Delta Apparel, Inc. (NYSE American: DLA), a provider of core
activewear, lifestyle apparel, and on-demand digital print
strategies, today announced financial results for its fiscal year
2024 second quarter ended March 30, 2024.
For the second quarter ended March 30, 2024:
- Net sales were $78.9 million compared to prior year period net
sales of $110.3 million. Salt Life Group segment net sales were
$15.5 million compared to prior year period net sales of $18.9
million. Net sales in the Delta Group segment were $63.4 million
compared to $91.3 million in the prior year period.
- Gross margins were 4.3% compared to 14.7% in the prior year
period, driven primarily by production curtailments in the Delta
Group segment. Adjusted for the cost impacts of these product
curtailments (“Production Curtailment Costs”), first quarter gross
margins were 14.4%. Delta Group segment gross margins were (6.3%)
compared to 5.5% in the prior year period. Adjusted for the
Production Curtailment Costs, Delta Group segment gross margins
were 6.3%. Salt Life Group segment gross margins were 47.5% versus
59% in the prior year period, driven primarily by price discounting
activity and the timing of inventory receipts.
- Selling, general, and administrative expenses (“SG&A”)
decreased from $19.3 million in the prior year period to $17.9
million, while SG&A as a percentage of sales increased over the
prior year period to 22.8%.
- Operating loss increased from $5.3 million in the prior year
period to $24.4 million. Adjusting for the Production Curtailment
Costs, the costs associated with strategic restructuring actions
(the “Restructuring Costs”), and an $8.8 million non-cash
impairment charge on the goodwill in our DTG2Go business (the
“Impairment Charge”), operating loss was $6.0 million. Delta Group
segment operating loss increased from $7.4 million to $22.4
million. Adjusted for the Production Curtailment Costs,
Restructuring Costs, and Impairment Charge, Delta Group segment
operating loss was $3.9 million. Operating income in the Salt Life
Group segment was $197 thousand compared to $4.6 million in the
prior year period.
- Net interest expense was $3.5 million compared to $3.7 million
in the prior year period, with the decrease driven by lower
borrowings partially offset by the elevated interest rate
environment.
- Earnings before interest, taxes, depreciation and amortization
(“EBITDA”) was a loss of $20.9 million. Adjusted for the Production
Curtailment Costs, Restructuring Costs, and Impairment Charge,
EBITDA was a loss of $2.4 million. Delta Group segment EBITDA was a
loss of $19.4 million. Adjusted for the Production Curtailment
Costs, Restructuring Costs, and Impairment Charge, Delta Group
segment EBITDA was a loss of $1.0 million. Salt Life Group segment
EBITDA was $744 thousand.
- Net loss increased to $36.3 million, or $5.15 per share, from a
net loss of $7.0 million, or $1.00 per share. Adjusted for the
Production Curtailment Costs, Restructuring Costs, and Impairment
Charge, net loss was $17.8 million, or $2.53 per share.
- Net inventory as of March 30, 2024, was $156.9 million, a
year-over-year decrease of 35% from inventory of $243.2 million at
March 2023 and a sequential decrease of almost 40% from inventory
of $258.9 million at December 2022.
- Debt outstanding under our U.S. revolving credit facility was
$95.8 million at March 30, 2024, a year-over-year reduction of
$57.4 million from March 2023. Total net debt, including capital
lease financing and cash on hand, was $126.2 million as of March
30, 2024, an approximately 35% reduction from $194.3 million at
March 2023.
- Cash on hand and availability under our U.S. revolving credit
facility totaled $11.8 million as of March 30, 2024, an increase of
$4.4 million from December 2023 and a decrease of $2.4 million from
September 2023.
- Capital spending was $200 thousand during the second quarter
compared to $2 million during the prior year second quarter.
No Conference Call
The Company will not be holding a conference call to discuss its
financial results for its fiscal year 2024 second quarter.
Non-GAAP Financial Measures
Reconciliations of GAAP gross margins to non-GAAP gross margins,
GAAP operating income to non-GAAP operating income, GAAP net income
to non-GAAP net income, GAAP net income to non-GAAP EBITDA, GAAP
net income to non-GAAP adjusted EBITDA, and GAAP operating income
to non-GAAP EBITDA and adjusted EBITDA are presented in tables
accompanying the selected financial data included in this release
and provide useful information to evaluate the Company’s
operational performance. A description of the amounts excluded on a
non-GAAP basis are provided in conjunction with these tables.
Non-GAAP gross margin, non-GAAP operating income, non-GAAP net
income, non-GAAP EBITDA and non-GAAP adjusted EBITDA should be
evaluated in light of the Company’s financial statements prepared
in accordance with GAAP.
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 proprietary DTG2Go technology and innovation to customer
supply chains. 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 and El Salvador.
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, our ability to obtain
necessary liquidity and/or access capital or that such liquidity or
capital will be available on terms acceptable to us or at all; 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 or 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 or refusal of suppliers or other third-parties,
including those related to transportation, to fulfill the terms of
their contracts with us; continued operating losses and
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 Six
Months Ended March 2024 March 2023
March 2024 March 2023 Net Sales
$
78,936
$
110,335
$
158,869
$
217,630
Cost of Goods Sold
75,580
94,126
146,767
187,798
Gross Profit
3,356
16,209
12,102
29,832
Selling, General and Administrative Expenses
17,961
19,298
36,576
38,168
Impairment of Goodwill
8,780
-
8,780
-
Other Expense (Income), Net
1,051
2,265
(3,870
)
(356
)
Operating Loss
(24,436
)
(5,354
)
(29,384
)
(7,980
)
Interest Expense, Net
3,471
3,723
7,047
6,613
Loss Before Provision For (Benefit From) Income
Taxes
(27,907
)
(9,077
)
(36,431
)
(14,593
)
Provision for (Benefit From) Income Taxes
8,393
(2,079
)
8,403
(3,996
)
Consolidated Net Loss
(36,300
)
(6,998
)
(44,834
)
(10,597
)
Net Loss Attributable to Non-Controlling
Interest
6
6
12
40
Net Loss Attributable to Shareholders
$
(36,294
)
$
(6,992
)
$
(44,822
)
$
(10,557
)
Weighted Average Shares Outstanding
Basic
7,051
7,001
7,027
6,978
Diluted
7,051
7,001
7,027
6,978
Net Loss per Common Share Basic
$
(5.15
)
$
(1.00
)
$
(6.38
)
$
(1.51
)
Diluted
$
(5.15
)
$
(1.00
)
$
(6.38
)
$
(1.51
)
March 2024 September
2023 March 2023 Current Assets
Cash
$
705
$
187
$
625
Receivables, Net
37,133
47,868
64,825
Inventories, Net
156,894
212,365
243,167
Prepaids and Other Assets
3,298
2,542
4,096
Total Current Assets
198,030
262,962
312,713
Noncurrent Assets Property, Plant
& Equipment, Net
59,741
65,611
70,739
Goodwill and Other Intangibles, Net
40,473
50,391
60,731
Deferred Income Taxes
-
7,822
1,342
Operating Lease Assets
54,534
55,464
56,174
Investment in Joint Venture
10,052
10,082
9,036
Other Noncurrent Assets
3,069
2,906
2,239
Total Noncurrent Assets
167,869
192,276
200,261
Total Assets
$
365,899
$
455,238
$
512,974
Current Liabilities
Accounts Payable and Accrued Expenses
$
74,701
$
80,321
$
84,652
Income Taxes Payable
869
710
671
Current Portion of Finance Leases
7,880
8,442
8,843
Current Portion of Operating Leases
9,886
9,124
8,861
Current Portion of Long-Term Debt
103,026
16,567
8,962
Total Current Liabilities
196,362
115,164
111,989
Noncurrent Liabilities Long-Term
Taxes Payable
1,184
2,131
2,131
Deferred Income Taxes
559
-
337
Long-Term Finance Leases
10,250
14,029
17,483
Long-Term Operating Leases
45,837
47,254
48,804
Long-Term Debt
5,757
126,465
159,591
Total Noncurrent Liabilities
63,587
189,879
228,346
Common Stock
96
96
96
Additional Paid-In Capital
60,916
61,315
60,912
Equity Attributable to Non-Controlling Interest
(719
)
(707
)
(696
)
Retained Earnings
88,566
133,387
156,043
Accumulated Other Comprehensive Gain (Loss)
-
-
180
Treasury Stock
(42,909
)
(43,896
)
(43,896
)
Total Equity
105,950
150,195
172,639
Total Liabilities and Equity
$
365,899
$
455,238
$
512,974
Reconciliation of Gross Margin, Operating Loss, and Net Loss to
Non-GAAP Measures Adjusted Gross Margin, Adjusted Operating Loss,
and Adjusted Net Loss Unaudited (in thousands)
Reconciliation of Gross Margin to Adjusted Gross Margin –
Unaudited Three Months Ending Six Months Ending
March 2024 March 2023 March 2024 March
2023 Gross Margin
$
3,356
$
16,209
$
12,102
$
29,832
Production Curtailment Costs (1)
8,027
879
9,375
4,249
Adjusted Gross Margin
$
11,383
$
17,088
$
21,477
$
34,081
14.4
%
15.5
%
13.5
%
15.7
%
Reconciliation of Operating Loss to Adjusted Operating
Loss – Unaudited Three Months Ending Six Months
Ending March 2024 March 2023 March 2024
March 2023 Operating Loss
$
(24,436
)
$
(5,354
)
$
(29,384
)
$
(7,980
)
Production Curtailment Costs (1)
8,027
879
9,375
4,249
Restructuring Costs (2)
1,664
813
2,477
813
Goodwill Impairment Charges (3)
8,780
-
8,780
-
Adjusted Operating Loss
$
(5,965
)
$
(3,662
)
$
(8,752
)
$
(2,918
)
Reconciliation of Net Loss to Adjusted Net Loss –
Unaudited Three Months Ending Six Months Ending
March 2024 March 2023 March 2024 March
2023 Net Loss
$
(36,294
)
$
(6,992
)
$
(44,822
)
$
(10,557
)
Production Curtailment Costs (1)
8,027
879
9,375
4,249
Restructuring Costs (2)
1,664
813
2,477
813
Goodwill Impairment Charges (3)
8,780
-
8,780
-
Tax Impact
9
(387
)
12
(1,392
)
Adjusted Net Loss
$
(17,814
)
$
(5,687
)
$
(24,178
)
$
(6,887
)
Reconciliation of Delta Group Segment Gross Margin to
Delta Group Segment Adjusted Gross Margin - Unaudited Three
Months Ending Six Months Ending March 2024
March 2023 March 2024 March 2023
Gross Margin
$
(4,017
)
$
5,000
$
40
$
12,759
Production Curtailment Costs (1)
8,027
879
9,375
4,249
Adjusted Gross Margin
$
4,010
$
5,879
$
9,415
$
17,008
6.3
%
6.4
%
7.1
%
9.0
%
Reconciliation of Delta Group Segment Operating Loss to
Delta Group Segment Adjusted Operating Loss - Unaudited
Three Months Ending Six Months Ending March
2024 March 2023 March 2024 March 2023
Operating Income
$
(22,350
)
$
(7,487
)
$
(21,860
)
$
(7,363
)
Production Curtailment Costs (1)
8,027
879
9,375
4,249
Restructuring Costs (2)
1,664
813
2,477
813
Goodwill Impairment Charges (3)
8,780
-
8,780
-
Adjusted Operating Loss
$
(3,879
)
$
(5,795
)
$
(1,228
)
$
(2,301
)
(1) Production Curtailment Costs consist of unabsorbed fixed
costs, temporary unemployment benefit payments, and other expense
items resulting from the Company’s decision to reduce production
levels. (2) Restructuring Costs consist of employee severance
benefits paid in connection with the transition of our more
expensive Mexico manufacturing capacity to our more efficient
Central America manufacturing platform, employee severance benefits
paid in connection with restructuring, and additional cost items
incurred from restructuring activities. (3) Goodwill Impairment
Charges consists of non-cash charge associated with our DTG2Go
business.
Reconciliations of GAAP Net Loss and
GAAP Operating Loss to Non-GAAP Measure Earnings Before Interest
Taxes Depreciation and Amortization ("EBITDA") and Adjusted Net
Loss and Adjusted Operating (Loss) Income to Adjusted
EBITDA
Unaudited (in thousands) Reconciliation of
Net Loss to EBITDA and Adjusted Net Loss to Adjusted EBITDA –
Unaudited Three Months Ending Six Months Ending
March 2024 March 2024 Net Loss
$
(36,294
)
$
(44,822
)
Interest Expense, Net
3,471
7,047
Provision For Income Taxes
8,393
8,403
Delta Group Segment Depreciation and Amortization
2,916
5,957
Salt Life Group Segment Depreciation and Amortization
547
1,081
Unallocated Depreciation and Amortization
57
115
EBITDA
(20,910
)
(22,219
)
Production Curtailment Costs (1)
8,027
9,375
Restructuring Costs (2)
1,664
2,477
Goodwill Impairment Charges (3)
8,780
8,780
Tax Impact
9
12
Adjusted Net Loss
(17,814
)
(24,178
)
Interest Expense, Net
3,471
7,047
Benefit From Income Taxes
8,384
8,391
Delta Group Segment Depreciation and Amortization
2,916
5,957
Salt Life Group Segment Depreciation and Amortization
547
1,081
Unallocated Depreciation and Amortization
57
115
Adjusted EBITDA
$
(2,439
)
$
(1,587
)
Reconciliation of Delta Group Segment Operating Loss to
Delta Group Segment EBITDA and Adjusted Delta Group Segment
Operating Loss to Adjusted Delta Group Segment EBITDA –
Unaudited Three Months Ending Six Months Ending
March 2024 March 2024 Delta Group Segment
Operating Income
$
(22,350
)
$
(21,860
)
Delta Group Segment Depreciation and Amortization
2,916
5,957
Delta Group Segment EBITDA
(19,434
)
(15,903
)
Production Curtailment Costs (1)
8,027
9,375
Restructuring Costs (2)
1,664
2,477
Goodwill Impairment Charges (3)
8,780
8,780
Adjusted Delta Group Segment Operating Income
(3,879
)
(1,228
)
Delta Group Segment Depreciation and Amortization
2,916
5,957
Adjusted Delta Group Segment EBITDA
$
(963
)
$
4,729
Reconciliation of Salt Life Group Segment
Operating Income (Loss) to Salt Life Group Segment EBITDA –
Unaudited Three Months Ending Six Months Ending
March 2024 March 2024 Salt Life Group
Segment Operating Income (Loss)
$
197
$
(1,933
)
Salt Life Group Segment Depreciation and Amortization
547
1,081
Salt Life Group Segment EBITDA
$
744
$
(852
)
(1) Production Curtailment Costs consist of unabsorbed fixed
costs, temporary unemployment benefit payments, and other expense
items resulting from the Company’s decision to reduce production
levels. (2) Restructuring Costs consist of employee severance
benefits paid in connection with the transition of our more
expensive Mexico manufacturing capacity to our more efficient
Central America manufacturing platform, employee severance benefits
paid in connection with restructuring, and additional cost items
incurred from restructuring activities. (3) Goodwill Impairment
Charges consists of non-cash charge associated with our DTG2Go
business.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240508438976/en/
Company Contact: Justin Grow, 864-232-5200 x6604
investor.relations@deltaapparel.com
Investor Relations Contact: ICR, Inc.
Investors: Tom Filandro, 646-277-1235
Delta Apparel (AMEX:DLA)
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