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 December 31, 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-- 24,317,128 shares as of January
30, 1995.
INDEX
DELTA WOODSIDE INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited
Page
Condensed consolidated balance sheets--
December 31, 1994 and July 2, 1994 3-4
Condensed consolidated statements of income --
Three and six months ended December 31, 1994 and
January 1, 1994 5
Condensed consolidated statements of cash
flows-- Six months ended December 31, 1994
and January 1, 1994 6
Notes to condensed consolidated financial
statements--December 31, 1994 7
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Conditions 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
December 31, July 2,
1994 1994
(In thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 623 $ 2,077
Accounts receivable:
Factor 54,077 55,440
Trade 60,267 64,921
114,344 120,361
Less allowances for doubtful
accounts and returns 2,519 3,275
111,825 117,086
Inventories
Finished goods 140,465 112,101
Work in process 63,697 69,402
Raw materials and supplies 23,267 22,300
227,429 203,803
Prepaid and other current assets 2,128 1,942
Deferred income taxes 14,510 12,028
TOTAL CURRENT ASSETS 356,515 336,936
PROPERTY, PLANT AND EQUIPMENT
Cost 288,241 279,813
Less accumulated depreciation 100,754 89,782
187,487 190,031
EXCESS OF COST OVER ASSIGNED VALUE OF NET
ASSETS ACQUIRED 27,741 28,164
OTHER ASSETS 11,593 11,872
$583,336 $567,003
DELTA WOODSIDE INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS--Continued
December 31, July 2,
1994 1994
(Unaudited)
(In thousands)
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 37,326 $ 46,712
Accrued and sundry liabilities 41,692 48,274
TOTAL CURRENT LIABILITIES 79,018 94,986
LONG-TERM DEBT, less current portion 192,665 161,948
OTHER LIABILITIES AND DEFERRED CREDITS 26,425 25,192
SHAREHOLDERS' EQUITY
Common Stock, par value $.01--
authorized 50,000,000 shares, issued
and outstanding 24,306,000 shares
at December 31, 1994 and 24,246,000
shares at July 2, 1994 243 242
Additional paid-in capital 162,789 162,114
Retained earnings 122,196 122,521
285,228 284,877
$583,336 $567,003
See notes to condensed consolidated financial statements
DELTA WOODSIDE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Six Months Ended
December 31, January 1, December 31, January 1,
1994 1994 1994 1994
(In thousands, except per share data)
Net sales $ 142,520 $ 149,344 $ 283,795 $295,770
Cost of goods sold 120,909 131,355 236,735 253,412
Gross profit on sales 21,611 17,989 47,060 42,358
Selling, general and
administrative expenses17,990 22,836 36,623 42,633
Litigation charge 33,000 33,000
Restructuring
(credit) charge (290) 12,660 (553) 12,660
3,911 (50,507) 10,990 (45,935)
Other expense (income):
Interest expense 3,272 1,978 6,124 3,849
Interest income
and other 36 (878) (2,508) (1,072)
3,308 1,100 3,616 2,777
INCOME (LOSS) BEFORE
INCOME TAXES 603 (51,607) 7,374 (48,712)
Income taxes (benefit) 232 (19,612) 2,839 (18,511)
NET INCOME (LOSS)$ 371 $ (31,995) $ 4,535 $ (30,201)
Net income (loss)
per share $ .02 $ ( 1.31) $ .19 $ (1.21)
Dividends per share of
common stock $ .10 $ .10 $ .20 $ .20
Weighted average shares
outstanding 24,300 24,498 24,298 24,857
See notes to condensed consolidated financial statements
DELTA WOODSIDE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended
December 31, January 1,
1994 1994
(In thousands)
OPERATING ACTIVITIES
Net income (loss) $ 4,535 $ (30,201)
Depreciation 11,434 11,077
Amortization 1,109 2,371
Other (2,524) (11,672)
Changes in operating assets and
liabilities (31,324) 37,163
NET CASH (USED) PROVIDED BY OPERATING
ACTIVITIES (16,770) 8,738
INVESTING ACTIVITIES
Acquisition of business net
of cash acquired (1,565)
Property, plant and equipment
purchases (9,746) (15,684)
Other 188 (151)
NET CASH (USED) BY INVESTING ACTIVITIES (9,558) (17,400)
FINANCING ACTIVITIES
Net proceeds from short-term line
of credit 15,317
Proceeds from revolving line of credit 162,454 33,000
Principal payments on revolving line
of credit (131,609) (11,000)
Scheduled principal payments of long-term
debt and capital lease obligations (646) (1,060)
Repurchase of Common Stock (3) (25,312)
Dividends paid (4,860) (4,937)
Other (462) 96
NET CASH PROVIDED BY FINANCING ACTIVITIES 24,874 6,104
DECREASE IN CASH AND CASH EQUIVALENTS (1,454) (2,558)
Cash and cash equivalents at beginning
of period 2,077 3,730
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 623 $ 1,172
See notes to condensed consolidated financial statements
DELTA WOODSIDE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
December 31, 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 and six months ended December 31,
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 approximately $29 million for a 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 prior revolving credit
facility and a note payable.
NOTE C--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.
During the first six months of fiscal 1994 the Company
repurchased 2.3 million shares of its Common Stock for $25.3
million.
NOTE D--LITIGATION AND RESTRUCTURING CHARGES
In the second quarter of fiscal 1994 the Company recognized
certain litigation and restructuring charges which are described
in Note J of the Company's annual report for the fiscal year
1994.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Net sales for the fiscal quarter ended December 31, 1994 were
$142,520,000, a decrease of 5% as compared to $149,344,000 in the
prior year's second quarter during which the Company's Harper
Brothers business, sold in June 1994, had sales of $5,547,000.
Net income for the second 1995 fiscal quarter was $371,000 as
compared to a net loss of $31,995,000 for the second quarter of
fiscal 1994. On a per share basis, earnings in the second
quarter of the current fiscal year were $.02 per share on the
24,300,000 average shares outstanding, as compared with a loss of
$1.31 per share on the 24,498,000 average shares outstanding in
the second quarter of fiscal 1994. Results for the second
quarter of fiscal 1994 included pre-tax charges to income of $33
million and $12.7 million to establish certain reserves for
litigation and restructuring, respectively. Without these
charges, the net loss for the quarter ended January 1, 1994
would have been approximately $.14 per share.
Net sales for the six months ended December 31, 1994 were
$283,795,000 as compared to $295,770,000 for the six months ended
January 1, 1994. Sales of the Harper Brothers operation were
$10,980,000 for the six months ended January 1, 1994. Net income
for the six months ended December 31, 1994 was $4,535,000 as
compared to a net loss of $30,201,000 for the six months ended
January 1, 1994. On a per share basis, earnings in the six
months ended December 31, 1994 were $.19 on the 24,298,000
average shares outstanding,as compared to a loss of $1.21 per
share on the 24,857,000 average shares outstanding for the six
months ended January 1, 1994. Without the special charges taken
in the quarter ended January 1, 1994, the loss for the six months
ended at that date would have been approximately $.07 per share.
Consolidated gross margin was 15% in the quarter ended December
31, 1994 compared to 12% for the quarter ended January 1, 1994.
Consolidated gross margin for the six months ended December 31,
1994 was 17% compared to 14% for the six months ended January 1,
1994.
Net sales in our textile segment were 6% higher in the quarter
ended December 31, 1994 than in the comparable quarter of the
prior year. Sales of unfinished woven fabrics (greige goods)
were lower due to fewer units billed at lower average prices.
Sales of finished woven fabrics were higher, with both unit and
average billing prices up slightly from the same period last
year. Knitted textile sales were up in both units and average
billing price. Gross profits in the textile segment were 13%
higher in the quarter ended December 31, 1994 than in the quarter
ended January 1, 1994. Greige goods gross margins declined while
finished woven fabric gross margins were about equal to those of
the same quarter last year. Knitted fabric gross margins were
higher in the quarter ended December 31, 1994 than in the same
quarter of last fiscal year. The improvement in gross margins
for knitted fabrics was due principally to lower manufacturing
costs following the consolidation of certain production
operations completed during the last half of fiscal 1994. The
Company has announced that it will close one of its three woven
greige goods weaving plants, a plant located in Anderson, South
Carolina. Production from this facility is expected to cease in
early April of 1995. Order backlogs in the Company's textile
segment were 7% higher at December 31, 1994 than at January 1,
1994. In the quarter ended December 31, 1994, the textile
segment contributed 71% and 56% to consolidated net sales and
gross profit, respectively.
Net sales in the Company's apparel segment in the quarter ended
December 31, 1994 were 15% lower than in the quarter ended
January 1, 1994. Sales of knitted apparel were higher, but sales
of Duck Head branded apparel were substantially lower, than in
the comparable quarter of the prior fiscal year. Knitted apparel
had increases in both units and average billing price. The
decrease in Duck Head branded apparel sales was attributable to
fewer units being shipped. The Company feels that the poor Duck
Head sales in the quarter ended December 31, 1994 were
principally due to poor delivery performance to the Company's
retailer customers in previous quarters. The percentage of
orders filled 100% and on time during January 1995, the starting
month for Spring season shipments, is substantially higher than
it was during the same period last year. Despite lower sales
volume, gross profits in the apparel segment increased 291% in
the quarter ended December 31, 1994 over the quarter ended
January 1, 1994. During the second quarter of fiscal 1994, the
apparel segment took $3.6 million of charges to gross profit to
increase market reserves. Without these charges in the quarter
ended January 1, 1994, the increase in gross profits would have
been 34% for the quarter ended December 31, 1994. Order backlogs
in the company's apparel segment were 28% higher at December 31,
1994 than at January 1, 1994. In the quarter ended December 31,
1994, the apparel segment contributed 24% of the Company's
consolidated net sales and 34% of consolidated gross profits.
Sales in the Company's Other segment decreased 47% in the quarter
ended December 31, 1994 as compared to the quarter ended January
1, 1994. The major part of this decrease was due to the sale of
the Company's Harper Brothers office products distribution
business in June of 1994. Gross profits in the Other segment
decreased 59%, due in part to the sale of Harper Brothers and
partly to increased costs associated with the Company's attempt
to enter the consumer market for personal fitness equipment.
Order backlogs for the Company's Other segment were 71% higher at
December 31, 1994 than at January 1, 1994. The contribution of
the Company's Other businesses to consolidated sales and gross
profits was 5% and 10% respectively.
Selling, general and administrative expenses in the quarter ended
December 31, 1994 decreased $5.4 million from those incurred in
the quarter ended January 1, 1994. Expenses for the comparable
quarter of fiscal 1994 included $1.9 million for the Harper
Brothers business.
The Company's consolidated order backlog at December 31, 1994
totalled $164.1 million, an increase of 17% compared to the total
backlog of $139.6 million at January 1, 1994.
Cotton and synthetic fibers are major raw material components of
most of the Company's products. Prices of these fibers have
increased sharply over the past several months. The Company has
fixed the prices of over half of its cotton fiber requirements
through June of 1995 at levels approximately 17 cents per pound
below recent trade prices. The Company expects to acquire the
balance of its requirements through June of 1995 at prices
considerable higher than its current ownership. There is no
assurance that the Company will be able to obtain prices for
future deliveries of its products sufficient to cover its higher
fiber costs.
Inventory levels have increased by $23.6 million from July 2,
1994 to December 31, 1994. These increases are principally in
greige goods, knitted apparel and branded apparel. Part of the
knitted and branded apparel increases are seasonal buildups in
anticipation of spring season shipments. The Company considers
its greige goods inventories excessive, and took an appropriate
charge to income in the quarter ended December 31, 1994 to
increase its greige goods market reserves. As reported
previously, the Company also considers a portion of its branded
apparel inventories excessive. Although the Company believes
that it is adequately reserved for any future price markdowns of
its excess inventories at December 31, 1994, it will continually
evaluate the adequacy of these reserves.
The Company's long term debt was $192.7 million at December 31,
1994, up from $161.9 million at July 2, 1994. The buildup of
inventories and fiscal year to date capital expenditures of $9.7
million were the principal causes of the additional debt. The
Company expects to reduce its inventories and increase its
capital expenditures during the second half of fiscal 1995.
On February 2, 1995 the Company obtained a waiver from its
lenders respecting the ratio of adjusted pretax income to
interest expense for the quarter ended December 31, 1994. Each
quarter the Company is required to maintain a ratio not less than
2.5 to 1.
The estimated effective tax rate for fiscal 1995 is 38.5%. The
Company believes that cash flow generated by its operations and
funds available under the existing credit facilities should be
sufficient to service its bank debt., to satisfy its day-to-day
working capital needs, to fund its 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
The following summarizes the votes at the Annual
Meeting of the Company's shareholders held on November
10, 1994:
Election of Broker
Directors For Against Withheld Abstentions Nonvotes
C. C. Guy 21,698,176 0 220,075 N/A N/A
J. F. Kane 21,697,426 0 220,825 N/A N/A
M. Lennon 21,697,761 0 220,490 N/A N/A
E. E. Maddrey, II 21,698,725 0 219,526 N/A N/A
B. Mickel 21,694,978 0 223,273 N/A N/A
B. A. Mickel 21,692,697 0 225,554 N/A N/A
B. C. Rainsford 21,698,693 0 219,558 N/A N/A
Ratification of
Appointment of
KPMG Peat Marwick
as Independent
Auditors
For Fiscal 1995 21,814,160 85,477 N/A 18,614 N/A
Item 5. Other Information*
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-K
4.3.1 February 2, 1995 Waiver Respecting Credit
Agreement dated as of September 7,1994
(b) No reports have been filed on form 8-K during the
quarter ended December 31, 1994.
Items 1, 2, 3, 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 February 6, 1995 /s/ E. Erwin Maddrey,II
E. Erwin Maddrey, II
President and
Chief Executive Officer
Date February 6, 1995 /s/ Douglas J. Stevens
Douglas J. Stevens
Controller and
Assistant Secretary
4.3.1. February 2, 1995 Waiver Respecting Credit Agreement
dated as of September 7, 1994.
EXHIBIT
February 2, 1994
Delta Woodside Industries, Inc.
233 North Main Street
Suite 200
Hammond Square
Greenville, South Carolina 29601
Attention: President
RE: Credit Agreement dated as of September 7, 1994 (the "Credit
Agreement") by and among Delta Woodside Industries, Inc. (the
"Borrower"), the Lenders described therein, NationsBank, N.A.
(Carolinas) (formerly known as NationsBank of North Carolina,
N.A.), as Agent, and Bank of America National Trust and Savings
Association and The Bank of New York, as Co-Agents.
Dear Sirs:
You have informed us that the Borrower will be in violation of
Section 9.1(d) of the above referenced Credit Agreement for the
Fiscal Quarter ended December 31, 1994, and you have requested that
the Lenders waive such violation.
The defined terms in the Credit Agreement are incorporated herein
by reference.
In accordance with your request, the undersigned Lenders hereby
agree to waive any violation of Section 9.1(d) of the Credit
Agreement resulting from the failure of the Borrower to maintain
the required Interest Coverage Ratio for the Fiscal Quarter ended
December 31, 1994.
The waiver set forth above shall be effective only in the specific
instance provided for above and only for the purpose for which
given and shall not entitle the Borrower to any other or further
waivers in similar or other circumstances.
Except as waived hereby, all of the terms and provisions of the
Credit Agreement remain in full force and effect.
This letter may be executed in any number of counterparts, each of
which shall constitute an original but all of which when taken
together shall constitute but on contract.
February 2, 1995
Page 2
This letter shall be governed by North Carolina Law.
Sincerely,
NATIONSBANK, N.A. (CAROLINAS) CHASE MANHATTAN BANK, N.A.
By: /s/E. Phifer Helms By:
Title: Senior Vice President Title:
BANK OF AMERICA NATIONAL TRUST PNC BANK, NATIONAL ASSOCIATION
AND SAVINGS ASSOCIATION
By: /s/Wayne H. Riess By: /s/James A. Frick
Title: Vice President Title: Vice President
THE BANK OF NEW YORK NatWest Bank N.A. (formerly)
NATIONAL WASHINGTON BANK (USA)
By: By: /s/Kurt S. Pohmer
Title: Title: Assistant Vice President
FIRST UNION NATIONAL BANK OF
SOUTH CAROLINA
By: /s/ Charles P. Cecil
Title: Senior Vice President
WACHOVIA BANK OF SOUTH CAROLINA
By: /s/ Thomas F. Snider
Title: Vice President
THE BANK OF NOVA SCOTIA
By:
Title:
(Signatures Continued)
February 2, 1995
Page 3
ACCEPTED AND AGREED:
DELTA WOODSIDE INDUSTRIES, INC.
By: /s/ Bettis C. Rainsford
Bettis C. Rainsford
Executive Vice President
ACKNOWLEDGED AND CONSENTED TO:
Alchem Capital Corporation
Delta Mills, Inc.
Duck Head Apparel Company, Inc.
Cargud, Sociedad Anonima
Armonia Textile, Sociedad Anonima
Nautilus International, Inc.
Nautilus Direct, Inc.
Delta Consolidated Corporation
Delta Merchandising, Inc.
By: /s/ Bettis C. Rainsford
Bettis C. Rainsford
Executive Vice President for
each of the above corporations
cc Mr. Bettis C. Rainsford
Eric B. Amstutz, Esq.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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This schedule contains summary financial information extracted from the
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<OTHER-SE> 284,985
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