##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 28, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 1-15583
 DELTA APPAREL, INC.
  GEORGIA
    
    58-2508794(State or Other Jurisdiction of 
Incorporation or Organization)
    
    (I.R.S. Employer
Identification No.)
 322 South Main StreetGreenville, SC
    
    29601(Address of principal executive offices)
    
    (Zip Code)
 (864) 232-5200
 (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year, if changed since last report.)
  þ o
  o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
  o þ




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##### 



INDEX
 PagePART I.
    
    Financial InformationItem 1.
    
    Financial StatementsCondensed Consolidated Financial Statements:Condensed Consolidated Balance Sheets  March 28, 2009 and June 28, 2008
    
    
    3Condensed Consolidated Statements of Operations  Three and nine months ended March 28, 2009 and 
March 29, 2008
    
    
    4Condensed
Consolidated Statements of Cash Flows  Nine months ended March 28,
2009 and March 
29, 2008
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and  Results of Operations
    
    
    13Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    18Item 4.
    
    Controls and Procedures
    
    
    19PART II.
    
    Other InformationItem 6.
    
    Exhibits
    
    
    19Signatures
    
    
    
    
    20Exhibits
    
    
    
    
    21EX-31.1EX-31.2EX-32.1EX-32.2
  2




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 DELTA APPAREL, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Balance Sheets
(Amounts in thousands, except share amounts and per share data)
(Unaudited)
 March 28,
    
    
    June 28,2009
    
    
    2008AssetsCurrent assets:Cash
    
    $
    1,162
    
    
    $
    586Accounts receivable, net
    
    
    49,702
    
    
    
    62,012Income taxes receivable
    
    
    2,440
    
    
    
    1,007Inventories, net
    
    
    136,469
    
    
    
    124,746Prepaid expenses and other current assets
    
    
    3,014
    
    
    
    2,916Deferred income taxes
    
    
    3,402
    
    
    
    2,542Total current assets
    
    
    196,189
    
    
    
    193,809Property, plant and equipment, net
    
    
    37,650
    
    
    
    40,042Goodwill
    
    
    16,814
    
    
    
    16,814Intangibles, net
    
    
    7,235
    
    
    
    7,603Other assets
    
    
    3,330
    
    
    
    3,355Total assets
    
    $
    261,218
    
    
    $
    261,623Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    37,560
    
    
    $
    35,423Accrued expenses
    
    
    14,479
    
    
    
    17,689Current portion of long-term debt
    
    
    5,718
    
    
    
    6,780Total current liabilities
    
    
    57,757
    
    
    
    59,892Long-term debt, less current maturities
    
    
    93,650
    
    
    
    95,542Deferred income taxes
    
    
    985
    
    
    
    578Other liabilities
    
    
    1,070
    
    
    
    718Total liabilities
    
    
    153,462
    
    
    
    156,730Stockholders equity:Preferred stock2,000,000 shares authorized; none issued
and outstanding
    
    
    
    
    
    
    Common stock$0.01 par value, 15,000,000 shares authorized,
9,646,972 shares issued, and 8,502,699 and 8,496,749
shares outstanding as of March 28, 2009 and June 28, 2008,
respectively
    
    
    96
    
    
    
    96Additional paid-in capital
    
    
    58,029
    
    
    
    57,431Retained earnings
    
    
    59,739
    
    
    
    57,307Accumulated other comprehensive loss
    
    
    (658
    )
    
    
    (441
    )Treasury stock1,144,273 and 1,150,223 shares as of March 28,
2009 and June 28, 2008, respectively
    
    
    (9,450
    )
    
    
    (9,500
    )Total stockholders equity
    
    
    107,756
    
    
    
    104,893Total liabilities and stockholders equity
    
    $
    261,218
    
    
    $
    261,623
  3




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DELTA APPAREL, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Operations
(Amounts in thousands, except share amounts and per share data)
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedMarch 28,
    
    
    March 29,
    
    
    March 28,
    
    
    March 29,2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales
    
    $
    85,685
    
    
    $
    75,364
    
    
    $
    250,458
    
    
    $
    216,706Cost of goods sold
    
    
    68,915
    
    
    
    59,654
    
    
    
    198,327
    
    
    
    177,184Gross profit
    
    
    16,770
    
    
    
    15,710
    
    
    
    52,131
    
    
    
    39,522Selling, general and administrative expenses
    
    
    14,450
    
    
    
    14,645
    
    
    
    45,850
    
    
    
    42,232Other (expense) income, net
    
    
    (34
    )
    
    
    9
    
    
    
    (49
    )
    
    
    57Restructuring costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62Operating income (loss)
    
    
    2,286
    
    
    
    1,074
    
    
    
    6,232
    
    
    
    (2,715
    )Interest expense, net
    
    
    1,028
    
    
    
    1,648
    
    
    
    3,669
    
    
    
    4,703Income (loss) before provision
(benefit) for income taxes
    
    
    1,258
    
    
    
    (574
    )
    
    
    2,563
    
    
    
    (7,418
    )Provision (benefit) for income taxes
    
    
    95
    
    
    
    (189
    )
    
    
    131
    
    
    
    (2,651
    )Net income (loss)
    
    $
    1,163
    
    
    $
    (385
    )
    
    $
    2,432
    
    
    $
    (4,767
    )Basic earnings (loss) per share
    
    $
    0.14
    
    
    $
    (0.05
    )
    
    $
    0.29
    
    
    $
    (0.56
    )Diluted earnings (loss) per share
    
    $
    0.14
    
    
    $
    (0.05
    )
    
    $
    0.29
    
    
    $
    (0.56
    )Weighted average number of shares outstanding
    
    
    8,503
    
    
    
    8,497
    
    
    
    8,501
    
    
    
    8,474Dilutive effect of stock options
    
    
    2
    
    
    
    
    
    
    
    1
    
    
    
    Weighted average number of shares assuming dilution
    
    
    8,505
    
    
    
    8,497
    
    
    
    8,502
    
    
    
    8,474Cash dividends declared per common share
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    0.05
  4




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DELTA APPAREL, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
 Nine Months EndedMarch 28,
    
    
    March 29,2009
    
    
    2008Operating activities:Net income (loss)
    
    $
    2,432
    
    
    $
    (4,767
    )Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    5,375
    
    
    
    4,462Deferred income taxes
    
    
    (453
    )
    
    
    (1,194
    )Loss on disposal of property, plant and equipment
    
    
    55
    
    
    
    26Non-cash stock compensation
    
    
    648
    
    
    
    966Changes in operating assets and liabilities:Accounts receivable
    
    
    12,310
    
    
    
    2,115Inventories
    
    
    (11,723
    )
    
    
    (11,588
    )Prepaid expenses and other current assets
    
    
    (98
    )
    
    
    (769
    )Other non-current assets
    
    
    25
    
    
    
    (174
    )Accounts payable and accrued expenses
    
    
    1,519
    
    
    
    (89
    )Income taxes
    
    
    (1,433
    )
    
    
    (504
    )Other liabilities
    
    
    135
    
    
    
    386Net cash provided by (used in) operating activities
    
    
    8,792
    
    
    
    (11,130
    )Investing activities:Purchases of property, plant and equipment
    
    
    (2,681
    )
    
    
    (12,699
    )Proceeds from sale of property, plant and equipment
    
    
    11
    
    
    
    50Cash paid for business
    
    
    (2,592
    )
    
    
    Net cash used in investing activities
    
    
    (5,262
    )
    
    
    (12,649
    )Financing activities:Proceeds from long-term debt
    
    
    263,165
    
    
    
    260,880Repayment of long-term debt
    
    
    (266,119
    )
    
    
    (236,866
    )Dividends paid
    
    
    
    
    
    
    (420
    )Net cash (used in) provided by financing activities
    
    
    (2,954
    )
    
    
    23,594Net increase (decrease) in cash
    
    
    576
    
    
    
    (185
    )Cash at beginning of period
    
    
    586
    
    
    
    792Cash at end of period
    
    $
    1,162
    
    
    $
    607Supplemental cash flow information:Cash paid for interest
    
    $
    3,781
    
    
    $
    4,109Cash paid (refunded) for income taxes
    
    $
    1,837
    
    
    $
    (1,564
    )Non-cash financing activityissuance of common stock
    
    $
    41
    
    
    $
    1,704
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DELTA APPAREL, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Note ABasis of Presentation
   Note BAccounting Policies
  Note CNew Accounting Standards
 Fair Value Measurements
 Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly
 The Fair Value Option for Financial
Assets and Financial Liabilities
 Non-controlling Interests in Consolidated
Financial Statements
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Business Combinations
 Accounting for Assets Acquired
and Liabilities Assumed in a Business Combination That Arise from Contingencies Accounting for Contingencies Reasonable
Estimation of the Amount of the Loss
 Disclosures about Derivative Instruments and Hedging
Activities
 , Determination of the Useful Life of
Intangible Assets Goodwill and Other Intangible
Assets
 Equity Method
Investment Accounting Considerations
 Note DInventories
  March 28,
    
    
    June 28,2009
    
    
    2008Raw materials
    
    $
    10,059
    
    
    $
    10,881Work in process
    
    
    27,709
    
    
    
    23,198Finished goods
    
    
    98,701
    
    
    
    90,667$
    136,469
    
    
    $
    124,746
  7




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Note EGoodwill and Intangible Assets
  March 28,
    
    
    Economic2009
    
    
    LifeGoodwill
    
    $
    16,814
    
    
    
    N/AIntangibles:Tradename/trademarks
    
    
    1,530
    
    
    20 yrsCustomer relationships
    
    
    7,220
    
    
    20 yrsNon-compete agreements
    
    
    250
    
    
    5 yrsTotal intangibles
    
    
    9,000Total goodwill and intangibles
    
    
    25,814Less accumulated amortization
    
    
    (1,765
    )$
    24,049
  Note FDebt
        8




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Note GSelling, General and Administrative Expense
  Note HStock Options and Incentive Stock Awards
 Share-Based Payment
 Delta Apparel Stock Option Plan (Option Plan)
  Delta Apparel Incentive Stock Award Plan (Award Plan)
   9




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Note IPurchase Contracts
  Natural gas
    
    $
    141Yarn
    
    
    21,643Finished fabric
    
    
    2,735Finished apparel products
    
    
    2,246$
    26,765
 Note JStockholders Equity
 Stock Repurchase Program
  Note KSegment Reporting
  ®
 ® ® ® ® ®
   Activewear
    
    Retail-Ready
    
    ConsolidatedThree months ended March 28,
2009:Net sales
    
    $
    53,313
    
    
    $
    32,372
    
    
    $
    85,685Segment operating (loss) income
    
    
    (543
    )
    
    
    2,829
    
    
    
    2,286Segment assets
    
    
    148,363
    
    
    
    112,855
    
    
    
    261,218Three months ended March 29,
2008:Net sales
    
    $
    40,345
    
    
    $
    35,019
    
    
    $
    75,364Segment operating (loss) income
    
    
    (3,649
    )
    
    
    4,723
    
    
    
    1,074Segment assets
    
    
    140,672
    
    
    
    112,515
    
    
    
    253,187
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Activewear
    
    Retail-Ready
    
    ConsolidatedNine months ended March 28, 2009:Net sales
    
    $
    144,271
    
    
    $
    106,187
    
    
    $
    250,458Segment operating (loss) income
    
    
    (4,919
    )
    
    
    11,151
    
    
    
    6,232Nine months ended March 29, 2008:Net sales
    
    $
    123,670
    
    
    $
    93,036
    
    
    $
    216,706Segment operating (loss) income
    
    
    (12,215
    )
    
    
    9,500
    
    
    
    (2,715
    )
  Three Months Ended
    
    
    Nine months EndedMarch 28,
    
    
    March 29,
    
    
    March 28,
    
    
    March 29,2009
    
    
    2008
    
    
    2009
    
    
    2008Segment operating income (loss)
    
    $
    2,286
    
    
    $
    1,074
    
    
    $
    6,232
    
    
    $
    (2,715
    )Unallocated interest expense
    
    
    1,028
    
    
    
    1,648
    
    
    
    3,669
    
    
    
    4,703Consolidated income (loss) before taxes
    
    $
    1,258
    
    
    $
    (574
    )
    
    $
    2,563
    
    
    $
    (7,418
    )
 Note LIncome Taxes
   Note MFactored Receivables
 Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities, a replacement of FASB Statement 125
 Note NRestructuring Plan
  11




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FY 07 Qtr 4
    
    
    FY 08 Qtr 1
    
    
    FY 08 Qtr 2
    
    
    FY 08 Qtr 3
    
    
    TotalCost of Sales
    
    $5.4 million
    
    $1.9 million
    
    $2.0 million
    
    $0.9 million
    
    $10.2 millionRestructuring Charges
    
    1.5 million
    
    0.1 million
    
    
    
    
    
    
    
    
    
    1.6 millionTotal
    
    $6.9 million
    
    $2.0 million
    
    $2.0 million
    
    $0.9 million
    
    $11.8 millionDiluted EPS Impact
    

    $0.51
    


    $0.16
    

    $0.15

    
    $0.07

    
    $0.90
  Note ODerivatives
   March 28,
    
    
    June 28,2009
    
    
    2008Deferred income tax liability
    
    $
    (412
    )
    
    $
    (275
    )Other liabilities
    
    
    1,070
    
    
    
    716Accumulated other comprehensive loss
    
    $
    658
    
    
    $
    441
   Note PSubsequent Event
 ® ® ® ®
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 FORWARD LOOKING STATEMENTS
        13




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® ® ®
            14




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15




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Derivative Instruments
     Operating Cash Flows
  16




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Investing Cash Flows
  Financing Activities
    Purchases by Delta Apparel of its Own Shares
  CRITICAL ACCOUNTING POLICIES
   ENVIRONMENTAL AND REGULATORY MATTERS
  17




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
       Derivatives
  18




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Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control Over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 Item 6. Exhibits
  31.1
    
    Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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SIGNATURES
  DELTA APPAREL, INC.(Registrant)May 1, 2009
    
    By:
    
    /s/ Deborah H. MerrillDate
    
    
    
    Deborah H. MerrillVice President, Chief Financial Officer and Treasurer
 20