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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 3, 1999
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.)
233 N. Main Street, Suite 200
Greenville, South Carolina 29601
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(Address of principal executive offices) (Zip code)
864/232-8301
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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
------------------- ----------------------
Common Stock, Par Value $.01 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
--- ---
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 17, 1999 was:
Common Stock, $.01 par value - $38,992,955
The number of shares outstanding of each of the registrant's classes of Common
Stock, as of September 17, 1999 was:
Common Stock, par value $.01 - 23,804,384
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Company's Annual Report to
shareholders for the fiscal year ended July 3, 1999 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 4,
1999 are incorporated by reference into Part III.
2
Item I Business
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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.
The Company has three operating divisions. 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. Duck Head Apparel also operates 24 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 12 states, Costa Rica and Honduras, and has approximately 5,000
employees.
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. 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
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 1999, 1998, and 1997.
Woven textile fabrics produced for sale by the Company 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
3
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.
If sold at this stage, greige goods are typically sold to converters who, in
turn, 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
Delta Mills Marketing Company sells a broad range of finished apparel
fabrics primarily to branded apparel manufacturers and resellers, including 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 $314
million, $342 million, and $336 million during fiscal 1999, 1998, and 1997
respectively. Sales of woven fabric to Levi Strauss & Co., Inc. accounted for
approximately 15%, 12% and 15% of the Company's total net sales for fiscal 1999,
1998 and 1997, respectively. The loss of this account could have a material
adverse effect on the results of the Company.
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 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), with sales agents also operating from Atlanta,
Chicago, Dallas, Los Angeles, San Francisco and Mexico.
During fiscal years 1999, 1998, and 1997, approximately 78%, 70% and 70%,
respectively, of the division's finished woven fabric sales were of fabrics made
from cotton or cotton/synthetic blends, while approximately 22%, 30% and 30%,
respectively, of such sales were of fabrics made from spun synthetics and other
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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 division's
production of cotton and cotton/synthetic blend and spun synthetic finished
woven fabrics is largely vertically integrated, with the division 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 woven finished fabrics plants are currently
operating at less than full capacity.
The division also produces a variety of unfinished light-weight woven
fabrics that are sold to converters of finished products. Due to import
pressure, the unfinished fabrics business is being discontinued and is being
replaced with more profitable product lines. This move away from the unfinished
fabric production will be substantially complete in the first quarter of fiscal
2000.
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 and shirts. In addition, this
division 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.
"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 division has over 400 men's and 200 boy's Duck Head shops in major
department stores. The "shop" display format of a large part of the Duck Head
line utilizes dedicated retail floor space in the sportswear department
positioned with other national brands. Net sales of "Duck Head" products were
approximately $72 million, $86 million, and $81 million during fiscal 1999,
1998, and 1997, respectively.
Duck Head Apparel operates 2 facilities located in Georgia and Costa Rica.
The division purchases the fabrics used in its products from a number of
producers. "Duck Head" also currently acquires a substantial amount of its
finished products from other sourcing companies throughout the world. This
outside production takes the form of sewing fabric parts cut at contractor's
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 distribution facility in
Georgia.
Duck Head labeled apparel items are generally required to be inventoried to
permit reorder shipment and to level production schedules. Customer private
5
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 a showroom in New York, New York and sales
personnel located throughout the country.
The Duck Head division has 24 outlet stores located in 9 states that sell
principally closeout and irregular Duck Head products. These stores also sell a
small amount of apparel and accessory items manufactured by Duck Head licensees.
DELTA APPAREL SEGMENT
Delta Apparel Company, headquartered in Duluth, Georgia, operates a total
of 5 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 $106
million, $106 million and $112 million during fiscal 1999, 1998, and 1997,
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. Demand for the division's products is strongest during the spring
and summer months. Most knit apparel items are inventoried to permit quick
shipment and to level production schedules during the months of lower demand.
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 a company
owned plant in Georgia and in leased facilities in 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.
RAW MATERIALS FOR YARN
The Company's principal raw material for yarn 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. For fiscal 1999
polyester prices were at the lowest prices the Company has paid since fiscal
year 1993. However, management expects that trend to be reversed in fiscal 2000.
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 $.770 in fiscal year 1999 as compared to
$.817 in fiscal year 1998, and, as compared to $.833 in fiscal year 1997.
Management expects the downward trend in cotton prices to continue in fiscal
2000. In fiscal year 2000, the Company expects to use approximately 97 million
6
pounds of cotton (including approximately 15 million pounds of premium cotton)
and 6 million pounds of polyester in its manufacture of yarn. The Company has
contracted to purchase about 61% of its expected cotton requirements for fiscal
year 2000. 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.
Delta Mills Marketing Company sells primarily to domestic apparel
manufacturers, many of which operate offshore sewing operations. The division
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 division 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.
Delta Mills Marketing 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 that 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 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.
7
Foreign competition is a significant factor in the United States fabric
market. The Delta Mills Marketing 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.
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
8
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
manufacturers 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 5,000 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 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.
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.
9
At the North Carolina site, the Selling Corporations 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. Trichlomethane, one of the substances delivered by the Selling
Corporation to the site, has been found in the site's groundwater and at nearby
residential 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
Segment information made part of Note G of the Company's consolidated
financial statements for the fiscal year ended July 3, 1999 is incorporated
herein by reference.
YEAR 2000 COMPLIANCE
Information concerning year 2000 compliance in "Management's Discussion and
Analysis of Results of Operations and Financial Condition, Year 2000 Compliance"
incorporated into Item 7 of this Form 10-K 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 1999 Versus Fiscal 1998" incorporated into Item 7 of this Form
10-K is incorporated herein by reference.
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Item 2. PROPERTIES
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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. 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)
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(5)
Maiden Plant, Maiden, NC knit/dye/finish/cut 325,000 Owned
Washington Plant, Washington, GA sew 129,800 Owned
Distribution Center, Knoxville, TN distribution 550,000 Owned
Honduras Plant, San Pedro Sula,
Honduras sew 104,000 Leased(3)
DUCK HEAD APPAREL COMPANY
Monroe #2, Monroe, GA pressing 93,000 Owned
San Jose Plant, San Jose, Costa Rica sew 60,000 Leased(3)
316 Distribution Center, Winder, GA admin offices and
warehouse 200,000 Owned
Various retail stores (4)
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Item 2. PROPERTIES
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(1) Lease expires in December 2003 with the right to renew for an additional
five-year period.
(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 operation leases 24 facilities in 9
states, which leased space is approximately 75,000 square feet. These
leases expire at various dates through 2006.
(5) The Rainsford Plant is owned by Delta Mills, Inc., a wholly-owned
indirect subsidiary of Delta Woodside. 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 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
plants in the Delta Mills Marketing division are operating at less than full
production capacity. Various factors affect the relative use by the Company's
apparel divisions of their own facilities and outside contractors in the various
apparel production phases. The Delta Apparel division is currently using the
majority of its internal production capacity. The Duck Head Apparel operation
is operating at approximately 50% of its internal 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.
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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 1999 fiscal year.
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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 July 3, 1999 is incorporated herein by reference.
The following table shows the issuances by the Company during fiscal 1999
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.
Date of Type of Amount of Class of Nature of
Transaction Transaction Common Stock Persons Transaction
----------- ----------- ------------- --------- --------------
May 10, 1999 Issued 750 Employees Service Awards
The Company believes that 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 July 3, 1999 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 3 through 7 of the
Company's annual shareholders' report for the year ended July 3, 1999 is
incorporated herein by reference.
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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
- ---------------------------------------------------------------------
RISK
----
COMMODITY RISK SENSITIVITY
- ----------------------------
As a part of the Company'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. The
Company may seek to fix prices up to 18 months in advance of delivery. 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. At July 3, 1999, a 10% decline in the market price
of the cotton covered by the Company's fixed price contracts would have a
negative impact of approximately $4.2 million on the value of the contracts. At
the end of fiscal 1998, a 10% decline in the market price of the Company's fixed
price contracts would have had a negative impact of approximately $5.6 million
on the value of the contracts. The decline in the potential negative impact
from 1998 to 1999 is due principally to current cotton commitments being at
significantly lower average prices than in fiscal 1998. The Company has changed
to the current disclosure format from the format in the fiscal year 1998 10-K in
an effort to improve the comparability of its disclosure to other companies in
its industry.
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 6.93% at July 3, 1999. Interest is based on LIBOR.
$30 million of short-term secured revolving credit facility expiring
December 2000 with interest of 7.22% at July 3, 1999. Interest is
based on LIBOR.
An interest rate change would not have an impact on the fixed rate ten year
senior notes totaling $150 million. An interest rate change would have a
negative impact to the extent the Company increases borrowings against the
revolving credit facilities. The impact would be dependent on the level of
borrowings incurred. During fiscal years 1999 and 1998, based on the average
principal balance outstanding, a 1% increase in interest rates would have
resulted in increased interest expense of approximately $533,000 and $879,000,
respectively. In fiscal year 2000, as of this date, the Company has no
outstanding borrowings against the revolving credit facilities.
15
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -------- -----------------------------------------------
The consolidated financial statements included on pages 10 through 13 of
the Company's annual shareholders' report for the year ended July 3, 1999 are
incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
- ------- -----------------------------------------------------------
AND FINANCIAL DISCLOSURE
--------------------------
Not applicable.
16
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".
17
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.
18
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.
4.2 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 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.
4.3.1 First Amendment and Waiver Agreement dated as of May 11, 1998 respecting Credit
Agreement dated as of August 25, 1997: Incorporated by reference to Exhibit 4.2.7 to the
Form 10-Q of the Company for the quarter ended March 28, 1998.
4.3.2 Second Amendment to Credit Agreement dated as of July 29, 1998 respecting Credit Agreement
dated as of August 25, 1997: Incorporated by reference to Exhibit 4.2.4.2 to the Form 10-K
of the Company for the year ended June 27, 1998.
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.
19
4.5 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.
10.2** Delta Woodside Deferred Compensation Plan for Key Managers, Amended and Restated
Effective January 1, 1998 as amended.
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.
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. 333-45767).
20
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).
10.10 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).
10.11 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).
10.12** 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.
10.13 ** Letter dated December 14, 1998 to Jane H. Greer: Incorporated by reference to Exhibit
10.11 to the December 1998 10-Q.
21
10.14 ** Letter dated June 8, 1998 to Douglas J. Stevens.
10.15 See Exhibits 4.3, 4.3.1, 4.3.2, and 4.4.
13 Annual Report to Shareholders of the Company for the fiscal year ended July 3, 1999.
21 Subsidiaries of the Company.
23.1 Report on Schedules and Independent Auditors' Consent for the years ended July 3, 1999,
June 27, 1998 and June 28,1997.
27 Financial Data Schedule.
* 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
----------------------
The Company filed a Form 8-K with date of June 25, 1999. Items
reported were:
Item 5. Other events
Item 7. Financial statements and exhibits
(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.
22
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.
September 30, 1999 /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 9/30/99 /s/ E. Erwin Maddrey 9/30/99
- ---------------- ------- --------------------- -------
C. C. Guy Date E. Erwin Maddrey, II Date
Director President, Chief Executive
Officer and Director
/s/ James F. Kane 9/30/99 /s/ Bettis C. Rainsford 9/30/99
- ---------------- ------- ----------------------- -------
James F. Kane Date Bettis C. Rainsford Date
Director Executive Vice President,
Chief Financial Officer, Treasurer
and Director
/s/ William F. Garrett 9/30/99
- --------------------- -------
William F. Garrett Date
Director
/s/ Max Lennon 9/30/99 /s/ Robert W. Humphreys 9/30/99
- ---------------- ------- ----------------------- --------
Max Lennon Date Robert W. Humphreys Date
Director Vice President - Finance
/s/ Buck A. Mickel 9/30/99
- ----------------- -------
Buck A. Mickel Date
Director
23
EXHIBIT INDEX
10.1 Lease, dated September 1, 1998, by and between Hammond
Square, Ltd. and the Company.
10.2 Delta Woodside Deferred Compensation Plan for Key Managers,
Amended and Restated Effective January 1, 1998 as amended.
10.12.1 Letter dated April 22, 1999 to Robert W. Humphreys.
10.14 Letter dated June 8, 1998 to Douglas J. Stevens.
13 Annual Report to Shareholders of the Company for the fiscal year
ended July 3, 1999.
21 Subsidiaries of the Company.
23.1 Report on Schedules 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 JULY 3, 1999
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 3, 1999 are incorporated by reference in
Item 8:
Consolidated balance sheets- July 3, 1999 and June 27, 1998.
Consolidated statements of operations--Years ended July 3, 1999,
June 27, 1998 and June 28, 1997.
Consolidated statements of shareholders' equity--Years ended July 3, 1999,
June 27, 1998 and June 28, 1997.
Consolidated statements of cash flows--Years ended July 3, 1999,
June 27, 1998 and June 28, 1997.
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.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS (in thousands)
Delta Woodside Industries, Inc.
July 3, 1999 June 27, 1998
----------- -----------
ASSETS
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $3,519 $1,825
Accounts receivable 49 41
Less allowances for doubtful accounts 10 14
----------- -----------
39 27
Prepaid expenses and other current assets 595 827
----------- -----------
TOTAL CURRENT ASSETS 4,153 2,679
PROPERTY, PLANT AND EQUIPMENT, at cost 1,341 1,833
Less accumulated depreciation 1,209 1,497
----------- -----------
132 336
INVESTMENT IN SUBSIDIARIES 74,202 127,842
ADVANCES TO SUBSIDIARIES 73,696 75,790
DEFERRED INCOME TAXES 831
OTHER ASSETS 2,872 2,864
----------- -----------
TOTAL ASSETS $155,055 $210,342
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term bank debt $1,678 $11,108
Accounts payable and accrued liabilities 17,265 17,643
Deferred income taxes 584 1,148
----------- -----------
TOTAL CURRENT LIABILITIES 19,527 29,899
LONG TERM DEBT
DEFERRED INCOME TAXES 941
OTHER LIABILITIES AND DEFERRED CREDITS 607 876
SHAREHOLDERS' EQUITY
Common Stock -- par value $.01 a
share -- authorized 50,000,000 shares,
issued and outstanding 23,792,000 shares
(1999) and 24,644,000 shares (1998) 238 246
Additional paid-in capital 160,863 165,221
Retained earnings (deficit) (27,121) 14,100
----------- -----------
133,980 179,567
COMMITMENTS AND CONTINGENCIES
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY $155,055 $210,342
See notes to condensed financial statements.
CONDENSED STATEMENTS OF OPERATIONS (in thousands)
Delta Woodside Industries, Inc.
Year Ended
------------------------------------------
July 3, 1999 June 27, 1998 June 28, 1997
----------- ------------- ------------
Net sales $728 $1,138 $1,305
Cost of goods sold 761 1,075 1,170
----------- ------------- ------------
Gross profit (loss) (33) 63 135
Selling, general and administrative
Expenses 2,977 552 (19)
Equity in income (loss) of subsidiaries (46,140) (41,085) 5,094
Other income 18 107 185
----------- ------------- ------------
OPERATING PROFIT (LOSS) (49,132) (41,467) 5,433
Interest (expense) income:
Interest expense (1,430) (5,218) (22,290)
Interest income 10,011 19,234 19,815
----------- ------------- ------------
8,581 14,016 (2,475)
INCOME (LOSS) BEFORE INCOME TAXES (40,551) (27,451) 2,958
Income tax expense (benefit) (1,156) 16,300 (4,433)
----------- ------------- ------------
NET INCOME (LOSS) (39,395) (43,751) 7,391
Basic and diluted earnings ($1.63) ($1.78) $0.30
(loss) per share
Weighted average number
of shares outstanding 24,149 24,575 24,513
See notes to condensed financial statements.
CONDENSED STATEMENTS OF CASH FLOWS (in thousands)
Delta Woodside Industries, Inc.
Year Ended
------------------------------------------
July 3, 1999 June 27, 1998 June 28, 1997
------------- ------------- -------------
OPERATING ACTIVITIES
Net income (loss) ($39,395) ($43,751) $7,391
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in net (income) loss 46,140 41,085 (5,094)
Provision for deferred income taxes 1,208 (428) 457
Other 204 168 148
Changes in operating assets and
liabilities (435) 14,927 (4,598)
------------- ------------- -------------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES 7,722 12,001 (1,696)
INVESTING ACTIVITIES
Dividends received from subsidiaries 7,500 8,000
------------- -------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 7,500 8,000
FINANCING ACTIVITIES
Proceeds (repayments) from revolving
lines of credit ($9,430) ($214,392) ($15,796)
Net advances from subsidiaries 2,094 197,008 12,704
Dividends paid (2,419) (2,460)
Repurchase common stock (4,520)
Other 747 411 641
------------- ------------- -------------
NET CASH (USED) BY FINANCING ACTIVITIES (13,528) (19,433) (2,451)
------------- ------------- -------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVILENTS 1,694 568 (4,147)
Cash and cash equivalents at beginning
of year 1,825 1,257 5,404
------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $3,519 $1,825 $1,257
See notes to condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTSDelta 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
various wholly-owned subsidiaries which are engaged in the manufacture, sale,
and distribution of textile and apparel products. Delta Woodside's investments
in its wholly owned 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 of Notes 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 the 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 3, 1999
approximately $900 thousand was available under the cumulative net income test;
however, payment of any further dividend would have caused a violation of a
covenant regarding minimum tangible net worth. As of July 3, 1999, net assets of
the subsidiary totaling approximately $50 million were restricted from
distribution.
F-2
Deducted from asset accounts
Allowance for doubtful accounts:
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 Charged to Describe of Period
and Expense Accounts-Describe
- -------------------------- -------------- ------------ --------------- ------------ -------------
Year ended July 3, 1999 $ 6,417,000 $ 6,118,000 $ (579,000)(2) 4,329,000(1) $ 7,627,000
============== ============ =============== ============ =============
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
============== ============ =============== ============ =============
Inventory reserves:
Year ended July 3, 1999 $ 9,560,000 $ 6,083,000 $ 15,643,000
============== ============ =============
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
============== ============ =============
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.