<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 1, 2000
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)
15720 JOHN J. DELANEY DR., SUITE 445
CHARLOTTE, NORTH CAROLINA 28277
(Address of principal executive offices) (Zip Code)
(704) 341-2299
(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.
<TABLE>
<CAPTION>
Title of each Number of shares outstanding as of January 24, 2000
- -------------------------------------- --------------------------------------------------------
<S> <C>
Common Stock $.01 par value 13,367,221
</TABLE>
<PAGE> 2
INDEX TO FORM 10-Q
DYERSBURG CORPORATION
<TABLE>
<CAPTION>
PART I--FINANCIAL INFORMATION PAGE
- ----------------------------- ----
<S> <C>
ITEM 1--FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Condensed Balance Sheets at
January 1, 2000 and October 2, 1999 .........................................................3
Consolidated Condensed Statements of Operations
for the Three Months Ended January 1, 2000
and January 2, 1999..........................................................................4
Consolidated Condensed Statements of Cash
Flows for the Three Months Ended
January 1, 2000, and January 2, 1999.........................................................5
Notes to Consolidated Condensed Financial
Statements...................................................................................6
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...............................................10
PART II--OTHER INFORMATION
- --------------------------
ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS.............................................12
ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K............................................................13
SIGNATURES..........................................................................................13
</TABLE>
2
<PAGE> 3
DYERSBURG CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
(in thousands except share and per share data)
<TABLE>
<CAPTION>
January 1, October 2,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash ...................................................... $ 152 $ 158
Accounts receivable, net of allowance for doubtful accounts
of $2,653 at January 1, 2000 and $2,826 at October 2, 1999 47,587 50,509
Inventories ............................................... 41,726 36,735
Deferred income taxes and other ........................... 6,537 14,558
------------ ------------
Total current assets .................................... 96,002 101,960
Property, plant and equipment, net ........................ 118,246 120,688
Goodwill, net ............................................. 90,239 90,954
Deferred debt costs and other, net ........................ 9,112 9,332
------------ ------------
$ 313,599 $ 322,934
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Trade accounts payable .................................... $ 13,238 $ 14,697
Accrued expenses .......................................... 11,945 11,127
Current portion of long-term obligations .................. 4,675 3,400
------------ ------------
Total current liabilities ............................... 29,858 29,224
Long-term obligations ..................................... 185,944 194,460
Deferred income taxes ..................................... 8,794 7,779
Other liabilities ......................................... 144 1,571
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 -- 13,367,221 at
January 1, 2000 and 13,341,066 at October 2, 1999 ......... 134 133
Additional paid-in capital ................................ 42,804 42,773
Retained earnings ......................................... 46,377 46,994
Accumulated other comprehensive loss ...................... (456) --
------------ ------------
Total shareholders' equity ................................. 88,859 89,900
------------ ------------
$ 313,599 $ 322,934
============ ============
</TABLE>
See notes to consolidated condensed financial statements.
3
<PAGE> 4
DYERSBURG CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands except share and per share data)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
January 1, January 2,
2000 1999
------------ ------------
<S> <C> <C>
Net Sales .................................................. $ 68,349 $ 75,391
Costs and expenses:
Cost of sales ............................................. 57,834 64,570
Selling, general, and administrative ...................... 6,251 8,597
Interest and amortization of debt costs ................... 4,857 5,167
------------ ------------
Total costs and expenses ................................... 68,942 78,334
------------ ------------
Loss before income taxes ................................... (593) (2,943)
Income tax (benefit) expense ............................... 24 (1,291)
------------ ------------
Net loss ................................................... $ (617) $ (1,652)
============ ============
Weighted average shares outstanding:
Basic ..................................................... 13,353,814 13,337,066
============ ============
Diluted ................................................... 13,353,814 13,337,066
============ ============
Loss per share:
Basic ..................................................... $ (0.05) $ (0.12)
============ ============
Diluted ................................................... $ (0.05) $ (0.12)
============ ============
Dividends per share ........................................ $ 0.00 $ 0.01
============ ============
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE> 5
DYERSBURG CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
January 1, January 2,
2000 1999
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss ............................................................ $ (617) $ (1,652)
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization ..................................... 4,884 5,034
Deferred income taxes ............................................. 1,352 (15)
Other-net ......................................................... 3,435 8,509
------------ ------------
Net cash provided by operating activities ....................... 9,054 11,876
INVESTING ACTIVITIES
Capital expenditures ................................................ (1,617) (2,434)
Other-net ........................................................... 528 (61)
------------ ------------
(1,089) (2,495)
FINANCING ACTIVITIES
Retirement of debt .................................................. -- (55)
Net repayment on debt ............................................... (7,241) (9,325)
Dividends paid ...................................................... -- (133)
Other ............................................................... (730) --
------------ ------------
Net cash used in financing activities ........................... (7,971) (9,513)
------------ ------------
Net decrease in cash ............................................ (6) (132)
Cash at beginning of period .......................................... 158 265
------------ ------------
Cash at end of period ................................................ $ 152 $ 133
============ ============
</TABLE>
See notes to consolidated condensed financial statements.
5
<PAGE> 6
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
DYERSBURG CORPORATION
January 1, 2000
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 accounting principles
generally accepted in the United States for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X. Financial
information as of October 2, 1999, 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 2, 1999.
NOTE B--INVENTORIES
<TABLE>
<CAPTION>
January 1, October 2,
2000 1999
---------- ----------
(in thousands)
<S> <C> <C>
Raw Materials .................................. $ 11,638 $ 11,611
Work in Process ................................ 14,491 12,436
Finished Goods ................................. 13,907 10,919
Supplies and Other ............................. 1,690 1,769
---------- ----------
$ 41,726 $ 36,735
========== ==========
</TABLE>
NOTE C--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.
6
<PAGE> 7
NOTE C--LONG-TERM OBLIGATIONS (continued)
Effective August 19, 1999, the Company entered into a Credit Agreement,
replacing its existing credit facility, consisting of a three-year $84,000,000
revolving line of credit (the "Revolver") and a three-year $26,000,000 term
loan (the "Term Loan"). Borrowings under the Credit Agreement bear interest at
either LIBOR plus a specified margin currently equal to 2.75% for the Revolver
and 3.25% for the Term Loan, or, at the Company's option, bear interest at the
lender's base rate (the base rate was 8.5% at January 1, 2000) plus a margin
equal to 1.0%, for the Revolver and 1.5% for the Term Loan. The availability
under the Revolver is limited at all times, through maturity, to a receivables
and inventory borrowing base.
NOTE D--EARNINGS PER SHARE
The table below sets forth the computations of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
January 1, January 2,
2000 1999
---------------------------------------------
(in thousands except share and per share data)
<S> <C> <C>
Numerator for basic and diluted earnings per
Share--net loss ................................... $ (617) $ (1,652)
------------ ------------
Denominator for basic and diluted earning per share -
adjusted weighted average shares and assumed
conversions ......................................... 13,353,814 13,337,066
============ ============
Basic earnings per share ............................ $ (0.05) $ (0.12)
============ ============
Diluted earnings per share .......................... $ (0.05) $ (0.12)
============ ============
</TABLE>
NOTE E--PENSION
The Company elected to freeze benefits under its salaried and hourly
defined benefit pension plans as of December 31, 1999. This resulted in the
recognition of a curtailment gain on the salary plan of approximately
$1,700,000. Also, in connection with the curtailment of the hourly plan, the
Company recognized additional minimum pension liability of $456,000 (net of
applicable taxes of $245,000). The additional minimum pension liability has
been recorded as accumulated other comprehensive loss on the balance sheet at
January 1, 2000.
7
<PAGE> 8
NOTE F--COMPREHENSIVE LOSS
The following table provides a reconciliation of net loss reported in the
Company's consolidated condensed statements of operations to comprehensive
loss:
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------
January 1, January 2,
2000 1999
------------ ------------
(in thousands)
<S> <C> <C>
Net loss ............................................ $ (617) $ (1,652)
Other comprehensive loss:
Additional minimum pension liability .............. (701) --
Tax effect ........................................ 245 --
------------ ------------
Net of tax ........................................ (456) --
Comprehensive loss .................................. $ (1,073) $ (1,652)
============ ============
</TABLE>
NOTE G--RESTRUCTURING CHARGES
During the third quarter 1999, the Company implemented a reorganization
plan related to its textile business. The textile business had been running at
less than full capacity due to the domestic circular knit industry experiencing
excess supply and low-priced garment imports from Asia. The duration of these
market conditions is uncertain. In response to these business conditions, the
Company decided to reduce its U.S. manufacturing capacity. The major elements
of the reorganization plan include the closing of the Company's facility in
Hamilton, North Carolina and the elimination of yarn spinning operations at the
Company's Trenton, Tennessee facilities which were completed during the fourth
quarter. Additionally, the plan resulted in the reduction of approximately 500
hourly and salaried employees, with severance benefits being paid over periods
up to twelve months from the termination date. At October 2, 1999 substantially
all employees had been terminated or notified of their impending termination.
The cost of the reorganization was reflected as a restructuring charge,
before income taxes, of $10,993,000, recorded in the third quarter 1999,
increased by $585,000 during the fourth quarter. The components of the charge
included $4,499,000 million for severance and related fringe benefits and
$7,079,000 for the write-down of impaired fixed assets. Assets that are no
longer in use have been sold or are held for sale at January 1, 2000 and were
written down to their estimated fair values less costs of sale based primarily
on independent appraisals.
The Company is actively marketing the assets held for sale through the
use of internal sources and outside agents. Assets held for sale were
$2,641,000 at January 1, 2000. The timing of the disposal of these assets is
not easily determined, but management of the Company does not believe any
significant sales will likely occur within one year. As a result of the
restructuring, the Company has idle assets of approximately $1.9 million which
continue to be depreciated.
8
<PAGE> 9
NOTE G--RESTRUCTURING CHARGES (continued)
The following is a summary of activity in the restructuring reserves for
severance and related expenses (in thousands):
<TABLE>
<S> <C>
June 1999 restructuring charge $ 4,023
Payments (353)
--------
Balance at July 3, 1999 3,670
Payments (3,292)
Additional severance recorded 476
--------
Balance at October 2, 1999 854
Payments (457)
--------
Balance at January 1, 2000 $ 397
========
</TABLE>
NOTE H--REPORTING SEGMENT INFORMATION
The Company has adopted SFAS No. 131, Disclosure About Segments of an
Enterprise and Related Information. SFAS No. 131 establishes standards for the
reporting by public companies of information about operating segments, products
and services, geographic areas and major customers. The method of determining
what information to report is based on the way management organizes the
segments within the Company for making operating decisions and assessing
financial performance.
The Company's chief operating decision-maker is considered to be the
Chief Executive Officer ("CEO"). The Company's CEO evaluates both consolidated
and disaggregated financial information in deciding how to allocate recourses
and assess performance. The CEO uses certain disaggregated financial
information for the Company's primary knit fabric markets: textile and stretch
fabrics. Sales for textile and stretch fabrics for the quarters ended January
1, 2000 and January 2, 1999 were $56.7 million and $7.1 million, and $67.9
million and $7.4 million respectively. The Company has aggregated these two
markets into a single reportable textile segment as allowed under SFAS No. 131
because these product lines have similar long-term economic characteristics
such as average gross margin, and the product lines are similar in regards to
nature of production processes, type of customers, and method used to
distribute products. The Company's textile segment manufactures in U.S. plants
and markets fabric through its sales offices, principally sold to customers in
the U.S.
The Company also has an apparel segment. The apparel segment purchases
fabric, contracts for cutting, sewing and packaging from companies in the U.S.
and Mexico, and markets the finished apparel to customers in the U.S. The
apparel segment has an equity investment in an apparel manufacturing joint
venture in the Dominican Republic, which is not material at January 1, 2000.
The Company holds a 50% equity position in the joint venture, and accordingly
does not include net sales and other items of profit and loss in its
Consolidated Statements of Operations or the following table.
9
<PAGE> 10
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
January 1, January 2,
2000 1999
---------- ----------
(in thousands)
<S> <C> <C>
Net Sales
Textile .................................................. $ 63,886 $ 75,296
Apparel .................................................. 4,463 95
---------- ----------
Consolidated net sales ............................................ $ 68,349 $ 75,391
========== ==========
Operating income (loss)
Textile .................................................. $ 5,798 $ 3,215
Apparel .................................................. (818) (325)
Amortization of goodwill .......................................... 716 666
Interest and amortization of debt costs ........................... 4,857 5,167
---------- ----------
Consolidated income (loss ) before taxes ....................... $ (593) $ (2,943)
========== ==========
Depreciation:
Textile .................................................. $ 3,775 $ 4,044
Apparel .................................................. 91 68
---------- ----------
$ 3,866 $ 4,112
========== ==========
Capital Expenditures:
Textile .................................................. $ 1,607 $ 1,929
Apparel .................................................. 10 505
---------- ----------
$ 1,617 $ 2,434
========== ==========
Assets at end of period:
Textile .................................................. $ 198,356 $ 230,257
Apparel .................................................. 9,986 1,697
Assets not allocated to segments ......................... 105,257 108,211
---------- ----------
$ 313,599 $ 340,165
========== ==========
</TABLE>
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Net sales for the quarter ended January 1, 2000, decreased by 9.3% to
$68.3 million versus $75.4 million for the same quarter of the prior year. The
decrease in net sales was primarily a result of reduced average prices of units
shipped. Gross margins for the quarter increased to 15.4% versus 14.4% for the
same period in fiscal 1999. Gross margins showed improvement due to increased
utilization of facilities that led to higher production efficiencies.
Selling, general and administrative expenses for the quarter were $6.3
million compared to $8.6 million for the same period of 1999. This decrease of
$2.3 million was primarily due to a
10
<PAGE> 11
Results of Operations (continued)
one-time credit of approximately $1.6 million stemming from consolidation of
employee benefit plans. Bad debt expense for the quarter was $0.5 million lower
than the first quarter 1999.
Interest expense in the first quarter of fiscal 2000 of $4.9 million was
lower than the same period of fiscal 1999 due to reduced borrowing levels.
Although the Company had a loss before taxes, income tax expense of $24,000 was
recorded for the quarter due to certain expense items not being deductible for
tax purposes, principally the amortization of goodwill.
Net loss for the quarter ended January 1, 2000 was $0.6 million, or $0.05
per share, versus net loss of $1.7 million, or $0.12 per share, for the same
period in fiscal 1999. Earnings per share are the same whether calculated on a
basic or diluted basis. The weighted average number of shares outstanding for
the quarter was approximately 13,354,000.
During the third quarter 1999, the Company implemented a reorganization
plan related to its textile business. The textile business had been running at
less than full capacity due to the domestic circular knit industry experiencing
excess supply and low-priced garment imports from Asia. The duration of these
market conditions is uncertain. In response to these business conditions, the
Company decided to reduce its U.S. manufacturing capacity. The major elements
of the reorganization plan included the closing of the Company's facility in
Hamilton, North Carolina and the elimination of yarn spinning operations at the
Company's Trenton, Tennessee facilities which were completed during the fourth
quarter. Additionally, the plan resulted in the reduction of approximately 500
hourly and salaried employees, with severance benefits being paid over periods
up to twelve months from the termination date. At October 2, 1999 substantially
all employees had been terminated or notified of their impending termination.
The cost of the reorganization was reflected as a restructuring charge,
before income taxes, of $10,993,000, recorded in the third quarter 1999,
increased by $585,000 during the fourth quarter. The components of the charge
included $4,499,000 million for severance and related fringe benefits and
$7,079,000 for the write-down of impaired fixed assets. Assets that are no
longer in use have been sold or are held for sale at January 1, 2000 and were
written down to their estimated fair values less costs of sale based primarily
on independent appraisals.
The Company is actively marketing the assets held for sale through the
use of internal sources and outside agents. Assets held for sale were
$2,641,000 at January 1, 2000. The timing of the disposal of these assets is
not easily determined, but management of the Company does not believe any
significant sales will likely occur within one year. As a result of the
restructuring, the Company has idle assets of $1.9 million, which continue to
be depreciated.
11
<PAGE> 12
Liquidity and Capital Resources
Working capital decreased to $66.1 million and the current ratio
decreased to 3.2:1 at January 1, 2000, from $72.7 million and 3.5:1,
respectively, at October 2, 1999. The Company's debt-to-capital ratio was 68.2%
at January 1, 2000, compared to 68.8% at October 2, 1999.
Net receivables of $47.6 million at January 1, 2000, decreased from the
level at October 2, 1999, due to reduced sales levels. Inventories increased to
$41.7 million at the end of the first quarter from $36.7 million at the end of
the fourth quarter of fiscal 1999 in anticipation of expected sales volume
increases during the second quarter.
Capital expenditures for the three months ended January 1, 2000, were
$1.6 million versus $2.4 million for the same period in the prior year. Cash
outlays for capital spending are anticipated to approximate $9 million in
fiscal 2000.
Based on the borrowing base computation within the Credit Agreement, the
amount of additional borrowing available at January 1, 2000, was approximately
$9.5 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.
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 1, 2000.
12
<PAGE> 13
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 1, 2000.
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 11, 2000 /s/ William S. Shropshire, Jr.
------------------------------------------
William S. Shropshire, Jr.
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE THREE MONTHS ENDED JANUARY 1, 2000, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> JAN-01-2000
<CASH> 152
<SECURITIES> 0<F1>
<RECEIVABLES> 50,240<F2>
<ALLOWANCES> (2,653)<F2>
<INVENTORY> 41,726
<CURRENT-ASSETS> 96,002
<PP&E> 209,712
<DEPRECIATION> (91,466)
<TOTAL-ASSETS> 313,599
<CURRENT-LIABILITIES> 29,858
<BONDS> 0
0
0
<COMMON> 134
<OTHER-SE> 88,725
<TOTAL-LIABILITY-AND-EQUITY> 313,599
<SALES> 68,349
<TOTAL-REVENUES> 68,349
<CGS> 57,834
<TOTAL-COSTS> 57,834
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,857
<INCOME-PRETAX> (593)
<INCOME-TAX> 24
<INCOME-CONTINUING> (617)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (617)
<EPS-BASIC> (0.05)
<EPS-DILUTED> (0.05)
<FN>
<F1>Amounts inapplicable or not disclosed as a separate line on the Balance
Sheet or Statement of Operations are reported as $0 herein.
<F2>*Amounts are reported net of reserves in the Consolidated Condensed Balance
Sheets.
</FN>
</TABLE>
