According to the Company’s FORM 10-Q for the quarterly period ended June 30, 2004, the Court subsequently approved the settlement agreement and, on July 12, 2004, entered a Final Judgment and Order of Dismissal with Prejudice in the case. As a result of the settlement and dismissal, all claims against the Company and its directors and officers relating to this matter have been resolved.
By the Notice of Pendency, a proposed settlement has been reached by the plaintiffs and defendants. The proposed settlement creates a fund in the amount of $4,000,000 in cash and will include interest that accrues on the fund prior to distribution (the "Settlement Fund"). Based on Representative Plaintiff's Counsel's estimate of the number of shares entitled to participate in the settlement, and the anticipated number of claims to be submitted by Class Members, the average distribution per share would be approximately $0.08 before deduction of court-approved fees and expenses. The actual recovery from the fund will depend on a number of variables including the number of claimants, the number of shares purchased, the expense of administering the claims process, and the timing of the purchases and sales, if any.
If the settlement is approved by the Court, counsel for the plaintiffs will apply to the Court for attorneys' fees of 25% of the settlement proceeds and reimbursement of out-of-pocket expenses not to exceed $290,000.00 to be paid from the settlement proceeds. If the amount requested by counsel is approved by the Court, the average cost per share would be $0.02. The average cost per share could vary depending on the number of shares for which claims are filed.
The original complaint charges AK Steel, Armco and certain of their officers and directors with violations of the federal securities laws. The complaint alleges that defendants' false and misleading statements about AK Steel's ability to renegotiate its contracts at the end of 1999, the minimal impact of a labor dispute in its Mansfield facility, the positive impact on AK Steel's results of price increases in the steel industry and an improved cost structure which would result in 2000 EPS of 2.65 artificially inflated the price of AK Steel stock to a Class Period high of $24-5/16. This upsurge in AK Steel's stock enabled AK Steel to acquire Armco in a stock-for-stock acquisition for fewer AK Steel shares than AK Steel otherwise would have had to issue had AK Steel's stock price been lower and permitted AK Steel to complete the exchange of $450 million in Senior Notes in September 1999. Then, on January 25, 2000, AK Steel revealed disappointing 4thQ 99 earnings and a huge drop in projected 2000 earnings versus earlier statements and exposed the problems AK Steel was having, including the adverse effects caused by the labor dispute in Mansfield, Ohio, the fact that AK Steel's costs were increasing due to increases in spot market for raw materials, and, because AK Steel was bound under long-term contracts which limited its ability to raise prices, its margins would not benefit from price increases in the market, all of which would severely reduce its 2000 earnings. On these disclosures, AK Steel's stock fell by 25% in one day to $12-3/8, on huge volume of more than 9.3 million shares, later falling to as low as $8 per share. AK Steel's stock price has not recovered and currently trades at less than $12 per share.