Russell Corporation NON-STOP ACTION 3330 CUMBERLAND BOULEVARD, SUITE 800 2005 ANNUAL REPORT ATLANTA, GEORGIA 30339 WWW.RUSSELLCORP.COM RUSSELL CORPORATION 2005 ANNUAL REPORT

RUSSELL CORPORATION Business Description Russell Corporation is a leading authentic athletic and sporting goods company with over a Corporate Information century of success. Building on its heritage as an athletic company, Russell Corporation has become a global leader in the sporting goods industry with apparel and equipment for all levels of activity – from the courts of the National Basketball Association to the playing fields of major colleges and backyards of homes everywhere. The Company is headquartered in Atlanta, Georgia, CORPORATE OFFICE DIVIDEND REINVESTMENT PLAN and its shares trade on the New York Stock Exchange under the symbol RML. 3330 Cumberland Blvd. For information about accounts or issuance of certificates, contact: Suite 800 Atlanta, GA 30339 SunTrust Bank, Atlanta (678) 742-8000 P.O. Box 4625 Atlanta, GA 30302 (800) 568-3476 OTHER INFORMATION ® The Company’s press releases, annual report and DIVERSITY other information can be accessed via the Internet at JERZEES continues growth in Diversity is a significant contributor to the Company’s success. RussellCorp.com Our goal is to maintain a fair and equitable culture in which every member of the Global Russell Team reinforces our values and TRANSFER AGENT AND REGISTRAR Artwear channel. has the opportunity to contribute to our business goals. Our SunTrust Bank, Atlanta Strategic Diversity Management Plan focuses on the following Leveraging its strong market position in the P.O. Box 4625 four areas: Atlanta, GA 30302 Artwear channel, JERZEES continued its (800) 568-3476 • Workforce – To attract and retain superior talent. growth in 2005 with sales increasing more • Workplace – To foster an empowering culture that than 10% in this market, which supplies DIVIDEND DISBURSING AGENT respects both differences and similarities. • Marketplace – To leverage our diversity to capitalize on SunTrust Bank, Atlanta apparel to screen printers and embroiderers. unique revenue opportunities. P.O. Box 4625 • Community – To support the communities where we live Atlanta, GA 30302 and operate. (800) 568-3476

DIVIDEND AND MARKET INFORMATION AUDITORS Russell Corporation stock trades on the New York Stock Ernst & Young LLP JERZEES builds on its #1 Exchange and various other regional exchanges under the ticker 600 Peachtree Street symbol RML. The range of high and low prices of the Common position in men’s sweatshirts Atlanta, GA 30308 Stock and the dividends per share paid during each calendar in the mass retail channel. quarter of the last two years are presented below: By providing quality FORM 10-K activewear in the mass Copies of Form 10-K as filed with the Securities and 2005 Dividend High Low Close channel, JERZEES offers Exchange Commission are available without cost to First $0.04 $19.50 $16.15 consumers with a strong shareholders of the Company by writing to: Second 0.04 21.65 17.17 Third 0.04 21.84 12.94 value consciousness Investor Relations Fourth 0.04 16.48 12.31 activewear to support Russell Corporation $0.16 $13.46 their healthy lifestyle. 3330 Cumberland Blvd., Suite 800 Atlanta, GA 30339 2004 Dividend High Low Close (678) 742-8000 First $0.04 $18.83 $17.13 Second 0.04 19.23 15.60 Third 0.04 19.20 16.42 Fourth 0.04 19.78 16.22 JERZEES committed to low-cost $0.16 $19.48 production. With the startup of Russell’s newest, most modern, and soon-to-be largest textile facility in Honduras, JERZEES further demonstrates its commitment to providing low-cost, high quality activewear. Designed and produced by Corporate Reports Inc./Atlanta www.corporatereport.com Designed and produced Russell Athletic® Russell Athletic Women’s posts continues most successful season. high-visibility Sales are on a roll this spring, as major retailers sponsorships. added additional Russell displays and expanded the women’s program to more stores. College bowl teams Georgia Tech, South Carolina and Colorado State; top-ranked baseball teams at Florida and LSU; plus nationwide Little League Baseball programs are all wearing Russell Athletic with pride through continued team sponsorships.

Russell Athletic Dri-Power ® drives performance apparel sales at retail.

Dri-Power’s moisture management technology transfers sweat away from the skin to keep athletes dry and comfortable. It’s ideal for all athletic activities, making it the fastest growing fabric category for Russell Athletic. Dri-Power programs racked up a strong sell-through with major sporting goods retail and department store customers.

Russell Athletic Russell Athletic brand Women’s increases Russell Athletic’s increases sales presence revenues. college bookstore at retail. Sales grew by more than 15%, and licensed A fully integrated point-of-purchase as more women appreciate business secures program, plus visuals rollout at more the comfort, fit and quality of new accounts. than 300 new locations, helped put Russell Athletic gear. Big sales Russell Athletic has seen the college the Russell brand front and center growth came in the Sporting licensed business move beyond with shoppers. Goods channel as sales were driven by Russell’s college campuses and bookstores. performance apparel. The licensed business has had a major hit with its tee-and-fleece combo pack, decorated with college logos, for sale in department stores.

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RRUS_NARR_wpcUS_NARR_wpc 1 33/31/06/31/06 22:00:24:00:24 PPMM Brooks® sees double digit growth in global business.

More runners are running with Brooks as the brand expands its distribution around the world. Today, Brooks footwear, apparel and accessories are sold in more than 40 countries, extending beyond North America, into Europe, Australia and Asia.

Brooks domestic footwear ratchets sales up by more than 20%. Another year of solid growth in the U.S. highlights the growing popularity of Brooks high-performance shoes. The brand contin- ues to become a key player in specialty running stores, increasing market share to 18% in this important distribution channel.

Moving Comfort® continues to add retailers to its roster.

Moving Comfort accelerated its brand growth in 2005 by adding new retailers to the mix, both traditional retail and catalog. With its outstanding products, Moving Comfort also expanded its sports bra program with major sporting goods chains.

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RRUS_NARR_wpcUS_NARR_wpc 2 33/31/06/31/06 22:00:31:00:31 PPMM Brooks earns #1 ranking with customers for six consecutive selling seasons. According to a recent independent retail survey, Brooks is the favorite with running specialty stores when it comes to in-house customer service, product delivery and sales rep support.

Brooksrunning.com creates unique partnership with Brooks retailers. Now, when consumers order online, their purchases can be fulfilled by local Brooks retailers. It’s a new twist on e-commerce shopping that directly benefits Brooks distributors and gives customers a local running store connection.

Brooks high-performance apparel gains market share in specialty running channel. Just like its shoes, the technologically advanced functionality and comfort that Brooks apparel provides has elevated the brand to the #3 spot in the market.

Mossy Oak® grows in non-camo business.

Leveraging its brand loyalty based on consumers serious about the outdoors, Mossy Oak is expanding its presence with its lifestyle product line, Elements®.

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RRUS_NARR_wpcUS_NARR_wpc 3 33/31/06/31/06 22:00:41:00:41 PPMM Spalding® nabs #4 spot as “Most Recognizable Sporting Goods Brand.”

A survey by Sporting Goods Business magazine asked Americans 16-65 to select the Top 20 most well-known brands in the sports marketplace. Spalding’s 90.9% awareness rating won it fourth place of the 50 brands in the survey.

AAI® debuts new TAC/10 gymnastic line.

Launched at the recent USA Gymnastic Coaches Congress, these new vaults, vault boards, pommel horses and balance beams are covered with Zi/O®, a composite leather originally developed by Spalding, that provides incredible grip with less slippage.

Bike® protection moves beyond jockstraps. AAI is the choice of many top basketball arenas. Bike’s product innovation in protective equipment has led to Bike pads, including the new X-treme lite shoulder pads, Fifteen NBA teams, including the being introduced into Detroit Pistons, Dallas Mavericks several Division 1 and the 2005 World Champion San athletic programs. Antonio Spurs, as well as perennial NCAA powers such as North Carolina, UCLA, Kentucky and Kansas, select us for their basketball equipment needs. We are the official basketball equipment supplier to the NCAA Final Four.

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RRUS_NARR_wpcUS_NARR_wpc 4 33/31/06/31/06 22:01:24:01:24 PPMM Spalding Expands In Asia.

Known for its basketballs and footballs in the U.S., Spalding’s continued expansion in China reaffirms the global strength of the Spalding brand. A license agreement with Kangwei calls for its subsidiary, Ganwei, to design, manufacture and market Spalding apparel and footwear to as many as 600 retail stores.

Spalding NEVER FLAT™ basketball rockets onto Popular Science magazine’s list of 100 “Best of What’s New” in recreation. This sensational new ball zoomed to #1 in the category three weeks after launch. Its proprietary pressure retention technology makes it the only ball guaranteed to stay fully inflated for at least one year.

Spalding continues to see growth in the basketball category— achieves over 50% market share. The first name in basketball products expanded distribution and continued to take share from competitors, moving Spalding into a strengthened category leadership position.

Spalding remains the offi cial backboard of the Spalding ramps up production of new NCAA Final Four. high-end residential backboards. 26 of the last 29 tournaments have These new in-ground units are the most authentic residential systems featured our Hydra Rib® backboards. in the marketplace and are featured at the Basketball Hall of Fame.

RRUS_NARR_wpcUS_NARR_wpc 5 33/31/06/31/06 22:01:54:01:54 PPMM To Our Shareholders:

There are two parts to the story of Russell in 2005. First, 2005 was a year of non-stop action in our businesses as we worked to grow and strengthen our brands. As you have read on the preceding pages, our portfolio of leading sports apparel, footwear and equipment brands spent the year introducing innovative products, winning new business, expanding distribution channels and gaining market share. From this perspective, it was a productive and successful year. Jack Ward Chairman and Chief Executive Officer

The other side of Russell’s story in 2005, unfortunately, is Combined, we project that these initiatives will result a disappointing one. It reflects a year of operational and in annualized, pre-tax cost savings of $35 to $40 million. external challenges that combined to produce a performance We also estimate a pre-tax charge of $60 to $80 million, below expectations. Midway through the year, we encoun- approximately half of which will be realized in 2006. This tered unanticipated operational issues that resulted in lost charge includes the costs associated with the impact of sales, and higher manufacturing and distribution costs, as eliminating approximately 2,300 positions globally, includ- well as significant charge backs from retailers. The majority ing approximately 1,700 jobs in the U.S., an action that is of these issues occurred due to operational problems. We regrettable, but necessary to remain competitive. Another quickly reacted to the situation and were in the midst of cor- part of the plan includes freezing the current defined recting the problems when Hurricane Katrina struck. We lost benefit plan in the Russell retirement program, while critical product, much of which had already been sold, and significantly improving the 401(k) employee savings plan the ports that we used for nearly 70 percent of our shipments for our employees. were closed. In addition to the disruption to our supply chain, the hurricanes produced soaring energy, general transporta- Becoming a Better Supplier tion and raw material costs. Though restructuring always involves difficult decisions, we The net effect of these developments was reduced have used this time as an opportunity to complete a thorough profitability and lower earnings in 2005. Sales increased evaluation of what we see as the future of Russell, an orga- 10.5% to $1.435 billion, with solid growth internationally and nization that has diversified into all three major segments from Brooks, the athletic footwear company we acquired at of the sporting goods industry – apparel, footwear and the end of 2004. Gross margins were 27.4% as a percent of equipment. As a result of this evaluation, we have embarked sales, compared to 28.0% in the prior year. Net income was on a number of strategic initiatives. These efforts include $34.4 million, or $1.03 per share on a fully diluted basis. Net expanded marketing and merchandising to support innova- income for 2004 was $47.9 million, or $1.46 per diluted share. tive products, such as Spalding’s Never Flat basketball, and To improve operating efficiencies and asset utilization, we Brooks’ new technical running products. We also intend to kicked off 2006 with a restructuring plan to improve Russell’s continue to leverage our authentic athletic positioning to long-term competitiveness. The restructuring includes a further enhance our longer-term brand building efforts. significant shift offshore of textile/apparel manufacturing, To elevate our manufacturing processes to new levels of completing the move of our retail backboard production operational excellence, investments in information systems systems to China, and ongoing overhead cost reductions and Lean Six Sigma initiatives are well underway. By year- throughout our organization. end, more than 1,400 employees will have completed

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RRUS_NARR_wpcUS_NARR_wpc 6 33/31/06/31/06 22:02:08:02:08 PPMM training in lean manufacturing and we will have approxi- Russell Athletic’s Dri-Power moisture management mately twenty employees trained as full-time Black Belts for technology, which has been extremely well received, will be Lean Six Sigma projects. This development effort represents used in all of their basic and premier fleece at retail this fall, a major investment in our business and our people. It should representing the most significant innovation in sweatshirts result in significant improvements in customer service, in more than a decade. As an aside, GQ magazine recently higher fill rates, shorter response times, lower inventories named the Russell sweatshirt as one of the top ten products and lower overall costs – essentially everything necessary that never go out of style! Dri-Power products also are to become a better supplier to our customers. As these providing a major boost to Russell Athletic’s women’s line, improvements become more evident, we also will be achiev- and a more value-priced moisture management t-shirt for ing the fastest, most efficient way to grow – increasing sales JERZEES has recently been introduced into their markets. to our existing customers. We have the product. We have Moving Comfort is now one of our fastest growing busi- the relationships. Now, we have the tools to build a superior nesses as it has gained additional distribution throughout the service component. year. The new Maia bra has taken a leadership position in the To see the effectiveness of quality products and sports bra category and has become a featured product with outstanding service at work, we only need to look internally many customers in the sporting goods and outdoor markets. at the success of Brooks. For the sixth consecutive year, While our sporting goods businesses are a major part of Brooks was ranked number one for in-house customer Russell’s long-term strategy, we are fortunate their growth is service, product delivery and sales support in the specialty complemented by our Activewear business, in particular, its running store distribution channel. It’s no coincidence that strong industry position in the Artwear channel. Solid sales during this time, Brooks performance footwear has more gains in 2005 built on our already strong market share than doubled and is one of the best performing, and most positions in that channel. Our Artwear business has done an profitable, brands within Russell today. excellent job of offering its customers the right combination of price and quality in this competitive, but profitable and Stressing Innovation and Technology growing channel. Another important strategic advantage is our commitment to and emphasis on continuous innovation. The Sporting Renewing Our Commitment to Performance Goods Manufacturers Association noted in its 2006 annual A successful sporting goods company must never lose sight report that technology and innovation are major themes of the ones it ultimately serves – athletes at all playing levels. that characterize our industry today and wrote, “Innovation Great athletes know that success comes with the ability to improves performance and makes play safer and more fun. get beyond a disappointing performance and attack the next Let’s not forget that innovative applications of new tech- opportunity with a renewed sense of purpose, enthusiasm nologies can actually draw new participants in the game.” and determination. Russell is taking its cue from these Technology and innovation are priorities across all athletes. Last year is behind us. Well into the first half of Russell businesses today as evidenced by several major 2006, we are hard at work to make this year a winning year new product introductions. On the heels of its revolution- for Russell. Our thanks to Russell team members around the ary HVAC moisture management product line, Brooks is world who embrace this goal and who will help us achieve it launching the new MoGo midsole technology. Spalding’s for the benefit of our customers and our shareholders. Never Flat basketball stands to revolutionize play in America’s favorite team sport. As innovative as Spalding’s Sincerely, Infusion® ball, the recently introduced Never Flat balls are guaranteed to maintain air pressure ten times longer than an ordinary basketball. During 2006, Spalding plans a major media and promotion campaign to support the continued Jack Ward rollout of Never Flat. Chairman and Chief Executive Officer March 22, 2006

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RRUS_NARR_wpcUS_NARR_wpc 7 33/31/06/31/06 22:02:11:02:11 PPMM Board of Directors and Officers

Board of Directors

Herschel M. Bloom Rebecca C. Matthias Mary Jane Robertson John F. Ward Partner President and COO Executive Vice President Chairman and CEO King & Spalding Mothers Work, Inc. and CFO Russell Corporation Atlanta, Georgia Philadelphia, Pennsylvania Crum & Forster Atlanta, Georgia Committee: Executive Committee: Management Morristown, New Jersey Committee: Executive (Chairperson) Development and Committees: Audit John A. White, Ph.D. Compensation (Chairperson), Ronald G. Bruno Chancellor Corporate Governance President Clarence V. Nalley III University of Arkansas Bruno Capital Management Chairman John R. Thomas Fayetteville, Arkansas Corporation Nalley Automotive Group Chairman, President and CEO Committees: Audit, Birmingham, Alabama Atlanta, Georgia Aliant Financial Corporation Corporate Governance Committees: Audit, Committee: Corporate Alexander City, Alabama Management Development and Governance (Chairperson) Committees: Corporate Compensation (Chairperson) Responsibility, Management Margaret M. Porter Development and Arnold W. Donald Civic Volunteer Compensation President and Birmingham, Alabama Chief Executive Officer Committee: Corporate Juvenile Diabetes Research Responsibility (Chairperson) Foundation International St. Louis, Missouri Committee: Management Development and Compensation

Officers

John F. Ward Robert D. Koney, Jr. K. Roger Holliday James M. Weber Chairman and Senior Vice President and Vice President, Vice President/President Chief Executive Officer Chief Financial Officer Investor Relations and Chief Executive Officer, Brooks Sports Julio A. Barea Victoria W. Beck Calvin S. Johnston Senior Vice President/President Vice President and Vice President and Nancy N. Young and Chief Executive Officer, Corporate Controller Chief Executive Officer, Vice President, Activewear Russell Athletic Communications and Scott H. Creelman Community Relations Edsel W. Flowers Vice President and Robert P. Keefe Senior Vice President, Chief Executive Officer, Vice President and Marietta Edmunds Zakas Human Resources Spalding Group Chief Information Officer Vice President, Business Development and Treasurer Floyd G. Hoffman Senior Vice President, Corporate Development, General Counsel and Secretary

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RRUS_NARR_wpcUS_NARR_wpc 8 33/31/06/31/06 22:02:12:02:12 PPMM UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended DECEMBER 31, 2005

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______to ______

Commission file number 1-5822 RUSSELL CORPORATION (Exact name of registrant as specified in its charter)

Delaware 63-0180720 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)

3330 Cumberland Blvd, Suite 800 Atlanta, Georgia 30339 (Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (678) 742-8000

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

Name of Each Exchange Title of Each Class on Which Registered Common Stock, $.01 par value New York Stock Exchange Pacific Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [x]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes [ ] No [x]

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 (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer [x] Non-accelerated filer [ ]

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [x]

The aggregate market value of Common Stock, par value $.01, held by non-affiliates of the registrant, as of July 3, 2005, was approximately $622,000,000, based on the closing sale price reported on the New York Stock Exchange.

As of March 7, 2006, there were 33,184,790 shares of Common Stock, $.01 par value outstanding (excluding treasury shares).

DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held on April 26, 2006 (the “Proxy Statement”) are incorporated by reference into Part III.

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6 0 / 42 65 20 21 21 21 38 38 39 40 41 66 11 15 20 37 66 67 68 70 68 70 70 70 71 75 23 24 1 3 / 33/31/06 2:11:48 PM ...... Security Ownership of Certain Beneficial Owners and Management and Other Information ...... Information Other ...... Comments Staff Unresolved Controls and Procedures ...... Procedures and Controls ...... About Market Risk Quantitative and Qualitative Disclosures Risk Factors ...... Factors Risk Executive Compensation ...... Compensation Executive ...... Certain Relationships and Related Transactions Principal Accountant Fees and Services ...... Exhibits and Financial Statement Schedules ...... of the Registrant and Executive Officers Directors Accountants on Accounting and Financial with Changes in and Disagreements Related Stockholder Matters and Common Equity, Market for Registrant’s Selected Financial Data and Analysis of Financial Condition and Results Discussion Management’s ...... Data Financial Statements and Supplementary Business ...... Properties Proceedings Legal ...... of Security Holders Submission of Matters to a Vote Russell Corporation and Subsidiaries Russell Corporation Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form 2005 Form 10-K Annual Report 10-K Annual 2005 Form Public Accounting Firm ...... Registered Report of Independent ...... Consolidated Balance Sheets ...... Statements of Income Consolidated Statements of Cash Flows Consolidated ...... Statements of Stockholders’ Equity Consolidated ...... to Consolidated Financial Statements Notes Firm on Public Accounting Report of Independent Registered ...... Internal over Financial Reporting Control Signatures ...... Signatures Related Stockholder Matters ITEM 13 ITEM 14 PART IV ITEM 15 PART III PART ITEM 10 ITEM 11 ITEM 12 ITEM 9 ITEM 9A ITEM 9B ITEM 6 ITEM 7 ITEM 7A ITEM 8 ITEM 3 ITEM 4 PART II ITEM 5 PART I ITEM 1 ITEM 1A ITEM 1B ITEM 2 TABLE OF CONTENTS TABLE Disclosure ...... Disclosure of Operations ...... Operations ...... of of Equity Securities Issuer Purchases 0 1

d d n i . c p w _ N I F _ 10 S Russell Corporation U RRUS_FIN_wpc.indd 10 RRUS_FIN_wpc.indd 11 U S _ F I N _ w 2005 Form10-KAnnualReport 2005 Form10-KAnnualReport and that launchedourparticipation inthesportinggoodsand in theworld.In2003,wecompleted twoacquisitions of HaasOutdoors,onethe premier camouflagebrands include Athletic ness activitiesunderwell-knownbrandssuchas accessories forawidevarietyofsports,outdoorandfit- athletic footwear, sportinggoods,athleticequipment,and in Atlanta,Georgia,wesellathleticuniforms,apparel, company withoveracenturyofsuccess.Headquartered “Company”) isaleading Russell Corporation(“Russell,”“we,”“our,” orthe General ITEM 1. BUSINESS I PART acquired the diversify ourportfolioofbrands andproducts. In2000,we evaluating selectiveacquisitionopportunitiestofurther ganization program inourapparel business,webegan In additiontotheinitiativesofrestructuring andreor- expanded production withlowercostcontractors. manufacturing operations,improved distributioncosts,and packaged sourcing costs,increased efficiencies inexisting manufacturing andadministrativeareas through lowerfull- asset utilization,whilestreamlining processes inboth our increases. Theprogram improved operatingefficiencies and selling pricedecreases, higherfibercostsandothercost gram thatachievedsignificantcostreductions tooffset In 2003,welaunchedanoperationalimprovement pro- increasingly efficient domesticfacilities. assembly operationstooffshore facilities,andutilizing outsourcing arrangements,transferringoursewingand opportunities tofurtherreduce costs,suchasstrategic structure withtheflexibilitytotakeadvantageoffuture products and(ii)creating anefficient, low-costoperating sumer-focused organizationthatmarketsbrandedapparel Company from amanufacturing-drivenbusinesstocon- zation program withtheobjectivesof(i)transitioning ways. In1998,weinitiatedarestructuring andreorgani- We haveresponded tothesecircumstances inseveral supply, reduced traderestrictions andlowbarriers toentry. try hasgrown increasingly intenseduetoglobalizationof Over thepastdecade,competitioninapparel indus- name hasbeenassociatedwithqualityapparel. Cross Creek Russell CorporationandSubsidiaries p Russell Corporation andSubsidiaries c . i n d d Sherrin

1 1 ® American Athletic , JERZEES ® ® . Sinceincorporatingin1902,the“Russell” , MovingComfort Mossy Oak ® , Spalding authentic athleticand ® camouflageapparel business ® , HuffySports ® , and ® , Bike Brooks ® , Dudley ® ® , MossyOak sporting . Otherbrands ® , Discus Russell goods ® ® , ,

sition ofBrooks Sports. we entered theathleticfootwearbusinesswithacqui- operate aspartofourSpaldingGroup. Then,inDecember, and accessories.AmericanAthleticHuffy Sportsnow our lineofbasketballbackboards, backboard systems we acquired theHuffy Sportsbusiness,furtherexpanding form fortheextensionofourSpaldingbusiness.InJuly, boards andbackboard systems,whichprovided aplat- supplier ofgymnasticsequipmentandbasketballback- acquired theassetsofAmericanAthletic,Inc.,aleading product mixwiththree strategicacquisitions.InJune,we During 2004,wefurtherexpandedoursportsequipment other inflatablesportinggoodsproducts. Inc., webecamealeadingmarketerofbasketballsand the sportinggoodsbusinessofSpaldingSportsWorldwide, acquisition ofthebrands,contractsandrelated assetsof ment intoourproduct offering. Then,withtheMay2003 knee andelbowpads,braces,otherprotective equip- Athletic Companybusinessintroduced athleticsupporters, athletic equipmentmarkets.TheacquisitionoftheBike Sporting GoodsandActivewear. and independentlicensees.We operateintwosegments: salaried salespersons,independent commissionedagents We sellourproducts primarilythrough acombinationof ers, andonalimitedbasisthrough ownedretail stores. houses, artweardistributors,screen printers,embroider- specialty stores, collegestores, on-lineretailers, mailorder dealers, specialtyrunningstores, departmentandsports products through massmerchandisers, sportinggoods mately 100othercountries.We marketanddistributeour marketed andsoldthroughout NorthAmericaandapproxi- across multipledistributionchannelsandourproducts are We offer adiversifiedportfolioofbrandsandproducts with oneofthefastestgrowing sportsintheworld. that leaguewhichallowsustocontinueourassociation the secondyearofourcurrent eight-yearagreement with the NationalBasketballAssociation(“NBA”).We are nowin world. Thispositionissolidifiedbyourlongassociationwith is alsothelargestprovider ofbasketballequipmentinthe uniforms intheU.S.Through theSpaldingGroup, Russell Russell Athletic,theCompanyisaleadingsupplierofteam built onwell-knownbrandsandqualityproducts. Through variety ofsportsandfitnessactivities.Ourglobalpositionis forms, apparel, athleticfootwear, andequipmentforawide goods companywitharichhistoryofmarketingathleticuni- Today, Russellisamajorbrandedathleticandsporting athletic footwearandapparel industry. for running)andisconsidered aninnovatorinthetechnical high-performance athleticfootwearandapparel (primarily The Brooks ® brandisaleaderin 33/31/06 2:11:48 PM / 3 1 / 0 6

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® 6 0 / 1 3 / 33/31/06 2:11:49 PM brands brands ® , American ® , Moving Comfort , Brooks ® ® Cross Creek . We market and distribute market and distribute . We and ® ® , Spalding ® , Mossy Oak ® Sherrin JERZEES , and ® Russell Athletic , Huffy Sports ® , Dudley ® Bike in the Sporting Goods segment primarily through products depart- stores, sporting goods dealers, specialty running college stores. and ment and sports specialty stores, athletic footwear Sporting Goods segment equipment and prod- The sports apparel primarily sourced. are products by the Company. and manufactured both sourced ucts are our basic, perfor- The Activewear segment consists of such as t-shirts, products, apparel mance and careerwear socks, and career sweatshirts and sweatpants, knit shirts, sold prin- are in the Activewear segment Products wear. cipally under the Our business, financial condition and results of operations of operations condition and results Our business, financial to a number of subject factors and are by many affected are variation, raw material volatility and risks, including seasonal of significant customers. See Item 1A. the materiality to us discussion of these and other risks. “Risk Factors” for a Financial Information About Segments Financial Information to Consolidated Financial Statements” See Note 9 of “Notes 10-K for financial in Part II, Item 8 of this Report on Form our segments. information regarding two reportable operate our global business primarily in We The Sporting segments: Sporting Goods and Activewear. sports equip- Goods segment consists of sports apparel, sold principally under which are ment and athletic footwear, the brands through mass merchandisers, distributors, screen printers, distributors, screen mass merchandisers, through in the Activewear segment are Products and embroiderers. by the Company utilizing a combi- primarily manufactured contractors. nation of owned facilities and third-party Other segments that do not meet the quantitative thresh- segments primarily include olds for determining reportable our fabrics division, custom private label business and included in the “All Other” data These are Yarns. Frontier herein. presented Prior to 2005, we operated our business along distribu- two segments: Domestic and tion channels and reported International In 2005, and after several acquisitions Apparel. Russell as an authentic in prior years that have redefined our we realigned athletic and sporting goods company, the seg- Accordingly, operations by brands and products. for 2004 and 2003 has been herein ment data presented our segment data on the new basis of to present restated segment reporting. Athletic branded products (t-shirts, (t-shirts, branded products ® JERZEES Russell Corporation and Subsidiaries Russell Corporation Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form 2005 Form 10-K Annual Report 10-K Annual 2005 Form sweats, knit shirts, career wear, and socks) the majority of and socks) the majority wear, career sweats, knit shirts, or into the Artwear retailers mass through sold which are label manufactur- market. Fabric sales and certain private other” category. in the “all presented are ing revenues products or source we produce business, For our apparel primarily in the utilizing a combination of owned facilities as well as contrac- United States, Honduras and Mexico, Approximately the world. tors and other suppliers around sewing and assembly operations are 99% of our apparel Our yarn and spinning joint venture conducted offshore. partner supply the majority of our yarn requirements. businesses, For our sporting goods and athletic equipment Moving Comfort, by Spalding, Brooks, offered the products contrac- third-party from generally sourced and Bike are in Asia. American tors outside the United States, primarily basket- gymnastics equipment, in-arena Athletic produces and systems in Company-owned facilities ball backboards a portion of its Sports produces in the United States. Huffy in Company-operated facilities, but basketball backboards contractor in Asia for approximately utilizes a third-party sourc- offshore and plans to increase 60% of its production raw materials ing to 100% during 2006. Steel and other a variety of suppli- from sourced are used in this production ers and countries. that In January 2006, we announced a major restructuring our includes a number of initiatives developed to improve cost is expected long-term competitiveness. The pre-tax years to be $60 to $80 million over the next two to three cost savings of $35 to annualized pre-tax with projected will focus on the continued $40 million. The restructuring manufacturing operations, of textile/apparel shift offshore Sports’ the completion of operational changes to Huffy in sales, and significant reductions business backboard marketing and administrative costs. These plans will impact including 1,700 2,300 positions globally, approximately 1,200 will eventually in the U.S., of which approximately and Mexico. As in our previous in Honduras be replaced will be combined with focused initiatives, the restructuring asset utilization and efficiency improved marketing efforts, sales, we expect will lead to increased which improvements profitability. higher margins and improved The Sporting Goods segment consists of those products segment consists of those products The Sporting Goods sports with sports apparel, associated or brands that are This segment goods sales at retail. equipment and sporting of Russell (consisting Athletic Group includes the Russell and Bike), the Spalding Group, Athletic, Moving Comfort segment primarily The Activewear Mossy Oak and Brooks. consists of sales of 2 1

d d n i . c p w _ N I F _ 12 S Russell Corporation U RRUS_FIN_wpc.indd 12 RRUS_FIN_wpc.indd 13 U S _ F I N _ affect thecostofcertainitems required inouroperations. tion, changesinthevalueof therelevant currencies may competitors sellproducts inthesamemarkets. In addi- also affect therelative pricesat whichweandourforeign operations. Fluctuationsincurrency exchangeratesmay ings andthecomparabilityofperiod-to-periodresults of mayadverselyaffectassets, whichinturn reported earn- the results ofouroperationsandthevalueforeign Fluctuations inforeign currency exchangeratesmayaffect in theeuro, BritishpoundsterlingandMexican peso. U.S. dollars.Theseexposures are primarilyconcentrated to foreign denominatedrevenues and coststranslatedinto currencies. We alsohaveforeign currency exposure related selling andfinancingincurrencies otherthanourfunctional We haveforeign currency exposures relating tobuying, delays inshipments. operations; (viii)politicalunrest; and(ix)disruptionsor tions; (vii)difficulties instaffing andmanaginginternational its backtotheUnitedStates;(vi)foreign lawsandregula- tariffs andtaxes;(v)restrictions onrepatriating foreign prof- license requirements; (iii)traderestrictions; (iv)changesin the following:(i)currency fluctuations;(ii)importandexport operating inforeign countries,including, butnotlimitedto, in social,politicalandeconomicconditionsinherent in Mexico. Duetothis,weare exposedtorisksofchange majority ofourforeign salesbeing inEurope, Australiaand Honduras, Mexico,andtheUnitedKingdom,with facilities innumerous foreign countries,includingAustralia, tries andwehavesales,administrative,ormanufacturing Our products are soldorlicensedinmore than100coun- this ReportonForm10-K. to ConsolidatedFinancialStatements”inPartII,Item8of See “Enterprise-wideDisclosures” from Note9of“Notes About GeographicAreas Financial Information or lossonintersegmenttransfers. are primarilyrecorded atcost,withnointercompany profit for transactionswithFrontier Yarns, intersegmenttransfers Form 10-KfortheyearendedDecember31,2005.Except consolidated financialstatementsinourAnnualReporton ments are thesameasthosedescribedinNote1to companies. Theaccountingpoliciesofthereportable seg- be comparabletosimilarlytitledmeasures usedbyother Segment operatingincomeaspresented byusmaynot interest andincometaxes(segmentoperatingincome). resources basedonprofit orlossfrom operationsbefore Our managementevaluatesperformanceandallocates w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

1 3 official gameballoftheNBA).The line ofNBAandteam-identifiedbasketballs(includingthe tains itsexclusiverightstoproduce andsellacomplete partnership withtheNBA,underwhichSpaldingmain- In December2004,weentered intoaneweight-yearglobal and sustaindemandforourproducts. these trademarksare instrumentaltoourabilitycreate and commonlawtrademarkshavesignificantvalue important toourbusiness.We believethatourregistered Sports United Statesfor and tradenames.We haveregistered trademarksinthe We marketourproducts underanumberoftrademarks Intellectual Property American Athletic terminate theagreements. including theobligationtopaylicensingfees,NBAmay comply withthematerialtermsofNBAagreements, to theNBAandteamsfree ofcharge. If wefailto products, and(iii)provide aspecifiedamountofproduct minimum amountsonadvertisingandpromotion ofNBA a percentage ofnetsalesproducts, (ii)expendcertain certain licensingfees,includingfixedminimumfeesplus to theretail channel.Theagreements require usto(i)pay sell NBAbrandedbackboards andcertainaccessories and Huffy Sportstohaveexclusiverightsproduce and mental league.Theagreements alsoprovide forSpalding official balloftheWNBAandNBDL,NBA’s develop- petitions, andSpaldingwillalsocontinuetoserveasthe com- NBA practices,exhibitions,gamesandinternational Ball willcontinuetobetheonlybasketballusedduringall Creek licenses tousecertainregistered mark registrations internationally. We alsohaveworldwide brands aswellothertrademarks.We havesimilartrade- 7A ofthisReportonForm10-K. Qualitative Disclosures AboutMarketRisks”inPartII,Item sion offoreign currency exposures, see“Quantitativeand of operationsandfinancialcondition.Forfurtherdiscus- have amaterialadverseeffect onourbusiness,results Fluctuations inforeign currency exchangeratescould ® ® , MovingComfort trademarks.Theprotection ofourtrademarksis Russell Athletic ® , and ® Brooks , Spalding ® ® , JERZEES andvariationsofthese Mossy Oak Spalding ® , Infusion ® , Bike ® NBAGame ® ® and , Dudley ® , Cross Huffy ® , 33/31/06 2:11:49 PM / 3 1 / 0 6

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6 0 / 1 3 / 33/31/06 2:11:50 PM and our and our www.russellcorp.com Available Information Available Our Internet is address on Form on Form 10-K, quarterly reports annual reports on Form 8-K, and all amendments reports 10-Q, current of charge, through available, free are to those reports the Investor Relations section of our website as soon as after filing with the Securities and practicable reasonably Exchange Commission. Employees approximately As of December 31, 2005, we employed have never had a strike or work stop- 15,500 persons. We with our employees to page and consider our relationship be good. Regulation regu- subject to federal, state and local laws and are We our business, including, but not limited lations affecting under the Occupational Safety to, those promulgated Safety Act, and Health Act, the Consumer Product Fiber Product the Flammable Fabrics Act, the Textile of the regulations Identification Act, and the rules and Safety Commission and various envi- Consumer Products in believe that we are We laws and regulations. ronmental compliance with all applicable governmental regulations in com- also believe that we are under these statutes. We and requirements environmental pliance with all current in the expenditures we expect no material environmental to maintain such compliance. future foreseeable to change the a proposal approved Our shareholders Alabama to state of incorporation from Company’s at the annual meeting of (the “reincorporation”) Delaware April 21, 2004. On April 27, 2005, we held on shareholders completed the reincorporation. Champion, Lifetime, New Balance, Nike, Under Armour, New Balance, Nike, Under Armour, Champion, Lifetime, and Wilson. in the Activewear Our primary competitors Gildan, Hanes, and vari- Fruit of the Loom, segment are house brands. Competitors in the All ous private label and of a wide variety of traditional textile Other segment consist and domestic. companies, both foreign

® Huffy Huffy license license ® products. If If products. Mossy Oak ® Mossy Oak Mossy Oak license from Haas Outdoors is perpetual Haas license from ® license is perpetual and non-royalty bearing. license is perpetual and non-royalty ® Mossy Oak Russell Corporation and Subsidiaries Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report Report 10-K Annual 10-K Annual 2005 Form2005 Form Competition in the apparel, sports equipment and athletic Competition in the apparel, line and we expect footwear industries varies by product competition to intensify in all of our businesses. While no single competitor dominates any channel in which we diversi- more larger, operate, some of our competitors are than other resources financial and fied and have greater face competition and others in our industry, we do. We, limitation: (i) quality of including, without on many fronts, differ- (iii) price; (iv) product (ii) brand recognition; product; also entiation; (v) advertising; and (vi) customer service. We compete with other global companies, many of which may competitive in the have lower costs. Our ability to remain development, price, marketing, product of quality, areas will, in processing manufacturing, distribution, and order success. Our primary com- large part, determine our future adidas, ASICS, petitors in the Sporting Goods segment are Competition Our fee calculated as a that we pay a licensing also requires our from of net sales percentage license, including the obligation to make royalty payments, payments, royalty license, including the obligation to make license. Our Haas Outdoors may terminate the Sports and permits us to use certain of the licensor’s trademarks, trademarks, certain of the licensor’s and permits us to use names, logos, and copyrights on service marks, trade This license is non-exclusive for and accessories. apparel gloves, headwear, including accessories, certain products incorporating performance bags, and products footwear, such as special fabrics. The features we fail to comply with the material terms of the we fail to comply with the material terms non-exclusive licenses with licensing agents have three We 338 colleges and universities. that cover approximately 2006 and in September One of those licenses expires license automati- 2007. The third in March another expires terms, but is subject to one-year for rolling cally renews on 90 days notice. termination without cause at any time with col- 43 licenses directly also have approximately We generally for one-to two-year leges and universities that are us to pay a licensing fee of a percentage terms and require of net sales. innovation is a highly important factor in our sport- Product and many of ing goods and athletic equipment businesses marketed by those busi- the innovations in the products any of our patents nesses have been patented. The loss of sales and and reduced competition in increased could result we do not believe that However, margins of these products. on the loss of any one patent would have a material effect of operations and financial condition. our business, results 4 1

d d n i . c p w _ N I F _ 14 S Russell Corporation U RRUS_FIN_wpc.indd 14 RRUS_FIN_wpc.indd 15 U S _ F I N _ w 2005 Form10-KAnnualReport f) e) d) c) b) a) forth underItem1A“RiskFactors,”andthefollowing: ward-looking statementsinclude,amongothers,thoseset results todiffer from estimatesin,orunderlying,suchfor- that couldaffect ourfinancialperformanceorcauseactual expressed in,orimpliedby, these statements.Factors mance andachievementstodiffer materiallyfrom those uncertainties thatcouldcauseouractualresults, perfor- Such forward-looking statementsare subjecttorisksand based uponassumptionswebelieveare reasonable. from operations.Theseforward-looking statementsare orlosses of netsales,gross margin,expenses, orearnings statements, including,butnotlimitedto,anyprojections are statementsthatcouldbedeemedforward-looking Act. Allstatementsotherthanofhistoricalfact ments inreliance uponthesafeharborprovisions ofthe ers, andwetherefore makesuchforward-looking state- to communicateourfuture expectationstoourstockhold- include suchstatementsbecausewebelieveitisimportant “estimates,” “expects,”“projects,” andsimilarphrases.We as “anticipates,”“believes,”“could,”“may,” “intends,” Litigation ReformActof1995(the“Act”))bywords such looking” statements(asdefinedinthePrivateSecurities Wherever possible,wehaveidentifiedthese“forward- Company baseduponcurrently availableinformation. pects, growth opportunities,andtheoutlookfor future businessconditions,pros-our beliefsconcerning of Operations,”containscertainstatementsthatdescribe Discussion andAnalysisofFinancialConditionResults This AnnualReportonForm10-K,including“Management’s Forward-Looking Information Russell CorporationandSubsidiaries Russell Corporation andSubsidiaries p c . savings; within theprojected timeframe andwiththeexpected complete therestructuring andachievecostreductions the ultimatecostofourrestructuring, andourabilityto i to, promotional andpricecompetition; significant competitiveactivity, including,butnotlimited we havenocontrol; andpoliticalfactorsoverwhich prices, andotherexternal interest rates,currency exchangerates,commodity changes ineconomicconditionssuchas changes inenvironmental andotherlawsregulations; our business; our abilitytomaintaincustomerrelationships andgrow changes incustomerdemandforourproducts and products; inherent risksinthemarketplaceassociatedwithnew n d d

1 5 prices orbyhigherfibercosts, highercostsassociatedwith may beoffset bypressures from ourcustomerstoreduce the benefitsofourefforts, anycostsavingsthatwe achieve cost savingsandotherbenefits. Moreover, even ifwerealize other costsavingsplans,wemaynotrealize allanticipated strategic costreductions includedinourrestructuring or of Operations.”Ifwecannotsuccessfullyimplementthe Discussion andAnalysisofFinancialConditionResults and improved profitability. SeeItem7,“Management’s these efforts toleadincreased sales,highermargins to improve ourlong-termcompetitiveness. We expect lization andefficiency improvements, havebeendeveloped with plannedfocusedmarketingefforts, improved assetuti- includes anumberofspecificactionswhich,combined In January2006,weannouncedarestructuring that may beoffsetbyothercompetitivepressures. savings initiativesandanythatwedoachieve andcostefits thatweexpectfromourrestructuring We thecostsavingsandotherben- may failtorealize business operationsandfinancialresults. we presently believeare notmaterialcouldalsoaffect our cash flows.Otherfactorsnotpresently knowntousorthat consolidated financialposition,results ofoperationsor and ExchangeCommission,couldadverselyaffect our where inthisForm10-KorotherfilingswiththeSecurities The followingfactors,aswellfactorsdescribedelse- ITEM 1A. RISKFACTORS future eventsorotherwise. looking statements,whetherasaresult ofnewinformation, We assumenoobligationtopubliclyupdateanyforward- financial condition,results ofoperations,andcashflows. additional factorsthatcouldadverselyaffect ourbusiness, tions ofthisAnnualReportonForm10-Kmayinclude The riskslistedaboveare notexhaustiveandothersec- n) m) l) k) j) i) h) g) risks associatedwithournewHondurastextileoperation; our managementofinventorylevelsandworkingcapital; practices; estimates andassumptionsutilizedinouraccounting our abilitytoefficiently utilizeplantsandequipment; filings. other riskfactorslistedfrom timetoinourSEC the collectibilityofreceivables from ourcustomers; requirements; our debtstructure, cashmanagementand our investmentsincapitalexpenditures; and 33/31/06 2:11:50 PM / 3 1 / 0 6

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6 0 / 1 3 / 33/31/06 2:11:51 PM We are dependent on joint ventures and other third are on joint ventures dependent and other third We of yarnparties for the purchase and other raw materi- als and the manufacture sourcing of our products or fail to perform,and if these parties we may not meet customers. the demands of our most of its yarn business produces in the joint Our apparel Spinning Mills and we established with Frontier venture partner our joint venture from the remainder purchases suppliers. In addition, we outsource and other third-party for our a portion of our sewing and assembly requirements sold in the United States and Canada. Most of the products our sporting goods and athletic equip- by offered products contractors third-party from sourced ment businesses are by third-party outside the United States or manufactured for manufac- contractors. Our dependence on thirdparties of fin- and for sourcing turing and raw materials production in obtaining could subject us to difficulties ished products that meet our quality standards. timely delivery of products of our contractors, Although we monitor the performance in you that they will deliver our products we cannot assure quality standards. a timely manner or that they will meet our to satisfy our customers’ requirements In this event, failure demand- in our customers canceling orders, could result or reducing to accept orders prices, refusing ing reduced any of which could materially adversely affect orders, future of operations and financial condition. our business, results do not have long-term supply contracts for any of our We raw materials, other than for yarn, our joint ven- through than other Spinning Mills. As a result, with Frontier ture either we or our suppliers Yarns, to Frontier with respect may unilaterally terminate the relationship or manufacturers at any time. In addition, we also compete for quality con- tractors, some of which have long-standing relationships with our competitors. After an initial period of disruption, available alternative readily sources are we believe there unable if we are however, of supply and manufacturers; with suppliers or maintain our relationships to secure or experience a delay in obtaining an and manufacturers, we may not be able to fulfill alternative of supply, source which could have a material our customers’ requirements, of operations and business, results on our adverse effect financial condition. al-Mart merchandising and sourcing and sourcing al-Mart merchandising Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form Some of our customers are material to our business and business and material to our Some of our customers are of operations. For fiscal 2005, 2004 and 2003, results our largest and its subsidiaries, Wal-Mart respectively, 16.9%, 19.3% approximately represented customer, sales. Our sales to and 21.2% of our consolidated gross in any given year, or decrease may increase Wal-Mart dependent upon W We rely a significant portion of on a few customers for We do not have any long-termour sales and we generally of these customers. contracts with any us that we would not notified decisions. In 2005, Wal-Mart fleece business, be the sole supplier of their boys’ basic accounted for beginning in 2006. Our top ten customers sales as compared 38.9% of our 2005 gross approximately believe that consolidation in the retail to 44% in 2004. We industry, sporting goods retail particularly in the industry, of our customers have given certain cus- and the strength demands over suppliers tomers the ability to make greater to continue. However, such as us and we expect this trend us may afford we also believe that this consolidation advanta- of more cost savings potential as a result greater array such a broad geous economies of scale, as we have and brands focused on the sporting goods of products of sales and results market. If consolidation continues, our sensitive to deterioration in operations may be increasingly the financial condition of, or other adverse developments believe of our customers. Although we with, one or more good, customers are with our major that our relationships we generally do not have long-term contracts with any of although As a result, them, which is typical of our industry. needs indications of their product our customers provide basis, they gen- on a season-by-season and purchases basis on an order-by-order our products erally purchase can be orders, as well as particular and the relationship, terminated at any time. The loss of, or significant decrease customers could have a any of our major in, business from of opera- on our business, results material adverse effect tions and financial condition. adding product features, higher energy and higher general higher energy and higher general features, adding product the to realize expenses. Our failure and administrative of our initiatives could have a material anticipated benefits operations and of our business, results on adverse effect financial condition. 6 1

d d n i . c p w _ N I F _ 16 S Russell Corporation U RRUS_FIN_wpc.indd 16 RRUS_FIN_wpc.indd 17 U S _ F I N _ tions andfinancialcondition. have anadverseeffect onourbusiness,results ofopera- could affect consumerandcorporatespendinghabits Any substantialdeclineingeneraleconomicconditions Brooks of ourproducts, particularlyourpremium apparel, footwearandsportinggoodsmaydecline.Many reduce discretionary spending,purchases ofspecialty due touncertaintiesaboutthefuture. Whenconsumers become unpredictable andcouldbesubjecttoreductions change, trends indiscretionary consumerspending economicconditions tions. Asdomesticandinternational historically havebeensubjecttosubstantialcyclicalvaria- The apparel, sportinggoodsand footwearindustries cial performance. our products,whichcouldadverselyaffectfinan- purchasesof intheeconomymayreduce a downturn The demandforsomeofourproductsiscyclicaland nesses havebeenpatented. the innovationsinproducts marketed bythosebusi- ing goodsandathleticequipmentbusinessesmanyof Product innovationisahighlyimportantfactorinoursport- ness, results ofoperationsandfinancialcondition. which couldhaveamaterialadverseeffect onourbusi- actions takenagainstusrelating toouruseoftrademarks, addition, wecouldincursubstantialcoststodefendlegal erty tothesameextentaslawsofUnitedStates.In countries maynotallowustoprotect ourintellectualprop- tection ofourintellectualproperty, thelawsofsomeforeign those claims. property orthatwewillbeabletosuccessfullyresolve not assertclaimstoourtrademarksandotherintellectual our products. We cannotassure youthatthird partieswill to ourabilitycreate andsustaindemandformarket cant valueandsomeofourtrademarksare instrumental Our registered andcommonlawtrademarkshavesignifi- ofourbrandsmaysuffer.or more to protectourintellectualproperty, theimageofone protect ourintellectualproperty, unable andifweare rights. We maybeforcedtoincursubstantialcosts tion ofourtrademarksandotherintellectualproperty Our successisdependentuponthecontinuedprotec- w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

1 andartwearproducts, are discretionary purchases. 7 In addition, while we seek international pro- In addition,whileweseekinternational Russell Athletic, materials andothercosts. may notimmediatelyreflect changesinourcostofraw elapse betweenproduction andshipmentofgoods,prices financial condition.Inaddition,duetothetimethatmay negative impactonourbusiness,results ofoperationsand lower plantandequipmentutilization,whichwouldhavea results ofoperations.Reduceddemandcouldalsoresult in our inventories.Thoseeventswouldadverselyaffect our time, sellexcessinventoryatreduced pricesorwritedown expected, wemayholdinventoryforextendedperiodsof of seasonaldeliveries,demandissignificantlylessthan If, afterproducing andstoringinventoryinanticipation expected demandfordeliveryintheupcomingseason. finished goodsinventory, particularlyfleece,tomeetthe the firsthalfofyear. Generally, weproduce andstore Typically, demandforBrooks’ products isslightlyhigherin as pronounced astheseasonalityofourfleecebusiness. typically higherinthesecondandfourthquarters,butisnot in ourbasketballandequipmentbusinessis fleece (sweatshirtsandsweatpants)products. Demand the demandforourapparel products, particularlyforour quarters ofeachfiscalyear. Weather conditionsalsoaffect our apparel products ishigherduringthethird andfourth tors, includingseasonalvariations.Typically, demandfor Our results ofoperationsare affected bynumerous fac- fleeceproducts. demand forourcore the weatherwouldlikelyreduce unseasonably warm The demandforsomeofourproductsisseasonaland i) h) g) f) e) d) c) b) a) ent inoperatingforeign countries,including: changes insocial,politicalandeconomicconditionsinher- in thelocalcurrency andweare exposedtotheriskof associated withforeign operations.Netsalesare collected Our foreign operationssubjectustoriskscustomarily exchangerates. fluctuations incurrency to uncertainconditionsinoverseasmarkets,including Our businessoutsideoftheUnitedStatesexposesus disruptions ordelaysinshipments. foreign lawsandregulations; trade restrictions; currency fluctuations; political unrest; and United States; restrictions onrepatriating foreign profits backtothe changes intariffs andtaxes; import andexportlicenserequirements; operations; difficulties instaffing andmanaging international 33/31/06 2:11:51 PM / 3 1 / 0 6

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6 0 / 1 3 / 33/31/06 2:11:52 PM require us to dedicate all or a substantial portion of our us to dedicate all or a substantial portion of our require funds cash flow to service our debt, which would reduce available for other business purposes, such as capital or acquisitions; expenditures to our place us at a competitive disadvantage relative competitors with less indebtedness; limit our ability to obtain additional financing for working strategic acquisitions and capital, capital expenditures, general corporate purposes; to changes in limit our flexibility in planning for or reacting the markets in which we compete; vulnerable to general adverse economic us more render and industry conditions; and make it more difficult for us to satisfy our financial difficult make it more obligations. We have substantial debt and interest payment interest have substantial debt and payment We requirements that may restrict and our operations impair our ability to meet our obligations. our operations and Our level of indebtedness could restrict for us to fulfill our obligations. Among difficult make it more other things, our indebtedness may: a) b) c) d) e) f) The apparel footwear industries are and subject to con- sumer preferences, pref- and if we misjudge consumer erences, more the image of one or brands may of our for our products may decrease.suffer and the demand subject to shift- are and footwear industries The apparel and and evolving fashion trends ing consumer demands upon our ability to anticipate our success is dependent of core to these changes. While the respond and promptly is basic activewear and less subject offerings our apparel we do market a considerable number of to style trends, to anticipate, identify or Failure performance products. styles, or brand prefer- to changing trends, react promptly demand for our products, in decreased ences may result which could as well as excess inventories and markdowns, of on our business, results have a material adverse effect addition, if we mis- operations and financial condition. In may be our brand image judge consumer preferences, At the same time, while we believe it significantly impaired. focus may result this is important to manage our inventory, to meet our in not having an adequate supply of products sales. customers’ demand and cause us to lose Russell Corporation and Subsidiaries and Subsidiaries Russell Corporation Russell Corporation 2005 Form 10-K Annual Report Report 10-K Annual 10-K Annual 2005 Form2005 Form are our products The raw materials used to manufacture supply condi- subject to price volatility caused by weather, tions, government economic climate and other regulations, In addition, fluctuations in petroleum factors. unpredictable and prices can influence the prices of chemicals, dyestuffs the risk caused by market fluc- reduce polyester yarn. To contracts into futures tuations, we have in the past entered to hedge commodity prices, principally cotton, on portions we do not currently However, of anticipated purchases. hold any significant hedging positions and have no pres- ent intention to engage in further commodity hedging. The for with our yarn provides supply agreement joint venture pricing to be calculated on a conversion cost basis plus the timing and direct the actual cost of raw materials. We by the joint venture. pricing of cotton purchases their of our competitors is able to reduce If one or more in taking advantage of any reductions costs by production from raw material prices, we may face pricing pressures our prices to reduce those competitors and may be forced or face a decline in net sales, either of which could have a of opera- on our business, results material adverse effect tions and financial condition. The raw materials used to manufacture our products which could increase are subject to price volatility, our costs. We have foreign currency exposures relating to buying, to buying, relating exposures currency have foreign We other than our functional in currencies selling and financing related exposure currency have foreign also We currencies. and costs translated into denominated revenues to foreign rates exchange currency in foreign U.S. dollars. Fluctuations of our of our operations and the value the results may affect assets, which in turn reported foreign may adversely affect earnings comparability of period-to-period results and the may exchange rates in currency of operations. Changes competi- prices at which we and foreign the relative affect in the same market. In addition, changes tors sell products the cost of may affect currencies in the value of the relevant assure cannot We in our operations. certain items required will exposure currency you that management of our foreign exchange currency fluctuations in foreign us from protect rates could exchange currency rates. Fluctuations in foreign of on our business, results have a material adverse effect operations and financial condition. jurisdictions. In to taxation in foreign also subject are We subsid- our foreign addition, transactions between us and withhold- foreign iaries may be subject to United States and jurisdictions differ ing taxes. Applicable tax rates in foreign those of the United States, and change periodically. from 8 1

d d n i . c p w _ N I F _ 18 S Russell Corporation U RRUS_FIN_wpc.indd 18 RRUS_FIN_wpc.indd 19 U S _ F I N _ c) b) a) that limitourabilityandsubsidiaries’to: contain anumberofsignificantrestrictions andcovenants ouroutstandingindebtedness The instrumentsgoverning wish toconsummate. us fromengagingintransactionsthatweprevent may limitouroperatingandfinancialflexibility thatoutstanding indebtednessimposerestrictions our governing The covenantsintheagreements ted underthetermsofourvariousdebtinstruments. capital requirements orthattheseactionswould bepermit- that theseactionswouldenableustocontinuesatisfyour you thatwewouldbeabletotakeanyoftheseactions, tion andresults ofoperations.Inaddition,wecannotassure a materialadverseeffect onourbusiness,financialcondi- If weare required totakeanyoftheseactions,itcouldhave e) revise ordelayourstrategicplans. d) reduce ordelaycapitalexpenditures; or c) sellsomeofourassetsoroperations; b) obtainadditionalfinancing; a) refinance alloraportionofourdebt; we mayberequired to: unable togeneratesufficient cashflowtoserviceourdebt, economic, financialandbusinessconditions.Ifweare beyond ourcontrol, includinginterest ratesandgeneral financial results, whichwillbesubject,inpart,tofactors tions willdependonourfuture operatingperformanceand requirements. However, ourabilitytosatisfyobliga- by ouroperations,willbesufficient toprovide forourcash sale/leaseback transactionscombinedwithcashprovided level ofborrowings availabletous,inadditionpermitted Although there canbenoassurances,webelievethatthe increase therisksabove. borrowings. Ourincurrence ofadditionaldebtcouldfurther ouroutstandingindebtednesspermitadditionalerning stantially more debt.Thetermsoftheagreements gov- We andoursubsidiariesmaystillbeabletoincursub- w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c levels; increase ourcommonstockdividendsabovespecified obligations ofanyotherperson; incur liensanddebtorprovide guaranteesregarding the ferred stock; issue redeemable preferred stockandsubsidiarypre- . i n d d

1 9 b) a) affected bythesepricingpressures if: pressures. Ourfinancialperformancemaybenegatively time toinresponse totheseindustry-widepricing To remain competitive,wemustadjustourpricesfrom ers mayusethesecostsavingstoreduce prices. costs thanouroffshore operations,andthosemanufactur- operating environment, possiblyinenvironments withlower ments from developingcountriestoachievealowercost Many ofourcompetitorsalsosource theirproduct require- to makeprimarilybecauselaborcostsare lower. Products produced andsewnoffshore generallycostless the retail industry. of distribution,increased competition, andconsolidationin facturing technologies,growth ofthemassretail channel sewing operationsoffshore, theintroduction ofnewmanu- past severalyearsprimarilyasaresult ofthetrend tomove Prices intheapparel industryhavebeendecliningoverthe suchasourgrossmargins. formance, our productsandadverselyimpactfinancialper- that maycauseustolowerthepriceswechargefor issubjecttopricingpressures industry The apparel j) restrict distributionsfrom subsidiaries. i) h) g) f) prepay, redeem orrepurchase debt; e) makeloans,investmentsandcapitalexpenditures; d) makeredemptions andrepurchases ofcapitalstock; and issuesellcapitalstockofsubsidiaries; change ourbusiness,amendcertainofagreements our production costs;or we are forced toreduce ourpricesandwecannotreduce asset dispositions; engage inmergers,acquisitions,consolidationsand our prices. our production costsincrease andwecannotincrease transactions; engage insale/leasebacktransactionsandaffiliate 33/31/06 2:11:52 PM / 3 1 / 0 6

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6 0 / 1 3 / 33/31/06 2:11:53 PM ITEM 1B. UNRESOLVED STAFF COMMENTS STAFF UNRESOLVED ITEM 1B. None. PROPERTIES ITEM 2. is located in Atlanta, executive office principal Russell’s located in Alexander City, Georgia, with other offices Massachusetts; Alabama; Ft. Payne, Alabama; Springfield, Iowa; Sussex, Wisconsin;Jefferson, Bothell, Washington; plants and/or have manufacturing Virginia. We and Chantilly, distribution facilities in Alabama, Georgia, North Carolina, Mexico, and Honduras. We Iowa, Wisconsin, Washington, of most of our outstanding debt by a pledge have secured substantially all of our domestic assets, which included first in the United States, property mortgages on most of our real on held for sale, and encumbrances other than property have manufacturing machinery held in the United States. We or manu- property no other material encumbrances on real facturing machinery. well maintained are of our properties believe that all We fully utilized for currently and suitable for operation and are such purposes, excluding plants and equipment that are and restructuring of our previous held for sale as a result programs. reorganization Our operations are also subject to the effects of interna- to the effects also subject Our operations are such as the North and regulations tional trade agreements the Caribbean Basin Trade Agreement, Trade American Free U.S. – Dominican Republic – Central Partnership Act, the regu- and the activities and Agreement Trade America Free these Generally, Organization. Trade lations of the World or benefit our business by reducing trade agreements and/or quotas assessed on products eliminating the duties some trade However, country. in a particular manufactured that negatively can also impose requirements agreements the countries from impact our business, such as limiting raw materials and setting limits on which we can purchase that may be imported into the United States from products organizations may In addition, trade a particular country. of trade negotiations that liberal- commence a new round may result ize textile trade. The elimination of safeguards countries which developing competition from in increased competi- increased historically have lower labor costs. This on our business, tion could have a material adverse effect of operations and financial condition. results Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form The countries in which our products are manufactured or into manufactured are The countries in which our products time to time impose imported may from which our goods are raw as to where and requirements duties, tariffs, safeguards, additional workplace regula- materials must be purchased, modify on our imports or adversely tions, or other restrictions in these costs and Adverse changes existing restrictions. you cannot assure our business. We could harm restrictions our competitors will not provide trade agreements that future costs, either of which our an advantage over us, or increase on our business, results could have a material adverse effect of operations and financial condition. Changing international trade regulation increase may Future quotas, duties or competition in our industry. tariffs may increaseour costs or limit the amount of products that we can import into a country. The markets in which we operate are extremely competi- extremely we operate are The markets in which diversified more larger, are tive. Some of our competitors than we financial and other resources and have greater sales or prices, in reduced result do. Competition could us. on have a material adverse effect or both, which could face competition and other participants in our industry, We, including: on many fronts, a) quality of product; b) brand recognition; c) price; differentiation; d) product e) advertising; and f) customer service. expect competition to intensify in each of our stra- We also compete with other global tegic business units. We Our ability to companies, which may have lower costs. market- price, of quality, competitive in the areas remain development, manufacturing, distribution ing, product large part, determine our will, in processing and order you that we will con- cannot assure success. We future tinue to compete successfully. The markets in which we operate are highly which we operate areThe markets in highly competitive. 0 2

d d n i . c p w _ N I F _ 20 S Russell Corporation U RRUS_FIN_wpc.indd 20 RRUS_FIN_wpc.indd 21 U S _ F I N _ a materialadverseeffect uponus. any ofthesematters,ifadverselydetermined,wouldhave normal conductofourbusiness.We donotbelievethat We are apartytovariousotherlawsuitsarisingoutofthe been settledontermsthatare notmateriallyadversetous. the fourthquarteroffiscal yearcovered bythisreport. No matterwassubmittedtoa vote ofsecurityholdersduring ITEM 4. SUBMISSION OFMATTERS TOAVOTE ( Alabama, bytworesidents oftheRaintree Subdivision November 20,2001,intheCircuit CourtofJefferson County, identical totheonefiledin ages fortrespass andnuisance.Acomplaintsubstantially plaintiffs inthecase,whichsoughtunspecifiedmoneydam- Subdivision inAlexanderCity, Alabama,were theoriginal families whoownproperty onLakeMartinintheRaintree in theCircuit CourtofJefferson County, Alabama.Fifteen 17,000 et al.v. RussellCorporation – As previously reported, wewere aco-defendantin ITEM 3. LEGALPROCEEDINGS 470,000 12,000 – Item 8ofthisReportonForm10-K). 5,000 “Notes toConsolidatedFinancialStatements”inPartII, Bothell, Washington; andChantilly, (seeNote8of Virginia 470,000 Georgia; Springfield,Massachusetts;Sussex,Wisconsin; – 606,000 shipping facilities,andtheCompany’s locationsin Atlanta, 85,000 certain regional salesoffices, certainwarehousing and 258,000 Total All presently utilizedfacilitiesintheU.S.are 263,000 owned, except Feet 271,000 All – Other Other 3,845,000 71,000 Corporate Idle orheldforsale Square Segment Activewear Segment Sales Goods and Offices 3,140,000 5,263,000 – 489,000 634,000 Administrative and Segment Sporting Warehousing andShipping 3,870,000 904,000 Fabrication 271,000 and Assembly Athletic Equipment Apparel Manufacturing Use Primary the approximate areas ofsuchfacilities: either idleorheldforsale.Thefollowingtablesummarizes ties, andhaveapproximately 470,000square feetthatis square feetofmanufacturing,warehousing andoffice facili- We utilizeanaggregate ofapproximately 10,002,000 w 2005 Form10-KAnnualReport Gould v. RussellCorporation,etal. Russell CorporationandSubsidiaries p c . i n d d

2 1 OF SECURITYHOLDERS , etal.filedonJanuary13,2000, Locke ). Thesecaseshave casewasfiledon Locke, 2005 are presented below: declared duringeachcalendarquarterofthelasttwoyears stock, year-end closingpricesandthedividendspershare stock. Therangeofhighandlowpricesourcommon had approximately 9,000holdersofrecord ofourcommon under thetickersymbolRML.AsofMarch 1,2006,we Exchange (“NYSE”)andvariousotherregional exchanges Russell’s securitiesare tradedontheNewYork Stock ITEM 5. MARKET FORREGISTRANT’SCOMMON II PART $.6 $19.48 Item 8ofthisReportonForm10-K. 16.22 the “NotestoConsolidatedFinancialStatements”inPartII, 16.42 19.78 2010. Foradescriptionofsuchrestrictions, seeNote2of 15.60 19.20 principal amountof9.25%SeniorUnsecured Notesdue $0.16 $17.13 0.04 Secured Credit Facilitiesandour$250millionaggregate 19.23 0.04 $18.83 pay dividendsunderthetermsofour$300millionSenior 0.04 We are subjecttocertainrestrictions onourabilityto $0.04 Fourth Third Second First 2004 Fourth Third Second First Dvdn Hg Lw Close Low High Dividend Dvdn Hg Lw Close Low High Dividend OF EQUITYSECURITIES MATTERS ANDISSUERPURCHASES EQUITY, RELATED STOCKHOLDER $0.16 $16.15 $19.50 $13.46 $0.04 .4 64 12.31 12.94 16.48 17.17 21.84 0.04 21.65 0.04 0.04 33/31/06 2:11:53 PM / 3 1 / 0 6

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6 0 / 1 3 / 33/31/06 2:11:54 PM Under the Plans or Programs (2) We do not otherwise have any plan or program to do not We ding taxes due upon the exercise of employee stock ery of shares to pay the exercise price of employee stock Paid Per Share or Programs Plans (1) options or to pay withholding taxes due upon the exercise of employee stock options or the vesting of restricted stock awards. of employee stock options or the vesting of restricted stock awards. options or to pay withholding taxes due upon the exercise purchase our common stock. options and the vesting of a restricted stock award. options and the vesting of a restricted stock award. Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form Our Chief Executive Officer certified to the NYSE on May 4, 2005, that he was not aware of any violation by the Company 2005, that he was not aware certified to the NYSE on May 4, Our Chief Executive Officer governance corporate listing standards. of the NYSE’s October 3, 2005 – November 6, 2005 October 3, 2005 – November November 7, 2005 – December 4, 2005 December 5, 2005 – December 31, 2005 Total 42,450 delivered to us by employees to pay withhol The issuer purchases during the period reflected in the table represent shares – (1) – $15.83 N/A $ N/A $ N/A N/A N/A 42,450 N/A N/A N/A $15.83 N/A N/A Period Number of Shares (or Units) Purchased Total Price Average Publicly Announced Be Purchased May Yet That (a) (b) of Number Total Units) (or Shares Number (c) Maximum Dollar As Part of Purchased Approximate (or (or Units) of Shares Value) (d) The following table summarizes our purchases of our common stock for the quarter ending December 31, 2005: stock for the quarter ending December of our common our purchases The following table summarizes deliv we from time to time accept with the exercise and vesting of stock option and restricted stock awards, In connection (2) 2 2

d d n i . c p w _ N I F _ 22 S Russell Corporation U RRUS_FIN_wpc.indd 22 RRUS_FIN_wpc.indd 23 U S _ F I N _ Dividends Operating income Capital expenditures Financial StatisticsandOtherData) (Dollars inthousands,exceptCommonStockData, FIVE-YEAR SELECTEDFINANCIALHIGHLIGHTS ITEM 6. SELECTEDFINANCIALDATA Net sales Operations Book value Depreciation andamortization Financial Data common shares Net income(loss)applicableto Income tax(benefit)provision Income (loss)before incometaxes ofnon-controlling interestsEarnings Interest expense Other –net SG&A Cost ofgoodssold Approximate numberofcommon shareholders Net commonshares outstanding(000somitted) Other Data stockholders’equity Net income(loss)asapercent of Net income(loss)asapercent ofsales asapercent ofsales Income (loss)before incometaxes Interest coverage Capital employed Inventories Receivables Net salesdividedby: Financial Statistics Low High Price range: Net income(loss)assumingdilution Common StockData Total assets Capital employed Stockholders’ equity Long-term debt Working capital w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d (a) (b)(g)

2 3 (a) (b)

(a) (b)(g) (a) (b)

(a) (b)(f)(h) (a) (b)(f)(h)

(a) (b)

(a) (b) (a) (b) (a) (b)(c) (a) (b)(c)

(a) (b)(c)(d)(e)

(a) (b)(c) (a) (b)(f)(h)

(a) (b)

(a) (b)(c)(d)(e)(f)

(a) (b)(c)(d)

(e) (a) (b)

(a) (b)(c)(d) (a) (c)(d)(e) (b) (a) (b)(c)(d)(e)

$ $ $1,434,605

1,041,037 1,311,311 311,070 987,635 588,838 398,797 517,790 34,430 43,399 39,153 84,372 33,129 42,471 52,333 (1,874) 8,969 1,820 9,000 12.31 21.84 17.77 2005 0.16 1.03 6.0% 2.4% 3.0% 2.2 1.5 3.4 6.5 200420032002 2001 $1,298,252 $1,186,263$1,164,328 $1,160,925 802 4,3 $ 501 $49,408 45,061 $ 44,936 $ $ 48,022 14 $ .2 10 $ (1.74) $1.06 $1.32 $ 1.46 ,5,0 ,2,1 9139 993,795 961,399 1,254,109 1,021,110 100,791 93,641 104,971 (54,269) 270,305 246,912235,810 226,458 934,372 842,127825,763 894,018 935,772 787,219732,253 765,167 562,851 514,864467,253 454,231 372,921 272,355265,000 310,936 457,814 403,485383,402 400,441 47,936 43,03934,306 (55,486) 19,991 20,93920,322 (31,107) 67,927 63,97854,628 (86,593) 30,843 29,66330,246 32,324 32,765 32,52332,18632,008 35,494 38,64128,343 48,975 (7,216) 3,583(2,216) 94,718 2,021 – – 9,000 8,800 15.60 14.9413.14 11.02 19.78 21.1519.55 20.84 17.18 15.8314.52 14.19 0.16 0.46 8.9% 8.8%7.4% (11.3)% 3.7% 3.6%2.9% (4.8)% 5.2% 5.4%4.7% (7.5)% 3.3 3.23.5 (1.7) 1.6 1.4 3.5 3.6 3.0 7.0 7.37.4 6.4 33/31/06 2:11:54 PM / 3 1 / 0 6

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® 6 0 / 1 3 / 33/31/06 2:11:55 PM Moving , ® American American . ® Russell Athletic Sherrin , we have products , we have products Cross Creek ® , ® , and ® Discus , Mossy Oak ® , and Brooks , ® ® Dudley , ® Spalding , Bike ® Huffy Sports , ANALYSIS OF FINANCIAL CONDITION AND OF FINANCIAL CONDITION ANALYSIS OF OPERATIONS RESULTS ® , ® Founded in 1902, Russell started on a small scale with a few Founded in 1902, Russell started on a small As the Company pieces of equipment and a small building. uniform busi- it became a pioneer in the athletic team grew, the most produce ness and one of the first companies to of all – the sweatshirt. popular athletic product industry apparel Over the past decade, competition in the intense due to globalization of sup- increasingly has grown We and low barriers to entry. trade restrictions reduced ply, in several ways. to these circumstances have responded began the transitioning efforts In 1998, major restructuring integrated manufactur- a vertically of the Company from ing-driven company with the majority of its production apparel in the U.S., to a customer and consumer-driven years, we moved away from the next three Over company. ownership of certain textile operations (yarn spinning) while operations successfully shifting the majority of our apparel facilities, primarily Mexico offshore (sewing) to lower-cost and Central America. In October 2003, we announced an that achieved significant program operations improvement higher selling price decreases, to offset cost reductions operat- improved We fiber costs and other cost increases. processes streamlining and asset utilization, ing efficiencies such in both our manufacturing and administrative areas efficien- costs, increased as lower full-packaged sourcing cies in textile (dyeing and finishing) operations, improved with lower- distribution costs, and expanded production cost contractors. JERZEES ITEM 7. MANAGEMENT’S DISCUSSION AND MANAGEMENT’S DISCUSSION ITEM 7. General is a major branded athletic and sport- Russell Corporation with a rich history of marketing athletic ing goods company and equipment for a wide variety of uniforms, apparel position is built on sports and fitness activities. Its global well-known brands and quality products. With brands such as established Comfort to meet the needs of everyone, from the serious athlete the serious athlete to meet the needs of everyone, from Other brands include to the weekend warrior. Athletic (2,160) 7,838 644 2,021 2,159 41 8,080 24,878 2004 2,061 $ 2,039 (527) 2,665 14 736 198 2005 5,771 1,820 2,867 2,809 2,557 (1,742) 10,976 20,627 Increase Increase $ 3,822 (decrease) (decrease)

presentation. presentation. purchased at 2004 year end. with the early retirement of long-term indebtedness. The after-tax impact of this The after-tax with the early retirement of long-term indebtedness. charge on 2002 earnings was ($0.39) per diluted share. Financial Interpretation No. 46, Consolidation of Variable Interest Entities. The con- Interest Entities. Variable Consolidation of 46, Financial Interpretation No. 2005 and 2004 balance sheet and LLC impacted our Yarns, solidation of Frontier results of operations as follows: of $7,303,000 and $144,092,000, respectively. The after-tax impact of these The after-tax respectively. of $7,303,000 and $144,092,000, per respectively, charges on 2003 and 2001 earnings was ($0.15) and ($2.88), significant special charges incurred in fiscal 2005, There were no diluted share. 2004 or 2002. Note 6 to the consolidated financial statements for more information on income taxes. Note 6 to the consolidated financial statements for more information on income taxes. along with the Brooks Sports business. In 2003, we acquired certain assets of Bike In 2003, business. along with the Brooks Sports AAI, The results of operations for Inc. Worldwide, Sports Athletic Company and Spalding have been included in our consolidated Bike and Spalding Brooks Sports, Huffy Sports, the con- See Note 13 to respective acquisition dates. financial statements since their for more information on certain of these acquisitions. solidated financial statements Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form h) Fiscal 2004 excludes impact from our acquisition of Brooks Sports since it was Fiscal 2004 excludes impact from our acquisition of Brooks Sports since h) f) Average of amounts at beginning and end of each fiscal year. of amounts at beginning and end of each fiscal year. Average f) Certain prior year amounts have been reclassified to conform to the fiscal 2005 g) Long-term debt assets Total Fiscal 2003 and 2001 include special charges related to certain restructuring plans c) net of tax) associated Fiscal 2002 includes a charge of $20,097,000 ($12,621,000, d) See 2004 and 2003 were favorably impacted by non-recurring tax effects. Fiscal 2005, e) (In thousands) Net sales b) On April 3, 2004, we began consolidating Frontier Yarns, LLC in accordance with LLC in accordance Yarns, Frontier we began consolidating 2004, 3, April On b) a) In 2004, we acquired the assets of American Athletic, Inc. (“AAI”) and Huffy Sports, (“AAI”) and Huffy Sports, Inc. Athletic, American acquired the assets of we In 2004, a) Earnings of non-controlling interests Depreciation and amortization Capital expenditures capital Working SG&A Cost of goods sold Other – net Operating income Interest expense 4 2

d d n i . c p w _ N I F _ 24 S Russell Corporation U RRUS_FIN_wpc.indd 24 RRUS_FIN_wpc.indd 25 U S _ F I N _ running equipmentbrand,is typically higherinthefirsthalf overseas. DemandforBrooks, ourathleticfootwearand footballs, volleyballs,soccer balls, etc.)are manufactured our operationsintheU.S.All of ourinflatables(basketballs, are primarilysourced, withsomeassemblyperformedat business. Componentsandcompletebasketballsystems isnotaspronounced asthefleece but itsseasonalpattern ness istypicallyhigherinthesecondandfourthquarters, Demand forourbasketballandequipmentbusi- demand fordeliveryintheupcomingseason. goods inventory, particularlyfleece,tomeettheexpected products. Generally, weproduce, source andstore finished particularly forourfleece(sweatshirtsandsweatpants) conditions alsoaffect thedemandforourapparel products, the third andfourthquartersofeachfiscalyear. Weather Typically, demandforourapparel products ishigherduring formance apparel designedespeciallyforwomen. holds astrong positioninrunningandfitnesswithitsper- world ofseriousrunners.Our industry, anditstechnicalapparel ishighlyvaluedinthe (“Brooks”). Brooks isaleaderinthetechnicalfootwear wear businesswiththeacquisitionofBrooks Sports,Inc. On December30,2004,weentered theathleticfoot- Huffy Sportsare nowpartofourSpaldingoperations. backboard systemsandaccessoriesbusiness.AAI Corporation, furtherexpandingourbasketballbackboard, and assumedcertainliabilities,ofHuffy Sportsfrom Huffy business. OnJuly19,2004,weacquired certainassets, into thebasketballbackboard andbackboard systems important tous,provided Spalding aplatformforextension a leaderinthegymnasticsequipmentbusiness,butas the netassetsofAmericanAthletic,Inc.(“AAI”),whichis balls, andvolleyballs.OnJune15,2004,weacquired of basketballsandsoftballs,alsosellingfootballs,soccer Worldwide, Inc.(“Spalding”),makingusaleadingmarketer On May16,2003,weacquired assetsofSpaldingSports braces, andprotective equipmentintoourproduct offering. introduced athleticsupporters,kneeandelbowpads, ity oftheassetsBikeAthleticCompany(“Bike”),which business. OnFebruary6,2003,weacquired themajor- to furtheradvanceourpositioninthesportsequipment During 2003and2004,wemadefivestrategicacquisitions versus thecostsattimeproject wasinitiated. generate approximately $15to$20millionincostsavings at fullcapacityin2006,theMerendon Plantisexpectedto and fleeceproduction attheendof2004.OncePhaseIis We builtanewtextileplantinHondurasandbegant-shirt w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

2 5 Moving Comfort ® brandalso brand intheActivewearsegmentis increased sales,highermargins,andimproved profitability. and efficiency improvements whichweexpectwillleadto with focusedmarketingefforts, improved assetutilization our previous initiatives,therestructuring willbecombined of ourMerendon facilityinPhaseII)andMexico.As eventually bereplaced inHonduras(through thedoubling ing 1,700intheU.S.,ofwhichapproximately 1,200will will impactapproximately 2,300positions globally, includ- sales, marketing,andadministrativecosts.Theseplans Sports’ backboard businessandsignificantreductions in operations, thecompletionofoperationalchangestoHuffy continued shiftoff shore oftextile/apparel manufacturing of $35to$40million.Therestructuring willfocusonthe three yearswithprojected annualizedpre-tax costsavings is expectedtobe$60$80millionoverthenexttwo improve ourlong-termcompetitiveness.Thepre-tax cost turing thatincludesanumberofinitiativesdevelopedto tiatives, inJanuary2006,weannouncedamajorrestruc- Building onthesuccessofourprevious improvement ini- respective acquisitiondates. ments, aspartoftheSportingGoodssegment,sincetheir have beenincludedinourconsolidatedfinancialstate- ing results ofBike,Spalding,AAI,Huffy Sports and Brooks assets, liabilities,revenues andexpenses,related dis- mates andjudgmentsthataffect thereported amountsof accepted accountingprinciples require thatwemakeesti- ciples generallyacceptedin the UnitedStates.Generally have beenprepared inaccordance withaccountingprin- based uponourconsolidatedfinancialstatements,which tion, results ofoperations,liquidity, andcapitalresources is The followingdiscussionandanalysisofourfinancialcondi- Critical AccountingPolicies Moving Comfort Russell Athletic brands includedintheSportingGoodssegmentare: Sporting GoodsandActivewear. TheCompany’s major We operate our businessprimarilyintwosegments: production costisfixed. to ourprofitability becauseasubstantialportionofourtotal manufacture products, plantutilizationlevelsare important ous brandsanddistributionchannels.Incaseswhere we ing profit issimilaramongproducts andacross ourvari- While product mixaffects ouroverallgross profit, operat- primarily from varioussuppliersinChina. of eachyear. Brooks sources 100%ofitsproduction, ® , ® , Spalding AAI ® and ® , Mossy Oak Brooks JERZEES ® , Huffy Sports ® . Thepredominant ® . Theoperat- ® , Bike ® ,

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6 0 / 1 3 / 33/31/06 2:11:56 PM Trade accounts receivable accounts receivable Trade We recognize revenues, net of net of revenues, recognize We Certain prior year amounts have been estimated sales returns, discounts and allowances, when estimated sales returns, discounts and allowances, when the sales price is shipped, title has passed, goods are Substantially assured. fixed, and collectibility is reasonably FOB shipping point terms. all of our sales reflect for estimated sales returns and allow- provisions record We sales are ances on sales in the same period as the related based on historical sales These estimates are recorded. memo data, specific notification analyses of credit returns, of pending returns, and other known factors. If the historical data we use to calculate these estimates do not properly returns, net sales could either be understated future reflect or overstated. consists of amounts due from our normal business activi- consists of amounts due from allowance for doubtful accounts to maintain an ties. We for bad debts provide losses. We expected credit reflect based on collection history and specific risks identified on basis. A considerable amount a customer-by-customer to assess the ultimate realization of judgment is required Reclassifications. Revenue recognition. accounts receivable. Trade reclassified to conform to the fiscal 2005 presentation. to conform to the fiscal 2005 presentation. reclassified net reported These changes had no impact on previously income or stockholders’ equity. expected losses of the entity if they occur, which makes makes which the entity if they occur, expected losses of to finance its activities, or (c) the it possible for the entity returns of the entity if the expected residual right to receive for risk of absorbing which is the compensation they occur, FIN 46-R, the party with an owner- expected losses. Under the that absorbs other financial interest ship, contractual or losses, or is expected entity’s interest majority of the variable or both, returns, a majority of the residual entitled to receive and is required primary beneficiary, is deemed to be the assets, liabilities entity’s to consolidate the variable interest of all performed a review We interests. and non-controlling in entities includ- of our ownership and contractual interests met Yarns determined that Frontier We Yarns. ing Frontier entity and that we the criteria for being a variable interest with In accordance the primary beneficiary of the entity. are on April Yarns FIN 46-R, we began consolidating Frontier 1, 2005, the 4, 2004. At December 31, 2005 and January our total assets increased Yarns consolidation of Frontier liabilities by $5.4 by $20.6 million and $24.8 million, total by interests million and $10.8 million and non-controlling The consoli- $15.2 million and $14.0 million, respectively. on did not have a significant impact Yarns dation of Frontier of operations for 2005 or 2004. our results , (“FIN , (“FIN The consolidated financial statements The consolidated financial statements Consolidation of Variable Interest Entities Consolidation of Variable Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form Consolidation. closure of contingent assets and liabilities. On an ongoing of contingent assets and liabilities. closure to estimates, including those related basis, we evaluate our returns, bad product and incentives, customer programs investments, intangible assets, long- debts, inventories, reserves, restructuring income taxes, lived assets, deferred base and litigation. We pension benefits, contingencies, experience and on various our estimates on historical under reasonable that we believe are other assumptions of which form the basis for results the the circumstances, of assets and making judgments about the carrying values other sources. from apparent not readily liabilities that are these estimates under differ- from may differ Actual results ent assumptions or conditions. believe that some of our accounting policies involve We of judgment or complexity than our other a higher degree have identified the policies below accounting policies. We critical to our business operations and the under- that are of operations. The impact of these standing of our results their associated policies on our business operations and Discussion “Management’s discussed throughout risks are and Results of and Analysis of Financial Condition and our reported such policies affect Operations” where For a detailed discussion on expected financial results. policies, see the application of these and other accounting Note 1 to the consolidated financial statements. 46”). In December 2003, the FASB issued a revised inter- issued a revised 46”). In December 2003, the FASB (“FIN 46-R”), which supersedes FIN 46 of FIN 46 pretation and clarifies certain aspects of FIN 46. FIN 46-R addresses whether business enterprises must consolidate the finan- enti- cial statements of entities known as “variable interest by FIN 46-R to be entity is defined ties.” A variable interest a business entity which has one or both of the following characteristics: (1) the equity investment at risk is not suf- ficient to permit the entity to finance its activities without other parties, which is provided additional support from that will absorb some or all of the other interests through expected losses of the entity; and (2) the equity investors of the following essential characteristics lack one or more ability or indirect (a) direct interest: financial of a controlling vot- activities through to make decisions about the entity’s ing rights or similar rights, (b) the obligation to absorb the include the accounts of Russell Corporation, all of our major- include the accounts of Russell Corporation, entities in interest ity-owned subsidiaries, and any variable after deemed to be the primary beneficiary, which we are accounts and transactions. the elimination of intercompany issued Financial Interpretation In January 2003, the FASB No. 46, 6 2

d d n i . c p w _ N I F _ 26 S Russell Corporation U RRUS_FIN_wpc.indd 26 RRUS_FIN_wpc.indd 27 U S _ F I N _ tional programs toourcustomers,includingthefollowing: become obsoleteandunmarketable totheirestimatednet Out (FIFO)method,wewrite downindividualSKU’s that our inventorythatisaccounted forundertheFirst-In,First- the LIFOcostofanindividual SKU.Fortheremainder of ing units(SKU’s), becauseitisnotpracticaltoestablish ries intheaggregate, ratherthantoindividualstockkeep- apply thelowerofcostormarketprincipletoLIFOinvento- determined undertheLast-In,First-Out(LIFO)method.We or market,withcostforthemajorityofourinventories Inventories. Seasonal Markdowns,DiscountsandAllowances. Growth IncentiveRebates. Cooperative Advertising. Promotional Programs. need todecrease ourreserves inthefuture. reserved orwritten off exceedsourestimates,wemay hand, ifourultimaterecovery ontheaccountswehave bad debtsmayberequired infuture periods.Ontheother their abilitytomakepayments,additionalprovisions for customers were todeterioratecausinganimpairmentof ally evaluatedandupdated.Ifthefinancialconditionofour customer. Furthermore, thesejudgmentsmustbecontinu- of accountsreceivable andthecreditworthiness ofeach the yearincurred. recorded inselling,generalandadministrativeexpense tising costsare recorded asareduction tonetsalesor advertise andpromote ourproducts. Cooperative adver- all, oraportion,ofthecostsincurred bythecustomerto arrangements, weagree toreimburse ourcustomerfor significant impactonoperatingresults. could result indifficulty estimating outcomes andhavea customers. Significantchangesinthesecommitments based onnegotiatedpromotional commitmentswithour costs whentherelated salesoccur. Theestimatesare We record accrualsforanticipatedpromotional program reduction ofnetsales. tive isoffered. Thecostoftheseincentivesisrecorded asa is recorded or, forretroactive credits, onthedateincen- cost oftheseincentivesisrecognized whentherelated sale are recorded asareduction ofnetsales. rebate toeachunderlyingsalestransaction.Theserebates paid andallocateaportionoftheestimatedcosts of thisnature, weestimatetheanticipated rebate tobe in certaindistributionchannels.Underincentiveprograms w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

2 7 Inventoriesare carriedatthelowerofcost We offer varioustypesofpromo- Undercooperativeadvertising We offer rebates tocustomers The provisions ofSFAS No.109, Income Taxes. Property, PlantandEquipment. tion ontheassetswhenwe formulate aplanofdisposal value tofair(lesscost sell)andsuspenddeprecia- classify assetsasheldforsale, writedownthecarrying shortened remaining estimatedusefullives.Otherwise,we values, asappropriate, torecognize depreciation overthe shorten theremaining usefullivesandadjustthe salvage orthrough restructuringand modernization activities,we out ofservicethrough theordinary courseofreplacement are impaired. Whenweidentifyassetsthatwillbetaken into logicalgroups forpurposesoftestingwhetherthey at theindividualassetlevel,butratherweaggregate them ordinarily cannotassessimpairmentofassetsheldforuse manufacturing anddistributionprocesses. Accordingly, we property, plantandequipmentisemployedinintegrated their carryingamountsmaynotberecoverable. Mostofour whenever eventsorchangesincircumstances indicatethat We review property, plantandequipmentforimpairment assets willbeofeconomicbenefittous. plant andequipmentbasedontheperiodoverwhich the assets.We estimatethedepreciable livesof property, computed usingthestraight-linemethodoverlivesof equipment are statedathistoricalcostanddepreciation is tional inventorywrite-downsmayberequired. market conditionsare lessfavorablethanweproject, addi- tions aboutfuture demandandmarketconditions.Ifactual realizable valuebasedupon,amongotherthings,assump- in theperiodthatwemakedetermination. assets, whichwillhavetheeffect ofincreasing netincome rently expect,wewilladjustourallowancefordeferred tax able torealize more ofourdeferred taxassetsthanwecur- the determination.Likewise,ifwedeterminethatwillbe ment willbechargedtoincomeintheperiodthatwemake valuation allowancefordeferred tax assetsandthatadjust- in thefuture, wewillmakeanadjustmenttoincrease our be abletorealize allorpartofournetdeferred taxassets for thevaluationallowance,ifwedeterminethatwillnot and feasibletaxplanningstrategiesinassessingtheneed considered future taxableincomeandongoing prudent amount webelieveislikelytoberealized. Whilewehave valuation allowancetoreduce deferred taxassetstothe when thetaxesare expectedtobepaid.We record a measured attheenactedtaxratesthatwillbeineffect reporting andtaxbasesofassetsliabilitiesare determined basedupondifferences betweenthefinancial Under SFAS No.109,deferred taxassetsandliabilitiesare We accountforincometaxesunderthe Accounting forIncomeTaxes Property, plantand . 33/31/06 2:11:56 PM / 3 1 / 0 6

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6 0 / 1 3 / 33/31/06 2:11:57 PM We are exposed to mar- exposed are We . On the date we enter into a derivative contract, contract, . On the date we enter into a derivative Accounting for Derivative Instruments and Hedging Accounting for Derivative Instruments and ket risks relating to fluctuations in interest rates, currency rates, currency to fluctuations in interest ket risks relating commodity prices. Our financial risk exchange rates and to minimize the potential are management objectives exchange rate and com- rate, foreign impact of interest modity price fluctuations on our earnings, cash flows and time to these risks, we may use, from manage To equity. rate interest time, various derivative instruments, including contracts and for- commodity futures swap agreements, contracts. exchange currency ward of SFAS account for derivatives under the provisions We No. 133, Activities of a recognized we designate derivatives as either a hedge firm commitment (fair asset or liability or an unrecognized transaction, or of value hedge), or a hedge of a forecasted to or paid related the variability of cash flows to be received asset or liability (cash flow hedge). a recognized por- ineffective and For fair value hedges, both the effective derivative, along tion of the changes in the fair value of the that is attributable with the gain or loss on the hedged item in earnings. The effective recorded to the hedged risk, are that is des- portion of changes in fair value of a derivative in accumulated ignated as a cash flow hedge is recorded hedged income or loss. When the other comprehensive the gain or loss included in accumulated item is realized, Any inef- income or loss is relieved. other comprehensive fective portion of the changes in the fair values of derivatives in the consolidated reported used as cash flow hedges are statements of income. including identifica- relationships, document hedge We tion of the hedging instruments and the hedged items, as well as our risk management objectives and strategies for undertaking the hedge transaction, at the inception of each in the con- recorded hedge transaction. Derivatives are formally assess, solidated balance sheets at fair value. We whether both at inception and at least quarterly thereafter, are used in hedging transactions the derivatives that are changes in either the fair values in offsetting highly effective or cash flows of the hedged item. Accounting for Derivatives. Other intangibles continue to be amortized over their continue to be amortized over their Other intangibles 2.4 to 40 years, and ranging from estimated useful lives, similar to that for impairment using a process reviewed plant and equipment. used to evaluate property, , Goodwill and Other Intangible Assets Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form Impairment and Amortization of Intangible Assets. Impairment and Amortization of Intangible Standards Statement of Financial Accounting Under FASB No. 142, (SFAS) an annual however, amortization of goodwill is eliminated; The first step deter- two-step impairment test is required. by comparing the fair value of mines if goodwill is impaired unit as a whole to the book value. If a defi- the reporting the amount of the ciency exists, the second step measures between the implied fair impairment loss as the difference In performing these value of goodwill and its carrying value. regarding annual impairment tests, we make assumptions cash flows and other factors to determine estimated future and then, if impaired, whether the carrying values are to determine the amount of any impairment loss impaired, carrying value to fair value. If these the to reduce required to may be required estimates or assumptions change, we impairment charges for these assets. record lives are intangibles with indefinite economic Purchased a lower of cost or tested for impairment annually using In determining whether an intangible fair value approach. use of the has an indefinite life, we consider the expected asset; the expected useful lives of other assets to which the or contractual provi- any legal, regulatory asset may relate; to required sions; the level of maintenance expenditures the asset; and cash flows from obtain the expected future demand and other economic of obsolescence, the effects factors. In performing these annual impairment tests, we cash flows estimated future make assumptions regarding and other factors to determine whether the carrying val- to determine the and then, if impaired, impaired, ues are the car- to reduce amount of any impairment loss required rying value to fair value. If these estimates or assumptions impairment charges to record change, we may be required for these assets. and there is no operational requirement to continue their to continue their is no operational requirement and there by reference determine fair value, in most cases, use. We cases, we perform appraisals, and, in other to third-party internal prices of com- sales analyses based upon recent evaluate periodically available). We parable assets (when of assets held for sale to determine the carrying values changed circum- to reflect needed are whether revisions conditions. stances, including market 8 2

d d n i . c p w _ N I F _ 28 S Russell Corporation U RRUS_FIN_wpc.indd 28 RRUS_FIN_wpc.indd 29 U S _ F I N _ assumptions suchasarisk-free interest rate,expected method ofaccountingforemployeestockawards using (“SFAS No.148”).SFAS No.148usesafairvaluebased for Stock-BasedCompensation-Transition andDisclosure Compensation No. 123, we adoptedtheprospective transitionprovisions ofSFAS stock optionsandrestricted shares. OnJanuary5,2003, tive stockawards, nonqualifiedstockoptions,reload the consolidatedfinancialstatements)mayincludeincen- compensation plans(asmore fullydescribedinNote7to Stock Compensation. at December31,2005. stockholders’ equityincreased $8.9millionto$33.2 positive in2005,ourafter-tax minimum pensionliabilityin onpensionplanassetswasAlthough ouractualreturn ings plan. plan andwillsignificantlyimprove the401(k)employeesav- April 1,2006,Russellwillfreeze thecurrent definedbenefit the Companywillchangeitsretirement program. Effective part oftherestructuring plansannouncedinJanuary2006, discount ratefrom 5.90%in2005to5.70%2006.As decrease inlong-terminterest rates,weplantoreduce the tized overfuture periods.Forinstance,giventhecontinued tions onourcomputationofpensionexpensetobeamor- pension plan’s assetsandchangesinpensionassump- SFAS No.87permitstheeffects oftheperformance sion liabilitiesandonfuture pensionbenefitcosts,although have asignificantimpactontheamountofrecorded pen- Periodicchangesinthesekeyassumptionscould returns. funds ofthepensionplanandprojected future market ontheinvestedbased uponthehistoricalrateofreturn onplanassetsisThe assumedlong-termrateofreturn experience andanticipatedfuture managementactions. The salaryincrease assumptionisbaseduponhistorical current yieldsonhigh-qualityfixed-incomeinvestments. plan assets.Indeterminingthediscountrate,weconsider increases, on andtheassumedlong-termrateofreturn be effectively settled,theanticipatedrateoffuture salary the discountrateatwhichpensionobligationscould Inherent inthesevaluationsare keyassumptions,including pension costsandliabilitiesbasedonactuarialvaluations. Accounting forPensions sion plansinaccordance withSFAS No.87, Pension Benefits. w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

2 9 Accounting andDisclosureofStock-Based , asamendedbySFAS No.148, We accountfordefinedbenefitpen- , whichrequires ustorecognize Awards underourincentive Employers’ Accounting

results ofoperationsorfinancialposition. believe thisnewstandard willhaveamaterialimpactonour adopt Statement123(R)inJanuary2006,andwedonot cash flowsinperiodsaftertheeffective date.We expectto reduce netoperatingcashflowsandincrease netfinancing as required undercurrent literature. This requirement will a financingcashflow, ratherthanasanoperatingcashflow excess ofrecognized compensationcosttobe reported as 123(R) alsorequires thebenefitsoftaxdeductionsin option valuationmodelunderStatement123(R). employees andexpecttocontinueusethisacceptable formula toestimatethevalueofstockoptionsgranted under SFAS No.148.Currently, weusetheBlack-Scholes which isachangefrom ourcurrent accounting treatment pensation awards grantedpriortoJanuary5,2003vest, to record stockcompensationexpenseascom- Inaddition,Statement123(R)willrequirealternative. us on theirfairvalues.Pro formadisclosure isno longeran options, toberecognized intheincomestatementbased ments toemployees,includinggrantsofemployeestock However, Statement123(R) is similartotheapproach describedinSFAS No.123. on January5,2003.Theapproach inStatement123(R) 123(R) alsosupersedesSFAS No.148,whichweadopted Statement No.95, 123(R) supersedesAPBNo.25andamendsFASB 123(R)”), whichisarevision ofSFAS No.123.Statement 123 (revised 2004), On December16,2004,theFASB issuedStatementNo. awards granted. SFAS No.148hadbeenapplied toallstockcompensation forma results thatassumesthefairvaluebasedmethodof ments foracomparisonofreported results versuspro Employees. Board OpinionNo.25, the intrinsicvalueapproach underAccountingPrinciples sation awards grantedpriortoJanuary5,2003,weused in 2005,2004and2003,respectively. Forstockcompen- $0.6 million($0.4after-tax) instockcompensation million after-tax), $5.2million($3.6after-tax) and 5, 2003.We recognized approximately $1.7million($1.3 by stockcompensationawards grantedpriortoJanuary of operationsandourfinancialpositionare notaffected spective transitionmethodofSFAS No.148,ourresults expected volatilityofourstockprice.Byelectingthepro- dividend yield,expectedlifeofthestockaward andthe SeeNote1totheconsolidatedfinancialstate- Statement ofCashFlows Share-Based Payment Accounting forStockIssuedto requires allshare-based pay- (“Statement . Statement 33/31/06 2:11:57 PM / 3 1 / 0 6

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6 0 / 1 3 / 33/31/06 2:11:58 PM 2.0 0.2% – –% (7.2) (0.6)% 0.3% 3.6 30.9 2.4% 2.5% 29.7 67.9 5.2% 5.4% 63.9 20.0 1.5% 1.8% 20.9 934.4 72.0% 71.0% 842.1 363.9 28.0% 29.0% 344.1 100.8 7.8% 7.9% 93.6 270.3 20.8% 20.8% 246.9 $ 47.9 $ 3.7% 43.0 $ 3.6% $1,298.3 100.0% 100.0% $1,186.2 Selling, general and administrative expenses (“SG&A”) were (“SG&A”) were Selling, general and administrative expenses 2005 versus $270.3 $311.1 million, or 21.7% of net sales, in This fiscal year. million, or 20.8% of net sales in the prior of net sales is primarily due in SG&A as a percent increase sport- acquired to the impact of acquisitions (as our recently of as a percent ing goods brands have higher SG&A costs benefits sales than do our base businesses), termination Operating Officer associated with the elimination of the Chief position, additional expenses to comply with the Sarbanes- partially Oxley Act of 2002, and higher pension costs, offset by lower incentive compensation expense. was income of $1.9 million in 2005, down Other-net $5.3 million versus $7.2 million of income in the prior was due primarily to the $4.4 million This decrease year. gain on the sale of our investment in Marmot Mountain, Ltd. (“Marmot”) in 2004. 2005 was $39.2 million, an increase expense for Interest of $8.3 million over the prior year expense of $30.9 million. of higher debt balances used to is the result This increase fund our investments in acquisitions plus higher interest expense in the higher interest rates. In addition, we incurred receivables increased of the 2005 fourth quarter as a result in in the artwear channel of our Activewear segment, where competitive situations we have matched competitors’ pay- ment terms with extended dating programs. 52 Weeks 52 Weeks Ended Ended 2004 2003 2005 Ended 52 Weeks 1.8 0.1% 9.0 0.6% (1.9) (0.1)% 84.4 5.8% 39.2 2.7% 43.4 3.0% 393.6 27.4% 311.1 21.7% 1,041.0 72.6% $ 34.4 $ 2.4% $1,434.6 100.0% om our fiscal 2004 sales of om our fiscal 2004 sales of

Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form Fiscal Year Fiscal Year 2005 vs. 2004 Consolidated Results $1.434 billion, an increase Our net sales for fiscal 2005 were of $136.3 million, or 10.5%, fr 2004 acquisitions net sales from $1.298 billion. Incremental $161.5 million for Sports, and AAI) were Huffy (Brooks, were our ongoing businesses 2005, while net sales from to 2004. See segment analysis down 2.0% compared information. below for more was $393.6 million, or 27.4% of net sales, for profit Gross of $363.9 million, or 28.0% profit fiscal 2005 versus a gross contribution Excluding the of net sales, in the prior year. was $328.2 million, profit our gross acquisitions, from as a profit in gross or 26.6% of net sales. This decrease for 2005 is primarily due to (i) lower of net sales percent (ii) sales volumes of Russell Athletic branded products, lower volume and pricing in our Mossy Oak business, (iii) businesses starting in our apparel significant costs incurred quickly in the 2005 second quarter to ramp up production to and react demand for our products to meet increased changes in style mix, (iv) lower sales volume and pricing in segment and (v) channel of our Activewear the mass retail higher transportation costs in our Activewear and Sporting Goods segments due to the impact of the hurricanes, all of the positive impact of higher sales than offset which more volume in the artwear channel of our Activewear segment. Net sales The following information is derived from our audited consolidated statements of income for our fiscal years ended of income for our fiscal years ended our audited consolidated statements is derived from The following information period) and January 3, 1, 2005 (fiscal 2004 – a 52-week (fiscal 2005 – a 52-week period), January December 31, 2005 a 52-week period). 2004 (fiscal 2003 – (Dollars in millions) Discussion and Analysis of Results of Operations Discussion and Cost of goods sold Gross profit Selling, general and Selling, expenses administrative Other – net Operating income Interest expense, net Interest expense, Earnings of non-controlling interests Income before income taxes Provision for income taxes Net income 0 3

d d n i . c p w _ N I F _ 30 S Russell Corporation U RRUS_FIN_wpc.indd 30 RRUS_FIN_wpc.indd 31 U S _ F I N _ l te Total segmentoperatingincome All Other Activewear prigGos Sporting Goods Segment operatingincome: Total netsales All Other oprt xess Corporateexpenses Unallocated amounts: Activewear neetepne e Consolidated incomebeforetaxes Interestexpense, net (In thousands) Total segmentoperatingincome (In thousands) solidated incomebefore incometaxesisasfollows: A reconciliation oftotalsegmentoperatingincometocon- Sporting Goods Net sales: (In thousands) and segmentoperatingincomebysegment: The followingtablepresents abreakdown ofournetsales Segment Results Form 10-K. Financial Statements”inPartII,Item8ofthisReporton tory taxrates,seeNote6ofthe“NotestoConsolidated ences betweenoureffective taxratesandapplicablestatu- tax provisions, aswellinformationregarding otherdiffer- income 2002 andprioryears.Forinformationconcerning 2004 third quarterfrom theclosure offederaltaxauditsfor reflects a$4.5milliontaxbenefitthatwasrecognized inthe years. Oureffective taxratewas29.4%for2004,which time resolution ofcertaintaxmattersrelating toprevious marily foreign countries).We alsobenefitedfrom aone- reflects ashiftinincometolowertaxingjurisdictions(pri- Our effective taxratewas20.7%forfiscal2005,which w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

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$ 101,698 $1,434,605 $ 41,184 $ 699,708 52 Weeks $ 101,698 12/31/05 $ 43,399 54,092 674,177 (19,146) (39,153) 60,720 Ended 6,422 2005 2005 $ 117,960 7,050 52,100 $ 58,810 $1,298,252 56,522 658,763 $ 117,960 $ 582,967 2004 2004 1/1/05 Ended 52 Weeks $ 67,927 (19,190) (30,843) Russell Athletic Discus contract inDecember2004,thediscontinuanceof by theexpirationofMajorLeagueBaseballapparel Athletic, saleswere downduetovolumedecreases driven Russell AthleticandMossyOakbusinesses.For 8.3%. Thisdecrease innetsalesisprimarilyduetoour Goods segmentfor2005decreased $44.8million,or mental netsalesfrom acquisitions,netsalesintheSporting 20.0%, from $583.0millioninfiscal2004.Excludingincre- totaled $699.7million,anincrease of$116.7million,or Fiscal 2005netsalesinourSportingGoodssegment Sporting Goods operational issues. the supplychaindisruptioncausedbyhurricanesand 12.5% versustheprioryear, despite thelossinsalesfrom dozens ofunitsshippedin2005were upapproximately was primarilydrivenbyvolumeintheartwearchannelas year’s netsalesof$658.8million.Thisincrease innet sales lion, anincrease of$15.4million,or2.3%,from theprior Our Activewearsegmenthad2005netsalesof$674.2mil- Activewear Huffy Sportsproduction offshore. decrease discussedaboveandadditionalcoststomove primarily duetothefactorsdrivingsegment’s netsales fiscal 2004.Thedecrease insegmentoperatingincomeis versus $52.9million,or9.8%ofthesegment’s netsales for $26.1 million,or5.3%ofthesegment’s netsalesfor 2005 year, theSportingGoodssegmentoperatingincomewas gain onthesaleofourinvestmentinMarmotprior Excluding theimpactfrom acquisitionsandthe$4.4million $58.8 million,or10.1%ofthesegment’s netsales,in2004. $41.2 million,or5.9%ofthesegment’s netsales,versus Our 2005SportingGoodssegmentoperatingincomewas private labelcamouflageproducts. of ourcustomerswhoare substantiallypromoting theirown continues tobepressured byourcompetitorsandseveral decrease innetsales.PricingtheMossyOakbusiness both reduced salesvolumeandpricingcontributedtothe customer allowancesandconcessions.ForMossyOak, issues andthehurricanes,whichalsoresulted inadditional ® brandatamajoraccount,missedshipmentsofour ® brandedproducts causedbyoperational 33/31/06 2:11:58 PM / 3 1 / 0 6

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6 0 / 1 3 / 33/31/06 2:11:59 PM Our gross profit was $363.9 million, or 28.0% of net sales, for was $363.9 million, or profit Our gross $344.1 million, or 29.0% of profit gross fiscal 2004 versus a 2004, our gross During fiscal year. of net sales, in the prior impacted by our acquisitions of was positively percent profit our ongoing cost savings initiatives. Spalding and AAI and the factors above in 2004 from The benefits we realized in primarily by: (1) pricing reductions, than offset more were (2) additional costs for new product the distributor market; insurance costs; (4) (3) higher pension and medical features; and (5) the higher raw material costs for cotton and polyester; in 2004. Sports, which was acquired of Huffy dilutive effect and administrative For fiscal 2004, our selling, general 20.8% of net $270.3 million, or (“SG&A”) expenses were of net sales, in the sales, versus $246.9 million, also 20.8% primarily due to our SG&A expenses increased prior year. Sports. In addition, acquisitions of Spalding, AAI and Huffy million in stock compensa- $5.2 approximately we incurred in 2003 primarily tion expense in 2004 versus $0.6 million and restricted to the 2004 grants of performance related under our Executive Incentive Plan. During awards share $0.8 million of charges primarily fiscal 2004, we incurred in our salaried and administrative to the reduction related of our sales and mar- as part of reorganization staff office in SG&A for the increase keting organization. Other reasons expenses to comply with the expense include incremental $1.4 million, Sarbanes-Oxley Act of 2002 of approximately and $2.1 mil- higher marketing expenses of $2.1 million, the consolidation of lion of additional SG&A expense from Yarns. Frontier was income of $7.2 million in fiscal 2004 versus Other-net expense of $3.6 million in fiscal 2003. Other income during fiscal 2004 was primarily attributable to a $4.4 million gain in Marmot Mountain, Ltd. on the sale of our minority interest transactions currency foreign and the favorable impact from in 2004 versus 2003. The 2003 fiscal year was negatively impacted by asset impairment and other charges of approxi- mately $2.7 million on assets held for sale; otherwise, other- net was an expense of $0.9 million in fiscal 2003. 3.3 per- decreased tax rate for 2004 of 29.4% Our effective 32.7% in fiscal 2003. This decrease centage points from of the closure from was mainly due to a benefit resulting federal tax audits for 2002 and prior years along with the operations. For information concern- of our foreign effects as well as information regard- ing income tax provisions, tax rates and between our effective ing other differences applicable statutory tax rates, see Note 6 of the “Notes to Consolidated Financial Statements” in Part II, Item 8 of this Report on Form 10-K. Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form 2004 vs. 2003 Consolidated Results $112.1 million or In fiscal 2004, our net sales increased 9.4% to $1.298 billion versus $1.186 billion in fiscal 2003. Huffy our 2004 acquisitions of AAI and Net sales from our net sales from 2004 Sports along with incremental $77.4 million. 2003 acquisitions (Spalding and Bike) were December 30, 2004, effective was acquired As Brooks of opera- no sales included in our 2004 results were there in 2004 due to acquisitions, tions. Excluding the increase 2.9% to $1.221 billion in 2004 versus net sales increased $1.186 billion in 2003. See segment analysis below for information. more Corporate Expenses in 2005 to by $0.1 million Corporate expenses decreased This decrease $19.1 million versus $19.2 million in 2004. lower incentive compensation of is primarily the result assets in 2004, expense and gains on sales of non-core costs to comply with the Sarbanes- by incremental offset Oxley Act of 2002, additional pension cost and the $3.2 mil- lion of termination benefits associated with the elimination position. of the Chief Operating Officer All Other $60.7 million, an Net sales for all other segments were fiscal 2004 net sales of $4.2 million, or 7.4%, from increase in net sales was primarily of $56.5 million. This increase as yards volume in our fabrics division driven by increased up 12.2%. sold were $6.4 million of In 2005, all other segments contributed of their net sales, segment operating income, or 10.6% sales, in the com- versus $7.1 million, or 12.5% of their net was primarily driven by This decrease parable prior year. sales volume in our fabrics division, which the increased costs and rework by the additional than offset was more in the 2005 that occurred in bad debt reserves the increase second quarter in our private label business. Our Activewear segment operating income for fiscal 2005 operating income for fiscal 2005 Our Activewear segment net sales in 2005 of the segment’s is $54.1 million or 8.0% net sales. This to $52.1 million, or 8.0% of 2004 compared of the sales volume increase is the result $2.0 million increase in international results and improved in the artwear channel by the operational issues in 2005 markets offset apparel hurricanes. the from and the adverse impact 2 3

d d n i . c p w _ N I F _ 32 S Russell Corporation U RRUS_FIN_wpc.indd 32 RRUS_FIN_wpc.indd 33 U S _ F I N _ Seilcags (7,303) (29,663) – (30,843) (12,229) (19,190) Our 2004netsalesinour $ 63,978 Sporting Goods $ 67,927 10,369 Consolidated incomebeforetaxes 7,050 $ 113,173 Interestexpense, $ net 117,960 50,600 Special charges 52,100 Corporateexpenses Unallocated amounts: Total segmentoperatingincome $ 52,204 $ 58,810 (In thousands) $ 113,173 $ 117,960 solidated incomebefore incometaxesisasfollows: $1,186,263 626,895 $1,298,252 A reconciliation oftotalsegmentoperatingincometocon- 658,763 Ended Ended 56,52257,910 $ Total segmentoperatingincome 501,458 $ 582,967 All Other 52 52 Weeks Activewear Weeks Sporting Goods Segment operatingincome: Total netsales All Activewear Other Sporting Goods Net sales: (In thousands) and segmentoperatingincomebysegment: The followingtablepresents abreakdown ofournetsales Segment Results sale ofMarmot. AAI andHuffy Sportsoffset bya$4.4milliongainon the operating expensesrelated totheacquisitionsofSpalding, as apercent ofsaleswasprimarilytheresult ofadditional sales, infiscal2003.Thisdecrease inoperating income sales, versus$52.2million,or10.4%ofthesegment’s net income was$58.8million,or10.1%ofthesegment’s net For fiscal2004,ourSportingGoodssegmentoperating to $505.6millionin2004versus$501.52003. net salesinourSportingGoodssegmentincreased 0.8% ment. Excludingtheincrease in2004duetoacquisitions, Bike) contributed$77.4milliontotheSportingGoodsseg- 2004 netsalesfrom our2003acquisitions(Spaldingand acquisitions (AAIandHuffy Sports) alongwithincremental $501.5 millionintheprioryear. Netsalesfrom our2004 $583.0 million,anincrease of$81.5 million,or16.3%,from w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

3 3 1/1/051/3/04 20042003 Sporting Goods segment totaled our JERZEES cipally drivenbyvolumeincreases despitelowersalesof sales of$626.9millionin2003.Thisincrease wasprin- in 2004,anincrease of$31.9million,or5.1%,from net Net salesinourActivewearsegmenttotaled$658.8million Activewear of 2002approximately $1.4million. mental expensestocomplywiththeSarbanes-OxleyAct higher marketingexpensesof$2.1million;and(4)incre- to reduction insalariedandadministrativeoffice staff; (3) sation expense;(2)$0.8millioninchargesprimarilyrelated was primarilytheresult of(1)$3.0millioninstockcompen- $19.2 millionversus$12.2in2003.Thisincrease In 2004,corporateexpensesincreased by$7.0millionto Corporate Expenses was primarilyduetoreduction inprivatelabelmargins. $10.4 millionor18%oftheirnetsalesin2003.Thisdecrease $7.1 million,or12.5%oftheir2004netsalescompared to net salesof$57.9million.Allothersegmentscontributed lion, adecrease of$1.4million,or 2.4%, from theprioryear’s Fiscal 2004netsalesforallothersegmentswere $56.5mil- All Other offset byhighercostsforcottonandpolyester. higher salesvolumesandcostsavinginitiativesin2004 increase inoperatingincomewasprimarilyattributableto or 8.1%ofthesegment’s netsales,in2003.Activewear’s 7.9% ofthesegment’s netsalesin2004versus$50.6 million, Activewear segmentoperatingincomewas$52.1millionor in thedistributormarket. year wassubstantiallyoffset bycontinuedpricereductions The favorableimpactfrom theincrease involumeyearover Activewear products shippedwere up8.3%versus2003. tributors inthesecondhalfversus2003.Overall,dozensof spring itemsduringthefirsthalf,andlowersalestodis- ® activewearinthemasschannelofcertain 33/31/06 2:11:59 PM / 3 1 / 0 6

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6 0 / 1 3 / 33/31/06 2:12:00 PM We paid $5.3 paid $5.3 We $250 million in 9.25% Senior Unsecured Notes (the Notes (the $250 million in 9.25% Senior Unsecured “Senior Notes”) due 2010; and $300 million Senior Secured Revolving Credit Facility Facility Revolving Credit $300 million Senior Secured $142.2 million (the “Revolver”) due April 2007, of which was outstanding; of which $11.4 million of other outstanding borrowings, our sub- used by to the line of credit $1.9 million related sidiary in the United Kingdom and $9.5 million primarily on their factored Yarns by Frontier to draws made related for Yarns by Frontier and capital leases held receivables machinery and equipment used in operations. million, $5.2 million and $5.2 million in dividends ($0.16 per million, $5.2 million and $5.2 million in dividends review We in 2005, 2004 and 2003, respectively. share) time to time and based upon cur- our dividend policy from we earnings projected and cash flow requirements, rent dividend for the anticipate continuing to pay a quarterly future. foreseeable $10 million the remaining On April 6, 2005, we paid off Loan that was Term outstanding under our Senior Secured December 2006. ratably through originally set to mature and outstanding On December 31, 2005, our debt facilities debt obligations included: a) b) c) Facilities (the Credit Senior Secured under our Borrowings equal to: prepayment subject to mandatory “Facilities”) are the issu- by us from received (1) 100% of the net proceeds debt securities (excluding ance of any new or replacement the issuance of the Senior Notes); and (2) 50% of the net the sale of certain of our assets. from received proceeds The Facilities and the Senior Notes impose certain restric- on our ability to: incur tions on us, including restrictions of obliga- guarantees in respect debt; grant liens; provide tions of any other person; pay dividends; make loans and preferred investments; sell our assets; issue redeemable stock; stock and non-guarantor subsidiary preferred capital stock; of and repurchases make redemptions or repurchase redeem prepay, make capital expenditures; debt; engage in mergers or consolidation; engage in sale/ Net Cash From Financing Activities. For fiscal 2006, we are forecasting capital expenditures to capital expenditures forecasting are For fiscal 2006, we million to $60 million. The majority be in the range of $55 to further are capital expenditures of planned fiscal 2006 and distribution capabilities, enhance our manufacturing of the new textile facility in Honduras including expansion to improve plan, and restructuring as announced in our capabilities to support our busi- our information systems ness initiatives. 40% $368,233 January 1,2005 January $457,814 Net cash used Net cash used Our operations 38% $517,790 $360,761 December 31,2005

ion lower than our net debt outstanding on January 1, ion lower than our net debt outstanding Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form generated approximately $47.0 million of cash during $47.0 million of cash during generated approximately same period in 2005, versus $81.3 million during the January 1, in working capital from 2004. The increase than the increase 2005 to December 31, 2005 was more 3, 2004 to January 1, January in working capital from 2005 primarily due to (i) higher inventory levels, which sales in the fourth of less than anticipated is the result primarily the result (ii) higher accounts receivable, quarter, of shipments occurring late in the fourth quarter and (iii) in days sales outstanding. modest growth in contributions to our qualified made $14.9 million We pension plans in 2005 versus $10.4 million in contributions in 2004. Net Cash From Investing Activities. Net Cash From Operating Activities. Net debt is defined as short-term and long-term borrow- Net debt is defined as short-term and to total capital, total ings less cash. For the ratio of net debt equity. capital is defined as net debt plus stockholders’ in working capital at December 31, 2005 The increase to January 1, 2005 is primarily due to an as compared of less than antici- which is the result in inventory, increase also receivable Accounts pated sales in the fourth quarter. primarily due to shipments occurring late in the increased outstanding. in days sales quarter and a modest increase 31, 2005 was $7.5 Our net debt outstanding at December mill in our net debt was primarily due to 2005. The decrease higher cash balances at the end of 2005. Our financial condition is reflected in the following table: is reflected Our financial condition (In thousands) capital Working Liquidity and Capital Resources Liquidity and Capital Net debt Net debt to total capital ratio Net debt to total capital ratio in investing activities was $38.5 million in 2005 versus in investing activities was $38.5 million in 2005 versus Our investing activities $178.4 million in the prior year. of in 2005 consisted primarily of capital expenditures of the settlement $42.5 million less $4.0 million from and the agreement disputes in the Spalding purchase assets. In 2004, our investing activities sale of non-core of $35.5 million primarily consisted of capital expenditures AAI and Huffy and acquisitions of $158.4 million (Brooks, the sale of from Sports) less $13.7 million of proceeds assets. non-core 4 3

d d n i . c p w _ N I F _ 34 S Russell Corporation U RRUS_FIN_wpc.indd 34 RRUS_FIN_wpc.indd 35 U S _ F I N _ ment feeontheunusedportionofFacilities0.375%. 2.25% orBaseRateplus0.5%,withanannualcommit- variable interest ontheRevolverwillbeeitherLIBORplus tion oftheFacilities0.375%.Forfirstquarter2006, 2005), withanannualcommitmentfeeontheunusedpor- 2005), orBaseRateplus0.50%(7.75%atDecember31, was eitherLIBORplus2.00%(6.46%atDecember31, majority offiscal2005,variableinterest onthe Revolver on ourconsolidatedfixedchargecoverageratio.Forthe Under theRevolver, pricingisadjustedquarterlybased date oftheotherindebtedness. and suchdefaultcausesanaccelerationofthematurity (which hasanoutstandingbalanceinexcessof$5million) we defaultonanycovenantofotherdebtagreement default provisions inourFacilities,adefaultwouldoccurif maturity dateoftheotherindebtedness.Also,undercross $25 million)andsuchdefaultcausesanaccelerationofthe ment (whichhasanoutstandingbalanceinexcessof if wedefaultonanycovenantofotherdebtagree- Notes whereby adefaultonourSeniorNoteswouldoccur provisions ourSenior existintheindenture governing terms, ortermsthatare acceptabletous.Cross default new financing,itmaynotbeoncommercially reasonable able torepay orrefinance it.Evenifweare abletoobtain lenders. Ifourindebtednessisaccelerated,wemaynotbe ments wouldbeindefaultandcouldacceleratedbyour waivers from ourlenders,debtundertheseagree- If weviolatetheloancovenantsandare unabletoobtain remain incompliancewithittheforeseeable future. covenant attheendoffiscalyear2005,andweexpectto age ratioof1.25to1.0.We were incompliancewiththis The Facilitiesrequire ustoachieveafixedchargecover- stock, subjecttoannuallimitations. to repurchase aportionofourSeniorNotesandcapital additional investmentsandguarantees,(3)allowus on ourabilitytomakeacquisitions,(2)permitus to, amongotherthings:(1)lessensomeoftherestrictions sidiaries. OnMarch 11,2003,weamendedtheFacilities stock ofsubsidiaries;andrestrict distributionsfrom sub- debt thatwemayissueinthefuture; issueandsellcapital anysubordinated Notes andotherdocumentsgoverning agreements, includingtheindentureSenior governing our business;amendcertaindebtandothermaterial leaseback transactionsandaffiliate transactions;change w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

3 5 ments, includingdebtserviceonourSeniorNotes. requirements; andmeetourforeseeable liquidityrequire- working capital,capitalexpenditure andpensionfunding hand, willbesufficient tooperateourbusiness;satisfy along withtheavailabilityunderourRevolverandcashon ances, webelievethatcashflowavailablefrom operations, fund ongoingoperations.Althoughthere canbenoassur- Frontier Yarns, wealsohad$35.4millionincashavailableto mately $106.5millionofavailabilityremaining. Excluding in outstandingborrowings undertheRevolverandapproxi- inventory. AsofDecember31,2005,wehad$142.2million is determinedbasedoneligibleaccountsreceivable and our Revolverissubjecttoaborrowing baselimitationthat contribute approximately $5million in2006. million overthenextfiveyears,outofwhichweexpectto projecting aggregate contributionsofapproximately $35.0 to ourqualifiedpensionplansin2006,weare currently plans. Althoughweare notrequired tomakeacontribution lion and$10.4million,respectively, toourqualifiedpension 2005. Infiscal2005and2004,wecontributed$14.9mil- liability ofapproximately $33.2millionatDecember31, 21.0% in2003.We haveanafter-tax minimumpension on planassetswas1.9%in2005,11.3%2004and Pension FundingConsiderations. Adequacy ofBorrowingCapacity. unused portionoftheFacilities0.375%. January 1,2005),withanannualcommitmentfeeonthe at January1,2005),orBaseRateplus1.0%(6.25% and ontheTerm LoanwaseitherLIBORplus2.5%(5.02% 2005), orBaseRateplus0.5%(5.75%atJanuary1, Revolver waseitherLIBORplus2.0%(4.52%atJanuary1, For themajorityoffiscal2004,variableinterest onthe Ouractualreturn Availability under 33/31/06 2:12:00 PM / 3 1 / 0 6

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6 0 / 1 3 / 33/31/06 2:12:01 PM Outlook that In January 2006, we announced a major restructuring our includes a number of initiatives developed to improve cost is expected long-term competitiveness. The pre-tax years to be $60 to $80 million over the next two to three cost savings of $35 to pre-tax annualized with projected associated $40 million. In addition to the cost reductions incorporate an incre- plans for 2006 with the restructuring, in information systems in our investment mental increase and Lean Six Sigma training and development. we the restructuring, from In addition to the charges resulting also announced our intention to change our inventory cost- ing methodology completely to FIFO (First In First Out) begin- the end of 2005, we ning in the first quarter of 2006. Through utilized a combination of LIFO (Last In First Out) and FIFO. 2006 to be in the $1.450 to $1.480 expect sales for fiscal We expect earnings also billion range. We per fully diluted share in the $1.10 to $1.25 range for 2006, excluding restructuring associ- $0.66 to $0.78 per share charges of approximately announcement. ated with the restructuring Other Trade Republic-Central America Free The U.S.-Dominican by which was signed into law (DR-CAFTA), Agreement a number of pro- Bush on August 2, 2005, includes President trade between the and apparel textile visions that will affect (U.S., Dominican Republic, Costa seven signatory countries Nicaragua). Guatemala, Honduras, and Rica, El Salvador, terminate certain tariffs to have agreed partners DR-CAFTA other countries that have also ratified the on imports from for the pos- provides the agreement Additionally, agreement. the U.S. of the import duties paid in recovery sible retroactive date. the operational effective January 1, 2004 through from finalized, Russell will are of DR-CAFTA Until the provisions duties. The amount of the benefit continue to pay the related cannot be estimated claim, if any, refund for any retroactive until the amount is at this time, and will not be recorded estimable. of collection and is reasonably probable quarter of 2005, the Company incurred During the third and finished goods damage to certain work in process of Hurricane Katrina. The Company inventory as a result for approximately has filed a claim with the insurer also plans $2.9 million, net of a deductible. The Company with its insurer to pursue a business interruption claim losses attributed to Hurricane Katrina. to business related be determined The ultimate outcome of this claim cannot at December 31, 2005. (1) Total (1) Gould v. Russell Gould v. Locke, et al. v. Russell Russell Locke, et al. v. case was filed on November 20, ). These cases have been settled on ). These cases have been settled on Locke The following table summarizes informa- The following table . , et al. filed on January 13, 2000, in the Circuit , et al. filed on January 13, 2000, in the Circuit Unconditional sports and league licenses. Obligations under advertising contractual arrangements, advertising contractual arrangements, Obligations under sports and league licenses. are also included. cotton purchase obligations and capital expenditure commitments Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form Litigation a co-defendant in were We Corporation Alabama. Fifteen families who County, Court of Jefferson Subdivision in Martin in the Raintree on Lake own property in the the original plaintiffs Alabama, were Alexander City, case, which sought unspecified money damages for tres- pass and nuisance. A complaint substantially identical to the one filed in the Alabama, by County, Court of Jefferson 2001, in the Circuit Subdivision ( Raintree of the two residents Corporation, et al. to us. not materially adverse terms that are a party to various other lawsuits arising out of the are We do not believe that normal conduct of our business. We any of these matters, if adversely determined, would have a upon us. material adverse effect Contingencies. Other commercial commitments at December 31, 2005, commitments at December 31, 2005, Other commercial $12.6 of approximately include outstanding letters of credit inventories, $9.8 million related of million for the purchase and cus- programs to workers’ compensation self-insured to utility bonds and toms bonds, and $0.6 million related set to are of credit other matters. All outstanding letters in 2006. expire (1) Includes guaranteed minimums for utilities and for royalties associated with various (1) tion about our contractual cash obligations, including those cash obligations, including those tion about our contractual (in millions): as of December 31, 2005 Yarns, of Frontier Operating Lease Fiscal Years Capital Purchase Long-term Short-term Debt 2006 2007 Debt 2008 $2.7 Obligations 44.4 – 0.9 2009 $ – 0.3 41.6 2.5 Leases 2010 – $1.6 Obligations Thereafter – 143.2 $12.0 – 78.0 $ 1.0 – 1.6 95.2 $ 0.6 $2.7 250.0 $395.7 1.6 $5.9 9.6 0.7 0.1 $42.7 $189.4 7.9 17.6 $636.4 5.9 4.8 172.0 17.1 17.6 17.5 27.6 272.4 24.8 Commitments 6 3

d d n i . c p w _ N I F _ 36 S Russell Corporation U RRUS_FIN_wpc.indd 36 RRUS_FIN_wpc.indd 37 U S _ F I N _ repurchase thedebtinopenmarket. our fixedratedebtwillnothaveanyimpactonusunlesswe by approximately $0.8million.Changesinthe fairvalueof market valueofourfixed-ratedebtatDecember31,2005, increase inmarketinterest rateswoulddecrease thefair flows byapproximately $2.2million.Aone-percentage point and cashnegatively impactourannualpre-tax earnings debt, aone-percentage pointincrease ininterest rateswould average outstandingborrowings underourvariable-rate and variable-ratedebtof$145.8million.Basedonour2005 million, whichconsistedoffixed-ratedebt$257.8million December 31,2005,ouroutstandingdebttotaled$403.6 Interest RateandDebtSensitivityAnalysis. modity prices. result ofchangesininterest rates,exchangeratesorcom- other potentialeffects whichcould impactourbusinessasa impacts from financialinstruments.Theydonotinclude are selectiveinnature andonlyaddress thepotential prices where available.Theseforward-looking disclosures based ontheinterest rateassumptions orquotedmarket values are thepresent valuesofprojected future cashflows are reasonably possibleoveraone-yearperiod.Market chosen fortheseanalysesreflects ourviewofchangesthat had occurred atDecember31,2005.Therangeofchanges exchange ratesandcommoditypricesasifthesechanges instruments tohypotheticalchangesininterest rates, andcashflowsofoursignificantfinancial value, earnings The followinganalysespresent thesensitivityofmarket use ofsuchinstruments. description ofouraccountingpoliciesandtheextent the consolidatedfinancialstatementsforamore complete to minimizetheriskofcredit loss.RefertoNotes1and4of ments withmajorfinancialinstitutionsasthecounterparties currency exchangecontracts.We onlyusetradedinstru- agreements, commodityfutures contractsandforward various financialinstruments,includinginterest rateswap cash flowsandequity. To managetheserisks,wemayuse rate andcommoditypricefluctuationsonourearnings, imize thepotentialimpactofinterest rate,foreign exchange prices. Ourfinancialriskmanagementobjectivesare tomin- interest rates, currency exchangeratesandcommodity We are exposedtomarketrisksrelating tofluctuationsin ITEM 7A. QUANTITATIVE ANDQUALITATIVE w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

3 7 DISCLOSURES ABOUTMARKETRISK At Currency ExchangeRateSensitivity. Commodity PriceSensitivity. not hedgethesenetinvestments. the U.S.dollaraslong-term.Asaresult, wegenerallydo eign subsidiariesthathaveafunctionalcurrency otherthan transactions. We generallyviewournetinvestmentsinfor- be ineffective athedgingcurrency exposures ofanticipated results ofoperationsunlessthesecontractsare deemedto rency forward contractswillnothaveanyimpactonour $1.8 million.Changesinthefairvalueofourforeign cur- rency for would decrease thefairmarketvalueofourforeign cur- point adversechangeintheforeign currency spotrates Afive-percentage flow andadverseimpactsonearnings. cies toprotect againstthepossibilityofdiminishedcash pated transactionsdenominatedinnon-functionalcurren- hedge currency exposures offirmcommitmentsandantici- with doingbusinessinforeign currencies. Ourpolicyisto currency forward contractstomanagetheriskassociated Canadian dollarandJapaneseyen.We enterintoforeign pound sterlingandtoalesserextent,theAustraliandollar, exposures are primarilyconcentratedintheeuro andBritish nated revenues andcoststranslatedintoU.S.dollars.These have foreign currency exposure related toforeign denomi- in currencies otherthanourfunctionalcurrencies. We also currency exposures related tobuying,sellingandfinancing contracts atDecember31,2005. polyester. We didnothaveanyoutstandingcottonfutures ing willcontinuetobeimpactedbythepriceofcottonand Frontier pric- Spinning,andotherthird partiesandouryarn hurricanes in2005.We from purchase Frontier yarn Yarns, unforeseen circumstances, suchasweexperiencedwith due topetroleum prices,theeconomic climateorother In addition,thepriceofpolyesterissubjecttofluctuations, tions, economicclimateorotherunforeseen circumstances. regula- factors suchasweatherconditions,governmental of cottonissubjecttowidefluctuationsdueunpredictable ward contractsheldatDecember31,2005,by Theavailabilityandprice We haveforeign 33/31/06 2:12:01 PM / 3 1 / 0 6

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6 0 / 1 3 / 33/31/06 2:12:02 PM (201,171) (32,907) 414 40,716 755,799 562,851 $1,254,109 94,710 93,130 65,961 253,801 $1,254,109 33,306 18,150 44,324 4,054 94,642 $ 18,190 6,938 219,604 372,921 20,286 64,351 84,637 14,096 – 212,063 411,701 17,737 29,816 $ 6,101 677,418 322,890 2004 – 414 2005 2,689 2,067 35,833 31,802 13,287 10,681 72,435 83,116 15,242 (42,155) 784,958 588,838 225,318 398,797 5,897 (190,212) 97,987 93,074 61,421 23,031 35,494 23,574 $ 116,948 $ 252,482 $ 42,792 $ 230,527 440,318 743,108 315,721 $1,311,311 $1,311,311

Total current liabilities Total Total current assets Total Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form See notes to consolidated financial statements. CONSOLIDATED BALANCE SHEETS CONSOLIDATED 2005 and January 2005 1, December 31, except share data) (In thousands, ASSETS Current assets: Cash ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA AND SUPPLEMENTARY FINANCIAL STATEMENTS ITEM 8. Accumulated other comprehensive loss Paid-in capital Paid-in earnings Retained stock (2005 – 8,290,696 shares and 2004 – 8,654,614 shares) Treasury Trademarks, net Trademarks, Other AND STOCKHOLDERS’ EQUITY LIABILITIES Current liabilities: accounts payable Trade rebates and fringes Accrued salaries Accrued expenses Other accrued debt taxes Deferred income Short-term Current maturities of long-term debt less current maturities Long-term debt, Deferred liabilities: taxes Income Pension and other Non-controlling interests Commitments and contingencies Stockholders’ equity: shares 41,419,958 par value $.01 per share; authorized 150,000,000 shares; Common stock, issued less allowances of $13,889 in 2005 accounts receivable, Trade Inventories and $17,984 in 2004 and other current assets Prepaid expenses receivable Income tax net plant and equipment, Property, assets: Other net Goodwill, 8 3

d d n i . c p w _ N I F _ 38 S Russell Corporation U RRUS_FIN_wpc.indd 38 RRUS_FIN_wpc.indd 39 U S _ F I N _ Basic Weighted-average commonsharesoutstanding: Diluted Basic Net incomepercommonshare: Diluted Net income Provision forincometaxes Incomebeforeincometaxes Earnings ofnon-controllinginterests Interest expense, net Other –net Selling, generalandadministrativeexpenses Gross profit Cost ofgoodssold Operating income See notestoconsolidatedfinancialstatements. Net sales (In thousands, exceptshareandperdata) Years endedDecember31, 2005, 1, January 3, 2005andJanuary 2004 CONSOLIDATED STATEMENTS OFINCOME w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

3 9 $1,434,605 33,293,900 33,057,179 $ 34,430 $ 1.03 $ 1.04 1,041,037 311,070 393,568 43,399 39,153 84,372 (1,874) 8,969 1,820 2005 4,3 $ $47,936 19,99120,939 – 67,92763,978 2,021 30,84329,663 93,641 100,791 270,305246,912 363,880344,136 934,372842,127 $1,298,252$1,186,263 32,897,55932,726,472 32,668,37632,376,617 2004 2003 (,1) 3,583 (7,216) .6 $ $ $ 1.46 $ 1.47

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6 0 / 1 3 / 33/31/06 2:12:03 PM 14,765 (6,001) 10,617 (35,494) (38,641) 1,769 678 (178,398) (109,889) 9,692 (3,582) (5,216) (5,177) (1,457) (80) 1,115 (592) (8,664) (17,600) (8,664) (26,194) (19,989) 1,164 (8,243) 7,037 (6,478) 2004 2003 2004 8,137 3,305 81,289 57,956 (158,370) (86,691) 13,697 91,307 7,355 (468) – 3,839 5,644 68,619 99,542 2,315 (48,503) 1,841 7,859 20,116 – 13,814 16,983 29,816 $ 28,168 $ 20,116 $ 27,124 $ 46,627 44,177 47,936 $ 1,395 759 2,021 1,453 6,963 – 43,039 $ 6,378 1,406 – – (46) 622 (708) (226) 2005 1,031 2,996 5,057 4,676 3,415 3,734 1,820 9,110 (5,271) (5,617) (2,006) 47,016 18,437 12,976 29,816 48,599 23,383 (7,682) (42,471) (38,490) (12,839) (26,828) (32,549) $ 42,792 $ 36,102 $ $ 34,430 $ Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form See notes to consolidated financial statements. Years ended December 31, 2005, January 1, 2005 and January 3, 2004 2005 and January 3, January 1, 2005, ended December 31, Years (In thousands) ACTIVITIES OPERATING Net income CONSOLIDATED STATEMENTS OF CASH FLOWS OF CASH STATEMENTS CONSOLIDATED Net cash provided by operating activities joint ventures and other Cash paid for acquisitions, Net cash used in investing activities FINANCING ACTIVITIES Borrowings on credit facility – net Debt issuance and amendment costs paid stock re-issued Treasury Net cash provided by financing activities Net increase (decrease) in cash Inventories assets Other current assets Prepaid expenses and other expenses Accounts payable and accrued Other liabilities Pension and other deferred INVESTING ACTIVITIES plant and equipment Purchases of property, plant and equipment and other assets Proceeds from the sale of property, Borrowings (payments) on short-term debt Dividends on common stock Cost of common stock for treasury Effect of exchange rate changes on cash LLC Yarns, Increase in cash from consolidating Frontier Cash balance at beginning of year Cash balance at end of year Supplemental disclosure of cash flow information: paid Interest net of refunds Income taxes paid, Adjustments to reconcile net income to Adjustments to reconcile net by operating activities: net cash provided Depreciation Amortization Other interest Earnings of non-controlling receivable accounts Trade Changes in operating assets and liabilities: taxes Income 0 4

d d n i . c p w _ N I F _ 40 S Russell Corporation U RRUS_FIN_wpc.indd 40 RRUS_FIN_wpc.indd 41 U S _ F I N _ aac tDcme 1 05 44 3,3 $8,5 $1022 $4,5) $588,838 $(42,155) $(190,212) $784,958 $35,833 $414 See notestoconsolidatedfinancialstatements. Balance atDecember31, 2005 43,039 – – 5,712 5,712 43,039 Other Accumulated – – Total Loss – – $467,253 – Stock $(33,373) Earnings $(218,113) – Capital $675,448 Comprehensive Treasury – Stock $42,877 Retained Paid-in – $414 Common – – Changeinunrealizedvalueofderivatives, netoftax Lossesonderivativesreclassifiedtoearnings, netoftax$1,705 Foreigncurrencytranslationadjustments Netincome Comprehensive income: 4,Balance atJanuary 2003 (In thousands, exceptsharedata) Years endedDecember31, 2005, 1, January 3, 2005andJanuary 2004 CONSOLIDATED STATEMENTS OFSTOCKHOLDERS’EQUITY te 5 21 – 22 – – 44,476 (5,216) – – (80) (231) 562,851 47,936 5,195 (32,907) 253 – 3,590 – – – – (201,171) – – 755,799 – – (5,729) – (80) 2,119 (5,216) 40,716 (5,729) 6,947 414 – 2,119 46,965 – Other – – 47,936 (5,177) Compensation expenserelatedtostockawards – – – Cash dividends($0.16pershare) 533 – – – Treasury stockre-issued(422,163shares) – – Treasury – stockacquired(44,438shares) 5,195 514,864 (1,457) – – (3,357) Comprehensive income – (29,447) 6,747 – – (2) Minimumpensionliability, netoftax$6,604 – – – Changeinunrealizedvalueofderivatives, netoftax$237 – – – (208,038) – Lossesonderivativesreclassifiedtoearnings, netoftax$2,062 – – Foreigncurrencytranslationadjustments 713,310 – (2) – Net (5,177) income (1,457) – 38,625 Comprehensive income: 11,532 – 1,Balance atJanuary 2005 – – – – 414 – – Other – Compensation expenserelatedtostockawards – Cash dividends($0.16pershare) – 533 Treasury – stockre-issued(246,894shares) – – Treasury stockacquired(4,433shares) (4,785) – Comprehensive income – Minimumpensionliability, net oftax$3,510 – – – Changeinunrealizedvalueofderivatives, netoftax Lossesonderivativesreclassifiedtoearnings, netoftax$1,690 Foreigncurrencytranslationadjustments Netincome – Comprehensive income: 3,Balance atJanuary 2004 Compensation expenserelatedtostockawards Cash dividends($0.16pershare) Treasury stockre-issued(410,088shares) Treasury stockacquired(73,618shares) Comprehensive income Minimumpensionliability, net oftax$383 w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

4 1 f$,9 – – – of $1,599 $2,808 – – $2,808 170 – 1,730 378 – (708) – 25,182 4,676 – 429 – – (8,893) – (205) 3,734 (8,893) 429 (708) (4,518) – – 3,734 – 34,430 11,872 – (4,518) – – – – – – 583 – 1,730 – – – – (7,196) – – – – – – – – – (5,271) – – – 34,430 – (5,271) – – – – – – – – 450 (4,580) (4,580) – – – 269 (2,609) (2,609) – – 2,796 2,759 33/31/06 2:12:03 PM / 3 1 / 0 6

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6 0 / 1 3 / 33/31/06 2:12:04 PM (“FIN 46”) which (“FIN 46”) which Trade accounts receiv- Trade The consolidated financial The consolidated financial We recognize revenues, net of net of revenues, recognize We The Company considers all highly The Company considers all highly Certain prior year amounts have been and non-controlling interests by $15.2 million and by $15.2 million and interests and non-controlling liquid investments with a maturity of three months or less months or less liquid investments with a maturity of three to be cash equivalents. when purchased In December, we entered the athletic footwear business the athletic footwear business we entered In December, Sports, Inc. (“Brooks”). of Brooks with the acquisition and apparel of performance footwear, is a provider Brooks enthusiasts worldwide. Brooks’ accessories to running specialty running through sold predominately are products quality, outlets specializing in high and other retail stores products. performance running Trade Accounts Receivable. Trade Reclassifications. Cash Equivalents. Revenue Recognition. estimated sales returns, discounts and allowances, when the sales price is fixed shipped, title has passed, goods are Substantially all of assured. and collectibility is reasonably terms. FOB shipping point our sales reflect for estimated sales returns and allow- provisions record We sales are ances on sales in the same period as the related based on historical sales These estimates are recorded. memo data, specific notification returns, analyses of credit of pending returns and other known factors. Principles of Consolidation. able consists of amounts due from our normal business our normal business able consists of amounts due from an allowance for doubtful accounts maintain activities. We reclassified to conform to the fiscal 2005 presentation. to conform to the fiscal 2005 presentation. reclassified net reported These changes had no impact on previously income or stockholders’ equity. statements include the accounts of Russell Corporation, Corporation, statements include the accounts of Russell and any variable all of our majority-owned subsidiaries, deemed to be the primary entities in which we are interest accounts after the elimination of intercompany beneficiary, and transactions. No. 46, In 2004, we adopted Financial Interpretation Interest Entities Consolidation of Variable whether business enterprises must consolidate addresses as “variable inter- the financial statements of entities known with FIN 46, we began con- est entities.” In accordance At December 31, on April 4, 2004. Yarns solidating Frontier of Frontier 2005 and January 1, 2005, the consolidation total assets by $20.6 million and our increased Yarns and $10.8 mil- $24.8 million, total liabilities by $5.4 million lion, The consolidation of Frontier $14.0 million, respectively. of did not have a significant impact on our results Yarns operations for 2005 and 2004. , ® Moving , ® American American , ® . ® Huffy Sports Brooks Sherrin , ® Cross Creek , ® and ® Spalding brands. , . AAI markets these products to . AAI markets these products ® Discus ® , Mossy Oak ® BPI , ® Jerzees and Dudley , Hydra Rib ® , ® and Bike ® ACCOUNTING POLICIES Huffy Sports , , ® ® Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form high schools, universities, professional teams and athletic athletic teams and high schools, universities, professional clubs globally. Sports”) Sports Company (“Huffy Huffy we acquired In July, Corporation further expanding our basketball Huffy from systems and accessories busi- backboard backboard, sells basketball equipment, including Sports ness. Huffy balls under the and inflatable backboards Sure Shot NOTE 1: SUMMARY OF SIGNIFICANT OF SIGNIFICANT SUMMARY 1: NOTE sporting goods com- an authentic athletic and are We of success. Our brands include: pany with over a century Russell Athletic Notes to Consolidated Financial Notes to Consolidated Statements We design, market and manufacture or source a variety of a variety of or source design, market and manufacture We including fleece, t-shirts, casual shirts, products apparel for attire jackets, athletic shorts, socks and camouflage supply team uniforms men, women, boys, and girls. We school and organized to college, high apparel and related supplier to the uniform the official are sports teams. We Baseball and U.S. Olympic baseball team and Little League uniform supplier to Minor League Baseball. The an official high quality apparel Russell name has been associated with since 1932. for over 100 years and with team uniforms With assets acquisition of the brand and related our 2003 we now also market and source of Bike Athletic Company, pads, braces and athletic supporters, knee and elbow with the acquisition equipment. Furthermore, protective of the sport- assets of the brands, contracts and related Inc. in Worldwide, ing goods business of Spalding Sports soccer balls, and 2003, we now sell basketballs, footballs, for basketball supplier volleyballs. Spalding is the official football for the Arena the NBA and the WNBA; the official ball of the Major Indoor soccer Football League; the official for the NCAA and volleyball Soccer League; and the official Association. American Volleyball further strategic acquisitions to In 2004, we made three advance our position in the sports equipment business. In Athletic, Inc. (“AAI”). Founded American June, we acquired including a variety of products in 1954, AAI manufactures basketball and volleyball equipment, athletic mats and gymnastics apparatus under a variety of brands, including American Athletic Athletic Comfort 2 4

d d n i . c p w _ N I F _ 42 S Russell Corporation U RRUS_FIN_wpc.indd 42 RRUS_FIN_wpc.indd 43 U S _ F I N _ tional programs toourcustomers,includingthefollowing: Administrative Expenses. Cost ofGoodsSoldandSelling,General Shipping andHandlingCosts. Seasonal Markdowns,DiscountsandAllowances. Growth IncentiveRebates. the yearincurred. recorded inselling,generalandadministrativeexpense tising costsare recorded asareduction tonetsalesor advertise andpromote ourproducts. Cooperative adver- all, oraportion,ofthecostsincurred bythecustomerto arrangements, weagree toreimburse ourcustomerfor Cooperative Advertising. Promotional Programs. on acashbasis. ity, financechargesonpastduereceivables are recognized Due tothehighdegree ofuncertaintyregarding collectibil- written off through theallowancefordoubtfulaccounts. ously evaluatedandupdated.Uncollectedaccountsare customer. Furthermore, thesejudgmentsmustbecontinu- of accountsreceivable andthecredit-worthiness ofeach of judgmentisrequired toassesstheultimaterealization a customer-by-customer basis.Aconsiderableamount based oncollectionhistoryandspecificrisksidentified to reflect expectedcredit losses.We provide forbaddebts general andadministrativeexpenses. benefits forsalespersons),royalties and othercorporate ing, sellingexpenses(including payroll andrelated payroll and distributionoffinished goods, marketing,advertis- and administrativeexpenses” are costsforwarehousing significant componentsofthe lineitem“Selling,general with themanufacturingandprocurement processes. The fer costs,depreciation, andotherindirect costsassociated expenses, production andsupervisorylabor, trans- internal als (includinginboundfreight andhandlingcosts),energy nents ofthelineitem“Costgoodssold”are rawmateri- sales andcostofgoodssold,respectively. revenues andcostsare includedasacomponentofnet reduction ofnetsales. tive isoffered. Thecostoftheseincentivesisrecorded asa is recorded or, forretroactive credits, onthedateincen- cost oftheseincentivesisrecognized whentherelated sale recorded asareduction ofnetsales. to eachunderlyingsalestransaction.Theserebates are and allocateaportionoftheestimatedcostsrebate of thisnature, weestimatetheanticipatedrebate tobepaid in certaindistributionchannels.Underincentiveprograms w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

4 3 We offer varioustypesofpromo- Undercooperativeadvertising We offer rebates tocustomers Thesignificantcompo- Shippingandhandling The Less accumulateddepreciation ahnr n qimn Construction-in-progress andequipment Machinery Buildings andimprovements from thoseestimates. accompanying notes.Actualresults couldmateriallydiffer reported intheconsolidatedfinancialstatementsand make estimatesandassumptionsthataffect theamounts ples generallyacceptedintheUnitedStatesrequires usto financial statementsinconformitywithaccountingprinci- follows: Property, plantandequipment,netare summarizedas revised salvagevalues. the shortenedusefullivesaftergivingconsiderationto adjust therelated usefullivesandrecord depreciation over the usefullivesorsalvagevaluesmayhavechanged,we equipment. Wheneventsandcircumstances indicatethat improvements andfrom 3to15yearsformachineryand ful livesrangefrom 15to40years forbuildingsandland upon theirestimatedusefullives.Initialuse- computed generallyonthestraight-linemethodbased depreciation ofproperty, plantandequipmenthasbeen ciation andimpairmentwrite-downs.Theprovision for equipment isstatedatcost,netofaccumulateddepre- $440,318 marketadjustments, net LIFO andlower-of-cost or Raw materialsandsupplies Work-in-process (In thousands) Inventories. Use ofEstimates adadipoeet Land andimprovements Property, PlantandEquipment. Finished goods Inventories are summarizedasfollows: mately $163.0millionin2005and$158.62004. the averagecostmethod,andwere valuedatapproxi- are carriedunder theFirst-In,First-Out(FIFO)method,or the Last-In,First-Out(LIFO)method.Certaininventories with costforthemajorityofourinventoriesdeterminedunder and rawmaterialsare carriedatthelowerofcostormarket, (In thousands)

Inventoriesoffinishedgoods,work-in-process . Thepreparation oftheconsolidated Property, plantand $ 315,721 $ 18,260 $340,753 (574,596) 890,317 586,463 271,929 444,508 13,665 26,524 77,231 (4,190) 2005 2005 $ 322,890 873,132 25,256 577,155 253,170 $17,551 2004 2004 25,711 53,598 $411,701 419,796 $340,487 (550,242) (8,095) 33/31/06 2:12:04 PM / 3 1 / 0 6

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6 0 / 1 3 / 33/31/06 2:12:05 PM Transactions between between Transactions We issue awards under under issue awards We , as amended by SFAS No. , as amended by SFAS Accounting and Disclosure Accounting and Disclosure Accounting for Income Taxes Long-lived assets are evaluated for evaluated for Long-lived assets are We account for income taxes under the account for income taxes under the We (“SFAS No. 148”). By electing the prospec- (“SFAS Investments in companies in which we have the Investments in companies Accounting for Stock-Based Compensation-Transition Accounting for Stock-Based Compensation-Transition Under SFAS No. 109, deferred tax assets and liabilities are tax assets and liabilities are No. 109, deferred Under SFAS between the financial determined based upon differences and tax bases of assets and liabilities and are reporting at the enacted tax rates that will be in effect measured expected to be paid. when the taxes are incentive compensation plans as described in Note 7. On incentive compensation plans as described in Note 7. On transition January 5, 2003, we adopted the prospective No. 123, of SFAS provisions of Stock-Based Compensation 148, and Disclosure of oper- 148, our results No. tive transition method of SFAS by stock not affected ations and our financial position are granted prior to January 5, 2003. compensation awards $1.7 million ($1.3 million approximately recognized We and $0.6 and $5.2 million ($3.6 million after-tax) after-tax), of stock-based employee million ($.04 million after-tax) For compensation in 2005, 2004 and 2003, respectively. The cost of advertising, marketing and promotions The cost of advertising, marketing and promotions $43.7 approximately incurred We is expensed as incurred. million, $48.6 million and $48.0 million in such costs during 2005, 2004 and 2003, respectively. ability to influence the operations are accounted for by the operations are ability to influence the in companies in which we equity method. Investments for at cost. accounted are cannot exert such influence Income Taxes. Advertising, Marketing and Promotions Expense. Stock-Based Compensation. Investments In and Advances to Unconsolidated Advances to Unconsolidated Investments In and Entities. Long-Lived Assets. indicate that facts and circumstances impairment whenever For an asset may not be recoverable. the carrying value of is recognized assets to be held and used, an impairment cash flows is future when the estimated undiscounted net exists, an adjust- less than the carrying value. If an impairment to its estimated fair ment is made to write the asset down for the difference value and an impairment loss is recorded fair value. between the carrying value and the estimated Related Party Transactions. provisions of SFAS No. 109, of SFAS provisions related parties and between different subsidiaries of the subsidiaries of the parties and between different related of business. The Company occur in the normal course its consolidated Company eliminates transactions with discloses significant related subsidiaries and appropriately party transactions. , and concluded We hold a portfolio hold a portfolio We Goodwill and identifi- Debt issuance costs are deferred deferred Debt issuance costs are Goodwill and Other Intangible Assets Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form able intangible assets that are deemed to have an indefinite deemed to able intangible assets that are tested to amortization and are not subject economic life are tested assets are for impairment on an annual basis. These unit level which is defined for impairment at the reporting operat- Company’s as one organizational level below the involves a two-step ing segments. The impairment testing The first step determines if goodwill is impaired approach. unit as a whole by comparing the fair value of the reporting the second step to the book value. If a deficiency exists, the amount of the impairment loss as the dif- measures between the implied fair value of goodwill and its ference unit to the reporting carrying value. Goodwill is allocated to assigned. Purchased are assets acquired which the related tested for lives are intangibles with indefinite economic cost or fair value impairment annually using a lower of Other intangibles continue to be amortized over approach. 2.4 to 40 years, their estimated useful lives, ranging from when indicators exist. for impairment and reviewed the annual impairment tests of good- have completed We No. by SFAS will and other intangible assets as required 142, that our goodwill and indefinite-lived intangible assets were that our goodwill and indefinite-lived intangible assets were not impaired. Investments (Trading Portfolio). Investments (Trading of marketable debt and equity securities in various trusts in connection with employee accounts and segregated mark these compensation plans. We benefit and deferred securities to market, using quoted market prices, through gains and losses on our income. Realized and unrealized trading portfolio have not been significant in any of the last years. three Debt Issuance Costs. Goodwill and Other Intangibles. In 2005, we realized approximately $0.9 million of net gains approximately In 2005, we realized In 2004, we realized properties. three on the disposal of on the disposal $0.4 million of net gains approximately $2.0 million of In 2003, we recorded properties. of three on certain assets, which is net of $1.1 impairment charges disposal of five properties. gains on the million of realized we held for sale two idled proper- At December 31, 2005, with an adjusted carrying value ties and certain equipment in $0.5 million, which have been included of approximately 2005, we held plant, and equipment. At January 1, property, certain equipment with an and idled properties for sale three $2.0 million. adjusted carrying value of approximately and amortized over the terms of the debt to which they and amortized over the terms of the debt to which they method. using the straight-line relate 4 4

d d n i . c p w _ N I F _ 44 S Russell Corporation U RRUS_FIN_wpc.indd 44 RRUS_FIN_wpc.indd 45 U S _ F I N _ pershare–diluted Pro formanetincome pershare–diluted Reported netincome pershare–basic Pro formanetincome Instruments. Concentrations ofCreditRiskandFinancial pershare–basic Reported netincome Pro formanetincome was applied .361 assumingSFAS No. 148 2.0years compensation, netoftax, 1.00% 2.0years .361 $3.88 Stock-based employee 2003 1.00% Reported netincome $3.88 2004 1.25% (In thousands, exceptpersharedata) 1.25% to expenseovertheoptions’vestingperiod. below, theestimatedfairvalueofoptionsisamortized For purposesofcalculatingthepro formadisclosures Estimated fairvalueperoption lifeofoptions Weighted-average expected Volatility factor Dividend yield Risk-free interestrate values were asfollows: and 2003keyassumptionsusedtodeterminethese values derivedforoptionsgrantedduringfiscalyears2004 There were nooptionsgrantedduringfiscal2005.Thefair using theBlack-Scholesoptionvaluationmodel. the fairvalueofemployeestockoptionsatdategrant granted. Forthepurposesofthisdisclosure, weestimated ing hadbeenappliedtoallstockcompensationawards that assumesthefairvaluebasedmethodofaccount- a comparisonofreported results versuspro formaresults for StockIssuedtoEmployees Accounting PrinciplesBoard OpinionNo.25, 5, 2003,weusedtheintrinsicvalueapproach under stock compensationawards grantedpriortoJanuary quately provided for intheallowancefordoubtfulaccounts. loss associatedwithourtrade accountsreceivable isade- in 2005,2004and2003,respectively. We believethat riskof approximately 38.9%,44.0%, and46.0%ofourgross sales diverse customers.Ourtoptencustomersaccountedfor able are comprisedofbalancesduefrom alargenumberof cant concentrationsofcredit risk.Ourtradeaccountsreceiv- w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

4 5 Except forWal-Mart, wedonothavesignifi-

$ 34,361 $ 1.03 $ 1.03 $ 1.04 $ 1.04 $34,430 . Thetablebelowpresents 2005 (69) 14 $ 1.28 $ 1.45 14 $ 1.32 $ 1.46 14 $ 1.29 $ 1.46 14 $ 1.33 $ 1.47 20042003 $47,936$43,039 $47,668$41,868 (268) (1,171) Accounting Accounting forDerivatives. Foreign CurrencyTranslation. undertaking thehedgetransaction, attheinceptionofeach well asourriskmanagement objectivesandstrategiesfor tion ofthehedginginstruments andthehedgeditems,as We documenthedgerelationships, including identifica- statements ofincome. used ascashflowhedgesare reported intheconsolidated fective portionofthechangesinfairvaluesderivatives other comprehensive incomeorlossisrelieved. Anyinef- item isrealized, thegainorlossincludedinaccumulated other comprehensive incomeorloss.Whenthehedged ignated asacashflowhedgeisrecorded inaccumulated portion ofchangesinfairvalueaderivativethatisdes- to thehedgedrisk,are recorded Theeffective inearnings. with thegainorlossonhedgeditemthatisattributable tion ofthechangesinfairvaluederivative,along For fairvaluehedges,boththeeffective andineffective por- a recognized assetorliability(cashflowhedge). the variabilityofcashflowstobereceived orpaidrelated to value hedge),orahedgeofforecasted transaction,orof asset orliabilityanunrecognized firmcommitment(fair we designatederivativesaseitherahedgeofrecognized Activities No. 133, We accountforderivativesundertheprovisions ofSFAS exchange contracts. ments, commodityfutures contractsandforward currency derivative instruments,includinginterest rateswapagree- manage theserisks,wemayuse,from timetotime,various cashflowsandequity.fluctuations onourearnings, To of interest rate,foreign exchangerateandcommodity price management objectivesare tominimizethepotentialimpact exchange ratesandcommodityprices.Ourfinancialrisk ket risksrelating tofluctuationsininterest rates,currency accompanying financialstatements. transaction gainsandlossesare inthe reflected inearnings recorded directly instockholders’equity. Foreign currency during theperiod.Anyrelated translationadjustmentsare expense accountsusingaweightedaverageexchangerate rates ineffect atthebalancesheetdateandforrevenue and formed forbalancesheetaccountsusingcurrent exchange applicable currencies intoUnitedStatesdollarsisper- 2005 andJanuary1,2005,respectively. 13.7% ofournetaccountsreceivable atDecember31, Wal-Mart anditssubsidiariesrepresented 12.5%and Accounting forDerivativeInstrumentsandHedging . Onthedateweenterintoaderivativecontract, We are exposedtomar- Thetranslationofthe 33/31/06 2:12:05 PM / 3 1 / 0 6

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6 0 / 1 3 / 33/31/06 2:12:06 PM Assets and liabilities recorded Assets and liabilities recorded (“SFAS No. 151”), which is the result of the of the 151”), which is the result No. (“SFAS A “modified retrospective” method which includes which includes method A “modified retrospective” method of the modified prospective the requirements the also permits entities to restate described above, but No. 123 for SFAS under recognized amounts previously either for (a) all prior forma disclosures purposes of pro periods in the year or (b) prior interim periods presented of adoption. 2.) No. 123R using the to adopt SFAS The Company plans method. The Company does not modified prospective No. 123R to have a material expect the adoption of SFAS of operations. impact on its results No. 151, issued SFAS In November 2004, the FASB Inventory an Amendment of ARB No. 43, Costs — Chapter 4 to converge U.S. accounting standards efforts FASB’s for inventory with International Standards. Accounting amounts of idle facility abnormal 151 requires No. SFAS handling costs, and wasted material to expense, freight, charges. It also requires as current-period be recognized overheads to the costs of that allocation of fixed production of the produc- conversion be based on the normal capacity costs for inventory is effective No. 151 tion facilities. SFAS during fiscal years beginning after June 15, 2005. incurred No. of SFAS The Company does not expect the adoption of operations. 151 to have a material impact on its results Foreign Currencies. in foreign currencies on the books of foreign subsidiaries subsidiaries on the books of foreign currencies in foreign is other than the U.S. dollar are whose functional currency balance on the translated at the exchange rate in effect translated sheet date. Revenues, costs and expenses are during the year. at average rates of exchange prevailing are this process from adjustments resulting Translation to accumulated other comprehensive charged or credited income or loss. The cumulative translation adjustments loss in included in accumulated other comprehensive $10.3 million and the consolidated balance sheets were $5.8 million at December 31, 2005 and January 1, 2005, a from gains or losses result Transaction respectively. change in exchange rates between the functional cur- in subsidiaries and other currencies of our foreign rency gains and which they conduct their business. Transaction for the period in which the included in other-net losses are exchange rate changes. yment Earnings In December In December . Generally, the the . Generally, Share-Based Pa We report earnings report per We Statement of Cash Flow Our fiscal year ends on the Saturday near- Our fiscal year ends on the Saturday . Basic earnings is computed per common share A “modified prospective” method in which compensa- method in A “modified prospective” date beginning with the effective tion cost is recognized No. 123R for all of SFAS (a) based on the requirements date granted after the effective payments share-based granted to all awards No. 123 for and (b) based on SFAS No. 123R date of SFAS employees prior to the effective date. unvested on the effective that remain Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form New Accounting Pronouncements. Fiscal Year. Earnings Per Common Share. Earnings Per Common hedge transaction. Derivatives are recorded in the con- recorded Derivatives are hedge transaction. formally assess, at fair value. We solidated balance sheets whether at least quarterly thereafter, both at inception and hedging transactions are used in are the derivatives that changes in either the fair values in offsetting highly effective hedged item. or cash flows of the est to January 1, which periodically results in a fiscal year in a fiscal year est to January 1, which periodically results 2003 ended on of 53 weeks. Fiscal years 2005, 2004 and January 3, 2004, December 31, 2005, January 1, 2005 and and each contained 52 weeks. respectively, 2004, the Financial Accounting Standards Board (“FASB”) (“FASB”) Board 2004, the Financial Accounting Standards 2004), No. 123 (revised issued SFAS Per Share of common shares using the weighted-average number consideration of outstanding during the period without common stock equivalents. Diluted earnings per common is computed using the weighted-average number of share outstanding plus common stock equiva- common shares stock grants and lents (employee stock options, restricted unless such common stock other performance awards) anti-dilutive. (See Note 10.) equivalents are No. 123. of SFAS 123R”) which is a revision No. (“SFAS APB No. 25 and amends No. 123R supersedes SFAS No. 95, SFAS No. 123R is similar to the approach in SFAS approach No. 123R SFAS No. 123. However, described in SFAS payments to employees, includ- all share-based requires ing grants of employee stock options, to be recognized in the income statement based on their fair values. will no longer be an alternative. forma disclosure Pro for fiscal 2006. No. 123R is effective SFAS No. 123R permits public companies to adopt its SFAS using one of two methods: requirements 1.) common share in accordance with SFAS No. 128, with SFAS in accordance common share 6 4

d d n i . c p w _ N I F _ 46 S Russell Corporation U RRUS_FIN_wpc.indd 46 RRUS_FIN_wpc.indd 47 U S _ F I N _ the pensionplanandprojected future marketreturns. ontheinvestedfundsofupon thehistoricalrateofreturn onplanassetsisbasedassumed long-termrateofreturn rience andanticipatedfuture managementactions.The salary increase assumptionisbaseduponhistoricalexpe- current yieldsonhigh-qualityfixed-incomeinvestments.The plan assets.Indeterminingthediscountrate,weconsider increases, on andtheassumedlong-termrateofreturn be effectively settled,theanticipatedrateoffuture salary the discountrateatwhichpensionobligationscould Inherent inthesevaluationsare keyassumptionsincluding pension costsandliabilitiesbasedonactuarialvaluations. Accounting forPensions sion plansinaccordance withSFAS No.87, Less currentmaturities Other capitalleaseobligations at7.04%;collateralizedbyequipment throughJune2009;paymentsincludeinterest invariousmonthlyandquarterlyinstallments withannualpaymentsof$1.5milliondue Frontier Yarns capitalleaseobligation collateralizedbyequipment paymentsincludeinterestat7.00%; inmonthlyinstallmentsthroughJuly2009; annualpaymentsof$1.1milliondue Frontier Yarns notespayablewith Senior Notes9.25%(due2010) Term Loan $300millionrevolvingcreditfacility Senior securedcreditfacilities(due April 2007): (In thousands) Long-term debtincludesthefollowing: NOTE 2:LONG-TERMDEBT Pension Benefits. w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

4 7

We accountfordefinedbenefitpen- , whichrequires ustorecognize $398,797 $142,239 400,864 250,000 (2,067) 4,427 3,412 2005 786 – 2004 $372,921 379,859 5,534 26 4,243 250,000 10,000 $110,056 Employers’ (6,938) a ,20 102.3125% Percentage 104.6250% 100.0000% May 1, 2008andthereafter May 1, 2007 May 1, 2006 Year as setforthbelow: percentages ofprincipalamountontheredemption date) redeemable afterthedatesandatprices(expressed in dates ofMay1andNovembereachyear;(2)are subsidiaries. TheSeniorNotes(1)haveinterest payment anteed, jointlyandseverally, bymostofourdomestic Bank, N.A.andusare fullyandunconditionallyguar- Indenture, datedasofApril18,2002,betweenWachovia face amount.TheSeniorNoteswere issuedpursuanttoan will mature in2010.We soldthesenotesfor100%oftheir amount of9.25%SeniorNotes(the“SeniorNotes”)that On April18,2002,weissued$250millioninprincipal Facilities of0.375%. an annualcommitmentfeeon theunusedportionof or BaseRateplus1.0%(6.25%atJanuary1,2005),with Loan wasLIBORplus2.5%(5.02%atJanuary1,2005), Rate plus0.5%(5.75%atJanuary1,2005)andontheTerm was LIBORplus2.0%(4.52%atJanuary1,2005),orBase 0.375%. Forthemajorityof2004,ourrateonRevolver commitment feeontheunusedportionofFacilities plus 0.50%(7.75%atDecember31,2005),withanannual plus 2.00%(6.46%atDecember31,2005),orBaseRate of 2005,variableinterest ontheRevolverwas either LIBOR to BaseRateplus1.75%fortheTerm Loan.Forthemajority plus 3.25%,orFleetNationalBank’s BaseRateplus0.50% 1.25% fortheRevolver, andLIBORplus2.00%to or FleetNationalBank’s BaseRatetotheplus and rangesfrom LIBORplus1.50%to2.75%, quarterly basedonourconsolidatedfixedcoverageratio variable interest that,beginninginfiscal2003,isadjusted ratably through December2006.TheFacilitiesprovide for Senior Secured termloanthatwasoriginallysettomature paid off theremaining $10millionoutstandingunderour Revolver matures onApril18,2007.On6,2005,we $25 millionseniorsecured termloan (the“Term Loan”).The of oureligibleaccountsreceivable andinventorya facility (the“Revolver”)whichisdependentonthelevels provide fora$300millionseniorsecured revolving credit the closingofSeniorNotesoffering. ThenewFacilities secured credit facilities(the“Facilities”)concurrently with On April18,2002,wealsoentered intonewsenior of paymenttoanyourfuture subordinated obligations. and (3)are seniorunsecured obligationsandare seniorinright 33/31/06 2:12:06 PM / 3 1 / 0 6

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P Russell Corporation 47 M M P

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6 0 / 1 3 / 33/31/06 2:12:07 PM Amortization expense of equipment acquired under capital under capital Amortization expense of equipment acquired expense. leases is included in depreciation DEBT 3: SHORT-TERM NOTE As of December 31, 2005 and January 1, 2005, we had a line with the Bank of Scotland with outstand- agreement of credit million, respectively. of $1.9 million and $14.0 ing borrowings At December 31, 2005, we had availability under this line of $15.9 million. The weighted-average of approximately credit was 5.8%, 4.5% and 5.7% rate on the line of credit interest for 2005, 2004 and 2003, respectively. In addition, we had $0.8 million and $4.2 million at December 31, 2005 and January 1, 2005, respectively, advances against Yarn’s outstanding under Frontier which is a non-recourse receivables, accounts factored rate associated with the advances The interest agreement. is prime plus 25 basis points on daily debit balances and balances, which prime minus 25 basis points on daily credit rate for 2005. interest in a 6.5% weighted-average resulted 3.9%. rate was For 2004, the weighted-average interest Aggregate maturities of long-term debt, other than obli- maturities of long-term debt, Aggregate lease obligations, at December 31, gations under capital as follows: 2005 are (In thousands) 2006 2007 2008 2009 2010 minimum lease payments under capital leases are Future as follows: (In thousands) 2006 2007 2008 2009 2010 $ 886 Thereafter 143,200 future minimum lease payments Total Less amount representing interest 1,025 Present value of future minimum lease payments $395,651 250,000 Less current portion 540 5,213 5,901 (688) $ 1,620 1,598 1,591 710 285 97 (1,181) 4,032 $ Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form We may choose LIBOR or base rate pricing and may elect may choose LIBOR or base rate pricing We or six months for LIBOR periods of one, two, three, interest loans managed by (except that all swing line borrowings under the Revolver will have base the Administrative Agent over pricing plus a 0.375% premium rate pricing or LIBOR spread). Revolver the current governing indenture The Revolver and the Notes the Senior on on us, including restrictions impose certain restrictions guarantees provide our ability to: incur debts; grant liens; of obligations of any other person; pay divi- in respect our assets; issue dends; make loans and investments; sell stock and non-guarantor subsidiary preferred redeemable of and repurchases stock; make redemptions preferred redeem prepay, capital stock; make capital expenditures; debt; engage in mergers or consolidation; or repurchase transac- affiliate engage in sale/leaseback transactions and debt and other tions; change our business; amend certain governing including the indenture the material agreements, Senior Notes and other documents governing any subor- issue and sell dinated debt that we may issue in the future; distributions from capital stock of subsidiaries; and restrict fixed us to achieve subsidiaries. The Revolver requires the next to through charge coverage ratios of: 1.15 to 1.0 the next to through last day of fiscal year 2003; 1.2 to 1.0 We 1.0 thereafter. last day of fiscal year 2004; and 1.25 to ratio of: 3.75 to also must maintain a maximum leverage the next to last day of fiscal year 2003; and 1.0 through with these in compliance were We 3.5 to 1.0 thereafter. covenants at the end of fiscal year 2005. the Revolver to, among 11, 2003, we amended On March on our abil- other things, (1) lessen some of the restrictions ity to make acquisitions, (2) permit us to make additional investments and guarantees, and (3) allow us to repurchase a portion of our Senior Notes and capital stock, subject to annual limitations. As of December 31, 2005, we had $142.2 million in out- million (under the Revolver) and $12.8 standing borrowings under the Facilities. As of in outstanding letters of credit approximately December 31, 2005, we could have borrowed $106.5 million of additional funds under our Revolver. 8 4

d d n i . c p w _ N I F _ 48 S Russell Corporation U RRUS_FIN_wpc.indd 48 RRUS_FIN_wpc.indd 49 U S _ F I N _ similar typesofborrowing arrangements. analyses, baseduponourincremental borrowing ratesfor of long-termdebtisestimated usingdiscountedcashflow short-term maturitiesofthese instruments.Thefairvalue payables approximated theirfairvalues,basedonthe instruments suchascash,tradeaccountsreceivable and 2005 andJanuary1,2005,thecarryingvalueoffinancial Other FinancialInstruments. have foreign exchangeforward eign currency exchangerates.AsofDecember31,2005,we world and,asaresult, weare exposedtomovementinfor- revenuesWe andincurexpensesinvariouspartsofthe earn NOTE 4: DERIVATIVE ANDOTHER 2004 wasnotmaterial. ended December31,2005,January1,2005and3, effective. Theamountofhedgeineffectiveness fortheyears 31, 2005andJanuary1,2005,ourcashflowhedgeswere tion andattheendofeachquarterthereafter. AtDecember measure theeffectiveness ofthecashflowhedgesatincep- asthehedges maturereclassed in2006.We toearnings also The 2005cashflowhedgeunrealized gains/(losses)willbe net oftaxes)related toforeign currency cashflowhedges. in othercomprehensive losswas $4.5 million($2.8 taxes) andatJanuary1,2005,unrealized lossreported comprehensive losswas$2.0million($1.4netof At December31,2005,unrealized gainreported inother million netoftaxes)in2005,2004and2003,respectively. $4.4 million($2.8netoftaxes)and$4.5 income amountedto$5.8million($3.7netoftaxes), reclassified toother-net intheconsolidatedstatementsof million netoftaxes),respectively. Inaddition,realized losses $4.2 million($2.6netoftaxes)and$7.4($4.6 expenses andaccumulatedothercomprehensive lossby fair valueoftheforward contractsincreased otheraccrued ($0.4 millionnetoftaxes).In2004and2003,thechangein and accumulatedothercomprehensive lossby$0.7million of theforward contractsdecreased otheraccruedexpenses and Australiandollar. During2005,thechangeinfairvalue euro, Britishpoundsterling,Japaneseyen,Canadiandollar, cipal currencies hedgedincludetheU.S.dollar, European contracts are accountedforascashflowhedges.Theprin- currency exchangerates.Theseforeign exchange forward volatilityresultingreduce from theearnings fluctuatingforeign gains andlossesonthehedgedtransactionsinaneffort to ies. Gainsandlossesonthederivativesare intendedtooffset subsidiar-than thefunctionalcurrencies ofourinternational inventory andsalesofgoodsdenominatedincurrencies other of fluctuatingforeign currencies onanticipatedpurchases of the endoffiscal2006thatare intendedtoreduce theeffect w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

4 9 FINANCIAL INSTRUMENTS FINANCIAL INSTRUMENTS contractse AtDecember31, xpiring through (rdn otoi) (trading portfolio) Investments exchange contracts Forward currency portion) (including current Long-term debt Short-term debt ASSET (LIABILITY) NOTE 5:EMPLOYEE RETIREMENTBENEFITS (In thousands) derivative andotherfinancialinstruments: The followingtablesummarizesfairvalueinformationfor ments, butthere are allowableranges. 65% equityinvestmentsand 35%fixedincomeinvest- classes are periodicallyrebalanced. Target allocationsare lishes atargetallocationforeachassetclass,andthe an acceptablelevelofrisk.Theinvestmentpolicyestab- maximize thelong-termrateofreturn onplanassetswithin Our investmentstrategyfortheRetirement Plansisto the 401(k)employeesavingsplan. qualified definedbenefitplansandwillsignificantlyimprove Effective April1,2006,theCompanywillfreeze thecurrent 2006, theCompanywillchangeitsretirement program. As partoftherestructuring plansannouncedinJanuary imately $5.0milliontotheRetirement Plansinfiscal2006. principal debtagreement. We expecttocontributeapprox- times neededtocomplywithfundingrequirements inour Income SecurityAct.Additionalcontributionsare some- minimum amountrequired bytheEmployeeRetirement We fundthequalifiedplansbycontributingannually ited service. benefit paymentsofstatedamountsforeachyearcred- years ofemployment.Oneourqualifiedplansprovides consecutive fiveyearsofcompensationduringthelastten based uponyearsofserviceandtheemployee’s highest Plans”). BenefitsfortheRetirement Plansare generally regulatory limitationsforcertainemployees(“Retirement retirement benefitsinexcessofqualifiedplanformulasor States employeesandunfundedplansthatprovide pension plansthatcoversubstantiallyallofourUnited We havetwoqualified,noncontributory, definedbenefit

$ (2,689) $ (2,689) (400,864) Carrying FairCarrying 11,082 Value Value 2,177 2005

(405,208) 2004 11,082 2,177

Value 10,531 10,531 (4,513) (4,513) $ (18,190) $ (18,190) (379,859) (395,085) Carrying

Value Fair 33/31/06 2:12:08 PM / 3 1 / 0 6

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6 0 / 1 3 / 33/31/06 2:12:08 PM 3.00% 8.50% 5.90% $(11,275) $(11,275) (39,831) 39,235 596 2004 2004 678 3.00% 8.50% 5.70% 2005 2005 54,732 $(6,367) (55,410) $ (6,367) (10,912) (11,005) 2004 2003 10,933 10,493 1,334 (452) 4,936 $ 5,045 $ 6,291 $ 4,081 $ 2005 3,769 11,602 (11,239) $ 5,893 $ $ 10,025 $

Rate of compensation increase Net amount recognized Expected return on plan assets Accumulated other comprehensive loss (pre-tax) Accumulated other comprehensive The expected return on plan assets is based upon the his- torical rate of return on the invested funds of the plans and market returns. future projected Additional minimum liability Additional minimum liability Intangible asset (In thousands) COMPONENTS OF NET PERIODIC BENEFIT COST Service cost The weighted average assumptions used to compute pen- as follows: sion amounts were Discount rate (In thousands) THE AMOUNTS RECOGNIZED IN BALANCE SHEETS CONSOLIDATED Accrued benefit cost prior service cost is recorded Amortization of unrecognized average remaining using the straight-line method over the of actu- service period of active employees. Amortization using the minimum amortization recorded arial losses are The corridor approach by the corridor approach. required that the net actuarial loss in excess of 10 percent requires or the benefit obligation of the projected of the greater value of the assets be amortized using the market-related service remaining straight-line method over the average period of the active employees. liability included in accu- minimum pension The after-tax loss was $33.2 million mulated other comprehensive and January 1, and $24.3 million at December 31, 2005 2005, respectively. periodic pension A summary of the components of net cost is as follows: Expected return on plan assets Net amortization and deferral Net periodic pension cost Interest cost 0.4% 24.5% 100.0% $(64,497) $(11,275) (9,499) (9,499) 874 $170,737 4,936 10,933 13,104 $112,943 12,749 10,412 1,344 52,348 75.1% 2004 2004 2004 2,235 – $192,446 $127,949 – – 2004 462 2005 2005 2005 1.1% 1,093 5,893 2,095 (9,282) (9,282) 75.7% 23.2% 2005 11,602 15,516 14,934 73,481 100.0% $ (6,367) $(80,941) $192,446 $127,949 $216,637 $135,696

Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form Unrecognized net actuarial loss (In thousands) STATUS OF FUNDED RECONCILIATION ACCRUED BENEFIT COST TO Unfunded status of the plan Unrecognized prior service cost (In thousands) ASSETS CHANGE IN PLAN Fair value of plan assets at beginning of year Service cost Interest cost Actuarial loss Benefits paid Plans The accumulated benefit obligation for the Retirement was $197.2 million and $179.0 million at December 31, 2005 and January 1, 2005, respectively. Actual return on plan assets Company contributions Acquisitions Benefits paid Accrued benefit cost CHANGE IN BENEFIT OBLIGATION Benefit obligation at beginning of year (In thousands) Plan assets at December 31, 2005, and January 1, 2005, Plan assets at December 31, 2005, and common stock of the Company’s include 600,960 shares and $11.7 million, having a market value of $8.1 million Dividends paid to the plan by the Company respectively. $0.1 million in 2005, 2004 and 2003. were the benefit obliga- The following table sets forth changes in tion, plan assets and funded status: ASSET CATEGORY Equity funds Fixed income funds The percentage of fair value of total plan assets by asset of fair value of total plan assets by asset The percentage date (which is January 1 category as of the measurement each year) is as follows: Cash and cash equivalents Cash and cash equivalents Total Plan amendments Benefit obligation at end of year Acquisitions Fair value of plan assets at end of year 0 5

d d n i . c p w _ N I F _ 50 S Russell Corporation U RRUS_FIN_wpc.indd 50 RRUS_FIN_wpc.indd 51 U S _ F I N _ of non-recurring taxbenefitsandotherdeferred taxadjustmentsrealized. Benefit of federaltaxauditsfor2002andprioryearsalongwiththeeffects ofourforeign operations.In2003there were $2.6millio and resolution ofcertaindeferred taxmatters.Thelowerratein2004isprimarilyduetoabenefitresulting from theclosure 2003, respectively. Thelowerratein2005ismainlyduetotherecognition ofthemajorityprofits inlower taxcountries Our effective taxratefor2005of20.7%decreased 8.7and12percentage pointsfrom 29.4%and32.7%infiscal2004 Totals Foreign State Federal (In thousands) Significant componentsoftheprovision forincometaxesare asfollows: primary contributorstoourforeign income. 2004 and2003,respectively. In2005 and2004,foreign operationsintheUnitedKingdom,HondurasandIreland were the Foreign operationscontributed$33.7million,$18.1millionand$1.3ofourincomebefore incometaxesin2005, NOTE 6:INCOMETAXES $0.9 millionin2003. contributions. Compensationexpenseassociatedwiththeseplanswas$1.3millionin2005,$1.02004and employees todeferportionsoftheirannualcompensationandparticipateinCompanymatchingdiscretionary Revenue Codeandanon-qualifiedplan(SavingsPlans).OurSavingsPlansallowsubstantiallyallUnitedStates In additiontoourRetirement Plans,wehavefivesavingsplansthatare qualifiedunderSection401(k)oftheInternal Fiscal Years (in thousands): The followingtableshowstheexpectedbenefitpaymentstobemadefrom theRetirement PlansasofDecember31,2005 00 9,940 9,684 9,398 9,137 $57,422 9,077 $ Five yearsthereafter 2010 2009 2008 2007 2006 w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

5 1 Currently $(2,558) $ 4,815 ,2 $4,742 $ 4,227 6,552 1,430 aal eerd Currently Payable Deferred Paya 233 (1,503) 2005 20 2003 2004 1,3 $405 1,2 $6,224 $15,826 $4,025 $19,036 2,313 639 335 (7,511) $21,907 $16,507 $(1,916) $ 4,432 558 42 1,570 (2,127) l eerd Currently Payable Deferred ble Deferred Payments n

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6 0 / 1 3 / 33/31/06 2:12:09 PM Net operating loss carry forwards (NOLs) are available to to available are (NOLs) carry forwards Net operating loss earnings future within the time periods specified offset state NOLs At December 31, 2005, we had U.S. by law. in 2013 through $373 million expiring of approximately $4.7 mil- NOLs of approximately 2020 and U.S. federal acquisition, subject to the Brooks lion specifically related limitation, which should be utilized to change in ownership International 2024. expiration in 2020 through NOLs before $30.1 million. The international total approximately NOLs and Australian pertain primarily to our United Kingdom indefinitely in the operations. NOLs can be carried forward business” and United Kingdom and Australia with “same ownership tests, respectively. our valuation allowance by In 2003, we increased in our interna-$5.9 million for additional NOLs generated our valuation tional operations. In 2004, we decreased anticipation of uti- allowance by $10.3 million primarily in generated in our United Kingdom lizing NOLs previously operations operations. Because our United Kingdom tax purposes, function as a branch of the U.S. for income up to offset tax liability was set deferred a corresponding tax asset. In 2005, we the United Kingdom NOL deferred our valuation allowance by $3.9 million primarily increased for additional NOLs generated in U.S. states. the American signed On October 22, 2004, the President Act of 2004 (the “Act”). The Act, among Jobs Creation a temporary incentive for U.S. other things, provides accumulated income earned corporations to repatriate an 85% dividends received outside the U.S. by providing foreign controlled deduction for certain dividends from provisions have evaluated the repatriation operations. We will not of the Act and determined that these provisions It is our current have a significant impact on our results. earningsintention to continue to indefinitely reinvest of our we do not provide international subsidiaries; therefore, for federal income taxes on their undistributed earnings. federal for At December 31, 2005, we had not provided income taxes on earnings of international subsidiaries of $53.9 million. If these earnings distrib- are approximately uted in the form of dividends or otherwise, we would be subject to both U.S. income taxes and withholding taxes in the various international jurisdictions. It is not practical deferred for us to determine the amount of unrecognized U.S. income tax liability because of the complexities asso- ciated with the hypothetical calculation. Withholding taxes million would be payable if all previ- $2.7 of approximately earnings ously unremitted as of December 31, 2005, were company. parent to the U.S. remitted 3,145 6,966 4,979 (9,196) 56,058 65,254 12,049 25,513 17,581 80,398 19,670 13,272 22,004 $24,340 2004 $20,473 2005 1,818 4,842 3,140 55,029 68,083 12,917 26,871 21,635 78,997 18,638 17,537 20,862 (13,054) $ 23,968 $ 18,820 – – 1,827 (836) (2,716) (4,612) (1,577) (620) (1,316) (1,248) 19,991 $20,939 $ (10,278) 5,931 $ 23,774 $22,392 $ 10,209 – 2004 2003 335 817 2005 2,921 3,856 (2,835) (2,072) (9,243) $15,190 $ 8,969

Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form Net deferred tax liabilities Net deferred tax assets Valuation allowance for deferred tax assets Valuation Total deferred tax assets Total Other Employee benefits Employee foreign and state net Federal, operating loss carry forwards Accounts receivable Accounts Deferred tax assets: obligations Pension and post-employment deferred tax liabilities Total Other Deferred income State income taxes rate change Other – net Change in reserves Deferred tax liabilities: plant and equipment Property, Acquired intangibles (In thousands) State income taxes (benefit), net State income taxes (benefit), of federal income tax benefit Change in valuation allowance on foreign/state NOLs of temporary the tax effects income taxes reflect Deferred between the carrying amounts of assets and differences purposes and the amounts liabilities for financial reporting components of used for income tax purposes. Significant tax liabilities and assets as of December 31, 2005 deferred follows: as and January 1, 2005, are (In thousands) at statutory on rate Taxes income before income taxes effects of foreign Tax net – operations United Kingdom branch liability tax Following is a reconciliation of income tax expense or or of income tax expense Following is a reconciliation amount computed by applying the benefit to the expected tax rate of 35% to income before statutory federal income income taxes: Inventories 2 5

d d n i . c p w _ N I F _ 52 S Russell Corporation U RRUS_FIN_wpc.indd 52 RRUS_FIN_wpc.indd 53 U S _ F I N _ 26696 2.4 ,7,6 $00 3.4 2.0 2.8 3.9 Weighted-Average 5.5 $20.03 5.2 4.1 $27.60 $22.19 OptionsOustanding $19.35 2,679,462 in Years $17.49 $14.28 705,266 $15.13 $20.04 329,384 Number of 398,453 ExercisePrice 140,921 $27.60 2,666,956 21,226 Remaining Life OptionsExcercisable 1,084,212 $22.19 $19.35 Shares Weighted-Average $17.50 705,266 $15.13 $14.25 329,384 Outstanding ExercisePrice 398,453 Weighted-Average 132,392 1,080,966 20,495 Number Weighted-Average of Shares Exercise Price $24.38 –$30.87 Shares $19.42 –$24.37 Weighted-Average $19.01 –$19.41 Exercise $15.94 –$19.00 Price $15.10 –$15.93 Shares $11.96 –$15.09 Excercise Price Weighted-Average Exercise Price Shares The rangeofexercise pricesoftheoutstandingandexercisable optionsare asfollowsatDecember31,2005: Exercisable atendofyear Outstanding atendofyear Forfeited Expired Exercised Granted atfairvalue Outstanding atbeginningofyear rights, performanceshares, andperformanceunitawards. options, bonusshares, deferred shares, stockappreciation stock options,nonqualifiedreload stock Under theplan,wemayissuerestricted stock,incentive and keyemployeesoftheCompanyitssubsidiaries. based compensationawards inseveralformstoallofficers Our ExecutiveIncentivePlanpermitsustoissueequity- Company at$0.01perRightundercertaincircumstances. expire onOctober25,2009,unlessredeemed earlierbythe held atasignificantdiscounttomarket.TheRightswill by theCompany, shares ofcommon stockforeachRight holder toacquire, aftertheRightsare nolongerredeemable a changeincontrol oftheCompany, theRightsentitle Company’s outstandingcommonstockbyathird party, or right toacquire, beneficialownershipof15%ormore ofthe $85. Uponcertaineventsrelating totheacquisitionof,or Preferred Stock,parvalue$0.01,atapurchase priceof of oneone-hundredth share ofSeriesAJuniorParticipating Right, whenexercisable, entitlestheholdertopurchase aunit Right foreachshare ofcommonstockoutstanding.Each a dividend,whichwasissuedonOctober25,1999,ofone On September15,1999,theBoard ofDirectors declared NOTE 7: STOCK RIGHTSPLANAND w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

5 3 STOCK COMPENSATION PLANS 2,666,956 $20.04 2,679,462 $20.03 3,280,057 $19.91 256,351 $20.67 271,844 $15.51 72,400 $30.00 $– – 2005 2004 2003 9,8 $51 3059 $15.28 340,539 $15.16 3,209,549 196,788 3,280,057 $19.98 3,209,053 207,469 $19.91 $20.62 3,695,689 $23.97 $20.05 316,415 3,695,689 $21.36 $20.05 4,367,793 $19.92 1,8 $67 8,0 $27.50 $19.48 85,800 70,650 $16.76 $18.88 12,380 1,005 Plan andpredecessor plans: options undertheExecutiveIncentivePlan,2000Option of grant.Thefollowingtablesummarizesthestatus either twoorfouryearsandexpire 10yearsafterthedate in 1999andlaterare exercisable equallyoverperiodsof the dateofgrant.Thestockoptionsthatwere granted two yearsafterthedateofgrantandexpire 10yearsafter All optionsgrantedpriorto1999are primarilyexercisable equal tothestock’s fairmarketvalueatthedateof grant. December 31,2005.Theoptionsare grantedataprice shares ofcommonstockwere reserved forissuanceat and predecessor stockoptionplans,atotalof2,910,036 Under theExecutiveIncentivePlan,2000OptionPlan units, andperformanceshares. rights, tandemstockappreciation rights,performance shares, deferred shares, freestanding stockappreciation options, reload stockoptions,restricted shares, bonus forms, includingincentivestockoptions,nonqualified 2000 OptionPlanallowsustograntawards inavarietyof 2000 OptionPlanalsomaybemadetoconsultants.The Stock OptionPlan(2000Plan).Awards underthe eligible toparticipateintheRussellCorporation2000 Most ofoursalariedemployees,includingofficers, are 33/31/06 2:12:10 PM / 3 1 / 0 6

2 : 1 2 : 1 0

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6 0 / 1 3 / 33/31/06 2:12:10 PM Total (1) Gould v. Russell Gould v. At December 31, Locke, et al. v. Russell Russell Locke, et al. v. case was filed on November 20, ). These cases have been settled on ). These cases have been settled on Locke filed on January 13, 2000, in the Circuit filed on January 13, 2000, in the Circuit et al. , Third Parties Related Party Related Parties Third million for capital improvements. Our remaining com- Our remaining million for capital improvements. Lease and rental expense for fiscal years 2005, 2004 expense for fiscal years 2005, 2004 Lease and rental and $7.6 mil- and 2003 was $11.9 million, $10.2 million lion, respectively. at had $23.0 million outstanding under letters of credit We to the related December 31, 2005, of which $12.6 million to workers’ of inventories, $9.8 million related purchase and customs bonds, programs compensation self-insured to utility bonds and other matters. and $0.6 million related in 2006. set to expire are All outstanding letters of credit obliga- have $189.4 million of unconditional purchase We for utilities and tions which include guaranteed minimums contractual and obligations under advertising for royalties capital obligations and arrangements, cotton purchase commitments. expenditure Litigation a co-defendant in were We Corporation Fifteen families who Alabama. County, Court of Jefferson Subdivision in Raintree on Lake Martin in the own property the in the original plaintiffs Alabama, were Alexander City, case, which sought unspecified money damages for tres- pass and nuisance. A complaint substantially identical to the one filed in the Alabama, by County, Court of Jefferson 2001, in the Circuit Subdivision ( Raintree of the two residents Corporation, et al. to us. not materially adverse terms that are NOTE 8: COMMITMENTS AND CONTINGENCIES 8: COMMITMENTS NOTE Commitments. Purchase and Lease 2,455 (In thousands) 2006 2007 2008 – 2009 2010 Thereafter 2,455 (1) Refer to Note 14 for more information. $9,488 7,073 5,251 $2,561 3,234 2,968 2,596 $12,049 $30,469 2,631 2,667 9,669 $12,249 1,794 7,882 $42,718 5,901 4,762 2005, we have commitments to spend approximately to spend approximately 2005, we have commitments $3.9 operating leases with initial mitments under noncancelable as follows: are terms of one year or more or remaining Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form Under the Russell Corporation 2000 Non-Employee Corporation 2000 Non-Employee Under the Russell Plan”), which Compensation Plan (the “Directors’ Directors’ Non-Employee the Russell Corporation 1997 replaced and Deferred Stock Grant, Stock Option Directors’ (the “Prior Plan”), each non-employee Compensation Plan annually a fee of receives (“Eligible Director”) director in quarterly installments of $8,750. $35,000, to be paid January 1, 2003, a stock retainer In addition, effective was established for deferral account (a “deferral account”) in lieu of stock options, which each non-employee director prior to that had been granted to non-employee directors meeting each time. Immediately following each annual deferral account will be credited non-employee director’s of common stock having a market value of with shares payment date, each $25,000. In addition, on each dividend of with additional shares deferral account will be credited of common shares common stock equal to the number of with the dividends paid on stock, which could be acquired of common stock in the deferral account based the shares on such date. The on the market value of such shares in a deferral account will be paid to a non-employee shares on the earlier of the first anniversary of the date director of the Company or ceased to be a director such director following ceases to be a director the day after such director may also age 70. Eligible Directors reaching such director all or a portion of their annual fees in shares elect to receive shares. or deferred price of granted at a were shares In 2005, 12,708 deferred granted were shares $17.70 and in 2004, 10,464 deferred at a price of $18.51. Options granted prior to 2003 under 10 years and expire Plan vest over 1 year the Directors’ options granted under after the date of grant; whereas, 10 years and expire years the Prior Plan vest over three an aggregate after the date of grant. Options to purchase $16.28 to $27.50 from at prices ranging of 169,890 shares Plan and the Prior under the Directors’ outstanding are Plan at December 31, 2005. 4 5

d d n i . c p w _ N I F _ 54 S Russell Corporation U RRUS_FIN_wpc.indd 54 RRUS_FIN_wpc.indd 55 U S _ F I N _ Athletic the SportingGoodssegment are primarilysourced. and sportsspecialtystores, andcollege stores. Products in sporting goodsdealers,specialtyrunningstores, department products intheSportingGoodssegmentprimarilythrough the brands ment andathleticfootwear, whichare soldprincipallyunder Goods segmentconsistsofsportsapparel, sportsequip- segments: SportingGoodsandActivewear. TheSporting We operateourglobalbusinessprimarilyintworeportable NOTE 9:SEGMENTINFORMATION at December31,2005. The ultimateoutcomeofthisclaimcannotbedetermined related tobusinesslossesattributedHurricaneKatrina. to pursueabusinessinterruptionclaimwithitsinsurer $2.9 million,netofadeductible.TheCompanyalsoplans has filedaclaimwiththeinsurer forapproximately inventory asaresult ofHurricaneKatrina.TheCompany damage tocertainworkinprocess andfinishedgoods During thethird quarterof2005, theCompanyincurred tion andisreasonably estimable. will notberecorded untiltheamountisprobable ofcollec- refund claim,ifany, cannotbeestimatedatthistime,and related duties.Theamountofthebenefitforanyretroactive DR-CAFTA are finalized,Russellwillcontinuetopaythe the operationaleffective date.Untiltheprovisions of duties paidintheU.S.from January1,2004through provides forthepossibleretroactive recovery oftheimport also ratifiedtheagreement. Additionally, theagreement certain tariffs onimportsfrom othercountriesthathave Nicaragua). DR-CAFTA partnershaveagreed toterminate Costa Rica,ElSalvador, Guatemala,Honduras,and the sevensignatorycountries(U.S.,DominicanRepublic, provisions thatwillaffect textileandapparel tradebetween President BushonAugust2,2005,includesanumberof Agreement (DR-CAFTA), whichwassignedintolawby The U.S.-DominicanRepublic-CentralAmericaFree Trade Other a materialadverseeffect uponus. any ofthesematters,ifadverselydetermined,wouldhave normal conductofourbusiness.We donotbelievethat We are apartytovariousotherlawsuitsarisingoutofthe Bike w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d ® d , Dudley

5 5 ® , HuffySports Russell Athletic ® , and Sherrin ® , MossyOak ® , Spalding ® . We marketanddistribute ® ® , Brooks , MovingComfort ® , American ® , or lossonintersegmenttransfers. are primarilyrecorded atcost,withnointercompany profit for transactionswithFrontier Yarns, intersegmenttransfers ments are thesameasthosedescribedinNote1.Except companies. Theaccountingpoliciesofthereportable seg- be comparabletosimilarlytitledmeasures usedbyother Segment operatingincomeaspresented byusmaynot interest andincometaxes(segmentoperatingincome). resources basedonprofit orlossfrom operationsbefore Our managementevaluatesperformanceandallocates new basisofsegmentreporting. has beenrestated topresent oursegmentdataonthe Accordingly, thesegmentdatapresented herein for2004 have realigned ouroperationsbybrandsandproducts. an authenticathleticandsportinggoodscompany, we acquisitions inprioryearsthathaveredefined Russellas Apparel. In2005andafterseveraland International tion channelsandreported twosegments:Domestic Prior to2005,weoperatedourbusinessalongdistribu- presented herein. Frontier Yarns. Theseare includedinthe“AllOther”data our fabricsdivision,customprivatelabelbusinessand olds fordeterminingreportable segmentsprimarilyinclude Other segmentsthatdonotmeetthequantitativethresh- nation ofownedfacilitiesandthird-party contractors. primarily manufactured bytheCompanyutilizingacombi- and embroiderers. Products intheActivewearsegmentare through massmerchandisers, distributors,screen printers, cipally underthe wear. Products intheActivewearsegmentare soldprin- sweatshirts andsweatpants,knitshirts,socks,career mance andcareerwear apparel products, suchast-shirts, The Activewearsegmentconsistsofourbasic,perfor- JERZEES ® and Cross Creek ® brands 33/31/06 2:12:11 PM / 3 1 / 0 6

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6 0 / 1 3 / 33/31/06 2:12:11 PM 684 $322,890 1,653 56,233 2004 $264,320 696 2005 2,701 72,188 $315,721 $240,136 32,897,559 32,726,472 32,897,559 44,649 31,877 $1,298,252 $1,186,263 32,376,617 32,668,376 349,855 229,183 $1,170,235 $1,084,184 83,368 70,202 2004 2003 2004 2003 2005 2005 80,384 236,721 119,954 33,293,900 33,057,179 $1,434,605 $1,234,267 COMMON SHARES OUTSTANDING

Consolidated total Other Europe Consolidated total Net common shares underlying unissued restricted stock and issuable on exercise of dilutive stock options Diluted weighted-average common shares outstanding Europe Other and Equipment by Geographic Region Plant Property, (In thousands) United States America and Mexico Central DILUTED WEIGHTED-AVERAGE 10: NOTE outstand- shares Our diluted weighted-average common follows: calculated as ing are Basic weighted-average common shares outstanding million 1.5 million, 1.7 million and 2.0 Options to purchase the com- excluded from stock were of our common shares out- putation of diluted weighted-average common shares standing for the years ended December 31, 2005, January 1, because the exercise 2005 and January 3, 2004, respectively, prices of the options exceeded the average market price. Enterprise-wide Disclosures: Net Sales by Geographic Region (In thousands) United States attributed to countries based on the location Revenues are of customers. and its subsidiaries represent sales to Wal-Mart Gross and 21.2% of our consoli- 16.9%, 19.3%, approximately sales for fiscal 2005, 2004 and 2003, respec- dated gross by made were and its subsidiaries Sales to Wal-Mart tively. segments. both the Sporting Goods and Activewear (19,190) (12,229) (30,843) (29,663) 582,967 $ 501,458 $ 658,763 626,895 56,522 57,910 $1,298,252 $1,186,263 58,810 $ 52,204 $ 52,100 50,600 10,369 7,050 $ 117,960 $ 113,173 $ 12,373 $ 10,846 25,210 26,032 6,202 4,105 4,237 3,953 48,022 $ 44,936 $ 4,655 $ 8,039 $ 25,694 26,762 1,246 718 4,427 2,594 35,494 $ 38,641 $ 537,289 $ 539,783 65,722 111,315 $1,254,109 2004 2003 $117,960 $113,173 – (7,303) – $ 67,927 $ 63,978 2004 2003 – 2005 2005 6,422 6,063 5,184 1,815 7,199 60,720 54,092 25,729 27,889 62,497 93,745 674,177 593,292 (19,146) (39,153) $101,698 $ 43,399 $1,434,605 41,184 $ 15,357 $ 52,333 $ 42,471 $ $1,311,311 $ 5,568 $ $ 699,708 $ 101,698 $ 561,777 $

Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form Unallocated amounts: Unallocated amounts: expenses Corporate Special charges Special Interest expense, net expense, Interest A reconciliation of total segment operating income to con- of total A reconciliation income taxes is as follows: solidated income before (In thousands) segment operating income Total Consolidated income before taxes income (In thousands) Net sales: Goods Sporting Activewear Other All net sales Total Segment operating income: Goods Sporting Activewear Other All income segment operating Total Depreciation & amortization expense: Goods Sporting Activewear Other All Corporate depreciation & Total expense amortization Capital expenditures: Goods Sporting Activewear Other All Corporate capital expenditures Total Assets: Goods Sporting Activewear Other All Corporate assets Total Following is selected financial data by reportable segment: financial data by reportable Following is selected 6 5

d d n i . c p w _ N I F _ 56 S Russell Corporation U RRUS_FIN_wpc.indd 56 RRUS_FIN_wpc.indd 57 U S _ F I N _ Other unconsolidated entities Investments inandadvancesto Investments (tradingportfolio) Less accumulatedamortization etisac ot Debt issuancecosts Other intangibles Goodwill (In thousands) Other assetsare summarizedasfollows: NOTE 12:OTHER ASSETS $ 0.31 $ 0.32 $0.82 $0.82 $ 0.31 $ 0.31 $ 0.02 $ 0.02 (1) Fourth quarterof2005includesanincometaxbenefitapproximately$1,803, or Diluted Quarter ended Basic 53110,16226,93810,305 Net incomeper $251,793$289,771$422,656$334,032 Net 64,633 80,345 121,803 97,099 Gross common income Net profit sales 1,January 2005 Year ended share: Quarter ended Diluted Basic Net incomeper Net income Gross profit common Net sales December 31, 2005 Year ended share: operations (inthousands,exceptpershare data): The followingisasummaryofunauditedquarterlyresults of NOTE 11: SUMMARY OFQUARTERLY RESULTS OF w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c from ashiftinincometolowertaxingjurisdictions(primarilyforeigncountries). to previousyears. The fourthquartereffectivetaxratewasalsopositivelyaffected $.05 perdilutedshare, fromtheone-timeresolutionofcertaintaxmattersrelating . i n d d

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OPERATIONS (UNAUDITED) 00 $ .4 .7 $ 0.36 $0.47 $ 0.37 $ 0.14 $0.48 $ 0.07 $ 0.14 $ 0.07 $313,242 $342,099$424,632$354,631 581 90,204117,392100,081 85,891 pi Jl Ot Jan. 1 Oct. 3 July4 April 4 Dec. 31 Oct. 2 July3 April 3 ,8 4,66415,76011,825 2,182 (20,472) $252,482 $101,972 236,391 256,863 138,495 11,082 16,396 2,497 2,512 2005 1,658 2,838 10,531 238,774 253,532 16,967 2004 137,870 $98,695 (14,758) $253,801 (1) te 7 – 9 – 596 – (396) $ $(3,387) 678 (396) $101,325 $137,870 (366) $ (396) $ $(6,879) – 12,675 $101,407 559 $138,495 $88,054 Total intangibleassets (396) intangibleassets $– $88,054 Total unamortized (559) 12,675 Other (273) 559 Licensed agreements $(2,991) Trademarks 3,823 $36,545 intangible $(6,483) assets: – $37,088 Unamortized (620) intangibleassets Gross 17,003 3,823 Total amortized Other 1, January 2005 (1,308) License agreements $ (673) Accumulated Carrying 17,003 $ Trademarks 7,063 8,405 (12) Accumulated December31, 2005 Carrying Customer relationships $(1,953) Gross $ 8,640 Patents andtechnology intangible (2,763) assets: (2,043) Amortized (in thousands) 6,755 $19,117 1,846 $82,855 $17,260 – – (1,679) $81,435 Other intangiblesare madeupofthefollowing: $17,272 $24,652 59,546 Balance atDecember31, 2005 Other Goodwill acquiredduringtheyear 1,Balance atJanuary 2005 Other Goodwill acquiredduringtheyear 3,Balance atJanuary 2004 (In thousands) able segmentare asfollows: The changesinthecarryingamountofgoodwillbyreport- 1,420 11 Aon Aotzto mut Amortization Amount Amortization Amount Sporting Goods Activewear 33/31/06 2:12:12 PM / 3 1 / 0 6

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Goodwill 59,546 assets Tangible Intangible assets not subject to amortization – trademarks registered Intangible assets subject to amortization (weighted-average useful life: (weighted-average 2004 – 11.5 years); relationships Customer 2004 - 13.0 years) useful life: Patents and technology (weighted-average (weighted-average agreements Licensing 2004 – 7.1 years) useful life: 2004 – 10.0 years) useful life: 51,326 Other (weighted-average useful life: 2004 – 2.4 years) 70,564 $ Goodwill 17,003 Liabilities assumed Net assets acquired 5,135 1,755 – 23,893 (48,928) $156,401 205,329 Approximately $46.0 million of the goodwill added in 2004 $46.0 million of the goodwill Approximately income tax purposes. is non-deductible for summarizes the estimated fair values The following table at the date and liabilities assumed of the assets acquired of acquisition. The above acquisitions were accounted for using the pur- The above acquisitions were price was purchase chase method of accounting, and the assets acquired allocated to the tangible and intangible fair their respective and liabilities assumed on the basis of have values on the date of acquisition. The financial results been included in the consolidated financial statements of the date of acquisition. the Company from TRANSACTIONS PARTY 14: RELATED NOTE on April 3, 2004, With Yarns the consolidation of Frontier Spinning partner Frontier we have deemed our joint venture We party. Spinning”) to be a related Mills, Inc. (“Frontier Yarns obtain the majority of our yarn Frontier needs from In 2005 and 2004, we purchased Spinning. and Frontier million and $41.8 million of yarn $56.7 approximately from 31, 2005 and At December Spinning, respectively. Frontier January 1, 2005, we had an outstanding payable to them of million and $15.3 million, respectively. $20.4 approximately yarn, Spinning provides In addition to providing Frontier certain management and accounting services to Frontier In operating agreement. pursuant to the joint venture Yarns Spinning 2005 and 2004, we paid $1.5 million to Frontier for such services. (in thousands) , ® ion, $3.5 mill Huffy Sports 2004 was mark and has been the ® NCAA brands. Huffy Sports has held a has held a Sports brands. Huffy ® Hydra Rib and ® Amortization Expense Amortization Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form Sure Shot NOTE 13: ACQUISITIONS NOTE the net assets of AAI for On June 15, 2004, we acquired $13 million. Founded in 1954, AAI manufac- approximately basketball and volleyball including a variety of products tures apparatus under a equipment, athletic mats and gymnastics and BPI. AAI variety of brands, including American Athletic to high schools, universities, profes- markets these products sional teams, and athletic clubs globally. the net assets of Huffy On July 19, 2004, we acquired Corporation, for approximately Sports, a division of Huffy sells basketball equipment, includ- Sports $30 million. Huffy inflatable balls under the and ing backboards Investments in and advances to unconsolidated entities entities Investments in and advances to unconsolidated $2.5 million were accounted for under the equity method January 1, 2005, and $2.8 million at December 31, 2005 and $0.3 million while our equity in earnings were respectively; million in 2003. The in 2005, $0.5 million in 2004 and $3.4 change in equity in earnings 2003 to 2004 is the result from in 2004, which we Yarns of the consolidation of Frontier 2003. accounted for under the equity method in (In millions) 2006 2007 2008 2009 2010 $3.3 3.3 3.3 2.6 2.5 The amortization expense for the year ended December 31, for the year ended December 31, The amortization expense and January 3, 2005, January 1, 2005 $1.4 million and $0.8 million, respectively. The estimated The estimated million, respectively. $1.4 million and $0.8 for the next five years is as follows: amortization expense official supplier to the NCAA’s Final Four Championship for 14 NCAA’s supplier to the official of the last 27 years. all of the issued On December 30, 2004, we acquired for $115.0 mil- and outstanding capital stock of Brooks of performance athletic is a provider lion in cash. Brooks and accessories to running enthusiasts apparel footwear, sold predominately are products worldwide. Brooks’ outlets and other retail stores specialty running through performance running products. specializing in high quality, acqui- In 2005, we completed our evaluation of the Brooks immaterial adjustments to goodwill. sition and recorded license (which was assigned to us as part of the acquisition) with the National Basketball Association (“NBA”) for use of the NBA league and team logos for nearly a quarter century. the Sports also licenses Huffy 8 5

d d n i . c p w _ N I F _ 58 S Russell Corporation U RRUS_FIN_wpc.indd 58 RRUS_FIN_wpc.indd 59 U S _ F I N _ the 401(k)employeesavings plan. the current defined benefitplanandsignificantlyimprove program. Effective April1,2006,theCompanywillfreeze plans, theCompanyannouncedachangeinitsretirement higher margins,andimproved profitability. Aspartofthese ments whichare expectedtoleadincreased sales, efforts, improved assetutilizationandefficiency improve- restructuring willbecombinedwithfocusedmarketing will eventuallybereplaced inHondurasandMexico.The including 1,700intheU.S.,ofwhichapproximately 1,200 plans willimpactapproximately 2,300positionsglobally, tions insales,marketing,andadministrativecosts.These to Huffy Sports’backboard businessandsignificantreduc- turing operations,thecompletionofoperationalchanges on thecontinuedshiftoffshore oftextile/apparel manufac- savings of$35to$40million.Therestructuring willfocus next 2to3yearswithprojected annualizedpre-tax cost pre-tax costisexpectedtobe$60$80millionoverthe improve theCompany’s long-termcompetitiveness.The turing thatincludesanumberofinitiativesdevelopedto In January2006,theCompanyannouncedamajorrestruc- NOTE 15:SUBSEQUENTEVENTS approximately $2.5millionin2005,2004and2003. andpaidrentspace inCityView tothejointventure of inAtlanta,Georgia.Weknown asCityView leasedoffice purpose ofconstructing,operatingandleasingtheoffice joint venture betweenusandanunrelated partyforthe Associates,LLCwasformedasa50/50 In 1999,CityView Yarns atJanuary 3,2004. a netoutstandingpayableof$5.9millionduetoFrontier from Frontier Yarns were $125.6millionin2003.We had basis plusactualcostofrawmaterials.Total purchases provides forpricingtobecalculatedonaconversioncost the formationofjointventure. Thesupplyagreement ply agreement thatwasexecutedsimultaneouslywith We from purchase Frontier yarn Yarns pursuanttoasup- in 2004. at January3,2004.This$5.0millionnotewaspaidinfull loaned Frontier Yarns $5.0million,whichwasoutstanding We alsocontributedapproximately $4.5millionincashand including facilitiesinLafayetteandWetumpka, Alabama. Frontier Yarns, spinningassets, mostofourremaining yarn the formationofFrontier Yarns, weagreed tosellorlease as arelated partyandFrontier Spinningwasnot.Aspartof In 2003(priortoconsolidation),Frontier Yarns wastreated w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

5 9 Asset Management,Inc.;Jerzees Quality Apparel Resources, Inc.(Inactive);Cumberland S.de R.L.;Brooks GmbH;Brooks SportsLimited(UK);Total SGG LiscoLLC;PatentsRLAManufacturing, Colombia Ltda;RussellAthleticHoldings(Ireland) Limited; Eagle RHoldingsLimited;CitygateTextiles Limited;Russell Limited; RussellHoldingsEurope B.V.; Ruservicios,S.A.; C.V.; RussellForeign SalesLtd.; RussellCorp.Bangladesh Spain, S.L.;RussellItalyS.r.l.; ServiciosRussell,S.A.de Russell FranceSARL;GermanyGmbH; S.A.; JerzeesCholoma,RusselldelCaribe,Inc.; Jerzees deHonduras,S.A.doC.V.; JerzeesBuenaVista, East, Limited;RussellJapanKK;SpaldingCanadaCorp.; Australia PtyLtd;RusselldoBrasil,Ltda.;Corp.Far Cross Creek deHonduras,S.A.C.V.; RussellCorp. Camargo, S.A.deC.V.; JerzeesdeJimenez,S.A.C.V.; S.A. deC.V.; Jerzees Yucatan, S.A.deC.V.; Athleticde Limited; RussellMexico,S.A.deC.V.; JerzeesCampeche, Service, Inc.;RussellServicingCo.,Europe guarantor subsidiaries,whichincludeAlexanderCityFlying are whollyowned);and(c)onacombinedbasis,thenon- Russell Co-Op,LLC;andBrooks Sports,Inc.(allofwhich Apparel, LLC;RINTELProperties, Inc.;RussellYarn, LLC; Services, Inc.;RussellAssetManagement, Creek Holdings, Inc.;DeSotoMills,LLC;RussellFinancial Oak Apparel Company;Cross Creek Apparel, LLC;Cross Guarantors”), whichincludeJerzeesApparel, LLC;Mossy basis, theguarantorsofSeniorNotes(“Subsidiary “Parent”) onastand-alonebasis;(b)combined ing financialinformationfor:(a)RussellCorporation(the The followingtablespresent condensedconsolidat- NOTE 16: CONDENSED CONSOLIDATING agement, informationservices, andfinancefunctions. andIowa,certaincorporateman- Alabama, Wisconsin The Parent iscomprisedofmanufacturingoperations in subsidiaries bydividendorloan. restrictions ontheParent’s abilitytoobtainfundsfrom its to investors.Furthermore, there are nosignificantlegal sures regarding theSubsidiaryGuarantorsare notmaterial we believeseparatefinancialstatementsandotherdisclo- Guarantor isfullandunconditional,jointseveral, because theguaranteebyeach100%ownedSubsidiary statements oftheSubsidiaryGuarantorsare notpresented jointventure). Separatefinancial(our 45.3%ownedyarn III-Confecção deVestu_rio, Lda.;andFrontier Yarns, LLC Russco Holdings,Ltd.;Picos-Comércio Têxtil,Lda.;Picos FINANCIAL INFORMATION Holdings (Ireland) Limited; 33/31/06 2:12:13 PM / 3 1 / 0 6

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6 0 / 1 3 / 33/31/06 2:12:13 PM Parent Guarantors Subsidiaries Eliminations Consolidated Eliminations Subsidiaries Guarantors Parent Parent Guarantors Subsidiaries Eliminations Consolidated Eliminations Subsidiaries Guarantors Parent Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form (In thousands) Net sales Cost of goods sold profit interests Gross administrative expenses general and Selling, Other – net income Operating Interest expense (income) – net Non-controlling 1,820 1,820 – 170,010 – – Income (loss) before income taxes and equity in earnings of consolidated subsidiaries Provision (benefit) for income taxes Equity in earnings of consolidated subsidiaries, 98,823 1,053,925 net of income taxes (loss) income Net $1,308,997 255,072 81,231 (150,914) 42,237 216,045 (67,863) $281,390 65,345 (48,611) 152,925 117,998 161,626 (43,628) 646,611 $723,091 76,480 – (151,476) 37,566 54,746 (875,544) 36,016 $(878,873) 1,550 (3,329) (136,733) 311,070 34,430 $ $1,434,605 (3,329) 1,041,037 (3,323) 2,834 (3,329) 393,568 $106,880 84,372 – – 43,399 $ 33,182 – – 39,153 $(140,062) (1,874) – 34,430 $ 8,969 136,733 – Russell Corporation OF INCOME STATEMENTS CONDENSED CONSOLIDATED 2005 For the year ended December 31, Subsidiary Non-Guarantor CONDENSED CONSOLIDATED BALANCE SHEETS BALANCE CONDENSED CONSOLIDATED 2005 December 31, (In thousands) ASSETS Current assets: Cash net accounts receivables, Trade Inventories and other current assets Prepaid expenses debt current assets Total net plant and equipment, Property, Investment in subsidiaries Intercompany balances Other assets 22,895 Short-term (1,439) 2,689 LIABILITIES AND STOCKHOLDERS’ EQUITY – 2,689 Current liabilities: 7,119 – – 191,310 201,991 and accrued expenses Accounts payable Subsidiary interests Non-Guarantor 290,579 of long-term debt Current maturities liabilities current 1,413,429 Total $1,214 313,249 30,191 less current maturities 1,668 Long-term debt, 43,736 $ Deferred liabilities 152,719 (784,104) 57,760 15,242 $ 11,024 Non-controlling – 15,242 277,894 – – Stockholders’ equity $ (13,761) 94,220 43,079 122 (2,211) 797,801 91,979 $ 30,554 64,325 $1,198,209 167,937 40,736 $ 392,257 230,527 – $ – 29,471 $1,279,955 (13,697) 52 $ 173,947 – (15,972) – (15,972) 42,792 $ $263,189 152,719 (1,413,603) $ 220,562 $(1,430,042) 440,318 – 315,721 – 14,677 743,108 – $1,311,311 49,153 43,079 588,838 6,540 – 2,067 (467) 1,205,546 31,330 $1,198,209 45,492 – $1,279,955 252,482 208,524 (15,972) – 2,633 $263,189 – $(1,430,042) (1,414,070) 225,318 398,797 $1,311,311 2,067 588,838 – 83,116 Russell Corporation 0 6

d d n i . c p w _ N I F _ 60 S Russell Corporation U RRUS_FIN_wpc.indd 60 RRUS_FIN_wpc.indd 61 U S _ F I N _ te 4) – (46) 5,057 29,816 (226) 12,976 (708) $42,792 (5,271) – – (12,839) – – – $– – – 4,676 – – 21,668 9,036 $30,704 – (226) – 18,437 – – $11,024 5,594 (12,839) 5,430 – – – – $ 1,064 (16,572) – 2,996 – – 2,554 (1,490) (38,490) – 1,031 (3,733) – 5,057 – (42,471) (46) – (708) – (5,271) – – – – – Cash balanceatendofyear 21,248 115 Cash balanceatbeginningofyear 111,333 Net increase(decrease)incash $47,016 (2,371) Non-Guarantor Effect ofexchangeratechangesoncash (22,181) 135,770 22,170 Net cash(usedin)providedbyfinancingactivities (252,273) Subsidiary Cost ofcommonstockfortreasury 2,001 $– Treasury stockre-issued (1,039) (250,021) (3,214) Dividends oncommonstock 102,450 Borrowings onshort-termdebt Borrowings (Payments)oncreditfacility–net 880 $(85,499) 114,251 Financing Activities 4,441 (17,076) Net cash(usedin)providedbyinvestingactivities Other $257,703 Proceeds fromsaleofproperty, plantandequipment Cash paidforacquisitions, jointventuresandother $(125,188) Investment inandadvancestosubsidiaries Purchase ofproperty, plantandequipment Investing Activities Net cashprovidedby(usedin)operatingactivities Operating Activities (In thousands) For theyearendedDecember31, 2005 CONDENSED CONSOLIDATED STATEMENTS OFCASH FLOWS Russell Corporation w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

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6 0 / 1 3 / 33/31/06 2:12:14 PM Parent Guarantors Subsidiaries Eliminations Consolidated Eliminations Subsidiaries Guarantors Parent Parent Guarantors Subsidiaries Eliminations Consolidated Eliminations Subsidiaries Guarantors Parent Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form (In thousands) Net sales Cost of goods sold profit Gross administrative expenses general and Selling, Other – net income Operating Interest expense (income) – net Non-controlling interests 176,058 Income (loss) before income taxes and equity in earnings of consolidated subsidiaries Provision (benefit) for income taxes Equity in earnings of consolidated subsidiaries, 61,536 net of income taxes 801,524 Net income (loss) $1,073,513 271,989 Subsidiary 28,361 32,711 (62,592) (32,210) 132,993 174,552 $ Non-Guarantor 41,559 2,021 (24,914) 128,141 113,101 111,737 1,364 $387,951 333,924 54,027 – – (133,078) 42,076 23,595 $(337,764) 22,477 (334,069) 1,118 (3,695) 270,305 85,614 $1,298,252 – (3,695) (2,279) $ 2,829 934,372 47,936 363,880 (3,695) 100,791 – – $ 69,661 – 67,927 – 2,021 – $ 19,648 30,843 (7,216) 19,991 $ (89,309) – $ 47,936 (85,614) – Russell Corporation OF INCOME STATEMENTS CONDENSED CONSOLIDATED 2005 For the year ended January 1, CONDENSED CONSOLIDATED BALANCE SHEETS BALANCE CONDENSED CONSOLIDATED 2005 January 1, (In thousands) ASSETS Current assets: Cash net accounts receivables, Trade Inventories and other current assets Prepaid expenses debt current assets Total net and equipment, plant, Property, Investment in subsidiaries Intercompany balances Other assets 32,796 Short-term (2,177) 18,190 LIABILITIES AND STOCKHOLDERS’ EQUITY 18,190 – Current liabilities: 7,334 209,928 – – 186,294 Subsidiary Accounts payable and accrued expenses $ 2,554 Non-Guarantor 272,396 of long-term debt Current maturities 1,243,104 liabilities current Total 305,569 36,372 59,629 less current maturities Long-term debt, $ 5,594 578 (679,171) Deferred liabilities 59,678 $ 153,446 Non-controlling interests (31,683) 258,900 (16,870) Stockholders’ equity 76,590 21,668 $ 195 $ 40,405 701,970 79,627 $ 70,602 – 212,063 $1,150,032 161,502 5,016 23,838 $ 49,178 365,083 $1,168,913 (22,799) 29,816 $ (48,553) – 171,476 $ (48,553) – – $227,016 158,462 $ 194,476 – (1,243,299) $(1,291,852) 677,418 411,701 322,890 – 11,723 – $1,254,109 14,096 49,540 40,405 562,851 1,922 7,838 – 1,098,506 30,002 $1,150,032 – 69,290 – – $1,168,913 (48,553) – 253,801 144,793 – 5,095 $227,016 $(1,291,852) (1,243,299) 219,604 – 6,938 372,921 $1,254,109 562,851 – – 84,637 14,096 Russell Corporation 2 6

d d n i . c p w _ N I F _ 62 S Russell Corporation U RRUS_FIN_wpc.indd 62 RRUS_FIN_wpc.indd 63 U S _ F I N _ e ficm ae 5,4 – (902 – (59,042) $43,039 – 20,939 $(59,042) 29,663 63,978 $ 325 93,641 – – – $58,717 – – 842,127 344,136 $1,186,263 2,127 $43,039 246,912 59,042 (1,188) 131 $(53,952) (52,764) 2,583 2,452 49,434 – 29,473 $149,984 120,511 79,907 (28,244) 108,151 (30,622) 38,733 $155,006 Non-Guarantor 116,273 11,151 24,494 57,776 20,116 Subsidiary (46,625) $935,225 277,118 3,839 (80) (592) 1,841 658,107 $29,816 Net income(loss) 7,859 netofincometaxes 58,884 1,769 (5,216) – Equity inearningsofconsolidatedsubsidiaries, 99,542 – Provision (benefit)forincometaxes $– 9,692 – inearningsofconsolidatedsubsidiaries – – 163,534 – – Income (loss)beforeincometaxesandequity – – 3,862 Interest expense(income)–net $21,668 – Operating – income – 9,947 (592) Other-net 102,433 – – 7,859 Selling, generalandadministrativeexpenses – – $ 5,594 15,840 Gross 91,307 profit 8,302 Cost ofgoodssold 9,692 (10,246) 2,554 $ Net sales – – – – 414 (In thousands) – – – – 2,140 – – 3,For theyearendedJanuary 2004 (178,398) – (158,370) 13,697 CONDENSED CONSOLIDATED – 3,839 STATEMENTS OFINCOME – – (1,390) (80) Russell Corporation (35,494) (100,058) (5,216) 91,240 – 1,769 – – Cash balanceatendofyear – Cash balanceatbeginningofyear – – – Increase incashfromconsolidatingFrontier – Yarns 78,418 Net increase(decrease)incash – 228 Effect ofexchangeratechangesoncash Net cashprovidedbyfinancingactivities 99,509 Non-Guarantor $81,289 92,697 (21,319) Cost ofcommonstockfortreasury 91,527 Subsidiary Treasury stockre-issued Dividends oncommonstock 2,396 – 2,354 $– 91,071 Debt issuanceandamendmentcostspaid (1,898) (348,343) Borrowings onshort-termdebt Borrowings (payments)oncreditfacility–net Financing Activities $(76,181) (190,580) 11,115 (12,277) Net cash(usedin)providedbyinvestingactivities (158,370) Other $(101,773) Proceeds fromsaleofproperty, plantandequipment Cash paidforacquisitions, jointventuresandother Investment inandadvancestosubsidiaries $259,243 Purchase ofproperty, plantandequipment (1,188) Investing Activities Net cashprovidedby(usedin)operatingactivities Operating Activities (In thousands) 1,For theyearendedJanuary 2005 CONDENSED CONSOLIDATED STATEMENTS OFCASH FLOWS Russell Corporation 3,583 w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

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6 0 / 1 3 / 33/31/06 2:12:15 PM Parent Guarantors Subsidiaries Eliminations Consolidated Eliminations Subsidiaries Guarantors Parent Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS OF CASH STATEMENTS CONDENSED CONSOLIDATED 2004 For the year ended January 3, (In thousands) Operating Activities activities Net cash provided by operating Investing Activities plant and equipment Purchase of property, Investment in and advances to subsidiaries joint ventures and other Cash paid for acquisitions, plant and equipment Proceeds from sale of property, $ 45,055 Other Net cash used in investing activities (86,691) (24,385) $11,883 Financing Activities 8,203 Borrowings on credit facility – net 702 Payments on short-term debt (8,623) Debt issuance and amendment costs paid $ 1,018 6,465 – Dividends on common stock (1,987) stock re-issued Treasury Subsidiary Cost of common stock for treasury (101,493) (5,633) Non-Guarantor $ – Net cash provided by (used in) financing activities Effect of exchange rate changes on cash 1,285 97 – Net (decrease) increase in cash (4,145) 7,355 (468) Cash balance at beginning of year $ 57,956 – 5,897 Cash balance at end of year – – – (4,251) – (5,177) 678 (1,457) – – (38,641) 5,644 – – – 14,765 (86,691) – (50,541) 50,955 – – – – – – $ 414 (3,582) – (109,889) – 7,738 (3,582) 8,102 $15,840 – – – – – – 1,115 (5,700) – 9,562 – $ 3,862 – – 7,355 – (468) 2,315 – – (3,582) $ – – – (5,177) (1,457) (48,503) $ 20,116 1,115 678 68,619 5,644 Russell Corporation 4 6

d d n i . c p w _ N I F _ 64 S Russell Corporation U RRUS_FIN_wpc.indd 64 RRUS_FIN_wpc.indd 65 U S _ F I N _ a reasonable basisforouropinion. statement presentation. We believethatourauditsprovide by management,aswellevaluatingtheoverallfinancial accounting principlesusedandsignificantestimatesmade financial statements.Anauditalsoincludesassessingthe evidence supportingtheamountsanddisclosures inthe statement. Anauditincludesexamining,onatestbasis, whether thefinancialstatementsare free of materialmis- perform theaudittoobtainreasonable assuranceabout (United States).Thosestandards require thatweplanand dards ofthePublicCompanyAccountingOversightBoard We conductedourauditsinaccordance withthestan- based onouraudits. an opiniononthesefinancialstatementsandschedule Company’s management.Ourresponsibility istoexpress statements andscheduleare theresponsibility ofthe schedule listedintheIndexatItem15(a).Thesefinancial 31, 2005.Ourauditsalsoincludedthefinancialstatement each ofthethree fiscalyearsintheperiodendedDecember ments ofincome,stockholders’equity, andcashflowsfor and January1,2005,therelated consolidatedstate- sheets ofRussellCorporationasDecember31,2005 We haveauditedtheaccompanyingconsolidatedbalance Russell Corporation The Board ofDirectors andStockholders PUBLIC ACCOUNTINGFIRM REPORT OFINDEPENDENTREGISTERED w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

6 5 March 10,2006 Atlanta, Georgia &Young/s/ Ernst LLP expressed anunqualifiedopinionthereon. Commission andourreport datedMarch 10,2006 Committee ofSponsoringOrganizationstheTreadway Control-Integrated Frameworkissuedbythein Internal of December31,2005,basedoncriteriaestablished Corporation’s control overfinancialreporting internal as Board (UnitedStates),theeffectiveness ofRussell dards ofthePublicCompanyAccountingOversight We alsohaveaudited,inaccordance withthestan- of Variable InterestEntities the provisions ofFASB Interpretation No.46, began consolidatingFrontier Yarns LLCinaccordance with As describedinNote1,effective April4,2004theCompany respects theinformationsetforththerein. statements takenasawhole,presents fairlyinallmaterial schedule, whenconsidered inrelation tothebasicfinancial ciples. Also,inouropinion,therelated financialstatement conformity withU.S.generallyacceptedaccountingprin- fiscal yearsintheperiodendedDecember31,2005, of itsoperationsandcashflowsforeachthethree 2005 andJanuary1,2005,theconsolidatedresults financial positionofRussellCorporationatDecember31, present fairly, inallmaterialrespects, theconsolidated In ouropinion,thefinancialstatementsreferred toabove . Consolidation 33/31/06 2:12:15 PM / 3 1 / 0 6

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6 0 / 1 3 / 33/31/06 2:12:16 PM Our management is responsible for Our management is responsible establishing and maintaining adequate internalestablishing and maintaining adequate over control as that term is defined in Exchange Act financial reporting, internal over finan- control Rule 13a-15(f). The Company’s reasonable designed to provide is a process cial reporting and of financial reporting the reliability assurance regarding of financial statements for externalthe preparation pur- accounting principles generally with poses in accordance All internalaccepted in the United States of America. control limi- have inherent systems, no matter how well designed, limitations, internaltations. Because of its inherent control or detect misstate- may not prevent over financial reporting of any evaluation of effectiveness ments. Also, projections may subject to the risks that controls periods are to future in conditions, or become inadequate because of changes of compliance with the policies or proce- that the degree may deteriorate. dures of the Our management assessed the effectiveness as internal over financial reporting control Company’s assessment, the of December 31, 2005. In making this InternalCompany used the criteria set forth in — Control Integrated Framework issued by the Committee of Commission Sponsoring Organizations of the Treadway (COSO). Based on this assessment, the Company’s management believes that, as of December 31, 2005, internal over financial reporting control the Company’s is effective. of the assessment of the effectiveness Management’s as of internal over financial reporting control Company’s December 31, 2005, has been audited by the Company’s public accounting firm, and that independent registered follows this report. attestation report firm’s Management’s Report on Internal Control Over Internal Control Over Report on Management’s Financial Reporting. ACCOUNTANTS ON ACCOUNTING AND ON ACCOUNTING ACCOUNTANTS FINANCIAL DISCLOSURE Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form Evaluation of Disclosure Controls and Procedures. Evaluation of Disclosure Controls that are and procedures controls maintain disclosure We to dis- required that information we are designed to ensure we file under the Securities Exchange close in the reports pro- is recorded, Act of 1934, as amended (Exchange Act), within the time periods cessed, summarized and reported that rules and forms, and to ensure specified in the SEC’s to our such information is accumulated and communicated Chief Executive management, including our Chairman and as Chief Financial Officer and Senior Vice President, Officer disclosure. to allow timely decisions regarding appropriate, by period covered As of December 31, 2005, the end of the we evaluated, under the supervision and with the this report, our Chairman participation of our management, including Chief and Senior Vice President, and Chief Executive Officer controls of our disclosure the effectiveness Financial Officer, Based on that evaluation, our Chairman and procedures. Chief and Senior Vice President, and Chief Executive Officer concluded that, as of December 31, 2005, Financial Officer effective. are and procedures controls our disclosure None. AND PROCEDURES CONTROLS ITEM 9A. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH CHANGES IN AND ITEM 9. 6 6

d d n i . c p w _ N I F _ 66 S Russell Corporation U RRUS_FIN_wpc.indd 66 RRUS_FIN_wpc.indd 67 U S _ F I N _ actions are recorded asnecessarytopermitpreparation of the company;(2)provide reasonable assurancethattrans- reflect thetransactionsanddispositionsofassets of records that,inreasonable detail,accurately and fairly policies andprocedures that(1)pertain tothemaintenance ny’s control overfinancial reporting internal includesthose with generallyacceptedaccountingprinciples.Acompa- purposesinaccordance of financialstatementsforexternal ing thereliability offinancialreporting andthepreparation process designedtoprovide reasonable assurance regard- A company’s control overfinancialreporting internal isa that ourauditprovides areasonable basisforouropinion. we considered necessaryinthecircumstances. We believe control, andperformingsuchotherproceduresinternal as and evaluatingthedesignoperatingeffectiveness of reporting, evaluatingmanagement’s assessment,testing control overfinancial obtaining anunderstandingofinternal was maintainedinallmaterialrespects. Ourauditincluded controlwhether effective overfinancialreporting internal perform theaudittoobtainreasonable assuranceabout (United States).Thosestandards require thatweplanand of thePublicCompanyAccountingOversightBoard We conductedourauditinaccordance withthestandards reporting basedonouraudit. tiveness ofthecompany’s control overfinancial internal management’s assessmentandanopiniononthe effec- reporting. Ourresponsibility istoexpress anopinionon controlment oftheeffectiveness overfinancial ofinternal control over financialreportinginternal andforitsassess- management isresponsible for maintainingeffective Commission (theCOSOcriteria).RussellCorporation’s Committee ofSponsoringOrganizationstheTreadway Control—Integrated Frameworkissuedbythein Internal as ofDecember31,2005,basedoncriteriaestablished controlmaintained effective overfinancialreporting internal Control OverFinancialReporting,thatRussellCorporation in theaccompanyingManagement’s ReportonInternal We haveauditedmanagement’s assessment,included Russell Corporation The Board ofDirectors andStockholders FINANCIAL REPORTING ACCOUNTING FIRMONINTERNALCONTROLOVER REPORT OFINDEPENDENTREGISTEREDPUBLIC w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

6 7 March 10,2006 Atlanta, Georgia &Young/s/ Ernst LLP fied opinionthereon. and ourreport datedMarch 10,2006expressed anunquali- the periodendedDecember31,2005ofRussellCorporation holders’ equity, andcashflowsforeachofthethree yearsin and therelated consolidatedstatementsofincome,stock- Corporation asofDecember31,2005andJanuary1,2005, (United States),theconsolidatedbalancesheetsofRussell of thePublicCompanyAccountingOversightBoard We alsohaveaudited,inaccordance withthestandards of December31,2005,basedontheCOSOcriteria. respects, control effective overfinancialreporting internal as our opinion,RussellCorporationmaintained,inallmaterial all materialrespects, basedonthe COSOcriteria.Also,in cial reporting asofDecember31,2005,isfairlystated,in Corporation maintainedeffectivecontrol overfinan- internal In ouropinion,management’s assessmentthatRussell dures maydeteriorate. that thedegree ofcompliancewiththepoliciesorproce- become inadequatebecauseofchangesinconditions,or to future periodsare subjecttotheriskthatcontrols may ments. Also,projections ofanyevaluationeffectiveness financial reporting maynotprevent ordetectmisstate- controlBecause ofitsinherent over limitations, internal a materialeffect onthefinancialstatements. use, ordispositionofthecompany’s assetsthatcouldhave prevention ortimelydetectionofunauthorizedacquisition, pany; and(3)provide reasonable assuranceregarding authorizations ofmanagementanddirectors ofthecom- of thecompanyare beingmadeonlyinaccordance with accounting principles,andthatreceipts andexpenditures financial statementsinaccordance withgenerallyaccepted 33/31/06 2:12:16 PM / 3 1 / 0 6

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6 0 / 1 3 / 33/31/06 2:12:17 PM Mr. Barea was employed by Russell in 2003, as Senior Vice was employed by Russell in Barea Mr. Activewear. and Chief Executive Officer, President/President Sara was a consultant to Barea Mr. Prior to joining Russell, 2003. Prior to that 2001 through Lee Corporation from knit products Sara Lee Corporation’s time, he was with years in various positions, 20 division for approximately Lee Corporation of Sara Vice as President most recently of their Latin American Branded Officer and Chief Executive Unit. Apparel Vice Flowers joined Russell in 2003, as Senior President, Mr. Prior to joining Russell, he was a Global Human Resources. Corporation, a manufacturer of Merisant Vice President for three products, and marketer of tabletop sweetener senior level human years and spent eight years in various most recently Company, positions at Monsanto resources and Vice President Strategic Staffing, as Vice President, for the Agricultural Sector. Human Resources was employed by Russell as Senior Vice Hoffman Mr. in 1999, and General Counsel and Secretary President, as Senior Vice President, assumed additional responsibility to joining Russell, Corporate Development in 2000. Prior for Counsel and Secretary he was Vice President-General 1996 to 1999. Prior to that, he OSI Industries, Inc., from General Counsel and Assistant was Vice President-Deputy for Sara Lee Corporation. Secretary and as Senior Vice Koney joined Russell President Mr. in 2004. Prior to that time, he was Chief Financial Officer publicly held com- employed by Goodrich Corporation, a pany that is a supplier of systems and services to the aero- space and defense industries, for 18 years, serving most and Chief Accounting Controller as Vice President, recently 1998 to 2004. Prior to joining Goodrich, from Officer Koney was manager of federal taxation with Picker Mr. International for four years and a senior tax accountant. Ms. Beck, a certified public accountant, was employed in June Corporate Controller by Russell as Vice President, 2005. Prior to joining Russell, she served as Executive Vice for HealthTronics Accounting Officer and Chief President Inc.), a pub- Surgical Services, Inc. (now HealthTronics, non-invasive surgery for licly held company that provides conditions and manufactures, and orthopedic urologic 2001 to markets and distributes medical equipment, from in 1997, serving as its Chief 2005. She joined HealthTronics until 2001. Financial Officer President and Chief Executive Activewear Officer, Human Resources Corporate Development, General Counsel and Secretary Chief Financial Officer Corporate Controller Athletic Russell Officer, and Chief Executive Officer, Brooks Sports Treasurer and Development, During the fiscal quarter During the fiscal quarter OF THE REGISTRANT “Election of Directors” from the Proxy Statement is Statement is the Proxy from “Election of Directors” by reference. incorporated herein Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form ended December 31, 2005, there were no changes in our were 2005, there ended December 31, that have materially internal over financial reporting control our likely to materially affect, reasonably or are affected, financial reporting. internal over control Additional executive officers who are not directors are as as are not directors who are Additional executive officers follows: Name Julio A. Barea 58 Age Officer 2003 Since Senior Vice President/ Position Identification of Directors and Identification of Directors Executive Officers (a) Flowers Edsel W. Hoffman Floyd G. 50 2003 63 Senior Vice President, Jr. Koney, Robert D. 1999 Vice President, Senior Beck W. Victoria 49 2004 Johnston Calvin S. Vice President and Senior 51 Weber James M. 2005 44 Vice President and 2005 Executive President/Chief Vice 46 Marietta Edmunds Zakas 47 2006 2005 Vice President/President Business Vice President, Not applicable. III PART DIRECTORS AND EXECUTIVE OFFICERS ITEM 10. ITEM 9B. OTHER INFORMATION OTHER ITEM 9B. Changes in Internal Control. Changes in Internal 8 6

d d n i . c p w _ N I F _ 68 S Russell Corporation U RRUS_FIN_wpc.indd 68 RRUS_FIN_wpc.indd 69 U S _ F I N _ Chairman andChiefExecutiveOfficer from 1993-1995. Director ofInvestorRelationsandExecutiveAssistanttothe to 2000,CorporateTreasurer from 1995to1996,and of InvestorRelationsandCorporateSecretary, from 1996 where President, sheservedasCorporateVice Director joining Russell,shespentsevenyearswithEquifaxInc., Development andTreasurer, inSeptember2005. Priorto President,period oftime,andwasappointedVice Business Treasurer afterhavingconsultedfortheCompanya PresidentMs. ZakasjoinedRussellin2002asVice and Inc. Inc. andO’BrienInternational, variety ofexecutivepositionsforTheColemanCompany, action sportscompany. Priortothattime,heservedina Chief ExecutiveOfficer ofSimsSports,Inc.,aleading 2001. Beginningin1996,Mr. Weber wasChairmanand Seattle InvestmentBankingoffice from May1999toApril as ManagingDirector ofU.S.Bancorp PiperJaffray inits December 2004.PriortojoiningBrooks, Mr. Weber served and accessories,whichwasacquired byRussellin Inc., adesignerandmarketerofathleticfootwear, apparel President andChiefExecutiveOfficer ofBrooks Sports, in February2006.HehasservedsinceApril2001as Mr. Weber President waselectedasaVice ofRussell (a divisionofUnilever)from 1986to1996. sales andmarketingpositionsforHeleneCurtisIndustries Benetton Sportsystems)from 1996-1998,andinvarious MarketingforRollerblade,Inc.(adivisionof International of BrunswickCorporation)from 1998to2000,Director of General ManagerforZebcoSportsEurope Ltd.(adivision apparel President andequipmentindustryasVice and Ltd. PriortojoiningRussell,heworkedintheathletic as President andManagingDirector forRussellEurope, ation withRussellbeganin2000,whenhewasemployed Executive Officer, RussellAthleticGroup, in2005.Hisaffili- Mr. President/Chief JohnstonwasappointedVice w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

6 9 (e) Proxy Statementisincorporatedherein byreference. (d) “ConductGuidelinesandCodeofConduct”from the herein byreference. Compliance” from theProxy Statementisincorporated (c) “Section16(a)BeneficialOwnershipReporting the Proxy Statementisincorporatedherein byreference. (b) “CommitteesoftheBoard ofDirectors; Meetings”from Directors meetingonFebruary15,2006. were electedorre-elected totheirpositionsattheBoard of All executiveofficers andallotherofficers oftheCompany the Company’s Board ofDirectors. by whichsecurityholdersmayrecommend nomineesto There havebeennomaterialchangestotheprocedures 33/31/06 2:12:17 PM / 3 1 / 0 6

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6 0 / 1 3 / 33/31/06 2:12:18 PM (c) (EXCLUDING SECURITIES NUMBER OF SECURITIES FUTURE ISSUANCE UNDER REMAINING AVAILABLE FOR REMAINING AVAILABLE REFLECTED IN COLUMN (a)) EQUITY COMPENSATION PLANS EQUITY COMPENSATION

Plan permit grants of several forms of equity securities in Plan, Executive Incentive Plan and the 2000 Non-Employee Executive Incentive Plan, ee or consultant of the Company. Approval of the 2000 Option ee or consultant of the Company. a variety of forms, including: (a) incentive stock options; (b) non- including: a variety of forms, 2000 Option Plan was adopted by the Board of Directors as an

Annual Report on Form 10-K. Annual Report on Form 10-K. (b) ng stock appreciation rights; (h) tandem stock appreciation rights; EXERCISE PRICE OF WEIGHTED-AVERAGE WARRANTS AND WARRANTS RIGHTS OUTSTANDING OPTIONS, OUTSTANDING

(a) EXERCISE OF wards, and develop the terms of such awards, to any employ and develop the terms of such awards, wards, TO BE ISSUED UPON NUMBER OF SECURITIES WARRANTS AND WARRANTS RIGHTS OUTSTANDING OPTIONS, OUTSTANDING STOCKHOLDER MATTERS Information concerning security ownership of management from the Proxy Statement under the caption “Security Statement under the caption “Security Information concerning the Proxy security ownership of management from by reference. is incorporated herein and Directors” Ownership of Executive Officers There are no arrangements known to the registrant the operation of which may at a subsequent date result in a change the operation of which may at a subsequent date result no arrangements known to the registrant are There of the registrant. in control “Principal Stockholders” from the Proxy Statement is incorporated herein by reference. by reference. Statement is incorporated herein the Proxy “Principal Stockholders” from Directors’ Compensation Plan, respectively. Both the Executive Incentive Plan and the 2000 Non-Employee Directors’ Compensation respectively. Directors’ Compensation Plan, Item 8 of this in Part II, Statements” “Notes to Consolidated Financial See Note 7 of warrants or rights. addition to options, incentive compensation plan that gives us broad discretion to grant a Plan by security holders was not required under applicable regulations. The 2000 Option Plan permits the issuance of awards in Plan by security holders was not required under applicable regulations. qualified stock options; (c) reload stock options; (d) restricted shares; (e) bonus shares; (f) deferred shares; (g) freestandi (i) performance units; and (j) performance shares. Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form The information under the heading “Audit Fees and All Other Fees” from the Proxy Statement is incorporated herein Statement is incorporated herein the Proxy The information under the heading “Audit Fees and All Other Fees” from by reference. (2) These shares are reserved for issuance under the Russell Corporation 2000 Stock Option Plan (the “2000 Option Plan”). The “2000 Option Plan”). These shares are reserved for issuance under the Russell Corporation 2000 Stock Option Plan (the (2) TRANSACTIONS AND RELATED RELATIONSHIPS CERTAIN ITEM 13. Statement is incorporated the Proxy with Management and Others and Certain Business Relationships” from “Transactions by reference. herein FEES AND SERVICES ACCOUNTANT PRINCIPAL ITEM 14. (1) Of this number of shares, 472,256, 2,607,906 and 302,130 are reserved for issuance under the 2000 Employee Stock Purchase 472,256, Of this number of shares, (1) PLAN CATEGORY PLAN CATEGORY

(c) Under Equity Compensation Plans Securities Authorized for Issuance ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED AND RELATED BENEFICIAL OWNERS AND MANAGEMENT CERTAIN SECURITY OWNERSHIP OF ITEM 12. (a) (b) “Executive Compensation” from the Proxy Statement is incorporated herein by reference. “Management Development “Management Development by reference. Statement is incorporated herein the Proxy from “Executive Compensation” Cumulative Total and “Comparison of Five-Year Committee Report on Executive Compensation” and Compensation (9) to Item 402(a)(3) but pursuant to Instruction by reference, incorporated herein Statement are Return” the Proxy from 18 of the Securities SEC or subject to the liabilities of Section not be deemed to be filed with the of Regulation S-K shall Exchange Act of 1934. ITEM 11. EXECUTIVE COMPENSATION EXECUTIVE ITEM 11. TOTAL 2,849,352 $19.91 3,597,023 $19.91 PLANS EQUITY COMPENSATION APPROVED BY SECURITY HOLDERS PLANS EQUITY COMPENSATION APPROVED BY SECURITY HOLDERS NOT 2,849,352 TOTAL 2,303,094 546,258 $20.90 $15.74 3,382,292 (1) 214,731 (2) 0 7

d d n i . c p w _ N I F _ 70 S Russell Corporation U RRUS_FIN_wpc.indd 70 RRUS_FIN_wpc.indd 71 U S _ F I N _ I VlainadQaiyn cons 76 Valuation and Qualifying Accounts consolidated financialstatementsorthenotesthereto, orisnotapplicablerequired. All otherfinancialstatementsandschedulesnotlistedhavebeenomittedsincetherequired informationisincludedinthe II Number Description Schedule (2) FinancialStatementSchedule All financialstatementsoftheregistrant assetforthunderItem8ofthisReportonForm10-K (1) FinancialStatements (a) ListofDocumentsfiledaspartthisReport: ITEM 15. EXHIBITSANDFINANCIALSTATEMENT SCHEDULES IV PART w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries 4)Aedett ihsAreet ae so pi 7 05Exhibit4toForm10-Q filedon Amendment toRightsAgreement, dated asofApril27,2005 (4b) RightsAgreement datedasofSeptember15,1999betweenthe (4a) CertificateofDesignationSeriesAJuniorParticipatingPreferred (3c) Amendedand RestatedBy-LawsofRussellCorporation,aDelaware (3b) RestatedCertificateofIncorporationRussellCorporation,aDelaware (3a) Agr (2b) Agreement andPlanofMergerdatedasJanuary30,2004by Exhibits(numbered inaccordance withItem601ofRegulationS-K) (2a) (3) p c . i n d d

7 1 Company andSunTrust Bank,Atlanta, Georgia Stock ofRussellCorporation,effective April27,2005 corporation, effective April27,2005 corporation, effective April27,2005 schedule totheSecuritiesandExchangeCommissionuponrequest. schedules. Theregistrant acopyofanysuchexhibitor agrees tofurnish 16 andDecember23,2004,respectively. Filedwithoutexhibitsand along withAmendmentNos.1and2thereto, datedasofDecember named therein, RussellCorporationandADRAcquisitionCorporation, 2004, byandamongBrooks Sports,Inc.,thePrincipalShareholders Corporation, aDelaware corporation between RussellCorporation,anAlabamacorporation,and eement and Plan of Reorganization, datedasofDecember14, eement andPlanofReorganization, 1999 Form 8-KfiledonSeptember17, Exhibit 4.1toCurrent Reporton April 27,2005 Exhibit 3.3toForm8-Kdated April 27,2005 Exhibit 3.2toForm8-Kdated April 27,2005 Exhibit 3.1toForm8-Kdated Form 8-KfiledJanuary5,2005 Exhibit 2.1toCurrent Reporton January 3,2004 on Form10-Kforyearended Exhibit (2)toAnnualReport May 11,2005 Page Number 33/31/06 2:12:18 PM / 3 1 / 0 6

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6 0 / 1 3 / 33/31/06 2:12:18 PM Exhibit 4.1 to Quarterly Report on Exhibit 4.1 to Quarterly 15, 2002 Form 10-Q filed on May Report Exhibit (4c) to Annual ended on Form 10-K for year January 4, 2003 * Exhibit 4.2 to Quarterly Report on Form 10-Q filed May 15, 2002 * * on Form 10-K for year ended January 1, 2005 Exhibit (10f) to Annual Report on Form 10-K for year ended January 2, 1999 16, 2000 dated March on Form 10-K for year ended January 4, 2003 on Form 10-K for year ended January 1, 2004 on Form 10-K for year ended January 1, 2004 Statement No. 333-30238 1 Company’s $300,000,000 Revolving Credit Facility Credit $300,000,000 Revolving Company’s Revolving $300,000,000 to the Company’s 11, 2003 relating March Facility Credit $300,000,000 Revolving to the Company’s June 14, 2004 relating Facility Credit Senior Notes due 2010 Senior Notes due 2010 9.25% Company’s Senior Notes due 2010 Compensation Plan Stock Option and Deferred (4d) dated as of Agreement Amendment No. 1 to Loan and Security (4e) dated as of No. 2 to Loan and Security Agreement Amendment (4f) 9.25% to the Company’s dated as of April 18, 2002 relating Indenture (4g) to the and Subsidiary Guarantee relating First Supplemental Indenture (4h) 9.25% to the Company’s relating Supplemental Indenture Second (4i) 31, 2005 as of January effective Rights Agreement Registration (10a) Stock Grant, Non-Employee Directors’ Russell Corporation 1997 Exhibit (4e) to Annual Report (10b) Executive Incentive Plan(10c) Russell Corporation Amended and Restated Flexible Deferral Plan(10d) (10d) to Annual Report Exhibit First Amendment to the Russell Corporation Flexible Deferral Plan(10e) Report Exhibit (10d) to Annual Plan Second Amendment to the Russell Corporation Flexible Deferral Exhibit (10e) to Annual Report (10f)(10g) Amendment to the Russell Corporation Flexible Deferral Plan Third Statement Appendix B to Proxy Russell Corporation 2000 Stock Option Plan * Exhibit 4(k) to Registration (4c) to the dated as of April 18, 2002 relating Loan and Security Agreement Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form 2 7

d d n i . c p w _ N I F _ 72 S Russell Corporation U RRUS_FIN_wpc.indd 72 RRUS_FIN_wpc.indd 73 U S _ F I N _ w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries 1t Russell CorporationAmendedandRestatedSupplementalRetirement (10t) SupplyAgreement datedasof December 28,2001byandbetweenthe (10s) SecondAmendmenttotheRussellCorporationSupplemental Executive (10r) FirstAmendmenttotheRussell CorporationSupplementalExecutive (10q) RussellCorporationAmendedandRestatedSupplementalExecutive (10p) AmendedandRestatedEmployment Agreement datedasofNovember (10o) AmendedandRestatedEmploymentAgreement, datedandeffective (10n) AmendedandRestatedExecutiveDeferred Compensationand (10m) SecondAmendmenttotheRussellCorporation2000Non-Employee (10l) FirstAmendmenttotheRussellCorporation2000 Non-Employee Exhibit4(m)toRegistration (10k) RussellCorporation2000Non-EmployeeDirectors’ CompensationPlan Exhibit4(k)toRegistration (10j) AmendmentNo.1totheRussellCorporationEmployeeStock (10i) RussellCorporationEmployeeStockPurchase Plan (10h) p c . i n d d

7 3 Benefit PlandatedJanuary1, 2002 Company andFrontier Yarns, LLC andFrontier SpinningMills,Inc. Retirement Plan Retirement Plan Retirement PlandatedJanuary1,2002 20, 2002byandbetweentheCompanyJonathanR.Letzler October 18,2005,betweenRussellCorporationandJohnF. Ward John F. Ward Buyout PlandatedApril1,2001,byandbetweentheCompany Directors’ CompensationPlandatedFebruary10,2004 Directors’ CompensationPlandatedDecember11,2002 Purchase Plan 2 January 4,2003 on Form10-Kforyearended Exhibit (10o)toAnnualReport January 1,2004 on Form10-Kforyearended Exhibit (10r)toAnnualReport 2004 on Form10-QfiledAugust12, Exhibit (10a)toQuarterlyReport January 4,2003 on Form10-Kforyearended Exhibit (10m)toAnnualReport January 4,2003 on Form10-Kforyearended Exhibit (10l)toAnnualReport October 18,2005 Exhibit 10.1toForm8-Kdated December 30,2000 on Form10-Kforyearended Exhibit (10n)toAnnualReport January 3,2004 on Form10-Kforyearended Exhibit (10j)toAnnualReport January 4,2003 on Form10-Kforyearended Exhibit (10i)toAnnualReport December 29,2001 on Form10-Kforyearended Exhibit (10i)toAnnualReport December 29,2001 on Form10-Kforyearended Exhibit (10p)toAnnualReport Statement No.333-55340 Statement No.333-30236 33/31/06 2:12:19 PM / 3 1 / 0 6

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6 0 / 1 3 / 33/31/06 2:12:19 PM Exhibit (10q) to Annual Report Exhibit (10q) to Annual ended on Form 10-K for year January 4, 2003 Report Exhibit (10w) to Annual ended on Form 10-K for year January 1, 2004 Exhibit (10b) to Quarterly Report on Form 10-Q filed November 12, 2004 Exhibit (10r) to Annual Report on Form 10-K for year ended January 4, 2003 Exhibit (10a) to Quarterly Report on Form 10-Q filed November 14, 2005 * on Form 10-K for year ended January 3, 2004 * omitted material has been filed separately with he Securities and Exchange Commission (“SEC”). he Securities and Exchange Commission (“SEC”). request for confidential treatment approved by the SEC. The request for confidential treatment approved by the SEC. the Company and Floyd G. Hoffman the Company and Floyd A. Barea the Company and Julio Jr. Company and Robert D. Koney, Jr. and Robert D. Koney, Hoffman Corporation between Jonathon R. Letzler and Russell Corporation and Calvin S. Johnston Accounting Firm The omitted material has been filed separately with the SEC. The omitted material has been filed separately with the SEC. the SEC. (10v) October 24, 2003 by and between dated as of Employment Agreement, (10w) 25, 2004, between the dated as of August Employment Agreement, (10x) Floyd G. with Julio A. Barea, Agreement Form of Change of Control (10y) Release, dated November 10, 2005 and General Separation Agreement (10z) 4, 2005, between Russell dated March Employment Agreement, (10aa) with Calvin S. Johnston Agreement Change of Control (14) Code of Ethics(21) * (23) List of Subsidiaries(24) Public Independent Registered LLP, Consent of Ernst & Young (31a) Powers of Attorney(31b) Rule 13a-14(a)/15d-14(a) CEO Certification(32) Rule 13a-14(a)/15d-14(a) CFO Certification Section 1350 Certifications Exhibit (14) to Annual Report * * * * * (10u) between dated as of January 17, 1999 by and Employment Agreement, Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form 2 Portions of the Supply Agreement have been omitted pursuant to a Portions of the Supply 2 *Filed electronically herewith. 1 Portions of the Loan and Security Agreement have been omitted pursuant to a request for confidential treatment approved by t Portions of the Loan and Security 1 4 7

d d n i . c p w _ N I F _ 74 S Russell Corporation U RRUS_FIN_wpc.indd 74 RRUS_FIN_wpc.indd 75 U S _ F I N _ onA ht* Director Director March15, 2006 Director E. Mary Director Moore Date Director As Attorney-in-Fact E. /s/Mary Moore * By: Date Director A majorityoftheBoardDirectors Director March15, 2006 ______Director March15, 2006 John A. White* Date Director John R. Thomas* Officer) (PrincipalAccounting (Principal Financial Officer) JaneRobertson* Mary March15, 2006 VicePresident, CorporateController Margaret M. Porter* ChiefFinancialOfficer C.V. Nalley, III* (DirectorandPrincipalExecutiveOfficer) Senior Vice Presidentand Rebecca C. Matthias* ChairmanandChiefExecutiveOfficer ChairmanandChiefExecutiveOfficer Arnold W.Donald* JohnF. Ward Ronald G. Bruno* Herschel M. Bloom* Victoria W.Beck /s/ Victoria W. Beck /s/John F. Ward Robert D. Koney, Jr. /s/RobertD. Koney, Jr. John F. Ward /s/JohnF. Ward on behalfoftheregistrant andinthecapacitiesondatesindicated. Pursuant totherequirements oftheSecuritiesExchangeAct1934,thisreport issignedbelowbythefollowingpersons Date: March 15,2006 RUSSELL this report tobesignedonitsbehalfbytheundersigned,thereunder dulyauthorized. Pursuant totherequirements ofSection13or15(d)theSecuritiesExchangeAct1934,registrant hasdulycaused SIGNATURES (Registrant) CORPORATION w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

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6 0 / 1 3 / 33/31/06 2:12:20 PM $ 6,184,221 $ 7,704,898 6,588,712 $ 11,394,941 5,768,678 $ 4,515,788 30,000 – 152,000 – – $20,249,000 2,793,000 25,000 245,000 – 556,000 $548,000 – – $9,903,000 (1) (2) (1) (2) (1) (2) (5) (3) (3) (3) (7) (3) (5) (3) (6) (3) (4) (3) (3) (9) (3) this liability e beginning of 2003 scussed in (7) – $ $28,964,000 $23,868,000 (8) of Period and Expenses Acquisitions Deductions of Period Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form (3) Represents cash paid and 100,000 treasury shares issued (4) Represents assets sold after write-down resulting in a net gain of $914,000 (5) Represents assets sold after write-downs the ultimate settlement of (6) Represents cash paid of $1,000,000 and an adjustment of $528,000 to reflect our best estimate of held for sale at th (7) Represents asset sold after write-downs and includes $1,072,000 of gains realized on the sale of assets This additional expense was partially offset by the adjustment noted at (6) along with the realized gains on asset sales di (8) (9) Represents assets sold after write-down resulting in a net gain of $431,000 Inventory losses including shipping and warehousing costs of certain licenses and contracts Termination Exit cost related to facilities Other 25,000 TOTALS 2004 3, YEAR ENDED JANUARY Asset impairment Employee terminations 245,000 Inventory losses including shipping and warehousing costs – of certain licenses and contracts Termination Exit cost related to facilities Other 37,000 TOTALS – – – 395,000 25,000 – – 556,000 542,000 528,000 $41,559,000 $23,868,000 640,000 93,000 – 1,298,000 542,000 $ $3,090,000 4,482,000 – – – – $ – $ 12,000 230,000 $14,325,000 $24,400,000 $43,929,000 678,000 542,000 $10,085,000 – – $8,903,000 – – 556,000 2,329,000 573,000 1,528,000 – 17,000 Employee terminations Employee of certain licenses and contracts Termination TOTALS 2005 1, YEAR ENDED JANUARY terminations Asset impairment Employee 152,000 30,000 – 3,211,000 2,793,000 – – $20,249,000 $10,085,000 3,241,000 – $ $3,211,000 152,000 – – $ – $ $10,346,000 9,537,000 $ – $548,000 2,763,000 Description 2005 YEAR ENDED DECEMBER 31, Asset impairment at Costs Reserve to Additions Beginning Charged $ 9,903,000 of Period – $ and Expenses Acquisitions – $ Deductions 9,355,000 $ End at of Period Balance (1) Uncollectible accounts written off, net of recoveries (1) Uncollectible accounts written off, (2) Discounts and returns allowed customers during the year Description 2005 31, YEAR ENDED DECEMBER Allowance for doubtful accounts $ 6,588,712 at Costs Balance $ to Additions 1,640,336 Beginning Charged – $ 2,044,827 $ End at Balance SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS AND QUALIFYING – VALUATION SCHEDULE II AND SUBSIDIARIES RUSSELL CORPORATION Reserve returns for discounts and TOTALS 2005 1, YEAR ENDED JANUARY for doubtful accounts Allowance Reserve for discounts and returns TOTALS 2004 3, YEAR ENDED JANUARY for doubtful accounts Allowance 11,394,941 Reserve for discounts and returns TOTALS 26,916,196 $ 5,768,678 4,515,788 $ 1,680,395 – 19,539,195 – $17,983,653 $ $18,050,384 30,606,239 $ 4,904,050 860,361 $28,556,532 $ 1,160,460 – – 11,820,210 $ $10,284,466 $438,658 $32,651,066 12,660,042 $13,880,824 464,842 $21,219,590 $13,889,119 $22,954,434 12,673,314 – $12,980,670 $ $13,520,403 $903,500 $17,983,653 $26,554,138 $10,284,466 6 7

d d n i . c p w _ N I F _ 76 S Russell Corporation U RRUS_FIN_wpc.indd 76 RRUS_FIN_wpc.indd 77 U S _ F I N _ March 10,2006 Atlanta, Georgia &Young/s/ Ernst LLP FormS-8RegistrationStatementNo.333-97129 FormS-8RegistrationStatementNo.333-55340 FormS-8RegistrationStatementNo.333-55338 FormS-8RegistrationStatementNo.333-30238 FormS-8RegistrationStatementNo.333-30236 FormS-8RegistrationStatementNo.333-89765 FormS-8RegistrationStatementNo.33-69679 FormS-3RegistrationStatementNo.333-116854 FormS-3RegistrationStatementNo.33-54361 FormS-3RegistrationStatementNo.33-47906 for theyearendedDecember31,2005. effectiveness control overfinancialreporting ofinternal ofRussellCorporation, includedinthisAnnualReport(Form10-K) Russell Corporationmanagement’s control assessmentoftheeffectiveness overfinancialreporting, ofinternal andthe reports datedMarch 10,2006,withrespect totheconsolidatedfinancialstatementsandscheduleofRussellCorporation, We consenttotheincorporationbyreference intheRegistrationStatementsofRussellCorporationlistedbelowour CONSENT OFINDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRM EXHIBIT (23) w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c . i n d d

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6 0 / 1 3 / 33/31/06 2:12:21 PM John F. Ward John F. Chairman and Chief Executive Officer Designed such internal control over financial reporting, or caused such internal control over financial reporting to or caused such internal over financial reporting Designed such internal over financial reporting, control control of financial report- the reliability assurance regarding reasonable provide be designed under our supervision, to financial statements for external of with generally accepted ing and the preparation purposes in accordance accounting principles; during that occurred internal over financial reporting control any change in the registrant’s Disclosed in this report that fourth fiscal quarter in the case of an annual report) fiscal quarter (the registrant’s most recent the registrant’s internal over financial control the registrant’s likely to materially affect, or is reasonably has materially affected, and reporting; in who have a significant role Any fraud, whether or not material, that involves management or other employees internal over financial reporting. control the registrant’s Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be to be and procedures controls or caused such disclosure and procedures, controls Designed such disclosure including its con- to the registrant, relating that material information designed under our supervision, to ensure us by others within those entities, particularly during the period in which solidated subsidiaries, is made known to is being prepared; this report in this report and presented and procedures controls disclosure of the registrant’s Evaluated the effectiveness period as of the end of the and procedures, controls of the disclosure our conclusions about the effectiveness based on such evaluation; and by this report covered of internalAll significant deficiencies and material weaknesses in the design or operation over financial control summarize and process, ability to record, the registrant’s likely to adversely affect reasonably which are reporting and financial information; report I have reviewed this annual report on Form 10-K of Russell Corporation; on this annual report I have reviewed fact or omit to state a material does not contain any untrue statement of a material Based on my knowledge, this report made, under which such statements were made, in light of the circumstances fact necessary to make the statements by this report; to the period covered not misleading with respect fairly present statements, and other financial information included in this report, Based on my knowledge, the financial the as of, and for, of operations and cash flows of the registrant the financial condition, results in all material respects in this report; periods presented and controls and maintaining disclosure for establishing responsible and I are other certifying officer(s) The registrant’s (as internal (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and over financial reporting control procedures have: and and 15d-15(f)) for the registrant defined in Exchange Act Rules 13a-15(f) evaluation of internal and I have disclosed, based on our most recent control other certifying officer(s) The registrant’s (or of directors board auditors and the audit committee of the registrant’s to the registrant’s over financial reporting, persons performing the equivalent functions): Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form I, John F. Ward, Chairman and Chief Executive Officer of Russell Corporation, certify that: of Russell Chief Executive Officer Chairman and Ward, I, John F. 1. 2. 3. 4. (a) (b) (c) (d) 5. (a) (b) 15, 2006 Date: March Ward /s/ John F. EXHIBIT (31a) OF CHIEF EXECUTIVE OFFICER RULE 13a-14(a)/15d-14(a) CERTIFICATION 8 7

d d n i . c p w _ N I F _ 78 S Russell Corporation U RRUS_FIN_wpc.indd 78 RRUS_FIN_wpc.indd 79 U S _ F I N _ ae ac 5 06 /s/RobertD.Koney, Jr. Date: March 15,2006 (b) (a) 5. (d) (c) (b) (a) 4. 3. 2. 1. I, RobertD.Koney, Jr., President SeniorVice andChiefFinancialOfficer ofRussellCorporation,certifythat: 13a-14(a)/15d-14(a)CERTIFICATIONRULE OFCHIEFFINANCIALOFFICER EXHIBIT (31b) w 2005 Form10-KAnnualReport Russell CorporationandSubsidiaries p c persons performingtheequivalentfunctions): over financialreporting, totheregistrant’s auditorsandtheauditcommitteeof the registrant’s board of directors (or The registrant’s othercertifyingofficer(s) control andIhavedisclosed,basedonourmostrecent evaluationofinternal defined inExchangeActRules13a-15(f)and15d-15(f))fortheregistrant andhave: procedures control overfinancialreporting (asdefinedinExchangeActRules13a-15(e)and15d-15(e))internal (as The registrant’s othercertifyingofficer(s) andIare responsible forestablishingandmaintainingdisclosure controls and periods presented inthisreport; in allmaterialrespects thefinancialcondition,results ofoperationsandcashflowstheregistrant asof,andfor, the Based onmyknowledge,thefinancialstatements,andotherinformationincludedinthisreport, fairlypresent not misleadingwithrespect totheperiodcovered bythisreport; fact necessarytomakethestatementsmade,inlightofcircumstances underwhichsuchstatementswere made, Based onmyknowledge,thisreport doesnotcontainanyuntruestatementofamaterialfactoromittostate I havereviewed thisannualreport onForm10-KofRussellCorporation; . i n d d

7 9 report financialinformation;and reporting whichare reasonably likelytoadversely affect theregistrant’s abilitytorecord, process, summarizeand control overfinancialAll significantdeficienciesandmaterialweaknessesinthe designoroperationofinternal covered bythisreport basedonsuchevaluation; and our conclusionsabouttheeffectiveness ofthedisclosure controls andprocedures, asoftheendperiod Evaluated theeffectiveness oftheregistrant’s disclosure controls andprocedures andpresented inthisreport this report isbeingprepared; solidated subsidiaries,ismadeknowntousbyotherswithinthoseentities,particularlyduringtheperiodinwhich designed underoursupervision,toensure thatmaterialinformationrelating totheregistrant, includingitscon- Designed suchdisclosure controls andprocedures, orcausedsuchdisclosure controls and procedures tobe the registrant’s control overfinancialreporting. internal Any fraud,whetherornotmaterial,thatinvolvesmanagement orotheremployeeswhohaveasignificantrole in reporting; and has materiallyaffected, orisreasonably likelytomateriallyaffect, theregistrant’s control overfinancial internal the registrant’s mostrecent fiscalquarter(theregistrant’s fourthfiscalquarterinthecaseofanannualreport) that Disclosed inthisreport anychangeintheregistrant’s control overfinancialreporting internal thatoccurred during accounting principles; purposesinaccordanceing andthepreparation withgenerallyaccepted offinancialstatementsforexternal be designedunderoursupervision,toprovide reasonable assuranceregarding thereliability offinancialreport- control control overfinancialreporting,Designed suchinternal orcausedsuchinternal overfinancialreporting to Chief FinancialOfficer President,Senior Vice Robert D.Koney, Jr. 33/31/06 2:12:21 PM / 3 1 / 0 6

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6 0 / 1 3 / 33/31/06 2:12:22 PM The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and of Section 13(a) or 15(d) of the Securities Exchange The Report fully complies with the requirements of the financial condition and results in all material respects, fairly presents, The information contained in the Report in the Report. and for the periods expressed operations of the Company as of the dates Russell Corporation and Subsidiaries Russell Corporation 2005 Form 10-K Annual Report 10-K Annual 2005 Form In connection with the Annual Report on Form 10-K of Russell Corporation (the “Company”) for the fiscal year ended the fiscal year ended Corporation (the “Company”) for the Annual Report on Form 10-K of Russell In connection with F. (the “Report”), John Commission on the date hereof as filed with the Securities and Exchange December 31, 2005, and as Senior Vice President Jr., and Robert D. Koney, of the Company, and Chief Executive Officer as Chairman Ward, as adopted pursuant to pursuant to 18 U.S.C. Section 1350, certifies, each hereby of the Company, Chief Financial Officer best of his knowledge: Act of 2002, that, to the Section 906 of the Sarbanes-Oxley (1) (2) Ward /s/ John F. Ward John F. Name: Title: Chairman and Chief Executive Officer Date: 15, 2006 March Jr. /s/ Robert D. Koney, Jr. Robert D. Koney, Name: Title: and Chief Financial Officer Senior Vice President Date: 15, 2006 March pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except This certification accompanies the Report the Company for purposes of Section 18 by the Sarbanes-Oxley Act of 2002, be deemed filed by to the extent required by Section 906 as amended. A signed original of this written statement required of the Securities Exchange Act of 1934, and furnished by Russell Corporation to Russell Corporation and will be retained to the Securities and has been provided upon request. Exchange Commission or its staff EXHIBIT (32) AND CHIEF FINANCIAL OFFICER OF CHIEF EXECUTIVE OFFICER SECTION 1350 CERTIFICATIONS 0 8

d d n i . c p w _ N I F _ 80 S Russell Corporation U RRUS_FIN_wpc.indd 80 Business Description Russell Corporation is a leading authentic athletic and sporting goods company with over a Corporate Information century of success. Building on its heritage as an athletic company, Russell Corporation has become a global leader in the sporting goods industry with apparel and equipment for all levels of activity – from the courts of the National Basketball Association to the playing fields of major colleges and backyards of homes everywhere. The Company is headquartered in Atlanta, Georgia, CORPORATE OFFICE DIVIDEND REINVESTMENT PLAN and its shares trade on the New York Stock Exchange under the symbol RML. 3330 Cumberland Blvd. For information about accounts or issuance of certificates, contact: Suite 800 Atlanta, GA 30339 SunTrust Bank, Atlanta (678) 742-8000 P.O. Box 4625 Atlanta, GA 30302 (800) 568-3476 OTHER INFORMATION ® The Company’s press releases, annual report and DIVERSITY other information can be accessed via the Internet at JERZEES continues growth in Diversity is a significant contributor to the Company’s success. RussellCorp.com Our goal is to maintain a fair and equitable culture in which every member of the Global Russell Team reinforces our values and TRANSFER AGENT AND REGISTRAR Artwear channel. has the opportunity to contribute to our business goals. Our SunTrust Bank, Atlanta Strategic Diversity Management Plan focuses on the following Leveraging its strong market position in the P.O. Box 4625 four areas: Atlanta, GA 30302 Artwear channel, JERZEES continued its (800) 568-3476 • Workforce – To attract and retain superior talent. growth in 2005 with sales increasing more • Workplace – To foster an empowering culture that than 10% in this market, which supplies DIVIDEND DISBURSING AGENT respects both differences and similarities. • Marketplace – To leverage our diversity to capitalize on SunTrust Bank, Atlanta apparel to screen printers and embroiderers. unique revenue opportunities. P.O. Box 4625 • Community – To support the communities where we live Atlanta, GA 30302 and operate. (800) 568-3476

DIVIDEND AND MARKET INFORMATION AUDITORS Russell Corporation stock trades on the New York Stock Ernst & Young LLP JERZEES builds on its #1 Exchange and various other regional exchanges under the ticker 600 Peachtree Street symbol RML. The range of high and low prices of the Common position in men’s sweatshirts Atlanta, GA 30308 Stock and the dividends per share paid during each calendar in the mass retail channel. quarter of the last two years are presented below: By providing quality FORM 10-K activewear in the mass Copies of Form 10-K as filed with the Securities and 2005 Dividend High Low Close channel, JERZEES offers Exchange Commission are available without cost to First $0.04 $19.50 $16.15 consumers with a strong shareholders of the Company by writing to: Second 0.04 21.65 17.17 Third 0.04 21.84 12.94 value consciousness Investor Relations Fourth 0.04 16.48 12.31 activewear to support Russell Corporation $0.16 $13.46 their healthy lifestyle. 3330 Cumberland Blvd., Suite 800 Atlanta, GA 30339 2004 Dividend High Low Close (678) 742-8000 First $0.04 $18.83 $17.13 Second 0.04 19.23 15.60 Third 0.04 19.20 16.42 Fourth 0.04 19.78 16.22 JERZEES committed to low-cost $0.16 $19.48 production. With the startup of Russell’s newest, most modern, and soon-to-be largest textile facility in Honduras, JERZEES further demonstrates its commitment to providing low-cost, high quality activewear. Designed and produced by Corporate Reports Inc./Atlanta www.corporatereport.com Designed and produced Russell Corporation NON-STOP ACTION 3330 CUMBERLAND BOULEVARD, SUITE 800 2005 ANNUAL REPORT ATLANTA, GEORGIA 30339 WWW.RUSSELLCORP.COM RUSSELL CORPORATION 2005 ANNUAL REPORT

RUSSELL CORPORATION