<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 October 1, 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.)
755 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.
<TABLE>
<CAPTION>
Class Outstanding at November 14, 1995
----- --------------------------------
<S> <C>
Common Stock, Par Value $.01 Per Share 38,951,326 shares
(Excludes Treasury)
</TABLE>
<PAGE> 2
RUSSELL CORPORATION
Index
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I. Financial Information:
Consolidated Condensed Balance Sheets--
October 1, 1995 and December 31, 1994 2
October 1, 1995 and October 2, 1994 3
Consolidated Condensed Statements of Income--
Thirteen Weeks Ended October 1, 1995
and October 2, 1994 4
Thirty-nine Weeks Ended October 1, 1995
and October 2, 1994 5
Consolidated Statements of Cash Flows--
Thirty-nine Weeks Ended October 1, 1995
and October 2, 1994 6
Notes to Consolidated Condensed Financial
Statements 7
Management's Discussion and Analysis of
Results of Operations and Financial
Condition 8
Exhibit 11 - Computation of Earnings Per
Share 10
Part II. Other Information 11
Index to Exhibits 12
</TABLE>
-1-
<PAGE> 3
PART I - FINANCIAL INFORMATION
RUSSELL CORPORATION
Consolidated Condensed Balance Sheets
(Dollars in Thousands)
<TABLE>
<CAPTION>
October 1 December 31
1995 1994
--------- -----------
ASSETS (Unaudited) (Audited)
<S> <C> <C>
Current Assets:
Cash $ 3,726 $ 4,141
Accounts receivable, net 302,745 211,976
Inventories:
Finished goods 266,214 227,625
In process 45,850 37,639
Raw materials and supplies 57,139 47,868
----------- -----------
369,203 313,132
LIFO reserve (47,829) (33,739)
----------- -----------
321,374 279,393
Prepaid expenses and other current assets 21,219 15,365
----------- -----------
Total current assets 649,064 510,875
Property, Plant and Equipment, net 459,831 467,044
Other Assets 68,274 68,658
----------- -----------
Total assets $ 1,177,169 $ 1,046,577
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt $ 156,023 $ 97,941
Accounts payable and accrued expenses 91,846 76,307
Federal and state income taxes -- 6,824
Current maturities of long-term debt 31,335 19,473
----------- -----------
Total current liabilities 279,204 200,545
Long-term debt, less current maturities 187,896 144,163
Deferred Liabilities 80,110 73,207
Shareholders' Equity:
Common Stock, at par value 414 414
Paid-in capital 52,790 53,511
Retained earnings 652,378 628,836
Currency translation adjustment (5,816) (5,501)
----------- -----------
699,766 677,260
Treasury Stock, at cost (69,807) (48,598)
----------- -----------
Total shareholders' equity 629,959 628,662
----------- -----------
Total liabilities & shareholders' equity $ 1,177,169 $ 1,046,577
=========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
-2-
<PAGE> 4
PART I - FINANCIAL INFORMATION
RUSSELL CORPORATION
Consolidated Condensed Balance Sheets
(Dollars in Thousands)
<TABLE>
<CAPTION>
October 1 October 2
1995 1994
--------- ---------
ASSETS (Unaudited) (Unaudited)
<S> <C> <C>
Current Assets:
Cash $ 3,726 $ 6,749
Accounts receivable, net 302,745 276,519
Inventories:
Finished goods 266,214 237,762
In process 45,850 37,940
Raw materials and supplies 57,139 40,480
----------- -----------
369,203 316,182
LIFO reserve (47,829) (33,697)
----------- -----------
321,374 282,485
Prepaid expenses and other current assets 21,219 13,223
----------- -----------
Total current assets 649,064 578,976
Property, Plant and Equipment, net 459,831 470,739
Other Assets 68,274 71,397
----------- -----------
Total assets $ 1,177,169 $ 1,121,112
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt $ 156,023 $ 186,340
Accounts payable and accrued expenses 91,846 74,285
Federal and state income taxes -- 4,412
Current maturities of long-term debt 31,335 19,513
----------- -----------
Total current liabilities 279,204 284,550
Long-term debt, less current maturities 187,896 144,232
Deferred Liabilities 80,110 73,860
Shareholders' Equity:
Common Stock, at par value 414 414
Paid-in capital 52,790 53,718
Retained earnings 652,378 605,085
Currency translation adjustment (5,816) (2,560)
----------- -----------
699,766 656,657
Treasury Stock, at cost (69,807) (38,187)
----------- -----------
Total shareholders' equity 629,959 618,470
----------- -----------
Total liabilities & shareholders' equity $ 1,177,169 $ 1,121,112
=========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
-3-
<PAGE> 5
RUSSELL CORPORATION
Consolidated Condensed Statements of Income
(Dollars in Thousands Except Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended
------------------------------
October 1 October 2
1995 1994
------------ ------------
<S> <C> <C>
Net sales $ 333,820 $ 317,131
Costs and expenses:
Cost of goods sold 244,408 216,822
Selling, general and
administrative expenses 62,822 56,328
Interest expense 6,118 5,494
Other - net (income) (986) (699)
------------ ------------
312,362 277,945
------------ ------------
Income before income taxes 21,458 39,186
Provision for income taxes 8,515 14,982
------------ ------------
Net income applicable
to Common Shares $ 12,943 $ 24,204
============ ============
Weighted average number of common and
common equivalent shares outstanding 39,128,005 40,269,327
Earnings per common and
common equivalent share $ .33 $ .60
Cash dividends per common share $ .12 $ .10
</TABLE>
See accompanying notes to consolidated condensed financial statements.
-4-
<PAGE> 6
RUSSELL CORPORATION
Consolidated Condensed Statements of Income
(Dollars in Thousands Except Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
39 Weeks Ended
------------------------------
October 1 October 2
1995 1994
------------ ------------
<S> <C> <C>
Net sales $ 850,866 $ 792,754
Costs and expenses:
Cost of goods sold 607,037 542,348
Selling, general and
administrative expenses 169,766 156,189
Interest expense 16,051 14,338
Other - net (income) (2,917) (1,962)
------------ ------------
789,937 710,913
------------ ------------
Income before income taxes 60,929 81,841
Provision for income taxes 23,274 31,556
------------ ------------
Net income applicable
to Common Shares $ 37,655 $ 50,285
============ ============
Weighted average number of common and
common equivalent shares outstanding 39,413,751 40,236,946
Earnings per common and
common equivalent share $ .96 $ 1.25
Cash dividends per common share $ .36 $ .30
</TABLE>
See accompanying notes to consolidated condensed financial statements.
-5-
<PAGE> 7
RUSSELL CORPORATION
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
39 Weeks Ended
-----------------------
October 1 October 2
1995 1994
--------- ---------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 37,655 $ 50,285
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 52,098 51,412
Deferred income taxes 4,829 4,775
Gain on sale of equipment (325) (596)
Changes in Assets and Liabilities:
Accounts receivable (90,923) (94,165)
Inventories (42,283) 1,247
Prepaid expenses and other current assets (1,846) 2,581
Other assets (1,559) (10,139)
Accounts payable & accrued expenses 21,292 7,115
Income taxes payable (9,679) (17,059)
Pension and other deferred liabilities 905 (2,834)
-------- --------
Net cash used in operating activities (29,836) (7,378)
Cash Flows from Investing Activities
Purchases of property, plant & equipment (52,237) (26,758)
Proceeds from sale of equipment 4,484 1,715
-------- --------
Net cash used in investing activities (47,753) (25,043)
Cash Flows from Financing Activities
Short-term borrowings 57,903 93,904
Long-term borrowings 75,000 --
Payments on long-term debt (19,409) (21,756)
Payments on notes payable -- (4,562)
Dividends on Common Stock (14,113) (11,990)
Cost of Common Stock for treasury (22,685) (22,776)
Distribution of treasury shares 755 2,344
-------- --------
Net cash provided by financing activities 77,451 35,164
Effect of exchange rate changes on cash (277) 109
-------- --------
Net (decrease) increase in cash (415) 2,852
Cash balance at beginning of period 4,141 3,897
-------- --------
Cash balance at end of period $ 3,726 $ 6,749
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
-6-
<PAGE> 8
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 October 1, 1995, October 2, 1994
and December 31, 1994, and the results of operations for the thirteen
and thirty-nine week periods ended October 1, 1995, and October 2,
1994, and cash flows for the thirty-nine week periods ended October 1,
1995 and October 2, 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. The results of operations for the thirteen and thirty-nine weeks
ended October 1, 1995 and October 2, 1994 are not necessarily
indicative of the results to be expected for the full year.
-7-
<PAGE> 9
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 39 Weeks 13 Weeks
Ended 10/1/95 Ended 10/1/95 Ended 10/1/95
and 10/2/94 and 10/2/94 and 7/2/95
------------------- ------------------- -------------------
Increase (Decrease)
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 16,689 5.3% $ 58,112 7.3% $ 65,089 24.2%
Cost of goods sold 27,586 12.7 64,689 11.9 53,214 27.8
Selling, general and
administrative expenses 6,494 11.5 13,577 8.7 8,625 15.9
Interest expense 624 11.4 1,713 11.9 779 14.6
Other income 287 41.1 955 48.7 (323) (24.7)
Income before income taxes (17,728) (45.2) (20,912) (25.6) 2,148 11.1
Provision for income taxes (6,467) (43.2) (8,282) (26.2) 1,685 24.7
Net income applicable
to common shares (11,261) (46.5) (12,630) (25.1) 463 3.7
</TABLE>
Sales increases for the third quarter and first nine months of 1995 reflect
higher unit volumes of domestic activewear and continued solid growth in the
International operations. International sales have grown 34% for the nine
months this year versus last year.
Gross margins were unfavorably impacted by competitive pricing associated
primarily with excess inventory of T-shirts, higher raw material costs, and
unfavorable variances associated with domestic contracting. The significance of
domestic contracting is diminishing as the Company adds internal capacities and
increases '807' assembly and offshore sourced product. It is anticipated that
competitive pricing pressure will continue through the fourth quarter of this
year. This trend should diminish in 1996 as industry capacity is adjusted and
excess inventories are corrected.
Selling, general and administrative expenses were higher principally due to
the inclusion of acquisitions and higher advertising costs. Interest expense
increased in the quarter due to higher seasonal borrowings. Other income was
derived mainly from interest, rental income and the disposition of certain
fixed assets.
-8-
<PAGE> 10
Financial Condition
The Company's financial condition remains strong. Long-term debt to total
capitalization is at 23.0%. As of October 1, short-term debt was $156,023,000.
During the second quarter of this year, the Company borrowed $75,000,000 under
an agreement with a major commercial bank. The proceeds from this borrowing
were used to reduce short-term debt. The Company continues to maintain
$209,000,000 in informal lines of credit.
The statement of cash flows reflects that $52,237,000 was invested in the
capital program in the first nine months of 1995. Capital expenditures, working
capital, dividends, and treasury stock purchases were met with internally
generated funds, short-term bank loans and long-term borrowings. Inventory
levels are up 14% over last year and are positioned for the anticipated higher
shipments in the fourth quarter. Accounts receivable growth of 9% is basically
in line with sales growth.
The Company utilizes interest rate swaps to change the characteristics of
certain debt. Prior to 1995, 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 facilitate setting 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.
While the purchasing of futures reduces the risks of adverse price
fluctuations, it 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 a portion of its cotton requirements. Cotton prices
rose in the second quarter and continued that trend in the third quarter. The
aforementioned futures favorably mitigated a portion of the impact of higher
prices. The unfavorable impact of higher fiber costs will continue in the
fourth quarter.
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.
SUBSEQUENT EVENTS
After October 1, the Company reached an agreement in principle for a
private placement of $100,000,000 of long-term debt, due 2008, at a fixed rate
of 6.78%. The proceeds of this placement will be used for the repayment of
short-term debt and other general corporate purposes.
-9-
<PAGE> 11
PART II - OTHER INFORMATION
Item 5. 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 October 1, 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 November 14, 1995 /s/ James D. Nabors
---------------------- ----------------------------------------
James D. Nabors
Executive Vice President and
Chief Financial Officer
(For the Registrant and as
Principal Financial Officer)
-11-
<PAGE> 12
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit No. Page No.
- ----------- --------
<S> <C>
11 Computation of Earnings Per Share 10
27 Financial Data Schedule (for SEC use only)
</TABLE>
-12-
<PAGE> 1
RUSSELL CORPORATION Exhibit 11
Computation of Earnings Per Share
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
--------------------------- ---------------------------
10/1/95 10/2/94 10/1/95 10/2/94
<S> <C> <C> <C> <C>
Net income $ 12,943 $ 24,204 $ 37,655 $ 50,285
=========== =========== =========== ===========
Shares:
Weighted average common
shares outstanding 38,957,004 40,013,087 39,173,504 40,000,451
Net common shares issuable
on exercise of certain
stock options 171,001 256,240 240,247 236,495
----------- ----------- ----------- -----------
Average common and common
equivalent shares
outstanding 39,128,005 40,269,327 39,413,751 40,236,946
=========== =========== =========== ===========
Earnings per common
and common equivalent share $ .33 $ .60 $ .96 $ 1.25
</TABLE>
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> OCT-01-1995
<CASH> 3,726
<SECURITIES> 1,507
<RECEIVABLES> 316,586
<ALLOWANCES> 13,841
<INVENTORY> 321,374
<CURRENT-ASSETS> 649,064
<PP&E> 976,500
<DEPRECIATION> 516,669
<TOTAL-ASSETS> 1,177,169
<CURRENT-LIABILITIES> 279,204
<BONDS> 187,896
<COMMON> 414
0
0
<OTHER-SE> 629,545
<TOTAL-LIABILITY-AND-EQUITY> 1,177,169
<SALES> 850,866
<TOTAL-REVENUES> 850,866
<CGS> 607,037
<TOTAL-COSTS> 607,037
<OTHER-EXPENSES> 163,455
<LOSS-PROVISION> 3,394
<INTEREST-EXPENSE> 16,051
<INCOME-PRETAX> 60,929
<INCOME-TAX> 23,274
<INCOME-CONTINUING> 37,655
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,655
<EPS-PRIMARY> 0.96
<EPS-DILUTED> 0.96
</TABLE>
