“We believe that any claim that the company issued materially false and misleading statements is wholly without merit,” company spokesperson Paul Blalock told ILN Tuesday.
“We intend to defend this matter vigorously.”
The matter at hand emerged late last week, when Georgia law firm Holzer Holzer & Fistel announced that an unnamed shareholder had filed a class action lawsuit against the producer in the US District Court for the Northern District of Alabama.
The filing is on behalf of those who obtained Walter Energy common stock shares between April 20 and September 21, 2011 and alleges the company was experiencing so-called “squeeze” events in Alabama and lower coal transportation rates in Canada that significantly reduced Walter's coal production.
It also claims the company's commitment to ship more than 700,000 tons of coal in the second quarter at first-quarter sales prices would result in a material adverse effect on Walter’s average sales prices and operating results during the second quarter.
The documentation went on to say Walter was experiencing a significant decline in its margins and profitability and the defendants lacked a reasonable basis for their positive statements about the company and its business prospects during the class period.
In the days subsequent to the class action filings, a handful of legal groups confirmed the commencement of investigations into the situation, including New York-based Faruqi & Faruqi.
“On August 3, 2011, Walter issued a press release announcing its operating results for its 2011 fiscal second quarter, the period ended June 30, 2011 [and] for the quarter, the company announced net income of $US107.4 million, or $1.71 per diluted common share, significantly less than Wall Street estimates,” it said.
“Then, on September 21, 2011, Walter [announced] its attempt to ‘enhance’ its historical statistical disclosure and its revisions to its 2011 second-half sales expectations.
“In response to this announcement, the price of Walter common stock declined from $75 per share on September 20, 2011 to $66.25 on September 21, 2011, on extremely heavy trading volume.”
Blalock did not offer further comment on the litigation or its defense plans.
According to Bloomberg News data, the company’s stock has seen a 45% drop in value over the last year.
Interestingly, according to investing news outlet Localized USA Tuesday afternoon, Walter’s stock was upgraded by investment analysts Sterne Agee from an “underperform” rating to a “neutral” rating.
Walter Energy has three business arms, including underground mining, surface mining and coke.
Its two largest operations are the underground metallurgical operations No. 7 and No. 4 in central Alabama.
