Total revenues at Dorel for the first quarter of 2004 were up 41.5% to $391.8 million, compared to $276.9 million. Net earnings for the quarter were $19.6 million or 60 cents per share, compared to 19.2 million or 60 cents per share for the first quarter of last year.

The company released Pacific Cycles results for the two months since the acquisition took place, and the new Recreation Products division is meeting expectations.
During a conference call with financial analysts, Dorel’s CEO, Martin Schwartz, said that Pacific’s sales were up “slightly” over last years numbers.

First quarter revenue for the Recreation Products division was $54 million, and Pacific Cycles February and March sales made up $52.0 million of that number. The Pacific Cycles acquisition contributed just under half of the overall Dorel sales increase.

Gross margins for the division came to 18.5%, and the operating income was $6.5 million or 12% of sales.
Schwartz said that Pacific’s results are in line with their annual target of $335 million to $375 million in sales with an operating income of 11.5% to 12.5%. If Pacific meets these goals it would make up about 20% of Dorel’s sales.

Pacific is playing up the introduction of the new Stingray bicycle at retail. Schwartz said that the retro bike designed by Orange County Choppers is “…the hottest moving item Dorel has ever seen. This is the first time we have measured shelf-time in hours, not days… Nothing stays in the stores.”

As a result of this spike in demand, Dorel has doubled its monthly production of the model.

While the introduction of new product is generally exciting to the consumer, one analyst questioned whether or not this would have an overall impact on Pacific sales.

Schwartz said that sales of the product could reach 200,000 units, and regardless of sales, the media attention alone was reason for mentioning the product in the quarterly report. If the Stingray does meet these estimated sales it could make up to $18 million in revenue for Pacific on a single bike.

On the question of rising bicycle raw material prices in the Far East, Schwartz pointed out that Dorel doesn’t actually buy the raw materials, but rather the finished product from their vendors in China.

“Prices have been going up,” Schwartz said, “and we have been able to raise the prices to our customers, but I don’t believe it has had any material impact.”


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