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11
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 27, 1998
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 of Incorporation) (I.R.S. Employer
Identification No.)
233 N. Main Street, Suite 200
Greenville, South Carolina
29601
(Address of principal executive offices)
(Zip code)
864/232-8301
(Registrant's telephone number, including area
code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which
registered
Common Stock, Par Value $.01 New York Stock
Exchange
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
None
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 by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (229.405 of this chapter)
is not contained herein, and will not be contained, to be best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-
K or any amendment to this Form 10-K [ ].
The aggregate market value of the common equity held by non-
affiliates of the registrant as of September 15, 1998 was :
Common Stock, $.01 par value - $51,738,989
The number of shares outstanding of each of the registrant's
classes of Common Stock, as of September 15, 1998 was:
Common Stock, par value $.01 - 24,657,850
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Company's
Annual Report to shareholders for the fiscal year ended June 27,
1998 are incorporated by reference into Parts I and II.
Portions of the Company's definitive Proxy Statement to be filed
pursuant to Regulation 14A for the annual shareholders' meeting
to be held on November 24, 1998 are incorporated by reference
into Part III.
Item I Business
General
Delta Woodside Industries, Inc. ("Delta Woodside" or the
"Company") is a South Carolina corporation with its principal
executive offices located at 233 North Main Street, Suite 200,
Greenville, South Carolina 29601 (telephone number: 864-232-
8301). All references herein to Delta Woodside or the Company
refer to Delta Woodside Industries, Inc. and its subsidiaries.
In the third quarter of fiscal year 1998, the Company has
adopted the segment reporting provisions of Financial Accounting
Standard 131. This standard requires the Company to report
segment information for divisions whose operating results are
regularly reviewed by the chief operating officer. The Company
has three segments in continuing operations: Delta Mills
Marketing Company, Duck Head Apparel Company and Delta Apparel
Company.
During fiscal 1998 the Company made the decision to exit the
knit textile market by closing its Stevcoknit Fabrics Company
operating division. The company also made the decision to exit
the fitness equipment business and is seeking a buyer for its
Nautilus International business. Stevcoknit Fabrics Company and
Nautilus International have been reclassified and reported as
discontinued operations.
Delta Mills Marketing Company produces a range of cotton,
synthetic and blended finished and unfinished woven products
which are sold for the ultimate production of apparel, home
furnishings, and other products. Duck Head Apparel produces
woven and knit apparel, including the "Duck Head" (Reg.
Trademark) line of casualwear marketed primarily in the
Southeastern United States to department stores and specialty
apparel retailers. The Company also operates 28 retail apparel
outlet stores that sell primarily closeout and irregular "Duck
Head" products. Delta Apparel manufactures and sells T-shirts,
fleece goods and sportswear to distributors, screen printers and
private label accounts. The Company has operations in 13 states,
Costa Rica and Honduras, and has approximately 6,000 employees.
Delta Woodside Industries, Inc. is the successor by merger
to Delta Woodside Industries, Inc., a Delaware corporation that
was incorporated in 1986 and whose subsidiaries' businesses were
acquired beginning in 1984. The corporation that is now Delta
Woodside Industries, Inc. was incorporated in 1972.
Products, Marketing and Manufacturing
The Company produces woven textile fabrics through its Delta
Mills Marketing Company operating division. It conducts its
branded and non-branded apparel operations through the "Duck
Head" and "Delta Apparel" (Reg. Trademarks) divisions
respectively. The Company also licenses the use of the "Duck
Head" trademark. Each division has its own management and
employees and operates independently of the other divisions under
the overall direction of the Company's executive officers.
Intersegment sales accounted for no more than approximately 2% of
net sales in any segment for fiscal 1998, 1997, and 1996.
Item I (Continued)
Textile fabrics produced for sale, by the Company, are
woven and are manufactured from cotton, wool or synthetic fibers
or from synthetic filament yarns. Knit fabrics are manufactured
by the Company, using cotton and polyester cotton blend yarns for
use in its knit apparel operations. Cotton and wool are
purchased from numerous suppliers. Synthetic fibers and
synthetic filament yarns are purchased from a smaller number of
competitive suppliers. The Company spins the major portion of
the spun yarns used in its weaving and knitting operations. In
manufacturing these yarns, the cotton and synthetic fibers,
either separately or in blends, are carded (fibers straightened
and oriented) and then spun into yarn. The Company combs
(removing short fibers) some cotton fiber to make high quality
yarns. In other fabrics, filament yarns are used. The spun or
filament yarn is then woven into fabric on looms or knitted into
fabric on knitting machines. The unfinished fabric at this stage
is referred to as greige goods. Greige goods are typically sold
to converters to enhance the fabric through finishing techniques
and sell it to manfacturers of apparel, home furnishings and
other products. Finished fabric refers to fabric that has been
treated by washing, bleaching, dyeing and applying certain
chemical finishes. Finished apparel fabric is ready to be cut and
sewn into garments. Finished fabrics generally have
significantly higher margins than greige goods.
The Company sells its woven fabrics primarily to numerous
apparel manufacturers and apparel resellers. Apparel products
are sold primarily to department stores and specialty retailers
under the Company's "Duck Head" label, to private label apparel
resellers, and to distributors and screen printers.
Delta Mills Marketing Segment
The Company sells a broad range of fabrics primarily to
branded apparel manufacturers and resellers, including Levi
Strauss, Haggar Corp., the Wranglerr and Leer divisions of V.F.
Corporation, Farah Incorporated, Kellwood Company, Liz Claiborne,
Inc. and private label apparel manufacturers for J.C. Penney
Company, Inc., Sears Roebuck & Company, Wal-Mart Stores, Inc.,
and other retailers. The Company believes that it is a leading
producer of cotton pants-weight woven fabric used in the
manufacture of casual slacks such as Levi Strauss' Dockersr and
Haggar Corp.'s Wrinkle-Freer. Other apparel items manufactured
with the Company's woven fabrics include women's chinos pants,
women's blazers, career apparel (uniforms) and battle dress
camouflage military uniforms. Net sales of woven fabrics were
$342 million, $336 million, and $294 million during fiscal 1998,
1997, and 1996 respectively.
Delta Mills Marketing Company has focused its marketing
efforts on building close relationships with major apparel
companies that have broad distribution channels and that the
Company believes have positioned themselves for long term growth.
The division's marketing efforts focus on four primary apparel
manufacturing groups: women's apparel, including fashion apparel;
men's apparel; career apparel and uniforms; and military and
other government uniforms and apparel. The woven fabrics
division sells and distributes its fabrics through a marketing
office based in New York City (which serves the United States,
Canadian and Mexican markets),
Item I (Continued)
with sales agents also operating from Atlanta, Chicago, Dallas,
Los Angeles, San Francisco and Mexico.
Approximately 70% of the division's fabric sales are made from
cotton or cotton/synthetic blends, while approximately 30% of
such sales are made from spun synthetics and other natural
fibers, including various blends of rayon, polyester and wool.
Woven fabrics are generally produced and shipped pursuant to
specific purchase orders, which minimizes the Company's
uncommitted inventory levels. The divisions production of cotton
and cotton/synthetic blend finished woven fabrics is largely
vertically integrated, with the division performing most of its
own spinning, weaving and finishing. The production of spun
synthetic finished woven fabrics is fully vertically integrated,
with various plants in the division performing spinning,
weaving, and finishing operations. In the production of military
fabrics, the Company purchases a portion of its greige goods
needs and finishes this fabric to specifications. The woven
fabrics division is currently operating its manufacturing
facilities at near full capacity.
The division also produces a variety of unfinished light-
weight woven fabrics that are ultimately used in the manufacture
of apparel (including blouses, dresses and suit linings), home
furnishings (including shower curtains) and medical tape.
Fabrics include filament acetate, textured polyester and other
"semi-fancy" fabrics of more complicated construction. The
unfinished woven fabrics operation is operating at less than full
capacity.
Raw Materials
Delta Mills Marketing Company's principle raw material is
cotton, although it also spins polyester, wool, linen fiber,
acrylic, nylon and rayon fibers and weaves filament acetate and
textured polyester. Polyester is obtained primarily from three
major suppliers, all of whom provide competitive prices.
Polyester and rayon are currently at the lowest prices the
Company has paid since fiscal year 1993. There can be no
assurance, however, that this trend will continue. During fiscal
year 1998, the Company's average price per pound of cotton
purchased and consumed (including freight, carrying cost and cost
for the relatively high amount of premium cotton the Company
uses) was $.817, compared to $.833 in fiscal year 1997 and as
compared to $.944 in fiscal year 1996. In fiscal year 1999 the
company expects to use approximately 98 million pounds of cotton
(including approximately 28 million pounds of premium cotton)
and 12 million pounds of polyester in its manufacture of yarn
for woven textiles. The company has contracted to purchase about
64% of its expected cotton requirements for fiscal year 1999.
The percentage of the Company's cotton requirements that the
Company fixes each year varies depending upon the Company's
forecast of future cotton prices. The Company believes that
recent cotton prices have enabled it to contract for cotton at
prices that will permit it to be competitive with other companies
in the United States textile industry when the cotton purchased
for future use is put into production. To the extent that cotton
prices decrease before the Company uses these future purchases,
the Company could be materially and adversely affected as there
can be no assurance that it would be able to pass along these
increased cost to its customers.
Item I (Continued)
Duck Head Apparel Segment
Duck Head produces collections of men's and boy's casual
apparel sold under the "Duck Head" label, including pants,
shorts, shirts, and accessories. This division also sells a
relatively
small amount of men's and boy's woven uniforms, sportswear and
casualwear under the private labels of its customers. The
division also licenses various other categories of apparel and
accessories, through an affiliated company.
"Duck Head" labeled products are primarily marketed by
employed sales staff to regional and national retailers. The
"Duck Head" trademark has been associated with apparel since 1865
and has been historically distributed in the Southeastern United
States. The Company acquired the brand in February 1989. The
Company has recently capitalized on the rise in popularity of the
brand and expanded its marketing efforts in department stores.
The division opened its first in-store Duck Head shop in April
1997 and now has installed over 500 men's and 200 boy's shops in
major department stores. The "shop" display format of the entire
Duck Headline utilizes dedicated retail floor space in the
sportswear department positioned with other national brands.
Gross sales of "Duck Head" labeled products were approximately
$92 million, $90 million, and $79 million during fiscal 1998,
1997, and 1996, respectively.
"Duck Head" Apparel operates a total of 3 facilities located
in Georgia and Costa Rica. The division purchases the fabrics
used in its products from a number of producers. "Duck Head"
currently acquires a substantial amount of its finished products
from other companies throughout the world. This outside
production takes the form of sewing fabric parts cut at "Duck
Head" facilities, cutting and sewing with fabric and patterns
supplied by "Duck Head", or providing finished garments made to
"Duck Head" specifications. The division maintains a staff of
quality specialists who consistently monitor work in process at
outside companies. The Company believes that there is ample
capacity among outside contractors worldwide to meet its future
production requirements. All of the products are warehoused in
the division's facilities.
"Duck Head" labeled apparel items are generally required to
be inventoried to permit quick shipment and to level production
schedules. Customer private label apparel items are generally
made only to order. The division's products are manufactured
primarily from 100% cotton. The division's marketing office is
based in Winder, Georgia with regional sales managers and sales
personnel located throughout the country.
The "Duck Head division has 29 outlet stores located in 13
states that sell principally closeout and irregular "Duck Head"
products. These stores also sell a small amount of apparel items
manufactured by Duck Head licensees.
Item I (Continued)
Delta Apparel Segment
Delta Apparel Company, headquartered in Duluth, Georgia,
operates a total of 7 facilities and produces knitted T-shirts,
polo-type shirts and sweatshirts. The division markets its
products primarily to companies that screen print shirts for
resale and to distributors. Net sales in this division were $108
million, $112 million and $123 million during fiscal 1998, 1997,
and 1996, respectively.
The division's marketing is performed by employed sales
personnel located throughout the country. Sales personnel call
directly on the retail trade, contacting department stores,
distributors, screen printing companies and the mass marketers
such as discount houses. This operation also utilizes
independent sales representatives to sell to distributors and
screen printing companies. Most knit apparel items are
inventoried to permit quick shipment and to level production
schedules. Special knit apparel items and customer private label
knit apparel styles generally are made only to order.
The division spins the majority of its yarn at the Company's
modern facility in Edgefield , South Carolina, with the remainder
being purchased from outside vendors. The division knits, dyes,
finishes, and cuts fabric in a company owned plant in Maiden,
North Carolina and sews garments in company owned plants in
Tennessee, Georgia and Honduras. The division also uses outside
sewing contractors when demand exceeds internal production
capacities. Fabrics used by the division are primarily 100%
cotton and polyester/cotton blends.
Competition
The cyclical nature of the textile and apparel industries,
characterized by rapid shifts in fashion, consumer demand and
competitive pressures, results in both price and demand
volatility. The demand for any particular product varies from
time to time based largely upon changes in consumer preferences
and general economic conditions affecting the textile and apparel
industries, such as consumer expenditures for non-durable goods.
The textile and apparel industries are also cyclical because the
supply of particular products changes as competitors enter or
leave the market.
The Company sells textiles primarily to domestic apparel
manufacturers, many of which operate offshore sewing operations.
The Company competes with numerous domestic and foreign
manufacturers, including companies larger in size and having
greater financial resources than the Company. The principal
competitive factors are price, service, delivery time, quality
and flexibility, with the relative importance of each factor
depending upon the needs of particular customers and the specific
product offering.
Delta Mills Marketing Company's competitive position varies
by product line. There are several major domestic competitors in
the finished cotton and cotton/polyester
Item I (Continued)
blend woven fabrics business, none of which dominates the market.
The Company believes, however, that it has a strong competitive
position in the all cotton pants-weight fabrics business, as well
as the spun synthetic slack-weight and skirt-weight woven fabrics
businesses. In addition, the Company is one of several major
domestic suppliers of acetate unfinished fabric used in apparel
linings and surgical tapes. Additional competitive strengths of
the woven fabrics division include: knowledge of its customers'
business needs; its ability to produce special fabrics such as
textured blends; state of the art spinning, weaving and fabric
finishing equipment at most of its facilities; substantial
vertical integration; and its ability to communicate
electronically with its customers.
Foreign competition is a significant factor in the United
States fabric market. The division believes that its relatively
small manual labor component, highly-automated manufacturing
processes and domestic manufacturing base allow the division to
compete on a price basis and to respond more quickly than foreign
producers to changing fashion trends and to its domestic
customers' delivery schedules. In addition, the division
benefits from protections afforded to apparel manufacturers based
in certain Latin American and Caribbean countries that ship
finished garments into the United States. NAFTA has effectively
eliminated or substantially reduced tariffs on goods imported
from Mexico if such goods are made from fabric originating in
Canada, Mexico, or the United States. Section 807 provides for
the duty free treatment of United States origin components used
in the assembly of imported articles. The result is that duty is
assessed only on the value of any foreign components that may be
present and the labor cost incurred offshore in the assembly of
apparel using United States origin fabric components. Because
Section 807 creates an incentive to use fabric manufactured in
the United States, it is beneficial to the division and other
domestic producers of apparel fabrics. In addition, pursuant to
Section 807A, apparel articles assembled in a Caribbean country,
in which all fabric components have been wholly formed and cut in
the United States, are subject to preferential quotas with
respect to access into the United States for such qualifying
apparel, in addition to the significant tariff reduction pursuant
to Section 807. A similar program, enacted as a result of NAFTA
and referred to as the Special Regime Program, provides even
greater benefits (complete duty free, quota free treatment) for
apparel assembled in Mexico from fabric components formed and cut
in the United States. In contrast, apparel not meeting the
criteria of Section 807, Section 807A, or the Special Regime
Program, is subject to quotas and/or relatively higher tariffs.
If Section 807, Section 807A or the Special Regime Program were
repealed or altered in whole or in part, the Company believes
that it could be at a serious competitive disadvantage relative
to textile manufacturers in other parts of the world seeking to
enter the United States market, which would have a material
adverse effect on the division. Moreover, there can be no
assurance that the current favorable regulatory environment will
continue or that other geographic areas will not be afforded
similar regulatory advantages.
Item I (Continued)
Duck Head Apparel Company competes with numerous domestic
and foreign manufacturers of branded and private label apparel.
Foreign competition has been an increasingly significant factor
in the apparel manufacturing industry, particularly with respect
to items that require labor-intensive production, such as shirts
and jackets, and high cost luxury items. Although domestic
apparel companies must compete to some extent on a price basis
with foreign competition, the Company's management believes that
domestic apparel companies can best compete by selling branded
products, by manufacturing off-shore, by offering product
flexibility, by responding quickly to changes in consumer demand
and by providing more timely deliveries. The latter
characteristics permit retailers to reduce their inventory cost
and lower the risk that product availability will not match
consumer demand. The division is oriented towards supplying its
customers with all or some of these competitive advantages.
Delta Apparel Company competes with a number of domestic
branded and private label manufacturers of T-shirts, Fleece
products, and Placket shirts. Many of these companies are larger
in size and have greater financial resources than the Company.
The division also competes with imported garments to a lesser
extent. The division, along with all of its major competition,
makes use of Section 807 and Section 807A of the tariff code
and/or NAFTA and assembles a substantial amount of its garment
production in certain Latin American or Caribbean countries and
Mexico. If Section 807 or Section 807A or any similar program
were repealed or altered in whole or in part, the division
believes it would be at a serious competitive disadvantage
relative to textile and apparel manufactures in the rest of the
world seeking to enter the United States market, which would have
a material and adverse effect on the division. Moreover, there
can be no assurance that the current favorable regulatory
environment will continue or that other geographic areas will not
be afforded similar regulatory advantages.
Employees
The Company has approximately 6,000 employees. The
Company's employees are not represented by unions. The Company
believes that its relations with its employees are good.
Environmental and Regulatory Matters
Delta Woodside is subject to various federal, state and
local environmental laws and regulations concerning, among other
things, wastewater discharges, storm water flows, air emissions,
ozone depletion and solid waste disposal. Delta Woodside's
plants generate very small quantities of hazardous waste which
are either recycled or disposed of off-site. Most of its plants
are required to possess one or more discharge permits.
The information contained under the subheading
"Environmental Matters" under the heading "Management's
Discussion and Analysis of Results of Operations and Financial
Condition" incorporated into item 7 of this form 10-K is
incorporated herein for reference.
Item I (Continued)
Generally, the environmental rules applicable to the company
are becoming increasingly stringent. The Company incurs capital
and other expenditures in each year that are aimed at achieving
compliance with current and future environmental standards.
The Company does not expect that the amount of such
expenditures in the future will have a material adverse effect on
its operations or financial condition. There can be no
assurance,
however, that future changes in federal, state, or local
regulations, interpretations of existing regulations or the
discovery of currently unknown problems or conditions will not
require substantial additional expenditures. Similarly, the
extent of Delta Woodside's liability, if any, for past failures
to comply with laws, regulations and permits applicable to its
operations cannot be determined.
Industry Segment Information
Segment information made part of Note G of the Company's
consolidated financial statements for the fiscal year ended June
27, 1998 is incorporated herein by reference.
Other
Information concerning order backlogs in "Management's
Discussion and Analysis of Results of Operations and Financial
Condition, Consolidated Company Results, Fiscal 1997, Verses
Fiscal 1997" incorporated into Item 7 of this Form 10K is
incorporated herein by reference.
Item 2. PROPERTIES
The following table provides a description of Delta
Woodside's principal production and warehouse facilities.
Approximate
Square
Location Utilization
Footage Owned/Leased
Delta Mills Marketing Company
Greenville, SC Admin. Offices17,400 Leased
(1)
Beattie Plant, Fountain Inn, SC spin/weave 390,000 (2)
Furman Plant, Fountain Inn, SC weave 155,000 (2)
Estes Plant, Piedmont, SC spin/weave 332,000 (2)
Delta 3 Plant, Wallace, SC dye/finish 555,000 (2)
Cypress Plant, Pamplico, SC spin 144,000 (2)
Pamplico Plant, Pamplico, SC spin/weave 275,000 (2)
Delta 2 Plant, Wallace, SC dye/finish 347,000 (2)
Catawba Plant, Maiden, NC spin 115,000
Owned
Delta Apparel Company
Duluth, GA
Admin. Offices 40,244 Leased
Rainsford Plant, Edgefield, SC spin
296,000 Owned(6)
Maiden Plant, Maiden, NCknit/dye/finish/cut 305,000 Owned
Washington Plant, Washington, GA sew 129,800 Owned
Distribution Center, Knoxville, TN distribution 550,000 Owned
Decatur Plant, Decatur, TN sew 75,000 Owned(4)
Honduras Plant, San Pedro Sula,
Honduras sew70,000 Leased(3)
Duck Head Apparel Company
Monroe #3, Monroe, GA cut 52,000 Owned
Monroe #2, Monroe, GA pressing 93,000 Owned
Harmony Plant, San Jose, Costa Rica sew 14,000 Owned
San Jose Plant, San Jose, Costa Rica sew 60,000 Leased(3)
316 Distribution Center, Winder, GAadmin offices and
warehouse200,000
Owned
Various (5) stores
Discontinued Operations
Independence, VA manufacturing
251,000 Owned
Greer, SC Admin. Offices
12,000 Owned
Carter Plant, Wallace, NC dye/finish 485,000
Owned
Holly Plant, Wallace, NC knit/finish 224,000 Owned
Item 2. PROPERTIES
(1) Lease expires in December 1998 with the right to renew for
two additional five-year periods.
(2) Titles to these facilities and substantially all of the
equipment located in such facilities are held by three South
Carolina counties under a fee-in-lieu-of-taxes arrangement,
which has the effect of substantially reducing the Company's
property taxes in South Carolina. Although the Company can
reacquire such property at a nominal price, this would
currently cause a significant increase in the amount of
property taxes paid by the Company.
(3) The Honduras plant has a lease that expires in November
2000. The San Jose plant is leased on a month-to-month
basis.
(4) The "Duck Head " Outlet Stores lease a portion of the
facility for retail sales.
(5) The "Duck Head" Outlet Stores operation leases 29
facilities in 13 states, which leased
space is approximately 142,000 square feet. These leases
expire at various dates through
2006.
(6) The Rainsford Plant is owned by Delta Mills, Inc. The plant
is managed by Delta Apparel Company.
Except as noted above all of the above facilities are owned
by Delta Woodside or one of its subsidiaries, subject in certain
cases to various outstanding mortgages and security interests.
Delta Woodside leases corporate offices in Greenville, South
Carolina. The lease on the corporate offices expires September
1, 2003. Sales offices are leased in or near Charlotte, New York,
Chicago, Newport Beach, San Francisco, Dallas and Los Angeles
with leases expiring through December 2004.
At the date of execution of this Form 10-K, the Company
believes that its weaving plants are operating near full
production capacity. Various factors affect the relative use by
the Company's apparel division segment of their own facilities
and outside contractors in the various apparel production phases.
The apparel divisions are currently using the majority of their
internal production capacity. The fitness equipment operation is
operating at approximately 35% of its production capacity.
The Company believes that its equipment and facilities are
generally adequate to allow it to remain competitive with its
principal competitors.
The Company's accounts receivable and inventory, and certain
other intangible property (including the capital stock of the
Company's major United States subsidiaries), secure the Company's
credit facility or the credit facility of the Company's indirect
wholly owned subsidiary, Delta Mills, Inc.
Item 3. LEGAL PROCEEDINGS
From time to time the Company and its subsidiaries are
defendants in legal actions involving claims arising in the
normal course of its business, including product liability
claims. The Company believes that, as a result of its legal
defenses, insurance arrangements and indemnification provisions
with financially capable parties, none of these actions is
reasonably likely to have a material adverse effect on its
results of operations or financial condition taken as a whole.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
No matter was submitted to a vote of security holders during
the fourth quarter of the Company's 1998 fiscal year.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The material under the heading "Common Stock Market Prices
and Dividends" on the inside front cover of the Company's annual
shareholders' report for the year ended June 27, 1998 is
incorporated herein by reference.
The following table shows the issuances by the Company
during fiscal 1997 of its shares of common stock that were not
registered under the Securities Act of 1933, as amended, and were
not previously reported by the Company in a Form 10-Q.
Amount of Class of Nature of
Date of Issuance Common Stock Persons Transaction
February 19, 1998 50 Employees Service Awards
April 30, 1998 450 Employees Service Awards
May 21, 1998 100 Employees Service Awards
June 26, 1998 150 Employees Service Awards
July 13, 1998 175 Employees Service Awards
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 6. SELECTED FINANCIAL DATA
The material under the heading "Selected Financial Data" on
page 1 of the Company's annual shareholders' report for the year
ended June 27, 1998 is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The material under the heading "Management's Discussion and
Analysis of Results of Operations and Financial Condition" on
pages 4 through 9 (exclusive of graphs) of the Company's annual
shareholders' report for the year ended June 27, 1998 is
incorporated herein by reference.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
As a part of Delta Woodside's business of converting fiber
to finished fabric, the Company makes raw cotton purchase
commitments and then fixes prices with cotton merchants who buy
from producers and sell to textile manufacturers. Daily price
fluctuations are minimal, yet long-term trends in price movement
can result in unfavorable pricing of cotton for the Company.
Before fixing prices, the Company looks at supply and demand
fundamentals, recent price trends and other factors that affect
cotton prices. The Company also reviews the backlog of orders
from customers as well as the level of fixed price cotton
commitments in the industry in general.
Carrying Amount Fair Value
(In thousands)
Cotton in inventory $2,443 $2,456
Fiscal year 1999 fixed price
purchase commitments $48,288 $51,437
Fiscal year 2000 fixed price
purchase commitments $ 7,345 $ 7,441
Interest Rate Sensitivity
The following debt obligations are sensitive to changes in
interest rates:
$150 million of unsecured ten year senior notes due
2007 at a fixed rate of 9.625%.
$100 million of secured five-year revolving credit
facility expiring 2002 with interest of 7.4% at June
27, 1998. Interest is based on LIBOR.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements included on pages 14
through 20 of the Company's annual shareholders' report for the
year ended June 27, 1998 are incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is incorporated herein
by reference from the portions of the definitive Proxy Statement
to be filed with the Securities and Exchange Commission on or
prior to 120 days following the end of the Company's fiscal year
under the headings "Election of Directors" ,"Executive Officers"
and "Section 16 (a) Beneficial Ownership Reporting Compliance".
Item 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein
by reference from the portions of the definitive Proxy Statement
to be filed with the Securities and Exchange Commission on or
prior to 120 days following the end of the Company's fiscal year
under the headings "Management Compensation" and "Compensation
Committee Interlocks and Insider Participation".
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein
by reference from the portion of the definitive Proxy Statement
to be filed with the Securities and Exchange Commission on or
prior to 120 days following the end of the Company's fiscal year
under the heading "Stock Ownership of Principal Shareholders and
Management".
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein
by reference from the portion of the definitive Proxy Statement
to be filed with the Securities and Exchange Commission on or
prior to 120 days following the end of the Company's fiscal year
under the heading "Related Party Transactions".
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) (1) and (2) Financial Statements and
Financial Statement Schedules
The response to this portion of Item 14 is set
forth on page F-2 included herein, which response is
incorporated herein by reference.
(3) Listing of Exhibits:*
3.1 Articles of Incorporation of the
Company, as amended through February 5, 1989:
Incorporated by reference to Exhibit 3.1 to the
Registration Statement on Form S-4 of RSI
Corporation and Porter Brothers, Inc., File No. 33-
30247 (the "Form S-4").
3.1.1 Articles of Amendment to Articles of
Incorporation of the Company: Incorporated by
reference to Exhibit 3.1.2 to the Form S-4.
3.1.2 Articles of Merger of Harper Brothers,
Inc. into RSI Corporation: Incorporated by
reference to Exhibit 4.1.1 to the Registration
Statement of the Company on Form S-8, File No. 33-
33116 (the "1990 Form S-8").
3.1.3 Articles of Merger of Delta Woodside
Industries, Inc., a Delaware corporation, into RSI
Corporation: Incorporated by reference to Exhibit
4.1.2 to the 1990 Form S-8.
3.1.4 Articles of Merger of Duncan Office
Supplies, Inc., into Delta Woodside Industries,
Inc.: Incorporated by reference to Exhibit 3.1 to
the Company's Form 10-Q for the quarterly period
ended December 29, 1990 (the "December 1990 10-
Q").
3.1.5 Articles of Amendment to the Articles of
Incorporation of Delta Woodside Industries, Inc.,
filed with the South Carolina Secretary of State
on November 15, 1991: Incorporated by reference
to Exhibit 4.6 to the Form 10-Q of the Company for
the quarterly period ended December 28, 1991.
3.2 By-laws of the Company, as amended:
Incorporated by reference to Exhibit 3.1.1 to the
Form S-4.
Item 14 (Continued)
3.2.1 Amendments to By-laws of the Company:
Incorporated by reference to Exhibit 3.2 to the
December 1990 10-Q.
3.2.2 Amendment to By-laws of the Company,
adopted as of June 29, 1992: Incorporated by
reference to Exhibit 3.2.2 to the Company's Form
10-K for the fiscal year ended June 27, 1992 (the
"1992 10-K").
4.1 See Exhibits 3.1, 3.1.1, 3.1.2, 3.1.3,
3.1.4, 3.1.5, 3.2, 3.2.1. and 3.2.2.
4.1.1 Specimen of Certificate for the
Company's Common Stock: Incorporated by reference
to Exhibit 4.7 to the Company's Registration
Statement on Form S-3, File No. 33-42710 (the
"Form S-3").
4.2 Amended and Restated Credit Agreement
dated as of March 15, 1996 among Delta Woodside
Industries, Inc., the Lenders named therein, and
NationsBank, N.A. as Agent (with exhibits and
schedules omitted) together with forms of
Promissory Notes,
Subsidiary Guaranty, Borrower Security
Agreement, Subsidiaries Security Agreement and
certain other documents: Incorporated by
reference to Exhibit 4.4 to the Form 10-Q of the
Company for the quarterly period ended March 30,
1996. The Company agrees to furnish
supplementally to the Securities and Exchange
Commission a copy of any omitted schedules or
exhibits to such agreement upon request of the
Commission.
4.2.1 Amendment and Waiver Agreement dated as
of May 20, 1996, by and among Delta Woodside
Industries, Inc., the guarantors identified on the
signature pages attached thereto and the lenders
and agents thereto: Incorporated by reference to
Exhibit 4.4.1 to the Form 8-K of the Company with
date of May 28, 1996 (the "May 1996 8-K"). The
Company agrees to furnish supplementally to the
Securities and Exchange Commission a copy of any
omitted schedules or exhibits to such agreement
upon request of the Commission.
4.2.2 Pledge Agreement dated as of May 20,
1996 by and among Delta Woodside Industries, Inc.,
the guarantors from time to time party thereto and
NationsBank, N.A., in its capacity as agent for
the lenders from time to time party to the Credit
Agreement described therein: Incorporated by
reference to Exhibit 4.4.2 to the May 1996 8-K.
The Company agrees to furnish supplementally to
the Securities and Exchange Commission a copy of
any omitted schedules or exhibits to such
agreement upon request of the Commission.
Item 14 (Continued)
4.2.3 Second Amendment and Waiver Agreement dated
as of December 20, 1996, among Delta Woodside
Industries, Inc., the guarantors identified as such on
the signature pages attached, the lenders and agents,
together with forms of certain real estate lien documents:
Incorporated by reference to Exhibit to the Form 10-Q
of the Company for the quarterly period ended
December 28, 1996. The Company agrees to furnish
supplementally to the Securities and Exchange Commission a
copy of any omitted schedules or exhibits to such agreement upon
request of the Commission.
4.2.4 Credit Agreement dated as of August 25, 1997
among Delta Mills, Inc., as Borrower, certain
subsidiaries of the Borrower from time to time party
thereto, as guarantors, the several lenders from time to time
party thereto, NationsBank, N.A., as Administrative Agent, and
BNY Financial Corporation, as Collateral Agent,
together with forms of certain related instruments,
agreements and documents (excluding schedules):
Incorporated by reference to Exhibit 4.2.4 to Form 8-K/A of the
Company with date of September 25, 1997. The Company
agrees to furnish supplementally to the
Securities and Exchange Commission a copy of any
omitted schedules to such agreement upon request of the
Commission.
4.2.4.1 Amendment and Waiver Agreement dated as of May 11,
1998 respecting Credit Agreement dated as of
Agreement dated as of August 25, 1997:
Incorporated by reference to the Form 10-Q of the
Company for the quarter ended March 28, 1998.
4.2.4.2 Second Amendment to Credit
Agreement dated as of July 29, 1998 respecting
Credit Agreement dated as of August 25, 1997.
4.2.5 Credit Agreement dated as of
August 25, 1997 among Delta Woodside Industries,
Inc., as Borrower, certain subsidiaries of the Borrower from
time to time party thereto, as guarantors, the several Lenders
from time to time party thereto and NationsBank,
N. A. as Agent , together with forms of certain
related instruments, agreements and documents (excluding
schedules): Incorporated by reference to Exhibit 4.2.5 to Form 8-
K/A of the Company with date of September 25, 1997.
The Company agrees to furnish supplementally to
the Securities and Exchange Commission a copy of any
omitted schedules to such agreement upon request of the
Commission.
4.2.6 Indenture, dated as of August 25, 1997 with
respect to Delta Mills, Inc.$150,000,000 Series A
and Series B 9 5/8% Senior Notes due 2007, with
The Bank of New York, as Trustee, together with
forms of certain related instruments, agreements
and documents: Incorporated by reference to
Exhibit 4.2.6 to Form 8-K/A of the Company with
date of September 25, 1997.
Item 14 (Continued)
4.3 The Company hereby agrees to furnish to
the Commission upon request of the Commission a
copy of any instrument with respect to long-term
debt not being registered in a principal amount
less than 10% of the total assets of the Company
and its subsidiaries on a consolidated basis.
10.1 Lease, dated December 27, 1987 by and
between Hammond Square, Ltd. and the Company:
Incorporated by reference to Exhibit 10.10 to
Registration Statement No. 33-22563 on Form S-4 of
Delta Woodside Industries, Inc., a Delaware
corporation ("Registration Statement No. 33-
22563").
10.2** Delta Woodside Deferred Compensation
Plan for Key Employees: Incorporated by reference
to Exhibit 10.6 to the Form 10-Q of the Company
for the quarterly period ended December 30, 1989.
10.3** Incentive Stock Award Plan effective
July 1, 1990: Incorporated by reference to
Exhibit 10.1 to the Form 10-Q of the Company for
the fiscal quarter ended March 31, 1990.
10.3.1** 1995 Amendment to the Incentive Stock Award
Plan effective as of November 9, 1995:
Incorporated by reference to Exhibit 10.3.1 to the
Form 10-Q of the Company for the quarterly period
ended December 30, 1995 (the "December 1995 10-
Q").
10.3.2** 1997 Amendment to Incentive Stock Award Plan
effective as of November 6, 1997: Incorporated by
reference to exhibit 99.1 to Registration
Statement on Form S-8 of Delta Woodside
Industries, Inc. (File No. 333-45771)
10.4.1** Stock Option Plan effective as of July 1,
1990: Incorporated by reference to Exhibit 10.11
to the Company's Form 10-K for the fiscal year
ended June 30, 1990.
10.4.2** Amendment No. 1 to Stock Option Plan:
Incorporated by reference to Exhibit 10.1 to the
December 1990 10-Q.
10.4.3** Amendment to Stock Option Plan: Incorporated
by reference to Exhibit 10.9.2 to the Company's
Form 10-K for the fiscal year ended June 29, 1991
(the "1991 10-K").
10.4.4** 1995 Amendment to the Stock Option Plan
effective as of November 9, 1995: Incorporated by
reference to Exhibit 10.4.4 to the December 1995
10-Q.
Item 14 (Continued)
10.4.5** 1997 Amendment to Stock Option Plan effective
as of November 6, 1997: Incorporated by reference
to Exhibit 99.1 to Registration Statement on Form
S-8 of Delta Woodside Industries, Inc. (File No.
333-4567).
10.5 Stock Transfer Restrictions and Right of
First Refusal Agreement between the Company and E.
Erwin Maddrey, II: Incorporated by reference to
Exhibit 10.2 to the December 1990 10-Q.
10.6 Stock Transfer Restrictions and Right of
First Refusal Agreement between the Company and
Bettis C. Rainsford: Incorporated by reference to
Exhibit 10.3 to the December 1990 10-Q.
10.7** Summary of Delta Woodside Industries,
Inc., Director Charitable Giving Program:
Incorporated by reference to Exhibit 10.11 to the
1992 10-K.
10.7.1** Resolution to amend Directors' Charitable
Giving Program dated February 2, 1995:
Incorporated by reference to Exhibit 10.7.1 to the
March 1995 10-Q.
10.8.1** Directors Stock Acquisition Plan:
Incorporated by reference to Exhibit 10.14 to the
1991 10-K.
10.8.2** Amendment of Director Stock Acquisition Plan,
dated April 30, 1992: Incorporated by reference
to Exhibit 10.12.2 to the 1992 10-K.
10.9** Delta Woodside Industries, Inc. Long
Term Incentive Plan: Incorporated by reference to
Exhibit 10.2 to Registration Statement on Form S-4
of Delta Mills, Inc. (File No. 333-37617).
10.11 Registration Rights Agreement, dated as
of August 25, 1997, by and among Delta Mills,
Inc., Delta Mills Marketing, Inc. and NationsBanc
Capital Markets, Inc.: Incorporated by reference
to Exhibit 1.2 to Registration Statement on Form S-
4 of Delta Mills, Inc. (File No. 333-376-17).
10.12 Purchase Agreement relating to $150
million 9 5/8% Senior Notes due 2007, dated August
20, 1997, by and among Delta Mills, Inc., Delta
Mills Marketing, Inc. and NationsBanc Capital
Markets, Inc.: Incorporated by reference to
Exhibit 1.1 to Registration Statement on Form S-4
of Delta Mills, Inc. (File No. 333-376-17).
10.13 See Exhibits 4.2, 4.2.1, 4.2.2, 4.2.3,
4.2.4, 4.2.4.1, 4.2.4.2, 4.2.5, and 4.2.6.
Item 14 (Continued)
13 Annual Report to Shareholders of the
Company for the fiscal year ended June 27, 1998.
21 Subsidiaries of the Company.
23.1 Report on Schedule and Independent
Auditors' Consent.
* All reports previously filed by the Company
with the Commission pursuant to the Exchange Act,
and the rules and regulations promulgated
thereunder, exhibits of which are incorporated to this
Report by reference thereto, were filed under
Commission File Number 1-10095.
** This is a management contract or
compensatory plan or arrangement.
(b) Reports on Form 8-K
No report on Form 8-K was filed during the quarter
ended June 27, 1998.
(c) Exhibits
The response to this portion of Item 14 is
submitted as a separate section of this report.
(d) Financial Statement Schedules
The response to this portion of Item 14 is
submitted as a separate section of this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
/s/ E. Erwin
Maddrey, II
Date E. Erwin Maddrey, II
President, Chief Executive
Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
/s/ C. C. Guy /s/ E. Erwin
Maddrey
C. C. Guy Date E.
Erwin Maddrey, II Date
Director President, Chief
Executive Officer
and Director
/s/ James F. Kane /s/ Bettis
C. Rainsford
James F. Kane Date Bettis C.
Rainsford Date
Director Executive Vice President,
Chief Financial Officer,
Treasurer
and Director
/s/ Max Lennon /s/ Robert W. Humphreys
Max Lennon Date Robert W.
Humphreys Date
Director Vice President - Finance
/s/ Buck A. Mickel
Buck A. Mickel Date
Director
EXHIBIT INDEX
4.2.4.2 Second Amendment to Credit Agreement
13 Annual Report to Shareholders of the Company for the fiscal
year ended June 27, 1998.
21 Subsidiaries of the Company.
23.1 Report on Schedule and Independent Auditor's
Consent.
ANNUAL REPORT ON FORM 10-K
ITEM 14(a) (1) and (2), (c) and (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED JUNE 27, 1998
DELTA WOODSIDE INDUSTRIES, INC.
GREENVILLE, SOUTH CAROLINA
F-1
FORM 10-K--ITEM 14(a)(1) AND (2)
DELTA WOODSIDE INDUSTRIES, INC.
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of Delta Woodside
Industries, Inc. and subsidiaries included in the Annual Report of the
Registrant to its shareholders for the Year ended June 27, 1998 are
incorporated by reference in Item 8:
Consolidated balance sheets- June 27, 1998 and June 28, 1997
Consolidated statements of operations--Years ended June 27, 1998,
June 28, 1997 and June 29, 1996.
Consolidated statements of shareholders' equity--Years ended June
27, 1998, June 28, 1997 and June 29, 1996.
Consolidated statements of cash flows--Years ended June 27, 1998,
June 28, 1997 and June 29, 1996.
Notes to consolidated financial statements.
The following consolidated financial statement schedule of Delta
Woodside Industries, Inc. is included in Item 14(d):
Schedule II -- Valuation and qualifying accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable, and
therefore have been omitted. Columns omitted from schedules filed
have been omitted because the information is not applicable.
F-2
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
DELTA WOODSIDE INDUSTRIES, INC.
COL. A COL. B COL. C COL. D COL. E
ADDITIONS
Balance at
DESCRIPTION Beginning (1) (2) Deductions Balance at End
of Period Charged to Costs Charged to Other Describe of Period
and Expenses Accounts-Describe
Deducted from asset accounts
Allowance for doubtful accounts:
Year ended June 27, 1998 $ 5,358,000 $ 2,771,000 $ (333,000)(2) $ 1,379,000(1) $ 6,417,000
Year ended June 28, 1997 $ 6,258,000 $ 1,215,000 $ (171,000)(2) $ 1,944,000(1) $ 5,358,000
Year ended June 29, 1996 $ 5,634,000 $ 2,577,000 $ 695,000(2) $ 2,648,000(1) $ 6,258,000
Inventory reserves:
Year ended June 27, 1998 $24,464,000 $14,904,000(3) $ 9,560,000
Year Ended June 28, 1997 $40,879,000 $16,415,000(3) $24,464,000
Year ended June 29, 1996 $14,052,000 $ 26,827,000 $40,879,000
NOTES:
(1) Uncollectible accounts written off.
(2) Net change in sales allowances charged to income as a reduction of sales.
(3) Deducted from costs and expenses.