RML Russell CP Delaware

Russell Reports Second Quarter Sales and Earnings Acquisition-led sales increases result in record second quarter sales; Outlook updated for the balance of the year ATLANTA, July 28 /PRNewswire-FirstCall/ -- Russell Corporation (NYSE:RML) today reported fiscal 2005 second quarter earnings of $4.7 million or $.14 per diluted share on sales of $342.1 million, record sales for any second quarter. (Logo: http://www.newscom.com/cgi-bin/prnh/20030630/RMLCORPLOGO) The 18 percent gain in sales over last year's second quarter was led by increases associated with acquisitions, which generated more than $50 million in revenues. Excluding the incremental revenue related to acquisitions, the Company experienced a slight increase in sales for the quarter. Operating income was $18.0 million in the quarter, down from last year's $23.9 million which included the one-time gain of $4.4 million associated with the sale of the Company's position in Marmot Mountain, Ltd. Sales in the Activewear segment increased more than 10 percent and were particularly strong in the Artwear channel, which recorded sales increases of nearly 15 percent for the quarter. Increased product demand led to significant cost increases associated with ramping up production quickly and reacting to changes in style mix, negatively impacting second quarter profits. Further impacting earnings, Activewear did not achieve all of its cost savings goals. For the Sporting Goods segment, sales increases of nearly 30 percent were driven by the 2004 acquisitions of AAI, Huffy Sports and Brooks. Overall, these acquisitions were on plan, and, as expected, had no material impact on EPS in the quarter. Excluding these acquisitions, revenue in the Sporting Goods segment declined 12 percent in the quarter. Mossy Oak experienced declines in revenue and profits for the quarter versus a year ago. Lower prices and the reduction of a major retail program resulted in a revenue decline of more than 30 percent in the quarter. Even though most of Mossy Oak's sales are planned for the second half, the negative impact to profits is not expected to be offset for the balance of the year. Also in the Sporting Goods segment, increases in sales in the quarter for the Russell Athletic Group's base business only partially offset the absence of Major League Baseball and the discontinuance of the Discus brand at a major account. "Given the expectations we had for the quarter, we are certainly disappointed with the results," said Jack Ward, chairman and CEO. "The good news is that there is solid consumer demand for our products and the major impacts experienced in the second quarter were primarily operational issues. We are rapidly addressing these issues, but we expect continued impact into the third quarter. We have already taken a number of steps to improve our cost position and further leverage our growth opportunities." "Our strategy, to maximize our presence in the sporting goods industry by developing new business and expanding programs within our core brands, continues to be successful with our customers," Ward added. "An example is the integration of Spalding, AAI and Huffy Sports into the Spalding Group, the world's largest provider of basketball equipment. We are achieving both operational and sales synergies with a number of accounts beginning to introduce new Spalding products into their markets. We believe we can leverage the strength we have in basketballs with the product offerings from these integrated businesses to create a strong foundation and increased sales, particularly with the turn-around at Huffy Sports." As demand has remained strong, Russell continues to anticipate that the Activewear segment will achieve strong sales and profit growth for the year, especially for the Company's market-leading men's fleece business. "In the Sporting Goods segment, Brooks is having a strong year with continued sales gains planned for the second half as well," Ward added. "With ongoing improvements that are being made through the Spalding integration of Huffy Sports and AAI, we expect to continue building momentum into 2006." Russell Athletic also anticipates sales increases in the second half, based on the reception of new styles and expanded floor space at retail. Ward continued, "With expectations for second half sales growth from existing businesses in the 4 to 6 percent range, we are maintaining our 2005 fiscal year sales forecast in the range of $1.500 billion to $1.520 billion versus $1.298 billion in 2004." Based on the second quarter results, the Company is revising the forecasted range of earnings per diluted share for fiscal 2005. Excluding the 2004 one-time gain associated with the sale of the position in Marmot Mountain, Ltd., in 2004, revised expectations now include an increase in operating profits of 17 to 19 percent for the year. Fully diluted earnings per share on an ongoing basis are now forecast to be in the $1.40 to $1.48 range. In addition, the Company may take certain actions to improve organizational effectiveness and reduce administrative costs which could result in special charges. For the remainder of 2005, Russell expects the following ranges: * Third quarter earnings -- Total diluted EPS on an ongoing basis, between $.62 and $.70 * Fourth quarter earnings -- Total diluted EPS on an ongoing basis, between $.52 and $.60 Conference Call Information Management will have a conference call today, July 28, 2005, at 8:30 a.m. Eastern Time to discuss the second quarter results. The call may be accessed at (877) 264 -7865 (domestically), and (706) 634-4917 (internationally), using conference call ID number 7767816. 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 the Mossy Oak business; (b) our ability to leverage growth opportunities; (c) risks associated with our long-term business strategies, including the integration of the Spalding, AAI and Huffy Sports businesses; (d) our ability to effect cost reductions and resolve current operational issues; (e) changes in customer demand for our products; and (f) 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 26 Weeks 26 Weeks Ended Ended Ended Ended July 3, July 4, July 3, July 4, 2005 2004 2005 2004 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Net sales $342,099 $289,771 $655,341 $541,564 Cost of goods sold 251,895 209,426 479,245 396,586 Gross profit 90,204 80,345 176,096 144,978 Selling, general and administrative expenses 73,186 61,686 146,703 118,164 Other income - net (1,023) (5,247) (1,568) (5,109) Operating income 18,041 23,906 30,961 31,923 Interest expense, net 10,064 7,754 18,953 14,941 Non-controlling interests 747 274 1,421 274 Income before income taxes 7,230 15,878 10,587 16,708 Provision for income taxes 2,566 5,716 3,741 6,015 Net income $4,664 $10,162 $6,846 $10,693 Weighted-average common shares outstanding: Basic 32,980,182 32,652,492 32,919,043 32,614,822 Diluted 33,540,238 32,836,177 33,368,450 32,843,219 Net income per common share: Basic $0.14 $0.31 $0.21 $0.33 Diluted $0.14 $0.31 $0.21 $0.33 RUSSELL CORPORATION Consolidated Balance Sheets (In Thousands Except Share and Per Share Amounts) July 3, January 1, July 4, 2005 2005 2004 ASSETS (Unaudited) (Note) (Unaudited) Current assets: Cash $44,784 $29,816 $21,789 Accounts receivable, net 268,078 212,063 225,951 Inventories 466,089 411,701 424,593 Prepaid expenses and other current assets 19,752 17,737 23,614 Income tax receivable 15,647 6,101 10,353 Total current assets 814,350 677,418 706,300 Property, plant & equipment, net 316,246 322,890 317,303 Other assets 251,092 253,801 134,161 Total assets $1,381,688 $1,254,109 $1,157,764 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $172,721 $190,422 $166,347 Deferred income taxes 13,721 4,054 6,078 Short-term debt 14,975 18,190 9,481 Current maturities of long-term debt 2,024 6,938 6,882 Total current liabilities 203,441 219,604 188,788 Long-term debt, less current maturities 496,758 372,921 362,072 Deferred liabilities: Income taxes 23,772 20,286 6,609 Pension and other 69,247 64,351 60,790 Non-controlling interests 14,842 14,096 12,348 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 38,325 40,716 38,665 Retained earnings 760,019 755,799 721,168 Treasury stock, at cost (193,247) (201,171) (204,943) Accumulated other comprehensive loss (31,883) (32,907) (28,147) Total stockholders' equity 573,628 562,851 527,157 Total liabilities & stockholders' equity $1,381,688 $1,254,109 $1,157,764 Note: Consolidated balance sheet at January 1, 2005 has been derived from audited financial statements. RUSSELL CORPORATION Consolidated Statements of Cash Flows (In Thousands) 26 Weeks Ended July 3, 2005 July 4, 2004 (Unaudited) (Unaudited) Operating Activities: Net income $6,846 $10,693 Adjustments to reconcile net income to net cash used in operating activities: Depreciation 25,304 23,470 Amortization 1,785 615 Earnings of non- controlling interests 1,421 274 Provision for deferred income taxes 11,029 - Gain on sale of assets (597) (4,614) Other 3,830 2,132 Changes in operating assets & liabilities: Trade accounts receivable (63,289) (46,954) Inventories (57,469) (72,821) Prepaid expenses and other current assets (2,144) (811) Other assets (442) 3,785 Accounts payable and accrued expenses (10,605) 13,462 Income taxes (9,267) 4,294 Pension and other deferred liabilities 4,896 925 Net cash used in operating activities (88,702) (65,550) Investing Activities: Purchases of property, plant & equipment (20,936) (10,221) Proceeds from the sale of property, plant & equipment and other assets 2,687 1,769 Net cash refund from (paid for) acquisitions, joint ventures and other 3,402 (14,758) Other (196) 1,469 Net cash used in investing activities (15,043) (21,741) Financing Activities: Borrowings on credit facility and other - net 118,838 80,424 Borrowings on short-term debt (1,889) 1,617 Dividends on common stock (2,626) (2,605) Treasury stock re-issued 4,484 1,759 Cost of common stock for treasury (30) (17) Net cash provided by financing activities 118,777 81,178 Effect of exchange rate changes on cash (64) (73) Net increase (decrease) in cash 14,968 (6,186) 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 $44,784 $21,789 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 - 9,519 Noncash investing and financing activities $- $11,019 RUSSELL CORPORATION FINANCIAL DATA BY REPORTABLE SEGMENT: (In Thousands) Q2 Q2 YTD 13 Weeks Ended 26 Weeks Ended July 3, July 4, July 3, July 4, 2005 2004 2005 2004 (Unaudited)(Unaudited)(Unaudited)(Unaudited) NET SALES Sporting Goods $160,282 $124,122 $325,585 $245,701 Activewear 167,833 151,702 298,159 269,117 All Other 13,984 13,947 31,597 26,746 TOTAL NET SALES $342,099 $289,771 $655,341 $541,564 SEGMENT OPERATING INCOME Sporting Goods $6,956 $12,267 * $19,399 $24,555 * Activewear 11,868 13,350 14,965 10,750 All Other 886 2,018 3,834 3,156 TOTAL SEGMENT OPERATING INCOME $19,710 $27,635 $38,198 $38,461 Reconciliation of total segment operating income to consolidated income before income taxes Total Segment operating Income $19,710 $27,635 $38,198 $38,461 Unallocated amounts: Corporate Expenses (2,416) (4,003) (8,658) (6,812) Interest expense, net (10,064) (7,754) (18,953) (14,941) CONSOLIDATED INCOME BEFORE INCOME TAXES $7,230 $15,878 $10,587 $16,708 * Includes one-time gain on the sale of Marmot Mountain, Ltd. of $4.4 Million http://www.newscom.com/cgi-bin/prnh/20030630/RMLCORPLOGO http://photoarchive.ap.org/ DATASOURCE: Russell Corporation CONTACT: Roger Holliday (Financial), +1-678-742-8181, or Nancy Young (Media), +1-678-742-8118, both of Russell Corporation Web site: http://www.russellcorp.com/

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