Business Wire | Aug 5, 2021 04:06PM EDT

Delta Apparel Achieves All-Time Record Third Quarter Earnings

Aug. 05, 2021

GREENVILLE, S.C.--(BUSINESS WIRE)--Aug. 05, 2021--Delta Apparel, Inc. (NYSE American: DLA), a leading provider of core activewear and lifestyle apparel products, today announced exceptionally strong results for its third quarter ended July 3, 2021 (the "June quarter").

Robert W. Humphreys, the Company's Chairman and Chief Executive Officer, commented, "Our results reflect our strongest quarterly earnings performance on record. We surpassed our expectations as sales returned to pre-pandemic levels and gross margins continued to expand, highlighting the strength and resilience of our diversified business model."

Mr. Humphreys continued, "While top line growth has been hampered by inventory constraints and labor shortages in our Delta Group segment, customer demand remains robust as we continue to expand our reach with large retail and global brand partners seeking the products and value-added services we can uniquely provide. Salt Life delivered record quarterly sales with strong, double-digit growth across its sales channels including over 150% growth in our direct-to-consumer channels compared to the third quarter of fiscal year 2019, highlighting the strength of brand's omnichannel marketing initiatives.

"We are thrilled with our performance during the quarter as it highlights the benefits of our broad channels of distribution, the demand in the market for the unique products and services we offer, and the efficiencies we can achieve with our vertically-integrated operations. We believe the momentum we are experiencing is just the beginning and, coupled with our ongoing strategic initiatives, positions us well for continued growth and profitability expansion," Humphreys concluded.

For the June 2021 quarter:

* Net sales were $118.7 million, an increase of 65.3% compared to the prior year third quarter when operations were significantly impacted by the COVID-19 pandemic. Compared to the fiscal 2019 third quarter, net sales were relatively flat driven by a 36% increase in net sales in the Salt Life Group partially offset by a 5% decline in the Delta Group segment. June quarter sales grew 9.2% from the March 2021 quarter, and sales in both segments exceeded internal expectations. * The strong sales performance in the Salt Life business was driven by double-digit year-over-year growth in its wholesale, ecommerce, and branded-retail channels, with Salt Life retail doors driving sales growth of 250% from the third quarter of fiscal 2019. Delta Group net sales declined as inventory was not available to support the strong order demand, and labor shortages impacted U.S. production and distribution capacity. * Gross profit was $30.2 million compared to $3.0 million in the prior year third quarter. Gross margin improved to 25.5% versus 4.2% in the prior year, and 20.8% in the June 2019 quarter, driven by higher direct-to-consumer sales and the benefit of strategic pricing initiatives combined with lower product costs still flowing through cost of sales. * Selling, general and administrative ("SG&A") expenses were $19.9 million, or 16.8% of sales, in the June quarter compared to $15.2 million, or 21.2% of sales, in the prior year third quarter, and $17.9 million, or 15.0% of sales, in the third quarter of fiscal 2019. The increase in SG&A compared to the third quarter of fiscal 2019 was driven by higher incentive compensation expenses, consistent with the improved profitability. * Operating income in the June 2021 quarter was $11.9 million compared to the prior year third quarter loss of $21.6 million, which included $23.1 million of COVID-19 related adjustments. Third quarter fiscal 2021 operating income increased 40% from the same quarter in fiscal 2019. The June 2021 quarter included a $1.2 million favorable adjustment to the contingent earnout liability from the DTG2Go acquisition. The June 2019 quarter included a $1.3 million gain related to the favorable settlement of a commercial litigation matter. * Net earnings for the June 2021 quarter were $8.2 million, or $1.14 per diluted share, compared to a net loss of $17.8 million, or $2.58 per share, in the June 2020 quarter, which included $17.7 million, or $2.57 per diluted share, of after-tax expenses associated with COVID-19. Net earnings per diluted share for the June 2021 quarter increased 60% compared to the same quarter in fiscal 2019. The June 2021 quarter included $0.9 million, or $0.13 per diluted share, of after-tax income related to the reduction of fair value of the contingent earnout liability. The third quarter fiscal 2019 results included an after-tax gain of $0.7 million, or $0.10 per diluted share, related to the settlement of a commercial litigation matter.

Total inventory as of June 2021 was $152.3 million, down $5.7 million compared to $158.0 million from a year ago. Total inventory increased $3.8 million from March 2021 resulting from an increase in raw materials and in-process inventory, partially offset by a $2.9 million decrease in finished goods. Total net debt, including capital lease financing and cash on hand, was $132.3 million as of June 2021, representing a $4.8 million increase from net debt levels a year ago, and a $2.9 million decrease from net debt levels in March 2021. The decline in total net debt since the March quarter was due to improved profitability, partially offset an in-process inventory build and $6.6 million paid for the Autoscale.ai technology announced on June 8, 2021. Cash on hand and availability under the Company's U.S. revolving credit facility totaled $43.4 million as of June 2021, a $2.3 million decrease from a year ago.

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 866-269-4261. If calling from outside the United States, please dial 323-347-3281. 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 5, 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 9985753.

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 8,200 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 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 pershare amounts) Three Months Ended Nine Months Ended

June 2021 June 2020 June 2021 June 2020

Net Sales $ 118,666 $ 71,801 $ 322,015 $ 264,351

Cost of Goods Sold 88,427 68,819 246,677 220,893

Gross Profit 30,239 2,982 75,338 43,458

Selling, General and 19,914 15,206 53,005 51,130 Administrative ExpensesOther (Income) Loss, Net (1,578 ) 9,364 (218 ) 7,724

Operating Income (Loss) 11,903 (21,588 ) 22,551 (15,396 )

Interest Expense, Net 1,735 1,710 5,225 5,320

Earnings (Loss) Before 10,168 (23,298 ) 17,326 (20,716 )Provision For (Benefit From)Income Taxes Provision For (Benefit From) 2,019 (5,454 ) 4,032 (4,884 )Income Taxes Consolidated Net Earnings 8,149 (17,844 ) 13,294 (15,832 )(Loss) Net Loss Attributable to 12 63 149 286 Non-Controlling Interest Net Earnings (Loss) $ 8,161 $ (17,781 ) $ 13,443 $ (15,546 )Attributable to Shareholders Weighted Average SharesOutstandingBasic 6,975 6,890 6,956 6,932

Diluted 7,128 6,890 7,077 6,932

Net Earnings (Loss) perCommon ShareBasic $ 1.17 $ (2.58 ) $ 1.93 $ (2.24 )

Diluted $ 1.14 $ (2.58 ) $ 1.90 $ (2.24 )

June 2021 September June 2020 2020

Current AssetsCash $ 11,389 $ 16,458 $ 14,520

Receivables, Net 66,969 61,000 51,867

Income Tax Receivable - 983 700

Inventories, Net 152,312 145,515 158,015

Prepaids and Other Assets 4,704 2,812 3,085

Total Current Assets 235,374 226,768 228,187

Noncurrent AssetsProperty, Plant & Equipment, 66,397 63,950 61,273 NetGoodwill and Other 64,647 57,845 58,238 Intangibles, NetDeferred Income Taxes 3,139 4,052 7,143

Operating Lease Assets 48,241 54,645 42,920

Investment in Joint Venture 10,333 10,573 10,273

Other Noncurrent Assets 2,063 2,398 2,398

Total Noncurrent Assets 194,820 193,463 182,245

Total Assets $ 430,194 $ 420,231 $ 410,432

Current LiabilitiesAccounts Payable and Accrued $ 68,816 $ 69,974 $ 73,931 ExpensesIncome Taxes Payable 1,714 379 -

Current Portion of Finance 7,102 6,956 7,099 LeasesCurrent Portion of Operating 8,974 9,039 8,720 LeasesCurrent Portion of Long-Term 7,520 7,559 8,046 DebtCurrent Portion of 1,200 2,120 2,685 Contingent ConsiderationTotal Current Liabilities 95,326 96,027 100,481

Noncurrent LiabilitiesLong-Term Taxes Payable 3,220 3,599 3,585

Long-Term Finance Leases 17,319 11,328 12,934

Long-Term Operating Leases 41,093 46,570 35,152

Long-Term Debt 111,782 112,782 113,939

Long-Term Contingent 1,900 4,300 4,096 ConsiderationOther Noncurrent Liabilities 2,883 2,939 3,735

Total Noncurrent Liabilities 178,197 181,518 173,441

Common Stock 96 96 96

Additional Paid-In Capital 60,284 61,005 60,154

Equity Attributable to (673 ) (524 ) (567 )Non-Controlling InterestRetained Earnings 140,006 126,564 121,390

Accumulated Other (893 ) (1,322 ) (1,430 )Comprehensive LossTreasury Stock (42,149 ) (43,133 ) (43,133 )

Total Equity 156,671 142,686 136,510

Total Liabilities and Equity $ 430,194 $ 420,231 $ 410,432

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CONTACT: Deborah Merrill, 864-232-5200 x6620 investor.relations@deltaapparel.com Investor Relations and Media Contact: ICR, Inc. Investors: Tom Filandro, 646-277-1235 Media: Jessica Liddell, 203-682-8208 DLAPR@icrinc.com