<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended October 4, 1998 Commission file number 0-1790
RUSSELL CORPORATION
(Exact name of registrant as specified in its charter)
Alabama 63-0180720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
755 Lee Street, Alexander City, Alabama 35011
(Address of principal executive offices) (Zip Code)
(256) 500-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding of each of the issuer's classes of common
stock.
Class Outstanding at November 16, 1998
Common Stock, Par Value $.01 Per Share 36,141,423 shares
(Excludes Treasury)
<PAGE> 2
RUSSELL CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Part I. Financial Information:
Consolidated Condensed Balance Sheets
October 4, 1998 and January 3, 1998 2
Consolidated Condensed Statements of Operations --
Thirteen Weeks Ended October 4, 1998 and October 5, 1997 3
Thirty-nine Weeks Ended October 4, 1998 and October 5, 1997 4
Consolidated Condensed Statements of Cash Flows --
Thirty-nine Weeks Ended October 4, 1998 and October 5, 1997 5
Notes to Consolidated Condensed Financial Statements 6
Management's Discussion and Analysis of Results of Operations and Financial
Condition 9
Part II. Other Information 13
Exhibit 27 - Financial Data Schedule 14
Exhibit 99 - Additional Information Press Release Dated November 18, 1998 15
</TABLE>
-1-
<PAGE> 3
PART I - FINANCIAL INFORMATION
RUSSELL CORPORATION
Consolidated Condensed Balance Sheets
(Dollars in Thousands)
<TABLE>
<CAPTION>
October 4 January 3
1998 1998
---------- ----------
ASSETS (Unaudited) (Audited)
------
<S> <C> <C>
Current Assets:
Cash $ 9,142 $ 8,609
Accounts receivable, net 287,166 242,988
Inventories:
Finished goods 313,853 286,254
In process 61,572 52,498
Raw materials and supplies 54,373 65,476
---------- ----------
429,798 404,228
LIFO reserve (32,837) (34,305)
---------- ----------
396,961 369,923
Prepaid expenses and other current assets 41,424 25,523
---------- ----------
Total current assets 734,693 647,043
Property, Plant & Equipment, net 522,500 526,113
Other Assets 44,471 74,806
---------- ----------
Total assets $1,301,664 $1,247,962
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Short-term debt $ 97,950 $ 39,256
Accounts payable and accrued expenses 121,157 84,878
Current maturities of long-term debt 32,214 21,478
---------- ----------
Total current liabilities 251,321 145,612
Long-term debt, less current maturities 328,393 360,607
Deferred Liabilities 83,850 76,141
Shareholders' Equity:
Common Stock, at par value 414 414
Paid-in capital 48,642 48,654
Retained earnings 740,417 761,428
Accumulated other comprehensive income (2,600) (4,724)
---------- ----------
786,873 805,772
Treasury Stock, at cost (148,773) (140,170)
---------- ----------
Total shareholders' equity 638,100 665,602
---------- ----------
Total liabilities & shareholders' equity $1,301,664 $1,247,962
========== ==========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
-2-
<PAGE> 4
RUSSELL CORPORATION
Consolidated Condensed Statements of Operations
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended
-----------------------------
October 4 October 5
1998 1997
----------- -----------
<S> <C> <C>
Net sales $ 377,208 $ 368,274
Costs and expenses:
Cost of goods sold 280,857 253,156
Selling, general and administrative expenses 76,743 69,716
Interest expense 7,589 7,585
Other - net (income) 33,765 171
----------- -----------
398,954 330,628
----------- -----------
Income (loss) before taxes (21,746) 37,646
Provision for (benefit from) income taxes (7,590) 14,412
----------- -----------
Net income (loss) $ (14,156) $ 23,234
=========== ===========
Average shares outstanding:
Basic 36,206,064 36,476,360
Diluted 36,354,267 36,588,211
Net income (loss) per common share:
Basic $ (0.39) $ 0.64
Diluted (0.39) 0.64
Cash dividends per common share $ 0.14 $ 0.13
</TABLE>
See accompanying notes to consolidated condensed financial statements.
-3-
<PAGE> 5
RUSSELL CORPORATION
Consolidated Condensed Statements of Operations
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
39 Weeks Ended
------------------------------
October 4 October 5
1998 1997
----------- ------------
<S> <C> <C>
Net sales $ 905,261 $ 896,706
Costs and expenses:
Cost of goods sold 663,244 621,510
Selling, general and administrative expenses 194,547 185,970
Interest expense 21,590 20,669
Other - net (income) 33,396 (639)
----------- ------------
912,777 827,510
----------- ------------
Income (loss) before taxes (7,516) 69,196
Provision for (benefit from) income taxes (1,769) 26,546
----------- ------------
Net income (loss) $ (5,747) $ 42,650
=========== ===========
Average shares outstanding:
Basic 36,300,029 37,006,327
Diluted 36,373,406 37,225,406
Net income (loss) per common share:
Basic $ (0.16) $ 1.15
Diluted $ (0.16) $ 1.15
Cash dividends per common share $ 0.42 $ 0.39
</TABLE>
See accompanying notes to consolidated condensed financial statements.
-4-
<PAGE> 6
RUSSELL CORPORATION
Consolidated Condensed Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
39 Weeks Ended
------------------------
October 4 October 5
1998 1997
-------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $ (5,747) $ 42,650
Adjustments to reconcile net income (loss) to
cash provided by (used in) operating activities:
Depreciation and amortization 55,772 57,912
Deferred income taxes (5,354) 3,355
Gain on sale of equipment (20) (767)
Restructuring and other unusual charges 49,663 --
Changes in assets and liabilities:
Accounts receivable (56,360) (122,156)
Inventories (35,093) (50,587)
Prepaid expenses and other current assets (7,273) (4,651)
Other assets 3,923 (3,070)
Accounts payable and accrued expenses 38,154 22,812
Income taxes payable (3,466) (8,142)
Pension and other deferred liabilities 8,133 248
-------- ---------
Net cash provided by (used in) operations 42,332 (62,396)
Cash Flows from Investing Activities:
Purchases of property, plant & equipment (55,063) (47,058)
Proceeds from the sale of property, plant & equipment 603 2,225
-------- ---------
Net cash used in investing activities (54,460) (44,833)
Cash Flows from Financing Activities:
Short-term borrowings 58,449 79,248
Long-term borrowings 0 125,000
Payments on long-term debt (21,478) (30,773)
Dividends on Common Stock (15,264) (14,405)
Cost of Common Stock for treasury (9,414) (49,775)
Distribution of treasury shares 799 4,300
-------- ---------
Net cash provided by financing activities 13,092 113,595
Effect of exchange rate changes on cash (431) (113)
-------- ---------
Net increase in cash 533 6,253
Cash balance at beginning of period 8,609 7,355
-------- ---------
Cash balance at end of period $ 9,142 $ 13,608
======== =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE> 7
RUSSELL CORPORATION
Notes to Consolidated Condensed Financial Statements
1. In the opinion of Management, the accompanying audited and unaudited
consolidated condensed financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present fairly
the financial position as of October 4, 1998, and January 3, 1998, and the
results of operations and cash flows for the thirteen and thirty-nine week
periods ended October 4, 1998, and October 5, 1997.
The accounting policies followed by the Company are set forth in Note One
to the Company's consolidated financial statements in Form 10-K for the
year ended January 3, 1998.
2. The results of operations for the thirteen and thirty-nine weeks ended
October 4, 1998, are not necessarily indicative of the results to be
expected for the full year. The financial statements for the nine months
ended October 4, 1998 are inclusive of a non-recurring charge, recorded in
the first quarter, of approximately $8 million related to the retirement,
and subsequent replacement of, the Chairman, President and Chief Executive
Officer of the Company.
On July 22, 1998, the Company announced its intent to undertake a major
restructuring to improve the Company's global competitiveness. It was
further announced that management expected the Company to incur charges
associated with the restructuring and reorganization in the range of $100
to $125 million after tax. It is anticipated that the restructuring will
occur over the next three years. The current accounting period includes
charges amounting to $61,078,000 pre-tax, $39,407,000 after-tax, or $1.09
on a per share basis, as part of the previously announced restructuring
charges.
For the quarter, $15,015,000 of the pre-tax charge was reflected in cost of
goods sold with the write down of certain inventories associated with the
exiting of certain businesses and severance accruals associated with the
closing of certain operations. Approximately $12,368,000 of the pre-tax
charge was included in selling, general and administrative expense,
reflecting the disposition of certain accounts receivables and expenses
related to the consolidation of certain warehousing operations. The balance
of the charges, $33,695,000, is reflected as a loss in other income and
expense and consists of write-down of assets (machinery, equipment and
facilities) to fair value, the reduction of the carrying value of goodwill
to the discounted expected future cash flows of the associated entities and
the recognition of remaining minimum royalty amounts due under certain
licensing agreements associated with businesses in which the Company will
no longer participate.
Recording the charges associated with the Company's restructuring plan has
caused the Company's interest coverage ratio to fall below the ratio
required in agreements related to the Company's long term debt. The Company
has reached agreement in principal with primary lenders and at this time
believes that the covenants will be amended to exclude the impact of the
restructuring charges. There exists no other violations of loan covenants,
therefore, the debt has been classified as short-term or long-term
according to its terms. The Company's restructuring plan is intended to
improve asset utilization and should not have a negative impact on the
Company's ability to perform under these agreements.
3. On November 17, 1998, a Jefferson County, Alabama jury returned a verdict
in Sullivan, et al. V. Russell Corporation, et al. Five plaintiff families
were awarded a total of $155,200 in compensatory property damages and
$52,398,000 in punitive damages from the three defendants, Russell
Corporation, Avondale Mills, Inc. and Alabama Power Company. Allegations in
the case were that two of the defendants', including Russell Corporation,
textile discharges in the Alexander City, Alabama wastewater treatment
plant, the subsequent treatment by the City of Alexander City and discharge
into Lake Martin constituted a nuisance and indirect trespass. Alabama
Power Company, the third defendant, was alleged to have allowed the
nuisance and trespass to continue as the owner of the land under the lake.
The plaintiffs alleged mental anguish but no damages were granted for this
claim. No allegation of personal injury was made in the case.
-6-
<PAGE> 8
The evidence was uncontroverted that Russell Corporation is in compliance
with its permit issued by the Alabama Department of Environmental
Management (ADEM) for the indirect discharge of its wastewater to the
Alexander City wastewater treatment plant. Therefore, the Company believes
that the verdict is contrary to the evidence presented in the case and will
immediately initiate, and vigorously pursue, post-trial motions and
appellate proceedings.
As management believes that the amount of the final verdict should be
significantly reduced, no immediate assessment can be made of the impact on
the Company's financial statements, liquidity or the Company's ability to
comply with its loan agreements. Accordingly, no adjustment has been
recorded for the period ended October 4, 1998.
4. In February, 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 128, "Earnings per Share," effective for periods ending after
December 15, 1997. The statement is intended to simplify the earnings per
share calculation by excluding common stock equivalents from the
calculation. The Company adopted FASB Statement No. 128 in 1997,
consequently, prior periods presented have been restated. Earnings per
share calculated in accordance with SFAS 128 is as follows:
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
----------------------------- -----------------------------
10/4/98 10/5/97 10/4/98 10/5/97
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net Income (loss) $ (14,156) $ 23,234 $ (5,747) $ 42,650
Basic Calculation:
Average shares outstanding 36,206,064 36,476,360 36,300,029 37,006,327
------------ ----------- ------------ -----------
Net income (loss) per share-basic $ (0.39) $ 0.64 $ (0.16) $ 1.15
============ =========== ============ ===========
Diluted Calculation:
Average shares outstanding 36,206,064 36,476,360 36,300,029 37,006,327
Net common shares issuable
on exercise of certain stock options 148,203 111,851 73,377 219,079
------------ ----------- ------------ -----------
36,354,267 36,588,211 36,373,406 37,225,406
------------ ----------- ------------ -----------
Net income (loss) per share-diluted $ (0.39) $ 0.64 $ (0.16) $ 1.15
============ =========== ============ ===========
</TABLE>
5. Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" establishes new rules for reporting comprehensive
income and its components. SFAS 130 is effective for periods beginning
after December 15, 1997, and was adopted by the Company for the fiscal year
beginning January 4, 1998. There was no impact on net income (loss) or
shareholders' equity from the adoption of the statement.
-7-
<PAGE> 9
For the periods ending October 4, 1998, and October 5, 1997, accumulated
other comprehensive income as shown in the consolidated balance sheets was
comprised of foreign currency translation adjustments which prior to
adoption was reported separately in shareholders' equity. The components of
comprehensive income, net of tax, for these periods were as follows:
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
--------------------- ---------------------
10/4/98 10/5/97 10/4/98 10/5/97
------- ------- ------- -------
<S> <C> <C> <C> <C>
(In thousands)
Net income (loss) $(14,156) $ 23,234 $(5,747) $ 42,650
Translation adjustment 1,472 (3,311) 2,124 (3,229)
-------- -------- ------- --------
Comprehensive income (loss) $(12,684) 19,923 (3,623) $ 39,421
======== ======== ======= ========
</TABLE>
6. In June, 1998, the FASB issued Statement No. 133, Accounting for Derivative
Instruments and for Hedging Activities. SFAS 133 provides a comprehensive
standard for the recognition and measurement of derivatives and hedging
activities. SFAS 133 requires all derivatives to be recorded on the balance
sheet at fair value and establishes "special accounting" for the different
types of hedges. Though the accounting treatment and criteria for each type
of hedge is unique, they all result in recognizing the offsetting changes
in value or cash flows of both the hedge and the hedged item in earnings in
the same period. Changes in the fair value of derivatives that do not meet
the hedge criteria are included in earnings in the period of the change.
The Company plans to adopt SFAS 133 in the year 2000, but has not yet
completed its analysis of the impact, if any, that SFAS 133 may have on its
financial statements.
-8-
<PAGE> 10
RUSSELL CORPORATION
Management's Discussion and Analysis of
Results of Operations and Financial Condition
RESULTS OF OPERATIONS
The following is Management's Discussion and Analysis of certain
significant factors which have affected the Company's earnings during the
periods included in the accompanying consolidated condensed statements of
operations.
A summary of the period to period changes in the principal items included
in the consolidated condensed statements of operations is shown below:
<TABLE>
<CAPTION>
Comparison of
--------------------------------------------------------------
13 Weeks 39 Weeks
Ended 10/4/98 Ended 10/4/98
and 10/5/97 and 10/5/97
--------------------- ------------------------
Increase (Decrease)
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Net sales $ 8,934 2.4% $ 8,555 1.0%
Cost of goods sold 27,701 10.9 41,734 6.7
Selling, general and
administrative expenses 7,027 10.1 8,577 4.6
Interest expense 4 0.1 921 4.5
Other - net (33,594) n/a (34,035) n/a
Income (loss) before taxes (59,392) n/a (76,712) n/a
Provision for (benefit from) (22,002) n/a (28,315) n/a
income taxes
Net Income (loss) (37,390) n/a (48,397) n/a
</TABLE>
In a press release dated July 22, 1998, the Company announced its intent to
restructure certain operations and record related charges of between $100-$125
million after-tax. This restructuring is intended to increase shareholder
returns through improved asset utilization and cost reductions along with
increased marketing efforts. The Company expects to record these charges over a
three-year period beginning with the third quarter of 1998.
Included in the current 13 week period and the current 39 week period, are
charges as part of that plan of $61,078,000 pre-tax, $39,407,000 after-tax or,
$1.09 on a per share basis.
Net sales for the quarter were up 2.4% to $377,208,000 versus the similar
period in 1997. For the comparable 39 week period, sales were up 1%.
Sales increases were strongest early in the quarter, and slowed in the last
month as warmer weather impacted retailer sales of the Company's fleece
products. Pricing pressures remained, as a major competitor led another round of
price reductions in the distributor/screenprint channel.
-9-
<PAGE> 11
Sales level increases at Cross Creek and the Jerzees brand offset slight
declines in Russell Athletic and International. Margins were down, 25.5% versus
31.3%, as the previously mentioned charges associated with restructuring and
price deterioration impacted the quarter.
Selling, general and administrative expenses increased to 20.3% of sales
for the quarter, versus 18.9% in the third quarter of 1997. Again, the expenses
reflects charges associated with the announced restructuring, primarily accounts
receivable. Additionally, for the 39 week period, expenses included an
approximately $8 million non-recurring charge related to the retirement, and
subsequent replacement of, the Chairman, President, and Chief Executive Officer
of the Company.
The net result was a loss of $14,156,000 for the quarter, compared to a
profit of $23,234,000 in the previous year's third quarter, resulting in a loss
of $5,747,000 year-to-date versus income of $42,650,000 last year.
Liquidity and Capital Resources
The financial condition of the Company remains strong. At the end of the
quarter the current ratio was 2.9:1, the same as the like period of 1997. Debt
to total capitalization was 34.0% at the end of the quarter versus 35.1% at
October 5, 1997.
Required cash for inventories, purchases of property, plant and equipment,
dividends, prepaid expenses, and treasury stock was provided from income net of
non-cash charges, accounts receivable and short-term borrowings. The Company
maintained $286 million of informal lines of credit at the end of the quarter.
Recording the charges associated with the Company's restructuring plan has
caused the Company's interest coverage ratio to fall below the ratio required in
agreements related to the Company's long term debt. The Company has reached
agreement in principal with primary lenders and at this time believes that the
covenants will be amended to exclude the impact of the restructuring charges.
There exists no other violations of loan covenants, therefore, the debt has been
classified as short-term or long-term according to its terms. The Company's
restructuring plan is intended to improve asset utilization and should not have
a negative impact on the Company's ability to perform under these agreements.
The Company utilizes two interest rate swap agreements in the management of
its interest rate exposure. These agreements effectively convert a portion of
the Company's interest rate exposure from a fixed to a floating rate basis and
from a floating rate to a fixed rate basis. The effect of these agreements was
to effectively lower interest expense on the Company's long-term debt in the
first three quarters.
The Company periodically enters into futures contracts as hedges for its
purchases of cotton inventories. Gains and losses on these hedges are deferred
and reflected in cost of sales as such inventories are sold. Purchasing futures
contracts not only limits the risk of price increases, but also limits the
Company's ability to benefit from future price decreases. At October 4, 1998,
the Company had outstanding futures contracts that, when combined with other
contracts and inventories, exceeded the Company's anticipated remaining 1998
cotton requirements.
Subsequent Event
On November 17, 1998, a Jefferson County, Alabama jury returned a verdict
in Sullivan, et al. V. Russell Corporation, et al. Five plaintiff families were
awarded a total of $155,200 in compensatory property damages and $52,398,000 in
punitive damages from the three defendants, Russell Corporation, Avondale mills
and Alabama Power Company. Allegations in the case were that two of the
defendants, including Russell Corporation, textile discharges in the Alexander
City, Alabama wastewater treatment plant, the subsequent treatment by the City
of Alexander City and discharge into Lake Martin constituted a nuisance and
indirect trespass. Alabama Power Company, the third defendant, was alleged to
have allowed the nuisance and trespass to continue as the owner of the land
under the lake. The plaintiffs alleged mental anguish but no damages were
granted for this claim. No allegation of personal injury was made in the case.
-10-
<PAGE> 12
The evidence was uncontroverted that Russell Corporation is in compliance
with its permit issued by the Alabama Department of Environmental Management
(ADEM) for the indirect discharge of its wastewater to the Alexander City
wastewater treatment plant. Therefore, the Company believes that the verdict is
contrary to the evidence presented in the case and will immediately initiate,
and vigorously pursue, post-trial motions and appellate proceedings.
As management believes that the amount of the final verdict should be
significantly reduced, no immediate assessment can be made of the impact on the
Company's financial statements, liquidity or the Company's ability to comply
with its loan agreements. Accordingly, no adjustment has been recorded for the
period ended October 4, 1998.
Year 2000 Disclosure Statement
The Company has been involved in an organized program to assure that the
Company's information technology systems and related infrastructure will be Year
2000 compliant. These efforts began in July of 1996 with the assignment of a
full-time coordinator of the Year 2000 Compliance. The project initially
involved the computer applications which support the parent company.
The initial phase of the corporate project involved the inventory and
analysis of existing information systems. From this analysis a plan for
remediation was formulated and put into action in January of 1997. This plan is
now ninety percent complete in bringing these systems into Year 2000 compliance
with 19,458 actual hours expended against a planned 21,393 hours. The planned
completion date for testing and implementation of this phase is March 31, 1999.
The second phase of the corporate project was to inventory, analyze and
test the infrastructure that involves imbedded microchips. This phase began in
January of 1998 and has identified 3,741 unique products (hardware and models,
software and releases) that are being certified through vendor certification and
testing where possible. To date 1,844 or forty-nine percent of these products
have been certified. The planned completion date for this phase is June of 1999.
The Year 2000 corporate project was expanded into a third phase to include
the Cross Creek and DeSoto Mills subsidiaries under the same project format and
phases as the parent company. DeSoto Mills is one hundred percent complete in
remediation of business and manufacturing systems and has certified twenty-two
percent of infrastructure products. The Cross Creek subsidiary is forty-four
percent complete on remediation of information systems and has certified
sixty-four percent of infrastructure products.
The fourth phase of the Year 2000 project involves the identification,
analysis and certification of suppliers of materials and services to the
Company. Two thousand five hundred and fifty-five suppliers have been identified
and have been individually contacted by questionnaires, letters and telephone
contacts to determine their compliance status and ability to service the Company
in the Year 2000. If it is determined that a supplier will be in non-compliance
or of questionable compliance, contingency plans will be developed to address
the need, including the selection and introduction of new suppliers.
The fifth phase of the Year 2000 project involves an assessment of the
major customers of the Company and their Year 2000 readiness. A questionnaire is
being mailed in November 1998 to two hundred customers to begin the assessment
of their Year 2000 status and their potential as a viable customer in the Year
2000.
The Year 2000 efforts in the Russell UK subsidiary involves the replacement
of purchased application software. The first phase of this project was to
identify and select an information systems software solution that would meet the
business needs of the subsidiary and resolve the Year 2000 issue. The progress
to date has been to select a software solution and to conduct a pilot project
for acceptance. This has been completed and the implementation project is
scheduled to be completed by the end of June 1999. The second phase of the
Russell UK project was the identification of infrastructure products. Fifty-nine
products were identified with twenty-five percent being certified as compliant
to date.
-11-
<PAGE> 13
Management has determined that the costs for correction of the Year 2000
issues are expected to total approximately $1,770,000 with $1,470,000 being
expended through the end of 1998. The Year 2000 project is being funded out of
normal operating funds.
Senior management receives monthly updates on the progress of this project
by each individual phase. The Year 2000 compliance project is a priority project
for the Company and especially the IT department. Other IT projects, including
upgrade of certain existing systems and implementation of new systems, continue
while the Year 2000 project is being accomplished.
At the present time the Company does not have a contingency plan to operate
in the event that its business systems are not Year 2000 compliant. If further
systems testing and supplier analysis were to indicate that there is a
substantial risk to the Company's ability to operate effectively, a contingency
plan will be developed in those areas affected.
This document contains Year 2000 Readiness Disclosures as defined in the
Year 2000 Information and Readiness Disclosure Act, P.L.105-271 (Oct 19, 1998).
Accordingly, this disclosure, in whole or in part, is not, to the extent
provided in the act, admissible in any state or federal civil action to prove
the accuracy or truth of any Year 2000 statements contained herein.
New Accounting Pronouncement
In June, 1997, the Financial Accounting Standards Board issued FAS 131,
Disclosures about Segments of an Enterprise and Related Information. FAS 131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. FAS 131 is
effective for annual financial statements for fiscal years beginning after
December 15, 1997. Management has not completed its review of FAS 131.
FORWARD LOOKING INFORMATION
This quarterly report on Form 10-Q contains certain statements which
describe the Company's beliefs concerning future business conditions and the
outlook for the Company based upon currently available information. Wherever
possible, the Company has identified these "forward looking" statements (as
defined in Section 21E of the Securities and Exchange Act of 1934) by words such
as "anticipates," "believes," "estimates," "expects," and similar phrases. These
forward looking statements are based upon assumptions the Company believes are
reasonable; however, such statements are subject to risks and uncertainties
which could cause the Company's actual results, performance and achievements to
differ materially from those expressed in, or implied by, these statements. Some
forward looking statements in this report concern anticipated sales levels, cost
estimates and resulting earnings that are not necessarily indicative of
subsequent periods due to the mix of future orders, at once orders and product
mix changes, which may vary significantly from quarter to quarter. The company
assumes no obligation to update publicly any forward looking statements whether
as a result of new information, future events or otherwise.
-12-
<PAGE> 14
PART II - OTHER INFORMATION
Item 5. Other Information
Press release relating to Sullivan, et al. V. Russell Corporation, et al.
as described above, is included herewith as exhibit 99.
Item 6. Exhibits and Reports on Form 8-K
Exhibit 99 Press release relating to Sullivan, et al. V. Russell
Corporation, et al.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RUSSELL CORPORATION
---------------------------------------
(Registrant)
Date November 18, 1998 /s/Eric N. Hoyle
-------------------------- ---------------------------------------
Eric N. Hoyle, Executive Vice President
and Chief Financial Officer
(For the Registrant and as
Principal Financial Officer)
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RUSSELL CORPORATION FOR THE 9 MONTHS ENDED OCTOBER 4,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> OCT-04-1998
<CASH> 9,142
<SECURITIES> 632
<RECEIVABLES> 300,102
<ALLOWANCES> 12,936
<INVENTORY> 396,961
<CURRENT-ASSETS> 734,693
<PP&E> 1,222,640
<DEPRECIATION> 700,140
<TOTAL-ASSETS> 1,301,664
<CURRENT-LIABILITIES> 251,321
<BONDS> 328,393
0
0
<COMMON> 414
<OTHER-SE> 637,686
<TOTAL-LIABILITY-AND-EQUITY> 1,301,664
<SALES> 905,261
<TOTAL-REVENUES> 905,261
<CGS> 663,244
<TOTAL-COSTS> 663,244
<OTHER-EXPENSES> 212,032
<LOSS-PROVISION> 15,911
<INTEREST-EXPENSE> 21,590
<INCOME-PRETAX> (7,516)
<INCOME-TAX> (1,769)
<INCOME-CONTINUING> (5,747)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,747)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
<PAGE> 1
EXHIBIT 99
ALABAMA JURY RETURNS VERDICT AGAINST
RUSSELL CORPORATION AND OTHERS
ALEXANDER CITY, AL, November 18, 1998 - Late Tuesday, November 17, 1998, a
Jefferson County, Alabama, jury returned a verdict in Sullivan, et al. v.
Russell Corporation, et al. Five plaintiff families were awarded a total of
$155,200 in compensatory damages for property damage and $52,398,000 in punitive
damages from the three defendants, Russell Corporation, Avondale Mills and
Alabama Power Company. Allegations in the case were that textile discharges of
two of the defendants, including Russell Corporation, into the Alexander City
wastewater treatment plant, the subsequent treatment by the City of Alexander
City and discharge into Lake Martin constituted a nuisance and indirect
trespass. Alabama Power Company, the third defendant, was alleged to have
allowed the nuisance and trespass to continue as the owner of the land under the
lake. The plaintiffs alleged mental anguish but no damages were granted for this
claim. No allegation of personal injury was made in the case.
The evidence was uncontroverted that Russell Corporation is in compliance with
its permit issued by the Alabama Department of Environmental Management (ADEM)
for the indirect discharge of its wastewater to the Alexander City wastewater
treatment plant. Therefore, the Company believes the verdict is contrary to the
evidence and under the applicable law, no damages should have been awarded. The
Company will immediately initiate post-trial motions and appellate proceedings
and vigorously pursue such actions.
"Russell Corporation is committed today, as it has always been, to protecting
and preserving the environment and to the welfare of the citizens in all
communities where we operate," said Jack Ward, chairman, president and CEO. "We
believe this verdict is contrary to the evidence presented."
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