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Vincent Sellecchia of the Delafield Fund http://www.delafieldfund.com, provides the following stock idea on Delta Woodside Industries (DLW 5). Below is the write up.


Delta Woodside Industries has been a disappointment for many of their shareholders. Their stock was trading in the $12 area back in August of 1994 and has slowly slithered downward since then to the $5 area currently. Delta owns and operates essentially five primary businesses. There is a woven's, t-shirt, apparel, knit fabric and Nautilus (fitness equipment) division.

A few months ago, Delta made a decision to exit their knit and Nautilus business because they have been losing money. They are in the process of liquidating their knit business and trying to sell their Nautilus business. Delta's total outstanding debt at the end of the 3rd quarter was $234 million. At the end of the 4th quarter (ending June 30th), it was $194 million. "They will continue to take debt down sharply," says Vincent Sellecchia of the Delafield Fund, "They have paid down quite a bit of debt in the 4th quarter and will pay down a significant amount of debt in 1999 once their two businesses are completely sold off."

Delta's wovens business had revenues of $340 million for fiscal year 1998 (ending in June). That business earned $46 million for them. Their t-shirt business had $105 million in revenues and is in the process of moving their capacity offshore in order to cut costs. Vincent notes that business has been losing money but thinks it will return to profitability in 1999. Their apparel business which goes by the name "Duck Head," had revenues of $85 million in fiscal 1998 but Vincent thinks they will have revenues of $100 million + in 1999, with margins in the mid single digits. He figures that Delta will earn $1 in 1999 and has the potential of hitting $10 during that time period.

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