2010 Annual Report - Dorel Industries

In Recreational / Leisure a new facility in the Metro-Vancouver area in British Columbia for the Apparel Footwear Group Division(AFG) was opened. At a cost of $2.5 million, the newly renovated 70,000-square-foot complex for manufacturing and distributionalso serves as the Global Headquarters for design and marketing for AFG.During the year, the Company secured new long-term financing by issuing $50 million of Series “A” Senior Guaranteed Notesand $150 million of Series “B” Senior Guaranteed Notes. The principal repayment of the Series “A” Senior Guaranteed Notes isdue in April 2015, whereas the principal repayments of the Series “B” Senior Guaranteed Notes begin in April 2013 with the finalpayment due in April 2020. In addition, an extension of a revolving credit facility was completed. This three-year agreement expiresJuly 1, 2013 and allows for borrowing up to $300 million and contains provisions to borrow up to an additional $200 million. As ofDecember 30, 2010, Dorel was compliant with all covenant requirements and expects to be so going forward.Contractual ObligationsThe following is a table of a summary of the contractual obligations of the Company as of December 30, 2010:less than 1 - 3 4 - 5 AfterContractual Obligations Total 1 year years years 5 years$ $ $ $ $Long-term debt repayments 329,948 10,667 132,778 70,434 116,069Interest payments (1) 61,489 15,400 25,891 6,647 13,551Net operating lease commitments 126,948 32,430 45,426 22,039 27,053Contingent considerations 28,002 — 28,002 — —Capital addition purchase commitments 5,872 5,872 — — —Minimum payments under licensing agreements 7,552 5,596 1,956 — —Total contractual obligations 559,811 69,965 234,053 99,120 156,673(1)Interest payments on the Company’s revolving bank loans are calculated using the interest rate in effect as at December 30, 2010 andassume no debt reduction until due date in July 2013, at which point it is assumed the loan would be paid in full. Interest payments on the Company’s notes are asspecified in the related note agreements.The Company does not have significant contractual commitments beyond those reflected in the consolidated balance sheet, thecommitments in Note 20 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 as agreements thatare enforceable and legally binding on the Company and that specify all significant terms, including: fixed or variable priceprovisions; and the approximate timing of the transaction. With the exception of those listed above, the Company does not havesignificant agreements for the purchase of raw materials or finished goods specifying minimum quantities or set prices that exceedits short term expected requirements. Therefore, not included in the above table are Dorel’s outstanding purchase orders for rawmaterials, finished goods or other goods and services which are based on current needs and are fulfilled by its vendors on relativelyshort timetables.As new product development is vital to the continued success of Dorel, the Company must make capital investments in researchand development, moulds and other machinery, equipment and technology. It is expected that the Company will invest atleast $35.0 million over the course of 2011 to meet its new product development and other growth objectives. The Companyexpects its existing operations to be able to generate sufficient cash flow to provide for this and other requirements as they arisethroughout the year.Annual Report 2010 17