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 March 29, 1997
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-- 24,516,596 shares as of April
1, 1997.
INDEX
DELTA WOODSIDE INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Page
Condensed consolidated balance sheets--
March 29, 1997 and June 29, 1996 3-4
Condensed consolidated statements of income --
Three and nine months ended March 29, 1997
and March 30, 1996 5
Condensed consolidated statements of cash
flows-- nine months ended March 29, 1997
and March 30, 1996 6
Notes to condensed consolidated financial
statements-- March 29, 1997 7
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 8-9
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 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
March 29, June 29,
1997 1996
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,391 $ 6,271
Accounts receivable:
Factor 73,905 63,194
Trade 64,034 65,230
137,939 128,424
Less allowances for doubtful
accounts and returns 5,023 6,258
132,916 122,166
Inventories
Finished goods 64,583 64,122
Work in process 78,574 60,739
Raw materials and supplies 20,853 16,197
164,010 141,058
Prepaid and other current assets 4,705 10,258
Deferred income tax (72)
TOTAL CURRENT ASSETS 305,950 279,753
PROPERTY, PLANT AND EQUIPMENT
Cost 367,093 357,613
Less accumulated depreciation 154,171 136,879
212,922 220,734
EXCESS OF COST OVER ASSIGNED VALUE
OF NET ASSETS ACQUIRED 25,836 26,464
OTHER ASSETS 10,176 10,765
TOTAL ASSETS $554,884 $537,716
DELTA WOODSIDE INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS--Continued
March 29, June 29,
1997 1996
(Unaudited)
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 50,503 $41,779
Accrued and sundry liabilities 32,425 28,261
Current portion of long-term debt 229,872 242,361
TOTAL CURRENT LIABILITIES 312,800 312,401
LONG-TERM DEBT, less current portion 7,885 283
OTHER LIABILITIES AND DEFERRED CREDITS 9,463 7,697
SHAREHOLDERS' EQUITY
Common Stock, par value $.01--
authorized 50,000,000 shares, issued
and outstanding 24,516,596 shares
at March 29, 1997 and 24,460,000
shares at June 29, 1996 245 245
Additional paid-in capital 164,802 164,170
Retained earnings 59,689 52,920
TOTAL SHAREHOLDERS EQUITY 224,736 217,335
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES $554,884 $537,716
See notes to condensed consolidated financial statements
DELTA WOODSIDE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Nine Months Ended
March 29, March 30, March 29, March 30,
1997 1996 1997 1996
(In thousands, except per share data)
Net Sales $ 163,873 $ 143,269 $ 471,065$ 434,870
Cost of goods sold 136,563 131,117 392,460 386,340
Gross profit on sales 27,310 12,152 78,605 48,530
Selling, general and
administrative expenses 18,387 19,958 55,233 54,097
Litigation charge (credit) (9,000)
8,923 (7,806) 23,372 3,433
Other expense (income):
Interest expense 6,092 4,718 17,223 13,289
Interest income
and other (546) (446) (2,419) (1,040)
5,546 4,272 14,804 12,249
INCOME (LOSS) BEFORE
INCOME TAXES 3,377 (12,078) 8,568 (8,816)
Income taxes (benefit) 769 (3,419) 1,799 (1,851)
NET INCOME (LOSS) $ 2,608 $ (8,659) $ 6,769 $ (6,965)
Net income per share $ .11 $ (.35) $ .28 $ (.28)
Dividends per share of
common stock $ .10 $ .30
Weighted average shares
outstanding 24,515 24,459 24,512 24,442
See notes to condensed consolidated financial statements
DELTA WOODSIDE INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
March 29, March 30,
1997 1996
(In thousands)
OPERATING ACTIVITIES
Net income $ 6,769 $ (6,965)
Depreciation 20,433 19,974
Amortization 1,655 1,577
Other 1,762 (1,366)
Changes in operating assets and liabilities (11,098) 24,721
NET CASH PROVIDED BY OPERATING ACTIVITIES 19,521 37,941
INVESTING ACTIVITIES
Property, plant and equipment purchases (17,529) (53,737)
Other 1,732 3,680
NET CASH (USED) BY INVESTING ACTIVITIES (15,797) (50,057)
FINANCING ACTIVITIES
Proceeds from revolving lines of credit 14,904 229,663
Payments on revolving lines of credit (27,096) (208,842)
Proceeds from long-term debt 6,942
Scheduled principal payments of long-term debt
and capital lease obligations (276) (182)
Dividends paid (7,332)
Other (78) (144)
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (5,604) 13,163
INCREASE IN CASH AND CASH EQUIVALENTS (1,880) 1,047
Cash and cash equivalents at beginning of period 6,271 719
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,391 $ 1, 766
See notes to condensed consolidated financial statements
DELTA WOODSIDE INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 29, 1997
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 nine months ended March 29, 1997 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--DEBT
The Company has amended its existing Credit Facility. The
amendment waives prior loan covenant violations. Because the
facility matures on September 30, 1997, it 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.
During the third quarter of fiscal 1997, the Company obtained $7
million in financing by pledging the distribution center in the
branded apparel division and a certificate of deposit as
collateral.
NOTE C--TAXES
The estimated effective tax rate for fiscal 1997 is 21% as
compared to an effective rate of 25% for the fiscal year ended
June 29, 1996. The lower tax rate in fiscal 1997 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 higher tax rate in
1996 was due to pretax losses along with permanent tax differences
as compared with this year's pretax earnings.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Net sales for the third quarter ended March 29, 1997 totaled
$163,873,000, as compared to $143,269,000 in the prior year's
third quarter, an increase of 14%. Net income was $2,608,000 for
the quarter ended March 29, 1997 as compared to a loss of
$8,659,000 for the quarter ended March 30, 1996. On a per share
basis, net income was $.11 per share on the 24,515,000 average
shares outstanding, as compared to a loss of $.35 per share on
the 24,459,000 average shares outstanding in the third quarter of
fiscal 1996.
Consolidated gross profit margin was 17% in the quarter ended
March 29, 1997, as compared to 18% in the quarter ended March 30,
1996. During the third quarter of fiscal 1997, 60% of the
Company's gross profit came from the textile segment compared to
8% in the third quarter of fiscal 1996. Apparel segment gross
profit as a percent of total gross profit decreased from 69% in
the third quarter of fiscal 1996 to 33% in the third quarter of
fiscal 1997. The change in relative gross profit contribution is
primarily attributable to improvements in both woven and knitted
textile gross profits.
Consolidated operating earnings for the quarter and year-to-date
periods ended March 29, 1997 increased from the same periods in
the prior fiscal year. Profits were higher in the textile
segment and apparel segments for the third quarter of fiscal 1997
compared to the third quarter of fiscal 1996; however profits
were lower in the apparel segment for the nine months ended March
29, 1997 compared to the same nine months a year ago, primarily
because earnings in the second quarter of the prior fiscal year
included a pretax credit to operating profits of $9 million
related to prior litigation charges.
Net sales in the textile segment totaled $106 million in the
quarter ended March 29, 1997 up 25% from the same quarter of the
prior year. Sales of woven fabrics were up 29% resulting from an
increase in unit sales and unit prices. Sales of government
fabrics decreased while sales to commercial accounts increased.
Gross profit on sales of woven fabrics also increased in part due
to manufacturing efficiencies resulting from completion of the
major portion of the plant renovation and modernization program,
and as a result of lower raw material costs. The modernization
project at the Beattie spinning and weaving mill was completed
during the current third quarter. Sales of knitted fabrics were
$24 million in the third quarter of fiscal 1997 up from $21
million in the third quarter of fiscal 1996. Sales increased as
a result of an increase in goods sold and in average unit prices.
Increased margins on sales of knitted fabrics were due
principally to lower raw material costs and improved absorption
of fixed costs resulting from higher manufacturing production
levels. The knitted textile division showed an operating loss in
the quarter just ended.However, the smaller operating loss in the current
quarter was a $5.5 million improvement over the same quarter of last fiscal
year. Net sales in the textile segment for the nine months ended
March 29, 1997 were up 13% as compared to the same period in the
prior fiscal year. Gross profit and operating profit were also
up substantially for the nine months ended March 29, 1997 as
compared to the same period of the prior fiscal year. Expenses
for the current year include certain unexpected costs associated
with interruption of operations in Wallace, North Carolina, from
Hurricane Fran in September 1996. Order backlogs were up in the
textile segment from $88 million a year ago to $145 million at
March 29, 1997. Most of the backlog increase in the textile
segment was in the woven division of the textile segment.
Net sales in the apparel segment were $51 million in the third
quarter of fiscal 1997, up 2% from the same quarter of the prior
fiscal year. Sales of branded apparel increased slightly while
sales of knitted apparel for printing decreased slightly. The
increased sales of branded apparel were due to more units being
sold at slightly higher average prices. Gross profit in the
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS --Continued
apparel segment was higher than in the same quarter of last
fiscal year. Results for the current third quarter in the
knitted apparel for printing business compared unfavorably with
the same quarter of the prior fiscal year. Higher than planned
production costs and price competition in the T-shirt market
depressed margins in the current quarter as compared to the same
quarter in the prior fiscal year. All the improvement in the
apparel segment gross profit came from the branded apparel
division, while gross profit declined in the knitted apparel for
printing division.
Excluding the effect of the $9 million litigation credit
described above, operating profits in the apparel segment were
slightly higher for the nine months ended March 29, 1997 as
compared to the same period in the prior fiscal year. During the
fourth quarter of fiscal 1997, in connection with the increase in
production at the new facility in Honduras, the Company expects
to discontinue production at two facilities in the knitted
apparel for printing division.
The Company's order backlog at March 29, 1997 was $191 million,
an increase of 31% over the order backlog at March 30, 1996.
Order backlogs increased in the textile segment, but decreased in
the apparel segment, due to lower order backlogs of knitted
apparel for printing.
Inventories were up approximately $23 million compared to June
29, 1996. The increase was primarily in the knitted apparel for
printing divisions resulting from a seasonal increase in units
of work-in-process inventory, higher than planned production
costs and lower than expected demand for knitted apparel for
printing.
During the third quarter of fiscal 1997, the Company obtained
financing of $7 million by pledging the branded apparel
distribution center and a certificate of deposit as collateral.
On June 28, 1997, the Company's revolving Credit Facility will be
reduced by $15 million to $234 million. These transactions
considered together will result in an overall reduction in
borrowing capacity under the credit agreement.
The Company has amended its existing Credit Facility. The
amendment waives prior loan covenant defaults and adds land and
buildings as collateral. Total collateral under this Credit
Facility has a net book value of approximately $497 million at
March 29, 1997. Because the facility matures on September 30,
1997, it 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 21% as
compared to an effective rate of 25% for the fiscal year ended
June 29, 1996. The lower tax rate in fiscal 1997 is primarily a
result of higher pretax earnings estimates in fiscal 1997, which
should result in a decrease in the valuation allowance previously
recognized for deferred taxes. The higher tax rate in 1996 was
due to pretax losses along with permanent differences in fiscal
1996.
The Company believes that, with replacement of the existing
Credit Facility, cash flow generated by its operations and funds
available under the current and any 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.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not applicable
PART II. OTHER INFORMATION
Item 1. Legal Proceedings*
Item 2. Changes in Securities
Date of Amount of Class of Nature of
Issuance Common Stock Persons Transaction
August 27, 1996 350 Employees Service Award
September 16, 1996 50 Employees Service Award
The Company believes these issuances are exempt
from registration under the Securities Act of 1933 by
reason of Section 4(2) of the Securities Act of 1933
and as not constituting a "sale".
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 were filed on Form 8-K during the
quarter ended March 29, 1997.
*Items 1, 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 May 8, 1997 /s/ E.Erwin Maddrey, II
E. Erwin Maddrey, II
President and
Chief Executive Officer
Date May 8, 1997 /s/ Douglas J. Stevens
Douglas J. Stevens
Controller and
Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
registrant's condensed consolidated financial statements for the fiscal quarter
ended March 29, 1997 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
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<PERIOD-END> MAR-29-1997
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