Dorel reports second quarter results
Montreal, Quebec - 8/12/2009
Dorel Industries Inc. (TSX: DII.B DII.A) today announced its results for the second quarter ended June 30, 2009. Net income was US$24.8 million or US$0.74 per diluted share compared with US$31.3 million or US$0.94 per diluted share for the corresponding quarter of 2008. As described below, the 2009 results include significant mark-to-market losses on foreign exchange contracts. These losses totaled US$12.6 million in the second quarter and represent an after tax amount of US$0.27 per diluted share. Excluding these losses, diluted EPS for the second quarter this year would have been US$1.01. This earnings improvement was despite a decline in revenues for the period which slipped 7.2% to US$551.1 million from US$593.7 million for the same period a year ago.
Year-to-date net income was US$52.8 million or US$1.58 per diluted share compared to US$66.5 million or US$1.99 per diluted share for the first half of 2008. Excluding year-to-date mark-to-market losses on foreign exchange contracts, earnings were US$61.3 million, or US$1.84 per diluted share. First half revenue was US$1.076 billion or a decrease of 6.4% from the US$1.150 billion last year.
To protect itself from variations in foreign exchange rates and their impact on the Company’s cash flow, it enters into foreign exchange forward contracts and other types of derivative financial instruments, the great majority of which are at Dorel Europe within the Juvenile segment. As the Company does not follow the accounting practice of “hedge accounting”, non-cash “mark-to-market” gains and losses are recognized, representing the difference between the contracted exchange rate and the market rate on these instruments at the end of a given accounting period. Therefore, the gains and losses on these instruments are recognized relative to fluctuations in current exchange rates as opposed to the date of maturity of the contracts, when the cash flow impact is recorded. The majority of the unrealized losses booked in 2009 thus far pertain to contracts that were in place as of December 30, 2008 on which the related unrealized gains were recorded in 2008.
“For the second consecutive quarter we have surpassed our internal earnings forecasts due to the implementation of stringent cost constraint measures, a focus on working capital management and a more stable cost environment. While sales are down, a significant percentage of the decrease is attributable to foreign exchange translation. High-end bicycle sales are still not where we want them to be as consumers remain selective in their discretionary spending. Overall, our divisions are performing well notwithstanding the challenging economy. Product development remains a key driver for Dorel. Exciting new products, such as our revolutionary Safety 1st Air Protect car seat, are being introduced to the market. At this year’s Tour de France two members of Team Liquigas, riding Cannondale’s new 2010 SuperSix road bike, finished in the top ten and a third took the prestigious King of the Mountains Polkadot Jersey. This is the first time ever that a Cannondale sponsored team had two riders finish in the top ten. These are examples of how our R&D commitment will further grow our strong competitive position,” commented Dorel CEO and President, Martin Schwartz.