Dorel’s home division boosted its overall first quarter performance, although a restructuring charge impacted earnings.
For the quarter, Dorel posted total revenue of $646.7 million versus $645.9 million in the period a year before.
In the home division, first quarter revenue rose 8.8% to $204 million, representing the best quarter in the segment’s history. Growth was driven by increased sales to online retailers in all divisions, representing 46% of total segment sales compared to 42% in the first quarter of 2016. Brick and mortar sales remained flat compared with last year’s first quarter. Operating profit for the quarter was $19.8 million, up 12% from $17.6 million a year ago, driven by higher sales volumes, slightly offset by a modest increase in selling expenses in line with sales growth.
However, extraordinary charges related to restructuring and a change in the company’s credit facility impacted Dorel Industries first quarter results, a period in which it recorded net income of $8.8 million, or 27 cents per diluted share, versus $16.7 million, or 51 cents per diluted share, in the period a year before. With extraordinary charges included, adjusted net income was $22.7 million, or 69 cents per diluted share, versus $19.7 million, or 60 cents per diluted share in the period a year prior.
“Dorel’s adjusted operating profit improved by over 15% versus last year’s first quarter when excluding restructuring and other costs within our income statement,” said Martin Schwartz, Dorel president and CEO. “Of our three business segments, Dorel Home was again a standout with revenues increasing 9% and operating profit approaching 10% of revenues. Dorel Sports also improved earnings from prior year, leveraging better margins and its more efficient cost structure. Dorel Juvenile is benefitting from its strategic direction on improving gross margins, but faced challenges at its China facility with a large ramp up on new products and labor shortages around the Chinese New Year which delayed some scheduled launches. In our smaller Juvenile markets, Brazil and Australia performed exceptionally well. At the corporate level, with the support of our lenders, we successfully re-negotiated our credit facilities. This resulted in a first quarter pre-tax expense of $10.2 million, or 30 cents per diluted share, related to the extinguishment of existing debt. This change will allow for better management of our long-term capital needs and will decrease our financing costs going-forward. Interest costs are expected to be reduced by approximately $4 million through the balance of 2017 and will continue annually going forward.”