Dorel: Kmart won't derail growth
By Michael J. Knell -- Furniture Today, March 3, 2002
MONTREAL — MONTREAL — The uncertain future of one of its largest customers won't affect Dorel Inds.' ability to grow its top and bottom lines this year, its president and chief executive officer told financial analysts.
While Kmart didn't place any orders in January, Martin Schwartz said, "they came back with a vengeance in February."
Historically, almost 50% of Dorel's business — in all sectors including juvenile, home furnishing and ready-to-assemble — has been done with Kmart and Wal-Mart. But Schwartz said sales to Target have grown substantially.
Dorel is maintaining its guidance for 2002 of earnings between $1.90 to $2 per share.
For the year ended Dec. 30, Dorel said its revenues were 21% to $916.8 million and net income rose 47.4% to $25.5 million or 89 cents per share. Dorel reports its results in U.S. dollars.
Those results include a charge of 5 cents per share in the fourth quarter for writing off Kmart receivables as the retailer filed for Chapter 11 bankruptcy protection. The company also recorded a $12.4 million after-tax charge to reflect an increase in the self-insured component of its product liability insurance program.
Those decisions led to a net loss in the fourth quarter of $7 million, although revenue rose 2.8% to $219.5 million.
Kmart's filing affected RTA sales, which dipped less than 1% to $244 million in 2001, although earnings from operations increased 9% to $44 million.
Fourth-quarter RTA sales were down 14% to $58 million while earnings from operations decreased 2% to $12 million.
"The positive results of our RTA furniture sector are in contrast to the others in the industry that have experienced a particularly difficult year," Schwartz said.
Dorel projects that its RTA group, including Ridgewood and Ameriwood, will generate sales of $270-$285 million this year, with earnings from operations in the range of 16.5% to 17.5% of sales.
Thanks to improvements in its Montreal-based futon operations, Dorel's home furnishings segments sales rose 19% for the year to $169 million, while earnings from operations nearly doubled to $3.4 million. In the fourth quarter, the division's sales were up 21% to $52 million with earnings from operations of $368,831 versus a loss of $2.6 million a year earlier.
Dorel now imports its futon frames from Asia while the Montreal facility makes the mattresses and assembles and packages the finished product.
"We have achieved the planned turnaround in the Home Furnishings Sector," Schwartz said.
| Quarter ended 12/30 | 2001 | 2000 | Change |
|---|---|---|---|
| Sales | $219,472,432 | $213,420,120 | 2.8% |
| Operating income | 15,395,226 | 20,761,177 | (25.8%) |
| Net income(a) | (7,012,318) | (10,781,927) | — |
| Earnings per share | (0.24) | (0.38) | — |
| Year ended 12/30 | 2001 | 2000 | Change |
| Sales | $916,769,449 | $757,539,886 | 21.0% |
| Operating income | 101,483,047 | 91,609,334 | 10.8% |
| Net income(b) | 25,504,046 | 17,305,545 | 47.4% |
| Earnings per share | 0.89 | 0.61 | 45.9% |
| (a) Includes income tax benefits of $7.2 million in the 2001 quarter and $4.5 million in the 2000 quarter and net losses from discontinued operations of $1.1 million in the 2001 quarter and $9.3 million in the 2000 quarter. The 2000 quarter also includes a $9.7 million pretax restructuring charge. (b) Includes net losses from discontinued operations of $1.1 million in the 2001 year and $12.7 million in the 2000 year. The 2000 year also includes a $9.7 million pretax restructuring charge. | |||
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