<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 5, 1997 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.
Class Outstanding at November 14, 1997
----- --------------------------------
Common Stock, Par Value $.01 Per Share 36,471,625 shares
(Excludes Treasury)
<PAGE> 2
RUSSELL CORPORATION
Index
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information:
Consolidated Condensed Balance Sheets--
October 5, 1997 and January 4, 1997 2
October 5, 1997 and September 29, 1996 3
Consolidated Condensed Statements of Income--
Thirteen Weeks Ended October 5, 1997
and September 29, 1996 4
Thirty-nine Weeks ended October 5, 1997
and September 29, 1996 5
Consolidated Statements of Cash Flows--
Thirty-nine Weeks Ended October 5, 1997
and September 29, 1996 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
</TABLE>
-1-
<PAGE> 3
PART I - FINANCIAL INFORMATION
RUSSELL CORPORATION
Consolidated Condensed Balance Sheets
(Dollars in Thousands)
<TABLE>
<CAPTION>
October 5 January 4
1997 1997
----------- -----------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 13,608 $ 7,355
Accounts receivable, net 345,413 224,155
Inventories:
Finished goods 328,099 280,368
In process 49,024 45,562
Raw materials and supplies 50,903 53,885
---------- ----------
428,026 379,815
LIFO reserve (32,767) (33,033)
---------- ----------
395,259 346,782
Prepaid expenses and other current assets 28,193 21,733
---------- ----------
Total current assets 782,473 600,025
Property, Plant and Equipment, net 515,853 526,786
Other Assets 69,119 68,369
---------- ----------
Total assets $1,367,445 $1,195,180
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt $ 141,926 $ 63,256
Accounts payable and accrued expenses 104,226 82,197
Federal and state income taxes 1,934 10,038
Current maturities of long-term debt 21,488 31,943
---------- ----------
Total current liabilities 269,574 187,434
Long-term debt, less current maturities 360,618 255,935
Deferred Liabilities 77,889 71,988
Shareholders' Equity:
Common Stock, at par value 414 414
Paid-in capital 49,184 50,200
Retained earnings 754,737 726,492
Currency translation adjustment (5,455) (2,226)
---------- ----------
798,880 774,880
Treasury Stock, at cost (139,516) (95,057)
---------- ----------
Total shareholders' equity 659,364 679,823
---------- ----------
Total liabilities & shareholders' equity $1,367,445 $1,195,180
========== ==========
</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 5 September 29
1997 1996
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 13,608 $ 5,230
Accounts receivable, net 345,413 316,489
Inventories:
Finished goods 328,099 310,468
In process 49,024 45,512
Raw materials and supplies 50,903 58,750
---------- ----------
428,026 414,730
LIFO reserve (32,767) (46,286)
---------- ----------
395,259 368,444
Prepaid expenses and other current assets 28,193 22,245
---------- ----------
Total current assets 782,473 712,408
Property, Plant and Equipment, net 515,853 513,450
Other Assets 69,119 68,308
---------- ----------
Total assets $1,367,445 $1,294,166
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt $ 141,926 $ 150,109
Accounts payable and accrued expenses 104,226 109,105
Federal and state income taxes 1,934 3,034
Current maturities of long-term debt 21,488 31,938
---------- ----------
Total current liabilities 269,574 294,186
Long-term debt, less current maturities 360,618 255,959
Deferred Liabilities 77,889 78,793
Shareholders' Equity:
Common Stock, at par value 414 414
Paid-in capital 49,184 51,791
Retained earnings 754,737 702,309
Currency translation adjustment (5,455) (7,458)
---------- ----------
798,880 747,056
Treasury Stock, at cost (139,516) (81,828)
---------- ----------
Total shareholders' equity 659,364 665,228
---------- ----------
Total liabilities & shareholders' equity $1,367,445 $1,294,166
========== ==========
</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 5 September 29
1997 1996
----------- -----------
<S> <C> <C>
Net sales $ 368,274 $ 336,679
Costs and expenses:
Cost of goods sold 253,156 227,487
Selling, general and
administrative expenses 69,716 63,765
Interest expense 7,585 6,896
Other - net (income) 171 (561)
----------- -----------
330,628 297,587
----------- -----------
Income before income taxes 37,646 39,092
Provision for income taxes 14,412 14,639
----------- -----------
Net income $ 23,234 $ 24,453
=========== ===========
Weighted average number of common and
common equivalent shares outstanding 36,588,211 38,769,619
Earnings per common and
common equivalent share $ .64 $ .63
Cash dividends per common share $ .13 $ .13
</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 5 September 29
1997 1996
----------- -----------
<S> <C> <C>
Net sales $ 896,706 $ 885,091
Costs and expenses:
Cost of goods sold 621,510 604,185
Selling, general and
administrative expenses 185,970 179,134
Interest expense 20,669 18,936
Other - net (income) (639) (1,861)
----------- -----------
827,510 800,394
----------- -----------
Income before income taxes 69,196 84,697
Provision for income taxes 26,546 32,282
----------- -----------
Net income $ 42,650 $ 52,415
=========== ===========
Weighted average number of common and
common equivalent shares outstanding 37,225,406 38,781,112
Earnings per common and
common equivalent share $ 1.15 $ 1.35
Cash dividends per common share $ .39 $ .37
</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 5 September 29
1997 1996
--------- ------------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 42,650 $ 52,415
Adjustments to reconcile net income to
cash used in operating activities:
Depreciation and amortization 57,912 55,981
Deferred income taxes 3,355 3,565
Gain on sale of property, plant & equipment (767) (14)
Changes in Assets and Liabilities:
Accounts receivable (122,156) (91,809)
Inventories (50,587) (46,793)
Prepaid expenses (4,651) (5,379)
Accounts payable & accrued expenses 22,812 27,450
Income taxes payable (8,142) (3,759)
Pension and other deferred liabilities 248 2,335
Other assets (3,070) 994
--------- --------
Net cash used in operating activities (62,396) (5,014)
Cash Flows from Investing Activities
Purchases of property, plant & equipment (47,058) (86,440)
Proceeds from sale of property, plant & equipment 2,225 1,160
--------- --------
Net cash used in investing activities (44,833) (85,280)
Cash Flows from Financing Activities
Short-term borrowings 79,248 142,616
Long-term borrowings 125,000 --
Payments on long-term debt (30,773) (31,263)
Dividends on Common Stock (14,405) (14,269)
Cost of Common Stock for treasury (49,775) (8,658)
Distribution of treasury shares 4,300 2,594
--------- --------
Net cash provided by financing activities 113,595 91,020
Effect of exchange rate changes on cash (113) 19
--------- --------
Net increase in cash 6,253 745
Cash balance at beginning of period 7,355 4,485
--------- --------
Cash balance at end of period $ 13,608 $ 5,230
========= ========
</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 5, 1997, September 29, 1996
and January 4, 1997, and the results of operations for the thirteen and
thirty-nine week periods ended October 5, 1997 and September 29, 1996,
and cash flows for the thirty-nine week periods ended October 5, 1997
and September 29, 1996.
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 January 4, 1997.
2. The results of operations for the thirteen and thirty-nine weeks ended
October 5, 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.
-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 condensed statements of income is shown below:
<TABLE>
<CAPTION>
Comparison of
-------------------------------------------------------------------
13 Weeks 39 Weeks 13 Weeks
Ended 10/5/97 Ended 10/5/97 Ended 10/5/97
and 9/29/96 and 9/29/96 and 7/6/97
------------------- ------------------- --------------------
Increase (Decrease)
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 31,595 9.4% $ 11,615 1.3% $ 98,001 36.3%
Cost of goods sold 25,669 11.3 17,325 2.9 60,950 31.7
Selling, general and
administrative expenses 5,951 9.3 6,836 3.8 10,789 18.3
Interest expense 689 10.0 1,733 9.2 373 5.2
Other income (732) N/A (1,222) (65.7) (1,462) N/A
Income before income taxes (1,446) (3.7) (15,501) (18.3) 24,427 184.8
Provision for income taxes (227) (1.6) (5,736) (17.8) 9,306 182.3
Net income (1,219) (5.0) (9,765) (18.6) 15,121 186.4
</TABLE>
Sales for the third quarter of 1997 were up 9.4% over the third quarter of
1996. This established a new record for quarterly sales, as well as a record
39-week comparison. The quarter re-established a positive trend in
year-over-year sales comparisons.
These sales comparisons benefitted, in particular, from strength at Cross
Creek, Russell Athletic and DeSoto Mills. Jerzees also had good sales increases
for the quarter - the first strong sales comparison for the year. Licensed
products sales continue to decline in quarterly comparisons with last year's
third quarter that included the Summer Olympics.
Margins continued to remain under pressure (31.3% vs. 32.4% for the
quarter; 30.7% vs. 31.7% for the year) due to the current pricing environment,
particularly in the screenprint/distributor market. Continuing improvements in
raw material prices, ongoing cost reductions, and improved efficiencies in
manufacturing mitigated the impact of lower selling prices versus the previous
year.
Selling, general and administrative expenses remained at 18.9% for the
quarter, representing 20.7% on a year-to-date basis versus 20.2% in 1996.
Increases in SG&A dollars were primarily dedicated to service improvements and
additional brand building of the Jerzees brand. As a result, net income for the
quarter declined five percent, but represented an increase in earnings on a per
share basis due to the previously authorized stock repurchase program.
-8-
<PAGE> 10
FINANCIAL CONDITION
The financial condition of the Company remains strong. Inventory increases
have begun to slow relative to the sales increases. The current ratio at the end
of the third quarter was 2.9 versus 2.4 the prior year.
On August 28, 1997, the Company issued $125 million of long-term debt with
a weighted average life of seven years at a rate of 6.65%. Proceeds of the loan
were used to reduce short-term debt.
Required cash for accounts receivable, inventories, capital expenditures
and dividends were derived from internally generated funds and the
aforementioned additional long-term debt. Additionally, the Company maintained
$286 million in informal lines of credit at the end of the quarter.
Total shareholder equity declined versus prior year due to treasury stock
puchases.
Subsequent to quarter end, the Company's Board of Directors voted to
increase the dividend payable to shareholders of record as of November 5, 1997
to $.14 per common share from $.13, 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 nine months of 1997.
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 October 5, 1997, the Company had outstanding futures contracts,
that when combined with other contracts and inventory, exceeded the Company's
anticipated 1997 cotton requirements.
-9-
<PAGE> 11
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
b) Reports on Form 8-K - there were no reports on Form 8-K filed for the
period ended October 5, 1997.
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, 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 39 Weeks Ended
--------------------------- ---------------------------
10/5/97 9/29/96 10/5/97 9/29/96
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income $ 23,234 $ 24,453 $ 42,650 $ 52,415
=========== =========== =========== ===========
Shares:
Weighted average common
shares outstanding 36,476,360 38,474,821 37,006,327 38,585,647
Net common shares issuable
on exercise of certain
stock options 111,851 294,798 219,079 195,465
----------- ----------- ----------- -----------
Average common and common
equivalent shares
outstanding 36,588,211 38,769,619 37,225,406 38,781,112
=========== =========== =========== ===========
Earnings per common
and common equivalent share $ .64 $ .63 $ 1.15 $ 1.35
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF RUSSELL CORPORATION FOR THE NINE MONTHS ENDED OCTOBER 5,
1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> OCT-05-1997
<CASH> 13,608
<SECURITIES> 823
<RECEIVABLES> 357,661
<ALLOWANCES> 12,248
<INVENTORY> 395,259
<CURRENT-ASSETS> 782,473
<PP&E> 1,153,296
<DEPRECIATION> 637,443
<TOTAL-ASSETS> 1,367,445
<CURRENT-LIABILITIES> 269,574
<BONDS> 360,618
0
0
<COMMON> 414
<OTHER-SE> 658,950
<TOTAL-LIABILITY-AND-EQUITY> 1,367,445
<SALES> 896,706
<TOTAL-REVENUES> 896,706
<CGS> 621,510
<TOTAL-COSTS> 621,510
<OTHER-EXPENSES> 181,706
<LOSS-PROVISION> 3,625
<INTEREST-EXPENSE> 20,669
<INCOME-PRETAX> 69,196
<INCOME-TAX> 26,546
<INCOME-CONTINUING> 42,650
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,650
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.15
</TABLE>
