Gainey McKenna & Egleston Announces A Class Action Lawsuit Has Been Filed Against CAE, Inc. (CAE)

/EIN News/ -- NEW YORK, July 17, 2024 (GLOBE NEWSWIRE) -- Gainey McKenna & Egleston announces that a securities class action lawsuit has been filed in the United States District Court for the Southern District of New York on behalf of all persons and entities who purchased securities of CAE Inc. (“CAE” or the “Company”) (NYSE: CAE) between February 11, 2022 and May 21, 2024, inclusive (the “Class Period”).

The Complaint alleges that Defendants made false and/or misleading statements and/or failed to disclose that: (1) several of CAE’s pre-COVID fixed-price Defense contracts had incurred severe cost overruns due to supply chain and labor issues – as the segment was significantly impacted by the pandemic – which dented the segment’s profit and operating margin; and (2) CAE failed to successfully reduce hard costs and achieve a sufficient level of operational efficiency, particularly with respect to such contracts, necessitating a re-baselining of the Defense business and significant associated charges.

On August 10, 2022, the Company announced it had incurred “$28.9 million in unfavourable contract profit adjustments in Defense, involving two programs in the U.S.” As a result, the Company’s Defense segment reported an adjusted segment operating loss of $21.2 million, compared to an adjusted segment operating income of $23.7 million in the first quarter of the prior year, according to the complaint. On this news, the price of CAE stock fell more than 16%.

Then, on November 14, 2023, the Company announced that within the Defense segment, the Company planned to “retir[e] legacy contracts, which have been most affected by inflationary pressures.” CAE further stated that “[i]nflationary pressures on legacy contracts, while finite, remain the most significant factor contributing to the current suboptimal margin performance of the business” and that “[w]e are firmly focused on retiring legacy contracts as soon as possible and to mitigating the cost pressures associated with them.” On this news, the price of CAE stock fell nearly 4%.

Then, on February 14, 2024, the Company revealed that it “sought to further accelerate the retirement of outstanding program risks, mainly associated with certain legacy Defense contracts that we entered into pre-COVID and have been most impacted by economic headwinds.” The complaint further alleges that CAE also revealed that there were “eight distinct legacy contracts” and that “[a]lthough [the contracts] represent only a small fraction of the current business, these contracts have disproportionately impacted overall Defense profitability” and that “[f]or the third quarter of fiscal 2024, the ongoing execution of Legacy Contracts had a negative impact of approximately two percentage points on the Defense adjusted segment operating income margin.” On this news, the price of CAE stock fell nearly 10%.

Finally, on May 21, 2024, the Company announced a “re-baselining of its Defense business, Defense impairments, accelerated risk recognition on Legacy Contracts and appointment of Nick Leontidis as COO[.]” According to the Complaint, the Company revealed that “[i]n the fourth quarter of fiscal 2024, CAE has recorded a $568.0 million non-cash impairment of Defense goodwill and $90.3 million in unfavorable Defense contract profit adjustments as a result of accelerated risk recognition on the Legacy Contracts” and also “recorded a $35.7 million impairment of related technology and other non-financial assets which are principally related to the Legacy Contracts.” On this news, the price of CAE stock fell more than 5%.

Investors who purchased or otherwise acquired shares of CAE should contact the Firm prior to the September 16, 2024 lead plaintiff motion deadline. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation. If you wish to discuss your rights or interests regarding this class action, please contact Thomas J. McKenna, Esq. or Gregory M. Egleston, Esq. of Gainey McKenna & Egleston at (212) 983-1300, or via e-mail at tjmckenna@gme-law.com or gegleston@gme-law.com.

Please visit our website at http://www.gme-law.com for more information about the firm.