WestPoint Stevens Inc. (NYSE: WXS) reported results for the second quarter ended June 30, 2002.
The Company's net sales for the second quarter of 2002 increased 12% to $449.6 million compared with $401.7 million a year ago. Sales grew in every product category with especially noteworthy performance in basic bedding products and other bedding accessories and towels.
Net income for the second quarter of 2002 was $2.0 million or $0.04 per diluted share compared with a loss, in the second quarter of 2001 before charges associated with the Eight-Point Plan, of $0.28 per diluted share. This was ahead of the recent First Call consensus EPS estimate of $0.01.
Last year, during the second quarter of 2001, WestPoint Stevens recognized a $3.7 million charge net of taxes for the implementation of its Eight-Point Plan. Including this charge, net income for the second quarter of 2001 was a loss of $17.5 million or $0.35 per diluted share.
Operating earnings for the second quarter of 2002 were $38.2 million or 8.5% of sales compared with $13.7 million or 3.4% of sales for the same period in 2001, before charges associated with the Eight-Point Plan of $5.7 million in 2001. The improved second-quarter results reflected the impact in 2002 of decreased raw material costs, favorable product mix and increased production efficiencies resulting from the implementation of the Eight-Point Plan.
Holcombe T. Green, Jr., Chairman and CEO of WestPoint Stevens, commented, "Our primary corporate goal is to reduce our financial leverage, and we are extremely pleased with the $27 million of total debt reduction achieved in the second quarter compared with a year ago. We remain on target to generate over $70 million of free cash flow in 2002 that will be used to lower debt. Our second-quarter performance leaves us comfortably in compliance with all financial covenants and we continue to have substantial liquidity."
M.L. "Chip" Fontenot, WestPoint Stevens President and COO, added, "Our second-quarter results showed solid market-share gains in accessories and continued growth with targeted key retail accounts. This is tangible proof that our strategic initiatives, begun almost two years ago, are positioning WestPoint Stevens to increase market share through product innovation, and lower costs through a combination of internal initiatives and sourcing. Our success continues to be a team effort across all functions of WestPoint Stevens."
For 2002 the Company is lowering its prior EPS guidance of $0.45-$0.50 to $0.35 to $0.40. The change in EPS guidance reflects a general uncertainty about retail demand for the latter part of 2002. The Company now expects sales to increase 2%-4% in 2002 compared with a year ago versus its prior expectation of 4% revenue growth.
During the first six months of 2002, sales increased 7.9% to $884.7 million versus $820.3 million in 2001. Operating earnings for the first half of 2002 were $77.1 million or 8.7% of sales compared with $43.3 million or 5.3% of sales before charges associated with the Eight-Point Plan in 2001. Net income for the first six months of 2002 was $4.0 million versus a loss of $19.0 million before charges of $9.4 million net of taxes for the first six months of 2001. The improvement reflects the impact of increased sales, a shift in sales towards higher margin product, lower raw material costs and improved operating efficiencies resulting from the Eight-Point Plan. Fully diluted earnings per share increased to $0.08 in the first half of 2002 versus a loss for the first half of 2001 before charges associated with the Eight- Point Plan of $0.38. Including charges associated with the Eight-Point Plan, net income increased to a loss of $28.4 million in the first half of 2001 and fully diluted earnings were a loss of $0.57 per share.
The Company has completed the transitional goodwill impairment test required by Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, and has determined that there currently is no impairment to its recorded goodwill balances.
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