<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 July 5, 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 August 18, 1998
Common Stock, Par Value $.01 Per Share 36,217,558 shares
(Excludes Treasury)
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RUSSELL CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information:
Consolidated Condensed Balance Sheets
July 5, 1998 and January 3, 1998 2
Consolidated Condensed Statements of Income --
Thirteen Weeks Ended July 5, 1998 and July 6, 1997 3
Twenty-six Weeks Ended July 5, 1998 and July 6, 1997 4
Consolidated Condensed Statements of Cash Flows --
Twenty-six Weeks Ended July 5, 1998 and July 6, 1997 5
Notes to Consolidated Condensed Financial Statements 6
Management's Discussion and Analysis of Results of Operations
and Financial Condition 7
Part II. Other Information 10
Exhibit 10.1 Retirement agreement between John C. Adams and the
Company dated as of April 1, 1998 11
Exhibit 11 - Computation of Earnings Per Share 17
</TABLE>
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PART I - FINANCIAL INFORMATION
RUSSELL CORPORATION
Consolidated Condensed Balance Sheets
(Dollars in Thousands)
<TABLE>
<CAPTION>
July 5 January 3
1998 1998
----------- -----------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
------
Current Assets:
Cash $ 5,663 $ 8,609
Accounts receivable, net 222,987 242,988
Inventories:
Finished goods 357,790 286,254
In process 56,865 52,498
Raw materials and supplies 60,300 65,476
----------- -----------
474,955 404,228
LIFO reserve (32,837) (34,305)
----------- -----------
442,118 369,923
Prepaid expenses and other current assets 31,571 25,523
----------- -----------
Total current assets 702,339 647,043
Property, Plant & Equipment, net 532,139 526,113
Other Assets 71,704 74,806
----------- -----------
Total assets $ 1,306,182 $ 1,247,962
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Short-term debt $ 103,210 $ 39,256
Accounts payable and accrued expenses 78,851 84,878
Current maturities of long-term debt 26,787 21,478
----------- -----------
Total current liabilities 208,848 145,612
Long-term debt, less current maturities 355,257 360,607
Deferred Liabilities 84,245 76,141
Shareholders' Equity:
Common Stock, at par value 414 414
Paid-in capital 48,646 48,654
Retained earnings 759,645 761,428
Accumulated other comprehensive income (4,072) (4,724)
----------- -----------
804,633 805,772
Treasury Stock, at cost (146,801) (140,170)
----------- -----------
Total shareholders' equity 657,832 665,602
----------- -----------
Total liabilities & shareholders' equity $ 1,306,182 $ 1,247,962
=========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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RUSSELL CORPORATION
Consolidated Condensed Statements of Income
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended
---------------------------------
July 5 July 6
1998 1997
------------ ------------
<S> <C> <C>
Net sales $ 271,824 $ 270,273
Costs and expenses:
Cost of goods sold 198,588 192,206
Selling, general and
administrative expenses 55,415 58,927
Interest expense 7,352 7,212
Other - net (income) (464) (1,291)
------------ ------------
260,891 257,054
------------ ------------
Income before income taxes 10,933 13,219
Provision for income taxes 4,373 5,106
------------ ------------
Net income $ 6,560 $ 8,113
============ ============
Average Shares Outstanding
Basic 36,279,681 36,776,846
Diluted 36,333,324 36,964,589
Net Income per common share
Basic $ 0.18 $ 0.22
Diluted 0.18 0.22
Cash dividends per common share $ 0.14 $ 0.13
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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RUSSELL CORPORATION
Consolidated Condensed Statements of Income
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
26 Weeks Ended
---------------------------------
July 5 July 6
1998 1997
------------ ------------
<S> <C> <C>
Net sales $ 528,053 $ 528,432
Costs and expenses:
Cost of goods sold 382,387 368,354
Selling, general and
administrative expenses 117,804 116,254
Interest expense 14,001 13,084
Other - net (income) (369) (810)
------------ ------------
513,823 496,882
------------ ------------
Income before income taxes 14,230 31,550
Provision for income taxes 5,821 12,134
------------ ------------
Net income $ 8,409 $ 19,416
============ ============
Average Shares Outstanding
Basic 36,341,613 37,232,656
Diluted 36,383,469 37,477,032
Net Income per common share
Basic $ 0.23 $ 0.52
Diluted 0.23 0.52
Cash dividends per common share $ 0.28 $ 0.26
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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RUSSELL CORPORATION
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
26 Weeks Ended
-------------------------
July 5 July 6
1998 1997
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 8,409 $ 19,416
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 37,135 38,100
Deferred income taxes (4,385) 1,918
Loss (gain) on sale of equipment 10 (237)
Changes in assets and liabilities:
Accounts receivable 19,691 (20,227)
Inventories (72,485) (75,341)
Prepaid expenses and other current assets (8,715) (12,104)
Other assets 1,331 396
Accounts payable and accrued expenses (5,242) 974
Income taxes payable 6,577 (16,214)
Pension and other deferred liabilities 8,712 3,072
--------- ---------
Net cash used in operating activities (8,962) (60,247)
Cash Flows from Investing Activities:
Purchases of property, plant & equipment (41,355) (29,170)
Proceeds from the sale of property, plant & equipment 156 1,288
--------- ---------
Net cash used in investing activities (41,199) (27,882)
Cash Flows from Financing Activities:
Short-term borrowings 63,851 154,866
Payments on long-term debt (41) (9,339)
Dividends on Common Stock (10,192) (9,663)
Cost of Common Stock for treasury (6,673) (49,576)
Distribution of treasury shares 34 3,918
--------- ---------
Net cash provided by financing activities 46,979 90,206
Effect of exchange rate changes on cash 236 120
--------- ---------
Net (decrease) increase in cash (2,946) 2,197
Cash balance at beginning of period 8,609 7,355
--------- ---------
Cash balance at end of period $ 5,663 $ 9,552
========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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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 July 5, 1998, and January 3, 1998,
and the results of operations and cash flows for the thirteen and
twenty-six week periods ended July 5, 1998, and July 6, 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 twenty-six weeks ended
July 5, 1998, are not necessarily indicative of the results to be
expected for the full year. The financial statements for the six months
ended July 5, 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.
3. In February, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards 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 SFAS 128 in 1997, consequently, prior periods presented have
been restated.
4. Subsequent to July 5, 1998, the company entered into an agreement to
terminate one of its license agreements. The effect of this transaction
will be to record a charge to pre-tax income of approximately $3.5
million in the third quarter of 1998.
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 or
shareholders' equity from the adoption of the statement.
For the periods ending July 5, 1998, and July 6, 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 26 Weeks Ended
------------------------- -------------------------
7/5/98 7/6/97 7/5/98 7/6/97
------ ------- ------ -------
<S> <C> <C> <C> <C>
(In thousands)
Net income $6,560 $ 8,113 $8,409 $19,416
Translation adjustment (41) 2,482 652 83
------ ------- ------ -------
Comprehensive income $6,517 $10,595 $9,061 $19,499
====== ======= ====== =======
</TABLE>
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<PAGE> 8
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
income.
A summary of the period to period changes in the principal items
included in the consolidated statements of income is shown below:
<TABLE>
<CAPTION>
Comparison of
----------------------------------------------------------------------------------
13 Weeks 26 Weeks 13 Weeks
Ended 7/5/98 Ended 7/5/98 Ended 7/5/98
and 7/6/97 and 7/6/97 and 4/5/98
----------------------- ---------------------------- -----------------------
Increase (Decrease)
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 1,551 0.6% $ (379) (0.1)% $ 15,595 6.1%
Cost of goods sold 6,382 3.3 14,033 3.8 14,789 8.0
Selling, general and
administrative expenses (3,512) (6.0) 1,550 1.3 (6,974) (11.2)
Interest expense 140 1.9 917 7.0 703 10.6
Other - net (827) (64.1) (441) (54.4) 559 n/a
Income before income taxes (2,286) (17.3) (17,320) (54.9) 7,636 231.6
Provision for income taxes (733) (14.4) (6,313) (52.0) 2,925 202.0
Net Income (1,553) (19.1) (11,007) (56.7) 4,711 254.8
</TABLE>
Sales were up slightly, less than 1%, for the second quarter of 1998
versus the same period in 1997. For the first half of the year, sales were
essentially flat, down 0.1%.
Sales levels benefited from increases at Cross Creek (placket shirts)
and DeSoto Mills (socks). These increases were generally offset by sales
declines in Jerzees, where slightly improved industry conditions allowed the
company to eliminate pull-forward programs to ship planned fall fleece orders in
the second quarter. The demise of these early shipments was the primary cause of
the decline of Jerzees sales in the second quarter.
Margins continued to remain under pressure (26.9% vs 28.9% for the
quarter; 27.6% vs 30.3% for the half) due to the current pricing environment and
the previously mentioned lower fleece shipments in the quarter.
Selling, general and administrative expenses were down for the quarter,
both in dollars and as a percent of sales (20.4% vs 21.8%). Expenses for the six
months are inclusive of 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.
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<PAGE> 9
Net income for the quarter was down 19.1% and represented 2.4% of
sales. On a year-to-date basis, net income was down 56.7% to 1.6% of sales for
the half.
Financial Condition
Required cash for inventories, purchases of property, plant and
equipment, dividends, prepaid expenses, and treasury stock was provided from net
income plus 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.
Subsequent to July 5, 1998, the Company entered into an agreement to
terminate its obligations under a licensing contract to which it was a party.
The result of this termination will cause the Company to record a pre-tax charge
of approximately $3.5 million in the third quarter of 1998. The Company remains
a party to other licensing contracts that include minimum royalty payment
agreements. The Company believes that it will be able to achieve the sales
necessary to cover the minimum royalty requirements under these contracts.
In a press release dated July 22, 1998, the Company announced its
intent to restructure and record related charges of between $100 -$125 million
after tax. This restructuring is intended to increase shareholder returns
through improved asset utilization, cost reductions and increased marketing
efforts. The Company expects to record these charges over a three year period
beginning with the third quarter of 1998.
The Company believes, that as a result of recording the charges
associated with its restructuring, it may be in non-compliance with certain
covenants under certain of its lending agreements. The Company is engaging in
discussions with certain of its lenders and, at this time, believes that the
resolution will not have a material adverse affect on its financial condition.
The Company has conducted an extensive review of its computer systems,
manufacturing equipment and electronic links with third parties to determine the
extent of modifications required to prevent system date problems associated with
the year 2000. While the company is dependent on certain suppliers and customers
to modify their computer systems, the necessary internal modifications are well
underway and it is anticipated that all of them will be complete in ample time
to avoid any problems. The cost of these modifications is considered to be
immaterial to the financial statements.
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.
In June, 1998, the FASB issued Statement No. 133, Accounting for
Derivative Instruments and for Hedging Activities. Statement No. 133 provides a
comprehensive standard for the recognition and measurement of derivatives and
hedging activities. Statement No. 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 Statement No. 133 in 2000, but has not yet completed its analysis of
the impact, if any, that Statement No. 133 may have on its financial statements.
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<PAGE> 10
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 half.
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 inventory is 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 July 5, 1998,
the Company had outstanding futures contracts that, when combined with other
contracts and inventory, exceeded the Company's anticipated remaining 1998
cotton requirements.
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.
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<PAGE> 11
PART II - OTHER INFORMATION
Item 5. Other Information
Pursuant to Rule 14a-4 of the Proxy Rules under the Securities Exchange
Act of 1934, if a stockholder fails to notify the Company on or before February
2, 1999 of a proposal which such stockholder intends to present at the Company's
April, 1999 Annual Meeting by a means other than inclusion of such proposal in
the Company's proxy materials for that meeting, then if the proposal is
presented at such annual meeting, the holders of the Board of Director's proxies
at such meeting may use their discretionary voting authority with respect to
such proposal, regardless of whether the proposal was discussed in the Company's
proxy statement for such meeting.
On August 11, 1998, the Board of Directors elected Eric N. Hoyle to the
position of Executive Vice President and Chief Financial Officer. Mr. Hoyle was
also elected to serve on the Board of Directors, filling the vacancy created by
the resignation of James D. Nabors.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits -
10.1 Retirement agreement between John C. Adams and the Company
dated as of April 1, 1998.
11 Computation of Earnings Per Share
27 Financial Data Schedule (For SEC use only)
b) Reports on Form 8-K - July 22, 1998 - Announcement of Plan to
Restructure.
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 August 18, 1998 /s/ Eric N. Hoyle
--------------------- ---------------------------------------
Eric N. Hoyle, Executive Vice President
and Chief Financial Officer
(For the Registrant and as
Principal Financial Officer)
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<PAGE> 1
EXHIBIT 10.1
RETIREMENT AGREEMENT
THIS RETIREMENT AGREEMENT is made and entered into as of the 1st day of
April, 1998, by and between JOHN C. ADAMS, an individual ("Retiree"), and
RUSSELL CORPORATION, an Alabama corporation (the "Corporation").
W I T N E S S E T H:
WHEREAS, the Corporation is engaged in the design, manufacture and
marketing of athletic and leisure clothing and fabrics, with its principal place
of business located in Alexander City, Alabama; and
WHEREAS, Retiree has been employed by the Corporation for in excess of
20 years in various executive positions, most recently serving as its Chairman,
President and Chief Executive Officer; and
WHEREAS, the Corporation requested that Retiree retire, and Retiree
agreed to retire, from active employment by the Corporation upon the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the terms, conditions, covenants
and premises herein contained, it is mutually agreed by and between Retiree and
the Corporation as follows:
1. Retirement. Effective April 1, 1998, Retiree retired from active
employment by the Corporation.
2. Compensation and Benefits.
(a) Retirement Compensation.
(1) Commencing on the date of this Agreement and continuing through
December 31, 1998, Retiree shall be paid retirement compensation
of Fifty Thousand Dollars ($50,000) per calendar month (the "1998
Retirement Compensation"), to be paid at the times and in the
manner specified in the Corporation's general policies regarding
the payment of employment compensation as established from time to
time. For federal, state and local tax purposes, said compensation
shall be treated as "wages" and the Corporation shall withhold all
appropriate taxes therefrom and shall remit such taxes, together
with the taxes imposed by ss. 3111 of the Internal Revenue Code of
1986 on the Corporation, to the applicable taxing authorities;
provided that subject to the Corporation's obligation to withhold
and remit income tax on said compensation to the applicable taxing
authorities, Retiree shall be responsible for and pay any
additional income tax due and owing thereon. During this period,
Retiree shall, in the same manner and at the same cost to him as
was in effect for him at the time of his retirement, continue
participation and coverage for himself and, where applicable, his
spouse under the following employee and fringe benefit plans and
policies of the Corporation in which he participated at the time
of his retirement: i.e., the Corporation's (i) Group Health Plan,
(ii) Group Life Insurance Plan, (iii) Accidental Death and
Dismemberment Insurance Plan, (iv) Cancer Expense Protection Plan,
(v) Dental Insurance Plan, (vi) Section 125 Tax Saving Benefit
Plan, (vii) Revised Pension Plan, (viii) 401(k) Retirement Savings
Plan, (ix) Supplemental Retirement Benefit Plan, (x) 1993
Executive Long-Term Incentive Plan, and (xi) Executive Incentive
Program. If Retiree is prohibited from participating in any such
plan or policy, the Corporation shall provide Retiree comparable
benefits outside such plan or policy. The Corporation further
agrees that (i) Retiree's 1998 bonus under the Short-Term
Incentive Plan component of the Corporation's Executive Incentive
Program shall be computed and paid in accordance with the terms of
the Plan, provided that for purposes of said computation the
Corporation's "return on assets employed" shall not be reduced by
any compensation or other benefits paid or to be paid or provided
to John F. Ward, the Corporation's Chief Executive Officer, and
(ii) Retiree shall be entitled to receive the bonus,
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<PAGE> 2
if any is earned, paid pursuant to the Performance Unit Plan
component of the Corporation's Executive Incentive Program for the
3-year performance plan cycle ending December 31, 1998. Retiree
shall be responsible for and pay any income taxes due or owing by
Retiree as the result of the Corporation's providing (i)
participation and coverage for Retiree, and where applicable, his
spouse, under the above designated employee and fringe benefit
plans and policies, and (ii) comparable benefits outside such
plans and policies in the event Retiree is prohibited from
participating in any such plans or policies.
(2) Commencing January 1, 1999 and continuing through the last day
of the month in which Retiree's 65th birthday occurs, Retiree
shall be paid annual retirement compensation of Four Hundred
Thousand Dollars ($400,000) (the "Post-1998 Retirement
Compensation"), to be paid at the times and in the manner
specified in the Corporation's general policies regarding the
payment of employment compensation as established from time to
time. For federal, state and local tax purposes, said compensation
shall be treated as "wages" and the Corporation shall withhold all
appropriate taxes therefrom and shall remit such taxes, together
with the taxes imposed by ss. 3111 of the Internal Revenue Code of
1986 on the Corporation, to the applicable taxing authorities;
provided that (i) subject to the Corporation's obligation to
withhold and remit income tax on said compensation to the
applicable taxing authorities, Retiree shall be responsible for
and pay any additional income tax due and owing thereon, and (ii)
said compensation shall be treated by the parties as "payments on
account of retirement", not as "wages", for purposes of the Social
Security earnings test. During this period, Retiree shall, in the
same manner and at the same cost to him as was in effect for him
at the time of his retirement, continue participation and coverage
for himself and, where applicable, his spouse under the following
employee and fringe benefit plans and policies of the Corporation
in which he participated at the time of his retirement: i.e., the
Corporation's (i) Group Health Plan, (ii) Group Life Insurance
Plan, (iii) Accidental Death and Dismemberment Insurance Plan,
(iv) Cancer Expense Protection Plan, (v) Dental Insurance Plan and
(vi) Section 125 Tax Savings Benefit Plan. In addition, the
Corporation shall cause Retiree to accrue benefits under the
Corporation's Revised Pension Plan and Supplemental Retirement
Benefit Plan during the period commencing January 1, 1999 and
ending on the earlier of (x) the last day of the month in which
Retiree's 65th birthday occurs or (y) the last day of the month in
which Retiree dies, as if Retiree were employed by the Corporation
and received salary and bonus of Six Hundred Thousand Dollars
($600,000) per year during said period. If Retiree is prohibited
from participating in, or accruing such benefit under, any such
plan or policy, the Corporation shall provide Retiree comparable
benefits outside such plan or policy. Retiree shall be responsible
for and pay any income taxes due or owning by Retiree as the
result of the Corporation's providing (i) participation and
coverage for Retiree, and where applicable, his spouse, under the
above designated employee and fringe benefit plans and policies,
(ii) comparable benefits outside such plans and policies in the
event Retiree is prohibited from participating in any such plans
or policies and (iii) accrued benefits as set forth in the
sentence immediately preceding the immediately preceding sentence.
(3) Commencing on the first day of the month following the month in
which Retiree's 65th birthday occurs and continuing for his life,
Retiree shall be paid annual retirement compensation of Three
Hundred Thousand Dollars ($300,000), to be paid as specified in
the Corporation's general policies regarding the payment of
employment compensation as established from time to time, reduced
by the payments actually received by Retiree from the
Corporation's Revised Pension Plan and Supplemental Retirement
Benefit Plan during such pay periods pursuant to the form of
benefit payment then elected by Retiree under said Plans. For
federal, state and local tax purposes, said compensation shall be
treated as "wages" and the Corporation shall withhold all
appropriate taxes therefrom and shall remit such taxes, together
with the taxes imposed by ss. 3111 of the Internal Revenue Code of
1986 on the Corporation, to the applicable taxing authorities;
provided, that (i) subject to the Corporation's obligation to
withhold and remit income tax on said compensation to the
applicable taxing authorities, Retiree shall be responsible for
and pay any additional income tax due and owing thereon, and (ii)
said compensation shall be treated by the parties as "payments on
account of retirement", not as "wages", for purposes of the Social
Security earnings test.
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<PAGE> 3
(b) Continuation of Benefits upon Death of Retiree Prior to Age 65.
If Retiree dies on or before the last day of the month in which
his 65th birthday occurs, the Corporation shall continue to pay to
Retiree's spouse Mary M. Adams, if she is living and was married
to Retiree at the time of Retiree's death, or if Retiree's spouse
Mary M. Adams (i) is not living at the time of Retiree's death or
was not married to Retiree at the time of Retiree's death, or (ii)
Retiree's spouse Mary M. Adams should subsequently die, to
Retiree's estate, amounts equal to the remaining unpaid 1998
Retirement Compensation and Post-1998 Retirement Compensation
(exclusive of benefits) to be paid or provided to Retiree under
subparagraphs (1) and (2) of Paragraph (a) of this Section 2,
respectively, which would have been paid to Retiree had he not
died, with said amounts to be paid as and when they would have
been paid to Retiree had he not died.
3. Pension Benefits. Retiree shall be entitled to receive, and this
Agreement shall not affect, Retiree's benefits payable under the
Corporation's Revised Pension Plan, 401(k) Retirement Savings Plan and
Supplemental Retirement Benefit Plan, which benefits shall be paid at
the times and in the manner as Retiree has or may hereafter elect under
the terms of said Plans.
4. Exercise of Stock Options. Effective upon Retiree's retirement
from the active employment by the Corporation, all options granted by
the Corporation to Retiree for the purchase of the Corporation's stock
pursuant to the Corporation's 1993 Executive Long-Term Incentive Plan
(the "1993 Plan"), or any predecessor stock option plan sponsored by
the Corporation, were immediately vested and non-cancellable, and may
be exercised by Retiree at any time on or before April 1, 2001 in the
manner specified in the 1993 Plan or predecessor stock option plan. The
Corporation acknowledges that Retiree possesses the following options
to purchase shares of the Corporation's common stock:
(1) Option dated July 24, 1991, to purchase 11,000 shares of
the Corporation's common stock at a price of $26.375 per
share.
(2) Option dated July 28, 1993, to purchase 14,300 shares of
the Corporation's common stock at a price of $27.50 per share.
(3) Option dated January 26, 1994, to purchase 16,900 shares
of the Corporation's common stock at a price of $27.4375 per
share.
(4) Option dated January 25, 1995, to purchase 18,000 shares
of the Corporation's common stock at a price of $30.00 per
share.
(5) Option dated January 24, 1996, to purchase 19,800 shares
of the Corporation's common stock at a price of $27.25 per
share.
(6) Option dated January 22, 1997, to purchase 19,400 shares
of the Corporation's common stock at a price of $30.875 per
share.
(7) Option dated January 28, 1998, to purchase 24,600 shares
of the Corporation's common stock at a price of $24.375 per
share.
5. Tax and Financial Planning. The Corporation shall pay the reasonable
attorneys' fees and expenses incurred by Retiree for the review of this
Agreement and the provision of advice to Retiree with respect thereto.
In addition, the Corporation shall pay the reasonable fees and expenses
of Retiree's attorneys, accountants and financial advisors incurred and
paid on or before December 31, 1998, with respect to Retiree's
financial and estate planning.
-13-
<PAGE> 4
6. Covenant Not to Compete. Commencing upon the execution of this
Agreement and continuing for the period during which the Corporation
shall pay employment or retirement compensation to Retiree, Retiree
shall not, directly or indirectly, individually or as a partner,
corporate employee, member, stockholder (other than as a shareholder of
less than 1% of a corporation whose shares are listed on a national or
regional securities exchange or have been registered under Section
12(g) of the Securities Exchange Act of 1934), officer, director,
consultant or advisor, work for or lend assistance to a competitor of
the Corporation engaged in manufacturing, marketing, selling or
distributing activewear, athletic uniforms, better knit shirts or
licensed sports apparel, or solicit any business from any customer of
the Corporation for or on behalf of any such competitor of the
Corporation. It is further agreed that due to the irreparable injury
and damage to the Corporation resulting from Retiree's violation of
this covenant, the Corporation will be entitled to injunctive relief
against the violation by Retiree of this covenant in addition to all
other remedies otherwise available to the Corporation. If any court of
competent jurisdiction should hold that the restrictions contained in
this Section 6 are unreasonable, said restrictions shall be deemed to
be reduced, but only to the extent necessary, in the opinion of said
court, to make them reasonable.
7. Confidential Information. Retiree agrees that all confidential
information that comes into his possession by reason of his employment
by the Corporation is the property of the Corporation. Retiree shall
not, during the term of this Agreement or thereafter, disclose or
acknowledge the content of any confidential information to any person
other than an employee of the Corporation who is authorized to possess
such confidential information or Retiree's advisors, such as
accountants or attorneys. For the purposes of this Section 7,
"confidential information" shall include all information relating to
the operations of the Corporation which has not been specifically
designated for release to the public by an authorized representative of
the Corporation, including, without limitation, trade secrets, plans,
pricing information, customer lists and other information developed by
or originated by the Corporation for its own use.
8. Offers to Personnel. Retiree acknowledges that the employees of
the Corporation have been and will be trained at great expense by the
Corporation, and the Corporation has a compelling interest in
maintaining its contractual relationship and expectation of future
contractual relationship with its employees. In addition, if the
employees of the Corporation were to terminate their relationship with
the Corporation and render services to Retiree, Retiree would be
unfairly benefitted without adequate compensation to the Corporation,
by the investment of the Corporation. Accordingly, Retiree covenants
that he shall not from the date hereof through the last day of the
calendar month in which Retiree's 65th birthday occurs, directly or
indirectly, impair or initiate any attempt to impair the relationship
or expectancy of a continuing relationship which exists or will exist
between the Corporation and its employees or make offers or contracts
of employment or offers or contracts for services with such employees
or with any partnership, corporation or association through which such
employees may render services or employment to Retiree.
9. Resignation as Trustee. Retiree hereby resigns, effective
immediately, as a trustee under the Corporation's Revised Pension Plan
and under all other employee benefit plans or trusts, if any, of which
he serves as trustee or other fiduciary.
10. Release and Indemnification. The Corporation, on its own behalf
and on behalf of its subsidiaries, affiliates, successors and assigns,
(i) releases, acquits and forever discharges Retiree, his successors,
assigns and personal representatives, for any and all claims, actions,
causes of actions, demands, damages, costs and expenses whatsoever,
which the Corporation, or anyone acting by it or on its behalf, has,
may have or which may hereafter accrue, and (ii) agrees to defend and
indemnify Retiree, his successors, assigns and personal
representatives, against and hold them harmless from any and all
claims, actions, causes of action, demands, costs and expenses
whatsoever, which in any way arise out of or relate to Retiree's
service as a trustee of any employee benefit or retirement plan
sponsored by the Corporation.
-14-
<PAGE> 5
11. Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and placed in the United States Certified
Mail, addressed to the party entitled to receive said notice, at the
following addresses:
(a) If to Retiree:
John C. Adams
190 Willow Lane
Alexander City, Alabama 35010
(b) If to the Corporation:
Russell Corporation
755 Lee Street
P. O. Box 272
Alexander City, Alabama 35011-0272
or at such other address as may be specified from time to time in notices given
in accordance with the provisions of this Section 11.
12. Assignment. Neither this Agreement, nor the rights or obligations
of any party hereunder, may be assigned without the prior written
consent of the other party; provided that in the event the Corporation
is merged into another corporation or all or substantially all of the
Corporation's assets are transferred to another corporation, such other
corporation shall assume all of the obligations of the Corporation
hereunder, and such transaction shall not require the consent of
Retiree for the rights of the Corporation hereunder to be assigned to
such other corporation.
13. Waiver of Breach. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach by any party.
14. Section Headings. The headings of the sections of this Agreement
are solely for the purpose of convenience and are not a part hereof,
and shall not be used in the construction or interpretation of any
provision.
15. Modifications. This Agreement may not be changed or modified, nor
may any provision hereof be waived, except by an agreement in writing
executed by the party against whom enforcement of the change,
modification or waiver is asserted.
16. Succession. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their heirs, personal
representatives, successors and assigns.
17. Governing Law. This Agreement shall be construed and interpreted
under, and the rights and obligations of the parties hereunder shall be
controlled and governed by, the laws of the State of Alabama.
18. Severability. Should any court of competent jurisdiction decide,
hold, adjudge or decree that any provision, paragraph, clause or term
of this Agreement is void or unenforceable in whole or as applied in a
particular situation, such determination shall not effect any other
provision of this Agreement, and all other provisions of this Agreement
shall remain in full force and effect in such situation, and all
provisions of this Agreement shall remain in full force and effect in
any and all other situations.
-15-
<PAGE> 6
IN WITNESS WHEREOF, Retiree and the Corporation have executed, or
caused to be executed, this Agreement as of the date herein first above written.
"RETIREE"
/s/ Steve R. Forehand /s/ John C. Adams
- --------------------------------------------------------------
Witness John C. Adams
"EMPLOYER"
ATTEST: RUSSELL CORPORATION, AN ALABAMA
CORPORATION
By: /s/ Steve R. Forehand By: /s/ John F. Ward
--------------------- ----------------
Its Secretary
Its Chairman, President and CEO
-------------------------------
-16-
<PAGE> 1
EXHIBIT 11
COMPUTATIONS OF EARNINGS PER COMMON SHARE
RUSSELL CORPORATION AND SUBSIDIARIES
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended 26 Weeks Ended
--------------------------- ----------------------------
7/5/98 7/6/97 7/5/98 7/6/97
<S> <C> <C> <C> <C>
Net Income $ 6,560 $ 8,113 $ 8,409 $ 19,416
Basic Calculation:
Average shares outstanding 36,279,681 36,776,846 36,341,613 37,232,656
----------- ----------- ----------- -----------
Net income per share-basic $ 0.18 $ 0.22 $ 0.23 $ 0.52
=========== =========== =========== ===========
Diluted Calculation:
Average shares outstanding 36,279,681 36,776,846 36,341,613 37,232,656
Net common shares issuable
on exercise of certain stock options 53,643 187,743 41,856 244,376
----------- ----------- ----------- -----------
36,333,324 36,964,589 36,383,469 37,477,032
----------- ----------- ----------- -----------
Net income per share-diluted $ 0.18 $ 0.22 $ 0.23 $ 0.52
=========== =========== =========== ===========
</TABLE>
-17-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RUSSELL CORPORATION FOR THE SIX MONTHS PERIOD ENDED
JULY 5, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> JUL-05-1998
<CASH> 5,663
<SECURITIES> 1,027
<RECEIVABLES> 235,905
<ALLOWANCES> 12,918
<INVENTORY> 442,118
<CURRENT-ASSETS> 702,339
<PP&E> 1,216,472
<DEPRECIATION> 684,333
<TOTAL-ASSETS> 1,306,182
<CURRENT-LIABILITIES> 208,848
<BONDS> 355,257
0
0
<COMMON> 414
<OTHER-SE> 657,418
<TOTAL-LIABILITY-AND-EQUITY> 1,306,182
<SALES> 528,053
<TOTAL-REVENUES> 528,053
<CGS> 382,387
<TOTAL-COSTS> 382,387
<OTHER-EXPENSES> 115,005
<LOSS-PROVISION> 2,430
<INTEREST-EXPENSE> 14,001
<INCOME-PRETAX> 14,230
<INCOME-TAX> 5,821
<INCOME-CONTINUING> 8,409
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,409
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
</TABLE>
