- Lower sales in North America as major brick and mortar customers attempt to reduce inventories
- Continued strength of U.S. dollar results in US$14.0 million negative foreign exchange impact at Dorel Juvenile
- Dorel Home concludes agreement to sell building in Cornwall, Ontario for CDN$46.1 million and subsequently enters into multi-year lease
MONTREAL, Nov. 04, 2022 (GLOBE NEWSWIRE) -- Dorel Industries Inc. (TSX: DII.B, DII.A) today announced results for the third quarter and nine months ended September 30, 2022.
Third quarter revenue was US$374.1 million, down 14.4% from US$437.2 million last year. Reported net loss from continuing operations was US$36.7 million or US$1.13 per diluted share, compared to US$68.0 million or US$2.09 per diluted share last year. Adjusted net loss1 from continuing operations was US$34.7 million or US$1.07 per diluted share, compared to US$66.8 million or US$2.06 per diluted share a year ago. Last year’s third quarter loss included US$61.7 million, or US$1.90 per diluted share as the result of an unfavourable tax assessment.
Nine-month revenue from continuing operations was US$1.23 billion, a decrease of 7.1% compared to US$1.32 billion last year. Reported net loss from continuing operations year-to-date was US$77.6 million or US$2.38 per diluted share, compared to US$82.2 million or US$2.53 per diluted share in 2021. Nine-month adjusted net loss1 from continuing operations was US$71.2 million or US$2.19 per diluted share, compared to US$70.8 million or US$2.18 per diluted share a year ago.
“It was a difficult quarter as we saw a significant drop in orders from our U.S. brick and mortar retail partners. These customers are reacting to the overall negative economic environment and poor consumer sentiment by focusing on reducing their in-store inventory levels across many product categories, including ours. We are also carrying excess inventories as the supply chain bottlenecks have eased, resulting in a considerable influx of merchandise as we entered the third quarter. At Dorel Home, this situation started in the second quarter and we responded with promotional activities in an effort to reduce inventory. The drop in orders at Dorel Juvenile in the U.S. was much more than we expected, after what was a tremendous second quarter. This coupled with the U.S. dollar strengthening even more in the third quarter were the two biggest drivers of our underperformance. Further, consumers in Europe are much more cautious due to the continued instability abroad and the particularly acute fall in the value of the Euro and Pound Sterling. As we move forward, our focus for the balance of the year will be to drive sales to reduce inventories and generate cash to prepare for 2023 where we anticipate lower input costs and a return to more normal ordering levels,” stated Dorel President & CEO, Martin Schwartz.
______________________
1 This is a non-GAAP financial ratio or measure with no standardized meaning prescribed by IFRS and therefore is unlikely to be comparable to similar measures presented by other issuers. Refer to the section “Definition and reconciliation of non-GAAP financial ratios and measures” in this press release.
| Summary of Financial Information (unaudited) | ||||||
| Third Quarters Ended September 30, | ||||||
| All figures in thousands of US $, except per share amounts | ||||||
| 2022 | 2021 | Change | ||||
| $ | $ | % | ||||
| CONTINUING OPERATIONS | ||||||
| Revenue | 374,143 | 437,236 | (14.4 | %) | ||
| Net loss | (36,747 | ) | (68,022 | ) | 46.0 | % |
| Per share - Basic | (1.13 | ) | (2.09 | ) | 45.9 | % |
| Per share - Diluted | (1.13 | ) | (2.09 | ) | 45.9 | % |
| Adjusted net loss(1) | (34,691 | ) | (66,813 | ) | 48.1 | % |
| Per share - Diluted(1) | (1.07 | ) | (2.06 | ) | 48.1 | % |
| Number of shares outstanding – | ||||||
| Basic weighted average | 32,536,472 | 32,505,121 | ||||
| Diluted weighted average | 32,536,472 | 32,505,121 | ||||
| (1) This is a non-GAAP financial ratio or measure with no standardized meaning prescribed by IFRS and therefore is unlikely to be comparable to similar measures presented by other issuers. Refer to the section “Definition and reconciliation of non-GAAP financial ratios and measures” in this press release. | ||||||
| Summary of Financial Information (unaudited) | ||||||
| Nine Months Ended September 30, | ||||||
| All figures in thousands of US $, except per share amounts | ||||||
| 2022 | 2021 | Change | ||||
| $ | $ | % | ||||
| CONTINUING OPERATIONS | ||||||
| Revenue | 1,230,013 | 1,323,436 | (7.1 | %) | ||
| Net loss | (77,561 | ) | (82,246 | ) | 5.7 | % |
| Per share - Basic | (2.38 | ) | (2.53 | ) | 5.9 | % |
| Per share - Diluted | (2.38 | ) | (2.53 | ) | 5.9 | % |
| Adjusted net loss(1) | (71,166 | ) | (70,763 | ) | (0.6 | %) |
| Per share - Diluted(1) | (2.19 | ) | (2.18 | ) | (0.5 | %) |
| Number of shares outstanding – | ||||||
| Basic weighted average | 32,536,782 | 32,505,121 | ||||
| Diluted weighted average | 33,373,873 | 32,505,121 | ||||
| (1) This is a non-GAAP financial ratio or measure with no standardized meaning prescribed by IFRS and therefore is unlikely to be comparable to similar measures presented by other issuers. Refer to the section “Definition and reconciliation of non-GAAP financial ratios and measures” in this press release. | ||||||
Dorel Home
| All figures in thousands of US $ | ||||||||||
| Third Quarters Ended September 30 (unaudited) | ||||||||||
| 2022 | 2021 | Change | ||||||||
| $ | % of rev. | $ | % of rev. | % | ||||||
| Revenue | 187,448 | 218,127 | (14.1 | %) | ||||||
| Gross profit | 8,918 | 4.8 | % | 23,065 | 10.6 | % | (61.3 | %) | ||
| Operating (loss) profit | (7,996 | ) | 6,814 | n.m. | ||||||
| n.m. = not meaningful | ||||||||||
| All figures in thousands of US $ | ||||||||||
| Nine Months Ended September 30 (unaudited) | ||||||||||
| 2022 | 2021 | Change | ||||||||
| $ | % of rev. | $ | % of rev. | % | ||||||
| Revenue | 608,745 | 683,604 | (11.0 | %) | ||||||
| Gross profit | 51,031 | 8.4 | % | 85,698 | 12.5 | % | (40.5 | %) | ||
| Operating (loss) profit | (236 | ) | 35,952 | n.m. | ||||||
| n.m. = not meaningful | ||||||||||
Revenue for the third quarter was US$187.4 million, down US$30.7 million, or 14.1% when compared to the same period a year ago. The sales decrease was mainly attributable to a drop of 31% in gross sales at brick-and-mortar due to high in-store stock levels and poor POS. Internet sales were down only slightly, underlining the strength of this channel in challenging market conditions. Branded sales also showed more resilience in the quarter, reinforcing the importance of our strategy to differentiate our product line through strategic partnerships. Nine-month revenue was US$608.7 million, a decrease of US$74.9 million or 11.0%.
Operating loss for the third quarter was US$8.0 million compared to an operating profit of US$6.8 million last year, hurt by the reduced sales volumes, significant promotional pricing and increased input costs. Operational performance improved at the segment’s warehouse and distribution facilities and, coupled with lower inventories, resulted in decreased warehouse and distribution costs compared to last year’s third quarter. Inventories for the segment dropped by US$27.0 million from the end of the second quarter. Nine-month operating loss was US$0.2 million, compared with an operating profit of US$36.0 million a year ago.
Dorel Juvenile
| All figures in thousands of US $ | ||||||||||
| Third Quarters Ended September 30 (unaudited) | ||||||||||
| 2022 | 2021 | Change | ||||||||
| $ | % of rev. | $ | % of rev. | % | ||||||
| Revenue | 186,695 | 219,109 | (14.8 | %) | ||||||
| Gross profit | 29,978 | 16.1 | % | 51,154 | 23.3 | % | (41.4 | %) | ||
| Operating (loss) profit | (18,446 | ) | 2,426 | n.m. | ||||||
| Adjusted operating (loss) profit(1) | (16,195 | ) | 3,816 | n.m. | ||||||
| n.m. = not meaningful | ||||||||||
| (1) This is a non-GAAP financial ratio or measure with no standardized meaning prescribed by IFRS and therefore is unlikely to be comparable to similar measures presented by other issuers. Refer to the section “Definition and reconciliation of non-GAAP financial ratios and measures” in this press release. | ||||||||||
| All figures in thousands of US $ | ||||||||||
| Nine Months Ended September 30 (unaudited) | ||||||||||
| 2022 | 2021 | Change | ||||||||
| $ | % of rev. | $ | % of rev. | % | ||||||
| Revenue | 621,268 | 639,832 | (2.9 | %) | ||||||
| Gross profit | 125,381 | 20.2 | % | 160,037 | 25.0 | % | (21.7 | %) | ||
| Operating loss | (35,609 | ) | (3,053 | ) | n.m. | |||||
| Adjusted operating (loss) profit(1) | (28,800 | ) | 8,902 | n.m. | ||||||
| n.m. = not meaningful | ||||||||||
| (1) This is a non-GAAP financial ratio or measure with no standardized meaning prescribed by IFRS and therefore is unlikely to be comparable to similar measures presented by other issuers. Refer to the section “Definition and reconciliation of non-GAAP financial ratios and measures” in this press release. | ||||||||||
Third quarter revenue was US$186.7 million, a decrease of US$32.4 million, or 14.8% versus 2021’s comparable period. Organic revenue1 decreased by 9.0% after removing the impact of varying foreign exchange rates year-over-year. This decline followed the highest revenue quarter since 2019 and was driven mainly by key U.S. retail customers reducing orders significantly to lower inventories across many categories, including Juvenile. This also created out-of-stock positions in-store, further reducing sales opportunities. Partially offsetting this was strong E-Commerce sales and recent point-of-sale data indicating demand for Dorel Juvenile product remains robust. Europe continued to face difficult market conditions due to ongoing geopolitical instability, high inflation and the weakened Euro which reached a 20-year low. Positive contributions to revenue in the quarter were from Brazil, Canada and Mexico which performed well. Nine-month revenue was US$621.3 million, down US$18.6 million or 2.9% from last year as sales increases in the first half were negated by the difficult third quarter.
Third quarter operating loss was US$18.4 million compared with an operating profit of US$2.4 million a year ago. Excluding restructuring costs, adjusted operating loss1 was US$16.2 million, versus an adjusted operating profit1 of US$3.8 million last year. A major contributor to the loss was the continued strength of the U.S. dollar against all other major currencies, which resulted in a negative US$14.0 million foreign exchange impact. As was the case the previous quarter, a further US$1.3 million expense was booked related to a warehouse lease in California renewed at a higher rate. Year-to-date operating loss was US$35.6 million compared to US$3.1 million last year. Nine-month adjusted operating loss1 was US$28.8 million compared to an adjusted operating profit1 of US$8.9 million a year ago.
Other
After quarter-end Dorel concluded the sale of its building in Cornwall, Ontario, the location of a Dorel Home ready-to-assemble manufacturing facility for CDN$46.1 million and subsequently entered into a multi-year lease agreement with the new owner.
Outlook
“Dorel Home was able to reduce inventories significantly in the quarter despite our retail partners focusing on reducing their own inventories at the same time. This effort will continue through the fourth quarter. This is also a priority at Dorel Juvenile where inventory levels are higher than necessary as the drop in third quarter orders was more significant than expected. As evidenced by our e-commerce sales and point-of-sale data, we believe this phenomenon cannot continue indefinitely as there is demand for our products from our consumers. However as of now, we expect this trend to continue through the balance of the year and remain focused on reducing inventory levels in preparation for 2023,” commented Dorel President & CEO, Martin Schwartz.
“With no real change in the value of the U.S. dollar versus other currencies, continued lower sales in the U.S. in the short-term and on-going challenges in Europe, we do not expect an improvement in earnings in the fourth quarter. However, as we look to 2023, better margins are expected, and as mentioned last quarter, we have also secured new listings for 2023 with many of our major accounts,” concluded Mr. Schwartz.
Conference Call
Dorel Industries Inc. will hold a conference call to discuss these results on Friday, November 4, 2022 at 1:00 P.M. Eastern Time. Interested parties can join the call by dialing 1-888-396-8049. The conference call can also be accessed via live webcast at http://www.dorel.com. If you are unable to call in at this time, you may access a recording of the meeting by calling 1-877-674-7070 and entering the passcode 574262 on your phone. This recording will be available on Friday, November 4, 2022 as of 4:30 P.M. until 11:59 P.M. on Friday, November 11, 2022.
Condensed consolidated interim financial statements as at September 30, 2022 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, DII.A) is a global organization, operating two distinct businesses in juvenile products 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 Maxi-Cosi and Tiny Love, complemented by regional brands such as Safety 1st, BebeConfort, Cosco and Infanti. Dorel Home, with its comprehensive e-commerce platform, markets a wide assortment of domestically produced and imported furniture. Dorel has annual sales of US$1.7 billion and employs approximately 4,200 people in facilities located in twenty-two 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, the Company 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, including statements regarding the impact of the COVID-19 pandemic on the Company’s business, financial position and operations, and are based on several assumptions which give rise to the possibility that actual results could differ materially from the Company’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, the Company cannot guarantee that any forward-looking statement will materialize, or if any of them do, what benefits the Company 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 the Company’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 the Company believed were reasonable on the day it made the forward-looking statements. Factors that could cause actual results to differ materially from the Company’s expectations expressed in or implied by the forward-looking statements include:
- general economic and financial conditions, including those resulting from the current high inflationary environment;
- changes in applicable laws or regulations;
- changes in product costs and supply channels, including disruption of the Company’s supply chain resulting from the COVID-19 pandemic;
- foreign currency fluctuations, including high levels of volatility in foreign currencies with respect to the US dollar reflecting uncertainties related to the COVID-19 pandemic;
- customer and credit risk, including the concentration of revenues with a 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;
- outbreak of public health crises, such as the current COVID-19 pandemic, that could adversely affect global economies and financial markets, resulting in an economic downturn which could be for a prolonged period of time and have a material adverse effect on the demand for the Company’s products and on its business, financial condition and results of operations;
- the effect of international conflicts on the Company’s sales, including the ongoing Russia-Ukraine war;
- continued access to capital resources, including compliance by the Company with all of the terms and conditions under its ABL facility, and the related costs of borrowing, all of which may be adversely impacted by the COVID-19 pandemic;
- failures related to information technology systems;
- changes in assumptions in the valuation of goodwill and other intangible assets and future decline in market capitalization; and
- there being no certainty that the Company will declare any dividend in the future.
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 the Company’s Annual MD&A and Annual Information Form filed with the applicable Canadian securities regulatory authorities. The risk factors set out in the previously mentioned documents are expressly incorporated by reference herein in their entirety.
The Company cautions readers that the risks described above are not the only ones that could impact it. Additional risks and uncertainties not currently known to the Company or that the Company currently deems to be immaterial may also have a material adverse effect on the Company’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.
All figures in the tables below are in thousands of US $, except per share amounts.
Consolidated Results
| Third Quarters Ended | Nine Months Ended | ||||||||||||||||
| Sep 30, | Sep 30, | Variation | Sep 30, | Sep 30, | Variation | ||||||||||||
| 2022 | 2021 | $ | % | 2022 | 2021 | $ | % | ||||||||||
| CONTINUING OPERATIONS | |||||||||||||||||
| Revenue | 374,143 | 437,236 | (63,093 | ) | (14.4 | )% | 1,230,013 | 1,323,436 | (93,423 | ) | (7.1 | )% | |||||
| Cost of sales | 335,247 | 363,017 | (27,770 | ) | (7.6 | )% | 1,053,601 | 1,077,701 | (24,100 | ) | (2.2 | )% | |||||
| Gross profit | 38,896 | 74,219 | (35,323 | ) | (47.6 | )% | 176,412 | 245,735 | (69,323 | ) | (28.2 | )% | |||||
| Selling expenses | 30,422 | 31,321 | (899 | ) | (2.9 | )% | 95,013 | 93,610 | 1,403 | 1.5 | % | ||||||
| General and administrative expenses | 33,595 | 31,003 | 2,592 | 8.4 | % | 112,903 | 106,620 | 6,283 | 5.9 | % | |||||||
| Research and development expenses | 6,041 | 7,187 | (1,146 | ) | (15.9 | )% | 18,901 | 22,604 | (3,703 | ) | (16.4 | )% | |||||
| Impairment loss (reversal) on trade accounts receivable | 303 | (369 | ) | 672 | n.m. | 1,034 | 43 | 991 | n.m. | ||||||||
| Restructuring costs | 2,251 | 1,390 | 861 | 61.9 | % | 6,809 | 11,955 | (5,146 | ) | (43.0 | )% | ||||||
| Operating (loss) profit | (33,716 | ) | 3,687 | (37,403 | ) | n.m. | (58,248 | ) | 10,903 | (69,151 | ) | n.m. | |||||
| Adjusted operating (loss) profit(1) | (31,465 | ) | 5,077 | (36,542 | ) | n.m. | (51,439 | ) | 22,858 | (74,297 | ) | n.m. | |||||
| Finance expenses | 5,079 | 15,966 | (10,887 | ) | (68.2 | )% | 22,228 | 30,193 | (7,965 | ) | (26.4 | )% | |||||
| Loss before income taxes | (38,795 | ) | (12,279 | ) | (26,516 | ) | (215.9 | )% | (80,476 | ) | (19,290 | ) | (61,186 | ) | (317.2 | )% | |
| Income taxes (recovery) expense | (2,048 | ) | 55,743 | (57,791 | ) | n.m. | (2,915 | ) | 62,956 | (65,871 | ) | n.m. | |||||
| Net loss from continuing operations | (36,747 | ) | (68,022 | ) | 31,275 | 46.0 | % | (77,561 | ) | (82,246 | ) | 4,685 | 5.7 | % | |||
| Adjusted net loss from continuing operations(1) | (34,691 | ) | (66,813 | ) | 32,122 | 48.1 | % | (71,166 | ) | (70,763 | ) | (403 | ) | (0.6 | )% | ||
| Basic loss per share from continuing operations | (1.13 | ) | (2.09 | ) | 0.96 | 45.9 | % | (2.38 | ) | (2.53 | ) | 0.15 | 5.9 | % | |||
| Diluted loss per share from continuing operations | (1.13 | ) | (2.09 | ) | 0.96 | 45.9 | % | (2.38 | ) | (2.53 | ) | 0.15 | 5.9 | % | |||
| Adjusted diluted loss per share from continuing operations(1) | (1.07 | ) | (2.06 | ) | 0.99 | 48.1 | % | (2.19 | ) | (2.18 | ) | (0.01 | ) | (0.5 | )% | ||
| DISCONTINUED OPERATION | |||||||||||||||||
| Income from discontinued operation, net of tax | - | 31,071 | (31,071 | ) | (100.0 | )% | 254,478 | 70,260 | 184,218 | 262.2 | % | ||||||
| Net (loss) income | (36,747 | ) | (36,951 | ) | 204 | 0.6 | % | 176,917 | (11,986 | ) | 188,903 | n.m. | |||||
| Basic (loss) earnings per share | (1.13 | ) | (1.14 | ) | 0.01 | 0.9 | % | 5.44 | (0.37 | ) | 5.81 | n.m. | |||||
| Diluted (loss) earnings per share | (1.13 | ) | (1.14 | ) | 0.01 | 0.9 | % | 5.30 | (0.37 | ) | 5.67 | n.m. | |||||
| Weighted average number of shares - Basic | 32,536,472 | 32,505,121 | n/a | n/a | 32,536,782 | 32,505,121 | n/a | n/a | |||||||||
| Weighted average number of shares - Diluted | 32,536,472 | 32,505,121 | n/a | n/a | 33,373,873 | 32,505,121 | n/a | n/a | |||||||||
| Gross margin(2) | 10.4 | % | 17.0 | % | n/a | (660) bp | 14.3 | % | 18.6 | % | n/a | (430) bp | |||||
| Selling expenses as a percentage of revenue(3) | 8.1 | % | 7.2 | % | n/a | 90 bp | 7.7 | % | 7.1 | % | n/a | 60 bp | |||||
| General and administrative expenses as a percentage of revenue(4) | 9.0 | % | 7.1 | % | n/a | 190 bp | 9.2 | % | 8.1 | % | n/a | 110 bp | |||||
| n.m. = not meaningful | |||||||||||||||||
| n/a = not applicable | |||||||||||||||||
| bp = basis point | |||||||||||||||||
| (1) This is a non-GAAP financial ratio or measure with no standardized meaning prescribed by IFRS and therefore is unlikely to be comparable to similar measures presented by other issuers. Refer to the section “Definition and reconciliation of non-GAAP financial ratios and measures” in this press release. | |||||||||||||||||
| (2) Gross margin is defined as gross profit divided by revenue. | |||||||||||||||||
| (3) Selling expenses as a percentage of revenue is defined as selling expenses divided by revenue. | |||||||||||||||||
| (4) General and administrative expenses as a percentage of revenue is defined as general and administrative expenses divided by revenue. | |||||||||||||||||
Dorel Home
| Third Quarters Ended | Nine Months Ended | ||||||||||||||||
| Sep 30, | Sep 30, | Variation | Sep 30, | Sep 30, | Variation | ||||||||||||
| 2022 | 2021 | $ | % | 2022 | 2021 | $ | % | ||||||||||
| Revenue | 187,448 | 218,127 | (30,679 | ) | (14.1 | )% | 608,745 | 683,604 | (74,859 | ) | (11.0 | )% | |||||
| Cost of sales | 178,530 | 195,062 | (16,532 | ) | (8.5 | )% | 557,714 | 597,906 | (40,192 | ) | (6.7 | )% | |||||
| Gross profit | 8,918 | 23,065 | (14,147 | ) | (61.3 | )% | 51,031 | 85,698 | (34,667 | ) | (40.5 | )% | |||||
| Selling expenses | 6,706 | 6,822 | (116 | ) | (1.7 | )% | 20,684 | 19,672 | 1,012 | 5.1 | % | ||||||
| General and administrative expenses | 8,922 | 8,083 | 839 | 10.4 | % | 26,686 | 26,345 | 341 | 1.3 | % | |||||||
| Research and development expenses | 1,297 | 1,284 | 13 | 1.0 | % | 3,899 | 3,618 | 281 | 7.8 | % | |||||||
| Impairment (reversal) loss on trade accounts receivable | (11 | ) | 62 | (73 | ) | n.m. | (2 | ) | 111 | (113 | ) | n.m. | |||||
| Operating (loss) profit | (7,996 | ) | 6,814 | (14,810 | ) | n.m. | (236 | ) | 35,952 | (36,188 | ) | n.m. | |||||
| Gross margin(1) | 4.8 | % | 10.6 | % | n/a | (580) bp | 8.4 | % | 12.5 | % | n/a | (410) bp | |||||
| Selling expenses as a percentage of revenue(2) | 3.6 | % | 3.1 | % | n/a | 50 bp | 3.4 | % | 2.9 | % | n/a | 50 bp | |||||
| General and administrative expenses as a percentage of revenue(3) | 4.8 | % | 3.7 | % | n/a | 110 bp | 4.4 | % | 3.9 | % | n/a | 50 bp | |||||
| n.m. = not meaningful | |||||||||||||||||
| n/a = not applicable | |||||||||||||||||
| bp = basis point | |||||||||||||||||
| (1) Gross margin is defined as gross profit divided by revenue. | |||||||||||||||||
| (2) Selling expenses as a percentage of revenue is defined as selling expenses divided by revenue. | |||||||||||||||||
| (3) General and administrative expenses as a percentage of revenue is defined as general and administrative expenses divided by revenue. | |||||||||||||||||
Dorel Juvenile
| Third Quarters Ended | Nine Months Ended | ||||||||||||||||
| Sep 30, | Sep 30, | Variation | Sep 30, | Sep 30, | Variation | ||||||||||||
| 2022 | 2021 | $ | % | 2022 | 2021 | $ | % | ||||||||||
| Revenue | 186,695 | 219,109 | (32,414 | ) | (14.8 | )% | 621,268 | 639,832 | (18,564 | ) | (2.9 | )% | |||||
| Cost of sales | 156,717 | 167,955 | (11,238 | ) | (6.7 | )% | 495,887 | 479,795 | 16,092 | 3.4 | % | ||||||
| Gross profit | 29,978 | 51,154 | (21,176 | ) | (41.4 | )% | 125,381 | 160,037 | (34,656 | ) | (21.7 | )% | |||||
| Selling expenses | 23,541 | 24,326 | (785 | ) | (3.2 | )% | 73,795 | 73,439 | 356 | 0.5 | % | ||||||
| General and administrative expenses | 17,574 | 17,540 | 34 | 0.2 | % | 64,348 | 58,778 | 5,570 | 9.5 | % | |||||||
| Research and development expenses | 4,744 | 5,903 | (1,159 | ) | (19.6 | )% | 15,002 | 18,986 | (3,984 | ) | (21.0 | )% | |||||
| Impairment loss (reversal) on trade accounts receivable | 314 | (431 | ) | 745 | n.m. | 1,036 | (68 | ) | 1,104 | n.m. | |||||||
| Restructuring costs | 2,251 | 1,390 | 861 | 61.9 | % | 6,809 | 11,955 | (5,146 | ) | (43.0 | )% | ||||||
| Operating (loss) profit | (18,446 | ) | 2,426 | (20,872 | ) | n.m. | (35,609 | ) | (3,053 | ) | (32,556 | ) | n.m. | ||||
| Adjusted operating (loss) profit(1) | (16,195 | ) | 3,816 | (20,011 | ) | n.m. | (28,800 | ) | 8,902 | (37,702 | ) | n.m. | |||||
| Gross margin(2) | 16.1 | % | 23.3 | % | n/a | (720) bp | 20.2 | % | 25.0 | % | n/a | (480) bp | |||||
| Selling expenses as a percentage of revenue(3) | 12.6 | % | 11.1 | % | n/a | 150 bp | 11.9 | % | 11.5 | % | n/a | 40 bp | |||||
| General and administrative expenses as a percentage of revenue(4) | 9.4 | % | 8.0 | % | n/a | 140 bp | 10.4 | % | 9.2 | % | n/a | 120 bp | |||||
| n.m. = not meaningful | |||||||||||||||||
| n/a = not applicable | |||||||||||||||||
| bp = basis point | |||||||||||||||||
| (1) This is a non-GAAP financial ratio or measure with no standardized meaning prescribed by IFRS and therefore is unlikely to be comparable to similar measures presented by other issuers. Refer to the section “Definition and reconciliation of non-GAAP financial ratios and measures” in this press release. | |||||||||||||||||
| (2) Gross margin is defined as gross profit divided by revenue. | |||||||||||||||||
| (3) Selling expenses as a percentage of revenue is defined as selling expenses divided by revenue. | |||||||||||||||||
| (4) General and administrative expenses as a percentage of revenue is defined as general and administrative expenses divided by revenue. | |||||||||||||||||
Definition and Reconciliation of Non-GAAP Financial Ratios and Measures
Dorel is presenting in this press release certain non-GAAP financial ratios and measures, as described below. These non-GAAP financial ratios and measures do not have a standardized meaning prescribed by IFRS and therefore are unlikely to be comparable to similar measures presented by other issuers. These non-GAAP financial ratios and measures should not be considered in isolation or as a substitute for a measure prepared in accordance with IFRS. Contained within this press release are reconciliations of the non-GAAP financial ratios and measures to the most directly comparable financial measures calculated in accordance with IFRS.
Dorel believes that the non-GAAP financial ratios and measures used in this press release provide investors with additional information to analyze its results and to measure its financial performance by excluding the variation caused by certain items that Dorel believes do not reflect its core business performance and provides better comparability between the periods presented. Excluding these items does not imply they are necessarily non-recurring. The non-GAAP financial measures are also used by management to assess Dorel’s financial performance and to make operating and strategic decisions.
Adjustments to non-GAAP financial ratios and measures
As noted above, certain of our non-GAAP financial measures and ratios exclude the variation caused by certain adjustments that affect the comparability of Dorel’s financial results and could potentially distort the analysis of trends in its business performance. Adjustments which impact more than one non-GAAP financial ratio and measure are explained below.
Restructuring costs
Restructuring costs are comprised of costs directly related to significant exit activities, including the sale of manufacturing facilities, closure of businesses, reorganization, optimization, transformation, and consolidation to improve the competitive position of the Company in the marketplace and to reduce costs and bring efficiencies, and acquisition-related costs in connection with business acquisitions. Restructuring costs are included as an adjustment of adjusted gross profit, adjusted gross margin, adjusted operating profit (loss) from continuing operations, adjusted net income (loss) from continuing operations and adjusted diluted earnings (loss) per share from continuing operations. Restructuring costs were respectively $2.3 million and $6.8 million for the third quarter and nine months ended September 30, 2022 (2021 - $1.4 million and $12.0 million). Refer to the section “Restructuring costs – Continuing operations” in the MD&A for more details.
Impact of acquired businesses
The impact of acquired businesses is included as an adjustment of adjusted organic revenue growth (decline). Revenue from acquired businesses is adjusted during the first year of operation in order to get a better comparison of revenue from year-to-year. Revenue from acquired businesses were respectively $5.6 million and $18.8 million for the third quarter and nine months ended September 30, 2022 and were all related to the acquisition of Notio Living by Dorel Home.
Impact of the sale of divisions
The impact of the sale of divisions is included as an adjustment of adjusted organic revenue growth (decline). Revenue from the sale of divisions is adjusted during the year after the disposal in order to get a better comparison of revenue from year-to-year. Revenue from the sale of divisions was $5.4 million for the nine months ended September 30, 2021 (none for the third quarter ended September 30, 2021) and was all related to the disposal of the manufacturing facility in Zhongshan, China by Dorel Juvenile.
Adjusted gross profit and adjusted gross margin
Adjusted gross profit is calculated as gross profit excluding the impact of restructuring costs. Adjusted gross margin is a non-GAAP ratio and is calculated as adjusted gross profit divided by revenue. Dorel uses adjusted gross profit and adjusted gross margin to measure its performance from one period to the next, without the variation caused by the impacts of the items described above. Dorel also uses adjusted gross profit and adjusted gross margin on a segment basis to measure its performance at the segment level. Dorel excludes this item because it affects the comparability of its financial results and could potentially distort the analysis of trends in its business performance. Certain investors and analysts use the adjusted gross profit and adjusted gross margin to measure the business performance of the Company as a whole and at the segment level from one period to the next, without the variation caused by the impact of the restructuring costs. Excluding this item does not imply it is necessarily non-recurring. These ratios and measures do not have any standardized meanings prescribed by IFRS and are therefore unlikely to be comparable to a similar measure presented by other companies.
There is no adjusted gross profit and adjusted gross margin for the third quarter and nine months ended September 30, 2022 and 2021.
Adjusted operating profit (loss) from continuing operations
Adjusted operating profit (loss) from continuing operations is calculated as operating profit (loss) from continuing operations excluding the impact of restructuring costs. Adjusted operating profit (loss) from continuing operations also excludes impairment loss on goodwill. Management uses adjusted operating profit (loss) from continuing operations to measure its performance from one period to the next, without the variation caused by the impacts of the items described above. Dorel also uses adjusted operating profit (loss) on a segment basis to measure its performance at the segment level. Dorel excludes these items because they affect the comparability of its financial results and could potentially distort the analysis of trends in its business performance. Certain investors and analysts use the adjusted operating profit (loss) from continuing operations to measure the business performance of the Company as a whole and at the segment level from one period to the next, without the variation caused by the impact of the restructuring costs and impairment loss on goodwill. Excluding these items does not imply they are necessarily non-recurring. This measure does not have any standardized meaning prescribed by IFRS and is therefore unlikely to be comparable to a similar measure presented by other companies.
| Third Quarters Ended | Nine Months Ended | ||||||||
| Sep 30, | Sep 30, | Sep 30, | Sep 30, | ||||||
| From continuing operations | 2022 | 2021 | 2022 | 2021 | |||||
| Operating (loss) profit from continuing operations | (33,716 | ) | 3,687 | (58,248 | ) | 10,903 | |||
| Adjustment for: | |||||||||
| Total restructuring costs | 2,251 | 1,390 | 6,809 | 11,955 | |||||
| Adjusted operating (loss) profit from continuing operations | (31,465 | ) | 5,077 | (51,439 | ) | 22,858 | |||
| Third Quarters Ended | Nine Months Ended | ||||||||
| Sep 30, | Sep 30, | Sep 30, | Sep 30, | ||||||
| Dorel Juvenile | 2022 | 2021 | 2022 | 2021 | |||||
| Operating (loss) profit | (18,446 | ) | 2,426 | (35,609 | ) | (3,053 | ) | ||
| Adjustment for: | |||||||||
| Restructuring costs | 2,251 | 1,390 | 6,809 | 11,955 | |||||
| Adjusted operating (loss) profit | (16,195 | ) | 3,816 | (28,800 | ) | 8,902 | |||
Adjusted net income (loss) from continuing operations and adjusted diluted earnings (loss) per share from continuing operations
Adjusted net income (loss) from continuing operations is calculated as net income (loss) from continuing operations excluding the impact of restructuring costs and impairment loss on goodwill, as well as income taxes expense (recovery) relating to the adjustments above. Adjusted diluted earnings (loss) per share from continuing operations is a non-GAAP ratio and is calculated as adjusted net income (loss) from continuing operations divided by the weighted average number of diluted shares. Management uses adjusted net income (loss) from continuing operations and adjusted diluted earnings (loss) per share from continuing operations to measure its performance from one period to the next, without the variation caused by the impacts of the items described above. Dorel excludes these items because they affect the comparability of its financial results and could potentially distort the analysis of trends in its business performance. Certain investors and analysts use the adjusted net income (loss) from continuing operations and adjusted diluted earnings (loss) per share to measure the business performance of the Company from one period to the next. Excluding these items does not imply they are necessarily non-recurring. These measures do not have any standardized meanings prescribed by IFRS and are therefore unlikely to be comparable to a similar measure presented by other companies.
| Third Quarters Ended | Nine Months Ended | |||||||||
| Sep 30, | Sep 30, | Sep 30, | Sep 30, | |||||||
| 2022 | 2021 | 2022 | 2021 | |||||||
| Net loss from continuing operations | (36,747 | ) | (68,022 | ) | (77,561 | ) | (82,246 | ) | ||
| Adjustment for: | ||||||||||
| Total restructuring costs | 2,251 | 1,390 | 6,809 | 11,955 | ||||||
| Income taxes recovery relating to the above-noted adjustments | (195 | ) | (181 | ) | (414 | ) | (472 | ) | ||
| Adjusted net loss from continuing operations | (34,691 | ) | (66,813 | ) | (71,166 | ) | (70,763 | ) | ||
| Basic loss per share from continuing operations | (1.13 | ) | (2.09 | ) | (2.38 | ) | (2.53 | ) | ||
| Diluted loss per share from continuing operations | (1.13 | ) | (2.09 | ) | (2.38 | ) | (2.53 | ) | ||
| Adjusted diluted loss per share from continuing operations(1) | (1.07 | ) | (2.06 | ) | (2.19 | ) | (2.18 | ) | ||
| (1) This is a non-GAAP financial ratio and it is calculated as adjusted net income (loss) from continuing operations divided by weighted average number of diluted shares. | ||||||||||
Organic revenue growth (decline) and adjusted organic revenue growth (decline)
Organic revenue growth (decline) is calculated as revenue growth (decline) compared to the previous period, excluding the impact of varying foreign exchange rates. Adjusted organic revenue growth (decline) is calculated as revenue growth (decline) compared to the previous period, excluding the impact of varying foreign exchange rates and the impact of the acquired businesses for the first year of operation and the sale of divisions. Management modified the calculation of the adjusted organic revenue growth (decline) to remove revenue from acquired businesses for the first year of operation in order to get a better comparison of revenue from year-to-year. Management uses organic revenue growth (decline) and adjusted organic revenue growth (decline) to measure its performance from one period to the next, without the variation caused by the impacts of the items described above. Dorel excludes these items because they affect the comparability of its financial results and could potentially distort the analysis of trends in its business performance. Certain investors and analysts use organic revenue growth (decline) and adjusted organic revenue growth (decline) to measure the business performance of the Company as a whole and at the segment level from one period to the next. Excluding these items does not imply they are necessarily non-recurring. These measures do not have any standardized meanings prescribed by IFRS and are therefore unlikely to be comparable to a similar measure presented by other companies.
| Third Quarters Ended September 30, | ||||||||||||||||||||||||||
| Consolidated | Dorel Home | Dorel Juvenile | ||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||
| $ | % | $ | % | $ | % | $ | % | $ | % | $ | % | |||||||||||||||
| Revenue of the period | 374,143 | 437,236 | 187,448 | 218,127 | 186,695 | 219,109 | ||||||||||||||||||||
| Revenue of the comparative period | (437,236 | ) | (447,798 | ) | (218,127 | ) | (242,166 | ) | (219,109 | ) | (205,632 | ) | ||||||||||||||
| Revenue (decline) growth | (63,093 | ) | (14.4 | ) | (10,562 | ) | (2.4 | ) | (30,679 | ) | (14.1 | ) | (24,039 | ) | (9.9 | ) | (32,414 | ) | (14.8 | ) | 13,477 | 6.6 | ||||
| Impact of varying foreign exchange rates | 13,284 | 3.0 | (7,713 | ) | (1.7 | ) | 541 | 0.3 | (418 | ) | (0.2 | ) | 12,743 | 5.8 | (7,295 | ) | (3.6 | ) | ||||||||
| Organic revenue (decline) growth(1) | (49,809 | ) | (11.4 | ) | (18,275 | ) | (4.1 | ) | (30,138 | ) | (13.8 | ) | (24,457 | ) | (10.1 | ) | (19,671 | ) | (9.0 | ) | 6,182 | 3.0 | ||||
| Impact of acquired businesses | (5,634 | ) | (1.3 | ) | - | - | (5,634 | ) | (2.6 | ) | - | - | - | - | - | - | ||||||||||
| Adjusted organic revenue (decline) growth(1) | (55,443 | ) | (12.7 | ) | (18,275 | ) | (4.1 | ) | (35,772 | ) | (16.4 | ) | (24,457 | ) | (10.1 | ) | (19,671 | ) | (9.0 | ) | 6,182 | 3.0 | ||||
| (1) This is a non-GAAP financial ratio or measure with no standardized meaning prescribed by IFRS and therefore is unlikely to be comparable to similar measures presented by other issuers. Refer to the section “Definition and reconciliation of non-GAAP financial ratios and measures” in this press release. | ||||||||||||||||||||||||||
| Nine Months Ended September 30, | ||||||||||||||||||||||||||
| Consolidated | Dorel Home | Dorel Juvenile | ||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||
| $ | % | $ | % | $ | % | $ | % | $ | % | $ | % | |||||||||||||||
| Revenue of the period | 1,230,013 | 1,323,436 | 608,745 | 683,604 | 621,268 | 639,832 | ||||||||||||||||||||
| Revenue of the comparative period | (1,323,436 | ) | (1,278,682 | ) | (683,604 | ) | (700,252 | ) | (639,832 | ) | (578,430 | ) | ||||||||||||||
| Revenue (decline) growth | (93,423 | ) | (7.1 | ) | 44,754 | 3.5 | (74,859 | ) | (11.0 | ) | (16,648 | ) | (2.4 | ) | (18,564 | ) | (2.9 | ) | 61,402 | 10.6 | ||||||
| Impact of varying foreign exchange rates | 29,060 | 2.2 | (34,267 | ) | (2.7 | ) | 1,054 | 0.2 | (1,620 | ) | (0.2 | ) | 28,006 | 4.4 | (32,647 | ) | (5.6 | ) | ||||||||
| Organic revenue (decline) growth(1) | (64,363 | ) | (4.9 | ) | 10,487 | 0.8 | (73,805 | ) | (10.8 | ) | (18,268 | ) | (2.6 | ) | 9,442 | 1.5 | 28,755 | 5.0 | ||||||||
| Impact of acquired businesses | (18,752 | ) | (1.4 | ) | - | - | (18,752 | ) | (2.7 | ) | - | - | - | - | - | - | ||||||||||
| Impact of the sale of divisions | 5,437 | 0.4 | - | - | - | - | - | - | 5,437 | 0.8 | - | - | ||||||||||||||
| Adjusted organic revenue (decline) growth(1) | (77,678 | ) | (5.9 | ) | 10,487 | 0.8 | (92,557 | ) | (13.5 | ) | (18,268 | ) | (2.6 | ) | 14,879 | 2.3 | 28,755 | 5.0 | ||||||||
| (1) This is a non-GAAP financial ratio or measure with no standardized meaning prescribed by IFRS and therefore is unlikely to be comparable to similar measures presented by other issuers. Refer to the section “Definition and reconciliation of non-GAAP financial ratios and measures” in this press release. | ||||||||||||||||||||||||||
CONTACTS:
Saint Victor Investments Inc
Rick Leckner
(514) 245-9232
Dorel Industries Inc.
Jeffrey Schwartz
(514) 934-3034
