<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 April 1, 2000
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 April 1, 2000:
Class A: 20,048,795 Shares
Class B: 2,062,070 Shares
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<PAGE> 2
Forward Looking Statements.
- --------------------------
This Quarterly Report contains forward-looking statements within the meaning
of the Securities Act of 1933 and the Securities and Exchange Act of 1934.
These statements are subject to certain risks and uncertainties that could
cause actual results to differ materially from those included in such forward
looking statements. The words "believes," "expects," "intends," "estimates"
or "anticipates" and similar expressions, as well as future or conditional
verbs such as "will," "should," "would," and "could," are intended to
identify forward-looking statements. Specific forward looking statements
contained in this Quarterly Report include, among others, statements
regarding adequacy of our liquidity and capital resources. These forward
looking statements are found in Part I, Item 2. There can be no assurance
that our assumptions are correct.
The forward looking statements in this Quarterly Report are also subject to
certain risks and uncertainties including, among others, that our performance
in future periods may be adversely impacted by the cyclical nature of the
textile industry, intense competition within the textile industry,
fluctuations in the price and availability of cotton and other raw materials,
our inability to make capital improvements necessary to maintain
competitiveness, possible adverse changes in governmental regulation
regarding the import of cotton and textile products, difficulties in
integrating acquired businesses and achieving cost savings, changes in
environmental regulations, deterioration of relationships with or the loss of
material customers and adverse changes in general market and industry
conditions.
We believe that the forward looking statements in this Quarterly Report are
reasonable; however, such statements are based on current expectations and
undue reliance should not be placed on such statements. We undertake no
obligation to update publicly any forward-looking statements.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
See Following Pages.
<PAGE> 3
DAN RIVER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 1, January 1,
2000 2000
------------ ------------
<S> <C> <C>
(in thousands, except share
and per share data)
ASSETS
Current assets:
Cash and cash equivalents $ 3,108 $ 2,084
Accounts receivable, net 94,845 77,009
Inventories 175,383 168,487
Prepaid expenses and other current assets 2,998 2,132
Deferred income taxes 14,581 15,381
------------ -----------
Total current assets 290,915 265,093
Property, plant and equipment 480,138 476,438
Less accumulated depreciation and amortization (188,693) (179,705)
------------ -----------
Net property, plant and equipment 291,445 296,733
Goodwill, net 109,672 110,384
Other assets 13,573 12,372
------------ -----------
$ 705,605 $ 684,582
============ ===========
</TABLE>
<PAGE>
<PAGE> 4
DAN RIVER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 1, January 1,
2000 2000
------------ ------------
<S> <C> <C>
(in thousands, except share
and per share data)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 23,876 $ 22,368
Accounts payable 33,748 33,464
Accrued compensation and related benefits 26,098 22,411
Other accrued expenses 17,902 12,485
------------ ------------
Total current liabilities 101,624 90,728
Other liabilities:
Long-term debt 298,356 292,416
Deferred income taxes 21,815 19,555
Other liabilities 10,840 10,931
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 20,048,795 shares
(20,574,020 shares at January 1, 2000) 200 206
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 210,752 213,620
Retained earnings 61,997 57,105
------------ ------------
Total shareholders' equity 272,970 270,952
------------ ------------
$ 705,605 $ 684,582
============ ============
</TABLE>
See accompanying notes.
<PAGE> 5
DAN RIVER INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
April 1, April 3,
2000 1999
--------- ---------
(in thousands, except per share data)
<S> <C> <C>
Net sales $ 164,949 $ 169,536
Costs and expenses:
Cost of sales 131,801 141,641
Selling, general and
administrative expenses 16,889 17,362
Amortization of goodwill 711 696
--------- ---------
Operating income 15,548 9,837
Other income 198 290
Interest expense (7,338) (7,344)
--------- ---------
Income before income taxes 8,408 2,783
Provision for income taxes 3,516 1,233
--------- ---------
Net income $ 4,892 $ 1,550
========= =========
Earnings per share:
Basic $ 0.22 $ 0.07
========= =========
Diluted $ 0.22 $ 0.07
========= =========
</TABLE>
See accompanying notes.
<PAGE>
<PAGE> 6
DAN RIVER INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
April 1, April 3,
2000 1999
------------ ------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,892 $ 1,550
Adjustments to reconcile net income to
net cash provided by operating activities:
Noncash interest expense 188 188
Depreciation and amortization of
property, plant and equipment 9,253 10,200
Amortization of goodwill 711 696
Deferred income taxes 3,060 509
Writedown/disposal of assets 9 12
Changes in operating assets and liabilities:
Accounts receivable (17,835) 1,208
Inventories (6,896) 9,361
Prepaid expenses and other assets (2,315) (29)
Accounts payable and accrued expenses 13,850 811
Other liabilities (90) (1,404)
--------- ----------
Net cash provided by operating
activities 4,827 23,102
---------- ----------
Cash flows from investing activities:
Capital expenditures (8,494) (9,728)
Proceeds from sale of assets 118 661
---------- ----------
Net cash used by investing activities (8,376) (9,067)
---------- ----------
Cash flows from financing activities:
Payments of long-term debt (5,553) (541)
Net borrowings (payments) - working capital
facility 13,000 (16,000)
Proceeds from exercise of stock options -- 1,636
Repurchase of common stock (2,874) --
---------- ----------
Net cash provided (used) by financing
activities 4,573 (14,905)
---------- ----------
Net increase (decrease) in cash and cash
equivalents 1,024 (870)
Cash and cash equivalents at beginning of period 2,084 3,356
---------- ----------
Cash and cash equivalents at end of period $ 3,108 $ 2,486
========== ==========
</TABLE>
See accompanying notes.
<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
subsidiaries, (collectively, 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 1, 2000.
2. Inventories
The components of inventory are as follows:
<TABLE>
<CAPTION>
April 1, January 1,
2000 2000
------------ ------------
(in thousands)
<S> <C> <C>
Finished goods $ 56,334 $ 55,710
Work in process 102,280 92,707
Raw materials 4,747 8,475
Supplies 12,022 11,595
-------- --------
Total Inventories $175,383 $168,487
======== ========
</TABLE>
<PAGE> 8
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 1, 2000 $ 206 $ 21 $213,620 $57,105 $270,952
Net income -- -- -- 4,892 4,892
Repurchase of
common stock (6) -- (2,868) -- (2,874)
------ ------ -------- ------- --------
Balance at April
1, 2000 $ 200 $ 21 $210,752 $61,997 $272,970
======= ====== ======== ======= ========
</TABLE>
<PAGE>
<PAGE> 9
4. Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
April 1, April 3,
2000 1999
------------ -----------
<S> <C> <C>
Numerator for basic and diluted earnings
per share -- net income $ 4,892,000 $ 1,550,000
=========== ===========
Denominator:
Denominator for basic earnings per share--
weighted-average shares 22,501,461 23,355,214
Effect of dilutive securities:
Employee stock options -- 168,379
----------- -----------
Denominator for diluted earnings per share--
weighted average shares adjusted for
dilutive securities 22,501,461 23,523,593
=========== ===========
Basic earnings per share $ 0.22 $ 0.07
=========== ===========
Diluted earnings per share $ 0.22 $ 0.07
=========== ===========
</TABLE>
<PAGE> 10
5. Segment Information
Summarized information by reportable segment is shown in the following
tables:
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
April 1, April 3,
2000 1999
------------ ------------
(in thousands)
<S> <C> <C>
Net sales:
Home Fashions $ 114,373 $ 117,390
Apparel Fabrics 36,951 40,228
Engineered Products 13,625 11,918
----------- -----------
Consolidated net sales $ 164,949 $ 169,536
============ ===========
Operating income (loss):
Home Fashions 13,750 11,764
Apparel Fabrics 3,083 (127)
Engineered Products 720 537
Corporate items not allocated to segments:
Amortization of goodwill (711) (696)
Other (1,294) (1,641)
----------- -----------
Consolidated operating income $ 15,548 $ 9,837
=========== ===========
</TABLE>
6. Subsequent Event
On April 3, 2000, the Company acquired substantially all of the
assets of Import Specialists, Inc. (ISI) for $16.3 million in cash,
subject to a working capital adjustment, and the assumption of
certain operating liabilities. The acquisition was funded with
borrowings under the Company's working capital line of credit. ISI
is an importer of home textile products, including natural fiber
doormats and bootscrapers, throws, area and accent rugs, and
decorative pillows.
<PAGE>
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
NET SALES
Net sales for the first quarter of fiscal 2000 were $164.9 million, a
decrease of $4.6 million or 2.7% from net sales of $169.5 million for the
first quarter of fiscal 1999.
Home Fashions
Net sales of home fashions products were $114.4 million for the first quarter
of fiscal 2000, down $3.0 million or 2.6% from the first quarter of fiscal
1999. Although the unfilled order position for home fashions products was
strong throughout the first quarter of fiscal 2000, poor weather at the
beginning of the quarter and disruptions associated with the implementation
of our new enterprise resource planning system negatively impacted our
ability to ship product. This situation improved as the quarter progressed.
Apparel Fabrics
Net sales of apparel fabrics for the first quarter of fiscal 2000 were $37.0
million, down $3.3 million or 8.1% from the first quarter of fiscal 1999.
Most of the decrease is attributable to the segment's largest product
category, shirting fabrics, in which sales declined by $3.0 million or 12.8%.
We believe that demand for this product category has continued to be
negatively impacted by increased fabric and garment imports, particularly
from Asia, as well as a decline in dress shirting sales at retail due to the
popularity of business casual dress.
Engineered Products
Net sales of engineered products were $13.6 million for the first quarter of
fiscal 2000, up $1.7 million or 14.3% from the first quarter of fiscal 1999.
The increase is attributable to certain manufacturing improvements, including
new fabric finishing capabilities, which have enabled us to better meet the
demand for our products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $16.9 million for the first
quarter of fiscal 2000 (10.2% of net sales), a decrease of $0.5 million or
2.7% from $17.4 million (10.2% of net sales) for the first quarter of fiscal
1999.
OPERATING INCOME
Consolidated operating income for the first quarter of fiscal 2000 was $15.5
million (9.4% of net sales) compared to $9.8 million (5.8% of net sales) for
the first quarter of fiscal 1999.
<PAGE>
<PAGE> 12
Segment Operating Income:
Operating income for the home fashions segment was $13.8 million for the
first quarter of fiscal 2000, compared to $11.8 million for the first quarter
of fiscal 1999. The increase in operating income reflects cost savings from
the integration of Bibb, better manufacturing performance and lower cotton
prices.
The apparel fabrics segment generated $3.1 million in operating income for
the first quarter of fiscal 2000, compared to an operating loss of $0.1
million for the first quarter of fiscal 1999. The better operating results
were due to improved margins, which more than offset the effect of the
decrease in sales. The improved margins reflect better capacity utilization
and lower raw material costs in the first quarter of fiscal 2000 compared to
the first quarter of 1999. Per unit costs for goods sold in the first
quarter of fiscal 1999 were high due to the under-absorption of fixed costs
resulting from operating on reduced running schedules as we worked off excess
inventories.
Operating income for the engineered products segment was $0.7 million for the
first quarter of fiscal 2000, compared to $0.5 million for the first quarter
of fiscal 1999. The increase generally reflects the increase in sales.
Corporate Items:
Amortization of goodwill, which is entirely attributable to the acquisition
of Bibb in 1998, was $0.7 million in the first quarter of fiscal 2000 and
1999.
Other expenses not allocated to segments totaled $1.3 million in the first
quarter of fiscal 2000 compared to $1.6 million in the first quarter of
fiscal 1999, and related primarily to depreciation on the write-up of fixed
assets from our acquisition in 1989. The vast majority of the write-up was
for manufacturing equipment that is now fully depreciated; therefore
depreciation expense associated with the 1989 write-up will not be
significant in future periods.
INTEREST EXPENSE
Interest expense was $7.3 million for the first quarter of fiscal 2000,
approximately the same as for the first quarter of fiscal 1999. Lower debt
levels reduced interest expense by approximately $0.5 million in the first
quarter of fiscal 2000. This was offset by the effect of higher average
interest rates, which increased to 8.6% in the first quarter of fiscal 2000
from 7.9% in the first quarter of fiscal 1999.
INCOME TAX PROVISION
The income tax provision was $3.5 million (41.8% of pre-tax income) for the
first quarter of fiscal 2000, compared to $1.2 million (44.3% of pre-tax
income) for the first quarter of fiscal 1999. The relatively high effective
rate for both periods was caused by the effect of nondeductible goodwill
amortization.
<PAGE>
<PAGE> 13
NET INCOME AND EARNINGS PER SHARE
Net income for the first quarter of fiscal 2000 was $4.9 million or $0.22 per
share (diluted) compared to $1.6 million or $0.07 per share (diluted) for the
first quarter of fiscal 1999. Weighted average diluted shares outstanding
decreased to 22.5 million for the first quarter of fiscal 2000 from 23.5
million for the first quarter of fiscal 1999 due principally to the
repurchase of shares under our stock repurchase program.
LIQUIDITY AND CAPITAL RESOURCES
General
We believe that internally generated cash flow, supplemented by borrowings
under its working capital line of credit, will be sufficient to meet our
foreseeable debt service requirements, capital expenditures, and working
capital needs. We had a debt to total capital ratio of 54.1% at April 1,
2000.
Credit Facilities
We maintain a credit facility comprised of a $120 million term loan and a
$150 million secured working capital line of credit. This credit facility is
secured by our accounts receivable and inventories. As of April 1, 2000,
$68.9 million was used and $81.1 million was unused and available for
borrowing under the working capital line of credit.
The credit facility bears interest at the Base Rate plus applicable
percentage, as defined (9.13% as of April 27, 2000) or LIBOR plus applicable
percentage (7.57% as of April 27, 2000), for periods of one, two, three or
six months, at our option. The working capital line is non-amortizing and
any amounts outstanding are due at the final maturity of September 30, 2003.
The term loan was fully borrowed for $125 million at its inception in October
of 1998 and has scheduled amortization payments, the first of which was made
for $5 million on March 31, 2000. The new outstanding under the term loan is
$120 million. Three more quarterly payments of $5 million each are scheduled
for this fiscal year.
The credit facility is provided pursuant to a loan agreement which contains
certain covenants, including the maintenance of a certain interest coverage
ratio and maximum debt levels, and limitations on mergers and consolidations,
affiliated transactions, incurring liens, disposing of assets and limitations
on investments. An event of default under the loan agreement includes Change
of Control (as defined) as well as non-compliance with certain other
provisions.
Working Capital
Net cash generated from operating activities was $4.8 million in the three
months ended April 1, 2000. Included in that amount is a use of cash from
operating assets and liabilities of $13.3 million, comprised of a $10.9
million use from operating working capital (accounts receivable - $17.8
million use, inventories - $6.9 million use, and accounts payable and accrued
expenses - $13.8 million source) and a $2.4 million use of cash for prepaid
expenses and other assets, and other liabilities.
<PAGE>
<PAGE> 14
During the comparable three month period ended April 3, 1999, net cash
generated from operating activities was $23.1 million. Included in that
amount is a source of cash for operating assets and liabilities of $9.9
million, comprised of a $11.4 million source for operating working capital
(accounts receivable - $1.2 million source, inventories - $9.4 million
source, and accounts payable and accrued expenses - $0.8 million source) and
a $1.4 million use of cash for other liabilities.
Capital Improvements
During the first three months of fiscal 2000, we purchased $8.5 million in
equipment and manufacturing improvements.
Share Repurchase
At the beginning of this fiscal year, we had $5 million remaining of a $10
million share repurchase program authorized by the Board of Directors in
August 1999. Shares repurchased pursuant to this program are retired and
constitute authorized but unissued shares. During the first quarter of
fiscal 2000 we repurchased 525,225 shares for $2,873,583. The Company has
$2,126,417 remaining under the authorization for repurchase of shares.
Acquisition
On April 3, 2000, we acquired substantially all of the assets of Import
Specialists, Inc. (ISI) for $16.3 million in cash, subject to a working
capital adjustment, and the assumption of certain operating liabilities. The
acquisition was funded with borrowings under our working capital line of
credit. ISI is an importer of home textile products, including natural fiber
doormats and bootscrapers, throws, area and accent rugs, and decorative
pillows.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
<PAGE> 15
PART II - OTHER INFORMATION
Items 1-5. No disclosure required.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
The Exhibits listed as applicable on the accompanying Exhibit
Index are filed as part of this Quarterly Report.
(b) Reports on Form 8-K. None.
<PAGE>
<PAGE> 16
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: May 5, 2000 /s/ Barry F. Shea
-----------------------------------
Barry F. Shea
Executive Vice President-Chief
Financial Officer
(Authorized Signing Officer and
Principal Financial Officer)
</TABLE>
<PAGE>
<PAGE> 17
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit Page
- ----------- ---------------------- ----
<S> <C> <C>
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 Statement regarding Computation of
Earnings per share (incorporated by
reference to Note 4 to the Unaudited
Condensed Consolidated Financial
Statements included in this
Quarterly Report on Form 10-Q)
27 Financial Data Schedule
</TABLE>
<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 APRIL 1, 2000
AND THE RELATED CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE THREE
MONTHS ENDED APRIL 1, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-END> APR-01-2000
<CASH> 3,108
<SECURITIES> 0
<RECEIVABLES> 94,845
<ALLOWANCES> 0
<INVENTORY> 175,383
<CURRENT-ASSETS> 290,915
<PP&E> 480,138
<DEPRECIATION> 188,693
<TOTAL-ASSETS> 705,605
<CURRENT-LIABILITIES> 101,624
<BONDS> 298,356
0
0
<COMMON> 221
<OTHER-SE> 272,749
<TOTAL-LIABILITY-AND-EQUITY> 705,605
<SALES> 164,949
<TOTAL-REVENUES> 164,949
<CGS> 131,801
<TOTAL-COSTS> 131,801
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,338
<INCOME-PRETAX> 8,408
<INCOME-TAX> 3,516
<INCOME-CONTINUING> 4,892
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,892
<EPS-BASIC> 0.22
<EPS-DILUTED> 0.22
</TABLE>
