1 EXHIBIT 99
Danville, Virginia, November 10, 2003. Dan River Inc. (NYSE: DRF)
today reported results for the third fiscal quarter and nine months ended
September 27, 2003. For the third quarter of fiscal 2003, the Company
reported a net loss of $103.5 million, or $4.70 per diluted share. As
previously announced, this loss includes a non-cash write-down of $91.7
million related to goodwill impairment as a result of recent operating
performance. The loss in the third quarter of fiscal 2003 compared to net
income of $4.7 million, or $0.21 per diluted share, for the third quarter
of fiscal 2002.
Net sales for the third quarter of fiscal 2003 were $103.7 million,
down $43.7 million or 29.6% from $147.4 million for the third quarter of
fiscal 2002. Net sales of Dan River's home fashions products were $76.4
million, down $29.5 million or 27.8% compared to the same quarter of fiscal
2002. Net sales of apparel fabrics were $20.5 million, down $10.7 million
or 34.3%. Net sales of engineered products were $6.8 million, down $3.5
million or 34.0%.
"Our third quarter sales were very disappointing," stated Joseph L.
Lanier, Jr., Chairman and Chief Executive Officer. "We believe this
reflects continuing adjustments in customer inventory levels during this
period. The softness we experienced in home fashions occurred in all
retail channels and across all price points and products."
The Company reported a net loss of $120.2 million, or $5.47 per
diluted share, for the nine months ending September 27, 2003. Included in
the year to date performance, in addition to the write-down of goodwill
explained above, was a $12.2 million pre-tax charge, primarily non-cash,
related to closing two manufacturing facilities in the second quarter of
fiscal 2003. Also included in these results are other expense of $1.3
million related to the write-off of unamortized costs pertaining to
financings which were prepaid in full during the second quarter of fiscal
2003, and $1.0 million in increased interest expense due to a one-month
period during the second fiscal quarter when both the Company's 1993
subordinated notes and its recently issued 12-3/4% notes were outstanding.
This compares to net income of $3.2 million, or $0.15 per diluted share,
for the nine months ended September 28, 2002, before the effect of an
accounting change related to the write-down of goodwill under SFAS No. 142,
"Impairment of Goodwill and Intangible Assets." The nine months results
for fiscal 2002 include an increase in income tax expense of $2.8 million,
attributable to the tax law changes associated with the Job Creation and
Worker Assistance Act of 2002, and $1.4 million in bad debt expense
related to the January 2002 Chapter 11 filing of Kmart Corporation.
For the first nine months of fiscal 2003, the Company's net sales were
$367.4 million, down $92.3 million or 20.1% from $459.8 million for the
first nine months of fiscal 2002. Net sales of Dan River's home fashions
products were $262.2 million, down $66.8 million or 20.3% compared to the
first nine months of fiscal 2002. Net sales of apparel fabrics were $79.7
million, down $20.5 million or 20.5%. Net sales of engineered products
were $25.6 million, down $5.0 million or 16.3% compared to the first nine
months of fiscal 2002.
2
Mr. Lanier stated, "As we have previously announced, the reduction in
sales activity has resulted in certain actions being taken by the Company
to offset the shortfall and to improve profitability. We have reduced home
fashions capacities by closing our Greenville and Fort Valley facilities as
announced in the second fiscal quarter. A salary freeze has been in place
since May of this year, and certain hourly wage increases have been
delayed. A reduction of 80 managerial and administrative positions was
announced in August. Planned capital expenditures have been reduced to $13
million for fiscal 2003.
"Additionally, we announced today that we are going to close our
Sevierville, Tennessee apparel fabrics weaving facility and our Camellia
home fashions distribution center in Juliette, Georgia over the next 60 to
90 days. Our apparel weaving will be consolidated into our Danville
weaving facilities, and the Camellia operations will be consolidated into
our other home fashions distribution facilities. Service to our customers
is not expected to be affected by these actions. As a result of these
closures, we expect to take a charge of up to $17 million in the fourth
quarter, most of which will be non-cash. The charge includes a write-down
of home fashions equipment from our closed Greenville plant that we
originally planned to relocate in Danville. Instead, apparel looms from
Sevierville will be relocated in the space we intended to use for the
equipment from Greenville. To the extent we need additional home fashions
greige cloth we intend to source it externally. The anticipated annual
savings from the Sevierville and Juliette closures are expected to be in
the range of $6 to $7 million.
"In summary, the actions we have taken since May are expected to save
the Company approximately $18 million per year when the savings are fully
realized. The full benefits of these actions will not begin to be
reflected in our income statement until fiscal 2004.
"As we look to the fourth quarter of fiscal 2003, we are projecting
sales to be at levels similar to the third quarter," Mr. Lanier continued.
"In order to keep inventories in line, we have scheduled production
downtime for several weeks during the fourth fiscal quarter. These
curtailment costs will significantly impact our operating results in the
fourth quarter. Although we expect to report a net loss in the fourth
fiscal quarter, based on current information we believe that we will have
sufficient liquidity under our revolving line of credit to provide for our
operating and debt service requirements in the fourth fiscal quarter."
On October 14, the Company announced that it had received a waiver
from its senior lenders in respect of the Company's violation of its
maximum leverage ratio covenant for the third fiscal quarter. As a result
of the waiver, the Company is currently in compliance with the terms of its
senior secured credit facility. In connection with the waiver, additional
covenants were established requiring minimum levels of excess availability
under the Company's revolving credit facility and monthly operating EBITDA
(as defined in the credit facility) during the fourth fiscal quarter.
These covenants are set forth in an amendment to the Company's credit
facility which was filed on October 14, 2003 as an exhibit to its Current
Report on Form 8-K.
3
As it is probable that the Company will not meet the maximum leverage
ratio and the minimum fixed charge ratio covenants at the end of the fourth
quarter, the Company is required to report its senior secured debt as long-
term debt due currently. Additionally, all senior debt which would be
subject to cross acceleration in the event the senior secured lenders
elected to accelerate has been reported as current, despite the fact that
no default has occurred with respect to this debt, which consists primarily
of the 12-3/4% senior notes.
Mr. Lanier said, "This has been a very difficult year for our Company.
However, our outlook for the first quarter of fiscal 2004 is more
optimistic across all of our divisions. Customers have indicated strong
support for our recently introduced home fashions products that will begin
to ship during the first quarter of fiscal 2004. Our apparel fabrics
division has also had success in new product placements that will ship in
the first quarter of fiscal 2004. With the announced cost savings measures
fully implemented, we expect to see the benefit of those savings contribute
directly to the bottom line in fiscal 2004."
Note: This news release contains forward-looking statements under
applicable securities laws. The Company believes its forward-looking
statements are reasonable; however, undue reliance should not be placed on
such statements, which are based on current expectations. Dan River's
financial condition and results of operations could be materially and
adversely affected by numerous market and industry factors outside of its
control. In particular, if demand for the Company's products does not
improve, the Company's results of operations and financial condition will
be materially and adversely affected. Additional risks associated with Dan
River's business are detailed in its annual report on Form 10-K filed with
the SEC on February 21, 2003.
4
The following are the financial highlights:
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(OOO's EXCEPT PER SHARE DATA)
Three Months Ended Nine Months Ended
------------------- -----------------
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
2003 2002 2003 2002
----- ------ ----- -----
Net Sales $ 103,728 $ 147,411 $ 367,448 $ 459,771
Cost of Sales 94,936 116,470 316,250 377,010
--------- ---------- ---------- ---------
Gross Profit 8,792 30,941 51,198 82,761
S, G and A 13,840 16,441 47,095 51,406
Impairment of Goodwill 91,701 -- 91,701 --
Other Operating Costs, Net
800 -- 12,549 (310)
--------- --------- --------- ---------
Operating Income (Loss) (97,549) 14,500 (100,147) 31,665
Other Income (Expense) 1,144 (103) 949 105
Interest Expense 7,130 6,450 20,757 20,978
--------- ---------- --------- ---------
Income (Loss) Before
Income Taxes and
Cumulative Effect (103,535)
of Accounting Change 7,947 (119,955) 10,792
Provision for Income Taxes -- 3,248 235 7,570
--------- --------- --------- ---------
Income (Loss) Before
Cumulative Effect of
Accounting Change (103,535) 4,699 (120,190) 3,222
Cumulative Effect of
Accounting Change, Net
of Tax -- -- -- (20,701)
-------- --------- --------- --------
Net Income (Loss) $(103,535) $ 4,699 $ (120,190) $ (17,479)
========= ========== ========== =========
5
UNAUDITED
CONDENSED CONSOLIDATED INCOME STATEMENT
(OOO's EXCEPT PER SHARE DATA)
Three Months Ended Nine Months Ended
------------------ -----------------
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
2003 2002 2003 2002
------ ------ ------ -----
Earnings (Loss) Per Share -
Basic:
Income (Loss) Before
Cumulative Effect
of Accounting
Change $ (4.70) $ 0.22 $ (5.47) $ 0.15
Cumulative Effect of
Accounting Change -- -- -- (0.95)
--------- ---------- --------- ---------
Net Income (Loss) $ (4.70) $ 0.22 $ (5.47) $ (0.80)
========= ========== ========= =========
Earnings (Loss) Per Share -
Diluted:
Income (Loss) Before
Cumulative Effect
of Accounting
Change $ (4.70) $ 0.21 $ (5.47) $ 0.15
Cumulative Effect of
Accounting Change - - - (0.94)
--------- ---------- --------- ---------
Net Income (Loss) $ (4.70) $ 0.21 $ (5.47) $ (0.79)
========= ========== ========= =========
Wtd. Avg. No. Shares:
Basic 22,016 21,840 21,985 21,823
Diluted 22,016 22,299 21,985 21,139
6
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's)
September 27, December 28,
2003 2002
--------- -----------
Assets:
- ------
Cash $ 2,147 $ 2,832
Accounts Receivable 50,994 71,292
Inventories 159,789 151,586
Other Current Assets 21,750 19,667
------------- ------------
Total Current Assets 234,680 245,377
Property, Plant & Equipment, Net 213,123 248,175
Goodwill, Net -- 91,701
Other Assets 18,676 10,269
------------- ------------
Total Assets $ 466,479 $ 595,522
============= ============
Liabilities and Shareholders' Equity:
- ------------------------------------
Current Maturities of Long-Term Debt $ 246,556 $ 241,231
Accounts Payable & Accrued Expenses 52,060 58,439
------------- ------------
Total Current Liabilities 298,616 299,670
Long-Term Debt 6,872 10,792
Deferred Income Taxes and Other
Liabilities 51,982 56,023
Shareholders' Equity 109,009 229,037
------------- ------------
Total Liabilities & Shareholders' $ 466,479 $ 595,522
Equity ============= ============
7
UNAUDITED
SEGMENT INFORMATION
(000's)
Three Months Ended Nine Months Ended
------------------ -----------------
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
2003 2002 2003 2002
---- ---- ---- ----
Net Sales:
Home Fashions $ 76,389 $105,857 $ 262,220 $ 329,059
Apparel Fabrics 20,549 31,272 79,652 100,154
Engineered Products 6,790 10,282 25,576 30,558
--------- -------- --------- ---------
Consolidated Net Sales $ 103,728 $147,411 $ 367,448 $ 459,771
========= ======== ========= =========
Operating Income (Loss):
Home Fashions $ (142) $ 13,632 $ 12,169 $ 31,157
Apparel Fabrics (3,242) 1,681 (4,391) 1,427
Engineered Products (1,029) (531) (2,497) (1,141)
Corporate Items Not
Allocated to
Segments:
Impairment of
Goodwill (91,701) -- (91,701) --
Other Operating
Costs, Net (800) -- (12,549) 310
Other (635) (282) (1,178) (88)
--------- -------- --------- --------
Consolidated Operating
Income (Loss) $ (97,549) $ 14,500 $(100,147) $ 31,665
========= ======== ========= ==========
8
UNAUDITED
OTHER FINANCIAL DATA
(000's)
Three Months Ended Nine Months Ended
------------------ ----------------
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
2003 2002 2003 2002
---- ---- ---- ----
Depreciation & Amortization
of Property, Plant & $ 8,795 $ 9,520 $ 27,674 $ 28,339
Equipment
Capital Expenditures in $ 2,289 $ 3,250 $ 9,856 $ 8,587
Cash