<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 2, 1999
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.
Number of shares outstanding
Title of each as of January 15, 1999
--------------------------- ----------------------------
Common Stock $.01 par value 13,337,066
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INDEX TO FORM 10-Q
DYERSBURG CORPORATION
PART I--FINANCIAL INFORMATION PAGE
- ----------------------------- ----
ITEM 1--FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Condensed Balance Sheets at
January 2, 1999 and October 3, 1998..........................3
Consolidated Condensed Statements of Income
for the Three Months Ended January 2, 1999
and January 3, 1998..........................................4
Consolidated Condensed Statements of Cash
Flows for the Three Months Ended
January 2, 1999, and January 3, 1998.........................5
Notes to Consolidated Condensed Financial
Statements...................................................6
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS......................8
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................................................................10
2
<PAGE> 3
Dyersburg Corporation
Consolidated Condensed Balance Sheets (Unaudited)
(in thousands except share data)
<TABLE>
<CAPTION>
January 2, October 3,
1999 1998
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash ......................................................... $ 133 $ 265
Accounts receivable, net of allowance for doubtful accounts
of $3,676 at January 2, 1999 and $2,899 at October 3, 1998 53,679 71,359
Inventories .................................................. 43,340 45,147
Deferred income taxes and other ............................ 9,033 9,845
-------- --------
Total current assets .................................. 106,185 126,616
Property, plant and equipment, net ......................... 134,935 136,613
Goodwill, net .............................................. 93,086 93,752
Deferred debt costs and other, net ......................... 5,959 6,153
-------- --------
$340,165 $363,134
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable ..................................... $ 9,837 $ 19,833
Accrued expenses ........................................... 13,912 14,706
Current portion of long-term obligations ................... 8,125 7,500
-------- --------
Total current liabilities ............................. 31,874 42,039
Long-term obligations ...................................... 188,950 198,900
Deferred income taxes ...................................... 10,242 10,242
Other liabilities .......................................... 2,513 3,582
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 - 13,337,066 at
January 2, 1999 and 13,337,066 at October 3, 1998 ......... 133 133
Additional paid-in capital ................................. 42,752 42,752
Retained earnings .......................................... 63,701 65,486
-------- --------
Total shareholders' equity ................................... 106,586 108,371
-------- --------
$340,165 $363,134
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
3
<PAGE> 4
Dyersburg Corporation
Consolidated Condensed Statements of Income (Unaudited)
(in thousands except share data)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------
January 2, January 3,
1999 1998
------------ -----------
<S> <C> <C>
Net Sales ................................ $ 75,391 $ 91,931
Costs and expenses:
Cost of sales ......................... 64,570 76,698
Selling, general, and administrative .. 8,597 8,192
Interest and amortization of debt costs 5,167 5,426
------------ -----------
Total costs and expenses ................. 78,334 90,316
------------ -----------
Income (Loss) before income taxes ........ (2,943) 1,615
Income tax (benefit) expense ............. (1,291) 632
------------ -----------
Net Income (Loss) ........................ $ (1,652) $ 983
============ ===========
Weighted average shares outstanding:
Basic ............................... 13,337,066 13,305,518
============ ===========
Diluted ............................. 13,337,066 13,393,951
============ ===========
Earnings (Loss) per share:
Basic ............................... $ (0.12) $ 0.07
============ ===========
Diluted ............................. $ (0.12) $ 0.07
============ ===========
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 2, January 3,
1999 1998
---------- ----------
<S> <C> <C>
Operating activities
Net Income (Loss) ........................................... $ (1,652) $ 983
Adjustments to reconcile to net cash
provided by (used in) operating activities:
Depreciation and amortization .......................... 5,034 5,439
Deferred income taxes .................................. (15) (54)
Other-net .............................................. 8,509 (7,106)
-------- -------
Net cash provided by (used in) operating activities 11,876 (738)
Investing activities
Capital expenditures ........................................ (2,434) (6,536)
Other-net ................................................... (61) 844
-------- -------
Net cash used in investing activities .............. (2,495) (5,692)
Financing Activities
Retirement of debt .......................................... (55) (51)
Net (repayment) borrowing on debt ........................... (9,325) 6,879
Dividends paid .............................................. (133) (133)
Issuance of common stock .................................... 221
-------- -------
Net cash (used in) provided by financing activities (9,513) 6,916
-------- -------
Net (decrease) increase in cash ................... (132) 486
Cash at beginning of period .................................... 265 948
-------- -------
Cash at end of period .......................................... $ 133 $ 1,434
======== =======
</TABLE>
See notes to consolidated condensed financial statements.
5
<PAGE> 6
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
DYERSBURG CORPORATION
January 2, 1999
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. Financial information as of October 3,
1998, 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 3, 1998.
- --------------------------------------------------------------------------------
NOTE B--CHANGE IN ACCOUNTING ESTIMATES FOR DEPRECIABLE LIVES OF CERTAIN
PROPERTY, PLANT AND EQUIPMENT
During the first quarter of fiscal 1999, the Company changed its
estimates for the useful lives of certain property, plant and equipment at its
Dyersburg Fabrics Inc. facilities. This change was implemented to reflect time
periods more consistent with actual historical experience and anticipated
utilization of the assets. The effect of the change was a decrease in
depreciation expense for the first quarter of 1999 of approximately $350,000. It
is anticipated that this change will decrease depreciation expense for the full
fiscal year by approximately $1.4 million. For the quarter ended January 2,
1999, the effect of the change was to reduce the net loss by approximately
$227,000, or $0.02 per share.
NOTE C--INVENTORIES
<TABLE>
<CAPTION>
Jan. 2, Oct. 3,
1999 1998
-------- --------
(in thousands)
<S> <C> <C>
Raw Materials .... $11,783 $15,071
Work in Process .. 15,564 15,218
Finished Goods ... 13,193 12,039
Supplies and Other 2,800 2,819
------- -------
$43,340 $45,147
======= =======
</TABLE>
6
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NOTE D--EARNINGS PER SHARE
The table below sets forth the computations of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Jan. 2, Jan. 3,
1999 1998
------------ -----------
(in thousands except share data)
<S> <C> <C>
Numerator for basic and diluted earnings per
Share--net income (loss) ....................... $ (1,652) $ 983
------------ -----------
Denominator:
Denominator for basic earnings (loss) per
share--weighted average shares ................. 13,337,066 13,305,518
Effect of dilutive securities:
Employee Stock Options ....................... -- 88,433
------------ -----------
Denominator for diluted earnings (loss) per share--
adjusted weighted average shares and assumed
conversions .................................... 13,337,066 13,393,951
============ ===========
Basic earnings (loss) per share ...................... $ (0.12) $ 0.07
============ ===========
Diluted earnings (loss) per share .................... $ (0.12) $ 0.07
============ ===========
</TABLE>
NOTE E--LONG-TERM OBLIGATIONS
In August 1997, the Company issued $125,000,000 principal amount of
9.75% Senior Subordinated Notes due September 1, 2007 (the "Subordinated
Notes"). The Subordinated Notes are unsecured senior subordinated obligations
and are subordinated in right of payment to the prior payment in full of all
senior indebtedness. The Subordinated Notes are guaranteed by all of the
Company's subsidiaries (the "Guarantors"). Separate financial statements of the
Guarantors are not included herein because: (a) the Company is a holding company
with no assets or operations other than its investments in its subsidiaries; (b)
the Guarantors are wholly-owned subsidiaries of the Company and have fully and
unconditionally guaranteed the Subordinated Notes on a joint and several basis;
(c) the Guarantors comprise all of the direct and indirect subsidiaries of the
Company; and (d) management believes that such information is not material to
investors.
7
<PAGE> 8
NOTE E--LONG-TERM OBLIGATIONS (continued)
During January 1999, at its sole discretion and as provided for in the
original terms of the Credit Agreement, the Company reduced its line of credit
on the Revolving Credit Facility from $110 million to $90 million. The reduction
does not impact the Company's level of available credit as computed as of
January 2, 1999, or anticipated in the near future. This action reduces certain
commitment fees charged on unused lines of credit.
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Net sales for the quarter ended January 2, 1999, decreased by 18% to
$75.4 million versus $91.9 million for the same quarter of the prior year. The
decrease in net sales was primarily a result of reduced volume impacted by
increased imports and softness in the knit market. Gross margins for the quarter
declined to 14.4% versus 16.6% for the same period in fiscal 1998. Gross margins
decreased as production was reduced for the lower sales volume. However, margins
were favorably impacted by a change in the accounting estimate for useful lives
of certain property and equipment at the Company's Dyersburg Fabrics facilities.
The effect of the change was a decrease in depreciation expense in the first
quarter of 1999 of approximately $350,000. It is anticipated that this change
will decrease depreciation expense for the full fiscal year by approximately
$1.4 million. For the quarter ended January 2, 1999, the effect of the change
was to reduce the net loss by approximately $227,000, or $0.02 per share.
Selling, general and administrative expenses increased by $405,000 the
first quarter of fiscal 1999 compared to the same period in fiscal 1998. The
increase was primarily due to bad debt expense, which increased by approximately
$560,000. During the first half of fiscal 1998, bad debt expense was
historically low due to an unusually high level of net recoveries. As a
percentage of sales, these same expenses increased to 11.4% for the first
quarter for fiscal 1999 versus 8.9% for the same period in fiscal 1998. This
percentage increase resulted from a combination of increased bad debt expense
and a decline in sales.
Interest expense in the first quarter of fiscal 1999 of $5.2 million
was lower than that of the same period of fiscal 1998 due to reduced borrowing
levels. The effective tax rate for the first quarter of fiscal 1999 was 43.9%.
The rate exceeded the federal statutory rate due to certain expense items not
being deductible for tax purposes, principally the amortization of goodwill.
Net loss for the quarter ended January 2, 1999 was $1.7 million, or
$0.12 per share, versus net income of $983,000, or $0.07 per share, for the same
period in fiscal 1998. Earnings (loss) per share are the same whether calculated
on a basic or diluted basis. The diluted weighted average number of shares
outstanding for the quarter was approximately 13,337,000.
8
<PAGE> 9
Liquidity and Capital Resources
Working capital decreased to $74.3 million and the current ratio
increased to 3.3:1 at January 2, 1999, from $84.6 million and 3.0:1,
respectively, at October 3, 1998. The Company's long-term debt-to-capital ratio
was 63.9% at January 2, 1999, compared to 64.7% at October 3, 1998.
Net receivables of $53.7 million at January 2, 1999, decreased from the
level at October 3, 1998, due to reduced sales levels. Inventories decreased
slightly to $43.3 million at the end of the first quarter from $45.1 million at
the end of the fourth quarter of fiscal 1998.
Capital expenditures for the three months ended January 2, 1999, were
$2.4 million versus $6.5 million for the same period in the prior year. Cash
outlays for capital spending are anticipated to approximate $17 million in
fiscal 1999.
Based on the borrowing base computation within the Credit Agreement and
excluding the impact of additional borrowings on any financial ratio covenants
contained in the Credit Agreement, the amount of additional borrowing available
at January 2, 1999, was approximately $32 million. 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.
Year 2000
The Company has determined that it will need to modify or replace
portions of its software so that its computer system will function properly with
respect to dates in the year 2000 and beyond. The Company also has initiated
discussions with its significant suppliers, large customers and financial
institutions to ensure that those parties have appropriate plans to remediate
Year 2000 issues where their systems interface with the Company's systems or
otherwise impact its operation.
The Company's comprehensive Year 2000 initiative is being managed by a
team of internal staff. The team's activities are designed to ensure that there
is no adverse effect on the Company's core business operations and that
transactions with customers, suppliers and financial institutions are fully
supported. The Company is well underway with these efforts. The Company's
business application programs are currently compliant or will be made compliant
through the Year 2000 Project. The few remaining non-compliant programs are to
be brought into compliance by the vendors that will supply the programs or
through modifications by internal staff. The majority of the business
applications Year 2000 Project were completed by December 31, 1998, with a few
software programs scheduled to be replaced in the first half of 1999. The
Company continues to follow up with critical suppliers and customers concerning
their plans and progress in addressing the Year 2000 problem. The costs of the
Year 2000 Project are not expected to be material to the Company's results of
operations or financial position and are being expensed as incurred. These costs
represent the labor costs of time allocated from existing internal staff. The
costs of the project and the date on which the Company believes it will complete
the Year 2000 modifications are based on management's best estimates, which were
derived utilizing numerous assumptions of future events, including the continued
availability of
9
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certain resources and other factors. However, there can be no guarantee that
these estimates will be achieved and actual results could differ materially from
those anticipated. Specific factors that might cause such material differences
include, but are not limited to, the availability and cost of personnel trained
in this area, the ability to locate and correct all relevant computer codes, and
similar uncertainties.
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 2, 1999.
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 2, 1999.
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 16, 1999 /s/ William S. Shropshire, Jr.
------------------------------
William S. Shropshire, Jr.
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE THREE MONTHS ENDED JANUARY 2, 1999, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> JAN-02-1999
<CASH> 133
<SECURITIES> 0
<RECEIVABLES> 57,355<F1>
<ALLOWANCES> (3,676)<F1>
<INVENTORY> 43,340
<CURRENT-ASSETS> 106,185
<PP&E> 218,883
<DEPRECIATION> (83,948)
<TOTAL-ASSETS> 340,165
<CURRENT-LIABILITIES> 31,874
<BONDS> 0
0
0
<COMMON> 133
<OTHER-SE> 106,453
<TOTAL-LIABILITY-AND-EQUITY> 340,165
<SALES> 75,391
<TOTAL-REVENUES> 75,391
<CGS> 64,570
<TOTAL-COSTS> 64,570
<OTHER-EXPENSES> 8,597
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,167
<INCOME-PRETAX> (2,943)
<INCOME-TAX> (1,291)
<INCOME-CONTINUING> (1,652)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,652)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
<FN>
<F1>Amounts are reported net of reserves in the Consolidated Condensed Balance
Sheets.
</FN>
</TABLE>
