Delta Apparel Reports Fiscal 2019 Second Quarter and Six-Month Results
May 06 2019 - 4:05PM
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
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SELECTED FINANCIAL DATA: |
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(In thousands, except per share amounts) |
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Three Months Ended |
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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 |
|
|
|
|
|
|
|
|
|
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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 |
) |
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|
|
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Weighted Average Shares
Outstanding |
|
|
|
|
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|
|
|
Basic |
|
6,943 |
|
|
|
7,195 |
|
|
|
6,933 |
|
|
|
7,231 |
|
|
Diluted |
|
7,103 |
|
|
|
7,496 |
|
|
|
6,933 |
|
|
|
7,231 |
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Net Income (Loss) per Common Share |
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|
|
|
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Basic |
$ |
0.14 |
|
|
$ |
0.50 |
|
|
$ |
(0.03 |
) |
|
$ |
(0.87 |
) |
|
Diluted |
$ |
0.13 |
|
|
$ |
0.48 |
|
|
$ |
(0.03 |
) |
|
$ |
(0.87 |
) |
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|
Mar 30, 2019 |
|
Sep 29, 2018 |
|
Mar 31, 2018 |
|
|
|
|
(Unaudited) |
|
(Audited) |
|
(Unaudited) |
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Current Assets |
|
|
|
|
|
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Cash |
$ |
1,777 |
|
|
$ |
460 |
|
|
$ |
434 |
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|
|
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Receivables, Net |
|
59,946 |
|
|
|
46,879 |
|
|
|
60,083 |
|
|
|
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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 |
|
|
|
|
|
|
|
|
|
|
|
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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 |
|
|
|
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Other Noncurrent Assets |
|
1,687 |
|
|
|
2,004 |
|
|
|
2,148 |
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|
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Total Noncurrent Assets |
|
127,804 |
|
|
|
118,187 |
|
|
|
108,979 |
|
|
|
|
|
|
|
|
|
|
|
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Total Assets |
$ |
379,055 |
|
|
$ |
343,609 |
|
|
$ |
345,894 |
|
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|
|
|
|
|
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|
|
|
|
|
|
|
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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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