UNITED STATES SECURITIES & EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1997
Commission File Number 0-23604
DAKOTAH, INCORPORATED
(Exact Name of Registrant as Specified in Its Charter)
South Dakota 46-0339860
- ------------------------------- ----------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation of Organization) Identification Number)
One North Park Lane
Webster, SD 57274
-------------------------------------------------
(Address of Principal Executive Offices, Zip Code)
Registrant's Telephone Number, Including Zip Code: (605) 345-4646
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 proceeding 12 months 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, 3,499,755 shares outstanding
as of November 5, 1997.
<PAGE>
DAKOTAH, INCORPORATED
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets (Unaudited):
September 30, 1997 and December 31,1996
Statements of Operations (Unaudited):
Three month and nine month periods ended
September 30, 1997, and September 30, 1996
Statements of Cash Flows (Unaudited):
Nine month periods ended
September 30, 1997, and September 30, 1996
Notes to Financial Statements:
September 30, 1997
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Items 1 through 5 have been omitted since items
are inapplicable or answer is negative
Item 6. Exhibits and Reports on Form 8-K
(a.) Exhibit Number: Description:
27.1 Financial Data Schedule
(b.) Reports on Form 8-K None
<PAGE>
DAKOTAH, INCORPORATED
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1997 1996
----------- -----------
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 8,538 $ 2,690
Accounts receivable, less allowance
for doubtful accounts of $432,000
in 1997 and $382,000 in 1996 9,535,170 7,538,724
Inventories 19,643,987 9,555,897
Prepaid expenses and other assets 329,869 735,929
Income taxes receivable 331,988
Deferred income taxes 496,000 496,000
----------- -----------
Total current assets 30,345,552 18,329,240
PROPERTY, PLANT AND EQUIPMENT - AT COST
Land 36,000 36,000
Buildings and improvements 2,425,418 2,334,516
Leasehold improvements 122,362 123,731
Machinery and equipment 3,274,038 3,009,792
Office equipment, furniture and fixtures and other 1,874,589 958,758
----------- -----------
7,732,407 6,462,797
Less accumulated depreciation & amortization 3,115,626 2,555,767
----------- -----------
4,616,781 3,907,030
OTHER ASSETS
Deferred income taxes 185,000 185,000
Long-lived assets not placed in service 1,088,049 499,490
Other 14,200 9,200
----------- -----------
1,287,249 693,690
----------- -----------
$36,249,582 $22,929,960
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Outstanding checks in excess of bank balances $ 888,268
Notes payable to bank 16,764,555 $ 7,123,000
Current maturities of notes payable and
capital lease obligations 273,847 150,696
Current maturities of notes payable to officers 288,800 332,139
Accounts payable 4,856,715 2,134,845
Accrued liabilities
Compensation and related benefits 857,398 925,739
Other 631,815 716,217
Income taxes payable 187,079
----------- -----------
Total current liabilities 24,561,398 11,569,715
LONG -TERM LIABILITIES
Long-term portion of notes payable and
capital lease obligations 1,884,129 783,423
Long-term portion of notes payable to officers 129,162
STOCKHOLDERS' EQUITY
Common stock, par value $.01; 10,000,000 shares authorized;
issued & outstanding shares 3,499,755 34,998 34,998
Additional contributed capital 7,004,839 6,904,156
Retained earnings 2,764,218 3,508,506
----------- -----------
9,804,055 10,447,660
----------- -----------
$36,249,582 $22,929,960
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
DAKOTAH, INCORPORATED
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended September 30, For the nine months ended September 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 13,158,468 $ 12,592,179 $ 26,696,554 $ 26,556,734
Cost of goods sold 9,667,854 9,448,414 19,846,030 19,818,811
------------ ------------ ------------ ------------
Gross profit 3,490,614 3,143,765 6,850,524 6,737,923
Operating expenses
Selling 1,436,096 1,453,401 3,641,549 3,532,083
General and administrative 1,316,336 868,939 3,582,539 2,485,991
------------ ------------ ------------ ------------
2,752,432 2,322,340 7,224,088 6,018,074
------------ ------------ ------------ ------------
Operating profit (loss) 738,182 821,425 (373,564) 719,849
Other income (expense)
Interest (414,125) (187,730) (767,724) (391,577)
Gain on sale of equipment 100,000 106,867
Other (60,000) (85,000)
------------ ------------ ------------ ------------
(414,125) (147,730) (767,724) (369,710)
Earnings (loss) before income
taxes 324,057 673,695 (1,141,288) 350,139
Income tax expense (benefit) 94,000 222,730 (397,000) 116,250
------------ ------------ ------------ ------------
NET EARNINGS (LOSS) $ 230,057 $ 450,965 $ (744,288) $ 233,889
============ ============ ============ ============
Net earnings (loss) per share $ 0.07 $ 0.13 $ (0.21) $ 0.07
============ ============ ============ ============
Weighted average common
shares outstanding 3,499,755 3,499,755 3,499,755 3,499,755
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
DAKOTAH, INCORPORATED
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended September 30,
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (744,288) $ 233,889
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities
Depreciation and amortization 559,859 547,669
Compensation to outside consultant 100,683 50,000
Gain on Sale of Equipment (106,867)
Changes in assets and liabilities:
Accounts receivable (1,996,446) (2,703,663)
Inventories (10,088,090) (5,445,136)
Prepaid expenses and other assets 406,060 (474,411)
Income taxes receivable (331,988)
Accounts payable 2,721,870 3,305,746
Accrued liabilities (152,743) 515,244
Income taxes payable (187,079)
------------ ------------
Total adjustments (8,967,874) (4,311,418)
------------ ------------
Net cash used in operating activities (9,712,162) (4,077,529)
Cash flows from investing activities:
Capital expenditures (766,903) (1,462,897)
Acquisition of long-lived assets not placed in service (588,559)
Other (5,000) 106,867
------------ ------------
Net cash used in investing activities (1,360,462) (1,356,030)
Cash flows from financing activities:
Outstanding checks in excess of bank balances 888,268
Net borrowings under notes payable to bank 9,641,555 5,142,592
Proceeds from issuance of long-term obligations 880,000 300,000
Proceeds from borrowings from officers 25,000
Principal payments on long-term obligations (158,850) (481,232)
Principal payments on notes payable to officers (197,501)
------------ ------------
Net cash provided by financing activities 11,078,472 4,961,360
Net increase (decrease) in cash and cash equivalents 5,848 (472,199)
Cash and cash equivalents at beginning of period 2,690 477,330
------------ ------------
Cash and cash equivalents at end of period $ 8,538 $ 5,131
============ ============
Supplemental disclosure of non-cash investing/financing activity:
Acquisition of computer hardware through
capital lease arrangement $ 502,707
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 676,548 $ 341,376
Income taxes $ 141,210
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
DAKOTAH, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
NOTE A: BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with the instructions of Form 10-Q pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although management believes
that the disclosures are adequate to make the information presented not
misleading.
In the opinion of management, the unaudited condensed financial statements
contain all adjustments consisting of normal recurring accruals necessary to
present fairly the financial position of the Company as of September 30, 1997,
the results of operations for the three and nine month periods ended September
30, 1997 and 1996, and the cash flows for the nine month periods ended September
30, 1997 and 1996. These results are not necessarily indicative of results which
may be expected for the year as a whole.
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE B: INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market and consist of the following:
September 30, 1997 December 31, 1996
------------------ -----------------
Raw Materials $10,235,350 $ 5,722,944
Work In Progress 1,937,032 1,667,023
Finished Goods 7,471,605 2,165,930
----------- -----------
$19,643,987 $ 9,555,897
=========== ===========
<PAGE>
NOTE C: NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards No. 128 "Earnings Per Share" which is effective
for financial statements issued after December 15, 1997. Early adoption of the
new standard is not permitted. The new standard eliminates primary and fully
diluted earnings per share and requires presentation of basic and diluted
earnings per share together with disclosure of how the per share amounts were
computed. Basic earnings per share excludes dilution and is computed by dividing
income available to common shareholders by the weighted-average common shares
outstanding for the period. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised and converted into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity. The effect of
adopting this new standard has not been determined.
In June 1997, the FASB issued Statement No. 130 "Reporting Comprehensive Income"
and Statement No. 131 "Disclosures about Segments of an Enterprise and Related
Information" which are effective for fiscal years beginning after December 15,
1997. Statement No. 130 will require the Company to display an amount
representing total comprehensive income, as defined by the statement, as part of
the Company's basic financial statements. Comprehensive income will include
items such as unrealized gains or losses on certain investment securities and
foreign currency items. Statement No. 131 will require the Company to disclose
financial and other information about its business segments, their products and
services, geographic areas, major customers, revenues, profits, assets and other
information. The adoption of these two statements is not expected to have a
material effect on the financial statements of the Company.
NOTE D: NOTES PAYABLE TO BANK
During the second quarter of 1997, the Company refinanced its credit facility,
and further amended it in the third quarter of 1997. The total amount available
under the revolving note, which is due on demand, is limited to the lesser of
$17,500,000 or a defined borrowing base of eligible accounts receivable and
inventory, outstanding amounts under the term note, plus $1,000,000. Advances
under the revolving note, based on inventory balances, eligible accounts
receivable, and the additional $1,000,000, provide for monthly interest payments
at 3%, 1% and 4%, respectively, above the bank's prime rate (11.5%, 9.5% and
12.5% respectively, at September 30, 1997). Advances under the term note, which
is due on demand and which requires monthly principal payments of $33,333,
provide for monthly interest payments at 1% above the bank's prime rate. The
outstanding balances on the revolving note and the term note were $14,864,555
and $1,900,000 at September 30, 1997. The outstanding balances on the previous
revolving note and term note were $6,415,000 and $708,000 at December 31, 1996.
<PAGE>
The current credit facility contains affirmative and negative covenants
including, among other things, provisions for minimum net earnings and net worth
requirements and limitations on capital expenditures. Additionally, the company
may not incur additional borrowings, sell certain assets, acquire other
businesses or pay cash dividends without prior consent.
NOTE E: RECLASSIFICATIONS
Certain amounts from the 1996 financial statements have been reclassified to
conform to the 1997 presentation.
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW:
Dakotah(R) Inc. (the "Company") designs and manufactures decorative pillows,
decorative throws, blankets, bedroom ensembles and other home accessory
products, such as footstools, chairpads and table linens. The Company's
objective has been to build a strong brand image associated with fashionable
styling and high quality products. It markets its products (primarily under the
Dakotah(R) and Polarfleece(R) names and various licensed names) to a broad range
of major retailers, including department stores, specialty retailers, mass
merchandisers and mail order houses, both domestic and international. Showrooms
for the Company's products, which support sales, are located across the country
in New York, Atlanta, Chicago, Denver and Seattle.
RESTATEMENT OF SECOND AND THIRD QUARTER 1996 FORM 10-Q'S. During the course of
the Company's 1996 annual close procedures, the Company noted that it had
inadvertently overlooked certain items during the preparation of its 1996 second
and third quarter Form 10-Q's. Upon identification of those matters, the Company
amended the respective Form 10-Q's to adjust for those items. The discussion and
analysis herein reflects these amendments.
RESULTS OF OPERATIONS:
The following table sets forth the percentage relationship to net sales of
certain items in the Company's statements of operations for the three and nine
month periods ended September 30, 1997 and 1996.
<TABLE>
<CAPTION>
Percentage of Net Sales Percentage of Net Sales
for the three month for the nine month
period ended September 30, period ended September 30,
1997 1996 1997 1996
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Gross Profit 26.5 25.0 25.7 25.4
Selling Expenses 10.9 11.6 13.6 13.3
General & Administrative 10.0 6.9 13.4 9.4
Operating Profit (Loss) 5.6 6.5 (1.4) 2.7
Interest Expense 3.1 1.5 2.9 1.5
Gain on Sale of Equipment 0.8 0.4
Earnings (Loss) Before Income Taxes 2.5 5.4 (4.3) 1.3
Net Earnings (Loss) 1.7 3.6 (2.8) 0.9
</TABLE>
NET SALES increased 1% to $26,697,000 for the nine months ended September 30,
1997 from $26,557,000 in the same period of 1996. Net sales increased 4% from
$12,592,000 in the third quarter of 1996 to $13,158,000 in the third quarter of
1997. The increase in
<PAGE>
net sales in the first nine months of 1997, as compared to the first nine months
of 1996, is due primarily to an increase in the Company's Polarfleece(R) line of
products and bedding ensembles, offset by a decrease in sales of pillows,
chairpads and table linens. The results also reflect the negative effects on
production time as a result of (1) the Company's consolidation of its primary
warehouse and shipping and receiving facility to the main Webster, SD
manufacturing facility, (2) the move of the Webster, SD pillow finishing
manufacturing equipment to the main Webster, SD manufacturing facility, (3) the
comprehensive reconfiguration of the main Webster, SD manufacturing facility,
(4) the effect of the severe winter weather in early 1997 and (5) inadequate
fabric delivery from certain suppliers which adversely effected the Company's
ability to meet delivery expectations of certain customers.
The increase in net sales for the third quarter of 1997 from the third quarter
of 1996 is the result of increased sales of the Company's Polarfleece(R) line of
products and bedding ensembles, offset by a decrease in sales of decorative
pillows, chairpads, non-fleece throws and table linens.
The trend of sales not meeting expectations beginning in the third quarter is
continuing in the fourth quarter of 1997. Unless the Company receives a
significant unexpected influx or cancellation of orders, at this time, the
Company expects fourth quarter sales to be approximately $14 million, which is
approximately $1 million less than 1996 fourth quarter sales. Management
believes that the failure to meet expectations during the fourth quarter is
primarily due to the lost momentum of certain products in July, August and early
September related to poor fabric delivery performance by significant suppliers
and lost sales at the retail level related to warmer than normal weather in
September and October. Additionally, sales are being negatively affected by the
late arrival of Polarfleece(R) Shop signs that were planned for many department
stores.
GROSS PROFIT PERCENTAGES increased from 25.4% in the first nine months of 1996
to 25.7% for the same period of 1997. During the third quarter of 1997, compared
to the same period of 1996, gross profit percentages increased to 26.5% from
25.0%. Gross profit margins increased during the first nine months of 1997 as
compared to the first nine months of 1996 as a result of an improved product mix
and overall improved labor efficiencies in 1997 resulting from the negative
effects in April, 1996, of the startup of the Redfield, SD manufacturing
facility. However, these gross profit margin improvements were adversely
effected in 1997 as compared to 1996 by the costs associated with the Company's
efforts to build capacity and infrastructure in the second half of 1996 for the
Fall selling season of 1996 and anticipated sales volume in 1997 and indirect
costs associated with the Company's move of its Webster, SD warehouse and pillow
finishing manufacturing and reconfiguration.
The improved product mix for the third quarter of 1997 was comprised of
increased volume of the Company's Polarfleece(R) line of products, improved
margins in bedding
<PAGE>
and accessories, and a decrease in lower margin products, such as chair pads and
table linens, partially offset by a decline in the volume of decorative pillow
sales.
SELLING EXPENSES grew from $3,532,000 in the first nine months of 1996 to
$3,642,000 in the first nine months of 1997. This increase of $110,000 is
primarily the result of (1) increased cost of showroom rent, supplies and
decorating of approximately $88,000, (2) increased sales support and shipping
personnel to support the planned growth of sales of approximately $155,000, (3)
a decrease in sales commissions of $146,000 resulting from changes in the
compensation structure and product mix, and (4) various other factors including
increased participation in trade shows, international marketing and lower
advertising costs. As a percentage of net sales, selling expenses increased from
13.3% in the first nine months of 1996 to 13.6% in the first nine months of 1997
as a result of higher selling expenses and consistent sales levels.
GENERAL AND ADMINISTRATIVE EXPENSES increased from $2,486,000 in the first nine
months of 1996 to $3,583,000 during the same period in 1997. The increase is
primarily due to (1) an increase in administrative, clerical, and management
staff of approximately $330,000 to support the planned growth of the Company,
the need to provide staff to accomplish the planned computer conversion and
re-engineering of the Company's processes and systems, and a growth in product
development and design personnel, (2) an increase of approximately $100,000 in
recruiting costs for senior management and staff positions, (3) increased
professional fees of approximately $95,000 primarily related to expanding
product distribution to international markets and increased accounting fees, (4)
increased computer and communication costs of approximately $135,000, primarily
to support the planned computer conversion and the increased needs of our
customers and (5) a general increase in costs relating to the Company's planned
computer conversion and planned sales in the fourth quarter of 1997. As a
percentage of net sales, general and administrative expenses increased from 9.4%
in the first nine months of 1996 to 13.4% in the first nine months of 1997 as a
result of the above mentioned increases and consistent sales levels. As stated
below, the Company announced a reduction of general and administrative positions
which is consistent with the Company's expected sales volume in the fourth
quarter and into 1998 and the expected efficiencies resulting from the planned
computer conversion in 1998.
INTEREST EXPENSE increased from $392,000 in the first nine months of 1996 to
$768,000 in the first nine months of 1997. This increase was primarily the
result of higher average borrowings to finance capital expenditures and the
buildup of inventory to support the Company's expected sales in the third and
fourth quarter of 1997.
CONSOLIDATION OF MANUFACTURING FACILITIES. The Company announced during the
fourth quarter of 1997 the consolidation of its Polarfleece(R) manufacturing in
Redfield, SD and the closing of its facility in Platte, SD, which employed
approximately 39 full time personnel and 13 temporary and part time personnel.
Despite the closing at the Platte, SD facility, the Company remains positioned
to accept and deliver on new Polarfleece(R)
<PAGE>
orders in excess of $2.5 million, new pillow orders in excess of $1.5 million
and other products in excess of $1.5 million. Management of the Company does not
believe that this consolidation will result in a material charge to the
statement of operations for the year ended December 31, 1997.
Additionally, until significant new orders are received or currently produced
finished goods and work in process inventories are depleted, the Company has
commenced termination of an estimated fifty direct labor, indirect labor and
general and administrative positions and expects to temporarily lay-off an
additional fifty to seventy employees. Management of the Company does not
believe that these actions will result in a material charge to the statement of
operations for the year ended December 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $5.8 million as of September 30, 1997 and $6.8 million as of
December 31, 1996.
Accounts receivable were approximately $9,535,000 as of September 30, 1997 and
$7,500,000 as of December 31, 1996. The increase in the first nine months of
1997 was due to higher sales over the last month of the third quarter of 1997 as
compared to the last month of the fourth quarter of 1996.
The allowance for doubtful accounts increased from $382,000 at December 31, 1996
to $432,000 at September 30, 1997. The Company estimates the allowance for
doubtful accounts based on the best information available to management. In
addition to a substantial increase in accounts receivable balances and new
customers, the Company had a number of customers go into bankruptcy during 1996
for which bankruptcy proceedings have not been concluded. Management believes
that the allowance is adequate to cover any losses as a result of these items.
The seasonality of the Company's production and sales cycle and the planned
increase of sales volume have resulted in increased working capital requirements
during 1997. In addition, the buying habits of the Company's customers indicate
a trend away from substantial advance stocking orders to smaller, more frequent
shipping orders. This trend requires the Company to carry larger levels of work
in progress and finished goods inventories than those historically maintained.
Inventories were approximately $19,644,000 as of September 30, 1997 and
$9,600,000 as of December 31, 1996. The increase in the first nine months of
1997 as compared to December 31, 1996, is primarily related to an increase of
finished goods and raw materials of Polarfleece(R) to support the Company's
planned sales in the fourth quarter of 1997. In addition, because of the lack of
expected new orders and the cancellation of
<PAGE>
existing orders, the reduction of inventory during the fourth quarter will not
be as significant as expected.
Accounts payable were approximately $4,857,000 as of September 30, 1997 and
$2,135,000 as of December 31, 1996. The increase as of September 30, 1997 as
compared to year end 1996 is primarily related to an increase in inventory.
The net cash used in operating activities during the first nine months of 1997
was primarily due to the Company's buildup of inventory to support the Company's
anticipated sales in the fourth quarter of 1997.
The net cash used in operating and investing activities during the first nine
months of 1997 was primarily provided by the Company's credit facilities and
additional long-term borrowings.
The Company has used and expects to continue using its revolving line of credit
to meet its short-term working capital requirements. During the second quarter
of 1997, the Company refinanced its credit facility. The Company also amended
its credit facility in the third quarter of 1997. The new credit facility, which
expires in June, 1999, provides adequate funding for the Company's buildup of
inventory, primarily Polarfleece(R) throws to allow the Company to maximize the
sales opportunities in the fourth quarter, optimize production capacity and
better serve its customers.
The total amount available under the revolving note, which is due on demand, is
limited to the lesser of $17,500,000 or a defined borrowing based of eligible
accounts receivable and inventory, outstanding amounts under the term note, plus
$1,000,000. Advances under the revolving note, based on inventory balances,
eligible accounts receivable, and the additional $1,000,000, provide for monthly
interest payments at 3%, 1% and 4%, respectively, above the bank's prime rate
(11.5%, 9.5% and 12.5%, respectively, at September 30, 1997). Advances under the
term note, which is due on demand and which requires monthly principal payments
of $33,333, provide for monthly interest payments at 1% above the bank's prime
rate. The outstanding balances on the revolving note and the term note were
$14,864,555 and $1,900,000 at September 30, 1997. The outstanding balances on
the previous revolving note and term note were $6,415,000 and $708,000 at
December 31, 1996. As of September 30, 1997, the Company had approximately
$730,000 available under its revolving note which was approximately $990,000
less than the calculated availability under its defined borrowing base. The
Company did not incur any borrowings against the additional $1,000,000 during
the quarter and does not expect to incur any such advances during the fourth
quarter of 1997.
For the nine month period ended September 30, 1997, the Company's capital
expenditures were $1,270,000. These capital expenditures include $503,000 to
upgrade computer hardware and refinance operating leases existing prior to the
upgrade, approximately $300,000 was used to purchase additional manufacturing
and transportation equipment, and $250,000 was used for the purchase of
additional
<PAGE>
computer network workstation hardware and software. The remaining $217,000 was
used primarily for plant and office space remodeling and expansion and the
purchase of additional transportation equipment.
The Company expects to spend an additional $250,000 for the remainder of 1997 in
conjunction with its planned computer conversion and to upgrade existing
production facilities and equipment. In addition the Company expects to complete
negotiations for the expansion of its facilities in Sisseton, SD, which will be
financed through the issuance of a long term lease purchase agreement and the
exchange of its current facility in Sisseton, SD. This transaction is not
expected to close until the second quarter of 1998 and is not expected to have a
material effect on the Company's financial statements.
Upon termination of the officers' stock appreciation program in March, 1994, the
Company became indebted to the Company's President and a former Executive Vice
President in the aggregate amount of $1,318,000. As of September 30, 1997, the
total outstanding indebtedness was $264,000 compared to $461,000 at December 31,
1996. This indebtedness bears interest at 6% per annum and is payable in varying
installments through January 1998.
The Company believes that cash flows generated from operations and funds
available as a result of its borrowing capacity will be adequate to meet its
short-term and long-term working capital, projected capital expenditures and
other financing needs.
FORWARD LOOKING STATEMENTS
Forward looking statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Investors are cautioned
that such forward looking statements involve risks and uncertainties, including,
without limitation, continued acceptance of the Company's products, cancellation
of orders, increased levels of competition for the Company, new products and
technological changes, the Company's dependence upon third party suppliers, and
intellectual property rights.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registered has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DAKOTAH, INCORPORATED
November 11, 1997 By: /s/ TROY JONES, JR.
-----------------------
Troy Jones, Jr.
Chief Executive Officer
November 11, 1997 By: /s/ WILLIAM R. RETTERATH
----------------------------
William R. Retterath
Chief Financial Officer
(Principal Financial and Accounting
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 8,538
<SECURITIES> 0
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0
0
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</TABLE>
