Dorel Industries Inc. reported organic revenue increased by 6 percent at its Recreational/Leisure segment in the third quarter.
Segment sales are up 8 percent for the three quarters ended Sept. 30 compared with the same period in 2013.
Overseas markets in the independent bicycle dealer (IBD) channels, particularly Europe and Japan, as well as sales to the North American mass merchant distribution channels contributed to the quarter and year-to-date organic growth. Increases in revenue in the IBD channel were due, in part, to growth in the E-bike and mountain bike categories, while Pacific Cycle benefited from improved consumer demand for bicycles and electric ride-on toys in the mass merchant channel.
The segment designs and markets premium bicycles and cycling apparel, footwear and gear under Cannondale, GT, Schwinn, Sugoi and other brands for the IDB channel, while Pacific Cycle and is a major supplier of bikes to mass merchants.
Despite an overall weak economy in Brazil, the company's Brazilian subsidiary Caloi contributed to operating profits after two consecutive quarters of losses. Bicycle sales in Brazil are starting to benefit from the successful introduction of Cannondale, GT and Schwinn which has led to gains in domestic market share. With the summer season about to begin in Brazil and the distraction of the World Cup behind them, Dorel said Caloi is poised for a strong fourth quarter.
Recreational/Leisure's operating expenses in the quarter include costs related to changes in the Cannondale Pro Cycling (CPC) team. The signing of a new agreement with Slipstream Racing led to a one-time write-off of Cannondale Sports Group's equity investment in the Brixia associated team of $3.4 million in the quarter. An additional $1.1 million was expensed for funding needed to bridge a shortfall in sponsorship income as the team could not solicit adequate sponsorship during the current transition period. Restructuring costs of $0.9 million for the quarter and $3.1 million year-to-date were recorded related mainly to the closure of the Bedford, PA assembly operation. Excluding the impact of the one-time CPC write-off, operating profit in the third quarter significantly improved year-over-year.
