Delta Apparel, Inc. (NYSE American:DLA), a leading provider of
basic and branded apparel, headwear and related accessories, today
announced financial results for the fourth quarter and fiscal year
ended September 30, 2017.
Full Year ResultsFor the fiscal
year ended September 30, 2017, net income increased to $10.5
million, or $1.33 per diluted share, compared with $9.0 million, or
$1.12 per diluted share, in fiscal year 2016, a 19% increase.
Net sales for the 2017 fiscal year were $385.1 million, compared to
$425.2 million in the prior year. The divestiture of the
Company’s Junkfood business during the year was largely responsible
for the sales decline. Adjusting for the Junkfood divestiture, net
sales were down 1.4% year-over-year primarily due to continued
retail weakness, customer bankruptcies and severe weather-related
market disruptions. Despite gross margin improvement in both
the basics and branded segments, overall gross margins declined 100
basis points from a higher mix of basics sales during the
year.
Quarterly ResultsFor the fourth
quarter ended September 30, 2017, net income was $2.1 million, or
$0.27 per diluted share, compared to $2.3 million, or $0.29 per
diluted share, in the prior year quarter. Net sales during the
quarter were $91.3 million, compared with $114.4 million in the
prior year fourth quarter. The divestiture of Junkfood, which
generated net sales of nearly $17 million in the prior year fourth
quarter, principally drove the decline. Severe weather
disruptions, along with the general impact of retail door closings
in the market, also contributed to the lower sales in the
quarter. Despite solid quarter-over-quarter margin growth in
the Salt Life and Activewear businesses, overall gross margins were
down to 18.2% from 20.9% in the prior year period, while SG&A
as a percentage of sales improved to 16.3% from 17.7% in the 2016
fourth quarter, both primarily resulting from the divestiture of
Junkfood.
Basics Segment ReviewBasics
segment net sales increased 1.1% year-over-year to $280.3 million
due to strong growth in private label sales and solid gains in the
ad-specialty and regional screen print channels, which were
partially offset by continued softness in the retail licensing
channel. Fourth quarter net sales in the basics segment were $69.6
million compared to $73.7 million in the prior year quarter. For
the full year, revenue growth and higher gross margins led to
operating income in the basics segment of $24.2 million, an 8.4%
improvement from the prior year.
Activewear sales were up 1.3% year-over-year
driven by record revenue in the FunTees private label business and
continued strong growth in higher-margin fashion basics
products. Art Gun began the 2017 fiscal year with a strong
and well-executed holiday season and also finished nicely, with
several previously delayed customer launches materializing in the
fourth quarter. Despite these delayed launches as well as the
operational disruptions caused by multiple hurricanes, Art Gun
sales were down only 1% from the prior year. Art Gun’s
momentum gains to close the year and its planned geographic
expansion to enhance service levels through quicker delivery
capabilities both point to solid growth opportunities for Art Gun’s
digital print and fulfillment model, which supports the evolving
trends shaping the future of retail.
Branded Segment ReviewBranded
segment net sales for the full year were $104.8 million, compared
to $148.1 million in the prior year. Excluding Junkfood, net sales
in the branded segment declined $8.5 million, a decrease of 8.7%
year-over-year. Fourth quarter net sales in the branded segment
were $21.7 million, compared with $40.7 million in the fiscal 2016
fourth quarter, with the Junkfood divestiture causing $17 million
of the decline. Gross margins improved year-over-year in the
branded segment and operating income was $3.9 million in fiscal
year 2017, down from $7 million in the prior year due principally
to the divestiture of Junkfood.
Product line enhancements and new retail doors
carried Salt Life to another period of growth and expansion.
Salt Life net sales increased by 6.3% for the year, including
growth of 6.9% for the fourth quarter, despite the impacts of
hurricanes in key markets. Salt Life’s eCommerce business
grew nearly 40% year-over-year and achieved record revenue.
Sales in the Soffe business were down $7.9
million year-over-year primarily due to a loss of comparable sales
in fiscal year 2017 associated with the bankruptcies of The Sports
Authority and other customers. Soffe continued to build new
relationships with strategic and independent sporting goods
retailers and e-retailers throughout the year and expects its
military programs and unique made-in-the-USA production capability
to provide a strong foundation for future growth. Soffe’s B2C
eCommerce business had a strong showing for the year, with 21%
sales growth over the prior year.
Robert W. Humphreys, Delta Apparel, Inc.’s
Chairman and Chief Executive Officer, commented, “Fiscal 2017 was a
busy year for Delta Apparel. The year began with Hurricane
Matthew and ended with Hurricanes Harvey and Irma, all three of
which disrupted some of our key markets. In the months
between, the retail sector and consumer demand remained weak,
resulting in less apparel retail doors in the market. While
our net sales reflected the impacts of those events and the
Junkfood divestiture, our margins held strong and we ended the year
with a 19% increase in earnings.
“Delta Apparel’s ability to navigate challenging
market conditions is the product of several factors, one of which
is our efforts to rationalize our business and focus our resources
on areas with higher growth and earnings potential. The sale of the
Junkfood business resulted from those efforts. While that
transaction reduced our revenue for the year, it enabled us to
lower our debt, fund additional share repurchases and improve our
investment and acquisition flexibility.
Our resilience also stems from our diversified
distribution channels and our proactive measures to reduce fixed
costs, realign our manufacturing operations and focus on our
omni-channel marketing efforts to reach our end consumers.
The benefits of our manufacturing realignment are apparent in
our profitability for the year and we actually exceeded our
incremental cost-reduction goals for that initiative. We
expect the bottom line effects of the realignment to become more
visible as our manufacturing output increases.
“Salt Life again turned in strong operating
performance and continues its growth trajectory. Its branded
stores in California are growing and we expect our new stores in
Daytona Beach, Florida and Columbus, Georgia to further serve as
valuable consumer touch-points. Salt Life continues to broaden its
consumer reach through the expansion of its social media and team
ambassador programs, which provide a platform of over eight million
“followers” through which it can amplify its lifestyle brand
message.
“All in all, it was a good year for Delta
Apparel and we expect the major initiatives we completed to benefit
us in fiscal year 2018 and beyond. Although the retail
environment is likely to remain challenging, we believe we are off
to a good start as we move into our new fiscal year.”
Conference CallThe Company will
hold a conference call with senior management to discuss its
financial results today at 4:30 p.m. ET. The Company invites
you to join the call by dialing 866-548-4713. If calling from
outside the United States, please dial 323-794-2093. 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 December 28, 2017. 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 9805545.
About Delta Apparel, Inc.
Delta Apparel, Inc., along with its operating subsidiaries, M.
J. Soffe, LLC, Salt Life, LLC and Art Gun, LLC, is an international
design, marketing, manufacturing, and sourcing company that
features a diverse portfolio of lifestyle basic and branded
activewear apparel, headwear and related accessories. The
Company specializes in selling casual and athletic products across
distribution tiers, including specialty stores, boutiques,
department stores, mid-tier and mass chains, and the U.S.
military. The Company’s products are made available
direct-to-consumer on its websites at www.saltlife.com,
www.coastapparel.com, www.soffe.com, and
www.deltaapparel.com. The Company's operations are located
throughout the United States, Honduras, El Salvador, and Mexico,
and it employs approximately 7,700 people worldwide. Additional
information about the Company is available at
www.deltaapparelinc.com.
Cautionary Note Regarding Forward-Looking
Statements
This press release contains “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, the general U.S. and international economic conditions, the
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, our ability to predict or react to
changing consumer preferences or trends, our ability to
successfully open and operate new retail stores in a timely and
cost-effective manner, pricing pressures and the implementation of
cost reduction strategies, changes in economic, political or social
stability at our offshore locations, disruptions at our
manufacturing and other facilities, our ability to attract and
retain key management, the effect of unseasonable or significant
weather conditions on purchases of our products, and other factors
set forth in the "Risk Factors" contained in our Annual Reports on
Form 10-K filed with the Securities and Exchange
Commission. 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.
Delta Apparel, Inc.
Deborah Merrill
Chief Financial
Officer
864-232-5200 ext. 6620
or
Investor Relations
Sally
Wallick 404-806-1398
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SELECTED FINANCIAL DATA: |
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(In thousands, except per share amounts) |
|
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|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
|
Sep 30, 2017 |
|
Oct 1, 2016 |
|
Sep 30, 2017 |
|
Oct 1, 2016 |
|
|
|
|
|
|
|
|
|
|
|
Net
Sales |
$ |
91,327 |
|
|
$ |
114,366 |
|
|
$ |
385,082 |
|
|
$ |
425,249 |
|
|
Cost of Goods Sold |
|
74,663 |
|
|
|
90,458 |
|
|
|
304,360 |
|
|
|
331,750 |
|
|
Gross Profit |
|
16,664 |
|
|
|
23,908 |
|
|
|
80,722 |
|
|
|
93,499 |
|
|
|
|
|
|
|
|
|
|
|
|
Selling, General and Administrative |
|
14,884 |
|
|
|
20,258 |
|
|
|
67,408 |
|
|
|
76,578 |
|
|
Restructuring Costs |
|
- |
|
|
|
78 |
|
|
|
- |
|
|
|
1,741 |
|
|
Change in Fair Value of Contingent
Consideration |
|
(300 |
) |
|
|
- |
|
|
|
(900 |
) |
|
|
(600 |
) |
|
Gain on Sale of Business |
|
- |
|
|
|
- |
|
|
|
(1,295 |
) |
|
|
- |
|
|
Other Income, Net |
|
(257 |
) |
|
|
(375 |
) |
|
|
(670 |
) |
|
|
(552 |
) |
|
Operating Income |
|
2,337 |
|
|
|
3,947 |
|
|
|
16,179 |
|
|
|
16,332 |
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
1,143 |
|
|
|
1,277 |
|
|
|
5,011 |
|
|
|
5,287 |
|
|
|
|
|
|
|
|
|
|
|
|
Income Before (Benefit From) Provision For Income
Taxes |
|
1,194 |
|
|
|
2,670 |
|
|
|
11,168 |
|
|
|
11,045 |
|
|
|
|
|
|
|
|
|
|
|
|
(Benefit From) Provision For Income Taxes |
|
(905 |
) |
|
|
365 |
|
|
|
657 |
|
|
|
2,081 |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
$ |
2,099 |
|
|
$ |
2,305 |
|
|
$ |
10,511 |
|
|
$ |
8,964 |
|
|
|
|
|
|
|
|
|
|
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Weighted Average Shares
Outstanding |
|
|
|
|
|
|
|
|
|
Basic |
|
7,387 |
|
|
|
7,695 |
|
|
|
7,531 |
|
|
|
7,726 |
|
|
|
Diluted |
|
7,713 |
|
|
|
8,004 |
|
|
|
7,882 |
|
|
|
7,979 |
|
|
|
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|
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Net Income per Common Share |
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.28 |
|
|
$ |
0.30 |
|
|
$ |
1.40 |
|
|
$ |
1.16 |
|
|
|
Diluted |
$ |
0.27 |
|
|
$ |
0.29 |
|
|
$ |
1.33 |
|
|
$ |
1.12 |
|
|
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|
|
|
|
|
|
Sep 30, 2017 |
|
Oct 1, 2016 |
|
|
|
|
|
|
|
|
|
|
|
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|
Current Assets |
|
|
|
|
|
|
|
|
|
Cash |
|
|
$ |
572 |
|
|
$ |
397 |
|
|
|
|
|
Receivables, Net |
|
|
|
47,557 |
|
|
|
63,609 |
|
|
|
|
|
Income Tax Receivable |
|
|
|
352 |
|
|
|
86 |
|
|
|
|
|
Inventories, Net |
|
|
|
174,551 |
|
|
|
164,247 |
|
|
|
|
|
Note Receivable |
|
|
|
2,016 |
|
|
|
- |
|
|
|
|
|
Prepaids and Other Assets |
|
|
|
2,646 |
|
|
|
4,145 |
|
|
|
|
Total Current Assets |
|
|
|
227,694 |
|
|
|
232,484 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Assets |
|
|
|
|
|
|
|
|
|
Property, Plant & Equipment, Net |
|
|
|
42,706 |
|
|
|
43,503 |
|
|
|
|
|
Goodwill and Other Intangibles, Net |
|
|
|
36,068 |
|
|
|
57,651 |
|
|
|
|
|
Deferred Income Taxes |
|
|
|
5,002 |
|
|
|
5,246 |
|
|
|
|
|
Other Noncurrent Assets |
|
|
|
6,332 |
|
|
|
5,768 |
|
|
|
|
Total Noncurrent Assets |
|
|
|
90,108 |
|
|
|
112,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
|
$ |
317,802 |
|
|
$ |
344,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
Accounts Payable and Accrued Expenses |
|
|
$ |
64,887 |
|
|
$ |
73,101 |
|
|
|
|
|
Current Portion of Long-Term Debt |
|
|
|
7,548 |
|
|
|
9,192 |
|
|
|
|
Total Current Liabilities |
|
|
|
72,435 |
|
|
|
82,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
|
Long-Term Debt |
|
|
|
85,306 |
|
|
|
106,603 |
|
|
|
|
|
Other Noncurrent Liabilities |
|
|
|
4,174 |
|
|
|
3,741 |
|
|
|
|
Total Noncurrent Liabilities |
|
|
|
89,480 |
|
|
|
110,344 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' Equity |
|
|
|
155,887 |
|
|
|
152,015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders'
Equity |
|
|
$ |
317,802 |
|
|
$ |
344,652 |
|
|
|
|
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