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Guilford gets reprieve from bank lenders

Bedding is lone bright spot in 4Q

Dodging the bankruptcy bullet, Guilford Mills said its bank lenders have given the diversified textiles producer more breathing room to work its way through its financial issues and restructure a crushing debt load.

Guilford said its senior lenders have agreed to defer a debt payment, and also extend a waiver of the company's non-compliance with debt covenants, to Feb. 15, giving it more time to restructure about $270 million in debt.

Earlier this month, Guilford warned that unless it received the waiver, it would be in default of its loan agreements, giving creditors the right to call in their loans and liquidate the collateral, "substantially all of the company's assets."

John Emrich, Guilford president and ceo, commented, "We are pleased that our lenders have agreed to this extended waiver period, as it allows the parties to continue their negotiations toward a mutually satisfactory restructuring of the company's senior debt." Emrich added, "The company is working closely with its investment bankers at Rothschild Inc. in order to develop a senior debt restructuring plan which would afford the company an opportunity to implement its business plan. While Guilford and the entire textile industry are obviously operating under tough economic conditions, we are fully committed to succeed in the face of these challenges and appreciate the support of our employees, customers and suppliers during this period."

With sales falling off by more than 20 percent, weighed down by debt and restructuring costs, and its margins past the vanishing point, Guilford recorded a fourth-quarter loss of $115.9 million during the period ended Sept. 30. Hammered by deep declines in its auto and apparel business, sales fell off by 21.3 percent, to $145.5 million from $185.0 million last year, a shortfall of $39.4 million.

One bright spot in an otherwise muted sales picture was Guilford's rapidly expanding bedding business, where sales climbed higher by 9 percent in an otherwise dreary period for the nation's home textiles producers, lifted by the growing Jockey Home business. But it wasn't enough to offset waning sales of home fashions fabrics, and Guilford's big home fashions unit posted a 5.3 percent drop in sales, to $19.3 million from $20.4 million last year.

With overall sales under heavy pressure, stunted by the apparel and automotive units, the company recorded a negative gross margin of 2.4 percent during the closing quarter, compared with last year's 8.4 percent average gross margin. For the 12-month period, gross margin narrowed to 4.8 percent from 12.9 percent the prior year. Most of the damage was done by the drop in sales and slowdowns in the company's plants, "which caused nearly $60 million of the margin decrease," the company reported.

For all of last year, Guilford's losses mounted to $160.8 million from losses of $21.0 million the prior year. Sales declined by 21.0 percent to $643.5 million from $814.2 million, a drop of more than $170 million.

Guilford Mills Inc.

Qtr. 9/30 (x000) 2001 2000 % CHG
( ): denotes loss
a-Fourth-quarter results include restructuring costs of $12.7 million; and an income-tax benefit of $13.4 million, compared with a prior-year benefit of $10.3 million.
b-12-month results include a $71.4 million pre-tax restructuring and impaired asset charge, compared with a similar $28.6 million charge the year before; an $11.5 million charge for impaired investments; $911,000 in miscellaneous expenses, compared with $6.3 million in miscellaneous income the prior year; an income-tax benefit of 2.6 million vs. a year-before benefit of $12.0 million; and a one-time charge of $2.6 million from the early retirement of debt.
Sales $145,520 $184,957 -21.3
Oper. income (EBIT) (21,237) (6,130)
Net income (115,851)a (17,770)a
Per share (diluted) (6.13) (0.94)
Average gross margin (2.4%) 8.4%
SG&A expenses 12.2% 11.7%
12 months
Sales 643,519 814,226 -21.0
Oper. income (EBIT) (51,462) 8,221
Net income (160,757)b (20,974)b
Per share (diluted) (8.48) (1.11)
Average gross margin 4.8% 12.9%
SG&A expenses 12.8% 11.9%


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