Item 2. PROPERTIES - -------- ----------
The following table provides a description of Delta Woodside's principal production and warehouse facilities.
Item 2. PROPERTIES - ------- ----------
(1) Lease expires in December 2003 with the right to renew for an additional five-year period. (2) Titles to these facilities and substantially all of the equipment located in such facilities are held by three South Carolina counties under a fee-in-lieu-of-taxes arrangement, which has the effect of substantially reducing the Company's property taxes in South Carolina. Although the Company can reacquire such property at a nominal price, this would currently cause a significant increase in the amount of property taxes paid by the Company. (3) The Honduras plant has a lease that expires in November 2000. The San Jose plant is leased on a month-to-month basis. (4) The "Duck Head" Outlet Stores operation leases 24 facilities in 9 states, which leased space is approximately 75,000 square feet. These leases expire at various dates through 2006. (5) The Rainsford Plant is owned by Delta Mills, Inc., a wholly-owned indirect subsidiary of Delta Woodside. The plant is managed by Delta Apparel Company.
Except as noted above all of the above facilities are owned by Delta Woodside or one of its subsidiaries, subject in certain cases to various outstanding mortgages and security interests.
Delta Woodside leases corporate offices in Greenville, South Carolina. The lease on the corporate offices expires September 1, 2003. Sales offices are leased in or near New York, Chicago, Newport Beach, San Francisco, Dallas and Los Angeles with leases expiring through December 2004.
At the date of execution of this Form 10-K, the Company believes that its plants in the Delta Mills Marketing division are operating at less than full production capacity. Various factors affect the relative use by the Company's apparel divisions of their own facilities and outside contractors in the various apparel production phases. The Delta Apparel division is currently using the majority of its internal production capacity. The Duck Head Apparel operation is operating at approximately 50% of its internal production capacity.
The Company believes that its equipment and facilities are generally adequate to allow it to remain competitive with its principal competitors.
The Company's accounts receivable and inventory, and certain other intangible property (including the capital stock of the Company's major United States subsidiaries), secure the Company's credit facility or the credit facility of the Company's indirect wholly owned subsidiary, Delta Mills, Inc.
Item 3.
Item 3. LEGAL PROCEEDINGS - ------ ------------------
From time to time the Company and its subsidiaries are defendants in legal actions involving claims arising in the normal course of its business, including product liability claims. The Company believes that, as a result of its legal defenses, insurance arrangements and indemnification provisions with financially capable parties, none of these actions is reasonably likely to have a material adverse effect on its results of operations or financial condition taken as a whole.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS - ------ ----------------------------------------------------------
No matter was submitted to a vote of security holders during the fourth quarter of the Company's 1999 fiscal year.
PART II
Item 5.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND - ------ ---------------------------------------------- RELATED STOCKHOLDER MATTERS -----------------------------
The material under the heading "Common Stock Market Prices and Dividends" on the inside front cover of the Company's annual shareholders' report for the year ended July 3, 1999 is incorporated herein by reference.
The following table shows the issuances by the Company during fiscal 1999 of its shares of common stock that were not registered under the Securities Act of 1933, as amended, and were not previously reported by the Company in a Form 10-Q.
Date of Type of Amount of Class of Nature of Transaction Transaction Common Stock Persons Transaction ----------- ----------- ------------- --------- --------------
May 10, 1999 Issued 750 Employees Service Awards
The Company believes that these issuances are exempt from registration under the Securities Act of 1933 by reason of Section 4(2) of the Securities Act of 1933 and as not constituting a "sale".
Item 6.
Item 6. SELECTED FINANCIAL DATA - ------ -------------------------
The material under the heading "Selected Financial Data" on page 1 of the Company's annual shareholders' report for the year ended July 3, 1999 is incorporated herein by reference.
Item 7.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF - ------ ------------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------------
The material under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition" on pages 3 through 7 of the Company's annual shareholders' report for the year ended July 3, 1999 is incorporated herein by reference.
Item 7A.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET - --------------------------------------------------------------------- RISK ----
COMMODITY RISK SENSITIVITY - ----------------------------
As a part of the Company's business of converting fiber to finished fabric, the Company makes raw cotton purchase commitments and then fixes prices with cotton merchants who buy from producers and sell to textile manufacturers. The Company may seek to fix prices up to 18 months in advance of delivery. Daily price fluctuations are minimal, yet long-term trends in price movement can result in unfavorable pricing of cotton for the Company. Before fixing prices, the Company looks at supply and demand fundamentals, recent price trends and other factors that affect cotton prices. The Company also reviews the backlog of orders from customers as well as the level of fixed price cotton commitments in the industry in general. At July 3, 1999, a 10% decline in the market price of the cotton covered by the Company's fixed price contracts would have a negative impact of approximately $4.2 million on the value of the contracts. At the end of fiscal 1998, a 10% decline in the market price of the Company's fixed price contracts would have had a negative impact of approximately $5.6 million on the value of the contracts. The decline in the potential negative impact from 1998 to 1999 is due principally to current cotton commitments being at significantly lower average prices than in fiscal 1998. The Company has changed to the current disclosure format from the format in the fiscal year 1998 10-K in an effort to improve the comparability of its disclosure to other companies in its industry.
INTEREST RATE SENSITIVITY - ---------------------------
The following debt obligations are sensitive to changes in interest rates:
$150 million of unsecured ten year senior notes due 2007 at a fixed rate of 9.625%.
$100 million of secured five year revolving credit facility expiring 2002 with interest of 6.93% at July 3, 1999. Interest is based on LIBOR.
$30 million of short-term secured revolving credit facility expiring December 2000 with interest of 7.22% at July 3, 1999. Interest is based on LIBOR.
An interest rate change would not have an impact on the fixed rate ten year senior notes totaling $150 million. An interest rate change would have a negative impact to the extent the Company increases borrowings against the revolving credit facilities. The impact would be dependent on the level of borrowings incurred. During fiscal years 1999 and 1998, based on the average principal balance outstanding, a 1% increase in interest rates would have resulted in increased interest expense of approximately $533,000 and $879,000, respectively. In fiscal year 2000, as of this date, the Company has no outstanding borrowings against the revolving credit facilities.
Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - -------- -----------------------------------------------
The consolidated financial statements included on pages 10 through 13 of the Company's annual shareholders' report for the year ended July 3, 1999 are incorporated herein by reference.
Item 9.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING - ------- ----------------------------------------------------------- AND FINANCIAL DISCLOSURE --------------------------
Not applicable.
PART III
Item 10.
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.
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.
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.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - --------- --------------------------------------------------
The information required by this Item is incorporated herein by reference from the portion of the definitive Proxy Statement to be filed with the Securities and Exchange Commission on or prior to 120 days following the end of the Company's fiscal year under the heading "Related Party Transactions".
PART IV
Item 14.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K - --------- ---------------------------------------------------------------------
(a) (1) and (2) Financial Statements and Financial Statement Schedules -------------------------------------------------------
The response to this portion of Item 14 is set forth on page included herein, which response is incorporated herein by reference.
(3) Listing of Exhibits:* ---------------------
(b) Reports on Form 8-K ----------------------
The Company filed a Form 8-K with date of June 25, 1999. Items reported were:
Item 5. Other events
Item 7. Financial statements and exhibits
(c) Exhibits --------
The response to this portion of Item 14 is submitted as a separate section of this report.
(d) Financial Statement Schedules -------------------------------
The response to this portion of Item 14 is submitted as a separate section of this report.
SIGNATURES - ----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DELTA WOODSIDE INDUSTRIES, INC.
September 30, 1999 /s/ E. Erwin Maddrey, II - -------------------- ------------------------------------- Date E. Erwin Maddrey, II President, Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ C. C. Guy 9/30/99 /s/ E. Erwin Maddrey 9/30/99 - ---------------- ------- --------------------- ------- C. C. Guy Date E. Erwin Maddrey, II Date Director President, Chief Executive Officer and Director
/s/ James F. Kane 9/30/99 /s/ Bettis C. Rainsford 9/30/99 - ---------------- ------- ----------------------- ------- James F. Kane Date Bettis C. Rainsford Date Director Executive Vice President, Chief Financial Officer, Treasurer and Director
/s/ William F. Garrett 9/30/99 - --------------------- ------- William F. Garrett Date Director
/s/ Max Lennon 9/30/99 /s/ Robert W. Humphreys 9/30/99 - ---------------- ------- ----------------------- -------- Max Lennon Date Robert W. Humphreys Date Director Vice President - Finance
/s/ Buck A. Mickel 9/30/99 - ----------------- ------- Buck A. Mickel Date Director
ANNUAL REPORT ON FORM 10-K
ITEM 14(a) (1) and (2), (c) and (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED JULY 3, 1999
DELTA WOODSIDE INDUSTRIES, INC.
GREENVILLE, SOUTH CAROLINA
FORM 10-K--ITEM 14(a)(1) AND (2)
DELTA WOODSIDE INDUSTRIES, INC.
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of Delta Woodside Industries, Inc. and subsidiaries included in the Annual Report of the Registrant to its shareholders for the Year ended July 3, 1999 are incorporated by reference in Item 8:
Consolidated balance sheets- July 3, 1999 and June 27, 1998.
Consolidated statements of operations--Years ended July 3, 1999, June 27, 1998 and June 28, 1997.
Consolidated statements of shareholders' equity--Years ended July 3, 1999, June 27, 1998 and June 28, 1997.
Consolidated statements of cash flows--Years ended July 3, 1999, June 27, 1998 and June 28, 1997.
Notes to consolidated financial statements.
The following consolidated financial statement schedules of Delta Woodside Industries, Inc. are included in Item 14(d):
Schedule I - Condensed Financial Information of Registrant
Schedule II -- Valuation and qualifying accounts
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. Columns omitted from schedules filed have been omitted because the information is not applicable.
See notes to condensed financial statements.
See notes to condensed financial statements.
See notes to condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTSDelta Woodside Industries, Inc. The accompanying financial statements of Delta Woodside Industries, Inc. should be read in conjunction with the consolidated financial statements of Delta Woodside Industries and its consolidated subsidiaries.
BASIS OF PRESENTATION: Delta Woodside Industries, Inc. is the top parent of various wholly-owned subsidiaries which are engaged in the manufacture, sale, and distribution of textile and apparel products. Delta Woodside's investments in its wholly owned subsidiaries are reported in these condensed financial statements using the equity method of accounting.
LONG TERM DEBT: A subsidiary of Delta Woodside has unsecured senior notes and a bank credit facility outstanding. See Note D of Notes to Consolidated Financial Statements and "Management's Discussion and Analysis of Results of Operations and Financial Condition - Liquidity and Sources of Capital". The senior notes and the credit facility contain restrictions which, among other things, limit the subsidiary from paying cash dividends to Delta Woodside. Generally, with certain exceptions, dividends and certain other restricted payments are limited to $12.5 million plus 50% of the cumulative net income of the subsidiary from the beginning of fiscal 1998. Additionally, dividends and other restricted payments are not permitted in any instance where such payment would cause non-compliance with any other restrictive covenant. As of July 3, 1999 approximately $900 thousand was available under the cumulative net income test; however, payment of any further dividend would have caused a violation of a covenant regarding minimum tangible net worth. As of July 3, 1999, net assets of the subsidiary totaling approximately $50 million were restricted from distribution.