<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_________________________
Form 10-Q/A
Amendment No. 1
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 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 July 1, 2000:
Class A: 19,703,439 Shares
Class B: 2,062,070 Shares
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<PAGE> 2
We hereby amend Items 1 and 2 and Item 6, Exhibit 27, of our Quarterly
Report on Form 10-Q for the period ending July 1, 2000, to read in their
entirety as set forth below.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
See Following Pages.
<PAGE>
<PAGE> 3
DAN RIVER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 1, January 1,
2000 2000
(restated)
----------- -----------
<S> <C> <C>
(in thousands, except share
and per share data)
ASSETS
Current assets:
Cash and cash equivalents $ 4,354 $ 2,084
Accounts receivable, net 81,674 77,009
Inventories 211,175 168,487
Prepaid expenses and other current assets 6,593 2,132
Deferred income taxes 14,661 15,381
----------- -----------
Total current assets 318,457 265,093
Property, plant and equipment 491,973 476,438
Less accumulated depreciation and amortization (197,997) (179,705)
----------- -----------
Net property, plant and equipment 293,976 296,733
Goodwill, net 116,508 110,384
Other assets 16,396 12,372
----------- -----------
$ 745,337 $ 684,582
=========== ===========
</TABLE>
<PAGE>
<PAGE> 4
DAN RIVER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 1, January 1,
2000 2000
(restated)
------------ ------------
<S> <C> <C>
(in thousands, except share
and per share data)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 25,876 $ 22,368
Accounts payable 38,179 33,464
Accrued compensation and related benefits 21,777 22,411
Other accrued expenses 16,692 12,485
------------ ------------
Total current liabilities 102,524 90,728
Other liabilities:
Long-term debt 335,718 292,416
Deferred income taxes 22,842 19,555
Other liabilities 10,802 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 19,703,439 shares
(20,574,020 shares at January 1, 2000) 197 206
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 209,096 213,620
Retained earnings 64,137 57,105
------------ ------------
Total shareholders' equity 273,451 270,952
------------ ------------
$ 745,337 $ 684,582
============ ============
</TABLE>
See accompanying notes.
<PAGE> 5
DAN RIVER INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------- ----------------------
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
(restated) (restated)
--------- -------- -------- --------
<S> <C> <C> <C> <C>
(in thousands, except per share data)
Net sales $ 157,232 $ 154,104 $ 322,181 $ 323,640
Costs and expenses:
Cost of sales 125,378 125,257 259,430 266,899
Selling, general
and administrative
expenses 18,066 16,034 34,036 33,395
Amortization of
goodwill 810 696 1,522 1,392
--------- --------- --------- ---------
Operating income 12,978 12,117 27,193 21,954
Other income 153 69 352 358
Interest expense (7,869) (6,985) (15,207) (14,329)
--------- --------- --------- ---------
Income before
income taxes 5,262 5,201 12,338 7,983
Provision for
income taxes 2,303 2,274 5,306 3,507
--------- --------- --------- ---------
Net income $ 2,959 $ 2,927 $ 7,032 $ 4,476
========= ========= ========= =========
Earnings per share:
Basic $ 0.13 $ 0.13 $ 0.32 $ 0.19
========= ========= ========= =========
Diluted $ 0.13 $ 0.12 $ 0.32 $ 0.19
========= ========= ========= =========
</TABLE>
See accompanying notes
<PAGE>
<PAGE>6
DAN RIVER INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
---------------------------
July 1, July 3,
2000 1999
(restated)
------------ ------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,032 $ 4,476
Adjustments to reconcile net income to net
cash provided by operating activities:
Noncash interest expense 376 376
Depreciation and amortization of
property, plant and equipment 18,652 19,530
Amortization of goodwill 1,522 1,392
Deferred income taxes 4,006 2,234
Writedown/disposal of assets (244) (48)
Changes in operating assets and liabilities:
Accounts receivable (5,607) 12,058
Inventories (36,724) 6,793
Prepaid expenses and other assets (5,179) (469)
Accounts payable and accrued expenses 11,316 (6,665)
Other liabilities (99) 1,989
---------- ----------
Net cash provided (used) by operating
activities (4,949) 41,666
---------- ----------
Cash flows from investing activities:
Capital expenditures (19,657) (18,352)
Proceeds from sale of assets 450 7,391
Acquisition of business (15,456) --
---------- ----------
Net cash used by investing activities (34,663) (10,961)
---------- ----------
Cash flows from financing activities:
Payments of long-term debt (11,100) (1,081)
Net proceeds from issuance of long-term debt 16,045 --
Net borrowings (payments) - working
capital facility 41,500 (29,000)
Proceeds from exercise of stock options 36 955
Repurchase of common stock (4,599) --
---------- ----------
Net cash provided (used) by
financing activities 41,882 (29,126)
---------- ----------
Net increase in cash and cash equivalents 2,270 1,579
Cash and cash equivalents at beginning of period 2,084 3,356
---------- ----------
Cash and cash equivalents at end of period $ 4,354 $ 4,935
========== ==========
</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. Restatement
As announced in the Company' earnings release on October 26, 2000 for
the third quarter of fiscal 2000, the Company has restated its operating
results for the first two quarters of fiscal 2000 to reflect a product
cost adjustment. During the third quarter of fiscal 2000, the Company
discovered that it had been understating fabric usage in the production
of certain home fashions products, which caused an understatement of
cost of sales in the first two quarters of the year. The recalculation
of cost of sales to reflect the proper fabric usage, and the related
adjustment to incentive compensation, reduced operating income and net
income for the three months ended July 1, 2000 by $2,354,000 and
$1,447,000, respectively, and reduced operating income and net income
for the six months ended July 1, 2000 by $3,686,000 and $2,266,000,
respectively. The accompanying balance sheets and statements of income
and cash flows have been restated to reflect these adjustments.
<PAGE>
<PAGE> 8
The following summarizes key financial statement items that were
affected by the restatement:
<TABLE>
<CAPTION>
as originally
reported restated
------------- --------
(in thousands, except per share data)
<S> <C> <C>
As of July 1, 2000:
Inventories $215,477 $211,175
Shareholders' equity 275,717 273,451
For the three months ended
July 1, 2000:
Cost of sales 123,326 125,378
Net income 4,406 2,959
Earnings per share
(basic and diluted) 0.20 0.13
For the six months ended
July 1, 2000:
Cost of sales 255,128 259,430
Net income 9,298 7,032
Earnings per share
(basic and diluted) 0.42 0.32
</TABLE>
3. Inventories
The components of inventory are as follows:
<TABLE>
<CAPTION>
July 1, January 1,
2000 2000
(restated)
------------ ------------
(in thousands)
<S> <C> <C>
Finished goods $ 83,056 $ 55,710
Work in process 109,846 92,707
Raw materials 4,139 8,475
Supplies 14,134 11,595
-------- --------
Total Inventories $211,175 $168,487
======== ========
</TABLE>
<PAGE> 9
DAN RIVER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. Shareholders' Equity
Activity in Shareholders' Equity is as follows (restated):
<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 -- -- -- 7,032 7,032
Stock option
activity -- -- 66 -- 66
Repurchase of
Common Stock (9) -- (4,590) -- (4,599)
------ ------ -------- ------- --------
Balance at July
1, 2000 $ 197 $ 21 $209,096 $64,137 $273,451
====== ====== ======== ======= ========
</TABLE>
<PAGE>
<PAGE>10
DAN RIVER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. 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 1, July 3, July 1, July 3,
2000 1999 2000 1999
(restated) (restated)
--------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Numerator for basic
and diluted earnings
per share -- net
income $ 2,959 $ 2,927 $ 7,032 $ 4,476
========= ========= ========= =========
Denominator:
Denominator for
basic earnings
per share--
weighted-average
shares 22,063 23,368 22,282 23,362
Effect of dilutive
securities:
Employee stock
options -- 162 -- 165
--------- --------- --------- ---------
Denominator for
diluted earnings
per share--weighted
average shares
adjusted for
dilutive securities 22,063 23,530 22,282 23,527
========= ========= ========= =========
Earnings per share:
Basic $ 0.13 $ 0.13 $ 0.32 $ 0.19
========= ========= ========= =========
Diluted $ 0.13 $ 0.12 $ 0.32 $ 0.19
========= ========= ========= =========
</TABLE>
<PAGE> 11
6. Segment Information
Summarized information by reportable segment is shown in the following
tables:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------- ----------------------
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
(restated) (restated)
--------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Net sales:
Home Fashions $ 105,624 $ 103,379 $ 219,997 $ 220,769
Apparel Fabrics 38,261 39,395 75,212 79,623
Engineered Products 13,347 11,330 26,972 23,248
--------- --------- --------- ---------
Consolidated net
sales $ 157,232 $ 154,104 $ 322,181 $ 323,640
========= ========= ========= =========
Operating income:
Home Fashions $ 10,152 $ 12,203 $ 22,392 $ 23,965
Apparel Fabrics 3,175 1,300 6,407 1,174
Engineered Products 822 1,035 1,572 1,572
Corporate items not
allocated to
segments:
Amortization of
goodwill (810) (696) (1,522) (1,392)
Other (361) (1,725) (1,656) (3,365)
--------- --------- --------- ---------
Consolidated
operating income $ 12,978 $ 12,117 $ 27,193 $ 21,954
========= ========= ========= =========
</TABLE>
7. Acquisition
On April 3, 2000, the Company acquired substantially all of the assets
of Import Specialists, Inc. ("ISI") for $15.5 million in cash, subject
to finalization of a working capital adjustment, and the assumption of
certain operating liabilities. The assets acquired consisted
principally of receivables and inventory. 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. The operations have been incorporated into the home fashions
division as the "Import Specialty Products Group." The acquisition has
been accounted for as a purchase and the results of operations of the
<PAGE> 12
acquired business have been included in the consolidated financial
statements since the date of acquisition. The preliminary allocation of
the purchase price of ISI to the assets acquired resulted in goodwill of
$7.6 million being recorded, which is being amortized over 20 years.
<PAGE> 13
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
As further described in Note 2 to the Condensed Consolidated Financial
Statements, the Company has restated its operating results for the first two
quarters of fiscal 2000 to reflect a product cost adjustment. The following
discussion reflects the effects of the restatement.
RESULTS OF OPERATIONS
Comparison of Three Months Ended July 1, 2000 and July 3, 1999
ACQUISITION
On April 3, 2000 we acquired substantially all of the assets of Import
Specialists, Inc. See Note 7 to Condensed Consolidated Financial Statements.
NET SALES
Net sales for the second quarter of fiscal 2000 were $157.2 million, an
increase of $3.1 million or 2.0% from net sales of $154.1 million for the
second quarter of fiscal 1999.
Net sales of home fashions products were $105.6 million for the second
quarter of fiscal 2000, up $2.2 million or 2.2% from the second quarter of
fiscal 1999. Incremental sales from the Import Specialists business we
acquired in April 2000 were $3.6 million. Excluding these sales, net sales
were down slightly in the second quarter of fiscal 2000, due to a slowdown in
reorders from some major retailers.
Net sales of apparel fabrics for the second quarter of fiscal 2000 were $38.3
million, down $1.1 million or 2.9% from the second quarter of fiscal 1999. We
believe that demand for this product category has been negatively impacted by
a decline in dress shirting sales at retail, due to the popularity of
business casual dress.
Net sales of engineered products were $13.3 million for the second quarter of
fiscal 2000, up $2.0 million or 17.8% from the second quarter of fiscal 1999.
The increase reflects healthy demand across all product lines for this
segment, as well as new fabric finishing capabilities, which have enabled us
to better meet the demand for certain of our products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $18.1 million for the
second quarter of fiscal 2000 (11.5% of net sales), an increase of $2.0
million or 12.7% from $16.0 million (10.4% of net sales) for the second
quarter of fiscal 1999. Incremental expenses resulting from the acquisition
of Import Specialists contributed $0.6 million of the increase. The
remainder of the increase was caused by higher expenses for home fashion
designs and higher information systems expenses, offset in part by lower
incentive compensation.
<PAGE> 14
OPERATING INCOME
Consolidated operating income for the second quarter of fiscal 2000 was $13.0
million (8.3% of net sales) compared to $12.1 million (7.9% of net sales) for
the second quarter of fiscal 1999.
Segment Operating Income:
Operating income for the home fashions segment was $10.2 million for the
second quarter of fiscal 2000, including $0.3 million in operating income
contributed by the Import Specialists business that we acquired in April,
2000. This compares to $12.2 million in operating income earned in the
second quarter of fiscal 1999. The decrease in operating income is generally
attributable to increases in information systems expenses and design costs.
The Import Specialists business contributed $1.0 million in gross profit in
the current quarter. Otherwise, gross profit was about equal in the second
quarter of fiscal 2000 compared to the second quarter of fiscal 1999, with
cost savings from lower cotton prices in the current year offset by the
effects of less efficient manufacturing performance.
The apparel fabrics segment generated $3.2 million in operating income for
the second quarter of fiscal 2000, compared to $1.3 million for the second
quarter of fiscal 1999. The higher profitability in the current quarter
reflects improved margins due to better capacity utilization and lower raw
material costs. Per unit costs for goods sold in the second 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 $0.8 million for the
second quarter of fiscal 2000, compared to $1.0 million for the second
quarter of fiscal 1999. Although revenues increased by $2.0 million in the
current quarter, manufacturing operations ran less efficiently in the second
quarter of 2000 compared to the second quarter of fiscal 1999, which
negatively impacted operating margins.
Corporate Items:
Amortization of goodwill was $0.8 million in the second quarter of fiscal
2000 compared to $0.7 million in the second quarter of fiscal 1999. The
increase in fiscal 2000 is attributable to goodwill resulting from our April
2000 acquisition of Import Specialists.
Other expenses not allocated to segments totaled $0.4 million in the second
quarter of fiscal 2000 compared to $1.7 million in the second quarter of
fiscal 1999. The fiscal 1999 amount includes $1.3 million of depreciation
on the write-up of the Company's fixed assets from its acquisition in 1989.
The vast majority of the write-up was for manufacturing equipment that was
fully depreciated before the second quarter of fiscal 2000.
INTEREST EXPENSE
Interest expense was $7.9 million for the second quarter of fiscal 2000, up
$0.9 million over the second quarter of fiscal 1999. Higher average debt
levels resulted in $0.5 million of the increase, with the remainder caused by
the effect of higher average interest rates.
<PAGE> 15
INCOME TAX PROVISION
The income tax provision was $2.3 million (43.8% of pre-tax income) for the
second quarter of fiscal 2000, which is approximately the same amount and
effective tax rate as in the comparable period of the prior year. The
relatively high effective rate for both periods was caused by the effect of
nondeductible goodwill amortization.
NET INCOME AND EARNINGS PER SHARE
Net income for the second quarter of fiscal 2000 was $3.0 million or $0.13
per share (diluted) compared to $2.9 million or $0.12 per share (diluted) for
the second quarter of fiscal 1999. Weighted average diluted shares
outstanding decreased to 22.1 million for the second quarter of fiscal 2000
from 23.4 million for the second quarter of fiscal 1999 due principally to
the repurchase of shares under the Company's stock repurchase program.
Comparison of Six Months Ended July 1, 2000 and July 3, 1999
NET SALES
Net sales for the first six months of fiscal 2000 were $322.2 million, a
decrease of $1.5 million or 0.5% from net sales of $323.6 million for the
first six months of fiscal 1999.
Net sales of home fashions products were $220.0 million for the first six
months of fiscal 2000, down $0.8 million or 0.3% from the first six months of
fiscal 1999. Excluding $3.6 million in incremental sales attributable to the
Import Specialist business that we acquired in April 2000, net sales
decreased by $4.4 million. The decrease was chiefly attributable to
disruptions early in fiscal 2000 caused by poor weather and the
implementation of our new enterprise resource planning system, and to a
slowdown in reorders from some major retailers in the second quarter of the
fiscal year.
Net sales of apparel fabrics for the first six months of fiscal 2000 were
$75.2 million, down $4.4 million or 5.5% from the first six months of fiscal
1999. The decrease reflects a competitive pricing environment for shirting
fabrics, and lower unit volume which we believe is attributable to a decline
in dress shirting sales at retail.
Net sales of engineered products were $27.0 million for the first six months
of fiscal 2000, up $3.7 million or 16.0% from the first six months of fiscal
1999. The increase reflects healthy demand across all product lines for this
segment, as well as new fabric finishing capabilities, which have enabled us
to better meet the demand for certain of our products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $34.0 million for the first
six months of fiscal 2000 (10.6% of net sales), an increase of $0.6 million
or 1.9% from $33.4 million (10.3% of net sales) for the first six months of
fiscal 1999. Except for $0.6 million in incremental expenses attributable to
<PAGE> 16
the Import Specialists business that we acquired in April 2000, total
selling, general and administrative expenses were approximately the same in
the first six months of both fiscal years. In the first six months of fiscal
2000 increases over the prior year in information systems expenses and home
fashions design costs were offset by lower incentive compensation.
OPERATING INCOME
Consolidated operating income for the first six months of fiscal 2000 was
$27.2 million (8.4% of net sales) compared to $22.0 million (6.8% of net
sales) for the first six months of fiscal 1999.
Segment Operating Income:
Operating income for the home fashions segment was $22.4 million for the
first six months of fiscal 2000, including $0.3 million in operating income
contributed by the Import Specialists business that we acquired in April,
2000. This compares to $24.0 million in operating income earned in the first
six months of fiscal 1999. The decrease in operating income is generally
attributable to increases in information systems expenses and design costs,
particularly in the second quarter of fiscal 2000. The Import Specialists
business contributed $1.0 million in gross profit in the current year.
Otherwise, gross profit was about equal in the first six months of fiscal
2000 compared to the first six months of fiscal 1999, with cost savings from
lower cotton prices in the current year offset by the effects of less
efficient manufacturing performance.
The apparel fabrics segment generated $6.4 million in operating income for
the first six months of fiscal 2000, compared to $1.2 million for the first
six months of fiscal 1999. The higher profitability in the current fiscal
year reflects improved margins due to better capacity utilization and lower
raw material costs. Per unit costs for goods sold in the first part 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 $1.6 million for the
first six months of fiscal 2000, approximately the same as for the first six
months of fiscal 1999. Although revenues increased by $3.7 million in the
first six months of fiscal 2000, less efficient manufacturing performance in
the current year negatively impacted operating margins.
Corporate Items:
Amortization of goodwill was $1.5 million in the first six months of fiscal
2000 compared to $1.4 million in the first six months of fiscal 1999. The
increase in fiscal 2000 is attributable to goodwill resulting from our April
2000 acquisition of Import Specialists.
Other expenses not allocated to segments totaled $1.7 million in the first
six months of fiscal 2000 compared to $3.4 million in the first six months of
fiscal 1999. The fiscal 2000 amount includes $1.2 million attributable to
depreciation on the write-up of the Company's fixed assets from its
acquisition in 1989, compared to $2.7 million in fiscal 1999. The vast
majority of the write-up was for manufacturing equipment that was fully
depreciated before the end of the first quarter of fiscal 2000.
<PAGE> 17
INTEREST EXPENSE
Interest expense was $15.2 million for the first six months of fiscal 2000,
up $0.9 million over the first six months of fiscal 1999. The increase was
caused by higher average interest rates.
INCOME TAX PROVISION
The income tax provision was $5.3 million (43.0% of pre-tax income) for the
first six months of fiscal 2000, compared to $3.5 million (43.9% of pre-tax
income) for the first six months of fiscal 1999. The relatively high
effective rate for both periods was caused by the effect of nondeductible
goodwill amortization.
NET INCOME AND EARNINGS PER SHARE
Net income for the first six months of fiscal 2000 was $7.0 million or $0.32
per share (diluted) compared to $4.5 million or $0.19 per share (diluted) for
the first six months of fiscal 1999. Weighted average diluted shares
outstanding decreased to 22.3 million for the first six months of fiscal 2000
from 23.5 million for the first six months of fiscal 1999 due principally to
the repurchase of shares under the Company's stock repurchase program.
LIQUIDITY AND CAPITAL RESOURCES
General
We believe that internally generated cash flow, supplemented by borrowings
under our 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 56.9% at July 1,
2000.
Credit Facilities
We maintain a credit facility comprised of a $127.9 million term loan and a
$150 million working capital line of credit. This credit facility is secured
by our accounts receivable and inventories. As of July 1, 2000, $97.4 million
was used and $52.6 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 (9.63% as of August 1, 2000) or LIBOR plus applicable
percentage (8.01% as of August 1, 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 which began this fiscal year.
In June, we added $12.9 million of new debt to the term loan. The new
outstanding under the term loan is $127.9 million. Two more quarterly
payments of $5 million each are scheduled for this fiscal year.
<PAGE> 18
The credit facility is provided pursuant to a loan agreement which contains
certain covenants, including the maintenance of 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 a
Change of Control (as defined) as well as non-compliance with certain other
provisions.
Working Capital
Net cash used in operating activities was $4.9 million in the six months
ended July 1, 2000. Included in that amount is a use of cash from operating
assets and liabilities of $36.3 million, comprised of a $31.0 million use of
operating working capital (accounts receivable - $5.6 million use, inven-
tories - $36.7 million use, and accounts payable and accrued expenses - $11.3
million source) and a $5.3 million use of cash for prepaid expenses and other
assets and other liabilities. The inventory buildup is due primarily to the
rollout of a major new home fashions program scheduled to begin shipping
during the third quarter.
During the comparable six month period ended July 3, 1999, net cash generated
from operating activities was $41.7 million. Included in that amount is a
source of cash for operating assets and liabilities of $13.7 million,
primarily comprised of a $12.2 million source for operating working capital
(accounts receivable - $12.1 million source, inventories - $6.8 million
source, and accounts payable and accrued expenses - $6.7 million use) and a
$1.5 million source of cash for prepaid expenses and other assets and other
liabilities.
Capital Improvements
During the first six months of fiscal 2000, we purchased $19.7 million in
equipment and manufacturing improvements. On April 3, 2000, we acquired
substantially all of the assets of Import Specialists, Inc. for $15.5 million
in cash, and the assumption of certain operating liabilities.
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 repurchases pursuant to this program are retired and
constitute authorized but unissued shares. During the first six months of
fiscal 2000 we repurchased 877,225 shares for $4,599,126. We have $400,874
remaining under the authorization for repurchase of shares.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
<PAGE> 19
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27 is attached hereto as amended in its entirety.
<PAGE>
<PAGE> 20
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.
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<S> <C>
Date: November 3, 2000 /s/ Barry F. Shea
-----------------------------------
Barry F. Shea
Executive Vice President-Chief
Financial Officer
(Authorized Signing Officer and
Principal Financial Officer)
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