Dorel reports first quarter results

EXCHANGES
TSX: DII.B, DII.A

  • Recreational / Leisure posts record quarter
  • Juvenile momentum returning

MONTREAL, May 11, 2012 /PRNewswire/ - Dorel Industries Inc. (TSX: DII.B, DII.A) today released results for the first quarter ended March 31, 2012. Revenue rose 2.2% to US$621.1 million from US$607.8 million a year ago. Net income was US$29.2 million or US$0.91 per diluted share, compared to last year's US$31.2 million or US$0.94 per diluted share.

Noting that the first quarter of 2011 was the prior year's strongest, Dorel President and CEO Martin Schwartz said that momentum thus far in 2012 is good after a tough 2011. "Last year was characterized by a good start, difficult second and third quarters and a reversal of that negative trend in the final quarter. I am pleased that we are continuing to move in the right direction. Recreational/Leisure continued to drive results, posting its best quarter ever on the back of a strong 2011. Powered by brand building, continuing innovation and growing distribution across the globe, sales grew in both the IBD and mass merchant channels. There has also been operational improvement at our Apparel Footwear Group (AFG).

"In the Juvenile segment, first quarter 2012 operating profits approached a level not seen since the beginning of last year. While there remain issues to contend with, we have made considerable progress. We are feeling more encouraged about our US juvenile business and we must continue to work hard to make it better. Despite the difficult economy in many European countries, we have solid operations there which have performed well under challenging circumstances. Brazil is recovering as planned and Chile is performing well, as expected.

"In Home Furnishings sales were up quarter-over-quarter, however product mix dampened margins. The growing importance of the Internet retail distribution channel for Home Furnishings has continued into 2012 and still offers even more opportunity for us. Corporate-wide, we have done a good job in maintaining the proper inventory levels which should translate into the generation of solid cash flow in 2012," concluded Mr. Schwartz.

 
Summary of Financial Highlights
First Quarters Ended March 31
All figures in thousands of US $, except per share amounts
          Change
  2012   2011   %
Total revenue 621,100   607,783   2.2%
Net income 29,163   31,164   (6.4%)
  Per share - basic 0.91   0.95   (4.2%)
  Per share - diluted 0.91   0.94   (3.2%)
Average number of shares outstanding -          
diluted weighted average 32,115,862   33,007,150    


Juvenile Segment

 
First Quarters Ended March 31
    2012   2011    
                    Change
    $   % of rev.   $   % of rev.   %
Total revenue   269,499       269,620       0.0%
Gross profit   74,367   27.6%   71,620   26.6%   3.8%
Operating profit   20,665   7.7%   23,672   8.8%   (12.7%)


The Juvenile segment had its best quarter since the same quarter a year ago. Revenue was flat with the corresponding period in 2011, but increased 12.5% quarter-over-quarter. Organic revenue decreased by approximately 4% after removing the Dorel Chile and Dorel Polska acquisitions as well as the impact of varying exchange rates year-over-year. In the U.S., comparative quarter sales were lower, but versus the fourth quarter, increased by over 10%. Sales in Europe in local currency were consistent with the prior year, despite the difficult economy in several of the Company's markets.

Dorel Brazil increased its sales as it has successfully broadened its product line. Dorel Chile contributed to both the revenue and earnings improvement. As an indication of the Company's stated objective of diversifying its markets, sales to customers outside North America and Europe accounted for approximately 15% of the segment's first quarter total revenues.

Recreational/Leisure Segment

 
First Quarters Ended March 31
    2012   2011    
                    Change
    $   % of rev.   $   % of rev.   %
Total Revenue   220,918       200,427       10.2%
Gross profit   58,440   26.5%   50,995   25.4%   14.6%
Operating profit   21,380   9.7%   17,771   8.9%   20.3%


The revenue growth of 2011 continued into the first quarter of 2012 with sales increasing in the IBD channel in the U.S., Europe and Japan. The Cannondale, GT, and Mongoose brands are doing especially well in Europe. CSG Canada also contributed to the sales growth with strong spring shipments to certain key customers. While more modest, sales were also up to the segment's mass merchant customers as favorable weather conditions helped drive consumer demand. Operating profit for the quarter was the highest ever in the segment's history, dating back to 2004. The AFG apparel division was a positive contributor to earnings and its turnaround is on track.

Home Furnishings Segment

 
First Quarters Ended March 31
    2012   2011    
                    Change
    $   % of rev.   $   % of rev.   %
Total revenue   130,683       137,736       (5.1%)
Gross profit   15,730   12.0%   17,186   12.5%   (8.5%)
Operating profit   5,791   4.4%   7,750   5.6%   (25.3%)


The first quarter revenue decrease in the Home Furnishings segment was mostly due to reductions in sales of imported ready-to-assemble and folding furniture. In addition, the prior year's quarter benefited from strong shipments of initial customer roll outs, and this did not re-occur in 2012. These declines were partially offset by the continued growth in sales to the Internet retail sales distribution channel. While input costs were stable versus last year, segment operating profit was lower due to the impact of decreased revenues and a less profitable sales mix.

Other
The 2012 first quarter tax rate was 14.6% versus 13.7% in the prior year. The Company has stated that for the year it expects its annual tax rate to be between 15% and 20%, and despite the lower rate recorded in the first quarter this expectation remains.

Quarterly dividend
The Board of Directors of Dorel declared its regular quarterly dividend of US$0.15 per share on the outstanding number of the Company's Class A Multiple Voting Shares, Class B Subordinate Voting Shares and Deferred Share Units. The dividend is payable on June 8th, 2012 to shareholders of record as at the close of business on May 25th, 2012.

Outlook
"Juvenile had its best quarter since the same period a year ago and we are encouraged that things are moving in the right direction. Operational improvements and new product introductions will help drive the turn around. This, along with the contribution of Dorel Chile as well as earnings improvements in Brazil, make us confident that 2012 will be better than 2011. While our juvenile divisions around the world are well positioned within their respective marketplaces, uncertain economic conditions and volatility in currencies leave us cautious about our outlook," commented Mr. Schwartz.

"Dorel's bicycle business continues to grow its revenues and earnings, and all indications are that this momentum will be maintained. Sales improved from the fourth quarter and this positive trend should continue. While still a small part of the Recreational/Leisure segment, there has been substantial improvement in the AFG apparel division and this will also help earnings. The Home Furnishings segment experienced a challenging second quarter in 2011 and we are expecting this year's second quarter to be better than last year. The segment is expecting continued growth in the already strong Internet retail channel," concluded Mr. Schwartz.

Conference Call
Dorel Industries Inc. will hold a conference call to discuss these results today, May 11, 2012 at 1:00 P.M. Eastern Time. Interested parties can join the call by dialing 1-888-231-8191. The conference call can also be accessed via live webcast at www.dorel.com or www.newswire.ca. If you are unable to call in at this time, you may access a recording of the meeting by calling 1-855-859-2056 and entering the passcode 69654396# on your phone. This recording will be available on Friday, May 11, 2012 as of 4:00 P.M. until 11:59 P.M. on Friday, May 18, 2012.

Complete condensed consolidated interim financial statements as at March 31, 2012 will be available on the Company's website, www.dorel.com, and will be available through the SEDAR website.

Profile
Dorel Industries Inc. (TSX: DII.B, DII.A) is a world class juvenile products and bicycle company. Now in its 50th year, Dorel creates style and excitement in equal measure to safety, quality and value. The Company's lifestyle leadership position is pronounced in both its Juvenile and Bicycle categories with an array of trend-setting products.  Dorel's powerfully branded products include Safety 1st, Quinny, Cosco, Maxi-Cosi and Bébé Confort in Juvenile, as well as Cannondale, Schwinn, GT, Mongoose, IronHorse and SUGOI in Recreational/Leisure.  Dorel's Home Furnishings segment markets a wide assortment of both domestically produced and imported furniture products, principally within North America. Dorel has annual sales of US$2.4 billion and employs 5,000 people in facilities located in twenty-two countries worldwide.

Caution Regarding Forward Looking Statements
Certain statements included in this press release may constitute "forward-looking statements" within the meaning of applicable Canadian securities legislation.  Except as may be required by Canadian securities laws, Dorel does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking statements, by their very nature, are subject to numerous risks and uncertainties and are based on several assumptions which give rise to the possibility that actual results could differ materially from Dorel's expectations expressed in or implied by such forward-looking statements and that the objectives, plans, strategic priorities and business outlook may not be achieved. As a result, Dorel cannot guarantee that any forward-looking statement will materialize. Forward-looking statements are provided in this press release for the purpose of giving information about Management's current expectations and plans and allowing investors and others to get a better understanding of Dorel's operating environment. However, readers are cautioned that it may not be appropriate to use such forward-looking statements for any other purpose.

Forward-looking statements made in this press release are based on a number of assumptions that Dorel believed were reasonable on the day it made the forward-looking statements. Factors that could cause actual results to differ materially from the Company's expectations expressed in or implied by the forward-looking statements include:  general economic conditions; changes in product costs and supply channel; foreign currency fluctuations; customer and credit risk including the concentration of revenues with few customers; costs associated with product liability; changes in income tax legislation or the interpretation or application of those rules; the continued ability to develop products and support brand names; changes in the regulatory environment; continued access to capital resources and the related costs of borrowing; changes in assumptions in the valuation of goodwill and other intangible assets and subject to dividends being declared by the Board of Directors, there can be no certainty that Dorel's Dividend Policy will be maintained. These and other risk factors that could cause actual results to differ materially from expectations expressed in or implied by the forward-looking statements are discussed in Dorel's annual MD&A and Annual Information Form filed with the applicable Canadian securities regulatory authorities. The risk factors outlined in the previously mentioned documents are specifically incorporated herein by reference.

Dorel cautions readers that the risks described above are not the only ones that could impact it. Additional risks and uncertainties not currently known to Dorel or that Dorel currently deems to be immaterial may also have a material adverse effect on our business, financial condition or results of operations.  Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

Except as otherwise indicated, forward-looking statements do not reflect the potential impact of any non-recurring or other unusual items or of any dispositions, mergers, acquisitions, other business combinations or other transactions that may be announced or that may occur after the date hereof. The financial impact of these transactions and non-recurring and other unusual items can be complex and depends on the facts particular to each of them. Dorel therefore cannot describe the expected impact in a meaningful way or in the same way Dorel presents known risks affecting the business.


DOREL INDUSTRIES INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
ALL FIGURES IN THOUSANDS OF US $
       
  as at   as at
  March 31,   December 30,
  2012   2011
  (unaudited)   (unaudited)
           
ASSETS          
CURRENT ASSETS          
  Cash and cash equivalents $ 32,399   $ 29,764
  Trade and other receivables   482,732     403,664
  Inventories   438,725     442,409
  Other financial assets   5,693     9,867
  Income taxes receivable   15,972     17,811
  Prepaid expenses   26,685     21,858
    1,002,206     925,373
           
NON-CURRENT ASSETS          
  Property, plant and equipment   157,836     158,363
  Intangible assets   416,233     411,171
  Goodwill   577,217     568,849
  Other financial assets   599     -
  Deferred tax assets   35,115     31,096
  Other assets   1,450     1,717
    1,188,450     1,171,196
  $ 2,190,656   $ 2,096,569
           
LIABILITIES          
CURRENT LIABILITIES          
  Bank indebtedness $ 29,392   $ 20,130
  Trade and other payables   347,291     323,552
  Other financial liabilities   13,085     13,065
  Income taxes payable   3,209     2,315
  Long-term debt   17,214     17,279
  Provisions   35,414     37,096
    445,605     413,437
           
NON-CURRENT LIABILITIES          
  Long-term debt   316,302     298,160
  Pension and post-retirement benefit obligations   35,048     35,258
  Deferred tax liabilities   84,246     79,702
  Provisions   1,975     1,876
  Other financial liabilities   35,996     33,141
  Other long-term liabilities   5,270     5,340
    478,837     453,477
           
EQUITY          
SHARE CAPITAL   175,470     174,782
CONTRIBUTED SURPLUS    26,884     26,445
ACCUMULATED OTHER COMPREHENSIVE INCOME   70,727     58,842
RETAINED EARNINGS   993,133     969,586
    1,266,214     1,229,655
  $ 2,190,656   $ 2,096,569
 
 
DOREL INDUSTRIES INC.
CONDENSED CONSOLIDATED INTERIM INCOME STATEMENTS
ALL FIGURES IN THOUSANDS OF US $, EXCEPT PER SHARE AMOUNTS
           
  Three Months Ended
  March 31, 2012   March 31, 2011
  (unaudited)   (unaudited)
           
Sales $ 617,151   $ 604,417
Licensing and commission income   3,949     3,366
TOTAL REVENUE   621,100     607,783
           
Cost of sales   472,563     467,982
GROSS PROFIT   148,537     139,801
           
           
Selling expenses   51,805     44,443
General and administrative expenses   50,630     45,778
Research and development expenses   6,987     7,590
OPERATING PROFIT   39,115     41,990
           
Finance expenses   4,980     5,878
INCOME BEFORE INCOME TAXES   34,135     36,112
           
Income taxes expense   4,972     4,948
NET INCOME $ 29,163   $ 31,164
           
EARNINGS PER SHARE           
  Basic   $0.91     $0.95
  Diluted   $0.91     $0.94
           
SHARES OUTSTANDING          
  Basic - weighted average   31,953,221     32,659,446
  Diluted - weighted average   32,115,862     33,007,150
 
 
DOREL INDUSTRIES INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS
OF COMPREHENSIVE INCOME
ALL FIGURES IN THOUSANDS OF US $
           
  Three Months Ended
  March 31, 2012   March 31, 2011
  (unaudited)   (unaudited)
           
NET INCOME $ 29,163   $ 31,164
           
OTHER COMPREHENSIVE INCOME:          
Cumulative translation account:          
Net change in unrealized foreign currency gains (losses) on translation of net
investments in foreign operations, net of tax of nil
  14,766     26,402
           
           
Net changes in cash flow hedges:          
Net change in unrealized gains (losses) on derivatives designated as
cash flow hedges
  (1,731)     (4,861)
Reclassification to income   243     1,023
Reclassification to the related non-financial asset   (2,464)     662
Deferred income taxes   1,071     744
    (2,881)     (2,432)
           
Defined benefit plans:          
Actuarial gains (losses) on defined benefit plans   (10)     (86)
Deferred income taxes   3     22
    (7)     (64)
           
TOTAL OTHER COMPREHENSIVE INCOME    11,878     23,906
           
TOTAL COMPREHENSIVE INCOME $ 41,041   $ 55,070



DOREL INDUSTRIES INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY
ALL FIGURES IN THOUSANDS OF US $
                           
   Attributable to equity holders of the Company 
                             
      Accumulated other          
      comprehensive income Retained earnings    
                             
      Cumulative   Defined Other    
  Share Contributed Translation Cash Flow Benefit Retained Total
  Capital Surplus Account Hedges Plans Earnings Equity
  (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
                             
Balance as at December 30, 2010  $ 178,816 $ 23,776 $ 67,970 $ (1,032) $ (2,312) $ 904,633 $ 1,171,851
                             
Net income    -   -   -   -   -   31,164   31,164
Total other comprehensive income (loss)   -   -   26,402   (2,432)   (64)   -   23,906
Issued under stock option plan   182   -   -   -   -   -   182
Reclassification from contributed surplus due
to exercise of stock options
  34   (34)   -   -   -   -   -
Repurchase and cancellation of shares   (198)   -   -   -   -   -   (198)
Premium paid on share repurchase   -   -   -   -   -   (771)   (771)
Share-based payments   -   811   -   -   -   -   811
Dividends on common shares   -   -   -   -   -   (4,914)   (4,914)
Dividends on deferred share units   -   16   -   -   -   (16)   -
                             
Balance as at March 31, 2011   $ 178,834  $ 24,569  $ 94,372  $ (3,464)  $ (2,376)  $ 930,096  $ 1,222,031
                             
                             
Balance as at December 30, 2011  $ 174,782 $ 26,445 $ 52,760 $ 6,082 $ (7,236) $ 976,822 $ 1,229,655
                             
Net income    -   -   -   -   -   29,163   29,163
Total other comprehensive income (loss)   -   -   14,766   (2,881)   (7)   -   11,878
Issued under stock option plan   782   -   -   -   -   -   782
Reclassification from contributed surplus due to
exercise of stock options
  167   (167)   -   -   -   -   -
Repurchase and cancellation of shares   (261)   -   -   -   -   -   (261)
Premium paid on share repurchase   -   -   -   -   -   (799)   (799)
Share-based payments   -   586   -   -   -   -   586
Dividends on common shares   -   -   -   -   -   (4,790)   (4,790)
Dividends on deferred share units   -   20   -   -   -   (20)   -
                             
Balance as at March 31, 2012  $ 175,470 $ 26,884 $ 67,526 $ 3,201 $ (7,243) $ 1,000,376 $ 1,266,214


 

DOREL INDUSTRIES INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
ALL FIGURES IN THOUSANDS OF US $
           
  Three Months Ended
  March 31, 2012   March 31, 2011
  (unaudited)   (unaudited)
           
CASH PROVIDED BY (USED IN):          
           
OPERATING ACTIVITIES          
Net income $ 29,163   $ 31,164
Items not involving cash:          
  Depreciation and amortization   13,029     13,184
  Amortization of deferred financing costs   141     369
  Accretion expense on contingent consideration and put option liabilities   915     531
  Unrealized (gains)/losses due to foreign exchange exposure on contingent consideration
and put option liabilities
  1,037     (714)
  Other finance expenses   3,924     4,978
  Income taxes expense   4,972     4,948
  Share-based payments   586     811
  Pension and post-retirement defined benefit plans   734     858
  Gain on disposal of property, plant and equipment   (36)     (18)
    54,465     56,111
Net change in balances related to operations:          
  Trade and other receivables   (73,681)     (103,657)
  Inventories   9,100     24,048
  Other financial assets   (620)     -
  Prepaid expenses   (4,606)     (2,384)
  Trade and other payables   18,941     13,225
  Pension and post-retirement benefit obligations   (1,201)     (1,312)
  Provisions, other financial long-term liabilities and other long-term liabilities   (1,737)     1,212
    (53,804)     (68,868)
           
  Income taxes paid   (3,082)     (5,640)
  Income taxes received   833     104
  Interest paid   (1,650)     (3,177)
  Interest received   312     -
           
CASH USED IN OPERATING ACTIVITIES   (2,926)     (21,470)
           
FINANCING ACTIVITIES          
  Bank indebtedness   8,471     12,841
  Increase of long-term debt   18,010     34,138
  Repayments of contingent consideration and put option liabilities   (168)     -
  Financing costs   (7)     (12)
  Share repurchase   (1,060)     (969)
  Issuance of share capital   689     182
  Dividends on common shares   (4,790)     (4,914)
CASH PROVIDED BY FINANCING ACTIVITIES   21,145     41,266
           
INVESTING ACTIVITIES          
  Acquisition of businesses   (2,896)     -
  Additions to property, plant and equipment    (6,563)     (6,647)
  Disposals of property, plant and equipment   50     37
  Additions to intangible assets   (6,318)     (4,603)
CASH USED IN INVESTING ACTIVITIES   (15,727)     (11,213)
           
  Effect of exchange rate changes on cash and cash equivalents   143     362
           
NET INCREASE IN CASH AND CASH EQUIVALENTS   2,635     8,945
           
Cash and cash equivalents, beginning of period   29,764     15,748
           
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 32,399   $ 24,693


 

DOREL INDUSTRIES INC.
INDUSTRY SEGMENTED INFORMATION
THREE MONTHS ENDED MARCH 31
ALL FIGURES IN THOUSANDS OF US $
                                 
  Total Juvenile Recreational / Leisure Home Furnishings
  2012 2011 2012 2011 2012 2011 2012 2011
  (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Total revenue  $ 621,100 $ 607,783 $ 269,499 $ 269,620 $ 220,918 $ 200,427 $ 130,683 $ 137,736
Cost of sales   472,563   467,982   195,132   198,000   162,478   149,432   114,953   120,550
Gross Profit   148,537   139,801   74,367   71,620   58,440   50,995   15,730   17,186
Selling expenses   51,151   43,879   25,347   20,727   21,530   18,967   4,274   4,185
General and administrative expenses   42,563   39,139   23,434   21,139   14,253   13,363   4,876   4,637
Research and development expenses   6,987   7,590   4,921   6,082   1,277   894   789   614
Operating profit   47,836   49,193 $ 20,665 $ 23,672 $ 21,380 $ 17,771 $ 5,791 $ 7,750
Finance expenses   4,980   5,878                        
Corporate expenses   8,721   7,203                        
Income taxes   4,972   4,948                        
                                 
Net income $ 29,163 $ 31,164                        
                                 
Earnings per Share                                
  Basic   $0.91   $0.95                        
  Diluted   $0.91   $0.94                        
                                 
Depreciation and amortization included in operating profit $ 12,944 $ 13,150 $ 9,695 $ 9,622 $ 2,054 $ 2,192 $ 1,195 $ 1,336

  

 

 

SOURCE DOREL INDUSTRIES INC.



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