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 April 1, 2000
Commission File No. 1-11126
DYERSBURG CORPORATION
(Exact name of registrant as specified in its charter)
TENNESSEE 62-1363247
(State or other jurisdiction of (I.R.S employer
incorporation or organization) identification no.)
15720 JOHN J. DELANEY DR., SUITE 445
CHARLOTTE, NORTH CAROLINA 28277
(Address of principal executive offices) (Zip Code)
(704) 341-2299
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, Par Value $.01/Share Over the Counter Bulletin Board
(Title of each class) (Name of exchange on which registered)
Securities registered pursuant to Section 12 (b) of the Act: None
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
Indicate the number of shares outstanding of each issuer's classes of common
stock, as of the latest practicable date.
Title of each Number of shares outstanding as of April 17, 2000
- ---------------------------- -------------------------------------------------
Common Stock $0.01 par value 13,388,556
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INDEX TO FORM 10-Q
DYERSBURG CORPORATION
PAGE
----
PART I--FINANCIAL INFORMATION
ITEM 1--FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets at
April 1, 2000, and October 2, 1999 ...........................3
Condensed Consolidated Statements of Operations
for the Three Months Ended April 1, 2000,
and April 3, 1999; Six Months Ended
April 1, 2000, and April 3, 1999..............................4
Condensed Consolidated Statements of Cash
Flows for the Six Months Ended
April 1, 2000, and April 3, 1999..............................5
Notes to Condensed Consolidated Financial
Statements....................................................6
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS......................11
PART II--OTHER INFORMATION
ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS....................13
ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K...................................15
SIGNATURES.................................................................16
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DYERSBURG CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except per share data)
APRIL 1, OCTOBER 2,
2000 1999
--------- ---------
ASSETS
Current assets:
Cash ........................................................... $ 331 $ 158
Accounts receivable, net of allowance for doubtful accounts
of $2,509 at April 1, 2000, and $2,826 at October 2, 1999 ...... 53,598 50,509
Inventories .................................................... 46,945 36,735
Income taxes receivable ........................................ -- 8,253
Deferred income taxes .......................................... 3,126 3,850
Prepaid expenses and other ..................................... 1,148 2,864
--------- ---------
Total current assets ...................................... 105,148 102,369
Property, plant and equipment, net ............................. 115,985 120,688
Goodwill, net .................................................. 89,523 90,954
Deferred debt costs ............................................ 4,735 5,018
Assets held for sale and other ................................. 2,995 3,905
--------- ---------
$ 318,386 $ 322,934
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable ........................................ $ 19,633 $ 14,697
Accrued expenses .............................................. 10,539 11,127
Current portion of long-term obligations ...................... 64,716 3,400
--------- ---------
Total current liabilities ................................. 94,888 29,224
Long-term obligations ......................................... 132,900 194,460
Deferred income taxes ......................................... 5,747 7,779
Other liabilities ............................................. -- 1,571
Shareholders' equity:
Preferred stock, authorized 5,000,000 shares; none issued
Common stock, $.01 par value, authorized 40,000,000 shares; issued
and outstanding shares 13,388,556 at April 1, 2000, and 13,341,066
at October 2, 1999 ............................................... 134 133
Additional paid-in capital ..................................... 42,824 42,773
Retained earnings .............................................. 42,349 46,994
Accumulated other comprehensive loss ........................... (456) --
--------- ---------
Total shareholders' equity ................................ 84,851 89,900
--------- ---------
$ 318,386 $ 322,934
========= =========
See notes to condensed consolidated financial statements.
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DYERSBURG CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands, except share and per share data)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------------- -------------------------------
APRIL 1, APRIL 3, APRIL 1, APRIL 3,
2000 1999 2000 1999
------------ ------------ ------------ ------------
Net Sales ..................... $ 78,724 $ 80,138 $ 147,073 $ 155,529
Costs and expenses:
Cost of sales .............. 70,519 70,068 128,353 134,638
Selling, general and
administrative .......... 9,062 8,816 15,313 17,413
Interest and amortization of
debt costs .............. 4,868 4,935 9,725 10,102
------------ ------------ ------------ ------------
Total costs and expenses ...... 84,449 83,819 153,391 162,153
------------ ------------ ------------ ------------
Loss before income taxes ...... (5,725) (3,681) (6,318) (6,624)
Income tax benefit ............ (1,697) (1,029) (1,673) (2,320)
------------ ------------ ------------ ------------
Net Loss ...................... $ (4,028) $ (2,652) $ (4,645) $ (4,304)
============ ============ ============ ============
Weighted average shares
outstanding:
Basic ..................... 13,382,929 13,345,598 13,368,372 13,342,321
Diluted ................... 13,382,929 13,348,033 13,368,372 13,343,767
============ ============ ============ ============
Earnings (loss) per share:
Basic ..................... $ (0.30) $ (0.20) $ (0.35) $ (0.32)
============ ============ ============ ============
Diluted ................... $ (0.30) $ (0.20) $ (0.35) $ (0.32)
============ ============ ============ ============
Dividends per share ........... $ 0.00 $ 0.01 $ 0.00 $ 0.02
============ ============ ============ ============
See notes to condensed consolidated financial statements.
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DYERSBURG CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
SIX MONTHS ENDED
------------------------
APRIL 1, APRIL 3,
2000 1999
-------- --------
OPERATING ACTIVITIES
Net Loss ........................................... $ (4,645) $ (4,304)
Adjustments to reconcile to net cash (used in)
provided by operating activities:
Depreciation and amortization ................. 10,536 10,442
Decrease (increase) in accounts receivable, net (3,089) 16,110
Increase in inventory ......................... (10,211) (4,456)
Increase (decrease) in trade accounts payable . 4,936 (5,208)
Federal income taxes .......................... 8,328 412
Other-net ..................................... (1,633) (2,481)
-------- --------
Net cash provided by operating activities ..... 4,222 10,515
INVESTING ACTIVITIES
Capital expenditures ............................... (3,796) (5,337)
Other-net .......................................... 1,259 (312)
-------- --------
Net cash used in investing activities ....... (2,537) (5,649)
FINANCING ACTIVITIES
Net repayment of debt .............................. (244) (4,706)
Dividends paid ..................................... -- (266)
Other .............................................. (1,268) 21
-------- --------
Net cash used in financing activities ....... $ (1,512) $ (4,951)
-------- --------
Net increase (decrease) in cash ............. 173 (85)
Cash at beginning of period .......................... 158 265
-------- --------
Cash at end of period ................................. $ 331 $ 180
======== ========
See notes to condensed consolidated financial statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DYERSBURG CORPORATION
April 1, 2000
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
include the accounts of Dyersburg Corporation ("Company") and its wholly-owned
subsidiaries. All significant intercompany balances and transactions have been
eliminated. The accompanying unaudited consolidated condensed financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Financial
information as of October 2, 1999, has been derived from the audited financial
statements of the Company, but does not include all disclosures required by
generally accepted accounting principles. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial information for the periods indicated have
been included. Due to seasonal patterns, the results for interim periods are not
necessarily indicative of results to be expected for the year. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the fiscal year
ended October 2, 1999.
NOTE B--INVENTORIES
APRIL 1, OCTOBER 2,
2000 1999
------- -------
(IN THOUSANDS)
Raw materials .... $13,514 $11,611
Work in process .. 17,816 12,436
Finished goods ... 13,964 10,919
Supplies and other 1,651 1,769
------- -------
$46,945 $36,735
======= =======
NOTE C--LONG-TERM OBLIGATIONS
In August 1997, the Company issued $125,000,000 principal amount of
9.75% Senior Subordinated Notes due September 1, 2007 (the "Subordinated
Notes"). The Subordinated Notes are unsecured senior subordinated obligations
and are subordinated in right of payment to the prior payment in full of all
senior indebtedness. The Subordinated Notes are guaranteed by all of the
Company's subsidiaries (the "Guarantors"). Separate financial statements of the
Guarantors are not included herein because: (a) the Company is a holding company
with no assets or operations other than its investments in its subsidiaries; (b)
the Guarantors are wholly-owned subsidiaries of the Company and have fully and
unconditionally guaranteed the Subordinated Notes on a joint and several basis;
(c) the Guarantors comprise all of the direct and indirect subsidiaries of the
Company; and (d) management believes that such information is not material to
investors.
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7
Effective August 19, 1999, the Company entered into a Credit Agreement,
replacing its existing credit facility, consisting of a three-year $84,000,000
revolving line of credit (the "Revolver") and a three-year $26,000,000 term loan
(the "Term Loan"). Borrowings under the Credit Agreement bear interest at either
LIBOR plus a specified margin currently equal to 2.75% for the Revolver and
3.25% for the Term Loan, or, at the Company's option, bear interest at the
lender's base rate (the base rate was 9.0% at April 1, 2000) plus a margin equal
to 1.0%, for the Revolver and 1.5% for the Term Loan. The availability under the
Revolver is limited at all times, through maturity, to a receivables and
inventory borrowing base.
The Company is currently in default under the terms of its Credit
Agreement as a result of its failure to achieve the prescribed level of
consolidated EBITDA (earnings before interest, taxes, depreciation and
amortization) during the six-month period ended April 1, 2000. On May 12, 2000,
the Company entered into a Forbearance Agreement with its Lenders. Under the
Forbearance Agreement, the Lenders have agreed that for a period ending on
August 25, 2000 they will continue to make Revolving Loans and Letter of Credit
accommodations available to the Company under the Credit Agreement and will not
exercise any remedies available to the Lenders as a result of the Company's
default, including the right to accelerate collection of the Company's
obligations or to foreclose on the Company's assets. The Lenders obligations
under the Forbearance Agreement are conditioned on the Company achieving a
consolidated EBITDA of at least $5 million for the three-month period ending
July 1, 2000, and at least $7 million for the four-month period ending July 29,
2000 and maintaining Net Worth (as defined in the Credit Agreement) of at least
$110 million. The Company continues to access its Revolver and has not realized
any reduction in its borrowing availability.
On May 12, 2000, the Company and its Lenders also entered into a First
Amendment to the Loan and Security Agreement. The amendment restricts certain
investments in affiliates and joint ventures and property transfers that were
previously permitted under the Credit Agreement.
In accordance with generally accepted accounting principles, as a
result of the default under the Credit Agreement, the amounts outstanding under
the Credit Agreement have been reflected in current liabilities on the balance
sheet.
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NOTE D--EARNINGS (LOSS) PER SHARE
The table below sets forth the computations of basic and diluted earnings per
share:
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------------- ---------------------------------
APRIL 1, APRIL 3, APRIL 1, APRIL 3,
2000 1999 2000 1999
------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Numerator for basic and diluted
earnings per share--net loss ... $ (4,028) $ (2,652) $ (4,645) $ (4,304)
Denominator:
Denominator for basic earnings
(loss) per share--weighted
average shares ................. 13,382,929 13,345,598 13,368,372 13,342,321
Effect of dilutive securities:
Employee Stock Options ........ -- 2,435 -- 1,446
------------ ------------ ------------ ------------
Denominator for diluted earnings
(loss) per share--adjusted
weighted average shares ........ 13,382,929 13,348,033 13,368,372 13,343,767
============ ============ ============ ============
Basic earnings (loss) per
share .......................... $ (0.30) $ (0.20) $ (0.35) $ (0.32)
============ ============ ============ ============
Diluted earnings (loss) per
share .......................... $ (0.30) $ (0.20) $ (0.35) $ (0.32)
============ ============ ============ ============
NOTE E--PENSION
The Company elected to freeze benefits under its salaried and hourly
defined benefit pension plans as of December 31, 1999. This resulted in the
recognition of a curtailment gain on the salary plan of approximately
$1,700,000. Also, in connection with the curtailment of the hourly plan, the
Company recognized additional net minimum pension liability of $456,000 (net of
applicable taxes of $245,000). The additional net minimum pension liability has
been recorded as accumulated other comprehensive loss on the balance sheet at
April 1, 2000.
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NOTE F--COMPREHENSIVE LOSS
The following table provides a reconciliation of net loss reported in
the Company's consolidated condensed statements of operations to comprehensive
loss:
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------- ------------------------
APRIL 1, APRIL 3, APRIL 1, APRIL 3,
2000 1999 2000 1999
------- ------- ------- -------
(IN THOUSANDS)
Net loss ................... $(4,028) $(2,652) $(4,645) $(4,304)
Other comprehensive loss:
Additional minimum pension
Liability ................ -- -- (701) --
Tax effect ................. -- -- 245 --
------- ------- ------- -------
Net of tax ................ -- -- (456) --
Comprehensive loss ......... $(4,028) $(2,652) $(5,101) $(4,304)
======= ======= ======= =======
NOTE G--RESTRUCTURING CHARGES
During the third quarter 1999, the Company implemented a reorganization
plan related to its textile business. The textile business had been running at
less than full capacity due to the domestic circular knit industry experiencing
excess supply and low-priced garment imports from Asia. The duration of these
market conditions remains uncertain. In response to these business conditions,
the Company decided to reduce its U.S. manufacturing capacity. The major
elements of the reorganization plan included the closing of the Company's
facility in Hamilton, North Carolina and the elimination of yarn spinning
operations at the Company's Trenton, Tennessee facilities which were completed
during the fourth quarter. Additionally, the plan resulted in the reduction of
approximately 500 hourly and salaried employees, with severance benefits being
paid over periods up to twelve months from the termination date. At October 2,
1999 substantially all employees had been terminated or notified of their
impending termination.
The cost of the reorganization was reflected as a restructuring charge,
before income taxes, of $10,993,000, recorded in the third quarter 1999,
increased by $585,000 during the fourth quarter 1999. The components of the
charge included $4,499,000 million for severance and related fringe benefits and
$7,079,000 for the write-down of impaired fixed assets. Assets that are no
longer in use have been sold or are held for sale at April 1, 2000 and were
written down to their estimated fair values less costs of sale based primarily
on independent appraisals.
The Company is actively marketing the assets held for sale through the
use of internal sources and outside agents. Assets held for sale were $2,561,000
at April 1, 2000. The timing of the disposal of these assets is not easily
determined, but management of the Company does not believe any significant sales
will likely occur within one year. As a result of the restructuring, the Company
has idle assets of approximately $1.1 million, which continue to be depreciated.
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NOTE G - RESTRUCTURING CHARGES (continued)
The following is a summary of activity in the restructuring reserves
for severance and related expenses (in thousands):
June 1999 restructuring charge $ 4,023
Payments (353)
-------
Balance at July 3, 1999 3,670
Payments (3,292)
Additional severance recorded 476
-------
Balance at October 2, 1999 854
Payments (457)
-------
Balance at January 1, 2000 397
Payments (129)
-------
Balance at April 1, 2000 $ 268
=======
NOTE H--REPORTING SEGMENT INFORMATION
The Company has adopted SFAS No. 131, Disclosure About Segments of an
Enterprise and Related Information. SFAS No. 131 establishes standards for the
reporting by public companies of information about operating segments, products
and services, geographic areas and major customers. The method of determining
what information to report is based on the way management organizes the segments
within the Company for making operating decisions and assessing financial
performance.
The Company's chief operating decision-maker is considered to be the
Chief Executive Officer ("CEO"). The Company's CEO evaluates both consolidated
and disaggregated financial information in deciding how to allocate recourses
and assess performance. The CEO uses certain disaggregated financial information
for the Company's primary knit fabric markets: textile and stretch fabrics.
Sales for textile and stretch fabrics for the quarters ended April 1, 2000 and
April 3, 1999 were $63.6 million and $8.8 million, and $70.4 million and $9.7
million respectively. Sales for textile and stretch fabrics for the six months
ended April 1, 2000 and April 3, 1999 were $120.3 million and $16.0 million, and
$138.4 million and $17.0 million respectively. The Company has aggregated these
two markets into a single reportable textile segment as allowed under SFAS No.
131 because these product lines have similar long-term economic characteristics
such as average gross margin, and the product lines are similar in regards to
nature of production processes, type of customers, and method used to distribute
products. The Company's textile segment manufactures in U.S. plants and markets
fabric through its sales offices, principally sold to customers in the U.S.
The Company also has an apparel segment. The apparel segment purchases
fabric, contracts for cutting, sewing and packaging from companies in the U.S.
and Mexico, and markets the finished apparel to customers in the U.S. The
apparel segment has a 50% equity investment in an apparel manufacturing joint
venture in the Dominican Republic, which is not material at April 1, 2000. The
Company accounts for the joint venture using the equity method, and accordingly
does not include net sales and other individual items of profit and loss in its
Consolidated
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Statements of Operations or the following table.
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------- -------------------------
APRIL 1, APRIL 3, APRIL 1, APRIL 3,
2000 1999 2000 1999
--------- --------- --------- ---------
(IN THOUSANDS)
Net Sales
Textile ................ $ 72,384 $ 80,138 $ 136,270 $ 155,434
Apparel ................ 6,340 -- 10,803 95
--------- --------- --------- ---------
Consolidated net sales .......... $ 78,724 $ 80,138 $ 147,073 $ 155,529
Operating income (loss)
Textile ................ $ 1,991 $ 2,393 $ 7,789 $ 5,608
Apparel ................ (2,133) (428) (2,951) (753)
Amortization of goodwill ........ 715 711 1,431 1,377
Interest and amortization of debt
costs ........................ 4,868 4,935 9,725 10,102
--------- --------- --------- ---------
Consolidated income (loss)
before taxes ................ $ (5,725) $ (3,681) $ (6,318) $ (6,624)
Depreciation
Textile ................ $ 4,000 $ 4,386 $ 7,775 $ 8,430
Apparel ................ 92 68 183 136
--------- --------- ---------
$ 4,092 $ 4,454 $ 7,958 $ 8,566
Capital Expenditures
Textile ................ $ 2,179 $ 2,847 $ 3,786 $ 4,776
Apparel ................ -- 56 10 561
--------- --------- --------- ---------
...................... $ 2,179 $ 2,903 $ 3,796 $ 5,337
Assets at end of period
Textile ................ $ 206,867 $ 213,392 $ 206,867 $ 213,392
Apparel ................ 9,986 1,602 9,986 1,602
Assets not allocated to
segments ............. 101,533 107,940 101,533 107,940
--------- --------- --------- ---------
$ 318,386 $ 322,934 $ 318,386 $ 322,934
========= ========= ========= =========
ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
This report contains certain forward-looking statements within the
meaning of the federal securities laws, all of which are intended to be covered
by the safe harbors created thereby. These statements include all statements
regarding the Company's intent, belief and expectations (such as statements
concerning the Company's liquidity and future operating and financial strategies
and
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results) and any other statements with respect to matters other than historical
fact. Investors are cautioned that all forward-looking statements involve known
and unknown risks and uncertainties (some of which are beyond the control of the
Company) including, without limitation, the ability of the Company to
restructure its long-term indebtedness, the ability of the Company to continue
to access availability under the Credit Agreement, the ability of the Company to
comply with the terms of the Forbearance Agreement and the Credit Agreement, as
amended, risks associated with the Company's use of substantial financial
leverage, access to trade credit and terms from suppliers, the ability of the
Company to improve its operating performance, restrictions imposed by the terms
of the Company's credit facility, the Company's ability and success in achieving
cost savings, the Company's ability to compete with other suppliers and to
maintain acceptable gross margins, potential adverse developments with respect
to the cost and availability of raw materials and labor, risks associated with
governmental regulation and trade policies, and potential adverse developments
regarding product demand or mix. Moreover, although the Company believes that
any assumptions underlying the forward-looking statements contained herein are
reasonable however, any of the assumptions could prove to be inaccurate.
Therefore, in light of these known and unknown risks and uncertainties, there
can be no assurances that the forward-looking statements included in this report
will prove to be accurate and the inclusion of such information should not be
regarded as a representation by the Company or any other person that the
forward-looking statements included in this report will prove to the accurate.
The Company undertakes no obligation to update any forward-looking statements
contained in this report.
Results of Operations
Net sales for the quarter ended April 1, 2000, were relatively flat at
$78.7 million versus $80.1 million for the same quarter of the prior year. Net
sales for the six months ended April 1, 2000, decreased by 5.4% compared to the
same period of the prior year. The decrease in net sales was primarily a result
of reduced average prices of units shipped. Gross margins for the quarter and
year-to-date declined to 10.4% and 12.7% versus 12.6% and 13.4% for the same
period in fiscal 1999, respectfully. The gross margins were unfavorably impacted
by negative margins realized among certain programs within the apparel segment.
The negative contribution by these programs was incurred due to higher than
anticipated requirements for fabric necessary to manufacture the garments
produced during fiscal 2000. Additionally, gross margins decreased as additional
costs were incurred to increase textile production for expected demand.
Selling, general and administrative expenses increased by 2.8% for the
second quarter and decreased 12.1% year-to-date for fiscal 2000 compared to the
same periods in fiscal 1999. The decrease year-to-date was primarily due to a
one-time credit of approximately $1.6 million stemming from the consolidation of
employee benefit plans.
Interest expense in the second quarter of fiscal 2000 of $4.9 million
and year-to-date of $9.7 million was lower than that of the same periods of
fiscal 1999 due to reduced borrowing levels. The effective tax rate for the
second quarter of fiscal 2000 was 29.6% and year-to-date was 26.5%. The
effective tax rate differs significantly from the statutory rate of
approximately 35% due to non-deductible permanent differences, primarily certain
goodwill.
Net loss for the quarter ended April 1, 2000 was $4.0 million, or $0.30
per share, versus net loss of $2.7 million, or $0.20 per share, for the same
period in fiscal 1999. For the six months
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ended April 1, 2000, the net loss was $4.6 million, or $0.35 per share, versus
net loss of $4.3 million, or $0.32 per share, for the same period in fiscal
1999. Losses per share are the same whether calculated on a basic or diluted
basis. The diluted weighted average number of shares outstanding for the quarter
and year-to-date was approximately 13,383,000 and 13,368,000, respectively.
During the third quarter 1999, the Company implemented a reorganization
plan related to its textile business. The textile business had been running at
less than full capacity due to the domestic circular knit industry experiencing
excess supply and low-priced garment imports from Asia. The duration of these
market conditions is uncertain. In response to these business conditions, the
Company decided to reduce its U.S. manufacturing capacity. The major elements of
the reorganization plan included the closing of the Company's facility in
Hamilton, North Carolina and the elimination of yarn spinning operations at the
Company's Trenton, Tennessee facilities which were completed during the fourth
quarter. Additionally, the plan resulted in the reduction of approximately 500
hourly and salaried employees, with severance benefits being paid over periods
up to twelve months from the termination date. At October 2, 1999 substantially
all employees had been terminated or notified of their impending termination.
The cost of the reorganization was reflected as a restructuring charge,
before income taxes, of $10,993,000, recorded in the third quarter 1999,
increased by $585,000 during the fourth quarter. The components of the charge
included $4,499,000 million for severance and related fringe benefits and
$7,079,000 for the write-down of impaired fixed assets. Assets that are no
longer in use have been sold or are held for sale at April 1, 2000 and were
written down to their estimated fair values less costs of sale based primarily
on independent appraisals.
The Company is actively marketing the assets held for sale through the
use of internal sources and outside agents. Assets held for sale were $2,561,000
at April 1, 2000. The timing of the disposal of these assets is not easily
determined, but management of the Company does not believe any significant sales
will likely occur within one year. As a result of the restructuring, the Company
has idle assets of $1.1 million, which continue to be depreciated.
Liquidity and Capital Resources
The Company is currently in default under the terms of its Credit
Agreement as a result of its failure to achieve the prescribed level of
consolidated EBITDA (earnings before interest, taxes, depreciation and
amortization) during the six-month period ended April 1, 2000. On May 12, 2000,
the Company entered into a Forbearance Agreement with its Lenders. Under the
Forbearance Agreement, the Lenders have agreed that for a period ending on
August 25, 2000 they will continue to make Revolving Loans and Letter of Credit
accommodations available to the Company under the Credit Agreement and will not
exercise any remedies available to the Lenders as a result of the Company's
default, including the right to accelerate collection of the Company's
obligations or to foreclose on the Company's assets. The Lenders obligations
under the Forbearance Agreement are conditioned on the Company achieving a
consolidated EBITDA of at least $5 million for the three-month period ending
July 1, 2000, and at least $7 million for the four-month period ending July 29,
2000 and maintaining Net Worth (as defined in the Credit Agreement) of at least
$110 million. The Company continues to access its Revolver and has not realized
any reduction in its borrowing availability.
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On May 12, 2000, the Company and its Lenders also entered into a First
Amendment to the Loan and Security Agreement. The amendment restricts certain
investments in affiliates and joint ventures and property transfers that were
previously permitted under the Credit Agreement.
In accordance with generally accepted accounting principles, as a
result of the default under the Credit Agreement, the amounts outstanding under
the Credit Agreement have been reflected in current liabilities on the balance
sheet.
Working capital and the current ratio decreased to $10.3 million and
1.1:1 at April 1, 2000, from $72.7 million and 3.5:1, respectively, at October
2, 1999. Changes in this ratio are the result of the classification of amounts
outstanding under the Company's Credit Agreement as to current liabilities. The
Company's debt-to-capital ratio was 70.0% at April 1, 2000, compared to 68.8% at
October 2, 1999.
Net receivables of $53.6 million at April 1, 2000, increased from the
level at October 2, 1999, due to higher sales levels. Inventories increased to
$46.9 million at the end of the second quarter from $36.7 million at the end of
the fourth quarter of fiscal 1999 in anticipation of expected sales volume
increases during the third quarter.
Capital expenditures for the six months ended April 1, 2000, were $3.8
million versus $5.3 million for the same period in the prior year. Cash outlays
for capital spending are anticipated to approximate $9 million in fiscal 2000.
Based on the borrowing base computation within the Credit Agreement,
the amount of additional borrowing available under the Credit Agreement at
April 1, 2000, was approximately $8.6 million. Availability under the Credit
Agreement and trade credit and terms from suppliers are the Company's primary
sources of liquidity. The Company believes that cash flow from operations and
the Credit Agreement will be sufficient to meet normal operating needs until
August 25, 2000. However, the ability of the Company to meet its operating needs
is dependent upon a combination of factors, including its ability to restructure
its long-term indebtedness and to continue to access liquidity from the Credit
Agreement and other factors described under "Cautionary Note Regarding Forward
Looking Information". The Company has retained a financial advisory firm to
assist the Company in developing strategic alternatives relating to a
restructuring of its long-term indebtedness.
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PART II--OTHER INFORMATION
ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
The Company held the Annual Meeting of Shareholders on January 26,
2000, ("Annual Meeting"). At the Annual Meeting, the shareholders of the Company
elected: three Class II directors to serve a term of three years, L. R. Jalenak,
T. Eugene McBride and John D. Howard. James P. Casey and M. L. Fontenot were
elected by the Board to serve as Class III directors for a term of one year.
Each of these directors will serve their respective terms until their successors
are duly elected and qualified. Continuing directors for the Company are Julius
Lasnick, Donna Randall, Mickey Ganot, P. Manohar and V. Ravi Shankar.
For Withheld (Abstain)
------------ ------------------
L. R. Jalenak 8,014,447 901,318
T. Eugene McBride 8,014,022 901,743
John D. Howard 7,996,247 919,518
James P. Casey 8,021,947 893,818
M. L. Fontenot 8,023,047 892,718
The shareholders amended the Company's 1992 Stock Incentive Plan
increasing the number of shares of the Company's common stock available for
grant under the 1992 Stock Plan by 1,000,000 shares. There were 3,076,600 votes
cast for such proposal, 1,593,889 votes cast against such proposal, and 91,682
votes withheld (abstained) with respect to such proposal.
ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K
(a) (1) Exhibits:
10 - Material Contract
(a) Amendment No. 1 to Credit Agreement dated May 12, 2000.
(b) Forbearance Agreement among Dyersburg Corporation (and certain
of its subsidiaries) and its Lenders dated May 12, 2000..
27 Financial Data Schedule (for SEC use only)
b) The Company did not file any reports on Form 8-K during the
three months ended April 1, 2000.
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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.
May 15, 2000 /s/ William S. Shropshire, Jr.
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William S. Shropshire, Jr.
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
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