Sure Fit files for bankruptcy
March 15, 2004-- Home Textiles Today,
Hammered by the high cost of building its rapidly growing catalog and Internet business, and at the same time shifting much of its production overseas, Sure Fit Inc., the nation's largest supplier of slip covers, last week filed for bankruptcy protection from its creditors in a U.S. Bankruptcy Court here.
Bert Shlensky, president and CEO, said, "It was two things really. We spent a lot of money to grow the catalog and Internet business, and the costs were greater than the revenues. At the same time, we started to import a lot of our product, and that takes a lot of money. You have to pay for the goods before they ship, and we were unable to raise the cash."
The bankruptcy, said Shlensky, "will give us the flexibility to reorganize and come out of this a stronger, profitable company."
In its bankruptcy filing, Sure Fit said it owes more than $42.7 million, including $14.7 million to its 20 largest unsecured creditors, including trade suppliers; and another $27.9 million in secured debt, most of that to its bank.
Sure Fit's single-largest creditor is Wachovia Bank, with a claim of $27.2 million. Sure Fit had a $30 million line of credit, but the credit pact had been amended nine times, most recently in June, reflecting the company's ongoing cash-flow problems. In October, running out of patience, Wachovia issued a forbearance agreement, further tying Sure Fit's hands.
Reflecting the increasing importance of its offshore supply lines, the company's single largest unsecured creditor is 1st Asia Corp., a sourcing and trading company. Another trading company, Alltex, is second in line with a $1.4 million claim, and a Taiwanese company, Taiwan Jing Mih Textile, is fourth at $794,493.
Among U.S. suppliers, Springs Industries holds the largest claim, $756,292.
Reflecting the high cost of doing business in the United States, two insurance companies are owed a combined total of $1.5 million for health insurance premiums for workers.
In its bankruptcy filing in the Southern District of New York State, Sure Fit described itself as a victim of its own heady growth. Between 1998 and 2002, the company said, sales had increased at an average annual rate of 30 percent. But the growth came at a high price, and Sure Fit said, "The capital and other costs associated with the debtor's expansion and the costs of doing business in the current environment, have more than outpaced such growth."
While trying to manage its aggressive growth, Sure Fit said in its filing, it was hampered by quota issues. Sure Fit said it was "negatively impacted by existing worldwide trade practices, including the existence of quotas on textiles, which will not be phased out until 2005. Such quotas have resulted in increased direct competition from foreign competitors through manufacturing of finished products overseas, driving down prices and decreasing the debtor's profit margins."
Looking to shuck off U.S. manufacturing costs, Sure Fit has increasingly shifted production overseas, and sourcing now accounts for about 40 percent of its annual sales, the company said in the bankruptcy filing.
The costs of shifting its business and building up the catalog, Sure Fit said its operating profit had swung from $11.1 million in 2002 to an estimated loss of $7.5 million for 2003.
SURE FIT INC. UNSECURED CREDITORS
|1st Asia Corp.||$4,778,802|
|Alltex Trading Co.||1,362,753|
|Highmark Blue Shield||904,664|
|Taiwan Jing Mih Textile Co.||794,493|
|RR Donnelley Receivables||660,193|
|Capital Blue Cross||591,582|
|Three Z Printing||533,894|
|Hearst Magazines Division||531,555|
|UPS Capital Global Trade Finance Corp.||448,416|
|Mi-llon Sales Associates||342,181|
|Blumenthal Print Works||341,894|
|The PMA Insurance Co.||200,000|
|Direct Response Media||184,067|
SURE FIT INC. SECURED CREDITORS
|Wachovia Bank||Revolving credit facility||$27,161,713|
|General Electric||Capital Corp. term loan||723,745|
|General Electric||Capital Corp. capital leases||33,188|
|NEC Financial Services||capital lease||4,741|
|Transcom Leasing Corp.||capital lease||802|
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