Delta Apparel Reports Fiscal 2019 Second Quarter and Six-Month Results

Date : 05/06/2019 @ 9:05PM
Source : GlobeNewswire Inc.
Stock : Delta Apparel Inc (DLA)
Quote : 25.01  0.06 (0.24%) @ 3:23PM

Delta Apparel Reports Fiscal 2019 Second Quarter and Six-Month Results

Delta Apparel (AMEX:DLA)
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Delta Apparel, Inc. (NYSE American: DLA), a leading provider of core activewear and lifestyle apparel products, today announced financial results for its fiscal year 2019 second quarter and first six months ended March 30, 2019.

Robert W. Humphreys, the Company’s Chairman and Chief Executive Officer, commented, “We were pleased to deliver another quarter of top-line growth despite challenges from unseasonable weather in key markets and this year’s later spring break selling period. Our Delta Group segment posted a nice sales increase for the quarter and our fast-growing digital print business, DTG2Go, was once again a bright spot, with sales growth of 177%.”

Mr. Humphreys continued, “Both our Delta Group and Salt Life Group segments achieved top-line growth for the first half of the year and we are off to a strong start to the second half. We see exciting opportunities for growth and increased profitability across all of our businesses as we leverage our investments in manufacturing technology and distribution, and expand into additional sales channels. We continue to believe Delta Apparel is uniquely positioned to succeed in today’s dynamic retail environment.”

For the second quarter ended March 30, 2019:

  • Net sales were $102.8 million, up almost 3% from $100.0 million in the prior year second quarter. Net sales in the Delta Group segment increased almost 4% over the prior year period and net sales in the Salt Life Group segment declined approximately 4% from the prior year period.
  • Gross margin sequentially improved 10 basis points from the first quarter to 18.4% in the second quarter, but declined compared to 22.2% in the prior year second quarter.  Anticipated transition costs from changes in the private label product mix and higher-cost raw materials in the Delta Group segment, coupled with higher than expected digital print acquisition integration expenses and delayed spring sales in the Salt Life Group segment, drove a decline in gross profit to $18.9 million from $22.2 million in the prior year period. The majority of these cost impacts are now behind us and we expect gross profit to improve in the back half of the year.
  • Selling, general and administrative ("SG&A") expenses as a percentage of sales were 16.6%, compared to 16.7% in the prior year second quarter.
  • The above-referenced cost impacts drove a decline in operating income for the quarter to $2.8 million compared to $5.6 million in the prior year second quarter, with Delta Group segment operating income declining $2.4 million and Salt Life Group segment operating income declining $0.1 million. We expect profitability to increase in the second half of the year as we enter our traditionally strong selling season with an expanding product mix and better balance between selling prices and raw material costs. 
  • Net income for the quarter was $0.9 million, or $0.13 per diluted share, compared to $3.6 million, or $0.48 per diluted share, in the prior year period.

For the six months ended March 30, 2019:

  • Net sales were $204.5 million, up 7.4% from $190.3 million in the comparable period last year. Net sales in the Delta Group segment increased 8.2% over the prior year and net sales in the Salt Life Group segment increased 1.5% over the prior year.
  • Gross profit was $37.5 million, down 2.9% from $38.6 million in the comparable period last year. Gross margin was 18.3% compared to 20.3% in the prior year period.
  • SG&A expenses as a percentage of sales improved 20 basis points from last year to 16.5%.
  • Operating income was $2.9 million compared to $7.4 million in the comparable period last year, with the majority of the decrease attributable to a discrete expense of $2.5 million taken during the first quarter in connection with the resolution of litigation stemming from The Sports Authority's March 2016 bankruptcy. Delta Group segment operating income was impacted by the litigation expense and declined $4.1 million over the prior year, while Salt Life Group segment operating income was relatively flat compared to the prior year.
  • The Company experienced a net loss for the period of $209 thousand, or $0.03 per diluted share, an improvement over the prior year period’s net loss of $6.3 million, or $0.87 per diluted share. Excluding the above-referenced $2.5 million litigation expense, the Company achieved net income of $1.9 million, or $0.27 per diluted share, for the six months ended March 30, 2019.

During the quarter, the Company spent approximately $1.9 million on capital expenditures and $717 thousand to repurchase 35,353 shares of its stock. Total debt, including capital lease financing, as of the end of the first six months of fiscal 2019 was $143.9 million, up approximately $32 million from the end of our 2018 fiscal year due principally to the Company’s recent digital print acquisition, capital expenditures, share repurchases and our seasonal build in inventory. Total inventory at the end of the first six months of fiscal 2019 was $186.5 million compared with $172.2 million a year ago due primarily to increased units on hand from the recent digital print acquisitions as well as higher costs per unit driven by product mix and the inflationary environment.

Conference CallThe 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 866-575-­6539. If calling from outside the United States, please dial 323-794-2423. 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 June 6, 2019. 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 9980067.

About Delta Apparel, Inc. Delta Apparel, Inc., along with its operating subsidiaries, Salt Life, LLC, M. J. Soffe, LLC, and DTG2Go, LLC, is an international design, marketing, manufacturing, and sourcing company that features a diverse portfolio of core activewear and lifestyle apparel and related accessory products. The Company specializes in selling casual and athletic products through a variety of distribution channels and distribution tiers, including department stores, mid and mass channels, e-retailers, sporting goods and outdoor retailers, independent and specialty stores, and the U.S. military. 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. The Company’s operations are located throughout the United States, Honduras, El Salvador, and Mexico, and it employs approximately 8,100 people worldwide. Additional information about the Company is available at www.deltaapparelinc.com.

Cautionary Note Regarding Forward-Looking StatementsThis 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; 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; 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. 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 x6620investor.relations@deltaapparel.com 

Investor Relations and Media Contact: ICR, Inc.

Investors:Tom Filandro, 646-277-1235

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

        
        
SELECTED FINANCIAL DATA:       
(In thousands, except per share amounts)       
  Three Months Ended Six Months Ended
  Mar 30, 2019 Mar 31, 2018 Mar 30, 2019 Mar 31, 2018
         
Net Sales$102,838  $100,004  $204,513  $190,346 
Cost of Goods Sold 83,930   77,769   167,036   151,741 
Gross Profit 18,908   22,235   37,477   38,605 
         
Selling, General and Administrative 17,056   16,737   33,841   31,717 
Other (Income) Expense, Net (843)  (116)  902   (464)
Operating Income 2,695   5,614   2,734   7,352 
         
Interest Expense, Net 1,985   1,350   3,750   2,685 
         
Income (Loss) Income Before Provision for Income Taxes 710   4,264   (1,016)  4,667 
         
(Benefit From) Provision for Income Taxes (115)  632   (614)  10,988 
         
Consolidated Net Income (Loss) 825   3,632   (402)  (6,321)
         
Net Loss Attributable to Non-Controlling Interest (117)  -   (193)  - 
         
Net Income (Loss) Attributable to Shareholders$942  $3,632  $(209) $(6,321)
         
Weighted Average Shares Outstanding        
 Basic 6,943   7,195   6,933   7,231 
 Diluted 7,103   7,496   6,933   7,231 
         
Net Income (Loss) per Common Share       
 Basic$0.14  $0.50  $(0.03) $(0.87)
 Diluted$0.13  $0.48  $(0.03) $(0.87)
         
         
  Mar 30, 2019 Sep 29, 2018 Mar 31, 2018  
  (Unaudited) (Audited) (Unaudited)  
         
Current Assets       
 Cash$1,777  $460  $434   
 Receivables, Net 59,946   46,879   60,083   
 Income Tax Receivable -   38   -   
 Inventories, Net 186,526   174,983   172,213   
 Prepaids and Other Assets 3,002   3,062   4,185   
Total Current Assets 251,251   225,422   236,915   
         
Noncurrent Assets       
 Property, Plant & Equipment, Net 54,311   52,114   50,093   
 Goodwill and Other Intangibles, Net 60,151   53,715   50,602   
 Deferred Income Taxes 1,924   1,374   1,996   
 Investment in Joint Venture 9,731   8,980   4,140   
 Other Noncurrent Assets 1,687   2,004   2,148   
Total Noncurrent Assets 127,804   118,187   108,979   
         
Total Assets$379,055  $343,609  $345,894   
         
         
Current Liabilities       
 Accounts Payable and Accrued Expenses$73,857  $64,750  $63,984   
 Income Tax Payable -   -   256   
 Current Portion of Contingent Consideration 3,190   638   -   
 Current Portion of Capital Lease Financing 5,308   3,846   2,336   
 Current Portion of Long-Term Debt 7,435   6,577   6,356   
Total Current Liabilities 89,790   75,811   72,932   
         
Noncurrent Liabilities       
 Long-Term Taxes Payable 3,451   4,259   7,414   
 Long-Term Contingent Consideration 6,104   9,904   5,850   
 Long-Term Capital Lease Financing 11,150   9,302   8,402   
 Long-Term Debt 120,043   92,083   105,798   
 Deferred Income Taxes 2,192   2,132   -   
 Other Noncurrent Liabilities 658   -   -   
Total Noncurrent Liabilities 143,598   117,680   127,464   
         
 Common Stock 96   96   96   
 Additional Paid-In Capital 59,121   61,979   60,561   
 Equity Attributable to Non-Controlling Interest (100)  93   -   
 Retained Earnings 128,486   128,695   121,032   
 Accumulated Other Comprehensive (Loss) Income (493)  136   167   
 Treasury Stock (41,443)  (40,881)  (36,358)  
Equity Attributable to Delta Apparel, Inc. 145,667   150,118   145,498   
         
Total Liabilities and Equity$379,055  $343,609  $345,894   
         

 

 

 

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