Exhibit 99.1
Delta Apparel Reports Fourth Quarter and Fiscal Year 2006 Financial Results
DULUTH, Ga.--(BUSINESS WIRE)--Aug. 18, 2006--Delta Apparel, Inc. (AMEX:
DLA):
-- 4Q06 Net Sales Rise 24.4% to Record $82.4 Million
-- 4Q06 Gross Margins Improve 340 Basis Points
-- 4Q06 Earnings Increase 98.4% to Record $0.74 per Basic Share
-- Reports Record FY06 Revenues and EPS Results
Delta Apparel, Inc. (AMEX: DLA) today reported financial results for its
fourth fiscal quarter and fiscal year ended July 1, 2006. The Company's results
for the fiscal 2006 fourth quarter and annual periods include the operations of
Junkfood Clothing Company since its acquisition by the Company on August 22,
2005.
For the three months ended July 1, 2006, net sales were a record $82.5
million, an increase of 24.4%, compared to $66.3 million in the prior year's
fourth quarter. Gross margins increased 340 basis points to 28.7% compared to
25.3% in the prior year fourth quarter. Selling, general and administrative
expenses improved 60 basis points to 15.9% of net sales compared to 16.5% of net
sales in the fourth quarter of the prior year. Net income was $6.3 million, or
$0.74 per basic share, in the fiscal fourth quarter of 2006 compared to the
prior year's level of $3.2 million, or $0.38 per basic share.
For the year ended July 1, 2006, net sales increased 18.4% to a record
$270.1 million compared to $228.1 million in the prior year. Gross margins
improved 590 basis points to 29.6% compared to 23.6% in the prior year due to
increased sales of the higher margin branded apparel products and improved
manufacturing costs and lower raw material pricing, offset partially by higher
energy and transportation costs. Selling, general and administrative expenses
were 19.8% of sales compared to 16.6% of sales in the prior year, primarily due
to the increased selling costs associated with the Junkfood business. In
addition, distribution costs remained higher than the prior year due to the
costs associated with consolidating the Company's West Coast distribution center
to a new, expanded facility. Net income for fiscal year 2006 increased 32.0% to
$14.8 million, or $1.73 per basic share and $1.71 per diluted share. When
comparing fiscal year 2006 to fiscal year 2005 results, the following chart
highlights the Company's fiscal year 2005 basic earnings per share, adjusted for
the impact of the sale of its Edgefield, South Carolina yarn spinning facility
and the reversal of the tax liability associated with the Company's decision to
permanently reinvest its foreign earnings in Honduras.
Actual FY05 Basic Earnings Per Share $1.35
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Sale of Edgefield Plant (0.26)
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Reversal of Foreign Earnings Tax Liability (0.08)
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Adjusted FY05 Basic Earnings per Share $1.01
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Excluding the preceding one-time items, fiscal year 2006 basic earnings per
share improved 71.3%, or $0.72 per share, compared to fiscal year 2005 adjusted
basic earnings per share of $1.01.
Robert W. Humphreys, President and CEO, commented, "We ended our fiscal
year with solid results, achieving record sales and record earnings for the
year. In our Retail-Ready segment, Soffe achieved a 32.6% sales growth in the
fourth quarter over the prior year and its inventory levels position this
business appropriately for solid sales growth going into fiscal year 2007. While
sales in the Junkfood business were not as strong as we anticipated,
sell-through of our products at retail is solid and demand for our new fall
product lines continues to be healthy. Our Activewear segment also achieved
sales growth during the quarter, driven by record unit sales, offset partially
by lower average pricing from higher sales of basic core products." Mr.
Humphreys continued, "We are excited to announce the acquisition of Fun-Tees,
Inc., which is anticipated to close on October 2, 2006. Fun-Tees will enhance
our Activewear segment through its private label programs and its off-shore
decorating capabilities. The acquisition of Fun-Tees is expected to be
immediately accretive to our earnings, even with the costs associated with the
integration of the Fun-Tees manufacturing operations into our existing
facilities, which will take place during the 2007 fiscal year. We are also
pleased to announce that we are opening a textile facility in Honduras, which
will allow us to continue to lower our manufacturing costs and enable us to
produce our core activewear products from start to finish at one location." Mr.
Humphreys concluded, "As we move into our 2007 fiscal year, we believe we have
an exciting and balanced product portfolio that will appeal to our growing
customer base. We remain focused on increasing shareholder value and will
continue exploring internal growth initiatives, diversifying our product
offering, improving our operating efficiencies and identifying cost saving
opportunities in each of our key business segments to grow sales and maximize
our performance in fiscal year 2007 and beyond."
Fiscal 2007 Guidance
The Company will continue to issue earnings guidance of its sales and
earnings expectations in fiscal year 2007. It has decided to change its earnings
guidance to diluted earnings per share from the prior practice of issuing
guidance based on basic earnings per share. The Company's earnings guidance
includes the anticipated acquisition of Fun-Tees, Inc. on or around October 2,
2006. In addition, the Company expects to record an extraordinary gain in its
first fiscal quarter associated with the final earn-out payment made to the
former M. J. Soffe shareholders. This anticipated extraordinary gain is also
included in the earnings guidance for the first fiscal quarter and fiscal year
guidance.
For the first fiscal quarter ended September 30, 2006, the Company expects
sales to be in the range of $64 to $68 million and diluted earnings per share to
be in the range of $0.41 to $0.45 per share. This compares to prior year fiscal
first quarter sales of $60.6 million and diluted earnings of $0.39 per share.
For the 2007 fiscal year ending June 30, 2007, the Company expects sales to
be in the range of $325 to $340 million and diluted earnings per share to be in
the range of $1.91 to $2.05. This compares to prior year fiscal year sales of
$270.1 million and diluted earnings of $1.71 per share.
Retail-Ready Apparel
This segment, which includes the Soffe and Junkfood businesses, reported a
sales increase of 58.0% to $40.4 million for the fourth quarter of fiscal year
2006 compared to $25.6 million in the prior year. The sales increase was driven
by both record sales in the Soffe business and the acquisition of Junkfood
Clothing Company. Operating income for the three months ended July 1, 2006
increased 124.6% to $8.7 million compared to $3.9 million in the prior year due
to the addition of the Junkfood business and improved Soffe operations. For the
fiscal year ended July 1, 2006, sales in the Retail-Ready segment were $133.4
million, an increase of 57.7% from $84.6 million in the prior fiscal year.
Operating income increased 94.9% to $19.1 million in fiscal year 2006 compared
to $9.8 million in fiscal year 2005.
Activewear Apparel
This segment, which includes the Delta Apparel business, reported sales of
$42.0 million for the fourth quarter of fiscal 2006, a 3.3% increase from the
prior year quarter. The increase in sales was due to an increase in basic tee
shirt volume, offset slightly by a decrease in specialty and private label
units. The change in sales mix, along with a slight decline in selling prices
across the product categories, drove a decrease in average selling prices. The
lower margins attributable to the basic tee shirt products, coupled with the
higher energy and transportation costs, yielded a decrease in operating income
to $1.8 million compared to $2.0 million in the prior year. For the fiscal year
ended July 1, 2006, sales in the Activewear segment were $136.7 million, a
decrease of 4.7% from $143.4 million in the prior fiscal year. Although sales
declined in fiscal year 2006, operating income increased 6.0%, or $0.4 million,
to $6.9 million in fiscal year 2006 compared to the prior year primarily due to
higher gross margins from improved manufacturing operations and lower raw
material pricing.
Share Repurchases
During fiscal year 2006, the Company purchased 72,477 shares of its stock
through its Stock Repurchase Program for a total cost of $1.3 million. In April,
the Company announced that its Board of Directors had increased the Company's
authorization to repurchase stock in open market transactions by an additional
$5.0 million pursuant to the Company's Stock Repurchase Program, bringing the
total amount authorized to $11.0 million. As of July 1, 2006, the Company had
repurchased a total of 0.8 million shares of stock for a total cost of $5.7
million. The Company is committed to its stock repurchase program and believes
it is a good use of capital and illustrates the Company's commitment to
increasing shareholder value.
Dividend Payment
In a meeting held on August 17, 2006, the Board of Directors declared a
quarterly dividend of five cents per common share of stock payable on September
11, 2006 to shareholders of record as of the close of business on August 30,
2006. This dividend was declared pursuant to the Company's previously announced
quarterly dividend program, which the Company may amend or terminate at any
time.
Conference Call
The Company will hold a conference call with senior management to discuss
the financial results at 9:00 a.m. ET today. The Company invites you to join the
call by dialing (913) 981-4900. A live webcast of the conference call will be
available on the Company's web site at www.deltaapparel.com.
About Delta Apparel, Inc.
Delta Apparel, Inc., along with its wholly owned subsidiaries, M.J. Soffe
Company and Junkfood Clothing Company, is a marketer, manufacturer and
distributor of high quality branded and private label activewear apparel. We
specialize in selling a variety of casual and athletic activewear tops and
bottoms, embellished and unembellished T-shirts, and fleece products for the
ever-changing apparel market. We focus on our broad distribution of apparel
products to specialty and boutique stores, high-end and mid-tier retail stores,
sporting goods stores, screen printers, and private label accounts. In addition,
certain products are sold in college bookstores and to the U.S. Military. Our
operations are in the United States, Honduras, and Mexico and we employ
approximately 3,900 people worldwide. Additional information on our company is
available at www.deltaapparel.com.
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 our expectations and are necessarily dependent
upon assumptions, estimates and data that we believe 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, the ability to achieve synergies in connection with the Fun-Tees
acquisition and to integrate it successfully into our business, the ability to
obtain consents and fulfill other conditions required for the closing of the
acquisition, 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 our reports filed with the Securities and
Exchange Commission. Accordingly, any forward-looking statements do not purport
to be predictions of future events or circumstances and may not be realized. We
do not undertake publicly to update or revise the forward-looking statements
even if it becomes clear that any projected results will not be realized.
SELECTED FINANCIAL DATA:
(In thousands, except per share amounts)
Three Months Twelve Months
Ended Ended
Jul 1, Jul 2, Jul 1, Jul 2,
2006 2005 2006 2005
-------- -------- --------- ---------
Net Sales $82,468 $66,297 $270,108 $228,065
Cost of Goods Sold 58,761 49,524 190,222 174,156
------- ------- -------- --------
Gross Profit 23,707 16,773 79,886 53,909
Selling, General and
Administrative 13,109 10,949 53,530 37,881
------- ------- -------- --------
Operating Income 10,598 5,824 26,356 16,028
Other Income (Expense) 381 505 657 4,117
Interest Expense, net 1,081 805 3,819 3,022
------- ------- -------- --------
Income Before Income Taxes 9,898 5,524 23,194 17,123
Provision for Income Taxes 3,551 2,324 8,350 5,880
-------- -------- --------- ---------
Net Income $ 6,347 $ 3,200 $ 14,844 $ 11,243
======= ======= ======== ========
Weighted Average Shares
Outstanding
Basic 8,586 8,376 8,590 8,316
Diluted 8,718 8,558 8,663 8,480
Net Income per Common Share
Basic $ 0.74 $ 0.38 $ 1.73 $ 1.35
Diluted $ 0.73 $ 0.37 $ 1.71 $ 1.33
July 1, July 2,
2006 2005
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Current Assets
Cash $ 642 $ 298
Receivables, Net 47,525 36,611
Inventories 103,660 99,026
Deferred Income Taxes 2,710 1,252
Other Assets 2,708 1,968
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Total Current Assets 157,245 139,155
Noncurrent Assets
Property, Plant &
Equipment, Net 21,164 19,950
Goodwill and Other
Intangibles, Net 22,467 -
Other Noncurrent Assets 2,247 409
-------- --------
Total Noncurrent Assets 45,878 20,359
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Total Assets $203,123 $159,514
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Current Liabilities
Accounts Payable and Accrued
Expenses $ 49,366 $ 36,700
Current Portion of Long
Term Debt 3,683 15,065
Income Tax Payable 986 480
-------- --------
Total Current Liabilities 54,035 52,245
Noncurrent Liabilities
Long-Term Debt 46,967 17,236
Deferred Income Taxes 1,123 171
Other Noncurrent
Liabilities 10 3,398
-------- --------
Total Noncurrent Liabilities 48,100 20,805
Stockholders' Equity 100,988 86,464
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Total Liabilities and
Stockholders' Equity $203,123 $159,514
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CONTACT: Delta Apparel, Inc.
Deborah Merrill, 864-232-5200 x6621
or
Investor Relations
Bill Zima, 203-682-8200