Russell Corporation reported fiscal 2003-fourth quarter net income of $14.5 million, or $.44 per diluted share, which included non-recurring favorable tax effects of $2.6
million, or $.08 per share, compared to $14.5 million, or $.45 per diluted share, in the prior year.
The 2003-fourth quarter results included a pre-tax charge of ($5.9) million, or ($.12) per diluted share, associated with the Company's Operational Improvement Program. Excluding charges associated with the Company's operational Improvement Program and the non-recurring favorable tax effects, net income in the 2003-fourth quarter would have been $15.9 million, or $.48 per diluted share.
First Call reports estimates for the Company's 2003-fourth quarter earnings, excluding charges, ranged between $.41 and $.47 per share, with a mean estimate of $.43 per diluted share. Previously, the Company indicated
that its 2003-fourth quarter net income, before any charges associated with its Operational Improvement Program, were projected to be in the range of
$0.41 to $0.49 per share.
“During the quarter, we aggressively reduced costs in all areas of our
business, which enabled us to be at the high end of our earnings guidance,”
said Jack Ward, chairman and chief executive officer. “However, our top-line
was softer than anticipated, principally as a result of key customers
continuing to reduce their inventories and poor weather conditions impacting
fleece sales.”
For the 2003-fourth quarter, a 13-week period, net sales were $302.4
million, a decrease of 2%, or $6.0 million, from $308.4 million in the year-
ago quarter, a 14-week period. In the U.S., net sales were $279.0 million
compared to $285.8 million in the year-ago quarter. For the 2003-fourth
quarter, net sales in the Athletic channel were up 19%, driven by the
Company's acquisitions of Spalding and Bike. Net sales in the Mass Retail
channel were down 15% from the year-ago quarter primarily due to reduced
inventory levels of key retailers versus prior year and the poor weather
conditions impacting fleece sales in the United States. Net sales in the
Artwear/Careerwear channel were down approximately 6%, reflecting lower
pricing. International net sales were $23.4 million, an increase of 3%, or
$0.7 million, reflecting the positive effects of foreign currency translation.
Gross profit was $91.3 million, or a 30.2% gross margin, for the 2003-
fourth quarter versus a gross profit of $92.1 million, or a 29.9% gross
margin, in the prior year. During the 2003-fourth quarter, gross profit was
positively impacted by the Spalding and Bike acquisitions, and by on-going
cost-saving initiatives. These positive impacts were offset by: (i) pricing
pressures; (ii) additional costs for new product features; (iii) higher
pension and medical insurance costs; and (iv) higher raw material costs for
cotton and polyester.
Selling, general and administrative expenses (“SG&A”) for the 2003-fourth
quarter were $65.0 million, or 21.5% of net sales, versus $61.3 million, or
19.9% of net sales, in the comparable period last year. Excluding ($3.2)
million of the pre-tax charge associated with the Operational Improvement
Program, SG&A expenses in the 2003-fourth quarter would have been $61.8
million, or 20.4% of net sales, which was basically flat with the year-ago
quarter. The Company benefited from its various cost-saving initiatives and
was able to offset the majority of the incremental SG&A expenses from its
acquisitions as well as additional expenses for marketing and advertising.
For the 2003-fourth quarter, total marketing expenses increased approximately
$3.7 million over the comparable period last year.
In the 2003-fourth quarter, the Company recognized non-recurring tax
benefits and other deferred tax adjustments of approximately $2.6 million, or
$.08 per share. Excluding the non-recurring tax adjustments, the effective
tax rate for the 2003-fourth quarter would have been 33.9% compared to 37.2%
in the year-ago quarter.
For fiscal 2003, a 52-week period, net sales were up $21.9 million to
$1.186 billion, a 1.9% increase over sales of $1.164 billion in fiscal 2002, a
53-week period. Gross profit was $344.1 million, or a 29.0% gross margin, for
fiscal 2003 versus a gross profit of $338.6 million, or a 29.1% gross margin,
in the prior year.
SG&A expenses for fiscal 2003 were $246.5 million or 20.8% of net sales,
versus $235.8 million, or 20.3% of net sales in fiscal 2002. Excluding
special charges in both fiscal years, SG&A expenses for fiscal 2003 would have
been $241.9 million, or 20.4% of net sales, an increase of $11.1 million over
$230.8 million, or 19.8% of net sales, in fiscal 2002. For fiscal 2003, total
marketing expenses increased approximately $15.4 million over fiscal 2002.
During fiscal 2003, the Company benefited from its various cost-saving
initiatives and was able to offset the majority of the incremental SG&A
expenses from its acquisitions as well as the additional expenses for
marketing and advertising.
Excluding the non-recurring tax effects described above, the effective tax
rate for fiscal 2003 would have been 36.8% compared to 37.2% in fiscal 2002.
For fiscal 2003, a 52-week period, net income was $43.0 million, or $1.32
per diluted share, versus $34.3 million, or $1.06 per diluted share, in fiscal
2002, a 53-week period. Excluding charges associated with the Company's
Operational Improvement Program and the favorable impact from the non-
recurring tax adjustments, net income in fiscal 2003 would have been $45.3
million, or $1.38 per diluted share. For fiscal 2002, earnings per share
included an after-tax charge of ($.39) per share associated with the early
retirement of debt, an after-tax gain of $.05 per share associated with the
sale of non-core assets, and an after-tax charge of ($.10) per share related
to increasing the Company's bad debt reserve. Excluding these items, net
income for fiscal 2002 would have been $48.5 million, or $1.50 per diluted
share.
“During 2004, we will continue our aggressive actions to build long-term
sales and profits for both the Athletic and Activewear sides of the business,”
said Ward. “In the Athletic Group, Russell Athletic has renewed its Bowl
Championship Series (BCS) sponsorship with ESPN and ABC Sports for the next
two seasons, which goes through the championship game in January 2006.
Additionally, Russell Athletic continues to be a leader in new product
introductions such as Sweatless Sweats(TM), the industry's first line of
moisture management fleece. The Sweatless Sweats product line is part of
Russell Athletic's high-performance Dri-POWER(R) collection and will be
available at retail in fall 2004.
“Spalding has performed exceptionally well since its acquisition nine
months ago and we believe there are substantial upside opportunities for this
business,” continued Ward. “In 2004, Spalding will introduce more than 40 new
products and launch a new marketing campaign which includes television and
print ads featuring Boston Celtics superstar Paul Pierce. Spalding also
recently announced a four-year agreement to be the exclusive provider of the
Arena Football League's official game ball, beginning with the 2004 season
that kicked off this month on NBC.
“In the Activewear Group, our JERZEES brand maintained its leadership
position in both men's and boy's fleece at mass retail,” said Ward. “In the
Artwear market, we are a leading supplier and we plan to grow our business.
For 2003, our JERZEES brand continued as the number one fleece product in that
channel with a share of 42.3%. Furthermore, in the blended fleece category,
the largest segment of the fleece market, our JERZEES brand had a share of 55%
for the month of December and finished 2003 with a share of 52.3%.
“In the overall T-shirt category, our share was unchanged at 12.6% for the
year. However, our JERZEES brand became the number one T-shirt in the blended
category in 2003 with a 33.2% share, an increase of 2.3 share points from the
prior year,” Ward continued. “JERZEES also became the number one brand in the
knit (sportshirt) category with a share of 21.0% in 2003.” All U.S. market
and market share data for the Artwear channel is based on the S.T.A.R.S.
Report produced by ACNielsen Market Decisions.
“Given the highly competitive pricing environment in the Activewear
channels coupled with significantly higher fiber costs, we continue to
approach our business cautiously,” said Ward. “We are now forecasting 2004
sales to be in the range of $1.26 billion to $1.30 billion. With our 2004
fiber costs currently projected to be about 25% to 30% higher than 2003, we
are continuing to forecast 2004 net income to be in the range of $1.40 to
$1.60 per share.”
For 2004, Russell expects:
* First quarter earnings to be in the range of $.06 to $.10 per share;
* Second quarter earnings to be in the range of $.12 to $.18 per share;
* Third quarter earnings to be in the range of $.70 to $.77 per share;
and,
* Fourth quarter earnings to be in the range of $.50 to $.55 per share.
RUSSELL CORPORATION
Consolidated Statements of Operations
(Dollars in Thousands Except Share and Per Share Amounts)
(2) (2)
13 Weeks 14 Weeks 52 Weeks 53 Weeks
Ended Ended Ended Ended
1/3/04 1/4/03 1/3/04 1/4/03
(Unaudited) (Unaudited) (Unaudited) (Note 1)
Net sales $302,354 $308,445 $1,186,263 $1,164,328
Cost of goods sold 211,032 216,342 842,127 825,763
Gross profit 91,322 92,103 344,136 338,565
Selling, general and
administrative expenses 64,973 61,326 246,477 235,810
Other expense (income) - net 1,218 317 4,018 (2,216)
Operating income 25,131 30,460 93,641 104,971
Interest expense 7,227 7,439 29,663 30,246
Debt retirement charge (1) -- -- -- 20,097
Income before income taxes 17,904 23,021 63,978 54,628
Provision for income taxes 3,432 8,564 20,939 20,322
Net income $14,472 $14,457 $43,039 $34,306
Weighted-average common
shares outstanding:
Basic 32,501,189 32,194,366 32,376,617 32,127,579
Diluted 32,785,080 32,312,994 32,726,472 32,269,813
Net income per common share:
Basic $0.45 $0.45 $1.33 $1.07
Diluted $0.44 $0.45 $1.32 $1.06
