a world class

1255 Greene Avenue, Suite 300Montreal, Quebec, Canada H3Z 2A4

T: 514.934.3034 F: 514.934.9932

www.dorel.comCert no. SW-COC-1741

A WORLD CLASS JUVENILE PRODUCTS AND BICYCLE COMPANY

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Juvenile

Recreational/Leisure

Home Furnishings

Our Premium Brands

Table of Contents3 Financial Highlights 4 Message to Shareholders 8 Message from Chief Operating Officer 10 Juvenile

12 Recreational/Leisure 14 Dorel Welcomes Cannondale and Sugoi 16 Home Furnishings

17 Asian Operations 20 Management’s Discussion and Analysis 43 Consolidated Financial Statements

79 Board of Directors 80 Major Operations, Corporate Information

At a Glance Head Office

Dorel Industries Inc.1255 Greene Avenue, Suite 300Montreal, Quebec, Canada H3Z 2A4

Lawyers

Heenan Blaikie LLP1250 René-Lévesque Blvd. WestSuite 2500Montreal, Quebec, Canada H3B 4Y1

Auditors

KPMG LLP600 de Maisonneuve Blvd. WestSuite 1500Montreal, Quebec, Canada H3A 0A3

Transfer Agent & Registrar

Computershare Investor Services Inc.100 University Avenue, 9th FloorToronto, Ontario, Canada M5J [email protected]

Corporate InformationInvestor Relations

MaisonBrisonRick Leckner1320 Graham Blvd., Suite 132T.M.R., Quebec, Canada H3P 3C8Tel.: (514) 731-0000Fax: (514) 731-4525email: [email protected]

Stock Exchange Listing

Share SymbolsTSX – DII.B; DII.A

Annual Meeting of Shareholders

Tuesday, May 27, 2008, at 10 amRitz-Carlton HotelOval Ballroom1228 Sherbrooke Street WestMontreal, Quebec H3G 1H6

Dorel Industries Inc. (TSX: DII.B, DII.A) is a world class juvenile products and bicycle company. Established in1962, Dorel creates style and excitement in equal measure to safety, quality and value. The Company’s lifestyleleadership position is pronounced in both its Juvenile and bicycle categories with an array of trend-settingproducts. In the Juvenile segment, Dorel’s powerfully branded products such as Quinny, Maxi-Cosi, Safety 1stand Bébé Confort have shown the way to safety, originality and fashion. Similarly, its highly popular brandssuch as Cannondale, Schwinn, GT, Mongoose and Sugoi have made Dorel a principal player with bothindependent bicycle dealers and mass merchants. Dorel’s Home Furnishings segment markets a wide assortmentof furniture products, both domestically produced and imported. The Company exerts relentless innovation andmarketing flair across all of its divisions. Dorel is a $2 billion company with forty-six hundred employees,facilities in seventeen countries, and sales worldwide.

US operations include Dorel Juvenile Group USA; the Cannondale Sports Group; Pacific Cycle; AmeriwoodIndustries which produces ready-to-assemble furniture; Altra Furniture; and Cosco Home & Office. In Canada,Dorel operates Dorel Distribution Canada, Dorel Home Products and Sugoi. Abroad, operations includeDorel Europe and IGC in Australia, a manufacturer and distributor of juvenile products. Dorel Asia sources andimports home furnishings products. Dorel China has eight offices which oversee the sourcing, engineering andlogistics of the Company’s Asian supplier chain.

Corporate Profile

Written and Produced by MaisonBrisonTSX : DII.A; DII.B

Dorel_Cover_EN:Layout 1 4/29/08 3:16 PM

1

The growing contribution of Dorel’s Juvenile and

Recreational/Leisure segments hold much promise for

long-term sustainable growth. We are proud to

have become the world’s premiere juvenile and bicycle

products company. Upscale quality, constant

innovation, eye-catching design – these are the features

that have made many of Dorel’s brands household

names. Retailers are attracted by Dorel’s breadth

of categories, consumers by Dorel’s renowned safety

and attractive pricing. We will continue to

build upon these successes, led by strong management

teams and supported by a solid financial base.

We are committed to delivering enhanced shareholder

value through these core strengths.

Dorel’s Value Drivers

2

Subsequent to year-end, Dorel acquired the

Cannondale Bicycle Corporation, a leading designer,

developer and manufacturer of high-end bicycles.

Headquartered in Bethel, Connecticut, Cannondale

has facilities in Bedford, Pennsylvania as well as

offices in Canada, Switzerland, Holland, Japan, and

Australia. Cannondale bikes are sold in more than

70 countries. The purchase also included Sugoi

Performance Apparel. Sugoi products are enjoyed

worldwide by everyone from world champions to

runners, cyclists, triathletes and fitness enthusiasts who

demand the best apparel available.

A New Highly Strategic Fit

Cannondale and Sugoi are

now part of the Cannondale

Sports Group, a new division

within the Recreational/Leisure segment, specifically created to focus exclusively on the Independent

Bicycle Dealers (IBD) category with premium-oriented brands.

The Cannondale/Sugoi acquisition is another example of how Dorel is unlocking value for its shareholders.

Please see page 14 for additional information on this exciting development.

3400,000

800,000

1,200,000

1,600,000

2,000,000

2007 2006 2005 2004 2003

Revenues 1,813,672 1,771,168 1,760,865 1,709,074 1,180,777

Cost of sales 1,375,418 1,363,421 1,367,217 1,315,921 874,763

Gross profit 438,254 407,747 393,648 393,153 306,014

as percent of revenues 24.2% 23.0% 22.4% 23.0% 25.9%

Operating expenses 317,117 303,802 279,753 286,180 206,663

Restructuring costs 14,509 3,671 6,982 – –

Pretax earnings 106,628 100,274 106,913 106,973 99,351


Income taxes 19,136 11,409 15,591 6,897 25,151

Net earnings 87,492 88,865 91,322 100,076 74,200


Earnings per share

Basic* 2.63 2.70 2.78 3.06 2.33

Fully diluted* 2.63 2.70 2.77 3.04 2.29

Book value per share at end of year** 28.08 24.33 20.46 19.15 15.14

Financial Highlights (2003-2007)

0

30,000

60,000

90,000

120,000

0.00

0.75

1.50

2.25

3.00

Revenues(in thousands of U.S. dollars)

Net Income(in thousands of U.S. dollars)

Net IncomePer Diluted Share(in U.S. dollars)

2003

2004

2005

2006

2007

2003

2004

2005

2006

2007

2003

2004

2005

2006

2007

2007—A record performance

• Adjusted net income of $100.1 million • Adjusted pre-tax earnings top $125 million• Juvenile segment revenue nears $1 billion, adjusted earnings from operations

exceed $114 million• Free cash flow exceeds $116 million

* Adjusted to account for the weighted daily average number of shares outstanding.** Based on the number of shares outstanding at year end.

4

Message to Shareholders

Dear Fellow Shareholder:

2007 was a defining year in the corporate evolution of Dorel. An aggressivestrategic direction was established to further unlock value within the Company;concentrating on the Juvenile and Recreational/Leisure segments which provide thegreatest potential, while continuing to actively address issues in Home Furnishings.We are convinced this approach will result in a stronger company going forward.

While organic growth has been an important and consistent component of our progress, key acquisitionshave also been a significant catalyst to Dorel’s development. The 2003 purchase of AmpaFrancespurred the expansion of Dorel’s European juvenile operations which today are a highly profitabledivision of the Company. Since 2004, Juvenile segment revenues have grown annually at an averageof almost 8%. Earnings from operations have a three year compound annual growth rate of 17%.In 2007, Juvenile accounted for 53% of all revenues and 68% of earnings from operations.

In 2004 we acquired Pacific Cycle, at that time, a new area of business for Dorel, but one which wasimmediately accretive and has provided exciting opportunities. We have learned a great deal aboutthe potential of the bicycle industry. To that end, subsequent to year-end, we completed the acquisitionof Bethel, Connecticut-based Cannondale Bicycle Corporation, a leading manufacturer of high-endbicycles. Widely regarded as the bike industry's foremost innovator, Cannondale has an outstandingheritage in competitive cycling. Among the many noteworthy accomplishments, Cannondale bikeshave been powered to eleven stages of the Tour de France as well as several other championships.

The transaction also includes the popular Sugoi Performance Apparel company. Sugoi products areknown and enjoyed worldwide by world champions, runners, cyclists, triathletes and fitness enthusiastswho demand the best apparel available. Sugoi has always been known for its combination oftechnical performance and fashion. They were among the very first companies to recognize thatrecreational athletes want and need high performance clothing, just as much as professionals.

This gives us two more well-known, respected and highly marketable brands in the IndependentBicycle Dealer (IBD) channel. It also greatly expands our bicycle business as Cannondale is sold inmore than 70 countries, with 40% of its sales in Europe, and provides huge potential in the bikeindustry overall.

5

A revitalized Recreational/Leisure segmentIn light of the Cannondale acquisition, Dorel has reorganized its Recreational/Leisure segment tomaximize the opportunities now before us, and has established two distinct operating divisions. A newDorel IBD Division, the Cannondale Sports Group, has been created to focus exclusively on thiscategory with premium-oriented brands. Pacific Cycle is now a stand-alone division with an exclusivefocus on mass merchant customers. Each division has its own specialized management team to bestserve our customers.

The Cannondale purchase is consistent with Dorel’s plan to concentrate on our core businesses and isthe first step in our goal to become the world’s number one IBD player. We are committed to pursuingthe bicycle sector, and this important transaction positions us globally in a most material way. Backedby Dorel’s extensive resources, the Cannondale Sports Group will build on Cannondale’s strengths togrow significantly within the IBD channel. Our intention is to seek further acquisitions in similar highquality, performance bicycle companies and create new innovative products to build a world-classcompany that dealers will want to buy from.

We are extremely encouraged with the prospects of the Recreational/Leisure segment. It now has anenormous opportunity to capitalize on the changing mindsets and trends around the world. Peopleare actively engaged in seeking healthier lifestyles; are concerned about the environment, want to dosomething about it; and, desire sustainability at all levels. We sincerely believe our products can helpmeet these objectives.

A world leader in JuvenileLikewise, the Juvenile segment, our most successful business, presents ample opportunities. Dorel is theworld’s largest juvenile products company in its categories and we intend to build on this strength.Our size and global marketing efforts allow us to leverage product development home runs byintroducing successful brands such as the award-winning European-styled Quinny stroller line tothe American market. In the US, the Quinny Buzz and Zapp quickly became highly popular andsought-after items.

It is this competitive advantage which will propel Dorel’s Juvenile growth in new markets. Consumers inmany countries around the world have embraced our known brands for their quality, innovation,fashion and reliability. This is allowing us to steadily grow our business globally. With last year’spurchase of a majority position in IGC, Australia, we have made meaningful inroads in that region aswell. Strong juvenile brands from Europe and the US have also been launched in Australia,complementing IGC’s solid portfolio. Dorel Europe did particularly well in 2007 due to advancedinnovation and a range of desired products which meets all price points. As you will read inCam Lisio’s comments on page 8, we have taken additional steps to strengthen management abroadto create further opportunities there.

Update on Home FurnishingsWhile Home Furnishings and particularly ready-to-assemble furniture (RTA) remained somewhat of astruggle last year, to a large degree because of the slowdown in the US housing industry, the segmentcontinues to contribute to the Company and was cash flow positive.

“We are extremely encouraged with the prospects of theRecreational/Leisure segment. It now has an enormousopportunity to capitalize on the changing mindsets and trendsaround the world. ”

6

There have been on-going operational adjustments at Ameriwood, the most significant being thesuspension of manufacturing operations at the Dowagiac, Michigan facility. While we remainconvinced that there will be sustained demand for domestically manufactured RTA furniture, we haveconcluded that with the improvements made at Ameriwood, our manufacturing footprint exceededanticipated market needs. We believe this will ensure the long-term viability of our domestic operationsand speed Ameriwood’s profitability growth.

RTA furniture and in fact, home furnishings, is a business we know well and will maintain. We intend toimprove our position, our share of the market, as well as profitability through further efficiencies andcontinued new product introductions. We are confident that, despite the challenging environment, thereis potential and we will take the required action to ensure success in this area. To be clear,Home Furnishings is now a smaller part of Dorel and will grow at a rate slower than that of ourother businesses.

Staying abreast of the e-commerce trend Dorel has recognized the influence of the web in the every day buying patterns of the consumer.We have embraced its importance and are taking steps to ensure we stay ahead of the curve so thatour brands are also recognized online. There is a talented group of in-house experts devotedexclusively to this task, maximizing the power of the Internet and of its potential for marketing our products.

During 2007 we integrated shared web services across North America. Prior to this, our divisionswere running multiple, independent environments. All web activity has now been centralized with theprimary objectives to reduce costs and deliver best-in-class technology to all divisions. This centralizedapproach offers advanced platforms under a highly controlled environment which enables applicationsfor brand awareness, product searches, search engine friendly web sites and much more. Centralizedweb development also allows for the systemic and shared delivery of custom software tools withoutrepetitive costs. In this way, all Dorel divisions benefit from services they might not have otherwisereceived, and at a fraction of the price. This is yet another advantage of properly utilizing theresources of a large corporation such as Dorel.

Tangible evidence is the completely revamped Safety 1st (www.safety1st.com) and Mongoose(www.mongoose.com) websites, both highly interactive. We are building upon the web accomplishmentsof last year by further advancing our strategic initiatives with eBrand awareness and development.The goal is to both provide timely and valuable information to benefit the consumer, as well as participatein online retailing with our online retail partners.

Building on a successful modelThere are two countries utilizing the DorelDistribution (DD) concept, a sales and distributionorganization which encompasses all three segments,established to service all accounts in smaller butemerging markets. Now in its fourth year, DorelDistribution Canada, the base model, continues togrow its relationships with retailers with its much

“The acquisition of Cannondale and Sugoi fortifies our position andstature in the bicycle industry and underlines our commitment tofurther unlock shareholder value by concentrating on Dorel’s coreRecreational/Leisure and Juvenile segments. ”

7

wider assortment of product categories. IGC in Australia is utilizing the same strategy and a third unit,Dorel UK, is being remodeled into a DD platform. To date, it has been a winning formula and onewhich will be utilized increasingly as marketing conditions warrant.

Outlook Dorel has evolved over the past several years, as evidenced by the proportion that each of oursegments contributes to revenues and earnings. Recent successes stem from the combined strength ofour Juvenile and Recreational/Leisure businesses. The acquisition of Cannondale and Sugoi fortifiesour position and stature in the bicycle industry and underlines our commitment to further unlockshareholder value by concentrating on Dorel’s core Recreational/Leisure and Juvenile segments, whichprovide the greatest potential.

This lays the groundwork for an eventful year. We will continue to strive to optimize the results of eachof our segments. Home Furnishings remains a core asset of Dorel and resources will be devoted toensuring its development. Any assessment of Dorel’s value, however, must be focused on the growingrole of Juvenile and Recreational/Leisure. We’re excited about the prospects for the future and lookforward to sharing this success with you, our shareholders.

I thank all Dorel employees for the important contributions that have been made during the pastyear. I am also grateful for the strong relationships we have with our customers and suppliers, all ofwhom we sincerely consider as our partners. My gratitude as well for the on-going guidance from ourBoard of Directors. Dorel will continue to take a growing position in the markets we serve andaccordingly be able to reward our shareholders.

Martin SchwartzPresident & Chief Executive OfficerMarch 11, 2008

8

Dorel’s various business units acted on several fronts to address issues created bythe economic climate of 2007. Significant progress was made in a number of divisions,while others have set in motion plans to deliver needed improvement in 2008.Overall, it was a satisfying year, both in terms of performance and in thecommitment of our management teams to further enhance operations.

Dorel Europe turned in a stellar performance in the face of an important restructuring program andchallenges in certain European markets. The manufacturing changes in France and Italy, necessary toensure adaptation to an increasingly competitive situation, were successfully implemented this past yearand will result in enhanced profitability.

Progress was achieved in traditional markets with the launch of an assortment of highly innovative,quality juvenile products. Chief among them was the introduction in Europe of the revolutionary Axisscar seat and the Maxi-Cosi Mura stroller. Both were officially recognized by consumer organizationsand professional bodies throughout Europe with several design awards. These successes also showpromise for the current year as the division continues to demonstrate it is a dominant player themid-to-high price point categories.

Intensified focus on the Juvenile segment Management has been strengthened at all levels and will continue to be throughout 2008. A newposition of Managing Director of Dorel France has been named and this individual will also sit as amember of the European Board of Directors. This will allow our President of Dorel Europe toconcentrate on the development of synergies across Europe. Among the assignments for 2008 areplans to build on the assets of our strong brands and drive business in both specialty stores and at themass merchant level.

Dorel continued to make investments in its Juvenile segment in 2007, ensuring that it continues toprovide value to shareholders going forward. The Dorel Juvenile Group USA (DJG USA) Design andDevelopment Centre was relocated to new offices in Foxboro, Massachusetts, where an environmentmore conducive to creative thinking will foster a more powerful product development process. Thenew facility has a larger, state-of-the-art showroom which will allow retailers to efficiently view the fullexpanse of product lines.

Notable new US Juvenile launches included the European-styled Quinny and Maxi-Cosi high margincar seats and strollers. To promote the arrival of the Quinny Buzz, DJG USA collaborated withrenowned fashion designer Lela Rose, in creating a limited collection fabric which was unveiled at amedia event in New York City. The Scenera car seat with its reusable and transportation efficientplastic bag packaging is a further example of avant-garde product development and underlinesDorel’s commitment to the environment.

Message from the Chief Operating Officer

9

Recreational/Leisure The Recreational/Leisure segment has established definite momentum. As Martin explains in hismessage, the Cannondale and Sugoi purchases underline our plan to further unlock shareholder valueby concentrating on Dorel’s core Recreational/Leisure and Juvenile segments, which provide thegreatest potential. These important additions will further underpin recent successes in its core bicyclebusiness. There is also a need to focus on non-bicycle products to further build this business.

Home Furnishings Efforts are continuing to beef up the Home Furnishings segment. This is clearly a work-in-progress andadditional initiatives are and will be undertaken to consolidate operations at all levels within thissegment and to provide the needed synergies. All opportunities are being evaluated and will bemaximized to drive down costs and further enhance profitability.

Additional progress was made in 2007 within the ready-to-assemble (RTA) furniture division althoughthe weakened US economy had an impact on home-related purchases. Ameriwood is benefiting fromthe positive effects of operating two domestic plants instead of three. The facilities in Tiffin, Ohio andCornwall, Ontario are running quite efficiently and the adjustments should continue to benefitAmeriwood throughout 2008. Ameriwood has also realigned its sales strategy with a return to basics,offering more of the value proposition consumers seek from RTA furniture and reinforcing relationshipswith retailers to once again, become involved in the decision process. Global Sourcing operationssaw solid growth in 2007 as this continues to expand import product into the Electronic Superstoreand Home Office retail platforms. Global Sourcing also creates opportunities in product designs notdomestically manufactured.

Our other Home Furnishings divisions, Cosco Home & Office, Dorel Asia and Dorel Home Productsare all cash flow positive and remain an important part of the segment. Each offers an array of qualityproduct lines that have gained acceptance with retailers.

Dorel Industries is a vibrant organization, made so by the talented and dedicated people who workthroughout the company. Despite our global scope and vast operations, there is a close workingrelationship among the management teams of all divisions which ensures continuity and crosspollination of ideas. This positive environment runs throughout the corporation and it is my privilege tobe a part of it. We look forward to an exciting year of successes and further growth.

Camillo LisioChief Operating OfficerMarch 11, 2008

“The Scenera car seat with its reusable and transportationefficient plastic bag packaging is a further example of avant-gardeproduct development and underlines Dorel’s commitment tothe environment. ”

10

Juvenile

The US debut of the highly popularDorel European-designed Quinny stroller

and Maxi – Cosi car seat lines took consumersby storm in 2007. With rave reviews, sales expectations

were exceeded for both product lines.

This PlaySafe high chairfeatures Safety 1st’s

very own proprietarytechnologies includingSlideGuard™ whichhelps prevent babyfrom sliding out.

Manufactured at Dorel’s car seat facilityin Columbus, Indiana, the Pronto!

is another reason why Dorel is the world’s leading car

seat manufacturer.

Bébé Confort's latest innovation, Axissa convenient and rotating car

seat has won numerousawards and is setting salesrecords at Dorel Europe.

The SecureTech®cabinet lockfeatures an

indicator that letsyou know when it's locked.

11

2007 was the best year ever for Dorel’s Juvenile segment.Revenue approached $1 billion and earnings from operationstopped $100 million. A solid product development pipelineand strong brands helped fuel growth.

The Quinny® Zapp™ is the world’s smallest fold-up travel strollerand comes with Maxi-Cosi® Mico™

car seat adapters. pick in 2007.

The Safety 1st High-Def Digital Monitor’sstate-of-the art technology ensures audio

clarity and guaranteedprivacy while monitoring.

Wide and comfy bouncer withadjustable headrest easily folds

flat for transporting or storing.

Ease of use and extrememaneuverability – another

example of Dorel’s productinnovation.

The Safety 1st

Forehead Thermometeris a favorite with

caregivers and can evenbe used while the child is

sleeping!A

12

Recreational/LeisureMongoose Black Diamond Double –

Named one of the “Bestof 2007” by Mountain

Bike Magazine.

Pacific Cycle continues tobuild its non-bike products platform with products such

as this reinforced steel swing set.

With the continuing rise in gas prices, morepeople are gravitating toSchwinn's World line of

commuter bikes.

Road racing starts here. Cannondale AdvancedAluminum Design. Purists know that this is the

foundation ofperformance.

New for 2008, the GT Marathon Team is GT's top

offering in the full suspensionXC segment.

The InStep swivelwheel jogger stroller

provides anothermethod ofexercise for

Pacific Cycle’sconsumers.

13

Dorel’s strategic approach to the bicycle industry ensures aclear focus on the two distinct distribution channels – theIndependent Bicycle Dealers (IBD) and mass merchantcategories. Both the newly-created Cannondale SportsGroup and Pacific Cycle have positioned Dorel to capture anincreasing share of the bicycle market.

One of a number of popular ride-ontoys. Sales of this category

continue to increase.

Mongoose Fraction – BMX Plus Magazine –“Mongoose is back on top of the game in a big way.”

The successful Hope 50cc model that hasraised over $100,000 for breast cancer

awareness and research.

The Scalpel, the lightest full suspension bikeon the planet is the most sought-after bike in

X-C racing withnumerous WorldCup wins to its

credit.

Sugoi is all aboutquality and

performance.Their productshave wide and

growing appeal among fitnessenthusiasts and professionals.

Schwinn’s Super Sport Ultra 2 is a highly popularroad bike providing an efficient and confortable ride.

The GTR Team is GT’s best road racebike.

14

Cannondale and Sugoi, acquired in early 2008, are part of the Cannondale Sports Group, a new

Dorel division within the Recreational/Leisure segment, created to devote all of its resources exclusively

to the Independent Bicycle Dealer (IBD) channel. A second separate division encompasses Pacific

Cycle, whose mandate is to deal specifically with mass merchant and sporting goods customers.

Dorel recognizes that doing business with these two categories requires distinct strategies and

specialized people selling the best products for those channels.

Established in 1971, Cannondale is widely regarded as the bike industry's leading innovator. Its

handcrafted bicycles have won numerous design awards and are sold in more than 70 countries.

40% of sales are in Europe.

Cannondale has a strong heritage in competitive cycling and has consistently been on the leading

edge of sports marketing. Through its sponsorship of a number of teams, Cannondale road bikes have

won numerous stages of the Tour De France and the Giro d’Italia, as well as multiple U.S. National

Dorel Welcomes Cannondale and SUGOi

15

Championships. Cannondale sponsored triathletes have also won various World Championships.

Off-road, Cannondale has dominated mountain biking through a variety of team sponsorships, and

their riders have enjoyed countless World Cup victories.

Sugoi was founded in 1987 and is based in Vancouver, where they also have a manufacturing facility.

Sugoi has consistently been known for its combination of technical performance and fashion. They

were among the first companies to recognize that recreational athletes want and need high

performance clothing, just as much as professionals. Sugoi has won numerous awards for its

products and has outfitted world class athletes. Products are distributed primarily through specialty

independent running and bicycle dealers. Sales are conducted in 24 countries.

The Cannondale Sports Group will develop innovative products and seek acquisitions in high quality,

premium-branded, performance bicycle companies. The transaction immediately gives Dorel a global

presence in the highly strategic IBD category, one of tremendous potential. The Cannondale/Sugoi

purchase is the first step in Dorel’s goal to become the world’s number one IBD player.

16

Home FurnishingsDorel is devoting the required attention to unlocking value

and building its Home Furnishings segment. A wide variety

of products addresses several product categories, a number

of which enjoy significant market share.

The Altra video baseis the perfect foundation for the highly

popular home theater systems.

This quality crafted leatherrecliner illustrates the value-add

that retailers havecome to rely on from

Dorel Asia.

Home office isincreasingly being accepted as an alternative to the “official” office. Ameriwood has an

extensive selection to respond to this growing trend.

Dorel futons have a significantshare of the mass market. Futon mattresses are

made with environmentally friendly fibers tomaximize sustainability.

From step stools to the “World’s Greatest”ladders, Cosco Home & Office offers products

consumers have counted on for years.

17

With more than a quarter century of experience

in the Far East, Dorel has established an extensive

operation based in China to ensure both continuity

with all Company divisions and best-in-class

service for its customers. Special attention has

been paid to nurturing strong relationships with

suppliers and Dorel is generally the largest

customer of its main suppliers. Dorel’s presence in

Asia continues to grow, with now over 160 full-time

Dorel employees located in eight offices

throughout China. The Company also closely

following trends and developing resources in

developing countries such as Vietnam, Indonesia,

Thailand and Malaysia.

The focus is consistently on four key areas: quality

control; 100% on-time delivery management; cost

containment and reductions and product

development. The latter is increasingly of major

importance as Dorel seeks to not only have its

suppliers produce, but become involved in the

design of products as well. This will help increase

the speed-to-market of new products, a key

competitive advantage.

Dorel devotes a great deal of effort to ensuring

strong supplier relationships. Each year a Far East

Suppliers Conference is held in Shenzhen,

bringing together well over 120 suppliers.

The event has proven to be a major success in

building and maintaining solid bonds. As the

influence of Asia grows, Dorel knows it can count

on its partners abroad.

Asian Operations

18

Juvenile


Home Furnishings

Brands You Know

192007 ANNUAL REPORT

2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997

Revenues 1,813,672 1,771,168 1,760,865 1,709,074 1,180,777 992,073 916,769 757,540 596,702 492,554 351,989

Cost of sales 1,375,418 1,363,421 1,367,217 1,315,921 874,763 760,423 718,123 582,741 452,974 381,826 264,789

Gross profit 438,254 407,747 393,648 393,153 306,014 231,650 198,646 174,799 143,728 110,729 87,200

as percent of revenues 24.2% 23.0% 22.4% 23.0% 25.9% 23.4% 21.7% 23.1% 24.1% 22.5% 24.8%

Operating expenses 317,117 303,802 279,753 286,180 206,663 145,956 147,353 127,356 85,996 74,635 61,024

Restructuring costs and

other one-time charges 14,509 3,671 6,982 – – – 20,000 12,037 – 10,066 –

Pretax earnings 106,628 100,274 106,913 106,973 99,351 85,694 31,293 35,406 57,732 26,027 26,176


Income taxes 19,136 11,409 15,591 6,897 25,151 24,099 4,731 5,432 17,756 8,330 8,862

Net earnings from

continuing operations 87,492 88,865 91,322 100,076 74,200 61,595 26,562 29,974 39,977 17,697 17,314


Income (loss) from

discontinued operations – – – – – – (1,058) (12,668) (1,401) 1,000 225

Net earnings 87,492 88,865 91,322 100,076 74,200 61,595 25,504 17,306 38,576 18,697 17,539


Earnings per share

Basic* 2.63 2.70 2.78 3.06 2.33 2.05 0.91 0.62 1.38 0.69 0.71

Fully diluted* 2.63 2.70 2.77 3.04 2.29 2.00 0.89 0.61 1.36 0.69 0.70

Book value per share

at end of year** 28.08 24.33 20.46 19.15 15.14 11.31 7.52 6.75 6.55 5.63 4.26

* Adjusted to account for the weighted daily average number of shares outstanding.** Based on the number of shares outstanding at year end.

All per share amounts have been adjusted to give retroactive recognition to the two-for-one stock split that took place in 1998.

Annual Results (1997-2007)

20 DOREL INDUSTRIES INC.

This Management’s Discussion and Analysis of financial conditions and results of operations (“MD&A”) should beread in conjunction with the consolidated financial statements for Dorel Industries Inc. (“Dorel” or “theCompany”) for fiscal years ended December 30, 2007 and 2006 (“the Consolidated Financial Statements”), aswell as with the notes to the Consolidated Financial Statements. All financial information contained in this MD&Aand in the Company’s Consolidated Financial Statements have been prepared in accordance with Canadiangenerally accepted accounting principles (“GAAP”) using the U.S. dollar as the reporting currency. Any non-GAAPfinancial measures referred to in this MD&A are clearly identified and reconciled to GAAP as necessary. Unlessotherwise indicated, all figures are in U.S. dollars. This MD&A is current as of March 10, 2008.

Additional information relating to the Company filed with the Canadian securities regulatory authorities, including theCompany’s Annual Information Form (“AIF”), and with the U.S. Securities and Exchange Commission are to beavailable within the prescribed filing deadlines, on-line at www.sedar.com and www.sec.gov respectively.

Corporate OverviewThe Company’s head office is based in Montreal, Quebec, Canada. In addition to the facilities described below,the Company’s subsidiaries have North American showrooms in Toronto, Ontario and High Point, North Carolina.In total, the Company operates in seventeen countries with sales made throughout the world and employsapproximately 4,600 people. Dorel’s ultimate goal is to satisfy consumer needs while achieving maximumfinancial results for its shareholders. The Company’s growth has resulted from both increasing sales of existingbusinesses and by acquiring businesses that management believes add value to the Company.

StrategyDorel is a world class juvenile products and bicycle company. Established in 1962, Dorel creates style andexcitement in equal measure to safety, quality and value. The Company’s lifestyle leadership position ispronounced in both its Juvenile and bicycle categories with an array of trend-setting products. In the Juvenilesegment, Dorel’s powerfully branded products such as Quinny, Maxi-Cosi, Safety 1st and Bébé Confort haveshown the way to safety, originality and fashion. Similarly, its highly popular brands such as Schwinn, GT andMongoose have made Dorel a principal player in the bicycle marketplace. Dorel’s Home Furnishings segmentmarkets a wide assortment of furniture products, both domestically produced and imported. The Companyexerts relentless innovation and marketing flair across all of its divisions.

As part of that strategy, subsequent to year-end, on February 4, 2008, the Company acquired all the outstandingshares of Cannondale Bicycle Corporation, a leading designer, developer and manufacturer of high-endbicycles. With significant operations in the United States and Holland, as well as locations in Switzerland, Japanand Australia, Cannondale is widely regarded as the bike industry’s leading innovator. Cannondale’shandcrafted bicycles have won numerous design awards and are sold in over 70 countries. This acquisitionexpands Dorel’s Recreational / Leisure segment to include a significant presence in the Independent Bike Dealer(IBD) network. Additionally, forming part of Cannondale is the Sugoi Performance Apparel division located inCanada. Sugoi products are used worldwide by runners, cyclists, triathletes and fitness enthusiasts.Cannondale sales in 2007 were approximately $200 million.

Within each of the three segments, there are several operating divisions or subsidiaries. Each is operated independentlyby a separate group of managers. Senior management of the Company coordinates the businesses of allsegments and maximizes cross-selling, cross-marketing, procurement and other complementary business opportunities.

Dorel conducts its business through a variety of sales and distribution arrangements. These consist of salariedemployees; individual agents who carry the Company’s products on either an exclusive or non-exclusive basis;individual specialized agents who sell products, including Dorel’s, exclusively to one customer such as a majordiscount chain; and sales agencies which themselves employ their own sales force. While retailers carry out thebulk of the advertising of Dorel’s products, all of the segments advertise and promote their products through theuse of advertisements in specific magazines, multi-product brochures and other media outlets.

Management’s Discussion and Analysis


Dorel believes that its commitment to providing a high quality, industry-leading level of service has allowed it todevelop successful and mutually beneficial relationships with major retailers. A high level of customer satisfactionhas been achieved by fostering particularly close contacts between Dorel’s sales representatives and clients. Permanent,full-service agency account teams dedicated exclusively to certain major accounts have been established. Thesededicated account teams provide these customers with the assurance that inventory and supply requirements will bemet and that any problems will be immediately addressed.

In addition to quality products and dedicated customer service, strong consumer brands are an important elementof Dorel’s strategy. As examples, in North America, Dorel’s Schwinn product line carries one of the mostrecognized brand names in the sporting goods industry. Safety 1st is a highly regarded Dorel brand in theNorth American juvenile products market. In Europe, Bébé Confort is universally recognized and has superiorbrand awareness in France. Throughout Europe, the Maxi-Cosi brand has become synonymous with quality carseats. These brands, and the fact that Dorel has a wide range of other brand names, allows for product andprice differentiation within the same product categories. Product development is the final element of Dorel’s pastand future growth. Dorel has invested heavily in this area, focusing on innovation, quality, safety and speed tomarket with several design and product development centres. Over the past two years, Dorel has spent over$42 million on new product development.

Operating SegmentsJuvenile Products The Juvenile Products (“Juvenile”) segment operates in North America, Europe and Australia. Dorel JuvenileGroup (“DJG”) USA’s operations in the United States are headquartered in Columbus, Indiana with facilities inFoxboro, Massachusetts and Ontario, California. As well as being the headquarters, all North Americanmanufacturing and car seat engineering is based in Columbus. Products are conceived, designed and developedat the Foxboro location. Dorel Distribution Canada is located in Montreal, Quebec and sells to customersthroughout Canada. The principal brand names in North America are Cosco and Safety 1st. In addition, items inNorth America are sold under a licensing agreement with the well-recognized Eddie Bauer brand name. DorelEurope is headquartered in Cholet, France and major product design facilities are located both in Cholet andHelmond, Holland. Sales operations along with manufacturing and assembly facilities are located in France,Holland and Portugal. In addition, sales and/or distribution subsidiaries are located in Italy, Spain, the UnitedKingdom, Germany, Belgium and Switzerland. In Europe, products are marketed under the brand namesBébé Confort, Maxi-Cosi, Quinny, Monbébé, Babidéal, Baby Relax and Safety 1st. In Australia, Dorel is themajority shareholder in IGC Dorel (“IGC”) which manufactures and distributes its products under several localbrands, the most prominent of which are Bertini and Mother’s Choice. Going forward IGC is expected to carrymany of the brands that are popular in North America and Europe, broadening their sales range. In addition,many of Dorel’s divisions sell products to customers which are marketed under various house brand names.

The Juvenile segment manufactures and imports products such as infant car seats, strollers, high chairs, toddlerbeds, playpens, swings and infant health and safety aids. Dorel is among the three largest juvenile productscompanies in North America along with Graco (a part of the Newell Group of companies) and EvenfloCompany Inc. In Europe, Dorel is also one of the largest juvenile products companies, competing with companiessuch as Britax, Peg Perego, Chicco, Bugaboo, Jane and Graco, as well as several smaller companies. Within itsprincipal categories, Dorel’s combined juvenile operations make it the largest juvenile products company in the world.

In North America, the majority of juvenile sales are made to mass merchants, department stores andhardware/home centres, where consumers’ priorities are safety and quality at reasonable prices. Therefore salesto this channel are focused on entry level to mid-price point products. Using innovative product designs, higher-endprice points are also being serviced by these customers, representing additional sales opportunities for thesegment. In Europe, Dorel sells products across all price points from entry-level to high-end juvenile products.However, with its well recognized brand names and superior product quality, the majority of European sales aremade to major European juvenile product chains along with boutiques and smaller stores. In Australia, sales aremade to both large retailers and specialist stores. In 2007, this segment accounted for 53 % of Dorel’s revenues.


Recreational/LeisureThis segment is the Pacific Cycle division and is based in Madison, Wisconsin with U.S. distribution centers inCalifornia and Illinois, and global distribution partners in several markets around the world. Pacific Cycle is theleading supplier of bicycles in North America and an expert in the design, marketing and distribution of highquality, branded bicycles. Pacific has extended this expertise to other recreational products such as swing sets,motor scooters, jogging strollers, ride-on toys and other products within the outdoor recreation category.Best known for its Schwinn, Mongoose and GT bicycle brands, the Company also markets products under theRoadmaster, InStep, Pacific, Schwinn Motor Scooters, PlaySafe, Powerlite and Murray labels. Pacific Cyclecombines these well-known brands with long-established, efficient Asian sourcing. Pacific was one of the first to sourcesuch product from Asia and today industry production of this range of products has shifted almost entirely overseas.

Pacific Cycle in the U.S. participates in the $75 billion recreational products industry comprised of sports andfitness equipment, footwear, apparel, and recreational transport items including bicycles, pleasure boats andRVs. Within the recreational products market, the U.S. bicycle industry accounts for an estimated $5.5 billion inretail sales annually, of which approximately $2.3 billion represents bicycles while the remainder representsparts and accessories. Over the past several years, the overall U.S. bicycle market has been stable despitevariations such as the rise in popularity of mountain bikes in the late 1990s and the spike in road bikes sales in theearly 2000s. During this period the mass merchant channel has captured a greater share of the market. Purchasingpatterns are generally influenced by economic conditions, weather and seasonality. Principal competitors include Huffy,Dynacraft, Trek, Giant, Specialized and Raleigh.

Distribution of its brands in the U.S. is enabled through its strong relationships with high volume retailers,particularly in the mass merchant channel. Pacific Cycle has garnered an industry-leading share of total U.S.bicycle sales by capitalizing on the continued growth of this sales channel. Pacific’s brand portfolio enables it toserve virtually all consumer demographics, price categories and bicycling styles. Additionally, Pacific licenses itsbrand names on bicycles internationally, which is an important revenue stream for the Company. In the UnitedStates, Pacific’s brands are licensed for use on other products such as clothing and bike accessories. In 2007, theRecreational/Leisure segment accounted for 21% of Dorel’s revenues.

As discussed, subsequent to year-end the Cannondale Bicycle Corporation (“Cannondale”) was acquired.Headquartered in Bethel, Connecticut and with facilities in five other countries, the total value of the all-cashtransaction will be $190 to $200 million, subject to Cannondale’s earnings results for the year ending June 30, 2008.In order to clearly delineate the business between mass merchant customers and the Independent Bike Dealer(“IBD”) network of smaller bicycle stores, the Company’s Recreational/Leisure segment is being split into twodistinct operating divisions. The IBD retail channel will be serviced by the newly created Cannondale SportsGroup, which will focus exclusively on this category with the premium-oriented brands Cannondale, Sugoi, GTand others. Pacific Cycle will remain a stand-alone division with an exclusive focus on mass merchant customers.

Home FurnishingsThe Home Furnishings segment consists of Ameriwood Industries (“Ameriwood”), as well as Cosco Home & Office(“Cosco”), Dorel Home Products (“DHP”) and Dorel Asia. Ameriwood specializes in ready-to-assemble (RTA)furniture, both manufactured and imported, and is headquartered in Wright City, Missouri. Significant manufacturingand distribution facilities are located in Tiffin, Ohio and Cornwall, Ontario. Brand names used by Ameriwoodare Ameriwood, Ridgewood, Charleswood, Altra, Carina and SystemBuild. Cosco is located in Columbus,Indiana and the majority of its sales are of metal folding furniture, step stools and ladders. In addition to sellingunder its own brand, Cosco has a licensing agreement with Samsonite to sell to distributors within thecommercial office equipment market. Cosco also has a small home healthcare business, selling products underthe Cosco Ability Care Essentials and Adepta brand names. DHP sells both manufactured and imported futonsand Dorel Asia specializes in sourcing finished goods from the Orient for sale in North America.


Over the past several years, in many of the product categories within the Home Furnishings and furnitureindustries, there has been a shift from domestic production to imported product. Dorel has also followed this trendand today the Company’s home furnishings offerings are often sourced from overseas. RTA furniture is manufacturedand packaged as component parts and is assembled by the consumer and by its nature, is a reasonably pricedalternative to traditional wooden furniture. Many RTA wood furniture items are still manufactured in North Americaas the manufacturing process is machine intensive and avoids the cost of container freight.

Home furnishings are sold mainly to mass merchants, office superstores and hardware/home centres. Dorelbelieves it is now the second largest producer of RTA furniture in North America. The Company’s principal RTAcompetitor is Sauder Woodworking, as during the year two traditional competitors, Bush and O’Sullivan eitherceased sales of RTA furniture or closed entirely. Besides Sauder, the Home Furnishings industry segment in whichDorel competes is characterized by a large number of smaller competitors. As such, there is little market shareinformation available that would help determine the Company’s size or performance in relation to thesecompetitors. In 2007, this segment accounted for 26% of Dorel’s revenues.

Significant Events in 2007On February 28, 2007, the Company acquired a 55% interest in Australian company IGC (Australia) Pty Ltd(“IGC”). Operating as In Good Care, IGC is a manufacturer and distributor of juvenile products in Australia andNew Zealand. The Company paid cash consideration of $2.7 (AUD $3.4) million in return for the 55%controlling interest and refinanced IGC’s debt in the amount of $7.4 (AUD$9.4) million through its existing creditfacilities. The acquisition was recorded under the purchase method of accounting with the results of operations ofthe acquired business being included in the accompanying consolidated financial statements since the date ofacquisition. It now operates as IGC Dorel Pty Ltd.

On March 7, 2007 the Company announced its intention to voluntarily delist its Class B Subordinate VotingShares (the “Class B Shares”) from the NASDAQ Global Market. The Company filed a notification of removalfrom listing on the NASDAQ Global Market on Form 25 with the U.S. Securities and Exchange Commission (the“SEC”) on March 19, 2007. The withdrawal of the Class B Shares from listing was effective 10 days afterthe filing of this notice. Accordingly, the Class B Shares were suspended from trading on the NASDAQ Global Marketas of market open on March 19, 2007 and the Class B Shares were delisted from the NASDAQ Global Marketon March 29, 2007.

With the delisting of the Class B Shares from the NASDAQ Global Market, the Company continues to file orfurnish reports with the SEC. However, the Company intends, if permitted under the rules of the SEC, to terminatethe registration of the Shares with the SEC. The delisting of the Shares from the NASDAQ Global Market has notaffected the listing of the Class B Shares on the Toronto Stock Exchange and the Class B Shares have continued totrade on the Toronto Stock Exchange after the NASDAQ Global Market delisting became effective. This de-registrationis expected to occur on March 31, 2008.

For the first time in its history, on March 12, 2007, the Board of Directors declared a quarterly dividend of twelveand one half cents (US$0.125) per share on the Class A Multiple Voting Shares, Class B Subordinate VotingShares and Deferred Share Units of the company. This dividend was the first of an ongoing quarterly dividendpolicy paying US$0.50 per share per annum. As this policy began during the year, a total of three dividendswere paid in 2007, totaling $12.5 million.


In May of 2007 it was announced that the majority of manufacturing operations at the Company’s Dowagiac,Michigan RTA furniture manufacturing facility would be suspended. As sourcing from overseas continues to grow inimportance, the production capacity required to support the market place necessitated the suspension of operationsthere. Therefore as of July 31, 2007 approximately 170 of the 215 member workforce located there were affected. As aresult of the closure, the Company now produces domestic RTA product at its Tiffin, Ohio and Cornwall, Ontario plants.

Operating Results

Operating results in both 2007 and 2006 include costs related to the closure of production facilities necessitatedby a shift of domestic production to overseas suppliers. Details of these closures are as follows:

The closure of the Company’s Dowagiac, Michigan RTA furniture manufacturing facility in 2007 followed asimilar closure in 2005 of the Company’s Wright City, Missouri facilities. Both closures were necessitated byexcess capacity caused by a strategic shift away from exclusive domestic production to a combination ofNorth American production and imported items. As such, results for 2007 and 2006 include the followingamounts pertaining to these closures:

2007 2006(‘000) (‘000)

Building and equipment write-downs $ 5,727 $ –Employee severance and termination benefits 613 –Contract termination costs 534 –Other associated costs 60 –

Recorded as Restructuring costs 6,934 –Move of inventory, equipment and other expenses (in Cost of sales) 130 831Inventory markdowns (in Cost of sales) 3,877 (91)

Total $ 10,941 $ 740

In the fourth quarter of 2006, Dorel Europe initiated restructuring activities affecting the Juvenile Segment.Significant operational changes related to the production facilities in Telgate, Italy and Cholet, France are beingimplemented. These restructuring initiatives are expected to be completed by 2008 and result in cumulativerestructuring charges now expected to total approximately $14.7 million. The Company recorded $8.2 millionin charges for 2007 and $4.0 million in charges for 2006, consisting of the following:

2007 2006(‘000) (‘000)

Employee severance and termination benefits $ 6,887 $ 2,871Building, machinery and equipment write-downs 1,052 1,286Net curtailment losses (gains) on defined benefit pension plans 264 (486)Curtailment gain on compensation liabilities (318) –Gains on sale of machinery & equipment (432) –Other associated costs 122 –

Recorded as restructuring costs 7,575 3,671Inventory markdowns (in Cost of sales) 668 329

Total $ 8,243 $ 4,000


As a result of these restructuring costs incurred in both 2007 and 2006, the Company is including in this MD&Athe following non-GAAP financial measures; “adjusted gross margin”, “adjusted earnings from operations”,“adjusted pre-tax income”, “adjusted net income” and “adjusted net income per diluted share”. The Companybelieves this results in a more meaningful comparison of its core business performance between the periodspresented. These non-GAAP financial measures do not have a standardized meaning prescribed by GAAP andtherefore are unlikely to be comparable to similar measures presented by other issuers. Contained within thisMD&A are reconciliations of these non-GAAP financial measures to the most directly comparable financialmeasures calculated in accordance with GAAP:

Following is a selected summary of Dorel’s operating results on an annual and quarterly basis.

Selected Financial Information (all tabular figures are in thousands except per share amounts)

Operating Results for the Years ended December 30:2007 2006 2005

% of % of % of$ revenues $ revenues $ revenues

Revenues $ 1,813,672 100.0% $1,771,168 100.0% $1,760,865 100.0%Net income $ 87,492 4.8% $ 88,865 5.0% $ 91,322 5.2%Cash dividends declared per share $ 0.375 NIL NILEarnings per share:

Basic $ 2.63 $ 2.70 $ 2.78 Diluted $ 2.63 $ 2.70 $ 2.77

Amount of restructuring costs included in the year based on diluted earnings per share $ 0.38 $ 0.10 $ 0.19

Operating Results for the Quarters Ended31-Mar-07 30-Jun-07 30-Sep-07 30-Dec-07

Revenues $ 455,669 $ 459,035 $ 440,115 $ 458,853Net income $ 27,939 $ 10,845 $ 26,360 $ 22,348Earnings per share:

Basic $ 0.85 $ 0.32 $ 0.79 $ 0.67Diluted $ 0.85 $ 0.32 $ 0.79 $ 0.67

Amount of restructuring costs included in the quarter based on diluted earnings per share $ 0.04 $ 0.27 $ 0.02 $ 0.05

Operating Results for the Quarters Ended31-Mar-06 30-Jun-06 30-Sep-06 30-Dec-06

Revenues $ 451,024 $ 435,914 $ 436,300 $ 447,930 Net income $ 24,181 $ 17,936 $ 25,073 $ 21,675 Earnings per share:

Basic $ 0.74 $ 0.55 $ 0.76 $ 0.66 Diluted $ 0.74 $ 0.55 $ 0.76 $ 0.66

Amount of restructuring costs included in thequarter based on diluted earnings per share $ 0.01 $ 0.00 $ 0.00 $ 0.08

2007

2006


0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

SeasonalityThough operating segments within Dorel may vary in their seasonality, for the Company as a whole, variationsbetween quarters are not significant as illustrated below.

Income Statement – Overview2007 versus 2006Tabular Summaries Variations in revenue across the Company segments:

Fourth Quarter Year

2007 2006 Increase (decrease) 2007 2006 Increase (decrease)$ % $ %

Juvenile $ 247,983 $ 225,698 $ 22,285 9.9% $ 963,572 $ 888,534 $ 75,038 8.4%Recreational /

Leisure 85,836 76,945 8,891 11.6% 374,783 340,696 34,087 10.0%Home

Furnishings 125,034 145,287 (20,253) (13.9%) 475,317 541,938 (66,621) (12.3%)

Total Revenues $ 458,853 $ 447,930 $ 10,923 2.4% $1,813,672 $1,771,168 $ 42,504 2.4%

Principal changes in earnings:4th Qtr Year-to-Date

Earnings from operations by Segment:Juvenile increase - excluding restructuring costs $ 4,779 $ 18,414 Recreational / Leisure (decrease) increase (103) 6,960Home Furnishings increase (decrease)

- excluding restructuring costs 1,775 (3,755)Restructuring costs decrease (increase) 1,517 (14,444)

Total earnings from operations increase 7,968 7,175Lower interest costs 1,815 6,433Variation in income taxes (5,660) (7,727)Other (3,450) (7,254)

Total increase (decrease) in net income $ 673 $ (1,373)

Note that detailed analyses of segmented annual results are presented within the discussions that follow this overview.

Home Furnishings Juvenile Recreational / Leisure

Revenues by Quarter by Segment

QTR1 QTR4QTR3QTR2 QTR1 QTR4QTR3QTR2 QTR1 QTR4QTR3QTR22005 20072006

Total Revenues

Quarter


2007 versus 2006Non-GAAP Reconciliation tables

Results for the year ended December 30, 2007Adjusted,

Restructuring ExcludingAs reported Costs Costs

TOTAL REVENUE $ 1,813,672 $ – $ 1,813,672

EXPENSESCost of sales 1,375,418 (4,675) 1,370,743

Selling, general and administrative expenses 244,798 – 244,798Depreciation and amortization 39,844 – 39,844Research and development costs 9,009 – 9,009Restructuring costs 14,509 (14,509) –Interest on long-term debt 23,782 – 23,782Other interest (316) – (316)

1,707,044 (19,184) 1,687,860

Income before income taxes 106,628 19,184 125,812Income taxes 19,136 6,584 25,720

NET INCOME $ 87,492 $ 12,600 $ 100,092EARNINGS PER SHARE

Basic $ 2.63 $ 0.38 $ 3.01Diluted $ 2.63 $ 0.38 $ 3.01

SHARES OUTSTANDINGBasic - weighted average 33,285,990 33,285,990 33,285,990Diluted - weighted average 33,293,248 33,293,248 33,293,248

Results for the year ended December 30, 2006Adjusted,


TOTAL REVENUE $ 1,771,168 $ – $ 1,771,168

EXPENSESCost of sales 1,363,421 (1,069) 1,362,352 Selling, general and administrative expenses 228,765 – 228,765 Depreciation and amortization 36,969 – 36,969 Research and development costs 8,169 – 8,169 Restructuring costs 3,671 (3,671) – Interest on long-term debt 29,594 – 29,594 Other interest 305 – 305

1,670,894 (4,740) 1,666,154

Income before income taxes 100,274 4,740 105,014Income taxes 11,409 1,580 12,989

NET INCOME $ 88,865 $ 3,160 $ 92,025 EARNINGS PER SHARE

Basic $ 2.70 $ 0.10 $ 2.80 Diluted $ 2.70 $ 0.10 $ 2.80

SHARES OUTSTANDINGBasic - weighted average 32,860,375 32,860,375 32,860,375 Diluted - weighted average 32,860,760 32,860,760 32,860,760

2007

2006


For fiscal 2007, Dorel recorded revenues of $1,814 million, an increase of 2.4% over 2006. Increases inrevenues occurred in the Juvenile segment and Recreational / Leisure segment which more than offset declines inHome Furnishings. The Juvenile segment is the only segment in which foreign exchange rate variations in both theEuro and the Canadian dollar versus the U.S. dollar can significantly affect revenue figures. In 2007, the U.S. dollarwas significantly weaker versus both the Euro and Canadian dollar and as such, reported revenues werepositively impacted by $42.3 million. Additionally, 2007 includes the results of IGC Dorel, the Australiancompany that was acquired during the year, adding another $26.0 million to revenues. Therefore excludingthese two factors, organic sales actually declined by 1.5%.

Gross margins for the year were 24.2%, an improvement of 120 basis points from 23.0% last year. While HomeFurnishings margins remained consistent with the prior year, both Juvenile and Recreational / Leisure segmentmargins improved over 2006. The Juvenile improvement was due to slightly higher margins in Europe whereasthe Recreational / Leisure segment margins improved as 2006 included a $3.5 million reserve taken againstspecific bicycle inventory. Note that gross margins were maintained despite an environment of rising rawmaterial costs in North America, Europe and Asia.

Selling, general and administrative expenses increased from 2006 levels by $16.0 million to $244.8 million in 2007from $228.8 million in 2006. The major reasons for the increase were higher costs in Europe, as a result ofcontinued sales growth and the impact of the stronger Euro on expenses. Other increases were due to the inclusion ofIGC Dorel in 2007, higher stock based compensation expenses and higher legal fees. Offsetting these increases was adecline in total product liability costs which were $18.9 million in 2007 versus $28.7 million in 2006.

Total interest costs in 2007 were $23.5 million versus $29.9 million in 2006. The Company’s average interestrate on its long-term borrowings and revolving facilities in 2007 was approximately 6.4%, consistent with theaverage of 6.7% in 2006. Income before income taxes was $106.6 million in 2007 versus $100.3 million in2006. Adjusted income before taxes and restructuring costs was $125.8 million in 2007 versus $105.0 million,an increase of $20.8 million or 19.8%. As a percentage of revenue, this represents adjusted pre-tax income of6.9% in 2007 and 5.9% in 2006.

As a multi-national company, Dorel is resident in numerous countries and therefore subject to different tax rates inthose various tax jurisdictions and by the application of income tax treaties between various countries. As such,significant variations from year to year in the Company’s combined tax rate can occur. In 2007 the Company’seffective tax rate was 17.9% as compared to 11.4% in 2006. The reasons for the increase in the effective taxrate in 2007 were twofold. First, a greater proportion of earnings occurred in higher tax rate jurisdictions in 2007versus 2006 and second, unlike in 2006, the Company was unable to recognize certain tax losses.

The Company’s statutory tax rate is 33%. The variation from 33% to 17.9% can be explained as follows:

$ %

PROVISION FOR INCOME TAXES $ 35,187 33.0%ADD (DEDUCT) EFFECT OF: Difference in effective tax

rates of foreign subsidiaries (20,247) (19.0%)Recovery of income taxes arising from

the use of unrecorded tax benefits (3,362) (3.2%)Change in valuation allowance 3,806 3.6%Non-deductible items 2,227 2.1%Change in future income taxes

resulting from changes in tax rates (580) (0.5%)Effect of foreign exchange 518 0.5%Other – net 1,587 1.4%

ACTUAL PROVISION FOR INCOME TAXES $ 19,136 17.9%


Net income for the full year amounted to $87.5 million or $2.63 per share fully diluted, compared to 2006 netincome of $88.9 million or $2.70 per diluted share. Excluding restructuring costs adjusted net income for 2007was $100.1 million, or $3.01 per diluted share and for 2006 was $92.0 million, or $2.80 per diluted share.

Fourth quarter 2007 versus 2006 Results for the fourth quarter ended December 30, 2007Adjusted,


TOTAL REVENUE $ 458,853 $ – $ 458,853

EXPENSESCost of sales 348,236 (753) 347,483Selling, general and administrative expenses 62,035 – 62,035Depreciation and amortization 10,635 – 10,635Research and development costs 2,581 – 2,581Restructuring costs 1,753 (1,753) – Interest on long-term debt 5,106 – 5,106Other interest (79) – (79)

430,267 (2,506) 427,761

Income before income taxes 28,586 2,506 31,092Income taxes 6,238 859 7,097

NET INCOME $ 22,348 $ 1,647 $ 23,995EARNINGS PER SHARE

Basic $ 0.67 $ 0.05 $ 0.72Diluted $ 0.67 $ 0.05 $ 0.72

SHARES OUTSTANDINGBasic - weighted average 33,397,192 33,397,192 33,397,192Diluted - weighted average 33,397,773 33,397,773 33,397,773

Results for the fourth quarter ended December 30, 2006Adjusted,


TOTAL REVENUE $ 447,930 $ – $ 447,930

EXPENSESCost of sales 341,223 (353) 340,870 Selling, general and administrative expenses 62,614 – 62,614Depreciation and amortization 9,868 – 9,868Research and development costs 1,459 – 1,459Restructuring costs 3,671 (3,671) – Interest on long-term debt 6,771 – 6,771Other interest 71 – 71

425,677 (4,024) 421,653

Income before income taxes 22,253 4,024 26,277Income taxes 578 1,329 1,907

NET INCOME $ 21,675 $ 2,695 $ 24,370 EARNINGS PER SHARE

Basic $ 0.66 $ 0.08 $ 0.74 Diluted $ 0.66 $ 0.08 $ 0.74

SHARES OUTSTANDINGBasic - weighted average 32,861,107 32,861,107 32,861,107 Diluted - weighted average 32,861,757 32,861,757 32,861,757

2007

2006


Revenues for the fourth quarter were $458.9 million compared to $447.9 million a year ago, an increase of2.4%. As for the full year, increases in revenues in the Juvenile and Recreational / Leisure segments more thanoffset declines in Home Furnishings. Net income for the fourth quarter was $22.3 million, an increase from$21.7 million in 2006. Earnings per share for the quarter were $0.67 fully diluted, compared to $0.66 pershare in the fourth quarter the previous year. The fourth quarter of 2007 includes $2.5 million of restructuringcosts whereas 2006 included $4.0 million of similar costs. Excluding these restructuring costs, adjusted netincome was $24.0 million in 2007 versus $24.4 million in 2006. Adjusted diluted earnings per share were$0.72 in 2007, compared to $0.74 in 2006.

Revenues in the fourth quarter within the Juvenile segment were up in 2007, increasing by 9.9% over 2006. Thisincrease was in Europe where organic sales growth was just over 10%. In U.S. dollars this increase was 24.3%due to the stronger Euro and British Pound in 2007. These strong gains compensated for a decline in North Americanrevenues. Lower sales volumes and a slightly less favourable product mix in North America caused gross marginsto decrease slightly from 30.6% in 2006 to 29.5% in 2007. Selling, general and administrative (“S, G & A”)costs decreased slightly in the quarter to $35.0 million from $36.8 million in 2006. This decline was due tolower product liability costs in the quarter which offset other increases, principally in Europe, which were due tohigher sales activity and the impact of the stronger Euro. The quarter also included $2.2 million of restructuringcosts incurred in Europe. Therefore overall earnings from operations increased by 34.2% over 2006 due to thecombined greater sales volumes along with a decline in S, G & A costs.

Recreational / Leisure segment revenues in the fourth quarter of 2007 increased by 11.6%. This increase wasconsistent with the increases experienced throughout the year as this segment recovered from a disappointing2006. The increase was in both the mass market and IBD channels, with the majority coming from several keymass customers. The increased volume included the sale of certain lower margin product, having the impact ofreducing margins in the quarter by 160 basis points from 19.7% to 18.1%. S, G & A costs in 2007 as apercentage of revenues declined from 11.6% to 10.9% in 2007. In real dollars this represents an increase of$0.4 million. As a result the segment as a whole posted earnings consistent with 2006 at $5.8 million in 2007versus $5.9 million in 2006.

Home Furnishing revenues continued their decline in 2007 and for the quarter decreased by 13.9% from 2006levels. This decline was experienced at the Ameriwood and Cosco Home & Office divisions. The sales levels atAmeriwood were consistent with those throughout the year whereas at Cosco, the decrease was due to the factthat the fourth quarter of 2006 was particularly strong driven by success with its ladder program that year.Despite the lower sales volumes, gross margins for the segment increased by 200 basis points to 17.5% from15.5% in 2006. As a result, gross margin dollars only declined by $0.7 million. The segments earningsincreased by 16.7% in 2007, from $8.9 million to $10.4 million.

Home Furnishing S, G & A costs in the fourth quarter declined by $2.7 million from 2006 levels. The mainreason is that the fourth quarter of 2006 included a charge of $4.5 million for anti-dumping duties imposed uponthe Company by the United States Department of Commerce (“DOC”). These duties pertained to certain metalfurniture imported from China into the United States that was subject to anti-dumping duties during the periodbetween December 3, 2001 through May 31, 2003. As such, the Company recorded an expense of $4.5 millionrelated to the duty on such imports. In relation to this charge, the Company has a pending claim against a majorinternational law firm that relates to a breach of professional duty by the law firm for its failure to timely file a requestfor an administrative review by the DOC of the duties imposed. As of December 30, 2007 this claim is still outstanding.

Interest costs were lower in 2007 by $1.8 million as a result of lower average borrowings. The Company’sincome tax expense was $6.2 million in the fourth quarter of 2007 as compared to $0.6 million in 2006. The2007 tax rate was 21.8% which was consistent with the annual rate. In 2006 that quarter’s earnings weregenerated in lower tax rate jurisdictions and certain higher tax rate jurisdictions incurred losses. As such the2006 rate was unusually low at 2.6% of pre-tax income.


Segment Results

Effective January 2007, the Company’s electric ride-on toy business, previously sold and serviced by DJG USA inthe Juvenile segment, has been transferred to Pacific Cycle in the Recreational / Leisure segment. To allow forbetter year-over-year comparability, all prior year comparative segmented revenue and earnings figures have beenre-stated, adding these sales and related earnings to the Recreational / Leisure segment and removing them from theJuvenile segment. As such, for the fourth quarter, revenues of $1.8 million and earnings of $0.2 million have beenre-classified. For the full year figures, revenues of $12.3 million and earnings of $1.6 million have been re-classified.

JuvenileJuvenile 2007 2006 Change

$ (‘000) % of sales $ (‘000) % of sales $ (‘000) %

Revenues $ 963,572 100.0% $ 888,534 100.0% $ 75,038 8.4%Gross margin 295,324 30.6% 263,502 29.7% 31,822 12.1%Selling, general and

administrative expenses 143,043 14.8% 132,651 14.9% 10,392 7.8%Depreciation and amortization 32,171 3.3% 29,849 3.4% 2,322 7.8%Research and development 6,364 0.7% 5,331 0.6% 1,033 19.4%Restructuring costs 7,575 0.8% 3,671 0.4% 3,904 106.4%

Earnings from operations $ 106,171 11.0% $ 92,000 10.4% $ 14,171 15.4%

Juvenile SegmentReconciliation of non-GAAP financial measures Year ended December 30, 2007

Adjusted,Restructuring Excluding

As reported Costs Costs

Revenues $ 963,572 $ – $ 963,572Cost of sales 668,248 (668) 667,580

Gross margin 295,324 668 295,992

Gross margin % 30.6% 30.7%Selling, general and administrative expenses 143,043 – 143,043Depreciation and amortization 32,171 – 32,171Research and development 6,364 – 6,364Restructuring costs 7,575 (7,575) –

Earnings from operations $ 106,171 $ 8,243 $ 114,414

Juvenile SegmentReconciliation of non-GAAP financial measures Year ended December 30, 2006

Adjusted,Restructuring Excluding

As reported Costs Costs

Revenues $ 888,534 $ – $ 888,534 Cost of sales 625,032 (329) 624,703

Gross margin 263,502 329 263,831

Gross margin % 29.7% 29.7%Selling, general and administrative expenses 132,651 – 132,651Depreciation and amortization 29,849 – 29,849Research and development 5,331 – 5,331Restructuring costs 3,671 (3,671) –


2007

2006


The Company’s Juvenile segment had the most successful year in its history as revenues reached almost $1 billion,finishing the year at $963.6 million. For the first time, earnings from operations exceeded $100 million and as apercentage of revenues were 11.0%. Restructuring costs in the Juvenile segment incurred as a result of the closureof facilities in Italy and France were $8.2 million in 2007 and $4.0 million in 2006. Excluding these restructuringcosts, earnings in 2007 reached $114.4 million or 11.9% of revenues. The increase in revenues was driven bysuccess in Europe where organic sales growth was 10.0%. Upon conversion to U.S. dollars this increase was20.1% due to the greater strength of the Euro and the British Pound against the U.S. dollar. The sales growth inEurope was due to continued gains in car seats and strollers as the investments made in new product developmentproved successful. The majority of these increases were in the United Kingdom, Germany as well as several easternEuropean countries as this relatively new market continues to be penetrated. In North America, sales declined from2006 levels as new product introductions in 2007 were not as well received by retailers as in the prior year.

Gross margins for the segment were 30.6% in 2007 as compared to 29.7% in 2006, due principally to animprovement in Europe. Selling, general and administrative costs increased over 2006 levels from $132.7 million to$143.0 million. The increase was due to higher costs in Europe due to greater sales activity and the higher rateof exchange in 2007, as well as the addition of the Australian business in the year. Offsetting these increaseswas a decline in product liability costs in the United States of $8.6 million. These costs totaled $16.6 million in 2007and $25.2 million in 2006. Depreciation and amortization expense also increased in 2007 by a total of $2.3 million.Of this increase, $1.0 million was due to foreign exchange with the balance due to the 2007 acquisition of IGCDorel and higher amortization of capitalized items due to increased spending on new product development.


Recreational / Leisure 2007 2006 Change$ (‘000) % of sales $ (‘000) % of sales $ (‘000) %

Revenues $ 374,783 100.0% $ 340,696 100.0% $ 34,087 10.0%Gross margin 72,948 19.5% 63,978 18.8% 8,970 14.0%Selling, general and

administrative expenses 38,260 10.2% 36,907 10.8% 1,353 3.7%Depreciation and amortization 1,736 0.5% 1,079 0.3% 657 60.9%

Earnings from operations $ 32,952 8.8% $ 25,992 7.7% $ 6,960 26.8%

Recreational / Leisure revenues increased 10.0% to $374.8 million in 2007 compared to $340.7 million a yearago. This increase was due to success in both the mass merchant and IBD sales channels as the segmentrecovered from a disappointing 2006. Additionally, sales were strong to certain warehouse club customers, arelatively new distribution channel for this segment. These increases came at both existing and new customersand were driven by bicycle sales, though other product lines continue to be explored and added in an attempt todiversify the sales of the segment.

Gross margins increased by 70 basis points in the year. However 2006 included a one-time $3.5 millioninventory write-down in that year’s second quarter, therefore margins were in fact consistent with the prior year.This write-down had the impact of lowering margins by 100 basis points accounting for the majority of theincrease in the current year. Selling, general and administrative expenses rose moderately from $36.9 million in 2006to $38.3 million in 2007. However as a percentage of revenue this represents a decrease of 60 basis points as salesvolume increases outpaced additional spending. These are the principal factors for the increase in earnings fromoperations from $26.0 million in 2006 to $33.0 million in 2007, an increase of $7.0 million or 26.8%.


Home Furnishings

Home Furnishings 2007 2006 Change$ (‘000) % of sales $ (‘000) % of sales $ (‘000) %

Revenues $ 475,317 100.0% $ 541,938 100.0% $ (66,621) (12.3%)Gross margin 69,982 14.7% 80,267 14.8% (10,285) (12.8%)Selling, general and

administrative expenses 37,358 7.9% 40,328 7.4% (2,970) (7.4%)Depreciation and amortization 5,848 1.2% 5,948 1.1% (100) (1.7%)Research and development 2,645 0.6% 2,838 0.5% (193) (6.8%)Restructuring costs 6,934 1.5% – 0.0% 6,934 –

Earnings from operations $ 17,197 3.5% $ 31,153 5.8% $ (13,956) (44.8%)

Home Furnishings SegmentReconciliation of non-GAAP financial measures

Year ended December 30, 2007Adjusted,


Revenues $ 475,317 $ – $ 475,317Cost of sales 405,335 (4,007) 401,328

Gross margin 69,982 4,007 73,989

Gross margin % 14.7% 15.6%Selling, general and administrative expenses 37,358 – 37,358Depreciation and amortization 5,848 – 5,848Research and development costs 2,645 – 2,645Restructuring costs 6,934 (6,934) –


Home Furnishings SegmentReconciliation of non-GAAP financial measures

Year ended December 30, 2006Adjusted,


Revenues $ 541,938 $ – $ 541,938 Cost of sales 461,671 (740) 460,931

Gross margin 80,267 740 81,007

Gross margin % 14.8% 14.9%Selling, general and administrative expenses 40,328 – 40,328 Depreciation and amortization 5,948 – 5,948Research and development costs 2,838 – 2,838Restructuring costs – – –

Earnings from operations $ 31,153 $ 740 $ 31,893

As announced in May of 2007, Ameriwood intended to suspend operations at its Dowagiac, Michigan RTAplant. This occurred in July and resulted in the Company recording a pre-tax restructuring charge of $10.9 million, ofwhich $4.0 million is grouped in cost of sales. Of the total amount, $9.6 million represents the write-down of building,equipment and inventory, a non-cash expense. The remaining $1.2 million is mainly for employee severance.

2007

2006


Home Furnishings revenues decreased by 12.3% to $475.3 from $541.9 million in 2006. Earnings fromoperations for the year were $17.2 million, a decline from $31.2 million the year before. Adjusted earnings fromoperations decreased 11.8% to $28.1 million from $31.9 million in 2006. In the second quarter of 2007, theCompany recorded an insurance recovery in the amount of $2.2 million. This amount was the final portion of aclaim settlement related to the Company’s business interruption insurance policy. The amount received was foradditional production costs incurred due to a lack of board supply following a mid-2006 fire at one of theCompany’s primary suppliers of particleboard.

The slowdown in the U.S. housing industry that began in this year’s second quarter continued to impact sales forthis segment. Of the year over year sales decline, the majority was in traditional furniture sold by the Ameriwoodand Dorel Asia divisions. Gross margins for the segment improved slightly over 2006 levels with gains atAmeriwood offsetting slight declines at Cosco Home & Office, Dorel Home Products and Dorel Asia. Grossmargins in 2007 remained consistent despite higher raw material costs and a stronger Canadian dollar whichlowers the earnings of the segment’s two Canadian factories which service mostly U.S. based customers.

Selling, general and administrative costs decreased by $2.9 million from $40.3 million in 2006 to $37.4 millionin 2007. As described earlier, this decrease was mostly due to 2006 including an amount of $4.5 million foranti-dumping duties imposed upon the Company by the United States Department of Commerce (“DOC”).In 2007, the Company continued to pursue a claim against a major international law firm in relation to this case,and as result 2007 includes an incremental amount of $2.9 million for legal fees pertaining to that claim.

Balance SheetSelected Balance Sheet Data as at December 30:

2007 2006 2005

Total assets $ 1,657,904 $ 1,627,406 $ 1,542,715

Long-term Financial Liabilities, excluding current portion:

Long-term debt $ 192,385 $ 375,135 $ 439,634 Other long-term liabilities, including balance of sale amounts $ 6,848 $ 7,719 $ 6,360

Certain of the Company’s working capital ratios are as follows:

As at December 30,2007 2006

Quick ratio 0.74 0.92Current ratio 1.63 1.98# of Days in receivables 57.9 58.8# of Days in inventory 85.0 86.6

The quick and current ratio declines are due to the classification of the Company’s $55.0 million Series “A”Senior Guaranteed Notes as current, as they are due in full in February 2008. The decrease in the number ofdays in inventory is a reflection of lower inventory levels in 2007 as inventory reduction programs were put inplace and successfully realized. The balance sheet values used in the days in receivables and inventory ratios aredone using quarterly average values so as to minimize the impact of unusual highs or lows at any one point intime. Net debt, defined as bank indebtedness, current and long-term debt, less cash, decreased by $122.2 millionin the year as cash flow generated by the Company was used to pay down debt. As of December 30, 2007,Dorel was compliant with all covenant requirements and expects to be so going forward.

There were no other significant changes to the financial position of the Company as at December 30, 2007.However, a substantial increase in the value of the Euro and British Pound versus the U.S. dollar has had theimpact of increasing certain balance sheet values. The Company’s major subsidiaries are considered to be


self-sustaining. As such, any foreign exchange fluctuations on conversion of non-U.S. functional currencysubsidiaries to the U.S. dollar are reflected in the increase in the Company’s Accumulated Other ComprehensiveIncome account, which is grouped in Shareholders’ Equity. This amount has increased from $63.9 million as atDecember 30, 2006 to $106.9 million as of December 30, 2007.

Also, the acquisition of IGC Dorel further distorts the comparison of the Company’s financial position as atDecember 30, 2007 versus 2006. For a more accurate interpretation of the Company’s change in financialposition, readers are asked to consult the Consolidated Statement of Cash Flow which does not include these twosources of variation when comparing the opening and closing periods. The Company’s $55.0 million Series “A”Senior Guaranteed Notes were due in full and paid in February 2008. Therefore, as at December 30, 2007, thisamount has been classified as current as opposed to long-term. This amount was paid from the Company’srevolving bank loan facilities.

Liquidity and Capital ResourcesCash Flow

Free cash flow, a non-GAAP financial measure, was $116.2 million in 2007 versus $83.4 million in 2006,detailed as follows:

2007 2006 Change

Cash flow from operations before changes in non-cash working capital: $ 142,858 $ 136,123 $ 6,735

Change in:Inventories 13,137 (39,752) 52,889 Accounts receivable 19,811 188 19,623 Accounts payable and other liabilities (23,707) 10,810 (34,517)Income taxes 15,367 (1,701) 17,068 Prepaid expenses (126) 1,053 (1,179)

Cash provided by operating activities 167,340 106,721 60,619 Plus (less):

Dividends paid (12,524) – (12,524)Additions to property, plant & equipment – net (22,269) (14,334) (7,935)Deferred development costs (14,470) (10,628) (3,842)Intangible assets (1,871) (2,034) 163Funds held by ceding insurer – 3,647 (3,647)

FREE CASHFLOW (1) $ 116,206 $ 83,372 $ 32,834

(1) “Free cash flow” is a non-GAAP financial measure and is defined as cash provided by operating activities less dividends paid, additionsto property, plant & equipment, deferred development costs and intangibles, plus or minus variations in funds held by ceding insurer.

During 2007, cash flow from operations, before changes in working capital, increased by $6.7 million. Afterchanges in non-cash working capital items, cash flow from operations increased by $60.6 million. The majorityof this improvement came from inventory reduction programs that were put in place in 2007. As a result the netchange from inventory alone was $52.9 million. The other variations in working capital balances, such asaccounts receivable, accounts payable and income taxes, were a function of timing as opposed to significantchanges in trends. Capital expenditures on property, plant and equipment, deferred development costs andintangible assets totalled $38.6 million in 2007, compared to $27.0 million in 2006. Note that the 2006 figureis net of proceeds of $4.2 million received in connection with the sale of certain of the Company’s Wright City,Missouri buildings, whereas proceeds on disposal of capital assets was an immaterial amount in 2007.Therefore the true increase in capital expenditure spending year over year was $7.4 million. The majority of thiswas in the area of new product development.


As of December 30, 2007, Dorel was compliant with all covenant requirements and expects to be so goingforward. During the year, the Company renegotiated the terms of its unsecured revolving credit facility. Thisfacility was extended to July 1, 2010 and provides for an annual one-year extension. The borrowing availabilityunder this facility decreased to $325 million from the availability as at December 30, 2006 of $425 million. Thecredit agreement was also amended to include an accordion feature allowing the Company to have access to anadditional $200 million on a revolving basis, if required. Subsequent to year end, with the acquisition ofCannondale, the Company used $150 million of this availability. The remaining $50 million under the accordionfeature remains available to the Company.

Contractual ObligationsThe following is a table of a summary of the contractual obligations of the Company as of December 30, 2007:

less than 1 - 3 4 - 5 After 5Contractual Obligations Total 1 year years years years

Long-term debt repayments $ 255,291 $ 62,906 $ 165,912 $ 26,473 $ –Interest payments (1) 33,760 12,970 17,866 2,924 – Net operating lease commitments 87,546 24,326 31,372 19,988 11,860Purchase obligations 22,902 17,236 5,666 – –Capital addition purchase commitments 6,121 6,121 – – –Minimum payments under licensing agreements 2,630 1,822 808 – –

Total contractual obligations $ 408,250 $ 125,381 $ 221,624 $ 49,385 $ 11,860

(1) Interest payments on revolving bank loans assume no debt reduction other than the balance due in full in July 2010 and are calculated usingthe interest rate in effect as at December 30, 2007. Interest payments on the Company’s notes are as specified in the related note agreements.

The Company does not have significant contractual commitments beyond those reflected in the consolidated balancesheet, the commitments in Note 18 to the Consolidated Financial Statements or those listed in the table above.

For purposes of this table, contractual obligations for the purchases of goods or services are defined asagreements that are enforceable and legally binding on the Company and that specify all significant terms,including: fixed or variable price provisions; and the approximate timing of the transaction. With the exceptionof those listed above, the Company does not have significant agreements for the purchase of raw materials orfinished goods specifying minimum quantities or set prices that exceed its short term expected requirements.Therefore, not included in the above table are Dorel’s outstanding purchase orders for raw materials, finishedgoods or other goods and services which are based on current needs and are fulfilled by our vendors onrelatively short timetables.

As new product development is vital to the continued success of Dorel, the Company must make capitalinvestments in research and development, moulds and other machinery, equipment and technology. It is expectedthat the Company will invest at least $25.0 million over the course of 2008 to meet its new product developmentand other growth objectives. The Company expects its existing operations to be able to generate sufficient cashflow to provide for this and other requirements as they arise throughout the year.


Over and above long-term debt in the contractual obligations table, included in the Company’s long-term liabilitiesare the following amounts:

Pension and post-retirement benefit obligations:As detailed in Note 15 of the Consolidated Financial Statements, this amount of $20.9 million pertains to theCompany’s pension and post-retirement benefit plans. Contributions expected to be made and benefits expected to bepaid under this plan in 2008 approximate $2.5 million.

Other long-term liabilities consist of:Government mandated employee savings plans in Europe,

the majority of which are due after five years $ 5,420A restructuring provision in connection with Dorel Europe

expected to be disbursed over the next two years 147Other liabilities due in more than one year 1,281

$ 6,848

Off-Balance Sheet ArrangementsIn addition to the contractual obligations listed above, the Company has certain off-balance sheet arrangementsand commitments that have financial implications, specifically contingent liabilities, guarantees, and commercialand standby letters of credit. The Company’s off-balance sheet arrangements are described in Notes 18 and 19 tothe Consolidated Financial Statements for the year ended December 30, 2007.

Requests for providing commitments to extend credit and financial guarantees are reviewed and approved bysenior management. Management regularly reviews all outstanding commitments, letters of credit and financialguarantees and the result of these reviews are considered in assessing the adequacy of Dorel’s reserve forpossible credit and guarantee losses.

Derivative Financial InstrumentsAs a result of its global operating activities, Dorel is subject to various market risks relating primarily to foreigncurrency exchange rate risk. In order to reduce or eliminate the associated risks, the Company uses variousderivative financial instruments such as options, futures and forward contracts to hedge against adverse fluctuationsin currency. The Company’s main source of foreign currency exchange rate risk resides in sales and purchasesof goods denominated in currencies other than the functional currency of each of Dorel’s subsidiaries. In fact, theCompany’s financial debt mainly consists of notes issued exclusively in U.S. dollars, for which no foreign currencyhedging is required. Short-term credit lines and overdrafts commonly used by Dorel’s subsidiaries are in the currencyof the borrowing entity and therefore carry no exchange-rate risk. Inter-company loans/borrowings are economicallyhedged as appropriate, whenever they present a net exposure to exchange-rate risk.

As such, derivative financial instruments are used as a method for meeting the risk reduction objectives of theCompany by generating offsetting cash flows related to the underlying position in respect of amount and timing offorecasted transactions. Dorel does not hold or use derivative financial instruments for trading or speculative purposes.

The Company does not apply hedge accounting to foreign exchange contracts. The fair values, average ratesand notional amounts of derivatives and the fair values and carrying amounts of financial instruments aredisclosed in Note 14 of the Consolidated Financial Statements. The Company recorded net foreign exchangegains in the amount of $0.7 million in 2007 and $0.5 million in 2006.


Critical Accounting Estimates The Consolidated Financial Statements have been prepared in accordance with Canadian GAAP. Thepreparation of these financial statements requires estimates and judgments that affect the reported amounts ofassets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. A completelist of all relevant accounting policies is listed in Note 2 to the Consolidated Financial Statements.

The Company believes the following are the most critical accounting policies that affect Dorel’s results aspresented herein and that would have the most material effect on the financial statements should these policieschange or be applied in a different manner:

• Goodwill and certain other indefinite life intangible assets: Goodwill and certain other intangible assetshave indefinite useful lives and as such, are not amortized to income. Instead, the Company mustdetermine at least once annually whether the fair values of these assets are less than their carrying value,thus indicating impairment. The Company uses either the discounted cash flows valuation method orexternal valuations based on a market approach and makes assumptions and estimates in a number of areas,including future cash flows, appropriate multiples of earnings of comparable companies and discount rates.

• Product liability: The Company is insured for product liability by the use of both traditional and self-fundedinsurance to mitigate its product liability exposure. The estimated product liability exposure is calculated byan independent actuarial firm based on historical sales volumes, past claims history and management andactuarial assumptions. The estimated exposure includes incidents that have occurred, as well as incidentsanticipated to occur on units sold prior to December 30, 2007. Significant assumptions used in theactuarial model include management’s estimates for pending claims, product life cycle, discount rates, andthe frequency and severity of product incidents.

• Pension plans and post retirement benefits: The costs of pension and other post-retirement benefits arecalculated based on assumptions determined by management, with the assistance of independent actuarialfirms and consultants. These assumptions include the long-term rate of return on pension assets, discountrates for pension and other post-retirement benefit obligations, expected service period, salary increases,retirement ages of employees and health care cost trend rates.

• Allowances for sales returns and other customer programs: At the time revenue is recognized certain provisionsmay also be recorded, including returns and allowances, which involve estimates based on current discussionswith applicable customers, historical experience with a particular customer and/or product, and other relevantfactors. Historical sales returns, allowances, write-offs, changes in our internal credit policies and customerconcentrations are used when evaluating the adequacy of our allowance for sales returns. In addition, theCompany records estimated reductions to revenue for customer programs and incentive offerings, includingspecial pricing agreements, promotions, advertising allowances and other volume-based incentives. Historicalsales data, agreements, customer vendor agreements, changes in internal credit policies and customerconcentrations are analyzed when evaluating the adequacy of our allowances.


Future Accounting ChangesCapital Disclosures and Financial Instruments – Disclosures and PresentationIn December 2006, the Canadian Institute of Chartered Accountants (“CICA”) issued three new accountingstandards: Section 1535, “Capital Disclosures”, Section 3862, “Financial Instruments – Disclosure”, andSection 3863, “Financial Instruments – Presentation”. These Sections are effective for fiscal years beginning onor after October 1, 2007. The Company will apply these new standards in the first quarter of 2008. These newstandards relate to disclosure only and will not impact the financial results of the Company.

Section 1535 establishes standards for disclosing information about an entity’s capital and how it is managed. Itdescribes the disclosure requirements of the entity’s objectives, policies and processes for managing capital, thequantitative data relating to what the entity regards as capital, whether the entity has complied with externalcapital requirements to which it is subject, and, if it has not complied, the consequences of such non-compliance.

Section 3862 requires entities to provide disclosures that enable users to evaluate: (1) the significance of financialinstruments for the Company’s financial position and performance and (2) the nature and extent of risk arising fromfinancial instruments to which the Company is exposed and how it manages those risks. Section 3863 carries forwardthe presentation requirement of the existing Section 3861, “Financial Instruments – Disclosure and Presentation”.

InventoriesIn June 2007, the CICA issued Section 3031 “Inventories” which replaces Section 3030 “Inventories” andharmonizes the Canadian standards related to inventories with International Financial Reporting Standards(“IFRS”). This Section provides changes to the measurement and more extensive guidance on the determination ofthe cost, including allocation of overheads and other costs to inventories; prohibits the use of the last-in, first-out(“LIFO”) method; requires the reversal of previous write-down when there is a subsequent increase in the value ofinventories; and expands the disclosure requirements regarding inventories and cost of sales to increase transparency.This Section applies to interim and annual financial statements beginning on or after January 1, 2008. TheCompany will apply these new standards in the first quarter of 2009. The Company has not yet determined whatthe impact of adopting this standard will have on its consolidated financial statements.

International Financial Reporting StandardsIn 2005, the Accounting Standards Board of Canada (“AcSB”) announced that accounting standards in Canadaare to converge with IFRS. The changeover date from current Canadian GAAP to IFRS is January 1, 2011.While IFRS uses a conceptual framework similar to Canadian GAAP, there are significant differences inaccounting policy which must be addressed. The Company is currently assessing the future impact of these newstandards on its consolidated financial statements.

Market Risks and UncertaintiesProduct CostsDorel purchases raw materials, component parts and finished goods. The main commodity items purchased forproduction include particleboard and plastic resins, as well as corrugated cartons. Key component parts includecar seat and futon covers, hardware, buckles and harnesses, and futon frames. These parts are derived fromtextiles, and a wide assortment of metals, plastics, and wood. The Company’s finished goods purchases arelargely derived from steel, aluminum, resins, textiles, rubber, and wood.

Of the significant raw materials purchased by the Company only particleboard pricing remained stable with2006 levels. Resin prices increased by as much as 30% in North America and 10% in Europe, due mainly to theover 50% increase in crude oil prices. Similarly corrugated carton pricing increased as suppliers faced their owncosting pressures. The Company’s suppliers of components and finished goods were also faced with significant priceincreases on steel, resin, rubber, textiles, and foam, ranging anywhere from 10% to 30%. The only exceptions to theseincreases were costs associated with aluminum and zinc which declined from their very high levels in 2006.


The Company’s suppliers based in China faced additional costs over and above raw material increases with thefurther strengthening of the Chinese currency (“RMB”) versus the U.S. dollar, rising labor rates and increases inenergy prices. In 2007, the RMB rose by roughly 6.5% against the U.S. dollar. Additionally, Chinese supplierswere impacted by Government imposed reductions on tax refunds, amounting to an average of 4% in increasedcosts within the second half of 2007. While the Company was able to avoid a portion of these costs, continuedcost pressures on its suppliers will inevitably be passed on to Dorel.

Dorel is among North America’s top 20 purchasers of ocean freight container transport from the Far East. Container freightcosts were higher in 2007 relative to 2006 as supply continued to be tight in both Asia-Transpacific and Asia-Europelanes. Higher fuel surcharges also impacted inland transportation costs in both North America and Europe.

The higher costs experienced in 2007 are for the most part expected to remain in place throughout most of 2008.Further increases in these costs could affect earnings negatively going forward.

Concentration of RevenuesFor the year ended December 30, 2007, one customer accounted for over 10% of the Company’s revenues, at33.9% of Dorel’s total. In 2006, there were two major customers that accounted for over 10% of revenues at36.5% and 10.8% respectively. Dorel does not have long-term contracts with its customers, and as such revenuesare dependent upon Dorel’s continuing ability to deliver attractive products at a reasonable price, combined withhigh levels of service. There can be no assurance that Dorel will be able to sell to such customers on an economicallyadvantageous basis in the future or that such customers will continue to buy from Dorel.

Credit RiskA substantial portion of Dorel’s revenues are from major retail chains. If certain of these major retailers ceaseoperations, there could be a material adverse effect on the Company’s consolidated results of operations. It should benoted that the Company conducts ongoing credit reviews and maintains credit insurance on selected accounts tominimize this risk.

Product LiabilityAs with all manufacturers of products designed for use by consumers, Dorel is subject to numerous productliability claims, particularly in the U.S. At Dorel, there is an ongoing effort to improve quality control and toensure the safety of its products. The Company is insured for product liability by the use of both traditionalinsurance and self-funded insurance programs, which mitigate its product liability exposure. No assurance canbe given that a judgment will not be rendered against it in an amount exceeding the amount of insurancecoverage or in respect of a claim for which Dorel is not insured.

Foreign CurrencyAs a multinational company that uses the U.S. dollar as its reporting currency, Dorel is subject to variations incurrency values against the U.S. dollar. The functional currency of Dorel’s European operations is the Euro, withall other significant subsidiaries using the U.S. dollar as their functional currency. As a result, Dorel’s operatingunits outside of the U.S. assume the majority of the Company’s foreign exchange risk.

Dorel’s Canadian operations benefit from a stronger U.S. dollar as large portions of its revenues are generatedin the U.S. and the majority of its costs are in Canadian dollars. This situation is mitigated by Dorel Canada’sjuvenile operations that import U.S. dollar denominated goods. Dorel’s European operations are negativelyeffected by a stronger U.S. dollar as portions of its purchases are in U.S. dollars while its revenues are not.Where advantageous, the Company uses options, futures and forward contracts to hedge against these adversefluctuations in currency. While the Canadian operations and European operations offset the possible negativeimpact of changes in the U.S. dollar, a significant change in the value of the U.S. dollar could affect future earnings.


Valuation of Goodwill and other Intangible AssetsAs part of annual impairment tests, the value of goodwill and other indefinite life intangible assets are subject tosignificant assumptions, such as future expected cash flows, comparable market transaction multiples andassumed discount rates. In addition, the value of customer relationship intangible assets recognized includessignificant assumptions in reference to customer attrition rates and useful lives. Changes in these assumptionscould materially affect these valuations.

Income TaxesThe Company’s current organizational structure has resulted in a comparatively low effective income tax rate. Thisstructure and the resulting tax rate are supported by current domestic tax laws in which the Company operates and bythe application of income tax treaties between various countries. Unanticipated changes to either these currentdomestic tax laws or rates, or to these tax treaties, could impact the effective income tax rate of the Company.

Product and Brand DevelopmentTo support continued revenue growth, the Company must continue to update existing products, design innovativenew items, develop strong brands and make significant capital investments. The Company has invested heavily inproduct development and plans to keep it at the centre of its focus. In addition, the Company must continue tomaintain, develop and strengthen our end-user brands. Should the Company invest in or design products that arenot accepted in the marketplace, or if its products are not brought to market in a timely manner, and in certaincases, fail to be approved by the appropriate regulatory authorities, this could negatively impact future growth.

Other InformationThe designation, number and amount of each class and series of its shares outstanding as of February 29, 2008are as follows:

An unlimited number of Class “A” Multiple Voting Shares without nominal or par value, convertible at any time atthe option of the holder into Class “B” Subordinate Voting Shares on a one-for-one basis, and;

An unlimited number of Class “B” Subordinate Voting Shares without nominal or par value, convertible into Class“A” Multiple Voting Shares, under certain circumstances, if an offer is made to purchase the Class “A” shares.

Details of the issued and outstanding shares are as follows:

Class A Class B TotalNumber $(‘000) Number $(‘000) $(‘000)

4,427,744 $ 1,913 28,969,448 $ 175,358 $ 177,271

Outstanding stock options and Deferred Share Unit items are disclosed in Note 17 to the Consolidated FinancialStatements. There were no significant changes to these values in the period between the year end and the date ofthe preparation of this MD&A.

Managements’ Report on Internal Control over Financial ReportingManagement, including the President and Chief Executive Officer and the Executive Vice-president,Chief Financial Officer and Secretary has evaluated the effectiveness of the Company’s disclosure controlsand procedures (as defined in Multilateral Instrument 52-109 of the Canadian Securities Administrators) asof December 30, 2007.

Management has concluded that, as of December 30, 2007, the Company’s disclosure controls and procedureswere effective to provide reasonable assurance that material information relating to the Company would bemade known to them by others within the Company and its subsidiaries, particularly during the period in whichthis report was being prepared.


Management is responsible for and has designed internal controls over financial reporting to provide reasonableassurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with Canadian GAAP. There were no changes in internal control over financial reporting thathave materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Forward Looking InformationCertain statements included in this MD&A may constitute “forward looking statements” within the meaning of theU.S. Private Securities Litigation Reform Act of 1995. Forward looking statements generally can be identified bythe use of forward looking terminology such as “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”,“plan”, “foresee”, “believe” or “continue” or the negatives of these terms or variations of them or similar terminology.We refer you to the Company’s filings with the Canadian securities regulatory authorities and the U.S. Securitiesand Exchange Commission for a discussion of the various factors that may affect the Company’s future results.

Readers are cautioned, however, not to place undue reliance on forward looking statements as there can be noassurance that the plans, intentions or expectations upon which they are based will occur. By their nature,forward looking statements involve numerous assumptions, known and unknown risks and uncertainties, bothgeneral and specific, that contribute to the possibility that the predictions, forecasts, projections and otherforward looking statements will not occur. This may cause the Company’s actual performance and financialresults in future periods to differ materially from any estimates or projections of future performance or resultsexpressed or implied by such forward looking statements.

We believe that the expectations represented by such forward looking statements are reasonable, yet there canbe no assurance that such expectations will prove to be correct. The forward looking statements contained in thisreport reflect the Company’s expectations as at the date of this MD&A and are subject to change after such date.Unless otherwise required by applicable securities laws, the Company expressly disclaims any intention, andassumes no obligation to update publicly or to revise any of the included forward looking statements, whether asa result of new information, future events or otherwise. The forward looking statements contained in this reportare expressly qualified by this cautionary statement.


Management’s ReportDorel Industries Inc.’s Annual Report for the year ended December 30, 2007, and the financial statementsincluded herein, were prepared by the Corporation’s Management and approved by the Board of Directors. TheAudit Committee of the Board is responsible for reviewing the financial statements in detail and for ensuring thatthe Corporation’s internal control systems, management policies and accounting practices are adhered to.

The financial statements contained in this Annual Report have been prepared in accordance with the accountingpolicies which are enunciated in said report and which Management believes to be appropriate for the activitiesof the Corporation. The external auditors appointed by the Corporation’s shareholders, KPMG, LLP have auditedthese financial statements and their report appears below. All information given in this Annual Report is consistentwith the financial statements included herein.

Martin Schwartz Jeffrey SchwartzPresident and Chief Executive Officer Executive Vice-President, Chief

Financial Officer and Secretary

Auditors’ Report to the Shareholders of Dorel Industries Inc.

We have audited the consolidated balance sheets of Dorel Industries Inc. (“the Company”) as at December 30, 2007and 2006 and the consolidated statements of income, comprehensive income, changes in shareholders’ equityand cash flows for each of the years in the two-year period ended December 30, 2007. These financialstatements are the responsibility of the Company’s management. Our responsibility is to express an opinion onthese financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standardsrequire that we plan and perform an audit to obtain reasonable assurance whether the financial statements arefree of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financialposition of the Company as at December 30, 2007 and 2006 and the results of its operations and its cash flowsfor each of the years in the two-year period ended December 30, 2007 in accordance with Canadian generallyaccepted accounting principles.

Chartered AccountantsMontreal, CanadaFebruary 29, 2008


DOREL INDUSTRIES INC.CONSOLIDATED BALANCE SHEETSAS AT DECEMBER 30, 2007 and 2006(All figures in thousands of U.S. dollars)

As at As atDecember 30, 2007 December 30, 2006

ASSETS

CURRENT ASSETSCash and cash equivalents (Note 24) $ 22,513 $ 25,925Accounts receivable (Note 5) 286,924 294,731Income taxes receivable 6,519 8,264Inventories (Note 6) 322,332 326,540Prepaid expenses 10,538 9,652Future income taxes (Note 22) 35,228 29,046

684,054 694,158

PROPERTY, PLANT AND EQUIPMENT (Note 7) 140,362 142,002INTANGIBLE ASSETS (Note 8) 276,383 261,966GOODWILL (Note 25) 525,235 501,356OTHER ASSETS (Notes 2 and 9) 31,870 27,924

$ 1,657,904 $ 1,627,406

See accompanying notes.


DOREL INDUSTRIES INC.CONSOLIDATED BALANCE SHEETSAS AT DECEMBER 30, 2007 and 2006(All figures in thousands of U.S. dollars)

As at As atDecember 30, 2007 December 30, 2006

LIABILITIESCURRENT LIABILITIES

Bank indebtedness (Note 10) $ 5,836 $ 3,733Accounts payable and accrued liabilities (Note 11) 325,938 326,915Income taxes payable 25,532 10,742Balance of sale payable – 605Future income taxes (Note 22) 136 –Current portion of long-term debt (Notes 2 and 12) 62,906 7,832

420,348 349,827

LONG-TERM DEBT (Notes 2 and 12) 192,385 375,135PENSION & POST-RETIREMENT BENEFIT OBLIGATIONS (Note 15) 20,942 20,370FUTURE INCOME TAXES (Note 22) 79,635 74,833OTHER LONG-TERM LIABILITIES (Note 13) 6,848 7,719

SHAREHOLDERS’ EQUITYCAPITAL STOCK (Note 16) 177,271 162,555CONTRIBUTED SURPLUS 11,623 6,061RETAINED EARNINGS 641,981 567,020ACCUMULATED OTHER COMPREHENSIVE INCOME 106,871 63,886

748,852 630,906

937,746 799,522

$ 1,657,904 $ 1,627,406

COMMITMENTS AND GUARANTEES (Note 18)CONTINGENCIES (Note 19)

ON BEHALF OF THE BOARD


_________________________________ DIRECTOR

___________________________________ DIRECTOR


DOREL INDUSTRIES INC.CONSOLIDATED STATEMENTS OF INCOMEFOR THE YEARS ENDED DECEMBER 30, 2007 and 2006 (All figures in thousands of U.S. dollars, except per share amounts)

2007 2006

Sales $ 1,792,611 $ 1,748,032Licensing and commission income 21,061 23,136

TOTAL REVENUE 1,813,672 1,771,168

EXPENSESCost of sales (Note 3) 1,375,418 1,363,421Selling, general and administrative expenses 244,798 228,765Depreciation and amortization 39,844 36,969Research and development costs (Note 9) 9,009 8,169Restructuring costs (Note 3) 14,509 3,671Interest on long-term debt 23,782 29,594Other interest (316) 305

1,707,044 1,670,894

Income before income taxes 106,628 100,274

Income taxes (Note 22)Current 26,418 7,878Future (7,282) 3,531

19,136 11,409

NET INCOME $ 87,492 $ 88,865

EARNINGS PER SHARE (Note 23)Basic $ 2.63 $ 2.70

Diluted $ 2.63 $ 2.70


DOREL INDUSTRIES INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEFOR THE YEARS ENDED DECEMBER 30, 2007 and 2006(All figures in thousands of U.S. dollars)

2007 2006

NET INCOME $ 87,492 $ 88,865OTHER COMPREHENSIVE INCOME:

Net change in unrealized foreign currency gainson translation of net investments in self-sustainingforeign operations, net of tax of nil 42,985 37,726

Portion included in income as a result of reductionsin net investments in self-sustaining foreign operations – (1,985)

42,985 35,741

COMPREHENSIVE INCOME $ 130,477 $ 124,606



CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITYFOR THE YEARS ENDED DECEMBER 30, 2007 and 2006(All figures in thousands of U.S. dollars)

2007 2006

CAPITAL STOCK (Note 16)Balance, beginning of year $ 162,555 $ 162,503Issued under stock option plan 14,716 52

Balance, end of year 177,271 162,555

CONTRIBUTED SURPLUSBalance, beginning of year 6,061 3,639Stock-based compensation (Note 17) 5,562 2,422


RETAINED EARNINGSBalance, beginning of year 567,020 478,155Net income 87,492 88,865Dividends on common shares (12,524) –Dividends on deferred share units (7) –


ACCUMULATED OTHER COMPREHENSIVE INCOMEBalance, beginning of year (1) 63,886 28,145Other comprehensive income 42,985 35,741


TOTAL SHAREHOLDERS’ EQUITY $ 937,746 $ 799,522

(1)The opening balances for all periods presented represent net foreign currency translation adjustments. These balances have beenreclassified in accumulated other comprehensive income in accordance with the new financial instruments accounting standards. Refer to Note 2.



DOREL INDUSTRIES INC.CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 30, 2007 and 2006 (All figures in thousands of U.S. dollars)

2007 2006

CASH PROVIDED BY (USED IN):OPERATING ACTIVITIESNet income $ 87,492 $ 88,865Items not involving cash:

Depreciation and amortization 39,844 36,969Amortization of deferred financing costs 217 512Future income taxes (7,282) 3,531Stock-based compensation (Note 17) 5,562 2,422Pension and post-retirement defined benefit plans (Note 15) 1,346 1,368Restructuring activities (Note 3) 15,436 3,840Exchange gain from reduction of net investments in foreign operations – (1,985)Loss on disposal of property, plant and equipment 243 601

142,858 136,123

Net changes in non-cash balances related to operations (Note 24) 24,482 (29,402)

CASH PROVIDED BY OPERATING ACTIVITIES 167,340 106,721

FINANCING ACTIVITIESBank indebtedness 1,577 (1,136)Long-term debt (136,036) (64,787)Dividends on common shares (12,524) –Issuance of capital stock (Note 16) 14,698 42

CASH USED IN FINANCING ACTIVITIES (132,285) (65,881)

INVESTING ACTIVITIESAcquisition of subsidiary companies (Notes 4 and 24) (2,786) (4,946)Additions to property, plant and equipment – net (22,269) (14,334)Deferred development costs (14,470) (10,628)Funds held by ceding insurer – 3,647Intangible assets (1,871) (2,034)

CASH USED IN INVESTING ACTIVITIES (41,396) (28,295)

Effect of exchange rate changes on cash and cash equivalents 2,929 1,035

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (3,412) 13,580Cash and cash equivalents, beginning of year 25,925 12,345

CASH AND CASH EQUIVALENTS, END OF YEAR (Note 24) $ 22,513 $ 25,925



DOREL INDUSTRIES INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEARS ENDED DECEMBER 30, 2007 and 2006(All figures in thousands of U.S. dollars, except per share amounts)

NOTE 1 – NATURE OF OPERATIONSDorel Industries Inc. (the “Company”) is a global consumer products company which designs, manufactures orsources, markets and distributes a diverse portfolio of powerful product brands, marketed through its juvenile,recreational/leisure and home furnishings segments. The principal markets for the Company’s products are theUnited States, Canada and Europe.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Basis of PresentationThe financial statements have been prepared in accordance with Canadian Generally Accepted AccountingPrinciples (GAAP) using the U.S. dollar as the reporting currency. The U.S. dollar is the functional currency of theCanadian parent company.

ReclassificationsEffective January 2007, the Company’s electric ride-on toy business, previously included in the Juvenile segment,has been transferred to the Recreational / Leisure segment. To allow for better year-over-year comparability, prior yearcomparative segmented revenue of $12,299 for the year and elements of earnings from operations totaling $1,553 forthe year have been reclassified. Segmented figures are presented in Note 25 to these financial statements.

Change in Accounting PoliciesEffective as of the beginning of our 2007 fiscal year, the Company adopted the new recommendations of theCanadian Institute of Chartered Accountants (CICA) under CICA Handbook Section 1530, ComprehensiveIncome, Section 3251, Equity, Section 3855, Financial Instruments – Recognition and Measurement,Section 3861, Financial Instruments – Disclosure and Presentation and Section 3865, Hedges. These newHandbook Sections provide comprehensive requirements for the recognition and measurement of financialinstruments. Section 1530 establishes standards for reporting and displaying comprehensive income.Comprehensive income is defined as the change in equity from transactions and other events from non-ownersources. Other comprehensive income refers to items recognized in comprehensive income but that are excludedfrom net income calculated in accordance with GAAP.

Under Financial Instruments standards, all financial instruments are classified into one of the following fivecategories: held for trading, held-to-maturity investments, loans and receivables, available-for-sale financial assetsor other financial liabilities. All financial instruments, including derivatives, are included on the consolidatedbalance sheet and are initially and subsequently measured at fair value with the exception of loans andreceivables, investments held-to-maturity and other financial liabilities, which are subsequently measured atamortized cost. Subsequent recognition of changes in fair value of financial instruments remeasured eachreporting date at fair value depend on their initial classification. Held for trading financial investments aremeasured at fair value with all gains and losses included in net income in the period in which they arise.Available-for-sale financial instruments are measured at fair value with gains and losses included in othercomprehensive income until the asset is removed from the balance sheet or until impaired.


NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (Cont’d)

Change in Accounting Policies (Cont’d)The standards require derivative instruments to be recorded as either assets or liabilities measured at their fairvalue unless exempted from derivative treatment as a normal purchase or sale. Certain derivatives embedded inother contracts must also be separated from the main contract and measured at fair value. All changes in the fairvalue of derivatives are recognized in earnings unless specific hedge criteria are met, which requires that acompany must formally document, designate and assess the effectiveness of transactions that receive hedgeaccounting. Any derivative instrument that does not qualify for hedge accounting is marked-to-market at eachreporting date and the gains or losses are included in earnings.

As a result of the adoption of these new standards, the Company has classified its cash and cash equivalents as heldfor trading. Accounts receivable are classified as loans and receivables. Bank indebtedness, accounts payable andaccrued liabilities, long-term debt, other long-term liabilities and balance of sale payable are classified as otherliabilities, all of which are measured at amortized cost. As at December 30, 2006 and December 30, 2007, alloutstanding foreign exchange contracts were reported on a mark-to-market basis and the gains or losses wereincluded in earnings as the Company elected not to follow hedge accounting for these derivatives.

Section 3855 also provides guidance on accounting for transaction costs incurred upon the issuance of debtinstruments or modification of a financial liability. Except for those incurred on the revolving credit facility,transaction costs are now deducted from the financial liability and are amortized using the effective interestmethod over the expected life of the related liability. As a result of the application of Section 3855, unamortizedfinancing costs of $179 as at December 30, 2007 ($331 – December 31, 2006), previously recorded in otherassets, have been reclassified against long-term debt. The adoption of these new standards also resulted in thereclassification of amounts previously recorded in “Cumulative translation adjustment” to “Accumulated othercomprehensive income” on the consolidated balance sheet. The adoption of these standards had no impact onthe consolidated statement of income.

Basis of ConsolidationThe consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.All significant inter-company balances and transactions have been eliminated.

Use of EstimatesThe preparation of consolidated financial statements in conformity with generally accepted accounting principlesrequires management to make estimates and assumptions that affect the reported amounts of assets andliabilities, related amounts of revenues and expenses, and disclosure of contingent assets and liabilities.Significant estimates and assumptions are used to evaluate the carrying values of long-lived assets, assets held forsale and goodwill, valuation allowances for accounts receivable and inventories, restructuring reserves, liabilitiesfor potential litigation claims and settlements including product liability, assets and obligations related toemployee pension and post-retirement benefits, the recovery, establishment of worldwide provision for incometaxes including future income tax liabilities and the determination of the realizable value of future income taxassets, and the allocation of the purchase price of acquired assets and businesses. Estimates and assumptionsare reviewed periodically and the effects of revisions are reflected in the consolidated financial statements in theperiod they are determined to be necessary. Actual results could differ from those estimates.



Revenue RecognitionSales and licensing and commission income are recognized upon shipment of product and transfer of ownershipto the customer. The Company records estimated reductions to revenue for customer programs and incentiveofferings, including special pricing agreements, promotions, advertising allowances and other volume-basedincentives. Provisions for customer incentives and provisions for sales and return allowances are made at thetime of product shipment.

Cash and Cash EquivalentsCash and cash equivalents include all highly liquid instruments with original maturities of three months or less.The carrying amounts of cash and cash equivalents are stated at cost, which approximates their fair values.

InventoriesInventories of raw material are valued at the lower of cost and replacement cost. Inventories of work in process andfinished goods are valued at the lower of cost and net realizable value. Cost is determined on a first-in, first-out basis.

Property, Plant and EquipmentProperty, plant and equipment are recorded at cost. Capital leases where the risks and rewards of ownership aretransferred to the Company are included in property, plant and equipment.

Property, plant and equipment are depreciated as follows:

Method Rate

Buildings and improvements Straight-line 40 yearsMachinery and equipment Declining balance 15%Moulds Straight-line 3 to 5 yearsFurniture and fixtures Declining balance 20%Vehicles Declining balance 30%Computer equipment Declining balance 30%Leasehold improvements Straight-line Over the lesser of the useful life and

the term of the lease

The capitalized value of depreciable assets under capital leases is amortized over the period of expected use, ona basis that is consistent with the above depreciation method and rates, if the lease contains terms that allowownership to pass to the Company or contains a bargain purchase option. Otherwise, the asset is amortizedover the lease term. Amortization of assets under construction begins when they are ready for their intended use.



Intangible AssetsIntangible assets are recorded at cost:

TrademarksTrademarks acquired as part of business acquisitions and registered trademarks are considered to have anindefinite life and are therefore not subject to amortization. They are tested annually for impairment or morefrequently when events or changes in circumstances indicate that the trademarks might be impaired. Theimpairment test compares the carrying amount of the trademarks with its fair value.

Customer RelationshipsCustomer relationships acquired as part of business acquisitions are amortized on a straight-line basis over aperiod of 20 to 25 years.

PatentsPatents are amortized on a straight-line basis over their expected useful lives ranging from 4 years to 18 years.

Software LicenseSoftware license is amortized on a straight-line basis over its expected useful life of 10 years.

GoodwillGoodwill represents the excess of the purchase price, including acquisition costs, over the fair values assigned toidentifiable net assets acquired. Goodwill, which is not amortized, is tested for impairment annually or morefrequently when an event or circumstance occurs that more likely than not reduces the fair value of a reportingunit below its carrying amount.

A two-step impairment test is used to identify potential goodwill impairment and measure the amount of agoodwill impairment loss to be recognized, if any. The fair value of a reporting unit is first compared with itscarrying amount, including goodwill, in order to identify a potential impairment. When the fair value of areporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not to be impaired andthe second step of the impairment test is unnecessary. When the carrying amount of a reporting unit exceeds itsfair value, the implied fair value of the reporting unit’s goodwill is then compared with its carrying amount tomeasure the amount of the impairment loss, if any. The implied fair value of goodwill is the excess of the fairvalue of the reporting unit over the fair value of the identifiable net assets of the reporting unit. The fair value of areporting unit is calculated based on discounted future net cash flows or valuations based on a market approach.When the carrying amount of a reporting unit goodwill exceeds the implied fair value of the goodwill, animpairment loss is recognized in an amount equal to the excess.



Impairment or Disposal of Long-Lived AssetsThe Company reviews its long-lived assets and amortizable intangible assets for impairment whenever events orchanges in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable.Determination of recoverability is based on an estimate of undiscounted future net cash flows resulting from theuse of the assets and its eventual disposition. An impairment loss is recognized when the carrying amount of theassets exceeds the fair value. Such evaluations for impairment are significantly affected by estimates of futureprices for the Company’s product, economic trends in the market and other factors. Quoted market values areused whenever available to estimate fair value. When quoted market values are unavailable, the fair value of thelong-lived asset is generally based on estimates of discounted expected net cash flows. Assets held for sale arereflected at the lower of their carrying amount or fair values less cost to sell and are not depreciated whileclassified as held for sale. Assets held for sale are included in other assets on the balance sheet.

Deferred ChargesDeferred charges are recorded at cost less accumulated amortization. They are included in other assets on thebalance sheet.

Research and Development Costs:The Company incurs costs on activities which relate to research and development of new products. Researchcosts are expensed as they are incurred. Development costs are also expensed as incurred unless they meetspecific criteria related to technical, market and financial feasibility. Deferred development costs areamortized on a straight-line basis over a period of two years.

Costs relating to revolving credit facility:The Company incurred certain costs related to the revolving credit facility. These amounts are amortized asinterest expense on a straight-line basis over the term or life of the related debt.

Foreign CurrencyThe assets and liabilities of self-sustaining foreign operations, whose functional currency is other than the U.S. dollar(located principally in Europe), are translated into U.S. dollars at the exchange rates in effect at the balancesheet date. Revenues and expenses are translated at average exchange rates for the period. Differences arisingfrom the exchange rate changes are included in the accumulated other comprehensive income (AOCI)component of shareholders’ equity. If there is a reduction in the Company’s permanent investment in a self-sustainingforeign operation, the relevant portion of AOCI is recognized in Selling, general and administrative expenses.All other operations, including the Canadian parent company, have the U.S. dollar as the functional currency. Forthese operations, monetary items denominated in currencies other than the U.S. dollar are translated at theexchange rates prevailing at the balance sheet date and translation gains and losses are included in income.Non-monetary items are translated at historical rates. Income and expenses are translated at the averageexchange rates for the period. Foreign exchange gains and losses are reflected in net income.

Derivative Financial InstrumentsDerivative financial instruments are utilized by the Company in the management of its foreign currencyexposures. These derivative financial instruments are used as a method for meeting the risk reduction objectivesof the Company by generating offsetting cash flows related to the underlying position in respect of amount andtiming of forecasted foreign currency cash flows. The Company’s policy is not to utilize derivative financialinstruments for trading or speculative purposes. To meet its objective, the Company uses foreign exchangecontracts, including futures, forwards and options.



Derivative Financial Instruments (Cont’d)The Company does not apply hedge accounting to foreign exchange contracts. Foreign exchange contracts aremarked to market. Unrealized and realized gains and losses associated with derivative instruments are recordedin cost of sales.

Pension Plans and Post-Retirement Benefits

Pension Plans:The Company maintains defined benefit plans and defined contribution plans for their employees. Pensionbenefit obligations under the defined benefit plans are determined annually by independent actuaries usingmanagement’s assumptions and the accumulated benefit method for plans where future salary levels do not affectthe amount of employee future benefits and the projected benefit method for plans where future salaries or costescalation affect the amount of employee future benefits. The plans provide benefits based on a defined benefitamount and length of service. Management’s assumptions consist mainly of best estimate of future salary levels,retirement age of employees, mortality and other actuarial factors.

Plan assets are measured using the fair value method. Actuarial gains or losses arise from the differencesbetween the actual and expected long-term rate of return on plan assets for a period or from changes in actuarialassumptions used to determine the accrued benefit obligation. The excess of the net accumulated actuarial gainor loss over 10 percent of the greater of the benefit obligation and the fair value of plan assets is amortized overthe expected average remaining service period. The average remaining service period of active employeescovered by all pension plans is 10 years. Prior service costs arising from plan amendments are deferred andamortized on a straight-line basis over the average remaining service period of employees active at the date ofamendment. When the restructuring of a benefit plan gives rise to both a curtailment and a settlement ofobligations, the curtailment is accounted for prior to the settlement.

Pension expense consists of the following:

• the cost of pension benefits provided in exchange for employees’ services rendered in the period;• interest on the actuarial present value of accrued pension benefits less earnings on pension fund assets;• amounts which represent the amortization of the unrecognized net pension assets that arose when accounting

policies were first applied and prior service costs and amendments, and subsequent gains or losses arisingfrom changes in actuarial assumptions, and experience gains or losses related to return on assets, amortizedon a straight-line basis over the expected average remaining service life of the employee group;

• Gains or losses on settlements or curtailments.

Post-Retirement Benefits Other Than Pensions:Post-retirement benefits other than pensions include health care and life insurance benefits for retired employees.The costs of providing these benefits are accrued over the working lives of employees in a manner similar topension costs. Actuarial gains or losses are treated in a similar manner to those relating to pension plans. Theaverage remaining service period of employees covered by the post-retirement benefit plan is 9 years.

Significant elements in determining the assets or liabilities and related income or expense for these plans are theexpected return on plan assets, the discount rate used to value future payment streams, expected trends in healthcare costs, and other actuarial assumptions. Annually, the Company evaluates the significant assumptions to beused to value its pension and post-retirement plan assets and liabilities based on current market conditions andexpectations of future costs.



Future Income TaxesThe Company follows the asset and liability method of accounting for income taxes. Under this method, futureincome taxes relate to the expected future tax consequences of differences between the carrying amount ofbalance sheet items and their corresponding tax values using the substantively enacted income tax rate, whichwill be in effect for the year in which the differences are expected to reverse. A valuation allowance is recordedto reduce the carrying amount of future income tax assets to the extent that, in the opinion of management, it is morelikely than not that the future income tax assets will not be realized. The ultimate realization of future tax assets isdependent upon the generation of future taxable income and tax planning strategies. Future income tax assets andliabilities are adjusted for the effects of changes in tax laws and rates on the date of substantive enactment.

Stock-Based CompensationThe Company recognizes as an expense, all stock options granted, modified or settled to its employees anddeferred shares units (DSU’s) granted to its directors using the fair value based method.

Stock options awards to employees are measured based on the fair value of the options at the grant date and acompensation expense is recognized over the vesting period of the options, with a corresponding increase tocontributed surplus. The fair value of these options is measured using a Black-Scholes option pricing model.When the stock options are exercised, capital stock is credited by the sum of the consideration paid, togetherwith the related portion previously recorded to contributed surplus. DSU’s are accounted for in compensationexpense at the grant date.

GuaranteesIn the normal course of business, the Company enters into various agreements that may contain features that meetthe definition of a guarantee. A guarantee is defined to be a contract that contingently requires the Company tomake payments to a third party based on (i) changes in an underlying interest rate, foreign currency exchangerate, index of prices or rates, or other variable, including the occurrence or non-occurrence of a specified event(such as a scheduled payment under a contract), that is related to an asset, a liability or an equity security of theguaranteed party, (ii) failure of another party to perform under an obligating agreement, or (iii) failure of anotherparty to pay its indebtedness when due. With the implementation of Section 3855 on financial instruments, thestand-by portion of the guarantees are initially measured at fair value. The contingent portion of the guarantee isrecorded when the Company considers it probable that a payment relating to the guarantee has to be made tothe other party of the contract or agreement.

Future Accounting Changes

Capital Disclosures and Financial Instruments – Disclosures and PresentationIn December 2006, the CICA issued three new accounting standards: Section 1535, “Capital Disclosures”,Section 3862, “Financial Instruments – Disclosure”, and Section 3863, “Financial Instruments – Presentation”.These Sections are effective for fiscal years beginning on or after October 1, 2007. The Company will applythese new standards in the first quarter of 2008. These new standards relate to disclosure only and will notimpact the financial results of the Company.

Section 1535 establishes standards for disclosing information about an entity’s capital and how it is managed. Itdescribes the disclosure requirements of the entity’s objectives, policies and processes for managing capital, thequantitative data relating to what the entity regards as capital, whether the entity has complied with externalcapital requirements to which it is subject, and, if it has not complied, the consequences of such non-compliance.

Section 3862 requires entities to provide disclosures that enable users to evaluate: (1) the significance offinancial instruments for the Company’s financial position and performance and (2) the nature and extent of riskarising from financial instruments to which the Company is exposed and how it manages those risks.Section 3863 carries forward the presentation requirement of the existing Section 3861, “Financial Instruments –Disclosure and Presentation”.



Future Accounting Changes (Cont’d)

InventoriesIn June 2007, the CICA issued Section 3031 “Inventories” which replaces Section 3030 “Inventories” andharmonizes the Canadian standards related to inventories with International Financial Reporting Standards(“IFRS”). This Section provides changes to the measurement and more extensive guidance on the determination ofthe cost, including allocation of overheads and other costs to inventories; prohibits the use of the last-in, first-out(LIFO) method; requires the reversal of previous write-down when there is a subsequent increase in the value ofinventories; and expands the disclosure requirements regarding inventories and cost of sales to increasetransparency. This Section applies to interim and annual financial statements beginning on or after January 1, 2008.The Company will apply these new standards in the first quarter of 2009. The Company has not yet determinedwhat the impact of adopting this standard will have on its consolidated financial statements.

International Financial Reporting StandardsIn 2005, the Accounting Standards Board of Canada (“AcSB”) announced that accounting standards in Canadaare to converge with IFRS. The changeover date from current Canadian GAAP to IFRS has been established asJanuary 1, 2011. While IFRS uses a conceptual framework similar to Canadian GAAP, there are significantdifferences in accounting policy which must be addressed. The Company is currently assessing the future impactof these new standards on its consolidated financial statements.

NOTE 3 – RESTRUCTURING ACTIVITIES

In 2007, the Company recorded total expenses of $19,184 (2006 – $4,740) with respect to restructuringactivities, of which $4,675 (2006 – $1,069) were recorded as cost of sales and $14,509 (2006 – $3,671)were recorded as restructuring costs.

Juvenile SegmentIn the fourth quarter of 2006, Dorel Europe initiated restructuring activities affecting the Juvenile Segment. Significantoperational changes related to the production facilities in Telgate, Italy and Cholet, France are being implemented.The plan’s objective is to reduce operational costs through strategic sourcing and manufacturing. These restructuringinitiatives are expected to be completed by 2008 and result in cumulative restructuring charges of approximately$14,700. To date, the Company has recorded a cumulative charge of $12,243 under the plan, including $3,335 ofnon-cash charges related to the write-down of long-lived assets and inventory markdowns, $9,758 of employeeseverance and termination benefits and $122 of other associated costs, net of curtailment gains on defined benefitpension plans of $222, curtailment gains on compensation liabilities of $318 and gains on sale of machinery andequipment of $432. Of this $12,243 cumulative charge, $4,000 was recorded in the fourth quarter of 2006 and$8,243 has been recorded in the current fiscal year. Additional costs expected to be incurred under this plan areapproximately $1,900 of severance and $600 of other associated costs.

The costs recognized for these restructuring activities consist of the following:2007 2006

Employee severance and termination benefits $ 6,887 $ 2,871Buildings, machinery and equipment write-downs 1,052 1,286Net curtailment losses (gains) on defined benefit pension plans (Note 15) 264 (486)Curtailment gain on compensation liabilities (318) –Gains on sale of machinery & equipment (432) –Other associated costs 122 –

Recorded as Restructuring costs $ 7,575 $ 3,671Inventory markdowns (in Cost of sales) 668 329

Total $ 8,243 $ 4,000


NOTE 3 – RESTRUCTURING ACTIVITIES (Cont’d)

As at December 30, 2007, the related restructuring plan provision totaling $7,574 (2006 – $2,935) consists ofemployee termination benefits. Of this amount, $7,427 (2006 – $1,303) is included in accrued liabilities and$147 (2006 – $1,632) is included in other long-term liabilities. A summary of the Company’s restructuring planprovision is as follows:

Balance Cash Effect of BalanceDecember 30, 2007 received foreign December 30,

2006 Provision (paid) exchange 2007

Employee severance andtermination benefits $ 2,935 $ 6,887 $ (3,078) $ 830 $ 7,574

Other associated costs – 122 (122) – –

Total $ 2,935 $ 7,009 $ (3,200) $ 830 $ 7,574

Home Furnishings Segment

Dowagiac, MichiganOn May 17, 2007, the Company announced a plan for restructuring at Ameriwood Industries. The Companydetermined that its current ready-to-assemble (RTA) furniture manufacturing footprint exceeds anticipated marketneeds. As such, the majority of manufacturing operations at the Dowagiac, Michigan RTA facility weresuspended in July of this year. The restructuring is part of an overall plan to improve the earnings of the HomeFurnishings Segment.

The total pre-tax cost of the restructuring plan is expected to be approximately $11,513 including $9,604 non-cashcharges related to the write-down of long-lived assets and inventory markdowns, $655 of employee severanceand termination benefits, $560 of contract termination costs and $694 of other associated costs. The plan isexpected to be completed by the third quarter of 2008.

The costs recognized for these restructuring activities consist of the following:

2007

Building and equipment write-downs $ 5,727Employee severance and termination benefits 613Contract termination costs 534Other associated costs 60

Recorded as Restructuring costs $ 6,934Move of inventory, equipment and other expenses (in Cost of sales) 130Inventory markdowns (in Cost of sales) 3,877

Total $ 10,941

A summary of the Company’s restructuring plan provision included in accrued liabilities is as follows:Balance

2007 Cash December 30,Provision paid 2007

Employee severance and termination benefits $ 613 $ (363) $ 250Contract termination costs 534 (140) 394Other associated costs 60 (45) 15

Total $ 1,207 $ (548) $ 659


NOTE 3 – RESTRUCTURING ACTIVITIES (Cont’d)

Wright City, MissouriIn the third quarter of 2005, the Company announced a plan for the consolidation of its four North Americanready-to-assemble (RTA) furniture manufacturing plants with the closure of its Wright City, Missouri facilities. Theclosure was necessitated by excess capacity caused by a strategic shift away from exclusive domestic productionto a combination of North American production and imported items. The related restructuring actions werecompleted in the fourth quarter of 2006, with $39 remaining to be paid as at December 30, 2006 which hasbeen paid in 2007. The Company has recorded a cumulative charge of $10,200 under the plan, of which $740was recorded in 2006 in cost of sales. Of the total restructuring costs incurred, $8,651 were non-cash chargesrelated to write-downs of assets held for sale and inventory markdowns.

NOTE 4 – BUSINESS ACQUISITION

On February 28, 2007, the Company acquired a 55% interest in an Australian company IGC (Australia) Pty Ltd(“IGC”). Operating as In Good Care, IGC is a manufacturer and distributor of juvenile products in Australia andNew Zealand. The Company has paid cash consideration of $2,733 (AUD$3,446) in return for the 55% controllinginterest and refinanced IGC’s debt in the amount of $7,437 (AUD$9,375) through its existing credit facilities.

As part of the acquisition, the Company entered into a put and call agreement with the minority interest holderfor the purchase of its 45% stake in IGC. Under the terms of this agreement, if specified earnings objectives arenot met at the end of 2008 and at the end of each subsequent year until the option is exercised, Dorel has anoption to buy this 45% minority interest (the call option) at a formulaic variable price based mainly on earningslevels in future periods (the “exit price”). Similarly, the holder of the minority interest has an option to sell his 45%stake in IGC to Dorel (the put option) for the same variable exit price if a certain earnings target is reached in 2008or at the end of any subsequent year until the option is exercised. In addition, following December 31, 2012, theminority interest holder has the right to sell its 45% stake in IGC to Dorel at any time for the same terms. Theagreement does not include a specified minimum amount of contingent consideration. Under the liability methodof accounting, the put and call agreement is reflected in the financial statements as follows:

• The put and call agreement is considered to have been fully executed at the time of acquisition, resulting inthe purchase by Dorel of a further 45% interest in IGC. As a result, Dorel has consolidated 100% of IGC atthe inception of this agreement.

• When the contingency is resolved in 2008 and in each subsequent year until the put or call option isexercised, the value of the exit price will be determined and recorded as a financial liability and as anadditional element of the purchase price and will increase goodwill.

The acquisition has been recorded under the purchase method of accounting with the results of operations of theacquired business being included in the accompanying consolidated financial statements since the date ofacquisition. The goodwill is not deductible for tax purposes. The total goodwill amount is included in theCompany’s Juvenile segment as reported in Note 25.


NOTE 4 – BUSINESS ACQUISITION (Cont’d)

The assets acquired and the liabilities assumed consist of the following:2007

AssetsCash and cash equivalents $ 541Accounts receivable 2,614Inventories 4,888Prepaid expenses 139Short-term future income tax assets 504Property, plant and equipment 2,213Trademarks 3,014Patents 595Goodwill 945

15,453

LiabilitiesBank indebtedness 196Accounts payable and accrued liabilities 3,095Long-term debt 7,908Long-term future income tax liabilities 1,521

12,720

Total purchase price $ 2,733

NOTE 5 – ACCOUNTS RECEIVABLE

Accounts receivable consist of the following:December 30, December 30,

2007 2006

Accounts receivable $ 320,174 $ 324,941Other receivables 16,867 18,871

337,041 343,812Allowance for anticipated credits (43,203) (43,254)Allowance for doubtful accounts (6,914) (5,827)

$ 286,924 $ 294,731

NOTE 6 – INVENTORIES

Inventories consist of the following:December 30, December 30,

2007 2006

Raw materials $ 62,459 $ 64,926Work in process 6,427 6,119Finished goods 253,446 255,495

$ 322,332 $ 326,540


NOTE 7 – PROPERTY, PLANT AND EQUIPMENTDecember 30, 2007

AccumulatedCost Depreciation Net

Land $ 11,561 $ – $ 11,561Buildings and improvements 60,551 14,549 46,002Machinery and equipment 73,837 49,896 23,941Moulds 122,125 97,793 24,332Furniture and fixtures 5,895 4,512 1,383Computer equipment 29,284 19,395 9,889Leasehold improvements 7,828 4,545 3,283Assets under construction 18,228 – 18,228Assets under capital leases 2,779 1,685 1,094Vehicles 1,684 1,035 649

$ 333,772 $ 193,410 $ 140,362

December 30, 2006Accumulated

Cost Depreciation Net

Land $ 10,892 $ – $ 10,892Buildings and improvements 54,810 11,464 43,346Machinery and equipment 82,917 52,081 30,836Moulds 104,034 83,597 20,437Furniture and fixtures 4,932 2,782 2,150Computer equipment 26,606 13,094 13,512Leasehold improvements 7,350 5,007 2,343Assets under construction 15,664 – 15,664Assets under capital leases 3,525 1,359 2,166Vehicles 1,483 827 656

$ 312,213 $ 170,211 $ 142,002

Assets under construction consists of the following major categories:December 30, December 30,

2007 2006

Buildings and improvements $ 2,520 $ 1,997Machinery and equipment 1,560 1,442Moulds 12,612 11,920Computer equipment 1,536 305

$ 18,228 $ 15,664

Depreciation of property, plant and equipment amounted to $25,062 (2006 – $22,587).

NOTE 8 – INTANGIBLE ASSETSDecember 30, 2007


Trademarks $ 219,700 $ – $ 219,700Customer relationships 57,310 10,968 46,342Patents 21,184 11,345 9,839Software license 502 – 502

$ 298,696 $ 22,313 $ 276,383


NOTE 8 – INTANGIBLE ASSETS (Cont’d)December 30, 2006


Trademarks $ 208,127 $ – $ 208,127Customer relationships 52,989 7,837 45,152Patents 17,736 9,049 8,687

$ 278,852 $ 16,886 $ 261,966

In 2007, the aggregate amount of amortizable intangible assets acquired amounted to $1,830 (2006 – $1,703) ofwhich $8 (2006 – $49) is unpaid at year-end. The aggregate amortization expense of intangible assetsamounted to $4,632 (2006 – $4,710).

NOTE 9 – OTHER ASSETS

Other assets consist of the following:December 30, December 30,

2007 2006

Deferred development costs (1) $ 21,375 $ 16,174Accrued benefit asset (Note 15) 8,970 10,134Long-term future income tax assets (Note 22) 892 817Costs relating to revolving credit facility (2) 188 331Assets held for sale 129 152Other 316 316

$ 31,870 $ 27,924

(1) The Company incurred $23,479 (2006 – $18,797) of research and development costs of which $9,009 (2006 – $8,169) wereexpensed and $14,470 (2006 – $10,628) were deferred. Amortization of deferred development costs amounted to $10,150 (2006 – $9,672).

(2) As a result of the application of Section 3855 (Note 2), unamortized financing costs of $179 as at December 30, 2007 (2006 – $331),previously recorded in other assets, have been reclassified in 2007 against long-term debt. The amortization of financing costs related to therevolving credit facility and to the long-term debt included in interest on long-term debt is $65 and $152 respectively (2006 – $512).

NOTE 10 – BANK INDEBTEDNESSThe average interest rates on the outstanding borrowings as at December 30, 2007 and 2006 were 6.08% and3.85% respectively. As at December 30, 2007, the Company had available bank lines of credit amounting toapproximately $31,460 (2006 – $24,385) which are renegotiated annually.

NOTE 11 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

December 30, December 30,2007 2006

Trade creditors and accruals $ 239,279 $ 238,891Salaries payable 27,505 23,797Product liability (Note 20) 30,571 32,593Other accrued liabilities 28,583 31,634

$ 325,938 $ 326,915


NOTE 12 – LONG-TERM DEBT


Series “A” Senior Guaranteed NotesBearing interest at 6.80 % per annum with principal repayments as follows $ 46,000 $ 47,000

1 instalment of $1,000 in July 20081 instalment of $8,500 in July 20092 annual instalments of $10,000 ending in July 20111 final instalment of $16,500 in July 2012

Bearing interest at 5.09% per annum repaid in February 2008 55,000 55,000

Series “B” Senior Guaranteed NotesBearing interest at 5.63% per annum repayable in February 2010 55,000 55,000

Term NotesBearing interest at 7.00% per annum repayable in April 2008 4,800 9,600Bearing interest at 7.13% per annum repayable in June 2008 1,600 3,200

Revolving Bank LoansBearing interest at various rates per annum, averaging 6.77% based onLIBOR or U.S. bank rates, total availability of $325,000, (2006 – $425,000)due to mature in July 2010. This agreement also includes an accordion feature allowing the company to have access to an additional amount of $200,000 on a revolving basis. (1) 92,000 212,296

Obligations under capital leases 1,045 593Other 25 278Less unamortized financing costs (Note 2) (179) –

255,291 382,967Current Portion (62,906) (7,832)

$ 192,385 $ 375,135

(1)Subsequent to year-end, with the acquisition of Cannondale Bicycle Corporation (Note 26), an amendment to the revolving bank loanswas signed on January 18, 2008. Under the revolving bank loans, the total availability was increased to $475,000 with an accordionfeature allowing the Company to have access to an additional amount of $50,000 on a revolving basis. This amended revolving bank loansis due to mature in July 2010.

The aggregate repayments in subsequent years of existing long-term debt will be:

Fiscal Year Ending Amount

2008 $ 62,9062009 8,8502010 157,0622011 10,0092012 16,464

$ 255,291

Under the unsecured notes and revolving credit facility, the Company is subject to certain covenants, includingmaintaining certain financial ratios. As at December 30, 2007, the Company is in compliance with these covenants.


NOTE 13 – OTHER LONG-TERM LIABILITIESDecember 30, December 30,

2007 2006

Employee compensation $ 5,420 $ 4,641Restructuring provision (Note 3) 147 1,632Balance of sale payable 192 189Other 1,089 1,257

$ 6,848 $ 7,719

Employee compensation consists of bonuses based on length of service and profit sharing offered by one of theCompany’s subsidiaries.

NOTE 14 – FINANCIAL INSTRUMENTS

In the normal course of business, the Company uses various financial instruments including derivative financialinstruments. As outlined in Note 2, the Company uses derivative financial instruments to reduce exposure to fluctuationsin foreign exchange rates. The derivative financial instruments consist of foreign exchange contracts, including futures,forwards and options. The Company does not enter into foreign exchange contracts for speculative or trading purposes.The non-derivative financial instruments include those as outlined below. By their nature, all such instruments involverisk, including market risk and the credit risk of non performance by counterparties. These financial instruments aresubject to normal credit standards, financial controls, risk management as well as monitoring procedures.

Foreign Exchange Risk ManagementThe Company enters into various types of foreign exchange contracts to manage its exposure to foreign currencyrisk. The Company’s market risk with respect to foreign exchange contracts is limited to the exchange ratedifferential. The fair values of foreign exchange contracts are estimated using year-end market rates and reflectthe amount the Company would receive or pay if the instruments were closed out at these dates. The term of thecurrency derivatives ranges from three to twelve months. The unrealized gains or losses associated with thederivative financial instruments are included in the other receivables or in the other accrued liabilities.

The amounts of outstanding contracts at year-end, presented by currency, are included in the table below:

December 30, 2007 December 30, 2006Foreign exchange contracts Average Notional Fair Average Notional FairCurrencies (sold/bought) rate(1) amount(2) value rate(1) amount(2) value

Futures$/CDN – – – 0.8901 $ 25,742 $ (849)

ForwardsEUR/$ 0.7074 $ 32,450 $ (1,337) 0.7676 $ 24,650 $ (390)GBP/$ 0.4937 $ 2,900 $ 34 0.5243 $ 2,600 $ (73)GBP/EUR 0.6942 $ 7,146 $ 392 0.6750 $ 3,165 $ (7)NZD/AUD 0.8423 $ 148 $ (7) – – –

OptionsEUR/$ 0.7077 $ 41,400 $ (1,672) 0.7602 $ 26,500 $ (333)GBP/$ 0.4893 $ 4,750 $ 31 0.5172 $ 4,250 $ (70)GBP/EUR 0.6896 $ 9,283 $ 272 0.6725 $ 3,099 $ (4)

(1)Rates are expressed as the number of units of the currency sold for one unit of currency bought.(2)Exchange rates as at December 30, 2007 and 2006 were used to translate amounts in foreign currencies.

During the year, the Company recorded net foreign exchange gains in the amount of $676 (2006 – $472) ofwhich an amount of $1,824 represents the net derivatives exchange losses on the foreign exchange contracts.


NOTE 14 – FINANCIAL INSTRUMENTS (Cont’d)

Fair Value DisclosureFair value estimates are made as of a specific point in time using available information about the financialinstrument. These estimates are subjective in nature and often cannot be determined with precision.

The Company has determined that the carrying amount of its short-term financial assets and liabilities approximatesfair values as at the balance sheet dates because of the short-term nature of those financial instruments.

The fair value of long-term debt is $254,054 (2006 – $380,244) compared to a carrying amount of $255,291(2006 – $382,967) as at December 30, 2007. The fair value of long-term debt is estimated based ondiscounting expected future cash flows at the discount rates which represent borrowing rates presently availableto the Company for loans with similar terms and maturity. For long-term debt bearing interest at variable rates,the fair value is considered to approximate the carrying amount.

As at December 30, 2007 and 2006, the fair value of other long-term liabilities is comparable to their carrying value.

As described in Note 18, the Company has certain outstanding letters of credit and guarantees. Managementdoes not expect any material losses to result from these instruments.

Concentrations of Credit RiskThe Company is exposed to credit losses resulting from defaults by counterparties. The Company enters intofinancial instruments with a diversity of creditworthy parties. When entering into foreign exchange contracts, thecounterparties are large Canadian and international banks. Therefore, the Company does not expect to incurmaterial credit losses on its risk management or other financial instruments.

Substantially all accounts receivable arise from sales to the retail industry. The Company performs ongoing creditevaluations of its customers’ financial condition and limits the amount of credit extended when deemednecessary. In addition, a portion of the total accounts receivable is insured against possible losses. In 2007,sales to a major customer represented 33.9% of total revenue. Accounts receivable from this customer comprised27.7% of the Company’s total accounts receivable balance as at December 30, 2007. In 2006, there were twomajor customers representing respectively 36.5% and 10.8% of total revenue, for an aggregate of 47.3%.Accounts receivable from these two customers comprised 30.5% and 6.3% respectively of the Company’s totalaccounts receivables as at December 30, 2006, for an aggregate of 36.8%. The Company establishes anallowance for doubtful accounts based on the specific credit risk of its customers and historical trends.

NOTE 15 – PENSION & POST-RETIREMENT BENEFIT PLANS

Pension BenefitsThe Company’s subsidiaries maintain defined benefit plans and defined contribution plans for their employees.Pension benefit obligations under the defined benefit plans are determined annually by independent actuariesusing management’s assumptions and the accumulated benefit method for the plan where future salary levels donot affect the amount of employee future benefits and the projected benefit method for plans where future salariesor cost escalation affect the amount of employee future benefits.


NOTE 15 – PENSION & POST-RETIREMENT BENEFIT PLANS (Cont’d)

Information regarding the Company’s defined benefit pension plans is as follows:


Accrued benefit obligations:Balance, beginning of year $ 36,128 $ 32,644Current service cost 1,573 1,549Interest cost 2,049 1,813Disposals (276) –Amendments – 842Participant contributions 246 178Benefits paid (2,332) (1,688)Effect of exchange rates 1,345 1,183Actuarial (gain) / loss (1,172) 489Restructuring giving rise to curtailments (95) (882)


Plan assetsFair value, beginning of year 28,653 25,660Actual return on plan assets 1,589 2,802Employer contributions 1,579 1,449Participant contributions 246 178Benefits paid (2,332) (1,688)Effect of exchange rates 471 378Additional charges (222) (126)

Fair value, end of year 29,984 28,653

Funded status - plan deficit (7,482) (7,475)Unamortized actuarial loss 8,853 10,284Unamortized transitional obligation 116 113Unamortized past service costs 1,291 1,517

Net amount recognized $ 2,778 $ 4,439

The net amount recognized consists of the following:December 30, December 30,

2007 2006

Accrued benefit asset $ 8,970 $ 10,134Accrued benefit liability (6,192) (5,695)

Net amount recognized $ 2,778 $ 4,439

The accrued benefit asset relating to pension benefits is included in other assets and the accrued benefit liabilityis included in pension & post-retirement benefit obligations on the Company’s Consolidated Balance Sheet.



The accrued benefit obligation at the end of the period and the fair value of plan assets at the end of the periodfor the aggregate of plans with accrued benefit obligations in excess of plan assets are the following:


Accrued benefit obligation, end of year $ 12,595 $ 11,806Fair value of plan assets, end of year $ 4,470 $ 4,043

Net pension costs for the defined benefit plans comprise the following:December 30, December 30,

2007 2006

Current service cost $ 1,573 $ 1,549Interest cost 2,049 1,813Actual return on plan assets (1,589) (2,802)Actuarial (gain) / loss (1,172) 489Disposals (276) –Amendments – 842Effect of curtailments (Note 3) 264 (486)

Cost before adjustments to recognize the long-term nature of the plans 849 1,405Difference between actual and expected return on plan assets (486) 855Difference between actuarial loss on accrued benefit obligation and the amount recognized 2,003 568Difference between amortization of past service costs and actual amendments for the year 230 (601)Amortization of transition obligation 9 9

Pension expense $ 2,605 $ 2,236

Under the Company’s defined contribution plans, total expense was $1,623 (2006 – $1,506). Total cash payments foremployee future benefits for 2007, consisting of cash contributed by the Company to its funded plans, cash contributed toits defined contribution plans and benefits paid directly to beneficiaries for unfunded plans, was $3,946 (2006 – $3,532).

Post-Retirement BenefitsOne of the Company’s subsidiaries maintains a defined benefit post-retirement benefit plan for substantially all its employees.

Information regarding this Company’s post-retirement benefit plan is as follows:December 30, December 30,

2007 2006

Accrued benefit obligations:Balance, beginning of year $ 13,839 $ 14,998Current service cost 204 356Interest cost 737 772Benefits paid (743) (573)Actuarial (gain) / loss (924) (1,714)

Balance, end of year $ 13,113 $ 13,839

Plan assets:Employer contributions 743 573Benefits paid (743) (573)

Fair value, end of year $ – $ –

Funded status-plan deficit $ (13,113) $ (13,839)Unamortized actuarial (gain)/loss (2,063) (1,288)Unamortized past service costs 426 452

Accrued benefit liability $ (14,750) $ (14,675)



Net costs for the post-retirement benefit plan comprise the following:


Current service cost $ 204 $ 356Interest cost 737 772Actuarial (gain)/loss (924) (1,714)

Cost (benefit) before adjustments to recognize the long-term nature of the plans 17 (586)Difference between actuarial (gain)/loss on accrued

benefit obligation and the amount recognized 775 1,714Difference between amortization of past service costs

and actual amendments for the year 26 26

Net benefit plan expense $ 818 $ 1,154

AssumptionsWeighted-average assumptions used to determine benefit obligations as at December 30:

Pension Post Retirement Benefits Benefits

2007 2006 2007 2006

Discount rate 6.03% 5.40% 6.50% 5.55%Rate of compensation increase 2.30% 2.30% n/a n/a

Weighted-average assumptions used to determine net periodic cost for the years ended December 30:

Pension Post Retirement Benefits Benefits

2007 2006 2007 2006

Discount rate 5.40% 5.29% 5.55% 5.75%Expected long-term return on plan assets 7.81% 7.97% n/a n/aRate of compensation increase 2.30% 2.28% n/a n/a

The measurement date used for plan assets and pension benefits and the measurement date used for post-retirementbenefits was December 30 for both 2007 and 2006. The most recent actuarial valuations for the pension plansand post-retirement benefit plans are dated January 1, 2007. The most recent actuarial valuation of the pension plansfor funding purposes was as of January 1, 2007, and the next required valuation will be as of January 1, 2008.

Plan assets are held in trust and their weighted average allocations were as follows as at the measurement date:

2007 2006

Equity securities 51% 60%Debt securities 34% 26%Other 15% 14%

100% 100%



The assumed health care cost trend used for measurement of the accumulated post-retirement benefit obligation is10% in 2008, decreasing gradually to 5% in 2013 and remaining at that level thereafter. Assumed health carecost trends have a significant effect on the amounts reported for health care plans. A one percentage pointchange in assumed health care cost trend rates would have the following effects:

1 Percentage 1 PercentagePoint Increase Point Decrease

Effect on total of service and interest cost $ 196 $ (156)Effect on post-retirement benefit obligation $ 2,055 $ (1,676)

OtherCertain of the Company’s subsidiaries have elected to act as self-insurer for certain costs related to all activeemployee health and accident programs. The expense for the year ended December 30, 2007 was $10,995(2006 – $11,871) under this self-insured benefit program.

NOTE 16 – CAPITAL STOCK

The capital stock of the Company is as follows:

AuthorizedAn unlimited number of preferred shares without nominal or par value, issuable in series.An unlimited number of Class “A” Multiple Voting Shares without nominal or par value, convertible at any time

at the option of the holder into Class “B” Subordinate Voting Shares on a one-for-one basis.An unlimited number of Class “B” Subordinate Voting Shares without nominal or par value, convertible into

Class “A” Multiple Voting Shares, under certain circumstances, if an offer is made to purchase the Class “A” shares.

Details of the issued and outstanding shares are as follows:December 30, December 30,

2007 2006Number Amount Number Amount

Class “A” Multiple Voting SharesBalance, beginning of year 4,440,544 $ 1,921 4,473,244 $ 1,939Converted from Class “A” to Class “B” (1) (12,800) (8) (32,700) (18)

Balance, end of year 4,427,744 $ 1,913 4,440,544 $ 1,921

Class “B” Subordinate Voting SharesBalance, beginning of year 28,420,898 $ 160,634 28,385,698 $ 160,564Converted from Class “A” to Class “B” (1) 12,800 8 32,700 18Issued under stock option plan (2) 535,750 14,716 2,500 52

Balance, end of year 28,969,448 $ 175,358 28,420,898 $ 160,634

TOTAL CAPITAL STOCK $ 177,271 $ 162,555

(1) During the year, the Company converted 12,800 (2006 –32,700) Class “A” Multiple Voting Shares into Class “B” Subordinate VotingShares at an average rate of $0.61 per share (2006 – $0.56 per share).

(2) During the year, the Company realized tax benefits amounting to $18 (2006 – $10) as a result of stock option transactions. The benefithas been credited to capital stock and is not reflected in the current income tax provision.


NOTE 17 – STOCK-BASED COMPENSATION AND OTHER STOCK-BASED PAYMENTS

Stock option plansUnder various plans, the Company may grant stock options on the Class “B” Subordinate Voting Shares at thediscretion of the Board of Directors, to senior executives and certain key employees. The exercise price is themarket price of the securities at the date the options are granted. Of the 6,000,000 Class “B” SubordinateVoting Shares initially reserved for issuance, 1,598,250 were available for issuance under the share optionplans as at December 30, 2007. Options granted vest according to a graded schedule of 25% per yearcommencing a day after the end of the first year, and expire no later than the year 2012.

The Company’s stock option plan is as follows:December 30, December 30,

2007 2006Options Weighted Options Weighted

Average AverageExercise Price Exercise Price

Options outstanding, beginning of year 1,364,000 $ 30.73 1,456,500 $ 30.88Granted 1,517,000 31.12 – –Exercised (535,750) 27.43 (2,500) 16.95Cancelled (36,500) 30.27 (90,000) 33.35

Options outstanding, end of year 2,308,750 $ 31.92 1,364,000 $ 30.73

Total exercisable, end of year 619,625 $ 33.50 942,000 $ 29.68

A summary of options outstanding at December 30, 2007 is as follows:

Total Outstanding Total Exercisable

WeightedWeighted Average WeightedAverage Remaining Average

Range of Exercise Exercise Contractual ExercisePrices Options Price Life Options Price

$29.27 - $32.62 1,618,500 $ 30.92 4.14 149,250 $ 30.68$33.45 - $38.84 690,250 34.28 1.50 470,375 34.40

2,308,750 $ 31.92 3.35 619,625 $ 33.50

Total compensation cost recognized in income for employee stock options for the year amounts to $5,163(2006 – $2,237), and was credited to contributed surplus.


NOTE 17 – STOCK-BASED COMPENSATION AND OTHER STOCK-BASED PAYMENTS (Cont’d)

The compensation cost recognized in income were computed using the fair value of granted options as at thedate of grant as calculated by the Black-Scholes option pricing model. The following weighted averageassumptions were used to estimate the fair values of options granted during the year:

2007 2006

Risk-free interest rate 4.00% n/aDividend yield 1.71% n/aExpected volatility 25.63% n/aExpected life 4.49 n/a

Deferred Share Unit PlanThe Company has a Deferred Share Unit Plan (the “DSU Plan”) under which an external director of the Companymay elect annually to have his or her director’s fees and fees for attending meetings of the Board of Directors orcommittees thereof paid in the form of deferred share units (“DSU’s”). A plan participant may also receivedividend equivalents paid in the form of DSU’s.The number of DSU’s received by a director is determined bydividing the amount of the remuneration to be paid in the form of DSU’s on that date or dividends to be paid onpayment date (the “Award Dates”) by the fair market value of the Company’s Class “B” Subordinate VotingShares on the Award Date. Upon termination of a director’s service, a director may receive, at the discretion ofBoard of Directors, either:

a) cash equal to the number of DSU’s credited to the director’s account multiplied by the fair market value of theClass “B” Subordinate Voting Shares on the date a notice of redemption is filed by the director; or

b) the number of Class “B” Subordinate Voting Shares equal to the number of DSU’s in the director’s account;c) a combination of cash and Class “B” Subordinate Voting Shares.

Of the 75,000 DSU’s authorized for issuance under the plan, 46,485 were available for issuance under the DSU planas at December 30, 2007. During the year, 12,553 additional DSU’s were issued (2006 – 7,242) and $392(2006 - $185) was expensed and credited to contributed surplus. An additional 240 DSU’s were issued fordividend equivalents and $7 (2006 – nil) was charged to retained earnings and credited to contributed surplus.At December 30, 2007, 28,515 (2006 – 15,722) DSU’s are outstanding with related contributed surplusamounting to $828 (2006 – $429).

NOTE 18 – COMMITMENTS AND GUARANTEES

a) The Company has entered into long-term operating lease agreements for buildings and equipment that expireat various dates through the year 2016. Rent expense was $26,579 and $24,961 in 2007 and 2006,respectively. Future minimum lease payments exclusive of additional charges, are as follows:

Fiscal Year Ending Amount

2008 $ 24,3262009 17,4392010 13,9332011 11,0142012 8,974Thereafter 11,860

$ 87,546


NOTE 18 – COMMITMENTS AND GUARANTEES (Cont’d)

b) The Company has entered into various licensing agreements for the exclusive use of certain brand names on itsproducts. Under these agreements, the Company is required to pay royalties as a percentage of sales withminimum royalties of $1,822 due in fiscal 2008 and $808 due in fiscal 2009 and 2010 combined.

c) In 2006, the Company entered into contracts to purchase raw materials. Under these agreements, theCompany must make specified minimum payments if raw material quantities it purchases fall below theminimum levels specified in the contract. As at December 30, 2007, the Company is subject to minimumpurchase commitments of approximately $17,236 due in 2008 and $5,666 due in 2009.

d) As at December 30, 2007, the Company has capital expenditure commitments of approximately $6,121and commercial letters of credit outstanding totalling $321.

e) In the normal course of business, the Company enters into agreements that may contain features which meetthe definition of a guarantee:

• The Company granted irrevocable standby letters of credit issued by highly rated financial institutions tovarious third parties to indemnify them in the event the Company does not perform its contractualobligations, such as payment of product liability claims, lease and licensing agreements, duties andworkers compensation claims. As at December 30, 2007, standby letters of credit outstanding totalled$15,488. As many of these guarantees will not be drawn upon, these amounts are not indicative offuture cash requirements. No material loss is anticipated by reason of such agreements and guaranteesand no amounts have been accrued in the Company’s consolidated financial statements with respect tothese guarantees. The Company has determined that the fair value of the non-contingent obligationsrequiring performance under the guarantees in the event that specified events or conditions occurapproximate the cost of obtaining the letters of credit.

• The Company has provided a financing provider the right, upon customer default on payment to thisfinancing provider, to sell back certain new products to the Company at predetermined prices. Themaximum exposure with respect to this guarantee as at December 30, 2007 is $1,196. Should theCompany be required to act under such agreement, it is expected that no material loss would result afterconsideration of possible resell recoveries. Historically, the Company has not made any payments undersuch vendor financing agreement and the estimated exposure have been accrued in the Company’sconsolidated financial statements with respect to this guarantee.

NOTE 19 – CONTINGENCIES

The breadth of the Company’s operations and the global complexity of tax regulations require assessments ofuncertainties and judgments in estimating the ultimate taxes the Company will pay. The final taxes paid aredependent upon many factors, including negotiations with taxing authorities in various jurisdictions, outcomes of taxlitigation and resolution of disputes arising from federal, provincial, state and local tax audits. The resolution of theseuncertainties and the associated final taxes may result in adjustments to the Company’s tax assets and tax liabilities.


NOTE 19 – CONTINGENCIES (Cont’d)

The Company is currently a party to various claims and legal proceedings. If management believes that a lossarising from these matters is probable and can reasonably be estimated, that amount of the loss is recorded, orthe minimum estimated liability when the loss is estimated using a range and no point within the range is moreprobable than another. When a loss arising from such matters is probable, legal proceedings against thirdparties or counterclaims are recorded only if management, after consultation with outside legal counsels, believessuch recoveries are likely to be realized. As additional information becomes available, any potential liabilityrelated to these matters is assessed and the estimates are revised, if necessary. Based on currently availableinformation, management believes that the ultimate outcome of these matters, individually and in aggregate, willnot have a material adverse effect on the Company’s financial position or overall trends in results of operations.

The fourth quarter of 2006 includes a charge of $4,472 for anti-dumping duties imposed upon the Company bythe United States Department of Commerce (“DOC”). These duties pertain to certain metal furniture imported fromChina into the United States that was subject to anti-dumping duties during the period between December 3, 2001through May 31, 2003. In relation to this charge the Company has a pending claim against a majorinternational law firm. That claim relates to a breach of professional duty by the law firm for its failure to timelyfile a request for an administrative review by the DOC of the duties imposed.

NOTE 20 – PRODUCT LIABILITY

The Company is insured for product liability by the use of both traditional insurance and self-funded insuranceprograms, which mitigate its product liability exposure.

The estimated product liability exposure was calculated by an independent actuary based on historical salesvolumes, past claims history and management and actuarial assumptions. The estimated exposure includesincidents that have occurred, as well as incidents anticipated to occur on units sold prior to December 30, 2007.Significant assumptions used in the actuarial model include management’s estimates for pending claims, productlife cycle, discount rates, and the frequency and severity of product incidents.

As at December 30, 2007, the Company’s recorded liability amounts to $30,571 (2006 – $32,593), whichrepresents the Company’s total estimated exposure related to current and future product liability incidents.

NOTE 21 – INSURANCE RECOVERY

In the second quarter of 2007, the Company has recorded a recovery of $2,200 in connection with the finalsettlement of a business interruption insurance claim made following a major fire at one of the Company’s primarysuppliers of particleboard in April 2006. The claim was made as a result of incurring increased costs of production,principally paying higher board prices. This insurance recovery was recorded as a reduction of these additionalcosts, in cost of sales. In 2006, the Company had recorded a recovery of $5,000 in connection with this claim.


NOTE 22 – INCOME TAXES

Variations of income tax expense from the basic Canadian federal and provincial combined tax rates applicableto income from operations before income taxes are as follows:


PROVISION FOR INCOME TAXES $ 35,187 33.0% $ 33,090 33.0%ADD (DEDUCT) EFFECT OF: Difference in effective tax rates of foreign subsidiaries (20,247) (19.0) (22,289) (22.2)Recovery of income taxes arising from

the use of unrecorded tax benefits (3,362) (3.2) (3,940) (3.8)Change in valuation allowance 3,806 3.6 2,432 2.4Non-deductible stock options 1,160 1.1 606 0.6Other non-deductible items 1,067 1.0 632 0.6Change in future income taxes

resulting from changes in tax rates (580) (0.5) 647 0.6Effect of foreign exchange 518 0.5 121 0.1Other - Net 1,587 1.4 110 0.1

$ 19,136 17.9% $ 11,409 11.4%

The tax effects of significant items comprising the Company’s net future income tax liabilities are as follows:


Capital and operating loss carryforwards $ 13,299 $ 8,379Employee pensions and post-retirement 3,473 2,725Other long-term liabilities 2,614 1,081Accounts receivable 3,969 3,613Inventories 9,698 6,887Accrued expenses 17,799 17,570Stock options 943 399Derivatives 454 480Property, plant and equipment (19,110) (21,482)Intangible assets (47,213) (44,595)Goodwill (13,578) (10,135)Deferred development costs (6,496) (4,212)Prepaid expenses (63) (126)Valuation allowance (7,325) (3,473)Foreign exchange and other (2,115) (2,081)

$ (43,651) $ (44,970)

The short-term and long-term future income tax assets and liabilities are as follows:


Short-term future income tax assets $ 35,228 $ 29,046Long-term future income tax assets (Note 9) 892 817Short-term future income tax liabilities (136) –Long-term future income tax liabilities (79,635) (74,833)

$ (43,651) $ (44,970)


NOTE 22 – INCOME TAXES (Cont’d)

As at December 30, 2007, the Company has $350 of capital losses with no expiry and $76,744 of operatingloss carryforwards, of which $37,311 will expire between 2008 and 2016 and $22,545 will expire between2022 and 2027. The remaining $16,888 has no expiration date. The Company also has unclaimed expensesavailable indefinitely to reduce federal income tax amounting to $2,392. The Company recognized a futureincome tax asset for all of these unused tax losses and other available income tax reductions but used a valuationallowance to reduce the related future income tax asset to the amount that is more likely than not to be realized.As limitations on the utilization of these tax assets may apply, the Company has provided a valuation allowancein the amount of $7,325 as at December 30, 2007 for the full value of the capital losses and unclaimedexpenses and for a portion of the operating loss carryforwards.

The Company has not recognized a future income tax liability for the undistributed earnings of its subsidiaries inthe current or prior years since the Company does not expect to sell or repatriate funds from those investments, inwhich case the undistributed earnings may become taxable. Any such liability cannot reasonably be determinedat the present time.

NOTE 23 – EARNINGS PER SHARE

The following table provides a reconciliation between the number of basic and fully diluted shares outstanding:


Weighted daily average number of Class “A” Multiple and Class “B” Subordinate Voting Shares 33,285,990 32,860,375

Dilutive effect of stock options and deferred share units 7,258 385

Weighted average number of diluted shares 33,293,248 32,860,760

Number of anti-dilutive stock options and deferred share units excluded from fully diluted earnings per share calculation 2,317,718 1,370,454

NOTE 24 – STATEMENT OF CASH FLOWS

Net changes in non-cash balances related to operations are as follows:


Accounts receivable $ 19,811 $ 188Inventories 13,137 (39,752)Prepaid expenses (126) 1,053Accounts payable, accruals and other liabilities (23,707) 10,810Income taxes 15,367 (1,701)

Total $ 24,482 $ (29,402)


NOTE 24 – STATEMENT OF CASH FLOWS (Cont’d)

Details of acquisition of subsidiary companies:


Acquisition of subsidiary companies (Note 4) $ (2,733) $ –Cash acquired (Note 4) 541 –

(2,192) –Balance of sale paid (594) (4,946)

$ (2,786) $ (4,946)

The components of cash and cash equivalents are:


Cash $ 18,449 $ 22,725Short-term investments 4,064 3,200

Cash and cash equivalents $ 22,513 $ 25,925

Supplementary disclosure:


Interest paid $ (22,989) $ (30,689)Income taxes paid $ (19,430) $ (20,217)Income taxes received $ 8,455 $ 12,832

Acquiring a long-lived asset by incurring a liability does not result in a cash outflow for the Company until theliability is paid. As such, the consolidated statement of cash flows excludes the following non-cash transactions:


Acquisition of property, plant and equipment financed by accounts payable and accrued liabilities $ 1,903 $ 1,088

Acquisition of intangible assets financed by accounts payableand accrued liabilities $ 8 $ 49


NOTE 25 – SEGMENTED INFORMATION

The Company’s significant business segments include:

• Juvenile Products Segment: Engaged in the design, sourcing, manufacturing and distribution of children’sfurniture and accessories which include infant car seats, strollers, high chairs, toddler beds, cribs and infanthealth and safety aids.

• Recreational / Leisure Segment: Engaged in the design, sourcing and distribution of recreational and leisureproducts and accessories which include bicycles, jogging strollers, scooters and other recreational products.

• Home Furnishings Segment: Engaged in the design, sourcing, manufacturing and distribution of ready-to-assemblefurniture and home furnishings which include metal folding furniture, futons, step stools, ladders and otherimported furniture items.

The accounting policies used to prepare the information by business segment are the same as those used toprepare the consolidated financial statements of the Company as described in Note 2.

The Company evaluates financial performance based on measures of income from segmented operations beforeinterest and income taxes. The allocation of revenues to each geographic areas are based on where the sellingcompany is located. Inter-segment sales were immaterial for the years ended December 30, 2007 and 2006.

Geographic Segments – Origin

December 30,

Property, plant and Total Revenue equipment and Goodwill

2007 2006 2007 2006

Canada $ 203,546 $ 189,152 $ 41,452 $ 41,151United States 1,025,958 1,061,049 349,038 355,500Europe 462,846 385,526 270,960 246,076Other foreign countries 121,322 135,441 4,147 631

Total $ 1,813,672 $ 1,771,168 $ 655,597 $ 643,358


NOTE 25 – SEGMENTED INFORMATION (Cont’d)

Industry SegmentsDecember 30,

Total Juvenile Recreational / Leisure Home Furnishings2007 2006 2007 2006 2007 2006 2007 2006

Total Revenue $ 1,813,672 $ 1,771,168 $ 963,572 $ 888,534 $ 374,783 $ 340,696 $ 475,317 $ 541,938

Cost of sales 1,375,418 1,363,421 668,248 625,032 301,835 276,718 405,335 461,671

Selling, general andadministrativeexpenses 218,661 209,886 143,043 132,651 38,260 36,907 37,358 40,328

Depreciation & amortization 39,755 36,876 32,171 29,849 1,736 1,079 5,848 5,948

Research and development costs 9,009 8,169 6,364 5,331 – – 2,645 2,838

Restructuring costs (Note 3) 14,509 3,671 7,575 3,671 – – 6,934 –

Earnings from Operations 156,320 149,145 $ 106,171 $ 92,000 $ 32,952 $ 25,992 $ 17,197 $ 31,153

Interest 23,466 29,899

Corporate expenses 26,226 18,972

Income taxes 19,136 11,409

Net income $ 87,492 $ 88,865

Total Assets $ 1,628,346 $ 1,594,160 $1,005,663 $ 907,693 $ 392,833 $ 389,058 $ 229,850 $ 297,409

Additions toproperty, plant and equipment – net $ 22,184 $ 14,236 $ 16,680 $ 11,799 $ 3,476 $ 753 $ 2,028 $ 1,684

Total AssetsDecember 30, December 30,

2007 2006

Total assets for reportable segments $ 1,628,346 $ 1,594,160Corporate assets 29,558 33,246

Total Assets $ 1,657,904 $ 1,627,406


NOTE 25 – SEGMENTED INFORMATION (Cont’d)

GoodwillThe continuity of goodwill by industry segment is as follows:

December 30,

Total Juvenile Recreational / Leisure Home Furnishings2007 2006 2007 2006 2007 2006 2007 2006

Balance, beginning of year $501,356 $481,518 $326,969 $307,259 $143,215 $143,087 $31,172 $31,172

Additions (Note 4) 945 – 945 – – – – –

Additional consideration – 128 – – – 128 – –Foreign exchange 22,934 19,710 22,934 19,710 – – – –

Balance, end of year $525,235 $501,356 $350,848 $326,969 $143,215 $143,215 $31,172 $31,172

Concentration of Credit Risk

Sales to the Company’s major customers as described in Note 14 were concentrated as follows:

Canada United States Foreign2007 2006 2007 2006 2007 2006

Juvenile 1.9% 2.2% 8.5% 12.6% – % – %Recreational/Leisure – % – % 8.1% 9.3% – % – %Home furnishings 1.8% 4.8% 9.5% 11.5% 4.1% 6.9%

NOTE 26 – SUBSEQUENT EVENT

On February 4, 2008, the Company signed a purchase agreement to acquire all the outstanding shares ofCannondale Bicycle Corporation, a leading designer, developer and manufacturer of high-end bicycles. Withsignificant operations in the United States and Holland, as well as locations in Switzerland, Japan and Australia,Cannondale is widely regarded as the bike industry’s leading innovator. The purchase also includes SugoiPerformance Apparel, located in Canada. The total value of the all-cash transaction will be $190,000 to$200,000 subject to Cannondale’s earnings results for the year ending June 30, 2008. The Company ispresently in the process of allocating the cost of this purchase to the net assets acquired.


Board of DirectorsMartin SchwartzPresident and Chief Executive OfficerMartin Schwartz is a co-founder of Ridgewood IndustriesLtd., which was merged with Dorel Industries Inc. and severalother associated companies to create the Company. Martinhas been President and CEO of Dorel since 1992.

Jeffrey SchwartzExecutive Vice-President, Chief Financial Officerand SecretaryJeffrey Schwartz, previously Vice President of the JuvenileDivision of the Company, has been the Company’s Vice-President, Finance since 1989. In 2003, Jeffrey’s title waschanged to Executive Vice President and CFO.

Jeff SegelExecutive Vice-President, Sales & MarketingJeff Segel is a co-founder of Ridgewood Industries Ltd. Jeffhas held the position of Vice-President, Sales & Marketingsince 1987. In 2003, Jeff’s title changed to Executive Vice-President, Sales & Marketing.

Alan SchwartzExecutive Vice-President, OperationsAlan Schwartz is a co-founder of Ridgewood Industries Ltd.Alan has held the position of Vice-President, Operationssince 1989. In 2003, Alan’s title was changed to ExecutiveVice-President, Operations.

Maurice Tousson*Lead DirectorSince January 2000, Maurice Tousson has been President andCEO of CDREM Inc., a retail chain known as Centre duRasoir/Personal Edge. He previously held executive positions atChateau Stores of Canada, Consumers’ Distributing and SportsExperts. Currently Mr. Tousson sits on the board of Le ChateauInc. and several privately held companies. Mr. Tousson holdsan MBA from Long Island University in New York.

Harold “Sonny” Gordon*DirectorHarold “Sonny” Gordon has been Chairman of DundeeCorporation (formerly Dundee Bancorp Inc.) since November2001. Previously, he was Vice-Chairman of Hasbro Inc., aspecial assistant to a Minister of the Government of Canada,and managing partner of Stikeman Elliot LLP. Mr. Gordonserves as a director of SFK Pulp Inc., Dundee Corporation,Transcontinental Inc., Pethealth Inc. and Madacy Holding Inc.

Dian Cohen**DirectorDian Cohen is a well-known broadcaster and author, recipientof the Order of Canada and other awards for economiccommunications excellence. In addition to serving on the DorelBoard of Directors, Cohen is a director of Norbord Industries,and is a trustee of Great Lakes Hydro Income Fund.

Alain Benedetti***DirectorAlain Benedetti, FCA, is the retired Vice-Chairman of Ernst &Young LLP, where he worked for 34 years. Alain hasextensive public and private company experience. He iscurrently Chair of the Canadian Institute of CharteredAccountants. Mr. Benedetti is a director of two other publiccompanies and a governor of a mutual fund group.

Robert P. Baird Jr.DirectorSince 2002, Robert Baird P. Jr. has been at KoninklijkePhilips Electronics N.V. In January 2008, he was named theTransformation Leader for combining the ConsumerElectronics and Domestic Appliance businesses into the newConsumer Lifestyle Sector. In 2007, he was Chairman of theInternational Retail Board.

* Members of the Audit Committee and the Human Resourcesand Corporate Governance Committee

** Member of the Human Resources and Corporate GovernanceCommittee

*** Member of the Audit Committee

Officers and Senior ManagementMartin SchwartzPresident and Chief Executive Officer

Camillo LisioVice-President, Chief Operating Officer

Alan SchwartzExecutive Vice-President, Operations

Jeff SegelExecutive Vice-President, Sales and Marketing

Jeffrey SchwartzExecutive Vice-President, Chief Financial Officer and Secretary

Frank RanaVice-President, Finance and Assistant-Secretary

Ed WyseVice-President, Global Procurement

Hani BasileChief Operating Officer, Juvenile Group

Norman BraunsteinChief Operating Officer, Home Furnishings Group


Major Operations

JuvenileNorth AmericaDorel Juvenile Group, Inc.Dave Taylor, President & CEO

(Head Office)2525 State StreetColumbus, Indiana, USA 47201Tel: (812) 372-0141

Dorel Juvenile GroupDesign and Development Centre 25 Forbes Blvd, Suite 4Foxboro, MA 02035Tel: 508-216-1923

Dorel Distribution CanadaMark Robbins, President873 Hodge StreetMontreal, Quebec, Canada H4N 2B1Tel: (514) 332-3737

EuropeDorel EuropeJean-Claude Jacomin, President & CEO

Dorel France SAZ.I. - 9, Bd du Poitou - BP 90549309 Cholet CedexFRANCETel: 00 33 (0)2 41 49 23 23

Dorel Italia SpAVia Verdi, 1424060 Telgate (BERGAMO)ITALYTel: 0039 035 4421035

Dorel Portugal S.A.Parque Industrial Da VarzielaRua nº 1 - Arvore4480 - 109 Vila do CondePORTUGAL Tel: 252 248 530

Dorel Hispania S.A.C/Pare Rodès n°26 Torre A 4°Edificio Del Llac Center08208 Sabadell (BARCELONA)SPAINTel: 902 11 92 58

Dorel Juvenile Switzerland S.A.Chemin de la Colice 4 (Niveau 2)1023 CrissierSWITZERLANDTel: 021 661 28 40

Dorel BelgiumBudasteenweg 7 1830 MachelenBELGIUMTel: 02 257 44 70

Maxi Miliaan BVKorendjik 55704 RD HelmondNETHERLANDSTel: 0492 57 81 12

Dorel Germany GMBHAugustinusstrasse 11 bD-50226 Frechen – KönigsdorfGERMANYTel: 02234 96 430

Dorel (U.K.) LimitedHertsmere House, Shenley RoadBorehamwood, Hertfordshire WD6 1TE UNITED KINGDOMTel: 020 8236 0707

OceaniaRobert Berchick, President & CEO

IGC Dorel Pty655-685 Somerville RoadSunshine WestMelbourneVICTORIA, 3020AUSTRALIATel: 61-3-8311-5300

IGC Dorel (New Zealand)P.O Box 82377 Highland ParkMt Wellington New ZealandTel : 0800 62 8000

Home FurnishingsAmeriwood IndustriesRick Jackson, President & CEO

(Head Office)410 East First Street SouthWright City, Missouri, USA 63390Tel: (636) 745-3351

458 Second AvenueTiffin, Ohio, USA 44883Tel: (419) 447-7448

3305 Loyalist StreetCornwall, Ontario, Canada K6H 6W6Tel: (613) 937-0711

Altra FurnitureSteve Warhaftig, Vice-Presidentand General Manager410 East First Street SouthWright City, Missouri, USA 63390Tel: (636)745-3351

Dorel Home ProductsIra Goldstein, Vice-President and General Manager12345 Albert-Hudon Blvd., Suite 100Montreal, Quebec, Canada H1G 3K9Tel: (514) 323-1247

Cosco Home & OfficeJeff Cartwright, President2525 State StreetColumbus, Indiana, USA 47201Tel: (812) 372-0141

Dorel Asia SRL Bruce Kaufman, Managing DirectorSt. Lawrence Main RoadChrist Church, BarbadosTel: (246) 418-1650

Recreational/LeisureCannondale Sports GroupJeff Frehner, President

(Head Office)16 Trowbridge DriveBethel, Connecticut, USA 06801Tel: (203) 749-7093

Cannondale USACannondale Bicycle Corporation172 Friendship Road, Bedford,Pennsylvania, 15522-6600, USATel: (814) 623-9073

Cannondale EuropeHanzepoort 277570 GC, Oldenzaal, NetherlandsTel: + 41 61.4879380

Cannondale AustraliaUnit 6, 4 Prosperity Parade,Warriewood N.S.W., 2102, AustraliaTel: (02) 9979 5851

Cannondale JapanNamba Sumiso Building 9F,4-19, Minami Horie 1-chome,Nishi-ku, Osaka 550-0015, JapanTel: 06-6110-9390

SugoiStan Mavis, President144 East 7th AvenueVancouver, British ColumbiaCanada V5T 1M6Tel: (604) 875-0887

Pacific CycleAlice Tillett, President

(Head Office)4902 Hammersley RoadMadison, Wisconsin, USA 53711Tel: (608) 268-2468

4730 E. Radio Tower LaneP.O. Box 344Olney, Illinois, USA 62450-0344Tel: (618) 393-2991

2041 Cessna DriveVacaville, California, USA 95688-8712Tel: (707) 452-1500

Dorel – Consulting (Shanghai) Company Ltd.Jenny Chang, Vice-President of Far Eastern OperationsRoom 205, No. 3203, Hong Mei RoadMinghang District, Shanghai 201103P.R. ChinaTel: 011-86-21-644-68999

Showrooms 2855 Argentia Road, Unit 4Mississauga, Ontario, Canada L5N 8G6Tel: (905) 814-0854

Commerce and Design Building201 West Commerce Street, 9th FloorHighpoint, North Carolina, USA 27260Tel: (336) 889-9130

Juvenile


Home Furnishings

Our Premium Brands

Table of Contents3 Financial Highlights 4 Message to Shareholders 8 Message from Chief Operating Officer 10 Juvenile

12 Recreational/Leisure 14 Dorel Welcomes Cannondale and Sugoi 16 Home Furnishings

17 Asian Operations 20 Management’s Discussion and Analysis 43 Consolidated Financial Statements

79 Board of Directors 80 Major Operations, Corporate Information

At a Glance Head Office

Dorel Industries Inc.1255 Greene Avenue, Suite 300Montreal, Quebec, Canada H3Z 2A4

Lawyers

Heenan Blaikie LLP1250 René-Lévesque Blvd. WestSuite 2500Montreal, Quebec, Canada H3B 4Y1

Auditors

KPMG LLP600 de Maisonneuve Blvd. WestSuite 1500Montreal, Quebec, Canada H3A 0A3

Transfer Agent & Registrar

Computershare Investor Services Inc.100 University Avenue, 9th FloorToronto, Ontario, Canada M5J [email protected]

Corporate InformationInvestor Relations

MaisonBrisonRick Leckner1320 Graham Blvd., Suite 132T.M.R., Quebec, Canada H3P 3C8Tel.: (514) 731-0000Fax: (514) 731-4525email: [email protected]

Stock Exchange Listing

Share SymbolsTSX – DII.B; DII.A

Annual Meeting of Shareholders

Tuesday, May 27, 2008, at 10 amRitz-Carlton HotelOval Ballroom1228 Sherbrooke Street WestMontreal, Quebec H3G 1H6

Dorel Industries Inc. (TSX: DII.B, DII.A) is a world class juvenile products and bicycle company. Established in1962, Dorel creates style and excitement in equal measure to safety, quality and value. The Company’s lifestyleleadership position is pronounced in both its Juvenile and bicycle categories with an array of trend-settingproducts. In the Juvenile segment, Dorel’s powerfully branded products such as Quinny, Maxi-Cosi, Safety 1stand Bébé Confort have shown the way to safety, originality and fashion. Similarly, its highly popular brandssuch as Cannondale, Schwinn, GT, Mongoose and Sugoi have made Dorel a principal player with bothindependent bicycle dealers and mass merchants. Dorel’s Home Furnishings segment markets a wide assortmentof furniture products, both domestically produced and imported. The Company exerts relentless innovation andmarketing flair across all of its divisions. Dorel is a $2 billion company with forty-six hundred employees,facilities in seventeen countries, and sales worldwide.

US operations include Dorel Juvenile Group USA; the Cannondale Sports Group; Pacific Cycle; AmeriwoodIndustries which produces ready-to-assemble furniture; Altra Furniture; and Cosco Home & Office. In Canada,Dorel operates Dorel Distribution Canada, Dorel Home Products and Sugoi. Abroad, operations includeDorel Europe and IGC in Australia, a manufacturer and distributor of juvenile products. Dorel Asia sources andimports home furnishings products. Dorel China has eight offices which oversee the sourcing, engineering andlogistics of the Company’s Asian supplier chain.

Corporate Profile

Written and Produced by MaisonBrisonTSX : DII.A; DII.B

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1255 Greene Avenue, Suite 300Montreal, Quebec, Canada H3Z 2A4

T: 514.934.3034 F: 514.934.9932

www.dorel.comCert no. SW-COC-1741

A WORLD CLASS JUVENILE PRODUCTS AND BICYCLE COMPANY

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a world class

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