Business Wire | Feb 8, 2021 04:05PM EST

Delta Apparel Reports Strong Start to Fiscal 2021 with First Quarter Results Ahead of Plan

Feb. 08, 2021

GREENVILLE, S.C.--(BUSINESS WIRE)--Feb. 08, 2021--Delta Apparel, Inc. (NYSE American: DLA), a leading provider of core activewear and lifestyle apparel products, today announced financial results for its fiscal 2021 first quarter ended January 2, 2021.

Robert W. Humphreys, the Company's Chairman and Chief Executive Officer, commented, "Fiscal 2021 is off to a strong start with our first quarter sales and profitability results well ahead of our internal expectations. Despite notable headwinds from inventory constraints, hurricane-related disruptions in Central America, and freight carrier limitations during the holiday season, our results were bolstered by strong order demand and impeccable manufacturing and operational execution at all levels."

Mr. Humphreys continued, "We were particularly pleased with the accelerating success of our retail model within the DTG2Go digital print business. DTG2Go gained significant traction during the quarter with traditional retailers utilizing our on-demand, seamless supply chain to expand their business. We also capitalized on market opportunities that fueled growth and expanded profitability in our Activewear business, overcoming the challenges caused by inventory constraints. Within our Salt Life Group segment, revenue and improved margins were propelled by robust direct-to-consumer sales. Salt Life enthusiasts actively engaged with the brand through online channels as well as seeking out our branded stores, driving strong same-store sales growth as well as outsized performance in our recently opened Salt Life retail doors in Estero, Palm Beach Gardens and Destin, Florida."

"Our business is firing on all cylinders as we continue to ramp our manufacturing output to record levels to keep up with the high demand we have in our pipeline. Our strong first quarter results and solid balance sheet have positioned us well to deliver against our goals for the fiscal year, and I could not be more proud of our teams. It is their hard work and dedication to our Company that continues to fuel our stellar results," concluded Mr. Humphreys.

For the first quarter ended January 2, 2021:

* Net sales were $94.7 million compared to $95.9 million in the prior year, with Delta Group segment down 1.5% partially offset by 2.3% growth in the Salt Life Group segment. Sales orders in Activewear were strong for the quarter, but delivery was hindered by inventory shortages and the impacts of two major hurricanes in Central America. DTG2Go's orders were down to begin the quarter, but quickly returned to strong growth in November, only to be hampered by freight carrier constraints during the holiday season. Salt Life Group sales growth was driven by a 60% increase in overall direct-to-consumer sales, with growth in both ecommerce and retail sales.

* Gross margins improved 70 basis points from the prior year, increasing to 21.4% of sales. Gross margins expanded in both business segments driven by favorable product mix, lower raw material costs, and manufacturing efficiencies and process improvements within the Delta Group segment, and a stronger mix of direct-to-consumer sales in the Salt Life Group segment.

* Selling, general and administrative ("SG&A") expenses decreased $2.0 million, or 11.3%, from cost reductions implemented during the pandemic that have continued, including lower personnel costs, reduced travel expenses, and a more digitally-focused sales and marketing strategy.

* Operating income for the quarter increased 16% to $3.1 million, or 3.2% of sales, compared to $2.6 million, or 2.8% of sales, in the prior year. Excluding the $1.3 million pre-tax expense related to the impact of two hurricanes that disrupted the Company's Honduran manufacturing facilities, adjusted operating income was $4.4 million, or 4.7% of sales, an increase of $1.8 million, or 67%, from the prior year.

* Net income for the December quarter was $0.9 million, or $0.13 per diluted share, consistent with the same period in the prior year. Adjusting for the $0.15 per diluted share impact of hurricane-related disruptions, adjusted net income for the first quarter of fiscal 2021 was $2.0 million, or $0.28 per diluted share, a 115% improvement compared to the prior year.

Total inventory as of December 2020 was $148.5 million, down $48.8 million from a year ago. The stronger than anticipated December quarter sales along with the temporary hurricane disruptions slowed the normal seasonal build of inventory during the quarter. The Company has already ramped up production at an accelerated pace in January and expects to be producing at all-time record levels in the back half of the year.

Total net debt, including capital lease financing and cash on hand, increased $7.6 million from September 2020 to $129.8 million at December 2020. Cash on hand and availability under the Company's U.S. revolving credit facility totaled $43.7 million at December 2020, a $3.4 million decrease from September 2020 due primarily to seasonal working capital build. The Company spent approximately $6.9 million on capital expenditures during the first quarter of fiscal 2021 compared to $2.5 million a year ago.

Conference Call The Company's senior management will hold a conference call to discuss its financial results today at 4:30 PM ET. The Company invites you to join the call by dialing 800-437-2398. If calling from outside the United States, please dial 323-289-6576. 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 March 8, 2021. 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 3131301.

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(r), COAST(r), Soffe(r), and Delta. The Company is a market leader in the on-demand, digital print and fulfillment industry, bringing DTG2Go's proprietary 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 digital platform. The Company's products are also made available direct-to-consumer on its ecommerce sites at www.saltlife.com, www.coastapparel.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 7,700 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 general U.S. and international economic conditions; the COVID-19 pandemic impact on our operations, financial condition, liquidity, and capital investments; significant interruptions within our manufacturing or distribution facilities 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; competitive conditions in the apparel industry; restrictions on our ability to borrow capital or service our indebtedness; 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; 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 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

December 2020 December 2019

Net Sales $ 94,723 $ 95,889

Cost of Goods 74,434 75,996 SoldGross Profit 20,289 19,893

Selling, Generaland 16,030 18,073 AdministrativeExpensesOther Loss )(Income), Net 1,190 (817

Operating Income 3,069 2,637

Interest Expense, Net 1,654 1,802

Earnings Before Provision For 1,415 835Income Taxes Provision For Income Taxes 572 44

Consolidated Net Earnings 843 791

Net Loss Attributable to 40 132 Non-ControllingInterest Net Earnings $ 883 $ 923 Attributable toShareholders Weighted AverageSharesOutstanding Basic 6,920 6,950

Diluted 7,000 7,072

Net Earnings perCommon Share Basic $ 0.13 $ 0.13

Diluted $ 0.13 $ 0.13

December 2020 September 2020 December 2019

Current Assets Cash $ 10,255 $ 16,458 $ 433

Receivables, 63,646 61,000 55,477 Net Income Tax Receivable 1,180 983 -

Inventories, 148,521 145,515 197,315 Net Prepaids and Other Assets 3,609 2,812 3,698

Total Current 227,211 226,768 256,923 Assets NoncurrentAssets Property, Plant 67,779 63,950 61,255 & Equipment, Net Goodwill and Other 57,452 57,845 59,052 Intangibles, Net Deferred Income Taxes 3,313 4,052 1,514

Operating Lease 52,171 54,645 41,996 Assets Investment in 10,462 10,573 10,689 Joint Venture Other Noncurrent 2,233 2,398 2,584 AssetsTotal Noncurrent 193,410 193,463 177,090 Assets Total Assets $ 420,621 $ 420,231 $ 434,013

CurrentLiabilities Accounts Payable and $ 73,153 $ 69,974 $ 74,089 Accrued Expenses Income Taxes Payable 383 379 -

Current Portion of Finance 6,915 6,956 6,822 Leases Current Portion of Operating 8,892 9,039 8,497 Leases Current Portion of Long-Term 7,112 7,559 7,337 Debt Current Portion of Contingent - 2,120 2,700 ConsiderationTotal Current 96,455 96,027 99,445 Liabilities NoncurrentLiabilities Long-Term Taxes Payable 3,599 3,599 3,875

Long-Term 13,409 11,328 12,734 Finance Leases Long-Term 44,522 46,570 34,430 Operating Leases Long-Term Debt 112,595 112,782 120,468

Long-Term Contingent 4,310 4,300 5,970 Consideration Other Noncurrent 2,534 2,939 2,680 LiabilitiesTotal Noncurrent 180,969 181,518 180,157 Liabilities Common Stock 96 96 96

Additional 59,564 61,005 58,825 Paid-In Capital Equity Attributable to (564 ) (524 ) (413 ) Non-Controlling Interest Retained 127,447 126,564 137,860 Earnings Accumulated Other (1,197 ) (1,322 ) (838 ) Comprehensive Loss Treasury Stock (42,149 ) (43,133 ) (41,119 )

Total Equity 143,197 142,686 154,411

Total $ 420,621 $ 420,231 $ 434,013 Liabilities andEquity View source version on businesswire.com: https://www.businesswire.com/news/home/20210208005750/en/

CONTACT: Company Contact:

CONTACT: Deborah Merrill, 864-232-5200 x6620 investor.relations@deltaapparel.com

CONTACT: Investor Relations and Media Contact: ICR, Inc.

CONTACT: Investors: Tom Filandro, 646-277-1235

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