Delta Apparel Inc reported financial results for its third fiscal quarter ended March 31, 2007. The Company's results for the fiscal 2007 third quarter include the operations of FunTees, which was acquired on October 2, 2006. The Company's results are consistent with previously disclosed revenue and diluted earnings per share estimates.
Net sales for the three months ended March 31, 2007 increased 22.6% to a third quarter record of $85.0 million compared to $69.4 million in the prior year's third quarter.
The increase was primarily due to the addition of FunTees and sales growth in the Soffe business, offset by lower sales in the Delta catalog and Junkfood businesses. Net income for the third quarter was $2.8 million, or $0.32 per diluted share, compared to the prior year's level of $2.7 million, or $0.31 per diluted share.
Gross margins for the fiscal third quarter were 24.4% compared to 27.7% in the prior year third quarter principally as a result of the inclusion of the FunTees business into the Company's overall results, as the private label business generally carries lower gross margins than the Company's branded businesses.
Margins in the FunTees business are expected to increase in fiscal year 2008 as lower cost textile manufacturing is achieved from the integration into Delta's textile facility. SG&A expenses for the fiscal 2007 third quarter decreased to 18.2% of sales compared to 20.1% of sales in the prior year period due to the lower selling, general and administrative costs associated with FunTees.
Mr. Humphreys concluded, “We continue to make steady progress on several major initiatives that we expect will improve our position as a quality branded and private label activewear apparel company. During the third quarter, we transitioned all the FunTees textile equipment into our existing Maiden, N.C. plant and began producing the FunTees' custom-knit products in that facility."
"Our Honduran textile initiative is on pace to begin production in the first half of fiscal year 2008 and achieve cost savings over our U.S. textile manufacturing in the second half of the year. These initiatives should improve our profitability and lower our working capital requirements in our activewear segment. We remain committed to enhancing shareholder value and believe our initiatives will improve our prospects for growth in all segments of our business in the upcoming fiscal year.”
For the fourth fiscal quarter ending June 30, 2007, the Company expects sales to be in the range of $100 to $106 million and diluted earnings to be in the range of $0.50 to $0.55 per share. This compares to sales of $82.5 million and diluted earnings of $0.73 per share in the prior year fourth fiscal quarter. For the 2007 fiscal year, the Company expects net sales to be in the range of $320 to $326 million and diluted earnings per share to be in the range of $1.15 to $1.20. This compares to previous fiscal 2007 guidance issued on February 2, 2007, of revenues in the range of $315 to $330 million and diluted earnings per share in the range of $1.33 to $1.46.
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