##### 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 29, 2008
 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.)2750 Premiere Parkway, Suite 100
Duluth, Georgia
    
    30097(Address of principal executive offices)
    
    (Zip Code)
 (678) 775-6900
 (Not Applicable)
  þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ




---



##### 



INDEX
 PagePART I.
    
    Financial Information
    
    
    
    

Item 1.
    
    Financial StatementsCondensed Consolidated Financial Statements:Condensed Consolidated Balance Sheets
March 29, 2008 and June 30, 2007
    
    
    3Condensed Consolidated Statements of Operations
Three and nine months ended March 29, 2008 and March 31, 2007
    
    
    4Condensed Consolidated Statements of Cash Flows
Nine months ended March 29, 2008 and March 31, 2007
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    12Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    19Item 4.
    
    Controls and Procedures
    
    
    20PART II.
    
    Other InformationItem 6.
    
    Exhibits
    
    
    21Signatures
    
    
    
    
    22Exhibits
    
    
    
    
    23EX-31.1 SECTION 302 CERTIFICATIONS OF CEOEX-31.2 SECTION 302 CERTIFICATIONS OF CFOEX-32.1 SECTION 906 CERTIFICATIONS OF CEOEX-32.2 SECTION 906 CERTIFICATIONS OF CFO
  2




---



##### Table of Contents



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 29,
    
    
    June 30,2008
    
    
    2007AssetsCurrent assets:Cash
    
    $
    607
    
    
    $
    792Accounts receivable, net
    
    
    44,329
    
    
    
    46,444Income taxes receivable
    
    
    2,696
    
    
    
    2,192Inventories, net
    
    
    136,192
    
    
    
    124,604Prepaid expenses and other current assets
    
    
    3,366
    
    
    
    2,597Deferred income taxes
    
    
    3,392
    
    
    
    1,891Total current assets
    
    
    190,582
    
    
    
    178,520Property, plant and equipment, net
    
    
    37,933
    
    
    
    29,407Goodwill
    
    
    14,222
    
    
    
    14,222Intangibles, net
    
    
    7,726
    
    
    
    8,091Other assets
    
    
    2,724
    
    
    
    2,550Total assets
    
    $
    253,187
    
    
    $
    232,790Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    40,370
    
    
    $
    35,906Accrued expenses
    
    
    13,021
    
    
    
    19,042Current portion of long-term debt
    
    
    6,273
    
    
    
    2,927Total current liabilities
    
    
    59,664
    
    
    
    57,875Long-term debt, less current maturities
    
    
    91,159
    
    
    
    70,491Deferred income taxes
    
    
    1,056
    
    
    
    749Other liabilities
    
    
    1,375
    
    
    
    6Total liabilities
    
    
    153,254
    
    
    
    129,121Stockholders equity:Preferred stock2,000,000 shares authorized; none issued
and outstanding
    
    
    
    
    
    
    Common stockpar value $0.01 a share, 15,000,000 shares authorized,
9,646,972 shares issued, and 8,496,749 and 8,398,395
shares outstanding as of March 29, 2008 and June 30, 2007,
respectively
    
    
    96
    
    
    
    96Additional paid-in capital
    
    
    57,135
    
    
    
    55,510Retained earnings
    
    
    53,044
    
    
    
    58,235Accumulated other comprehensive (loss) income
    
    
    (842
    )
    
    
    140Treasury stock1,150,223 and 1,248,577 shares as of March 29,
2008 and June 30, 2007, respectively
    
    
    (9,500
    )
    
    
    (10,312
    )Total stockholders equity
    
    
    99,933
    
    
    
    103,669Total liabilities and stockholders equity
    
    $
    253,187
    
    
    $
    232,790
  3




---



##### Table of Contents



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 29,
    
    
    March 31,
    
    
    March 29,
    
    
    March 31,2008
    
    
2007
    
    

2008
    
    

2007Net sales
    
    $
    75,364
    
    
    $
    85,013
    
    
    $
    216,706
    
    
    $
    220,642Cost of goods sold
    
    
    59,654
    
    
    
    64,294
    
    
    
    177,184
    
    
    
    166,494Gross profit
    
    
    15,710
    
    
    
    20,719
    
    
    
    39,522
    
    
    
    54,148Selling, general and administrative expenses
    
    
    14,645
    
    
    
    15,471
    
    
    
    42,232
    
    
    
    42,984Other income (expense), net
    
    
    9
    
    
    
    (18
    )
    
    
    57
    
    
    
    74Restructuring costs
    
    
    
    
    
    
    
    
    
    
    62
    
    
    
    Operating income (loss)
    
    
    1,074
    
    
    
    5,230
    
    
    
    (2,715
    )
    
    
    11,238Interest expense, net
    
    
    1,648
    
    
    
    1,384
    
    
    
    4,703
    
    
    
    3,813(Loss) income before (benefit)
provision for income taxes and
extraordinary gain
    
    
    (574
    )
    
    
    3,846
    
    
    
    (7,418
    )
    
    
    7,425(Benefit) provision for income taxes
    
    
    (189
    )
    
    
    1,068
    
    
    
    (2,651
    )
    
    
    2,440(Loss) income before extraordinary gain
    
    
    (385
    )
    
    
    2,778
    
    
    
    (4,767
    )
    
    
    4,985Extraordinary gain, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    672Net (loss) income
    
    $
    (385
    )
    
    $
    2,778
    
    
    $
    (4,767
    )
    
    $
    5,657Basic (loss) earnings per share(Loss) income before extraordinary gain
    
    $
    (0.05
    )
    
    $
    0.33
    
    
    $
    (0.56
    )
    
    $
    0.58Extraordinary gain, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.08Net (loss) income
    
    $
    (0.05
    )
    
    $
    0.33
    
    
    $
    (0.56
    )
    
    $
    0.66Diluted (loss) earnings per share(Loss) income before extraordinary gain
    
    $
    (0.05
    )
    
    $
    0.32
    
    
    $
    (0.56
    )
    
    $
    0.57Extraordinary gain, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.08Net (loss) income
    
    $
    (0.05
    )
    
    $
    0.32
    
    
    $
    (0.56
    )
    
    $
    0.65Weighted average number of shares outstanding
    
    
    8,497
    
    
    
    8,524
    
    
    
    8,474
    
    
    
    8,536Dilutive effect of stock options
    
    
    
    
    
    
    162
    
    
    
    
    
    
    
    165Weighted average number of shares assuming dilution
    
    
    8,497
    
    
    
    8,686
    
    
    
    8,474
    
    
    
    8,701Cash dividends declared per common share
    
    
    
    
    
    $
    0.05
    
    
    $
    0.05
    
    
    $
    0.15
  4




---



##### Table of Contents



DELTA APPAREL, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
 Nine Months EndedMarch 29,
    
    
    March 31,2008
    
    

2007Operating activities:Net (loss) income
    
    $
    (4,767
    )
    
    $
    5,657Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:Depreciation and amortization
    
    
    4,462
    
    
    
    3,838Deferred income taxes
    
    
    (1,194
    )
    
    
    (109
    )Provision for doubtful accounts
    
    
    109
    
    
    
    Loss on disposal of property, plant and equipment
    
    
    26
    
    
    
    33Extraordinary gain on earn-out payment
    
    
    
    
    
    
    (672
    )Non-cash stock compensation
    
    
    966
    
    
    
    1,429Changes in operating assets and liabilities, net of effect of acquisitions:Accounts receivable
    
    
    2,006
    
    
    
    7,956Inventories
    
    
    (11,588
    )
    
    
    (9,366
    )Prepaid expenses and other current assets
    
    
    (769
    )
    
    
    (419
    )Other non-current assets
    
    
    (174
    )
    
    
    143Accounts payable and accrued expenses
    
    
    (89
    )
    
    
    (190
    )Income taxes
    
    
    (504
    )
    
    
    (2,009
    )Other liabilities
    
    
    386
    
    
    
    (321
    )Net cash (used in) provided by operating activities
    
    
    (11,130
    )
    
    
    5,970Investing activities:Purchases of property, plant and equipment
    
    
    (12,699
    )
    
    
    (5,402
    )Proceeds from sale of property, plant and equipment
    
    
    50
    
    
    
    6Cash paid for business, net of cash acquired
    
    
    
    
    
    
    (25,798
    )Net cash used in investing activities
    
    
    (12,649
    )
    
    
    (31,194
    )Financing activities:Proceeds from long-term debt
    
    
    260,880
    
    
    
    227,214Repayment of long-term debt
    
    
    (236,866
    )
    
    
    (199,462
    )Treasury stock acquired
    
    
    
    
    
    
    (1,447
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    23Dividends paid
    
    
    (420
    )
    
    
    (1,281
    )Net cash provided by financing activities
    
    
    23,594
    
    
    
    25,047Net decrease in cash
    
    
    (185
    )
    
    
    (177
    )Cash at beginning of period
    
    
    792
    
    
    
    642Cash at end of period
    
    $
    607
    
    
    $
    465Supplemental cash flow information:Cash paid for interest
    
    $
    4,109
    
    
    $
    3,410Cash (refunded) paid for income taxes
    
    $
    (1,564
    )
    
    $
    4,585Non-cash financing activityissuance of common stock
    
    $
    1,704
    
    
    $
    90
  5




---



##### Table of Contents



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
 The Fair Value Option for Financial
Assets and Financial Liabilities
 Non-controlling Interests in Consolidated
Financial Statements
 Business Combinations
 6




---



##### Table of Contents



Note DInventories
  March 29,
    
    
    June 30,2008
    
    
    2007Raw materials
    
    $
    12,278
    
    
    $
    11,922Work in process
    
    
    26,622
    
    
    
    27,723Finished goods
    
    
    97,292
    
    
    
    84,959$
    136,192
    
    
    $
    124,604
  Note EGoodwill and Intangible Assets
  March 29,
    
    
    Economic2008
    
    
    LifeGoodwill
    
    $
    14,222
    
    
    
    N/AIntangibles:Tradename/trademarks
    
    
    1,530
    
    
    20 yrsCustomer relationships
    
    
    7,220
    
    
    20 yrsNon-compete agreements
    
    
    250
    
    
    5 yrsTotal intangibles
    
    
    9,000Total goodwill and intangibles
    
    
    23,222Less accumulated amortization
    
    
    (1,274
    )$
    21,948
  Note FDebt
    7




---



##### Table of Contents



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)
  8




---



##### Table of Contents



Delta Apparel Incentive Stock Award Plan (Award Plan)
   Note IPurchase Contracts
  Natural gas
    
    $
    40Yarn
    
    
    6,710Finished fabric
    
    
    2,046Finished apparel products
    
    
    2,393$
    11,189
 Note JComputation of Basic and Diluted Earnings per Share (EPS)
  Note KStockholders Equity
 Stock Repurchase Program
  Quarterly Dividend Program
  9




---



##### Table of Contents



Note LSegment Reporting
  ®
 ® ® ® ®
    Activewear
    
    Retail-Ready
    
    Corporate andApparel
    
    Apparel
    
    Unallocated
    
    ConsolidatedThree months ended 3/29/08:Net sales
    
    $
    40,345
    
    
    $
    35,019
    
    
    $
    
    
    
    $
    75,364Segment operating income (loss)
    
    
    (3,649
    )
    
    
    4,723
    
    
    
    
    
    
    
    1,074Segment assets
    
    
    140,672
    
    
    
    112,515
    
    
    
    
    
    
    
    253,187Three months ended 3/31/07:Net sales
    
    $
    52,328
    
    
    $
    32,685
    
    
    $
    
    
    
    $
    85,013Segment operating income
    
    
    1,140
    
    
    
    4,090
    
    
    
    
    
    
    
    5,230Segment assets
    
    
    133,220
    
    
    
    106,654
    
    
    
    
    
    
    
    239,874
  Activewear
    
    Retail-Ready
    
    Corporate andApparel
    
    Apparel
    
    Unallocated
    
    ConsolidatedNine months ended 3/29/08:Net sales
    
    $
    123,670
    
    
    $
    93,036
    
    
    $
    
    
    
    $
    216,706Segment operating income (loss)
    
    
    (12,215
    )
    
    
    9,500
    
    
    
    
    
    
    
    (2,715
    )Nine months ended 3/31/07:Net sales
    
    $
    129,744
    
    
    $
    90,898
    
    
    $
    
    
    
    $
    220,642Segment operating income
    
    
    2,687
    
    
    
    8,508
    
    
    
    43
    
    
    
    11,238
  10




---



##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedMarch 29,
    
    
    March 31,
    
    
    March 29,
    
    
    March 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Segment operating income (loss)
    
    $
    1,074
    
    
    $
    5,230
    
    
    $
    (2,715
    )
    
    $
    11,238Unallocated interest expense
    
    
    1,648
    
    
    
    1,384
    
    
    
    4,703
    
    
    
    3,813Consolidated income (loss) before taxes
    
    $
    (574
    )
    
    $
    3,846
    
    
    $
    (7,418
    )
    
    $
    7,425
 Note MIncome Taxes
  Accounting for
Uncertainty in Income Taxes
  Note NExtraordinary Gain
  Note OFactored Receivables
 Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,
a replacement of FASB Statement 125
 11




---



##### Table of Contents



Note PRestructuring Plan
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 FORWARD LOOKING STATEMENTS
        12




---



##### Table of Contents



13




---



##### Table of Contents



14




---



##### Table of Contents



15




---



##### Table of Contents



Derivative Instruments
    16




---



##### Table of Contents



Operating Cash Flows
  Investing Cash Flows
  Financing Activities
   Purchases by Delta Apparel of its Own Shares
  Dividend Program
  17




---



##### Table of Contents



CRITICAL ACCOUNTING POLICIES
   Revenue Recognition and Accounts Receivable
  Inventories
  Self Insurance
  Share-Based Compensation
 Share-Based Payment
 18




---



##### Table of Contents



Income Taxes
 Accounting for Income Taxes
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
       19




---



##### Table of Contents



Derivatives
   
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control Over Financial Reporting
  20




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 6. Exhibits
 Exhibits31.1
    
    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.
 21




---



##### Table of Contents



SIGNATURES
  DELTA APPAREL, INC. 
(Registrant)May 2, 2008
    By:
    /s/ Deborah H. MerrillDate
    
    Deborah H. MerrillVice President, Chief Financial Officer and Treasurer 22