Delta Apparel Inc Reports Operating Results (10-Q)
Delta Apparel has a market cap of $110.1 million; its shares were traded at around $12.95 with a P/E ratio of 10.2 and P/S ratio of 0.3. Delta Apparel had an annual average earning growth of 1.4% over the past 10 years.Mutual Fund and Other Gurus that owns DLA: John Buckingham of Al Frank Asset Management, Inc..
Highlight of Business Operations:We reiterate our fiscal year 2011 outlook for sales and earnings. For the year ending July 2, 2011, we continue to expect net sales to be in the range of $455 to $465 million and earnings to be in the range of $1.55 to $1.70 per diluted share. The sales outlook for fiscal 2011 includes anticipated organic growth of approximately 3% to 6% after adjusting for one less week of operations in fiscal 2011 compared to the prior year, and approximately $25 million in additional revenues from The Cotton Exchange. We expect our branded segment to grow approximately 15% with sales in the range of $225 to $230 million. The basics segment sales grew 14% in fiscal 2010, and we expect to achieve sales of $230 to $235 million in this segment in fiscal 2011.
Net sales for the second quarter of fiscal year 2011 increased by $13.6 million to $104.7 million, an increase of 14.9% from the second quarter of the prior year. Basics segment sales were $56.2 million for the second quarter of fiscal year 2011, an increase of 23.9% compared to $45.4 million in sales in the second quarter of fiscal year 2010, driven by sales growth in both catalog and private label products. These sales increases resulted from an increase of approximately 7% in average selling prices combined with a 16% increase in unit sales. Branded segment sales were $48.5 million for the three months ended January 1, 2011, an increase of 5.9% over the prior year second quarter sales of $45.8 million. The sales growth resulted from revenue in The Cotton Exchange, which we acquired on July 12, 2010, partially offset by lower sales of vintage licensed tees.
Our net sales for the first six months of fiscal year 2011 grew 11.8% to $212.6 million, an increase of $22.4 million over the same period of fiscal year 2010. Both the basics and branded segments contributed to the growth with sales increases of $13.3 million and $9.1 million, respectively. The sales growth in our branded segment includes the addition of The Cotton Exchange which we acquired during the first quarter of fiscal year 2011.
Operating income for the second quarter of fiscal year 2011 was $2.6 million, an increase of $0.4 million from the second quarter of the prior year. This included a non-cash net favorable adjustment of $0.9 million related to the valuation of the Art Gun contingent consideration and goodwill, resulting in a positive impact of $0.07 per diluted share. For the first six months of fiscal year 2011, operating income was $5.6 million, a $1.1 million decrease compared to the first six months of fiscal year 2010 of $6.7 million.
Net interest expense for the second quarter of fiscal year 2011 was $0.6 million, a reduction of $0.3 million compared to the second quarter of fiscal year 2010. The decrease in net interest expense was due to the expiration of our $15.0 million interest rate swap at 5.06% and $15.0 million collar agreement at 4.33%, partially offset by the new $15.0 million interest rate swap at 1.11% added in March 2010. For the first six months of fiscal year 2011 net interest expense declined by $0.7 million to $1.2 million compared to $1.9 million for the first six months of fiscal year 2010.
Capital expenditures for the first six months of fiscal year 2011 were $3.8 million compared to $2.2 million for the first six months of the prior year. Expenditures for the first six months of fiscal year 2011 were primarily from adding new digital printing machines associated with the start-up of Art Gun and to continue to increase capacity and lower costs in our textile facilities. During the first quarter of fiscal year 2011, we acquired The Cotton Exchange for $9.9 million (See Note MThe Cotton Exchange Acquisition). During the first quarter of the prior year, we made the final payment of $0.7 million associated with the acquisition of To The Game, LLC.
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