Dan River loses $10M during 4Q

Joan Gunin, Don Hogsett, March 11, 2002

DANVILLE, VA — Hard hit by the Kmart bankruptcy and picking up the tab for a sweeping consolidation of its manufacturing plants, Dan River Inc. recorded a fourth-quarter loss of $10.0 million, more than four times the size of a year-before loss of $2.3 million.

Taking a bite out of the bottom line was a $3.5 million bad debt reserve to cover costs tied to the Kmart bankruptcy. Dan River supplies bed-in-a-bag to the discounter.

The textiles producer rang up a $4.3 million one-time charge — most of it a non-cash writedown — as it consolidates some of its manufacturing plants — a move that will eventually save the company about $6.5 million a year.

And the Kmart hit "could have been much worse," said Joseph Lanier Jr., chairman and ceo, in a conference call with investors. Anticipating the worst weeks before the bankruptcy filing, he said, "We bought a put option on the debt," a sophisticated financial hedge that allowed Dan River to limit its exposure in the event of a bankruptcy at the giant mass merchant.

The Kmart bankruptcy will continue to take a toll on the current first quarter, resulting in another $1.4 million after-tax charge against earnings.

Indeed, said Lanier in the conference call, Dan River expects to post another loss during the first quarter — about $0.20 a share — before returning to profitability during the second quarter. With inventories sharply reduced, cotton costs coming down, the home fashions plants running full out and the apparel fabrics business finally stabilizing, Dan River should generate a profit of $0.05 to $0.10 a share during the second quarter, and a profit of $0.30 to $0.40 per share during the second half of the year. For all of 2002, including the first-quarter deficit, Lanier projected a per-share profit in the range of $0.20 to $0.30 cents.

Dan River Inc.

Qtr. 12/29/01 (x000) 2001 2000 % change
(loss) a-Fourth-quarter results include a $4.3 million pre-tax charge stemming from the consolidation of manufacturing plants; a $2,000 in miscellaneous expenses, compared with $208,000 the prior year; and an income-tax benefit of $5.4 million, compared with a year-before tax benefit of $1.2 million. b-12-month results include a $4.3 million pre-tax charge stemming from the consolidation of manufacturing plants; $694,000 in miscellaneous income, compared with $226,000 a year ago; and an income-tax benefit of $18.1 million, compared with a tax provision of $8.2 million the preceding year.
Sales $145,824 $165,828 -12.1
Oper. income (EBIT) (3,861) (5,713)
Net income (10,023)a (2,252)a
Per share (diluted) (0.46) (0.10)
Average gross margin 10.7% 14.1%
SG&A expenses 12.8% 10.1%
12 months
Sales 631,072 663,567 -4.9
Oper. income (EBIT) (3,061) 51,932
Net income (20,869)b 10,773
Per share (diluted) (0.96) 0.49
Average gross margin 10.8% 18.4%
SG&A expenses 10.8% 10.1%

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