Dorel Industries Inc. saw net income for the fourth quarter fall 35.2% to $22.5 million or 69 cents per diluted share, compared to $34.7 million or $1.05 per diluted share a year ago. Fourth quarter revenue was US$430.3 million, down from US$469.1 million a year ago.
The revenue decline in the quarter was due to a sharp decline in the Recreational/Leisure segment, which declined by 35.8% against the fourth quarter of 2004 which included exceptional sales of the Sting-Ray bicycle in anticipation of the 2004 holiday shopping season. The Juvenile and Home Furnishing segments posted modest revenue increases of 1.5% and 2.0% respectively in the quarter.
Revenue for the full year increased by 3.0% to US$1.76 billion from last year's revenue of US$1.71 billion. Adjusted net income for the year declined 2.6% to US$97.5 million or US$2.96 per diluted share compared to US$100.1 million or US$3.04 per share a year ago. On an unadjusted basis, annual net income was down 8.7% to US$91.3 million or US$2.77 per diluted share.
Year-over-year increases in revenues also occurred in both the Juvenile and Home Furnishing segments, which increased by 9.1% and 4.8% respectively. However, these gains were offset by a decline in Recreational/Leisure sales of 11.5%, due principally to the 2004 success of the Sting-Ray bicycle. In 2005, our sales of these models were negligible as retailers were fully stocked throughout the year.
“In 2005 Dorel had strong performances in Juvenile and in several Home Furnishing units. However these were offset by challenges in Recreational/Leisure and Ready-to-Assemble (RTA) furniture. Pacific Cycle was following a huge success in 2004 with its Sting-Ray chopper bicycle, a success that made 2005 a difficult one by comparison. However, as a result of this event, we have re-focused our energy on improving the recreational product line beyond bicycles into motor scooters, swing sets and adding effort to other areas of that business. Our RTA furniture business continues to be in a turn-around phase. Significant improvements were made in sales and marketing, as well as new product development, but necessary factory improvements remain to be achieved,” commented Martin Schwartz, Dorel President and CEO.
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Summary of Financial Highlights
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Fourth quarter ended December 30
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All figures in thousands of US $, except per share amounts
2005 2004 Change %
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Revenue 430,258 469,072 -8.3%
Adjusted net income 22,893 34,721 -34.1%
Per share - Basic 0.70 1.06 -34.0%
Per share - Diluted 0.70 1.05 -33.3%
Net income 22,546 34,721 -35.1%
Per share - Basic 0.69 1.06 -34.9%
Per share - Diluted 0.69 1.05 -34.3%
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Average number of shares
outstanding - diluted
weighted average 32,859,112 32,924,736
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Summary of Financial Highlights
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Year ended December 30
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All figures in thousands of US $, except per share amounts
2005 2004 Change %
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Revenue 1,760,865 1,709,074 3.0%
Adjusted net income 97,453 100,076 -2.6%
Per share - Basic 2.97 3.06 -2.9%
Per share - Diluted 2.96 3.04 -2.6%
Net income 91,322 100,076 -8.7%
Per share - Basic 2.78 3.06 -9.2%
Per share - Diluted 2.77 3.04 -8.9%
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Average number of shares
outstanding - diluted
weighted average 32,927,701 32,915,232
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Recreational/Leisure Segment
Fourth quarter Recreational/Leisure revenue decreased 35.8% to US$80.2 million compared to last year's US$125.0 million. Earnings from operations dropped 58.6% to US$6.5 million from US$15.7 million. For the year, revenue was down 11.5% to $344.7 million from US$389.5 million last year. Full year earnings from operations were down 29.5% to US$34.9 million from US$49.4 million last year.
The revenue and earnings decline in the quarter was due exclusively to lower sales of the Sting-Ray bicycle. Excluding sales of this model, revenues increased by 10% over 2004 levels. For the year, 2005 sales include US$12.3 million from an extra month's sales. Therefore, as 2004 only included eleven month's results, true organic revenues actually declined by 14.7% from the prior year. Sales of non-Sting-Ray products actually increased by 9% over 2004 as the core business remains strong and is being expanded. These sales increases occurred in several product categories and brands. However, Sting-Ray sales in 2004 far exceeded those in 2005 more than offsetting any increases.
DOREL INDUSTRIES INC.
CONSOLIDATED STATEMENT OF INCOME
ALL FIGURES IN THOUSANDS OF US $, EXCEPT PER SHARE AMOUNTS
Fourth quarter ended Year ended
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December 30, December 30, December 30, December 30,
2005 2004 2005 2004
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Sales $ 426,053 $ 464,492 $1,740,693 $1,690,952
Licensing and
commission income 4,205 4,580 20,172 18,122
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TOTAL REVENUE 430,258 469,072 1,760,865 1,709,074
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EXPENSES
Cost of sales 339,287 364,289 1,367,217 1,315,921
Selling, general and
administrative
expenses 44,437 51,770 200,159 211,362
Depreciation and
amortization 10,448 8,930 38,999 34,611
Research and development
costs 1,733 1,729 7,945 6,420
Restructuring costs 550 - 6,982 -
Interest on long-term
debt 7,861 8,215 31,240 30,594
Other interest 338 206 1,410 3,193
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404,654 435,139 1,653,952 1,602,101
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Income before income
taxes 25,604 33,933 106,913 106,973
Income taxes 3,058 (788) 15,591 6,897
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NET INCOME $ 22,546 $ 34,721 $ 91,322 $ 100,076
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EARNINGS PER SHARE
Basic $ 0.69 $ 1.06 $ 2.78 $ 3.06
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Diluted $ 0.69 $ 1.05 $ 2.77 $ 3.04
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