Delta Apparel Reports First Quarter Fiscal 2024 Results
Focus on Cost Restructuring and Capital Optimization Continues
Chairman and Chief Executive Officer
Our Salt Life business registered sales growth for the quarter on the strength of its direct-to-consumer channels, and its recently opened retail location in
For the first quarter ended
-
Net sales were
$79.9 million compared to prior year period net sales of$107.3 million .Salt Life Group segment net sales were$10.3 million and up slightly compared to the prior year period. Net sales in theDelta Group segment were$69.6 million compared to$97.0 million in the prior year period. -
Gross margins were 10.9% compared to 12.7% in the prior year period, driven primarily by production curtailments. Adjusted for the cost impacts of these product curtailments (“Production Curtailment Costs”), first quarter gross margins were 12.6%.
Delta Group segment gross margins were 5.8% compared to 7.8% in the prior year period. Adjusted for the Production Curtailment Costs,Delta Group segment gross margins were 8%.Salt Life Group segment gross margins were 45.4% versus 57.0% in the prior year period. Salt Life’s gross margins for the quarter were negatively impacted to some degree by the timing of inventory receipts, which should reverse in the second quarter. -
Selling, general, and administrative expenses (“SG&A”) decreased from
$18.9 million in the prior year period to$18.6 million , while SG&A as a percentage of sales increased over the prior year period to 23.3%. -
Operating loss increased from
$2.6 million in the prior year period to an operating loss of$4.9 million . Adjusting for the Production Curtailment Costs and costs associated with the restructuring of our offshore manufacturing footprint down to two countries and related initiatives (“Restructuring Costs”), operating loss was$2.8 million .Delta Group segment operating income improved from$0.1 million to$0.5 million . Adjusted for the Production Curtailment Costs and Restructuring Costs,Delta Group segment operating income was$2.7 million , or 3.8% of sales.The Salt Life Group segment experienced an operating loss of$2.1 million , compared to operating income of$0.3 million in the prior year period. -
Net interest expense was
$3.6 million compared to$2.9 million in the prior year period, with the increase driven by the elevated interest rate environment partially offset by lower borrowings. -
Earnings before interest, taxes, depreciation and amortization (“EBITDA”) was a loss of
$1.3 million . Adjusted for the Production Curtailment Costs and Restructuring Costs, EBITDA was positive at$853 thousand .Delta Group segment EBITDA was$3.5 million . Adjusted for the Production Curtailment Costs and Restructuring Costs,Delta Group segment EBITDA was$5.7 million .Salt Life Group segment EBITDA was a loss of$1.6 million . -
Net loss increased to
$8.5 million , or$1.22 per share, from a loss of$3.6 million , or$0.51 per share. Adjusted for the Production Curtailment Costs and Restructuring Costs, net loss was$6.6 million , or$0.94 per share. -
Net inventory as of
December 30, 2023 , was$196.3 million , a sequential decrease of almost$16 million , or 8%, fromSeptember 2023 and a year-over-year decrease of$62.5 million , or 24%, fromDecember 2022 . -
Debt outstanding under our
U.S. revolving credit facility was$110.8 million atDecember 30, 2023 , a reduction of$31.5 million from the prior year December and$42.3 million fromMarch 2023 . Total net debt, including capital lease financing and cash on hand, was$144.4 million as ofDecember 30, 2023 , an approximately 26% reduction from$194.3 million atMarch 2023 and an approximately 22% reduction from$185.2 million atDecember 2022 . -
Cash on hand and availability under our
U.S. revolving credit facility totaled$7.4 million as ofDecember 30, 2023 , a decrease of$19.8 million fromDecember 2022 and$6.8 million fromSeptember 2023 . We believe we will need to obtain additional liquidity in the near term to fund our operations and meet the obligations specified in ourU.S. revolving credit facility, and we are currently exploring a variety of options toward that end. -
Capital spending was
$300 thousand during the first quarter compared to$2.1 million during the prior year first quarter.
Conference Call
On
Non-GAAP Financial Measures
Reconciliations of GAAP gross margins to non-GAAP gross margins, GAAP operating income to non-GAAP operating income, GAAP net income to non-GAAP net income, GAAP net income to non-GAAP EBITDA, GAAP net income to non-GAAP adjusted EBITDA, and GAAP operating income to non-GAAP EBITDA and adjusted EBITDA are presented in tables accompanying the selected financial data included in this release and provide useful information to evaluate the Company’s operational performance. A description of the amounts excluded on a non-GAAP basis are provided in conjunction with these tables. Non-GAAP gross margin, non-GAAP operating income, non-GAAP net income, non-GAAP EBITDA and non-GAAP adjusted EBITDA should be evaluated in light of the Company’s financial statements prepared in accordance with GAAP.
About
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, our ability to access capital or that it will be available on terms acceptable to us or at all; the general
SELECTED FINANCIAL DATA: | ||||||||
(In thousands, except per share amounts) |
|
Three Months Ended |
||||||
|
|
|
|
|
||||
|
|
|
|
|
|
|
||
|
|
$ |
79,934 |
|
|
$ |
107,295 |
|
Cost of Goods Sold |
|
|
71,187 |
|
|
|
93,672 |
|
Gross Profit |
|
|
8,747 |
|
|
|
13,623 |
|
|
|
|
|
|
|
|
||
Selling, General and Administrative Expenses |
|
|
18,614 |
|
|
|
18,870 |
|
Other Income, Net |
|
|
(4,921 |
) |
|
|
(2,621 |
) |
Operating Loss |
|
|
(4,946 |
) |
|
|
(2,626 |
) |
|
|
|
|
|
|
|
||
Interest Expense, Net |
|
|
3,577 |
|
|
|
2,890 |
|
|
|
|
|
|
|
|
||
Loss Before Provision For (Benefit From) Income Taxes |
|
|
(8,523 |
) |
|
|
(5,516 |
) |
|
|
|
|
|
|
|
||
Provision For (Benefit From) Income Taxes |
|
|
10 |
|
|
|
(1,917 |
) |
|
|
|
|
|
|
|
||
Consolidated Net Loss |
|
|
(8,533 |
) |
|
|
(3,599 |
) |
|
|
|
|
|
|
|
||
Net Loss Attributable to Non-Controlling Interest |
|
|
6 |
|
|
|
34 |
|
|
|
|
|
|
|
|
||
Net Loss Attributable to Shareholders |
|
$ |
(8,527 |
) |
|
$ |
(3,565 |
) |
|
|
|
|
|
|
|
||
Weighted Average Shares Outstanding |
|
|
|
|
|
|
||
Basic |
|
|
7,003 |
|
|
|
6,954 |
|
Diluted |
|
|
7,003 |
|
|
|
6,954 |
|
|
|
|
|
|
|
|
||
Net Loss per Common Share |
|
|
|
|
|
|
||
Basic |
|
$ |
(1.22 |
) |
|
$ |
(0.51 |
) |
Diluted |
|
$ |
(1.22 |
) |
|
$ |
(0.51 |
) |
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|||
Current Assets |
|
|
|
|
|
|
|
|
|
|||
Cash |
|
$ |
377 |
|
|
$ |
187 |
|
|
$ |
327 |
|
Receivables, Net |
|
|
34,488 |
|
|
|
47,868 |
|
|
|
61,514 |
|
Inventories, Net |
|
|
196,348 |
|
|
|
212,365 |
|
|
|
258,891 |
|
Prepaids and Other Assets |
|
|
3,526 |
|
|
|
2,542 |
|
|
|
4,114 |
|
Total Current Assets |
|
|
234,739 |
|
|
|
262,962 |
|
|
|
324,846 |
|
|
|
|
|
|
|
|
|
|
|
|||
Noncurrent Assets |
|
|
|
|
|
|
|
|
|
|||
Property, Plant & Equipment, Net |
|
|
62,598 |
|
|
|
65,611 |
|
|
|
72,771 |
|
|
|
|
49,822 |
|
|
|
50,391 |
|
|
|
61,324 |
|
Deferred Income Taxes |
|
|
7,822 |
|
|
|
7,822 |
|
|
|
1,342 |
|
Operating Lease Assets |
|
|
56,909 |
|
|
|
55,464 |
|
|
|
49,313 |
|
Investment in Joint Venture |
|
|
9,751 |
|
|
|
10,082 |
|
|
|
9,045 |
|
Other Noncurrent Assets |
|
|
3,263 |
|
|
|
2,906 |
|
|
|
2,800 |
|
Total Noncurrent Assets |
|
|
190,165 |
|
|
|
192,276 |
|
|
|
196,595 |
|
|
|
|
|
|
|
|
|
|
|
|||
Total Assets |
|
$ |
424,904 |
|
|
$ |
455,238 |
|
|
$ |
521,441 |
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Current Liabilities |
|
|
|
|
|
|
|
|
|
|||
Accounts Payable and Accrued Expenses |
|
$ |
77,308 |
|
|
$ |
80,321 |
|
|
$ |
100,652 |
|
Income Taxes Payable |
|
|
700 |
|
|
|
710 |
|
|
|
321 |
|
Current Portion of Finance Leases |
|
|
8,246 |
|
|
|
8,442 |
|
|
|
8,603 |
|
Current Portion of Operating Leases |
|
|
9,741 |
|
|
|
9,124 |
|
|
|
8,585 |
|
Current Portion of Long-Term Debt |
|
|
117,275 |
|
|
|
16,567 |
|
|
|
9,514 |
|
Total Current Liabilities |
|
|
213,270 |
|
|
|
115,164 |
|
|
|
127,675 |
|
|
|
|
|
|
|
|
|
|
|
|||
Noncurrent Liabilities |
|
|
|
|
|
|
|
|
|
|||
Long-Term Taxes Payable |
|
|
2,131 |
|
|
|
2,131 |
|
|
|
2,841 |
|
Deferred Income Taxes |
|
|
- |
|
|
|
- |
|
|
|
2,232 |
|
Long-Term Finance Leases |
|
|
12,007 |
|
|
|
14,029 |
|
|
|
18,465 |
|
Long-Term Operating Leases |
|
|
48,259 |
|
|
|
47,254 |
|
|
|
42,015 |
|
Long-Term Debt |
|
|
7,260 |
|
|
|
126,465 |
|
|
|
148,899 |
|
Total Noncurrent Liabilities |
|
|
69,657 |
|
|
|
189,879 |
|
|
|
214,452 |
|
|
|
|
|
|
|
|
|
|
|
|||
Common Stock |
|
|
96 |
|
|
|
96 |
|
|
|
96 |
|
|
|
|
60,643 |
|
|
|
61,315 |
|
|
|
60,559 |
|
Equity Attributable to Non-Controlling Interest |
|
|
(713 |
) |
|
|
(707 |
) |
|
|
(690 |
) |
Retained Earnings |
|
|
124,860 |
|
|
|
133,387 |
|
|
|
163,035 |
|
Accumulated Other Comprehensive Gain (Loss) |
|
|
- |
|
|
|
- |
|
|
|
210 |
|
Treasury Stock |
|
|
(42,909 |
) |
|
|
(43,896 |
) |
|
|
(43,896 |
) |
Total Equity |
|
|
141,977 |
|
|
|
150,195 |
|
|
|
179,314 |
|
|
|
|
|
|
|
|
|
|
|
|||
Total Liabilities and Equity |
|
$ |
424,904 |
|
|
$ |
455,238 |
|
|
$ |
521,441 |
|
Reconciliations of GAAP Net Loss to Non-GAAP Measures Earnings Before Interest Taxes Depreciation and Amortization ("EBITDA"), Adjusted Net Loss, and Adjusted EBITDA | ||||
Unaudited | ||||
(in thousands) | ||||
Reconciliation of GAAP Measure Net Loss to Non-GAAP Measures EBITDA, Adjusted Net Loss, and Adjusted EBITDA – Unaudited | ||||
Three Months Ending | ||||
|
||||
Net Loss |
$ |
(8,527 |
) |
|
Interest Expense, Net |
|
3,577 |
|
|
Provision For Income Taxes |
|
10 |
|
|
Delta Group Segment Depreciation and Amortization |
|
3,041 |
|
|
Salt Life Group Segment Depreciation and Amortization |
|
534 |
|
|
Unallocated Depreciation and Amortization |
|
57 |
|
|
EBITDA |
|
(1,308 |
) |
|
Production Curtailment Costs (1) |
|
1,348 |
|
|
Restructuring Costs (2) |
|
813 |
|
|
Tax Impact |
|
(216 |
) |
|
Adjusted Net Loss |
|
(6,582 |
) |
|
Interest Expense, Net |
|
3,577 |
|
|
Provision For Income Taxes |
|
226 |
|
|
Delta Group Segment Depreciation and Amortization |
|
3,041 |
|
|
Salt Life Group Segment Depreciation and Amortization |
|
534 |
|
|
Unallocated Depreciation and Amortization |
|
57 |
|
|
Adjusted EBITDA |
$ |
853 |
|
|
Reconciliation of GAAP Measure Delta Group Segment Operating Income to Non-GAAP Measures Delta Group Segment EBITDA, Adjusted Delta Group Segment Operating Income, and Adjusted Delta Group Segment EBITDA – Unaudited | ||||
Three Months Ending | ||||
|
||||
Delta Group Segment Operating Income |
$ |
492 |
|
|
Delta Group Segment Depreciation and Amortization |
|
3,041 |
|
|
Delta Group Segment EBITDA |
|
3,533 |
|
|
Production Curtailment Costs (1) |
|
1,348 |
|
|
Restructuring Costs (2) |
|
813 |
|
|
Adjusted Delta Group Segment Operating Income |
|
2,653 |
|
|
Delta Group Segment Depreciation and Amortization |
|
3,041 |
|
|
Adjusted Delta Group Segment EBITDA |
$ |
5,694 |
|
|
Reconciliation of GAAP Measure Salt Life Group Segment Operating Loss to Non-GAAP Measure Salt Life Group Segment EBITDA – Unaudited | ||||
Three Months Ending | ||||
|
||||
Salt Life Group Segment Operating Loss |
$ |
(2,130 |
) |
|
Salt Life Group Segment Depreciation and Amortization |
|
534 |
|
|
Salt Life Group Segment EBITDA |
$ |
(1,596 |
) |
|
(1) Production Curtailment Costs consist of unabsorbed fixed costs, temporary unemployment benefit payments, and other expense items resulting from the Company’s decision to reduce production levels to better align with the significantly reduced demand across the activewear industry due to high inventory levels stemming from the heavy replenishment activity following pandemic-related supply chain challenges. | ||||
(2) Restructuring Costs consist of employee severance benefits paid in connection with the transition of our more expensive |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240212240772/en/
Company Contact:
Justin Grow, 864-232-5200 x6604
investor.relations@deltaapparel.com
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