-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RdswGyn3gMcL7ZqYFlD5oOC8ZWOi3qYoSvGErXAzIHsHouEx6iErGzuRSdQt4tKy Pu+2D3B5aHK7bdhz1P9FRA== 0001015402-02-000421.txt : 20020414 0001015402-02-000421.hdr.sgml : 20020414 ACCESSION NUMBER: 0001015402-02-000421 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20011229 FILED AS OF DATE: 20020212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELTA WOODSIDE INDUSTRIES INC /SC/ CENTRAL INDEX KEY: 0000806624 STANDARD INDUSTRIAL CLASSIFICATION: BROADWOVEN FABRIC MILLS, COTTON [2211] IRS NUMBER: 570535180 STATE OF INCORPORATION: SC FISCAL YEAR END: 0628 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10095 FILM NUMBER: 02536624 BUSINESS ADDRESS: STREET 1: P O BOX 6126 CITY: GREENVILLE STATE: SC ZIP: 29606 BUSINESS PHONE: 8642554100 MAIL ADDRESS: STREET 1: P O BOX 6126 CITY: GREENVILLE STATE: SC ZIP: 29606 10-Q 1 doc1.txt 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 December 29, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ____________ Commission File number 1-10095 DELTA WOODSIDE INDUSTRIES, INC. ---------------------------------------------------- (Exact name of registrant as specified in its charter) SOUTH CAROLINA 57- 0535180 (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 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-5,830,575 shares as of February 12, 2002, following a 4:1 reverse stock split on February 5, 2002. 1
DELTA WOODSIDE INDUSTRIES, INC. INDEX PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements (Unaudited) Condensed consolidated balance sheets-- December 29, 2001 and June 30, 2001 3 Condensed consolidated statements of operations-- Three and Six months ended December 29, 2001 and December 30, 2000 4 Condensed consolidated statements of cash flows-- Six months ended December 29, 2001 and December 30, 2000 5 Notes to condensed consolidated financial statements-December 29, 2001 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-10 Item 3. Quantitative and Qualitative Disclosures about Market Risk 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings 11 Item 2. Changes in Securities and use of Proceeds 11 Item 3. Defaults upon Senior Securities 11 Item 4. Submission of Matters to a Vote of Security Holders 11 Item 5. Other Information 11 Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 12
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PART I. FINANCIAL INFORMATION - ----------------------------- ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS (In Thousands, except share and per share data) Delta Woodside Industries, Inc. December 29, 2001 June 30, 2001 ------------------- --------------- Unaudited ASSETS CURRENT ASSETS Cash and cash equivalents $ 13,497 $ 14,491 Accounts receivable: Factor 38,188 37,617 Less allowances for doubtful accounts and returns 51 51 ------------------- --------------- 38,137 37,566 Inventories Finished goods 9,443 13,241 Work in process 20,085 23,195 Raw materials and supplies 5,850 6,766 ------------------- --------------- 35,378 43,202 Deferred income taxes 3,340 2,966 Prepaid expenses and other current assets 299 547 ------------------- --------------- TOTAL CURRENT ASSETS 90,651 98,772 PROPERTY, PLANT AND EQUIPMENT Cost 168,910 166,226 Less accumulated depreciation 93,957 81,195 ------------------- --------------- 74,953 85,031 DEFERRED LOAN COSTS 1,470 1,680 NONCURRENT DEFERRED INCOME TAXES 10,418 4,959 OTHER ASSETS 46 74 ------------------- --------------- TOTAL ASSETS $ 177,538 $ 190,516 =================== =============== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Trade accounts payable $ 7,096 $ 8,570 Accrued employee compensation 1,121 2,339 Accrued and sundry liabilities 11,655 11,966 ------------------- --------------- TOTAL CURRENT LIABILITIES 19,872 22,875 LONG-TERM DEBT 83,815 83,815 DEFERRED COMPENSATION 6,980 6,608 SHAREHOLDERS' EQUITY Preferred Stock Common Stock - par value $.01 a share - authorized 50,000,000 shares, issued and outstanding 5,831,000 shares at December 29, 2001 and 5,809,000 shares at June 30, 2001,as adjusted (see Note D) 58 58 Additional paid-in capital 86,699 86,561 Accumulated deficit (19,886) (9,401) ------------------- --------------- TOTAL SHAREHOLDERS' EQUITY 66,871 77,218 Commitments and Contingencies ------------------- --------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 177,538 $ 190,516 =================== ===============
See notes to consolidated financial statements. 3
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In Thousands, except per share data) Delta Woodside Industries, Inc. Three Three Six Six Months Ended Months Ended Months Ended Months Ended December 29, December 30, December 29, December 30, 2001 2000 2001 2000 -------------- -------------- -------------- -------------- Net sales $ 44,140 $ 59,697 $ 81,117 $ 122,896 Cost of goods sold 42,432 53,780 78,335 107,705 -------------- -------------- -------------- -------------- Gross profit 1,708 5,917 2,782 15,191 Selling, general and administrative expenses 2,871 3,580 5,463 6,921 Impairment and restructuring charges 8,683 Other income (expense) 18 (12) 40 363 -------------- -------------- -------------- -------------- Operating Profit (Loss) (1,145) 2,325 (11,324) 8,633 Interest (expense) income: Interest expense (2,468) (2,703) (4,933) (5,674) Interest income 36 173 133 458 -------------- -------------- -------------- -------------- (2,432) (2,530) (4,800) (5,216) -------------- -------------- -------------- -------------- Income (Loss) before Income Taxes and Extraordinary Item (3,577) (205) (16,124) 3,417 Income tax expense (benefit) (1,251) (61) (5,639) 1,225 -------------- -------------- -------------- -------------- Income (Loss ) before Extraordinary Item (2,326) (144) (10,485) 2,192 Extraordinary gain (net of taxes) 946 1,585 -------------- -------------- -------------- -------------- Net Income (Loss) ($2,326) $ 802 ($10,485) $ 3,777 ============== ============== ============== ============== Basic and diluted earnings (loss) per share, as adjusted (Note D): Income (loss) before extraordinary item $ (0.40) $ (0.02) $ (1.80) $ 0.36 Extraordinary gain 0.00 0.16 0.00 0.26 -------------- -------------- -------------- -------------- Net earnings (loss) $ (0.40) $ 0.14 $ (1.80) $ 0.62 ============== ============== ============== ============== Weighted average number of shares outstanding 5,831,000 6,028,000 5,832,000 6,033,000 ============== ============== ============== ==============
See notes to consolidated financial statements. 4
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Delta Woodside Industries, Inc. (In Thousands) For the Six Months Ended December 29, 2001 December 30, 2000 ------------------- ------------------- OPERATING ACTIVITIES Net income (loss) ($10,485) $ 3,777 Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: Depreciation 4,551 5,557 Amortization 211 212 Decrease in deferred loan costs 783 Discount to face value on repurchase of bonds (3,242) Provision for impairment and restructuring 8,683 Change in deferred income taxes (5,833) 1,948 Deferred compensation 367 562 Changes in operating assets and liabilities 4,225 3,556 Other (125) ------------------- ------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 1,719 13,028 INVESTING ACTIVITIES Property, plant and equipment: Purchases (2,674) (1,956) Proceeds of dispositions of assets 450 Other 204 ------------------- ------------------- NET CASH USED BY INVESTING ACTIVITIES (2,674) (1,302) FINANCING ACTIVITIES Proceeds from revolving line of credit 3,003 Repayments of revolving line of credit (3,003) Repurchase and retirement of long term debt (28,021) Repurchase of common stock (39) (479) ------------------- ------------------- NET CASH USED BY FINANCING ACTIVITIES (39) (28,500) ------------------- ------------------- DECREASE IN CASH AND CASH EQUIVALENTS (994) (16,774) Cash and cash equivalents at beginning of year 14,491 19,385 ------------------- ------------------- CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 13,497 $ 2,611 =================== ===================
See notes to consolidated financial statements. 5 DELTA WOODSIDE INDUSTRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE A--BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of Delta Woodside Industries, Inc. ("the Company") have been prepared in accordance with accounting principles generally accepted in the United States of America 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 accounting principles generally accepted in the United States of America 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 six months ended December 29, 2001 are not necessarily indicative of the results that may be expected for the year ending June 29, 2002. 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 June 30, 2001. NOTE B-LONG-TERM DEBT, CREDIT ARRANGEMENTS, AND NOTES PAYABLE On August 25, 1997 a subsidiary of the Company, Delta Mills, Inc., ("DMI" or "Delta Mills"), issued $150 million of unsecured ten-year Senior Notes at an interest rate of 9.625%. These bonds will mature in August, 2007. At December 29, 2001, the outstanding balance of the notes was $83,815,000, unchanged from June 30, 2001. In August of 1997 a subsidiary of the Company, Delta Mills, Inc., ("DMI" or "Delta Mills"), obtained a secured five-year $100 million revolving line of credit subject to borrowing base limitations. The $100 million revolving line of credit was replaced by a new credit facility on March 31, 2000. Borrowings under the new credit facility are based on eligible accounts receivable and inventory of the Company, subject to a maximum $50 million availability limit. The facility is secured by the accounts receivable, inventory and capital stock of the Company. The interest rate on the credit facility is based on a spread over either LIBOR or a base rate. At each of June 30, 2001 and December 29, 2001, no amounts were outstanding under this facility. The Company's secured four-year $50 million revolving bank credit facility was amended October 5, 2001. The credit facility contains restrictive covenants that, among other things, require that the Delta Mills' Maximum Leverage Ratio, as defined therein, not exceed specified amounts. The agreement also restricts 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 amendment of October 5, 2001 substantially increases the permitted leverage ratio for the preceding four quarters ending with the third quarter of fiscal year 2002, and slightly reduces the permitted leverage ratio for the four quarters ending with the fourth fiscal quarter of fiscal year 2002 and subsequent quarters that Delta Mills is required to maintain pursuant to covenants in the agreement. The amendment also extends the term of the Revolving Credit Agreement to March 31, 2004, includes the lender's consent to the sale of Delta Mills' Furman Plant, which was announced August 22, 2001, and allows Delta Mills to exclude from the calculation of the leverage ratio the closing costs and continuing costs associated with the closing of its Furman Plant. During the three months ended December 29, 2001, the Company did not pay any dividends to Delta Woodside Industries, Inc. The Company assigns a substantial portion of its trade accounts receivable to GMAC Commercial Credit 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 receivables 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 General and Administrative Expense. 6
NOTE C - STOCKHOLDERS' EQUITY Activity in stockholders' equity during the six months ended December 29, 2001 is as follows (in thousands): Total Common Additional Paid Accumulated Stockholders' Stock In Capital Deficit Equity -------- ----------------- ------------ --------------- Balance at June 30, 2001 $ 58 $ 86,561 ($9,401) $ 77,218 Incentive stock award plan, shares issued 1 176 177 Share repurchases (1) (38) (39) Net Income (loss) (10,485) (10,485) -------- ----------------- ------------ --------------- Balance at December 29, 2001 $ 58 $ 86,699 ($19,886) $ 66,871 ======== ================= ============ ===============
NOTE D - REVERSE STOCK SPLIT The Company effected a 4:1 reverse split of its common stock on Tuesday, February 5, 2002. The Company's shareholders adopted an amendment to the Company's articles of incorporation that provides for the reverse split at a special meeting held on January 28, 2002. The shareholders authorized the Company's board of directors to determine whether to consummate the reverse split and to determine the ratio of the reverse split within a range of whole shares from 3:1 to10:1. The Company's board of directors set the ratio for the reverse split at 4:1. The Company paid cash in lieu of any fractional share in an amount based on the average of the closing sale prices of the Company's common stock (as adjusted to reflect the reverse split of shares) for the 20 trading days immediately prior to February 5, 2002 as reported in The Wall Street Journal. The total number of authorized shares of common stock and the par value of the common stock remain the same and were unaffected by the reverse split. The common stock purchase rights attached to the Company's common stock pursuant to its Shareholder Rights Agreement, dated December 10, 1999 as amended, with First Union National Bank as rights agent were adjusted in connection with the reverse stock split as required by the provisions of Section 11(a) of the Rights Agreement to prevent any dilution or enlargement of the rights. The exercise price of each right was increased from the pre-split $5.00 per quarter-share of common stock to $20.00 per quarter-share. Each share of common stock will continue to have only one right attached to it, and each right will continue to evidence the right to acquire one quarter share of the Company's common stock. All shares and per share amounts in the condensed consolidated financial statements have been retroactively restated in connection with the reverse stock split. 7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion contains certain "forward-looking statements". All statements, other than statements of historical fact, that address activities, events or developments that the Company expects or anticipates will or may occur in the future, including such matters as future revenues, future cost savings, future capital expenditures, business strategy, competitive strengths, goals, plans, references to future success and other such information are forward-looking statements. The words "estimate", "project", "anticipate", "expect", "intend", "believe" and similar expressions are intended to identify forward-looking statements. The forward-looking statements in this Quarterly Report are based on the Company's expectations and are subject to a number of business risks and uncertainties, any of which could cause actual results to differ materially from those set forth in or implied by the forward-looking statements. These risks and uncertainties include, among others, changes in the retail demand for apparel products, the cost of raw materials, competitive conditions in the apparel and textile industries, the relative strength of the United States dollar as against other currencies, changes in United States trade regulations and the discovery of unknown conditions (such as with respect to environmental matters and similar items). 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. The Company, through its Delta Mills operating division, sells a broad range of woven, finished apparel fabric primarily to branded apparel manufacturers and resellers. Delta Mills also sells camouflage fabric and other fabrics used in apparel sold to the United States Department of Defense. Delta Mills represents the only business segment of the Company. Net sales for the three months ended December 29, 2001 were $44.1 million as compared to $59.7 million in the first quarter of the prior fiscal year, a decrease of 26.1%. The decline in sales was primarily due to a reduction in sales unit volume that reflects the downward adjustment in market demand for the apparel industry. Some sales price declines also contributed to the decline in sales. For the six months ended December 29, 2001, net sales were $81.1 million as compared to $122.9 million for the six months ended December 30, 2000. Gross profit was $1.7 million and 3.9% of sales in the second quarter of fiscal year 2002. This compares to gross profit of $5.9 million and 9.9% of sales in the prior year quarter. Compared to the previous year, the negative results for the current quarter were primarily due to decreased production schedules that were caused by the decline in sales and market demand. Continued price pressure also had a negative impact on the current quarter results. The decline in gross profit was somewhat offset by reduced manufacturing costs as a result of the cost reduction plan put in place at the beginning of fiscal year 2002. For the six months ended December 29, 2001, gross profit was $2.8 million or 3.4% of net sales as compared to $15.2 million or 12.4% of net sales for the same six month period of the prior fiscal year. Selling, general and administrative expense (SG&A) was $2.9 million and 6.5% of net sales for the second quarter of fiscal year 2002 compared to SG&A of $3.6 million and 6.0% of net sales for the prior year quarter. Selling, general and administrative expense (SG&A) was $5.5 million and 6.7% of net sales for the six months ended December 29, 2001 as compared to SG&A of $6.9 million and 5.6% of net sales for the prior year six months ended December 30, 2000. The reduction in SG&A represents reductions in expenses associated with administrative salaries and various general expense items. Some of these reductions were part of the cost reduction plan put in place at the beginning of fiscal year 2002. The Company reported an operating loss of $1.1 million in the current quarter compared to an operating profit of $2.3 million in the previous year quarter and an operating loss of $10.2 million last quarter. Last quarter's operating loss included asset impairment and restructuring charges of $8.6 million associated with closing the Furman Plant, as announced August 22, 2001. The current quarter's operating loss included continuing costs of $329,000 associated with closed facilities. Excluding the asset impairment and continuing costs of closed facilities, the Company's operating loss during the current quarter would have been $816,000, an improvement over the $1.5 million operating loss in the first quarter. For the six months ended December 29, 2001, the Company's operating loss was $11.3 million as compared to an operating profit of $8.6 million for the six months ended December 30, 2000. Excluding impairment and restructuring charges, the Company's operating loss would have been $2.7 million for the six months ended December 29, 2001. The decline in operating profit was due to the factors discussed above. 8 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED Interest expense net of interest income was $2.4 million for the quarter ended December 29, 2001, compared to $2.5 million for the prior year quarter. Interest expense net of interest income for the six months ended December 29, 2001 was $4.8 million compared to $5.2 million for the same period in fiscal 2001. The reduction in interest expense is primarily due to the reduction in the senior notes and was somewhat offset by a reduction in interest income due to a decline in interest rates. The Company's subsidiary, Delta Mills, Inc., amended its $50 million revolving bank credit facility effective October 5, 2001. At each of June 30, 2001 and December 29, 2001, no amounts were outstanding under this facility. The amendment substantially increases the permitted leverage ratio for the preceding four quarters ending with the third quarter of fiscal year 2002, and slightly reduces the permitted leverage ratio for the four quarters ending with the fourth fiscal quarter of fiscal year 2002 and subsequent quarters that Delta Mills is required to maintain pursuant to covenants in the agreement. The amendment also extends the term of the Revolving Credit Agreement from March 31, 2003 to March 31, 2004, includes the lender's consent to the sale of Delta Mills' Furman Plant, which was announced August 22, 2001, and allows Delta Mills to exclude from the calculation of the leverage ratio the closing costs and continuing costs associated with the closing of its Furman Plant. The income tax benefit for the quarter was $1.3 million. This compares to an income tax benefit of $61,000 in the previous year quarter. The income tax benefit for the six months ended December 29, 2001 was $5.6 million. This compares to income tax expense of $1.2 million for the six months ended December 30, 2000. The effective tax rate in both periods was approximately 35%. At December 29, 2001, the Company had regular tax loss carry forwards of $39 million for federal purposes and $13 million for state purposes. The Federal loss carry forwards expire at various intervals from 2012 to 2021 while the state loss carry forwards expire at various intervals beginning in 2003. At December 29, 2001, the Company's gross deferred tax assets are not reduced by a valuation allowance due to management's belief that it is more likely than not that the gross deferred tax assets will be realized in the future. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Over the next two quarters, management will continue to evaluate the need for a valuation allowance based upon the Company's current operations and projections of future earnings. The potential tax effect of establishing a full valuation allowance is approximately $14 million. The Company reported a net loss of $2.3 million or $0.40 per common share for the quarter ended December 29, 2001 compared to a net income of $802,000 or $.14 per common share for the quarter ended December 30, 2000. The Company's net income for the quarter ended December 30, 2000 included an after tax extraordinary gain of $946,000 or $0.16 per common share. The Company's net loss for the quarter ended December 29, 2001 included continuing costs of closed facilities of $214,000 or $.04 per share on an after tax basis. The Company reported a net loss of $10.5 million or $1.80 per common share for the six months ended December 29, 2001 compared to net income of $3.8 million or $.62 per common share for the six months ended December 30, 2000. The Company's net income for the six months ended December 30, 2000 included an after tax extraordinary gain of $1.6 million. This extraordinary gain occurred when the Company's subsidiary, Delta Mills, Inc., purchased $15.7 million face amount of its 9.625 % Senior Notes for $14.2 million. There was no extraordinary gain for the current fiscal year. The net loss for the six months ended December 29, 2001 included asset impairment and continuing costs associated with closed facilities of $5.9 million or $1.00 per share on an after tax basis. The decline in net income was due to the factors discussed above. In the quarter ended December 29, 2001 the Company purchased, in the open market, 105 shares, as adjusted (see Note D), of its common stock. These shares were retired at the time of purchase. The Company believes that current cash balances combined with the cash flow generated by its operations will be sufficient to service its debt, to satisfy its day to day working capital requirements and to fund its planned capital expenditures. The Company expects that no amounts will be outstanding against its $50 million revolver at the end of fiscal year 2002. 9 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED On October 3, 2001 the FASB issued statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" that is applicable to financial statements issued for fiscal years beginning after December 15, 2001. The FASB's new rules on asset impairment supersede FASB statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", and provide a single accounting model for long-lived assets to be disposed of. The Company will adopt the Statement effective for fiscal 2003. The adoption of this standard is not expected to materially impact the Company. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 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 December 29, 2001, a 10% decline in market price of the Company's fixed price contracts would have had a negative impact of approximately $1.5 million on the value of the contracts. As of June 30, 2001, such a 10% decline would have had a negative impact of $2.1 million. The decline in the potential negative impact from June 30, 2001 to December 29, 2001 is due principally to current cotton commitments being at lower average prices and because of a decline in the quantity of cotton fixed as compared to the previous period. 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings* Item 2. Changes in Securities and Use of Proceeds The Company effected a 4:1 reverse split of its common stock on Tuesday, February 5, 2002. The Company's shareholders adopted an amendment to the Company's articles of incorporation that provides for the reverse split at a special meeting held on January 28, 2002. The shareholders authorized the Company's board of directors to determine whether to consummate the reverse split and to determine the ratio of the reverse split within a range of whole shares from 3:1 to10:1. The Company's board of directors set the ratio for the reverse split at 4:1. The Company paid cash in lieu of any fractional share in an amount based on the average of the closing sale prices of the Company's common stock (as adjusted to reflect the reverse split of shares) for the 20 trading days immediately prior to February 5, 2002 as reported in The Wall Street Journal. The total number of authorized shares of common stock and the par value of the common stock remain the same and were unaffected by the reverse split. The common stock purchase rights attached to the Company's common stock pursuant to its Shareholder Rights Agreement, dated December 10, 1999 as amended, with First Union National Bank as rights agent were adjusted in connection with the reverse stock split as required by the provisions of Section 11(a) of the Rights Agreement to prevent any dilution or enlargement of the rights. The exercise price of each right was increased from the pre-split $5.00 per quarter-share of common stock to $20.00 per quarter-share. Each share of common stock will continue to have only one right attached to it, and each right will continue to evidence the right to acquire one quarter share of the Company's common stock. Item 3. Defaults upon Senior Securities* Item 4. Submission of Matters to a Vote of Security Holders The following summarizes the votes at the Special Meeting of the Company's shareholders held on January 28, 2002.
Broker For Against Withheld Abstentions Non-Votes ---------- ------- -------- ----------- --------- Reverse Stock Split 20,672,014 362,138 29,772 - -----------
Item 5. Other Information* Item 6. Exhibits and Reports on Form 8-K a) Listing of Exhibits 3.1.6 Articles of Amendment to the Articles of Incorporation of the Company filed with the South Carolina Secretary of State on February 5, 2002. b) No report on Form 8-K was filed during the fiscal quarter ended December 29, 2001. * Items 1,3, and 5 are not applicable. 11 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 Woodside Industries, Inc. ------------------------------- (Registrant) Date February 12, 2002 By: /s/ W. H. Hardman, Jr. ---------------------------- ------------------------------ W.H. Hardman, Jr. Chief Financial Officer 12 EX-3.1.6 3 doc2.txt Exhibit 3.1.6 13 STATE OF SOUTH CAROLINA SECRETARY OF STATE ARTICLES OF AMENDMENT TYPE OR PRINT CLEARLY IN BLACK INK - ---------------------------------------- Pursuant to Section 33-10-106 of the 1976 South Carolina Code of Laws, as amended, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation: 1. The name of the corporation is Delta Woodside Industries, Inc. ---------------------------------- 2. Date of Incorporation May 31, 1972 ------------ 3. Agent's Name and Address William J. Hardman, Jr., 100 Augusta Street, ---------------------------------------------- Greenville, SC 29601 ---------------------- 4. On January 28, 2002 the corporation adopted the following Amendment(s) of ----------------- its Articles of Incorporation: (Type or attach the complete text of each Amendment) Effective on February 5, 2002, upon the filing of these Articles of Amendment of the Articles of Incorporation of the Corporation on such date (the "Effective Date"), each four (4) shares of Common Stock of the Corporation then issued and outstanding automatically shall be combined into one (1) share of fully paid and nonassessable Common Stock of the Corporation. The number of authorized shares of the Common Stock and the par value of the Common Stock shall remain unchanged. There shall be no fractional shares of Common Stock issued. Each holder of shares of Common Stock who would otherwise be entitled to receive a fractional share shall be entitled to receive a cash payment in lieu thereof equal to the fraction to which the stockholder would otherwise be entitled multiplied by the average of the closing sale prices of the Common Stock (as adjusted to reflect the reverse split of shares hereby) for the 20 trading days immediately prior to the Effective Date, as reported in The Wall Street Journal. If such price or prices are not available, the fractional share payment will be based on such other price as determined by the Board of Directors of the Corporation. 5. The manner, if not set forth in the Amendment, in which any exchange, reclassification, or cancellation of issued shares provided for in the Amendment shall be effected, is as follows: (if not applicable, insert "not applicable" or "NA"). Set forth in paragraph 4. 6. Complete either "a" or "b", whichever is applicable. a. X Amendment(s) adopted by shareholder action. At the date of adoption of the Amendment, the number of outstanding shares of each voting group entitled to vote separately on the Amendment, and the vote of such shares was:
Number of Number of Number of Votes Number of Undisputed Voting Outstanding Votes Entitled Represented at Shares Group Shares to be Cast The Meeting For or Against - ------ ----------- -------------- --------------- ------------------------------ Common 23,324,548 23,324,548 21,063,924 20,672,014 362,138 Stock
*NOTE: Pursuant to Section 33-10-106(6)(i) of the 1976 South Carolina Code of Laws, as amended, the corporation can alternatively state the total number of undisputed shares cast for the amendment by each voting group together with a statement that the number of votes cast for the amendment by each voting group was sufficient for approval by that voting group. 14 b. [ ] The Amendment(s) was duly adopted by the incorporators or board of directors without shareholder approval pursuant to Section 33-6-102(d), 33-10-102 and 33-10-105 of the 1976 South Carolina Code of Laws, as amended, and shareholder action was not required. 7. Unless a delayed date is specified, the effective date of these Articles of Amendment shall be the date of acceptance for filing by the Secretary of State (See Section 33-1-230(b) of the 1976 South Carolina Code of Laws, as amended)___________________________________________________________________ Date: February 5, 2002 Delta Woodside Industries, Inc. ---------------- --------------------------------------- Name of Corporation Effective Hour: 9:00 a.m. ---------- --------------------------------------- Signature William H. Hardman, Jr., VP & Secretary --------------------------------------- Type or Print Name and Office FILING INSTRUCTIONS ------------------- 1. Two copies of this form, the original and either a duplicate original or a conformed copy, must be filed. 2. If the space in this form is insufficient, please attach additional sheets containing a reference to the appropriate paragraph in this form. 3. Filing fees and taxes payable to the Secretary of State at time of filing application. Filing Fee $ 10.00 Filing Tax 100.00 ------ TOTAL $110.00 Return to: Secretary of State P.O. Box 11350 Columbia, SC 29211 15 -----END PRIVACY-ENHANCED MESSAGE-----