##### 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 December 26, 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
  þ o
  Large accelerated filer o
    
    Accelerated filer
o
    
    Non-accelerated filer   þ
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
  o þ




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##### 



INDEX
 PART I.
    
    Financial Information
    
    PageItem 1.
    
    Financial StatementsCondensed Consolidated Financial Statements:Condensed Consolidated Balance Sheets  December 26, 2009 and June 27, 2009
    
    
    3Condensed Consolidated Statements of Income  Three and six months ended December 26, 2009 and December 27, 2008
    
    
    4Condensed Consolidated Statements of Cash Flows  Six months ended December 26, 2009 and December 27, 2008
    
    
    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
    
    
    15Item 4.
    
    Controls and Procedures
    
    
    16PART II.
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    
    17Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    17Item 6.
    
    Exhibits
    
    
    17Signatures
    
    
    
    
    18Exhibits
    
    
    
    
    19EX-31.1EX-31.2EX-32.1EX-32.2
   
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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 and per share data)
(Unaudited)
 December 26,
    
    
    June 27,2009
    
    
    2009AssetsCurrent assets:Cash
    
    $
    423
    
    
    $
    654Accounts receivable, net
    
    
    45,920
    
    
    
    57,884Income taxes receivable
    
    
    887
    
    
    
    1,755Inventories, net
    
    
    130,010
    
    
    
    125,887Prepaid expenses and other current assets
    
    
    3,576
    
    
    
    3,387Deferred income taxes
    
    
    3,290
    
    
    
    3,475Total current assets
    
    
    184,106
    
    
    
    193,042Property, plant and equipment, net
    
    
    35,491
    
    
    
    36,480Goodwill
    
    
    16,814
    
    
    
    16,814Intangibles, net
    
    
    6,870
    
    
    
    7,114Other assets
    
    
    3,377
    
    
    
    3,543Total assets
    
    $
    246,658
    
    
    $
    256,993Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    30,565
    
    
    $
    34,103Accrued expenses
    
    
    18,028
    
    
    
    17,852Current portion of long-term debt
    
    
    5,718
    
    
    
    5,718Total current liabilities
    
    
    54,311
    
    
    
    57,673Long-term debt, less current maturities
    
    
    74,229
    
    
    
    85,936Deferred income taxes
    
    
    1,471
    
    
    
    1,223Other liabilities
    
    
    123
    
    
    
    16Total liabilities
    
    
    130,134
    
    
    
    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 December 26, 2009 and June 27, 2009,
respectively
    
    
    96
    
    
    
    96Additional paid-in capital
    
    
    58,724
    
    
    
    58,301Retained earnings
    
    
    67,325
    
    
    
    63,763Accumulated other comprehensive loss
    
    
    (283
    )
    
    
    (565
    )Treasury stock1,130,679 and 1,144,273 shares as of December 26,
2009 and June 27, 2009, respectively
    
    
    (9,338
    )
    
    
    (9,450
    )Total stockholders equity
    
    
    116,524
    
    
    
    112,145Total liabilities and stockholders equity
    
    $
    246,658
    
    
    $
    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
    
    
    Six Months EndedDecember 26,
    
    
    December 27,
    
    
    December 26,
    
    
    December 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales
    
    $
    91,160
    
    
    $
    73,361
    
    
    $
    190,282
    
    
    $
    164,773Cost of goods sold
    
    
    69,384
    
    
    
    57,306
    
    
    
    144,861
    
    
    
    129,412Gross profit
    
    
    21,776
    
    
    
    16,055
    
    
    
    45,421
    
    
    
    35,361Selling, general and administrative expenses
    
    
    19,561
    
    
    
    14,559
    
    
    
    38,819
    
    
    
    31,400Other income (expense), net
    
    
    28
    
    
    
    10
    
    
    
    133
    
    
    
    (15
    )Operating income
    
    
    2,243
    
    
    
    1,506
    
    
    
    6,735
    
    
    
    3,946Interest expense, net
    
    
    903
    
    
    
    1,222
    
    
    
    1,857
    
    
    
    2,641Income before provision
(benefit) for income taxes
    
    
    1,340
    
    
    
    284
    
    
    
    4,878
    
    
    
    1,305Provision (benefit) for income taxes
    
    
    361
    
    
    
    (311
    )
    
    
    1,316
    
    
    
    36Net income
    
    $
    979
    
    
    $
    595
    
    
    $
    3,562
    
    
    $
    1,269Basic earnings per share
    
    $
    0.11
    
    
    $
    0.07
    
    
    $
    0.42
    
    
    $
    0.15Diluted earnings per share
    
    $
    0.11
    
    
    $
    0.07
    
    
    $
    0.42
    
    
    $
    0.15Weighted average number of shares outstanding
    
    
    8,516
    
    
    
    8,503
    
    
    
    8,512
    
    
    
    8,500Dilutive effect of stock options
    
    
    51
    
    
    
    11
    
    
    
    37
    
    
    
    11Weighted average number of shares assuming dilution
    
    
    8,567
    
    
    
    8,514
    
    
    
    8,549
    
    
    
    8,511
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DELTA APPAREL, INC. AND SUBSIDIARIES
 Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
 Six Months EndedDecember 26,
    
    
    December 27,2009
    
    
    2008Operating activities:Net income
    
    $
    3,562
    
    
    $
    1,269Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    3,357
    
    
    
    3,718Deferred income taxes
    
    
    433
    
    
    
    (565
    )Loss on disposal of property and equipment
    
    
    56
    
    
    
    51Non-cash stock compensation
    
    
    744
    
    
    
    538Changes in operating assets and liabilities,
net of effect of acquisitions:Accounts receivable
    
    
    11,964
    
    
    
    27,844Inventories
    
    
    (4,123
    )
    
    
    (15,960
    )Prepaid expenses and other current assets
    
    
    (189
    )
    
    
    (392
    )Income taxes receivable
    
    
    868
    
    
    
    (1,389
    )Other non-current assets
    
    
    166
    
    
    
    82Accounts payable and accrued expenses
    
    
    (2,872
    )
    
    
    223Other liabilities
    
    
    390
    
    
    
    220Net cash provided by operating activities
    
    
    14,356
    
    
    
    15,639Investing activities:Purchases of property and equipment
    
    
    (2,186
    )
    
    
    (1,966
    )Proceeds from sale of property, plant and equipment
    
    
    6
    
    
    
    Cash paid for business
    
    
    (700
    )
    
    
    (2,592
    )Net cash used in investing activities
    
    
    (2,880
    )
    
    
    (4,558
    )Financing activities:Proceeds from long-term debt
    
    
    197,247
    
    
    
    183,897Repayment of long-term debt
    
    
    (208,954
    )
    
    
    (195,210
    )Net cash used in financing activities
    
    
    (11,707
    )
    
    
    (11,313
    )Net decrease in cash
    
    
    (231
    )
    
    
    (232
    )Cash at beginning of period
    
    
    654
    
    
    
    586Cash at end of period
    
    $
    423
    
    
    $
    354Supplemental cash flow information:Cash paid for interest
    
    $
    1,709
    
    
    $
    2,783Cash paid for income taxes, net of refunds
    
    $
    209
    
    
    $
    1,766Non-cash financing activityissuance of common stock
    
    $
    118
    
    
    $
    41
  5




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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
 Accounting for Assets Acquired
and Liabilities Assumed in a Business Combination That Arise from Contingencies Accounting for Contingencies Note NSubsequent Events
 Determination of the Useful Life of Intangible Assets Goodwill and Other Intangible Assets Note NSubsequent Events
 Equity Method Investment Accounting
Considerations
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Improvements to Financial
Reporting by Enterprises Involved with Variable Interest Entities Consolidation of Variable Interest Entities
 Note DInventories
  December 26,
    
    
    June 27,2009
    
    
    2009Raw materials
    
    $
    9,872
    
    
    $
    9,626Work in process
    
    
    18,778
    
    
    
    21,842Finished goods
    
    
    101,360
    
    
    
    94,419$
    130,010
    
    
    $
    125,887
  Note EDebt
     Balance Sheet Classification of Borrowings Outstanding
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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)
  Note HPurchase Contracts
  Natural gas
    
    $
    814Yarn
    
    
    15,938Finished fabric
    
    
    252Finished apparel products
    
    
    9,663$
    26,667
 Note ISegment Reporting
  ®
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® ® ® ® ®
   Activewear
    
    
    Retail-Ready
    
    
    ConsolidatedThree months ended December 26, 2009:Net sales
    
    $
    45,379
    
    
    $
    45,781
    
    
    $
    91,160Segment operating (loss) income
    
    
    (638
    )
    
    
    2,881
    
    
    
    2,243Segment assets
    
    
    136,759
    
    
    
    109,899
    
    
    
    246,658Purchases of property, plant and equipment
    
    
    533
    
    
    
    374
    
    
    
    907Three months ended December 27, 2008:Net sales
    
    $
    40,970
    
    
    $
    32,391
    
    
    $
    73,361Segment operating (loss) income
    
    
    (1,471
    )
    
    
    2,977
    
    
    
    1,506Segment assets
    
    
    145,395
    
    
    
    104,708
    
    
    
    250,103Purchases of property, plant and equipment
    
    
    176
    
    
    
    753
    
    
    
    929
 Activewear
    
    
    Retail-Ready
    
    
    ConsolidatedSix months ended December 26, 2009:Net sales
    
    $
    92,524
    
    
    $
    97,758
    
    
    $
    190,282Segment operating (loss) income
    
    
    (1,723
    )
    
    
    8,458
    
    
    
    6,735Purchases of property, plant and equipment
    
    
    1,411
    
    
    
    775
    
    
    
    2,186Six months ended December 27, 2008:Net sales
    
    $
    90,958
    
    
    $
    73,815
    
    
    $
    164,773Segment operating (loss) income
    
    
    (4,376
    )
    
    
    8,322
    
    
    
    3,946Purchases of property, plant and equipment
    
    
    614
    
    
    
    1,352
    
    
    
    1,966
  Three Months Ended
    
    
    Six Months EndedDecember 26,
    
    
    December 27,
    
    
    December 26,
    
    
    December 27,2009
    
    
    2008
    
    
    2009
    
    
    2008Segment operating income
    
    $
    2,243
    
    
    $
    1,506
    
    
    $
    6,735
    
    
    $
    3,946Unallocated interest expense
    
    
    903
    
    
    
    1,222
    
    
    
    1,857
    
    
    
    2,641Consolidated income before taxes
    
    $
    1,340
    
    
    $
    284
    
    
    $
    4,878
    
    
    $
    1,305
 Note JIncome Taxes
  9




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Note KFactored Receivables
 Transfers and Servicing
 Note LDerivatives
  Derivatives and Hedging
  December 26,
    
    
    June 27,2009
    
    
    2009Accrued expenses
    
    $
    337
    
    
    $
    902Other liabilities
    
    
    123
    
    
    
    16Deferred tax liabilities
    
    
    (177
    )
    
    
    (353
    )Accumulated other comprehensive loss
    
    $
    283
    
    
    $
    565
 10




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Note MLegal Proceedings
     Note NSubsequent Events
   
 Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 FORWARD LOOKING STATEMENTS
  11




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12




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13




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Operating Cash Flows
  Investing Cash Flows
  Financing Activities
   14




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Purchases by Delta Apparel of its Own Shares
  CRITICAL ACCOUNTING POLICIES
   ENVIRONMENTAL AND REGULATORY MATTERS
    
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
   15




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Derivatives
    
 Item 4.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  16




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Changes in Internal Control Over Financial Reporting
  
 PART II.
    
    OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
 Note MLegal Proceedings
 
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
  Election of Directors
    
    For
    
    AgainstJames A. Cochran
    
    
    7,418,399
    
    
    
    31,771William F. Garrett
    
    
    7,411,015
    
    
    
    39,155Dr. Elizabeth J. Gatewood
    
    
    7,419,018
    
    
    
    31,152Robert W. Humphreys
    
    
    7,419,018
    
    
    
    31,152Dr. Max Lennon
    
    
    7,414,248
    
    
    
    35,922E. Erwin Maddrey, II
    
    
    7,408,652
    
    
    
    41,518Buck A. Mickel
    
    
    7,408,712
    
    
    
    41,458David Peterson
    
    
    7,419,018
    
    
    
    31,152Robert E. Staton, II
    
    
    7,419,018
    
    
    
    31,152BrokerFor
    
    Against
    
    Abstain
    
    Non-VoteRatification of the
Appointment of Ernst &
Young LLP as Independent
Registered Public
Accounting Firm for
Fiscal Year 2010
    
    
    7,422,232
    
    
    
    26,554
    
    
    
    1,384
    
    
    
    
 
 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)February 8, 2010
    By:
    /s/ Deborah H. MerrillDate
    
    Deborah H. MerrillVice President, Chief Financial Officer and Treasurer 18