WPS chief wants to keep business a private affair
By Don Hogsett -- Home Textiles Today, 3/1/2004 8:01:00 AM
NEW YORK —
WestPoint Stevens is still on track to emerge from bankruptcy some time during the second quarter, but it may not be as a public company if CEO "Chip" Fontenot gets his way.
For the first time publicly, Fontenot suggested last week that WestPoint, like Springs Industries before it, might withdraw from the public gaze and the tiresome, costly ritual of opening its books to shareholders every three months.
"It depends on who the owners are when we emerge, and whether they need access to the public markets. But I can tell you, we'd rather be a private company."
Grinning, Fontenot quipped, "Being public is not always a whole lot of fun. You know, I've been lifting my skirts in public for a long time now, and I'd rather not have to do it again."
But getting serious, he added, "We don't like being the only one out there to have to open its books every quarter. And it's costly being a public company."
The major mill, Fontenot conceded, is taking longer than he had originally hoped to emerge from bankruptcy, but should be out by the end of June. "When we filed last June, we thought we could get in and out fairly quickly — we figured this was a financial restructuring, not an operating restructuring, which would be a lot more complex."
He went on to acknowledge, "But I think that was our naivete about the bankruptcy process and how long it takes. This process is exactly that — a process, and sometimes it doesn't go the way you expect. Everything takes longer than you think it will."
Indeed, it might have happened earlier but for squabbles with some of WestPoint's creditors, reportedly about how much debt the company will still carry on its books once it emerges from bankruptcy, and whether it could realistically handle the debt in a rapidly shifting global environment.
Now, said Fontenot, WestPoint is forging a "thoughtful, conservative, realistic and very workable business plan" that it will put before creditors some time in the next few weeks. The plan will serve as the basis for the crucial plan of reorganization that will ultimately assign a value to the company and its operations. The plan will also go before a bankruptcy judge for approval, once creditors have signed off on it.
"We're still working on the plan, and hope to have that in the next few weeks. And it will reflect the reality of the world we're living in — sourcing versus U.S. manufacturing," he said.
Currently, WestPoint is importing about 20 to 25 percent of the products it sells, said Fontenot. Given the realities of the new global playing field, specifically low-cost labor abroad, imports will probably climb to a level of 50 percent over the next five years, he said. "We'll never have the labor costs they do in China. We'll never get the support the Chinese government gives to its textiles industry. The reality is that textiles is an ideal industry for low-skilled, low-cost labor."
While imports show no signs of ever abating, Fontenot does think "at some point, we strike a balance between domestic production and sourcing. The dock strike, the SARS scare, increased shipping costs will give some people second thoughts about importing. But it will probably never be as much U.S. sourcing as at one time we thought."
While WestPoint will step up its sourcing, that doesn't necessarily mean any seismic restructuring of WestPoint manufacturing operations in the United States. "You can never say never anymore. So, will there be more restructuring? Probably, but over time. We're challenged there because our plants are in such good shape. So, as for the fear of sweeping change, I don't think you're going to see it coming out of this company."
Moving into the new year, a lot of the signs are bullish, said Fontenot. The company's operating profit — before bankruptcy, restructuring costs and interest expense — "is still very strong, though not at historical levels. And it's getting stronger." Costs are being slashed at a rapid pace, generating further cash savings and earnings.
WestPoint's towel plants are running flat out, and its basic bedding business is strong, said Fontenot, especially after the collapse of rival Pillowtex.
But WestPoint, he added quickly, never picked up as much of the Pillowtex business as others did. And deliberately so. "The reality is that the strength of Pillowtex was in bath. And 65 percent of that business we didn't want to touch. Because the margins weren't there, we wouldn't make any money."
Fontenot added, "So we took a pass, and one large competitor took on a slew of new programs that's brought them nothing but problems. They may have sold themselves into a hole from which they won't recover very easily. One thing you can say about us, whatever may have happened in Chapter 11, operationally there's been no interruption. We're still delivering on time and the quality is still there in the product and in the service."
Moving into the new year and seeing some light at the end of the tunnel, Fontenot said, "In spite of this whole bankruptcy thing, I've never been more positive about the company. We've lost no market share that we didn't choose to leave. Our customers respect our superior performance and our ability to deliver remains unaffected. I think our future has to be shaped to fit a changing world, and we're in the process of doing that now."
So what will the company look like five years from now? By then, said Fontenot, WestPoint "will be getting back to where it was, maybe $1.9 billion in annual sales. We'll certainly grow, but it will be the right kind of growth where we can make some money at it."
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