Delta Apparel, Inc. (NYSE American:DLA), a leading provider of
basic and branded apparel, headwear and related accessories, today
announced financial results for its fiscal year 2018 first quarter
ended December 30, 2017.
Net sales for the fiscal year 2018 first quarter
were $90.3 million, an increase of $14.4 million, or 19%, from
prior year first quarter sales of $75.9 million excluding the $9.4
million of sales from the Company’s since-divested Junkfood
business. Net sales for the fiscal year 2018 first quarter
increased by $5.0 million, or 5.9%, from the $85.3 million reported
for the prior year first quarter that includes sales from the
since-divested Junkfood business. Significantly, each of the
Company’s business units achieved double-digit sales growth over
the prior year period, led by increases of 28% and 26% at Soffe and
Art Gun, respectively, and 20% growth at Activewear.
Gross margins for the quarter improved
significantly within the branded segment, expanding to 37.2% from
31.1% in the prior year period. This increase was offset by a
decline in basics segment gross margins due to higher raw material
costs, resulting in overall gross margins of 18.1% compared to
20.6% in the prior year period. Significant improvement in
selling, general and administrative expenses contributed to
year-over-year increases in profitability. The Company achieved
operating profit of $1.7 million for the quarter, a 271% increase
over the prior year period’s operating profit of $0.5 million, and
also achieved a pre-tax profit of $0.4 million compared to a
pre-tax loss of $0.8 million in the prior year period.
During the quarter, the Company recognized a
discrete provisional tax expense of $10.6 million associated with
the recent United States tax reform legislation, which impacted the
Company’s earnings by $1.45 per share. Included in the $10.6
million is $1.1 million of expense related to the revaluation of
the Company’s net deferred tax assets, which is a non-cash item,
and $9.5 million of expense related to the transition tax on deemed
repatriated cumulative earnings of the Company’s foreign
subsidiaries, which will be paid over the next eight years.
The Company anticipates that the benefit resulting from the
reduction of the federal tax rate from 34% to 21% will offset the
future payments of the transition tax, resulting in minimal cash
flow impact to the Company. The amounts recorded during the
quarter are based on reasonable estimates for the impact of the new
tax legislation and may change as more information becomes
available. For the quarter ended December 30, 2017, the
Company had a net loss of $9.95 million, or $1.37 per diluted
share. Adjusting for the discrete impact of tax reform,
the Company achieved net income of $0.08 per diluted share as
compared to a loss of $0.08 per diluted share in the prior year
period.
Basics Segment ReviewFiscal year 2018 first
quarter net sales in the basics segment were $73.2 million, up 20%
from $60.8 million in the fiscal year 2017 first quarter.
Activewear sales grew 20% over the prior year quarter, with
significant increases at both Catalog and FunTees. The
Catalog growth was supported by rebounding conditions in the retail
licensing channel and strong demand within most other channels,
while the FunTees growth drew on the strength of private-label
sales to strategic brands. The marked growth in Catalog
fashion basics products seen in recent periods continued during the
quarter. These higher-margin products, particularly those
within the Delta Platinum line, continued to gain acceptance in the
market and sales increased 73% year-over-year. As expected, Art Gun
returned to its traditional growth trend, with a double-digit
increase in units driving 26% year-over-year sales growth and
record sales for the quarter. The combination of excellent service
levels, increases in digital print capacity and flexibility, and
its market-differentiating vertical fulfillment platform enabled
Art Gun to both gain market share and boost profits.
Branded Segment ReviewNet sales in the branded
segment were $17.2 million for the quarter, up 14% year-over-year
after excluding sales of $9.4 million in the prior year period from
the Company’s since-divested Junkfood business. Sales in the
prior year period were $24.5 million including Junkfood
sales. Soffe sales for the quarter increased 28% over the
prior year period. Strength in the military channel from
successes with “pride” graphic programs and military issue programs
drove Soffe’s sales momentum. Successful graphic programs with
strategic sporting goods retailers also contributed to Soffe’s
strong top-line growth. Soffe gross margins expanded
year-over-year and, coupled with its cost-control efforts, drove
significant profitability improvement at Soffe during the
quarter. Salt Life sales increased 12.4% over the prior year
period with solid growth across the majority of its distribution
channels. New product categories along with additional retail doors
contributed to the expansion. Salt Life’s eCommerce sales
remained on their double-digit growth path during the quarter and
its new retail store in Daytona Beach, Florida, continued to
perform extremely well.
“With double-digit growth across the board and
improved operating earnings, we are pleased with our results in
what is usually our most challenging seasonal quarter,” commented
Robert W. Humphreys, Delta Apparel, Inc.’s Chairman and Chief
Executive Officer. “While the pickup in holiday demand for apparel
was an encouraging development, we believe the time and effort our
team devotes to marketing and omni-channel strategies, operational
improvements and cost-control initiatives were also key success
drivers for us during the quarter.”
“Art Gun’s customer service focus and execution
resulted in additional market share during the important holiday
season and also led to record sales and profitability for the
quarter. Those wins, coupled with several anticipated new
customer launches, expansion opportunities with existing customers
and the move to a larger production facility that fully integrates
with Activewear’s vertical manufacturing platform, should provide
solid growth momentum for Art Gun during fiscal 2018.”
“Year-over-year increases in both units and
selling prices drove solid growth at Activewear for the
quarter. That growth was also well-balanced, with both
Catalog and FunTees contributing to the gain. The improved
conditions in the retail licensing channel were a welcome contrast
to last year’s weak environment and customer de-stocking activity,
and our Catalog business was able to take advantage of the
opportunity with strong inventory positions. FunTees continues to
benefit from its efforts to diversify both its customer base and
product offerings as well as leverage its design competencies and
manufacturing versatility.”
“We were pleased to see Salt Life’s sales growth
accelerate during the quarter and return to its previous
double-digit trend. We are excited about the prospect of Salt Life
adding more retail doors this year through additional new accounts
with regional and national footprints. With substantial
increases in eCommerce sales to California and growth at our
Huntington Beach and San Clemente retail stores, we remain
optimistic about the brand’s West Coast market
potential.”
“Soffe gained velocity during the quarter with
strong sales growth and solid profit improvement. Soffe also
recently opened its fourth branded retail location, in
Jacksonville, North Carolina, and we are excited about its
potential with military consumers in that market. Soffe has
many ongoing initiatives to continue its growth and further improve
its overall performance in the coming quarters.”
“While we expect the apparel markets to
generally remain challenging, particularly for traditional
retailers, we are excited about what we are seeing in our
businesses and anticipate another year of growth and profitability
for Delta Apparel. Our efforts to rationalize our business in
recent years have us well-positioned for opportunities wherever and
whenever they materialize, as reflected in our strong first quarter
results,” Mr. Humphreys said. Conference
CallThe Company will hold a conference call with senior
management to discuss the financial results at 4:30 p.m. ET
today. The Company invites you to join the call by dialing
800-281-7973. 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 March 5,
2018. 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 9469905.
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 also 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 7,500 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.
|
|
|
|
|
|
|
SELECTED FINANCIAL DATA: |
Three Months Ended |
|
|
(In
thousands, except per share amounts) |
(Unaudited) |
|
|
|
|
Dec 30, 2017 |
|
Dec 31, 2016 |
|
|
Net
Sales |
$ |
90,342 |
|
|
$ |
85,335 |
|
|
|
Cost of Goods Sold |
|
73,972 |
|
|
|
67,777 |
|
|
|
Gross Profit |
|
16,370 |
|
|
|
17,558 |
|
|
|
|
|
|
|
|
|
|
Selling, General and Administrative |
|
14,979 |
|
|
|
17,311 |
|
|
|
Change in Fair Value of Contingent
Consideration |
|
(300 |
) |
|
|
(100 |
) |
|
|
Other Income, Net |
|
(47 |
) |
|
|
(122 |
) |
|
|
Operating Income |
|
1,738 |
|
|
|
469 |
|
|
|
|
|
|
|
|
|
|
Interest Expense, Net |
|
1,334 |
|
|
|
1,301 |
|
|
|
|
|
|
|
|
|
|
Income (Loss) Before Provision for (Benefit from) Income
Taxes |
|
404 |
|
|
|
(832 |
) |
|
|
|
|
|
|
|
|
|
Provision for (Benefit from) Income Taxes |
|
10,356 |
|
|
|
(225 |
) |
|
|
|
|
|
|
|
|
|
Net
Loss |
$ |
(9,952 |
) |
|
$ |
(607 |
) |
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding |
|
|
|
|
|
|
Basic |
|
7,268 |
|
|
|
7,598 |
|
|
|
|
Diluted |
|
7,268 |
|
|
|
7,598 |
|
|
|
|
|
|
|
|
|
|
Net
(Loss) Income per Common Share |
|
|
|
|
|
|
Basic |
$ |
(1.37 |
) |
|
$ |
(0.08 |
) |
|
|
|
Diluted |
$ |
(1.37 |
) |
|
$ |
(0.08 |
) |
|
|
|
|
|
|
|
|
|
|
|
Dec 30, 2017 |
|
Sep 30, 2017 |
|
Dec 31, 2016 |
|
|
(Unaudited) |
|
(Audited) |
|
(Unaudited) |
Current Assets |
|
|
|
|
|
|
Cash |
$ |
603 |
|
|
$ |
572 |
|
|
$ |
410 |
|
Receivables,
Net |
|
51,010 |
|
|
|
47,557 |
|
|
|
48,161 |
|
Income Tax
Receivable |
|
404 |
|
|
|
352 |
|
|
|
236 |
|
Inventories,
Net |
|
174,505 |
|
|
|
174,551 |
|
|
|
179,038 |
|
Prepaids and
Other Assets |
|
4,916 |
|
|
|
4,662 |
|
|
|
4,887 |
Total Current Assets |
|
231,438 |
|
|
|
227,694 |
|
|
|
232,732 |
|
|
|
|
|
|
|
Noncurrent Assets |
|
|
|
|
|
|
Property, Plant
& Equipment, Net |
|
45,449 |
|
|
|
42,706 |
|
|
|
43,167 |
|
Goodwill and
Other Intangibles, Net |
|
35,842 |
|
|
|
36,068 |
|
|
|
57,316 |
|
Deferred Income
Taxes |
|
2,656 |
|
|
|
5,002 |
|
|
|
5,440 |
|
Other
Noncurrent Assets |
|
6,277 |
|
|
|
6,332 |
|
|
|
5,710 |
Total Noncurrent Assets |
|
90,224 |
|
|
|
90,108 |
|
|
|
111,633 |
|
|
|
|
|
|
|
Total Assets |
$ |
321,662 |
|
|
$ |
317,802 |
|
|
$ |
344,365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
Accounts
Payable and Accrued Expenses |
$ |
59,100 |
|
|
$ |
64,887 |
|
|
$ |
69,283 |
|
Current Portion
of Long-Term Debt |
|
6,600 |
|
|
|
7,548 |
|
|
|
8,600 |
Total Current Liabilities |
|
65,700 |
|
|
|
72,435 |
|
|
|
77,883 |
|
|
|
|
|
|
|
Noncurrent Liabilities |
|
|
|
|
|
|
Long-Term
Debt |
|
99,360 |
|
|
|
85,306 |
|
|
|
111,154 |
|
Income Taxes
Payable |
|
8,058 |
|
|
|
- |
|
|
|
- |
|
Other
Noncurrent Liabilities |
|
6,034 |
|
|
|
4,174 |
|
|
|
4,864 |
Total Noncurrent Liabilities |
|
113,452 |
|
|
|
89,480 |
|
|
|
116,018 |
|
|
|
|
|
|
|
Shareholders' Equity |
|
142,510 |
|
|
|
155,887 |
|
|
|
150,464 |
|
|
|
|
|
|
|
Total Liabilities and Shareholders' Equity |
$ |
321,662 |
|
|
$ |
317,802 |
|
|
$ |
344,365 |
|
|
|
|
|
|
|
Company
Contact:
Deborah Merrill Chief Financial Officer(864) 232-5200 x6620
Investor Relations Contact:
Sally Wallick, CFA(404)
806-1398investor.relations@deltaapparel.com
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