Dorel Industries Inc. first quarter net income was $24.2 million or 74 cents per diluted share compared to $27.2 million or 83 cents per diluted share a year ago. First quarter revenue was $451.0 million, down from $471.9 million last year.
The revenue decrease in the quarter was due to an 8.0% decline in the Home Furnishings segment, a 7.0% decline in the Recreational/Leisure segment, and a 1.4% decline in the Juvenile segment.
“The aggressive plan announced last year to revitalize Dorel's ready-to- assemble (RTA) furniture division is on track and important progress has been made on several fronts. A greatly enhanced new product development capability has resulted in an exciting flow of new products; Ameriwood has a wider positioning in its markets and has added new customers; sourcing has increased significantly from China and overheads have been reduced due to operational improvements at the division's domestic factories.
“However, the required turnaround is being affected by external events such as industry-wide particle board shortages and recent steep price increases in this commodity. Customer price increases are being implemented and will take effect later this year. In our other segments, Juvenile performed well and Recreational/Leisure was affected by lower bicycle sales in the mass merchant channel which should be corrected as we move through the year,” commented Martin Schwartz, Dorel President and CEO.
<<
-------------------------------------------------------------------------
Summary of Financial Highlights
-------------------------------------------------------------------------
First quarter ended March 31
-------------------------------------------------------------------------
All figures in thousands of US $, except per share amounts
2006 2005 Change %
-------------------------------------------------------------------------
Revenue 451,024 471,903 -4.4 %
Net income 24,181 27,205 -11.1 %
Per share - Basic 0.74 0.83 -10.8 %
Per share - Diluted 0.74 0.83 -11.3 %
-------------------------------------------------------------------------
Average number of shares
outstanding - diluted
weighted average 32,859,694 32,959,283
-------------------------------------------------------------------------
Recreational/Leisure Segment
First quarter Recreational/Leisure revenue decreased 7.0% to $77.2 million compared to last year's $83.1 million. Earnings from operations dropped 19.1% to $7.1 million from $8.7 million. The sales decrease was due to lower bicycle sales through the mass merchant channel where a major customer chose to reduce on-hand inventory levels, impacting orders in the first quarter. It is believed that this customer will return to more normal inventory levels. This decrease in bicycle sales was partially offset by the shipment of the new swing set product category, which is being marketed under the Playsafe brand name.
Gross margins decreased by 100 basis points due to a less favourable product mix as on average, bicycle sales carry a higher margin than the swing set category.
Pacific Cycle's independent bicycle dealers (IBD) channel continues to expand as has the list of dealers for Schwinn's motor scooters. Subsequent to the end of the first quarter Pacific Cycle launched its Mongoose bicycle program in China with a major display at the Shanghai Bike Show. Mongoose has signed with the Chinese National Cycling Federation to be the exclusive supplier to the Chinese National team at the 2008 Beijing Summer Olympics.
CONSOLIDATED STATEMENT OF INCOME
ALL FIGURES IN THOUSANDS OF US $, EXCEPT PER SHARE AMOUNTS
------------------------------------------------------------------------
Three Months Ended
March 31, March 31,
2006 2005
-------------------------------------------------------------------------
(unaudited) (unaudited)
-------------------------------------------------------------------------
Sales $ 444,891 $ 465,624
Licensing and commission income 6,133 6,279
---------- ----------
TOTAL REVENUE 451,024 471,903
---------- ----------
---------- ----------
EXPENSES
Cost of sales 349,916 362,734
Selling, general and administrative expenses 52,450 55,749
Depreciation and amortization 8,926 9,271
Research and development costs 2,281 2,190
Interest on long-term debt 7,774 7,920
Other interest 143 157
---------- ----------
421,490 438,021
---------- ----------
Income before income taxes 29,534 33,882
Income taxes 5,353 6,677
---------- ----------
NET INCOME $ 24,181 $ 27,205
---------- ----------
---------- ----------
EARNINGS PER SHARE
Basic $ 0.74 $ 0.83
---------- ----------
---------- ----------
Diluted $ 0.74 $ 0.83
---------- ----------
---------- ----------
SHARES OUTSTANDING
Basic - weighted average 32,859,217 32,802,978
Diluted - weighted average 32,859,694 32,959,283
-------------------------------------------------------------------------
-------------------------------------------------------------------------
