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spk00: Welcome to Durrell 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 11th, 2022. I'll now turn the conference over to Martin Schwartz, President and CEO. Please go ahead.
spk02: Martin Schwartz Hi, thank you. Good morning, and thank you all for joining us for the REL's fourth quarter and year-end earnings call. The period ended December 30th. 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 the rail 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 Darrell 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 Darrell Home and Darrell 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 the rail 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, raw materials, among other things. The container situation has not improved, and this has seriously hampered the rail'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 the rail 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 facility 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 the Rail 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 Norio in Europe allows HOME to consolidate operations and strengthen management, with Norio 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 the real juvenile, the procurement landscape in Asia also remained difficult as COVID continued to impact the supply chain. No 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 bottleneck. 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 Baby Comfort in the mass market. In the States, Juvenile benefited from strong consumer demand, notably in car seats 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, the REL Juvenile sold its remaining manufacturing facility in Wangxi, China, late in the quarter. Going forward, the focus will be on co-development opportunities with a wider supplier base bringing 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-cozy items in the U.S. Turning to our outlook. Earnings via 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 the rail 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 improvement could be a challenge. Juvenile's poor performance is the result of European losses, negating earnings in other markets. We have made changes in the organization, which we expect 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. But with the principal concern of supply, earnings visibility is limited. I'll now Jeff, I'll ask Jeffrey to review the numbers. Jeffrey? Jeffrey Siedman Thank you, Martin.
spk04: 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. So, of course, on October 11th, we announced a deal to sell our sports group to Pond Holdings for $810 million in cash. That was closed on January 4th of this year. And then Doral went on to pay a $12 U.S. dividend per share to all its shareholders, and 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 Nodeo 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. And, 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 U.S. in taxes, including interest. So those were the big events that happened during the quarter. If we now look at some of the numbers, in the fourth quarter, Durrell'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, the Doral home, which had some declines, but Doral 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. uh, cause, you know, was going back a year. I think everybody on the call knows, you know, why we have all these issues, uh, but they have a significant impact on Doral. Our gross profit dollars were down, uh, 48.4 million or, uh, almost 50%. When we exclude restructuring costs, um, the adjusted gross margin decreased by 780 basis points, uh, from, uh, was 22.2% last year down to 14.4% this year. So, uh, that's really, uh, in our eyes, the story of the quarter, um, the decline was in both home and juvenile. I mean, home, you know, we'll, we'll, I'll get into a little bit more detail when we talk about home, um, as well as juvenile. But like I said, gross margin is really the story of the quarter. Um, Finance expenses for the company was increased to $8.1 million from $7.5 the previous year. That, of course, is going to be significantly less going forward because of our new debt structure. And 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 homes, Home's fourth quarter revenues declined by 3.4%, 3.4 million or 1.4%, to 230.7 million. Last year's first quarter was heavily impacted by delayed shipments from China, resulting in the supply chain disruptions in that country. So, again, everything that we've got, uh, is really related to supply chains going forward. Now the gross profit, uh, as we said, it decreased by 16 million, uh, dollars or 43.6% compared to a year prior to that. And the gross margin was only 9.1% in the fourth quarter. Um, and that's down the 670 basis points. So let's, let's take a little bit of time to explain, you know, what is happening here. Um, They're all, you know, increased price costs have a severe impact on a furniture company, as one could imagine. When a container goes from, you know, $2,000 to $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. And therefore, our pricing has to go up significantly. So 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 had 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. And that is, you know, by far a huge record. And, you know, in theory, we should not be paying anything. I mean, in a normal year, you probably end up maybe about a million dollars or so. But the eight and a half 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 at the door on a much faster rate than we have in the last six months right now. So I think we've turned the corner and we're starting to see an actual increase in dropship 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 going to see fuel increases. So 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. So it's not necessarily a competitive issue. But what we do is we question what some people what is going to be the response of the market to significant price increases on large goods that freight has sort of increased significantly. So 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. So we have to balance sort of the newness with the margin squeeze. And we feel like when all of this storm sort of dissipates, and we don't know when that's going to be, we'll be in a good shape to move forward quickly. So our operating profit, which really took a hit, was declined by $13.5 million to $4.3 million from $17.8 million. And then the adjusted operating profit declined by $13 million to $4.6 million. As I explained, it's mostly all in the margins. Expenses are normal, and business is fairly normal other than the margins. The juvenile, a 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 was flat when we removed the impact of exchange rates, and then organic 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 products. A lot of it was doing really well. And then supply just kind of stopped or was significantly delayed. So 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. So 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. So 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. And hopefully now with our margins starting to look a little bit better, we're going to see better results. If we look at gross profits, like I said, that's been the problem. They decreased as well. significantly, excluding restructuring costs, our margin for the quarter was 20.4% down 910 basis points. And again, the decline is the underperformance of Europe that was affected by lower sales volume. 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. And the operating loss in the quarter was 26.7 compared to a profit of 1.9. If we exclude restructuring costs, the loss increased to $8.9 million from an adjusted profit of 5.6 the year before. With that, I mean, I know it was a disappointing quarter number-wise, but, 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.
spk02: Okay, thank you, Jeffrey. Okay. I'll now ask the operator to open the lines for questions. And again, I asked the questioners, please keep your first round to two questions. Operator?
spk00: Thank you. If you would like to ask a question, please press star followed by the number one on your telephone keypad. To withdraw your question, please press star one again. We'll pause for just a moment to compile the Q&A roster. Our first question comes from Derek Lessard from TD Securities. Please go ahead. Your line is open.
spk03: Yeah, good morning, everybody. And I appreciate maybe some of the difficulty it'll be in answering some of these questions. But my first one is around the restructuring and 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?
spk04: 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, the factories as well as our domestic operations. There's been a lot of cost restructuring that's come out of China this year. And 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. So that'll be not being there is really where we're going to save. And in Europe, it's, you know, we're looking at continued sales, sorry, continued cost decreases on our overheads. But we do believe in what we're doing. We just haven't been able to show it in the numbers yet because 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, 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. So even when the stuff's coming in, if it's not in the quantities you need, you're sort of behind the ball and doing promotions. So it's difficult to know exactly when we're going to 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 and things are going from yellow to green but we just need to get that that momentum so 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 if you know it's come down since the war started so 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.
spk03: Okay, and did you guys have any sort of like an internal margin improvement target stemming from those measures?
spk04: 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, 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 going to come in, which will allow us to see to increase our sales, which gives us better overhead absorption, which gives us better margins. All of that is still unknown because we don't know how many goods we can get through the system. I noticed you put out something saying visibility is really tough. It really is for us, too. We can't rely on the normal movement of goods like we have for the last 30 years. And we're kind of, you 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. So it's really difficult to know when we can get those margins back. We just know we're doing the right thing to get the margins back. And we just have to wait.
spk03: Okay, that's fine. And maybe just a follow up on that, I guess, given the facility sales that you've done in China and and the consolidation you're doing in the US and Europe, I guess, how much as your rent expense and gone down and maybe just on your CapEx going forward, how much of the 2022 CapEx budget is for juvenile growth initiatives?
spk04: 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 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 going to go off 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 want to 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. And, you know, so we are going to increase our CapEx in juvenile, but I don't see much of a change in rent.
spk03: Okay. And maybe one last one for me before I recoup. 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 how much is manufactured in China versus, I guess, North America and Europe?
spk04: I don't have that now with me. Are we talking about juvenile?
spk03: Well, I mean, I would ask for both segments.
spk04: I guess we're just wondering. I mean, I can look at that. I mean, you know, in juvenile, given that we've sold our own manufacturing facilities, you're going to see more third party. We are looking where we can to do more domestic stuff. uh domestic includes uh 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 uh i don't you know i mean the number is going to shift to him the third more third party because we don't have our own factories anymore but Leaving that outside, we probably are looking where we can to increase our domestic production.
spk06: Is it fair to say that most of the manufacturing is third-party?
spk04: Not necessarily on Juvenile. We have some pretty big factories, right? We make most of our car seats domestically. 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. I'll get you that number, but it's not that small. We do a lot of domestic production. On the home side, 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. I'll probably give the market an update at the end of Q1 on what we've achieved, but there is a little bit of onshoring. We are taking a few items that we imported. But 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. And so 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. But since the anti-dumping duties, we stopped that. We're back making mattresses again. domestically that we used to make years ago. So that's not really on-shoring, but we definitely are going to rely on our three facilities to drive earnings and margin. 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.
spk03: Okay. Over to you. Thanks, gentlemen.
spk00: Our next question comes from Steven McLeod from BMO Capital Markets. Please go ahead. Your line is open.
spk01: Thank you. Good morning, guys. Good morning. Just a couple of follow-up questions. In the home business, it sounds like you're actually seeing positive underlying demand But in your outlook, you talk about having to pass through price and potentially 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?
spk04: Well, 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, we had to skew it towards, I guess, the size of the item, not the price of the item, right? So if it was a low-volume, 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 prior to COVID. We just feel gut-wise that that's got to take some impact on demand when people have to fill their tanks of gas and they have to have food and all of that. So 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 the peak of COVID. There's no question about that. But it's a steady, steady demand, and it goes up and down. But we are nervous, like I think everybody is, who's raising prices, that perhaps some items will be affected. Okay.
spk05: Right. Okay. That makes sense.
spk01: Maybe just turning to juvenile, I just wanted to get a better understanding as to why did the European business so much weaker relative to the other markets? Does it solely have to do with sourcing? And if so, can you give a bit of color as to the sourcing habits for places like U.S. and Chile that are performing better versus Europe?
spk04: I mean, we were replacing, 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. And a lot of it ended up being very choppy as far as getting containers. Containers in, I'd say, the second half of last year were far worse. The availability of containers are far worse in Europe than they were in America. Ironically, just anecdotally, right now, Canada is worse than Europe. So it's harder for us to get containers into Canada than we are in Europe. So 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 until the end of the year. And so we absorbed all of the costs last year, and that affected us. So we hope to start seeing that starting to change now. And it takes some time, takes some momentum. We've got to get the items in. But it is definitely the focus of the company on – 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. Uh, they've got at least the same features, if not more features than what's in the market. We're a little bit behind. Um, 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.
spk05: Okay. Okay. I see.
spk01: Um, okay. Thank you. And then maybe just finally, um, I know post the sale of the sports business, potentially monetizing juvenile and home are potential strategic initiatives down the road. And 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.
spk04: Well, all I can say is, like I said, we feel like we're in a storm right now. And we want to get through to the other side. And 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. Um, and then maybe then we'll have a better idea of how to answer your question. But as long as we're in a storm like this and, and we're struggling to, you know, keep, keep our margins steady, uh, you know, with between like cuts going up and that's 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 going to be able to get there.
spk05: Right. Okay. That makes perfect sense.
spk04: Okay, great.
spk05: Thanks, guys. No problem.
spk00: Our next question comes from Derek Lessard from TD Securities. Please go ahead. Your line is open.
spk03: 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 on inflation or increases in cost versus Europe or North America?
spk04: Yeah, I think I'm going to say it's a little less so far in China because they don't have that freight issue anymore. that we have. You know, so much of what our cost increases are freight related. And, you know, it's up, but it's not up as much as it is, let's say, in North America.
spk03: Okay. And I guess probably coming back to 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 going to help you down the road? And 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?
spk04: Oh, yeah, we've changed. Yeah, I mean, that's not going to happen again. We've basically rewritten all our contracts with all our customers at the end of last year going into this year. So 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 uh, a different, different terms for everybody, you know, a thousand different customers, a thousand different terms. And we've restructured that last year. Uh, that was one of the big projects that we did. I haven't talked about it, but it, it should pay off going forward, including one that I think it's 60 days notice now instead of, uh, you know, the end of the year. So that won't happen again.
spk03: Okay. Um, and, and just maybe a couple of, um, I guess, modeling questions for me. Any color on the $14 million, I guess, marked down at juvenile and whether we should expect more? On the inventory?
spk04: Most of that is in China. Like I said, we're downsizing significantly and No, I don't see anything else after that. I think we're done there.
spk03: Okay. And 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 31st close. Obviously, paying the special divvy was one. But it looks like you may have drawn down on the ABL 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?
spk04: I think what you should look at, you know, where's Dorrell going to be aiming to be for most of the year? Obviously, there will be ups and downs from there. It's probably close to $150 million. $150 million? $150 million is probably the right balance sheet number. You know, it'll be above that. Sometimes it'll be below that sometimes. But that's kind of where we're focused, and we think we can keep it in that area. Okay.
spk03: That's helpful, Jeffrey. Thanks, everybody.
spk04: Yeah.
spk03: No problem.
spk00: We have no further questions in queue. I'd like to turn the call back over to the presenters for any closing remarks.
spk02: 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 the rail will prevail. Our products and brands are renowned, and the sale of the rail sports has significantly fortified our balance sheet, allowing us to sustain the downturns and invest in our businesses for long-term value creation. I want to thank everybody for being with us. Stay safe and have a good weekend.
spk00: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
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