q3 highlights - dorelan increase in ecommerce sales. significantly, the segment has also succeeded...
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A WORD FROM THE PRESIDENTThe 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 potential 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.
Martin SchwartzPresident & CEO — November 5, 2015
Dorel Industries Inc. (TSX: DII.B, 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.
A COMPANY IN MOTION
INVESTOR FACT SHEET Q3 2015 TSX: DII.B, DII.ATHIRD QUARTER — SEPTEMBER 30, 2015
Q3 HIGHLIGHTSQ3 REVENUE 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 Q3 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 expense. After tax, this net negative impact represented US$0.28 per diluted share. 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. FX had a consolidated net negative impact of US$33 million or US$0.81 per diluted share.
DOREL JUVENILE Q3 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. 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, 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. 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. Operating profit was impacted by a net negative impact of foreign exchange rates of approximatively US$4 million for Q3 and US$15 million for the nine-months.
DOREL SPORTS Q3 REVENUE REMAINED FLAT AT US$266.5 MILLION, BUT WAS UP APPROXIMATELY 9% AFTER REMOVING THE IMPACT OF FOREIGN EXCHANGE YEAR-OVER-YEAR. 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. Q3 adjusted operating profit of US$10.8 million was down US$9.3 million, or 46.3%. Year-to-date adjusted operating profit was US$32.8 million, a decline of 40.8% compared to last year. Foreign exchange had a net negative impact on the segment’s operating profit of approximatively US$10 million during Q3 and US$24 million for the nine-months.
DOREL HOME FURNISHINGS Q3 REVENUE INCREASED US$19.7 MILLION OR 13.5% TO US$165.5 MILLION, FROM US$145.8 MILLION A YEAR AGO. 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$28.4 million, an increase of 84.9% and 50.9%, respectively.
OUTLOOKDespite challenges through much of 2015, Dorel Sports will turn the corner in the fourth quarter with increases over last year in both sales and earnings. Considerable changes have been made in the segment, new pricing has been implemented on 2016 model year bicycles and Dorel Sports has launched its largest ever number of new bicycle platforms. These new investments will pay off with the start of a new positive trend going forward. Foreign exchange remains unpredictable, however the segment is in a stronger position to face this issue.
The substantial growth trend established by Home Furnishings during the first nine months is expected to continue through the end of the year. All divisions have benefitted from an increase in ecommerce sales. Significantly, the segment has also succeeded in maintaining its level of sales in the brick and mortar channel. This combination should result in an excellent year for Home Furnishings.
Sales and adjusted operating profit for Dorel Juvenile for the fourth quarter are expected to be at levels similar to those of the third quarter as foreign exchange rates are not showing signs of immediate recovery. Recently introduced new products are priced at current foreign exchange rate levels and this, along with the benefits of our restructuring activities initiated in the third quarter, will positively impact earnings as we begin 2016.
FINANCIAL HIGHLIGHTS (in thousands of US$, except per share amounts)
Except for historical information provided herein, this fact sheet may contain information and statements of a forward-looking nature concerning the future performance of the Company. These statements are based on suppositions and uncertainties as well as on management’s best possible evaluation of future events. Such factors may include, without excluding other considerations, fluctuations in quarterly results, evolution in customer demand for the Company’s products and services, the impact of price pressures exerted by competitors, and general market trends or economic changes. As a result, readers are advised that actual results may differ from expected results.
STOCK DATA
as at November 5, 2015 (TSX: DII.B, DII.A)
Shares outstanding A 4,195,135 B 28,126,876 32,322,011
Market capitalization (CAD$M) .......................................................... 1,061.78 Adjusted P/E ratio (LTM)* ....................................................................... 15.64 Reported P/E Ratio (LTM) ..................................................................... (15.41)Stock price (CAD$) ............................................................................... $32.85 52-wk high (CAD$) ............................................................................... $42.12 52-wk low (CAD$)................................................................................. $29.50
CONTACT
Jeffrey Schwartz (514) 934-3034Email: [email protected]
MaisonBrison CommunicationsRick Leckner (514) 731-0000Email: [email protected]
DOREL INDUSTRIES INC.
1255 Greene Avenue, Suite 300Westmount, Quebec, Canada H3Z 2A4www.dorel.com
President and CEO: Martin SchwartzCFO: Jeffrey Schwartz
GEOGRAPHIC DISTRIBUTION OF 2014 SALES AND SHARE PRICES AND VOLUMES
54% United States
5% Canada
10% Latin America
24% Europe
7% Other
Share Pricing Volume
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* As a result of impairment losses, restructuring and other costs and remeasurement of the forward purchase agreement liabilities, the P/E ratio is presented on an adjusted basis. For additional information regarding the specific items and non-GAAP measures, please refer to the section entitled “Operating results: non-GAAP measures” in the MD&A for the quarter ended September 30, 2015 and the year ended December 30, 2014.
(Periods Ended September 30) Q3’15 Q3’14 %chg 9M’15 9M’14 %chg
Revenue 679,287 673,020 0.9% 2,014,419 1,976,552 1.9%Adjusted gross profit (1) 139,934 151,998 (7.9%) 435,746 463,554 (6.0%)Adjusted net income (1) 15,469 23,771 (34.9%) 43,889 72,975 (39.9%)Adjusted earnings per share (1) - Basic 0.48 0.74 (35.1%) 1.36 2.27 (40.1%) - Diluted 0.48 0.73 (34.2%) 1.35 2.25 (40.0%)Gross profit 135,555 151,494 (9.9%) 432,367 462,379 (6.5%)Net income (loss) (8,757) 19,480 (145.0%) 19,090 59,480 (67.9%)Earnings per share - Basic (0.27) (0.60) (145.0%) 0.59 1.85 (68.1%) - Diluted (0.27) (0.60) (145.0%) 0.59 1.83 (67.8%)Capital expenditures (2) 11,577 13,863 (16.5%) 37,551 41,455 (9.4%)Cash flow from operations 77,404 59,408 30.3% 7,891 76,000 (89.6%)Weighted avg. # of diluted shares outstanding 32,322,011 32,493,300 (0.5%) 32,522,810 32,417,922 0.3%Total assets — — — 2,436,102 2,470,136 —Total debt (3) — — — 602,252 464,939 —Shareholders’ equity — — — 1,113,660 1,338,730 —
(1) On adjusted basis. For reconciliation of these non-GAAP measures to the most directly comparable financial measures calculated in accordance with GAAP, please refer to the section entitled “operating results - non-GAAP measures” in the Management Discussion and Analysis” for the third quarter and nine months ended September 30, 2015. (2) Capital expenditures = additions of property, plant and equiopment and intangible assets net of any disposals. (3) Total debt = bank indebtedness + long-term debt