Dorel News

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

Montreal, Quebec - 3/22/2018

Dorel Industries Inc. (TSX: DII.B, 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.