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Michael Knell

Dorel sales, earnings down, but home furnishings profit up

MONTREAL — Consumer goods giant Dorel Inds. said declines across all three of its operating segments resulted in overall revenue and earnings decreases for the second quarter of the year.

The company's bright spot was its home furnishings segment, which had substantially improved profitability despite a decline in sales.

For the three months ending June 30, Dorel's revenues were $600.5 million, down 5.2% from $633.7 million for the second quarter of 2012.

Net income was $13.2 million or 41 cents per share, a decrease of 56.4% from $30.3 million or 95 cents per share reported for the comparable period.

Martin Schwartz, Dorel's longtime president and CEO, attributed the decline to the late arrival of the spring selling season for bicycles across the U.S., Canada and Europe. That resulted in higher than normal inventories and industry-wide discounting.

For the six months ending June 30, revenues were $1.2 billion compared to $1.25 billion last year - a decline of 4.8%.

Net income was $35.5 million or $1.11 per share, down 40.2% from $59.4 million or $1.85 per share for the first half of 2012.

Dorel compiles its financial statements in U.S. dollars.

The company's home furnishings segment - which includes Ameriwood, Altra Furniture, Cosco Products, Signature Sleep and Dorel Asia - had second quarter revenues of $118.9 million, down 6.4% from $127.0 million for the same period a year ago. However, operating profit climbed 7.6% to $7.2 million.

Revenues for the first half of 2013 were $254.3 million, off 1.3% from the prior year's $257.7 million. However, operating profit improved 21.3% to $15.1 million.

"The segment's revenue decrease, both for the quarter as well as year-to-date, was mostly in imported upholstery and domestic ready-to-assemble furniture. This was partially offset by the sustained growth of the Internet sales channels," Schwartz explained.

He said the segment's drop-ship vendor program continued to drive significant growth in on-line sales, adding, "The number of products offered online continues to grow as well as the ability to efficiently distribute these products throughout North America. The bedroom category, including mattresses and youth oriented beds, has been an area of significant growth as the product offering continues to expand."

He also reported the segment is gaining market share in the step stool and ladder categories with a growing presence at do-it-yourself and mass retailers under the Cosco brand.

"Operating profit improved versus last year despite the drop in sales helped by overhead cost control, a more profitable sales mix and a more favorable rate of exchange on the Canadian dollar," Schwartz added.

Meanwhile the juvenile segment, which makes car seats and a host of other products for the baby and youth market, - saw revenues fall 4.5% in the period to $243.4 million as operating profit fell 7.6% to $15.8 million. For the first half, revenue was down 4.9% to $498.6 million and operating profit was off 10.1% to $33.7 million.

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