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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_________________________
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 20, 1998
DAN RIVER INC.
(Exact name of registrant as specified in its charter)
Commission file number 1-13421
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
There are 7 pages in the sequentially numbered, manually signed original of
this report.
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Item 5. Other Events.
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Dan River Inc. ("Dan River" or the "Company"), or its executive
officers and directors on behalf of the Company, may from time to time make
"forward looking statements" within the meaning of the Securities Act of
1933 and the Securities Exchange Act of 1934 (collectively, the "Acts").
The Company is filing this Current Report on Form 8-K to avail itself of
the safe harbor provided in the Acts with respect to any such (i) forward
looking statements that may be contained in the Company's reports and other
documents filed with the Securities and Exchange Commission under Sections
13 or 15(d) of the Securities Exchange Act of 1934 and (ii) oral forward
looking statements made by the Company's executive officers and directors
on behalf of the Company to the press, potential investors, securities
analysts and others. Such forward looking statements could involve, among
other things, statements regarding the Company's intent, belief or
expectation with respect to (a) the Company's results of operations and
financial condition, (b) the consummation of acquisitions and financing
transactions and the effect thereof on the Company's business, and (c) the
Company's plans and objectives for future operations and expansion. Any
such forward looking statements would be subject to risks and uncertainties
that could cause actual results of operations, financial condition,
acquisitions, financing transactions, operations, expansion and other
events to differ materially from those expressed or implied in such forward
looking statements. Any such forward looking statements would be subject
to a number of assumptions regarding, among other things, future economic,
competitive and market conditions generally. Such assumptions would be
based on facts and conditions as they exist at the time such statements are
made as well as predictions as to future facts and conditions, the accurate
prediction of which may be difficult and involve the assessment of events
beyond the Company's control. Further, the Company's business is subject
to a number of risks that would affect any such forward looking statement
such risks include, among others, the following:
Cyclical Nature of Textile Industry; Seasonality. Domestic
demand for textile products tends to vary with the business cycle of
the U.S. economy. In addition, the popularity, supply and demand for
particular textile products may change significantly from year to year
based upon prevailing fashion trends and other factors. These factors
historically have contributed to fluctuations in the sales and
profitability of certain textile products and in Dan River's results
of operations. A decline in the demand for textile products, an
increase in the supply of textile products due to expansion of
capacity within the textile industry, changes in fashion trends or
deteriorating economic conditions could have a material adverse effect
on the Company's results of operations and financial condition.
Demand for the Company's products and the level of the Company's
sales fluctuate moderately during the year, based upon historical
buying trends. Generally, there is increased retail demand for home
fashions products during the fall (back to school) and Christmas
holiday seasons and for apparel fabrics during the same seasons as
well as for Father's Day. As a result, the Company sells more of its
home fashions products during its third and fourth fiscal quarters
when demand for home fashions products is generally higher, and the
Company sells more apparel fabrics during the first and second
quarters when demand for apparel fabrics is greatest.<PAGE>
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Intense Competition. The textile industry is highly competitive.
Dan River sells its products primarily to domestic customers and
competes with large, vertically integrated textile manufacturers as
well as numerous smaller companies specializing in limited segments of
the market. Competitors are both domestic and foreign, and include a
number of companies that are larger in size and have greater financial
resources than the Company. Increases in domestic capacity and
imports of foreign-made textile and apparel products are a significant
source of competition for many domestic textile manufacturers,
including Dan River. Competition in the form of imported textile and
apparel products, pricing strategies of domestic competitors and the
proliferation of newly styled fabrics competing for fashion acceptance
have been factors affecting the Company's business environment. The
primary competitive factors in the textile industry are price, product
styling and differentiation, quality, manufacturing flexibility,
delivery time and customer service. The importance of these factors
is determined by the needs of particular customers and the
characteristics of particular products. To the extent that one or
more of the Company's competitors gains an advantage with respect to
any key competitive factor, Dan River's business could be materially
adversely affected. In addition, import protections afforded to
foreign textile manufacturers could make the Company's products less
competitive and have a material adverse effect on the Company's
results of operations and financial condition.
Possible Adverse Effect of Fluctuations in Price and Availability
of Cotton. The primary raw material used by the Company is cotton.
Prior to 1991, from time to time, domestic cotton prices exceeded
world prices, which created a competitive disadvantage for the Company
and other domestic textile manufacturers, which are required by law to
purchase substantially all of their cotton from domestic sources. The
U.S. government has taken legislative action to improve the price
imbalance, but there can be no assurance that this will continue to be
the case. To the extent that U.S. cotton prices exceed world cotton
prices, the Company's competitiveness may be materially adversely
affected. U.S. Cotton prices are also affected by general economic
conditions as well as the demand for U.S. cotton in world markets and
may increase or decrease depending on other market variables at the
time. Prevailing cotton prices significantly impact the Company's
results of operations, and price increases could have a material
adverse effect on the Company's results of operations and financial
condition. In connection with its purchase of cotton, Dan River
generally covers open order requirements, which average approximately
three months of production, through direct purchases and hedging
transactions, and the Company may shorten or lengthen that period in
accordance with its perception of the direction of cotton prices.
There can be no assurance that such transactions will not result in
higher costs to the Company or will protect the Company from
fluctuations in cotton prices. Further, since cotton is an
agricultural product, its supply and quality are subject to forces of
nature. Any material shortage or interruption in the supply,
variations in the quality of cotton by reason of weather, infestations
or any other factor that would result in an increase in the cost of
cotton could have a material adverse effect on the Company's results
of operations and financial condition.
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Substantial Capital Requirements. The textile manufacturing
industry is capital intensive. In order to maintain their competitive
position, textile manufacturers, including Dan River, must continually
modernize their manufacturing processes, plants and equipment, which
can involve substantial capital investments. Dan River generally
finances its capital improvements with cash from operations, vendor
financing and borrowings under its credit facilities. To the extent
these sources of funds are insufficient to meet the Company's ongoing
capital improvements requirements, the Company may be required to seek
alternative sources of financing or curtail or delay capital spending
plans. There can be no assurance that such financing will be
available when needed or, if available, that it will be on terms
acceptable to the Company. Failure to make capital improvements
necessary to continue modernizing the Company's manufacturing
operations and reduce costs could adversely affect the Company's
competitive position and have a material adverse effect on the
Company's results of operations and financial condition.
Possible Adverse Effect of Government Policy and Import
Regulations. The domestic textile market is subject to various U.S.
governmental policies affecting raw material costs and product supply.
In addition, the policies of foreign governments may, directly or
indirectly, affect the domestic market. Because U.S. textile
companies are generally prohibited from importing cotton, Dan River
must purchase substantially all of its cotton in the domestic market.
Prior to 1991, from time to time, price imbalances between world and
domestic cotton prices existed. A series of U.S. legislative
initiatives has resulted in the reduction of the Company's effective
cotton costs to near world levels. Because the availability and cost
of cotton are affected by U.S. agricultural policies, Dan River may
experience increased cotton costs that cannot be entirely passed on to
its customers.
The extent of import protection afforded by the U.S. government
to domestic textile producers has been, and is likely to remain,
subject to considerable domestic political deliberation. In view of
the labor cost advantages and the number of foreign producers of
textile products that compete with certain of the Company's products,
substantial elimination of import protection for domestic textile
manufacturers could have a material adverse effect on the Company's
business. In January 1995, a multilateral trade organization, the
World Trade Organization ("WTO"), was established to replace the
General Agreement on Tariffs and Trade. This new body has set forth
the mechanisms by which world trade in textiles and clothing will be
progressively liberalized with the elimination of quotas and the
reduction of duties. The implementation began in January 1995 with
the phasing-out of quotas and the reduction of duties to take place
over a 10-year period. The selection of products at each phase is
made by each importing country and must be drawn from each of the four
main textile groups: tops and yarns, fabrics, made-up textile products
and apparel. The elimination of quotas and the reduction of tariffs
under the WTO may result in increased imports of certain textile
products and apparel into North America. These factors could make the
Company's products less competitive against low cost imports from
developing countries.
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The North American Free Trade Agreement ("NAFTA"), which was
entered into by Canada, Mexico and the United States and became
effective on January 1, 1994, has created the world's largest
free-trade zone. The agreement contains safeguards that were sought
by the U.S. textile industry, including a rule of origin requirement
that products be processed in one of the three countries in order to
benefit from NAFTA. NAFTA will phase out all trade restrictions and
tariffs on textiles and apparel among the three countries. There can
be no assurance that the removal of these barriers to trade will not
have a material adverse effect on the Company's results of operations
and financial condition.
Acquisition Risks. The Company has pursued and may continue to
pursue acquisition opportunities that enhance its business. There can
be no assurance that the Company will be able successfully to identify
suitable acquisition candidates, complete acquisitions, integrate
acquired operations into its existing operations or expand into new
markets. There can also be no assurance that future acquisitions will
not have an adverse effect upon the Company's operating results,
particularly in the fiscal quarters immediately following the
completion of such acquisitions while the operations of the acquired
business are being integrated into the Company's operations. Once
integrated, acquired operations may not achieve levels of revenues,
profitability or productivity comparable with those achieved by the
Company's existing operations, or otherwise perform as expected. In
addition, the Company competes for acquisition and expansion
opportunities with companies that have substantially greater
resources.
Impact of Restrictive Covenants on Ability to Obtain Additional
Financing. The Company's working capital facility and the indenture
dated December 15, 1993 governing the Company's 10 1/8% Senior
Subordinated Notes contain restrictions on the ability of the Company
to, among other things (i) incur additional indebtedness, (ii) place
liens on assets, (iii) sell assets, (iv) engage in mergers or
consolidations, (v) pay dividends, (vi) engage in certain transactions
with affiliates and (vii) enter into sale and leaseback transactions.
The working capital facility also requires, among other things, that
the Company maintain compliance with a certain cash interest coverage
ratio and maintain a minimum net worth. These limitations and
requirements may restrict the ability of Dan River to obtain
additional financing for working capital, capital improvements,
acquisitions or general corporate purposes.
Potential Unforeseen Environmental Liabilities or Costs. Dan
River is subject to various federal, state and local environmental
laws and regulations limiting the discharge of pollutants and the
storage, handling and disposal of a variety of substances, including
some substances which contain constituents considered hazardous under
environmental laws. The Company's dyeing and finishing operations
result in the discharge of substantial quantities of wastewater and
emissions to the atmosphere. The Company's operations also are
governed by laws and regulations relating to workplace safety and
worker health which, among other things, establish cotton dust,
formaldehyde, asbestos and noise standards, and regulate the use of
hazardous chemicals in the workplace. Treatment costs of air <PAGE>
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emissions and wastewater discharges, as well as other costs of
environmental compliance, have increased moderately over the past
several years. There can be no assurance that compliance with
environmental or health and safety laws and regulations will not
materially adversely affect the Company's operations in the future.
In addition, Dan River cannot predict what environmental or health and
safety legislation or regulations will be enacted in the future or how
existing or future laws or regulations will be enforced, administered
or interpreted, nor can it predict the amount of future expenditures
which may be required in order to comply with any such environmental
or health and safety laws or regulations.
Customer Concentration. Each of the home fashions division and
the apparel fabrics division has certain key customers, the loss of
which could have a material adverse effect on the Company's net sales
attributable to such division.
Reliance on Key Management. The success of the Company is
dependent upon the talents and efforts of a small number of key
management personnel, including Joseph L. Lanier, Jr., the Company's
Chairman and Chief Executive Officer, Richard L. Williams, the
Company's President and Chief Operating Officer, and Barry F. Shea,
the Company's Vice President--Chief Financial Officer. The loss of
such management personnel could have an adverse effect on the business
of the Company.
In light of the significant uncertainties inherent in any forward
looking statements, undue reliance should not be placed on any such
statements.
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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 hereunto duly authorized.
DAN RIVER INC. (Registrant)
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Date: July 20, 1998 /s/ Harry L. Goodrich
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Harry L. Goodrich
Vice President
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