(Amounts in thousands, except share amounts and per share data)

(Unaudited)

	*June 2023*			*September 2022*
Assets
Cash and cash equivalents	$	296		$	300
Accounts receivable, less allowances of $98 and $109, respectively		41,733			68,215
Other receivables		889			1,402
Income tax receivable		1,898			1,969
Inventories, net		226,196			248,538
Prepaid expenses and other current assets		4,221			2,755
Total current assets		275,233			323,179

Property, plant and equipment, net of accumulated depreciation of $115,383 and $108,534, respectively		69,040			74,109
Goodwill		37,897			37,897
Intangibles, net		22,264			24,026
Deferred income taxes		3,105			1,342
Operating lease assets		54,054			50,275
Equity method investment		9,356			9,886
Other assets		2,020			2,967
Total assets	$	472,969		$	523,681

Liabilities and Equity
Liabilities:
Accounts payable	$	63,897		$	83,553
Accrued expenses		17,424			27,414
Income taxes payable		695			379
Current portion of finance leases		8,942			8,163
Current portion of operating leases		8,980			8,876
Current portion of long-term debt		10,180			9,176
Total current liabilities		110,118			137,561

Long-term income taxes payable		2,131			2,841
Long-term finance leases		15,871			16,776
Long-term operating leases		46,664			42,721
Long-term debt		131,461			136,750
Deferred income taxes		-			4,310
Total liabilities	$	306,245		$	340,959

Shareholder's 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 authorized, 9,646,972 shares issued, and 7,001,020 and 6,915,663 shares outstanding as of June 2023 and September 2022, respectively		96			96
Additional paid-in capital		61,448			61,961
Retained earnings		149,756			166,600
Accumulated other comprehensive income		21			141
Treasury stock - 2,645,952 and 2,731,309 shares as of June 2023 and September 2022, respectively		(43,896	)		(45,420	)
Equity attributable to Delta Apparel, Inc.		167,425			183,378
Equity attributable to non-controlling interest		(701	)		(656	)
Total equity		166,724			182,722
Total liabilities and equity	$	472,969		$	523,681

~~(Unaudited)~~

December 30,
2017 September 30,
2017
Assets
Current assets:

  Cash and cash equivalents $ 603
$ 572
  Accounts receivable, less allowances of $1,502 and $1,433, respectively 51,010
47,557
  Income tax receivable 404
352
  Inventories, net 174,505
174,551
  Note receivable 1,031
2,016
  Prepaid expenses and other current assets 3,885
2,646
Total current assets 231,438
227,694

Property, plant and equipment, net of accumulated depreciation of $69,320 and $67,780, respectively 45,449
42,706
  Goodwill 19,917
19,917
  Intangibles, net 15,925
16,151
  Deferred income taxes 2,656
5,002
  Other assets 6,277
6,332
Total assets $ 321,662
$ 317,802

Liabilities and Shareholders’ Equity
Current liabilities:

Accounts payable $ 45,597
$ 47,183
Accrued expenses 13,503
17,704
Current portion of long-term debt 6,600
7,548
Total current liabilities 65,700
72,435

Long-term debt, less current maturities 99,360
85,306
Income tax payable 8,058
—
Other liabilities 4,734
2,574
Contingent consideration 1,300
1,600
Total liabilities $ 179,152
$ 161,915

Shareholders’ 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 7,227,374 and 7,300,297 shares outstanding as of December 30, 2017, and September 30, 2017, respectively 96
96
Additional paid-in capital 59,856
61,065
Retained earnings 117,402
127,358
Accumulated other comprehensive income (loss) 51
(35 )
Treasury stock —2,419,598 and 2,346,675 shares as of December 30, 2017, and September 30, 2016, respectively (34,895 ) (32,597 )
Total shareholders’ equity 142,510
155,887
Total liabilities and shareholders' equity $ 321,662
$ 317,802

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

Delta Apparel, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Amounts in thousands, except per share data)

(Unaudited)

	*Three Months Ended*						*Nine Months Ended*
	June 2023			June 2022			June 2023			June 2022

Net sales	$	106,319		$	126,875		$	323,949		$	369,319
Cost of goods sold		92,384			96,182			280,181			282,100
Gross profit		13,935			30,693			43,768			87,219

Selling, general and administrative expenses		18,491			22,416			56,658			59,613
Other (income), net		(95	)		(1,018	)		(452	)		(1,947	)
Operating (loss) income		(4,461	)		9,295			(12,438	)		29,553

Interest expense, net		4,049			1,971			10,662			5,370
(Loss) earnings before (benefit from) provision for income taxes		(8,510	)		7,324			(23,100	)		24,183
(Benefit from) provision for income taxes		(2,218	)		1,087			(6,214	)		4,149
Consolidated net (loss) earnings		(6,292	)		6,237			(16,886	)		20,034
Net (loss) income attributable to non-controlling interest		(5	)		(3	)		(45	)		11
Net (loss) earnings attributable to shareholders	$	(6,287	)	$	6,240		$	(16,841	)	$	20,023

Basic (loss) earnings per share	$	(0.90	)	$	0.90		$	(2.41	)	$	2.87
Diluted (loss) earnings per share	$	(0.90	)	$	0.88		$	(2.41	)	$	2.84

Weighted average number of shares outstanding		7,001			6,946			6,985			6,966
Dilutive effect of stock awards		-			119			-			95
Weighted average number of shares assuming dilution		7,001			7,065			6,985			7,061

~~(Unaudited)~~

Three Months Ended
December 30,
2017 December 31,
2016
Net sales $ 90,342
$ 85,335
Cost of goods sold 73,972
67,777
Gross profit 16,370
17,558

Selling, general and administrative expenses 14,979
17,311
Change in fair value of contingent consideration (300 ) (100 )
Other income, net (47 ) (122 )
Operating income 1,738
469

Interest expense, net 1,334
1,301
Income (loss) before provision for income taxes 404
(832 )
Provision for (benefit from) income taxes 10,356
(225 )
Net loss $ (9,952 ) $ (607 )

Basic loss per share $ (1.37 ) $ (0.08 )
Diluted loss per share $ (1.37 ) $ (0.08 )

Weighted average number of shares outstanding 7,268
7,598
Dilutive effect of stock options and awards —
—
Weighted average number of shares assuming dilution 7,268
7,598

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

Delta Apparel, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive ~~Loss~~

Income

(Amounts in thousands)

(Unaudited)

	*Three Months Ended*					*Nine Months Ended*
	June 2023			June 2022		June 2023			June 2022

Net (loss) earnings attributable to shareholders	$	(6,287	)	$	6,240	$	(16,841	)	$	20,023
Other comprehensive (loss) income related to unrealized (loss) gain on derivatives, net of income tax		(159	)		186		(121	)		779
Consolidated comprehensive (loss) income	$	(6,446	)	$	6,426	$	(16,962	)	$	20,802

~~(Unaudited)~~

Three Months Ended
December 30,
2017 December 31,
2016
Net loss $ (9,952 ) $ (607 )
Other comprehensive income related to unrealized gain on derivatives, net of income tax 85
49
Comprehensive loss $ (9,867 ) $ (558 )

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

Delta Apparel, Inc. and Subsidiaries

Condensed Consolidated Statements of ~~Cash Flows~~

Shareholders’ Equity

(Amounts in ~~thousands)~~thousands, except share amounts)

(Unaudited)

											*Accumulated*
					*Additional*						*Other*									*Non-*
	*Common Stock*				*Paid-In*			*Retained*			*Comprehensive*			*Treasury Stock*						*Controlling*
	*Shares*		*Amount*		*Capital*			*Earnings*			*Income (Loss)*			*Shares*			*Amount*			*Interest*			*Total*
Balance as of September 2022		9,646,972	$	96	$	61,961		$	166,600		$	141			2,731,309		$	(45,420	)	$	(656	)	$	182,722

Net loss		-		-		-			(3,565	)		-			-			-			-			(3,565	)
Other comprehensive income		-		-		-			-			69			-			-			-			69
Net loss attributable to non-controlling interest		-		-		-			-			-			-			-			(34	)		(34	)
Vested stock awards		-		-		(2,067	)		-			-			(85,357	)		1,524			-			(543	)
Stock based compensation		-		-		665			-			-			-			-			-			665
Balance as of December 2022		9,646,972	$	96	$	60,559		$	163,035		$	210			2,645,952		$	(43,896	)	$	(690	)	$	179,314

Net loss		-		-		-			(6,992	)		-			-			-			-			(6,992	)
Other comprehensive loss		-		-		-			-			(30	)		-			-			-			(30	)
Net loss attributable to non-controlling interest		-		-		-			-			-			-			-			(6	)		(6	)
Stock based compensation		-		-		353			-			-			-			-			-			353
Balance as of March 2023		9,646,972	$	96	$	60,912		$	156,043		$	180			2,645,952		$	(43,896	)	$	(696	)	$	172,639

Net loss		-		-		-			(6,287	)		-			-			-			-			(6,287	)
Other comprehensive loss		-		-		-			-			(159	)		-			-			-			(159	)
Net loss attributable to non-controlling interest		-		-		-			-			-			-			-			(5	)		(5	)
Stock based compensation		-		-		536			-			-			-			-			-			536
Balance as of June 2023		9,646,972	$	96	$	61,448		$	149,756		$	21			2,645,952		$	(43,896	)	$	(701	)	$	166,724

~~(Unaudited)~~

Three Months Ended
December 30,
2017 December 31,
2016
Operating activities:
Net loss $ (9,952 ) $ (607 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 2,433
2,415
Amortization of deferred financing fees 76
78
Provision for deferred income taxes 2,346
(194 )
Non-cash stock compensation 437
369
Change in the fair value of contingent consideration (300 ) (100 )
Loss on disposal of equipment —
5
Changes in operating assets and liabilities:
Accounts receivable, net (3,453 ) 15,448
Inventories, net 46
(14,791 )
Prepaid expenses and other assets (1,252 ) (770 )
Other non-current assets 61
—
Accounts payable (1,902 ) 3,063
Accrued expenses (4,290 ) (5,264 )
Income taxes 8,007
(150 )
Other liabilities (71 ) 44
Net cash used in operating activities (7,814 ) (454 )

Investing activities:
Purchases of property and equipment, net (2,162 ) (1,883 )
Proceeds from sale of Junkfood assets 1,000
—
Proceeds from sale of fixed assets 1
—
Net cash used in investing activities (1,161 ) (1,883 )

Financing activities:
Proceeds from long-term debt 119,529
115,707
Repayment of long-term debt (106,424 ) (111,749 )
Repayment of capital financing (257 ) (101 )
Repurchase of common stock (2,897 ) (965 )
Payment of withholding taxes on stock awards (945 ) (542 )
Net cash provided by financing activities 9,006
2,350
Net increase in cash and cash equivalents 31
13
Cash and cash equivalents at beginning of period 572
397
Cash and cash equivalents at end of period $ 603
$ 410

Supplemental cash flow information:
Cash paid during the period for interest $ 1,094
$ 1,209
Cash paid during the period for income taxes $ 19
$ 94
Non-cash financing activity - capital lease agreements $ 3,050
$ 1,619

										*Accumulated*
					*Additional*					*Other*									*Non-*
	*Common Stock*				*Paid-In*			*Retained*		*Comprehensive*			*Treasury Stock*						*Controlling*
	*Shares*		*Amount*		*Capital*			*Earnings*		*Income (Loss)*			*Shares*			*Amount*			*Interest*			*Total*
Balance as of September 2021		9,646,972	$	96	$	60,831		$	146,860	$	(786	)		2,672,312		$	(42,149	)	$	(658	)	$	164,194

Net income		-		-		-			3,645		-			-			-			-			3,645
Other comprehensive income		-		-		-			-		212			-			-			-			212
Net income attributable to non-controlling interest		-		-		-			-		-			-			-			25			25
Purchase of common stock		-		-		-			-		-			74,232			(2,143	)		-			(2,143	)
Vested stock awards		-		-		(1,766	)		-		-			(76,460	)		674			-			(1,092	)
Stock based compensation		-		-		140			-		-			-			-			-			140
Balance as of December 2021		9,646,972	$	96	$	59,205		$	150,505	$	(574	)		2,670,084		$	(43,618	)	$	(633	)	$	164,981

Net income		-		-		-			10,137		-			-			-			-			10,137
Other comprehensive income		-		-		-			-		381			-			-			-			381
Net loss attributable to non-controlling interest		-		-		-			-		-			-			-			(11	)		(11	)
Vested stock awards		-		-		-			-		-			-			-			-			-
Purchase of common stock		-		-		-			-		-			28,015			(846	)		-			(846	)
Stock based compensation		-		-		714			-		-			-			-			-			714
Balance as of March 2022		9,646,972	$	96	$	59,919		$	160,642	$	(193	)		2,698,099		$	(44,464	)	$	(644	)	$	175,356

Net income		-		-		-			6,240		-			-			-			-			6,240
Other comprehensive income		-		-		-			-		186			-			-			-			186
Net loss attributable to non-controlling interest		-		-		-			-		-			-			-			(3	)		(3	)
Purchase of common stock		-		-		-			-		-			33,934			(968	)		-			(968	)
Stock based compensation		-		-		903			-		-			-			-			-			903
Balance as of June 2022		9,646,972	$	96	$	60,822		$	166,882	$	(7	)		2,732,033		$	(45,432	)	$	(647	)	$	181,714

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

Delta Apparel, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)

	*Nine Months Ended*
	*June 2023*			*June 2022*
Operating activities:
Consolidated net (loss) earnings	$	(16,886	)	$	20,034
Adjustments to reconcile net (loss) earnings to net cash provided by (used in) operating activities:
Depreciation and amortization		11,397			11,272
Amortization of deferred financing fees		519			244
Provision for inventory market reserves		(3,707	)		1,484
Change in reserves for allowances on accounts receivable		(11	)		(160	)
(Benefit from) provision for deferred income taxes		(6,033	)		488
Non-cash stock compensation		1,554			1,756
Loss on disposal of equipment		135			348
Loss on impairment		831			-
Other, net		(710	)		(2,263	)
Changes in operating assets and liabilities:
Accounts receivable		27,006			(1,251	)
Inventories		26,049			(67,452	)
Prepaid expenses and other current assets		(1,985	)		602
Other non-current assets		2,023			199
Accounts payable		(19,524	)		23,390
Accrued expenses		(9,816	)		(1,737	)
Net operating lease liabilities		268			409
Income taxes		(323	)		264
Other liabilities		-			(1,049	)
Net cash provided by (used in) operating activities		10,787			(13,422	)
Investing activities:
Purchases of property and equipment		(3,551	)		(10,931	)
Proceeds from sale/leaseback		4,417			-
Proceeds from sale of equipment		19			33
Cash paid for intangible asset		-			(132	)
Cash paid for business		-			(583	)
Net cash used in investing activities		885			(11,613	)
Financing activities:
Proceeds from long-term debt		363,438			411,600
Repayment of long-term debt		(367,723	)		(383,919	)
Repayment of finance lease obligations		(6,849	)		(5,604	)
Payment of deferred financing cost		-			(850	)
Repurchase of common stock		-			(3,934	)
Payment of withholding taxes on stock awards		(542	)		(1,092	)
Net cash (used in) provided by financing activities		(11,676	)		16,201
Net decrease in cash and cash equivalents		(4	)		(8,834	)
Cash and cash equivalents at beginning of period		300			9,376
Cash and cash equivalents at end of period	$	296		$	542

Supplemental cash flow information
Finance lease assets exchanged for finance lease liabilities	$	6,708		$	10,381
Operating lease assets exchanged for operating lease liabilities	$	11,039		$	6,869

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

Delta Apparel, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note A— Description of Business and Basis of Presentation

Delta Apparel, Inc. (collectively with DTG2Go, LLC, Salt Life, LLC, M.J. Soffe, LLC, and ~~Description~~other subsidiaries, "Delta Apparel," "we," "us," "our," or the "Company") is a vertically-integrated, international apparel company with approximately 7,100 employees worldwide. We design, manufacture, source, and market a diverse portfolio of ~~Business~~

core activewear and lifestyle apparel products under our primary brands of Salt Life®, Soffe®, and Delta. We are a market leader in the on-demand, digital print and fulfillment industry, bringing DTG2Go's proprietary technology and innovation to our customers' supply chains. We specialize in selling casual and athletic products through a variety of distribution channels and tiers, including outdoor and sporting goods retailers, independent and specialty stores, better department stores and mid-tier retailers, mass merchants, eRetailers, the U.S. military, and through our business-to-business digital platform. Our products are also made available direct-to-consumer on our ecommerce sites and in our branded retail stores. Our diversified go-to-market strategy allows us to capitalize on our strengths in providing activewear and lifestyle apparel products to a broad and evolving customer base whose shopping preferences may span multiple retail channels.

We design and internally manufacture the majority of our products, with more than 90% of the apparel units that we sell sewn in our own facilities. This allows us to offer a high degree of consistency and quality, leverage scale efficiencies, and react quickly to changes in trends within the marketplace. We have manufacturing operations located in the United States, El Salvador, Honduras, and Mexico, and we use domestic and foreign contractors as additional sources of production. Our distribution facilities are strategically located throughout the United States to better serve our customers with same-day shipping on our catalog products and weekly replenishments to retailers. We were incorporated in Georgia in 1999, and our headquarters is located in Duluth, Georgia. Our common stock trades on the NYSE American exchange under the symbol “DLA."

We operate on a 52-53 week fiscal year ending on the Saturday closest to September 30. Our 2023 fiscal year is a 52-week year and will end on September 30, 2023 ("fiscal 2023"). Accordingly, this Quarterly Report on Form 10-Q presents our results for our third quarter of fiscal 2023. Our 2022 fiscal year was a 52-week year and ended on October 1, 2022 ("fiscal 2022").

For presentation purposes herein, all references to period ended relate to the following fiscal years and dates:

Period Ended	Fiscal Year	Date Ended
June 2022	Fiscal 2022	July 2, 2022
September 2022	Fiscal 2022	October 1, 2022
December 2022	Fiscal 2023	December 31, 2022
March 2023	Fiscal 2023	April 1, 2023
June 2023	Fiscal 2023	July 1, 2023

We prepared the accompanying interim ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements in accordance with the instructions for Form ~~10-Q~~10-Q and Article 10 of Regulation ~~S-X.~~S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles ("U.S. GAAP") for complete financial statements. We believe these Condensed Consolidated Financial Statements include all normal recurring adjustments considered necessary for a fair presentation. Operating results for the ~~three-month period~~three and nine months ended ~~December 30, 2017~~, June 2023 are not necessarily indicative of the results that may be expected for our fiscal ~~year ending September 29, 2018.~~2023. Although our various product lines are sold on a year-round basis, the demand for specific products or styles reflects some seasonality. By diversifying our product lines and go-to-market strategies over the years, we have reduced the overall seasonality of our business. Consumer demand for apparel is cyclical and dependent upon the overall level of demand for soft goods, which may or may not coincide with the overall level of discretionary consumer spending. These levels of demand change as regional, domestic and international economic conditions change. Therefore, the distribution of sales by quarter in ~~our June quarter generally being~~fiscal 2023may not be indicative of the ~~highest and sales~~distribution in ~~our December quarter generally being~~future years. These Condensed Consolidated Financial Statements should be read in conjunction with the ~~lowest. For more information regarding our results of operations and financial position, refer to the~~audited Consolidated Financial Statements and footnotes included in our Annual Report on Form ~~10-K~~10-K for our fiscal ~~year ended September 30, 2017,~~2022, filed with the United States Securities and Exchange Commission (“SEC”).

~~“Delta Apparel”,~~

Our Condensed Consolidated Financial Statements include the ~~“Company”, “we”, “us” and “our” are used interchangeably to refer to~~accounts of Delta Apparel ~~Inc. together with our domestic~~and its wholly-owned ~~subsidiaries, including M.J. Soffe, LLC (“Soffe”), Culver City Clothing Company (f/k/a Junkfood Clothing Company) (“Junkfood”), Salt Life, LLC (“Salt Life”),~~ and Art Gun, LLC (“Art Gun”), and other international subsidiaries, as appropriate to the context. On March 31, 2017, we sold substantially all of the assets comprising our Junkfood business to JMJD Ventures, LLC. See Note D—Divestitures, for further information on this transaction.

Delta Apparel, Inc. is an international apparel design, marketing, manufacturing and sourcing company that features a diverse portfolio of lifestyle basics and branded activewear apparel, headwear and related accessory products. We specialize in selling casual and athletic products through a variety of distribution channels and distribution tiers, including department stores, mid and mass channels, e-retailers, sporting goods and outdoor retailers, independent and specialty stores, and the U.S. military. Our products are also made available direct-to-consumer on our websites and in our branded retail stores. We believe this diversified distribution allows us to capitalize on our strengths to provide casual activewear to consumers purchasing from most types of retailers.

We design and internally manufacture the majority of our products, which allows us to offer a high degree of consistency and quality controls as well as leverage scale efficiencies. One of our strengths is the speed with which we can reach the market from design to delivery. We have manufacturing operations located in the United States, El Salvador, Honduras and Mexico, and usemajority-owned domestic and foreign ~~contractors as additional sources~~subsidiaries. We apply the equity method of ~~production.~~accounting for our investment in 31% of the outstanding capital stock of a Honduran company. During the nine months ended June 2023 and June 2022, we received dividends from this investment of $1.2 million and $1.1 million, respectively. Our ~~distribution facilities are strategically located throughout~~Ceiba Textiles manufacturing facility is leased under an operating lease arrangement with this Honduran company. During the ~~United States~~nine months ended June 2023 and June 2022, we paid approximately $1.3 million in rent under this arrangement.

We make available copies of materials we file with, or furnish to, ~~better serve our customers with same-day shipping~~the SEC free of charge at https://ir.deltaapparelinc.com. The information found on our ~~catalog products~~website is not part of this, or any other, report that we file with, or furnish to, the SEC. In addition, we will provide upon request, at no cost, paper or electronic copies of our reports and ~~weekly replenishments~~other filings made with the SEC. Requests should be directed to: Investor Relations Department, Delta Apparel, Inc., 2750 Premiere Parkway, Suite 100, Duluth, Georgia 30097. Requests can also be made by telephone to ~~retailers.~~864-232-5200, or via email at investor.relations@deltaapparel.com.

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We were incorporated in Georgia in 1999 and our headquarters is located at 322 South Main Street, Greenville, South Carolina 29601 (telephone number: 864-232-5200). Our common stock trades on the NYSE American exchange under the symbol “DLA”. We operate on a 52-53 week fiscal year ending on the Saturday closest to September 30. Our 2018 fiscal year is a 52-week year and will end on September 29, 2018. Our 2017 fiscal year was a 52-week year and ended on September 30, 2017.

Note B—Accounting Policies

Our accounting policies are consistent with those described in our Significant Accounting Policies in our Annual Report on Form ~~10-K~~10-K for ~~the~~our fiscal ~~year ended September 30, 2017,~~2022, filed with the SEC. See Note C for consideration of recently issued accounting standards.

Note C—New Accounting Standards

~~Recently~~

Standards Not Yet Adopted ~~Standards~~

In ~~July 2015,~~ June 2016, the FASB issued ASU No.2016-13,Financial ~~Accounting Standards Board ("FASB"~~Instruments - Credit Losses (Topic 326) ~~issued Accounting Standards Update ("ASU") No. 2015-11,~~ ~~Simplifying the~~: Measurement of ~~Inventory~~Credit Losses on Financial Instruments (“ASU 2016-13”), ~~("ASU 2015-11"). This new guidance~~which requires an entity to ~~measure inventory at~~assess impairment of its financial instruments based on the ~~lower~~entity's estimate of ~~cost~~expected credit losses. Since the issuance of ASU 2016-13, the FASB released several amendments to improve and ~~net realizable value. Currently, entities measure inventory at~~clarify the ~~lower~~implementation guidance. These standards have been collectively codified within ASC Topic 326,Credit Losses (“ASC 326”). As a smaller reporting company as defined by the SEC, the provisions of ~~cost or market. ASU 2015-11 replaces market with net realizable value. Net realizable value is~~ASC 326 are effective as of the ~~estimated selling price in the ordinary course~~beginning of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured under last-in, first-out or the retail inventory method. ASU 2015-11 requires prospective adoption for inventory measurements for fiscal years beginning after December 15, 2016, and interim periods within those years for public business entities. Early application is permitted. ASU 2015-11 was adopted in our fiscal year ~~beginning October 1, 2017. The adoption~~2024. We are currently evaluating the impacts of ~~this standard did not have a material impact~~the provisions of ASC 326 on our ~~consolidated~~ financial ~~statements~~condition, results of operations, cash flows, and disclosures.

~~Standards Not Yet Adopted~~

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~~In May 2014, the FASB issued ASU No. 2014-09,~~

Note D—Revenue Recognition

Our Condensed Consolidated Statements of Operations include revenue streams from ~~Contracts with Customers, ("ASU 2014-09"). This new guidance requires an entity to recognize~~retail sales at our branded retail stores; direct-to-consumer ecommerce sales on our consumer-facing websites; and sales from wholesale channels, which includes our business-to-business ecommerce and DTG2Go sales. The table below identifies the amount and percentage of ~~revenue to which it expects to be entitled~~net sales by distribution channel (in thousands):

	*Three Months Ended*
	*June 2023*				*June 2022*
Retail	$	4,830	5	%	$	4,412	3	%
Direct-to-consumer ecommerce		1,870	2	%		1,145	1	%
Wholesale		99,619	93	%		121,318	96	%
Net sales	$	106,319	100	%	$	126,875	100	%

	*Nine Months Ended*
	*June 2023*				*June 2022*
Retail	$	11,441	4	%	$	9,685	3	%
Direct-to-consumer ecommerce		4,542	1	%		3,199	1	%
Wholesale		307,966	95	%		356,435	96	%
Net sales	$	323,949	100	%	$	369,319	100	%

The table below provides net sales by reportable segment and the percentage of net sales by distribution channel for ~~the transfer~~each reportable segment (in thousands):

	*Three Months Ended June 2023*
	*Net Sales*		*Retail*			*Direct-to-consumer ecommerce*			*Wholesale*
Delta Group	$	89,118		0.0	%		0.4	%		99.6	%
Salt Life Group		17,201		28.0	%		8.9	%		63.1	%
Total	$	106,319

	*Three Months Ended June 2022*
	*Net Sales*		*Retail*			*Direct-to-consumer ecommerce*			*Wholesale*
Delta Group	$	106,020		0.1	%		0.4	%		99.5	%
Salt Life Group		20,855		20.8	%		3.4	%		75.8	%
Total	$	126,875

	*Nine Months Ended June 2023*
	*Net Sales*		*Retail*			*Direct-to-consumer ecommerce*			*Wholesale*
Delta Group	$	277,471		0.1	%		0.3	%		99.6	%
Salt Life Group		46,478		24.4	%		8.2	%		67.4	%
Total	$	323,949

	*Nine Months Ended June 2022*
	*Net Sales*		*Retail*			*Direct-to-consumer ecommerce*			*Wholesale*
Delta Group	$	323,276		0.1	%		0.3	%		99.6	%
Salt Life Group		46,043		20.3	%		5.0	%		74.7	%
Total	$	369,319

Table of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. ASU 2014-09 is effective for annual periods beginning after December 15, 2017, for public business entities and permits the use of either the retrospectiveContents

or cumulative effect transition method. Early application is permitted only for annual reporting periods beginning after December 15, 2016. ASU 2014-09 will therefore be effective in our fiscal year beginning September 30, 2018. Although we have not yet determined our adoption method, we have identified a committee, agreed on a methodology for review of our revenue arrangements and initiated the review process for adoption of this ASU, and are evaluating the effect that ASU 2014-09 will have on our Consolidated Financial Statements and related disclosures.

~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases,~~ ("ASU 2016-02"). ASU 2016-02 requires lessees to recognize assets and liabilities for most leases. All leases will be required to be recorded on the balance sheet with the exception of short-term leases. Early application is permitted. The guidance must be adopted using a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. ASU 2016-02 is effective for financial statements issued for annual periods beginning after December 15, 2018, and interim periods within those annual periods. ASU 2016-02 will therefore be effective in our fiscal year beginning September 29, 2019. We are evaluating the effect that ASU 2016-02 will have on our Consolidated Financial Statements and related disclosures.

~~Note D—Divestitures~~

~~On March 31, 2017, we completed the sale of substantially all of the assets comprising our Junkfood business to JMJD Ventures, LLC for $27.9 million. The business sold consisted of vintage-inspired~~ ~~Junk Food~~ branded and private label products sold in the United States and internationally. We received cash at closing of $25.0 million and recorded a $2.9 million note receivable with payments due between June 30, 2017, and March 30, 2018. The note receivable was amended on June 29, 2017, to revise the repayment schedule for payments to be made between September 29, 2017, and March 30, 2018.

We realized a $1.3 million pre-tax gain on the sale of the Junkfood business resulting from the proceeds of $27.9 million less the costs of assets sold and other expenses, and less direct selling costs associated with the transaction. The pre-tax gain was recorded in the Condensed Consolidated Statement of Operations as a Gain on sale of business in our 2017 second fiscal quarter as a Gain on sale of business.

Note E—Inventories

Inventories, net of ~~$9.9~~reserves of $14.0 million and ~~$9.8~~$17.7 million ~~in reserves,~~ as of ~~December 30, 2017,~~ June 2023 and September ~~30, 2017,~~ 2022, respectively, consisted of the following (in thousands):

	*June 2023*		*September 2022*
Raw materials	$	20,500	$	22,603
Work in process		18,684		23,501
Finished goods		187,012		202,434
	$	226,196	$	248,538

Raw materials include finished yarn and direct materials for the Delta Group, undecorated garments for the DTG2Go business, and direct embellishment materials for the Salt Life Group.

December 30,
2017 September 30,
2017
Raw materials $ 8,639
$ 8,973
Work in process 16,179
18,543
Finished goods 149,687
147,035
$ 174,505
$ 174,551

Note F—Debt

Credit Facility

On May 10,2016, we entered into a Fifth Amended and Restated Credit Agreement ~~(the~~(as further amended, the “Amended Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”), as Administrative Agent, the Sole Lead Arranger and the Sole Book Runner, and the financial institutions named therein as Lenders, which are Wells Fargo, PNC Bank, ~~National Association~~ and Regions Bank. Our subsidiaries M.J. Soffe, LLC, Culver City Clothing Company, ~~(f/k/a Junkfood Clothing Company),~~ Salt Life, LLC, and ~~Art Gun,~~DTG2Go, LLC ~~(together with~~(collectively, the ~~Company, the “Companies”~~"Borrowers"), are co-borrowers under the Amended Credit Agreement.

~~On November 27, 2017, Delta Apparel, Soffe, Junkfood, Salt Life, and Art Gun (collectively, the “Borrowers”)~~ The Borrowers entered into ~~a First~~amendments to the Amended Credit Agreement with Wells Fargo and the other lenders on November 27,2017,March 9,2018,October 8,2018,November 19,2019,April 27,2020,August 28,2020,June 2, 2022, January 3, 2023, February 3, 2023, and March 23, 2023.

On June 2,2022, the Borrowers entered into the Seventh Amendment to the Fifth Amended and Restated Credit Agreement with Wells Fargo and the other lenders set forth therein (the ~~“First~~“Seventh Amendment”).

The ~~First~~Seventh Amendment, (i) removes LIBOR based borrowing and utilizes SOFR (Secured Overnight Financing Rate) as the primary pricing structure, (ii) amends the pricing structure based on SOFR plus a CSA (Credit Spread Adjustment) defined as 10 bps for 1 month and 15 bps for 3-month tenors, (iii) sets the SOFR floor to 0 bps, (iv) reloads the fair market value of real estate and intellectual property within the borrowing base calculation and resets their respective amortization schedules, (v) sets the maturity date to 5 years from the closing date, and (vi) updates the requirement for our Fixed Charge Coverage Ratio (“FCCR”) for the preceding 12-month period to not be less than 1.0 (previously 1.1).

On January 3, 2023, the Borrowers entered into the Eighth Amendment to the Fifth Amended and Restated Credit Agreement with Wells Fargo and the other lenders set forth therein (the “Eighth Amendment”). The Eighth Amendment essentially clarifies the Amended Credit Agreement’s provisions regarding the inclusion of eligible in-transit inventory in the borrowing base and amends the definition of ~~Fixed Charge Coverage Ratio within~~Increased Reporting Event to include 12.5% of the lesser of the borrowing base and the maximum revolver amount as opposed to 12.5% of the line cap.

On February 3, 2023, the Borrowers entered into the Ninth Amendment to the Fifth Amended and Restated Credit Agreement ~~to permit up to $10 million of~~with Wells Fargo and the ~~proceeds received from~~other lenders set forth therein (“Ninth Amendment”). The Ninth Amendment adds an Accommodation Period beginning on the ~~March 31, 2017, sale of certain assets of the Junkfood business to be used towards share repurchases for up to one year from~~amendment date and continuing through the date ~~of that transaction. In addition,~~following September 30, 2023, upon which Borrowers satisfy minimum availability thresholds and during which: (i) the definition of Permitted Purchase Money Indebtedness is amended to extend the time period within which the Borrowers may enter into capital leases and to increase the aggregate principal amount of such leases into which the Borrowers may enter to up to $15 million. The definition of Permitted Investments is also amended to permit the Borrowers to make investments in entities that are not a partyminimum borrowing availability thresholds applicable to the Amended Credit Agreement ~~in an aggregate amount of up~~are (a) through (and including) April 1, 2023, $7,500,000, (b) on and after April 2, 2023 through (and including) June 4, 2023, $9,000,000, (c) on and after June 5, 2023, through the date following September 30, 2023, upon which Borrowers satisfy minimum availability thresholds, $10,000,000; and (d) at all times thereafter, $0; (ii) the FCCR covenant is suspended; (iii) Borrowers must maintain specified minimum EBITDA levels for trailing three-month periods starting March 4, 2023; (iv) the Applicable Margin with respect to ~~$2 million. The First~~loans under the Amended Credit Agreement is increased by 50 basis points; and (v) a Cash Dominion Trigger Event occurs if availability is less than $2,000,000.

On March 23, 2023, the Borrowers entered into the Tenth Amendment ~~also allows the change in the name of our Junkfood Clothing Company subsidiary to Culver City Clothing Company. There were no changes~~ to the Fifth Amended and Restated Credit Agreement ~~related~~with Wells Fargo and the other lenders set forth therein to ~~interest rate, borrowing capacity, or maturity.~~

account for specified costs and expenses in calculating EBITDA for purposes of the Amended Credit Agreement.

The Amended Credit Agreement allows us to borrow up to ~~$145~~$170 million (subject to borrowing base limitations), including a maximum of $25 million in letters of credit. Provided that no event of default exists, we have the option to increase the maximum credit to $200

million (subject to borrowing base limitations), conditioned upon the Administrative Agent's ability to secure additional commitments and customary closing conditions. The ~~credit facility matures on May 10, 2021. In fiscal year 2016, we paid $1.0 million in financing costs associated with the Amended Credit Agreement.~~

~~As of December 30, 2017, there was $90.1 million outstanding under our U.S. revolving credit facility at an average interest rate of 3.3% and additional borrowing availability of $26.6 million.~~ This credit facility includes a financial covenant requiring that if the amount of availability falls below the threshold amounts set forth in the Amended Credit Agreement, our Fixed Charge Coverage Ratio (“FCCR”) (as defined in the Amended Credit Agreement) for the preceding 12-month period must not be less than 1.1 to 1.0. We were not subject to the FCCR covenant at ~~December 30, 2017, because our availability was above the minimum required under the Amended Credit Agreement, and we would have satisfied our financial covenant had we been subject to it.~~ ~~At December 30, 2017, and September 30, 2017, there was $9.0 million and $7.7 million, respectively, of retained earnings free of restrictions to make cash dividends or stock repurchases.~~

~~The~~ Amended Credit Agreement contains a subjective acceleration clause and a “springing” lockbox arrangement (as defined in ~~FASB Codification No. 470,~~ ~~Debt~~ ("ASC ~~470"))~~470, Debt) whereby remittances from customers will be forwarded to our general bank account and will not reduce the outstanding debt until and unless a specified event or an event of default occurs. ~~Pursuant to ASC 470, we~~We classify borrowings under the Amended Credit Agreement as long-term ~~debt.~~

~~In August 2013,~~ debt with consideration of current maturities.

As of June 2023, we ~~acquired Salt Life and issued two promissory notes in the aggregate principal amount~~had $126.4 million outstanding under our U.S. revolving credit facility at an average interest rate of ~~$22.0 million, which included a one-time installment of $9.0 million that was due and paid as required~~7.8%. Our cash on ~~September 30, 2014, and quarterly installments commencing on March 31, 2015,~~hand combined with the ~~final installment due on~~ availability under the U.S. revolving credit facility totaled $14.4 million. At June ~~30, 2019. The promissory notes are zero-interest notes~~ 2023 and ~~state that interest will be imputed as required~~September 2022, there was $16.4 million and $24.9 million, respectively, of retained earnings free of restrictions to make cash dividend payments or stock repurchases to the extent permitted under Section 1274 of the Internal Revenue Code. We imputed interest at 1.92% on the promissory note that matured June 30, 2016, and was paid in full as required. We impute interest at 3.62% on the promissory note that matures on June 30, 2019. At December 30, 2017, the discounted value of the promissory note outstanding was $3.9 million.

our U.S. revolving credit facility.

Honduran Debt

Since March 2011, we have entered into term loans and a revolving credit facility with Banco Ficohsa, a Honduran bank, to finance investments in both the operations and capital expansion of our Honduran facilities. ~~Each~~In December 2020, we entered into a new term loan and revolving credit facility with Banco Ficohsa, both with five-year terms, and simultaneously settled the prior term loans and revolving credit facility with outstanding balances at the time of ~~these~~settlement of $1.1 million and $9.5 million, respectively. Additionally, in May 2022, we entered into a new term loan with a five-year term with a principal amount of $3.7 million. These loans isare secured by a ~~first-priority~~first-priority lien on the assets of our Honduran operations and is are not guaranteed by our U.S. entities. These loans are denominated in U.S. dollars, and the carrying value of the debt approximates its fair value. ~~The~~As the revolving credit facility requires minimum payments during each six-month period of the 18-month term; however, the loan agreement permits additional drawdowns to the extent payments are made and certain objective covenants are met. The current revolving Honduran debt, by its nature, is not long-term, as it requires scheduled payments each six months. However, as the loan permits us to re-borrow funds up to the amount repaid, subject to certain objective covenants, and we intend to re-borrow funds, subject to those covenants, the amounts ~~have been~~borrowed are classified as long-term debt.

El Salvador Debt

In September 2022, we entered into a new term loan with a five-year term with a principal amount of $3.0 million with Banco Ficohsa, a Panamanian bank, to finance investments in our El Salvador operations. This loan is secured by a first-priority lien on the assets of our El Salvador operations and is not guaranteed by our U.S. entities. The loan is denominated in U.S. dollars, and the carrying value of the debt approximates its fair value. Information about this loan and the outstanding balance as of March 2023 is listed as part of the long-term debt schedule below.

Additional information about these loans and the outstanding balances as of ~~December 30, 2017,~~ June 2023 is as follows (in thousands):

	*June 2023*
Revolving credit facility with Banco Ficohsa, a Honduran bank, with interest at 7.9%, due August 2025	$	3,909
Term loan with Banco Ficohsa, a Honduran bank, interest at 7.75%, quarterly installments which began September 2021 and are due through December 2025.		5,072
Term loan with Banco Ficohsa, a Honduran bank, interest at 7.75%, quarterly installments which began March 2023 and are due through May 2027.		3,308
Term loan with Banco Ficohsa, a Panamanian bank, interest at the prevailing market rate within the Panamanian Banking Market, monthly installments which began October 2022 and are due through August 2027.		2,627

December 30,
2017
Revolving credit facility established March 2011, interest at 8.0% due March 2019 $ 4,804
Term loan established March 2011, interest at 7.0%, payable monthly with a seven-year term 243
Term loan established November 2014, interest at 7.5%, payable monthly with a six-year term 1,850
Term loan established June 2016, interest at 8.0%, payable monthly with a six-year term 1,286
Term loan established September 2017, interest at 8.0%, payable monthly with a six-year term 3,817

Note G—Selling, General and Administrative Expense

We include in selling, general and administrative ("SG&A") expenses the costs incurred subsequent to the receipt of finished goods at our distribution facilities, such as the cost of stocking, warehousing, picking, packing, and shipping goods for delivery to our customers. Distribution costs included in SG&A expenses totaled ~~$3.9~~$5.2 million and ~~$3.5~~$5.6 million for the ~~three-month periods~~June 2023 and June 2022 quarters, respectively. Distribution costs included in SG&A expenses totaled $16.3 million and $16.8 million for the nine months ended ~~December 30, 2017,~~ June 2023 and ~~December 31, 2016,~~ June 2022, respectively. In addition, SG&A expenses include costs related to sales associates, administrative personnel, advertising and marketing expenses, ~~royalty payments on licensed products~~retail store build-outs, and other general and administrative expenses.

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Note H—Stock-Based Compensation

On February ~~4, 2015,~~6,2020, our shareholders ~~re-approved~~approved the Delta Apparel, Inc. ~~2010~~2020 Stock Plan ~~("2010~~("2020 Stock Plan") ~~that~~to replace the 2010 Stock Plan, which was ~~originally approved~~previously re-approved by our shareholders on ~~November 11, 2010.~~ ~~Since November 2010, no additional awards have been or will be granted under either~~February 4,2015, and was scheduled to expire by its terms on September 14,2020. The purpose of the ~~Delta Apparel~~2020 Stock ~~Option~~ Plan ~~("Option Plan") or the Delta Apparel Incentive Stock Award Plan ("Award Plan") and, instead, all stock awards have been and will~~is to continue to ~~be granted under~~give our Board of Directors and its Compensation Committee the ~~2010 Stock Plan.~~

~~We account for these plans pursuant~~ability to ~~ASC 718, SAB 107, SAB 110,~~offer a variety of compensatory awards designed to enhance the Company’s long-term success by encouraging stock ownership among its executives, key employees and ~~ASU 2016-09. Shares are generally issued from treasury stock upon exercise of the options or the vesting of the restricted stock units and performance units.~~

~~Compensation expense is recorded on the SG&A expense line item in our~~ ~~Condensed Consolidated Statements of Operations~~ over the vesting periods. During the three-month periods ended December 30, 2017, and December 31, 2016, we recognized $0.5 million and $0.6 million, respectively, in stock-based compensation expense.

~~2010 Stock Plan~~

directors. Under the ~~2010~~2020 Stock Plan, the Compensation Committee of our Board of Directors has the authority to determine the employees and directors to whom awards may be granted, and the size and type of each award and manner in which such awards will vest. The awards available under the plan consist of stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock, stock performance units, and other stock and cash awards. While employed by the Company or serving as a director, unvested awards become fully vested under certain circumstances as defined in the 2020 Stock Plan. Such circumstances include, but are not limited to, the participant’s death or disability. The ~~aggregate number~~Compensation Committee is authorized to establish the terms and conditions of ~~shares of common stock that may be delivered~~awards granted under the ~~2010~~2020 Stock Plan, ~~is 500,000 plus~~to establish, amend and rescind any ~~shares of common stock subject~~rules and regulations relating to ~~outstanding awards under~~ the ~~Option~~2020 Stock Plan, ~~or Award~~and to make any other determinations that it deems necessary. Similar to the 2010 Stock Plan, ~~that are subsequently forfeited or terminated for any reason before being exercised. The 2010~~the 2020 Stock Plan limits the number of shares that may be covered by awards to any participant in a given calendar year and also limits the aggregate awards of restricted stock, restricted stock units and performance stock granted in a given calendar year. ~~If a participant dies or becomes disabled (as defined in~~Shares are generally issued from treasury stock upon the ~~2010 Stock Plan) while employed by~~vesting of the Company or serving as a director, all unvested awards become fully vested. The Compensation Committee is authorized to establish the terms and conditions of awards granted under the 2010 Stock Plan, to establish, amend and rescind any rules and regulations relating to the 2010 Stock Plan, and to make any other determinations that it deems necessary.

~~During the three-month period ended December 30, 2017,~~ restricted stock units, ~~and~~ performance units or other awards under the 2020 Stock Plan. On August 2, 2023, our Board of Directors, upon the recommendation of its Compensation Committee, approved a Declaration of Amendment to the 2020 Stock Plan. See Part II, Item 5 of this Quarterly Report on Form 10-Q for more information.

Compensation expense is recorded within SG&A in our Condensed Consolidated Statements of Operations over the vesting periods. During the June 2023 and June 2022 quarters, we recognized $0.6 million and $1.1 million in stock-based compensation expense, respectively. Associated with this compensation cost are income tax benefits recognized of $0.2 million and $0.2 million, respectively, for each of the three-month periods ended June 2023 and June 2022. During the nine-months ended June 2023 and June 2022, we recognized $1.6 million and $2.4 million respectively, in stock-based compensation expense. Associated with the compensation cost are income tax benefits recognized of $0.5 million and $0.4 million, respectively, for each of the nine-months periods ended June 2023 and June 2022.

During the December 2022 quarter, restricted stock units representing ~~54,602 and 92,068~~105,000 shares of our common stock ~~respectively,~~ vested ~~upon~~with the filing of our Annual Report on Form ~~10-K~~10-K for ~~the~~ fiscal ~~year ended September 30, 2017,~~2022 and were issued in accordance with their respective agreements. ~~One-half of the restricted stock units~~Of these vested awards, all were payable in common ~~stock and one-half were payable in cash. Of the performance units, 72,138 were payable in common stock and 19,930 were payable in cash.~~

stock.

During the ~~three-month period ended~~ December ~~30, 2017,~~2022 quarter, performance stock units and restricted stock units representing 5,000 and performance stock units, each consisting of 55,750 shares of our common stock, were issued and are eligible to vest upon the filing of our Annual Report on Form 10-K for the fiscal year ended September 28, 2019. One-half of the restricted stock units and one-half of the performance units are payable in common stock and one-half are payable in cash.

~~During the three-month period ended December 31, 2016, restricted stock units and performance units representing 8,438 and 53,248~~18,000 shares of our common stock, respectively, ~~vested upon the filing of our Annual Report on Form 10-K for the fiscal year ended October 1, 2016, and~~ were ~~issued in accordance with their respective agreements. The restricted stock units and performance units are payable one-half in common stock and one-half in cash.~~

forfeited.

As of ~~December 30, 2017,~~ June 2023, there was ~~$4.1~~$2.0 million of total unrecognized compensation cost related to unvested awards granted under the ~~2010~~2020 Stock Plan. This cost is expected to be recognized over a period of 32.4 years.

~~Option Plan~~

~~All options granted under the Option Plan vested prior to October 3, 2015. As such,~~ no ~~expense was recognized during each of the three-month periods ended December 30, 2017, and December 31, 2016. No options were exercised during the three-month period ended December 30, 2017.~~

Note I—Purchase Contracts

We have entered into agreements, and have fixed prices, to purchase yarn, finished fabric, and finished apparel and headwear products. At ~~December 30, 2017,~~June 2023, minimum payments under these contracts were as follows (in thousands):

Yarn	$	19,123
Finished fabric		1,952
Finished products		7,542
	$	28,617

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Yarn $ 3,252
Finished fabric 2,271
Finished products 21,995
$ 27,518

Note J—Business Segments

Our operations are managed and reported in two segments, Delta Group and Salt Life Group, which reflect the manner in which the business is managed, and results are reviewed by the Chief Executive Officer, who is our chief operating decision maker.

The Delta Group is comprised of the following business units, which are primarily focused on core activewear styles: DTG2Go and Delta Activewear.

DTG2Go is a market leader in the on-demand, direct-to-garment digital print and fulfillment industry, bringing technology and innovation to the supply chains of our many customers. Our ‘On-Demand DC’ digital solution provides retailers and brands with immediate access to utilize DTG2Go’s broad network of print and fulfillment facilities, while offering the scalability to integrate digital fulfillment within the customer's own distribution facilities. We ~~operate our business in two distinct segments: branded and basics.Although the two segments are similar in their production~~use highly-automated factory processes and ~~regulatory environments, they~~our proprietary software to deliver on-demand, digitally printed apparel direct to consumers on behalf of our customers. Via our multi-facility fulfillment footprint across the United States, DTG2Go offers a robust digital supply chain shipping custom graphic products within 24 to 48 hours to consumers in the United States and to over 100 countries internationally. DTG2Go has made significant investments in its “digital first” retail model providing digital graphic prints that meet the high-quality standards of brands, retailers and intellectual property holders. Through integration with Delta Activewear, DTG2Go also services the eRetailer, ad-specialty, promotional and screen print marketplaces, among others.

Delta Activewear is a preferred supplier of activewear apparel to regional and global brands as well as direct-to-retail and wholesale markets. The Activewear business is organized around three key customer channels – Delta Direct, Global Brands, and Retail Direct – that are distinct in their ~~economic characteristics,~~go-to-market strategies and how their respective customer bases source their various apparel needs. Our Delta Direct channel services the screen print, promotional, and eRetailer markets as well as retail licensing customers that sell through to many mid-tier and mass market retailers. Delta Direct products ~~marketing,~~include a broad portfolio of apparel and ~~distribution methods.~~

~~The~~accessories under the Delta, Delta Platinum, and Soffe brands as well as sourced items from select third party brands. Our fashion basics ~~segment is comprised of our business units primarily focused on garment styles characterized by low fashion risk, and~~line includes our Platinum Collection, which offers fresh, fashionable silhouettes with a luxurious look and feel, as well as versatile fleece offerings. We offer innovative apparel products, including the Delta ~~Activewear (which includes~~Dri line of performance shirts built with moisture-wicking material to keep athletes dry and comfortable; ringspun garments with superior comfort, style and durability; and Delta ~~Catalog~~Soft, a collection with an incredible feel and ~~FunTees)~~price. We also offer our heritage, mid- and ~~Art Gun business units. We market, distribute and manufacture unembellished knit apparel under the main brands of Delta Platinum™, Delta Dri®, Delta Magnum Weight®, and~~heavier-weight Delta Pro Weight® and Magnum Weight® tee shirts.

The iconic Soffe brand offers activewear for ~~sale~~spirit makers and record breakers and is widely known for the original "cheer short" with the signature roll-down waistband. Soffe carries a wide range of activewear for the entire family. Soffe's heritage is anchored in the military, and we continue to be a ~~diversified audience ranging~~proud supplier to both active duty and veteran United States military personnel worldwide. The Soffe men's assortment features the tagline "anchored in the military, grounded in training" and offers everything from physical training gear certified by the respective branches of the military, classic base layers that include the favored 3-pack tees, and the iconic "ranger panty." Complementing the Delta and Soffe brand apparel, we offer customers a broad range of nationally recognized branded products including polos, outerwear, headwear, bags and other accessories. Our Soffe products are also available direct to consumers at www.soffe.com.

Our Global Brands channel serves as a key supply chain partner to large ~~licensed screen printers to small independent businesses. We also manufacture private label products for~~multi-national brands, major branded sportswear companies, trendy regional brands, ~~retailers,~~ and ~~sports-licensed apparel marketers. Typically our private label~~all branches of the United States armed forces, providing services ranging from custom product development to the shipment of branded products ~~are sold~~ with “retail-ready” value-added services ~~such as~~including embellishment, hangtags, ~~ticketing, hangers,~~ and ~~embellishment so that~~

~~they are fully ready~~ticketing.

Our Retail Direct channel serves brick and mortar and online retailers by providing our portfolio of Delta, Delta Platinum, and Soffe products directly to the retail locations and ecommerce fulfillment centers of a diversified customer base including sporting goods and outdoor retailers, specialty and resort shops, farm and fleet stores, department stores, and mid-tier and mass retailers. As a key element of the integrated Delta Group segment, each of Activewear’s primary channels offer a seamless solution for ~~retail. Using~~replenishment strategies, small-run decoration needs, and quick reaction programs with on-demand digital print equipment and proprietary technology, Art Gun embellishes garments to create private label, custom-decorated apparel servicing the fast-growing e-retailer channels as well as the ad-specialty, promotional products and retail marketplaces.

services, powered by DTG2Go.

The ~~branded segment~~Salt Life Group is comprised of our Salt Life business, ~~units focused~~which is built on ~~specialized apparel garments, headwear,~~the authentic, aspirational Salt Life lifestyle brand that represents a passion for the ocean, the salt air, and, ~~related accessories~~more importantly, a way of life and all it offers, from surfing, fishing, and diving to ~~meet consumer preferences~~beach fun and sun-soaked relaxation. The Salt Life brand combines function and fashion ~~trends,~~with a tailored fit for the active lifestyles of those that “live the Salt Life.” With increased worldwide appeal, Salt Life has continued to provide the cotton graphic tees and ~~includes~~logo decals that originally drove awareness for the brand, and expanded into performance apparel, swimwear, board shorts, sunglasses, bags, and accessories. Consumers can also seamlessly experience the Salt Life brand through retail partners including surf shops, specialty stores, department stores, and outdoor merchants or by accessing our Salt Life ~~Soffe, and Coast business units.~~ ecommerce site at www.saltlife.com.

Our branded segment also included our Junkfood business unit prior to its disposition on March 31, 2017. These branded products are sold through specialty and boutique shops, traditional department stores and mid-tier retailers, sporting goods stores, e-retailers and the U.S. military, as well as direct-to-consumer through branded ecommerce sites and "brick and mortar" retail stores. Products in this segment are marketed under our lifestyle brands of Salt Life®, Soffe®, and COAST®, as well as other labels.

~~Our Chief Operating Decision Maker~~chief operating decision maker and management evaluate performance and allocate resources based on profit or loss from operations before interest, ~~and~~ income taxes and special charges ("segment operating earnings"). Our segment operating earnings may not be comparable to similarly titled measures used by other companies. The accounting policies of our reportable segments are the same as those described in Note 2 in our Annual Report on Form ~~10-K~~10-K for ~~the~~ fiscal ~~year ended September 30, 2017,~~2022, filed with the SEC.

Intercompany transfers between operating segments are transacted at cost and have been eliminated within the segment amounts shown in the following table (in thousands).

Three Months Ended
December 30, 2017 December 31, 2016
Segment net sales:
Basics $ 73,176
$ 60,838
Branded 17,166
24,497
Total net sales $ 90,342
$ 85,335

Segment operating income (loss):
Basics $ 4,189
$ 4,684
Branded 458
(1,000 )
Total segment operating income $ 4,647
$ 3,684

	*Three Months Ended*					*Nine Months Ended*
	*June 2023*			*June 2022*		*June 2023*			*June 2022*
Segment net sales:
Delta Group	$	89,118		$	106,020	$	277,471		$	323,276
Salt Life Group		17,201			20,855		46,478			46,043
Total net sales	$	106,319		$	126,875	$	323,949		$	369,319

Segment operating earnings:
Delta Group	$	(3,616	)	$	10,701	$	(10,974	)	$	33,557
Salt Life Group		1,642			3,574		6,509			7,037
Total segment operating (loss) earnings	$	(1,974	)	$	14,275	$	(4,465	)	$	40,594

The following table reconciles the segment operating ~~income~~(loss) earnings to the consolidated ~~income (loss)~~earnings before (benefit from) provision for ~~(benefit from)~~ income taxes (in thousands):

	*Three Months Ended*					*Nine Months Ended*
	*June 2023*			*June 2022*		*June 2023*			*June 2022*
Segment operating (loss) earnings	$	(1,974	)	$	14,275	$	(4,465	)	$	40,594
Unallocated corporate expenses		2,487			4,980		7,973			11,041
Unallocated interest expense		4,049			1,971		10,662			5,370
Consolidated (loss) earnings before (benefit from) provision for income taxes	$	(8,510	)	$	7,324	$	(23,100	)	$	24,183

Three Months Ended
December 30, 2017 December 31, 2016
Segment operating income $ 4,647
$ 3,684
Unallocated corporate expenses 2,909
3,215
Unallocated interest expense 1,334
1,301
Consolidated income (loss) before provision for (benefit from) income taxes $ 404
$ (832 )

Table of Contents

Note K—Income Taxes

~~On December 22, 2017, the~~

The Tax Cuts and Jobs Act of 2017 ~~(the “New Tax Legislation”) was enacted. The New Tax Legislation~~ enacted on December 22,2017, significantly revised the U.S. corporate income tax code by, among other things, lowering federal corporate income tax rates, implementing a modified territorial tax system and imposing a repatriation tax ("transition tax") on deemed repatriated cumulative earnings of foreign ~~subsidiaries. During~~subsidiaries which will be paid over eight years. In addition, new taxes were imposed related to foreign income, including a tax on global intangible low-taxed income (“GILTI”) as well as a limitation on the ~~three-month period ended December 30, 2017, we recognized provisional amounts totaling $10.6 million~~deduction for business interest expense (“Section 163(j)"). GILTI is the excess of ~~tax expense.~~the shareholder’s net controlled foreign corporations net tested income over the net deemed tangible income. GILTI income is eligible for a deduction of up to 50% of the income inclusion, but the deduction is limited to the amount of U.S. adjusted taxable income. The Section 163(j) limitation does not allow the amount of deductible interest to exceed the sum of the taxpayer's business interest income and 30% of the taxpayer’s adjusted taxable income. We have ~~made reasonable estimates~~included in our calculation of our effective tax rate the ~~effects~~estimated impact of GILTI and Section 163(j). In addition, we have elected to account for the tax on GILTI as a period cost and, therefore, do not record deferred taxes related to GILTI on our existing deferred tax balances and the one-time transition tax; however, these amounts may change as more information becomes available. We accounted for the $10.6 million provisional amount as a discrete item for tax provision purposes, recording tax expense on our best estimate of the effect of the New Tax Legislation. Excluding the effect of this discrete item, theforeign subsidiaries.

Our effective income tax rate on operations for the ~~three-month period~~nine-months ended ~~December 30, 2017,~~ June 2023 was ~~(46.4%). This tax benefit relates~~27.0% compared to ~~stock option excess benefits as~~ a ~~result from our adoption of ASU 2016-09. This compares to an effective income tax~~ rate of ~~27.0% for~~17.2% in the same period inof the prior year, and ~~5.9%~~an effective rate of 17.9% for ~~the~~ fiscal ~~year ended September 30, 2017.~~

2022.We generally benefit from having income in foreign jurisdictions that are either exempt from income taxes or have tax rates that are lower than those in the United States. ~~Based on our current projected pre-tax income and the anticipated amount of U.S. taxable income compared~~

to profits in the offshore taxable and tax-free jurisdictions in which we operate, our estimated annual income tax rate for the fiscal year ending September 29, 2018, excluding the discrete tax expense associated with the New Tax Legislation, is currently expected to be approximately 12%-13%. The change in the federal statutory rate from 34% to 21% as a result of the New Tax Legislation is effective at the beginning of our fiscal year. As such, ~~the blended federal statutory tax rate for the fiscal year is anticipated to be approximately 24.3%. However,~~ changes in the mix of U.S. taxable income compared to profits in tax-free or lower-tax jurisdictions can have a significant impact on our overall effective tax rate. ~~In addition, the impact of the New Tax Legislation may differ from our initial provisional estimates, possibly materially,~~The current year tax expense decreased relative to prior periods due to ~~among other things, changes in interpretations and assumptions made regarding the New Tax Legislation, guidance that may be issued and actions we may take as~~US operating losses expected to generate a ~~result of the New Tax Legislation.~~

~~Provisional amounts~~

~~As noted above we consider the estimate of the effects on our existing deferred~~US tax ~~balances and the one-time transition tax to be provisional.~~benefit.

Deferred tax assets and liabilities: We remeasured our deferred tax assets and liabilities based on an estimated scheduling of when we anticipate these amounts will reverse and by applying estimated rates based on the period we believe they will reverse. However, we are still analyzing certain aspects of the New Tax Legislation and refining our scheduling and calculations, which could potentially affect the remeasurement of these balances. The provisional amount of expense related to the remeasurement of our deferred tax balance was approximately $1.1 million which was recognized during the quarter.

Transition tax: Our current estimate of the one-time transition tax is based on an estimate of our total earnings and profits (E&P) from our foreign subsidiaries which were previously deferred from US income taxes. A deferred tax liability for such undistributed earnings was not previously recognized since the earnings are considered to be permanently reinvested. We recorded a provisional amount related to this one-time transition tax of $9.5 million during the quarter which will be paid over eight years. We anticipate that the benefit resulting from the reduction of the federal tax rate from 34% to 21% will offset the future payments of the transition tax, resulting in minimal cash flow impact. We have not completed our analysis of the total E&P or the split between liquid and illiquid assets for our foreign subsidiaries. As such this amount may change when we finalize our analysis.

State tax effect: We continued to apply ASC 740 based on the provisions of the state tax laws that were in effect immediately prior to the New Tax Legislation being enacted. It is currently impractical to determine the changes to our state provision resulting from the New Tax Legislation; however, we believe the impact will not be material.

We file income tax returns in the U.S. federal jurisdiction and various state, local and foreign jurisdictions. Tax years 2014, 2015 and 2016, according to statute and with few exceptions, remain open to examination by various federal, state, local and foreign jurisdictions.

Note L—Derivatives and Fair Value Measurements

From time to time, we may use interest rate swaps or other instruments to manage our interest rate exposure and reduce the impact of future interest rate changes. These financial instruments are not used for trading or speculative purposes. We have designated our interest rate swap contracts as cash flow hedges of our future interest payments. As a result, the gains and losses on the swap contracts are reported as a component of other comprehensive income and are reclassified into interest expense as the related interest payments are made. As of June 2023, all of our other comprehensive income was attributable to shareholders; none related to the non-controlling interest. Outstanding instruments as of ~~December 30, 2017,~~ June 2023 are as follows:


		*Notional*
	*Effective Date*	~~Notational~~ *Amount*		*Fixed LIBOR Rate*		*Maturity Date*
Interest Rate Swap	July ~~19, 2017~~25, 2018	$1020.0 million	~~1.74%~~	3.18%		July ~~19, 2019~~25, 2023
~~Interest Rate Swap~~	~~July 19, 2017~~	~~$10 million~~	~~1.99%~~		~~May 10, 2021~~

The following table summarizes the fair value and presentation in the Condensed Consolidated Balance Sheets for derivatives related to our interest swap agreements as of June 2023 and September 2022 (in thousands):

	June 2023			September 2022
Deferred tax assets	$	(7	)	$	(48	)
Other assets		28			189
Accumulated other comprehensive gain	$	21		$	141

From time to time, we may purchase cotton option contracts to economically hedge the risk related to market fluctuations in the cost of cotton used in our operations. We do not receive hedge accounting treatment for these derivatives. As such, the realized and unrealized gains and losses associated with them are recorded within cost of goods sold on the Condensed Consolidated Statement of Operations.

~~FASB Codification No.~~ No such cotton contracts were outstanding at June 2023 and September 2022.

ASC 820,Fair Value Measurements and Disclosures (“ASC 820”), defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Assets and liabilities measured at fair value are grouped in three levels. The levels prioritize the inputs used to measure the fair value of the assets or liabilities. These levels are:


◦ ○	Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.


◦
	○	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 markets that are less active.


◦
	○	Level 3 – Unobservable inputs that are supported by little ornomarket activity for assets or liabilities and includes certain pricing models, discounted cash flow methodologies and similar techniques.

Table of Contents

The following financial ~~assets (liabilities)~~liabilities are measured at fair value on a recurring basis (in thousands):

Fair Value Measurements Using
Period Ended Total
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Interest Rate Swaps
December 30, 2017 $ 83
—
$ 83
—
September 30, 2017 (56 ) —
(56 ) —

Cotton Options

December 30, 2017 $ (1 ) $ (1 ) —
—
September 30, 2017 (125 ) (125 ) —
—

Contingent Consideration
December 30, 2017 $ (1,300 ) —
—
$ (1,300 )
September 30, 2017 (1,600 ) —
—
(1,600 )

			*Fair Value Measurements Using*
			*Quoted Prices in*		*Significant Other*		*Significant*
			*Active Markets for*		*Observable*		*Unobservable*
			*Identical Assets*		*Inputs*		*Inputs*
Period Ended	*Total*		*(Level 1)*		*(Level 2)*		*(Level 3)*
Interest Rate Swaps
June 2023	$	21		—	$	21		—
September 2022	$	141		—	$	141		—

The fair value of the interest rate swap agreements was derived from a discounted cash flow analysis based on the terms of the contract and the forward interest rate curves adjusted for our credit risk, which fall in Level 2 of the fair value hierarchy. At ~~December 31, 2017,~~June 2023 and September 2022, book value for fixed rate debt approximates fair value based on quoted market prices for the same or similar issues or on the current rates offered to us for debt of the same remaining maturities (a Level 2 fair value measurement).

~~The following table summarizes the fair value and presentation in the~~ ~~Condensed Consolidated Balance Sheets~~ ~~for derivatives related to our interest swap agreements as of December 30, 2017, and September 30, 2017 (in thousands):~~

December 30,
2017 September 30,
2017
Other assets $ 83
$ —
Deferred tax assets —
21
Accrued expenses —
(56 )
Deferred tax liabilities (32 ) —
Accumulated other comprehensive income (loss) $ 51
$ (35 )

In August 2013, we acquired Salt Life and issued contingent consideration payable in cash after the end of calendar year 2019 if financial performance targets involving the sale of Salt Life-branded products are met during the 2019 calendar year. We used a Monte Carlo model utilizing the historical results and projected cash flows based on the contractually defined terms, discounted as necessary, to estimate the fair value of the contingent consideration for Salt Life at the acquisition date as well as to remeasure the contingent consideration related to the acquisition of Salt Life at each reporting period. Accordingly, the fair value measurement for contingent consideration falls in Level 3 of the fair value hierarchy.

At December 30, 2017, we had $1.3 million accrued in contingent consideration related to the Salt Life acquisition, a $0.3 million reduction from the accrual at September 30, 2017. The reduction in the fair value of contingent consideration is based on the inputs into the Monte Carlo model, including the time remaining in the measurement period. The sales expectations for calendar year 2019 have been reduced from the sales expectations used in the valuation of contingent consideration at acquisition due to our current view of the retail environment. Our expectations are consistent with those at September 30, 2017.

Note M—Legal Proceedings

~~The Sports Authority Bankruptcy Litigation~~

Soffe is involved in several related litigation matters stemming from The Sports Authority's ("TSA") March 2, 2016, filing of a voluntary petition(s) for relief under Chapter 11 of the United States Bankruptcy Code (the "TSA Bankruptcy"). Prior to such filing, Soffe provided TSA with products to be sold on a consignment basis pursuant to a "pay by scan" agreement and the litigation matters relate to Soffe's interest in the products it provided TSA on a consignment basis (the "Products") and the proceeds derived from the sale of such products (the "Proceeds").

TSA Stores, Inc. and related entities TSA Ponce, Inc. and TSA Caribe, Inc. filed an action against Soffe on March 16, 2016, in the United States Bankruptcy Court for the District of Delaware (the "TSA Action") essentially seeking a declaratory judgment that: (i) Soffe does not own the Products but rather has a security interest that is not perfected or senior and is avoidable; (ii) Soffe only has an unsecured claim against TSA; (iii) TSA and TSA's secured creditors have valid, unavoidable and senior rights in the Products and the Products are

the property of TSA’s estate; (iv) Soffe does not have a perfected purchase money security interest in the Products; (v) Soffe is not entitled to a return of the Products; and (vi) TSA can continue to sell the Products and Soffe is not entitled to any proceeds from such sales other than as an unsecured creditor. The TSA Action also contains claims seeking to avoid Soffe's filing of a financing statement related to the Products as a preference and recover the value of that transfer as well as to disallow Soffe's claims until it has returned preferential transfers or their associated value. TSA also brings a claim for a permanent injunction barring Soffe from taking certain actions. We believe that many of the claims in the TSA Action, including TSA’s claim for injunction, are now moot as a result of Soffe’s agreement to permit TSA to continue selling the Products in TSA’s going-out-of-business sale.

On May 16, 2016, TSA lender Wilmington Savings Fund Society, FSB, as Successor Administrative and Collateral Agent ("WSFS"), intervened in the TSA Action seeking a declaratory judgment that: (i) WSFS has a perfected interest in the Products and Proceeds that is senior to Soffe's interest; and (ii) the Proceeds paid to Soffe must be disgorged pursuant to an order previously issued by the court. WSFS's intervening complaint also contains a separate claim seeking the disgorgement of all Proceeds paid to Soffe along with accrued and unpaid interest.

Soffe has asserted counterclaims against WSFS in the TSA Action essentially seeking a declaratory judgment that: (i) WSFS is not perfected in the Products; and (ii) WSFS's interest in the Products is subordinate to Soffe's interest.

On May 24, 2016, Soffe joined an appeal filed by a number of TSA consignment vendors in the United States District Court for the District of Delaware challenging an order issued in the TSA Bankruptcy that, should WSFS or TSA succeed in the TSA Action, granted TSA and/or WSFS a lien on all Proceeds received by Soffe and requiring the automatic disgorgement of such Proceeds. Soffe and another entity are the remaining consignment vendors pursuing this appeal.

Although we will continue to vigorously defend against the TSA Action and pursue the above-referenced counterclaims and appeal, should TSA and/or WSFS ultimately prevail on their claims, we could be forced to disgorge all Proceeds received and forfeit our ownership rights in any Products that remain in TSA's possession. We believe the range of possible loss in this matter is currently $0 to $3.3 million; however, it is too early to determine the probable outcome and, therefore, no amount has been accrued related to this matter.

~~In addition, at~~

At times, we are party to various legal claims, actions and complaints. We believe that, as a result of legal defenses, insurance arrangements, and indemnification provisions with parties believed to be financially capable, such actions should not have a material adverse effect on our operations, financial condition, or liquidity.

Note N—Repurchase of Common Stock

As of ~~December 30, 2017,~~September 28,2019, our Board of Directors authorized management to use up to ~~$50.0~~$60.0 million to repurchase stock in open market transactions under our Stock Repurchase Program.

~~During the December quarter of fiscal year 2018, we purchased 145,124~~ We did not purchase any shares of our common stock ~~for a total cost of $3.0 million.~~during the June 2023 quarter. Through ~~December 30, 2017,~~ June 2023, we have purchased ~~3,038,611~~3,735,114 shares of our common stock for an aggregate of ~~$41.7~~$56.4 million ~~since the inception of~~under our Stock Repurchase ~~Program.~~Program since its inception. All purchases were made at the discretion of management and pursuant to the safe harbor provisions of SEC Rule ~~10b-18.~~10b-18. As of ~~December 30, 2017, $8.3~~June 2023, $3.6 million remained available for future purchases under our Stock Repurchase Program, which does not have an expiration date.

~~The following table summarizes the purchases~~

Table of ~~our common stock for the quarter ended December 30, 2017:~~

Contents

Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans Dollar Value of Shares that May Yet Be Purchased Under the Plans
October 1, 2017 to November 4, 2017 29,081
$21.04 29,081

$10.7 million
November 5, 2017 to December 2, 2017 46,444
20.67 46,444
9.7 million
December 3, 2017 to December 30, 2017 69,599
20.56 69,599
8.3 million
Total 145,124
$20.69 145,124

$8.3 million

Note O—Goodwill and Intangible Assets

Components of intangible assets consist of the following (in thousands):

December 30, 2017 September 30, 2017
Cost Accumulated Amortization Net Value Cost Accumulated Amortization Net Value Economic Life

Goodwill $ 19,917
$ —
$ 19,917
$ 19,917
$ —
$ 19,917
N/A

Intangibles:
Tradename/trademarks $ 16,090
$ (2,329 ) $ 13,761
$ 16,090
$ (2,193 ) $ 13,897
20 – 30 yrs
Technology 1,220
(978 ) 242
1,220
(947 ) 273
10 yrs
License agreements 2,100
(449 ) 1,651
2,100
(423 ) 1,677
15 – 30 yrs
Non-compete agreements 1,037
(766 ) 271
1,037
(733 ) 304
4 – 8.5 yrs
Total intangibles $ 20,447
$ (4,522 ) $ 15,925
$ 20,447
$ (4,296 ) $ 16,151

	*June 2023*							*September 2022*
	*Cost*		*Accumulated Amortization*			*Net Value*		*Cost*		*Accumulated Amortization*			*Net Value*		*Economic Life*

Goodwill	$	37,897	$	—		$	37,897	$	37,897	$	—		$	37,897	N/A

Intangibles:
Tradename/trademarks	$	16,000	$	(5,251	)	$	10,749	$	16,000	$	(4,851	)	$	11,149	20 – 30 yrs
Customer relationships		7,400		(3,768	)		3,632		7,400		(3,213	)		4,187	20 yrs
Technology		10,083		(3,284	)		6,799		10,083		(2,610	)		7473	10 yrs
License agreements		2,100		(1,017	)		1,083		2,100		(940	)		1,160	15 – 30 yrs
Non-compete agreements		1,657		(1,656	)		1		1,657		(1,600	)		57	4 – 8.5 yrs
Total intangibles	$	37,240	$	(14,976	)	$	22,264	$	37,240	$	(13,214	)	$	24,026

Goodwill represents the acquired goodwill net of the ~~cumulative~~$0.6 million impairment losses recorded in fiscal year ~~2011~~2011. As of ~~$0.6 million. The~~June 2023, the Delta Group segment assets include $18.0 million of goodwill, and the Salt Life Group segment assets include $19.9 million of goodwill.

Depending on the type of intangible asset, amortization is recorded ~~on our financial statements is included in the branded segment.~~

under cost of goods sold or selling, general and administrative expenses. Amortization expense for intangible assets ~~was $0.2 million~~ for the ~~three-month period ended December 30, 2017,~~ June 2023 and ~~$0.3~~June 2022 quarters was $0.6 million and $0.6 million, respectively. Amortization expense for the ~~three-month period~~nine-months ended ~~December 31, 2016.~~June 2023 and June 2022 was $1.8 million and $1.8 million, respectively. Amortization expense is estimated to be approximately ~~$0.9~~$2.3 million for the year ended September 2023, approximately $2.3 million for each of ~~fiscal~~the years ~~2018~~ ended September 2024 and ~~2019, approximately $0.7 million for fiscal year 2020,~~2025, and approximately ~~$0.6~~$2.2 million for each of ~~fiscal~~the years ~~2021~~ ended September 2026 and ~~2022.~~2027.

Note P—Subsequent Events

None.

Table of Contents

~~None~~

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

Cautionary Note Regarding Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of the Company. We may from time to time make written or oral statements that are “forward-looking,” including statements contained in this report and other filings with the SEC, in our press releases, and in other reports to our shareholders. All statements, other than statements of historical fact, which address activities, events or developments that we expect or anticipate will or may occur in the future are forward-looking statements. The words “plan”, “estimate”, “project”, “forecast”, “outlook”, “anticipate”, “expect”, “intend”, ~~“seek’~~“remain”, “seek", “believe”, “may”, “should” and similar expressions, and discussions of strategy or intentions, are intended to identify forward-looking statements.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current expectations and are necessarily dependent upon assumptions, estimates and data that we believe are reasonable and accurate but may be incorrect, incomplete or imprecise. Forward-looking statements are subject to a number of business risks and inherent uncertainties, any of which could cause actual results to differ materially from those set forth in or implied by the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in forward-looking statements include, among others, the following:

~~the volatility and uncertainty of cotton and other raw material prices;~~

~~the general U.S. and international economic conditions;~~

~~the competitive conditions in the apparel industry;~~

~~restrictions on our ability to borrow capital or service our indebtedness;~~

~~deterioration in the financial condition of our customers and suppliers and changes in the operations and strategies of our customers and suppliers;~~

~~our ability to predict or react to changing consumer preferences or trends;~~

~~our ability to successfully open and operate new retail stores in a timely and cost-effective manner;~~

~~pricing pressures and the implementation of cost reduction strategies;~~

~~changes in economic, political or social stability at our offshore locations;~~

~~disruptions at our manufacturing and other facilities;~~

~~our ability to attract and retain key management;~~

~~the effect of unseasonable or significant weather conditions on purchases of our products;~~

~~significant changes in our effective tax rate;~~

~~interest rate fluctuations increasing our obligations under our variable rate indebtedness;~~

~~the ability to raise additional capital;~~

~~the ability to grow, achieve synergies and realize the expected profitability of acquisitions;~~

~~the volatility and uncertainty of energy and fuel prices;~~

~~material disruptions in our information systems related to our business operations;~~

~~data security or privacy breaches;~~

~~significant interruptions within our manufacturing or distribution operations;~~

~~changes in or our ability to comply with safety, health and environmental regulations;~~

~~significant litigation in either domestic or international jurisdictions:~~

~~the ability to protect our trademarks and other intellectual property;~~

~~the ability to obtain and renew our significant license agreements;~~

~~the impairment of acquired intangible assets;~~

~~changes in ecommerce laws and regulations;~~

~~changes in international trade regulations;~~

~~our ability to comply with trade regulations;~~

~~changes in employment laws or regulations or our relationship with employees;~~

~~cost increases and reduction in future profitability due to the effects of healthcare legislation;~~

~~foreign currency exchange rate fluctuations;~~

~~violations of manufacturing standards or labor laws or unethical business practices by our suppliers and independent contractors;~~

~~the illiquidity of our shares;~~

~~price volatility in our shares and the general volatility of the stock market; and~~

~~the costs required to comply with the regulatory landscape regarding public company governance and disclosure.~~

	●	the general U.S. and international economic conditions;
	●	the impact of the COVID-19 pandemic and government/social actions taken to contain its spread on our operations, financial condition, liquidity, and capital investments, including recent labor shortages, inventory constraints, and supply chain disruptions;

●

significant interruptions or disruptions within our manufacturing, distribution or other operations;

●

deterioration in the financial condition of our customers and suppliers and changes in the operations and strategies of our customers and suppliers;

●

the volatility and uncertainty of cotton and other raw material prices and availability;

●

the competitive conditions in the apparel industry;

●

our ability to predict or react to changing consumer preferences or trends;

●

our ability to successfully open and operate new retail stores in a timely and cost-effective manner;

●

the ability to grow, achieve synergies and realize the expected profitability of acquisitions;

●

changes in economic, political or social stability at our offshore locations or in areas in which we, or our suppliers or vendors, operate;

●

our ability to attract and retain key management;

●

the volatility and uncertainty of energy, fuel and related costs;

●

material disruptions in our information systems related to our business operations;

●

compromises of our data security;

●

significant changes in our effective tax rate;

●

significant litigation in either domestic or international jurisdictions;

●

recalls, claims and negative publicity associated with product liability issues;

●

the ability to protect our trademarks and other intellectual property;

●

changes in international trade regulations;

●

our ability to comply with trade regulations;

●

changes in employment laws or regulations or our relationship with employees;

●

negative publicity resulting from violations of manufacturing standards or labor laws or unethical business practices by our suppliers and independent contractors;

	●	the inability of suppliers or other third-parties, including those related to transportation, to fulfill the terms of their contracts with us;
	●	restrictions on our ability to borrow capital or service our indebtedness;

●

interest rate fluctuations increasing our obligations under our variable rate indebtedness;

●

the ability to raise additional capital;

●

the impairment of acquired intangible assets;

●

foreign currency exchange rate fluctuations;

●

the illiquidity of our shares; and

●

price volatility in our shares and the general volatility of the stock market.

A detailed discussion of significant risk factors that have the potential to cause actual results to differ materially from our expectations is ~~described~~set forth in Part 1 under the subheading "Risk Factors" in our Annual Report on Form 10-K for ~~our~~ fiscal ~~year ended September 30, 2017,~~2022, filed with the SEC. Any forward-looking statements in this Quarterly Report on Form 10-Q do not purport to be predictions of future events or circumstances and may not be realized. Further, any forward-looking statements are made only as of the date of this Quarterly Report on Form 10-Q, and we do not undertake to publicly update or revise the forward-looking statements, except as required by the federal securities ~~laws.~~law.

Table of Contents

Business Outlook

We are seeing indications of stabilizing demand in the activewear market and believe that the elevated inventory levels in the retail supply chain following last year’s heavy buying activity may be moderating. In addition, we continue to make steady progress towards a more normalized operating environment for our ~~strong first~~business, with our decision last year to reduce production levels to align with the lower demand environment and purchase less price-inflated cotton proving effective in positioning Delta Apparel for improved operating results going forward.

During our third quarter ~~results, including double-digit sales growth across all~~we were able to work through much of the trailing expense impacts of our ~~businesses~~curtailed production levels and ~~pre-tax profitability~~last year’s historically high-priced cotton flowing through our cost of sales. Our Activewear business, which houses our nearshore manufacturing platform and serves the channels hit hardest by the over-inventoried retail environment, was the most directly impacted by these unique cost-driving events. Now that we are inputting lower cotton cost in ~~what~~our inventory and running our manufacturing facilities at levels closer to capacity, we believe our Activewear business is ~~seasonally our most challenging period, provide solid momentum as we move further into our fiscal year 2018. That momentum, coupled with our recent efforts to rationalize our business, should have us~~ well-positioned to take advantage of ~~opportunities wherever and whenever they may arise.~~

~~Art Gun’s customer service focus and execution~~market improvements going forward.

We expect to complete a significant strategic initiative before the end of our fiscal year involving the transition of our more expensive offshore production capacity into our lower cost Central American platform. This initiative, along with several other recent restructuring activities, should generate annual cost savings of up to $6 million. We also made substantial progress during the quarter ~~facilitated both~~on inventory and debt reduction initiatives intended to counteract the challenging operating environment seen in recent periods, including an approximately 20% reduction in inventory and an approximately 15% reduction in long-term debt from our most recent high points. We expect further inventory and debt reductions as we move through our fourth quarter and plan to continue to tightly manage our spending and reduce capital expenditures year-over-year.

Our Salt Life business continued to expand its direct-to-consumer footprint during the quarter, opening its 24^th and 25^th retail locations across the country. Salt Life’s branded retail footprint now extends across nine states including California, Texas, Alabama, Georgia, Florida, South Carolina, Delaware, New Jersey and, most recently, two locations in New York. In addition, Salt Life’s ecommerce business grew over 100% during the June quarter and achieved significant gains across key metrics including site traffic and conversion rates. Salt Life’s four new retail locations in the Northeast U.S. market are a ~~return~~great example of our omni-channel consumer strategy and data-driven approach to retail store site selection, with ecommerce order activity in New Jersey and New York and adjacent states consistently among the most active on our site in recent periods. We expect for Salt Life’s direct-to-consumer retail and ecommerce channels to continue to expand and anticipate additional sales growth at Salt Life going forward.

Our DTG2Go business recently achieved a variety of key milestones, including the recalibration of our entire “Digital First” technology fleet, a consumer satisfaction initiative involving the rationalization of size and color offerings within our “Digital First” channel, and the launch of a proprietary online portal geared towards quick reaction programs not suited for traditional decoration platforms. The gains flowing from these initiatives and the near-term demand creation opportunities from the new portal should provide a solid foundation for improved operating results and double-digit sales growth at DTG2Go going forward. Moreover, DTG2Go is poised to further capitalize on the ongoing digital disruption in the decorated apparel market through its ~~traditional high-growth trajectory~~industry-leading print capacity, nationwide fulfillment network, proprietary technology and processes, and vertical blank supply through Delta Direct.

With two very significant cost-driving trends now moving behind us and a streamlined cost structure in place moving ahead, Delta Apparel is in an excellent position to take advantage of favorable changes in demand as they arise across our five go-to-market channels. We expect to see steady improvement in our overall operating results as we close out our fourth quarter and move into our next fiscal year. For fiscal year 2024, we currently anticipate net sales in a range of $410 to $425 million generating operating profit margins of 3.25% to 4.25%, with gross margins sequentially increasing into the low-to-mid 20% range and improving operating profit margins beginning in the second quarter, as well as record sales and profitability. Its new production facility, which fully integrates with our Activewear business’s vertical manufacturing platform, should serve as a valuable differentiator for Art Gunrevenue growth in the digital print and fulfillment marketplace. We believe that the flexibility provided by the new facility, along with capacity expansions and new business opportunities, will enable Art Gun to continue to gain market share and further increase profitability as the year unfolds.

We are highly encouraged by the double-digit sales growth seen on both sides of our Activewear business during the quarter. The improving conditions in the retail licensing channel are a welcome contrast to last year's customer de-stocking activity. We expect the market penetration of Catalog's higher-margin Delta Platinum line and other fashion basics products to continue at its rapid pace as the year progresses. Moreover, we are optimistic that the successes our FunTees business has achieved in diversifying its customer base and leveraging its design and manufacturing sophistication will continue.

Sales in our Salt Life business accelerated during the quarter through product expansions and additional doors. Sales on the www.saltlife.com ecommerce site continue to grow significantly and Salt Life's new retail store in Daytona Beach, Florida, is performing extremely well. The brand is expanding geographically both through its own direct-to-consumer strategies as well as additional doors with new retail accounts, giving Salt Life strong momentum heading into the lattersecond half of the year. We remain keenly focused on growth, profitability, and above all, creating value for shareholders for many years to come.

Results of Operations

Financial results included herein have been presented on a generally accepted accounting principles ("GAAP") basis and, in certain limited instances, we have presented our financial results on a GAAP and non-GAAP (“adjusted”) basis, which is further described in the sections entitled “Non-GAAP Financial Measures.”

Net sales were $106.3 million in the third quarter of fiscal 2023, a decline of 16% compared to the prior year third quarter net sales of $126.9 million. For the first nine months, net sales were $323.9 million compared to prior year period net sales of $369.3 million.

Net sales in the Delta Group segment declined 16% to $89.1 million in the third quarter of fiscal 2023 compared to $106.0 million in the prior year third quarter. Delta Direct channel sales were down from the prior year but sequentially grew 9% from the March quarter. Retail Direct and Global Brand channel sales declined primarily due to customers being overstocked. Net sales in the Delta Group segment for the first nine months of fiscal 2023 were $277.5 million, a 14% decrease from the prior year.

~~Soffe’s~~

Net sales in the Salt Life Group segment for the third quarter of fiscal 2023 declined 18% to $17.2 million compared to $20.9 million in the prior year third quarter. Salt Life direct-to-consumer sales continued their strong growth trend with over 100% sales growth in ecommerce and 11% sales growth in the branded Salt Life stores over the prior year. This was offset by lower wholesale sales year-over-year due to sales in the prior year quarter being skewed by significant sales shifting from the March quarter to the June quarter in connection with ~~successes~~transportation delays. For the first nine months of 2023, net sales were $46.5 million, up $0.5 million from the prior year's net sales of $46.0 million.

Gross margins were 13.1% for the third quarter of fiscal 2023, a decline from 24.2% in the ~~military and strategic sporting goods channels provides good velocity in that business moving forward. Soffe’s growth was augmented~~prior year third quarter driven by ~~significant~~production curtailments to match manufacturing output with market demand as well as inflationary cotton costs (collectively "Production Curtailment & Cotton Costs"). Excluding these Production Curtailment & Cotton Costs, third quarter adjusted gross ~~margin expansion and profitability improvement during~~margins were 22.7%. Gross margins for the ~~quarter. Soffe has many ongoing initiatives~~first nine months were 13.5% compared to ~~continue its growth and further bolster its top and bottom-line performance~~23.6% in the ~~coming quarters. In addition, Soffe's latest~~prior year period, driven primarily by the Production Curtailment & Cotton Costs coupled with the impacts of the restructuring actions actions we undertook to better optimize our overall cost structure (collectively "Restructuring Costs"). Excluding the Production Curtailment & Cotton Costs and Restructuring Costs, adjusted gross margins for the first nine months were 22.7%.

The Delta Group segment gross margins were 5.9% for the third quarter of fiscal 2023 compared to 19.1% in the prior year third quarter. Excluding the Production Curtailment & Cotton Costs, adjusted gross margins were 17.4%. Gross margins for the first nine months of fiscal 2023 declined from 19.6% in the prior year to 6.5% in the current year. However, when excluding the Production Curtailment & Cotton Costs and Restructuring Costs we took earlier this year, Delta Group segment adjusted gross margins were 17.2%.

The Salt Life Group segment gross margins were 50.5% in the third quarter of fiscal 2023, an improvement of 30 basis points compared to 50.2% in the prior year third quarter resulting from a favorable mix of sales, including increased Salt Life branded retail ~~location, recently opened~~store sales. For the first nine months of fiscal year 2023, gross margins grew to 55.4% of sales from 51.6% in ~~Jacksonville, North Carolina,~~

~~should resonate~~the prior year.

Selling, general, and administrative expenses ("SG&A") were $18.5 million in the third quarter of fiscal 2023, or 17.4% of sales, compared to $22.4 million, or 17.7% of sales, in the prior year's third quarter. The decrease in SG&A expenses of $3.9 million compared to the prior year third quarter was primarily driven by lower variable selling and distribution costs as well ~~with military consumers~~as lower compensation costs. SG&A expenses for the first nine months of fiscal 2023 were $56.7 million, or 17.5% of sales, compared to $59.6 million, or 16.1% of sales, in ~~that market~~the prior year.

Other income for the 2023 and ~~serve as another valuable consumer touch-point~~2022 third fiscal quarters include profits related to our Green Valley Industrial Park equity method investment. Other income for the third fiscal quarter of 2022 also includes a valuation change in ~~its omni-channel strategy.~~

~~The increases~~our contingent consideration liabilities of $0.8 million. Other income for the first nine months of fiscal 2023 includes a discrete gain of $2.5 million from the settlement of a commercial litigation matter recorded in demand for apparel during the quarter and the successes we are seeing from our sales and marketing efforts, operational improvements and cost-control initiatives are very encouraging. While we expect the markets to generally remain challenging, particularly for traditional retailers, we are pleased with what we are seeing across our businesses as we move through the year.

~~Results of Operations~~

~~Net sales for~~ the first quarter of fiscal 2023 as well as profits in our Honduran equity method investment, offset by costs incurred to better align our offshore manufacturing cost structure with market demand. Other income for the first nine months of fiscal 2022, included profits related to our Honduran equity method investment and a valuation adjustment of our contingent consideration.

Operating loss in the third quarter of fiscal 2023 was $4.5 million, or (4.2)% of sales. This is a decrease of 148.0% over the prior year ~~2018 were $90.3~~third fiscal quarter's $9.3 million of operating profit. However, excluding the Production Curtailment & Cotton Costs, third quarter adjusted operating income was $5.8 million, or 5.5% of sales. Operating income for the first nine months of fiscal 2023 declined year-over-year from $29.6 million, or 8% of sales, to an operating loss of $12.4 million, or (3.8%) of sales. However, excluding the Production Curtailment & Cotton Costs and Restructuring Costs, operating income was $20.5 million, or 6.3% of sales. For the first nine months of fiscal year 2022, operating income was $29.6 million.

The Delta Group segment experienced an operating loss of $3.6 million in the third fiscal quarter of 2023, or (4.1%) of net sales, compared to ~~$85.3~~operating profit of $10.7 million, or 10.1% of net sales, in the prior year ~~period. After adjusting for~~third quarter. Excluding the ~~$9.4 million of sales from the since-divested Junkfood business in the prior year~~Production Curtailment & Cotton Costs, third quarter ~~first quarter sales grew 19% year-over-year. Each business unit achieved double-digit sales growth over the prior year quarter.~~

~~Our direct-to-consumer retail and ecommerce sales represented 7.1% of total revenues for the first quarter of 2018. Overall growth in our direct-to-consumer retail and ecommerce sales for the quarter~~adjusted operating income was only 1.1%, as the prior year sales included ecommerce and retail sales of the since-divested Junkfood business. Excluding these sales from the since-divested Junkfood business in the prior year quarter, sales growth in our direct-to-consumer retail and ecommerce channels was 9.7% year-over-year driven from increased sales on our Salt Life, Soffe, and Coast consumer ecommerce sites and in our new retail stores.

Gross margins were 18.1% for the first quarter compared with 20.6% in the prior year period. Basics segment gross margins declined 270 basis points from the prior year quarter, primarily from higher cost raw materials partially offset by the benefits of the manufacturing realignment. Branded segment margins for the quarter improved to 37.2% compared to 31.1% in the prior year period.

~~Selling, general, and administrative expenses were $15.0~~$6.7 million, or ~~16.6%~~7.5% of net sales. Operating loss was $11.0 million, or (4.0)% of sales, for the ~~quarter ended December 30, 2017,~~first nine months of fiscal 2023, compared to ~~17.3~~operating income of $33.6 million, or ~~20.3%~~10.4% of sales, in the prior year period. ~~When~~However, excluding the Production Curtailment & Cotton Costs and Restructuring Costs, Delta Group segment adjusted ~~to exclude results~~operating income was $22.0 million, or 7.9% of sales.

The Salt Life Group segment achieved operating income of $1.6 million in the ~~since-divested Junkfood business~~third fiscal quarter of 2023, or 9.6% of net sales, compared to $3.6 million, or 17% of net sales, in the prior year ~~quarter, such expenses were $14.2~~third quarter. The lower operating income was driven by lower sales volume and increased selling costs partially offset by increased gross margins as a percentage of sales. For the first nine months of fiscal 2023, operating income was $6.6 million, or ~~18.7%~~14.1% of sales, ~~with the quarter's increase of $0.8 million primarily due to variable selling costs on significantly higher sales volumes.~~

The change in fair value of contingent consideration was associated with the Salt Life acquisition. Based upon our updated analysis, the fair value of this liability decreased $0.3 million in the 2018 first quarter compared to ~~a decrease~~$7 million, or 15.3% of ~~$0.1 million~~sales, in the prior year period. ~~The change is principally due to~~

Net interest expense for the ~~reduced remaining time in the measurement period. The sales expectations for calendar~~third quarters of fiscal year 2019 have been reduced from the sales expectations used in the valuation of contingent consideration at acquisition due to our current view of the retail environment. Our expectations are consistent with those at September 30, 2017.

~~During the first quarter we recorded $47 thousand in other income compared to $0.1~~2023 and 2022 was $4.0 million ~~in the prior year period.~~and $2.0 million, respectively. Net interest expense for the first ~~quarter~~nine months of ~~each~~2023 was $10.7 million compared to $5.4 million in the prior year first nine months. The increases in interest expense are over the prior year periods is primarily due to increased interest rates.

Table of ~~fiscal years 2018 and 2017 was $1.3 million.~~Contents

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “New Tax Legislation”) was enacted. The New Tax Legislation significantly revised the U.S. corporate income tax code by, among other things, lowering federal corporate income tax rates, implementing a modified territorial tax system and imposing a repatriation tax on deemed repatriated cumulative earnings of foreign subsidiaries. During the three-month period ended December 30, 2017, we recognized provisional amounts totaling $10.6 million of tax expense. We have made reasonable estimates of the effects on our existing deferred tax balances and the one-time transition tax; however, these amounts may change as more information becomes available. We accounted for the $10.6 million provisional amount as a discrete item for tax provision purposes, recording tax expense on our best estimate of the effect of the New Tax Legislation. Excluding the effect of this discrete item, the

Our effective tax rate on operations for the ~~three-month~~nine-month period ended ~~December 30, 2017,~~June 2023 was ~~(46.4%)~~27.0%. ~~This tax benefit relates to stock option excess benefits as a result from our adoption of ASU 2016-09.~~ This compares to an effective ~~income~~ tax rate of ~~27.0%~~17.2% for the same period in the prior year and ~~5.9%~~17.9% for the full fiscal year ~~ended September 30, 2017.~~

We benefit from having income in foreign jurisdictions that are either exempt from income taxes or have tax rates that are lower than those in the United States. Based on our current projected pre-tax income and the anticipated amount of U.S. taxable income compared to profits in the offshore taxable and tax-free jurisdictions in which we operate, our estimated annual income tax rate for the fiscal year ending September 29, 2018, excluding the discrete tax expense associated with the New Tax Legislation, is currently expected to be approximately 12-13%. The change in the federal statutory rate from 34% to 21% as a result of the New Tax Legislation is effective at the beginning of our fiscal year. As such, the blended federal statutory tax rate for the fiscal year is anticipated to be approximately 24.3%. However, changes2022. Changes in the mix of U.S. taxable income compared to profits in tax-free or lower-tax jurisdictions ~~can have a significant impact on~~drove this change in our ~~overall~~ effective tax rate. ~~In addition, the impact of the New Tax Legislation may differ from our initial provisional estimates, possibly materially, due~~

Net loss attributable to ~~among other things, changes in interpretations and assumptions made regarding the New Tax Legislation, guidance that may be issued and actions we may take as a result of the New Tax Legislation.~~

~~Largely impacted by the New Tax Legislation, we experienced a net loss~~shareholders for the third fiscal quarter of ~~$10.0~~2023 was $6.3 million, or ~~$1.37~~$0.90 per diluted share, compared to ~~a prior year~~ net ~~loss~~income of ~~$0.6~~$6.2 million, or ~~$0.08~~$0.88 per diluted share, in the prior year. Excluding the Production Curtailment & Cotton Costs, third quarter adjusted net income was $1.2 million, or $0.17 per diluted share. ~~Adjusting~~Net loss attributable to shareholders for the ~~discrete impact~~first nine months of fiscal 2023 was $16.8 million, or $2.41 per diluted share, compared to net income of $20.0 million, or $2.84 per diluted share, in the ~~new tax legislation, our~~prior year. However, excluding the Production Curtailment & Cotton Costs along with Restructuring Costs, adjusted net income was ~~approximately $0.08~~$7.2 million, or $1.02 per diluted ~~share.~~

~~At December 30, 2017, accounts~~share, for the first nine months of fiscal 2023.

Accounts receivable were ~~$51.0~~$41.7 million at June 2023, compared to ~~$48.2 million at December 31, 2016, and $47.6~~$68.2 million as of September ~~30, 2017.~~2022. Days sales outstanding ("DSO") ~~decreased from 53~~as of June 2023 were 36 days ~~in the prior year~~compared to ~~48 days, and was in line with the 49~~

52 days at September ~~30, 2017.~~2022.

Net inventory as of June 2023 was $226.2 million, a decrease of $22.3 million from September 2022. The ~~improvement in DSO from~~inventory value is lower than both the prior third quarter and fiscal year ~~results~~end as a result of lower input costs impacting materials, transportation and labor combined with a decrease in units on hand.

Total net debt, including capital lease financing and cash on hand, was $166.2 million at June 2023, a decrease of $4.4 million from ~~the since-divested Junkfood business, which carried higher DSO than~~September 2022. Cash on hand and availability under our ~~other business units.~~

~~Inventory levels remained flat with those~~U.S. revolving credit facility totaled $14.4 million at June 2023, a $20.3 million decrease from September ~~30, 2017, at $174.5 million as of December 30, 2017. Strong sales~~2022 principally driven by investments in the ~~quarter offset the normal seasonal build in inventory that occurs in the December quarter.~~

~~Capital expenditures were $4.9 million during the first quarter of fiscal year 2018. Capital expenditures primarily related~~business to ~~machinery~~support working capital needs and equipment as well as investments in our direct-to-consumer business, including our retail stores, and enhancements to our information technology systems. Depreciation and amortization expense, including non-cash compensation, was $2.9 million for the first quarter of fiscal year 2018.

~~Total debt at December 30, 2017, was $106.0 million compared with $119.8 million at December 31, 2016. The decrease from the prior year was primarily~~increased input costs due to the $27.0 million in proceeds received on the sale of the Junkfood business partially offset by borrowings to fund increased stock repurchases and improvement in the timing of payments made to suppliers.

~~Branded Segment~~

Sales in the branded segment were $17.2 million compared to $24.5 million in the prior year quarter, which included $9.4 million of sales in the since-divested Junkfood business. Excluding Junkfood sales in the prior year quarter, branded segment sales increased 14% year-over-year. Salt Life continued its growth trend with 12% sales growth primarily due to expanded product categories. Soffe achieved 28% sales growth over the prior year with a strong increase in military sales and success with strategic sporting goods retailers.

Operating income in the branded segment for the first quarter was $0.5 million, an improvement of $1.5 million compared to the prior year quarter. When adjusted for the since-divested Junkfood business, operating income increased by $1.1 million.

~~Basics Segment~~

Net sales in our basics segment grew 20.3% in the first quarter, to $73.2 million from $60.8 million in the prior year period. Activewear achieved strong sales growth of 20% over the prior year period, with growth in both Delta Catalog products and FunTees private label products. In our Catalog business, sales increased due to increased demand in the retail licensing channel coupled with 73% growth in our fashion basics products. FunTees also continued its strong growth, with customers requesting earlier delivery of products. Sales at Art Gun grew 26% over the prior year quarter primarily from increased volume with existing customers as well as new customer launches .

Basics segment operating income decreased to $4.2 million in the first quarter of 2018 from $4.7 million in the prior year quarter, driven from higher cost inventory being sold due to the higher raw material prices, partially offset by the benefits of the manufacturing realignment.

inflationary pressures.

Non-GAAP Financial Measures

We provide all information required in accordance with U.S. GAAP, but we believe that evaluating our ongoing operating results may be difficult if limited to reviewing only U.S. GAAP financial measures. In an effort to provide investors with additional information regarding ~~the Company's~~our results, we also provide non-GAAP information that management believes is useful to investors. We discuss ~~adjusted~~gross margins, operating income ~~adjusted earnings per share, adjusted gross margin, adjusted selling general~~ and ~~administrative expenses~~net income performance measures that are, for comparison purposes, adjusted to eliminate items or results stemming from discrete events. We do this because management uses these measures in evaluating ~~the Company's~~our underlying performance on a consistent basis across periods. We also believe these measures are frequently used by securities analysts, investors and other interested parties in the evaluation of ~~the Company's~~our ongoing performance. These non-GAAP measures have limitations as analytical tools, and securities analysts, investors and other interested parties should not consider any of these non-GAAP measures in isolation or as a substitute for analysis ~~of the Company's~~or our results as reported under U.S. GAAP. These non-GAAP measures may not be comparable to similarly titled measures used by other companies.

Reconciliation of GAAP gross margins to non-GAAP gross margins, GAAP operating income to non-GAAP operating income, and GAAP net income to non-GAAP net income are presented below. A description of the amounts excluded on a non-GAAP basis are provided in conjunction with the below information. Non-GAAP gross margin, non-GAAP operating income, and non-GAAP net income should be evaluated in light of the Company's financial statements prepared in accordance with GAAP.

Reconciliation of Gross Margin, Operating Income and Net Income to Non-GAAP Measures Adjusted Gross Margin, Adjusted Operating Income, and Adjusted Net Income

Unaudited

(in thousands)

	Three Months Ended				Nine Months Ended
	June 2023		June 2022		June 2023		June 2022

Gross Margin	$	13,935	$	30,693	$	43,768	$	87,219
Production Curtailment Costs ⁽¹⁾		3,340		-		7,589		-
Cotton Costs ⁽²⁾		6,906		-		22,027		-
Adjusted Gross Margin	$	24,181	$	30,693	$	73,384	$	87,219
Percent of Sales		22.7%		24.2%		22.7%		23.6%

Operating (Loss) Income	$	(4,461)	$	9,295	$	(12,438)	$	29,553
Production Curtailment Costs ⁽¹⁾		3,340		-		7,589		-
Cotton Costs ⁽²⁾		6,906		-		22,027		-
Restructuring Costs ⁽³⁾		32		-		3,344		-
Adjusted Operating Income	$	5,817	$	9,295	$	20,522	$	29,553

Net (Loss) Income	$	(6,287)	$	6,240	$	(16,841)	$	20,023
Production Curtailment Costs ⁽¹⁾		3,340		-		7,589		-
Cotton Costs ⁽²⁾		6,906		-		22,027		-
Restructuring Costs ⁽³⁾		32		-		3.344		-
Tax Impact		(2,775)		-		(8,950)		-
Adjusted Operating Income	$	1,216	$	6,240	$	7,169	$	20,023

Reconciliation of Delta Group Segment Gross Margin and Operating Income to Delta Group Segment Adjusted Gross Margin and Adjusted Operating Income

Unaudited

(in thousands)

	Three Months Ended				Nine Months Ended
	June 2023		June 2022		June 2023		June 2022

Gross Margin	$	5,254	$	20,227	$	18,013	$	63,470
Production Curtailment Costs ⁽¹⁾		3,340		-		7,589		-
Cotton Costs ⁽²⁾		6,906		-		22,027		-
Adjusted Gross Margin	$	15,500	$	20,227	$	47,629	$	63,470
Percent of Sales		17.4%		19.1%		17.2%		19.6%

Operating (Loss) Income	$	(3,621)	$	10,701	$	(10,979)	$	33,557
Production Curtailment Costs ⁽¹⁾		3,340		-		7,589		-
Cotton Costs ⁽²⁾		6,906		-		22,027		-
Restructuring Costs ⁽³⁾		32		-		3,344		-
Adjusted Operating Income	$	6,657	$	10,701	$	21,981	$	33,557
Percent of Sales		7.5%		10.1%		7.9%		10.4%

⁽¹⁾ Production Curtailment Costs consist of unabsorbed fixed costs, temporary unemployment benefit payments, and other expense items resulting from the Company's decision to reduce production levels to better align with the significantly reduced demand across the activewear industry due to high inventory levels stemming from the heavy replenishment activity following pandemic-related supply chain challenges.

⁽²⁾ Cotton Costs consist of the amount of the cotton component of the Company's cost of sales in excess of the average price per pound of cotton over a recent 10-year period ($0.78 per pound) as well as a reasonable estimate of the additional cost for what the industry refers to as "basis" typically required to be purchased in connection with the delivery of cotton ($0.15 per pound). As such, Cotton Costs consist of the cotton component of the Company's cost of sales in excess of $0.93 per pound.

⁽³⁾ Restructuring Costs consist of employee severance benefits paid in connection with the transition of our more expensive Mexico manufacturing capacity to our more efficient Central America manufacturing platform, employee severance benefits paid in connection of leadership restructuring, expenses incurred in connection with the closure of a legacy facility we acquired via acquisition and the absorption of the print capacity at that facility into our nationwide network of dual purpose digital print and blank garment distribution facilities, and additional cost items incurred from restructuring activities.

Liquidity and Capital Resources

~~Our current primary cash needs are for working capital, capital expenditures, and debt service, as well as to fund share repurchases under our Stock Repurchase Program.~~

Operating Cash Flows

Operating activities resulted in cash provided of $10.8 million for the nine months ended June 2023 compared to net cash used ~~$7.8 million and $0.5~~in operations of $13.4 million in the prior year period. The increase in cash provided by operating cash flows in the ~~first three months of fiscal years 2018 and 2017, respectively. The increased use of cash from the prior~~current year is due to ~~increased payments to suppliers to improve timing of payments and higher receivables from our customers from the higher sales~~a decline in inventory compared to the prior ~~year.~~year build from increased input costs and manufacturing output. This iswas partially offset ~~partially~~ by decreased earnings in the ~~prior year having a larger seasonal inventory build.~~

business and change in the timing of payments to suppliers in the current period.

Investing Cash Flows

~~Capital~~

Cash outflows for capital expenditures were $3.5 million during the first ~~three~~nine months of ~~fiscal year 2018 were $2.2 million~~2023 compared to ~~$1.9~~$11.6 million in the same period last year. Capital expenditures in both periods primarily related to machinery and equipment, along with investments in our direct-to-consumer initiatives and information technology systems. There were $3.1 million in expenditures financed under a capital lease arrangement and

~~$0.1 million in unpaid expenditures~~ in the first three months of fiscal 2018. During the first three months of fiscal year 2018, investing cash flows also included $1.0 million in proceeds received from the promissory note related to the sale of our Junkfood business. See Note D—Divestitures, for further information on this transaction.

prior year. We anticipate our fiscal ~~year 2018~~2023 capital expenditures, including those financed under capital leases, to be approximately ~~$13~~$8.0 million for fiscal 2023 and to be focused primarily on ~~manufacturing equipment along with~~our information technology and direct-to-consumer ~~enhancements .~~

investments, including additional Salt Life retail store openings.

Financing Activities

During the ~~three~~nine months ended ~~December 30, 2017,~~June 2023, cash ~~provided by~~used in financing activities was ~~$9.0~~$11.7 million ~~compared~~and primarily related to ~~$2.4 million provided~~repayments of debt partially offset by ~~financing activities for the three months ended December 31, 2016. The cash provided by our financing activities during the first three months of fiscal year 2018 was used~~debt drawdowns to fund our operating activities, ~~as well as share repurchases.~~

~~Based on our current expectations, we believe that our credit facility should be sufficient to satisfy our foreseeable~~ working capital needs, and ~~that cash flow generated~~certain capital investments offset by scheduled loan principal payments.

Future Liquidity and Capital Resources

See Note F – Debt to the Condensed Consolidated Financial Statements for discussion of our ~~operations and funds available under~~various financing arrangements, including the terms of our revolving U.S. credit facility.

Our credit facility, ~~should be sufficient~~as well as cash flows from operations, are intended to ~~service our debt payment requirements, to satisfy~~fund our day-to-day working capital needs, and along with capital lease financing arrangements, to fund our planned capital expenditures. ~~Any~~However, any material deterioration in our results of operations, ~~however,~~ may result in the loss of our ability to borrow under our U.S. revolving credit facility and to issue letters of credit to suppliers, or may cause the borrowing availability under that facility to be insufficient for our needs. Availability under our credit facility is primarily a function of the levels of our accounts receivable and inventory. A significant deterioration in our accounts receivable or inventory levels could restrict our ability to borrow additional funds or service our indebtedness. Moreover, our credit facility includes a financial covenant that if the availability under our credit facility falls below the amounts specified in our U.S. credit agreement, our fixed charge coverage ratio (FCCR) for the preceding 12-month period must not be less than 1.1 to 1.0. While ourOur availability at ~~December 30, 2017,~~June 2023 was above the applicable minimum thresholds specified in our credit agreement, ~~a significant deterioration~~and we were in compliance with the applicable EBITDA covenant minimum thresholds.

We currently believe that our results of operations should be sufficient to allow us to satisfy our liquidity needs and comply with the covenants in our ~~business could cause~~U.S. revolving credit facility. Our ability to satisfy our ~~availability~~liquidity needs and meet the covenants in our U.S. revolving credit facility is dependent upon our ability to ~~fall below such thresholds, thereby requiring us to maintain~~achieve operating results that reflect improvement over our results for the nine months ended June 2023. Although we are currently in compliance with the applicable EBITDA covenant in our U.S. revolving credit facility as of June 2023, the minimum ~~FCCR specified~~thresholds applicable to that covenant increase in the coming quarter. Means for improving our ~~credit agreement.~~

~~Purchases By Delta Apparel Of Its Own Shares~~

~~During~~profitability include successfully meeting sales targets, expense management and the ~~three months ended December 30, 2017,~~realization of pricing, productivity and efficiency initiatives, as well as increased production volumes, all of which may not be within our control. If we ~~purchased 145,124~~are unable to achieve the improved results required to comply with this covenant, we will need to pursue certain actions including, but not limited to, reducing capital expenditures for machinery & equipment and technology and seeking to implement additional cost reductions within the organization, all of which may not be within our control. Some of those actions might adversely affect our results of operations and financial performance.

Share Repurchase Program

We did not purchase any shares under our previously announced share repurchase program in the June 2023 quarter. The total amount repurchased during the life of ~~our common stock for an aggregate amount~~the program is $56.4 million. At the end of ~~$3.0 million (see Note N-Repurchase~~the third quarter of ~~Common Stock). As of December 30, 2017, there was $8.3~~fiscal 2023, we had $3.6 million of remaining repurchase ~~authorization remaining~~capacity under our Stock Repurchase Program. We evaluate current leverage, working capital requirements, our free cash flow outlook, stock valuation and future business opportunities to determine when we believe the repurchaseexisting authorization.

Table of ~~our stock is a sound investment opportunity that we can pursue without sacrificing future growth plans.~~

Contents

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our Condensed Consolidated Financial Statements, which were prepared in accordance with U.S. GAAP. The preparation of our Condensed Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We base our estimates and judgments on historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant estimates and assumptions relate to revenue recognition, accounts receivable and related reserves, inventory and related reserves, the carrying value of goodwill, and the accounting for income taxes.

A detailed discussion of critical accounting policies is contained in the Significant Accounting Policies included in Note 2 to the Audited Consolidated Financial Statements included in our Annual Report on Form 10-K for ~~the~~ fiscal ~~year ended September 30, 2017,~~2022, and there have been no changes in those policies since the filing of that Annual Report on Form 10-K with the ~~SEC.~~

SEC, except as disclosed in Note C—New Accounting Standards related to the adoption of the cloud computing standard.

Environmental and Other Regulatory Matters

We are subject to various federal, state and local environmental laws and regulations concerning, among other things, wastewater discharges, storm water flows, air emissions and solid waste disposal. The labeling, distribution, importation, marketing, and sale of our products are subject to extensive regulation by various federal agencies, including the Federal Trade Commission, Consumer Product Safety Commission and state attorneys general in the United States. Our ~~plants generate small quantities of hazardous waste, which~~international operations are ~~either recycled or disposed of off-site.~~

also subject to compliance with the U.S. Foreign Corrupt Practices Act (the “FCPA”) and other anti-bribery laws applicable to our operations.

The environmental and other regulations applicable to our business are becoming increasingly stringent, and we incur capital and other expenditures annually to achieve compliance with these environmental ~~standards.~~standards and regulations. We currently do not expect that the amount of expenditures required to comply with these environmental ~~laws~~standards or other regulatory matters will have a material adverse ~~affect~~effect on our operations, financial condition or liquidity. There can be no assurance, however, that future changes in federal, state, or local regulations, interpretations of existing regulations or the discovery of currently unknown problems or conditions will not require substantial additional expenditures. Similarly, while we believe that we are currently in ~~material~~ compliance with all applicable environmental and other regulatory requirements, the extent of our liability, if any, for past failures to

comply with laws, regulations and permits applicable to our operations cannot be determined and could have a material adverse effect on our operations, financial condition and liquidity.

~~Item 3. Quantitative and Qualitative Disclosures About Market Risk~~

~~Commodity Risk Sensitivity~~

We have a supply agreement with Parkdale Mills, Inc. and Parkdale America, LLC (collectively "Parkdale") to supply our yarn requirements until December 31, 2018. Under the supply agreement, we purchase from Parkdale all of our yarn requirements for use in our manufacturing operations, excluding yarns that Parkdale does not manufacture or cannot manufacture due to temporary capacity constraints. The purchase price of yarn is based upon the cost of cotton plus a fixed conversion cost.Thus, we are subject to the commodity risk of cotton prices and cotton price movements, which could result in unfavorable yarn pricing for us. We fix the cotton prices as a component of the purchase price of yarn, pursuant to the supply agreement, in advance of the shipment of finished yarn from Parkdale. Prices are set according to prevailing prices, as reported by the New York Cotton Exchange, at the time we elect to fix specific cotton prices.

~~Yarn with respect to which we have fixed cotton prices at~~ ~~December 30, 2017, was valued at $3.3 million, and is scheduled for delivery between January 2018 and March 2018. At~~ ~~December 30, 2017~~, a 10% decline in the market price of the cotton covered by our fixed price yarn would have had a negative impact of approximately $0.2 million on the value of the yarn. This compares to what would have been a negative impact of $0.5 million at our 2017 fiscal year-end based on the yarn with fixed cotton prices at September 30, 2017. The impact of a 10% decline in the market price of the cotton covered by our fixed price yarn would have been lower at ~~December 30, 2017, than at September 30, 2017, due to lower commitments at~~ ~~December 30, 2017, compared to September 30, 2017, combined with lower cotton costs.~~

We may use derivatives, including cotton option contracts, to manage our exposure to movements in commodity prices. We do not designate our options as hedge instruments upon inception. Accordingly, we mark to market changes in the fair market value of the options in cost of goods sold in our Condensed Consolidated Statements of Operations. See Note L—Derivatives and Fair Value Measurements, for further discussion on derivatives and fair value measurements.

If Parkdale’s operations are disrupted and it is not able to provide us with our yarn requirements, we may need to obtain yarn from alternative sources. Although alternative sources are presently available, we may not be able to enter into short-term arrangements with substitute suppliers on terms as favorable as our current terms with Parkdale. ~~In addition, the cotton futures we have fixed with Parkdale may not be transferable to alternative yarn suppliers.~~ ~~Because there can be no assurance that we would be able to pass along the higher cost of yarn to our customers, this could have a material adverse effect on our results of operations.~~

~~Interest Rate Sensitivity~~

~~Our U.S. revolving credit facility provides that the outstanding amounts owed shall bear interest at variable rates. If the amount of outstanding floating rate indebtedness at~~ ~~December 30, 2017, under our U.S. revolving credit facility had been outstanding during the entire three-month period ended~~ ~~December 30, 2017~~, and the interest rate on this outstanding indebtedness was increased by 100 basis points, our expense would have increased by approximately $0.2 million, or 13.1% of actual interest expense, during the quarter. This compares to an increase of $0.5 million, or 10.9%, for the 2017 fiscal year based on the outstanding floating rate indebtedness at September 30, 2017, or an average of $0.1 million per quarter. The dollar amount, as well as the percentage, of the increase in interest expense is higher as of December 30, 2017, primarily due to the higher floating rate debt level as of December 30, 2017, compared to September 30, 2017. The actual increase in interest expense resulting from a change in interest rates would depend on the magnitude of the increase in rates and the average principal balance of floating rate indebtedness.

~~Derivatives~~

From time to time, we may use interest rate swaps or other instruments to manage our interest rate exposure and reduce the impact of future interest rate changes as described in Note L—Derivatives and Fair Value Measurements.

~~Tax Reform~~

We are subject to income taxes in both the United States and various foreign jurisdictions. Governments in the jurisdictions in which we operate implement changes to tax laws and regulations from time to time. Any changes in corporate income tax laws, such as the recently-enacted tax reform legislation in the United States, changes relating to transfer pricing or further changes regarding the repatriation of capital, and any changes in the interpretation of existing tax laws and regulations could lead to increases in overall tax liability and adversely affect our financial position and results of operations. See Note K—Income Taxes, for further discussion on the New Tax Legislation that was enacted on December 22, 2017.


Item 4.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to reasonably assure that information required to be disclosed 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 SEC’s requirements. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information we are required to disclose 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,~~principal accounting officer, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and ~~Chief Financial Officer,~~principal accounting officer, has evaluated the effectiveness of our disclosure controls and procedures as of ~~December 30, 2017~~,the end of the period covered by this quarterly report ("the Evaluation Date") and, based on their evaluation, our Chief Executive Officer and ~~Chief Financial Officer~~principal accounting officer have concluded that these controls and procedures were effective atas of the ~~evaluation date.~~

Evaluation Date.
Changes in Internal Control Over Financial Reporting

There ~~was~~were no ~~change~~changes during the ~~first~~June 2023 quarter ~~of fiscal year 2018~~ that ~~has~~have materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

PART II.
OTHER INFORMATION

Item 1.
Legal Proceedings

See Note M—Legal Proceedings, in Part I, Item 1, which is incorporated herein by reference.

Item 1A.

Risk Factors

None

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(c) Repurchases of Common Stock

See Note N—Repurchase of Common Stock, Part I, in Item 1, which is incorporated herein by reference.

Item 5.	Other Information
~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~

~~(c) Repurchases~~
Amendment to Delta Apparel, Inc. 2020 Stock Plan to Include "Double Trigger" Vesting Provisions
On August 2, 2023 (“Effective Date”), the Board of ~~Common~~Directors of Delta Apparel, Inc. (“Board”) approved the recommendation of the Compensation Committee of the Board (“Committee”) to enter into a Declaration of Amendment (“Amendment”) to the Delta Apparel, Inc. 2020 Stock

~~See Note N—Repurchase~~ Plan (“Plan”). The Plan was approved by the shareholders on February 6, 2020, and filed as Exhibit 1 to Delta Apparel’s Proxy Statement filed on December 17, 2019.
The Amendment essentially operates to add “double trigger” vesting provisions to the Plan in the event of ~~Common Stock,~~a Change in Control. More specifically, the Amendment replaces Section 9(c) of the Plan entirely with the following terms that apply to grants of Awards made to Participants after the Effective Date and ~~Note F—Debt,~~ in ~~Item 1,~~the event of a Change in Control: (i) to the extent a successor or surviving company does not assume or substitute an Award granted prior to the Change in Control, the Award shall become fully vested, exercisable (if applicable), earned and payable to the fullest extent of the original grant of the applicable Award, provided that, performance-based Awards shall be deemed earned at target unless otherwise provided in an individual Award Agreement; (ii) if a successor or surviving company assumes, continues, or substitutes an Award granted prior to the Change in Control on substantially similar terms and if the employment or Service of a Participant is terminated for Cause or Good Reason within one year after the effective date of the Change in Control, the Award will become fully vested, exercisable (if applicable), earned and payable to the fullest extent of the original grant of the applicable Award, provided that, performance-based Awards shall be deemed earned at target; (iii) definitions are provided for the terms Cause and Good Reason; and (iv) unless an individual Award Agreement states otherwise, if the Participant has entered into an employment agreement or similar agreement or arrangement, the Participant is entitled to the greater of benefits provided upon a Change in Control under the Plan or the respective employment agreement or similar agreement or arrangement. The Amendment also provides that Awards outstanding as of the Effective Date shall continue in accordance with their terms and are not affected by the Amendment.
The foregoing summary of the Amendment does not purport to be complete and is qualified in its entirety by reference to the text of the Amendment, which ~~are~~is filed herewith as Exhibit 10.1 to this Quarterly Report on Form 10-Q and which is incorporated herein by reference.
20

Table of Contents

Item 6.

Exhibits

Exhibits

10.1		Exhibit 10.1 Declaration of Amendment of Delta Apparel, Inc. 2020 Stock Plan.
~~Item 6.~~	~~Exhibits~~

~~Exhibits~~


31.1
~~31.1~~		Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of the ~~Chief Financial~~Principal Accounting Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of the ~~Chief Financial~~Principal Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase

104		Cover Page Interactive Data File - (formatted as Inline XBRL and contained in Exhibit 101)

Table of Contents

SIGNATURES

Pursuant 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 APPAREL, INC. (Registrant)
			~~DELTA APPAREL, INC.~~ ~~(Registrant)~~
Date	~~February 5, 2018~~ August 9, 2023	By:	/s/ ~~Deborah H. Merrill~~ Nancy P. Bubanich
			~~Deborah H. Merrill~~ Nancy P. Bubanich Chief ~~Financial~~Accounting Officer ~~and President, Delta Basics~~

Georgia		58-2508794

~~GEORGIA~~		~~58-2508794~~
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

~~322 South Main Street~~ 2750 Premier Parkway, Suite 100
~~Greenville, SC~~ Duluth, Georgia		~~29601~~ 30097
(Address of principal executive offices)		(Zip Code)

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, par value $0.01		DLA		NYSE American



Large accelerated filer o ☐	Accelerated filer þ ☑	Non-accelerated filer o ☐	Smaller reporting company o ☑	Emerging growth company o ☐
		~~(Do not check if a smaller reporting company)~~

		Page
PART I.	Financial Information

Item 1.	Financial Statements (unaudited):

	Condensed Consolidated Balance Sheets — June 2023 and September 2022	3

	Condensed Consolidated Statements of Operations — Three and Nine Months ended June 2023 and June 2022	4

	Condensed Consolidated Statements of Comprehensive (Loss) Income — Three and Nine Months ended June 2023 and June 2022	5

	Condensed Consolidated Statements of Shareholders' Equity — Three and Nine Months ended June 2023 and June 2022	6

	Condensed Consolidated Statements of Cash Flows — Nine Months ended June 2023 and June 2022	7

	Notes to Condensed Consolidated Financial Statements (unaudited)	8
	Note A—Basis of Presentation and Description of Business	8
	Note B—Accounting Policies

~~Exhibits~~
~~EX-31.1~~
~~EX-31.2~~
~~EX-32.1~~
~~EX-32.2~~


☑
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


		9
	Note C—New Accounting Standards	~~Page~~9
~~PART I.~~	~~Financial Information~~Note D—Revenue Recognition	10
	Note E—Inventories	11
	Note F—Debt	11
	Note G—Selling, General and Administrative Expense	11
	Note H—Stock-Based Compensation	12
	Note I—Purchase Contracts	12
	Note J—Business Segments	13
	Note K—Income Taxes	14
	Note L—Derivatives and Fair Value Measurements	14
	Note M—Legal Proceedings	15
	Note N—Repurchase of Common Stock	15
	Note O—Goodwill and Intangible Assets	16
	Note P—Subsequent Events	16

~~Item 1.~~	~~Financial Statements:~~

	~~Condensed Consolidated Balance Sheets — December 30, 2017, and September 30, 2017 (unaudited)~~	3

	~~Condensed Consolidated Statements of Operations — Three months ended December 30, 2017, and December 31, 2016 (unaudited)~~	4

	~~Condensed Consolidated Statements of Comprehensive Loss — Three months ended December 30, 2017, and December 31, 2016 (unaudited)~~	5

	~~Condensed Consolidated Statements of Cash Flows — Three months ended December 30, 2017, and December 31, 2016 (unaudited)~~	6

	~~Notes to Condensed Consolidated Financial Statements (unaudited)~~	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1517

Item 3. 4.	~~Quantitative~~Controls and ~~Qualitative Disclosures About Market Risk~~Procedures	20

PART II.	Other Information

Item 1.	Legal Proceedings	20

Item 1A.	Risk Factors	20

~~Item 4.~~	~~Controls and Procedures~~	21

~~PART II.~~	~~Other Information~~

~~Item 1.~~	~~Legal Proceedings~~	21

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2120

Item 5.	Other Information	20

Item 6.	Exhibits	21

Signatures		22

Exhibits
EX-10.1
~~Item 6.~~ EX-31.1		~~Exhibits~~	21
EX-31.2
~~Signatures~~ EX-32.1			21
EX-32.2



	December 30, 2017			September 30, 2017
Assets
Current assets:
Cash and cash equivalents	$	603		$	572
Accounts receivable, less allowances of $1,502 and $1,433, respectively	51,010			47,557
Income tax receivable	404			352
Inventories, net	174,505			174,551
Note receivable	1,031			2,016
Prepaid expenses and other current assets	3,885			2,646
Total current assets	231,438			227,694

Property, plant and equipment, net of accumulated depreciation of $69,320 and $67,780, respectively	45,449			42,706
Goodwill	19,917			19,917
Intangibles, net	15,925			16,151
Deferred income taxes	2,656			5,002
Other assets	6,277			6,332
Total assets	$	321,662		$	317,802

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	45,597		$	47,183
Accrued expenses	13,503			17,704
Current portion of long-term debt	6,600			7,548
Total current liabilities	65,700			72,435

Long-term debt, less current maturities	99,360			85,306
Income tax payable	8,058			—
Other liabilities	4,734			2,574
Contingent consideration	1,300			1,600
Total liabilities	$	179,152		$	161,915

Shareholders’ 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 7,227,374 and 7,300,297 shares outstanding as of December 30, 2017, and September 30, 2017, respectively	96			96
Additional paid-in capital	59,856			61,065
Retained earnings	117,402			127,358
Accumulated other comprehensive income (loss)	51			(35		)
Treasury stock —2,419,598 and 2,346,675 shares as of December 30, 2017, and September 30, 2016, respectively	(34,895		)	(32,597		)
Total shareholders’ equity	142,510			155,887
Total liabilities and shareholders' equity	$	321,662		$	317,802



	Three Months Ended
	December 30, 2017			December 31, 2016
Net sales	$	90,342		$	85,335
Cost of goods sold	73,972			67,777
Gross profit	16,370			17,558

Selling, general and administrative expenses	14,979			17,311
Change in fair value of contingent consideration	(300		)	(100		)
Other income, net	(47		)	(122		)
Operating income	1,738			469

Interest expense, net	1,334			1,301
Income (loss) before provision for income taxes	404			(832		)
Provision for (benefit from) income taxes	10,356			(225		)
Net loss	$	(9,952	)	$	(607	)

Basic loss per share	$	(1.37	)	$	(0.08	)
Diluted loss per share	$	(1.37	)	$	(0.08	)

Weighted average number of shares outstanding	7,268			7,598
Dilutive effect of stock options and awards	—			—
Weighted average number of shares assuming dilution	7,268			7,598



	December 30, 2017
Revolving credit facility established March 2011, interest at 8.0% due March 2019	$	4,804
Term loan established March 2011, interest at 7.0%, payable monthly with a seven-year term	243
Term loan established November 2014, interest at 7.5%, payable monthly with a six-year term	1,850
Term loan established June 2016, interest at 8.0%, payable monthly with a six-year term	1,286
Term loan established September 2017, interest at 8.0%, payable monthly with a six-year term	3,817



Yarn	$	3,252
Finished fabric	2,271
Finished products	21,995
	$	27,518



	Three Months Ended
	December 30, 2017		December 31, 2016
Segment net sales:
Basics	$	73,176	$	60,838
Branded	17,166		24,497
Total net sales	$	90,342	$	85,335

Segment operating income (loss):
Basics	$	4,189	$	4,684
Branded	458		(1,000		)
Total segment operating income	$	4,647	$	3,684



	Fair Value Measurements Using
Period Ended	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Interest Rate Swaps
December 30, 2017	$	83		—			$	83		—
September 30, 2017	(56		)	—			(56		)	—

Cotton Options
December 30, 2017	$	(1	)	$	(1	)	—			—
September 30, 2017	(125		)	(125		)	—			—

Contingent Consideration
December 30, 2017	$	(1,300	)	—			—			$	(1,300	)
September 30, 2017	(1,600		)	—			—			(1,600		)



Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans	Dollar Value of Shares that May Yet Be Purchased Under the Plans
October 1, 2017 to November 4, 2017	29,081	$21.04	29,081		$10.7	million
November 5, 2017 to December 2, 2017	46,444	20.67	46,444	9.7		million
December 3, 2017 to December 30, 2017	69,599	20.56	69,599	8.3		million
Total	145,124	$20.69	145,124		$8.3	million


PART 1.	FINANCIAL INFORMATION



	December 30, 2017							September 30, 2017
	Cost		Accumulated Amortization			Net Value		Cost		Accumulated Amortization			Net Value		Economic Life

Goodwill	$	19,917	$	—		$	19,917	$	19,917	$	—		$	19,917	N/A

Intangibles:
Tradename/trademarks	$	16,090	$	(2,329	)	$	13,761	$	16,090	$	(2,193	)	$	13,897	20 – 30 yrs
Technology	1,220		(978		)	242		1,220		(947		)	273		10 yrs
License agreements	2,100		(449		)	1,651		2,100		(423		)	1,677		15 – 30 yrs
Non-compete agreements	1,037		(766		)	271		1,037		(733		)	304		4 – 8.5 yrs
Total intangibles	$	20,447	$	(4,522	)	$	15,925	$	20,447	$	(4,296	)	$	16,151