Russell Corporation reported fiscal 2003 first quarter net sales of $228.0 million, a 6% increase over the comparable period last year. The Company also reported earnings per diluted share of $.11, a 38% increase over the comparable period last year, which exceeded the First Call consensus estimate of $.09 per share for the quarter.
“The strength of our brands and the expansion of our athletic business in the retail and team sports channels certainly contributed to our positive first quarter results,” said Jack Ward, chairman and CEO. “Russell Athletic remains a leader in the team uniform business and is the number-one fleece brand in the national chain stores. Additionally, our JERZEES brand is growing its number-one market position with the mass merchandisers in both the men’s and boys fleece categories. Throughout this time of economic uncertainty, we continue to focus on reducing expenses, introducing innovative products, building our brands, maintaining high levels of quality and service and, most importantly, strengthening and expanding our relationships with our customers.”
Net sales for the 2003 first quarter were $228.0 million, an increase of $12.2 million, or 6%, from last year’s first quarter sales of $215.8 million. This increase was driven by higher retail sales of Russell Athletic, JERZEES, Discus, and Mossy Oak branded products. In addition, net sales during the quarter were favorably impacted by increases in our team sports and college bookstore businesses as well as the acquisitions of Bike and Moving Comfort. The increase in net sales was partially offset by price reductions and lower volumes in the distributor market of the Artwear channel.
Gross profit was $62.8 million, or a 27.6% gross margin, for the 2003 first quarter versus a gross profit of $59.8 million, or a 27.7% gross margin, in the prior year. During the 2003 first quarter, gross profit was positively impacted by improved plant utilization, ongoing cost savings, and higher sales volumes in the Russell Athletic and Mass Retail channels. These benefits were partially offset by higher raw material costs for cotton and polyester, additional costs for product improvements, and pricing pressures and lower volumes in the distributor market of the Artwear channel.
Selling, general and administrative expenses (“SG&A”) for the 2003 first quarter were $49.4 million, or 21.7% of net sales, versus $49.0 million, or 22.7% of net sales in the comparable period last year.
Net income for the 2003 first quarter was $3.4 million, a 31% increase over last year’s first quarter net income of $2.6 million. Earnings per diluted share increased 38% to $.11 per share in the 2003 first quarter versus $.08 per share in the comparable period last year.
On April 16, 2003, Russell announced that it had signed a purchase agreement to acquire the brand names, inventory, contracts and related assets of the sporting goods business of Spalding Sports Worldwide, Inc. for $65 million. Spalding is a leading producer and marketer of basketballs, footballs, soccer balls and volleyballs under the SPALDING brand name and of softballs under the DUDLEY brand. In 2002, sales for the Spalding sporting goods business were $90 million, comprised of $80 million from sports equipment and $10 million from licensing royalties of the brand.
“I am pleased to announce that we have received clearance under the Hart- Scott-Rodino Act to complete the acquisition of the Spalding business,” said Ward. “We expect that the acquisition will be completed by the end of May and that it will be mildly accretive to our earnings in 2003.”
“Even in this challenging economic environment, we are continuing to forecast earnings per share to range between $1.60 and $1.75, which includes additional marketing and advertising expenses, higher raw material costs and continued pricing pressure in the distributor market of the Artwear channel,” continued Ward. “Assuming that the Spalding transaction closes by the end of May, we would recognize about $45 to $50 million in sales for 2003. Therefore, we are forecasting our net sales for the 2003 fiscal year to be in the range of $1.26 billion to $1.30 billion.”
For the remainder of 2003, Russell expects:
- Second quarter earnings to range between $.16 and $.20 per share.
- Third quarter earnings to range between $.82 and $.88 per share.
- Fourth quarter earnings to range between $.50 and $.56 per share.
RUSSELL CORPORATION Consolidated Statements of Operations (Dollars in Thousands Except Share and Per Share Amounts) 13 Weeks Ended 4/6/03 3/31/02 (Unaudited) (Unaudited) Net sales $227,983 $215,825 Costs and expenses: Cost of goods sold 165,162 155,989 Selling, general and administrative expenses 49,378 48,968 Interest expense 7,167 6,694 Other (income) expense - net 714 (11) 222,421 211,640 Income before income taxes 5,562 4,185 Provision for income taxes 2,114 1,557 Net income $3,448 $2,628