According to a complaint filed on November 2, 2011, the Defendants released allegedly false and misleading statements about the Company’s business prospects, thereby violating federal securities laws.
In particular, defendants caused the Company to issue false and misleading statements in its public filings, press releases, and conference calls that touted the Company's positive financial results, significant growth, and presented aggressive forward guidance. Specifically, defendants trumpeted the Company's "transformation" of its business operations and implementation of new strategic initiatives that would improve its financial performance. When questioned about the impact of the Company's wholesale transition on its financial results, defendants steadfastly rebuffed notions that the transition would adversely affect its financial performance going forward or its ability to achieve its business outlook. Further, the complaint alleges the defendants continued to maintain that the Company had an effective system of internal and disclosure controls in place concerning its financial reporting.
3. The complaint further states that the Company was facing significant charges arising from legacy contracts entered into in or before 2009, and substantial weakness in sales in its North American sector. Moreover, plaintiffs claim that defendants knew that the Company "lack[ed] operational discipline, process and controls" and that such "operational issues" would result in charges arising from certain fixed-price projects that possessed cost assumption for contingencies that rendered such contracts unprofitable and at a high-risk of loss. The Company’s Chief Executive Officer acknowledged that despite his earlier aggressive statements, the "shortfall in North American sales and revenue production … [was] not completely unforeseen."
As a result of defendants' materially false and misleading statements, states the complaint, the Company’s stock traded at artificially inflated prices during the Class Period, reaching a high of $6.86 per share on April 6, 2011.
On August 3, 2011, the Company issued a press release and held an earnings conference call reporting financial results that were "significantly below … expectations," and announcing that it would suspend its full-year 2011 guidance due to "sales weakness in North America, [and] changes in estimates on five [fixed-price] projects that were signed in 2009 or earlier, and required adjustments to the balance sheet." The underperforming five fixed-price contracts resulted in $13.4 million in charges against the Company's quarterly revenue and earnings. Further, the Company disclosed a disappointing 23% decline in revenue for its North American operations.
When the Company revealed the truth about its business health, the Company’s stock price fell to $1.22 or approximately 23.6% in a single day, closing at just $3.94 per share on August 3, 2011 on extraordinarily high-volume trading.
According to the Minute Entry filed on January 31, 2012, the Court appointed lead plaintiff and approved the selection of lead counsel.
On April 9, 2012, plaintiffs filed a consolidated complaint.
On June 7, 2012, plaintiffs filed an amended consolidated complaint.
On November 26, 2013, the parties entered into a Stipulation of Settlement. On December 16th, the Court preliminarily approved the Settlement.
In light of the Settlement, the Court issued an Order denying defendants' motion to dismiss on February 6, 2014.