Dorel Industries Inc. said it recorded a charge of $3.8 million tied to the liquidation of Toys “R” Us U.S. Of the charge, $0.7 million is within Dorel Juvenile and $3.1 million is within Dorel Sports.
This amount represents Dorel’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 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 U.S. $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 U.S. $2.8 million within Dorel Home, U.S. $5.2 million within Dorel Juvenile and U.S. $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 U.S. $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 U.S. $17.3 million, or U.S. $0.53 per diluted share, compared to U.S. $7.7 million, or U.S. $0.24 per diluted share, for the fourth quarter of 2016. Reported net loss for the quarter was U.S. $6.1 million, or U.S. $0.19 per diluted share, compared to U.S. $5.6 million, or U.S. $0.17 per diluted share, a year ago.
Adjusted net income for the year rose 14.9% to U.S. $67.0 million, or U.S. $2.05 per diluted share, compared to U.S. $58.3 million, or U.S. $1.79 per diluted share in 2016. Reported net income for the year was U.S. $27.4 million, or U.S. $0.84 per diluted share, compared to a reported net loss of U.S. $11.6 million, or U.S. $0.36 per diluted share the previous year.
In 2017, Toys “R” Us U.S. business accounted for approximately 3 percent of Dorel’s total revenue.
