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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that
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Delta Apparel, Inc. and Subsidiaries
June 2022 | September 2021 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 542 | $ | 9,376 | ||||
Accounts receivable, less allowances of $91 and $251, respectively | 68,435 | 66,973 | ||||||
Other receivables | 1,433 | 761 | ||||||
Income tax receivable | 0 | 356 | ||||||
Inventories, net | 227,671 | 161,703 | ||||||
Prepaid expenses and other current assets | 3,798 | 3,794 | ||||||
Total current assets | 301,879 | 242,963 | ||||||
Property, plant and equipment, net of accumulated depreciation of $105,998 and $99,225, respectively | 75,144 | 67,564 | ||||||
Goodwill | 37,897 | 37,897 | ||||||
Intangibles, net | 24,627 | 26,291 | ||||||
Deferred income taxes | 1,164 | 1,854 | ||||||
Operating lease assets | 47,570 | 45,279 | ||||||
Equity method investment | 10,277 | 10,433 | ||||||
Other assets | 2,893 | 2,007 | ||||||
Total assets | $ | 501,451 | $ | 434,288 | ||||
Liabilities and Equity | ||||||||
Liabilities: | ||||||||
Accounts payable | $ | 76,244 | $ | 52,936 | ||||
Accrued expenses | 25,936 | 29,949 | ||||||
Income taxes payable | 666 | 379 | ||||||
Current portion of finance leases | 8,265 | 6,621 | ||||||
Current portion of operating leases | 8,044 | 8,509 | ||||||
Current portion of long-term debt | 7,615 | 7,067 | ||||||
Current portion of contingent consideration | 563 | 0 | ||||||
Total current liabilities | 127,333 | 105,461 | ||||||
Long-term income taxes payable | 2,841 | 3,220 | ||||||
Long-term finance leases | 18,802 | 15,669 | ||||||
Long-term operating leases | 40,940 | 38,546 | ||||||
Long-term debt | 128,230 | 101,680 | ||||||
Long-term contingent consideration | 0 | 1,897 | ||||||
Other non-current liabilities | 1,591 | 3,621 | ||||||
Total liabilities | $ | 319,737 | $ | 270,094 | ||||
Shareholder's equity: | ||||||||
Preferred stock - $0.01 par value, 2,000,000 shares authorized, none issued and outstanding | 0 | 0 | ||||||
Common stock - $0.01 par value, 15,000,000 authorized, 9,646,972 shares issued, and 6,914,939 and 6,974,660 shares outstanding as of June 2022 and September 2021, respectively | 96 | 96 | ||||||
Additional paid-in capital | 60,822 | 60,831 | ||||||
Retained earnings | 166,882 | 146,860 | ||||||
Accumulated other comprehensive loss | (7 | ) | (786 | ) | ||||
Treasury stock - 2,732,033 and 2,672,312 shares as of June 2022 and September 2021, respectively | (45,432 | ) | (42,149 | ) | ||||
Equity attributable to Delta Apparel, Inc. | 182,361 | 164,852 | ||||||
Equity attributable to non-controlling interest | (647 | ) | (658 | ) | ||||
Total equity | 181,714 | 164,194 | ||||||
Total liabilities and equity | $ | 501,451 | $ | 434,288 | ||||
Three Months Ended Nine Months Ended June 2022 June 2021 June 2022 June 2021 Net sales Cost of goods sold Gross profit Selling, general and administrative expenses Other (income), net Operating income Interest expense, net Earnings before provision for income taxes Provision for income taxes Consolidated net earnings Net (loss) income attributable to non-controlling interest Net earnings attributable to shareholders Basic earnings per share Diluted earnings per share Weighted average number of shares outstanding Dilutive effect of stock awards Weighted average number of shares assuming dilution Three Months Ended Nine Months Ended June 2022 June 2021 June 2022 June 2021 Net earnings attributable to shareholders Other comprehensive income related to unrealized gain on derivatives, net of income tax Consolidated comprehensive income Accumulated Additional Other Non- Shares Amount Capital Earnings Income (Loss) Shares Amount Interest Total Balance as of September 2020 Net earnings Other comprehensive income Net loss attributable to non-controlling interest Vested stock awards Stock based compensation Balance as of December 2020 Net earnings Other comprehensive income Net loss attributable to non-controlling interest Vested stock awards Purchase of common stock Stock based compensation Balance as of March 2021 Net earnings Other comprehensive income Net loss attributable to non-controlling interest Stock based compensation Balance as of June 2021 Accumulated Additional Other Non- Common Stock Paid-In Retained Comprehensive Treasury Stock Controlling Shares Amount Capital Earnings Shares Amount Interest Total Balance as of September 2021 Net earnings Other comprehensive income Net income attributable to non-controlling interest Purchase of common stock Vested stock awards Stock based compensation Balance as of December 2021 Net earnings Other comprehensive income Net loss attributable to non-controlling interest Purchase of common stock Stock based compensation Balance as of March 2022 Net earnings Other comprehensive income Net loss attributable to non-controlling interest Purchase of common stock Stock based compensation Balance as of June 2022 Nine Months Ended June 2022 June 2021 Operating activities: Consolidated net earnings Adjustments to reconcile net earnings to net cash used in operating activities: Depreciation and amortization Amortization of deferred financing fees Provision for inventory market reserves Change in reserves for allowances on accounts receivable, net Provision for deferred income taxes Non-cash stock compensation Loss (gain) on disposal of equipment Other, net Changes in operating assets and liabilities: Accounts receivable, net Inventories, net Prepaid expenses and other current assets Other non-current assets Accounts payable Accrued expenses Net operating lease liabilities Income taxes Other liabilities Net cash (used in) provided by operating activities Investing activities: Purchases of property and equipment Proceeds from equipment purchased under finance leases Proceeds from sale of equipment Cash paid for intangible asset Cash paid for business Net cash used in investing activities Financing activities: Proceeds from long-term debt Repayment of long-term debt Repayment of finance lease obligations Payment of contingent consideration Payment of deferred financing cost Repurchase of common stock Payment of withholding taxes on stock awards Net cash provided by (used in) financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Supplemental cash flow information Finance lease assets exchanged for finance lease liabilities Operating lease assets exchanged for operating lease liabilities Three Months Ended June 2022 June 2021 Retail Direct-to-consumer ecommerce Wholesale Net sales Nine Months Ended June 2022 June 2021 Retail Direct-to-consumer ecommerce Wholesale Net sales Three Months Ended June 2022 Net Sales Retail Direct-to-consumer ecommerce Wholesale Delta Group Salt Life Group Total Three Months Ended June 2021 Net Sales Retail Direct-to-consumer ecommerce Wholesale Delta Group Salt Life Group Total Nine Months Ended June 2022 Net Sales Retail Direct-to-consumer ecommerce Wholesale Delta Group Salt Life Group Total Nine Months Ended June 2021 Net Sales Retail Direct-to-consumer ecommerce Wholesale Delta Group Salt Life Group Total June 2022 September 2021 Raw materials Work in process Finished goods 3, June 2022 Revolving credit facility established December 2020, interest at 7.25%, due August 2025 Term loan established December 2020, interest at 7.5%, quarterly installments beginning September 2021 through December 2025 Term loan established May 2022, interest at 7.5%, quarterly installments beginning March 2023 through May 2027 stock. Yarn Finished fabric Finished products the retail Three Months Ended Nine Months Ended June 2022 June 2021 June 2022 June 2021 Segment net sales: Delta Group Salt Life Group Total net sales Segment operating earnings: Delta Group (1) Salt Life Group Total segment operating earnings Three Months Ended Nine Months Ended June 2022 June 2021 June 2022 June 2021 Segment operating earnings Unallocated corporate expenses Unallocated interest expense Consolidated earnings before provision for income taxes June 2022 September 2021 Deferred tax assets $ 1 $ 266 Other non-current liabilities (8 ) (1,052 ) Accumulated other comprehensive loss $ (7 ) $ (786 ) 2022. The following financial liabilities are measured at fair Quoted Prices in Significant Other Significant Active Markets for Observable Unobservable Identical Assets Inputs Inputs Period Ended Total (Level 1) (Level 2) (Level 3) Interest Rate Swaps June 2022 September 2021 Contingent Consideration June 2022 September 2021 June 2022 September 2021 Cost Accumulated Amortization Net Value Cost Accumulated Amortization Net Value Goodwill Intangibles: Tradename/trademarks 20 – 30 yrs Customer relationships 20 yrs Technology 10 yrs License agreements 15 – 30 yrs Non-compete agreements 4 – 8.5 yrs Total intangibles Business Outlook mass retail supply strategies and focus onorganic growth throughboth new customeracquisition and basis. channels. plant curtailment costs. quarter. Our effective tax rate on operations for the 2022. second quarter. needs. reduced customer demand. Critical Accounting Policies $ 126,875 $ 118,666 $ 369,319 $ 322,015 96,182 88,427 282,100 246,677 30,693 30,239 87,219 75,338 22,416 19,914 59,613 53,005 (1,018 ) (1,578 ) (1,947 ) (218 ) 9,295 11,903 29,553 22,551 1,971 1,735 5,370 5,225 7,324 10,168 24,183 17,326 1,087 2,019 4,149 4,032 6,237 8,149 20,034 13,294 (3 ) (12 ) 11 (149 ) $ 6,240 $ 8,161 $ 20,023 $ 13,443 $ 0.90 $ 1.17 $ 2.87 $ 1.93 $ 0.88 $ 1.14 $ 2.84 $ 1.90 6,946 6,975 6,966 6,956 119 153 95 121 7,065 7,128 7,061 7,077 $ 6,240 $ 8,161 $ 20,023 $ 13,443 186 105 779 429 $ 6,426 $ 8,266 $ 20,802 $ 13,872 Common Stock Paid-In Retained Comprehensive Treasury Stock Controlling 9,646,972 $ 96 $ 61,005 $ 126,564 $ (1,322 ) 2,756,854 $ (43,133 ) $ (524 ) $ 142,686 - 0 0 883 0 - 0 0 883 - 0 0 0 125 - 0 0 125 - 0 0 0 0 - 0 (40 ) (40 ) 0 0 (2,117 ) 0 0 (84,542 ) 984 0 (1,133 ) - 0 676 0 0 - 0 0 676 9,646,972 $ 96 $ 59,564 $ 127,447 $ (1,197 ) 2,672,312 $ (42,149 ) $ (564 ) $ 143,197 - 0 0 4,398 0 - 0 0 4,398 - 0 0 0 199 - 0 0 199 - 0 0 0 0 - 0 (97 ) (97 ) - 0 0 0 0 - 0 0 0 - 0 0 0 0 - 0 0 0 - 0 278 0 0 - 0 0 278 9,646,972 $ 96 $ 59,842 $ 131,845 $ (998 ) 2,672,312 $ (42,149 ) $ (661 ) $ 147,975 - 0 0 8,161 0 - 0 0 8,161 - 0 0 0 105 - 0 0 105 - 0 0 0 0 - 0 (12 ) (12 ) - 0 442 0 0 - 0 0 442 9,646,972 $ 96 $ 60,284 $ 140,006 $ (893 ) 2,672,312 $ (42,149 ) $ (673 ) $ 156,671 Income (Loss) 9,646,972 $ 96 $ 60,831 $ 146,860 $ (786 ) 2,672,312 $ (42,149 ) $ (658 ) $ 164,194 - 0 0 3,645 0 - 0 0 3,645 - 0 0 0 212 - 0 0 212 - 0 0 0 0 - 0 25 25 0 0 0 0 0 74,232 (2,143 ) 0 (2,143 ) 0 0 (1,766 ) 0 0 (76,460 ) 674 0 (1,092 ) - 0 140 0 0 - 0 0 140 9,646,972 $ 96 $ 59,205 $ 150,505 $ (574 ) 2,670,084 $ (43,618 ) $ (633 ) $ 164,981 - 0 0 10,137 0 - 0 0 10,137 - 0 0 0 381 - 0 0 381 - 0 0 0 0 - 0 (11 ) (11 ) 0 0 0 0 0 28,015 (846 ) 0 (846 ) - 0 714 0 0 - 0 0 714 9,646,972 $ 96 $ 59,919 $ 160,642 $ (193 ) 2,698,099 $ (44,464 ) $ (644 ) $ 175,356 - 0 0 6,240 0 - 0 0 6,240 - 0 0 0 186 - 0 0 186 - 0 0 0 0 - 0 (3 ) (3 ) 0 0 0 0 0 33,934 (968 ) 0 (968 ) - 0 903 0 0 - 0 0 903 9,646,972 $ 96 $ 60,822 $ 166,882 $ (7 ) 2,732,033 $ (45,432 ) $ (647 ) $ 181,714 $ 20,034 $ 13,294 11,272 10,212 244 244 1,484 1,447 (160 ) (511 ) 488 912 1,756 1,396 348 (2 ) (2,263 ) (1,672 ) (1,251 ) (5,458 ) (67,452 ) (8,244 ) 602 (2,136 ) 199 1,264 23,390 (5,191 ) (1,737 ) 3,592 409 543 264 1,939 (1,049 ) (626 ) (13,422 ) 11,003 (10,931 ) (1,676 ) 0 2,312 33 422 (132 ) (6,655 ) (583 ) (2,527 ) (11,613 ) (8,124 ) 411,600 346,841 (383,919 ) (346,131 ) (5,604 ) (5,415 ) 0 (2,110 ) (850 ) 0 (3,934 ) 0 (1,092 ) (1,133 ) 16,201 (7,948 ) (8,834 ) (5,069 ) 9,376 16,458 $ 542 $ 11,389 $ 10,381 $ 12,290 $ 6,869 $ 1,032 7company. Withcompany with approximately 9,100 worldwide, weworldwide. We design, manufacture,source, and market a diverse portfoliothe our customers'supply chain of our customers. chains.Wespecialize in sellingcasual andathletic productsand e-retailers,eRetailers, the U.S.military, and through ourbusiness-to-business digital platform. Our products are alsomade available direct-to-consumerdistribution modelgo-to-marketstrategy allows usto capitalize onour strengths to provide our in providingactivewear and lifestyleproducts. More products, with morethan 90% of the apparelunits that we sell are sewnin our owned or leasedown facilities.This allows us tooffer52-5352-53 weekfiscal yearending onthe Saturdayclosest toSeptember 30.Our 20222023 fiscalyear isa 52-week 52-weekyear andwill endon October 1, 2022 ("September30, 2023 ("fiscal2022"10-Q10-Q presents our thirdresults for our first quarter of fiscal 2022.2023. Our 20212022 fiscal year was a 52-week52-week year and ended on2, 2021 ("1, 2022 ("fiscal 2021"2022").Period EndedFiscal YearDate EndedJune 2021Fiscal 2021July 3, 2021September 2021Fiscal 2021October 2, 2021December 2021Fiscal 2022January 1, 2022March 2022Fiscal 2022April 2, 2022June 2022Fiscal 2022July 2, 202210-Q10-Q and Article 10 of Regulation S--month and nine-month periods months ended June December 2022 are not necessarily indicative of the results that may be expected for our fiscal 2022.2023. Although our variousour June quarter generally beingfiscal2023 may not be indicativeof the highest and salesdistribution in our December quarter generally being the lowest.futureyears. These10-K10-K for our fiscal 2021,2022, filed with the UnitedStates Securities and Exchange Commission (“SEC”). 31%nine-monthsthree months ended June DecemberJune December 2021, we received dividendsfrom thethis investment of $1.1 $$0.9 $nine-months threemonthsendedJune December2022andDecember2021, wepaidapproximately $1.3 Payments of approximately $1.8 million were made during the nine-months ended June 2021, which included payment of rent deferrals related to the June 2020 quarter as a result of the COVID pandemic.864-232-5200,864-232-5200,or via email at investor.relations@deltaapparel.com.10-K10-K for our fiscal 2021,2022, filed withtheRecently StandardsDecember 2019, June 2016, the FASBissued ASU No.2019-12,Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes, eliminates certain exceptions within Accounting Standards Codification ("ASC") 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective as of the beginning of our fiscal year 2022. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The impact of the adoption of provision of ASU 2019-12 did not have a material impact to our financial condition, results of operations, cash flows, and disclosures.Standards Not Yet AdoptedIn June 2016, the FASB issued ASU No.2016-13, 2016-13, (Topic 326)(Topic 326):Measurement of CreditLosses on Financial Instruments (“2016-13”2016-13, (“In March 2020, the FASB issued ASU 2020-04,Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04provides optional guidance for a limited period of time to ease potential accounting and financial reporting impacts of reference rate reform, including the expected transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This new guidance includes temporary optional practical expedients and exceptions for applying U.S. GAAP to transactions affected by reference rate reform if certain criteria are met. These transactions include contract modifications, hedging relationships and the sale or transfer of debt securities classified as held-to-maturity. Entities may apply the provisions of the new standard at the beginning of the reporting period when the election is made. This guidance may be applied through December 31, 2022. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures and does not currently intend to early adopt the new rules..web sites;websites; and sales from wholesale channels, which includes our business-to-business ecommerce sales and sales inour DTG2Go sales. business.The table $ 4,412 3 % $ 3,543 3 % 1,145 1 % 2,105 2 % 121,318 96 % 113,018 95 % $ 126,875 100 % $ 118,666 100 % $ 9,685 3 % $ 8,429 3 % 3,199 1 % 5,393 2 % 356,435 96 % 308,193 95 % $ 369,319 100 % $ 322,015 100 % $ 106,020 0.1 % 0.4 % 99.5 % 20,855 20.8 % 3.4 % 75.8 % $ 126,875 $ 102,562 0.2 % 0.3 % 99.5 % 16,104 20.6 % 11.1 % 68.3 % $ 118,666 $ 323,276 0.1 % 0.3 % 99.6 % 46,043 20.3 % 5.0 % 74.7 % $ 369,319 $ 284,404 0.3 % 0.3 % 99.4 % 37,611 20.6 % 12.1 % 67.3 % $ 322,015 10Table of Contents$17.4 $$15.9 $JuneDecember 2022 and September 2021, 2022, respectively, consisted of thefollowing (in thousands): $ 23,660 $ 17,204 23,005 20,954 181,006 123,545 $ 227,671 $ 161,703 (as(as further amended,the “Amended CreditAgreement”) with WellsFargo Bank, (“(“Wells Fargo”), as AdministrativeAgent, the SoleLead Arranger andthe SoleBook Runner, andthe financialinstitutions namedtherein as Lenders, (collectively, (collectively, “Seventh“Seventh Amendment”).The SeventhAmendment, (i)removes LIBORbased borrowingand utilizesSOFR (SecuredOvernight3-month3-month tenors, (iii)sets theSOFR floor to (previously 1.1)$170 $$25 $$200 $JuneDecember 2022, we had $122.8 $ 3.4%totaled $30.8 million.totaled $JuneDecember 2022 and September 2021 2022, there was $25.0 millionwas $$19.0 $PromissoryOn October 8, 2018, we acquired substantially all P—Subsequent Events for a discussion of the assets of Silk Screen Ink, Ltd. d/b/a SSI Digital Print Services. In conjunction withEighth and Ninth Amendments to the acquisition, we issued a promissory note in the principal amount of $7.0 million. The promissory note beared interest at 6% with quarterly installments, which began Fifth Amended and Restated Credit Agreement entered into on January 2, 2019, with the final installment due October 1, 2021. The final payment, in accordance with the promissory note agreement, was made during the three-months ended December 2021. -year $1.1 $ $9.5 $$3.7 $Each of theseThese loans aresecured by a first-priorityfirst-is are not guaranteed by our U.S. entities.These loans are denominated in U.S. dollars, and the carrying value ofhave beenborrowed are classified as long-term debt.JuneDecember 2022 is as follows (in thousands): $ 2,000 7,100 3,656 $5.6 $$5.2 $JuneDecember 2022 and December 2021 quarters, respectively. Distribution costs included in SG&A expenses totaled $16.8 million and $15.6 million for the nine-months ended June 2022 and 2021, respectively. In addition, SG&A expenses include costs related to sales associates, administrative("("2020Stock Plan") to replace the 2010 Stock Plan,which was previously re-approvedre-servingsserving as a director, become fully vested under certain circumstances as defined in the 2020 StockPlan. Such circumstances include, butbecoming disabled.disability. The Compensation Committeeis authorized to establish theterms and conditions of awardsgranted under the 2020JuneDecember 2022 and$1.1 $$0.5 $the thiscompensation cost are$0.2 $$0.1 $three-monththree-month periods ended JuneDecember 2022 andJune 2021, respectively. December 2021.nine-months ended JuneDecember 2022 and June 2021, we recognized $2.4 million and $2.0 million, respectively, in stock-based compensation expense. Associated with the compensation cost are income tax benefits recognized of $0.4 million and $0.5 million, respectively, for each of the nine-months periods ended June 2022 and June 2021. During the December 2021 quarter, performance stock units and restricted stock 47,700 and 95,000 respectively, vested with the filing ofour Annual Report on Form10-K10-K for2021,2022 and were issued in accordance with their respectiveagreements. Of these vested awards, 96,350all were payable incommon stock and 46,350 were payable in cash.2021 2022 quarter,performance stock unitsand restricted stockunits representing 5,000and 18,000shares of our common stock were granted and are eligible to vest upon the filing of our Annual Report on Form 10-K for fiscal 2022 and are payable in common stock.During the December 2021 quarter, performance stock units and restricted stock units representing 59,625 and 59,625 shares of our granted and are eligible to vest upon the filing of our Annual Report for fiscal 2023. Of these shares, 64,625 are payable in common stock and 54,625 are payable in cash.During the December 2021 quarter, restricted stock units representing 13,000 shares of our common stock were granted and are eligible to vest upon the filing of our Annual Report on Form 10-K for fiscal 2024 and are payable in common stock.During the March 2022 quarter, restricted stock units representing 42,000 shares of our common stock were granted and are eligible to vest upon the filing of our Annual Report for fiscal 2023. Of these shares, 21,000 are payable in common stock and 21,000 are payable in cash.During the March 2022 quarter, restricted stock units representing 42,000 shares of our common stock were granted and are eligible to vest upon the filing of our Annual Report for fiscal 2024. Of these shares, 21,000 are payable in common stock and 21,000 are payable in cash.During the June 2022 quarter, restricted stock units representing 10,000 shares of our common stock were granted and are eligible to vest upon the filing of our Annual Report on Form 10-K for fiscal 2022 and are payable in common stock. Additionally, restricted stock units representing 10,000 shares of our common stock were granted and are eligible to vest upon the filing of our Annual Report for fiscal 2023. Of these shares, 5,000 are payable in common stock and 5,000 are payable in cash. Additionally, restricted stock units representing 10,000 shares of our common stock were granted and are eligible to vest upon the filing of our Annual Report for fiscal 2024. Of these shares, 5,000 are payable in common stock and 5,000 are payable in cash.During the June 2022 quarter, performance stock units representing 10,000 were granted and are eligible to vest upon the filing of our Annual Report on Form 10-K for fiscal 2023. Of these shares, 5,000 are payable in common stock and 5,000 are payable in cash. Additionally, performance stock units representing 10,000 were granted and are eligible to vest upon the filing of our Annual Report on Form 10-K for fiscal 2024. Of these shares, 5,000 are payable in common stock and 5,000 are payable in cash. June December2022, there was $4.9 million 2.4 years.June December 2022, minimum $ 30,480 7,620 11,059 $ 49,159 ourthe following businessunits, which are primarily focused on core activewear styles, and includes our styles:DTG2Go and Delta Activewear business units. We areActivewear. chainchains of our OurVia our multi-facility fulfillment footprint acrossbusiness is organized around key customer channelsDTG2Go also servicesthe eRetailer, ad-specialty, promotional and how they source their various apparel needs. screen through wholesale markets. We offerThe Activewear businessisSoffe, and sourced-branded products that we distribute utilizingSoffebrands as wellas sourceditems fromselect thirdparty brands.Our fashionbasics lineincludes our network of fulfillment centers. Delta Direct services key channels, such as the screen print, promotional,PlatinumCollection, whichoffers fresh, fashionableeRetailer channels feel,as well as versatile fleece offerings.We offer innovativeapparel products, including the retail licensingDelta Dri line ofperformance shirts whose customers sell through to many mid-tier and mass market retailers. In our Global Brands & Retail Direct business we serve our customersserves as theirakey supply chainpartner from product development to shipment of their branded products, with the majority of products being sold with value-added services including embellishment, hangtags, and ticketing. We also serve retailers by providing our portfolio of products directly to their retail stores and through their ecommerce channels. We sell our products to a diversified audience, including sporting goods and outdoor retailers, specialty and resort shops, farm and fleet stores, department stores, and mid-tier retailers. We also service custom apparel tolarge multi-nationalbrands, major brandedsportswear companies, trendyregional brands, andallforces. We also offerforces,providing services ranging from custom product developmentto the shipment of branded products with “retail-ready”value-direct directlyto consumers at www.soffe.com. our lifestyle brand focused on a broad range of apparel garments, headwear and related accessories to meet consumer preferences and fashion trends, and includes our Salt Life business, unit. These products are soldwhichis built on the authentic, aspirational Salt Lifelifestyle brand that represents a passion forthe ocean,and boutique shops, traditional stores,department stores, and outdoor retailers, as well as direct-to-consumer through brandedsites and branded retail stores. Products in this segment are marketed under our lifestyle brand of Salt Life®siteat10-K 10-Kfor fiscal2021,2022, filedwith theSEC. (in (in $ 106,020 $ 102,562 $ 323,276 $ 284,404 20,855 16,104 46,043 37,611 $ 126,875 $ 118,666 $ 369,319 $ 322,015 $ 10,701 $ 13,869 $ 33,557 $ 28,394 3,574 2,916 7,037 4,726 $ 14,275 $ 16,785 $ 40,594 $ 33,120 (1) In fiscal the included $1.3 million of expense, reported within "Other loss (income), net", related to two catastrophic hurricanes that disrupted operations during the December 2020 quarter. (in thousands): $ 14,275 $ 16,785 $ 40,594 $ 33,120 4,980 4,882 11,041 10,569 1,971 1,735 5,370 5,225 $ 7,324 $ 10,168 $ 24,183 $ 17,326 13 (the “New(the “2017 TaxLegislation”) was enacted on December 22,2017,which significantly revised theU.S. corporate income taxcode by,among163(j)163(j)"). GILTI is the excess of the163(j)163(j) limitationdoes not allowthe amount of deductible163(j)163(j). WeIn addition, we have elected to accountfor the tax on GILTIas a period cost and, therefore, donotnine-months three-monthsended JuneDecember 2022 was 17.2% 23.1% 21.9%2021.2022. Wegenerally benefit from having income inforeign jurisdictions that are either exemptfrom income taxes or have taxratesJune December2022, all of our othercomprehensive income was attributableto shareholders; none related tothe non-controllingJuneDecember 2022 are as follows:NotionalEffective DateAmountFixed LIBOR RateMaturity DateInterest Rate SwapJuly 25, 2018$20.0 million3.18%July 25, 2023JuneDecember 2022 and September 2021 (in2022 (in thousands): June December2022 and September 2021.○Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.○Level 2 – Inputs other than quoted prices that are observable for assets and liabilities, either directly or indirectly. These inputs include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are less active.○Level 3 – Unobservable inputs that are supported by little or no market activity for assets or liabilities and includes certain pricing models, discounted cash flow methodologies and similar techniques.14 Fair Value Measurements Using $ (8 ) 0 $ (8 ) 0 $ (1,052 ) 0 $ (1,052 ) 0 $ (563 ) 0 0 $ (563 ) $ (1,897 ) 0 0 $ (1,897 ) JuneDecember 2022 and September 2021,2022,book value for fixed ratedebt approximates approximatedfairThe DTG2Go acquisition purchase price consisted of additional payments contingent on the combined business’s achievement of certain performance targets related to sales and earnings before interest, taxes, depreciation and amortization ("EBITDA") for the period from April 1, 2018, through September 29, 2018, as well as for our fiscal years 2019,2020,2021 and 2022. The valuation of the fair value of the contingent consideration is based upon projected results. The fair value of the contingent consideration is sensitive to changes in our projected results and discount rates. As of June 2022, we estimate the fair value of contingent consideration to be $0.6 million, a $1.3 million decrease from September 2021 due to a change in projected results resulting in decreased estimated future earnout payments. $60.0 $During WedidJune December2022quarter.ThroughDecember2022, quarter, wehavepurchased 33,934 $1.0 million. Through June 2022, we have purchased 3,735,114 shares of our common stock for an aggregate of $56.4 $10b-18.10b-18.As of JuneDecember 2022, $ (in(in thousands): Economic Life $ 37,897 $ — $ 37,897 $ 37,897 $ — $ 37,897 N/A $ 16,000 $ (4,717 ) $ 11,283 $ 16,000 $ (4,317 ) $ 11,683 7,400 (3,028 ) 4,372 7,400 (2,473 ) 4,927 10,083 (2,385 ) 7,698 9,952 (1,715 ) 8237 2,100 (914 ) 1,186 2,100 (837 ) 1,263 1,657 (1,569 ) 88 1,657 (1,476 ) 181 $ 37,240 $ (12,613 ) $ 24,627 $ 37,109 $ (10,818 ) $ 26,291 $0.6 $June December 2022, the Delta Group segment assets$18.0 $$19.9 $June December2022andJune December2021quarterswas $0.6 $ $0.5 $ for the nine-months ended June 2022 and June 2021 was $1.8 million and 1.2 million, respectively. Amortization expenseisestimatedtobe$2.3 $2022, 2023,approximately $2.2 $2023, 2024,and approximately $2.22024, 2025, 2026, and 2026.On June 1, 2021, DTG2Go, LLC acquired specified net assets of Fan Print Inc., which primarily included its Autoscale.ai technology as well as immaterial net working capital. The costs to acquire the net assets were $8.0 million, of which $6.6 million was paid at closing through our existing U.S. credit facility and $1.4 million will be paid in three installments, one installment in our third quarter of fiscal 2022 and two installments remaining. The acquisition qualified as an asset acquisition in accordance with ASU 2017-01,Clarifying the Definition of a Business, as substantially all of the fair value of the net assets acquired or $8.1 million were assigned to the technology intangible asset with an estimated economic life of 10 years. The acquisition cost also consists of additional payments contingent on the adjusted operating profits resulting from the Autoscale.ai technology for the period from June 1, 2021 through October 2, 2021, as well as for our fiscal years 2022 through 2026. These contingent earnout liabilities are recognized when the contingency is probable and reasonably estimable, which generally results in recognition, if earned, during the fourth quarter of each fiscal year and which would increase the value of the technology intangible asset.None.16Contentseligible in-transit inventory in the borrowing base and amends the definition of Increased Reporting Event to include 12.5% of the “plan”“plan”, “estimate”, “project”, “forecast”“forecast”, “outlook”, “anticipate”, “expect”, “intend”“intend”, “remain”, “seek"●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; and●price volatility in our shares and the general volatility of the stock market.2021,2022, filed withthe SEC. Any forward-looking statementsin this Quarterly Report onForm 10-Q10-laws.law.The resultsthirdfive go-to-marketchannels, including record salesand almost 20% growth fiscal 2022 reflect a continuationfurther illustratessolid performance we achievedsoft demand for basictees impacting the mass retail supplychain and our Deltafirst halfmarket– a multi-fiscal 2022, whichUnited States consumers and priority access to our Delta Direct channel’slow-cost vertical blankbelieve has been driven by strong consumer demandareencouraged with theproductivity gainsproducts. While sales continue to grow year over year, our operating margin was negatively impacted by inflationary pressures, resultinglong-termobjectives in higher variable selling and distribution costs and lower operating margins. Our bottom line results achieved diluted earnings per share of $0.88 for the third quarter. Our five focused go-to-market strategies and our vertical manufacturing supply chain are driving growth across all the channels we serve. thissegment saw 3%segment’s Global Brands channel delivered double-digit sales growth overfor the prior yearquarter and continues to add value to the supply chains of multi-national,diversified channelsDelta Group segment overtime.distribution cotton,as a resultpressures margins accordingly.We expect to cycle through most of providing additional value-added services. Driventhat higher-priced cotton in large part by increased customeroursecond quarter and begin to see the benefit of lower input costs Activewear business, comprised of Delta Direct and Global Brands & Retail Direct business, saw sales increase overchannel outsideof the prior year third quarter. Our digital print business, DTG2Go, also saw sales growth during the third quarter of fiscal 2022. exceededcontinues with this quarter’s record salesand excellent bottom line performance as it moves into its traditionally strong prior year third quarter with sales increasing by 30%. Our wholesale channel continued to demonstrate strength, andbrand’s consumer basestretching across the country.Salt Life branded retail footprint was further expanded withis targetingsix to eight newstore openings this fiscalyear,opening U.S.coastline fromnew locations in Foley, Alabama; Hilton Head, South Carolina; Boca Raton, Florida;the brand’straditional southeasternRehoboth Beach, Delaware, bringing the number ofits wholesale business also continues to expand.There are now approximately 1,800 customer retail doors across 48 states and foreign countries offering Salt20 locations across seven states. Our recent Salt Life retail store openings have continued to validate the strength ofsee a tremendous runway for growth for the Salt Life brand across the UnitedStates and internationally. strategy.basis and, in certain limited instances, we have presented our financial results on a GAAP and non-GAAP (“adjusted”) basis, which is further described in the sections entitled “Non-GAAP Financial Measures.”$126.9$107.3 million in the thirdfirst quarter of fiscal 2022, an increase2023, a decrease of 7%3.1% compared to the prior year thirdfirst quarter net salesof $118.7$110.7 million.grew 3%declined 4.8% to $106.0$97.0 million in the thirdfirst quarter of fiscal 20222023 compared to $102.6$101.9 million in the prior year thirdfirst quarter. Retail Direct and Global Brands grew 3% from prior year. Net sales for the first nine months of 2022 were $323.3 million, a 14% increase over the prior year.channel.third firstquarter fiscal 20222023 revenue grew 30%16.5% to $20.9$10.3 million compared to $16.1$8.8 million in the prior year thirdfirst quarter. The segment’s growth was primarilyourboth direct-to-consumerand wholesale channel and retail stores. For the first nine months of 2022, net sales were $46.0 million, up over $8.4 million from the prior year net sales of $37.6 million.24.2%12.7% for the thirdfirst quarter of fiscal 2022,2023, declining 130810 basis points from the prior year thirdfirst quarter gross margin of 25.5%20.8%.19.1% 8.0%for the thirdfirst quarter of fiscal 2022,2023, a decline of 260100 basis pointsfrom the prior year thirdfirst quartermargins of 21.7%increasedhigher inventory costs from inflationaryraw material and other input costs. Margins for the first nine months ofpricingin fiscal 2022 declined from 20.2%flowing throughprior yearaddition to 19.6% of sales$3.4 million in the current year.50.2%57.0% in the thirdfirst quarter of fiscal 2022,2023, an improvement of 50370 basis points compared to 49.7%53.3% in thethirdfirst quarter resulting from a favorable mixof sales, including increased Salt Life branded retail storeand ecommerce sales. For the first nine months of fiscal year 2022, gross margins grew to 51.6% of sales from 47.9% in prior year.$22.4$18.9 million in the third firstquarter of fiscal 2022,2023, or 17.7%17.6% of sales, compared to $19.9$17.5 million, 16.8%or 15.8% ofthirdfirst quarter.The increase in SG&A expenses of $2.5$1.3 million compared to the prior year thirdfirst quarterwas primarily driven by higher variable selling costsdistributionadministrative costs. SG&A expenses for the first nine months of 2022 were $59.6 million, or 16.1% of sales, compared to $53.0 million, or 16.5% of sales, in the prior year.and 2021 thirdfirst fiscal quarters includesprofits related to our Green Valley Industrial Park equity method investment. Other income for the third fiscal quarter of 2022 also includes a valuation change in our contingent consideration liabilities of $0.8 million. The first nine months of 2022 other income was $1.9 million, including profits related to our Green Valley Industrial Park equity method investment and a valuation adjustment to our contingent consideration. Other expenseAdditionally, in the first nine months of 2021 include $1.9 million of expenses related to the impact of two hurricanes that disrupted our Honduran manufacturing facilities in the December 2020 quarter in addition to $0.4 million of long-lived asset impairment charges as the result of a strategic decision in the June 2021 quarter to exit branded Soffe retail stores.Operating profit in the third 2022 2023, we recognized a discrete gain of$2.5 million from the settlement of a commercial litigation matter.$9.3$2.6 million.This is a decreasecompares to operating income of 22% over$5.9 millionin the prior year thirdfirst fiscal quarter of $11.9 million of operating profit. For the first nine months of fiscal year 2022, operating income was $29.5 million.$10.7$0.1 million in the thirdfirst fiscal quarter of 2022,2023, or 10.1%0.1% of net sales, compared to $13.9$8.4 million,or 13.5%8.3% of netthird firstquarter. The decrease inoperating profit wasdriven by declininggross margins. Operating income was $33.6 million, or 10.4% of sales, for the first nine months of fiscal 2022, compared margins dueto $28.4 million, or 10.0% of sales, in the prior year adjusted for $1.3 million of hurricane-related disruption increased inflationarycosts and plantcurtailment$3.6$0.3 million in the thirdfirst fiscalquarter of 2022,2023, or 17.1%2.5% of net sales, compared to $2.9$0.1 million,or 18.1%1.5% ofthirdfirst quarter.The increase in operating profit was driven by higher sales volume and increased grossmargins offset by higher selling and For the first nine months, operating income improved by $2.3 million to $7.0 million.Net interest expense for the third quarters of fiscal year 2022 and 2021 was $2.0 million and $1.7 million, respectively. nine monthsquarters of each of fiscal years2023 and 2022 was $5.4$2.9 million compared to $5.2and $1.6 million, in the prior year first nine months.respectively.nine-monththree-month period ended JuneDecember 2022 was 17.2%35.0%. This compares23.1%15.1% for the same period in21.9 %17.9% forthe full fiscalyear 2021.2022. Changesin the mixof U.S. taxableincome compared toprofits in tax-freeor lower-tax jurisdictions have drivendrove thisincomeloss attributable to shareholders for the thirdfirst fiscal quarter of 2022 were $6.22023was $3.6 million,or $0.88a loss of $0.51 per diluted share, compared to $8.2net income of$3.6 million, or $1.14 Net income attributable to shareholders for the first nine months of 2022 was $20.0 million, or $2.84 per diluted share, compared to $13.4 million, or $1.90 per diluted share, in the prior year.$68.4$57.8 millionat JuneDecember 2022, comparedto $67.0$68.2 million as of September 2021.2022. Days sales outstanding ("DSO")as of JuneDecember 2022were 494752 days at September 2021.JuneDecember 2022 was $227.7$258.9 million,an increase of $66.0$10.4 million from September 20212022 and $75.4$75.8 million from JuneDecember 2021. The increase fromvalue is higher than both deliveries compared to last year’s supplychain delays pushing scheduled deliveries intoprior third quarter and the fiscal year end as a result of higher input costs impacting materials, transportation and labor combined with an increase in units on hand.$162.4$185.2 million at Juneas of December 31, 2022, an increase of $40.6$14.6 million from September 2022 and our the Company’sU.S. revolving credit facilitytotaled $30.8$27.2 million at Juneasof December 31, 2022,a $14.6decrease fromSeptember 2022 and $5.8 million fromDecember 2021, with the increase fromSeptember 2022 principally driven by investments in theneeds and increased input costs due to inflationary pressures.Non-GAAP Financial MeasuresWe provide all information required in accordance with U.S. GAAP, but we believe that evaluating our ongoing operating results may be difficult if limited to reviewing only U.S. GAAP financial measures. In an effort to provide investors with additional information regarding our results, we also provide non-GAAP information that management believes is useful to investors. We discuss operating income, net income and earnings per diluted share performance measures that are, for comparison purposes, adjusted to eliminate items or results stemming from discrete events. We do this because management uses these measures in evaluating our underlying performance on a consistent basis across periods. We also believe these measures are frequently used by securities analysts, investors and other interested parties in the evaluation of our ongoing performance. These non-GAAP measures have imitations as analytical tools, and securities analysts, investors and other interested parties should not consider any of these non-GAAP measures in isolation or as a substitute for analysis or our results as reported under U.S. GAAP. These non-GAAP measures may not be comparable to similarly titled measures used by other companies.$13.4$11.9 million for the nine threemonths ended JuneDecember 2022 compared to $11.0 $13.2million of cash providedused in theprior year. The decreaseprovidedused in operating cash flows in the current year are due to a buildthe timing of payments from customers and to vendors, in addition to reduced inventoryincreased input costs and manufacturing output. This was partially offset by increased earnings in the business and change in timing of payments to suppliers in the current period.$10.9$2.1 million during the first ninethree months of 20222023 compared to $1.7$1.8 million in the same period in the prior year. During the nine-months$10.4$0.1 million of capital expendituresfinanced under a capital lease arrangement. We anticipate currently expect to spend less on capitalfiscal 2022 capital expenditures including those financed under capital leases,expected to be approximately $20 million for fiscal 2022 and to be focused primarily focuson our distribution expansion, digital print equipment, manufacturing equipment, information technology, manufacturingefficiency, andadditionalnew Salt Life retail store openings.ninethree months ended JuneDecember 2022, cash provided by financingactivities was $16.2$9.6 million and primarily related to fund fundingour operating activities, working our credit agreement, which we may not be able to maintain. Moreover, our credit facility includes a financial covenant that if the availability under our credit facility falls below the amounts specified in our U.S. credit agreement, our fixed charge coverage ratio (FCCR) for the preceding 12-month period must not be less than 1.0. While our availability at June 2022 was above the minimum thresholds specified in our credit agreement, a significant deterioration in our business could cause our availability to fall below such thresholds, thereby requiring us to maintain the minimum FCCR specified in our credit agreement.In thirdfirst quarter of fiscal 2022 under the previously announced share repurchase program, the Company purchased 33,934 shares for $1.0 million, bringing the2023. The total amountrepurchased to $56.4 million program. program is $56.4 million.At the end ofthe thirdfirst quarter offiscal 2022,2023, the Company had $3.6$3.6 million of remaining repurchase capacity underits
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Pursuant to the requirements of the Chief Executive Officerpursuant to Rule 13a-14(a) under theSecurities Exchange Act of 1934, as amended,as adopted pursuant to
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