Standard &Poors cut the credit rating for Pillowtex Corporation and put it on Credit
Watch on Sept. 7, according to an internet Yahoo! Finance report. The total rated debt is
about $1.1 billion, the report said.No one was available at Pillowtex for comment this morning.
Standard & Poors’ actions
are related to Pillowtex’ recent announcement that it expects continued earnings
weakness for the rest of the year because of higher expenses for sales and marketing,
lower margins because of attempts to reduce inventory levels and manufacturing disruptions
caused by plant upgrades and installing new systems, the report said.
At the end of the second quarter,
Pillowtex sales were up but earnings were down.
Net earnings for the second
quarter ending July 3 fell to $6.2 million, or 40 cents per diluted share, from $6.5
million or 42 cents per diluted share, for the same quarter last year. Pillowtex stock has
gone from a 52-week high of 35 to closing at 7 7/16 yesterday.
Charles F. Parks, president of
C.F. Parks and Co., an investment management and financial planning firm in Salisbury,
said in August that the company’s recent dispute with the Union of Needletrades,
Industrial and Textile Employees (UNITE) probably affected stock prices because investors
worry about the impact of a union on the bottom line.
The Yahoo!report said,
“Liquidity is extremely tight, and the company is seeking waivers and amendments to
its bank covenants for the remainder of 1999 and beyond.”
In an interview with a Post
reporter in March, Pillowtex CEO Chuck Hansen said the development of a global market has
made textiles a “very basic industry, such as steel” in which manufacturers face
stiff competition. He said staying ahead of foreign competition after quotas are dropped
will require Pillowtex to be “very fleet of foot.”
After the company announced in
March that earnings for the first half of 1999 would be about 40 cents per share, not the
predicted 59 to 60 cents, the company announced it would buy back about 7 percent of its
outstanding stock.
At the time, the company
attributed the earnings shortfall mainly to extra costs of installing new computer systems
in several plants, cost overruns from new productions lines and shutdown costs for plants
in Alabama. Hansen said in a prepared statement that the company’s stock was
undervalued and the buy back was a good investment.
The Yahoo! report said,
“Standard &Poors will monitor the situation, meet with management and review
Pillowtex’ operating and financial plans, as well as its search for a chief financial
officer.” |
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