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Delta Apparel, Inc (DLA) SEC Filing 8-K Material Event for the period ending Thursday, August 4, 2022

Delta Apparel, Inc

CIK: 1101396 Ticker: DLA

Exhibit 99.1

 

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Delta Apparel Reports Third Quarter Fiscal 2022 Sales and Earnings

 

Continues Quarterly Sales Year-over-Year Growth

 

Delta Apparel, Inc. (NYSE American: DLA), a leading provider of core activewear and lifestyle apparel products, today announced financial results for its fiscal 2022 third quarter ended July 2, 2022.

 

Robert W. Humphreys, the Company’s Chairman and Chief Executive Officer, commented, “We are pleased to achieve another quarter of revenue growth in what remains a dynamic operating environment. We delivered third-quarter sales growth across both our Delta Group and Salt Life Group segments. In our Delta Group segment, we registered year-over-year sales growth of 3% as we continued to benefit from our broad channels of distribution. Demand increased for both our Global Brands and on-demand digital print business, somewhat offset by a decline in our Delta Direct business. At Salt Life, we saw strong year-over-year sales growth of 30%, further validating the brand’s broad lifestyle appeal.”

 

Humphreys further commented, “Our continued growth in the face of economic headwinds validates our investment in Salt Life’s retail footprint. This investment combined with our growth in the wholesale channel and updated ecommerce site is allowing us to deliver a strong omnichannel shopping experience to our end consumers.  With the opening of four new Salt Life locations during the quarter, we have achieved our fiscal 2022 year-end target of opening 20 retail stores. As a result, we are now operating Salt Life branded stores across seven states. At DTG2Go, we continue to make progress with our on-demand digital-first strategy and enjoyed another quarter of unit and revenue growth while broadening the footprint of our digital equipment to service increasing demand.    

 

Overall, we made good progress in the third quarter with a solid performance as our team stayed focused on our long-term strategies while simultaneously managing through a changing economy and consumer expectations. Our manufacturing investments have created scale efficiencies and platform flexibility positioning us well to continue to grow our business.”

 

For the third quarter ended July 2, 2022:

 

Net sales were $126.9 million in the third quarter of fiscal 2022, an increase of 7% compared to the prior year third quarter net sales of $118.7 million.  Net sales in the Delta Group segment grew 3% to $106.0 million in the third quarter of fiscal 2022 compared to $102.6 million in the prior year third quarter. The Salt Life segment net sales grew 30% to $20.9 million compared to $16.1 million in the prior year third quarter.

 

Within the Delta Group, segment sales increased in the Global Brands business with both revenue and unit expansion with an expanded array of value-added service offerings. Sales in the Delta Direct channel declined following the reduction in market demand for activewear primarily in the Retail License business.  In the digital print business, DTG2Go increased sales over both the third quarter of fiscal 2021 and the second quarter of the current year, benefitting from the demand for the Company’s digital-first technology and growth in installed capacity.   

 

The strong sales performance in the Salt Life business was driven by double-digit year-over-year growth in both the wholesale and retail channels. Continued strong bookings from wholesale partners and the successful opening of four new Salt Life stores in the quarter led to year-over-year sales growth. Largely driven by constraints in inventory available, Salt Life’s sales in its e-commerce channel were down year-over-year; however, web demand has accelerated sequentially with sales increasing over 40% from the second quarter of 2022.

 

On a consolidated basis, third quarter gross margins were 24.2%, declining 130 basis points from 25.5% in the prior year, largely as a result of inflationary cost pressures, which are now flowing through the cost of sales.  During the quarter, the impact of higher cotton prices, energy, and freight costs were the largest drivers of margin pressure. 

 

Selling, general, and administrative expenses ("SG&A") were $22.4 million, or 17.7% of sales, compared to $19.9 million, or 16.8% of sales, in the prior year third quarter. The increase in SG&A expenses was primarily driven by higher variable selling costs and travel expenses compared to the same period last year.  In addition, distribution costs were higher primarily due to increased wages.

 

Operating income in the third quarter of 2022 decreased to $9.3 million, or 7.3% of sales, compared to the prior year third quarter profit of $11.9 million, or 10.0% of sales.

 

Net income was $6.2 million, or $0.88 per diluted share, as compared to prior year net income of $8.2 million, or $1.14 per share.

 

Net inventory as of June 2022 was $227.7 million, an increase of $30.0 million from March 2022 and $75.4 million from June 2021. The increase in inventory levels reflect planned increased production combined with higher input costs.

 

Total net debt and cash on hand was $162.4 million at June 2022, an increase of $9.0 million from March 2022 including capital lease financing. Cash on hand and availability under the Company’s U.S. revolving credit facility totaled $30.8 million at June 2022, a $4.4 million decrease from March 2022.

 

The Company invested approximately $5.5 million on capital expenditures during the third quarter of fiscal 2022, substantially in continuing investments in digital print equipment and Salt Life retail store openings, compared to $3.2 million during the prior year third quarter.

 

In the third quarter of fiscal 2022 under the previously announced share repurchase program, the Company purchased 33,934 shares for $1.0 million, bringing the total amount repurchased to $56.4 million during the life of the program. At the end of the third quarter of fiscal 2022, the Company had $3.6 million of remaining repurchase capacity under the existing authorization.

 

Conference Call:

 

The Company will hold a conference call with senior management to discuss its financial results today at 4:30 p.m. ET. The Company invites you to join the call by dialing 844-825-9789. If calling from outside the United States, please dial 412-317-5180. 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 September 4, 2022. 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 10168456.

 

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®, Soffe®, and Delta. The Company is a market leader in the direct-to-garment digital print and fulfillment industry, bringing DTG2Go 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 e-commerce sites. The Company’s products are also made available direct-to-consumer on its websites at www.saltlife.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 9,100 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 impact of the COVID-19 pandemic and government/social actions taken to contain its spread on our operations, financial condition, liquidity, and capital investments, including recent labor shortages, inventory constraints, and supply chain disruptions; significant interruptions or disruptions within our manufacturing, distribution 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; the competitive conditions in the apparel industry; 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; the ability to grow, achieve synergies and realize the expected profitability of acquisitions; changes in economic, political or social stability at our offshore locations in areas in which we, or our suppliers or vendors, operate; our ability to attract and retain key management; the volatility and uncertainty of energy, fuel and related costs; material disruptions in our information systems related to our business operations; compromises of our data security; significant changes in our effective tax rate; 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; changes in international trade regulations; our ability to comply with trade regulations; changes in employment laws or regulations or our relationship with employees; negative publicity resulting from violations of manufacturing standards or labor laws or unethical business practices by our suppliers and independent contractors; the inability of suppliers or other third-parties, including those related to transportation, to fulfill the terms of their contracts with us; restrictions on our ability to borrow capital or service our indebtedness; interest rate fluctuations increasing our obligations under our variable rate indebtedness; the ability to raise additional capital; the impairment of acquired intangible assets; foreign currency exchange rate fluctuations; the illiquidity of our shares; price volatility in our shares and the general volatility of the stock market; 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.

 

Investor Relations and Media Contact: ICR,Inc.

 

Investors:

 

Tom Filandro, 646-277-1235 investor.relations@deltaapparel.com

 

Media:

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

 

 

 

SELECTED FINANCIAL DATA:

(In thousands, except per share amounts)

 

   

Three Months Ended

   

Nine Months Ended

 
   

June 2022

   

June 2021

   

June 2022

   

June 2021

 
                                 

Net Sales

  $ 126,875     $ 118,666     $ 369,319     $ 322,015  

Cost of Goods Sold

    96,182       88,427       282,100       246,677  

Gross Profit

    30,693       30,239       87,219       75,338  
                                 

Selling, General and Administrative Expenses

    22,416       19,914       59,613       53,005  

Other (Income), Net

    (1,018 )     (1,578 )     (1,947 )     (218 )

Operating Income

    9,295       11,903       29,553       22,551  
                                 

Interest Expense, Net

    1,971       1,735       5,370       5,225  
                                 

Earnings Before Provision For Income Taxes

    7,324       10,168       24,183       17,326  
                                 

Provision For Income Taxes

    1,087       2,019       4,149       4,032  
                                 

Consolidated Net Earnings

    6,237       8,149       20,034       13,294  
                                 

Net Loss (Income) Attributable to Non-Controlling Interest

    3       12       (11 )     149  
                                 

Net Earnings Attributable to Shareholders

  $ 6,240     $ 8,161     $ 20,023     $ 13,443  
                                 

Weighted Average Shares Outstanding

                               

Basic

    6,946       6,975       6,966       6,956  

Diluted

    7,065       7,128       7,061       7,077  
                                 

Net Earnings per Common Share

                               

Basic

  $ 0.90     $ 1.17     $ 2.87     $ 1.93  

Diluted

  $ 0.88     $ 1.14     $ 2.84     $ 1.90  

 

 

 

   

June 2022

   

September 2021

   

June 2021

 
                         

Current Assets

                       

Cash

  $ 542     $ 9,376     $ 11,389  

Receivables, Net

    69,868       68,090       66,969  

Inventories, Net

    227,671       161,703       152,312  

Prepaids and Other Assets

    3,798       3,794       4,704  

Total Current Assets

    301,879       242,963       235,374  
                         

Noncurrent Assets

                       

Property, Plant & Equipment, Net

    75,144       67,564       66,397  

Goodwill and Other Intangibles, Net

    62,524       64,188       64,647  

Deferred Income Taxes

    1,164       1,854       3,139  

Operating Lease Assets

    47,570       45,279       48,241  

Investment in Joint Venture

    10,277       10,433       10,333  

Other Noncurrent Assets

    2,893       2,007       2,063  

Total Noncurrent Assets

    199,572       191,325       194,820  
                         

Total Assets

  $ 501,451     $ 434,288     $ 430,194  
                         
                         

Current Liabilities

                       

Accounts Payable and Accrued Expenses

  $ 102,180     $ 82,885     $ 68,816  

Income Tax Payable

    666       379       1,714  

Current Portion of Finance Leases

    8,265       6,621       7,102  

Current Portion of Operating Leases

    8,044       8,509       8,974  

Current Portion of Long-Term Debt

    7,615       7,067       7,520  

Current Portion of Contingent Consideration

    563       -       1,200  

Total Current Liabilities

    127,333       105,461       95,326  
                         

Noncurrent Liabilities

                       

Long-Term Taxes Payable

    2,841       3,220       3,220  

Long-Term Finance Leases

    18,802       15,669       17,319  

Long-Term Operating Leases

    40,940       38,546       41,093  

Long-Term Debt

    128,230       101,680       111,782  

Long-Term Contingent Consideration

    -       1,897       1,900  

Other Noncurrent Liabilities

    1,591       3,621       2,883  

Total Noncurrent Liabilities

    192,404       164,633       178,197  
                         

Common Stock

    96       96       96  

Additional Paid-In Capital

    60,822       60,831       60,284  

Equity Attributable to Non-Controlling Interest

    (647 )     (658 )     (673 )

Retained Earnings

    166,882       146,860       140,006  

Accumulated Other Comprehensive Loss

    (7 )     (786 )     (893 )

Treasury Stock

    (45,432 )     (42,149 )     (42,149 )

Total Equity

    181,714       164,194       156,671  
                         

Total Liabilities and Equity

  $ 501,451     $ 434,288     $ 430,194  

 

 

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Ticker: DLA
CIK: 1101396
Form Type: 8-K Corporate News
Accession Number: 0001437749-22-018885
Submitted to the SEC: Thu Aug 04 2022 4:09:13 PM EST
Accepted by the SEC: Thu Aug 04 2022
Period: Thursday, August 4, 2022
Industry: Wholesale Apparel Piece Goods And Notions
Events:
  1. Earnings Release
  2. Financial Exhibit
  3. Regulated Disclosure

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