March 8/14 15:58 pm - Dorel Announces Final 2013 Financials with Weak Bicycle Division Performance
Posted by Editor on 03/8/14
Dorel Industries Inc. (TSX: DII.B, DII.A) announced on Tuesday results for the fourth quarter and full year ended December 30, 2013. Revenue for the fourth quarter was US$633.5 million, up 1.8% from US$622.6 million a year ago. Net income was US$11.0 million or US$0.34 per diluted share compared to net income of US$29.1 million or US$0.91 per diluted share in 2012.
The Company had previously announced a restructuring of its Recreational/Leisure segment, with a total pre-tax charge of US$14 million to US$16 million. Included in this fourth quarter is US$13.5 million pre-tax, of which 65% is non-cash, related to this restructuring with the balance to be incurred in 2014. Excluding the impact of these restructuring charges, adjusted net income for the quarter was US$19.2 million or US$0.60 per diluted share.
Revenue for the full year was US$2.4 billion, down 2.2% from last year's US$2.5 billion. Net income was US$57.7 million or US$1.79 per diluted share, compared to US$108.5 million or US$3.39 per diluted share a year ago. Excluding full year restructuring charges of US$15.4 million pre-tax in the Recreational/Leisure segment, adjusted net income for the year was US$67.1 million or US$2.09 per diluted share.
"2013's performance was disappointing," stated Dorel's President and CEO, Martin Schwartz. "A number of the issues we faced were industry and economy related, while others were the result of less than perfect execution on our part. As announced last month, our Recreational/Leisure segment was negatively affected by top line weakness and a poorer product mix as mass merchant store traffic in general was reduced and the independent bike dealer (IBD) channel was reluctant to increase inventories going into the new year. Matters in our direct control are being addressed and there has been definite progress."
Dorel communicated in January that the Recreational/Leisure segment is restructuring its operations to enhance its competitiveness. "Specifically, we want to significantly reduce development and supply chain lead times with our global partners, improve cost structures and operating margins. This plan will result in higher levels of service for our customers and consumers and will improve profit through 2014 and 2015. We expect to realize annualized cost savings of at least US$6 million once the restructuring is completed in late 2014," added Mr. Schwartz. [See Daily News - Dorel Restructures Bicycle Division]
Segment revenues were up US$18.8 million or 8.3% for the quarter. The organic sales increase was approximately 1%, excluding the impact of foreign exchange and the acquisition of Caloi. Sales were affected by the global bike market slowdown, a sluggish start to the holiday season in both the IBD and mass merchant channels as well as an unfavourable product mix. Industry discounting continued throughout the quarter and more 2013 model year bicycles with lower gross profit were sold than had been anticipated. As well, supply for firm customer orders for more than US$10 million of CSG 2014 models did not arrive in time for fourth quarter delivery and were shipped during the current first quarter.
The US$13.5 million pre-tax restructuring charges and costs resulted in a decline of the segment's results to an operating loss of US$5.4 million from an operating profit of US$16.5 million in 2012. Excluding the restructuring charges, the segment posted US$8.1 million in operating profit. All organic businesses experienced a profit decline in the fourth quarter. Caloi, acquired in August 2013, contributed a full quarter of profitability.
The organic sales decrease after removing the impact of foreign exchange and acquisitions was approximately 2% and was in both the IBD and the mass merchant distribution channels. In both cases the decline was driven by a 2013 global decrease in the bicycle market, predominantly caused by the extremely poor weather during the first half of 2013.
For the year the segment recorded a total of US$15.4 million pre-tax in restructuring charges and costs. Operating profit in all of the segment's divisions, with the exception of Caloi, was down as increased price discounting was prevalent through the year. Unfavorable product and customer mix was also a major contributor to the reduced gross profit.