Delta Mills Q2 Sales Declines 18.8%; Posts Profit

Delta Mills, Inc. reported net sales of $35.9 million for the quarter ended December 28, 2002, compared to net sales of $44.1 million for the quarter ended December 29, 2001. Sales for the current year quarter decreased 18.8% from sales for the previous year quarter. For the six months ended December 28, 2002 the Company reported net sales of $82.0 million compared to net sales of $81.1 million for the six months ended December 29, 2001.

The Company reported operating profit of $1.2 million for the quarter ended December 28, 2002 compared to an operating loss of $1.1 million for the quarter ended December 29, 2001. For the six months ended December 28, 2002 the Company reported operating profit of $4.3 million compared to an operating loss of $11.3 million for the six months ended December 29, 2001. The operating loss reported for the previous year’s six month period included impairment and restructuring expenses associated with closed facilities of $8.7 million. For the quarter and six months ending December 28, 2002, the Company recorded a before tax gain of $0.6 million and $1.3 million respectively from the repurchase of a portion of its 9 5/8% senior notes. There was no gain recorded in this category for the previous year’s corresponding periods.

The Company reported net income of $0.3 million for the quarter ended December 28, 2002 compared to a net loss of $2.4 million for the quarter ended December 29, 2001. For the six months ended December 28, 2002 the Company reported net income of $1.7 million compared to a net loss of $10.6 million for the six months ended December 29, 2001. The net loss for the six months ended December 29, 2001 included impairment and restructuring expenses associated with closed facilities of $5.6 million on an after tax basis.

W.F. Garrett, President and CEO, commented, “Holiday apparel sales were weaker than expected and most retailers heavily discounted to keep inventories in line. Core cotton products were affected the most by these discounts. On the positive side, synthetic products sold well and our non-retail fabrics are showing a positive trend.”

CONSOLIDATED STATEMENTS OF OPERATIONS
Delta Mills Inc.
(In Thousands)

                            3 Mths     3 Mths     6 Mths    6 Mths 
                             Ended      Ended      Ended     Ended
                            Dec. 28,   Dec. 29,   Dec. 28,  Dec. 29, 
                             2002       2001        2002      2001
                           --------  ---------   --------  --------
Net sales                  $35,853     $44,140    $82,032   $81,117

Cost of goods sold          32,158      42,432     72,792    78,330
                           --------  ---------   --------  --------
Gross profit                 3,695       1,708      9,240     2,787
Selling, general and 
 administrative expenses     2,566       2,871       5,461    5,463
Impairment and restructuring 
 expenses                                                     8,683
Other income                    23          18         488       31
                            --------  ---------   --------  --------
  OPERATING PROFIT (LOSS)    1,152      (1,145)      4,267  (11,328)
Other (expense) income:
  Interest expense          (1,240)     (2,544)     (2,771)  (4,999)
  Interest income                           36                  133
  Gain on extinguishment 
   of debt                     565                   1,303
                            --------  ---------   --------  --------             
                              (675)     (2,508)     (1,468)  (4,866)
                            --------  ---------   --------  --------               
INCOME(LOSS) BEFORE INCOME 
 TAXES                         477      (3,653)      2,799  (16,194)
Income tax expense (benefit)   184      (1,251)      1,074   (5,639)
                             --------  ---------   --------  --------                
NET INCOME (LOSS)             $293     $(2,402)     $1,725  $(10,555)