Pillowtex 3Q loss exceeds last year with $43M drop

Don Hogsett, November 19, 2001

DALLAS — Pillowtex Corp. posted a net loss of $43.7 million in the third quarter, more than double the loss it reported for third quarter of 2000. The company reported its third-quarter financial results to the Securities and Exchange Commission on Nov. 13, one day before the first year anniversary of its Chapter 11 bankruptcy filing.

Even more disconcerting was Pillowtex's third-quarter operating loss of $8.9 million, which reversed its operating profit from the year-ago third quarter of $6.5 million. The lion's share of this stemmed from an identical $8.9 million operating loss recorded by the company's blanket division, which it closed in September.

The textile giant's third-quarter sales fell 18 percent, to $271.4 million. In the 10-Q, the company's management attributed the sales drop to the loss of a specific (but unidentified) customer in August 2000. Sales also took a hit from the expiration of Pillowtex's licensing agreement with the Ralph Lauren organization.

According to the filing, the sales decrease included a 17 percent falloff in sales in its bed and bath division, and a nearly 14 percent decline in sales of pillow and pad products.

Declining sales darkened the entire financial picture for Pillowtex in the third quarter. Although the company was able to trim expenses, its average gross margin and selling, general and administrative expenses as a percentage of sales both headed in the wrong directions in the third quarter.

Average gross margin plummeted a staggering 460 basis points, to 4.6 percent, as this figure was slammed by the decline in sales and increased, unabsorbed overhead costs, management said in the filing. Much of these costs were due to the company's efforts to cut inventories and to higher levels of "customer deductions," the filing said.

In SG&A, Pillowtex continued to control costs in the areas of travel, salaries and wages, and general fees and services. The company's third-quarter SG&A dollars were 11 percent less than the comparable figure for last year's third quarter.

Pillowtex Corp.

QTR 9/29 (x000) 2001 2000 % CHG
( ): Denotes loss
Sales $271,395 $330,391 -17.9
Oper. income (EBIT) (8,890) 6,498 -236.8
Net income (43,688) (16,268) 168.6
Per share (diluted) (3.39) (1.29) 162.8
Average gross margin 4.6% 9.2%
SG&A percentage 7.9% 7.2%
Nine months
Sales 787,455 978,678 -19.5
Oper. income (EBIT) (47,443) 40,304 -217.7
Net income (172,591) (32,113)
Per share (diluted) (12.95) (2.68)
Average gross margin 2.3% 11.5%
SG&A percentage 8.4% 7.4%

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