Russell CP Delaware (NYSE:RML)
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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 (877) 264-7865 domestically, and (706) 634-4719, 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 (800) 642-1687 domestically and (706) 645-9291 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: walshsarah@russellcorp.com
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DATASOURCE: Russell Corporation
CONTACT: Financial: Roger Holliday, +1-678-742-8181, or Media: Nancy
Young +1-678-742-8118, both for Russell Corporation
Web site: http://www.russellcorp.com/