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 28, 1996
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)
864\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-- 24,511,196 shares as of October 21, 1996.
INDEX
DELTA WOODSIDE INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Page
Condensed consolidated balance sheets--
September 28, 1996 and June 29, 1996 3-4
Condensed consolidated statements of income --
Three months ended September 28, 1996 and
September 30, 1995 5
Condensed consolidated statements of cash
flows-- Three months ended September 28, 1996
and September 30, 1995 6
Notes to condensed consolidated financial
statements--September 28, 1996 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 28, June 29,
1996 1996
(Unaudited)
(In thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 20,363 $ 6,271
Accounts receivable:
Factor 64,719 63,194
Trade 55,733 65,230
120,452 128,424
Less allowances for doubtful
accounts and returns 5,088 6,258
115,364 122,166
Inventories
Finished goods 63,676 64,122
Work in process 67,136 60,739
Raw materials and supplies 18,673 16,197
149,485 141,058
Prepaid and other current assets 2,019 10,258
TOTAL CURRENT ASSETS 287,231 279,753
PROPERTY, PLANT AND EQUIPMENT
Cost 373,564 357,613
Less accumulated depreciation 143,566 136,879
229,998 220,734
EXCESS OF COST OVER ASSIGNED VALUE
OF NET ASSETS ACQUIRED 26,254 26,464
OTHER ASSETS 10,739 10,765
$554,222 $537,716
DELTA WOODSIDE INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS--Continued
September 28, June 29,
1996 1996
(Unaudited)
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 50,314 $ 41,779
Accrued and sundry liabilities 33,975 28,261
Current portion of long-term debt 242,222 242,361
TOTAL CURRENT LIABILITIES 326,511 312,401
LONG-TERM DEBT, less current portion 154 283
OTHER LIABILITIES AND DEFERRED CREDITS 7,955 7,697
SHAREHOLDERS' EQUITY
Common Stock, par value $.01--
authorized 50,000,000 shares, issued
and outstanding 24,511,000 shares
at September 28, 1996 and 24,460,000
shares at June 29, 1996 245 245
Additional paid-in capital 164,434 164,170
Retained earnings 54,923 52,920
219,602 217,335
$554,222 $537,716
See notes to condensed consolidated financial statements
DELTA WOODSIDE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended
September 29, September 30,
1996 1995
(In thousands, except per share data)
Net sales $ 144,521 $ 141,043
Cost of goods sold 119,293 120,279
Gross profit on sales 25,228 20,764
Selling, general and administrative
expenses 18,354 14,882
6,874 5,882
Other expense (income):
Interest expense 5,172 4,087
Interest income and other (451) (540)
4,721 3,547
INCOME BEFORE INCOME TAXES 2,153 2,335
Income taxes 150 1,008
NET INCOME $ 2,003 $ 1,327
Net income per share $ .08 $ .05
Dividends per share of common stock $ .10
Weighted average shares outstanding 24,510 24,409
See notes to condensed consolidated financial statements
DELTA WOODSIDE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
September 28, September 30,
1996 1995
(In thousands)
OPERATING ACTIVITIES
Net income $ 2,003 $ 1,327
Depreciation 6,687 6,643
Amortization 498 517
Other 408 (578)
Changes in operating assets and liabilities 14,715 4,773
NET CASH PROVIDED BY OPERATING ACTIVITIES 24,311 12,682
INVESTING ACTIVITIES
Property, plant and equipment
purchases (9,640) (28,401)
Other (39) (52)
NET CASH (USED) BY INVESTING ACTIVITIES (9,679) (28,453)
FINANCING ACTIVITIES
Proceeds from revolving line of credit 1,030 65,796
Principal payments on revolving line of credit (1,485) (47,391)
Scheduled principal payments of long-term
debt and capital lease obligations (77) (80)
Dividends paid (2,441)
Other (8) (7)
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (540) 15,877
INCREASE IN CASH AND CASH EQUIVALENTS 14,092 106
Cash and cash equivalents at beginning of period 6,271 719
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 20,363 $ 825
See notes to condensed consolidated financial statements
DELTA WOODSIDE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 28, 1996
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 28, 1996 are not necessarily
indicative of the results that may be expected for the year
ending June 28, 1997. 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 June 29, 1996.
NOTE B--SHORT-TERM DEBT
The Company is negotiating with certain lenders to replace its
existing Credit Facility with one which would have greater
credit availability and different financial covenants. The
existing Credit Facility requires certain financial ratios and
imposes certain loan limitations which the Company has not
satisfied. Because the Company is in default under the terms
of the agreement, the Credit Facility has been reported as
current in the accompanying financial statements. Although
there can be no assurance, the Company believes that it will
be able to replace the existing Credit Facility prior to
maturity. The Company expects such a new facility to have a
similar or slightly higher rate of interest.
NOTE C--TAXES
The estimated effective tax rate for fiscal 1997 is 7% as
compared to an effective rate of 25% for the fiscal year ended
June 29, 1996. The lower tax rate is primarily a result of
positive pretax earnings expectations in fiscal 1997, which
should result in a decrease in the valuation allowance
previously recognized for deferred taxes.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Net sales for the first quarter ended September 28, 1996
totaled $144,521,000, as compared to $141,043,000 in the prior
year's first quarter, an increase of 2%. Net income was
$2,003,000 for the quarter ended September 28, 1996 as
compared to $1,327,000 for the quarter ended September 30,
1995. On a per share basis, net income was $.08 per share on
the 24,510,000 average shares outstanding, as compared to $.05
per share on the 24,409,000 average shares outstanding in the
first quarter of fiscal 1996.
Consolidated gross profit margin was 17% in the quarter ended
September 28, 1996, as compared to 15% in the quarter ended
September 30, 1995. During the first quarter of fiscal 1997,
52% of the Company's gross profit came from the textile
segment compared to 41% in the first quarter of fiscal 1996.
Apparel segment gross profit as a percent of total gross
profit declined from 47% in the first quarter of fiscal 1996
to 40% in fiscal 1997.
Net sales in the textile segment totaled $94 million in the
quarter ended September 28, 1996 up 4% from the same quarter
of the prior year. Sales of woven fabrics were down 4% due to
fewer units sold, but at slightly higher average unit prices.
Sales of government fabrics decreased while sales to
commercial accounts increased.
Gross profit on sales of woven fabrics increased as the major
part of the disruptions arising from the extensive plant
renovation and modernization program is largely complete. The
Company is still working on the second half of the
modernization project in the Beattie spinning and weaving mill
in Fountain Inn, South Carolina, but expects this phase to be
completed early in calendar 1997. Sales of knitted fabrics
increased from $16 million in the first quarter of fiscal 1996
to $22 million in the first quarter of fiscal 1997. The
knitted textile division continued to show an operating loss,
but the loss in the quarter just ended was less than in the
same quarter of last fiscal year. Expenses in the most recent
quarter include certain unexpected costs associated with
interruption of operations in Wallace, North Carolina, from
Hurricane Fran in September 1996. Order backlogs in the
textile segment were $94 million, down slightly from the same
time last year. An increase in the knitted fabrics backlog
was offset by a decrease in the woven fabrics backlog.
Net sales in the apparel segment were $45 million, up 1% from
the same quarter of the prior fiscal year. Sales of branded
apparel increased, offsetting a decline in sales of knit
apparel for printing. The increased sales of branded apparel
were due to more units being sold, but at lower average
prices, as the Company continues to dispose of excess
inventories which were written down in fiscal 1996. Unit
sales of knitted apparel, as well as average unit prices, were
down from last year as the T-shirt market became very slow
following the 1996 Olympics. In the segment gross profit was
higher, but operating earnings declined as a result of the
prior year's lower selling, general and administrative
expenses.
Sales and gross margins in the Company's other segment,
consisting primarily of sales of the physical fitness
equipment division, were down compared to the prior year. The
Company determined that the costs of trying to enter the
consumer market at this time outweigh the benefits.
The Company's order backlog at September 28, 1996, was
$156,679,000 an increase of 9% from order backlogs at
September 30, 1995. Order backlogs increased in the apparel
segment, but declined in the textile segment.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS --Continued
Inventories were up approximately $8 million compared to June
29, 1996, primarily due to increased work-in-process in the
woven textile division. Finished goods declined slightly.
The Company is negotiating with certain lenders to replace its
existing Credit Facility with one which would have greater
credit availability and different financial covenants. The
existing Credit Facility requires certain financial ratios and
imposes certain loan limitations which the Company has not
satisfied. Because the Company is in default under the terms
of the agreement, the Credit Facility has been reported as
current in the accompanying financial statements. Although
there can be no assurance, the Company believes that it will
be able to replace the existing Credit Facility prior to
maturity. The Company expects such a new facility to have a
similar or slightly higher rate of interest.
The estimated effective tax rate for fiscal 1997 is 7% as
compared to an effective rate of 25% for the fiscal year ended
June 29, 1996. The lower tax rate is primarily a result of
positive pretax earnings expectations in fiscal 1997, which
should result in a decrease in the valuation allowance
previously recognized for deferred taxes.
The Company believes that, with replacement of the existing
Credit Facility, cash flow generated by its operations and
funds available under the future Credit Facility will be
sufficient to service its bank debt, to satisfy its day-to-day
working capital needs and to fund its planned capital
expenditures.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings*
Item 2. Changes in Securities*
Item 3. Defaults upon Senior Securities
The Company is a party to an Amended and
Restated Credit Agreement, dated as of March 15,
1996, (the "Credit Agreement"), as amended which
permits aggregate borrowings (subject to certain
conditions, such as there being no Event of Default
as defined, and limitations) of $248,500,000. The
covenants contained in the Credit Agreement
respecting minimum tangible net worth and the ratio
of adjusted pretax income to interest expense were
not satisfied as of June 29, 1996 and September 28,
1996. The lenders party to the Credit Agreement
have not waived these Events of Default.
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 were filed on Form 8-K during
the quarter ended September 28, 1996.
* Items 1, 2, 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 11, 1996 /s/ E. Erwin Maddrey, II
E. Erwin Maddrey, II
President and
Chief Executive Officer
Date November 11, 1996 /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 28, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
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