<PAGE> 1
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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 July 4, 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 July 4, 1998:
Class A: 16,765,826 Shares
Class B: 2,062,070 Shares
Exhibit Index is on page 18.
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<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>
July 4, January 3,
1998 1998
----------- -----------
<S> <C> <C>
(in thousands, except share
and per share data)
ASSETS
Current assets:
Cash and cash equivalents $ 2,097 $ 1,759
Accounts receivable, net 60,814 70,676
Inventories 107,648 92,376
Prepaid expenses and other current assets 3,840 5,112
Deferred income taxes 7,518 7,628
----------- -----------
Total current assets 181,917 177,551
Property, plant and equipment 342,451 321,994
Less accumulated depreciation and amortization (128,520) (113,866)
----------- -----------
Net property, plant and equipment 213,931 208,128
Other assets 7,195 6,616
----------- -----------
$ 403,043 $ 392,295
=========== ===========
/TABLE
<PAGE>
<PAGE> 4
DAN RIVER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 4, 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 $ 199 $ 301
Accounts payable 23,430 27,933
Accrued compensation and related benefits 10,790 16,661
Other accrued expenses 7,666 9,052
------------ ------------
Total current liabilities 42,085 53,947
Other liabilities:
Long-term debt 151,557 143,455
Deferred income taxes 21,784 20,182
Other liabilities 9,854 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 16,765,826 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 139,417 139,140
Retained earnings 38,157 26,501
------------ ------------
Total shareholders' equity 177,763 165,830
------------ ------------
$ 403,043 $ 392,295
============ ============
</TABLE>
See accompanying notes.<PAGE>
<PAGE> 5
DAN RIVER INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------- ----------------------
July 4, June 28, July 4, June 28,
1998 1997 1998 1997
--------- -------- -------- --------
<S> <C> <C> <C> <C>
(in thousands, except per share data)
Net sales $ 118,596 $ 122,199 $ 239,539 $ 227,935
Costs and expenses:
Cost of sales 91,459 95,133 186,356 180,720
Selling, general
and administrative
expenses 13,285 13,237 27,187 25,098
Other operating
costs, net (400) 7,875 (400) 7,875
--------- --------- --------- ---------
Operating income 14,252 5,954 26,396 14,242
Other income 138 83 417 123
Interest expense (3,852) (5,514) (7,671) (10,599)
--------- --------- --------- ---------
Income before
income taxes 10,538 523 19,142 3,766
Provision for
income taxes 4,060 202 7,262 1,452
--------- --------- --------- ---------
Net income $ 6,478 $ 321 $ 11,880 $ 2,314
========= ========= ========= =========
Earnings per share:
Basic $ 0.34 $ 0.02 $ 0.63 $ 0.16
========= ========= ========= =========
Diluted $ 0.34 $ 0.02 $ 0.62 $ 0.16
========= ========= ========= =========
</TABLE>
See accompanying notes<PAGE>
<PAGE>6
DAN RIVER INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
---------------------------
July 4, June 28,
1998 1997
------------ ------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 11,880 $ 2,314
Adjustments to reconcile net income to net
cash provided by operating activities:
Noncash interest expense 417 621
Depreciation and amortization 15,048 14,042
Deferred income taxes 1,712 (2,248)
Writedown/disposal of assets (351) 46
Writedown-plant closure -- 7,875
Changes in operating assets and liabilities,
net of business acquired:
Accounts receivable 9,842 2,323
Inventories (15,271) (11,143)
Prepaid expenses and other assets (1,461) (980)
Accounts payable and accrued expenses (11,337) 3,806
Other liabilities 973 1,079
---------- -----------
Net cash provided by operating
activities 11,452 17,735
Cash flows from investing activities:
Capital expenditures (21,254) (8,482)
Proceeds from sale of assets 2,140 1,722
Acquisition of business -- (66,330)
---------- -----------
Net cash used by investing activities (19,114) (73,090)
Cash flows from financing activities:
Payments of long-term debt (500) (5,473)
Net borrowings - working capital facility 8,500 (1,900)
Proceeds from issuance of long-term debt -- 60,783
Payments of debt issuance costs -- (1,274)
---------- -----------
Net cash provided by financing
activities 8,000 52,136
---------- -----------
Net increase (decrease) in cash and cash equivalents 338 (3,219)
Cash and cash equivalents at beginning of period 1,759 5,042
---------- -----------
Cash and cash equivalents at end of period $ 2,097 $ 1,823
========== ===========
</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>
July 4, January 3,
1998 1998
------------ ------------
(in thousands)
<S> <C> <C>
Finished goods $ 31,931 $ 25,401
Work in process 63,834 56,156
Raw materials 2,767 2,429
Supplies 9,116 8,390
-------- --------
Total Inventories $107,648 $ 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 -- -- -- 11,880 11,880
Tax effect of stock
options exercised -- -- 277 -- 277
Retirement of
Common Stock -- -- -- (224) (224)
------ ------ -------- ------- --------
Balance at July
4, 1998 $ 168 $ 21 $139,417 $38,157 $177,763
======= ====== ======== ======= ========
/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 Six Months Ended
----------------------- ----------------------
July 4, June 28, July 4, June 28,
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 $ 6,478 $ 321 $ 11,880 $ 2,314
========= ========= ========= =========
Denominator:
Denominator for
basic earnings
per share--
weighted-average
shares 18,833 14,155 18,835 14,155
Effect of dilutive
securities:
Employee stock
options 303 114 269 94
--------- --------- --------- ---------
Denominator for
diluted earnings
per share--weighted
average shares
adjusted for
dilutive securities 19,136 14,269 19,104 14,249
========= ========= ========= =========
Earnings per share:
Basic $ 0.34 $ 0.02 $ 0.63 $ 0.16
========= ========= ========= =========
Diluted $ 0.34 $ 0.02 $ 0.62 $ 0.16
========= ========= ========= =========
</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 six months ended
July 4, 1998 and June 28, 1997. In addition, accumulated other
comprehensive income was $-0- at July 4, 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 or what impact, if any, SFAS 133 will
have on its earnings or financial position.
6. Acquisition
On June 28, 1998, the Company entered into a merger agreement with The
Bibb Company ("Bibb") under which the Company will acquire Bibb for a
combination of cash and Dan River Inc. common stock in a tax-free
transaction valued in excess of $250 million, including assumed debt.
Under the terms of the agreement, each Bibb stockholder will be entitled
to elect whether to receive $16.50 in cash, .84615 shares of Dan River
Class A common stock, or a combination thereof, for each Bibb share they
hold, subject to proration. The Company expects to finance the merger
under a secured bank credit agreement. Consummation of the merger is
subject to various conditions, including approval by the shareholders of
the Company and Bibb. The transaction will be accounted for as a
purchase.
Bibb is a manufacturer and marketer of: consumer products for the home,
principally sheets, bedding and bath accessories; textile products for
the hospitality and healthcare industries; and specialty engineered
textile products used in making high-pressure hoses and other industrial
products.<PAGE>
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
General
Net sales for the second quarter of 1998 were $118.6 million, a decrease of
$3.6 million or 2.9%, compared to the second quarter of 1997. Sales of home
fashions products increased $9.4 million or 15.5%, while sales of apparel
fabrics were down $13.0 million or 21.1%.
The increase in sales of home fashions products resulted from higher unit
volumes of bed ensembles. The decrease in sales of apparel fabrics resulted
from lower unit volumes across all major products categories offset somewhat
by higher average pricing reflecting a better mix of products. The unit
volume reduction in apparel fabrics was caused by lower demand, the loss of
one shipping week in this year's second quarter compared with last year's
second quarter because of the timing of the July 4th vacation shutdown, and
the absence of certain commission dyeing and yarn sales that were included in
the second quarter of 1997.
Gross profit for the second quarter of 1998 of $27.1 million or 22.9% of
sales was even with gross profit for the second quarter of 1997, during which
gross profit represented 22.1% of sales. While overall gross profit was
flat, higher volumes and lower raw material costs in home fashions were
offset by a less profitable mix and increased costs as a result of using more
outside suppliers to support the sales increase. This contrasts with apparel
fabrics where there were lower volumes 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.
In the second quarter of this year, 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 in
the second quarter of 1997 as a result of the Company's decision to close the
Riverside apparel fabrics weaving operation.
Selling, general and administrative expenses for the second quarter of 1998
were $13.3 million (11.2% of sales), relatively flat when compared to $13.2
million (10.8% of sales) for the second quarter of 1997.
Due to the factors described above, operating income was $14.3 million or
12.0% of sales for the second quarter of 1998. This compares with $6.0
million or 4.9% for the second quarter of 1997. Excluding one-time gains and
charges, operating income was $13.9 million for the second quarter of 1998,
slightly higher than the $13.8 million recorded in the second quarter of
1997.
Interest expense for the second quarter of 1998 was $3.9 million, a decrease
of $1.7 million from the second 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.
<PAGE>
<PAGE> 11
An income tax provision of $4.1 million was recorded in the second quarter of
1998 (38.5% of pre-tax income) compared to an income tax provision of $0.2
million (38.6% of pre-tax income) recorded in the second quarter of 1997.
Accordingly, net income was $6.5 million or $0.34 per basic share on
18,833,000 shares outstanding for the second quarter of 1998 compared to
$321,000 or $0.02 per basic share on 14,155,000 shares outstanding for the
second quarter of 1997.
Net sales for the first six months of 1998 were $239.5 million, which was
$11.6 million (5.1%) higher than the corresponding period in 1997. Sales of
home fashions products were up $23.2 million or 19.9%, while sales of apparel
fabrics were down $11.6 million or 10.4% during the applicable period.
The increase in sales of home fashions products was 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 except shirting
fabrics, sales of which were flat when compared to the comparable period in
1997. This was offset somewhat by higher average pricing reflecting a better
mix of products. The unit volume reduction in apparel fabrics was caused by
lower demand, the loss of one shipping week in this year's second quarter
compared with last year second quarter because of the timing of the July 4th
vacation shutdown, and the absence of certain commission dyeing and yarn
sales that were included in the first half of 1997.
Gross profit for the first six months of 1998 was $53.2 million (22.2% of
sales) up $6.0 million or 12.6% from the first six months of 1997, during
which gross margins were 20.7% 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.
The Company recorded a one-time gain in the first half of this year as
compared to a one-time charge in the first half of 1997. These gains and
charges are more fully described above in the discussion of the results for
the three months ended July 4, 1998.
Selling, general and administrative expenses for the first six months of 1998
were $2.1 million (8.3%) 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 in apparel
fabrics to support new fabric introductions. For the first six months of
1998, these expenses represented 11.3% of sales compared to 11.0% of sales
for the comparable period in 1997.
For the reasons described above, operating income was $26.4 million, up $12.2
million or 85.3% from the first six months of 1997. Excluding one-time gains
and charges, operating income was $26.0 million for the first six months of
1998, up $3.9 million or 17.5% from the $22.1 million recorded for the first
six months of 1997.
<PAGE>
<PAGE> 12
Interest expense for the first six months of 1998 was $7.7 million, a
decrease of $2.9 million from the first six 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 $7.3 million was recorded for the first six months
of 1998 (37.9% of pre-tax income) compared to an income tax provision of $1.5
million (38.6% of pre-tax income) recorded for the first six months of 1997.
Accordingly, net income was $11.9 million or $0.63 per basic share on
18,835,000 shares outstanding for the first six months of 1998 compared to
$2.3 million or $0.16 per basic share on 14,155,000 shares outstanding for
the first six months of 1997.
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
46.1% at July 4, 1998.
Credit Facilities and Vendor Financing
The Company maintains a $90 million secured working capital line of credit.
The working capital line of credit is tied to a borrowing base formula and is
secured by the Company's accounts receivable and inventories. As of July 4,
1998, $27.0 million was used and $56.3 million was unused and available for
borrowing.
The working capital line of credit bears interest at the Base Rate, as
defined (8.50% as of August 13, 1998) or LIBOR plus .75% (6.39% as of August
13, 1998), for periods of one, three or six months, at the Company's option.
The working capital line is nonamortizing and any amounts outstanding are due
at the final maturity of February 28, 2001.
The working capital line of credit is provided pursuant to a Loan and
Security Agreement which contains certain covenants including requirements
for the maintenance of a certain cash interest coverage ratio and a minimum
net worth.
Working Capital
Net cash generated from operating activities was $11.5 million in the six
months ended July 4, 1998. Included in that amount is a use of cash for
operating assets and liabilities of $17.3 million, primarily comprised of a
$16.8 million use for operating working capital (accounts receivable - $9.8
million source, inventories - $15.3 million use, and accounts payable and
accrued expenses - $11.3 million use) and a $0.5 million use of cash for
prepaid expenses and other assets and other liabilities.
<PAGE>
<PAGE> 13
During the comparable six month period ended June 28, 1997, net cash
generated from operating activities was $17.7 million. Included in that
amount is a use of cash for operating assets and liabilities of $4.9 million,
primarily comprised of a $5.0 million use for operating working capital
(accounts receivable - $2.3 million source, inventories - $11.1 million use,
and accounts payable and accrued expenses - $3.8 million source).
Capital Improvements
During the first six months of 1998, the Company purchased $21.3 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 working capital line of credit.
Impact of Year 2000
The Company presently expects to spend approximately $8.4 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 is installing improved financial systems which are
Year 2000 compliant and are expected to be operational in the fourth quarter
of 1998. 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 installa-
tion and modification of these ERP Systems are expected to be completed by
the end of the first quarter of 1999. Additionally, the Company is communi-
cating 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.
Acquisition of The Bibb Company
The Company entered into a definitive merger agreement dated as of June 28,
1998, whereby the Company agreed to acquire all of the capital stock of The
Bibb Company ("Bibb") for a combination of cash and Dan River stock. In
connection with the Merger, the Company has secured an underwritten
commitment from a lender for a $275 million secured bank credit agreement
(the "New Credit Agreement") which will have a five year term, be secured by
the Company's working capital and consist of a $125 million amortizing term
<PAGE>
<PAGE> 14
loan and a $150 million revolving credit line. The Company intends to use
the New Credit Agreement to fund the cash portion of the Merger
consideration, refinance all of Bibb's outstanding indebtedness, refinance
Dan River's existing secured working capital facility and pay various
transaction costs.
On a pro forma basis, had the Merger been consummated as of July 4, 1998, the
Company would have borrowed approximately $211 million under the New Credit
Agreement and $64 million would be unused and available for borrowing.
The Company believes that borrowings under the New Credit Agreement and cash
flow from operations will be adequate to finance the Merger and meet the
Company's working capital and capital expenditures needs.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
<PAGE>
<PAGE> 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The registrant reported in its Report on Form 10-K for the fiscal
year ended January 3, 1998, that a competitor had filed a Petition
for Cancellation with the U. S. Patent Office challenging the
Company's "BED-IN-A-BAG" trademark. The competitor withdrew its
Petition for Cancellation on July 2, 1998, and the registrant has
granted the competitor a license to use the mark, subject to
certain specified terms and conditions.
Item 4. Submission of Matters to a Vote of Security Holders
The registrant's Annual Meeting of Shareholders was held on April
22, 1998. The following is a brief description of each matter
voted upon at the meeting and the number of votes cast for, against
or withheld, as well as the number of abstentions and broker non-
votes, as to each such matter.
1. Election of Directors
Election of Donald J. Keller and Joseph L. Lanier, Jr. to hold
office until the Annual Meeting of Shareholders in 2001, or until
their successors are elected and qualified:
1. Donald J. Keller For: 23,980,370 Withheld: 42,600
2. Joseph L. Lanier, Jr. For: 23,980,570 Withheld: 42,400
Continuing directors are Edward J. Lill, John F. Maypole and
Richard L. Williams.
2. To ratify the appointment of Ernst & Young LLP as independent
auditors of the registrant for fiscal 1998.
For: 24,017,470 Against: 1,800 Abstained: 3,700
Item 5. Other Information.
On June 29, 1998, the registrant announced that it had entered into
a definitive merger agreement, dated as of June 28, 1998, in which
it agreed to acquire all of the capital stock of The Bibb Company
("Bibb") for a combination of cash and Dan River stock in a tax-
free transaction valued in excess of $250 million, including
assumed debt. Each Bibb stockholder will be entitled to elect
whether to receive $16.50 in cash, .84615 shares of Dan River Class
A Common Stock, or a combination thereof, for each Bibb share they
hold, subject to proration. The transaction is subject to stock-
holder approvals and other conditions as set forth in the merger
agreement.
<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:
None. <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: August 14, 1998 /s/ Barry F. Shea
-----------------------------------
Barry F. Shea
Vice President-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, by and between Dan River
Inc. and The Bibb Company (incorporated
by reference to Exhibit 2.1 in Registration
Statement on Form S-4 (File No. 333-58855)).
2.2 First Amendment dated as of August 14, 1998
to Agreement and Plan of Merger by and between
Dan River Inc. and The Bibb Company. 19
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. 21
99 Text of News Release of Dan River Inc., dated
August 12, 1998. 22
</TABLE>
<PAGE> 19
FIRST AMENDMENT TO AGREEMENT AND
PLAN OF MERGER
THIS FIRST AMENDMENT TO THE AGREEMENT AND PLAN OF MERGER, dated as of
August 14, 1998 (the "First Amendment"), between DAN RIVER INC., a Georgia
corporation ("Parent"), and THE BIBB COMPANY, a Delaware corporation (the
"Company").
W I T N E S S E T H:
WHEREAS, Parent and the Company have entered into that certain Agreement
and Plan of Merger, dated as of June 28, 1998 (the "Original Agreement"),
providing for the merger of the Company with and into Parent on the terms and
conditions contained therein and in accordance with the Georgia Business
Corporation Code and General Corporation Law of the State of Delaware; and
WHEREAS, the respective Boards of Directors of Parent and the Comapny
have approved this First Amendment; and
WHEREAS, the parties now desire to amend the Original Agreement in
certain respects;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements set forth herein, the parties hereto agree as
follows:
1. Section 6.3(d) of the Original Agreement is hereby deleted in
its entirety and the following Section 6.3(d) shall be subsituted in
lieu thereof:
"(d) Tax Opinion. The Company shall have received a written
opinion of King & Spalding, dated on or about the date that is two
business days prior to the date the Joint Proxy Statement is first
mailed to the Company stockholders and reaffirmed as of the Closing
Date, in form and substance reasonably satisfactory to the Company
to the effect that the Merger will constitute a reorganization
within the meaning of Section 368(a)(1) of the Code. In rendering
such tax opinion, counsel may be entitled to rely upon customary
representations of officers of the Company and Parent."
2. All references in the Original Agreement to "the Merger
Agreement" or "this Agreement" shall be deemed to refer to the Original
Agreement as amended by this First Amendment.
3. The Original Agreement, as amended by this First Amendment,
shall remain in full force and effect in accordance with its terms.
This First Amendment may be executed in two or more counterparts, all of
which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the
parties and delivered to the other parties. In the event of any
conflict between the provisions of this First Amendment and the
provisions of the Original Agreement, the provisions of this First
Amendment shall control.<PAGE>
<PAGE> 20
4. Capitalized terms used herein but not otherwise defined shall
have the meanings assigned to such terms in the Original Agreement.
5. This First Amendment shall be governed by and construed in
accordance with the laws of the State of Georgia (without regard to the
principles of conflict of laws thereof).
IN WITNESS WHEREOF, this First Amendment has been signed by the duly
authorized officers of each of the parties hereto as of the day and year
first written above.
DAN RIVER INC.
/s/ J. L. Lanier, Jr.
By:----------------------------
Name: J. L. Lanier, Jr.
Title: Chairman
THE BIBB COMPANY
/s/ Michael L. Fulbright
By:----------------------------
Name: Michael L. Fulbright
Title: Chairman and Chief Executive
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET OF DAN RIVER INC. AS OF JULY 4, 1998 AND
THE RELATED CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS
ENDED JULY 4, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> JUL-04-1998
<CASH> 2,097
<SECURITIES> 0
<RECEIVABLES> 60,814
<ALLOWANCES> 0
<INVENTORY> 107,648
<CURRENT-ASSETS> 181,917
<PP&E> 342,451
<DEPRECIATION> 128,520
<TOTAL-ASSETS> 403,043
<CURRENT-LIABILITIES> 42,085
<BONDS> 151,557
0
0
<COMMON> 189
<OTHER-SE> 177,763
<TOTAL-LIABILITY-AND-EQUITY> 403,043
<SALES> 239,539
<TOTAL-REVENUES> 239,539
<CGS> 186,356
<TOTAL-COSTS> 186,356
<OTHER-EXPENSES> (400)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,671
<INCOME-PRETAX> 19,142
<INCOME-TAX> 7,262
<INCOME-CONTINUING> 11,880
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,880
<EPS-PRIMARY> 0.63
<EPS-DILUTED> 0.62
</TABLE>
<PAGE> 22
Dan River Inc. News Release
P.O. Box 261
Danville, Virginia 24543
For Immediate Release: August 12, 1998
- ---------------------
Investor Relations Contact:
- --------------------------
Scott D. Batson, Vice President-Finance
804-799-4113
DAN RIVER INC. AND THE BIBB COMPANY SET SHAREHOLDER MEETINGS
FOR SEPTEMBER 28, 1998
DANVILLE, VIRGINIA. Dan River Inc. (NYSE:DRF) and The Bibb Company
(AMEX:BIB) announced today that their respective special meetings of
stockholders called to approve the merger between Dan River and Bibb,
initially scheduled for late August, have been rescheduled for Monday,
September 28, 1998. The companies presently expect to mail proxy materials
to stockholders on or prior to August 28, 1998.
