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 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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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 the Company's 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, fluctua-
tions 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, deteriora-
tion 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.
3
DAN RIVER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
July 1, January 1,
2000 2000
----------- -----------
(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 215,477 168,487
Prepaid expenses and other current assets 6,593 2,132
Deferred income taxes 14,661 15,381
----------- -----------
Total current assets 322,759 265,093
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
----------- -----------
$ 749,639 $ 684,582
=========== ===========
4
DAN RIVER INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
July 1, January 1,
2000 2000
------------ ------------
(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 22,393 22,411
Other accrued expenses 17,005 12,485
------------ ------------
Total current liabilities 103,453 90,728
Other liabilities:
Long-term debt 335,718 292,416
Deferred income taxes 23,949 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 66,403 57,105
------------ ------------
Total shareholders' equity 275,717 270,952
------------ ------------
$ 749,639 $ 684,582
============ ============
See accompanying notes.
5
DAN RIVER INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
----------------------- ----------------------
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
--------- -------- -------- --------
(in thousands, except per share data)
Net sales $ 157,232 $ 154,104 $ 322,181 $ 323,640
Costs and expenses:
Cost of sales 123,326 125,257 255,128 266,899
Selling, general
and administrative
expenses 17,764 16,034 34,652 33,395
Amortization of
goodwill 810 696 1,522 1,392
--------- --------- --------- ---------
Operating income 15,332 12,117 30,879 21,954
Other income 153 69 352 358
Interest expense (7,869) (6,985) (15,207) (14,329)
--------- --------- --------- ---------
Income before
income taxes 7,616 5,201 16,024 7,983
Provision for
income taxes 3,210 2,274 6,726 3,507
--------- --------- --------- ---------
Net income $ 4,406 $ 2,927 $ 9,298 $ 4,476
========= ========= ========= =========
Earnings per share:
Basic $ 0.20 $ 0.13 $ 0.42 $ 0.19
========= ========= ========= =========
Diluted $ 0.20 $ 0.12 $ 0.42 $ 0.19
========= ========= ========= =========
See accompanying notes
6
DAN RIVER INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
---------------------------
July 1, July 3,
2000 1999
------------ ------------
(in thousands)
Cash flows from operating activities:
Net income $ 9,298 $ 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 5,113 2,234
Writedown/disposal of assets (244) (48)
Changes in operating assets and liabilities:
Accounts receivable (5,607) 12,058
Inventories (41,026) 6,793
Prepaid expenses and other assets (5,179) (469)
Accounts payable and accrued expenses 12,245 (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
========== ==========
See accompanying notes.
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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:
July 1, January 1,
2000 2000
------------ ------------
(in thousands)
Finished goods $ 83,056 $ 55,710
Work in process 114,148 92,707
Raw materials 4,139 8,475
Supplies 14,134 11,595
-------- --------
Total Inventories $215,477 $168,487
======== ========
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DAN RIVER INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. 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 Janu-
ary 1, 2000 $ 206 $ 21 $213,620 $57,105 $270,952
Net income -- -- -- 9,298 9,298
Stock option
activity -- -- 66 -- 66
Repurchase of
Common Stock (9) -- (4,590) -- (4,599)
------ ------ -------- ------- --------
Balance at July
1, 2000 $ 197 $ 21 $209,096 $66,403 $275,717
======= ====== ======== ======= ========
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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:
Three Months Ended Six Months Ended
----------------------- ----------------------
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
--------- -------- -------- --------
(in thousands, except per share data)
Numerator for basic
and diluted earnings
per share -- net
income $ 4,406 $ 2,927 $ 9,298 $ 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 $ 0.20 $ 0.13 $ 0.42 $ 0.19
========= ========= ========= =========
Diluted $ 0.20 $ 0.12 $ 0.42 $ 0.19
========= ========= ========= =========
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5. Segment Information
Summarized information by reportable segment is shown in the following
tables:
Three Months Ended Six Months Ended
----------------------- ----------------------
July 1, July 3, July 1, July 3,
2000 1999 2000 1999
--------- -------- -------- --------
(in thousands)
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 $ 12,702 $ 12,203 $ 26,452 $ 23,965
Apparel Fabrics 3,014 1,300 6,097 1,174
Engineered Products 787 1,035 1,508 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 $ 15,332 $ 12,117 $ 30,879 $ 21,954
========= ========= ========= =========
6. 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
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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.
12
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
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 6 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 $17.8 million for the
second quarter of fiscal 2000 (11.3% of net sales), an increase of $1.7
million or 10.8% 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.
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OPERATING INCOME
Consolidated operating income for the second quarter of fiscal 2000 was $15.3
million (9.8% 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 $12.7 million for the
second quarter of fiscal 2000, compared to $12.2 million for the second
quarter of fiscal 1999. Most of the increase is attributable to the Import
Specialists business, acquired in April, which contributed $0.3 million in
operating income. The remainder of the increase is generally attributable to
reduced costs due to lower cotton prices.
The apparel fabrics segment generated $3.0 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.
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INCOME TAX PROVISION
The income tax provision was $3.2 million (42.1% of pre-tax income) for the
second quarter of fiscal 2000, compared to $2.3 million (43.7% of pre-tax
income) for the second quarter 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 second quarter of fiscal 2000 was $4.4 million or $0.20
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 $34.7 million for the first
six months of fiscal 2000 (10.8% of net sales), an increase of $1.3 million
or 3.8% from $33.4 million (10.3% of net sales) for the first six months of
fiscal 1999. Incremental expenses resulting from the acquisition of Import
15
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.
OPERATING INCOME
Consolidated operating income for the first six months of fiscal 2000 was
$30.9 million (9.6% 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 $26.5 million for the
first six months of fiscal 2000, compared to $24.0 million for the first six
months of fiscal 1999. The Import Specialists business, acquired in April
2000 contributed $0.3 million of the increase. The remainder of the increase
is generally attributable to lower cotton prices.
The apparel fabrics segment generated $6.1 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 $1.5 million for the
first six months of fiscal 2000, compared to $1.6 million 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.
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.
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INCOME TAX PROVISION
The income tax provision was $6.7 million (42.0% 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 $9.3 million or $0.42
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 56.7% 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.
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.
17
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 $39.7 million, comprised of a $34.4 million use of
operating working capital (accounts receivable - $5.6 million use, inven-
tories - $41.0 million use, and accounts payable and accrued expenses - $12.2
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.
18
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The registrant's Annual Meeting of Shareholders was held on April
20, 2000. 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 Edward J. Lill and John F. Maypole to hold office until
the Annual Meeting of Shareholders in 2003, or until their
successors are elected and qualified:
1. Edward J. Lill For: 16,192,655 Withheld: 328,315
2. John F. Maypole For: 16,192,655 Withheld: 328,315
Continuing directors are Donald J. Keller, Joseph L. Lanier, Jr.
and Richard L. Williams.
2. To approve the performance goals contained in our management
incentive plan.
For: 15,686,798 Against: 799,901 Abstained: 34,271
3. To adopt and approve a long-term incentive plan, which will, among
other things, make available up to 2,000,000 shares of our Class A
Common Stock for issuance under the plan.
For: 13,075,982 Against: 1,851,482 Abstained: 35,742
4. To ratify the appointment of Ernst & Young LLP as our independent
auditors for fiscal 2000.
For: 16,215,639 Against: 282,667 Abstained: 22,664
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
19
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: August 8, 2000 /s/ Barry F. Shea
-----------------------------------
Barry F. Shea
Executive Vice President-Chief
Financial Officer
(Authorized Signing Officer and
Principal Financial Officer)
20
EXHIBIT INDEX
-------------
Exhibit No. Description of Exhibit Page
No.
- ----------- ---------------------- -------
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)).
10* Third Amendment to Credit Agreement dated
as of June 26, 2000, amending Credit Agreement
dated as of October 14, 1998, among Dan River
Inc. and certain of its subsidiaries, the
several lenders parties thereto and First Union
National Bank as Agent.
27* Financial Data Schedule, which is submitted
electronically to the Securities and Exchange
Commission for information only and not filed.
- ------------------
*Filed herewith.
EX 10
1
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (the "Third Amendment") dated
as of June 26, 2000, is to that Credit Agreement dated as of October 14,
1998, as amended by a First Amendment to Credit Agreement dated May 21, 1999
and a Second Amendment to Credit Agreement dated December 29, 1999 (as may be
subsequently amended and modified from time to time, the "Credit Agreement";
terms used but not otherwise defined herein shall have the meanings provided
in the Credit Agreement), by and among DAN RIVER INC., a Georgia corporation
(the "Borrower"), the Guarantors identified therein, the several banks and
other financial institutions identified therein (the "Lenders") and FIRST
UNION NATIONAL BANK, as administrative agent for the Lenders thereunder (in
such capacity, the "Agent"), BANK ONE, N.A. formerly The First National Bank
of Chicago, as syndication agent, and WACHOVIA BANK, N.A., as documentation
agent.
W I T N E S S E T H:
WHEREAS, the Lenders have established a credit facility for the benefit
of the Borrower pursuant to the terms of the Credit Agreement;
WHEREAS, the Borrower has requested that the Required Lenders (i) amend
certain provisions of the Credit Agreement by making certain modifications
thereto including a $12,910,000 increase to the Term Loan Committed Amount,
such increase to be funded by certain of the Lenders (the "Increasing
Lenders") in the amounts set forth on Annex I attached hereto, and (ii) waive
compliance by the Borrower with certain provisions of the Credit Agreement;
and
WHEREAS, the Required Lenders have agreed to the requested amendment and
waiver on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
A. The Credit Agreement is amended in the following respects:
1. The definition of "Interest Period" in Section 1.1 of the
Credit Agreement is hereby amended by deleting the reference
to "twelve (12)" in subclause (ii)(E) and replacing such
reference with "fifteen (15)".
2. Section 2.2(a) is hereby amended by deleting the amount of
"ONE HUNDRED TWENTY-FIVE MILLION DOLLARS ($125,000,000)" in
the first sentence thereof and replacing it with "ONE HUNDRED
THIRTY-SEVEN MILLION NINE HUNDRED TEN THOUSAND DOLLARS
($137,910,000)".
3. Section 2.2(b) is hereby amended by deleting the Term Loan
Principal Amortization Payment for September 30, 2003 in the
amount of "$12,000,000" and replacing it with "$24,910,000".
2
4. Section 6.5(b) is hereby amended by making the additions set
forth in bold below:
(a) (i) purchase, lease or otherwise acquire (in a
single transaction or a series of related transactions) the
property or assets of any Person (other than purchases or
other acquisitions of inventory, leases, materials, property
and equipment in the ordinary course of business, except as
otherwise limited or prohibited herein) provided that so long
as no Default or Event of Default shall have occurred and be
continuing or would result therefrom, the Borrower may acquire
all or a majority of the Capital Stock or other ownership
interest in any Person (in a similar or related line of
business) or all or a substantial portion of the assets,
property and/or operations of a Person (in a similar or
related line of business) in an aggregate amount not to exceed
(x) $40,000,000 in fiscal year 2000 and (y) $25,000,000 in any
other fiscal year, or (ii) enter into any transaction of
merger or consolidation, except for (A) investments or
acquisitions permitted pursuant to Section 6.6, and (B) the
merger or consolidation of a Credit Party with and into
another Credit Party, provided that if the Borrower is a party
thereto, the Borrower will be the surviving corporation.
5. Schedule 2.1(a) of the Credit Agreement is hereby deleted in
its entirety and replaced with Schedule 2.1(a) as set forth in
Annex II attached hereto.
B. The Required Lenders hereby waive the mandatory prepayment
requirement of Section 2.7 (b)(iii), to the extent that such provision would
have required the Borrower to prepay the Loans with the proceeds of the
$12,910,000 increase in the Term Loan Committed Amount provided for
hereunder.
C. Except as modified hereby, all of the terms and provisions of the
Credit Agreement (and Exhibits) remain in full force and effect.
D. The Credit Parties hereby represent and warrant that (a) the
representations and warranties contained in Article III of the Credit
Agreement, as amended hereby are correct in all material respects on and as
of the date hereof as though made on and as of such date and after giving
effect to the amendments contained herein and (b) no Default or Event of
Default exists on and as of the date hereof and after giving effect to the
amendments contained herein.
E. This Third Amendment shall become effective upon three Business
Days following the satisfaction of the following conditions precedent (such
date referred to herein as the "Amendment Effective Date)":
(a) Execution of Third Amendment. The Agent shall have received
counterparts of this Third Amendment, executed by a duly authorized
officer of each party hereto.
3
(b) Term Notes. The Agent shall have received, for the account of
each Increasing Lender, fully executed Term Notes in the amounts set
forth on Annex I.
(c) Authority Documents. The Agent shall have received the
following:
(i) Articles of Incorporation. Copies of the articles of
incorporation or other charter documents, as applicable, of each
Credit Party certified to be true and complete as of a recent date
by the appropriate governmental authority of the state of its
incorporation.
(ii) Resolutions. Copies of resolutions of the board of
directors of each Credit Party approving and adopting the
Amendment, the transactions contemplated therein, including the
increase of the Term Loan Committed Amount hereunder, and
authorizing execution and delivery thereof, certified by an officer
of such Credit Party as of the Amendment Effective Date to be true
and correct and in force and effect as of such date.
(iii) Bylaws. A copy of the bylaws of each Credit Party
certified by an officer of such Credit Party as of the Amendment
Effective to be true and correct and in force and effect as of such
date.
(iv) Good Standing. Copies of (i) certificates of good
standing, existence or its equivalent with respect to the each
Credit Party certified as of a recent date by the appropriate
governmental authorities of the state of incorporation and (ii) a
certificate indicating payment of all corporate franchise taxes
certified as of a recent date by the appropriate governmental
taxing authorities of the state of incorporation of each Credit
Party.
(v) Incumbency. An incumbency certificate of each Credit
Party certified by a secretary or assistant secretary to be true
and correct as of the Amendment Effective Date.
(d) Amendment Fee. The Borrower shall have paid an amendment
fee to each Lender party to this Third Amendment in the amount of
0.125% of such Lender's Commitment (such amount to be determined
prior to giving effect to the increase of the Term Loan Committed
Amount hereunder).
(e) Commitment Fee. The Borrower shall have paid a
commitment fee to each Increasing Lender in the amount of .50% of
such Lender's increased Term Loan Commitment as set forth on Annex
1 attached hereto.
E. The Guarantors acknowledge and consent to all of the terms and
conditions of this Third Amendment and agree that this Third Amendment and
all documents executed in connection herewith do not operate to reduce or
discharge the Guarantors' obligations under the Credit Agreement or the other
Credit Documents. The Guarantors further acknowledge and agree that the
4
Guarantors have no claims, counterclaims, offsets, or defenses to the Credit
Documents and the performance of the Guarantors' obligations thereunder or if
the Guarantors did have any such claims, counterclaims, offsets or defenses
to the Credit Documents or any transaction related to the Credit Documents,
the same are hereby waived, relinquished and released in consideration of the
Required Lenders' execution and delivery of this Third Amendment.
F. This Third Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original and it shall not be necessary in making proof of this Third
Amendment to produce or account for more than one such counterpart.
G. This Third Amendment and the Credit Agreement, as amended
hereby, shall be deemed to be contracts made under, and for all purposes
shall be construed in accordance with the laws of the State of North
Carolina.
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Third Amendment to be duly executed and delivered as of
the date and year first above written.
BORROWER: DAN RIVER INC.,
- -------- a Georgia corporation
By:_________________________
Name:_______________________
Title:_______________________
THE BIBB COMPANY,
a Delaware corporation
By:_________________________
Name:_______________________
Title:_______________________
DAN RIVER FACTORY STORES, INC.,
a Georgia corporation
By:_________________________
Name:_______________________
Title:_______________________
5
AGENTS AND LENDERS: FIRST UNION NATIONAL BANK,
- ------------------ as Administrative Agent and as
a Lender
By:_________________________
Name:_______________________
Title:_______________________
BANK ONE, NA
formerly The First National Bank
of Chicago, as Syndication Agent
and as a Lender
By:_________________________
Name:_______________________
Title:_______________________
WACHOVIA BANK, N.A.,
as Documentation Agent and as a Lender
By:__________________________
Name:________________________
Title:________________________
THE BANK OF NEW YORK
as a Lender
By:__________________________
Name:________________________
Title:________________________
CENTURA BANK,
as a Lender
By:___________________________
Name:_________________________
Title:_________________________
Page 6
COMERICA BANK,
as a Lender
By:___________________________
Name:_________________________
Title:_________________________
FLEET BANK, N.A.,
as a Lender
By:___________________________
Name:_________________________
Title:_________________________
NATIONAL CITY BANK OF KENTUCKY,
as a Lender
By:___________________________
Name:_________________________
Title:_________________________
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A. "RABOBANK
NEDERLAND", NEW YORK BRANCH,
as a Lender
By:___________________________
Name:_________________________
Title:_________________________
SOUTHTRUST BANK, N.A.,
as a Lender
By:____________________________
Name:__________________________
Title:__________________________
7
SUNTRUST BANK,
as a Lender
By:___________________________
Name:_________________________
Title:_________________________