<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 3, 1998
Commission File No. 1-11126
DYERSBURG CORPORATION
(Exact name of registrant as specified in its charter)
TENNESSEE 62-1363247
(State or other jurisdiction of (I.R.S employer identification no.)
incorporation or organization)
1315 PHILLIPS ST., DYERSBURG, TENNESSEE 38024
(Address of principal executive offices) (Zip Code)
(901) 285-2323
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, Par Value $.01/Share New York Stock Exchange
(Title of each class) (Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X No
----- ------
Indicate the number of shares outstanding of each issuer's classes of common
stock, as of the latest practicable date.
Title of each Number of shares outstanding as of January 15, 1998
- --------------------------- ---------------------------------------------------
Common Stock $.01 par value 13,330,110
<PAGE> 2
INDEX TO FORM 10-Q
DYERSBURG CORPORATION
PART I--FINANCIAL INFORMATION PAGE NUMBER
- ----------------------------- -----------
ITEM 1--FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Condensed Balance Sheets at
January 3, 1998, October 4, 1997, and
January 4, 1997.................................................3
Consolidated Condensed Statements of Income
for the Three Months Ended January 3, 1998,
and January 4, 1997.............................................4
Consolidated Condensed Statements of Cash
Flows for the Three Months Ended
January 3, 1998, and January 4, 1997............................5
Notes to Consolidated Condensed Financial
Statements......................................................6
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.........................9
PART II--OTHER INFORMATION
- --------------------------
ITEM 4--SUBMISSION OF MATTERS TO A VOTE
OF SHAREHOLDERS...............................................10
ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K.....................................10
SIGNATURES...................................................................11
2
<PAGE> 3
DYERSBURG CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
(in thousands, except share data)
<TABLE>
<CAPTION>
January 3, October 4, January 4,
1998 1997 1997
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash ....................................................... $ 1,434 $ 948 $ 464
Accounts receivable, net of allowance for doubtful accounts
of $2,350 at January 3, 1998, $2,075 at October 4, 1997,
and $1,210 at January 4, 1997 ........................... 60,449 68,290 24,817
Inventories ................................................ 60,901 52,222 32,215
Prepaid expenses and other ................................. 6,896 6,597 865
-------- -------- --------
Total current assets ................................. 129,680 128,057 58,361
Property, plant and equipment, net ......................... 154,449 152,523 67,612
Goodwill, net .............................................. 77,947 78,277 58,612
Deferred debt costs and other, net ......................... 6,647 7,959 505
-------- -------- --------
$368,723 $366,814 $185,090
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable .................................... $ 17,113 $ 23,721 $ 7,726
Accrued expenses .......................................... 15,647 14,758 5,228
Income taxes payable ...................................... 837 1,564 548
Current portion of long-term obligations .................. 7,500 7,500 --
-------- -------- --------
Total current liabilities ............................ 41,097 47,543 13,502
Long-term obligations ..................................... 210,714 203,450 73,103
Deferred income taxes ..................................... 8,363 8,459 8,668
Other liabilities ......................................... 6,373 6,258 659
Shareholders' equity:
Preferred stock, authorized 5,000,000 shares; none issued
Common stock, $.01 par value, authorized 40,000,000
shares; issued and outstanding shares - 13,327,410 at
January 3, 1998, 13,280,033 at October 4, 1997, and
13,132,480 at January 4, 1997 ............................. 133 133 132
Additional paid-in capital ................................ 42,207 41,985 41,323
Retained earnings ......................................... 59,836 58,986 47,703
-------- -------- --------
Total shareholders' equity .................................. 102,176 101,104 89,158
-------- -------- --------
$368,723 $366,814 $185,090
======== ======== ========
</TABLE>
See notes to consolidated condensed financial statements.
3
<PAGE> 4
DYERSBURG CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)
(in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------
January 3, January 4,
1998 1997
----------- -----------
<S> <C> <C>
Net Sales ................................ $ 91,931 $ 38,793
Costs and expenses:
Cost of sales ......................... 76,698 30,350
Selling, general, and administrative .. 8,192 5,810
Interest and amortization of debt costs 5,426 1,482
----------- -----------
Total costs and expenses ................. 90,316 37,642
----------- -----------
Income before income taxes ............... 1,615 1,151
Income taxes ............................. 632 467
----------- -----------
Net Income ............................... $ 983 $ 684
=========== ===========
Weighted average shares outstanding:
Basic .................................. 13,305,518 13,135,133
=========== ===========
Diluted ................................ 13,393,951 13,201,545
=========== ===========
Earnings per share:
Basic .................................. $ 0.07 $ 0.05
=========== ===========
Diluted ................................ $ 0.07 $ 0.05
=========== ===========
Dividends per share ...................... $ 0.01 $ 0.01
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE> 5
DYERSBURG CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
January 3, January 4,
1998 1997
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net Income .................................................. $ 983 $ 684
Adjustments to reconcile to net cash (used in)
provided by operating activities:
Depreciation and amortization .......................... 5,439 2,811
Deferred income taxes .................................. (54) 88
Other-net............................................... (7,106) 6,700
-------- --------
Net cash (used in) provided by operating activities (738) 10,283
INVESTING ACTIVITIES
Capital expenditures ........................................ (6,536) (2,138)
Other-net ................................................... 844 95
-------- --------
Net cash used in investing activities .............. (5,692) (2,043)
FINANCING ACTIVITIES
Acquisition of common stock for treasury .................... -- (160)
Retirement of debt .......................................... (51) (58)
Net borrowing (repayment) on debt ........................... 6,879 (8,432)
Dividends paid .............................................. (133) (131)
Issuance of common stock .................................... 221 22
-------- --------
Net cash provided by (used in) financing activities 6,916 (8,759)
-------- --------
Net increase (decrease) in cash ................... 486 (519)
Cash at beginning of period .................................... 948 983
-------- --------
Cash at end of period .......................................... $ 1,434 $ 464
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
5
<PAGE> 6
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
DYERSBURG CORPORATION
January 3, 1998
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements
include the accounts of Dyersburg Corporation ("Company") and its wholly-owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated. The accompanying unaudited consolidated condensed financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. Financial information as of
October 4, 1997, has been derived from the audited financial statements of the
Company, but does not include all disclosures required by generally accepted
accounting principles. In the opinion of management, all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
financial information for the periods indicated have been included. Due to
seasonal patterns, the results for interim periods are not necessarily
indicative of results to be expected for the year. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's annual report on Form 10-K for the fiscal year ended October 4,
1997. The quarter ended January 3, 1998, included 13 weeks, while the quarter
ended January 4, 1997, included 14 weeks.
NOTE B--BUSINESS COMBINATION
In August 1997, the Company acquired all the outstanding common stock
of AIH, Inc. from West Point Stevens, Inc. AIH, Inc., through its subsidiary,
Alamac Knit Fabrics, Inc. (collectively referred to as "Alamac") is a
manufacturer of knit fabrics sold primarily to domestic apparel producers. The
acquisition was accounted for using the purchase method of accounting. The
purchase price was $127,708,000, subject to adjustment for changes in pension
assets and liabilities subsequent to December 31, 1996.
The operating results of Alamac are included in the Company's condensed
consolidated statements of income from August 27, 1997, the acquisition date.
The following unaudited pro forma results of operations assume the Alamac
acquisition and related financing transactions occurred at the beginning of the
period presented. In connection with the acquisition of Alamac, the Company
recorded an extraordinary charge of $905,000, or $0.07 per share, related to the
early extinguishment of debt. The pro forma results of operations do not purport
to represent what the Company's results would have been had such transactions in
fact occurred at the beginning of the years presented or to project the
Company's results of operations in any future period.
6
<PAGE> 7
<TABLE>
<CAPTION>
Quarter Ended
------------------------------
Jan. 3, 1998 Jan. 4, 1997
------------ ------------
(in thousands, except per share data)
<S> <C> <C>
Pro forma
Net sales $ 91,931 $ 94,728
Income before extraordinary loss 983 304
Net income (loss) 983 (721)
Earnings per share:
Income before extraordinary loss $ 0.07 $ 0.01
Net income (loss) $ 0.07 $ (0.06)
</TABLE>
NOTE C--INVENTORIES
<TABLE>
<CAPTION>
Jan. 3, Oct. 4, Jan. 4,
1998 1997 1997
---------------------------------
(in thousands)
<S> <C> <C> <C>
Raw Materials ........... $20,325 $18,243 $ 5,914
Work in Process ......... 17,796 14,011 13,077
Finished Goods .......... 20,002 17,180 12,337
Supplies and Other ...... 2,778 2,788 887
------- ------- -------
$60,901 $52,222 $32,215
======= ======= =======
</TABLE>
7
<PAGE> 8
NOTE D--EARNINGS PER SHARE
The Company has adopted the Financial Accounting Standards Board (FASB)
Statement No. 128, Earnings per Share, and accordingly, the prior period
presentation has been restated. The table below sets forth the computations of
basic and diluted earnings per share:
<TABLE>
<CAPTION>
Jan. 3, Jan. 4,
1998 1997
--------------------------------------------
(in thousands except share and per share data)
<S> <C> <C>
Numerator for basic and diluted earnings per
share--income available to
common stockholders .......................... $ 983 $ 684
----------- -----------
Denominator:
Denominator for basic earnings per
share--weighted average shares ............... 13,305,518 13,135,133
Effect of dilutive securities:
Employee Stock Options ...................... 88,433 66,412
----------- -----------
Denominator for diluted earnings per share--
adjusted weighted average shares and assumed
conversions ................................ 13,393,951 13,201,545
=========== ===========
Basic earnings per share ........................... $ 0.07 $ 0.05
=========== ===========
Diluted earnings per share ......................... $ 0.07 $ 0.05
=========== ===========
</TABLE>
8
<PAGE> 9
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Net income for the first fiscal quarter of 1998 was $983,000, or $0.07
per share, versus $684,000, or $0.05 per share, in the first fiscal quarter of
the prior year. Earnings per share are the same whether calculated on a basic or
diluted basis. The weighted average number of shares outstanding in the quarter
ended January 3, 1998 was approximately 13,306,000.
Net sales for the quarter ended January 3, 1998 increased by 137% to
$91.9 million versus $38.8 million for the same quarter prior year. The increase
in net sales was due to the inclusion of Alamac sales in fiscal 1998. Without
Alamac sales, net sales decreased slightly from the first quarter of fiscal 1997
by 4%, or $1.6 million. Increased sales of outerwear fleece were more than
offset by a decrease in sales of stretch fabrics. Gross margins for the quarter
declined to 16.6% versus 21.8% for the same period in fiscal 1997. The decrease
in gross margins resulted from the inclusion of Alamac's sales in fiscal 1998,
which have historically experienced gross margins of 11 to 14%.
Selling, general and administrative expenses increased 41% for the
first quarter of fiscal 1998 compared to the same period in fiscal 1997 due to
the inclusion of Alamac in fiscal 1998. As a percentage of sales, these same
expenses decreased to 8.9% for the first quarter fiscal 1998 versus 14.9% for
the same period in fiscal 1997. This decrease reflects the impact of Alamac's
lower selling, general and administrative expenses as a percent of sales.
Quarterly interest expense in the first quarter of fiscal 1998 of $5.4
million was significantly higher than that of the same period of fiscal 1997 due
to the additional debt issued in relation to the Alamac acquisition. The
effective tax rate for the first quarter of fiscal 1998 was approximately 39%,
exceeding the federal statutory rate due to certain expense items not being
deductible for tax purposes, principally $599,000 from the amortization of
goodwill.
Liquidity and Capital Resources
Working capital increased to $88.6 million and the current ratio
improved to 3.2:1 at January 3, 1998, compared to $80.5 million in working
capital and a current ratio of 2.7:1 at October 4, 1997. The increase in working
capital and current ratio is the result of seasonal increases in inventories
offset by declines in accounts receivable reflecting typically lower sales
volume experienced in the first fiscal quarter as compared to the fourth fiscal
quarter. The Company's debt-to-capital ratio was 67.3% at January 3, 1998,
versus 66.8% at October 4, 1997.
9
<PAGE> 10
Net receivables decreased from $68.3 million at October 4, 1997, to
$60.4 million at January 3, 1998, as a result of seasonal sales levels partially
offset by a buildup in Alamac's net accounts receivable balance from $24.1
million at year end to $34.3 million at January 3, 1998. Alamac's accounts
receivable are anticipated to average $40-42 million in the remainder of fiscal
1998. Inventories increased to $60.9 million during the first quarter of fiscal
1998 in anticipation of seasonally stronger sales for the remainder of the
fiscal year.
Capital expenditures for the three months ended January 3, 1998, were
$6.5 million versus $2.1 million for the same period in the prior year. Cash
outlays for capital spending are anticipated to approximate $25 million in
fiscal 1998.
At January 3, 1998, the Company had $35.8 million of additional
borrowings available. The Company believes that cash flow from operations and
the existing revolving credit facility will be sufficient to meet operating
needs and fund the capital spending program.
As the year 2000 approaches, an issue impacting all companies has
emerged regarding how existing application software programs and operating
systems can accommodate this date value. The Company places significant reliance
on technology for many of its operational systems. A review of all systems has
been undertaken to ensure that they do not malfunction as a result of the year
2000. As a result of this process the Company expects to both replace some
systems and upgrade others. The current cost of this effort is still being
evaluated however management does not expect the financial impact to be material
to the consolidated financial statements. Management's estimate of the ultimate
cost and completion of necessary software replacement or modification is based
on numerous assumptions regarding future events including continued availability
of certain resources, third party modification plans, and other factors.
However, there can be no guarantee that these estimates will be achieved and
actual results could differ materially from those anticipated.
PART II--OTHER INFORMATION
ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of shareholders during the
three months ended January 3, 1998.
ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K
(a) 27 Financial Data Schedule (for SEC use only)
(b) The Corporation did not file any reports on Form 8-K
during the three months ended January 3, 1998.
10
<PAGE> 11
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
February 13, 1998 /s/ William S. Shropshire, Jr.
-----------------------------------------
William S. Shropshire, Jr.
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE THREE MONTHS ENDED JANUARY 3, 1998, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> JAN-03-1998
<CASH> 1,434
<SECURITIES> 0
<RECEIVABLES> 62,799<F1>
<ALLOWANCES> (2,350)<F1>
<INVENTORY> 60,901
<CURRENT-ASSETS> 129,680
<PP&E> 223,447
<DEPRECIATION> (68,998)
<TOTAL-ASSETS> 368,723
<CURRENT-LIABILITIES> 41,097
<BONDS> 0
0
0
<COMMON> 133
<OTHER-SE> 102,043
<TOTAL-LIABILITY-AND-EQUITY> 368,723
<SALES> 91,931
<TOTAL-REVENUES> 91,931
<CGS> 76,698
<TOTAL-COSTS> 76,698
<OTHER-EXPENSES> 8,192
<LOSS-PROVISION> 161
<INTEREST-EXPENSE> 5,426
<INCOME-PRETAX> 1,615
<INCOME-TAX> 632
<INCOME-CONTINUING> 983
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 983
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
<FN>
Amounts inapplicable or not disclosed as a separate line on the Balance Sheet
or Statement of Income are reported as $0 herein.
<F1>*Notes and accounts receivable - trade are reported net of allowances for
doubtful accounts in the Consolidated Condensed Balance Sheets.
</FN>
</TABLE>
