Dan River Inc. Announces Third Quarter 2003 Results.Business Editors DANVILLE Danville. 1 City (1990 pop. 33,828), seat of Vermilion co., E Ill., on the Vermilion River at the Ind. line; inc. 1839. It is a commercial and industrial center in a dairy, farm, and coal area. , Va.--(BUSINESS WIRE)--Nov. 10, 2003 Dan River Inc. (NYSE NYSE See: New York Stock Exchange : DRF DRF Daily Racing Form (horse racing) DRF Dansk Ride Forbund (Danish) DRF Deafness Research Foundation DRF Disaster Relief Fund DRF Data Recovery Field DRF Demat Request Form DRF Dose Reduction Factor ) today reported results for the third fiscal quarter and nine months ended September September: see month. 27, 2003. For the third quarter of fiscal 2003, the Company reported a net loss of $103.5 million, or $4.70 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. As previously announced, this loss includes a non-cash write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. of $91.7 million related to goodwill impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. as a result of recent operating performance. The loss in the third quarter of fiscal 2003 compared to net income of $4.7 million, or $0.21 per diluted share, for the third quarter of fiscal 2002. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the third quarter of fiscal 2003 were $103.7 million, down $43.7 million or 29.6% from $147.4 million for the third quarter of fiscal 2002. Net sales of Dan River's home fashions products were $76.4 million, down $29.5 million or 27.8% compared to the same quarter of fiscal 2002. Net sales of apparel fabrics were $20.5 million, down $10.7 million or 34.3%. Net sales of engineered products were $6.8 million, down $3.5 million or 34.0%. "Our third quarter sales were very disappointing," stated Joseph L. Lanier La·nier , Sidney 1842-1881. American writer and musician noted for his melodic poems, including "The Marshes of Glynn" (1878). His novel Tiger Lilies (1867) is based on his experiences as a Confederate soldier. , Jr., Chairman and Chief Executive Officer. "We believe this reflects continuing adjustments in customer inventory levels during this period. The softness we experienced in home fashions occurred in all retail channels and across all price points and products." The Company reported a net loss of $120.2 million, or $5.47 per diluted share, for the nine months ending September 27, 2003. Included in the year to date performance, in addition to the write-down of goodwill explained above, was a $12.2 million pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta charge, primarily non-cash, related to closing two manufacturing facilities in the second quarter of fiscal 2003. Also included in these results are other expense of $1.3 million related to the write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of unamortized costs pertaining per·tain intr.v. per·tained, per·tain·ing, per·tains 1. To have reference; relate: evidence that pertains to the accident. 2. to financings which were prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. in full during the second quarter of
fiscal 2003, and $1.0 million in increased interest expense due to a
one-month period during the second fiscal quarter when both the
Company's 1993 subordinated notes and its recently issued 12-3/4%
notes were outstanding. This compares to net income of $3.2 million, or
$0.15 per diluted share, for the nine months ended September 28, 2002,
before the effect of an accounting change related to the write-down of
goodwill under SFAS SFAS Statement of Financial Accounting StandardsSFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No. 142, "Impairment of Goodwill and Intangible Assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. ." The nine months results for fiscal 2002 include an increase in income tax expense of $2.8 million, attributable to the tax law changes associated with the Job Creation and Worker Assistance Act of 2002, and $1.4 million in bad debt expense related to the January January: see month. 2002 Chapter 11 filing of Kmart Corporation. For the first nine months of fiscal 2003, the Company's net sales were $367.4 million, down $92.3 million or 20.1% from $459.8 million for the first nine months of fiscal 2002. Net sales of Dan River's home fashions products were $262.2 million, down $66.8 million or 20.3% compared to the first nine months of fiscal 2002. Net sales of apparel fabrics were $79.7 million, down $20.5 million or 20.5%. Net sales of engineered products were $25.6 million, down $5.0 million or 16.3% compared to the first nine months of fiscal 2002. Mr. Lanier stated, "As we have previously announced, the reduction in sales activity has resulted in certain actions being taken by the Company to offset the shortfall Shortfall The amount by which the capital required to fulfill a financial obligation exceeds available capital. Notes: Shortfall risk is often combated with an efficient hedging strategy created by a fund, group, institution, or individual. and to improve profitability. We have reduced home fashions capacities by closing our Greenville and Fort Valley facilities as announced in the second fiscal quarter. A salary freeze Salary Freeze The action of a company suspending salary increases for a period of time. Notes: A salary freeze typically occurs when a company is experiencing financial difficulties. It may choose to freeze salaries for a while in order to minimize layoffs. has been in place since May of this year, and certain hourly wage increases have been delayed. A reduction of 80 managerial and administrative positions was announced in August. Planned capital expenditures have been reduced to $13 million for fiscal 2003. "Additionally, we announced today that we are going to close our Sevierville, Tennessee Sevierville (pronounced /səˈvɪrvɪl/) is a city in Sevier County, Tennessee, located in the Southeastern United States. apparel fabrics weaving weaving, the art of forming a fabric by interlacing at right angles two or more sets of yarn or other material. It is one of the most ancient fundamental arts, as indicated by archaeological evidence. facility and our Camellia camellia (kəmēl`yə) [for G. J. Kamel, a Moravian Jesuit missionary], any plant of the genus Camellia in the tea family, evergreen shrubs or small trees native to Asia but now cultivated extensively in warm climates and in home fashions distribution center in Juliette, Georgia Juliette, Georgia, is a city located in Monroe County in the U.S. state of Georgia. Named for Juliette McCracken, daughter of a railroad engineer, the town formed with the merging of Brownsville and Iceberg. over the next 60 to 90 days. Our apparel weaving will be consolidated into our Danville weaving facilities, and the Camellia operations will be consolidated into our other home fashions distribution facilities. Service to our customers is not expected to be affected by these actions. As a result of these closures, we expect to take a charge of up to $17 million in the fourth quarter, most of which will be non-cash. The charge includes a write-down of home fashions equipment from our closed Greenville plant that we originally planned to relocate re·lo·cate v. re·lo·cat·ed, re·lo·cat·ing, re·lo·cates v.tr. To move to or establish in a new place: relocated the business. v.intr. in Danville. Instead, apparel looms from Sevierville will be relocated re·lo·cate v. re·lo·cat·ed, re·lo·cat·ing, re·lo·cates v.tr. To move to or establish in a new place: relocated the business. v.intr. in the space we intended to use for the equipment from Greenville. To the extent we need additional home fashions greige greige adj. Not bleached or dyed; unfinished. Used of textiles. [French grège, from Italian (seta) greggia, raw (silk), from greggio, gray, of Germanic origin.] cloth we intend to source it externally. The anticipated annual savings from the Sevierville and Juliette closures are expected to be in the range of $6 to $7 million. "In summary, the actions we have taken since May are expected to save the Company approximately $18 million per year when the savings are fully realized. The full benefits of these actions will not begin to be reflected in our income statement until fiscal 2004. "As we look to the fourth quarter of fiscal 2003, we are projecting sales to be at levels similar to the third quarter," Mr. Lanier continued. "In order to keep inventories in line, we have scheduled production downtime The time during which a computer is not functioning due to hardware, operating system or application program failure. for several weeks during the fourth fiscal quarter. These curtailment Curtailment The act of contracting or reducing operations of a company in the hope of bringing it financial or operational stability. This management technique is often used when a company has grown too fast and is unable to effectively manage its operations. costs will significantly impact our operating results in the fourth quarter. Although we expect to report a net loss in the fourth fiscal quarter, based on current information we believe that we will have sufficient liquidity under our revolving line of credit Revolving line of credit A bank line of credit on which the customer pays a commitment fee and can take and repay funds at will. Normally a revolving LOC involves a firm commitment from the bank for a period of several years. to provide for our operating and debt service requirements in the fourth fiscal quarter." On October 14, the Company announced that it had received a waiver The voluntary surrender of a known right; conduct supporting an inference that a particular right has been relinquished. The term waiver is used in many legal contexts. from its senior lenders in respect of the Company's violation of its maximum leverage ratio covenant for the third fiscal quarter. As a result of the waiver, the Company is currently in compliance with the terms of its senior secured credit facility. In connection with the waiver, additional covenants were established requiring minimum levels of excess availability under the Company's revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility and monthly operating EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become (as defined in the credit facility) during the fourth fiscal quarter. These covenants are set forth in an amendment to the Company's credit facility which was filed on October 14, 2003 as an exhibit to its Current Report on Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. . As it is probable that the Company will not meet the maximum leverage ratio and the minimum fixed charge ratio covenants at the end of the fourth quarter, the Company is required to report its senior secured debt as long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. due currently. Additionally, all senior debt which would be subject to cross acceleration in the event the senior secured lenders elected to accelerate has been reported as current, despite the fact that no default has occurred with respect to this debt, which consists primarily of the 12-3/4% senior notes. Mr. Lanier said, "This has been a very difficult year for our Company. However, our outlook for the first quarter of fiscal 2004 is more optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op across all of our divisions. Customers have indicated strong support for our recently introduced home fashions products that will begin to ship during the first quarter of fiscal 2004. Our apparel fabrics division has also had success in new product placements that will ship in the first quarter of fiscal 2004. With the announced cost savings measures fully implemented, we expect to see the benefit of those savings contribute directly to the bottom line in fiscal 2004." Note: This news release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. under applicable securities laws. The Company believes its forward-looking statements are reasonable; however, undue reliance should not be placed on such statements, which are based on current expectations. Dan River's financial condition and results of operations could be materially and adversely affected by numerous market and industry factors outside of its control. In particular, if demand for the Company's products does not improve, the Company's results of operations and financial condition will be materially and adversely affected. Additional risks associated with Dan River's business are detailed in its annual report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. filed with the SEC on February 21, 2003. The following are the financial highlights: UNAUDITED CONDENSED con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. CONSOLIDATED STATEMENTS OF OPERATIONS (OOO's EXCEPT PER SHARE DATA)
Three Months Ended Nine Months Ended
------------------------------------------------
Sept. 27, Sept. 28, Sept. 27, Sept.28,
2003 2002 2003 2002
------------------------------------------------
Net Sales $103,728 $147,411 $367,448 $459,771
Cost of Sales 94,936 116,470 316,250 377,010
------------------------------------------------
Gross Profit 8,792 30,941 51,198 82,761
S, G and A 13,840 16,441 47,095 51,406
Impairment of Goodwill 91,701 - 91,701 -
Other Operating Costs,
Net 800 - 12,549 (310)
------------------------------------------------
Operating Income
(Loss) (97,549) 14,500 (100,147) 31,665
Other Income (Expense) 1,144 (103) 949 105
Interest Expense 7,130 6,450 20,757 20,978
------------------------------------------------
Income (Loss) Before Income
Taxes And Cumulative
Effect of Accounting
Change (103,535) 7,947 (119,955) 10,792
Provision for Income
Taxes - 3,248 235 7,570
------------------------------------------------
Income (Loss) Before
Cumulative Effect
of Accounting
Change (103,535) 4,699 (120,190) 3,222
Cumulative Effect of
Accounting Change,
Net of Tax - - - (20,701)
------------------------------------------------
Net Income (Loss) $(103,535) $4,699 $(120,190) $(17,479)
================================================
UNAUDITED
CONDENSED CONSOLIDATED INCOME STATEMENT
(OOO's EXCEPT PER SHARE DATA)
Three Months Ended Nine Months Ended
-------------------------------------------
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
2003 2002 2003 2002
-------------------------------------------
Earnings (Loss) Per Share -
Basic:
Income (Loss) Before
Cumulative Effect of
Accounting Change ($ 4.70) $0.22 ($ 5.47) $0.15
Cumulative Effect of
Accounting Change - - - (0.95)
-------------------------------------------
Net Income (Loss) ($ 4.70) $0.22 ($ 5.47) ($ 0.80)
===========================================
Earnings (Loss) Per Share -
Diluted:
Income (Loss) Before
Cumulative Effect of
Accounting Change ($ 4.70) $0.21 ($ 5.47) $0.15
Cumulative Effect of
Accounting Change - - - (0.94)
-------------------------------------------
Net Income (Loss) ($ 4.70) $0.21 ($ 5.47) ($ 0.79)
===========================================
Wtd. Avg. No. Shares:
Basic 22,016 21,840 21,985 21,823
Diluted 22,016 22,299 21,985 22,139
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's)
September 27, December 28,
2003 2002
-----------------------------------
Assets:
Cash $2,147 $2,832
Accounts Receivable 50,994 71,292
Inventories 159,789 151,586
Other Current Assets 21,750 19,667
-----------------------------------
Total Current Assets 234,680 245,377
Property, Plant & Equipment, Net 213,123 248,175
Goodwill, Net - 91,701
Other Assets 18,676 10,269
-----------------------------------
Total Assets $466,479 $595,522
===================================
Liabilities and Shareholders' Equity:
-----------------------------------
Current Maturities of Long-Term
Debt $246,556 $241,231
Accounts Payable & Accrued
Expenses 52,060 58,439
-----------------------------------
Total Current Liabilities 298,616 299,670
Long-Term Debt 6,872 10,792
Deferred Income Taxes and Other
Liabilities 51,982 56,023
Shareholders' Equity 109,009 229,037
-----------------------------------
Total Liabilities &
Shareholders' Equity $466,479 $595,522
===================================
UNAUDITED
SEGMENT INFORMATION
(000's)
Three Months Ended Nine Months Ended
------------------------------------------
Sept. 27, Sept.28, Sept. 27, Sept. 28,
2003 2002 2003 2002
------------------------------------------
Net Sales:
Home Fashions $76,389 $105,857 $262,220 $329,059
Apparel Fabrics 20,549 31,272 79,652 100,154
Engineered Products 6,790 10,282 25,576 30,558
------------------------------------------
Consolidated Net
Sales $103,728 $147,411 $367,448 $459,771
==========================================
Operating Income (Loss):
Home Fashions $(142) $13,632 $12,169 $31,157
Apparel Fabrics (3,242) 1,681 (4,391) 1,427
Engineered Products (1,029) (531) (2,497) (1,141)
Corporate Items Not
Allocated to
Segments:
Impairment of
Goodwill (91,701) - (91,701) -
Other Operating
Costs, Net (800) - (12,549) 310
Other (635) (282) (1,178) (88)
------------------------------------------
Consolidated Operating
Income (Loss) $(97,549) $14,500 $(100,147) $31,665
==========================================
UNAUDITED
OTHER FINANCIAL DATA
(000's)
Three Months Ended Nine Months Ended
----------------------------------------------
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
2003 2002 2003 2002
----------------------------------------------
Depreciation &
Amortization of
Property,
Plant & Equipment $8,795 $9,520 $27,674 $28,339
Capital Expenditures in
Cash $2,289 $3,250 $9,856 $8,587
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