FTL PERIOD LOSS $398.5M
Byline: Vicki M. Young
NEW YORK — Faced with price decreases, higher production costs and losses from discontinued products and obsolete inventory, bankrupt Fruit of the Loom reported staggering losses for the fourth quarter and yearend results.
The innerwear and activewear manufacturer, which filed for Chapter 11 protection in December, sustained a huge $398.5 million loss for the quarter ended Jan. 1, compared with an $11 million loss in the comparable 1998 period. Charges in the quarter included $3 million in reorganization costs and an $85.1 million loss connected to the shutdown of its ProPlayer division. The company said that the loss for continuing operations in the quarter was $327.8 million versus 1998’s $32.4 million loss. Sales in the quarter declined to $429.4 million, from $457 million in the year-ago period.
For 1999, FTL’s loss ballooned to $576.2 million, compared with 1998’s income of $135.9 million. The loss for continuing operations, the manufacturer said, was $491.1 million, versus 1998’s $113 million in income.
Sales in 1999 dipped to $1.84 billion from $1.98 billion in 1998.
Dennis Bookshester, acting chief executive officer, said in a statement, “Our operational plan is focused on ongoing initiatives to provide customer-driven and profitable core products, the sale of non-core assets and other action steps necessary to complete our turnaround.”
Bookshester added, “We continue to be encouraged that, despite the difficulties we have experienced, demand for our products remains strong.”
FTL said retail product sales for the year grew in the men’s and boys’ underwear, children’s wear and casualwear categories. However, the company added, the increase in retail sales was offset by pricing decreases, particularly in the activewear division. Losses in the quarter — on the sale of closeout and irregular merchandise as well as charges for slow-moving merchandise, discontinued products and obsolete inventory — contributed to the firm’s mammoth losses.
Other fourth-quarter expenses include a $20 million charge for a loss contingency on FTL’s guaranty of a $65 million loan to William Farley, the company’s former chairman and chief executive, and a $22 million write-off of debt premiums, fees and miscellaneous receivables.
As noted, FTL said it will pursue whatever legal remedies are available against Farley.
Although FTL is still restructuring and exploring its options, credit analysts and vulture-fund investors said that FTL’s bankruptcy could last for up to two years, assuming that the manufacturer can’t find a buyer in a reasonable amount of time.
As reported, FTL has been in talks with mass-market discounter Wal-Mart. Neither would disclose how a potential deal would be structured. Sources familiar with the negotiations said that Wal-Mart could potentially buy the company, keep the trademarks and sell the factories to contractors that would have the right to manufacture FTL goods for a set period of time.
Investment contacts said that the likelihood of a deal, or the possibility of other purchasers stepping up to the plate, depends on how FTL’s results are perceived and whether there is any real profit potential to continued operations beyond the value of the FTL trademark.