Dorel Industries Inc. said bicycle sales drove a 10 percent increase in sales by its recreational/leisure segment, which makes Pacific, Mongoose, GT and Schwinn bicycles.

 

Dorel CEO and President, Martin Schwartz said that while he could not provide earnings guidance for 2008, the company had “not witnessed any slowdown of consumer spending in Dorel’s products during the first two months of 2008.” 

 

Montreal-based Dorel operates three divisions. Its juvenile division sells baby care products including car seats and carriers, while its recreation/leisure division sells bikes and related apparel. Its home furnishing division sells a wide assortment of furniture products.

 

For the fourth quarter, revenue at the recreational/leisure segment rose 11.6% to $85.8 million from the previous year’s $76.9 million. Earnings from operations were essentially flat at $5.8 million as compared to $5.9 million the year before. For the full year, segment sales increased by 10.0% to $374.8 million from $340.7 million the year before. Earnings from operations jumped 26.8% to $33.0 million from $26.0 million a year ago.


For the year, the improvement was due to success in both the mass merchant and Independent Bicycle Dealers (IBD) channels. The majority of the increase came from several key mass customers as sales rebounded after declines in 2006.


Sales were also strong with certain warehouse club customers, a relatively new distribution channel for this segment. These increases, at both existing and new customers, were driven by bicycle sales, although other recreational product lines continue to be explored and added in an attempt to diversify sales of the segment.

Gross margins for the year increased by 70 basis points. However fiscal 2006 included a one-time $3.5 million inventory write-down, therefore margins were, in fact, consistent with the prior year.

 

Selling, general and administrative expenses rose moderately from $36.9 million in 2006 to $38.3 million in 2007. However as a percentage of revenue this represents a decrease of 60 basis points as 2007 sales volume increases outpaced additional spending.

Companywide, revenue for the fourth quarter increased 2.4% to $458.9 million from $447.9 million a year ago. In the fourth quarter, net income grew 3.1% to $22.3 million, or 67 cents per diluted share compared to $21.7 million, or 66 cents per diluted share in the fourth quarter of 2006. These results include the previously announced restructuring costs at Dorel Europe and Ameriwood Industries.

 

Companywide, full year revenue reached $1.81 billion, up from last year’s $1.77 billion. 2007 net income was basically flat at $87.5 million or $2.63 per diluted share, compared to 2006 net earnings of $88.9 million or $2.70 per diluted share. However, excluding the above mentioned restructuring costs in both years, 2007 adjusted net income was $100.1 million or $3.01 per diluted share, compared to adjusted net income of $92.0 million or $2.80 per diluted share last year.

 

Pre-tax earnings for the year were also up considerably over 2006 levels. On an adjusted basis for the fourth quarter pre-tax earnings increased 18.3% to $31.1 million and for the year the increase was 19.8%, reaching $125.8 million.