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Press release from CNW Group

Dorel reports first quarter results

Friday, May 11, 2012

Dorel reports first quarter results08:51 EDT Friday, May 11, 2012EXCHANGESTSX: DII.B, DII.ARecreational / Leisure posts record quarterJuvenile momentum returningMONTREAL, May 11, 2012 /CNW Telbec/ - 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 HighlightsFirst Quarters Ended March 31All figures in thousands of US $, except per share amounts     Change 2012 2011 %Total revenue621,100 607,783 2.2%Net income29,163 31,164 (6.4%) Per share - basic0.91 0.95 (4.2%) Per share - diluted0.91 0.94 (3.2%)Average number of shares outstanding -     diluted weighted average32,115,862 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.OtherThe 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 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 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 CallDorel 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.ProfileDorel 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 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.CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITIONALL FIGURES IN THOUSANDS OF US $     as at as at March31, 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  174,782CONTRIBUTED SURPLUS  26,884  26,445ACCUMULATED OTHER COMPREHENSIVE INCOME 70,727  58,842RETAINED EARNINGS 993,133  969,586  1,266,214  1,229,655 $2,190,656 $2,096,569  DOREL INDUSTRIES INC.CONDENSED CONSOLIDATED INTERIM INCOME STATEMENTSALL FIGURES IN THOUSANDS OF US $, EXCEPT PER SHARE AMOUNTS       Three Months Ended March 31, 2012 March31, 2011 (unaudited) (unaudited)      Sales$617,151 $604,417Licensing and commission income 3,949  3,366TOTAL REVENUE 621,100  607,783      Cost of sales 472,563  467,982GROSS PROFIT 148,537  139,801            Selling expenses 51,805  44,443General and administrative expenses 50,630  45,778Research and development expenses 6,987  7,590OPERATING PROFIT 39,115  41,990      Finance expenses 4,980  5,878INCOME BEFORE INCOME TAXES 34,135  36,112      Income taxes expense 4,972  4,948NET 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 STATEMENTSOF COMPREHENSIVE INCOMEALL FIGURES IN THOUSANDS OF US $       ThreeMonths Ended March31, 2012 March31, 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 netinvestments 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 ascash flow hedges (1,731)  (4,861)Reclassification to income 243  1,023Reclassification to the related non-financial asset (2,464)  662Deferred 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 $55,070DOREL INDUSTRIES INC.CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITYALL FIGURES IN THOUSANDS OF US $                Attributable to equity holders of the Company                   Accumulated other        comprehensive incomeRetained earnings                    Cumulative DefinedOther   ShareContributedTranslationCashFlowBenefitRetainedTotal CapitalSurplusAccountHedgesPlansEarningsEquity (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 31,164Total other comprehensive income (loss) - - 26,402 (2,432) (64) - 23,906Issued under stock option plan 182 - - - - - 182Reclassification from contributed surplus dueto exercise of stock options 34 (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                              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 29,163Total other comprehensive income (loss) - - 14,766 (2,881) (7) - 11,878Issued under stock option plan 782 - - - - - 782Reclassification from contributed surplus due toexercise of stock options 167 (167) - - - - -Repurchase and cancellation of shares (261) - - - - - (261)Premium paid on share repurchase - - - - - (799) (799)Share-based payments - 586 - - - - 586Dividends 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 INTERIMSTATEMENTS OF CASH FLOWSALL 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 $31,164Items 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 considerationand 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  56,111Net 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 INFORMATIONTHREE MONTHS ENDED MARCH 31ALL FIGURES IN THOUSANDS OF US $                  TotalJuvenileRecreational / LeisureHomeFurnishings 20122011201220112012201120122011 (unaudited)(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)(unaudited)Total revenue $621,100$607,783$269,499$269,620$220,918$200,427$130,683$137,736Cost of sales 472,563 467,982 195,132 198,000 162,478 149,432 114,953 120,550Gross Profit 148,537 139,801 74,367 71,620 58,440 50,995 15,730 17,186Selling expenses 51,151 43,879 25,347 20,727 21,530 18,967 4,274 4,185General and administrative expenses 42,563 39,139 23,434 21,139 14,253 13,363 4,876 4,637Research and development expenses 6,987 7,590 4,921 6,082 1,277 894 789 614Operating profit 47,836 49,193$20,665$23,672$21,380$17,771$5,791$7,750Finance 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    For further information: MaisonBrison Communications Rick Leckner (514) 731-0000 Dorel Industries Inc. Jeffrey Schwartz (514) 934-3034