UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q


[ X ]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 1, 2005
OR
[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
       SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File number  333-376-17

                                DELTA MILLS, INC.
                     --------------------------------------
             (Exact name of registrant as specified in its charter)

       DELAWARE                                             13-2677657
-------------------------------                        --------------------
(State or other jurisdiction of                          (I.R.S. Employer
 incorporation or organization)                         Identification No.)



  700 North Woods Drive
  Fountain Inn, South Carolina                                29644
  ------------------------------------------------        -------------
 (Address of principal executive offices)                  (Zip Code)

                                  864 862-3557
                           ---------------------------
              (Registrant's telephone number, including area code)


       P.O. Box 6126, 100 Augusta Street, Greenville, South Carolina 29606
       --------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report.)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [X] No [ ].

Indicate by check mark if the registrant is an accelerated  filer (as defined in
Rule 12b-2 of the Exchange Act ). Yes [ ] No [ X ].

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest  practicable date. Common Stock, $.01 Par Value -
100 shares as of February 11, 2005.





<PAGE>
<TABLE>
<CAPTION>

                                DELTA MILLS, INC.
                                      INDEX

PART I. FINANCIAL INFORMATION
                                                                                                            Page
Item 1.  Financial Statements (Unaudited)

<S>                                                                                                        <C>
Condensed consolidated balance sheets--January 1, 2005 and July 3, 2004                                     3

Condensed consolidated statements of operations--
                  Three and six months ended January 1, 2005 and December 27, 2003                          4

Condensed consolidated statements of cash flows--
                  Six months ended January 1, 2005 and December 27, 2003                                    5

Notes to condensed consolidated financial statements                                                        6-9


Item 2.    Management's Discussion and Analysis of  Financial Condition and Results of Operations           10-21

Item 3.    Quantitative and Qualitative Disclosures about Market Risk                                       22

Item 4.    Controls and Procedures                                                                          22-23

PART II. OTHER INFORMATION

Item 1.    Legal Proceedings                                                                                24

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds                                      24

Item 3.    Defaults upon Senior Securities                                                                  24

Item 4.    Submission of Matters to a Vote of Security Holders                                              24

Item 5.    Other Information                                                                                24

Item 6.    Exhibits                                                                                         24


SIGNATURES                                                                                                  24

CERTIFICATIONS                                                                                              25-32

</TABLE>


                                       2
<PAGE>
<TABLE>
<CAPTION>

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Delta Mills, Inc.
(In Thousands)
                                                   January 1, 2005      July 3, 2004
                                                   -----------------    -------------
ASSETS
CURRENT ASSETS
<S>                                                   <C>                <C>
  Cash and cash equivalents                           $         868      $       585
  Accounts receivable:
     Factor                                                  36,465           38,613
     Less allowances for returns                                  1               20
                                                   -----------------    -------------
                                                             36,464           38,593
  Inventories
     Finished goods                                           7,649            6,613
     Work in process                                         20,649           18,877
     Raw materials and supplies                               6,092            6,889
                                                   -----------------    -------------
                                                             34,390           32,379

  Deferred income taxes                                       1,659            1,113
  Other assets                                                  498              302
                                                   -----------------    -------------
                    TOTAL CURRENT ASSETS                     73,879           72,972

ASSETS HELD FOR SALE                                          8,857            2,495

PROPERTY, PLANT AND EQUIPMENT, at cost                      123,350          163,032
     Less accumulated depreciation                           74,592           99,907
                                                   -----------------    -------------
                                                             48,758           63,125

DEFERRED LOAN COSTS                                             292              347
                                                   -----------------    -------------
                                                     $      131,786      $   138,939
                                                   =================    =============

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  Trade accounts payable                             $       12,667      $     7,879
  Revolving credit facility                                  24,079           21,388
  Accrued income taxes payable                               13,692           13,698
  Payable to affiliates                                       3,721            3,686
  Accrued employee compensation                               3,056            3,179
  Accrued restructuring                                       2,536
  Accrued and sundry liabilities                              4,464            5,543
                                                   -----------------    -------------
                    TOTAL CURRENT LIABILITIES                64,215           55,373
LONG-TERM DEBT                                               31,941           31,941
NON-CURRENT DEFERRED INCOME TAXES                             1,662            4,853
DEFERRED COMPENSATION                                         2,070            2,328
SHAREHOLDERS' EQUITY
  Common Stock -- par value $0.01 a share -- authorized
3,000 shares, issued and outstanding 100 shares
  Additional paid-in capital                                 51,792           51,792
  Accumulated deficit                                       (19,894)          (7,348)
                                                   -----------------    -------------
                                                             31,898           44,444
COMMITMENTS AND CONTINGENCIES
                                                   -----------------    -------------
                                                     $      131,786      $   138,939
                                                   =================    =============


</TABLE>

                                       3
<PAGE>
<TABLE>
<CAPTION>

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Delta Mills, Inc.
(In Thousands)


                                                    3 Mths Ended      3 Mths Ended      6 Mths Ended     6 Mths Ended
                                                     January 1,       December 27,       January 1,      December 27,
                                                        2005              2003              2005             2003
                                                   ---------------- ----------------- ----------------- ----------------

<S>                                                       <C>               <C>               <C>              <C>
Net sales                                                 $ 39,310          $ 48,500          $ 74,750         $ 91,081

Cost of goods sold                                          40,735            44,087            75,866           86,049
                                                   ---------------- ----------------- ----------------- ----------------
GROSS PROFIT (LOSS)                                         (1,425)            4,413            (1,116)           5,032

Selling, general and administrative expenses                 2,608             2,959             5,328            5,787
Impairment and restructuring expenses                        7,350                               7,350
Other income                                                    25               411                61              701
                                                   ---------------- ----------------- ----------------- ----------------
  OPERATING PROFIT (LOSS)                                  (11,358)            1,865           (13,733)             (54)

Interest expense                                            (1,265)           (1,161)           (2,556)          (2,368)
                                                   ---------------- ----------------- ----------------- ----------------

INCOME (LOSS) BEFORE INCOME TAXES                          (12,623)              704           (16,289)          (2,422)
Income tax expense (benefit)                                (2,399)              417            (3,743)            (732)
                                                   ---------------- ----------------- ----------------- ----------------

NET INCOME (LOSS)                                        $ (10,224)            $ 287         $ (12,546)        $ (1,690)
                                                   ================ ================= ================= ================


See notes to condensed consolidated financial statements.

</TABLE>





                                       4
<PAGE>
<TABLE>
<CAPTION>

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Delta Mills, Inc.
(In Thousands)
                                                      6 Mths Ended                 6 Mths Ended
                                                    January 1, 2005              December 27, 2003
                                                 -----------------------      ------------------------

OPERATING ACTIVITIES
<S>                                                       <C>                            <C>
  Net loss                                                $     (12,546)                 $     (1,690)
  Adjustments to reconcile net loss to net cash
     provided by operating activities:
     Depreciation                                                 4,381                         4,396
     Amortization                                                    55                            55
     Impairment and restructuring expenses                        7,350
     Gains on disposition of property
        and equipment                                                                            (253)
     Change in deferred income taxes                             (3,737)                       (5,488)
     Deferred compensation                                         (258)                          418
     Changes in operating assets and liabilities                  2,568                        10,376
                                                 -----------------------      ------------------------

           NET CASH (USED IN) PROVIDED BY
               OPERATING ACTIVITIES                              (2,187)                        7,814
                                                 -----------------------      ------------------------

INVESTING ACTIVITIES
  Property, plant and equipment:
     Purchases                                                     (221)                       (2,795)
     Proceeds of dispositions                                                                     424
                                                 -----------------------      ------------------------
           NET CASH USED IN
               INVESTING ACTIVITIES                                (221)                       (2,371)
                                                 -----------------------      ------------------------


FINANCING ACTIVITIES
  Proceeds from revolving lines of credit                        80,075                        91,571
  Repayments on revolving lines of credit                       (77,384)                      (96,940)
                                                 -----------------------      ------------------------
           NET CASH PROVIDED BY (USED IN)
               FINANCING ACTIVITIES                               2,691                        (5,369)
                                                 -----------------------      ------------------------

INCREASE IN CASH
     AND CASH EQUIVALENTS                                           283                            74


Cash and cash equivalents at beginning of period                    585                           520
                                                 -----------------------      ------------------------

             CASH AND CASH EQUIVALENTS
                  AT END OF PERIOD                        $         868                  $        594
                                                 =======================      ========================
</TABLE>


  See notes to condensed consolidated financial statements.

                                       5
<PAGE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (UNAUDITED)

NOTE A--BASIS OF PRESENTATION

The accompanying  unaudited condensed consolidated financial statements of Delta
Mills, Inc. and subsidiary ("the Company") have been prepared in accordance with
U.S. generally accepted accounting  principles for interim financial information
and  with the  instructions  to Form  10-Q and  Article  10 of  Regulation  S-X.
Accordingly,  they do not include all of the information and footnotes  required
by  U.S.  generally  accepted  accounting   principles  for  complete  financial
statements.  In the opinion of management,  all adjustments  (consisting of only
normal recurring  accruals)  considered  necessary for a fair  presentation have
been  included.  Operating  results for the six months ended January 1, 2005 are
not  necessarily  indicative  of the results  that may be expected  for the year
ending  July  2,  2005.  For  further  information,  refer  to the  consolidated
financial  statements  and footnotes  thereto  included in the Company's  annual
report on Form 10-K for the year ended July 3, 2004.


NOTE B--SUMMARIZED FINANCIAL INFORMATION OF SUBSIDIARY

Delta Mills Marketing,  Inc. (the  "Guarantor") is a wholly-owned  subsidiary of
the Company and has fully and  unconditionally  guaranteed (the "Guarantee") the
Company's payment of principal, premium, if any, interest and certain liquidated
damages, if any, on the Company's Senior Notes. The Guarantor's  liability under
the  Guarantee  is limited to such  amount,  the payment of which would not have
left the Guarantor  insolvent or with unreasonably small capital at the time its
Guarantee  was entered into,  after giving effect to the  incurrence of existing
indebtedness immediately prior to such time.

The  Guarantor  is the sole  subsidiary  of the Company and does not  comprise a
material portion of the Company's assets or operations.  All future subsidiaries
of the Company will  provide  guarantees  identical to the one  described in the
preceding paragraph unless such future subsidiaries are Receivables Subsidiaries
(as defined in the indenture relating to the Notes). Such additional  guarantees
will be joint and several with the Guarantee of the Guarantor.

The Company has not presented separate financial statements or other disclosures
concerning the Guarantor  because  Company  management has determined  that such
information is not material to investors.

Summarized financial information for the Guarantor is as follows (in thousands):


                                     January 1, 2005           July 3, 2004
                                     ---------------           ------------
Current assets                             $139                    $ 83
Non-current assets                            1                      13
Current liabilities                       2,363                   2,275
Non-current liabilities                     712                     697
Stockholders' deficit                    (2,935)                 (2,876)

Summarized   results  of  operations  for  the  Guarantor  are  as  follows  (in
thousands):

                                                   Six Months Ended
                                          -------------------------------------
                                          January 1, 2005     December 27, 2003
                                          ---------------     -----------------

Net sales - Intercompany commissions          $ 1,678              $ 2,044
Cost and expenses                               1,737                1,930
Net income (loss)                                 (59)                 114



                                       6
<PAGE>


NOTE C-LONG-TERM DEBT, CREDIT ARRANGEMENTS, AND NOTES PAYABLE

On August 25, 1997, the Company issued $150 million of unsecured ten-year Senior
Notes at an interest rate of 9.625%.  These notes will mature in August 2007. At
January 1, 2005, the outstanding balance of the notes was $31,941,000, unchanged
from the balance at July 3, 2004.

The Company has a revolving  credit facility with GMAC with a term lasting until
March 2007. Borrowings under this credit facility are based on eligible accounts
receivable  and  inventories  of the  Company.  The  facility  is secured by the
accounts  receivable,  inventories and capital stock of the Company. The average
interest  rate on the credit  facility was 5.39% at January 1, 2005 and is based
on a spread over either  LIBOR or a base rate.  Borrowings  under this  facility
were  $24.1  million  and $21.4  million as of January 1, 2005 and July 3, 2004,
respectively.  As of January 1, 2005, the revolving credit facility availability
was approximately  $9.2 million,  net of the $7 million  availability  reduction
described below.

Prior to April 19, 2004, the GMAC credit  facility had financial  covenants that
required the Company to comply with a maximum leverage ratio and a minimum fixed
charge coverage ratio. As a result of the operating loss in the third quarter of
fiscal year 2004,  the Company was not in compliance  with the maximum  leverage
ratio covenant at the end of that quarter.  On April 19, 2004,  GMAC granted the
Company a waiver and amendment that waived the existing  default with respect to
the maximum  leverage ratio covenant,  temporarily  amended the maximum leverage
ratio  covenant  for the fourth  quarter of fiscal  year 2004,  and  temporarily
eliminated  the fixed charge  coverage  ratio covenant for the fourth quarter of
fiscal year 2004. The Company was in compliance with these amended  covenants at
July 3, 2004.  The April 2004 waiver and  amendment  also reduced the  Company's
availability  under the credit  facility by $7 million for the remaining term of
the facility and increased the interest  rates under the credit  facility by 125
basis points;  however,  the interest  rates will revert to their  pre-amendment
levels  if the  Company  has net  income  for  fiscal  year 2005 and no event of
default  exists  under the credit  facility.  On August 18,  2004,  the  Company
entered into further  amendments to the GMAC credit  facility  pursuant to which
the maximum  availability  was reduced to $38 million,  and the maximum leverage
ratio and fixed charge  coverage  ratio  covenants  were replaced with a minimum
EBITDA  covenant.  The new covenant sets required minimum EBITDA levels for each
quarter of fiscal year 2005 and  provides  that it will  constitute  an event of
default if the  Company  and its lender  fail to agree by the end of fiscal year
2005 to minimum  EBITDA  levels for the  remainder of the term of the  revolving
credit  facility.  On October  18,  2004,  GMAC  agreed to an  amendment  to the
financial covenants in the credit facility to reduce the required minimum EBITDA
levels for each quarter of fiscal year 2005. The Company was in compliance  with
these amended covenants at January 1, 2005.

The Company's  credit  facility  contains  restrictive  covenants  that restrict
additional  indebtedness,  dividends,  and capital expenditures.  The payment of
dividends with respect to the Company's  stock is permitted if there is no event
of default  and there is at least $1 of  availability  under the  facility.  The
indenture  pertaining  to  the  Company's  9.625%  Senior  Notes  also  contains
restrictive  covenants that restrict  additional  indebtedness,  dividends,  and
investments by the Company and its  subsidiaries.  The payment of dividends with
respect  to the  Company's  stock is  permitted  if there is no event of default
under the indenture  and after payment of the dividend,  the Company could incur
at least $1 of additional indebtedness under a fixed charge coverage ratio test.
Dividends are also capped based on  cumulative  net income and proceeds from the
issuance of securities and liquidation of certain  investments.  The Company may
loan funds to Delta Woodside subject to compliance with the same conditions.  At
January 1, 2005,  the  Company was  prohibited  by these  covenants  from paying
dividends and making loans to Delta Woodside. During the year ended July 3, 2004
and the quarter ended January 1, 2005,  the Company did not pay any dividends to
Delta Woodside.

The Company  assigns a substantial  portion of its trade accounts  receivable to
GMAC  Commercial  Finance  LLC  (the  "Factor")  under a factor  agreement.  The
assignment of these  receivables is primarily  without  recourse,  provided that
customer  orders are approved by the Factor prior to shipment of goods,  up to a
maximum for each individual account.  The assigned trade accounts receivable are
recorded  on the  Company's  books at full value and  represent  amounts due the
Company  from the  Factor.  There are no  advances  from the Factor  against the
assigned receivables. All factoring fees are recorded in the Company's statement
of  operations  as  incurred as a part of  selling,  general and  administrative
expenses.

                                       7
<PAGE>

NOTE D - STOCK COMPENSATION

The Company also participates in the Delta Woodside Industries,  Inc. 2004 Stock
Plan, Incentive Stock Award Plan, and 2000 Stock Option Plan.

The Company applies the intrinsic value-based method of accounting for the stock
option plans, in accordance with the provisions of Accounting  Principles  Board
Opinion  No. 25,  "Accounting  for Stock  Issued to  Employees,"  (APB 25),  and
related  interpretations.  Under this  method,  compensation  expense  for stock
options is recorded on the date of the grant only if the current market price of
the underlying stock exceeded the exercise price.  Compensation  expense for the
incentive stock award plan is approximately the same under APB 25 as it would be
under  Statement of Financial  Accounting  Standards  No. 123,  "Accounting  for
Stock-Based  Compensation"  (SFAS  No.  123).  If  the  Company  had  determined
compensation expense at fair value for stock options, as under SFAS No. 123, the
Company's net income (loss) would have been as follows:

<TABLE>
<CAPTION>
(In thousands)                                               3 Months         3 Months          6 Months         6 Months
                                                              Ended            Ended             Ended            Ended
                                                             1/1/2005        12/27/2003         1/1/2005        12/27/2003
                                                           -------------    -------------     -------------    -------------

<S>                                                        <C>              <C>               <C>              <C>
Net income (loss), as reported                             $   (10,224)     $        287      $   (12,546)     $    (1,690)

Add stock based employee compensation expense
   included in reported net income (loss), net of tax               16                 0               33               26

Less total stock based employee compensation
   expense determined under fair value based
   method, net of related tax effects                              (16)              (0)              (33)             (26)
                                                           -------------    -------------     -------------    -------------

Pro forma net income (loss)                                $   (10,224)     $        287      $   (12,546)     $    (1,690)
                                                           =============    =============     =============    =============
</TABLE>


NOTE E - COMMITMENTS AND CONTINGENCIES

During 1998,  Delta Woodside  received  notices from the State of North Carolina
asserting  deficiencies  in state  corporate  income and franchise taxes for the
Delta  Woodside's 1994 - 1997 tax years.  The total  assessment  proposed by the
State amounted to $1.5 million,  which  included  interest and penalties at that
time. The assessment was delayed pending an administrative review of the case by
the State.  In October  2002,  the State  proposed a  settlement  in which Delta
Woodside would have paid approximately 90% of the assessed amount plus a portion
of certain penalties for Delta Woodside's tax years 1994 - 2000. In January 2005
the North Carolina  Department of Revenue (the Department)  notified the Company
that the North Carolina  Court of Appeals  unanimously  upheld the  Department's
assessment of corporate income and franchise tax against A&F Trademark and eight
other holding  company  subsidiaries  of the Limited  Stores,  Inc. (the Limited
Stores Case), ruling that the trademark holding companies were doing business in
the state of North  Carolina for corporate  income tax purposes.  As a result of
the Limited Stores Case ruling, the Department  proposed a Voluntary  Compliance
Program (the Program)  whereby the Company could pay the  assessment  amount for
the Company's 1994 - 1997 tax years plus interest  totaling  approximately  $1.4
million.  Under the Program,  the Department would waive all penalties  provided
the Company pays the tax and  interest and waives all rights to a refund.  Delta
Woodside  rejected this offer and continued with its appeal due to  management's
belief  that  the  State's  legal  position  is  in  conflict  with  established
principles of federal constitutional law. Delta Woodside considers all exposures
in determining probable amounts of payment; therefore, any payment in settlement
of this matter is not expected to result in a material  impact on the  Company's
results of operations.


                                       8
<PAGE>

NOTE F - DEFERRED COMPENSATION

On  January  16,  2004,  based  on  the   recommendation   of  Delta  Woodside's
Compensation  Committee,  the Board (with Mr.  Garrett  abstaining)  approved an
amendment of the Company's deferred compensation plan. The deferred compensation
plan amendment provided that each participant's  deferred  compensation  account
will  be  paid  to  the  participant  upon  the  earlier  of  the  participant's
termination of employment or in accordance  with a schedule of payment that will
pay approximately 40%, 30%, 20% and 10% of the participant's total pre-amendment
account on  February 15 of 2004,  2005,  2006 and 2007,  respectively.  Any such
February 15 payment  will be  conditioned  on there  being no default  under the
Company's  Senior Note Indenture or the Company's  revolving credit facility and
on  compliance  with the fixed  charge  coverage  ratio test in the Senior  Note
Indenture for the most recently ended four full fiscal quarters, determined on a
pro  forma  basis.  Compliance  with the fixed  charge  coverage  ratio  test is
required by the Senior Note Indenture only for the incurrence of indebtedness or
the issuance of preferred stock in certain circumstances; however, the amendment
of  the  deferred  compensation  plan  requires  compliance  for  the  scheduled
payments.  As a result of this  amendment  to the  deferred  compensation  plan,
approximately  $2.3 million,  which  represents the scheduled  February 15, 2005
payment,  plus distributions  anticipated to occur in the next twelve months due
to participant  retirements,  has been reclassified on the consolidated  balance
sheet at  January  1,  2005  from  deferred  compensation  to  accrued  employee
compensation in current  liabilities.  The first payment of  approximately  $3.1
million was made in February  2004. As of February 15, 2005, the Company was not
in compliance,  for the purpose of the scheduled payment,  with the fixed charge
coverage  ratio test in the Senior Note  Indenture for the most  recently  ended
four full fiscal  quarters,  determined on a pro forma basis.  Accordingly,  any
future payment in accordance  with the schedule in the amendment will be delayed
until compliance is achieved.



NOTE G -IMPAIRMENT AND RESTRUCTURING CHARGES

During the quarter ended January 1, 2005, the Company recorded an impairment and
restructuring  charge of $7.4 million,  on a pretax basis,  associated  with its
2005  realignment  plan as announced on October 20, 2004. The Company recorded a
$3.8  million  non-cash  asset  impairment  charge to reflect  the write down of
property and equipment to its estimated fair value,  less selling  costs.  These
assets are recorded on the consolidated  financial statements as Assets Held for
Sale.  The carrying  amount of Assets Held for Sale,  including  the Catawba and
Furman  plants  which  were   previously   classified  in  this  category,   was
approximately $8,857,000 at January 1, 2005. The Company has entered asset sales
agreements covering the Catawba,  Furman, and Estes plants and equipment located
at these closed plants as well as some impaired equipment located at the Beattie
and Pamplico plants.

The remainder of the charge relates to restructuring  costs of $3.5 million,  as
noted below:

<TABLE>
<CAPTION>
                                                      Employee
                                                  Termination Costs    Other Expenses         Total
                                                  -----------------    --------------         -----
<S>                                                   <C>                  <C>             <C>
Restructuring Accrual                                 $3,154,229           $350,000        $3,504,229

Less: Charges Paid Year to Date                          959,166              9,059           968,225

Remaining Liability as of January 1, 2005             $2,195,063           $340,941        $2,536,004
</TABLE>


The employee  termination  costs are principally for separation pay and benefits
costs for the approximately 400 terminated employees and are expected to be paid
over 18 months  beginning in November  2004.  The other  expenses are  primarily
estimated contract termination costs.

In addition to the restructuring and impairment charges, the Company recorded in
cost of goods sold  $781,000  for the  write-off of certain  supply  inventories
associated with equipment to be sold.

                                       9
<PAGE>

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS


Delta Mills sells a broad range of finished apparel fabrics primarily to branded
apparel manufacturers and resellers, including Haggar Corp., the Wrangler(R) and
Lee(R) labels of V.F. Corporation,  Liz Claiborne,  Inc., Levi Strauss and their
respective  subcontractors,  and private  label apparel  manufacturers  for J.C.
Penney Company,  Inc., Sears,  Roebuck & Co.,  Wal-Mart Stores,  Inc., and other
retailers.  Delta Mills also sells  camouflage  fabric and other fabrics used in
apparel for the United States Department of Defense.


CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION

The following  discussion  contains various  "forward-looking  statements".  All
statements,  other than statements of historical fact, which address activities,
events or developments that the Company expects or anticipates will or may occur
in the future are  forward-looking  statements.  Examples  are  statements  that
concern future revenues,  future costs,  future capital  expenditures,  business
strategy,   competitive  strengths,   competitive   weaknesses,   goals,  plans,
references to future success or difficulties and other similar information.  The
words  "estimate",  "project",  "forecast",  "anticipate",  "expect",  "intend",
"believe" and similar  expressions,  and  discussions of strategy or intentions,
are intended to identify forward-looking statements.

The  forward-looking  statements  in this  document  are based on the  Company's
expectations and are necessarily dependent upon assumptions,  estimates and data
that the Company  believes are  reasonable  and  accurate but may be  incorrect,
incomplete or imprecise. Forward-looking statements are also subject to a number
of business risks and uncertainties,  any of which could cause actual results to
differ  materially  from those set forth in or  implied  by the  forward-looking
statements. These risks and uncertainties include, but are not limited to:

o    changes in the retail demand for apparel products
o    the cost of raw materials
o    competitive conditions in the apparel and textile industries
o    the  relative  strength  of the  United  States  dollar  as  against  other
     currencies
o    changes in United States and  international  trade  regulations,  including
     without  limitation  the end of  quotas on  textile  and  apparel  products
     amongst WTO member states in 2005
o    the  discovery of unknown  conditions,  such as  environmental  matters and
     similar items
o    escalating  energy  costs
o    the federal  government  policy  respecting  US sourcing  requirements  for
     military fabrics

Accordingly,  any forward-looking statements do not purport to be predictions of
future events or circumstances  and may not be realized.  You should also review
the other  cautionary  statements we make in this quarterly  report and in other
reports and other  documents the Company files with the  Securities and Exchange
Commission. All forward-looking statements attributable to us, or persons acting
for us, are expressly qualified in their entirety by our cautionary statements.

The Company does not undertake publicly to update or revise the  forward-looking
statements  even if it becomes  clear  that any  projected  results  will not be
realized.




                                       10
<PAGE>

MANAGEMENT OVERVIEW AND COMPANY OUTLOOK

THE CURRENT ENVIRONMENT.  As we end our second fiscal quarter and enter calendar
year 2005, we recognize  that the Company  faces a significant  change in global
competition as a result of the WTO's  phase-out of textile and apparel quotas at
the end of calendar year 2004. It is too early in the calendar year to judge the
WTO's  effect  on  our  commercial  business.   While  we  recognize  our  Asian
competitors  will have a cost advantage as tariffs on  textile/apparel  products
are reduced  (but not  eliminated),  we believe we have  competitive  advantages
compared to Asian competitors and we must fully utilize those advantages.  Among
our advantages are our  well-established  relationships with our customers,  our
ability  to respond  quickly  to  customer  needs and the  logistical  advantage
associated with our manufacturing being located in North America. However, there
can be no assurance that these advantages will allow us to successfully  compete
with foreign textile producers.

During the second fiscal quarter, we closed our Estes weaving facility,  located
in Piedmont,  South Carolina as part of the realignment  plan announced  October
20, 2004. The equipment run-out schedule was completed in approximately five (5)
weeks as  planned.  In  addition  to our Estes  Plant,  we have two  other  idle
facilities:  the Catawba  Plant  located in Maiden,  North  Carolina  was closed
during  fiscal year 2003 and the Furman Plant,  located in Fountain  Inn,  South
Carolina was closed during fiscal year 2002. We will discuss the status of these
impaired  facilities and related  equipment  under the  Realignment  Plan update
later in this overview.

SECOND QUARTER AND FIRST HALF OF FISCAL YEAR 2005.  Sales increased $3.9 million
from the first  quarter of fiscal 2005  quarter but  declined  $9.2 million over
last year's  second  quarter and $16.3  million  over the prior year's first six
months.  The declines were principally a result of the decline in the commercial
cotton product category.  This decline was not unexpected and current conditions
in the market  place have not changed  significantly.  We still  expect  surplus
capacity in the domestic  textile  manufacturing  base to remain in place and we
expect Asia to continue to disrupt the sourcing  patterns of U.S.  retailers and
brands. We remain diligent in our efforts to understand the globally competitive
market  place and to look  within  our  Company  to lower our costs and  improve
performance.

OUTLOOK.  We  continue  to  believe  the  best  opportunity  for  improving  our
performance   and  protecting  the  investment  of  our   constituents,   is  to
successfully  execute our  Realignment  Plan that was  announced  on October 20,
2004.  +At this point in time,  as  planned,  we have  completed  the  workforce
reductions,  reduced medical and 401k benefits,  reduced salaried employees pay,
closed the Estes  Plant,  increased  the  capacity  utilization  of our  Beattie
weaving facility,  initiated fixed overhead  reductions in the manufacturing and
administrative  areas  including the  relocation of the New York and  Greenville
administrative  offices,  and negotiated  asset sales  contracts on all impaired
real  and  personal  property.   With  our  anticipated  improved  manufacturing
performance  and market  support  beginning the last half of our fiscal year, we
should  see  the  true  test  of our  plan's  success  as the  effect  of  these
initiatives moves to the bottom line.

Our commercial  cotton market has recently shown signs of improvement,  although
we cannot  pinpoint the exact reason nor can we assume the  improvement  in this
business to be long term.  Some of the possible  reasons are that some  domestic
capacity  rationalization  has taken place, the supply chain inventory has moved
to a lower than usual level or that our customers,  even though they continue to
look for new  opportunities,  are comfortable with their current domestic supply
chain.

On the other hand, our commercial  synthetic product categories are not enjoying
the  same  trend  as we  are  experiencing  in  the  commercial  cotton  product
categories. In this business, we are suffering through what we hope is the usual
seasonal adjustment.

Our government business remains strong. The government procurement agency (DPSC)
has made  significant  long-term  awards in support of its program to adequately
equip the  standing  army during  these  troubled  times.  This coupled with its
transitioning  into the new uniform for the Armed Services  should bring comfort
that our current military business expectations will materialize.

In the third  fiscal  quarter  we expect to  realize  the first  results  of our
realignment  plan cost reductions.  As we stated earlier,  there are no apparent
obstacles  on the horizon,  however,  we  recognize  the risks that  continue to
threaten the success of our future plans, namely:

                                       11
<PAGE>

o    the high level of over capacity in the domestic textile industry
o    the relative strength of the US dollar against other currencies
o    the federal  government policy  respecting U. S. sourcing  requirements for
     military fabrics
o    the Company's 9.625% Senior Notes outstanding balance of $31,941,000 due in
     August 2007
o    the realignment plan's dependence on predictable plant operating  schedules
     supported  by timely  customer  orders in both  commercial  and  government
     product lines
o    the realignment  plan's  dependence on the ability of the Company to retain
     employees in light of the plan's pay and benefit reductions
o    the realignment  plan's dependence on the ability of the Company to acquire
     adequate supplies of yarn and greige fabric at favorable prices

Management  believes we can  succeed  with our  realignment  plan and return the
Company to profitability provided the negative consequences  associated with the
above risks do not become insurmountable.

OUR 2005 REALIGNMENT PLAN.

During the second quarter of fiscal year 2005, the Company's  Board of Directors
approved a  comprehensive  realignment  plan (the Plan) that will streamline the
Company's  operations and provide for significant cost reductions.  The Plan was
announced on October 20, 2004 with the closing of the Estes weaving facility and
the reduction in staffing  throughout the  organization.  The Plan also includes
capacity reductions in our commercial synthetics business and the elimination of
yarn manufacturing at our Beattie plant. Other critical aspects of the Plan that
were  implemented   beginning  in  January  2005  are  the  reduction  in  fixed
manufacturing costs, benefit cost reductions, salary pay adjustments and reduced
administrative costs.

The Plan resulted in a charge to earnings of $8,863,000 as follows:
<TABLE>
<CAPTION>
                                                    Asset       Restructuring     Cost of
                                     Total        Impairment        Costs       Goods Sold
                                -------------------------------------------------------------
<S>                                  <C>            <C>              <C>          <C>
Asset impairment costs               $3,845,000     $3,845,000
Cash restructuring costs              3,504,000                      3,504,000
Estes and Beattie run-out
costs
  and inventory write-down            1,514,000                                    1,514,000
                                -------------------------------------------------------------
Total                                $8,863,000     $3,845,000      $3,504,000    $1,514,000
                                -------------------------------------------------------------
</TABLE>

The asset  impairment  portion of the charge was  determined  based on estimated
proceeds of  $8,857,000  associated  with asset sales  agreements  covering  our
Catawba,  Furman,  and Estes plants and equipment located at these closed plants
as well as some impaired  equipment  located at our Beattie and Pamplico plants.
Closings for equipment sales agreements  totaling $4,038,000 have been completed
through February 15, 2005. The closings for the remaining asset sales agreements
are  scheduled  during  the  third  quarter  of  fiscal  2005 for the  remaining
equipment  sales and  during  the  fourth  quarter  of fiscal  2005 for the real
property sales. As reported in Form 8-K filed on February 2, 2005, the larger of
the asset purchase agreements was with Gibbs International,  Inc. for $7,000,000
covering  the  Company's  Furman,  Catawba and Estes plants and a portion of the
equipment  located at those  plants as well as  equipment  associated  with yarn
production at the Beattie plant.  The various  closings for these asset purchase
agreements are subject to customary closing conditions.  The closing of the sale
of the plants is further  subject to completion  by Gibbs of due diligence  with
respect to title, survey and environmental matters. The restructuring portion of
the  charge  is  principally  for  separation  pay and  benefits  costs  for the
approximately 400 terminated employees and is expected to be paid over 18 months
beginning in November 2004.  The charges  recorded in cost of goods sold include
$733,000 of run-out  costs at the Estes plant and $781,000 for the  write-off of
certain supply inventories associated with equipment to be sold.

We estimate that this aggressive  cost reduction  initiative will improve pretax
earnings on an annual basis by $11.0 to $16.0  million  when  compared to fiscal
2004 results, although there can be no assurance to this effect. The uncertainty
associated  with these  anticipated  costs  reductions  relates to the Company's
performance and the industry risks described above as the detailed plan unfolds.

                                       12
<PAGE>

DEVELOPMENTS SINCE QUARTER END

On  January  27,  2005,  the  Board of  Directors  of Delta  Woodside,  upon the
recommendation of the Compensation Committee of the Board, adopted a Fiscal Year
2005  Incentive  Bonus Plan  pursuant  to which cash  bonuses  will,  subject to
conditions set forth in the plan, be awarded to employees if Delta Mills exceeds
a minimum  EBITDA  target  during  fiscal year 2005.  If Delta Mills exceeds the
minimum  EBITDA  target,  a bonus  pool is  established,  the amount of which is
calculated  based on varying  portions  of the amount of EBITDA in excess of the
target, from which bonus pool cash bonuses will, subject to conditions set forth
in the  plan,  be  paid  to  employees,  including  Delta  Woodside's  executive
officers,  in the discretion of the  Compensation  Committee of the Board (as to
the executive  officers) or the Company's chief  executive  officer (as to other
employees).  For  purposes  of the bonus  plan,  EBITDA  will be  calculated  in
accordance with the definition of that term set forth in Delta Mills'  Revolving
Credit and Security Agreement dated as of March 31, 2000, as amended.























                                       13
<PAGE>

RESULTS OF OPERATIONS
SECOND QUARTER OF FISCAL 2005 VERSUS SECOND QUARTER OF FISCAL 2004

The following table  summarizes the Company's  results for the second quarter of
Fiscal 2005 versus the second  quarter of Fiscal 2004.  Amounts are in thousands
except for percentages.
<TABLE>
<CAPTION>

                                                                                      Increase/(Decrease)
                                                    3 Months        3 Months          From 2004 to 2005
                                                      Ended           Ended         -----------------------
                                                      1/1/2005       12/27/2003           $            %
                                                   ------------------------------------------------------------
<S>                                                   <C>              <C>            <C>           <C>
Net Sales                                             $ 39,310         $ 48,500       $ (9,190)     (18.95)%
% of Net Sales                                          100.00 %         100.00%

Gross Profit (Loss)                                     (1,425)           4,413         (5,838)    (132.29)%
% of Net Sales                                           (3.63)%           9.10%

Selling, General and Administrative Expenses             2,608            2,959           (351)     (11.86)%
% of Net Sales                                            6.63 %           6.10%

Impairment and restructuring expenses                    7,350                           7,350

Other Income                                                25              411           (386)     (93.92)%

Operating Profit (Loss)                                (11,358)           1,865        (13,223)    (709.01)%
% of Net Sales                                          (28.89)%           3.85%

Interest Expense                                        (1,265)          (1,161)           104        8.96 %
% of Net Sales                                           (3.22)%          (2.39)%

Income (Loss) Before Income Taxes                      (12,623)             704        (13,327)   (1893.04)%
% of Net Sales                                          (32.11)%           1.45%

Income Tax Expense (benefit)                            (2,399)             417         (2,816)    (675.30)%
% of Net Sales                                           (6.10)%           0.86%

Net Income (Loss)                                      (10,224)             287        (10,511)   (3662.37)%
% of Net Sales                                          (26.01)%           0.59%

</TABLE>



                                       14
<PAGE>

NET SALES:
The 19.0%  decline in net sales was the result of a 22.8%  decline in unit sales
partially  offset by a 5.0% increase in average sales price. The decline in unit
sales was primarily due to a decline in the Company's commercial cotton products
brought on by the high level of over capacity in the textile industry,  pressure
from  foreign  imports and  inconsistent  demand at retail.  The decline in unit
sales of commercial cotton products, which is the Company's lowest price product
category, accounted for the majority of the average sales price increase.

GROSS PROFIT (LOSS):
The decline in gross profit was primarily due to a decline in profit  margins in
the commercial cotton and synthetic product  categories.  The high level of over
capacity in the textile industry, pressure from foreign imports and inconsistent
demand at retail were the primary factors contributing to the declines in profit
margin in the commercial  product  categories.  Additionally,  run-out costs and
inventory  write-downs  associated  with the  closing of the Estes plant and the
Beattie  plant  yarn  manufacturing  totaling  approximately  $1.5  million  are
included  in the 2005 gross  loss.  Also  contributing  to the  decline in gross
profit were increased raw material and energy costs combined with declining cost
absorption due to lower unit volume.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
The decline in selling, general and administrative expenses was primarily due to
lower  salary  and  benefit  costs  due  to  staff  reductions  related  to  the
realignment  plan and lower  distribution  costs  associated  with  reduced unit
sales.

IMPAIRMENT AND RESTRUCTURING EXPENSES:
Impairment and restructuring  expenses related to the Company's Realignment plan
for the current year quarter  include asset  impairment  charges of $3.8 million
and cash  restructuring  expenses,  primarily  related to  employee  termination
costs, of $3.5 million.

OTHER INCOME:
Other  income  for the second  quarter of fiscal  2005  consisted  primarily  of
discounts taken for early payment of accounts payable invoices. Other income for
the prior year quarter was primarily  associated with asset disposals associated
with the Company's closed Furman and Catawba facilities.

OPERATING PROFIT (LOSS):
The  increase  in the  operating  loss was  primarily  the  result  of the items
discussed above.

INTEREST EXPENSE:
The average  interest rate on the Company's credit facility is based on a spread
over either LIBOR or a base rate. The increase in interest expense was primarily
due to increases in interest rates in connection with the amendment of the Delta
Mills' revolving credit facility and increases in LIBOR due to changes in market
rates.  The average  interest rate on the revolving credit facility was 2.91% as
of  December  27,  2003,  compared  to an average  interest  rate of 5.39% as of
January 1, 2005.

INCOME TAX EXPENSE  (BENEFIT):  The Company's net deferred tax assets at January
1,  2005 are  reduced  by  valuation  allowances.  The  necessity  to  establish
valuation  allowances  during the period reduces the expected income tax benefit
as a percentage of pre-tax losses.

NET INCOME (LOSS):
The  increase  in net  loss for the  second  quarter  of  fiscal  year  2005 was
primarily  due  to  the   deterioration  in  gross  profit  and  impairment  and
restructuring expenses as described above.



                                       15
<PAGE>

RESULTS OF OPERATIONS
FIRST SIX MONTHS OF FISCAL 2005 VERSUS FISCAL 2004

The following  table  summarizes the Company's  results for the six months ended
January 1, 2005 versus the six months ended  December  27, 2003.  Amounts are in
thousands except for percentages.
<TABLE>
<CAPTION>
                                                                                         Increase/ (Decrease)
                                                    6 Months          6 Months            From 2004 to 2005
                                                      Ended            Ended         --------------------------
                                                      1/1/2005       12/27/2003            $              %
                                                   --------------------------------------------------------------
<S>                                                   <C>              <C>            <C>              <C>
Net Sales                                             $ 74,750         $ 91,081       $ (16,331)       (17.93)%
% of Net Sales                                          100.00%          100.00%

Gross Profit (Loss)                                     (1,116)           5,032          (6,148)      (122.18)%
% of Net Sales                                           (1.49)%           5.52%

Selling, General and Administrative Expenses             5,328            5,787            (459)        (7.93)%
% of Net Sales                                            7.13%            6.35%

Impairment and restructuring expenses                    7,350                            7,350

Other Income                                                61              701            (640)       (91.30)%

Operating Loss                                         (13,733)             (54)        (13,679)    (25331.48)%
% of Net Sales                                          (18.37)%          (0.06)%

Interest Expense                                        (2,556)          (2,368)            188          7.94 %
% of Net Sales                                           (3.42)%          (2.60)%

Loss Before Income Taxes                               (16,289)          (2,422)        (13,867)      (572.54)%
% of Net Sales                                          (21.79)%          (2.66)%

Income Tax Benefit                                      (3,743)            (732)         (3,011)      (411.34)%
% of Net Sales                                           (5.01)%          (0.80)%

Net Loss                                               (12,546)          (1,690)        (10,856)      (642.37)%
% of Net Sales                                          (16.78)%          (1.86)%

Order Backlog                                         $ 59,840         $ 49,489         $10,351         20.92 %


</TABLE>


                                       16
<PAGE>

NET SALES:
The 17.9%  decline in net sales was the result of a 20.8%  decline in unit sales
partially  offset by a 3.7% increase in average sales price. The decline in unit
sales was primarily due to a decline in the Company's commercial cotton products
brought on by the high level of over capacity in the textile industry,  pressure
from  foreign  imports and  inconsistent  demand at retail.  The decline in unit
sales of commercial cotton products, which is the Company's lowest price product
category, accounted for the majority of the average sales price increase.

GROSS PROFIT (LOSS):
The decline in gross profit was primarily due to a decline in profit  margins in
the commercial cotton and synthetic product  categories.  The high level of over
capacity in the textile industry, pressure from foreign imports and inconsistent
demand at retail were the primary factors contributing to the declines in profit
margin in the commercial  product  categories.  Additionally,  run-out costs and
inventory  write-downs  associated  with the  closing of the Estes plant and the
Beattie  plant  yarn  manufacturing  totaling  approximately  $1.5  million  are
included  in the 2005 gross  loss.  Also  contributing  to the  decline in gross
profit were increased raw material and energy costs.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
The decline in selling, general and administrative expenses was primarily due to
lower  salary  and  benefit  costs  due  to  staff  reductions  related  to  the
realignment  plan and lower  distribution  costs  associated  with  reduced unit
sales.

OTHER INCOME:
Other  income for the first six months of fiscal  2005  consisted  primarily  of
discounts taken for early payment of accounts payable invoices. Other income for
the  prior  year six  months  was  primarily  associated  with  asset  disposals
associated with the Company's closed Furman and Catawba facilities.

OPERATING LOSS:
The  increase  in the  operating  loss was  primarily  the  result  of the items
discussed above.

INTEREST EXPENSE:
The average  interest rate on the Company's credit facility is based on a spread
over either LIBOR or a base rate. The increase in interest expense was primarily
due to increases in interest rates in connection with the amendment of the Delta
Mills' revolving credit facility and increases in LIBOR due to changes in market
rates.  The average  interest rate on the revolving credit facility was 2.91% as
of  December  27,  2003,  compared  to an average  interest  rate of 5.39% as of
January 1, 2005.

INCOME TAX BENEFIT:
The  Company's  net  deferred  tax  assets at  January  1, 2005 are  reduced  by
valuation allowances. The necessity to establish valuation allowances during the
period  reduces  the  expected  income tax  benefit as a  percentage  of pre-tax
losses.

NET LOSS:
The  increase in net loss for the six months of fiscal  year 2005 was  primarily
due to the  deterioration  in gross  profit  and  impairment  and  restructuring
expenses as described above.

ORDER BACKLOG:
The increase in the order backlog was primarily due to a recent  increase in the
demand for the Company's  commercial cotton products,  as well as an increase in
the demand  for  uniform  fabrics  used in  apparel  sold to the  United  States
Department of Defense.

Over the last several  years many of the  Company's  commercial  customers  have
shortened lead times for delivery  requirements.  Because of shortened lead time
coupled with inconsistent  demand at retail,  management believes that the order
backlog at any given point in time may not be an indication of future sales.


                                       17
<PAGE>

LIQUIDITY AND SOURCES OF CAPITAL

SOURCES AND USES OF CASH.  The Company's  primary  sources of liquidity are cash
flows from operations and its revolving  credit facility with GMAC. In the first
six  months of fiscal  year 2005,  the  Company  used $2.2  million in cash from
operating  activities  principally  as the result of the $12.5  million net loss
discussed   above,  net  of  non-cash   impairment   charges  of  $3.8  million.
Additionally,  $1.0 million of the $3.5 million  cash  restructuring  costs were
actually paid during the period. The changes in operating assets and liabilities
were  principally the result of a $4.8 million increase in trade payables due to
the outsourcing of yarn  manufacturing  associated with the closing of the Estes
Plant.

Availability  on the  revolving  credit  facility was $9.2 million at January 1,
2005,  and the Company was in compliance  with the credit  facility's  financial
covenants as amended at January 1, 2005.

Capital  expenditures  during the first six months of fiscal years 2004 and 2005
were primarily used for the second phase of the  modernization  of the Company's
Delta 3 cotton finishing plant. On November 6, 2002, the Company  announced that
it had started a major capital project to modernize its Delta 3 cotton finishing
plant in Wallace,  S.C. This plan was divided into three phases. The first phase
consisted of the  installation  of a new dye range that was completed in June of
fiscal year 2003. The majority of the $6.4 million in capital  expenditures  for
fiscal  year 2003 were for this  project.  The  second  phase  consisted  of the
installation  of a new print  range and a new prep range that was  completed  in
early fiscal year 2005. The majority of the $5.1 million in capital expenditures
for fiscal year 2004 were for this project. The third phase will start in fiscal
year 2005 and  consists  of the  installation  of a new dye  range  that will be
designed for wide fabric  finishing.  The  majority of the $4.0 million  capital
expenditures  planned  for  fiscal  year  2005  will be spent  on this  project,
primarily  in the third and fourth  quarters of fiscal year 2005,  which ends on
July 2, 2005.  With the  completion of phases one and two of this  modernization
plan, the Company is positioned to provide  long-term support for its government
business  and  long-term  support  for  an  improved  quality  product  for  its
commercial  cotton business.  The completion of phase three will further enhance
the  Company's  ability  to meet the  needs  of its  cotton  business  on a cost
effective and profitable  basis and compete more  effectively in the industry in
2005 and beyond.

With the October 2004 amendment to the GMAC revolving credit agreement described
below and subject to completion of the Company's 2005 realignment plan discussed
above,  the Company believes that the cash flows generated by its operations and
funds  available  under Delta Mills'  credit  facility  should be  sufficient to
service its debt, to satisfy its  day-to-day  working  capital needs and to fund
its planned capital expenditures for the next twelve months and beyond.

DELTA MILLS' 9.625% SENIOR NOTES.  On August 25, 1997,  the Company  issued $150
million of unsecured ten-year Senior Notes at an interest rate of 9.625%.  These
notes will mature in August 2007. At January 1, 2005, the outstanding balance of
the notes was $31,941,000, unchanged from the balance at July 3, 2004.

THE GMAC REVOLVING CREDIT FACILITY.  The Company has a revolving credit facility
with GMAC with a term  lasting  until March 2007.  Borrowings  under this credit
facility  are based on  eligible  accounts  receivable  and  inventories  of the
Company.  The facility is secured by the accounts  receivable,  inventories  and
capital stock of the Company.  The average  interest rate on the credit facility
was 5.39% at January  1, 2005 and is based on a spread  over  either  LIBOR or a
base rate.  Borrowings  under this facility were $24.1 million and $21.4 million
as of January 1, 2005 and July 3, 2004, respectively. As of January 1, 2005, the
revolver  availability  was  approximately  $9.2 million,  net of the $7 million
availability reduction described below.

Prior to April 19, 2004, the GMAC credit  facility had financial  covenants that
required the Company to comply with a maximum leverage ratio and a minimum fixed
charge coverage ratio. As a result of the operating loss in the third quarter of
fiscal year 2004,  the Company was not in compliance  with the maximum  leverage
ratio covenant at the end of that quarter.  On April 19, 2004,  GMAC granted the
Company a waiver and amendment that waived the existing  default with respect to
the maximum  leverage ratio covenant,  temporarily  amended the maximum leverage

                                       18
<PAGE>

ratio  covenant  for the fourth  quarter of fiscal  year 2004,  and  temporarily
eliminated  the fixed charge  coverage  ratio covenant for the fourth quarter of
fiscal year 2004. The Company was in compliance with these amended  covenants at
July 3, 2004.  The April 2004 waiver and  amendment  also reduced the  Company's
availability  under the credit  facility by $7 million for the remaining term of
the facility and increased the interest  rates under the credit  facility by 125
basis points;  however,  the interest  rates will revert to their  pre-amendment
levels  if the  Company  has net  income  for  fiscal  year 2005 and no event of
default  exists  under the credit  facility.  On August 18,  2004,  the  Company
entered into further  amendments to the GMAC credit  facility  pursuant to which
the maximum  availability  was reduced to $38 million,  and the maximum leverage
ratio and fixed charge  coverage  ratio  covenants  were replaced with a minimum
EBITDA  covenant.  The new covenant sets required minimum EBITDA levels for each
quarter of fiscal year 2005 and  provides  that it will  constitute  an event of
default if the  Company  and its lender  fail to agree by the end of fiscal year
2005 to minimum  EBITDA  levels for the  remainder of the term of the  revolving
credit  facility.  On October 18, 2004,  GMAC,  the lender  under the  Company's
revolving credit facility,  agreed to an amendment to the financial covenants in
the  credit  facility  to reduce the  required  minimum  EBITDA  levels for each
quarter of fiscal year 2005.  The Company was in  compliance  with these amended
covenants at January 1, 2005.

RESTRICTIVE  COVENANTS.  The  Company's  credit  facility  contains  restrictive
covenants  that  restrict  additional   indebtedness,   dividends,  and  capital
expenditures.  The payment of dividends  with respect to the Company's  stock is
permitted  if  there  is no  event  of  default  and  there  is at  least  $1 of
availability  under the  facility.  The  indenture  pertaining  to the Company's
9.625% Senior Notes also contains restrictive covenants that restrict additional
indebtedness,  dividends,  and investments by the Company and its  subsidiaries.
The payment of  dividends  with respect to the  Company's  stock is permitted if
there is no event of  default  under  the  indenture  and after  payment  of the
dividend, the Company could incur at least $1 of additional indebtedness under a
fixed charge coverage ratio test.  Dividends are also capped based on cumulative
net income and  proceeds  from the issuance of  securities  and  liquidation  of
certain  investments.  The Company may loan funds to Delta  Woodside  subject to
compliance  with the same  conditions.  At  January  1, 2005,  the  Company  was
prohibited by these  covenants  from paying  dividends and making loans to Delta
Woodside.  During the quarter  ended  January 1, 2005 and the year ended July 3,
2004, the Company did not pay any dividends to Delta Woodside.

OTHER MATTERS.  The Company assigns a substantial  portion of its trade accounts
receivable  to GMAC  Commercial  Finance  LLC  (the  "Factor")  under  a  factor
agreement.  The assignment of these  receivables is primarily  without recourse,
provided  that  customer  orders are approved by the Factor prior to shipment of
goods, up to a maximum for each individual account.  The assigned trade accounts
receivable  are  recorded  on the  Company's  books at full value and  represent
amounts due to the  Company  from the  Factor.  There are no  advances  from the
Factor against the assigned receivables.  All factoring fees are recorded in the
Company's statement of operations as incurred as a part of selling,  general and
administrative expenses.

The Company has  entered  into  agreements,  and has fixed  prices,  to purchase
cotton for use in its  manufacturing  operations.  At  January 1, 2005,  minimum
payments  under these  contracts  with  non-cancelable  contract terms were $2.8
million.

During 1998,  Delta Woodside  received  notices from the State of North Carolina
asserting  deficiencies in state corporate  income and franchise taxes for Delta
Woodside's  1994 - 1997 tax years.  The total  assessment  proposed by the State
amounted to $1.5 million,  which  included  interest and penalties at that time.
The assessment was delayed pending an  administrative  review of the case by the
State.  In October 2002, the State proposed a settlement in which Delta Woodside
would  have paid  approximately  90% of the  assessed  amount  plus a portion of
certain penalties for Delta Woodside's tax years 1994 - 2000. In January,  2005,
the North Carolina  Department of Revenue (the Department)  notified the Company
that the North Carolina  Court of Appeals  unanimously  upheld the  Department's
assessment of corporate income and franchise tax against A&F Trademark and eight
other holding  company  subsidiaries  of the Limited  Stores,  Inc. (the Limited
Stores Case), ruling that the trademark holding companies were doing business in
the state of North  Carolina for corporate  income tax purposes.  As a result of
the Limited Stores Case ruling, the Department  proposed a Voluntary  Compliance
Program (the Program)  whereby the Company could pay the  assessment  amount for
the Company's 1994 - 1997 tax years plus interest  totaling  approximately  $1.4
million.  Under the Program,  the Department would waive all penalties  provided
the Company pays the tax and  interest and waives all rights to a refund.  Delta
Woodside  rejected this offer and continued with its appeal due to  management's
belief  that  the  State's  legal  position  is  in  conflict  with  established
principles of federal constitutional law. Delta Woodside considers all exposures
in determining  probable  amounts of payment and has determined  that any likely
settlement  will not exceed  established  reserves;  therefore,  any  payment in
settlement  of this  matter is not  expected  to result in a material  impact on
Delta Woodside's results of operations.

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<PAGE>

On  January  16,  2004,  based  on  the  recommendation  of the  Delta  Woodside
Compensation  Committee,  the Delta Woodside Board (with Mr. Garrett abstaining)
approved an amendment of the Delta  Woodside  deferred  compensation  plan.  The
deferred  compensation plan amendment provided that each participant's  deferred
compensation  account  will be paid to the  participant  upon the earlier of the
participant's  termination  of employment  or in  accordance  with a schedule of
payment that will pay  approximately  40%, 30%, 20% and 10% of the participant's
total  pre-amendment  account  on  February  15 of 2004,  2005,  2006 and  2007,
respectively. Any such February 15 payment will be conditioned on there being no
default under the  Company's  Senior Note  Indenture or the Company's  revolving
credit  facility and on compliance  with the fixed charge coverage ratio test in
the Senior Note Indenture for the most recently ended four full fiscal quarters,
determined on a pro forma basis. Compliance with the fixed charge coverage ratio
test is  required  by the  Senior  Note  Indenture  only for the  incurrence  of
indebtedness  or the  issuance  of  preferred  stock in  certain  circumstances;
however, the amendment of the deferred compensation plan requires compliance for
the  scheduled  payments.  As  a  result  of  this  amendment  to  the  deferred
compensation plan,  approximately  $2.3 million,  which represents the scheduled
February 15, 2005 payment,  plus distributions  anticipated to occur in the next
twelve  months due to  participant  retirements,  has been  reclassified  on the
consolidated  balance  sheet at January 1, 2005 from  deferred  compensation  to
accrued  employee  compensation  in current  liabilities.  The first  payment of
approximately  $3.1 million was made in February  2004. As of February 15, 2005,
the Company was not in  compliance,  for the purpose of the  scheduled  payment,
with  the fixed charge  coverage ratio test in the Senior Note Indenture for the
most recently ended four full fiscal quarters,  determined on a pro forma basis.
Accordingly, any future payment in accordance with the schedule in the amendment
will be delayed until compliance is achieved.


CRITICAL ACCOUNTING POLICIES

Critical  accounting  policies  are  defined  as those  that are  reflective  of
significant  judgments and  uncertainties,  and potentially result in materially
different results under different assumptions and conditions.

Impairment of Long - Lived Assets:  In  accordance  with  Statement of Financial
Accounting  Standards (SFAS) No. 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets," long-lived assets, such as property, plant and equipment,
are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.  Recoverability  of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to its fair value, which SFAS 144 defines as the estimated undiscounted
future cash flows expected to be generated by the asset.  If the carrying amount
of an asset exceeds its SFAS 144 fair value, an impairment  charge is recognized
equal to the amount by which the carrying  amount of the asset  exceeds the fair
value  of the  asset.  Any  impairment  charge  would  reduce  the  value of the
Company's  assets on its balance  sheet and result in a  corresponding  non-cash
charge  to  earnings   that  would  reduce  the  Company's  net  income  on  its
consolidated  statement  of  operations.  Assets to be  disposed  of by sale are
separately presented in the consolidated balance sheet and reported at the lower
of the  carrying  amount or fair  value  less  costs to sell,  and are no longer
depreciated.  Estimates  of  future  cash  flows and asset  selling  prices  are
inherently  uncertain.  Different estimates could result in materially different
carrying amounts.

Income  Taxes:  The  Company  accounts  for  income  taxes  under  the asset and
liability method in accordance with Statement of Financial  Accounting Standards
No. 109,  Accounting  for Income  Taxes  ("SFAS  109").  The Company  recognizes
deferred income taxes, net of any valuation allowances, for the estimated future
tax effects of temporary  differences  between the financial  statement carrying
amounts of existing assets and liabilities and their tax bases and net operating
loss and tax credit  carryforwards.  Deferred  tax assets  and  liabilities  are
measured  using  enacted tax rates  expected  to apply to taxable  income in the
years in which those  temporary  differences  are  expected to be  recovered  or
settled.  The effect on deferred tax assets and  liabilities  of a change in tax
rates is recognized  in income in the period that  includes the enactment  date.
Changes in deferred tax assets and liabilities are recorded in the provision for
income taxes. As of July 3, 2004, the Company had approximately  $3.7 million in
net deferred tax  liabilities.  As of January 1, 2005,  the Company did not have
any  deferred  tax  assets,  net  of  valuation   allowances  and  deferred  tax
liabilities.

The Company  evaluates on a regular basis the  realizability of its deferred tax
assets for each  taxable  jurisdiction.  In making this  assessment,  management
considers  whether it is more  likely  than not that some  portion or all of its
deferred tax assets will be realized.  The ultimate  realization of deferred tax

                                       20
<PAGE>

assets is  dependent  on the  generation  of future  taxable  income  during the
periods in which  those  temporary  differences  become  deductible.  Management
considers all  available  evidence,  both positive and negative,  in making this
assessment.  The Company's pre-tax operating losses in fiscal 2002, fiscal 2003,
fiscal 2004 and year-to-date  fiscal 2005 represent negative evidence,  which is
difficult to overcome under SFAS 109, with respect to the  realizability  of the
Company's deferred tax assets. In addition, management monitors and assesses the
need to change estimates with respect to tax exposure  reserve items,  resulting
in income tax expense increases or decreases  occurring in the period of changes
in estimates.

As a result of the Company's  Realignment Plan and the associated  restructuring
and  impairment  expenses,   combined  with  the  Company's  continuing  pre-tax
operating losses,  the Company's income tax benefit in the quarter ended January
1, 2005 would have  resulted in a net  deferred tax asset  position.  Due to the
negative  evidence  discussed  above,  the Company's net deferred tax assets are
reduced by valuation allowances.

RECENT ACCOUNTING PRONOUNCEMENTS

In  November  2004,  the FASB  issued  SFAS No.  151,  "Inventory  Costs".  This
statement  amends  Accounting  Research  Bulletin  ("ARB")  No.  43,  Chapter 4,
"Inventory  Pricing," and removes the "so abnormal" criterion that under certain
circumstances  could have led to the capitalization of these items. SFAS No. 151
requires  that idle  facility  expense,  excess  spoilage,  double  freight  and
rehandling  costs be recognized as current period charges  regardless of whether
they meet the  criterion of "so abnormal" as defined in ARB No. 43. SFAS No. 151
also requires that allocation of fixed production overhead expenses to the costs
of conversion be based on the normal capacity of the production facilities. SFAS
No. 151 is effective  for all fiscal years  beginning  after June 15, 2005.  The
Company is  currently  evaluating  the impact that the  adoption of SFAS No. 151
will have on its consolidated financial statements.

In December  2004,  the FASB issued SFAS No. 123  (revised  2004),  "Share-Based
Payment" ("SFAS No. 123(R)").  SFAS No. 123(R) will require companies to measure
all  employee  stock-based  compensation  awards  using a fair value  method and
record such expense in its financial  statements.  In addition,  the adoption of
SFAS No. 123(R)  requires  additional  accounting and disclosure  related to the
income  tax  and  cash  flow  effects   resulting   from   share-based   payment
arrangements.  SFAS No. 123(R) is effective beginning as of the first interim or
annual  reporting period beginning after June 15, 2005. The Company is currently
evaluating  the impact  that the  adoption  of SFAS No.  123(R) will have on its
consolidated  financial  statements.  The cumulative effect of adoption, if any,
will be measured and recognized in the consolidated  statements of operations on
the date of adoption.







                                       21
<PAGE>

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Commodity Risk Sensitivity

As a part of the Company's  business of converting fiber to finished fabric, the
Company makes raw cotton purchase  commitments and then fixes prices with cotton
merchants who buy from producers and sell to textile manufacturers.  Daily price
fluctuations  are minimal,  yet long-term trends in price movement can result in
unfavorable pricing of cotton. Before fixing prices, the Company looks at supply
and demand  fundamentals,  recent  price  trends and other  factors  that affect
cotton prices.  The Company also reviews the backlog of orders from customers as
well as the level of fixed price cotton  commitments in the industry in general.
As of January 1, 2005,  a 10%  decline in market  price of the  Company's  fixed
price contracts would have had a negative impact of  approximately  $0.3 million
on the value of the contracts. As of July 3, 2004, such a 10% decline would have
had a negative  impact of $0.7 million.  The decrease in the potential  negative
impact  from July 3, 2004 to  January  1, 2005 is due to a lower  level of fixed
price cotton  commitments  at the more recent date.  This decline in fixed price
cotton  commitments is due primarily to the Company's closing of its Estes plant
and the announced closing of its yarn manufacturing at the Beattie plant.


Interest Rate Sensitivity

The Company's revolving credit facility expiring in 2007 is sensitive to changes
in interest  rates.  Interest is based on a spread over LIBOR or a base rate. An
interest  rate increase  would have a negative  impact to the extent the Company
borrows against the revolving credit facility.  The impact would be dependent on
the level of  borrowings  incurred.  As of January 1, 2005,  an  increase in the
interest  rate of 1% would  have a  negative  impact of  approximately  $241,000
annually.  As of July 3, 2004, an increase in the interest rate of 1% would have
had a negative impact of approximately  $214,000  annually.  The increase in the
potential  negative  impact  from July 3, 2004 to  January 1, 2005 is due to the
increase in borrowings under the facility.

An interest  rate change  would not have an impact on the payments due under the
Company's fixed rate ten year Senior Notes.


Item 4.  CONTROLS AND PROCEDURES

Disclosure  controls and procedures are our controls and other  procedures  that
are  designed to ensure that  information  required to be disclosed by us in the
reports that we file or submit  under the  Exchange Act is recorded,  processed,
summarized and reported within the time periods  specified in the Securities and
Exchange  Commission's  rules and  forms.  Disclosure  controls  and  procedures
include,  without  limitation,  controls and procedures  designed to ensure that
information required to be disclosed by us in the reports that we file or submit
under the  Exchange  Act is  accumulated  and  communicated  to our  management,
including  our  Chief  Executive  Officer  and  Chief  Financial   Officer,   as
appropriate to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

The Company's  principal  executive officer and its principal financial officer,
after  evaluating the  effectiveness  of the Company's  disclosure  controls and
procedures  (as defined in Exchange Act Rules  13a-15(e)  and  15d-15(e)),  have
concluded  that, as of January 1, 2005,  the Company's  disclosure  controls and
procedures  were  adequate  and  effective to ensure that  material  information
relating to the Company and its consolidated subsidiaries would be made known to
them by others within those entities.

Changes in Internal Controls

During the quarter ended  January 1, 2005, as part of the Company's  Realignment
Plan,  staffing  reductions were made throughout the Company.  These  reductions
affected all functional areas,  including accounting,  procurement,  information
technology and  administrative  staff at the corporate and facility  level. As a
result of these staffing reductions, certain duty segregations and detail review
controls previously in place are no longer possible. Although we believe we will

                                       22
<PAGE>

be able to develop and implement higher level review controls and other controls
that are  adequate,  there  can be no  assurance  that  these  changes  will not
materially affect the Company's internal control over financial reporting.






























                                       23
<PAGE>

PART II.  OTHER INFORMATION

Item 1.     Legal Proceedings (not applicable)

Item 2.     Unregistered Sales of Equity  Securities  and  Use  of Proceeds (not
            applicable)

Item 3.     Defaults upon Senior Securities (not applicable)

Item 4.     Submission of Matters to a Vote of Security Holders (not applicable)

Item 5.     Other Information (not applicable)

ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT


Item 6.     Exhibits

         Listing of Exhibits


4.3.1.9     Amendment to Credit  Agreement  dated October 18, 2004 between Delta
            Mills,  Inc.  and GMAC  Commercial  Finance LLC as lender and agent:
            incorporated by reference to Exhibit 4.3.1.9 to the Company's Annual
            Report on Form 10-K for the fiscal year ended July 3, 2004 and filed
            with the Securities and Exchange Commission on October 18, 2004.

10.1        Resolution of the Board of Directors dated January 27, 2005 adopting
            Fiscal Year 2005 Incentive Bonus Plan.

10.2        Asset Purchase Agreement dated January 27, 2005 by and between Delta
            Mills Inc. and Gibbs International Inc.

31.1        Certification  of CEO Pursuant to Section 302 of the  Sarbanes-Oxley
            Act of 2002.

31.2        Certification  of CFO Pursuant to Section 302 of the  Sarbanes-Oxley
            Act of 2002.

32.1        Certification  of CEO Pursuant to Section 906 of the  Sarbanes-Oxley
            Act of 2002.

32.2        Certification  of CFO Pursuant to Section 906 of the  Sarbanes-Oxley
            Act of 2002.


                                   SIGNATURES

ursuant  to the  requirements  of the  Securities  Exchange  Act  of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



                                  Delta Mills, Inc.
                                  --------------------------------------
                                  (Registrant)




Date    February 15, 2005         By:/s/ W.H. Hardman, Jr.
      --------------------------  --------------------------------------------
                                  W.H. Hardman, Jr.
                                  Chief Financial Officer

                                       24