March 9/17 18:09 pm - Dorel Announces 2016 Q4 & Year End

Posted by Editoress on 03/9/17
 

Dorel Industries Inc. (TSX:DII.B)(TSX:DII.A) announced on Thursday results for the fourth quarter and year ended December 30, 2016. Revenue for the fourth quarter was US$648.7 million, down 3.0% from US$668.9 million a year ago. Adjusted net income for the fourth quarter was US$7.7 million or US$0.24 per diluted share compared to adjusted net income of US$14.1 million or US$0.43 per diluted share in the fourth quarter of 2015. Reported net loss for the quarter was US$5.6 million or US$0.17 per diluted share compared to reported net income of US$6.6 million or US$0.20 per diluted share a year ago.
Revenue for the full year was US$2.60 billion, down 3.0% from US$2.68 billion the previous year. Adjusted net income for the year rose slightly to US$58.3 million or US$1.79 per diluted share compared to adjusted net income of US$58.0 million or US$1.78 per diluted share in 2015. Reported net loss was US$11.6 million or US$0.36 per diluted share, compared to reported net income of US$25.7 million or US$0.79 per diluted share the previous year.

The Company strengthened its statement of financial position throughout the year with cash provided by operating activities generating US$171.9 million, compared to US$78.7 million last year. Lowering inventory levels has been a prime focus, contributing to the improved cash flow. Year-over-year, the Company's net debt position (defined as long-term debt and bank indebtedness less cash and cash equivalents) has been reduced by approximately US$96.0 million. As a result, the indebtedness to adjusted EBITDA ratio improved to 2.28 from 3.06 in 2015 as detailed in the attached tables of this press release.

"Our management teams successfully navigated through challenging conditions in several markets in 2016. I am pleased with the results achieved across our business units. There was notable progress in inventory control and cash flow management. As such, we are considerably less leveraged than a year ago. It was another breakout year for Dorel Home and the segment has evolved from a traditional furniture company to one that understands today's marketplace with a best-in-class technological distribution platform for home products. Dorel Juvenile is changing to become more proactive in responding to industry trends, returning to its entrepreneurial origins. Management is simplifying the organization, concentrating on projects that generate profitable short-term revenue and materially accelerating our time to market. Despite the reduced top line at Dorel Sports, efforts at mitigating the headwinds in bikes were successful as fourth quarter adjusted operating profit increased almost 11%," stated Martin Schwartz, Dorel President and CEO.

Dorel Sports - Bicycle Division Continues to Struggle with Inventory Glut

Fourth quarter revenue decreased US$18.4 million, or 7.3% to US$235.3 million. Organic revenue declined approximately 14.6% when removing currency rate fluctuations and the revenue gross-up generated by the transition of Cycling Sports Group (CSG) International business from a licensing model to a distribution platform. Since this year's third quarter, CSG International's shipments have been recognized as net sales and associated expenses in cost of sales. Previously these were recognized on a net basis in licensing and commission income.

The quarter's revenue decline was due primarily to the change in North American CSG dealers' purchasing habits to reduce their inventory prior to the cycling season which is expected to move fourth quarter orders to the first half of 2017. CSG inventories are now at appropriate levels. December 2016 Bicycle Products Supplier Association (BPSA) data indicates U.S. supplier inventories are down 24.0% and retailer inventory levels down 6.3%.

Full year revenue declined US$61.2 million, or 6.1% to US$939.0 million and organic revenue declined by approximately 8.4% when removing currency rate fluctuations and the above-mentioned revenue recognition change impact. The main causes were the change in dealers' purchasing patterns, industry-wide discounting due to excess inventories at suppliers and retailers during the first half of 2016 and a generally soft global bike market overall.

Fourth quarter operating profit declined US$3.5 million to US$5.0 million and adjusted operating profit increased US$1.0 million, or 10.8% to US$10.2 million when excluding restructuring and other costs. Margin improvements and cost controls offset the reduced sales impact to exceed the prior year's fourth quarter.

Year-to-date operating loss was US$33.9 million compared to an operating profit of US$10.9 million in 2015. Excluding impairment losses, restructuring and other costs, adjusted operating profit declined US$10.5 million, or 24.9% to US$31.5 million mainly from lower demand and reduced margins from discounting during the first half of 2016. Pacific Cycle had a good year, in part, due to improved supply chain efficiencies. Strategic pricing, cost controls as well as a better product mix allowed Caloi to increase its profitability.

Commencing this year, restructuring actions are expected to result in annualized savings of US$5.0 million. The goal is to refocus the business to deliver enhanced profitability during all business conditions.