FORSTMANN ENDS 3RD PERIOD IN RED
NEW YORK — Forstmann & Co., which emerged from Chapter 11 in July, reported a profit from operations for the third quarter ended Aug. 3, but after special charges, there were net losses of about $1 million in both this year’s and last year’s quarters.
Robert Dangremond, president and chief executive officer, said in a statement the business is “on target to achieve our financial goals for the year.” He noted the company’s debt has been cut almost in half with Forstmann’s emergence from bankruptcy, and added, “Inventories are at manageable levels.”
In the quarter, earnings before interest, taxes, depreciation, amortization and reorganization items (EBITDAR) were down 10.8 percent to $6.6 million from $7.4 million. The firm said $1.6 million in higher medical and dental self-insurance expenses contributed to the decline. There were 11 catastrophic medical claims of more than $100,000 each filed in the quarter; in all of fiscal 1996, there were no individual claims of more than $100,000.
Net sales for the quarter were off 7 percent to $53.9 million, and gross profit dipped to $6.2 million from $9.2 million as gross margins dropped to 11.4 percent of sales from 15.79 percent. The margin decline reflected a lower demand for some higher-margin products.
Total yards of fabric sold during the quarter dropped about 4.75 percent to 7 million, and the average price per yard dipped to $7.73 from $7.92 due to shifts in the product mix. There was a $6.3 million decline in worsted fabric sales, primarily in the women’s worsted market, but there was also a $1.3 million decline in men’s and specialty fabrics.
In the 39 weeks ended Aug. 3, yardage of fabrics sold totaled 20.3 million, a decline of less than 1 percent from the year-earlier figure, the company said. The average selling price per yard decreased to $7.40 from $7.62, primarily because of a $11.7 million decline in worsted fabric sales, largely in the women’s market. There was also a $2.4 million dip from discontinued product lines, including uniforms, converting and international sales. The sales declines were partially offset by a $9.9 million increase in woolen fabric sales in the women’s markets.
Looking ahead, the company said it expects worsted sales in the men’s and women’s wear markets will continue to be highly competitive for the balance of the fiscal year. At the same time, it expects the women’s woolens markets to remain favorable for the balance of the year. The company noted, however, that part of the increase in women’s woolen fabric sales was due to “the company offering certain strategic customers favorable competitive pricing and terms on purchase of certain woolen fabrics” in the fourth quarter of last year that were shipped in this year’s nine-month period.
Reorganization items in the third quarter were $25.1 million, including $22.1 million for the write-down of assets to market value and $1.2 million in professional fees. This was largely offset by a gain of $24.1 million for discharge of debt in the Chapter 11 proceeding.
For the nine months, margins were up to 14 percent of sales from 13.7 percent. EBITDAR increased 20.8 percent to $18.6 million from $15.4 million. Sales were off 2 percent to $149.9 million from $153.4 million.
The company said interest costs in the latest three quarters declined $1.8 million to $5.2 million. It also noted inventory levels during the latest period fell to an average of $47 million from $88 million.
After special items, the company lost $6.2 million in the nine months against a year-earlier loss of $8 million.
Special charges in the latest nine months were $33.4 million, including the write-down of assets, $3.2 million in professional fees, $4.6 million for impairment of assets and $3.3 million in expenses related to rejecting executory contracts. In the year-ago period, special charges totaled $7.7 million.