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 March 31, 2002 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.)
3330 Cumberland Blvd, Suite 800, Atlanta, Georgia 30339
and
755 Lee Street, Alexander City, Alabama 35011-0272
(Address of principal executive offices) (Zip Code)
(678)742-8000
(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 May 13, 2002
Common Stock, Par Value $ .01 Per Share 32,093,863 shares
(Excludes Treasury)
RUSSELL CORPORATION
INDEX
Page No.
--------
Part I. Financial Information:
Item 1. Financial Statements
Consolidated Condensed Balance Sheets --
March 31, 2002 and December 29, 2001 2
Consolidated Condensed Statements of Operations --
Thirteen Weeks Ended March 31, 2002 and April 1, 2001 3
Consolidated Condensed Statements of Cash Flows --
Thirteen Weeks Ended March 31, 2002 and April 1, 2001 4
Notes to Consolidated Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Results of Operations and
Liquidity and Capital Resources 11
Item 3. Quantitative and Qualitative Disclosure about Market Risk 13
Part II. Other Information:
Item 1. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 13
1
RUSSELL CORPORATION
Consolidated Condensed Balance Sheets
(In Thousands Except Share and Per Share Amounts)
(Unaudited)
March 31 December 29
2002 2001
---- ----
ASSETS (Unaudited) (Note 1)
Current assets:
Cash $ 12,271 $ 5,882
Accounts receivable, net 167,264 166,105
Inventories - Note 2 372,777 360,338
Prepaid expenses & other current assets 37,658 40,975
----------- -----------
Total current assets 589,970 573,300
Property, plant & equipment 1,053,221 1,051,669
Less accumulated depreciation (704,457) (695,384)
----------- -----------
348,764 356,285
Other assets 66,623 65,585
----------- -----------
Total assets $ 1,005,357 $ 995,170
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable & accrued expenses $ 130,447 $ 126,026
Short-term debt 3,487 6,187
Current maturities of long-term debt 39,271 39,271
----------- -----------
Total current liabilities 173,205 171,484
Long-term debt, less current maturities 317,994 310,936
Deferred liabilities 58,642 58,519
Stockholders' equity:
Common stock, par value $.01 per share; authorized
150,000,000 shares, issued 41,419,958 shares 414 414
Paid-in capital 45,211 45,392
Retained earnings 647,627 646,279
Treasury stock, at cost (9,400,492 shares at
3/31/02 and 9,411,462 shares at 12/29/01) (222,869) (223,172)
Accumulated other comprehensive loss (14,867) (14,682)
----------- -----------
Total stockholders' equity 455,516 454,231
----------- -----------
Total liabilities & stockholders' equity $ 1,005,357 $ 995,170
=========== ===========
See accompanying notes to consolidated condensed financial statements.
2
RUSSELL CORPORATION
Consolidated Condensed Statements of Operations
(In Thousands Except Share and Per Share Amounts)
(Unaudited)
13 Weeks Ended
--------------
March 31 April 1
2002 2001
---- ----
Net sales $ 215,825 $ 240,994
Costs & expenses:
Cost of goods sold 155,989 175,938
Selling, general & administrative expenses 48,968 53,040
Interest expense 6,694 7,448
Other (income) expense - net (11) 957
------------ -----------
211,640 237,383
------------ -----------
Income before income taxes 4,185 3,611
Provision for income taxes 1,557 1,372
------------ -----------
Net income $ 2,628 $ 2,239
============ ===========
Weighted-average common shares outstanding:
Basic 32,016,884 31,902,656
Diluted 32,037,374 32,302,659
Net income per common share:
Basic $ 0.08 $ 0.07
Diluted 0.08 0.07
Cash dividends per common share $ 0.04 $ 0.14
See accompanying notes to consolidated condensed financial statements.
3
RUSSELL CORPORATION
Consolidated Condensed Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
13 Weeks Ended
--------------
March 31 April 1
2002 2001
---- ----
Operating Activities:
Net income $ 2,628 $ 2,239
Adjustments to reconcile net income to
cash provided by (used in) operating activities:
Depreciation 11,741 12,479
Amortization 58 422
Deferred income tax benefit -- 2
Gain on sale of property, plant & equipment (86) (21)
Non-cash restructuring, asset impairment &
other unusual charges -- 760
Foreign currency transaction loss (gain) 99 (1,057)
Changes in operating assets & liabilities:
Accounts receivable (1,352) 14,324
Inventories (13,039) (53,047)
Prepaid expenses & other current assets 3,211 (1,816)
Other assets 1,106 (1,267)
Accounts payable & accrued expenses 3,713 (9,283)
Other deferred liabilities 942 3,119
-------- --------
Net cash provided by (used in) operating activities 9,021 (33,146)
Investing Activities:
Purchases of property, plant & equipment (4,037) (13,319)
Proceeds from the sale of property, plant & equipment 664 474
-------- --------
Net cash used in investing activities (3,373) (12,845)
Financing Activities:
Borrowings on credit facility - net 7,052 51,718
Payments on short-term debt (2,598) --
Debt issuance cost (2,470) --
Dividends on common stock (1,280) (4,468)
Distribution of treasury stock 122 178
-------- --------
Net cash provided by financing activities 826 47,428
Effect of exchange rate changes on cash (85) 1,076
-------- --------
Net increase in cash 6,389 2,513
Cash balance at beginning of period 5,882 4,193
-------- --------
Cash balance at end of period $ 12,271 $ 6,706
======== ========
See accompanying notes to consolidated condensed financial statements.
4
RUSSELL CORPORATION
Notes to Consolidated Condensed Financial Statements
1. The accompanying unaudited, consolidated, condensed financial statements
have been prepared in accordance with accounting principles generally
accepted in the United States for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States
for complete financial statements. In our opinion, the accompanying
interim, consolidated, condensed financial statements contain all
adjustments (consisting only of normal recurring accruals) necessary to
present fairly our financial position as of March 31, 2002, and the results
of our operations for the thirteen week period ended March 31, 2002 and
April 1, 2001, and our cash flows for the thirteen week period ended March
31, 2002 and April 1, 2001.
The balance sheet at December 29, 2001, has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in our Annual Report on Form 10-K for the year
ended December 29, 2001.
Our revenues and income are subject to seasonal variations. Consequently,
the results of operations for the thirteen week period ended March 31,
2002, are not necessarily indicative of the results to be expected for the
full year.
2. The components of inventories consist of the following: (in thousands)
3/31/02 12/29/01 4/1/01
------- -------- ------
Finished goods $ 307,335 $ 297,571 $ 342,692
Work in process 44,747 42,136 77,930
Raw materials and supplies 23,488 23,424 42,349
--------- --------- ---------
375,570 363,131 462,971
LIFO and lower-of-cost or
market adjustments, net (2,793) (2,793) (5,286)
--------- --------- ---------
$ 372,777 $ 360,338 $ 457,685
========= ========= =========
3. In July 1998, we adopted a restructuring and reorganization program with
the objective of (1) transitioning our company from a manufacturing-driven
business to a consumer-focused organization that markets branded apparel
products and (2) creating an efficient, low-cost operating structure with
the flexibility to take advantage of future opportunities to reduce our
costs. The plan originally called for the closing of a number of our
world-wide facilities, which included selected manufacturing plants,
distribution centers and offices; expanding production outside the United
States; consolidating and downsizing the licensed products businesses;
disposing of owned shopping-center real estate; reorganizing the corporate
structure; establishing a dual headquarters in Atlanta, GA in addition to
Alexander City, AL; as well as other cost saving activities. In July 2001,
we announced an extension of this program to align the organization by
distribution channel to provide stronger customer service, supply chain
management, and more cost-effective operations.
During the first quarter of 2002, we did not incur any additional
restructuring charges ("special charges").
5
The special charges reflected in the consolidated condensed statements of
operations are as follows: (in thousands)
13 Weeks Ended
4/1/01
------
Exit costs related to facilities $1,148
Impairment of facilities & equipment
held for disposal 760
Expenses associated with the establishment
of dual headquarters 680
Other 134
======
Total before taxes 2,722
======
Total after taxes $1,687
======
These charges have been classified in the consolidated condensed statements
of operations as follows: (in thousands)
13 Weeks Ended
4/1/01
------
Cost of goods sold $ 40
Selling, general & administrative expenses 680
Other, net 2,002
------
$2,722
======
A summary of activity in the restructuring liability accounts follows: (in
thousands)
13 Weeks Ended
03/31/02 04/01/01
-------- --------
Restructuring liabilities at
beginning of period $ 16,139 $ 5,726
Exit costs accrued -- 1,148
Other charges -- 814
Payments charged to the liability accounts (4,554) (4,139)
-------- -------
Restructuring liabilities at end of period $ 11,585 $ 3,549
======== =======
At March 31, 2002, we held for sale certain closed facilities with an
adjusted carrying value of approximately $18.7 million, which have been
included in property, plant and equipment as part of the domestic
activewear segment.
4. We are a co-defendant in Locke, et al. v. Russell Corporation, et al., in
Jefferson County, Alabama. Of the fifteen original plaintiff families in
this case, ten have withdrawn from the case, leaving only five plaintiff
families. The claims asserted in the complaint are for trespass and
nuisance relating to property owned by the plaintiffs on Lake Martin in a
subdivision of Alexander City, Alabama called the Raintree Subdivision. The
plaintiffs in this case have not specified the amount of damages they are
seeking. A complaint substantially identical to the one filed in the Locke
case was filed on November 20, 2001 in the Circuit Court of Jefferson
County, Alabama, by two residents of the Raintree Subdivision (Gould v.
Russell Corporation, et al.). This case has been consolidated with the
Locke case. The claims and allegations in the Locke and Gould cases are
virtually identical to a similar case styled Sullivan, et al. v. Russell
Corporation, et al., which was resolved in our favor in a ruling by the
Supreme Court of Alabama in 2001. We plan to vigorously defend the Locke
and Gould suits.
6
By letter dated January 13, 2000, we were notified by the United States
Department of Justice ("DOJ") that the DOJ intended to institute legal
proceedings against us and certain other parties alleging violations by
those parties of the Clean Water Act in connection with the treatment and
discharge of waste at a water treatment facility operated by the City of
Alexander City, Alabama. Since that time, we and the other parties engaged
in discussions with the DOJ. On March 5, 2002, we and two other parties,
with no admission of liability, entered into a Consent Decree with the DOJ
whereby we and the other parties agreed (i) to pay a civil penalty of
$30,000, of which we will pay $10,000 and (ii) to participate in a
Supplemental Environmental Project, the cost of which will be approximately
$197,000, of which we will pay approximately $112,000. We are not required
to undertake any corrective or remedial action under the terms of the
Consent Decree. The Consent Decree must be judicially approved after public
comment, but we have no reason to believe such approval will be withheld.
The Supplemental Environmental Project will be undertaken in connection
with the settlement of a civil enforcement action taken by the United
States for violations of the Clean Water Act. We specifically denied the
allegations of the DOJ and specifically denied any liability based upon
those allegations. We do not believe the settlement of this matter will
have a material adverse effect upon us.
We also are a party to various other lawsuits arising out of the conduct of
our business. We do not believe that any of these lawsuits, if adversely
determined, would have a material adverse effect upon us.
5. Earnings per share calculated in accordance with SFAS 128, Earnings Per
Share, are as follows: (in thousands except share and per share amounts)
13 Weeks Ended
--------------
3/31/02 4/1/01
------- ------
Net income $ 2,628 $ 2,239
=========== ===========
Basic calculation:
Weighted-average common shares outstanding 32,016,884 31,902,656
=========== ===========
Net income per common share-basic $ 0.08 $ 0.07
=========== ===========
Diluted calculation:
Weighted-average common shares outstanding 32,016,884 31,902,656
Net common shares issuable
on exercise of dilutive stock options 20,490 400,003
----------- -----------
32,037,374 32,302,659
=========== ===========
Net income per common share-diluted $ 0.08 $ 0.07
=========== ===========
6. For the periods ended March 31, 2002 and April 1, 2001, accumulated other
comprehensive loss as shown in the consolidated condensed balance sheets
was comprised of foreign currency translation adjustments, and FAS 133
adjustments which consists of interest rate swap agreements, cotton futures
contracts for 2001 only, and foreign currency forward contracts. The
components of comprehensive loss, net of tax, for these periods were as
follows: (in thousands)
7
13 Weeks Ended
--------------
3/31/02 4/1/01
------- ------
Net income $ 2,628 $ 2,239
Foreign currency translation loss (898) (1,729)
Change in unrealized value of derivative
instruments 713 (1,051)
Cumulative effect adjustment (SFAS 133) -- (578)
------- -------
Comprehensive income (loss) $ 2,443 $(1,119)
======= =======
7. We operate our business in two reportable segments: Domestic Activewear and
International Activewear. Domestic Activewear is further organized into
three business lines, which are aligned by distribution channel: Russell
Athletic, Mass Retail, and Artwear/Careerwear. The International Activewear
business sells our products in more than 40 countries.
In 2001, we realigned our domestic organizational structure by distribution
channel to provide a stronger focus on customer service, marketing, supply
chain management and cost effective operations. Accordingly, the segment
data presented herein for 2001 has been restated to present our segment
data on the new basis of segment reporting. The business units that were
previously shown as "all other" are now considered part of our Domestic
Activewear segment.
Our management evaluates performance and allocates resources based on
profit or loss from operations before interest, income taxes and special
charges (Segment EBIT). The accounting policies of the reportable segments
are the same as those described in Note One to the consolidated financial
statements in our Annual Report on Form 10-K for the year ended December
29, 2001, except that inventories are valued at standard cost at the
segment level, whereas a substantial portion of inventories are valued on a
Last-In, First-Out (LIFO) basis in the consolidated financial statements.
Intersegment transfers are recorded at cost; there is no intercompany
profit or loss on intersegment transfers.
8
13 Weeks ended March 31, 2002
(in thousands)
Domestic International
Activewear Activewear Total
---------- ---------- -----
Net sales $195,135 $20,690 $ 215,825
Depreciation &
amortization expense 11,639 160 11,799
Segment EBIT 14,190 120 14,310
Total assets 947,096 58,261 1,005,357
13 Weeks ended April 1, 2001
(in thousands)
Domestic International
Activewear Activewear Total
---------- ---------- -----
Net sales $ 222,336 $18,658 $ 240,994
Depreciation &
amortization expense 12,410 491 12,901
Segment EBIT 19,908 463 20,371
Special charges not included
in Segment EBIT 2,441 281 2,722
Total assets 1,115,807 76,300 1,192,107
A reconciliation of combined segment EBIT to consolidated income before
income taxes is as follows:
13 Weeks Ended
--------------
3/31/02 4/1/01
------- ------
Total segment EBIT $ 14,310 $ 20,371
Special charges -- (2,722)
Unallocated amounts:
Corporate expenses (3,431) (6,590)
Interest expense (6,694) (7,448)
-------- --------
Consolidated income before income taxes $ 4,185 $ 3,611
======== ========
NET SALES BY DISTRIBUTION CHANNEL
(in thousands)
13 Weeks Ended
--------------
3/31/02 4/1/01
------- ------
Domestic Russell Athletic 59,056 61,420
Domestic Mass Retail $ 42,363 $ 47,218
Domestic Artwear/Careerwear 93,716 113,698
International Activewear 20,690 18,658
-------- --------
Consolidated total $215,825 $240,994
======== ========
8. In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets that supersedes FASB Statement
No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, and provides a single accounting model
for long-lived assets to be disposed of. Although retaining many of the
fundamental recognition and measurement provisions of Statement No. 121,
the new rules significantly change the criteria that would
9
have to be met to classify an asset as held-for-sale. The new rules also
supersede the provisions of APB Opinion 30 with regard to reporting the
effects of a disposal of a segment of a business and require expected
future operating losses from discontinued operations to be displayed in
discontinued operations in the period(s)in which the losses are incurred
(rather than as of the measurement date as presently required by APB 30).
We adopted SFAS No. 144 in the first quarter of 2002. The new rules had no
impact on our consolidated financial position or our results of operations.
9. On December 29, 2001, we adopted SFAS No. 142, "Goodwill and Other
Intangible Assets", which eliminates amortization of goodwill and requires
an annual impairment test. SFAS No. 142 requires that impairment be tested
at the reporting unit level, using a two-step impairment test. The first
step determines if goodwill is impaired by comparing the fair value of the
reporting unit as a whole to the book value. If a deficiency exists, the
second step measures the amount of the impairment loss as the difference
between the implied fair value of goodwill and its carrying value.
Purchased intangibles with indefinite economic lives will be tested for
impairment annually using a lower of cost or fair value approach. Other
intangibles will continue to be amortized over their useful lives and
reviewed for impairment.
The following table presents the impact of SFAS No. 142 on net income and
net income per share had the standard been in effect for the first quarter
of fiscal 2001.
Thirteen Weeks Ended
--------------------
March 31 April 1
2002 2001
---- ----
Reported net income $ 2,628 $ 2,239
Proforma SG&A adjustments:
Amortization of goodwill 281
Amortization of trademarks and licenses 79
--------- ---------
Total proforma SG&A adjustments -- 360
Income tax effect (101)
--------- ---------
Net proforma SG&A adjustments -- 259
--------- ---------
Adjusted net income $ 2,628 $ 2,498
========= =========
Reported net income per share $ 0.08 $ 0.07
Adjusted net income per share $ 0.08 $ 0.08
Reported net income per share diluted $ 0.08 $ 0.07
Adjusted net income per share diluted $ 0.08 $ 0.08
We have not completed the goodwill or other intangible asset impairment
tests at this time.
However, we do not anticipate any transitional impairment will be
recognized. We also are required to perform the impairment tests on an
annual basis. There can be no assurance that future impairment tests will
not result in a charge to earnings.
10
Item 2. Management's Discussion and Analysis of Results of Operations and
Liquidity and Capital Resources
RESULTS OF OPERATIONS
Thirteen weeks ended March 31, 2002 compared to April 1, 2001
NET SALES. Net sales decreased 10.4%, or $25.2 million, to $215.8 million
for the first quarter of 2002 from $241.0 million in the first quarter of
2001. The decrease in net sales for the 2002 first quarter consisted of a
12.2% decline, or $27.2 million, in the Domestic Activewear segment.
Partially offsetting this decrease, net sales for the International
Activewear segment increased 10.9%, or $2.0 million, primarily due to
higher sales of our Discus(R) brand in Japan.
Overall dozens shipped within the Domestic Activewear segment were down
3.6% from the 2001 first quarter. Reduced consumer spending combined with
the unseasonably warm weather impacted net sales of $195.1 million for our
Domestic Activewear segment during the 2002 first quarter. Our Domestic
Activewear segment is organized into three business lines, which are
aligned by distribution channel: Russell Athletic, Mass Retail and
Artwear/Careerwear. Russell Athletic net sales decreased 3.8% to $59.1
million in the 2002 first quarter. Net sales in Mass Retail decreased $4.9
million, or 10.3% to $42.4 million. Net sales in Artwear/Careerwear
decreased 17.6% to $93.7 million in 2002 first quarter, reflecting
industry-wide lower prices, primarily in the promotional white T-shirt
market, and reduced corporate spending for our higher priced products, such
as sports shirts, denims, and wovens.
GROSS PROFIT AND GROSS MARGIN. Our gross profit was $59.8 million, or a
27.7% gross margin, in 2002 first quarter versus a gross profit of $65.1
million, or a 27.0% gross margin, in 2001 first quarter. Our gross margins
were positively impacted by cost savings attributable to our restructuring
and reorganization program and our other ongoing efforts to improve and
streamline our manufacturing processes, as well as our continued focus on
reducing expenses. However, these positive impacts to our gross margins
were partially offset by pricing pressures (primarily in our artwear
products) and curtailed production schedules (estimated at $2.0 million, or
$.04 per share, in 2002 first quarter versus the comparable year-ago
period).
SELLING, GENERAL AND ADMINISTRATIVE (SG&A). SG&A decreased $4.1 million to
$49.0 million, or 22.7% of net sales, in the 2002 first quarter versus
$53.0 million, or 22.0% of net sales, in 2001 first quarter. Excluding the
impact of special charges in 2001 first quarter, SG&A was $52.4 million, or
21.7% of net sales.
EARNINGS BEFORE INTEREST AND TAXES (EBIT). Consolidated EBIT was $10.9
million, or 5.0% of net sales, in the 2002 first quarter versus $11.1
million, or 4.6% of net sales, in the 2001 first quarter. Exclusive of
special charges in the 2001 first quarter, consolidated EBIT was $13.8
million, or 5.7% of net sales. This decrease is primarily attributed to
lower volumes and pricing pressure (mainly in our Domestic
Artwear/Careerwear products) and curtailed production schedules.
LIQUIDITY AND CAPITAL RESOURCES
Our current ratio was 3.4 and 4.2 at March 31, 2002 and April 1, 2001,
respectively. Total debt to capitalization decreased to 44.2% at March 31,
2002, versus 47.7% at April 1, 2001, reflecting our reduced levels of
working capital.
On April 18, 2002, we announced that we had completed our refinancing. The
new financial structure includes:
- $325 million in Senior Secured Credit Facilities (the "Facilities").
The Facilities include a five year $300 million Senior Secured
Revolving Credit Facility and a five year $25 million Senior Secured
Term Loan; and
11
- $250 million in 9.25% Senior Unsecured Notes (the "Senior Notes") due
2010.
We used the net proceeds of the Senior Notes offering together with $132.4
million of the initial borrowings under the Facilities to repay the
outstanding balances, accrued interest, prepayment penalties and expenses
under our existing revolving credit facility, and long-term notes
and to pay issuance costs. We will incur one-time, pre-tax charges of
approximately $20 million ($12.5 million after tax) associated with our
refinancing activities. These charges will be recognized as an
extraordinary item during the second quarter of 2002. We intend to use the
additional availability under the Facilities for working capital and
general corporate purposes.
The Senior Notes have not been registered under the Securities Act and may
not be offered or sold in the United States absent registration or an
applicable exemption from the registration requirements.
We believe that cash flow available from operations and availability under
our Facilities will be sufficient to operate our business and meet our
foreseeable liquidity requirements, including debt service on the Senior
Notes and the Facilities. Our availability under the new Revolving Credit
Facility is subject to a borrowing base limitation that is determined on
the basis of eligible accounts receivable and inventory.
Borrowings under our Facilities will be subject to mandatory prepayment
equal to (1) 100% of the net proceeds received by us from the issuance of
debt securities; and (2) 50% of the net proceeds received from our sale of
or disposition of all or any part of certain of our assets.
The Facilities and the indenture governing the Senior Notes impose certain
restrictions on us, including restrictions on our ability to: incur debt;
grant liens; provide guarantees in respect of obligations of any other
person; pay dividends; make loans and investments; sell our assets; issue
redeemable preferred stock and non-guarantor subsidiary preferred stock;
make redemptions and repurchases of capital stock; make capital
expenditures; prepay, redeem or repurchase debt; engage in mergers or
consolidation; engage in sale/leaseback transactions and affiliate
transactions; change our business; amend certain debt and other material
agreements; issue and sell capital stock of subsidiaries; and restrict
distributions from subsidiaries.
CONTINGENCIES
For information concerning our ongoing litigation, see Note 4 to the
Consolidated Condensed Financial Statements.
RECENT DEVELOPMENTS
See Liquidity and Capital Resources
FORWARD LOOKING INFORMATION
This Quarterly Report on Form 10-Q, including management's discussion and
analysis, contains certain statements that describe our beliefs concerning
future business conditions, prospects, growth opportunities, new product
lines and the outlook for our company based upon currently available
information. Wherever possible, we have identified these "forward looking"
statements (as defined in Section 21E of the Securities Exchange Act of
1934) by words such as "anticipates", "believes", "intends", "estimates",
"expects", "projects", and similar phrases. These forward looking
statements are based upon assumptions we believe are reasonable. Such
forward looking statements are subject to risks and uncertainties, which
could cause our actual results, performance and achievements to differ
materially from those expressed in, or implied by, these statements,
including among other matters: economic conditions, including those
specific to the retail industry; significant competitive activity,
including promotional and price competition; changes in customer demand for
our products; inherent risks in the marketplace associated with new
products and new product lines; the availability of sufficient funds to
meet foreseeable operating and liquidity requirements; the ability to
effect
12
organization savings, manufacturing and distribution efficiencies and
inventory management in line with expected savings; effects of lawsuits and
government regulations; dependence on licenses from third parties; price
volatility of raw materials; reliance on a few customers for a portion of
our sales; continued consolidation in the retail industry; risks related to
our international operations; protection of our intellectual property; and
other risk factors listed from time to time in our SEC reports and
announcements. These risks and uncertainties include, but are not limited
to, the matters discussed under the caption "Forward Looking Information"
in our Annual Report on Form 10-K for the year ended December 29, 2001. The
risks listed above are not exhaustive and other sections of this Quarterly
Report on Form 10-Q may include additional factors that could adversely
affect our business and financial performance. We assume no obligation to
publicly update any forward looking statements, whether as a result of new
information, future events or otherwise.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
We are exposed to market risks relating to fluctuations in interest rates,
currency exchange rates and commodity prices. There has been no material
change in our market risks that would significantly affect the disclosures
made in our Annual Report on Form 10-K for the year ended December 29,
2001.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Contingencies
For information concerning our ongoing litigation, see Note 4 to the
Consolidated Condensed Financial Statements.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders was held on April 24, 2002.
At the Annual Meeting, shareholders voted upon the following nominees to
serve as Directors for a three-year term expiring in 2005. The results of the
vote are as follows:
Name For Withheld
---- --- --------
Herschel M. Bloom 28,428,527 1,765,593
Ronald G. Bruno 28,426,548 1,767,572
Mary Jane Robertson 28,428,036 1,766,084
All nominees were elected.
John F. Ward, Benjamin Russell, and Margaret M. Porter will continue in
office until their terms expire in 2003. Tim Lewis, C. V. Nalley, III, John
R. Thomas, and John A. White will continue in office until their terms
expire in 2004.
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
------ -----------
4.1 Loan and Security Agreement dated as of April 18, 2002 relating to
the Company's $300,000,000 Revolving Credit Facility and $25,000,000
Term Loan Facility(1)
4.2 Indenture dated as of April 18, 2002 relating to the Company's 9.25%
Senior Notes due 2010
4.3 Registration Rights Agreement dated as of April 18, 2002 relating to
the Company's 9.25% Senior Notes due 2010
4.4 Purchase Agreement dated as of April 18, 2002 relating to the
Company's 9.25% Senior Notes due 2010
(b) Reports on Form 8-K
On April 18, 2002, we filed a Form 8-K announcing the completion of
the refinancing of our current debt.
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 May 15, 2002 /s/ Robert D. Martin
------------ ------------------------------------------
Robert D. Martin
Senior Vice President and
Chief Financial Officer
Date May 15, 2002 /s/ Larry E. Workman
------------ ------------------------------------------
Larry E. Workman, Controller
(Principal Accounting Officer)
- ----------
(1) Portions of the Loan and Security Agreement have been omitted pursuant to a
request for confidential treatment filed with the Securities and Exchange
Commission ("SEC"). The omitted material has been filed separately with the
SEC.
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