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Previous: WESTWOOD GROUP INC, 10-Q, 1997-05-20 |
Next: CONSOLIDATED TECHNOLOGY GROUP LTD, 10-Q, 1997-05-20 |
<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 April 6, 1997 Commission file number 0-1790
RUSSELL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Alabama 63-0180720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
755 Lee Sreet, Alexander City, Alabama 35011
(Address of principal executive offices) (Zip Code)
</TABLE>
(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 15, 1997
----- ---------------------------
Common Stock, Par Value $.01 Per Share 36,467,078 shares
(Excludes Treasury)
<PAGE> 2
RUSSELL CORPORATION
Index
<TABLE>
Page No.
--------
Part I. Financial Information:
<S> <C>
Consolidated Condensed Balance Sheets--
April 6, 1997 and January 4, 1997 2
Consolidated Condensed Statements of Income--
Thirteen Weeks Ended April 6, 1997 and
March 31, 1996 3
Consolidated Statements of Cash Flows--
Thirteen Weeks Ended April 6, 1997 and
March 31, 1996 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
</TABLE>
-1-
<PAGE> 3
PART I - FINANCIAL INFORMATION
RUSSELL CORPORATION
Consolidated Condensed Balance Sheets
(Dollars in Thousands)
<TABLE>
<CAPTION>
April 6 January 4
1997 1997
ASSETS (Unaudited) (Audited)
------ ----------- ----------
<S> <C> <C>
Current Assets:
Cash $ 6,144 $ 7,355
Accounts receivable, net 220,931 224,155
Inventories:
Finished goods 337,067 280,368
In process 45,911 45,562
Raw materials and supplies 55,225 53,885
---------- ---------
438,203 379,815
LIFO reserve (34,962) (33,033)
---------- ---------
403,241 346,782
Prepaid expenses and other current assets 28,880 21,733
---------- ---------
Total current assets 659,196 600,025
Property, Plant and Equipment, net 516,981 526,786
Other Assets 66,272 68,369
---------- ---------
Total assets $1,242,449 $1,195,180
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt $111,133 $63,256
Accounts payable and accrued expenses 92,937 82,197
Federal and state income taxes 3,519 10,038
Current maturities of long-term debt 31,938 31,943
---------- ---------
Total current liabilities 239,527 187,434
Long-term debt and capital lease obligations,
less current maturities 255,921 255,935
Deferred Liabilities 75,808 71,988
Shareholders' Equity:
Common Stock, at par value 414 414
Paid-in capital 49,665 50,200
Retained earnings 732,872 726,492
Currency translation adjustment (4,625) (2,226)
---------- ---------
778,326 774,880
Treasury Stock, at cost (107,133) (95,057)
---------- ---------
Total shareholders' equity 671,193 679,823
---------- ---------
Total liabilities & shareholders' equity $1,242,449 $1,195,180
========== ==========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
-2-
<PAGE> 4
RUSSELL CORPORATION
Consolidated Condensed Statements of Income
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended
--------------------------
April 6 March 31
1997 1996
---------- ----------
<S> <C> <C>
Net sales $ 258,159 $ 257,854
Costs and expenses:
Cost of goods sold 176,148 176,639
Selling, general and
administrative expenses 57,327 57,190
Interest expense 5,872 5,796
Other - net (income) 481 (619)
---------- ----------
239,828 239,006
---------- ----------
Income before income taxes 18,331 18,848
Provision for income taxes 7,028 7,196
---------- ----------
Net income $ 11,303 $ 11,652
========== ==========
Weighted average number of common and
common equivalent shares outstanding 38,107,146 38,830,040
Net Income per common and
common equivalent share $ .30 $ .30
Cash dividends per common share $ .13 $ .12
</TABLE>
See accompanying notes to consolidated condensed financial statements.
-3-
<PAGE> 5
RUSSELL CORPORATION
Consolidated Condensed Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended
----------------------
April 6 March 31
1997 1996
------- ---------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $11,303 $11,652
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 19,969 18,733
Deferred income taxes 783 1,051
Loss on sale of equipment 372 18
Changes in assets and liabilities:
Accounts receivable 2,551 3,040
Inventories (57,898) (40,452)
Prepaid expenses (6,373) (5,217)
Accounts payable & accrued expenses 11,184 16,233
Income taxes payable (6,489) (2,651)
Pension and other deferred liabilities 1,918 851
Other assets 1,337 4,233
------- ---------
Net cash (used in) provided by operating activities (21,343) 7,491
Cash Flows from Investing Activities
Purchases of property, plant & equipment (10,827) (30,553)
Proceeds from sale of property, plant & equipment 360 539
------- ---------
Net cash used in investing activities (10,467) (30,014)
Cash Flows from Financing Activities
Short-term borrowings 48,252 28,481
Payments on long-term debt ( 19) ( 66)
Dividends on Common Stock ( 4,923) ( 4,642)
Cost of Common Stock for treasury (16,029) ( 1,013)
Distribution of treasury shares 3,418 252
------- ---------
Net cash provided by financing activities 30,699 23,012
Effect of exchange rate changes on cash ( 100) ( 1)
------- ---------
Net (decrease) increase in cash (1,211) 488
Cash balance at beginning of period 7,355 4,485
------- ---------
Cash balance at end of period $ 6,144 $ 4,973
======= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
-4-
<PAGE> 6
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 April 6, 1997, and January 4, 1997, and the
results of operations and cash flows for the thirteen weeks ended April 6,
1997 and March 31, 1996.
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 January 4, 1997.
2. The results of operations for the thirteen weeks ended April 6, 1997, are
not necessarily indicative of the results to be expected for the full year.
3. In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share",
effective for periods ending after December 15, 1997. The statement is
intended to simplify the earnings per share calculation by excluding common
stock equivalents from the calculation. While the Company has not completed
its analysis, it is not anticipated that the change in the calculation will
have a significant effect on reported earnings per share.
-5-
<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
April 6, 1997 and April 6, 1997 and
March 31, 1996 January 4, 1997
----------------------- ---------------------
Increase (Decrease)
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Net sales $ 305 0.1% $(100,954) (28.1)%
Cost of goods sold ( 491) (0.3) ( 65,833) (27.2)
Selling, general and
administrative expenses 137 0.2 ( 7,298) (11.3)
Interest expense 76 1.3 ( 930) (13.7)
Other - net 1,100 N/A ( 376) (43.9)
Income before income taxes ( 517) (2.7) ( 26,517) (59.1)
Provision for income taxes ( 168) (2.3) ( 8,659) (55.2)
Net income ( 349) (3.0) ( 17,858) (61.2)
</TABLE>
Sales were essentially flat for the first quarter of 1997 over the first
quarter of 1996. Weather related weakness in fleece sales at retail resulted
in lower fleece sales for the quarter. Sales did increase into the distributor
market despite the continuance of competitive pricing pressures, primarily in
t-shirts. Additionally, sales increases in other areas of the Company further
offset the fleece decline.
Gross margins improved to 31.8% of sales for the quarter from the previous
year's first quarter 31.5% margins. Lower selling prices were more than offset
by improvements in raw material prices and improving manufacturing
efficiencies.
Selling, general and administrative expenses increased slightly, but
remained constant as a percent of sales at 22.2%.
FINANCIAL CONDITION
The Company's financial condition remains strong. Inventories increased
slightly faster than sales, again, primarily due to the lower than anticipated
fleece sales at retail. The current ratio was 2.8:1 at April 6, 1997. The
Company's debt to total capitalization at that date was 27.6%, down from 31.1%
for the same period in 1996.
-6-
<PAGE> 8
Required cash for inventories, treasury stock purchases, capital expenditures
and dividends was derived from internally generated funds and borrowings under
short-term bank loans. The Company maintained $288 million in informal lines
of credit at the end of the quarter.
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 April 6, 1997, the Company had outstanding futures contracts, that when
combined with other contracts and inventory, exceeded the Company's anticipated
remaining 1997 cotton requirements.
-7-
<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 23, 1997.
c) Crawford T. Johnson III retired from the Board of Directors effective
at the Annual Meeting.
At the Annual Meeting, shareholders voted upon the following nominees to
serve as Directors for a three-year term. The results of the vote are as
follows:
<TABLE>
<CAPTION>
Name For Withheld
---- --- --------
<S> <C> <C>
John C. Adams 33,154,629 515,273
James D. Nabors 33,155,569 514,333
Benjamin Russell 33,156,710 513,192
Margaret M. Porter 33,161,011 508,891
</TABLE>
All nominees were elected.
C.V. Nalley III, John R. Thomas, John A. White, and Timothy A. Lewis will
continue in office until their terms expire in 1998. Herschel M. Bloom and
Ronald G. Bruno will continue in office until their terms expire in 1999.
The proposal voted upon by the shareholders involved amendments to the Russell
Corporation 1993 Executive Long Term Incentive Plan (the "1993 Plan"). The
reason for amending the 1993 Plan was to provide individual annual limits on
grants of stock options, SARs, restricted stock and performance shares or
performance units. These limits will bring the 1993 Plan into compliance with
Internal Revenue Code Section 162(m) so these awards will continue to be tax
deductible. The vote upon this proposal was as follows:
For: 33,113,368
Against: 479,005
Abstain: 77,526
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 April 6, 1997.
-9-
<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 15, 1997 /S/James D. Nabors
----------------- ------------------------------------
James D. Nabors
Executive Vice President and
Chief Financial Officer
(For the Registrant and as
Principal Financial Officer)
-10-
<PAGE> 1
Exhibit 11
RUSSELL CORPORATION
Computation of Earnings Per Share
(Dollars in Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
13 Weeks Ended
-----------------------
4/6/97 3/31/96
---------- ----------
<S> <C> <C>
Net income $11,303 $11,652
========== ==========
Shares:
Weighted average common
shares outstanding 37,806,137 38,678,635
Net common shares issuable
on exercise of certain
stock options 301,009 151,405
---------- ----------
Average common and common
equivalent shares
outstanding 38,107,146 38,830,040
========== ==========
Earnings per common and
common equivalent share $0.30 $0.30
</TABLE>
-8-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> APR-06-1997
<CASH> 6,144
<SECURITIES> 569
<RECEIVABLES> 230,142
<ALLOWANCES> 9,211
<INVENTORY> 403,241
<CURRENT-ASSETS> 659,196
<PP&E> 1,124,059
<DEPRECIATION> 607,078
<TOTAL-ASSETS> 1,242,449
<CURRENT-LIABILITIES> 239,527
<BONDS> 255,921
0
0
<COMMON> 414
<OTHER-SE> 670,779
<TOTAL-LIABILITY-AND-EQUITY> 1,242,449
<SALES> 258,159
<TOTAL-REVENUES> 258,159
<CGS> 176,148
<TOTAL-COSTS> 176,148
<OTHER-EXPENSES> 56,434
<LOSS-PROVISION> 1,374
<INTEREST-EXPENSE> 5,872
<INCOME-PRETAX> 18,331
<INCOME-TAX> 7,028
<INCOME-CONTINUING> 11,303
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,303
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
</TABLE>
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