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Delta Apparel, Inc. along with our wholly-owned subsidiaries, M. J. Soffe, LLC, Junkfood Clothing Company and To The Game, LLC, is an international design, manufacturing, sourcing and marketing company that features a diverse portfolio of high quality branded and private label activewear apparel and headwear. We specialize in selling a variety of casual and athletic products through almost every distribution channel for these types of apparel. Our products are sold to specialty and boutique shops, upscale and traditional department stores, mid-tier retailers, sporting goods stores, screen printers, and private label accounts. In addition, we sell certain products to college bookstores and to the US military. Our products are also available direct to consumers through our websites at www.soffe.com, www.junkfoodclothing.com, and www.deltaapparel.com. The new headwear products can be viewed at www.2the game.com. We believe this diversified distribution allows us to capitalize on our strengths to provide casual activewear to consumers purchasing from all types of retailers.
We were incorporated in Georgia in 1999 and our principal executive offices are located at 322 South Main Street, Greenville, SC 29601 (telephone number: 864-232-5200). Our common stock trades on the NYSE Alternext US under the symbol "DLA".
Business Developments
On March 29, 2009, our wholly-owned subsidiary, To The Game, LLC, purchased substantially all of the assets of Gekko Brands, LLC, a premier supplier of licensed and decorated headwear sold under the brands of The Game™ and Kudzu™. The Game™ and Kudzu™ have extensive license agreements including most major colleges and universities, motorsports properties, Churchill Downs, and various resort properties. The Game™ was founded in 1986 as a premier headwear supplier to colleges and universities. Its founder, Neil Stillwell, remains a vital and active leader in the business. The Kudzu™ brand was formed in 1993 to design, import and sell headwear and jackets to NASCAR teams just as The Game™ had done for colleges. To The Game will continue to be headquartered in Phenix City, Alabama and all current operations will remain in place. The purchase of this business is in keeping with our strategy of acquiring brands, licensed properties and operating companies that expand our channels of distribution. We believe these brands, combined with the sourcing, marketing, art, and distribution skills of To The Game management, will provide significant growth opportunities.
The acquisition was financed through our asset-based secured revolving credit facility. In conjunction with the acquisition, we exercised our $10 million accordion feature under our existing credit facility, bringing our total line of credit to $110 million, subject to borrowing base limitations. No goodwill or intangibles are expected to be recorded on our financial statements in connection with the acquisition.
In fiscal year 2008, we began production at 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 knits, dyes, finishes and cuts fabric into apparel, primarily for the activewear segment of our business. We reached our first production goal of 500,000 pounds of production per week in our fourth quarter of fiscal year 2008. In our second quarter of fiscal year 2009, we achieved our next production goal of 700,000 pounds of production per week, its current capacity with the equipment in place. We have the ability to increase production at this facility to one million pounds per week with an additional capital expenditure of $2 to $3 million. We expect to add this capacity as demand for our products will support this additional production.
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.
Business Segments
We operate our business in two distinct segments: Activewear and Retail-Ready. The Activewear segment comprises 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 segment since the FunTees acquisition on October 2, 2006.
The Retail-Ready segment consists of our business units primarily focused on more specialized apparel garments and headwear to meet consumer preferences and fashion trends. We sell these embellished and unembellished products through specialty and boutique stores, upscale and traditional department stores, mid-tier retailers 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®”, “Junk Food®”, “Junk Mail®” and “Sweet and Sour®”. Our newest headwear products under “The Game™” and “Kudzu™” are included in the Retail-Ready segment beginning on March 29, 2009.
Products and Marketing
We specialize in selling a variety of casual and athletic products through almost every distribution channel for these types of apparel. Our products are sold to specialty and boutique shops, upscale and traditional department stores, mid-tier retailers, sporting goods stores, screen printers, and private label accounts. In addition, we sell certain products to college bookstores and to the U.S. military. Our products are also available direct to consumers on our websites at www.soffe.com, www.junkfoodclothing.com and www.deltaapparel.com. The new headwear products can be viewed at www.2the game.com. We believe this diversified distribution allows us to capitalize on our strengths to provide casual activewear to consumers purchasing from all types of retailers.
Our Activewear 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™ 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 customers 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. Quail Hollow also offers a trendy slim fitting tee for all adults. Through the acquisition of FunTees, we have increased our business of designing, manufacturing, marketing, and selling private label custom knit t-shirts, including embellished products, primarily to major branded sportswear companies. Also in connection with the FunTees acquisition, we have added the ability to provide our customers with products that they can direct ship to the retailer without further packaging enhancements (hangers, tags, wrappings).
Our Retail-Ready 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, mens, womens and big & tall. With the acquisition of The Game™ and Kudzu™, our retail-ready segment also includes licensed and decorated headwear. 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 segment includes vintage licensed apparel for juniors, men, boys and children. The Junk Food® product line, including Junk Mail® and Sweet and Sour®, has distinct and innovative designs and styles. We believe our Retail-Ready 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 both employed sales personnel and independent sales representatives located throughout the country. We currently service over 18,000 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, and finish our fabric in a company-owned plant located in Maiden, North Carolina. Additionally, we knit, dye, finish and cut our fabric at Ceiba Textiles, a state-of-the-art leased facility near San Pedro Sula, Honduras. 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 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 6,500 full time employees located in the United States, Honduras, El Salvador and Mexico. Approximately 950 employees in Honduras are covered by a collective bargaining agreement. We have never had a strike or legal work stoppage and believe that our relations with our employees are good. 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, LLC, 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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