The complaint charges certain of Huffy's officers and directors with violations of the Securities Exchange Act of 1934. Huffy is a diversified sporting goods company. The Company markets basketball equipment, sports balls and other outdoor games under various brand names.
More specifically, the complaint alleges that throughout the Class Period, defendants issued numerous positive statements concerning the Company's growth and long-term prospects. As alleged in the Complaint, these statements were materially false and misleading because Defendants failed to disclose and/or misrepresented the following adverse facts which were known to defendants or recklessly disregarded by them at all relevant times: (i) that the Company was experiencing problems integrating the McCalla and Gen-X acquisitions such that the Company was experiencing rising expenses and was not generating the benefits from the acquisitions that it had represented to investors; (ii) that the Company's Canadian operations were engaged in improper accounting practices, thereby overstating the Company's revenues and income. Specifically, the Company was failing to properly account for customer returns and reductions, was failing to timely write down the value of bad debt and was overstating the value of its inventory; (iii) that the legacy costs associated with certain of the Company's discontinued operations were continuing to mount and were increasingly draining cash from the Company; (iv) that, as a result of the foregoing, in addition to continued weakness in the Company's core lines of business, the Company's financial condition was dramatically eroding such that it was approaching insolvency and would soon have to file for bankruptcy; and (v) based on the foregoing, Defendants lacked a reasonable basis for their positive statements concerning the Company's increased sales growth and long term growth prospects.
The complaint further alleges that on or around August 13, 2004, Huffy issued a press release announcing that, in the course of its review of the Corporation's financial statements for the first quarter of 2004, it determined that certain accounting entries, estimated in the range of $3.5 to $5.0 million related primarily to customer deductions, credits and reserves for inventory valuation and doubtful account receivables for Huffy Sports Canada (formerly known as Gen-X Sports) were more properly reflected in the period ended December 31, 2003 rather than in the first quarter of 2004. As a result, the next trading day, the price of Huffy common stock declined from $0.58 per share to $0.35 per share, a decline of 40 percent.
On August 16, 2004, the Company announced that the New York Stock Exchange ("NYSE") has determined that trading of Huffy common stock should be suspended immediately and that the NYSE will take steps to remove Huffy as a listed company on the NYSE. Finally, on October 20, 2004, the Company announced that the Company and all of its United States and Canadian subsidiaries have filed voluntary petitions for protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Ohio.
According to the docket, a Consolidated Complaint was filed on July 29, 2005, by the Alaska Hotel Group. On September 27, 2005 all defendants filed a motion to dismiss the complaint. On September 17, 2008, Judge Walter H. Rice granted in part and denied in part the defendants’ motion to dismiss. On June 5, 2009, the defendants filed a Motion for Summary Judgment Based on Lead Plaintiffs' Lack of Standing--Notice of Filing Under Seal and a Motion for Partial Summary Judgment On Plaintiffs' Allegations Regarding The April 16, 2002 and June 17, 2002 Huffy Corporation Press Releases.
On February 10, 2010, the Court ordered that the above captioned cause be administratively processed in anticipation of a final agreement for preliminary approval, including certification of the class within 60 days.
May 12, 2010, a Stipulation of Settlement Agreement and Release was executed by the parties involved.
On May 24, 2010, a Corrected Stipulation of Settlement Agreement and Release was executed by the parties involved.
On June 04, 2010, an Order Preliminarily Approving The Stipulation Of Settlement Agreement And Release, and Providing For Notice was issued by the Court.
On October 20, 2010, an Order Approving Plan of Allocation of Settlement Proceeds; an Order Awarding Attorneys' Fees and Expenses To Plaintiffs' Counsel and Expenses To Lead Plaintiffs; and a Final Judgment and Order of Dismissal With Prejudice were issued by the Court in accordance with the stipulation of the parties.