Supreme Industries (NYSE MKT: STS) reached an agreement with King County, Washington, to settle litigation that could have cost the company in excess of $10.5 million.
On February 22, 2012, King County, Washington filed a complaint against a subsidiary of Supreme seeking to revoke the county's acceptance of a fleet of 35 buses which had been manufactured and delivered to King County beginning in 2009. King County alleged breach of contract and breach of implied warranties. As of February 28, 2013, King County claimed its damages were then $10,594,113. The county subsequently moved to add a consumer protection act claim which would permit an award of attorney's fees, in addition to its damages, if successful.
Supreme’s bus division and King County entered into a settlement and release agreement June 14. Under the terms of the agreement, the lawsuit will be dismissed and mutual releases granted in exchange for payment of the sum of $4,737,500 to the county within ninety days of the date of the agreement.
Through separate agreements, Supreme’s bus division subsidiary settled third-party claims against certain party subcontractors who will contribute $520,000 of the settlement funds. The bus division will pay the balance, using approximately 12% of Supreme’s $35,000,000 credit facility. The settlement, net of third party funds, is $4,217,500 or $2,867,900 net of tax.
The Company will take possession of the fleet of buses from the county on or before July 9, 2013. The Company will look at ways to resell or repurpose the buses in a way that maximizes their value.
"In light of the risks and costs inherent in continuing this suit, the company determined that it was in its interest to bring this matter to resolution,” said Mark Weber, president and chief executive officer. “Supreme remains focused on providing products and services that meet customer expectations for the truck, armored vehicle, shuttle bus, mid-size bus, and trolley markets."