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We, along with our wholly owned subsidiaries, M. J. Soffe Company and Junkfood Clothing Company, are a marketer, manufacturer and distributor of high quality branded and private label activewear apparel. We specialize in selling a variety of casual and athletic activewear tops and bottoms, embellished and unembellished T-shirts, and fleece products for the ever-changing apparel market. We focus on our broad distribution of apparel products to specialty and boutique stores, high-end and mid-tier retail stores, sporting goods stores, screen printers, and private label accounts.
We were incorporated in Georgia in 1999 and our principal executive offices are located at 2750 Premiere Parkway, Suite 100, Duluth, Georgia 30097 (telephone number: 678-775-6900). Our common stock trades on the American Stock Exchange under the symbol "DLA".
Business Developments
In fiscal year 2008, we are opening Ceiba Textiles, a state-of-the-art offshore textile manufacturing facility. This facility is located in the Green Valley Industrial Park near San Pedro Sula, Honduras and will knit, dye, finish and cut fabrics into apparel, primarily for the activewear segment of our business. We expect production to begin during the second quarter of fiscal year 2008 and anticipate reaching 500,000 pounds of production per week by our fourth fiscal quarter. We will continue to increase production levels at the facility, and believe we can produce around a million pounds per week level by the second half of fiscal year 2009. We are leasing the building from the Green Valley Industrial Park. In addition to transferring some of our existing equipment from the United States, we expect to invest approximately $15 million in new equipment for the facility. The new capital is being financed through a local Honduran bank.
On October 2, 2006, we completed the acquisition of Fun-Tees, Inc. Founded in 1972, FunTees is in the business of designing, manufacturing, marketing, and selling private labeled custom knit t-shirts primarily to branded sportswear companies. We believe that the strength of FunTees is its flexibility to custom-manufacture products in a variety of garment styles, fabrics and colors and its ability to decorate and package products for retail in its offshore facilities. The integration of its textile operations into our manufacturing platform is expected to result in improved manufacturing efficiencies and cost savings in our combined business.
On August 22, 2005, we acquired substantially all of the assets and properties of Liquid Blaino Designs, Inc. d/b/a Junkfood Clothing. Junkfood Clothing is in the business of designing, marketing, and selling licensed and branded apparel. The acquisition of Junkfood is an important part of our expansion strategy. The addition of the Junkfood business to Delta Apparel keeps with our strategy of acquiring profitable apparel operations that expand our channels of distribution. Junkfood Clothing remains headquartered in Los Angeles, California and is operated as a separate business within our retail-ready segment.
On October 3, 2005, our wholly-owned subsidiary, M. J. Soffe Company, purchased substantially all of the assets of Intensity Athletics, Inc. Intensity Athletics is in the business of designing, manufacturing, and marketing athletic uniform apparel. The acquisition of Intensity Athletics expands our sporting goods product offerings in the M. J. Soffe business.
Business Segments
We operate our business in two distinct segments: Activewear Apparel and Retail-Ready Apparel. The Activewear Apparel segment consists of our business units primarily focused on garment styles that are characterized by low fashion risk. We market, distribute and manufacture unembellished knit apparel under the brands of “Delta Pro Weight®”, “Delta Magnum Weight™” and “Quail Hollow™.” The products are primarily sold to screen printing companies. In addition, we manufacture products under private labels for retailers, branded sportswear companies, corporate industry programs and sports licensed apparel marketers. The custom knit unembellished and embellished private label apparel products in the FunTees business are included in the Activewear Apparel segment since the FunTees Acquisition on October 2, 2006.
The Retail-Ready Apparel segment consists of our business units primarily focused on more specialized apparel garments to meet consumer preferences and fashion trends. We sell these embellished and unembellished products through specialty and boutique stores, high-end and mid-tier retail stores and sporting goods stores. In addition to these retail channels, we also supply college bookstores and produce products for the U.S. Military. Our products in this segment are marketed under the brands of “Soffe®”, “Intensity Athletics®”, “Junkfood®”, “Junk Mail®” and “Sweet and Sour®”.
Products and Marketing
We specialize in selling a variety of casual and athletic tops and bottoms, embellished and unembellished t-shirts, and fleece products for the ever-changing apparel market.
Our Activewear Apparel segment markets high quality knit apparel garments for the entire family. These garments are marketed under the Delta Pro Weight®, Delta Magnum Weight™, and Quail Hollow™ Sportswear brand names. The Pro Weight line represents a diverse selection of mid-weight, 100% cotton silhouettes. Short sleeve and long sleeve tees are available in youth and adult sizes in a variety of colors. Specialty items that are also available for adults include pocket tees and ringer tees in a wide variety of colors. The Magnum Weight line is designed to give our customer a variety of silhouettes in a heavier-weight, 100% cotton fabric. Products in this category include short sleeve and long sleeve silhouettes in a wide range of colors, available from the size 2-Toddler to adult sizes up to 5X. Specialty items are also available within this segment including the popular Tall Tee in sizes to 5XLT for young men and Toddler and Juvenile styles for the younger child. The Quail Hollow™ line includes polo shirts, ladies and junior tees. The ladies and juniors programs feature an assortment of styles developed specifically for misses, plus sizes and young juniors. Polo shirts are offered in solid color ringspun pique for men, ladies and youth, and a heavy weight 100% cotton jersey style for adults. Quail Hollow also offers a trendy slim fitting tee for all adults. New for the 2008 line is an ultra soft Ringspun tee line for the whole family. Through the acquisition of FunTees, we have increased our business of designing, manufacturing, marketing, and selling private labeled custom knit t-shirts, including embellished products, primarily to major branded sportswear companies. Also with FunTees we have added full retail put-up capabilities, meaning the ability to provide our customers with a product that they can direct ship to the retailer without further packaging enhancements (hangers, tags, wrappings).
Our Retail-Ready Apparel segment designs and produces shorts, t-shirts, jersey and fleece apparel that are available in a wide variety of colors and sizes, including toddlers, boys’, girls’, men’s, women’s and big & tall. We believe that the shorts that are branded with the Soffe® label enjoy a very loyal following among teenage and adolescent girls, many of whom are involved in cheerleading and dance teams. During the 2006 fiscal year, we also added sports team uniforms to our product line, under the Intensity Athletics® label. With the addition of Junkfood Clothing Company in fiscal year 2006, our Retail-Ready Apparel segment includes vintage licensed apparel for juniors, men, boys and children. The Junkfood® product line, including Junk Mail® and Sweet and Sour®, has distinct and innovative designs and styles. We believe our Retail-Ready Apparel segment is also a leader in product innovation as demonstrated by our Dri-release™ offerings. Dri-release™ is a microblend performance fiber that is engineered to offer cotton-like comfort with quick dry properties to wick perspiration away from the skin. Our recent additions to this line include the Soffe performance apparel line offering WicAway fabrics, a new fabric with quick-drying properties.
Our marketing is performed by employed sales personnel and independent sales representatives located throughout the country. Our sales force services the retail direct, sporting goods, military, private label, department store and college bookstore customer bases. We currently service over 16,000 customers. Part of our strategy is not to become dependent on any single customer. As such, no single customer accounts for more than 10% of our sales in any year.
Manufacturing
We manufacture the majority of the products we sell utilizing company-owned and leased facilities. When demand exceeds production capacity or when it is cost effective to do so, we source products from third party producers and use outside contractors and general suppliers for textile and sewing production.
We knit, dye, finish and cut our fabric in company-owned plants located in Maiden, North Carolina, and Fayetteville, North Carolina. Our garments are primarily sewn in our company-owned plants in Fayetteville, North Carolina, and Rowland, North Carolina, and in leased facilities in La Paz, El Salvador, in Campeche, Mexico and in San Pedro Sula, Honduras. In addition to our leased sewing facilities, we use outside contractors, primarily located in the Caribbean basin, to sew our products. Along with our internal manufacturing, we also source undecorated products and full-package products through independent sources.
Our products are distributed from our facilities strategically located throughout the United States. We offer same-day shipping in our activewear apparel segment and both segments use third party carriers to ship products to our customers. In order to better serve our customers, we allow our customer to order products by the piece, by the dozen, or in full case quantities.
Employees
We employed approximately 6,000 full time employees located in the United States, Honduras, El Salvador and Mexico. We have invested significant time and resources in ensuring that the working conditions in all of our facilities meet or exceed the standards imposed by the governing laws. We have obtained WRAP (Worldwide Responsible Apparel Production) certification for all of our existing sewing plants that we operate in Honduras, El Salvador and Mexico. We also obligate our third party manufacturing contractors to follow our employment policies.
Senior Management
The senior management team at Delta Apparel has extensive experience in the textile and apparel industry. Our senior management's average of over 15 years of experience at several major international textile and apparel firms has produced an effective team at Delta Apparel.
Bob Humphreys was elected President and Chief Executive Officer of Delta Apparel in December 1999 after having served as President of Delta Apparel Company division since April 1999. He was employed at Delta Woodside Industries for the thirteen years prior to joining Delta Apparel. For over 10 of these years he served as President of Stevecoknit Fabrics Company, the knit fabrics division of Delta Woodside. Bob is a 1979 graduate of Auburn University with a B.S. in Marketing.
Deborah Merrill, CPA, was named Vice President, Chief Financial Officer and Treasurer in July 2006. She has been with Delta Apparel since 1998 having served in various financial roles. Prior to joining Delta Apparel, she was the Logistics Controller for GNB Technologies and an auditor for Deloitte & Touche. Deb is a 1995 graduate of the University of South Carolina with a B.S. in Accounting.
Martha “Sam” Watson was named Vice President and Secretary in October 2000. Prior to joining Delta Apparel, Inc., she served as President of Carolina Benefit Services, a payroll company, Vice President of Operations for Sunland Distribution, Inc., a public warehousing company, and Director of Human Resources for divisions of Delta Woodside Industries, Inc.
David Palmer was named Vice President and Assistant Treasurer in July 2006. Prior to joining Delta Apparel, Inc., he served various executive roles at Delta Woodside Industries, Inc., a textile manufacturing company.
Ken Spires was named President of M. J. Soffe Co., a wholly-owned subsidiary of Delta Apparel, Inc., in September 2004. From July 2000 to September 2004, Mr. Spires served as Vice President of Technical Services of the company, and from November 1993 to June 2000, Mr. Spires served as Vice President of Technical Services of the Delta Apparel division of Delta Woodside Industries, Inc.
Will McGhee was named President of Delta Activewear, the activewear division of Delta Apparel, Inc. in April 2007. Prior to joining Delta Apparel, Inc., he served as Vice President of Grupo Karim’s Brand Yarns Division, a yarn manufacturer and distributor and as Executive Vice President of Ameritex Yarn, LLC, a yarn manufacturer.
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