dla20190601_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 April 3, 2021

☐	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.)

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

(864) 232-5200

(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 April 28, 2021, there were outstanding 6,974,660 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 2021 and September 2020	3

	Condensed Consolidated Statements of Operations — Three and Six months ended March 2021 and March 2020	4

	Condensed Consolidated Statements of Comprehensive Income — Three and Six months ended March 2021 and March 2020	5

	Condensed Consolidated Statements of Shareholders' Equity — Three and Six months ended March 2021 and March 2020	6

	Condensed Consolidated Statements of Cash Flows — Six months ended March 2021 and March 2020	7

	Notes to Condensed Consolidated Financial Statements (unaudited)	8
	Note A—Basis of Presentation and Description of Business	8
	Note B—Accounting Policies	8
	Note C—New Accounting Standards	8
	Note D—Revenue Recognition	9
	Note E—Inventories	9
	Note F—Debt	10
	Note G—Selling, General and Administrative Expense	10
	Note H—Stock-Based Compensation	10
	Note I—Purchase Contracts	10
	Note J—Business Segments	11
	Note K—Income Taxes	11
	Note L—Derivatives and Fair Value Measurements	12
	Note M—Legal Proceedings	12
	Note N—Repurchase of Common Stock	13
	Note O—Goodwill and Intangible Assets	13
	Note P—Subsequent Events	13

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 4.	Controls and Procedures	15

PART II.	Other Information

Item 1.	Legal Proceedings	15

Item 1A.	Risk Factors	15

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	15

Item 5.	Other Information	15

Item 6.	Exhibits	15

Signatures		16

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

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 2021*			*September 2020*
Assets
Cash and cash equivalents	$	12,551		$	16,458
Accounts receivable, less allowances of $577 and $684, respectively		66,079			60,146
Other receivables		408			854
Income tax receivable		-			983
Inventories, net		148,530			145,515
Prepaid expenses and other current assets		4,351			2,812
Total current assets		231,919			226,768

Property, plant and equipment, net of accumulated depreciation of $96,014 and $92,123, respectively		66,207			63,950
Goodwill		37,897			37,897
Intangibles, net		19,162			19,948
Deferred income taxes		3,226			4,052
Operating lease assets		49,570			54,645
Equity method investment		10,742			10,573
Other assets		2,142			2,398
Total assets	$	420,865		$	420,231

Liabilities and Equity
Liabilities:
Accounts payable	$	44,986		$	49,800
Accrued expenses		18,366			20,174
Income taxes payable		496			379
Current portion of finance leases		7,256			6,956
Current portion of operating leases		8,946			9,039
Current portion of long-term debt		7,536			7,559
Current portion of contingent consideration		2,400			2,120
Total current liabilities		89,986			96,027

Long-term income taxes payable		3,220			3,599
Long-term finance leases, less current maturities		18,552			11,328
Long-term operating leases, less current maturities		42,377			46,570
Long-term debt, less current maturities		114,375			112,782
Long-term contingent consideration		1,910			4,300
Other non-current liabilities		2,470			2,939
Total liabilities	$	272,890		$	277,545

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 6,974,660 and 6,890,118 shares outstanding as of March 2021 and September 2020, respectively		96			96
Additional paid-in capital		59,842			61,005
Retained earnings		131,845			126,564
Accumulated other comprehensive loss		(998	)		(1,322	)
Treasury stock - 2,672,312 and 2,756,854 shares as of March 2021 and September 2020, respectively		(42,149	)		(43,133	)
Equity attributable to Delta Apparel, Inc.		148,636			143,210
Equity attributable to non-controlling interest		(661	)		(524	)
Total equity		147,975			142,686
Total liabilities and equity	$	420,865		$	420,231

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 2021		March 2020			March 2021		March 2020

Net sales	$	108,626	$	96,660		$	203,349	$	192,550
Cost of goods sold		83,816		76,079			158,250		152,075
Gross profit		24,810		20,581			45,099		40,475

Selling, general and administrative expenses		17,061		17,850			33,091		35,924
Other loss (income), net		170		(823	)		1,360		(1,640	)
Operating income		7,579		3,554			10,648		6,191

Interest expense, net		1,837		1,808			3,491		3,610
Earnings before provision for income taxes		5,742		1,746			7,157		2,581
Provision for income taxes		1,441		526			2,013		570
Consolidated net earnings		4,301		1,220			5,144		2,011
Net loss attributable to non-controlling interest		97		91			137		223
Net earnings attributable to shareholders	$	4,398	$	1,311		$	5,281	$	2,234

Basic earnings per share	$	0.63	$	0.19		$	0.76	$	0.32
Diluted earnings per share	$	0.62	$	0.19		$	0.75	$	0.32

Weighted average number of shares outstanding		6,975		6,957			6,947		6,953
Dilutive effect of stock awards		130		98			105		110
Weighted average number of shares assuming dilution		7,105		7,055			7,052		7,063

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

Delta Apparel, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Amounts in thousands)

(Unaudited)

	Three Months Ended					Six Months Ended
	March 2021		March 2020			March 2021		March 2020

Net earnings attributable to shareholders	$	4,398	$	1,311		$	5,281	$	2,234
Other comprehensive income (loss) related to unrealized gain (loss) on derivatives, net of income tax		199		(595	)		324		(464	)
Consolidated comprehensive income	$	4,597	$	716		$	5,605	$	1,770

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

Delta Apparel, Inc. and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity

(Amounts in thousands, except share amounts)

(Unaudited)

										*Accumulated*
					*Additional*					*Other*									*Non-*
	*Common Stock*				*Paid-In*			*Retained*		*Comprehensive*			*Treasury Stock*						*Controlling*
	*Shares*		*Amount*		*Capital*			*Earnings*		*Income (Loss)*			*Shares*			*Amount*			*Interest*			*Total*
Balance as of September 2019		9,646,972	$	96	$	59,855		$	136,937	$	(969	)		2,725,555		$	(41,750	)	$	(281	)	$	153,888

Net earnings		-		-		-			923		-			-			-			-			923
Other comprehensive income		-		-		-			-		131			-			-			-			131
Net loss attributable to non-controlling interest		-		-		-			-		-			-			-			(132	)		(132	)
Vested stock awards		-		-		(1,615	)		-		-			(67,406	)		631			-			(984	)
Stock based compensation		-		-		585			-		-			-			-			-			585
Balance as of December 2019		9,646,972		96		58,825			137,860		(838	)		2,658,149			(41,119	)		(413	)		154,411

Net earnings		-		-		-			1,311		-			-			-			-			1,311
Other comprehensive loss		-		-		-			-		(595	)		-			-			-			(595	)
Net loss attributable to non-controlling interest		-		-		-			-		-			-			-			(91	)		(91	)
Vested stock awards		-		-		4			-		-			(1,266	)		15			-			19
Purchase of common stock		-		-		-			-		-			99,971			(2,029	)		-			(2,029	)
Stock based compensation		-		-		611			-		-			-			-			-			611
Balance as of March 2020		9,646,972	$	96	$	59,440		$	139,171	$	(1,433	)		2,756,854		$	(43,133	)	$	(504	)	$	153,637

										*Accumulated*
					*Additional*					*Other*									*Non-*
	*Common Stock*				*Paid-In*			*Retained*		*Comprehensive*			*Treasury Stock*						*Controlling*
	*Shares*		*Amount*		*Capital*			*Earnings*		*Income (Loss)*			*Shares*			*Amount*			*Interest*			*Total*
Balance as of September 2020		9,646,972	$	96	$	61,005		$	126,564	$	(1,322	)		2,756,854		$	(43,133	)	$	(524	)	$	142,686

Net earnings		-		-		-			883		-			-			-			-			883
Other comprehensive income		-		-		-			-		125			-			-			-			125
Net loss attributable to non-controlling interest		-		-		-			-		-			-			-			(40	)		(40	)
Vested stock awards		-		-		(2,117	)		-		-			(84,542	)		984			-			(1,133	)
Stock based compensation		-		-		676			-		-			-

SEC Form 10-Q filed by Delta Apparel, Inc.