Dorel Industries Inc. Class A · TSX:DII.A
Dorel Industries Inc. Class A — Q3 2015 Earnings Presentation
32 slides from Dorel Industries Inc. Class A's earnings presentation, November 2015
Slide 1: Investor Presentation Third Quarter Ended September 30, 2015
Investor Presentation Third Quarter Ended September 30, 2015 1
Slide 2: Forward-looking statements
Except for historical information provided herein, this presentation may contain information and statements of a forward-looking nature concerning the future performance of Dorel Industries Inc. These statements are based on assumptions and uncertainties as well as on management's best possible eval
Slide 3: Non-GAAP financial measures
As a result of impairment losses and the restructuring and other costs incurred in both 2015 and 2014, the Company is including in this investor presentation the following non-GAAP financial measures: “adjusted gross profit”, “adjusted operating profit”, “adjusted net income”, and “adjusted earnings
Slide 4: Dorel at a glance
• 3 major segments • Dorel Juvenile (2014 revenue - $1.07 billion) • Dorel Sports (2014 revenue - $1.05 billion) • Dorel Home furnishings (2014 revenue - $554 million) • $2.7 billion in sales annually • Approximately 10,800 employees • Sales to 100+ countries • Facilities located in 25 countries 4
Slide 5: Dorel's Key Brands
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Slide 6: Third quarter consolidated results
(in thousands, other than EPS) 2015 2014 Total revenue $ 679,287 $ 673,020 Adjusted net income $ 15,469 $ 23,771 Adjusted EPS (diluted) $ 0.48 $ 0.73 Net income (loss) $ (8,757) $ 19,480 EPS (diluted) $ (0.27) $ 0.60 6
Slide 7: Dorel Juvenile third quarter results
Third Quarters Ended September 30 (in thousands) 2015 2014 Total revenue $ 247,296 $ 260,723 Adjusted gross profit $ 65,067 $ 73,165 Adjusted operating profit $ 7,852 $ 17,145 Gross profit $ 64,200 $ 73,165 Operating profit $ 2,802 $ 16,112 7
Slide 8: Dorel Juvenile Q3 commentary
• Revenue decreased 5.1% to US$247.3 million from US$260.7 million a year ago. The decrease was mainly attributable to reduced sales in the United States and Canada where certain retailers reduced orders to lower in-stock levels, partly offset by several Latin American divisions which posted double
Slide 9: Dorel Juvenile China update
Dorel Juvenile China update The pace of change at Dorel Juvenile China is proceeding well, and more is being done to bring the factories to a best-in-class status. Experienced Asian managers have replaced most of the acquired management team and there has been a material change to a more performan
Slide 10: Dorel Juvenile strengths
• Company owned factories in China to optimize supply chain • Global brand presence with global, regional and local brands around the world • Leading brands in multiple categories • Global leadership in Car Seat Safety • Extensive product development and local adaptation to fit consumers needs • Str
Slide 11: Safety 1st Step and Go Travel System
• Dorel Juvenile has created a way to make mobility a little easier, innovative travel system solution for modern day parents and caregivers: the Safety 1st Step and Go™ Travel System, featuring the onBoard™35 infant car seat. • A first-of-its-kind stroller that features the only step-to-open design
Slide 12: Maxi-Cosi AxissFix
• The new Maxi-Cosi AxissFix is the first swiveling child seat to meet, and exceed, the latest EU child car seat regulation. Not only is it extremely safe, but it's easy for parents to use without straining their backs or necks. • The AxissFix is able to swivel a full 360 degrees. • Parents can stra
Slide 13: Rachel Zoe line and Quinny brand
• A new designer line from reality TV star and stylist, Rachel Zoe, was unveiled and enthusiastically received by retailers at the recent ABC juvenile products show in Las Vegas. • Quinny further builds global consumer brand presence – Global Website launches – Social networks • New Limited Edition
Slide 14: Dorel Sports third quarter results
Third Quarters Ended September 30 (in thousands) 2015 2014 Total revenue $ 266,499 $ 266,503 Adjusted gross profit $ 53,466 $ 62,556 Adjusted operating profit $ 10,825 $ 20,174 Gross profit $ 50,954 $ 62,052 Operating profit (loss) $ (20,169) $ 14,769 14
Slide 15: Dorel Sports Q3 commentary
Q3 revenue remained flat at US$266.5 million, but was up approximately 9% after removing the impact of foreign exchange year- over-year. The main drivers of the increased revenue were in the independent bike dealer (IBD) channel due to increased demand of new model year 2016 higher margin bicycl
Slide 16: Cycling Sports Group
Four distinct operating divisions 1) Cycling Sports Group (CSG) • IBD Division • Premium Brands • Growing dealer network • CSG sales growing rapidly outside North America • Innovation – continuing focus • Building Dorel’s bike business to # 1 position 16
Slide 17: Pacific Cycle
2) Pacific Cycle • Mass merchants/sporting goods chains • Bicycle parts/accessories • Full service provider – bikes, parts and accessories, branded apparel • Brand building has enhanced Schwinn’s awareness 17
Slide 18: Caloi
3) Caloi • Acquired 70% interest in Q3 2013 • Established in 1898 in Brazil, Caloi is one of the world’s oldest and most established bike brands • It is the largest bicycle brand in Latin America and the leader in the Brazilian market • Caloi’s portfolio includes a full range of bicycles, from high-
Slide 19: Apparel Footwear Group (AFG)
4) Apparel Footwear Group (AFG) • Performance apparel division comprised of the SUGOI, Sombrio, Cannondale and Schwinn brands • Award-winning manufacturer and distributor of world class cycling, run and triathlon apparel and outdoor gear • Products sold globally 19
Slide 20: Dorel Home Furnishings third quarter results
Third Quarters Ended September 30 (in thousands) 2015 2014 Total revenue $ 165,492 $ 145,794 Gross profit $ 21,401 $ 16,277 Operating profit $ 10,122 $ 5,473 20
Slide 21: Dorel Home Furnishings Q3 commentary
Revenue increased by US$19.7M or 13.5% to US$165.5M from US$145.8M. Driven by an expanded product line that resonates with consumers, the segment’s sales to on-line retailers continued to drive revenue, representing over 37% of total segment sales in the quarter. Operating profit rose US$4.6M
Slide 22: Restructuring charges
• Q3 includes restructuring charges of approximately US$8.4M related to both the Dorel Juvenile and Dorel Sports segments and acquisition-related costs of US$1.1M for the Juvenile segment. Dorel Juvenile has undertaken various restructuring initiatives which will continue over the balance of 2015 an
Slide 23: Caloi impairment losses
• In Brazil, as a result of the challenging economy and local market conditions, the rising inflation and the devaluation of the Brazil Real, assumptions on projected earnings and cash flow growth were revised for Caloi resulting in US$26.5M pre-tax non-cash impairment losses on goodwill and custome
Slide 24: Outlook by segment
Dorel Sports Despite challenges through much of 2015, Dorel Sports will turn the corner in Q4 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 l
Slide 25: Why invest in Dorel
• A record of successfully integrated acquisitions • A focus on Juvenile and bicycles where Dorel is a key player • Strategically growing Dorel Juvenile and Dorel Sports segments in global markets • A portfolio of known, premium brands • Product development capabilities that drive growth • Establish
Slide 26: Appendix
APPENDIX 26
Slide 27: Reconciliation tables (US dollars, thousands)
(In thousands of U.S dollars, except per share amounts) 27
Slide 28: Acquisition history 1988-2009
• 1988 Cosco Inc (DJG) • 1990 Charleswood Corporation • 1994 Maxi-Miliaan B.V. (Maxi-Cosi) • 1998 Ameriwood Industries • 2000 Safety 1st Inc. • 2001 Quint B.V. (Quinny) • 2003 Ampa France (Dorel Europe) • 2004 Pacific Cycle • 2007 IGC Australia • 2008 Cannondale/SUGOI • 2008 PTI Sports • 2009 Baby A
Slide 29: Acquisition history 2009-2014
• 2009 Dorel Brazil • 2009 Iron Horse Bicycles • 2009 Gemini Bicycles (Australia) • 2009 Hot Wheels, Circle Bikes (UK) • 2011 Silfa Group (Chile, Peru, Bolivia, Argentina) - 70% interest • 2012 Poltrade (Poland) • 2012 Best Brands Group SA (Panama) and Baby Universe SAS (Colombia) – 70% interest • 2
Slide 30: Sales by segment
2014 2013 21% 21% 40% 41% 38% 39% DOREL JUVENILE DOREL SPORTS DOREL HOME FURNISHINGS 30
Slide 31: Sales by region
2014 2013 8% 10% 6% 7% 24% 24% 54% 56% 6% 5% US Canada Europe Other Latin America 31
Slide 32: Sustainability initiatives
• Active in sustainability on several fronts throughout all three segments • Dorel Home Products facility is FSC certified • Cornwall RTA plant recycling for 10 years • 98% of materials are recycled or sold • DJG’s sustainability initiatives include zero landfill, water usage reduced by 98%; high-ef