Guilford Mills Announces Third Quarter Earnings
27 July 2000
Board Votes to Suspend Dividend
GREENSBORO, N.C. - Guilford Mills, Inc. today announced operating results
for the Company's third quarter ended July 2, 2000 and other developments
referred to below.
Third quarter sales of $211,678,000 were lower than the $217,923,000
reported for the third quarter of the prior year. The Company incurred a net
loss of $2,597,000 or $0.14 per diluted share compared to net income of
$931,000 or $0.04 per diluted share for the comparable quarter for the prior
year.
Apparel segment sales were down 14.1% from the third quarter of the prior
year and continued to be impacted by low-cost imports. This decline in the
apparel segment more than offset continued growth in the automotive and home
fashions segments. Automotive sales were $99.3 million, up 5.8% from last
year. The home fashions segment generated a moderate increase over last year
with sales of $26.3 million, a 3.5% increase. The specialty segment was down
overall with sales of $11.7 million, which represents a 2.5% decrease from
fiscal third quarter 1999.
John Emrich, President and Chief Executive Officer, said, "We are
continuing to see pressure on our margins in the apparel segment. Results
have been negatively impacted by low-cost imports and changes in product mix.
Furthermore, we have reduced production levels at some of our operations that
were built for large runs resulting in higher unit costs. This combination
resulted in a pretax operating loss of $3.5 million for the apparel segment
for the quarter, and a $6.9 million apparel pretax operating loss for the nine
months year-to-date.
"Our automotive segment is strong and growing. The segment's decline in
profitability for the quarter was a result of especially strong product demand
at the time we were still integrating operations and expanding capacity. We
are returning to more normalized operations and our profitability should
reflect these improvements by the end of our fiscal year."
Guilford's UK automotive operations also reported lower revenues and
operating income resulting from adverse currency exchange rates and market
weakness in certain models. Guilford Mills will continue to take proactive
steps through its hedging strategies to attempt to decrease its vulnerability
to currency conditions. In Mexico, the Company's automotive operations
continued to show growth in both revenue and operating income. The Company's
Brazilian operations performed at levels similar to last year and they are
expected to be profitable in the first fiscal quarter of 2001.
Mr. Emrich continued, "Success in the Industrial and Specialty Fabrics
segment will continue to be driven by Guilford Mills' innovation,
technological advances and patented products. This segment has the potential
for considerable growth going forward.
"Through our strategically positioned global operations, diverse product
mix, solid customer relationships, technological innovation and strong
corporate culture, we believe Guilford Mills is on the right track for
increased growth and profitability," Mr. Emrich concluded.
GUILFORD MILLS, INC.
THIRD QUARTER EARNINGS SUMMARY
Third Fiscal Comparable
Quarter Ended Quarter Ended
July 2, 2000 July 4, 1999
Three Months Ended
Sales
Apparel $74,296,000 $86,547,000
Automotive 99,312,000 93,875,000
Home Fashions 26,349,000 25,547,000
Industrial/Specialty 11,721,000 11,954,000
Total Sales $211,678,000 $217,923,000
Net Income/(loss) ($2,597,000) $931,000
Net Income /(loss) Per Share:
Basic ($.14) $.04
Diluted (.14) .04
Equivalent Shares Outstanding:
Basic 18,899,000 22,059,000
Diluted 18,939,000 22,059,000
Nine Months Ended
Sales
Apparel $220,940,000 $252,785,000
Automotive 298,348,000 272,451,000
Home Fashions 75,176,000 90,726,000
Industrial/Specialty 34,805,000 35,144,000
Total Sales $629,269,000 $651,106,000
Net Income $3,197,000 $8,049,000
Net Income Per Share:
Basic $ .17 $ .36
Diluted .17 .36
Equivalent Shares Outstanding:
Basic 18,899,000 22,456,000
Diluted 18,958,000 22,467,000
Other Items
Guilford Mills, Inc. separately announced today a strategic realignment of
its apparel operations designed to provide a more competitive cost structure
and to increase profitability. In connection with the realignment, Guilford
Mills will discontinue the dyeing and finishing operations at its Fishman
plant once current production is completed and will reduce its dyeing and
finishing capacity at its Greenberg plant as circular knit dyeing and
finishing is transitioned to the Company's soon to be completed manufacturing
facility in Tampico, Mexico.
Total costs associated with the restructuring are expected to be
approximately $35 million to $40 million. These costs will be incurred
during the fourth quarter of fiscal 2000 and throughout fiscal year 2001. The
Company will take a restructuring charge in the fourth quarter of fiscal 2000
of $16 million to $19 million and expects to incur an additional $6 million in
related costs for an estimated after-tax impact on fourth quarter earnings of
$0.75 to $0.85 per share. The remaining $13 million to $15 million period
costs will be incurred in fiscal year 2001 and, when netted against expected
savings for the period, are expected to result in a positive estimated
after-tax impact on EPS of $0.27 to $0.34 for fiscal year 2001. The Company
expects the net savings, and therefore positive impact on EPS, to be greater
in future periods. These restructuring charges include both the impact of the
realignment related to the Fishman facility and the Company's plans with
respect to the Greenberg facility. As a result of the restructuring, the
Company anticipates that it will not be in compliance, as of the end of fiscal
2000, with certain covenants in its loan agreements and has commenced
discussions with its lenders to obtain appropriate amendments or waivers.
Guilford Mills also announced today that, in light of the current business
conditions, the Board of Directors has voted to suspend the quarterly
dividend.
Additionally, the Company announced that its Board of Directors adopted a
Stockholder Rights Plan ("Rights Plan") designed to protect Company
stockholders in the event of takeover activity that might deny them the full
value of their investment. The Rights Plan was not adopted in response to any
specific takeover threat and replaces the Company's existing rights plan,
which expires on August 23, 2000. In adopting the new Rights Plan, which will
expire on July 26, 2010, the Board declared a dividend distribution of one
preferred stock purchase right for each outstanding share of common stock of
the Company, payable to stockholders of record at the close of business on
August 23, 2000. The rights will become exercisable only in the event, with
certain exceptions, a person either acquires 15% or more of the Company's
voting stock or commences a tender or exchange offer, which if successfully
consummated, would result in such person owning 15% or more of the Company's
voting stock. Details of the replacement Rights Plan will be outlined in a
letter to be mailed to stockholders on or about the record date of August 23,
2000.
Additionally, the Company has consented to the entry of a cease and desist
order, issued by the Securities and Exchange Commission on July 24, 2000,
relating to the previously announced, and now concluded, SEC investigation
into accounting irregularities at the Company's Hofmann Laces unit. No
monetary fines or penalties were imposed against the Company, which neither
admitted nor denied the findings of the order.
Guilford Mills is an integrated designer and producer of value-added
fabrics using a broad range of technologies. The company is the largest warp
knitter in the world and is a leader in technological advances in textiles,
including microdenier warp knits and wide width circular knits of cotton
blended with LYCRA(R). Guilford Mills serves a diversified customer base in
the home furnishings, apparel, automotive and industrial markets. Through its
Guilford Home Fashions subsidiary, the company produces bedding products,
window treatments and shower curtains for the retail market.