LITTLE ROCK, Ark., March 21, 2002 (PRIMEZONE) -- The Emerson Firm today announced that a shareholder derivative lawsuit has been filed in the Superior Court of Fulton County, Atlanta, Georgia on behalf of WestPoint Stevens Inc. ("WestPoint Stevens" or the "Company") (NYSE:WXS). Named as defendants in the action are Holcombe T. Green, Jr., William F. Crumley, Thomas J. Ward, Morgan M. Schuessler, Charles W. McCalll, Dale C. Williams and Gerald B. Mitchell (the "Individual Defendants") who have also been named as defendants in a federal securities fraud class action lawsuit. Further, each Individual Defendant personally benefited from their wrongful actions through insider stock sales of $6.2 million, and Green was able to use his personal holdings of Company stock to secure a $250 million loan for another company he controls.
The complaint charges that the Individual Defendants breached the fiduciary duties they owed to the Company by wrongfully causing WestPoint Stevens to report better-than-expected 4thQ 98 and 1stQ 99 results, and thus exposing the Company to liability. The Individual Defendants also assured investors and analysts that the Company's business remained extremely strong, demand for all of its products was good, its inventories were under control and that it remained postured to achieve revenue and EPS growth of 5% and 20%, respectively, going forward and was increasing its 99 and 00 EPS forecasts to $1.82-$1.85 and $2.10-$2.20, respectively. Based on these better-than-expected 1stQ 99 results and defendants' positive commentary on WestPoint Stevens' business, WestPoint Stevens stock advanced to a high of $37-9/16 in late April 1999.
When WestPoint Stevens reported its 2ndQ and 3rdQ 99 results, the Individual Defendants again assured investors that the Company's business was very strong. It also told investors that while its inventories had increased, especially towels, the increased towel inventory did not pose any significant risk of loss to WestPoint Stevens because it was basic solid colored goods with core value. The Individual Defendants continued to forecast strong revenue for WestPoint Stevens and EPS growth for the balance of 99 and 00, including 00 EPS of $2.10-$2.20.
On June 28, 2000, the Individual Defendants announced that the Company's Eight-Point Program would ensure strong performance in the future, that momentum was building for strong prospects throughout 00 and inventory was now on target to below $400 million by year-end and the Company was still on tract to report EPS of $2.08+ and $2.40 in 00 and 01, respectively. As a result, WestPoint Stevens' stock stabilized in the $10-$15 range. However, by late September, 2000, the Individual Defendants knew that it would be impossible for them to continue to conceal the severe deterioration in WestPoint Stevens' business any longer, and that once the Company reported its 3rdQ 00 results, it would be apparent to the market how horrible WestPoint Stevens' business was actually performing and the stock would collapse. In an attempt to cause the stock to make a "soft landing" for what they knew would be horrible 00 results, defendants on September 27, 2000 announced that 3rdQ 00 results would be flat with 3rdQ 99 results, in the same press release in which the Company also announced a new licensing agreement with Disney. WestPoint Stevens' stock declined only slightly on this news to $11-9/16 due to defendants' positive statements. Then, on October 10, 2000, the Individual Defendants caused WestPoint Stevens to reveal that 3rdQ 00 sales would actually decline 3% from the prior year, with earnings of only $0.55-$0.60 per share, lower than prior guidance. On this news, WestPoint Stevens stock declined to below $9 per share.
If you are a current holder of WestPoint Stevens common stock, and purchased shares prior to February 10, 1999, and still hold shares, you may wish to serve as a plaintiff in this action. Or, if you would like further information about this case and your rights, please e-mail, call, or fax:
THE EMERSON FIRM John G. Emerson, Jr. P.O. Box 25336 Little Rock, AR 72221-5336 Phone: (501) 907-2555 Fax: (501) 537-4888 e-mail: jge@emersonfirm.com
More information on this and other class actions can be found on the Class Action Newsline at www.primezone.com/ca