PLUMA: GOING FOR THE AN IPO
Byline: Jennifer L. Brady
NEW YORK — Banking on continued improvement in the activewear business, a relatively small maker, Pluma Inc., aims to join the ranks of its competitors as a publicly traded company.
Pluma looks to tap the public market in an offering of 2.5 million shares of common stock.
A vertically integrated manufacturer of fleece and jersey, Pluma posted earnings of $5.8 million in 1996. In 1995, final net was $1.1 million, but that excludes a $2 million charge to bring the company’s sales and marketing functions in-house and a $3.3 million write-off for doubtful accounts.
Sales in the latest year jumped 26.9 percent to $127.8 million from $100.7 million. Fleece apparel accounted for about $80.4 million in sales in 1996, while jersey products constituted $46.8 million.
Pluma expects to raise about $29.4 million through the offering of shares priced between $12 and $14 each.
According to the company’s preliminary prospectus filed with the Securities and Exchange Commission, proceeds from the deal will be used to reduce the company’s outstanding debt under its revolving credit facility.
As of Dec. 31, Pluma had $43.6 million in outstanding debt under the facility.
The company was founded in 1986 by current management, all of them ex-employees of Bassett-Walker, a division of VF Corp. These founders are George G. Wade, chairman emeritus; G. Walker Box, chairman; R. Duke Ferrell Jr., president and chief executive officer, and C. Monroe Light, executive vice president of manufacturing.
The Eden, N.C.-based firm sells its activewear to major sports branded companies such as Adidas, Nike and Starter, as well as to entertainment firms such as Walt Disney, Busch Gardens and Hard Rock Cafe.
The company also markets its products under its own Pluma, Santee and Snowbank labels to retailers including Sam’s Club, a division of Wal-Mart Stores. Other customers include wholesale distributors, screen-printers and embroiderers.
Sales to retailers accounted for 33.7 percent of net revenues in 1996. Branded accounts such as Adidas, Nike, Reebok and Starter constituted 20.6 percent; screenprinters and embroiderers, 19.7 percent; wholesale, 17.6 percent, and entertainment, 8.4 percent.
In the prospectus, Pluma said it competes in an activewear industry that, according to figures from the Sporting Goods Manufacturers Association, grew to about $40 billion at retail in 1996 from $37.6 billion in 1995 and $34.4 billion in 1994. It lists as its major competitors such diversified giants as Fruit of the Loom, VF and Sara Lee Corp., as well as such fleecewear specialists as Russell Corp., Oneita Industries and Tultex Corp.
Pluma attributed growth of activewear business to several factors. First is the trend to increased fitness and the “casualization of America,” which has led to a greater acceptance of fleece and jersey.
In addition, Pluma said, “The versatility of fleece and jersey fabric, coupled with technological advances in product development and manufacturing, has significantly improved product design and quality, resulting in increased consumer demand.”
The company also noted that the basic styles of fleece and jersey activewear are not “primarily driven by fashion trends or fads, contributing to the stability of product demand.”
Pluma said it expects to drive its bottom- and top-line growth through adding new customers and increasing its business to existing customers, developing new products and styles and investing in new manufacturing and distribution technologies.
Pluma said it was one of the first to introduce heavyweight cotton jersey products suitable for outerwear. The company recently introduced an all-cotton fleece piquA and a five-way stretch fleece in a cotton and spandex blend.
The company said it has made significant investments to improve efficiencies. These include upgrading knitting equipment, adding computerized monitoring and control systems for its dyeing processes, and improving sewing and cutting with new machines and innovations such as its patented tandem sewing table.
In Pluma’s offering, an additional 600,000 shares will be sold by shareholders.
The selling shareholders include the M.J. Soffe company, selling 193,593 shares; George G. Wade, 78,381; the George Henry Box Jr. Revocable Trust, 32,860 shares; R. Duke Ferrell Jr., 4,151 shares, and C. Monroe Light, 17,068 shares.
After the offering, Pluma will have 7,815,797 shares outstanding.
Underwriting the deal are J.P. Morgan & Co., Interstate Johnson Lane Corp. and Wheat First Butcher Singer.