Item 2. PROPERTIES
The following table provides a description of Delta Woodside's principal production and warehouse facilities. Approximate Square Location Utilization Footage Owned/Leased
Delta Mills Marketing Company Greenville, SC Admin. Offices17,400 Leased (1) Beattie Plant, Fountain Inn, SC spin/weave 390,000 (2) Furman Plant, Fountain Inn, SC weave 155,000 (2) Estes Plant, Piedmont, SC spin/weave 332,000 (2) Delta 3 Plant, Wallace, SC dye/finish 555,000 (2) Cypress Plant, Pamplico, SC spin 144,000 (2) Pamplico Plant, Pamplico, SC spin/weave 275,000 (2) Delta 2 Plant, Wallace, SC dye/finish 347,000 (2) Catawba Plant, Maiden, NC spin 115,000 Owned
Delta Apparel Company Duluth, GA Admin. Offices 40,244 Leased Rainsford Plant, Edgefield, SC spin 296,000 Owned(6) Maiden Plant, Maiden, NCknit/dye/finish/cut 305,000 Owned Washington Plant, Washington, GA sew 129,800 Owned Distribution Center, Knoxville, TN distribution 550,000 Owned Decatur Plant, Decatur, TN sew 75,000 Owned(4) Honduras Plant, San Pedro Sula, Honduras sew70,000 Leased(3)
Duck Head Apparel Company Monroe #3, Monroe, GA cut 52,000 Owned Monroe #2, Monroe, GA pressing 93,000 Owned Harmony Plant, San Jose, Costa Rica sew 14,000 Owned San Jose Plant, San Jose, Costa Rica sew 60,000 Leased(3) 316 Distribution Center, Winder, GAadmin offices and warehouse200,000 Owned Various (5) stores
Discontinued Operations Independence, VA manufacturing 251,000 Owned Greer, SC Admin. Offices 12,000 Owned Carter Plant, Wallace, NC dye/finish 485,000 Owned Holly Plant, Wallace, NC knit/finish 224,000 Owned
Item 2. PROPERTIES
(1) Lease expires in December 1998 with the right to renew for two additional five-year periods. (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 lease a portion of the facility for retail sales. (5) The "Duck Head" Outlet Stores operation leases 29 facilities in 13 states, which leased space is approximately 142,000 square feet. These leases expire at various dates through 2006. (6) The Rainsford Plant is owned by Delta Mills, Inc. 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 Charlotte, 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 weaving plants are operating near full production capacity. Various factors affect the relative use by the Company's apparel division segment of their own facilities and outside contractors in the various apparel production phases. The apparel divisions are currently using the majority of their internal production capacity. The fitness equipment operation is operating at approximately 35% of its 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 1998 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 June 27, 1998 is incorporated herein by reference.
The following table shows the issuances by the Company during fiscal 1997 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.
Amount of Class of Nature of Date of Issuance Common Stock Persons Transaction
February 19, 1998 50 Employees Service Awards April 30, 1998 450 Employees Service Awards May 21, 1998 100 Employees Service Awards June 26, 1998 150 Employees Service Awards July 13, 1998 175 Employees Service Awards
The Company believes 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 June 27, 1998 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 4 through 9 (exclusive of graphs) of the Company's annual shareholders' report for the year ended June 27, 1998 is incorporated herein by reference.
Item 7A.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a part of Delta Woodside'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 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.
Carrying Amount Fair Value (In thousands)
Cotton in inventory $2,443 $2,456
Fiscal year 1999 fixed price purchase commitments $48,288 $51,437
Fiscal year 2000 fixed price purchase commitments $ 7,345 $ 7,441
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 7.4% at June 27, 1998. Interest is based on LIBOR.
Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements included on pages 14 through 20 of the Company's annual shareholders' report for the year ended June 27, 1998 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:*
3.1 Articles of Incorporation of the Company, as amended through February 5, 1989: Incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-4 of RSI Corporation and Porter Brothers, Inc., File No. 33- 30247 (the "Form S-4").
3.1.1 Articles of Amendment to Articles of Incorporation of the Company: Incorporated by reference to Exhibit 3.1.2 to the Form S-4.
3.1.2 Articles of Merger of Harper Brothers, Inc. into RSI Corporation: Incorporated by reference to Exhibit 4.1.1 to the Registration Statement of the Company on Form S-8, File No. 33- 33116 (the "1990 Form S-8").
3.1.3 Articles of Merger of Delta Woodside Industries, Inc., a Delaware corporation, into RSI Corporation: Incorporated by reference to Exhibit 4.1.2 to the 1990 Form S-8.
3.1.4 Articles of Merger of Duncan Office Supplies, Inc., into Delta Woodside Industries, Inc.: Incorporated by reference to Exhibit 3.1 to the Company's Form 10-Q for the quarterly period ended December 29, 1990 (the "December 1990 10- Q").
3.1.5 Articles of Amendment to the Articles of Incorporation of Delta Woodside Industries, Inc., filed with the South Carolina Secretary of State on November 15, 1991: Incorporated by reference to Exhibit 4.6 to the Form 10-Q of the Company for the quarterly period ended December 28, 1991.
3.2 By-laws of the Company, as amended: Incorporated by reference to Exhibit 3.1.1 to the Form S-4.
Item 14 (Continued)
3.2.1 Amendments to By-laws of the Company: Incorporated by reference to Exhibit 3.2 to the December 1990 10-Q.
3.2.2 Amendment to By-laws of the Company, adopted as of June 29, 1992: Incorporated by reference to Exhibit 3.2.2 to the Company's Form 10-K for the fiscal year ended June 27, 1992 (the "1992 10-K").
4.1 See Exhibits 3.1, 3.1.1, 3.1.2, 3.1.3, 3.1.4, 3.1.5, 3.2, 3.2.1. and 3.2.2.
4.1.1 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").
4.2 Amended and Restated Credit Agreement dated as of March 15, 1996 among Delta Woodside Industries, Inc., the Lenders named therein, and NationsBank, N.A. as Agent (with exhibits and schedules omitted) together with forms of Promissory Notes, Subsidiary Guaranty, Borrower Security Agreement, Subsidiaries Security Agreement and certain other documents: Incorporated by reference to Exhibit 4.4 to the Form 10-Q of the Company for the quarterly period ended March 30, 1996. The Company agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedules or exhibits to such agreement upon request of the Commission.
4.2.1 Amendment and Waiver Agreement dated as of May 20, 1996, by and among Delta Woodside Industries, Inc., the guarantors identified on the signature pages attached thereto and the lenders and agents thereto: Incorporated by reference to Exhibit 4.4.1 to the Form 8-K of the Company with date of May 28, 1996 (the "May 1996 8-K"). The Company agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedules or exhibits to such agreement upon request of the Commission.
4.2.2 Pledge Agreement dated as of May 20, 1996 by and among Delta Woodside Industries, Inc., the guarantors from time to time party thereto and NationsBank, N.A., in its capacity as agent for the lenders from time to time party to the Credit Agreement described therein: Incorporated by reference to Exhibit 4.4.2 to the May 1996 8-K. The Company agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedules or exhibits to such agreement upon request of the Commission.
Item 14 (Continued)
4.2.3 Second Amendment and Waiver Agreement dated as of December 20, 1996, among Delta Woodside Industries, Inc., the guarantors identified as such on the signature pages attached, the lenders and agents, together with forms of certain real estate lien documents: Incorporated by reference to Exhibit to the Form 10-Q of the Company for the quarterly period ended December 28, 1996. The Company agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedules or exhibits to such agreement upon request of the Commission.
4.2.4 Credit Agreement dated as of August 25, 1997 among Delta Mills, Inc., as Borrower, certain subsidiaries of the Borrower from time to time party thereto, as guarantors, the several lenders from time to time party thereto, NationsBank, N.A., as Administrative Agent, and BNY Financial Corporation, as Collateral Agent, together with forms of certain related instruments, agreements and documents (excluding schedules): Incorporated by reference to Exhibit 4.2.4 to Form 8-K/A of the Company with date of September 25, 1997. The Company agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedules to such agreement upon request of the Commission.
4.2.4.1 Amendment and Waiver Agreement dated as of May 11, 1998 respecting Credit Agreement dated as of Agreement dated as of August 25, 1997: Incorporated by reference to the Form 10-Q of the Company for the quarter ended March 28, 1998.
4.2.4.2 Second Amendment to Credit Agreement dated as of July 29, 1998 respecting Credit Agreement dated as of August 25, 1997.
4.2.5 Credit Agreement dated as of August 25, 1997 among Delta Woodside Industries, Inc., as Borrower, certain subsidiaries of the Borrower from time to time party thereto, as guarantors, the several Lenders from time to time party thereto and NationsBank, N. A. as Agent , together with forms of certain related instruments, agreements and documents (excluding schedules): Incorporated by reference to Exhibit 4.2.5 to Form 8- K/A of the Company with date of September 25, 1997. The Company agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedules to such agreement upon request of the Commission.
4.2.6 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. Item 14 (Continued)
4.3 The Company hereby agrees to furnish to the Commission upon request of the Commission a copy of any instrument with respect to long-term debt not being registered in a principal amount less than 10% of the total assets of the Company and its subsidiaries on a consolidated basis.
10.1 Lease, dated December 27, 1987 by and between Hammond Square, Ltd. and the Company: Incorporated by reference to Exhibit 10.10 to Registration Statement No. 33-22563 on Form S-4 of Delta Woodside Industries, Inc., a Delaware corporation ("Registration Statement No. 33- 22563").
10.2** Delta Woodside Deferred Compensation Plan for Key Employees: Incorporated by reference to Exhibit 10.6 to the Form 10-Q of the Company for the quarterly period ended December 30, 1989.
10.3** Incentive Stock Award Plan effective July 1, 1990: Incorporated by reference to Exhibit 10.1 to the Form 10-Q of the Company for the fiscal quarter ended March 31, 1990.
10.3.1** 1995 Amendment to the Incentive Stock Award Plan effective as of November 9, 1995: Incorporated by reference to Exhibit 10.3.1 to the Form 10-Q of the Company for the quarterly period ended December 30, 1995 (the "December 1995 10- Q").
10.3.2** 1997 Amendment to Incentive Stock Award Plan effective as of November 6, 1997: Incorporated by reference to exhibit 99.1 to Registration Statement on Form S-8 of Delta Woodside Industries, Inc. (File No. 333-45771)
10.4.1** Stock Option Plan effective as of July 1, 1990: Incorporated by reference to Exhibit 10.11 to the Company's Form 10-K for the fiscal year ended June 30, 1990.
10.4.2** Amendment No. 1 to Stock Option Plan: Incorporated by reference to Exhibit 10.1 to the December 1990 10-Q.
10.4.3** Amendment to Stock Option Plan: Incorporated by reference to Exhibit 10.9.2 to the Company's Form 10-K for the fiscal year ended June 29, 1991 (the "1991 10-K").
10.4.4** 1995 Amendment to the Stock Option Plan effective as of November 9, 1995: Incorporated by reference to Exhibit 10.4.4 to the December 1995 10-Q.
Item 14 (Continued)
10.4.5** 1997 Amendment to Stock Option Plan effective as of November 6, 1997: Incorporated by reference to Exhibit 99.1 to Registration Statement on Form S-8 of Delta Woodside Industries, Inc. (File No. 333-4567).
10.5 Stock Transfer Restrictions and Right of First Refusal Agreement between the Company and E. Erwin Maddrey, II: Incorporated by reference to Exhibit 10.2 to the December 1990 10-Q.
10.6 Stock Transfer Restrictions and Right of First Refusal Agreement between the Company and Bettis C. Rainsford: Incorporated by reference to Exhibit 10.3 to the December 1990 10-Q.
10.7** Summary of Delta Woodside Industries, Inc., Director Charitable Giving Program: Incorporated by reference to Exhibit 10.11 to the 1992 10-K.
10.7.1** Resolution to amend Directors' Charitable Giving Program dated February 2, 1995: Incorporated by reference to Exhibit 10.7.1 to the March 1995 10-Q.
10.8.1** Directors Stock Acquisition Plan: Incorporated by reference to Exhibit 10.14 to the 1991 10-K.
10.8.2** Amendment of Director Stock Acquisition Plan, dated April 30, 1992: Incorporated by reference to Exhibit 10.12.2 to the 1992 10-K.
10.9** Delta Woodside Industries, Inc. Long Term Incentive Plan: Incorporated by reference to Exhibit 10.2 to Registration Statement on Form S-4 of Delta Mills, Inc. (File No. 333-37617).
10.11 Registration Rights Agreement, dated as of August 25, 1997, by and among Delta Mills, Inc., Delta Mills Marketing, Inc. and NationsBanc Capital Markets, Inc.: Incorporated by reference to Exhibit 1.2 to Registration Statement on Form S- 4 of Delta Mills, Inc. (File No. 333-376-17).
10.12 Purchase Agreement relating to $150 million 9 5/8% Senior Notes due 2007, dated August 20, 1997, by and among Delta Mills, Inc., Delta Mills Marketing, Inc. and NationsBanc Capital Markets, Inc.: Incorporated by reference to Exhibit 1.1 to Registration Statement on Form S-4 of Delta Mills, Inc. (File No. 333-376-17).
10.13 See Exhibits 4.2, 4.2.1, 4.2.2, 4.2.3, 4.2.4, 4.2.4.1, 4.2.4.2, 4.2.5, and 4.2.6. Item 14 (Continued)
13 Annual Report to Shareholders of the Company for the fiscal year ended June 27, 1998.
21 Subsidiaries of the Company.
23.1 Report on Schedule and Independent Auditors' Consent.
* All reports previously filed by the Company with the Commission pursuant to the Exchange Act, and the rules and regulations promulgated thereunder, exhibits of which are incorporated to this Report by reference thereto, were filed under Commission File Number 1-10095.
** This is a management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
No report on Form 8-K was filed during the quarter ended June 27, 1998.
(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.
/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 /s/ E. Erwin Maddrey C. C. Guy Date E. Erwin Maddrey, II Date Director President, Chief Executive Officer and Director
/s/ James F. Kane /s/ Bettis C. Rainsford James F. Kane Date Bettis C. Rainsford Date Director Executive Vice President, Chief Financial Officer, Treasurer and Director
/s/ Max Lennon /s/ Robert W. Humphreys
Max Lennon Date Robert W. Humphreys Date Director Vice President - Finance
/s/ Buck A. Mickel Buck A. Mickel Date Director
EXHIBIT INDEX
4.2.4.2 Second Amendment to Credit Agreement
13 Annual Report to Shareholders of the Company for the fiscal year ended June 27, 1998.
21 Subsidiaries of the Company.
23.1 Report on Schedule and Independent Auditor's Consent.
ANNUAL REPORT ON FORM 10-K
ITEM 14(a) (1) and (2), (c) and (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED JUNE 27, 1998
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 June 27, 1998 are incorporated by reference in Item 8:
Consolidated balance sheets- June 27, 1998 and June 28, 1997
Consolidated statements of operations--Years ended June 27, 1998, June 28, 1997 and June 29, 1996.
Consolidated statements of shareholders' equity--Years ended June 27, 1998, June 28, 1997 and June 29, 1996.
Consolidated statements of cash flows--Years ended June 27, 1998, June 28, 1997 and June 29, 1996.
Notes to consolidated financial statements.
The following consolidated financial statement schedule of Delta Woodside Industries, Inc. is included in Item 14(d):
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.