WEST POINT, Ga., Nov 1, 2002 /PRNewswire-FirstCall via COMTEX/ — WestPoint Stevens Inc. (NYSE: WXS) (www.westpointstevens.com ) today reported results for the third quarter ended September 30, 2002.
The Company's net sales for the third quarter of 2002 decreased 10% to $460.5 million compared with $513.1 million a year ago. Sales declined in every product category given widespread softness in demand at retail.
Net income for the third quarter of 2002, before charges associated with recently announced restructuring initiatives, was a loss of $6.3 million or $0.13 per diluted share compared with net income in the third quarter of 2001 before charges associated with the Eight-Point Plan of $0.11 per diluted share. This was below the recent First Call consensus EPS estimate of a loss of $0.07. The Company recorded bad debt expense of $3.2 million net of taxes in the third quarter of 2002 related to the Kmart Corporation bankruptcy filing.
During the third quarter of 2002, WestPoint Stevens recognized a $10.3 million charge net of taxes for implementation of further restructuring initiatives versus a $1.7 million charge net of taxes last year. Including these charges, net income for the third quarter of 2002 was a loss of $16.6 million or $0.33 per diluted share compared with net income of $0.07 per diluted share for the year ago period.
Operating earnings for the third quarter of 2002 were $25.4 million or 5.5% of sales compared with $55.7 million or 10.9% of sales for the same period in 2001, before charges associated with further restructuring initiatives of $16.1 million in 2002 and $2.7 million in 2001. The lower third-quarter results reflected the impact in 2002 of reduced sales, increased promotional activity, reduced production efficiencies and under-absorbed overhead due to production curtailment and increased bad debt expense that more than offset decreased raw material costs.
Holcombe T. Green, Jr., Chairman and CEO of WestPoint Stevens, commented, 'Our recently announced restructuring initiatives will allow us to re-deploy assets to our expanding Basic Bedding operation while at the same time helping to improve utilization of our bath manufacturing facilities. Careful analysis of our Retail Stores Division in light of changing industry conditions has prompted us to close non-performing stores during 2002 and 2003. Collectively, these actions should result in annual savings of $10 million once the initiatives are fully implemented. Despite disappointing third- quarter results, we are in compliance with all financial covenants and continue to have substantial liquidity.
M.L. 'Chip' Fontenot, WestPoint Stevens President and COO, added, 'Our third-quarter results reflect challenging retail conditions; however, despite this environment we continued to strengthen our position with targeted key retail accounts. Positive retailer response during Fall Market indicates our strategic initiatives, begun over two years ago, are positioning WestPoint Stevens to increase market share through product innovation and superior servicing as well as lower costs through a combination of internal initiatives and sourcing.'
For 2002 the Company expects an EPS loss of $0.10 to $0.15 on flat to modestly up sales. The guidance reflects a general uncertainty about retail demand for the remainder of 2002.
During the first nine months of 2002, sales increased 0.9% to $1,345.2 million versus $1,333.3 million in 2001. Operating earnings before charges for the nine month period in 2002 were $102.4 million or 7.6% of sales compared with $99.0 million or 7.4% of sales before charges associated with the Eight-Point Plan in 2001. Net income for the first nine months of 2002 was a loss of $2.3 million before charges of $10.3 million net of taxes versus a loss of $13.6 million before charges of $11.2 million net of taxes for the first nine months of 2001. The improvement reflects the impact of lower raw material costs, increased sales, and a shift in sales towards higher margin product. Fully diluted earnings per share increased to a loss of $0.05 in the first nine months of 2002 before charges associated with recent restructuring initiatives versus a loss for the first nine months of 2001 before charges associated with the Eight-Point Plan of $0.27. Including charges associated with recently announced restructuring initiatives, net income increased to a loss of $0.25 per fully diluted share for the first nine months of 2002 versus a loss for the first nine months of 2001 including charges associated with the Eight-Point Plan of $0.50 per fully diluted share.
At 11:00 a.m. EST today, WestPoint Stevens will host a conference call to further elaborate on third-quarter 2002 results and to discuss the Company's ongoing expectations. This call may be accessed as a webcast by going to www.westpointstevens.com .
WestPoint Stevens Inc. is the nation's premier home fashions consumer products marketing company, with a wide range of bed linens, towels, blankets, comforters and accessories marketed under the well-known brand names GRAND PATRICIAN, PATRICIAN, MARTEX, ATELIER MARTEX, BABY MARTEX, UTICA, STEVENS, LADY PEPPERELL, VELLUX and CHATHAM — all registered trademarks owned by WestPoint Stevens Inc. and its subsidiaries — and under licensed brands including RALPH LAUREN HOME, DISNEY HOME, SANDERSON, DESIGNERS GUILD, GLYNDA TURLEY and SIMMONS BEAUTYREST. WestPoint Stevens is also a manufacturer of the MARTHA STEWART and JOE BOXER bed and bath lines. WestPoint Stevens can be found on the World Wide Web at www.westpointstevens.com .
Safe Harbor Statement: Except for historical information contained herein, certain matters set forth in this press release are 'forward looking statements' within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward looking statements. Such risks and uncertainties may be attributable to important factors that include but are not limited to the following: Product margins may vary from those projected; Raw material prices may vary from those assumed; Additional reserves may be required for bad debts, returns, allowances, governmental compliance costs, or litigation; There may be changes in the performance of financial markets or fluctuations in foreign currency exchange rates; Unanticipated natural disasters could have a material impact upon results of operations; There may be changes in the general economic conditions that affect customer practices or consumer spending; Competition for retail and wholesale customers, pricing and transportation of products may vary from time to time due to seasonal variations or otherwise; Customer preferences for our products can be affected by competition, or general market demand for domestic or imported goods or the quantity, quality, price or delivery time of such goods; There could be an unanticipated loss of a material customer or a material license; The availability and price of raw materials could be affected by weather, disease, energy costs or other factors. The information contained in this release is as of November 1, 2002. WestPoint Stevens assumes no obligation to update publicly any forward-looking statements, contained in this document as a result of new information or future events or developments.
CONTACT: Lorraine D. Miller, CFA, Senior Vice President – Investor
Relations of WestPoint Stevens Inc., +1-404-760-7180