PILLOWTEX ANNOUNCES QUARTERLY RESULTS
Dallas, Texas, May 3, 1999--Pillowtex Corporation (NYSE:PTX) (www.pillowtex.com) announced today that net earnings for its quarter ended April 3, 1999 were $5.3 million, or $0.31 per diluted share, as compared to $5.6 million, or $0.33 per diluted share, for the corresponding period last year. Net sales for the first quarter increased to $368.5 million from $366.3 million in the same quarter of 1998.
Prior to the end of the first quarter, the Company announced its belief that net earnings would be approximately $0.40 per share on a diluted basis. At that time, Pillowtex indicated that earnings would be negatively impacted due primarily to inefficiencies incurred during the installation of new computer systems in several plants, certain manufacturing cost overruns experienced during the production ramp up of several new product introductions, and certain consolidation costs incurred in the shut down of the Leshner spinning and weaving operations in Opelika, Alabama. Pillowtex's management subsequently determined that $2.1 million of charges related to the closure of the Opelika weaving mill during the first quarter should be expensed rather than capitalized. Due to this change in accounting treatment and lower than expected sales for the first quarter, actual net earnings results for the quarter were $0.09 per share lower than Pillowtex had previously anticipated.
"During the quarter, we faced many operating challenges. In particular, during the final week of the quarter, the new computer systems at our sheet mills were unable to process the higher month end shipping demands and as a result, left unshipped orders on the dock at quarter end," said Charles M. Hansen, Jr., Chairman and CEO. "The implementation of new manufacturing computer systems, which are expected to enable the Company to continue to improve its operating performance, have temporarily placed a tremendous strain on the plants as they are set into place. Despite these setbacks, we believe the overall business remains strong and that our changes to systems, introductions of new products and consolidation of operations will add long term profitability to the corporation."
Net Sales
Net sales for the first quarter of 1999 were $368.5 million, an increase of $2.2 million, or 0.6% over the same period last year, reflecting the operating difficulties resulting from systems installation which hampered the Company's ability late in the quarter to ship effectively from its sheet operations. Despite the systems issues, the Company did successfully roll-out to its retail customers several new programs during the first quarter of 1999.
Profitability Results
Gross profit achieved for the first quarter of 1999 was $56.2 million, or 15.3% of net sales, as compared to $61.5 million, or 16.8% of net sales for the same period in 1998. This decrease is primarily the result of the higher costs noted above during the installation of new computer systems, new product rollouts and costs associated with the closure of the plant in Opelika, Alabama.
Operating Results
Selling, general and administrative expenses for the first quarter of 1999 were $28.1 million, a decrease from $33.7 million for the same period in 1998, reflecting the continued success of our cost reduction plans implemented in connection with the Fieldcrest Cannon acquisition. Earnings from operations increased from $26.3 million, or 7.2% of sales in the first quarter of 1998 to $28.1 million, or 7.6% of sales, in the first quarter of 1999.
"Installing new computer systems in several of our facilities during the first quarter of 1999 has proved to be a trying experience," commented Jeffrey D. Cordes, President and Chief Operating Officer. "Although we have now installed these systems in over half of our facilities, and many plants are running successfully, we are disappointed with the first quarter results. Based on our recent experiences with the system installation process, we believe it is prudent to anticipate additional operational inefficiencies in the second quarter. As a result, we now anticipate that earnings will be approximately $0.40 per diluted share for the period. We believe the system installation and integration will be completed by the end of summer. Following such completion, we are confident that the final outcome of our efforts to upgrade our plants will have a positive impact on operating performance."
Statements contained in this press release that are not historical facts are forward-looking statements and could differ materially from actual results. Primary factors that could cause actual results to differ are discussed in the Company's most recently filed Form 10-K.
Pillowtex Corporation, with annualized sales in excess of $1.5 billion, markets and manufactures home textile furnishings for the bedroom and bathroom. The Company operates a network of manufacturing, purchasing and distribution facilities in the U.S. and Canada with approximately 14,000 employees. |
