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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT FTO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 29, 2007
 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 100Duluth, Georgia
    
    30097(Address of principal executive offices)
    
    (Zip Code)
 (678) 775-6900
 
  (Not Applicable)
   þ o
  o þ o
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INDEX
 PagePART I.
    
    Financial InformationItem 1.
    
    Financial StatementsCondensed Consolidated Financial Statements:Condensed Consolidated Balance Sheets
September 29, 2007 and June 30, 2007
    
    
    3Condensed Consolidated Statements of Operations
Three months ended September 29, 2007 and September 30, 2006
    
    
    4Condensed Consolidated Statements of Cash Flows
Three months ended September 29, 2007 and September 30, 2006
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    11Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    18Item 4.
    
    Controls and Procedures
    
    
    19PART II.
    
    Other InformationItem 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    20Item 6.
    
    Exhibits
    
    
    20Signatures
    
    
    
    
    21Exhibits
    
    
    
    
    22EX-31.1 SECTION 302 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICEREX-31.2 SECTION 302 CERTIFICATION OF THE CHIEF FINANCIAL OFFICEREX-32.1 SECTION 906 CERTIFICATION OF THE CHIEF EXECUTIVE OFFICEREX-32.2 SECTION 906 CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
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##### 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)
 September 29,
    
    
    June 30,2007
    
    
    2007AssetsCurrent assets:Cash
    
    $
    534
    
    
    $
    792Accounts receivable, net
    
    
    38,043
    
    
    
    46,444Income taxes receivable
    
    
    754
    
    
    
    2,192Inventories, net
    
    
    129,615
    
    
    
    124,604Prepaid expenses and other current assets
    
    
    3,314
    
    
    
    2,597Deferred income taxes
    
    
    2,959
    
    
    
    1,891Total current assets
    
    
    175,219
    
    
    
    178,520Property, plant and equipment, net
    
    
    32,926
    
    
    
    29,407Goodwill
    
    
    14,222
    
    
    
    14,222Intangibles, net
    
    
    7,969
    
    
    
    8,091Other assets
    
    
    2,740
    
    
    
    2,550Total assets
    
    $
    233,076
    
    
    $
    232,790Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    29,637
    
    
    $
    35,906Accrued expenses
    
    
    15,533
    
    
    
    19,042Current portion of long-term debt
    
    
    5,270
    
    
    
    2,927Total current liabilities
    
    
    50,440
    
    
    
    57,875Long-term debt, less current maturities
    
    
    78,251
    
    
    
    70,491Deferred income taxes
    
    
    805
    
    
    
    749Other liabilities
    
    
    205
    
    
    
    6Total liabilities
    
    
    129,701
    
    
    
    129,121Stockholders equity:Preferred stock2,000,000 shares
authorized; none issued and outstanding
    
    
    
    
    
    
    Common stockpar value $.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 September 29,
2007 and June 30, 2007,
respectively
    
    
    96
    
    
    
    96Additional paid-in capital
    
    
    56,637
    
    
    
    55,510Retained earnings
    
    
    56,265
    
    
    
    58,235Accumulated other comprehensive (loss) income
    
    
    (123
    )
    
    
    140Treasury stock1,150,223 and 1,248,577
shares as of September 29,
2007 and June 30, 2007, respectively
    
    
    (9,500
    )
    
    
    (10,312
    )Total stockholders equity
    
    
    103,375
    
    
    
    103,669Total liabilities and stockholders equity
    
    $
    233,076
    
    
    $
    232,790
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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 EndedSeptember 29,
    
    
    September 30,2007
    
    
    2006Net sales
    
    $
    72,562
    
    
    $
    62,680Cost of goods sold
    
    
    59,571
    
    
    
    45,344Gross profit
    
    
    12,991
    
    
    
    17,336Selling, general and administrative expenses
    
    
    14,203
    
    
    
    13,898Restructuring costs
    
    
    62
    
    
    
    Operating (loss) income
    
    
    (1,274
    )
    
    
    3,438Other income, net
    
    
    82
    
    
    
    51Interest expense, net
    
    
    1,470
    
    
    
    947(Loss) income before (benefit)
provision for income taxes and extraordinary gain
    
    
    (2,662
    )
    
    
    2,542(Benefit) provision for income taxes
    
    
    (1,114
    )
    
    
    967(Loss) income before extraordinary gain
    
    
    (1,548
    )
    
    
    1,575Extraordinary gain, net of income taxes
    
    
    
    
    
    
    672Net (loss) income
    
    $
    (1,548
    )
    
    $
    2,247Basic (loss) earnings per share(Loss) income before extraordinary gain
    
    $
    (0.18
    )
    
    $
    0.18Extraordinary gain, net of income taxes
    
    
    
    
    
    
    0.08Net (loss) income
    
    $
    (0.18
    )
    
    $
    0.26Diluted (loss) earnings per share(Loss) income before extraordinary gain
    
    $
    (0.18
    )
    
    $
    0.18Extraordinary gain, net of income taxes
    
    
    
    
    
    
    0.08Net (loss) income
    
    $
    (0.18
    )
    
    $
    0.26Weighted average number of shares outstanding
    
    
    8,430
    
    
    
    8,546Dilutive effect of stock options
    
    
    
    
    
    
    144Weighted average number of shares assuming dilution
    
    
    8,430
    
    
    
    8,690Cash dividends declared per common share
    
    $
    0.05
    
    
    $
    0.05
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DELTA APPAREL, INC. AND SUBSIDIARIES
 Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
 Three Months EndedSeptember 29,
    
    
    September 30,2007
    
    
    2006Operating activities:Net (loss) income
    
    $
    (1,548
    )
    
    $
    2,247Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:Depreciation and amortization
    
    
    1,375
    
    
    
    1,189Deferred income taxes
    
    
    (2,260
    )
    
    
    (717
    )Gain on disposal and impairment of property
    
    
    
    
    
    
    (17
    )Extraordinary gain on earn-out payment
    
    
    
    
    
    
    (672
    )Non-cash stock compensation
    
    
    507
    
    
    
    1,000Changes in operating assets and liabilities, net
of effect of acquisitions:Accounts receivable
    
    
    8,401
    
    
    
    11,293Inventories
    
    
    (5,011
    )
    
    
    (2,234
    )Prepaid expenses and other current assets
    
    
    (717
    )
    
    
    234Other non-current assets
    
    
    (190
    )
    
    
    (1
    )Accounts payable and accrued expenses
    
    
    (8,347
    )
    
    
    (10,311
    )Income taxes
    
    
    2,686
    
    
    
    236Other liabilities
    
    
    (32
    )
    
    
    (1
    )Net cash (used in) provided by operating
activities
    
    
    (5,136
    )
    
    
    2,246Investing activities:Purchases of property, plant and equipment
    
    
    (4,771
    )
    
    
    (1,042
    )Proceeds from sale of property, plant and equipment
    
    
    
    
    
    
    20Cash paid for business, net of cash acquired
    
    
    
    
    
    
    (334
    )Net cash used in investing activities
    
    
    (4,771
    )
    
    
    (1,356
    )Financing activities:Proceeds from long-term debt
    
    
    99,608
    
    
    
    48,306Repayment of long-term debt
    
    
    (89,539
    )
    
    
    (48,590
    )Treasury stock acquired
    
    
    
    
    
    
    (506
    )Dividends paid
    
    
    (420
    )
    
    
    (427
    )Net cash provided by (used in) financing activities
    
    
    9,649
    
    
    
    (1,217
    )Net decrease in cash
    
    
    (258
    )
    
    
    (327
    )Cash at beginning of period
    
    
    792
    
    
    
    642Cash at end of period
    
    $
    534
    
    
    $
    315Supplemental cash flow information:Cash paid during the period for interest
    
    $
    1,373
    
    
    $
    811Cash (refunded) paid during the period for income taxes
    
    $
    (1,704
    )
    
    $
    1,247Non-cash financing activityissuance of common stock
    
    $
    1,704
    
    
    $
    90
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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
 Accounting for Certain Hybrid Financial
Instruments  an amendment of FASB Statements No. 133 and 140
 Accounting for Uncertainty in Income Taxes Accounting for Income Taxes,
 The Fair Value Option for Financial
Assets and Financial Liabilities
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Note DInventories
  September 29,
    
    
    June 30,2007
    
    
    2007Raw materials
    
    $
    11,004
    
    
    $
    11,922Work in process
    
    
    28,835
    
    
    
    27,723Finished goods
    
    
    89,776
    
    
    
    84,959$
    129,615
    
    
    $
    124,604
  Note EGoodwill and Intangible Assets
  September 29,
    
    
    Economic2007
    
    
    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
    
    
    (1,031
    )$
    22,191
  Note FDebt
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Note GSelling, General and Administrative Expense
  Note HStock Options and Incentive Stock Awards
  Delta Apparel Stock Option Plan (Option Plan)
  8




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Delta Apparel Incentive Stock Award Plan (Award Plan)
  Note IPurchase Contracts
  Natural gas
    
    $
    1,166Yarn
    
    
    22,428Finished fabric
    
    
    2,065Finished apparel products
    
    
    4,328$
    29,987
 Note JComputation of Basic and Diluted Earnings per Share (EPS)
  Note KStockholders Equity
 Stock Repurchase Program
  Quarterly Dividend Program
  Note LSegment Reporting
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®
 ® ® ® ® ®
    Activewear
    
    Retail-Ready
    
    Corporate andApparel
    
    Apparel
    
    Unallocated
    
    ConsolidatedFiscal Year 2008:Net sales
    
    $
    42,232
    
    
    $
    30,330
    
    
    $
    
    
    
    $
    72,562Segment operating (loss) income
    
    
    (3,929
    )
    
    
    2,737
    
    
    
    
    
    
    
    (1,192
    )Segment assets
    
    
    130,485
    
    
    
    102,591
    
    
    
    
    
    
    
    233,076Fiscal Year 2007:Net sales
    
    $
    30,323
    
    
    $
    32,357
    
    
    $
    
    
    
    $
    62,680Segment operating income
    
    
    216
    
    
    
    3,273
    
    
    
    
    
    
    
    3,489Segment assets
    
    
    97,234
    
    
    
    96,536
    
    
    
    
    
    
    
    193,770
  Three Months EndedSeptember 29,
    
    
    September 30,2007
    
    
    2006Segment operating (loss) income
    
    $
    (1,192
    )
    
    $
    3,489Unallocated interest expense
    
    
    1,470
    
    
    
    947Consolidated (loss) income before
taxes and extraordinary gain
    
    $
    (2,662
    )
    
    $
    2,542
 Note MIncome Taxes
  Accounting for Uncertainty in
Income Taxes
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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
 Note PRestructuring Plan
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 FORWARD LOOKING STATEMENTS
  11




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Derivative Instruments
    15




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Operating Cash Flows
  Investing Cash Flows
  Financing Activities
   Purchases by Delta Apparel of its Own Shares
  Dividend Program
  16




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CRITICAL ACCOUNTING POLICIES
   Revenue Recognition and Accounts Receivable
  Inventories
  Self Insurance
  17




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Share-Based Compensation
 Share-Based Payment
 Income Taxes
 Accounting for Income Taxes
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
       18




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Derivatives
   
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control Over Financial Reporting
  19




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PART II. OTHER INFORMATION
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Total Number of
    
    Dollar Value ofShares Purchased as
    
    Shares that May YetAverage
    
    Part of Publicly
    
    Be Purchased UnderTotal Number of
    
    Price Paid
    
    Announced Plans or
    
    the Plans orPeriod
    
    Shares Purchased
    
    per Share
    
    Programs
    
    ProgramsJuly Period
(July 1, 2007 to August 4, 2007)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $1.9millionAugust Period
(August 5, 2007 to September 1, 2007)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $5.9millionSeptember Period
(September 2, 2007 to September 29, 2007)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $5.9million
   
 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)November 2, 2007
    By:
    /s/ Deborah H. MerrillDate
    
    Deborah H. MerrillVice President, Chief Financial Officer and Treasurer 21