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 2, 1994 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.)
1 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 7, 1994
----- -------------------------------
Common Stock, Par Value $.01 Per Share 39,912,942 shares
(Excludes Treasury)
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RUSSELL CORPORATION
Index
Page No.
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Part I. Financial Information:
Consolidated Condensed Balance Sheets--
October 2, 1994 and January 1, 1994 2
October 2, 1994 and October 3, 1993 3
Consolidated Condensed Statements of Income--
Thirteen Weeks Ended October 2, 1994
and October 3, 1993 4
Thirty-nine Weeks Ended October 2, 1994
and October 3, 1993 5
Consolidated Statements of Cash Flows--
Thirty-nine Weeks Ended October 2, 1994
and October 3, 1993 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
Index to Exhibits 12
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PART I - FINANCIAL INFORMATION
RUSSELL CORPORATION
Consolidated Condensed Balance Sheets
(Dollars in Thousands)
October 2 January 1
1994 1994
--------- ---------
ASSETS (Unaudited) (Audited)
------
Current Assets:
Cash $ 6,749 $ 3,897
Accounts receivable, net 276,519 176,949
Inventories:
Finished goods 237,762 243,876
In process 37,940 30,382
Raw materials and supplies 40,480 41,102
---------- ----------
316,182 315,360
LIFO reserve (33,697) (36,740)
---------- ----------
282,485 278,620
Prepaid expenses and other current assets 13,223 14,122
---------- ----------
Total current assets 578,976 473,588
Property, Plant and Equipment, net 470,739 490,886
Other Assets 71,397 52,570
---------- ----------
Total assets $1,121,112 $1,017,044
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Short-term debt $ 186,340 $ 95,188
Accounts payable and accrued expenses 74,285 58,787
Federal and state income taxes 4,412 21,471
Current maturities of long-term debt 19,513 20,150
---------- ----------
Total current liabilities 284,550 195,596
Long-term debt, less current maturities 144,232 163,334
Deferred Liabilities 73,860 70,463
Shareholders' Equity:
Common Stock, at par value 414 414
Paid-in capital 53,718 49,040
Retained earnings 605,085 566,789
Currency translation adjustment ( 2,560) (5,552)
---------- ----------
656,657 610,691
Treasury Stock, at cost (38,187) (23,040)
---------- ----------
Total shareholders' equity 618,470 587,651
---------- ----------
Total liabilities & shareholders' equity $1,121,112 $1,017,044
========== ==========
See accompanying notes to consolidated condensed financial statements.
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PART I - FINANCIAL INFORMATION
RUSSELL CORPORATION
Consolidated Condensed Balance Sheets
(Dollars in Thousands)
October 2 October 3
1994 1993
--------- ---------
ASSETS (Unaudited) (Unaudited)
------
Current Assets:
Cash $ 6,749 $ 4,514
Accounts receivable, net 276,519 243,933
Inventories:
Finished goods 237,762 236,356
In process 37,940 32,820
Raw materials and supplies 40,480 40,244
---------- ----------
316,182 309,420
LIFO reserve (33,697) (40,689)
---------- ----------
282,485 268,731
Prepaid expenses and other current assets 13,223 14,214
---------- ----------
Total current assets 578,976 531,392
Property, Plant and Equipment, net 470,739 492,217
Other Assets 71,397 38,741
---------- ----------
Total assets $1,121,112 $1,062,350
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Short-term debt $ 186,340 $ 164,706
Accounts payable and accrued expenses 74,285 55,739
Federal and state income taxes 4,412 12,246
Current maturities of long-term debt 19,513 19,756
---------- ----------
Total current liabilities 284,550 252,447
Long-term debt, less current maturities 144,232 163,832
Deferred Liabilities 73,860 62,277
Redeemable Cumulative Preferred Stock -- 347
Shareholders' Equity:
Common Stock, at par value 414 414
Paid-in capital 53,718 49,280
Retained earnings 605,085 546,762
Currency translation adjustment ( 2,560) (4,574)
---------- ----------
656,657 591,882
Treasury Stock, at cost (38,187) (8,435)
---------- ----------
Total shareholders' equity 618,470 583,447
---------- ----------
Total liabilities & shareholders' equity $1,121,112 $1,062,350
========== ==========
See accompanying notes to consolidated condensed financial statements.
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RUSSELL CORPORATION
Consolidated Condensed Statements of Income
(Dollars in Thousands Except Share Amounts)
(Unaudited)
13 Weeks Ended
----------------------------------------
October 2 October 3
1994 1993
----------- -----------
Net sales $ 317,131 $ 266,622
Costs and expenses:
Cost of goods sold 216,822 177,601
Selling, general and
administrative expenses 56,328 50,019
Interest expense 5,494 4,410
Write-down of assets -- 34,583
Other - net (income) (699) (81)
----------- -----------
277,945 266,532
----------- -----------
Income before income taxes 39,186 90
Provision for income taxes 14,982 3,849
----------- -----------
Net income (loss) after taxes 24,204 (3,759)
Preferred Stock dividends -- 3
----------- -----------
Net income (loss) applicable
to Common Share $ 24,204 $ (3,762)
=========== ===========
Weighted average number of common and
common equivalent shares outstanding
40,269,327 41,257,905
Earnings (loss) per common and
common equivalent share $ .60 $ (.09)
Cash dividends per common share $ .10 $ .10
See accompanying notes to consolidated condensed financial statements.
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RUSSELL CORPORATION
Consolidated Condensed Statements of Income
(Dollars in Thousands Except Share Amounts)
(Unaudited)
39 Weeks Ended
---------------------------------------
October 2 October 3
1994 1993
----------- -----------
Net sales $ 792,754 $ 680,337
Costs and expenses:
Cost of goods sold 542,348 454,281
Selling, general and
administrative expenses 156,189 135,661
Interest expense 14,338 13,085
Write-down of assets -- 34,583
Other - net (income) (1,962) (274)
----------- -----------
710,913 637,336
----------- -----------
Income before income taxes 81,841 43,001
Provision for income taxes 31,556 18,028
----------- -----------
Net income after taxes 50,285 24,973
Preferred Stock dividends -- 15
----------- -----------
Net income applicable
to Common Shares $ 50,285 $ 24,958
=========== ===========
Weighted average number of common and
common equivalent shares outstanding 40,236,946 41,266,466
Earnings per common and
common equivalent share $ 1.25 $ .60
Cash dividends per common share $ .30 $ .29
See accompanying notes to consolidated condensed financial statements.
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RUSSELL CORPORATION
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
39 Weeks Ended
-----------------------------------
October 2 October 3
1994 1993
--------- ---------
Cash Flows from Operating Activities
Net income $ 50,285 $ 24,973
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 51,412 51,051
Deferred income taxes 4,775 (10,132)
(Gain) loss on sale of equipment (596) 854
Write-down of assets -- 34,583
Changes in Assets and Liabilities:
Accounts receivable (94,165) (70,505)
Inventories 1,247 (37,627)
Prepaid expenses 2,581 (947)
Accounts payable & accrued expenses 7,115 (2,124)
Income tax payable (17,059) 2,296
Accrued liabilities ( 2,834) (286)
Other assets (10,139) (2,431)
-------- --------
Net cash used in operating activities (7,378) (10,295)
Cash Flows from Investing Activities
Purchases of property, plant & equipment (26,758) (73,215)
Proceeds from sale of equipment 1,715 4,898
-------- ---------
Net cash used in investing activities (25,043) (68,317)
Cash Flows from Financing Activities
Distribution of treasury shares 2,344 1,822
Cost of Common Stock for treasury (22,776) (68)
Payments on notes payable (4,562) --
Payments of long-term debt (21,756) (22,391)
Dividends on Common Stock (11,990) (11,856)
Dividends on Preferred Stock -- (15)
Short-term borrowings 93,904 109,856
Retirement of Preferred Stock -- (276)
-------- --------
Net cash provided by financing activities 35,164 77,072
Effect of exchange rate changes on cash 109 (41)
-------- ---------
Net increase (decrease) in cash 2,852 (1,581)
Cash balance at beginning of period 3,897 6,095
-------- --------
Cash balance at end of period $ 6,749 $ 4,514
======== ========
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 October 2, 1994, October 3, 1993
and January 1, 1994, and the results of operations for the thirteen and
thirty-nine week periods ended October 2, 1994, and October 3, 1993,
and cash flows for the thirty-nine week periods ended October 2, 1994,
and October 3, 1993.
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 1, 1994.
2. Effective January 3, 1993, the Company adopted Financial Accounting
Standards Board Statement 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" and Statement 109, "Accounting for Income
Taxes". The effect of the adoption of these standards was not material.
3. During the third quarter of 1993, the Company conducted a review of its
operating units and concluded that certain fixed assets and goodwill
had an economic value that was substantially less than their book
value. Accordingly, a non-cash pre-tax charge of $34,583,000 was
recorded to reduce the book value of those assets. The after-tax
effect on earnings per share was $.56.
4. During the third quarter of 1993, the Company increased its provision
for income taxes by $1,968,000 or $.05 per common share to reflect the
impact of the Omnibus Budget Reconciliation Act of 1993. The increase
in tax expense reflects both the federal income tax rate increase from
34% to 35% effective retroactively to January 1, 1993, and a $1,200,000
increase to net deferred tax liabilities as a result of the tax rate
change.
5. On December 23, 1993, Russell Corporation acquired The Game Inc., a
wholly owned, second-tier subsidiary of W.C. Bradley Co. of Columbus,
Georgia. The all cash transaction, valued at approximately $35
million, resulted in The Game Inc. being operated as a wholly owned
subsidiary of Russell Corporation.
6. The results of operations for the thirteen and thirty-nine weeks ended
October 2, 1994, are not necessarily indicative of the results to be
expected for the full year.
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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:
Comparison of
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13 Weeks 39 Weeks 13 Weeks
Ended 10/2/94 Ended 10/2/94 Ended 10/2/94
and 10/3/93 and 10/3/93 and 7/3/94
---------------- ----------------- ----------------
Increase (Decrease)
(Dollars in Thousands)
Net sales $50,509 18.9% $112,417 16.5% $73,626 30.2%
Cost of goods sold 39,221 22.1 88,067 19.4 47,179 27.8
Selling, general and
administrative expenses 6,309 12.6 20,528 15.1 7,136 14.5
Interest expense 1,084 24.6 1,253 9.6 660 13.7
Write-down of assets (34,583) N/A (34,583) N/A -- N/A
Other income 618 763.0 1,688 616.1 23 3.4
Income before income taxes 39,096 N/A 38,840 90.3 18,674 91.0
Provision for income taxes 11,133 289.2 13,528 75.0 7,185 92.2
Net income applicable
to common shares 27,966 N/A 25,327 101.5 11,489 90.4
Sales increases for the third quarter and first nine months of 1994
reflect higher unit volumes of fleecewear, revenues from acquisitions and
continued solid growth in international operations. Acquisitions accounted for
approximately $25.6 million of the quarterly increase and $61.4 million of the
nine month increase.
Gross margins remained under pressure in the third quarter as a result
of higher raw materials costs and lower average selling prices for fleecewear.
Shrinking industry capacity and strengthening demand favor improved pricing for
activewear. The Company implemented price increases on T-shirts in the third
quarter and announced increases on fleecewear which will take effect during the
fourth quarter. Cost of goods sold for the nine months was impacted by less
than optimal plant operating schedules in the first quarter and higher raw
materials costs.
Selling, general and administrative expenses were higher principally
due to the inclusion of acquisitions in this year's results. The benefits of
higher volumes and disciplined expense management resulted in a decline in
selling, general and administrative expenses as a percent of sales in the third
quarter. Interest expense increased due to higher short-term borrowing rates.
Other income was derived mainly from interest, rental income and the
disposition of certain fixed assets.
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Last year's third quarter was affected by a $34,583,000 pre-tax
write-down of certain fixed assets and goodwill which impacted after-tax
earnings by approximately $.56 per share. The write-down also reduced the
provision for income taxes in 1993's third quarter and nine month periods
causing a higher provision in 1994 by comparison.
The Company utilizes hedges to set sales prices which are generally
set six months to a year in advance of the selling season. Depending upon
market conditions, hedges may be purchased to cover the Company's cotton
requirements, generally, at the time that prices are set. Purchasing hedges
not only reduces the risks of adverse price fluctuations, but limits the
Company's ability to benefit from positive price fluctuations over the terms of
the agreements.
In anticipation of higher cotton prices in 1994, the Company purchased
hedges to cover its cotton requirements. Cotton prices rose significantly in
the first nine months of 1994 and the aforementioned hedges favorably mitigated
cotton prices for this period.
FINANCIAL CONDITION
The Company's financial condition remained strong with long-term debt
representing 18.9% of capitalization. The statement of cash flows reflects
that $26.8 million was invested in the capital program during the first nine
months of 1994. Capital expenditures, working capital needs, dividends, and
treasury stock purchases were met through internally generated funds and
short-term bank loans. The Company, at quarterend, maintained $293 million in
informal lines of credit.
Excluding acquisitions, accounts receivable increased at a rate less
than sales growth and inventories declined. Other assets increased due to
goodwill arising from the acquisitions of The Game Inc. in December, 1993 and
DeSoto Mills, Inc. on April 1, 1994.
The carrying value of goodwill is reviewed by management when facts
and circumstances suggest that it may be impaired. Should this review indicate
that goodwill will not be recoverable, based upon undiscounted cash flows of
the entity, the Company's carrying value of the goodwill is reduced by the
estimated shortfalls of the cash flows.
SUBSEQUENT EVENTS
Subsequent to quarter-end, the Company raised its quarterly dividend
from $.10 to $.12 per common share, a 20% increase.
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PART II - OTHER INFORMATION
Item 5. Exhibits and Reports on Form 8-K
a) Exhibits -
11 Computation of Earnings Per Share
27 Financial Data Schedule (for the SEC use only)
b) Reports on Form 8-K - there were no reports on Form 8-K filed for the
period ended October 2, 1994.
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 7, 1994 /s/James D. Nabors
---------------------- -----------------------------------
James D. Nabors
Executive Vice President and
Chief Financial Officer
(For the Registrant and as
Principal Financial Officer)
11
12
Index to Exhibits
Exhibit No. Page No.
11 Computation of Earnings Per Share 10
27 Financial Data Schedule (for SEC use only)
12