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PARAGON ANNOUNCES RECORD THIRD QUARTER EARNINGS

 FEDERAL WAY, Wash., Oct. 22 /PRNewswire/ -- Paragon Trade Brands Inc. (NYSE: PTB) today announced net earnings of $24,632,000 or $2.14 per share for the third quarter ended Sept. 26, 1993 on net sales of $144,855,000. The net earnings include a tax benefit resulting from recent federal corporate tax law changes in the amount of $15,588,000 or $1.36 per share. Without the tax benefit Paragon's net earnings would have been a record $9,044,000 or 79 cents per share, a 42-percent increase over last year's third quarter pro forma net earnings of $6,373,000 or 55 cents per share, on 7.6 percent higher net sales.
 For the first nine months of 1993, Paragon's net earnings were $38,486,000, or $3.35 per share, on net sales of $425,171,000, a 17.6-percent increase over the 1992 period. Without the third quarter tax benefit the nine months pro forma net earnings would be $22,898,000 or $1.99 per share, a 64-percent increase over the pro forma 1992 net earnings of $13,962,000, or $1.21 per share.
 The improved performance was the result of increased volume, and a higher mix of larger sized products and higher priced training pants, both which helped to offset price reductions. Margins were improved by the company's prompt cost reduction actions and lower material prices, primarily pulp. "The results of the quarter demonstrate the strength of our relationships with our customers, their dedication to their store brands, and the ability of our employees to service customers and find ways to lower costs," said Bobby Abraham, chairman and chief executive officer of Paragon. "Looking forward, we are seeing increased promotions by the national brands. We plan to respond via increased promotional spending or selective price actions. Weaker pulp prices and our cost reduction actions should offset some of these costs. We expect the national roll out of our thin product during the second quarter of 1994," continued Abraham.
 The $15,588,000 federal tax benefit represents the one-time recognition of income for the future tax deduction of the goodwill resulting from the purchase of the assets of the business from Weyerhaeuser. This benefit arose as a result of the new tax law passed during the quarter which allows for the deduction for tax purposes of intangibles, including goodwill, over 15 years. The deferred tax asset was increased by the amount of the tax benefit. The balance sheet remains strong with the cash balance increasing to over $25 million and no debt.
 Paragon Trade Brands is the leading manufacturer of private label infant disposable diapers in the United States and Canada. Paragon manufactures a line of premium and economy diapers and disposable training pants, which are distributed throughout the United States and Canada, primarily through grocery and food stores, mass merchandisers, warehouse clubs, toy stores and drug stores that market the products under their own store brand names.
 PARAGON TRADE BRANDS INC.
 PRO FORMA EARNINGS STATEMENTS
 (Unaudited; Dollar amounts in thousands except per share amounts)
 13 Weeks Ended
 Sept. 26, 1993
 Paragon
 Sales, net of discounts and
 allowances $ 144,855
 Cost of sales 114,984
 Gross profit 29,871
 Selling, general and administrative
 expense 13,626
 Research and development expense 1,260
 Total expenses 14,886
 Operating profit 14,985
 Interest expense 61
 Other income (expense), net (688)
 Earnings before income taxes 14,236
 Provision for income taxes 5,192
 Impact of tax law change (benefit) (15,588)(D)
 Net earnings $ 24,632(E)
 Net earnings per common share $ 2.14(F)
 Weeks Ended Sept. 27, 1992
 Private Label
 Diaper Paragon
 Business Adjustments Pro Forma
 Sales, net of discounts
 and allowances $ 134,614 $ -- $ 134,614
 Cost of sales 109,703 -- 109,703
 Gross profit 24,911 -- 24,911
 Selling, general and
 administrative expense 11,777 1,043(A) 12,820
 Research and development
 expense 1,445 -- 1,445
 Total expenses 13,222 1,043 14,265
 Operating profit 11,689 (1,043) 10,646
 Interest expense -- 44(B) 44
 Other income (expense), net (306) -- (306)
 Earnings before income
 taxes 11,383 (1,087) 10,296
 Provision for income taxes 4,335 (412)(C) 3,923
 Impact of tax law change
 (benefit) -- -- --
 Net earnings $ 7,048 $ (675) $ 6,373
 Net earnings per common
 share $ 0.55
 (A) To reflect the expected insurance and other costs to Paragon in excess of the historical charges by Weyerhaeuser to the Private Labor Diaper Business and to reflect the expected costs of corporate, administrative and public financial reporting activities not previously undertaken by the Private Label Diaper Business and the costs implementing Paragon's employee retirement benefits program.
 (B) To reflect (i) amortization of deferred financing costs related to the Bank Credit Facility, (ii) interest expense, (iii) commitment fees, and (iv) interest income.
 (C) To provide for the federal and state tax effects of the pro forma adjustments described in notes (A) and (B) above.
 (D) Reflects the effect of the change in the tax law. The amount reflects the increase in the deferred tax asset due to changes in the law with regard to amortization of intangibles, including goodwill, and the 1-percent increase in the corporate tax rate.
 (E) Without the tax credit of $15,588,000, the net earnings from operations for the 13 weeks would be $9,044,000 or 79 cents per share for the nine months of 1993.
 (F) Net earnings per common share are computed assuming 11,500,000 shares of common stock are outstanding for the entire periods presented. Paragon has granted options to purchase 401,500 shares of common sock to management.
 PARAGON TRADE BRANDS INC.
 PRO FORMA EARNINGS STATEMENTS
 (Unaudited; Dollar amounts in thousands except per share amounts)
 39 weeks ended Sept. 26, 1993
 Paragon and
 Private label
 Diaper Paragon
 Business Adjustments Pro Forma
 Sales, net of discounts
 and allowances $425,171 $ -- $425,171
 Cost of sales 344,876 -- 344,876
 Gross profit 80,295 80,295
 Selling, general and
 administrative expense 37,676 424(A) 38,100
 Research and development
 expense 4,156 -- 4,156
 Total expenses 41,832 424 42,256
 Operating profit 38,463 (424) 38,039
 Interest expense 259 53(B) 312
 Other income (expense), net (1,266) -- (1,266)
 Earnings before income taxes 36,938 (477) 36,461
 Provision for income taxes 13,739 (176)(C) 13,563
 Impact of tax law change
 (benefit) (15,588) -- (15,588)(D)
 Net earnings $ 38,787 $ (301) $ 38,486 (E)
 Net earnings per common
 share $ 3.35 (F)
 39 weeks ended Sept. 27, 1992
 Paragon and
 Private label
 Diaper Paragon
 Business Adjustments Pro Forma
 Sales, net of discounts
 and allowances $361,585 $ -- $361,585
 Cost of sales 297,912 -- 297,912
 Gross profit 63,673 -- 63,673
 Selling, general and
 administrative expense 32,937 3,128 36,065
 Research and development
 expense 4,665 -- 4,665
 Total expenses 37,602 3,128 40,730
 Operating profit 26,071 (3,128) 22,943
 Interest expense -- 249 249
 Other income (expense), net (235) -- (235)
 Earnings before income taxes 25,836 (3,377) 22,459
 Provision for income taxes 9,775 (1,278) 8,497
 Impact of tax law change
 (benefit) -- -- --
 Net earnings $ 16,061 $ (2,099) $ 13,962
 Net earnings per common
 share $ 1.21
 (A) To reflect the expected insurance and other costs to Paragon in excess of the historical charges by Weyerhaeuser to the Private Label Diaper Business and to reflect the expected costs of corporate, administrative and public financial reporting activities not previously undertaken by the Private Label Diaper Business and the costs implementing Paragon's employee retirement benefits program.
 (B) To reflect (i) amortization of deferred financing costs related to the Bank Credit Facility, (ii) interest expense, (iii) commitment fees, and (iv) interest income.
 (C) To provide for the federal and state tax effects of the pro forma adjustments described in notes (A) and (B) above.
 (D) Reflects the effect of the change in the tax law. The amount reflects the increase in the deferred tax asset due to changes in the law with regard to amortization of intangibles, including goodwill, and the 1-percent increase in the corporate tax rate.
 (E) Without the tax credit of $15,588,000, the pro forma net earnings from the operations for the 39 weeks of 1993 would be $22,898,000 or $1.99 per share.
 (F) Net earnings per common share are computed assuming 11,500,000 shares of common stock are outstanding for the entire periods presented. Paragon has granted options to purchase 401,500 shares of common stock to management.
 PARAGON TRADE BRANDS INC.
 CONSOLIDATED BALANCE SHEET
 (Dollar amounts in thousands)
 As of Sept. 26, 1993 Dec. 27, 1992
 (Unaudited)
 Assets
 Cash and short-term
 investments $ 25,741 $ 58
 Receivables 40,522 43,076
 Inventories 24,139 24,286
 Other current assets 3,706 4,884
 Total current assets 94,108 72,304
 Net property plant and equipment 91,043 74,949
 Deferred income taxes 37,264 --
 Other assets 3,104 3,371
 Total assets $225,519 $150,624
 Liabilities and investment by
 Weyerhaeuser Co./Stockholders' equity:
 Accounts payable $ 38,686 $ 27,964
 Accrued liabilities 26,805 12,411
 Total current liabilities 65,491 40,375
 Deferred income taxes -- 1,415
 Total liabilities 65,491 41,790
 Investment by Weyerhaeuser -- 108,834
 Total stockholders' equity 160,028 --
 Total liabilities and investment
 by Weyerhaeuser Co.
 stockholders' equity $225,519 $150,624
 NOTE: The Dec. 27, 1992, balances represent the Private Label Business of Weyerhaeuser Co.
 -0- 10/22/93
 /CONTACT: Cliff Bickell, vice president, chief financial officer & treasurer, of Paragon, 206-924-4568/
 (PTB)


CO: Paragon Trade Brands Inc. ST: Washington IN: PAP SU: ERN

RB-JH -- SE001 -- 2193 10/22/93 07:26 EDT
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Date:Oct 22, 1993
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