dla20240219_10q.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 30, 2024

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-15583

DELTA APPAREL, INC.

(Exact name of registrant as specified in its charter)

Georgia		58-2508794
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

2750 Premier Parkway, Suite 100
Duluth, Georgia		30097
(Address of principal executive offices)		(Zip Code)

(678) 775-6900

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report.)

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

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, par value $0.01		DLA		NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of May 7, 2024, there were outstanding 7,051,153 shares of the registrant’s common stock, par value of $0.01 per share, which is the only class of outstanding common or voting stock of the registrant.

Table of Contents

TABLE OF CONTENTS

		Page
PART I.	Financial Information

Item 1.	Financial Statements (unaudited):

	Condensed Consolidated Balance Sheets — March 2024 and September 2023	3

	Condensed Consolidated Statements of Operations — Three and Six Months ended March 2024 and March 2023	4

	Condensed Consolidated Statements of Comprehensive Loss — Three and Six Months ended March 2024 and March 2023	5

	Condensed Consolidated Statements of Shareholders ’ Equity — Three and Six Months ended March 2024 and March 2023	6

	Condensed Consolidated Statements of Cash Flows — Six Months ended March 2024 and March 2023	7

	Notes to Condensed Consolidated Financial Statements (unaudited)	8
	Note A—Basis of Presentation and Description of Business	8
	Note B—Accounting Policies	9
	Note C—New Accounting Standards	9
	Note D—Revenue Recognition	9
	Note E—Inventories	10
	Note F—Debt	10
	Note G—Selling, General and Administrative Expense	12
	Note H—Stock-Based Compensation	12
	Note I—Purchase Contracts	13
	Note J—Business Segments	13
	Note K—Income Taxes	14
	Note L—Fair Value Measurements	14
	Note M—Legal Proceedings	15
	Note N—Repurchase of Common Stock	15
	Note O—Goodwill and Intangible Assets	15
	Note P —Sale-Leaseback Transaction	15
	Note Q—Subsequent Events	15

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 4.	Controls and Procedures	20

PART II.	Other Information

Item 1.	Legal Proceedings	21

Item 1A.	Risk Factors	21

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21

Item 5.	Other Information	21

Item 6.	Exhibits	21

Signatures		22

Exhibits
EX-31.1
EX-31.2
EX-32.1
EX-32.2

Table of Contents

Cautionary Note Regarding Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of the Company. We may from time to time make written or oral statements that are “forward-looking,” including statements contained in this report and other filings with the SEC, in our press releases, and in other reports to our shareholders. All statements, other than statements of historical fact, which address activities, events or developments that we expect or anticipate will or may occur in the future are forward-looking statements, including statements about our ability to continue as a going concern, our ongoing discussions with our lenders regarding non-compliance with covenant requirements under our U.S. revolving credit facility, and the potential to seek relief under applicable bankruptcy laws. The words “plan,” “estimate,” “project,” “forecast,” “outlook,” “anticipate,” “expect,” “intend,” “remain,” “seek,” “believe,” “may,” “should” and similar expressions, and discussions of strategy or intentions, are intended to identify forward-looking statements.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current expectations and are necessarily dependent upon assumptions, estimates and data that we believe are reasonable and accurate but may be incorrect, incomplete or imprecise. Forward-looking statements are subject to a number of business risks and inherent uncertainties, any of which could cause actual results to differ materially from those set forth in or implied by the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in forward-looking statements include, among others, the following:

	●	our ability to continue as a going concern;
	●	continued operating losses and restrictions on our ability to borrow capital or service our indebtedness;
	●	the inability or refusal of suppliers or other third-parties, including those related to transportation, to fulfill the terms of their contracts with us;
	●	the general U.S. and international economic conditions;
	●	the impact of the COVID-19 pandemic and government/social actions taken to contain its spread on our operations, financial condition, liquidity, and capital investments, including recent labor shortages, inventory constraints, and supply chain disruptions;

●

significant interruptions or disruptions within our manufacturing, distribution or other operations;

●

deterioration in the financial condition of our customers and suppliers and changes in the operations and strategies of our customers and suppliers;

●

the volatility and uncertainty of cotton and other raw material prices and availability;

●

the competitive conditions in the apparel industry;

●

our ability to predict or react to changing consumer preferences or trends;

●

our ability to successfully open and operate new retail stores in a timely and cost-effective manner;

	●	the ability to successfully implement our strategic plans and achieve our business strategies;
	●	the ability to grow, achieve synergies and realize the expected profitability of acquisitions;

●

changes in economic, political or social stability at our offshore locations or in areas in which we, or our suppliers or vendors, operate;

●

our ability to attract and retain key management;

●

the volatility and uncertainty of energy, fuel and related costs;

●

material disruptions in our information systems related to our business operations;

●

compromises of our data security;

●

significant changes in our effective tax rate;

●

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;

●

changes in international trade regulations;

●

our ability to comply with trade regulations;

●

changes in employment laws or regulations or our relationship with employees;

●

negative publicity resulting from violations of manufacturing standards or labor laws or unethical business practices by our suppliers and independent contractors;

●

interest rate fluctuations increasing our obligations under our variable rate indebtedness;

●

the ability to raise additional capital;

●

the impairment of acquired intangible assets;

●

foreign currency exchange rate fluctuations;

●

the illiquidity of our shares; and

●

price volatility in our shares and the general volatility of the stock market.

A detailed discussion of significant risk factors that have the potential to cause actual results to differ materially from our expectations is set forth in Part 1 under the subheading “Risk Factors” in our Annual Report on Form 10-K for fiscal 2023, filed with the SEC, and updates to certain of those risk factors and additional risk factors are contained in Item 1A of Part II of this Quarterly Report on Form 10-Q. Any forward-looking statements in this Quarterly Report on Form 10-Q do not purport to be predictions of future events or circumstances and may not be realized. Further, any forward-looking statements are made only as of the date of this Quarterly Report on Form 10-Q, and we do not undertake to publicly update or revise the forward-looking statements, except as required by the federal securities law.

Table of Contents

PART 1.

FINANCIAL INFORMATION

Item 1.

Financial Statements

Delta Apparel, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Amounts in thousands, except share amounts and per share data)

(Unaudited)

	March 2024			September 2023
Assets
Cash and cash equivalents	$	705		$	187
Accounts receivable, less allowances of $115 and $119, respectively		35,206			45,130
Other receivables		562			1,350
Income tax receivable		1,365			1,388
Inventories, net		156,894			212,365
Prepaid expenses and other current assets		3,298			2,542
Total current assets		198,030			262,962

Property, plant and equipment, net		59,741			65,611
Goodwill		19,917			28,697
Intangibles, net		20,556			21,694
Deferred income taxes		-			7,822
Operating lease assets		54,534			55,464
Equity method investment		10,052			10,082
Other assets		3,069			2,906
Total assets	$	365,899		$	455,238

Liabilities and Equity
Liabilities:
Accounts payable	$	58,306		$	62,085
Accrued expenses		16,395			18,236
Income taxes payable		869			710
Current portion of finance leases		7,880			8,442
Current portion of operating leases		9,886			9,124
Current portion of long-term debt		103,026			16,567
Total current liabilities		196,362			115,164

Long-term income taxes payable		1,184			2,131
Long-term finance leases		10,250			14,029
Long-term operating leases		45,837			47,254
Long-term debt		5,757			126,465
Deferred income taxes		559			-
Total liabilities	$	259,949		$	305,043

Shareholder's equity:
Preferred stock - $0.01 par value, 2,000,000 shares authorized, none issued and outstanding		-			-
Common stock - $0.01 par value, 15,000,000 authorized, 9,646,972 shares issued, and 7,051,153 and 7,001,020 shares outstanding as of March 2024 and September 2023, respectively		96			96
Additional paid-in capital		60,916			61,315
Retained earnings		88,566			133,387
Accumulated other comprehensive income		-			-
Treasury stock - 2,595,819 and 2,645,952 shares as of March 2024 and September 2023, respectively		(42,909	)		(43,896	)
Equity attributable to Delta Apparel, Inc.		106,669			150,902
Equity attributable to non-controlling interest		(719	)		(707	)
Total equity		105,950			150,195
Total liabilities and equity	$	365,899		$	455,238

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

Delta Apparel, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Amounts in thousands, except per share data)

(Unaudited)

	Three Months Ended						Six Months Ended
	March 2024			March 2023			March 2024			March 2023

Net sales	$	78,936		$	110,335		$	158,869		$	217,630
Cost of goods sold		75,580			94,126			146,767			187,798
Gross profit		3,356			16,209			12,102			29,832

Selling, general and administrative expenses		17,961			19,298			36,576			38,168
Loss on impairment of goodwill		8,780			-			8,780			-
Other loss (income), net		1,051			2,265			(3,870	)		(356	)
Operating loss		(24,436	)		(5,354	)		(29,384	)		(7,980	)

Interest expense, net		3,471			3,723			7,047			6,613

SEC Form 10-Q filed by Delta Apparel Inc.