UNITED STATES SECURITIES AND EXCHANGE COMMISSION
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 September 30, 1995
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-- 24,428,329 shares as of October 9, 1995.
INDEX
DELTA WOODSIDE INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Page
Condensed consolidated balance sheets--
September 30, 1995 and July 1, 1995 3-4
Condensed consolidated statements of income -Three
months ended September 30, 1995 and
October 1, 1994 5
Condensed consolidated statements of cash
flows-- Three months ended September 30,
1995 and October 1, 1994 6
Notes to condensed consolidated financial
statements--September 30, 1995 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 10
Item 3. Defaults upon Senior Securities 10
Item 4. Submission of Matters to a Vote of
Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DELTA WOODSIDE INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, July 1,
1995 1995
(Unaudited)
(In thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 825 $ 719
Accounts receivable:
Factor 68,620 63,085
Trade 62,680 64,143
131,300 127,228
Less allowances for doubtful
accounts and returns 4,699 5,634
126,601 121,594
Inventories
Finished goods 134,695 137,675
Work in process 66,590 58,806
Raw materials and supplies 30,980 29,553
232,265 226,034
Deferred income taxes 10,460 8,951
Prepaid and other current assets 1,993 5,826
TOTAL CURRENT ASSETS 372,144 363,124
PROPERTY, PLANT AND EQUIPMENT
Cost 332,065 312,452
Less accumulated depreciation 110,649 104,393
221,416 208,059
EXCESS OF COST OVER ASSIGNED VALUE
OF NET ASSETS ACQUIRED 27,098 27,310
OTHER ASSETS 11,630 11,803
$632,288 $610,296
DELTA WOODSIDE INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS--Continued
September 30, July 1,
1995 1995
(Unaudited)
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 50,922 $ 50,593
Accrued and sundry liabilities 29,032 25,368
Current portion of long-term debt 270 276
TOTAL CURRENT LIABILITIES 80,224 76,237
LONG-TERM DEBT, less current portion 237,332 219,119
DEFERRED INCOME TAXES 21,719 21,473
OTHER LIABILITIES AND DEFERRED CREDITS 7,221 6,968
SHAREHOLDERS' EQUITY
Common Stock, par value $.01--
authorized 50,000,000 shares, issued
and outstanding 24,427,000 shares
at September 30, 1995 and 24,357,000
shares at July 1, 1995 248 244
Additional paid-in capital 163,767 163,364
Retained earnings 121,777 122,891
285,792 286,499
$632,288 $610,296
See notes to condensed consolidated financial statements
DELTA WOODSIDE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended
September 30, October 1,
1995 1994
(In thousands, except per share data)
Net sales $ 141,043 $ 141,275
Cost of goods sold 120,279 115,826
Gross profit on sales 20,764 25,449
Selling, general and
administrative expenses 14,882 18,370
5,882 7,079
Other expense (income):
Interest expense 4,087 2,852
Interest income
and other (540) (2,544)
3,547 308
INCOME BEFORE
INCOME TAXES 2,335 6,771
Income taxes 1,008 2,607
NET INCOME $ 1,327 $ 4,164
Net income per share $ .05 $ .17
Dividends per share of
common stock $ .10 $ .10
Weighted average shares
outstanding 24,409 24,296
See notes to condensed consolidated financial statements
DELTA WOODSIDE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
September 30, October 1,
1995 1994
(In thousands)
OPERATING ACTIVITIES
Net income $ 1,327 $ 4,164
Depreciation 6,643 5,642
Amortization 517 577
Other (578) (1,282)
Changes in operating assets and
liabilities 4,773 (9,616)
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 12,682 (515)
INVESTING ACTIVITIES
Property, plant and equipment
purchases (28,401) (5,323)
Other (52) (39)
NET CASH (USED) BY INVESTING ACTIVITIES (28,453) (5,362)
FINANCING ACTIVITIES
Net proceeds from short-term line
of credit 10,565
Proceeds from revolving line of credit 65,796 162,900
Principal payments on revolving line
of credit (47,391) (165,852)
Scheduled principal payments of long-term
debt and capital lease obligations (80) (324)
Dividends paid (2,441) (2,430)
Other (7) (365)
NET CASH PROVIDED BY FINANCING ACTIVITIES 15,877 4,494
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 106 (1,383)
Cash and cash equivalents at beginning of period 719 2,077
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 825 $ 694
See notes to condensed consolidated financial statements
DELTA WOODSIDE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1995
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 September 30,
1995 are not necessarily indicative of the results that may be expected
for the year ending June 29, 1996. 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 1, 1995.
NOTE B--OTHER
In the first quarter of fiscal 1995, the Company recognized certain life
insurance proceeds which resulted in a pretax gain of $2,204,000.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Net sales for the fiscal quarter ended September 30, 1995 were
$141,043,000, approximately the same as the $141,275,000 in the quarter ended
October 1, 1994. Consolidated gross profit margin was 15% for the quarter ended
September 30, 1995 as compared to 18% for the quarter ended October 1,
1994.
Net earnings for the quarter ended September 30, 1995 were $1,327,000 as
compared to $4,164,000 in the quarter ended October 1, 1994. On a per
share basis, earnings were $.05 on the 24,409,000 average shares
outstanding in the first quarter of fiscal 1996 as compared to $.17 on
the 24,296,000 average shares outstanding in the first quarter of fiscal
1995.
In the textile segment, sales decreased 4% and gross profit decreased 32%
in the quarter ended September 30, 1995 as compared to the same quarter
of the prior fiscal year. Sales of woven textiles were higher as a
result of more units being billed at slightly better average billing
prices. Sales of knitted textiles were lower as a result of
significantly lower units being billed at lower average billing prices.
Textile segment gross profit margins in the quarter ended September 30,
1995 were 9% as compared to 13% in the quarter ended October 1, 1994.
Woven textile gross margins were slightly higher, as higher fiber prices
were more than offset by better capacity utilization. Knitted textile
gross margins were negative, due principally to low plant capacity
utilization, higher fiber prices, and lower selling prices. The textile
segment accounted for 64% and 41% of the Company's consolidated sales and
gross profit, respectively, for the quarter ended September 30, 1995 as
compared to 66% and 49%, respectively, for the same period a year ago.
The Company does not expect to see any material improvement in its
knitted textile business at least until the first quarter of calendar
1996. In addition, during the quarter which will end December 31, 1995,
the major portion of the historically high costs of cotton purchased
earlier this calendar year are expected to move through the textile
segment's cost of goods sold. Therefore, gross profit margins in the
textile segment are expected to remain under pressure at least until the
Company's third fiscal quarter.
In the apparel segment, net sales increased 9% and gross profit decreased
5% in the quarter ended September 30, 1995 as compared to the quarter
ended October 1, 1994. Net sales of non-branded knit apparel were higher
in dollars, with a small reduction in average billing price being more
than offset by higher units billed. Sales of branded apparel were lower
in dollars, with fewer units being billed at a lower average billing price
than in the first fiscal 1995 quarter. Gross profit margins in the
apparel segment were 22% in the quarter ended September 30, 1995 as
compared to 26% in the same quarter of the prior fiscal year. Gross
profit margins in each of the apparel operations were not materially
different from those in the first quarter of prior fiscal year, but the
higher percentage of nonbranded knit apparel sales (which normally
generate lower gross profit margins than branded apparel) caused the
segment gross profit margin to decline. Selling, general, and
administrative costs in the apparel segment were significantly lower in
the quarter ended September 30, 1995 than in the comparable quarter of
fiscal 1995 due principally to certain credits to legal expenses and to
tighter controls over other expenses. The apparel segment accounted for
31% and 47% of the Company's consolidated net sales and gross profits,
respectively, in the quarter ended September 30, 1995 as compared to 29%
and 41%, respectively, for the same period
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS--Continued
a year ago. During the quarter, the Company received and recorded in
pre tax income approximately $4.2 million received from a third party
respecting prior litigation. The Company's estimate for litigation
liabilities was increased by approximately the same amount for possible
additional losses. The Company does not expect its branded apparel business
to show any material improvement until at least the first calendar quarter of
1996. The Company's knit apparel operation has seen a reduction in new orders
over the past several weeks, accompanied by market pressures to reduce
prices. This business also faces abnormally high yarn costs moving
through its cost of goods sold in the fiscal quarter which will end
December 31, 1995.
The contribution of the Company's other businesses to consolidated net
sales and consolidated gross profit was 5% and 12%, respectively, in the
quarter ended September 30, 1995 as compared to 5% and 10%, respectively,
in the quarter ended October 1, 1994.
Selling, general and administrative expenses decreased by $3.3 million in
the quarter ended September 30, 1995 as compared to the same quarter of
the prior fiscal year. Expenses were reduced in all of the Company's
business segments, with significant reductions in the apparel segment, as
noted above. However, the Company expects its levels of selling, general
and administrative costs to move up towards prior quarter levels also due
in part to the implementation of certain branded apparel and consumer
fitness equipment advertising and promotion plans in the quarter ending
December 31, 1995 and beyond.
Earnings 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.
The Company's consolidated order backlog at September 30, 1995 was
$143.9 million as compared to $167.0 million at October 1, 1994. Order
backlogs for the textile segment are 4% lower and for the apparel
segment are 32% lower than at the same time in the prior fiscal year.
The Company's consolidated inventories increased $6.2 million during the
first fiscal quarter of 1996. Finished goods decreased, but work in
process and raw material inventories increased. Inventories of branded
apparel decreased during the quarter ended September 30, 1995 as
compared to July 1, 1995. However, the Company considers its
branded apparel inventories excessive. The Company believes that it has
adequate reserves to cover any future price markdowns, however, no estimate can
be made of the range of amounts of loss that are reasonably possible
should its inventory reduction programs not be successful.
Capital expenditures in the quarter were $28 million as compared to $5
million in the first quarter of the preceding fiscal year, due
principally to the plant modernization program in the woven textile
division. The $18 million increase in long-term debt was due
principally to the plant modernization program.
The estimated effective tax rate for fiscal 1996 is approximately 43%.
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.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings*
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
(a) Exhibits required by Item 601 of Regulation S-
K None
(b) No reports have been filed on Form 8-K
during the quarter ended September 30, 1995.
* Items 1, 2, 3, 4 and 5 are not applicable
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 1, 1995 /s/ E. Erwin Maddrey, II
E. Erwin Maddrey, II
President and
Chief Executive Officer
Date November 1, 1995 /s/ Douglas J. Stevens
Douglas J. Stevens
Controller and
Assistant Secretary
<TABLE> <S> <C>
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<LEGEND>
This schedule contains summary financial information extracted from the
registrant's condensed consolidated financial statements for the fiscal quarter
ended September 30, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
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