Dorel Industries announced that due to a dispute with one of its insurance carriers over the aggregate amount of insurance available to the Company, including one claim that came due this month, Dorel is recording a charge for liability claims in the amount of US$6.5 million pre-tax in the first quarter ended March 31, 2004. The insurance company's refusal to honour its policy, despite fully paid up premiums, has resulted in a shortfall in Dorel's planned liability reserves. The US$6.5 million pre-tax expense is equivalent to a US$0.13 per share after-tax impact and will be recorded in the Company's first quarter results.
As a result, Dorel is reducing its guidance for fiscal 2004 by US$0.13
per share, to earnings of between US$3.12 to US$3.22 per share.
Dorel President and CEO Martin Schwartz said the situation with TIG
Specialty Insurance Solutions, of Irving Texas is highly irregular and most
disappointing. TIG Specialty Insurance Solutions is a subsidiary of Fairfax
Financial Holdings Inc. “We adamantly disagree with the position being
asserted by the insurer and have engaged in legal proceedings with the
insurance company. We are optimistic that we will be able to prove our
position. Should a decision be made in our favour, the recovery will be
included in our net income in future periods.
“Mr. Schwartz said that Dorel's 2004 budget has sufficient reserves in
place to address liability issues for the balance of the year. “We have
routinely budgeted for our liability requirements through a combination of
self-insurance and insurance from carriers. TIG Insurance's refusal to honour
its obligations has created a temporary situation which we must fund.”
