Dorel Announces Improved Third Quarter Results

• Juvenile organic quarter revenue growth of 5% with strong earnings improvement
• Recreational/Leisure revenue grows for third consecutive quarter
• Lerado platform positions Dorel for further juvenile global leadership

EXCHANGES
TSX: DII.B, DII.A

MONTREAL, Nov. 6, 2014 /PRNewswire/ - Dorel Industries Inc. (TSX: DII.B, DII.A) today announced results for the third quarter and nine months ended September 30, 2014. Revenue for the quarter increased 10.8% to US$673.0 million compared to US$607.3 million a year ago. Net income for the period rose 75.4% to US$19.5 million or US$0.60 per diluted share compared to US$11.1 million or US$0.34 per diluted share in 2013.

Total revenue for the nine months was up 9.7% to US$1.98 billion compared to US$1.80 billion in the prior year. Net income increased by 27.5% to US$59.5 million or US$1.83 per diluted share, compared to US$46.6 million or US$1.45 per diluted share for the year-to-date a year ago.

"Marking the third quarter were a number of positive highlights in all three segments.  Results were generally good across most of our juvenile divisions and this was despite the strength of the US dollar relative to last year reducing earnings by around US$4.0 million. Product development was showcased at two major juvenile trade shows and there is a substantial number of new product introductions scheduled for next year.  There has been a great deal of activity associated with our newly-acquired facilities in China and Taiwan. We see the Lerado transaction as a game-changer for Dorel and there has been a team in place coordinating the integration changeover for several months," said Martin Schwartz, Dorel President & CEO.

"We continue to be pleased with the sustained progress in our Recreational/Leisure segment. For the third consecutive quarter, segment revenue grew by double digits.  The Cannondale Sports Group (CSG) has had a solid nine months and we see a bright future for this business with a dynamic management team in place. Caloi's operating profit was positive after losses during the first half and we still expect the bulk of Caloi's earnings during the current fourth quarter. In the mass channel, Pacific Cycle posted healthy increases with quarterly performance exceeding prior year in both revenue and operating profit.  We look forward to an excellent racing year in 2015 with our new partners, Slipstream Racing.

"As we transition out of the Brixia relationship with our Cannondale Pro Cycling team, we have incurred one-time costs of US$4.5 million in the quarter, as outlined below in the Recreational/Leisure segment.  In addition, the segment's on-going restructuring program resulted in costs of US$0.9 million.  The strength of the US dollar also had an unfavourable net impact on the Recreational/Leisure results of approximately US$1.0 million versus last year.  Home Furnishings revenues increased with Internet and drop ship vendor sales doing well. Operating profit was down slightly due to declines in domestically produced RTA furniture," concluded Mr. Schwartz.

In total, the appreciation of the US dollar had a net negative impact on the Juvenile and Recreational/Leisure segments of approximately US$5.0 million for the quarter versus the third quarter of 2013. Offsetting this was the favourable effect of exchange on the revaluation of put option liabilities which resulted in a gain of US$3.1 million in the quarter versus a loss of US$3.5 million in the same period in 2013 (representing a net favourable change of US$6.6 million), recorded in corporate expenses in the segmented information. In addition, third quarter total expenses related to the Cannondale Pro Cycling team one-time costs and the segment's restructuring costs were US$5.4 million pre-tax. Note that the third quarter of 2013 included a pre-tax expense of US$8.0 million related to an unfavourable ruling in a US car seat product liability case.

On November 3, 2014, Dorel completed its acquisition of 100% of the juvenile business of Hong Kong-based Lerado Group, a juvenile product manufacturer in China specializing in the design and manufacture of a wide range of infant and juvenile products.

Juvenile Segment

Segment organic revenue increased by 5% in the quarter and by 3% year-to-date driven by Latin America, Europe and Australia in the quarter and mainly Latin America year-to-date.  Dorel Juvenile Europe was the most significant contributor to the segment's increased operating profit, due to improved gross margins and the timing and containment of certain operating costs. With the exception of Dorel Juvenile USA, operating profits in all juvenile divisions were impacted negatively due to the strength of the US dollar. Compared to the prior year, this unfavorable net impact totaled approximately US$4.0 million.  In 2013, reported operating profit for the third quarter included a pre-tax charge of US$8.0 million related to a US car seat product liability case.

Two important juvenile trade shows took place during the quarter, in Cologne, Germany and in Las Vegas. Tiny Love was a highlight at the Cologne show as it won an innovation award for one of its new crib mobiles. Both Safety 1^st and Maxi-Cosi marked their 30^th anniversaries during the shows. Maxi-Cosi is seeing considerable momentum in North America and it is expected the brand, originally developed in Europe, will continue to grow and provide enhanced earnings opportunities going forward. Traffic at both events was good with Dorel's large, attractive booths generating considerable interest.

Dorel Asia Juvenile has seen rejuvenated growth in the sale of cribs and wooden furniture, a product category which the Company re-entered approximately a year ago.  Profits have also grown correspondingly. The third quarter also saw the first shipments of products from Dorel's start-up in Mexico. While immaterial in the short term, this new division holds promise going forward with the organization supported by Dorel brands which are already known in the Mexican market.

Recreational/Leisure Segment

Organic revenue increased by 6% in the quarter and 8% year-to-date. 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.

Despite an overall weak economy in Brazil, 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, 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 US$3.4 million in the quarter.  An additional US$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 US$0.9 million for the quarter and US$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.

Home Furnishings Segment

Sales to the segment's drop ship vendor and on-line customers once again increased for the quarter, further increasing year-to-date results in these channels. They represent a growing percentage of overall revenue and are partly offset by declines in sales to brick-and-mortar stores. Dorel Home Products (DHP) and Cosco Home & Office both had another good quarter. Sales of Ameriwood domestically-produced RTA furniture also grew.

The majority of the segment's divisions posted improved operating results for the third quarter, offset somewhat by lower results at Ameriwood due principally to higher particle board prices.  Operating expenses for the segment remained well-contained.

Other
Third quarter and nine months tax rates were 19.4% and 18.5% respectively. This compares to a recovery of 8.6% for the quarter and an expense of 9.8% year-to-date in 2013. The main causes of the variations year-over-year are changes in the jurisdictions in which the Company generated its income and the recognition in 2013 of a tax benefit pertaining to an adjustment of tax balances following a foreign reorganization.  For the full year the Company expects its annual tax rate to be between 15% and 20%.

Quarterly dividend
The Board of Directors of Dorel declared its regular quarterly dividend of US$0.30 per share on the outstanding number of the Company's Class A Multiple Voting Shares, Class B Subordinate Voting Shares, Deferred Share Units and cash-settled Performance Share Units. The dividend is payable on December 4, 2014 to shareholders of record as at the close of business on November 20, 2014.

Outlook
"We remain on-track for a much improved year in Recreational/Leisure.  Thanks to improved earnings at all three of our major divisions, CSG, Pacific Cycle and Caloi, we fully expect to deliver much better results for the fourth quarter versus last year.  Both CSG and Pacific Cycle will build on 2014's solid year-to-date gains while Caloi will benefit from the addition of the Cannondale, GT and Schwinn brands in the Brazil market," said Mr. Schwartz.

"In the Juvenile segment, the strength of the US dollar against all of our operating currencies in other geographies had a material impact on the third quarter and based on current levels, will also impact the fourth quarter. Despite this and though fourth quarter results will be below last year's, full year earnings are expected to exceed prior year in line with our outlook issued at the end of the second quarter. Excluded from this outlook is the impact of the costs associated with integrating the Lerado operations and transitioning supply to our newly owned Asian-based facilities.

"Home Furnishings should maintain its steady performance of this year and we anticipate the fourth quarter will be better than last year."

"I am pleased that our teams have worked diligently through the nine months of 2014 to rebuild after a difficult 2013.  Not only have we posted significantly improved results to date, in addition, many projects have been launched to position us for an even better 2015. We are conscious of the macro challenges that we face such as an uncertain economy and fluctuating exchange rates in many of our markets, but with our broadened geographic footprint and diversified product line, we remain confident about 2015," concluded Mr. Schwartz.

Conference Call
Dorel Industries Inc. will hold a conference call to discuss these results today, November 6, 2014 at 1:00 P.M. Eastern Time. Interested parties can join the call by dialling 1-888-231-8191. The conference call can also be accessed via live webcast at www.dorel.com or www.newswire.ca. If you are unable to call in at this time, you may access a recording of the meeting by calling 1-855-859-2056 and entering the passcode 5042955 on your phone. This recording will be available on Thursday, November 6, 2014 as of 4:00 P.M. until 11:59 P.M. on Thursday, November 13, 2014.

Condensed consolidated interim financial statements will be available on the Company's website, www.dorel.com, and will be available through the SEDAR websites.

Profile
Dorel Industries Inc. (TSX: DII.B, DII.A) is a world class juvenile products and bicycle company. Dorel creates style and excitement in equal measure to safety, quality and value. The Company's lifestyle leadership position is pronounced in both its Juvenile and Bicycle categories with an array of trend-setting products. Dorel's powerfully branded products include global juvenile brands Safety 1^st, Quinny, Maxi-Cosi, Bébé Confort and Tiny Love, complemented by regional brands such as Cosco and Infanti. In Recreational/Leisure, brands include Cannondale, Schwinn, GT, Mongoose, Caloi, IronHorse and SUGOI.  Dorel's Home Furnishings segment markets a wide assortment of both domestically produced and imported furniture products, principally within North America. Dorel has annual sales of US$2.4 billion and employs approximately 10,500 people in facilities located in twenty-five countries worldwide.

Caution Regarding Forward Looking Statements
Certain statements included in this press release may constitute "forward-looking statements" within the meaning of applicable Canadian securities legislation. Except as may be required by Canadian securities laws, Dorel does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking statements, by their very nature, are subject to numerous risks and uncertainties and are based on several assumptions which give rise to the possibility that actual results could differ materially from Dorel's expectations expressed in or implied by such forward-looking statements and that the objectives, plans, strategic priorities and business outlook may not be achieved. As a result, Dorel cannot guarantee that any forward-looking statement will materialize. Forward-looking statements are provided in this press release for the purpose of giving information about Management's current expectations and plans and allowing investors and others to get a better understanding of Dorel's operating environment. However, readers are cautioned that it may not be appropriate to use such forward-looking statements for any other purpose.

Forward-looking statements made in this press release are based on a number of assumptions that Dorel believed were reasonable on the day it made the forward-looking statements. Factors that could cause actual results to differ materially from Dorel's expectations expressed in or implied by the forward-looking statements include: general economic conditions; changes in product costs and supply channels; foreign currency fluctuations; customer and credit risk, including the concentration of revenues with few customers; costs associated with product liability; changes in income tax legislation or the interpretation or application of those rules; the continued ability to develop products and support brand names; changes in the regulatory environment; continued access to capital resources and the related costs of borrowing; changes in assumptions in the valuation of goodwill and other intangible assets; and there being no certainty that Dorel's current dividend policy will be maintained.  These and other risk factors that could cause actual results to differ materially from expectations expressed in or implied by the forward-looking statements are discussed in Dorel's annual Management Discussion and Analysis and Annual Information Form filed with the applicable Canadian securities regulatory authorities. The risk factors outlined in the previously-mentioned documents are specifically incorporated herein by reference.

Dorel cautions readers that the risks described above are not the only ones that could impact it. Additional risks and uncertainties not currently known to Dorel or that Dorel currently deems to be immaterial may also have a material adverse effect on Dorel's business, financial condition or results of operations. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

SOURCE Dorel Industries Inc.

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