<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 March 31, 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 May 14, 1996
----- ---------------------------
Common Stock, Par Value $.01 Per Share 38,435,128 shares
(Excludes Treasury)
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RUSSELL CORPORATION
Index
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information:
Consolidated Condensed Balance Sheets--
March 31, 1996 and December 30, 1995 2
Consolidated Condensed Statements of Income--
Thirteen Weeks Ended March 31, 1996 and
April 2, 1995 3
Consolidated Statements of Cash Flows--
Thirteen Weeks Ended March 31, 1996 and
April 2, 1995 4
Notes to Consolidated Condensed Financial
Statements 5
Management's Discussion and Analysis of
Results of Operations and Financial
Condition 6
Exhibit 11 - Computation of Earnings Per
Share 8
Part II. Other Information 9
Index to Exhibits 11
</TABLE>
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PART I - FINANCIAL INFORMATION
RUSSELL CORPORATION
Consolidated Condensed Balance Sheets
(Dollars in Thousands)
<TABLE>
<CAPTION>
March 31 December 30
1996 1995
----------- -----------
ASSETS (Unaudited) (Audited)
------
<S> <C> <C>
Current Assets:
Cash $ 4,973 $ 4,485
Accounts receivable, net 221,094 224,375
Inventories:
Finished goods 313,238 274,035
In process 45,148 43,476
Raw materials and supplies 61,065 62,099
---------- ----------
419,451 379,610
LIFO reserve (58,037) (58,401)
---------- ----------
361,414 321,209
Prepaid expenses and other current assets 19,940 14,808
---------- ----------
Total current assets 607,421 564,877
Property, Plant and Equipment, net 493,387 481,734
Other Assets 66,677 71,553
---------- ----------
Total assets $1,167,485 $1,118,164
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Short-term debt $ 35,768 $ 7,389
Accounts payable and accrued expenses 97,706 81,342
Federal and state income taxes 4,142 6,793
Current maturities of long-term debt 31,234 31,283
---------- ----------
Total current liabilities 168,850 126,807
Long-term debt and capital lease obligations,
less current maturities 287,860 287,878
Deferred Liabilities 72,739 70,921
Shareholders' Equity:
Common Stock, at par value 414 414
Paid-in capital 52,185 52,405
Retained earnings 671,173 664,163
Currency translation adjustment ( 8,817) ( 8,046)
---------- ----------
714,955 708,936
Treasury Stock, at cost (76,919) (76,378)
---------- ----------
Total shareholders' equity 638,036 632,558
---------- ----------
Total liabilities & shareholders' equity $1,167,485 $1,118,164
========== ==========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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RUSSELL CORPORATION
Consolidated Condensed Statements of Income
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended
-----------------------------
March 31 April 2
1996 1995
---------- ----------
<S> <C> <C>
Net sales $ 257,854 $ 248,315
Costs and expenses:
Cost of goods sold 176,639 171,435
Selling, general and
administrative expenses 57,190 52,747
Interest expense 5,796 4,594
Other - net (income) (619) (622)
---------- ----------
239,006 228,154
---------- ----------
Income before income taxes 18,848 20,161
Provision for income taxes 7,196 7,929
---------- ----------
Net income applicable
to Common Shares $ 11,652 $ 12,232
========== ==========
Weighted average number of common and
common equivalent shares outstanding 38,830,040 39,744,794
Earnings per common and
common equivalent share $ .30 $ .31
Cash dividends per common share $ .12 $ .12
</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>
13 Weeks Ended
--------------------------------
March 31 April 2
1996 1995
-------- ---------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 11,652 $ 12,232
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 18,733 17,646
Deferred income taxes 1,051 1,669
Loss (gain) on sale of equipment 18 ( 391)
Changes in Assets and Liabilities:
Accounts receivable 3,040 7,479
Inventories (40,452) (33,717)
Prepaid expenses ( 5,217) ( 2,483)
Accounts payable & accrued expenses 16,233 2,865
Income taxes payable ( 2,651) ( 2,660)
Accrued liabilities 851 700
Other assets 4,233 ( 5,423)
-------- --------
Net cash provided by (used in) operations 7,491 ( 2,083)
Cash Flows from Investing Activities
Purchases of property, plant & equipment (30,553) (10,376)
Proceeds from sale of equipment 539 550
-------- --------
Net cash used in investing activities (30,014) ( 9,826)
Cash Flows from Financing Activities
Short-term borrowings 28,481 33,325
Payments on long-term debt ( 66) ( 76)
Dividends on Common Stock ( 4,642) ( 4,744)
Cost of Common Stock for treasury ( 1,013) (13,193)
Distribution of treasury shares 252 231
-------- --------
Net cash provided by financing activities 23,012 15,543
Effect of exchange rate changes on cash ( 1) ( 443)
-------- --------
Net increase in cash 488 3,191
Cash balance at beginning of period 4,485 4,141
-------- --------
Cash balance at end of period $ 4,973 $ 7,332
======== ========
</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 March 31, 1996, and December 30, 1995, and the
results of operations and cash flows for the thirteen weeks ended March 31,
1996 and April 2, 1995.
The accounting policies followed by the Company are set forth in Note A to
the Company's consolidated financial statements in Form 10-K for the year
ended December 30, 1995.
2. The results of operations for the thirteen weeks ended March 31, 1996, are
not necessarily indicative of the results to be expected for the full year.
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<PAGE> 7
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
---------------------------------------------
Quarter Ended Quarter Ended
March 31, 1996 and March 31, 1996 and
April 2, 1995 December 30, 1995
------------------- -------------------
Increase (Decrease)
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Net sales $ 9,539 3.8% $(43,913) (14.6)%
Cost of goods sold 5,204 3.0
(33,158) (15.8)
Selling, general and
administrative expenses 4,443 8.4 ( 2,391) ( 4.0)
Interest expense 1,202 26.2 149 2.6
Other - net ( 3) ( 0.5) 557 N/A
Income before income taxes ( 1,313) ( 6.5) ( 7,956) (29.7)
Provision for income taxes ( 733) ( 9.2) ( 3,146) (30.4)
Net income applicable
to common shares ( 580) ( 4.7) ( 4,810) (29.2)
</TABLE>
Sales increased approximately 4% versus the first quarter of 1995.
Continued competitive pricing pressures in domestic T-shirt markets were more
than offset by continued growth in international and other domestic markets.
Gross margins improved to 31.5% of sales in the first quarter. Lower
selling prices, especially in T-shirts were more than offset by improvements in
raw material prices and better manufacturing efficiencies. The Company expects
that favorable gross margin comparisons will continue for the remainder of 1996
as lower raw material prices continue and benefits from the Company's cost
reduction efforts are realized.
Selling, general and administrative expenses increased from higher
expenditures for customer service, support for the Company's international
operations and continued investment spending for marketing. These
expenditures, while penalizing first quarter earnings, are expected to deliver
future benefits.
FINANCIAL CONDITION
The Company's financial condition remains strong. Accounts receivable
increased in line with sales growth and inventories increased in line with
projected
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requirements for future orders. The current ratio was 3.6:1 at March 31, 1996.
The Company's debt to total capitalization ratio is 31.1% after a 100% increase
in long-term debt over the same period in 1995. The statement of cash flows
indicates that $30.6 million was spent on the capital program in the first
quarter, mainly for investments in customer service and manufacturing
facilities. Cash requirements for capital expenditures, working capital,
treasury stock purchases and dividends were provided by internally generated
funds and short-term bank loans. At quarter-end the company maintained $209
million in informal lines of credit.
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 quarter.
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 March 31, 1996, the Company had outstanding futures contracts,
that when combined with other contracts and inventory, exceeded the Company's
anticipated 1996 cotton requirements.
During 1995, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for Long- Lived Assets and for Assets to be
Disposed of." The Company records impairment losses on long-lived assets used
in operations when events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be generated by those
assets are less than the carrying amounts of those assets. An impairment loss
would be recorded based on the excess of the carrying amount of the asset over
the asset's fair value. There was no impact on the Company's financial
statements from the adoption of Statement 121 in 1995 or during the first
quarter of 1996.
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<PAGE> 9
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
a) The Annual Meeting of Shareholders was held on April 24, 1996.
b) On February 28, 1996, a majority of the Board of Directors adopted a
resolution which established the size of the Board of Directors at ten
members, effective April 24, 1996.
Glenn Ireland II retired from the Board of Directors effective at the
Annual Meeting.
c) At the Annual Meeting, shareholders voted upon the election of
Directors serving a three-year term.
For Director, the following nominees received the following votes:
<TABLE>
<CAPTION>
Name For Withheld
---- --- --------
<S> <C> <C>
Herschel M. Bloom 35,218,219 447,880
Ronald G. Bruno 35,217,761 448,338
</TABLE>
All nominees were elected.
John C. Adams, Crawford T. Johnson III, James D. Nabors, and Benjamin
Russell will continue in office until their terms expire in 1997.
C.V. Nalley III, John R. Thomas, John A. White, and Timothy A. Lewis
will continue in office until their terms expire in 1998.
Item 5. Other Information
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 March 31, 1996.
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<PAGE> 10
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 May 14, 1996 /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.
- -----------
11 Computation of Earnings Per Share
27 Financial Data Schedule (for SEC use only)
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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
---------------------------
3/31/96 4/2/95
------- --------
<S> <C> <C>
Net income $ 11,652 $ 12,232
========== ==========
Shares:
Weighted average common
shares outstanding 38,678,635 39,460,758
Net common shares issuable
on exercise of certain
stock options 151,405 284,036
---------- ----------
Average common and common
equivalent shares
outstanding 38,830,040 39,744,794
========== ==========
Earnings per common and
common equivalent share $ .30 $ .31
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RUSSELL CORP FOR THE THREE MONTHS ENDED MARCH 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-04-1996
<PERIOD-END> MAR-31-1996
<CASH> 4,973
<SECURITIES> 1,298
<RECEIVABLES> 231,781
<ALLOWANCES> 10,687
<INVENTORY> 361,414
<CURRENT-ASSETS> 607,421
<PP&E> 1,040,802
<DEPRECIATION> 547,415
<TOTAL-ASSETS> 1,167,485
<CURRENT-LIABILITIES> 168,850
<BONDS> 287,860
0
0
<COMMON> 414
<OTHER-SE> 637,622
<TOTAL-LIABILITY-AND-EQUITY> 1,167,485
<SALES> 257,854
<TOTAL-REVENUES> 257,854
<CGS> 176,639
<TOTAL-COSTS> 176,639
<OTHER-EXPENSES> 55,433
<LOSS-PROVISION> 1,138
<INTEREST-EXPENSE> 5,796
<INCOME-PRETAX> 18,848
<INCOME-TAX> 7,196
<INCOME-CONTINUING> 11,652
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,652
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
</TABLE>
