TAMPA - Shares in Tropical Sportswear Int'l Corp. took another hit Wednesday as analysts predicted the company may need to seek protection from creditors in a Chapter 11 bankruptcy reorganization.
Tropical shares dropped 8 percent to close at $1.48 a share, down 12 cents. The price indicates investors value the company that did $389-million in sales last year at $16-million. The price of Tropical's outstanding bonds also have been sinking, trading as low as 40 cents on the dollar.
"Tropical may have a future, but the key is how fast they can turn the operation around," said Mary Gilbert, a distressed securities analyst with Imperial Capital in Los Angeles. "There is a high risk of (Chapter 11) bankruptcy."
In a conference call Wednesday, leaders of the troubled apparelmaker said they hope to stage a comeback. But they declined to say how much they have drawn down a new bank credit agreement that provides the company with working capital. That makes it difficult for analysts to make judgments about Tropical's liquidity after the company reported negative cash flow in the quarter ended Jan. 3. "I just signed a new credit agreement with the banks," said Michael Kagan, Tropical's chief executive officer. "I didn't do that with the intention of filing for bankruptcy."
Tropical's cash flow was strained when the company missed delivery dates for the Christmas holiday season. Many big retailers canceled orders. Kohl's, for instance, cut Tropical's Savane brand to 120 stores, down from almost 500. After excess inventory was sold at a discount, Tropical's backlog of more than 1-million pairs of casual and dress pants is almost back to normal. But cash remains tight.
Tropical officials also discussed the decision to move the last piece of its U.S. fabric cutting operations offshore by eliminating 65 jobs by March 14. The workforce at its Tampa headquarters and distribution center has shrunk from a peak of 1,000 workers two years ago to less than 700. While more cost-cutting is envisioned, officials have no plans to eliminate more jobs in Tampa.
The company is weighing whether to sell or rent the 110,000-square-foot cutting facility, which also houses some corporate offices. The company's new but never occupied headquarters building on W Waters Avenue already is for sale.
Tropical uses the cutting facility to cut raw fabric into garment pieces. The pieces are then shipped to assembly plants in the Caribbean where they are sewed into pants. The finished product is flown back to the Tampa distribution center where labels and price tags are added, then shipped to retailers. In the past year Tropical had shifted more than half its cutting room work to offshore contractors where labor is cheaper.
"This is really the tail end of it," said Kagan, who added that shifting the work offshore cut out a step that enables Tropical to react more quickly to changes in demand.
