RUSSELL BEATS ANALYSTS’ FORECAST
Byline: Brenda Lloyd
ALEXANDER CITY, Ala. — Russell Corp. topped analysts’ earnings expectations in the first quarter, but was unable to match year-ago earnings before restructuring charges.
Net income for the quarter ended March 31 rose 17.4 percent to $2.6 million, or 8 cents per share, from $2.2 million, or 7 cents, a year ago. The results were slightly ahead of First Call’s consensus estimate of 7 cents a share.
However, the most recent quarter landed below year-ago results when nonrecurring charges were eliminated. Excluding $1.7 million in restructuring charges in 2001, income would have been $3.9 million, or 12 cents a share.
Sales dipped 10.4 percent to $215.8 million from $241 million a year ago. “We are pleased to have exceeded analysts’ EPS expectations,” said Jack Ward, chairman and chief executive officer, in a statement.
“We also continue to forecast a strong second half in 2002 based on new business commitments and our cost-saving initiatives.”
He noted that Russell this month completed its refinancing, giving it greater long-term operating and financial flexibility. As a result, Russell is raising the lower end of its full-year earnings guidance, excluding extraordinary charges in connection with the refinancing, to $1.50 a share from $1.45, making the earnings guidance for the full year $1.50 to $1.60 per share, he said.
Currently, the company has sales commitments for more than $60 million in new business, primarily in the second half, and Russell is anticipating sales in fiscal 2002 to be between $1.18 billion and $1.22 billion, compared with $1.16 billion in fiscal 2001.
Addressing the annual shareholders meeting on Wednesday, Ward acknowledged that 2001 was a difficult year, but described it as one “in which Russell made great strides in creating a stronger, more viable company.” Sales were down 5 percent because of the weak economy and elimination of unprofitable businesses, he said, and earnings per share dropped to $1.13, compared with $1.90 in 2000. However, Russell improved its position in all product channels, attracted new customers, such as J.C. Penney Co. and Sam’s Club, and organized into divisions that focus on channels of distribution.
Many of Russell’s competitors, including Tultex Corp. and Starter, didn’t survive because they “did not make the necessary changes to face today’s new economy,” he said. “While the last four years have been difficult and required many very tough decisions, we are seeing results from all our efforts.”
He stressed that Russell accomplished its restructuring “much more effectively than anyone in our industry had ever done before,” doing in three years what most other companies do in 10 or more years.
Citing $15 million in savings from the transfer of yarn operations into a joint venture with Frontier Spinning, Ward pointed out: “Restructuring has allowed us to build a low-cost model to compete in a global market where prices are constantly declining.”