Dorel 4Q revenues, profits fall; RTA segment still weak
By Michael J. Knell -- Furniture Today, March 5, 2006
Montreal — Furniture, juvenile products and bicycle maker Dorel Inds. said total revenues fell 8.3% in the fourth quarter, mainly because of a sharp sales decline in its Sting-Ray bicycles, and despite modest upticks in home furnishings and juvenile products.
Meanwhile, restructuring costs of just under $7 million in 2005, incurred in the shutdown of Ameriwood's ready-to-assemble furniture factory in Wright City, Mo., helped drive down the company's bottom line.
Net income in the fourth quarter was $22.5 million, down 35.1% from the same period a year earlier, on revenues of $430.3 million.
Dorel, which reports in U.S. dollars, said annual revenue of $1.76 billion was up 3% from 2004. Net earnings fell 8.7% to $91.3 million, or $2.77 per share.
Dorel's home furnishings segment saw revenues climb 2% in the quarter to $148.8 million, and by 4.8% for the year to $569.3 million. But the segment's contribution to earnings fell by nearly half in both periods, to $7.6 million in the fourth quarter and $23.7 million in the year.
"Our RTA furniture business continues to be in a turn-around phase. Significant improvements were made in sales and marketing, as well as new product development, but necessary factory improvements remain to be achieved," said Martin Schwartz, president and CEO, in a conference call with analysts.
He said Dorel Asia, the import division, continued to grow during the quarter, offsetting declines of 5.5% in Cosco Home & Office and 13% in RTA furniture and futons at Ameriwood.
For the year, all home furnishings operations had revenue increases except Ameriwood's RTA. Cosco's sales of folding furniture and other imported home furnishings increased by 7% over 2004.
"Successful new product placements in several categories by Dorel Asia at new and existing customers helped revenues reach $133 million, a 65% increase from 2004. Ameriwood's futon sales increased 28% over the prior year. However, RTA sales declined 17% from the prior year due to declines at mass-merchant customers, Schwartz said.
The stronger Canadian dollar also hurt earnings as two of Ameriwood's five remaining factories are in Canada and both have substantial U.S. sales.
Schwartz said returning the RTA furniture division to acceptable levels of profitability remains a priority.
"During the year (the division) successfully broadened its customer base from the traditional mass merchants and implemented an increasingly successful import program," he said. Planned improvements in factory operations haven't taken effect as quickly as anticipated but should beginning helping the bottom line as the year progresses, he added.
Schwartz said, however, that higher prices for particleboard early in 2006 might put additional pressure on margins.
| Dorel Inds. | |||
|---|---|---|---|
| Owns Ameriwood, Charleswood, Cosco and Ridgewood | |||
| Earnings per share are fully diluted, and all figures in parentheses are losses or declines. | |||
| Quarter ended 12/30 | 2005 | 2004 | Change |
| (a) Includes licensing and commission income of $4.2 million in the 2005 quarter, $4.6 million in the 2004 quarter, $20.2 million in the 2005 year and $18.1 million in the 2004 year. Includes restructuring costs of $550,000 in the 2005 quarter and $7 million in the 2005 year. |
|||
| Sales | $430,258,000 | $469,072,000 | (8.3%) |
| Operating income | 46,534,000 | 103,013,000 | (54.8%) |
| Net income (a) | 22,546,000 | 34,721,000 | (35.1%) |
| Earnings per share | 0.69 | 1.05 | (34.3%) |
| Year ended 12/30 | 2005 | 2004 | Change |
| Sales | $1,760,865,000 | $1,709,074,000 | 3.0% |
| Operating income | 193,489,000 | 181,791,000 | 6.4% |
| Net income (a) | 91,322,000 | 100,076,000 | (8.7%) |
| Earnings per share | 2.77 | 3.04 | (8.9%) |
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Dorel sales, earnings decline in fourth quarter
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