Dorel Files 2017 Audited Consolidated Financial Statements and Management’s Discussion and Analysis

MONTREAL, March 22, 2018 (GLOBE NEWSWIRE) -- Dorel Industries Inc. (TSX:DII.B) (TSX:DII.A) today announced that it has filed its audited consolidated financial statements and management’s discussion and analysis (MD&A) for the year ended December 30, 2017 with the applicable Canadian securities regulatory authorities. These consolidated financial statements differ from the year-end financial results issued on March 8, 2018, as outlined below, due to the evolving situation with Toys“R”Us.

On March 15, 2018, Toys“R”Us, one of Dorel’s customers, announced that it had filed a motion seeking Bankruptcy Court approval to begin the process of conducting an orderly wind-down of its U.S. business and liquidation of inventory in all of its U.S. stores. Dorel assessed whether an additional impairment loss on the trade accounts receivable from this customer should be recorded in its consolidated financial statements for the year ended December 30, 2017. Dorel has determined that an amount of US$7.6 million of trade accounts receivable from this customer as at December 30, 2017 is at risk of collection. Accordingly, Dorel has recorded a bad debt expense of US$3.8 million within general and administrative expenses in its consolidated financial statements for the year ended December 30, 2017 with respect to these trade accounts receivable from Toys“R”Us U.S., of which US$0.7 million is within Dorel Juvenile and US$3.1 million is within Dorel Sports. This amount represents Management’s current best estimate of potential losses arising from non-payment based on limited information available to date; the actual loss incurred may differ from this amount. The maximum credit risk to which Dorel is exposed as at December 30, 2017 represents the total value of the trade accounts receivable.

Revenue recorded from sales to Toys“R”Us U.S. business in Dorel’s 2018 first quarter, up to March 21, 2018, amounts to US$13.4 million. As at March 21, 2018, in total, Dorel has trade accounts receivable from Toys“R”Us U.S. amounting to US$17.2 million (net of allowance for anticipated credits and allowance for doubtful accounts including the bad debt expense referred to above but excluding any bad debt allowance on 2018 sales). This represents US$2.8 million within Dorel Home, US$5.2 million within Dorel Juvenile and US$9.2 million within Dorel Sports.

Dorel will continue to carefully monitor the Toys“R”Us situation as it unfolds, and will revise its estimated bad debt allowance for the 2017 sales and record any required allowance for the 2018 sales accordingly in Dorel’s 2018 first quarter consolidated financial statements, which Dorel expects to issue on May 4, 2018.

As a result of this adjusting event, Dorel is issuing revised financial results for the fourth quarter and year ended December 30, 2017 revised from those included in its press release issued on March 8, 2018. This represents a reduction of US$3.1 million in net income for both the fourth quarter and year ended December 30, 2017. Accordingly, adjusted net income for the fourth quarter of 2017 was US$17.3 million or US$0.53 per diluted share compared to US$7.7 million or US$0.24 per diluted share for the fourth quarter of 2016. Reported net loss for the quarter was US$6.1 million or US$0.19 per diluted share compared to US$5.6 million or US$0.17 per diluted share a year ago.

Adjusted net income for the year rose 14.9% to US$67.0 million or US$2.05 per diluted share, compared to US$58.3 million or US$1.79 per diluted share in 2016. Reported net income for the year was US$27.4 million or US$0.84 per diluted share, compared to a reported net loss of US$11.6 million or US$0.36 per diluted share the previous year.

In 2017, Toys“R”Us U.S. business accounted for approximately 3% of Dorel’s total revenue.

The consolidated financial statements and MD&A for the year ended December 30, 2017 are available on the Company’s website, www.dorel.com, and under Dorel’s profile on the SEDAR website, www.sedar.com. In addition, this press release contains the updated tables to indicate changes in certain Company metrics.

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 net income” and “adjusted earnings per 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. Please refer to the Company’s MD&A for reconciliations of non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP.

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, Bébé 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 risk resulting from the liquidation and reorganization of Toys“R”Us referred to in this press release and 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.

DOREL INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
ALL FIGURES IN THOUSANDS OF US $
(unaudited)
As at As at
December 30, December 30,
2017 2016
ASSETS
CURRENT ASSETS
Cash and cash equivalents$36,841 $31,883
Trade and other receivables425,736 422,118
Inventories592,136 549,688
Other financial assets553 4,333
Income taxes receivable12,035 14,466
Prepaid expenses26,593 21,040
Other assets13,747 8,944
1,107,641 1,052,472
Assets held for sale8,481 20,017
1,116,122 1,072,489
NON-CURRENT ASSETS
Property, plant and equipment199,026 191,294
Intangible assets442,626 427,587
Goodwill438,072 435,790
Deferred tax assets26,159 39,324
Other financial assets550 -
Other assets7,152 6,148
1,113,585 1,100,143
$2,229,707 $2,172,632
LIABILITIES
CURRENT LIABILITIES
Bank indebtedness$58,229 $49,490
Trade and other payables440,410 428,881
Forward purchase agreement liabilities- 7,500
Other financial liabilities4,546 569
Income taxes payable14,338 15,143
Long-term debt13,667 51,138
Provisions43,475 63,169
Other liabilities11,150 14,603
585,815 630,493
NON-CURRENT LIABILITIES
Long-term debt433,760 355,118
Net pension and post-retirement defined benefit liabilities35,237 35,206
Deferred tax liabilities43,832 53,293
Provisions2,953 1,681
Written put option liabilities23,464 26,325
Other financial liabilities1,338 1,115
Other liabilities11,157 13,302
551,741 486,040
EQUITY
Share capital203,300 202,400
Contributed surplus27,557 27,139
Accumulated other comprehensive loss(70,205) (113,840)
Other equity5,888 3,027
Retained earnings925,611 937,373
1,092,151 1,056,099
$2,229,707 $2,172,632


DOREL INDUSTRIES INC.
CONSOLIDATED INCOME STATEMENTS
ALL FIGURES IN THOUSANDS OF US $, EXCEPT PER SHARE AMOUNTS
(unaudited)
Fourth Quarters Ended Years Ended
December 30, December 30, December 30, December 30,
2017 2016 2017 2016
Sales$676,481 $647,559 $2,576,004 $2,596,062
Licensing and commission income571 1,190 1,664 7,123
TOTAL REVENUE677,052 648,749 2,577,668 2,603,185
Cost of sales (1)515,604 499,808 1,965,917 1,992,624
GROSS PROFIT161,448 148,941 611,751 610,561
Selling expenses58,929 57,730 233,106 230,623
General and administrative expenses 64,350 69,219 228,395 244,631
Research and development expenses8,039 14,463 31,065 39,092
Restructuring and other costs (1)4,138 12,887 11,814 19,560
Impairment losses on goodwill and intangible assets19,929 - 19,929 55,341
OPERATING PROFIT (LOSS)6,063 (5,358) 87,442 21,314
Finance expenses8,222 11,766 43,248 42,899
INCOME (LOSS) BEFORE INCOME TAXES(2,159) (17,124) 44,194 (21,585)
Income taxes expense (recovery)3,975 (11,557) 16,753 (9,974)
NET INCOME (LOSS) $(6,134) $(5,567) $27,441 $(11,611)
EARNINGS (LOSS) PER SHARE
Basic($0.19) ($0.17) $0.85 ($0.36)
Diluted($0.19) ($0.17) $0.84 ($0.36)
SHARES OUTSTANDING
Basic - weighted average32,426,326 32,373,809 32,409,551 32,352,953
Diluted - weighted average32,426,326 32,373,809 32,665,713 32,352,953
(1) Restructuring and other costs charged to:
Cost of sales$(438) $2,419 $260 $5,121
Expenses4,138 12,887 11,814 19,560
$3,700 $15,306 $12,074 $24,681

DOREL INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
ALL FIGURES IN THOUSANDS OF US $
(unaudited)
Fourth Quarters Ended
Years Ended
December 30,
2017
December 30,
2016
December 30,
2017
December 30,
2016
NET INCOME (LOSS) $(6,134) $(5,567) $27,441 $(11,611)
OTHER COMPREHENSIVE INCOME (LOSS):
Items that are or may be reclassified subsequently to net income:
Cumulative translation account:
Net change in unrealized foreign currency gains (losses) on translation of net investments in foreign operations, net of tax of nil1,920 (16,237) 40,342 3,856
Net gains (losses) on hedge of net investments in foreign operations, net of tax of nil1,643 (6,816) 12,809 (1,964)
3,563 (23,053) 53,151 1,892
Net changes in cash flow hedges:
Net change in unrealized gains (losses) on derivatives designated as cash flow hedges(706) 5,418 (9,363) 4,395
Reclassification to net income62 156 267 608
Reclassification to the related non-financial asset1,681 (2,768) 1,053 (4,477)
Deferred income taxes(346) (1,138) 1,949 (354)
691 1,668 (6,094) 172
Items that will not be reclassified to net income:
Defined benefit plans:
Remeasurements of the net pension and post-retirement defined benefit liabilities108 779 (43) (2,913)
Deferred income taxes(3,426) (465) (3,379) 965
(3,318) 314 (3,422) (1,948)
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)936 (21,071) 43,635 116
TOTAL COMPREHENSIVE INCOME (LOSS)$(5,198) $(26,638) $71,076 $(11,495)


DOREL INDUSTRIES INC.
CONSOLIDATED 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 loss:
Net loss-- - - - -(11,611)(11,611)
Other comprehensive income (loss)-- 1,892 172 (1,948)-- 116
-- 1,892 172 (1,948)-(11,611)(11,495)
Issued under stock option plan1,534- - - - -- 1,534
Reclassification from contributed surplus due to exercise of stock options385(385)- - - -- -
Reclassification from contributed surplus due to settlement of deferred share units204(420)- - - -- (216)
Share-based payments-1,197 - - - -- 1,197
Remeasurement of written put option liabilities-- - - - 1,500- 1,500
Dividends on common shares-- - - - -(38,818)(38,818)
Dividends on deferred share units-267 - - - -(267)-
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-- - - - -27,441 27,441
Other comprehensive income (loss)-- 53,151 (6,094)(3,422)-- 43,635
-- 53,151 (6,094)(3,422)-27,441 71,076
Reclassification from contributed surplus due to settlement of deferred share units900(1,074)- - - -- (174)
Share-based payments-1,184 - - - -- 1,184
Remeasurement of written put option liabilities-- - - - 2,861- 2,861
Dividends on common shares-- - - - -(38,895)(38,895)
Dividends on deferred share units-308 - - - -(308)-
Balance as at December 30, 2017$203,300 $27,557 $(49,478) $(3,242) $(17,485) $5,888 $925,611 $1,092,151


DOREL INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
ALL FIGURES IN THOUSANDS OF US $
(unaudited)
Fourth Quarters Ended
Years Ended
December 30,
2017
December 30,
2016
December 30,
2017
December 30,
2016
CASH PROVIDED BY (USED IN):
OPERATING ACTIVITIES
Net income (loss) $(6,134) $(5,567) $27,441 $(11,611)
Items not involving cash:
Depreciation and amortization13,129 13,275 50,145 53,186
Impairment losses on goodwill and intangible assets19,929 - 19,929 55,341
Unrealized losses (gains) arising on financial assets and financial liabilities classified as held for trading(492) (215) (394) 197
Share-based payments154 114 348 484
Defined benefit pension and post-retirement costs1,399 (74) 4,354 (5,711)
Loss (gain) on disposal of property, plant and equipment447 67 628 (1,286)
Write-down of deferred development costs- 5,590 - 5,590
Restructuring and other costs(222) 9,670 1,249 13,593
Finance expenses8,222 11,766 43,248 42,899
Income taxes expense (recovery)3,975 (11,557) 16,753 (9,974)
Net changes in balances related to operations (1)(15,987) 62,833 (65,085) 75,254
Income taxes paid(3,233) (3,830) (19,594) (20,257)
Income taxes received4,327 1,301 9,238 9,913
Interest paid(9,875) (12,927) (31,327) (36,200)
Interest received52 62 461 447
CASH PROVIDED BY OPERATING ACTIVITIES15,691 70,508 57,394 171,865
FINANCING ACTIVITIES
Bank indebtedness(275) (6,296) 6,927 (8,249)
Increase of long-term debt15,140 - 217,360 -
Repayments of long-term debt- (53,109) (187,189) (98,749)
Repayments of forward purchase agreement liabilities- - (7,857) (4,414)
Increase of written put option liabilities- - - 673
Financing costs(13) (91) (2,773) (2,173)
Issuance of share capital- 869 - 1,479
Dividends on common shares(9,730) (9,796) (38,895) (38,818)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES5,122 (68,423) (12,427) (150,251)
INVESTING ACTIVITIES
Acquisition of businesses- - - 5,475
Additions to property, plant and equipment (11,941) (6,001) (36,464) (20,014)
Disposals of property, plant and equipment142 12 390 1,564
Net proceeds from disposals of assets held for sale- 1,347 15,027 5,883
Additions to intangible assets(6,951) (4,061) (21,054) (16,165)
CASH USED IN INVESTING ACTIVITIES(18,750) (8,703) (42,101) (23,257)
Effect of foreign currency exchange rate changes on cash and cash equivalents454 (1,398) 2,092 344
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS2,517 (8,016) 4,958 (1,299)
Cash and cash equivalents, beginning of period34,324 39,899 31,883 33,182
CASH AND CASH EQUIVALENTS, END OF PERIOD$36,841 $31,883 $36,841 $31,883
(1) Supplemental information on net changes in balances related to operations:
Trade and other receivables$(26,371) $13,508 $8,754 $7,922
Inventories55,062 28,421 (23,730) 31,823
Other financial assets(5) (568) (629) 693
Prepaid expenses4,726 1,080 (3,851) (1,064)
Other assets1,385 (2,336) (4,571) (734)
Trade and other payables(48,670) (570) (13,757) (695)
Net pension and post-retirement defined benefit liabilities(687) (42) (3,833) (3,896)
Provisions, other financial liabilities and other liabilities(1,427) 23,340 (23,468) 41,205
$(15,987) $62,833 $(65,085) $75,254


DOREL INDUSTRIES INC.
SEGMENTED INFORMATION
FOURTH QUARTERS ENDED DECEMBER 30,
ALL FIGURES IN THOUSANDS OF US $, EXCEPT PER SHARE AMOUNTS
(unaudited)
Total
Dorel Juvenile
Dorel Sports
Dorel Home
2017 2016 2017 2016 2017 201620172016
Total revenue$677,052 $648,749 $239,306 $236,447 $236,771 $235,253 $200,975 $177,049
Cost of sales (1)515,604 499,808 168,661 165,207 184,666 187,255162,277147,346
Gross profit161,448 148,941 70,645 71,240 52,105 47,99838,69829,703
Selling expenses58,496 57,477 29,532 31,146 22,150 20,2586,8146,073
General and administrative expenses57,542 62,639 26,075 35,437 21,679 18,2709,7888,932
Research and development expenses8,039 14,463 5,634 11,798 1,373 1,7361,032929
Restructuring and other costs (1)4,138 12,887 3,780 10,118 358 2,769--
Impairment loss on goodwill19,929 - 19,929 - - ---
Operating profit (loss)13,304 1,475 $(14,305) $(17,259) $6,545 $4,965 $21,064 $13,769
Finance expenses8,222 11,766
Corporate expenses7,241 6,833
Income taxes expense (recovery)3,975 (11,557)
Net loss$(6,134) $(5,567)
Loss per share
Basic($0.19) ($0.17)
Diluted($0.19) ($0.17)
Depreciation and amortization included in operating profit (loss)$12,926 $13,057 $9,302 $9,857 $2,855 $2,592 $769 $608
Write-down of long-lived assets included in operating profit (loss)$1,854 $13,943 $1,854 $13,943 $- $ $- $-
(1) Restructuring and other costs charged to:
Cost of sales$(438) $2,419 $281 $- $(719) $2,419 $- $-
Expenses4,138 12,887 3,780 10,118 358 2,769--
$3,700 $15,306 $4,061 $10,118 $(361) $5,188 $- $-


DOREL INDUSTRIES INC.
SEGMENTED INFORMATION
YEARS ENDED DECEMBER 30,
ALL FIGURES IN THOUSANDS OF US $, EXCEPT PER SHARE AMOUNTS
(unaudited)
Total
Dorel Juvenile
Dorel Sports
Dorel Home
20172016 201720162017 2016 20172016
Total revenue $2,577,668 $2,603,185 $921,669 $928,963 $865,380 $938,975 $790,619 $735,247
Cost of sales (1)1,965,9171,992,624 646,408638,345670,440 742,774 649,069611,505
Gross profit611,751610,561 275,261290,618194,940 196,201 141,550123,742
Selling expenses231,417229,196 116,275115,13289,197 91,247 25,94522,817
General and administrative expenses205,076220,362 94,200115,44777,211 71,961 33,66532,954
Research and development expenses31,06539,092 21,89328,7255,313 6,576 3,8593,791
Restructuring and other costs (1)11,81419,560 10,35814,5541,456 5,006 --
Impairment losses on goodwill and intangible assets19,92955,341 19,929-- 55,341 --
Operating profit (loss)112,45047,010 $12,606 $16,760 $21,763 $(33,930) $78,081 $64,180
Finance expenses43,24842,899
Corporate expenses25,00825,696
Income taxes expense (recovery)16,753(9,974)
Net income (loss)$27,441 $(11,611)
Earnings (loss) per share
Basic $0.85($0.36)
Diluted $0.84($0.36)
Depreciation and amortization included in operating profit (loss)$49,338 $52,365 $35,744 $37,404 $9,748 $11,015 $3,846 $3,946
Write-down of long-lived assets included in operating profit (loss)$2,222 $14,367 $2,222 $14,367 $- $- $- $-
(1) Restructuring and other costs charged to:
Cost of sales$260 $5,121 $1,575 $- $(1,315) $5,121 $- $-
Expenses11,81419,560 10,35814,5541,456 5,006 --
$12,074 $24,681 $11,933 $14,554 $141 $10,127 $- $-

CONTACTS:
MaisonBrison Communications
Rick Leckner
(514) 731-0000

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

Source:Les Industries Dorel Inc.