Delta Woodside Industries, Inc. reported net sales of $37.9 million for the quarter ended March 27, 2004, a decrease of 18.4% when compared to net sales of $46.5 million for the quarter ended March 29, 2003. The decrease from the prior year quarter was the result of reduced unit sales partially offset by a 6.0% increase in average sales price.
For the nine months ended March 27, 2004, the Company reported net sales of $129.0 million as compared to net sales of $128.5 million for the previous year nine months ended March 29, 2003. The increase was the result of a 1.2% increase in average sales price partially offset by a decline in unit sales. Unit sales declined in both the quarter and nine-month periods primarily as a result of weaker retail sales partially offset by improved demand for military fabrics. Product mix changes accounted for the increase in average sales price.
The Company reported an operating loss of $1.2 million for the quarter ended March 27, 2004 compared to an operating loss of $0.5 million in the prior year quarter. For the nine months ended March 27, 2004 the Company reported an operating loss of $1.3 million compared to an operating profit of $3.8 million for the nine months ended March 29, 2003.
The Company reported a net loss of $2.3 million or $0.40 per common share for the quarter ended March 27, 2004 compared to a net loss of $1.1 million or $0.19 per common share for the quarter ended March 29, 2003.
For the nine months ended March 27, 2004, the Company reported a net loss of $4.8 million or $0.82 per common share as compared to net income of $0.6 million and $0.10 per common share for the previous year's nine months ended March 29, 2003. The increase in operating loss in the current year quarter was the result of reduced absorption of manufacturing costs due to reduced running schedules and deteriorating margins on commodity products due to continued pressure from imports coupled with over capacity of domestic textile production, partially offset by an improved product mix. The operating loss for the current year nine month period resulted principally from unabsorbed manufacturing costs associated with reduced running schedules brought on by reduced customer demand.
For the current quarter ended March 27, 2004 the Company recorded an income tax benefit of $35,000. For the prior year quarter and nine months ended March 29, 2003, the Company recorded a tax benefit of $0.7 million and a tax expense of $0.4 million, respectively.
As a result of the operating loss in the current year third quarter, the Company's operating subsidiary Delta Mills, Inc. was not in compliance with the maximum leverage ratio covenant of its $50 million revolving credit agreement with GMAC at the end of the third quarter of fiscal 2004. GMAC has granted Delta Mills a waiver and amendment that waives the existing default with respect to the maximum leverage ratio covenant, temporarily amends the maximum leverage ratio covenant for the fourth quarter of fiscal 2004, and temporarily eliminates the fixed charge coverage ratio covenant for the fourth quarter of fiscal 2004. The waiver and amendment also reduces Delta Mills' availability under the credit facility by $7 million for the remaining term of the facility and increases the interest rates under the credit facility by 125 basis points; however, the interest rates will revert to their pre-amendment levels if Delta Mills has net income for fiscal 2005 and no event of default exists under the credit facility.
The New York Stock Exchange announced on April 20, 2004 that trading on the NYSE in the common stock of the Company, ticker symbol DLW, will be suspended prior to the opening of trading on Friday, April 23, 2004, and that the NYSE will subsequently delist the Company's common stock. The Company intends to move its listing to the Over the Counter Bulletin Board (OTC-BB) and expects its common stock to be quoted on the OTC Bulletin Board beginning at the opening of trading on Friday, April 23, 2004.
The Company was operating under a plan to address by March 31, 2004 its non-compliance with the NYSE's continued listing requirement to maintain an average global market capitalization of at least $15 million over a consecutive 30 trading-day period, but the Company was unable to return to compliance within the required time frame. Furthermore, the NYSE has announced that it is seeking to amend its continued listing criteria to require an average global market capitalization of $25 million. In addition, the NYSE has announced that it is seeking to amend its current continued listing criteria that require a listed company to maintain total stockholder's equity of $50 million if its average global market capitalization is less than $50 million to increase both thresholds to $75 million. It was evident to the Company that under the new NYSE continued listing criteria, the Company could meet neither the $25 million average global market capitalization requirement nor the $75 million total shareholder's equity requirement for companies with average global market capitalization of less than $75 million.
The Company has decided to move its listing to the OTC Bulletin Board for the foreseeable future. If business conditions improve sufficiently for the Company to meet the listing criteria of one of the major exchanges, the Company will consider the possibility of moving its listing to one of the major exchanges.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Delta Woodside Industries Inc.
(In Thousands, except per share data)
3 Mths Ended 9 Mths Ended
March 27, March 29, March 27, March 29,
2004 2003 2004 2003
-------- -------- --------- ---------
Net sales $37,919 $46,489 $129,000 $128,521
Cost of goods sold 36,241 43,649 122,290 116,451
-------- -------- --------- ---------
Gross profit 1,678 2,840 6,710 12,070
Selling, general and
administrative expenses 2,902 2,969 8,713 8,430
Impairment and restructuring
charges 398 398
Other income 28 48 729 536
-------- -------- --------- ---------
OPERATING PROFIT (LOSS) (1,196) (479) (1,274) 3,778
Other (expense) income:
Interest expense (1,172) (1,326) (3,540) (4,097)
Gain on extinguishment of
debt 1,303
-------- -------- --------- ---------
(1,172) (1,326) (3,540) (2,794)
-------- -------- --------- ---------
INCOME (LOSS) BEFORE
INCOME TAXES (2,368) (1,805) (4,814) 984
Income tax expense (benefit) (35) (705) 369
-------- -------- --------- ---------
NET INCOME (LOSS) $(2,333) $(1,100) $(4,814) $615
======== ======== ========= =========
Basic and diluted earnings
(loss) per share $(0.40) $(0.19) $(0.82) $0.10
