Russell Corporation reported fiscal 2004 fourth quarter sales of $334.0 million, an increase of 10.5% over the same period a year ago. The Company also reported earnings of $10.3 million, or 31 cents per diluted share. Earnings for the quarter include an approximate 6 cents per share impact from the dilution of Huffy Sports, severance costs associated with cost improvement initiatives and incremental expenses associated with Sarbanes-Oxley related projects. For the fourth quarter of 2003, earnings were $14.5 million, or 44 cents per diluted share.
Sales for the quarter ended January 1, 2005, reflect a 3% increase in the Company’s ongoing businesses in addition to approximately $22 million dollars in incremental sales from acquisitions owned for less than a year. Sales gains were again recorded for the Activewear Group, the Athletic Group and the International apparel segment.
“During the fourth quarter, sales increases in our domestic segment were led by our Athletic Group. Increases in Athletic were driven by our recent acquisitions, which have solidified and grown our position as a leading branded athletic and sporting goods company. Our International apparel segment continued its sales growth pace, with increases of more than 20% for the quarter and the year,” said Jack Ward, chairman and chief executive officer. “For the quarter, our Activewear Group had a 3% increase in revenues, led by our JERZEES(R) sports apparel in the mass channel.”
Gross profit for the fourth quarter of 2004 was $97.1 million, or a 29.1% gross margin, versus a gross profit of $91.3 million, or a 30.2% gross margin, in the prior year. The positive impact of increased volumes and revenues, coupled with ongoing cost improvements, was dampened by higher year-over-year costs of fiber, transportation and energy, lower margins experienced in Huffy Sports and other increased costs, as well as the fourth quarter impact of price reductions in Artwear which were taken in early 2004.
For the 2004 fourth quarter, selling, general and administrative expenses (“SG&A”) were $73.5 million versus $65.0 million in the comparable period last year, resulting in operating income of $24.9 million, versus $25.1 million in the same quarter last year.
For the full year ended January 1, 2005, net sales increased $112 million to $1.298 billion, a 9.4% increase over the prior year’s sales of $1.186 billion. Net income for fiscal 2004 was $47.9 million, or $1.46 per share on a fully diluted basis, within the range of previous guidance.
Gross profit was $363.9 million, or a 28.0% gross margin, for fiscal 2004 versus a gross profit of $344.1 million, or a 29.0% gross margin, in the prior year. SG&A expenses for fiscal 2004 were $269.6 million, or 20.8% of net
sales, versus $246.5 million, also 20.8% of net sales, in fiscal 2003.
Operating income for the full 2004 year increased $7.2 million over fiscal 2003, to $100.8 million. Net income for 2004 increased 11.4%, or $4.9 million, to $47.9 million, or $1.46 per diluted share, versus $43.0 million, or $1.32 per diluted share, in 2003.
“We are pleased with our substantial progress in expanding our position as a leading, authentic sporting goods company,” said Jack Ward, chairman and CEO. “As we capitalize on our acquisitions of sports equipment and athletic footwear, Russell will continue to gain momentum in the sporting goods market. Acquisitions have resulted in our becoming the leading provider of basketballs and basketball equipment, and we expect Brooks to maintain strong growth in the performance running category. Each of these strengthens Russell’s position and is an investment in our future growth.”
Russell expects sales for fiscal 2005 to increase approximately 15% to 17%, to approximately $1.50 billion to $1.52 billion. As previously stated, Russell expects earnings per fully diluted share in the $1.55 to $1.65 range for 2005. For the first quarter of 2005, the Company expects sales to increase in the 20% plus range and now expects earnings per share of 5 cents to 8 cents. For the remaining quarters, the Company expects the following EPS ranges:
- Second quarter: – Earnings of $0.18 to $0.22 per share
- Third quarter: – Earnings of $0.70 to $0.78 per share
- Fourth quarter: – Earnings of $0.52 to $0.60 per share
Additionally, the Company expects to record an effective tax rate of approximately 35% for the full year of 2005.
RUSSELL CORPORATION Consolidated Statements of Income (Dollars in Thousands Except Share and Per Share Amounts) 13 Weeks 13 Weeks 52 Weeks 52 Weeks Ended Ended Ended Ended 1/01/05 1/03/04 1/01/05 1/03/04 Net sales $334,032 $302,354 $1,298,252 $1,186,263 Cost of goods sold 236,933 211,032 934,372 842,127 Gross profit 97,099 91,322 363,880 344,136 Selling, general and administrative expenses 73,509 64,973 269,558 246,477 Other (income) expense - net (1,290) 1,218 (6,469) 4,018 Operating income 24,880 25,131 100,791 93,641 Interest expense, net 7,680 7,227 30,843 29,663 Non-controlling interest 1,081 -- 2,021 -- Income before income taxes 16,119 17,904 67,927 63,978 Provision for income taxes 5,815 3,432 19,991 20,939 Net income $10,304 $14,472 $47,936 $43,039 Weighted-average common shares outstanding: Basic 32,750,260 32,501,189 32,668,376 32,376,617 Diluted 33,000,155 32,785,080 32,897,559 32,726,472 Net income per common share: Basic $0.31 $0.45 $1.47 $1.33 Diluted $0.31 $0.44 $1.46 $1.32