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P'tex sees red with 1Q losses

Don Hogsett -- Home Textiles Today, May 20, 2002

Weighed down by bankruptcy and restructuring charges that totaled almost $40 million as it clears the decks before emerging from bankruptcy next month, Pillowtex recorded a $53.7 million first-quarter loss, slightly wider than the year-before deficit of $51.9 million.

But after pulling out all the one-time charges that dog the bottom line, the company managed to slash its operating loss by almost 60 percent in the opening quarter, to $6.8 million from $16.7 million last year, as it beefed up margins while hacking away at costs.

Sales in the period continued their downward slide, losing 12.0 percent, to $240.9 million from $273.8 million last year, a shortfall of $32.9 million, after the company lost the lucrative Ralph Lauren basic bedding license lost the lucrative Ralph Lauren basic bedding license.

Lauren sales alone accounted for about an $18 million loss in sales, substantially more than half of the overall decline. The remaining drop in sales was due primarily to a one-time inventory liquidation in 2001, the company said, rather than lost business.

Inventories at the close of the first quarter were down more than 23 percent from year-ago levels, to $189.9 million from $248.4 million.

Sales of bed and bath products declined by 12.7 percent in the opening quarter, to $180.6 million from $208.0 million last year. Even on the lower level of sales, the bed and bath business recorded a gross profit of $10.8 million, up 65.5 percent from a year ago.

Pillow and pad sales fell 10.3 percent, to $55.7 million from $62.1 million last year. Gross profit for the business declined by 10.7 percent, to $5.9 million from $6.6 million.

Steadily improving its operations as it works its way through Chapter 11 and a sweeping overhaul of operations, the slimmed-down company boosted its average gross margin by 310 basis points, or 3.1 percentage points, to 3.9 percent from a whisper-thin 0.9 percent the prior year. Fueling the solid margin improvement were sharply lower overhead costs following the shutdown of more than a dozen plants and the layoff of more than 1,000 workers in a sweeping overhaul of operations. Given the lower overhead costs, gross margin dollars almost tripled, rising by 288.6 percent, to $9.4 million from $2.4 million last year.

Still cutting costs aggressively, Pillowtex pared its operating costs by 30 basis points, to 6.7 percent of sales from 7.0 percent last year, even given the steep drop in overall sales. Measured in absolute dollars, costs were whittled down by 15.5 percent, to $16.1 million from $19.1 million last year, generating a cash savings of $3.0 million.

Pillowtex Corp.

Qtr. 3/30 (x000) 2002 2001 % chg
(loss)
a-First-quarter results include a $30.9 million charge for the impairment of long-lived assets; restructuring charges of $3.0 million, compared with $2.0 million last year; bankruptcy costs of $5.3 million, compared with $7.6 million last year; an income-tax benefit of $7.2 million; and a preferred share dividend and accretion of $4.6 million vs. $3.7 million a year ago.
Sales $240,925 $273,842 -12.0
Oper. income (EBIT) (6,756) (16,666)
Net income (53,729)a (51,926)a
Per share (diluted) (3.77) (3.64)
Average gross margin 3.9% 0.9%
SG&A expenses 6.7% 7.0%


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