Delta Apparel, Inc. sales for three months ended October 2,
2004 were $54.3 million, an increase of $23.5 million, or 76.3%, from the prior year quarter due primarily to the acquisition of M. J. Soffe Co.
Gross margins for the quarter ended October 2, 2004 improved to
21.3% compared to 13.3% in the prior year quarter. The improvement in
gross margin was primarily the result of the higher gross margins
associated with the Soffe branded apparel business, offset partially
by lower gross margins in the basic tee shirt business. The gross
margins on basic tee shirts declined in the first fiscal quarter
compared to the prior year quarter principally due to higher raw
material costs. We achieved operating income of $3.1 million for the
quarter ended October 2, 2004, an increase of $2.0 million, or 184.5%,
from $1.1 million in the first fiscal quarter of the prior year.
Basic and diluted earnings per share for the quarter ended October
2, 2004 were $0.35 and $0.34 per share, respectively, compared to
basic and diluted earnings per share in the prior year quarter of
$0.15 and $0.14, respectively.
Robert W. Humphreys, President and CEO, commented, “Our focus on
the distribution of our products continues as we increase our customer
base and broaden our product lines. The Delta segment shipped product
to approximately 26% more customers during the quarter than in the
prior year quarter. In addition to our pending acquisition of a modern
distribution facility in Tennessee, we have finalized a lease on a new
distribution center to service the northeastern states and expect to
start serving customers from this center by spring of 2005. We have
new styles of spring merchandise available for all distribution
channels in our Soffe business and recently introduced a full line of
fleece products under the Delta label. The initial sales response to
the new styles has been positive and we believe these products will
help reduce our seasonality and strengthen our sales.
“We are pleased with the integration of Soffe with the Delta
business. As part of our long-term succession planning, we recently
appointed Ken Spires as President of M. J. Soffe Co. Ken was
previously the Vice President of Technical Services at Delta Apparel
and has over 25 years of experience in the industry. Jim Soffe will
continue to serve as Chief Executive Officer of M. J. Soffe Co. As we
continue to take advantage of the combined purchasing power and
synergies of the two businesses, we expect to see continued success as
an integrated company.”
Our financial results for the quarter ended October 2, 2004 were
positively impacted by the acquisition of Soffe in October 2003. The
Soffe business contributed $22.0 million in sales and $3.1 million in
operating income during the first fiscal quarter of fiscal year 2005.
The Soffe segment exceeded its sales expectations in its military
distribution channel and expects the strong sales in this channel to
continue through the fiscal year. Demand for the Soffe brand continues
to be strong and we continue to expand our Soffe product offering
through the addition of new styles and colors. The new Soffe product
line, coupled with proper inventory levels, should allow this segment
to achieve increased sales through the spring selling season.
The Delta business reported sales of $33.4 million for the three
months ended October 2, 2004, an increase of $2.6 million, or 8.5%,
from sales in the prior year quarter. Operating income for the first
fiscal quarter was $9 thousand, a decrease of $1.1 million from the
prior year quarter primarily as a result of the higher priced raw
materials discussed above. The increased raw material cost was
partially offset by higher average selling prices on basic tees and
increased sales of specialty products. The Delta segment focused on
increasing the sales of its higher margin colored products, decreasing
its sales of white products to 31% of sales, down from 39% in the
prior year quarter. In addition, the Delta segment just recently
released its new line of fleece products, including sweatshirts and
sweatpants.
Accounts receivable increased $12.0 million from September 27,
2003 to $29.4 million on October 2, 2004. The increase in accounts
receivable was primarily the result of the addition of Soffe.
Inventories increased $55.7 million from September 27, 2003 to $105.9
million on October 2, 2004. The acquisition of M. J. Soffe Co.
resulted in an increase of $52.7 million in inventory compared to the
prior year. The increase in inventory in the Delta business is
primarily the result of the higher raw material prices in inventory.
We continue to focus on managing our inventory levels while
maintaining the inventory necessary to achieve our expected sales
growth in fiscal year 2005.
Delta Apparel also announces today that on October 28, 2004, the
Board of Directors declared a dividend of seven cents per common share
of stock payable November 29, 2004 to shareholders of record as of the
close of business on November 17, 2004. This dividend was declared
pursuant to our previously announced quarterly dividend program, which
we may amend or terminate at any time.
SELECTED FINANCIAL DATA:
(In thousands, except per share amounts)Three Months Ended
Oct. 2, Sept. 27,
2004 2003
---------- ----------Net Sales $ 54,300 30,802
Cost of Goods Sold 42,723 26,720
---------- ----------
Gross Margin 11,577 4,082SG&A 8,446 3,059
Other Income (10) (81)
---------- ----------
Operating Income 3,141 1,104Interest Expense 703 154
Taxes 994 361---------- ----------
Net Income $ 1,444 $ 589
========== ==========Weighted Average Shares Outstanding
Basic 4,141 4,044
Diluted 4,268 4,168Net Income per Common Share
Basic $ 0.35 $ 0.15
Diluted $ 0.34 $ 0.14
