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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 2, 1999
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 Identification No.)
Incorporation or Organization)
15720 JOHN J. DELANEY DRIVE, SUITE 445 28277
CHARLOTTE, NC (Zip Code)
(Address of Principal Executive Offices)
(704) 341-2299
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
Common Stock, Par Value $.01/Share New York Stock Exchange
and associated stock purchase rights
Securities registered pursuant to Section 12(g) 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of December 13, 1999, 13,347,231 shares of common stock were outstanding. The
aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $11,740,482 based on the closing price of such
stock on the New York Stock Exchange (NYSE) on December 10, 1999, assuming, for
purposes of this report, that all executive officers and directors of the
registrant are affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
Part III
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held on January 26, 2000, are incorporated by reference into
Items 10, 11, 12 and 13.
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DYERSBURG CORPORATION
FORM 10-K REPORT
TABLE OF CONTENTS
PART I........................................................................4
ITEM 1. BUSINESS.....................................................4
General.....................................................4
Products ...................................................4
Manufacturing/Seasonality...................................6
Sales and Marketing.........................................7
Inventory Management........................................7
Research and Development....................................7
Raw Materials...............................................8
Competition.................................................8
Governmental Regulation.....................................8
Employees...................................................9
Executive Officers of the Registrant........................9
ITEM 2. PROPERTIES.................................................10
ITEM 3. LEGAL PROCEEDINGS..........................................11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........11
PART II......................................................................11
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS...................11
Market Information.........................................11
Holders ..................................................11
Dividends..................................................11
ITEM 6. SELECTED FINANCIAL DATA....................................12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.....13
Results of Operations......................................13
Liquidity and Capital Resources............................16
Seasonality................................................16
Inflation..................................................17
Year 2000..................................................17
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK..17
Risk Management............................................17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................18
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE...............40
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PART III ....................................................................40
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.........40
ITEM 11. EXECUTIVE COMPENSATION.....................................40
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT........................................40
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............40
PART IV......................................................................40
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K.......................................40
SIGNATURES...................................................................41
INDEX TO EXHIBITS............................................................42
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PART I
ITEM 1 . BUSINESS
GENERAL
Dyersburg Corporation (the "Company") is a leading manufacturer of knit
fleece, jersey and stretch fabrics sold principally to domestic apparel
producers ("Textile" products). The Company's fleece fabrics are used to produce
(i) outerwear apparel suitable for outdoor recreational activities, as well as
casual sportswear; (ii) children's and women's sportswear, including sweatshirts
and sweatpants; (iii) infant blanket sleepers and (iv) blankets and throws. The
Company's jersey fabrics are used to produce a broad range of women's and
children's lightweight apparel, including tops and shorts. The Company's stretch
fabrics are used to produce a variety of activewear, including dancewear,
swimwear, biking and running garments, recreational and casual sportswear and
intimate apparel. The Company's manufacturing operations are vertically
integrated, beginning with the conversion of fiber into yarn and knitting,
dyeing and finishing the fabric in a wide range of styles and colors. The
Company's fabrics are used in apparel marketed by leading brands such as Calvin
Klein, Columbia, Health-Tex, Danskin, Patagonia, Polo, Tommy Hilfiger and
William Carter; and sold to catalog merchants and specialty stores such as L.L.
Bean and Eddie Bauer, department stores and national chains.
The Company also has an apparel manufacturing business. The apparel
business purchases fabric primarily from its Textile business, 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. ("Apparel" products). The apparel
business also has a joint venture in the Dominican Republic. The Company
manufactures Apparel products for leading brands such as Nike, SanMar and
Timberland.
The Company was formed in 1929 and, through the early 1990s, marketed
its fabrics to apparel manufacturers that supplied children's and women's
apparel. In 1992, the Company began implementing a strategy of broadening its
line of higher margin, value-added knit fabrics, including outerwear fleece and
stretch fabrics, and targeting manufacturers of brand name apparel, catalog
merchants, specialty stores, department stores and national chains. To support
this shift in strategy, over the past several years the Company has upgraded its
manufacturing operations and has increased its investment in marketing, research
and development and customer service capabilities.
On August 27, 1997, the Company acquired AIH Inc. ("Alamac"), then a
subsidiary of WestPoint Stevens Inc. ("WestPoint Stevens") (the "Acquisition").
Formed in 1946, Alamac is a leading manufacturer of interlock, jersey, pique and
other knit fabrics sold primarily to domestic apparel producers. Similar to the
Company's other manufacturing operations, Alamac's manufacturing operations are
vertically integrated.
The Company has integrated Alamac's manufacturing, sales and marketing
personnel and other resources with the Company's existing operations to
establish coordinated production planning, product development, marketing and
customer service across its product lines for its combined customer base. The
Company has consolidated certain general and administrative activities, where
appropriate, to eliminate redundancies and exploit economies of scale.
PRODUCTS
The Company's products are divided into six principal categories:
fleece, interlock, jersey, pique, rib and stretch.
Fleece. The principal uses of the Company's fleece fabrics are in
manufacturing outerwear, children's and women's activewear and infant blanket
sleepers. The Company's fleece fabrics are made of acrylic, polyester, cotton or
blends of these fibers. The fabric is dyed and undergoes a series of finishing
and abrading processes by which a surface is brushed or "napped" to give the
fabric the "hand" or feel associated with fleece.
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Outerwear Fleece. In 1992, the Company introduced a new line of
outerwear fleece designed for use in recreational and casual sportswear apparel
products. In 1993, this product line was complemented by the introduction of
Dyersburg E.C.O.(TM), outerwear fleece made of yarn using fibers from recycled
plastics. The Company's variety of outerwear fleece fabrics has grown
significantly, with new fabric weights, blends, fiber configurations and
finishes that promote functionality. The Company's outerwear fleece products are
engineered for water repellency, wickability, moisture vapor transport and
warmth. The Company's branded outerwear fleece products have grown to include
Kinderfleece targeted to children's outerwear, Citifleece targeted to adult
outerwear, Dyersburg E.C.O. Lite, a lighter weight E.C.O. product, and
Triplex(TM), a new triple microdenier/Lycra(R) product line. Garments
manufactured from these products are primarily sold to catalog merchants and
specialty retailers.
Other Fleece Products. Fleece fabrics sold to the children's activewear
market, principally sweatshirts and sweatpants, are made of 100% acrylic fibers
or polyester/cotton blends. Acrylic's low cost, ability to be dyed brighter
colors and low shrinkage are of particular importance to the children's
activewear market. Fleece fabrics sold to manufacturers of women's activewear
are primarily made either of 50% polyester/50% cotton blends or polyester/cotton
blends with a higher cotton content. In recent years, there has been increased
use in activewear apparel of polyester/cotton blends, which management believes
is attributable to increased consumer demand for natural fibers, as well as the
greater receptivity of these fabrics to printing compared to 100% acrylic
fabrics. Polyester/cotton blends are also typically softer and less likely to
"pill" than 100% synthetics, while still offering less fabric shrinkage than
100% cotton products.
The Company's remaining major fleece fabric product categories are
fabrics used to manufacture infant blanket sleepers and for home furnishings.
The demand for infant blanket sleepers is primarily attributable to its fire
retardant characteristics. The Company's Maison Fleece(TM) brand blankets and
throws are made from the Company's outerwear fleece fabrics for sale to the
growing home furnishings market.
Interlock. Interlock is made from 100% cotton ring spun and
cotton/polyester blends. Interlock is used primarily in men's, women's and
children's turtlenecks and women's sportswear. Interlock is considered one of
the leading base fabrications for domestic knit fabric production.
Jersey. The Company markets a line of jersey fabrics for use in a broad
range of women's and children's lightweight apparel, principally tops, T-shirts
and shorts. Jersey is a flat-knit fabric, which is typically made from a
polyester/cotton blend or from 100% cotton fibers and, unlike fleece, is not
surface-finished. Jersey fabrics are also generally lighter in weight than
fleece. The Company produces jersey fabric in tubular and open width form.
Pique. Pique is a textured knit and is the predominant fabric used in
men's golf shirts. Fabric for knit collars and cuffs manufactured by the Company
is the other significant ingredient necessary to participate in the golfwear
category.
Rib. Rib is a stretch fabric, used primarily in tops. The stretch
results from the fabric construction, rather than the use of spandex. Rib
continues to be an important fashion fabric for branded and mass merchant
womenswear.
Stretch. Stretch fabrics consist of custom formulations of cotton,
spandex, nylon and other synthetic yarns designed for comfort, performance and
styling. To produce a variety of shades and patterns, stretch fabrics may be
knit from dyed yarns, dyed as cloth, sold to independent printers for printing
or garment-dyed by the customer. These fabrics are used in a variety of fashion
and activewear products, including dancewear, swimwear, biking and running
garments, recreational and casual sportswear and intimate apparel. The majority
of these fabrics are used by leading manufacturers to produce higher-priced
branded sportswear products.
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MANUFACTURING/SEASONALITY
To support the Company's strategy of broadening its line of value-added
fabrics and to increase its manufacturing efficiencies and reduce manufacturing
costs, the Company has invested significantly in its manufacturing operations.
During 1996, the Company updated its yarn manufacturing facilities resulting in
a reduction in the production of off-quality yarns and a decrease in the labor
component of its manufacturing costs. The Company's dyeing and finishing
operations have also been significantly expanded and redesigned to accommodate
sales of outerwear fleeces and performance cottons. As a result of its plant
modernization program, the Company has improved its ability to produce high
quality, competitively priced fabrics and to be versatile and flexible with
respect to the weight, gauge and composition of its fabrics. The Company's yarn
spinning, knitting, dyeing and finishing equipment can be used with a variety of
fibers and blends to meet shifts in consumer demand.
Knitted fabrics are made almost entirely from yarns containing acrylic,
cotton or polyester fibers or blends of these materials. These fibers are
blended, if required, carded to disentangle locks and straighten individual
fibers and drawn to produce continuous untwisted strands called "slivers." The
slivers are spun, drawn and twisted to produce yarn. The Company produces the
majority of its yarns, but also purchases yarn from a number of vendors. The
Company maintains several sources for branded and non-branded spandex and
synthetic blend yarns. The yarn is subsequently knit into fabric known as
"greige" or undyed fabric. After knitting is completed, the greige fabric is
dyed in computer-controlled, pressurized dyeing machines. Fabric dyeing is the
most time-consuming operation in fleece fabric manufacturing, with dyeing cycles
ranging from four to twelve hours, depending on the fabric and color dyed.
Efficiency and quality controls implemented as part of a plant modernization
program and new equipment have increased the Company's ability to match colors
and reduce energy costs and are expected to reduce the time consumed in the
dyeing process, as well as the overall production time for the Company's
fabrics. The Company is able to dye certain of its yarns, as well as fabric,
which allows it to produce fabrics in an unlimited variety of stripes and
patterns.
The Company finishes fleece fabric surfaces by napping or utilizing
other processes. Fabrics are napped by being fed through machines that fluff one
side of the fabric with rotating wire brushes, and then finished to produce the
distinctive pile and feel of fleece through Company-developed processes that
polish, raise and shear the fibers. Jersey fabric is a smooth, flat-knit fabric
that is dyed but is not surface-finished. The Company also produces pile
finished fleece fabrics, where a special knit construction produces an unusually
long nap. This deep "pile" can be "tumbled" in rotary dryers to create a pilled
or "sherpa" look; embossed, where patterns are cut into the pile; or sheared,
where the fibers are uniformly cut to form a very dense, compact fabric with a
smooth surface. In addition, with a special knit construction, fabrics produced
with any of these finishing techniques can be napped on both sides. The Company
also offers fabrics, both fleece and jersey, that are mechanically compacted to
reduce the wash shrinkage of garments.
The Company has two manufacturing facilities in Dyersburg, Tennessee,
one facility in Cleveland, Tennessee and one facility in each of Lumberton,
Elizabethtown and Clinton, North Carolina. The original Dyersburg facility spins
100% synthetic (acrylic or polyester), 60% cotton/40% polyester and 50%
polyester/50% cotton yarns. These yarns are used along with yarns produced at
the Clinton facility and yarns purchased from outside sources to knit fleece and
jersey fabrics at the Dyersburg knitting facility prior to dyeing and finishing.
The Company's facility in Cleveland, Tennessee uses the Company's yarn as well
as purchased yarn from outside sources to knit, dye and finish stretch and
lining fabrics.
The Clinton and Dyersburg facilities produce approximately 60% of the
Company's cotton and polyester yarn needs with the remaining requirements
obtained from outside vendors. All yarn dyeing requirements of the Company are
produced at the Elizabethtown facility.
The Company's sales have historically had a pronounced seasonal pattern
with the majority of its sales occurring during its third quarter. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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SALES AND MARKETING
The Company maintains sales offices in New York, Charlotte, Seattle,
Atlanta and Los Angeles. The Company employs sales representatives and utilizes
a network of independent sales agents coordinated through its marketing
organization in New York. In addition to calling on the Company's customers, the
Company's sales representatives attempt to create additional demand for the
Company's products by marketing directly to brand name clothing designers and
retailers.
The Company also maintains a resource center at its Elizabethtown
facility, where customers have access to a designer, six fully electronic
knitting machines and color and fabric libraries to facilitate the design and
development of apparel lines.
INVENTORY MANAGEMENT
The Company's customers typically negotiate their purchases from the
Company through informal purchase orders that specify their anticipated fabric
needs over periods as long as five months. The orders are revocable and serve
primarily to outline the customers' intentions over a specified term and permit
the Company to "block out" its production schedule. Although orders are subject
to cancellation by customers at any time before the Company receives color
specifications from the customers, fabric produced for canceled orders can
ordinarily be used to fill other orders. Because these informal purchase orders
are cancelable, the Company has no appreciable long-term backlog.
In order to facilitate its ability to respond quickly to customer
demands and due to the seasonal nature of the Company's business, the Company
puts substantial efforts into the management of its inventory. Based in part
upon the volume of informal customer purchase orders, the Company builds an
inventory of uncolored and basic color fabrics (such as blacks, whites and gray
heathers) during the Company's off-peak season. As customers determine their
precise needs, they provide the Company with firm orders for fabrics with
specific dyeing and finishing requirements. The Company's build-up of inventory,
together with its modern dyeing and distribution facilities, permits the Company
to quickly color, finish and ship fabric during the peak demand season. In
addition, the Company's ability to manage its inventory and to efficiently dye
and distribute its fabrics also enables the Company to produce and ship fabrics
not contained in inventory.
RESEARCH AND DEVELOPMENT
The Company's research and development activities are coordinated
through the Company's marketing department and are directed toward maintaining
and improving the quality of the Company's products and the development of new
value-added products such as Dyersburg E.C.O., Synsation(TM), Kinderfleece(TM),
Citifleece(TM) and Maison Fleece to meet the changing needs of the knit fabric
market. Emphasis is placed on physical characteristics that provide competitive
differentiations between fabrics including "hand" or feel, warmth, fade
resistance and shrinkage reduction. The Company's research and development
activities are also focused on providing innovative stretch fabrics that will
meet the evolving needs of its customers, while developing new products to gain
entry in other markets. The Company was instrumental in developing products from
DuPont Lycra(R) spandex and DuPont Supplex(R) nylon to provide customers with
new types of performance fabrics that exhibit unique properties.
The costs of the Company's research and development activities are not
considered by management to be material to the results of operations or the
financial condition of the Company.
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RAW MATERIALS
The Company uses three primary fibers as raw material for producing
yarn: acrylic, polyester and cotton. Cotton makes up approximately 65%, acrylic
approximately 5%, and polyester approximately 30% of the raw material fiber used
in production. Cotton is an agricultural commodity, while acrylic and polyester
are petroleum based. These items are subject to market price fluctuations, but
supplies are not dependent on any single vendor, and management believes that
sources for materials will be adequate to meet requirements. The Company
purchases yarns from a number of vendors and maintains several sources for
branded and non-branded spandex and synthetic blend yarns.
COMPETITION
The textile industry is extremely competitive and includes numerous
companies, no one of which is dominant in the industry. The Company and its
competitors market their products nationwide, as domestic shipping costs are not
a significant competitive factor. The Company's primary competition comes from
suppliers of knit fabric. The Company also competes with vertically integrated
apparel manufacturers that produce the fabric used in their apparel products and
with foreign manufacturers. The primary competitive factors in the textile
industry are product styling and differentiation, quality, customer service and
price. The importance of these factors is determined by the need of particular
customers and the characteristics of particular products.
GOVERNMENTAL REGULATION
The Company is subject to various federal, state and local
environmental laws and regulations limiting the discharge, storage, handling and
disposal of a variety of substances and wastes used in or resulting from its
operations and potential remediation obligations thereunder, particularly the
Federal Water Pollution Control Act, the Clean Air Act, the Resource
Conservation and Recovery Act (including amendments relating to underground
tanks) and the Comprehensive Environmental Response, Compensation and Liability
Act, commonly referred to as "Superfund" or "CERCLA." The Company has obtained,
and believes it is in compliance in all material respects with, all material
permits required to be issued by federal, state or local law in connection with
the operation of the Company's business as described herein.
The operations of the Company also are governed by laws and regulations
relating to workplace safety and worker health, principally the Occupational
Safety and Health Act and regulations thereunder which, among other things,
establish cotton dust, formaldehyde, asbestos and noise standards and regulate
the use of hazardous chemicals in the workplace. Alamac uses resins containing
formaldehyde in processing some of its products. Although the Company does not
use asbestos in the manufacture of its products, some of its facilities contain
some structural asbestos that management believes is all properly contained.
Many of the manufacturing facilities owned by the Company have been in
operation for several decades. Historical waste disposal and hazardous substance
releases and storage practices may have resulted in on-site and off-site
remediation liability for which the Company would be responsible. In addition,
certain wastewater treatment facilities and air emission sources may have to be
upgraded to meet more stringent environmental requirements in the future.
Although the Company cannot with certainty assess at this time the impact of
future emission standards or enforcement practices under the foregoing
environmental laws and regulations and, in particular, under the 1990 Clean Air
Act, upon its operations or capital expenditure requirements, the Company
believes that it is currently in compliance in all material respects with
applicable environmental and health and safety laws and regulations. The Company
is aware of certain environmental contamination at the Alamac facilities. The
Company estimates that the remaining cost to remediate such contamination will
range from approximately $1.5 million to $2.5 million. Pursuant to the Stock
Purchase Agreement, WestPoint Stevens has agreed to indemnify the Company for a
portion of such costs. Further reference is made to Note 11 "Contingencies"
beginning on page 35.
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EMPLOYEES
At October 2, 1999, the Company employed approximately 2,250 people in
hourly, salaried, supervisory, management and administrative positions. No labor
union represents any of the Company's employees and the Company believes its
relationship with its employees to be good.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding executive
officers of the Company as of October 2, 1999. All officers serve at the
discretion of the Board of Directors.
Name Age Position
- ---- --- --------
T. Eugene McBride 56 Chief Executive Officer and Chairman
M. L. (Chip) Fontenot 56 President, Chief Operating Officer and Director
William S. Shropshire, Jr. 42 Executive Vice President, Chief
Financial Officer, Secretary and Treasurer
Don S. Carswell 52 President - International Operations
Mark A. Cabral 46 Executive Vice President - Strategic Planning
Stephen J. Dauer 58 Sr. Vice President - Sales
Paul L. Hallock 51 Vice President - Finance and Assistant
Secretary - Treasurer
Harry M. Harden 41 Senior Vice President - Administration
Hunter Lee Lunsford, III 42 Executive Vice President - Operations
Jerry W. Miller 48 Executive Vice President-Research and
Development
Jerry W. Patton 52 Vice President - Information Services
The following is additional information with respect to the above-named
executive officers.
Mr. McBride joined the Company in September 1988 as Executive Vice
President and was named President and Chief Operating Officer in January 1989.
He was named Chief Executive Officer, in September 1990 and Chairman of the
Board of Directors in July 1995. Prior to joining the Company, Mr. McBride was
Vice President - Operations at Pannill Knitting from 1986 to 1988 and Vice
President - Manufacturing at Buster Brown Apparel from 1980 to 1986.
Mr. Fontenot joined the Company in January 1999 as President of
Marketing and a director. He was named President and Chief Operating Officer in
July 1999. Prior to joining the Company, Mr. Fontenot was President and Chief
Executive Officer of Decorative Home Accents from 1996-1998; and President and
Chief Executive Officer and Chairman of Perfect Fit Industries from 1989-1996.
Prior to joining Perfect Fit Industries, Mr. Fontenot was Executive Vice
President of Springs Industries where he worked for over 22 years.
Mr. Shropshire, a certified public accountant, joined the Company as
Executive Vice President, Chief Financial Officer, Secretary and Treasurer in
October 1996. For the previous five years, he was Chief Financial Officer and
Senior Vice President for Charter Bancshares, Inc.
Mr. Carswell, President - International Operations, joined the Company
in July 1998. He joined Dyersburg from Oxford Industries where he worked for
over 25 years. Most recently, he was President of the Tommy Hilfiger Golf
division, and previously served as President of Polo For Boys and Senior Vice
President of Planning and Development for the Oxford Shirt Group.
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Mr. Cabral was named Executive Vice President - Strategic Planning in
September 1999. He joined Alamac Knit Fabrics in 1970. His assignments have
included being Plant Manager of the Elizabethtown complex, General Manager of
Manufacturing, Vice President of Manufacturing, and most recently Executive Vice
President of Operations at Alamac Knit Fabrics since September 1, 1998.
Mr. Dauer became the Sr. Vice President - Sales in January 1996 after
joining the Company as Vice President - Marketing in June 1984.
Mr. Hallock joined the Company in April 1977. He was named Assistant
Secretary in October 1978, Assistant Secretary - Treasurer in October 1981, and
Vice President - Finance in March 1987.
Mr. Harden, was named Senior Vice President - Administration in April
1999, and prior to that date was Vice President of Human Resources for the
Corporation since his appointment on October 1, 1997. He was Director of Human
Resources for the Alamac Division of WestPoint Stevens from 1989 to 1997.
Mr. Lunsford was named Executive Vice President - Operations in
September 1999. He joined the Company in August 1997 as Vice President -
Manufacturing. He was named Executive Vice President of Operations at Dyersburg
Fabrics on April 22, 1998. Prior to joining the Company, Mr. Lunsford served as
Plant Manager from February 1992 until February 1997 and General Manager from
February 1997 until August 1997 at Dan River, a textile manufacturer.
Mr. Miller joined the Company in August 1993 as Director of
Manufacturing and was named Vice President of Manufacturing in May 1994. He was
named President of United Knitting, Inc. ("UKI") in June 1997 and Executive Vice
President of Research and Development in April 1999.
Mr. Patton joined the Company in 1966 in the production area. He was
named MIS Director in May 1990, Vice President - MIS in September 1993 and Vice
President - Administration in January 1996. Mr. Patton was named Vice President
- - Information Services in October 1997.
ITEM 2. PROPERTIES
The Company's business is conducted primarily through facilities
located in Dyersburg and Cleveland, Tennessee and Clinton, Elizabethtown and
Lumberton, North Carolina. Each of these facilities and the property on which
they are located are owned by the Company. The Company leases selling offices in
New York, New York; Charlotte, North Carolina; Seattle, Washington; Atlanta,
Georgia and Los Angeles, California. The New York office contains approximately
13,000 square feet. The remaining offices have substantially less square
footage.
The primary Dyersburg facility was built in 1929 with 275,000 square
feet of floor space. After several expansions, it now contains approximately
888,000 square feet of plant space situated on 30 acres of land. The knitting
facility (completed December 1993) encompasses approximately 155,000 square feet
situated on approximately 30 acres in the Dyersburg Industrial Park. The floor
space is distributed as follows: 684,000 square feet for manufacturing, 273,000
square feet for warehousing and distribution, 28,000 square feet for offices and
60,000 square feet for maintenance shops and boiler space. A warehouse facility
containing approximately 213,000 square feet was completed in September 1997.
The Cleveland facility was built in 1986 with approximately 70,000
square feet of floor space followed by a 38,000 square foot expansion in 1991. A
45,000 square foot addition (primarily warehouse, distribution and laboratory
facilities) was completed in December 1994. A 19,200 square foot expansion was
completed in December 1997.
The Clinton facility was built in 1965 and contains approximately
367,000 square feet situated on approximately 48 acres of land. The
Elizabethtown facility was built in 1971 and contains approximately 193,000
square feet situated on approximately 148 acres of land. The Lumberton facility
was built in 1962 and contains approximately 414,000 square feet situated on
approximately 198 acres of land.
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ITEM 3. LEGAL PROCEEDINGS.
The Company is a party to various routine lawsuits arising out of the
conduct of its business, none of which are expected by the Company to have a
material adverse effect upon the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders during the fourth
quarter of fiscal 1999 ended October 2, 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's Common Stock is traded on the New York Stock Exchange
(the "NYSE") under the symbol "DBG." On September 23, 1999, the NYSE notified
the Company that it does not comply with the NYSE's continued listing criteria
and that the Company's Common Stock may be delisted from the NYSE. On November
4, 1999, the Company submitted a plan to the NYSE designed to comply with the
proposed continued listing criteria. On December 9, 1999 the Company received
notification that the NYSE accepted the Company's business plan and that the
NYSE is prepared to continue listing of the Company's stock. The Company will be
subject to quarterly monitoring for compliance with the plan. The NYSE will
review the Company's market capitalization over the next six months independent
of business plan success. If the Company's market capitalization has not
improved and/or the Company's 30 day average price per share is less than $1 at
the end of the six months timeframe, the Company will be subject to NYSE trading
suspension at that time. If the Company fails to raise its total capitalization
to $15 million by March 2001, then the Company's Common Stock will be delisted
from the NYSE. There can be no assurance that the Common Stock will remain
listed on the NYSE or otherwise be the subject of an established public trading
market. If the Company's Common Stock is delisted from the NYSE, the Company
believes that the Common Stock would be eligible for trading on the OTC Bulletin
Board. The range of high and low sales prices of the Common Stock during each
quarter of the last two fiscal years are presented below:
High Low
----------- -----------
1999 First $ 4 3/8 $ 2 3/4
Second 3 13/16 1 9/16
Third 1 13/16 1 1/4
Fourth 1 1/4 9/32
1998 First $ 14 $ 11
Second 12 7 11/16
Third 8 1/4 5 1/16
Fourth 6 3 1/2
HOLDERS
As of December 10, 1999, the Company had approximately 2,300
shareholders based on the number of record holders of the Company's Common Stock
and an estimate of the number of individual participants represented by security
position listings.
DIVIDENDS
During the first two quarters of fiscal 1999 and all of fiscal 1998,
the Company declared and paid regular quarterly cash dividends of $ .01 per
share of Common Stock. At its regularly scheduled meeting on May 11, 1999, the
board of directors voted to discontinue the payment of dividends.
The documents relating to the Company's new Credit Agreement prohibit
dividends and certain other payments, including stock repurchases, by the
Company.
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ITEM 6. SELECTED FINANCIAL DATA
1999 1998 1997(A) 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands, except ratios, percentages and per share data)
SUMMARY OF OPERATIONS:
Net sales $ 311,460 $ 417,525 $ 250,193 $ 195,866 $ 199,413
Income (loss) before income taxes and
extraordinary loss (24,980) (b) 12,346 21,900 14,254 12,542 (c)
Income tax (benefit) expense (7,958) 5,313 8,634 5,854 5,982
Income (loss) before extraordinary loss (17,022) 7,033 13,266 8,400 6,560
Extraordinary loss (1,203) (d) -- (905) (e) -- --
Net income (loss) (18,225) 7,033 12,361 8,400 6,560
PER SHARE OF COMMON STOCK:
Earnings Per Share (diluted)
Income (loss) before extraordinary loss $ (1.28) $ 0.53 $ 1.01 $ 0.61 $ 0.46
Extraordinary loss (0.09) -- (0.07) -- --
Net income (loss) (1.37) 0.53 0.94 0.61 0.46
Cash dividends 0.02 0.04 0.04 0.04 0.04
Stock range:
High 4.38 14.00 13.44 6.25 6.63
Low 0.28 3.50 5.38 3.88 4.25
Book value 6.74 8.13 7.61 6.75 6.08
Weighted average common
shares outstanding (diluted) 13,345 13,336 13,210 13,681 14,271
CAPITAL EXPENDITURES AND DEPRECIATION:
Capital expenditures $ 10,158 $ 17,564 $ 14,041 $ 11,778 $ 12,816
Depreciation 15,821 15,721 11,742 9,573 10,001
STATISTICAL DATA:
Income (loss) before extraordinary item to
average shareholders' equity (17.17)% 6.72% 14.05% 9.76% 7.90%
Inventory turnover (f) 6.09 5.81 5.69 (g) 5.20 5.96
Accounts receivable turnover (h) 5.59 5.79 5.75 (g) 5.63 5.53
Interest coverage (i) -- 1.55 3.93 3.31 3.03
Current ratio 3.49 3.01 2.69 4.37 3.79
SELECTED BALANCE SHEET DATA:
Working capital $ 72,736 $ 84,577 $ 80,514 $ 52,083 $ 45,227
Total assets 322,934 363,134 366,814 195,007 188,872
Long-term obligations, excluding current
portion 194,460 198,900 203,450 80,950 $ 76,800
Shareholders' equity 89,900 108,371 101,104 88,742 86,258
(a) Fifty-three weeks. Includes operations of Alamac effective August 27, 1997.
(b) Includes a pre-tax restructuring charge of $11.6 million
(c) Includes a pre-tax write-down of fixed assets of $2,153.
(d) Write-off of deferred financing costs related to refinancing of Credit
Facility.
(e) Early extinguishment of debt negotiated with Alamac purchase.
(f) Cost of sales divided by average inventory.
(g) Excludes impact of Alamac.
(h) Net sales divided by average net accounts receivable.
(i) Net income before interest, taxes and extraordinary item divided by the sum
of annual interest and amortization of debt costs.
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ITEM 7 . 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 future operating and financial strategies and 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 including, without limitation, risks associated
with the Company's use of substantial financial leverage, 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, potential adverse
developments regarding product demand or mix, and the potential delisting of the
Common Stock from the New York Stock Exchange. Moreover, although the Company
believes that any assumptions underlying the forward-looking statements
contained herein are reasonable, 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 be accurate. The Company undertakes no obligation to update any
forward-looking statements contained in this report.
RESULTS OF OPERATIONS
The Company's fiscal year ends on the Saturday closest to September 30,
which resulted in a fifty-three week fiscal year in 1997 and a fifty-two week
fiscal year in 1998 and 1999. The Company's fiscal 1999 and 1998 results include
the full year's operations of Alamac. The fiscal 1997 results include six weeks
of operations of Alamac, which was acquired as of August 27, 1997.
Beginning in fiscal 1998 and continuing throughout fiscal 1999, the
domestic circular knit industry has experienced accelerating consolidation and a
supply/demand imbalance that adversely affected the Company's results of
operations. The Company experienced weakness in sales and margins in both fleece
and jersey fabrics. Competition from imports increased as global sourcing
patterns continued to shift between the Far East and the West. Unstable, often
faltering economies in the Far East forced many textile and apparel
manufacturers in the region to offer products to U.S. markets at reduced prices.
These low prices were made even more attractive to U.S. retailers by significant
and prolonged currency devaluations in several countries. The duration of these
market conditions, evidenced by additional, if not an excessive, supply of
low-priced imports is uncertain. Due to the continued softness in the knit
market, management has undertaken initiatives to increase or stabilize revenues
and reduce costs. Increased emphasis on research and development directed at
better uses of developing technology in concert with market intelligence of
retail customers is intended to intensify the Company's focus on developing
additional value added and differentiated products and improving the speed to
market of such products. The Company believes garment packaging, whereby the
Company converts fabric into a finished garment, has provided new opportunities
for fabric sales.
During fiscal 2000 the Company will be consolidating all retirement
plans into one successor plan. As a result of this change, all benefits accrued
in the Company's pension plans will be frozen as of January 1, 2000. Ongoing
expenses for retirement benefits are not expected to be materially impacted in
fiscal 2000 as a result of this change. However, a one-time curtailment gain of
approximately $1.5 to $2.0 million is anticipated to be recorded in the first
fiscal quarter of 2000.
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FISCAL 1999 COMPARED TO FISCAL 1998
Net Sales. Net sales for this year totaled $311.5 million, down 25%
from $417.5 million for fiscal year 1998. The decrease was driven by lower
volume of sales principally in fleece and active-wear fabrics. Sales in these
categories were adversely impacted by low-priced imports.
Gross Profit. Gross profit for this year totaled $40.5 million, down
45% from $73.6 million for fiscal 1998. Due to lower production levels, overhead
costs per yard sharply increased, driving margins lower. However, margins were
favorably impacted by a change in the accounting estimate for useful lives of
certain property and equipment at the Company's Dyersburg, Tennessee facilities.
The effect of the change was a decrease in depreciation expense in fiscal 1999
of approximately $1.4 million, which reduced the after-tax net loss by
approximately $854,000, or $0.06 per share.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses as a percentage of sales for 1999 were 10.8% compared to
9.0% for 1998. These expenses decreased from $37.5 million in 1998 to $33.6
million in 1999. The dollar decrease was primarily due to reductions in
administrative costs due to lower sales volume and reductions in certain
compensation expenses that are based on performance. The Company believes cost
savings initiatives completed in the third and fourth quarters of fiscal 1999
should reduce selling, general and administrative expenses by over $3 million
annually, which is expected to favorably impact the ratio of selling, general
and administrative expenses as a percent of sales beginning in the first quarter
of fiscal 2000.
Restructuring Charges. During 1999, the Company announced the
consolidation of certain manufacturing facilities. The consolidation was
accomplished through a reduction of the weekend operations at the Company's
Dyersburg, Tennessee facilities, closing of the Company's facility in Hamilton,
North Carolina and the elimination of yarn spinning operations at the Company's
Trenton, Tennessee facility. Restructuring charges of $11,578,000 were charged
to operations during fiscal 1999 as a result of eliminating the Hamilton and
Trenton operations. These restructuring charges represent a write-down to net
realizable value of $7,079,000 for property, plant and equipment which are
either held for sale or abandoned as a result of the consolidation. The Company
is actively marketing such assets held for sale through the use of internal
sources and outside agents. The timing of the disposal of these assets is not
likely to occur within one year.
The Company recorded in fiscal 1999 severance related expenses
associated with terminated employees of $4,499,000. Over 500 hourly and salaried
employees have been notified of their terminations. During fiscal 1999,
approximately $3,645,000 was paid for severance and fringe benefits related to
these fiscal 1999 restructuring charges, resulting in a balance of accrued
restructuring charges of $854,000 at October 2, 1999. Substantially all of the
remaining balance in these restructuring charges will be paid in the next twelve
months. The Company believes cost savings associated with the closing of certain
facilities and the resulting consolidation of manufacturing should exceed $9
million annually. The Company believes approximately $1 million of such amount
will represent an annual reduction in depreciation expense.
The Company also recorded a charge of $1.3 million for restructuring
charges in the third quarter of fiscal 1998. These restructuring charges
represented severance-related expenses associated with terminated employees.
During fiscal 1998, $727,000 was paid for severance and related fringe benefits,
resulting in a balance in accrued restructuring charges of $575,000 at fiscal
year end. During the first, second, third and fourth quarters of fiscal 1999,
approximately $77,000, $326,000, $47,000 and $93,000, respectively, was paid for
severance and fringe benefits related to these fiscal 1998 restructuring
charges; resulting in a balance in accrued restructuring charges of $498,000,
$172,000, $125,000 and $32,000, respectively at each fiscal quarter end.
All of the employees identified by the restructuring plan have been terminated.
Interest and Amortization of Debt Costs. Interest and amortization of
debt costs for 1999 was $20.3 million, compared to $22.5 million in 1998. In
August 1999, the Company refinanced its bank credit facility with a new Credit
Agreement. Terms of the new Credit Agreement are not anticipated to materially
adversely impact interest cost in fiscal 2000.
14
15
Federal and State Income Taxes. Due to a net loss before income taxes
of $25.0 million, the Company recorded a federal and state tax benefit of $8.0
million for 1999. The effective tax rate of 31.9% was lower than the federal
statutory rate primarily due to the non-deductibility of certain goodwill
amortization.
Net Income (Loss). The loss for 1999, before an extraordinary item was
$17.0 million, or ($1.28) per share on both a basic and diluted basis. Net
income for fiscal 1998 was $7.0 million, or $0.53 per share for basic and
diluted earnings per share. During the fourth quarter of 1999 the Company
recorded an extraordinary charge, net of taxes, of $1,203,000, or $0.09 per
share, related to the early extinguishment of debt in connection with the
refinancing relating to the new bank Credit Agreement.
FISCAL 1998 COMPARED TO FISCAL 1997
Net Sales. Net sales for this year totaled $417.5 million, up 66.9%
from $250.2 million for fiscal year 1997. The sales totals for 1998 includes
$215.4 million from Alamac. 1997 totals included only six weeks of Alamac sales
of $26.8 million. Without the inclusion of the Alamac sales, sales decreased by
9.5%, or $21.3 million in 1998. The decrease was driven by lower volume of sales
principally in fleece fabrics and to a lesser degree in stretch and jersey
fabrics. Sales in these categories were impacted by an increasing supply of low
priced imports.
Gross Profit. Gross profit for this year totaled $73.6 million, up
28.2% from $57.4 million for fiscal 1997. Included in gross profits was $24.2
million and $3.7 million, for fiscal 1998 and 1997, respectively, from Alamac.
Exclusive of the impact from Alamac, which has historically experienced gross
margins of 10 to 14% of sales, the Company's gross profit margins increased
slightly to 24.5% in 1998 as compared to 24.1% in 1997.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses as a percentage of sales for 1998 were 9.0% compared to
11.2% for 1997. These expenses increased to $37.5 million in 1998 from $28.0
million in 1997. Excluding Alamac, these expenses decreased significantly from
$26.3 million in 1997 to $21.6 million in 1998. Lower incentive compensation,
sales bonus and profit sharing expenses as a result of the Company's reduced
profitability, combined with lower bad debt expenses, contributed to these
reduced expenses.
Restructuring Charges. The Company recorded a charge of $1.3 million
for restructuring charges in the third quarter of fiscal 1998. These
restructuring charges represented severance-related expenses associated with
terminated employees. During fiscal 1998, $727,000 was paid for severance and
related fringe benefits, resulting in a balance in accrued restructuring charges
of $575,000 at fiscal year end. All of the employees identified by the
restructuring plan have been terminated.
Interest and Amortization of Debt Costs. Interest and amortization of
debt costs for 1998 was $22.5 million, compared to $7.5 million in 1997. In
August 1997, in conjunction with the acquisition of Alamac, the Company issued
$125 million in senior subordinated notes due 2007 and entered into a new bank
Credit Agreement. With the issuance of the new notes and Credit Agreement, the
interest and amortization of debt costs increased during 1998 as expected.
Federal and State Income Taxes. Federal and state income taxes of $5.3
million for fiscal year 1998 and $8.6 million for the comparable period in 1997
were higher than the federal statutory rate due to state income taxes and the
non-deductibility of certain goodwill amortization.
Net Income. Net income for 1998 was $7.0 million, or $0.53 per share on
both a basic and diluted basis. Income for fiscal 1997, before an extraordinary
charge, totaled $13.3 million, or $1.01 per share on a basic and diluted basis.
During the fourth quarter of 1997, the Company recorded an extraordinary charge
of $905,000, or $0.07 per share, related to the early extinguishment of debt in
connection with the acquisition of Alamac.
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LIQUIDITY AND CAPITAL RESOURCES
The Company entered into a loan security agreement effective August 19,
1999, with Congress Financial Corporation (Southern) and BankBoston, N.A. for a
revolving credit, term loan and letter of credit facility in an aggregate
principal amount of up to $110,000,000 (the "Credit Agreement"), to replace the
Company's previous credit facility and to support the Company's working capital
and general corporate needs. The Company's primary capital requirements are for
working capital, debt service and capital expenditures. Management believes that
cash generated from operations, together with borrowings available under the
Credit Agreement, will be sufficient to meet the Company's working capital and
capital expenditure needs in the foreseeable future.
Net cash provided by operating activities for fiscal 1999, 1998 and
1997 was $20.5 million, $25.6 million and $19.9 million, respectively. These
cash flows have been supplemented primarily by borrowings under the Company's
credit facilities. The average balances outstanding and the average interest
rates paid for 1999, 1998 and 1997 were approximately $67.1 million, $94.5
million, and $46.3 million, respectively, and 8.7%, 8.4%, and 7.5%,
respectively. Availability under the Revolver is limited at all times, through
maturity to a receivables and inventory borrowing base. Based on the borrowing
base computation within the Credit Agreement, the amount of additional borrowing
available at October 2, 1999 was $5.8 million. Further reference is made to Note
6 to the consolidated financial statements.
Working capital at October 2, 1999, was $72.7 million versus $84.6
million at October 3, 1998. The Company's current ratio was 3.5:1 and its
debt-to-capital ratio was 68.8% at October 2, 1999, compared to 3.0:1 and 65.6%
respectively, at October 3, 1998.
Net accounts receivable were $50.5 million as of October 2, 1999,
compared to $71.3 million at October 3, 1998, due to lower sales volume.
Inventories decreased from $45.1 million at October 3, 1998, to $36.7 million as
of October 2, 1999, due to reduced production related to the lower level of
sales activity in the current period.
Capital expenditures during 1999, 1998 and 1997 were $10.2 million,
$17.6 million and $14.0 million, respectively. Cash outlays for capital spending
are anticipated to approximate $8 to $9 million in 2000.
SEASONALITY
The following table sets forth the net sales and percentage of net
sales for the Company by fiscal quarter for the last three fiscal years.
1999 1998 1997(1)
- ----------------- ------------------------ ------------------------- --------------------
(in thousands)
First Quarter $ 75,391 24.2% $ 91,931 22.0% $ 38,793 17.4%
Second Quarter 80,138 25.7% 109,958 26.3% 51,038 22.8%
Third Quarter 83,053 26.7% 113,533 27.2% 68,383 30.6%
Fourth Quarter 72,878 23.4% 102,103 24.5% 65,135 29.2%
- ----------------- ------------ ---------- ------------ ---------- ------------ ----------
$ 311,460 100.0% $ 417,525 100.0% $ 223,349 100.0%
- ----------------- ------------ ---------- ------------ ---------- ------------ ----------
(1) Excludes Alamac sales of $26.8 million in the fourth fiscal quarter of 1997.
Due to this seasonal pattern of the Company's sales, typically
inventories are lowest at the end of the fiscal year and gradually increase over
the following six months in anticipation of the peak selling period. Receivables
tend to decline during the first fiscal quarter and are at their lowest point
during December through February. The net result is increased working capital
requirements from February through late in the third quarter.
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INFLATION
Similar to other textile and apparel manufacturers, the Company is
dependent on the prices and supplies of certain principal raw materials
including cotton, acrylic and polyester fibers. During 1999, 1998 and 1997
prices for both cotton and polyester declined. The long-term impact of
subsequent raw material price fluctuations on the Company's performance is,
however, uncertain. The Company intends to support margins through continued
efforts to improve its product mix and improve product pricing as market
conditions permit.
YEAR 2000
The Company determined that it was necessary to modify or replace
portions of its software so that its computer systems will function properly
with respect to dates in the year 2000 and beyond. The Company also has
initiated discussions with its significant suppliers, large customers and
financial institutions to ensure that those parties have appropriate plans to
remediate Year 2000 issues where their systems interface with the Company's
systems or otherwise impact its operations.
The Company's comprehensive Year 2000 initiative is being managed by a
team of internal staff. The team's activities are designed to ensure that there
is no adverse effect on the Company's core business operations and that
transactions with customers, suppliers and financial institutions are fully
supported. The Company believes its business application programs are currently
compliant. The Company continues to follow up with critical suppliers and
customers concerning their plans and progress in addressing the Year 2000
problem. The Company has not received assurances from all of the significant
third parties with whom it does business or upon whom it relies and there can be
no assurances that such parties have addressed adequately their year 2000 issues
or how any failure to do so will not adversely affect the Company. The costs of
the Year 2000 Project have not been and are not expected to be material to the
Company's results of operations or financial position and are being expensed as
incurred. These costs represent the labor costs of time allocated from existing
internal staff. The costs of the project are based on management's best
estimates. Specific factors that might cause material differences to these cost
estimates include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct all relevant
computer codes, and similar uncertainties. The Company believes its reasonably
likely worst case scenario would be a loss of power. If any interruption of
power were to persist it could have a material adverse effect on the Company's
results of operations and its liquidity.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
RISK MANAGEMENT
The Company is exposed to market risk from changes in interest rates
and commodity prices. To reduce such risks, the Company selectively uses
financial instruments. All such hedging transactions are authorized and executed
pursuant to clearly defined procedures, which strictly prohibit the use of
financial instruments for trading purposes. A discussion of the Company's risk
management accounting policies is included in the Notes to the Consolidated
Financial Statements.
Interest Rates
At October 2, 1999, the fair value of the Company's total debt was
estimated at $87.1 million using yields obtained through independent pricing
sources for the same or similar types of borrowing arrangements and taking into
consideration the underlying terms of the debt. Such fair value is less than the
carrying value of debt at October 2, 1999. Market risk is estimated as the
potential change in fair value resulting from a hypothetical change in interest
rates. Using a yield to maturity analysis and assuming an increase in interest
rates of 10% from October 2, 1999, the potential decrease in fair value of total
debt would be $1.1 million.
The Company had $72.9 million of variable rate debt outstanding at
October 2, 1999. At this borrowing level, a hypothetical 10% adverse change in
interest rates, considering the effect of the interest rate hedge agreements,
would have approximately a $450,000 unfavorable impact on the Company's net
income and cash flows.
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Commodities
The availability and price of cotton, which represents approximately
65% of raw material fibers the Company uses are subject to wide fluctuations due
to unpredictable factors such as weather, plantings, government farm programs
and policies, and changes in global production. To reduce price risk caused by
market fluctuations the Company from time to time will enter into long-term
purchase contracts. At October 2, 1999, the Company had commitments to purchase
approximately $19 million of cotton through July 2000 representing approximately
100% of estimated fiscal 2000 requirements. The hypothetical incremental loss in
earnings for the cotton commodity positions at October 2, 1999 is estimated to
be approximately $1.9 million, assuming a decrease of 10% in cotton prices.
The above risk management discussion and the estimated amounts
generated from the sensitivity analyses are forward-looking statements of market
risk assuming certain adverse market conditions occur. Actual results in the
future may differ materially from those projected due to actual developments in
the market.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements set forth below are included beginning on page 22.
Page
Report of Independent Auditors............................................................................. 19
Consolidated Balance Sheets as of October 2, 1999 and October 3, 1998...................................... 20
Consolidated Statements of Operations for the years ended October 2, 1999, October 3, 1998 and
October 4, 1997.............................................................................. 21
Consolidated Statements of Shareholders' Equity for the years ended October 2, 1999, October 3, 1998
and October 4, 1997.......................................................................... 22
Consolidated Statements of Cash Flows for the years ended October 2, 1999, October 3, 1998 and
October 4, 1997.............................................................................. 23
Notes to Consolidated Financial Statements................................................................. 24
Schedules:
Schedule II - Valuation and Qualifying Accounts......................................................... 39
All other financial statement schedules are omitted as the information is not
required or because the required information is presented in the financial
statements or the notes thereto.
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19
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Dyersburg Corporation
We have audited the accompanying consolidated balance sheets of
Dyersburg Corporation as of October 2, 1999 and October 3, 1998, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended October 2, 1999. Our audits also
included the financial statement schedule listed in the index for Item 8. These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Dyersburg Corporation at October 2, 1999 and October 3, 1998, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended October 2, 1999, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
/s/ Ernst & Young LLP
Charlotte, North Carolina
October 29, 1999
19
20
Dyersburg Corporation
Consolidated Balance Sheets
OCTOBER 2, October 3,
1999 1998
-------- --------
(in thousands, except share data)
ASSETS
Current assets:
Cash .................................................... $ 158 $ 265
Accounts receivable, net of allowance for doubtful
accounts of $2,826 in 1999 and $2,899 in 1998 ........ 50,509 71,359
Inventories ............................................. 36,735 45,147
Income taxes receivable ................................. 8,253 2,545
Deferred income taxes ................................... 3,850 5,386
Prepaid expenses and other .............................. 2,455 1,914
-------- --------
Total current assets ........................................ 101,960 126,616
Property, plant and equipment, net .......................... 120,688 136,613
Goodwill, net ............................................... 90,954 93,752
Deferred debt costs, net .................................... 5,018 5,935
Assets held for sale and other .............................. 4,314 218
-------- --------
$322,934 $363,134
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable .................................. $ 14,697 $ 19,833
Accrued expenses and other .............................. 11,127 14,706
Current portion of long-term obligations ................ 3,400 7,500
-------- --------
Total current liabilities ................................... 29,224 42,039
Long-term obligations ....................................... 194,460 198,900
Deferred income taxes ....................................... 7,779 10,242
Other liabilities ........................................... 1,571 3,582
Commitments and contingencies
Shareholders' equity:
Preferred stock, 5,000,000 shares authorized; none issued
Series A Preferred stock, authorized 200,000 shares; none
issued
Common stock, $.01 par value,
Authorized 40,000,000 shares;
Issued and outstanding shares--
13,341,066 in 1999 and 13,337,066 in 1998 ............ 133 133
Additional paid-in capital .............................. 42,773 42,752
Retained earnings ....................................... 46,994 65,486
-------- --------
Total shareholders' equity .................................. 89,900 108,371
-------- --------
$322,934 $363,134
======== ========
See accompanying notes.
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21
Dyersburg Corporation
Consolidated Statements of Operations
YEAR ENDED
--------------------------------------------
OCTOBER 2, October 3, October 4,
1999 1998 1997
--------------------------------------------
(in thousands, except per share data)
Net sales .................................... $ 311,460 $ 417,525 $ 250,193
Cost of sales ................................ 270,959 343,901 192,802
Selling, general and administrative expenses . 33,608 37,488 28,008
Restructuring charges ........................ 11,578 1,300 --
Interest and amortization of debt costs ...... 20,295 22,490 7,483
--------- --------- ---------
336,440 405,179 228,293
--------- --------- ---------
Income (loss) before income taxes and
extraordinary loss ........................ (24,980) 12,346 21,900
Federal and state income taxes ............... (7,958) 5,313 8,634
--------- --------- ---------
Income (loss) before extraordinary loss ...... (17,022) 7,033 13,266
Extraordinary loss, net of tax benefit ....... (1,203) -- (905)
--------- --------- ---------
Net income (loss) ............................ $ (18,225) $ 7,033 $ 12,361
========= ========= =========
Weighted average shares
outstanding:
Basic ................................... 13,345 13,326 13,155
Diluted ................................. 13,345 13,336 13,210
========= ========= =========
Basic earnings per share:
Income (loss) before extraordinary loss ... $ (1.28) $ 0.53 $ 1.01
Extraordinary loss ........................ (0.09) -- (0.07)
--------- --------- ---------
Net Income (loss) ......................... $ (1.37) $ 0.53 $ 0.94
========= ========= =========
Diluted earnings per share:
Income (loss) before extraordinary loss ... $ (1.28) $ 0.53 $ 1.01
Extraordinary loss ........................ (0.09) -- (0.07)
--------- --------- ---------
Net (loss) income ......................... $ (1.37) $ 0.53 $ 0.94
========= ========= =========
See accompanying notes.
21
22
Dyersburg Corporation
Consolidated Statements of Shareholders' Equity
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
--------- --------- --------- ---------
(in thousands, except share data)
Balance at September 28, 1996 .......... $ 132 $ 41,460 $ 47,150 $ 88,742
Net income ......................... -- -- 12,361 12,361
Cash dividends paid ($.04 per share) -- -- (525) (525)
Acquisition and retirement of 27,000
shares of common stock ............. (160) -- (160)
Exercise of 152,525 stock options .. 1 685 -- 686
--------- --------- --------- ---------
Balance at October 4, 1997 ............. 133 41,985 58,986 101,104
Net income ......................... -- -- 7,033 7,033
Cash dividends paid ($.04 per share) -- -- (533) (533)
Stock issued of 1,383 shares and
exercise of 55,651 stock options,
including tax benefit ........... -- 767 -- 767
--------- --------- --------- ---------
Balance at October 3, 1998 ............. 133 42,752 65,486 108,371
Net (loss) ......................... -- -- (18,225) (18,225)
Cash dividends paid ($.02 per share) -- -- (267) (267)
Stock issued of 4,000 shares ....... -- 21 -- 21
--------- --------- --------- ---------
Balance at October 2, 1999 ............. $ 133 $ 42,773 $ 46,994 $ 89,900
========= ========= ========= =========
See accompanying notes .
22
23
Dyersburg Corporation
Consolidated Statements of Cash Flows
YEAR ENDED
----------------------------------------------
OCTOBER 2, October 3, October 4,
1999 1998 1997
--------- --------- ---------
(in thousands)
OPERATING ACTIVITIES
Net income (loss) ............................... $ (18,225) $ 7,033 $ 12,361
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Writedown of fixed assets .................... 7,079 -- --
Extraordinary loss, net of tax benefit ....... 1,203 -- 905
Depreciation ................................. 15,821 15,721 11,742
Amortization ................................. 3,824 3,971 2,136
Deferred income taxes and other .............. (2,334) 1,845 847
Changes in operating assets and liabilities:
Accounts receivable ...................... 20,850 (3,069) (25,821)
Inventories .............................. 8,412 7,075 4,487
Trade accounts payable and other current
liabilities ............................ (8,716) (8,108) 13,287
Income taxes receivable, net of
extraordinary loss tax effect .......... (5,060) (576) 1,128
Other .................................... (2,350) 1,700 (1,158)
--------- --------- ---------
Net cash provided by operating activities ....... 20,504 25,592 19,914
INVESTING ACTIVITIES
Purchases of property, plant and equipment ...... (10,158) (17,564) (14,041)
Purchase of Alamac Sub Holdings, Inc. ........... -- (4,272) (127,679)
Other ........................................... 518 88 --
--------- --------- ---------
Net cash used in investing activities ........... (9,640) (21,748) (141,720)
FINANCING ACTIVITIES
Net (payments) borrowings on long-term
obligations ................................. (8,540) (4,550) 128,662
Deferred financing costs ........................ (1,959) -- (6,697)
Dividends paid .................................. (267) (533) (525)
Exercise of stock options, net of tax benefit ... -- 767 686
Acquisition of common stock ..................... -- -- (160)
Other ........................................... (205) (211) (195)
--------- --------- ---------
Net cash (used in) provided by financing
activities .................................. (10,971) (4,527) 121,771
--------- --------- ---------
Net decrease in cash ............................ (107) (683) (35)
Cash at beginning of year ....................... 265 948 983
--------- --------- ---------
Cash at end of year ............................. $ 158 $ 265 $ 948
========= ========= =========
See accompanying notes.
23
24
Notes To Consolidated Financial Statements
Dyersburg Corporation 1999 Annual Report
1. ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts
of Dyersburg Corporation and its wholly-owned subsidiaries (the "Company").
Investments in affiliates in which the Company owns 20 to 50 percent of the
voting stock are accounted for using the equity method. All significant
intercompany balances and transactions have been eliminated.
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates and assumptions.
OPERATIONS
The Company is a textile manufacturer of knit fabrics with customers
concentrated in the domestic apparel industry. The Company does not require
collateral for accounts receivable. One customer, Garan Incorporated, accounted
for more than 10% (approximately $46.4 million) of the Company's net sales for
the year ended October 3, 1998. No customer accounted for 10% or more of sales
in fiscal 1999 or 1997.
CASH AND CASH EQUIVALENTS
The Company considers cash equivalents to be temporary cash investments
with a maturity of three months or less when purchased.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out
method) or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation is
computed on the straight-line basis over the estimated useful lives of the
assets: buildings - 25 to 40 years; machinery and equipment - 5 to 15 years.
During the first quarter of fiscal 1999, the Company changed its estimates for
the useful lives of certain property, plant and equipment at its Dyersburg,
Tennessee facilities. This change was implemented to reflect time periods more
consistent with actual historical experience and anticipated utilization of the
assets. The effect of the change was a decrease in depreciation expense for each
quarter of fiscal 1999 of approximately $350,000. This change decreased
depreciation expense for the full fiscal year by approximately $1.4 million. For
the year ended October 2, 1999, the effect of the change was to reduce the after
tax net loss by approximately $854,000, or $0.06 per share.
INTANGIBLE ASSETS
Goodwill, which consists of costs in excess of net assets acquired, is
amortized by the straight-line method over forty years. Deferred debt costs are
amortized by the interest method over the life of the related debt. Goodwill is
net of accumulated amortization of $22,329,000 and $20,034,000 and deferred debt
costs and other is net of accumulated amortization of $1,035,000 and $1,226,000
at October 2, 1999 and October 3, 1998, respectively.
24
25
1. ACCOUNTING POLICIES (CONTINUED)
IMPAIRMENT OF LONG LIVED ASSETS
Long-lived assets, including goodwill, are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. If the sum of the estimated undiscounted cash flows is
less than the carrying amount of the asset, a loss is recognized for the
difference between fair value and the carrying amount of the asset. Long-lived
assets to be disposed of are carried at the lower of cost or fair value less
cost to sell when the Company is committed to a plan of disposal and the asset
is no longer in use. The estimated useful lives of long-lived assets, including
goodwill, are evaluated continually to determine whether later events and
circumstances warrant revised estimates.
INCOME TAXES
The Company provides income taxes under the liability method.
Accordingly, deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and for income tax purposes.
STOCK BASED COMPENSATION
The Company grants stock options for a fixed number of shares to
employees with an exercise price equal to the market value of the shares at the
date of grant. The Company accounts for stock option grants in accordance with
APB Opinion No. 25, Accounting for Stock Issued to Employees and, accordingly,
has recognized no compensation expense for stock option grants.
EARNINGS PER COMMON SHARE
Basic earnings per common share is computed using the weighted average
number of common shares outstanding during each period. Diluted earnings per
common share is computed using the weighted average number of common shares
outstanding during each period, including common stock equivalents, consisting
of stock options calculated using the treasury stock method, when dilutive.
ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement No. 133, Accounting for
Derivative Instruments and Hedging Activities, which is required to be adopted
in years beginning after June 15, 2000. The Company expects to adopt the new
Statement effective October 1, 2000. The Statement will require the Company to
recognize all derivatives on the balance sheet at fair value. Derivatives that
are not hedges must be adjusted to fair value through income. If the derivative
is a hedge, depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset against the change in fair value of the hedged
assets, liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. The Company cannot predict what the effect of adoption
of Statement No. 133 will be on the earnings and financial position of the
Company.
REVENUE RECOGNITION
Revenue is recognized when products are shipped and all terms of the
sale are final.
RECLASSIFICATIONS
Certain amounts in the 1998 and 1997 financial statements have been
reclassified to conform with the 1999 financial statement presentation. Such
reclassifications had no effect on net income as previously reported.
25
26
2. BUSINESS COMBINATION
In August 1997, the Company acquired all the outstanding common stock
of Alamac Sub Holdings, Inc. ("Alamac"), a wholly-owned subsidiary of West Point
Stevens, Inc. and a manufacturer of knit fabrics sold primarily to domestic
apparel producers. The acquisition was accounted for using the purchase method
of accounting. The purchase price was $131,973,000. Under its previous financing
arrangements, Alamac sold its accounts receivable and, as a result, the Company
did not acquire Alamac's accounts receivable. Accordingly, the Company financed
approximately $40,000,000 of additional working capital following the closing of
the acquisition. The Company used the net proceeds from the Senior Subordinated
Notes (see Note 6), together with borrowings under its credit facility, to
finance the purchase price and working capital needs, repay amounts outstanding
under the Company's existing credit facility and certain other indebtedness, and
pay related fees and expenses. During 1998, the Company finalized estimation of
the fair market value of certain Alamac fixed assets resulting in a reduction of
$17.5 million in property, plant and equipment, a reduction in pension
liabilities of $3.1 million and additional cash paid to the seller of $4.1
million. The total purchase price has been allocated as follows to the assets
acquired and liabilities assumed (in thousands):
Working capital $ 22,699
Property, plant and equipment 66,589
Goodwill 38,497
Other assets 6,140
Pension obligation (1,952)
---------
$ 131,973
=========
During 1998, the Company increased the amount of goodwill by $18.5
million, due to an adjustment in the fair value of property, plant and equipment
of $17.5 million and a working capital adjustment of $1 million. The preliminary
allocation of purchase price was based on the preacquisition book value of land
and buildings and a historical appraisal of equipment. The final purchase price
allocation, completed in the third quarter of 1998, was based primarily on third
party appraisals of fair market value.
The operating results of Alamac are included in the Company's
consolidated statements of income from August 27, 1997, the acquisition date.
The following unaudited pro forma results of operations assume the Alamac
acquisition and related financing transactions occurred at the beginning of the
period presented. The pro forma results of operations do not purport to
represent what the Company's results would have been had such transactions in
fact occurred at the beginning, of the years presented or to project the
Company's results of operations in any future period. The following pro forma
results for the year ended October 4, 1997 of operations are unaudited:
(in thousands, except per
share data)
Net sales $ 468,556
Income before extraordinary loss 14,182
Net income 13,277
Earnings per share:
Income before extraordinary loss $ 1.07
Net income 1.00
26
27
3. INVENTORIES
Inventories consist of the following:
OCTOBER 2, October 3,
1999 1998
-----------------------
(in thousands)
Raw materials $11,611 $15,071
Work in process 12,436 15,218
Finished goods 10,919 12,039
Supplies and other 1,769 2,819
------- -------
$36,735 $45,147
======= =======
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
OCTOBER 2, October 3,
1999 1998
------------------------
(in thousands)
Land $ 2,054 $ 2,279
Buildings 55,623 63,165
Machinery and equipment 150,665 151,005
-------- --------
208,342 216,449
Less: accumulated depreciation 87,654 79,836
-------- --------
$120,688 $136,613
======== ========
5. ACCRUED EXPENSES
Accrued expenses consist of the following:
OCTOBER 2, October 3,
1999 1998
----------------------
(in thousands)
Accrued interest Subordinated Debt $ 1,172 $ 1,172
Accrued bonuses and commissions 238 746
Accrued profit sharing 213 2,426
Workers' compensation 1,250 2,459
Other 8,254 7,903
------- -------
$11,127 $14,706
======= =======
27
28
6. LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
OCTOBER 2, October 3,
1999 1998
------------------------
(in thousands)
Senior subordinated notes $125,000 $125,000
Credit Agreement 64,960 73,500
Industrial revenue bonds 7,900 7,900
-------- --------
197,860 206,400
Less current portion 3,400 7,500
-------- --------
Total long-term obligations $194,460 $198,900
======== ========
In August 1997, the Company issued $125,000,000 principal amount of
9.75% Senior Subordinated Notes due September 1, 2007 (the "Subordinated
Notes"). These Subordinated Notes are unsecured senior subordinated obligations
and are subordinated in right of payment to the prior payment in full of all
senior indebtedness, including the indebtedness under the Credit Agreement and
the Industrial Revenue Bonds.
The Company is a holding company with no assets other than its
investment in its subsidiaries. The guarantor subsidiaries are wholly-owned
subsidiaries of the Company and have fully and unconditionally guaranteed the
Subordinated Notes due September 1, 2007 on a joint and several basis. The
guarantor subsidiaries comprise all of the direct and indirect subsidiaries of
the Company. As of October 2, 1999, there is no restriction on the payment of
dividends from subsidiaries to the parent company under the terms of the
Subordinated Notes. The Company has not presented separate financial statements
and other disclosures concerning each guarantor subsidiary because management
has determined that such information is not material to investors.
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 8.25% at October 2, 1999) plus a margin
currently 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 amount available for borrowing at
October 2, 1999 was $5.8 million. Up to $16,000,000 of the amount available
under the Revolver may be used for the issuance of letters of credit. The Term
Loan provides for scheduled monthly amortization of $425,000 beginning February
1, 2000. Borrowings under the Credit Agreement are secured by substantially all
assets of the Company. The Company is required to maintain compliance with
certain financial covenants under the Credit Agreement, including covenants
relating to minimum net worth, minimum cash flow and interest ratio coverage and
minimum excess availability. The credit facility also prohibits the payment of
dividends and the repurchase of the Company's stock. The extinguishment of debt
related to the refinancing of the bank credit facility resulted in an
extraordinary loss due to a write-off of deferred financing costs, net of taxes
of $1,203,000, or $0.09 per share.
The Industrial Revenue Bonds bear interest at adjustable rates (3.90%
at October 2, 1999 and 4.15% at October 3, 1998) and mature November 1, 2002.
The bonds are secured by a letter of credit issued under the Revolver.
The 6.78% Senior Notes that were due 2002 were retired concurrent with
the Subordinated Notes offering which resulted in an extraordinary loss net of
taxes of $905,000, or $.07 per share.
28
29
The schedule of debt maturities presented below assumes borrowings
under the Revolver are outstanding until maturity (in thousands):
YEAR AMOUNT
---- --------
2000 $ 3,400
2001 5,100
2002 56,460
2003 7,900
Thereafter 125,000
--------
Total $197,860
========
Total interest paid was $19,196,000 in 1999, $22,794,000 in 1998, and
$6,185,000 in 1997.
The Company has letters of credit outstanding of $9,453,000 at October
2, 1999. During the third and fourth quarter of fiscal 1999, the Company
terminated all of its outstanding interest rate hedge agreements. The cost to
unwind these agreements was insignificant. There were no swap arrangements or
interest rate collars in effect at October 2, 1999. The fair value of the swap
arrangements and collar at October 3, 1998 was a loss of $2,075,000 and was not
recognized in the financial statements. Presently, the Company has $125 million
of its debt at a fixed rate, with the remaining balance of the Term Loan and
Revolver bearing interest at a floating rate of interest.
The fair value of long-term obligations is estimated using yields
obtained through independent pricing sources for the same or similar types of
borrowing arrangements. The fair value of long-term obligations, at October 2,
1999 was estimated at $87.1 million, or approximately $110.7 million less than
the book value at that date. The fair value of long-term obligations, excluding
interest rate swaps and collars, at October 3, 1998 was estimated at $171.5
million, or approximately $34.9 million less than the carrying value at that
date. For all other financial instruments, the carrying amounts approximate fair
value due to their short maturities.
7. SHAREHOLDERS' EQUITY
In June 1999 the Board of Directors adopted a Shareholder Rights Plan.
Under the plan, shareholders of common stock received as a dividend one
preferred stock purchase right for each share of common stock held (the "Right"
or "Rights"). Each Right, when exercisable, will entitle the registered holder
to purchase one one-hundredth of a share of new Series A Junior Preferred Stock
at an exercise price of $12 per Right, subject to certain adjustments. The
Rights are not represented by separate certificates and are only exercisable
upon a person's or group's acquisition of, or commencement of a tender or
exchange offer for, 15% or more of the Company's Common Stock ("Acquiring
Party"). The Rights are also exercisable in the event of certain mergers or
asset sales involving more than 50% of the Company's assets or earning power.
Upon becoming exercisable, each Right will allow the holder (other than the
Acquiring Party) to buy either securities of the Company or securities of the
Acquiring Party having a value twice the exercise price of the Rights. The
Rights expire on June 3, 2009 and are redeemable by the Board of Directors at
$.001 per Right. The Rights are exchangeable by the Board of Directors at an
exchange ratio of one share of Common Stock per Right at any time after the
Rights become exercisable.
On October 4, 1995, the Company approved a plan to repurchase up to
2,000,000 shares of Dyersburg Corporation common stock. Purchases were made at
the discretion of the Company as warranted based on market pricing. During the
year ended October 4, 1997, a total of 27,000 shares were purchased under the
repurchase plan at an aggregate cost of approximately $160,000. The Company's
Credit Agreement prohibits stock repurchases; accordingly, the Company does not
presently anticipate further purchases under the plan.
The Company's Stock Option Plans (the "Option Plans") provide for the
granting of stock options to management, key employees and outside directors.
Options are subject to terms and conditions determined by the Compensation
Committee of the Board of Directors, and generally are exercisable in increments
of 20% per year beginning one year from date of grant and expire 10 years from
date of grant.
29
30
7. SHAREHOLDERS' EQUITY (CONTINUED)
Option Plan activity is summarized in the table below.
NUMBER OF WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
-------------------------------------
(in thousands, except exercise price)
Balance at September 28, 1996 399 $ 4.70
Options granted 47 7.57
Options exercised (153) 4.50
Options canceled (26) 4.50
------
Balance at October 4, 1997 267 5.34
------
Options granted 195 10.67
Options exercised (55) 4.73
Options canceled (4) 9.20
------
Balance at October 3, 1998 403 7.97
------
Options granted 346 3.47
Options canceled (72) 5.82
------
Balance at October 2, 1999 677 5.90
======
The weighted average grant date fair value of options was $2.40, $5.58 and
$3.40 for 1999, 1998 and 1997, respectively. Options outstanding at October 2,
1999 are summarized in the table below:
OUTSTANDING EXERCISABLE
--------------------------------------------- ------------------------------
WEIGHTED AVERAGE WEIGHTED
AVERAGE REMAINING AVERAGE
EXERCISE CONTRACTUAL EXERCISE
EXERCISE PRICE OPTIONS PRICE LIFE(YEARS) OPTIONS PRICE
- -------------------------------------------------------------------------------------------------------
(in thousands, except exercise price and contractual life)
$2.75 - 6.00 484 $ 3.94 7.12 209 $ 4.29
$6.01 - 11.25 193 10.80 5.83 87 10.42
--- ---
Total 677 296
=== ===
There were 296,000 and 228,000 options exercisable and 505,000 and
779,000 shares reserved for future grants at October 2, 1999 and October 3,
1998, respectively.
The Company has elected to follow Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees (APB No. 25) and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, Accounting for Stock-Based Compensation, requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB No. 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted average
assumptions: risk-free interest rate of 5.32%; volatility of the expected market
price of the common stock of 0.476; expected life of the options of 9.0 years;
and an expected dividend yield of 0.5%. Since compensation expense from stock
options is recognized over the future years' vesting period, and additional
awards generally are made from time to time, pro forma amounts for 1999 may not
be representative of future years' amounts.
30
31
7. SHAREHOLDERS' EQUITY (CONTINUED)
For purpose of the following pro forma disclosures, the estimated fair
value of the options is amortized to expense over the options' vesting period.
OCTOBER 2, October 3, October 4,
1999 1998 1997
-----------------------------------------
(in thousands, except per share data)
Net income (loss):
As reported $(18,225) $ 7,033 $12,361
Pro forma (18,444) 6,861 12,245
Net income (loss) per share - diluted:
As reported $ (1.37) $ 0.53 $ 0.94
Pro forma (1.38) 0.51 0.93
The table below sets forth the computations of basic and diluted earnings per
share:
Year Ended
-----------------------------------------------
OCTOBER 2, October 3, October 4,
1999 1998 1997
---------- --------- ----------
(in thousands, except per share data)
Numerator for basic and diluted earnings per
share:
Income (loss) before extraordinary loss ....... $ (17,022) $ 7,033 $ 13,266
Extraordinary loss ............................ (1,203) -- (905)
---------- ---------- ----------
Net income (loss) ................................ (18,225) $ 7,033 $ 12,361
========== ========== ==========
Denominator:
Denominator for basic earnings per share--
weighted average shares outstanding ........ 13,345 13,326 13,155
Effect of dilutive securities:
Employee stock options ..................... -- 10 55
---------- ---------- ----------
Denominator for diluted earnings per share--
adjusted weighted average shares outstanding 13,345 13,336 13,210
========== ========== ==========
Basic earnings per share:
Income (loss) before extraordinary loss ....... $ (1.28) $ .53 $ 1.01
Extraordinary loss ............................ (0.09) -- (.07)
---------- ---------- ----------
Net income (loss) ............................. $ (1.37) $ .53 $ .94
========== ========== ==========
Diluted earnings per share:
Income (loss) before extraordinary loss ....... $ (1.28) $ .53 $ 1.01
Extraordinary loss ............................ (0.09) -- (.07)
---------- ---------- ----------
Net income (loss) ............................. $ (1.37) $ .53 $ .94
========== ========== ==========
31
32
8. INCOME TAXES
Significant components of the Company's deferred tax liabilities and
assets are as follows:
OCTOBER 2, October 3,
1999 1998
----------------------
(in thousands)
Deferred tax liabilities:
Depreciation $ 8,997 $ 8,582
Other 2,635 2,415
------- -------
Total deferred tax liabilities 11,632 10,997
Deferred tax assets:
Non-deductible reserves 3,272 4,184
Net operating loss and credit carryforwards 3,204 --
Deferred compensation 550 1,439
Other 677 518
------- -------
Total deferred tax assets 7,703 6,141
------- -------
Net deferred tax liabilities $ 3,929 $ 4,856
======= =======
Significant components of the provision (benefit) for income taxes are
as follows:
YEAR ENDED
--------------------------------------
OCTOBER 2, October 3, October 4,
1999 1998 1997
--------------------------------------
(in thousands)
Current:
Federal $(7,031) $ 2,199 $ 9,014
State -- 258 249
Deferred, primarily federal (927) 2,856 (629)
------- ------- -------
$(7,958) $ 5,313 $ 8,634
======= ======= =======
The provision (benefit) for income taxes differed from the amount
computed by applying the statutory federal income tax rate of 35% to income
(loss) before income taxes due to the following:
YEAR ENDED
----------------------------------------
OCTOBER 2, October 3, October 4,
1999 1998 1997
----------------------------------------
(in thousands)
Computed federal tax expense (benefit) at
statutory rate $(8,743) $ 4,321 $ 7,665
State taxes, net of federal income tax
benefit (264) 167 162
Effect of nondeductibility of amortization
of goodwill 715 751 655
Other 334 74 152
------- ------- -------
$(7,958) $ 5,313 $ 8,634
======= ======= =======
At October 2, 1999, the Company had available federal net operating
loss carryforwards of $822,000 which may be used to offset future taxable
income. These carryforwards expire in fiscal 2019. In addition, the Company had
available a tax credit carryforward of $2,625,000 which may be used to reduce
future federal regular income taxes over an indefinite period.
32
33
Income tax payments were $645,300, $6,622,000, and $7,154,000 for
fiscal years 1999, 1998, and 1997, respectively. A tax benefit was realized for
the exercise of stock options in the amount of $504,000, and such amount was
recognized as additional paid in capital for the year ended October 3, 1998. The
extraordinary items for the fiscal years 1999 and 1997 are shown net of tax
benefits of $647,000 and $590,000, respectively.
9. EMPLOYEE BENEFIT PLANS
The Company has two separate defined contribution plans that,
collectively, cover substantially all employees, excluding Alamac employees.
Contributions to one plan equal 7.5% of adjusted income, as defined, plus
additional amounts which the Board of Directors may authorize. Contributions to
the other plan are at the discretion of the Board of Directors. The contribution
for either plan shall not exceed the maximum amount deductible for federal
income tax purposes. Profit-sharing expense was $213,000, $2,544,000 and
$2,599,000 for fiscal years 1999, 1998, and 1997, respectively.
The Company provided defined benefit pension plans (the "Pension
Plans") to substantially all full-time active employees of Alamac whose
employment transferred to the Company upon acquisition. The terms of the plans
were substantially identical, with respect to the classes of employees covered
under the plan and eligibility, to the terms provided by the seller prior to the
purchase of Alamac. Benefits under the existing plans were based on years of
service and compensation and become vested after five years of service.
Substantially all benefits were vested at the valuation date. The Company funds
the plans in accordance with the Employee Retirement Income Security Act of
1974.
The following summarizes information including the plans' funded
status:
YEAR ENDED
----------------------------
OCTOBER 2, October 3,
1999 1998
-------- --------
CHANGE IN PENSION OBLIGATION (in thousands)
Pension obligation at beginning of year $ 18,693 $ 14,711
Service cost 1,175 759
Interest cost 1,428 868
Actuarial (gain) loss (3,494) 3,089
Benefits paid (667) (734)
Effect of curtailment (107) --
-------- --------
Pension obligation at end of year $ 17,028 $ 18,693
======== ========
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year $ 13,792 $ 12,759
Actual return on plan assets 638 1,392
Company contributions 2,048 375
Benefits paid (667) (734)
-------- --------
Fair value of plan assets at end of year $ 15,811 $ 13,792
======== --------
Underfunded status of the plan $ (1,217) $ (4,901)
Unrecognized net actuarial (gain) loss (227) 2,628
-------- --------
Accrued pension cost at end of year $ (1,444) $ (2,273)
======== ========
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9. EMPLOYEE BENEFIT PLANS (CONTINUED)
YEAR ENDED
-------------------------
OCTOBER 2, October 3,
1999 1998
---------- ----------
WEIGHTED-AVERAGE ASSUMPTIONS
Discount rate 7.75% 7.25%
Expected return on plan assets 9.50% 9.75%
Rate of compensation increase (salaried only) 4.00% 3.50%
COMPONENTS OF NET PERIODIC PENSION COST
Service cost $ 1,175 $ 759
Interest cost 1,428 868
Actual return on plan assets (1,374) (1,392)
Net amortization and deferral 112 461
------- -------
Net pension cost 1,341 696
------- -------
Curtailment gain (122) --
------- -------
$ 1,219 $ 696
======= =======
Plan assets are invested primarily in United States Government,
corporate debt securities and equity securities. The salaried plan and hourly
plan projected benefit obligation was $10,886,000 and $6,142,000, respectively,
at October 2, 1999. The plan assets of the salaried and hourly plans were
$9,925,000 and $5,886,000, respectively, at October 2, 1999.
10. COMMITMENTS
The Company leases certain equipment and office space under
noncancelable operating leases. Most of these leases include renewal options and
some include purchase options. Rent expense was $7,829,000 in 1999, $7,690,000
in 1998, and $4,123,000 in 1997.
Future minimum payments under these leases are as follows:
FISCAL YEAR AMOUNT
------
(in thousands)
2000 $ 6,155
2001 5,093
2002 3,853
2003 3,779
2004 2,711
Thereafter 4,238
--------
Total aggregate future minimum lease payments $ 25,829
========
The Company routinely enters into forward purchase commitments to
secure the purchase price and availability of cotton, a significant raw material
utilized in its manufacturing process. At October 2, 1999, the Company has
outstanding commitments to purchase approximately $19 million in cotton through
July 2000.
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11. CONTINGENCIES
In connection with the acquisition of Alamac, the Company conducted an
environmental investigation of Alamac's facilities and identified environmental
contamination at certain facilities that will require remediation activities.
The Company estimates that the cost of such remediation activities will range
from approximately $3,500,000 to $5,000,000. As the Company continues to study
and evaluate necessary remediation activity, these estimates could change.
Pursuant to the Acquisition Agreement, WestPoint Stevens, Inc. agreed to pay 75%
of any losses occurring within three years of the closing of the acquisition for
matters identified in the Company's environmental investigation or arising as a
result of a breach of WestPoint Stevens' representations and warranties in
respect of environmental matters up to $10,000,000 and 67% of such losses in
excess of $10,000,000 and up to $20,000,000. WestPoint Stevens will not be
obligated to indemnify the Company for any such losses in excess of $20,000,000.
In addition, WestPoint Stevens agreed to indemnify the Company without regard to
time or dollar limitation for losses resulting from third-party claims relating
to the identified environmental contamination. Management believes that
WestPoint Stevens has the financial capability to honor this indemnity. As a
part of the acquisition of Alamac, the Company recorded an accrual of
approximately $875,000 for the estimated cost of remediation not covered by the
West Point indemnity. During 1999, the Company increased this reserve by
$150,000. As of October 2, 1999, the balance remaining in this accrual was
$828,000 and is classified in accrued expenses.
The Company is involved in various legal actions and claims arising in
the ordinary course of business. It is the opinion of management that such
litigation and claims will be resolved without material adverse effect to the
Company's financial position or results of operations.
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12. RESTRUCTURING ACTIVITIES
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 include 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 will result 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 October 2, 1999 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 $2,841,000
at October 2, 1999. The effect of suspending depreciation on these assets is not
material in the current year. 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 $1.9 million which continue to be
depreciated.
The following is a summary of activity in the 1999 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
========
Other costs related to the restructuring, primarily relocation of
equipment, of approximately $950,000 before tax, were charged to operations as
incurred.
The Company also recorded a charge of $1.3 million for restructuring
charges in the third quarter of fiscal 1998. This restructuring charge
represented severance-related expenses associated with terminated employees.
During fiscal 1998, $727,000 was paid for severance and related fringe benefits,
resulting in a balance in accrued restructuring charges of $575,000 at fiscal
year end. During the four quarters of fiscal 1999, approximately $77,000,
$326,000, $47,000 and $125,000 respectively, was paid in severance and related
fringe benefits. At October 2, 1999, there is no balance remaining related to
this restructuring charge.
13. REPORTABLE 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.
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37
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 resources
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 years ended October 2, 1999,
October 3, 1998 and October 4, 1997 were $273.2 million and $37.4 million,
$380.6 million and $35.2 million and $207.9 million, and $39.9 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 an equity investment in a apparel manufacturing joint
venture in the Dominican Republic which is not material at October 2, 1999.
The accounting policies of the segments are the same as those described
in the summary of significant accounting policies footnote. The Company
evaluates the performance of each segment based on operating income excluding
amortization of goodwill, restructuring charges and other one-time items
reflected in the consolidated statement of operations. Equity in earnings (loss)
of unconsolidated affiliate is included in the apparel segment. Assets
attributable to the Company's operating segments consist primarily of accounts
receivable, inventories, and property plant and equipment. Assets not
attributable to segments include: cash, prepaid expenses and other current
assets, deferred income taxes, goodwill and other non-current assets.
1999 1998 1997
--------- --------- ---------
Net Sales (in thousands)
Textile $ 310,632 $ 415,849 $ 247,761
Apparel 828 1,676 2,432
--------- --------- ---------
Consolidated net sales $ 311,460 $ 417,525 $ 250,193
========= ========= =========
Operating income (loss)
Textile $ 11,784 $ 39,784 $ 31,768
Apparel (2,093) (712) (479)
Amortization of goodwill 2,798 2,936 1,906
Restructuring 11,578 1,300 --
Interest 20,295 22,490 7,483
--------- --------- ---------
Consolidated income (loss) before taxes and
extraordinary loss $ (24,980) $ 12,346 $ 21,900
========= ========= =========
Depreciation
Textile $ 15,536 $ 15,612 $ 11,738
Apparel 285 109 4
--------- --------- ---------
$ 15,821 $ 15,721 $ 11,742
========= ========= =========
Capital Expenditures
Textile $ 9,488 $ 16,475 $ 14,024
Apparel 670 1,089 17
--------- --------- ---------
$ 10,158 $ 17,564 $ 14,041
========= ========= =========
Assets at end of year
Textile $ 204,241 $ 251,991 $ 272,141
Apparel 4,582 1,215 894
Assets not allocated to segments 114,111 109,928 93,779
--------- --------- ---------
$ 322,934 $ 363,134 $ 366,814
========= ========= =========
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14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
1999
FIRST SECOND THIRD FOURTH (a)
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands, except share data)
Net sales $ 75,391 $ 80,138 $ 83,053 $ 72,878
Gross profit 10,821 10,070 12,189 7,421
Income (loss) before extraordinary loss (1,652) (2,652) (8,541) (4,177)
Net income (loss) (1,652) (2,652) (8,541) (5,380)
Income (loss) per share before
extraordinary loss (.12) (.20) (0.64) (0.31)
Net income (loss) per share:
Basic (.12) (.20) (0.64) (0.40)
Fully diluted (.12) (.20) (0.64) (0.40)
Market prices of common stock:
High 4.38 3.81 1.81 1.25
Low 2.75 1.56 1.25 0.28
1998
FIRST SECOND THIRD FOURTH
- ---------------------------------------------------------------------------------------------------------------------------
(in thousands, except share data)
Net sales $ 91,931 $ 109,958 $ 113,533 $ 102,103
Gross profit 15,233 19,301 21,382 17,708
Net income 983 1,343 3,023 1,684
Net income per share:
Basic 0.07 0.10 0.23 0.13
Fully diluted 0.07 0.10 0.23 0.13
Market prices of common stock:
High 14.00 12.00 8.25 6.00
Low 11.00 7.69 5.06 3.50
(a) Fourth quarter 1999 includes $1,203, or $0.09 per share extraordinary loss
for write-off of deferred financing costs associated with obtaining new debt
agreements.
38
39
DYERSBURG CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
- ---------------------------------------- --------------- --------------- --------------- ----------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ---------------------------------------- --------------- --------------- --------------- ----------------
Additions
Balance at Charged to Balance
Beginning of Costs and Deductions(1) at end of
Description Period Expenses Describe Period
--------------- --------------- --------------- ----------------
Year ended October 2, 1999
Allowance for doubtful accounts $ 2,899 $ 2,566 $ 2,639 $ 2,826
=============== =============== =============== ================
Year ended October 3, 1998
Allowance for doubtful accounts $ 2,075 $ 1,464 $ 640 $ 2,899
=============== =============== =============== ================
Year ended October 4, 1997
Allowance for doubtful accounts $ 1,500 $ 2,184 $ 1,609 $ 2,075
=============== =============== =============== ================
(1) Write-offs, net of recoveries.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G(3), information with respect to
directors of the Company is included in the Company's definitive Proxy Statement
for the Annual Meeting of Shareholders to be held January 26, 2000 (the "Proxy
Statement") under the caption "Proposal One - Election of Directors," which
information is herein incorporated by reference.
Information with respect to executive officers of the Company is
included in Part I of this Form 10-K under the caption "Executive Officers of
the Registrant."
Information with respect to Section 16(a) of the Securities Exchange
Act of 1934, as amended, beneficial ownership reporting compliance is included
in the Company's Proxy Statement under the caption "Section 16(a) Beneficial
Ownership Reporting Requirements," which information is herein incorporated by
reference.
ITEM 11 . EXECUTIVE COMPENSATION
Information with respect to executive compensation is included in the
Proxy Statement under the caption "Executive Compensation," which information is
herein incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to the security ownership of certain
beneficial owners and management is included in the Proxy Statement under the
caption "Security Ownership of Management and Certain Beneficial Owners," which
information is herein incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to certain relationships and related
transactions is included in the Proxy Statement under the caption "Certain
Transactions," which information is herein incorporated by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(l) Financial Statements. See Item 8.
(a)(2) Supplemental Schedules Supporting Financial Statements. See Item 8.
(a)(3) Exhibits. See Index to Exhibits, page 42.
(b) The Company filed a Current Report on Form 8-K, effective
August 25, 1999, regarding entering into a new bank Credit
Agreement.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
DYERSBURG CORPORATION
Date: December 10, 1999 /s/ T. Eugene McBride
---------------------------------------
T. Eugene McBride
Chief Executive Officer
(Principal executive officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities indicated on December 00, 1999.
/s/ T. Eugene McBride /s/ Julius Lasnick
- ----------------------------------- ----------------------------------
T. Eugene McBride Julius Lasnick
Chairman Director
Chief Executive Officer
(Principal executive officer)
/s/ James P. Casey
- ----------------------------------- ----------------------------------
James P. Casey P. Manohar
Director Director
/s/ M. L. Fontenot /s/ Donna M. Randall
- ----------------------------------- ----------------------------------
M. L. Fontenot Donna M. Randall
President, Chief Operating Officer Director
and Director
- ----------------------------------- ----------------------------------
Mickey Ganot Ravi Shankar
Director Director
/s/ John D. Howard /s/ Paul L. Hallock
- ----------------------------------- ----------------------------------
John D. Howard Paul L. Hallock
Director Vice President - Finance and
Assistant Secretary - Treasurer
(Principal accounting officer)
/s/ L. R. Jalenak, Jr.
- -----------------------------------
L. R. Jalenak, Jr.
Director /s/ William S. Shropshire, Jr.
----------------------------------
William S. Shropshire, Jr.
Executive Vice President,
Chief Financial Officer
(Principal financial officer)
41
42
INDEX TO EXHIBITS
Exhibit
No. Description
- ------------- --------------------------------------------------------------
2.1 Stock Purchase Agreement, dated as of July 15, 1997, by and
among Dyersburg Corporation, Alamac Sub Holdings, Inc., AIH
Inc. and WestPoint Stevens Inc. (incorporated by reference to
Exhibit 2.1 to the Current Report on Form 8-K filed with the
Securities and Exchange Commission on July 18, 1997).
3.1 Amended and Restated Charter of Dyersburg Corporation
(incorporated by reference to Exhibit 3 to the Current Report
on Form 8-K filed with the Securities and Exchange Commission
on June 3, 1999.)
3.2 Amended and Restated Bylaws of Dyersburg Corporation
(incorporated by reference to Exhibit 3.1 to the Current
Report on Form 8-K filed with the Securities and Exchange
Commission on April 17, 1997).
4.1 Rights Agreement, dated June 3, 1999, between Dyersburg
Corporation and SunTrust Bank, Atlanta, N.A. (incorporated by
reference to Exhibit 4 to Current Report on form 8-K filed
with the Securities and Exchange Commission on June 3, 1999.)
10.1 Loan Agreement between The Industrial Revenue Board of the
City of Trenton, Tennessee and Dyersburg Fabrics Inc. dated as
of July 1, 1990 (incorporated by reference to Dyersburg
Fabrics Inc.'s Form 10-K for the fiscal year ended September
29, 1990).
10.2 Tax Sharing Agreement dated July 24, 1990 between Dyersburg
Fabrics Inc. and Dyersburg Corporation (incorporated by
reference to Dyersburg Fabrics Inc.'s Form 10-K for the fiscal
year ended September 29, 1990).
10.3* Dyersburg Corporation 1992 Stock Incentive Plan (incorporated
by reference to Exhibit 10(a).2 to the Registration Statement
on Form S-1 (Registration No. 33-46331)), as amended,
(incorporated by reference to Appendix A to Proxy Statement
dated December 14, 1995).
10.4* Dyersburg Fabrics Inc. Deferred Compensation Plan, as amended,
(incorporated by reference to Appendix A to Proxy Statement
dated December 14, 1995).
10.5 Form of Registration Rights Agreement dated as of April 30,
1992 between the Company and each shareholder of the Company
(incorporated by reference to Exhibit 10(k) to the
Registration Statement on Form S-1 (Registration No.
33-46331)).
10.6* Dyersburg Corporation Non-qualified Stock Option Plan for
Employees of Acquired Companies (incorporated by reference to
Exhibit 4(c) to the Registration Statement on Form S-8
(Registration No. 33-74350)), as amended, (incorporated by
reference to Appendix A to Proxy Statement dated December 14,
1995).
10.7* Amendment to Dyersburg Corporation 1992 Stock Incentive Plan
(incorporated by reference to a Registration Statement on Form
S-8 filed with the Securities and Exchange Commission on March
28, 1996).
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10.8 Second Amended and Restated Letter of Credit Agreement dated
as of July 1, 1990, among Dyersburg Fabrics Limited
Partnership, I, Dyersburg Fabrics Inc., Dyersburg Corporation,
DFIC, Inc., and SunTrust Bank, Atlanta, relating to $7,900,000
The Industrial Development Board of the City of Trenton,
Tennessee Industrial Development Revenue Bonds (Dyersburg
Fabrics Inc. Project Series 1990) (incorporated by reference
to Exhibit 10.11 to the Quarterly Report on Form 10-Q of the
quarter ended March 30, 1996).
10.9 Stock Purchase Agreement, dated April 8, 1997, between
Polysindo Hong Kong Limited and the sellers named therein
(incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K filed with the Securities and Exchange
Commission on April 17, 1997).
10.10 Agreement, dated April 8, 1997, among Polysindo Hong Kong
Limited, PT. Texmaco Jaya and Dyersburg Corporation
(incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K filed with the Securities and Exchange
Commission on April 17, 1997).
10.11 Purchase Agreement, dated August 20, 1997, by and among
Dyersburg Corporation, Dyersburg Fabrics Inc., Dyersburg
Fabrics Limited Partnership, I, DFIC, Inc., IQUE, Inc.,
IQUEIC, Inc., IQUE Limited Partnership, I, United Knitting
Inc., UKIC, Inc., United Knitting Limited Partnership, I,
Bear, Stearns & Co., Inc. And Prudential Securities
Incorporated (incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K filed with the Securities and
Exchange commission on September 2, 1997).
10.12 Indenture, dated as of August 27, 1997, by and among Dyersburg
Corporation, Dyersburg Fabrics Inc., Dyersburg Fabrics Limited
Partnership, I, DFIC, Inc., IQUE, Inc., IQUE Limited
Partnership, I, United Knitting Inc., UKIC, Inc., United
Knitting Limited Partnership, I, Alamac Knit Fabrics Inc.,
Alamac Enterprises Inc., AIH Inc., and State Street Bank and
Trust Company (incorporated by reference to exhibit 10.2 to
the Current Report on Form 8-K filed with the Securities and
Exchange Commission on September 2, 1997).
10.13 Registration Rights Agreement, dated as of August 27, 1997,
among Dyersburg Corporation, the Guarantors named therein,
Bear, Stearns & Co. Inc. and Prudential Securities
Incorporated (incorporated by reference to Exhibit 10.3 to the
Current Report on Form 8-K filed with the Securities and
Exchange Commission on September 2, 1997).
10.14 Dyersburg Corporation Deferred Compensation Plan, as amended
in fiscal 1998 (incorporated by reference to Exhibit 10.20 to
the Dyersburg Corporation's Form 10-K for the fiscal year
ended October 3, 1998).
10.15 Loan and Security Agreement dated August 17, 1999, by and
among Congress Financial Corporation (Southern), BankBoston,
N.A., and Dyersburg Corporation, Dyersburg Fabrics Limited
Partnership, I, Dyersburg Fabrics Inc., United Knitting, Inc.,
United Knitting Limited Partnership, I, IQUE, Inc., IQUE
Limited Partnership, I, AIH Inc., and Alamac Knit Fabrics,
Inc. (incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K filed with the Securities and Exchange
Commission on August 25, 1999).
10.16 Employment Contracts with Senior Management
21 Subsidiaries
23 Consent of Independent Auditors
27.1 Financial Data Schedule (for SEC use only)
27.2 Restated Financial Data Schedule for 1998 (for SEC use only)
*Compensation Plan
43