Hastings Settles Shareholder Class Actions12 Sep, 2002 By: Hive News
Hastings Entertainment, Inc. has reached an agreement in principle with respect to shareholder class action lawsuits filed against it in fiscal 2000, the company announced today.
The settlement, which is subject to execution of a final settlement agreement and approval by the court, requires a payment of $5.75 million. Amounts remaining under the company's director and officer insurance policy after payment of litigation expenses are expected to cover a substantial portion of the settlement. The Company estimates that amounts remaining under the policy after all litigation expenses will be approximately $3.25 million and has recorded a loss contingency of $2.5 million, or $0.22 per diluted share. The loss contingency has been recorded in the company's financial statements as of July 31contained in its quarterly report on Form 10-Q filed today.
The financial statements will show a loss of $0.14 per diluted share for the second quarter of fiscal 2002. "Although we believe there was no merit to the allegations brought by the Plaintiffs," stated John H. Marmaduke, president and CEO, "we felt a settlement was in the best interest of our shareholders, especially considering the amount of time, money and attention management has had to devote to defending these lawsuits. We are pleased to put an end to this process and return our focus to running our business." "While confident of our position in the litigation, the litigation was a continuing drain on the company's limited resources, resources that should be focused on our business," stated Dan Crow, VP and CFO. "In the end, we reluctantly concluded that the interests of the shareholders and the Company would best be served by settling these claims as it became apparent there was a risk that estimated legal costs to continue litigating the matter could have exceeded the settlement amount we were offered.
"As the potential outcome of the litigation was not determinable and the amount of loss, if any, could not be estimated, the earnings guidance we had previously issued on August 21, 2002 did not reflect any cost to Hastings for this litigation and, in fact, it was only after August 21, 2002 that the plaintiffs made a proposal that allowed us to believe a settlement was possible," Crow continued. "Therefore, we are now lowering our guidance for fiscal year 2002 from a range of $0.60 to $0.65 per diluted share to a range of $0.38 to $0.43 per diluted share to allow for the effect of settling these actions."