WORLDTEX SEES QUARTER LOSS AFTER MARGINS SLIP
NEW YORK — Citing margin erosion in both its core covered-elastic yarn business and its growing narrow elastics operation, Worldtex Inc. reported a $1.1 million net loss in its first quarter. That compares with net income of $815,000 in the prior-year quarter.
Sales for the quarter ended March 31 were $73.9 million, off 5.2 percent from $78 million. Operating profit slipped to 5.4 percent of sale from 8.7 percent. The company also reported earnings before interest, taxation, depreciation and amortization of $8 million, off 25.5 percent from $10.8 million.
In a conference call with analysts, Barry Setzer, chairman and chief executive officer of the Hickory, N.C.-based company, said, “These results are unsatisfactory to me and all the managers at Worldtex.”
However, he added, “These results do reflect the difficult times for the textile and apparel industry we serve. We’re committed to continuing to take bold steps to improve our financial performance in the future.”
The company said that its covered-elastic yarn sales were off 12.8 percent for the quarter, to $40.1 million. Setzer attributed that decline to the weak hosiery market.
“Demand for pantyhose is down around the world. It’s been in a decline for a number of years now,” he said. “Our efforts are being put into developing new end uses for covered yarn.”
Sales of narrow elastic fabrics, an area the company has been developing over the past two years, were up 5.6 percent, to $33.8 million. That business represented 45.7 percent of total revenues, which the company noted was ahead of the 40 percent target set for this year.
Setzer said margins in that business were off, which he attributed to “higher sales of [lower-margin] underwear products and less of higher-margin products.”
Worldtex also disclosed that it incurred $800,000 in costs in the quarter related to the acquisition of a 34 percent stake in the company by EGS Partners LLC. However, Worldtex said that EGS agreed to reimburse those costs as part of its standstill agreement.
Setzer also said that Worldtex had reached an agreement in principle for a new revolving credit facility, which it expects to finalize in the second quarter. The new $40 million facility would replace the company’s existing $25 million arrangement.
The results were released after the close of trading Friday. In Monday trading on the New York Stock Exchange, Worldtex shares slipped 1/16 to close at 1/2.