<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 2, 1995 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 11, 1995
----- ------------------------------
Common Stock, Par Value $.01 Per Share 38,955,965 shares
----------
(Excludes Treasury)
<PAGE> 2
RUSSELL CORPORATION
Index
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information:
Consolidated Condensed Balance Sheets--
July 2, 1995 and December 31, 1994 2
Consolidated Condensed Statements of Income--
Thirteen Weeks Ended July 2, 1995 and
July 3, 1994 3
Twenty-six Weeks Ended July 2, 1995 and
July 3, 1994 4
Consolidated Statements of Cash Flows--
Twenty-six Weeks Ended July 2, 1995 and
July 3, 1994 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 9
Part II. Other Information 10
Index to Exhibits 11
</TABLE>
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<PAGE> 3
PART I - FINANCIAL INFORMATION
RUSSELL CORPORATION
Consolidated Condensed Balance Sheets
(Dollars in Thousands)
<TABLE>
<CAPTION>
July 2 December 31
1995 1994
ASSETS ----------- ----------
------ (Unaudited) (Audited)
<S> <C> <C>
Current Assets:
Cash $ 5,521 $ 4,141
Accounts receivable, net 232,714 211,976
Inventories:
Finished goods 286,019 227,625
In process 44,887 37,639
Raw materials and supplies 58,581 47,868
---------- ----------
389,487 313,132
LIFO reserve (41,458) (33,739)
---------- ----------
348,029 279,393
Prepaid expenses and other current assets 23,316 15,365
---------- ----------
Total current assets 609,580 510,875
Property, Plant and Equipment, net 461,305 467,044
Other Assets 67,492 68,658
---------- ----------
Total assets $1,138,377 $1,046,577
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Short-term debt $ 121,846 $ 97,941
Accounts payable and accrued expenses 86,367 76,307
Federal and state income taxes -- 6,824
Current maturities of long-term debt 20,618 19,473
---------- ----------
Total current liabilities 228,831 200,545
Long-term debt, less current maturities
and unamortized debt discount 209,382 144,163
Deferred Liabilities 77,772 73,207
Shareholders' Equity:
Common Stock, at par value 414 414
Paid-in capital 53,121 53,511
Retained earnings 644,110 628,836
Currency translation adjustment ( 4,938) ( 5,501)
---------- ----------
692,707 677,260
Treasury Stock, at cost (70,315) (48,598)
---------- ----------
Total shareholders' equity 622,392 628,662
---------- ----------
Total liabilities & shareholders' equity $1,138,377 $1,046,577
========== ==========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE> 4
RUSSELL CORPORATION
Consolidated Condensed Statements of Income
(Dollars in Thousands Except Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended
----------------------
July 2 July 3
1995 1994
-------- --------
<S> <C> <C>
Net sales $ 268,731 $ 243,505
Costs and expenses:
Cost of goods sold 191,194 169,643
Selling, general and
administrative expenses 54,197 49,192
Interest expense 5,339 4,834
Other - net (income) (1,309) (676)
----------- -----------
249,421 222,993
----------- -----------
Income before income taxes 19,310 20,512
Provision for income taxes 6,830 7,797
----------- -----------
Net income applicable
to Common Shares $ 12,480 $ 12,715
=========== ===========
Weighted average number of common and
common equivalent shares outstanding 39,313,678 40,261,335
Earnings per common and
common equivalent share $ .32 $ .32
Cash dividends per common share $ .12 $ .10
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE> 5
RUSSELL CORPORATION
Consolidated Condensed Statements of Income
(Dollars in Thousands Except Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
26 Weeks Ended
-----------------------
July 2 July 3
1995 1994
-------- --------
<S> <C> <C>
Net sales $ 517,046 $ 475,623
Costs and expenses:
Cost of goods sold 362,629 325,526
Selling, general and
administrative expenses 106,944 99,861
Interest expense 9,933 8,844
Other - net (income) (1,931) (1,263)
----------- -----------
477,575 432,968
----------- -----------
Income before income taxes 39,471 42,655
Provision for income taxes 14,759 16,574
----------- -----------
Net income applicable
to Common Shares $ 24,712 $ 26,081
=========== ===========
Weighted average number of common and
common equivalent shares outstanding 39,530,347 40,216,175
Earnings per common and
common equivalent share $ .63 $ .65
Cash dividends per common share $ .24 $ .20
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE> 6
RUSSELL CORPORATION
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
26 Weeks Ended
------------------------
July 2 July 3
1995 1994
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 24,712 $ 26,081
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 35,266 35,167
Deferred income taxes 3,362 3,117
Gain on sale of equipment ( 458) ( 608)
Changes in Assets and Liabilities:
Accounts receivable (20,672) (23,564)
Inventories (68,748) (28,546)
Prepaid expenses ( 3,119) 494
Accounts payable & accrued expenses 10,860 ( 479)
Income taxes payable (11,148) (21,471)
Accrued liabilities 689 ( 2,911)
Other assets 74 ( 3,907)
-------- --------
Net cash used in operating activities (29,182) (16,627)
Cash Flows from Investing Activities
Purchases of property, plant & equipment (28,514) (17,689)
Proceeds from sale of equipment 858 1,544
-------- --------
Net cash used in investing activities (27,656) (16,145)
Cash Flows from Financing Activities
Short-term borrowings 23,644 76,656
Long-term borrowings 75,000 --
Payments on long-term debt ( 8,643) (10,754)
Payments on notes payable -- ( 4,562)
Dividends on Common Stock ( 9,438) ( 7,990)
Cost of Common Stock for treasury (22,487) (22,600)
Distribution of treasury shares 380 1,550
-------- --------
Net cash provided by financing activities 58,456 32,300
Effect of exchange rate changes on cash ( 238) 43
-------- --------
Net increase (decrease) in cash 1,380 ( 429)
Cash balance at beginning of period 4,141 3,897
-------- --------
Cash balance at end of period $ 5,521 $ 3,468
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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<PAGE> 7
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 2, 1995, and December 31, 1994,
and the results of operations for the thirteen and twenty-six week
periods ended July 2, 1995, and July 3, 1994, and cash flows for the
twenty-six week periods ended July 2, 1995, and July 3, 1994.
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 December 31, 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 2, 1995, are not necessarily indicative of the results to be
expected for the full year.
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<PAGE> 8
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 7/2/95 Ended 7/2/95 Ended 7/2/95
and 7/3/94 and 7/3/94 and 4/2/95
--------------- ------------------ -----------------
Increase (Decrease)
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Net sales $25,226 10.4% $41,423 8.7% $20,416 8.2%
Cost of goods sold 21,551 12.7 37,103 11.4 19,759 11.5
Selling, general and
administrative expenses 5,005 10.2 7,083 7.1 1,450 2.7
Interest expense 505 10.4 1,089 12.3 745 16.2
Other income 633 93.6 668 52.9 687 110.5
Income before income taxes (1,202) ( 5.9) (3,184) ( 7.5) ( 851) ( 4.2)
Provision for income taxes ( 967) (12.4) (1,815) (11.0) (1,099) (13.9)
Net income applicable
to common shares ( 235) ( 1.8) (1,369) ( 5.2) 248 2.0
</TABLE>
Sales increases for the second quarter and first half of 1995 reflected
strong worldwide demand for the Company's activewear products. International
sales grew 37% in the second quarter and 41% during the first half.
Gross margins were impacted in the second quarter principally by
competitive pricing pressures in the imprintable T-shirt market and by higher
raw material costs, primarily cotton and polyester. Also, higher outside
contracting costs were incurred in order to meet demand.
During the first half, the Company experienced less than planned sales and
earnings in the Russell Athletic and Licensed Products Divisions. The
lingering effects of the baseball strike and general weakening in demand for
licensed sports apparel have unfavorably impacted the Company's licensed
apparel business.
Selling, general and administrative expenses increased 10% in the quarter,
but remained constant as a percentage of sales. Interest expense increased
primarily from higher short-term borrowing rates. Other income was derived
mainly from interest, rental income and the disposition of certain fixed
assets. The effective tax rate in the second quarter declined from 38.0% to
35.3% as the Company's international profitability improved.
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<PAGE> 9
FINANCIAL CONDITION
The Company's financial condition remained strong. Long-term debt to
total capitalization increased from 20.6% to 25.2% as a result of a $75 million
long-term financing which the Company completed during the quarter with a
commercial bank. Proceeds were used to reduce short-term debt. At
quarter-end, the Company maintained $209 million in informal lines of credit.
The statement of cash flows reflects that $28,514,000 was invested in the
capital program during the first half of 1995. Capital expenditures, working
capital needs, dividends and treasury stock purchases were met with internally
generated funds, short-term bank loans and long-term borrowings. Inventory
levels were up 12% over last year and are positioned for forecasted higher
shipments in the third quarter. Accounts receivable also grew 12% and were
basically in-line with sales growth.
The Company utilizes interest rate swaps to change the characteristics of
certain debt. Previous to this quarter, the Company had an outstanding
agreement that effectively converted $75,000,000 of long-term debt from a fixed
rate to a floating rate basis. Additionally, an agreement was entered into in
the second quarter, converting the most recent $75,000,000 long-term borrowing
from a floating rate to a fixed rate of 6.67%.
The Company utilizes cotton futures contracts to set sales prices which
are generally set six months to a year in advance of the selling season.
Depending upon market conditions, futures may be purchased to cover the
Company's cotton requirements, generally, at the time that prices are set.
Purchasing futures not only reduces the risks of adverse price fluctuations,
but also limits the Company's ability to benefit from positive price
fluctuations over the terms of the agreements.
In anticipation of higher cotton prices in 1995, the Company purchased
futures contracts to cover its cotton requirements. Cotton prices rose in the
second quarter of 1995 and the aforementioned futures favorably mitigated some
cotton prices for this period.
The carrying value of goodwill is reviewed by management when facts and
circumstances suggest that it may be impaired. Should this review indicate
that goodwill will not be recoverable, based upon undiscounted cash flows of
the entity, the Company's carrying value of the goodwill is reduced by the
estimated shortfalls of the cash flows.
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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
27 Financial Data Schedule (for SEC use only)
b) Reports on Form 8-K - there were no reports on Form 8-K filed for the
period ended July 2, 1995.
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, 1995 /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
Exhibit No. Page No.
----------- --------
11 Computation of Earnings Per Share 9
27 Financial Data Schedule (for SEC use only)
-11-
<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
------------------------ --------------------------
7/2/95 7/3/94 7/2/95 7/3/94
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income $ 12,480 $ 12,715 $ 24,712 $ 26,081
=========== =========== =========== ===========
Shares:
Weighted average common
shares outstanding 39,066,310 40,025,842 39,264,645 39,992,663
Net common shares issuable
on exercise of certain
stock options 247,368 235,493 265,702 223,512
----------- ----------- ----------- -----------
Average common and common
equivalent shares
outstanding 39,313,678 40,261,335 39,530,347 40,216,175
=========== =========== =========== ===========
Earnings per common and
common equivalent share $ .32 $ .32 $ .63 $ .65
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RUSSELL CORPORATION FOR THE SIX MONTHS ENDED JULY 2,
1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> JUL-02-1995
<CASH> 5,521
<SECURITIES> 1,414
<RECEIVABLES> 245,061
<ALLOWANCES> 12,347
<INVENTORY> 348,029
<CURRENT-ASSETS> 609,580
<PP&E> 965,723
<DEPRECIATION> 504,418
<TOTAL-ASSETS> 1,138,377
<CURRENT-LIABILITIES> 228,831
<BONDS> 209,382
<COMMON> 414
0
0
<OTHER-SE> 621,978
<TOTAL-LIABILITY-AND-EQUITY> 1,138,377
<SALES> 517,046
<TOTAL-REVENUES> 517,046
<CGS> 362,629
<TOTAL-COSTS> 362,629
<OTHER-EXPENSES> 102,693
<LOSS-PROVISION> 2,320
<INTEREST-EXPENSE> 9,933
<INCOME-PRETAX> 39,471
<INCOME-TAX> 14,759
<INCOME-CONTINUING> 24,712
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,712
<EPS-PRIMARY> 0.63
<EPS-DILUTED> 0.63
</TABLE>
