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Dan River Q3 sales tumble; debt covenant waived

Danville, Va — Providing a heads-up to investors and lenders, diversified textiles producer Dan River Inc. said sales in its third fiscal quarter ended Sept. 27 have fallen by roughly 30 percent from year-ago levels, to $104 million, a daunting shortfall of $44 million.

The sales drop marks the second straight steep decline in sales for the producer of home fashions, notably bed in a bag, men's shirting fabrics and industrial fabrics. During the second quarter, Dan River sales declined by 24.4 percent, to $116.3 million, helping to trigger a loss of $19.4 million. Home fashions sales during the second quarter were particularly hard hit, sliding by 27.8 percent, to $77.4 million. For the third quarter just completed, the company did not break out sales of home fashions products. Complete results for the third quarter will be released "in early November," the company said.

Dan River broke out the bad news along with some good as it said it has cut a deal with its lenders to waive a restrictive debt covenant that required a certain level of cash flow to interest expense and debt during the second quarter, an agreement the company breached as its sales continued their downward slide. Because of the drop-off in sales, the company said, cash flow fell short of expectations, missing the required ratio.

Dan River said that "based on current information," it believes it has sufficient liquidity under its credit facility to provide for anticipated working capital needs and debt service for the fourth quarter of the year. The company said it "will work with its lending group to negotiate such further amendments or waivers as will be necessary to maintain compliance with the terms of its credit facility during fiscal 2004."

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