<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended July 3, 1994 Commission file number 0-1790
RUSSELL CORPORATION
(Exact name of registrant as specified in its charter)
Alabama 63-0180720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 Lee Street, Alexander City, Alabama 35010
(Address of principal executive offices) (Zip Code)
(205) 329-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding of each of the issuer's classes of common
stock.
Class Outstanding at August 15, 1994
----- ------------------------------
Common Stock, Par Value $.01 Per Share 40,009,219 shares
(Excludes Treasury)
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RUSSELL CORPORATION
Index
Page No.
Part I. Financial Information: --------
Consolidated Condensed Balance Sheets--
July 3, 1994 and January 1, 1994 2
Consolidated Condensed Statements of Income--
Thirteen Weeks Ended July 3, 1994 and
July 4, 1993 3
Twenty-six Weeks Ended July 3, 1994 and
July 4, 1993 4
Consolidated Statements of Cash Flows--
Twenty-six Weeks Ended July 3, 1994 and
July 4, 1993 5
Notes to Consolidated Condensed Financial
Statements 6
Management's Discussion and Analysis of
Results of Operations and Financial
Condition 7
Exhibit 11 - Computation of Earnings Per
Share 11
Part II. Other Information 9
Index to Exhibits 10
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<PAGE> 3
PART I - FINANCIAL INFORMATION
RUSSELL CORPORATION
Consolidated Condensed Balance Sheets
(Dollars in Thousands)
<TABLE>
<CAPTION>
July 3 January 1
1994 1994
---------- ----------
ASSETS (Unaudited) (Audited)
<S> <C> <C>
Current Assets:
Cash $ 3,468 $ 3,897
Accounts receivable, net 205,414 176,949
Inventories:
Finished goods 265,542 243,876
In process 37,056 30,382
Raw materials and supplies 43,679 41,102
---------- ----------
346,277 315,360
LIFO reserve (34,662) (36,740)
---------- ----------
311,615 278,620
Prepaid expenses and other current assets 15,182 14,122
Total current assets 535,679 473,588
Property, Plant and Equipment, net 477,550 490,886
Other Assets 65,358 52,570
---------- ----------
Total assets $1,078,587 $1,017,044
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt $ 168,718 $ 95,188
Accounts payable and accrued expenses 66,163 58,787
Federal and state income taxes -- 21,471
Current maturities of long-term debt 19,747 20,150
---------- ----------
Total current liabilities 254,628 195,596
Long-term debt, less current maturities
and unamortized debt discount 154,992 163,334
Deferred Liabilities 71,949 70,463
Shareholders' Equity:
Common Stock, at par value 414 414
Paid-in capital 53,911 49,040
Retained earnings 584,881 566,789
Currency translation adjustment ( 3,227) ( 5,552)
---------- ----------
635,979 610,691
Treasury Stock, at cost (38,961) (23,040)
---------- ----------
Total shareholders' equity 597,018 587,651
---------- ----------
Total liabilities & shareholders' equity $1,078,587 $1,017,044
========== ==========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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RUSSELL CORPORATION
Consolidated Condensed Statements of Income
(Dollars in Thousands Except Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended
-----------------------
July 3 July 4
1994 1993
-------- --------
<S> <C> <C>
Net sales $243,505 $209,061
Costs and expenses:
Cost of goods sold 169,643 142,677
Selling, general and
administrative expenses 49,192 42,495
Interest expense 4,834 4,433
Other - net (income) (676) (894)
-------- --------
222,993 188,711
-------- --------
Income before income taxes 20,512 20,350
Provision for income taxes 7,797 7,651
-------- --------
Net income after taxes 12,715 12,699
Preferred Stock dividends -- 6
-------- --------
Net income applicable
to Common Shares $ 12,715 $ 12,693
======== ========
Weighted average number of common and
common equivalent shares outstanding 40,261,335 41,260,037
Earnings per common and
common equivalent share $ .32 $ .31
Cash dividends per common share $ .10 $ .10
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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RUSSELL CORPORATION
Consolidated Condensed Statements of Income
(Dollars in Thousands Except Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
26 Weeks Ended
-----------------------
July 3 July 4
1994 1993
-------- --------
<S> <C> <C>
Net sales $475,623 $413,715
Costs and expenses:
Cost of goods sold 325,526 276,680
Selling, general and
administrative expenses 99,861 85,642
Interest expense 8,844 8,675
Other - net (income) (1,263) ( 193)
-------- --------
432,968 370,804
-------- --------
Income before income taxes 42,655 42,911
Provision for income taxes 16,574 14,179
-------- --------
Net income after taxes 26,081 28,732
Preferred Stock dividends -- 12
-------- --------
Net income applicable
to Common Shares $ 26,081 $ 28,720
======== ========
Weighted average number of common and
common equivalent shares outstanding 40,216,175 41,268,416
Earnings per common and
common equivalent share $ .65 $ .70
Cash dividends per common share $ .20 $ .19
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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RUSSELL CORPORATION
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
26 Weeks Ended
------------------------
July 3 July 4
1994 1993
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 26,081 $ 28,732
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 35,167 35,795
Deferred income taxes 3,117 346
(Gain) loss on sale of equipment ( 608) 181
Changes in Assets and Liabilities:
Accounts receivable (23,564) (15,227)
Inventories (28,546) (58,524)
Prepaid expenses 494 828
Accounts payable & accrued expenses ( 479) ( 3,152)
Income taxes payable (21,471) ( 4,503)
Accrued liabilities ( 2,911) ( 4,295)
Other assets ( 3,907) ( 500)
-------- --------
Net cash used in operating activities (16,627) (20,319)
Cash Flows from Investing Activities
Purchases of property, plant & equipment (17,689) (54,143)
Proceeds from sale of equipment 1,544 712
-------- --------
Net cash used in investing activities (16,145) (53,431)
Cash Flows from Financing Activities
Distribution of treasury shares 1,550 965
Purchase of treasury shares (22,600) ( 68)
Payments on notes payable ( 4,562) --
Payments on long-term debt (10,754) (11,303)
Dividends on Common Stock ( 7,990) ( 7,763)
Dividends on Preferred Stock -- ( 12)
Short-term borrowings 76,656 90,770
Retirement of Preferred Stock -- ( 276)
-------- --------
Net cash provided by financing activities 32,300 72,313
Effect of exchange rate changes on cash 43 ( 22)
-------- --------
Net decrease in cash ( 429) ( 1,459)
Cash balance at beginning of period 3,897 6,095
-------- --------
Cash balance at end of period $ 3,468 $ 4,636
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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RUSSELL CORPORATION
Notes to Consolidated Condensed Financial Statements
1. In the opinion of Management, the accompanying audited and unaudited
consolidated condensed financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the financial position as of July 3, 1994, and January 1, 1994,
and the results of operations for the thirteen and twenty-six week
periods ended July 3, 1994, and July 4, 1993, and cash flows for the
twenty-six week periods ended July 3, 1994, and July 4, 1993.
The accounting policies followed by the Company are set forth in Note A to
the Company's consolidated financial statements incorporated by reference in
Form 10-K for the year ended January 1, 1994.
2. Effective January 3, 1993, the Company adopted Financial Accounting
Standards Board Statement 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" and Statement 109, "Accounting for Income
Taxes". The effect of the adoption of these standards was not material.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the carrying amounts for income tax purposes. At
January 3, 1993, deferred tax liabilities totaling approximately $58 million
consisted primarily of tax depreciation in excess of book depreciation.
Deferred tax assets of approximately $9 million consisted of basis
differences in inventories, retirement benefits and bad debt accruals.
3. The results of operations for the thirteen and twenty-six weeks ended July
3, 1994, are not necessarily indicative of the results to be expected for
the full year.
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RUSSELL CORPORATION
Management's Discussion and Analysis of
Results of Operations and Financial Condition
RESULTS OF OPERATIONS
The following is Management's Discussion and Analysis of certain
significant factors which have affected the Company's earnings during the
periods included in the accompanying consolidated condensed statements of
income.
A summary of the period to period changes in the principal items included
in the consolidated statements of income is shown below:
<TABLE>
<CAPTION>
Comparison of
-------------------------------------------------------
13 Weeks 26 Weeks 13 Weeks
Ended 7/3/94 Ended 7/3/94 Ended 7/3/94
and 7/4/93 and 7/4/93 and 4/3/94
---------------- ------------------ --------------
Increase (Decrease)
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Net sales $34,444 16.5% $61,908 15.0% $11,387 4.9%
Cost of goods sold 26,966 18.9 48,846 17.7 13,760 8.8
Selling, general and
administrative expenses 6,697 15.8 14,219 16.6 (1,477) ( 2.9)
Interest expense 401 9.0 169 1.9 824 20.5
Other income ( 218) (24.4) 1,070 554.4 89 15.2
Income before income taxes 162 .8 ( 256) ( .6) (1,631) ( 7.4)
Provision for income taxes 146 1.9 2,395 16.9 ( 980) (11.2)
Net income applicable
to common shares 22 .2 (2,639) ( 9.2) ( 651) ( 4.9)
</TABLE>
Sales increases for the second quarter and first half of 1994 reflect the
inclusion of sales from acquisitions and solid growth in the Company's
International operations. Acquisitions accounted for approximately $18.7
million of the quarterly increase and $36 million of the first half increase.
Higher sales levels were achieved despite pricing promotions faced by
activewear manufacturers during the first half of 1994. Industry-wide
inventory imbalances in activewear continue to improve. With supply and demand
coming back into balance, the Company expects pricing pressures to abate during
the second half of the year.
Gross margins were impacted by pricing pressures in the second quarter and
by pricing pressures and less than optimal plant operating schedules in the
first quarter. Selling, general and administrative expenses rose principally
as a result of the inclusion of The Game Inc. which was acquired in December,
1993. Advertising expense was comparable to that during the similar period
last year and is expected to grow in line with sales growth. Interest expense
increased due to higher short-term borrowing rates. Other income was derived
mainly from interest, rental income and the disposition of certain fixed
assets. The provision for income taxes was basically flat in the second
quarter but higher for the first half due to the adoption of FASB 109 in the
first quarter of 1993 which reduced the first quarter 1993 provision.
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<PAGE> 9
The Company utilizes hedges to set sales prices which are generally set
six months to a year in advance of the selling season. Depending upon market
conditions, hedges may be purchased to cover the Company's cotton requirements,
generally, at the time that prices are set.
In anticipation of higher cotton prices in 1994, the Company purchased
hedges to cover its cotton requirements. Cotton prices rose significantly in
the first half of 1994 and the aforementioned hedges favorably mitigated cotton
prices for this period.
The Company has implemented price increases on t-shirts and selected
fleece items which will cover increases in raw materials. Prices were
increased based upon an improved supply-demand outlook for activewear. The
Company believes that it will be successful in maintaining these increases.
FINANCIAL CONDITION
The Company's financial condition remained strong with long-term debt to
total capitalization of 20.6%. The statement of cash flows reflects that $17.7
million was invested in the capital program during the first half of 1994.
Capital expenditures, working capital needs, dividends, and treasury stock
purchases were met with internally generated funds and short-term bank loans.
At quarter-end, the Company maintained $293 million in informal lines of
credit.
Excluding acquisitions, accounts receivable and inventories were flat and
down respectively. Other assets increased due to goodwill arising from the
acquisition of The Game Inc. in December, 1993 and DeSoto Mills, Inc. on April
1, 1994.
SUBSEQUENT EVENTS
Subsequent to quarter end, the Company acquired the trademarks and licenses of
Chalk Line Inc. for $5.8 million adding the following brand names: Chalk
Line(R), Stadium Club(R) and Locker Line(R).
The Company announced the formation of a new Licensed Products Division on
July 26, 1994 to consolidate its sports licensed sales and marketing efforts
into one unit. K. Roger Holliday, former president of the Knit Apparel
Division, was elected president of the new division. Joseph P. Irwin was
elected president of the Knit Apparel Division succeeding Mr. Holliday. Mr.
Irwin previously served as Vice President, Sales, of the same division. The
realignment will combine the licensed sales of The Game Inc., Chalk Line and
Russell Athletic family of brands. Sales of the new division are projected to
triple to over $300 million in the next three years.
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<PAGE> 10
PART II - OTHER INFORMATION
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits -
11 Computation of Earnings Per Share
b) Reports on Form 8-K - there were no reports on Form 8-K filed for the
period ended July 3, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RUSSELL CORPORATION
-----------------------------------------
(Registrant)
Date August 15, 1994 /S/James D. Nabors
-----------------------------------------
James D. Nabors, Executive Vice President
and Chief Financial Officer
(For the Registrant and as
Principal Financial Officer)
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<PAGE> 11
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit No. Page No.
- - ----------- --------
<S> <C>
11 Computation of Earnings Per Share 11
</TABLE>
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<PAGE> 1
Exhibit 11
RUSSELL CORPORATION
Computation of Earnings Per Share
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended 26 Weeks Ended
-------------------- --------------------
7/3/94 7/4/93 7/3/94 7/4/93
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net income $ 12,715 $ 12,693 $ 26,081 $ 28,720
========== ========== ========== ===========
Shares:
Weighted average common
shares outstanding 40,025,842 40,868,228 39,992,663 40,855,386
Net common shares issuable
on exercise of certain
stock options 235,493 391,809 223,512 413,030
---------- ---------- ---------- -----------
Average common and common
equivalent shares
outstanding 40,261,335 41,260,037 40,216,175 41,268,416
========== ========== ========== ==========
Earnings per common and
common equivalent share $ .32 $ .31 $ .65 $ .70
</TABLE>
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