Dorel reports first quarter results

EXCHANGES
TSX: DII.B, DII.A

• Recreational / Leisure posts record quarter
  
• Juvenile momentum returning

MONTREAL, 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 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 50^th 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 1^st, 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

  

 

 

MaisonBrison Communications
Rick Leckner
[phone]

Dorel Industries Inc.
Jeffrey Schwartz
[phone]