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Red ink has vendors singing the blues

Battered by a slowdown in sales, hobbled by rising debt levels, hammered by the costs of shutting down plants in a ferociously competitive global arena — then, adding insult to injury, drained by rising retail chargebacks — the American home fashions industry endured its worst year in decades, moving into a new millennium, with 15 key players recording a composite loss of almost three-quarters of a billion dollars.

In a punishing year that left an entire industry reeling, fully two-thirds of the companies in this year's HTT Vendor Report Card — 10 out of the 15 — lost money, generating a composite loss for the entire industry of $669.1 million, compared with a profit the year before of $289.7 million — a one-year drop of almost a billion dollars.

Taking a big toll on the industry last year was the double whammy of both high debt and high restructuring costs, as a handful of companies hurried to shut down some of the capacity, plants and U.S. workforce made obsolete by a rising tide of low-cost imports and the shift of American production to other countries, notably Mexico.

The top line didn't look much better, as a consumer slowdown that started during the second half of the year held overall sales in check. Combined sales for the entire sample eked out a whisper-thin gain of just 0.2 percent, to $15.3 billion.

Operating profits? Forget it. Down 30.5 percent, to $761.7 million from $1.1 billion in 1999, a drop of $333.5 million — a third of a billion dollars. Putting operating profits under heavy pressure, average gross margin narrowed by 210 basis points, to 16.7 percent from 18.8 percent the prior year. But hacking away at costs — closing plants and cutting jobs — the industry held expenses in check at 11.7 percent of sales.

Skewing the entire sample, and dragging down the entire industry's profile, were just two companies which between them lost more than $790 million — Burlington Industries Inc., a giant denim, apparel and home goods producer, with a loss of $527 million; and bankrupt bed and bath producer Pillowtex Corp., struggling under a crushing debt load, with a $271.3 million deficit.

Not all the news was bad last year, and in a remarkably Darwinian environment, the strong really did get stronger. Quaker Fabrics made a strong comeback, Mohawk Industries made a small gain in earnings as it continued to build its home fashions business, and Springs Industries held relatively steady, with profits thinning out by just 2.6 percent, compared to deep losses at both of its rivals, WestPoint Stevens and Pillowtex.

Composite results of 13 textiles companies (excludes Crown Crafts & Thomaston Mills)
figures, excluding percentages, in $000s

2000 1999 %CHG
( ): denotes loss
Source: Home Textiles Today market research
Sales $15,298,308 $15,268,404 0.2%
Operating income 761,657 1,095,183 -30.5
Net income (669,147) 289,703
Average gross margin 16.7% 18.8%
SG&A as a % of sales 11.7% 11.7%
Net debt coverage 74.8% 43.6%


Composite results of home fashions producers
figures, excluding percentages, in $000s

2000 1999 %CHG
( ): denotes loss
Source: Home Textiles Today market research
Sales $10,072,661 $10,107,340 -0.3%
Operating income 566,269 850,444 -33.4
Net income (91,496) 324,654
Average gross margin 18.7% 21.1%
SG&A as a % of sales 13.1% 12.7%
Net debt coverage 61.1% 34.3%


Composite results of diversified textiles producers
figures, excluding percentages, in $000s

2000 1999 %CHG
( ): denotes loss
Source: Home Textiles Today market research
Sales $5,225,647 $5,161,064 1.3%
Operating income 223,433 244,739 -8.7
Net income (577,651) (34,951)
Average gross margin 12.9% 14.5%
SG&A as a % of sales 9.1% 9.7%
Net debt coverage 114.4% 76.0%


Top 5 sales (in $000s) Top 5 earnings (in $000s)
Source: Home Textiles Today market research
In prior editions of the Report Card, vendors were ranked by the top five sales and earnings increases. But this year, with gains of any kind hard to come by, they are ranked simply by size.
1. Mohawk $3,255,846 1. Mohawk $162,599
2. Springs Inds. 2,275,056 2. Springs Inds. 67,144
3. WestPoint Stevens 1,815,870 3. Wellman 27,811
4. Burlington Inds. 1,620,247 4. Dan River 10,773
5. Pillowtex 1,349,627 5. Quaker Fabric 10,945


Mohawk, Springs among few money makers

Profitability Measures Sales Operations
1. Includes a $7 million pretax charge for a class action legal settlement.
2. 1996 net income includes a $700,000 pretax restructuring charge and a $3.1 million pretax charge for asset valuation reductions.
3. Includes pretax charges for restructuring and realignment expenses of $5.3 million in 2000 and $21 million in 1996. 1996 net income also includes a $50.1 million gain on the sale of Clark-Schwebel and a $3.6 million extraordinary loss.
4. Includes a $109.2 million pretax restructuring and asset impairment charge and a $35.4 million income tax benefit. 1999 net income was $104.1 million.
5. 1996 net income was $57.7 million and includes a $287,000 net loss from discontinued operations.
6. Includes pretax restructuring charges of $67 million in 2000 and $62.1 million in 1999, equity in income of joint ventures of $10.3 million in 2000 and $6.4 million in 1999 and income tax benefits of $21.7 million in 2000 and $15.9 million in 1999. 1999 net loss was $31.5 million.
7. 1996 net income was $41.6 million and includes a $29.9 million pretax loss on the closing of a division and a $697,000 extraordinary loss on the early extinguishment of debt.
8. After preferred dividends of $8.9 million in 2000 and $12.3 million in 1999; includes pretax asset impairment charges of $112.7 million in 2000 and $2 million in 1999 and income tax benefits of $104.8 million in 2000 and $7.9 million in 1999. 2000 net income also includes a $19.4 million reorganization charge. 1999 net loss was $31.8 million.
9. 1996 net income was $14.1 million and includes a $609,000 extraordinary loss.
10. Includes a $793,000 restructuring credit.
11. 1999 net loss was $11 million and includes a $17.4 million pretax restructuring charge, a $3.8 million income tax benefit and a $1.8 million extraordinary charge, the cumulative effect of an accounting change.
12. Includes a $549,000 pretax foreign currency loss, a $2.7 million income tax benefit and a $741,000 extraordinary gain. 1999 net income was $33.4 million.
13. 1996 net loss was $2.1 million after $3 million in preferred dividends; includes a $3 million pretax foreign currency loss and a $13.9 million extraordinary gain.
14. 2000 and 1996 are 52 weeks; 1999 is 53 weeks.
15. Includes a $28.6 million pretax restructuring and asset impairment charge and a $12 million income tax benefit.
16. 1999 net income was $10.2 million and includes a $470,000 pretax restructuring and asset impairment credit.
17. 1996 net income was $34 million.
18. Includes $226,000 in equity in loss of joint venture.
19. After preferred dividends; includes pretax restructuring and asset impairment charges of $38.5 million in 2000 and $16 million in 1999, income tax benefits of $14.6 million in 2000 and $10.7 million in 1999 and equity in earnings of unconsolidated affiliate of $2.7 million in 2000 and $1.7 million in 1999. 1999 net loss was $22.1 million and also includes a $1 million extraordinary charge, the cumulative effect of an accounting change.
20. 1996 net loss after preferred dividends was $5.1 million; includes a $5.2 million pretax restructuring charge, a $2.3 million income tax benefit and a $2.4 million after-tax equity loss in earnings of unconsolidated affiliates.
21. Includes a $5.6 million pretax restructuring charge and a $4.1 million income tax benefit. 1999 net income was $9.4 million; 1996 net income was $13.8 million.
22. 2000 and 1999 are 52 weeks; 1996 is 53 weeks.
23. As of press time, Crown Crafts had not released its year-end results for the fiscal year ended March, 2001. Figures shown are from unaudited data based on the trailing 12-month period ended Dec. 31, 2000 and may not include all extraordinary charges, credits or income tax benefits. Annual data is not available to calculate percentage changes from 1996 data, return on equity, operating income, operating margin, gross margin, SG&A as a percentage of sales, inventory turns and net debt coverage.
24. Includes a $19.6 million pretax charge for restructuring and other non-recurring asset write-offs, a $1.1 million credit to restructuring and severance charges, a $28.1 million extraordinary gain on the repurchase of debt, $2.6 million in net income from discontinued operations and a $9 million net loss on the disposal of discontinued operations.
25. 1999 net loss was $14 million and includes a $7 million pretax charge for restructuring and other non-recurring asset write-offs, a $8.9 million income tax benefit and $577,000 in net income from discontinued operations.
26. 1996 net loss was $10.7 million and includes a $7.4 million income tax benefit and $2.2 million in net income from discontinued operations.
27. As of press time, Thomaston Mills had not released its year-end results for the fiscal year ended June, 2001. Figures shown are from unaudited data based on the trailing 12-month period ended Dec. 30, 2000 and may not include all extraordinary charges, credits or income tax benefits. Annual data is not available to calculate percentage changes from 1996 data, return on equity, operating income, operating margin, gross margin, SG&A as a percentage of sales, inventory turns and net debt coverage.
Company Net Income ($000s) % Change ’99-’00 % Change ’96-’00 Return on sales Return on equity Net Sales ($000) % Change ’99-’00 % Change ’96-’00 Operating income % Change ’99-’00 Operating margin Gross margin SG&A/turns Inventory coverage Net debt Fiscal year end
Mohawk $162,5991 3.4% 185.6%2 5.0% 21.6% $3,255,846 5.6% 45.4% $317,115 7.6% 9.7% 25.3% 15.5% 4.6x 12.0% 12/31/00
Springs Inds. 67,1443 -2.6 -20.93 3.0 8.2 2,275,056 2.5 2.4 150,671 6.6 6.6 18.7 12.1 3.7x 21.2 12/30/00
WestPoint Stevens (63,310)4 4 5 -3.5 8.9 1,815,870 -3.6 20.9 144,145 -46.2 7.9 21.4 13.5 3.3x 84.8 12/31/00
Burlington Inds. (526,972)6 6 7 -32.5 -556.0 1,620,247 -1.9 -25.8 46,655 -43.2 2.9 11.4 8.6 4.7x 142.0 9/30/00
Pillowtex (271,336)8 8 9 -20.1 427.6 1,349,627 -13.0 175.1 (128,028) -9.5 0.0 9.5 3.8x -83.6 12/30/00
Wellman 27,81110 11 4.8 2.5 4.4 1,116,706 19.4 1.6 54,077 207.8 4.8 11.1 6.3 5.5x 33.2 12/31/00
Polymer Group (4,323)12 12 13 -0.5 -1.9 862,035 -3.1 65.3 84,563 -29.7 9.8 22.3 12.5 5.7x 108.6 12/30/00
Guilford Mills14 (20,974)15 16 17 -2.6 -6.8 814,226 -5.0 -1.9 8,151 -72.3 1.0 12.9 11.9 5.4x 231.7 10/1/00
Dan River 10,77318 -26.8 89.5 1.6 3.9 663,467 5.5 74.8 55,069 7.2 8.3 18.4 10.1 2.9x 59.8 12/30/00
Cone Mills (29,122)19 19 20 -4.7 -23.0 617,721 0.2 -17.2 18,118 2.9 10.9 8.0 5.1x 93.7 12/31/00
Culp (8,311)21 21 21 -2.0 -6.8 409,810 -16.0 2.7 5,621 -77.3 1.4 13.7 12.3 5.3x 161.3 4/29/01
Quaker Fabric22 10,945 428.0 27.8 3.6 7.9 302,985 20.5% 52.4 21,676 162.1 7.2 22.5 15.3 5.5x 22.4 12/30/00
Crown Crafts23 (49,982) -17.5 286,376 -12.7 -12.7 12/31/00
CMI Inds. (24,071)24 25 125.726 -12.4 319.2 194,712 -7.7 -21.2 (16,176) -8.3 -0.7 7.6 9.1x -71.4 12/30/00
Thomaston Mills27 (20,403) -12.5 162,979 -1.4 12/30/00
Medians 0.4 58.7 -2.6 4.4 -1.9 2.7 29.7 4.8 13.7 11.9 5.1x 59.8


Operating margin
Operating income as a percentage of sales

The high
1. Polymer Group 9.8%
2. Mohawk 9.7
3. Dan River 8.3
The low
1. Pillowtex -9.5%
2. CMI Inds. -8.3
3. Guilford Mills 1.0


The bottom line
Return on sales: after-tax profits as percentage of sales

The top
1. Mohawk 5.0%
2. Quaker Fabric 3.6
3. Springs Inds. 3.0
The bottom
1. Burlington Inds. -32.5%
2. Pillowtex -20.1
3. Crown Crafts -17.5


Worker productivity
sales productivity ($000s)

Rank by sales Rank by income Company Sales per employee 2000 1999 Income per employee 2000 1999
Source: Home Textiles Today market research
1 1 Wellman $429.5 $346.4 $10.7 (4.1)
2 6 Polymer Group 200.5 197.7 (1.0) 7.4
3 10 Cone Mills 143.7 143.3 (6.8) (5.1)
4 8 Guilford Mills 137.3 137.1 (3.5) 1.6
5 2 Mohawk 135.6 133.8 6.8 6.8
6 7 Culp 132.2 128.4 (2.7) 2.5
7 4 Springs Inds. 125.0 121.3 3.7 3.8
8 3 Quaker Fabric 122.7 106.1 4.4 0.9
9 9 WestPoint Stevens 108.7 115.6 (3.8) 6.4
10 12 Pillowtex 108.0 110.9 (21.7) (2.3)
11 11 CMI Inds. 92.9 101.7 (11.5) (3.8)
12 13 Burlington Inds. 90.5 89.3 (29.4) (1.7)
13 5 Dan River 89.7 86.2 1.5 2.0


Stockpiles
building or cutting inventories

Rank by % CHG in inventory Rank by % CHG in sales Company Inventory % CHG Sales % CHG
Source: Home Textiles Today market research
1 4 Dan River 22.4% 5.5%
2 3 Mohawk 16.1 5.6
3 9 Polymer Group 8.4 -3.1
4 1 Quaker Fabric 7.2 20.5
5 5 Springs Inds. 6.0 2.5
6 2 Wellman 5.6 19.4
7 6 Cone Mills -3.9 0.2
8 11 Guilford Mills -6.7 -5.0
9 10 WestPoint Stevens -9.3 -3.6
10 8 Burlington Inds. -9.3 -1.9
11 12 CMI Inds. -14.4 -7.7
12 15 Culp -19.4 -16.0
13 14 Pillowtex -34.1 -13.0


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