third quarter - doreldetermined that an amount of $17.3 million of trade accounts receivable from...

1

Ended September 30, 2018

Third Quarter

Forward-Looking Statement

2

Except for historical information provided herein, this presentation may contain information andstatements of a forward-looking nature concerning the future performance of Dorel Industries Inc.These statements are based on assumptions and uncertainties as well as on management's bestpossible evaluation of future events. The business of the Company and these forward-lookingstatements are subject to a number of risks and uncertainties that could cause actual results to differfrom expected results. Important factors which could cause such differences may include, withoutexcluding other considerations, general economic conditions; changes in product costs and supplychannels; foreign currency fluctuations; customer and credit risk, including the risk resulting from theliquidation and reorganization of Toys“R”Us referred to in this presentation and the concentration ofrevenues with a small number of customers; costs associated with product liability; changes in incometax legislation or the interpretation or application of those rules; the continued ability to developproducts and support brand names; changes in the regulatory environment; continued access to capitalresources and the related costs of borrowing; changes in assumptions in the valuation of goodwill andother intangible assets; and there being no certainty that Dorel’s current dividend policy will bemaintained. A description of the above mentioned items and certain additional risk factors arediscussed in the Company’s Annual MD&A and Annual Information Form, filed with the Canadiansecurities regulatory authorities. The risk factors outlined in the previously mentioned documents arespecifically incorporated herein by reference. The Company’s business, financial condition, or operatingresults could be materially adversely affected if any of these risks and uncertainties were to materialize.Given these risks and uncertainties, investors should not place undue reliance on forward-lookingstatements as a prediction of actual results.

Note: All figures are in US dollars.

Non-GAAP Financial Measures

3

As a result of impairment loss on intangible assets, restructuring and othercosts, remeasurement of forward purchase agreement liabilities and loss onearly extinguishment of long-term debt incurred in 2018 and 2017, theCompany is including in this investor presentation the following non-GAAPfinancial measures: “adjusted gross profit”, “adjusted operating profit”,“adjusted tax rate”, “adjusted net income” and “adjusted earnings per dilutedshare”. The Company believes that this results in a more meaningfulcomparison of its core business performance between the periods presented.These non-GAAP financial measures do not have a standardized meaningprescribed by GAAP and therefore are unlikely to be comparable to similarmeasures presented by other issuers. Reconciliations of these non-GAAPfinancial measures to the most directly comparable financial measurescalculated in accordance with GAAP are included in the MD&A for the thirdquarter and nine months ended September 30, 2018.

Overview

4

• 3 business segments

• Dorel Home (2017 revenue - $791 million)

• Dorel Juvenile (2017 revenue - $922 million)

• Dorel Sports (2017 revenue - $865 million)

• $2.6 billion in sales annually

• Approximately 9,200 employees

• Sales to 100+ countries

• Facilities located in 25 countries

TSX: DII.B DII.A

Overview

6

(in thousands, other than EPS) 2018 2017(1)

Total revenue $ 670,437 $ 642,634

Adjusted net income $ 10,988 $ 14,538

Adjusted EPS (diluted) $ 0.34 $ 0.44

(1) The Company has initially applied IFRS 15 and IFRS 9 as at December 31, 2017. Under thetransition methods chosen, comparative information is not restated.

Third Quarters ended September 30

7


(in thousands) 2018 2017(1)

Total revenue $ 221,627 $ 201,449

Gross profit $ 34,844 $ 35,408

Operating profit $ 19,504 $ 20,537

(1) The Company has initially applied IFRS 15 and IFRS 9 as at December 31, 2017. Under the transition methods chosen, comparative information is not restated.

Q3 Highlights

8

Record quarter for revenue. Q3 e-commerce gross sales grew 26.6% representing 58% of total

segment gross sales compared to 51% a year ago, driven byincreased sales in all divisions to on-line retailers.

Operating profit decreased 5% as some divisions slightly affectedby overseas finished goods cost increases not yet fully offset byprice increases. Warehousing and distribution costs were higherthan prior year due to additional overall warehouse footprint.

October 1, 2018, Dorel Home acquired the assets and operationsof UK-based Alphason, a designer and distributer of award-winninghome office and audio-visual furniture. Creates a new base toexpand and to provide strong logistics support to serve and growthe European business.

10



Total revenue $ 229,690 $ 235,645

Gross profit $ 57,846 $ 69,601

Adjusted operating profit $ 1,675 $ 11,355


Q3 Highlights

11

Organic revenue decreased by approximately 0.4%.

Dorel Juvenile U.S. sales improved by 5%. Sales improvementscontinued at major customers as they benefitted from the absence ofToys“R”Us stores.

New product launches in Brazil combined with price increases,contributed more than 30% revenue growth for the quarter, though inUS dollar terms, this growth was 5%.

Sales in Europe in US dollar terms were down 2%. Several new marketintroductions are slowly gaining traction.

The largest contributor to the quarter’s lower operating profit wasgross profit. All markets faced pressure on input costs, such as resinand less favourable FX rates which impacted US dollar denominatedinput costs.

Dorel Juvenile USA - Innovation

12

Maxi-Cosi Magellan

• One premium car seat which combines 10 years of safety, comfort and adventure

• 5-in-1 seating system for children from 5 - 120 lbs, designed to grow with children from birth to 10 years.

• The only convertible car seat equipped with Maxi-Cosi’s patented Adjustable Side Impact Protection

Dorel Juvenile Europe - Innovation

13

Maxi-Cosi Lila

• Unique cocoon stroller to use from birth up to approximately 3.5 years.

• Ergonomic memory foam ‘ShapeOfYou’ inlay for newborns, designed in collaboration with pediatricians.

• Easy one-hand folding which brings a new level of comfort to parents.

14


Total revenue $ 219,120 $ 205,540

Adjusted gross profit $ 46,244 $ 46,076

Adjusted operating profit $ 7,549 $ 587



Q3 Highlights

15

Organic revenue grew approximately 11.8% after excluding the impact ofvarying FX rates year-over-year and the divestment of the performanceapparel line of business (SUGOI) in Q2 2018.

Cycling Sports Group delivered improved year-over-year results as the U.S.independent bike dealers channel had a solid Q3 finish on the heels ofstrong momentum created at the annual August sales meeting. Thedivestiture of SUGOI, other cost cutting measures across all regions andprevious restructuring efforts markedly reduced operating expenses.

Pacific Cycle experienced a double-digit revenue increase as customersbuilt inventory in advance of the busy holiday season. Other driversincluded improved parts and accessories shipments, continued growth inMongoose scooter sales and strong sales of battery powered ride-ons.

Caloi posted strong organic revenue growth versus prior year, althoughdeclined in reported currency due to unfavourable FX.

Recent Cannondale Introductions

16

Habit Carbon 2

Topstone Apex

Recent Pacific-Cycle Introductions

17

Schwinn Sidewinder

Rideamal

Dorel Sports – 3 Divisions

18

1) Cycling Sports Group (CSG)

• IBD Division.

• Premium Brands.

• Innovation – continuing focus


19

2) Pacific Cycle

• Mass merchants/sporting goods channel.

• Full service provider – bikes and parts & accessories.

• Brand building has enhanced Schwinn/Mongooseawareness.

• Electric ride-on toys.


20

3) Caloi

• Largest bicycle brand in LATAM and leader in Brazilian market.

• Portfolio includes full range of bicycles, from high-performance to children’s mountain bikes, urban, recreational and road bikes.

• Caloi’s factory in Manaus is largest bicycle manufacturing plant outside Southeast Asia.

• Brazil is a Dorel production hub, assembling Caloi, Cannondale, Schwinn, Mongoose & GT brand bicycles for local and export markets.

Other

21

Taxes

During the third quarter and nine months ended September 30, 2018, theCompany’s effective tax rates were 28.2% and 90.4%, respectively versus21.3% and 27.6% for the same periods in the prior year. Excluding incometaxes on restructuring and other costs, the Company’s third quarter adjustedtax rate was 24.5% in 2018 and 21.4% in 2017. Excluding income taxes onimpairment loss on intangible assets, restructuring and other costs,remeasurement of forward purchase agreement liabilities and loss on earlyextinguishment of long-term debt, the adjusted tax rate for the nine monthswas 16.5% in 2018 versus 23.8% in 2017. Variations in the adjusted tax rateyear-over-year for the third quarter and nine months are explained largelydue to changes in the jurisdictions in which the Company generated itsincome, including the impact related to the U.S. Tax Reform signed into lawon December 22, 2017, effective as of January 1, 2018. The Company isstating that for the full year it expects its annual adjusted tax rate to bebetween 20% and 25%.

Outlook

22

Dorel Home is expected to deliver higher sales in Q4, compared to last year, with operating profitconsistent with prior year.

Dorel Juvenile is expected to recover from Q3. Current expectations are for organic revenue growthto be in the mid single digit range, with improved gross margins versus Q3. Adjusted operating profitin Q4 is expected to be close to prior year levels. Sales strength should continue in the U.S. and theincreasing contribution of new product introductions will benefit Europe. In Chile and Peru, Q4 isalways the strongest of the year and price increases in several markets will begin to take effect.

Dorel Sports’ improved Q3 results will continue into Q4 as successfully introduced new products startshipping in significant quantities. Much improved Q4 adjusted operating profit on higher revenue, willresult in excellent year-over-year gains for the segment.

As Dorel has substantial multi-national operations, FX rates are a risk. However, should the value ofthe US dollar against the Chinese currency continue to rise, this would provide opportunity for costsavings in all three segments, possibly negating some of the possible negative impacts of othercurrencies deflating and of the higher U.S. tariffs.

A substantial number of Dorel’s imports from China into the U.S. are now subject to new 10% U.S.tariffs, which primarily affect Dorel Home and Dorel Sports. Customers have been informed of theimpending price increase necessitated by these tariffs. The rate of imposition is currently scheduledto increase to 25% on January 1, 2019 and at that level, these increases could impact consumerdemand in the longer term.

Significant Event in 2018

23

On March 15, 2018, Toys“R”Us, Inc. (“Toys“R”Us”), one of the Company’s customers, announced that it had fileda motion seeking Bankruptcy Court approval to begin the process of conducting an orderly wind-down of its U.S.business and liquidation of inventory in all of its U.S. stores. Considering this event, the Company haddetermined that an amount of $17.3 million of trade accounts receivable from this customer as at June 30, 2018was at risk of collection ($7.6 million as at December 30, 2017). Accordingly, the Company had recorded anadditional impairment loss of $12.5 million within impairment loss on trade and other receivables in itscondensed consolidated interim income statement for the six months ended June 30, 2018 with respect to thesetrade accounts receivable from Toys“R”Us U.S. (fourth quarter ended December 30, 2017 - $3.8 million). Of thisamount, $2.1 million (fourth quarter ended December 30, 2017 - nil) was within Dorel Home, $3.8 million(fourth quarter ended December 30, 2017 - $0.7 million) was within Dorel Juvenile and $6.6 million (fourthquarter ended December 30, 2017 - $3.1 million) was within Dorel Sports. These amounts representedmanagement’s best estimate of potential losses arising from non-payment based on information available at thattime.

In August 2018, the Bankruptcy Court approved the Toys“R”Us settlement agreement with its creditorsand lenders. As part of the settlement agreement reached, the Company expects to receiveapproximately 22 cents on the dollar which is consistent with management’s estimate as at June 30,2018. Accordingly, no impairment loss allowance adjustment was necessary to record as a result of thesettlement agreement. As at September 30, 2018, $1.2 million was received under the settlementagreement and in total, the Company had a remaining balance of trade accounts receivable fromToys“R”Us U.S. amounting to $3.7 million (net of impairment loss allowance). On October 12, 2018, theCompany received an additional amount of $3.0 million under the settlement agreement.

24

APPENDIX

Financial Performance5 Years adjusted (1)

25

(In thousands of U.S. dollars, except per share data)

Growth Through Acquisitions

• 1988 Cosco Inc (DJG)

• 1990 Charleswood Corporation

• 1994 Maxi-Miliaan B.V. (Maxi-Cosi)

• 1998 Ameriwood Industries

• 2000 Safety 1st Inc.

• 2001 Quint B.V. (Quinny)

• 2003 Ampa France (Dorel Europe)

• 2004 Pacific Cycle

• 2007 IGC Australia

• 2008 Cannondale/SUGOI (SUGOI was divested of in Q2 2018)

• 2008 PTI Sports

• 2009 Baby Art

26

Growth Through Acquisitions

• 2009 Dorel Brazil

• 2009 Iron Horse Bicycles

• 2009 Gemini Bicycles (Australia)

• 2009 Hot Wheels, Circle Bikes (UK)

• 2011 Silfa Group (Chile, Peru, Bolivia, Argentina) - 70% interest

• 2012 Poltrade (Poland)

• 2012 Best Brands Group SA (Panama) and Baby Universe SAS(Colombia) – 70% interest

• 2013 Caloi (Brazil)

• 2014 Tiny Love Ltd. (Israel)

• 2014 Right to sell Infanti brand in Brazilian market

• 2014 Juvenile business of Lerado Group (Hong Kong)

• 2014 Intercycles (Chile)

27

Total Revenue by Segment

28

2017 2016

36%

33%

31%36%

36%

28%

DOREL JUVENILE DOREL SPORTS DOREL HOME

Geographical Distribution of Total Revenue

29

2017 2016

60%

4%

21%

3%10% 2%

62%

3%

21%

3%9%

2%

US Canada Europe Other Latin America Asia

Sustainability Philosophy

• Active in sustainability on several fronts throughout all three segments.

• Dorel Home Products facility is FSC certified.

• Cornwall RTA plant recycling for 10 years.

• 98% of materials are recycled or sold.

• DJG’s sustainability initiatives include zero landfill, water usage reduced by 98%; high-efficiency lighting systems.

• Strict policy in place to ensure sustainable business practices of suppliers.

30

third quarter - doreldetermined that an amount of $17.3 million of trade accounts receivable from...

Documents