Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 1, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File number 1-10095
___________DELTA WOODSIDE INDUSTRIES, INC.___________
(Exact name of registrant as specified in its charter)
SOUTH CAROLINA_______ 57-0535180____
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
233 North Main Street
Hammond Square, Suite 200
Greenville, South Carolina____________ ___ _29601____
(Address of principal executive offices) (Zip Code)
803/232-8301
Registrant's telephone number, including area code
Not Applicable
Former name, former address and former fiscal year, if changed since
last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes x No .
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $.01 Par Value-- 24,301,253 shares as of October 17, 1994.
<PAGE>
INDEX
DELTA WOODSIDE INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Page
Condensed consolidated balance sheets--
October 1, 1994 and July 2, 1994 3-4
Condensed consolidated statements of income --
Three months ended October 1, 1994 and
October 2, 1993 5
Condensed consolidated statements of cash
flows-- Three months ended October 1, 1994
and October 2, 1993 6
Notes to condensed consolidated financial
statements--October 1, 1994 7
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 8-9
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security
Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DELTA WOODSIDE INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS7
October 1, July 2,
1994 1994
(Unaudited)
(In thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 694 $ 2,077
Accounts receivable:
Factor 49,282 55,440
Trade 65,080 64,921
114,362 120,361
Less allowances for doubtful
accounts and returns 3,367 3,275
110,995 117,086
Inventories
Finished goods 129,614 112,101
Work in process 68,145 69,402
Raw materials and supplies 23,309 22,300
221,068 203,803
Prepaid and other current assets 1,663 1,942
Deferred income taxes
14,443 12,028
TOTAL CURRENT ASSET S348,863 336,936
PROPERTY, PLANT AND EQUIPMENT
Cost 284,298 279,813
Less accumulated depreciation 95,329 89,782
188,969 190,031
EXCESS OF COST OVER ASSIGNED VALUE OF NET
ASSETS ACQUIRED 27,962 28,164
OTHER ASSETS 11,916 11,872
$577,710 $567,003
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DELTA WOODSIDE INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS--Continued
October 1, July 2,
1994 1994
(Unaudited)
(In thousands)
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES
Trade accounts payable $42,357 $ 46,712
Accrued and sundry liabilities 52,182 48,274
TOTAL CURRENT LIABILITIES 94,539 94,986
LONG-TERM DEBT, less current portion 169,492 161,948
DEFERRED INCOME TAXES AND OTHER
LIABILITIES S26,448 25,192
SHAREHOLDERS' EQUITY
Common Stock, par value $.01--
authorized 50,000,000 shares, issued
and outstanding 24,299,000 shares
at October 1, 1994 and 24,246,000
shares at July 2, 1994 243 242
Additional paid-in capital 162,733 162,114
Retained earnings 124,255 122,521
287,231 284,877
$577,710 $567,003
See notes to condensed consolidated financial statements
<PAGE>
DELTA WOODSIDE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended _____
October 1, October 2,
1994__ ___1993___
(In thousands, except per share data)
Net sales $ 141,275 $ 146,426
Cost of goods sold 115,826 122,057
Gross profit on sales 25,449 24,369
Selling, general and
administrative expenses 18,633 19,797
Restructuring (credit) (263) ________
7,079 4,572
Other expense (income):
Interest expense 2,852 1,871
Interest income
and other (2,544) (194)
308 1,677
INCOME BEFORE
INCOME TAXES 6,771 2,895
Income taxes 2,607 1,101
NET INCOME (LOSS) $ 4,164 $ 1,794
Net income per share $ .17 $ .07
Dividends per share of
common stock $ .10 $ .10
Weighted average shares
outstanding 24,296 25,216
See notes to condensed consolidated financial statements
<PAGE>
DELTA WOODSIDE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
October 1, October 2,
1994 1993
(In thousands)
OPERATING ACTIVITIES
Net income (loss) $ 4,164 $ 1,794
Depreciation 5,642 5,473
Amortization 577 469
Other (1,282) 1,498
Changes in operating assets and
liabilities (9,616) (20,227)
NET CASH (USED) BY OPERATING ACTIVITIES (515) (10,993)
INVESTING ACTIVITIES
Property, plant and equipment
purchases (5,323) (10,100)
Other (39) (161)
NET CASH (USED) BY INVESTING ACTIVITIES (5,362) (10,261)
FINANCING ACTIVITIES
Net proceeds from short-term line
of credit 10,565 8,606
Proceeds from revolving line of credit 162,900 33,000
Principal payments on revolving line
of credit (165,852) (4,000)
Scheduled principal payments of long-term
debt and capital lease obligations (324) (524)
Repurchase of Common Stock (1) (16,601)
Dividends paid (2,430) (2,498)
Other (364)
NET CASH PROVIDED BY FINANCING ACTIVITIES 4,494 17,983
(DECREASE) IN CASH AND CASH EQUIVALENTS (1,383) (3,271)
Cash and cash equivalents at beginning
of period 2,077 3,730
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 69 $459
See notes to condensed consolidated financial statements
<PAGE>
DELTA WOODSIDE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
October 1, 1994
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements of Delta Woodside Industries, Inc. ("the Company")
have been prepared in accordance with generally accepted
accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of only
normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the
three months ended October 1, 1994 are not necessarily
indicative of the results that may be expected for the year
ending July 1, 1995. For further information, refer to the
consolidated financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the
year ended July 2, 1994.
NOTE B--DEBT
On September 7, 1994, the Company obtained a $275 million
unsecured Revolving Loan Facility. The Credit Facility has a
limit of $25 million for the purpose of issuing letters of
credit and a separate limit of $29 million for letter of
credit issued in connection with certain litigation. The
Credit Facility will mature on September 30, 1997, with a
provision for one year extensions. The Company's initial
interest rate is LIBOR plus .5%, but the Credit Facility
contains provisions that may increase or decrease the spread
over LIBOR depending upon certain previous financial ratios.
The Company used the proceeds of the Credit Facility to
refinance its revolving credit facility and a note payable.
NOTE C--OTHER
In the current quarter the company recognized certain life
insurance proceeds which resulted in a pretax gain of
$2,204,000.
During the first three months of fiscal 1994 the Company
repurchased 1.5 million shares of its Common Stock for $16.6
million.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Net sales for the fiscal quarter ended October 1, 1994 were
$141,275,000, a decrease of 4% from the same quarter last
year. The Company's Harper Brothers division, which was sold
as of June 4, 1994, accounted for $5,433,000 of sales in the
fiscal quarter ended October 2, 1993. Net earnings for the
quarter ended October 1, 1994 were $4,164,000 as compared to
$1,794,000 in the prior year first quarter, an increase of
132%. On a per share basis, earnings in the first quarter of
fiscal 1995 were $.17 per share on the 24,296,000 average
shares outstanding as compared to $.07 per share on the
25,216,000 average shares outstanding in the first quarter of
fiscal 1994. Income in the quarter ended October 1, 1994
included a pre-tax credit of approximately $2.2 million
relating principally to proceeds from a life insurance policy
covering a key manager of the Nautilus division.
During the quarter ended October 1, 1994, the Company
subleased certain property previously utilized by its Harper
Brothers division referred to above. As a result of these
subleases, the Company reduced its restructuring reserves and
credited pretax income in the amount of $263,000 during the
quarter.
Consolidated gross profit margin increased to 18% in the first
quarter of fiscal 1995 from 17% reported for the first fiscal
quarter of the prior year.
In the textile segment, sales decreased 5% but gross profits
increased 23% in the quarter ended October 1, 1994 as compared
to the same period a year ago. Sales of unfinished woven
fabrics and of synthetic woven fabrics were lower, and sales
of all cotton woven and of knitted finished fabrics were
higher than in the same quarter of the prior year. Gross
profits for woven fabrics declined from the previous year's
first fiscal quarter, but this decline was more than offset by
increased gross profits for knitted textiles. The
improvements in gross profits for knitted textiles was due
primarily to lower costs attributable to the completion of the
knit finishing plant consolidations which began about June
1993. The textile segment accounted for 66% and 49% of the
consolidated sales and gross profit, respectively, for the
quarter ended October 1, 1994 as compared to 67% and 41%,
respectively, for the same period a year ago.
In the apparel segment, sales increased 13% and gross profits
increased 12% in the quarter ended October 1, 1994 as compared
to the same quarter of the prior fiscal year. Sales of Duck
Head branded apparel were lower, but increased sales of
knitted apparel more than offset this decline. The increase
in sales of knitted apparel was principally due to increased
unit volume. The decrease in sales of Duck Head branded
apparel was due primarily to lower sales through the Company's
36 retail outlet stores, reflecting generally weak performance
in the overall outlet mall sector across the country during
this period. Gross profits for woven branded apparel were
approximately equal to those of the first quarter of fiscal
<PAGE>
1993, and gross profits for knitted apparel were higher, due
principally to higher sales volume. The apparel segment
accounted for 29% and 41% of the consolidated sales and gross
profit, respectively, for the quarter ended October 1, 1994 as
compared to 25% and 38%, respectively, for the same period a
year ago.
The contribution of the Company's other businesses to
consolidated sales and gross profits was 5% and 10%,
respectively, during the first quarter of fiscal 1995.
Selling, general and administrative expenses decreased by $1.2
million in the quarter ended October 1, 1994 as compared to
the same quarter of the prior fiscal year. Prior year's first
quarter expenses included $2.1 million of expenses related to
the Harper Brothers office products business referred to
above.
The consolidated order backlog at October 1, 1994 was $167.0
million as compared to $171.5 million at October 2, 1993.
Order backlogs for the textile segment are 1% higher, for the
apparel segment are 11% lower, and for the Company's other
businesses are 35% higher than at the same time in the prior
fiscal year.
Inventory levels increased by approximately $17 million during
the first fiscal quarter of 1995 over those reported at fiscal
year end on July 2, 1994. The increases were roughly equal
between the textile and apparel segments. The textile segment
increases was primarily in unfinished woven goods, reflecting
continued weakness in these markets. The apparel increase was
due partly to seasonal buildup of branded apparel and partly
to buildup of knitted apparel stocks, reflecting higher sales
activity. The branded apparel division continues to hold
excessive finished goods inventories. The Company believes
that it is adequately reserved for any future writedowns of
this excess inventory.
The estimated effective tax rate for fiscal 1994 is
approximately 38.5%
The Company believes that cash flow generated by its
operations and funds available under its existing credit
facilities should be sufficient to service its bank debt, to
satisfy its day-to-day working capital needs, to fund its
planned capital expenditures and to pay dividends.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company has previously reported the award on November
24, 1993 by a jury in the Circuit Court of Montgomery County,
Alabama (the "Circuit Court"), of $29,056,000 to a former Duck
Head independent sales representative (Ken Hoots) and two of
his salesmen (Terry Long and Bill Pace) against a subsidiary
of the Company in a suit captioned "Ken Hoots, Terry Long and
Bill Pace v. Duck Head Apparel Company Inc. et. al. (the
"Hoots Suit"). The Hoots Suit commenced on March 17, 1992.
After a hearing, the Circuit Court judge reduced the
verdict to $22,852,000 and entered judgment against the
Company's subsidiary on March 28, 1994 as follows:
(a) $852,000 to the plaintiffs on their claim of breach
of contract respecting alleged unpaid commissions,
(b) $4,000,000 to Ken Hoots, $2,000,000 to Terry Long,
and $1,000,000 to Bill Pace for mental anguish on their
claim for fraud, and
(c) $15,000,000 to the plaintiffs as punitive damages on
their claim of fraud.
The Company believes that the verdict is fundamentally
unjust and intends vigorously to seek its reversal on appeal.
On April 9, 1994, the Company's subsidiary filed a notice of
appeal of Judgment and on October 10, 1994, oral argument on
the Company's appeal occured before the Alabama Supreme Court
In order to prevent execution of the judgment during the
appellate process, the Company has guaranteed payment of the
final adjudicated award and posted bond in the amount of
$28,565,000.
The Company is seeking recovery of a portion of the award
under certain of its insurance policies. At this time,
however, there is no assurance that any portion of the award
will be recovered by the Company through insurance.
Alabama law permits the plaintiffs to recover interest at
the rate of 12% per annum on the amount of the final
adjudicated award from the date the original judgment was
entered (November 24, 1993) until the date that any final
adjudicated award is paid to the plaintiffs.
The Company made a charge to income during fiscal 1994 to
establish reserves which it feels are sufficient in order to
cover payment of any final adjudicated award.
A lawsuit with allegations similar to those in the Hoots
Suit is pending against a subsidiary of the Company in the
United States District Court for Western District of Kentucky
brought by an individual (Donnie Cecil) who previously served
as an independent sales representative for the Duck Head
division. The suit was filed on October 1, 1993. The amount
of damages claimed in the suit has not yet been determined,
and the ultimate impact of the suit on the Company is as yet unknown.
<PAGE>
PART II. OTHER INFORMATION--Continued
In addition to those actions noted above, from time to
time the Company and its subsidiaries are defendants in legal
actions arising in the normal course of its business,
including product liability claims. The Company believes
that, as a result of its legal defenses, insurance
arrangements and indemnification provisions with parties
believed by the Company to be financially capable, none of
these actions should have a material adverse effect on its
results of operations or financial condition taken as a whole.
Item 2. Changes in Securities*
Item 3. Defaults upon Senior Securities*
Item 4. Submission of Matters to a Vote of Security
Holders*
Item 5. Other Information*
Item 6. Exhibits and Reports on Form 8-K
The Company filed form 8-K with date of August 18,
1994:
Item 4. Changes in registrants certifying
accountants.
* Items 2, 3, 4 and 5 are not applicable
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
Delta Woodside Industries,Inc.
(Registrant)
Date November 11, 1994 /s/ E. Erwin Maddrey,II
E. Erwin Maddrey, II
President and
Chief Executive Officer
Date November 11, 1994 /s/ Douglas J. Stevens
Douglas J. Stevens
Controller and
Assistant Secretary
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