SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 24, 1993
DELTA WOODSIDE INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
South Carolina
(State or other jurisdiction of incorporation)
1-10095 57-0535180
(Commission File Number) (I.R.S. Employer
Identification No.)
233 North Main Street
Hammond Square, Suite 200
Greenville, South Carolina 29601
(Address of principal (Zip Code)
executive offices)
803/232-8301
(Registrant's Telephone Number, Including Area Code)
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Item 5. Other Events
On November 24, 1993, a jury in the Circuit Court of
Montgomery County, Alabama (the "Circuit Court"), awarded
$29,056,353.60 to a former Duck Head sales representative (Ken
Hoots) and two of his salesmen (Terry Long and Bill Pace) against
a subsidiary of Delta Woodside Industries, Inc. (the "Company").
The Circuit Court entered judgment on such award against the
Company's subsidiary on November 24, 1993. The suit, which is
captioned Ken Hoots, Terry Long and Bill Pace v. Duck Head
Apparel Company, Inc., et.al. (the "Hoots Suit"), was commenced
by the filing of a Complaint in the Circuit Court on March 17,
1992.
The Hoots Suit concerns a dispute over sales commissions that
the plaintiffs claim are owed them by the subsidiary. The
Circuit Court jury found in favor of the plaintiffs against the
subsidiary, awarding:
(a) $2,556,353.60 to the plaintiffs on their claim of
breach of contract under an Alabama treble damage
statute (which amount represents three times the
actual damages found by the jury),
(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) $19,500,000 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 or reduction,
first by making appropriate motions before the Circuit Court
judge and then, if necessary, appealing the matter to the Alabama
Supreme Court.
If the jury award is not overturned or reduced by subsequent
court order, and absent any insurance recovery, the amount of the
jury award (excluding interest) will be approximately $18.0
million on an after-tax basis. 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.
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The Company intends to take a reserve of $33 million for the
Company's second fiscal quarter ended January 1, 1994 respecting
the judgment in the Hoots Suit and related interest and legal
fees. With respect to this reserve, the Company will be required
to obtain waivers or amendments of certain of its covenants in
the Credit Agreement dated June 24, 1992, as amended, between the
Company, The First National Bank of Boston, as agent, and the
lenders thereunder (the "Credit Agreement"), and certain of its
other debt agreements. The Company intends to seek any such
necessary waivers or amendments. Although, based on
conversations with certain of its lenders, the Company believes
that it should be able to obtain any such required waivers or
amendments, there is no assurance that it will be able to do so.
In order to prevent execution of the judgment during the
post-trial stage, the Company has guaranteed payment of the final
adjudicated award and may, during the post-trial or appellate
level stages, be required to post bond or other security in the
amount of 125% of the amount of the jury award after any
adjustments that may be made by the trial court. The Company has
obtained waivers through March 31, 1994, from its major lenders
that permit this guaranty and any such posting of security.
Under the terms of the Credit Agreement and certain of the
Company's other debt agreements, any court judgment in excess of
$2.5 million, or writ of execution for such a judgment, that
continues undischarged or unstayed for 10 days constitutes an
Event of Default. The plaintiffs in the Hoots Suit have agreed
that execution on the judgment in the case shall be stayed until
ten days after the deadline for filing any appeal has passed and,
subject to the posting of a bond in the amount of 125% of the
judgment, shall be further stayed pending any appeal.
Two other lawsuits brought by individuals who previously
served as salesmen for the Duck Head division are pending against
a subsidiary of the Company that make allegations similar to
those in the Hoots Suit. The amount of damages claimed in either
of these suits has not yet been determined, and the ultimate
impact of these suits on the Company is as yet unknown.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
Delta Woodside Industries, Inc.
(Registrant)
Date: January 11, 1994 By: /s/ Douglas J. Stevens______
Name: Douglas J. Stevens
Controller and Assistant
Secretary
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