Delta Apparel Reports Strong Start to Fiscal 2021 with First Quarter Results Ahead of Plan

Reports 16% Expansion in Operating Income

Diluted EPS of $0.13 and Adjusted Diluted EPS of $0.28

GREENVILLE, S.C.--()--Delta Apparel, Inc. (NYSE American: DLA), a leading provider of core activewear and lifestyle apparel products, today announced financial results for its fiscal 2021 first quarter ended January 2, 2021.

Robert W. Humphreys, the Company’s Chairman and Chief Executive Officer, commented, “Fiscal 2021 is off to a strong start with our first quarter sales and profitability results well ahead of our internal expectations. Despite notable headwinds from inventory constraints, hurricane-related disruptions in Central America, and freight carrier limitations during the holiday season, our results were bolstered by strong order demand and impeccable manufacturing and operational execution at all levels.”

Mr. Humphreys continued, “We were particularly pleased with the accelerating success of our retail model within the DTG2Go digital print business. DTG2Go gained significant traction during the quarter with traditional retailers utilizing our on-demand, seamless supply chain to expand their business. We also capitalized on market opportunities that fueled growth and expanded profitability in our Activewear business, overcoming the challenges caused by inventory constraints. Within our Salt Life Group segment, revenue and improved margins were propelled by robust direct-to-consumer sales. Salt Life enthusiasts actively engaged with the brand through online channels as well as seeking out our branded stores, driving strong same-store sales growth as well as outsized performance in our recently opened Salt Life retail doors in Estero, Palm Beach Gardens and Destin, Florida.”

“Our business is firing on all cylinders as we continue to ramp our manufacturing output to record levels to keep up with the high demand we have in our pipeline. Our strong first quarter results and solid balance sheet have positioned us well to deliver against our goals for the fiscal year, and I could not be more proud of our teams. It is their hard work and dedication to our Company that continues to fuel our stellar results,” concluded Mr. Humphreys.

For the first quarter ended January 2, 2021:

  • Net sales were $94.7 million compared to $95.9 million in the prior year, with Delta Group segment down 1.5% partially offset by 2.3% growth in the Salt Life Group segment. Sales orders in Activewear were strong for the quarter, but delivery was hindered by inventory shortages and the impacts of two major hurricanes in Central America. DTG2Go’s orders were down to begin the quarter, but quickly returned to strong growth in November, only to be hampered by freight carrier constraints during the holiday season. Salt Life Group sales growth was driven by a 60% increase in overall direct-to-consumer sales, with growth in both ecommerce and retail sales.
  • Gross margins improved 70 basis points from the prior year, increasing to 21.4% of sales. Gross margins expanded in both business segments driven by favorable product mix, lower raw material costs, and manufacturing efficiencies and process improvements within the Delta Group segment, and a stronger mix of direct-to-consumer sales in the Salt Life Group segment.
  • Selling, general and administrative ("SG&A") expenses decreased $2.0 million, or 11.3%, from cost reductions implemented during the pandemic that have continued, including lower personnel costs, reduced travel expenses, and a more digitally-focused sales and marketing strategy.
  • Operating income for the quarter increased 16% to $3.1 million, or 3.2% of sales, compared to $2.6 million, or 2.8% of sales, in the prior year. Excluding the $1.3 million pre-tax expense related to the impact of two hurricanes that disrupted the Company’s Honduran manufacturing facilities, adjusted operating income was $4.4 million, or 4.7% of sales, an increase of $1.8 million, or 67%, from the prior year.
  • Net income for the December quarter was $0.9 million, or $0.13 per diluted share, consistent with the same period in the prior year. Adjusting for the $0.15 per diluted share impact of hurricane-related disruptions, adjusted net income for the first quarter of fiscal 2021 was $2.0 million, or $0.28 per diluted share, a 115% improvement compared to the prior year.

Total inventory as of December 2020 was $148.5 million, down $48.8 million from a year ago. The stronger than anticipated December quarter sales along with the temporary hurricane disruptions slowed the normal seasonal build of inventory during the quarter. The Company has already ramped up production at an accelerated pace in January and expects to be producing at all-time record levels in the back half of the year.

Total net debt, including capital lease financing and cash on hand, increased $7.6 million from September 2020 to $129.8 million at December 2020. Cash on hand and availability under the Company’s U.S. revolving credit facility totaled $43.7 million at December 2020, a $3.4 million decrease from September 2020 due primarily to seasonal working capital build. The Company spent approximately $6.9 million on capital expenditures during the first quarter of fiscal 2021 compared to $2.5 million a year ago.

Conference Call
The Company’s senior management will hold a conference call to discuss its financial results today at 4:30 PM ET. The Company invites you to join the call by dialing 800-437-2398. If calling from outside the United States, please dial 323-289-6576. 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 8, 2021. 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 3131301.

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 on-demand, digital print and fulfillment industry, bringing DTG2Go’s proprietary 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 digital platform. The Company’s products are also made available direct-to-consumer on its ecommerce sites 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 7,700 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 general U.S. and international economic conditions; the COVID-19 pandemic impact on our operations, financial condition, liquidity, and capital investments; significant interruptions within our manufacturing or distribution facilities or other operations; deterioration in the financial condition of our customers and suppliers and changes in the operations and strategies of our customers and suppliers; the volatility and uncertainty of cotton and other raw material prices and availability; competitive conditions in the apparel industry; restrictions on our ability to borrow capital or service our indebtedness; 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; 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 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.

 
 
 
 
SELECTED FINANCIAL DATA:
(In thousands, except per share amounts)

Three Months Ended

December 2020

 

December 2019

 
Net Sales

 $

                  94,723

 

 $

                  95,889

 

Cost of Goods Sold

 

                     74,434

 

 

                     75,996

 

Gross Profit

 

                     20,289

 

 

                     19,893

 

 
Selling, General and Administrative Expenses

 

                     16,030

 

 

                     18,073

 

Other Loss (Income), Net

 

                       1,190

 

 

                        (817

)

Operating Income

 

                       3,069

 

 

                       2,637

 

 
Interest Expense, Net

 

                       1,654

 

 

                       1,802

 

 
Earnings Before Provision For Income Taxes

 

                       1,415

 

 

                          835

 

 
Provision For Income Taxes

 

                          572

 

 

                            44

 

 
Consolidated Net Earnings

 

                          843

 

 

                          791

 

 
Net Loss Attributable to Non-Controlling Interest

 

                            40

 

 

                          132

 

 
Net Earnings Attributable to Shareholders

 $

                       883

 

 $

                       923

 

 
Weighted Average Shares Outstanding 
Basic

 

                       6,920

 

 

                       6,950

 

Diluted

 

                       7,000

 

 

                       7,072

 

 
Net Earnings per Common Share
Basic

 $

                      0.13

 

 $

                      0.13

 

Diluted

 $

                      0.13

 

 $

                      0.13

 

 
 

December 2020

September 2020

December 2019

 
Current Assets
Cash

 $

                  10,255

 

 $

                  16,458

 

 $

                       433

 

Receivables, Net

 

                     63,646

 

 

                     61,000

 

 

                     55,477

 

Income Tax Receivable

 

                       1,180

 

 

                          983

 

 

                            -

 

Inventories, Net

 

                   148,521

 

 

                   145,515

 

 

                   197,315

 

Prepaids and Other Assets

 

                       3,609

 

 

                       2,812

 

 

                       3,698

 

Total Current Assets

 

                   227,211

 

 

                   226,768

 

 

                   256,923

 

 
Noncurrent Assets
Property, Plant & Equipment, Net

 

                     67,779

 

 

                     63,950

 

 

                     61,255

 

Goodwill and Other Intangibles, Net

 

                     57,452

 

 

                     57,845

 

 

                     59,052

 

Deferred Income Taxes

 

                       3,313

 

 

                       4,052

 

 

                       1,514

 

Operating Lease Assets

 

                     52,171

 

 

                     54,645

 

 

                     41,996

 

Investment in Joint Venture

 

                     10,462

 

 

                     10,573

 

 

                     10,689

 

Other Noncurrent Assets

 

                       2,233

 

 

                       2,398

 

 

                       2,584

 

Total Noncurrent Assets

 

                   193,410

 

 

                   193,463

 

 

                   177,090

 

 
Total Assets

 $

                420,621

 

 $

                420,231

 

 $

                434,013

 

 
 
Current Liabilities
Accounts Payable and Accrued Expenses

 $

                  73,153

 

 $

                  69,974

 

 $

                  74,089

 

Income Taxes Payable

 

                          383

 

 

                          379

 

 

                            -

 

Current Portion of Finance Leases

 

                       6,915

 

 

                       6,956

 

 

                       6,822

 

Current Portion of Operating Leases

 

                       8,892

 

 

                       9,039

 

 

                       8,497

 

Current Portion of Long-Term Debt

 

                       7,112

 

 

                       7,559

 

 

                       7,337

 

Current Portion of Contingent Consideration

 

                            -

 

 

                       2,120

 

 

                       2,700

 

Total Current Liabilities

 

                     96,455

 

 

                     96,027

 

 

                     99,445

 

 
Noncurrent Liabilities
Long-Term Taxes Payable

 

                       3,599

 

 

                       3,599

 

 

                       3,875

 

Long-Term Finance Leases

 

                     13,409

 

 

                     11,328

 

 

                     12,734

 

Long-Term Operating Leases

 

                     44,522

 

 

                     46,570

 

 

                     34,430

 

Long-Term Debt

 

                   112,595

 

 

                   112,782

 

 

                   120,468

 

Long-Term Contingent Consideration

 

                       4,310

 

 

                       4,300

 

 

                       5,970

 

Other Noncurrent Liabilities

 

                       2,534

 

 

                       2,939

 

 

                       2,680

 

Total Noncurrent Liabilities

 

                   180,969

 

 

                   181,518

 

 

                   180,157

 

 
Common Stock

 

                            96

 

 

                            96

 

 

                            96

 

Additional Paid-In Capital

 

                     59,564

 

 

                     61,005

 

 

                     58,825

 

Equity Attributable to Non-Controlling Interest

 

                        (564

)

 

                        (524

)

 

                        (413

)

Retained Earnings

 

                   127,447

 

 

                   126,564

 

 

                   137,860

 

Accumulated Other Comprehensive Loss

 

                     (1,197

)

 

                     (1,322

)

 

                        (838

)

Treasury Stock

 

                   (42,149

)

 

                   (43,133

)

 

                   (41,119

)

Total Equity

 

                   143,197

 

 

                   142,686

 

 

                   154,411

 

 
Total Liabilities and Equity

 $

                420,621

 

 $

                420,231

 

 $

                434,013

 

 
 

 

Contacts

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

Release Summary

Delta Apparel Reports Strong Start to Fiscal 2021 with First Quarter Results Ahead of Plan. Diluted EPS of $0.13 and Adjusted Diluted EPS of $0.28.

Contacts

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