating profit 10,825 4.1 % 20,174 7.6 % (46.3 %)
Gross profit 50,954 19.1 % 62,052 23.3 % (17.9 %)
Operating profit (loss) (20,169) (7.6 %) 14,769 5.5 % (236.6 %)
All figures in thousands of US $
Nine Months Ended September 30
2015 2014
$ % of rev. $ % of rev. Change %
Total revenue 746,515 793,100 (5.9 %)
Adjusted gross profit 163,553 21.9 % 191,017 24.1 % (14.4 %)
Adjusted operating profit 32,842 4.4 % 55,477 7.0 % (40.8 %)
Gross profit 161,041 21.6 % 189,842 23.9 % (15.2 %)
Operating profit 2,472 0.3 % 46,292 5.8 % (94.7 %)

Dorel Sports third quarter revenue remained flat at US$266.5 million, but was up approximately 9% after removing the impact of foreign exchange year-over-year. The main drivers of the increased revenue were in the independent bike dealer (IBD) channel due to increased demand of new model year 2016 higher margin bicycles. Caloi sales grew in Brazil as consumers were attracted to Caloi's strong brand equity in the lower price-point category. Sales of battery powered ride-ons in the US mass market channel continued to increase. Nine month revenue decreased 5.9% to US$746.5 million. Organic revenue increased approximately 2%, after removing the impact of varying foreign exchange rates year-over-year.

Third quarter adjusted operating profit of US$10.8 million was down US$9.3 million, or 46.3%. All major divisions saw their currencies weaken significantly against the US dollar which had a net negative impact on the segment's operating profit of approximately US$10 million. Year-to-date adjusted operating profit was US$32.8 million, a decline of 40.8% compared to last year. The net negative impact of foreign exchange for the first nine months was approximately US$24 million.

Cannondale won a 2015 Eurobike Gold Award for Best Road Race Bike for the new Slate Force CX1. The Eurobike Award is selected by an independent jury of industry experts and is one of the most prestigious design awards in the cycling industry. Cannondale also received the American "Interbike Road Bike of the Year" award for the SuperSix EVO Carbon Force Racing Edition.

Dorel Home Furnishings

All figures in thousands of US $
Third Quarters Ended September 30
2015 2014
$ % of rev. $ % of rev. Change %
Total revenue 165,492 145,794 13.5 %
Gross profit 21,401 12.9 % 16,277 11.2 % 31.5 %
Operating profit 10,122 6.1 % 5,473 3.8 % 84.9 %
All figures in thousands of US $
Nine Months Ended September 30
2015 2014
$ % of rev. $ % of rev. Change %
Total revenue 480,994 402,175 19.6 %
Gross profit 62,696 13.0 % 50,181 12.5 % 24.9 %
Operating profit 28,357 5.9 % 18,797 4.7 % 50.9 %

Dorel Home Furnishings third quarter revenue increased US$19.7 million or 13.5% to US$165.5 million, from US$145.8 million a year ago. Sales to brick and mortar stores were flat for the quarter while sales to on-line retailers continue to grow, benefitting all divisions, and representing over 37% of total segment sales. Year-to-date, segment revenue has increased US$78.8 million or 19.6% to US$481.0 million from US$402.2 million in 2014 driven by both the on-line and brick and mortar channels.

Third quarter and year-to-date operating profit was US$10.1 million and US$28.4 million, an increase of 84.9% and 50.9%, respectively. All divisions posted improved results with DHP, Cosco Home & Office and the Altra import division of Ameriwood experiencing substantial growth.

"The fact that the segment has maintained brick and mortar sales at current levels is an important achievement given today's retail environment. This stability plus the exceptional progress in our online business is driving Home Furnishings success," commented Mr. Schwartz.

Impairment losses, restructuring and other costs:
(All figures are in thousands of US$, except per share amounts)
Third Quarters Ended
September 30
Nine Months Ended
September 30
2015 2014 2015 2014
$ $ $ $
Recorded as restructuring costs 5,035 404 4,411 1,887
Restructuring costs recorded in cost of sales 3,379 504 3,379 1,175
Total Restructuring Costs 8,414 908 7,790 3,062
Acquisition-related costs 1,120 1,039 2,835 1,452
Brixia investment write-down and other costs related to team sponsorship
-

4,491

-

5,939
Total Restructuring and Other costs 9,534 6,438 10,625 10,453
Impairment losses on goodwill and customer relationships 26,510 - 26,510 -
Finance Expenses
Loss (gain) on remeasurement of forward purchase agreement liabilities
(9,711
)
(1,364
)
(9,879
)
5,087
Total impairment losses, restructuring and other costs and remeasurement of the forward purchase agreement liabilities before income taxes(1)

26,333


5,074


27,256


15,540
Total impairment losses, restructuring and other costs and remeasurement of the forward purchase agreement liabilities after income taxes

24,226


4,291


24,799


13,495
Total impact on diluted earnings per share (0.75 ) (0.13 ) (0.76 ) (0.42 )
(1) Includes non-cash amounts of: 21,178 2,536 21,010 10,574

The third quarter includes restructuring charges of approximately US$8.4 million related to both the Dorel Juvenile and Dorel Sports segments and acquisition-related costs of US$1.1 million for the Juvenile segment. Dorel Juvenile has undertaken various restructuring initiatives which will continue over the balance of 2015 and into 2016. The segment will incur a total of approximately US$10.6 million pre-tax in restructuring charges, US$3.9 million of which was recorded in the third quarter. The major component is for severance costs as headcount is being reduced by approximately 700 employees globally, the majority at manufacturing facilities in China. Annualized cost savings of at least US$9.0 million are expected once the restructuring is completed in late 2016.

Dorel Sports recorded US$4.5 million pre-tax in restructuring charges in the quarter, of which US$3.5 million is non-cash, related to structural changes in both the Cycling Sports Group and SUGOI divisions. The SUGOI and Cannondale apparel product lines will be consolidated into a single global apparel portfolio with SUGOI as the primary brand and a move to a SUGOI center of excellence at a new location. An additional US$1.0 million charge is expected to be recorded in the fourth quarter. The restructuring initiatives are expected to be completed by the end of 2015 and will deliver annual cost savings of an estimated US$4.0 million.

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 customer relationships in Dorel Sports third quarter results. This situation also resulted in a remeasurement of the Caloi acquisition forward purchase agreement liability amounting to an unrealized gain of US$9.7 million reflected in finance expenses.

Other

The third quarter and nine months ended September 30, 2015 tax rates were a recovery of 20.6% and an expense of 13.1%, respectively (2014 - expenses of 19.4% and 18.5%, respectively). The main causes of the variations year-over-year are changes in the jurisdictions in which the Company generated its income, the non-deductible impairment of goodwill, the recognition of tax benefits related to tax losses following a Canadian reorganization and the decrease in the fair value adjustments related to the forward purchase agreement liabilities which are non-deductible for tax purposes. The Company has stated that for the full year it expects its annual tax rate to be between 12% and 17%.

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 December 3, 2015 to shareholders of record as at the close of business on November 19, 2015.

Outlook

"Despite challenges through much of 2015, Dorel Sports will turn the corner in the fourth quarter with increases over last year in both sales and earnings. Considerable changes have been made in the segment, new pricing has been implemented on 2016 model year bicycles and Dorel Sports has launched its largest ever number of new bicycle platforms. These new investments will pay off with the start of a new positive trend going forward. Foreign exchange remains unpredictable, however the segment is in a stronger position to face this issue," stated Mr. Schwartz.

The substantial growth trend established by Home Furnishings during the first nine months is expected to continue through the end of the year. All divisions have benefitted from an increase in ecommerce sales. Significantly, the segment has also succeeded in maintaining its level of sales in the brick and mortar channel. This combination should result in an excellent year for Home Furnishings.

"Sales and adjusted operating profit for Dorel Juvenile for the fourth quarter are expected to be at levels similar to those of the third quarter as foreign exchange rates are not showing signs of immediate recovery. Recently introduced new products are priced at current foreign exchange rate levels and this, along with the benefits of our restructuring activities initiated in the third quarter, will positively impact earnings as we begin 2016," concluded Mr. Schwartz.

Conference Call

Dorel Industries Inc. will hold a conference call to discuss these results today, November 5, 2015 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 57395110 on your phone. This recording will be available on Thursday, November 5, 2015 as of 4:00 P.M. until 11:59 P.M. on Thursday, November 12, 2015.

Complete condensed consolidated interim financial statements as at September 30, 2015 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, Bébé 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 10,800 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 and the restructuring and other costs incurred in both 2015 and 2014, 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", "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)

Reconciliation of non-GAAP financial measures:
Results for the third quarter ended September 30, 2015
Reported Impairment
losses,
restructuring
and other costs
Adjusted
$ $ $
Total revenue679,287 679,287
Cost of sales542,732 (3,379)539,353
GROSS PROFIT136,555 3,379 139,934
Selling expenses57,943 57,943
General and administrative expenses46,245 46,245
Research and development expenses9,210 9,210
Restructuring and other costs6,155 (6,155)-
Impairment losses on goodwill and customer relationships26,510 (26,510)-
OPERATING PROFIT (LOSS)(9,508)36,044 26,536
Finance expenses1,522 9,711 11,233
INCOME (LOSS) BEFORE INCOME TAXES(11,030)26,333 15,303
Income taxes (recovery) expense(2,273)2,107 (166)
Tax rate20.6% -1.1%
NET INCOME (LOSS)(8,757)24,226 15,469
EARNINGS (LOSS) PER SHARE
Basic(0.27)0.75 0.48
Diluted(0.27)0.75 0.48
SHARES OUTSTANDING
Basic - weighted average32,322,011 32,322,011
Diluted - weighted average32,322,011 32,530,160

Results for the third quarter ended September 30, 2014
Reported Restructuring
and other costs
Adjusted
$ $ $
Total revenue673,020 673,020
Cost of sales521,526 (504)521,022
GROSS PROFIT151,494 504 151,998
Selling expenses57,118 57,118
General and administrative expenses49,347 49,347
Research and development expenses8,557 8,557
Restructuring and other costs5,934 (5,934)-
OPERATING PROFIT30,538 6,438 36,976
Finance expenses6,375 1,364 7,739
INCOME BEFORE INCOME TAXES24,163 5,074 29,237
Income taxes expense4,683 783 5,466
Tax rate19.4% 18.7%
NET INCOME19,480 4,291 23,771
EARNINGS PER SHARE
Basic0.60 0.14 0.74
Diluted0.60 0.13 0.73
SHARES OUTSTANDING
Basic - weighted average32,305,379 32,305,379
Diluted - weighted average32,493,300 32,493,300
Reconciliation of non-GAAP financial measures:
Results for the nine months ended September 30, 2015
Reported Impairment losses,
restructuring and
other costs
Adjusted
$ $ $
Total revenue2,014,419 2,014,419
Cost of sales1,582,052 (3,379)1,578,673
GROSS PROFIT432,367 3,379 435,746
Selling expenses174,452 174,452
General and administrative expenses154,680 154,680
Research and development expenses27,041 27,041
Restructuring and other costs7,246 (7,246)-
Impairment losses on goodwill and customer relationships26,510 (26,510)-
OPERATING PROFIT42,438 37,135 79,573
Finance expenses20,463 9,879 30,342
INCOME BEFORE INCOME TAXES21,975 27,256 49,231
Income taxes expense2,885 2,457 5,342
Tax rate13.1% 10.9%
NET INCOME19,090 24,799 43,889
EARNINGS PER SHARE
Basic0.59 0.77 1.36
Diluted0.59 0.76 1.35
SHARES OUTSTANDING
Basic - weighted average32,321,887 32,321,887
Diluted - weighted average32,522,810 32,522,810
Results for the nine months ended September 30, 2014
Reported Restructuring and
other costs
Adjusted
$ $ $
Total revenue1,976,552 1,976,552
Cost of sales1,514,173 (1,175)1,512,998
GROSS PROFIT462,379 1,175 463,554
Selling expenses174,332 174,332
General and administrative expenses152,955 152,955
Research and development expenses24,253 24,253
Restructuring and other costs9,278 (9,278)-
OPERATING PROFIT101,561 10,453 112,014
Finance expenses28,539 (5,087)23,452
INCOME BEFORE INCOME TAXES73,022 15,540 88,562
Income taxes expense13,542 2,045 15,587
Tax rate18.5% 17.6%
NET INCOME59,480 13,495 72,975
EARNINGS PER SHARE
Basic1.85 0.42 2.27
Diluted1.83 0.42 2.25
SHARES OUTSTANDING
Basic - weighted average32,180,681 32,180,681
Diluted - weighted average32,417,922 32,417,922

Dorel Juvenile

Reconciliation of non-GAAP financial measuresThird quarters ended September 30
2015 2014
Reported Restruc-
turing
and other
costs
Adjusted Reported Restruc-turing
and other
costs
Adjusted
Total revenue$247,296 $- $247,296 $260,723 $- $260,723
Cost of sales 183,096 (867) 182,229 187,558 - 187,558
Gross profit 64,200 867 65,067 73,165 - 73,165
Gross profit as a percentage of total revenue 26.0% 26.3% 28.1% 28.1%
Selling expenses 28,051 - 28,051 28,225 - 28,225
General and administrative expenses 22,503 - 22,503 22,163 - 22,163
Research and development expenses 6,661 - 6,661 5,632 - 5,632
Restructuring and other costs 4,183 (4,183) - 1,033 (1,033) -
Operating profit$2,802 $5,050 $7,852 $16,112 $1,033 $17,145
Operating profit as a percentage of total revenue 1.1% 3.2% 6.2% 6.6%
Reconciliation of non-GAAP financial measures Nine months ended September 30
2015 2014
Reported Restruc-
turing
and other
costs
Adjusted Reported Restruc-turing
and other
costs
Adjusted
Total revenue$786,910 $- $786,910 $781,277 $- $781,277
Cost of sales 578,280 (867) 577,413 558,921 - 558,921
Gross profit 208,630 867 209,497 222,356 - 222,356
Gross profit as a percentage of total revenue 26.5% 26.6% 28.5% 28.5%
Selling expenses 84,719 - 84,719 85,939 - 85,939
General and administrative expenses 71,698 - 71,698 67,142 - 67,142
Research and development expenses 19,583 - 19,583 16,152 - 16,152
Restructuring and other costs 5,898 (5,898) - 1,268 (1,268) -
Operating profit$26,732 $6,765 $33,497 $51,855 $1,268 $53,123
Operating profit as a percentage of total revenue 3.4% 4.3% 6.6% 6.8%

Dorel Sports

Reconciliation of non-GAAP financial measures Third quarters ended September 30
2015 2014
Reported Impairment
losses,
restruc-
turing and
other costs
Adjusted Reported Restruc-
turing and
other costs
Adjusted
Total revenue$266,499 $- $266,499 $266,503 $- $266,503
Cost of sales 215,545 (2,512) 213,033 204,451 (504) 203,947
Gross profit 50,954 2,512 53,466 62,052 504 62,556
Gross profit as a percentage of total revenue 19.1% 20.1% 23.3% 23.5%
Selling expenses 25,391 - 25,391 24,281 - 24,281
General and administrative expenses 15,712 - 15,712 16,209 - 16,209
Research and development expenses 1,538 - 1,538 1,892 - 1,892
Restructuring and other costs 1,972 (1,972) - 4,901 (4,901) -
Impairment losses on goodwill and customer relationships 26,510 (26,510) - - - -
Operating profit (loss)$(20,169)$30,994 $10,825 $14,769 $5,405 $20,174
Operating profit (loss) as a percentage of total revenue -7.6% 4.1% 5.5% 7.6%

Reconciliation of non-GAAP financial measures Nine months ended September 30
2015 2014
Reported Impairment
losses,
restruc-
turing and
other costs
Adjusted Reported Restruc-turing and
other
costs
Adjusted
Total revenue$746,515 $- $746,515 $793,100 $- $793,100
Cost of sales 585,474 (2,512) 582,962 603,258 (1,175) 602,083
Gross profit 161,041 2,512 163,553 189,842 1,175 191,017
Gross profit as a percentage of total revenue 21.6% 21.9% 23.9% 24.1%
Selling expenses 74,593 - 74,593 74,141 - 74,141
General and administrative expenses 51,466 - 51,466 56,222 - 56,222
Research and development expenses 4,652 - 4,652 5,177 - 5,177
Restructuring and other costs 1,348 (1,348) - 8,010 (8,010) -
Impairment losses on goodwill and customer relationships 26,510 (26,510) - - - -
Operating profit$2,472 $30,370 $32,842 $46,292 $9,185 $55,477
Operating profit as a percentage of total revenue 0.3% 4.4% 5.8% 7.0%
DOREL INDUSTRIES INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
ALL FIGURES IN THOUSANDS OF US $
(unaudited)

as at
September 30,
2015

as at
December 30,
2014

ASSETS
CURRENT ASSETS
Cash and cash equivalents$34,701 $47,101
Trade and other receivables 445,265 474,704
Inventories 681,777 633,022
Other financial assets 3,179 4,299
Income taxes receivable 11,930 15,731
Prepaid expenses 34,318 25,343
1,211,170 1,200,200
Assets held for sale 2,966 1,308
1,214,136 1,201,508
NON-CURRENT ASSETS
Property, plant and equipment 210,105 226,893
Intangible assets 476,048 519,798
Goodwill 498,474 544,782
Other financial assets - 571
Deferred tax assets 32,292 31,009
Other assets 5,047 5,398
1,221,966 1,328,451
$2,436,102 $2,529,959
LIABILITIES
CURRENT LIABILITIES
Bank indebtedness$60,220 $27,053
Trade and other payables 495,159 490,527
Written put option and forward purchase agreement liabilities 2,918 -
Other financial liabilities 2,762 1,655
Income taxes payable 21,198 19,046
Long-term debt 32,897 62,556
Provisions 33,564 37,727
648,718 638,564
NON-CURRENT LIABILITIES
Long-term debt 509,135 490,188
Net pension and post-retirement defined benefit liabilities 45,180 46,128
Deferred tax liabilities 75,688 89,199
Provisions 1,677 1,765
Written put option and forward purchase agreement liabilities 29,625 44,640
Other financial liabilities 2,352 2,063
Other long-term liabilities 10,067 10,428
673,724 684,411
EQUITY
Share capital 199,988 199,927
Contributed surplus 26,395 25,691
Accumulated other comprehensive income (105,898) (20,579)
Other equity 1,979 579
Retained earnings 991,196 1,001,366
1,113,660 1,206,984
$2,436,102 $2,529,959
DOREL INDUSTRIES INC.
CONDENSED CONSOLIDATED INTERIM INCOME STATEMENTS
ALL FIGURES IN THOUSANDS OF US $, EXCEPT PER SHARE AMOUNTS
(unaudited)
Third Quarters EndedNine Months Ended
September 30,
2015
September 30,
2014
September 30,
2015
September 30,
2014
Restated Restated
Sales$676,196$669,923$2,004,519$1,966,496
Licensing and commission income 3,091 3,097 9,900 10,056
TOTAL REVENUE 679,287 673,020 2,014,419 1,976,552
Cost of sales(1) 542,732 521,526 1,582,052 1,514,173
GROSS PROFIT 136,555 151,494 432,367 462,379
Selling expenses 57,943 57,118 174,452 174,332
General and administrative expenses 46,245 49,347 154,680 152,955
Research and development expenses 9,210 8,557 27,041 24,253
Restructuring and other costs(1) 6,155 5,934 7,246 9,278
Impairment losses on goodwill and customer relationships 26,510 - 26,510 -
OPERATING PROFIT (LOSS) (9,508) 30,538 42,438 101,561
Finance expenses 1,522 6,375 20,463 28,539
INCOME (LOSS) BEFORE INCOME TAXES (11,030) 24,163 21,975 73,022
Income taxes (recovery) expense (2,273) 4,683 2,885 13,542
NET INCOME (LOSS)$(8,757)$19,480$19,090$59,480
EARNINGS (LOSS) PER SHARE
Basic$(0.27)$0.60$0.59$1.85
Diluted$(0.27)$0.60$0.59$1.83
SHARES OUTSTANDING
Basic - weighted average 32,322,011 32,305,379 32,321,887 32,180,681
Diluted - weighted average 32,322,011 32,493,300 32,522,810 32,417,922
(1)Restructuring and other costs charged to:
Cost of sales$3,379$504$3,379$1,175
Expenses 6,155 5,934 7,246 9,278
$9,534$6,438$10,625$10,453
DOREL INDUSTRIES INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME
ALL FIGURES IN THOUSANDS OF US $
(unaudited)
Third Quarters Ended Nine Months Ended
September 30,
2015
September 30,
2014
September 30,
2015
September 30,
2014
NET INCOME (LOSS)$(8,757)$19,480 $19,090 $59,480
OTHER COMPREHENSIVE INCOME (LOSS):
Items that are or may be reclassified subsequently to net income:
Cumulative translation account:
Net change in unrealized foreign currency gains (losses) on translation of net investments in foreign operations, net of tax of nil (37,730) (51,891) (83,554) (51,782)
Net changes in cash flow hedges:
Net change in unrealized gains (losses) on derivatives designated as cash flow hedges 1,723 7,085 1,490 6,146
Reclassification to income 214 208 808 688
Reclassification to the related non-financial asset 88 (494) (5,384) 983
Deferred income taxes (163) (2,008) 1,260 (2,235)
1,862 4,791 (1,826) 5,582
Items that will not be reclassified to net income:
Defined benefit plans:
Remeasurements of the net pension and post-retirement defined benefit liabilities (1) 107 91 116
Deferred income taxes - (30) (30) (33)
(1) 77 61 83
TOTAL OTHER COMPREHENSIVE LOSS (35,869) (47,023) (85,319) (46,117)
TOTAL COMPREHENSIVE INCOME (LOSS)$(44,626)$(27,543)$(66,229)$13,363
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
Share
Capital
Contributed
Surplus
Cumulative
Translation
Account
Cash
Flow
Hedges
Defined
Benefit
Plans
Other
Equity
Retained
Earnings
Total
Equity
Balance as at December 30, 2013$190,458$26,994 $75,378 $(2,154)$(5,400)$-$1,061,484 $1,346,760
Total comprehensive income:
Net income - - - - - - 59,480 59,480
Other comprehensive income (loss) - - (51,782) 5,582 83 - - (46,117)
$-$- $(51,782)$5,582 $83 $-$59,480 $13,363
Issued under stock option plan 7,065 - - - - - - 7,065
Reclassification from contributed surplus due to exercise of stock options 1,881 (1,881) - - - - - -
Reclassification from contributed surplus due to settlement of deferred share units 264 (484) - - - - - (220)
Share-based payments - 719 - - - - - 719
Dividends on common shares - - - - - - (28,957) (28,957)
Dividends on deferred share units - 147 - - - - (147) -
Balance as at September 30, 2014$199,668$25,495 $23,596 $3,428 $(5,317)$-$1,091,860 $1,338,730
Balance as at December 30, 2014$199,927$25,691 $(8,842)$2,180 $(13,917)$579$1,001,366 $1,206,984
Total comprehensive loss:
Net income - - - - - - 19,090 19,090
Other comprehensive income (loss) - - (83,554) (1,826) 61 - - (85,319)
$-$- $(83,554)$(1,826)$61 $-$19,090 $(66,229)
Reclassification from contributed surplus due to settlement
of deferred share units 61 (101) - - - - - (40)
Share-based payments - 635 - - - - - 635
Remeasurement of written put option liabilities - - - - - 1,400 - 1,400
Dividends on common shares - - - - - - (29,090) (29,090)
Dividends on deferred share units - 170 - - - - (170) -
Balance as at September 30, 2015$199,988$26,395 $(92,396)$354 $(13,856)$1,979$991,196 $1,113,660
DOREL INDUSTRIES INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
ALL FIGURES IN THOUSANDS OF US $
(unaudited)
Third Quarters Ended Nine Months Ended
September 30,
2015
September 30,
2014
September 30,
2015
September 30,
2014
Restated Restated
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net income (loss)$(8,757)$19,480 $19,090 $59,480
Items not involving cash:
Depreciation and amortization 14,957 14,797 43,692 44,509
Impairment losses on goodwill and customer relationships 26,510 - 26,510 -
Unrealized losses (gains) arising on financial assets
and financial liabilities classified as held for trading (522) (613) (357) (75)
Finance expenses 1,522 6,375 20,463 28,539
Restructuring and other costs 9,534 6,438 10,625 10,453
Income taxes (recovery) expense (2,273) 4,683 2,885 13,542
Share-based payments 104 69 294 575
Defined benefit pension and post-retirement costs 815 821 2,448 2,525
Loss (gain) on disposal of property, plant and equipment 745 (11) 727 9
42,635 52,039 126,377 159,557
Net changes in balances related to operations:
Trade and other receivables 7,715 1,974 1,923 (9,355)
Inventories (18,028) (8,625) (85,636) (40,241)
Other financial assets 37 (252) 149 (429)
Prepaid expenses (1,452) 3,134 (10,470) (3,369)
Other assets (484) 1,061 (566) 2,133
Trade and other payables 58,601 20,966 4,299 12,438
Net pension and post-retirement defined benefit liabilities (671) (603) (2,656) (2,755)
Provisions, other financial liabilities and other long-term liabilities (2,695) (2,124) (7,368) (8,602)
43,023 15,531 (100,325) (50,180)
Income taxes paid (4,527) (3,310) (13,925) (21,854)
Income taxes received 972 395 7,100 6,840
Interest paid (4,784) (5,548) (11,594) (18,938)
Interest received 85 301 258 575
CASH PROVIDED BY OPERATING ACTIVITIES 77,404 59,408 7,891 76,000
FINANCING ACTIVITIES
Bank indebtedness (14,458) 4,663 45,310 (32,531)
Increase of long-term debt 504 - 72,721 106,083
Repayments of long-term debt (52,927) (40,932) (63,125) (26,237)
Increase of written put option and forward purchase agreement liabilities - - 525 -
Financing costs (398) (93) (1,863) (1,384)
Issuance of share capital - 149 - 7,050
Dividends on common shares (9,697) (9,691) (29,090) (28,957)
CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (76,976) (45,904) 24,478 24,024
INVESTING ACTIVITIES
Acquisition of businesses - (150) (1,736) (54,743)
Additions to property, plant and equipment (7,788) (7,964) (24,617) (26,048)
Disposals of property, plant and equipment 27 294 557 862
Additions to intangible assets (3,816) (6,193) (13,491) (16,269)
CASH USED IN INVESTING ACTIVITIES (11,577) (14,013) (39,287) (96,198)
Effect of foreign currency exchange rate changes on cash and cash equivalents (2,584) (4,739) (5,482) (8,290)
NET DECREASE IN CASH
AND CASH EQUIVALENTS (13,733) (5,248) (12,400) (4,464)
Cash and cash equivalents, beginning of period 48,434 40,858 47,101 40,074
CASH AND CASH EQUIVALENTS, END OF PERIOD$34,701 $35,610 $34,701 $35,610
DOREL INDUSTRIES INC.
SEGMENTED INFORMATION
THIRD QUARTERS ENDED SEPTEMBER 30
ALL FIGURES IN THOUSANDS OF US $, EXCEPT PER SHARE AMOUNTS
(unaudited)
TotalDorel JuvenileDorel SportsDorel Home Furnishings
2015 2014201520142015 201420152014
(Restated) (Restated) (Restated)
Total revenue$679,287 $673,020$247,296$260,723$266,499 $266,503$165,492$145,794
Cost of sales (1) 542,732 521,526 183,096 187,558 215,545 204,451 144,091 129,517
Gross profit 136,555 151,494 64,200 73,165 50,954 62,052 21,401 16,277
Selling expenses 57,658 56,480 28,051 28,225 25,391 24,281 4,216 3,974
General and administrative expenses 44,267 44,169 22,503 22,163 15,712 16,209 6,052 5,797
Research and development expenses 9,210 8,557 6,661 5,632 1,538 1,892 1,011 1,033
Restructuring and other costs (1) 6,155 5,934 4,183 1,033 1,972 4,901 - -
Impairment losses on goodwill and customer relationships 26,510 - - - 26,510 - - -
Operating profit (loss) (7,245) 36,354$2,802$16,112$(20,169)$14,769$10,122$5,473
Finance expenses 1,522 6,375
Corporate expenses 2,263 5,816
Income taxes (recovery) expense (2,273) 4,683
Net income (loss)$(8,757)$19,480
Earnings (loss) per share
Basic$(0.27)$0.60
Diluted$(0.27)$0.60
Depreciation and amortization included in operating profit (loss)$14,692 $14,753$10,381$9,760$3,200 $3,837$1,111$1,156
(1)Restructuring and other costs charged to:
Cost of sales$3,379 $504$867$-$2,512 $504$-$-
Expenses 6,155 5,934 4,183 1,033 1,972 4,901 - -
$9,534 $6,438$5,050$1,033$4,484 $5,405$-$-
DOREL INDUSTRIES INC.
SEGMENTED INFORMATION
NINE MONTHS ENDED SEPTEMBER 30
ALL FIGURES IN THOUSANDS OF US $, EXCEPT PER SHARE AMOUNTS
(unaudited)
TotalDorel JuvenileDorel SportsDorel Home Furnishings
20152014201520142015201420152014
(Restated) (Restated) (Restated)
Total revenue$2,014,419$1,976,552$786,910$781,277$746,515$793,100$480,994$402,175
Cost of sales (1) 1,582,052 1,514,173 578,280 558,921 585,474 603,258 418,298 351,994
Gross profit 432,367 462,379 208,630 222,356 161,041 189,842 62,696 50,181
Selling expenses 172,217 172,165 84,719 85,939 74,593 74,141 12,905 12,085
General and administrative expenses 141,792 139,739 71,698 67,142 51,466 56,222 18,628 16,375
Research and development expenses 27,041 24,253 19,583 16,152 4,652 5,177 2,806 2,924
Restructuring and other costs (1) 7,246 9,278 5,898 1,268 1,348 8,010 - -
Impairment losses on goodwill and customer relationships 26,510 - - - 26,510 - - -
Operating profit 57,561 116,944$26,732$51,855$2,472$46,292$28,357$18,797
Finance expenses 20,463 28,539
Corporate expenses 15,123 15,383
Income taxes expense 2,885 13,542
Net income$19,090$59,480
Earnings per share
Basic$0.59$1.85
Diluted$0.59$1.83
Depreciation and amortization included in operating profit$43,337$44,378$29,903$30,357$9,943$10,705$3,491$3,316
(1)Restructuring and other costs charged to:
Cost of sales$3,379$1,175$867$-$2,512$1,175$-$-
Expenses 7,246 9,278 5,898 1,268 1,348 8,010 - -
$10,625$10,453$6,765$1,268$3,860$9,185$-$-

Contact Information

  • MaisonBrison Communications
    Rick Leckner
    (514) 731-0000

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