EXHIBIT 99.1
DELTA APPAREL REPORTS FOURTH QUARTER AND FISCAL YEAR 2003 RESULTS
DULUTH, Ga.--(BUSINESS WIRE)--August 12, 2003--Delta Apparel, Inc. (AMEX-DLA)
announces basic and diluted earnings per share of $1.50 and $1.45, respectively,
for the fiscal year ended June 28, 2003, a two cent increase over the upper
range of the previously announced expected basic earnings of $1.43 to $1.48 per
share.
For the quarter ended June 28, 2003, the Company recorded sales of $36.8
million, a decrease of $6.6 million, or 15.3%, from the prior year quarter.
During the quarter, pricing in the marketplace continued to decrease, causing
Delta Apparel's average selling prices to decline 8.4% from the prior year
quarter. The price declines were primarily in the basic white and colored tees.
In the beginning of the quarter, the Company did not participate in many of the
competitor price promotions causing unit volume to decrease by 7.5% from the
prior year quarter. Delta Apparel's specialty tees and private label programs
continued to generate good margins and helped offset declining margins on basic
tees. Gross profit as a percentage of net sales decreased to 18.3% for the
fourth fiscal quarter from 19.3% in the prior year quarter. The lower gross
margin was the result of the lower selling prices, offset partially by lower
cotton costs.
Selling, general and administrative costs were $3.9 million for the quarter
ended June 28, 2003, an increase of $0.5 million from $3.4 million in the prior
year quarter. Distribution expenses increased $0.3 million, primarily the result
of the new Florida distribution center that opened in February. Bad debt expense
increased $0.4 million primarily due to slower payments from customers
attributed to the depressed retail climate. General and administrative expenses
decreased $0.4 million primarily due to lower management incentives resulting
from the lower operating earnings during the quarter.
Other expense for the quarter ended June 28, 2003 was $40 thousand compared to
other income of $0.7 million in the prior year quarter. During the prior year
quarter, the Company recognized a gain of $0.3 million on cotton options that
were purchased in April 2002. In addition, the Company received final payment on
an installment sale of a previously idle manufacturing facility, resulting in a
gain of $0.3 million.
Operating earnings for the quarter were $2.8 million, down $2.8 million from the
prior year quarter primarily from the decrease in gross margin and other income
and increase in selling, general and administrative expenses.
Interest expense was $204 thousand for the quarter, compared to $153 thousand in
the prior year quarter. The increase in interest expense resulted from an
increase in the average debt outstanding, partially offset by a reduction in the
average interest rates.
The effective tax rate on pretax income for the quarter ended June 28, 2003 was
37.7% compared to 30.0% in the prior year quarter. In the quarter ended June 29,
2002, the Company reversed a valuation allowance against $8.7 million in state
net operating loss carryforwards. This reduced the effective tax rate for the
quarter ended June 29, 2002 to 30.0%.
Net earnings for the quarter were $1.6 million, or 4.4% of sales, down from $3.9
million, or 8.9% of sales, for the prior year quarter. Basic and diluted
earnings per share for the quarter ended June 28, 2003 were $0.41 and $0.39 per
share on 4.01 million and 4.15 million shares, respectively. Basic and diluted
earnings per share for the quarter ended June 29, 2002 were $0.97 and $0.92 on
3.98 million and 4.20 million shares, respectively. On June 28, 2003, the
Company had 4.04 million shares outstanding.
Sales for the year ended June 28, 2003 were $129.5 million, down $2.1 million,
or 1.6% from the prior year. Operating earnings for fiscal year 2003 were $10.6
million, up $0.2 million, or 2.1%, from the prior year.
The effective tax rate on pretax income for the year ended June 28, 2003 was
38.3% compared to 33.0% for the prior year. During the quarter ended June 29,
2002, the Company reversed the valuation allowance against $8.7 million in state
net operating loss carryforwards, as the Company believed these state net
operating losses would be used in the upcoming years. This reduced the effective
tax rate for the year ended June 29, 2002 to 33.0%.
Net earnings for the year ended June 28, 2003 were $6.1 million, down $0.4
million from the prior year. Basic and diluted earnings per share for the year
ended June 28, 2003 were $1.50 and $1.45 per share on 4.05 million and 4.18
million shares, respectively. Basic and diluted earnings per share for the year
ended June 29, 2002 were $1.48 and $1.42 per share on 4.37 million and 4.56
million shares, respectively.
Inventories on June 28, 2003 were $47.2 million, an increase of $11.7 million
from $35.5 million on June 29, 2002. The Company built higher levels of
inventory in the first half of the fiscal year in expectation of increased sales
over the prior year. The Company did not meet its sales volume expectations
during the fourth quarter, resulting in an increase in finished goods of $7.4
million from June 29, 2002. In-process inventory at June 28, 2003 increased $6.1
million from June 29, 2002 as inventory levels were increased to support
expected sales growth. The Company's raw material inventory decreased $3.0
million during the quarter ended June 28, 2003, and is $1.8 million lower than
at June 29, 2002. Beginning in the fourth quarter of the prior year, the Company
began increasing its raw material inventory to take advantage of lower cotton
prices and to support its increased textile capacity. During the quarter ended
June 28, 2003, the Company decreased its raw material inventory to levels that
it expects to maintain during fiscal year 2004.
During the year ended June 28, 2003, the Company purchased 130,204 shares of its
stock through its Stock Repurchase Program. The stock was purchased at an
average cost of $14.74 per share. The Company did not purchase any shares in its
fourth quarter.
Robert W. Humphreys, President and CEO, commented, "Our fourth fiscal quarter
results were hurt by the lower pricing being driven by the higher inventory
levels in the pipeline. Average selling prices for the quarter were down 8.4%
from the prior year. We expect pricing to remain depressed until excess
inventories are worked through the retail market. In response, we have escalated
our emphasis on cost reductions in order to offset the impact of the lower
pricing. We continue to decrease our participation in the distributor market,
which accounted for approximately 10% of our sales in the quarter. New customer
growth continued at a strong pace for the quarter and was up 49% for the year.
New product sales continued to increase with good margins. We feel that our
continued efforts to grow our non-commodity business and increase sales to our
direct customers will serve us well in the future."
Commenting on the Company's recently announced agreement to acquire the M.J.
Soffe Company, Mr. Humphreys said, "We have made considerable progress related
to the due diligence and financing arrangements for the acquisition of the Soffe
Company. We expect to be able to close the acquisition in September 2003."
Delta Apparel, Inc. is a vertically integrated manufacturer and marketer of high
quality knit apparel. The Company specializes in selling undecorated T-shirts,
golf shirts and tank tops to screen printers, private label accounts and
distributors. Delta Apparel has operations in six states, two company-operated
sewing facilities in Honduras and one company-operated sewing facility in
Mexico. The Company employs about 3,200 worldwide.
Statements and other information in this press release that are not reported
financial results or other historical information are forward-looking
statements. These are based on Delta Apparel's expectations and are necessarily
dependent upon assumptions, estimates and data that the Company believes are
reasonable and accurate but may be incorrect, incomplete or imprecise.
Forward-looking statements are also subject to a number of business risks and
uncertainties, any of which could cause actual results to differ materially from
those set forth in or implied by the forward-looking statements. The risks and
uncertainties include, among others, changes in the retail demand for apparel
products, the cost of raw materials, competitive conditions in the apparel and
textile industries, the relative strength of the United States dollar as against
other currencies, changes in United States trade regulations, the discovery of
unknown conditions (such as with respect to environmental matters and similar
items) and other risks described from time to time in the Company's reports
filed with the Securities and Exchange Commission. There is also the business
risk that the Soffe acquisition may not be able to be completed as described
above. In addition, there are risks and uncertainties associated with the Soffe
business that may not be known at this time. Accordingly, any forward-looking
statements do not purport to be predictions of future events or circumstances
and may not be realized. The Company does not undertake publicly to update or
revise the forward-looking statements even if it becomes clear that any
projected results will not be realized.
Contact: Delta Apparel, Inc.
Herb Mueller 678/775-6900
SELECTED FINANCIAL DATA:
(In thousands, except per share amounts)
Three Months Ended Twelve Months Ended
June 28, June 29, June 28, June 29,
2003 2002 2003 2002
-------- -------- -------- --------
Net Sales $ 36,766 $ 43,390 $ 129,521 $ 131,601
Cost of Goods Sold 30,037 35,012 105,552 110,273
------------ ---------- ---------- ------------
Gross Margin 6,729 8,378 23,969 21,328
SG&A 3,867 3,391 13,220 11,807
Other Expense (Income) 40 (667) 194 (816)
------------ ---------- ---------- ------------
Operating Income 2,822 5,654 10,555 10,337
Interest Expense 204 153 732 677
Taxes 986 1,648 3,760 3,188
------------ ---------- ---------- ------------
Net Income $ 1,632 $ 3,853 $ 6,063 $ 6,472
============ ========== ========== ============
Weighted Average Shares Outstanding *
Basic 4,013 3,984 4,045 4,368
Diluted 4,149 4,196 4,176 4,562
Net Income per Common Share
Basic $ 0.41 $ 0.97 $ 1.50 $ 1.48
Diluted $ 0.39 $ 0.92 $ 1.45 $ 1.42
June 28, June 29,
2003 2002
-------- --------
Current Assets
Cash $ 203 $ 4,102
Receivables, Net 22,196 22,812
Income Tax Receivable 434 -
Inventories 47,174 35,483
Deferred Income Taxes 620 1,119
Other Assets 1,689 1,835
-------- ---------
Total Current Assets 72,316 65,351
Noncurrent Assets
Property, Plant & Equipment, Net 22,077 22,992
Other Noncurrent Assets 54 3
-------- ---------
Total Noncurrent Assets 22,131 22,995
-------- ---------
Total Assets $ 94,447 $ 88,346
======== =========
Current Liabilities
Current Portion of Long Term Debt $ 2,000 $ 2,000
Income Tax Payable - 1,860
Other Current Liabilities 16,033 17,718
-------- --------
Total Current Liabilities 18,033 21,578
Noncurrent Liabilities
Long-Term Debt 7,865 3,667
Deferred Income Taxes 1,162 700
Other Noncurrent Liabilities 1,418 1,123
-------- --------
Total Noncurrent Liabilities 10,445 5,490
Stockholders' Equity 65,969 61,278
-------- --------
Total Liabilities and Stockholders' Equity $ 94,447 $ 88,346
======== ========
* Adjusted for 2-for-1 stock split effective as of September 20, 2002