A sharp falloff in denim sales and severe margin erosion drove bankrupt mill Galey & Lord Inc. deeper into the red in its third quarter, according to a recent filing with the Securities and Exchange Commission.

The mill recorded a $16.4 million net loss for the quarter ended June 28, representing a deficit of $1.37 a share, compared with a loss of $2.7 million, or 22 cents a share, a year earlier. The loss reflected a $5.5 million writedown of goodwill associated with its Swift Denim business, and also reflected a decline in gross profit to $2 million — 1.4 percent of sales — compared with $16 million — 8.1 percent — a year earlier. Net sales were off 23.6 percent to $150.1 million.

The sharpest sales decline came at the New York-headquartered mill’s Swift Denim unit, which saw sales slip 38.6 percent to $49.4 million and recorded a $10.9 million operating loss, compared with operating profit of $5.1 million.

In addition to the writedown, the company said Swift’s loss reflected “lower sales volume, which resulted in a curtailment of capacity, price pressure due to competition and unfavorable variances due to manufacturing inefficiencies and higher raw material and energy costs.”

At the firm’s largest unit, Galey & Lord Apparel, which produces twill fabrics, sales fell 24.5 percent to $63.3 million. That unit recorded a $932,000 loss, compared with $86,000 in profit a year earlier.

Favorable exchange rates helped boost sales 16.1 percent at the Klopman International unit, which recorded revenue of $37.4 million. That business reported operating income of $1.9 million, off 24.7 percent from a year ago.

For the nine months, Galey posted a $110.3 million net loss, which reflected an $87.4 million aftertax charge for an accounting change, compared with a $23.8 million loss, a year earlier.

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