WestPoint Records $150 Million Loss in 2004

Don Hogsett, June 20, 2005

WestPoint, Ga. — Hobbled by more than $102 million in one-time charges pegged to its bankruptcy and restructuring, WestPoint Stevens recorded a widening $150 million loss last year, compared with a $133 million loss during 2003.

Cutting through the thicket of one-time charges that obscure the bottom line, the company put up a small operating profit of $14 million, down more than 73 percent from $52.3 million the year before.

Calling a halt to a long period of sliding sales — hurt first by low-cost imports and later by its own bankruptcy — WestPoint managed to stabilize its top line at $1.62 billion, off just 1.7 percent from $1.65 billion the preceding year. The modestly lower sales, the company said, stemmed from lower sales of bedding products, offsetting higher towel sales; lower sales in its retail operation due to store closings; and the shutdown of its U.K. operations.

Scoping out sales by channel, WestPoint said, “Growth with mass merchants and specialty stores was offset by sales declines to department stores.”

Average gross margin continued to erode, thinning 340 basis points, or 3.4 percentage points, to 13.8 percent from 17.2 percent in 2003. Taking a bite out of margins was $16.8 million in costs tied to ongoing restructuring, including equipment relocation and inventory write-offs at shuttered WestPoint Stevens retail stores.

But acting as a partial offset, the company continued to hack away at costs, which were pared 110 basis points, or 1.1 percentage points, to 13 percent of sales from 14.1 percent the year before. Measured in absolute dollars, costs were slashed 9.5 percent, to $209.6 million from $231.5 million in 2003, yielding a cash savings of $21.9 million. Cost savings were generated by the downsizing of the retail store business; the closing of the U.K. operations; lower bad debt expenses; and the elimination of the trade receivables program.

The company recorded an income-tax benefit of $17.1 million, down from a prior-year tax benefit of $61.3 million.

WestPoint Stevens Inc.

Year 12/31 (x000) 2004 2003 % change
a. Twelve-month results include a $52.5 million restructuring and impairment charge, compared with $49.6 million during 2003; a $7.9 million fixed asset impairment charge; $7.8 million in miscellaneous expenses, compared with $17.6 million in 2003; and Chapter 11 expenses of $34.6 million, compared with $31.5 million during 2003; and an income-tax benefit of $17.1 million versus $61.3 million during 2003. Results from 2003 include a $46.3 million goodwill impairment charge.
Sales $1,618,684 $1,646,202 -1.7
Oper. Income (EBIT) 14,024 52,341 -73.2
Net income (150,047)a (133,284)a
Per share (diluted) (3.01) (2.67)
Average gross margin 13.8% 17.2%
SG&A expenses 13.0% 14.1%

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