Delta Woodside Industries, Inc. Announces Fourth Quarter and Fiscal Year 2004 Results

Business Wire, Oct 4, 2004

GREENVILLE, S.C. -- Delta Woodside Industries, Inc. (OTCBB: DLWI) reported net sales of $45.4 million for the 14 week quarter ended July 3, 2004, a decrease of 6.8% when compared to net sales of $48.7 million for the 13 week quarter ended June 28, 2003. The decrease from the prior year quarter was the result of a 15.8% reduction in unit sales partially offset by a 10.1% increase in average sales price. For the 53 week year ended July 3, 2004, the Company reported net sales of $174.4 million as compared to net sales of $177.2 million for the previous 52 week year ended June 28, 2003. The decrease was the result of a 5.0% decline in unit sales partially offset by 3.6% increase in average sales price. Unit sales declined in both the quarter and year periods primarily as a result of weaker retail sales partially offset by improved demand for military fabrics. Product mix changes accounted for the increases in average sales price.

The Company reported gross profit of $1.3 million for the quarter ended July 3, 2004 compared to gross profit of $4.9 million in the prior year quarter. This decrease was the result of reduced absorption of manufacturing costs due to reduced plant operating 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. For the year ended July 3, 2004 the Company reported gross profit of $8.0 million compared to gross profit of $17.0 million for the year ended June 28, 2003. This decrease for the year resulted principally from unabsorbed manufacturing costs associated with reduced plant operating schedules brought on by reduced customer demand.

Selling general and administrative expenses were $3.1 million for the quarter ended July 3, 2004 compared to $2.9 million in the prior year quarter. This increase was primarily due to the extra week of expenses in the current year 14 week quarter. Selling general and administrative expenses were $11.8 million for the year ended July 3, 2004 compared to $11.4 million for the prior year. This increase was primarily due to the extra week of expenses in the current year coupled with increased credit insurance costs associated with increased sales to customers based in the Caribbean.

The Company reported an operating loss of $2.6 million for the quarter ended July 3, 2004 compared to an operating profit of $2.0 million in the prior year quarter. For the year ended July 3, 2004, the Company reported an operating loss of $3.9 million compared to an operating profit of $5.8 million for the preceding year ended June 28, 2003. The decreases in operating profit were primarily the result of declines in gross profit as discussed above coupled with an impairment charge associated with the Company's Furman plant discussed below.

Interest expense was $1.2 million for the quarter ended July 3, 2004 compared to $1.2 million in the prior year quarter. Interest expense was $4.8 million for the year ended July 3, 2004 compared to $5.3 million for the prior year. At July 3, 2004, the Company's subsidiary Delta Mills, Inc. was in compliance with the covenants under its revolving credit facility, as amended, and with the covenants of its senior notes indenture dated August 25, 1997. Delta Mills, Inc. has made the September 1, 2004 semi-annual interest payment required by the senior notes indenture. At July 3, 2004, the Company had unused availability under its revolving credit facility of $12.6 million. Subsequent to July 3, 2004, the Company entered into further amendments to its revolving credit facility pursuant to which the maximum availability was reduced to $38 million and the maximum leverage ratio and fixed charge coverage ratio covenants were replaced with a minimum EBITDA covenant. The new covenant sets required minimum EBITDA levels for each quarter end of fiscal 2005 and provides that it will constitute an event of default if the Company and its lender fail to agree by the end of fiscal year 2005 to minimum EBITDA levels for the remainder of the term of the revolving credit facility. This amendment would not have changed the unused availability under the revolving credit facility as of July 3, 2004.

The Company reported a net loss of $2.9 million or $0.48 per diluted common share for the quarter ended July 3, 2004 compared to a net loss of $5.2 million or $0.89 per diluted common share for the prior year quarter. The net loss in the current year quarter includes a tax benefit of $1.0 million related to a reduction in tax reserves. The net loss in the prior year quarter includes tax expense of $8.4 million and a gain on extinguishments of debt of $2.3 million. For the year ended July 3, 2004, the Company reported a net loss of $7.7 million or $1.30 per diluted common share, compared to a net loss of $4.6 million or $0.79 per diluted common share, for the year ended June 28, 2003. The net loss in the year ended July 3, 2004 includes a tax benefit of $1.0 million related to a reduction in tax reserves. The net loss in the prior year includes tax expense of $8.8 million and a gain on extinguishments of debt of $3.6 million.