Delta Apparel Reports Strong Fiscal 2018 Third Quarter and Nine-Month Results
GREENVILLE, S.C., Aug. 06, 2018 (GLOBE NEWSWIRE) -- Delta Apparel, Inc. (NYSE American: DLA), a leading provider of basic and branded apparel, headwear and related accessories, today announced financial results for its fiscal year 2018 third quarter and nine months ended June 30, 2018.
Net sales for the third quarter were $112 million, up 8% from $104 million in the prior-year third quarter. Earnings increased 9% to $0.62 per diluted share from $0.57 per diluted share in the prior-year period. In addition, gross margins improved to 21.6% from 21.4% in the prior-year period driven largely by margin expansion in the basics segment.
For the first nine months of fiscal year 2018, net sales increased to $303 million from $294 million in the prior-year period, a 3% improvement. Sales for the first nine months were up 9% year-over-year after adjusting for $16 million in prior-year sales from the since-divested Junkfood Clothing business. A discrete provisional tax expense of $10.6 million in the first quarter stemming from the recent United States tax reform legislation resulted in a $0.25 loss per diluted share for the first nine months compared with earnings of $1.07 per diluted share in the prior-year period. Excluding the one-time tax expense, earnings for the first nine months were $1.18 per diluted share, up 10% year-over-year and up 23% year-over-year after excluding the prior year’s $0.11 per diluted share gain on the sale of the Junkfood Clothing business.
Basics Segment ReviewBasics segment revenue for the quarter was $90 million, a 14% increase over the prior year. Growth at both Delta Catalog and FunTees drove a 7% increase in Activewear sales for the quarter. The sales growth in higher-margin fashion basics products seen in recent periods continued, with the premium Delta Platinum line gaining more customer interest and market share on the strength of its quality, styling and fabric sophistication. Sales on Activewear’s B2B eCommerce site also continued to escalate, with almost 30% growth for the quarter. Activewear gross margins improved to 18.0% from 16.6% in the prior-year quarter with higher selling prices helping to offset raw material and other cost pressures in the market.
The fiscal year 2018 third quarter was the first full quarter of combined operation for the Company’s digital print and fulfillment business, DTG2Go (previously Art Gun), following its recent acquisition on March 9, 2018. The integrated DTG2Go business achieved third quarter sales growth of 167% over the prior-year period, with increased sales from existing customers and new customer launches contributing to the strong performance. DTG2Go opened its fourth manufacturing and fulfillment location during the quarter. The new facility, located on Soffe’s Fayetteville, North Carolina campus, further increased DTG2Go’s capacity as well as its consumer reach in the key northeastern market.
Branded Segment ReviewThird quarter revenue in the branded segment was $23 million, compared with $25 million in the prior-year period. At Salt Life, incremental sales with new national retailers and a double-digit increase in eCommerce sales were offset by the impacts of unseasonably cool, wet weather on demand in the independent sales channel, especially in key southeastern markets. While these conditions resulted in a sales decline of 2% for the quarter, gross margins held strong and drove solid profitability at Salt Life.
Soffe sales declined about $1 million during the quarter but are up 2% year-over-year through the first nine months. The third quarter decline resulted primarily from lower sales in the military channel, offsetting growth with strategic sporting goods retailers through improved floor placement and increased demand for Soffe shorts.
Robert W. Humphreys, Delta Apparel, Inc.’s Chairman and Chief Executive Officer, commented, “We had a solid third quarter with overall sales and earnings growth despite some headwinds associated with the inflationary cost environment and well-documented challenges at retail.
“Activewear sales were up a strong 7% for the third quarter, with multiple growth drivers at Delta Catalog including increased demand, momentum with fashion basics merchandise, and higher selling prices. The private label market fundamentals remain strong and we continue to see brands emphasizing Western Hemisphere sourcing strategies. The FunTees platform is uniquely positioned to accommodate brands and retailers seeking more supply chain versatility along with improved speed-to-market.
“The third quarter was another exciting period of growth for our DTG2Go business as it integrated its recent acquisition and further expanded its national footprint. DTG2Go continues to solidify its market-leading position and we believe the momentum we are seeing will continue as it moves toward its seasonally strong holiday quarter.
“We expect a return to growth at Salt Life with the temporary factors affecting third quarter sales now behind us. Salt Life continues to add doors and win floor space with national accounts and its direct-to-consumer channels are growing at encouraging rates. The success of the brand’s recent craft beer launch, Salt Life Lager, and expansion into ladies’ swimwear are exciting new developments that further solidify its positioning as a true “lifestyle” brand.
“Soffe’s third quarter performance was mixed. While sales declined in the military channel, we continue to see successes in the strategic sporting goods channel and expect further growth with dance, cheer and gymnastics programs. The new DTG2Go operation on the Soffe campus opens up exciting new customer opportunities for blended fulfillment solutions, including both digital and traditional printing. Soffe also added to its branded retail footprint during the quarter with a new store in Greenville, North Carolina. We expect the new store to serve as another important touch point in a key consumer market for the brand.
“Overall we are excited about the growth opportunities at Delta Apparel, Inc. driven by new products and category extensions, our broadening customer base, and our investments in the dynamic digital print market. Our manufacturing investments have created scale efficiencies and platform flexibility that are allowing us to both reduce costs and internally produce merchandise that we previously sourced. In addition, the Salt Life brand offers tremendous growth opportunities for our Company as it continues to expand both geographically and into additional lifestyle categories. All things considered, we believe we are positioned for a strong finish to fiscal year 2018 and good momentum going into the new fiscal year.”
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 323-994-2082. 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 6, 2018. 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 4393527.
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 lifestyle basic and branded activewear apparel, headwear and related accessories. The Company specializes in selling casual and athletic products across distribution tiers, including specialty stores, boutiques, department stores, mid-tier and mass chains, and the U.S. military. The Company’s products are also made available direct-to-consumer 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 7,500 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 factors set forth in the “Risk Factors” contained in our Annual Reports 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 Chief Financial Officer(864) 232-5200 x6620
Investor Relations Contact: Sally Wallick, CFA(404) firstname.lastname@example.org
SELECTED FINANCIAL DATA: (In thousands, except per share amounts) Three Months Ended Nine Months Ended (Unaudited) (Unaudited) Jun 30, Jul 1, 2017 Jun 30, Jul 1, 2017 2018 2018 ----------- ----------- ----------- ----------- Net Sales $ 112,182 $ 104,281 $ 302,528 $ 293,755 Cost of Goods Sold 87,919 82,012 239,660 229,697 Gross Profit 24,263 22,269 62,868 64,058 Selling, General and Administrative 17,936 16,964 49,654 52,523 Change in Fair Value of Contingent 100 (400 ) (300 ) (600 ) Consideration Gain on Sale of Business - - - (1,295 ) Other Income, Net (441 ) (146 ) (505 ) (413 ) Operating Income 6,668 5,851 14,019 13,843 Interest Expense, Net 1,522 1,256 4,207 3,868 - ------- - - ------- - - ------- - - ------- - Income Before Provision for Income Taxes 5,146 4,595 9,812 9,975 Provision for Income Taxes 596 127 11,583 1,563 - ------- - - ------- - - ------- - - ------- - Net Income (Loss) $ 4,550 $ 4,468 $ (1,771 ) $ 8,412 - ------- - - ------- - - ------- - - ------- - Weighted Average Shares Outstanding Basic 7,116 7,541 7,193 7,580 Diluted 7,388 7,866 7,193 7,869 Net Income (Loss) per Common Share Basic $ 0.64 $ 0.59 $ (0.25 ) $ 1.11 Diluted $ 0.62 $ 0.57 $ (0.25 ) $ 1.07 Jun 30, Sep 30, Jul 1, 2017 2018 2017 (Unaudited) (Audited) (Unaudited) ----------- ----------- ----------- Current Assets Cash $ 393 $ 572 $ 489 Receivables, Net 62,567 47,557 56,310 Income Tax Receivable - 352 842 Inventories, Net 169,601 174,551 175,873 Prepaids and Other Assets 3,881 4,662 7,303 Total Current Assets 236,442 227,694 240,817 Noncurrent Assets Property, Plant & Equipment, Net 50,794 42,706 42,443 Goodwill and Other Intangibles, Net 51,294 36,068 36,293 Deferred Income Taxes 1,488 5,002 3,705 Other Noncurrent Assets 6,945 6,332 6,034 Total Noncurrent Assets 110,521 90,108 88,475 Total Assets $ 346,963 $ 317,802 $ 329,292 - ------- - - ------- - - ------- - Current Liabilities Accounts Payable and Accrued Expenses $ 66,018 $ 64,039 $ 64,587 Income Tax Payable 291 - - Current Portion of Capital Lease Financing 3,309 848 736 Current Portion of Long-Term Debt 6,156 7,548 7,771 Total Current Liabilities 75,774 72,435 73,094 Noncurrent Liabilities Long-Term Taxes Payable 7,414 - - Long-Term Capital Lease Financing 8,007 2,519 2,141 Long-Term Debt 98,858 85,306 94,885 Other Noncurrent Liabilities 7,200 1,655 1,900 Total Noncurrent Liabilities 121,479 89,480 98,926 Shareholders’ Equity 149,710 155,887 157,272 Total Liabilities and Shareholders’ Equity $ 346,963 $ 317,802 $ 329,292 - ------- - - ------- - - ------- -