##### 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 27, 2010
 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
    
    (I.R.S. EmployerIncorporation or Organization)
    
    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
  þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ




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INDEX
 PagePART I. Financial InformationItem 1. Financial StatementsCondensed Consolidated Financial Statements:Condensed Consolidated Balance Sheets 
March 27, 2010 and June 27, 2009
    
    3Condensed Consolidated Statements of Income 
Three and nine months ended March 27, 2010 and March 28, 2009
    
    4Condensed Consolidated Statements of Cash Flows 
Nine months ended March 27, 2010 and March 28, 2009
    
    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
    
    16Item 4. Controls and Procedures
    
    17PART II. Other InformationItem 1. Legal Proceedings
    
    17Item 6. Exhibits
    
    17Signatures
    
    18EX-31.1EX-31.2EX-32.1EX-32.2
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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 and per share data)
(Unaudited)
 March 27,
    
    
    June 27,2010
    
    
    2009AssetsCurrent assets:Cash
    
    $
    555
    
    
    $
    654Accounts receivable, net
    
    
    62,258
    
    
    
    57,884Income taxes receivable
    
    
    
    
    
    
    1,755Inventories, net
    
    
    125,871
    
    
    
    125,887Prepaid expenses and other current assets
    
    
    3,474
    
    
    
    3,387Deferred income taxes
    
    
    3,492
    
    
    
    3,475Total current assets
    
    
    195,650
    
    
    
    193,042Property, plant and equipment, net
    
    
    36,142
    
    
    
    36,480Goodwill
    
    
    17,426
    
    
    
    16,814Intangibles, net
    
    
    8,192
    
    
    
    7,114Other assets
    
    
    3,312
    
    
    
    3,543Total assets
    
    $
    260,722
    
    
    $
    256,993Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    35,005
    
    
    $
    34,103Accrued expenses
    
    
    19,465
    
    
    
    17,852Income taxes payable
    
    
    211
    
    
    
    Current portion of long-term debt
    
    
    5,718
    
    
    
    5,718Total current liabilities
    
    
    60,399
    
    
    
    57,673Long-term debt, less current maturities
    
    
    77,045
    
    
    
    85,936Deferred income taxes
    
    
    1,566
    
    
    
    1,223Other liabilities
    
    
    1,866
    
    
    
    16Total liabilities
    
    
    140,876
    
    
    
    144,848Stockholders equity:Preferred stock$0.01 par value, 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 8,516,293 and 8,502,699
shares outstanding as of March 27, 2010 and June 27, 2009,
respectively
    
    
    96
    
    
    
    96Additional paid-in capital
    
    
    58,947
    
    
    
    58,301Retained earnings
    
    
    70,284
    
    
    
    63,763Accumulated other comprehensive loss
    
    
    (143
    )
    
    
    (565
    )Treasury stock1,130,679 and 1,144,273 shares as of March 27,
2010 and June 27, 2009, respectively
    
    
    (9,338
    )
    
    
    (9,450
    )Total stockholders equity
    
    
    119,846
    
    
    
    112,145Total liabilities and stockholders equity
    
    $
    260,722
    
    
    $
    256,993
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DELTA APPAREL, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Income
(Amounts in thousands, except per share data)
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedMarch 27,
    
    
    March 28,
    
    
    March 27,
    
    
    March 28,2010
    
    
    2009
    
    
    2010
    
    
    2009Net sales
    
    $
    107,942
    
    
    $
    85,685
    
    
    $
    298,224
    
    
    $
    250,458Cost of goods sold
    
    
    82,739
    
    
    
    68,915
    
    
    
    227,600
    
    
    
    198,327Gross profit
    
    
    25,203
    
    
    
    16,770
    
    
    
    70,624
    
    
    
    52,131Selling, general and administrative expenses
    
    
    20,345
    
    
    
    14,450
    
    
    
    59,164
    
    
    
    45,850Other income (expense), net
    
    
    56
    
    
    
    (34
    )
    
    
    189
    
    
    
    (49
    )Operating income
    
    
    4,914
    
    
    
    2,286
    
    
    
    11,649
    
    
    
    6,232Interest expense, net
    
    
    948
    
    
    
    1,028
    
    
    
    2,805
    
    
    
    3,669Income before provision for income taxes
    
    
    3,966
    
    
    
    1,258
    
    
    
    8,844
    
    
    
    2,563Provision for income taxes
    
    
    1,008
    
    
    
    95
    
    
    
    2,324
    
    
    
    131Net income
    
    $
    2,958
    
    
    $
    1,163
    
    
    $
    6,520
    
    
    $
    2,432Basic earnings per share
    
    $
    0.35
    
    
    $
    0.14
    
    
    $
    0.77
    
    
    $
    0.29Diluted earnings per share
    
    $
    0.34
    
    
    $
    0.14
    
    
    $
    0.76
    
    
    $
    0.29Weighted average number of shares outstanding
    
    
    8,516
    
    
    
    8,503
    
    
    
    8,513
    
    
    
    8,501Dilutive effect of stock options
    
    
    215
    
    
    
    2
    
    
    
    65
    
    
    
    1Weighted average number of shares assuming dilution
    
    
    8,731
    
    
    
    8,505
    
    
    
    8,578
    
    
    
    8,502
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DELTA APPAREL, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
 Nine Months EndedMarch 27,
    
    
    March 28,2010
    
    
    2009Operating activities:Net income
    
    $
    6,520
    
    
    $
    2,432Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    5,172
    
    
    
    5,375Deferred income taxes
    
    
    326
    
    
    
    (453
    )Loss on disposal of property and equipment
    
    
    56
    
    
    
    55Non-cash stock compensation
    
    
    1,385
    
    
    
    648Changes in operating assets and liabilities,
net of effect of acquisitions:Accounts receivable
    
    
    (4,368
    )
    
    
    12,310Inventories
    
    
    52
    
    
    
    (11,723
    )Prepaid expenses and other current assets
    
    
    (87
    )
    
    
    (98
    )Income taxes receivable
    
    
    1,966
    
    
    
    (1,433
    )Other non-current assets
    
    
    233
    
    
    
    25Accounts payable and accrued expenses
    
    
    4,013
    
    
    
    1,519Other liabilities
    
    
    (927
    )
    
    
    135Net cash provided by operating activities
    
    
    14,341
    
    
    
    8,792Investing activities:Purchases of property and equipment
    
    
    (3,855
    )
    
    
    (2,681
    )Proceeds from sale of property, plant and equipment
    
    
    6
    
    
    
    11Cash paid for business
    
    
    (1,700
    )
    
    
    (2,592
    )Net cash used in investing activities
    
    
    (5,549
    )
    
    
    (5,262
    )Financing activities:Proceeds from long-term debt
    
    
    296,161
    
    
    
    263,165Repayment of long-term debt
    
    
    (305,052
    )
    
    
    (266,119
    )Net cash used in financing activities
    
    
    (8,891
    )
    
    
    (2,954
    )Net (decrease) increase in cash
    
    
    (99
    )
    
    
    576Cash at beginning of period
    
    
    654
    
    
    
    586Cash at end of period
    
    $
    555
    
    
    $
    1,162Supplemental cash flow information:Cash paid for interest
    
    $
    2,571
    
    
    $
    3,781Cash paid for income taxes, net of refunds
    
    $
    301
    
    
    $
    1,837Non-cash financing activityissuance of common stock
    
    $
    118
    
    
    $
    41
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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
 FASB Accounting Standards and the Hierarchy of Generally Accepted Accounting
Principles
 Business Combinations Note N  Art Gun Acquisition
 Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from Contingencies Accounting for Contingencies Note N  Art Gun Acquisition
 Determination of the Useful Life of Intangible Assets Goodwill and Other Intangible Assets
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Note N  Art Gun Acquisition
 Equity Method Investment Accounting
Considerations
 Improvements to Financial
Reporting by Enterprises Involved with Variable Interest Entities Consolidation of Variable Interest Entities
 Improving Disclosures
about Fair Value Measurements Fair Value
Measurements and Disclosures
 Amendments to Certain
Recognition and Disclosure Requirements Subsequent
Events
 Note DInventories
  March 27,
    
    
    June 27,2010
    
    
    2009Raw materials
    
    $
    10,601
    
    
    $
    9,626Work in process
    
    
    20,441
    
    
    
    21,842Finished goods
    
    
    94,829
    
    
    
    94,419$
    125,871
    
    
    $
    125,887
  Note EDebt
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Balance Sheet Classification of Borrowings Outstanding
  Note FSelling, General and Administrative Expense
  Note GStock Options and Incentive Stock Awards
 Share-Based Payment
 Delta
Apparel Stock Option Plan (Option Plan)
  Delta
Apparel Incentive Stock Award Plan (Award Plan)
  8




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Note HPurchase Contracts
  Natural gas
    
    $
    426Yarn
    
    
    31,671Finished fabric
    
    
    350Finished apparel and headwear products
    
    
    11,455$
    43,902
 Note ISegment Reporting
  ®
 ® ® ® ®
   Activewear
    
    
    Retail-Ready
    
    
    ConsolidatedThree months ended March 27, 2010:Net sales
    
    $
    61,685
    
    
    $
    46,257
    
    
    $
    107,942Segment operating income
    
    
    1,368
    
    
    
    3,546
    
    
    
    4,914Segment assets
    
    
    140,291
    
    
    
    120,431
    
    
    
    260,722Purchases of property, plant and equipment
    
    
    1,092
    
    
    
    577
    
    
    
    1,669Three 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
    
    
    
    261,218Purchases of property, plant and equipment
    
    
    345
    
    
    
    370
    
    
    
    715
 Activewear
    
    
    Retail-Ready
    
    
    ConsolidatedNine months ended March 27, 2010:Net sales
    
    $
    154,209
    
    
    $
    144,015
    
    
    $
    298,224Segment operating (loss) income
    
    
    (355
    )
    
    
    12,004
    
    
    
    11,649Purchases of property, plant and equipment
    
    
    2,503
    
    
    
    1,352
    
    
    
    3,855Nine months ended March 28, 2009:Net sales
    
    $
    144,271
    
    
    $
    106,187
    
    
    $
    250,458Segment operating (loss) income
    
    
    (4,919
    )
    
    
    11,151
    
    
    
    6,232Purchases of property, plant and equipment
    
    
    959
    
    
    
    1,722
    
    
    
    2,681
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Three Months Ended
    
    
    Nine Months EndedMarch 27,
    
    
    March 28,
    
    
    March 27,
    
    
    March 28,2010
    
    
    2009
    
    
    2010
    
    
    2009Segment operating income
    
    $
    4,914
    
    
    $
    2,286
    
    
    $
    11,649
    
    
    $
    6,232Unallocated interest expense
    
    
    948
    
    
    
    1,028
    
    
    
    2,805
    
    
    
    3,669Consolidated income before taxes
    
    $
    3,966
    
    
    $
    1,258
    
    
    $
    8,844
    
    
    $
    2,563
 Note JIncome Taxes
    Note KFactored Receivables
 Transfers and Servicing
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Note LDerivatives
  NotionalEffective Date

    
    Amount
    
    LIBOR Rate
    
    
    Maturity DateCollar Agreement
    
    April 2, 2007
    
    $15 million
    
    
    4.33% - 5.50
    %
    
    April 1, 2010Interest Rate Swap
    
    April 2, 2007
    
    $15 million
    
    
    5.06
    %
    
    April 1, 2010Interest Rate Swap
    
    April 1, 2009
    
    $15 million
    
    
    1.57
    %
    
    April 1, 2011Interest Rate Swap
    
    March 1, 2010
    
    $15 million
    
    
    1.11
    %
    
    September 1, 2011
 Derivatives and Hedging
  March 27,
    
    
    June 27,2010
    
    
    2009Accrued expenses
    
    $
    4
    
    
    $
    902Other liabilities
    
    
    228
    
    
    
    16Deferred tax liabilities
    
    
    (89
    )
    
    
    (353
    )Accumulated other comprehensive loss
    
    $
    143
    
    
    $
    565
  Note MLegal Proceedings
  Note NArt Gun Acquisition
    11




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Note OSubsequent Events
 , Subsequent Events
 
 Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 FORWARD LOOKING STATEMENTS
        12




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Operating Cash Flows
  Investing Cash Flows
  Financing Activities
   Purchases by Delta Apparel of its Own Shares
  CRITICAL ACCOUNTING POLICIES
  15




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ENVIRONMENTAL AND REGULATORY MATTERS
   
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
       16




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Derivatives
 Note L  Derivatives
  
 Item 4.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control Over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
 Note MLegal Proceedings
 
 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)Date May 5, 2010
    
    By:
    /s/ Deborah H. MerrillDeborah H. MerrillVice President, Chief Financial Officer and Treasurer 18