Net sales for the fiscal 2013 second quarter were $106.8 million, a 1.2 % increase over 2012 second quarter sales of $105.5 million. Net income for the 2013 second quarter was $46 thousand, or $0.01 per diluted share, compared with a loss in the 2012 second quarter of $13.6 million, or $1.61 per diluted share. As previously reported, net income for the fiscal 2012 second quarter and first half was negatively impacted by a one-time inventory markdown of $16.2 million resulting from record high cotton costs combined with selling price decreases in Delta’s line of basic undecorated t-shirts.
For the first six months of fiscal 2013, sales increased 3.4% to $236.9 million compared to $229.0 million for the first six months of fiscal 2012. Net income for the first six months of fiscal 2013 was $3.6 million, or $0.42 per diluted share, compared to a loss of $9.2 million, or $1.09 per share, in the prior-year six-month period. Fiscal 2013 first half net income was affected by a one-time charge of $1.2 million related to the previously reported Audit Committee internal investigation completed in September 2012 that reduced 2013 first quarter earnings per share by $0.10.
The Company’s second quarter benefitted from solid year-over-year sales growth in its Delta Catalog, Junkfood, The Game and Art Gun businesses. This growth was offset somewhat by continued softness in the Company’s Soffe business and lower selling prices within its FunTees and Delta Catalog businesses due to lower priced cotton.
Basics Segment Review
Second quarter 2013 sales in the basics segment rose to $58.8 million, a 2.2% increase over the comparable 2012 period. The increase resulted from a 13.1% rise in basics segment volume, which was offset somewhat by lower average selling prices in both the Delta Catalog and FunTees businesses. The addition of new customers in the blank and private-label business was the principal driver of the volume increase.
Delta Catalog experienced a 15% increase in unit volume, driving 7.8% sales growth. Due to lower pricing, FunTees experienced a net sales decline of 7.3% despite a 6% increase in volume. Efficient use of new print programs using Delta Catalog blanks and the success of Delta’s Six Sigma initiatives in reducing manufacturing costs bolstered revenue and provided improved margins for the basics segment.
Branded Segment Review
Branded segment sales for the second quarter were $47.9 million, up slightly from the prior year second quarter. Junkfood, The Game and Art Gun each experienced double-digit net sales growth, which was offset by continued weakness in the Soffe business. While Soffe’s strategic sporting goods channel gained new distribution and better product placement, its independent sporting goods business remained slow.
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