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Dan River Announces Two Plant Closings And Lowers Its Earnings Outlook

Dan River Announces Two Plant Closings And Lowers Earnings OutlookDan River Inc., Danville, Va., announced today it will close two manufacturing facilities in order to rationalize capacity in its home fashions division. As a result, the company expects to record a pre-tax restructuring charge in the second quarter of approximately $12 million, about $10 million of which is non-cash.The company also announced that the continuing weak retail environment and excessive retail inventories have negatively impacted sales and margins for the first two months of the second quarter. Based on current projections and including the restructuring charge noted above, the company expects to report a net loss of about $13 million, or $0.60 per share, for the second fiscal quarter which ends June 28, 2003. After giving effect to the restructuring charge, the company remains in covenant compliance under its credit facility, and it maintains ample liquidity.The company plans to close a home fashions weaving facility located in Greenville, S.C., and a comforter sewing plant in Fort Valley, Ga., which collectively employ about 630 people. The company expects that the closures will be substantially completed during the third quarter. The anticipated savings from the closings of these two facilities is expected to be about $9 million per year. As demand recovers to more normalized levels, the company plans to transfer production capacity from the closed facilities to other company facilities in Danville, Va., and Morven, N.C.Mr. Joseph L. Lanier Jr., Chairman and CEO, said, "The uncertainty we expressed in our outlook at the end of the first quarter of 2003 was a reflection of the recent slowdown at retail. This slowdown has since intensified. Retailers, burdened with excess inventory due to lackluster sales, continue to adjust inventories by reducing their product intake. The current lull in our sales efforts affords us the opportunity to make the plant consolidation moves announced today without interruption to customer service. We will meet future increases in demand by a combination of increased internal production and outsourcing.""We are thankful to our associates in Fort Valley and Greenville for their many contributions," Mr. Lanier continued. "It has been a very difficult decision to close these plants. We are grateful for their loyal service and their contribution to the company over the years."Mr. Lanier closed by saying, "We expect the company's financial results in the second half of 2003 to be somewhat of a mirror image of the first half. As the anticipated recovery in the economy occurs, we should experience a gradual improvement in our results over the last six months of the year. While our financial results for the remainder of the year may be weaker than originally projected, we continue to expect to generate free cash flow and reduce debt."Press Release Courtesy of Dan River Inc. June 2003