Dorel Industries Inc. manufactures and markets juvenile products, bicycles, and a wide assortment of both domestically produced and imported furniture products, principally within North America. The company’s annual report for 2012 included the following information (dollar amounts are in thousands):
From the beginning of the year to April 3, 2012, the date of its expiry, the Company repurchased under its previous normal course issuer bid (“NCIB”) a total of 47,100 Class “B” Subordinate Voting Shares for a cash consideration of $ 1,207. The excess of the shares’ repurchase value over their carrying amount ($ 913) was charged to retained earnings as share repurchase premiums. On April 2, 2012, the Company announced that it had decided to implement a new normal course issuer bid (the “2012 NCIB”). As approved by the TSX, under the 2012 NCIB, the Company is entitled to repurchase for cancellation up to 850,000 Class “B” Subordinate Voting Shares during the period of April 4, 2012, to April 3, 2013, or until such earlier time as the bid is completed or terminated at the option of the Company. Any shares the Company purchases under the 2012 NCIB will be purchased on the open market plus brokerage fees through the facilities of the TSX at the prevailing market price at the time of the transaction. Shares acquired under the 2012 NCIB will be cancelled. In accordance with the 2012 NCIB, the Company repurchased during the period ended December 30, 2012, a total of 629,000 Class “B” Subordinate Voting Shares for a cash consideration of $ 16,605. The excess of the shares’ repurchase value over their carrying amount ($ 12,679) was charged to retained earnings as share repurchase premiums.
1. Determine the average issuance price per Class “B” Subordinate Voting Share.
2. Determine the impact of this transaction on the financial statements.
3. Why do you think the board decided to repurchase the company’s shares?
4. What impact will this purchase have on Dorel’s future dividend obligations?