-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LvUndt72qoXaKUnVixTfA9pt6/QR+xM3FdglPahjnPSfvfgMYfyA8ZUM/+c06Zqb MNx7/YGTRwT/nj4zKzkERg== 0000914384-01-500003.txt : 20010514 0000914384-01-500003.hdr.sgml : 20010514 ACCESSION NUMBER: 0000914384-01-500003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAN RIVER INC /GA/ CENTRAL INDEX KEY: 0000914384 STANDARD INDUSTRIAL CLASSIFICATION: TEXTILE MILL PRODUCTS [2200] IRS NUMBER: 581854637 STATE OF INCORPORATION: GA FISCAL YEAR END: 0129 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13421 FILM NUMBER: 1630478 BUSINESS ADDRESS: STREET 1: 2291 MEMORIAL DRIVE CITY: DANVILLE STATE: VA ZIP: 24541 BUSINESS PHONE: 8047997000 10-Q 1 q1q01.txt 1 - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 _________________________ Form 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 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 March 31, 2001: Class A: 19,703,439 Shares Class B: 2,062,070 Shares - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- 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 from both foreign imports and domestic sources of supply, fluctuations in the price and availability of cotton and other raw materials, our inability to make capital improvements necessary to maintain competitiveness, our inability to increase prices in order to recover increased energy, raw material, labor or other costs, 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, including but not limited to high inventory levels at retail or within the textile industry generally. 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. 3 DAN RIVER INC. CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 30, 2001 2000 ------------ ------------ (in thousands, except share and per share data) ASSETS Current assets: Cash and cash equivalents $ 2,144 $ 3,675 Accounts receivable, net 88,617 84,726 Inventories 192,205 206,227 Prepaid expenses and other current assets 6,825 6,254 Deferred income taxes 16,220 16,656 ------------ ----------- Total current assets 306,011 317,538 Property, plant and equipment 519,812 508,498 Less accumulated depreciation and amortization (225,392) (216,035) ------------ ----------- Net property, plant and equipment 294,420 292,463 Goodwill, net 115,636 115,011 Other assets 13,024 20,461 ------------ ----------- $ 729,091 $ 745,473 ============ ===========
4 DAN RIVER INC. CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 30, 2001 2000 ------------ ------------ (in thousands, except share and per share data) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 39,087 $ 25,872 Accounts payable 26,845 27,622 Accrued compensation and related benefits 22,951 20,437 Other accrued expenses 15,830 11,233 ------------ ------------ Total current liabilities 104,713 85,164 Other liabilities: Long-term debt 317,593 343,399 Deferred income taxes 24,544 28,583 Other liabilities 11,568 11,135 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 197 197 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 209,096 209,096 Retained earnings 61,359 67,878 ------------ ------------ Total shareholders' equity 270,673 277,192 ------------ ------------ $ 729,091 $ 745,473 ============ ============
See accompanying notes. 5 DAN RIVER INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended -------------------------- March 31, April 1, 2001 2000 --------- --------- (in thousands, except per share data) Net sales $ 164,000 $ 164,949 Costs and expenses: Cost of sales 147,944 134,051 Selling, general and administrative expenses 16,821 15,971 Amortization of goodwill 806 711 --------- --------- Operating income (loss) (1,571) 14,216 Other income 164 198 Equity in loss of joint venture (67) -- Interest expense (8,648) (7,338) --------- --------- Income (loss) before income taxes (10,122) 7,076 Provision (benefit) for income taxes (3,603) 3,003 --------- --------- Net income (loss) $ (6,519) $ 4,073 ========= ========= Earnings (loss) per share: Basic $ (0.30) $ 0.18 ========= ========= Diluted $ (0.30) $ 0.18 ========= =========
See accompanying notes. 6 DAN RIVER INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended --------------------------- March 31, April 1, 2001 2000 ------------ ------------ (in thousands) Cash flows from operating activities: Net income (loss) $ (6,519) $ 4,073 Adjustments to reconcile net income to net cash provided by operating activities: Noncash interest expense 265 188 Depreciation and amortization of property, plant and equipment 9,765 9,253 Amortization of goodwill 806 711 Deferred income taxes (3,603) 2,660 Writedown/disposal of assets 96 9 Changes in operating assets and liabilities: Accounts receivable (4,169) (17,835) Inventories 14,637 (4,646) Prepaid expenses and other assets 1,233 (2,315) Accounts payable and accrued expenses 9,698 12,819 Other liabilities 265 (90) ---------- ---------- Net cash provided by operating activities 22,474 4,827 ---------- ---------- Cash flows from investing activities: Capital expenditures (6,913) (8,494) Proceeds from sale of assets 22 118 Investment in subsidiary (3,681) -- ---------- ---------- Net cash used by investing activities (10,572) (8,376) ---------- ---------- Cash flows from financing activities: Payments of long-term debt (7,090) (5,553) Payments of debt issuance costs (843) -- Net borrowings (payments) - working capital facility (5,500) 13,000 Repurchase of common stock -- (2,874) ---------- ---------- Net cash provided (used) by financing activities (13,433) 4,573 ---------- ---------- Net increase (decrease) in cash and cash equivalents (1,531) 1,024 Cash and cash equivalents at beginning of period 3,675 2,084 ---------- ---------- Cash and cash equivalents at end of period $ 2,144 $ 3,108 ========== ==========
See accompanying notes. 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 December 30, 2000. 2. Adoption of New Accounting Standard Effective as of the beginning of fiscal 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended ("SFAS 133"), which requires that derivative instruments be reported on the balance sheet at fair value. The standard also establishes criteria for designation and effectiveness of hedging relationships. In connection with the purchasing of cotton for anticipated manufacturing requirements, the Company may enter into cotton futures and option contracts in order to reduce the risk associated with future price fluctuations. Under SFAS 133, certain cotton futures and option contracts will no longer be accounted for as hedges. Due to the insignificance of such contracts and the absence of other derivative instruments subject to SFAS 133, the adoption of the new standard did not have a material impact on the Company's financial position or results of operations. 3. Inventories The components of inventory are as follows:
March 31, December 30, 2001 2000 ------------ ------------ (in thousands) Finished goods $ 75,612 $ 78,597 Work in process 100,423 110,591 Raw materials 3,109 3,215 Supplies 13,061 13,824 -------- -------- Total Inventories $192,205 $206,227 ======== ========
8 4. Shareholders' Equity Activity in Shareholders' Equity is as follows:
Total Additional Share- Common Stock Paid-In Retained holders' Class A Class B Capital Earnings Equity ------- -------- ---------- -------- ---------- (in thousands) Balance at Dec- ember 30, 2000 $ 197 $ 21 $209,096 $67,878 $277,192 Net loss -- -- -- (6,519) (6,519) ------ ------ -------- ------- -------- Balance at March 31, 2001 $ 197 $ 21 $209,096 $61,359 $270,673 ======= ====== ======== ======= ========
5. Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share:
Three Months Ended -------------------------- March 31, April 1, 2001 2000 ------------ ----------- Numerator for basic and diluted earnings per share -- net income (loss) $(6,519,000) $ 4,073,000 =========== =========== Denominator for basic and diluted earnings per share--weighted average shares 21,765,509 22,501,461 =========== =========== Basic earnings (loss) per share $ (0.30) $ 0.18 =========== =========== Diluted earnings (loss) per share $ (0.30) $ 0.18 =========== ===========
9 6. Segment Information Summarized information by reportable segment is shown in the following tables:
Three Months Ended --------------------------- March 31, April 1, 2001 2000 ------------ ------------ (in thousands) Net sales: Home fashions $ 120,529 $ 114,373 Apparel fabrics 32,202 36,951 Engineered products 11,269 13,625 ----------- ----------- Consolidated net sales $ 164,000 $ 164,949 ============ =========== Operating income (loss): Home fashions $ 485 12,239 Apparel fabrics (497) 3,232 Engineered products (398) 750 Corporate items not allocated to segments: Amortization of goodwill (806) (711) Other (355) (1,294) ----------- ----------- Consolidated operating income (loss) $ (1,571) $ 14,216 =========== ===========
10 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 2001 were $164.0 million, a decrease of $0.9 million or 0.6% from the first quarter of fiscal 2000. Home Fashions Net sales of home fashions products were $120.5 million for the first quarter of fiscal 2001, up $6.2 million or 5.4% from the first quarter of fiscal 2000. Incremental sales from the Import Specialists business we acquired in April 2000 were $3.0 million. The remainder of the increase is attributable to a significant program with a large mass merchant that began in the third quarter of fiscal 2000, which more than compensated for generally soft demand at retail for our home fashions products. Apparel Fabrics Net sales of apparel fabrics for the first quarter of fiscal 2001 were $32.2 million, a decrease of $4.7 million or 12.9% from the first quarter of fiscal 2000. Most of the decrease is attributable to the segment's largest product category, shirting fabrics, in which sales declined by $3.2 million, or 15.6%, reflecting the sluggish retail environment and softness in the career apparel market. Engineered Products Net sales of engineered products for the first quarter of fiscal 2001 were $11.3 million, a decrease of $2.4 million or 17.3% from the first quarter of fiscal 2000. The decrease generally reflects the slowdown in activity in the automobile and tire industries, which began to impact demand for our products in the fourth quarter of fiscal 2000. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses were $16.8 million for the first quarter of fiscal 2001 (10.3% of net sales), an increase of $0.9 million or 5.3% from $16.0 million (9.7% of net sales) for the first quarter of fiscal 2000. Most of the increase is attributable to incremental expenses from the Import Specialists business, which we acquired in April 2000. OPERATING INCOME The Company generated a consolidated operating loss of $1.6 million in the first quarter of fiscal 2001, compared to $14.2 in operating income for the first quarter of fiscal 2000. 11 Segment Operating Income: Operating income for the home fashions segment was $0.5 million for the first quarter of fiscal 2001, including $0.2 million in operating income contributed by the Import Specialists business. In the first quarter of fiscal 2001 the soft retail environment, combined with our focus on inventory reduction, led to promotional pricing which adversely affected our product mix and resulted in lower margins. In addition, profitability was negatively impacted by higher energy and raw material costs, and by production curtailments which were necessary in order to attain targeted inventory levels. The apparel fabrics segment generated a $0.5 million operating loss for the first quarter of fiscal 2001, compared to $3.2 million in operating income for the first quarter of fiscal 2000. In addition to the lower sales volume in the first quarter of fiscal 2001, profitability was negatively impacted by higher energy and raw material costs, and production curtailments that were necessary in order to keep inventories in line with demand for our products. The engineered products segment generated a $0.4 million operating loss in the first quarter of fiscal 2001, compared to $0.8 million in operating income in the first quarter of fiscal 2000. The decrease in profitability reflects both the lower sales volume and higher per-unit manufacturing costs resulting from reduced manufacturing running schedules. Corporate Items: Amortization of goodwill was $0.8 million in the first quarter of fiscal 2001 compared to $0.7 million in the first quarter of fiscal 2000. The increase in fiscal 2001 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 first quarter of fiscal 2001 compared to $1.3 million in the first quarter of fiscal 2000. The fiscal 2000 amount includes $1.1 million related to 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 is now fully depreciated. INTEREST EXPENSE Interest expense was $8.6 million for the first quarter of fiscal 2001, up $1.3 million over the first quarter of fiscal 2000. Approximately 75% of the increase was caused by higher average debt levels, with the remainder attributable to higher average interest rates. INCOME TAX PROVISION The Company recorded a $3.6 million income tax benefit (35.6% of the pre-tax loss) for the first quarter of fiscal 2001, compared to a $3.0 million provision (42.4% of pre-tax income) for the first quarter of fiscal 2000. The effect of nondeductible goodwill amortization decreased the income tax benefit for the first quarter of fiscal 2001 by 2.7% of the pre-tax loss and increased the income tax provision in the first quarter of fiscal 2000 by 3.9% of pre-tax income. 12 NET INCOME AND EARNINGS PER SHARE The net loss for the first quarter of fiscal 2001 was $6.5 million or $0.30 per share compared to net income of $4.1 million or $0.18 per share for the first quarter of fiscal 2000. Weighted average diluted shares outstanding decreased to 21.8 million for the first quarter of fiscal 2001 from 22.5 million for the first quarter of fiscal 2000, due to the repurchase of shares during the first half of fiscal 2000 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 March 31, 2001. Credit Facilities We maintain a credit facility comprised of a term loan and a $150 million secured working capital line of credit. This credit facility is secured by our accounts receivable, inventories and real and personal property. The credit facility bears interest at the Base Rate plus applicable percentage, as defined (8.75% as of May 9, 2001) or LIBOR plus applicable percentage (6.67% as of May 9, 2001), 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. As of March 31, 2001, $109.6 million was used and $40.4 million was unused and available for borrowing. The term loan had an outstanding principal balance of $111.4 million at March 31, 2001. Scheduled amortization payments for fiscal 2001 on the term loan total $23.0 million, $6.5 million of which was paid in the first quarter. 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 Change of Control (as defined) as well as non-compliance with certain other provisions. Working Capital Net cash generated from operating activities in the three months ended March 31, 2001 was $22.5 million. Included in that amount is cash generated from operating assets and liabilities of $21.7 million, comprised of a $20.2 million source from operating working capital (accounts receivable - $4.2 million use, inventories - $14.7 million source, and accounts payable and accrued expenses - $9.7 million source) and a $1.5 million source of cash for prepaid expenses and other assets and other liabilities. 13 During the comparable three month period ended April 1, 2000, net cash generated from operating activities was $4.8 million. Included in that amount is a use of cash from operating assets and liabilities of $12.1 million, comprised of a $9.7 million use from operating working capital (accounts receivable - $17.8 million use, inventories - $4.6 million use, and accounts payable and accrued expenses - $12.8 million source) and a $2.4 million use of cash for prepaid expenses and other assets and other liabilities. Investing Activities During the first three months of fiscal 2001, we purchased $6.9 million in equipment and manufacturing improvements. In addition we invested $3.7 million in our Mexican garment manufacturing operations, including $3.2 million paid in connection with the purchase of our joint venture partner's interest. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not Applicable. 14 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. 15 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. Date: May 11, 2001 /s/ Barry F. Shea ----------------------------------- Barry F. Shea Executive Vice President-Chief Financial Officer (Authorized Signing Officer and Principal Financial Officer)
16 EXHIBIT INDEX -------------
Exhibit No. Description of Exhibit Page - ----------- ---------------------- ---- 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)
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