Delta Apparel, Inc. announces record sales for the quarter ended December 28, 2002 of $30.0 million, a 23.3% increase from the prior year second fiscal quarter.

The sales increase of $5.7 million over the prior year quarter was the result of a 38.9% increase in volume, partially offset by a 11.2% decrease in average selling prices. Sales of basic and heavyweight adult and youth short sleeve tees drove the volume increase for the quarter. Price promotions in the marketplace resulted in lower average selling prices in the basic tee styles. Operating income was $2.1 million for the quarter, an increase of $0.8 million, or 69.4%, from $1.2 million in the second fiscal quarter of the prior year. The increase resulted from higher sales and lower manufacturing cost, driven by improvements in efficiencies at the Company’s Edgefield and Maiden facilities. EBITDA for the quarter was $3.8 million, up $0.9 million from the prior year quarter.

Interest expense was $0.2 million for the quarter, compared to $0.1 million in the prior year quarter. The increase in interest expense resulted from an increase of approximately $2.0 million in average debt outstanding, partially offset by a reduction in the average interest rates of over 100 basis points.

The effective income tax rate on pretax income for the three months ended December 28, 2002 was 38.7%, compared to 36.9% for the second fiscal quarter of the prior year and 33.0% for the fiscal year ended June 29, 2002. In fiscal year 2002, the Company reversed the valuation allowance against its net operating loss carryforwards, resulting in the effective tax rate of 33.0%. The Company expects its annualized effective tax rate to more closely approximate statutory rates for fiscal year 2003.

Net earnings for the quarter were $1.2 million, or 3.8% of sales, up $0.5 million from the prior year quarter. Basic and diluted earnings per share for the quarter ended December 28, 2002 were $0.28 and $0.27 per share on 4.06 million and 4.22 million shares, respectively. Basic and diluted earnings per share for the quarter ended December 29, 2001 were $0.15 and $0.14 on 4.64 million and 4.86 million shares, respectively (after giving effect to the 2-for-1 stock split effective as of September 20, 2002). On December 28, 2002, the Company had 4.06 million shares outstanding.

Sales for the first six months of fiscal year 2003 were $58.9 million, up $3.5 million, or 6.4%, from the first six months of the prior year. For the six months ended December 28, 2002, operating earnings were $5.1 million, up $3.6 million from the first six months of the prior year. EBITDA for the first six months of fiscal year 2003 was $8.5 million, up $3.7 million, or 78.2%, from the first six months of the prior year.

Interest expense was $0.3 million for the six months ended December 28, 2002, compared to $0.4 million in the first six months of last year. This reduction in interest expense resulted from a decrease in average interest rates.

Net earnings for the first six months of fiscal year 2003 were $2.9 million, up $2.2 million from the first six months of last year. Basic and diluted earnings per share for the six months ended December 28, 2002 were $0.73 and $0.70 per share, respectively. For the six months ended December 29, 2001, basic and diluted earnings per share were $0.16 and $0.15 per share, respectively.

Accounts receivable increased $4.2 million from December 29, 2001 to $17.7 million on December 28, 2002. The increase was a result of higher sales during the current year quarter, partially offset by lower days sales outstanding. Days sales outstanding decreased to 50 days on December 28, 2002 compared to 60 days on December 29, 2001.

Inventories increased $1.8 million from September 28, 2002 to $50.2 million on December 28, 2002. This is an increase of $14.7 million from June 29, 2002 and an increase of $10.6 million from the prior year quarter. Finished goods inventory remains consistent with the prior year quarter; however, the Company continued to increase its in process inventory to support the opening of its Florida distribution center and its anticipated sales growth for fiscal year 2003. The Company’s raw material inventory decreased slightly during the quarter, although it remained higher than at June 29, 2002. The Company had increased its raw material inventory to take advantage of lower cotton prices and to support its increased textile capacity. The Company expects raw material inventories to decrease during the second half of the fiscal year.

The Company purchased 30,100 shares of its stock through its Stock Repurchase Program during the quarter ended December 28, 2002 for a total cost of $0.4 million. For the six months ended December 28, 2002, the Company purchased 48,704 shares for a total cost of $0.7 million.

Robert W. Humphreys, President and CEO, commented, “We are very excited about the record sales and earnings for the quarter and believe we are well positioned to continue our growth in the second half of our fiscal year. We expect to open our new Florida distribution center later this month and expect it to be fully operational to support our spring selling season. During the quarter we introduced our pick/pack program, which allows our customer to order products by the piece or by the dozen, in addition to full case quantities. We believe this will allow us to service a new segment of customers and look forward to growing our business in this area.”

SELECTED FINANCIAL DATA:
(In thousands, except
 per share amounts)
                         Three Months Ended        Six Months Ended
                         Dec 28,      Dec 29,      Dec 28,    Dec 29,
                          2002          2001        2002       2001
                       ------------ ----------- ----------- ----------

Net Sales                  $30,002     $24,337     $58,885    $55,351
Cost of Goods Sold          24,881      20,596      47,760     48,643
                       ------------ ----------- ----------- ----------
Gross Margin                 5,121       3,741      11,125      6,708

SG&A                         3,032       2,675       5,867      5,340
Other Expense (Income)          34        (147)        142       (175)
                       ------------ ----------- ----------- ----------
Operating Income             2,055       1,213       5,116      1,543

Interest Expense               171         139         319        367
Taxes                          729         396       1,851        434
                       ------------ ----------- ----------- ----------
Net Income                  $1,155        $678      $2,946       $742