UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER PURSUANT TO RULES 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
May 2, 2007
Commission File Number: 0-29712
DOREL INDUSTRIES INC.
________________________________________________________________________________________________
1255 Greene Ave, Suite 300, Westmount, Quebec, Canada H3Z 2A4
_________________________________________________________________________________________________
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F
[ ]
Form 40-F
[ X ]
Indicate by check mark whether the registrant by furnishing the information in this Form is also thereby furnishing
the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes
[ ]
No
[ X ]
![[form6k002.gif]](form6k002.gif)
“The positive first quarter at several of our divisions demonstrates that our efforts in 2006 are paying off. Dorel Europe had its best quarter ever with record sales and earnings. Ameriwood posted earnings gains over last year on similar sales levels as things are moving in the right direction. Board prices have stabilized; the domestic plants are now better run with scrap levels down, board yield up and inventories remaining stable. Pacific Cycle domestic sales increased by almost nine percent over last year, driven by both bicycle sales and related products such as bike trailers,” commented Dorel President and CEO, Martin Schwartz.
![[form6k004.gif]](form6k004.gif)
Juvenile Segment
First quarter Juvenile revenue was up 4.1%, or US$9.6 million, to US$245.2 million compared to US$235.6 million during the same period a year ago. Adjusted earnings from operations increased 14% during the first quarter to US$34.0 million from US$29.8 million last year. The revenue increase was led by strong sales in Europe where revenues were up by 14% in Euro terms. The stronger Euro in the first quarter of 2007 was also a contributor to revenue growth, increasing the growth percentage to 24% for Europe as a whole. These gains came from increased sales of car seats and strollers, mainly in Germany and the United Kingdom.
Offsetting this strong performance was a revenue decline in North America of 12%, as sales to mass merchant customers in the United States were down from last year’s first quarter levels. The lower sales levels were near plan, as last year’s strong first quarter results were not expected to be repeated. This level of decline should not continue and expectations are that North American revenues should stabilize for the balance of the year. Despite the lower sales volumes, gross margins improved by 60 basis points over last year.
Dorel Distribution Canada continued its sales growth with its expanded product lines, most notably as it now sells and services Pacific Cycle’s product offerings in Canada. At the end February 2007, Dorel acquired a 55% interest IGC (Australia) Pty Ltd, based in Melbourne, Australia. Renamed IGC Dorel Pty Ltd, one month revenue included in 2007 results was US$2.4 million and this division was a contributor to earnings.
Home Furnishings Segment
Home Furnishings revenue was down 8.4% to US$122.6 million from US$133.7 million during the first quarter a year ago. The majority of this decline was at the Dorel Asia division. Approximately one half was due to certain customers switching to a commission structure whereby, the revenue recognized by Dorel represents only the commission earned as opposed to the entire sale. Despite the lower revenues, Dorel Asia earnings were only slightly lower than the prior year. For the entire segment, earnings from operations decreased to US$2.4 million from US$4.6 million last year. Compared to last year’s adjusted earnings from operations of US$5.1 million that excludes US$0.5 million related to last year’s Ameriwood restructuring, the earnings decline was 52.4%.
First quarter improvements at Ameriwood resulted in an adjusted gross margin improvement of 310 basis points over 2006. Sales of RTA furniture at Ameriwood were close to the levels recorded during the first quarter of 2006 and the division was slightly profitable. Particle board prices have stabilized and are expected to remain at these levels through 2007.
Despite slightly higher sales levels, Cosco Home & Office earnings were hampered by a less profitable mix of sales, higher inventory levels and related carrying costs, and higher legal fees. These fees are due to its ongoing claim against a major international law firm for its failure to timely file a request for an administrative review of duties imposed on the Company by the United States Department of Commerce. Positives in the quarter include a number of new ladder and step stool items being secured with a major retailer for 2007. Also doing well are articulating ladders, and Cosco Home & Office has displaced a major competitor in the DIY space for this business.
First quarter sales at Dorel Home Products (DHP) were down in the first two months of the year and as a result, gross margins were negatively impacted as the ensuing low production levels and poor overhead absorption, severely hampered margins. Both sales and earnings rebounded in March and this trend is expected to extend into the second quarter. The focus at Dorel Home Products is on adding new customers and offering additional items. The balance of the year is expected to stabilize in futons with new designs being offered and additional items introduced.
At Dorel Asia, new customers were added during the first quarter, mainly among major and club format retailers. New juvenile products including a wooden bunk bed and upholstered items, such as home theatre seating groups, have been introduced. The rest of 2007 will see more of the same with a continued broadening of Dorel Asia’s product range and customer base.
Recreational/Leisure Segment
First quarter Recreational/Leisure revenue increased 7.6% to US$87.9 million compared to last year’s US$81.7 million. Earnings from operations were down 2.8% to US$7.2 million from US$7.4 million. The decline in gross margins and earnings in the quarter were the result of a decrease in international licensing income. This decline offset the additional margin dollars generated on domestic sales in the U.S.
Last year’s modest decline in bicycle sales was reversed during the first quarter as Pacific’s main customers experienced strong sell-through. Sales to the independent bicycle dealer network were solid, with same store sales up. The InStep brand also had a good first quarter with its trailers and strollers. First shipments of the new Schwinn electric bike were made during the quarter. The potential for this model is anticipated to be particularly strong in Europe. Playsafe swing sets continue to sell well with major retailers and the brand is picking up market share in its second year. Sales of gas-powered motor scooters were stable.
Added to Pacific’s line-up this year is the electric ride-on toy business, transferred from DJG USA. With Pacific’s well-entrenched recreational distribution channel and a specific team dedicated to the ride-ons, strong growth is projected. Note that the comparative quarter revenue and earnings figures have been restated to reflect the inclusion of the sales of these items that were sold by DJG USA in the prior year. As such, 2006 revenues are US$4.5 million higher than previously reported and earnings have been increased by US$0.4 million. These same amounts have been reduced from the Juvenile segment comparative figures as presented in this press release and all related continuous disclosure documents.
Tax rate
The Company’s effective tax rate in the first quarter of 2007 was 5.4% compared to 18.1% in 2006. However, 2007 includes the US$2.7 million tax recovery explained above. Excluding this recovery, the Company’s tax rate would have been 14.4%. This rate is in line with current revised expectations for the Company’s annual tax rate now expected to be from 14% to 18%.
Outlook
“Product development has been a keen focus throughout Dorel’s various businesses. The past several months have seen intense activity in all three segments and the benefits of these efforts will be felt as early as the third quarter. Our Quinny line, a premier lifestyle brand that has been highly successful in Europe, is being introduced in the United States over the next few months and completely redesigned and revamped Safety 1st packaging and products will be launched later this year. Dorel Europe has consistently demonstrated its innovative skills through a rigorous campaign of product launches. The revolutionary Axiss, a high quality car seat featuring a height-adjustable head-rest and a rotating mechanism to facilitate placement of the child, was introduced to the market in March. Reaction has been excellent. Pacific Cycle is widening its product platforms with additional recreational items in the fish and game and back-yard categories, as well as a new line later this year of electric assist motor products for commercial and residential applications. There has been solid progress at Ameriwood and the recently announced closure of one of our largest competitors should provide opportunities going forward,” concluded Mr. Schwartz.
Conference Call
Dorel Industries Inc. will hold a conference call to discuss these results today, May 2, 2007 at 2:00 P.M. Eastern Time. Interested parties can join the call by dialling 1-800-590-1817. The conference call can also be accessed via live webcast at www.dorel.com , www.newswire.ca or www.q1234.com. If you are unable to call in at this time, you may access a tape recording of the meeting by calling 1-877-289-8525 and entering the passcode 21228378# on your phone. This tape recording will be available on Wednesday, May 2, 2007 as of 4:00 P.M. until 11:59 P.M. on Wednesday, May 9, 2007.
Complete financial statements will be available on the Company's website, www.dorel.com, and will be available through the SEDAR websites.
Profile
Dorel Industries (TSX: DII.B, DII.A) is a global consumer products company engaged in the designing, manufacturing and marketing of a diverse portfolio of powerful consumer brands, sold through its Juvenile, Home Furnishings, and Recreational/Leisure segments. Headquartered in Montreal and with significant operations in the United States and Europe, Dorel employs approximately 4,700 people in 15 countries. Annual sales are US$1.8 billion and are made in over 60 countries worldwide.
US operations include Dorel Juvenile Group, which markets the Cosco and Safety 1st brands as well as Eddie Bauer and Disney Baby licensed products; Ameriwood Industries, which markets ready-to-assemble furniture products under the Ameriwood, Carina, SystemBuild, Altra Furniture and Ridgewood brands; Cosco Home & Office, which markets home/office products under the Cosco brand and Samsonite license as well as home healthcare products under the Cosco Ability Essentials and Adepta brands; and Pacific Cycle, which markets several brands including Schwinn, Mongoose, GT, InSTEP, Playsafe and Roadmaster. In Canada, Dorel operates Dorel Distribution Canada, Ridgewood Industries and Dorel Home Products. Dorel Europe markets juvenile products throughout Europe, under the Bébé Confort, Maxi-Cosi, Quinny, Safety 1st, Babidéal, Mon Bébé and Baby Relax brands. Dorel Asia sources and imports home furnishings products. Dorel is the majority owner of IGC Dorel Pty Ltd, a manufacturer and distributor of juvenile products in Australia, whose two principal brands are Bertini and Mother’s Choice. Dorel also has eight offices in China, headquartered in Shanghai, which oversee the sourcing, engineering and logistics of the Company’s Asian supplier chain.
Caution Concerning Forward-Looking Statements
Except for historical information provided herein, this press release may contain information and statements of a forward-looking nature concerning the future performance of Dorel Industries Inc. These statements are based on suppositions and uncertainties as well as on management's best possible evaluation of future events. The business of the Company and these forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ from expected results. Important factors which could cause such differences may include, without excluding other considerations, increases in raw material costs, particularly for key input factors such as particle board and resins; increases in ocean freight container costs; failure of new products to meet demand expectations; changes to the Company’s effective income tax rate as a result of changes in the anticipated geographic mix of revenues; the impact of price pressures exerted by competitors, and settlements for product liability cases which exceed the Company’s insurance coverage limits. A description of the above mentioned items and certain additional risk factors are discussed in the Company’s Annual MD&A and Annual Information Form, filed with the securities regulatory authorities in Canada and the U.S. The risk factors outlined in the previously mentioned documents are specifically incorporated herein by reference. The Company’s business, financial condition, or operating results could be materially adversely affected if any of these risks and uncertainties were to materialize. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.
DOREL INDUSTRIES INC.
CONSOLIDATED BALANCE SHEET
ALL FIGURES IN THOUSANDS OF US $
| as at March 31, 2007 |
| as at December 30, 2006 |
| (unaudited) |
| (audited) |
|
|
|
|
ASSETS |
|
|
|
CURRENT ASSETS |
|
|
|
Cash and cash equivalents | $ 18,510 |
| $ 25,925 |
Accounts receivable | 316,880 |
| 294,731 |
Income taxes receivable | 8,917 |
| 8,264 |
Inventories | 324,285 |
| 326,540 |
Prepaid expenses | 11,171 |
| 9,652 |
Future income taxes | 30,778 |
| 29,046 |
| 710,541 |
| 694,158 |
|
|
|
|
|
|
|
|
PROPERTY, PLANT AND EQUIPMENT | 141,772 |
| 142,002 |
GOODWILL | 504,875 |
| 501,356 |
INTANGIBLE ASSETS | 262,772 |
| 261,966 |
OTHER ASSETS | 27,631 |
| 27,924 |
| $ 1,647,591 |
| $ 1,627,406 |
|
|
|
|
LIABILITIES |
|
|
|
CURRENT LIABILITIES |
|
|
|
Bank indebtedness | $ 5,415 |
| $ 3,733 |
Accounts payable and accrued liabilities | 295,815 |
| 326,915 |
Income taxes payable | 13,451 |
| 10,742 |
Dividends payable | 4,177 |
| - |
Balance of sale payable | 594 |
| 605 |
Current portion of long-term debt | 62,722 |
| 7,832 |
| $ 382,174 |
| $ 349,827 |
|
|
|
|
|
|
|
|
LONG-TERM DEBT | 320,870 |
| 375,135 |
PENSION & POST-RETIREMENT BENEFIT OBLIGATIONS | 20,803 |
| 20,370 |
FUTURE INCOME TAXES | 73,103 |
| 74,833 |
OTHER LONG-TERM LIABILITIES | 8,342 |
| 7,719 |
|
|
|
|
SHAREHOLDERS’ EQUITY |
|
|
|
CAPITAL STOCK | 177,271 |
| 162,555 |
CONTRIBUTED SURPLUS | 6,885 |
| 6,061 |
RETAINED EARNINGS | 590,782 |
| 567,020 |
ACCUMULATED OTHER COMPREHENSIVE INCOME | 67,361 |
| 63,886 |
| 842,299 |
| 799,522 |
|
|
|
|
| $ 1,647,591 |
| $ 1,627,406 |
DOREL INDUSTRIES INC.
CONSOLIDATED STATEMENT OF INCOME
ALL FIGURES IN THOUSANDS OF US $, EXCEPT PER SHARE AMOUNTS
| Three months ended | ||
|
|
|
|
| March 31, 2007 |
| March 31, 2006 |
| (unaudited) |
| (unaudited) |
|
|
|
|
Sales | $ 450,159 |
| $ 444,891 |
|
|
|
|
Licensing and commission income | 5,510 |
| 6,133 |
|
|
|
|
TOTAL REVENUE | 455,669 |
| 451,024 |
|
|
|
|
EXPENSES |
|
|
|
Cost of sales | 344,502 |
| 349,916 |
Selling, general and administrative expenses | 60,819 |
| 52,450 |
Depreciation and amortization | 9,544 |
| 8,926 |
Research and development costs | 2,608 |
| 2,281 |
Restructuring costs | 2,126 |
| - |
Interest on long-term debt | 6,548 |
| 7,774 |
Other interest | - |
| 143 |
| 426,147 |
| 421,490 |
|
|
|
|
Income before income taxes | 29,522 |
| 29,534 |
|
|
|
|
Income taxes | 1,583 |
| 5,353 |
|
|
|
|
NET INCOME | $ 27,939 |
| $ 24,181 |
|
|
|
|
EARNINGS PER SHARE: |
|
|
|
Basic | $0.85 |
| $0.74 |
Diluted | $0.85 |
| $0.74 |
|
|
|
|
SHARES OUTSTANDING: |
|
|
|
Basic – weighted average | 32,951,162 |
| 32,859,217 |
Diluted – weighted average | 32,990,690 |
| 32,859,694 |
DOREL INDUSTRIES INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
ALL FIGURES IN THOUSANDS OF US $
| Three months ended | ||
| March 31, 2007 |
| March 31, 2006 |
| (unaudited) |
| (unaudited) |
|
|
|
|
CASH PROVIDED BY (USED IN): |
|
|
|
OPERATING ACTIVITIES |
|
|
|
Net income | $ 27,939 |
| $ 24,181 |
Items not involving cash: |
|
|
|
Depreciation and amortization | 9,544 |
| 8,926 |
Amortization of deferred financing costs | 42 |
| 398 |
Future income taxes | (3,198) |
| 1,352 |
Restructuring activities | 2,114 |
| - |
Stock based compensation | 824 |
| 617 |
Pension and post-retirement defined benefit plan | 750 |
| 605 |
Loss (gain) on disposal of property, plant and equipment | (9) |
| 31 |
| 38,006 |
| 36,110 |
|
|
|
|
Changes in non-cash balances related to operations: |
|
|
|
Accounts receivable | (18,688) |
| (9,135) |
Inventories | 8,531 |
| 324 |
Prepaid expenses | (1,715) |
| (1,357) |
Accounts payable, accruals and other liabilities | (35,968) |
| (13,018) |
Income taxes | 1,599 |
| (1,472) |
| (46,241) |
| (24,658) |
|
|
|
|
CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES | (8,235) |
| 11,452 |
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
Bank indebtedness | 1,297 |
| (1,705) |
Long-term debt | (6,584) |
| 8,843 |
Issuance of capital stock | 14,698 |
| 17 |
CASH PROVIDED BY FINANCING ACTIVITIES | 9,411 |
| 7,155 |
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
Acquisition of subsidiary companies | (2,170) |
| (4,946) |
Additions to property, plant and equipment - net | (4,167) |
| (3,471) |
Deferred development costs | (2,317) |
| (1,843) |
Funds held by ceding insurer | - |
| (25) |
Intangible assets | (118) |
| (1,525) |
CASH USED IN INVESTING ACTIVITIES | (8,772) |
| (11,810) |
|
|
|
|
Effect of exchange rate changes on cash | 181 |
| 41 |
|
|
|
|
NET (DECREASE) INCREASE IN CASH | (7,415) |
| 6,838 |
|
|
|
|
Cash and cash equivalents, beginning of period | 25,925 |
| 12,345 |
|
|
|
|
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ 18,510 |
| $ 19,183 |
DOREL INDUSTRIES INC.
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
ALL FIGURES IN THOUSANDS OF US $
| Three months ended | ||
| March 31, 2007 |
| March 31, 2006 |
| (unaudited) |
| (unaudited) |
|
|
|
|
BALANCE, BEGINNING OF PERIOD | $ 567,020 |
| $ 478,155 |
|
|
|
|
Net income | 27,939 |
| 24,181 |
Common dividends | (4,177) |
| - |
|
|
|
|
BALANCE, END OF PERIOD | $ 590,782 |
| $ 502,336 |
DOREL INDUSTRIES INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
ALL FIGURES IN THOUSANDS OF US $
| Three months ended | ||
| March 31, 2007 |
| March 31, 2006 |
| (unaudited) |
| (unaudited) |
|
|
|
|
NET INCOME | $ 27,939 |
| $ 24,181 |
OTHER COMPREHENSIVE INCOME: |
|
|
|
Net change in unrealized foreign currency gains on translation of net investments in self-sustaining foreign operations, net of tax of nil | 3,475 |
| 7,407 |
|
|
|
|
COMPREHENSIVE INCOME | $ 31,414 |
| $ 31,588 |
DOREL INDUSTRIES INC.
SEGMENTED INFORMATION
FOR THE THREE MONTHS ENDED MARCH 31 (Unaudited)
ALL FIGURES IN THOUSANDS OF US $
| Total | Juvenile | Home Furnishings | Recreational/Leisure | ||||
| 2007 | 2006 | 2007 | 2006 | 2007 | 2006 | 2007 | 2006 |
|
|
|
|
|
|
|
|
|
Total Revenue | $ 455,669 | $ 451,024 | $ 245,227 | $235,623 | $122,553 | $133,727 | $ 87,889 | $ 81,674 |
Cost of sales | 344,502 | 349,916 | 167,088 | 168,027 | 106,595 | 116,993 | 70,819 | 64,896 |
Selling, general and administrative | 55,382 | 48,037 | 34,795 | 29,239 | 11,251 | 9,711 | 9,336 | 9,087 |
Depreciation and amortization | 9,523 | 8,905 | 7,410 | 7,001 | 1,606 | 1,649 | 507 | 255 |
Research and development costs | 2,608 | 2,281 | 1,918 | 1,511 | 690 | 770 | - | - |
Restructuring costs | 2,126 | - | 2,126 | - | - | - | - | - |
Earnings from Operations | 41,528 | 41,885 | $ 31,890 | $ 29,845 | $ 2,411 | $ 4,604 | $ 7,227 | $ 7,436 |
Interest | 6,548 | 7,917 |
|
|
|
|
|
|
Corporate expenses | 5,458 | 4,434 |
|
|
|
|
|
|
Income taxes | 1,583 | 5,353 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income | $ 27,939 | $ 24,181 |
|
|
|
|
|
|
|
|
|
|
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|
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Earnings per Share |
|
|
|
|
|
|
|
|
Basic | $0.85 | $0.74 |
|
|
|
|
|
|
Diluted | $0.85 | $0.74 |
|
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Reconciliation to non-GAAP financial measures |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
Earnings from Operations as above | $ 41,528 | $ 41,885 | $ 31,890 | $ 29,845 | $ 2,411 | $ 4,604 | $ 7,227 | $ 7,436 |
Restructuring costs | 2,126 | - | 2,126 | - | - | - | - | - |
Restructuring costs in cost of sales | - | 464 | - | - | - | 464 | - | - |
Adjusted earnings from Operations | 43,654 | 42,349 | $ 34,016 | $ 29,845 | $ 2,411 | $ 5,068 | $ 7,227 | $ 7,436 |
Interest | 6,548 | 7,917 |
|
|
|
|
|
|
Corporate expenses | 5,458 | 4,434 |
|
|
|
|
|
|
Income taxes - as above | 1,583 | 5,353 |
|
|
|
|
|
|
Income taxes on restructuring costs | 749 | 162 |
|
|
|
|
|
|
Adjusted Net income | $ 29,316 | $ 24,483 |
|
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|
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Adjusted Earnings per Share |
|
|
|
|
|
|
|
|
Basic | $0.89 | $0.75 |
|
|
|
|
|
|
Diluted | $0.89 | $0.75 |
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DOREL INDUSTRIES INC.
By: /s/ Martin Schwartz_____________
Martin Schwartz
Title: President and Chief Executive Officer
By: /s/ Jeffrey Schwartz_____________
Jeffrey Schwartz
Title: Executive Vice-President,
Chief Financial Officer
May 2, 2007