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Company Contact:
Deborah Merrill
 
(864)232-5200 x 6620
 
investor.relations@deltaapparel.com
 
 
Investor Relations and Media Contact: ICR, Inc.
 
Investor:
Tom Filandro
 
(203)682-8200
 
 
Tom.Filandro@icrinc.com
 
Media:
Jessica Liddell
 
 
(203)682-8208
 
 
DLAPR@irinc.com

Delta Apparel Reports Fiscal 2019 Second Quarter and Six-Month Results
Company achieves year-over-year sales growth for quarter
GREENVILLE, S.C., May 6, 2019 -- Delta Apparel, Inc. (NYSE American: DLA), a leading provider of core activewear and lifestyle apparel products, today announced financial results for its fiscal year 2019 second quarter and first six months ended March 30, 2019.

Robert W. Humphreys, the Company’s Chairman and Chief Executive Officer, commented, “We were pleased to deliver another quarter of top-line growth despite challenges from unseasonable weather in key markets and this year’s later spring break selling period. Our Delta Group segment posted a nice sales increase for the quarter and our fast-growing digital print business, DTG2Go, was once again a bright spot, with sales growth of 177%.”

Mr. Humphreys continued, “Both our Delta Group and Salt Life Group segments achieved top-line growth for the first half of the year and we are off to a strong start to the second half. We see exciting opportunities for growth and increased profitability across all of our businesses as we leverage our investments in manufacturing technology and distribution, and expand into additional sales channels. We continue to believe Delta Apparel is uniquely positioned to succeed in today’s dynamic retail environment.”

For the second quarter ended March 30, 2019:
•
Net sales were $102.8 million, up almost 3% from $100.0 million in the prior year second quarter. Net sales in the Delta Group segment increased almost 4% over the prior year period and net sales in the Salt Life Group segment declined approximately 4% from the prior year period.
•
Gross margin sequentially improved 10 basis points from the first quarter to 18.4% in the second quarter, but declined compared to 22.2% in the prior year second quarter. Anticipated transition costs from changes in the private label product mix and higher-cost raw materials in the Delta Group segment, coupled with higher than expected digital print acquisition integration expenses and delayed spring sales in the Salt Life Group segment, drove a decline in gross profit to $18.9 million from $22.2 million in the prior year period. The majority of these cost impacts are now behind us and we expect gross profit to improve in the back half of the year.
•
Selling, general and administrative ("SG&A") expenses as a percentage of sales were 16.6%, compared to 16.7% in the prior year second quarter.
•
The above-referenced cost impacts drove a decline in operating income for the quarter to $2.8 million compared to $5.6 million in the prior year second quarter, with Delta Group segment operating income declining $2.4 million and Salt Life Group segment operating income declining $0.1 million. We expect profitability to increase in the second half of the year as we enter our traditionally strong selling season with an expanding product mix and better balance between selling prices and raw material costs.


•
Net income for the quarter was $0.9 million, or $0.13 per diluted share, compared to $3.6 million, or $0.48 per diluted share, in the prior year period.

For the six months ended March 30, 2019:
•
Net sales were $204.5 million, up 7.4% from $190.3 million in the comparable period last year. Net sales in the Delta Group segment increased 8.2% over the prior year and net sales in the Salt Life Group segment increased 1.5% over the prior year.
•
Gross profit was $37.5 million, down 2.9% from $38.6 million in the comparable period last year. Gross margin was 18.3% compared to 20.3% in the prior year period.
•
SG&A expenses as a percentage of sales improved 20 basis points from last year to 16.5%.
•
Operating income was $2.9 million compared to $7.4 million in the comparable period last year, with the majority of the decrease attributable to a discrete expense of $2.5 million taken during the first quarter in connection with the resolution of litigation stemming from The Sports Authority's March 2016 bankruptcy. Delta Group segment operating income was impacted by the litigation expense and declined $4.1 million over the prior year, while Salt Life Group segment operating income was relatively flat compared to the prior year.
•
The Company experienced a net loss for the period of $209 thousand, or $0.03 per diluted share, an improvement over the prior year period’s net loss of $6.3 million, or $0.87 per diluted share. Excluding the above-referenced $2.5 million litigation expense, the Company achieved net income of $1.9 million, or $0.27 per diluted share, for the six months ended March 30, 2019.

During the quarter, the Company spent approximately $1.9 million on capital expenditures and $717 thousand to repurchase 35,353 shares of its stock. Total debt, including capital lease financing, as of the end of the first six months of fiscal 2019 was $143.9 million, up approximately $32 million from the end of our 2018 fiscal year due principally to the Company’s recent digital print acquisition, capital expenditures, share repurchases and our seasonal build in inventory. Total inventory at the end of the first six months of fiscal 2019 was $186.5 million compared with $172.2 million a year ago due primarily to increased units on hand from the recent digital print acquisitions as well as higher costs per unit driven by product mix and the inflationary environment.

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 866-575--6539. If calling from outside the United States, please dial 323-794-2423. 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, 2019. 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 9980067.

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 core activewear and lifestyle apparel and related accessory products. The Company specializes in selling casual and athletic products through a variety of distribution channels and distribution tiers, including department stores, mid and mass channels, e-retailers, sporting goods and outdoor retailers, independent and specialty stores, and the U.S. military. The Company’s products are also made available direct-to-consumer at its branded retail stores and 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 8,100 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 volatility and uncertainty of cotton and other raw material prices; the general U.S. and international economic conditions; competitive conditions in the apparel industry; restrictions on our ability to borrow capital or service our indebtedness; deterioration in the financial condition of our customers and suppliers and changes in the operations and strategies of our customers and suppliers; 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; significant interruptions within our manufacturing or distribution facilities or other operations; 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. 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 30, 2019
 
March 31, 2018
 
March 30, 2019
 
March 31, 2018
 
 
 
 
 
 
 
 
 
Net Sales
$
102,838

 
$
100,004

 
$
204,513

 
$
190,346

Cost of Goods Sold
83,930

 
77,769

 
167,036

 
151,741

Gross Profit
18,908

 
22,235

 
37,477

 
38,605

 
 
 
 
 
 
 
 
 
Selling, General and Administrative
17,056

 
16,737

 
33,841

 
31,717

Other (Income) Expense, Net
(843
)
 
(116
)
 
902

 
(464
)
Operating Income
2,695

 
5,614

 
2,734

 
7,352

 
 
 
 
 
 
 
 
 
Interest Expense, Net
1,985

 
1,350

 
3,750

 
2,685

 
 
 
 
 
 
 
 
 
Income (Loss) Income Before Provision for Income Taxes
710

 
4,264

 
(1,016
)
 
4,667

 
 
 
 
 
 
 
 
 
(Benefit From) Provision for Income Taxes
(115
)
 
632

 
(614
)
 
10,988

 
 
 
 
 
 
 
 
 
Consolidated Net Income (Loss)
825

 
3,632

 
(402
)
 
(6,321
)
 
 
 
 
 
 
 
 
 
Net Loss Attributable to Non-Controlling Interest
(117
)
 
—

 
(193
)
 
—

 
 
 
 
 
 
 
 
 
Net Income (Loss) Attributable to Shareholders
$
942

 
$
3,632

 
$
(209
)
 
$
(6,321
)
 
 
 
 
 
 
 
 
 
Weighted Average Shares Outstanding
 
 
 
 
 
 
 
 
Basic
6,943

 
7,195

 
6,933

 
7,231

 
Diluted
7,103

 
7,496

 
6,933

 
7,231

 
 
 
 
 
 
 
 
 
Net Income (Loss) per Common Share
 
 
 
 
 
 
 
 
Basic
$
0.14

 
$
0.50

 
$
(0.03
)
 
$
(0.87
)
 
Diluted
$
0.13

 
$
0.48

 
$
(0.03
)
 
$
(0.87
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 30, 2019
 
September 29, 2018
 
March 31, 2018
 
 
 
 
(Unaudited)
 
(Audited)
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
Current Assets
 
 
 
 
 
 
 
 
Cash
$
1,777

 
$
460

 
$
434

 
 
 
Receivables, Net
59,946

 
46,879

 
60,083

 
 
 
Income Tax Receivable
—

 
38

 
—

 
 
 
Inventories, Net
186,526

 
174,983

 
172,213

 
 
 
Prepaids and Other Assets
3,002

 
3,062

 
4,185

 
 
Total Current Assets
251,251

 
225,422

 
236,915

 
 
 
 
 
 
 
 
 
 
 
Noncurrent Assets
 
 
 
 
 
 
 
 
Property, Plant & Equipment, Net
54,311

 
52,114

 
50,093

 
 
 
Goodwill and Other Intangibles, Net
60,151

 
53,715

 
50,602

 
 
 
Deferred Income Taxes
1,924

 
1,374

 
1,996

 
 
 
Investment in Joint Venture
9,731

 
8,980

 
4,140

 
 
 
Other Noncurrent Assets
1,687

 
2,004

 
2,148

 
 
Total Noncurrent Assets
127,804

 
118,187

 
108,979

 
 
 
 
 
 
 
 
 
 
 
Total Assets
$
379,055

 
$
343,609

 
$
345,894

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current Liabilities
 
 
 
 
 
 
 
 
Accounts Payable and Accrued Expenses
$
73,857

 
$
64,750

 
$
63,984

 
 
 
Income Tax Payable
—

 
—

 
256

 
 
 
Current Portion of Contingent Consideration
3,190

 
638

 
—

 
 
 
Current Portion of Capital Lease Financing
5,308

 
3,846

 
2,336

 
 
 
Current Portion of Long-Term Debt
7,435

 
6,577

 
6,356

 
 
Total Current Liabilities
89,790

 
75,811

 
72,932

 
 
 
 
 
 
 
 
 
 
 
Noncurrent Liabilities
 
 
 
 
 
 
 


 
Long-Term Taxes Payable
3,451

 
4,259

 
7,414

 
 
 
Long-Term Contingent Consideration
6,104

 
9,904

 
5,850

 
 
 
Long-Term Capital Lease Financing
11,150

 
9,302

 
8,402

 
 
 
Long-Term Debt
120,043

 
92,083

 
105,798

 
 
 
Deferred Income Taxes
2,192

 
2,132

 
—

 
 
 
Other Noncurrent Liabilities
658

 
—

 
—

 
 
Total Noncurrent Liabilities
143,598

 
117,680

 
127,464

 
 
 
 
 
 
 
 
 
 
 
 
Common Stock
96

 
96

 
96

 
 
 
Additional Paid-In Capital
59,121

 
61,979

 
60,561

 
 
 
Equity Attributable to Non-Controlling Interest
(100
)
 
93

 
—

 
 
 
Retained Earnings
128,486

 
128,695

 
121,032

 
 
 
Accumulated Other Comprehensive (Loss) Income
(493
)
 
136

 
167

 
 
 
Treasury Stock
(41,443
)
 
(40,881
)
 
(36,358
)
 
 
Equity Attributable to Delta Apparel, Inc.
145,667

 
150,118

 
145,498

 
 
 
 
 
 
 
 
 
 
 
Total Liabilities and Equity
$
379,055

 
$
343,609

 
$
345,894