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.
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.
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."
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.
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.
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.
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.
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.
ITEM 3.
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.
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.
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.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
(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.
ITEM 7
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.
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.
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.
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.
(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.
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.
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.
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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements set forth below are included beginning on page 22.
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.
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
Dyersburg Corporation Consolidated Balance Sheets
See accompanying notes.
Dyersburg Corporation Consolidated Statements of Operations
See accompanying notes.
Dyersburg Corporation Consolidated Statements of Shareholders' Equity
See accompanying notes .
Dyersburg Corporation Consolidated Statements of Cash Flows
See accompanying notes.
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.
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.
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
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 ======= =======
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.
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.
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:
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.
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.
The table below sets forth the computations of basic and diluted earnings per share:
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:
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.
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:
9. EMPLOYEE BENEFIT PLANS (CONTINUED)
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.
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.
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.
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.
14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(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.
DYERSBURG CORPORATION SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (In thousands)
(1) Write-offs, net of recoveries.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.
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
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.
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.
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.
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.
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)
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).
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