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P'tex sales softening results in $25M loss

Don Hogsett -- Home Textiles Today, September 3, 2001

KANNAPOLIS, NC — Wounded by sharply falling sales —specifically, the loss of a big Kmart program and a continued drop-off in blanket sales — then hit by bankruptcy and restructuring costs, Pillowtex Corp. recorded a second-quarter loss of $25.7 million, compared with a year-before profit of $16.9 million.

Sales at the textiles giant fell by 27.6 percent, to $247.5 million from $341.9 million the prior year, a shortfall of more than $94 million.

With margins approaching the vanishing point in bed and bath products, and non-existent in blankets, the company generated a negative gross margin of 2.0 percent, compared with a prior-year margin of 11.6 percent. Helping somewhat to offset eroding margins, the company kept hacking away at costs, slashing its overhead by 8.6 percent, to $20.7 million from $22.6 million last year — a cash savings of $2 million.

In a major drag on the bottom line, the company paid $4.9 million in restructuring costs and another $13.5 million in bankruptcy costs.

Breaking its sales out by product segment, Pillowtex said bed and bath sales declined by 29.2 percent, to $176.3 million from $248.9 million last year, a drop of $72.5 million. Worse, the business recorded a gross margin of just 2.7 percent, compared with 16.6 percent a year ago.

Pillow and pad sales declined by 17.4 percent, to $55.8 million from $67.5 million, a decline of $11.7 million. Average gross margin here narrowed to 11.6 percent, from 17.3 percent the prior year.

The step-child blanket business — in the process of being sold to a private investor and a group of managers — continued its long slide, with sales falling off by 42.7 percent, to $10.4 million from $18.1 million last year.

Sales in the company's retail stores was off by almost a third, falling by 32.4 percent, to $5.1 million from $7.5 million.

Through the first six months of the year, Pillowtex posted a loss of $136.3 million, compared with a prior-year deficit of $19.8 million. First-half sales were off by 21.8 percent, to $537.3 million from $687.1 million.

Pillowtex Corp.

Qtr. 6/30 (x000) 2001 2000 %CHG
(loss) a-Second-quarter results include a $20.1 million one-time charge for the impairment of long-lived assets; a $4.9 million restructuring charge; $13.5 million in bankruptcy costs; and $3.7 million in preferred stock dividends and accretion, compared with $2.0 million the prior year. The year before, the company recorded an income-tax benefit of $3.0 million. b-Six-month results include a $20.1 million charge for the impairment of long-lived assets; a $6.9 million restructuring charge; $7.4 million in preferred dividends and accretion. The year before, the company recorded an income-tax benefit of $8.9 million.
Sales $247,487 $341,940 -27.6
Oper. income (EBIT) (25,710) 16,899
Net income (84,373)a (8,112)a
Per share (diluted) (5.92) (0.57)
Average gross margin (2.0%) 11.6%
SG&A expenses 8.3% 6.6%
six months 2001 2000 %CHG
Sales 537,253 687,100 -21.8
Oper. income (EBIT) (45,413) 29,055
Net income (136,299)b (19,782)b
Per share (diluted) (9.56) (1.39)
Average gross margin (0.1%) 11.4%
SG&A expenses 8.3% 7.2%

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