On October 19, 2004, the plaintiff voluntarily moved to dismiss the action without prejudice. On November 9, 2004, the Court entered the Order dismissing the case.
According to a press release dated July 22, 2004, the complaint charges Reynolds, Lloyd G. Waterhouse, and Dale L. Medford with violations of the Securities Exchange Act of 1934. More specifically, the Complaint alleges that the Company failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them: (1) that the Company knew or recklessly disregarded the fact that market demand for the Company's cutting edge products, such as Reynolds Generation Series, was lackluster; (2) that as a consequence of the foregoing, the Company's strategy for growth was seriously flawed as the Company was forced to expend additional resources to pitch new products to unwilling customers, while neglecting the marketing of its more conventional revenue-producing products; and (3) that, as a result of the foregoing, defendants lacked a reasonable basis for their positive statements about the Company and their earnings projections.
On June 24, 2004, Reynolds announced that it anticipated revenues and earnings would be lower than its previous estimates when the Company reported results for its third fiscal quarter on July 21, 2004. News of this shocked the market. Shares of Reynolds fell $7.28 per share or 23.81 percent, on June 25, 2004, to close at $23.30 per share. On July 7, 2004, Reynolds announced that CEO, Chairman and President Lloyd 'Buzz' Waterhouse had resigned from the Company and its board of directors, effective immediately. On the news shares of Reynolds plummeted further. Shares of Reynolds fell a further $.83 per share or 3.63 percent, on July 7, 2004, to close at $22.12 per share.