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<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 June 30, 1996 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 35011
(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 9, 1996
----- -----------------------------
Common Stock, Par Value $.01 Per Share 38,484,286 shares
(Excludes Treasury)
<PAGE> 2
RUSSELL CORPORATION
Index
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information:
Consolidated Condensed Balance Sheets--
June 30, 1996 and December 30, 1995 2
Consolidated Condensed Statements of Income--
Thirteen Weeks Ended June 30, 1996 and
July 2, 1995 3
Twenty-six Weeks Ended June 30, 1996 and
July 2, 1995 4
Consolidated Statements of Cash Flows--
Twenty-six Weeks Ended June 30, 1996 and
July 2, 1995 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>
-1-
<PAGE> 3
PART I - FINANCIAL INFORMATION
RUSSELL CORPORATION
Consolidated Condensed Balance Sheets
(Dollars in Thousands)
<TABLE>
<CAPTION>
June 30 December 30
1996 1995
---------- ----------
ASSETS (Unaudited) (Audited)
<S> <C> <C>
Current Assets:
Cash $ 5,062 $ 4,485
Accounts receivable, net 246,799 224,375
Inventories:
Finished goods 328,164 274,035
In process 43,302 43,476
Raw materials and supplies 58,676 62,099
---------- ----------
430,142 379,610
LIFO reserve (50,194) (58,401)
---------- ----------
379,948 321,209
Prepaid expenses and other current assets 24,393 14,808
---------- ----------
Total current assets 656,202 564,877
Property, Plant and Equipment, net 505,267 481,734
Other Assets 67,745 71,553
---------- ----------
Total assets $1,229,214 $1,118,164
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt $ 103,930 $ 7,389
Accounts payable and accrued expenses 95,656 81,342
Federal and state income taxes -- 6,793
Current maturities of long-term debt 31,986 31,283
---------- ----------
Total current liabilities 231,572 126,807
Long-term debt, less current maturities
and unamortized debt discount 277,392 287,878
Deferred Liabilities 76,174 70,921
Shareholders' Equity:
Common Stock, at par value 414 414
Paid-in capital 52,028 52,405
Retained earnings 682,858 664,163
Currency translation adjustment (7,913) (8,046)
---------- ----------
727,387 708,936
Treasury Stock, at cost (83,311) (76,378)
---------- ----------
Total shareholders' equity 644,076 632,558
---------- ----------
Total liabilities & shareholders' equity $1,229,214 $1,118,164
========== ==========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
-2-
<PAGE> 4
RUSSELL CORPORATION
Consolidated Condensed Statements of Income
(Dollars in Thousands Except Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended
--------------------------------
June 30 July 2
1996 1995
---------- ----------
<S> <C> <C>
Net sales $ 290,558 $ 268,731
Costs and expenses:
Cost of goods sold 200,059 191,194
Selling, general and
administrative expenses 58,179 54,197
Interest expense 6,244 5,339
Other - net (income) (681) (1,309)
---------- ----------
263,801 249,421
---------- ----------
Income before income taxes 26,757 19,310
Provision for income taxes 10,447 6,830
---------- ----------
Net income $ 16,310 $ 12,480
========== ==========
Weighted average number of common and
common equivalent shares outstanding 38,630,930 39,313,678
Earnings per common and
common equivalent share $ .42 $ .32
Cash dividends per common share $ .12 $ .12
</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>
26 Weeks Ended
--------------------------------
June 30 July 2
1996 1995
---------- ----------
<S> <C> <C>
Net sales $ 548,412 $ 517,046
Costs and expenses:
Cost of goods sold 376,698 362,629
Selling, general and
administrative expenses 115,369 106,944
Interest expense 12,040 9,933
Other - net (income) (1,300) (1,931)
---------- ----------
502,807 477,575
---------- ----------
Income before income taxes 45,605 39,471
Provision for income taxes 17,643 14,759
---------- ----------
Net income $ 27,962 $ 24,712
========== ==========
Weighted average number of common and
common equivalent shares outstanding 38,725,839 39,530,347
Earnings per common and
common equivalent share $ .72 $ .63
Cash dividends per common share $ .24 $ .24
</TABLE>
See accompanying notes to consolidated condensed financial statements.
-4-
<PAGE> 6
RUSSELL CORPORATION
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
26 Weeks Ended
-------------------------------
June 30 July 2
1996 1995
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 27,962 $ 24,712
Adjustments to reconcile net income to
cash used in operating activities:
Depreciation and amortization 37,702 35,266
Deferred income taxes 2,693 3,362
Loss (gain) on sale of equipment 22 (458)
Changes in Assets and Liabilities:
Accounts receivable (22,290) (20,672)
Inventories (58,596) (68,748)
Prepaid expenses (7,151) (3,119)
Accounts payable & accrued expenses 14,114 10,860
Income taxes payable (8,173) (11,148)
Pension and other deferred liabilities 1,558 689
Other assets 2,320 74
-------- --------
Net cash used in operating activities (9,839) (29,182)
Cash Flows from Investing Activities
Purchases of property, plant & equipment (60,704) (28,514)
Proceeds from sale of equipment 960 858
-------- --------
Net cash used in investing activities (59,744) (27,656)
Cash Flows from Financing Activities
Short-term borrowings 96,511 23,644
Long-term borrowings -- 75,000
Payments on long-term debt (9,782) (8,643)
Dividends on Common Stock (9,267) (9,438)
Cost of Common Stock for treasury (7,693) (22,487)
Distribution of treasury shares 383 380
-------- --------
Net cash provided by financing activities 70,152 58,456
Effect of exchange rate changes on cash 8 (238)
-------- --------
Net increase in cash 577 1,380
Cash balance at beginning of period 4,485 4,141
-------- --------
Cash balance at end of period $ 5,062 $ 5,521
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
-5-
<PAGE> 7
RUSSELL CORPORATION
Notes to Consolidated Condensed Financial Statements
1. In the opinion of Management, the accompanying audited and unaudited
consoli dated condensed financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the financial position as of June 30, 1996, and December 30, 1995,
and the results of operations for the thirteen and twenty-six week
periods ended June 30, 1996, and July 2, 1995, and cash flows for the
twenty-six week periods ended June 30, 1996, and July 2, 1995.
The accounting policies followed by the Company are set forth in Note 1
to the Company's consolidated financial statements incorporated by
reference in Form 10-K for the year ended December 30, 1995.
2. The results of operations for the thirteen and twenty-six weeks ended
June 30, 1996, are not necessarily indicative of the results to be
expected for the full year.
-6-
<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 condensed statements of income is shown below:
<TABLE>
<CAPTION>
Comparison of
--------------------------------------------------------------------------------
13 Weeks 26 Weeks 13 Weeks
Ended 6/30/96 Ended 6/30/96 Ended 6/30/96
and 7/2/95 and 7/2/95 and 3/31/96
----------------------- ---------------------- ---------------------
Increase (Decrease)
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Net sales $21,827 8.1% $31,366 6.1% $32,704 12.7%
Cost of goods sold 8,865 4.6 14,069 3.9 23,420 13.3
Selling, general and
administrative expenses 3,982 7.3 8,425 7.9 989 1.7
Interest expense 905 17.0 2,107 21.2 448 7.7
Other income (628) (48.0) (631) (32.7) 62 10.0
Income before income taxes 7,447 38.6 6,134 15.5 7,909 42.0
Provision for income taxes 3,617 53.0 2,884 19.5 3,251 45.2
Net income 3,830 30.7 3,250 13.2 4,658 40.0
</TABLE>
Sales for the quarter increased 8.1% in comparison to the same period in
1995. For the first half of 1996, sales increased 6.1%. The Licensed Products
and International Divisions as well as the Company's DeSoto Mills subsidiary
showed significant increases in sales for the second quarter as well as the
first half of the year.
Gross margins improved to 31.1% and 31.3% for the quarter and first half,
respectively versus 28.9% and 29.9% in the comparable periods in 1995. These
improvements can be attributed mainly to more favorable raw material prices,
improved manufacturing efficiencies and the realization of savings from the
Company's ongoing cost reduction efforts.
Selling, general and administrative expenses increased 7.3% in dollars,
but decreased slightly as a percent of sales in the quarter reflecting the
benefits of increased sales volumes. Increased royalty rates and customer
service expenditures as well as international expansion were the main
contributors to the dollar increases. Interest expense increased with higher
levels of debt when compared to the same periods of 1995.
-7-
<PAGE> 9
FINANCIAL CONDITION
The Company's balance sheet continues to reflect a strong financial
condition. Long-term debt to total capitalization percentage increased from
25.2% at July 2, 1995 to 30.1% at June 30, 1996, reflecting the issuance of an
additional $100 million of long-term debt in the fourth quarter of 1995.
Inventory levels rose with seasonal requirements to service fall shipments. At
quarter-end the Company maintained $209 million in informal lines of credit.
The statement of cash flows reflects that the Company has invested
approximately $61 million in additional property, plant and equipment during
the first half of 1996 as the Company continues to improve its customer service
capabilities and manufacturing efficiencies. These capital expenditures as
well as dividends, treasury share purchases and other working capital
requirements were financed with internally generated funds and short-term
borrowings.
Subsequent to quarter end, the Company's Board of Directors adjusted the
authorization to repurchase the Company's outstanding Common Stock, in open
market transactions, to a total of two million shares. The Board of Directors
also voted to increase the dividend payable to shareholders of record as of
August 5 to $.13 from $.12, an 8% increase.
The Company utilizes two interest rate swap agreements in the management
of its interest rate exposure. These agreements effectively convert a portion
of the Company's interest rate exposure from a fixed to a floating rate basis,
and from a floating rate to a fixed rate basis. The effect of these agreements
was to effectively lower interest expense on the Company's long-term debt in
the first half of 1996.
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, these contracts may be purchased at the time
prices are set. Purchasing futures contracts not only limits the risk of price
increases, but also limits the Company's ability to benefit from future price
decreases. At June 30, 1996, the Company had outstanding futures contracts,
that when combined with other contracts and inventory, exceeded the Company's
anticipated 1996 cotton requirements.
-8-
<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 June 30, 1996.
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 9, 1996 /s/ James D. Nabors
------------------ -----------------------------------------
James D. Nabors, Executive Vice President
and Chief Financial Officer
(For the Registrant and as
Principal Financial Officer)
-10-
<PAGE> 11
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit No. Page No.
- ----------- --------
<S> <C> <C>
11 Computation of Earnings Per Share 9
27 Financial Data Schedule (for SEC use only)
</TABLE>
-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
---------------------------- --------------------------
6/30/96 7/2/95 6/30/96 7/2/95
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income $ 16,310 $ 12,480 $ 27,962 $ 24,712
========== ========== ========== ==========
Shares:
Weighted average common
shares outstanding 38,501,951 39,066,310 38,585,647 39,264,645
Net common shares issuable
on exercise of certain
stock options 128,979 247,368 140,192 265,702
---------- ---------- ---------- ----------
Average common and common
equivalent shares
outstanding 38,630,930 39,313,678 38,725,839 39,530,347
========== ========== ========== ==========
Earnings per common and
common equivalent share $ .42 $ .32 $ .72 $ .63
</TABLE>
-9-
<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 JUNE 30,
1996, 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> JAN-04-1997
<PERIOD-END> JUN-30-1996
<CASH> 5,062
<SECURITIES> 560
<RECEIVABLES> 258,776
<ALLOWANCES> 11,977
<INVENTORY> 379,948
<CURRENT-ASSETS> 656,202
<PP&E> 1,069,854
<DEPRECIATION> 564,587
<TOTAL-ASSETS> 1,229,214
<CURRENT-LIABILITIES> 231,572
<BONDS> 277,392
0
0
<COMMON> 414
<OTHER-SE> 643,662
<TOTAL-LIABILITY-AND-EQUITY> 1,229,214
<SALES> 548,412
<TOTAL-REVENUES> 548,412
<CGS> 376,698
<TOTAL-COSTS> 376,698
<OTHER-EXPENSES> 111,533
<LOSS-PROVISION> 2,536
<INTEREST-EXPENSE> 12,040
<INCOME-PRETAX> 45,605
<INCOME-TAX> 17,643
<INCOME-CONTINUING> 27,962
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,962
<EPS-PRIMARY> 0.72
<EPS-DILUTED> 0.72
</TABLE>
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