Dorel Industries sewcond quarter net earnings rose 21.4 % to $21.7 million or 66 cents per diluted share compared to $17.9 million or 54 cents per share earned in the second quarter a year ago. Pre-tax earnings for the quarter increased by 32.3% to $25.3 million, up from $19.1 million in the prior year. Revenue for the period increased 6.4% to $435 million compared to 2004 second quarter revenues of $408.9 million. Six month earnings climbed 31.2% to $49 million or $1.49 per diluted share compared with $37.3 million or $1.13 per share a year ago. Year-to-date pre-tax earnings have increased by 41%, increasing from $42.0 million in 2004 to $59.1 million in the current year. Year-to-date revenue was $906.6 million, up 12.5% from last year's first half revenue of $805.8 million.

All three segments contributed to both the second quarter and year-to- date revenue improvement. Organic revenue growth was 5.1% in the quarter and 9.6% year-to-date, excluding both the impact of currency variations and the additional month of revenue in 2005 versus 2004 in the Recreational/Leisure segment. Gross margins remained in line with the prior year for both the quarter and year-to-date.


    <<
    -------------------------------------------------------------------------
                       Summary of Financial Highlights
    -------------------------------------------------------------------------
                        Second quarter ended June 30
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         All figures in thousands of US $, except per share amounts

                                               2005        2004      Change %
    -------------------------------------------------------------------------
    Revenue                                 434,983     408,880         6.4 %
    Net income                               21,745      17,908        21.4 %
      Per share - Basic                        0.66        0.55        20.0 %
      Per share - Diluted                      0.66        0.54        22.2 %
    -------------------------------------------------------------------------
    Average number of shares
     outstanding -
     diluted weighted average            32,940,164  32,955,200
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                       Summary of Financial Highlights
    -------------------------------------------------------------------------
                          Six months ended June 30
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         All figures in thousands of US $, except per share amounts

                                               2005        2004      Change %
    -------------------------------------------------------------------------
    Revenue                                 906,560     805,844        12.5 %
    Net income                               48,950      37,308        31.2 %
      Per share - Basic                        1.49        1.14        30.7 %
      Per share - Diluted                      1.49        1.13        31.9 %
    -------------------------------------------------------------------------

    Average number of shares
     outstanding -
     diluted weighted average            32,951,503  32,921,590
    -------------------------------------------------------------------------
    >>

Second quarter Juvenile revenue was up 5.1% to US$192.8 million compared to US$183.6 million during the same period a year ago. Earnings from operations increased 74.3% to US$19.8 million from US$11.4 million last year. For the first half, revenue rose 10.6% to US$436.3 million from US$394.6 million last year, while earnings from operations increased 61.6% to US$47.3 million, from US$29.3 million.

Excluding the impact of currency changes, overall, year-to-date organic revenue growth in the Juvenile Segment was 8%. Year-to-date, revenues in Europe have increased by 11.3%, while North American year-to-date revenues are up 1.3%. In the second quarter, the revenue increase was driven by European operations where the first quarter's success of new travel systems continued, contributing to particularly strong gains in Germany, Italy, the United Kingdom, Portugal and Spain. In North America, revenues declined from last year's second quarter. This was due to a combination of particularly strong shipments in this year's first quarter and some customers delaying orders into the third quarter of 2005 in anticipation of new product introductions.

European gross margins improved over the prior year due mainly to an enhanced operational performance in Holland and the stronger Euro. In contrast, North American gross margins were negatively impacted by higher raw material prices, a less profitable product mix and competitive pricing pressures. Operating expenses declined by US$5.7 million in the quarter and US10.5 million year-to-date, due mainly to lower product liability costs.

Home Furnishings revenue increased 7.9% to US$131.9 million during the second quarter compared to US$122.3 million a year ago. Earnings from operations were flat at US$6.2 million versus US$6.3 million last year. For the six months, revenue grew 9.3% to US$277.3 million from US$253.8 million last year. Earnings from operations for the first half were up 12.2% to US$17 million from US$15.1 million last year.

Successful new product placements in several categories by Dorel Asia and good retail acceptance of newly designed futons helped to increase combined sales of furniture by Ameriwood and Dorel Asia by 8% in the quarter and 7.9% year-to-date. Cosco Home & Office sales of folding furniture and other imported home furnishings also increased both in the quarter and year-to-date by 7.7% and 14.9% respectively.

Raw material pricing pressure has eased from last year, reflected both in stabilized board prices, the principal commodity in ready-to-assemble (RTA) furniture products, and declining steel prices, a significant component in futons and folding furniture. However, manufacturing inefficiencies at the segment's RTA plants continue to be the main reason for lower than expected earnings. The new Ameriwood management team is implementing several business optimization initiatives, including a core focus on low cost, efficient production of RTA furniture as well as process and organizational changes to achieve substantial productivity enhancements.

Dorel President and CEO, Martin Schwartz stated the initiatives are far ranging. “We are taking a look at things from the ground up. Everything is being addressed, including sales and operations planning, inventory management, procurement, customer service and speed-to-market via an already implemented and greatly enhanced new product development capability. A new design system is now in place with designers and product development teams able to bring product ideas to market in less time. The highly visible and successful launch of California Closets branded RTA products during the second quarter is a result of these new capabilities. Ameriwood's production efficiencies for the balance of fiscal year 2005 will continue to be challenged as it recalibrates its operations. The aggressive change initiatives are anticipated to reposition the Company for RTA furniture product growth in 2006.”

Second quarter Recreational/Leisure revenue increased 7% to $110.2 million compared to last year's $103 million. Earnings from operations rose 6.3% to $13.4 million from $12.6 million. For the six months, revenue was up 22.5% to US$193 million from US$157.5 million in 2004. Of this increase, sales in January 2005 were US$12.3 million. As the Pacific Cycle acquisition became effective in February 2004, this additional month of revenue in 2005 results in organic year-to-date sales growth of 14.7%. First half earnings from operations increased 15.9% to US$22.1 million from US$19.1 million last year. Sales increases occurred across several product categories and brands.

The Juvenile Segment is expected to experience a good second half with new listings in North America and several new product introductions. In addition, operating costs continue to run at levels lower than last year principally due to reduced product liability costs, as well as other cost containment measures. Continued success in Europe is expected to contribute to the segment's overall progress.

As previously announced and detailed above, Dorel's ready-to-assemble (RTA) furniture division is facing challenges. Plans are being implemented in response to lower sales volumes and factory inefficiencies. Partly offsetting the RTA results are better than expected performances at Dorel Asia and Cosco Home & Office, where new product categories and additional customers are driving sales increases.

As also previously disclosed, despite increased year- to-date sales within the majority of its product categories, revenues in the Recreational/Leisure segment are expected to be lower in the second half of 2005 versus 2004. Retail sales of the Sting-Ray model bicycle continue to be above average as compared to other bicycle categories and remain a key part of the Schwinn portfolio. However, second half sales of the Sting-Ray will be lower than the unprecedented record levels achieved in the second half of 2004, resulting in lower second half earnings than in the prior year.

“We are pleased with the first half performance and the year-over-year earnings increase of 31.2%. As announced in July, while we anticipate higher pre-tax earnings over 2004, challenges at our Ameriwood division and lower second half sales at Pacific Cycle will affect earnings in the second half this year. As a result, we currently see fiscal 2005 after-tax earnings to be within the same range as 2004,” concluded Mr. Schwartz.



                            DOREL INDUSTRIES INC.
                      CONSOLIDATED STATEMENT OF INCOME
         ALL FIGURES IN THOUSANDS OF US $, EXCEPT PER SHARE AMOUNTS

                              Second quarter ended          Six months ended
                          ------------------------- -------------------------
                              June 30,     June 30,     June 30,     June 30,
                                 2005         2004         2005         2004
                           (unaudited)  (unaudited)  (unaudited)  (unaudited)
                          -----------  -----------  -----------  -----------

    Sales                 $   429,789  $   404,163  $   895,087  $   797,718

    Licensing and
     commission income          5,194        4,717       11,473        8,126
                          ------------ ------------ ------------ ------------

    TOTAL REVENUE             434,983      408,880      906,560      805,844
                          ------------ ------------ ------------ ------------

    EXPENSES
      Cost of sales           337,775      318,070      700,183      619,833
      Operating                52,043       53,313      107,792      107,842
      Depreciation and
       amortization             9,777        8,890       19,450       18,276
      Research and
       development costs        2,462        1,978        4,652        3,676
      Interest on
       long-term debt           7,228        7,191       14,746       13,745
      Other interest              437          345          594          514
                          ------------ ------------ ------------ ------------
                              409,722      389,787      847,417      763,886
                          ------------ ------------ ------------ ------------

    Income before
     income taxes              25,261       19,093       59,143       41,958

      Income taxes              3,516        1,185       10,193        4,650
                          ------------ ------------ ------------ ------------

    NET INCOME            $    21,745  $    17,908  $    48,950  $    37,308
                          ------------ ------------ ------------ ------------
                          ------------ ------------ ------------ ------------

    EARNINGS PER SHARE
      Basic               $      0.66  $      0.55  $      1.49  $      1.14
                                 -----        -----        -----        -----
                                 -----        -----        -----        -----
      Diluted             $      0.66  $      0.54  $      1.49  $      1.13
                                 -----        -----        -----        -----
                                 -----        -----        -----        -----

    SHARES OUTSTANDING
      Basic - weighted
       average             32,825,827   32,712,577   32,814,402   32,679,375
      Diluted -
       weighted average    32,940,164   32,955,200   32,951,503   32,921,590