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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 July 6, 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 August 15, 1997
----- ------------------------------
Common Stock, Par Value $.01 Per Share 36,476,291 shares
(Excludes Treasury)
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RUSSELL CORPORATION
Index
Page No.
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Part I. Financial Information:
Consolidated Condensed Balance Sheets--
July 6, 1997 and January 4, 1997 2
Consolidated Condensed Statements of Income--
Thirteen Weeks Ended July 6, 1997 and
June 30, 1996 3
Twenty-six Weeks Ended July 6, 1997 and
June 30, 1996 4
Consolidated Statements of Cash Flows--
Twenty-six Weeks Ended July 6, 1997 and
June 30, 1996 5
Notes to Consolidated Condensed Financial
Statements 6
Management's Discussion and Analysis of
Results of Operations and Financial
Condition 7
Exhibit 11 - Computation of Earnings Per
Share 9
Part II. Other Information 10
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PART I - FINANCIAL INFORMATION
RUSSELL CORPORATION
Consolidated Condensed Balance Sheets
(Dollars in Thousands)
July 6 January 4
1997 1997
----------- ------------
(Unaudited) (Audited)
ASSETS
Current Assets:
Cash $ 9,552 $ 7,355
Accounts receivable, net 244,664 224,155
Inventories:
Finished goods 1,826 280,368
In process 7,129 45,562
Raw materials and supplies 56,247 53,885
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455,202 379,815
LIFO reserve (32,945) (33,033)
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422,257 346,782
Prepaid expenses and other current assets 41,873 21,733
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Total current assets 718,346 600,025
Property, Plant and Equipment, net 518,348 526,786
Other Assets 66,408 68,369
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Total assets $ 1,303,102 $ 1,195,180
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt $ 218,434 $ 63,256
Accounts payable and accrued expenses 83,288 82,197
Federal and state income taxes -- 10,038
Current maturities of long-term debt 21,488 31,943
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Total current liabilities 323,210 187,434
Long-term debt, less current maturities
and unamortized debt discount 257,052 255,935
Deferred Liabilities 78,840 71,988
Shareholders' Equity:
Common Stock, at par value 414 414
Paid-in capital 49,342 50,200
Retained earnings 736,245 726,492
Currency translation adjustment (2,144) (2,226)
----------- -----------
783,857 774,880
Treasury Stock, at cost (139,857) (95,057)
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Total shareholders' equity 644,000 679,823
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Total liabilities & shareholders' equity $ 1,303,102 $ 1,195,180
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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
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July 6 June 30
1997 1996
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Net sales $ 270,273 $ 290,558
Costs and expenses:
Cost of goods sold 192,206 200,059
Selling, general and
administrative expenses 58,927 58,179
Interest expense 7,212 6,244
Other - net (income) (1,291) (681)
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257,054 263,801
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Income before income taxes 13,219 26,757
Provision for income taxes 5,106 10,447
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Net income $ 8,113 $ 16,310
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Weighted average number of common and
common equivalent shares outstanding 36,964,589 38,630,930
Earnings per common and
common equivalent share $ .22 $ .42
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)
26 Weeks Ended
---------------------------
July 6 June 30
1997 1996
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Net sales $ 528,432 $ 548,412
Costs and expenses:
Cost of goods sold 368,354 376,698
Selling, general and
administrative expenses 116,254 115,369
Interest expense 13,084 12,040
Other - net (income) (810) (1,300)
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496,882 502,807
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Income before income taxes 31,550 45,605
Provision for income taxes 12,134 17,643
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Net income $ 19,416 $ 27,962
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Weighted average number of common and
common equivalent shares outstanding 37,477,032 38,725,839
Earnings per common and
common equivalent share $ .52 $ .72
Cash dividends per common share $ .26 $ .24
See accompanying notes to consolidated condensed financial statements.
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RUSSELL CORPORATION
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
26 Weeks Ended
-------------------
July 6 June 30
1997 1996
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Cash Flows from Operating Activities
Net income $ 19,416 $ 27,962
Adjustments to reconcile net income to
cash used in operating activities:
Depreciation and amortization 38,100 37,702
Deferred income taxes 1,918 2,693
(Gain) loss on sale of equipment (237) 22
Changes in Assets and Liabilities:
Accounts receivable (20,227) (22,290)
Inventories (75,341) (58,596)
Prepaid expenses (12,104) (7,151)
Accounts payable & accrued expenses 974 14,114
Income taxes payable (16,214) (8,173)
Pension and other deferred liabilities 3,072 1,558
Other assets 396 2,320
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Net cash used in operating activities (60,247) (9,839)
Cash Flows from Investing Activities
Purchases of property, plant & equipment (29,170) (60,704)
Proceeds from sale of property, plant & equipment 1,288 960
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Net cash used in investing activities (27,882) (59,744)
Cash Flows from Financing Activities
Short-term borrowings 154,866 96,511
Payments on long-term debt (9,339) (9,782)
Dividends on Common Stock (9,663) (9,267)
Cost of Common Stock for treasury (49,576) (7,693)
Distribution of treasury shares 3,918 383
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Net cash provided by financing activities 90,206 70,152
Effect of exchange rate changes on cash 120 8
-------- --------
Net increase in cash 2,197 577
Cash balance at beginning of period 7,355 4,485
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Cash balance at end of period $ 9,552 $ 5,062
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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
consoli dated condensed financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present fairly
the financial position as of July 6, 1997, and January 4, 1997, and the
results of operations for the thirteen and twenty-six week periods ended
July 6, 1997 and June 30, 1996, and cash flows for the twenty-six week
periods ended July 6, 1997 and June 30, 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 twenty-six weeks ended
July 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.
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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 condensed statements of income is shown below:
Comparison of
---------------------------------------------------------------
13 Weeks 26 Weeks 13 Weeks
Ended 7/6/97 Ended 7/6/97 Ended 7/6/97
and 6/30/96 and 6/30/96 and 4/6/97
----------------- ------------------ ----------------
Increase (Decrease)
(Dollars in Thousands)
Net sales $(20,285) (7.0)% $(19,980) (3.6)% $12,114 4.7%
Cost of goods sold (7,853) (3.9) (8,344) (2.2) 16,058 9.1
Selling, general and
administrative expenses 748 1.3 885 .8 1,600 2.8
Interest expense 968 15.5 1,044 8.7 1,340 22.8
Other income 610 89.6 (490) (37.7) 1,772 N/A
Income before income taxes (13,538) (50.6) (14,055) (30.8) (5,112) (27.9)
Provision for income taxes (5,341) (51.1) (5,509) (31.2) (1,922) (27.3)
Net income (8,197) (50.3) (8,546) (30.6) (3,190) (28.2)
Sales were down 7.0% for the second quarter of 1997 as compared to the
second quarter of 1996. Comparisons with last year's record second quarter
suffered from the absence of Olympic headwear sales and difficulties in the
licensed products business in general. The second quarter of 1996 also
benefited from strong hosiery sales with the introduction of Jerzees branded
socks in the mass market. The distributor market for T-shirts dampened sales
dollars in the Jerzees Division, with the continuance of competitive pricing
pressures.
Gross margins declined to 28.9% (vs. 31.1%) for the quarter, and to 30.3%
(vs. 31.3%) on a year-to-date basis. Improvements in manufacturing
efficiencies and raw materials prices were unable to offset the margin declines
brought about by declines in Licensed Products and pricing pressures, primarily
in basic T-shirts in the distributor/screen print market.
Selling, general and administrative expenses increased 1.3% to 21.8% of
sales for the quarter versus 20.0% last year. During the quarter, the Company
consolidated the sales, merchandising and marketing functions of licensed
related sales into the existing structures of Jerzees, Russell Athletic and
Cross Creek as appropriate by product or distribution. There were certain
costs associated with these changes, such as the elimination of a separate
sales force, that negatively impacted the quarter's results.
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FINANCIAL CONDITION
The Company's financial condition remains strong. Inventories increased
11.1% on a 3.6% year-to-date sales decline, as previously discussed. The
current ratio was 2.2 at July 6, 1997. The Company's debt to total
capitalization at that date was 28.5% down from 30.1% for the like period of
1996.
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.
After the end of the quarter, the Company entered into a commitment with
an insurance company to issue $125 million of long-term debt with a weighted
average life of seven years at a rate of 6.65%. Proceeds from the loan will be
used to reduce short-term debt. Although there can be no assurance that such
transaction shall be consummated, it is anticipated that the loan will close
during the third quarter.
Total shareholder equity declined for the quarter, due to treasury stock
purchases. The impact yields a book value per share of $17.66 vs. $17.87 at
year-end.
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 half 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 July 6, 1997, the Company had outstanding futures contracts,
that when combined with other contracts and inventory, exceeded the Company's
anticipated 1997 cotton requirements.
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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 (for SEC use only)
b) Reports on Form 8-K - there were no reports on Form 8-K filed for the
period ended July 6, 1997.
SIGNATURES
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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 August 18, 1997 /S/James D. Nabors
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James D. Nabors, Executive Vice President
and Chief Financial Officer
(For the Registrant and as
Principal Financial Officer)
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