NEW YORK — Tropical Sportswear International stunned investors, competitors and retailers alike last week when it disclosed that it expects a $130 million loss for the fiscal year ended Sept. 27.
This story first appeared in the January 5, 2004 issue of WWD. Subscribe Today.
The bombshell disclosure came as Tropical alerted the Securities and Exchange Commission that its quarterly Form 10-K, due on Dec. 29, wouldn’t be filed on time and requested at least a 15-day extension. Shares hit a 52-week low of $2.20 in Nasdaq trading before closing at $2.21, down 16 percent that day. On Friday, shares established yet another 52-week low, and closed at $2.16, down 0.9 percent.
In a statement the company said the filing extension was necessitated by ongoing negotiations with its lenders regarding an amendment to its revolving credit facility and real estate loan.
However, more telling information surfaced in the company’s Form 12b-25 filing with the SEC, in which the company said it was estimating a $130 million loss for fiscal 2003, compared with earnings of $2.3 million reported in 2002. As Tropical’s losses for the first nine months of the fiscal year totaled $34.9 million, the fourth-quarter loss would be in excess of $95 million.
Following the announcement Standard & Poor’s Ratings Services downgraded the company in several key areas. The company’s corporate credit rating was downgraded to “CCC” from “B-minus” and its subordinated debt foundered to “CC” from “CCC.” S&P also lowered its senior secured debt rating on the company’s $95 million revolving credit facility, due 2006, to “CCC-plus” from “B.”
According to S&P, Tropical Sportswear’s approximately $140 million in debt outstanding as of June 28 combined with problems associated with the consolidation of the company’s Savane division were key factors in the downgrades. According to a statement, S&P said that following the consolidation the company had experienced “greater than expected sales returns and allowances,” necessitating heavy discounting on excess inventory.
S&P also noted that sweeping changes in senior management created further instability. As reported in early August, the company terminated president and chief executive officer Christopher B. Munday, executive vice president and chief financial officer N. Larry McPherson and executive vice president and general counsel Gregory Williams after third-quarter figures were released. Sales for the nine months slid 11.1 percent to $308.5 million.