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 September 29, 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 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 11, 1996
----- --------------------------------
Common Stock, Par Value $.01 Per Share 38,245,635 shares
(Excludes Treasury)
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RUSSELL CORPORATION
Index
Page No.
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Part I. Financial Information:
Consolidated Condensed Balance Sheets--
September 29, 1996 and December 30, 1995 2
September 29, 1996 and October 1, 1995 3
Consolidated Condensed Statements of Income--
Thirteen Weeks Ended September 29, 1996
and October 1, 1995 4
Thirty-nine Weeks Ended September 29, 1996
and October 1, 1995 5
Consolidated Statements of Cash Flows--
Thirty-nine Weeks Ended September 29, 1996
and October 1, 1995 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)
September 29 December 30
1996 1995
---- ----
(Unaudited) (Audited)
Current Assets:
Cash $ 5,230 $ 4,485
Accounts receivable, net 316,489 224,375
Inventories:
Finished goods 310,468 274,035
In process 45,512 43,476
Raw materials and supplies 58,750 62,099
----------- -----------
414,730 379,610
LIFO reserve (46,286) (58,401)
----------- -----------
368,444 321,209
Prepaid expenses and other current assets 22,245 14,808
----------- -----------
Total current assets 712,408 564,877
Property, Plant and Equipment, net 513,450 481,734
Other Assets 68,308 71,553
----------- -----------
Total assets $ 1,294,166 $ 1,118,164
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt $ 150,109 $ 7,389
Accounts payable and accrued expenses 109,105 81,342
Federal and state income taxes 3,034 6,793
Current maturities of long-term debt 31,938 31,283
----------- -----------
Total current liabilities 294,186 126,807
Long-term debt, less current maturities 255,959 287,878
Deferred Liabilities 78,793 70,921
Shareholders' Equity:
Common Stock, at par value 414 414
Paid-in capital 51,791 52,405
Retained earnings 702,309 664,163
Currency translation adjustment (7,458) (8,046)
----------- -----------
747,056 708,936
Treasury Stock, at cost (81,828) (76,378)
----------- -----------
Total shareholders' equity 665,228 632,558
----------- -----------
Total liabilities & shareholders' equity $ 1,294,166 $ 1,118,164
=========== ===========
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)
September 29 October 1
1996 1995
---- ----
(Unaudited) (Unaudited)
ASSETS
------
Current Assets:
Cash $ 5,230 $ 3,726
Accounts receivable, net 316,489 302,745
Inventories:
Finished goods 310,468 266,214
In process 45,512 45,850
Raw materials and supplies 58,750 57,139
----------- -----------
414,730 369,203
LIFO reserve (46,286) (47,829)
----------- -----------
368,444 321,374
Prepaid expenses and other current assets 22,245 21,219
----------- -----------
Total current assets 712,408 649,064
Property, Plant and Equipment, net 513,450 459,831
Other Assets 68,308 68,274
----------- -----------
Total assets $ 1,294,166 $ 1,177,169
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt $ 150,109 $ 156,023
Accounts payable and accrued expenses 109,105 91,846
Federal and state income taxes 3,034 --
Current maturities of long-term debt 31,938 31,335
----------- -----------
Total current liabilities 294,186 279,204
Long-term debt, less current maturities 255,959 187,896
Deferred Liabilities 78,793 80,110
Shareholders' Equity:
Common Stock, at par value 414 414
Paid-in capital 51,791 52,790
Retained earnings 702,309 652,378
Currency translation adjustment (7,458) (5,816)
----------- -----------
747,056 699,766
Treasury Stock, at cost (81,828) (69,807)
----------- -----------
Total shareholders' equity 665,228 629,959
----------- -----------
Total liabilities & shareholders' equity $ 1,294,166 $ 1,177,169
=========== ===========
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
----------------------------
September 29 October 1
1996 1995
------------ -------------
Net sales $ 336,679 $ 333,820
Costs and expenses:
Cost of goods sold 227,487 244,408
Selling, general and
administrative expenses 63,765 62,822
Interest expense 6,896 6,118
Other - net (income) (561) (986)
----------- -----------
297,587 312,362
----------- -----------
Income before income taxes 39,092 21,458
Provision for income taxes 14,639 8,515
----------- -----------
Net income applicable
to Common Shares $ 24,453 $ 12,943
=========== ===========
Weighted average number of common and
common equivalent shares outstanding 38,769,619 39,128,005
Earnings per common and
common equivalent share $ .63 $ .33
Cash dividends per common share $ .13 $ .12
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
----------------------------
September 29 October 1
1996 1995
------------ -------------
Net sales $ 885,091 $ 850,866
Costs and expenses:
Cost of goods sold 604,185 607,037
Selling, general and
administrative expenses 179,134 169,766
Interest expense 18,936 16,051
Other - net (income) (1,861) (2,917)
----------- -----------
800,394 789,937
----------- -----------
Income before income taxes 84,697 60,929
Provision for income taxes 32,282 23,274
----------- -----------
Net income applicable
to Common Shares $ 52,415 $ 37,655
=========== ===========
Weighted average number of common and
common equivalent shares outstanding 38,781,112 39,413,751
Earnings per common and
common equivalent share $ 1.35 $ .96
Cash dividends per common share $ .37 $ .36
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
----------------------------
September 29 October 1
1996 1995
------------ -------------
Cash Flows from Operating Activities
Net income $ 52,415 $ 37,655
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 55,981 52,098
Deferred income taxes 3,565 4,829
Gain on sale of equipment (14) (325)
Changes in Assets and Liabilities:
Accounts receivable (91,809) (90,923)
Inventories (46,793) (42,238)
Prepaid expenses and other current assets (5,379) (1,846)
Other assets 994 (1,559)
Accounts payable & accrued expenses 27,450 21,292
Income taxes payable (3,759) (9,679)
Pension and other deferred liabilities 2,335 905
----------- -----------
Net cash used in operating activities (5,014) (29,836)
Cash Flows from Investing Activities
Purchases of property, plant & equipment (86,440) (52,237)
Proceeds from sale of equipment 1,160 4,484
----------- -----------
Net cash used in investing activities (85,280) (47,753)
Cash Flows from Financing Activities
Short-term borrowings 142,616 57,903
Long-term borrowings -- 75,000
Payments on long-term debt (31,263 (19,409)
Dividends on Common Stock (14,269) (14,113)
Cost of Common Stock for treasury (8,658) (22,685)
Distribution of treasury shares 2,594 755
----------- -----------
Net cash provided by financing activities 91,020 77,451
Effect of exchange rate changes on cash 19 (277)
----------- -----------
Net increase (decrease) in cash 745 (415)
Cash balance at beginning of period 4,485 4,141
----------- -----------
Cash balance at end of period $ 5,230 $ 3,726
=========== ===========
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 September 29, 1996, October 1, 1995 and
December 30, 1995, and the results of operations for the thirteen and
thirty-nine week periods ended September 29, 1996, and October 1, 1995, and
cash flows for the thirty-nine week periods ended September 29, 1996 and
October 1, 1995.
The accounting policies followed by the Company are set forth in Note
A to the Company's consolidated financial statements incorporated by
reference in Form 10-K for the year ended December 30, 1995.
2. The results of operations for the thirteen and thirty-nine week periods
ended September 29, 1996 and October 1, 1995 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
---------------------------------------------------------------------------
13 Weeks 39 Weeks 13 Weeks
Ended 9/29/96 Ended 9/29/96 Ended 9/29/96
and 10/1/95 and 10/1/95 and 6/30/96
-------------------- ------------------ ------------------------
Increase (Decrease)
(Dollars in Thousands)
Net sales $ 2,859 .9% $ 34,225 4.0% $ 46,121 15.9%
Cost of goods sold (16,921) (6.9) (2,852) (.5) 27,428 13.7
Selling, general and
administrative expenses 943 1.5 9,368 5.5 5,586 9.6
Interest expense 778 12.7 2,885 18.0 652 10.4
Other income (425) (43.1) (1,056) (36.2) (120) (17.6)
Income before income taxes 17,634 82.2 23,768 39.0 12,335 46.1
Provision for income taxes 6,124 71.9 9,008 38.2 4,192 40.1
Net income applicable
to common shares 11,510 88.9 14,760 39.2 8,143 49.9
Net sales for the quarter increased 1% from the third quarter of 1995 to
$336,679,000 reflecting lower than expected shipments as domestic retailers
scheduled shipments closer to the time of sale and an increasingly competitive
environment in Europe. Sales for the nine months ended September 29, 1996 of
$885,091,000, were 4% higher than the same period of 1995.
Gross margins continue to show strong improvement over the depressed levels
of 1995 due to lower raw material prices and more cost effective manufacturing.
Gross margins in the third quarter of 1996 were 32.4% as compared to 26.8% in
the same period of 1995. For the nine months ended September 29, 1996, gross
margins were 31.7% as compared to 28.7% in the first nine months of 1995.
Selling, general and administrative expenses increased moderately in
dollars and as a percent of sales for the quarter and the year when compared to
1995 primarily due to increased expenditures for customer service, royalties and
international expansion. Interest expense increased with higher levels of debt
when compared to the same periods in 1995.
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Financial Condition
The balance sheet reflects the Company's strong financial condition. Debt
to total capitalization decreased to 27.8% from the previous quarter's 30.1%.
When compared to the same period of 1995, debt to total capitalization increased
from 23.0% reflecting the issuance of $100 million of long-term debt during the
fourth quarter of 1995. Inventory levels rose in line with requirements to
service anticipated fourth quarter shipments.
The statement of cash flows indicates that the Company has invested
approximately $86 million in additional property, plant and equipment during
1996. These expenditures were mainly for customer service facilities and
additional manufacturing capacity as the Company continues to improve
manufacturing efficiencies and customer service capabilities. The funds for
these expenditures as well as those for Common Stock dividends, the repurchase
of treasury shares and the repayment of long-term debt were provided by
internally generated funds and short-term borrowings. 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 rate 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 three quarters of 1996.
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 stabilizes the price the Company pays for
cotton, thereby limiting the risk of price increases as well as the Company's
ability to benefit from price decreases. At September 29, 1996, the Company had
outstanding futures contracts that, when combined with other contracts and
inventory, exceeded the Company's anticipated 1996 cotton requirements.
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PART II - 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 September 29, 1996.
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 11, 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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