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 ~~July 3, 2021~~January 1, 2022

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

~~(864) 232-5200~~(678) 775-6900

(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 every Interactive Data File required to be submitted 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 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 “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer ☑

Non-accelerated filer ☐

Smaller reporting company ☑

Emerging growth 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 ☑

As of ~~July 28, 2021,~~January 27, 2022, there were outstanding ~~6,974,660~~6,948,873 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.

	*June 2021*			*September 2020*			*December 2021*			*September 2021*
Assets
Cash and cash equivalents	$	11,389		$	16,458		$	6,379		$	9,376
Accounts receivable, less allowances of $173 and $684, respectively		66,520			60,146
Accounts receivable, less allowances of $183 and $251, respectively								65,060			66,973
Other receivables		449			854			681			761
Income tax receivable		0			983			439			356
Inventories, net		152,312			145,515			183,058			161,703
Prepaid expenses and other current assets		4,704			2,812			5,162			3,794
Total current assets		235,374			226,768			260,779			242,963

Property, plant and equipment, net of accumulated depreciation of $96,925 and $92,123, respectively		66,397			63,950
Property, plant and equipment, net of accumulated depreciation of $102,014 and $99,225, respectively								66,350			67,564
Goodwill		37,897			37,897			37,897			37,897
Intangibles, net		26,750			19,948			25,766			26,291
Deferred income taxes		3,139			4,052			1,030			1,854
Operating lease assets		48,241			54,645			43,423			45,279
Equity method investment		10,333			10,573			10,202			10,433
Other assets		2,063			2,398			1,929			2,007
Total assets	$	430,194		$	420,231		$	447,376		$	434,288

Liabilities and Equity
Liabilities:
Accounts payable	$	44,609		$	49,800		$	60,498		$	52,936
Accrued expenses		24,207			20,174			22,823			29,949
Income taxes payable		1,714			379			356			379
Current portion of finance leases		7,102			6,956			6,581			6,621
Current portion of operating leases		8,974			9,039			8,197			8,509
Current portion of long-term debt		7,520			7,559			7,265			7,067
Current portion of contingent consideration		1,200			2,120			1,897			0
Total current liabilities		95,326			96,027			107,617			105,461

Long-term income taxes payable		3,220			3,599			3,186			3,220
Long-term finance leases, less current maturities		17,319			11,328
Long-term operating leases, less current maturities		41,093			46,570
Long-term debt, less current maturities		111,782			112,782
Long-term finance leases								13,946			15,669
Long-term operating leases								37,208			38,546
Long-term debt								118,149			101,680
Long-term contingent consideration		1,900			4,300			0			1,897
Other non-current liabilities		2,883			2,939			2,289			3,621
Total liabilities	$	273,523		$	277,545		$	282,395		$	270,094

Shareholder's equity:
Preferred stock - $0.01 par value, 2,000,000 shares authorized, none issued and outstanding		0			0			0			0
Common stock - $0.01 par value, 15,000,000 authorized, 9,646,972 shares issued, and 6,974,660 and 6,890,118 shares outstanding as of June 2021 and September 2020, respectively		96			96
Common stock - $0.01 par value, 15,000,000 authorized, 9,646,972 shares issued, and 6,976,888 and 6,974,660 shares outstanding as of December 2021 and September 2021, respectively								96			96
Additional paid-in capital		60,284			61,005			59,205			60,831
Retained earnings		140,006			126,564			150,505			146,860
Accumulated other comprehensive loss		(893	)		(1,322	)		(574	)		(786	)
Treasury stock - 2,672,312 and 2,756,854 shares as of June 2021 and September 2020, respectively		(42,149	)		(43,133	)
Treasury stock - 2,670,084 and 2,672,312 shares as of December 2021 and September 2021, respectively								(43,618	)		(42,149	)
Equity attributable to Delta Apparel, Inc.		157,344			143,210			165,614			164,852
Equity attributable to non-controlling interest		(673	)		(524	)		(633	)		(658	)
Total equity		156,671			142,686			164,981			164,194
Total liabilities and equity	$	430,194		$	420,231		$	447,376		$	434,288

											*Accumulated*																								*Accumulated*
					*Additional*						*Other*									*Non-*										*Additional*					*Other*									*Non-*
	*Common Stock*				*Paid-In*			*Retained*			*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*		*Loss*			*Shares*			*Amount*			*Interest*			*Total*
Balance as of September 2019		9,646,972	$	96	$	59,855		$	136,937		$	(969	)		2,725,555		$	(41,750	)	$	(281	)	$	153,888
Balance as of September 2020																											9,646,972	$	96	$	61,005		$	126,564	$	(1,322	)		2,756,854		$	(43,133	)	$	(524	)	$	142,686

Net earnings		-		0		0			923			0			-			0			0			923			-		0		0			883		0			-			0			0			883
Other comprehensive income		-		0		0			0			131			-			0			0			131			-		0		0			0		125			-			0			0			125
Net loss attributable to non-controlling interest		-		0		0			0			0			-			0			(132	)		(132	)		-		0		0			0		0			-			0			(40	)		(40	)
Vested stock awards		0		0		(1,615	)		0			0			(67,406	)		631			0			(984	)		0		0		(2,117	)		0		0			(84,542	)		984			0			(1,133	)
Stock based compensation		-		0		585			0			0			-			0			0			585			-		0		676			0		0			-			0			0			676
Balance as of December 2019		9,646,972		96		58,825			137,860			(838	)		2,658,149			(41,119	)		(413	)		154,411

Net earnings		-		0		0			1,311			0			-			0			0			1,311
Other comprehensive loss		-		0		0			0			(595	)		-			0			0			(595	)
Net loss attributable to non-controlling interest		-		0		0			0			0			-			0			(91	)		(91	)
Vested stock awards		0		0		4			0			0			(1,266	)		15			0			19
Purchase of common stock		0		0		0			0			0			99,971			(2,029	)		0			(2,029	)
Stock based compensation		-		0		611			0			0			-			0			0			611
Balance as of March 2020		9,646,972		96		59,440			139,171			(1,433	)		2,756,854			(43,133	)		(504	)		153,637

Net earnings		-		0		0			(17,781	)		0			-			0			0			(17,781	)
Other comprehensive income		-		0		0			0			3			-			0			0			3
Net loss attributable to non-controlling interest		-		0		0			0			0			-			0			(63	)		(63	)
Stock based compensation		-		0		714			0			0			-			0			0			714
Balance as of June 2020		9,646,972	$	96	$	60,154		$	121,390		$	(1,430	)		2,756,854		$	(43,133	)	$	(567	)	$	136,510
Balance as of December 2020																											9,646,972	$	96	$	59,564		$	127,447	$	(1,197	)		2,672,312		$	(42,149	)	$	(564	)	$	143,197

										*Accumulated*																								*Accumulated*
					*Additional*					*Other*									*Non-*										*Additional*					*Other*									*Non-*
	*Common Stock*				*Paid-In*			*Retained*		*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*		*Loss*			*Shares*			*Amount*			*Interest*			*Total*
Balance as of September 2020		9,646,972	$	96	$	61,005		$	126,564	$	(1,322	)		2,756,854		$	(43,133	)	$	(524	)	$	142,686
Balance as of September 2021																										9,646,972	$	96	$	60,831		$	146,860	$	(786	)		2,672,312		$	(42,149	)	$	(658	)	$	164,194

Net earnings		-		0		0			883		0			-			0			0			883			-		0		0			3,645		0			-			0			0			3,645
Other comprehensive income		-		0		0			0		125			-			0			0			125			-		0		0			0		212			-			0			0			212
Net loss attributable to non-controlling interest		-		0		0			0		0			-			0			(40	)		(40	)
Net income attributable to non-controlling interest																										-		0		0			0		0			-			0			25			25
Purchase of common stock																										0		0		0			0		0			74,232			(2,143	)		0			(2,143	)
Vested stock awards		0		0		(2,117	)		0		0			(84,542	)		984			0			(1,133	)		0		0		(1,766	)		0		0			(76,460	)		674			0			(1,092	)
Stock based compensation		-		0		676			0		0			-			0			0			676			-		0		140			0		0			-			0			0			140
Balance as of December 2020		9,646,972		96		59,564			127,447		(1,197	)		2,672,312			(42,149	)		(564	)		143,197

Net earnings		-		0		0			4,398		0			-			0			0			4,398
Other comprehensive income		-		0		0			0		199			-			0			0			199
Net loss attributable to non-controlling interest		-		0		0			0		0			-			0			(97	)		(97	)
Stock based compensation		-		0		278			0		0			-			0			0			278
Balance as of March 2021		9,646,972		96		59,842			131,845		(998	)		2,672,312			(42,149	)		(661	)		147,975

Net earnings		-		0		0			8,161		0			-			0			0			8,161
Other comprehensive income		-		0		0			0		105			-			0			0			105
Net loss attributable to non-controlling interest		-		0		0			0		0			-			0			(12	)		(12	)
Stock based compensation		-		0		442			0		0			-			0			0			442
Balance as of June 2021		9,646,972	$	96	$	60,284		$	140,006	$	(893	)		2,672,312		$	(42,149	)	$	(673	)	$	156,671
Balance as of December 2021																										9,646,972	$	96	$	59,205		$	150,505	$	(574	)		2,670,084		$	(43,618	)	$	(633	)	$	164,981

	*Nine Months Ended*						*Three Months Ended*
	*June 2021*			*June 2020*			*December 2021*			*December 2020*
Operating activities:
Consolidated net earnings (loss)	$	13,294		$	(15,832	)
Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities:
Consolidated net earnings							$	3,670		$	843
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization		10,212			9,566			3,629			3,368
Amortization of deferred financing fees		244			233			81			81
Provision for inventory market reserves		1,447			4,897			851			(405	)
Provision for (benefit from) deferred income taxes		912			(5,629	)
Provision for deferred income taxes								754			740
Non-cash stock compensation		1,396			1,911			140			676
Gain on disposal of equipment		(2	)		(29	)		2			30
Contingent consideration valuation adjustment		(1,210	)		187
Other, net		(462	)		(505	)		(390	)		(200	)
Changes in operating assets and liabilities:
Accounts receivable, net		(5,969	)		9,020			1,993			(2,598	)
Inventories, net		(8,244	)		16,195			(22,206	)		(2,601	)
Prepaid expenses and other current assets		(2,136	)		31			(1,449	)		(797	)
Other non-current assets		1,264			(198	)		699			394
Accounts payable		(5,191	)		2,957			7,584			387
Accrued expenses		3,592			(1,899	)		(7,572	)		(2,044	)
Net operating lease liabilities		543			952			206			279
Income taxes		1,939			(328	)		(140	)		(193	)
Other liabilities		(626	)		462			(1,050	)		(447	)
Net cash provided by operating activities		11,003			21,991
Net cash used in operating activities								(13,198	)		(2,487	)
Investing activities:
Purchases of property and equipment		(1,676	)		(4,443	)		(1,822	)		(408	)
Proceeds from equipment purchased under finance leases		2,312			0			0			196
Proceeds from sale of equipment		422			0			0			2,312
Cash paid for intangible asset		(6,655	)		0			(51	)		0
Cash paid for business		(2,527	)		(2,243	)		(583	)		(838	)
Net cash used in investing activities		(8,124	)		(6,686	)
Net cash (used in) provided by investing activities								(2,456	)		1,262
Financing activities:
Proceeds from long-term debt		346,841			312,251			138,543			112,506
Repayment of long-term debt		(346,131	)		(304,352	)		(121,293	)		(112,557	)
Repayment of finance lease obligations		(5,415	)		(2,714	)		(1,783	)		(1,684	)
Payment of contingent consideration		(2,110	)		(2,500	)		0			(2,110	)
Payment of deferred financing costs		0			(1,079	)
Repurchase of common stock		0			(2,029	)		(1,718	)		0
Payment of withholding taxes on stock awards		(1,133	)		(967	)		(1,092	)		(1,133	)
Net cash used in financing activities		(7,948	)		(1,390	)
Net (decrease) increase in cash and cash equivalents		(5,069	)		13,915
Net cash provided by (used in) financing activities								12,657			(4,978	)
Net decrease in cash and cash equivalents								(2,997	)		(6,203	)
Cash and cash equivalents at beginning of period		16,458			605			9,376			16,458
Cash and cash equivalents at end of period	$	11,389		$	14,520		$	6,379		$	10,255

Supplemental cash flow information
Finance lease assets exchanged for finance lease liabilities	$	12,290		$	9,069		$	20		$	3,976
Operating lease assets exchanged for operating lease liabilities	$	1,032		$	6,158		$	1,401		$	0

Delta Apparel, Inc. (collectively with DTG2Go, LLC, Salt Life, LLC, M.J. Soffe, LLC, and other subsidiaries, "Delta Apparel," "we," "us," "our," or the "Company") is a vertically-integrated, international apparel company. With approximately ~~8,200~~8,700 employees worldwide, we design, manufacture, source, and market a diverse portfolio of core activewear and lifestyle apparel products under our primary brands of Salt Life®~~, COAST®~~, Soffe®, and Delta. We are a market leader in the on-demand, digital print and fulfillment industry, bringing DTG2Go's proprietary technology and innovation to the supply chain of our customers. We specialize in selling casual and athletic products through a variety of distribution channels and tiers, including outdoor and sporting goods retailers, independent and specialty stores, better department stores and mid-tier retailers, mass merchants and e-retailers, the U.S. military, and through our business-to-business digital platform. Our products are also made available direct-to-consumer on our ecommerce sites and in our branded retail stores. Our diversified distribution model allows us to capitalize on our strengths to provide our activewear and lifestyle apparel products to a broad and evolving customer base whose shopping preferences may span multiple retail channels.

We design and internally manufacture the majority of our products. More than 90% of the apparel ~~garments~~units that we sell are sewn byin our ~~employees in either~~ 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 in ~~Greenville, South Carolina.~~Duluth, Georgia. Our common stock trades on the NYSE American under the symbol “DLA."

We operate on a 52-53 week fiscal year ending on the Saturday closest to September 30. Our ~~2021~~2022 fiscal year is a 52-week year and will end on October ~~2, 2021~~1, 2022 ("fiscal ~~2021"~~2022"). Accordingly, this Form 10-Q presents our ~~third~~first quarter of fiscal ~~2021.~~2022. Our ~~2020~~2021 fiscal year was a 5352-week year and ended on October ~~3, 2020~~2, 2021 ("fiscal ~~2020"~~2021").

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

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 ~~and~~ ~~nine~~~~-month periods~~period ended ~~June~~December 2021 are not necessarily indicative of the results that may be expected for our fiscal ~~2021.~~2022. 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. These Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and footnotes included in our Annual Report on Form 10-K for our fiscal ~~2020,~~2021, filed with the United States Securities and Exchange Commission (“SEC”).

Our Condensed Consolidated Financial Statements include the accounts of Delta Apparel and its wholly-owned and majority-owned domestic and foreign subsidiaries. We apply the equity method of accounting for our investment in 31% of the outstanding capital stock of a Honduran company. During the ~~nine~~three-months ended ~~June~~December 2021 and ~~June~~December 2020, we received dividends from the investment of ~~$0.9~~$0.6 million and ~~$0.6~~$0.3 million, respectively. Our Ceiba Textiles manufacturing facility is leased under an operating lease arrangement, with this Honduran company. During the ~~nine~~three-months ended ~~June~~December 2021, we paid approximately ~~$1.8~~$0.4 million under this ~~arrangement,~~arrangement. Payments of approximately $0.8 million were made during the three-months ended December 2020 which included ~~repayment~~payment of rent deferrals related to the June 2020 ~~quarter. Payments~~quarter as a result of ~~approximately $0.9 million were made during~~ the ~~nine~~~~-months ended~~ ~~June 2020.~~COVID pandemic.

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~~2750 ~~South Main Street, Greenville, South Carolina~~Premiere Parkway, Suite ~~29601.~~100, Duluth, Georgia 30097. Requests can also be made by telephone to 864-232-5200, or via email at investor.relations@deltaapparel.com.

Our accounting policies are consistent with those described in our Significant Accounting Policies in our Annual Report on Form 10-K for our fiscal ~~2020,~~2021, filed with the SEC. See Note C for consideration of recently issued accounting standards.

In ~~August 2018,~~ ~~the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 requires customers to apply internal-use software guidance to determine the implementation costs that are able to be capitalized. Capitalized implementation costs are required to be amortized over the term of the arrangement, beginning when the cloud computing arrangement is ready for its intended use. We adopted ASU ~~2018~~-15 ~~prospectively as of the beginning of fiscal~~ ~~2021,~~ ~~and the provisions did~~ ~~not~~ ~~have a material effect on our financial condition, results of operations, cash flows, or disclosures.~~

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes, eliminates certain exceptions within Accounting Standards Codification ("ASC") 740, Income Taxes,, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective as of the beginning of our fiscal year 2022. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. ~~We believe~~The impact of the ~~impacts~~adoption of ~~adopting the provisions~~provision of ASU 2019-12 ~~will~~did not behave a material impact to our financial condition, results of operations, cash flows, and disclosures.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires an entity to assess impairment of its financial instruments based on the entity's estimate of expected credit losses. Since the issuance of ASU 2016-13, the FASB released several amendments to improve and clarify the implementation guidance. These standards have been collectively codified within ASC Topic 326, Credit Losses (“ASC 326”). As a smaller reporting company as defined by the SEC, the provisions of ASC 326 are effective as of the beginning of our fiscal year 2024. We are currently evaluating the impacts of the provisions of ASC 326 on our financial condition, results of operations, cash flows, and disclosures.

In March 2020, the FASB issued ASU 2020-04,Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04provides optional guidance for a limited period of time to ease potential accounting and financial reporting impacts of reference rate reform, including the expected transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This new guidance includes temporary optional practical expedients and exceptions for applying U.S. GAAP to transactions affected by reference rate reform if certain criteria are met. These transactions include contract modifications, hedging relationships and the sale or transfer of debt securities classified as held-to-maturity. Entities may apply the provisions of the new standard at the beginning of the reporting period when the election is made. This guidance may be applied through December 31, 2022. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures and has yet to elect an adoption date.

Our Condensed Consolidated Statements of Operations include revenue streams from retail sales at our branded retail stores; direct-to-consumer ecommerce sales on our consumer-facing web sites; and sales from wholesale channels, which includes our business-to-business ecommerce and DTG2Go sales. The table below identifies the amount and percentage of net sales by distribution channel (in thousands):

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

Inventories, net of reserves of ~~$16.4~~$16.7 million and ~~$15.0~~$15.9 million as of ~~June~~ December 2021and September ~~2020,~~2021, respectively, consisted of the following (in thousands):

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.

On May 10, 2016, we entered into a Fifth Amended and Restated Credit Agreement (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, and Regions Bank. Our subsidiaries M.J. Soffe, LLC, Culver City Clothing Company, Salt Life, LLC, and DTG2Go, 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, October 8, 2018, November 19, 2019, April 27, 2020, and August 28, 2020.

The Amended Credit Agreement allows us to borrow up to $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 Amended Credit Agreement contains a subjective acceleration clause and a “springing” lockbox arrangement (as defined in 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. We classify borrowings under the Amended Credit Agreement as long-term debt with consideration of current maturities.

As of ~~June~~December 2021, we had ~~$108.2~~$116.0 million outstanding under our U.S. revolving credit facility at an average interest rate of ~~3.4%~~3.2%. Our cash on hand combined with the availability under the U.S. credit facility totaled ~~$43.4~~$33.0 million. At ~~June~~December 2021 and September ~~2020~~2021 there was ~~$15.5~~$18.6 million and ~~$8.8~~$19.0 million, respectively, of retained earnings free of restrictions to make cash dividends or stock repurchases.

On October 8, 2018, we acquired substantially all of the assets of Silk Screen Ink, Ltd. d/b/a SSI Digital Print Services. 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 which began January 2, 2019, with the final installment due October 1, 2021. ~~As of~~ ~~June 2021,~~ ~~there was $1.2 million outstanding on~~The final payment, in accordance with the promissory ~~note.~~note agreement, was made during the three-months ended December 2021.

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. In December 2020, we entered into a new term loan and revolving credit facility with Banco Ficohsa, both with five-year terms, and simultaneously settled the prior term loans and revolving credit facility with outstanding balances at the time of settlement of $1.1 million and $9.5 million, respectively. Each of these new 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. As the revolving credit facility permits us to re-borrow funds up to the amount repaid, subject to certain objective covenants, and we intend to re-borrow funds, subject to those covenants, the amounts have been classified as long-term debt. Additional information about these loans and the outstanding balances as of ~~June~~December 2021 is as follows (in thousands):

We include in selling, general and administrative ("SG&A") expenses the costs incurred subsequent to the receipt of finished goods at our distribution facilities, such as the cost of stocking, warehousing, picking, packing, and shipping goods for delivery to our customers. Distribution costs included in SG&A expenses totaled ~~$5.2~~$5.5 million and ~~$3.5~~$5.2 million for the ~~June~~December 2021 and 2020 quarters, ~~respectively. Distribution costs included in SG&A expenses totaled $15.6 million and $13.2 million for the~~ ~~nine~~~~-months ended~~ ~~June 2021~~ ~~and~~ ~~2020,~~ respectively. In addition, SG&A expenses include costs related to sales associates, administrative personnel, advertising and marketing expenses and other general and administrative expenses.

On February 6, 2020, our shareholders approved the Delta Apparel, Inc. 2020 Stock Plan ("2020 Stock Plan") to replace the 2010 Stock Plan, which was previously re-approved by our shareholders on February 4, 2015 and was scheduled to expire by its terms on September 14, 2020. The 2020 Stock Plan is substantially similar in both form and substance to the 2010 Stock Plan. The purpose of the 2020 Stock Plan is to continue to give our Board of Directors and its Compensation Committee the ability to offer a variety of compensatory awards designed to enhance the Company’s long-term success by encouraging stock ownership among its executives, key employees and directors. Under the 2020 Stock Plan, the Compensation Committee of our Board of Directors has the authority to determine the employees and directors to whom awards may be granted, and the size and type of each award and manner in which such awards will vest. The awards available under the plan consist of stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock, stock performance units, and other stock and cash awards. Unvested awards, while employed by the Company or servings as a director, become fully vested under certain circumstances as defined in the 2020 Stock Plan. Such circumstances include, but are not limited to, the participant’s death or becoming disabled. 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. 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. Shares are generally issued from treasury stock upon the vesting of the restricted stock units, performance units or other awards under the 2020 Stock Plan.

Compensation expense is recorded within SG&A in our Condensed Consolidated Statements of Operations over the vesting periods. During the ~~June~~December 2021 and 2020 quarters, we recognized ~~$0.5~~$0.4 million and ~~$0.7~~$0.9 million in stock-based compensation expense, respectively. Associated with the compensation cost are income tax benefits recognized of $0.1 million and ~~$0.2~~$0.3 million for each of the three-month periods ended ~~June~~ ~~2021~~ ~~and~~ ~~June 2020,~~ ~~respectively. During the~~ ~~nine~~~~-months ended~~ ~~June~~December 2021 and ~~June~~December 2020, we recognized $2.0 million and $2.1 million, respectively, in stock-based compensation expense. Associated with the compensation cost are income tax benefits recognized of $0.5 million and $0.7 million for the ~~nine~~~~-months periods ended~~ ~~June 2021~~ ~~and~~ ~~June~~ ~~2020,~~respectively.

During the December ~~2020~~2021 quarter, performance stock units and restricted stock units representing ~~42,000~~47,700 and ~~74,000~~95,000 shares of our common stock, respectively, vested with the filing of our Annual Report on Form 10-K for fiscal ~~2020,~~2021, and were issued in accordance with their respective agreements. ~~All~~Of these vested awards, 96,350 were ~~paid~~payable in common stock and 46,350 were payable in cash.

During the December 2021 quarter, restrictive stock units representing 5,000 shares of our common stock were granted and are eligible to vest upon the filing of our Annual Report on Form 10-K for fiscal 2022 and are payable in common stock.

During the December 2021 quarter, performance stock units and restrictive stock units representing 59,625 and 59,625 shares of our common stock, respectively, were granted and are eligible to vest upon the filing of our Annual Report for fiscal 2023. Of these shares, 64,625 are payable in common stock and 54,625 are payable in cash.

During the December 2021 quarter, restrictive stock units representing 13,000 shares of our common stock were granted and are eligible to vest upon the filing of our Annual Report on Form 10-K for fiscal 2024 and are payable in common stock.

As of ~~June~~December 2021, there was ~~$2.1~~$4.2 million of total unrecognized compensation cost related to unvested awards granted under the 2020 Stock Plan. This cost is expected to be recognized over a period of ~~1.4~~2.9 years.

We have entered into agreements, and have fixed prices, to purchase yarn, finished fabric, and finished apparel and headwear products. At ~~June~~December 2021, minimum payments under these contracts were as follows (in thousands):

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

The Delta Group is comprised of our business units primarily focused on core activewear styles, and includes our DTG2Go and Delta Activewear business units. We are a market leader in the on-demand, direct-to-garment digital print and fulfillment industry, bringing~~DTG2Go's~~ ~~proprietary~~ 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. Our Activewear business is organized around key customer channels and how they source their various apparel needs. Delta Activewear is a preferred supplier of activewear apparel to regional and global brands, direct to retail and through wholesale markets. We offer a broad ~~range~~portfolio of apparel and accessories ~~through our Delta Direct business~~ under the Delta, Delta Platinum, Soffe, and ~~Soffe brands, as well as other brands~~sourced-branded products that we distribute utilizing our ~~digital platform and~~ network of fulfillment centers. Delta Direct services key channels, such as the screen print, promotional, and eRetailer channels as well as the retail licensing channel, whose customers sell through to many mid-tier and mass market retailers. In ~~addition,~~ our Global Brands & Retail Direct business ~~serves~~we serve our customers as their supply chain partner, from product development to shipment of their branded products, with the majority of products being sold with value-added services including embellishment, hangtags, and ~~ticketing, so that they are ready for~~ticketing. We also serve retailers by providing our portfolio of products directly to their retail ~~sale~~stores and through their ecommerce channels. We sell our products to ~~end consumers.~~a diversified audience, including sporting goods and outdoor retailers, specialty and resort shops, farm and fleet stores, department stores, and mid-tier retailers. We also service custom apparel to major branded sportswear companies, trendy regional brands, and all branches of the United States armed forces. We also offer our Soffe products direct to consumers at www.soffe.com.

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.~~unit. These products are sold through specialty and boutique shops, ~~outdoor retailers and~~ 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® ~~and COAST®.~~

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 earnings"). Our segment operating earnings may not be comparable to similarly titled measures used by other companies. The accounting policies of our reportable segments are the same as those described in Note 2 in our Annual Report on Form 10-K for fiscal ~~2020,~~2021, 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).

⁽¹⁾In fiscal 2021, the Delta Group operating earnings included $1.3 million of expense, reported within "Other loss (income), net", related to two catastrophic hurricanes that disrupted operations during the December 2020 quarter. ~~For the~~ ~~three~~~~-months and~~ ~~nine~~~~-months ended~~ ~~June 2020,~~ ~~the Delta Group operating income (loss) included $23.1 million and $25.0 million, respectively, of expenses related to the COVID-~~19 ~~pandemic. For the~~ ~~June 2020~~ quarter, these costs primarily related to the curtailment of manufacturing operations ($9.8 million), incremental costs to right size production to new forecasted demand ($2.6 million), increased accounts receivable and inventory reserves related to the heightened risks in the market as the U.S. continues its recovery ($6.6 million), and other expenses ($4.1 million). These costs are included within net sales ($0.5 million), cost of goods sold ($12.1 million), SG&A expenses ($2.4 million), and other loss (income), net ($8.1 million). The ~~first~~~~nine~~ ~~months of fiscal~~ ~~2020~~ ~~includes an additional $1.9 million of costs related to the curtailment of manufacturing operations in cost of goods sold.~~

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

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 which will be paid over eight years. In addition, new taxes were imposed related to foreign income, including a tax on global intangible low-taxed income (“GILTI”) as well as a limitation on the deduction for business interest expense (“Section 163(j)"). GILTI is the excess of the shareholder’s net 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 and 30% of the taxpayer’s adjusted taxable income. We have included in our calculation of our effective tax rate the estimated impact of GILTI and Section 163(j). 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.

~~The 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 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.~~

Our effective income tax rate on operations for the ~~nine~~three-months ended ~~June~~December 2021 was ~~23.1%~~15.1% compared to a rate of ~~23.9%~~39.3% in the same period of the prior year, and an effective rate of ~~23.6%~~21.9% for fiscal ~~2020.~~2021. We generally benefit from having income in foreign jurisdictions that are either exempt from income taxes or have tax rates that are lower than those in the United States. As such, 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.

From time to time, we may use interest rate swaps or other instruments to manage our interest rate exposure and reduce the impact of future interest rate changes. These financial instruments are not used for trading or speculative purposes. We have designated our interest rate swap contracts as cash flow hedges of our future interest payments. As a result, the gains and losses on the swap contracts are reported as a component of other comprehensive income and are reclassified into interest expense as the related interest payments are made. As of ~~June~~December 2021, all of our other comprehensive income was attributable to shareholders; none related to the non-controlling interest. Outstanding instruments as of ~~June~~December 2021 are as follows:

The following table summarizes the fair value and presentation in the Condensed Consolidated Balance Sheets for derivatives related to our interest swap agreements as of June 2021 and September 2020 (in thousands):

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 ~~June~~December 2021 and September ~~2020.~~2021.

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:

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

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~~December 2021 and September ~~2020,~~2021, book value for fixed rate debt approximates fair value based on quoted market prices for the same or similar issues or on the current rates offered to us for debt of the same remaining maturities (a Level 2 fair value measurement).

The DTG2Go acquisition purchase price consisted of 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 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 present value to derive the fair value. The fair value of the contingent consideration is sensitive to changes in our projected results and discount rates. As of ~~June~~December 2021, we estimate the fair value of contingent consideration to be ~~$3.1~~$1.9 million, ~~a $3.3 million decrease from~~consistent with our estimate as of September ~~2020~~ 2021.~~due to the $2.1 million payment made during the~~ ~~December 2020~~ ~~quarter for the fiscal~~ ~~2020~~ ~~contingent consideration period and a $1.2 million change in estimated future earnout payments.~~

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

As of September 28, 2019, our Board of Directors authorized management to use up to $60.0 million to repurchase stock in open market transactions under our Stock Repurchase Program. No ~~shares of our common stock were repurchased in~~During the ~~June~~December 2021 ~~quarter. Through~~ ~~June 2021,~~ quarter, we ~~have~~ purchased ~~3,598,933~~74,232 shares of our common stock for an aggregate of ~~$52.5~~$2.1 million. Through December 2021, we have purchased 3,673,165 shares of our common stock for an aggregate of $54.6 million under our Stock Repurchase Program since its inception. All purchases were made at the discretion of management and pursuant to the safe harbor provisions of SEC Rule 10b-18. As of ~~June~~December 2021, $~~7.5~~5.4 million remained available for future purchases under our Stock Repurchase Program, which does not have an expiration date.

Goodwill represents the acquired goodwill net of the $0.6 million impairment losses recorded in fiscal year 2011. As of ~~June~~December 2021, the Delta Group segment assets include $18.0 million of goodwill, and the Salt Life segment assets include $19.9 million.

Depending on the type of intangible asset, amortization is recorded under cost of goods sold or selling, general and administrative expenses. Amortization expense for intangible assets for the three-months ended ~~June~~December 2021 and ~~June~~December 2020 was ~~$0.5~~$0.6 million and $0.4 ~~million, respectively. Amortization for the~~ ~~nine~~~~-months ended~~ ~~June 2021~~ ~~and~~ ~~June 2020~~ ~~was $1.2 million and $1.3~~ million, respectively. Amortization expense is estimated to be approximately ~~$1.8~~$1.6 million for ~~fiscal~~the year ended ~~2021,~~September 2022, ~~$2.0~~approximately $1.5 million for ~~fiscal~~the year ended ~~2022,~~September 2023, ~~$2.3~~and approximately $1.4 million for ~~fiscal~~the years ended ~~2023,~~September 2024, ~~and $2.2 million for each of fiscal~~ ~~2024~~2025 and ~~2025.~~2026.

On June 1, 2021, DTG2Go, LLC acquired specified net assets of Fan Print Inc., which primarily included its Autoscale.ai technology as well as immaterial net working capital. The costs to acquire the net assets were $8.0 million, of which $6.6 million was paid at closing through our existing U.S. credit facility and ~~$1.4~~$1.4 million will be paid in three installments in our second, third, and fourth quarters of fiscal 2022. The acquisition qualified as an asset acquisition in accordance with ASU 2017-01, Clarifying the Definition of a Business, as substantially all of the fair value of the net assets acquired or $8.1 million were assigned to the technology intangible asset with an estimated economic life of 10 years. The acquisition cost also consists of additional payments contingent on the adjusted operating profits resulting from the Autoscale.ai technology for the period from June 1, 2021 through October 2, 2021, as well as for our fiscal years 2022 through 2026. These contingent earnout liabilities are recognized when the contingency is probable and reasonably estimable, which generally results in recognition, if earned, during the fourth quarter of each fiscal year and which would increase the value of the technology intangible asset.

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”, “outlook”, “anticipate”, “expect”, “intend”, “remain”, “seek", “believe”, “may”, “should” and similar expressions, and discussions of strategy or intentions, are intended to identify forward-looking statements.

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

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 Part 1 under the subheading "Risk Factors" in our Annual Report on Form 10-K for fiscal ~~2020,~~2021, 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.

Our record-breaking June 2021 quarter results reflect the culmination of our multi-year strategic initiatives coming to realization. Our sales are back to pre-pandemic levels, with customer order demand exceeding historic levels. Profitability on current year sales is greatly expanded, driven by our margin-moving sales strategies, manufacturing efficiencies, and continued spending controls. This culminated in diluted earnings per share of $1.14 for the June quarter, a record for Delta Apparel, while also generating close to $10 million of operating cash flows.

We ~~are entering~~began fiscal 2022 a streamlined organization, with the Delta Group segment operating as a fully-integrated Activewear business, ~~powered~~complemented by DTG2Go digital fulfillment solutions. Our Activewear business is organized around our key customer channels and how they source their diverse apparel needs. Customers seeking our portfolio of Delta, Delta Platinum, Soffe, and sourced apparel products can purchase them directly from our Delta Direct ~~business, formerly referred to as Delta Catalog.~~business. Delta Direct services key channels, ~~such as~~including the screen print, promotional, and eRetailer channels ~~as well as~~together with the key retail licensing channel, whose customers sell through to many mid-tier and mass market retailers and which drove strong sales in the June quarter. Although we remain inventory constrained in the near term in this at-once business, we are working diligently to serve our customers’ needs and ultimately rebuild our inventory levels for future opportunities.retailers. In our Global Brands & Retail Direct business, we are a supply chain partner to global brands, from product development of custom garments to shipment of their branded products, with the majority of products being sold with value-added services. We also serve global retailers by providing our portfolio of Delta, Delta Platinum, and Soffe products directly to their retail stores and through their ecommerce channels. ~~The strength of our Global Brands & Retail Direct~~Our business is ~~demonstrated by~~now organized including the ~~growth in sales compared to the same June quarter in pre-pandemic fiscal 2019. This organizational structure, which includes the integration of our~~ Soffe business ~~into~~as part of Activewear, ~~has led to~~resulting in a more customer-centric sales and support team; a more proactive manufacturing, inventory planning, and distribution network; and a streamlined back-office support function. ~~We continue to anticipate annual benefits from this integration initiative in the range of $0.12 to $0.15 per diluted share beginning in fiscal 2022.~~

Our digital print business, DTG2Go, remains a competitive force in the digital print and fulfillment ~~market which is poised to expand rapidly in coming years.~~market. We believe we are differentiated in this market, considering our vertically-integrated supply chain, broad geographic network for fulfillment and distribution, proprietary technology, and broad and diverse customer relationships. We continue to see the transition of additional retailers and brands, many of whom are current Delta Group customers, to an on-demand digital fulfillment ~~model as a positive tipping point for DTG2Go. In fact, DTG2Go saw growth in the June quarter~~model. One of over 70% in the traditional retail channel compared to prior year. DTG2Go started the quarter strong with new customers coming onboard to the platform and increased production from existing customers. We experienced temporary disruptions as the result of labor shortages to meet the surge in orders received, resulting in a 4% decrease in units produced compared to the June quarter of fiscal 2019. Following the implementation of additional incentive pay programs during the quarter, we anticipate a better balance of production labor to service the demand we see in the market. As a testament to the strategic benefits of being a vertically-integrated apparel supplier is that customers are able chose Delta blanks for ~~56% of~~ the garments digitally printed during the June fiscal 2021 quarter, which is significantly above the 30% Delta blank fulfillment in the prior year third quarter and ahead of the 50% Delta blank usage in the March quarter.digital printing. This ~~trend is promising as it~~often creates a more efficient operation, reduces garment costs for our customers, and lowers working capital needs in the business.

We invest in digital print equipment to build production capacity, ~~but we~~in addition to also ~~make~~making investments and improvements in our proprietary technology that will both provide our customers with an even better experience ~~as well as~~and provide us improved inventory planning. ~~During the June quarter, we integrated our recently acquired~~We leverage Autoscale technology ~~into~~in our DTG2Go business. Autoscale provides automated solutions for design creation, art & licensing management ~~and~~as well marketing spend enabling seamless connection with various online marketplaces. ~~Integrating Autoscale’s~~Using Autoscale innovative technology ~~into~~in our portfolio is part of our strategy to drive enterprise value over the long term by providing an automated, scalable, seamless solution for on-demand, decorated apparel – from design to fulfillment. ~~We believe Autoscale’s technology and innovation pipeline will expand the on-demand opportunities for our existing customers and bring new customers to the DTG2Go platform.~~

Salt Life enthusiasts ~~are~~continue to actively ~~engaging this summer~~engage with the authentic, aspirational lifestyle brand. Showing ~~its~~ true omni-channel strength, sales grew over ~~35%~~25% compared to the ~~pre-pandemic June 2019~~first quarter of fiscal 2021 with ~~at least~~ double-digit growth for each of our wholesale, retail, and ecommerce channels. Direct-to-consumer sales now make up approximately one-third of total sales in the ~~June 2020~~December 2021 quarter, ~~making~~continuing to progress totoward our long-term goal of two-thirds direct-to-consumer contributions. ~~Sales at our retail doors grew over 250% compared to the June 2019 quarter, particularly in key vacation destinations.~~ We plan to open an additional six to eight stores in ~~the September 2021 quarter in Myrtle Beach, South Carolina, as well as our first store in Texas in Galveston.~~fiscal 2022. We ~~are accelerating our investments~~continue to invest in this key sales channel and ~~look~~are looking to ~~further expand~~end the ~~Salt Life brand reach~~fiscal year with ~~at least five additional~~approximately 20 retail ~~locations in 2022.~~stores. Salt Life enthusiasts also actively engaged with the brand through all our online channels. In particular, viewership of Salt Life content on YouTube increased approximately 30% for the June 2021 quarter, with minutes watched increasing more at 40% from the prior quarter. Following the launch of our “The Daily Salt” online publication in March 2021,continues to increase while we ~~have increased~~continue to increase the frequency of content publications as well as launched a weekly podcast, “Above and Below”, in July 2021. Since June 2019, we have added approximately 30% more email subscribers, which is encouraging considering that approximately one quarter of all web sales in the June 2021 quarter were generated fromon “The Daily Salt,” our ~~email marketing channel, driving 40% growth of ecommerce sales year-over-year in the June 2021 quarter.~~

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

Net sales were ~~$118.7~~$110.7 million in the first quarter of fiscal 2022, an increase of ~~65.3%~~17% compared to the prior year ~~third~~first quarter when our operations were significantly impacted by the COVID-19 pandemic, and were relatively flat with the pre-pandemic June 2019 quarter. The third quarter sales performance represents a 9.2% increase to the second quarter 2021 sales. For the first nine months of 2021, net sales ~~were $322.0 million compared to $264.4 million in the prior year. Our direct-to-consumer sales channels, comprised~~ of consumer-facing ecommerce sites and our branded retail stores, increased 30% in the current quarter compared to the prior year quarter. Retail and total ecommerce sales represented 5% of total revenues for the third quarter compared to 6% in the prior year and 4% for the first nine months of both years.$94.7 million.

Net sales in the Delta Group segment grew ~~57%~~16% to ~~$102.6~~$101.9 million compared to ~~$65.5~~$87.6 million in the prior year, which was unfavorably impacted by the COVID-19 pandemic. Compared to June 2019, net sales were down 5% primarily from inventory constraints resulting from COVID-19 restrictions on manufacturing infirst fiscal quarter of the prior year. ~~Net~~Delta Direct and Global Brands & Retail Direct grew over 16% from the prior year first quarter. DTG2Go sales ~~for the first nine months of 2021 were $284.4 million, a 19% improvement~~grew by 17% over the prior ~~year.~~year with new customer launches.

Salt Life segment net sales grew ~~over 150%~~24% from the first quarter of the prior year to ~~$16.1~~$8.8 million. ~~Compared~~The sales growth is attributable to ~~the June 2019 quarter, net~~increased wholesale sales ~~increased 36%,~~together with ~~at least double-digit growth across all sales channels, including 250%~~ growth in the direct-to-consumer business with our branded retail ~~sales. For~~stores.

Retail and total ecommerce sales represented 10% of total revenues for the ~~first nine months of~~both the December 2021 ~~net sales were $37.6 million, up 47% from the prior year net sales of $25.7 million.~~and 2020 quarters.

Gross ~~margin improved to 25.5% versus 4.2%~~margins were 20.8% for the first quarter of fiscal 2022, lower than the 21.4% in the prior year ~~and 20.8% in the June 2019 quarter~~largely driven by ~~the benefit of selling price increases combined with lower product~~inflationary costs ~~still flowing through cost of sales. For the first nine months of fiscal year 2021, gross margins grew 700 basis points from the prior year to 23.4%.~~pressure.

The Delta Group segment gross margins were ~~21.7%~~18.0% for the ~~June~~December quarter, ~~an improvement to~~a decline from the prior year December quarter margins of ~~0.7% and June 2019 margins of 17.9%. When adjusted for $12.6 million of COVID-19 related expenses in the prior year, gross margins would have been 19.7%~~19.1%. Gross margins ~~improved from~~were negatively impacted by the ~~benefit of selling price increases combined with benefit of lower~~higher product costs ~~still~~ flowing through cost of ~~sales. Margins for the first nine months improved~~sales, offset partially by ~~700 basis points to 20.2% of sales.~~increased selling prices.

The Salt Life Group segment gross margins ~~were 49.7%~~improved to 53.3% compared to ~~40.8%~~50.2% in the prior year ~~and 47.3% in June 2019~~December quarter resulting from a favorable mix of ~~direct-to-consumer~~ sales, ~~especially from~~driven by the Salt Life branded retail store sales. ~~For the first nine months of fiscal year 2021, gross margins grew 300 basis points to 47.9% also from the stronger mix of direct-to-consumer sales.~~

Other income for the fiscal year 2022 and fiscal year 2021 ~~and 2020 June~~December quarters includes profits related to our Honduran equity method investment. The ~~June 2021~~first quarter ~~also includes a $1.2 million favorable valuation change in our contingent consideration liability. The first nine months~~ of ~~2021 includes~~the prior year included $1.3 million of expenses related to the impact of two hurricanes that disrupted our Honduran manufacturing facilities in the ~~December 2020~~first quarter ~~and $0.4 million~~ of long-lived asset impairment charges as the result of a strategic decision in the March 2021 quarter to exit branded Soffe retail stores. The prior year first nine months included $8.1 million of COVID-19 related adjustments.

Operating profit in the ~~third~~first quarter for the fiscal year 2022 increased to ~~$11.9~~$5.9 million, compared to the prior year ~~third~~first quarter ~~loss~~profit of $21.6 million, which included $23.1 million of COVID-19 related adjustments. Operating income for the June 2021 quarter increased over 40% compared to operating income of $8.3 million for the same quarter in fiscal 2019. For the first nine months of fiscal year 2021, operating income increased $37.9 million compared to the same period of fiscal 2020 and increased $11.5 million compared to the same period of fiscal 2019. The first nine months of fiscal year 2020 includes $25 million of COVID-19 related expenses. The first nine months of fiscal year 2019 includes $1.2 million, of net expenses from litigation settlements. After adjusting for these items, the improvement in our results is principally from the stronger gross margins.$3.1 million.

The Delta Group segment had operating income of ~~$13.9~~$8.4 million, or ~~13.5%~~8.3% of net sales, compared to ~~a loss of $17.5~~$6.3 million, or ~~26.7%~~7.2% of net sales, in the prior year ~~and to $9.2 million, or 8.6% of net sales,~~first quarter. The increase in ~~fiscal 2019. The expanded~~ operating ~~profitability~~profit was driven by ~~favorable gross margins, continuing cost controls,~~leveraging fixed costs against higher sales as well as $1.2 million of income from the reduction of the contingent earnout liability in fiscal 2021 and $23.1 million of COVID-19 related expenses in fiscal 2020. Operating income for the first nine months of fiscal 2021 for the Delta Group segment was $28.4 million, or 10.0% of net sales, compared to a loss of $5.1 million, or 2.2% of net sales, in fiscal 2020 and $15.4 million, or 5.3% of net sales, in fiscal 2019. The first nine months of fiscal year 2021 includes $1.3 million of hurricane-related expenses as well as $1.2 million of income for the reduction in the contingent earnout liability. The first nine months of fiscal year 2020 includes $25 million of COVID-19 related expenses. The first nine months of fiscal year 2019 includes $2.5 million of expenses from litigation settlements.continuing cost controls.

The Salt Life Group segment had operating income of ~~$2.9~~$0.1 million, or ~~18.1%~~1.5% of net sales, compared to a loss of ~~$0.6~~$0.1 million, or ~~10.0%~~1.4% of sales, in the prior year and $2.6 million or 21.9% of sales, in fiscal 2019. Third quarter fiscal 2019 was favorably impacted by $1.1 million reduction of contingent earnout liability from the Salt Life acquisition. Excluding this adjustment, adjusted operating income for June 2019 quarter was $1.3 million or 10.9% of net sales.first quarter. The ~~expanded~~improved operating profit was driven ~~from~~by a stronger direct-to-consumer sales mix. Operating income for the first nine months of fiscal 2021 for the Salt Life Group segment was $4.7 million, or 12.6% of net sales, compared to $0.2 million, or 0.7% of net sales, in fiscal 2020 and $5.6 million, or 17.3% of net sales, in fiscal 2019. The first nine months of fiscal year 2019 includes $1.3 million of income from favorable litigation settlements as well as $1.1 million of income from a reduction in the contingent earnout liability from the Salt Life acquisition. Excluding these adjustments, adjusted operating income for the first nine months of fiscal 2019 was $3.2 million or 9.8% of net sales.

Net interest expense was ~~$1.7~~$1.6 million for ~~both the third quarters~~first fiscal quarter of ~~fiscal 2021 and 2020. Net interest expense for the first nine months of 2021 was $5.2 million~~2022 compared to ~~$5.3~~$1.7 million in the prior year first ~~nine months.~~ fiscal quarter.

Our effective tax rate on operations for the ~~nine-month~~three-month period ended ~~June~~December 2021 was ~~23.1%~~15.1%. This compares to an effective tax rate of ~~23.9%~~39.3% for the same period in the prior year and ~~23.6%~~21.9 % for the full fiscal year ~~2020.~~2021. See Note K—Income taxes for more information.

We achieved net earnings for the ~~June~~December 2021 quarter of ~~$8.2~~$3.6 million, or ~~$1.14~~$0.51 per diluted share, compared to a net loss of $17.8 million, or $2.58 per share, in the prior year period, which included $17.7 million, or $2.57 per diluted share, of after-tax COVID-19 related expenses. Net earnings per diluted share for the June 2021 quarter increased over 60% compared to $0.70 for the same quarter in fiscal 2019. The third quarter fiscal 2021 results included $0.9 million, or $0.13 per diluted share, ~~of after-tax income related to~~in the reduction of fair value of the contingent earnout liability from the DTG2Go acquisition. The third quarter fiscal 2019 results included an after-tax gain of $0.7 million, or $0.10 per diluted share, related to the settlement of a commercial litigation matter.prior year first quarter.

Accounts receivable were ~~$67.0~~$65.7 million at ~~June~~December 2021, compared to ~~$60.1~~$67.7 million as of September ~~2020.~~2021. Days sales outstanding ("DSO") as of ~~June~~December 2021 were 5049 days compared to 5147 days at September ~~2020.~~2021.

Net inventory as of ~~June~~December 2021 was ~~$152.3~~$183.1 million, an increase of ~~$6.8~~$21.4 million from September ~~2020, but down $5.7~~2021 and $34.6 million from aDecember 2020. We have increased production during the past year ~~ago.~~and are now producing at record manufacturing levels. The ~~strong sales in the first nine months, along with the~~ temporary hurricane disruptions during the December 2020 quarter ~~slowed~~impacted the planned inventory build during ~~fiscal 2021. We have increased production during~~ the prior year first ~~nine months of fiscal 2021 and are now producing at record levels.~~quarter.

Total net debt, including capital lease financing and cash on hand, was ~~$132.3~~$139.6 million at ~~June~~December 2021, an increase of ~~$10.1~~$18.0 million from September ~~2020.~~2021. Cash on hand and availability under our U.S. revolving credit facility totaled ~~$43.4~~$33.0 million at ~~June~~December 2021, a ~~$3.7~~$12.4 million decrease from September ~~2020~~2021 principally driven ~~from~~by investments in the ~~$6.6 million paid for the Autoscale acquisition in June 2021.~~business to support working capital needs.

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 results, we also provide non-GAAP information that management believes is useful to investors. We discuss operating income, net income and earnings per diluted share 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 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 ongoing performance. These non-GAAP measures have imitations 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 or our results as reported under U.S. GAAP. These non-GAAP measures may not be comparable to similarly titled measures used by other companies.

Operating activities ~~provided $11.0~~used $13.2 million of cash for ~~the nine months ended June~~December 2021 quarter compared to ~~$22.0~~$2.5 million in the prior ~~year. The~~year December quarter. Net cash used in operating ~~cash flows in the current year were impacted by~~activities primarily increased ~~payments to suppliers following the COVID-19 related disruptions in the prior year, along with~~as a result of higher inventory production in the current year. This was partially offset by the increased operating ~~income during fiscal 2021.~~income.

~~Total capital expenditures for the nine months ended June 2021 were $11.6 million and primarily related to investments~~Cash used in digital printing capacity, machinery and equipment to support our manufacturing process, and racking for our new Phoenix, Arizona distribution center. Cash outflows for capital expenditures were $1.7investing activities was $2.5 million during the first ~~nine months~~quarter of ~~2021~~fiscal year 2022 compared to ~~$4.4~~cash provided by investing activities of $1.3 million infor the same period in the prior year. ~~Cash paid for technology intangible assets acquired as part of the Autoscale.ai acquisition was $6.7 million.~~ As of ~~June~~December 2021, there ~~were $12.3 million of capital expenditures financed under a capital lease arrangement and $0.4~~was $0.6 million in unpaid expenditures. In ~~addition,~~the first quarter of fiscal 2021, we received proceeds of $2.3 million ~~during the first nine months of fiscal 2021~~ from finance lease arrangements related to prior year capital expenditure cash outflows. ~~Total capital expenditures during the first nine months of fiscal 2020 were $8.1 million and primarily related to investments in our distribution expansion, retail stores, and machinery and equipment.~~

We anticipate our fiscal ~~2021~~2022 capital expenditures, including those financed under capital leases, to be approximately $20 million and to be focused primarily on our distribution expansion, digital print equipment, manufacturing equipment, information technology, and direct-to-consumer investments, including additional Salt Life retail store openings.

During the ~~nine months ended June~~December 2021 quarter, cash ~~used~~provided by financing activities was ~~$7.9~~$12.7 million ~~and~~which related primarily ~~related~~ to ~~scheduled loan principal payments, DTG2Go contingent earnout payments, and finance lease payments, partially offset by~~ advances from our long-term debt used to fund operations, working capital needs, and ~~capital expenditures.~~repurchases of our stock.

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.

Prior to the amendments executed on April 27, 2020 and August 28, 2020 (collectively, the "Bridge Amendments"), our U.S. revolving credit facility 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. The Bridge Amendments amend the financial covenant provisions from the amendment dates through July 3, 2021, including effectively lowering the minimum availability thresholds and removing the requirement that our FCCR for the preceding 12-month period must not be less than 1.1 to 1.0. Our availability at June 2021 was above both the minimum availability threshold per the Bridge Amendments as well as the higher thresholds in the U.S. credit agreement that would trigger an FCCR covenant requirement. Had we been subject to the FCCR requirements at June 2021, we would have been in compliance with this covenant.

Our credit facility, as well as cash flows from operations, are intended to fund our day-to-day working capital needs, and along with ~~finance~~capital lease financing arrangements, to fund our planned capital expenditures. However, any material deterioration in our results of operations, ~~such as those that could occur due to the COVID-19 pandemic,~~ may result in the loss of our ability to borrow orunder our U.S. revolving credit facility and to issue letters of credit to suppliers, ~~under our U.S. revolving credit facility,~~ 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. Additionally, a significant deterioration in our business results could cause our availability to fall below minimum thresholds, thereby requiring us to maintain the minimum FCCR specified in our credit agreement, which we may not be able to maintain.

Moreover, our credit facility includes a financial covenant that if the availability under our credit facility falls below the amounts specified in our U.S. credit agreement, our fixed charge coverage ratio (FCCR) for the preceding 12-month period must not be less than 1.1 to 1.0. While our availability at December 2021 was above the minimum thresholds specified in our credit agreement, a significant deterioration in our business could cause our availability to fall below such thresholds, thereby requiring us to maintain the minimum FCCR specified in our credit agreement.

During the ~~June~~December 2021 quarter, we ~~did not purchase any~~purchased 74,232 shares of our common stock for $2.1 million (see Note N—Repurchase of Common Stock). As of ~~June~~December 2021, there was ~~$7.5~~$5.4 million of repurchase authorization remaining under our Stock Repurchase Program.

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 fiscal ~~2020,~~2021, and there have been no changes in those policies since the filing of that Annual Report on Form 10-K with the SEC, except as disclosed in Note C—New Accounting Standards related to the adoption of the cloud computing standard.

We are subject to various federal, state and local environmental laws and regulations concerning, among other things, wastewater discharges, storm water flows, air emissions and solid waste disposal. The labeling, distribution, importation, marketing, and sale of our products are subject to extensive regulation by various federal agencies, including the Federal Trade Commission, Consumer Product Safety Commission and state attorneys general in the United States. Our international operations are also subject to compliance with the U.S. Foreign Corrupt Practices Act (the “FCPA”) and other anti-bribery laws applicable to our operations.

The environmental and other regulations applicable to our business are becoming increasingly stringent, and we incur capital and other expenditures annually to achieve compliance with these environmental standards and regulations. We currently do not expect that the amount of expenditures required to comply with these environmental standards or other regulatory matters 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 compliance with all applicable environmental and other regulatory requirements, the extent of our liability, if any, for past failures to comply with laws, regulations and permits applicable to our operations cannot be determined and could have a material adverse effect on our operations, financial condition and liquidity.

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 the end of period covered by this quarterly report ("the Evaluation Date") and, based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures were effective as of the Evaluation Date.

There were no changes during the ~~June~~December 2021 quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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

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

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 (unaudited):

	Condensed Consolidated Balance Sheets — ~~June~~December 2021 and September ~~2020~~2021	3

	Condensed Consolidated Statements of Operations — Three ~~and Nine~~ months ended ~~June~~December 2021 and ~~June~~December 2020	4

	Condensed Consolidated Statements of Comprehensive Income — Three ~~and Nine~~ months ended ~~June~~December 2021 and ~~June~~December 2020	5

	Condensed Consolidated Statements of Shareholders' Equity — Three ~~and Nine~~ months ended ~~June~~December 2021 and ~~June~~December 2020	6

	Condensed Consolidated Statements of Cash Flows — ~~Nine~~Three months ended ~~June~~December 2021 and ~~June~~December 2020	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—Selling, General and Administrative Expense	10
	Note H—Stock-Based Compensation	10
	Note I—Purchase Contracts	10
	Note J—Business Segments	11
	Note K—Income Taxes	11
	Note L—Derivatives and Fair Value Measurements	12
	Note M—Legal Proceedings	12
	Note N—Repurchase of Common Stock	13
	Note O—Goodwill and Intangible Assets	13
	Note P—Subsequent Events	13

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 4.	Controls and Procedures	15

PART II.	Other Information

Item 1.	Legal Proceedings	15

Item 1A.	Risk Factors	15

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	15

Item 5.	Other Information	15

Item 6.	Exhibits	15

Signatures		16

Exhibits
EX-10.6.5
EX-31.1
EX-31.2
EX-32.1
EX-32.2

	Three Months Ended						Nine Months Ended						Three Months Ended
	June 2021			June 2020			June 2021			June 2020			December 2021			December 2020

Net sales	$	118,666		$	71,801		$	322,015		$	264,351		$	110,746		$	94,723
Cost of goods sold		88,427			68,819			246,677			220,893			87,743			74,434
Gross profit		30,239			2,982			75,338			43,458			23,003			20,289

Selling, general and administrative expenses		19,914			15,206			53,005			51,130			17,482			16,030
Other (income) loss, net		(1,578	)		9,364			(218	)		7,724			(395	)		1,190
Operating income (loss)		11,903			(21,588	)		22,551			(15,396	)
Operating income														5,916			3,069

Interest expense, net		1,735			1,710			5,225			5,320			1,598			1,654
Earnings before provision for (benefit from) income taxes		10,168			(23,298	)		17,326			(20,716	)
Provision for (benefit from) income taxes		2,019			(5,454	)		4,032			(4,884	)
Consolidated net earnings (loss)		8,149			(17,844	)		13,294			(15,832	)
Net loss attributable to non-controlling interest		12			63			149			286
Net earnings (loss) attributable to shareholders	$	8,161		$	(17,781	)	$	13,443		$	(15,546	)
Earnings before provision for income taxes														4,318			1,415
Provision for income taxes														648			572
Consolidated net earnings														3,670			843
Net (income) loss attributable to non-controlling interest														(25	)		40
Net earnings attributable to shareholders													$	3,645		$	883

Basic earnings (loss) per share	$	1.17		$	(2.58	)	$	1.93		$	(2.24	)
Diluted earnings (loss) per share	$	1.14		$	(2.58	)	$	1.90		$	(2.24	)
Basic earnings per share													$	0.52		$	0.13
Diluted earnings per share													$	0.51		$	0.13

Weighted average number of shares outstanding		6,975			6,890			6,956			6,932			6,999			6,920
Dilutive effect of stock awards		153			0			121			0			86			80
Weighted average number of shares assuming dilution		7,128			6,890			7,077			6,932			7,085			7,000

	Three Months Ended					Nine Months Ended
	June 2021		June 2020			June 2021		June 2020

Net earnings (loss) attributable to shareholders	$	8,161	$	(17,781	)	$	13,443	$	(15,546	)
Other comprehensive income (loss) related to unrealized gain (loss) on derivatives, net of income tax		105		3			429		(461	)
Consolidated comprehensive income (loss)	$	8,266	$	(17,778	)	$	13,872	$	(16,007	)

Period Ended	Fiscal Year	Date Ended
December ~~2019~~2020	Fiscal ~~2020~~2021	~~December 28, 2019~~
~~March 2020~~	~~Fiscal~~ ~~2020~~	~~March 28, 2020~~
~~June 2020~~	~~Fiscal~~ ~~2020~~	~~June 27, 2020~~
~~September 2020~~	~~Fiscal~~ ~~2020~~	~~October 3, 2020~~
~~December 2020~~	~~Fiscal~~ ~~2021~~	January 3, 2021
March 2021	Fiscal 2021	April 3, 2021
June 2021	Fiscal 2021	July 3, 2021
September 2021	Fiscal 2021	October 2, 2021
December 2021	Fiscal 2022	January 1, 2022

	*Three Months Ended*
	*June 2021*				*June 2020*
Retail	$	3,543	3	%	$	1,179	2	%
Direct-to-consumer ecommerce		2,105	2	%		3,153	4	%
Wholesale		113,018	95	%		67,469	94	%
Net sales	$	118,666	100	%	$	71,801	100	%

	*Three Months Ended June 2021*											*December 2021 Quarter*
	*Net Sales*		*Retail*			*Direct-to-consumer ecommerce*			*Wholesale*			*Net Sales*		*Retail*			*Direct-to-consumer ecommerce*			*Wholesale*
Delta Group	$	102,562		0.2	%		0.3	%		99.5	%	$	101,921		0.2	%		0.3	%		99.5	%
Salt Life Group		16,104		20.6	%		11.0	%		68.4	%		8,825		30.4	%		12.0	%		57.6	%
Total	$	118,666										$	110,746

	*Three Months Ended June 2020*
	*Net Sales*		*Retail*			*Direct-to-consumer ecommerce*			*Wholesale*
Delta Group	$	65,543		0.2	%		1.0	%		98.8	%
Salt Life Group		6,258		17.0	%		40.3	%		42.7	%
Total	$	71,801

	*Nine Months Ended June 2021*
	*Net Sales*		*Retail*			*Direct-to-consumer ecommerce*			*Wholesale*
Delta Group	$	284,404		0.3	%		0.2	%		99.5	%
Salt Life Group		37,611		20.6	%		12.1	%		67.3	%
Total	$	322,015

	*Nine Months Ended June 2020*											*December 2020 Quarter*
	*Net Sales*		*Retail*			*Direct-to-consumer ecommerce*			*Wholesale*			*Net Sales*		*Retail*			*Direct-to-consumer ecommerce*			*Wholesale*
Delta Group	$	238,685		0.3	%		0.4	%		99.3	%	$	87,624		0.2	%		0.4	%		99.4	%
Salt Life Group		25,666		10.9	%		18.9	%		70.2	%		7,099		31.4	%		21.1	%		47.5	%
Total	$	264,351										$	94,723

	*June 2021*		*December 2021*
Revolving credit facility established December 2020, interest at 7.25%, due August 2025	$	667	$	984
Term loan established December 2020, interest at 7.5%, quarterly installments beginning September 2021 through December 2025		9,128		8,114

Yarn	$	31,040	$	28,071
Finished fabric		2,620		7,808
Finished products		18,238		18,929
	$	51,898	$	54,808

		*Notional*
	*Effective Date*	*Amount*	*Fixed LIBOR Rate*	*Maturity Date*
Interest Rate Swap	July 25, 2018	$20.0 million	3.18%	July 25, 2023

	June 2021			September 2020			December 2021			September 2021
Deferred tax assets	$	298		$	442		$	195		$	266
Accrued expenses		—			(108	)
Other non-current liabilities		(1,191	)		(1,656	)		(769	)		(1,052	)
Accumulated other comprehensive loss	$	(893	)	$	(1,322	)	$	(574	)	$	(786	)

	○	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.

	*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 2021	$	(1,191	)		0	$	(1,191	)		0
September 2020	$	(1,764	)		0	$	(1,764	)		0

Contingent Consideration
June 2021	$	(3,100	)		0		0		$	(3,100	)
September 2020	$	(6,420	)		0		0		$	(6,420	)

	June 2021							September 2020								*December 2021*							*September 2021*
	Cost		Accumulated Amortization			Net Value		Cost		Accumulated Amortization			Net Value		Economic Life	*Cost*		*Accumulated Amortization*			*Net Value*		*Cost*		*Accumulated Amortization*			*Net Value*		*Economic Life*

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

Intangibles:
Tradename/trademarks	$	16,000	$	(4,184	)	$	11,816	$	16,090	$	(3,820	)	$	12,270	20 – 30 yrs	$	16,000	$	(4,450	)	$	11,550	$	16,000	$	(4,317	)	$	11,683	20 – 30 yrs
Customer relationships		7,400		(2,288	)		5,112		7,400		(1,733	)		5,667	20 yrs		7,400		(2,658	)		4,742		7,400		(2,473	)		4,927	20 yrs
Technology		9,815		(1,494	)		8321		1,720		(1,380	)		340	10 yrs		10,024		(1,937	)		8087		9,952		(1,715	)		8237	10 yrs
License agreements		2,100		(811	)		1,289		2,100		(733	)		1,367	15 – 30 yrs		2,100		(862	)		1,238		2,100		(837	)		1,263	15 – 30 yrs
Non-compete agreements		1,657		(1,445	)		212		1,657		(1,353	)		304	4 – 8.5 yrs		1,657		(1,508	)		149		1,657		(1,476	)		181	4 – 8.5 yrs
Total intangibles	$	36,972	$	(10,222	)	$	26,750	$	28,967	$	(9,019	)	$	19,948		$	37,181	$	(11,415	)	$	25,766	$	37,109	$	(10,818	)	$	26,291

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

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

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.

10.6.5		Fifth Amendment to Yarn Supply Agreement dated as of December 27, 2018, between Delta Apparel, Inc. and Parkdale Mills, LLC, and Parkdale America, LLC. ⁺

10.6.6		Sixth Amendment to Yarn Supply Agreement dated as of December 27, 2021, between Delta Apparel, Inc. and Parkdale Mills, LLC, and Parkdale America, LLC: Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 3, 2022. +

⁺		Portions of this exhibit (indicated therein by asterisk) have been omitted for confidential treatment.

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

101.SCH		Inline XBRL Taxonomy Extension Schema

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase

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

			DELTA APPAREL, INC. (Registrant)

Date	~~August 5, 2021~~February 8, 2022	By:	/s/ ~~Deborah H. Merrill~~Simone Walsh
			~~Deborah H. Merrill~~Simone Walsh Chief Financial Officer ~~and President, Delta Group~~