Paragon Announces First Quarter Loss, Increased Sales Volume and Improved Earnings Anticipated in Second Half Norcross, Ga. (ots-PRNewswire) - Paragon Trade Brands, Inc. (NYSE: PTB) today reported a net loss of $7.2 million, or $.60 per share, for the quarter ended March 28, 1999 compared to net earnings of $6.0 million, or $.50 per share for the first quarter of 1998. Net sales for the quarter were $126.2 million, compared to $138.3 million for the first quarter of 1998. Earnings before interest, taxes, depreciation and amortization and bankruptcy costs (EBITDA) for the first quarter totaled $2.7 million. The Company believes that the decrease in sales was due to a number of factors, including some previously announced product performance issues and competitive pressures related to pricing and promotional activities. Operating results were impacted by higher cost of sales resulting from increased raw material costs, manufacturing inefficiencies due to changeovers to redesigned products, lower volume and royalty payments to The Procter & Gamble Company (P&G) and Kimberly-Clark Corporation (K-C) as a result of licensing agreements which became effective during the first quarter. In addition, operating results were also impacted by a price concession made to an export customer to address product acceptance issues. Selling, General and Administrative (SG&A) expense was negatively impacted by increased promotional expenses, information technology and sales and marketing expenses. In addition, depreciation and amortization charges included in SG&A increased as a result of the Company's newly installed SAP R-3 enterprise resource planning system. Commenting on the first quarter results, Chief Executive Officer, Bobby Abraham, said, "In announcing our 1998 year-end results, we anticipated that results for 1999 would be negatively impacted by lower volume, increased raw material costs, increased manufacturing costs from machine changeovers and increased marketing costs as well as royalties payable to P&G and K-C. The first quarter reflects the impact of all these factors. Although we anticipate the impact of some of these factors to continue through the second quarter, we believe the conversion to a dual cuff diaper product, coupled with the introduction of an improved super-absorbent polymer, both of which were completed as of the end of the first quarter, will help us grow sales volume and improve our bottom line during the second half of the year." Paragon Trade Brands is the leading manufacturer of store brand infant disposable diapers in the United States and Canada. Paragon manufactures a line of premium and economy diapers, training pants, feminine care and adult incontinence products, 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 has also established international joint ventures in Mexico, Argentina, Brazil and China for the sale of infant disposable diapers and other absorbent personal care products. Statements made in this press release, other than those concerning historical information, should be considered forward-looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the Company's forward-looking statements. Factors which could affect the Company's financial results, including, but not limited to: the Company's Chapter 11 filing; increased raw material prices and product costs; new product and packaging introductions by competitors; increased price and promotion pressure from competitors; new competitors in the market; Year 2000 compliance issues; and patent litigation, are described in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof, and which are made by management pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995.


Consolidated Earnings Statements

(Amounts In Thousands Except Per Share Data)


Thirteen Weeks Ended

March 28, 1999 March 29, 1998 Sales, net of discounts and allowances $ 126,244 $138,297 Cost of sales 109,537 110,799 Gross profit 16,707 27,498 Selling, general and administrative expense 21,443 19,052 Research and development expense 1,008 1,402 Total expenses 22,451 20,454 Operating profit (loss) (5,744) 7,044 Other income, net 765 1,058 Earnings (loss) before income taxes and bankruptcy costs (4,979) 8,102 Bankruptcy costs 1,927 1,646 Earnings (loss) before income taxes (6,906) 6,456 Provision for income taxes 313 450 Net earnings (loss) $ (7,219) $ 6,006 Basic earnings (loss) per share $ (.60) $ .50 Average common shares outstanding 11,950 11,934


Consolidated Balance Sheets

(Dollar Amounts In Thousands)


As of As of

March 28, 1999 December 27, 1998 Assets Cash and short-term investments $ 25,274 $ 22,625 Receivables 59,324 79,156 Inventories 51,999 53,282 Current portion of deferred income taxes 3,334 4,260 Other current assets 5,082 4,323

Total current assets 145,013 163,646 Net property, plant and equipment 130,205 125,826 Assets held for sale 1,463 4,691 Goodwill 32,340 32,819 Investment in and advances to Unconsolidated subsidiaries 90,280 88,784 Other assets 13,308 13,521

Total assets $412,609 $429,287 Liabilities and Shareholders' Equity (Deficit) Accounts payable $ 40,278 $ 44,849 Accrued liabilities 29,994 33,646 Total current liabilities 70,272 78,495 Liabilities subject to compromise 406,527 406,859 Other long-term liabilities 4,797 5,773

Total liabilities 481,596 491,127 Total shareholders' equity (deficit) (68,987) (61,840)

Total liabilities and shareholders'

equity (deficit) $412,609 $429,287 ots Original Text Service: Paragon Trade Brands, Inc. Internet: Contact: Kurt P. Ross,, or Guy B. Lawrence, both of K.P. Ross (USA) 212-308-3333, for Paragon Trade Brands e-mail:

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