Martin Schwartz - President and CEO Jeffrey Schwartz - EVP and CFO

Derek Lessard - TD Securities Anthony Zicha - Scotiabank Sabahat Khan - RBC Capital Markets Stephen MacLeod - BMO Capital

Thank you. Good afternoon.

On behalf of Jeffrey Schwartz and Frank Rana welcome to our third quarter 2014 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.

There were a number of positives in all three segments during the quarter. Most of our Juvenile businesses did well despite the strength of the U.S.

dollar, which reduced earnings in all of the U.S. division.

We continue to be pleased with the sustained progress and recreation leisure as the segment revenue grew for the third consecutive quarter. The Cannondale Sports Group has had a solid nine months and we see a bright future for this business with a dynamic management team in place.

There were a number of one-time charges this quarter which Jeffrey will address shortly, but first a look at each of our segments. In Juvenile, we are all very pleased that the Lerado Juvenile acquisition was completed this past Monday and we’ve had a transition team in place at the four facilities since shortly after the transaction was announced in June.

Several people in upper management with industry experience in China are already in place and the process of managing facilities is already underway. In fact a few months ago, the production of several products was shifted to Lerado from other suppliers in anticipation of closing the deal.

I’m leaving this evening to personally greet our new employees at our new facilities as well as to meet with government officials in the various cities where the factories are located. We intend to not only grow our business there, but to integrate with local communities as well.

Approximately 4,000 Lerado employees become part of Dorel bringing our global workforce to 10,500. This is a sound investment in our future and will further position Dorel as the global leader in Juvenile.

It is still far too early to provide projections. One thing is clear.

We are looking at all aspects of Lerado’s operations and will make changes that will improve efficiencies and profit. Dorel is excellent streamlining operations and we will apply this expertise at Lerado.

Going forward we will control our own destiny, allowing us to be more flexible in an increasingly changing competitive landscape. We’re also be able to deliver our products to market faster.

Lerado’s Juvenile will complement our existing facilities worldwide and we will look at the possibility of these facilities serving our other businesses in addition to Juvenile. During the third quarter, Juvenile’s two biggest trade shows in Cologne, Germany and in Las Vegas were held and were pleased both with attendance and the positive customer feedback.

Tiny Love, our Israeli based division won Cologne’s prestigious innovation award in the world of baby toys category for its new double sided flip toys. Maxi-Cosi, currently celebrating its 30th anniversary launched the industry’s first instant car seat carrier, which meet the European Union’s ISI safety standard.

Known as the Pedal Plus it is now available in select European stores and is an important advancement in car seat safety. And by the Maxi-Cosi has been a Dorel brand for 20 of those 30 years and we are proud of the innovations we have brought to the market.

Safety 1st is also celebrating its 30th anniversary in child safety leadership and a yearlong program of activities which showcase at the ABC show in Las Vegas. As you know, we bought the rights to the Infanti brand earlier this year in Brazil and this has proven to be a sound investment as the brand has given us significant lift in that country.

Recently, the first products have been shipped from Dorel’s start up in Mexico. This new division holds promise going forward with the organization supported by Dorel brands, which are already known in the Mexican market.

The Recreation Leisure segment had another good quarter. Globally the Cannondale Sports Group had a solid quarter of sales fueled by strong performance at Cannondale Sports Europe, UK and Japan.

As those regions benefited from a robust bicycle market, good weather and growth in their markets at the expense of competitors. Growth was also driven by the e-bike and mountain bike categories.

CSG’s profitability was affected by the onetime cost associated with merging the Cannondale pro-cycling and Slipstream Racing teams. Caloi’s operating profit was positive after losses during the first half and we still expect the bulk of Caloi’s earnings to come during the current fourth quarter.

On the math side Pacific Cycle bike cycles to most customers saw healthy year-over-year increases and the electric ride-on business also did well as an important program was picked up by a major big box retailer. As in Juvenile, the year’s two major bicycle trade shows were held during the third quarter.

At both Euro Bike and Interbike, our brands received strong dealer and consumer attention. New product lines and technologies were showcased with Cannondale highlighting exciting new road, survey [ph] and triathlon models.

One example was the introduction of the Contro 1, the Cannondale’s urban line of bikes, its newest to muting machine. It is available as an e-bike an increasingly important categories for us in Europe and will be in stores this month with up to four models available primarily in Europe.

The Contro 1 won a Eurobike Design Award, one of the most prestigious design awards in the cycling industry. GT also had a strong showing at both shows with a Eurobike Award for the new adventure road bike that GT Grey.

Cannondale’s sports store in Carle Place, New York has received the Hub Magazine Award for excellence in brand and retail experience. Hub is a leading provider of marketing news and analysis by industry leaders.

This is a significant distinction as the mission of our three retail stores is to provide retail options and intelligence to Cannondale dealers across the country. Our UK cycling sports group won a prestigious bike distributor of the year award, presented by BikeBiz, a prominent UK industry publication.

The award is given to a distributor of brands who has performed faster in the year in terms of delivery, sales, marketing and customer service, and is judged by a random panel of UK industry figures. As announced in August, Cannondale Pro Cycling and Slipstream Sports are joining forces in 2015.

Cannondale will become a title and technical bike sponsor and will take an ownership stake in the management organization of Slipstream Sports, the top American professional cycling organization. Things are coming together nicely and the final team roster will be announced later this month.

Home Furnishings top-line grew 7% with Internet, Dorel Home Products and Cosco Home & Office sales driving the quarter. Internet sales represented an increasing proportion of segment sales as growth continues through our customer’s online channels as well as through other ecommerce sites.

We have added a number of senior people at Ameriwood during the last few months and have created a couple of new positions to help strengthen that business. We reentered the crib and wooden nursery furniture sector less than two years ago after waiting for the government to finalize new status.

There has been rejuvenated growth in this area and we are seeing increased sales in the mid to high end range of these products. Jeffery will now provide the financial perspective.

Jeffery?

Thank you, Martin. And as always, I’ll concentrate on the quarter results rather than year-to-date.

Our revenue increased 10.8% to $673 million. The organic revenue increased, removing the impact of foreign exchange and new businesses was approximately 6%.

Our pre-tax earnings increased 136.3% to $24.2 million and net income was $19.5 million, an increase of 75.4%. On a diluted earnings per share basis, that equates to $0.60 for the quarter versus $0.34 a year before.

We've significant amount of either non-reoccurring or one-time items in our Q3 results. I just like income go through them, so people understand what we’ve done.

The appreciation of the U.S. dollar had a negative effect on both the Juvenile and Recreational Leisure segment because we are a global company and that number versus the same quarter 2013 was about $5 million; the cost to us.

This was offset by the effect of the exchange rate on the revaluation of the put option liabilities, which represented a swing of about 6.6 million versus the previous year. However for the quarter, our gain was only $3.1 million this year and last year we had a $3.5 million loss in the time period.

Total expenses is related to the Cannondale Pro Cycling teams, the non-reoccurring costs and restructuring in the recreational leisure segment was 5.4 million, and just to remind everybody, last year in the quarter we had a pre-tax expense of $8 million related to an unfavorable car seat product liability case. So those are all kind of the large non-reoccurring or one-time charges that we had or the effect of these change rate on our numbers.

Now get into some detail about the numbers. Gross profit for the company as a percent of sales increased 30 basis points to 22.5 from 22.2 last year.

Gross profit increases were in the Juvenile segment partially offset by decreases in the Recreational Leisure and home furnishing. Selling expenses increased by $6.8 million or 12.4%.

That includes the $4.5 million related to the changes in the Cannondale Pro Cycling team. What’s happened there is the signature of a new agreement with Slipstream Sports has led to a non-cash write-off of the equity investment we have in the old Brixia associated team, up 3.4 million.

In addition to that, we have to fund the current Brixia team by an additional $1.1 million because of a shortfall from sponsorship, which occurred basically because once we knew we were getting out of the team for next year, there was no point to try to increase the sponsorship on the old team. So that number ended up being about a one-time one, which won’t reoccur with the new team next year.

So excluding these amounts, as well as the impact of the acquisition of Tiny Love and Caloi, selling expenses actually decreased by 0.8%. General and administrative expenses decreased by $9.4 million.

However in there we’ve got a gain of $3.1 million related to the unrealized foreign exchange gains on the put option and last year we had a loss in that area of $3.5 million. And again last year included the $8 million courtesy charge that we had in the third quarter of 2013.

So excluding all of those amounts, as well as the impact of acquired companies, general and administrative expenses increased by $1.9 million representing 7.4% of revenue and last year they were 7.6% of revenue in 2013. Finance expenses increased by $4 million to $9.5 million from $5.5 million last year.

Included in the finance expense is the amount of $1.8 million related to accretion interest on the put option liabilities, compared to $1.1 million that we had in that area last year. Tax rate 19.4%, versus with the recovery last year of 8.6%.

Main causes of the variation again are changes in jurisdictions, in which we generated our income and the recognition in 2013 of the tax benefit pertaining to the adjustment of tax balances following a foreign reorganization. If we look over just for the Juvenile business now, revenue was $260.7 million, an increase of 9.1%.

Organic revenue increased by about 5% for the Juvenile business. Organic revenue growth for the segment overall was driven by Latin America, Europe and Australia.

Gross profits increased by 90 basis points to 28.1%. Operating profit for the quarter was $16.1 million, an increase from 5 million in 2013 but again 2013 included a $8 million charge related to the currency gains.

So excluding the impact of the acquisition of Tiny Love in ’14 and the charge, our operating profit increased by 13.1%. Dorel Juvenile Europe was the main driver of the increased operating profit, due to improved gross margins and operating costs that were well contained.

With the exception of Dorel USA, operating profits in all our divisions were impacted negatively due to the weakening of their foreign exchange currency versus the U.S., reducing the segment’s operating profit by about $4 million versus last year same time. To move over to recreation and leisure, revenue increased by $34.9 million or 15.1% to $266.5 million.

Again from an organic standpoint revenue increased by about 6%. The increase in revenue for the segment was driven partially by the improved weather conditions when compared to last year.

Overall markets in the IBD channel, particularly Europe and Japan, as well as sales to the North American market channel also contributed to the organic growth. Adjusted operating profit, excluding restructuring costs increased by $1.6 million or 11% to $15.7 million.

Excluding restructuring costs, adjusted gross margins increased 10 basis points to 23.5% from 23.4%. Gross margins improved due to higher volume and favorable sales mix in the mass market.

The improvement was reduced by the weakening of the foreign exchange currencies as I talked about before, but the net impact on the Recreational Leisure was only 1 million versus the quarter last year. Selling expenses increased by 24.5%.

However if you think out the impact of Caloi that we bought last year as well as the cost related to the Pro Cycling team, selling expenses actually declined by 2.3%. General and administrative expenses were up by 4.1% but excluding the expenses of Caloi, the actual increase -- that actual number was a decrease of 10.4%.

And then the restructuring cost in the quarter were $0.9 million this year and nothing last year. In Home Furnishing, revenue increased by $9 million or 6.6%, operating profit was $5.5 million versus $5.8 million, a decrease of 0.4 million, gross profit 11.2% versus a decrease, which is a decrease of 20 basis points from the 11.4 last year.

We had some input costs rising slightly versus last year, particularly particle board, but gross profits deteriorated due to the impact of a higher proportion of sales of lower margin products. Not a lot to say in that area.

We're looking for better Q4 which will make up for any shortfall we have in Q3 for sure. Liquidity, from that point of view, a few items.

Our financial statement shows inventory of $583 million, an increase of 5% from December of 2013. The increase was mainly in Recreational Leisure due to both the acquisition of Caloi of course, which represents more half the increase, as well as an increase in a number of Caloi related items that will be shipped in the fourth quarter to our mass market business.

And with that, I’ll pass it back to you Martin.

Okay. Thank you, Jeffery.

For our outlook we are on track for a much improved year in Recreation Leisure. With improved earnings of Cannondale Sports Group and Pacific Cycle, we fully expect to deliver much better results for the fourth quarter versus last year.

Both CSG and Pacific Cycle will build on 2014 solid year-to-date gains, while Caloi will benefit from the addition of the Cannondale, GT and Schwinn brands in the Brazilian market. Juvenile based on current levels, the strength in the U.S.

dollar against our operating currencies in other geographies will also impact the fourth quarter. But despite this though, fourth quarter Juvenile results will be below last year.

Full year earnings are expected to exceed 2013. Excluded is the impact of the cost associated with integrating the Lerado operations and conditioning supply to our newly own Asian based facilities.

Home furnishing shipment maintained this year's steady performance 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. In addition many projects have been launched to position us or an even better 2015.

We are conscious of the macro challenges such as an uncertain economy and fluctuating exchange rates in many markets, but with Dorel’s broaden geographic footprint and diversified product line we remain confident about 2015. I’ll now ask the operator to the open the lines for your questions.

Please remember limit your questions to only two on the first round. Operator please.

Yes, good afternoon everyone and congratulations on a good quarter. You pointed the strong overseas growth in the IBD channel.

I am just wondering if you could add some color as to what you're seeing in the U.S. how the trends are, how 2015 is shaping up early in the selling season?

I think the U.S. is still much more sluggish for us at least than it is in Europe and some of the overseas markets.

It's good. It's just we’re not seeing the same level of growth.

And again people I think are still being able to cautious ’14 because what happened in 2013 and I think dealers are still relatively cautious. So, we have a cautious outlook as well for the U.S.

market.

Okay and can you talk maybe about when you three guys took accidentally [ph] the Brixia partnership and what we should expect in terms of sponsorship of the Pro team level next year and the potential cost savings if there are any?

Well, there was a Brixia partnership at one point until our partner pulled out. So we were kind of forced to buy the rest of Brixia if we still wanted to have any type of sponsorship and that’s kind of where we got stuck owning all of Brixia.

So there was no partnership anymore and we decided that it's more efficient for us to be sponsor of a team unlike we'll say professional team owners, mange the team, run the team. We'll focus on the marketing end of it, we’ll our brand exposed and we don’t have any sort of downside that we’ve had here.

This cost us money that we didn’t want to spend and going forward we know what our commitment is and we don’t have to go out and beyond that commitment which we have to do this year and fund the team's shortfalls for any type of sponsorship. So we are expecting to spend less money and have what I think is going to be a better team next year and a more competitive team and I think it's going to help us.

I think we’re going to get a lot of – a lot more sort of marketing exposure next year than we did in 2014.

Okay and just a follow-up on that. Does it preclude you guys come from sponsoring anybody else at that level or even lower than the World Tour?

We do have other teams. We have mountain bike teams.

We have downhill teams. We have other teams.

We have other individual athletes that we sponsor but we’re only going to sponsor one Pro team like one major CI team [ph]. The other ones, are downhill, the mountain, they're all pro teams and we've got teams in those events as well.

Martin, with reference to transition to Lerado, is there a potential restructuring charge that could occur this year or next year and when do you think the deal would be accretive?

Well, I’ll answer that Tony. Yes, there probably will be some restructurings in probably Q4 as we go through We’ve had to move product over from other factories to Lerado.

There is going to be write-offs on the molds and tooling as an example. There's a number of stuff.

We have to go in and see if there is anything we’re going to do different and we’re restructuring the way we do our business. So is it possible?

Yes it’s probably possible. We don’t have the number certainly today.

So it's not going to be something we can about. And even the exact timing on it -- we closed on it a couple of days ago.

But it would make sense that some assets that we were using in the past aren’t going to be needed anymore. Well that’s possible, and from accretion it’s just early to let you know.

We’re making our changes which -- I think what people need to understand is we bought a factory that you saw [indiscernible] of the company doing one set of things and today it’s going to be [indiscernible]

Okay, there will be more employees in the same factory?

More employees?

Well, factory employees no, but management yes. We've brought in some several new people, built up some spots that were vacant.

We feel to make that place very efficient and cost effective, we need the proper people and this what we’re looking on now?

Okay, and then Martin, knowing that you’re one of the biggest users of the ports of Los Angeles with transpacific shipments. We’ve been reading and researching that the Port of Los Angeles and Long Beach, they're severely log jammed as container shipments in certain manufacturers are getting delays.

Is there any impact for your merchant deliveries or have you re-routed….

No. Let me explain how we’ve been doing our container input.

A while ago, we started moving containers to different ports along the West Coast, whether it would be in Oakland, Vancouver, Prince Rupert and we’ve done a lot of all water containers and bringing them around through Panama to Savanna and to Eastern Canada. So we’re very spread out.

And so now it’s not the bulk of our containers going into Long Beach and it has slowed a little bit. We’re watching it carefully.

What we’re doing is we’re loading containers quicker in Asia, earlier than we normally would to offset whatever delay we face in California. So, it’s effecting a little bit but not -- far from critical.

Any impact on cost?

Not really, no. It’s not a material number.

There is no question we've had a number of containers delayed but I think other companies have had lot worst problems than we’ve had.

This is [indiscernible] on for Dave. My first question is regarding the Juvenile business and thinking a little more about your guidance, it looks like for the year you’re forecasting an improvement year-over-year, both on operating and EPS basis but looking at it on the low end, still kind of implies that it could be down fairly significantly in Q4.

Just trying to get a better sense on what the currency impact to that is and just maybe a little bit more color on how you see that trending year-over-year sequentially?

Yes, I think we said that we’re probably going to be down in the quarter but we’re still maintaining that we’re going to be ahead of last year. The quarter, it’s not a significant reduction.

It’s a small -- it’s not significant. There is some currency but there's a couple of other things, particularly in Europe where Martin talked about some new products, some major new products being introduced that were introducing at the last show.

The timing on those products for sales is probably December, January, February shipping and we’re -- in Q4 we’re laying out the marketing plan on the launch of those products. So we’ve got a little disconnect on the spend versus the revenue recognition on when those products are going to come in.

So we’re expecting Europe, even though the trends are good to actually to be down a little bit because of the marketing launches.

And then thinking a little bit more about the Lerado acquisition. On the call you mentioned that -- you think that you'll be able to get products out the door a little bit faster through the acquisition.

Just trying to get a better sense on what you think working capital could be assist [ph] you with that and what maybe inventory trends would change -- inventories trends would change?

I guess I'm running against the time I think I've had and rightfully so every analyst is asked for a little more help in trying to build a model with Lerado inside and they've looked at historical numbers and they have asked us. And I think the challenge that we’ve got from building that model as well internally and that you got is that; the company that we look at, the old Lerado company spoke to customers that in the mid to long-term, won’t be there anymore.

They made products for those customers that we’re not going to make anymore. The factory is going to be reconfigured for our needs, making new products that have never been made in the past.

We’re going to have different management team than before, a different purchasing group than in the past and even the SG&A profile was very different as we moved from getting businesses from an external customer base to into Company sales. So we’re really changing everything that occurred in the past.

In addition they were public company and had other expenses that we don’t need anymore. They had factories set up.

Like on their main campus there's 18 buildings, they would have a building just for Dorel and then another building just for another customer, another building for another customer. And all that was set up for marketing purposes, so that you can tell Dorel that don’t worry you have your own building and you have your own employees on our campus building stuff for you.

The problem with that is it's extremely inefficient. You'd be running different products down assembly lines with the only thing that was in common was who the customer was going to be.

So moving forward we’re going to be much more efficient and it's difficult because of these changes that we’re doing to estimate the impact. Today they estimate the impact on inventories, on margins, on all of that and we think everything is going to be a positive impact, but it's too early at this stage, given that we've closed a few days to anticipate exactly what the financial impact is going to be other than we’re all convinced it's going to be better.

Just a quick question on just kind of input cost looking forward, taking kind of fuel into account and some other product manufacturers have commented on higher cost coming out of China. Could you give us some outlook on how you expect that across all your segments?

We haven’t seen any higher costs coming out of China. If anything we’re doing a little better than in the past.

Raw materials, especially, metals, plastics and synthetics fabrics are down. So I can’t comment on other peoples cost in China, but we’re doing fine there.

Okay, great. And just kind of heading kind of -- I know you don’t provide guidance for the next year yet, but is just there any indication of what the retailer is saying looking into 2015 or anything?

Any intel you have on that front?

Yes, the retailers at this time of the year hold everything close to their vest and wait for Christmas and it's still little early even. I think we got to get pass Thanksgiving in the U.S.

to get a feel for what they're expecting for the year. So based on the Christmas Day then we’ll have a feeling for next year.

Overall we’re just -- we’ve been cautious now for a while about retail. And I don't think anything has changed.

Maybe some other of our competitors have been more positive and more negative, but we’ve been positive. I know October was good month, but it's difficult.

At this point everybody -- there's still a lot of uncertainty in the year.

Just wanted to follow-up on the rec segment, you talked about Caloi a big distributor in Q4. Can you just quantify like how much of Q4 did that segment previously represent of Caloi's full year earnings?

I know I said last year. I think that over 100% of their earnings are in the second half and the bulk of that -- again, I'm not sure for this year yet.

The big challenges we have across the board everywhere is currency. So the Brazilian -- whatever the currency is going to end up being over the next couple of months is going to have an impact on their profits for the quarter and which will have an impact on the percentage.

But by far the largest percentage, more than 50% is fourth quarter. But more than that I don’t want to say at this point.

I understand. And then just sort of looking in the bikes channel, generally, on the IBD side, what are you hearing about or what are your customers saying about inventory levels as they move through into the next seasons bike models?

I know our inventory was good. I mean one of the reasons we maintained a good gross margin in the quarter is because we didn’t have to do premature discounting.

So I know we manage our levels well. The general retail level haven’t had a lot of feedback.

I think it’s relatively stable. I've just been getting some feedback that people are still just cautious.

They don’t want to take the chances that used to take before 2013 and buy a lot of inventory yet. So, I think they’re waiting again to see what the weather is going to be like the spring.

Yes, guys you did a good job at laying out that the various things adjusted [indiscernible]. Do you have a specific internal timeline for trying to get this all done?

Not yet. We still need to make that final list of what we need to do.

Again we don’t -- just owned it a few days now. But I will tell you, we’ve had more progress posing on this acquisition than we’ve had on any other acquisition by far and we’ve already hired numerous senior management people that will starting next week in the factory.

That's pretty comforting, to know that you’ve got a lot of new experienced people coming in for a lot of different levels and from either an accounting standpoint you've done a lot of work before closing but we still -- till you get in there and know exactly what the challenges are and what’s going to take time and what’s not going to take time, we’re not estimating anything here.

Okay, thank you. I want to thank everybody for joining us today.

It’s been an exciting quarter for us and we expect the momentum created will drive things in Q4 and into 2015. Lerado will be the focus of much attention and we will update you on the progress as appropriate.

Have a pleasant afternoon and thank you again for being with us.