##### 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 July 3, 2010
 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
(State or other jurisdiction of 
incorporation or organization)
    
    58-2508794
(I.R.S. Employer Identification No.)
 322 South Main Street
Greenville, SC 29601
(Address of principal executive offices) (zip code)
 Registrants telephone number, including area code: (864) 232-5200
 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
    
    NYSE Amex
 Securities registered pursuant to Section 12(g) of the Act:
 o þ
 o þ
 þ o
 þ o
 þ
  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
   DOCUMENTS INCORPORATED BY REFERENCE:




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TABLE OF CONTENTS  PART IITEM 1. BUSINESSITEM 1A. RISK FACTORSITEM 1B. UNRESOLVED STAFF COMMENTSITEM 2. PROPERTIESITEM 3. LEGAL PROCEEDINGSPART IIITEM 4. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIESITEM 5. SELECTED FINANCIAL DATAITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 6A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREITEM 8A. CONTROLS AND PROCEDURESITEM 8B. OTHER INFORMATIONPART IIIITEM 9. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEITEM 10. EXECUTIVE COMPENSATIONITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER            MATTERSITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEITEM 13. PRINCIPAL ACCOUNTANT FEES AND SERVICESPART IVITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULESSIGNATURESEX-21EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2    Table of Contents  Cautionary Note Regarding Forward Looking Statements
   
    
    the general U.S. and international economic conditions, including market
conditions;
    
    the ability to grow, achieve synergies and realize the expected profitability
of recent acquisitions;
    
    changes in consumer confidence, consumer spending, and demand for apparel
products;
    
    the ability of our brands and products to meet consumer preferences within the
prevailing retail environment;
    
    the financial difficulties encountered by our customers and higher credit risk
exposure;
    
    the ability to obtain and renew our significant license agreements;
    
    the competitive conditions in the apparel and textile industries;
    
    changes in environmental, tax, trade, employment and other laws and
regulations;
    
    any restrictions to our ability to borrow capital or obtain financing;
    
    the uncertainty of raw material, transportation and energy prices;
    
    changes in our information systems related to our business operations;
    
    any significant interruptions with our distribution network;
    
    changes in the economic, political and social stability at our offshore
locations; and
    
    the relative strength of the United States dollar as against other currencies.
  
 PART I
 
 ITEM 1. BUSINESS
    2




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OVERVIEW
   ACQUISITIONS
  Business
    
    Date of Acquisition
    
    Business SegmentThe Cotton Exchange
    
    July 12, 2010
    
    Retail-ReadyArt Gun
    
    December 28, 2009
    
    Retail-ReadyTo The Game
    
    March 29, 2009
    
    Retail-ReadyFunTees
    
    October 2, 2006
    
    ActivewearIntensity Athletics
    
    October 3, 2005
    
    Retail-ReadyJunkfood Clothing
    
    August 22, 2005
    
    Retail-ReadyM.J. Soffe
    
    October 3, 2003
    
    Retail- Ready
 The Cotton Exchange Acquisition
   Art Gun Acquisition
  3




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##### Table of Contents



BUSINESS SEGMENTS
  ® ® ® ®
 ® ® ® ® ®
  PRODUCTS
  ® ® ® ® ® ® ® ® ® ® ®
 ® ® ® ® ® ®
  TRADEMARKS AND LICENSE AGREEMENTS
 ®
 4




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® ® ® ® ® ® ® ® ®
 ® ®
 MARKETING
     COMPETITION
    5




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SEASONALITY
  MANUFACTURING
   ® ®
 RAW MATERIALS
   6




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##### Table of Contents



EMPLOYEES
  ENVIRONMENTAL AND REGULATORY MATTERS
   AVAILABLE INFORMATION
 www.deltaapparelinc.com
  
 ITEM 1A. RISK FACTORS
  Current economic conditions may adversely impact demand for our products .
 7




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##### Table of Contents



Deterioration of the financial condition of our customers could adversely affect our financial
position and results of operations .
 The apparel industry is highly competitive, and we face significant competitive threats to our
business .
 We currently pay income taxes at lower than statutory rates, which could change in the future
adversely affecting our financial position and results of operations .
 We may be restricted in our ability to borrow under our credit agreement which could adversely
affect our financial position and results of operations .
 We may need to raise additional capital to grow our business and if unable to do so, we will need
to modify our growth strategy .
 We have expanded our business through acquisitions that could result in diversion of resources, an
inability to integrate acquired operations and extra expenses .
 The price of our purchased raw materials is prone to significant fluctuations and volatility .
 8




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The price of energy is prone to significant fluctuations and volatility which could adversely
affect our results of operations .
 Significant increases in the costs of freight and transportation could adversely affect our results
of operations .
 Our business operations rely on our information systems and any material disruption or slowdown of
our systems could cause operational delays that could have a material adverse effect on our results
of operations .
 Our business could be harmed if we are unable to deliver our products to the market due to problems
with our distribution network .
 Failure of our operations to comply with environmental regulation could have a material adverse
effect on our financial position and results of operations .
 We are subject to periodic litigation in both domestic and international jurisdictions that may
adversely affect our financial position and results of operations .
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##### Table of Contents



Our success depends, in part, on our ability to predict or effectively react to changing consumer
preferences and trends .
 We rely on the strength of our trademarks and could incur significant costs to protect these
trademarks . ® ® ®
 A significant portion of our business relies upon license agreements and the loss of or failure to
obtain license agreements could negatively impact our results of operations .
 We may be subject to the impairment of acquired intangible assets, which could have a material
adverse effect on our results of operations .
 Changes in the regulations and laws regarding e-commerce could limit our ability to grow,
negatively impacting our results of operations .
 Our Activewear segment is subject to significant pricing pressures which may decrease our gross
profit margins if we are unable to implement our cost reduction strategies .
 Our operations are subject to political, social, economic, and climate risks in Mexico, Honduras
and El Salvador which could negatively impact our financial position and results of operations .
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##### Table of Contents



Significant changes to international trade regulations could adversely affect our results of
operations .
 The market price of Delta Apparel shares is affected by illiquidity of our shares, which could lead
to our shares trading at prices that are significantly lower than expected .
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
  Location
    
    Utilization
    
    SegmentExecutive Office, Greenville, SC*
    
    Principal executive offices
    
    Activewear and Retail-ReadyDelta Office, Duluth, GA*
    
    Administration/sales
    
    ActivewearMaiden Plant, Maiden, NC
    
    Knit/dye/finish/cut
    
    Activewear and Retail-ReadyCeiba Textiles, Honduras*
    
    Knit/dye/finish/cut
    
    Activewear and Retail-ReadyHonduras Plant, San Pedro Sula,
Honduras*
    
    Sew
    
    Activewear and Retail-ReadyCortes Plant, San Pedro Sula, Honduras*
    
    Sew
    
    Activewear and Retail-ReadyMexico Plant, Campeche, Mexico*
    
    Cut/Sew
    
    Activewear and Retail-ReadyFunTees Office, Concord, NC*
    
    Administration/sales
    
    ActivewearFunTees Design, Concord, NC*
    
    Research/development
    
    Activewear and Retail-ReadyFunTees Samples, Concord, NC*
    
    Research/development
    
    Activewear and Retail-ReadyLa Paz Plant, La Paz, El Salvador*
    
    Sew/decoration
    
    Activewear and Retail-ReadyCampeche Sportswear, Campeche, Mexico*
    
    Sew/decoration
    
    Activewear and Retail-ReadyFayetteville Plant, Fayetteville, NC
    
    Sew/decoration/distribution/administration
    
    Retail-ReadyRowland Plant, Rowland, NC
    
    Sew
    
    Retail-ReadyDowning Drive, Phenix City, AL*
    
    Administration/distribution/decoration
    
    Retail-ReadyWarehouse, Louisville, KY*
    
    Warehouse/distribution
    
    Retail-ReadyJunkfood Office, Los Angeles, CA*
    
    Administration/sales
    
    Retail-ReadyArt Gun Office, Miami, FL*
    
    Administration/decoration/distribution
    
    Retail-ReadyDistribution Center, Clinton, TN
    
    Distribution
    
    Activewear
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##### Table of Contents



Location
    
    Utilization
    
    SegmentDistribution 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-ReadySoffe Outlet Store, Prince William, VA*
    
    Retail sales
    
    Retail-ReadySoffe Outlet Store, N. Myrtle Beach, SC*
    
    Retail sales
    
    Retail-ReadySoffe Outlet Store, Smithfield, NC*
    
    Retail sales
    
    Retail-ReadySoffe Outlet Store, Fayetteville, NC*
    
    Retail sales
    
    Retail-ReadyTo The Game Outlet Store, Columbus, GA*
    
    Retail sales
    
    Retail-ReadyNew York Showroom, New York, NY*
(two office locations)
    
    Sales
    
    Activewear and Retail-ReadyJunkfood Showroom, Los Angeles, CA*
    
    Sales
    
    Retail-Ready
 
 *
    
    - Denotes leased location  
 ITEM 3. LEGAL PROCEEDINGS
  
 PART II
 
 ITEM 4.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES.
 Market Information for Common Stock:
  Fiscal Year 2010
    
    Fiscal Year 2009High
    
    Low
    
    High
    
    LowFirst Quarter
    
    $
    9.23
    
    
    $
    6.59
    
    
    $
    7.30
    
    
    $
    3.64Second Quarter
    
    
    11.85
    
    
    
    7.52
    
    
    
    8.35
    
    
    
    3.27Third Quarter
    
    
    15.93
    
    
    
    10.20
    
    
    
    4.60
    
    
    
    2.72Fourth Quarter
    
    
    17.51
    
    
    
    13.89
    
    
    
    9.00
    
    
    
    4.25
 Dividends:
  12




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##### Table of Contents



Purchases of our Own Shares of Common Stock:
 Securities Authorized for Issuance Under Equity Compensation Plans:
 COMPARISON OF TOTAL RETURN AMONG DELTA APPAREL, INC., NYSE AMEX US MARKET INDEX, AND NYSE AMEX
WHOLESALE & RETAIL TRADE INDEX:
  
 2005
    
    2006
    
    2007
    
    2008
    
    2009
    
    2010Delta Apparel, Inc.
    
    
    100.00
    
    
    
    132.24
    
    
    
    141.57
    
    
    
    29.25
    
    
    
    54.15
    
    
    
    110.20NYSE Amex US Market Index
    
    
    100.00
    
    
    
    111.67
    
    
    
    132.65
    
    
    
    119.13
    
    
    
    87.05
    
    
    
    101.08NYSE Amex Wholesale
& Retail Trade Index
    
    
    100.00
    
    
    
    117.71
    
    
    
    124.36
    
    
    
    107.69
    
    
    
    101.63
    
    
    
    154.54
 
 ITEM 5. SELECTED FINANCIAL DATA
  13




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##### Table of Contents



Fiscal Year EndedJuly 3,
    
    
    June 27,
    
    
    June 28,
    
    
    June 30,
    
    
    July 1,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006(In thousands, except per share amounts)Statement of Operations Data:Net sales
    
    $
    424,411
    
    
    $
    355,197
    
    
    $
    322,034
    
    
    $
    312,438
    
    
    $
    270,108Cost of goods sold
    
    
    (323,628
    )
    
    
    (278,758
    )
    
    
    (257,319
    )
    
    
    (239,365
    )
    
    
    (190,222
    )Selling, general and administrative
expenses
    
    
    (80,695
    )
    
    
    (64,388
    )
    
    
    (59,898
    )
    
    
    (59,187
    )
    
    
    (53,530
    )Other income (loss), net
    
    
    74
    
    
    
    96
    
    
    
    132
    
    
    
    (89
    )
    
    
    657Restructuring costs
    
    
    
    
    
    
    
    
    
    
    (62
    )
    
    
    (1,498
    )
    
    
    Operating income
    
    
    20,162
    
    
    
    12,147
    
    
    
    4,887
    
    
    
    12,299
    
    
    
    27,013Interest expense, net
    
    
    (3,509
    )
    
    
    (4,718
    )
    
    
    (6,042
    )
    
    
    (5,157
    )
    
    
    (3,819
    )Income (loss) before income taxes
    
    
    16,653
    
    
    
    7,429
    
    
    
    (1,155
    )
    
    
    7,142
    
    
    
    23,194Provision (benefit) for income taxes
    
    
    4,466
    
    
    
    973
    
    
    
    (647
    )
    
    
    1,471
    
    
    
    8,350Extraordinary gain, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    672
    
    
    
    Net income (loss)
    
    $
    12,187
    
    
    $
    6,456
    
    
    $
    (508
    )
    
    $
    6,343
    
    
    $
    14,844Basic earnings (loss) per common share:Income (loss) before extraordinary gain
    
    $
    1.43
    
    
    $
    0.76
    
    
    $
    (0.06
    )
    
    $
    0.67
    
    
    $
    1.73Extraordinary gain, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.08
    
    
    
    Net income (loss)
    
    $
    1.43
    
    
    $
    0.76
    
    
    $
    (0.06
    )
    
    $
    0.75
    
    
    $
    1.73Diluted earnings (loss) per common share:Income (loss) before extraordinary gain
    
    $
    1.40
    
    
    $
    0.76
    
    
    $
    (0.06
    )
    
    $
    0.65
    
    
    $
    1.71Extraordinary gain, net of income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.08
    
    
    
    Net income (loss)
    
    $
    1.40
    
    
    $
    0.76
    
    
    $
    (0.06
    )
    
    $
    0.73
    
    
    $
    1.71Dividends declared per common share
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    0.05
    
    
    $
    0.20
    
    
    
    0.17Balance Sheet Data (at year end):Working capital
    
    $
    125,163
    
    
    $
    135,369
    
    
    $
    133,917
    
    
    $
    120,645
    
    
    $
    103,210Total assets
    
    
    251,333
    
    
    
    256,993
    
    
    
    261,623
    
    
    
    232,790
    
    
    
    203,123Total long-term debt, less current
maturities
    
    
    62,355
    
    
    
    85,936
    
    
    
    95,542
    
    
    
    70,491
    
    
    
    46,967Shareholders equity
    
    
    125,714
    
    
    
    112,145
    
    
    
    104,893
    
    
    
    103,669
    
    
    
    100,988
 
 ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 BUSINESS OUTLOOK
 ® ® ®
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Leverage Existing Business Strengths to Drive Growth ® ® ® ® ® ®
 ®
 Improve Profitability in our Activewear Segment
 Consolidate and Improve Information Technology Platforms
 Maintain Appropriate Inventory Levels
  15




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EARNINGS GUIDANCE
           RESULTS OF OPERATIONS
 Overview
     16




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Quarterly Financial Data
  Fiscal Year 2010 versus Fiscal Year 2009
 ®
        17




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Fiscal Year 2009 versus Fiscal Year 2008
         LIQUIDITY AND CAPITAL RESOURCES
 Credit Facility and Other Financial Obligations
  18




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Debt
     Derivative Instruments
   19




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Operating Cash Flows
  Investing Cash Flows
      Financing Activities
   Future Liquidity and Capital Resources
  20




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Payments Due by Period (in thousands)Less than
    
    
    1 - 3
    
    
    3  5
    
    
    After 5Total
    
    
    1 year
    
    
    years
    
    
    years
    
    
    yearsContractual Obligations:Long-term debt (a)
    
    $
    68,073
    
    
    $
    5,718
    
    
    $
    62,355
    
    
    $
    
    
    
    $
    Operating leases
    
    
    41,040
    
    
    
    8,907
    
    
    
    15,079
    
    
    
    14,584
    
    
    
    2,470Capital leases
    
    
    204
    
    
    
    104
    
    
    
    90
    
    
    
    10
    
    
    
    Letters of credit
    
    
    2,793
    
    
    
    2,793
    
    
    
    
    
    
    
    
    
    
    
    Royalty guarantees
    
    
    2,936
    
    
    
    722
    
    
    
    1,364
    
    
    
    850
    
    
    
    Purchase obligations
    
    
    54,789
    
    
    
    54,789
    
    
    
    
    
    
    
    
    
    
    
    Total (b)
    
    $
    169,835
    
    
    $
    73,033
    
    
    $
    78,888
    
    
    $
    15,444
    
    
    $
    2,470
 
 (a)
    
    We exclude interest payments from these amounts because the cash outlay for the interest
is unknown and can not be reliably estimated because 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.(b)
    
    We excluded deferred income tax liabilities of $3.8 million from the contractual cash
obligations table because we believe inclusion would not be meaningful. Refer to Note 9 of
our audited consolidated financial statements. Deferred income tax liabilities are
calculated based on temporary differences between tax bases of assets and liabilities and
their respective book bases, which will result in taxable amounts in future years when the
liabilities are settled at their reported financial statement amounts. The results of
these calculations do not have a direct connection with the amount of cash taxes to be paid
in any future periods and therefore would not relate to liquidity needs. As a result,
including deferred income tax liabilities as payments due by period in the schedule could
be misleading. Off-Balance Sheet Arrangements
  Dividends and Purchases of our Own Shares
   Dividend Program
  21




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CRITICAL ACCOUNTING POLICIES
   Revenue Recognition
  Accounts Receivable and Related Reserves
  Inventories and Related Reserves
  Goodwill
  22




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Share-Based Compensation
 Compensation  Stock Compensation
 Income Taxes
 Income Taxes
  23




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RECENT ACCOUNTING STANDARDS
  
 ITEM 6A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Commodity Risk Sensitivity
    Interest Rate Sensitivity
  Derivatives
   24




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ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 8A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   Managements Annual Report on Internal Control over Financial Reporting
  Internal Control  Integrated Framework
  Changes in Internal Control over Financial Reporting
  25




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Report of Independent Registered Public Accounting Firm
         
 26




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ITEM 8B. OTHER INFORMATION
  
 PART III
 
 ITEM 9. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  www.deltaapparelinc.com
 
 ITEM 10. EXECUTIVE COMPENSATION
  
 ITEM 11. 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
    
    
    1,209,500
    
    
    $
    10.07
    
    
    
    344,718Total
    
    
    1,209,500
    
    
    $
    10.07
    
    
    
    344,718
   27




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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 13. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  
 PART IV
 
 ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  
    
    Report of Independent Registered Public Accounting Firm.
    
    Consolidated Balance Sheets as of July 3, 2010 and June 27, 2009.
    
    Consolidated Statements of Operations for the years ended July 3, 2010, June 27, 2009
and June 28, 2008.
    
    Consolidated Statements of Shareholders Equity and Comprehensive Income (Loss) for the
years ended July 3, 2010, June 27, 2009 and June 28, 2008.
    
    Consolidated Statements of Cash Flows for the years ended July 3, 2010, June 27, 2009
and June 28, 2008.
    
    Notes to Consolidated Financial Statements.
  
    
    Schedule II  Consolidated Valuation and Qualifying Accounts
       28




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*
    
    All reports previously filed by the Company with the Commission pursuant to the Securities
Exchange Act, and the rules and regulations promulgated thereunder, exhibits of which are
incorporated to this Report by reference thereto, were filed under Commission File Number
1-15583.**
    
    Portions of this exhibit have been omitted pursuant to a request for confidential treatment
and have been filed separately with the Securities and Exchange Commission.***
    
    This is a management contract or compensatory plan or arrangement.     See information under (a)(1) and (2) of Item 14.
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SIGNATURES
  DELTA APPAREL, INC.(Registrant)September 1, 2010
    
    By: /s/ Deborah H. MerrillDate
    
    Deborah H. MerrillVice President, Chief Financial Officer and Treasurer(principal financial and accounting officer)
  /s/ James A. Cochran
    
    8-31-10
    
    /s/ E. Erwin Maddrey, II
    
    8-31-10James A. Cochran
    
    Date
    
    E. Erwin Maddrey, II
    
    DateDirector
    
    
    
    Director/s/ William F. Garrett
    
    8-31-10
    
    /s/ Deborah H. Merrill
    
    8-31-10William F. Garrett
    
    Date
    
    Deborah H. Merrill
    
    DateDirector
    
    
    
    Vice President, Chief FinancialOfficer and Treasurer (principalfinancial and accounting
officer)/s/ Elizabeth J. Gatewood
    
    8-31-10
    
    /s/ David Peterson
    
    8-31-10Elizabeth J. Gatewood
    
    Date
    
    David Peterson
    
    DateDirector
    
    
    
    Director/s/ Robert W. Humphreys
    
    8-31-10
    
    /s/ Robert E. Staton, Sr
    
    8-31-10Robert W. Humphreys
    
    Date
    
    Robert E. Staton, Sr.
    
    DateChairman and Chief
Executive Officer
    
    
    
    Director/s/ A. Max Lennon
    
    8-31-10A. Max Lennon
    
    DateDirector
 31




---



##### Table of Contents



Delta Apparel, Inc. and Subsidiaries
 Index to Consolidated Financial Statements
 Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of July 3, 2010 and June 27, 2009
    
    
    F-3Consolidated Statements of Operations for the years ended July 3, 2010, June 27, 2009 and June 28, 2008
    
    
    F-4Consolidated Statements of Shareholders Equity and Comprehensive Income (Loss) for the years ended
July 3, 2010, June 27, 2009 and June 28, 2008
    
    
    F-5Consolidated Statements of Cash Flows for the years ended July 3, 2010, June 27, 2009 and June 28, 2008
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7
 F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
       
 F-2




---



##### Table of Contents



Delta Apparel, Inc. and Subsidiaries
 
 Consolidated Balance Sheets
 July 3, 2010
    
    
    June 27, 2009AssetsCurrent assets:Cash and cash equivalents
    
    $
    687
    
    
    $
    654Accounts receivable, less allowances of $2,136
and $3,039, respectively
    
    
    59,916
    
    
    
    55,855Other receivables
    
    
    1,075
    
    
    
    2,029Income tax receivable
    
    
    
    
    
    
    1,755Inventories, net
    
    
    116,599
    
    
    
    125,887Prepaid expenses and other current assets
    
    
    3,475
    
    
    
    3,387Deferred income taxes
    
    
    3,162
    
    
    
    3,475Total current assets
    
    
    184,914
    
    
    
    193,042Property, plant and equipment, net
    
    
    37,694
    
    
    
    36,480Goodwill
    
    
    17,426
    
    
    
    16,814Intangibles, net
    
    
    8,016
    
    
    
    7,114Other assets
    
    
    3,283
    
    
    
    3,543$
    251,333
    
    
    $
    256,993Liabilities and Shareholders EquityCurrent liabilities:Accounts payable
    
    $
    34,459
    
    
    $
    34,103Accrued expenses
    
    
    18,862
    
    
    
    17,852Income tax payable
    
    
    712
    
    
    
    Current portion of long-term debt
    
    
    5,718
    
    
    
    5,718Total current liabilities
    
    
    59,751
    
    
    
    57,673Long-term debt, less current maturities
    
    
    62,355
    
    
    
    85,936Deferred income taxes
    
    
    1,826
    
    
    
    1,223Other liabilities
    
    
    157
    
    
    
    16Contingent consideration
    
    
    1,530
    
    
    
    Total liabilities
    
    $
    125,619
    
    
    $
    144,848Commitments and contingenciesShareholders 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 July 3, 2010 and June 27, 2009, respectively
    
    
    96
    
    
    
    96Additional paid-in capital
    
    
    59,111
    
    
    
    58,301Retained earnings
    
    
    75,950
    
    
    
    63,763Accumulated other comprehensive loss
    
    
    (105
    )
    
    
    (565
    )Treasury stock 1,130,679 and 1,144,273 shares as of July 3, 2010
and June 27, 2009, respectively
    
    
    (9,338
    )
    
    
    (9,450
    )Total shareholders equity
    
    
    125,714
    
    
    
    112,145$
    251,333
    
    
    $
    256,993
  F-3




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##### Table of Contents



Delta Apparel, Inc. and Subsidiaries
 
 Consolidated Statements of Operations
 July 3, 2010
    
    
    June 27, 2009
    
    
    June 28, 2008Net sales
    
    $
    424,411
    
    
    $
    355,197
    
    
    $
    322,034Cost of goods sold
    
    
    323,628
    
    
    
    278,758
    
    
    
    257,319Gross profit
    
    
    100,783
    
    
    
    76,439
    
    
    
    64,715Selling, general and administrative expenses
    
    
    80,695
    
    
    
    64,388
    
    
    
    59,898Other income, net
    
    
    (74
    )
    
    
    (96
    )
    
    
    (132
    )Restructuring costs
    
    
    
    
    
    
    
    
    
    
    62Operating income
    
    
    20,162
    
    
    
    12,147
    
    
    
    4,887Interest expense, net
    
    
    3,509
    
    
    
    4,718
    
    
    
    6,042Income (loss) before provision (benefit)
for income taxes
    
    
    16,653
    
    
    
    7,429
    
    
    
    (1,155
    )Provision (benefit) for income taxes
    
    
    4,466
    
    
    
    973
    
    
    
    (647
    )Net income (loss)
    
    $
    12,187
    
    
    $
    6,456
    
    
    $
    (508
    )Basic earnings (loss) per share
    
    $
    1.43
    
    
    $
    0.76
    
    
    $
    ( 0.06
    )Diluted earnings (loss) per share
    
    $
    1.40
    
    
    $
    0.76
    
    
    $
    (0.06
    )Weighted average number of shares outstanding
    
    
    8,514
    
    
    
    8,502
    
    
    
    8,480Dilutive effect of stock options
    
    
    219
    
    
    
    
    
    
    
    Weighted average number of shares assuming dilution
    
    
    8,733
    
    
    
    8,502
    
    
    
    8,480Cash dividends declared per common share
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    0.05
  F-4




---



##### Table of Contents



Delta Apparel, Inc. and Subsidiaries
 
 Consolidated Statements of Shareholders Equity and Comprehensive Income (Loss)
 AccumulatedAdditional
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Treasury StockShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Shares
    
    
    Amount
    
    
    TotalBalance at June 30, 2007
    
    
    9,646,972
    
    
    $
    96
    
    
    $
    55,510
    
    
    $
    58,235
    
    
    $
    140
    
    
    
    1,248,577
    
    
    $
    (10,312
    )
    
    $
    103,669Comprehensive income:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (508
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (508
    )Unrealized gain on derivatives
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (581
    )
    
    
    
    
    
    
    
    
    
    
    (581
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (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
    )
    
    
    104,893Comprehensive income (loss):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,456
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,456Unrealized loss on derivatives
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (124
    )
    
    
    
    
    
    
    
    
    
    
    (124
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,332Stock grant
    
    
    
    
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    (5,950
    )
    
    
    50
    
    
    
    43Employee stock based compensation
    
    
    
    
    
    
    
    
    
    
    877
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    877Balance at June 29, 2009
    
    
    9,646,972
    
    
    
    96
    
    
    
    58,301
    
    
    
    63,763
    
    
    
    (565
    )
    
    
    1,144,273
    
    
    
    (9,450
    )
    
    
    112,145Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,187
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,187Unrealized gain on derivatives
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    460
    
    
    
    
    
    
    
    
    
    
    
    460Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,647Stock grant
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    (13,594
    )
    
    
    112
    
    
    
    117Employee stock based compensation
    
    
    
    
    
    
    
    
    
    
    805
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    805Balance at July 3, 2010
    
    
    9,646,972
    
    
    $
    96
    
    
    $
    59,111
    
    
    $
    75,950
    
    
    $
    (105
    )
    
    
    1,130,679
    
    
    $
    (9,338
    )
    
    $
    125,714
  F-5




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##### Table of Contents



Delta Apparel, Inc. and Subsidiaries
 
 Consolidated Statements of Cash Flows
 Year EndedJuly 3, 2010
    
    
    June 27, 2009
    
    
    June 28, 2008Operating activities:Net income (loss)
    
    $
    12,187
    
    
    $
    6,456
    
    
    $
    (508
    )Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:Depreciation
    
    
    6,203
    
    
    
    6,589
    
    
    
    5,843Amortization
    
    
    585
    
    
    
    489
    
    
    
    488Provision (benefit from) deferred income taxes
    
    
    916
    
    
    
    (288
    )
    
    
    (822
    )(Benefit from) provision for allowances on accounts
receivable, net
    
    
    (903
    )
    
    
    (384
    )
    
    
    870Non-cash stock compensation
    
    
    1,764
    
    
    
    1,004
    
    
    
    1,208Loss (gain) on disposal
    
    
    170
    
    
    
    (9
    )
    
    
    105Changes in operating assets and liabilities, net of
effect of acquisitions:Accounts receivable
    
    
    (2,198
    )
    
    
    8,980
    
    
    
    (16,438
    )Inventories
    
    
    9,324
    
    
    
    2,152
    
    
    
    (142
    )Prepaid expenses and other current assets
    
    
    (88
    )
    
    
    (219
    )
    
    
    (319
    )Other non-current assets
    
    
    262
    
    
    
    (188
    )
    
    
    (805
    )Accounts payable
    
    
    251
    
    
    
    (1,912
    )
    
    
    (483
    )Accrued expenses
    
    
    868
    
    
    
    635
    
    
    
    (2,420
    )Income taxes
    
    
    2,467
    
    
    
    (748
    )
    
    
    1,185Other liabilities
    
    
    461
    
    
    
    (826
    )
    
    
    131Net cash provided by (used in) operating activities
    
    
    32,269
    
    
    
    21,731
    
    
    
    (12,107
    )Investing activities:Purchases of equipment
    
    
    (6,965
    )
    
    
    (3,058
    )
    
    
    (16,590
    )Proceeds from sale of equipment
    
    
    10
    
    
    
    40
    
    
    
    7Cash paid for businesses, net of cash acquired
    
    
    (1,700
    )
    
    
    (7,977
    )
    
    
    Net cash used in investing activities
    
    
    (8,655
    )
    
    
    (10,995
    )
    
    
    (16,583
    )Financing activities:Proceeds from long-term debt
    
    
    409,680
    
    
    
    362,297
    
    
    
    353,703Repayment of long-term debt
    
    
    (433,261
    )
    
    
    (372,965
    )
    
    
    (324,799
    )Dividends paid
    
    
    
    
    
    
    
    
    
    
    (420
    )Net cash (used in) provided by financing activities
    
    
    (23,581
    )
    
    
    (10,668
    )
    
    
    28,484Net increase (decrease) in cash and cash equivalents
    
    
    33
    
    
    
    68
    
    
    
    (206
    )Cash and cash equivalents at beginning of year
    
    
    654
    
    
    
    586
    
    
    
    792Cash and cash equivalents at end of year
    
    $
    687
    
    
    $
    654
    
    
    $
    586Supplemental cash flow information:Cash paid during the year for interest
    
    $
    3,643
    
    
    $
    4,867
    
    
    $
    5,219Cash paid (refunded) during the year for income taxes
    
    $
    1,375
    
    
    $
    1,887
    
    
    $
    (1,394
    )Non-cash financing activityissuance of common stock
    
    $
    118
    
    
    $
    43
    
    
    $
    1,703
  F-6




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##### Table of Contents



Delta Apparel, Inc. and SubsidiariesNotes 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) Sales Tax:
 (f) Cash and Cash Equivalents:
 F-7




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##### Table of Contents



(g) Accounts Receivable: Transfers and Servicing.
 (h) Inventories:
 (i) Property, Plant and Equipment:
 (j) Internally Developed Software Costs. Intangibles-Goodwill and Other, Internal-Use
Software
 (k) Impairment of Long-Lived Assets (Including Amortizable Intangible Assets): Property, Plant, and Equipment
 (l) Goodwill and Intangibles:
 (m) Impairment of Goodwill:
 F-8




---



##### Table of Contents



Intangibles  Goodwill and Other
     (n) Self-Insurance Reserves:
 (o) Income Taxes:
 (p) Cost of Goods Sold:
 (q) Selling, General and Administrative Expense:
 F-9




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##### Table of Contents



(r) Advertising Costs: Revenue Recognition, Customers Payments and
Incentives
 (s) Stock Option and Incentive Award Plans: Compensation  Stock Compensation
 (t) Earnings (Loss) per Share: Earnings Per Share Compensation
 Stock Compensation
 (u) Foreign Currency Translation:
 (v) Fair Value of Financial Instruments:
 (w) Yarn and Cotton Procurements:
 F-10




---



##### Table of Contents



(x) Derivatives:
 Derivatives and Hedging
    (y) Comprehensive (Loss) Income:
 (z) Recently Adopted Accounting Pronouncements: Business Combinations Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from
Contingencies Accounting for Contingencies
 Determination of the Useful Life of Intangible Assets Goodwill and Other Intangible Assets
 F-11




---



##### Table of Contents



Improving Disclosures
about Fair Value Measurements Fair Value
Measurements and Disclosures
 Amendments to Certain
Recognition and Disclosure Requirements Subsequent
Events
 (aa) Recently Issued Accounting Pronouncements Not Yet Adopted: Consolidation of Variable Interest Entities Consolidations: Improvements to Financial Reporting by
Enterprises Involved with Variable Interest Entities
 (bb) Subsequent Events:
 NOTE 3ACQUISITIONS
 Art Gun Acquisition
  Business
 F-12




---



##### Table of Contents



Combinations
 To The Game Acquisition
 ® ®
 NOTE 4INVENTORIES
  July 3,
    
    
    June 27,2010
    
    
    2009Raw materials
    
    $
    10,604
    
    
    $
    9,626Work in process
    
    
    21,277
    
    
    
    21,842Finished goods
    
    
    84,718
    
    
    
    94,419$
    116,599
    
    
    $
    125,887
  NOTE 5PROPERTY, PLANT AND EQUIPMENT
  Estimated
    
    July 3,
    
    
    June 27,Useful Life
    
    2010
    
    
    2009Land and land improvements
    
    N/A
    
    $
    993
    
    
    $
    993Buildings
    
    10-20 years
    
    
    7,292
    
    
    
    7,227Machinery and equipment
    
    5-15 years
    
    
    58,620
    
    
    
    56,834Computers and software
    
    3-10 years
    
    
    14,973
    
    
    
    10,073Furniture and fixtures
    
    7 years
    
    
    4,465
    
    
    
    4,104Leasehold improvements
    
    3-10 years
    
    
    1,986
    
    
    
    1,797Automobiles
    
    5 years
    
    
    486
    
    
    
    453Construction in progress
    
    N/A
    
    
    3,148
    
    
    
    3,55991,963
    
    
    
    85,040Less accumulated depreciation and amortization
    
    
    
    
    (54,269
    )
    
    
    (48,560
    )$
    37,694
    
    
    $
    36,480
 F-13




---



##### Table of Contents



NOTE 6GOODWILL AND INTANGIBLE ASSETS
  July 3,
    
    June 27,
    
    Economic2010
    
    2009
    
    LifeGoodwill
    
    $
    17,426
    
    
    $
    16,814
    
    
    N/AIntangibles:Tradename/trademarks
    
    
    1,530
    
    
    
    1,530
    
    
    20 yrsCustomer relationships
    
    
    7,220
    
    
    
    7,220
    
    
    20 yrsTechnology
    
    
    1,220
    
    
    
    
    
    
    10 yrsNon-compete agreements
    
    
    517
    
    
    
    250
    
    
    4  8.5 yrsTotal intangibles
    
    
    10,487
    
    
    
    9,000Less accumulated amortization
    
    
    (2,471
    )
    
    
    (1,886
    )$
    8,016
    
    
    $
    7,114
  NOTE 7ACCRUED EXPENSES
  July 3,
    
    
    June 27,2010
    
    
    2009Accrued employee compensation and benefits
    
    $
    10,460
    
    
    $
    7,610Taxes accrued and withheld
    
    
    230
    
    
    
    770Accrued insurance
    
    
    777
    
    
    
    637Accrued advertising
    
    
    772
    
    
    
    909Accrued royalties
    
    
    1,562
    
    
    
    1,611Accrued commissions
    
    
    916
    
    
    
    700Derivative liability
    
    
    105
    
    
    
    902Other
    
    
    4,040
    
    
    
    4,713$
    18,862
    
    
    $
    17,852
 NOTE 8LONG-TERM DEBT
  July 3,
    
    
    June 27,2010
    
    
    2009Revolving credit facility secured by receivables,
inventory, property and equipment, interest at
prime rate or LIBOR rate plus an applicable margin
(interest at 1.54% on July 3, 2010) due September
2012
    
    $
    61,152
    
    
    $
    81,352Capital expansion loan agreement with Banco
Ficohsa, a Honduran bank, interest at 6% until June
2010, 6.5% for the remainder of the term beginning
in July 2010, payable monthly with a five-year term
(denominated in U. S. dollars)
    
    
    6,921
    
    
    
    10,30268,073
    
    
    
    91,654Less current installments
    
    
    (5,718
    )
    
    
    (5,718
    )Long-term debt, excluding current installments
    
    $
    62,355
    
    
    $
    85,936
  F-14




---



##### Table of Contents



Debt
   Fiscal Year2011
    
    $
    5,7182012
    
    
    5,2642013
    
    
    57,091$
    68,073
 F-15




---



##### Table of Contents



NOTE 9INCOME TAXES
  Year endedJuly 3,
    
    
    June 27,
    
    
    June 28,2010
    
    
    2009
    
    
    2008Current:Federal
    
    $
    3,317
    
    
    $
    954
    
    
    $
    (687
    )State
    
    
    288
    
    
    
    262
    
    
    
    599Foreign
    
    
    148
    
    
    
    154
    
    
    
    119Total current
    
    $
    3,753
    
    
    $
    1,370
    
    
    $
    31Deferred:Federal
    
    $
    115
    
    
    $
    33
    
    
    $
    (539
    )State
    
    
    598
    
    
    
    (430
    )
    
    
    (139
    )Total deferred
    
    
    713
    
    
    
    (397
    )
    
    
    (678
    )Provision (benefit) for income taxes
    
    $
    4,466
    
    
    $
    973
    
    
    $
    (647
    )
  Year endedJuly 3,
    
    
    June 27,
    
    
    June 28,2010
    
    
    2009
    
    
    2008Income tax expense at the statutory rate
    
    $
    5,662
    
    
    $
    2,525
    
    
    $
    (393
    )State income tax expense net of federal income tax effect
    
    
    358
    
    
    
    112
    
    
    
    (375
    )Rate difference and nondeductible items in foreign jurisdictions
    
    
    (12
    )
    
    
    25
    
    
    
    (33
    )Permanent reinvestment of foreign earnings
    
    
    (1,765
    )
    
    
    (1,441
    )
    
    
    (580
    )Valuation allowance adjustments
    
    
    84
    
    
    
    (374
    )
    
    
    681Nondeductible amortization and other permanent differences
    
    
    95
    
    
    
    59
    
    
    
    (138
    )Amended return and charitable contribution adjustments
    
    
    (20
    )
    
    
    24
    
    
    
    177Other
    
    
    64
    
    
    
    43
    
    
    
    14Provision (benefit) for income taxes
    
    $
    4,466
    
    
    $
    973
    
    
    $
    (647
    )
  July 3,
    
    
    June 27,2010
    
    
    2009Deferred tax assets:State net operating loss carryforward
    
    $
    792
    
    
    $
    952Charitable donation carryforward
    
    
    757
    
    
    
    1,039Derivative  interest rate contract
    
    
    66
    
    
    
    354Currently nondeductible accruals
    
    
    3,665
    
    
    
    3,596Gross deferred tax assets
    
    
    5,280
    
    
    
    5,941Less valuation allowance  Charitable
    
    
    
    
    
    
    (353
    )Less valuation allowance  State net operating loss
    
    
    (108
    )
    
    
    (25
    )Net deferred tax assets
    
    
    5,172
    
    
    
    5,563Deferred tax liabilities:Depreciation
    
    
    (1,738
    )
    
    
    (1,590
    )Goodwill and intangibles
    
    
    (2,081
    )
    
    
    (1,636
    )Other
    
    
    (17
    )
    
    
    (85
    )Gross deferred tax liabilities
    
    
    (3,836
    )
    
    
    (3,311
    )Net deferred tax asset
    
    $
    1,336
    
    
    $
    2,252
 F-16




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##### Table of Contents



Income Taxes
 NOTE 10LEASES
   Fiscal Year2011
    
    $
    8,9072012
    
    
    8,0542013
    
    
    7,0252014
    
    
    6,0052015
    
    
    5,269Thereafter
    
    
    5,780$
    41,040
  NOTE 11EMPLOYEE BENEFIT PLANS
   F-17




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##### Table of Contents



July 3,
    
    
    June 27,2010
    
    
    2009Change in benefit obligations:Balance at beginning of year
    
    $
    716
    
    
    $
    945Interest (credit) cost
    
    
    6
    
    
    
    (80
    )Benefits paid
    
    
    (79
    )
    
    
    (83
    )Actuarial adjustment
    
    
    (17
    )
    
    
    (66
    )Balance at end of year
    
    $
    626
    
    
    $
    716
 NOTE 12STOCK OPTIONS AND INCENTIVE STOCK AWARDS
 Compensation 
Stock Compensation
 Option Plan
    2010
    
    2009
    
    2008Risk-free interest rate
    
    
    2.86
    %
    
    
    2.27
    %
    
    
    3.11
    %Expected life
    
    
    6.0
    yrs
    
    
    6.1
    yrs
    
    
    6.7
    yrsExpected volatility
    
    
    51.4
    %
    
    
    49.7
    %
    
    
    34.3
    %Expected dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    1.20
    %Weighted-average per share fair value of options granted
    
    $
    3.53
    
    
    $
    2.00
    
    
    $
    2.95
  F-18




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##### Table of Contents



WeightedAverageWeighted
    
    Remaining
    
    AggregateAverage
    
    Contractual
    
    Intrinsic ValueShares
    
    Exercise Price
    
    Term
    
    (thousands)Outstanding at June 27, 2009
    
    
    1,006,500
    
    
    $
    11.98Granted
    
    
    28,000
    
    
    $
    6.84Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (10,000
    )
    
    $
    6.84Expired
    
    
    
    
    
    
    Outstanding at July 3, 2010
    
    
    1,024,500
    
    
    $
    11.89
    
    
    
    5.6
    
    
    
    Exercisable at July 3, 2010
    
    
    821,839
    
    
    $
    12.83
    
    
    
    5.2
    
    
    
    
   Weighted-AverageGrant-DateShares
    
    
    Fair ValueNonvested at June 27, 2009
    
    
    286,000
    
    
    $
    2.92Granted
    
    
    28,000
    
    
    $
    3.53Vested
    
    
    (101,339
    )
    
    $
    2.94Forfeited
    
    
    (10,000
    )
    
    $
    3.53Expired
    
    
    
    
    
    
    Nonvested at July 3, 2010
    
    
    202,661
    
    
    $
    2.96
  Award Plan
    F-19




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##### Table of Contents



WeightedAverageExerciseShares
    
    
    PriceNonvested at June 27, 2009
    
    
    5,844
    
    
    $
    0.01Granted
    
    
    186,000
    
    
    $
    0.01Vested
    
    
    (5,844
    )
    
    $
    0.01Forfeited
    
    
    (1,000
    )
    
    $
    0.01Expired
    
    
    
    
    
    
    Nonvested at July 3, 2010
    
    
    185,000
    
    
    $
    0.01
  NOTE 13BUSINESS SEGMENTS
  ® ® ® ®
 ® ® ® ® ®
  F-20




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##### Table of Contents



Activewear
    
    Retail-Ready
    
    ConsolidatedFiscal Year 2010:Net sales
    
    $
    226,590
    
    
    $
    197,821
    
    
    $
    424,411Segment operating income
    
    
    2,360
    
    
    
    17,802
    
    
    
    20,162Segment assets *
    
    
    131,012
    
    
    
    120,321
    
    
    
    251,333Purchases of property, plant and equipment
    
    
    4,486
    
    
    
    2,479
    
    
    
    6,965Fiscal Year 2009:Net sales
    
    $
    199,027
    
    
    $
    156,170
    
    
    $
    355,197Segment operating (loss) income
    
    
    (5,444
    )
    
    
    17,591
    
    
    
    12,147Segment assets *
    
    
    141,013
    
    
    
    115,980
    
    
    
    256,993Purchases of property, plant and equipment
    
    
    1,248
    
    
    
    1,810
    
    
    
    3,058Fiscal 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
    
    
    
    16,590
 
 *
    
    All goodwill on our balance sheet is included in the Retail-Ready segment.  Year EndedJuly 3,
    
    
    June 27,
    
    
    June 28,2010
    
    
    2009
    
    
    2008Segment operating income
    
    $
    20,162
    
    
    $
    12,147
    
    
    $
    4,887Unallocated interest expense
    
    
    3,509
    
    
    
    4,718
    
    
    
    6,042Consolidated income (loss) before taxes
    
    $
    16,653
    
    
    $
    7,429
    
    
    $
    (1,155
    )
  July 3, 2010
    
    
    June 27, 2009Long-Lived Assets:United States
    
    $
    19,124
    
    
    $
    17,886Honduras
    
    
    16,075
    
    
    
    16,537El Salvador
    
    
    1,246
    
    
    
    670Mexico
    
    
    1,249
    
    
    
    1,387All Foreign Countries
    
    
    18,570
    
    
    
    18,594Total Long-Lived Assets
    
    $
    37,694
    
    
    $
    36,480
 NOTE 14COMMITMENTS AND CONTINGENCIES
 (a) Litigation
  F-21




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##### Table of Contents



(b) Purchase Contracts
  Yarn
    
    $
    31,256Natural Gas
    
    
    1,289Finished fabric
    
    
    3,399Finished products
    
    
    18,845$
    54,789
 (c) Letters of Credit
  (d) Derivatives
  NotionalEffective Date
    
    Amount
    
    LIBOR Rate
    
    Maturity DateInterest 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
 Fair Value Measurements and Disclosures
 o
    
    Level 1  Quoted prices (unadjusted) in active markets for identical assets or liabilities.o
    
    Level 2  Inputs other than quoted prices that are observable for assets and liabilities,
either directly or indirectly. These inputs include quoted prices for similar assets or
liabilities in active markets and quoted prices for identical or similar assets or
liabilities in market that are less active.o
    
    Level 3  Unobservable inputs for assets or liabilities reflecting the reporting entitys
own assumptions.
 F-22




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##### Table of Contents



Fair Value Measurements UsingQuoted Prices in
    
    
    
    
    
    SignificantActive Markets for
    
    Significant Other
    
    UnobservableIdentical Assets
    
    Observable Inputs
    
    InputsFiscal Year
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Interest rate swaps2010
    
    $
    171,013
    
    
    
    
    
    
    $
    171,013
    
    
    
    2009
    
    $
    509,761
    
    
    
    
    
    
    $
    509,761
    
    
    
    Collar agreements2010
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    2009
    
    $
    408,428
    
    
    
    
    
    
    $
    408,428
    
    
    
    
    July 3,
    
    
    June 27,2010
    
    
    2009Accrued expenses
    
    $
    105
    
    
    $
    902Deferred tax liabilities
    
    
    (66
    )
    
    
    (354
    )Other liabilities
    
    
    66
    
    
    
    16Accumulated other comprehensive loss
    
    $
    105
    
    
    $
    564
 (e) License Agreements
   Fiscal Year2011
    
    $
    7222012
    
    
    8672013
    
    
    4972014
    
    
    5502015
    
    
    300$
    2,936
 F-23




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##### Table of Contents



NOTE 15RESTRUCTURING PLAN
   FY 2007
    
    FY 2008
    
    TotalCost of Sales
    
    $
    5.4
    million
    
    $
    4.9
    million
    
    $
    10.3
    millionRestructuring Charges
    
    
    1.5
    million
    
    
    
    
    
    
    1.5
    millionTotal
    
    $
    6.9
    million

    
    $
    4.9
    million

    
    $
    11.8
    millionDiluted EPS Impact
    
    $
    0.51
    
    
    $
    0.39
    
    
    $
    0.90
 NOTE 16QUARTERLY FINANCIAL INFORMATION

(UNAUDITED)
  2010 Quarter Ended
    
    2009 Quarter EndedSeptember 26
    
    December 26
    
    March 27
    
    July 3
    
    September 27
    
    December 27
    
    March 28
    
    June 27Net sales
    
    $
    99,122
    
    
    $
    91,160
    
    
    $
    107,942
    
    
    $
    126,187
    
    
    $
    91,412
    
    
    $
    73,361
    
    
    $
    85,685
    
    
    $
    104,739Gross profit
    
    
    23,645
    
    
    
    21,776
    
    
    
    25,203
    
    
    
    30,159
    
    
    
    19,306
    
    
    
    16,055
    
    
    
    16,770
    
    
    
    24,308Operating income
    
    
    4,492
    
    
    
    2,243
    
    
    
    4,914
    
    
    
    8,513
    
    
    
    2,440
    
    
    
    1,506
    
    
    
    2,286
    
    
    
    5,915Net income
    
    
    2,583
    
    
    
    979
    
    
    
    2,958
    
    
    
    5,667
    
    
    
    674
    
    
    
    595
    
    
    
    1,163
    
    
    
    4,024Basic EPS
    
    $
    0.30
    
    
    $
    0.11
    
    
    $
    0.35
    
    
    $
    0.67
    
    
    $
    0.08
    
    
    $
    0.07
    
    
    $
    0.14
    
    
    $
    0.47Diluted EPS
    
    $
    0.30
    
    
    $
    0.11
    
    
    $
    0.34
    
    
    $
    0.64
    
    
    $
    0.08
    
    
    $
    0.07
    
    
    $
    0.14
    
    
    $
    0.47
 F-24




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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
    
    Balance2010
    
    $
    1,319
    
    
    $
    
    
    
    $
    649
    
    
    $
    (1,207
    )
    
    $
    7612009
    
    
    1,117
    
    
    
    897
    
    
    
    936
    
    
    
    (1,631
    )
    
    
    1,3192008
    
    
    341
    
    
    
    
    
    
    
    1,301
    
    
    
    (525
    )
    
    
    1,117
 RETURNS AND ALLOWANCES
 Beginning
    
    Purchase
    
    
    
    
    
    
    
    
    
    EndingBalance
    
    Accounting *
    
    Expense
    
    Credits Issued
    
    Balance2010
    
    $
    1,720
    
    
    $
    
    
    
    $
    4,867
    
    
    $
    (5,212
    )
    
    $
    1,3752009
    
    
    1,696
    
    
    
    66
    
    
    
    3,935
    
    
    
    (3,977
    )
    
    
    1,7202008
    
    
    1,602
    
    
    
    
    
    
    
    6,078
    
    
    
    (5,984
    )
    
    
    1,696
 TOTAL RESERVES FOR ALLOWANCES
 Beginning
    
    Purchase
    
    
    
    
    
    Write-Offs/
    
    EndingBalance
    
    Accounting *
    
    Expense
    
    Credits Issued
    
    Balance2010
    
    $
    3,039
    
    
    $
    
    
    
    $
    5,516
    
    
    $
    (6,419
    )
    
    $
    2,1362009
    
    
    2,813
    
    
    
    963
    
    
    
    4,871
    
    
    
    (5,608
    )
    
    
    3,0392008
    
    
    1,943
    
    
    
    
    
    
    
    7,379
    
    
    
    (6,509
    )
    
    
    2,813
 MARKET AND OBSOLESCENCE RESERVE
 Beginning
    
    Purchase
    
    
    
    
    
    
    
    
    
    EndingBalance
    
    Accounting *
    
    Expense **
    
    Deductions **
    
    Balance2010
    
    $
    4,074
    
    
    $
    
    
    
    $
    (292
    )
    
    $
    
    
    
    $
    3,7822009
    
    
    2,215
    
    
    
    1,486
    
    
    
    373
    
    
    
    
    
    
    
    4,0742008
    
    
    2,039
    
    
    
    
    
    
    
    176
    
    
    
    
    
    
    
    2,215
 SELF INSURANCE RESERVE
 Beginning
    
    Purchase
    
    
    
    
    
    
    
    
    
    EndingBalance
    
    Accounting *
    
    Expense **
    
    Deductions **
    
    Balance2010
    
    $
    636
    
    
    $
    
    
    
    $
    141
    
    
    $
    
    
    
    $
    7772009
    
    
    595
    
    
    
    
    
    
    
    41
    
    
    
    
    
    
    
    6362008
    
    
    445
    
    
    
    
    
    
    
    150
    
    
    
    
    
    
    
    595
 DEFERRED TAX ASSET VALUATION ALLOWANCE
 Beginning
    
    Purchase
    
    
    
    
    
    
    
    
    
    EndingBalance
    
    Accounting *
    
    Expense **
    
    Deductions **
    
    Balance2010
    
    $
    378
    
    
    $
    
    
    
    $
    (270
    )
    
    $
    
    
    
    $
    1082009
    
    
    1,289
    
    
    
    
    
    
    
    (911
    )
    
    
    
    
    
    
    3782008
    
    
    255
    
    
    
    
    
    
    
    1,034
    
    
    
    
    
    
    
    1,289
 
 *
    
    Represents the allowance and reserves provided for as a result of the To The Game
Acquisition on March 29, 2009.**
    
    Net change in the market and obsolescence and self insurance reserves are shown in the expense
column.