##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D. C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For The Fiscal Year Ended June 28, 2008
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File No. 1-15583
 DELTA APPAREL, INC.
 (Exact name of registrant as specified in its charter)
 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)
 Registrants telephone number, including area code: (678) 775-6900
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon Stock, par value $0.01
    
    American Stock Exchange
 Securities registered pursuant to Section 12(g) of the Act:
 o þ
 o þ
 þ o
 þ
  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
   DOCUMENTS INCORPORATED BY REFERENCE




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FORWARD LOOKING STATEMENTS
    TABLE OF CONTENTS  PART IITEM 1. BUSINESSITEM 1A. RISK FACTORSITEM 1B. UNRESOLVED STAFF COMMENTSITEM 2. PROPERTIESITEM 3. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESITEM 6. SELECTED FINANCIAL DATAITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREITEM 9A. CONTROLS AND PROCEDURESITEM 9B. OTHER INFORMATIONPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEITEM 11. EXECUTIVE COMPENSATIONITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESPART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULESSIGNATURESEX-10.19 EMPLOYMENT AND NON-SOLICITATION AGREEMENTEX-21 SUBSIDIARIES OF THE COMPANYEX-23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMEX-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    Table of Contents  
 PART I
 
 ITEM 1. BUSINESS
  www.deltaapparelinc.com
 OVERVIEW
     2




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ACQUISITIONS AND BUSINESS DEVELOPMENTS
 FunTees Acquisition
    Restructuring Plan
  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
    
    
    $
    0.08
    
    
    $
    0.90
 Closing of Fayette, Alabama Operations
  Offshore Textiles
  3




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Junkfood Acquisition
  Soffe Acquisition
  BUSINESS SEGMENTS
     PRODUCTS
  4




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release release
 MARKETING
    5




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COMPETITION
  SEASONALITY
  MANUFACTURING
  RAW MATERIALS
  6




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TRADEMARKS
  LICENSES
  EMPLOYEES
  AVAILABLE INFORMATION
 www.deltaapparelinc.com
  ENVIRONMENTAL AND REGULATORY MATTERS
   7




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##### Table of Contents



ITEM 1A. RISK FACTORS
  The apparel industry is heavily influenced by general economic cycles.
 We are exposed to the risk of financial non-performance by our customers on a significant amount of
our sales.
 Our Activewear segment is subject to significant pricing pressures and we must implement our cost
reduction business strategies and plans to be successful.
 The apparel industry is highly competitive and we face significant competitive threats to our
business.
 Our success depends, in part, on our ability to anticipate evolving consumer preferences and
trends.
 8




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The price of our purchased raw materials is prone to significant fluctuations and volatility.
 We rely on our distribution operations to deliver product to customers.
 Our business operations rely on our information systems.
 Our business incurs significant freight and transportation costs.
 The price of energy is prone to significant fluctuations and volatility.
 We may be subject to the impairment of acquired intangible assets.
 We may be restricted in our ability to borrow under our credit agreement.
 9




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The cost to borrow under our credit agreement may impact our results of operations.
 The market price of Delta Apparel shares is affected by its illiquidity.
  Our principal shareholders may exert substantial influence.
 Our operations are subject to political and economic risks in Mexico, Honduras and El Salvador.
 We are subject to international trade regulations.
    10




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Our operations are subject to environmental regulation.
 We have a significant amount of independent contract production.
 We rely on the strength of our trademarks. TM
 A significant portion of our business relies upon license agreements.
 We depend on key management.
 
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  11




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ITEM 2. PROPERTIES
  Location
    
    Utilization
    
    SegmentDuluth, Georgia*
    
    Principal Headquarters
    
    Activewear and
Retail-ReadyMaiden Plant, Maiden, NC
    
    Knit/dye/finish/cut
    
    ActivewearCeiba Textiles, Honduras
    
    Knit/dye/finish/cut
    
    ActivewearFayetteville Plant 1, Fayetteville, NC
    
    Cut/sew/decoration/distribution/administration
    
    Retail-ReadyFayetteville Plant 2, Fayetteville, NC
    
    Knit/dye/finish/cut
    
    Retail-ReadyRowland Plant, Rowland, NC
    
    Sew
    
    Retail-ReadyHonduras Plant, San Pedro Sula, Honduras*
    
    Sew
    
    ActivewearCortes Plant, San Pedro Sula, Honduras*
    
    Sew
    
    ActivewearLa Paz Plant, La Paz, El Salvador*
    
    Sew
    
    ActivewearCampeche Sportswear Plant, Campeche, Mexico*
    
    Sew
    
    ActivewearMexico Plant, Campeche, Mexico*
    
    Sew
    
    ActivewearFunTees Design, Concord, NC*
    
    Research/development
    
    ActivewearFunTees Samples, Concord, NC*
    
    Research/development
    
    ActivewearShannon Drive Warehouse, Fayetteville, NC
    
    Warehouse
    
    Retail-ReadyDistribution Center, Clinton, TN*
    
    Distribution
    
    ActivewearDistribution Center, Santa Fe Springs, CA*
    
    Distribution
    
    Activewear and
Retail-ReadyDistribution Center, Miami, FL*
    
    Distribution
    
    Activewear and
Retail-ReadyDistribution Center, Cranbury NJ*
    
    Distribution
    
    Activewear and
Retail-ReadyDC Annex, Fayetteville, NC*
    
    Distribution
    
    Retail-ReadyDistribution Center, Lansing, MI*
    
    Distribution
    
    Retail-ReadyDistribution Center, Andalusia, AL*
    
    Distribution
    
    ActivewearSoffe Outlet Store, Smithfield, NC*
    
    Retail sales
    
    Retail-ReadyNew York Office, New York, NY*
(two office locations)
    
    Sales
    
    Activewear and
Retail-ReadyFunTees Executive Office, Concord, NC*
    
    Administration/sales
    
    ActivewearGreenville Executive Office, Greenville, SC*
    
    Administration
    
    Activewear and
Retail-ReadyLos Angeles Office, Los Angeles, CA*
    
    Administration/sales
    
    Retail-Ready
 
 *
    
    - Denotes leased location  
 ITEM 3. LEGAL PROCEEDINGS
   
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  12




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PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES.
 Market Information for Common Stock:
  Fiscal Year 2008
    
    Fiscal Year 2007High
    
    Low
    
    High
    
    LowFirst Quarter
    
    $
    19.99
    
    
    $
    16.38
    
    
    $
    19.85
    
    
    $
    16.48Second Quarter
    
    
    17.25
    
    
    
    6.06
    
    
    
    20.50
    
    
    
    16.45Third Quarter
    
    
    9.34
    
    
    
    6.04
    
    
    
    18.50
    
    
    
    14.91Fourth Quarter
    
    
    7.45
    
    
    
    2.09
    
    
    
    18.50
    
    
    
    14.97
 Dividends:
  First
    
    Second
    
    Third
    
    FourthQuarter
    
    Quarter
    
    Quarter
    
    QuarterFiscal Year 2008
    
    $
    0.05
    
    
    
    
    
    
    
    
    
    
    
    Fiscal Year 2007
    
    $
    0.05
    
    
    $
    0.05
    
    
    $
    0.05
    
    
    $
    0.05
   Purchases of our Own Shares of Common Stock:
 Securities Authorized for Issuance Under Equity Compensation Plans:
 13




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COMPARISON OF TOTAL RETURN AMONG DELTA APPAREL, INC., AMEX US MARKET INDEX, AND AMEX WHOLESALE &
RETAIL TRADE INDEX
  
 2003
    
    2004
    
    2005
    
    2006
    
    2007
    
    2008Delta Apparel, Inc.
    
    
    100.00
    
    
    
    150.16
    
    
    
    168.81
    
    
    
    223.29
    
    
    
    239.12
    
    
    
    48.88AMEX US Market Index
    
    
    100.00
    
    
    
    121.27
    
    
    
    135.15
    
    
    
    151.28
    
    
    
    179.95
    
    
    
    161.47AMEX Wholesale & Retail Trade Index
    
    
    100.00
    
    
    
    122.47
    
    
    
    148.04
    
    
    
    198.37
    
    
    
    248.24
    
    
    
    215.24
  
 ITEM 6. SELECTED FINANCIAL DATA
  14




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##### Table of Contents



Fiscal Year EndedJune 28,
    
    
    June 30,
    
    
    July 1,
    
    
    July 2,
    
    
    July 3,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(In thousands, except per share amounts)Statement of Operations Data:Net sales
    
    $
    322,034
    
    
    $
    312,438
    
    
    $
    270,108
    
    
    $
    228,065
    
    
    $
    208,113Cost of goods sold
    
    
    (257,319
    )
    
    
    (239,365
    )
    
    
    (190,222
    )
    
    
    (174,156
    )
    
    
    (159,852
    )Selling, general and administrative expenses
    
    
    (59,898
    )
    
    
    (59,187
    )
    
    
    (53,530
    )
    
    
    (37,881
    )
    
    
    (31,043
    )Other income (loss)
    
    
    132
    
    
    
    (89
    )
    
    
    657
    
    
    
    4,117
    
    
    
    (192
    )Restructuring costs
    
    
    (62
    )
    
    
    (1,498
    )
    
    
    
    
    
    
    
    
    
    
    Operating income
    
    
    4,887
    
    
    
    12,299
    
    
    
    27,013
    
    
    
    20,145
    
    
    
    17,026Interest expense, net
    
    
    (6,042
    )
    
    
    (5,157
    )
    
    
    (3,819
    )
    
    
    (3,022
    )
    
    
    (2,622
    )(Loss) income before income taxes
    
    
    (1,155
    )
    
    
    7,142
    
    
    
    23,194
    
    
    
    17,123
    
    
    
    14,404(Benefit) provision for income taxes
    
    
    (647
    )
    
    
    1,471
    
    
    
    8,350
    
    
    
    5,880
    
    
    
    4,674Extraordinary gain, net of taxes
    
    
    
    
    
    
    672
    
    
    
    
    
    
    
    
    
    
    
    Net (loss) income
    
    $
    (508
    )
    
    $
    6,343
    
    
    $
    14,844
    
    
    $
    11,243
    
    
    $
    9,730Basic earnings per common share:(Loss) income before extraordinary gain
    
    $
    (0.06
    )
    
    $
    0.67
    
    
    $
    1.73
    
    
    $
    1.35
    
    
    $
    1.19Extraordinary gain, net of income taxes
    
    
    
    
    
    
    0.08
    
    
    
    
    
    
    
    
    
    
    
    Net (loss) income
    
    $
    (0.06
    )
    
    $
    0.75
    
    
    $
    1.73
    
    
    $
    1.35
    
    
    $
    1.19Diluted earnings per common share:(Loss) income before extraordinary gain
    
    $
    (0.06
    )
    
    $
    0.65
    
    
    $
    1.71
    
    
    $
    1.33
    
    
    $
    1.16Extraordinary gain, net of income taxes
    
    
    
    
    
    
    0.08
    
    
    
    
    
    
    
    
    
    
    
    Net (loss) income
    
    $
    (0.06
    )
    
    $
    0.73
    
    
    $
    1.71
    
    
    $
    1.33
    
    
    $
    1.16Dividends Declared per Common Share
    
    $
    0.050
    
    
    $
    0.200
    
    
    $
    0.170
    
    
    $
    0.145
    
    
    $
    0.125Balance Sheet Data (at year end):Working capital
    
    $
    133,917
    
    
    $
    120,645
    
    
    $
    103,210
    
    
    $
    86,910
    
    
    $
    94,408Total assets
    
    
    261,623
    
    
    
    232,790
    
    
    
    203,123
    
    
    
    159,514
    
    
    
    169,379Total long-term debt, less current maturities
    
    
    95,542
    
    
    
    70,491
    
    
    
    46,967
    
    
    
    17,236
    
    
    
    29,246Shareholders equity
    
    
    104,893
    
    
    
    103,669
    
    
    
    100,988
    
    
    
    86,464
    
    
    
    75,492
 
 ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 BUSINESS OUTLOOK
    15




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EARNINGS GUIDANCE
   RESULTS OF OPERATIONS
 Overview
    Quarterly Financial Data
  16




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Fiscal Year 2008 versus Fiscal Year 2007
          Fiscal Year 2007 versus Fiscal Year 2006
  17




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LIQUIDITY AND CAPITAL RESOURCES
 Credit Facility and Other Financial Obligations
  18




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19




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Derivative Instruments
    Operating Cash Flows
  Investing Cash Flows
   Financing Activities
  20




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Future Liquidity and Capital Resources
   Payments Due by Period (in thousands)Less than
    
    
    1 - 3
    
    
    3  5
    
    
    After 5Total
    
    
    1 year
    
    
    years
    
    
    years
    
    
    yearsContractual Obligations:Long-term debt (a)
    
    $
    102,322
    
    
    $
    6,780
    
    
    $
    94,378
    
    
    $
    1,164
    
    
    $
    Operating leases
    
    
    42,207
    
    
    
    8,446
    
    
    
    17,866
    
    
    
    11,482
    
    
    
    4,413Letters of credit
    
    
    874
    
    
    
    874
    
    
    
    
    
    
    
    
    
    
    
    Purchase obligations
    
    
    19,645
    
    
    
    19,645
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    165,048
    
    
    $
    35,745
    
    
    $
    112,244
    
    
    $
    12,646
    
    
    $
    4,413
 
 (a)
    
    We exclude interest payments from these amounts as the cash outlay for the interest is
unknown and could not be reliably estimated as the majority of the debt is under a
revolving credit facility. Interest payments will be determined based upon the daily
outstanding balance of the revolving credit facility and the prevailing interest rate
during that time. The interest on the Junkfood Seller Note is immaterial and therefore was
excluded. Off-Balance Sheet Arrangements
  Dividends and Purchases of our Own Shares
   21




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Dividend Program
  CRITICAL ACCOUNTING POLICIES
   Revenue Recognition and Accounts Receivable
   Inventories
  Self Insurance
  22




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Share-Based Compensation
 Share-Based Payment
 Income Taxes
 , Accounting for Income Taxes
 RECENT ACCOUNTING STANDARDS
 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
 Fair Value Measurements
 The Fair Value Option for Financial
Assets and Financial Liabilities
 Non-controlling Interests in Consolidated
Financial Statements
 23




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Business Combinations
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Commodity Risk Sensitivity
    Interest Rate Sensitivity
  24




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Derivatives
   
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   Managements Annual Report on Internal Control over Financial Reporting
  Internal Control  Integrated Framework
 25




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Changes in Internal Control over Financial Reporting
  Report of Independent Registered Public Accounting Firm
         
 26




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ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  www.deltaapparelinc.com
 
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
   Number of securitiesWeighted-average
    
    
    remaining available forNumber of securities to
    
    
    exercise price of
    
    
    future issuance under equitybe issued upon exercise
    
    
    outstanding
    
    
    compensation plansof outstanding options,
    
    
    options, warrants
    
    
    (excluding securitiesPlan Category
    
    warrants and rights
    
    
    and rights
    
    
    reflected in column (a))(a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders
    
    
    
    
    
    
    
    
    
    
    Equity compensation
plans not approved
by security holders
    
    
    1,070,050
    
    
    $
    11.23
    
    
    
    490,012Total
    
    
    1,070,050
    
    
    $
    11.23
    
    
    
    490,012
  27




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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  
 PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  
    
    Report of Independent Registered Public Accounting Firm.
    
    Consolidated Balance Sheets as of June 28, 2008 and June 30, 2007
    
    Consolidated Statements of Operations for the years ended June 28, 2008, June 30, 2007
and July 1, 2006.
    
    Consolidated Statements of Shareholders Equity for the years ended June 28, 2008, June
30, 2007 and July 1, 2006.
    
    Consolidated Statements of Cash Flows for the years ended June 28, 2008, June 28, 2007
and July 1, 2006.
    
    Notes to Consolidated Financial Statements.
        28




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SIGNATURES
  DELTA APPAREL, INC.

(Registrant)August 28, 2008

Date
    
    By: /s/ Deborah H. Merrill

Deborah H. MerrillVice President, Chief FinancialOfficer and Treasurer(principal financial and accounting officer)
  /s/ David S. Fraser
    
    8-25-08
    
    /s/ E. Erwin Maddrey, II
    
    8-23-08David S. Fraser
    
    Date
    
    E. Erwin Maddrey, II
    
    DateDirector
    
    
    
    Director/s/ William F. Garrett
    
    8-22-08
    
    /s/ Deborah H. Merrill
    
    8-28-08William F. Garrett
    
    Date
    
    Deborah H. Merrill
    
    DateDirector
    
    
    
    Vice President, Chief FinancialOfficer and Treasurer (principalfinancial and accounting officer)/s/ Elizabeth J. Gatewood
    
    8-22-08
    
    /s/ Buck A. Mickel
    
    8-22-08Elizabeth J. Gatewood, Ph.D.
    
    Date
    
    Buck A. Mickel
    
    DateDirector
    
    
    
    Director/s/ Robert W. Humphreys
    
    8-28-08
    
    /s/ David Peterson
    
    8-25-08Robert W. Humphreys
    
    Date
    
    David Peterson
    
    DatePresident, Chief Executive
Officer
    
    
    
    Directorand Director/s/ Max Lennon
    
    8-22-08Max Lennon
    
    DateDirector
 31




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Delta Apparel, Inc. and Subsidiaries
 Index to Consolidated Financial Statements
 Reports of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of June 28, 2008 and June 30, 2007
    
    
    F-3Consolidated Statements of Operations for the years ended June 28, 2008, June 30, 2007 and July 1, 2006
    
    
    F-4Consolidated Statements of Shareholders Equity and Comprehensive Income (Loss) for the years ended
June 28, 2008, June 30, 2007 and July 1, 2006
    
    
    F-5Consolidated Statements of Cash Flows for the years ended June 28, 2008, June 30, 2007 and July 1, 2006
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7
 F- 1




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Report of Independent Registered Public Accounting Firm
     Accounting for Uncertainty in Income
Taxesan Interpretation of FASB Statement No. 109
   
 F- 2




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Delta Apparel, Inc. and Subsidiaries
Consolidated Balance Sheets
 June 28, 2008
    
    
    June 30, 2007AssetsCurrent assets:Cash
    
    $
    586
    
    
    $
    792Accounts receivable, less allowances of $2,813
and $1,943, respectively
    
    
    61,048
    
    
    
    45,326Other receivables
    
    
    964
    
    
    
    1,118Income tax receivable
    
    
    1,007
    
    
    
    2,192Inventories, net
    
    
    124,746
    
    
    
    124,604Prepaid expenses and other current assets
    
    
    2,916
    
    
    
    2,597Deferred income taxes
    
    
    2,542
    
    
    
    1,891Total current assets
    
    
    193,809
    
    
    
    178,520Property, plant and equipment, net
    
    
    40,042
    
    
    
    29,407Goodwill
    
    
    16,814
    
    
    
    14,222Intangibles, net
    
    
    7,603
    
    
    
    8,091Other assets
    
    
    3,355
    
    
    
    2,550$
    261,623
    
    
    $
    232,790Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    35,423
    
    
    $
    35,906Accrued expenses
    
    
    17,689
    
    
    
    19,042Current portion of long-term debt
    
    
    6,780
    
    
    
    2,927Total current liabilities
    
    
    59,892
    
    
    
    57,875Long-term debt, less current maturities
    
    
    95,542
    
    
    
    70,491Deferred income taxes
    
    
    578
    
    
    
    749Other liabilities
    
    
    718
    
    
    
    6Total liabilities
    
    
    156,730
    
    
    
    129,121Commitments and contingenciesShareholders equity:Preferred stock2,000,000 shares authorized, none issued
and outstanding.
    
    
    
    
    
    
    Common stock $.01 par value, 15,000,000 shares authorized,
9,646,972 shares issued, and 8,496,749 and 8,398,395 shares
outstanding as of June 28, 2008 and June 30, 2007, respectively.
    
    
    96
    
    
    
    96Additional paid-in capital
    
    
    57,431
    
    
    
    55,510Retained earnings
    
    
    57,307
    
    
    
    58,235Accumulated other comprehensive (loss) income
    
    
    (441
    )
    
    
    140Treasury stock 1,150,223 and 1,248,577 shares as of June 28, 2008
and June 30, 2007, respectively.
    
    
    (9,500
    )
    
    
    (10,312
    )Total shareholders equity
    
    
    104,893
    
    
    
    103,669$
    261,623
    
    
    $
    232,790
  F- 3




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##### Table of Contents



Delta Apparel, Inc. and Subsidiaries
Consolidated Statements of Operations
 Year EndedJune 28, 2008
    
    
    June 30, 2007
    
    
    July 1, 2006Net sales
    
    $
    322,034
    
    
    $
    312,438
    
    
    $
    270,108Cost of goods sold
    
    
    257,319
    
    
    
    239,365
    
    
    
    190,222Gross profit
    
    
    64,715
    
    
    
    73,073
    
    
    
    79,886Selling, general and administrative expenses
    
    
    59,898
    
    
    
    59,187
    
    
    
    53,530Other (income) expense, net
    
    
    (132
    )
    
    
    89
    
    
    
    (657
    )Restructuring costs
    
    
    62
    
    
    
    1,498
    
    
    
    Operating income
    
    
    4,887
    
    
    
    12,299
    
    
    
    27,013Interest expense, net
    
    
    6,042
    
    
    
    5,157
    
    
    
    3,819(Loss) income before (benefit) provision for income
taxes and extraordinary gain
    
    
    (1,155
    )
    
    
    7,142
    
    
    
    23,194(Benefit) provision for income taxes
    
    
    (647
    )
    
    
    1,471
    
    
    
    8,350(Loss) income before extraordinary gain
    
    
    (508
    )
    
    
    5,671
    
    
    
    14,844Extraordinary gain
    
    
    
    
    
    
    672
    
    
    
    Net (loss) income
    
    $
    (508
    )
    
    $
    6,343
    
    
    $
    14,844Basic (loss) earnings per share(Loss) income before extraordinary gain
    
    
    ($0.06
    )
    
    $
    0.67
    
    
    $
    1.73Extraordinary gain
    
    
    
    
    
    
    0.08
    
    
    
    Net (loss) income
    
    
    ($0.06
    )
    
    $
    0.75
    
    
    $
    1.73Diluted (loss) earnings per share(Loss) income before extraordinary gain
    
    
    ($0.06
    )
    
    $
    0.65
    
    
    $
    1.71Extraordinary gain
    
    
    
    
    
    
    0.08
    
    
    
    Net (loss) income
    
    
    ($0.06
    )
    
    $
    0.73
    
    
    $
    1.71Weighted average number of shares outstanding
    
    
    8,480
    
    
    
    8,506
    
    
    
    8,590Dilutive effect of stock options
    
    
    
    
    
    
    169
    
    
    
    75Weighted average number of shares assuming dilution
    
    
    8,480
    
    
    
    8,675
    
    
    
    8,665Cash dividends declared per common share
    
    $
    0.05
    
    
    $
    0.20
    
    
    $
    0.17
  F- 4




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##### Table of Contents



Delta Apparel, Inc. and Subsidiaries
Consolidated Statements of Shareholders Equity and Comprehensive (Loss) Income
 AccumulatedAdditional
    
    
    
    
    
    OtherCommon Stock
    
    Paid-In
    
    Retained
    
    Comprehensive
    
    Treasury StockShares
    
    Amount
    
    Capital
    
    Earnings
    
    Income (Loss)
    
    Shares
    
    Amount
    
    TotalBalance at July 2, 2005
    
    
    9,646,972
    
    
    $
    96
    
    
    $
    53,867
    
    
    $
    39,106
    
    
    $
    
    
    
    
    1,124,920
    
    
    $
    (6,605
    )
    
    $
    86,464Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,844
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,844Treasury stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72,477
    
    
    
    (1,252
    )
    
    
    (1,252
    )Stock grant
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    
    
    
    
    (4,844
    )
    
    
    29
    
    
    
    70Stock options exercised under
Awards Plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    805
    
    
    
    
    
    
    
    (94,402
    )
    
    
    554
    
    
    
    1,359Stock options exercised under
Option Plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76
    
    
    
    
    
    
    
    (14,000
    )
    
    
    82
    
    
    
    158Cash dividend ($0.17 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,460
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,460
    )Employee stock based compensation
    
    
    
    
    
    
    
    
    
    
    805
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    805Balance at July 1, 2006
    
    
    9,646,972
    
    
    
    96
    
    
    
    54,672
    
    
    
    53,412
    
    
    
    
    
    
    
    1,084,151
    
    
    
    (7,192
    )
    
    
    100,988Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,343
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,343Unrealized gain on derivatives
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    140
    
    
    
    
    
    
    
    
    
    
    
    140Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,483Treasury stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    196,770
    
    
    
    (3,378
    )
    
    
    (3,378
    )Stock grant
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    56
    
    
    
    
    
    
    
    (4,844
    )
    
    
    33
    
    
    
    89Employee stock based compensation
    
    
    
    
    
    
    
    
    
    
    838
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    838Stock options exercised under
Option Plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    123
    
    
    
    
    
    
    
    (27,500
    )
    
    
    225
    
    
    
    348Cash dividend ($0.20 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,699
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,699
    )Balance at June 30, 2007
    
    
    9,646,972
    
    
    
    96
    
    
    
    55,510
    
    
    
    58,235
    
    
    
    140
    
    
    
    1,248,577
    
    
    
    (10,312
    )
    
    
    103,669Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (508
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (508
    )Unrealized loss on derivatives
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (581
    )
    
    
    
    
    
    
    
    
    
    
    (581
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,089
    )Stock grant
    
    
    
    
    
    
    
    
    
    
    49
    
    
    
    
    
    
    
    
    
    
    
    (5,438
    )
    
    
    45
    
    
    
    94Employee stock based compensation
    
    
    
    
    
    
    
    
    
    
    1,030
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,030Stock options exercised under
Awards Plan
    
    
    
    
    
    
    
    
    
    
    842
    
    
    
    
    
    
    
    
    
    
    
    (92,916
    )
    
    
    767
    
    
    
    1,609Cash dividend ($0.05 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (420
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (420
    )Balance at June 28, 2008
    
    
    9,646,972
    
    
    $
    96
    
    
    $
    57,431
    
    
    $
    57,307
    
    
    $
    (441
    )
    
    
    1,150,223
    
    
    $
    (9,500
    )
    
    $
    104,893
  F- 5




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##### Table of Contents



Delta Apparel, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
 Year EndedJune 28, 2008
    
    
    June 30, 2007
    
    
    July 1, 2006Operating activities:Net (loss) income
    
    $
    (508
    )
    
    $
    6,343
    
    
    $
    14,844Adjustments to reconcile net (loss) income
to net cash (used in) provided by operating activities:Depreciation
    
    
    5,843
    
    
    
    4,785
    
    
    
    4,329Amortization
    
    
    488
    
    
    
    488
    
    
    
    421(Benefit from) provision for deferred income taxes
    
    
    (822
    )
    
    
    24
    
    
    
    (506
    )Provision for (benefit from) allowances on accounts
receivable, net
    
    
    870
    
    
    
    (226
    )
    
    
    (711
    )Non-cash stock compensation
    
    
    1,208
    
    
    
    1,778
    
    
    
    2,959Extraordinary gain on earn-out payment
    
    
    
    
    
    
    (672
    )
    
    
    Loss (gain) on disposal and impairment of property
    
    
    105
    
    
    
    1,758
    
    
    
    (73
    )Changes in operating assets and liabilities, net of
effect of acquisitions:Accounts receivable
    
    
    (16,438
    )
    
    
    10,784
    
    
    
    480Inventories
    
    
    (142
    )
    
    
    (1,541
    )
    
    
    (807
    )Prepaid expenses and other current assets
    
    
    (319
    )
    
    
    237
    
    
    
    (549
    )Other non-current assets
    
    
    (805
    )
    
    
    50
    
    
    
    360Accounts payable
    
    
    (483
    )
    
    
    (1,147
    )
    
    
    3,581Accrued expenses
    
    
    (2,420
    )
    
    
    1,288
    
    
    
    (1,262
    )Income taxes
    
    
    1,185
    
    
    
    (3,178
    )
    
    
    506Other liabilities
    
    
    131
    
    
    
    (321
    )
    
    
    (3,389
    )Net cash (used in) provided by operating activities
    
    
    (12,107
    )
    
    
    20,450
    
    
    
    20,183Investing activities:Purchases of plant and equipment
    
    
    (16,590
    )
    
    
    (10,915
    )
    
    
    (5,381
    )Proceeds from sale of property, plant and equipment
    
    
    7
    
    
    
    6
    
    
    
    182Cash paid for businesses, net of cash acquired
    
    
    
    
    
    
    (27,430
    )
    
    
    (28,237
    )Cash invested in joint venture
    
    
    
    
    
    
    
    
    
    
    (2,248
    )Proceeds from sale of joint venture
    
    
    
    
    
    
    
    
    
    
    50Net cash used in investing activities
    
    
    (16,583
    )
    
    
    (38,339
    )
    
    
    (35,634
    )Financing activities:Repayment of Soffe revolving credit facility, net
    
    
    
    
    
    
    
    
    
    
    (11,781
    )Proceeds from long-term debt
    
    
    353,703
    
    
    
    317,634
    
    
    
    156,372Repayment of long-term debt
    
    
    (324,799
    )
    
    
    (294,864
    )
    
    
    (126,242
    )Dividends paid
    
    
    (420
    )
    
    
    (1,699
    )
    
    
    (1,460
    )Treasury stock acquired
    
    
    
    
    
    
    (3,378
    )
    
    
    (1,252
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    346
    
    
    
    158Net cash provided by financing activities
    
    
    28,484
    
    
    
    18,039
    
    
    
    15,795(Decrease) increase in cash
    
    
    (206
    )
    
    
    150
    
    
    
    344Cash at beginning of year
    
    
    792
    
    
    
    642
    
    
    
    298Cash at end of year
    
    $
    586
    
    
    $
    792
    
    
    $
    642Supplemental cash flow information:Cash paid during the year for interest
    
    $
    5,219
    
    
    $
    5,292
    
    
    $
    3,475Cash (refunded) paid during the year for income taxes
    
    $
    (1,394
    )
    
    $
    4,781
    
    
    $
    8,350Non-cash financing activityissuance of common stock
    
    $
    1,703
    
    
    $
    89
    
    
    $
    1,428
  F- 6




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##### Table of Contents



Delta Apparel, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
 NOTE 1THE COMPANY
  NOTE 2SIGNIFICANT ACCOUNTING POLICIES
 (a) Basis of Presentation:
  (b) Fiscal Year:
 (c) Use of Estimates:
 (d) Revenue Recognition:
 (e) Cash:
 (f) Accounts Receivable: Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
 F- 7




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##### Table of Contents



(g) Inventories:
 (h) Property, Plant and Equipment:
 (i) Impairment of Long-Lived Assets: Accounting for the Impairment or Disposal of Long-Lived Assets
 (j) Goodwill and Intangibles:
 (k) Impairment of Goodwill and Intangibles:
 (l) Self Insurance Reserves:
 (m) Internally Developed Software Costs. Accounting for Computer Software Developed for or obtained for Internal
Use
 F- 8




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##### Table of Contents



(n) Income Taxes:
 (o) Cost of Goods Sold:
 (p) Selling, General and Administrative Expense:
 (q) Advertising Costs: Accounting for Consideration
Given by a Vendor to a Customer (Including a Reseller of the Vendors Products)
 (r) Foreign Currency Translation:
 (s) (Loss) Earnings per Share:
 (t) Yarn and Cotton Procurements:
 (u) Stock Option and Incentive Award Plans: Share-Based Payment Share-Based
Payment
 F- 9




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##### Table of Contents



(v) Comprehensive (Loss) Income:
 (w) Fair Value of Financial Instruments:
 (x) Derivatives:
 Accounting for Derivative Instruments and Hedging Activities
   (y) Reclassifications:
 (z) Recent Accounting Pronouncements: Accounting for Certain Hybrid Financial Instruments  an amendment of FASB Statements No. 133
and 140
 Accounting for Uncertainty in Income Taxes 
an Interpretation of FASB Statement No.109 Accounting for Income Taxes
 F- 10




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##### Table of Contents



Fair Value Measurements
 The Fair Value Option for Financial
Assets and Financial Liabilities
 Non-controlling Interests in Consolidated
Financial Statements
 Business Combinations
  NOTE 3ACQUISITIONS
 FunTees Acquisition
  Junkfood Acquisition
  F- 11




---



##### Table of Contents



NOTE 4INVENTORIES
  June 28,
    
    
    June 30,2008
    
    
    2007Raw materials
    
    $
    10,881
    
    
    $
    11,922Work in process
    
    
    23,198
    
    
    
    27,723Finished goods
    
    
    90,667
    
    
    
    84,959$
    124,746
    
    
    $
    124,604
  NOTE 5PROPERTY, PLANT AND EQUIPMENT
  Estimated
    
    
    June 28,
    
    
    June 30,Useful Life
    
    
    2008
    
    
    2007Land and land improvements
    

    N/A

    
    $
    993
    
    
    $
    1,243Buildings
    
    10-20 years
    
    
    7,189
    
    
    
    8,144Machinery and equipment
    
    5-15 years
    
    
    56,938
    
    
    
    40,490Computers and software
    
    3-10 years
    
    
    10,926
    
    
    
    8,065Furniture and fixtures
    
    7 years
    
    
    3,897
    
    
    
    3,665Leasehold improvements
    
    3-10 years
    
    
    1,712
    
    
    
    1,720Automobiles
    
    5 years
    
    
    367
    
    
    
    361Construction in progress
    

    N/A

    
    
    3,078
    
    
    
    8,82785,100
    
    
    
    72,515Less accumulated depreciation and amortization
    
    
    
    
    
    
    (45,058
    )
    
    
    (43,108
    )$
    40,042
    
    
    $
    29,407
 NOTE 6GOODWILL AND INTANGIBLE ASSETS
  June 28,
    
    June 30,
    
    Economic2008
    
    2007
    
    LifeGoodwill
    
    $
    16,814
    
    
    $
    14,222
    
    
    
    N/AIntangibles:Tradename/trademarks
    
    
    1,530
    
    
    
    1,530
    
    
    20 yrsCustomer relationships
    
    
    7,220
    
    
    
    7,220
    
    
    20 yrsNon-compete agreements
    
    
    250
    
    
    
    250
    
    
    5 yrsTotal intangibles
    
    
    9,000
    
    
    
    9,000Less accumulated amortization
    
    
    (1,397
    )
    
    
    (909
    )$
    7,603
    
    
    $
    8,091
  F- 12




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##### Table of Contents



NOTE 7ACCRUED EXPENSES
  June 28,
    
    
    June 30,2008
    
    
    2007Accrued employee compensation and benefits
    
    $
    6,310
    
    
    $
    11,936Taxes accrued and withheld
    
    
    516
    
    
    
    496Accrued insurance
    
    
    734
    
    
    
    659Accrued advertising
    
    
    657
    
    
    
    862Accrued earnout payment
    
    
    2,592
    
    
    
    Accrued royalties
    
    
    1,682
    
    
    
    973Other
    
    
    5,198
    
    
    
    4,116$
    17,689
    
    
    $
    19,042
 NOTE 8LONG-TERM DEBT
  June 28,
    
    
    June 30,2008
    
    
    2007Revolving credit facility secured by receivables,
inventory, property and equipment, interest at
prime rate or LIBOR rate plus an applicable margin
(4.66% at June 28, 2008) due August 2012
    
    $
    87,120
    
    
    $
    68,418Capital expansion loan agreement with Banco
Ficohsa, a Honduran bank, interest at LIBOR plus
2%, payable monthly, (6.0% at June 28, 2008) with
a five year term (denominated in U. S. dollars)
    
    
    13,952
    
    
    
    3,000Junkfood Seller note, interest at 9% with interest
payable quarterly, principal amount of $1,250 due
August 2008.
    
    
    1,250
    
    
    
    2,000102,322
    
    
    
    73,418Less current installments
    
    
    (6,780
    )
    
    
    (2,927
    )Long-term debt, excluding current installments
    
    $
    95,542
    
    
    $
    70,491
     F- 13




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##### Table of Contents



Fiscal Year2009
    
    $
    6,7802010
    
    
    5,5302011
    
    
    5,5302012
    
    
    83,3182013
    
    
    1,164$
    102,322
 NOTE 9INCOME TAXES
  Year endedJune 28,
    
    
    June 30,
    
    
    July 1,2008
    
    
    2007
    
    
    2006Current:Federal
    
    $
    (687
    )
    
    $
    (10
    )
    
    $
    7,471State
    
    
    599
    
    
    
    140
    
    
    
    1,308Foreign
    
    
    119
    
    
    
    216
    
    
    
    77Total current
    
    
    31
    
    
    
    346
    
    
    
    8,856Deferred:Federal
    
    $
    (539
    )
    
    
    869
    
    
    
    (433
    )State
    
    
    (139
    )
    
    
    256
    
    
    
    (73
    )Total deferred
    
    
    (678
    )
    
    
    1,125
    
    
    
    (506
    )(Benefit) provision for income taxes
    
    $
    (647
    )
    
    $
    1,471
    
    
    $
    8,350
  F- 14




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##### Table of Contents



Year endedJune 28,
    
    
    June 30,
    
    
    July 1,2008
    
    
    2007
    
    
    2006Income tax expense at the statutory rate
    
    $
    (393
    )
    
    $
    2,428
    
    
    $
    8,118State income tax expense net of federal income tax effect
    
    
    (375
    )
    
    
    257
    
    
    
    803Rate difference and nondeductible items in foreign jurisdictions
    
    
    (33
    )
    
    
    (72
    )
    
    
    8Permanent reinvestment of foreign earnings
    
    
    (580
    )
    
    
    (271
    )
    
    
    (297
    )Section 199 deduction under the American Jobs Creation Act of 2004
    
    
    
    
    
    
    14
    
    
    
    (237
    )Valuation allowance adjustments
    
    
    681
    
    
    
    109
    
    
    
    Nondeductible amortization and other permanent differences
    
    
    (138
    )
    
    
    (643
    )
    
    
    42Amended return and charitable contribution adjustments
    
    
    177
    
    
    
    (348
    )
    
    
    Other
    
    
    14
    
    
    
    (3
    )
    
    
    (87
    )Income tax expense
    
    $
    (647
    )
    
    $
    1,471
    
    
    $
    8,350
  June 28,
    
    
    June 30,2008
    
    
    2007Deferred tax assets:State net operating loss carryforward
    
    $
    1,427
    
    
    $
    840Charitable donation carryforward
    
    
    834
    
    
    
    507Derivative  interest rate contract
    
    
    276
    
    
    
    Currently nondeductible accruals
    
    
    3,196
    
    
    
    2,133Gross deferred tax assets
    
    
    5,733
    
    
    
    3,480Less valuation allowance
    
    
    (936
    )
    
    
    (255
    )Net deferred tax assets
    
    
    4,797
    
    
    
    3,225Deferred tax liabilities:Depreciation
    
    
    (1,670
    )
    
    
    (1,067
    )Goodwill and intangibles
    
    
    (1,161
    )
    
    
    (693
    )Other
    
    
    (2
    )
    
    
    (323
    )Gross deferred tax liabilities
    
    
    (2,833
    )
    
    
    (2,083
    )Net deferred tax asset
    
    $
    1,964
    
    
    $
    1,142
    F- 15




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##### Table of Contents



NOTE 10LEASES
   Fiscal Year2009
    
    $
    8,4462010
    
    
    6,9032011
    
    
    5,9992012
    
    
    4,9642013
    
    
    4,352Thereafter
    
    
    11,543$
    42,207
  NOTE 11EMPLOYEE BENEFIT PLANS
   June 28,
    
    
    June 30,2008
    
    
    2007Change in benefit obligations:Balance at beginning of year
    
    $
    964
    
    
    $
    939Interest cost
    
    
    80
    
    
    
    82Benefits paid
    
    
    (99
    )
    
    
    (58
    )Actuarial adjustment
    
    
    
    
    
    
    1Balance at end of year
    
    $
    945
    
    
    $
    964
 NOTE 12STOCK OPTIONS AND INCENTIVE STOCK AWARDS
  Option Plan
  F- 16




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##### Table of Contents



2008
    
    2007
    
    2006Risk-free interest rate
    
    
    3.11
    %
    
    
    4.85
    %
    
    
    4.00
    %Expected life
    
    6.7
    yrs
    
    6
    yrs

    
    7
    yrsExpected volatility
    
    
    34.3
    %
    
    
    31.7
    %
    
    
    35.8
    %Expected dividend yield
    
    
    1.20
    %
    
    
    1.13
    %
    
    
    1.30
    %Weighted-average per share fair
value of options granted
    
    $
    2.95
    
    
    $
    6.16
    
    
    $
    5.18
   WeightedAverageWeighted
    
    Remaining
    
    AggregateAverage
    
    Contractual
    
    Intrinsic ValueShares
    
    Exercise Price
    
    Term
    
    (thousands)Outstanding at June 30, 2007
    
    
    810,500
    
    
    $
    13.44Granted
    
    
    286,000
    
    
    $
    8.30Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (100,000
    )
    
    $
    12.47Expired
    
    
    
    
    
    
    Outstanding at June 28, 2008
    
    
    996,500
    
    
    $
    12.06
    
    
    
    7.5
    
    
    
    Exercisable at June 28, 2008
    
    
    555,500
    
    
    $
    13.28
    
    
    
    6.9
    
    
    
    
   F- 17




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##### Table of Contents



Weighted-AverageGrant-DateShares
    
    
    Fair ValueNonvested at June 30, 2007
    
    
    366,000
    
    
    $
    5.37Granted
    
    
    286,000
    
    
    $
    2.95Vested
    
    
    (183,000
    )
    
    $
    5.37Forfeited
    
    
    (28,000
    )
    
    $
    4.38Expired
    
    
    
    
    
    
    Nonvested at June 28, 2008
    
    
    441,000
    
    
    $
    3.86
  Transition Election Related to
Accounting for the Tax Effects of Share-Based Payment Awards
  Award Plan
   WeightedAverageExerciseShares
    
    
    PriceNonvested at June 30, 2007
    
    
    92,916
    
    
    $
    0.01Granted
    
    
    76,950
    
    
    $
    0.01Vested
    
    
    (92,916
    )
    
    $
    0.01Forfeited
    
    
    (3,400
    )
    
    $
    0.01Expired
    
    
    
    
    
    
    Nonvested at June 28, 2008
    
    
    73,550
    
    
    $
    0.01
  F- 18




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##### Table of Contents



NOTE 13BUSINESS SEGMENTS
      CorporateActivewear
    
    Retail-Ready
    
    andApparel
    
    Apparel
    
    Unallocated
    
    ConsolidatedFiscal Year 2008:Net sales
    
    $
    179,394
    
    
    $
    142,640
    
    
    $
    
    
    
    $
    322,034Segment operating (loss) income
    
    
    (14,027
    )
    
    
    18,914
    
    
    
    
    
    
    
    4,887Segment assets
    
    
    146,499
    
    
    
    115,124
    
    
    
    
    
    
    
    261,623Purchases of property, plant and equipment
    
    
    14,148
    
    
    
    2,442
    
    
    
    
    
    
    
    16,590Fiscal Year 2007:Net sales
    
    $
    178,249
    
    
    $
    134,189
    
    
    $
    
    
    
    $
    312,438Segment operating (loss) income
    
    
    (4,826
    )
    
    
    17,082
    
    
    
    43
    
    
    
    12,299Segment assets
    
    
    126,086
    
    
    
    106,704
    
    
    
    
    
    
    
    232,790Purchases of property, plant and equipment
    
    
    8,422
    
    
    
    2,493
    
    
    
    
    
    
    
    10,915Fiscal Year 2006:Net sales
    
    $
    136,666
    
    
    $
    133,442
    
    
    $
    
    
    
    $
    270,108Segment operating income
    
    
    7,556
    
    
    
    19,111
    
    
    
    346
    
    
    
    27,013Segment assets
    
    
    99,786
    
    
    
    103,337
    
    
    
    
    
    
    
    203,123Purchases of property, plant and equipment
    
    
    3,711
    
    
    
    1,670
    
    
    
    
    
    
    
    5,381
 F- 19




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##### Table of Contents



Year EndedJune 28,
    
    
    June 30,
    
    
    July 1,2008
    
    
    2007
    
    
    2006Segment operating income
    
    $
    4,887
    
    
    $
    12,299
    
    
    $
    27,013Unallocated interest expense
    
    
    6,042
    
    
    
    5,157
    
    
    
    3,819Consolidated (loss) income
before taxes
    
    $
    (1,155
    )
    
    $
    7,142
    
    
    $
    23,194
  June 28, 2008
    
    
    June 30, 2007Long Lived Assets:United States
    
    $
    19,388
    
    
    $
    21,392Honduras
    
    
    18,007
    
    
    
    5,568El Salvador
    
    
    978
    
    
    
    1,212Mexico
    
    
    1,632
    
    
    
    1,235Dominican Republic
    
    
    37
    
    
    
    All Foreign Countries
    
    
    20,654
    
    
    
    8,015Total Long-lived Assets
    
    $
    40,042
    
    
    $
    29,407
 NOTE 14COMMITMENTS AND CONTINGENCIES
 (a)
    
    Litigation
   (b)
    
    Purchase Contracts
  Yarn
    
    
    13,477Finished fabric
    
    
    1,802Finished apparel products
    
    
    4,366$
    19,645
 F- 20




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##### Table of Contents



(c)
    
    Letters of Credit
 As of June 28, 2008, we had outstanding standby letters of credit totaling $0.5 million and
outstanding commercial letters of credit totaling $0.4 million.
 NOTE 15RESTRUCTURING PLAN
  NOTE 16RELATED PARTY TRANSACTIONS
  NOTE 17QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
  2008 Quarter Ended
    
    2007 Quarter EndedSeptember 29 (b)
    
    December 29 (c)
    
    March 29 (d)
    
    June 28
    
    September 30
    
    December 30
    
    March 31
    
    June 30 (a)Net sales
    
    $
    72,562
    
    
    $
    68,780
    
    
    $
    75,364
    
    
    $
    105,328
    
    
    $
    62,680
    
    
    $
    72,949
    
    
    $
    85,013
    
    
    $
    91,796Gross profit
    
    
    12,991
    
    
    
    10,883
    
    
    
    15,710
    
    
    
    25,131
    
    
    
    17,336
    
    
    
    16,094
    
    
    
    20,719
    
    
    
    18,924Operating
(loss) income
    
    
    (1,192
    )
    
    
    (2,597
    )
    
    
    1,074
    
    
    
    7,602
    
    
    
    3,489
    
    
    
    2,521
    
    
    
    5,230
    
    
    
    1,059(Loss) income
before
extraordinary gain
    
    
    (1,548
    )
    
    
    (2,834
    )
    
    
    (385
    )
    
    
    4,259
    
    
    
    1,575
    
    
    
    633
    
    
    
    2,778
    
    
    
    685Net (loss) income
    
    
    (1,548
    )
    
    
    (2,834
    )
    
    
    (385
    )
    
    
    4,259
    
    
    
    2,247
    
    
    
    633
    
    
    
    2,778
    
    
    
    685Basic EPS
    
    $
    (0.18
    )
    
    $
    (0.33
    )

    
    $
    (0.05
    )
    
    $
    0.50
    
    
    $
    0.26
    
    
    $
    0.07
    
    
    $
    0.33
    
    
    $
    0.08Diluted EPS
    
    $
    (0.18
    )
    
    $
    (0.33
    )
    
    $
    (0.05
    )
    
    $
    0.50
    
    
    $
    0.26
    
    
    $
    0.07
    
    
    $
    0.32
    
    
    $
    0.08
 
 (a)
    
    The quarter ended June 30, 2007 includes excess manufacturing costs and restructuring
costs of $5.4 million and $1.5 million in gross profit and operating income, respectively.(b)
    
    The quarter ended September 29, 2007 includes excess manufacturing costs and
restructuring costs of $2.0 million and $0.1 million in gross profit and operating income
(loss), respectively.(c)
    
    The quarter ended December 29, 2007 includes excess manufacturing costs of $2.0 million
in gross profit.(d)
    
    The quarter ended March 29, 2008 includes excess manufacturing costs of $0.8 million in
gross profit. NOTE 18EXTRAORDINARY GAIN
  F- 21




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F- 22




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##### Table of Contents



SCHEDULE II  CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
 DELTA APPAREL, INC. AND SUBSIDIARIES
 ALLOWANCE FOR DOUBTFUL ACCOUNTS
 Beginning
    
    Purchase
    
    
    
    
    
    
    
    
    
    EndingBalance
    
    Accounting *
    
    Expense
    
    Write-Offs
    
    Balance2008
    
    $
    341
    
    
    $
    
    
    
    $
    1,348
    
    
    $
    (572
    )
    
    $
    1,1172007
    
    
    1,051
    
    
    
    
    
    
    
    467
    
    
    
    (1,177
    )
    
    
    3412006
    
    
    1,290
    
    
    
    
    
    
    
    (123
    )
    
    
    (116
    )
    
    
    1,051
 RETURNS AND ALLOWANCES
 Beginning
    
    Purchase
    
    
    
    
    
    
    
    
    
    EndingBalance
    
    Accounting *
    
    Expense
    
    Credits Issued
    
    Balance2008
    
    $
    1,602
    
    
    $
    
    
    
    $
    6,077
    
    
    $
    (5,984
    )
    
    $
    1,6952007
    
    
    1,118
    
    
    
    300
    
    
    
    9,894
    
    
    
    (9,710
    )
    
    
    1,6022006
    
    
    604
    
    
    
    987
    
    
    
    6,961
    
    
    
    (7,434
    )
    
    
    1,118
 TOTAL RESERVES FOR ALLOWANCES
 Beginning
    
    Purchase
    
    
    
    
    
    Write-Offs/
    
    EndingBalance
    
    Accounting *
    
    Expense
    
    Credits Issued
    
    Balance2008
    
    $
    1,943
    
    
    $
    
    
    
    $
    7,425
    
    
    $
    (6,556
    )
    
    $
    2,8122007
    
    
    2,169
    
    
    
    300
    
    
    
    10,361
    
    
    
    (10,887
    )
    
    
    1,9432006
    
    
    1,894
    
    
    
    987
    
    
    
    6,838
    
    
    
    (7,550
    )
    
    
    2,169
 MARKET AND OBSOLESCENCE RESERVE
 Beginning
    
    Purchase
    
    
    
    
    
    
    
    
    
    EndingBalance
    
    Accounting *
    
    Expense **
    
    Deductions **
    
    Balance2008
    
    $
    2,039
    
    
    $
    
    
    
    $
    176
    
    
    $
    
    
    
    $
    2,2152007
    
    
    1,614
    
    
    
    
    
    
    
    425
    
    
    
    
    
    
    
    2,0392006
    
    
    2,371
    
    
    
    220
    
    
    
    (977
    )
    
    
    
    
    
    
    1,614
 SELF INSURANCE RESERVE
 Beginning
    
    Purchase
    
    
    
    
    
    
    
    
    
    EndingBalance
    
    Accounting *
    
    Expense **
    
    Deductions **
    
    Balance2008
    
    $
    445
    
    
    $
    
    
    
    $
    150
    
    
    $
    
    
    
    $
    5952007
    
    
    478
    
    
    
    
    
    
    
    (33
    )
    
    
    
    
    
    
    4452006
    
    
    720
    
    
    
    
    
    
    
    (242
    )
    
    
    
    
    
    
    478
 DEFERRED TAX ASSET VALUATION ALLOWANCE
 Beginning
    
    Purchase
    
    
    
    
    
    
    
    
    
    EndingBalance
    
    Accounting *
    
    Expense **
    
    Deductions **
    
    Balance2008
    
    $
    255
    
    
    $
    
    
    
    $
    681
    
    
    $
    
    
    
    $
    9362007
    
    
    146
    
    
    
    
    
    
    
    109
    
    
    
    
    
    
    
    2552006
    
    
    146
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    146
 
 *
    
    Represents the allowance provided for as a result of the acquisition of the assets of
FunTees, Inc. on October 2, 2006 and the acquisition of the assets of Junkfood Clothing
Company on August 22, 2005.**
    
    Net change in the market and obsolescence and self insurance reserves are shown in the expense
column.