8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 8-K

CURRENT REPORT PURSUANT

TO SECTION 13 or 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT (Date of earliest event reported): April 30, 2020

DELTA APPAREL, INC.

(Exact name of registrant as specified in its charter)

	Georgia
	(State or Other Jurisdiction of Incorporation)
1-15583		58-2508794
(Commission File Number)		(IRS Employer Identification No.)

322 South Main Street, Greenville, South Carolina	29601
(Address of principal executive offices)	(Zip Code)

	(864) 232-5200
(Registrant's Telephone Number Including Area Code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below)

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Large accelerated filer	Accelerated filer	Non-accelerated filer	Smaller reporting company	Emerging growth company
☐	☒	☐	☒	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common	DLA	NYSE American

Item 2.02 Results of Operations and Financial Condition.

On April 30, 2020, Delta Apparel, Inc. (the "Company") issued a press release containing a discussion of the Company's results of operations for the quarter ended March 28, 2020.

A copy of the press release is attached as Exhibit 99.1 hereto and also made available through the Company's website at www.deltaapparelinc.com.

Item 7.01.       Regulation FD Disclosure.

Robert W. Humphreys, Chairman and Chief Executive Officer, and Deborah H. Merrill, Chief Financial Officer and President, Delta Group, will hold a conference call on Thursday, April 30, 2020, at 4:30 p.m. Eastern Time to discuss financial results and provide a business update.  The conference call will be broadcast through the Company’s website at www.deltaapparelinc.com.  Investors may listen to the call by selecting the webcast link on the homepage of the website.  A replay of the webcast will be available and accessible at the above website through May 30, 2020.

The information in this Current Report on Form 8-K, including the exhibit, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act.

Item 9.01.       Financial Statements and Exhibits.

             (d) Exhibits.

Exhibit Number	Description
99.1	Press release issued by Delta Apparel, Inc. on April 30, 2020. The information contained in the attached exhibit is unaudited and should be read in conjunction with Delta Apparel, Inc.'s annual and quarterly reports filed with the U.S. Securities and Exchange Commission.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		DELTA APPAREL, INC.
Date:	April 30, 2020	/s/ Deborah H Merrill
		Deborah H. Merrill
		Chief Financial Officer and President, Delta Group

EX-99.1

Exhibit 99.1

Delta Apparel Reports Second Quarter Fiscal 2020 Results

Earnings per share growth of 46% bolstered by strong gross profit

Revolving credit facility bridge amendment secured providing additional financial flexibility

GREENVILLE, S.C., April 30, 2020 -- Delta Apparel, Inc. (NYSE American: DLA), a leading provider of core activewear and lifestyle apparel products, today announced financial results for its second quarter and six months ended March 28, 2020.

Robert W. Humphreys, the Company’s Chairman and Chief Executive Officer, commented, “Our second quarter earnings reflect our continued focus on driving profitability despite topline challenges faced late in the quarter due to COVID-19. Our vertically-integrated business model with diversified sales channels and broad geographic reach is allowing us to not only continue to operate and generate sales in the current environment, but has also created an opportunity for Delta Apparel to support our existing customers and onboard new customers in select channels.”

Mr. Humphreys continued, “In light of COVID-19, we continue to prudently manage all aspects of our business with a focus on conserving capital and maintaining strong financial flexibility. We are in a solid financial position to weather the current storm, and I am confident we will emerge from this pandemic stronger, ready to profitably grow our business and continue to provide value for all of our stakeholders.” 

For the second quarter ended March 28, 2020:

● Net sales were $96.7 million, a decrease of 6.0% from $102.8 million in the prior year second quarter. Prior to the March impact of COVID-19, the Company was on pace to achieve sales growth of approximately 9% for the quarter. During March 2020, the closure of retail stores throughout the U.S. dramatically halted revenue during the final month of the quarter. Net sales in the Delta Group segment and Salt Life Group segment decreased 6.0% and 6.3%, respectively, from the prior year period.

● Gross profit was $20.6 million, an 8.8% increase from $18.9 million in the prior year second quarter. Gross margin increased 290 basis points to 21.3% versus 18.4% in the prior year and increased 60 basis points compared to the first quarter of fiscal 2020. Second quarter gross profit was reduced by $1.9 million, or 200 basis points, from plant curtailments caused by government-mandated country closures in El Salvador and Honduras in March 2020. Adjusting for these plant curtailment expenses, gross margins would have been 23.3% during the March 2020 quarter, an improvement of 490 basis points from the prior year and 260 basis points from the fiscal 2020 December quarter. This margin expansion was attributable to continued efficiencies and process improvements within the Delta Group segment’s integrated vertical manufacturing platform.

● Selling, general and administrative ("SG&A") expenses were $17.9 million in the March 2020 quarter compared to $17.1 million in the prior year second quarter. The increase in SG&A expenses principally resulted from distribution network expansion investments.

● Operating income increased to $3.6 million compared to $2.7 million in the prior year second quarter as a result of the strong gross margin expansion more than offsetting the lower sales levels and higher distribution network expenses.

● Net income for the quarter was $1.3 million, or $0.19 per diluted share, compared to $0.9 million, or $0.13 per diluted share, in the prior year period. When adjusted for the $1.9 million pre-tax, or $0.20 per diluted share, of plant curtailment expenses, net earnings per diluted share for the 2020 fiscal second quarter was $0.39, which represents a 200% increase over the prior year.

For the six months ended March 28, 2020:

● Net sales were $192.6 million, a decrease of 5.8% from $204.5 million in the comparable period last year. Net sales in the Delta Group segment and Salt Life Group segment decreased 5.9% and 5.8%, respectively, from the prior year period.

● Gross margin increased 270 basis points to 21.0% compared to 18.3% in the prior year period. Adjusting for the fiscal 2020 second quarter plant curtailment expenses, gross margins would have been 22.0%, an improvement of 370 basis points from the prior year first six months.

● SG&A expenses as a percentage of sales were 18.7%, compared to 16.5% in the prior year period as fixed costs were not leveraged on the lower revenue.

● Operating income increased by $3.5 million to $6.2 million compared to $2.7 million in the prior year period. Adjusting fiscal year 2020 for the $1.9 million in plant curtailment expenses, and adjusting fiscal year 2019 for the $2.5 million discrete expense in the December quarter in connection with a 2016 customer bankruptcy, operating income in fiscal 2020 would have been $8.1 million, a $2.9 million improvement over $5.2 million in the prior year period. Operating margin improvement resulted from significantly stronger gross margins, being partially offset by lower sales and higher distribution expenses.

● Net income for the period was $2.2 million, or $0.32 per diluted share, compared to a net loss of $0.2 million, or $0.03 per diluted share loss, in the prior year period. When adjusted for the $1.9 million pre-tax expense, or $0.20 per diluted share, of plant curtailment expenses, adjusted net earnings for the first six months of fiscal 2020 were $0.52 per diluted share. When adjusted for the discrete $2.5 million pre-tax expense, or $0.30 per diluted share, net earnings for the first six months of fiscal 2019 were $1.9 million, or $0.27 per diluted share.

During the quarter, the Company spent approximately $4.1 million on capital expenditures and $2.0 million to repurchase 99,971 shares of its stock. Total debt, including capital lease financing, as of March 28, 2020 was $167.9 million, up $32.8 million from September 28, 2019 due principally to seasonally higher working capital and maintaining over $9 million of cash on hand. Since September 28, 2019, inventory increased $18.2 million to $197.3 million at March 28, 2020 primarily from the build of inventory to support the spring selling season. The increase in inventory from the year ago level of $186.5 million resulted from the expansion of product categories and the lower than anticipated sales in the current year quarter due to the COVID-19 pandemic. As of quarter-end, the Company had liquidity access to over $30 million considering its cash on hand and availability under its U.S. revolving credit facility.

As previously announced, due to the current environment and the impact of COVID-19, the Company has taken aggressive actions to strengthen its financial position, preserve cash, and improve liquidity beyond its current levels. On April 27, 2020, the Company secured a bridge amendment to its U.S. revolving credit facility with its lenders. The amendment provides additional flexibility to tap into the availability provided under the Company’s asset-based lending arrangement.

Conference Call

The Company will hold a conference call with senior management to discuss its financial results today at 4:30 PM ET. The Company invites you to join the call by dialing 800-458-4148.  If calling from outside the United States, please dial 323-794-2597.  A live webcast of the conference call will be available at www.deltaapparelinc.com.  Please visit the website at least 15 minutes early to register for the teleconference webcast and download any necessary software.  A replay of the call will be available through May 30, 2020.  To access the telephone replay, participants should dial toll-free 844-512-2921.  International callers can dial 412-317-6671.  The access code for the replay is 7621307.

About Delta Apparel, Inc.

Delta Apparel, Inc., along with its operating subsidiaries, DTG2Go, LLC, Salt Life, LLC, and M.J. Soffe, LLC, is a vertically-integrated, international apparel company that designs, manufactures, sources, and markets a diverse portfolio of core activewear and lifestyle apparel products under the primary brands of Salt Life®, COAST®, Soffe®, and Delta. The Company is a market leader in the direct-to-garment digital print and fulfillment industry, bringing DTG2Go technology and innovation to the supply chain of its customers. The Company specializes in selling casual and athletic products through a variety of distribution channels and tiers, including outdoor and sporting goods retailers, independent and specialty stores, better department stores and mid-tier retailers, mass merchants and e-retailers, the U.S. military, and through its business-to-business e-commerce sites. The Company’s products are also made available direct-to-consumer at its branded retail stores and on its websites at www.saltlife.com, www.coastapparel.com, www.soffe.com and www.deltaapparel.com as well as through its branded retail stores. The Company’s operations are located throughout the United States, Honduras, El Salvador, and Mexico, and it employs approximately 8,400 people worldwide. Additional information about the Company is available at www.deltaapparelinc.com.

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, the volatility and uncertainty of cotton and other raw material prices and availability; the general U.S. and international economic conditions; the COVID-19 pandemic impact on our operations, financial condition, liquidity, and capital investments; competitive conditions in the apparel industry; restrictions on our ability to borrow capital or service our indebtedness; deterioration in the financial condition of our customers and suppliers and changes in the operations and strategies of our customers and suppliers; changing consumer preferences or trends; our ability to successfully open and operate new retail stores; changes in economic, political or social stability at our offshore locations; significant interruptions within our manufacturing or distribution facilities or other operations; our ability to attract and retain key management; significant changes in our effective tax rate; interest rate fluctuations increasing our obligations under our variable rate indebtedness; the ability to raise additional capital; the ability to grow, achieve synergies and realize the expected profitability of acquisitions; the volatility and uncertainty of energy, fuel and other costs; material disruptions in our information systems; compromises of our data security; significant litigation in either domestic or international jurisdictions; recalls, claims and negative publicity associated with product liability issues; the ability to protect our trademarks and other intellectual property; the impairment of intangible assets; changes in international trade regulations; our ability to comply with trade regulations; changes in employment laws or regulations or our relationship with employees; foreign currency exchange rate fluctuations; negative publicity resulting from violations of manufacturing standards or labor laws or unethical business practices by our suppliers and independent contractors; the illiquidity of our shares; price volatility in our shares and the general volatility of the stock market; and the other factors set forth in the "Risk Factors" contained in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission and as updated in our subsequently filed Quarterly Reports on Form 10-Q. Except as may be required by law, Delta Apparel, Inc. expressly disclaims any obligation to update these forward-looking statements to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.

Company Contact:

Deborah Merrill, 864-232-5200 x6620

investor.relations@deltaapparel.com 

Investor Relations and Media Contact:
ICR, Inc.

Investors:

Tom Filandro, 646-277-1235

Media:

Jessica Liddell, 203-682-8208

DLAPR@icrinc.com 

SELECTED FINANCIAL DATA:
(In thousands, except per share amounts)
	Three Months Ended						Six Months Ended
	Mar 28, 2020			Mar 30, 2019			Mar 28, 2020			Mar 30, 2019
Net Sales	$	96,660		$	102,838		$	192,550		$	204,513
Cost of Goods Sold		76,079			83,930			152,075			167,036
Gross Profit		20,581			18,908			40,475			37,477
Selling, General and Administrative Expenses		17,941			17,056			36,147			33,841
Other (Income) Loss, Net		(914	)		(843	)		(1,863	)		902
Operating Income		3,554			2,695			6,191			2,734
Interest Expense, Net		1,808			1,985			3,610			3,750
Earnings (Loss) Before Provision For (Benefit From) Income Taxes		1,746			710			2,581			(1,016	)
Provision For (Benefit From) Income Taxes		526			(115	)		570			(614	)
Consolidated Net Earnings (Loss)		1,220			825			2,011			(402	)
Net Loss Attributable to Non-Controlling Interest		91			117			223			193
Net Earnings (Loss) Attributable to Shareholders	$	1,311		$	942		$	2,234		$	(209	)
Weighted Average Shares Outstanding
Basic		6,957			6,943			6,953			6,933
Diluted		7,055			7,103			7,063			6,933
Net Earnings (Loss) per Common Share
Basic	$	0.19		$	0.14		$	0.32		$	(0.03	)
Diluted	$	0.19		$	0.13		$	0.32		$	(0.03	)

	Mar 28, 2020			Sep 28, 2019			Mar 30, 2019
	(Unaudited)			(Audited)			(Unaudited)
Current Assets
Cash	$	9,568		$	605		$	1,777
Receivables, Net		59,407			60,887			59,946
Inventories, Net		197,333			179,107			186,526
Prepaids and Other Assets		4,072			2,999			3,002
Total Current Assets		270,380			243,598			251,251
Noncurrent Assets
Property, Plant & Equipment, Net		62,587			61,404			54,311
Goodwill and Other Intangibles, Net		58,631			59,504			60,151
Deferred Income Taxes		1,514			1,514			1,924
Operating Lease Assets		43,226			-			-
Investment in Joint Venture		10,309			10,388			9,731
Other Noncurrent Assets		2,484			1,580			1,687
Total Noncurrent Assets		178,751			134,390			127,804
Total Assets	$	449,131		$	377,988		$	379,055
Current Liabilities
Accounts Payable and Accrued Expenses	$	71,055		$	73,111		$	73,857
Current Portion of Contingent Consideration		1,970			2,790			3,190
Current Portion of Finance Leases		6,965			6,434			5,308
Current Portion of Operating Leases		8,525			-			-
Current Portion of Long-Term Debt		7,577			6,540			7,435
Total Current Liabilities		96,092			88,875			89,790
Noncurrent Liabilities
Long-Term Taxes Payable		3,585			3,977			3,451
Long-Term Contingent Consideration		3,610			6,304			6,104
Long-Term Finance Leases		12,239			12,836			11,150
Long-Term Operating Leases		35,611			-			-
Long-Term Debt		141,088			109,296			120,043
Deferred Income Taxes		1,355			1,519			2,192
Other Noncurrent Liabilities		1,914			1,293			658
Total Noncurrent Liabilities		199,402			135,225			143,598
Common Stock		96			96			96
Additional Paid-In Capital		59,442			59,855			59,121
Equity Attributable to Non-Controlling Interest		(504	)		(281	)		(100	)
Retained Earnings		139,168			136,937			128,486
Accumulated Other Comprehensive (Loss) Income		(1,432	)		(969	)		(493	)
Treasury Stock		(43,133	)		(41,750	)		(41,443	)
Total Equity		153,637			153,888			145,667
Total Liabilities and Equity	$	449,131		$	377,988		$	379,055