Delta Apparel, Inc. reported that net sales for the fourth quarter ended June 29 were $133.6 million compared to $135.4 million for the
comparable 2012 quarter. Net income for the 2013 fourth quarter was $4.0
million, or 48 cents per diluted share, compared to $4.8 million, or 55 cents
per diluted share, in the 2012 fourth quarter.

While operating profit
for fourth quarter 2013 was higher than that of the comparable 2012
period, net income was negatively impacted by a less favorable tax
treatment in the 2013 period.

Revenue for the fiscal year increased to $490.5 million from $489.9 million in fiscal 2012, marking the company’s tenth consecutive year of record sales. Net income for fiscal 2013 was $9.2 million, or $1.08 per diluted share, compared with a net loss in fiscal 2012 of $2.4 million, or $0.29 loss per diluted share. The net loss in fiscal 2012 was primarily due to the previously disclosed 2012 second quarter inventory markdown in the company’s basics segment, which was necessitated by unprecedented, record-high cotton costs.

Strong net sales gains in the company’s basics segment along with similar growth in the company’s Junkfood, The Game and Art Gun businesses drove the record revenue for the year. These gains were somewhat offset by softness in the Soffe business that continued through the fiscal year. In addition to the company’s record high consolidated revenue, improved margins across most business units drove the net income gains for fiscal 2013.

All of the company’s business units other than Soffe experienced revenue growth for both the full year and fourth quarter. Excluding Soffe, higher unit sales in both the branded and basics segments were somewhat offset by lower average selling prices.

Branded Segment Review

All of the company’s branded segment businesses other than Soffe experienced strong sales growth during fiscal 2013; however, the 12 percent increase in combined sales for Junkfood, The Game and Art Gun was offset by a 24 percent sales decline in the Soffe business. As such, fiscal 2013 branded segment sales declined to $219.6 million from $235.2 million in fiscal 2012. Art Gun continued its rapid growth with a 94 percent increase in sales. The Game posted an 11 percent revenue increase, driven primarily by rapid growth in the Salt Life product line, which experienced nearly 50 percent sales growth in fiscal 2013. The popular Junkfood brand grew sales 8 percent as it expanded its professional sports product line. All three of these businesses also expanded gross margins in fiscal 2013.

For the fourth quarter, branded segment sales totaled $55.5 million versus $57.9 million in the 2012 fourth quarter. The double digit sales increases posted by The Game, Junkfood and Art Gun in the fourth quarter were more than offset by the previously mentioned softness that continued in the Soffe business.

Basics Segment Review

Strong unit sales growth in both Delta Catalog and FunTees resulted in a 6.3 percent net sales increase in the basics segment, which reached $270.9 million compared to $254.7 million in fiscal 2012. A 14 percent gain in unit sales for the segment was offset by lower average selling prices. Gross margins in both businesses were significantly improved in fiscal 2013 due primarily to improved manufacturing performance.

Net sales for the basics segment in the 2013 fourth quarter were up slightly to $78.0 million compared with $77.5 million in the 2012 fourth quarter. Both the Delta Catalog and FunTees businesses contributed to the sales increase while also expanding gross margins.

Robert W. Humphreys, Delta Apparel’s Chairman and Chief Executive Officer, commented that the strategies Delta has executed over the past eighteen months are paying off in greater unit sales and improved margins, which are having the anticipated positive effect on net income. “We’re pleased that the strong performance of nearly all of our businesses has more than offset the weakness in Soffe, which has not yet turned the corner.”

“In that regard, we have implemented significant measures to improve Soffe’s unit sales and margins, and to bring its financial results in line with the performance of our other businesses. We have made some important changes in Soffe’s key management to lead the efforts in rebuilding the brand. We are already receiving positive feedback from customers on Soffe’s spring 2014 product offerings, and are hopeful this will equate to growth in the back half of fiscal 2014. We have modernized Soffe’s screen print operations, closed its Wendell, North Carolina decoration facility, and consolidated those operations within the Fayetteville printing facility. We have also taken additional measures to reduce SG&A costs at Soffe. We believe these and other initiatives that we will take over the next few quarters will return Soffe to profitability in fiscal 2014.”

“We continue to improve our other businesses as well. We have consolidated our bookstore business into The Game, integrating the merchandising, selling and administrative functions along with the decoration and retail packaging operations. We also moved our FunTees print development offshore and have expanded our El Salvador printing operations. In addition, we completed the conversion of the FunTees ERP system onto the Catalog platform, which has streamlined operations, consolidated administrative functions, and reduced costs.”

“Earlier today we announced the acquisition of the Salt Life brand. This acquisition furthers our strategy of building lifestyle brands that can take advantage of our creative capabilities, vertical manufacturing platform and international sourcing competencies. With Salt Life on board and operating as a division of To The Game, we can fully benefit from its popularity and rapid growth potential.”

“Finally, we are changing our fiscal year-end from June to September in order to better align the company’s planning, financial and reporting functions with the seasonality of our business. This, we believe, will provide investors with more timely information that better reflects the operations of the business,” Mr. Humphreys said.

The company’s fiscal year will end on the Saturday closest to September 30. In connection with the change, the company will have a three-month bridge period that will end on September 28, 2013, and its fiscal year 2014 will then begin on September 29, 2013 and end on September 27, 2014.

Fiscal 2014 Guidance

For the three-month bridge period ending September 28, 2013, the company anticipates sales will be in the range of $130 million to $132 million, with earnings per diluted share expected to be in the range of $0.30 to $0.35. The earnings per share guidance is net of approximately $0.14 per share for one-time costs, comprising $0.11 related to the Wendell facility closing and $0.03 related to the Salt Life acquisition.

For the full fiscal year ending September 27, 2014, the company expects revenue to be in the range of $500 million to $510 million and earnings to be between $2.00 and $2.10 per diluted share.

Delta Apparel, Inc., along with its operating subsidiaries, M. J. Soffe, LLC, Junkfood Clothing company, To The Game, LLC and Art Gun, LLC, is an international design, marketing, manufacturing, and sourcing company that features a diverse portfolio of lifestyle basic and branded activewear apparel and headwear.