RUSSELL REVISES EPS, STOCK JUMPS UP 13.8%
Byline: Vicki M. Young / Dan Burrows
NEW YORK — Russell Corp. said Tuesday that it expects to exceed analysts’ expectations for the first quarter ended March 31, and reaffirmed guidance for the remainder of 2002.
The company’s shares jumped $2.03, or 13.8 percent, to close at $16.75 in New York Stock Exchange trading Tuesday on volume nearly seven times their average of 100,545 units.
“We are pleased to announce that we expect to exceed the 2002 first-quarter consensus estimate of 5 cents per share and report earnings per share in the range of 6 cents to 8 cents per share,” Jack Ward, chairman and chief executive officer, said in a statement.
For the 2002 fiscal year, the company is forecasting earnings per share — excluding extraordinary charges to be determined in connection with the refinancing announced April 1 — to be in the range of $1.45 to $1.60, compared with its previous guidance of $1.40 to $1.60 per share.
Ward added: “Our EPS expectations for the second quarter are also looking stronger than our previous guidance of 9 cents to 13 cents per share. We are now projecting second-quarter earnings per share, excluding extraordinary charges in connection with the refinancing, to be in the range of 14 cents to 18 cents, which includes approximately 5 cents per share for the sale of assets.”
Meanwhile, Russell will be looking to pay off its old notes and debts with new ones. The Atlanta-based apparel maker disclosed Monday its intention to establish a new credit facility, as well as offer new senior unsecured notes.
An administrative agent has been selected, along with the lead arranger to underwrite and syndicate $375 million in senior secured credit facilities, which will include a five-year $325 million senior secured revolving credit facility and a five-year $50 million senior secured term loan.
At the same time, and conditioned upon the new facility, Russell is pursuing at least $200 million in senior unsecured notes, subject to market and other conditions.
“After four years of restructuring, it seems like the company is looking to reinvent itself,” said Thomas Lewis, an analyst with C.L. King & Associates. “By addressing the relative shortcomings of their current credit agreement, they can reposition themselves in an industry that has seen big-time global change. It’s an interesting time to try and sell notes, but with bankers not as willing as they were even two years ago to lend money, you have to play the hand you’re dealt.”
Russell intends to use the net proceeds of the senior note offering together with the new borrowings to repay all of its long-term notes as well as outstanding balances, fees and expenses under its extant revolving credit facility. Whatever is left over will be used for working capital and general corporate purposes.
Standard & Poor’s said Tuesday that it assigned a double-“B”-plus rating to the proposed $375 million senior secured credit facility and a double-“B” to its proposed $200 million senior unsecured note issue. The proceeds are to be used for refinancing existing debt.
In addition, a double-“B”-plus corporate credit rating was assigned to the firm. The outlook is stable.
“The outlook anticipates that Russell will continue to maintain its strong market positions. Standard & Poor’s expects financial performance to remain commensurate with the current rating,” David Shapiro, S&P credit analyst, said.
For the upcoming first quarter, Russell anticipates reporting sales in line with expectations of approximately $214 million to $217 million and earnings before interest, taxes, depreciation and amortization in the range of $20 million to $22 million. For the second quarter, the company anticipates reporting sales of approximately $254 million to $262 million, and an EBITDA range of between $27 million and $30 million. For the 2002 fiscal year, sales are projected in the range of $1.18 billion to $1.22 billion and EBITDA of between $150 million and $160 million.
Russell manufactures and markets activewear, casualwear and athletic uniforms under brands including Russell, Jerzees, Mossy Oak, Cross Creek and Discus.
The company expects to announce its first-quarter earnings before the market opens on April 25.