UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~June 29, 2019~~March 28, 2020

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

For the transition period from to

Commission File Number 1-15583

DELTA APPAREL, INC.

(Exact name of registrant as specified in its charter)

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

322 South Main Street
Greenville, SC		29601
(Address of principal executive offices)		(Zip Code)

(864) 232-5200

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:

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

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

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of a “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

~~Securities registered pursuant to Section 12(b) of the Act:~~

~~Title of each class~~		~~Trading Symbol~~		~~Name of each exchange on which registered~~
~~Common~~		~~DLA~~		~~NYSE American~~

As of ~~July 19, 2019,~~April 23, 2020, there were outstanding ~~6,921,417~~6,890,118 shares of the registrant’s common stock, par value of $0.01 per share, which is the only class of outstanding common or voting stock of the registrant.

~~Table of Contents~~

Note A—Basis of Presentation and Description of Business

We prepared the accompanying interim Condensed Consolidated Financial Statements in accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles ("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~~three and ~~nine-month~~six-month periods ended ~~June 29, 2019~~March 28, 2020, are not necessarily indicative of the results that may be expected for our fiscal year ending ~~September 28, 2019.~~October 3, 2020. Although our various product lines are sold on a year-round basis, the demand for specific products or styles reflects some seasonality, with sales in our June quarter generally being the highest and sales in our December quarter generally being the lowest. The COVID-19 pandemic is occurring during the seasonally strongest months of the business. As such, the historic seasonality may not be indicative of future results. For more information regarding our results of operations and financial position, refer to the Consolidated Financial Statements and footnotes included in our Annual Report on Form 10-K for our fiscal year ended September ~~29, 2018~~,28, 2019, filed with the United States Securities and Exchange Commission (“SEC”).

~~“Delta Apparel”, the “Company”, “we”, “us” and “our” are used interchangeably to refer to~~ Delta Apparel, Inc. ~~together~~(collectively with ~~our domestic wholly-owned subsidiaries, including~~DTG2Go, LLC, Salt Life, LLC, M.J. Soffe, LLC, ~~(“Soffe”~~and other subsidiaries, "Delta Apparel," "we," "us," "our," or the "Company")~~, DTG2Go, LLC (f/k/~~ is a Art Gun LLC) (“DTG2Go”), Salt Life, LLC (“Salt Life”), Culver City Clothing Company (f/k/a Junkfood Clothing Company) (“Junkfood”), and our other domestic and international subsidiaries, as appropriate to the context. On October 8, 2018, we purchased substantially all the assets of Silk Screen Ink, Ltd. d/b/a SSI Digital Print Services. See Note D—Acquisitions, for further information on this transaction.

~~Delta Apparel, Inc. is an~~vertically-integrated, international apparel company. With approximately 8,400 employees worldwide, we design, ~~marketing, manufacturing~~manufacture, source, and ~~sourcing company that features~~market a diverse portfolio of core activewear and lifestyle apparel ~~products.~~products under our primary brands of Salt Life®, COAST®, Soffe®, and Delta. We are a market leader in the direct-to-garment digital print and fulfillment industry, bringing DTG2Go technology and innovation to the supply chain of our customers. We specialize in selling casual and athletic products through a variety of distribution channels and ~~distribution~~ tiers, including ~~department stores, mid~~outdoor and ~~mass channels, e-retailers,~~ sporting goods ~~and outdoor~~ retailers, independent and specialty stores, better department stores and mid-tier retailers, mass merchants and e-retailers, the U.S. ~~military.~~military, and through our business-to-business ecommerce sites. Our products are also made available direct-to-consumer on our websites and in our branded retail stores. ~~We believe this~~This diversified distribution allows us to capitalize on our strengths to provide ~~casual~~our activewear and lifestyle apparel products to a broad and evolving customer base whose shopping preferences may span multiple retail channels.

~~As a vertically-integrated manufacturer, we~~We design and internally manufacture the majority of our ~~products, which~~products. More than 90% of the apparel units that we sell are sewn in our owned or leased 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 ~~at 322 South Main Street,~~in Greenville, South ~~Carolina 29601 (telephone number: 864-232-5200).~~Carolina. Our common stock trades on the NYSE American ~~exchange~~ under the symbol ~~“DLA”.~~“DLA." We operate on a 52-53 week fiscal year ending on the Saturday closest to September 30. Our ~~2019~~2020 fiscal year is a ~~52-week~~53-week year and will end on ~~September 29,~~October 3, 2020. Our 2019~~. Our 2018~~ fiscal year was ~~also~~ a 52-week year and ended on September ~~29, 2018~~.28, 2019.

We make available copies of materials we file with, or furnish to, the SEC free of charge at https://ir.deltaapparelinc.com. The information found on our 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 other filings made with the SEC. Requests should be directed to: Investor Relations Department, Delta Apparel, Inc., 322 South Main Street, Greenville, South Carolina 29601. Requests can also be made by telephone to 864-232-5200, or via email at investor.relations@deltaapparel.com.

Note C—New Accounting Standards

Recently Adopted Standards

In ~~May 2014,~~August 2017, the Financial Accounting Standards Board, ("FASB"), issued Accounting Standards Update, ("ASU") ~~No. 2014-09,~~ ~~Revenue from Contracts with Customers~~ ("ASU 2014-09"). This new guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 was effective for annual periods beginning after December 15, 2017, for public business entities and permitted the use of either the retrospective or cumulative effect transition method. Early application is permitted only for annual reporting periods beginning after December 15, 2016. ASU 2014-09 was adopted in our fiscal year beginning September 30, 2018, using the modified retrospective transition method and we applied the provisions of ASU 2014-09 to all contracts at the date of adoption.

Our revenue streams consist of wholesale, direct-to-consumer ecommerce and retail stores which are included in our Condensed Consolidated Statements of Operations. The table below identifies the amount and percentage of net sales by distribution channel (in thousands):

Three Months Ended

June 29, 2019

June 30, 2018

$
%
$
%

Retail
$ 1,296 1 % $ 986 1 %
Direct-to-consumer ecommerce
1,419 1 % 1,503 1 %
Wholesale
116,545 98 % 109,693 98 %
Net Sales
$ 119,260 100 % $ 112,182 100 %

Nine Months Ended

June 29, 2019

June 30, 2018

$
%
$
%

Retail
$ 3,180 1 % $ 2,602 1 %
Direct-to-consumer ecommerce
3,990 1 % 3,974 1 %
Wholesale
316,603 98 % 295,952 98 %
Net Sales
$ 323,773 100 % $ 302,528 100 %

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

Third Quarter Fiscal Year 2019

Net Sales

Retail

Ecommerce

Wholesale

Delta Group
$ 107,409 0.3 % 0.3 % 99.4 %
Salt Life Group
11,851 8.6 % 9.0 % 82.4 %
Total
$ 119,260

Third Quarter Fiscal Year 2018

Net Sales

Retail

Ecommerce

Wholesale

Delta Group
$ 102,107 0.3 % 0.3 % 99.4 %
Salt Life Group
10,075 7.3 % 11.3 % 81.4 %
Total
$ 112,182

Year To Date Fiscal Year 2019

Net Sales

Retail

Ecommerce

Wholesale

Delta Group
$ 291,325 0.3 % 0.3 % 99.4 %
Salt Life Group
32,448 7.1 % 9.3 % 83.6 %
Total
$ 323,773

Year To Date Fiscal Year 2018

Net Sales

Retail

Ecommerce

Wholesale

Delta Group
$ 272,157 0.4 % 0.3 % 99.3 %
Salt Life Group
30,371 5.8 % 10.1 % 84.1 %
Total
$ 302,528

Revenue is recognized when performance obligations under the terms of the contracts are satisfied. Our performance obligation primarily consists of delivering products to our customers. Control is transferred upon providing the products to customers in our retail stores, upon shipment of our products to the consumers from our ecommerce sites, and upon shipment from our distribution centers to our customers in our wholesale operations. Once control is transferred to the customer, we have completed our performance obligation.

~~Table of Contents~~

Our receivables resulting from wholesale customers are generally collected within two months, in accordance with our established credit terms. Our direct-to-consumer ecommerce and retail store receivables are collected within a few days. Our revenue, including freight income, is recognized net of applicable taxes in our Condensed Consolidated Statements of Operations.

In certain areas of our wholesale business, we offer discounts and allowances to support our customers. Some of these arrangements are written agreements, while others may be implied by customary practices in the industry. Wholesale sales are recorded net of discounts, allowances, and operational chargebacks. As certain allowances and other deductions are not finalized until the end of a season, program or other event which may not have occurred, we estimate such discounts, allowances, and returns that we expect to provide.

In accordance with the new revenue guidance, we only recognize revenue to the extent that it is probable that we will not recognize a significant reversal of revenue when the uncertainties related to the variability are ultimately resolved. In determining our estimates for discounts, allowances, chargebacks, and returns, we consider historical and current trends, agreements with our customers and retailer performance. We record these discounts, returns and allowances as a reduction to net sales in our Condensed Consolidated Statements of Operations and as a liability in our accrued expenses in our Condensed Consolidated Balance Sheets, with the estimated value of inventory expected to be returned in prepaid and other current assets in our Condensed Consolidated Balance Sheets.

We have made accounting policy elections related to the new revenue recognition standard. We exclude any taxes collected from customers that are remitted to taxing authorities from net sales. We record shipping and handling charges incurred by us before and after the customer obtains control as a fulfillment cost rather than an additional promised service. Our customers' terms are less than one year from the transfer of goods, and we do not adjust receivable amounts for the impact of the time value of money. We do not capitalize costs of obtaining a contract which we expect to recover, such as commissions, as the amortization period of the asset recognized would be one year or less. We do not believe any of these expedients had a material impact on our financial statements upon our adoption of the guidance.

With the adoption of ASU 2014-09, the timing of revenue recognition for our primary revenue streams remained substantially unchanged, with no material effect on net sales. See the table below (in thousands) for the effect of the adoption of the standard on our Condensed Consolidated Balance Sheets as of ~~June 29, 2019~~ ~~due to the change in recording provisions for customer refunds as a liability instead of netted against trade accounts receivable.~~

As Reported
June 29, 2019

Effect of Standard

Balances
without Adoption

Accounts receivable, net
$ 67,200 $ (748 ) $ 66,452
Prepaid expenses and other current assets
3,384 (166 ) 3,218
Total Current Assets
250,297 (914 ) 249,383
Total assets
381,425 (914 ) 380,511
Accrued liabilities
16,834 (1,163 ) 15,671
Total current liabilities
81,576 (1,163 ) 80,413
Total liabilities
231,140 (1,163 ) 229,977
Total liabilities and equity
381,425 (1,163 ) 380,262

~~In August 2016, the FASB issued ASU No. 2016-15,~~ ~~Statement of Cash Flows (Topic 230)~~, ~~Classification of Certain Cash Receipts and Cash Payments,~~ ("ASU 2016-15"). The amendments add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. This was issued with the intent of reducing diversity in practice with respect to certain types of cash flows. ASU 2016-15 is required to be adopted retrospectively. ASU 2016-15 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those annual periods. ASU 2016-15 was adopted in our fiscal year beginning September 30, 2018. During the March quarter, we paid $0.6 million in contingent consideration. With the adoption of ASU 2016-15, $0.1 million and $0.5 million were recorded in net cash used in operating activities and financing activities, respectively.

~~Standards Not Yet Adopted~~

~~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. 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, with early application permitted. ASU 2016-02 will therefore be adopted 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.~~

~~Table of Contents~~

~~In August 2017, the FASB issued ASU~~ No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities(", ("ASU 2017-12"). The amendments in ASU 2017-12 apply to any entity that elects to apply hedge accounting in accordance with U.S. GAAP. ASU 2017-12 permits more flexibility in hedging interest rate risk for both variable rate and fixed rate financial instruments, and the ability to hedge risk components for nonfinancial hedges. In addition, this ASU requires an entity to present the earnings effect of hedging the instrument in the same income statement line in which the earnings effect of the hedge item is reported. In addition, companies no longer need to separately measure and report hedge ineffectiveness and can use an amortization approach or continue with mark-to-market accounting. We adopted ASU 2017-12 ~~is effective for financial statements issued for fiscal years beginning after December 15, 2018, and interim periods within those annual periods.~~as of September 29, 2019. The provisions of ASU 2017-12 ~~will be adopted in our fiscal year beginning~~ ~~September 29, 2019. We are evaluating the~~did not have a material effect ~~that ASU 2017-12 will have~~ on our ~~Consolidated Financial Statements and related~~financial condition, results of operations, cash flows or disclosures.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and other (Topic 350), Simplifying the Test for Goodwill Impairment, ("ASU 2017-04"). To simplify the subsequent measurement of goodwill, ASU 2017-04 eliminates Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following ~~a similar process~~the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. ~~Under~~Instead, under the amendments in ASU 2017-04, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. ASU 2017-04 also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. Therefore, the same impairment assessment applies to all reporting units. An entity is required to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. We early adopted ASU 2017-04 as of September 29, 2019. The provisions of ASU 2017-04 did not have a material effect on our financial condition, results of operations, cash flows or disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”), which requires lessees to include most leases on the balance sheet as lease liabilities with an associated right-of-use ("ROU") asset. Since the issuance of ASU 2016-02, the FASB released several amendments to improve and clarify the implementation guidance, as well as to change the allowable adoption methods. These standards have been collectively codified within Accounting Standard Codification, ("ASC ") 842, Leases (“ASC 842”). We adopted ASC 842 using the modified retrospective method and applied the standard to all leases existing as of September 29, 2019. Information for prior years presented has not been restated and continues to reflect the authoritative accounting standards in effect for those periods. We elected the package of transition practical expedients that allows us to carryforward our historical assessments of whether existing contracts contain leases, determinations of lease classification, and treatments of initial direct costs. As of September 29, 2019, we recognized total operating lease liabilities of $44.6 million in our Consolidated Balance Sheets, of which $36.1 million was recorded within Long-term operating leases, less current maturities and $8.5 million was recorded within Current portion of operating leases. We additionally derecognized $0.8 million of previously recorded net deferred rent balances and recorded operating lease ROU assets of $43.8 million related to our operating leases, which are reflected within Operating lease assets in our Consolidated Balance Sheets. The adoption of the new leasing standard had no significant impact on covenants or other provisions of our secured credit facility.

Standards Not Yet Adopted

In August 2018, the FASB issued ASU No. 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (“ASU 2018-15”), which will require customers to apply internal-use software guidance to determine the implementation costs that are able to be capitalized. Capitalized implementation costs will be required to be amortized over the term of the arrangement, beginning when the cloud computing arrangement is ready for its intended use. ASU 2018-15 is effective for financial statements issued for ~~annual and interim periods~~fiscal years beginning after December 15, ~~2019.~~2019, and interim periods within those annual periods. ASU ~~2017-04~~2018-15 will therefore be ~~adopted in~~effective for us as of October 4, 2020 including the interim periods within our fiscal year ~~beginning October 4, 2020.~~2021 annual period. The standard allows changes to be applied either retrospectively or prospectively. We are evaluating the effect that ASU ~~2017-04~~2018-15 will have on our ~~Consolidated Financial Statements~~financial statements and related disclosures.

Note D—~~Acquisitions~~Revenue Recognition

~~On October 8, 2018,~~We only recognize revenue to the extent that it is probable that we will not recognize a significant reversal of revenue when the uncertainties related to the variability are ultimately resolved. In determining our ~~DTG2Go, LLC subsidiary purchased substantially all of the assets of Silk Screen Ink, Ltd. d/b/~~estimates for discounts, allowances, chargebacks, and returns, we consider historical and current trends, agreements with our customers and retailer performance. We record these discounts, returns and allowances as a SSI Digital Print Services ("SSI"), a premium provider of direct-to-garment digital printed products. The SSI business operated from locations in Iowa and Colorado serving the western and mid-western parts of the United States. During the March quarter, we stopped production at the smaller operation in Colorado as the location was not strategic as it served the same geographic locations as the Iowa and existing Nevada locations.

~~The financial results of the acquired business have been included~~reduction to net sales in our ~~Delta Group since the date~~Condensed Consolidated Statements of ~~the acquisition. It is not practicable to disclose the revenue~~Operations and ~~income of SSI since the acquisition date~~ as ~~we have integrated the SSI and DTG2Go businesses together since acquisition.~~

~~The SSI acquisition purchase price consisted of $2.0 million~~a refund liability in cash, a promissory note for $7.0 million and $3.0 million in capital lease funding secured by the acquired fixed assets. The cash portion of the purchase price included a payment at closing of $2.0 million and a post-closing net working capital adjustment. The post–closing net working capital adjustment of $0.7 million was paid during the March quarter. The below table represents the total consideration for the acquisition (in thousands):

Cash
$ 2,000
Promissory note
7,000
Capital lease financing
3,000
Net working capital adjustment
729
Total consideration
$ 12,729

~~The current allocation of consideration to the assets and liabilities are noted in the table below as well as measurement-period adjustments recorded~~our accrued expenses in our Condensed Consolidated Balance Sheets, aswith the estimated value of June 29, 2019. The adjustments are related to additional information obtained on conditions that existed at the acquisition date. The Company is in the process of finalizing its valuation of the intangible assets acquired; thus, the provisional measurements of intangible assets and goodwill are subject to change. The total amount of goodwill isinventory expected to be ~~deductible~~returned in prepaid and other current assets in our Condensed Consolidated Balance Sheets. As of March 28, 2020, and September 28, 2019, there was $1.0 million in refund liabilities for ~~tax purposes.~~customer returns, allowances, markdowns and discounts within accrued expenses.

Our revenue streams consist of retail stores, direct-to-consumer ecommerce, and wholesale channels which are included in our Condensed Consolidated Statements of Operations. The table below identifies the amount and percentage of net sales by revenue stream (in thousands):

Allocation as of
March 30, 2019

Measurement
Period Adjustments

Allocation as of
June 29, 2019

Accounts receivable
$ 1,184 $ - $ 1,184
Inventory
1,127 - 1,127
Other current assets
86 - 86
Property, plant, and equipment
3,400 - 3,400
Goodwill
3,380 1,300 4,680
Intangible assets
4,020 (1,100 ) 2,920
Accounts payable
(668 ) - (668 )
Consideration paid
$ 12,529 $ 200 $ 12,729

	Three Months Ended
	March 28, 2020					March 30, 2019
	$		%			$		%
Retail	$	962		1	%	$	872		1	%
Direct-to-consumer ecommerce		1,084		1	%		1,019		1	%
Wholesale		94,614		98	%		100,947		98	%
Net Sales	$	96,660		100	%	$	102,838		100	%

	Six Months Ended
	March 28, 2020					March 30, 2019
	$		%			$		%
Retail	$	2,195		1	%	$	1,884		1	%
Direct-to-consumer ecommerce		2,767		1	%		2,601		1	%
Wholesale		187,588		98	%		200,028		98	%
Net sales	$	192,550		100	%	$	204,513		100	%

~~Table~~

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

	Second Quarter Fiscal Year 2020
	Net Sales		Retail			ecommerce			Wholesale
Delta Group	$	84,191		0.2	%		0.2	%		99.6	%
Salt Life Group		12,469		6.4	%		7.1	%		86.5	%
Total	$	96,660

	Second Quarter Fiscal Year 2019
	Net Sales		Retail			ecommerce			Wholesale
Delta Group	$	89,526		0.3	%		0.3	%		99.4	%
Salt Life Group		13,312		4.4	%		5.7	%		89.9	%
Total	$	102,838

	Year To Date Fiscal Year 2020
	Net Sales		Retail			ecommerce			Wholesale
Delta Group	$	173,143		0.3	%		0.3	%		99.4	%
Salt Life Group		19,407		8.9	%		11.9	%		79.2	%
Total	$	192,550

	Year To Date Fiscal Year 2019
	Net Sales		Retail			ecommerce			Wholesale
Delta Group	$	183,916		0.3	%		0.3	%		99.4	%
Salt Life Group		20,597		6.1	%		9.7	%		84.2	%
Total	$	204,513

Note E—Inventories

Inventories, net of reserves of ~~$10.2~~$9.4 million and ~~$10.5~~$10.0 million, as of ~~June 29,~~March 28, 2020, and September 28, 2019 ~~and September 29, 2018~~, respectively, consisted of the following (in thousands):

	June 29,		September 29,
	2019		2018		March 28, 2020		September 28, 2019
Raw materials	$	11,794	$	9,641	$	13,461	$	12,022
Work in process		16,026		18,327		16,568		17,765
Finished goods		149,959		147,015		167,304		149,320
	$	177,779	$	174,983	$	197,333	$	179,107

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.

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 DTG2Go, LLC (f/k/a Art Gun, LLC) (collectively, the "Borrowers"), are co-borrowers under the Amended Credit Agreement. The Borrowers entered into amendments to the Amended Credit Agreement with Wells Fargo and the other lenders on November 27, 2017, March 9, 2018, and October 8, 2018.

On November ~~27, 2017,~~19, 2019, the Borrowers entered into a ~~First~~Consent and Fourth Amendment to the Fifth Amended and Restated Credit Agreement with Wells Fargo and the other lenders set forth therein (the ~~“First Amendment”~~"Fourth Amendment"). The ~~First~~Fourth Amendment, among other things, (i) increased the borrowing capacity under the Amended Credit Agreement from $145 million to $170 million (subject to borrowing base limitations), (ii) extended the maturity date from May 21, 2021 to November 19, 2024, (iii) reduced pricing on the revolver and first-in last-out "FILO" borrowing components by 25 basis points, and (iv) added 25% of the fair value of eligible intellectual property to the borrowing base calculation. In addition, the Fourth Amendment amended the definition of Fixed Charge Coverage Ratio ~~within the Amended Credit Agreement~~ to ~~permit~~exclude up to $10 million of the proceeds received from the March 31, 2017, sale of certain assets of the Junkfood business to be used towards share repurchases for up to one year from the date of that transaction. In addition, the definition of Permitted Purchase Money Indebtedness was amended to extend the time period within whichcapital expenditures incurred by the Borrowers ~~may enter into capital leases and to increase~~in connection with the ~~aggregate principal amount~~expansion of ~~such leases into which~~their distribution facility located within the ~~Borrowers may enter to up to $15 million. The definition~~Town of Permitted Investments was also amended to permit the Borrowers to make investments in entities that are not a party to the Amended Credit Agreement in an aggregate amount of up to $2 million. The First Amendment also allowed the change in the name of our Junkfood Clothing Company subsidiary to Culver City Clothing Company. There were no changes to the Amended Credit Agreement related to interest rate, borrowing capacity, or maturity.

On March 9, 2018, the Borrowers entered into a Consent and Second Amendment to the Fifth Amended and Restated Credit Agreement with Wells Fargo and the other lenders set forth therein (the “Second Amendment”). Pursuant to the Second Amendment, Wells Fargo and the other lenders set forth therein consented to Art Gun, LLC’s acquisition of substantially all of the assets of TeeShirt Ink Inc. d/b/a DTG2Go. The Second Amendment also: (i) revised certain provisions in the Amended Credit Agreement relating to our ability to pay cash dividends or distributions to shareholders or to repurchase shares of our common stock so that the effects of the Tax Cuts and Jobs Act of 20~~17 would not~~ negatively impact our ability to make such dividends or distributions or to repurchase shares of our common stock during our 2018 fiscal year; (ii) amended the definition of Permitted Investments in the Amended Credit Agreement to allow investments in the Honduras partnership (as defined in the Amended Credit Agreement) in an aggregate original principal amount not to exceed $6 million; (iii) amended the definition of Permitted Purchase Money Indebtedness in the Amended Credit Agreement to increase the aggregate principal amount of capital leases into which we may enter to up to $25 million; (iv) permitted the name change of Art Gun, LLC to DTG2Go, LLC; and (v) added new definitions relating to the DTG2Go acquisition. There were no changes to the Amended Credit Agreement related to interest rate, borrowing capacity, or maturity.

On October 8, 2018, the Borrowers entered into a Consent and Third Amendment to the Fifth Amended and Restated Credit Agreement with Wells Fargo and the other lenders set forth therein (the "Third Amendment"). Pursuant to the Third Amendment, the Lenders consented to DTG2Go's acquisition of substantially all of the assets of SSI. The Third Amendment also: (i) amended the existing loan agreement, including various definitions therein, to add a first-in last-out "FILO" borrowing component and (ii) amended the existing loan agreement, including various definitions therein, to address the potential unavailability or discontinuance of the use of LIBOR rates and updated certain provisions regarding compliance with denied party, sanctioned entity, anti-corruption and anti-money laundering and related laws and regulations and other items.Clinton, Anderson County, Tennessee.

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.~~

~~Table of Contents~~

As of ~~June 29, 2019~~March 28, 2020, there was ~~$114.8~~$135.7 million outstanding under our U.S. revolving credit facility at an average interest rate of ~~4.7% and~~3.2%. Our cash on hand combined with the additional borrowing availability ~~of $21.6~~under the U.S. credit facility totaled $30.5 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 ~~June 29, 2019~~March 28, 2020, because our availability was above the minimum required under the Amended Credit Agreement, but we would have satisfied our financial covenant had we been subject to it. At ~~June 29,~~March 28, 2020, and September 28, 2019 ~~and September 29, 2018~~, there was ~~$14.4~~$15.2 million and ~~$14.7~~$16.1 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.~~ASC 470, Debt ("ASC 470")) 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, we acquired Salt Life and issued two promissory notes in the aggregate principal amount of $22.0 million, which included~~See Note Q—Subsequent Events for a one-time installment of $9.0 million that was due and paid as required on September 30, 2014, and quarterly installments commencing on March 31, 2015, with the final installment due on June 30, 2019. The promissory notes are zero-interest notes and state that interest will be imputed as required under Section 1274discussion of the ~~Internal Revenue Code. We imputed interest at 1.92%~~Fifth Amendment to the Fifth Amended and Restated Credit Agreement entered into on ~~the promissory note that matured on June 30, 2016, and was paid in full as required. We impute interest at 3.62% on the promissory note that matured on June 30, 2019. At~~ ~~June 29, 2019, the discounted value of the promissory note outstanding was $0.5 million.~~April 27, 2020.

Promissory Note

On October 8, 2018, we acquired substantially all of the assets of Silk Screen Ink, Ltd. d/b/a SSI Digital Print Services. ~~See Note-D Acquisitions for more information on this transaction.~~ In conjunction with the acquisition, we issued a promissory note in the principal amount of $7.0 million. The promissory note bears interest at 6% with quarterly installments ~~beginning~~which began January 2, 2019, with the final installment due October 1, 2021. As of ~~June 29, 2019~~March 28, 2020, there was ~~$5.9~~$4.1 million outstanding on the promissory note.

Honduran Debt

Since March 2011, we have entered into term loans and a revolving credit facility with Banco Ficohsa, a Honduran bank, to finance both the operations and capital expansion of our Honduran facilities. Each of these loans is secured by a first-priority lien on the assets of our Honduran operations and is 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 revolving credit facility requires minimum payments during each ~~nine-month~~six-month period of the 12 to 18-month ~~term;~~terms; 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 covenants, and we intend to re-borrow funds, subject to those covenants, the amounts have been classified as long-term debt.

Additional information about these loans and the outstanding balances as of ~~June 29, 2019~~March 28, 2020, is as follows (in thousands):

	June 29,		March 28,
	2019		2020
Revolving credit facility established March 2011, interest at 6.2% expiring August 2020	$	4,984
Revolving credit facility established March 2011, weighted average interest at 6.6% expiring August 2025			$	6,267
Term loan established November 2014, interest at 6.0%, payable monthly with a six-year term		950		500
Term loan established June 2016, interest at 6.0%, payable monthly with a six-year term		849		631
Term loan established October 2017, interest at 6.0%, payable monthly with a six-year term		2,219		1,420

~~Table of Contents~~

Note G—Leases

We lease property and equipment under operating lease arrangements, most of which relate to distribution centers and manufacturing facilities in the U.S., Honduras, El Salvador, and Mexico. We also lease machinery and equipment under finance lease arrangements in the U.S. We include both the contractual term as well as any renewal option that we are reasonably certain to exercise in the determination of our lease terms. For leases with a term of greater than 12 months, we value lease liabilities and the related assets as the present value of the lease payments over the related term. We apply the short-term lease exception to leases with a term of 12 months or less and exclude such leases from our Condensed Consolidated Balance Sheet. Payments related to these short-term leases are expensed on a straight-line basis over the lease term and reflected as a component of lease cost within our Condensed Consolidated Statements of Operations. Lease payments generally consist of fixed amounts, and variable amounts based on a market rate or an index are not material to our consolidated lease cost. Our operating lease agreements for buildings generally include provisions for the payment of our proportional share of operating costs, property taxes, and other variable payments. These incremental payments are excluded from our calculation of operating lease liabilities and right of use assets. We have elected to use the practical expedient present in ASC 842 to not separate lease and non-lease components for all significant underlying asset classes and instead account for them together as a single lease component in the measurement of our lease liabilities.

Generally, the rate implicit in our operating leases is not readily determinable. Therefore, we discount future lease payments using our estimated incremental borrowing rate at lease commencement. We determine this rate based on a credit-adjusted risk-free rate, which approximates a secured rate over the lease term. The weighted average discount rate for operating leases as of March 28, 2020, was 4.2%. We discount our finance lease payments based on the rate implicit and stated in the lease. The weighted average discount rate for finance leases as of March 28, 2020, was 5.1%.

The following table presents the future undiscounted payments due on our operating and finance lease liabilities as well as a reconciliation of those payments to our operating and finance lease liabilities, recorded as of March 28, 2020 (in thousands):

	Operating			Finance
	Leases			Leases
2020	$	5,509		$	3,989
2021		9,488			6,684
2022		8,116			4,475
2023		6,119			3,464
2024		4,675			1,965
Thereafter		17,635			295
Undiscounted fixed lease payments	$	51,542		$	20,872
Discount due to interest		(7,406	)		(1,668)
Total lease liabilities	$	44,136		$	19,204
Less current maturities		(8,525	)		(6,965	)
Lease liabilities, excluding current maturities	$	35,611		$	12,239

As of March 28, 2020, we have entered into certain operating leases that have not yet commenced and which will result in annual fixed lease payments that range from $1.0 million to $1.3 million per year for a 10-year period.

Our Ceiba Textiles manufacturing facility is leased under an operating lease arrangement with a Honduran company, of which we own 31% of the outstanding capital stock of the lessor at March 28, 2020. During the six-months ended March 28, 2020, and March 30, 2019, we paid approximately $0.9 million in lease payments under this arrangement.

As of March 28, 2020, we recorded $43.2 million of operating lease, ROU assets which were reflected within Operating lease assets in our Condensed Consolidated Balance Sheet, and $25.3 million of finance lease ROU assets, which were reflected within Property, plant, and equipment, net in our Condensed Consolidated Balance Sheet.

The weighted average remaining lease terms for our operating leases and finance leases were approximately 7 years and 4 years, respectively, as of March 28, 2020.

The components of total lease expense were as follows for the six months ended March 28, 2020 (in thousands):

Operating lease fixed expense	$	5,513
Operating lease variable cost expense		879
Finance lease amortization of ROU assets expense		1,630
Finance lease interest expense		486
Total lease expense	$	8,508

Total operating lease expense, excluding variable lease costs, recognized during the six months ended March 30, 2019, prior to the adoption of ASC 842, was $5.2 million. In addition, during the six months ended March 30, 2019, we also incurred expenses related to finance leases, including interest expense and depreciation expense of financed Property, plant and equipment.

Cash outflows for operating lease payments and interest payments for finance leases during the six months ended March 28, 2020, were $5.4 million and $0.5 million, respectively, and are classified within Net cash used in operating activities on the Condensed Consolidated Statement of Cash Flows. Cash outflows for finance lease payments during the six months ended March 28, 2020, were $3.2 million and are classified within Net cash provided by financing activities on the Condensed Consolidated Statement of Cash Flows.

ROU assets obtained in exchange for operating lease and finance lease liabilities during the six months ended March 28, 2020, were $4.1 million and $4.4 million, respectively. During the six-month period ended March 30, 2019, prior to the adoption of ASC 842, we entered into new finance lease obligations totaling $5.7 million.

We do not have significant leasing transactions in which we are the lessor.

Note H—I—Stock-Based Compensation

On February ~~4, 2015,~~6, 2020, our shareholders ~~re-approved~~approved the Delta Apparel, Inc. 2020 Stock Plan ("2020 Stock Plan") to replace the 2010 Stock Plan, ~~("2010 Stock Plan") that~~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 the Delta Apparel~~February 4, 2015 and was scheduled to expire by its terms on September 14, 2020. The 2020 Stock ~~Option~~ Plan ~~("Option Plan") or the Delta Apparel Incentive Stock Award Plan ("Award Plan")~~is substantially similar in both form and ~~instead, all stock awards have been and will continue~~substance to ~~be granted under~~ the 2010 Stock Plan.

~~We account for these plans pursuant to ASC 718, SAB 107, SAB 110, and ASU 2016-09. Shares are generally issued from treasury stock upon exercise~~ The purpose of the ~~options or~~2020 Stock Plan is to continue to give our Board of Directors and its Compensation Committee the ~~vesting~~ability to offer a variety of compensatory awards designed to enhance the ~~restricted~~Company’s long-term success by encouraging stock ~~units, performance units or other awards under the 2010 Stock Plan.~~

~~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~~ ~~June 29, 2019~~,ownership among its executives, key employees and ~~June 30, 2018, we recognized $0.5 million and $0.8 million, respectively, in stock-based compensation expense. During the~~ ~~nine-month periods ended~~ ~~June 29, 2019, and~~ ~~June 30, 2018, we recognized $1.8 million and $2.0 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, performance units, and other stock and cash awards. If a participant dies or becomes disabled (as defined in the 2020 Stock Plan) while employed by 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 2020 Stock Plan, to establish, amend and rescind any rules and regulations relating to the 2020 Stock Plan, and to make any other determinations that it deems necessary. The aggregate number of shares of common stock that may be delivered under the ~~2010~~2020 Stock Plan is ~~500,000~~449,714 plus any shares of common stock subject to outstanding awards under the ~~Option Plan or Award~~2010 Stock Plan that are subsequently forfeited or terminated for any reason before being exercised. ~~The~~Similar to the 2010 Stock Plan, 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~~The 2010 Stock Plan terminated and the 2020 Stock Plan became effective on February 6, 2020, the date of shareholders’ approval.

Shares are generally issued from treasury stock upon the vesting of the restricted stock units, performance units or ~~becomes disabled (as defined in~~other awards under the 2010 Stock ~~Plan) while employed by~~Plan and 2020 Stock Plan.

Compensation expense is recorded within SG&A in our Condensed Consolidated Statements of Operations over the ~~Company or serving as a director, all unvested awards become fully vested. The Compensation Committee is authorized to establish~~vesting periods. During the ~~terms~~three-month periods ended March 28, 2020, and ~~conditions~~March 30, 2019, we recognized $0.5 million and $0.6 million, respectively, in stock-based compensation expense. During the six-month periods ended March 28, 2020, and March 30, 2019, we recognized $1.4 million and $1.3 million, respectively, in stock-based compensation expense.

On February 5, 2020, restricted stock units representing 74,000 shares of ~~awards~~our common stock were granted under the 2010 Stock Plan and are eligible 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.~~

~~No restricted stock units or performance units were granted during the three-month and~~ ~~nine-month periods ended~~ ~~June 29, 2019~~.

~~During the three-month period ended December 29, 2018, restricted stock units and performance units representing 205,000 and 42,000 shares of our common stock, respectively, vested~~vest upon the filing of our Annual Report on Form 10-K for the fiscal year ~~ended~~ ~~September 29, 2018~~,ending October 1, 2022 and ~~were issued in accordance with their respective agreements. All vested awards were paid~~are payable in common stock.

~~During the three-month period ended December 30, 2017,~~On September 29, 2019, restricted stock units and performance units, ~~representing 54,602 and 92,068~~each consisting of 60,000 shares of our common stock, ~~respectively, vested~~were granted under the 2010 Stock Plan and are eligible to vest upon the filing of our Annual Report on Form 10-K for the fiscal year ~~ended September 30, 2017, and were issued in accordance with their respective agreements.~~ending October 2, 2021. One-half of the restricted stock units ~~were paid~~and one-half of the performance units are payable in common stock ~~and one-half were paid in cash. Of~~with the ~~performance units, 72,138 were paid in common stock and 19,930 were paid~~remainder payable in cash.

As of ~~June 29, 2019~~March 28, 2020, there was ~~$1.7~~$4.0 million of total unrecognized compensation cost related to unvested awards granted under the 2010 Stock Plan. This cost is expected to be recognized over a period of ~~1.5~~2.6 years. No awards have been granted under the 2020 Stock Plan.

Note J—K—Business Segments

~~We operate our business~~Our operations are managed and reported in two segments, ~~the~~ Delta Group and the Salt Life Group. During fiscal year 2018, we made a strategic decision to re-align our business into segments that better reflect our operating model and allow us to better leverage and more efficiently manage our cost structure as we plan future growth. With this re-alignment, we changed and renamed our reportable segments to reflect how our Chief Operating Decision Maker and management currently make financial decisions and allocate resources. We report our results under the Delta Group, comprising our Delta Activewear, DTG2Go and Soffe business units, and the Salt Life Group, ~~comprising~~which reflect the manner in which the business is managed and results are reviewed by the Chief Executive Officer, who is our Salt Life and Coast business units. Although the two segments are similar in their production processes and regulatory environments, they are distinct in their economic characteristics, products, marketing, and distribution methods.chief operating decision maker.

The Delta Group is comprised of our business units primarily focused on core activewear styles, and includes our Delta Activewear ~~(which includes~~(encompassing our Delta Catalog and ~~FunTees)~~FunTees businesses), Soffe, and DTG2Go business units. We market, distribute and manufacture unembellished knit apparel under the main brands of Soffe^®, Delta Platinum, Delta Pro Weight^®, and Delta Magnum Weight^® for sale to a diversified audience ranging from large licensed screen printers to small independent businesses. Through our FunTees business, we serve our customers as their supply chain partner, from product development to shipment of their branded products, with the majority of products sold with value-added services including embellishment, hangers, hangtags and ticketing, so that they are ready for retail sale to the end customers. We assist our customers in managing their production and inventory needs and provide technology tools to help them manage and grow their business. We sell our products to a diversified audience, including sporting goods retailers, large licensed screen printers, specialty and resort stores, and ad-specialty and promotional products ~~businesses, the U.S. military and others.~~businesses. We also ~~manufacture private label products for~~service major branded sportswear companies, trendy regional brands, retailers, and ~~sports licensed~~sports-licensed apparel marketers. ~~Typically, our private label products are sold with value-added services such as hangtags, ticketing, hangers, and embellishment so that they are fully ready for retail. Using~~Our DTG2Go business is a market leader in the direct-to-garment digital print ~~equipment~~ and fulfillment industry, bringing technology and innovation to the supply chain of our many customers. We use highly-automated factory processes and our proprietary software to deliver on-demand, digitally printed apparel direct to consumers on behalf of our customers. Utilizing its ~~proprietary technology,~~seven fulfillment facilities throughout the United States, DTG2Go ~~embellishes garments~~offers a robust digital supply chain to ~~create private label,~~ship custom ~~decorated apparel servicing~~graphic products typically within 24 to 48 hours to consumers in the ~~fast-growing e-retailer channels, as well as the ad-specialty, promotional products, screen print, traditional retail, social media,~~United States and ~~licensed apparel marketplaces, among others.~~to over 100 countries worldwide.

The Salt Life Group is comprised of our lifestyle brands focused on a broad range of apparel garments, headwear and related accessories to meet consumer preferences and fashion trends, and includes our Salt Life and Coast business units. These products are sold through specialty and boutique shops, traditional department stores, and outdoor retailers, as well as direct-to-consumer through branded ecommerce sites and branded retail stores. Products in this segment are marketed under our lifestyle brands of Salt ~~Life~~^®Life® and ~~COAST~~^®.COAST®, as well as other labels.

Our Chief Operating Decision Maker and management evaluate performance and allocate resources based on profit or loss from operations before interest, income taxes and special charges ("segment operating ~~income"~~earnings"). Our segment operating income 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 for the fiscal year ended September ~~29, 2018~~,28, 2019, 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				Nine Months Ended				Three Months Ended				Six Months Ended
	June 29, 2019		June 30, 2018		June 29, 2019		June 30, 2018		March 28, 2020		March 30, 2019		March 28, 2020		March 30, 2019
Segment net sales:
Delta Group	$	107,409	$	102,107	$	291,325	$	272,157	$	84,191	$	89,526	$	173,143	$	183,916
Salt Life Group		11,851		10,075		32,448		30,371		12,469		13,312		19,407		20,597
Total net sales	$	119,260	$	112,182	$	323,773	$	302,528	$	96,660	$	102,838	$	192,550	$	204,513

Segment operating income:
Delta Group ⁽¹⁾	$	9,248	$	9,137	$	15,393	$	19,337	$	5,066	$	3,367	$	12,334	$	6,144
Salt Life Group ⁽²⁾		2,596		1,085		5,608		4,295
Salt Life Group										1,473		2,733		804		3,012
Total segment operating income	$	11,844	$	10,222	$	21,001	$	23,632	$	6,539	$	6,100	$	13,138	$	9,156

⁽¹⁾In the quarter ended March 28, 2020, the Delta Group operating income included $1.9 million of cost of goods sold expense from plant curtailments caused by government mandated country closures in El Salvador and Honduras in March 2020. In the quarter ended December 29, 2018, the Delta Group operating income included $2.5 million of expense incurred in connection with the settlement of litigation related to the 2016 bankruptcy filing of ~~The Sports Authority. See Note M - Legal Proceedings.~~

⁽²⁾~~In the quarter ended June 29, 2019, the Salt Life Group operating income included~~ a ~~discrete gain of $1.3 million realized from the settlement of a commercial litigation matter.~~ customer.

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

The Delta Group segment assets have increased by ~~$32.7~~$48.0 million since September ~~29, 2018~~,28, 2019, to ~~$316.6~~$363.7 million as of ~~June 29, 2019~~March 28, 2020, primarily as a result of ~~our recent digital print acquisition as well as~~the adoption of ASU 2016-02 and increases in working capital due to the seasonality of the business. ~~See Note D—Acquisitions for further information on our recent digital print acquisition.~~ The Salt Life Group segment assets have increased by ~~$6.1~~$13.4 million since September ~~29, 2018~~28, 2019, to ~~$61.1~~$71.0 million as of ~~June 29, 2019~~March 28, 2020, primarily due to ~~higher receivables.~~seasonal inventory build and the adoption of ASU 2016-02. The working capital of both segments increased as well due to the impact of slower sales and collections in late March 2020 due to the COVID-19 pandemic.

Note K—L—Income Taxes

The Tax Cuts and Jobs Act of 2017 (the “New Tax Legislation”) was enacted on December 22, 2017, which 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. The New Tax Legislation created, among other things, a new requirement that certain income earned by controlled foreign corporations (“CFCs”) must~~subsidiaries which will be ~~included currently in the gross income of the CFCs’ U.S. shareholder.~~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 deduction for business interest expense (“Section 163(j)")".

GILTI is the excess of the shareholder’s net ~~CFC~~controlled foreign corporations ("CFC") 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, 30% of the taxpayer’s adjusted taxable income, and the taxpayer’s floor plan financing interest expense for the year. We have included in our calculation of our effective tax rate the estimated impact of GILTI and Section 163(j). which were effective for us beginning in fiscal year 2019. 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 foreign subsidiaries.

InThe Coronavirus Aid, Relief, and Economic Security (“CARES Act”), which was enacted on March 27, 2020, provided temporary changes to income and non-income-based tax laws, including some provisions which were previously enacted under the ~~quarter ended December 30, 2017, when~~New Tax Legislation. The CARES Act revised the U.S. corporate income tax code on a temporary basis by, among other things, eliminating the 80% of taxable income limitation on net operating loss (“NOL”) carryforwards, allowing NOL carrybacks, and increasing the Section 163(j) interest limitation deduction from 30% to 50% of adjusted taxable income. We have included the estimated impact of these provisions in our effective tax rate calculation.

Certain tax deductions, including many of those provided under the New Tax Legislation ~~was enacted, we made reasonable estimates~~and the CARES Act, include limitations based on U.S. taxable income, which may be impacted due to anticipated lower pre-tax income as a result of the ~~effects on our existing deferred tax balances and~~impacts of the transition tax, recording $10.6 million of tax expense based on an estimate of our total earnings and profits (E&P) from our foreign subsidiaries which were previously deferred from U.S. taxes. During the quarter ended ~~September 29, 2018~~, we increased the provisional amount by $0.1 million based on our E&P study resulting in $10.7 million recorded in our 2018 fiscal year. The transition tax will be paid over eight years. The transitional tax was finalized during the first quarter of fiscal year 2019 and is no longer considered provisional.

COVID-19 pandemic. Our effective income tax rate on operations for the ~~nine-month~~six-month period ended ~~June 29, 2019~~,March 28, 2020, was ~~16.8%. For~~20.3% compared to a rate of 74.6% in the ~~nine-month~~same period ~~ended~~ ~~June 30, 2018, our~~of the prior year and an effective ~~income tax~~ rate ~~excluding the $10.6 million provision related to the New Tax Legislation, was 10.5%. Our effective income tax rate on operations~~of 5.5% for ~~the~~ fiscal year ~~ended~~ ~~September 29, 2018, excluding the $10.7 million provision related to the New Tax Legislation, was a benefit of 1.7%.~~2019.

We intend to reinvest all of our unremitted earnings of our foreign subsidiaries and therefore, outside of the transition tax mentioned previously, we have provided no provision for income taxes which may result from withholding taxes and/or other outside basis differences. We believe that the determination of such income taxes is impracticable.

Wegenerally 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 28, 2019, is currently expected to be approximately 17%-19%. 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. Furthermore, we may be limited in our ability to deduct 50% of applicable foreign earnings under the GILTI income inclusion based on anticipated lower U.S. taxable income due to the COVID-19 pandemic. In addition, the ~~final~~future impact of the CARES Act and New Tax Legislation may differ from ~~our estimates,~~historical amounts, possibly materially, due to, among other things, changes in interpretations ~~additional regulatory~~and assumptions made regarding the CARES Act and New Tax Legislation, guidance that may be issued, ~~additional information that may become available to us,~~ and actions we may take as a result of the CARES Act and New Tax Legislation.

We file income tax returns in the U.S. federal jurisdiction and various state, local and foreign jurisdictions. Tax years 2015, 2016, and 2017, according to statute and with few exceptions, remain open to examination by various federal, state, local and foreign jurisdictions.

~~Table of Contents~~

Note L—M—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. ~~All components~~As of March 28, 2020, all of other comprehensive income ~~are~~was attributable to ~~shareholders. As of~~ ~~June 29, 2019, there are no components~~shareholders; none related to the non-controlling interest. Outstanding instruments as of ~~June 29, 2019~~March 28, 2020, are as follows:

		~~Notational~~Notional
	Effective Date	Amount	Fixed LIBOR Rate		Maturity Date
Interest Rate Swap	July 19, 2017	$10.0 million	~~1.74%~~		~~July 19, 2019~~
~~Interest Rate Swap~~	~~July 19, 2017~~	~~$10.0 million~~		1.99%		May 10, 2021
Interest Rate Swap	July 25, 2018	$20.0 million	3.18%		July 25, 2023

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 March 28, 2020, and September 28, 2019 (in thousands):

	March 28,			September 28,
	2020			2019
Deferred tax liabilities	$	481		$	324
Other non-current liabilities		(1,914	)		(1,293	)
Accumulated other comprehensive loss	$	(1,433	)	$	(969	)

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. No such cotton contracts were outstanding at March 28, 2020, or September 28, 2019.

○

~~FASB Codification No.~~

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 or no market activity for assets or liabilities and includes certain pricing models, discounted cash flow methodologies and similar techniques.

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

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 29, 2019
$ (1,184 ) — $ (1,184 ) —
September 29, 2018
183 — 183 —

Cotton Options

June 29, 2019
$ — — — —
September 29, 2018
(110 ) (110 ) — —

Contingent Consideration

June 29, 2019
$ (9,394 ) — — $ (9,394 )
September 29, 2018
(10,542 ) — — (10,542 )

	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
March 28, 2020	$	(1,914	)		—	$	(1,914	)		—
September 28, 2019	$	(1,293	)		—	$	(1,293	)		—

Contingent Consideration
March 28, 2020	$	(5,580	)		—		—		$	(5,580	)
September 28, 2019	$	(9,094	)		—		—		$	(9,094	)

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 ~~June 29,~~March 28, 2020 and September 28, 2019,, 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).

~~Table~~

The DTG2Go acquisition purchase price consisted of ~~Contents~~

additional payments contingent on the combined business’s achievement of certain performance targets related to sales and earnings before interest, taxes, depreciation and amortization ("EBITDA") for the period from April 1, 2018, through September 29, 2018, as well as for our fiscal years 2019, 2020, 2021 and 2022. The ~~following table summarizes~~valuation of the fair value of the contingent consideration is based upon inputs into the Monte Carlo model, including projected results, which then are discounted to a present value to derive the fair value. The fair value of the contingent consideration is sensitive to changes in our projected results and ~~presentation~~discount rates. At September 28, 2019, the fair value of contingent consideration was estimated at $8.9 million. During the six-months ended March 28, 2020, $2.5 million was paid related to the 2019 period. As of March 28, 2020, we estimate the fair value of contingent consideration to be $5.6 million, a $0.8 million reduction from September 28, 2019, resulting from changes in the ~~Condensed Consolidated Balance Sheets for derivatives related~~projections and adjustments to ~~our interest swap agreements as of~~ ~~June 29, 2019, and~~ ~~September 29, 2018~~ ~~(in thousands):~~the discount rate.

June 29,

September 29,

2019

2018

Other assets
$ — $ 182
Deferred tax assets
297 (46
)
Other non-current liabilities
(1,184 ) —
Accumulated other comprehensive (loss) income
$ (887 ) $ 136

In August 2013, we acquired Salt Life, ~~and issued~~which included contingent consideration as part of the purchase price and which is 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~~During the quarter ended March 28, 2020, it was determined that the calendar year 2019 performance targets were not achieved and, as a ~~Monte Carlo model utilizing~~result, the ~~historical results and projected cash flows based on the contractually defined terms, discounted~~$0.2 million accrual as ~~necessary, to estimate the fair value~~ of ~~the~~September 28, 2019, was reversed. At March 28, 2020, no amount was accrued for contingent consideration ~~for Salt Life at the acquisition date as well as to remeasure the contingent consideration related~~in relation 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 ~~June 29, 2019, we had $0.2 million accrued in contingent consideration related to the Salt Life acquisition, a $1.1 million reduction from the accrual at~~ ~~September 29, 2018~~. The reduction in the fair value of contingent consideration is recorded in other income and is based on the inputs into the Monte Carlo model, including the time remaining in the measurement period and our expectations of sales in calendar year 2019 which have been reduced based on our current view of the retail environment.

On March 9, 2018, we acquired Teeshirt Ink, Inc. d/b/a DTG2Go. The purchase price consisted of $16.6 million in cash and additional contingent consideration based on achievement of certain performance targets related to sales and EBITDA for the period from April 1, 2018, through ~~September 29, 2018~~, as well as for our fiscal years 2019, 2020, 2021 and 2022. In the second quarter of fiscal year 2019, in accordance with the purchase agreement, contingent consideration of $0.6 million was paid to the sellers for the earn-out period from April 1, 2018, through ~~September 29, 2018. During the nine-months ended June 29, 2019, we expensed $0.6 million to increase the contingent consideration primarily driven from the time value from the discount period.~~

At ~~June 29, 2019, we had a total of $9.4 million accrued in contingent consideration, a $1.1 million decrease from the accrual at~~ ~~September 29, 2018~~. The decrease is driven by the $0.6 million payment made during the second fiscal quarter along with a $0.5 million decrease in the accrual which is recorded in other income. The fair value of contingent consideration is based on the inputs into the Monte Carlo model, including the time remaining in the measurement period. Accordingly, the fair value measurement for contingent consideration falls in Level 3 of the fair value hierarchy. Life.

Goodwill was recorded in conjunction with our acquisitions of Salt Life and DTG2Go businesses and represents the acquired goodwill, net of the $0.6 million cumulative impairment losses recorded in fiscal year 2011. ~~The goodwill recorded on our financial statements is included in both of our segments, with $18.0 million~~At March 28, 2020, the Salt Life reporting within the Salt Life Group segment and ~~$19.9 million included in~~DTG2Go reporting unit within the Delta Group segment had goodwill of $19.9 million and $18.0 million, respectively. We evaluate the carrying value of goodwill annually on the first day of our third fiscal quarter or more frequently if events or circumstances indicate that an impairment loss may have occurred. Such circumstances could include, but are not limited to, a significant adverse change in business climate, increased competition or other economic conditions.

As of March 28, 2020, we performed an interim goodwill impairment evaluation using the optional qualitative assessment provided within ASC 350, Intangibles - Goodwill and Other and concluded that it is more likely than not that the fair value of the Salt Life and DTG2Go reporting units are greater than the carrying value at March 28, 2020. In reaching this conclusion, we applied various management judgments and estimates, including the results of prior annual impairment tests and the drivers of the near-term reduced projected results. In the annual goodwill impairment evaluation performed during the fiscal 2019 June quarter, we estimated the fair value of the reporting units using a discounted cash flow methodology using key assumptions as described in the fiscal 2019 Form 10-K, Critical Accounting Policies. As a result of this analysis, we estimated that the fair value of the reporting units exceeded their carrying values by significant margins.

Prior to the COVID-19 pandemic, we anticipated double-digit topline growth in our DTG2Go and Salt Life ~~Group, respectively.~~businesses for fiscal year 2020 compared to the prior year. For the Salt Life reporting unit, we expect results to be negatively impacted in the short term by the temporary closure of retail channels, including the Salt Life-branded retail stores, as a result of the COVID-19 pandemic impact in the U.S. There remains uncertainty as to when these channels will re-open and to what level they will be restored. We have seen continued strength in ecommerce sales channels, including our Salt Life consumer site. During the March quarter ended March 28, 2020, Salt Life web sales increased 20% over the prior year. In April, we have experienced further acceleration of Salt Life ecommerce sales, with sales more than doubling over the same period in the prior year. This continuing revenue stream provides support of the underlying strength of the Salt Life brand and expectations regarding future performance as the U.S economy re-opens. We have also taken actions to improve cash flows and operating income in the short and long-term. The DTG2Go business has experienced a notable increase in sales orders in the final week of the fiscal 2020 March quarter that has further accelerated into April. In April 2020, the average daily orders received is more than double that of March 2020 and approximates the average daily orders received during the December 2019 holiday period. Greater than 90% of DTG2Go sales come through ecommerce sales channels, which show positive sales trends during the COVID-19 pandemic. Considering the significant excess of fair value over carrying value in the prior year impairment evaluations and the leading indicators of strong Salt Life ecommerce and DTG2Go sales in recent weeks, we concluded that it is more likely than not that the fair values of the Salt Life and DTG2Go reporting units are greater than the carrying value.

~~On October 8, 2018,~~Although we ~~acquired substantially~~are aggressively managing our response to the recent COVID-19 pandemic, its impact on the Salt Life and DTG2Go reporting units' full year fiscal 2020 and beyond results and cash flows is uncertain. We believe that the most significant elements of uncertainty are the intensity and duration of the impact on retailers as well as the ability of our customers, supply chain, and distribution to operate with minimal disruption for the remainder of fiscal 2020 and beyond, all of which could negatively impact the ~~assets~~reporting units' financial position, results of ~~Silk Screen Ink, Ltd. d/b/a SSI Digital Print Services. See Note D—Acquisitions. We have identified certain~~operations, cash flows, and outlook. Given the current macro-economic environment and the uncertainties regarding its potential impact on our business, there can be no assurance that our estimates and assumptions used in our impairment tests will prove to be accurate predictions of the future. If our assumptions regarding fair value are not achieved, it is possible that an impairment review may be triggered and goodwill or other intangible assets ~~associated with the acquisition, including technology, customer relationships, non-compete agreements and goodwill. While we are still~~may be impaired in the process of finalizing the valuations of the intangible assets acquired, we provisionally valued goodwill associated with SSI at $4.7 million, and customer relationships and non-compete agreements at $2.9 million.a future period.

Amortization expense for intangible assets was $0.4 million and $0.5 million for the three-month periods ended ~~June 29, 2019~~March 28, 2020, and ~~June~~March 30, ~~2018~~2019~~. Amortization expense for intangible assets was $1.4~~, respectively, and $0.9 million and $1.0 million for the ~~nine-month period~~six-month periods ended ~~June 29,~~March 28, 2020, and March 30, 2019,~~, and $0.9 million for the~~ ~~nine-month period ended~~ ~~June 30, 2018~~. respectively. Amortization expense is estimated to be approximately ~~$2.0 million for fiscal year 2019, $1.8~~$1.7 million for fiscal year 2020, ~~and $1.7~~$1.6 million for each of fiscal years 2021 and 2022, $1.5 million for fiscal year 2023, and ~~2023.~~approximately $1.4 million for fiscal year 2024.

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

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”, “anticipate”, “expect”, “intend”, “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:

A detailed discussion of significant risk factors that have the potential to cause actual results to differ materially from our expectations is set forth in Item 1A of this report entitled "Risk Factors" in this Form 10-Q and in Part 1 under the subheading "Risk Factors" in our Annual Report on Form 10-K for our fiscal year ended September ~~29, 2018~~,28, 2019, 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.

~~We were~~Our fiscal 2020 second quarter was trending towards a projected 9% increase in sales for our fiscal 2020 March quarter until the COVID-19 pandemic halted retail in the U.S. in mid-March. With this March impact, our sales declined 6% for the 2020 quarter compared to prior year. Despite these headwinds, we are pleased to ~~deliver overall~~have delivered strong gross margin performance that more than offset our lower sales performance during the quarter.

Second quarter fiscal 2020 reported gross margins improved 290 basis points from the prior year to 21.3% as we leveraged our vertical manufacturing platform and ~~earnings growth~~benefited from internal process efficiencies implemented over the last several quarters. The March 2020 gross margins were hurt by approximately $1.9 million, or 200 basis points, of plant curtailment expenses caused by government-mandated country closures in El Salvador and Honduras in March 2020. Adjusting for these plant curtailment expenses, gross margins would have been 23.3% during the March 2020 quarter, an improvement of 490 basis points from the prior year and 260 basis points from the fiscal 2020 December quarter.

The strength of our ~~third quarter, with both~~business model remains anchored in our ~~Delta Group and Salt Life Group segments performing well. Our investments in new manufacturing technologies, speed-to-market distribution strategies, and additional~~diversification of our sales channels ~~continue~~and our unique business capabilities, as well as our geographic diversification across the U.S., Central America, and Mexico. We are leveraging our clear competitive advantages in this disruptive period to ~~generate growth opportunities across~~gain greater business traction with existing customers and attract new customers to Delta Apparel. Unlike many apparel companies, we are not disproportionately exposed to any specific customer or sales channel, such as brick and mortar, department stores, mass merchants or wholesale distributors. Over 17% of our ~~businesses and differentiate us from competitors. We expect to capitalize on this momentum and further accelerate~~sales are generated through various ecommerce channels, including our ~~top and bottom-line performance as we bring our fiscal year to a close.~~

~~Customer diversification remains a key strategic focus~~branded consumer websites and our DTG2Go ~~digital print business is taking advantage of exciting new opportunities in a variety of channels including its traditional e-retailer base. The adoption of DTG2Go’s virtual inventory model~~business. Sales on our Salt Life website increased nearly 20% in the ~~brick~~March 2020 quarter compared to prior year. In April, we have experienced further acceleration of Salt Life ecommerce sales with sales more than doubling over the same period in the prior year. Sales on our Soffe consumer website in April have also more than doubled over prior year, and mortar retailer channel demonstrates the significant untapped potential for on-demand printing and fulfillment. We recently began offering customers in this channel the additional "retail-ready" service of affixing unique universal product codes (UPC) and other packaging options to products to allow a seamless customer experience with on-demand and in-store purchases. We see similar growth opportunities within other channels, including retail license, promotional products, large brands, screen printers, team uniforms and social media, as we continue to differentiate ourselves from competitors through not only value-added services but also our first-to-market adoption of polyester printing technology. To further solidify our leadership position in this area we are ~~expanding~~experiencing strong sales of Soffe product on ecommerce sites of our fulfillment footprint and capacity through the opening of two new facilities in New Jersey and Texas. These new facilities will continue our strategy of integrating DTG2Go’s on-demand platform with our Activewear business’s cost-effective blank garment supply in combined locations and also give DTG2Go the unique ability to reach over half of all U.S. consumers with one-day shipping, including the key New York City and Dallas metropolitan areas.

Market conditions in our core Activewear business are solid, with demand for our higher-margin Catalog fashion basics products and Western Hemisphere manufacturing platform continuing to accelerate. Our FunTees private label business remains on pace for record unit sales for the year and, as expected, profitability is improving as we move past the new customer start-up expenses and other costs impacting prior periods. Our emphasis on new sales channels such as direct-to-retail and ecommerce, and cross-selling opportunities involving the DTG2Go and Soffe decoration platforms, is driving new business along with valuable customer diversification. We anticipate more growth at Activewear as we further leverage our internal manufacturing capacity and build out our distribution network with unique, single-solution facilities integrated with DTG2Go’s digital printing. retail partners.

We ~~were pleased~~have a unique business model with proprietary technology in DTG2Go whose advantages are more transparent to ~~see both top~~the marketplace in this time of supply chain disruption combined with consumer restrictions on traditional shopping habits. The DTG2Go business experienced headwinds in early March related to the COVID-19 pandemic, but orders increased the last week of March and ~~bottom-line improvement~~have accelerated further in April, with increased demand from ~~our Soffe brand~~existing customers and the rapid onboarding of several new customers. In April 2020, the average daily orders received is more than double that of March 2020 and approximates the average daily orders received during the ~~third quarter and believe there are more opportunities for growth going forward. We are pursuing a variety~~December 2019 holiday period. Greater than 90% of ~~programs~~DTG2Go sales come through ecommerce sales channels, which have shown positive sales trends during the COVID-19 pandemic. With the recent supply chain disruptions in the ~~military channel~~marketplace, customers appear to be appreciating DTG2Go’s strong competitive advantages with our large geographic network of production facilities, half of which are integrated with our Delta distribution facilities. Although the order backlog at DTG2Go is currently significant, we remain temporarily limited in our production output as adjustments were made to work schedules and ~~look for conditions~~ in our facilities to comply with social distancing guidelines and curfews implemented by certain local governments. We expect the ~~specialty channel to remain solid going~~current positive trends at DTG2Go will continue into the ~~holiday season. The Soffe brand also continues to gain momentum with key ecommerce partners and~~future, as we believe that as the ~~growth to date in direct-to-consumer sales from Soffe’s ecommerce and brick and mortar~~ retail ~~platforms indicates that~~market evaluates their go-forward strategy, there will be an increased adoption rate for the ~~brand’s authenticity and heritage are resonating with consumers.~~on-demand supply chain model.

We ~~were pleased~~are also seeing strength within our military business, which historically has represented about 5% of our overall revenue. We service all branches of the military, and are seeing solid orders during this pandemic, with the strong double-digit sales growth in our Salt Life business during the third quarter, including expansion across all major sales channels. We expect the momentum at Salt Life to continue as the brand expands geographically through growth with national and regional retailers, and to potentially escalate with several new key account opportunities on the horizon. The increasing penetration of Salt Life’s higher-priced performance products within both wholesale and direct-to-consumer channels and the success of brand extensions such as Salt Life Lager and Salt Life Food Shack restaurants continue to broaden the brand’s audience and lifestyle positioning. Salt Life Lager is now sold in Florida, Georgia, Alabama, Tennessee and South Carolina, and we expect it to be available in additional markets in the near term. New Salt Life-branded brick and mortar retail stores in Orlando and Key West, Florida are scheduled to open in the next few quarters, along with several more locations in Florida and South Carolina now under development, should also drive more consumer awareness and revenue for ~~the brand.~~growth.

Overall we ~~expect to see additional sales and earnings growth to finish the year, driven~~estimate that approximately 25% of our revenue has not been hurt by the ~~extensive new product development~~COVID-19 pandemic, and ~~customer diversification efforts ongoing across~~in many situations has experienced an acceleration of growth. The remaining business, however, has been significantly impacted in the near-term, and it is unclear at this point how quickly and to what extent it will recover.

We are committed to servicing our ~~business. Our focus on a broad range of go-to-market strategies supported by a flexible back-end platform allowing us~~customers with same-day shipping, picking to ~~internally manufacture~~the piece level, retail ready packaging and EDI support, and operate the majority of our ~~products~~business based on at-once orders. We maintain an inventory position, located in our US-based distribution centers, to service the business. Since mid-March, our manufacturing operations in El Salvador and ~~deliver them quickly~~Honduras have been curtailed due to government-mandated country-wide shutdowns. We have, however, been able to continue operations in our U.S. manufacturing facilities, which principally service the military business, and in our Mexico-based facilities, which are producing private-label and catalog products. We are also producing face masks and face coverings in our facilities in North Carolina and Mexico, and recently received approval for a small group of employees in Honduras and El Salvador to also produce face masks. This allows us to keep more workers actively employed and provides an additional revenue stream for Delta Apparel. We expect to restart production at our manufacturing facilities in El Salvador and Honduras when conditions in these countries allow and demand rebuilds to a level that requires additional production. We will also evaluate the level of social distancing and other protocols required, which could limit the number of employees allowed in our facilities when production resumes.

While we are unable to quantify the impact on our forward results, we have taken swift and decisive action to navigate through these difficult times to strengthen our financial position, as we prudently preserve cash to improve our liquidity. We immediately paused capital projects that were not critical in the short term to the business, suspended our share repurchase program, and took actions to reduce our fixed costs. We have temporarily furloughed or permanently terminated approximately 300 employees in the U.S., and have also reduced spending across all aspects of the business. As it relates to the CARES Act, we are taking advantage of payroll tax deferrals and credits that are afforded to companies our size with the ~~retail customization~~newly enacted legislation. On April 27, 2020, we secured a bridge amendment to our U.S. revolving credit facility, which provides additional flexibility and ~~sophistication customers demand has us,~~increased access to the availability provided under the agreement. We are also looking at other available debt financing options that may be prudent.

During these unprecedented times, we are benefiting from our fully-integrated and diversified business model. We believe we are in a ~~uniquely strong~~solid financial position and are confident we will emerge from this pandemic stronger, ready to ~~capitalize on the shifting trends within retail.~~profitably grow our business and continue to provide value for all of our stakeholders.

Our financial results 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 for the ~~third~~March quarter were ~~$119.3~~$96.7 million ~~up $7.1~~compared to sales of $102.8 million ~~or over 6%, from~~in the prior year ~~period’s net sales of $112.2 million. DTG2Go continued its accelerated sales growth with an increase of 63% from~~March quarter. Prior to the ~~prior quarter. Organic growth as well as~~COVID-19 pandemic in the ~~acquisition of the SSI Digital Print business acquired in fiscal year 2019 drove this increase. Salt Life and Soffe had sales growth of approximately 18% and 3%, respectively, and Activewear~~United States, our second quarter sales were ~~flat with~~growing but the ~~prior year~~mid-March shutdowns in retail channels dramatically halted revenue during the final month of the quarter. For the first ~~nine~~six months of ~~2019,~~2020, net sales ~~grew 7% to $323.8~~were $192.6 million from $302.5 million in the prior year. DTG2Go sales increased 153% to over $47 million, and Salt Life sales grew by 7% to over $30 million. These sales increases were partially offset by lower sales at Activewear and Soffe. Changes in the private label product mix drove sales declines in Activewear although unit sales increased compared to ~~the prior year quarter. Soffe~~$204.5 million. The first quarter sales were ~~hindered~~hurt by ~~declines in~~ the ~~military channel in the first half of the year, offsetting increases being achieved in other sales channels.~~shortened holiday calendar and mid-week Christmas Day, combined with earlier shipping cut-off for in-hands holiday receipts.

Our retail stores and ecommerce sales, including our ~~B2C~~direct-to-consumer and ~~B2B~~business-to-business ecommerce sites, increased ~~120 and 70 basis points~~16% over the prior year three-month ~~and~~ ~~nine-month periods, respectively.~~period. The growth was driven by increased sales on our ~~Soffe~~Activewear and ~~Activewear~~Salt Life ecommerce sites as well as growth at our Salt Life ~~and Soffe~~ retail stores. Retail and ecommerce sales represented ~~8.7% and 7.7%~~9% of total revenues for the three-month and ~~nine-month~~six-month periods ended ~~June 29, 2019~~,March 28, 2020, compared to ~~7.5%~~7% and ~~7.0%~~8% for the three-month and six-month periods ended March 30, 2019, respectively.

Net sales in the Delta Group segment were $84.2 million compared to $89.5 million in the prior year. The strong sales growth in our FunTees business, including shipments to several new direct-to-retail programs in the current year, was offset by declines in our Catalog business, which was impacted by the COVID-19 pandemic. Our DTG2Go business was also impacted by the pandemic in early March with orders rebounding the last week of ~~total revenues~~March.

The Salt Life Group segment second quarter revenue was $12.5 million compared to $13.3 million in the prior year ~~periods, respectively.~~period. The segment was impacted by the temporary closure of retail, including our Salt Life branded retail stores, in March based on government guidelines for COVID-19. However, our direct-to-consumer web sales increased by nearly 20% from the prior year.

Gross margins in ~~our third fiscal~~the second quarter expanded ~~240~~290 basis points from the ~~second~~prior quarter to ~~20.8%, but declined~~21.3% despite being reduced by $1.9 million, or 200 basis points, from plant curtailments caused by government-mandated country closures in El Salvador and Honduras in March. For the first six months of fiscal year 2020, gross margins improved by 270 basis points from the ~~21.6%~~prior year to 21.0% from manufacturing efficiencies as well as lower raw material costs.

The Delta Group segment gross margins grew to 17.8% from 14.0% in the prior ~~year.~~year from the continued process efficiencies and further leveraging of the segment’s integrated vertical manufacturing platform. The segment incurred $1.9 million in expenses associated with plant curtailments. Adjusting for the $1.9 million, or 230 basis points, in plant curtailment expenses, gross margins would have been 20.1% during the March 2020 quarter, an improvement of 610 basis points from the prior year and 150 basis points from the fiscal 2020 December quarter. Gross margins expanded 320 basis points from prior year to 18.2% for the first six months of fiscal year 2020.

The Salt Life Group segment gross margins were ~~47.3%~~44.8% in the ~~third~~second quarter compared to ~~49.1%~~48.0% in the prior year quarter ~~due~~as recently-enacted tariffs increased product costs. Gross margins for the first six months of fiscal year 2020 were 46.2% when compared to ~~a change in the mix of sales. The Delta Group segment gross margins declined to 17.9% from 18.9% in~~ the prior year ~~from the costs associated with the diversification of our private label products.~~ 48.4%.

Selling, general, and administrative expenses ("SG&A") were $17.9 million, or 18.5%, of sales compared to $17.1 million, or 16.6% of sales, in the prior year. The increase resulted from investments in our distribution expansion and fixed costs not fully leveraged against revenues. SG&A for the ~~third~~first six months of fiscal ~~quarter~~year 2020 were $36.1 million, or 18.7% of sales, compared to $33.8 million, or 16.5% of sales, in the prior year.

Other income in both years ~~but down 100 basis points from the prior year to 15.0% of sales as we continue to leverage our SG&A costs with higher sales volumes.~~

~~Other income~~primarily includes profits related to our Honduran equity method investment and valuation changes in our contingent consideration ~~a discrete gain realized from~~liabilities.

Operating income in the ~~settlement~~second quarter was $3.6 million compared to $2.7 million in the prior year. For the first six months, operating income was $6.2 million compared to $2.7 million in the prior year.

The Delta Group segment operating income increased in the current fiscal year quarter by $1.7 million to $5.1 million, or 6.0% of ~~a commercial litigation matter~~net sales, compared to $3.4 million, or 3.8% of net sales in the prior year. The increase is attributable to the strong gross margin expansion, partially offset by lower sales and higher distribution expenses. For the first six months of fiscal year 2020, Delta Group segment income was $12.3 million compared to $6.1 million in the prior year.

The Salt Life Group segment ~~and other less significant items. The discrete gain realized~~operating income was $1.5 million, or 12.5% of sales compared to prior year $2.7 million, or 21.4% of sales. For the first six months of fiscal year 2020, Salt Life Group segment income was $0.8 million compared to $3.0 million in the prior year. Operating income declined from lower sales coupled with higher product costs from the ~~settlement of a commercial litigation matter amounts~~newly-enacted tariffs on imported goods. In addition, the prior year benefited from higher favorable adjustments to ~~$1.3 million and derives from a claim Salt Life previously filed with~~ the BP Deepwater Horizon claims fund administration established in connection with the 2010 oil spill off of the Gulf Coast seeking damages for the impacts of the spill on Salt Life's business. The change in fair value of contingent ~~consideration was associated with the DTG2Go acquisitions. Based upon our updated analysis, the fair value of this liability increased $0.1 million in the 2019 fiscal third quarter.~~earn-out liability.

Net interest expense for the ~~third~~second quarter ~~of fiscal year 2019~~ was ~~$2.0~~$1.8 million as compared to ~~$1.4~~$2.0 million in the prior year. For the first six months of fiscal year ~~period~~2020, interest expense was $3.6 million compared to $3.8 million in the prior year. The lower interest expense is due to ~~higher debt levels principally from our recent acquisitions, coupled with increased~~favorable interest ~~rates.~~rates in the current fiscal year.

Our effective tax rate ~~on operations~~ for the ~~nine-month~~six-month period ended ~~June 29, 2019~~,March 28, 2020, was ~~16.8%~~20.3%. This compares to an effective tax rate of ~~10.5%~~74.6% for the same period in the prior year, and ~~a benefit of 1.7%~~5.5% for the fiscal year ended September ~~29, 2018, when excluding the impact of the New Tax Legislation.~~28, 2019. See Note K—L—Income ~~taxes~~Taxes for more information.

We achieved net earnings for the second fiscal quarter of $1.3 million, or $0.19 per diluted share, an increase of 46% compared to the prior year $0.9 million, or $0.13 per diluted share. When adjusted for the $1.9 million pre-tax, or $0.20 per diluted share, of plant curtailment expenses, our net earnings would have been $0.39 per diluted share in the 2020 fiscal second quarter. Net income for the ~~third quarter of $4.9~~first six months was $2.2 million, or ~~$0.70~~$0.32 per diluted share, compared to the prior year $0.2 million net ~~income of $4.6 million,~~loss, or ~~$0.62~~$0.03, per diluted share. ~~Net Income for the first nine months was $4.7 million, or $0.67 per diluted share, compared to the prior year net loss of $1.8 million, or $0.25 per diluted share.~~

Accounts receivable were ~~$67.2~~$58.7 million at ~~June 29, 2019~~,March 28, 2020, compared to ~~$45.6~~$59.3 million as of September ~~29, 2018~~.28, 2019. Days sales outstanding ("DSO") as of ~~June 29, 2019~~,March 28, 2020, were 4955 days ~~in line with~~compared to 48 days at September ~~29, 2018~~.28, 2019. We experienced slower collections on accounts receivable in March 2020 from customers extending terms due to the COVID-19 pandemic.

Net inventory was ~~$177.8~~$197.3 million as of ~~June 29, 2019~~,March 28, 2020, an increase of ~~$2.8~~$18.2 million from September ~~29, 2018~~.28, 2019. The ~~higher~~increase is from our seasonal build of inventory ~~levels resulted from increased units from the SSI Acquisition~~ as well as ~~an increase in the higher average cost of inventory with~~ the stronger mix of fashion basics, fleece and performance products in inventory to support the then-anticipated growth in these categories. Inventory levels at March 28, 2020 were higher than planned from the lower March 2020 sales, and we anticipate will remain higher due to lower anticipated sales in the second half of fiscal 2020, partially offset by the temporary closures of certain manufacturing operations and initiatives to manage inventory levels through the COVID-19 pandemic.

Capital spending was ~~$6.6~~$4.1 million ~~during~~and $6.7 million for the ~~June quarter of fiscal year 2019~~three-months and six month periods ending March 28, 2020, respectively. The spending primarily related to ~~digital print equipment~~investments in our distribution expansion as well as ~~information technology enhancements.~~investments in our retail stores. Depreciation and amortization expense, including non-cash compensation, was ~~$10.3~~$7.6 million for the first ~~nine~~six months of fiscal year ~~2019.~~2020.

Total debt, ~~excluding~~including capital ~~leases, at~~ ~~June 29, 2019~~,lease financing, as of the end of the fiscal 2020 second quarter was ~~$130.1~~$167.9 million compared ~~with $105.0~~to $135.1 million at ~~June 30, 2018. The increase from the prior year was primarily driven from the recent acquisitions~~fiscal 2019 year-end due to seasonal higher working capital, share repurchases, and investments in ~~the digital print business coupled with higher working capital to support the overall growth of the Company.~~distribution facilities.

The Salt Life Group segment third quarter revenue grew by 18% to $11.9 million from $10.1 million in the prior year period. Sales for the first nine months increased by 7% to $32.5 million from the prior year $30.4 million.

Gross margins were 47.3% for the third quarter compared to 49.1% in the prior year. The margins were impacted by the mix of sales including Salt Life beer which carries a lower gross margin. For the first nine months, gross margins were relatively flat to the prior year at 48%. Operating income in the Salt Life Group segment for the third quarter was $2.7 million compared to $1.1 million in the prior year period. Operating income for the first nine months was $5.9 million compared to $4.3 million in the prior year period.

The Delta Group segment revenue grew over 5% during the third quarter to $107.4 million from $102.1 million in the prior year period. DTG2Go sales increased over $5 million from the prior year driven from organic growth as well as the SSI acquisition. Soffe achieved nearly 3% revenue growth driven from strong military sales. Activewear sales were relatively flat to the prior year at $81.5 million. The higher-margin fashion basics products growth continued with 45% sales growth, and represented 26% of total catalog sales. Net sales for the first nine months grew 7% to $291.3 million compared to $272.2 million in the prior year.

Gross margins expanded 390 basis points from the March 2019 quarter to 17.9%, but were still 100 basis points below the prior year quarter. While Soffe experienced improved margins, this was offset by the sales mix in our private label business at Activewear. For the first nine months of fiscal year 2019 gross margins were 16.0% compared to the prior year 17.7%. Operating income for the third quarter was $9.2 million compared to $9.1 million in the prior year. Delta Group segment operating income for the first nine months was impacted by $2.5 million of litigation expense and was $15.4 million compared to $19.3 million in the prior year.

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 ~~our~~the Company’s results, we also provide non-GAAP information that management believes is useful to investors. We discuss ~~income~~gross margins and net earnings per ~~diluted~~ share, adjusted for discrete items, as 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 ~~our~~the Company’s 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 ~~our~~the Company’s 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 our results as reported under U.S. GAAP. These non-GAAP measures may not be comparable to similarly titled measures used by other companies.

~~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 activities used ~~$8.5~~$10.2 million and $8.3 million in cash in the first ~~nine~~six months of fiscal year 2020 and 2019, ~~compared to cash provided in operations of $4.0 million in the first nine months of fiscal year 2018.~~respectively. The ~~increased~~additional use of cash ~~from~~in the ~~prior~~current year is primarily due to ~~more~~additional inventory ~~units~~levels driven by broader product offerings within Activewear, partially offset by improved operating income and higher collections from ~~expansion of skus and the SSI acquisition as well as timing of payments from our~~ customers.

Cash ~~used~~outflows for capital expenditures ~~was $4.2~~were $3.9 million during the first ~~nine~~six months of fiscal year ~~2019~~2020 compared to ~~$4.3~~$2.1 million in the same period last year. Capital expenditures in both periods primarily related to ~~machinery and equipment, including~~ investments in our ~~digital print business. In~~distribution expansion and investments in our retail stores, in addition ~~property, plant,~~to machinery and ~~equipment of $3.4 million was acquired as part of the SSI acquisition during fiscal year 2019.~~equipment. There was an additional ~~$6.7~~$3.1 million in expenditures financed under capital lease arrangements and ~~$0.8~~$1.5 million in unpaid expenditures as of ~~June 29, 2019. During~~March 28, 2020.

On October 8, 2018, our DTG2Go, LLC subsidiary purchased substantially all of the assets of Silk Screen Ink, Ltd. d/b/a SSI Digital Print Services ("SSI"), a premium provider of direct-to-garment digital printed products. The SSI acquisition purchase price consisted of $2.0 million in cash, a promissory note for $7.0 million and $3.0 million in capital lease funding secured by the acquired fixed assets. The cash portion of the purchase price included: (i) a payment at closing of $2.0 million, and (ii) a post-closing net working capital adjustment of $0.7 million. In the first ~~nine~~six months of fiscal year ~~2018, investing cash flows also included $1.9~~2020, we repaid approximately $1.7 million ~~in proceeds received from~~under the promissory note ~~related to the sale of our Junkfood business.~~

~~Investing activities for the first nine months of fiscal year 2018 included $5.8 million of proceeds from the sale of fixed assets. Property, plant,~~ and ~~equipment (“equipment”) of $5.0 million was acquired as part of the DTG2Go acquisition. Subsequently, a~~ capital lease ~~arrangement was entered into to finance the purchase of the equipment. There were $6.7 million in expenditures financed under a capital lease arrangement and $0.8 million in unpaid expenditures as of~~ ~~June 29, 2019~~.funding.

We now anticipate our fiscal year ~~2019~~2020 capital expenditures, including those financed under capital leases, to be approximately $13 million to $15 million, ~~and~~compared to our previous estimates of $25 million to $28 million for the year. In March 2020, we took action to significantly reduce or delay capital projects that were not critical to the business in the near-term, which resulted in a nearly 65% reduction in capital spending for the second half of fiscal year 2020. We have also temporarily delayed the expansion of our Clinton, Tennessee distribution center. The remaining capital expenditures for fiscal year 2020 will be focused ~~primarily~~ on ~~digital print equipment along with information technology~~completing capital projects that were in process during March 2020, such as distribution and direct-to-consumer ~~enhancements.~~initiatives.

During the ~~nine~~six months ended ~~June 29, 2019~~,March 28, 2020, cash provided by financing activities was ~~$17.3~~$24.7 million compared to ~~$4.1~~$15.4 million provided by financing activities for the ~~nine~~six months ended ~~June 30, 2018~~.March 29, 2019. The cash provided by our financing activities during the first ~~nine~~six months of fiscal ~~year~~years 2020 and 2019 was used to fund ~~the SSI digital print acquisition as well as fund~~ our operating activities and ~~share repurchases.~~capital expenditures as well as the SSI acquisition in fiscal year 2019.

See Note F – Debt to the Condensed Consolidated Financial Statements for discussion of our various financing arrangements, including the terms of our revolving U.S. credit facility. See Note Q—Subsequent Events to the Condensed Consolidated Financial Statements for a discussion of the Fifth Amendment to the Fifth Amended and Restated Credit Agreement entered into on ~~our current expectations, we believe that our~~April 27, 2020 (the “Fifth Amendment”).

Our credit facility, ~~should be sufficient~~as amended on April 27, 2020, as well as cash flows from operations, are intended to satisfy our foreseeable working capital needs, and that cash flow generated by our operations and funds available under our credit facility should be sufficient to service our debt payment requirements, to satisfyfund 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,~~such as could occur with the COVID-19 pandemic, 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,~~

Prior to the Fifth Amendment executed on April 27, 2020, our credit facility ~~includes~~included 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~~We were not subject to the FCCR covenant at March 28, 2020, because our availability at ~~June 29, 2019~~, was above the minimum required under the Amended Credit Agreement, but we would have satisfied our financial covenant had we been subject to it. The Fifth Amendment amends the financial covenant provisions from the amendment date through October 3, 2020, including effectively lowering the minimum availability thresholds ~~specified in~~and removing the requirement that our ~~credit agreement,~~FCCR for the preceding 12-month period must not be less than 1.1 to 1.0. Following the expiration of these Fifth Amendment terms on October 3, 2020, a significant deterioration in our business could cause our availability to fall below ~~such~~minimum thresholds, thereby requiring us to maintain the minimum FCCR specified in our credit agreement.

During the ~~nine~~six months ended ~~June 29, 2019~~,March 28, 2020, we purchased ~~141,501~~99,971 shares of our common stock for an aggregate ~~amount of $2.7~~$2.0 million the quarter ended March 28, 2020 (see Note N—O—Repurchase of Common Stock). As of ~~June 29, 2019~~,March 28, 2020, there was ~~$9.5~~$7.5 million of repurchase authorization remaining under our Stock Repurchase Program. ~~We evaluate current leverage, working capital requirements, our free cash flow outlook, stock valuation and future business opportunities~~During March 2020, we temporarily suspended share repurchases in an effort to ~~determine when we believe~~preserve liquidity during the ~~repurchase of our stock is a sound investment opportunity that we can pursue without sacrificing future growth plans.~~COVID-19 pandemic.

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 ~~29, 2018~~,28, 2019, and there have been no changes in those policies, except as disclosed in Note C—New Accounting Standards related to the adoption of the new revenue recognition standard, since the filing of that Annual Report on Form 10-K with the SEC.

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. Some of our facilities generate small quantities of hazardous waste that are either recycled or disposed of off-site.

The environmental regulations applicable to our business are becoming increasingly stringent and we incur capital and other expenditures annually to achieve compliance with environmental standards. We currently do not expect that the amount of expenditures required to comply with environmental laws and regulations will have a material adverse 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 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.

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, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of ~~June 29, 2019~~March 28, 2020, and, based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures were effective ~~at the evaluation date.~~as of March 28, 2020.

There was no change during the ~~third~~second quarter of fiscal year ~~2019~~2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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

~~Other than as set forth~~We operate in a rapidly changing, highly competitive business environment that involves substantial risks and uncertainties. The risk factors described in Part ~~II,~~1, Item ~~1A of the Company's Quarterly~~1A. Risk Factors in our Annual Report on Form ~~10-Q~~10-K for the ~~quarter~~year ended ~~March 30,~~September 28, 2019, ~~there have been no~~as revised below, as well as risks described elsewhere in this report or in our other filings with the SEC, could materially affect our business, financial condition or operating results and the value of Company securities held by investors and should be carefully considered in evaluating our Company and the forward-looking statements contained in this report or future reports. The risks described below are not the only risks facing Delta Apparel. Additional risks not presently known to us or that we currently do not view as material ~~changes~~may become material and may impair our business operations. Any of these risks could cause, or contribute to causing, our actual results to differ materially from expectations.

The risk factor described below updates the risk factors disclosed in Part I, Item ~~1A of the Company's~~1A. Risk Factors in our Annual Report on Form 10-K for the ~~fiscal~~ year ended September ~~29, 2018.~~28, 2019, to include additional information.

The COVID-19 pandemic could have a material adverse effect our ability to operate, results of operations, financial condition, liquidity, and capital investments. The World Health Organization has declared the COVID-19 outbreak a pandemic, and the virus continues to spread in areas where we operate and sell our products. The COVID-19 pandemic and similar pandemics or disruptions in the future could have a material adverse effect on our ability to operate, results of operations, financial condition, liquidity, and capital investments. Several public health organizations have recommended, and some local and foreign governments have implemented, certain measures to slow and limit the transmission of the virus, including shelter in place and social distancing ordinances. Such preventive measures, or others we may voluntarily put in place, may have a material adverse effect on our business for an indefinite period of time, such as the potential shutdown of certain locations, decreased employee availability, potential border closures, and others. Since mid-March 2020, all of our branded retail locations have been closed in compliance with guidelines for retail store operations. Our facilities in El Salvador and Honduras have been temporarily closed since mid-March due to the government-mandated country shutdowns. Uncertainty remains as to when these locations will be permitted to resume operations.

Many of our customers and suppliers also face these and other challenges, which could lead to reduced demand for our products and services and a disruption in our supply chain. These challenges could impair our customers' ability to pay all or a portion of amounts owed to us per the sales agreements, resulting in reduced cash flows and charges incurred for bad debt. These issues may also materially affect our future access to our sources of liquidity, particularly our cash flows from operations, financial condition, capitalization, and capital investments.

The extent to which COVID-19 impacts our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the pandemic, new information that may emerge concerning the severity of COVID-19, and public and private actions to contain COVID-19 or treat its impact. The COVID-19 pandemic has and will likely continue to result in social, economic, and labor instability in the countries in which we or the third parties with whom we engage operate. The long-term economic impact and near-term financial impacts of the COVID-19 pandemic, including but not limited to, possible impairment, restructuring, and other charges, as well as overall impact on our business, results of operations, financial condition, liquidity, or capital resources and investments, cannot be reliably quantified or estimated at this time due to the uncertainty of future developments.

See Note N—O—Repurchase of Common Stock, ~~and Note F—Debt,~~Part I, in Item 1, which ~~are~~is incorporated herein by reference.

The Fifth Amendment amends the financial covenant provisions from the amendment date through October 3, 2020, including lowering the minimum availability thresholds and removing the requirement that our Fixed Charge Coverage Ratio (“FCCR”) for the preceding 12-month period must not be less than 1.1 to 1.0. The Fifth Amendment also, among other things, (i) allows for an additional 30 days of aged receivables from customers in the borrowing base through August 1, 2020, (ii) ceases amortization of real estate and machinery and equipment assets in the borrowing base through August 1, 2020, (iii) postpones amortization of trademark assets in the borrowing base until October 4, 2020; (iv) amends the definition of Fixed Charge Coverage Ratio to reference the monthly amortization of the borrowing bases that were amended as part of the Fourth Amendment to the Fifth Amended and Restated Credit Agreement on November 19, 2019, (v) amends the LIBOR rate definition to include a floor rate of 1.0%, and (vi) requires weekly reporting of accounts receivable to the Agent through October 3, 2020.

We expect the Fifth Amendment will enhance our borrowing base and allow us to access more of our availability under the Amended Credit Agreement while easing the financial covenant restrictions for the remainder of fiscal 2020.

The foregoing summary of the Fifth Amendment and the transactions contemplated thereby does not purport to be complete and is qualified in its entirety by reference to the text of the Fifth Amendment, which is filed herewith as Exhibit 10.1 to this Quarterly Report on Form 10-Q and which is incorporated herein by reference.

Separate from the relationship related to the Amended Credit Agreement, as amended, certain lenders thereunder have engaged in, or may in the future engage in, transactions with, and perform services for, Delta Apparel, Inc. and/or its subsidiaries in the ordinary course of business.

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.

		Page
PART I.	Financial Information

Item 1.	Financial Statements:

	Condensed Consolidated Balance Sheets — ~~June 29, 2019,~~March 28, 2020, and September ~~29, 2018~~28, 2019 (unaudited)	3

	Condensed Consolidated Statements of Operations — Three and ~~nine~~six months ended ~~June 29,~~March 28, 2020, and March 30, 2019 ~~and June 30, 2018~~ (unaudited)	4

	Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ — Three and ~~nine~~six months ended ~~June 29,~~March 28, 2020, and March 30, 2019 ~~and June 30, 2018~~ (unaudited)	5

	Condensed Consolidated ~~Statement~~Statements of Shareholders' Equity — ~~Three and nine~~Six months ended ~~June 29,~~March 28, 2020, and March 30, 2019 ~~and June 30, 2018~~ (unaudited)	6

	Condensed Consolidated Statements of Cash Flows — ~~Nine~~Six months ended ~~June 29,~~March 28, 2020, and March 30, 2019 ~~and June 30, 2018~~ (unaudited)	7

	Notes to Condensed Consolidated Financial Statements (unaudited)	8
	Note A—Basis of Presentation and Description of Business	8
	Note B—Accounting Policies	8
	Note C—New Accounting Standards	8
	Note D—Revenue Recognition	9
	Note E—Inventories	9
	Note F—Debt	10
	Note G—Leases	10
	Note H—Selling, General and Administrative Expense	11
	Note I—Stock-Based Compensation	11
	Note J—Purchase Contracts	11
	Note K—Business Segments	12
	Note L—Income Taxes	12
	Note M—Derivatives and Fair Value Measurements	13
	Note N—Legal Proceedings	13
	Note O—Repurchase of Common Stock	14
	Note P—Goodwill and Intangible Assets	14
	Note Q—Subsequent Events	14

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1915

Item 4.	Controls and Procedures	2418

PART II.	Other Information

Item 1.	Legal Proceedings	2418

Item 1A.	Risk Factors	2518

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2518

Item 5.	Other Information	2518

Item 6.	Exhibits	2518

Signatures		2619

Exhibits
EX-10.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

	June 29,			September 29,
	2019			2018			March 28, 2020			September 28, 2019
Assets
Current assets:
Current Assets:
Cash and cash equivalents	$	371		$	460		$	9,568		$	605
Accounts receivable, less allowances of $506 and $1,475, respectively		67,200			45,605
Accounts receivable, less allowances of $366 and $327, respectively								58,682			59,337
Other receivables		1,563			1,274			725			1,550
Income tax receivable		—			38			703			729
Inventories, net		177,779			174,983			197,333			179,107
Note receivable		—			100
Prepaid expenses and other current assets		3,384			2,962			3,369			2,270
Total current assets		250,297			225,422			270,380			243,598

Property, plant and equipment, net of accumulated depreciation of $79,954 and $74,018, respectively		58,422			52,114
Property, plant and equipment, net of accumulated depreciation of $86,893 and $81,787, respectively								62,587			61,404
Goodwill		37,897			33,217			37,897			37,897
Intangibles, net		22,060			20,498			20,734			21,607
Deferred income taxes		1,053			1,374			1,514			1,514
Operating lease assets								43,226			-
Equity method investment		10,038			8,980			10,309			10,388
Other assets		1,658			2,004			2,484			1,580
Total assets	$	381,425		$	343,609		$	449,131		$	377,988

Liabilities and Equity
Current liabilities:
Accounts payable	$	48,235		$	48,008		$	56,022		$	52,320
Accrued expenses		16,834			16,742			15,033			20,791
Income taxes payable		593			—
Current portion of contingent consideration		2,790			638			1,970			2,790
Current portion of capital lease financing		6,084			3,846
Current portion of finance leases								6,965			6,434
Current portion of operating leases								8,525			-
Current portion of long-term debt		7,040			6,577			7,577			6,540
Total current liabilities		81,576			75,811			96,092			88,875

Long-term taxes payable		3,492			4,259			3,585			3,977
Long-term contingent consideration, less current maturities		6,604			9,904
Long-term capital lease financing, less current maturities		13,012			9,302
Long-term contingent consideration								3,610			6,304
Long-term finance leases, less current maturities								12,239			12,836
Long-term operating leases, less current maturities								35,611			-
Long-term debt, less current maturities		123,236			92,083			141,088			109,296
Deferred income taxes		2,036			2,132			1,355			1,519
Other non-current liabilities		1,184			—			1,914			1,293
Total liabilities	$	231,140		$	193,491		$	295,494		$	224,100

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 6,921,417 and 6,909,446 shares outstanding as of June 29, 2019, and September 29, 2018, respectively		96			96
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 6,890,118 and 6,921,417 shares outstanding as of March 28, 2020, and September 28, 2019, respectively								96			96
Additional paid-in capital		59,602			61,979			59,440			59,855
Retained earnings		133,414			128,695			139,171			136,937
Accumulated other comprehensive (loss) income		(887	)		136
Treasury stock —2,725,555 and 2,737,526 shares as of June 29, 2019, and September 29, 2018, respectively		(41,750	)		(40,881	)
Accumulated other comprehensive loss								(1,433	)		(969	)
Treasury stock - 2,756,854 and 2,725,555 shares as of March 28, 2020, and September 28, 2019, respectively								(43,133	)		(41,750	)
Equity attributable to Delta Apparel, Inc.		150,475			150,025			154,141			154,169
Equity attributable to non-controlling interest		(190	)		93			(504	)		(281	)
Total equity		150,285			150,118			153,637			153,888
Total liabilities and equity	$	381,425		$	343,609		$	449,131		$	377,988

	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	June 29,			June 30,			June 29,			June 30,			March 28, 2020			March 30, 2019			March 28, 2020			March 30, 2019
	2019			2018			2019			2018
Net sales	$	119,260		$	112,182		$	323,773		$	302,528		$	96,660		$	102,838		$	192,550		$	204,513
Cost of goods sold		94,470			87,919			261,505			239,660			76,079			83,930			152,075			167,036
Gross profit		24,790			24,263			62,268			62,868			20,581			18,908			40,475			37,477

Selling, general and administrative expenses		17,931			17,936			51,771			49,654			17,941			17,056			36,147			33,841
Other income, net		(1,477	)		(341	)		(574	)		(805	)
Other (income) loss, net														(914	)		(843	)		(1,863	)		902
Operating income		8,336			6,668			11,071			14,019			3,554			2,695			6,191			2,734

Interest expense, net		1,989			1,522			5,739			4,207			1,808			1,985			3,610			3,750
Income before provision for income taxes		6,347			5,146			5,332			9,812
Provision for income taxes		1,510			596			896			11,583
Consolidated net income (loss)		4,837			4,550			4,436			(1,771	)
Less: Net loss attributable to non-controlling interest		(89	)		—			(283	)		—
Net income (loss) attributable to shareholders	$	4,926		$	4,550		$	4,719		$	(1,771	)
Earnings (loss) before provision for (benefit from) income taxes														1,746			710			2,581			(1,016	)
Provision for (benefit from) income taxes														526			(115	)		570			(614	)
Consolidated net earnings (loss)														1,220			825			2,011			(402	)
Net loss attributable to non-controlling interest														91			117			223			193
Net earnings (loss) attributable to shareholders													$	1,311		$	942		$	2,234		$	(209	)

Basic income (loss) per share	$	0.71		$	0.64		$	0.68		$	(0.25	)
Diluted income (loss) per share	$	0.70		$	0.62		$	0.67		$	(0.25	)
Basic earnings (loss) per share													$	0.19		$	0.14		$	0.32		$	(0.03	)
Diluted earnings (loss) per share													$	0.19		$	0.13		$	0.32		$	(0.03	)

Weighted average number of shares outstanding		6,928			7,116			6,931			7,193			6,957			6,943			6,953			6,933
Dilutive effect of stock awards		152			272			134			—			98			160			110			-
Weighted average number of shares assuming dilution		7,080			7,388			7,065			7,193			7,055			7,103			7,063			6,933

	Three Months Ended					Nine Months Ended
	June 29,			June 30,		June 29,			June 30,
	2019			2018		2019			2018
Net income (loss) attributable to shareholders	$	4,926		$	4,550	$	4,719		$	(1,771	)
Other comprehensive (loss) income related to unrealized (loss) gain on derivatives, net of income tax		(394	)		100		(1,023	)		302
Consolidated comprehensive income (loss)	$	4,532		$	4,650	$	3,696		$	(1,469	)

	Three Months Ended						Six Months Ended
	March 28, 2020			March 30, 2019			March 28, 2020			March 30, 2019

Net earnings (loss) attributable to shareholders	$	1,311		$	942		$	2,234		$	(209	)
Other comprehensive loss related to unrealized loss on derivatives, net of income tax		(595	)		(257	)		(464	)		(629	)
Consolidated comprehensive income (loss)	$	716		$	685		$	1,770		$	(838	)

											Accumulated
					Additional						Other									Non-
	Common Stock				Paid-In			Retained			Comprehensive			Treasury Stock						Controlling
	Shares		Amount		Capital			Earnings			Income (Loss)			Shares			Amount			Interest		Total
Balance at September 30, 2017		9,646,972	$	96	$	61,065		$	127,358		$	(35	)		2,346,675		$	(32,597	)	$	—	$	155,887
Net earnings		—		—		—			(9,956	)		—			—			—			—		(9,956	)
Other comprehensive income		—		—		—			—			86			—			—			—		86
Vested stock awards		—		—		(1,647	)		—			—			(72,201	)		702			—		(945	)
Stock based compensation		—		—		438			—			—			—			—			—		438
Purchase of common stock		—		—		—			—			—			145,124			(3,000	)		—		(3,000	)
Balance at December 30, 2017		9,646,972		96		59,856			117,402			51			2,419,598			(34,895	)		—		142,510
Net earnings		—		—		—			3,630			—			—			—			—		3,630
Other comprehensive income		—		—		—			—			116			—			—			—		116
Stock based compensation		—		—		705			—			—			—			—			—		705
Purchase of common stock		—		—		—			—			—			74,934			(1,463	)		—		(1,463	)
Balance at March 31, 2018		9,646,972		96		60,561			121,032			167			2,494,532			(36,358	)		—		145,498
Net earnings		—		—		—			4,549			—			—			—			—		4,549
Other comprehensive income		—		—		—			—			100			—			—			—		100
Vested stock awards		—		—		(20	)		—			—			(922	)		16			—		(4	)
Stock based compensation		—		—		777			—			—			—			—			—		777
Purchase of common stock		—		—		—			—			—			63,300			(1,210	)		—		(1,210	)
Balance at June 30, 2018		9,646,972	$	96	$	61,318		$	125,581		$	267			2,556,910		$	(37,552	)	$	—	$	149,710

											Accumulated																									Accumulated
					Additional						Other									Non-										Additional						Other									Non-
	Common Stock				Paid-In						Comprehensive			Treasury Stock						Controlling						Common Stock				Paid-In			Retained			Comprehensive			Treasury Stock						Controlling
	Shares		Amount		Capital			Earnings			Income (Loss)			Shares			Amount			Interest			Total			Shares		Amount		Capital			Earnings			Income (Loss)			Shares			Amount			Interest			Total
Balance at September 29, 2018		9,646,972	$	96	$	61,979		$	128,695		$	136			2,737,526		$	(40,881	)	$	93		$	150,118
Balance as of September 29, 2018																											9,646,972	$	96	$	61,979		$	128,695		$	136			2,737,526		$	(40,881	)	$	93		$	150,118

Net loss																											-		-		-			(1,151	)		-			-			-			-			(1,151	)
Other comprehensive loss																											-		-		-			-			(372	)		-			-			-			(372	)
Net loss attributable to non-controlling interest																											-		-		-			-			-			-			-			(76	)		(76	)
Vested stock awards																											-		-		(3,981	)		-			-			(153,472	)		1,867			-			(2,114	)
Purchase of common stock																											-		-		-			-			-			92,148			(1,711	)		-			(1,711	)
Stock based compensation																											-		-		660			-			-			-			-			-			660
Balance as of December 29, 2018																											9,646,972		96		58,658			127,544			(236	)		2,676,202			(40,725	)		17			145,354

Net earnings		—		—		—			(1,156	)		—			—			—			—			(1,156	)		-		-		-			942			-			-			-			-			942
Other comprehensive income		—		—		—			—			(372	)		—			—			—			(372	)
Other comprehensive loss																											-		-		-			-			(257	)		-			-			-			(257	)
Net loss attributable to non-controlling interest																											-		-		-			-			-			-			-			(117	)		(117	)
Purchase of common stock																											-		-		-			-			-			35,353			(718	)		-			(718	)
Stock based compensation																											-		-		463			-			-			-			-			-			463
Balance as of March 30, 2019																											9,646,972	$	96	$	59,121		$	128,486		$	(493	)		2,711,555		$	(41,443	)	$	(100	)	$	145,667

																																				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 28, 2019																											9,646,972	$	96	$	59,855		$	136,937		$	(969	)		2,725,555		$	(41,750	)	$	(281	)	$	153,888

Net earnings																											-		-		-			923			-			-			-			-			923
Other comprehensive loss																											-		-		-			-			131			-			-			-			131
Net loss attributable to non-controlling interest		—		—		—			—			—			—			—			(76	)		(76	)		-		-		-			-			-			-			-			(132	)		(132	)
Vested stock awards		—		—		(3,980	)		—			—			(153,472	)		1,866			—			(2,114	)		-		-		(1,615	)		-			-			(67,406	)		631			-			(984	)
Stock based compensation		—		—		664			—			—			—			—			—			664			-		-		585			-			-			-			-			-			585
Balance as of December 28, 2019																											9,646,972		96		58,825			137,860			(838	)		2,658,149			(41,119	)		(413	)		154,411

Net earnings																											-		-		-			1,311			-			-			-			-			1,311
Other comprehensive loss																											-		-		-			-			(595	)		-			-			-			(595	)
Net loss attributable to non-controlling interest																											-		-		-			-			-			-			-			(91	)		(91	)
Vested stock awards																											-		-		4			-			-			(1,266	)		15			-			19
Purchase of common stock		—		—		—			—			—			92,148			(1,709	)		—			(1,709	)		-		-		-			-			-			99,971			(2,029	)		-			(2,029	)
Balance at December 29, 2018		9,646,972		96		58,663			127,539			(236	)		2,676,202			(40,724	)		17			145,355
Net earnings		—		—		—			940			—			—			—			—			940
Other comprehensive income		—		—		—			—			(257	)		—			—			—			(257	)
Net loss attributable to non-controlling interest		—		—		—			—			—			—			—			(117	)		(117	)
Stock based compensation		—		—		463			—			—			—			—			—			463			-		-		611			-			-			-			-			-			611
Purchase of common stock		—		—		—			—			—			35,353			(717	)		—			(717	)
Balance at March 30, 2019		9,646,972		96		59,126			128,479			(493	)		2,711,555			(41,441	)		(100	)		145,667
Net earnings		—		—		—			4,935			—			—			—			—			4,935
Other comprehensive income		—		—		—			—			(394	)		—			—			—			(394	)
Net loss attributable to non-controlling interest		—		—		—			—			—			—			—			(90	)		(90	)
Stock based compensation		—		—		476			—			—			—			—			—			476
Purchase of common stock		—		—		—			—			—			14,000			(309	)		—			(309	)
Balance at June 29, 2019		9,646,972	$	96	$	59,602		$	133,414		$	(887	)		2,725,555		$	(41,750	)	$	(190	)	$	150,285
Balance as of March 28, 2020																											9,646,972	$	96	$	59,440		$	139,171		$	(1,433	)		2,756,854		$	(43,133	)	$	(504	)	$	153,637

	Nine Months Ended
	June 29,			June 30,			Six Months Ended
	2019			2018			March 28, 2020			March 30, 2019
Operating activities:
Consolidated net loss	$	4,436		$	(1,771	)
Adjustments to reconcile net loss to net cash used in operating activities:
Consolidated net earnings (loss)							$	2,011		$	(402	)
Adjustment to reconcile net earnings (loss) to net cash used in operating activities:
Depreciation and amortization		8,728			7,398			6,381			5,859
Amortization of deferred financing fees		234			229			157			153
Provision for deferred income taxes		225			3,514
Benefit from deferred income taxes								-			(490	)
Non-cash stock compensation		1,603			1,914			1,196			1,123
(Gain) loss on disposal of equipment								(28	)		2
Other, net		(1,642	)		(300	)		(1,555	)		(1,435	)
Loss on disposal of equipment		18			62
Changes in operating assets and liabilities, net of effect of acquisition:
Accounts receivable, net		(20,700	)		(14,222	)
Changes in operating assets and liabilities, net of effect of acquisition
Accounts receivable								1,480			(11,882	)
Inventories, net		(1,669	)		6,096			(18,226	)		(10,416	)
Prepaid expenses and other assets		(236	)		(1,019	)
Prepaid expenses and other current assets								(176	)		147
Other non-current assets		(71	)		(247	)		(285	)		(20	)
Accounts payable		209			(2,279	)		4,065			10,920
Accrued expenses		110			(2,098	)		(5,640	)		(1,283	)
Change in net operating lease liabilities								910			-
Income taxes		(136	)		8,057			(485	)		(770	)
Other liabilities		344			(1,355	)		(7	)		212
Net cash (used in) provided by operating activities		(8,547	)		3,979

Net cash used in operating activities								(10,202	)		(8,282	)
Investing activities:
Purchases of property and equipment, net		(4,211	)		(4,313	)		(3,886	)		(2,102	)
Proceeds from sale of Junkfood assets		—			1,946
Proceeds from sale of fixed assets		—			5,779
Investment in partnership		—			(300	)
Cash paid for business		(4,599	)		(11,350	)		(1,660	)		(3,699	)
Net cash used in investing activities		(8,810	)		(8,238	)		(5,546	)		(5,801	)

Financing activities:
Proceeds from long-term debt		356,141			346,218			237,622			233,864
Repayment of long-term debt		(330,359	)		(334,059	)		(203,622	)		(211,265	)
Repayment of capital financing		(3,041	)		(1,461	)		(2,714	)		(2,031	)
Payment of contingent consideration		(564	)		—			(2,500	)		(564	)
Payment of deferred financing fees		—			2
Payment of deferred financing costs								(1,079	)		-
Repurchase of common stock		(2,796	)		(5,673	)		(2,029	)		(2,488	)
Payment of withholding taxes on stock awards		(2,113	)		(947	)		(967	)		(2,116	)
Net cash provided by financing activities		17,268			4,080			24,711			15,400
Net decrease in cash and cash equivalents		(89	)		(179	)
Net (decrease) increase in cash and cash equivalents								8,963			1,317
Cash and cash equivalents at beginning of period		460			572			605			460
Cash and cash equivalents at end of period	$	371		$	393		$	9,568		$	1,777

Supplemental cash flow information:
Non-cash financing activity - seller financing	$	—		$	5,000
Non-cash financing activity - capital lease agreements	$	9,693		$	9,131

	Third Quarter Fiscal Year 2019
	Net Sales		Retail			Ecommerce			Wholesale
Delta Group	$	107,409		0.3	%		0.3	%		99.4	%
Salt Life Group		11,851		8.6	%		9.0	%		82.4	%
Total	$	119,260

	Third Quarter Fiscal Year 2018
	Net Sales		Retail			Ecommerce			Wholesale
Delta Group	$	102,107		0.3	%		0.3	%		99.4	%
Salt Life Group		10,075		7.3	%		11.3	%		81.4	%
Total	$	112,182

	Year To Date Fiscal Year 2019
	Net Sales		Retail			Ecommerce			Wholesale
Delta Group	$	291,325		0.3	%		0.3	%		99.4	%
Salt Life Group		32,448		7.1	%		9.3	%		83.6	%
Total	$	323,773

	Year To Date Fiscal Year 2018
	Net Sales		Retail			Ecommerce			Wholesale
Delta Group	$	272,157		0.4	%		0.3	%		99.3	%
Salt Life Group		30,371		5.8	%		10.1	%		84.1	%
Total	$	302,528

	As Reported June 29, 2019		Effect of Standard			Balances without Adoption
Accounts receivable, net	$	67,200	$	(748	)	$	66,452
Prepaid expenses and other current assets		3,384		(166	)		3,218
Total Current Assets		250,297		(914	)		249,383
Total assets		381,425		(914	)		380,511
Accrued liabilities		16,834		(1,163	)		15,671
Total current liabilities		81,576		(1,163	)		80,413
Total liabilities		231,140		(1,163	)		229,977
Total liabilities and equity		381,425		(1,163	)		380,262

Cash	$	2,000
Promissory note		7,000
Capital lease financing		3,000
Net working capital adjustment		729
Total consideration	$	12,729

	Allocation as of March 30, 2019			Measurement Period Adjustments			Allocation as of June 29, 2019
Accounts receivable	$	1,184		$	-		$	1,184
Inventory		1,127			-			1,127
Other current assets		86			-			86
Property, plant, and equipment		3,400			-			3,400
Goodwill		3,380			1,300			4,680
Intangible assets		4,020			(1,100	)		2,920
Accounts payable		(668	)		-			(668	)
Consideration paid	$	12,529		$	200		$	12,729

Yarn	$	21,866	$	32,073
Finished fabric		3,061		2,276
Finished products		10,716		7,166
	$	35,643	$	41,515

	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 29, 2019	$	(1,184	)		—		$	(1,184	)		—
September 29, 2018		183			—			183			—

Cotton Options
June 29, 2019	$	—			—			—			—
September 29, 2018		(110	)		(110	)		—			—

Contingent Consideration
June 29, 2019	$	(9,394	)		—			—		$	(9,394	)
September 29, 2018		(10,542	)		—			—			(10,542	)

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
March 31, 2019 to May 4, 2019		—		—		—	$9.9 million
May 5, 2019 to June 1, 2019		14,000	$	21.97		14,000	9.5 million
June 2, 2019 to June 29, 2019		—		—		—	9.5 million
Total		14,000	$	21.97		14,000	$9.5 million

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
December 29, 2019 to February 1, 2020		—		—		—	$9.5 million
February 2, 2020 to February 29, 2020		53,761	$	22.21		53,761	8.3 million
March 1, 2020 to March 28, 2020		46,210		18.08		46,210	7.5 million
Total		99,971	$	20.30		99,971	$7.5 million

	•	the volatility and uncertainty of cotton and other raw material ~~prices;~~prices and availability;
	•	the general U.S. and international economic conditions;
	•	the COVID-19 pandemic impact on our operations, financial condition, liquidity, and capital investments:
	•	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;
	•	changes in economic, political or social stability at our offshore locations;
	•	significant interruptions or disruptions within our manufacturing, distribution or other operations;
	•	our ability to attract and retain key management;
	•	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, fuel and related costs;
	•	material disruptions in our information systems related to our business operations;
	•	compromises of our data security;
	•	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;
	•	the impairment of acquired intangible assets;
	•	changes in international trade regulations;
	•	our ability to comply with trade regulations;
	•	changes in employment laws or regulations or our relationship with employees;
	•	foreign currency exchange rate fluctuations;
	•	negative publicity resulting from violations of manufacturing standards or labor laws or unethical business practices by our suppliers and independent contractors;
	•	the illiquidity of our shares; and
	•	price volatility in our shares and the general volatility of the stock market.

10.1		Fifth Amendment to Fifth Amended and Restated Credit Agreement, dated April 27, 2020, among Delta Apparel, Inc., M.J. Soffe, LLC, Culver City Clothing Company, Salt Life, LLC, and DTG2Go, LLC, and the financial institutions named therein as Lenders, and Wells Fargo Bank, National Association, as agent for Lenders.

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

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

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

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

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation Linkbase

101.DEF		XBRL Taxonomy Extension Definition Linkbase

101.LAB		XBRL Taxonomy Extension Label Linkbase

101.PRE		XBRL Taxonomy Extension Presentation Linkbase

			DELTA APPAREL, INC. (Registrant)

Date	~~August 1, 2019~~April 30, 2020	By:	/s/ Deborah H. Merrill
			Deborah H. Merrill Chief Financial Officer and President, Delta Group