OPERATING NET OFF AT BURLINGTON APPAREL FABRIC

Byline: Thomas J. Ryan

GREENSBORO, N.C.--Burlington Industries Inc. said that although earnings overall moved ahead, operating profits at its apparel fabrics group slumped 14.7 percent in the third quarter ended July 2, primarily due to higher raw material costs for wool and cotton.
Apparel fabric profits sank to $51.5 million, or 13.7 percent of sales, from $60.4 million, or 16.4 percent, a year earlier.
Sales in the apparel segment inched ahead 2 percent to $374.6 million from $367.4 million. The increase reflected higher volume in the Klopman, Denim and Men's Wear divisions, partially offset by reduced sales in the knitted fabrics division.
Burlington said it was unable to offset higher prices for wool and cotton with increased selling prices for its knit and denim products.
The apparel group's profits were also hurt by the delay in the expected benefits from restructuring the knit fabrics division, as well as by increased costs for a new employee-incentive program.
A Burlington spokesman noted that the apparel group was going against a record quarter in the third quarter of 1993, when apparel's EBITDA (earnings before interest, taxes, depreciation and amortization) reached 20.1 percent of sales. In the latest quarter, the EBITDA was 17.3 percent of sales.
In a conference call to analysts, the company said its denim business was improving, with orders running well ahead of last year and prices up moderately. However, the price increases were not enough to offset increased cotton prices, analysts said.
The knit division posted a modest loss in the quarter but showed signs of improvement. Analysts said the company was hurt by bottleneck problems caused by a industry-wide pickup in demand for knit products coming at the same time Burlington was consolidating two dyeing and finishing plants. This caused production and scheduling problems, analysts said.
In its Men's Wear division, which makes wool worsted fabric for men and women, men's wear was strong, but the company noted weakness in its misses' area, which was hampered by softness of better-priced women's apparel at retail.
The Klopman group, which produces fabrics of man-made fibers and blends of man-made and natural fibers principally for the apparel market, had a "very strong" quarter, analysts said.
Apparel's operating profits in the nine months slid 22.4 percent to $124.7 million from $160.6 million. Apparel's sales dipped 0.7 percent to $991.7 million from $998.8 million.
Overall, profits for the company--which also makes home textiles and carpeting--jumped 35.6 percent in the quarter to $37.7 million, or 56 cents a share, from $27.8 million, or 41 cents. The bottom line improvement reflected a 49 percent drop in interest expense to $12.4 million from $24.5 million.
The latest quarter reflects a gain of $7.5 million, or 11 cents, from the sale of its decorative prints division to Galey & Lord Inc. on April 29.
Commenting on the overall improvement, Frank S. Greenberg, chairman and chief executive officer, credited the increased bottom line earnings to "stronger demand for almost all products, a continued strengthening in the performance of the interior furnishings products segment and the benefit of lower interest costs."
Sales improved 5.3 percent to $583.4 million from $554 million.
Operating profits overall dipped 0.4 percent to $69.3 million from $70 million. The latest year included an increase of $4.4 million in incentive compensation expense, resulting principally from the initiation of a new company-wide performance-based incentive plan.
In the interior products division, operating profits in the quarter vaulted 83.5 percent to $17.8 million while sales advanced 12 percent to $208.8 million.
In the nine months, earnings jumped 38.2 percent to $83.2 million, or $1.22, from $60.2 million, or 88 cents. Sales increased 2.2 percent to $1.58 billion from $1.55 billion.
Most analysts, citing higher than expected raw material costs, expect to lower their forecasts of Burlington's earnings for its year ending Oct. 29 to a range of $1.40 to $1.45 a share from previous estimates of $1.60 to $1.70. In the year ended Oct. 30, 1993, Burlington earned $1.19 a share, which included a restructuring charge of 18 cents a share.
Analysts said Burlington stated that its goal for 1995 is a 15 percent earnings increase.
Shares of Burlington Industries fell 1 to 13 7/8 Tuesday on the New York Stock Exchange.
Jay Meltzer, at Goldman Sachs, said most of the company's divisions are "still doing very well" and orders for denim and knits are improving. The company's biggest need, according to Meltzer, is to increase pricing to offset the higher raw material prices.
"All prices for all goods were equal to or better than this time a year ago, so pricing is moving in the right direction for them," Meltzer said.
"It was pretty positive," said Kay Norwood, at Interstate Johnson, based in Charlotte, N.C., of the conference call. "Back orders are at record levels, interior furnishings is strong, and they're getting higher prices and good production. The things that are holding them back are the higher raw material costs."
--Fairchild News Service

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