First quarter revenue and EBITDA improves compared to fourth quarter of 1999 – Completes consolidation of domestic covered yarn manufacturing operations – Continues integration of narrow elastic fabric operations – Enters into an agreement in principle for new credit facility

Worldtex, Inc. (NYSE: WTX) today announced revenues of $73.9 million in the first quarter, as compared to $78.0 million for the corresponding period in 1999, a decrease of 5.3%. Earnings before interest, taxes, depreciation and amortization (EBITDA), were $8.0 million for the first quarter of 2000 as compared to $10.8 million in the first quarter of 1999. The net loss for the quarter was $1.1 million or $.08 per share compared with net income of $0.8 million or $.06 per share in the first quarter of 1999.

Gross profit in the quarter was $10.6 million or 14.3% of sales compared to $13.5 million or 17.3% in the first quarter of 1999. The decrease in margins as compared to the first quarter of 1999 was due to an unfavorable change in product mix, reduced demand in covered yarns, and manufacturing inefficiencies incurred during the consolidation of our covered yarn operations. Selling and administrative expenses and goodwill amortization in the quarter were $6.6 million or 8.9% of sales as compared to $6.7 million or 8.6% in the first quarter of 1999. As a result, operating income was $4.0 million in the first quarter, compared to $6.8 million in the first quarter of 1999.

Other income increased $0.7 million over the first quarter of 1999. The current quarter includes a one-time charge of $0.8 million relating to the estimated costs and expenses arising from the impact on various Worldtex agreements of the “change of control event” resulting from the acquisition of approximately 34% of the Worldtex common stock by certain investment managers. However, these costs are offset by the recognition of $0.8 million in income arising from the agreement of such investment managers to reimburse Worldtex for its costs and expenses in such amounts. The prior year quarter expense resulted primarily from foreign currency losses relating to certain French intercompany financing.

Barry D. Setzer, Chairman and Chief Executive Officer, commented that “We are pleased with Worldtex’s financial improvements over the fourth quarter of 1999. Before fourth quarter one-time charges, revenues increased 14.8% or $9.5 million, gross profit increased 27.7% or $2.3 million and operating income increased 135.3% or $2.3 million. However, lower revenues, a significant change in product mix in our narrow elastic fabrics business, continued softness in the covered yarn market due primarily to reduced demand from pantyhose customers and currency issues compressed profit margins in the first quarter of 2000 compared to the first quarter of 1999.”

Setzer continued, “Our narrow elastic fabrics sales of $33.8 million exceeded our expectations, an increase of 5.6% more than first quarter of 1999. This comprised 46% of our total revenues, which is above our 2000 target of 40%. However, gross margins were negatively affected due primarily to significantly higher volumes of lower margin commodity products.”

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Covered elastic yarn revenues were $40.1 million in the quarter, which were 12.8% below the first quarter of 1999. The decline was due to reduced pantyhose demand, as well as continued weakness of the French Franc as compared to the dollar. Our European business continues to generate adequate gross margins and maintains profitability in a very difficult environment, but macroeconomic issues including currency weakness, increasing imports and overcapacity continue to challenge the European textile industry. In our North American business, during the first quarter we completed the previously announced consolidation plan to reduce conventional covered yarn capacity by closing a plant facility in Hickory, North Carolina, which created disruptions and inefficiencies to that operation.

Setzer added, “We are disappointed with our operating results and continue to work to improve overall operating margins in both narrow elastic fabrics and covered yarns. We have experienced some difficulty during the final stages of implementation of our management information system and expect to resolve these issues by the end of the second quarter. Once the system is fully implemented, we should achieve improvements in operating performance.”

Setzer also noted that “The Company has entered into an agreement in principle with a financial institution for a new credit facility that will improve domestic liquidity, and we expect to have the new facility in place during the second quarter.”

Setzer concluded, “As we look forward to the remainder of the year, we continue to experience a very challenging environment for our business and the textile industry in general. Some of the factors affecting our first quarter results will continue to affect our operating results into the second quarter. We believe that by utilizing our market position, geographic and product line diversification and restructuring efforts, Worldtex should be able to improve our margin and cash flow in future periods.”

With current annual revenues of nearly $300 million, Worldtex is a market leader in the covered elastic yarn and narrow elastic fabric markets throughout the Americas and Europe. Worldtex supplies a broad range of component products to the apparel, textile, home furnishings and specialty end-use markets.

(Dollars and shares in thousands except per share amounts)

Quarter Ended
March 31,
2000 1999
Net sales $ 73,934 78,017
Cost of goods sold 63,323 64,489
Gross profit 10,611 13,528
Selling & administrative expenses 5,838 5,852
Goodwill amortization 765 841

Operating profit 4,008 6,835
Interest expense 5,173 4,906
Other income (expense) - net 152 (509)

Income (loss) before income taxes (1,013) 1,420
Provision for income taxes 62 605

Net income (loss) $ (1,075) 815

Net income (loss) per share
Basic $ (.08) .06
Diluted $ (.08) .06

Weighted average shares outstanding
Basic 14,271 14,271
Diluted 14,271 14,271

Supplemental disclosure
EBITDA (A) $ 8,017 10,768

(A) EBITDA represents operating profit (loss) plus depreciation and
amortization and one-time items. While EBITDA should not be
considered as an alternative measure of net income or cash provided by
operating activities, it is presented to provide additional
information relating to the company’s debt service capability. EBITDA
should not be considered in isolation or as a substitute for other
measures of financial performance or liquidity.

Forward looking statements made in this release involve a number of risks and uncertainties, including, but not limited to, the financial strength of the apparel industry, the level of consumer spending for apparel, changing consumer preferences, the competitive pricing environment within the hosiery market segment of the apparel industry, foreign currency translation, success of new product introductions, and other risk factors detailed in the Company’s Securities and Exchange Commission filings.