DANVILLE, Va.--Profits at Dan River Inc. jumped 76.8 percent in the second quarter ended July 3, driven by strong demand for wrinkle-resistant apparel fabrics and robust sales of home furnishings fabrics.
Earnings climbed to $2.7 million from $1.5 million. Sales rose 14.1 percent to $95.1 million from $83.3 million. Apparel sales rose 6.6 percent to $40.3 million while home furnishing sales climbed 20.5 percent to $54 million.
In the half, profits slumped 33.4 percent to $1.66 million from $2.5 million, as strength in home furnishings was offset by weakness in apparel fabrics.
The apparel fabric sales decline in the half stemmed from lower sales of shirting fabrics in the first quarter pending the introduction of wrinkle-resistant fabrics in the second quarter. The company said the rebound in apparel fabric sales reflects strong demand for the wrinkle-resistant shirting fabrics.
"This strong demand continues as the company fills the initial pipeline for WR shirting products," Dan River said.
Dan River is privately held but files financial reports with the Securities and Exchange Commission because of its large amount of publicly held bonds. Total sales in the half rose 5.7 percent to $172.4 million from $163.1 million. Apparel sales dipped 3.7 percent to $72.9 million while home furnishing sales rose 13.8 percent to $99.8 million.
Operating income in the quarter jumped 62.7 percent to $8.6 million, reflecting strong home furnishings sales and improved manufacturing performance in apparel fabrics due to increased running schedules and, to a lesser extent, cost savings associated with the installation of open end spinning.
Selling, general and administrative expenses increased 3.9 percent to $10.9 million in the quarter, largely attributable to the opening of four factory outlet stores since last year's quarter.
Interest expense jumped 40.8 percent in the quarter to $4 million, reflecting higher interest rates associated with the firm's issuance of 10.8 percent senior subordinated notes in December 1993. The proceeds funded a $40 million capital improvement program in 1994 and increased working capital associated with higher sales.
The company purchased $16 million in equipment and manufacturing improvements in the first six months. It expects to continue modernizing and making capital improvements over the next several years.
Dan River noted in the 10-Q filing that it is considered a highly leveraged company, with a debt-to-total-capital ratio of 69.2 percent as of July 2. However, it believes that internally generated cash flow and borrowings under its revolving credit facility and vendor financing will be sufficient to meet foreseeable debt service requirements, capital expenditures and working capital needs.
--Fairchild News Service

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