COMMITMENTS AND CONTINGENCIES

3 Months Ended

Apr. 01, 2017

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

NOTE 9 — COMMITMENTS AND CONTINGENCIES

The Company is subject to various investigations, claims, and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities, certain of which are covered in whole or in part by insurance.  The Company establishes accruals for these matters to the extent that losses are deemed probable and are reasonably estimable.  Although the outcome of these matters cannot be fully determined on the basis of information currently available, it is the opinion of management that the ultimate outcome of these matters would not be significant to the Company’s consolidated financial position, results of operations, or cash flow.

On January 3, 2017, an amended complaint was filed against the Company’s subsidiary, Supreme Corporation, in a suit (SVI, Inc. v. Supreme Corporation, Hometown Trolley (a/k/a Double K, Inc.) and Dustin Pence) in the United States District Court, District of Nevada.  The amended complaint (original complaint filed on May 16, 2016), filed by Supreme Corporation’s former trolley distributor, alleges that Supreme Corporation’s sale of its trolley assets to another trolley manufacturer was improper.  Claims alleged against Supreme Corporation include: (i) misappropriation of trade secrets; (ii) civil conspiracy/collusion; (iii) tortious interference with contractual relationships; (iv) tortious interference with prospective economic advantage; (v) unjust enrichment; (vi) breach of contract; (vii) breach of the covenant of good faith and fair dealing; (viii) breach of fiduciary duties; (ix) promissory estoppel; (x) declaratory relief establishing a joint venture or partnership; and (xi) cancellation of a trademark registration.  The plaintiff alleges that the net present value of the amount lost by the plaintiff is approximately $40,000,000.  Supreme Corporation has filed a motion to dismiss which is pending.  Due to the inherent risk of litigation, the outcome of this case is uncertain and unpredictable; however, at this time, management believes that the allegations are without merit and is vigorously defending the matter.

On November 4, 2016, a putative class action lawsuit was filed against the Company, Mark Weber (the Company’s Chief Executive Officer) and Matthew W. Long (the Company’s Chief Financial Officer) in the United States District Court for the Central District of California alleging the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 by making material, misleading statements in July 2016 regarding projected backlog.  The plaintiff seeks to recover unspecified damages.  On February 14, 2017, the court transferred the venue of the case to the Northern District of Indiana upon the joint stipulation of the plaintiff and the defendants.  An amended complaint was filed on April 24, 2017 challenging statements made during a putative class period of October 22, 2015 through October 21, 2016.  Due to the inherent risk of litigation, the outcome of this case is uncertain and unpredictable; however, at this time, management believes that the allegations are without merit and is vigorously defending the matter.