Delta Apparel Fiscal 2021 Second Quarter Results Surpass Expectations

Net earnings for the quarter grow over 200% to $0.62 per diluted share

GREENVILLE, S.C.--()--Delta Apparel, Inc. (NYSE American: DLA), a leading provider of core activewear and lifestyle apparel products, today announced stronger than expected financial results for its second quarter ended April 3, 2021.

Robert W. Humphreys, the Company’s Chairman and Chief Executive Officer, commented, “In every aspect, our March quarter results showcase the positive trajectory of the Company. With double-digit sales growth and significant profitability expansion in both business segments, we have proven the benefits of our broad customer base and diversified channels of distribution. We believe the momentum is just beginning, and we are excited by the many opportunities we see for continued growth. Consumers are demonstrating their deep emotional connection to the Salt Life brand, resulting in strong growth in all channels of distribution.”

Humphreys continued, “Our innovative technology in the on-demand, digital print market is transforming the retail and ecommerce supply chain for decorated apparel. Through our new, exclusive partnership with Autoscale.ai, DTG2Go will provide automated solutions for design creation, art and licensing management, and marketing spend, along with seamless connectivity with various online marketplaces, further solidifying our leadership position in this market segment. Supported by our vertically-integrated, flexible manufacturing platform, broad distribution and fulfillment network, and strong business systems with unique proprietary technology, we believe we are well-positioned to continue to deliver compelling top and bottom line results for our shareholders.”

For the second quarter ended March 2021:

  • Net sales were $108.6 million, an increase of 12% from $96.7 million in the prior year second quarter. Net sales in the Delta Group segment grew 12% driven by the demand in the market for activewear apparel, particularly in our direct-to-retail and brand-direct channels, which grew over 40% compared to prior year. Net sales in the Salt Life Group segment increased 16% with notable performance in our direct-to-consumer channels, with sales growth of over 175% and 40% at our branded retail stores and saltlife.com site, respectively.
  • Gross profit was $24.8 million, a 21% increase from $20.6 million in the prior year second quarter. Gross margin improved 150 basis points to 22.8% versus 21.3% in the prior year and 21.4% in the December 2020 quarter driven by favorable product mix, selling price increases, and manufacturing efficiencies and process improvements.
  • Selling, general and administrative ("SG&A") expenses were $17.1 million, or 15.7% of sales, in the March 2021 quarter compared to $17.9 million, or 18.5% of sales, in the prior year second quarter. The improved results are from spending and cost controls, as well as integration efficiencies in the Delta Group segment, which more than offset the additional costs incurred in the consolidation of Soffe products into our new Phoenix distribution facility.
  • Operating income in the March 2021 quarter was $7.6 million, which was more than double the prior year second quarter income of $3.6 million. The expanded operating profit was driven by the sales growth, favorable gross margins, continuing cost controls, and $1.9 million of plant curtailment costs in the prior year.
  • Net earnings for the quarter were $4.4 million, or $0.62 per diluted share, compared to $1.3 million, or $0.19 per diluted share, in the prior year period. Excluding the $1.9 million pre-tax, or $0.20 per diluted share, of plant curtailment expenses in the prior year quarter, adjusted net earnings per diluted share for the second quarter fiscal 2020 were $0.39.

Total inventory as of March 2021 was $148.5 million, down $49 million, or approximately 25% from a year ago. The strong sales in the first six months, along with the temporary hurricane disruptions during the December 2020 quarter, slowed the normal seasonal build of inventory during the quarter. The Company has increased production during the March 2021 quarter and is now producing at all-time record levels to support demand in the marketplace for its products.

Total net debt, including capital lease financing and cash on hand, increased $5 million from December 2020 to $135.2 million as of March 2021, representing a $23 million decrease from net debt levels a year ago. Cash on hand and availability under the Company’s U.S. revolving credit facility totaled $44.2 million as of March 2021, a $0.5 million increase from December 2020 and a $14 million, or approximately 50% increase, from March 2020.

Conference Call

The 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 800-430-8332. If calling from outside the United States, please dial 323-289-6581. 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, 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 3070922.

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 7,900 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 Six Months Ended
March 2021 March 2020 March 2021 March 2020
 
Net Sales

$

108,626

 

$

96,660

 

$

203,349

 

$

192,550

 

Cost of Goods Sold

 

83,816

 

 

76,079

 

 

158,250

 

 

152,075

 

Gross Profit

 

24,810

 

 

20,581

 

 

45,099

 

 

40,475

 

 
Selling, General and Administrative Expenses

 

17,061

 

 

17,850

 

 

33,091

 

 

35,924

 

Other Loss (Income), Net

 

170

 

 

(823

)

 

1,360

 

 

(1,640

)

Operating Income

 

7,579

 

 

3,554

 

 

10,648

 

 

6,191

 

 
Interest Expense, Net

 

1,837

 

 

1,808

 

 

3,491

 

 

3,610

 

 
Earnings Before Provision For Income Taxes

 

5,742

 

 

1,746

 

 

7,157

 

 

2,581

 

 
Provision For Income Taxes

 

1,441

 

 

526

 

 

2,013

 

 

570

 

 
Consolidated Net Earnings

 

4,301

 

 

1,220

 

 

5,144

 

 

2,011

 

 
Net Loss Attributable to Non-Controlling Interest

 

97

 

 

91

 

 

137

 

 

223

 

 
Net Earnings Attributable to Shareholders

$

4,398

 

$

1,311

 

$

5,281

 

$

2,234

 

 
Weighted Average Shares Outstanding
Basic

 

6,975

 

 

6,957

 

 

6,947

 

 

6,953

 

Diluted

 

7,105

 

 

7,055

 

 

7,052

 

 

7,063

 

 
Net Earnings per Common Share
Basic

$

0.63

 

$

0.19

 

$

0.76

 

$

0.32

 

Diluted

$

0.62

 

$

0.19

 

$

0.75

 

$

0.32

 

 
 
March 2021 September 2020 March 2020
 
Current Assets
Cash

$

12,551

 

$

16,458

 

$

9,568

 

Receivables, Net

 

66,487

 

 

61,000

 

 

59,407

 

Income Tax Receivable

 

-

 

 

983

 

 

-

 

Inventories, Net

 

148,530

 

 

145,515

 

 

197,333

 

Prepaids and Other Assets

 

4,351

 

 

2,812

 

 

4,072

 

Total Current Assets

 

231,919

 

 

226,768

 

 

270,380

 

 
Noncurrent Assets
Property, Plant & Equipment, Net

 

66,207

 

 

63,950

 

 

62,587

 

Goodwill and Other Intangibles, Net

 

57,059

 

 

57,845

 

 

58,631

 

Deferred Income Taxes

 

3,226

 

 

4,052

 

 

1,514

 

Operating Lease Assets

 

49,570

 

 

54,645

 

 

43,226

 

Investment in Joint Venture

 

10,742

 

 

10,573

 

 

10,309

 

Other Noncurrent Assets

 

2,142

 

 

2,398

 

 

2,484

 

Total Noncurrent Assets

 

188,946

 

 

193,463

 

 

178,751

 

 
Total Assets

$

420,865

 

$

420,231

 

$

449,131

 

 
 
Current Liabilities
Accounts Payable and Accrued Expenses

$

63,352

 

$

69,974

 

$

71,055

 

Income Taxes Payable

 

496

 

 

379

 

 

-

 

Current Portion of Finance Leases

 

7,256

 

 

6,956

 

 

6,965

 

Current Portion of Operating Leases

 

8,946

 

 

9,039

 

 

8,525

 

Current Portion of Long-Term Debt

 

7,536

 

 

7,559

 

 

7,577

 

Current Portion of Contingent Consideration

 

2,400

 

 

2,120

 

 

1,970

 

Total Current Liabilities

 

89,986

 

 

96,027

 

 

96,092

 

 
Noncurrent Liabilities
Long-Term Taxes Payable

 

3,220

 

 

3,599

 

 

3,585

 

Long-Term Finance Leases

 

18,552

 

 

11,328

 

 

12,239

 

Long-Term Operating Leases

 

42,377

 

 

46,570

 

 

35,611

 

Long-Term Debt

 

114,375

 

 

112,782

 

 

141,088

 

Long-Term Contingent Consideration

 

1,910

 

 

4,300

 

 

3,610

 

Other Noncurrent Liabilities

 

2,470

 

 

2,939

 

 

3,269

 

Total Noncurrent Liabilities

 

182,904

 

 

181,518

 

 

199,402

 

 
Common Stock

 

96

 

 

96

 

 

96

 

Additional Paid-In Capital

 

59,842

 

 

61,005

 

 

59,442

 

Equity Attributable to Non-Controlling Interest

 

(661

)

 

(524

)

 

(504

)

Retained Earnings

 

131,845

 

 

126,564

 

 

139,168

 

Accumulated Other Comprehensive Loss

 

(998

)

 

(1,322

)

 

(1,432

)

Treasury Stock

 

(42,149

)

 

(43,133

)

 

(43,133

)

Total Equity

 

147,975

 

 

142,686

 

 

153,637

 

 
Total Liabilities and Equity

$

420,865

 

$

420,231

 

$

449,131

 

 

Contacts

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

DLA net earnings for the quarter grow over 200% to $0.62 per diluted share.

Contacts

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