Russell Corporation Reports Third Quarter Results at the Top End of Latest Guidance

ATLANTA, Oct. 27  /PRNewswire-FirstCall/ -- Russell Corporation (NYSE:RML) today reported fiscal third quarter 2005 earnings of $15.8 million, or $0.47 per diluted share on sales of $424.6 million versus last year's $422.7 million in revenues.

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Operating income was $33.9 million in the quarter, down from last year's $44.0 million, as operational issues disclosed in the second quarter were exacerbated by Hurricanes Katrina and Rita. In addition to the previously announced impact of the elimination of the COO position in the third quarter of approximately $0.06 cents per share, the Company experienced significant economic losses attributed to the storms.  The Company estimates the equivalent of $0.05 per share of lost earnings associated with missed sales due to the hurricanes plus additional direct costs of $0.02 per share in the third quarter.

Excluding the impact of the hurricanes and the elimination of the COO position in the quarter, earnings would have been approximately $0.60 per share, at the top end of the range previously provided by the Company. This compares with third quarter 2004 earnings per share of $0.82 on a fully diluted basis, which included a $0.13 benefit from a favorable tax adjustment.

Russell achieved results at the top end of range versus earlier projections due to lower than expected costs in Activewear and strong sales and profit improvements in international apparel, which were partially offset by losses at Huffy Sports.

Aggressive Action Yields Results

The Company is on track to have the previously announced operational issues resolved by the end of the year. Significant improvements have been made in sewing efficiencies in offshore plants while reducing manufacturing variances associated with the ramp up of production within textile operations in Alexander City, Alabama.

According to Jack Ward, chairman and CEO, "We have made significant progress in fixing our short term issues, despite major disruptions due to the recent hurricanes. Having addressed these short term issues, we can now concentrate on building our businesses for the long term."

Reduced Hurricane Impact

As reported earlier, the Company lost more than 40 containers of product from Katrina, as the Company's primary ports of entry for the export of components (fabric and cut parts) and the import of finished goods were damaged in the storm. Shipping has now returned to more normal levels with the reopening of Gulfport, Mississippi, and the shift of certain shipments through Panama City, Florida.

Due to the effects of Katrina, fiber manufacturers increased prices as much as 20 percent.  With Russell's traditional strength in poly/cotton blends, higher staple costs are expected to continue to impact the Company's financial results temporarily, but should "normalize," albeit at a higher level, when world supplies are increased, as expected.

With aggressive actions, the estimated losses associated with the hurricanes have been reduced to a range of $0.13 to $0.16 on a per share basis. The Company does expect to recover a significant portion of these extra expenses from its insurance carriers.

Segment Sales

Sales in the Sporting Goods segment increased by 5 percent, or nearly $10 million, with sales from acquisitions owned for less than a year contributing approximately $33 million.  Continued strength in Dri-POWER(R) performance products for the Russell Athletic Group partially offset declines due to product availability. Sales in the Spalding Group were down slightly from prior year, while Brooks continued to perform exceptionally well, contributing nearly $32 million in revenues in the quarter and achieving its profit plan.

In the Activewear segment, demand remained strong for JERZEES(R) products in the Artwear channel, offsetting declines in the Retail channel, which were primarily due to retail inventory adjustments.

Outlook

The Company is reaffirming its earnings projections for the full year, and expects fiscal 2005 sales in the $1.45 billion to $1.46 billion range with earnings on a per share basis (excluding the COO position elimination, the impact of the hurricanes, and other potential special charges) in the $1.25 to $1.35 range.

The Company is anticipating solid sales increases in most of its businesses next year, which should more than offset the recent Wal-Mart decision to replace the JERZEES(R) brand of boys' sweatshirts and sweatpants for fall 2006. Additionally, expected operational improvements, a full year of the Honduran plant and selective price increases, should offset inflationary trends currently being experienced.

Russell is forecasting solid spring business with a number of new products and an expanded presence at retail. Russell Athletic continues to expand its floor space at retail with product line extensions and increased visibility with a new point of sale presence in sporting goods chains. Likewise, Spalding's latest innovation, the new NeverFlat(TM) basketball, has recently been introduced and is being well received by sporting good retailers. This premium priced NeverFlat(TM) basketball holds its pressure ten times longer than an ordinary basketball, and is expected to be on retail shelves this winter. Also, in the Sporting Goods segment, Brooks continues to meet or exceed expectations, with bookings for spring 2006 currently up more than 30 percent. Brooks is experiencing increased demand from national sporting goods accounts in addition to its primary market, specialty running retailers, where Brooks is one of the largest share brands.

Ward added, "We feel positive about our long-term potential. We continue to believe in our strategy to become a premier sporting goods company, as demonstrated by our stable of consumer brands built on a heritage of quality athletic products."

Conference Call Information

Management will have a conference call today, October 27, 2005, at 8:30 a.m. Eastern Time to discuss the third quarter results.  The call may be accessed at (877) 264 -7865 (domestically), and [phone] (internationally), using conference call ID number 1525624.  The call will also be simultaneously web cast via the Investor Relations homepage of the Company's website at http://www.russellcorp.com/.  A replay of the call will be available through the website for 30 days.  In addition, you can register through the above referenced website if you would like to receive press releases, conference call reminders and other notices.

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 stockholders, 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) risks associated with (i) our long-term business strategies, (ii) the impact of Hurricane Katrina and other recent hurricanes on the Company's business, (iii) the short- and long-term effects of higher prices for raw materials, energy, and transportation, (iv) the loss of Wal-Mart's boys' fall fleece program, (v) the introduction of new products; (b) our ability to (i) fully resolve current operational issues and implement operational improvements, and (ii) meet planned production schedules; (c) the degree to which we are able to (i) achieve increased sales of our products and (ii) realize increased revenues from announced and planned price increases; and (d) 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      39 Weeks     39 Weeks
                         Ended        Ended         Ended        Ended
                       October 2,   October 3,    October 2,    October 3,
                         2005         2004          2005         2004
                      (Unaudited)  (Unaudited)   (Unaudited)   (Unaudited)

  Net sales             $424,632     $422,656   $1,079,973     $964,220
  Cost of goods sold     307,240      300,853      786,486      697,439
    Gross profit         117,392      121,803      293,487      266,781

  Selling, general and
   administrative
   expenses               84,501       78,445      231,203      196,610
  Other (income) expense
   - net                  (1,005)        (630)      (2,573)      (5,739)
    Operating income      33,896       43,988       64,857       75,910

  Interest expense, net   10,382        8,222       29,336       23,163
  Non-controlling
   interests                 144          666        1,565          940

    Income before
     income taxes         23,370       35,100       33,956       51,807

  Provision for income
   taxes                   7,610        8,161       11,351       14,175

    Net income           $15,760      $26,939      $22,605      $37,632

  Weighted-average common
   shares outstanding:
    Basic             33,176,005   32,691,064   33,003,348   32,639,512
    Diluted           33,380,966   32,901,106   33,318,486   32,861,790

  Net income per common share:
    Basic                 $ 0.48        $0.82        $0.68       $ 1.15
    Diluted               $ 0.47        $0.82        $0.68       $ 1.15



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

                           October 2, 2005  January 1, 2005  October 3, 2004
     ASSETS                  (Unaudited)         (Note)        (Unaudited)

  Current assets:
    Cash                         $48,581          $29,816          $37,361
    Accounts receivable, net     338,578          212,063          289,325
    Inventories                  426,426          411,701          385,203
    Prepaid expenses and other
     current assets               25,377           17,737           18,354
    Income tax receivable         18,234            6,101            2,799

      Total current assets       857,196          677,418          733,042

  Property, plant &
   equipment, net                316,226          322,890          316,077

  Other assets                   254,261          253,801          151,003

      Total assets            $1,427,683       $1,254,109       $1,200,122

     LIABILITIES AND
      STOCKHOLDERS' EQUITY

  Current liabilities:
    Accounts payable and
     accrued expenses           $214,064         $190,422         $187,781
    Deferred income taxes         13,619            4,054            6,615
    Short-term debt               10,132           18,190           13,831
    Current maturities of
     long-term debt                2,048            6,938            4,405

      Total current liabilities  239,863          219,604          212,632

  Long-term debt, less
   current maturities            497,591          372,921          359,115

  Deferred liabilities:
    Income taxes                  33,527           20,286            6,604
    Pension and other             53,639           64,351           53,119

  Non-controlling interests       14,986           14,096           13,015

  Commitments and contingencies       --               --               --

  Stockholders' equity:
    Common stock, par value
     $.01 per share; authorized
     150,000,000 shares, issued
     41,419,958 shares               414              414              414
    Paid-in capital               37,253           40,716           40,377
    Retained earnings            774,458          755,799          746,801
    Treasury stock, at cost     (192,214)        (201,171)        (203,976)
    Accumulated other
     comprehensive loss          (31,834)         (32,907)         (27,979)
      Total stockholders'
       equity                    588,077          562,851          555,637

      Total liabilities &
       stockholders' equity   $1,427,683       $1,254,109       $1,200,122

   Note: Consolidated balance sheet at January 1, 2005 has been derived from
         audited financial statements.



                          RUSSELL CORPORATION
                Consolidated Statements of Cash Flows
                             (In Thousands)

                                                    39 Weeks Ended
                                           October 2, 2005   October 3, 2004
                                              (Unaudited)      (Unaudited)
  Operating Activities:
    Net income                                     $22,605        $37,632
    Adjustments to reconcile net income
     to net cash used in operating activities:
      Depreciation                                  36,342         34,859
      Amortization                                   2,816          1,000
      Earnings of non-controlling interests          1,565            940
      Provision for deferred income taxes           20,497              -
      Gain on sale of assets                          (788)        (4,672)
      Other                                          3,741          6,923
      Changes in operating assets & liabilities:
        Trade accounts receivable                 (133,962)      (101,812)
        Inventories                                (17,840)       (26,973)
        Prepaid expenses and other
         current assets                             (7,390)           639
        Other assets                                (2,140)         5,805
        Accounts payable and accrued expenses       29,631         22,950
        Income taxes                               (11,791)        11,905
        Pension and other deferred liabilities     (10,712)        (7,632)
    Net cash used in operating activities          (67,426)       (18,436)
  Investing Activities:
    Purchases of property, plant & equipment       (30,290)       (17,717)
    Proceeds from the sale of property,
     plant & equipment and other assets              2,911          8,624
    Net cash refund from (paid for)
     acquisitions, joint ventures and other          1,031        (43,293)
    Other                                              (46)         1,619
    Net cash used in investing activities          (26,394)       (50,767)
  Financing Activities:
    Borrowings on credit facility and
     other - net                                   118,960         74,990
    (Payments) borrowings on short-term debt        (7,238)         5,993
    Dividends on common stock                       (3,948)        (3,910)
    Treasury stock re-issued                         5,050          2,195
    Cost of common stock for treasury                  (37)           (17)
    Net cash provided by financing activities      112,787         79,251
  Effect of exchange rate changes on cash             (202)          (662)
    Net increase in cash                            18,765          9,386
  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                    $48,581        $37,361

  Supplemental schedule of noncash
   investing and financing activities:
    Sold building - portion of proceeds in
     the form of a note                                 $-         $1,500
    Sold investment - proceeds in the form
     of stock and cash                                   -          4,945
  Noncash investing and financing activities            $-         $6,445



                           RUSSELL CORPORATION
                   Financial Data by Reportable Segment
                              (in thousands)

                               Quarter-to-Date             Year-to-Date
                            13 Weeks      13 Weeks    39 Weeks     39 Weeks
                             Ended         Ended       Ended        Ended
                           October 2,    October 3,  October 2,   October 3,
                               2005        2004         2005        2004
                           (Unaudited) (Unaudited)  (Unaudited)  (Unaudited)
  NET SALES
  Sporting Goods           $201,840     $192,360     $527,425     $438,061
  Activewear                207,828      215,064      505,987      484,181
  All Other                  14,964       15,232       46,561       41,978
  TOTAL NET SALES          $424,632     $422,656   $1,079,973     $964,220

  SEGMENT OPERATING INCOME
  Sporting Goods            $15,518      $23,949      $34,917      $48,504 *
  Activewear                 21,275       25,051       36,240       35,801
  All Other                   1,423        1,131        5,257        4,287
  TOTAL SEGMENT OPERATING
   INCOME                   $38,216      $50,131      $76,414      $88,592

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

  Total Segment operating
   Income                   $38,216      $50,131      $76,414      $88,592
  Unallocated amounts:
    Corporate Expenses       (4,464)      (6,809)     (13,122)     (13,622)
    Interest Expense, net   (10,382)      (8,222)     (29,336)     (23,163)
  CONSOLIDATED INCOME
   BEFORE INCOME TAXES      $23,370      $35,100      $33,956      $51,807

  * Includes one-time gain on the sale of Marmot Mountain, Ltd. of
    $4.4 million


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DATASOURCE: Russell Corporation



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

Young, [phone], both of Russell Corporation 



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

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