SUIT WILL CAUSE LOSS FOR FRUIT OF THE LOOM
NEW YORK — Fruit of the Loom Inc. said a $101.2 million charge resulting from a lawsuit originally filed in 1984 will result in a loss in the third quarter.
Fruit of the Loom said the California Court of Appeals upheld a 1994 judgment of $96 million against Universal Manufacturing Corp., which had been owned by FTL’s former parent Northwest Industries.
William Farley, Fruit of the Loom’s current chief executive officer, acquired Northwest Industries in 1985 in a leveraged buyout and sold Universal to Mangetex Inc., based in Nashville, Tenn., in 1986. Fruit of the Loom was liable in the lawsuit because Northwest indemnified Mangetex to cover pending litigation as part of the sale.
Fruit of the Loom said it plans to appeal in California Supreme Court, but added that under U.S. accounting rules it must reserve for the judgment now.
Fruit of the Loom said on Aug. 18 that it paid $28.6 million to plaintiffs in the original 1994 judgment.
The company said Friday that should the appeal fail, it would have to pay an additional $71.4 million, plus interest dating from Aug. 1.
The jury found that Universal had fraudulently induced LMP Corp. to sell its electronic lighting technology in 1981 but didn’t expand the line as promised under the contract.
In the 1996 third quarter, Fruit of the Loom earned $47.8 million, or 63 cents a share, on sales of $628 million.
Despite news of the charge, shares of Fruit of the Loom moved up 1/16 to 26 1/16 Friday on the New York Stock Exchange.