UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 29, 2002
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.)
PO Box 6126
100 Augusta Street
Greenville, South Carolina 29606
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(Address of principal executive offices) (Zip code)
864/255-4122
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
------------------- on which registered
----------------------
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
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 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 24, 2002 was:
Common Stock, $.01 par value - $8,054,957
The number of shares outstanding of each of the registrant's classes of Common
Stock, as of September 24, 2002 was:
Common Stock, par value $.01 - 5,862,216
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Company's Annual Report to
shareholders for the fiscal year ended June 29, 2002 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,
2002 are incorporated by reference into Part III.
2
PART I
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. These risks and uncertainties include, among others, changes in the
retail demand for apparel products, the cost of raw materials, competitive
conditions in the apparel and textile industries, the relative strength of the
United States dollar as against other currencies, changes in United States trade
regulations and the discovery of unknown conditions (such as with respect to
environmental matters and similar items). 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, PO Box 6126, Greenville, South Carolina 29606 (telephone number:
864-255-4122). 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. ("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.
3
GENERAL - CONTINUED
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.
During the year ended June 29, 2002, the Company announced the closing of its
Furman Plant, a weaving only facility located in Fountain Inn, South Carolina.
The equipment run-out schedule was completed on October 21, 2001 and the Company
is in the process of liquidating the assets associated with this facility. The
Company has transferred the current production for the closed facility to other
weaving facilities in the Company to better utilize the remaining equipment. The
Company expects to complete the sale of these assets in fiscal year 2003.
PRODUCTS, MARKETING AND MANUFACTURING
The Company produces woven textile fabrics through its Delta Mills (formerly
named the Delta Mills Marketing Company) operating division. As a result of the
spin-offs of Delta Apparel and Duck Head and the subsequent 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. 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 Levi Strauss, Haggar Corp., the
Wrangler(R) and Lee(R) divisions of V.F. Corporation, The Gap, 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 also sells camouflage fabric and other fabrics used in apparel sold
to the United States Department of Defense. These fabrics account for more than
10% of net sales for fiscal year 2002. 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(R) and Haggar Corp.'s Wrinkle-Free(R).
Other apparel items manufactured with the Company's woven fabrics include
women's chino pants, women's blazers, and career apparel (uniforms). Net sales
of woven fabrics were $175 million, $213 million, and $249 million during fiscal
2002, 2001, and 2000 respectively. For fiscal year 2002, the Company had two
customers, Levi Strauss and V.F. Corporation, that each exceeded 10% of
consolidated net sales. The Company's sales to these customers totaled $63
million in fiscal 2002. For fiscal year 2001 and fiscal year 2000, the Company
had three customers, Levi Strauss, Haggar Corp., and V.F. Corporation, that each
exceeded 10% of consolidated net sales. The Company's aggregate sales to these
customers were $90 million and $109 million for fiscal 2001and for fiscal 2000,
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, Dallas, San Francisco and Mexico.
4
PRODUCTS, MARKETING AND MANUFACTURING - CONTINUED
During fiscal years 2002, 2001 and 2000, approximately 83%, 82% and 83%,
respectively, of the Company's finished woven fabric sales are of fabrics made
from cotton or cotton/synthetic blends, while approximately 17%, 18% and 17%,
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.
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. Polyester prices for
fiscal year 2002 were unchanged from fiscal year 2001. The Company's average
price per pound of cotton purchased and consumed, including freight and carrying
costs, was $.594 in fiscal year 2002 as compared to $.659 in fiscal year 2001,
and $.661 in fiscal year 2000. As of June 29, 2002, the Company had contracted
to purchase 100% and had fixed the price for approximately 92% of its expected
cotton requirements for fiscal year 2003. 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.
5
COMPETITION - CONTINUED
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. The North American Free
Trade Agreement (often referred to as "NAFTA") entered into force on January 1,
1994. NAFTA has effectively eliminated all tariffs and quotas on goods imported
from Mexico if such goods are made from fabric originating in Canada, Mexico, or
the United States. The Caribbean Basin Trade Partnership Act (often referred to
as "CBTPA") became effective on October 1, 2000. CBTPA has effectively
eliminated tariffs and quotas on apparel products imported from participating
Caribbean and Central American nations if such products are made from fabric
woven in the United States of U.S. yarn. Because NAFTA and CBTPA create an
incentive to use fabric manufactured in the United States, they are beneficial
to the Company and other domestic producers of apparel fabrics. In contrast,
apparel not meeting the criteria of NAFTA or CBTPA is subject to quotas and/or
relatively higher tariffs. If NAFTA or CBTPA 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 World Trade Organization (often referred to as the "WTO"), a multilateral
trade organization, was formed in January 1995 and is the successor to the
General Agreement on Tariffs and Trade or "GATT". This 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.
A Free Trade Area of the Americas agreement (often referred to as "FTAA") is
being negotiated, with expected implementation in the year 2005. FTAA will be a
NAFTA-like agreement among most of the nations in the Americas. While the
agreement language is not final, the rules of origin will likely allow apparel
to be imported into the United States without tariff or quota provided the yarns
and fabrics are formed in any participating country. This agreement would create
an incentive for apparel manufacturers to use fabric from the Americas region
rather than other parts of the world, which could be beneficial to the Company
and other domestic textile manufacturers. Conversely, this agreement may result
in an increase in the production and use of regional fabrics formed outside the
U.S., which would be a disadvantage to the Company.
EMPLOYEES
The Company has approximately 1,800 employees. The Company's employees are not
represented by unions. The Company believes that its relations with its
employees are good.
6
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 aim at achieving compliance with current and future environmental
standards.
The Company does not expect that the amount of such expenditures in the future
will have a material adverse effect on its operations or financial condition.
There can be no assurance, however, that future changes in federal, state, or
local regulations, interpretations of existing regulations or the discovery of
currently unknown problems or conditions will not require substantial additional
expenditures. Similarly, the extent of Delta Woodside's liability, if any, for
past failures to comply with laws, regulations and permits applicable to its
operations cannot be determined.
INDUSTRY SEGMENT INFORMATION
As a result of the spin-offs of Delta Apparel and Duck Head and the subsequent
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.
7
ITEM 2. PROPERTIES
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The following table provides a description of Delta Woodside's principal
facilities.
Approximate
Square
Location Utilization Footage Owned/Leased
-------- ----------- ------- ------------
Corporate and
Greenville. SC Administrative Offices 17,400 Leased (1)
Beattie Plant, Fountain Inn, SC Spinning and Weaving 390,000 (2)
Estes Plant, Piedmont, SC Spinning and Weaving 332,000 (2)
Delta 3 Plant, Wallace, SC Dyeing and Finishing 555,000 (2)
Pamplico/Cypress Plant, Pamplico, SC Spinning and Weaving 419,000 (2)
Delta 2 Plant, Wallace, SC Dyeing and Finishing 347,000 (2)
Catawba Plant, Maiden, NC Spinning 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 liens.
Delta Woodside leases corporate offices in Greenville, South Carolina.
The lease on the corporate offices expires December 31, 2003. Sales offices are
leased in New York City under leases expiring in 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.
At the date of execution of this Form 10-K, the Company has closed and
plans to dispose of its Furman facility in Fountain Inn, SC. The Company expects
to complete the sale of this facility in fiscal year 2003.
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.
8
ITEM 3. LEGAL PROCEEDINGS
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All litigation to which the Company is a party is ordinary routine product
liability litigation, contract breach litigation, or employment 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 2002 fiscal year.
9
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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The material under the heading "Common Stock Market Prices and Dividends" on the
inside front cover of the Company's annual shareholders' report for the year
ended June 29, 2002 is incorporated herein by reference.
During fiscal 2002, 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.
Equity Compensation Plan Disclosure
The following table summarizes equity compensation plans approved by security
holders and equity compensation plans that were not approved by security holders
as of June 29, 2002:
( c )
Number of Securities
( a ) Remaining Available for
Number of Securities ( b ) Future issuance Under
to be Issued Upon Weighted-Average Equity Compensation
Exercise of Outstanding Exercise Price of Plans (Excluding
Options, Warrants, Outstanding Options, Securities Reflected in
Plan category and Rights Warrants and Rights Column ( a ))
- ---------------------------------- --------------------------- ------------------------- --------------------------
Equity compensation plans
approved by stockholders:
Stock Option Plans 412,196 $7.09 44,341
Incentive Stock Plans 87,841 $0.01 7,173
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Sub-total 500,037 $5.85 51,514
Equity compensation plans not
approved by stockholders N/A N/A N/A
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Total 500,037 $5.85 51,514
ITEM 6. SELECTED FINANCIAL DATA
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The material under the heading "Selected Financial Data" on page 1 of the
Company's annual shareholders' report for the year ended June 29, 2002 is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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The material under the heading "Management's Discussion and Analysis of Results
of Operations and Financial Condition" on pages 3 through 12 of the Company's
annual shareholders' report for the year ended June 29, 2002 is incorporated
herein by reference.
10
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 11 of the Company's
annual shareholders' report for the year ended June 29, 2002 is incorporated
herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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The consolidated financial statements included on pages 16 through 36 of the
Company's annual shareholders' report for the year ended June 29, 2002 are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
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Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
The information required by this Item is incorporated herein by reference from
the portions of the definitive Proxy Statement to be filed with the Securities
and Exchange Commission on or prior to 120 days following the end of the
Company's fiscal year under the headings "Election of Directors" ,"Executive
Officers" and "Section 16 (a) Beneficial Ownership Reporting Compliance".
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
The information required by this Item is incorporated herein by reference from
the portions of the definitive Proxy Statement to be filed with the Securities
and Exchange Commission on or prior to 120 days following the end of the
Company's fiscal year under the headings "Management Compensation" and
"Compensation Committee Interlocks and Insider Participation".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
The information required by this Item is incorporated herein by reference from
the portion of the definitive Proxy Statement to be filed with the Securities
and Exchange Commission on or prior to 120 days following the end of the
Company's fiscal year under the heading "Stock Ownership of Principal
Shareholders and Management".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
The information required by this Item is incorporated herein by reference from
the portion of the definitive Proxy Statement to be filed with the Securities
and Exchange Commission on or prior to 120 days following the end of the
Company's fiscal year under the heading "Related Party Transactions".
11
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
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(a) (1) and (2) Financial Statements and Financial Statement
Schedules
--------------------------------------------
The following consolidated financial statements of Delta Woodside Industries,
Inc. and subsidiaries included in the Annual Report of the Registrant to its
shareholders for the Year ended June 29, 2002 are incorporated by reference in
Item 8:
Consolidated balance sheets-- June 29, 2002 and June 30, 2001.
Consolidated statements of operations--Years ended June 29, 2002, June
30, 2001 and July 1, 2000.
Consolidated statements of shareholders' equity--Years ended June 29,
2002, June 30, 2001 and July 1, 2000.
Consolidated statements of cash flows--Years ended June 29, 2002, June
30, 2001 and July 1, 2000.
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.
(3) Listing of Exhibits:*
-------------------
2.1 Distribution Agreement by and among Delta Woodside Industries, Inc,
DH Apparel Company, Inc. (subsequently renamed 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").
12
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.
3.1.6 Articles of Amendment to the Articles of Incorporation of the
Company filed with the South Carolina Secretary of State on February
5, 2002: Incorporated by reference to Exhibit 3.1.6 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended December
29, 2001 and filed with the Securities and Exchange Commission on
February 12, 2002.
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: Incorporated by reference to Exhibit 4.3.1.1 to the
Company's Report on Form 10-K dated July 1, 2000 and filed with the
Securities and Exchange Commission on September 29, 2000.
4.3.1.2 Consent and Amendment to Credit Agreement and Other Documents, dated
as of October 5, 2001: Incorporated by reference to Exhibit 4.3.1.2
to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 29, 2001 and filed with the Securities and
Exchange Commission on November 9, 2001.
4.3.1.3 Consent and Amendment to Credit Agreement and Other Documents, dated
as of March 31,2002: Incorporated by reference to Exhibit 4.3.1.3 to
the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 30, 2002 and filed with the Securities and Exchange
Commission on May 14, 2002.
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
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 : Incorporated by reference to Exhibit 4.3.6 to the
Company's Report on Form 10-K dated July 1, 2000 and filed with the
Securities and Exchange Commission on September 29, 2000.
13
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.
5.1** Delta Woodside Deferred Compensation Plan for Key Managers, Amended
and Restated Effective June 30, 2000: Incorporated by reference to
Exhibit 10.2 to the Company's Report on Form 10-K dated July 1, 2000
and filed with the Securities and Exchange Commission on September
29, 2000.
5.2** 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
5.2.1** 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").
5.2.2** 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)
5.3** 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.
5.3.1** Amendment No. 1 to Stock Option Plan: Incorporated by reference to
Exhibit 10.1 to the December 1990 10-Q.
5.3.2** 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").
5.3.3** 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.
5.3.4** 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).
5.3.5** 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.
14
5.3.6** Amendments to Stock Option Plan: Incorporated by reference to
Exhibit 4.3.1.1 to the Company's Report on Form 10-K dated July 1,
2000 and filed with the Securities and Exchange Commission on
September 29, 2000.
5.4** 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: Incorporated by reference to Exhibit 10.7 to the
Company's Report on Form 10-K dated July 1, 2000 and filed with the
Securities and Exchange Commission on September 29, 2000.
5.4.1 List of directors and officers of the Company who signed the
document described in Exhibit 10.7: Incorporated by reference to
Exhibit 10.7.1 to the Company's Report on Form 10-K dated July 1,
2000 and filed with the Securities and Exchange Commission on
September 29, 2000.
5.4.2** Form of Amendment of Stock Options by and between Delta Woodside
Industries, Inc. and certain pre-spin-off plan participants:
Incorporated by reference to Exhibit 10.7.2 to the Company's Report
on Form 10-K dated July 1, 2000 and filed with the Securities and
Exchange Commission on September 29, 2000.
5.5** Directors Stock Acquisition Plan: Incorporated by reference to
Exhibit 10.14 to the 1991 10-K.
5.5.1** Amendment of Director Stock Acquisition Plan, dated April 30, 1992:
Incorporated by reference to Exhibit 10.12.2 to the 1992 10-K.
5.6** 2000 Stock Option Plan of Delta Woodside Industries, Inc:
Incorporated by reference to Exhibit 10.10 to the Company's Report
on Form 10-K dated July 1, 2000 and filed with the Securities and
Exchange Commission on September 29, 2000.
5.6.1 Amendment of 2000 stock option plan of Delta Woodside Industries,
Inc: Incorporated by reference to Item 6(a) of the Company's report
on Form 10-Q for the quarter ended September 30, 2000 and filed with
the Securities and Exchange Commission on November 14, 2000.
5.7** 2000 Incentive Stock Award Plan of Delta Woodside Industries, Inc:
Incorporated by reference to Exhibit 10.11 to the Company's Report
on Form 10-K dated July 1, 2000 and filed with the Securities and
Exchange Commission on September 29, 2000.
5.8** Letter dated June 28,2000 to William F. Garrett: Incorporated by
reference to Exhibit 10.14 to the Company's Report on Form 10-K
dated July 1, 2000 and filed with the Securities and Exchange
Commission on September 29, 2000.
5.9 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 the date of June 30, 2000.
5.9.1 Amendment to tax sharing agreement dated as of August 6, 2001.:
Incorporated by reference to Exhibit 10.17.2 to the Company's Report
on Form 10-K for the fiscal year ended June 30, 2001 and filed with
the Securities and Exchange Commission on September 24, 2001, the
"2001 10-K."
5.10 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 June 29, 2002.
21 Subsidiaries of the Company: Incorporated by reference to Exhibit 21
to the 2001 10-K.
15
23 Report on Schedules and Independent Auditors' Consent for the years
ended June 29, 2002, June 30, 2001 and July 1, 2000.
99.1 Certificate Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, signed by William F. Garrett, dated September 27, 2002.
99.2 Certificate Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, signed by William H. Hardman, dated September 27, 2002.
* 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.
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
--------------------
No reports were filed on Form 8-K during the fourth quarter of
fiscal 2002.
(c) Exhibits
The response to this portion of Item 14 is incorporated by
reference from Item 14(a)(3) above.
(d) Financial Statement Schedules
The response to this portion of Item 14 is submitted as a
separate section of this report.
16
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 27, 2002 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 9/27/2002 /s/ William F. Garrett 9/27/2002
- ------------------------------------- ------------ -------------------------------------------------------- ------------
C.C. Guy Date William F. Garrett Date
Director President, Chief Executive Officer and Director
/s/ James F. Kane 9/27/2002 /s/ William H. Hardman, Jr. 9/27/2002
- ------------------------------------- ------------ -------------------------------------------------------- ------------
James F. Kane Date William H. Hardman, Jr. Date
Director Vice President, Treasurer, and Chief Financial Officer
/s/ Max Lennon 9/27/2002 /s/ Donald C. Walker 9/27/2002
- ------------------------------------- ------------ -------------------------------------------------------- ------------
Max Lennon Date Donald C. Walker Date
Director Vice President, Assistant Secretary, and Controller
/s/ E. Erwin Maddrey, II 9/27/2002
- ------------------------------------- ------------
E. Erwin Maddrey, II Date
Director
/s/ Buck A. Mickel 9/24/2002
- ------------------------------------- ------------
Buck A. Mickel Date
Director
17
CERTIFICATIONS
- --------------
I, William F. Garrett, the President and Chief Executive Officer of Delta
Woodside Industries, Inc., certify that:
1. I have reviewed this annual report on Form 10-K of Delta Woodside;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
Date: September 27, 2002 /s/ William F. Garrett
- ------------------------ ------------------------
William F. Garrett
President and Chief Executive
Officer
I, William H. Hardman, Jr., the Vice President, Treasurer and Chief Financial
Officer of Delta Woodside Industries, Inc., certify that:
1. I have reviewed this annual report on Form 10-K of Delta Woodside;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
Date: September 27, 2002 /s/ William H. Hardman, Jr.
------------------ ----------------------------
William H. Hardman, Jr.
Vice President, Treasurer
and
Chief Financial Officer
18
EXHIBIT INDEX
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
19
CONDENSED BALANCE SHEETS
Delta Woodside Industries, Inc.
(In thousands)
June 29, 2002 June 30, 2001
------------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 262 $ 2,775
Deferred income taxes 533 984
Prepaid expenses and other current assets 5,470 5,545
---------------- ----------------
TOTAL CURRENT ASSETS 6,265 9,304
INVESTMENT IN SUBSIDIARIES 38,926 40,989
ADVANCES TO SUBSIDIARIES 16,870 13,543
DEFERRED INCOME TAXES 13,214 13,518
OTHER ASSETS 25 25
---------------- ----------------
TOTAL ASSETS $75,300 $77,379
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 54 $ 161
---------------- ----------------
TOTAL CURRENT LIABILITIES 54 161
SHAREHOLDERS' EQUITY
Preferred Stock 0 0
Common Stock -- par value $.01 a share -- authorized
50,000,000 shares, issued and outstanding 5,829,000 shares
(2002) and 5,809,000 shares (2001) 58 58
Additional paid-in capital 86,694 86,561
Retained deficit (11,506) (9,401)
---------------- ----------------
75,246 77,218
COMMITMENTS AND CONTINGENCIES
---------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY $75,300 $77,379
================ ================
See notes to condensed financial statements.
F-1
CONDENSED STATEMENTS OF OPERATIONS Delta Woodside Industries, Inc.
(In thousands, except per share data) Year Ended Year Ended Year Ended
June 29, 2002 June 30, 2001 July 1, 2000
------------- ------------- ------------
Net sales $ 0 $ 0 $ 0
Cost of goods sold 8
---------------- ---------------- ---------------
Gross profit (loss) (8)
Selling, general and administrative (expenses) 118 (7,704)
Equity in income (loss) of subsidiaries (2,063) (3,926) 15,654
Other income (expense) 4 (27) 29
---------------- ---------------- ---------------
OPERATING PROFIT (LOSS) (1,941) (3,953) 7,971
Interest (expense) income:
Interest expense (28) (476)
Interest income 76 54 6,637
---------------- ---------------- ---------------
76 26 6,161
---------------- ---------------- ---------------
INCOME (LOSS) BEFORE INCOME TAXES (1,865) (3,927) 14,132
Income tax expense (benefit) 240 (6) (7,509)
---------------- ---------------- ---------------
NET INCOME (LOSS) $ (2,105) $ (3,921) $21,641
================ ================ ===============
Basic and diluted earnings (loss) per share ($0.36) ($0.66) $3.66
Weighted average number
of shares outstanding 5,831 5,959 5,913
================ ================ ===============
See notes to condensed financial statements.
F-2
CONDENSED STATEMENTS OF CASH FLOWS
Delta Woodside Industries, Inc.
(In thousands) Year Ended Year Ended Year Ended
June 29, 2002 June 30, 2001 July 1, 2000
------------- ------------- ------------
OPERATING ACTIVITIES
Net income (loss) ($2,105) ($3,921) $21,641
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating
activities:
Equity in net (income) loss of subsidiaries 2,063 3,926 (15,654)
Change in deferred income taxes 755 529 (16,556)
Other 113 981 1,392
Changes in operating assets and liabilities 32 (3,342) 2,384
---------------- ---------------- ---------------
NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES 858 (1,827) (6,793)
INVESTING ACTIVITIES
Dividends received from subsidiaries 2,900
---------------- ---------------- ---------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 2,900
FINANCING ACTIVITIES
Proceeds (repayments) from revolving lines of credit (1,678)
Net advances from (to) subsidiaries (3,327) 1,627 7,375
Repurchase common stock (44) (1,023) (1,030)
Other (295)
---------------- ---------------- ---------------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (3,371) 604 4,372
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (2,513) 1,677 (2,421)
Cash and cash equivalents at beginning of year 2,775 1,098 3,519
---------------- ---------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 262 $ 2,775 $1,098
================ ================ ===============
See notes to consolidated financial statements.
F-3
NOTES TO CONDENSED FINANCIAL STATEMENTS
Delta Woodside Industries, Inc.
The accompanying condensed financial statements of Delta Woodside Industries,
Inc. should be read in conjunction with the consolidated financial statements of
Delta Woodside Industries, Inc. and its consolidated subsidiaries.
BASIS OF PRESENTATION: Delta Woodside Industries Inc. is the parent of
subsidiaries which are engaged in the manufacture, sale and distribution of
textile products. Through June 30, 2000, Delta Woodside was also the 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" in the Company's
Annual Report to Shareholders. The DMI credit facility contains restrictive
covenants that restrict additional indebtedness, dividends, and capital
expenditures of Delta Mills. The payment of dividends with respect to Delta
Mills' stock is permitted if there is no event of default and there is at least
$1 of undrawn availability under the facility. Loan covenants in the Senior
Notes and the DMI credit facility limit the Company's ability to use cash
generated by DMI to fund operations in the rest of the Company. In addition to
the limitations contained in the DMI credit agreement described above, the
Senior Notes also contain restrictive covenants limiting payments to the rest of
the Company. At June 29, 2002, the net assets of the Company include net assets
of the wholly owned subsidiary DMI of approximately $47 million, which are
subject to the restrictions described above.
REVERSE STOCK SPLIT: The Company effected a 4:1 reverse split of its common
stock on February 5, 2002. The Company's shareholders adopted an amendment to
the Company's articles of incorporation that provided for the reverse split at a
special meeting held on January 28, 2002. The shareholders authorized the
Company's board of directors to determine whether to consummate the reverse
split and to determine the ratio of the reverse split within a range of whole
shares from 3:1 to 10:1. The Company's board of directors set the ratio for the
reverse split at 4:1. The Company paid cash in lieu of any fractional shares.
The total number of authorized shares of common stock and the par value of the
common stock remain the same and were unaffected by the reverse split. All
shares and per share amounts have been retroactively restated in connection with
the reverse stock split.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
DELTA WOODSIDE INDUSTRIES, INC.
- ------------------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ------------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
--------------------------------------
Balance at
DESCRIPTION Beginning (1) (2) Deductions Balance at End
of Period Charged to Costs Charged to Other Describe of Period
and Expenses Accounts-Describe
- ------------------------------------------------------------------------------------------------------------------------------------
Deducted from asset accounts
Allowance for Returns:
Year ended June 29, 2002 $ 51,000 $1,795,000 (1) ($1,814,000) (2) $32,000
=================== ===================== ================= =================
Year ended June 30, 2001 $173,000 $2,998,000 (1) ($3,222,000) (2) $51,000
=================== ===================== ================= =================
Year ended July 1, 2000 $291,000 $4,472,000 (1) ($4,590,000) (2) $173,000
=================== ===================== ================= =================
NOTES:
1) The change in the reserve for returns and allowances is charged to income as a reduction of sales.
2) Deductions represent customer returns and allowances during the period.