ITHACA UP IN QUARTER

Byline: Thomas J. Ryan

NEW YORK--Ithaca Industries Inc., hosiery, underwear and T-shirt manufacturer, reported operating earnings more than doubled in the second quarter ended July 29, largely reflecting a special charge a year earlier.
The privately held firm's operating earnings increased to $8.7 million from $4.2 million a year earlier. However, the year-ago quarter included a $4 million provision to write off bad debt of Pacific Outlook Sportswear, an Anaheim, Cal.-based screenprint firm that filed a Chapter 11 bankruptcy petition last year.
Excluding the debt charge, operating earnings would have increased 6.2 percent. Net earnings came to $1.99 million versus a $1 million loss after the charge a year earlier.
Sales in the quarter dipped 1.1 percent to $101.5 million from $103.6 million. Ithaca said lower sales of hosiery and T-shirts offset gains in the men's and women's underwear. The T-shirt area was hurt by lower unit volume while the hosiery area was hurt by lower unit prices. The company said it does not anticipate an improvement in hosiery sales and no significant improvement in T-shirts for the remainder of the year.
Ithaca, based in Wilkesboro, N.C., files financial information because of its publicly held debt. About 90 percent of Ithaca's products are private label, with 41 percent of total sales going to J.C. Penney Co. last year and 12 percent to Wal-Mart Stores. Its most significant branded product is the Evan-Picone line of hosiery, but it also makes hosiery under the Vassarette label, women's underwear under Lady Manhattan and Bestform, and men's underwear under Perry Ellis, Hang Ten and John Weitz.
Gross margins in the quarter improved to 15.7 percent versus 14.4 percent a year earlier, largely due to the elimination of inefficient sewing plants. Ithaca closed four sewing plants and one distribution center last year.
Interest expense was $4.7 million in the quarter, the same as a year earlier.
In the half, earnings more than doubled to $4 million from $1.9 million a year ago, after the $4 million charge. Operating profits climbed 18.5 percent to $17.7 million from $15 million. Sales declined 3.8 percent to $206.2 million from $214.2 million.
In its year ended Jan. 31, Ithaca earned $2.9 million on sales of $414.7 million. The sales breakout was hosiery, 32 percent; men's and boy's underwear, 28 percent; women's and girls' underwear, 19 percent; and T-shirts, 19 percent.
Ithaca was purchased from its founders in a management-led leveraged buyout in 1983. In December 1992, the company completed a public offering of 11 1/8 percent senior subordinated notes J.C. Penney had been Ithaca's primary customer in the past, accounting for 90 percent of sales in 1980. However, the company in the Eighties broadened its sales mix and reduced Penney's contribution to around 40 percent. The company's main customers for T-shirt products are J.C. Penney, Banana Republic, Crazy Shirts, and The Gap. About 85 percent of Ithaca's products are made domestically.
--Fairchild News Service

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