Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Dorel Industries Fourth Quarter 2021 Results Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference, please press star followed by zero for operator assistance at any time. Before turning the meeting over to management, please be advised that this conference call will contain statements that are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. I'd like to remind everyone that this conference call is being recorded today, March 11, 2022. I'll now turn the conference over to Martin Schwartz, President and CEO. Please go ahead.
All right, thank you. Good morning, and thank you all for joining us for Dorel's fourth quarter and year-end earnings call. The period ended December 30. With me are Jeffrey Schwartz, CFO, and Frank Rana, VP of Finance. We will take your questions following our comments. Again, all figures are in U.S. dollars. A key objective of any public company is to enhance shareholder value. Our efforts to do so have paid off handsomely with the sale of Dorel Sports. The team built an excellent bicycle business over the years, and we sold it in October at a very attractive price. Our timing was excellent, growing the business as the demand for bikes surged, particularly during the peak of COVID. We rewarded shareholders with a special dividend, disbursing $390 million to them.
We also used the net proceeds to pay down debt, and our balance sheet is stronger than ever. We now intend to grow Dorel Home and Dorel Juvenile as we did Sports. Our strengthened balance sheet places Dorel in a firm financial position, which gives us the ability to solidify these businesses and sustain the current downturns. Turning now to the fourth quarter. Record inflation, continuing global supply chain issues, and higher costs for products, services, and commodities pressured margins, creating a negative effect on earnings at both Dorel Home and Dorel Juvenile. Demand for our products was steady, but we were unable to secure the necessary goods or parts to fully satisfy consumer requirements. Six months ago, the problems were the result of COVID-related shutdowns at our suppliers in Malaysia, Vietnam, and China.
Today, suppliers are up and running, but it is the shortage of containers that is causing delays in shipments. We are making investments and changes to strengthen our operations and expand our domestic production. At Dorel Home, the erratic supply chain was a problem throughout 2021, with no relief in the fourth quarter, resulting in substantial cost increases on imported and manufactured items in warehousing, freight, labor, and raw materials, among other things. The container situation has not improved, and this has seriously hampered Dorel's ability to introduce several new products as the procurement process remains difficult. Home has announced product price increases effective late first quarter. Depending on future cost increases, another round of price hikes may be required. Reducing warehouse and distribution costs has been a prime objective for the segment. There was an urgent need to correct operational issues.
I'm pleased to say that Dorel Home senior management has done an excellent job in regulating things. Management changes have been made at the Savannah facility, leading to vast improvements. The backlog of incoming product was cleared in late November. The speed to ship product to customers is much better. Plus, square footage in Savannah has been reduced. The investments to upgrade our North American manufacturing facilities should bring results by Q2. The addition of new equipment at Ameriwood's RTA plant in Tiffin, Ohio, and Cornwall, Ontario, are being implemented and will increase domestic production through 2022. New machinery at Dorel Home Products' Montreal factory is almost complete and will permit the expansion into domestically manufactured coiled spring mattresses for the North American market. These additions across our plants will return some production from Asia.
There is great potential from these initiatives, which will permit increased volumes and the production of higher quality items, which will translate into higher margins. The acquisition of Notio in Europe allows Home to consolidate operations and strengthen management, with Notio taking the lead in the segment's growth initiatives to expand into the European mainland. New items will be introduced in Europe, utilizing North American designs and brands adapted to European tastes and standards. We foresee exciting opportunities as a result. Branded sales again increased, beating prior year by almost 20%, with further growth anticipated. At Dorel Juvenile, the procurement landscape in Asia also remained difficult as COVID continued to impact the supply chain. Though commodity prices rose through 2021, overall, we kept costs at a manageable level, allowing us to successfully pass on price increases in most markets.
Juvenile has been proactive in attempting to mitigate the higher procurement prices by, among other things, migrating the production of some of the soft goods to Mexico. Regarding sales, most Juvenile markets did better than last year, except for Europe, which continued to suffer from shortages created by the supply chain bottlenecks. Additional changes were initiated in Europe, including a new brand strategy, positioning Maxi-Cosi as a powerful global brand in the mid to high end for specialist stores, and Bébé Confort in the mass market. In the States, Juvenile benefited from strong consumer demand, notably in car seat and umbrella stroller categories. There have, however, been delays in getting components due to the supply chain challenges. Importantly, our U.S. domestic manufacturing footprint at the Columbus factory remains a definite competitive advantage.
In line with the segment's overall strategy of simplifying the organization, improving cash flow, and bringing a broader product line to market faster, Dorel Juvenile sold its remaining manufacturing facility in Huangshi, China late in the quarter. Going forward, the focus will be on co-development opportunities with a wider supplier base, freeing up resources to concentrate on product innovation and branding. It was also decided to streamline the activities of the Juvenile distribution business in Shanghai. There are several Q4 product launches, including a new line of car seats in Europe and Maxi-Cosi items in the U.S. Turning to our outlook. Earnings visibility is a significant challenge going forward for both segments, with the volatility in earnings likely to continue into 2022. Lack of container availability and higher shipping costs are expected to persist.
Coupled with rampant inflation and the current terrible humanitarian situation in Ukraine, this makes the predictability of our earnings very difficult. At Dorel Home, higher input costs will translate into increased retail prices, which with inflation may limit consumer purchases. Though we have resolved many of our internal North American warehouse issues, the overall supply chain remains fragile and could create further challenges. Our investment in domestic production will give us a competitive edge going forward, but in the short term, earnings improvements could be a challenge. Juvenile's poor performance is a result of European losses negating earnings in other markets. We have made changes in the organization which will drive improvements. Our product portfolio is strong, and with it, we are actively improving key retailer relationships, which is important given the need for price increases.
COVID and supply chain issues have delayed our turnaround strategy in Europe, but we remain convinced we are on the right track. We are among the leaders in our other main Juvenile markets and remain positive about our future prospects. We sell across all price points, which will protect us somewhat from consumers trading down in the face of higher prices. With the principal concern of supply, earnings visibility is limited. I'll ask Jeffrey to review the numbers. Jeffrey?
Thank you, Martin. Before I jump in the numbers, I just want to remind everybody some of the major transactions that happened in Q4, which is unlike many other quarters. Of course, you know, on October 11th, we announced a deal to sell our sports group to Pon Holdings for $810 million in cash. That was closed on January fourth of this year. Then Dorel went on to pay $12 U.S. dividend per share to all its shareholders. In addition to that, of course, paying down a significant amount of long-term debt. Other things that happened during the quarter, at the end of November, we announced the acquisition of Notio Living, an e-commerce home furnishing brand based in Denmark for $17 million.
We also, as Martin mentioned, sold our last remaining factory in China. We are now officially out of the manufacturing business in Asia. We will buy from third parties. Of course, on a negative note, in October, we had a ruling against us by the Luxembourg Administrative Tribunal, which said that we owed $64 million in taxes, including interest. Those were the big events that happened during the quarter. If we now look at some of the numbers, in the fourth quarter, Dorel's revenue decreased $3.8 million or 0.9%. If we look at organic revenue as well as removing the impact of the sale of the Juvenile facilities, our organic revenue was flat.
Making up that is, you know, Dorel Home, which had some declines, but Dorel Juvenile had some improvements. The gross margin, I mean, that's really the story of the fourth quarter. Our margins have been squeezed by various different supply chain issues caused, you know, going back a year. I think everybody on the call knows, you know, why we have all these issues, but they have a significant impact on Dorel. Our gross profit dollars were down $48.4 million or almost 50%. When we exclude restructuring costs, the adjusted gross margin decreased by 780 basis points, was 22.2% last year, down to 14.4% this year. That's really, in our eyes, the story of the quarter.
The decline was in both Home and Juvenile. I mean, Home, you know, I'll get into a little bit more detail when we talk about Home, as well as Juvenile. Like I said, gross margin is really the story of the quarter. Financing expenses for the company was increased to $8.1 million from $7.5 million the previous year. That, of course, is going to be significantly less going forward because of our new debt structure. In the fourth quarter, the effective tax rate was 13.6%. The net loss from continuing operations during the quarter was $29.6 million, $0.91 per diluted share, compared with a $13.3 million loss or $0.41 in the previous year.
Excluding restructuring charges, adjusted net loss for the quarter was $12 million or $0.37 compared to $9.8 million or $0.30 a year ago. If we move over to home. You know, home's fourth quarter revenues declined by 3.4%. $3.4 million or 1.4% to $230.7 million. Last year's fourth quarter was heavily impacted by delayed shipments from China, resulting from the supply chain disruptions in that country. Again, everything that we've got is really related to supply chains going forward. Now, the gross profit, as we said, has decreased by $16 million or 43.6% compared to a year prior.
The gross margin was only 9.1% in the fourth quarter, and that's down 670 basis points. Let's take a little bit of time to explain, you know, what is happening here. Increased freight costs have a severe impact on a furniture company, as one could imagine. When a container goes from, you know, $2,000-$15,000 in an 18-month period, and there's only maybe 300 or 400 bunk beds or sofas on the container, the increase is significant. Therefore, you know, our pricing has to go up significantly. Just the increase in ocean freight was huge. Warehousing, we had significant issues in our East Coast warehouse related to COVID.
COVID hit us over the summer, just when we were getting in significant amount of containers, and have quite a bit of orders. We had significant drop in attendance for a number of weeks, and the backlog took months to clear up. In fact, we paid this year in demurrage and detention, which is basically rent on the containers that are not unloaded, $8.5 million. That is, you know, by far a huge record. You know, in theory, we should not be paying anything. I mean, in a normal year, you probably end up maybe about $1 million or so. The $8.5 million last year was certainly a major pain.
We are, as Martin said, we've made a lot of changes. We are getting back to clearing containers on a timely fashion. We're getting our product shipped out the door on a much faster rate than we have in the last six months right now. I think we've turned the corner, and we're starting to see an actual increase in drop ship orders because our speed of delivery has increased. In addition to that, you know, what I haven't talked about is just raw material price increases, labor increases, finished goods from various places in Asia increases. All of this is happening. And then as we look at things now, you know, you're gonna see fuel increases. We are in the middle of a storm.
Visibility is difficult to know when this thing will end. We respond to all of these increases by increasing our prices as does everybody else in the marketplace. It's not necessarily a competitive issue. You know, what we do is we question, you know, what is gonna be the response of the market to significant price increases on large goods that freight has sort of increased significantly. A lot of unknowns there, but overall, you know, we think our product range is good, and we have a lot of new stuff that we're offering. We have to balance sort of the newness with the margin squeeze.
We feel like when all of this storm sort of dissipates, and we don't know when that's gonna be, we'll be in a good shape to move forward quickly. Our operating profit, which really took a hit, declined by $13.5 million to $4.3 million from $17.8 million. The adjusted operating profit declined by $13 million to $4.6 million. As I explained, it's mostly all in the margins. You know, expenses normal and other business is fairly normal other than the margins. The Juvenile little bit of a different story, but still with the same theme of supply chain problems. Fourth quarter revenue declined by 0.2% to $204 million.
Organic revenue is flat when we remove the impact of exchange rates, and then it actually went up by 2.6% when we removed the impact of the sale of the Chinese factory in the fourth quarter. We're seeing improvements in the United States. Sales are growing there. The Chilean market, which was fairly closed in 2020, is opening up, and we're starting to see a nice rebound in that market over there. These improvements were offset by declines in Europe as supply chain shortages have really hurt us there. Getting containers delivered in Q4 to Europe was extremely difficult. We had introduced a lot of new product.
A lot of it was doing really well, and then supply just kinda stopped or was significantly delayed. Our best and hottest products, we couldn't get to market fast enough, and that obviously had an impact on our sales, which then of course had an impact on our margins and profitability. We are looking forward in Europe to seeing some changes there. We also had another issue in Europe where in 2021 we were not contractually not able to increase our prices to a number of accounts. That is now changed and price increases have started in 2022.
We're expecting to see this year in 2022 a nice rebound in our European business as we're seeing success in the products that we're introducing. Hopefully now with our margins starting to look a little bit better, we're gonna see better results. If we look at gross profits, like I said, that's the big problem. They decreased as well, significantly. Excluding restructuring costs, our margin for the quarter was 20.4%, down 910 basis points. Again, the decline is the underperformance of Europe that was affected by lower sales volume. You know, overhead absorption really takes a hit when your sales drop like that, and then it all shows up in the gross profit line.
Supply chain disruptions, as I've talked about, and of course, higher costs of everything that's coming in and not being able to raise prices in Europe certainly hurt us. The operating loss in the quarter was $26.7 million compared to a profit of $1.9 million. If we exclude restructuring costs, the loss increased to $8.9 million from an adjusted profit of $5.6 million the year before. With that, I mean, I know it was a disappointing quarter numbers wise.
You know, I think what Martin's talked about, I've talked about, that we're focused on fixing parts of business that aren't working and enhancing the parts of the business that are, so that when this storm lifts, and we do believe it will lift, we'll be in a good shape. With that, I'll pass it back to you, Martin.
Okay. Thank you, Jeffrey. Okay, I'll now ask the operator to open the lines for questions. Again, I ask the questioners, please keep your, you know, your first round to two questions. Operator?
Our first question comes from Derek Lessard from TD Securities. Please go ahead. Your line is open.
Yeah. Good morning, everybody, and I appreciate maybe some of the difficulty will be in answering some of these questions. My first one is around the restructuring in Juvenile. You know, you're well down the path. You spent probably another $30 million or so in 2021. Could you just maybe talk about your expectations around these initiatives, maybe in a normal market environment, and what kind of cost savings or margin enhancement these initiatives were designed to deliver? Yeah. I mean, they're in different areas. We've made some structural changes in the U.S. on how we're going to go to market. The numbers aren't that big in the U.S.
We are downsizing our Chinese presence, whether, as you know, on the factories as well as our domestic operation. There's been a lot of cost restructuring that's come out of China this year. It's a difficult place to do business, and I think we've realized that. We were out of our. You know, when we had our bike business, I remember years ago we went in heavy, we took a hit, and we got out. Here, we're downsizing significantly, and there's costs related to that. That'll be. Not being there is really where we're gonna save. In Europe, it's. You know, we're looking at continued cost decreases, on our overhead. We do believe in what we're doing.
We just haven't been able to show it in the numbers yet because, you know, we have all of these new items and all of this new stuff that we've spent time building. We have a new sales go-to-market strategy. But if you don't have the goods, not only is it hard to, you know, the obvious thing, you don't have the goods, you don't have the sales, but you can't even do the promotions. You can't even do the things that drive your business at key times of the year because you just don't have enough inventory to launch it. Even when the stuff's coming in, if it's not in the quantities you need, you're sort of behind the ball on doing promotions. It's difficult to know exactly when we're gonna see the results.
It's this year in Europe. It's not in years to come because, you know, we're ticking the boxes and things are going from yellow to green, but we just need to get that momentum. We're hoping maybe by the end of Q2, probably by Q3, to start to see improvements in Europe. Now, that assumes, you know, containers don't get worse. That assumes the euro doesn't get much worse, although it, you know, it's come down since the war started. There's a whole bunch of things out there that can change all of this, but they're all external. I think on the internal side, we've done what we can or we're in the process of doing what we can.
Okay. Did you guys have any sort of, like an internal margin improvement target stemming from those initiatives?
Again, you know what? In a normal world, maybe, but, you know, we're still struggling to get our normal margin. I mean, a lot of our margin is related to volume. It really is. It's overhead absorption. We've seen it in the U.S. You know, if you looked at last year's, I think Q1, we had a huge. Well, again, you don't see all the numbers. We had a huge Q1 in the U.S. because our sales were very high and the absorption went great. So, you know, how much goods are gonna come in, which will allow us to increase our sales, which gives us better overhead absorption, which gives us better margins, which, you know, all of that is still unknown because we don't know how many goods, we can get through the system.
Okay.
It's really. You know, I noticed you put out something saying visibility is really tough. It really is for us, too. You know, we can't rely on the normal movement of goods like we have for the last 30 years. We don't know which parts. I mean, there's even things like containers that carry one specific part could get, you know, quarantined. We had that last year, where parts for one range of furniture products got quarantined for an extra six weeks or eight weeks, and we just couldn't run those products. There's nothing you can do. You know, they're heavy furniture products and parts. It's really difficult to know when we can get those margins back.
We just know we're doing the right things to get the margins back, and we just have to wait.
Okay. That's fine. Maybe just a follow-up on that. I guess, given the facility sales that you've done in China and the consolidation you're doing in the U.S. and Europe, I guess, how much has your rent expense gone down? Maybe just on your CapEx going forward, how much of the 2022 CapEx budget is for juvenile growth initiatives?
Again, most of it. We have quite a few new products we're putting through. The rent, I mean, all the stuff we've done is we've sold buildings. There's no rent related to the buildings we've sold. So, I don't think rent expense changes very much. CapEx is probably gonna go up a bit in Juvenile. There are certain things we've put off in the last couple of years that some products we've sort of kicked down the line that we wanna get to market this year. You know, demand seems to be fairly good. There was talk last year of a huge birth decrease because of COVID, which there was a decrease. It wasn't as big as some people had predicted, and we're starting to feel better about some of those numbers in North America, at least.
We are going to increase our CapEx in juvenile, but I don't see much of a change in rent.
Okay. Maybe one last one for me before I queue. Just maybe remind me about your manufacturing footprint. I guess what I'm getting at is more on a segmented basis. Are you able to sort of split it out geographically and, you know, how much is manufactured in China versus I guess North America and Europe?
I don't have that now with me. Are we talking about juvenile? What are we talking about?
Well, I mean, I would ask for both segments. I guess we're just wondering-
I don't have the answer offhand, Derek. I mean, I can look at that. I mean, you know, in juvenile, given that we've sold our own manufacturing facilities, you're gonna see more third-party, we are looking where we can to do more domestic stuff, domestic includes, you know, we have a facility in Portugal, and we are looking to do a number of items that are currently in Asia and bring them into Portugal for the European market. I don't know, you know. I mean, the number's gonna shift to more third-party because we don't have our own factories anymore. Leaving that outside, we probably are looking where we can to increase our domestic production.
Okay. Is it fair to say?
On the home side.
Yeah.
Go ahead.
No, I was just wondering if it was fair to say that most of the manufacturing is third party?
Not necessarily on Juvenile. We have some pretty big factories, right? We have, we make most of our car seats domestically. You know, I mean, we do import some, particularly the smaller ones, but the larger car seats, both in Europe and in the U.S. are made domestically. We even make car seats in Brazil. No, I mean, I'll get you that number, but it's not that small. We do a lot of domestic production. On the home side, you know, clearly, we've announced that we want to increase our production domestically and make better use of the facilities we have, and that's going well. You know, I'll probably give the market an update at the end of Q1 on what we've achieved. There is a little bit of onshoring.
We are taking a few items that we imported. I think the better way to look at it is we can now make things domestically that we did not import because the margins were either too low or didn't make sense. We're in some new categories. Even the mattresses, I mean, we did import mattresses a number of years ago, very inexpensive ones from China. You know, since the anti-dumping duties, we stopped that. We're back making mattresses again domestically that we used to make years ago. That's not really onshoring, but we definitely are gonna rely on our three facilities to drive earnings and margin. We're focused.
We used to focus on high volume, low margin runs, and now with the equipment that we bought, we can do high margin, low volume runs and hope to have a change in our outlook in our home furnishing business.
Okay. Over to you. Thanks, gentlemen.
Our next question comes from Stephen MacLeod from BMO Capital Markets. Please go ahead. Your line is open.
Thank you. Good morning, guys.
Morning.
Just a couple of follow-up questions. In the home business, you know, it sounds like you're actually seeing positive underlying demand. In your outlook, you talk about having to pass through price and potentially that negatively impacting purchase habits. Can you talk about whether you've actually seen that customer price sensitivity so far to price increases that you've put through?
We have been putting I don't know how many rounds we have. This is the fourth round now, something like that. Maybe a fifth round. Probably a fifth round coming. We haven't seen a huge pushback yet, but everybody sits there and says, "You know, this can't keep going on." Also, the last round we had to skew it towards, because of freight, I guess, the size of the item, not the price of the item, right? So, if it was a low volume, a low cubic volume item, then perhaps the price didn't go up materially. But if it was a sofa or stuff like that, you're seeing significant increases to the point that maybe items are selling for 75% more than they did, you know, prior to COVID.
We just feel, you know, gut-wise that that's gotta take some impact on demand when people have to fill their tanks of gas and they have to have food and all of that. We're going in cautiously, but we haven't seen major impacts. I mean, certainly it's slower now in the marketplace than it was during, you know, the peak of COVID. There's no question about that. It's a steady demand, and it goes up and down. We are nervous like I think everybody is who's raising prices, that perhaps some items will be affected.
Right. Okay. That makes sense. Maybe just turning to Juvenile, I just wanted to get a better understanding as to why is the European business so much weaker relative to the other markets? Does it solely have to do with sourcing? If so, can you give a bit of color as to the sourcing habits for, you know, places like U.S. and Chile that are performing better versus Europe?
I mean, we probably replaced more of our product line in Europe than anywhere else in the world, as our older items were really not, you know, as competitive as perhaps older items in the U.S. A lot of it ended up being very choppy as far as getting containers in, I'd say, the second half of last year were far worse. The availability of containers were far worse in Europe than they were in America. Ironically, just anecdotally, right now, Canada is worse than Europe. It's harder for us to get containers into Canada than we are in Europe. The backlog in Europe is decreasing, and we're starting to see the improvement. We also, like I said, had that problem where we were contractually unable to raise prices last year.
We had given prices at the beginning of the year, and that was it, till the end of the year. We absorbed all of the costs last year, all went to, you know, and that affected us. We hope to start seeing, you know, that starting to change now. And it takes some time, takes some momentum. We gotta get the items in. But it is definitely the focus of the company. I think we've done a lot of the right stuff. I think we really have. I think the items are good. They're more competitive. They've got at least the same features, if not more features than what's in the market. We're a little bit behind.
We did introduce a lot last year, but we didn't have enough volume of it to move the needle as much as we wanted to.
Okay. Okay, I see. Okay. Thank you. Then maybe just finally, you know, I know, post the sale of the sports business, you know, potentially monetizing Juvenile and Home are potential strategic initiatives down the road. I was just curious if you could give a bit of color around sort of what your views are on those two things potentially coming to fruition at some point, and maybe what the timing is that the market could expect.
All I can say is, you know, like I said, we're in a storm right now, and we wanna get through to the other side. Hopefully the things that we're doing today will allow us to sort of sprint when we get through the storm as opposed to just walk out. Then maybe we'll have a better idea of how to answer your question. As long as we're in a storm like this and we're struggling to, you know, keep our margins steady, you know, with between like costs going up and us raising prices and all of that. You know, it's pointless to discuss, you know, where we are in that area.
I mean, it's where we're heading to, but, you know, we can't see when we're gonna be able to get there.
Right. Okay. That makes total sense. Okay, great. Thanks, guys.
No problem.
Our next question comes from Derek Lessard from TD Securities. Please go ahead. Your line is open.
Yeah, maybe a few more for me. On the cost inflation side, what are you seeing in terms of, I guess, the differences in China versus inflation or increases in cost versus Europe or North America?
I think I'm gonna say it's a little less so far in China because they don't have that freight issue that we have. You know, like so much of what our cost increases are freight related. It's up, but it's not up as much as it is, let's say, in North America.
Okay. I guess it's probably coming back to the pricing challenges that you faced in Europe, but is there anything that you're learning about the business in this environment that you think that's gonna help you down the road? I just mentioned pricing just because you weren't able to pass it through. Are there any changes that you see along the lines there that you could implement in the future in order to more easily, I guess, pass on prices?
Oh, yeah, we've changed. I mean, that's not gonna happen again. We've basically rewritten all our contracts with all our customers at the end of last year going into this year. That's not an issue. I mean, what we used to have, unfortunately, was a lot of different contracts for different customers in different countries and almost a different terms for everybody. You know, a thousand different customers, a thousand different terms. We've restructured that last year. That was one of the big projects that we did. I haven't talked about it, but it should pay off going forward, including one that I think it's 60 days notice now instead of, you know, the end of the year. That won't happen again.
Okay. Just maybe a couple of, I guess, modeling questions from me. Any color on the $14 million, I guess, markdown at Juvenile and whether we should expect more?
We're, um-
On the inventory write-down.
Most of that is in China. Like I said, we're downsizing significantly. No, I don't see anything else after that. I think we're done there.
Okay. One last one for me, just in respect to your balance sheet and your net debt. There were a number of cash flow movements that you made post the December 31 close. Obviously, paying the special dividend was one. It looks like you may have drawn down on the ABL, you know, to partially fund that dividend and keep a small cash balance. I guess what I'm getting at is I'm close to about $100 million in net debt. Does this sound reasonable to you currently?
I think what you should look at, you know, where's Dorel gonna be aiming to be for most of the year? Obviously, there'll be ups and downs from there. It's probably closer to 150.
150?
150 is probably the right balance sheet number. You know, it'll be above that sometimes, it'll be below that sometimes. That, that's kinda where we're focused, and we think we can keep it in that area.
Okay. That's helpful, Jeffrey. Thanks, everybody.
Yeah. No problem.
We have no further questions in queue. I'd like to turn the call back over to the presenters for any closing remarks.
Okay. Thank you. Well, two years of COVID and now a senseless war. I mean, who could have predicted this? Yes, there are a lot of challenges out there, but Dorel will prevail. Our products and brands are renowned, and the sale of Dorel Sports has significantly fortified our balance sheet, allowing us to sustain the downturns and invest in our businesses for long-term value creation. I wanna thank everybody for being with us. Stay safe and have a good weekend.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.