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 1, 2001 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.)
3330 Cumberland Blvd, Suite 800, Atlanta, Georgia 30339
and
755 Lee Street, Alexander City, Alabama 35011-0272
(Address of principal executive offices) (Zip Code)
(256) 500-4000
(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 11, 2001
Common Stock, Par Value $.01 Per Share 31,909,188 shares
(Excludes Treasury)
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RUSSELL CORPORATION
INDEX
Page No.
--------
Part I. Financial Information:
Item 1. Financial Statements
Consolidated Condensed Balance Sheets --
April 1, 2001 and December 30, 2000 2
Consolidated Condensed Statements of Operations --
Thirteen Weeks Ended April 1, 2001 and April 2, 2000 3
Consolidated Condensed Statements of Cash Flows --
Thirteen Weeks Ended April 1, 2001 and April 2, 2000 4
Notes to Consolidated Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition 12
Item 3. Quantitative and Qualitative Disclosure about Market Risk 13
Part II. Other Information:
Item 1. Legal Proceedings 13
Item 4. Submissions of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 15
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RUSSELL CORPORATION
Consolidated Condensed Balance Sheets
(Dollars in Thousands)
April 1, December 30,
2001 2000
------------ ------------
(Unaudited) (Note 1)
ASSETS
Current assets:
Cash $ 6,706 $ 4,193
Accounts receivable, net 183,229 198,610
Inventories - Note 2 457,685 406,446
Prepaid expenses and other current assets 31,562 30,892
------------ ------------
Total current assets 679,182 640,141
Property, plant & equipment 1,194,625 1,213,722
Less accumulated depreciation (742,302) (760,714)
------------ ------------
452,323 453,008
Other assets 60,602 60,011
------------ ------------
Total assets $ 1,192,107 $ 1,153,160
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 120,222 $ 129,456
Current maturities of long-term debt 39,271 39,271
------------ ------------
Total current liabilities 159,493 168,727
Long-term debt, less current maturities 434,813 384,211
Deferred liabilities 77,271 74,282
Shareholders' equity:
Common stock, par value $.01 per share; authorized
150,000,000 shares, issued 41,419,958 shares 414 414
Paid-in capital 46,859 47,104
Retained earnings 714,230 716,460
Treasury stock, at cost (9,510,770 shares at
4/1/01 and 9,524,424 shares at 12/30/00) (226,047) (226,470)
Accumulated other comprehensive loss (14,926) (11,568)
------------ ------------
Total shareholders' equity 520,530 525,940
------------ ------------
Total liabilities & shareholders' equity $ 1,192,107 $ 1,153,160
============ ============
See accompanying notes to consolidated condensed financial statements.
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RUSSELL CORPORATION
Consolidated Condensed Statements of Operations
(Dollars in Thousands Except Shares and Per Share Amounts)
(Unaudited)
13 Weeks Ended
---------------------------------
April 1, April 2,
2001 2000
------------ ------------
Net sales $ 238,716 $ 251,982
Costs and expenses:
Cost of goods sold 173,660 187,297
Selling, general and administrative expenses 53,040 54,176
Interest expense 7,448 6,877
Other-net 957 2,812
------------ ------------
235,105 251,162
------------ ------------
Income before income taxes 3,611 820
Provision for income taxes 1,372 354
------------ ------------
Net income $ 2,239 $ 466
============ ============
Weighted-average common shares outstanding:
Basic 31,902,656 32,657,233
Diluted 32,302,659 32,673,535
Net income per common share:
Basic $ 0.07 $ 0.01
Diluted 0.07 0.01
Cash dividends per common share $ 0.14 $ 0.14
See accompanying notes to consolidated condensed financial statements.
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RUSSELL CORPORATION
Consolidated Condensed Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
13 Weeks Ended
---------------------------
April 1, April 2,
2001 2000
-------- --------
Operating Activities:
Net income $ 2,239 $ 466
Adjustments to reconcile net income to
cash used in operating activities:
Depreciation and amortization 12,868 13,833
Deferred income taxes 2 --
Gain on sale of property, plant & equipment (21) (176)
Non-cash restructuring, asset impairment and
other unusual charges 760 1,512
Foreign currency transaction (gain) loss (1,057) 95
Changes in operating assets and liabilities:
Accounts receivable 14,324 (2,836)
Inventories (53,047) (32,493)
Prepaid expenses and other current assets (1,816) (1,112)
Other assets (1,234) (1,021)
Accounts payable and accrued expenses (9,283) 3,209
Pension and other deferred liabilities 3,119 178
-------- --------
Net cash used in operating activities (33,146) (18,345)
Investing Activities:
Purchases of property, plant & equipment (13,319) (14,191)
Proceeds from the sale of property, plant & equipment 474 1,068
-------- --------
Net cash used in investing activities (12,845) (13,123)
Financing Activities:
Borrowings on credit facility - net 51,718 38,889
Dividends on common stock (4,468) (4,586)
Cost of common stock for treasury -- (4,072)
Distribution of treasury stock 178 --
-------- --------
Net cash provided by financing activities 47,428 30,231
Effect of exchange rate changes on cash 1,076 (222)
-------- --------
Net increase (decrease) in cash 2,513 (1,459)
Cash balance at beginning of period 4,193 9,123
-------- --------
Cash balance at end of period $ 6,706 $ 7,664
======== ========
See accompanying notes to consolidated condensed financial statements.
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RUSSELL CORPORATION
Notes to Consolidated Condensed Financial Statements
1. The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, the accompanying interim consolidated
condensed financial statements contain all adjustments (consisting only
of normal recurring accruals) necessary to present fairly the financial
position of the Company as of April 1, 2001, and the results of its
operations for the thirteen week period ended April 1, 2001 and April
2, 2000, and its cash flows for the thirteen week period ended April 1,
2001 and April 2, 2000.
The balance sheet at December 30, 2000 has been derived from the
audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's annual report on Form
10-K for the year ended December 30, 2000.
Certain prior year amounts have been reclassified to conform to fiscal
year 2001 presentation. These changes had no impact on previously
reported results of operations or shareholders' equity.
The Company's revenues and income are subject to seasonal variations.
Consequently, the results of operations for the thirteen week period
ended April 1, 2001 are not necessarily indicative of the results to be
expected for the full year.
2. The components of inventory consist of the following: (in thousands)
4/1/01 12/30/00
--------- ---------
Finished goods $ 342,692 $ 293,587
Work in process 77,930 69,568
Raw materials and supplies 42,349 41,718
--------- ---------
462,971 404,873
LIFO and lower-of-cost or
market adjustments, net (5,286) 1,573
--------- ---------
$ 457,685 $ 406,446
========= =========
3. On July 22, 1998, the Company announced the Board of Directors had
approved a three-year restructuring and reorganization plan to improve
the Company's global competitiveness. The results of operations for the
interim periods presented herein reflect one-time and other unusual
charges associated with the plan in accordance with generally accepted
accounting principles. Consequently, the results of operations for the
thirteen week periods ended April 1, 2001 and April 2, 2000 are not
necessarily indicative of the results to be expected on an ongoing
recurring basis when the restructuring and reorganization plan is
completed.
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The charges reflected in the consolidated condensed statements of operations are
as follows: (in thousands)
13 Weeks Ended
4/1/01 4/2/00
-------- --------
Restructuring charges:
Employee termination charges $ -- $ 5,405
Exit cost related to facilities 1,148 1,121
-------- --------
$ 1,148 $ 6,526
-------- --------
Asset impairment charges:
Impairment of facilities and equipment
held for disposal $ 760 $ 1,512
-------- --------
$ 760 $ 1,512
-------- --------
Other unusual charges:
Inventory losses including warehouse and shipping cost $ 40 $ --
Accelerated depreciation on facilities and
equipment to be taken out of service -- 497
Expenses associated with the establishment
of dual headquarters 680 522
Accounts receivable recovery (35) --
Other 129 291
-------- --------
$ 814 $ 1,310
-------- --------
Totals before taxes $ 2,722 $ 9,348
======== ========
Totals after taxes $ 1,687 $ 5,608
======== ========
These charges have been classified in the consolidated condensed statements of
operations as follows: (in thousands)
13 Weeks Ended
04/01/01 04/02/00
-------- --------
Cost of goods sold $ 40 $ 5,660
Selling, general and administrative expenses 680 522
Other, net 2,002 3,166
-------- --------
$ 2,722 $ 9,348
======== ========
Charges recorded by segments were recorded as follows: (in thousands)
13 Weeks Ended
4/1/01 4/2/00
-------- --------
Restructuring charges:
Activewear $ 867 $ 5,461
International 281 1,065
All Other -- --
-------- --------
$ 1,148 $ 6,526
======== ========
Asset impairment charges:
Activewear $ 760 $ 1,512
International -- --
All Other -- --
-------- --------
$ 760 $ 1,512
======== ========
Other unusual charges:
Activewear $ 814 $ 1,310
International -- --
All Other -- --
-------- --------
$ 814 $ 1,310
======== ========
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A summary of the activity related to the restructuring, asset impairment and
other unusual charges is as follows: (in thousands)
Cash Related:
Liability at Expense Amount Liability at
30-Dec-00 Incurred Paid 1-Apr-01
------------ -------- ------ ------------
Exit costs related to facilities $ -- $1,148 $1,148 $ --
Employee termination charges 3,320 -- 2,298 1,022
Other 2,406 814 693 2,527
------ ------ ------ ------
$5,726 $1,962 $4,139 $3,549
====== ------ ====== ======
Non-cash Related:
Impairment charges and other non-cash charges 760
------
Total Charges $2,722
======
At April 1, 2001, the Company held for sale certain closed facilities
with an adjusted carrying value of approximately $24.1 million, which
have been included in property, plant and equipment.
4. The Company has been a co-defendant in Sullivan, et al. v. Russell
Corporation, et al., in Jefferson County, Alabama. Five families were
plaintiffs in this case; other defendants were Avondale Mills, Inc. and
Alabama Power Company. The claims asserted at the trial of this case
were for trespass and nuisance relating to property owned by the
plaintiffs on Lake Martin in a subdivision of Alexander City, Alabama.
The damages claimed by the plaintiffs were for decreased value of their
homes, mental anguish and punitive damages. In November 1998, the jury
returned a verdict against all three defendants in the amount of
$155,200 compensatory damages for alleged property devaluation, $0
damages for mental anguish and punitive damages of $52,398,000. The
defendants appealed this verdict to the Alabama Supreme Court, which on
August 4, 2000, reversed the jury verdict and rendered judgment in
favor of the Company and the other defendants on all claims. The
plaintiffs filed an application for rehearing before the Alabama
Supreme Court, which denied that application and reaffirmed its ruling
in favor of the defendants in an opinion issued on January 12, 2001.
The Alabama Supreme Court issued a Certificate of Judgment affecting
such actions on January 30, 2001.
On February 23, 1999, a similar lawsuit was filed in Jefferson County,
Alabama, by two former residents of the same residential subdivision,
which suit was dismissed with prejudice without liability on the
Company's part on February 1, 2001. On January 13, 2000, another
lawsuit was filed in Jefferson County, Alabama, by 15 families owning
property adjacent to Lake Martin, seeking unspecified damages for
alleged nuisance and trespass. The Company plans to vigorously defend
this suit.
By letter dated January 13, 2000, the Company was notified by the
United States Department of Justice (DOJ) that the DOJ intended to
institute legal proceedings against the Company and certain other
parties alleging violations by those parties of the Clean Water Act in
connection with the treatment and discharge of waste at a water
treatment facility operated by the City of Alexander City, Alabama.
Continuing discussions are being held with the DOJ with regard to the
proposed suit by the DOJ. The Company believes it is in compliance with
the Clean Water Act and will vigorously oppose the imposition of any
monetary penalties or injunctive relief in any lawsuit that may be
filed.
The Company is a party to various other lawsuits arising out of the
conduct of its business, the majority of which, if adversely
determined, would not have a material adverse effect upon the Company.
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5. Earnings per share calculated in accordance with SFAS 128, Earnings Per
Share, are as follows: (in thousands except shares and per share
amounts)
13 Weeks Ended
--------------------------------
4/1/01 4/2/00
------------ ------------
Net income $ 2,239 $ 466
============ ============
Basic Calculation:
Weighted-average common shares outstanding 31,902,656 32,657,233
============ ============
Net income per common share-basic $ 0.07 $ 0.01
============ ============
Diluted Calculation:
Weighted-average common shares outstanding 31,902,656 32,657,233
Net common shares issuable
on exercise of dilutive stock options 400,003 16,302
------------ ------------
32,302,659 32,673,535
============ ============
Net income per common share-diluted $ 0.07 $ 0.01
============ ============
6. For the period ended April 1, 2001 and April 2, 2000, accumulated other
comprehensive loss as shown in the consolidated condensed balance
sheets was comprised of foreign currency translation adjustments, and
FAS 133 adjustments which consists of interest rate swap agreements,
cotton futures contracts, and foreign currency forward contracts. The
components of comprehensive income, net of tax, for these periods were
as follows: (In thousands)
13 Weeks Ended
--------------------------
4/1/01 4/2/00
-------- --------
Net income $ 2,239 $ 466
Foreign currency translation loss (1,729) (799)
FAS 133 adjustments (1,629) --
-------- --------
Comprehensive loss $ (1,119) $ (333)
======== ========
7. Russell Corporation has two reportable segments: activewear and
international operations. The Company's activewear segment consists of
three strategic business units that sell the following products to
sporting goods dealers, department and specialty stores, mass
merchants, wholesale clubs, college bookstores, screen printers,
distributors, golf pro shops and mail order catalogs: T-shirts, fleece
products (such as sweatshirts and pants), athletic uniforms and knit
shirts. The international strategic business distributes activewear
products to international locations in approximately 50 countries.
Other segments that do not meet the quantitative thresholds for
determining reportable segments sell fabrics to other apparel
manufacturers, and manufacture and sell socks to mass merchants. These
are included in the "All Other" data presented herein.
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The Company evaluates performance and allocates resources based on
profit or loss from operations before interest and income taxes,
restructuring, reorganization and other unusual charges (Segment EBIT).
The accounting policies of the reportable segments are the same as
those described in Note One to the Company's consolidated financial
statements in its Annual Report on Form 10-K for the year ended
December 30, 2000, except that inventories are valued at standard cost
at the segment level, where as a substantial portion of inventories are
valued on a Last-In, First-Out (LIFO) basis in the consolidated
financial statements. Intersegment transfers are recorded at the
Company's cost; there is no intercompany profit or loss on intersegment
transfers.
13 Weeks ended April 1, 2001
(In thousands)
Activewear International All Other Total
---------- ------------- --------- ----------
Net sales $ 194,542 $ 18,658 $25,516 $ 238,716
Depreciation and
amortization expense 11,450 491 927 12,868
Segment EBIT 16,593 463 3,315 20,371
Total assets 1,041,847 76,300 73,960 1,192,107
13 Weeks ended April 2, 2000
(In thousands)
Activewear International All Other Total
---------- ------------- --------- ----------
Net sales $ 196,744 $ 28,435 $26,803 $ 251,982
Depreciation and
amortization expense 11,659 611 1,066 13,336
Segment EBIT (loss) 19,801 (2,368) 5,096 22,529
Total assets 981,048 116,176 87,334 1,184,558
A reconciliation of combined segment EBIT to consolidated income before income
taxes is as follows: (in thousands)
13 Weeks Ended
---------------------------
4/1/01 4/2/00
-------- --------
Total segment EBIT $ 20,371 $ 22,529
Restructuring, asset impairment, and
other unusual charges (2,722) (9,348)
Unallocated amounts;
Corporate expenses (6,590) (5,484)
Interest expenses (7,448) (6,877)
-------- --------
Consolidated income before income taxes $ 3,611 $ 820
======== ========
8. As of December 31, 2000, the Company adopted FASB Statement No. 133. In
accordance with the provisions of Statement 133, the Company recorded a
transition adjustment during the first quarter of 2001. The impact of
this transition adjustment is to increase Accumulated Other
Comprehensive Loss by approximately $578,000 net of taxes and to
decrease net assets by approximately $578,000.
The Company uses derivatives, including futures contracts, forward
contracts and swap contracts, to manage its exposure to movements in
commodity prices, foreign exchange rates and interest rates,
respectively. Initially, upon adoption of the new derivative accounting
requirements, and prospectively, on the date a derivative contract is
entered into, the Company designates the derivative as either 1) a
hedge of a recognized asset or liability or an unrecognized firm
commitment (fair value hedge) or 2) a hedge of a forecasted transaction
or of the variability of cash flows to be received or paid related to a
recognized asset or liability (cash flow hedge).
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For fair value hedges, both the effective and ineffective portion of
the changes in the fair value of the derivative, along with the gain or
loss on the hedged item that is attributable to the hedged risk, are
recorded in earnings. The effective portion of the changes in the fair
values of a derivative that is designated as a cash flow hedge is
recorded in Accumulated Other Comprehensive Loss. When the hedged item
is realized, the gain or loss included in Accumulated Other
Comprehensive Loss is relieved. Any ineffective portion of the changes
in the fair values of derivatives used as cash flow hedges are reported
in the Consolidated Condensed Statements of Operations.
The Company formally documents its hedge relationships, including
identification of the hedging instruments, and the hedged items, as
well as its risk management objectives and strategies for undertaking
the hedge transaction. Derivatives are recorded in the Consolidated
Condensed Balance Sheets at fair value. The Company also formally
assesses both at inception and at least quarterly, thereafter, whether
the derivatives that are used in hedging transactions are highly
effective in offsetting changes in either the fair values or cash flows
of the hedged item.
Interest rate swap agreement-To manage interest rate risk, the Company
has entered into an interest rate swap that effectively fixes the
interest payments of a certain floating rate debt instrument. The
interest rate swap agreement is accounted for as a cash flow hedge that
was set up so that the cash flows from the interest rate swap perfectly
offset the changes in the cash flows associated with the floating rate
of interest on the debt. The interest rate swap qualifies for the
"short-cut" method as defined in the statement. The transition
adjustment to record the fair value of the interest rate swap on the
Company's Consolidated Condensed Balance Sheets was a loss of $557,000
($345,000 net of taxes) with an offsetting entry to Accumulated Other
Comprehensive Loss. There was no amount reclassified from Accumulated
Other Comprehensive Loss to net earnings during the quarter ended April
1, 2001. The fair value of the swap decreased net assets by $501,000
during the first quarter, causing Accumulated Other Comprehensive Loss
to increase to $1,365,000 ($846,000 net of taxes).
Foreign currency forward contracts- The Company generates international
revenues and expenses from its activities in various parts of the world
and, as a result, is exposed to movement in foreign currency exchange
rates. The Company has entered into foreign exchange forward contracts
through December 2001 to reduce the effect of fluctuating foreign
currencies on its anticipated purchases of inventory and its
anticipated sale of goods in its international operations. Gains and
losses on the derivatives are intended to offset gains and losses on
the hedged transaction in an effort to reduce the earnings volatility
resulting from fluctuating foreign currency exchange rates. The foreign
exchange forward contracts are primarily accounted for as cash flow
hedges. The principal currencies hedged by the Company include the US
Dollar, European EURO, Mexican peso and British pound sterling. There
was no transition adjustment recorded upon adoption of FAS 133, as
there were no significant foreign currency forward contracts impacted
by the statement. The Company has entered into several new contracts
during the first quarter and has increased net assets on the
Consolidated Condensed Balance Sheets at April 1, 2001 by recording the
foreign exchange forward contracts at fair value with an offsetting
gain to Accumulated Other Comprehensive Loss of $122,000 ($76,000 net
of taxes). The Company anticipates that approximately $76,000 of the
deferred gain on the foreign exchange forward contracts will be
reclassified into net earnings during the next twelve months.
The Company was also a party to some foreign exchange forward contracts
during the first quarter that did not qualify for hedge accounting
under FAS 133. The Company recorded these contracts on the Consolidated
Condensed Balance Sheets at fair value with an offsetting gain of
$1,021,000 ($633,000 net of taxes) into the Consolidated Condensed
Statement of Operations.
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Futures contracts- Raw materials used by the Company are subject to
price volatility caused by weather, supply conditions and other
unpredictable factors. The Company has entered into futures contracts
through December 2001 to hedge commodity (primarily cotton) price risk
on anticipated purchases. The futures contracts are accounted for as
cash flow hedges. The transition adjustment to record the fair value of
the futures contracts on the Company's Consolidated Condensed Balance
Sheets was a loss of $376,000 ($233,000 net of taxes) with an
offsetting entry to Accumulated Other Comprehensive Loss. It is the
Company's policy to relieve any gains/losses in Accumulated Other
Comprehensive Loss in the period during which the hedged item affects
earnings. The change in fair value of the commodity futures contracts
decreased net assets and increased Accumulated Other Comprehensive Loss
by $1,284,000 (net of taxes) during the first quarter. Losses
reclassified to current earnings during the quarter ended April 1, 2001
amounted to $658,000 (net of taxes). The Company anticipates that
approximately $859,000 (after tax) of the deferred loss recorded in
Accumulated Other Comprehensive Loss will be reclassified into net
earnings during the next twelve months.
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Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
RESULTS OF OPERATIONS
Thirteen weeks ended April 1, 2001 compared to April 2, 2000
NET SALES. Net sales decreased 5.3%, or $13,266,000, to $238,716,000 for first
quarter 2001 from $251,982,000 during the comparable prior year period. The
overall net decrease consisted of a 1.1% decline, or $2,202,000 within the
Company's Activewear segment; a 34.4% decline, or $9,777,000 within the
Company's International segment; and a 4.8% decline, or $1,287,000, for all
other. Overall dozens shipped within the Activewear segment were down less than
2% over the comparable prior year period. Favorable product mix changes within
the Activewear segment offset the negative impact of lower selling prices within
certain categories. Of the decline in the International segment sales,
approximately $6,500,000 was related to the restructuring of certain product
lines in Europe during the second half of fiscal year 2000. The decrease in net
sales for all other was attributable to a decline in fabric sales to other
manufacturers, which was partially offset by an increase in sock sales.
GROSS MARGIN %. The Company's overall gross margin percentage increased to 27.3%
for first quarter 2001 versus 25.7% in the comparable prior year period.
Excluding the impact of restructuring, asset impairment, and other unusual
charges ("special charges"), as described in Note 3 to the consolidated
condensed financial statements, of $40,000 and $5,660,000 for 2001 and 2000,
respectively, the overall gross margin percentage decreased to 27.3% for 2001
from 27.9% for 2000. Gross margins were negatively impacted by the overall net
decrease in sales mentioned above and higher cotton, fiber and energy costs.
However, gross margins continue to be positively impacted by the Company's
on-going efforts in improving and streamlining its manufacturing processes.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A). SG&A as a percent of net sales
increased to 22.2% for first quarter 2001 versus 21.5% in the comparable prior
year period. Excluding the impact of special charges of $680,000 and $522,000
for 2001 and 2000, respectively, SG&A as a percent of net sales increased to
21.9% for 2001 from 21.3% for 2000.
EARNINGS BEFORE INTEREST AND TAXES (EBIT). The Company's overall EBIT as a
percent of net sales decreased to 5.8% for first quarter 2001 from 6.8% in the
comparable prior year period when calculated exclusive of special charges of
$2,722,000 and $9,348,000 for 2001 and 2000, respectively. The Activewear
segment EBIT, exclusive of special charges, as a percent of net sales is 8.5%
for first quarter 2001 down from 10.1% for first quarter 2000. This decline is
attributed both to the overall net decreased sales and higher cotton, fiber and
energy costs mentioned above. The International segment EBIT, exclusive of
special charges, as a percent of net sales increased to 2.5% for first quarter
2001 up from a negative 8.3% for first quarter 2000. The improvement within the
International segment was due to the elimination of losses during fiscal 2000
related to the sales elimination mentioned above from the restructuring of
certain product lines in Europe during the second half of fiscal year 2000. In
addition, product costs within the International segment were lower due to the
closure of manufacturing facilities in Scotland during fiscal 2000 and the
increased use of third party suppliers. The International segment also
experienced gains related to the closeout of certain foreign currency forward
contracts during the quarter ended April 1, 2001. The all other EBIT, exclusive
of special charges, as a percent of net sales decreased to 13.0% for first
quarter 2001 down from 19.0% for first quarter 2000 and is primarily due to the
net sales decrease mentioned above.
Liquidity and Capital Resources
The Company's current ratio was 4.2 and 4.1 at April 1, 2001 and April 2,
2000, respectively. Total debt to capitalization was 47.7% and 44.8% at April 1,
2001 and April 2, 2000, respectively.
Required cash for purchases of property, plant and equipment and dividends
was provided by borrowings under the Company's credit facility (long-term debt)
during the period ended April 1, 2001.
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Contingencies
For information concerning ongoing litigation of the Company, see Note
4 to the Consolidated Condensed Financial Statements.
FORWARD LOOKING INFORMATION
This quarterly report on Form 10-Q, including management's discussion
and analysis, contains certain statements that describe the Company's beliefs
concerning future business conditions and prospects, growth opportunities and
the outlook for the Company based upon information currently available. Wherever
possible, the Company has identified these "forward-looking" statements (as
defined in Section 21E of the Securities and Exchange Act of 1934) by words such
as "anticipates," "believes," "intends," "estimates," "expects," "projects" and
similar phrases. These forward-looking statements are based upon assumptions the
Company believes are reasonable. Such forward-looking statements are subject to
risks and uncertainties which could cause the Company's actual results,
performance and achievements to differ materially from those expressed in, or
implied by, these statements, including among other matters, the ability to
effect the restructuring of Europe within the projected timeframe in line with
expected savings, significant competitive activity, including promotional and
price competition, currency exchange rates, interest rates, wage increases,
increases in raw material and energy costs, changes in customer demand for the
Company's products, inherent risks in the market place associated with new
products and new product lines, including uncertainties about trade and consumer
acceptance and other risk factors listed from time to time in the Company's SEC
reports and announcements. The Company assumes no obligation to update publicly
any forward-looking statements whether as a result of new information, future
events or otherwise.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
The Company is exposed to market risks relating to fluctuations in
interest rates, currency exchange rates and commodity prices. There has been no
material change in the Company's market risks that would significantly affect
the disclosures made in the Annual Report on Form 10-K for the year ended
December 30, 2000.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Contingencies
For information concerning ongoing litigation of the Company, see Note
4 to the Consolidated Condensed Financial Statements.
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Item 4. Submissions of Matters to a Vote of Security Holders
a) The Annual Meeting of Shareholders was held on April 25, 2001.
At the Annual Meeting, shareholders voted upon the following nominees
to serve as Directors for a three-year term expiring in 2004. The results of the
vote are as follows:
Name For Withheld
---- ---------- --------
Tim Lewis 28,020,778 615,379
C. V. Nalley, III 28,255,903 380,254
John R. Thomas 28,253,859 382,298
John A. White 28,256,891 379,266
Mary Jane Robertson 28,256,543 379,614
All nominees were elected.
Herschel M. Bloom and Ronald G. Bruno will continue in office until
their terms expire in 2002. John F. Ward, Benjamin Russell, and Margaret Porter
will continue in office until their terms expire in 2003.
b) The shareholders voted on approval of the Russell Corporation 2000
Non-employee Directors Compensation Plan. The results of the vote are
as follows:
For Against Abstain
---------- --------- -------
19,168,896 9,336,264 130,997
The Plan was approved.
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.1 - Russell Corporation Severance Pay Plan for Grades 1-18
Exhibit 10.2 - Russell Corporation Severance Pay Plan for Grade 19 and
Above
(b) Reports on Form 8-K
None
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, 2001 /s/ Robert D. Martin
------------ ---------------------------------------------
Robert D. Martin
Senior Vice President, and
Chief Financial Officer
Date May 15, 2001 /s/ Larry E. Workman
------------ ---------------------------------------------
Larry E. Workman, Controller
(Principal Accounting Officer)
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