Earnings:
Monday August 14, 12:03 pm Eastern Time
Press Release
SOURCE: Dorel Industries Inc.
Dorel Sales and Profits Continue to Climb - Second Quarter Results: Revenues Up 20%, Earnings Increase 13% - Company Now Reporting In $U.S.
MONTREAL, Aug. 14 /CNW-PRN/ - Continuing top and bottom line increases during the second quarter ended June 30, 2000 marked the 24th consecutive quarter of growth for global consumer products manufacturer, Dorel Industries Inc. (TSE: DII.A - news, DII.B - news; NASDAQ: DIIBF - news). All figures, for the first time, are being reported in U.S. dollars.
Results for the second quarter ended June 30, 2000 were as follows:
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________________________________________________________________________
SUMMARY OF FINANCIAL HIGHLIGHTS
________________________________________________________________________
Six month ended June 30,
________________________________________________________________________
All figures in US $
2000 1999 Change
________________________________________________________________________
Revenue 357,368,559 310,026,335 15.3 %
Net income 20,157,157 16,843,233 19.7 %
Net income per share
Basic 0.72 0.60 19.4 %
Fully diluted 0.69 0.58 18.6 %
________________________________________________________________________
________________________________________________________________________
SUMMARY OF FINANCIAL HIGHLIGHTS
________________________________________________________________________
Second quarter ended June 30,
________________________________________________________________________
All figures in US $
2000 1999 Change
________________________________________________________________________
Revenue 169,233,568 141,425,016 19.7 %
Net income 9,456,117 8,332,279 13.5 %
Net income per share
Basic 0.34 0.29 16.5 %
Fully diluted 0.33 0.29 13.3 %
Average number of shares
outstanding - diluted 29,624,586 29,377,592
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JUVENILE
JUVENILE sales for the quarter rose 32.7% to $86.2 million, while earnings from operations jumped 53.4% to $7.2 million. During the first half, sales were up 29.4% to $177.6 million while earnings from operations grew 46.7% to $14.9 million.
Dorel President and CEO, Martin Schwartz stated that while the performance of Safety 1st only impacted Dorel for the last month of the quarter, following completion of its acquisition on June 5, 2000, results were excellent and the outlook is highly positive. ``In recent weeks we have met with several major mass merchants to preview the 2001 product lines. Reaction has been enthusiastic to our wide range of new introductions. As we expected, the Safety 1st brand carries a great deal of weight in the market.''
At Cosco, licensing agreements with Eddie Bauer and NASCAR continued to propel sales. The third quarter will also see the introduction of Disney character juvenile products.
New products also spurred growth at Europe's Maxi Miliaan. Sales of Maxi-Cosi Rodi, a booster seat for children introduced in June 1999, exceeded expectations during the quarter. The Maxi-Cosi Mico, a car seat for infants in the 0-15 month category, brought to market just this past June, drew excellent reaction with promising initial sales.
``The product categories of Cosco and Safety 1st completely complement one another. While each company will continue to market its full product line without competing against one another, we will also draw upon our collective resources to best serve our customers. This will help maintain and enhance the strong brand identities of both Cosco and Safety 1st and accelerate the development of new products. These new products as well as new listings will maintain growth, particularly through the latter portion of the current year,'' stated Mr. Schwartz.
READY TO ASSEMBLE
RTA sales and earnings were basically flat during the most recent quarter. Revenues were $52.2 million, while earnings from operations were $8.6 million. For the six month period, sales were $117.3 million while earnings from operations were $18.7 million.
Early in the year it was determined that certain improvements were required to strengthen RTA. As such, Bob Klassen, former COO of Ridgewood Industries was recently named President of the RTA Division, to be merged under the Ameriwood name. Along with others in design and product development, he has relocated from Cornwall to St. Louis.
``Bob has demonstrated solid abilities in both product development and marketing. This is the kick-start we require. Coupled with Ridgewood's consistently successful formula, we are highly confident of improvement throughout the RTA Division,'' said Mr. Schwartz.
The sales and marketing department is also being bolstered in preparation for an aggressive push for new customers and new products during the current quarter. Increased distribution channels are also being opened up with regional hardware and furniture store chains. In addition, export opportunities are being developed. During the quarter an agreement was signed with a U.K. distributor for sales to parts of Europe and Australia.
HOME FURNISHINGS
In HOME FURNISHINGS, sales increased 29.1% to $30.8 million, while earnings from operations grew 53.8% to $1.4 million. For the six months ended June 30, 2000, sales were up 16.7% to $62.5 million while earnings from operations decreased 1.9% to $3.1 million.
Sales of Cosco's expanded selection of metal folding furniture were 10% above the corresponding period last year and significantly ahead of plan. The quality orientation of the bridge sets was cited as a key reason for this success. ``The World's Greatest Work Platform Step Stool'' is expected to perform well in the second half of the current year.
Futon sales for the first six months were 100% over last year's first half, however margins remained under pressure. A cost savings program has been established to address the situation. A portion of the plan is now in place and the remainder will come into effect through the third quarter. Improvement is anticipated through the balance of the year.
OUTLOOK
``Juvenile has again been a solid performer for Dorel and the addition of Safety 1st will further enhance performance. Our focus is on RTA and Home Furnishings where certain issues have been identified and are being aggressively addressed. We have created a very strong RTA team that has a clear mandate to deliver major product upgrades and new customers. This process is currently underway. Sales in Home Furnishings are markedly up and cost controls are improving. We anticipate a solid second half,'' concluded Mr. Schwartz.
DOREL PROFILE
Dorel is a rapidly growing, consumer products manufacturer specializing in three product areas: ready-to-assemble (RTA) furniture, juvenile products and home furnishings. Dorel's product offerings include a wide variety of RTA furniture for home and office use; juvenile products such as infant car seats, strollers, high chairs, infant health and safety aids, toddler beds and cribs; and home furnishings such as metal folding chairs, tables, bunk beds, futons and step stools.
Dorel employs more than 3,800 people in nine countries. Major North American facilities are located in Montreal, Quebec; Cornwall, Ontario; Columbus, Indiana; Wright City, Missouri; Canton, Massachusetts; Tiffin, Ohio; Dowagiac, Michigan; Cartersville, Georgia; Fort Smith, Arkansas and San Diego, California. The Company's major divisions in the United States include Cosco, Safety 1st, Ameriwood and Infantino. In Canada, Dorel operates Ridgewood and Dorel Home Products. European operations are carried out through Maxi-Miliaan B.V. in the Netherlands and Dorel (U.K.) Ltd. in the United Kingdom.
CONFERENCE CALL NOTE:
A conference call hosted by Dorel Industries will be held TODAY at
2PM, EDT. You may listen live at www.newswire.ca
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Except for the historical information contained herein, this press release contains statements that constitute forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that may cause or contribute to such differences include, among other things, the Company's ability to close the proposed transaction. Other risks and uncertainties include changes in business conditions and the economy in general, changes in governmental regulations, unforeseen litigation and other risk factors identified in the Company's public filings under ``Risk Factors.'' The Company undertakes no obligation to update these forward-looking statements for revisions or changes after the date of this press release.
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CONSOLIDATED BALANCE SHEET
AS AT JUNE 30 , 2000 (unaudited)
ALL FIGURES IN US $
2000 1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents 14,010,767 4,712,902
Accounts receivable 126,973,239 94,160,242
Inventories 172,841,536 112,600,122
Prepaid expenses 16,346,624 8,808,648
Deferred income taxes 23,664,289 4,297,745
___________________________________
353,836,455 224,579,661
CAPITAL ASSETS 110,670,079 93,635,542
DEFERRED CHARGES 7,349,288 3,080,508
INTANGIBLE ASSETS 159,515,599 14,714,053
___________________________________
631,371,421 336,009,763
___________________________________
___________________________________
LIABILITIES
CURRENT LIABILITIES
Bank indebtedness - 1,470,710
Accounts payable and accrued liabilities 108,802,552 55,747,766
Salaries payable 7,901,292 6,494,878
Income taxes payable 9,522,817 7,230,179
Current portion of long-term debt 2,571,228 1,563,687
___________________________________
128,797,888 72,507,220
___________________________________
___________________________________
LONG-TERM DEBT 282,590,844 90,736,222
___________________________________
PENSION OBLIGATION 12,103,325 -
___________________________________
DEFERRED INCOME TAXES 14,904,079 7,347,451
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SHAREHOLDERS' EQUITY
CAPITAL STOCK 62,462,071 62,608,745
RETAINED EARNINGS 130,366,981 97,760,673
CUMULATIVE TRANSLATION ADJUSTMENT 146,233 5,049,453
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192,975,285 165,418,871
___________________________________
631,371,421 336,009,763
___________________________________
___________________________________
CONSOLIDATED STATEMENT OF INCOME
FOR THE SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 2000 (unaudited)
ALL FIGURES IN US $
Second quarter ended Six months ended
_____________________________________________________
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
SALES 169,233,568 141,425,016 357,368,559 310,026,335
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EXPENSES
Cost of sales 127,959,618 108,514,795 274,702,196 239,622,230
Operating 19,304,159 14,735,598 38,909,221 32,954,162
Amortization 5,507,105 4,358,539 9,816,174 9,091,673
Research and
development costs 747,999 440,585 1,359,305 902,485
Interest on
long-term debt 2,858,254 1,478,853 4,273,344 3,265,082
Other interest 388,771 58,711 424,764 84,644
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156,765,905 129,587,082 329,485,004 285,920,277
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INCOME BEFORE
INCOME TAXES 12,467,663 11,837,934 27,883,555 24,106,058
Income taxes 3,011,546 3,505,654 7,726,398 7,262,825
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NET INCOME 9,456,117 8,332,280 20,157,157 16,843,233
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_____________________________________________________
EARNINGS PER SHARE
Basic 0.34 0.29 0.72 0.60
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Fully Diluted 0.33 0.29 0.69 0.58
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CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 2000 (unaudited)
ALL FIGURES IN US $
Second quarter ended Six months ended
________________________ ________________________
CASH PROVIDED BY
(USED IN): June 30, June 30, June 30, June 30,
2000 1999 2000 1999
OPERATING ACTIVITIES
Net income 9,456,117 8,332,279 20,157,157 16,843,233
Adjustments for: -
Amortization 5,507,105 4,358,539 9,816,174 9,091,674
Deferred income taxes (221,855) (8,038) (265,066) 24,698
Gain on disposal of
capital assets 20 - (2,830) -
________________________ ________________________
14,741,387 12,682,780 29,705,435 25,959,604
Changes in non-cash
working capital: -
Decrease (increase)
in accounts
receivable 30,226,257 24,247,453 7,898,455 (14,791,136)
Increase in
inventories (42,066,752) (18,162,486) (46,767,553) (17,893,584)
Increase in prepaid
expenses (1,142,670) (3,062,227) (3,816,212) (1,281,255)
Increase in accounts
payable and accrued
liabilities 17,038,386 3,437,019 23,239,613 10,514,079
Increase (decrease)
in income taxes
payable (502,135) 2,460,408 3,039,566 4,077,709
Decrease in
salaries payable (237,539) (1,178,842) (3,082,433) (1,395,781)
________________________ ________________________
3,315,557 7,741,325 (19,488,564) (20,769,969)
________________________ ________________________
- -
________________________ ________________________
CASH PROVIDED BY
OPERATING
ACTIVITIES 18,056,934 20,424,105 10,216,871 5,189,636
________________________ ________________________
- - -
FINANCING ACTIVITIES
Increase (decrease) in
long-term debt 269,377 (12,272,420) 8,132,079 8,715,628
Issuance of capital stock - 1,491,383 - 1,619,583
Repurchase of
capital stock (157,757) - (824,683) -
Decrease in bank
indebtedness (1,855,032) (5,704,875) (1,085,335) (7,471,330)
________________________ ________________________
CASH PROVIDED BY (USED IN)
FINANCING
ACTIVITIES 1,743,412 (16,485,912) 6,222,061 2,863,881
________________________ ________________________
- -
INVESTING ACTIVITIES
Acquisition of
subsidiary
company (143,540,499) - (143,540,499) -
Cash on hand 6,860,721 - 6,860,721 -
________________________ ________________________
(136,679,778) - (136,679,778) -
Financed by
long-term debt (136,679,778) - (136,679,778) -
________________________ ________________________
Additions to capital
assets - net (3,165,218) (5,626,965) (5,514,177) (9,440,630)
Deferred charges (3,206,946) 44,468 (3,668,749) (301,844)
Intangible assets (113,705) (273,068) (113,705) (137,993)
________________________ ________________________
CASH USED IN INVESTING
ACTIVITIES (6,485,869) (5,855,565) (9,296,631) (9,880,468)
________________________ ________________________
OTHER
Effect of exchange rate
changes on cash 356,722 902,567 785,657 (285,677)
________________________ ________________________
- -
NET DECREASE IN CASH
AND CASH
EQUIVALENTS 10,184,375 (1,014,806) 7,927,958 (2,112,628)
Cash and cash equivalents,
beginning of period 3,826,392 5,727,709 6,082,809 6,825,530
________________________ ________________________
CASH AND CASH EQUIVALENTS,
END OF PERIOD 14,010,767 4,712,902 14,010,767 4,712,902
________________________ ________________________
________________________ ________________________
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
FOR THE 6 MONTHS ENDED JUNE 30, 2000
ALL AMOUNTS ARE IN $US
2000 1999
BALANCE, BEGINNING OF PERIOD 119,344,595 80,917,440
Accounting change (Note 2) (8,418,112) -
Net income 20,157,157 16,843,233
Premium paid on repurchase of shares (716,659) -
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BALANCE, END OF PERIOD 130,366,981 97,760,673
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Notes to the Consolidated Financial Statements
As at June 30, 2000 (unaudited)
All figures in US$
1. Change in Functional and Reporting Currency
The Company has historically presented its financial statements in Canadian dollars. Effective April 1, 2000 as a result of the Company's increasing economic activity in the United States, the U.S dollar has been adopted as the Company's reporting and functional currency.
The comparative financial information presented here has been restated using the translation of convenience method in accordance with Generally Accepted Accounting Principles in Canada. For periods up to and including March 31, 2000 the Canadian dollar financial statements of the Company have been restated into U.S. dollars using the December 30, 1999 closing exchange rate of CDN $1.4433 per US $1.00.
2. Adoption of New Accounting Standards
a) Employee future benefits
Effective January 1, 2000, the company adopted new recommendations issued by the Accounting Standards Board of the Canadian Institute of Chartered Accountants for the recognition, measurement and disclosure of the cost of employee future benefits. Under this standard, a liability and an expense is recognized for all employee future benefits in the reporting period in which an employee has provided the service that give rise to the benefits. The recommendations were adopted in a manner that produces recognized and unrecognized amounts for all of its benefit plans the same as those determined by application of accounting principles generally accepted in the United States.
The new recommendations, which will not affect the company's cash flows or liquidity, have been adopted retroactively without restating prior periods. As a result, Retained Earnings were decreased by $6.3 million, Deferred Tax Assets were increased by $4.8 million, Prepaid Expenses were increased by $0.3 million, Deferred Tax Liabilities were increased by $0.2 million, Pension Obligation was increased by $11.8 million and Cumulative Translation Adjustment was decreased by $0.6 million at January 1, 2000. The impact of the new recommendations on the first half of 2000 was to increase cost of sales by $324,000 and decrease net earnings after taxes by $194,000.
b) Income taxes
Effective January 1, 2000, the company adopted new recommendations issued by the Accounting Standards Board of the Canadian Institute of Chartered Accountants with respect to accounting for income taxes. This standard requires the use of liability method for computing future income taxes. Under this method, future tax assets and liabilities are determined based on reporting differences between the bases of assets and liabilities used for financial statement and income statement purposes. Such differences are then measured using substantially enacted tax rates and laws that will be in effect when these differences are expected to reverse. Prior to the adoption of this standard, income tax expense was determined using the deferral method of tax allocation.
The new recommendations, which will not affect the company's cash flows or liquidity, have been adopted retroactively without restating prior periods. As a result, retained earnings were decreased by $2.1 million and deferred tax liabilities were increased by $2.1 million at January 1, 2000. The impact of the new recommendations on the first half of 2000 was to decrease income tax expense by $129,000 and increase net earnings by $129,000.
3. Comparative Figures
Certain of the prior year's accounts have been reclassified to conform to the 2000 financial statement presentation.
SOURCE: Dorel Industries Inc. |
