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Delta Apparel Reports First Quarter Fiscal 2020 Results

GREENVILLE, S.C., Feb. 03, 2020 (GLOBE NEWSWIRE) -- Delta Apparel, Inc. (NYSE American: DLA), a leading provider of core activewear and lifestyle apparel products, today announced financial results for its fiscal 2020 first quarter ended December 28, 2019.

Robert W. Humphreys, the Company’s Chairman and Chief Executive Officer, commented, “As we previously reported, our first quarter sales results were impacted by the shortened holiday calendar combined with an earlier shipping cut-off for in-hands holiday receipts. With that said, we are pleased to have delivered strong gross margin performance from our Delta Group segment that more than offset our sales performance during the quarter. We continue to drive efficiencies throughout our business while scaling our integrated vertical manufacturing platform and believe we are well-positioned to capitalize on the great growth opportunities that lie ahead for Delta Apparel.”

For the first quarter ended December 28, 2019:

  • Net sales were $95.9 million, down 5.7% from $101.7 million in the prior year first quarter. Net sales in the Delta Group segment and Salt Life Group segment decreased 5.8% and 4.7%, respectively, from the prior year period.
  • Gross profit was $19.9 million, a 7.1% increase from $18.6 million in the prior year first quarter. Gross margin improved 240 basis points to 20.7% driven by Delta Group’s improved process efficiencies further leveraging the segment’s integrated vertical manufacturing platform.  
  • Selling, general and administrative (“SG&A”) expenses as a percentage of sales was 18.8%, compared to 16.5% in the prior year first quarter. The increase in SG&A expenses principally resulted from investments in our distribution expansion not yet fully leveraged against revenues, coupled with higher equity compensation costs.
  • Operating income for the quarter was $2.6 million compared to $41 thousand in the prior year first quarter, which included a $2.5 million discrete expense in connection with the resolution of litigation surrounding a 2016 customer bankruptcy.  
  • Net income for the quarter was $0.9 million, or $0.13 per diluted share, compared to a net loss of $1.1 million, or $0.17 per share, in the prior year period. When adjusted for the discrete $2.5 million pre-tax expense, or $0.31 per share, impact of the litigation settlement, adjusted earnings for the first quarter of fiscal 2019 was $0.14 per diluted share.

During the quarter, the Company spent approximately $2.5 million on capital expenditures. The Company did not repurchase shares during the period, and approximately $9.5 million remains available under the Company’s authorized share repurchase program as of quarter-end. Total inventory at the end of first quarter fiscal 2020 increased to $197.3 million compared to $179.1 million at fiscal 2019 year-end, primarily driven from the seasonal build of inventory as well as broader product offerings within Activewear and Salt Life. Total debt, including capital lease financing, as of the end of first quarter fiscal 2020 was $147.4 million, up approximately 9% from the fiscal 2019 year-end due primarily to the seasonal higher working capital along with investments in distribution facilities.

Conference Call
The Company will hold a conference call with senior management to discuss its financial results today at 4:30 PM ET. The Company invites you to join the call by dialing 888-394-8218. If calling from outside the United States, please dial 323-794-2588. A live webcast of the conference call will be available at www.deltaapparelinc.com. Please visit the website at least 15 minutes early to register for the teleconference webcast and download any necessary software. A replay of the call will be available through March 3, 2020. To access the telephone replay, participants should dial toll-free 844-512-2921. International callers can dial 412-317-6671. The access code for the replay is 6108016.

About Delta Apparel, Inc.
Delta Apparel, Inc., along with its operating subsidiaries, DTG2Go, LLC, Salt Life, LLC, and M.J. Soffe, LLC, is a vertically-integrated, international apparel company that designs, manufactures, sources, and markets a diverse portfolio of core activewear and lifestyle apparel products under the primary brands of Salt Life®, COAST®, Soffe®, and Delta. The Company is a market leader in the direct-to-garment digital print and fulfillment industry, bringing DTG2Go technology and innovation to the supply chain of its customers. The Company specializes in selling casual and athletic products through a variety of distribution channels and tiers, including outdoor and sporting goods retailers, independent and specialty stores, better department stores and mid-tier retailers, mass merchants and e-retailers, the U.S. military, and through its business-to-business e-commerce sites. The Company’s products are also made available direct-to-consumer at its branded retail stores and on its websites at www.saltlife.com, www.coastapparel.com, www.soffe.com and www.deltaapparel.com as well as through its branded retail stores. The Company’s operations are located throughout the United States, Honduras, El Salvador, and Mexico, and it employs approximately 8,500 people worldwide. Additional information about the Company is available at www.deltaapparelinc.com.

Cautionary Note Regarding Forward-Looking Statements
This press release may contain “forward-looking” statements that involve risks and uncertainties. Any number of factors could cause actual results to differ materially from anticipated or forecasted results, including, but not limited to, the volatility and uncertainty of cotton and other raw material prices and availability; the general U.S. and international economic conditions; competitive conditions in the apparel industry; restrictions on our ability to borrow capital or service our indebtedness; deterioration in the financial condition of our customers and suppliers and changes in the operations and strategies of our customers and suppliers; changing consumer preferences or trends; our ability to successfully open and operate new retail stores; changes in economic, political or social stability at our offshore locations; significant interruptions within our manufacturing or distribution facilities or other operations; our ability to attract and retain key management; significant changes in our effective tax rate; interest rate fluctuations increasing our obligations under our variable rate indebtedness; the ability to raise additional capital; the ability to grow, achieve synergies and realize the expected profitability of acquisitions; the volatility and uncertainty of energy, fuel and other costs; material disruptions in our information systems; compromises of our data security; significant litigation in either domestic or international jurisdictions; recalls, claims and negative publicity associated with product liability issues; the ability to protect our trademarks and other intellectual property; the impairment of intangible assets; changes in international trade regulations; our ability to comply with trade regulations; changes in employment laws or regulations or our relationship with employees; foreign currency exchange rate fluctuations; negative publicity resulting from violations of manufacturing standards or labor laws or unethical business practices by our suppliers and independent contractors; the illiquidity of our shares; price volatility in our shares and the general volatility of the stock market; and the other factors set forth in the "Risk Factors" contained in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission and as updated in our subsequently filed Quarterly Reports on Form 10-Q. Except as may be required by law, Delta Apparel, Inc. expressly disclaims any obligation to update these forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.

Company Contact:

Deborah Merrill, 864-232-5200 x6620
investor.relations@deltaapparel.com

Investor Relations and Media Contact:
ICR, Inc.

Investors:
Tom Filandro, 646-277-1235

Media:
Jessica Liddell, 203-682-8208
DLAPR@icrinc.com 

SELECTED FINANCIAL DATA:          
(In thousands, except per share amounts)          
    Three Months Ended    
    Dec 28, 2019   Dec 29, 2018    
             
Net Sales $   95,889     $   101,675      
Cost of Goods Sold     75,996         83,105      
Gross Profit     19,893         18,570      
             
Selling, General and Administrative     18,073         16,784      
Other (Income) Expense, Net     (817 )       1,745      
Operating Income     2,637         41      
             
Interest Expense, Net     1,802         1,765      
             
Income (Loss) Before Provision For (Benefit From) Income Taxes     835         (1,724 )    
             
Provision For (Benefit From) Income Taxes     44         (499 )    
             
Consolidated Net Earnings (Loss)     791         (1,225 )    
             
Net Loss Attributable to Non-Controlling Interest     (132 )       (76 )    
             
Net Earnings (Loss) Attributable to Shareholders $   923     $   (1,149 )    
             
Weighted Average Shares Outstanding          
  Basic     6,950         6,924      
  Diluted     7,072         6,924      
             
Net Earnings (Loss) per Common Share          
  Basic $   0.13     $   (0.17 )    
  Diluted $   0.13     $   (0.17 )    
             
             
    Dec 28,2019   Sep 28, 2019   Dec 29, 2018
    (Unaudited)   (Audited)   (Unaudited)
             
Current Assets          
  Cash $   433     $   605     $   558  
  Receivables, Net     55,477         60,887         56,857  
  Inventories, Net     197,315         179,107         187,653  
  Prepaids and Other Assets     3,698         2,999         3,670  
Total Current Assets     256,923         243,598         248,738  
             
Noncurrent Assets          
  Property, Plant & Equipment, Net     61,255         61,404         54,883  
  Goodwill and Other Intangibles, Net     59,052         59,504         60,625  
  Deferred Income Taxes     1,514         1,514         1,924  
  Operating Lease Assets     41,996         -          -   
  Investment in Joint Venture     10,689         10,388         9,399  
  Other Noncurrent Assets     2,584         1,580         1,760  
Total Noncurrent Assets     177,090         134,390         128,591  
             
Total Assets $   434,013     $   377,988     $   377,329  
             
             
Current Liabilities          
  Accounts Payable and Accrued Expenses $   74,089     $   73,111     $   80,995  
  Current Portion of Contingent Consideration     2,700         2,790         638  
  Current Portion of Finance Leases     6,822         6,434         5,106  
  Current Portion of Operating Leases     8,497         -          -   
  Current Portion of Long-Term Debt     7,337         6,540         8,176  
Total Current Liabilities     99,445         88,875         94,915  
             
Noncurrent Liabilities          
  Long-Term Taxes Payable     3,875         3,977         3,862  
  Long-Term Contingent Consideration     5,970         6,304         9,644  
  Long-Term Finance Leases     12,734         12,836         11,512  
  Long-Term Operating Leases     34,430         -          -   
  Long-Term Debt     120,468         109,296         109,322  
  Deferred Income Taxes     1,561         1,519         2,404  
  Other Noncurrent Liabilities     1,119         1,293         315  
Total Noncurrent Liabilities     180,157         135,225         137,059  
             
  Common Stock     96         96         96  
  Additional Paid-In Capital     58,825         59,855         58,658  
  Equity Attributable to Non-Controlling Interest     (413 )       (281 )       17  
  Retained Earnings     137,860         136,937         127,546  
  Accumulated Other Comprehensive (Loss) Income     (838 )       (969 )       (237 )
  Treasury Stock     (41,119 )       (41,750 )       (40,725 )
Equity Attributable to Delta Apparel, Inc.     154,411         153,888         145,355  
             
Total Liabilities and Equity $   434,013     $   377,988     $   377,329