Dorel's third quarter financials paint a rosy picture for the Cycling Sports Group parent, with total revenues for the nine months thus far up 9.7 per cent.
Revenue for the third quarter increased 10.8 per cent to US$673.0 million compared to US$607.3 million a year ago. Net income for the period rose 75.4 per cent to US$19.5 million or US$0.60 per diluted share compared to US$11.1 million or US$0.34 per diluted share in 2013.
Total revenue for the nine months was up to US$1.98 billion compared to US$1.80 billion in the prior year. Net income increased by 27.5 per cent to US$59.5 million or US$1.83 per diluted share, compared to US$46.6 million or US$1.45 per diluted share for the year-to-date a year ago.
"Marking the third quarter were a number of positive highlights in all three segments. Results were generally good across most of our juvenile divisions and this was despite the strength of the US dollar relative to last year reducing earnings by around US$4.0 million. Product development was showcased at two major juvenile trade shows and there is a substantial number of new product introductions scheduled for next year. There has been a great deal of activity associated with our newly-acquired facilities in China and Taiwan. We see the Lerado transaction as a game-changer for Dorel and there has been a team in place coordinating the integration changeover for several months," said Martin Schwartz, Dorel President & CEO.
"We continue to be pleased with the sustained progress in our Recreational/Leisure segment. For the third consecutive quarter, segment revenue grew by double digits. The Cannondale Sports Group (CSG) has had a solid nine months and we see a bright future for this business with a dynamic management team in place. Caloi's operating profit was positive after losses during the first half and we still expect the bulk of Caloi's earnings during the current fourth quarter. In the mass channel, Pacific Cycle posted healthy increases with quarterly performance exceeding prior year in both revenue and operating profit. We look forward to an excellent racing year in 2015 with our new partners, Slipstream Racing.
"As we transition out of the Brixia relationship with our Cannondale Pro Cycling team, we have incurred one-time costs of US$4.5 million in the quarter, as outlined below in the Recreational/Leisure segment. In addition, the segment's on-going restructuring program resulted in costs of US$0.9 million. The strength of the US dollar also had an unfavourable net impact on the Recreational/Leisure results of approximately US$1.0 million versus last year. Home Furnishings revenues increased with Internet and drop ship vendor sales doing well. Operating profit was down slightly due to declines in domestically produced RTA furniture," concluded Mr. Schwartz.
The appreciation of the US dollar had a net negative impact on the Juvenile and Recreational/Leisure segments of approximately US$5.0 million for the quarter versus the third quarter of 2013. This was however offset by the favourable effect of exchange on the revaluation of put option liabilities which resulted in a gain of US$3.1 million in the quarter versus a loss of US$3.5 million in the same period in 2013 (representing a net favourable change of US$6.6 million), recorded in corporate expenses in the segmented information.
In addition, third quarter total expenses related to the Cannondale Pro Cycling team one-time costs and the segment's restructuring costs were US$5.4 million pre-tax. The third quarter of 2013 also included a pre-tax expense of US$8.0 million related to an unfavourable ruling in a US car seat product liability case.
On November 3rd Dorel completed its acquisition of 100 per cent of the juvenile business of Hong Kong-based Lerado Group, a juvenile product manufacturer in China specializing in the design and manufacture of a wide range of infant and juvenile products.