DOREL. Moderator: Martin Schwartz May 7, :00 a.m. ET

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DOREL

Moderator: Martin Schwartz May 7, 2015

11:00 a.m. ET

Operator: This is conference # 17048845.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Dorel Industries' first quarter 2015 results conference call.

At this time, all participants are in a listen-only mode. Following the

presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for question. If any one has any difficulties hearing the conference, please press star followed by zero for operator assistance at any time.

Before turning the meeting over to management, please be advised that this conference call will contain statements that are forward looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated.

I would like to remind everyone that this conference call is being recorded on Thursday, May 7, 2015.

I will now turn the conference over to Mr. Martin Schwartz, President and CEO. Please go ahead.

Martin Schwartz: Thank you. Good morning, everyone. On behalf of Jeffrey Schwartz and Frank Rana, welcome to Dorel's first quarter conference call. We will be pleased to take your questions following our initial comments. And, as always, all numbers mentioned are in U.S. dollars.

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As expected, the continued strength of the U.S. dollar affected Dorel's first quarter performance in our non-U.S. markets, where we derive almost half of our revenue. FX translation to our reported currency reduced operating profits by approximately $12 million in all areas across the Company.

Price increases have been implemented in certain markets to mitigate the currency issues. Other markets will see price increases beginning in the second quarter. Situation clearly not unique to Dorel masks a number of the first quarter's positive accomplishments.

Another factor affecting Q1 was the West Coast port slowdown, which persisted for months. While initially we were not seriously affected, the disruption eventually cost Dorel approximately $1.5 million in excess transportation and logistics costs during the first quarter. This doesn't take into account the shortage of product created as well as missed and cancelled orders. Fortunately, this matter has been resolved.

The integration of the former Lerado facilities, now rebranded as Dorel Juvenile China, is proceeding as planned, and is a critical element in creating a future cohesive and efficient supply chain across the juvenile segment. Work is underway to improve operations in the factories.

We have changed out most of the previous management and have recruited a new team from different areas of Asia to fill senior positions. They are doing an excellent job of leveraging this acquisition, as the focus remains on

improving and benefiting from these operations. The new team, which includes better quality control people, is working diligently with segment management to increase efficiencies and implement cost savings throughout the operations.

Initial areas of improvements to streamline operations and enhance product quality, among other things, have already been identified and have begun rolling out. The results of these initiatives will materialize in the second half as these programs are cascaded through the organizations. We are committed to maximizing the full potential of our Chinese facilities.

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2015 is a year of transformation for Dorel juvenile, as we implement the changes in culture, integrate our improved supply chain and implement efficiencies across the segment. Among the changes are further benefiting from the new management team for our manufacturing facilities as well as the Shenzhen sourcing office. This group is looking at all facets of manufacturing and making decisions how to do things better.

We're developing strategic partners for parts and subassemblies. Certain tasks are being or will be subcontracted to third parties who are more specialized and can do specific jobs better than us. Consistent global order planning and processing is being established. Management is working closely with all divisions regarding better planning, better order processing and improved quality control.

In terms of leveraging our buying power in China, we have met with all factory suppliers to renegotiate the cost of materials and services. We are consolidating the factory supply chain to achieve better services and costs and are already seeing lower costs. As well, staffing levels are being streamlined, with a view to removing redundant levels.

Our American juvenile business had a good start to the year, and new product introductions are helping. Many new products are in the pipeline for later this year as well as into 2016 and even 2017. The Costco Scenera NEXT infant car seat, the next generation of our popular opening price point Scenera, is performing well.

Spokesperson Kimberly Henderson, whose daughter was saved by a Costco Kids car seat in October – in an October 2014 crash, has become a YouTube sensation with her Lullaby Mom rendition. She's created a social media buzz and has exposed the Costco brand name to millions.

Actually, sales of Costco-branded products are up 22 percent. We firmly believe this combination of an innovative product and targeted marketing spend is required for any new successful product launch.

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We also recently launched the Safety 1st Step and Go Travel System, one of the first travel systems in the industry to feature both a unique step-to-open action and washable fabric.

Last month Dorel juvenile U.S.A staged a PR event in New York City, hosted by celebrity stylist and expectant mom Bobbie Thomas, to introduce the new premium build-to-order offering for consumers wishing to design their own Maxi-Cosi Max 30 car seat. The build-to-order is another first in the juvenile industry. This event garnished 1.7 million social media impressions on Twitter alone.

Dorel Europe's AxissFix car seat has won the prestigious Red Dot design award. It is performing above forecast, with many new listings in Q1. A lot of our car seat inputs are in euros as we assemble in Europe, so this will help mitigate some of the FX impact.

Sales growth in Latin America was in the low-double digits, and Brazil did particularly well despite the weak economy in that country. In fact, the month of March was the highest sales month for Brazil.

To counter the currency issues, our juvenile segment is working to implement price increases and further offset the FX impact by reducing costs with suppliers.

Excluding foreign exchange differences, Dorel sports grew both revenue and operating profit. The segment recorded moderate progress in its markets in local currencies, with low-double digit organic revenue growth in Europe, Japan and the UK, where Cannondale is benefiting from strong demand and a better supply position.

The CSG Q1 decrease in year-over-year operating profit was due entirely to FX fluctuation. At Pacific Cycle, the quarter started slowly but finished strong, and we have seen a very good start to Q2. Sales of the electric ride-on toys continue their positive momentum.

Top-line organic growth moved ahead nicely in Brazil, driven by the

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healthier dealer stock levels and an increased demand in the opening price point bikes. Since December Caloi has successfully implemented price increases, and this bodes well for the division's Q2 performance. Caloi is just one example, as all divisions are taking price hikes with their customers. As with juvenile, Dorel sports is also going back to its suppliers and seeking decreased cost wherever possible. Cannondale is already well established in the higher end category and is now creating new categories to appeal to as wide a spectrum as possible, including the casual and aspiring riders.

Additional funding of new product development has resulted in the creation of nine new Cannondale platforms, all of which will be launched starting in Q4. This is the largest number of launches in the segment's history and underlines Dorel sport's quest for constant innovation. Already in stores is the new Cannondale Slice, ideal for serious triathletes looking for the ultimate in the lightest, best fitting and most comfortable triathlete bike, and there is much more to come.

Home furnishings had one of its best quarters in recent years, with all

positions posting improved operating results and margins. The growth came from the sale of mattresses, beds and upholstered furniture, with the segment benefiting from increased listings at retailers, with strong sell-through on many items.

The expansion of SKUs helped create a record quarter for online and drop-ship vendor sales, which continue to represent a growing percentage of total sales. For the second consecutive quarter there was also a strong increase at the brick-and-mortar channel. We are seeing improved efficiencies, as well, at Ameriwood.

A favorable Canadian dollar versus the U.S. dollar for manufacturing was also a positive factor, as we export considerably – considerable amount of RTA products from Canada to the U.S.. There has been significant progress in home furnishings' warehouse and distribution costs, and as a percentage of sales they are trending below last year, as the investment in technology and automation is starting to pay off.

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Jeffrey will now provide the financial perspective. Jeffrey Schwartz: Thank you, Martin.

Again, from a financial standpoint the highlight or lowlight is the change in foreign exchange. As Martin mentioned, $12 million is the hit on operating profit, approximately. Of this, actually $13 million of negative impact on the sports and juvenile group, while we did have a positive $1 million effect at the corporate level.

Overall, the first quarter's revenues were up 2.7 percent, to $665.5 million, compares to $647.7 million last year. Organically the revenue increase after removing the impact of foreign exchange and new business acquisitions was about five percent.

Pretax earnings declined 48 percent, to $15.4 million, from $29.8 million. And the net income from the quarter, $11.6 million, down from $24.8 million. Therefore on a diluted basis that's $0.36 for the first quarter, compared to $0.77 last year.

The impact of the foreign exchange variation between both periods is $0.30. The $0.30 is the overall negative impact, but that's made up of $0.38 negative impact on operations and a positive $0.08 which is included in the

remeasurements of the forward purchase agreement liabilities, which are in finance expenses, compared to last year.

The gross profit declined 200 basis points, to 21.9 percent from 23.9 percent, again, foreign exchange having the largest impact there.

Selling expense decreased ($4.4) million, or 0.8 percent. Excluding selling expenses for Juvenile China, which was acquired in Q4, selling expenses would've actually decreased by 3.8 percent.

General and administrative expenses increased by 7.9 percent. Dorel China is a part of that.

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Total finance expenses, this one's a little bit – needs a little explanation. They decreased by $2.6 million, from $8.4 – to $8.4 million from $11 million last year. Both this year and last year's finance expenses include noncash, nontaxable amounts related to the remeasurement of the forward purchase agreement liabilities. So this year we had an income of $400,000, and last year we had an expense of $4 million.

So the actual interest, cash interest, on long-term debt increased this year to $7.3 million from last year's $4.9 million. And that's – most of that's due to the borrowing cost related to the issuance of the convertible debenture that we took out for the acquisition of Dorel Juvenile China.

The Company's tax rate in the quarter was 24.3 percent versus 16.8 percent. Again, it moves around. That's basically just the way the jurisdictions fell in the first quarter where we generated income. We still believe that for the full year we'll be between 15 percent and 20 percent.

Juvenile numbers, juvenile segment increased by two percent, from $269 million to $274 million. Organically, the segment increased three percent if we take out the Dorel China and the exchange rate variations. The organic sales growth is principally because of the growth in Latin America, where in local currencies our sales were over 10 percent.

Operating profit for the period was $9.2 million, a decline of 53 percent from $19.6 million. This includes a full quarter of Dorel Juvenile China, which was acquired in 2014.

So all major divisions saw their currencies weaken against the U.S. dollar. This had a negative impact on operating profits of about $6 million in juvenile for the quarter. Most of the remaining earnings shortfalls were due to losses at Dorel Juvenile China and the recently created Dorel Juvenile Mexico, as well as the $1.1 million acquisition-related costs related to the Dorel China acquisition.

Gross profits decreased by 240 basis points, to 26 percent. This was primarily due, again, to foreign exchange pressures in all the regions, as well as the

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Dorel China acquisition. As previously stated, we said Dorel China will not be profitable until the end of this year.

Over in the sports group, revenues decreased by $11.4 million, or a drop of 4.8 percent. That's $228 million versus last year's $240 million. However, again removing the foreign exchange, year over year organic growth was actually three percent up. So that's good. Strong sales were noted in the independent dealers, mostly in Europe and Japan as well as Caloi in Brazil. The overseas market, especially Europe, started the year very strongly. There was a little bit of a slowdown in the U.S., which had a softer start because of the late spring, although spring is definitely out there now, and we're

expecting some business to pick up.

Operating profit decreased by $4.7 million to $11.6 million. This compares to $16.3 million last year. Gross profit's down to 23.4 percent from 25.1 percent. That's driven by the unfavorable exchange rate.

Selling expenses decreased 1.8 percent, and G&A were all down by 6.1 percent. These decreases are part of the result of the restructuring plan that we've done in previous years as well as low expenses due to foreign exchange. The net negative impact of the exchange rate on our operating profit was about $7 million. So if we remove the impact on foreign exchange our operating profit would've actually increased by about 12 percent. So a pretty good quarter considering the foreign exchange that we had to deal with. Over in home furnishings, sales were up 17.2 percent from $138.1 million last year to $161.9 million this year. The segment's Internet, as Martin mentioned, their Internet and drop-ship programs are up over 30 percent over last year, although now we've seen a growth again in brick-and-mortar sales, which we had seen struggling for a number of years.

Operating profits $9.6 million compared to $8.1 million, an increase of about 18 percent. Gross profits 12.8 percent, a small decline from last year's 13.1 percent. It's driven by a product mix change and slightly higher material costs in the ready-to-assemble furniture area.

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Operating costs, consisting of SG&A and R&D, rose by 11 percent compared with the previous year.

A few items on the balance sheet. Overall debt increased compared to December's balance sheet. Traditionally the first quarter requires increased borrowings as our cash flow generating – generated from operating activities is more weighted towards the second half of the year. The additional debt increased in Q1 versus Q1 of 2004 (sic - see press release, "2014") due to increases in inventory, increases in receivables and a decrease in trade and other payables.

Inventory increased by about 1.7 percent, by about $11 million. Most of that is in the sports area, where bike sales are ramping up into the big Q2. But that was partially offset by decreases in juvenile home furnishings.

So with that I'll pass it back to Martin. Martin Schwartz: OK. Thank you, Jeffrey.

Well, as expected, the negative impact of the increased value of the U.S. dollar against practically all our local currencies severely depressed earnings in the quarter. Although rates have stabilized somewhat over the past few weeks, we have not seen any of the currencies in our markets significantly increase in value. Therefore, we expect lower earnings in juvenile and sports to continue into the second quarter.

Now that currencies have started to stabilize, price increases have been implemented where relevant, and we anticipate this will benefit the second quarter, although the significant benefit will be in the second half. In juvenile, our U.S. business will show improved earnings for the balance of the year, but it won't be enough to offset the segment's overall currency challenges. Our European business has lost several margin points to exchange. We will continue to invest in the business as we work through this period, but results for the full year will not match those of 2014.

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In Latin America our teams have successfully overcome higher material costs due to exchange, and we remain confident they will exceed prior-year

earnings. The integration of Dorel Juvenile China is ongoing and will likely decrease earnings over the course of the next two quarters.

At Dorel sports, the second quarter should again organically beat sales and earnings compared to the same period last year, excluding the impact of foreign exchange. As stated in our year-end release, we believe the second half will be strong, and we will exceed the first half, as significant new

product introductions should generate incremental volume and revised pricing will boost earnings. In home furnishing the positive momentum of the first quarter is expected to continue throughout the year.

I'll now ask the operator to open the lines for your questions. Again, please limit your questions to two on the first round. Operator?

Operator: Thank you. Ladies and gentlemen, we will now conduct the question and answer session. If you have a question, please press star followed by the number one on your touchtone phone. You will hear a tone acknowledging your request. Your questions will be answered in the order they are received. Please ensure you lift the handset if you’re using a speakerphone before pressing any keys.

One moment please for your first question.

Your first question comes from the line of Derek Lessard, TD Securities. Derek Lessard: Just a quick question on Dorel China. Maybe you can just add – I know you

pointed to it in some of your comments, but maybe if you can just add some color to where you stand on the integration and basically what gives you the confidence in your outlook statement where it looks like you're anticipating only another two quarters of earnings pressure.

Jeffrey Schwartz: Well, we've actually accomplished a lot. I mean, there's a lot to do, but we've actually put some of it behind us. I think we have now the senior management team is in place, all experienced people that understand what the goal is. And

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that was virtually every new senior person had to be put in. So we're talking about probably a team of five or six senior people. They're in place. They're working.

We've seen quality levels are up significantly. They're not necessarily exactly where we want them, but we're seeing progress there.

There is a game plan. There is a schedule where we have to achieve certain areas. And one by one we're getting there. So we feel confident that we see what the problems are, and now we just have to execute and get it done. Martin Schwartz: We also have done – are working very hard on our purchasing of services and

raw materials. Like I said, they've met almost of our suppliers. They're renegotiating all our costs. They also are looking at consolidating the suppliers for similar products from – for example today there might be 10 or 12 suppliers down to maybe 3 or 4 good ones where we can leverage volumes and get even better cost.

So all of that is in process. We've seen material reduction already. And we're far from the end of this process.

Derek Lessard: OK, and I guess maybe just to follow up on that, I think last call you had said that all of the product destined for the U.S. was being manufactured in the plants and Europe was to come. Are you anywhere close? Where are you in terms of getting – of producing European product?

Martin Schwartz: We're getting closer. I mean, right now we're in the design and engineering stage. European products will probably start in the factory later this year. Right now we want to make sure that we do the best possible job on getting out the North American products, which are less complicated. So we're using the North American products basically as our learning curve, and then we'll move into the European. So we'll be pretty much heavily into the European in 2016.

Jeffrey Schwartz: We also, just to remind you, we still have third-party customers. So right now about half the factory is still making product for some of them are competitors,

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some of them are retailers. So the factory is still busy. It's not an issue of factory load.

Derek Lessard: OK. Thanks, guys. I'll requeue. Operator: Sabahat Khan, RBC Capital Markets.

Sabahat Khan: On the juvenile side, can you maybe comment on how the U.S. mass segment is progressing and how the competitive environment there is?

Jeffrey Schwartz: Yes, we're actually – I think we're making some nice progress. The Costco brand that Martin talked about is really kind of the opening price point brand, and probably a brand that had been neglected for years.

We're actually putting some marketing behind that, some better product design behind that, and we're starting to see some success. I mean, 22 percent in that brand is – it's our second brand after Safety 1st in the U.S.. So it's good. We're excited about that.

And we are making some progress. It's – we had a good year last year and we expect to have a better year, focused a little bit more on earnings than on top line. And we're seeing results in the U.S..

In addition, we're also doing quite a good job on cribs again. We were in that business a number of years ago. We got out of the crib business while the standards were being debated. And now that it's sort of there's a set level of standards, we know what we have to do when we build the product, we've gotten back into it and we've gotten a lot of success lately. So some of the growth in that segment is coming from cribs, as well. So, but in general we're making progress for probably the first time in a couple of years at the mass level.

Sabahat Khan: All right, thanks. And just on the bike segment quickly, can you comment on was it just the weather in Q1 that hit the U.S. market, or was there something else there, as well?

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Jeffrey Schwartz: I mean, again, we're not off by a lot here. I don't want to overemphasize the – it's just the U.S. didn't go up while most of the other parts of the world went up. So weather definitely had a part in it.

On the mass side I know we had a really big Q4, so we had some inventories, I guess, that more inventory sold in Q4 than Q1. So January was a fairly weak start on the mass side. But it's been building, and March was really good and April's good. So we're – I don't put too much into that.

On the independent side, we're – 2015 bikes were not our best bikes as far as the product launch. Martin mentioned 2016 we have nine new platforms. A lot of that is sort of catch-up. You can't introduce nine new platforms every year. That's a bit much. But because we've been sort of a little bit behind in 2015 we've got a significant amount of new stuff coming out. And 2016 is – that's the model year, so that gets introduced in the second half of this year. So we get to see those – the results from those bikes this year.

So I'm pretty optimistic. And I think we'll be fine. Considering that we didn't have a lot of new introductions in the 2015 year, we're doing all right with what we have.

Sabahat Khan: Thank you.

Operator: Derek Dley, Canaccord Genuity.

Derek Dley: Just following up on that last question, can you just talk about the inventory level at the IVD channel in terms of the 2015 model year bikes? I mean, are you guys well positioned for the 2016 given the excitement around the new product launches there?

Jeffrey Schwartz: Yes, I think so. I mean, it depends on what part of the world, like there's different inventory levels in different countries. I think weather has to do with it. Certainly Europe has a – a lot of people in Europe have bought a lot of bikes at the store level because they knew prices are going up, so they bought a lot.

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But I don't see that as a problem. We're not sitting on excess inventories of really any model at all. So, as an example, if we go back to the worst year, which was 2013, discounting, we were forced to discount in March, I believe. From what I understand, we haven't started discounting yet. So, and here we are in May. So it's pretty much a normal year from that point of view. Derek Dley: OK, great. That's very helpful. And just looking at your guys' cash flow

statement, and I know you mentioned this a little bit on the – in your prepared remarks, but you had a big working capital drawdown. I think the number was around $117 million. Should we expect that to reverse in Q2, or more so in the back half of the year?

Jeffrey Schwartz: I don't see anything – that's coming out of the AR, a lot of it. We shipped a lot of product in March. I would say March was – it wasn't an even quarter, so our AR's been pushed up. I mean, that should balance out. There's nothing in AR, there's nothing in inventories that stand out as to be abnormal from any previous year.

Derek Dley: OK. Thank you very much.

Operator: Stephen MacLeod, BMO Capital Markets.

Stephen MacLeod: Just had a question on the sports outlook, two things. One is what's your outlook on the mass side of the business? And then secondly when you think about the strong organic growth profile or positive organic growth profile relative to FX, do you think that, including FX, do you see EBIT growth in that segment in 2015?

Jeffrey Schwartz: Do we see EBIT growth after – how does FX figure into your question? Stephen MacLeod: Yes, so you said that you have a positive sort of organic growth profile for the

year, and I'm just wondering if that will be offset by FX fully or partially or – Jeffrey Schwartz: Yes, it's going to be tough to beat last year's number because of the FX. With

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But we have about – almost 50 percent of our sales are outside the U.S. in the bike business, so it will be very challenging to beat last year because of the FX.

Stephen MacLeod: Right. OK. And on the home furnishings business, which has actually been quite strong for two quarters now, this strong growth that you've seen in Q4 and Q1, I mean, sort of on like low-single digit growth in previous years, do you expect that kind of growth trajectory to continue through the year, or is there something in Q4 and Q1 timing related that caused this sort of mid-teens growth profile?

Jeffrey Schwartz: No, I don't think – no, there's nothing special. We are seeing better growth and better demand, I think, is for the first – I think the last two quarters we're really seeing POS at the retailers going up, at the brick and mortar.

So while we've been growing significantly online, and that's going to continue, and that's where I think our strength lies, but the fact the brick and mortar's doing better is probably really sort of supercharging, if we can call it that, the growth that – in the home furnishings. So, again, we're expecting – difficult to forecast that division, because it literally is a week-by-week thing, but we're expecting a good solid year, probably the best year in a long time.

Stephen MacLeod: OK, great. Thank you. Operator: Anthony Zicha, Scotiabank.

Anthony Zicha: Jeffrey, looking forward to the integration of the manufacturing facilities in China, do you see any potential restructuring charges going forward as you transfer business and production to those plants? And the second part to that question is what kind of annual CapEx are we looking at tied to those three plant facilities in China?

Jeffrey Schwartz: Well, the first part, the answer's most likely going to be yes, because we're going to be cleaning up, not necessarily going to be staying in all the buildings we're in. We're going to look to be more efficient, and there could be some restructuring along the way to get us there. So, again, I don't have any

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estimate yet because we don't have the plans yet, but I wouldn't be surprised to see some both cash and noncash restructuring charges as the year goes on. And as far as CapEx, well, we reviewed our CapEx for the Company, and we're at about $55 million. I think we're toning down some CapEx in other spots and are obviously going to spend some in China.

But we're also moving away from the, I think, what we'll call the older Chinese manufacturing attitude of try and do everything in-house and just throw a lot of people at it, and instead we're being more – trying to take more of, I guess, a North American or Western view of just being the most efficient. And people aren't – they're cheaper there, but labor is still a cost, and we want to manage the cost properly. And in some cases we're going to outsource things that they're doing currently in-house. So that's not going to lead to any CapEx. So I don't see a spike in CapEx for Dorel, if that's what you're asking. Anthony Zicha: And then, Martin, what do you see as the biggest risk going forward tied to

those manufacturing plants, since you're – since Dorel's going to be operating those plants.

Martin Schwartz: Just time to get everything done. I think we know what has to be done. A lot of it's in progress. It's just that we – if we keep to our schedule everything is going to be very good. The risk is they fall behind. But we're watching this very closely. And so far we're on schedule.

Anthony Zicha: OK, thank you.

Operator: Mark Petrie, CIBC World Markets.

Mark Petrie: I just wanted to follow up on juvenile and the performance, just breaking it down, FX and other. So was FX about a $5 million impact on operating profit, and so then the balance of the decline was really China or Lerado?

Jeffrey Schwartz: It's the net – well, the impact of FX is almost $7 million, but there was some price increases, particularly South America. So that's why they seem to come

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out ahead. So they – so the net effect would be maybe closer to $5 million after that.

Mark Petrie: OK, and so Dorel Juvenile China was the balance?

Jeffrey Schwartz: Dorel Juvenile China we've got – you've got a $1 million charge for

acquisition costs that are still there. Then there's a bunch – Mexico is a few hundred thousand. There's a bunch of a few hundred thousand here, a few hundred thousand there. But the biggest one would be China, for sure. Mark Petrie: OK. And you expect Dorel Juvenile China to be additive to earnings by Q4,

is that right?

Jeffrey Schwartz: That's our goal. That's our goal.

Mark Petrie: OK. And do you guys have a leverage target? I think you're at about 3.5 times net debt to EBITDA right now.

Jeffrey Schwartz: Yes, we're a little bit under that. Yes, we want to get to below 3 by the end of the year.

Mark Petrie: OK. And then just in juvenile in the U.S. in the mass channel, you said you've been making nice progress and Costco's been performing well. What about Safety 1st, and what's the outlook there?

Jeffrey Schwartz: Well, I mean, we started – that's sort of the next brand that we're working on. Martin mentioned a new stroller that we launched that we have high hopes for. And we're going to continue to focus product on that brand. It's a higher price point brand than the Costco brand, and that's got to be the next brand that we have some success with.

Mark Petrie: OK. Thanks very much.

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Danielle McCoy: I was wondering if you have or could provide us and kind of break out the percent of international versus U.S. for juvenile and sports divisions.

Jeffrey Schwartz: Yes, so juvenile in the U.S. is about 40 percent, and it's about 50 percent, just over 50 percent for the bike business.

Danielle McCoy: OK, great. And then I was wondering if you can give us an overall view of the juvenile market in terms of increased pricing competition, given the ability to compare prices, match prices on the Internet, and what you're kind of doing to mitigate this kind of issue that's been going on.

Jeffrey Schwartz: It sounds like a little bit more of a U.S. issue, I think. We certainly don't have that problem in South America. What are we doing with that problem? I mean, it's a problem, I guess, everywhere. We're trying to manage – how do you manage that? You manage that by exclusive products to certain retailers, and you try and manage that, as well, by – I mean, there's a lot of different ways. It's not been a huge problem for us. That's why I'm not coming up with a lot right away. I mean, that's not – obviously there's an issue here or there. But generally we don't have that problem in general.

Danielle McCoy: OK. And then just lastly, what should we expect for this year for G&A? Jeffrey Schwartz: I think the first quarter was pretty indicative of what we are going to do

throughout the year. So the $14 million, yes. So $14 million to $15 million a quarter.

Danielle McCoy: All right. Great. Thank you, guys. Good luck. Operator: Derek Lessard, TD Securities.

Derek Lessard: Yes, I'm just wondering about how comfortable or what's your clarity on the various foreign exchanges going forward?

Jeffrey Schwartz: About the same as yours, Derek. I don't know. I mean, we have hedges. We've seen stability now in the last few weeks. Is it going to last? I don't

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know. We're kind of viewing everything from around where we are today. We have more hedges going through this year today than we had the last time I talked to you. So in some currencies we're pretty much hedged.

So, but that only takes care of the transaction. I mean, in Europe where we make a lot of money the translation of our earnings back to U.S. dollars is very large. In the first quarter just translation of all the different currencies was about $3.5 million. And that's nothing – you can't hedge against that. Derek Lessard: That was in Europe.

Jeffrey Schwartz: No, it would be all of them together. But Europe is the bulk of that. Europe's about $3.1 million of the $3.5 million. So, yes, that's a big deal, the euro, and just on the translation.

Derek Lessard: OK. And fair enough. Just maybe talk about what – you mentioned you're getting nine new product launches in the bike business this year. Maybe you can just talk to a few that you think are – that have the best potential or growth potential. What's getting you guys excited?

Jeffrey Schwartz: A lot of them are really – some of them it's competitive issues. I mean, I think people know – one I think we can talk about without explaining it is we have a new EVO. You're familiar with the EVO bike, which is the flagship road bike. So we have a – we've been tweaking it for years. We finally have a complete new bike out there now. So we're pretty excited about that.

And then we've got eight – that's a platform. We have eight other platforms. So within each platform there's a whole bunch of models. So there's more platforms than we've ever introduced, and probably more than we should've introduced in one year. But at the same time we've been behind, so we wanted to get these products out.

And we've shown them already to a number of international distributors at a show in Taiwan about a month ago, and we were told this is the best product line that Cannondale's had in years. So we're pretty excited about that.

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Derek Lessard: OK, that's cool. And when you say – so does that bring you up now to the competition in terms of different various product lines, price points and all that?

Jeffrey Schwartz: I mean, that's the idea, right? So we haven't seen what they're coming out with, but –

Martin Schwartz: We hope to be ahead of them.

Jeffrey Schwartz: – we hope to be ahead of them. I mean, it's a lot of stuff. I mean, it's in the mountain area, it's in the road area, it's – there are some new platforms that kind of don't exist today in any area. So we're really tapping a lot of different stuff, and we're pretty excited.

Derek Lessard: OK. Thanks, guys.

Operator: Anthony Zicha, Scotiabank.

Anthony Zicha: Yes, Martin, could you give us some color on terms of how Dorel sports is experiencing increased competition in Europe and North America stemming from Internet direct sales to the consumer? And how well are you positioned to deal with this increasing challenge? And I guess we could say the same thing for some juvenile products. But do you see this as a big change in the distribution channels going forward?

Jeffrey Schwartz: It's Jeffrey. I'll answer that. I don't actually see it in the juvenile, so it's not really an issue. But we do see there are a couple of brands that are selling direct to consumers, more in Europe than in the United States. And, yes, it is a bit disruptive, because they're avoiding the dealers. So it's a threat to the dealers as well as competition with ourselves.

Having said that, we continue to grow in Europe double digits. So it's obviously affecting brands, not necessarily our brand. But it is affecting the channel.

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And, again, we're going to continue to go – I mean, there are some benefits of going traditional. If you're buying a bike for $10,000 or $5,000, you want it fitted properly, you want it with all the expertise that the dealer can do and the service. When you buy it yourself and have to put it together yourself you might save some money, but are you really getting exactly the right fit and everything that you need on the bike?

So we're monitoring it. We're aware of it. But right now it hasn't hurt us. Like I said, we're growing in Europe, where that phenomena is larger than it is anywhere else. But we're aware of it.

Anthony Zicha: OK. Thank you.

Operator: Ladies and gentlemen, if there are any additional questions at this time, please press star followed by the number one. As a reminder, if you’re using a speaker phone, please lift the handset before pressing any keys.

Your next question comes from the line of Stephen MacLeod, BMO Capital Markets. Your line is open.

Stephen MacLeod: I just have two follow-up questions. First, can you say what Lerado contributed in terms of the top line in the quarter? And then, secondly, is it fair to say that on the bike side you have a generally positive view for the mass channel for 2015 given the momentum through the quarter?

Jeffrey Schwartz: I'll answer the second one first. Well, yes, I mean we were behind a little bit on the mass, but we're actually looking at a good, positive year. We plan to come in on plan, and plan is ahead of last year for the mass side. And we haven't changed that.

We got off – January was a little bit of a slow start. Had a good March, having a good April, have lots of listings in the back half. Very excited about our ride-on toy business, which is proving to be significant now in that

segment. So overall very – we're still very bullish on that. And the first part, Dorel China revenue was about $34 million.

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Stephen MacLeod: Thank you very much.

Operator: Mr. Schwartz, there are no further questions at this time. Please continue. Martin Schwartz: OK. Well, we want to thank everybody for joining us today and also take this

opportunity to invite all of you to our Annual General Meeting, which will be held in Montreal at the Mount Royal Center on Sherbrooke Street at 10:00 a.m. on May the 28th, exactly three weeks from today. It's a great opportunity to see our newest products and to meet many members of the Dorel senior management team. We look forward to seeing you there.

Thank you again, and have a pleasant day.

Operator: Ladies and gentlemen, this concludes the conference call for today.

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