UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 2, 2004
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 333-376-17
DELTA MILLS, INC.
-----------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-2677657
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 6126 100 Augusta Street
Greenville, South Carolina 29606
------------------------------------------------ -------------
(Address of principal executive offices) (Zip Code)
864 255-4122
----------------
(Registrant's telephone number, including area code)
(Not Applicable)
-------------------
(Former name, former address and former
fiscal year, if changed since last report.)
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 the registrant is an accelerated filer (as defined in
Rule 12b-2 of the Exchange Act ). Yes [ ] No [ X ].
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. Common Stock, $.01 Par Value -
100 shares as of November 15, 2004.
DELTA MILLS, INC.
INDEX
PART I. FINANCIAL INFORMATION
Page
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets--October 2, 2004 and July 3, 2004 3
Condensed consolidated statements of operations--
Three months ended October 2, 2004 and September 27, 2003 4
Condensed consolidated statements of cash flows--
Three months ended October 2, 2004 and September 27, 2003 5
Notes to condensed consolidated financial statements 6-9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10-17
Item 3. Quantitative and Qualitative Disclosures about Market Risk 18
Item 4. Controls and Procedures 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 19
Item 3. Defaults upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits 19
SIGNATURES 20
CERTIFICATIONS 21-28
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Delta Mills, Inc.
(In Thousands)
October 2, 2004 July 3, 2004
----------------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 635 $ 585
Accounts receivable:
Factor and other 35,429 38,613
Less allowances for returns 1 20
----------------- -------------
35,428 38,593
Inventories
Finished goods 5,894 6,613
Work in process 22,923 18,877
Raw materials and supplies 6,449 6,889
----------------- -------------
35,266 32,379
Deferred income taxes 1,267 1,113
Other assets 178 302
----------------- -------------
TOTAL CURRENT ASSETS 72,774 72,972
ASSETS HELD FOR SALE 2,495 2,495
PROPERTY, PLANT AND EQUIPMENT, at cost 163,155 163,032
Less accumulated depreciation 102,125 99,907
----------------- -------------
61,030 63,125
DEFERRED LOAN COSTS AND OTHER ASSETS 319 347
----------------- -------------
$ 136,618 $ 138,939
================= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 7,459 $ 7,879
Revolving credit facility 23,472 21,388
Payable to Affiliates 3,721 3,686
Accrued employee compensation 3,541 3,179
Accrued and sundry liabilities 18,259 19,241
----------------- -------------
TOTAL CURRENT LIABILITIES 56,452 55,373
LONG-TERM DEBT 31,941 31,941
NON-CURRENT DEFERRED INCOME TAXES 3,663 4,853
DEFERRED COMPENSATION 2,440 2,328
SHAREHOLDERS' EQUITY
Common Stock - par value $.01 a share - authorized
3,000 shares, issued and outstanding 100 shares
Additional paid-in capital 51,792 51,792
Accumulated deficit (9,670) (7,348)
----------------- -------------
42,122 44,444
COMMITMENTS AND CONTINGENCIES
----------------- -------------
$ 136,618 $ 138,939
================= =============
See notes to condensed consolidated financial statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Delta Mills, Inc.
(In Thousands)
3 Mths Ended 3 Mths Ended
October 2, September 27,
2004 2003
---------------- -----------------
Net sales $ 35,440 $ 42,581
Cost of goods sold 35,131 41,962
---------------- -----------------
GROSS PROFIT 309 619
Selling, general and administrative expenses 2,720 2,828
Other income 36 290
---------------- -----------------
OPERATING LOSS (2,375) (1,919)
Interest expense (1,291) (1,207)
---------------- -----------------
LOSS BEFORE INCOME TAXES (3,666) (3,126)
Income tax benefit (1,344) (1,149)
---------------- -----------------
NET LOSS $ (2,322) $ (1,977)
================ =================
See notes to condensed consolidated financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Delta Mills, Inc.
(In Thousands)
3 Mths Ended 3 Mths Ended
October 2, 2004 September 27, 2003
----------------------- ------------------------
OPERATING ACTIVITIES
Net loss $ (2,322) $ (1,977)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 2,218 2,198
Amortization 28 28
Gains on disposition of property
and equipment (253)
Change in deferred income taxes (1,344) (1,342)
Deferred compensation 112 197
Changes in operating assets and liabilities (603) 4,102
----------------------- ------------------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (1,911) 2,953
----------------------- ------------------------
INVESTING ACTIVITIES
Property, plant and equipment:
Purchases (123) (1,355)
Proceeds of dispositions 308
----------------------- ------------------------
NET CASH USED IN
INVESTING ACTIVITIES (123) (1,047)
----------------------- ------------------------
FINANCING ACTIVITIES
Proceeds from revolving lines of credit 40,449 47,435
Repayments on revolving lines of credit (38,365) (49,268)
----------------------- ------------------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 2,084 (1,833)
----------------------- ------------------------
INCREASE IN CASH
AND CASH EQUIVALENTS 50 73
Cash and cash equivalents at beginning of period 585 520
----------------------- ------------------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 635 $ 593
======================= ========================
See notes to condensed consolidated financial statements.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Delta
Mills, Inc. and subsidiary ("the Company") have been prepared in accordance with
U.S. generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by U.S. generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of only
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended October 2, 2004 are
not necessarily indicative of the results that may be expected for the year
ending July 2, 2005. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended July 3, 2004.
NOTE B--SUMMARIZED FINANCIAL INFORMATION OF SUBSIDIARY
Delta Mills Marketing, Inc. (the "Guarantor") is a wholly-owned subsidiary of
the Company and has fully and unconditionally guaranteed (the "Guarantee") the
Company's payment of principal, premium, if any, interest and certain liquidated
damages, if any, on the Company's Senior Notes. The Guarantor's liability under
the Guarantee is limited to such amount, the payment of which would not have
left the Guarantor insolvent or with unreasonably small capital at the time its
Guarantee was entered into, after giving effect to the incurrence of existing
indebtedness immediately prior to such time.
The Guarantor is the sole subsidiary of the Company and does not comprise a
material portion of the Company's assets or operations. All future subsidiaries
of the Company will provide guarantees identical to the one described in the
preceding paragraph unless such future subsidiaries are Receivables Subsidiaries
(as defined in the indenture relating to the Notes). Such additional guarantees
will be joint and several with the Guarantee of the Guarantor.
The Company has not presented separate financial statements or other disclosures
concerning the Guarantor because Company management has determined that such
information is not material to investors.
Summarized financial information for the Guarantor is as follows (in thousands):
October 2, 2004 July 3, 2004
--------------- ------------
Current assets $117 $ 83
Non-current assets 10 13
Current liabilities 2,371 2,275
Non-current liabilities 735 697
Stockholders' deficit (2,979) (2,876)
Summarized results of operations for the Guarantor are as follows (in
thousands):
Three Months Ended
----------------------------------------
October 2, 2004 September 27, 2003
--------------- -------------------
Net sales - Intercompany commissions $ 794 $ 949
Cost and expenses 897 963
Net loss (103) (14)
6
NOTE C-LONG-TERM DEBT, CREDIT ARRANGEMENTS, AND NOTES PAYABLE
On August 25, 1997, the Company issued $150 million of unsecured ten-year Senior
Notes at an interest rate of 9.625%. These notes will mature in August 2007. At
October 2, 2004, the outstanding balance of the notes was $31,941,000, unchanged
from the balance at July 3, 2004.
The Company has a revolving credit facility with GMAC with a term lasting until
March 2007. Borrowings under this credit facility are based on eligible
accounts receivable and inventories of the Company. The facility is secured by
the accounts receivable, inventories and capital stock of the Company. The
average interest rate on the credit facility was 4.840% at October 2, 2004 and
is based on a spread over either LIBOR or a base rate. Borrowings under this
facility were $23.5 million and $21.4 million as of October 2, 2004 and July 3,
2004, respectively. As of October 2, 2004, the revolver availability was
approximately $9.7 million, net of the $7 million availability reduction
described below.
Prior to April 19, 2004, the GMAC credit facility had financial covenants that
required the Company to comply with a maximum leverage ratio and a minimum fixed
charge coverage ratio. As a result of the operating loss in the third quarter of
fiscal year 2004, the Company was not in compliance with the maximum leverage
ratio covenant at the end of that quarter. On April 19, 2004, GMAC granted the
Company a waiver and amendment that waived the existing default with respect to
the maximum leverage ratio covenant, temporarily amended the maximum leverage
ratio covenant for the fourth quarter of fiscal year 2004, and temporarily
eliminated the fixed charge coverage ratio covenant for the fourth quarter of
fiscal year 2004. The Company was in compliance with these amended covenants at
July 3, 2004. The April 2004 waiver and amendment also reduced the Company's
availability under the credit facility by $7 million for the remaining term of
the facility and increased the interest rates under the credit facility by 125
basis points; however, the interest rates will revert to their pre-amendment
levels if the Company has net income for fiscal year 2005 and no event of
default exists under the credit facility. On August 18, 2004, the Company
entered into further amendments to the GMAC credit facility pursuant to which
the maximum availability was reduced to $38 million, and the maximum leverage
ratio and fixed charge coverage ratio covenants were replaced with a minimum
EBITDA covenant. The new covenant sets required minimum EBITDA levels for each
quarter of fiscal year 2005 and provides that it will constitute an event of
default if the Company and its lender fail to agree by the end of fiscal year
2005 to minimum EBITDA levels for the remainder of the term of the revolving
credit facility. On October 18, 2004, GMAC agreed to an amendment to the
financial covenants in the credit facility to reduce the required minimum EBITDA
levels for each quarter of fiscal year 2005. The Company was in compliance with
these amended covenants at October 2, 2004.
The Company's credit facility contains restrictive covenants that restrict
additional indebtedness, dividends, and capital expenditures. The payment of
dividends with respect to the Company's stock is permitted if there is no event
of default and there is at least $1 of availability under the facility. The
indenture pertaining to the Company's 9.625% Senior Notes also contains
restrictive covenants that restrict additional indebtedness, dividends, and
investments by the Company and its subsidiaries. The payment of dividends with
respect to the Company's stock is permitted if there is no event of default
under the indenture and after payment of the dividend, the Company could incur
at least $1 of additional indebtedness under a fixed charge coverage ratio test.
Dividends are also capped based on cumulative net income and proceeds from the
issuance of securities and liquidation of certain investments. The Company may
loan funds to Delta Woodside subject to compliance with the same conditions. At
October 2, 2004, the Company was prohibited by these covenants from paying
dividends and making loans to Delta Woodside. During the year ended July 3, 2004
and the quarter ended October 2, 2004, the Company did not pay any dividends to
Delta Woodside.
The Company assigns a substantial portion of its trade accounts receivable to
GMAC Commercial Finance LLC (the "Factor") under a factor agreement. The
assignment of these receivables is primarily without recourse, provided that
customer orders are approved by the Factor prior to shipment of goods, up to a
maximum for each individual account. The assigned trade accounts receivable are
recorded on the Company's books at full value and represent amounts due the
Company from the Factor. There are no advances from the Factor against the
assigned receivables. All factoring fees are recorded on the Company's books as
incurred as a part of selling, general and administrative expenses.
7
NOTE D - STOCK COMPENSATION
The Company also participates in the Delta Woodside Industries, Inc. 2004 Stock
Plan, Incentive Stock Award Plan, and 2000 Stock Option Plan.
The Company applies the intrinsic value-based method of accounting for the stock
option plans, in accordance with the provisions of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," (APB 25), and
related interpretations. Under this method, compensation expense for stock
options is recorded on the date of the grant only if the current market price of
the underlying stock exceeded the exercise price. Compensation expense for the
incentive stock award plan is approximately the same under APB 25 as it would be
under Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS No. 123). If the Company had determined
compensation expense at fair value for stock options, as under SFAS No. 123, the
Company's net loss would have been as follows:
(In thousands) 3 Months 3 Months
Ended Ended
10/2/2004 9/27/2003
------------ ------------
Net loss, as reported $ (2,322) $ (1,977)
Add stock based employee compensation expense
included in reported net loss, net of tax 11 16
Less total stock based employee compensation
expense determined under fair value based
method, net of related tax effects (11) (16)
------------ ------------
Pro forma net loss $ (2,322) $ (1,977)
============ ============
NOTE E - COMMITMENTS AND CONTINGENCIES
During 1998, Delta Woodside received notices from the State of North Carolina
asserting deficiencies in state corporate income and franchise taxes for the
Delta Woodside's 1994 - 1997 tax years. The total assessment proposed by the
State amounted to $1.5 million, which included interest and penalties at that
time. The assessment was delayed pending an administrative review of the case by
the State. In October 2002, the State proposed a settlement in which Delta
Woodside would have paid approximately 90% of the assessed amount plus a portion
of certain penalties for Delta Woodside's tax years 1994 - 2000. Delta Woodside
rejected this offer and continued with its appeal due to management's belief
that the State's legal position is in conflict with established principles of
federal constitutional law. Delta Woodside considers all exposures in
determining probable amounts of payment; therefore, any payment in settlement of
this matter is not expected to result in a material impact on the Company's
results of operations.
8
NOTE F - DEFERRED COMPENSATION
On January 16, 2004, based on the recommendation of Delta Woodside's
Compensation Committee, the Board (with Mr. Garrett abstaining) approved an
amendment of the Company's deferred compensation plan. The deferred compensation
plan amendment provided that each participant's deferred compensation account
will be paid to the participant upon the earlier of the participant's
termination of employment or in accordance with a schedule of payment that will
pay approximately 40%, 30%, 20% and 10% of the participant's total pre-amendment
account on February 15 of 2004, 2005, 2006 and 2007, respectively. Any such
February 15 payment will be conditioned on there being no default under the
Company's Senior Note Indenture or the Company's revolving credit facility and
on compliance with the fixed charge coverage ratio test in the Senior Note
Indenture for the most recently ended four full fiscal quarters, determined on a
pro forma basis. As a result of this amendment to the deferred compensation
plan, approximately $2.3 million, which represents the February 15, 2005
payment, plus distributions anticipated to occur in the next twelve months due
to participant retirements, has been reclassified on the consolidated balance
sheet at October 2, 2004 from deferred compensation to accrued employee
compensation in current liabilities. The first payment of approximately $3.1
million was made in February 2004.
NOTE G - SUBSEQUENT EVENTS
During the second quarter of fiscal year 2005, the Company's Board of Directors
approved a comprehensive realignment plan that will streamline the Company's
operations and provide for significant cost reductions. As a result, the Company
expects to record a second quarter pretax asset impairment and restructuring
charge to earnings ranging from $10.0 to $12.6 million. The Company also expects
to incur plant run-out costs of approximately $1.6 million associated with the
closing of the Company's Estes weaving facility. The asset impairment portion of
the charge, primarily associated with closing of the Company's Estes weaving
facility, as well as looms in other facilities, is expected to range from $6.0
to $8.9 million. The restructuring portion of the charge, estimated to be
approximately $4.3 million, is principally for separation pay and benefits for
the approximately 400 terminated employees and is expected to be paid over 18
months beginning in November 2004. The total pre-tax charge is net of estimated
proceeds of $5.0 to $7.0 million from land, building and equipment sales. The
Company expects disposal of the Estes plant assets to be completed during
calendar year 2005.
9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Delta Mills sells a broad range of finished apparel fabrics primarily to branded
apparel manufacturers and resellers, including Haggar Corp., the Wrangler(R) and
Lee(R) labels of V.F. Corporation, Liz Claiborne, Inc., Levi Strauss and their
respective subcontractors, and private label apparel manufacturers for J.C.
Penney Company, Inc., Sears, Roebuck & Co., Wal-Mart Stores, Inc., and other
retailers. Delta Mills also sells camouflage fabric and other fabrics used in
apparel for the United States Department of Defense.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
The following discussion contains various "forward-looking statements". All
statements, other than statements of historical fact, which 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, but are not limited to:
o changes in the retail demand for apparel products
o the cost of raw materials
o competitive conditions in the apparel and textile industries
o the relative strength of the United States dollar as against other
currencies
o changes in United States and international trade regulations, including
without limitation the expected end of quotas on textile and apparel
products amongst WTO member states in 2005
o the discovery of unknown conditions, such as 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. You should also review
the other cautionary statements we make in this quarterly report and in other
reports and other documents the Company files with the Securities and Exchange
Commission. All forward-looking statements attributable to us, or persons acting
for us, are expressly qualified in their entirety by our cautionary statements.
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.
10
MANAGEMENT OVERVIEW AND COMPANY OUTLOOK
THE CURRENT ENVIRONMENT. The Company expects to face a significant change in
global competition in 2005 as a result of the WTO's phase-out of textile and
apparel quotas by the end of calendar year 2004. Tariffs on textile/apparel
products are also being reduced (but not eliminated). In addition, China's
admission to the WTO will have a significant impact on global textile and
apparel trade. By gaining admission to the WTO, China is able to take advantage
of the elimination of quota limitations on access to the U.S. market, and there
could be a significant negative impact on the North American textile industry.
With the arrival of 2005 and the elimination of quotas for WTO members, certain
countries, most particularly, but not limited to, China, may have cost
advantages compared to the Company. Accordingly, the Company believes it must
fully utilize other competitive advantages it believes it has compared to Asian
competitors. Among the advantages of the Company are its well-established
relationships with its customers, its ability to respond quickly to its
customers' needs as well as the logistical advantages associated with its
manufacturing being located in North America. However, there can be no assurance
that these advantages will allow the Company to successfully compete with
foreign textile producers.
During the year ended June 28, 2003, the Company announced the closing of its
Catawba Plant, a yarn manufacturing facility located in Maiden, North Carolina.
The equipment run-out schedule was completed in April 2003 and the Company is in
the process of liquidating the assets associated with this facility. The Company
has replaced the production from this facility with purchased yarn from outside
sources.
During the year ended June 29, 2002, the Company announced the closing of its
Furman Plant, a weaving facility located in Fountain Inn, South Carolina. The
equipment run-out schedule was completed in October 2001. The Company has since
liquidated or transferred substantially all of the assets associated with this
facility except for the facility's real property.
In August of 2004, the Company entered into a contract to sell the Furman Plant
real property for expected net proceeds of approximately $1.8 million. The sales
price, net of selling costs, under the contract was approximately $847,000 less
than the carrying amount of the asset on the Company's books. Based on this
information relative to the fair value of the property at July 3, 2004, the
Company recorded an impairment charge of approximately $847,000 in the fourth
quarter of fiscal 2004. The sale was subject to closing conditions, and the
prospective purchaser has since terminated the proposed sale as permitted by
this contract. The Company has lowered its offering price for the property to
reflect the price in the terminated contract.
FIRST QUARTER OF FISCAL YEAR 2005. We continue to face a number of major
challenges in fiscal year 2005 and beyond. We recognize the challenges
associated with what we believe are the unfair trade practices of foreign
competitors. The threat of these practices comes primarily from the Chinese
government's policy of maintaining an artificially low valuation for its
currency and of subsidizing China's textile industries to keep manufacturing
costs artificially low. We also recognize challenges associated with the high
level of over capacity in the domestic textile industry and inconsistent demand
at retail. In an effort to confront these threats to our Company, management's
main focus has been to aggressively reduce our cost by concentrating on the
items that are largely under our control. To that end, as announced in our press
release of October 20, 2004, we have developed and begun the implementation of a
major realignment plan that will streamline the Company's operations and provide
for significant cost reductions. This plan is underway as planned and is
discussed in more detail below.
Our first quarter fiscal year 2005 net loss of $2.3 million reinforced the
urgency to proceed rapidly with our realignment plan. We anticipated weak sales
in our commercial business, but expected the increased demand in our government
business to more than offset the negative results of the downward pressure on
our commercial product volume and profit margins. We were encouraged to learn
that the Department of Defense (DOD) made a critical decision to adopt a new
uniform; however, the transition to the new uniform has not come without a cost.
As DOD transitioned from the old to the new uniform, they reduced fabric orders
for the old uniform for deliveries in the last two quarters of calendar year
2004 (the first two quarters of our 2005 fiscal year) in anticipation of a surge
in production of the new uniform design in the first two quarters of calendar
year 2005 (the last two quarters of our 2005 fiscal year.) Working with DOD to
accomplish the change to the new uniform created a shortfall in sales for the
first quarter of fiscal year 2005; however, we believe we are well positioned to
participate in production of the new uniform and anticipate an increase in our
Government Business in the second half of our 2005 fiscal year.
11
Even though we are encouraged by the first signs of success with our realignment
plan coupled with the introduction of the new uniform for DOD as discussed
above, we recognize there are risks that could impede our progress and our
success in fiscal year 2005.
First, we expect our commercial business to continue to suffer from a high level
of over capacity in the textile industry, inconsistent retail demand and
pressure from imports that could intensify beginning in January 2005 with the
removal of import quotas. And while we expect that the volume of our commercial
business will stabilize at approximately the fiscal year 2004 levels, we believe
that there is little hope for any pricing improvement. Also, the rationalization
of the over capacity in the commercial cotton business is less likely than last
year because one of our chief competitors has recently announced that it intends
to stay competitive in the commercial cotton business with the support of its
new owners.
Secondly, there is no guarantee that the federal government will continue to
mandate that government uniform fabric be produced in the United States. Our
long term success will hinge on this government policy.
Lastly, our realignment plan success is in part dependent on the continued
moderation of raw material costs and predictable plant operating schedules
supported by timely customer orders in both our commercial and government
product lines.
Management believes we can succeed with our realignment plan and return the
Company to profitability provided the negative consequences associated with the
above risks do not become insurmountable.
OUR 2005 REALIGNMENT PLAN.
During the second quarter of fiscal year 2005, the Company's Board of Directors
approved a comprehensive realignment plan that will streamline the Company's
operations and provide for significant cost reductions. As a result, the Company
expects to record a second quarter pretax asset impairment and restructuring
charge to earnings ranging from $10.0 to $12.6 million. The Company also expects
to incur plant run-out costs of approximately $1.6 million associated with the
closing of the Company's Estes weaving facility. The asset impairment portion of
the charge, primarily associated with closing of the Company's Estes weaving
facility, as well as looms in other facilities, is expected to range from $6.0
to $8.9 million. The restructuring portion of the charge, estimated to be
approximately $4.3 million, is principally for separation pay and benefits for
the approximately 400 terminated employees and is expected to be paid over 18
months beginning in November 2004. The total pre-tax charge is net of estimated
proceeds of $5.0 to $7.0 million from land, building and equipment sales. The
Company expects disposal of the Estes plant assets to be completed during
calendar year 2005.
We estimate that this aggressive cost reduction initiative will improve pretax
earnings on an annual basis by $11.0 to $16.0 million when compared to fiscal
2004 results, although there can be no assurance to this effect. The uncertainty
associated with these anticipated charges relates to the timing and the amount
of the charges resulting from the rollout of the detailed plan.
GMAC, our revolving credit facility lender, has demonstrated its commitment to
us by agreeing to revise the financial covenants in our credit facility to
accommodate our realignment plan. We firmly believe that this plan will allow
the Company to continue to meet its financial obligations, maintain GMAC's
support, and define a path to profitability in the future.
12
RESULTS OF OPERATIONS
FIRST QUARTER OF FISCAL 2005 VERSUS FIRST QUARTER OF FISCAL 2004
The following table summarizes the Company's results for the first quarter of
Fiscal 2005 versus the first quarter of Fiscal 2004:
Increase/(Decrease)
In thousands, except percentages From 2004 to 2005
--------------------------
10/2/2004 9/27/2003 $ %
---------------------------------------------------------------
Net Sales $35,440 $42,581 $ (7,141) (16.77)%
% of Net Sales 100.00% 100.00%
Gross Profit 309 619 (310) (50.08)%
% of Net Sales 0.87% 1.45%
Selling, General and Administrative Expenses 2,720 2,828 (108) (3.82)%
% of Net Sales 7.67% 6.64%
Other Income 36 290 (254) (87.59)%
Operating Loss (2,375) (1,919) 456 23.76 %
% of Net Sales (6.70)% (4.51)%
Interest Expense (Net) (1,291) (1,207) 84 6.96 %
% of Net Sales (3.64)% (2.83)%
Loss Before Income Taxes (3,666) (3,126) 540 17.27 %
% of Net Sales (10.34)% (7.34)%
Income Tax Benefit (1,344) (1,149) 195 16.97 %
% of Net Sales (3.79)% (2.70)%
Net Loss (2,322) (1,977) 345 17.45 %
% of Net Sales (6.55)% (4.64)%
Order Backlog $ 47,142 $ 53,964 $ (6,822) (12.64)%
NET SALES:
The 16.8% decline in net sales was the result of a 19.0% decline in unit sales
partially offset by a 2.2% increase in average sales price. The decline in unit
sales was primarily due to a decline in the Company's commercial cotton products
brought on by the high level of over capacity in the textile industry, pressure
from foreign imports and inconsistent demand at retail. This decline was
partially offset by an increase in demand for military fabrics and an increase
in the Company's commercial synthetic product sales. These increases in military
and synthetic product sales accounted for the majority of the average sales
price increase.
GROSS PROFIT:
The decline in gross profit was primarily due to a decline in profit margins in
the commercial cotton and synthetic product categories. The high level of over
capacity in the textile industry, pressure from foreign imports and inconsistent
demand at retail were the primary factors contributing to the declines in profit
margin in the commercial product categories. Also contributing to the decline in
gross profit were increased raw material costs. These declines were somewhat
offset by improved manufacturing cost absorption associated with improved
running schedules.
13
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
The decline in selling, general and administrative expenses was primarily due to
lower distribution costs associated with reduced unit sales.
OTHER INCOME:
Other income for the first quarter of fiscal 2005 consisted primarily of
discounts taken for early payment of accounts payable invoices, along with
income from asset disposals at the Company's two closed facilities, the Furman
Plant and the Catawba Plant. Other income for the fiscal quarter ended September
27, 2003, was primarily associated with asset disposals associated with the same
closed facilities mentioned above. The fair value less costs to sell for these
two closed facilities is shown as assets held for sale on the Company's
consolidated balance sheet.
OPERATING LOSS:
The increase in the operating loss was primarily the result of the items
discussed above.
INTEREST EXPENSE, NET:
The average interest rate on the Company's credit facility is based on a spread
over either LIBOR or a base rate. The increase in interest expense was due
primarily to increases in interest rates due to an amendment of the Company's
revolving credit facility and increases in LIBOR due to changes in market rates.
The average interest rate on the revolving credit facility was 2.870% as of
September 27, 2003, compared to an average interest rate of 4.840% as of October
2, 2004.
INCOME TAX BENEFIT:
The effective tax rate for the quarter ended October 2, 2004 was 36.7% compared
to an effective tax rate of 36.8% for the quarter ended September 27, 2003. The
effective tax rate will be impacted by the second quarter asset impairment and
restructuring charge.
NET LOSS:
The increase in net loss for the first quarter of fiscal year 2004 was primarily
due to the deterioration in gross profit as described above.
ORDER BACKLOG:
The decrease in the order backlog was primarily due to the decline in the demand
for the Company's commercial cotton products as a result of a high level of over
capacity in the textile industry, pressure from foreign imports and inconsistent
demand at retail. This decline was somewhat offset by an increase in the demand
for uniform fabrics used in apparel sold to the United States Department of
Defense.
Over the last several years many of the Company's commercial customers have
shortened lead times for delivery requirements. Because of shortened lead time
coupled with inconsistent demand at retail, management believes that the order
backlog at any given point in time may not be an indication of future sales.
LIQUIDITY AND SOURCES OF CAPITAL
SOURCES AND USES OF CASH. The Company's primary sources of liquidity are cash
flow from operations and the Company's revolving credit facility with GMAC. In
the first quarter of fiscal year 2005, the Company used $1.9 million in cash
from operating activities principally as the result of the $2.3 million net loss
discussed above. A net increase in deferred income taxes of $1.3 million and a
decrease in accrued and sundry liabilities of $1.0 million also contributed to
the Company's use of cash from operations. Partially offsetting these uses of
cash were an increase in the revolving credit facility balance of $2.1 million
and an increase in accrued employee compensation of $0.4 million.
Availability on the revolving credit facility was $9.7 million at October 2,
2004 and the Company was in compliance with the credit facility's financial
covenants as amended at October 2, 2004.
Capital expenditures during the first quarters of fiscal years 2004 and 2005
were primarily used for the second phase of the modernization of the Company's
Delta 3 cotton finishing plant. On November 6, 2002, the Company announced that
it had started a major capital project to modernize its Delta 3 cotton finishing
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plant in Wallace, S.C. This plan was divided into three phases. The first phase
consisted of the installation of a new dye range that was completed in June of
fiscal year 2003. The majority of the $6.4 million in capital expenditures for
fiscal year 2003 were for this project. The second phase consisted of the
installation of a new print range and a new prep range that was completed in
early fiscal year 2005. The majority of the $5.1 million in capital expenditures
for fiscal year 2004 were for this project. The third phase will start in fiscal
year 2005 and consists of the installation of a new dye range that will be
designed for wide fabric finishing. The majority of the $4.0 million capital
expenditures planned for fiscal year 2005 will be spent on this project,
primarily in the third and fourth quarter of fiscal year 2005, which ends on
July 2, 2005. With the completion of phases one and two of this modernization
plan, the Company is positioned to provide long-term support for its government
business and long-term support for an improved quality product for its
commercial cotton business. The completion of phase three will further enhance
the Company's ability to meet the needs of its cotton business on a cost
effective and profitable basis and compete more effectively in the industry in
2005 and beyond.
With its entry into the October 2004 amendment to the GMAC revolving credit
agreement described below and subject to completion of the Company's 2005
realignment plan discussed above, the Company believes that the cash flows
generated by its operations and funds available under Delta Mills' credit
facility should be sufficient to service its debt, to satisfy its day-to-day
working capital needs and to fund its planned capital expenditures for the next
twelve months and beyond.
CONTRACTUAL OBLIGATIONS. As of October 2, 2004, the Company had contractual
obligations in the form of leases, cotton commitments, deferred compensation,
debt, and related interest as follows (in thousands):
Payments Due by Fiscal Year
Contractual Obligations 2005(1) 2006 2007 2008 2009 Thereafter Total
-------------------- -------------------- ---------- ----------- ----------
Cotton Commitments $4,195 $4,195
Deferred Compensation 2,365 $1,604 $773 4,742
Non-Cancelable Operating Leases 233 275 294 $306 $276 $121 1,505
Revolving Credit Facility 23,472 23,472
Long-Term Debt 31,941 31,941
Interest Payments on Long-Term Debt 1,537 3,074 3,074 512 8,197
-------------------- -------------------- ---------- ----------- ----------
Total $8,330 $4,953 $27,613 $32,759 $276 $121 $74,052
==================== ==================== ========== =========== ==========
(1) Represents amounts due in the remaining nine months of fiscal year 2005.
Subsequent to the quarter ended October 2, 2004, the Company entered into a
five-year lease agreement for office space in New York City. Payments on this
lease will begin in January of 2005 after the expiration of the Company's
previous lease for its sales offices. Total payments for this lease will be
approximately $1.1 million over the life of the lease, and these amounts have
been included in the table above.
DELTA MILLS' 9.625% SENIOR NOTES. On August 25, 1997, the Company issued $150
million of unsecured ten-year Senior Notes at an interest rate of 9.625%. These
notes will mature in August 2007. At October 2, 2004, the outstanding balance of
the notes was $31,941,000, unchanged from the balance at July 3, 2004.
THE GMAC REVOLVING CREDIT FACILITY. The Company has a revolving credit facility
with GMAC with a term lasting until March 2007. Borrowings under this credit
facility are based on eligible accounts receivable and inventories of the
Company. The facility is secured by the accounts receivable, inventories and
capital stock of the Company. The average interest rate on the credit facility
was 4.840% at October 2, 2004 and is based on a spread over either LIBOR or a
base rate. Borrowings under this facility were $23.5 million and $21.4 million
as of October 2, 2004 and July 3, 2004, respectively. As of October 2, 2004,
the revolver availability was approximately $9.7 million, net of the $7 million
availability reduction described below.
Prior to April 19, 2004, the GMAC credit facility had financial covenants that
required the Company to comply with a maximum leverage ratio and a minimum fixed
charge coverage ratio. As a result of the operating loss in the third quarter of
fiscal year 2004, the Company was not in compliance with the maximum leverage
15
ratio covenant at the end of that quarter. On April 19, 2004, GMAC granted the
Company a waiver and amendment that waived the existing default with respect to
the maximum leverage ratio covenant, temporarily amended the maximum leverage
ratio covenant for the fourth quarter of fiscal year 2004, and temporarily
eliminated the fixed charge coverage ratio covenant for the fourth quarter of
fiscal year 2004. The Company was in compliance with these amended covenants at
July 3, 2004. The April 2004 waiver and amendment also reduced the Company's
availability under the credit facility by $7 million for the remaining term of
the facility and increased the interest rates under the credit facility by 125
basis points; however, the interest rates will revert to their pre-amendment
levels if the Company has net income for fiscal year 2005 and no event of
default exists under the credit facility. On August 18, 2004, the Company
entered into further amendments to the GMAC credit facility pursuant to which
the maximum availability was reduced to $38 million, and the maximum leverage
ratio and fixed charge coverage ratio covenants were replaced with a minimum
EBITDA covenant. The new covenant sets required minimum EBITDA levels for each
quarter of fiscal year 2005 and provides that it will constitute an event of
default if the Company and its lender fail to agree by the end of fiscal year
2005 to minimum EBITDA levels for the remainder of the term of the revolving
credit facility. On October 18, 2004, GMAC agreed to an amendment to the
financial covenants in the credit facility to reduce the required minimum EBITDA
levels for each quarter of fiscal year 2005. The Company was in compliance with
these amended covenants at October 2, 2004.
RESTRICTIVE COVENANTS. The Company's credit facility contains restrictive
covenants that restrict additional indebtedness, dividends, and capital
expenditures. The payment of dividends with respect to the Company's stock is
permitted if there is no event of default and there is at least $1 of
availability under the facility. The indenture pertaining to the Company's
9.625% Senior Notes also contains restrictive covenants that restrict additional
indebtedness, dividends, and investments by the Company and its subsidiaries.
The payment of dividends with respect to the Company's stock is permitted if
there is no event of default under the indenture and after payment of the
dividend, the Company could incur at least $1 of additional indebtedness under a
fixed charge coverage ratio test. Dividends are also capped based on cumulative
net income and proceeds from the issuance of securities and liquidation of
certain investments. The Company may loan funds to Delta Woodside subject to
compliance with the same conditions. At October 2, 2004, the Company was
prohibited by these covenants from paying dividends and making loans to Delta
Woodside. During the quarter ended October 2, 2004 and the year ended July 3,
2004, the Company did not pay any dividends to Delta Woodside.
OTHER MATTERS. The Company assigns a substantial portion of its trade accounts
receivable to GMAC Commercial Finance LLC (the "Factor") under a factor
agreement. The assignment of these receivables is primarily without recourse,
provided that customer orders are approved by the Factor prior to shipment of
goods, up to a maximum for each individual account. The assigned trade accounts
receivable are recorded on the Company's books at full value and represent
amounts due the Company from the Factor. There are no advances from the Factor
against the assigned receivables. All factoring fees are recorded on the
Company's books as incurred as a part of selling, general and administrative
expenses.
The Company has entered into agreements, and has fixed prices, to purchase
cotton for use in its manufacturing operations. At October 2, 2004, minimum
payments under these contracts with non-cancelable contract terms were $4.2
million.
During 1998, Delta Woodside received notices from the State of North Carolina
asserting deficiencies in state corporate income and franchise taxes for Delta
Woodside's 1994 - 1997 tax years. The total assessment proposed by the State
amounted to $1.5 million, which included interest and penalties at that time.
The assessment was delayed pending an administrative review of the case by the
State. In October 2002, the State proposed a settlement in which Delta Woodside
would have paid approximately 90% of the assessed amount plus a portion of
certain penalties for Delta Woodside's tax years 1994 - 2000. Delta Woodside
rejected this offer and continued with its appeal due to management's belief
that the State's legal position is in conflict with established principles of
federal constitutional law. The Company considers all exposures in determining
probable amounts of payment and has determined that any likely settlement will
not exceed established reserves; therefore, any payment in settlement of this
matter is not expected to result in a material impact on the Company's results
of operations.
On January 16, 2004, based on the recommendation of Delta Woodside's
Compensation Committee, the Board (with Mr. Garrett abstaining) approved an
amendment of the Company's deferred compensation plan. The deferred compensation
16
plan amendment provided that each participant's deferred compensation account
will be paid to the participant upon the earlier of the participant's
termination of employment or in accordance with a schedule of payment that will
pay approximately 40%, 30%, 20% and 10% of the participant's total pre-amendment
account on February 15 of 2004, 2005, 2006 and 2007, respectively. Any such
February 15 payment will be conditioned on there being no default under the
Company's Senior Note Indenture or the Company's revolving credit facility and
on compliance with the fixed charge coverage ratio test in the Senior Note
Indenture for the most recently ended four full fiscal quarters, determined on a
pro forma basis. As a result of this amendment to the deferred compensation
plan, approximately $2.3 million, which represents the February 15, 2005
payment, plus distributions anticipated to occur in the next twelve months due
to participant retirements, has been reclassified on the consolidated balance
sheet at October 2, 2004 from deferred compensation to accrued employee
compensation in current liabilities. The first payment of approximately $3.1
million was made in February 2004.
CRITICAL ACCOUNTING POLICIES
Critical accounting policies are defined as those that are reflective of
significant judgments and uncertainties, and potentially result in materially
different results under different assumptions and conditions.
Impairment of Long - Lived Assets: In accordance with Statement of Financial
Accounting Standards (SFAS) No. 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets," long-lived assets, such as property, plant and equipment,
are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to its fair value, which SFAS 144 defines as the estimated undiscounted
future cash flows expected to be generated by the asset. If the carrying amount
of an asset exceeds its SFAS 144 fair value, an impairment charge is recognized
equal to the amount by which the carrying amount of the asset exceeds the fair
value of the asset. Any impairment charge would reduce the value of the
Company's assets on its balance sheet and result in a corresponding non-cash
charge to earnings that would reduce the Company's net income on its
consolidated statement of operations. Assets to be disposed of by sale are
separately presented in the consolidated balance sheet and reported at the lower
of the carrying amount or fair value less costs to sell, and are no longer
depreciated. Estimates of future cash flows and asset selling prices are
inherently uncertain. Different estimates could result in materially different
carrying amounts.
Income Taxes: The Company accounts for income taxes under the asset and
liability method in accordance with Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes ("SFAS 109"). The Company recognizes
deferred income taxes, net of any valuation allowances, for the estimated future
tax effects of temporary differences between the financial statement carrying
amounts of existing assets and liabilities and their tax bases and net operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Changes in deferred tax assets and liabilities are recorded in the provision for
income taxes. As of July 3, 2004, the Company had approximately $3.7 million in
net deferred tax liabilities. As of October 2, 2004, the Company had
approximately $2.4 million in net deferred tax liabilities.
The Company evaluates on a regular basis the realizability of its deferred tax
assets for each taxable jurisdiction. In making this assessment, management
considers whether it is more likely than not that some portion or all of its
deferred tax assets will be realized. The ultimate realization of deferred tax
assets is dependent on the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers all available evidence, both positive and negative, in making this
assessment. In addition, management monitors and assesses the need to change
estimates with respect to tax exposure reserve items, resulting in income tax
expense increases or decreases occurring in the period of changes in estimates.
17
Item 3. 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. Daily price
fluctuations are minimal, yet long-term trends in price movement can result in
unfavorable pricing of cotton. 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.
As of October 2, 2004, a 10% decline in market price of the Company's fixed
price contracts would have had a negative impact of approximately $0.4 million
on the value of the contracts. As of July 3, 2004, such a 10% decline would have
had a negative impact of $0.7 million. The decrease in the potential negative
impact from July 3, 2004 to October 2, 2004 is due to a lower level of fixed
price cotton commitments coupled with lower cotton prices at the more recent
date.
Interest Rate Sensitivity
The Company's revolving credit facility expiring in 2007 is sensitive to changes
in interest rates. Interest is based on a spread over LIBOR or a base rate. An
interest rate increase would have a negative impact to the extent the Company
borrows against the revolving credit facility. The impact would be dependent on
the level of borrowings incurred. As of October 2, 2004, an increase in the
interest rate of 1% would have a negative impact of approximately $235,000
annually. As of July 3, 2004, an increase in the interest rate of 1% would have
had a negative impact of approximately $214,000 annually. The increase in the
potential negative impact from July 3, 2004 to October 2, 2004 is due to the
increase in borrowings under the facility.
An interest rate change would not have an impact on the payments due under the
Company's fixed rate ten year Senior Notes.
Item 4. CONTROLS AND PROCEDURES
Disclosure controls and procedures are our controls and other procedures that
are designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
The Company's principal executive officer and its principal financial officer,
after evaluating the effectiveness of the Company's disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), have
concluded that, as of October 2, 2004, the Company's disclosure controls and
procedures were adequate and effective to ensure that material information
relating to the Company and its consolidated subsidiaries would be made known to
them by others within those entities.
Changes in Internal Controls
There was no change in the Company's internal controls over financial reporting
during the fiscal quarter ended October 2, 2004 that has materially affected, or
is likely to materially affect, the Company's internal control over financial
reporting.
18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings (not applicable)
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (not
applicable)
Item 3. Defaults upon Senior Securities (not applicable)
Item 4. Submission of Matters to a Vote of Security Holders (not applicable)
Item 5. Other Information (not applicable)
Item 6. Exhibits
Listing of Exhibits
4.3.1.8 Amendment to Credit Agreement dated August 18, 2004 between
Delta Mills, Inc. and GMAC Commercial Finance LLC as lender
and agent: incorporated by reference to Exhibit 4.3.1.8 to the
Company's Annual Report on Form 10-K for the fiscal year ended
July 3, 2004 and filed with the Securities and Exchange
Commission on October 18, 2004.
4.3.1.9 Amendment to Credit Agreement dated October 18, 2004 between
Delta Mills, Inc. and GMAC Commercial Finance LLC as lender
and agent: incorporated by reference to Exhibit 4.3.1.9 to the
Company's Annual Report on Form 10-K for the fiscal year ended
July 3, 2004 and filed with the Securities and Exchange
Commission on October 18, 2004.
31.1 Certification of CEO Pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
31.2 Certification of CFO Pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
32.1 Certification of CEO Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
32.2 Certification of CFO Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
19
SIGNATURES
Pursuant to the requirements 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 Mills, Inc.
(Registrant)
Date November 16, 2004 By:/s/ W.H. Hardman, Jr.
-------------------------- --------------------------------------------
W.H. Hardman, Jr.
Chief Financial Officer
20