Delta Apparel, Inc. announced preliminary financial results for the first quarter ended September 30, 2006 and updated its guidance for the fiscal year ended June 30, 2007. The Company currently expects first quarter revenues in the range of $61 million to $63 million versus its prior expectation of $64 to $68 million. It also now expects diluted earnings per share in the range of 25 cents to 27 cents versus prior guidance of 41 cents to 45 cents.
As reported in the Company's August 18, 2006 earnings release, net income in the first quarter of 2007 includes an extraordinary gain associated with the final earn-out payment made to the former M. J. Soffe shareholders. This extraordinary gain is expected to be approximately $0.09 per diluted share for the 2007 first fiscal quarter.
For the full fiscal year, the Company continues to expect net sales to be in the range of $325 to $340 million. The Company now expects diluted earnings per share to be in the range of $1.81 to $2.00 per diluted share for the 2007 fiscal year versus its prior guidance of $1.91 to $2.05 per diluted share.
Robert W. Humphreys, the Company's President and Chief Executive Officer, commented, “While we set new sales records for our first quarter, sales were below our expectations in our Junkfood business. Revenue in our Delta business was ahead of the prior year but lower than expected, and margins during the quarter were depressed by weak pricing and promotional freight costs. We continued to experience strong sales in our Soffe business through all of its distribution channels and expect the growth at Soffe to continue throughout the year.”
Mr. Humphreys concluded, “As we look ahead, our Junkfood business is entering the second fiscal quarter with a stronger backlog which should drive improved results as compared to the first quarter of this year. We are well underway with the integration of Fun-Tees and expect to realize immediate savings on raw material and transportation costs. Additional savings should be realized when we complete the manufacturing integration in the second half of this fiscal year. These factors, including the expected positive impact of the Fun-Tees acquisition, should enable us to make up for a portion of the first quarter shortfall as the year progresses. We are building a well-diversified distribution model and believe that our prospects remain strong for growth and healthy profitability in fiscal 2007 and beyond.”
The Company also announced that it has completed the previously announced acquisition of Fun-Tees, Inc. for a total purchase price of $20 million in cash, subject to certain post-closing adjustments, including an adjustment based on the actual working capital purchased. Delta Apparel funded the acquisition through draws under its revolving credit facility. After the $20 million payment for the purchase of Fun-Tees, the Company had an aggregate of approximately $69 million outstanding under the revolving lines of credit with approximately $16 million of aggregate credit availability.
