ten dollars september 2007 - FMMG.com

financial roundtable
How will the credit squeeze, caused by problems in the sub-prime mortgage
market, affect banking and factoring for the apparel industry, if at all?
How will the lowering of the federal discount rate affect the garment business,
in general? Explain what problems or benefits these conditions will
cause for this industry.
Sheldon Laufgraben
Vice President
VNB NEW YORK CORP.
“The effect on the banking industry is evidenced
by the decline in value of their mortgage
backed securities holdings. Those holdings
marked available for sale have taken a
severe hit as of late.
“The effect on Factors and apparel firms who
do not have such holdings
will be minimal.
The Fed has lowered
interest rates which
will have some beneficial
effect on borrowers
as it reduces the rate at
which these companies
Sheldon Laufgraben
borrow. It is still difficult
to appraise the
long term effect of the decline of the mortgage
market other than to say that for the present
the underwriting standards will much stricter.
In many states the foreclosures on real estate
properties has increased drastically due to
delinquencies in the subprime market.”
Jason Goldberg
Vice President
WESTGATE FINANCIAL CORP.
“The current turmoil in the credit markets will
definitely have an
Jason Goldberg
effect on our industry.
The obvious effect will
be the tightening of
credit to many retailers
both big and small. We
are already seeing this
in the increase in surcharges
on retailers
74 SEPTEMBER 2007 BODY • WWW.FMMG.COM
that used to have none. Further this effect on
banks will be that they start looking at their in
house clients with a much more jaundiced eye.
Clients of banks with marginal equity and
assets valuation compared to their loan and
those who have not had great earnings performance
will be asked to find alternate financing.
“The good news is that we have lived
through this scenario several times in my
career and survived as an industry. I am confident
the outcome will be the same this time.”
John W. Kiefer
Chief Executive Officer
FIRST CAPITAL
“The ‘credit squeeze’ will cause banks to take a
much harder look at
credits. Apparel businesses
may not be able
to rely on that source of
financing particularly
for any over line or out
of formula accommodations.
John Kiefer
“Factors on the other
hand are used to closely
monitoring their loans and will be more
willing to step into the breach. We at FCC are
seeing more deal flow which we expect will
accelerate.”
Joseph F. Ingrassia
Managing Member
CAPSTONE BUSINESS CREDIT
“The sub-prime mess will effect those factors
who are highly leveraged since all of the credit
providers are becoming more conservative with
their credit underwriting terms and conditions.
“Lower prime will help reduce the cost of
capital for those companies
with strong balance
sheets. Those who are
not strong will rely on
the secondary and tertiary
factors who do not
offer pricing related to
prime and therefore will
Joseph Ingrassia
not see any reduction in
their cost of capital.”
Stanley Officina
President
ULTIMATE FINANCIAL SOLUTIONS LLC
“To this point our clients have not suffered any
ill effects from the credit sqeeze gnerated by
the sub- prime mortgage
market or the
relaxing of credit standards
as the press has
reported, in the banking
industry.
The current crunch has
a greater impact in that
Stanley Officina
area and the borrowers
who depend on it , than it does on the apparel
industry.
Credit has always been granted in our market
based on financial credibility and performance.
It is not a G-d given right.
That being said, since a good loan or extention
of credit enhances the lenders portfolio and
profitability, benefits the customer and the
economy, it makes no sense to decline loans
and credit as an overall reaction to todays segmented
credit squeeze. To do so is similiar to
shooting oneself in the foot. ”
B
finance
expenses in the first half of 2007 was $5.8 million,
compared to a net income before restructuring
expenses of $1.2 million in the first half of 2006.
— D.C.
tefron 2q revenues down 18.3
Tefron Ltd. announced financial results for the
second quarter of 2007. Second quarter revenues
were $40.6 million, representing an 18.3 percent
decrease from second quarter 2006 revenues of
$49.7 million. The decrease in revenues in the
quarter was due to a reduction in sales of activewear
and intimate apparel during the quarter.
Second quarter gross margin was 14.0 percent,
compared with a gross margin of 21.7 percent in
the second quarter of 2006. Operating income
totaled $1.0 million (2.5 percent of revenues),
compared with $6.6 million (13.4 percent of revenues)
in the second quarter of 2006.
The decline in gross and operating margins in
the second quarter was primarily due to the lower
revenue and manufacturing levels in the quarter.
Additionally, cash flow from operations was
$2.2 Million, leading to a net cash position of
$4.2 million at the end of the quarter. — D.C.
blackstone invests in gokaldas
The Blackstone Group has announced that it will
spend up to $165 million to buy a stake of up to
70.1 percent in Indian apparel firm Gokaldas
Exports Ltd. The deal was announced a week
after the private equity firm’s president said it had
a huge pipeline of deals lined up in India.
Blackstone will drop 4.75 billion rupees for a
50.1 percent stake in the apparel firm, and in
accordance with Indian law, will make an additional
offer for another 20 percent, explained
Gokaldas executive director, Rajendra Hinduja,
to Reuters on August 20.
The deal breaks down to Blackstone paying 275
rupees per share, which is a 20 percent premium
to Gokaldas’ closing price of 228.70 rupees on
August 20, 2007. The deal states Gokaldas’ worth
as more than $230 million.
Gokaldas is one of India’s largest apparel firms,
with 46 plants and 47,000 employees. The company
makes 2.5 million garments per month, and
counts Nike, Adidas and Mothercare as a few of
its top customers. — D.M.
(Continued from page 67)
movie star’s ‘07 results
Movie Star, Inc. has announced its financial
results for the fiscal 2007 fourth quarter and full
year ended June 30, 2007.
The company reported fourth quarter net sales
of $13,493,000—an increase of 64.6 percent up
from 2006 fourth quarter sales of $8,196,000.
Gross margin, as a percentage of sales, vaulted
8.0 percentage points to 30.8 percent for the fiscal
quarter from 22.8 percent last year.
The company racked up $439,000 in mergerrelated
fees for the fiscal 2007 fourth quarter, due
in part to its previously announced merger with
Frederick’s of Hollywood.
Net sales for the year increased 23 percent to
$63,493,000, over 2006 sales of $51,639,000.
— D.M.
warnaco group revenues up
The Warnaco Group, Inc. reported a rise in rev-
enues and a jump in net income, for the second
quarter, which ended June 30, 2007,
Net revenues rose 4.4
percent $465.1 million ,
or 4.4 percent, over second-quarter
2006 earnings
of $445.6 million.
Income from continuing
operations was $13.7
million, up from $5.5
million in the prior year
quarter. Net income
increased to $13.8 million
from $3.4 million in
second quarter 2006.
The Intimate
Apparel Group’s revenues
rose 6.1 percent
to $160.5 million, and
operating income
increased to $21.8 million
or 13.6 percent of
Intimate Apparel
Group revenues. The
Swimwear Group
reported revenues of
$111.8 million, a
decline of 11.8 percent from the prior year quarter.
Operating loss for the Swimwear Group
included $3.2 million. — L.D.
vf posts lower 2q
Apparel company VF Corp. reported its second-
quarter profit declined despite strong revenue
growth, as the company posted a loss from the
sale of its intimate apparel business.
Net income for the quarter declined to $81.7 million
from $99 million a year earlier. However, revenue
climbed to $1.52 billion, or 12 percent, up from
$1.35 billion in 2006. — D.C.
people’s liberation 2nd qt.
People’s Liberation, Inc. has announced its net sales
rose from $3.3 million to $4.6 million for the second
quarter of 2007. The increase is due to the continued
growth of the William Rast brand.
The company saw an increase in operating expenses
for the second quarter — $2.5 million compared to
$1.7 million during the quarter for 2006. B —D.M.
SEPTEMBER 2007 BODY • WWW.FMMG.COM
75