On January 4, 2008, the lead plaintiffs filed a motion for final approval of the class action settlement. On January 15, 2008, the Court entered the Orders signed by U.S. District Judge William P. Dimitrouleas approving the plan of allocation and awarding attorneys’ fees and expenses. Specifically, the Court awarded Plaintiffs’ Counsel attorneys’ fees of 33% of the Settlement Fund and reimbursement of expenses in an aggregate amount of $71,862.83, plus interest. Lastly, the Court entered the Final Judgment and Order of Dismissal with Prejudice. The settlement was approved and the case has been dismissed with prejudice.
On May 10, 2006, the Court entered the Order signed by U.S. District Judge William P. Dimitrouleas granting the motion to consolidate cases. On June 26 and later on July 10, 2006, the plaintiffs filed Consolidated Class Action Complaints. On August 9, 2006, the defendants filed a motion to dismiss the Consolidated Class Action Complaint. On January 17, 2007, the Court entered the Order granting in part the motion to dismiss the Consolidated Class Action Complaint. The plaintiffs were given leave to file an amended complaint. On February 20, 2007, the plaintiffs did not file an amended complaint and thus certain portions of the complaint were dismissed with prejudice. The parties entered into mediation. On November 6, 2007, the plaintiffs filed a joint motion for settlement preliminary approval. The proposed settlement was in the amount of $2 million, in cash. That day, the Court preliminarily approved the settlement.
The original complaint charges Applica and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Applica engages in the manufacture, marketing, and distribution of small household appliances. The Company markets and distributes kitchen products, home products, pest control products, pet care products, and personal care products.
Specifically, the Complaint alleges that, throughout the Class Period, defendants issued materially false and misleading statements highlighting the Company’s ability to transform its business and become more profitable. As alleged in the Complaint, these statements were materially false and misleading because they failed to disclose and misrepresented the following adverse facts, among others: (a) that the Company was experiencing decreasing demand for its products. In particular, demand for two key products, Tide™ Buzz™ Ultrasonic Stain Remover and Home Café™ single cup coffee maker, were not meeting internal expectations; (b) that Applica was materially overstating its net worth by failing to timely write down the value of its inventory which had become obsolete and unsaleable; (c) that Applica was experiencing higher product warranty returns, which it had not appropriately reserved for; (d) that Applica’s financial statements issued during the Class Period were not prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) and therefore were materially false and misleading; and (e) as a result of the foregoing, there was no reasonable basis for the Company’s revenue and earnings guidance.
The Complaint further alleges that, on April 20, 2005, Defendants revealed that the Company would not come near achieving the guidance they had previously sponsored and/or endorsed, that the Company’s business was suffering from numerous adverse factors and that the Company was marking down inventory and experiencing increased warranty expenses. Then, on April 28, 2005, Defendants further detailed the impact of these adverse factors on Applica’s business. These belated disclosures had an immediate, adverse impact on the price of Applica shares.