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Dorel Sports

Dorel Sports had a record year in cash generation. While rev-
enue was down year-over-year, two of the three businesses
improved operating profits due to higher margins. Pacific
Cycle, our mass merchant and sporting goods division posted
strong profits on the back of exciting progress in product in-
novation and tight cost controls. Its flagship brand, Schwinn,
maintained its popularity andbenefited from considerable
exposure and positive social media commentary. Caloi had a
good yeardespite the political and economic turmoil in Brazil.
While volumes were lower, price increases, tightcontrol of
costs and working capital, as well as robust new innovation
combined to deliver strongresults. Caloi has an exciting port-
folio in place for the 2017 model year.

Cycling Sports Group (CSG) had a disappointing 2016, mirror-
ing the difficult year the industry experienced in the inde-
pendent bicycle dealer (IBD) channel. Cannondale’s reduced
sales followed the trend of a softer global bike market as
well as changes in the North American IBD environment.
Dealers shifted their purchasing patterns, demanding more
just-in-time deliveries and moving previous fourth quarter
orders to the first half, in line with consumer demand during
the actual cycling season. Despite this, CSG maintained low
inventory levels and discounting was not as prevalent as it
was with some of our competition. The Cannondale brand
remains as strong as ever, with exciting products and excel-
lent reviews.

Dorel Sports management is responding with a comprehen-
sive plan for a better 2017. The right mix of people is key to
flawless execution, passionate bike people working along-
side seasoned business people. Talent is being upgraded,
enhanced training platforms have been created to ensure
retail sales staff have the knowledge to complete the sale.
The segment is also working on reducing costs by exiting or
reconfiguring non-core businesses, streamlining leadership
and taking a fresh look at sponsorships. Inventory is another
focal point with objective of ensuring the right inventory at
the right time in the right place. To that end, steps have been
taken to considerably reduce delivery times across North
America and to have product in dealers’ hands for the busy
weekend sales periods. We are confident that with these ini-
tiatives and many others, Dorel Sports will be healthy in any
storm and will thrive in the market upturn.

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