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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 July 1, 2000
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
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DELTA WOODSIDE INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
South Carolina 57-0535180
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(State of Incorporation) (I.R.S. Employer Identification No.)
100 Augusta Street
Greenville, South Carolina 29601
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(Address of principal executive offices) (Zip code)
864/255-4100
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(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
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Common Stock, Par Value $.01 New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
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None
1
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
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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 the 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 20, 2000 was :
Common Stock, $.01 par value - $25,577,265
The number of shares outstanding of each of the registrant's classes of Common
Stock, as of September 20, 2000 was:
Common Stock, par value $.01 - 24,156,625
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Company's Annual Report to
shareholders for the fiscal year ended July 1, 2000 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 7,
2000 are incorporated by reference into Part III.
2
Item I Business
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The following discussion contains various "forward-looking statements".
All statements, other than statements of historical fact, that address
activities, events or developments that the Company expects or anticipates will
or may occur in the future are forward-looking statements. Examples are
statements that concern future revenues, future costs, future capital
expenditures, business strategy, competitive strengths, competitive weaknesses,
goals, plans, references to future success or difficulties and other similar
information. The words "estimate", "project", "forecast", "anticipate",
"expect", "intend", "believe" and similar expressions, and discussions of
strategy or intentions, are intended to identify forward-looking statements.
The forward-looking statements in this document are based on the Company's
expectations and are necessarily dependent upon assumptions, estimates and data
that the Company believes are reasonable and accurate but may be incorrect,
incomplete or imprecise. Forward-looking statements are also subject to a
number of business risks and uncertainties, any of which could cause actual
results to differ materially from those set forth in or implied by the
forward-looking statements. Accordingly, any forward-looking statements do not
purport to be predictions of future events or circumstances and may not be
realized.
The Company does not undertake publicly to update or revise the
forward-looking statements even if it becomes clear that any projected results
will not be realized.
GENERAL
Delta Woodside Industries, Inc. ("Delta Woodside" or the "Company") is a
South Carolina corporation with its principal executive offices located at 100
Augusta Street, Greenville, South Carolina 29601 (telephone number:
864-255-4100). All references herein to Delta Woodside or the Company refer to
Delta Woodside Industries, Inc. and its subsidiaries.
Until June 30, 2000, the Company had two apparel businesses and a textile
fabrics business. One of the apparel businesses was conducted by the Company's
Delta Apparel Company division, a vertically integrated supplier of knit
apparel, particularly T-shirts, sportswear and fleece goods. The other apparel
business was conducted by the Company's Duck Head Apparel Company division,
which designed, sourced, produced, marketed and distributed boys' and men's
value-oriented casual sportswear. The textile fabrics business was conducted by
the Company's Delta Mills Marketing Company division, which engages in the
manufacture and sale of a broad range of finished apparel fabrics primarily to
branded apparel manufacturers and resellers and private label apparel
manufacturers.
During fiscal 2000, the Company's board of directors determined that it was
in the best interest of the Company and its shareholders to separate the three
businesses into three independent companies. In May of 2000, the Company
internally reorganized its business operations such that (i) all of the assets
and operations of the Delta Apparel Company division were transferred to a
newly-formed direct subsidiary of the Company named Delta Apparel, Inc.
3
("Delta Apparel") or to a subsidiary of Delta Apparel,(ii) all of the assets and
operations of the Duck Head Apparel Company division were transferred to another
newly-formed direct subsidiary of the Company named Duck Head Apparel Company,
Inc. ("Duck Head") or to a subsidiary of Duck Head, and (iii) the Company's
subsidiary Delta Mills, Inc., which includes all of the assets and operations of
the Delta Mills Marketing Company division, became a direct subsidiary of the
Company.
On June 30, 2000, the Company simultaneously spun-off Delta Apparel and
Duck Head. All of the outstanding common stock of Delta Apparel and all of the
outstanding common stock of Duck Head were distributed to the shareholders of
the Company pro rata based on their record ownership on June 19, 2000 of the
Company's common stock.
The description of the Distribution Agreement and the Tax Sharing Agreement
related to the spin-offs that is contained in the portion of the Company's
definitive proxy statement incorporated by reference into Part III of this Form
10-K under the heading "Related Party Transactions - Relationships or
Transactions With Delta Apparel and Duck Head - Agreements Between the Company,
Delta Apparel and Duck Head" is incorporated herein by reference.
In connection with the spin-offs, E. Erwin Maddrey, II resigned as
President and Chief Executive Officer of the Company (though he remains a
director of the Company), Jane H. Greer resigned as Vice President and Secretary
of the Company, David R. Palmer resigned as Controller of the Company and Brenda
L. Jones resigned as Assistant Secretary of the Company.
During fiscal 1998 the Company made the decision to exit the knit textile
market by closing its Stevcoknit Fabrics Company operating division. Also
during fiscal 1998 the Company made the decision to exit the fitness equipment
(Nautilus International) business. Delta Apparel, Duck Head Apparel, Stevcoknit
Fabrics Company and Nautilus International have been classified and reported as
discontinued operations. Most of the liquidation of Stevcoknit Fabrics Company
was completed in fiscal 1998. The Nautilus International business was sold in
January 1999.
Delta Woodside Industries, Inc. is the successor by merger to Delta
Woodside Industries, Inc., a Delaware corporation that was incorporated in 1986.
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
(formally named the Delta Mills Marketing Co.) operating division. With the
classification of the Duck Head Apparel Company division and the Delta Apparel
Company division as discontinued operations, Delta Mills is the only business
segment of the Company.
Woven textile fabrics produced for sale by the Company are manufactured
from cotton, wool or synthetic fibers or from synthetic filament yarns. 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
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.
4
In other fabrics, filament yarns are used. The spun or filament yarn is then
woven into fabric on looms. The unfinished fabric at this stage is referred to
as greige goods. Finished fabric refers to fabric that has been treated by
washing, bleaching, dyeing and applying certain chemical finishes.
The Company sells a broad range of finished apparel fabrics primarily to
branded apparel manufacturers and resellers, including The Gap, Levi Strauss,
Haggar Corp., the Wrangler and Lee divisions of V.F. Corporation, Farah
Incorporated, Kellwood Company and Liz Claiborne, Inc., and private label
apparel manufacturers for J.C. Penney Company, Inc., Sears Roebuck & Co.,
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' Dockers and Haggar Corp.'s Wrinkle-Free .
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 $249
million, $314 million, and $343 million during fiscal 2000, 1999, and 1998
respectively. The Company had three customers, Levi Strauss, Haggar Corp. and
V.F. Corporation, that each exceeded 10% of consolidated net sales. The
Company's sales to these customers were $109 million, $150 million, and $136
million for fiscal 2000, 1999, and 1998 respectively. The loss of any of these
accounts could have a material adverse effect on the results of the Company.
The 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 Company sells and distributes its fabrics through a marketing office based
in New York City (which serves the United States, Canadian and Mexican markets),
with sales agents also operating from Atlanta, Chicago, Dallas, Los Angeles, San
Francisco and Mexico.
During fiscal years 2000, 1999and 1998, approximately 83%, 78% and 70%,
respectively, of the Company's finished woven fabric sales are of fabrics made
from cotton or cotton/synthetic blends, while approximately 17%, 22% and 30%,
respectively, of such sales are of fabrics 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 Company's
production of cotton and cotton/synthetic blend and spun synthetic finished
woven fabrics is largely vertically integrated, with the Company performing most
of its own spinning, weaving and finishing. In the production of military
fabrics, the Company purchases a portion of its greige goods needs and finishes
this fabric to specifications. The Company's woven finished fabrics plants are
currently operating at less than full capacity.
During fiscal year 2000 the Company also produced a variety of unfinished
light-weight woven fabrics that were sold to converters of finished products.
Due to import pressure, the unfinished fabrics business was discontinued and
replaced with more profitable product lines. This move away from the unfinished
fabric production was completed in the first half of fiscal 2000.
5
RAW MATERIALS
The Company's principal raw material is cotton, although it also spins
polyester, wool, linen fiber, acrylic, lyocell, nylon and rayon fibers and
weaves textured polyester filament. Polyester is obtained primarily from three
major suppliers, all of whom provide competitive prices. Cotton is acquired
from several suppliers. 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 $.661 in fiscal
year 2000 as compared to $.770 in fiscal year 1999, and as compared to $.817 in
fiscal year 1998. As of July 1, 2000 the Company had contracted to purchase
about 85% and had fixed the price for approximately 67% of its expected cotton
requirements for fiscal year 2001. 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 its higher costs to its customers. In
addition, to the extent that cotton prices increase and the Company has not
provided for its requirements with fixed price contracts, the Company may be
materially and adversely affected as there can be no assurance that it would be
able to pass along these increased costs to its customers.
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 primarily to domestic apparel manufacturers, many of
which operate offshore sewing operations. The Company competes with numerous
domestic and foreign fabric manufacturers, including companies larger in size
and having greater financial resources than the Company. The principal
competitive factors in the woven fabrics markets 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. Management believes that the Company maintains its ability to compete
effectively by providing its customers with a broad array of high-quality
fabrics at competitive prices on a timely basis.
The Company's competitive position varies by product line. There are
several major domestic competitors in the finished cotton and cotton/polyester
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. In addition, the Company believes it is one of
only two finishers successful in printing camouflage for sale to apparel
suppliers of the U.S. Government and the only supplier that is vertically
integrated for camouflage production. Additional competitive strengths of the
Company 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.
6
Foreign competition is a significant factor in the United States fabric
market. The Company believes that its relatively small manual labor component,
highly-automated manufacturing processes and domestic manufacturing base allow
the Company 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 Company 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 Company
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, except as may
result under the Trade and Development Act of 2000, as noted below. 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 Company. 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.
The Trade and Development Act of 2000 (often referred to as the "CBI Parity
Bill") will become effective on October 1, 2000. The Company believes that the
provisions of the CBI Parity Bill will have the following effects most relevant
to its business:
-Apparel assembled in most Caribbean nations from fabric formed and
cut in the United States of U.S. yarn can enter the United States
duty-free;
-Apparel cut and sewn in most Caribbean nations from fabric formed in
the United States of U.S. yarn can enter the United States duty-free
so long as it is sewn with U.S. manufactured thread; and
-Certain limits of apparel made from fabric formed in certain
Caribbean nations of U.S. yarn and cut and sewn in those nations can
enter the United States duty-free.
7
Apparel entering the United States under any of these three provisions will not
be subject to any quotas that may exist for that specific category of goods.
The Company believes that the CBI Parity Bill will give it a competitive
advantage relative to fabric manufacturers outside of the United States.
Subsequent repeal or adverse alteration of the CBI Parity Bill could put the
Company at a serious competitive disadvantage relative to such manufacturers.
The World Trade Organization (which this document refers to as the "WTO"), a new
multilateral trade organization, was formed in January 1995 and is the successor
to the General Agreement on Tariffs and Trade. This new multilateral trade
organization has set forth mechanisms by which world trade in clothing is being
progressively liberalized by phasing-out quotas and reducing duties over a
period of time that began in January of 1995. As it implements the WTO
mechanisms, the U.S. government is negotiating bilateral trade agreements with
developing countries (which are generally exporters of textile and apparel
products) that are members of the WTO to get them to reduce their tariffs on
imports of textiles and apparel in exchange for reductions by the United States
in tariffs on imports of textiles and apparel. The elimination of quotas and
the reduction of tariffs under the WTO may result in increased imports of
certain textile and apparel products into North America. These factors could
make the Company's products less competitive against low cost imports from
developing countries.
EMPLOYEES
The Company has approximately 2,200 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 by reference.
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.
8
The Company's previously owned Nautilus business has been named as a
"potentially responsible party" ("PRP") under the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA") with respect to three
hazardous waste sites in North Carolina, South Carolina and Mississippi. To the
Company's knowledge, all of the transactions with these sites were conducted by
a corporation (the "Selling Corporation") whose assets were sold in 1990
pursuant to the terms of an order of the United States Bankruptcy Court to
another corporation, the stock of which was subsequently acquired by the Company
in January 1993.
At the North Carolina site, the Selling Corporation is listed as a "de
Minimis" party, and at the South Carolina site, the Selling Corporation has been
listed as an "insolvent" party and would appear to qualify as a "de Minimis"
party. The Company believes that the Selling Corporation's share of the
liabilities at either of these sites will be immaterial. At the Mississippi
site, the PRP group has completed the surface removal action and is
investigating soil and groundwater contamination, both at the site and in the
surrounding area. The Company's latest information is that the Selling
Corporation is ranked eleventh out of a total of over 300 PRPs in contributions
of material to the site, and, based on volume, the Selling Corporation
contributed approximately 3% of the site's material. To the Company's
knowledge, latest estimates of costs to clean up the site range up to $4
million. Trichloromethane, one of the substances delivered by the Selling
Corporation to the site, has been found in the site's groundwater and at nearby
drinking water wells.
Although no assurance can be provided, the Company believes that it is shielded
from liability at these three sites by the order of the United States Bankruptcy
Court pursuant to which the Selling Corporation sold its assets to the
corporation subsequently acquired by the Company. The Company has denied any
responsibility at these three sites, has declined to participate as a member of
the respective PRP groups, and has not provided for any reserves for costs or
liabilities attributable to the Selling Corporation.
INDUSTRY SEGMENT INFORMATION
With the classification of the Duck Head Apparel Company division and the Delta
Apparel Company division as discontinued operations, Delta Mills is the only
business segment of the Company.
OTHER
Information concerning order backlogs in "Management's Discussion and
Analysis of Results of Operations and Financial Condition, Results of
Operations, Fiscal 2000 Versus Fiscal 1999" incorporated into Item 7 of this
Form 10-K is incorporated herein by reference.
Item 2. PROPERTIES
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The following table provides a description of Delta Woodside's principal
facilities.
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Approximate
Square
Location Utilization Footage Owned/Leased
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Greenville, SC Admin. Offices 17,400 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)
PAMPLICO/CYPRESS PLANT, PAMPLICO, SC SPIN/WEAVE 419,000 (2)
DELTA 2 PLANT, WALLACE, SC DYE/FINISH 347,000 (2)
CATAWBA PLANT, MAIDEN, NC SPIN 115,000 OWNED
(1) Lease expires in December 2003 with the right to renew for an additional
five-year period.
(2) The title to these facilities and substantially all of the equipment
located in these facilities is 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.
Except as noted above, all of the above facilities are owned by the
Company's Delta Mills, Inc. subsidiary, subject in certain cases to various
outstanding 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 New York, Chicago, Newport Beach, San Francisco, Dallas and
Los Angeles under leases expiring through December 2004.
At the date of execution of this Form 10-K, the Company believes that its
plants are operating at less than full 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 Delta Mills, Inc. and its
subsidiary) secure the credit facility of the Company's wholly owned subsidiary,
Delta Mills, Inc.
10
Item 3. LEGAL PROCEEDINGS
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On January 10, 2000, the North Carolina Department of Environment and
Natural Resources requested that Delta Mills, Inc., a subsidiary of the
Company, accept responsibility for investigating the discharge of hazardous
substances at an inactive hazardous waste site known as the Glen Raven
Mills Site, Kings Mountain, North Carolina (the "Site"). A predecessor by
merger of Delta Mills, Inc., Park Yarn Mills Company, Inc. ("Park Yarn"),
owned the Site for approximately six (6) years, from approximately 1977 to
1983 (prior to the time Delta Mills, Inc. became a subsidiary of Delta
Woodside Industries, Inc.) Delta Mills, Inc. is aware of no evidence that
Park Yarn discharged or deposited any hazardous substance at the Site or is
otherwise a "responsible party" for the Site. Further, Park Yarn filed
bankruptcy and was discharged in 1983. Although no assurance can be
provided, any liability of Park Yarn for the Site may have been discharged
by the bankruptcy order. Accordingly, Delta Mills, Inc. has denied any
responsibility at the Site, has declined to undertake any activities
concerning the Site, and had not provided for any reserves for costs or
liabilities attributable to Park Yarn.
On January 13, 2000, Marion Mills, LLC, a supplier to the Delta Mills, Inc.
subsidiary of the Company, brought an action against Delta Mills, Inc. in
North Carolina Superior Court in McDowell County, North Carolina. Delta
Mills, Inc. removed the case to federal court in the Western District of
North Carolina, Asheville Division, where it is currently pending.
Plaintiff seeks actual damages in excess of $1.8 million and consequential
and incidental damages in excess of $7.4 million. The actual damages claim
is based on an alleged failure by Delta Mills, Inc. to pay in excess of
$1.8 million of invoice amounts. The consequential and incidental damages
claim is based on the allegation that Delta Mills, Inc's. failure to pay
caused Marion Mills, LLC to shut down its business. The Company's position
is that Delta Mills, Inc. paid some of the invoices claimed to be unpaid
and did not pay the other invoices because of defects in the goods supplied
by the plaintiff (which were returned per the plaintiff's authorization).
The Company and Delta Mills, Inc. therefore deny and are vigorously
contesting the claims.
All other litigation to which the Company is a party is ordinary routine
product liability litigation or contract breach litigation incident to its
business that does not depart from the normal kind of such actions. The
Company believes that none of these actions, if adversely decided, would
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
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No matter was submitted to a vote of security holders during the fourth
quarter of the Company's 2000 fiscal year.
11
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
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RELATED STOCKHOLDER MATTERS
-----------------------------
The material under the heading "Common Stock Market Prices and Dividends"
on the inside back cover of the Company's annual shareholders' report for the
year ended July 1, 2000 is incorporated herein by reference.
During fiscal 2000, the Company issued no 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.
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 July 1, 2000 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 5 through 11 of the
Company's annual shareholders' report for the year ended July 1, 2000 is
incorporated herein by reference.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
- ---------------------------------------------------------------------
RISK
----
The material under the subheading , "Quantitative and Qualitative
Disclosures About Market Risk" under the heading "Management's Discussion and
Analysis of Results of Operations and Financial Condition" on page 10 of the
Company's annual shareholders' report for the year ended July 1, 2000 is
incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------------------------------------------------------------
The consolidated financial statements included on pages 13 through 16 of
the Company's annual shareholders' report for the year ended July 1, 2000 are
incorporated herein by reference.
12
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ---------------------------------------------------------------------------
FINANCIAL DISCLOSURE
----------------------
Not applicable.
13
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".
Effective September 14, 2000 Bettis C. Rainsford resigned as a director of
The Company.
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".
14
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:*
---------------------
2.1 Distribution Agreement by and among Delta Woodside Industries, Inc,
DH Apparel Company, Inc. (now named Duck Head Apparel
Company, Inc.) and Delta Apparel, Inc. (excluding schedules and
exhibits): Incorporated by reference to Exhibit 2.1 to the Form 10/A
of Delta Apparel, Inc. (File No. 1-15583).
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.
15
3.2 Amended and Restated Bylaws of the Company adopted December 9,
1999: Incorporated by reference to Exhibit 3.1 to the Company's
Current Report on Form 8-K with date of December 9, 1999 and filed
with the Securities and Exchange Commission on December 16, 1999.
4.1 See Exhibits 3.1, 3.1.1, 3.1.2, 3.1.3, 3.1.4, 3.1.5 and 3.2.
4.2 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").
4.3.1 Revolving Credit and Security Agreement, dated as of March 31,
2000, between GMAC Commercial Credit LLC as agent and lender,
and Delta Mills, Inc. as borrower: Incorporated by reference to
Exhibit 99.1 to the Company's Current Report on Form 8-K dated
March 31, 2000 and filed with the Securities and Exchange
Commission on April 13, 2000
4.3.1.1 Letter, dated July 28, 2000, amending Revolving Credit and Security
Agreement.
4.3.2 Guarantee, dated as of March 31, 2000, of Delta Mills Marketing, Inc.
in favor of GMAC Commercial Credit LLC as agent: Incorporated by
reference to Exhibit 99.2 to the Company's Current Report on Form 8-
K dated March 31, 2000 and filed with the Securities and Exchange
Commission on April 13, 2000.
4.3.3 General Security Agreement, dated as of March 31, 2000, between
Delta Mills Marketing, Inc. and GMAC Commercial Credit LLC as
agent: Incorporated by reference to Exhibit 99.3 to the Company's
Current Report on Form 8-K dated March 31, 2000 and filed with the
Securities and Exchange Commission on April 13, 2000.
4.3.4 Stock Pledge and Security Agreement, dated as of March 31, 2000, by
Alchem Capital Corporation in favor of GMAC Commercial Credit
LLC as agent: Incorporated by reference to Exhibit 99.4 to the
Company's Current Report on Form 8-K dated March 31, 2000 and
filed with the Securities and Exchange Commission on April 13, 2000.
4.3.5 Stock Pledge and Security Agreement, dated as of March 31, 2000, by
Delta Mills, Inc. in favor of GMAC Commercial Credit LLC as agent:
Incorporated by reference to Exhibit 99.5 to the Company's Current
Report on Form 8-K dated March 31, 2000 and filed with the
Securities and Exchange Commission on April 13, 2000
16
4.3.6 Stock Pledge and Security Agreement, dated as of May 11, 2000, by
Delta Woodside Industries, Inc. in favor of GMAC Commercial Credit
LLC as agent.
4.4 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.
4.5 Rights Agreement, dated as of December 10, 1999, between the
Company and First Union National Bank, which includes, as Exhibit
A, the Form of Rights Certificate and, as Exhibit B, the Summary of
Rights to Purchase Common Stock: Incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K with date
of December 9, 1999 and filed with the Securities and Exchange
Commission on December 16, 1999.
4.5.1 Amendment No. 1 to Shareholders Rights Agreement, dated as of
March 15, 2000, between the Company and First Union National
Bank: Incorporated by reference to the Company's Current Report on
Form 8-K dated March 15, 2000 and filed with the Securities and
Exchange Commission on April 3, 2000.
4.6 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 September 1, 1998 and between Hammond Square, Ltd.
and the Company: Incorporated by reference to exhibit 10.1 to the
Company's Form 10-K for the fiscal year ended July 3, 1999.
10.1.1 Letter terminating lease between 233 N. Main, Inc. (formerly named
Hammond Square, Ltd.) and the Company.
10.2** Delta Woodside Deferred Compensation Plan for Key Managers,
Amended and Restated Effective June 30, 2000.
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
17
10.3.2** 1997 Amendment to Incentive Stock Award Plan effective as of
November 6, 1997: Incorporated b
10.4.1** Stock Option Plan effective as of July 1, 1990: Incorporated by
reference to Exhibit 10.11 to
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 referenc
10.4.5** 1997 Amendment to Stock Option Plan effective as of November 6,
1997: Incorporated by reference to
10.4.6** Amendment to Stock Option Plan adopted April 25, 2000:
Incorporated by reference to Exhibit 10.4.6 to the Company's Form
10-Q for the fiscal quarter ended April 1, 2000.
10.4.7** Amendments to Stock Option Plan.
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.
10.5.1 Termination of Stock Transfer Restrictions and Right of First Refusal
Agreement with E. Erwin Maddrey, II, dat
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.
10.6.1 Termination of Stock Transfer Restrictions and Right of First Refusal
Agreement with Bettis C. Rainsford, dated June 14, 2000.
18
10.7** Form of Amendment of Certain Rights and Benefits Relating to Stock
Options and Deferred Compensation by and between the Company
and certain pre-spin-off Delta Woodside Industries, Inc, plan
participants.
10.7.1 List of directors and officers of the Company who signed the
document described in Exhibit 10.7.
10.7.2** Form of Amendment of Stock Options by and between Delta
Woodside Industries, Inc. and certain pre-spin-off plan participants.
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).
10.9.1** Amendments of Delta Woodside Industries, Inc. Long Term Incentive
Plan.
10.9.2** Form of Agreement Respecting Delta Woodside Industries, Inc. Long
Term Incentive Plan, dated in June, 2000.
10.10** 2000 Stock Option Plan of Delta Woodside Industries, Inc.
10.11** 2000 Incentive Stock Award Plan of Delta Woodside Industries, Inc.
10.12** Letter dated December 14, 1998 to Robert W. Humphreys:
Incorporated by reference to Exhibit 10.10 to the form 10-Q/A of the
Company for the quarterly period ended December 26, 1998 (the
"December 1998 10-Q").
10.12.1** Letter dated April 22, 1999 to Robert W. Humphreys: Incorporated by
reference to exhibit 10.12.1 to the Companys Form 10-K for the fiscal
year ended July 3, 1999.
10.13** Letter dated December 14, 1998 to Jane H. Greer: Incorporated by
reference to Exhibit 10.11 to the December 1998 10-Q.
10.14** Letter dated June 28,2000 to William F. Garrett
10.15** Election and Release Form for the Severance Plan for Salaried
Employees of Delta Woodside Industries, Inc., and its Adopting
Subsidiaries with Bettis C. Rainsford
19
10.16 Letter terminating lease with Bettis C. Rainsford.
10.17 Tax Sharing Agreement, dated as of June 30, 2000, by and among
Delta Woodside Industries, Inc., Duck Head Apparel
Company, Inc. and Delta Apparel, Inc.: Incorporated by
reference to Exhibit 2.2 to the Report on Form 8-K of the
Company with date of June 30, 2000.
10.18 See Exhibits 4.3.1, 4.3.1.1, 4.3.2, 4.3.3, 4.3.4, 4.3.5, 4.3.6
and 4.4.
13 Annual Report to Shareholders of the Company for the fiscal year
ended July 1, 2000.
21 Subsidiaries of the Company.
23.1 Report on Schedules and Independent Auditors' Consent for the years
ended July 1, 2000, July 3, 1999 and June 27,1998.
* All reports previously filed by the Company with the Commission
pursuant to the Exchange Act, and the rules and
** This is a management contract or compensatory plan or arrangement.
The registrant agrees to furnish supplementally to the Securities and
Exchange Commission a copy of any omitted schedule or exhibit to any of the
above filed exhibits upon request of the Commission.
(b) Reports on Form 8-K
----------------------
The Company filed a Form 8-K with date of May 25, 2000. Items reported
were:
Item 5. Other events
Item 7. Financial statements and exhibits
The Company filed a Form 8-K with date of June 8, 2000. Items reported
were:
Item 5. Other events
Item 7. Financial statements and exhibits
20
(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.
21
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.
(Registrant)
September 28, 2000 By: /s/ William F. Garrett
- ---------------------------------- ------------------------------
Date William F. Garrett
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 9/25/2000 /s/ William F. Garrett 9/28/2000
- ------------------------------- -------------------------------------
C. C. Guy Date William F. Garrett Date
Director President, Chief Executive Officer
and Director
/s/ James F. Kane 9/28/2000 /s/ William H. Hardman, Jr 9/25/2000
- ------------------------------- -------------------------------------
James F. Kane Date William H. Hardman, Jr. Date
Director Vice President, Treasurer and Chief
Financial Officer
/s/ Max Lennon 9/27/2000 /s/ Donald C. Walker 9/25/2000
- ------------------------------- -------------------------------------
Max Lennon Date Donald C. Walker Date
Director Controller
/s/ E. Erwin Maddrey 9/28/2000
- -------------------------------
E. Erwin Maddrey, II Date
Director
/s/ Buck A. Mickel 9/27/2000
- -------------------------------
Buck A. Mickel Date
Director
22
EXHIBIT INDEX
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 JULY 1, 2000
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 July 1, 2000 are incorporated by reference in
Item 8:
Consolidated balance sheets- July 1, 2000 and July 3, 1999.
Consolidated statements of operations--Years ended July 1, 2000, July 3,
1999 and June 27, 1998.
Consolidated statements of shareholders' equity--Years ended July 1, 2000,
July 3, 1999 and June 27, 1998.
Consolidated statements of cash flows--Years ended July 1, 2000, July 3,
1999 and June 27, 1998.
Notes to consolidated financial statements.
The following consolidated financial statement schedules of Delta Woodside
Industries, Inc. are included in Item 14(d):
Schedule I - Condensed Financial Information of Registrant
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
(in thousands)
CONDENSED BALANCE SHEETS
Delta Woodside Industries, Inc.
July 1, 2000 July 3, 1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,098 $ 3,519
--------------- --------------
Accounts receivable 227 49
Less allowances for doubtful accounts and returns 0 10
--------------- --------------
227 39
Deferred income taxes 2,068
Prepaid expenses and other current assets 4,867 595
--------------- --------------
TOTAL CURRENT ASSETS 8,260 4,153
PROPERTY, PLANT AND EQUIPMENT, at cost 1,342 1,341
Less accumulated depreciation 1,310 1,209
--------------- --------------
32 132
INVESTMENT IN SUBSIDIARIES 47,815 74,202
ADVANCES TO/(FROM) SUBSIDIARIES 14,862 73,696
DEFERRED INCOME TAXES 12,963
OTHER ASSETS 1,237 2,872
--------------- --------------
TOTAL ASSETS $ 85,169 $ 155,055
--------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term bank debt $ 0 $ 1,678
Accounts payable and accrued liabilities 3,952 17,265
Deferred income taxes 0 584
--------------- --------------
TOTAL CURRENT LIABILITIES 3,952 19,527
DEFERRED INCOME TAXES 0 941
OTHER LIABILITIES AND DEFERRED CREDITS 312 607
SHAREHOLDERS' EQUITY
Preferred Stock 0 0
Common Stock -- par value $.01 a share -- authorized
50,000,000 shares, issued and outstanding 23,999,000 shares
(2000) and 23,792,000 shares (1999) 240 238
Additional paid-in capital 86,145 160,863
Retained earnings (deficit) (5,480) (27,121)
--------------- --------------
80,905 133,980
COMMITMENTS AND CONTINGENCIES
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY $ 85,169 $ 155,055
See notes to condensed financial statements.
CONDENSED STATEMENTS OF OPERATIONS (in thousands)
Delta Woodside Industries, Inc.
Year Ended
July 1, 2000 July 3, 1999 June 27, 1998
Net sales $ 0 $ 728 $ 1,138
Cost of goods sold 8 761 1,075
--------------- -------------- ---------------
Gross profit (loss) (8) (33) 63
Selling, general and administrative (expenses) (7,704) (2,977) (552)
Equity in income (loss) of subsidiaries 15,654 (46,140) (41,085)
Other income (expense) 29 18 107
--------------- -------------- ---------------
OPERATING PROFIT (LOSS) 7,971 (49,132) (41,467)
Interest (expense) income:
Interest expense (476) (1,430) (5,218)
Interest income 6,637 10,011 19,234
--------------- -------------- ---------------
6,161 8,581 14,016
INCOME (LOSS) BEFORE INCOME TAXES 14,132 (40,551) (27,451)
Income tax expense (benefit) (7,509) (1,156) 16,300
--------------- -------------- ---------------
NET INCOME (LOSS) 21,641 (39,395) (43,751)
Basic and diluted earnings (loss) per share $ 0.91 ($1.63) ($1.78)
Weighted average number
of shares outstanding 23,651 24,149 24,575
=============== ============== ===============
See notes to condensed financial statements.
CONDENSED STATEMENTS OF CASH FLOWS (in thousands)
Delta Woodside Industries, Inc.
Year Ended
July 1, 2000 July 3, 1999 June 27, 1998
OPERATING ACTIVITIES
Net income (loss) $ 21,641 ($39,395) ($43,751)
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in net (income) loss of subsidiaries (15,654) 46,140 41,085
Provision for deferred income taxes (16,556) 1,208 (428)
Other 1,392 204 168
Changes in operating assets and liabilities 2,384 (435) 14,927
--------------- -------------- ---------------
NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES (6,793) 7,722 12,001
INVESTING ACTIVITIES
Dividends received from subsidiaries 0 7,500 8,000
NET CASH PROVIDED BY INVESTING ACTIVITIES 0 7,500 8,000
FINANCING ACTIVITIES
Proceeds (repayments) from revolving lines of credit ($1,678) ($9,430) ($214,392)
Net advances from subsidiaries 7,375 2,094 197,008
Dividends paid 0 (2,419) (2,460)
Repurchase common stock (1,030) (4,520)
Other (295) 747 411
--------------- -------------- ---------------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES 4,372 (13,528) (19,433)
--------------- -------------- ---------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (2,421) 1,694 568
Cash and cash equivalents at beginning of year 3,519 1,825 1,257
--------------- -------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,098 $ 3,519 $ 1,825
=============== ============== ===============
See notes to condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Delta Woodside Industries, Inc.
The accompanying financial statements of Delta Woodside Industries, Inc. should
be read in conjunction with the consolidated financial statements of Delta
Woodside Industries and its consolidated subsidiaries.
BASIS OF PRESENTATION: Delta Woodside Industries Inc. is the top parent of
subsidiaries which are engaged in the manufacture, sale and distribution of
textile products. Through June 30, 2000, Delta Woodside was also the top parent
of subsidiaries which were engaged in the manufacture, sale and distribution of
apparel products. On June 30, 2000, Delta Woodside spun-off to its current
shareholders, as separate public companies, its Delta Apparel and Duck Head
subsidiaries. These spin-off transactions followed a subsidiary restructuring
which involved, among other things, contributions of advances to subsidiaries to
the capital of the subsidiaries, the transfer of certain tax attributes, and the
merger of the Alchem Capital Corporation subsidiary into Delta Woodside. Since
these were non-cash transactions, amounts presented in the Condensed Statements
of Cash Flows are net of the changes resulting from these transactions. Delta
Woodside's investments in its subsidiaries are reported in these condensed
financial statements using the equity method of accounting.
LONG TERM DEBT: A subsidiary of Delta Woodside has unsecured senior notes and a
bank credit facility outstanding. See Note D to Consolidated Financial
Statements and "Management's Discussion and Analysis of Results of Operations
and Financial Condition - Liquidity and Sources of Capital". The senior notes
and the credit facility contain restrictions which, among other things, limit
the subsidiary from paying cash dividends to Delta Woodside. Generally, with
certain exceptions, dividends and certain other restricted payments are limited
to $12.5 million plus 50% of cumulative net income of the subsidiary from the
beginning of fiscal 1998. Additionally, dividends and other restricted payments
are not permitted in any instance where such payment would cause non-compliance
with any other restrictive covenant. As of July 1, 2000 approximately $1.8
million was available under the cumulative net income test. As of July 1, 2000,
net assets of the subsidiary totaling approximately $56 million were restricted
from distribution.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
DELTA WOODSIDE INDUSTRIES, INC.
COL. A COL. B COL. C COL. D COL. E
Balance at ADDITIONS
-------------------------------------
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 and returns:
Year ended July 1, 2000 $ 287,000 $ 114,000(2) $ 173,000
========== =============== ===========
Year ended July 3, 1999 $ 246,000 $ 49,000(1) $ 287,000
========== ============= ===========
Year ended June 27, 1998 $ 128,000 $ 118,000(1) $ 246,000
========== ============= ===========
Inventory reserves:
Year ended July 1, 2000 $1,347,000 $ 9,000(2) $ 1,338,000
========== =============== ===========
Year ended July 3, 1999 $3,452,000 $ 2,105,000(2) $ 1,347,000
========== ================ ===========
Year ended June 27, 1998 $2,638,000 $ 814,000 $ 3,452,000
========== ========= ===========
NOTES:
(1) Net change in sales allowances charged to income as a reduction of sales.
(2) Deducted from costs and expenses.