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Press release from CNW Group


Wednesday, May 18, 2011

DOREL REPORTS FIRST QUARTER RESULTS08:55 EDT Wednesday, May 18, 2011Cannondale's innovative models continue to impressInventory levels returning to normalEXCHANGESTSX: DII.B, DII.AMONTREAL, May 18 /CNW Telbec/ - Dorel Industries Inc. (TSX: DII.B DII.A) today released results for the first quarter ended March 31, 2011. Revenue reached US$607.8 million, up 1.9% from US$596.3 million a year ago.  Net income was US$31.2 million or US$0.94 per diluted share, compared to last year's US$38.2 million or US$1.15 per diluted share. Upon transition to International Financial Reporting Standards (IFRS), previously issued earnings per diluted share for the first quarter of 2010 which was reported as US$1.12, have been restated to US$1.15."A highlight of the first quarter results is the momentum of the Company's bicycle business, particularly in the IBD channel.  Improved earnings in that segment were offset by a challenging retail environment for our U.S. juvenile products business.  Home Furnishings revenues were stronger both year-over-year and particularly sequentially, but factors including high commodity prices and freight rates, as well as the weakening US dollar resulted in lower earnings compared to last year's first quarter.  I am pleased to report that the high 2010 year-end inventories have started to come down and this will convert into improved cash flow as we move through the year," stated Dorel CEO and President Martin Schwartz. Summary of Financial HighlightsFirst Quarters Ended March 31All figures in thousands of US $, except per share amounts 2011 2010 Change % Total revenues607,783 596,313 1.9%Net income31,164 38,206 -18.4% Per share - Basic0.95 1.16 -18.1% Per share - Diluted0.94 1.15 -18.3%Average number of shares outstanding - diluted weighted average33,007,150 33,241,496   Juvenile Segment       First Quarters Ended March 31 20112010  $% of rev.$% of rev.Change %Total revenues269,620 285,793 -5.7%Gross profit71,62026.6%83,09929.1%-13.8%Operating profit23,6728.8%33,13111.6%-28.6%The first quarter revenue decrease of 5.7% was in most of the Company's Juvenile operating divisions, but was most pronounced in the United States, where consumer spending in this category continues to be down at the retail level.  In local currencies, European sales decreased by less than 2% from last year. As foreign exchange rates were relatively consistent year-over-year, revenues in local currencies were down by a similar percentage.  Sales of mid-price point Safety 1st products have been well received by consumers in Europe and car seats will be offered later this year in the opening-price point category.Earnings were affected by lower sales as well as higher input costs, a less profitable product mix at Dorel Juvenile Group USA and higher costs in Europe due to less favourable foreign exchange rates on that division's US dollar purchases. However, recent strength in the Euro will help the Juvenile segment going forward if the trend continues. The current US retail environment is making the acceptance of price increases difficult, a situation which is being closely monitored and addressed with new product introductions scheduled throughout the balance of the year.Recreational/Leisure  First Quarters Ended March 31 20112010  $% of rev.$% of rev.Change %Total revenues200,427 181,677 10.3%Gross profit50,99525.4%46,12325.4%10.6%Operating profit17,7718.9%15,0718.3%17.9%The US$18.8 million or 10.3% increase in Recreational/Leisure sales was entirely organic with operating profit improving by 17.9%.  Revenue growth was above 25% in the IBD channel as the momentum created last year with the introduction of the well received 2011 new model year product line continued into this year's first quarter.  Sales growth was in all markets, but was strongest for the Cannondale and GT brands in Europe and Australia. The Cannondale dealer base continues to grow due to innovation and brand building. Sales in the segment's mass merchant category declined mid-single digits, due in part to poor weather and the late Easter holiday period.The Liquigas-Cannondale pro-cycling team is currently competing in the Giro d'Italia which runs until May 29th. The Giro is one of the world's three Grand Tours and will provide outstanding visibility for the Cannondale brand.  As announced last year, Dorel is now a Co-Title sponsor of the renamed "Liquigas-Cannondale" race team. The team came first in the 2010 Giro.Home Furnishings  First Quarters Ended March 31 20112010  $% of rev.$% of rev.Change %Total revenues137,736 128,843 6.9%Gross profit17,18612.5%19,82415.4%-13.3%Operating profit7,7505.6%10,7038.3%-27.6%First quarter Home Furnishings revenue increased at several major customers and was led principally by increased sales of upholstered furniture and futons. On-line sales continue to grow in importance for this segment and revenues from this distribution channel nearly doubled from 2010.This segment's profit was the most affected of all Dorel businesses by increased input costs through the first three months this year, with steel and polyester experiencing the most dramatic increases. Year-over-year higher freight rates also reduced earnings as did the weakening US dollar. A delay in obtaining price increases also had an impact on operating profit. The increase in sales volume and increased factory efficiencies helped offset some of the above mentioned cost increases.OtherThe 2011 first quarter tax rate was 13.7% versus 21.7% in the prior year. The principal cause of the rate decrease was lower earnings within higher tax rate jurisdictions. 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. However, variations in earnings across quarters mean that this rate may vary significantly from quarter to quarter.As at the 2010 year-end the Company had experienced a significant increase in inventory levels as sales fell short of expectations in the fourth quarter of 2010 and inventories rose above normal levels. Therefore, as was expected, in the first quarter of 2011 inventories declined from US$510.1 million as at December 30, 2010 to US$493.0 million as at quarter end. The decline was as expected in Juvenile and Home Furnishings with a combined decrease of over 10%. However, partially offsetting that was an increase in Recreational / Leisure in anticipation of second quarter shipping, the strongest of the year for that segment. Though much higher than inventory levels as at March 31, 2010 which were US$373.0 million, 2011 inventories are more in line with current requirements, whereas in 2010 the Company had allowed inventories to fall to below normal levels.Quarterly dividendThe 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 15th, 2011 to shareholders of record as at the close of business on June 1st, 2011.OutlookThe U.S. retail environment, particularly in Juvenile, continues to pose challenges. As evidenced by lower margins in the Juvenile and Home Furnishings segments, high input costs have not receded and the majority of these higher costs are being absorbed by the Company at this time.In Recreational/Leisure, the solid start to the year is expected to continue with an overall improved performance over 2010. Dorel has invested heavily in its bicycle brands and coupled with the enthusiastic acceptance of new models, growth is occurring in the IBD dealer network. The Company is optimistic for the balance of the year in its mass merchant channel as point-of-sales activity has improved in recent weeks.The Company remains committed to new product development and strategic brand support as the best way to ensure it continues to bring value to its customers and consumers. An illustration of this is the work being done at the new Dorel Technical Center for Child Safety which has recently developed a next generation crash force energy management technology which provides Dorel with an important edge over other car seat manufacturers. Other important research is underway and will be announced at next week's Annual Meeting of Shareholders.First quarter inventory levels were reduced as expected and will continue to come down to appropriate levels. The Company fully anticipates that cash flow will increase significantly through the year as inventory levels are reduced."Despite the current short-term challenges we are not wavering from our commitment to new product development in all our segments. We realize that to successfully navigate an environment of rising costs and prudent consumers, we need to promote our brands and bring new exciting products to market that will create demand, allowing us to improve profitability," commented Mr. Schwartz.Conference CallDorel Industries Inc. will hold a conference call to discuss these results today, May 18, 2011 at 1:00 P.M. Eastern Time. Interested parties can join the call by dialling 1-877-974-0445. The conference call can also be accessed via live webcast at or If you are unable to call in at this time, you may access a tape recording of the meeting by calling 1-877-289-8525 and entering the passcode 4437451# on your phone. This tape recording will be available on Wednesday, May 18, 2011 as of 4:00 P.M. until 11:59 P.M. on Wednesday, May 25, 2011.Complete financial statements will be available on the Company's website,, and will be available through the SEDAR website.ProfileDorel Industries Inc. (TSX: DII.B, DII.A) is a world class juvenile products and bicycle company.  Established in 1962, 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 furniture products, both domestically produced and imported.   Dorel is a US$2.3 billion company with 4700 employees, facilities in nineteen countries, and sales worldwide.Caution Regarding Forward Looking StatementsCertain 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.CONSOLIDATED STATEMENTS OFFINANCIAL POSITIONALL FIGURES IN THOUSANDS OF US $            as at as at as at  March 31,2011 December 30, 2010 December 31,2009            (unaudited) (unaudited) (unaudited)          ASSETS         CURRENT ASSETS          Cash and cash equivalents $24,693 $15,748 $19,847 Trade and other receivables  467,657  356,507  348,579 Inventories  493,045  510,068  399,866 Other financial assets  782  2,554  1,411 Income taxes receivable  12,733  14,096  16,264 Prepaid expenses  20,094  17,823  17,358   1,019,004  916,796  803,325          NON-CURRENT ASSETS          Property, plant and equipment  161,221  158,752  154,261 Intangible assets  402,426  396,354  401,831 Goodwill  566,734  554,528  569,824 Other financial assets  -   -   1,476 Deferred tax assets  69,109  65,690  66,002 Other assets  1,898  2,215  668   1,201,388  1,177,539  1,194,062  $2,220,392 $2,094,335 $1,997,387          LIABILITIES         CURRENT LIABILITIES          Bank indebtedness $44,283 $30,515 $1,987 Trade and other payables  344,121  323,588  291,932 Other financial liabilities  5,966  4,203  1,185 Income taxes payable  13,622  13,154  27,257 Long-term debt  10,783  10,667  322,508 Provisions  44,353  43,232  46,482   463,128  425,359  691,351          NON-CURRENT LIABILITIES          Long-term debt  354,006  319,281  27,075 Pension and post-retirement benefit obligations  32,185  32,056  28,622 Deferred tax liabilities  112,305  109,789  122,362 Provisions  1,985  1,780  1,726 Other financial liabilites  31,804  31,253  22,112 Other long-term liabilities  2,948  2,966  1,301   535,233  497,125  203,198          EQUITY         SHARE CAPITAL  178,834  178,816  174,816CONTRIBUTED SURPLUS  24,569  23,776  20,311ACCUMULATED OTHER COMPREHENSIVE INCOME  88,532  64,626  97,735RETAINED EARNINGS  930,096  904,633  809,976   1,222,031  1,171,851  1,102,838  $2,220,392 $2,094,335 $1,997,387 DOREL INDUSTRIES INC.CONSOLIDATED INCOME STATEMENTSALL FIGURES IN THOUSANDS OF US $, EXCEPT PER SHARE AMOUNTS       Three Months Ended    March 31, 2011 March 31, 2010   (unaudited)  (unaudited)       Sales $604,417 $593,696Licensing and commission income  3,366  2,617TOTAL REVENUE  607,783  596,313       Cost of sales  467,982  447,267GROSS PROFIT  139,801  149,046              Selling expenses  44,443  41,730General and administrative expenses   45,778  47,467Research and development expenses  7,590  7,773OPERATING PROFIT  41,990  52,076       Finance expenses  5,878  3,278INCOME BEFORE INCOME TAXES  36,112  48,798       Income taxes expense  4,948  10,592NET INCOME $31,164  38,206       EARNINGS PER SHARE       Basic $0.95 $1.16 Diluted $0.94 $1.15       SHARES OUTSTANDING       Basic - weighted average  32,659,446  32,933,666 Diluted - weighted average  33,007,150  33,241,496               DOREL INDUSTRIES INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEALL FIGURES IN THOUSANDS OF US $         Three Months Ended  March 31, 2011 March31, 2010   (unaudited)  (unaudited)       NET INCOME $31,164 $38,206       OTHER COMPREHENSIVE INCOME:      Cumulative translation account:      Net change in unrealized foreign currency gains (losses) on translationof net investments in foreign operations, net of tax of nil  26,402  (27,780)              Net changes in cash flow hedges:      Net change in unrealized gains (losses) on derivatives designated ascash flow hedges  (3,206)  749Reclassification to income  (1,450)  210Reclassification to the related non-financial asset  1,480  (372)Deferred income taxes  744  206   (2,432)  793       Defined benefit plans:      Acturial gains (losses) on defined benefit plans  (86)  (907)Deferred income taxes  22  326   (64)  (581)       TOTAL OTHER COMPREHENSIVE INCOME (LOSS)  23,906  (27,568)       TOTAL COMPREHENSIVE INCOME $55,070 $10,638 DOREL INDUSTRIES INC.CONSOLIDATED STATEMENTS OF CHANGES IN EQUITYALL FIGURES IN THOUSANDS OF US $         Attributable to equity holders of the Company Share CapitalContributedSurplusCumulativeTranslationAccount*Cash FlowHedges*DefinedBenefitPlans*RetainedEarningsTotalEquity (unaudited)(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)        Balance as at December 31, 2009$ 174,816$ 20,311$ 96,840$ 895$ - $ 809,976$ 1,102,838        Total comprehensive income (loss)- - (27,780)793(581)38,20610,638Issued under stock option plan759- - - - - 759Reclassification from contributed surplus due to exercise of stock options156(156)- - - - - Repurchase and cancellation of shares(272)- - - - - (272)Premium paid on share repurchase- - - - - (1,128)(1,128)Share-based payments- 988- - - - 988Dividends on common shares- - - - - (4,118)(4,118)Dividends on deferred share units- 9- - - (9)-         Balance as at March 31, 2010$ 175,459$ 21,152$ 69,060$ 1,688$ (581)$ 842,927$ 1,109,705                Balance as at December 31, 2010$ 178,816$ 23,776$ 67,970$ (1,032)$ (2,312)$ 904,633$ 1,171,851        Total comprehensive income (loss)- - 26,402(2,432)(64)31,16455,070Issued under stock option plan182- - - - - 182Reclassification from contributed surplus due to exercise of stock options34(34)- - - - - Repurchase and cancellation of shares(198)- - - - - (198)Premium paid on share repurchase- - - - - (771)(771)Share-based payments- 811- - - - 811Dividends 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        *Accumulated other comprehensive income        DOREL INDUSTRIES INC.  CONSOLIDATED STATEMENTS OF CASH FLOWS  ALL FIGURES IN THOUSANDS OF US $           Three MonthsEnded March 31, 2011 March 31, 2010 (unaudited) (unaudited)      CASH PROVIDED BY (USED IN):           OPERATING ACTIVITIES     Net income$31,164 $38,206Items not involving cash:      Depreciation and amortization 13,184  12,752 Amortization of deferred financing costs 369  29 Accretion expense on contingent considerations 531  475 Income taxes expense 4,948  10,590 Share-based payments 811  988 Pension and post-retirement defined benefit plans (1,305)  (854) (Gain) Loss on disposal of property, plant and equipment (18)  6  49,684  62,192Net changes in non-cash balances related to operations:      Trade and other receivables (103,657)  (85,274) Inventories 24,048  22,436 Prepaid expenses (2,384)  (2,557) Trade and other payables 19,054  35,169 Provisions, other financial liabilities and other long-term liabilities 1,212  958  (61,727)  (29,268)       Income taxes paid (5,640)  (2,479) Income taxes received 104  2,720 Interest paid (3,177)  (4,517)      CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (20,756)  28,648      FINANCING ACTIVITIES      Bank indebtedness 12,841  13,095 Increase of long-term debt 34,138  50,569 Repayments of long-term debt -   (55,000) Share repurchase (969)  (1,400) Issuance of share capital 182  759 Dividends on common shares (4,914)  (4,118)CASH PROVIDED BY FINANCING ACTIVITIES 41,278  3,905      INVESTING ACTIVITIES     Acquisition of businesses      Additions to property, plant and equipment - net (6,610)  (5,628) Additions to intangible assets (4,615)  (4,737)CASH USED IN INVESTING ACTIVITIES (11,225)  (10,365)       Effect of exchange rate changes on cash and cash equivalents (352)  (4,640)      NET INCREASE IN CASH AND CASH EQUIVALENTS 8,945  17,548      Cash and cash equivalents, beginning of period 15,748  19,847      CASH AND CASH EQUIVALENTS, END OF PERIOD$24,693 $37,395  DOREL INDUSTRIES INC.INDUSTRY SEGMENTED INFORMATIONTHREE MONTHS ENDED MARCH 31ALL FIGURES IN THOUSANDSOF US $             Total JuvenileRecreational / LeisureHome Furnishings  20112010201120102011201020112010  (unaudited)(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)Total revenue $ 607,783$ 596,313$ 269,620$ 285,793$ 200,427$ 181,677$ 137,736$ 128,843Cost of sales 467,982447,267198,000202,694149,432135,554120,550109,019Gross profit 139,801149,04671,62083,09950,99546,12317,18619,824Selling expenses 43,87941,15420,72719,94818,96717,4064,1853,800General and administrative expenses 39,13941,21421,13923,60313,36312,9734,6374,638Research and development expenses 7,5907,7736,0826,417894673614683Operating profit 49,19358,905$ 23,672$ 33,131$ 17,771$ 15,071$ 7,750$ 10,703Finance expenses 5,8783,278      Corporate expenses 7,2036,829      Income taxes 4,94810,592      Net income $ 31,164$ 38,206                Earnings per Share          Basic $0.95$1.16       Diluted $0.94$1.15                Depreciation and amortization included in operating profit $ 13,150$ 12,717$ 9,622$ 9,213$ 2,192$ 2,122$ 1,336$ 1,382   For further information: MaisonBrison Communications Rick Leckner (514) 731-0000 Dorel Industries Inc. Jeffrey Schwartz (514) 934-3034