FTL IS BACK IN THE BLACK
CHICAGO — Boosted by strong gross margins and a lower tax rate, Fruit of the Loom Inc. was firmly in the black in the fourth quarter ended Dec. 31, after the heavy deficit of a year earlier.
Fourth-quarter earnings were $43.1 million, or 56 cents a share, while the year before the company lost $308 million, after $157 million in special charges related to write-downs of goodwill related to the Gitano casualwear and Salem licensed sportswear businesses, the closing of several plants and job cuts.
The results in the latest quarter came in well ahead of Wall Street estimates of 48 cents, and on the New York Stock Exchange Wednesday, FTL stock rose 1/2 to close at 40 3/4.
Sales for the three months ended Dec. 31 gained 14.2 percent to $581 million from $508.8 million a year ago.
FTL also said it expects an improved operating performance in 1997.
For the year, the company earned $151.2 million, or $1.98, against a loss of $232.5 million, which included the above-noted special charges and a $5.2 million accounting charge. Sales inched ahead 1.8 percent to $2.45 billion from $2.40 billion.
“We closed the year on a high note, recording solid revenue and operating profit during our fourth fiscal quarter,” William Farley, chairman and chief executive officer, said in a statement.
Revenue growth in the final quarter was spurred by strong shipments of blank T-shirts for the imprint market, casual fleece products, women’s and girls’ underwear and Gitano jeans, Farley said. He noted that international operations also performed well, rising more than 11 percent.
He added that profitability improved primarily due to the benefits derived from offshore sewing operations.
Leslie McCall, apparel analyst at Oppenheimer & Co., noted that FTL’s performance was a pleasant surprise.
“I’ve been taking a more conservative approach to basic apparel,” she said. “Basic seems to be having more of a struggle than fashion.”
Larry K. Switzer, chief financial officer, noted that inventories were down $81 million.
Accounts receivable totaling $200 million were sold in a securitization transaction to reduce carrying costs while some underperforming assets were sold. As a result, FTL was able to reduce its debt by more than $550 million.
Late in the quarter the company also initiated a stock repurchase program, which will continue in 1997.
Also during the period, FTL established a reserve of $35 million relating to its guarantee of debt incurred or created by Acme Boot Co. under Acme’s credit facilities. Acme Boot, once a part of Fruit of the Loom, was sold to an affiliate in 1987.
In addition, effective Dec. 31, 1996, all tax years through 1991 were closed. As a result, income tax reserves for tax years subsequent to the acquisition through 1991 of $24.1 million were reversed and reduced income tax expense in 1996.
Richard C. Lappin, chief operating officer, added that the outlook for the next several years is encouraging. “With a wealth of new sales and marketing talent on board, we will bring to market a number of products across all lines,” he said. “To support these new products, we have an aggressive advertising and promotional campaign in excess of $130 million with an emphasis on the Gitano, Pro Player and Fruit of the Loom brands.”
Looking ahead, Oppenheimer’s McCall said she expects the company to earn 24 cents a share in the first quarter, compared with 16 cents last year.