According to a press release dated June 19, 2004, U.S. District Judge John Moore II of Jacksonville approved the company's $6.75 million settlement, resolving nine consolidated securities-fraud suits. PSS World Medical officials said earlier that insurance would cover about $6.5 million of the settlement.
The Complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between October 26, 1999 and September 1, 2000, thereby artificially inflating the price of PSSI securities. Throughout the class period, defendants issued multiple press releases and filed quarterly reports and an annual report with the Securities and Exchange Commission which materially overstated the Company's net income in violation of Generally Accepted Accounting Principles. On June 22, 2000, Defendants issued a press release announcing its year end results and the fact that it had entered into a definitive stock-for-stock merger agreement with Fisher Scientific International, Inc. (``Fisher''). The market reacted favorably to this announcement because of the value of the exchange ratio of Fisher's shares. One of the key terms of the merger, which was belatedly disclosed by the Company, was that the Company had to report EBITDA of not less than $23 million for the quarter in order for the merger to be consummated. In an August 8, 2000 press release, defendants announced that they were in compliance with this provision of the merger agreement and that the merger was expected to proceed. On September 1, 2000, the Company issued a press release reporting that the merger agreement had been terminated. In response to this announcement, the market reevaluated the true value of PSSI's shares, which had been buoyed by the potential exchange value of Fisher's stock during the Class Period, and, accordingly, shares of PSSI's stock, which had closed at $6 3/8 prior to announcement of the merger termination, closed at $4 13/16 on an inordinate volume of 5,730,200 shares upon dissemination of the news. As the sell-off continued, the price of the Company's stock settled into the range of approximately $2 3/4 - $3 3/4. While Fisher had abandoned the merger because of the results of its own due diligence review of the Company's books and records, the public only became aware of the truth on June 27, 2001. On that date, PSSI filed its Form 10-K for the fiscal year ended March 31, 2001 with the SEC and disclosed, for the first time, the fact that the Company's internal controls over inventory, accounts payable, sales, and accounts receivable were, at all relevant times, materially deficient and that the Company had previously issued financial statements for the quarter ended June 30, 2000 which were materially misleading. As a result of these problems, the Company would be forced to restate its previous financial data, and would also cause the Company's EBITDA to be reduced, below the threshold that would have allowed the merger to be completed.