The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

News Sources

Take control of your investments with the latest investing news and analysis

Press release from PR Newswire

Dorel reports first quarter results

Friday, May 11, 2012

Dorel reports first quarter results08:51 EDT Friday, May 11, 2012 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.For further information: <p> </p> <p> MaisonBrison Communications<br/> Rick Leckner<br/> (514) 731-0000 </p> <p> Dorel Industries Inc.<br/> Jeffrey Schwartz<br/> (514) 934-3034 </p>