Hockey Dealers Association

LAWSUIT ACCUSES PERFORMANCE SPORTS GROUP OF FRAUD

(TSN, August 17, 2016, and The Globe and Mail, August 18, 2016) - A lawsuit filed in New York district court in mid-August accused Performance Sports Group, the parent company of Bauer, of fraud and stock market manipulation. The lawsuit alleges that PSG moved future orders into earlier financial quarters by pressuring hockey retailers to accept products they did not need to increase the company's sales.

The Plumbers and Pipefitters National Pension Fund, which is a PSG shareholder, is named as the lead plaintiff. Former PSG CEO Kevin Davis and former CFO Amir Rosenthal are named as defendants. The lawsuit claims PSG knowingly or recklessly engaged in acts, transactions, practices and courses of business which operated as a fraud and deceit.

PSG saw its share prices cut in half after it was unable to file an audited annual report with regulators by an August 15 deadline. That puts PSG in a default position under its credit agreements.

PSG said in a statement its filing was delayed by an internal investigation by its Audit Committee. PSG has initiated discussions with its lenders to address the issue but said it can offer no assurances on the outcome of those discussions. The company plans to continue operating its business and serving its customers in a normal fashion.

On Aug. 17, PSG confirmed it was facing an investigation by the U.S. securities regulator, The company also said in a filing that it was subject to inquiries by the Canadian securities regulator, besides the investigation by the U.S. Securities and Exchange Commission.

PSG, which makes Easton baseball gear and other sports equipment, saw its shares drop to $2.30 in the first half hour of trading on Monday, Aug. 15 in Toronto from $4.50 on Aug. 12. That was a drop from a year-earlier price of $19.93.

The company also announced a corporate restructuring in early August which resulted in a workforce reduction in several areas and levels of the organization. Along with the consolidation of its baseball and softball operations, PSG reduced its workforce by approximately 15% since the end of its Fiscal Year 2016.

"It is important that we focus our efforts on our core businesses of hockey, baseball/softball and lacrosse, while we make improvements to our business processes with the goal of making our entire company more efficient and effective," said CEO Harlan Kent in a statement.

Get more details in these reports from TSN and The Globe and Mail.