Putting 2 and 2 together...
Last week there was a strong rally in the stock and this corresponded to a visit by Chuck Hansen, Pillowtex' CEO, to Kannapolis, NC to speak with suppliers (go here hometextilestoday.com and scroll half way down the page for a story entitled, 'Pillowtex to pay on time' - pasted below. If you scroll through a story entilted, 'IFDA identifies hot colors' (......), you've missed the PTX article.). Now obviously the company has been, and, to a large degree, still is, in financial distress. It would not be a illogical assumption that many of Pillowtex' suppliers are investors in the stock since no one, other than PTX management, is closer to the company's business.
Thus, putting 2 + 2 together, it would also not be an illogical conclusion to draw that last week's strong move on increased volume could at least partially be explained by a positive reaction by these suppliers after their meeting with Hansen. If this is the case, then it would, in a sense, reinforce the theme created by the high level of insider buying occurring at the end of July.
This is an hypothesis, nothing more.
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Pillowtex to pay on time
By Don Hogsett
KANNAPOLIS, NC — Allaying the concerns of more than 130 anxious suppliers who haven't been getting paid on time, Pillowtex chairman and ceo Chuck Hansen said the major mill will be "absolutely current with its payments early in the fourth quarter, and after that the late payments are history, a thing of the past."
Seeking to quell signs of restlessness among its various suppliers, who have grown increasingly antsy waiting for their cash, Pillowtex called a general meeting of suppliers last week "to brief them about what went wrong, to tell them where we are now, and where we're going in the future," said Hansen.
Hansen told Home Textiles Today, "We admitted that we screwed up, that we're way late in paying them because we built our inventories up too high and got caught in a liquidity crunch. At the same time we did a lousy job of collecting the money that some of the stores owed us. We ran short of cash and we weren't paying our bills."
What wasn't selling? "Everything, it was right across the board. There's been a general slowdown at retail, affecting everyone — the department stores, the chains, the regional discounters and the dollar stores. Business hasn't been great."
Hansen told the almost 140 suppliers who turned out for the two meeting last week, "We will be absolutely current on our payments early in the fourth quarter. And after that those problems will be a thing of the past."
Pillowtex has, in the past, triggered violation of some of its debt covenants with bank lenders, requirements that the major mill generate a minimum amount of cash during each financial quarter. Where does the company stand during the current third quarter? "Well, the quarter's still going on, it isn't over yet, but we don't anticipate breaking any covenants. It looks like we're going to be fine," said Hansen.
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