Exhibit 99.1
Delta Apparel Reports First Quarter 2008
Results
DULUTH, Ga.--(BUSINESS WIRE)--Nov. 2, 2007--Delta Apparel, Inc.
(AMEX: DLA) today reported financial results for its fiscal first
quarter ended September 29, 2007.
Net sales for the three months ended September 29, 2007 increased
15.8% to a first quarter record of $72.6 million compared to $62.7
million in the prior year's first quarter. The increase was driven
primarily by the acquisition of FunTees on October 2, 2006 and the
sales growth in the Junkfood business, but was somewhat offset by
lower sales of Soffe products and undecorated t-shirts. Gross margins
declined 980 basis points to 17.9% compared to 27.7% in the prior year
first quarter primarily as a result of higher sales in the activewear
segment, higher raw material prices, and textile restructuring related
costs.
Net loss for the first quarter was $1.5 million, or ($0.18) per
diluted share, compared to the prior year's net income of $2.2
million, or $0.26 per diluted share. The first quarter of the prior
year included an extraordinary gain, net of taxes, of $0.7 million, or
$0.08 per diluted share, associated with the final earn-out payment
made to the former M. J. Soffe shareholders.
The Company previously announced on July 18, 2007 an overall
restructuring plan which included the closing of its Fayette, Alabama
manufacturing facility, the expensing of excess manufacturing costs
with the FunTees integration and start-up costs stemming from the
opening of its Honduran textile facility. The restructuring charges
began in the Company's fiscal fourth quarter of 2007 and are expected
to impact financial results through the third quarter of fiscal 2008.
The Company expects to incur total costs of approximately $11.8
million, or $0.90 per diluted share, associated with the
restructuring. This is an increase of $1.8 million, or $0.15 per
diluted share, from the previously disclosed amounts, primarily caused
from higher manufacturing costs in the Maiden, North Carolina facility
due to the relocation of cutting offshore and lower production levels
from the FunTees integration. The expenses are expected to impact the
Company's financials as follows:
FY 07 FY 08 FY 08 FY 08
Qtr 4 Qtr 1 Qtr 2 Qtr 3 Total
-------- -------- -------- -------- --------
Cost of Sales $5.4 $2.0 $1.9 $0.9 $10.2
million million million million million
Restructuring Charges $1.5 $0.1 $ 1.6
million million -- -- million
--------------------------------------------
Total $6.9 $2.1 $1.9 $0.9 $11.8
million million million million million
Diluted EPS Impact $0.51 $0.16 $0.15 $0.07 $0.90
Robert W. Humphreys, President and CEO, commented, "Our first
quarter financial results were negatively impacted by our previously
announced textile restructuring costs and slower than expected results
at Soffe, which were driven by a weak retail environment and certain
production and sourcing constraints. Our retail partners continue to
give us positive feedback on our Soffe products and our internet sales
are growing steadily. The general slowdown in apparel sales is causing
some retailers to delay call-outs, making us cautious until we see
more sustained trends during our peak selling season this spring. We
are pleased that our Junkfood business continued to grow during the
quarter and has a good order backlog going into our second quarter. We
have established additional customer relationships in this business
which should provide further growth opportunities in the future."
Mr. Humphreys continued, "We made significant progress with our
textile restructuring during the first quarter. We closed operations
at our Fayette, Alabama facility and started the transition of cutting
from our Maiden, North Carolina plant into our new textile operation
in Honduras. Construction and equipment installation progressed in our
new Ceiba Textile facility in Honduras, which will soon be ready to
start production of first quality fabric. We are rebuilding the
productivity in our manufacturing facilities that was disrupted with
the FunTees integration and are continuing to implement our
manufacturing initiatives. We are seeing weekly progress and expect
consistent improvement as we progress through the rest of fiscal year
2008."
"While we remain encouraged with the future opportunities for each
of our operating units, we recognize that the weak overall demand for
apparel, significant raw material and energy price increases, and
production constraints and start-up costs associated with our textile
restructuring create risk to our overall profitability in the near
future. Therefore, we are adjusting our fiscal year financial
estimates downward accordingly."
Fiscal 2008 Guidance
For the second fiscal quarter ending December 29, 2007, the
Company expects sales to be in the range of $64 to $68 million and a
loss in the range of ($0.33) to ($0.37) per diluted share. This
includes approximately $1.9 million of expected textile restructuring
related expenses during the quarter. For the full fiscal year, the
Company expects net sales to be in the range of $325 to $340 million
and diluted earnings per share to be in the range of $0.62 to $0.76.
Restructuring related expenses for the full year are expected to total
approximately $4.9 million on a pre tax basis, or approximately $0.39
per diluted share.
The Board of Directors has elected to suspend payment of the
Company's $0.05 quarterly dividend on its common stock. The Board
believes the suspension of the dividend at this time is prudent to
preserve the Company's financial flexibility in this uncertain retail
environment and period of increased capital spending for our new
Honduran textile facility. The additional capital resulting from this
decision is intended to allow the Company to improve its balance sheet
and increase its debt availability. The Company will evaluate the
opportunity to resume a dividend payment as the quarterly
profitability for the Company becomes more consistent.
Mr. Humphreys concluded, "While we are cautious about consumer
demand for apparel in the short run, we believe all of our business
units are moving forward in a positive direction. These trends should
help us position ourselves to take advantage of better market
conditions as they unfold. We remain focused on completing our textile
restructuring, as we begin production in our Ceiba textile facility
and rebuild the productivity and efficiency in our Maiden plant. We
expect the excess expense associated with these initiatives will be
substantially behind us by the end of our third fiscal quarter. Our
efforts to implement these initiatives should result in significant
cost savings in the years ahead."
Retail-Ready Apparel
This segment, which includes the Soffe and Junkfood businesses,
reported a sales decrease of 6.3% to $30.3 million for the first
quarter of fiscal year 2008 compared to $32.4 million in the prior
year quarter. The sales decrease was driven by lower sales in the
Soffe business, offset partially by higher sales in the Junkfood
business. Sales of our Soffe products were down 14.3% from the prior
year, driven by the weak retail environment. In addition, capacity
constraints on decorated products and late shipments on sourced
products further slowed the sales in this business. Sales in the
Junkfood business grew 36% from the prior year first quarter, driven
by increased sales to the higher-end department stores and specialty
stores. In addition, foreign sales continued to expand. Operating
income in the first fiscal quarter of 2008 decreased $0.5 million from
the prior year first quarter to $2.7 million due primarily to the
lower sales levels.
Activewear Apparel
The activewear segment, which includes the Delta and the FunTees
businesses, reported sales of $42.2 million for the three months ended
September 29, 2007, a 39% increase from the prior year first quarter.
The increase in sales was primarily due to the acquisition of the
FunTees business on October 2, 2006, offset partially by lower volume
in undecorated t-shirts. Our textile restructuring initiatives,
including the costs of the FunTees integration, drove the decrease in
operating income to a loss of $3.9 million compared to a profit of
$0.2 million in the prior year first quarter.
Share Repurchase Program
During the three months ended September 29, 2007, the Company did
not repurchase any shares of its stock through its Stock Repurchase
Program. The Company has $5.9 million remaining of the total $15.0
million authorized by the Company's Board of Directors to repurchase
shares under the Company's Stock Repurchase Program.
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) 312-0733. A live webcast
of the conference call will be available on the Company's web site at
www.deltaapparelinc.com.
About Delta Apparel, Inc.
Delta Apparel, Inc., along with its wholly owned subsidiaries, M.
J. Soffe Co. and Junkfood Clothing Company, is a marketer,
manufacturer and distributor of high quality branded and private label
activewear apparel. The Company specializes 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. The Company focuses its 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. The Company's operations are
located throughout the United States, Honduras, El Salvador and Mexico
and the Company employs approximately 6,200 people worldwide.
Additional information on the Company is available at
www.deltaapparelinc.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
FunTees acquisition and to integrate it successfully into our
business, 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 environmental matters and
similar items) and other risks described in "Item 1A. Risk Factors" in
our annual Report on Form 10-K for the fiscal year ended June 30, 2007
and 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.
(Tables to follow)
SELECTED FINANCIAL DATA:
(In thousands, except per share amounts)
Three Months Ended
Sept 29, Sept 30,
2007 2006
--------- --------
Net Sales $ 72,562 $ 62,680
Cost of Goods Sold 59,571 45,344
--------- --------
Gross Profit 12,991 17,336
Selling, General and Administrative 14,203 13,898
Restructuring Costs 62 -
--------- --------
Operating (Loss) Income (1,274) 3,438
Other Income, net 82 51
Interest Expense, net 1,470 947
--------- --------
(Loss) Income Before Provision for Income
Taxes and (2,662) 2,542
Extraordinary Gain
(Benefit) Provision for Income Taxes (1,114) 967
(Loss) Income before Extraordinary Gain (1,548) 1,575
Extraordinary Gain, Net of Taxes - 672
--------- --------
Net (Loss) Income $ (1,548) $ 2,247
========= ========
Weighted Average Shares Outstanding
Basic 8,430 8,546
Diluted 8,430 8,690
Net (Loss) Income per Common Share , before
Extraordinary Gain
Basic $ (0.18) $ 0.18
Diluted $ (0.18) $ 0.18
Net (Loss) Income per Common Share, after
Extraordinary Gain
Basic $ (0.18) $ 0.26
Diluted $ (0.18) $ 0.26
Sept 29, June 30, Sept 30,
2007 2007 2006
-------- --------- --------
Current Assets:
Cash $ 534 $ 792 $ 315
Accounts Receivable, Net 38,043 46,444 36,232
Income Taxes Receivable 754 1,209 -
Inventories, Net 129,615 124,604 105,894
Deferred Income Taxes 2,959 2,874 2,792
Other Assets 3,314 2,597 2,474
-------- --------- --------
Total Current Assets 175,219 178,520 147,707
Noncurrent Assets:
Property, Plant & Equipment, Net 32,926 29,407 21,136
Goodwill and Other Intangibles, Net 22,191 22,313 22,679
Other Assets 2,740 2,550 2,248
-------- --------- --------
Total Noncurrent Assets 57,857 54,270 46,063
-------- --------- --------
Total Assets $233,076 $232,790 $193,770
======== ========= ========
Current Liabilities:
Accounts Payable and Accrued Expenses $ 45,170 $ 54,948 $ 38,658
Current Portion of Long Term Debt 5,270 2,927 3,933
Income Taxes Payable - - 1,222
-------- --------- --------
Total Current Liabilities 50,440 57,875 43,813
Noncurrent Liabilities:
Long-Term Debt 78,251 70,491 46,433
Deferred Income Taxes 805 749 909
Other Noncurrent Liabilities 205 6 9
-------- --------- --------
Total Noncurrent Liabilities 79,261 71,246 47,351
Stockholders' Equity 103,375 103,669 102,606
-------- --------- --------
Total Liabilities and Stockholders' Equity $233,076 $232,790 $193,770
======== ========= ========
CONTACT: Delta Apparel, Inc.
Company Contact:
Deborah Merrill, 864-232-5200 ext. 6620
Chief Financial Officer
or
Integrated Corporate Relations
Investor Relations Contact:
Bill Zima, 203-682-8200