<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 October 3, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to _______________
Commission file number 1-13421
DAN RIVER INC.
(Exact name of registrant as specified in its charter)
GEORGIA 58-1854637
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2291 Memorial Drive 24541
Danville, Virginia (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (804) 799-7000
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
Number of shares of common stock outstanding as of October 30, 1998:
Class A: 21,117,383 Shares
Class B: 2,062,070 Shares
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<PAGE>
<PAGE> 2
THIS FORM 10-Q AND OTHER STATEMENTS ISSUED OR MADE FROM TIME TO TIME BY
DAN RIVER INC. OR ITS REPRESENTATIVES CONTAIN STATEMENTS WHICH MAY CONSTITUTE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE SECURITIES ACT OF
1933, AS AMENDED, AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED BY THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, 15 U.S.C.A. SECTIONS 77Z-2
AMD 78U-5 (SUPP. 1996). THOSE STATEMENTS INCLUDE STATEMENTS REGARDING THE
INTENT, BELIEF OR CURRENT EXPECTATIONS OF DAN RIVER INC. AND MEMBERS OF ITS
MANAGEMENT TEAM, AS WELL AS THE ASSUMPTIONS ON WHICH SUCH STATEMENTS ARE
BASED. PROSPECTIVE INVESTORS ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING
STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND
UNCERTAINTIES, AND THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS CURRENTLY
KNOWN TO MANAGEMENT THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE IN FORWARD-LOOKING STATEMENTS ARE SET FORTH IN THE CURRENT REPORT ON
FORM 8-K FILED ON JULY 20, 1998 BY DAN RIVER INC., AND ARE HEREBY
INCORPORATED BY REFERENCE. DAN RIVER UNDERTAKES NO OBLIGATION TO UPDATE OR
REVISE FORWARD-LOOKING STATEMENTS TO REFLECT CHANGED ASSUMPTIONS, THE
OCCURRENCE OF UNANTICIPATED EVENTS OR CHANGES TO FUTURE OPERATING RESULTS
OVER TIME.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
See Following Pages.
<PAGE>
<PAGE> 3
DAN RIVER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 3, January 3,
1998 1998
----------- -----------
<S> <C> <C>
(in thousands, except share
and per share data)
ASSETS
Current assets:
Cash and cash equivalents $ 1,269 $ 1,759
Accounts receivable, net 65,724 70,676
Inventories 127,467 92,376
Prepaid expenses and other current assets 3,123 5,112
Deferred income taxes 8,005 7,628
----------- -----------
Total current assets 205,588 177,551
Property, plant and equipment 350,828 321,994
Less accumulated depreciation and amortization (135,690) (113,866)
----------- -----------
Net property, plant and equipment 215,138 208,128
Other assets 7,943 6,616
----------- -----------
$ 428,669 $ 392,295
=========== ===========
/TABLE
<PAGE>
<PAGE> 4
DAN RIVER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 3, January 3,
1998 1998
------------ ------------
<S> <C> <C>
(in thousands, except share
and per share data)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 211 $ 301
Accounts payable 27,128 27,933
Accrued compensation and related benefits 13,602 16,661
Other accrued expenses 9,450 9,052
------------ ------------
Total current liabilities 50,391 53,947
Other liabilities:
Long-term debt 159,394 143,455
Deferred income taxes 26,330 20,182
Other liabilities 8,898 8,881
Shareholders' equity:
Preferred stock, $.01 par value; authorized
50,000 shares; no shares issued -- --
Common stock, Class A, $.01 par value;
authorized 175,000,000 shares; issued
and outstanding 16,756,908 shares
(16,778,472 shares at January 3, 1998) 168 168
Common stock, Class B, $.01 par value;
authorized 35,000,000 shares; issued
and outstanding 2,062,070 shares 21 21
Common stock, Class C, $.01 par value;
authorized 5,000,000 shares; no shares
outstanding -- --
Additional paid-in capital 139,594 139,140
Retained earnings 43,873 26,501
------------ ------------
Total shareholders' equity 183,656 165,830
------------ ------------
$ 428,669 $ 392,295
============ ============
</TABLE>
See accompanying notes.<PAGE>
<PAGE> 5
DAN RIVER INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------- ----------------------
October 3, Sept. 27, October 3, Sept. 27,
1998 1997 1998 1997
--------- -------- -------- --------
<S> <C> <C> <C> <C>
(in thousands, except per share data)
Net sales $ 118,589 $ 116,254 $ 358,128 $ 344,189
Costs and expenses:
Cost of sales 90,768 88,019 277,124 268,739
Selling, general
and administrative
expenses 14,313 14,114 41,500 39,212
Other operating
costs, net -- -- (400) 7,875
--------- --------- --------- ---------
Operating income 13,508 14,121 39,904 28,363
Other income (expense) 4 (392) 421 (269)
Interest expense (4,032) (5,578) (11,703) (16,177)
--------- --------- --------- ---------
Income before
income taxes 9,480 8,151 28,622 11,917
Provision for
income taxes 3,654 3,142 10,916 4,594
--------- --------- --------- ---------
Net income $ 5,826 $ 5,009 $ 17,706 $ 7,323
========= ========= ========= =========
Earnings per share:
Basic $ 0.31 $ 0.35 $ 0.94 $ 0.52
========= ========= ========= =========
Diluted $ 0.31 $ 0.35 $ 0.93 $ 0.51
========= ========= ========= =========
</TABLE>
See accompanying notes<PAGE>
<PAGE>6
DAN RIVER INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------
October 3, Sept. 27,
1998 1997
------------ ------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 17,706 $ 7,323
Adjustments to reconcile net income to net
cash provided by operating activities:
Noncash interest expense 592 1,031
Depreciation and amortization 22,457 20,839
Deferred income taxes 5,771 (1,656)
Writedown/disposal of assets (241) 7,953
Changes in operating assets and liabilities,
net of business acquired:
Accounts receivable 4,931 1,633
Inventories (35,091) (16,432)
Prepaid expenses and other assets (1,678) (313)
Accounts payable and accrued expenses (3,149) 4,732
Other liabilities 17 2,196
---------- -----------
Net cash provided by operating
activities 11,315 27,306
Cash flows from investing activities:
Capital expenditures (29,843) (14,022)
Proceeds from sale of assets 2,189 1,777
Acquisition of business -- (64,661)
---------- -----------
Net cash used by investing activities (27,654) (76,906)
Cash flows from financing activities:
Payments of long-term debt (651) (7,585)
Net borrowings payments - working
capital facility 16,500 (5,900)
Net proceeds from issuance of long-term debt -- 59,459
---------- -----------
Net cash provided by financing
activities 15,849 45,974
---------- -----------
Net decrease in cash and cash equivalents (490) (3,626)
Cash and cash equivalents at beginning of period 1,759 5,042
---------- -----------
Cash and cash equivalents at end of period $ 1,269 $ 1,416
========== ===========
</TABLE>
See accompanying notes.<PAGE>
<PAGE>7
DAN RIVER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
include the accounts of Dan River Inc. and its wholly-owned subsidiary,
Dan River Factory Stores, Inc. (together, the "Company"). In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation of results for
the interim periods presented have been included. Interim results are
not necessarily indicative of results for a full year. For further
information, refer to the consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the
year ended January 3, 1998.
2. Inventories
The components of inventory are as follows:
<TABLE>
<CAPTION>
October 3, January 3,
1998 1998
------------ ------------
(in thousands)
<S> <C> <C>
Finished goods $ 43,309 $ 25,401
Work in process 72,551 56,156
Raw materials 2,677 2,429
Supplies 8,930 8,390
-------- --------
Total Inventories $127,467 $ 92,376
======== ========
</TABLE>
3. Shareholders' Equity
Activity in Shareholders' Equity is as follows:
<TABLE>
<CAPTION>
Total
Additional Share-
Common Stock Paid-In Retained holders'
Class A Class B Capital Earnings Equity
------- -------- ---------- -------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance at Janu-
ary 3, 1998 $ 168 $ 21 $139,140 $26,501 $165,830
Net income -- -- -- 17,706 17,706
Tax effect of stock
options exercised -- -- 454 -- 454
Retirement of
Common Stock -- -- -- (334) (334)
------ ------ -------- ------- --------
Balance at July
4, 1998 $ 168 $ 21 $139,594 $43,873 $183,656
======= ====== ======== ======= ========
/TABLE
<PAGE>
<PAGE>8
DAN RIVER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------- ----------------------
October 3, Sept. 27, October 3, Sept. 27,
1998 1997 1998 1997
--------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Numerator for basic
and diluted earnings
per share -- net
income $ 5,826 $ 5,009 $ 17,706 $ 7,323
========= ========= ========= =========
Denominator:
Denominator for
basic earnings
per share--
weighted-average
shares 18,825 14,155 18,832 14,155
Effect of dilutive
securities:
Employee stock
options 182 138 240 94
--------- --------- --------- ---------
Denominator for
diluted earnings
per share--weighted
average shares
adjusted for
dilutive securities 19,007 14,293 19,072 14,249
========= ========= ========= =========
Earnings per share:
Basic $ 0.31 $ 0.35 $ 0.94 $ 0.52
========= ========= ========= =========
Diluted $ 0.31 $ 0.35 $ 0.93 $ 0.51
========= ========= ========= =========
</TABLE>
<PAGE>
<PAGE> 9
5. Recent Accounting Pronouncements
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"), at the beginning of
fiscal year 1998. SFAS 130 establishes standards for the reporting and
display of comprehensive income and its components in financial
statements. Comprehensive income includes net income and other items,
such as minimum pension liability adjustments, which previously were
reported directly in shareholders' equity. There were no differences
between net income and comprehensive income during the nine months ended
October 3, 1998 and September 27, 1997. In addition, accumulated other
comprehensive income was $-0- at October 3, 1998 and January 3, 1998.
In February 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits" ("SFAS
132"). This standard revises financial statement disclosures about
pensions and other postretirement benefit plans, but does not change the
measurement or recognition of costs or obligations under these plans.
SFAS 132 is effective for the Company's 1999 fiscal year.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"), which
requires capitalization of certain costs to develop or obtain software
for internal use. SOP 98-1 is effective for fiscal years beginning
after December 15, 1998, with earlier application permitted. The
Company has not yet assessed the impact of SOP 98-1, but it will likely
result in capitalization of certain costs which previously would have
been expensed.
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), which is required to
be adopted in years beginning after June 15, 1999. The Company has not
yet determined when it will adopt SFAS 133 or what impact, if any, the
adoption will have on its earnings or financial position.
6. Subsequent Events
Acquisition
On October 14, 1998 the Company acquired all of the capital stock of The
Bibb Company ("Bibb") pursuant to a merger agreement originally entered
into on June 28, 1998, and as amended through September 23, 1998. The
Company paid approximately $83 million in cash and issued approximately
4,257,000 shares of its Class A Common Stock in consideration for all of
the outstanding Bibb Common Stock. The transaction will be accounted
for as a purchase.
In connection with the acquisition of Bibb, the Company entered into a
new five year secured credit agreement, (the "New Credit Agreement"),
consisting of a $125 million amortizing term loan and a $150 million
revolving line of credit. Borrowings under the New Credit Agreement
were used to fund the cash portion of the Bibb acquisition, and
<PAGE>
<PAGE> 10
refinance approximately $78 million of Bibb indebtedness. In addition,
$37 million in borrowings under the New Credit Agreement were used to
retire the Company's existing $90 million working capital line of
credit.
Bibb is a manufacturer and marketer of: consumer products for the home,
principally sheets, bedding and bedding accessories; textile products
for the hospitality and healthcare industries; and specialty engineered
textile products used in making high-pressure hoses and other industrial
products.
Plant Closure
On October 28, 1998, the Board of Directors approved the closure of the
Company's apparel fabrics weaving plant located in Spindale, North
Carolina. The plant closure is expected to result in a pre-tax charge
of approximately $8.5 million in the fourth quarter of 1998, primarily
for the writedown of fixed assets.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
General
Net sales for the third quarter of 1998 were $118.6 million, an increase of
$2.3 million or 2.0%, compared to the third quarter of 1997. Sales of home
fashions products increased $4.9 million or 7.4%, while sales of apparel
fabrics were down $2.6 million or 5.2% (despite the third quarter of 1998
having 13 shipping weeks compared to 12 shipping weeks in 1997).
The increase in sales of home fashions products resulted from higher unit
volumes, particularly complete bed ensembles, offset by lower average pricing
reflecting increased sales to the mass market channels of distribution. The
decrease in sales of apparel fabrics resulted from the absence of certain
commission dyeing and yarn sales that were included in the third quarter of
1997.
Gross profit for the third quarter of 1998 of $27.8 million or 23.5% of sales
was slightly below gross profit of $28.2 million or 24.3% of sales recorded
for the third quarter of 1997. Gross profits on sales of home fashions
products were virtually unchanged. Increased volume and lower raw material
prices were offset by a less profitable mix and higher manufacturing costs as
a result of increased usage of outside suppliers. Gross profits on sales of
apparel fabrics were slightly lower reflecting lower volumes offset somewhat
by lower raw material costs.
Selling, general and administrative expenses for the third quarter of 1998
were $14.3 million (12.1% of sales), relatively flat when compared to $14.1
million (12.1% of sales) for the third quarter of 1997.
Due to the factors described above, quarterly operating income was $13.5
million or 11.4% of sales for the third quarter of 1998. This compares with
$14.1 million or 12.1% of sales for the third quarter of 1997.
<PAGE>
<PAGE> 11
Interest expense for the third quarter of 1998 was $4.0 million, a decrease
of $1.5 million from the third quarter of 1997. The decrease in interest
expense was due to lower debt levels as a result of the Company's initial
public offering of common stock in November 1997, from which it used the
proceeds of $64.5 million to reduce debt.
An income tax provision of $3.7 million was recorded in the third quarter of
1998 (38.5% of pre-tax income) compared to an income tax provision of $3.1
million (38.5% of pre-tax income) recorded in the third quarter of 1997.
Accordingly, net income was $5.8 million or $0.31 per basic share on
18,825,000 shares outstanding for the third quarter of 1998 compared to $5.0
million or $0.35 per basic share on 14,155,000 shares outstanding for the
third quarter of 1997.
Net sales for the first nine months of 1998 were $358.1 million up $13.9
million or 4.0% from the corresponding period of 1997. Sales of home
fashions products were up $28.1 million or 15.4%, while sales of apparel
fabrics were down $14.2 million or 8.8% during the applicable period.
The increase in sales of home fashions products was primarily due to higher
unit volumes of bed ensembles. The decrease in sales of apparel fabrics
resulted from lower unit volumes across all major product categories caused
by lower demand and the absence of certain commission dyeing and yarn sales
that were included in the first nine months of 1997.
Gross profit for the first nine months of 1998 was $81.0 million (22.6% of
sales) up $5.6 million or 7.4% from the first nine months of 1997, during
which gross margins were 21.9% of sales. The increase in gross profit was
due to higher volumes in home fashions and lower raw material costs offset by
a less profitable mix and increased costs as a result of using more outside
suppliers to support the sales increase. There were lower volumes in apparel
fabrics offset by a better sales mix, lower raw material costs, and lower
manufacturing costs as a result of the integration of The New Cherokee
Corporation and the closure of the Riverside weaving plant.
During the first nine months of 1998 the Company recognized a gain of
$400,000 on the early termination of a lease. This is reflected under "Other
Operating Costs, Net." This compares to a charge of $7.9 million incurred
during the comparable period in 1997 as a result of the Company's decision to
close the Riverside apparel fabrics weaving operation.
Selling, general and administrative expenses for the first nine months of
1998 were $2.3 million (5.8%) higher than the corresponding period of 1997.
The increase was caused primarily by increased spending for management
information systems, higher spending to support the Company's Nautica line of
home fashions products and increased color matching activity to support the
fashion trends in the business. For the first nine months of 1998, these
expenses represented 11.6% of sales compared to 11.4% of sales for the
comparable period in 1997.
For the reasons described above, operating income for the first nine months
of 1998 was $39.9 million, up $11.5 million or 40.7% from the first nine
months of 1997. Excluding one-time gains and charges, operating income was
$39.5 million for the first nine months of 1998, up $3.3 million or 9.0% from
the $36.2 million recorded for the first nine months of 1997. <PAGE>
<PAGE> 12
Interest expense for the first nine months of 1998 was $11.7 million, a
decrease of $4.5 million from the first nine months of 1997. The decrease in
interest expense was due to lower debt levels as a result of the Company's
initial public offering of common stock in November 1997, from which it used
the proceeds of $64.5 million to reduce debt.
An income tax provision of $10.9 million was recorded for the first nine
months of 1998 (38.1% of pre-tax income) compared to an income tax provision
of $4.6 million (38.5% of pre-tax income) recorded for the first nine months
of 1997.
Accordingly, net income was $17.7 million or $0.94 per basic share on
18,832,000 shares outstanding for the first nine months of 1998 compared to
$7.3 million or $0.52 per basic share on 14,155,000 shares outstanding for
the first nine months of 1997.
Plant Closure
On October 28, 1998, the Board of Directors approved the closure of the
Company's apparel fabrics weaving plant located in Spindale, North Carolina.
The plant closure is expected to result in a pre-tax charge of approximately
$8.5 million in the fourth quarter of 1998, primarily for the writedown of
fixed assets.
LIQUIDITY AND CAPITAL RESOURCES
General
The Company believes that internally generated cash flow, supplemented by
borrowings under its working capital line of credit, will be sufficient to
meet its foreseeable debt service requirements, capital expenditures, and
working capital needs. The Company had a debt to total capital ratio of
46.3% at October 3, 1998.
On October 14, 1998 the Company acquired The Bibb Company in a transaction
where Bibb shareholders received cash and Dan River stock and the Bibb
indebtedness was assumed by the Company. As a result, the Company issued 4.3
million shares of Dan River Class A common stock, paid Bibb shareholders $83
million and assumed $95 million in debt. The transaction also required the
refinancing of $37 million of borrowings outstanding under the Company's $90
million working capital line of credit. Of the $95 million in Bibb debt
assumed and outstanding on the date of the acquisition $78 million was repaid
on that date. To finance the acquisition, including fees and expenses, the
Company entered into a five year credit agreement with a new syndicate of
banks providing for total borrowings up to $275 million pursuant to a $125
million amortizing term loan and a $150 million revolving line of credit (New
Credit Agreement). The New Credit Agreement is secured by the Company's
accounts receivable and inventories. As of October 22, 1998 $209 million was
outstanding under the New Credit Agreement and $66 million was available for
borrowings.
Credit Facilities
As of October 3,1998 the Company had a $90 million secured working capital
line of credit (Old Credit Line). The Old Credit Line was tied to a borrowing
<PAGE>
<PAGE> 13
base formula and was secured by the Company's accounts receivable and
inventories. As of October 3, 1998, $35.0 million was used and $54.9 million
was unused and available for borrowing. The borrowings were repaid and the
Old Credit Line was terminated upon establishing the New Credit Agreement
with a $150 million credit line (New Credit Line) and a $125 million term
loan (Term Loan) in conjunction with the Bibb acquisition on October 14,
1998.
Borrowings under the New Credit Agreement bears interest at the Base Rate
plus 0.125%, as defined (8.13% as of October 23, 1998) or LIBOR plus 1.375%
(6.58% as of October 23, 1998), for periods one, two, three or six months, at
the Company's option. Each quarter the interest rates are reset subject to a
schedule where the interest rate is determined depending on the Company's
financial performance as measured by a debt-to-cash flow leverage ratio. The
New Credit Line is nonamortizing and any amounts outstanding are due at the
final maturity of the New Credit Agreement, September 30, 2003. The $125
million New Term Loan amortizes with required quarterly principal payments
beginning March 31, 2000 with $20 million, $33 million, $40 million and $32
million due in 2000, 2001, 2002 and 2003, respectively. The New Term Loan
terminates on September 30, 2003.
The New Credit Agreement is provided pursuant to a Credit Agreement and a
Security Agreement which contain certain covenants including requirements for
the maintenance of a certain minimum cash flow-to-interest coverage ratio and
a maximum debt-to-cash flow ratio.
Working Capital
Net cash generated from operating activities was $11.3 million in the nine
months ended October 3, 1998. Included in that amount is a use of cash for
operating assets and liabilities of $35.0 million, comprised of a $33.3
million use for operating working capital (accounts receivable - $4.9 million
source, inventories - $35.1 million use, and accounts payable accrued
expenses - $3.1 million use) and a $1.7 million use of cash for prepaid
expenses and other assets and other liabilities.
During the comparable period net cash generated from operating activities was
$27.3 million in the nine months ended September 27, 1997. Included in that
amount is a use of cash for operating assets and liabilities of $8.2 million,
comprised of a $10.1 million use for operating working capital (accounts
receivable - $1.6 million source, inventories - $16.4 million use, and
accounts payable and accrued expenses - $4.7 million source) and a $1.9
million source for prepaid expenses and other assets and other liabilities.
Capital Improvements
During the first nine months of 1998, the Company purchased $29.8 million in
equipment and manufacturing improvements. The Company expects to continue
modernizing and making capital improvements over the next several years,
which are anticipated to be financed through cash generated by operations and
borrowings under the New Credit Line.
<PAGE>
<PAGE> 14
Impact of Year 2000
The Company presently expects to spend approximately $12.2 million during
1998 and 1999 to modify its computer information systems to ensure the proper
processing of transactions relating to Year 2000 and beyond. Included in
this amount are expenditures to implement certain new or improved systems
which not only achieve Year 2000 compliance, but significantly improve and
expand operational capabilities of certain of the Company's computer systems.
Specifically, the Company has successfully installed improved financial and
material management systems which are Year 2000 compliant and are
operational. It is installing a new Enterprise Resource Planning (ERP)
System for its home fashions operations and modifying the existing ERP System
for the apparel fabrics operations to ensure Year 2000 compliance. The
modification of the apparel fabrics ERP System is expected to be completed by
the end of 1998. The Dan River home fashions ERP System is expected to be
completed by the second quarter of 1999. Also, as a result of the acquisi-
tion of The Bibb Company, its systems will need to be converted to Dan
River's systems. The corporate systems of Bibb, i.e., financial, human
resources, etc. are expected to be converted by the end of the first quarter
of 1999 and the ERP systems for the home fashions and engineered products
businesses are expected to be converted by the end of the third quarter of
1999.
Additionally, the Company is communicating with its suppliers, vendors,
including machinery manufacturers, and customers to determine the status of
their Year 2000 initiatives.
Based on analyses of its own systems and discussions with and surveys of its
key vendors and customers, management currently believes that Company
information systems affected by Year 2000 issues have been or will be timely
identified and that its implementation plans will render all material systems
Year 2000 compliant on a timely basis; however, should other entities upon
whose systems the Company relies fail to properly address Year 2000
compliance issues, or should key resources required to achieve the
initiatives described herein become unavailable or prove to be unreliable,
the Company's effectiveness in achieving Year 2000 compliance could be
delayed, which could have a material adverse effect on the Company's results
of operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
<PAGE>
<PAGE> 15
PART II - OTHER INFORMATION
<PAGE>
<PAGE> 16
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
(The exhibits to this Form 10-Q are listed in the accompanying
index to Exhibits.)
(b) Reports on Form 8-K:
(1) On July 7, 1998 registrant filed a Current Report on Form 8-K,
dated June 28, 1998, reporting its execution of a definitive
Merger Agreement, in which the registrant agreed to acquire
all of the capital stock of Bibb.
(2) On July 20, 1998 the registrant filed a Current Report on Form
8-K, dated July 20, 1998, providing certain information which
should be considered by investors in conjunction with
"forward-looking statements" made by the registrant.
(3) On September 28, 1998 the registrant filed a Current Report on
Form 8-K, dated September 21, 1998, reporting that the
registrant and Bibb amended the terms of their Merger
Agreement to provide, among other things, that the acquisition
of Bibb would no longer qualify as a tax free reorganization.
The registrant also reported the adjournment of its scheduled
shareholders' meeting until the week of October 11, 1998.
<PAGE>
<PAGE>17
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.
DAN RIVER INC.
<TABLE>
<S> <C>
Date: November 10, 1998 /s/ Barry F. Shea
-----------------------------------
Barry F. Shea
Executive Vice President and Chief
Financial Officer (Authorized Signing
Officer and Principal Financial Officer)
</TABLE>
<PAGE>
<PAGE> 18
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page
No.
- ----------- ---------------------- -------
<S> <C> <C>
2.1 Agreement and Plan of Merger, dated as of
June 28, 1998, as amended August 14, 1998,
by and between Dan River Inc. and The Bibb
Company (incorporated by reference to
Exhibit 2.1 in Amendment No. 1 to Registration
Statement on Form S-4 (File No. 333-58855)).
2.2 Second Amendment to Agreement and Plan of
Merger, dated as of September 23, 1998, among
Dan River Inc., DRI Acquisition Corp. and The
Bibb Company (incorporated by reference to
Exhibit 2.2 in Post-Effective Amendment No. 1
to Registration Statement on Form S-4 (File No.
333-58855)).
3.1 Amended and Restated Articles of Incorporation
of Dan River Inc. (incorporated by reference
to Exhibit 3.1 in Amendment No. 1 to
Registration Statement on Form S-1 (File
No. 333-36479)).
3.2 Bylaws of Dan River Inc. (incorporated by
reference to Exhibit 3.2 in Amendment No. 1
to Registration Statement on Form S-1 (File
No. 333-36479)).
11.1 Statement regarding computation of earnings
per share. (See financial statements and
schedules and notes thereto included in this
Quarterly Report on Form 10-Q.)
27 Financial Data Schedule, which is submitted
electronically to the Securities and Exchange
Commission for information only and not filed.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET OF DAN RIVER INC. AS OF OCTOBER 3, 1998
AND THE RELATED CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE NINE
MONTHS ENDED OCTOBER 3, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> OCT-03-1998
<CASH> 1,269
<SECURITIES> 0
<RECEIVABLES> 65,724
<ALLOWANCES> 0
<INVENTORY> 127,467
<CURRENT-ASSETS> 205,588
<PP&E> 350,828
<DEPRECIATION> 135,690
<TOTAL-ASSETS> 428,669
<CURRENT-LIABILITIES> 50,391
<BONDS> 159,394
0
0
<COMMON> 189
<OTHER-SE> 183,467
<TOTAL-LIABILITY-AND-EQUITY> 428,669
<SALES> 358,128
<TOTAL-REVENUES> 358,128
<CGS> 277,124
<TOTAL-COSTS> 277,124
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,703
<INCOME-PRETAX> 28,622
<INCOME-TAX> 10,916
<INCOME-CONTINUING> 17,706
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,706
<EPS-PRIMARY> 0.94
<EPS-DILUTED> 0.93
</TABLE>
