DLA

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.

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

 

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220804005844/en/

ICR,Inc.

Investors:

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

Media:

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