-----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, HysO0ndvSEpsJWty0eSJbQ33kYB13KVvYuycnJ3PGxOBYf/U/n1vpOZ6Au/1OfFO dbKZJVRptyZ56A99D8UK/g== 0000897101-97-001153.txt : 19971114 0000897101-97-001153.hdr.sgml : 19971114 ACCESSION NUMBER: 0000897101-97-001153 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAKOTAH INC CENTRAL INDEX KEY: 0000859944 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED TEXTILE PRODUCTS [2390] IRS NUMBER: 460339860 STATE OF INCORPORATION: SD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23604 FILM NUMBER: 97713548 BUSINESS ADDRESS: STREET 1: ONE N PARK LN CITY: WEBSTER STATE: SD ZIP: 57274-0120 BUSINESS PHONE: 6053454646 MAIL ADDRESS: STREET 1: ONE NORTH PARK LANE CITY: WEBSTER STATE: SD ZIP: 57274-0120 10-Q 1 UNITED STATES SECURITIES & EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 1997 Commission File Number 0-23604 DAKOTAH, INCORPORATED (Exact Name of Registrant as Specified in Its Charter) South Dakota 46-0339860 - ------------------------------- ---------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation of Organization) Identification Number) One North Park Lane Webster, SD 57274 ------------------------------------------------- (Address of Principal Executive Offices, Zip Code) Registrant's Telephone Number, Including Zip Code: (605) 345-4646 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 proceeding 12 months 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, 3,499,755 shares outstanding as of November 5, 1997. DAKOTAH, INCORPORATED INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets (Unaudited): September 30, 1997 and December 31,1996 Statements of Operations (Unaudited): Three month and nine month periods ended September 30, 1997, and September 30, 1996 Statements of Cash Flows (Unaudited): Nine month periods ended September 30, 1997, and September 30, 1996 Notes to Financial Statements: September 30, 1997 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION Items 1 through 5 have been omitted since items are inapplicable or answer is negative Item 6. Exhibits and Reports on Form 8-K (a.) Exhibit Number: Description: 27.1 Financial Data Schedule (b.) Reports on Form 8-K None DAKOTAH, INCORPORATED BALANCE SHEETS (Unaudited)
September 30, December 31, ASSETS 1997 1996 ----------- ----------- CURRENT ASSETS Cash and cash equivalents $ 8,538 $ 2,690 Accounts receivable, less allowance for doubtful accounts of $432,000 in 1997 and $382,000 in 1996 9,535,170 7,538,724 Inventories 19,643,987 9,555,897 Prepaid expenses and other assets 329,869 735,929 Income taxes receivable 331,988 Deferred income taxes 496,000 496,000 ----------- ----------- Total current assets 30,345,552 18,329,240 PROPERTY, PLANT AND EQUIPMENT - AT COST Land 36,000 36,000 Buildings and improvements 2,425,418 2,334,516 Leasehold improvements 122,362 123,731 Machinery and equipment 3,274,038 3,009,792 Office equipment, furniture and fixtures and other 1,874,589 958,758 ----------- ----------- 7,732,407 6,462,797 Less accumulated depreciation & amortization 3,115,626 2,555,767 ----------- ----------- 4,616,781 3,907,030 OTHER ASSETS Deferred income taxes 185,000 185,000 Long-lived assets not placed in service 1,088,049 499,490 Other 14,200 9,200 ----------- ----------- 1,287,249 693,690 ----------- ----------- $36,249,582 $22,929,960 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Outstanding checks in excess of bank balances $ 888,268 Notes payable to bank 16,764,555 $ 7,123,000 Current maturities of notes payable and capital lease obligations 273,847 150,696 Current maturities of notes payable to officers 288,800 332,139 Accounts payable 4,856,715 2,134,845 Accrued liabilities Compensation and related benefits 857,398 925,739 Other 631,815 716,217 Income taxes payable 187,079 ----------- ----------- Total current liabilities 24,561,398 11,569,715 LONG -TERM LIABILITIES Long-term portion of notes payable and capital lease obligations 1,884,129 783,423 Long-term portion of notes payable to officers 129,162 STOCKHOLDERS' EQUITY Common stock, par value $.01; 10,000,000 shares authorized; issued & outstanding shares 3,499,755 34,998 34,998 Additional contributed capital 7,004,839 6,904,156 Retained earnings 2,764,218 3,508,506 ----------- ----------- 9,804,055 10,447,660 ----------- ----------- $36,249,582 $22,929,960 =========== ===========
The accompanying notes are an integral part of these statements. DAKOTAH, INCORPORATED STATEMENTS OF OPERATIONS (Unaudited)
For the three months ended September 30, For the nine months ended September 30, 1997 1996 1997 1996 ---- ---- ---- ---- Net sales $ 13,158,468 $ 12,592,179 $ 26,696,554 $ 26,556,734 Cost of goods sold 9,667,854 9,448,414 19,846,030 19,818,811 ------------ ------------ ------------ ------------ Gross profit 3,490,614 3,143,765 6,850,524 6,737,923 Operating expenses Selling 1,436,096 1,453,401 3,641,549 3,532,083 General and administrative 1,316,336 868,939 3,582,539 2,485,991 ------------ ------------ ------------ ------------ 2,752,432 2,322,340 7,224,088 6,018,074 ------------ ------------ ------------ ------------ Operating profit (loss) 738,182 821,425 (373,564) 719,849 Other income (expense) Interest (414,125) (187,730) (767,724) (391,577) Gain on sale of equipment 100,000 106,867 Other (60,000) (85,000) ------------ ------------ ------------ ------------ (414,125) (147,730) (767,724) (369,710) Earnings (loss) before income taxes 324,057 673,695 (1,141,288) 350,139 Income tax expense (benefit) 94,000 222,730 (397,000) 116,250 ------------ ------------ ------------ ------------ NET EARNINGS (LOSS) $ 230,057 $ 450,965 $ (744,288) $ 233,889 ============ ============ ============ ============ Net earnings (loss) per share $ 0.07 $ 0.13 $ (0.21) $ 0.07 ============ ============ ============ ============ Weighted average common shares outstanding 3,499,755 3,499,755 3,499,755 3,499,755 ============ ============ ============ ============
The accompanying notes are an integral part of these statements. DAKOTAH, INCORPORATED STATEMENTS OF CASH FLOWS (Unaudited)
For the nine months ended September 30, 1997 1996 ---- ---- Cash flows from operating activities: Net earnings (loss) $ (744,288) $ 233,889 Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities Depreciation and amortization 559,859 547,669 Compensation to outside consultant 100,683 50,000 Gain on Sale of Equipment (106,867) Changes in assets and liabilities: Accounts receivable (1,996,446) (2,703,663) Inventories (10,088,090) (5,445,136) Prepaid expenses and other assets 406,060 (474,411) Income taxes receivable (331,988) Accounts payable 2,721,870 3,305,746 Accrued liabilities (152,743) 515,244 Income taxes payable (187,079) ------------ ------------ Total adjustments (8,967,874) (4,311,418) ------------ ------------ Net cash used in operating activities (9,712,162) (4,077,529) Cash flows from investing activities: Capital expenditures (766,903) (1,462,897) Acquisition of long-lived assets not placed in service (588,559) Other (5,000) 106,867 ------------ ------------ Net cash used in investing activities (1,360,462) (1,356,030) Cash flows from financing activities: Outstanding checks in excess of bank balances 888,268 Net borrowings under notes payable to bank 9,641,555 5,142,592 Proceeds from issuance of long-term obligations 880,000 300,000 Proceeds from borrowings from officers 25,000 Principal payments on long-term obligations (158,850) (481,232) Principal payments on notes payable to officers (197,501) ------------ ------------ Net cash provided by financing activities 11,078,472 4,961,360 Net increase (decrease) in cash and cash equivalents 5,848 (472,199) Cash and cash equivalents at beginning of period 2,690 477,330 ------------ ------------ Cash and cash equivalents at end of period $ 8,538 $ 5,131 ============ ============ Supplemental disclosure of non-cash investing/financing activity: Acquisition of computer hardware through capital lease arrangement $ 502,707 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 676,548 $ 341,376 Income taxes $ 141,210
The accompanying notes are an integral part of these statements. DAKOTAH, INCORPORATED NOTES TO FINANCIAL STATEMENTS NOTE A: BASIS OF PRESENTATION The accompanying unaudited condensed financial statements have been prepared in accordance with the instructions of Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, the unaudited condensed financial statements contain all adjustments consisting of normal recurring accruals necessary to present fairly the financial position of the Company as of September 30, 1997, the results of operations for the three and nine month periods ended September 30, 1997 and 1996, and the cash flows for the nine month periods ended September 30, 1997 and 1996. These results are not necessarily indicative of results which may be expected for the year as a whole. The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE B: INVENTORIES Inventories are stated at the lower of cost (first-in, first-out method) or market and consist of the following: September 30, 1997 December 31, 1996 ------------------ ----------------- Raw Materials $10,235,350 $ 5,722,944 Work In Progress 1,937,032 1,667,023 Finished Goods 7,471,605 2,165,930 ----------- ----------- $19,643,987 $ 9,555,897 =========== =========== NOTE C: NEW ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board (FASB) has issued Statement of Financial Accounting Standards No. 128 "Earnings Per Share" which is effective for financial statements issued after December 15, 1997. Early adoption of the new standard is not permitted. The new standard eliminates primary and fully diluted earnings per share and requires presentation of basic and diluted earnings per share together with disclosure of how the per share amounts were computed. Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the weighted-average common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. The effect of adopting this new standard has not been determined. In June 1997, the FASB issued Statement No. 130 "Reporting Comprehensive Income" and Statement No. 131 "Disclosures about Segments of an Enterprise and Related Information" which are effective for fiscal years beginning after December 15, 1997. Statement No. 130 will require the Company to display an amount representing total comprehensive income, as defined by the statement, as part of the Company's basic financial statements. Comprehensive income will include items such as unrealized gains or losses on certain investment securities and foreign currency items. Statement No. 131 will require the Company to disclose financial and other information about its business segments, their products and services, geographic areas, major customers, revenues, profits, assets and other information. The adoption of these two statements is not expected to have a material effect on the financial statements of the Company. NOTE D: NOTES PAYABLE TO BANK During the second quarter of 1997, the Company refinanced its credit facility, and further amended it in the third quarter of 1997. The total amount available under the revolving note, which is due on demand, is limited to the lesser of $17,500,000 or a defined borrowing base of eligible accounts receivable and inventory, outstanding amounts under the term note, plus $1,000,000. Advances under the revolving note, based on inventory balances, eligible accounts receivable, and the additional $1,000,000, provide for monthly interest payments at 3%, 1% and 4%, respectively, above the bank's prime rate (11.5%, 9.5% and 12.5% respectively, at September 30, 1997). Advances under the term note, which is due on demand and which requires monthly principal payments of $33,333, provide for monthly interest payments at 1% above the bank's prime rate. The outstanding balances on the revolving note and the term note were $14,864,555 and $1,900,000 at September 30, 1997. The outstanding balances on the previous revolving note and term note were $6,415,000 and $708,000 at December 31, 1996. The current credit facility contains affirmative and negative covenants including, among other things, provisions for minimum net earnings and net worth requirements and limitations on capital expenditures. Additionally, the company may not incur additional borrowings, sell certain assets, acquire other businesses or pay cash dividends without prior consent. NOTE E: RECLASSIFICATIONS Certain amounts from the 1996 financial statements have been reclassified to conform to the 1997 presentation. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW: Dakotah(R) Inc. (the "Company") designs and manufactures decorative pillows, decorative throws, blankets, bedroom ensembles and other home accessory products, such as footstools, chairpads and table linens. The Company's objective has been to build a strong brand image associated with fashionable styling and high quality products. It markets its products (primarily under the Dakotah(R) and Polarfleece(R) names and various licensed names) to a broad range of major retailers, including department stores, specialty retailers, mass merchandisers and mail order houses, both domestic and international. Showrooms for the Company's products, which support sales, are located across the country in New York, Atlanta, Chicago, Denver and Seattle. RESTATEMENT OF SECOND AND THIRD QUARTER 1996 FORM 10-Q'S. During the course of the Company's 1996 annual close procedures, the Company noted that it had inadvertently overlooked certain items during the preparation of its 1996 second and third quarter Form 10-Q's. Upon identification of those matters, the Company amended the respective Form 10-Q's to adjust for those items. The discussion and analysis herein reflects these amendments. RESULTS OF OPERATIONS: The following table sets forth the percentage relationship to net sales of certain items in the Company's statements of operations for the three and nine month periods ended September 30, 1997 and 1996.
Percentage of Net Sales Percentage of Net Sales for the three month for the nine month period ended September 30, period ended September 30, 1997 1996 1997 1996 ----------------------------------------------------------- Net Sales 100.0% 100.0% 100.0% 100.0% Gross Profit 26.5 25.0 25.7 25.4 Selling Expenses 10.9 11.6 13.6 13.3 General & Administrative 10.0 6.9 13.4 9.4 Operating Profit (Loss) 5.6 6.5 (1.4) 2.7 Interest Expense 3.1 1.5 2.9 1.5 Gain on Sale of Equipment 0.8 0.4 Earnings (Loss) Before Income Taxes 2.5 5.4 (4.3) 1.3 Net Earnings (Loss) 1.7 3.6 (2.8) 0.9
NET SALES increased 1% to $26,697,000 for the nine months ended September 30, 1997 from $26,557,000 in the same period of 1996. Net sales increased 4% from $12,592,000 in the third quarter of 1996 to $13,158,000 in the third quarter of 1997. The increase in net sales in the first nine months of 1997, as compared to the first nine months of 1996, is due primarily to an increase in the Company's Polarfleece(R) line of products and bedding ensembles, offset by a decrease in sales of pillows, chairpads and table linens. The results also reflect the negative effects on production time as a result of (1) the Company's consolidation of its primary warehouse and shipping and receiving facility to the main Webster, SD manufacturing facility, (2) the move of the Webster, SD pillow finishing manufacturing equipment to the main Webster, SD manufacturing facility, (3) the comprehensive reconfiguration of the main Webster, SD manufacturing facility, (4) the effect of the severe winter weather in early 1997 and (5) inadequate fabric delivery from certain suppliers which adversely effected the Company's ability to meet delivery expectations of certain customers. The increase in net sales for the third quarter of 1997 from the third quarter of 1996 is the result of increased sales of the Company's Polarfleece(R) line of products and bedding ensembles, offset by a decrease in sales of decorative pillows, chairpads, non-fleece throws and table linens. The trend of sales not meeting expectations beginning in the third quarter is continuing in the fourth quarter of 1997. Unless the Company receives a significant unexpected influx or cancellation of orders, at this time, the Company expects fourth quarter sales to be approximately $14 million, which is approximately $1 million less than 1996 fourth quarter sales. Management believes that the failure to meet expectations during the fourth quarter is primarily due to the lost momentum of certain products in July, August and early September related to poor fabric delivery performance by significant suppliers and lost sales at the retail level related to warmer than normal weather in September and October. Additionally, sales are being negatively affected by the late arrival of Polarfleece(R) Shop signs that were planned for many department stores. GROSS PROFIT PERCENTAGES increased from 25.4% in the first nine months of 1996 to 25.7% for the same period of 1997. During the third quarter of 1997, compared to the same period of 1996, gross profit percentages increased to 26.5% from 25.0%. Gross profit margins increased during the first nine months of 1997 as compared to the first nine months of 1996 as a result of an improved product mix and overall improved labor efficiencies in 1997 resulting from the negative effects in April, 1996, of the startup of the Redfield, SD manufacturing facility. However, these gross profit margin improvements were adversely effected in 1997 as compared to 1996 by the costs associated with the Company's efforts to build capacity and infrastructure in the second half of 1996 for the Fall selling season of 1996 and anticipated sales volume in 1997 and indirect costs associated with the Company's move of its Webster, SD warehouse and pillow finishing manufacturing and reconfiguration. The improved product mix for the third quarter of 1997 was comprised of increased volume of the Company's Polarfleece(R) line of products, improved margins in bedding and accessories, and a decrease in lower margin products, such as chair pads and table linens, partially offset by a decline in the volume of decorative pillow sales. SELLING EXPENSES grew from $3,532,000 in the first nine months of 1996 to $3,642,000 in the first nine months of 1997. This increase of $110,000 is primarily the result of (1) increased cost of showroom rent, supplies and decorating of approximately $88,000, (2) increased sales support and shipping personnel to support the planned growth of sales of approximately $155,000, (3) a decrease in sales commissions of $146,000 resulting from changes in the compensation structure and product mix, and (4) various other factors including increased participation in trade shows, international marketing and lower advertising costs. As a percentage of net sales, selling expenses increased from 13.3% in the first nine months of 1996 to 13.6% in the first nine months of 1997 as a result of higher selling expenses and consistent sales levels. GENERAL AND ADMINISTRATIVE EXPENSES increased from $2,486,000 in the first nine months of 1996 to $3,583,000 during the same period in 1997. The increase is primarily due to (1) an increase in administrative, clerical, and management staff of approximately $330,000 to support the planned growth of the Company, the need to provide staff to accomplish the planned computer conversion and re-engineering of the Company's processes and systems, and a growth in product development and design personnel, (2) an increase of approximately $100,000 in recruiting costs for senior management and staff positions, (3) increased professional fees of approximately $95,000 primarily related to expanding product distribution to international markets and increased accounting fees, (4) increased computer and communication costs of approximately $135,000, primarily to support the planned computer conversion and the increased needs of our customers and (5) a general increase in costs relating to the Company's planned computer conversion and planned sales in the fourth quarter of 1997. As a percentage of net sales, general and administrative expenses increased from 9.4% in the first nine months of 1996 to 13.4% in the first nine months of 1997 as a result of the above mentioned increases and consistent sales levels. As stated below, the Company announced a reduction of general and administrative positions which is consistent with the Company's expected sales volume in the fourth quarter and into 1998 and the expected efficiencies resulting from the planned computer conversion in 1998. INTEREST EXPENSE increased from $392,000 in the first nine months of 1996 to $768,000 in the first nine months of 1997. This increase was primarily the result of higher average borrowings to finance capital expenditures and the buildup of inventory to support the Company's expected sales in the third and fourth quarter of 1997. CONSOLIDATION OF MANUFACTURING FACILITIES. The Company announced during the fourth quarter of 1997 the consolidation of its Polarfleece(R) manufacturing in Redfield, SD and the closing of its facility in Platte, SD, which employed approximately 39 full time personnel and 13 temporary and part time personnel. Despite the closing at the Platte, SD facility, the Company remains positioned to accept and deliver on new Polarfleece(R) orders in excess of $2.5 million, new pillow orders in excess of $1.5 million and other products in excess of $1.5 million. Management of the Company does not believe that this consolidation will result in a material charge to the statement of operations for the year ended December 31, 1997. Additionally, until significant new orders are received or currently produced finished goods and work in process inventories are depleted, the Company has commenced termination of an estimated fifty direct labor, indirect labor and general and administrative positions and expects to temporarily lay-off an additional fifty to seventy employees. Management of the Company does not believe that these actions will result in a material charge to the statement of operations for the year ended December 31, 1997. LIQUIDITY AND CAPITAL RESOURCES Working capital was $5.8 million as of September 30, 1997 and $6.8 million as of December 31, 1996. Accounts receivable were approximately $9,535,000 as of September 30, 1997 and $7,500,000 as of December 31, 1996. The increase in the first nine months of 1997 was due to higher sales over the last month of the third quarter of 1997 as compared to the last month of the fourth quarter of 1996. The allowance for doubtful accounts increased from $382,000 at December 31, 1996 to $432,000 at September 30, 1997. The Company estimates the allowance for doubtful accounts based on the best information available to management. In addition to a substantial increase in accounts receivable balances and new customers, the Company had a number of customers go into bankruptcy during 1996 for which bankruptcy proceedings have not been concluded. Management believes that the allowance is adequate to cover any losses as a result of these items. The seasonality of the Company's production and sales cycle and the planned increase of sales volume have resulted in increased working capital requirements during 1997. In addition, the buying habits of the Company's customers indicate a trend away from substantial advance stocking orders to smaller, more frequent shipping orders. This trend requires the Company to carry larger levels of work in progress and finished goods inventories than those historically maintained. Inventories were approximately $19,644,000 as of September 30, 1997 and $9,600,000 as of December 31, 1996. The increase in the first nine months of 1997 as compared to December 31, 1996, is primarily related to an increase of finished goods and raw materials of Polarfleece(R) to support the Company's planned sales in the fourth quarter of 1997. In addition, because of the lack of expected new orders and the cancellation of existing orders, the reduction of inventory during the fourth quarter will not be as significant as expected. Accounts payable were approximately $4,857,000 as of September 30, 1997 and $2,135,000 as of December 31, 1996. The increase as of September 30, 1997 as compared to year end 1996 is primarily related to an increase in inventory. The net cash used in operating activities during the first nine months of 1997 was primarily due to the Company's buildup of inventory to support the Company's anticipated sales in the fourth quarter of 1997. The net cash used in operating and investing activities during the first nine months of 1997 was primarily provided by the Company's credit facilities and additional long-term borrowings. The Company has used and expects to continue using its revolving line of credit to meet its short-term working capital requirements. During the second quarter of 1997, the Company refinanced its credit facility. The Company also amended its credit facility in the third quarter of 1997. The new credit facility, which expires in June, 1999, provides adequate funding for the Company's buildup of inventory, primarily Polarfleece(R) throws to allow the Company to maximize the sales opportunities in the fourth quarter, optimize production capacity and better serve its customers. The total amount available under the revolving note, which is due on demand, is limited to the lesser of $17,500,000 or a defined borrowing based of eligible accounts receivable and inventory, outstanding amounts under the term note, plus $1,000,000. Advances under the revolving note, based on inventory balances, eligible accounts receivable, and the additional $1,000,000, provide for monthly interest payments at 3%, 1% and 4%, respectively, above the bank's prime rate (11.5%, 9.5% and 12.5%, respectively, at September 30, 1997). Advances under the term note, which is due on demand and which requires monthly principal payments of $33,333, provide for monthly interest payments at 1% above the bank's prime rate. The outstanding balances on the revolving note and the term note were $14,864,555 and $1,900,000 at September 30, 1997. The outstanding balances on the previous revolving note and term note were $6,415,000 and $708,000 at December 31, 1996. As of September 30, 1997, the Company had approximately $730,000 available under its revolving note which was approximately $990,000 less than the calculated availability under its defined borrowing base. The Company did not incur any borrowings against the additional $1,000,000 during the quarter and does not expect to incur any such advances during the fourth quarter of 1997. For the nine month period ended September 30, 1997, the Company's capital expenditures were $1,270,000. These capital expenditures include $503,000 to upgrade computer hardware and refinance operating leases existing prior to the upgrade, approximately $300,000 was used to purchase additional manufacturing and transportation equipment, and $250,000 was used for the purchase of additional computer network workstation hardware and software. The remaining $217,000 was used primarily for plant and office space remodeling and expansion and the purchase of additional transportation equipment. The Company expects to spend an additional $250,000 for the remainder of 1997 in conjunction with its planned computer conversion and to upgrade existing production facilities and equipment. In addition the Company expects to complete negotiations for the expansion of its facilities in Sisseton, SD, which will be financed through the issuance of a long term lease purchase agreement and the exchange of its current facility in Sisseton, SD. This transaction is not expected to close until the second quarter of 1998 and is not expected to have a material effect on the Company's financial statements. Upon termination of the officers' stock appreciation program in March, 1994, the Company became indebted to the Company's President and a former Executive Vice President in the aggregate amount of $1,318,000. As of September 30, 1997, the total outstanding indebtedness was $264,000 compared to $461,000 at December 31, 1996. This indebtedness bears interest at 6% per annum and is payable in varying installments through January 1998. The Company believes that cash flows generated from operations and funds available as a result of its borrowing capacity will be adequate to meet its short-term and long-term working capital, projected capital expenditures and other financing needs. FORWARD LOOKING STATEMENTS Forward looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward looking statements involve risks and uncertainties, including, without limitation, continued acceptance of the Company's products, cancellation of orders, increased levels of competition for the Company, new products and technological changes, the Company's dependence upon third party suppliers, and intellectual property rights. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registered has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DAKOTAH, INCORPORATED November 11, 1997 By: /s/ TROY JONES, JR. ----------------------- Troy Jones, Jr. Chief Executive Officer November 11, 1997 By: /s/ WILLIAM R. RETTERATH ---------------------------- William R. Retterath Chief Financial Officer (Principal Financial and Accounting Officer) EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 8,538 0 9,967,170 432,000 19,643,987 30,345,552 7,732,407 3,115,626 36,249,582 24,561,398 1,884,129 0 0 34,998 9,769,057 36,249,582 26,696,554 26,696,554 19,846,030 19,846,030 0 82,672 767,724 (1,141,288) (397,000) (744,288) 0 0 0 (744,288) (.21) 0
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