Collins & Aikman Floorcoverings Margins Fall

Collins & Aikman Floorcoverings' weakening revenues and margins has led Standard & Poor's to downgrade the company's ratings. Its operating margin dropped to 12.9% from 22.7% the prior year.

  • 20 Aug 2004
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Collins & Aikman Floorcoverings’ weakening revenues and margins has led Standard & Poor’s to downgrade the company’s ratings. Its operating margin dropped to 12.9% from 22.7% the prior year. Much of this is due to weak demand in the corporate sector, where the company had about 35% concentration in 2003, explained Susan Ding, an analyst with S&P. Leverage increased from 3.2 times to 5.5 times.

S&P lowered the corporate credit rating and bank loan rating to B+ from BB- and the subordinated debt rating to B- from B. “With the corporate credit rating most of the issues were lowered in tandem,” Ding explained. The downgrade should not have a big impact on bank loan investors. “There is a little additional risk. There is still a secured group and they would still fare better than the unsecured creditors,” she added. The credit comprises a $50 million revolver, $60 million “A” loan and $146 million “B” loan.

The company has the number one market position in the fast-growing area of six-foot roll carpet segment and is the leading manufacturer of vinyl-backed commercial floor covering. S&P assigned a 4 recovery rating to the $256 million credit facility, indicating a 25-50% recovery of principal in the event of default. S&P believes a default would occur if all of the company’s divisions simultaneously experienced drawbacks or if a major new player took over market share. Darrell McCay, cfo, declined comment.

Imagistics International has been using free cash flow for debt reduction, share repurchases and acquisitions. Moody’s Investors Service has upgraded the company’s ratings as a result of its low leverage, strong operating performance and improved coverage statistics. Total debt was $73 million as of June 31 and leverage was less than one time at Dec. 31. Imagistics’ $95 million revolver due 2006 and $53 million term loan due 2007 were both upgraded from Ba2 to Ba1.

Trumbull, Conn.-based Imagistics sells, services and markets business document imaging and management solutions. The company is experiencing strong revenue growth in its copiers/multifunctional (MFP) products but weakening revenues in facsimile products. Moody’s expects the growth in the copiers/MFP business to offset the expected decline in the fax business.


  • 20 Aug 2004

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