Russell Corporation Reports Fourth Quarter and Year End Results

Sales increase 6.2% for the quarter, 10.5% for the year





ATLANTA, Feb. 16  /PRNewswire-FirstCall/ -- Russell Corporation (NYSE:RML) today reported fiscal 2005 fourth quarter sales of $354.6 million, an increase of 6.2% over the $334.0 million reported in the same period a year ago.  The Company reported earnings of $11.8 million, or $0.36 per diluted share, versus $0.31 per diluted share reported in the fourth quarter of 2004. Net income in the fourth quarter of 2005 was impacted by a tax benefit in the quarter.

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Sales for the quarter ended December 31, 2005 included $27 million in incremental sales from Brooks, the only acquisition owned for less than a year. Beyond Brooks, sales gains were strongest in the Artwear business, which experienced growth in the quarter in the mid-teens.

Gross profit for the fourth quarter of 2005 was $99.9 million, or a 28.2% gross margin as a percent of sales, versus a gross profit of $97.1 million, or a 29.1% gross margin, in the prior year.  The positive impact of increased unit volumes in Artwear and higher margins associated with Brooks was generally offset by a shift in product mix and increased year-over-year costs for polyester, transportation and energy. Losses at Huffy Sports also negatively affected results.

For the 2005 fourth quarter, selling, general and administrative expenses ("SG&A") were up $6.2 million to $79.9 million. Excluding the SG&A associated with Brooks, these expenses were lower than a year ago. For the quarter, the Company reported operating income of $19.5 million, versus $24.9 million in the same quarter last year.

During the quarter, the Company recognized the majority of its profits in lower tax countries. The Company benefited from significantly improved profitability in its RLA Manufacturing subsidiary, responsible for the management of Russell's Latin American manufacturing operations. Additionally, Spalding experienced a greater proportion of its profits outside the U.S. through its international licensing subsidiary, based in Ireland. With a greater proportion of profits in these areas, the effective tax rate was significantly reduced in the quarter versus prior year. The Company also benefited from a one-time resolution of certain tax matters relating to previous years.

Year-to-date Results

For the full year ended December 31, 2005, net sales increased $136.4 million to $1.435 billion, a 10.5% increase over the prior year's sales of $1.298 billion.  Excluding the sales from acquisitions owned for less than a year, sales were $1.271 billion.

"As indicated earlier, we were disappointed in our 2005 financial results. Despite certain areas of our business having record performances, such as international apparel and Brooks, we did experience disappointing sales overall in our Sporting Goods segment. Unfilled orders earlier in the year contributed to weaker sales results for the balance of the year for Russell Athletic. Additionally, sales weakness in Mossy Oak continued throughout the year, with declines of approximately 20 percent from 2004," said Jack Ward, chairman and chief executive officer.

Gross profit was $393.6 million, or a 27.4% gross margin as a percent of sales, for fiscal 2005 versus a gross profit of $363.9 million, or a 28.0% gross margin, in the prior year.  SG&A expenses for fiscal 2005 were $311.1 million, or 21.7% of net sales, versus $270.3 million, or 20.8% of net sales, in fiscal 2004. Excluding the acquisitions owned for less than a year, SG&A was 21.0% of sales in 2005.

Operating income in 2005 was $84.4 million versus $100.8 million last year. With the impact of the tax benefit in the fourth quarter, the effective rate for the year was approximately 21%, yielding net income for fiscal 2005 of $34.4 million, or $1.03 per share on a fully diluted basis. Net income for 2004 was $47.9 million, or $1.46 per diluted share.

Outlook

"We feel positive about our many growth opportunities and our cost reduction initiatives outlined in January. We also have already begun to see the benefits from our lean manufacturing initiatives and have experienced a broad base of support for these efforts throughout our operations," said Ward. "Russell's brands remain solidly positioned with our customers, and we continue to build on our reputation for quality, authenticity and performance, particularly with our primary brands, Spalding, Russell Athletic, Jerzees and Brooks."

The Company reaffirmed its previous annual guidance for 2006. Russell expects sales for fiscal 2006 to be in the $1.450 to $1.480 billion range. As previously announced, Russell expects GAAP earnings per fully diluted share of $0.32 to $0.59, as charges associated with the previously announced restructuring are estimated to be in the $0.66 to $0.78 range for 2006. Excluding those charges, ongoing earnings are expected to be in the $1.10 to $1.25 range.

Additionally, the Company expects to record an effective tax rate for 2006 of 30% or less.

The Company reported that it expects to report a loss in the first quarter of 2006 in the range of $0.29 to $0.41, as approximately half of the expected 2006 restructuring charges are scheduled to impact the first quarter. Ongoing earnings are expected to be in a range from ($0.02) to $0.04 per share for the quarter reflecting the Company's planned shift to the FIFO (First In First Out) method for accounting for inventory.

Conference Call Information

A conference call is scheduled for today at 8:30 a.m. Eastern Time to discuss the 2005 financial results and 2006 plans.  To listen, please call the conference call line at [phone] domestically, and [phone], internationally, prior to the scheduled start time and use conference ID number 4708755.  This conference call will also be broadcast live on the Internet.  A link to the broadcast can be found on the Investor Relations homepage of the Company's website at http://www.russellcorp.com/.

If you are unable to participate in this conference call, a replay will be available through February 23, 2006 by dialing [phone] domestically and [phone] internationally and entering 4708755.  Alternatively, a link to the replay of the call will be available on the Investor Relations homepage of the Company's website through May 25, 2006.

About Russell Corporation

Russell Corporation is a leading branded athletic and sporting goods company marketing athletic apparel, uniforms, footwear and equipment for a wide variety of sports, outdoor and fitness activities.  The Company's major brands included in the Sporting Goods Segment are: Russell Athletic(R), Spalding(R), Brooks(R), Huffy Sports(R), Bike(R), Moving Comfort(R), AAI(R) and Mossy Oak(R).  The predominant brand in the Activewear segment is JERZEES(R).  The Company's common stock is listed on the New York Stock Exchange under the symbol RML and its web site address is http://www.russellcorp.com/.

Forward-Looking Statement

This Press Release includes certain "forward-looking" statements (as defined by the Private Securities Litigation Reform Act of 1995 (the "Act")) that describe our beliefs concerning future business conditions, prospects, growth opportunities, and the outlook for the Company based upon currently available information. Wherever possible, we have identified these statements by words such as "anticipate," "believe," "intend," "expect," "continue," "could," "may," "plan," "project," "predict," "will" and similar expressions. We include such statements because we believe it is important to communicate our future expectations to our shareholders, and we therefore make such statements in reliance upon the safe harbor provisions of the Act. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including, but not limited to, any projections of sales and earnings. These forward-looking statements are based upon assumptions that we believe are reasonable. Factors that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to: (a) the ultimate cost of the restructuring, and our ability to complete the restructuring and achieve cost reductions within the projected time frame and with the expected savings; (b) factors impacting our ability to achieve sales growth, including inherent risks in the marketplace associated with new products, the effectiveness of increased marketing efforts, significant competitive activity and related pricing pressures; and (c) other risk factors listed in our reports filed with the Securities and Exchange Commission from time to time. We undertake no obligation to revise the forward-looking statements included in this Press Release to reflect any future events or circumstances. Our actual results, performance or achievements could differ materially from the results expressed or implied by any forward-looking statements contained in this Press Release.

                             RUSSELL CORPORATION
                      Consolidated Statements of Income
              (In Thousands Except Share and Per Share Amounts)

                                Quarter-to-Date           Year-to-Date
                              13 Weeks    13 Weeks    52 Weeks    52 Weeks
                               Ended       Ended       Ended       Ended
                            December 31, January 1,  December 31, January 1,
                                2005        2005        2005        2005
                            (Unaudited) (Unaudited) (Unaudited)     (1)

  Net sales                   $354,631    $334,032  $1,434,605  $1,298,252
  Cost of goods sold           254,771     236,933   1,041,037     934,372
     Gross profit               99,860      97,099     393,568     363,880

  Selling, general and
     administrative expenses    79,866      73,695     311,070     270,305
  Other (income) expense - net     479      (1,476)     (1,874)     (7,216)
     Operating income           19,515      24,880      84,372     100,791

  Interest expense, net          9,817       7,680      39,153      30,843
  Non-controlling interests        255       1,081       1,820       2,021

     Income before income taxes  9,443      16,119      43,399      67,927

  Provision (benefit) for
   income taxes                 (2,382)      5,815       8,969      19,991

     Net income                $11,825     $10,304     $34,430     $47,936

  Weighted-average common
   shares outstanding:
     Basic                  32,237,863  32,750,260  33,057,179  32,668,376
     Diluted                33,239,330  33,000,155  33,293,900  32,897,559

  Net income per common share:
     Basic                       $0.37       $0.31       $1.04       $1.47
     Diluted                     $0.36       $0.31       $1.03       $1.46

  (1) Derived from the audited financial statements as of January 1, 2005



                            RUSSELL CORPORATION
                        Consolidated Balance Sheets
             (In Thousands Except Share and Per Share Amounts)

                                      December 31, 2005    January 1, 2005
                                         (Unaudited)            (1)
     ASSETS

  Current assets:
       Cash                                 $42,600             $29,816
       Accounts receivable, net             229,552             212,063
       Inventories                          440,318             411,701
       Prepaid expenses and other
        current assets                       25,270              17,737
       Income tax receivable                  5,897               6,101

             Total current assets           743,637             677,418

  Property, plant & equipment, net          315,721             322,890

  Other assets                              252,482             253,801

             Total assets                $1,311,840          $1,254,109

     LIABILITIES AND STOCKHOLDERS' EQUITY

  Current liabilities:
       Accounts payable and accrued
        expenses                            $207,804           $190,422
       Deferred income taxes                  14,829              4,054
       Short-term debt                         2,689             18,190
       Current maturities of long-term debt    2,067              6,938

             Total current liabilities       227,389            219,604

  Long-term debt, less current maturities    398,797            372,921

  Deferred liabilities:
       Income taxes                            9,139             20,286
       Pension and other                      72,435             64,351

  Non-controlling interests                   15,242             14,096

  Commitments and contingencies                   --                 --

  Stockholders' equity:
       Common stock, par value $.01
        per share; authorized 150,000,000
        shares, issued 41,419,958 shares         414                414
       Paid-in capital                        35,833             40,716
       Retained earnings                     784,958            755,799
       Treasury stock, at cost              (190,212)          (201,171)
       Accumulated other comprehensive loss  (42,155)           (32,907)
             Total stockholders' equity      588,838            562,851

             Total liabilities &
              stockholders' equity        $1,311,840         $1,254,109

  (1) Derived from the audited financial statements as of January 1, 2005



                             RUSSELL CORPORATION
                    Consolidated Statements of Cash Flows
                                (In Thousands)

                                         52 Weeks Ended      52 Weeks Ended
                                       December 31, 2005    January 1, 2005
                                          (Unaudited)             (1)
  Operating Activities:
   Net income                                 $34,430            $47,936
   Adjustments to reconcile net income
    to net cash provided by operating
    activities:
     Depreciation                              48,599             46,627
     Amortization                               3,734              1,395
     Earnings of non-controlling interests      1,820              2,021
     Provision for deferred income taxes        4,333             (1,708)
     Gain on sale of assets                      (533)            (5,387)
     Other                                      5,309              8,548
     Changes in operating assets & liabilities:
      Trade accounts receivable               (25,853)            (8,664)
      Inventories                             (32,549)           (26,194)
      Prepaid expenses and other current
       assets                                  (7,313)             1,164
      Other assets                             (2,006)             7,037
      Accounts payable and accrued expenses    23,912              6,378
      Income taxes                                622              8,137
      Pension and other deferred liabilities   (7,682)            (6,001)
   Net cash provided by operating activities   46,823             81,289
  Investing Activities:
    Purchases of property, plant & equipment  (42,471)           (35,494)
    Proceeds from the sale of property, plant
     & equipment and other assets               2,996             13,697
    Net cash refund from (paid for)
     acquisitions, joint ventures and other     1,031           (158,370)
    Other                                         (46)             1,769
    Net cash used in investing activities     (38,490)          (178,398)
  Financing Activities:
   Borrowings on credit facility and
    other - net                                18,437             91,307
  (Payments) borrowings on short-term debt    (12,839)             9,692
   Dividends on common stock                   (5,271)            (5,216)
   Treasury stock re-issued                     5,057              3,839
   Cost of common stock for treasury             (709)               (80)
   Net cash provided by financing activities    4,675             99,542
  Effect of exchange rate changes on cash        (224)              (592)
   Net increase in cash                        12,784              1,841
  Increase in cash from consolidating
   Frontier Yarns, LLC                              -              7,859
  Cash balance at beginning of period          29,816             20,116
  Cash balance at end of period               $42,600            $29,816

  (1) Derived from the audited financial statements as of January 1, 2005



                             RUSSELL CORPORATION
                    FINANCIAL DATA BY REPORTABLE SEGMENT
                               (in thousands)

                                 Quarter-to-Date         Year-to-Date
                               13 Weeks   13 Weeks   52 Weeks    52 Weeks
                                 Ended      Ended      Ended       Ended
                             December 31, January 1, December 31, January 1,
                                  2005      2005       2005        2005
                             (Unaudited)(Unaudited) (Unaudited) (Unaudited)
  NET SALES
  Sporting Goods               $169,802  $144,906    $699,708    $582,967
  Activewear                    170,675   174,582     674,177     658,763
  All Other                      14,154    14,544      60,720      56,522
  TOTAL NET SALES              $354,631  $334,032  $1,434,605  $1,298,252

  SEGMENT OPERATING INCOME
  Sporting Goods                 $4,350   $10,306     $41,184     $58,810
  Activewear                     19,768    16,299      54,092      52,100
  All Other                       1,163     2,763       6,422       7,050
  TOTAL SEGMENT OPERATING
   INCOME                       $25,281   $29,368    $101,698    $117,960

  Reconciliation of total
   segment operating income to
   consolidated income before
   income taxes:

  Total Segment operating
   Income                       $25,281   $29,368    $101,698    $117,960
  Unallocated amounts:
    Corporate Expenses           (6,021)   (5,569)    (19,146)    (19,190)
    Interest Expense, net        (9,817)   (7,680)    (39,153)    (30,843)
  CONSOLIDATED INCOME BEFORE
    INCOME TAXES                 $9,443   $16,119     $43,399     $67,927


First Call Analyst: 

FCMN Contact: [e-mail] 

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DATASOURCE: Russell Corporation



CONTACT:  Financial: Roger Holliday, [phone], or Media: Nancy

Young [phone], both for Russell Corporation 



Web site:  http://www.russellcorp.com/ 

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