The registrant’s Annual Meeting of Shareholders is currently scheduled for February 8, 2024. Portions of the registrant’s Proxy Statement for its annual meeting are incorporated by reference in Part III of this Annual Report on Form 10-K shallwhere indicated. Such proxy statement will be incorporated fromfiled with the Securities and Exchange Commission (“SEC”) within 120 days of the registrant’s definitive Proxy Statement to be filed pursuant to Regulation 14A for the registrant’s Annual Meetingfiscal year ended September 30, 2023.
EX-10.2.14 EX-23.1 EX-31.1 EX-31.2 EX-32.1 EX-32.2 Cautionary Note Regarding Forward-Looking Statements The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of the Company. We may from time to time make written or oral statements that are “forward-looking,” including statements contained in this report and other filings with the Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current expectations and are necessarily dependent upon assumptions, estimates and data that we believe are reasonable and accurate but may be incorrect, incomplete or imprecise. Forward-looking statements are subject to a number of business risks and inherent uncertainties, any of which could cause actual results to differ materially from those set forth in or implied by the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in forward-looking statements include, among others, the following: the general U.S. and international economic conditions; ● the impact of the COVID-19 pandemic or the advent of similar pandemics or events on our operations, financial condition, liquidity, and capital investments, including labor shortages, inventory constraints, and supply chain disruptions; A detailed discussion of significant risk factors that have the potential to cause actual results to differ materially from our expectations is Overview Delta Apparel, Inc. We design and internally manufacture the majority of our products We 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., 2750 Premiere Parkway, Suite 100, Duluth, Georgia 30097. Requests can also be made by telephone to 864-232-5200, or via email at investor.relations@deltaapparel.com. Segments, Products, Brands, and Customers Our operations are managed and reported in two Delta Group The Delta Activewear Delta Activewear is a preferred supplier of activewear apparel to regional and global brands as well as direct to retail and wholesale markets. The Activewear business is organized around three key customer channels – Delta Direct, Global Brands, and Retail Direct – that are distinct in their go-to-market strategies and how their respective customer bases source their various apparel needs. Our Delta Direct channel services the screen print, promotional, and eRetailer markets as well as retail licensing customers that sell through to many mid-tier and mass market retailers. Delta Direct products include a broad portfolio of apparel and accessories under the Delta, Delta Platinum, and Soffe brands as well as sourced items from select third party brands. Our fashion basics line includes our Platinum Collection, which offers fresh, fashionable silhouettes with a luxurious look and feel, as well as versatile fleece offerings. We offer innovative apparel products including the Delta Dri line of performance shirts built with moisture-wicking material to keep athletes dry and comfortable; ringspun garments with superior comfort, style and durability; and Delta Soft, a collection with an incredible feel and price. We also offer our heritage, mid- and heavier-weight Delta Pro Weight® and Magnum Weight® tee shirts. Our iconic Soffe brand offers activewear for spirit makers and record breakers and is widely known for the original “cheer short” with the signature roll-down waistband. Soffe carries a wide range of activewear for the entire family. Soffe’s heritage is anchored in the military, and we continue to be a proud supplier to both active duty and veteran United States military personnel worldwide. The Soffe men's assortment features the tagline “anchored in the military, grounded in training” and offers everything from physical training gear certified by the respective branches of the military, classic base layers that include the favored 3-pack tees, and the iconic “ranger panty.” Complementing our Delta and Soffe branded apparel, we provide our customers with a broad range of product categories from nationally recognized brands including polos, outerwear, headwear, bags, and other accessories. Our Soffe products are also available direct to consumers at www.soffe.com. Our Global Brands channel serves as a key supply chain partner to large multi-national brands, major branded sportswear companies, trendy regional brands, and all branches of the United States armed forces, providing services ranging from custom product development to shipment of branded products with “retail-ready” value-added services including embellishment, hangtags, and ticketing. Our Retail Direct channel serves brick and mortar and online retailers by providing our portfolio of Delta, Delta Platinum, and Soffe products directly to the retail locations and ecommerce fulfillment centers of a diversified customer base including sporting goods and outdoor retailers, specialty and resort shops, farm and fleet stores, department stores, and mid-tier retailers. As a key element of the integrated Delta Group segment, each of Activewear’s primary channels offers a seamless solution for small-run decoration needs with on-demand digital print services, powered by DTG2Go. Salt Life Group Salt Life Salt Life is an authentic, aspirational lifestyle brand that represents a passion for the ocean, the salt air, and, more importantly, a way of life and all it offers, from surfing, fishing, and diving to beach fun and sun-soaked relaxation. Our apparel takes you from the boat to the beach and is constantly evolving to fit our customers’ needs. The Salt Life brand combines function and fashion with a tailored fit for the active lifestyles of those that “live the Salt Life.” With increased worldwide appeal, Salt Life has continued to provide the cotton graphic tees and logo decals that originally drove awareness for the brand and also expanded into performance apparel, swimwear, board shorts, sunglasses, bags, and accessories. Our Salt Life business is organized around three Salt Life omnichannel markets - wholesale, ecommerce, and branded retail stores – that are distinct in their go-to-market strategies and how their respective customer bases source their various apparel needs. Salt Life’s wholesale channel allows consumers to seamlessly experience the Salt Life brand through one of our See Note 13 to the Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operation” for additional information regarding reportable segments. Manufacturing, Sourcing, and Distribution The vast majority of our products are manufactured or sewn in facilities that we own or lease and Our manufacturing operations begin with the purchase of yarn and other raw materials from third-party suppliers. We have operated with a supply agreement with Parkdale Mills, Inc. and Parkdale America, LLC (collectively “Parkdale”) to supply our yarn requirements since 2005, with our existing agreement running through December 31, 2024. Under that supply agreement, we purchase all of our yarn requirements for use in our manufacturing operations from Parkdale, excluding yarns that Parkdale does not manufacture or cannot manufacture due to temporary capacity constraints. The purchase price of yarn is based upon the cost of cotton, as reported by the New York Cotton Exchange, plus a fixed conversion cost. We set future cotton prices with purchase commitments as a component of the purchase price in advance of the shipment of finished yarn from Parkdale. We manufacture fabrics in our leased textile facility located near San Pedro Sula, Honduras. In fiscal years 2023 and 2022, we manufactured approximately 60% and 80%, respectively, of the fabrics used in our internally produced garments. The manufacturing process continues at one of our five apparel manufacturing facilities where fabric is cut and sewn into finished garments. These owned or leased facilities are located domestically (two in North Carolina) and internationally (two in Honduras and one in El Salvador). In fiscal years 2023 and 2022, approximately 95% or more of our manufactured products were sewn in our owned or leased manufacturing facilities. The remaining products were sewn by third-party contractors located primarily in the Caribbean Basin. To supplement our internal manufacturing platform, we purchase products from third-party global suppliers. In fiscal years 2023 and 2022, we sourced less than 10% of our total products from third parties. Many of the garments we produce will be decorated using screen printing or digital printing technology, and will be retail-packaged, including ticketing, hang tags, and hangers. These services can be performed domestically for quick-turn service or internationally in our El Salvador facility. We offer digital fulfillment services, powered by DTG2Go, at seven domestic facilities, including five such facilities that are integrated with Delta Group distribution centers. These facilities support our strategy of establishing integrated fulfillment locations that combine our DTG2Go state-of-the-art digital platform with our Delta Activewear supply of fashion and core basic garments. Furthermore, these facilities create a seamless nationwide footprint allowing us to reach the vast majority of all U.S. consumers within a two-day shipping window. Sales & Marketing Our sales and marketing The majority of our Trademarks and License Agreements We own several well-recognized trademarks that are important to our business. Salt Life® is an authentic, aspirational lifestyle brand that embraces those who love the ocean and everything associated with living the Environmental, Sustainability, and We aim to disclose and communicate transparently any material risks that Conserving the Environment We believe that efficiently and sustainably managing natural resources is a smart business practice and a responsible decision for the planet. By effectively and safely managing the materials used to Reducing our Environmental Impact Environmental problems such as climate change and resource depletion are escalating worldwide. Therefore, understanding and managing greenhouse gas emissions is important to effectively mitigate our impact to the environment. We are committed to monitoring our greenhouse gas emissions and adopting innovative technologies to improve the energy efficiency of our facilities The focus on reducing our overall energy intensity is driven by our goal to establish an energy efficient operation and reduce greenhouse gas emissions, which will contribute to lowering our operating costs as well as reducing our carbon footprint. The operations at our Ceiba Textiles facility in Honduras account for When comparing total greenhouse gas emissions in 2023 to our 2018 baseline year, we reduced our total emissions by 26.7%. This reduction avoids the equivalent of 12,634 metric tons of CO2 emissions, which is comparable to the electricity used by approximately 2,458 homes for one year or the carbon sequestered by 15,066 acres of U.S. forest in one year. In recent years we implemented several energy efficiency projects such as installing a heat exchanger at our Ceiba Textiles facility that plays an essential role in reducing the environmental impact of manufacturing processes by recovering and reusing energy. We also continue to replace compact florescent light bulbs with LED lighting, which is known to emit less heat and use less energy than conventional bulbs, decrease the temperature on factory floors, and thus raise productivity, particularly on hot days. In the sewing area, we improved the performance of our sewing machines by installing new motors that use significantly less energy due to advanced technology. In the knitting operations area, we modified the cooling system to turn off automatically when the outside temperature and humidity reach the optimum environment inside. In 2022 we removed 27 older model circular knitting machines and installed 18 large capacity knitting machines. Each new machine is much more energy efficient in addition to being more productive, with each machine capable of knitting one and one-half times more greige fabric in less time than one of the older knitting machines. These large capacity knitting machines were directly responsible for reducing our electricity usage by approximately 360,539 kilowatt-hours in 2023. Additional energy saving initiatives at Ceiba Textiles included the 2022 installation of a new steam textile dryer that replaced two existing thermal oil dryers. The steam dryer is capable of drying 66% more pounds of fabric per week than the thermal dryers and uses 25% less energy. During 2023, the steam dryer was responsible for reducing our electricity usage by approximately 239,742 kilowatt-hours. Together, these two energy-saving initiatives reduced our total electricity usage by 600,281 kilowatt-hours and avoided 425 metric tons of carbon dioxide (CO2) emissions, which is comparable to the carbon sequestered by 507 acres of forest in one full year. Managing Water Water is one of the world’s most precious and vital resources. Access to water is essential to Delta Apparel’s manufacturing operations, and we are committed to managing our water use in an efficient and responsible manner. Treating textile wastewater is necessary not only to protect the local ecosystems, but also to make the recycled water available to reuse in manufacturing processes or irrigation. To properly treat problematic substances before the water is discharged, our vertically integrated manufacturing facilities, as well as our third-party fabric suppliers, must comply with wastewater discharge requirements through currently active licenses and permits issued by local governments. In each of the last five years, none of our wastewater treatment facilities have received a compliance citation or violation. During manufacturing the most significant amount of water consumption occurs during the fabric washing, dyeing, and rinsing processes. To reduce our water consumption at Ceiba Textiles, we implemented a system in 2018 that reuses the leftover dye water in future batches of similar-colored fabric. This system saves approximately four million gallons or 15,000 cubic meters of water per year while maintaining the quality of our dyed fabrics. We also improved our dye formulas to further reduce water consumption and reduce the amount of contaminates remaining in the wastewater. In 2023, water intensity rose 2.6% against our 2018 baseline, which was mainly due to reduced fabric production, as absolute water consumption from all locations was down 26.6% compared to our 2018 baseline. Wastewater from Ceiba Textiles is transferred to the Green Valley water treatment facility, which operates on an environmental license issued by the Honduras Ministry of Energy, Natural Resources, Environment, and Mines. Over 87% of our 2023 water consumption at Ceiba Textiles was recycled. The Green Valley wastewater treatment facility uses the industry standard primary, secondary, and tertiary water treatment methods based on the types of effluents being discharged as well as regulatory and environmental standards. Treatment procedures are also in place to neutralize and remove additional substances that may potentially be harmful, but are not necessarily regulated. The following information describes the primary, secondary, and tertiary water treatment methods: ● Primary – Primary treatment methods include screening, sedimentation, homogenization, pH neutralization, and mechanical and chemical flocculation, which is a chemical added to the water that binds suspended solids into heavier particles that are easier to remove. Nano and cross-flow nano filtration techniques are also used to reduce the vast majority of sodium chloride and dyes. ● Secondary – Secondary treatment is designed to substantially degrade the biological content of the wastewater by using a combination of physical and aerobic biological processes. Secondary treatment methods include various types of filtration along with an activated sludge process, which stabilizes and converts potentially toxic contaminates into less harmful forms such as carbon dioxide and water, which are safe for the environment. ● Tertiary – Tertiary treatment is the final cleaning process that purifies wastewater before it is reused, recycled, or discharged into the environment. Treatment methods include a combination of physical and chemical techniques to decontaminate and purify the water. Managing Waste Our waste management strategy is to reduce, reuse, and recycle, which increases the likelihood that the waste materials we generate during the manufacturing process never reach landfills, lakes, rivers, streams, or municipal water systems. We are committed to full compliance with local, regional, and national environmental laws and regulations in the countries in which we operate, including as they relate to responsible recycling and disposal of hazardous and non-hazardous waste. Pre-consumer textile waste is created during the cutting and sewing processes and includes small pieces of fabric trimmed away and other fabric scraps. We have modified sewing patterns to significantly reduce fabric waste during cutting. We also invested in sewing machines capable of folding excess fabric inside the sleeve and bottom hems to eliminate trimming. This initiative not only reduces textile waste but also lowers fabric production needs, which saves water, electricity, and fuel. We have multiple reuse and recycle programs that help limit the waste that would otherwise be disposed in landfills: ● We partner with several companies that collect our fabric waste and sell it to manufacturers in the automotive industry, among others, that can mix the fabric with other materials to create alternate applications for the fabric, such as for automotive seats and windshield wipers. ● ● All of our manufacturing, sewing, and distribution facilities participate in cardboard recycling programs. Each facility flattens and places all cardboard in an outside container for recycling companies to then collect on a regular schedule. Using Safe Chemistry Textile operations use various chemicals, cleaners, dyes, and inks throughout the manufacturing, finishing, and decorating processes. We strive to use non-hazardous, bioeliminable ingredients in our apparel products and throughout our manufacturing processes to protect the safety of our customers and employees as well as reduce negative impacts on the environment. For example, our DTG2Go digital printing facilities use water-based biodegradable inks that are 100% non-hazardous and adhere to strict human health and environmental standards. We have a robust, hazard-based chemicals management system throughout our manufacturing processes. Our commitment to safe chemistry begins in the design and development stage of our products, which are conceived from the latest fashion trends and are fully compliant with statutory, industry, and customer-specific safety requirements. We are proud that the chemicals we use comply with the restricted substance list (“RSL”) published by the American Apparel & Footwear Association (“AAFA”). AAFA is the industry’s leading resource for maintaining and publishing banned and restricted substances lists for finished apparel products around the world. We continuously monitor our RSL, which includes additional substances that may be harmful, but are not necessarily regulated. We also control against the procurement of restricted substances through our purchase approval processes and arrangements with dye and chemical vendors. The dyes and chemicals used in our manufacturing facilities are tested annually by a third-party laboratory that uses a scoring system to determine the level of compliance. Since 2017 we have maintained a “Green” status, which is the highest level of compliance. Annual tests are also conducted by a third-party laboratory to ensure our compliance with The Consumer Product Safety Improvement Act (“CPSIA”) of 2008 and The Safe Drinking Water and Toxic Enforcement Act of 1986 (“Proposition 65 of California State Law”) as well as our adherence to any customer-supplied RSL. Our manufacturing employees are provided training on compliance with our RSL as well as training on how to safely handle potentially hazardous substances throughout the manufacturing process. It is also important to us that all of our significant third-party yarn and fabric suppliers share our high compliance standards and operate in a legal and responsible manner. We require these suppliers to provide, at least annually, certification or self-declaration documents that demonstrate compliance with industry standard parameters for safe chemistry. We take immediate corrective actions in instances where non-compliance may be identified. Responsible Sourcing As a vertically integrated apparel company, we believe it is important to have a high degree of oversight into all aspects of sourcing, manufacturing, and distribution. To that Delta Apparel is a member of the Cotton LEADS program, which is committed to sustainable and traceable cotton production. This partnership enables us to broaden our support of the cotton farmers who supply our Company with high-quality cotton, allowing us to continue transforming sustainably-sourced cotton into high quality, responsible apparel products for our customers. We serve as a supply chain partner for many customers who expect high quality raw materials and require the ability to trace those raw materials back to the source. With cotton traceability, we are now able to trace the fiber used in our garments all the way back to harvest. The vast majority of the yarn we use in our textile operations is sourced from Parkdale Mills, whose products are independently certified to Standard 100 by OEKO-TEX. In addition, our significant suppliers of external fabric are certified to Standard 100 by OEKO-TEX. We purchase cotton from Parkdale Mills based upon the price reported by the New York Cotton Exchange at the time we enter into a purchase commitment, along with a fixed conversion cost. Cotton pricing is impacted by weather, consumer demand, commodities market speculation, inflation, labor and transportation costs, and other variable factors beyond our control. As such, we are subject to the risk of fluctuating cotton prices, with sudden price decreases potentially resulting in our inventory costs exceeding the cost of new production, which may result in downward selling price pressures and a negative impact to profitability. We take measures designed to mitigate these risks including hedging and forward purchase commitment strategies, production volume adjustments, price increases and other strategies. In addition to risks related to pricing, we are also subject to availability risks with respect to cotton. If Parkdale Mills is unable to provide us with our cotton and poly cotton yarn requirements, we may need to obtain yarn from alternative sources who may not be amenable to short-term arrangements with terms similar to those we have with Parkdale Mills. In addition, we may not be able to obtain sufficient quantities of U.S. yarn from alternative sources, which could require us to use cotton grown with lower quality and/or environmental sustainability characteristics and potentially require us to adjust manufacturing levels. We purchased approximately 13,276 metric tons of yarn during our fiscal year 2023. Monitoring Progress We use the Sustainable Apparel Coalition’s Higg Index to measure the environmental impact of all our offshore manufacturing facilities and the facilities of our key external fabric suppliers. The Higg Index tool provides transparency of our efforts to reduce our environmental impact, and it identifies areas for continued improvement. Our Ceiba Textiles facility has been using this tool for several years, and our 2022 self-assessment resulted in a total score in the upper quartile as compared to our industry competitors. Our most recent self-assessment was completed in April 2023 and the results will be available in April 2024. We retain the services of an external consultant to verify our assessments for a sample of facilities and to provide guidance for any areas of improvement. Social Responsibility and Human Capital Management Our employees are our most important and valuable asset. Our diverse and talented workforce helps drive our culture of high performance, close teamwork, and deep caring for each other across geographies and functions. We have an impact on the lives of over 6,800 employees across the globe as well as their families and communities. We support the livelihoods of our people through competitive wages and benefits, providing them with a safe and healthy workspace, supporting the communities in which they live, and, most importantly, treating all employees with dignity and respect. Our People The table below provides an overview of the approximate number of our employees by geographic location as well as the tenure of that employee base as of September 2023: El Salvador Our employee base fluctuates based on seasonal labor requirements within our distribution and fulfillment centers, as well as based on production levels within our manufacturing facilities. These personnel changes generally trend with the overall demand for our products and services. Approximately 90% of the employees at two of our facilities in San Pedro Sula, Honduras, are party to multi-year collective bargaining agreements. We have historically conducted our operations without significant labor disruptions and believe that our relations with our employees are positive. The table below provides an overview of the approximate percentage of employees by gender and region as of September 2023. Diversity and Inclusion We are committed to fostering an inclusive culture where every employee is treated with dignity and respect, regardless of their gender, age, race, abilities, or sexual orientation. We believe that our employees’ contributions are richer because of their diverse backgrounds and experiences, which strengthens the collaboration of our cross-functional, global teams and leads to improved performance. Wages and Benefits Investing in our people is critical for their personal and professional success, and we believe this investment enhances engagement and performance levels. Our compensation philosophy is to provide a In recognition of the importance of raising the standard of living in certain communities in which we operate, we provide additional benefits such as free onsite medical care from fully licensed physicians and nurses that encompass clinics and wellness programs. In these locations, we also provide subsidized meal assistance as well as free transportation to and from our facilities. We invest in the professional development of our employees through various training programs. In 2023, we provided more than 114,000 hours of professional development and safety training for our employees. Health and Safety Our responsibility is to provide our employees with a safe and healthy work environment that meets or exceeds applicable environmental and health and safety laws and regulations. All of our manufacturing facilities in El Salvador, Honduras, and Mexico are Worldwide Responsible Accredited Production (“WRAP”) certified. We are a Category C affiliate with the Fair Labor Association (“FLA”), an organization that supports human rights compliance monitoring for our plants and our third-party contractors. Because textile manufacturing can contain various hazards and risks to workers, we have proactive programs in place to promote workplace safety, personal health, and employee wellness. Our culture promotes and rewards safety-first in all aspects of manufacturing, materials handling, and distribution of our apparel products. Safety training and awareness is embedded in employee orientation and onboarding, job performance and evaluation, and ongoing training based on a set safety training calendar by topic. We standardize, document, and improve our manufacturing and distribution safety procedures that require activities to be performed in the safest manner possible. We are proud that our safety records are consistently better than OSHA’s benchmarks for the apparel manufacturing sector. For example, Delta Apparel’s 2023 incident rate for total recordable cases was 0.2% compared to the apparel industry average incident rate of 1.7%. Our production and distribution processes incorporate ergonomic material handling equipment to reduce physical risks, protect employee health, and optimize productivity. In our cut and sew facilities, we use ergonomically-friendly chairs and floor mats in addition to facilitating frequent group stretching and movement exercises. In several of our manufacturing and distribution facilities we provide lightweight slip sheet material handling equipment, which has the dual benefit of reducing manual labor and potential back strain on employees. Monitoring We conduct annual audits of our internal manufacturing facilities as well as our significant third-party fabric suppliers to evaluate compliance with the FLA Workplace Code of Conduct. These audits cover labor topics such as forced or child labor, compensation policies, and nondiscrimination, as well as environmental health and safety topics such as fire safety, processes for safe chemistry, and environmental permits. These audits are important in identifying and preventing human rights and environmental health and safety violations. The annual audits are conducted by Delta Apparel employees in our human resources or compliance departments, and they follow predefined audit programs and checklists that involve a mix of in-person site visits and walkthroughs of the facility, observations of processes, interviews with employees, and inspection of records and applicable permits. The audit results are documented with supporting photographs for any non-conformance findings. The internal auditors then report the findings to management, including the recommended corrective actions and the date by which the corrective actions must be complete. The audits performed in 2023 resulted in no priority non-conformance findings, defined as severe violations of code of conduct in the areas of labor or environmental health and safety. For minor violations identified, we put corrective action plans in place to remediate the findings. Community Outreach Delta Apparel is committed to giving back to the communities where our employees live and work through volunteer service and community outreach. In 2023, our employees were involved in programs to promote environmental responsibility and improve the way of life for nearby communities. For example, Salt Life sponsored a number of national organizations, in addition to offering a variety of t-shirts for which donations were collected for various relief efforts. In addition, our U.S. employees were directly involved with the community through both the donation of merchandise to fundraisers and sponsorship of individual volunteer efforts with nearby organizations. Additionally, our offshore employees in Mexico and Honduras were involved in numerous activities throughout the year including the following: ● ● Competition As a vertically integrated apparel company, we have numerous competitors Competition in our Delta Group segment is generally based upon price, service, delivery time, and quality, with the relative importance of each factor dependent upon the needs of the particular customer and the specific product offering. Our Delta Direct products generally are highly price competitive, and competitor actions can greatly influence pricing and demand for our products. While price is still important in our Global Brands and Retail Direct channels, quality and service are generally more important factors for customer choice. Our ability to consistently service the needs of our Global Brand and Retail Direct customers greatly impacts future business in these channels. We believe our U.S. market-adjacent manufacturing platform enables us to compete effectively by providing an outlet for customers to diversify their sourcing footprints and reduce time to market. Furthermore, as an integrated entity with design, manufacturing, sourcing, and marketing capabilities, we We believe that competition within our Seasonality Although our various product lines are sold on a year-round basis, the demand for specific products or styles reflects some Environmental and 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 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 We operate in a rapidly changing, highly competitive business environment that involves substantial risks and uncertainties, including, but not limited to, the risks identified below. The following risks, as well as risks described elsewhere in this report or in our other filings with the SEC, could materially affect our business, financial condition or operating results and the value of Company securities held by investors and should be carefully considered in evaluating our Company and the forward-looking statements contained in this report or future reports. The risks described below are not the only risks facing Delta Apparel. Additional risks not presently known to us or that we currently do not view as material may become material and may impair our business operations. Any of these risks could cause, or contribute to causing, our actual results to differ materially from expectations. Risks Related to our Strategy Our future success depends in part on our ability to successfully implement our strategic plan and achieve our business strategies. We continue to focus on strategic initiatives designed to enhance our capabilities, strengthen the foundation of our Company, and accelerate profitable growth across our business segments. There can be no assurance that these or other future strategic initiatives will be successful to the extent we expect, or at all. Additionally, we are investing resources in these initiatives and the costs of the initiatives may outweigh their benefits. If we miscalculate the resources we need to complete these strategic initiatives or fail to implement them effectively, our business and operating results could be adversely affected. Our strategy to grow our direct-to-consumer retailbusiness depends upon our ability to successfully open and operate new stores in a timely and cost-effective manner. Our strategy to grow our “brick and mortar” retail footprint depends on many factors including, among others, our ability to: identify desirable store locations; negotiate acceptable lease terms; hire, train and retain a growing workforce of store managers, sales associates and other personnel; successfully integrate new stores into our existing control structure and operations, including our information technology systems; and coordinate well with our digital platforms and wholesale customers to minimize the competition within our sales channels. As we expand into new geographic areas, we need to successfully identify and satisfy the consumer preferences in these areas. In addition, we need to address competitive, merchandising, marketing, distribution and other challenges encountered in connection with any expansion. Finally, we cannot ensure that any newly-opened stores will be received as well as, or achieve net sales or profitability levels comparable to those of, our existing stores in our estimated time periods, or at all. If our stores fail to achieve, or are unable to sustain, acceptable net sales and profitability levels, our business overall may be materially harmed, and we may incur significant costs associated with closing or relocating stores. The apparel industry is highly competitive, and we face significant competitive threats to our business. The market for activewear apparel and the related accessory and other items we provide is highly competitive and includes many new participants as well as increased competition from established companies, some of which are larger or more diversified and may have greater financial resources. Many of our competitors also have larger sales forces, stronger brand recognition among consumers, bigger advertising budgets, and/or greater economies of scale. We compete with these companies primarily on the basis of price, quality, service and brand recognition, all of which are important competitive factors in the apparel industry. Our ability to maintain our competitive edge depends upon these factors, as well as our ability to deliver new products at the best value for the customer, maintain positive brand recognition, and obtain sufficient retail floor space and effective product presentation at retail. If we are unable to compete successfully with our competitors, our business and results of operations will be adversely affected. The availability of Cotton is the primary raw material used in the manufacture of our apparel products. As is the case with other commodities, the price of cotton fluctuates and is affected by weather, consumer demand, speculation on the commodities market, inflation, the cost of labor and transportation, and other factors that are generally unpredictable and beyond our control. As described under the heading Additionally, if Parkdale’s operations are disrupted and Parkdale is not able to provide us with our yarn requirements, we may need to obtain yarn from alternative sources. We may not be able to enter into short-term arrangements with substitute suppliers on terms as favorable as our current terms with Parkdale, which could negatively affect our business. Our operations Our success depends, in part, on our ability to predict or effectively react to changing consumer preferences and trends. The success of our businesses depends on our ability to anticipate and respond quickly to changing consumer demand and preferences in apparel and If our Ineffective marketing, advertising and promotional programs could inhibit our ability to Risks Related to The COVID-19 pandemic has had a material adverse effect on The COVID-19 pandemic adversely effected our performance, results of The extent to which the COVID-19 pandemic or any similar global or regional event impacts or continues to impact our business will depend on future developments that are highly uncertain and cannot be predicted, including the ultimate duration, severity and sustained geographic resurgence of the virus or any similar event, the emergence of new variants and strains of the virus or any similar dynamic, and the success of actions to contain the virus and its variants or any similar event, or treat their respective impacts. Any resurgence of the COVID-19 pandemic or the occurrence of any similar global or regional event would likely result in social, economic, and labor instability in the countries in which we, or the third parties with whom we engage, operate. The long-term economic impact and near-term financial impacts of any such event, including but not limited to, possible impairment, restructuring, and other charges, as well as overall impact on our business, results of operations, financial condition, liquidity, capital resources and investments, cannot be reliably quantified or estimated at this time due to the uncertainty of future developments. Our operations are subject to political, social, The majority of our products are manufactured in Honduras and, El Salvador and, previously, Mexico If we experience disruptions We own or lease manufacturing facilities in the United States, Honduras, El Salvador and Mexico (our Mexico leases will terminate in early 2024 in connection with our decision to close our sewing and The talents and continued contributions of our key management team are important to our success. We believe our future success depends on our ability to retain and motivate our key management team, our ability to attract and integrate new members of management into our operations, and the ability of all personnel to If any of the third parties upon whom we rely to provide certain key equipment and services fails to satisfy their obligations to us in the future, we may suffer a disruption to our business. We rely on certain key equipment and services provided by various third parties, including logistics partners and equipment suppliers. For example, we rely on third parties to provide certain inbound and outbound transportation and delivery services and other third parties to provide us with Energy, fuel and related costs are prone to significant fluctuations and volatility, which could adversely affect our results of operations. Our manufacturing operations require high inputs of energy, and changes in energy prices directly impact our gross profits. In addition, we incur significant freight costs to transport goods between our offshore facilities and the United States, along with transportation expenses to ship products to our customers. The cost of energy and fuel fluctuates due to a number of factors outside of our control, including government policy and regulation, supply disruptions, inflation, and weather conditions. Many of these factors impacted such cost in fiscal years 2023 and 2022 and may have an impact going forward. To mitigate the risk of fluctuations in energy costs, we continue to focus on methods that will reduce the amount of energy used in the manufacture of our products. However, significant increases in energy and fuel prices may have a material adverse effect on our financial position and results of Our business operations We depend on information systems to, among other things, manage our inventory, process transactions, operate our websites, respond to customer inquiries, purchase, sell and ship goods on a timely basis, and maintain cost-effective operations. Management uses information systems to support decision-making and to monitor business performance. If we experience any disruptions or slowdowns with our information systems, we may fail to generate accurate and complete financial and operational reports essential for making decisions at various levels of management, which could lead to decisions being made that have adverse results. We have invested significant capital and expect future capital expenditures associated with the implementation and integration of our information technology systems across our businesses. This process involves the replacement and consolidation of technology platforms so that our businesses are served by fewer platforms, resulting in operational efficiencies and reduced costs. Our inability to effectively implement or convert our operations to the Compromises of our data security could lead to liability and reputational damage. In the ordinary course of our business, we often collect, retain, transmit, and use sensitive and confidential information regarding customers and employees, and we process customer payment card and check information. There can be no assurance that we will not suffer a data compromise, that unauthorized parties will not gain access to personal information, or that any such data compromise or access will be discovered in a timely manner. Further, the systems currently used for transmission and approval of payment card transactions, and the technology utilized in payment cards themselves, all of which can put payment card data at risk, are determined and controlled by the payment card industry, not by us. Our computer systems, software and networks may be vulnerable to breaches (including via computer hackings), unauthorized access, misuse, computer viruses, phishing or other failures or disruptions that could result in disruption to our business or the loss or theft of confidential information, including customer information. Any failure, interruption, or breach in security of these systems could result in the misappropriation of personal information, payment card or check information or confidential business information of our Company. In addition, there may be non-technical issues, such as our employees, contractors or third parties with whom we do business or to whom we outsource business operations may attempt to circumvent our security measures in order to misappropriate such information and may purposefully or inadvertently cause a breach involving such information. The methods used by third parties to obtain unauthorized access change frequently and may not be anticipated or immediately detected. Thus, despite the security measures we may have in place, an actual or perceived information security breach, whether due to “cyber-attack," computer viruses or other malicious software code, or human error or malfeasance, could occur. Actual or anticipated attacks may cause us to incur significant costs to rectify the consequences of the security breach or cyber-attack, including costs to deploy additional personnel and protection technologies, repair damage to our systems, train employees and engage third-party experts and consultants. The collection, retention, transmission, and use of personal information is subject to contractual requirements and is highly regulated by a multitude of state, federal, and foreign laws. Privacy and information security laws are complex and constantly changing. Compliance with these laws and regulations may result in additional costs due to new systems and processes, and our non-compliance could lead to legal liability. Any compromise of our customer, employee or company data, failure to prevent or mitigate the loss of personal or business information, or delay in detecting or providing prompt notice of any such compromise could attract media attention, damage our customer or other business relationships and reputation, result in lost sales, fines, liability for stolen assets or information, costs of incentives we may be required to offer to our customers or business partners to retain their business, significant litigation or other costs and involve the loss of confidential company information, any or all of which could have a material adverse effect on our business, financial condition and results of operations. Extreme weather conditions, natural disasters, and other catastrophic events, including those caused by climate change, could negatively impact our results of operations and financial condition. Extreme weather conditions in the areas in which our manufacturing facilities, retail stores, suppliers, customers, distribution centers, data centers, and offices are located could adversely affect our results of operations and financial condition. Moreover, natural disasters such as earthquakes, hurricanes, floods, or wildfires, public health crises, such as pandemics and epidemics (including, for example, the COVID-19 pandemic), political crises, such as terrorist attacks, war and other political instability, or other catastrophic events, whether occurring in the United States or abroad, and their related consequences and effects, including energy shortages, could disrupt our operations, the operations of our suppliers or customers or result in economic instability that could negatively impact customer spending, any or all of which would negatively impact our results of operations and financial condition. In addition, fire and other natural disasters such as hurricanes, earthquakes, or floods have occurred and can recur in the countries in which we operate. These types of events could impact our global supply chain, including the ability of suppliers to provide raw materials where and when needed, the ability of third parties to ship merchandise, and our ability to ship products from or to the impacted region(s). In addition, climate change and the increased focus by governments, organizations, customers, and investors on sustainability issues, including those related to climate change and socially responsible activities, may adversely affect our reputation, business, and financial results. Investor advocacy groups, certain institutional investors, investment funds, other market participants, shareholders, and stakeholders have focused increasingly on environmental, social, and governance, or ESG, and related sustainability practices of companies. These parties have placed increased importance on the implications of the social cost of their investments. If our ESG practices do not meet investor or other stakeholder expectations and standards (which are continually evolving and may emphasize different priorities than the ones we choose to focus on), then our brand, reputation, and potential employee retention may be negatively impacted. We could also incur additional costs and require additional resources to monitor, report, and comply with various ESG practices and regulations. Also, our failure, or perceived failure, to manage reputational threats and meet expectations with respect to socially responsible activities and sustainability commitments could negatively impact our brand credibility, employee retention, and the willingness of our customers and suppliers to do business with us. Risks Related to Legal and Regulatory Matters Changes in U.S. or other tax laws or regulations may cause us to incur additional tax liability. We are subject to income tax in the United States and in certain foreign jurisdictions where we generate net operating profits. We generally benefit from a lower overall effective income tax rate due to the majority of our manufacturing operations being located in foreign tax-free jurisdictions or foreign jurisdictions with tax rates that are lower than those in the United States. Our U.S. legal entity contracts with our foreign subsidiaries to manufacture products on its behalf, with the intercompany prices paid for the manufacturing services and manufactured products based on an arms-length standard and supported by an economic study. The December 22, 2017, Tax Cuts and Jobs Act of 2017 (the “2017 Tax Legislation”) significantly revised the U.S. corporate income tax code by, among other things, lowering federal corporate income tax rates, implementing a modified territorial tax system and imposing a repatriation tax (“transition tax”) on deemed repatriated cumulative earnings of foreign subsidiaries. In addition, new taxes were imposed related to foreign income, including a tax on global intangible low-taxed income (“GILTI”), a limitation on the deduction for business interest expense (“Section 163(j)”), and a limitation on the deductibility of a company’s net operating losses (“NOLs”). GILTI is the excess of the shareholder’s net controlled foreign corporations' (“CFCs”) net tested income over the deemed tangible 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 or 30% of the taxpayer’s adjusted taxable income. U.S. federal NOLs cannot fully offset taxable income and carryforward indefinitely. The Coronavirus Aid, Relief, and Economic Security Act (“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 2017 Tax Legislation. The CARES Act also 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. Our effective tax rate could be adversely affected by changes in the mix of earnings between the U.S. and tax-free or lower-tax foreign jurisdictions. We may be limited in our ability to deduct 50% of applicable foreign earnings under the GILTI income inclusion or to deduct U.S. interest expense based on the amount of U.S. taxable income earned in a particular fiscal year. In addition, the future impact of the CARES Act and 2017 Tax Legislation may differ from historical amounts, possibly materially, due to, among other things, changes in interpretations and assumptions made regarding the CARES Act and 2017 Tax Legislation, guidance that may be issued, and actions we may take as a result of the CARES Act and 2017 Tax Legislation. Further changes to U.S. tax laws, including those impacting how U.S. multinational corporations are taxed on U.S. and foreign earnings, such as any potential increase in the U.S. corporate income tax rate, the doubling of the rate of tax on certain earnings of foreign subsidiaries, and a minimum tax on worldwide book income, among other things, could have a material adverse effect on our tax expense and cash flow. We are subject to periodic litigation in both domestic and international jurisdictions that may adversely affect our financial From time to time we may be involved in legal or regulatory actions regarding product liability, employment practices, intellectual property infringement, bankruptcies and other Our operations are subject to certain product liability risks common to most brands and manufacturers and our ability to maintain consumer confidence in the safety and quality of our products is vital to our success. We have implemented product safety and quality programs and standards that we follow and we expect our supplier partners to strictly adhere to applicable requirements and best practices. In addition to selling apparel and accessory products, we also license one of our brands for use in connection with restaurant, food, and beverage services and home furnishings. We also previously participated in a joint venture involving the sale of a branded alcoholic beverage and previously licensed one of our brands for use in connection with a branded alcoholic beverage. Selling products intended for human consumption carries inherent risks and uncertainties. If we or our supplier or license partners fail to comply with applicable product safety and quality standards and our products or those otherwise associated with our brands are, or become, unsafe, non-compliant, contaminated or adulterated, we may be required to recall our products and encounter product liability claims and negative publicity. Any of these events could adversely affect our reputation, business or results of operations. We rely on the strength of our trademarks and could incur significant costs to protect these trademarks and our other intellectual property. Our trademarks, including Salt Life®, Soffe® Significant changes to international trade regulations could adversely affect our results of operations. The majority of our products are manufactured in Honduras and El Salvador and, In addition, our products are subject to foreign competition, which in the past has been faced with significant U.S. government import restrictions. The extent of import protection afforded to domestic apparel producers has been, and is likely to remain, subject to political considerations. The reduction or elimination of import protections for domestic apparel producers could significantly increase global competition, which could adversely affect our business and results of operations. Our failure to comply with trade and other regulations could lead to investigations or actions by government regulators and negative publicity. 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. Any failure to comply with such regulations could cause us to become subject to investigation and enforcement actions resulting in significant penalties or claims or in our inability to conduct business, adversely affecting our results of operations. Our international operations are also subject to compliance with the Changes in domestic or foreign employment regulations, As of September 30, Our business is dependent on attracting and retaining a large number of quality employees with staffing needs especially high during the holiday season. Competition for personnel is highly competitive, and there is no assurance we will be able to The value of our brands, sales of our products and our licensing relationships could be impacted by negative publicity resulting from violations of manufacturing or employee safety standards or labor laws or unethical business practices by our suppliers and independent contractors. We are committed to ensuring that all of our manufacturing facilities comply with our strict internal code of conduct, applicable laws and regulations, and the codes and principles to which we Risks Related to Financial Matters Economic conditions may adversely impact demand for our products. The apparel industry is cyclical and dependent upon the overall level of demand for soft goods, which may or may not coincide with the overall level of discretionary consumer spending. These levels of demand change as regional, domestic and international economic conditions change. These economic conditions include, but are not limited to, employment levels, energy costs, interest rates, tax rates, inflation, personal debt levels, and uncertainty about the future, with many of these factors outside of our control. Recent distress in global credit markets, rising interest rates, foreign exchange rate fluctuations, significant geopolitical conflicts, volatility in energy prices, constraints on the global supply chain and other factors continue to affect the global economy and adversely impact demand for our products. In 2022 and 2023, the U.S. experienced significantly heightened inflationary pressures. We may not be able to fully mitigate the impact of inflation through price increases, productivity initiatives and cost savings, which could have a material adverse effect on our financial results. In addition, if the U.S. economy enters a recession, we may experience sales declines and may have to decrease prices, all of which could have a material adverse impact on our financial results. Historically, during recessionary periods, the demand for casual and activewear apparel has been strong and our business has performed well. However, there can be no assurances that this correlation will continue in future recessions. Sometimes, the timing of increases or decreases in consumer purchases of soft goods can differ from the timing of increases or decreases in the overall level of economic activity. Weakening sales may require us to reduce manufacturing operations to match our output to demand or expected demand and reductions in our manufacturing operations may increase unit and other costs and lower our gross margins, causing a material adverse effect on our results of operations. For example, during fiscal year 2023 we experienced significant reductions in demand across our Activewear business due to high inventory levels across the supply chain, particularly channels serving mass retailers, and we made the decision to curtail our production levels to maintain balance with the declining demand. We incurred expenses in connection with our decision to reduce production that amounted to approximately $8.0 million in excess cost during fiscal year 2023, with most of that cost driven by lower fixed cost absorption due to lower production volume and the payment of temporary unemployment benefits to idled employees at our offshore locations. We may be restricted in our ability to borrow under our revolving credit facility or service our indebtedness. Significant operating losses or significant uses of cash in our operations could cause us to default on our asset-based revolving credit facility. We rely on our credit facility, as well as on cash generated by our operations, to fund our working capital and capital expenditure needs, to make acquisitions, to fund repurchases under our share repurchase program and to pay dividends should we choose to do so in the future. Our working capital needs are generally greater in advance of the spring and summer selling seasons. Availability under our credit facility is primarily a function of the levels of our accounts receivable and inventory, as well as the uses of cash in our operations. A significant deterioration in our accounts receivable or inventory levels could restrict our ability to borrow additional funds or service our indebtedness. Cash on hand and availability under our U.S. revolving credit facility totaled $14.2 million at September 30, 2023. A significant deterioration in our business could cause us not to satisfy availability, fixed charge coverage ratio (FCCR), EBITDA and/or other thresholds in our asset-based revolving credit facility. Moreover, if we failed to satisfy our minimum availability threshold, we would be required to maintain the minimum FCCR specified in our credit agreement, which we may not be able to maintain. The covenants in our credit facility include, among other things, limitations on asset sales, consolidations, mergers, liens, indebtedness, loans, investments, guaranties, acquisitions, dividends, stock repurchases, and transactions with affiliates as well as requirements to complete transactions related to certain assets. If an event of default under our credit facility occurred or became imminent, we may request our credit agreement lenders to provide a waiver. If we were unsuccessful in that endeavor, we could explore alternative sources of capital, whether debt or equity, which would likely be more expensive than the costs we incur under our credit facility and may not be available. If we were unable to cure an un-waived event of default under our credit facility, we would be unable to borrow additional amounts under the facility, we could be unable to fund our working capital and capital expenditure needs, make acquisitions, fund share repurchases or pay dividends, and our lenders thereunder could accelerate our obligations under the agreement and foreclose on our assets subject to the liens in their favor. This circumstance would have a material adverse effect on our financial position and results of operations. Deterioration in the financial condition of our customers or suppliers and changes in the operations and strategies of our customers or suppliers could adversely affect our financial position and results of operations. We extend credit to our customers, generally without requiring collateral. The extension of credit involves considerable judgment and is based on an evaluation of each customer’s financial condition and payment history. We monitor credit risk exposure by periodically obtaining credit reports and updated financial statements on our customers. Deterioration in the economy, declines in consumer purchases of apparel, disruption in the apparel retail environment, or the inability of our customers to access liquidity could have an adverse effect on the financial condition of our customers. During the past several years, various retailers and other customers have experienced significant difficulties, including consolidations, restructurings, bankruptcies and liquidations as well as retail shutdowns as a result of the COVID-19 pandemic. The inability of retailers and other customers to overcome these difficulties may continue or even increase due to the current economic and retail market conditions. We maintain an allowance for doubtful accounts for potential credit losses based upon current conditions, historical trends, estimates and other available information, which involves judgments and uncertainties. During fiscal year 2023, customers generally paid on the credit extended to them, and we ended fiscal year 2023 with days sales outstanding at 45.8 days, down from 51.7 days at September 2022. Although our historical allowances have been materially accurate, if market conditions change additional reserves may be required. The inability to collect on sales to significant customers or a group of customers could have a material adverse effect on our financial condition and results of operations. Significant changes in the financial condition of any of our suppliers or other parties with which we do business could result in disruption to our business and have a material adverse effect on our financial condition and results of operations. In addition, significant changes in the retail, merchandising and/or operational strategies employed by our customers may result in decreased sales of our products to such customers and could have a material adverse effect on our financial condition and results of operations. Likewise, significant changes in the operations of any of our suppliers or other parties with which we do business could result in disruption to our business and have a material adverse effect on our financial condition and results of operations. Our variable rate debt subjects us to interest rate risk that could cause our debt service obligations to increase significantly. The debt we incur under our asset-based revolving credit facility is at variable rates of interest, which exposes us to interest rate risk. Reference rates used to determine the applicable interest rates for our variable rate debt began to rise significantly in the second half of fiscal year 2022 and continued into fiscal year 2023. If interest rates continue to increase, the debt service obligations on such indebtedness will continue to increase even if the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease. In addition, as a result of a recent amendment to our asset-based revolving credit facility, certain of the variable rate indebtedness extended to us uses the Secured Overnight Financing Rate (SOFR) as a benchmark for establishing the interest rate. While we will continue to use SOFR, other factors may impact SOFR including factors causing SOFR to cease to exist, new methods of calculating SOFR to be established, or the use of an alternative reference rate(s). These consequences are not entirely predictable and could have an adverse impact on our financing costs, returns on investments, valuation of derivative contracts and our financial results. We may need to raise additional capital to grow our business. The rate of our growth, especially through acquisitions, depends, in part, on the availability of debt and equity capital. We may not be able to raise capital on terms acceptable to us or at all. If new sources of financing are required, but are insufficient or unavailable, we may be required to modify our growth and operating plans based on available funding, which could adversely affect our ability to operate and/or grow the business. We may be subject to the impairment of acquired intangible assets. When we acquire a business, a portion of the purchase price of the acquisition may be allocated to goodwill and other identifiable intangible assets. The amount of the purchase price that is allocated to goodwill is determined by the excess of the purchase price over the net identifiable assets acquired. At September 2023 and September 2022, our goodwill and other intangible assets were approximately $50.4 million and $61.9 million, respectively. We conduct an annual review, and more frequent reviews if events or circumstances dictate, to determine whether goodwill is impaired. We also determine whether impairment indicators are present related to our identifiable intangible assets. If we determine that goodwill or intangible assets are impaired, we would be required to write down the value of these assets. We completed our annual impairment test of goodwill on the first day of our third fiscal quarter and concluded that there was no indication of impairment. However, based upon the operating results and projections for our DTG2Go business, during our fourth fiscal quarter we concluded that the goodwill associated with that business was impaired. Due to this impairment, we recorded an impairment charge of $9.2 million in fiscal year 2023. At September 2023, we concluded based on the assessment performed that there was no additional indication of impairment on the goodwill to be recorded on our financial statements. We also concluded that there are no additional indicators of impairment related to our intangible assets. There can, however, be no assurance that we will not be required to take an impairment charge in the future, which could have a material adverse effect on our results of operations. We are subject to foreign currency exchange rate fluctuations. We manufacture the majority of our products outside of the United States, exposing us to currency exchange rate fluctuations. In addition, movements in foreign exchange rates can affect transaction costs because we source products from various countries. We may seek to mitigate our exposure to currency exchange rate fluctuations, but our efforts may not be successful. Accordingly, changes in the relative strength of the United States dollar against other currencies could adversely affect our business. The market price of our shares is affected by the illiquidity of our shares, which could lead to our shares trading at prices that are significantly lower than expected. Various investment banking firms have informed us that public companies with relatively small market capitalizations have difficulty generating institutional interest, research coverage, As of November The market price of our shares may be highly volatile, and the stock market in general can be highly volatile. Fluctuations in our stock price may be influenced by, among other things, general economic and market conditions, conditions or trends in our industry, changes in the market valuations of other apparel companies, announcements by us or our competitors of significant acquisitions, strategic None. Our principal executive office is located in a leased facility in Owned Leased Other Manufacturing Distribution Decoration/distribution Retail stores/showroom Offices Total Our primary manufacturing Name Location Utilization Segment Ceiba Textiles Naco, Quimistan, Santa Barbara Honduras Knit/dye/finish/cut Delta Group Honduras Plant San Pedro Sula, Sew Delta Group Cortes Plant San Pedro Sula, Sew Delta Group Textiles LaPaz La Paz, El Salvador Cut/sew/decoration Delta Group/Salt Life Group Fayetteville Plant Fayetteville, North Carolina Cut/sew/decoration Delta Group/Salt Life Group Rowland Plant Rowland, North Carolina Sew Delta Group * Closure to be completed in fiscal year 2024. As of September 2023, and 2022, our long-lived assets in Honduras, El Salvador and Mexico collectively encompassed approximately 25% and 27%, respectively, of our consolidated net property, plant and equipment, of which 17% was in Honduras. See Item 1A. Risk Factors for a description of risks associated with our operations located outside of the United States. Our primary distribution centers, including those integrated with decoration operations, as of September 2023, are as follows: Location Utilization Segment Clinton, TN Distribution Delta Group Fayetteville, NC Distribution Salt Life Group Opelika, AL* Distribution Delta Group Cranbury, NJ Decoration/distribution Delta Group Fayetteville, NC Decoration/distribution Delta Group Miami, FL Decoration/distribution Delta Group Nashville, TN Decoration/distribution Delta Group Storm Lake, IA Decoration/distribution Delta Group * Operated by third party. Our primary retail stores as of September 2023, are as follows: Location Boca Raton, FL Jacksonville, FL We believe that all of our facilities are suitable for the purposes for which they are designed and are generally adequate to allow us to remain competitive. We continue to maintain a sharp focus on improving our supply chain, lowering our product costs and reducing the operating capital required in our business. We will continue to take At times, we are party to various legal claims, actions and complaints. There are currently no material pending legal proceedings to which we are a party or of which any of our property is Not applicable. Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock: The common stock of Delta Apparel, Inc. is listed and traded on the Dividends: Our Board of Directors did not declare, nor were any dividends paid, during 2023 or 2022. Subject to certain restrictions, our credit facility allows stock repurchases and cash dividends from two sources: (1) legally available funds other than cash from certain sale/leaseback transactions, and (2) legally available funds solely from certain recent sale/leaseback transactions. In each case, at least 15% of the maximum revolver amount and borrowing base must be available both for 30 days before the transaction and after giving effect to it. There is also a restriction on the total amount of such payments from April 3, 2016 to the date of determination. For payments from funds other than sale/lease backs, the amount is $10,000,000 plus 50% of net income since April 3, 2016. For payments solely from sale/leasebacks, the amount is limited to $10,000,000 since April 3, 2016. Also, payments from sale/leasebacks must be in excess of the subject real property’s contribution to the borrowing base. Subsidiaries of the Borrowers (as defined in the credit facility) are not subject to these restrictions on dividends to the Borrowers. Notwithstanding the foregoing, the Amended Credit Agreement currently restricts us from making cash dividends or stock repurchases until the later of (x) November 4, 2023 and (y) the date upon which (a) our availability (as defined in the Amended Credit Agreement) and (b) our average availability (as defined in the Amended Credit Agreement) for the immediately preceding 30 consecutive days, is equal to or more than the greater of (i) 17.50% of the lesser of (A) our borrowing base (as defined in the Amended Credit Agreement) or (B) the maximum revolver amount (as defined in the Amended Credit Agreement) and (ii) $25,000,000 and (II) certification that (x) our FCCR is equal to or greater than 1.00:1.00 for the trailing 12-month period and (y) as of such date, no default (as defined in the Amended Credit Agreement) or event of default exists. For purposes of this definition, availability and average availability will be calculated (x) after giving effect to the availability block (as defined in the Amended Credit Agreement) and (y) without giving effect to the application of the net cash proceeds from certain sale-leaseback transactions. Absent the restrictions referenced in the preceding two sentences, at September 2023, and September 2022, there was $8.3 million and $24.9 million, respectively, of retained earnings free of restrictions to make cash dividends or stock repurchases. Any future cash dividend payments will depend upon our earnings, financial condition, capital requirements, compliance with loan covenants and other relevant factors. Purchases of our Own Shares of Common Stock: See Note 14— Repurchase of Common Stock - Debt, in Item 15, which is incorporated herein by reference. Securities Authorized for Issuance Under Equity Compensation Plans: The information required by Item 201(d) of Regulation S-K is set forth under “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report, which information is incorporated herein by reference. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of Delta Apparel’s financial condition and results of operations for the fiscal years Business Outlook During fiscal year 2023, we were able to work through most of the trailing expense impacts of our curtailed production levels and last year’s historically high-priced cotton flowing through our cost of sales. Our Activewear business, which houses our nearshore manufacturing platform and serves the channels hit hardest by the much-publicized over-inventoried retail environment in 2023, was the most directly impacted by these unique cost-driving events. Now that we are inputting lower cotton cost in our inventory and running our manufacturing facilities at more consistent levels closer to capacity, we believe our Activewear business is well-positioned to take advantage of market improvements and see more indications that the elevated inventory levels in the retail supply chain following heavy buying activity in 2022 may be moderating. We continue to make steady progress towards a more normalized operating environment for our overall business, with our decision last year to reduce production levels to align with the lower demand environment and purchase less price-inflated cotton proving effective in positioning Delta Apparel for improved operating results going forward. We will complete a significant strategic initiative involving the transition of our more expensive Mexico production capacity into our lower-cost Central American platform in the next few months. This initiative, along with several other restructuring activities completed in 2023, should generate annual cost savings of up to $6 million and position our Company to generate better returns on the capital we invest in our business in the current higher interest rate environment. In addition, we made substantial progress on inventory and debt reduction initiatives intended to counteract the challenging operating environment seen in recent periods, including an approximately 16% reduction in inventory from our most recent high in December 2022 and an approximately 17% reduction in long-term debt from our most recent high in February 2023. We expect further inventory and debt reductions as we move through fiscal year 2024 and plan to continue to tightly manage our spending and reduce capital expenditures year-over-year. Our Delta Group segment’s fully integrated Activewear and DTG2Go businesses continue to offer solutions to a broadening spectrum of customers across the apparel industry. The two largest channels in Activewear’s Delta Direct business, Retail License and Regional Screenprint, showed signs of improvement during the fourth quarter and to start the new fiscal year, while Delta Direct’s eRetail and promotional channels continue to strengthen. We expect Activewear’s Global Brands and Retail Direct businesses to steadily pick up as we move into the second half of this fiscal year and get past some of the current headwinds from lower demand and excess global manufacturing capacity. Our onshore and nearshore manufacturing and fulfillment platforms, coupled with a distribution network spanning the United States, continue to become more integral to brand and retailer sourcing strategies and generate interest from customers looking to reach the United States market more efficiently and manage supply chain risks associated with international trade policy, ESG priorities, inflationary pressures, and supply chain disruptions. Our DTG2Go business recently achieved a variety of key milestones including the recalibration of our entire “Digital First” technology fleet and the launch of a proprietary online portal geared towards quick reaction programs not suited for traditional decoration platforms. We also advanced several significant research and development initiatives including a proprietary fabric optimized for digital printing that should accelerate customer usage of Delta Direct blank garments at DTG2Go and a proprietary textile manufacturing process designed to solve well-known quality challenges arising during digital printing. The gains flowing from these initiatives should provide a solid foundation for improved operating results and sales growth at DTG2Go going forward. We believe that DTG2Go is well-positioned to capitalize on the ongoing digital disruption in the decorated apparel market through its industry-leading print capacity, nationwide fulfillment network, proprietary technology and processes, and vertical blank supply through Delta Direct. Our Salt Life business generated significant operating profitability in fiscal year 2023 despite some temporary softness in its wholesale channel stemming from higher inventory levels at retail. We expect a return to sales growth at Salt Life going forward, including more direct-to-consumer growth in both the branded retail and eCommerce channels. Salt Life continues to expand its branded retail footprint with the recent opening of two new retail doors in Florida and the brand’s first location in Virginia set to open in the second quarter of fiscal year 2024. It will finish the calendar year with six new retail stores and a total owned retail footprint comprising 27 stores, including 15 full-price stores and 12 outlet stores across the country and over 55,000 square feet of retail floor space. Salt Life’s ecommerce website sales continue to outperform and grew 52% for the year. We believe there is ample room for more growth in the ecommerce channel as we develop more data analytics and targeted marketing strategies. We were also pleased to see the initial market interest in Salt Life’s newly licensed home furnishings line exceed expectations and expect Salt Life’s license royalty revenue stream to more than double this fiscal year as the new line sells through. We continue to invest in marketing initiatives designed to elevate the Salt Life brand and drive increased engagement. Salt Life’s YouTube channel, www.youtube.com/@saltlife, currently has over 53 million total views and over 125,000 subscribers. In addition, Salt Life’s social media audience spanning Facebook, Instagram, X (formerly Twitter), LinkedIn, and Pinterest continues to grow, and Salt Life continues to interact with consumers through its online content portal, The Daily Salt, and its Salt Life-branded podcast, Above and Below. With two very significant cost-driving trends now moving behind us and a streamlined cost structure in place moving ahead, Delta Apparel is in excellent position to take advantage of favorable changes in demand as they arise across our five go-to-market channels. We expect to see steady improvement in our overall operating results in fiscal year 2024 and will remain keenly focused on growth, profitability, and above all, creating value for shareholders for many years to come. Results of Operations Net sales for 2023 were $415.4 million, a decline of 14.3% from $484.9 million in the prior year when the apparel industry was a “seller’s market” with retailers and their suppliers accumulating inventory amid the rebound from COVID-related supply chain delays. Delta Group segment net sales decreased 16.1% to $356.3 million in 2023 compared to prior year net sales of $424.8 million. Within the Activewear business, our Delta Direct, Global Brands and Retail Direct channels all experienced double-digit year-over-year declines as customers right-sized inventory levels from fiscal year 2022. The Activewear business was heavily impacted by the over-inventoried environment in the retail and other supply chains following the notable buying activity in fiscal year 2022 due to economic conditions, supply-chain constraints, and product availability. Salt Life Group segment net sales were $59.0 million in 2023, a decrease of 1.7% from $60.1 million in the prior year. During fiscal year 2023, the segment saw growth in its direct-to-consumer sales through retail stores and ecommerce channels offset by a decline in the wholesale channel. Salt Life opened four new branded retail doors during the fiscal year, bringing our total retail store locations to 25 as of fiscal year end. Salt Life has since opened two additional retail stores and plans to open another location in second quarter of fiscal year 2024, bringing its total branded retail stores to 28. Gross margins were 13.0% for fiscal year 2023, a decline from 22.4% in fiscal year 2022 driven by production curtailments to match manufacturing output with market demand as well as inflationary cotton costs (collectively "Production Curtailment & Cotton Costs"). Excluding these Production Curtailment & Cotton Costs, fiscal year 2023 adjusted gross margins were 21.2%. Delta Group segment gross margins were 6.1% for fiscal year 2023, a decrease of 1,220 basis points from gross margins of 18.3% in fiscal year 2022. Excluding the Production Curtailment & Cotton Costs, adjusted gross margins were 15.6% for fiscal year 2023. Salt Life Group segment gross margins were 54.6% in fiscal year 2023, an improvement of 300 basis points compared to 51.6% in fiscal year 2022 resulting from a favorable mix of sales, including increased Salt Life branded retail store sales, which offset a decline in wholesale sales from recent market softness. Selling, general and administrative (“SG&A”) expenses in fiscal year 2023 were $73.7 million, or 17.8% of sales, compared to $79.5 million, or 16.4% of sales, in 2022. SG&A expenses decreased in 2023 due to lower wages and wage-related expenses, offset by an increase in expenses due to costs associated with the expansion of Salt Life’s retail store footprint. Other expense of $9.7 million in 2023 includes $9.2 million in goodwill impairment charges, $1.0 million in other impairment charges and $0.6 million severance charges, offset by $1.0 million in profits related to our equity investment in Green Valley Industrial Park, S.A. de C.V., the Honduran entity that owns and operates the industrial park in Naco, Quimistan, Santa Barbara Honduras, where our Ceiba Textiles facility is located (“Honduran Equity Method Investment”). The other impairment charges stem from the closure of our legacy single-purpose DTG2Go facility in Clearwater, Florida and shift of its' digital production capacity into our national footprint of dual-purpose facilities housing digital printing and blank garment distribution under one roof, as well as long-lived asset impairment of our Mexico facilities in connection with their closure. Severance charges related to expected employee severance at our Mexico facilities. In the prior year, other income of $2.4 million included $0.9 million in profits related to the Operating loss for fiscal year 2023 was $29.4 million. Excluding the Production Curtailment, Cotton Costs, Restructuring Costs and Goodwill Impairment Charges, fiscal year 2023 adjusted operating income was $9.2 million, or 2.2% of net sales. This compares to operating income of $31.8 million in the prior year. The Delta Group segment experienced an operating loss of $26.2 million in fiscal year 2023, or (7.3%) of Delta Group net sales, compared to operating profit of $38.0 million, or 9.0% of Delta Group net sales, in fiscal year 2022. Excluding the Production Curtailment, Cotton Costs, Restructuring Costs and Goodwill Impairment Charges fiscal year 2023 Delta Group segment adjusted operating income was $21.7 million, or 6.1% of Delta Group net sales. The Salt Life Group segment achieved operating income of $6.2 million in fiscal year 2023, or 10.4% of Salt Life Group net sales, compared to $8.2 million, or 13.6% of Salt Life Group net sales, in fiscal year 2022. The lower operating income was driven by lower sales volume, accompanied by a favorable product sales mix and increased selling costs partially offset by increased gross margins as a percentage of sales. Net interest expense for fiscal years 2023 and 2022 was $14.2 million and $7.7 million, respectively. The increases in interest expense over the prior year periods is primarily due to increased interest rates. Our effective tax rate on operations for fiscal year 2023 is 23.8%. This compares to an effective tax rate of 17.9% for fiscal year 2022. Changes in the mix of U.S. taxable income compared to profits in tax-free or lower-tax jurisdictions drove this change in our effective tax rate. See Note 9—Income Taxes for more information. Accounts receivable was $45.1 million on September 2023, as compared to $68.2 million as of September 2022. Days sales outstanding (“DSO”) as of September 2023 were 46 days compared to 52 days at September 2022. Net inventory as of September 2023 was $212.4 million, a decrease of $36.2 million from September 2022. The reductions in inventory reflects the Company’s success with initiatives to right-size inventories and counteract the challenging operating environment going forward. In addition, the inventory value is lower than the prior fiscal year end as a result of lower input costs impacting materials, transportation and labor combined with a decrease in units on hand. Non-GAAP Financial Measures We provide all information required in accordance with U.S. GAAP, but we believe that evaluating our ongoing operating results may be difficult if limited to reviewing only U.S. GAAP financial measures. In an effort to provide investors with additional information regarding our results, we also provide non-GAAP information that management believes is useful to investors. We discuss gross margins, operating income and net income performance measures that are, for comparison purposes, adjusted to eliminate items or results stemming from discrete events. We do this because management uses these measures in evaluating 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 limitations as analytical tools, and securities analysts, investors and other interested parties should not consider any of these non-GAAP measures in isolation or as a substitute for analysis or our results as reported under U.S. GAAP. These non-GAAP measures may not be comparable to similarly titled measures used by other companies. Reconciliation of GAAP gross margins to non-GAAP gross margins, GAAP operating income to non-GAAP operating income, and GAAP net income to non-GAAP net income are presented below. A description of the amounts excluded on a non-GAAP basis are provided in conjunction with the below information. Non-GAAP gross margin, non-GAAP operating income, and non-GAAP net income should be evaluated in light of the Company’s financial statements prepared in accordance with GAAP. Reconciliation of Gross Margin, Operating Income and Net Income to Non-GAAP Measures Adjusted Gross Margin, Adjusted Operating Income, and Adjusted Net Income - Unaudited (in thousands) For the year ended September 2023 2022 Gross Margin (GAAP) Production Curtailment Costs (1) Cotton Costs (2) Adjusted Gross Margin (non-GAAP) Percent of Sales Operating (Loss) Income (GAAP) Production Curtailment Costs (1) Cotton Costs (2) Restructuring Costs (3) Adjusted Operating Income (non-GAAP) Adjusted Net Income (non-GAAP) Reconciliation of Delta Group Segment Gross Margin and Operating Income to Delta Group Segment Adjusted Gross Margin and Adjusted Operating Income - Unaudited (in thousands) For the year ended September 2023 2022 Gross Margin (GAAP) $ 21,773 $ 77,823 Production Curtailment Costs (1) 8,019 — Cotton Costs (2) 25,929 — Adjusted Gross Margin (non-GAAP) $ 55,721 $ 77,823 Percent of Sales 15.6% 18.3% Operating (Loss) Income (GAAP) $ (26,179) $ 38,045 Production Curtailment Costs (1) 8,019 — Cotton Costs (2) 25,929 — Restructuring Costs (3) 4,723 — Adjusted Operating Income (non-GAAP) $ 21,692 $ 38,045 Percent of Sales 6.1% 9.0% (1) Production Curtailment Costs consist of unabsorbed fixed costs, temporary unemployment benefit payments, and other expense items resulting from the Company’s decision to reduce production levels to better align with the significantly reduced demand across the activewear industry due to high inventory levels stemming from the heavy replenishment activity following pandemic-related supply chain challenges. (2) Cotton Costs consist of the amount of the cotton component of the Company's cost of sales in excess of the average price per pound of cotton over a recent 10-year period ($0.78 per pound) as well as a reasonable estimate of the additional cost for what the industry refers to as “basis” typically required to be purchased in connection with the delivery of cotton ($0.15 per pound). As such, Cotton Costs consist of the cotton component of the Company's cost of sales in excess of $0.93 per pound. (3) Restructuring Costs consist of employee severance benefits paid in connection with the transition of our more expensive Mexico manufacturing capacity to our more efficient Central America manufacturing platform, employee severance benefits paid in connection with leadership restructuring, expenses incurred in connection with the closure of a legacy facility we acquired via acquisition and the absorption of the print capacity at that facility into our nationwide network of dual purpose digital print and blank garment distribution facilities, and additional cost items incurred from restructuring activities. (4) Goodwill Impairment Charges consists of a non-cash charge associated with our DTG2Go business. Liquidity and Capital Resources We have funded our working capital requirements, capital expenditures, mergers, acquisitions and investments, restructuring activities, and stock repurchases from net cash provided by operating activities, borrowings under our credit facilities, proceeds from the sale of property, plant and equipment removed from service, if any. See Note 8 - Long-Term Debt of the Notes to Consolidated Financial Statements for detailed information regarding our debt. Operating Cash Flows Cash provided by operating activities in fiscal year 2023 was $11.2 million, compared to cash used by operating activities of $20.1 million in fiscal year 2022. The increase in operating cash flows in 2023 primarily relate to increasing accounts receivable collection and a decline in inventory compared to the prior year build from increased input costs and manufacturing output. This was partially offset by decreased earnings in the business and change in the timing of payments to suppliers in the current period. Investing Cash Flows Cash provided by investing activities in fiscal year 2023 was $1.6 million and cash used in investing activities was $13.0 million in fiscal year 2022. Capital expenditures during fiscal years 2023 and 2022 were $5.5 and $19.9 million, respectively. Capital expenditures in both periods primarily related to investments in our distribution expansion, digital print equipment, information technology, and retail stores. There were $2.3 million in expenditures financed under capital lease arrangements and $1.3 million in unpaid expenditures as of September 2023. We currently expect to spend less on capital expenditures in fiscal year 2024 as compared to fiscal year 2023, with these expenditures focused on information technology, manufacturing efficiency, and direct-to-consumer investments, including new Salt Life retail store openings. Financing Activities Cash used by financing activities was $13.0 million in fiscal year 2023 as compared to cash provided by financing activities of $24.1 million in fiscal year 2022. In fiscal year 2023, we concentrated on the reduction of debt. In fiscal year 2022, we increased the amount outstanding Future Liquidity and Capital Resources See Note 8 – Long-Term Debt to the Consolidated Financial Statements for discussion of our various financing arrangements, including the terms of our revolving U.S. credit facility. Our asset-based U.S. revolving credit facility and cash flows from operations are Derivative Instruments 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 gains and losses associated with them were recorded within cost of goods sold on the Consolidated Statement of Operations. At September 2023, there were no material option agreements that were outstanding. 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 September 2023, and September 2022, all of other comprehensive (loss) income was attributable to shareholders and none related to the non-controlling interest. The changes in fair value of the interest rate swap agreements resulted in other comprehensive loss, net of taxes, of $0.1 million and other comprehensive gain, net of taxes, of $0.9 million for the years ended September 2023, and September 2022, respectively. Off-Balance Sheet Arrangements As of September 2023, we did not have any off-balance sheet arrangements that were material to our financial condition, results of operations or cash flows as defined by Item 303(a)(4) of Regulation S-K promulgated by the SEC other than letters of credit and purchase obligations. We have disclosed letters of credit and purchase obligations in Note 15—Commitments and Contingencies. Dividends and Purchases of our Pursuant to the terms of our credit facility, we are allowed to make cash dividends and stock repurchases if (i) as of the date of the payment or repurchase and after giving effect to the payment or repurchase, we have availability on that date of not less than 15% of the lesser of the borrowing base or the commitment, and average availability for the 30-day period immediately preceding that date of not less than 15% of the lesser of the borrowing base or the commitment; and (ii) the aggregate amount of dividends and stock repurchases after May 10, 2016, does not exceed $10 million plus 50% of our cumulative net income (as defined in the Amended Credit Agreement) from the first day of the third quarter of Our Board of Directors did not declare, nor were any dividends paid, during fiscal years 2023 and 2022. Any future cash dividend payments will depend upon our earnings, financial condition, capital requirements, compliance with loan covenants and other relevant factors. As of September Critical Accounting Policies The discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements, which were prepared in accordance with U.S. GAAP. The preparation of our 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. We have no reason to believe that our past estimates have not been appropriate. Our most critical accounting estimates, discussed Note 2 to our Consolidated Financial Statements includes a summary of the significant accounting policies or methods used in the preparation of our Consolidated Financial Statements. Revenue Recognition Revenue is recognized when In certain areas of our wholesale business, we offer discounts and allowances to support our customers. Some of these arrangements are written agreements, while others may be implied by customary practices in the industry. Wholesale sales are We record reductions to revenue for estimated customer returns, allowances, markdowns and Accounts Receivable and Related Reserves Accounts receivable consists primarily of We estimate the net Inventories and Related Reserves We state inventories at the lower of cost Impairment of Long-Lived Assets We recorded restructuring and impairment charges in fiscal year 2023 in the amount of $1.1 million, no charges were incurred in fiscal year 2022. The charges in fiscal year 2023 relate to $0.8 million in expense in our DTG2Go business as we shifted the digital production capacity from our legacy, single-purpose Clearwater, Florida facility into our national footprint of dual-purpose facilities housing digital printing and blank garment distribution under one roof to advance our integrated on-demand model and further leverage the distinct competitive advantages it provides DTG2Go. Additionally, $0.2 million in fixed asset impairment charges related to the Campeche, Mexico assets as we implemented strategic actions to better optimize our overall cost structure, including the transition of our more expensive production capacity in Mexico, where we have to purchase third party textile fabric to our lower cost Central American platform served by our own textile manufacturing operations. These other Central American platforms will absorb the Mexican production. This transition requires significant reductions in our offshore manufacturing workforce and associated severance benefit payments. The remaining fixed assets related to Campeche, Mexico are fully recoverable and were not impaired. Goodwill Goodwill The Company’s goodwill impairment Income Taxes We account for income taxes under the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, We established a valuation allowance related to certain of our state operating loss carryforward amounts in accordance with the provisions of ASC 740. We continually review the adequacy of the valuation allowance and recognize the benefits of deferred tax assets if reassessment indicates that it is more likely than not that the deferred tax assets will be realized based on earnings forecasts in the respective state tax jurisdictions. As of September Recent Accounting Standards For information regarding recently issued accounting standards, refer to Note We Item 8. Financial Statements Our Consolidated Financial Statements for each of our Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and 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 Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information that 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 Management’s Annual Report on Internal Control over Financial Reporting Management of Delta Apparel, Inc. is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance regarding the preparation and fair presentation of published financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief The effectiveness of our internal control over financial reporting as of September Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting during the fourth quarter of To the Shareholders and the Board of Directors Opinion on Internal Control over Financial Reporting We have audited Delta Apparel, Inc. and We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 30, 2023, and October 1, 2022, and the related consolidated statements of operations, comprehensive (loss) income, shareholders’ equity and cash flows for each of the two years in the period ended September 30, 2023, and the related notes and our report dated December 28, 2023 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control We conducted our audit in accordance with the standards of the Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Atlanta, December 28, Thirteenth Amendment to the Fifth Amended and Restated Credit Agreement On The First Amendment The Thirteenth Amendment (i) modifies the Availability Block such that (a) on and after the Ninth Amendment Date through and including April 1, 2023, it shall be $7,500,000, (b) on and after April 2, 2023 through and including June 4, 2023, it shall be $9,000,000, (c) on and after June 5, 2023 through and including December 4, 2023, it shall be $10,000,000, (d) on and after December 5, 2023 through and including January 18, 2024, it shall be $7,000,000, (d) on and after January 19, 2024 through and including and February 15, 2024, it shall be $8,500,000, and (e) on and after February 16, 2024 and at all times thereafter, it shall be $10,000,000; (ii) requires that, commencing with the fiscal month ending June 29, 2024, the Company must maintain a Fixed Charge Coverage Ratio for the immediately preceding 12 consecutive fiscal months of We expect the Thirteenth Amendment to The foregoing summary of the Separate from the relationship related to the Amended Credit Agreement, as amended, Termination of Real Estate Purchase and Sale Contract with RH Dunn LLC On December 27, 2023, RH Dunn LLC (the "Buyer") exercised its discretionary right to terminate the Real Estate and Sale Contract entered into between Delta Apparel, Inc. (the "Company") and Buyer dated November 22, 2023, for the sale and long-term leaseback of the Company's approximately 35-acre campus in Fayetteville, North Carolina (the "Agreement"). The purchase price for the Fayetteville campus contained in the agreement was $25 million and the Agreement contained customary representations, warranties and covenants made by the Company. The obligations of the Buyer under the Agreement were subject to inspection, due diligence and other customary closing conditions. The Agreement contained a transaction closing condition requiring the Company or its wholly-owned subsidiary to enter into a long-term lease agreement with the Buyer or its affiliate, with such lease agreement having an initial term of 10 years, with two five-year renewal options. The Company is not aware of any material relationship that it or its affiliates have with the Buyer other than in respect of the Agreement. The Company did not incur any early termination penalties in connection with the termination of the Agreement. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. Item 10. Directors, Executive Officers and Corporate Governance The information required by this Item is incorporated herein by reference from the portions of the definitive Proxy Statement to be filed with the Securities and Exchange Commission within 120 days following the end of our All of our employees, including our Chief Executive Officer, and The information required by this Item is incorporated herein by reference from the portions of the definitive Proxy Statement to be filed with the Securities and Exchange Commission within 120 days following the end of our Item 12. Security Ownership of Certain Beneficial Owners and The information relating to security ownership by certain beneficial owners and management is incorporated herein by reference from the portion of the definitive Proxy Statement to be filed with the Securities and Exchange Commission within 120 days following the end of our On February Set forth in the table below is certain information about securities issuable under our equity compensation plans as of September Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) Weighted-average exercise price of outstanding options, warrants and rights (2) Number of securities remaining available for future issuance under equity compensation plans (excluding those currently outstanding) Equity compensation plans approved by security holders Equity compensation plans not approved by security holders Total (1) Includes all outstanding restricted stock units that have a performance-based vesting condition that would vest in equity shares and assumes 100% vesting of performance-based targets. (2) Not applicable, as there are no outstanding stock options at period end. For additional information on our stock-based compensation plans, see Note Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this Item is incorporated herein by reference from the portion of the definitive Proxy Statement to be filed with the Securities and Exchange Commission within 120 days following the end of our Item 14. Principal Accountant Fees and The information required by this Item is incorporated herein by reference from the portion of the definitive Proxy Statement to be filed with the Securities and Exchange Commission within 120 days following the end of our Financial Statements: Report of Independent Registered Public Accounting Firms. Consolidated Balance Sheets as of Consolidated Statements of Operations for the years ended Consolidated Statements of Comprehensive Income for the years ended Consolidated Statements of Shareholders’ Equity for the years ended Consolidated Statements of Cash Flows for the years ended Notes to Consolidated Financial Statements. All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. Columns omitted from schedules filed have been omitted because the information is not applicable. (a)(3) Listing of Exhibits* 4.1 See Exhibits 3.1.1, 3.1.2, 3.1.3, 3.1.4, 3.2.1, 3.2.2, 3.2.3, 3.2.4, 3.2.5, and 3.2.6. 10.1 See Exhibit Form of Restricted Stock Unit and Performance Unit Award * All reports previously filed by the Company with the Commission pursuant to the Securities Exchange Act, and the rules and regulations promulgated thereunder, exhibits of which are incorporated to this Report by reference thereto, were filed under Commission File Number 1-15583. *** This is a management contract or compensatory plan or arrangement. The registrant agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedule or exhibit to any of the above filed exhibits upon request of the Commission. (b) Exhibits See Item 15(a)(3) above. None. Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DELTA APPAREL, INC. (Registrant) /s/Nancy P. Bubanich Date Nancy P. Bubanich Chief Accounting Officer (principal financial and accounting officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and as of the dates indicated. /s/Anita D. Britt 12/28/23 Anita D. Britt Date Robert W. Humphreys Date Director (principal executive officer) /s/Timothy Brog /s/Sonya E. Medina Timothy Brog Date Date Director /s/J. Bradley Campbell Date Date Director /s/ Dr. Bill C. Hardgrave Date Date Director /s/ Delta Apparel, Inc. and Subsidiaries Index to Consolidated Financial Statements To the Shareholders and the Board of Directors Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Delta Apparel, Inc. and We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of September 30, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated December 28, 2023 expressed an unqualified opinion thereon. Basis for Opinion These consolidated financial statements We conducted our audits in accordance with the standards of the Critical Audit Matters The critical audit matters communicated below are matters arising from the Inventory Reserve Valuation Description of the Matter As described in Note 4 to the Company’s consolidated financial statements, the Company’s inventories, net totaled approximately $212.4 million as of September 30, 2023, net of approximately $15.8 million of inventory reserves. As discussed in Note 2 to the consolidated financial statements, the Company states inventories at the lower of cost or net realizable value. In connection with this policy, the Company periodically reviews inventory quantities on hand and records reserves for obsolescence, excess quantities, irregulars and slow-moving inventory based on historical selling prices, current market conditions, and forecasted product demand to reduce inventory to its net realizable value. The Company’s evaluation of inventory valuation includes consideration of the life cycle of the individual products and historical sales and margin information based on such life cycles. Auditing management’s estimate of certain inventory reserves was complex and required significant judgment due to estimation uncertainty in the assumptions about the life cycle of the individual products and expected selling price when considering expected future demand and inventory quantities on hand. Changes in these assumptions can lead to a material effect on the amount of recorded inventory reserves. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated design, and tested the operating effectiveness of controls over the Company’s process to determine the valuation of the Company’s inventory reserves. This included internal controls over the Company’s review of significant assumptions underlying the inventory reserve estimate. To test the adequacy of the Company’s inventory reserve, our substantive audit procedures included, among others, assessing methodologies and assumptions used, testing the accuracy and completeness of the underlying data used in management’s estimation calculations, including aging of inventory and historical margins, and performing sensitivity analyses on the significant assumptions used. Description of the Matter As of September 30, 2023, the Company’s goodwill balance for the DTG2Go reporting unit was approximately $8.8 million. As discussed in Note 2 of the consolidated financial statements, goodwill is tested by the Company for impairment on an annual basis at the reporting unit level. The Company’s annual testing date is the first day of the third fiscal quarter. Further, when events or changes in circumstances indicate the carrying value may not be recoverable the Company tests for impairment as of an interim date. As disclosed in Notes 2 and 6 to the consolidated financial statements, as a result of the impact of market conditions on profitability and future cash flow, as well as the decline in share price, the Company performed an interim impairment analysis at September 30, 2023 on the DTG2Go reporting unit’s goodwill, which resulted in an impairment charge recorded in the fourth quarter in the amount of approximately $9.2 million. The Company estimated the fair value of the DTG2Go reporting unit using the discounted cash flow method, a form of the income approach. Auditing the Company’s interim impairment test for DTG2Go goodwill was complex and highly judgmental and required the involvement of a valuation specialist due to the significant judgment in estimating the fair value of the reporting unit. In particular, the fair value estimate of the DTG2Go reporting unit is sensitive to assumptions such as revenue, EBITDA margin, terminal period growth and discount rate. These assumptions are sensitive to, and affected by, expected future market or economic conditions, as well as industry and company-specific qualitative factors. How We Addressed the We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s DTG2Go interim goodwill impairment testing process, including controls over management’s review of the significant assumptions described above and the valuation model used to develop such estimates. To test the estimated fair value of the Company’s DTG2Go reporting unit and the measurement of the impairment charge recognized in the fourth quarter, we performed audit procedures that included, among others, testing the significant assumptions discussed above, testing the underlying data used by the Company in its analyses by comparing to historical and other industry data, as well as validating certain assertions with data internal to the Company and from other sources. We compared the significant assumptions used by management to current industry and economic trends while also considering changes to the Company’s business model, customer base and product mix. We involved our valuation specialists to assist in our evaluation of the Company's model, valuation methodology and certain assumptions utilized in the discounted cash flow model. We also involved our valuation specialists to independently compute a range of reasonableness for the discount rate. We performed sensitivity analyses to evaluate the impact that changes in the significant assumptions would have on the fair value of the reporting unit. In addition, we tested the reconciliation of the fair value of the reporting units to the market capitalization of the Company. /s/ Ernst & Young, LLP We have served as the Atlanta, Georgia December 28, 2023 Consolidated Balance Sheets (Amounts in thousands, except share amounts and per share data) September 2023 September 2022 Assets Cash and cash equivalents Accounts receivable, less allowances of $119 and $109, respectively Other receivables Income tax receivable Inventories, net 212,365 Prepaid expenses and other current assets Total current assets Property, plant and equipment, net Goodwill Intangible assets, net Deferred income taxes Operating lease assets Equity method investment Other assets 2,906 Total assets 455,238 Liabilities and Equity Liabilities: Accounts payable Accrued expenses 18,236 Income taxes payable Current portion of finance leases Current portion of operating leases Current portion of long-term debt Total current liabilities 115,164 Long-term income taxes payable Long-term finance leases, less current maturities Long-term operating leases, less current maturities Long-term debt, less current maturities Deferred income taxes Total liabilities Shareholders’ equity: Preferred stock—$0.01 par value, 2,000,000 shares authorized, none issued and outstanding Common stock —$0.01 par value, 15,000,000 shares authorized, 9,646,972 shares issued, and 7,001,020 and 6,915,663 shares outstanding as of September 2023, and September 2022, respectively Additional paid-in capital Retained earnings Accumulated other comprehensive gain Treasury stock —2,645,952 and 2,731,309 shares as of September 2023, and September 2022, respectively Equity attributable to Delta Apparel, Inc. Equity attributable to non–controlling interest Total equity Total liabilities and equity See accompanying Notes to Consolidated Financial Statements. Consolidated Statements of Operations (Amounts in thousands, except per share data) Year Ended September 2023 September 2022 Net sales Cost of goods sold Gross profit Selling, general and administrative expenses Goodwill impairment charge Other loss (income), net Operating (loss) income Interest expense (Loss) earnings before (benefit from) provision for income taxes (Benefit from) provision for income taxes Consolidated (loss) earnings, net Net (loss) income attributable to non-controlling interest Net (loss) earnings attributable to shareholders Basic (loss) earnings per share Diluted (loss) earnings per share Weighted average number of shares outstanding Dilutive effect of stock options and awards Weighted average number of shares assuming dilution See accompanying Notes to Consolidated Financial Statements. Consolidated Statements of Comprehensive (Loss) Income (Amounts in thousands) Year Ended September 2023 September 2022 Net (loss) earnings attributable to shareholders Other comprehensive (loss) income related to unrealized (loss) gain on derivatives, net of income tax Consolidated comprehensive (loss) income See accompanying Notes to Consolidated Financial Statements Delta Apparel, Inc. and Subsidiaries Consolidated Statements of Shareholders’ Equity (Amounts in thousands, except share amounts) Accumulated Additional Other Non- Common Stock Paid-In Retained Comprehensive Treasury Stock Controlling Shares Amount Capital Earnings Income (Loss) Shares Amount Interest Total Balance at September 2021 Net earnings Other comprehensive income Net income attributable to non-controlling interest Stock buyback Vested stock awards Stock based compensation Balance at September 2022 Net loss Other comprehensive loss Net loss attributable to non-controlling interest Vested stock awards Stock based compensation Balance at September 2023 See accompanying Notes to Consolidated Financial Statements. Consolidated Statements of (Amounts in Year Ended September 2023 September 2022 Operating activities: Consolidated net (loss) earnings Adjustments to consolidated net (loss) earnings attributable to net cash provided by (used in) operating activities: Depreciation Amortization of intangibles Amortization of deferred financing fees (Benefit from) provision for deferred income taxes Provision for market reserves Non-cash stock compensation Loss on disposal of equipment Loss on impairment of equipment Loss on impairment of goodwill Contingent consideration earn out adjustment Other, net Changes in operating assets and liabilities, net of effect of acquisitions: Accounts receivable, net Inventories, net Prepaid expenses and other current assets Other non-current assets Accounts payable Accrued expenses Change in net operating lease liabilities Income taxes Other liabilities Net cash provided by (used in) operating activities Investing activities: Purchases of property and equipment Proceeds from sale of property and equipment Proceeds from equipment under financed leases Cash paid for intangible asset Cash paid for business Net cash provided by (used in) investing activities Financing activities: Proceeds from long-term debt Repayment of long-term debt Payment of capital financing Repurchase of common stock Payment of deferred financing costs Payment of withholding taxes on stock awards Net cash (used in) provided by financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Supplemental cash flow information: Cash paid during the period for interest Cash paid during the period for income taxes, net of refunds received See accompanying Notes to Consolidated Financial Statements. Notes to Consolidated Financial Statements September 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 We design and internally manufacture the majority of our products, (a) Basis of Presentation: We operate our business in two distinct segments: (b) Fiscal Year: (c) Use of Estimates: (d) Cash and Cash Equivalents: (e) Accounts Receivable: We estimate the net (f) Inventories:We state inventories at the lower of cost or (g) Property, Plant and Equipment: (h) Internally Developed Software (i) Impairment of Long-Lived Assets (Including Amortizable Intangible Assets): (j) Goodwill and Intangible Assets: (k) Impairment of Goodwill: We complete our annual impairment test of goodwill on the first day of our third fiscal Under a qualitative approach, the Company evaluates various market and other factors to determine whether it is more likely than not that the Company’s goodwill has been impaired. In performing the qualitative assessment, the Company considers the carrying value of its reporting units As part of the quantitative test, we utilize the present value of expected cash flows or, as appropriate, a combination of the present value of expected cash flows and the guideline public company method to determine the estimated fair value of our reporting units. This present value model requires management to estimate future cash flows, the timing of these cash flows, and a discount rate (based on a weighted average cost of capital), which represents the time value of money and the inherent risk and uncertainty of the future cash flows. Factors that management must estimate when performing this step in the process During the third quarter of fiscal year In the fourth quarter of fiscal year 2023, the Company recorded a goodwill impairment charge of $9.2 million associated with the DTG2Go reporting unit. This impairment resulted from an interim impairment assessment of DTG2Go goodwill, which we were required to perform in the fourth quarter of fiscal year 2023 due to the adverse impact of the market conditions on our current year profitability and estimated future business results and cash flows, as well as the significant decrease in our market capitalization because of a sustained decline in our common stock price. The Company’s ability to realize the future cash flows used in its fair value calculations is affected by factors such as changes in economic conditions, changes in the Company’s operating performance, and changes in the Company’s business strategies. Significant changes in any of the assumptions involved in calculating these estimates could affect the estimated fair value of (l) Revenue Recognition: Our receivables resulting from wholesale customers are generally collected within three months, in accordance with our established credit terms. Our direct-to-consumer ecommerce and retail store receivables are collected within a few days. Our revenue, including freight income, is recognized net of applicable taxes in our Consolidated Statements of Operations. In certain areas of our wholesale business, we offer discounts and allowances to support our customers. Some of these arrangements are written agreements, while others may be implied by customary practices in the industry. Wholesale sales are recorded net of discounts, allowances, and operational chargebacks. As certain allowances and other deductions are not finalized until the end of a season, program or other event which We only recognize revenue to the We record shipping and handling charges incurred by us before and after the customer obtains control as a fulfillment cost rather than an additional promised service. Our customers' terms are less than one year from the transfer of (m) Sales Tax: (n) Cost of Goods Sold: (o) Selling, General and Administrative Expense: We include in selling, general and administrative expenses costs incurred subsequent to the receipt of finished goods at our distribution facilities, such as the cost of stocking, warehousing, picking and packing, and shipping goods for delivery to our customers. Distribution costs included in selling, general and administrative expenses totaled (p) Advertising Costs: (q) Stock-Based Compensation: (r) Income Taxes: (s) Earnings per Share: (t) Foreign Currency Translation: (u) Fair Value of Financial Instruments: (v) Other Comprehensive (w) Yarn and Cotton Procurements: (x) Derivatives: From time to time, we enter into forward contracts, option agreements or other instruments to limit our exposure to fluctuations in interest rates and raw material prices with respect to long-term debt and cotton purchases, respectively. We determine at inception whether the derivative instruments will be accounted for as hedges. We account for derivatives and hedging activities in accordance with We are exposed to counterparty credit risks on all derivatives. Because these amounts are recorded at fair value, the full amount of our exposure is the carrying value of these instruments. We only enter into derivative transactions with 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 gains and losses associated with them were recorded within cost of goods sold on the Consolidated Statement of Operations. There were (y) Equity Method Accounting: As of September 2023, we owned 31% of the outstanding capital stock in our Honduran Equity Method Investment. We apply the equity method of accounting for our investment, as we have less than a 50% ownership interest and can exert significant influence. We do not exercise control over this company and do not have substantive participating rights. As such, this entity is not considered a variable interest entity. (z) Net Income Attributable to Non-Controlling Interest: The net income attributable to non-controlling interest represents the share of net income allocated to members of our consolidated affiliates. In (aa) Business Combinations: Business combinations completed by Delta Apparel have been accounted for under the acquisition method of accounting. The acquisition method requires the assets acquired and (ab) Recently Adopted Accounting Pronouncements: In December 2019, the FASB issued ASU No.2019-12,Simplifying the Accounting In March 2020, the FASB issued ASU 2020-04,Reference Rate Reform (Topic848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting, (“ASU 2020-04”). ASU 2020-04 provides optional guidance for a limited period of time to (ac) Recently Issued Accounting Pronouncements Not Yet Adopted: Our revenue streams consist of wholesale, direct-to-consumer ecommerce and Year Ended September 2023 % % Retail 4 % % Direct-to-consumer ecommerce % % Wholesale % % Net Sales % % The table below provides net sales by reportable segment (in thousands) and the Year Ended September 2023 Net Sales Retail Direct-to-Consumer ecommerce Wholesale Delta Group % % % Salt Life Group % % % Total Year Ended September 2022 Net Sales Retail Direct-to-Consumer ecommerce Wholesale Delta Group % % % Salt Life Group % % % Total Inventories, net of reserves of September 2023 September 2022 Raw materials Work in process Finished goods Total inventories, net Raw materials include finished yarn and direct materials for the Note 5—Property, Plant and Property, plant and equipment consist of the following (in thousands, except September 2023 September 2022 Land and land improvements Buildings Machinery and equipment Computers and software Furniture and fixtures Leasehold improvements Vehicles and related equipment Construction in progress Less accumulated depreciation and amortization Total property, plant and equipment, net Note 6—Goodwill and Intangible Assets Goodwill and components of intangible assets consist of the following (in thousands): September 2023 September 2022 Cost Accumulated Impairment Losses Net Value Cost Accumulated Impairment Losses Net Value Economic Life Goodwill: Delta Group Salt Life Group Total goodwill, net September 2023 September 2022 Cost Accumulated Amortization Net Value Cost Accumulated Amortization Net Value Economic Life Intangibles: Tradename/trademarks 20 - 30 yrs Customer relationships 20 yrs Technology 10 yrs License agreements 15 - 30 yrs Non-compete agreements 4 – 8.5 yrs Total intangibles, net Goodwill represents the acquired goodwill net of the cumulative impairment losses recorded in fiscal years 2023 and 2011 of $9.2 million and $0.6 million, respectively. In the fourth quarter of fiscal year Accrued expenses consist of the following (in thousands): September 2023 September 2022 Accrued employee compensation and benefits Taxes accrued and withheld Refund liabilities Accrued freight Accrued capital expenditures Deferred purchase price (1) Accrued interest Other Total accrued expenses (1) Unsecured liability associated with the purchase of intangible technology, of which the final quarterly installment of $0.5 million was paid in the first quarter of fiscal year 2023. September 2023 September 2022 Revolving U.S. credit facility, interest at base rate or adjusted SOFR rate plus an applicable margin (interest at 8.2% on September 2023) due June 2027 Revolving credit facility with Banco Ficohsa, a Honduran bank, interest at 8.6% as of September 2023 and 7.25% as of September 2022, due August 2025 Term loan with Banco Ficohsa, a Honduran bank, interest at 9.0%, quarterly installments beginning September 2021 through December 2025 Term loan with Banco Ficohsa, a Honduran bank, interest at 8.75%, quarterly installments beginning March 2023 through May 2027 Term loan with Banco Ficohsa, a Panamanian bank, interest at the prevailing market rate within the Panamanian Banking Market (interest at 9.8% on September 2023), monthly installments beginning October 2022 through August 2027 Salt Life Beverage, LLC promissory note, interest at 4.0% Less current portion of long-term debt Long-term debt, excluding current maturities Credit Facility On May 10, 2016, we On November 19, 2019, the Borrowers entered into a Consent and Fourth Amendment to the On April 27, 2020, the Borrowers entered into a Fifth Amendment to the Fifth Amended and Restated Credit Agreement with Wells Fargo Bank (the “Agent”) and the other lenders set forth therein (the “Fifth Amendment”). The Fifth Amendment, among other things, amends the financial covenant provisions from the amendment date through September 2020, including effectively lowering the minimum availability thresholds and removing the requirement that our Fixed Charge Coverage Ratio (“FCCR”) for the preceding 12-month period must not be less than 1.1 to 1.0. The Fifth Amendment also, among other things, (i) allowed for an additional 30 days of aged receivables from customers in the borrowing base through August 1, 2020, (ii) ceased amortization of real estate and machinery and equipment assets in the borrowing base through August 1, 2020, (iii) postponed amortization of trademark assets in the borrowing base until October 4, 2020; (iv) amends the definition of Fixed Charge Coverage Ratio to reference the monthly amortization of the borrowing bases that were amended as part of the Fourth Amendment to the Fifth Amended and Restated Credit Agreement on November 19, 2019, (v) amends the LIBOR rate definition to include a floor rate of 1.0%, and (vi) required weekly reporting of accounts receivable to the Agent through October 3, 2020. On August 28, 2020, the Borrowers entered into a Sixth Amendment to the Fifth Amended and Restated Credit Agreement with the Agent and the other lenders set forth therein (the “Sixth Amendment”). The Sixth Amendment, among other things, (i) maintained lower minimum availability thresholds from the amendment date through July 3, 2021, (ii) allowed for an additional 30 days of aged receivables from customers in the borrowing base through April 3, 2021, (iii) increased the advance rate to 70% of real estate assets in the borrowing base and commences amortization on October 4, 2020, (iv) ceased amortization of machinery and equipment assets in the borrowing base through April 3, 2021, (v) postponed amortization of trademark assets in the borrowing base until April 4, 2021, (vi) required the Applicable Margin to be set at Level III through July 3, 2021 and increased the Applicable Margin by 50 basis points across all Levels within the Applicable Margin table for the remaining term of the Amended Credit Agreement, and (vii) required continued weekly reporting of accounts receivable to the Agent through July 3, 2021. On June 2, 2022, the Borrowers entered into a Seventh Amendment to the Fifth Amended and Restated Credit Agreement with the Agent and the other lenders set forth therein (the “Seventh Amendment”). The Seventh Amendment, among other things, (i) removes LIBOR based borrowing and utilizes SOFR (Secured Overnight Financing Rate) as the primary pricing structure, (ii) amends the pricing structure based on SOFR plus a CSA (Credit Spread Adjustment) defined as 10 bps for 1 month and 15 bps for 3-month tenors, (iii) sets the SOFR floor to 0 bps, (iv) reloads the fair market value of real estate and intellectual property within the borrowing base calculation and resets their respective amortization schedules, (v) sets the maturity date to 5 years from the closing date, and (vi) updates the requirement for our FCCR for the preceding 12-month period to not be less than 1.0 (previously 1.1). On January 3, 2023, the Borrowers entered into an Eighth Amendment to the Fifth Amended and Restated Credit Agreement with the Agent and the other lenders set forth therein (the “Eighth Amendment”). The Eighth Amendment essentially clarifies the Amended Credit Agreement’s provisions regarding the inclusion of eligible in-transit inventory in the borrowing base and amends the definition of Increased Reporting Event to include 12.5% of the lesser of the borrowing base and the maximum revolver amount as opposed to 12.5% of the line cap. On February 3, 2023, the Borrowers entered into a Ninth Amendment to the Fifth Amended and Restated Credit Agreement with the Agent and the other lenders set forth therein (the “Ninth Amendment”). The Ninth Amendment, among other things, adds an Accommodation Period beginning on the amendment date and continuing through the date following September 30, 2023, upon which Borrowers satisfy minimum availability thresholds and during which: (i) the minimum borrowing availability thresholds applicable to the Amended Credit Agreement are (a) through (and including) April 1, 2023, $7,500,000, (b) on and after April 2, 2023 through (and including) June 4, 2023, $9,000,000, (c) on and after June 5, 2023, through the date following September 30, 2023, upon which Borrowers satisfy minimum availability thresholds, $10,000,000; and (d) at all times thereafter, $0; (ii) the covenant requiring that our FCCR (as defined in our credit agreement) for the preceding 12-month period must not be less than 1.0 if the availability under our credit facility falls below the amounts specified in our credit agreement is suspended; (iii) Borrowers must maintain specified minimum EBITDA levels for trailing three-month periods starting March 4, 2023; (iv) the Applicable Margin with respect to loans under the Amended Credit Agreement is increased by 50 basis points; and (v) a Cash Dominion Trigger Event occurs if availability is less than $2,000,000. On March 23, 2023, the Borrowers entered into a Tenth Amendment to the Fifth Amended and Restated Credit Agreement with the Agent and the other lenders set forth therein to account for specified costs and expenses in calculating EBITDA for purposes of the Amended Credit Agreement. At September 2023, the Amended Credit Agreement allowed us to borrow up to At September Proceeds of the loans made pursuant to the Amended Credit Agreement may be used for permitted acquisitions (as defined in the Amended Credit Agreement), general operating expenses, working capital, other corporate purposes, and to finance credit facility fees and expenses. See Note 16—Subsequent Events for a discussion of the Eleventh, Twelfth and Thirteenth Amendments to the Fifth Amended and Restated Credit Agreement Honduran Debt Since March 2011, we have entered into term loans and a revolving credit facility with Banco Ficohsa, a Honduran bank, El Salvador Debt In September 2022 we entered into a new term loan with a five-year term with a principal amount of $3.0 million with Banco Ficohsa, a Panamanian bank, to finance our El Salvador operations. This loan is secured by a first-priority lien on the assets of our El Salvador operations and is not guaranteed by our U.S. entities. The loan is denominated in U.S. dollars, and the carrying value of the debt approximates its fair value. Information about Total Debt The aggregate maturities of debt for the succeeding five fiscal years and thereafter at September September Amount 2024 2025 2026 2027 2028 Thereafter The Tax Cuts and Jobs Act of 2017 (the “2017 Tax Legislation”) was enacted on December 22, 2017, and 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. The Section 163(j) limitation does not allow the amount of deductible interest to exceed the sum of the taxpayer’s business interest income or 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) which were effective for us beginning fiscal year 2019. We have elected to account for the tax on GILTI as a period cost and, therefore, do not record deferred taxes related to GILTI on our foreign subsidiaries. The Coronavirus Aid, Relief, and Economic Security Act (“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 2017 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. The provision for income taxes consists of the following (in thousands): Year Ended September 2023 September 2022 Current: Federal State Foreign Total current Deferred: Federal State Total deferred (Benefit from) provision for income taxes For financial reporting purposes our (loss) income before (benefit from) provision for income taxes includes the following components (in thousands): Year Ended September 2023 September 2022 United States, net of income/loss attributable to non-controlling interest Foreign Our effective income tax rate on operations for 2023 was 23.8%compared to a rate of 17.9% in the prior year. 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. In addition, the future impact of the CARES Act and 2017 Tax Legislation may differ from historical amounts, possibly materially, due to, among other things, changes in interpretations and assumptions made regarding the CARES Act and 2017 Tax Legislation, guidance that may be issued, and actions we may take as a result of the CARES Act and 2017 Tax Legislation. A reconciliation between the actual provision for income taxes and the provision for income taxes computed using the federal statutory income tax rate of Year Ended September 2023 September 2022 Income tax (benefit) expense at the statutory rate of 21.0% State income tax benefits, net of federal income tax benefit Impact of foreign earnings in tax-free zone GILTI inclusion Other permanent differences Impact of state rate changes Permanent reinvestment of foreign earnings Other (Benefit from) provision for income taxes Significant components of our deferred tax assets and liabilities are as follows (in thousands): September 2023 September 2022 Deferred tax assets: State net operating loss carryforwards Federal net operating loss carryforwards Foreign net operating loss carryforward Section 163(j) deduction carryforwards Receivable allowances and reserves Inventories and reserves Accrued compensation and benefits Operating lease liabilities Other Gross deferred tax assets Less valuation allowance — state net operating loss carryforwards Net deferred tax assets Deferred tax liabilities: Depreciation Goodwill and intangibles Operating lease assets Other Gross deferred tax liabilities Net deferred tax assets (liabilities) As of September For both federal and state purposes, the ultimate realization of deferred tax assets depends upon the generation of future taxable income or tax planning strategies during the periods in which those temporary differences become deductible or when the carryforwards are available. ASC 740, As of September 2023, We file income tax returns in the U.S. federal jurisdiction and various state, local and foreign jurisdictions. Tax years We lease property and equipment under operating lease arrangements, most of which relate to distribution centers and manufacturing facilities in the U.S., Honduras, El Salvador, and Mexico. We also lease machinery and equipment in the U.S. under finance lease arrangements. We include both the contractual term as well as any renewal option that we are reasonably certain to exercise in the determination of our lease terms. For leases with a term of greater than 12 months, we value lease liabilities and the related assets at the present value of the lease payments over the related term. We apply the short-term lease exception to leases with a term of 12 months or less and exclude such leases from our Condensed Consolidated Balance Sheet. Payments related to these short-term leases are expensed on a straight-line basis over the lease term and are reflected as a component of lease cost within our Condensed Consolidated Statements of Operations. Our operating lease agreements for buildings generally include provisions for the payment of our proportional share of operating costs, property taxes, and other variable payments. These incremental payments are excluded from our calculation of operating lease liabilities and right of use assets. We have Generally, the rate implicit in our operating leases The following table presents the future undiscounted payments due on our operating and finance lease liabilities as well as a reconciliation of those payments to Operating Finance Leases Leases 2024 2025 2026 2027 2028 Thereafter Undiscounted fixed lease payments Discount due to interest Total lease liabilities Less current maturities Lease liabilities, excluding current maturities As of September 2023, we have entered into certain operating leases that have not yet commenced, but the annual fixed lease payments are not significant. Our Ceiba Textiles manufacturing facility is leased under an operating lease arrangement with a Honduran company, of which we own 31% of the outstanding capital stock of such lessor at September 2023. During each of 2023 and As of September 2023, and September 2022, we had $55.5 million and $50.3 million, respectively, of operating lease ROU assets which were reflected within Operating lease assets in our Consolidated Balance Sheet,and $27.2 million and $32.1 million, respectively, of finance lease ROU assets, which were reflected within Property, plant, and equipment, net in our Consolidated Balance Sheet. The weighted average remaining lease terms for our operating leases and finance leases were approximately 7 years and 3 years, respectively, as of The components of total lease expense were as follows Operating lease fixed expense Operating lease variable cost expense Finance lease amortization of ROU assets expense Finance lease interest expense Total lease expense Cash outflows for ROU assets obtained in exchange for We do not have significant leasing transactions in which we are the lessor. We sponsor and maintain a We provide post-retirement life insurance benefits for September 2023 September 2022 Balance at beginning of year Interest expense Benefits paid Balance at end of year On February Shares are generally issued from treasury stock upon the vesting of the restricted stock units, performance units or other awards under the Compensation expenses are recorded within selling, general and The following table summarizes the restricted stock unit and performance unit award activity during the periods ended September Year Ended September 2023 September 2022 Number of Units Weighted average grant date fair value Number of Units Weighted average grant date fair value Units outstanding, beginning of fiscal period Units granted Units issued Units forfeited Units outstanding, end of fiscal period During During 2023, performance units and restricted stock units representing 6,000 and 6,000 shares of our During 2023, performance units and restricted stock units representing 6,000 and 6,000 shares of our During 2023, performance units and restricted stock units representing During 2022, performance units and restricted stock units representing 47,700 and 95,000 shares of our common stock, respectively, vested upon the filing of our Annual Report on Form During 2022, restricted stock units representing 15,000 shares of our common stock were granted and vested upon the filing of our Annual Report on Form 10-K for the year ended September 2022. These restricted stock units were payable in common stock and During During As of The following table summarizes information about the unvested restricted stock units and performance units as of Restricted Stock Units/Performance Units Number of Units Average Market Price on Date of Grant Vesting Date* Fiscal Year 2023 Restricted Units November 2023 Fiscal Year 2024 Restricted Units November 2024 Fiscal Year 2024 Performance Units November 2024 Fiscal Year 2025 Restricted Units November 2025 Fiscal Year 2025 Performance Units November 2025 * These awards are eligible to vest upon the filing of our Annual Report on Form Our operations are managed and reported in two segments, Delta Group and Salt Life Group, which reflect the manner in which the business is managed, and results are reviewed by the Chief Executive Officer, who is our chief operating decision maker. The Delta Group is comprised of the DTG2Go is a market leader in the Delta Activewear is a preferred supplier of The iconic Soffe brand offers activewear for spirit makers and record breakers and is widely known for the original “cheer short” with the signature roll-down waistband. Soffe carries a wide range of activewear for the entire family. Soffe’s heritage is anchored in the military, and we continue to be a proud supplier to both active duty and veteran United States military personnel worldwide. The Soffe men’s assortment features the tagline “anchored in the military, grounded in training” and offers everything from physical training gear certified by the respective branches of the military, classic base layers that include the favored 3-pack tees, and the iconic “ranger panty.” Complementing the Delta Our Global Brands channel serves as a Our Retail Direct channel serves brick and mortar and online retailers by providing our portfolio of Delta, Delta Platinum, and Soffe products directly to the retail locations and ecommerce fulfillment centers of a diversified customer base including sporting goods and outdoor retailers, specialty and resort shops, farm and fleet stores, department stores, and mid-tier retailers. As a key element of the integrated Delta Group segment, each of Activewear’s primary channels offer a seamless solution for The 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 Year Ended September 2023 September 2022 Segment net sales: Delta Group Salt Life Group Total net sales Segment operating income: Delta Group Salt Life Group Total segment operating (loss) income Purchases of property, plant and equipment: Delta Group Salt Life Group Corporate Total purchases of property, plant and equipment Depreciation and amortization: Delta Group Salt Life Group Total depreciation and amortization Goodwill, net: Delta Group Salt Life Group Total goodwill, net Interim and Annual Goodwill Impairment Analysis Please review Note 2—Critical Accounting Estimates - (k) Impairment of Goodwill and Note 6—Goodwill and Intangible Assets for a discussion of our fiscal year 2023 interim and annual impairment tests. Based on the results of our interim goodwill impairment analysis, the Company determined that impairment of $9.2 million of DTG2Go’s goodwill (Delta Group segment) was warranted. The following reconciles the segment operating income to the consolidated income before provision for income taxes (in thousands): Year Ended September 2023 September 2022 Segment operating (loss) income Unallocated corporate expenses Unallocated interest expense Consolidated (loss) income before (benefit from) provision for income taxes Our revenues include sales to domestic and foreign customers. Foreign customers are composed of companies whose headquarters are located outside of the United States. Our total assets and equity investment by segment are as follows (in thousands): As of September 2023 September 2022 Total assets by segment: Delta Group Salt Life Group Corporate Total assets Equity investment in joint venture: Delta Group Salt Life Group Total equity investment in joint venture We attribute our property, plant and equipment to a particular country based on the location of As of September 2023 September 2022 United States Honduras El Salvador Mexico All foreign countries Total property, plant and equipment, net Our Board of Directors (a) Litigation At times, we are party to various legal claims, actions and complaints. We believe that, as a result of legal (b) Purchase Contracts We have entered into agreements, and have fixed prices, to purchase yarn, finished fabric, and finished apparel and headwear products. At September Yarn Finished fabric Finished products As of September (d) 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. 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 ASC 820, ○ Level 1 ○ Level 2 ○ Level 3 The following financial liabilities are measured at fair value on a recurring basis (in thousands): Fair Value Measurements Using Period Ended Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Interest Rate Swap September 2023 September 2022 The fair value of the interest rate swap agreements The following table summarizes the fair value and presentation in the Consolidated Balance Sheets for derivatives as of September September 2023 September 2022 Deferred tax asset Other assets Other liabilities Accumulated other comprehensive gain Credit Facility Modifications On October 6, 2023, the Borrowers entered into On December 5, 2023, the Borrowers entered into a Twelfth Amendment to the Agreement with the Agent and other lenders set forth therein (the “Twelfth Amendment”). The definitions of capitalized terms, if not so defined herein, may be found in the Agreement or the Twelfth Amendment. The Twelfth Amendment, among other things: (i) modifies the Applicable Margin during the period commencing on December 5, 2023, and ending on the date after certain real estate transactions have been consummated in accordance with the terms thereof; (ii) modifies the Availability Block upon consummation of certain On December 28, 2023, the Borrowers entered into a Thirteenth Amendment to the Agreement with the Agent and other lenders set forth therein (the “Thirteenth Amendment”). The definitions of capitalized terms, if not so defined herein, may be found in the Agreement or the Thirteenth Amendment. The Thirteenth Amendment (i) modifies the Availability Block such that (a) on and after the Ninth Amendment Date through and including April 1, 2023, it shall be $7,500,000, (b) on and after April 2, 2023 through and including June 4, 2023, it shall be $9,000,000, (c) on and after June 5, 2023 through and including December 4, 2023, it shall be $10,000,000, (d) on and after December 5, 2023 through and including January 18, 2024, it shall be $7,000,000, (d) on and after January 19, 2024 through and including and February 15, 2024, it shall be $8,500,000, and (e) on and after February 16, 2024 and at all times thereafter, it shall be $10,000,000; (ii) requires that, commencing with the fiscal month ending June 29, 2024, the Company must maintain a Fixed Charge Coverage Ratio for the immediately preceding 12 consecutive fiscal months of not less than 1.00 to 1.00 if (a) Availability is less than $17,500,000 or (b) a Default or Event of Default exists; and (iii) requires that Borrowers maintain specified minimum EBITDA levels measured on a cumulative month-to-date basis through the end of the fiscal month ending March 2, 2024, and for trailing three-month periods starting March 30, 2024. The Thirteenth Amendment also, among other things, removes the requirement that certain real estate transactions be consummated and also removes the occurrence of an Event of Default in the event such transactions are not consummated by certain dates. Sale-Leaseback Transactions On November 22, 2023, the Company entered into a Real Estate Purchase and Sale Contract with RH Dunn LLC (“RH Dunn”) for the sale and long-term leaseback of the Company’s approximately 35-acre campus in Fayetteville, North Carolina with approximately 550,000 square feet of industrial space utilized across the Company’s various business units for manufacturing, decoration, distribution and other activities (the “Fayetteville Agreement”). On December 27, 2023, RH Dunn exercised its discretionary right to terminate the Fayetteville Agreement. The purchase price for the Fayetteville campus contained in the Fayetteville Agreement was $25 million and the Fayetteville Agreement contained customary representations, warranties and covenants made by the Company. The obligations of RH Dunn under the Fayetteville Agreement were subject to inspection, due diligence and other customary closing conditions. The Fayetteville Agreement contained a transaction closing condition requiring the Company or its wholly-owned subsidiary to enter into a long-term lease agreement with RH Dunn or its affiliate, with such lease agreement having an initial term of 10 years, with two five-year renewal options. On November 3, 2023, the Company entered into an agreement providing for the sale and long-term leaseback of the Company’s approximately 25-acre property in Clinton, Tennessee with approximately 164,000 square feet of distribution space utilized in the Company’s Activewear business. The purchase price for the Clinton property is $6.5 million and the Company expects to receive net proceeds (after tax and transaction-related costs) of approximately $6 million. The Company intends to utilize the net proceeds to repay outstanding borrowings under its asset-based revolving credit facility. The proposed transaction is currently expected to be 10 19 19 20 20 21 21 21 29 29 29 29 32 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 33 34 34 34 35 35 35 39 40 EX-10.27 EX-21 Securities and Exchange Commission (the “SEC”),SEC, in our press releases, and in other reports to our shareholders. All statements, other than statements of historical fact, which address activities, events or developments that we expect or anticipate will or may occur in the future are forward-looking statements. The words “plan”, “estimate”, “project”, “forecast”, “anticipate”, “expect”, “intend”, “seek’, “believe”, “may”, “should”“plan,” “estimate,” “project,” “forecast,” “outlook,” “anticipate,” “expect,” “intend,” “remain,” “seek,” “believe,” “may,” “will,” “see,” “should,” “aim,” “will likely result,” “will continue,” and similar expressions, and discussions of strategy or intentions, are intended to identify forward-looking statements.the volatility and uncertainty of cotton and other raw material prices;the general U.S. and international economic conditions;the competitive conditions in the apparel industry;restrictions on our ability to borrow capital or service our indebtedness;deterioration in the financial condition of our customers and suppliers and changes in the operations and strategies of our customers and suppliers;our ability to predict or react to changing consumer preferences or trends;our ability to successfully open and operate new retail stores in a timely and cost-effective manner;pricing pressures and the implementation of cost reduction strategies;changes in economic, political or social stability at our offshore locations;disruptions at our manufacturing and other facilities;our ability to attract and retain key management;the effect of unseasonable or significant weather conditions on purchases of our products;significant changes in our effective tax rate;interest rate fluctuations increasing our obligations under our variable rate indebtedness;the ability to raise additional capital;the ability to grow, achieve synergies and realize the expected profitability of acquisitions;the volatility and uncertainty of energy and fuel prices;material disruptions in our information systems related to our business operations;data security or privacy breaches;significant interruptions within our manufacturing or distribution operations;changes in or our ability to comply with safety, health and environmental regulations;significant litigation in either domestic or international jurisdictions;the ability to protect our trademarks and other intellectual property;the ability to obtain and renew our significant license agreements;the impairment of acquired intangible assets;changes in ecommerce laws and regulations;changes in international trade regulations;our ability to comply with trade regulations;changes in employment laws or regulations or our relationship with employees;cost increases and reduction in future profitability due to the effects of healthcare legislation;foreign currency exchange rate fluctuations;violations of manufacturing standards or labor laws or unethical business practices by our suppliers and independent contractors;the illiquidity of our shares;price volatility in our shares and the general volatility of the stock market; andthe costs required to comply with the regulatory landscape regarding public company governance and disclosure.● ● significant interruptions or disruptions within our manufacturing, distribution or other operations; ● deterioration in the financial condition of our customers and suppliers and changes in the operations and strategies of our customers and suppliers; ● the volatility and uncertainty of cotton and other raw material prices and availability; ● the competitive conditions in the apparel industry; ● our ability to predict or react to changing consumer preferences or trends; ● our ability to successfully open and operate new retail stores in a timely and cost-effective manner; ● the ability to grow, achieve synergies and realize the expected profitability of acquisitions; ● changes in economic, political or social stability at our offshore locations or in areas in which we, or our suppliers or vendors, operate; ● our ability to attract and retain key management; ● the volatility and uncertainty of energy, fuel and related costs; ● material disruptions in our information systems related to our business operations; ● compromises of our data security; ● a cybersecurity incident or other disruptions in the availability of our computer systems or privacy breaches; ● significant changes in our effective tax rate; ● significant litigation in either domestic or international jurisdictions; ● recalls, claims and negative publicity associated with product liability issues; ● the ability to protect our trademarks and other intellectual property; ● changes in international trade regulations; ● our ability to comply with trade regulations; ● changes in employment laws or regulations, our relationship with employees; or our ability to attract and retain employees; ● negative publicity resulting from violations of manufacturing standards or labor laws or unethical business practices by our suppliers or independent contractors; ● the inability of suppliers or other third-parties, including those providing properly functioning key equipment, transportation, and other services, to perform their obligations or fulfill the terms of their contracts with us; ● restrictions on our ability to borrow capital or service our indebtedness; ● interest rate fluctuations increasing our obligations under our variable rate indebtedness; ● the ability to raise additional capital; ● the impairment of acquired intangible assets; ● foreign currency exchange rate fluctuations; ● the illiquidity of our shares; and ● price volatility in our shares and the general volatility of the stock market. describedset forth in Part 1 under the heading ofsubheading “Risk Factors.” Any forward-looking statements in this Annual Report on Form 10-K 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 Annual Report on Form 10-K, and we do not undertake to publicly update or revise the forward-looking statements, except as required by the federal securities laws.PART IITEM 1.BUSINESS“Delta Apparel”, the “Company”, “we”, “us” and “our” are used interchangeably to refer to together(collectively with our domestic wholly-owned subsidiaries, includingDTG2Go, LLC; Salt Life, LLC; M.J. Soffe, LLC (“Soffe”), Junkfood Clothing Company (“Junkfood”), Salt Life, LLC (“Salt Life”), Art Gun, LLC (“Art Gun”),LLC; and other international subsidiaries, as appropriate to the context. On March 31, 2017, we sold our Junkfood business to JMJD Ventures, LLC. See Note 3—Divestitures for further information on this transaction.We were incorporated in Georgia in 1999 and our headquarters“Delta Apparel,” “we,” “us,” “our,” or “the Company”) is located at 322 South Main Street, Greenville, South Carolina 29601 (telephone number: 864-232-5200). Our common stock trades on the NYSE MKT under the symbol “DLA”.We operate on a 52-53 week fiscal year ending on the Saturday closest to September 30. The 2017 and 2016 fiscal years were 52-week years that ended on September 30, 2017, and October 1, 2016, respectively. The 2015 fiscal year was a 53-week year that ended on October 3, 2015.OVERVIEWDelta Apparel, Inc. is anvertically integrated, international apparel company with approximately 6,800 employees worldwide. We design, marketing, manufacturingmanufacture, source, and sourcing company that featuresmarket a diverse portfolio of core activewear and lifestyle basicsapparel products under our primary brands of Salt Life®, Soffe®, and branded activewear apparel, headwearDelta. We are a market leader in the on-demand, digital print and related accessory products.fulfillment industry, bringing DTG2Go’s proprietary technology and innovation to our customers’ supply chains. We specialize in selling casual and athletic products through a variety of distribution channels and distribution tiers, including department stores, midoutdoor and mass channels, e-retailers, sporting goods and outdoor retailers, independent and specialty stores, better department stores and mid-tier retailers, mass merchants, eRetailers, the U.S. military.military, and through our business-to-business digital platform. Our products are also made available direct-to-consumer on our websitesecommerce sites and in our branded retail stores. We believe thisOur diversified distributiongo-to-market strategy allows us to capitalize on our strengths to provide casualour activewear and lifestyle apparel products to consumers purchasing from most types of retailers.whichwith more than 90% of the apparel units that we sell sewn in our own facilities. This allows us to offer a high degree of consistency and quality, controls as well as leverage scale efficiencies. One of our strengths isefficiencies, and react quickly to changes in trends within the speed with which we can reach the market from design to delivery.became a diversified branded apparel company through acquisitions that added well-recognized brands towere incorporated in Georgia in 1999, and our portfolio, expanded our product offerings and broadened our distribution channels and customer base.BUSINESS SEGMENTSbusinesspublic float was less than the applicable $250 million threshold on the last day of our second quarter.distinct segments: basicsreportable segments, Delta Group and branded.AlthoughSalt Life Group, which reflect the two segmentsmanner in which the business is managed and results are similar in their production processes and regulatory environments, they are distinct in their economic characteristics, products, marketing, and distribution methods.basics segmentDelta Group is comprised of ourthe following business units primarily focused on garment styles characterized by low fashion risk, and includes our Delta Activewear (which includes Delta Catalog and FunTees) and Art Gun business units. We market, distribute and manufacture unembellished knit apparel under the main brands of Delta Pro Weight® core activewear styles: DTG2Go and Delta Magnum Weight® for sale toActivewear.diversified audience ranging from large licensed screen printers to small independent businesses. We also manufacture private label products for major branded sportswear companies, trendy regional brands, retailers, and sports licensed apparel marketers. Typically, our private label products are sold with value-added services such as hangtags, ticketing, hangers, and embellishment so that they are fully ready for retail. Usingmarket leader in the on-demand, direct-to-garment digital print equipment and its proprietaryfulfillment industry, bringing technology Art Gun embellishes garments to create private label, custom decorated apparel servicing the fast-growing e-retailer channels, as well as the ad specialty, promotional products and retail marketplaces.The branded segment is comprised of our business units focused on specialized apparel garments, headwear and related accessories to meet consumer preferences and fashion trends, and includes our Salt Life, Soffe, and Coast business units. Our branded segment also included our The Game and Junkfood business units prior to their dispositions on March 2, 2015, and March 31, 2017, respectively. These branded products are sold through specialty and boutique shops, upscale and traditional department stores, mid-tier retailers, sporting goods stores, e-retailers and the U.S. military, as well as direct-to-consumer through branded ecommerce sites and "brick and mortar" retail stores. Products in this segment are marketed under our lifestyle brands of Salt Life®, Soffe®, and COAST®, as well as other labels. On August 30, 2016, we purchased substantially all of the assets comprising our Coast Apparel business ("Coast"), continuing our strategy of building lifestyle brands that take advantage of our creative capabilities, direct-to-consumer infrastructure, vertical manufacturing platform and sourcing competencies. The results of the Coast business have been included in the branded segment since its acquisition on August 30, 2016.See Note 14 of the Notes to Consolidated Financial Statements for financial information regarding segment reporting, which information is incorporated herein by reference.PRODUCTSWe specialize in the design, merchandising, sales, and marketing of a variety of casual and athletic products for men, women, juniors, youth and children at a wide range of price points through most distribution channels. We market fashion apparel garments, headwear and accessories under our primary brands of Salt Life®, Soffe® and COAST®, as well as other labels. We market our basic apparel garments under our Delta brand.Salt Life is an authentic, aspirational and lifestyle brand that embraces those who love the ocean and everything associated with living the “Salt Life”. Salt Life is dedicated to providing transcendent, ocean-inspired products and designs that combine function and fashion with an incredible fit tailored for the active lifestyle. Salt Life has successfully evolved into a lifestyle brand with global appeal and distribution across surf shops, specialty stores, department stores, sporting goods retailers and other channels as well as its own direct-to-consumer channels at www.saltlife.com and “brick and mortar” retail locations in California, Florida and Georgia. Soffe is a lifestyle activewear brand that designs, produces, and markets products for men, women, juniors, and children. Soffe offers unique assortments based in the military, team wear and cheer/dance/gymnastics markets and is known for fit, function and comfort. Soffe's women's product offerings are grounded in the brand's heritage in the cheer/gymnastics/dance markets and include a newly introduced dance capsule, Sweat & Grace, that brings function and fit to fashion-forward dance wear, along with updated, trend-right spirit wear. As a supplier to the military since 1946, Soffe's men's products are anchored in training and grounded in military heritage. Core items include performance garments issued directly to enlisted soldiers, certified U.S. Made physical training apparel, and a wide range of preferred base layer garments, which has led to a cult-like following for key products like Soffe’s Ranger Panty. Lastly, Intensity by Soffe incorporates fashion-forward elements and extreme attention to fit with on-the-field sensibility. Intensity branded products include uniforms, practice gear, and accessories. Soffe has a diverse distribution network that includes all military branches, big-box sporting goods retailers, department stores, independent sporting goods retailers, team dealers, screen printers, schools and direct-to-consumer outlets including Soffe-branded ecommerce site www.soffe.com and multiple "brick and mortar" retail locations.Coast integrates the coastal experience of weekends and summers at the beach with everyday life throughout the year. Beginning with just a men’s polo shirt, Coast Apparel has since expanded into a full line of traditional, sports-casual attire, headwear and accessories. Coast Apparel primarily markets direct-to-consumer through two retail stores located in Greenville, South Carolina and via its ecommerce site at www.coastapparel.com. Coast Apparel products can also be found at select independent retailers.Delta offers a wide assortment of apparel garments for the entire family with an industry-leading color palette available in infant to adult sizes up to 5X. Embracing its roots, Delta's Pro Weight® line represents a diverse selection of mid-weight, 100% cotton silhouettes. The Magnum Weight® line is designed to give our customers a variety of silhouettes in a heavier-weight, 100% cotton fabric. As the marketplace continues to search for an upgrade in its t-shirt selections, Delta has brought innovation to the forefrontsupply chains of allour many customers. Our ‘On-Demand DC’ digital solution provides retailers and brands with immediate access to utilize DTG2Go’s broad network of its new styles. Delta has an extensive ringspun cotton line that includes a large selection of heathered and solid colors with great, soft feel at a value price. Delta recently broadened its Delta Dri performance line, which incorporates softer fabrics with both moisture wicking and anti-microbial properties, with new ladies and boys products to accompany the existing men’s line. New pepper heathers, tri-blends and poly/cotton fabrics options expand the Delta Soft component of Delta's fashion basics line. With refined styling and a luxurious look and feel, the Delta Platinum collection is a cut above its competition. Delta also now offers triblend hoodie styles, raglan sleeve silhouettes and a stylish ladies Dolman tee. FunTees is a leading private label apparel manufacturer. FunTees' long-standing, trusted relationships with top-tier global sportswear and lifestyle brands are supported by a commitment to innovation and service and its diverse capabilities in design, textiles, cut & sew, embellishment, and retail packaging have made it a go-to source for worldwide brands.Art Gun is a leader in the direct-to-garment printingprint and fulfillment marketplace, with one offacilities, while offering the mostscalability to integrate digital fulfillment within the customer’s own distribution facilities. We use highly-automated factory processes for deliveringand our proprietary s oftware to deliver on-demand, digitally printed apparel direct to consumers on behalf of all types. Art Gun is driven by obsessive attention to detail, with its development and operation teams collaborating to optimizeour customers. Via our seven fulfillment facilities throughout the print quality, fulfillment, and speedy delivery of every order. Quality is the touchstone of everything Art Gun does. Built uponUnited States, DTG2Go offers a robust backend digital supply chain, and infrastructure to scale with large company mindsets, Art Gun is the perfect fit for ecommerce companies as well as the ad specialty, promotionalshipping custom graphic products and retail marketplaces. Orders ship from Art Gun within 24 to 48 hours to consumers in over 50the United States and to many countries worldwide.A key DTG2Go has made significant investments in its “digital-first” retail model, providing digital graphic prints that meet the high-quality standards required for brands, retailers and intellectual property holders. Throughout fiscal year 2023, we continued to invest in research and development initiatives related to the successsetups, formulas and processes needed to serve our customers. Through integration with Delta Activewear, DTG2Go also services the eRetailer, ad-specialty, promotional and screen print marketplaces, among others.businesses isretail partners, which include surf shops, specialty stores, department stores, and outdoor merchants. Salt Life’s ecommerce channel allows customers to purchase merchandise by accessing our abilitySalt Life ecommerce site at www.saltlife.com. Salt Life’s branded retail store channel allows customers to anticipatepurchase merchandise at retail stores owned and quickly respondoperated by Salt Life. Salt Life’s branded retail store footprint now includes 27 locations spanning across the U.S. coastline from Southern California to changing consumer preferences. Our art team reviews trend analyses, conceptsKey West and color trendsup the eastern seaboard to keepRiverhead, New York.designs in style. This information is used byoperate to support both the Delta Group and Salt Life Group. To a lesser extent, we also use third-party contractors and suppliers to supplement our in-house designersrequirements. Our vertically integrated manufacturing operations include a textile facility and merchandisers, alongmultiple sew and decoration facilities.personnel, who review market trends,functions consist of both employed and independent sales resultsrepresentatives and agencies located throughout the country. Our sales teams service specialty and resort shops; department, mid-tier and mass retailers; sporting goods stores; eRetailers and the popularityU.S. military, as well as other sales channels. Our brands leverage both in-house and outsourced marketing communication professionals to amplify their lifestyle statements.latestapparel products are produced based on forecasts to permit quick shipments to our customers; however, our custom programs are generally made only to order. During fiscal year 2023, we shipped our products to design new merchandise to meet the expected future demandsapproximately 6,600 customers, many of whom have numerous retail doors. No single customer accounted for more than 10% of our consumers.TRADEMARKS AND LICENSE AGREEMENTS"Salt Life".“Salt Life.” Soffe® has stood for quality and value in the athletic and activewear market for more than sixty60 years. Our other registered trademarks include COAST®, Intensity Athletics®, Kudzu®, Pro Weight®, Magnum Weight®, and the Delta Design.Design logo trademark. Our trademarks are valuable assets that differentiate the marketing of our products. We vigorously protect our trademarks and other intellectual property rights against infringement.We have distribution rights While our strategy is to other trademarks through license agreements. The Soffeown the intellectual property we use within our business, unit iswe are an official intellectual property licensee for major colleges and universities as well as branches of the United States military.military which we operate within our Soffe branded business. We also have license agreements for motorsports properties, including NASCAR. Ourbelieve these license agreements are typically non-exclusive in natureimportant given the military heritage of Soffe.have termsGovernancerange from onecould affect our investors, and we strive to three years. We are not dependent on any single licenseimplement policies and practices that continuously improve the transparency and sustainability of our supply chain. The Environmental, Sustainability, and Governance (“ESG”) disclosures within this Annual Report and our license agreements collectively are of valuedefinitive Proxy Statement align with the standards issued by the Sustainability Accounting Standards Board (“SASB”) for the Apparel, Accessories, and Footwear industry and with regulations and guidance issued by the Securities and Exchange Commission. The indicators in the Annual Report and definitive Proxy Statement have been carefully selected to our branded segment.SALES & MARKETINGOur sales and marketing functions consist of both employed and independent sales representatives and agencies located throughoutshow the country. In our branded segment, sales teams service specialty and boutique shops, upscale and traditional department stores, mid-tier retailers, sporting goods stores, e-retailers and the U.S. military. Our brands leverage both in-house and outsourced marketing communications professionals to amplify their lifestyle statements. In our basics segment, we sell our knit apparel products primarily direct to large and small screen printers and into the promotional products markets. Our private label products are sold primarily to major branded sportswear companies and regional, trendy brands.During fiscal year 2017, we shipped our products to approximately 10,000 customers, many of whom have numerous retail "doors". No single customer accounted for more than 10%most relevant aspects of our salesperformance in fiscal years 2017, 2016, or 2015,the areas of environmental impact, health and our strategysafety, responsible raw material sourcing, safe chemical management, and responsible corporate governance.not become dependent on any single customer. Revenues attributable to sales of our products in foreign countries, as a percentage of our consolidated net sales, represented less than 1% in fiscal year 2017, and approximately 2% in each of fiscal years 2016 and 2015.The majority ofmanufacture our apparel products, are produced based on forecasts to permit quick shipments to our customers. Private label programs are generally made only to order or based on customer forecasts,we also protect the health and our headwear products are primarily sourced based on customer orders. We aggressively explore new ways to leverage our strengths and efficiencies to meet the quick-turn needssafety of our customers.have distributionare committed to full compliance with local, regional, and national environmental laws and regulations.strategically located throughout the United States that carry in-stock inventoryand reduce our overall energy intensity, which is measured as primary energy consumption in kilowatt-hours per unit of gross domestic product. shipment to customers, with most shipments made via third party carriers. To better serve customers, we allow products to be ordered by the piece, dozen, or full case quantity. Because a significant portion of the fuel and electricity used in our business consistsmanufacturing network and, as such, are our largest contributors of at-once replenishment,carbon dioxide (CO2) emissions. In May 2022 Ceiba Textiles began receiving 100% clean, renewable energy from a 14.7-megawatt solar power array installed by the industrial park in which the facility is located. This new solar installation significantly reduces dependence on oil, coal, and natural gas for electricity production. Not only is solar energy sustainable, it does not emit greenhouse gases, air, or water pollution when producing electricity, contributing to our goal to establish an energy efficient operation and reduce greenhouse gas emissions. As a result of the solar power array installation, electricity usage at Ceiba Textiles during 2023 was reduced by 30.8% when compared to our 2018 baseline, which was the year we first began collecting data.Our offshore screen-printing facilities recycle colors of ink that remain at the end of a production project for use in future production. In one year, this recycling program can recover as much as 75% of the residual plastisol ink and 50% of the residual water-based ink that otherwise would have been discarded. backlog orderend, the lifecycle of a Delta Apparel garment begins with high quality, sustainable cotton, which is the primary ingredient for the majority of apparel products across our brand portfolio. Over 90% of our garments are created with U.S. cotton, which is known for both the quality of its fibers as well as the sustainability practices of the cotton farmers who harvest it. Cotton is not considered a water-intensive crop and more than 60% of the cotton grown in the U.S. is produced without irrigation. Cotton is also highly tolerant of soil and water salinity levels, so it can be grown with water and soil resources unsuitable for most other crops. We do not source cotton from regions with water stress, and we do not source conflict minerals in the production of our products. Tenure Country Number of Employees 5 Years or Less 6 - 10 Years 10 Years or More 2,871 54% 24% 22% Honduras 2,593 46% 30% 24% Mexico 357 41% 17% 42% United States 990 70% 10% 20% Total 6,811 53% 24% 23% Region Male Female Offshore 49% 51% United States 36% 64% Total 47% 53% general indicationfair living wage that is also scalable to the performance of future sales.the business. We provide our employees with at least the legal minimum wage or the prevailing industry wage in the countries where we operate, whichever is higher, complying with all legal wage requirements. We also provide fringe benefits, some of which are required by law, contract, or as per established collective bargaining agreements, while others are more favorable than required.For the second year, our Honduras sewing facilities donated groceries, toys, and clothes to the San Raphael Orphanage located in Villanueva, Cortes. The San Raphael Orphanage provides housing and education for approximately 90 children. Employees from Delta Honduras visited the Arturo Castro Kindergarten located in San Antonio de Cortes and cleaned the green areas, painted restrooms and classrooms, repaired benches, and donated two trash cans. Approximately 17% of the school’s population are children of Delta Honduras and Delta Cortes employees. Employees also visited the Jose Trinidad Cabañas School in Villanueva, Cortes and cleaned the green areas and donated cleaning supplies for the restrooms. Approximately 5% of the school’s population are children of Delta Honduras and Delta Cortes employees. Additionally, employees from Delta Honduras rehabilitated the restroom area for the local fire station that serves the community near the Delta Honduras sewing facility. ● Delta Cortes employees reforested the green areas and donated trash cans for the Church of God in Villanueva, Cortes. During the activity, the team also organized games and donated toys and candy for the children. Approximately 2% of the church population are Delta Honduras and Delta Cortes employees. Employees from Delta Cortes also reforested the green areas at the Union and Effort School in Villanueva, Cortes. The team donated and installed trash cans, and donated cleaning supplies for the restroom area. Approximately 5% of the school population are children of Delta Honduras and Delta Cortes employees. ● Employees at Ceiba Textiles donated a gas-powered trimmer and brush cutter to the Quimistán Municipal Environmental Unit to support the maintenance of the area reforested as a result of the annual “United for a Greener Honduras” campaign in which Ceiba Textiles employees previously participated. Reforestation in this area of western Honduras was a critical factor in increasing the region’s water retention capacity as it reduced the impact to nearby communities when rivers would overflow during the rain and hurricane seasons. In addition, Ceiba Textiles employees donated toys, snacks, and sodas in celebration of Children’s Day at the Pedro Nufio School located in Tierra Amarilla, Santa Barbara and the Benjamin Trochez School located in Pinalejo, Santa Barbara. Approximately 23% of Ceiba Textiles employees reside in these towns. ● Mexico employees donated toys, snacks, and sodas in celebration of Children’s Day in the towns of Hampolol and Xkeulil, Campeche. Approximately 4% of Mexico employees reside in the towns of Hampolol and Xkeulil. Mexico employees also donated t-shirts in support of the campaign at the Women’s Institute of Campeche (Instituto de la Mujer del Estado de Campeche) to end violence against women. The Women’s Institute provides legal, psychological, and medical care services to more than 29,000 people in the state of Campeche. with respect to the sale of apparel and headwear products in both domestic and international markets, many of which are larger and have more brand recognition and greater marketing budgets thanbudgets. Some of these competitors may benefit from lower production costs that can result from greater operational scale, a differing supply chain footprint, or trade-related agreements and other macroeconomic factors that may enable them to compete more effectively.do.brandedSalt Life Group segment is based primarily upon brand recognition, design, and consumer preference. We focus on sustaining the strong reputation of our lifestyle brands by adapting our product offerings to changes in fashion trends and consumer preferences. We aim to keep our merchandise offerings fresh with unique artwork and new designs and support the integrated lifestyle statement of our products through effective consumer marketing. We believe that our favorable competitive position stems from strong consumer recognition and brand loyalty, the high quality of our products, and our flexibility and process control, which drive product consistency. We believe that our ability to remain competitive in the areas of quality, price, design, marketing, product development, manufacturing, technology and distribution will, in large part, determine our future success.Competition in our basics segment is generally based upon price, service, delivery time and quality, with the relative importance of each factor depending upon the needs of the particular customer and the specific product offering. These businesses are highly price competitive and competitor actions can greatly influence pricing and demand for our products. While price is still important in the private label market, quality and service are generally more important factors for customer choice. Our ability to consistently service the needs of our private label customers greatly impacts future business with these customers.SEASONALITYAlthoughseasonality, with sales in our June fiscal quarter typically being the highest and sales in our December fiscal quarter typically being the lowest. As we continue to expandseasonality. By diversifying our product offerings,lines and go-to-market strategies over the years, we have reduced the overall seasonality inof our business has become less pronounced. The percentage of net sales by quarter for the year ended September 30, 2017, was 23%, 26%, 27% and 24% for the first, second, third, and fourth fiscal quarters, respectively.business. Consumer demand for apparel is cyclical and dependent upon the overall level of demand for soft goods, which may or may not coincide with the overall level of discretionary consumer spending. These levels of demand change as regional, domestic and international economic conditions change. Therefore, the distribution of sales by quarter in fiscal year 20172023 may not be indicative of the distribution in future years.MANUFACTURINGWe have a vertically integrated manufacturing platform that supports both our basicsbranded segments. Our manufacturing operations begin with the purchase of yarn and other raw materials from third-party suppliers. We manufacture fabrics in our leased textile facility located near San Pedro Sula, Honduras and purchase fabric domestically and internationally to supplement our internal production. The manufacturing process continues at one of our six apparel manufacturing facilities where products are ultimately sewn into finishedgarments. We either own these facilities or lease and operate them. These facilities are located domestically (two in North Carolina) and internationally (two in Honduras, one in El Salvador and one in Mexico). Our garments may also be embellished and prepared for retail sale (with any combination of services, including ticketing, hang tags, and hangers). The facilities that perform these operations are located domestically (one in Florida and one in North Carolina) and internationally (one in El Salvador and one in Mexico). In fiscal years 2017, 2016, and 2015, approximately 91%, 81%, and 84%, respectively, of our manufactured products were sewn in company-operated locations. The remaining products were sewn by outside contractors located primarily in the Caribbean Basin.At our 2017, 2016, and 2015, fiscal year-ends, our long-lived assets in Honduras, El Salvador and Mexico collectively comprised approximately 54%, 58%, and 44%, respectively, of our total net property, plant and equipment, with our long-lived assets in Honduras comprising 43%, 45%, and 33% of the total, respectively. See Item 1A. Risk Factors for a description of risks associated with our operations located outside of the United States.To supplement our internal manufacturing platform, we purchase fabric, undecorated products and full-package products from independent sources throughout the world. In fiscal years 2017, 2016, and 2015, we sourced approximately 8%, 15%, and 16%, respectively, of our products from third parties. The decline in fiscal year 2017 is due to the sale of our Junkfood business to JMJD Ventures, LLC on March 31, 2017. See Note 3—Divestitures for further information on this transaction.RAW MATERIALSWe have a supply agreement with Parkdale Mills, Inc. and Parkdale America, LLC (collectively "Parkdale") to supply our yarn requirements until December 31, 2018. Under the supply agreement, we purchase all of our yarn requirements for use in our manufacturing operations from Parkdale, excluding yarns that Parkdale does not manufacture or cannot manufacture due to temporary capacity constraints. The purchase price of yarn is based upon the cost of cotton plus a fixed conversion cost.If Parkdale’s operations are disrupted and it is not able to provide us with our yarn requirements, we may need to obtain yarn from alternative sources. Although alternative sources are presently available, we may not be able to enter into short-term arrangements with substitute suppliers on terms as favorable as our current terms with Parkdale. In addition, the cotton futures we have fixed with Parkdale may not be transferable to alternative yarn suppliers. Because there can be no assurance that we would be able to pass along the higher cost of yarn to our customers, this could have a material adverse effect on our results of operations.We also purchase specialized fabrics that we currently do not have the capacity or capability to produce and may purchase other fabrics when it is cost-effective to do so. While these fabrics typically are available from various suppliers, there are times when certain yarns become limited in quantity, causing some fabrics to be difficult to source. This can result in higher prices or the inability to provide products to customers, which could negatively impact our results of operations. Dyes and chemicals are also purchased from several third party suppliers. While historically we have not had difficulty obtaining sufficient quantities of dyes and chemicals for manufacturing, the availability of products can change, which could require us to adjust dye and chemical formulations. In certain instances, these adjustments can increase manufacturing costs, negatively impacting our results of operations.EMPLOYEES AND SOCIAL RESPONSIBILITYAs of September 30, 2017, we employed approximately 7,700 full time employees, of whom approximately 1,000 were employed in the United States. A total of approximately 2,900 employees at two of our facilities in San Pedro Sula, Honduras are party to multi-year collective bargaining agreements. We have historically conducted our operations without significant labor disruptions and believe that our relations with our employees are good. We have invested significant time and resources to have the working conditions in all of our facilities meet or exceed the standards imposed by governing laws and regulations. All of our manufacturing facilities in Honduras, El Salvador and Mexico are Worldwide Responsible Accredited Production (WRAP ) certified. Delta Apparel, Inc. is a Category B participant with the Fair Labor Association (FLA), which further enhances human rights compliance monitoring for our plants and our third party contractors. In addition, we have proactive programs to promote workplace safety, personal health and employee wellness. We also support educational institutions and/or charitable organizations in communities where we operate.ENVIRONMENTAL AND REGULATORY MATTERSplants generate small quantities of hazardous waste, whichinternational operations are either recycled or disposed of off-site.standards.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.RESEARCH & DEVELOPMENTAlthough we continually seek new products and brands to take to market via our diverse distribution network and customer base, there were no material amounts spent on research and development in the fiscal years ended September 30, 2017, October 1, 2016, and October 3, 2015.AVAILABLE INFORMATIONOur corporate internet address is www.deltaapparelinc.com. We make available free of charge on our website our SEC reports, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Section 16 filings and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information found on our website is not part of this, or any other, report that we file with or furnish to the SEC.In addition, we will provide upon request, at no cost, paper or electronic copies of our reports and other filings made with the SEC. Requests should be directed to: Investor Relations Department, Delta Apparel, Inc., 322 South Main Street, Greenville, South Carolina 29601. Requests can also be made by telephone to 864-232-5200 extension 6621, or via email at investor.relations@deltaapparel.com.ITEM 1A.RISK FACTORSpurchased yarn and otherour key raw materials is prone to significant fluctuationsor raw material price volatility may interrupt our supply chains and volatility.materially harm our business.“Business–Raw Materials”,“Manufacturing, Sourcing, and Distribution,” the price of yarn purchased from Parkdale, our key supplier, is based upon the cost of cotton plus a fixed conversion cost. We set future cotton prices with purchase commitments as a component of the purchase price of yarn in advance of the shipment of finished yarn from Parkdale. Prices are set according to prevailing prices, as reported by the New York Cotton Exchange, at the time we enter into the commitments. Thus, we are subject to the commodity risk of cotton prices and cotton price movements, which could result in unfavorable yarn pricing for us. TheIn the past, the Company, and the apparel industry as a whole, has experienced unprecedented increases inperiods of increased cotton pricescosts and price volatilityvolatility. By way of example, the price of cotton per pound increased almost 50% in 2011a five-month period and 2012. Wereached a high of over $1.50 in our fiscal year 2022. In some instances, we were unable to pass through these higher costs to our customers, with the highergross margins in our Activewear and other businesses negatively impacted as a result. In addition, sudden decreases in the price of cotton and other raw materials may result in the cost of cotton therebyinventory exceeding the cost of new production, which may result in downward selling price pressures, negatively impacting the gross margins in our basics segmentActivewear and other businesses by $16.2 million in our 2012 fiscal year.In addition,significant amounts.Current economic conditions may adversely impact demand for our products. The apparel industry is cyclical and dependent upon the overall level of demand for soft goods, which may or In addition, we may not coincide with the overall levelbe able to obtain sufficient quantities of discretionary consumer spending. These levels of demand change as regional, domestic and international economic conditions change. These economic conditions include, but are not limited to, employment levels, energy costs, interest rates, tax rates, inflation, personal debt levels, and uncertainty about the future, with many of these factors outside of our control. Overall, consumer purchases of discretionary items tend to decline during recessionary periods when disposable income is lower. As such, deterioration in general economic conditions that creates uncertainty or alters discretionary consumer spending habitsyarn from alternative sources, which could reduce our sales. Sometimes, however, the timing of increases or decreases in consumer purchases of soft goods can differ from the timing of increases or decreases in the overall level of economic activity. Weakening sales may require us to reduceadjust manufacturing operations to match our output to demand or expected demand. Reductions in our manufacturing operations may increase unit costs and lower our gross margins, causing a material adverse effect on our results of operations.The apparel industry is highly competitive, and we face significant competitive threats to our business. The market for athletic and activewear apparel and headwear is highly competitive and includes many new competitors as well as increased competition from established companies, some of which are larger or more diversified and may have greater financial resources than we do. Many of our competitors have larger sales forces, stronger brand recognition among consumers, bigger advertising budgets, and greater economies of scale. We compete with these companies primarily on the basis of price, quality, service and brand recognition, all of which are important competitive factors in the apparel industry. Our ability to maintain our competitive edge depends upon these factors, as well as our ability to deliver new products at the best value for the customer, maintain positive brand recognition, and obtain sufficient retail floor space and effective product presentation at retail. If we are unable to compete successfully with our competitors,levels, negatively impacting our business and results of operations.will be adversely affected.We may be restricted in our ability to borrow under our revolving credit facility or service our indebtedness. Significant operating losses oralso require significant usesamounts of cash in our operationsdyes and chemicals that we purchase from several third-party suppliers. While historically we have not had difficulty obtaining sufficient quantities of dyes and chemicals for manufacturing, the availability of products can change, which could causerequire us to default onadjust dye and chemical formulations. In certain instances, these adjustments can increase manufacturing costs, negatively impacting our asset-based revolving credit facility. We rely on our credit facility, as well as on cash generated by our operations, to fund our working capital and capital expenditure needs, to make acquisitions, to fund repurchases under our share repurchase program and to pay dividends should we choose to do so in the future. Our working capital needs are generally greater in advance of the spring and summer selling seasons. Availability under our credit facility is primarily a function of the levels of our accounts receivable and inventory, as well as the uses of cash in our operations. A significant deterioration in our accounts receivable or inventory levels could restrict our ability to borrow additional funds or service our indebtedness. Moreover, our credit facility includes a financial covenant that if the availability under our credit facility falls below the amounts specified in our credit agreement, our Fixed Charge Coverage Ratio (“FCCR”) (as defined in our credit agreement) for the preceding 12-month period must not be less than 1.1 to 1.0. Although our availability at September 30, 2017, 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. Our credit facility also includes customary conditions to funding, representations and warranties, covenants, and events of default. The covenants include, among other things, limitations on asset sales, consolidations, mergers, liens, indebtedness, loans, investments, guaranties, acquisitions, dividends, stock repurchases, and transactions with affiliates. If an event of default under our credit facility occurred or became imminent, we may request our credit agreement lenders to provide a waiver. If we were unsuccessful in that endeavor, we could explore alternative sources of capital, whether debt or equity, which would likely be more expensive than the costs we incur under our credit facility. If we were unable to cure an un-waived event of default under our credit facility, we would be unable to borrow additional amounts under the facility, we could be unable to make acquisitions as well as fund share repurchases and pay dividends, and our lenders thereunder could accelerate our obligations under the agreement and foreclose on our assets subject to the liens in their favor. This circumstance would have a material adverse effect on our financial position and results of operations.Deterioration in the financial conditionIn addition, significant changes in the retail or operational strategies employed by our customers may result in decreased sales of our products to such customers and could have a material adverse effect on our financial condition and results of operations. Likewise, significant changes in the operations of any of our suppliers or other parties with which we do business could result in disruption to our business and have a material adverse effect on our financial condition and results of operations.headwear.other items we provide. We believe that our brands are recognized by consumers across many demographics.demographics and geographies. The popularity supply and demand forof particular products can change significantly from year to yearyear-to-year based on prevailing fashion trends (particularly in our branded business)lifestyle businesses) and on other factors and, accordingly, our ability to adapt to fashion trends in designing products is important to the success of our brands. If we are unable to quickly adapt to changes in consumer preferences in the design of our products, our results of operations could be adversely affected. Moreover, because we and our customers project demand for our products based on estimated sales and fashion trends, the actual demand for our products sometimes falls short of what was projected. This can lead to higher inventory levels than desired. Excess inventory levels increase our working capital needs, and sometimes excess inventory must be sold at discounted prices, all of which could have an adverse impact on our business, financial condition and results of operations.Our strategy to growdirect-to-consumer business depends uponadvertising, marketing and promotional programs are ineffective, or if our competitors are more effective with their programs, our sales could be negatively affected.successfully openmaintain brand relevance and operate new stores incould ultimately decrease sales. While we market our products and attract customers, some of our competitors may expend more for their programs than we do, or use different approaches than we do that prove more successful, any of which may provide them with a timelycompetitive advantage. If our programs are not effective or require increased expenditures that are not offset by increased sales, our revenue and cost-effective manner. Our strategyresults of operations could be negatively impacted.grow our “brick and mortar” retail footprint dependsOperations many factors including, among others, our ability to: identify desirable store locations; negotiate acceptable lease terms; hire, trainto operate, results of operations, financial condition, liquidity, and retain a growing workforcecapital investments, and it or any other global or regional pandemic or similar event could have material adverse impacts on our business going forward.store managers, sales associatesoperations, financial condition, liquidity, and other personnel; successfully integrate new stores intocapital investments and also impacted all regions around the world, resulting in restrictions and shutdowns implemented by national, state, and local authorities. During our existing control structurefiscal year 2020, these requirements resulted in temporary closures of all of our branded retail locations and operations, including our information technology systems;manufacturing facilities in El Salvador, Honduras Mexico, and coordinate well withNorth Carolina. Many of our ecommerce platformscustomers and retail customers to minimize the competition within our sales channels.If we expand into new geographic areas, we will need to successfully identify and satisfy the consumer preferences insuppliers also faced these areas. In addition, we will need to address competitive, merchandising, marketing, distribution and other challenges, encounteredwhich resulted in connectionwith any expansion. Finally, we cannot assure that any newly opened stores will be received as well as,supply chain and logistic constraints, closure of certain third-party manufacturers and increased freight costs at various stages of the pandemic. Any further or achieve net salessimilar temporary or profitability levels comparable to those of, our existing storeslong-term disruption in our estimated time periods,supply chain due to the COVID-19 pandemic or at all. Ifother global or regional pandemic or similar event could lead to reduced demand for our stores fail to achieve, or are unable to sustain, acceptable net sales and profitability levels, our business overall may be materially harmed and we may incur significant costs associated with closing or relocating stores.Our basics segment is subject to significant pricing pressures which may decrease our gross profit margins if we are unable to implement or achieve the expected cost savings associated with certain of our cost reduction strategies. We operate our basics segment in a highly competitive and price sensitive industry. Our strategy in this market environment is to be a low-cost producer and to differentiate ourselves by providing quality products and value-added services and could impair our customers’ ability to pay all or portion of the amounts owed to us. We rely on suppliers and third-parties to deliver raw materials and transport our customers. In recent years, we moved several functions within our private labelfinished goods. Prolonged inventory shortages may result in significant lost business to our El Salvador facility to better serve customers through an enhanced and efficient product development process. In fiscal 2016, we further realigned our manufacturing operations by expanding production at our offshore facilities and closing our Maiden, North Carolina textile facility. These initiatives, along with continual improvementsor delay in our production and delivery of products, are expected to lower our product costs and improve our results of operations. However, any unexpected increases in the costs to carry out these initiatives or the failure to achieve the cost savings expected from these initiativesshipments which could have a material adverse effect on our results of operations.economic, and climateeconomic risks in Honduras, El Salvador and Mexico.with concentrationsbefore we began the process of closing our sewing and screenprint operations in Honduras and El Salvador.Mexico during fiscal year 2023 that we will finalize in the early part of fiscal year 2024. These countries from time to timetime-to-time experience political, social and economic instability, and we cannot be certain of their future stability. Instability in a country can lead to protests, riots and labor unrest. Governments have changed, and may continue to change, and employment, wage and other laws and regulations may change, thereby increasing our costs to operate in those countries. In addition, fire or natural disasters such as hurricanes, earthquakes, or floods can occur in these countries. Any of these political, social, economic or climaticeconomic events or conditions could disrupt our supply chain or increase our costs, adversely affecting our financial position and results of operations.ator interruptions within any of our facilities, we may not be able to meet our obligations and may lose sales and customers. In the event of a regional disruption where we manufacture our products, we may not be able to shift our operations, to a different geographic region, and we may have to cease or curtail our operations in a selected area. This may cause us to lose sales and customers. The types of disruptions that may occur include foreign trade disruptions, import restrictions, labor disruptions, embargoes, government intervention, natural disasters or regional pandemics.The talents and continued contributions of our key management are important to our success. We believe our future success depends on our ability to retain and motivate our key management, our ability to attract and integrate new members of management into our operations, and the ability of all personnel to work together effectively as a team and to execute our business strategy. Our inability to accomplish any of these goals could have a material adverse effect on our results of operations.Our business is influenced by weather patterns and is susceptible to unseasonable weather conditions as well as hurricanes and other significant weather events. Extended periods of unusually warm temperatures during the winter season or cooler weather during the spring and summer seasons could render portions of our inventory incompatible with weather conditions and influence consumers to alter their apparel purchasing habits. Reduced sales volumes from extreme or prolonged unseasonable weather conditions or from the effects of hurricanes and other significant weather events on our customers could adversely affect our business and results of operations.We currently pay income taxes at lower than statutory rates and may incur additional tax liability. We are subject to income tax in the United States and in foreign jurisdictions where we generate net operating profits. We benefit from a lower overall effective income tax rate due to the majority of our manufacturing operations being located in foreign tax-free locations. Our U.S. legal entity contracts with our foreign subsidiaries to manufacture products on its behalf, with the intercompany prices paid for the manufacturing services and manufactured products based on an arms-length standard and supported by an economic study. We have concluded that the profits earned in the tax-free locations are considered permanently reinvested. Thus, no U.S. deferred tax liability is recorded on these profits, causing our effective tax rate to be significantly below U.S. statutory rates. Our effective tax rate could be adversely affected by changes in the mix of earnings between the U.S. and tax-free foreign jurisdictions. In addition, changes to U.S. tax laws impacting how U.S. multinational corporations are taxed on foreign earnings or a need or requirement for us to remit tax-free earnings back to the U.S. could also have a material adverse effect on our tax expense and cash flow.Our variable rate debt subjects us to interest rate risk that could cause our debt service obligations to increase significantly. The debt we incur under our asset-based revolving credit facility is at variable rates of interest, which exposes us to interest rate risk. If interest rates increase, our obligations on this variable rate indebtedness would increase even though the amount borrowed remained the same, and there would be a corresponding decrease in our net income and cash flows, including cash available for servicing our debt.We may need to raise additional capital to grow our business. The rate of our growth, especially through acquisitions, depends, in part, on the availability of debt and equity capital. We may not be able to raise capital on terms acceptable to us or at all. If new sources of financing are required, but are insufficient or unavailable,distribution networks, we may be required to modify our growth and operating plans based on available funding, which could adversely affect our ability to grow the business.We have expanded our business through acquisitions that could result in diversion of resources, an inability to integrate acquired operations and extra expenses. A part of our growth strategy has involved acquiring businesses that complement our existing business.The negotiation of potential acquisitions and integration of acquired businesses could divert our management’s attention from our existing businesses, which could negatively impact our results of operations. In addition, if the integration of an acquired business is not successful or takes significantly longer than expected, or if we are unable to realize the expected benefits from an acquired business, it could adversely affect our financial condition and results of operations.The price of energy and fuel costs are prone to significant fluctuations and volatility, which could adversely affect our results of operations. Our manufacturing operations require high inputs of energy, and therefore changes in energy prices directly impact our gross profits. In addition, we incur significant freight costs to transport goods between our offshore facilities and the United States, along with transportation expenses to ship products to our customers. The cost of energy and fuel fluctuates due to a number of factors outside of our control, including government policy and regulation and weather conditions. We continue to focus on methods that will reduce the amount of energy used in the manufacture of products to mitigate risks of fluctuations in the cost of energy. However, significant increases in energy and fuel prices may make us less competitive compared to others in the industry, which may have a material adverse effect on our financial position and results of operations.Our business operations rely on our information systems and any material disruption or slowdown of our systems could cause operational delays. We depend on information systems to, among other things, manage our inventory, process transactions, respond to customer inquiries, purchase, sell and ship goods on a timely basis and maintain cost-effective operations. We have invested significant capital and expect future capital expenditures associated with the integration of our information technology systems across our businesses. This process involves the replacement and consolidation of technology platforms so that our businesses are served by fewer platforms, resulting in operational efficiencies and reduced costs. Our inability to effectively convert our operations to the new systems could cause delays in product fulfillment and reduced efficiency in our operations. In addition, we may experience operational problems with our information systems as a result of system failures, "cyber-attacks", computer viruses, security breaches, disasters or other causes. Any material disruption or slowdown of our information systems could cause operational delays that could have a material adverse effect on our business and results of operations.Data security and privacy breaches could lead to liability and reputational damage. Our business involves the regular collection and use of sensitive and confidential information regarding customers and employees. These activities are subject to contractual requirements and are highly regulated. Privacy and information security laws are complex and constantly changing. Compliance with these laws and regulations may result in additional costs due to new systems and processes, and our non-compliance could lead to legal liability. Further, the methods used by third parties to obtain unauthorized access change frequently and may not be anticipated or immediately detected. Thus, despite the security measures we may have in place, an actual or perceived information security breach, whether due to "cyber attack", computer viruses or human error, could occur. Actual or anticipated attacks may cause us to incur significant costs, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants. Any breach of customer, employee or company data could attract media attention, damage our customer or other business relationships and reputation, result in lost sales, fines, significant litigation or other costs and involve the loss of confidential company information, any or all of which could have a material adverse effect on our business, financial condition and results of operations.Our business could be harmed if we are unable to deliver our products to the market due to casualty or other problems with our manufacturing operations or distribution network.and may lose sales and customers.El Salvador.screenprint operations there). We also own or lease distribution facilities located throughout the United States and maintain inventory at certain third-party distribution facilities in the United States.locations. Any casualty or other circumstance that damages or destroys any of these material facilities or significantly limits their ability to function could have a material adverse effect on our business. Similarly, any significant interruption in the operation of any of these facilities or our related sourcing and transportation logistics functions, whether within or outside of our control, may delay shipment of merchandise to our customers, potentially damaging our reputation and customer relationships and causing a loss of revenue. Moreover, in the event of a regional disruption where we manufacture our products, we may not be able to shift our operations to a different geographic region, and we may have to cease or curtail our operations in a selected area. This may cause us to lose sales and customers. The types of disruptions that may occur include foreign trade disruptions, import restrictions, labor disruptions, embargoes, government intervention, natural disasters, regional or global pandemics and political disruptions such as those referenced in the immediately preceding paragraph of this section. In addition, if we are unable to successfully coordinate the planning of inventory across these facilities and the related distribution activities, it could have a material adverse effect on our business, financial condition and results of operations.Failurecomplywork together effectively as a team and to execute our business strategy. Our inability to accomplish any of these objectives could have a material adverse effect on our results of operations.safety, healthkey equipment to support our manufacturing and environmental regulationsfulfillment platforms, including our DTG2Go digital platform. If any of these or other third parties fail to satisfy their obligations to us or does not provide properly functioning equipment or services to us in the future, we may suffer a disruption to our business or increased costs. Further, we may be unable to implement substitute arrangements on a timely and cost-effective basis on terms favorable to us.operations.must meet extensive federal, staterely on our information systems and local regulatory standardsany material disruption or slowdown of our systems could cause operational delays, reputational harm, or loss of revenue.areas of safety, healthnew systems could cause delays in product fulfillment and environmental pollution controls. There can be no assurance that interpretations of existing regulations, futurereduced efficiency in our operations. Further, if changes in existing laws,technology cause our information systems to become obsolete, or if our information systems are inadequate to handle our growth, we could lose customers. We are also subject to risks and uncertainties associated with the enactmentinternet, including changes in required technology interfaces, website downtime and other technical failures. Our failure to successfully respond to these risks and uncertainties could reduce sales, increase costs and damage the reputation of new laws and regulations will not require substantial additional expenditures. Althoughour brands. In addition, we believe thatinteract with many of our customers through our websites. Customers increasingly utilize our online platforms to purchase our merchandise. If we are in compliance in all material respects with existing regulatory requirements in these areas,unable to continue to provide consumers a user-friendly experience and evolve our platforms to satisfy consumer preferences, the extentgrowth of our liability, if any, for the discovery of currently unknown problemsecommerce and other businesses and our sales may be negatively impacted. If our websites contain errors or conditions,other vulnerabilities which impede or past failures to comply with laws, regulations and permits applicablehalt service, it could result in damage to our operations, cannot be determinedbrands’ images and a loss of revenue. In addition, we may experience operational problems with our information systems as a result of system failures, “cyber-attacks,” computer viruses, security breaches, disasters or other causes. Any material disruption or slowdown of our information systems could cause operational delays and increased costs that could have a material adverse effect on our financial positionbusiness and results of operations.positioncondition and results of operations.litigation.litigation or enforcement matters. Due to the inherent uncertainties of litigation in both domestic and foreign jurisdictions, we cannot accurately predict the ultimate outcome of any such proceedings. These proceedings could cause us to incur costs and may require us to devote resources to defend against these claims and could ultimately result in a loss or other remedies such as product recalls, which could adversely affect our financial positioncondition and results of operations. For a description of current material legal proceedings, see Part I, Item 3, Legal Proceedings.
Product liability issues could lead to recalls, claims and negative publicity, and adversely affect our results of operations., Coast®, Intensity Athletics®, Kudzu®, Pro Weight®, Magnum Weight®, and the Delta Design, among others, are important to our marketing efforts and have substantial value. We aggressively protect these trademarks and have incurred legal costs in the past to establish and protect these trademarks. We may in the future be required to expend significant additional resources to protect these trademarks and our other intellectual property. Intellectual property litigation may be costly and may divert management's attention from the operation of our business. Adverse determinations in any litigation may result in the loss of our proprietary rights, subject us to significant liabilities or require us to seek licenses from third parties, which may not be available on commercially reasonable terms, if at all. Any of these outcomes may have a material adverse effect on our financial condition, results of operations or cash flows.A significant portion of our business relies upon license agreements and we rely on licensed products for a portion of our sales. We believe that our license agreements in the aggregate are of significant value to our business. The loss of or failure to obtain, renew or extend license agreements on favorable terms could adversely affect our sales and have a material adverse effect on our financial condition and results of operations.We may be subject to the impairment of acquired intangible assets. When we acquire a business, a portion of the purchase price of the acquisition may be allocated to goodwill and other identifiable intangible assets. The amount of the purchase price that is allocated to goodwill is determined by the excess of the purchase price over the net identifiable assets acquired. At September 30, 2017, and October 1, 2016, our goodwill and other intangible assets were approximately $36.1 million and $57.7 million, respectively. We conduct an annual review, and more frequent reviews if events or circumstances dictate, to determine whether goodwill is impaired. We also determine whether impairment indicators are present related to our identifiable intangible assets. If we determine that goodwill or intangible assets are impaired, we would be required to write down the value of these assets. We completed our annual impairment test of goodwill on the first day of our 2017 third fiscal quarter. Based on the valuation, we concluded there was no impairment on the goodwill recorded on our financial statements. We also concluded that there are no additional indicators of impairment related to our intangible assets. There can, however, be no assurance that we will not be required to take an impairment charge in the future, which could have a material adverse effect on our results of operations.Changes in the regulations and laws regarding ecommerce could reduce the growth and lower the profitability of our internet sales. The ecommerce industry has undergone, and continues to undergo, rapid development and change. There have been continuing efforts to increase the legal and regulatory obligations of and restrictions on companies conducting commerce through the internet, primarily in the areas of taxation, consumer privacy and protection of consumer personal information. These laws and regulations could increase the costs and liabilities associated with our ecommerce activities, thereby negatively impacting our results of operations.Mexico.previously, Mexico before we began the process of closing our sewing and screenprint operations in Mexico during fiscal year 2023 that we will finalize in the early part of fiscal year 2024. We therefore benefit from current free trade agreements and other duty preference programs, including the North American Free Trade Agreement (“NAFTA”) and the Central America Free Trade Agreement (“CAFTA”). Our claims for duty free or reduced duty treatment under CAFTA NAFTA and other available programs are largely conditioned on our ability to produce or obtain accurate records (some of which are provided to us by third parties) about production processes and sources of raw materials. Recent changes in the United States federal government have caused uncertainty about the future of tradeTrade partnerships and treaties ascan be subjected to negotiations and modifications by domestic and foreign governments, which could result in new or increased tariffs on goods we import into the current administration has expressed its desireUnited States. Subsequent repeal or further modification of CAFTA, further increases to specifically modify NAFTA and other existing trade agreements and has raised the possibility of imposing significant increases on tariffs on goods imported into the United States. Subsequent repeal or modification of NAFTA or CAFTA,States, or the inadequacy or unavailability of supporting records, could have a material adverse effect on our results of operations. A complaint was filed in March 2012 with the U.S. Department of Labor's Office of Trade & Labor Affairs by the AFL-CIO and various Honduran union federations alleging that the Honduran government failed to enforce its labor laws in violation of the provisions of CAFTA. The complaint contains various and sundry allegations of Honduran labor law violations by U.S.-based companies with Honduran operations, including our Ceiba Textiles operation. We contend that the allegations against Ceiba Textiles have no merit. The U.S. Department of Labor has initiated an investigation of the allegations in the complaint. We believe that the legal action, if any, that may result from this investigation would be an action by the U.S. government against Honduras under CAFTA, not a legal action against us related to the specific allegations contained in the complaint. However, an action against Honduras could result in sanctions or other penalties against Honduras under CAFTA or in other governmental action that could have a material negative effect on our ability to conduct business there.U.S. Foreign Corrupt Practices Act (the “FCPA”)FCPA and other anti-bribery laws applicable to our operations. In many foreign countries, particularly in those with developing economies, it may be a local custom that businesses operating in such countries engage in business practices that are prohibited by the FCPA or other U.S. and foreign laws and regulations applicable to us. Although we have implemented procedures designed to ensure compliance with the FCPA and similar laws, some of our agents or other channel partners, as well as those companies to which we outsource certain of our business operations, could take actions in violation of our policies. Any such violation could have a material and adverse effect on our business.or changes in our relationship with our employees, and changes in our ability to attract and retain employees could adversely affect our results of operations.2017,2023, we employed approximately 7,7006,800 employees worldwide, with approximately 6,7005,800 of these employees located in Honduras, El Salvador, and Mexico. Changes in domestic and foreign laws and regulations governing our relationships with our employees, includingincluding wage and human resources laws and regulations, labor standards, overtime pay, unemployment tax rates, workers'workers’ compensation rates, and payroll taxes would likely have a directcould impact on our operating costs. Increases in wage rates inrelationship with our employees and adversely impact the countries in which we operate have occurred,productivity and any further significant increases in wage rates in those countries could have a material adverse impact onultimate cost of our operating results.manufacturing operations. A total of approximately 2,9002,000 employees at two of our facilities in San Pedro Sula, Honduras, are party to multi-year collective bargaining agreements. We have historically conducted our operations without significant labor disruptions and believe that our relations with our employees are generally good. However, a change in labor relationsrelations could adversely affect the productivity and ultimate cost of our manufacturing operations.Healthcare legislation may continue increase our costs and reduce our future profitability. To attract and retain employeesa sufficient number of qualified personnel in future periods. Our ability to meet our operationslabor needs is subject to many factors such as prevailing wage rates, minimum wage legislation, unemployment levels, and actions by our competitors with respect to compensation levels. Wage rates have increased significantly in the United States,U.S. and wage increases have also occurred in foreign countries in which we maintainoperate. Any further significant increases in wage rates in these countries in which we operate could have a competitive health insurance program for those employeesmaterial adverse impact on our operating results. In addition, changes in federal, state, or local laws and their dependents. The Patient Protectionregulations relating to employee benefits, including, but not limited to, sick time, paid time off, leave of absence, wage-and-hour, overtime, and Affordable Care Act, signed into law in 2010, hasmeal-and-break time could cause us to incur additional costs. Competitive and regulatory pressures have already significantly increased our employee healthcare cost obligations and may continue to increase our employee healthcare cost obligations going forward. We cannot predict the effect that this legislation, or any future state or federal healthcare legislation or regulation, will ultimately have on our business. However, rising healthcarelabor costs and universal healthcare coverage in the United States could result in significant long-termwe may be unable to fully pass these costs to us,our customers through increased selling prices, which could adversely affectdeteriorate our future profitability and financial condition. Also, rising healthcare costs could force us to makeprofitability. In addition, further changes to our benefits program, which could negatively impactthat hurt our ability to attract and retain employees.We are subject to foreign currency exchange rate fluctuations. We manufacture the majority of our products outside of the United States, exposing us to currency exchange rate fluctuations. In addition, movements in foreign exchange rates can affect transaction costs because we source products from various countries. We may seek to mitigate our exposure to currency exchange rate fluctuations but our efforts may not be successful. Accordingly, changes in the relative strength of the United States dollar against other currenciespersonnel could adversely affect our business.subscribe, including those of Worldwide Responsible Accredited Production (WRAP) and the Fair Labor Association (FLA).subscribe. In addition, we require our suppliers and independent contractors to operate their businesses in compliance with the laws and regulations that apply to them. However, we do not control these suppliers and independent contractors. A violation of our policies, applicable manufacturing or employee safety standards and codes of conduct, labor laws or other laws or regulations by our suppliers or independent contractors could interrupt or otherwise disrupt our operations. Negative publicity regarding the production or operating methods of any of our suppliers or independent contractors or their failure to comply with our policies, applicable manufacturing or employee safety standards and codes of conduct, labor laws or other laws or regulations could adversely affect our reputation, brands, sales and licensing relationships, which could adversely affect our business and results of operations.orand trading volume. This illiquidity can translate into price discounts as compared to industry peers or to the shares’ inherent value. We believe that the market perceives us to have a relatively small market capitalization. This has led and could continue to lead to our shares trading at prices that are significantly lower than our estimate of their inherent value.14, 2017,30, 2023, we had 7,244,6867,001,020 shares of common stock outstanding. We believe that approximately 62%51% of our stock is beneficially owned by entities and individuals who each own more than 5% of the outstanding shares of our common stock. Included in the 62% are institutionalInstitutional investors that each beneficially own more than 5% of the outstanding shares. These institutional investorsshares collectively own approximately 46%39% of the outstanding shares of our common stock. Sales of substantial amounts of our common stock in the public market by any of these large holders could adversely affect the market price of our common stock.stock, especially in light of the limited trading volumes.Efforts to comply with the evolving regulatory landscape regarding public company governance and disclosure could result in significant additional costs. We are committed to maintaining high standards for internal controls over financial reporting, corporate governance and public disclosure. However, evolving laws, regulations and standards relating to these issues such as the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Sarbanes-Oxley Act, and similar regulations have created significant additional compliance requirements for companies like us. We have devoted and will continue to devote significant resources, and our management team has devoted and will continue to devote substantial time, to comply with these standards. This may lead to increases in our cost structure, divert the attention of our management team from revenue generating activities to compliance efforts, and could have a material adverse effect on our business, financial condition and results of operations.ITEM 1B.UNRESOLVED STAFF COMMENTSITEM 2.PROPERTIESGreenville, South Carolina.Duluth, Georgia. We own and lease properties supporting our administrative, manufacturing, distribution, and direct retail, and administrative activities. The majority of our products are manufactured through a combination of facilities that we either own or lease and operate. As of September 30, 2017, we owned or leased nine manufacturing facilities (located inThe following listing summarizes the United States, Honduras, El Salvador and Mexico) and ten distribution facilities (all within the United States). In addition,significant categories as of September 30, 2017, we operated 11 branded retail stores and a leased showroom. Total 2 6 — 8 2 1 1 4 1 5 1 7 1 25 — 26 — 5 — 5 6 42 2 50 and distribution facilitieslocations as of September 2023, are as follows:Location Utilization SegmentCeiba Textiles, Honduras* Knit/dye/finish/cut Basics and brandedHonduras*Honduras Basics and brandedHonduras*Honduras Basics and brandedMexico Plant, Campeche Mexico*Plant*Seybaplaya, Campeche Mexico Cut/sew Basics and brandedTextiles LaPaz, La Paz, El Salvador*Cut/sew/decorationBasics and brandedDelta Group/Salt Life GroupCampeche Sportswear, Sportswear*Campeche, Mexico*Mexico Decoration Basics and brandedDelta Group/Salt Life GroupFayetteville Plant, Fayetteville, NC Cut/sew/decoration BrandedRowland Plant, Rowland, NC Sew Basics and brandedArt Gun, Miami, FL*Hebron, OH Distribution Delta Group Lewisville, TX Decoration/distribution Basics and brandedDelta GroupDistribution Center, Phoenix, AZ Decoration/distribution Delta Group Utilization Segment Retail Store Salt Life Group Charleston, SC Retail Store Salt Life Group Columbus, GA Retail Store Salt Life Group Daytona Beach, FL Retail Store Salt Life Group Deer Park, NY Retail Store Salt Life Group Destin, FL Retail Store Salt Life Group Estero, FL Retail Store Salt Life Group Fayetteville, NC Retail Store DistributionBrandedDelta GroupDistribution Center, Clinton, TNFoley, ALRetail Store DistributionBasicsSalt Life GroupDistribution Center, Santa Fe Springs, CA*Fort Lauderdale, FLRetail Store DistributionBasics and brandedSalt Life GroupDistribution Center, Miami, FL*Hilton Head, SCRetail Store DistributionBasicsSalt Life GroupDistribution Center, Cranbury, NJ*Huntington Beach, CARetail Store DistributionBasicsSalt Life GroupDistribution Center, Dallas, TX**Retail Store DistributionBasicsSalt Life GroupDistribution Center, Chicago, IL**Jupiter, FLRetail Store DistributionBasicsSalt Life GroupDC Annex, Fayetteville, NC*Key West, FLRetail Store DistributionBrandedSalt Life GroupDistribution Center, Opelika, AL**Long Branch, NJRetail Store DistributionBasicsSalt Life Group Myrtle Beach, SC Retail Store Salt Life Group *Orlando, FLDenotes leased locationRetail StoreSalt Life Group **Palm Beach Gardens, FLDenotes third party-operated distribution facilityRetail StoreSalt Life Group Pembroke, FL Retail Store Salt Life Group Rehoboth Beach, DE Retail Store Salt Life Group Riverhead, NY Retail Store Salt Life Group San Clemente, CA Retail Store Salt Life Group Sarasota, FL Retail Store Salt Life Group Tampa, FL Retail Store Salt Life Group Texas City, TX Retail Store Salt Life Group the necessary actions to balance capacities with demand as needed. Substantially all of our assets are subject to liens in favor of our lenders under our U.S. asset-based secured credit facility, and our Honduran credit facility, and our Salvadoran credit facility.ITEM 3.LEGAL PROCEEDINGSThe Sports Authority Bankruptcy LitigationSoffeITEM 3.Legal Proceedingsinvolved in several related litigation matters stemming from The Sports Authority's ("TSA") March 2, 2016, filingsubject, and we are not aware of a voluntary petition(s) for relief under Chapter 11 of the United States Bankruptcy Code (the "TSA Bankruptcy"). Prior toany such filing, Soffe provided TSA with products to be sold on a consignment basis pursuant to a "payproceedings that are contemplated by scan" agreement and the litigation matters relate to Soffe's interest in the products it provided TSA on a consignment basis (the "Products") and the proceeds derived from the sale of such products (the "Proceeds").TSA Stores, Inc. and related entities TSA Ponce, Inc. and TSA Caribe, Inc. filed an action against Soffe on March 16, 2016, in the United States Bankruptcy Court for the District of Delaware (the "TSA Action") essentially seeking a declaratory judgment that: (i) Soffe does not own the Products but rather has a security interest that is not perfected or senior and is avoidable; (ii) Soffe only has an unsecured claim against TSA; (iii) TSA and TSA's secured creditors have valid, unavoidable and senior rights in the Products and the Products are the property of TSA’s estate; (iv) Soffe does not have a perfected purchase money security interest in the Products; (v) Soffe is not entitled to a return of the Products; and (vi) TSA can continue to sell the Products and Soffe is not entitled to any proceeds from such sales other than as an unsecured creditor. The TSA Action also contains claims seeking to avoid Soffe's filing of a financing statement related to the Products as a preference and recover the value of that transfer as well as to disallow Soffe's claims until it has returned preferential transfers or their associated value. TSA also brings a claim for a permanent injunction barring Soffe from taking certain actions. We believe that many of the claims in the TSA Action, including TSA’s claim for injunction, are now moot as a result of Soffe’s agreement to permit TSA to continue selling the Products in TSA’s going-out-of-business sale.On May 16, 2016, TSA lender Wilmington Savings Fund Society, FSB, as Successor Administrative and Collateral Agent ("WSFS"), intervened in the TSA Action seeking a declaratory judgment that: (i) WSFS has a perfected interest in the Products and Proceeds that is senior to Soffe's interest; and (ii) the Proceeds paid to Soffe must be disgorged pursuant to an order previously issued by the court. WSFS's intervening complaint also contains a separate claim seeking the disgorgement of all Proceeds paid to Soffe along with accrued and unpaid interest.Soffe has asserted counterclaims against WSFS in the TSA Action essentially seeking a declaratory judgment that: (i) WSFS is not perfected in the Products; and (ii) WSFS's interest in the Products is subordinate to Soffe's interest.On May 24, 2016, Soffe joined an appeal filed by a number of TSA consignment vendors in the United States District Court for the District of Delaware challenging an order issued in the TSA Bankruptcy that, should WSFS or TSA succeed in the TSA Action, granted TSA and/or WSFS a lien on all Proceeds received by Soffe and requiring the automatic disgorgement of such Proceeds. Soffe and another entity are the remaining consignment vendors pursuing this appeal.Although we will continue to vigorously defend against the TSA Action and pursue the above-referenced counterclaims and appeal, should TSA and/or WSFS ultimately prevail on their claims, we could be forced to disgorge all Proceeds received and forfeit our ownership rights in any Products that remain in TSA's possession. We believe the range of possible loss in this matter is currently $0 to $3.3 million; however, it is too early to determine the probable outcome and, therefore, no amount has been accrued in our financial statements related to this matter.ITEMItem 4. MINE SAFETY DISCLOSURESPART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.MKTAmerican under the symbol “DLA”. “DLA.” As of November 14, 2017,December 2, 2023, there were approximately 841765 record holders of our common stock.The following table sets forth, for each of the periods indicated below, the high and low sales prices per share of our common stock as reported on the NYSE MKT. High Low Sale Price Sale Price Fiscal Year 2017: September Quarter $22.88 $18.00 June Quarter $23.47 $16.95 March Quarter $21.84 $15.55 December Quarter $21.93 $14.85 Fiscal Year 2016: September Quarter $25.52 $15.31 June Quarter $22.93 $17.01 March Quarter $19.93 $11.61 December Quarter $18.10 $13.70 2017ended September 30, 2023 and 2016. SubjectOctober 1, 2022 should be read in conjunction with our audited consolidated financial statements and the notes to those statements. Financial measures included herein have been presented on a generally accepted accounting principles (“GAAP”) basis. In the following discussion and analysis of financial condition and results of operations, certain financial measures may be considered “non-GAAP financial measures” under SEC rules. These rules require supplemental explanation and reconciliation, which is provided elsewhere in this Annual Report.provisionsHonduran Equity Method Investment, as well as $1.9 million in income from the net reduction in contingent consideration liabilities, offset by a loss on the disposal of fixed assets of $0.4 million. $ 54,013 $ 108,843 8,019 — 25,929 — $ 87,961 $ 108,843 21.2 % 22.4 % $ (29,442 ) $ 31,781 8,019 — 25,929 — 4,723 — Goodwill Impairment Charges (4) 9,200 — $ 18,429 $ 31,871 Net (Loss) Income (GAAP) $ (33,213 ) $ 19,740 Production Curtailment Costs (1) 8,019 — Cotton Costs (2) 25,929 — Restructuring Costs (3) 4,723 — Goodwill Impairment Charges (4) 9,200 — Tax Impact (11,393 ) — $ 3,265 $ 19,740 Goodwill Impairment Charges (4) 9,200 — blank check preferred stock (noneon our U.S credit facility and utilized cash proceeds to fund operating activities and certain capital investments, as well as the required payments on our capital lease financing. Additionally, in fiscal year 2022, we entered into a new Honduran term loan with a principal of which is currently outstanding), the holders$3.7 million and a new term loan related to our El Salvador operations for $3.0 million, both with five-year terms. In fiscal year 2023, there were no share repurchases. In fiscal year 2022, we repurchased $4.0 million in shares of our common stockstock.entitledintended to receive whatever dividends,fund our day-to-day working capital needs and, along with capital lease financing arrangements, to fund our planned capital expenditures. However, any material deterioration in our results of operations may result in the loss of our ability to borrow under our U.S. revolving credit facility and to issue letters of credit to suppliers or may cause the borrowing availability under that facility to be insufficient for our needs. Availability under our credit facility is primarily a function of the levels of our accounts receivable and inventory. A significant deterioration in our accounts receivable or inventory levels could restrict our ability to borrow additional funds or service our indebtedness.any, that may be declared fromdue more than a year after September 30, 2023.Board of Directors in its discretion from funds legally available for that purpose. fiscal year 2016 to the date of determination.AtNotwithstanding the foregoing, the Amended Credit Agreement currently restricts us from making cash dividends or stock repurchases until the later of (x) November 4, 2023 and (y) the date upon which (a) our availability (as defined in the Amended Credit Agreement) and (b) our average availability (as defined in the Amended Credit Agreement) for the immediately preceding 30 consecutive days, is equal to or more than the greater of (i) 17.50% of the lesser of (A) our borrowing base (as defined in the Amended Credit Agreement) or (B) the maximum revolver amount (as defined in the Amended Credit Agreement) and (ii) $25,000,000 and (II) certification that (x) our FCCR is equal to or greater than 1.00:1.00 for the trailing 12-month period and (y) as of such date, no default (as defined in the Amended Credit Agreement) or event of default exists. For purposes of this definition, availability and average availability will be calculated (x) after giving effect to the availability block (as defined in the Amended Credit Agreement) and (y) without giving effect to the application of the net cash proceeds from certain sale-leaseback transactions. Absent the restrictions referenced in the preceding two sentences, at September 30, 2017,2023, and October 1, 2016,September 2022, there was $7.7$8.3 million and $10.7$24.9 million, respectively, of retained earnings free of restrictions to make cash dividends or stock repurchases.Purchases of our Own Shares of Common Stock: See Note 15 - Repurchase of Common Stock and Note 9 - Debt, in Item 15, which is incorporated herein by reference.Securities Authorized for Issuance Under Equity Compensation Plans: The information required by Item 201(d) of Regulation S-K is set forth under “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report, which information is incorporated herein by reference.Comparison of Total Return Among Delta Apparel, Inc., CRSP NYSE MKT Index (US), and CRSP NYSE MKT Wholesale & Retail Trade Index: Our common stock began trading on the NYSE MKT (previously the NYSE Amex) on June 30, 2000, the last trading day of our fiscal year 2000. Prior to that date, no securities of Delta Apparel were publicly traded. Set forth below is a line graph comparing the yearly change in the cumulative total stockholder return, assuming dividend reinvestment, of our common stock with (1) the CRSP NYSE MKT Index (US) and (2) the CRSP NYSE MKT Wholesale and Retail Trade Index, which is comprised of all NYSE MKT companies with SIC codes from 5000 through 5999. This performance graph assumes that $100 was invested in the common stock of Delta Apparel and comparison groups on June 30, 2012, and that all dividends have been reinvested.
2012 2013 2014 2015 2016 2017 Delta Apparel, Inc. $ 100.00 $ 103.22 $ 64.42 $ 131.41 $ 120.50 $ 157.47 CRSP NYSE MKT Index (US) $ 100.00 $ 100.04 $ 128.99 $ 100.13 $ 103.57 $ 111.49 CRSP NYSE MKT Wholesale & Retail Trade Index $ 100.00 $ 132.74 $ 137.75 $ 186.04 $ 158.89 $ 463.36 ITEM 6.SELECTED FINANCIAL DATAThe selected financial data includes the financial position and results of operations of acquired businesses beginning on the date of acquisition. On August 30, 2016, we acquired substantially all of the assets of Coast Apparel, LLC, and on August 27, 2013, we acquired substantially all of the assets of Salt Life Holdings, LLC, including all of its domestic and international trademark rights in the Salt Life brand. Prior to the acquisition of Salt Life, we sold Salt Life-branded products under exclusive license agreements which began in January 2011. The consolidated statements of operations data for the year ended June 29, 2013, the transition period ended September 28, 2013, the year ended September 27, 2014 and the consolidated balance sheet data as of June 29, 2013, September 28, 2013, September 27, 2014, and October 3, 2015, are derived from, and are qualified by reference to, our audited consolidated financial statements not included in this document. The consolidated statement of operations data for the years ended October 3, 2015, October 1, 2016, and September 30, 2017, and the consolidated balance sheet data as of October 1, 2016, and September 30, 2017, are derived from, and are qualified by reference to, our audited consolidated financial statements included elsewhere in this document.We operate on a 52-53 week fiscal year ending on the Saturday closest to September 30. All fiscal years shown were 52-week years with the exception of fiscal year 2015, which was a 53-week year, and the 13-week transition period ended September 28, 2013. Historical results are not necessarily indicative of results to be expected in the future. The selected financial data should be read in conjunction with the Consolidated Financial Statements and the related notes as indexed on page F-1 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7. Period Ended September 30,
2017 October 1,
2016 October 3,
2015 September 27,
2014 September 28, 2013* June 29,
2013 (In thousands, except per share amounts) Statement of Operations Data: Net sales $ 385,082 $ 425,249 $ 449,142 $ 452,901 $ 122,559 $ 490,523 Cost of goods sold (304,360 ) (331,750 ) (360,823 ) (367,160 ) (95,439 ) (381,014 ) Selling, general and administrative expenses (67,408 ) (76,578 ) (81,086 ) (86,275 ) (26,588 ) (94,944 ) Restructuring costs — (1,741 ) — — — — Change in fair value of contingent consideration 900 600 500 (200 ) — — Gain on sale of business 1,295 — 7,704 — — — Other income (expense), net 670 552 682 (927 ) 24 (662 ) Operating income (loss) 16,179 16,332 16,119 (1,661 ) 556 13,903 Interest expense, net 5,011 5,287 6,021 5,792 1,033 3,997 Earnings (loss) before income taxes 11,168 11,045 10,098 (7,453 ) (477 ) 9,906 Provision for (benefit from) income taxes 657 2,081 2,005 (6,493 ) (1,045 ) 722 Net earnings (loss) $ 10,511 $ 8,964 $ 8,093 $ (960 ) $ 568 $ 9,184 Basic earnings (loss) per common share: $ 1.40 $ 1.16 $ 1.03 $ (0.12 ) $ 0.07 $ 1.12 Diluted earnings (loss) per common share: $ 1.33 $ 1.12 $ 1.00 $ (0.12 ) $ 0.07 $ 1.08 Dividends declared per common share $ — $ — $ — $ — $ — $ — Balance Sheet Data (at year end): Working capital $ 155,259 $ 150,191 $ 131,485 $ 156,258 $ 171,681 $ 173,435 Total assets 317,802 344,652 324,903 354,578 351,762 311,910 Total long-term debt, less current maturities 85,306 106,603 93,872 114,469 131,030 94,763 Shareholders’ equity 155,887 152,015 144,499 138,207 138,872 141,066 *Period ended September 28, 2013, was a 13-week transition period due to the change in our fiscal year endITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSBUSINESS OUTLOOKFiscal year 2017 was another successful year for Delta Apparel in what continues to be challenging market conditions. Three major hurricanes disrupted key markets for us at various times during the year and the retail sector and consumer demand remained weak, resulting in the loss of additional apparel retail doors. While our net sales for the year were impacted by these events and the divestiture of the Junkfood business, our margins held strong and we ended the year with a 19% increase in earnings.Our ability to remain flexible and navigate market challenges is seen through our efforts to rationalize our business and focus on areas with higher growth and earnings potential. The sale of the Junkfood business is an example of this. That transaction enabled us to lower our debt, fund additional share repurchases and improve our investment and acquisition flexibility. Our proactive measures to reduce fixed costs and realign our manufacturing platform also give us operational flexibility. The benefits of these actions are evident in our profitability for the year. The realignment should further enhance our results as our manufacturing volumes increase.In our basics segment, we continued to expand our fashion basics product line during fiscal year 2017 and introduced our Delta Platinum collection's fresh, fashion-forward styles and fabrics to the market. Our new B2B ecommerce site launched during the September quarter, providing new functionality and an easier shopping experience for our Activewear customers. We also recently opened a state-of-the-art, integrated digital print and distribution facility that provides a seamless fulfillment solution for customers in our basics businesses. Activewear’s product line enhancements, along with Art Gun’s planned geographic expansion, point to solid growth opportunities in these businesses. We continue to broaden our manufacturing and decoration capabilities, staying relevant to changing trends in apparel.On the branded side of our business, Salt Life again turned in strong operating performance for the year and continues its growth trajectory. Its California stores are growing and we expect the new stores in Daytona Beach, Florida and Columbus, Georgia to further serve as valuable consumer touch-points. Salt Life continues to broaden its consumer reach through the expansion of its social media and team ambassador programs, which provide a platform of over 8 million “followers” through which it amplifies its lifestyle brand message. We plan to continue to make investments in Salt Life’s omni-channel consumer strategy and anticipate strong growth for Salt Life in years to come.Although sales in our Soffe business were down in fiscal year 2017, we expect Soffe’s expanding relationships with strategic and independent sporting goods retailers and e-retailers and the momentum with its military programs and unique made-in-the-USA production capability to provide a strong foundation for growth in fiscal year 2018.We believe that the major initiatives that we completed in fiscal year 2017 will benefit us in 2018 and beyond. Although the retail environment is likely to remain challenging, we believe we have built solid momentum going into the year. We also believe we have a great opportunity to grow our top-line revenue in fiscal year 2018 and expect our operating margins to benefit from cost improvements and a stronger sales mix of branded and fashion basics products.RESULTS OF OPERATIONSOur financial results have been presented on a 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 and reconciled in the sections entitled “Non-GAAP Financial Measures.”OverviewNet sales for the fiscal year ended September 30, 2017, were $385.1 million compared with prior year sales of $425.2 million. When adjusting both years to exclude sales in the Junkfood business, which was sold to JMJD Ventures, LLC on March 31, 2017, sales were $369.4 million, down $5.3 million from fiscal year 2016, primarily due to a loss of comparable sales in fiscal year 2017 associated with the bankruptcy of The Sports Authority. Gross margins improved for the year in both the basics and branded segments but, due to a higher mix of basics sales during the year, overall gross margins declined 100 basis points.Net income in fiscal year 2017 was $10.5 million, or $1.33 per diluted share, compared with a net income in the prior year of $9.0 million, or $1.12 per diluted share.Branded SegmentNet sales in our branded segment were $104.8 million in fiscal year 2017 compared to $148.1 million in the prior year. When adjusted to exclude sales in the Junkfood business, branded segment sales declined $8.5 million, or 8.7%, over the prior year. Salt Life sales grew by 6.3% from the prior year despite the impact of hurricanes in key markets and the loss of retail doors due to customer bankruptcies. This growth was offset by a sales decline at Soffe stemming primarily from the negative impact of The Sports Authority bankruptcy. Gross margins in the branded segment improved to 33.2% in fiscal year 2017 and, excluding the results of the since-divested Junkfood business, improved 90 basis points over the prior year to 34.6%. Operating income in the branded segment was $3.9 million in fiscal year 2017 compared to $6.9 million in the prior year due mainly to the Junkfood divestiture.Basics SegmentNet sales in our basics segment increased by 1.1% to $280.3 million from prior year sales of $277.1 million. Strong private label growth drove the increase, with our FunTees business exceeding $100 million in revenue, a record for that business. Gross margins in the basics segment improved 30 basis points from the prior year due primarily to sales of higher margin fashion basics products. Operating income increased by $1.9 million to $24.2 million, or 8.6% of sales, compared to $22.3 million, or 8.0% of sales, in the prior year due to increased sales and a more favorable product mix.Quarterly Financial DataFor information regarding quarterly financial data, refer to Note 17 - Quarterly Financial Information (Unaudited) to the Consolidated Financial Statements, which information is incorporated herein by reference.Fiscal Year 2017 Versus Fiscal Year 2016Net sales for fiscal year 2017 were $385.1 million compared with prior year sales of $425.2 million. When adjusted to exclude sales in the since-divested Junkfood business, sales were $369.4 million in fiscal year 2017 compared to $374.8 million in the prior year, a decline of 1.4%. Our direct-to-consumer and ecommerce sales represented 6.8% of total revenues for the 2017 fiscal year compared to 5.3% of revenues in the prior year.While gross margins improved in both the branded and basics segments, overall gross margins declined to 21.0% from the lower mix of branded sales resulting from the divestiture of Junkfood. Our gross margins may not be comparable to those of other companies because some companies include costs related to their distribution network in cost of goods sold and we exclude them from gross profit and include them in selling, general and administrative expenses.Fiscal year 2017 selling, general and administrative expenses were $67.4 million, or 17.5% of sales, compared to $76.6 million, or 18.0% of sales, in fiscal year 2016. The decrease in selling, general and administrative expenses is primarily due to the Junkfood divestiture.The change in fair value of contingent consideration resulted from the remeasurement of the contingent consideration related to Salt Life. Based upon the current operating results and future projections, a $0.9 million reduction in contingent consideration was recorded, principally from the reduced remaining time in the measurement period as well as a reduction in the sales expectations for calendar year 2019 due to overall softness in the retail environment.We realized a $1.3 million pre-tax gain resulting from the sale of the Junkfood business. We completed this transaction in our March quarter of fiscal year 2017. See Note 3-Divestitures for more information on the sale of the Junkfood business.Other income includes earnings from our Honduran joint venture. Other income increased to $0.7 million in fiscal year 2017 from $0.6 million in fiscal year 2016. Fiscal year 2016 included $1.7 million in restructuring costs associated with the expansion and realignment of our manufacturing platforms to eliminate duplicative fixed costs and better leverage our lower-cost facilities and equipment capabilities. There were no restructuring costs incurred in fiscal year 2017.Fiscal year 2017 operating income was relatively flat with the prior year at $16.2 million compared to $16.3 million in fiscal year 2016. Operating income in fiscal year 2017 was comprised of $24.2 million in the basics segment and $3.9 million in the branded segment offset by unallocated general corporate costs of $11.9 million. This compares to fiscal year 2016 operating income of $22.3 million in the basics segment and $6.9 million in the branded segment offset by unallocated general corporate costs of $12.9 million.Interest expense for fiscal year 2017 decreased $0.3 million to $5.0 million, compared to $5.3 million in fiscal year 2016. The decrease is due primarily to lower average debt levels in fiscal year 2017 compared to the prior year.Our fiscal year 2017 effective income tax rate was 5.9% compared to 18.8% in the prior fiscal year. We benefit from having income in foreign jurisdictions that are either exempt from income taxes or have tax rates lower than the United States. We also benefited in the current fiscal year from our early adoption of ASU 2016-09 as described in Note 2(aa) of our Consolidated Financial Statements.Net income in fiscal year 2017 was $10.5 million, or $1.33 per diluted share, compared with net income in the prior year of $9.0 million, or $1.12 per diluted share.Non-GAAP Financial MeasuresWe provide all information required in accordance with generally accepted accounting principles (“GAAP”), but we believe that evaluating our ongoing operating results may be difficult if limited to reviewing only GAAP financial measures. In an effort to provide investors with additional information regarding the Company's results, we also provide non-GAAP information that management believes is useful to investors. We discuss adjusted net sales and adjusted gross margins as performance measures because management uses these measures in evaluating the Company's underlying performance on a consistent basis across periods. We also believe these measures are frequently used by securities analysts, investors and other interested parties in the evaluation of the Company's ongoing performance. These non-GAAP measures have limitations as analytical tools, and securities analysts, investors and other interested parties should not consider any of these non-GAAP measures in isolation or as a substitute for analysis of the Company's results as reported under GAAP. These non-GAAP measures may not be comparable to similarly titled measures used by other companies. The table below reconciles net sales, gross profit and gross margins to the adjusted net sales, adjusted gross profit and adjusted gross margins (in thousands, except per share amounts): Year Ended September 30, 2017 October 1, 2016 Net sales $ 385,082 $ 425,249 Adjustment for: (15,648 ) (50,495 ) Adjusted net sales $ 369,434 $ 374,754 Gross profit $ 80,722 $ 93,499 Adjustment for manufacturing realignment expenses — 1,096 (3,997 ) (16,064 ) Adjusted gross profit $ 76,725 $ 78,531 Gross margins 21.0 % 22.0 % Adjustment for manufacturing realignment expenses — % 0.2 % (0.2 )% (1.3 )% Adjusted gross margins 20.8 % 20.9 % Fiscal Year 2016 Versus Fiscal Year 2015Net sales for fiscal year 2016 were $425.2 million compared with prior year sales of $449.1 million. Sales declined 0.5% from the prior year adjusted net sales. Net sales in the branded segment were $148.1 million in fiscal year 2016 compared to $166.7 million in fiscal year 2015. Sales in the branded segment declined $2.3 million when excluding the $16.3 million in sales related to the since-divested The Game business and the since-discontinued Kentucky Derby license as well as the additional week of sales in fiscal year 2015. Net sales in our basics segment were 277.1 million in fiscal year 2016 compared with $282.5 million in fiscal year 2015. Net sales in fiscal year 2016 were flat with the prior year adjusted net sales, after reducing for the additional week of sales in fiscal year 2015. Our direct-to-consumer and ecommerce sales represented 5.3% of total revenues for the 2016 fiscal year, a 90 basis point increase over the prior year period, during which direct-to-consumer and ecommerce sales were 4.4% of total revenues.Gross margins were 22.0% in fiscal year 2016 compared to 19.7% in the prior year. Adjusted gross margins improved 250 basis points from the prior year driven primarily from a more profitable sales mix and lower product costs in the basics segment, coupled with higher direct-to-consumer sales in the branded segment. Excluding the expenses associated with the manufacturing initiative, gross margins as a percentage of sales increased by 480 basis points compared to the prior fiscal year. Our basics gross margins expanded by 380 basis points from fiscal year 2015 to 2016, to 15.5%. Gross margins in the branded segment declined by 60 basis points to 33.6% in fiscal year 2016 from the prior year. Our gross margins may not be comparable to other companies because some companies include costs related to their distribution network in cost of goods sold and we exclude them from gross profit and include them in selling, general and administrative expenses.Fiscal year 2016 selling, general and administrative expenses were $76.6 million, or 18.0% of sales, compared to $81.1 million, or 18.1% of sales, in fiscal year 2015. The decrease in selling, general and administrative expenses is primarily due to lower selling costs and efficiency improvements in our distribution facilities, partially offset by higher incentive compensation costs resulting from our improved operating results in fiscal year 2016 from the prior year.The change in fair value of contingent consideration is the remeasurement of the contingent consideration related to the acquisition of Salt Life. Based upon the operating results and future projections as of the remeasurement, a $0.6 million reduction in contingent consideration was recorded, principally from the reduced remaining time in the measurement period.Other income includes our income from our Honduran joint venture, along with sublease income. Other income decreased slightly to $0.6 million in fiscal year 2016 from $0.7 million in fiscal year 2015.Fiscal year 2016 operating income was $16.3 million compared to $16.1 million in fiscal year 2015. Fiscal year 2016 adjusted operating income was $19.2 million, or 4.5% of sales, an $8.6 million, or 81.9%, increase over the prior year adjusted operating income of $10.5 million. Operating income in fiscal year 2016 was $22.3 million in the basics segment and $6.9 million in the branded segment offset by unallocated general corporate costs of $12.9 million, compared to $13.1 million in the basics segment and $12.4 million in the branded segment offset by unallocated corporate costs of $9.4 million.Interest expense for fiscal year 2016 decreased $0.7 million to $5.3 million compared to $6.0 million in fiscal year 2015. The decrease is due primarily to the lower average debt levels in fiscal year 2016 compared to the prior year, coupled with slightly lower interest rates on our U.S. credit facility.Our fiscal year 2016 effective income tax rate was 18.8% compared to 19.9% in the prior fiscal year. We benefit from having income in foreign jurisdictions that are either exempt from income taxes or have tax rates lower than the United States.Net income in fiscal year 2016 was $9.0 million, or $1.12 per diluted share, compared with net income in the prior year of $8.1 million, or $1.00 per diluted share. Adjusted earnings per diluted share were $1.41, a 147.4% increase from the prior year’s $0.57 adjusted earnings per diluted share.Non-GAAP Financial MeasuresWe provide all information required in accordance with generally accepted accounting principles (“GAAP”), but we believe that evaluating our ongoing operating results may be difficult if limited to reviewing only GAAP financial measures. In an effort to provide investors with additional information regarding the Company's results, we also provide non-GAAP information that management believes is useful to investors. We discuss adjusted net sales, adjusted gross margins, adjusted operating income and adjusted earnings per diluted share as performance measures because management uses these measures in evaluating the Company's underlying performance on a consistent basis across periods. We also believe these measures are frequently used by securities analysts, investors and other interested parties in the evaluation of the Company's ongoing performance. These non-GAAP measures have limitations as analytical tools, and securities analysts, investors and other interested parties should not consider any of these non-GAAP measures in isolation or as a substitute for analysis of the Company's results as reported under GAAP. These non-GAAP measures may not be comparable to similarly titled measures used by other companies. The table below reconciles net sales, gross profit, gross margins, operating income and earnings per diluted share to the adjusted net sales, adjusted gross margins, adjusted operating income and adjusted earnings per diluted share (in thousands, except per share amounts): Year Ended October 1, 2016 October 3, 2015 Net sales $ 425,249 $ 449,142 Adjustment for: 53 weeks versus 52 weeks in fiscal year — (8,585 ) — (10,207 ) Sales from the since-discontinued Kentucky Derby business — (2,889 ) Adjusted net sales $ 425,249 $ 427,461 Gross profit $ 93,499 $ 88,319 Adjustment for manufacturing realignment expenses 1,096 — Adjusted gross profit $ 94,595 $ 88,319 Gross margins 22.0 % 19.7 % Adjustment for manufacturing realignment expenses 0.2 % — % Adjusted gross margins 22.2 % 19.7 % Operating income $ 16,332 $ 16,119 Adjustment for manufacturing realignment expenses included in gross profit 1,096 — Adjustment for manufacturing realignment expenses included in restructuring costs 1,741 — — (5,582 ) Adjusted operating income $ 19,169 $ 10,537 Earnings per diluted share $ 1.12 $ 1.00 Adjustment for manufacturing realignment expenses 0.29 — — (0.43 ) Adjusted earnings per diluted share $ 1.41 $ 0.57 LIQUIDITY AND CAPITAL RESOURCESCredit Facility and Other Financial ObligationsOn May 10, 2016, we amended our U.S. revolving credit facility and entered into a Fifth Amended and Restated Credit Agreement (the "Amended Credit Agreement") with Wells Fargo Bank, National Association ("Wells Fargo"), as Administrative Agent, the Sole Lead Arranger and the Sole Book Runner, and the financial institutions named therein as Lenders, which are Wells Fargo, PNC Bank, National Association and Regions Bank. Our subsidiaries, M.J. Soffe, LLC, Junkfood Clothing Company, Salt Life, LLC, and Art Gun, LLC (together with the Company, the "Companies"), are co-borrowers under the Amended Credit Agreement. The Amended Credit Agreement was subsequently amended on November 27, 2017. For further information refer to Item 9B. Other Information.The Amended Credit Agreement allows us to borrow up to $145 million (subject to borrowing base limitations), including a maximum of $25 million in letters of credit. Provided that no event of default exists, we have the option to increase the maximum credit to $200 million (subject to borrowing base limitations), conditioned upon the Administrative Agent's ability to secure additional commitments and customary closing conditions. The credit facility matures on May 10, 2021.At September 30, 2017, we had $74.6 million outstanding under our U.S. revolving credit facility at an average interest rate of 2.9%, and had the ability to borrow an additional $37.5 million.For further information regarding our U.S. asset-based secured credit facility, refer to Note 9 - Long-Term Debt to the Consolidated Financial Statements, which information is incorporated herein by reference.In August 2013, we acquired Salt Life and issued two promissory notes in the aggregate principal amount of $22.0 million, which included a one-time installment of $9.0 million that was paid as required on September 30, 2014, and quarterly installments commencing on March 31, 2015, with the final installment due on June 30, 2019. The promissory notes are zero-interest notes and state that interest will be imputed as required under Section 1274 of the Internal Revenue Code. We have imputed interest at 1.92% and 3.62% on the promissory notes that matured on June 30, 2016, and will mature on June 30, 2019, respectively. At September 30, 2017, the discounted value of the promissory note was $5.3 million. Refer to Note 9 - Long Term Debt to the Consolidated Financial Statements for further information on these promissory notes.We have loan agreements with Banco Ficohsa, a Honduran bank. This credit facility is secured by a first-priority lien on the assets of our Honduran operations and the loans are not guaranteed by our U.S. entities. 30, 2017, we had a total of $12.9 millionoutstanding on these loans. For further information regarding our Honduran loans, refer to Note 9 - Long-Term Debt to the Consolidated Financial Statements, which information is incorporated herein by reference.Our primary cash needs are for working capital and capital expenditures, as well as to fund share repurchases under our Stock Repurchase Program. In addition, we may use cash to pay dividends in the future.Derivative InstrumentsFrom time to time we may use derivative instruments to manage our exposure to interest rates. These financial instruments are not used for trading or speculation purposes. When we enter into a derivative instrument, we determine whether hedge accounting can be applied. Where hedge accounting can be applied, a hedge relationship is designated as either a fair value hedge or cash flow hedge. The hedge is documented at inception, detailing the particular risk objective and strategy considered for undertaking the hedge. The documentation identifies the specific asset or liability being hedged, the risk being hedged, the type of derivative used and how effectiveness of the hedge will be assessed. During fiscal years 2017, 2016, and 2015, these interest rate swap agreements had minimal ineffectiveness and were considered highly-effective hedges.Changes in the derivatives’ fair values are deferred and are recorded as a component of accumulated other comprehensive income (“AOCI”), net of income taxes, until the underlying transaction is recorded. When the hedged item affects income, gains or losses are reclassified from AOCI to the Consolidated Statements of Operations as interest income/expense. Any ineffectiveness in our hedging relationships is recognized immediately in the Consolidated Statement of Operations.The changes in fair value of the interest rate swap agreements resulted in AOCI gains, net of taxes, of $0.1 million and $0.3 million for the years ended September 30, 2017, and October 1, 2016, respectively, and an AOCI loss, net of taxes, of $0.2 million for the year ended October 3, 2015.Operating Cash FlowsCash provided by operating activities in fiscal year 2017 was $13.9 million compared to $2.2 million for fiscal year 2016. The increase of cash provided is primarily related to increased earnings combined with increased collections from our customers compared to our prior fiscal year.Investing Cash FlowsCash provided by investing activities in fiscal year 2017 was $18.9 million compared to $10.8 million used in investing activities in fiscal year 2016. Capital expenditures during fiscal year 2017 were $7.9 million and primarily related to machinery and equipment, along with investments in our direct-to-consumer initiatives and information technology systems. During fiscal year 2017, investing cash flows also included $26.0 million in proceeds received from the sale of our Junkfood business. See Note 3—Divestitures, for further information on this transaction. In fiscal year 2016, we used $12.3 million in cash for capital expenditures, including expenditures for the expansion of our textile operations to decrease reliance on purchased fabric and allow us to better leverage our internal operations.We expect to spend approximately $13 million in capital expenditures in fiscal year 2018, primarily on manufacturing equipment along with information technology and direct-to-consumer investments.Financing ActivitiesCash used in financing activities was $32.7 million in fiscal year 2017 compared to $8.7 million provided by financing activities in fiscal year 2016. In fiscal year 2017, the cash received from the sale of our Junkfood business was used to reduce debt as well as to repurchase our stock throughout the year.Future Liquidity and Capital ResourcesBased on our current expectations, we believe that our credit facility should be sufficient to satisfy our foreseeable working capital needs, and that the cash flow generated by our operations and funds available under our credit facility should be sufficient to service our debt payment requirements, to satisfy our day-to-day working capital needs and to fund our planned capital expenditures. Any material deterioration in our results of operations, however, may result in our loss of the ability to borrow under our revolving credit facility and to issue letters of credit to suppliers, or may cause the borrowing availability under our 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, as well as the uses of cash in our operations. A significant deterioration in our accounts receivable or inventory levels could restrict our ability to borrow additional funds or service our indebtedness. Moreover, our credit facility includes a financial covenant that if the availability under our credit facility falls below the amounts specified in our credit agreement, our Fixed Charge Coverage Ratio (“FCCR”) (as defined in our credit agreement) for the preceding 12-month period must not be less than 1.1 to 1.0. Although our availability at September 30, 2017, 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. As of September 30, 2017, our FCCR was above the minimum threshold specified in our credit agreement.The following table summarizes our contractual cash obligations as of September 30, 2017, by future period. Payments Due by Period (in thousands) Total Contractual Obligations: Long-term debt (a) $ 92,854 $ 7,548 $ 15,443 $ 69,863 $ — Operating leases 44,966 8,259 14,559 7,762 14,386 Capital leases 3,330 840 1,670 806 14 Purchase obligations 32,681 32,681 — — — Total (b) $ 173,831 $ 49,328 $ 31,672 $ 78,431 $ 14,400 ______________________(a)We include interest on our fixed rate debt as a component of our future obligations. However, we exclude interest payments on our revolving credit facility since the cash outlay for the interest is unknown and cannot be reliably estimated. Interest payments will be determined based upon the daily outstanding balance of the revolving credit facility and the prevailing interest rate during that time.(b)We excluded deferred income tax liabilities of $6.9 million from the contractual cash obligations table because we believe inclusion would not be meaningful. Refer to Note 10 - Income Taxes to our Consolidated Financial Statements for more information on our deferred income tax liabilities. Deferred income tax liabilities are calculated based on temporary differences between tax bases of assets and liabilities and their respective book bases, which will result in taxable amounts in future years when the liabilities are settled at their reported financial statement amounts. The results of these calculations do not have a direct connection with the amount of cash taxes to be paid in any future periods and therefore would not relate to liquidity needs. As a result, including deferred income tax liabilities as payments due by period in the schedule could be misleading.Off-Balance Sheet ArrangementsAs of September 30, 2017, we did not have any off-balance sheet arrangements that were material to our financial condition, results of operations or cash flows as defined by Item 303(a)(4) of Regulation S-K promulgated by the SEC other than the letters of credit, operating leases, and purchase obligations described in the table above. We have entered into derivative interest rate contracts as described and included below in “Quantitative and Qualitative Disclosures about Market Risk” in Item 7A of this report.Dividends and Purchases of our Own SharesPursuant to the terms of our credit facility, we are allowed to make cash dividends and stock repurchases if (i) as of the date of the payment or repurchase and after giving effect to the payment or repurchase, we have availability on that date of not less than 15% of the lesser of the borrowing base or the commitment, and average availability for the 30-day period immediately preceding that date of not less than 15% of the lesser of the borrowing base or the commitment; and (ii) the aggregate amount of dividends and stock repurchases after May 10, 2016, does not exceed $10 million plus 50% of our cumulative net income (as defined in the Amended Credit Agreement) from the first day of the third quarter of fiscal year 2016 to the date of determination.At September 30, 2017, and October 1, 2016, there was $7.7 million and $10.7 million, respectively, of retained earnings free of restrictions to make cash dividends or stock repurchases.Our Board of Directors did not declare, nor were any dividends paid, during fiscal years 2017 and 2016.Any future cash dividend payments will depend upon our earnings, financial condition, capital requirements, compliance with loan covenants and other relevant factors.As of September 30, 2017,2023, our Board of Directors had authorized management to use up to $50.0$60.0 million to repurchase stock in open market transactions under our Stock Repurchase Program.During fiscal years 2017, 2016, and 2015,2022, we purchased 413,337136,181 shares 217,568 shares, and 140,336 shares, respectively, of our common stock for a total cost of $7.8 million, $3.5 million, and $2.1 million, respectively.$4.0 million. There were no repurchases of our common stock in 2023. As of September 30, 2017,2023, we havehad purchased 2,893,4873,735,114 shares of common stock for an aggregate of $38.7$56.4 million since the inception of the Stock Repurchase Program. All purchases were made at the discretion of management and pursuant to the safe harbor provisions of SEC Rule 10b-18. As of September 30, 2017, $11.32023, $3.6 million remained availableauthorized by our Board of Directors for future purchases under our Stock Repurchase Program, which does not have an expiration date.CRITICAL ACCOUNTING POLICIESinventoryinventories and related reserves, the carrying value of goodwill, and the accounting for income taxes.Revenues from product sales areownershipperformance obligations under the terms of the contracts are satisfied. Our performance obligations primarily consist of delivering products to our customers. Control is transferred upon providing the products to customers in our retail stores, upon shipment of our products to consumers from our ecommerce sites, and upon shipment from our distribution centers to our customers in our wholesale operations. Once control is transferred to the customer, which includes not only the passage of title, but also the transfer of the risk of loss related to the product. At this point, the sales price is fixed and determinable, and we are reasonably assured of the collectibility of the sale. The majorityhave completed our performance obligation.shipped FOB or Ex Works shipping pointrecorded net of discounts, allowances, and revenue is therefore recognized when the goodsoperational chargebacks. As certain allowances and other deductions are shipped to the customer. For sales that are shipped FOB or Ex Works destination point, we do not recognize the revenuefinalized until the goods are received by the customer. Shippingend of a season, program or other event which may not have occurred, we estimate such discounts, allowances, and handling charges billedreturns that we expect to our customers are included in netprovide.the related costs are included in cost of goods sold. Revenues are reported on a net sales basis, which is computed by deducting product returns, discounts and estimated returns and allowances.discounts. We estimate these reductions based on historical rates of customer returns and allowances as well as the specific identification of outstanding returns, markdowns and allowances that have not yet been received by us. The actual amount of customer returns and allowances, which is inherently uncertain, may differ from our estimates. If we determine that actual or expected returns or allowances are significantly higher or lower than the reserves we established, we would record a reduction or increase, as appropriate, to net sales in the period in which we make such a determination. Reserves for returns, allowances, markdowns and discounts are included within accrued expenses as refund liabilities, and the value of inventory associated with reserves for sales returns are included within prepaid expenses and other current assets on an ongoing basis by considering historicalthe Consolidated Balance Sheets. As of September 2023, and current trends.In the normal coursebusiness, we extend credit toreceivables from our customers based upon definedarising from the sale of our products, and we generally do not require collateral from our customers. We actively monitor our exposure to credit criteria.risk through the use of credit approvals and credit limits. Accounts receivable as shown on our Consolidated Balance Sheets, areis presented net of related reserves. reserves for doubtful accounts.collectibilitycollectability of our accounts receivable and establish an allowance for doubtful accounts based upon this assessment. In situations where we are aware of a specific customer’s inability to meet its financial obligation, such as in the case of a bankruptcy filing, we assess the need for a specific reserve for bad debts is recorded against amounts due to reduce the net recognized receivable to the amount reasonably expected to be collected. For all other customers, reservesdebts. Reserves are determined through analysis of the aging of accounts receivable balances, historical bad debts, customer concentrations, customer credit-worthiness, current economic trends and changes in customer payment terms. In addition, reserves are established for other concessions thatAlthough our historical allowances have been extended to customers, including advertising, markdownsmaterially accurate, if market conditions change, additional reserves may be required. Bad debt expense was less than 1% of net sales in each of fiscal years 2023 and other accommodations, net of historical recoveries. These reserves are determined based upon historical deduction trends and evaluation of current market conditions. Significant changes in customer concentration or payment terms, deterioration of customer credit-worthiness or further weakening in economic trends could have a significant impact on the collectibility of receivables and our operating results.or marketand net realizable value using the first-in, first-out method. Inventory cost includes materials, labor and manufacturing overhead on manufactured inventory and all direct and associated costs, including inbound freight, to acquire sourced products. See Note 2(y) for further information regarding yarn procurements. We regularly review inventory quantities on hand and record reserves for obsolescence, excess quantities, irregulars and slow-moving inventory based on historical selling prices, current market conditions, and forecasted product demand to reduce inventory to its net realizable value. If Although our historical reserves have been materially accurate, if actual selling prices are less favorable than those projected or if sell-through of the inventory is more difficult than anticipated, additional inventory reserves may be required.and definite-lived intangibles werewas recorded in conjunction with our acquisitions of Salt Life, Junkfood, Art Gun,DTG2Go, and Coast.Silk Screen Ink, Ltd. d/b/a SSI Digital Print Services, (“SSI”). We did not record any separately identifiable indefinite-lived intangibles associated with any of these acquisitions. On March 31, 2017, we sold our Junkfood business to JMJD Ventures, LLC. See Note 3—Divestitures for further information on this transaction. Goodwill represents the excess of the purchase price and related costs over the value assigned to net tangible and identifiable intangible assets of businesses acquired.acquired and liabilities assumed. Goodwill must be tested for impairment at least annually or more frequently if events or changes in circumstances indicate that the carrying amount may be impaired, and goodwill is required to be written down when impaired. testing process involvesloss calculations contain uncertainties because they require management to make significant judgments in estimating the usefair value of significant assumptions, estimates and judgments with respect to a varietythe Company’s reporting units, including the projection of factors, including sales, gross margins, selling, general and administrative expenses, capital expenditures,future cash flows and the selection of an appropriate discount rate, allrates. These calculations contain uncertainties because they require management to make assumptions such as estimating economic factors, including the profitability of which are subjectfuture business operations. Further, the Company’s ability to inherent uncertaintiesrealize the future cash flows used in its fair value calculations is affected by factors such as changes in economic conditions, changes in the Company’s operating performance, and subjectivity. When we perform goodwill impairment testing, our assumptions are based on annualchanges in the Company’s business plans and other forecasted results, which we believe represent those of a market participant. We select a discount rate, which is used to reflect market-based estimatesstrategies. Significant changes in any of the risks associated withassumptions involved in calculating these estimates could affect the projected cash flows, based on the best information available asestimated fair value of the date of theCompany’s reporting units and could result in impairment assessment.Given the current macro-economic environment and the uncertainties regarding its potential impact on our business, there can be no assurance that our estimates and assumptions usedcharges in our impairment tests will prove to be accurate predictions of the future. If our assumptions regarding forecasted cash flows are not achieved, it is possible that an impairment review may be triggered and goodwill may be impaired.andas well as operating loss, interest deductions, and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.Financial Accounting Standards Board ("FASB") Codification No. 740, Income Taxes (" (“ASC 740"740”), and look to taxable income in prior carryback years, reversals of existing temporary book/tax differences, tax planning strategies and future taxable income exclusive of reversals of existing temporary differences. By its very nature, future taxable income requires estimates and judgments about future events that may be predictable but are far less certain than past events that can be objectively measured.30, 2017,2023, we had state NOLsnet operating losses of approximately $41.6$79.3 million, with deferred tax assets of $1.6$4.1 million related to these state NOLs, and related valuation allowances against them of approximately $0.5$1.1 million. These state net loss carryforwards expire at various intervals from 20192027 through 2036.RECENT ACCOUNTING STANDARDS2(aa)2(ad) and Note 2(ab)2(ae) to our Consolidated Financial Statements.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKCommodityItem 7A. Quantitative and Qualitative Disclosures About Market Risk Sensitivityhaveare a supply agreement with Parkdale to supply our yarn requirements until December 31, 2018. Under the supply agreement, we purchase from Parkdale all of our yarn requirements for use in our manufacturing operations, excluding yarns that Parkdale does not manufacture or cannot manufacture due to temporary capacity constraints. The purchase price of yarn is based upon the cost of cotton plus a fixed conversion cost. Thus, we are subject to the commodity risk of cotton prices and cotton price movements, which could result in unfavorable yarn pricing for us. We fix the cotton pricessmaller reporting company as a componentdefined by Rule 12b-2 of the purchase priceSecurities Exchange Act of yarn, pursuant to the supply agreement, in advance of the shipment of finished yarn from Parkdale. Prices1934 (the “Exchange Act”) and are set according to prevailing prices, as reported by the New York Cotton Exchange, at the time we elect to fix specific cotton prices.Yarn with respect to which we have fixed cotton prices at September 30, 2017, was valued at $6.7 million, and scheduled for delivery between October 2017 and December 2017. At September 30, 2017, a 10% decline in the market price of the cotton covered by our fixed price yarn would have had a negative impact of approximately $0.5 million on the value of the yarn. This compares to what would have been a negative impact of $0.9 million at our 2016 fiscal year-end based on the yarn with fixed cotton prices at October 1, 2016.We may use derivatives, including cotton option contracts, to manage our exposure to movements in commodity prices. We do not designate our options as hedge instruments upon inception. Accordingly, we mark to market changes in the fair market value of the options in cost of sales in the Consolidated Statements of Operations. We did not own any significant cotton options contracts on September 30, 2017, or October 1, 2016.If Parkdale’s operations are disrupted and it is not ablerequired to provide us with our yarn requirements, we may need to obtain yarn from alternative sources. Although alternative sources are presently available, we may not be able to enter into short-term arrangements with substitute suppliers on terms as favorable as our current terms with Parkdale. In addition, the cotton futures we have fixed with Parkdale may not be transferable to alternative yarn suppliers. Because there can be no assurance that we would be able to pass along the higher cost of yarn to our customers,information under this could have a material adverse effect on our results of operations.Interest Rate SensitivityOur U.S. revolving credit facility provides that the outstanding amounts owed shall bear interest at variable rates. If the amount of outstanding floating rate indebtedness at September 30, 2017, under the U.S. revolving credit facility had been outstanding during the entire year and the interest rate on this outstanding indebtedness was increased by 100 basis points, our expense would have increased by approximately $0.5 million, or 10.9%, for the fiscal year. This compares to an increase of $0.3 million, or 6.1%, for the 2016 fiscal year based on the outstanding floating rate indebtedness at October 1, 2016. The effect of a 100 basis point increase in interest rates would have had a higher dollar impact for the year ended September 30, 2017, compared to the year ended October 1, 2016, from the higher floating rate debt outstanding on September 30, 2017. The percentage increase is more significant for fiscal year 2017 than for fiscal year 2016 because our total interest expense for fiscal year 2017 was lower than our total interest expense for fiscal year 2016. The actual increase in interest expense resulting from a change in interest rates would depend on the magnitude of the increase in rates and the average principal balance outstanding.DerivativesFrom 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. See Note 2(z) and Note 16(d) to the Consolidateditem.for more information on our derivatives.ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAfiscal yearsperiods ended September 30, 2017, October 1, 2016,2023, and October 3, 2015,September 2022, together with the Reports of Independent Registered Public Accounting Firms thereon, are included in this report commencing on page F-1 and are listed under Part IV, Item 15 in this report.ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENot applicable.ITEM 9A.CONTROLS AND PROCEDURESChief Financial Officer,principal accounting officer, has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2017,2023, and, based on their evaluation, our Chief Executive Officer and Chief Financial Officerprincipal accounting officer have concluded that these controls and procedures were effective at the evaluation date.Chief Financial Officer,principal accounting officer, as appropriate to allow timely decisions regarding required disclosure.FinancialAccounting Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of September 30, 2017.2023. In this evaluation, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) ("COSO"(“COSO”) in 20172023 included all of our operations. Based on our evaluation, our management has concluded that, as of September 30, 2017,2023, our internal control over financial reporting is effective.30, 2017,2023, has been audited by Ernst & Young, LLP ("EY"(“EY”), our independent registered public accounting firm, who also audited our Consolidated Financial Statements. EY’s attestation report on our internal controls over financial reporting is included herein.fiscal year 20172023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.The and Stockholders of Delta Apparel, Inc. and subsidiariessubsidiaries’Subsidiaries’ internal control over financial reporting as of September 30, 2017,2023, based on criteria established in subsidiaries’Subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of September 30, 2023, based onthe COSO criteria.overOver Financial Reporting. Our responsibility is to express an opinion on the company’sCompany’s internal control over financial reporting based on our audit.Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.In our opinion, Delta Apparel, Inc. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of September 30, 2017, based onthe COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Delta Apparel, Inc. and subsidiaries as of September 30, 2017, and October 1, 2016, and the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for each of the two years in the period ended September 30, 2017, of Delta Apparel, Inc. and subsidiaries, and our report dated November 28, 2017, expressed an unqualified opinion thereon.GANovemberGeorgia20172023FirstOther InformationNovember 27, 2017,December 28, 2023, Delta Apparel, Inc. and its subsidiaries, M.J. Soffe, LLC, Culver City Clothing Company (f/k/a Junkfood Clothing Company), Salt Life, LLC, and DTG2Go, LLC (f/k/a Art Gun, LLC) (collectively, the “Borrowers”) entered into a FirstThirteenth Amendment to the Fifth Amended and Restated Credit Agreement with Wells Fargo Bank National Association (“Wells Fargo”(the “Agent”) and the other lenders set forth therein (the “First“Thirteenth Amendment”).(the “Amended Credit Agreement”), was filed as Exhibit 10.1 to aDelta Apparel’s Quarterly Report on Form 10-Q filed with the SEC on May 12, 2016. amends the definition of Fixed Charge Coverage Ratio within the Amended Credit Agreement to permit up to $10 million of the proceeds received from the March 31, 2017, sale of certain assets of Junkfood to be used towards share repurchases for up to one year from the date of that transaction. In addition, the definition of Permitted Purchase Money Indebtedness is amended to extend the time period within which the Borrowers may enter into capital leases and to increase the aggregate principal amount of such leases into which the Borrowers may enter to up to $15 million. The definition of Permitted Investments is also amended to permit the Borrowers to make investments in entities that are not a party to the Amended Credit Agreement in an aggregate amountwas filed as Exhibit 10.2.5 to Delta Apparel’s Annual Report on Form 10-K filed with the SEC on November 28, 2017. The Consent and Second Amendment to the Amended Credit Agreement was filed as Exhibit 10.1 to Delta Apparel’s Form 8-K filed with the SEC on March 13, 2018. The Consent and Third Amendment to the Amended Credit Agreement was filed as Exhibit 10.1 to Delta Apparel’s Form 8-K filed with the SEC on October 9, 2018. The Consent and Fourth Amendment to the Amended Credit Agreement was filed as Exhibit 10.2.8 to Delta Apparel's Annual Report on Form 10-K filed with the SEC on November 21, 2019. The Fifth Amendment to the Amended Credit Agreement was filed as Exhibit 10.1 to Delta Apparel’s Quarterly Report on Form 10-Q filed with the SEC on April 30, 2020. The Sixth Amendment to the Amended Credit Agreement was filed as Exhibit 10.1 to Delta Apparel’s Form 8-K filed with the SEC on August 31, 2020. The Seventh Amendment to the Amended Credit Agreement was filed as Exhibit 10.1 to Delta Apparel’s Form 8-K filed with the SEC on June 3, 2022. The Eighth Amendment to the Amended Credit Agreement was filed as Exhibit 10.1 to Delta Apparel’s Quarterly Report on Form 10-Q filed with the SEC on February 7, 2023. The Ninth Amendment to the Amended Credit Agreement was filed as Exhibit 10.2 to Delta Apparel’s Quarterly Report on Form 10-Q filed with the SEC on February 7, 2023. The Tenth Amendment to the Amended Credit Agreement was filed as Exhibit 10.1 to Delta Apparel’s Form 8-K filed with the SEC on March 29, 2023. The Eleventh Amendment to the Amended Credit Agreement was filed as Exhibit 10.1 to Delta Apparel’s Form 8-K filed with the SEC on October 11, 2023. The Twelfth Amendment to the Amended Credit Agreement was filed as Exhibit 10.1 to Delta Apparel’s Form 8-K filed with the SEC on December 8, 2023.upnot less than 1.00 to $2 million.1.00 if (a) Availability is less than $17,500,000 or (b) a Default or Event of Default exists; and (iii) requires that Borrowers maintain specified minimum EBITDA levels measured on a cumulative month-to-date basis through the end of the fiscal month ending March 2, 2024, and for trailing three-month periods starting March 30, 2024. The FirstThirteenth Amendment also, permits Junkfoodamong other things, removes the requirement that certain real estate transactions be consummated and also removes the occurrence of an Event of Default in the event such transactions are not consummated by certain dates.change its name.FirstThirteenth Amendment and the transactions contemplated thereby does not purport to be complete and is qualified in its entirety by reference to the text of the FirstThirteenth Amendment, which is filed herewith as Exhibit 10.2.510.2.14 to this Annual Report on Form 10-K and which is incorporated herein by reference. by the First Amendment, certain lenders thereunder have engaged in, or may in the future engage in, transactions with, and perform services for, Delta Apparel, Inc. and/or its subsidiaries in the ordinary course of business.PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE20172023 fiscal year under the headings "Proposal“Proposal No. 1: Election of Directors",Directors,” “Corporate Governance”,Governance,” and “Executive Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance.Officers.”Chief Financial Officer (who is also our principal accounting officer),officer, are required to abide by our business conduct policies so that our business is conducted in a consistently legal and ethical manner. We have adopted a code of business conduct and ethics known as our Ethics Policy Statement. The Ethics Policy Statement is available without charge on our website. In the event that we amend or waive any of the provisions of the Ethics Policy Statement applicable to our Chief Executive Officer, or Chief Financial Officer,principal accounting officer, we intend to disclose the same on our website at ITEM 11.EXECUTIVE COMPENSATION20172023 fiscal year under the headings “Compensation Discussion and Analysis”,“Executive Compensation,” “Compensation Tables,” “Compensation Committee Interlocks and Insider Participation”“Director Compensation.”“Compensation Committee Report.”ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS20172023 fiscal year under the headingheadings “Equity Compensation Plan Information” and “Stock Ownership of Management and Principal Shareholders."4, 2015,6, 2020, our shareholders re-approvedapproved the Delta Apparel, Inc. 2020 Stock Plan (“2020 Stock Plan”) to replace the 2010 Stock Plan, ("2010 Stock Plan") thatwhich was originally approvedpreviously re-approved by our shareholders on November 11, 2010.February 4, 2015, and was scheduled to expire by its terms on September 14, 2020. The re-approval of2020 Stock Plan is substantially similar in both form and substance to the 2010 Stock Plan, including the material termsPlan. The purpose of the performance goals included in the 20102020 Stock Plan enables usis to continue to grant equity incentive compensationgive our Board of Directors and its Compensation Committee the ability to offer a variety of compensatory awards that are structured in a manner intendeddesigned to qualify as tax deductible, performance-based compensation under Section 162(m)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 Internal Revenue Code of 1986. Since November 2010, no additionalauthority to determine the employees and directors to whom awards have been or willmay be granted and the size and type of each award and manner in which such awards will vest. The awards available under either the Delta Apparelplan consist of stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock, performance units, and other stock and cash awards. If a participant dies or becomes disabled (as defined in the 2020 Stock Option Plan ("Option Plan")Plan) while employed by the Company or serving as a director, all unvested awards become fully vested. The Compensation Committee is authorized to establish the Delta Apparel Incentive Stock Award Plan ("Award Plan"); instead, all stockterms and conditions of awards have been and will continue to be granted under the 20102020 Stock Plan.20102020 Stock Plan is 500,000449,714 plus any shares of common stock subject to outstanding awards under the Option Plan or Award2010 Stock Plan that are subsequently forfeited or terminated for any reason before being exercised. TheSimilar to the 2010 Stock Plan, the 2020 Stock Plan limits the number of shares that may be covered byanya given calendar year. The 2010 Stock Plan terminated and the 2020 Stock Plan became effective on February 6, 2020, the date of shareholders’ approval. On August 2, 2023, the 2020 Stock Plan was amended to require all equity awards granted after August 2, 2023, to contain a “double-trigger” vesting provision such that vesting will require both a change-in-control and an additional event such as a termination or other adverse employment action.30, 2017.Plan Category Number of securities to
be issued upon exercise of outstanding options, warrants and rights Weighted-average
exercise price of
outstanding options, warrants and rights Number of securities
remaining available for
future issuance under equity
compensation plans (excluding securities reflected in column (a)) (a) (b) (c) Equity compensation plans approved by security holders 512,856 $ 13.09 514,027 Equity compensation plans not approved by security holders 6,000 $ 8.30 — Total 518,856 $ 13.03 514,027 121,813 $ — 121,813 — — — 121,813 $ — 121,813 1312 - Stock-Based Compensation to the Consolidated Financial Statements.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE20172023 fiscal year under the headings “Related Party Transactions”heading “Corporate Governance.”"Corporate Governance".ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES20172023 fiscal year under the heading “Proposal No. 3: Ratification of Appointment of Independent Registered Public Accounting Firm”.PARTPart IVITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULESReports30, 2017,2023, and October 1, 2016.30, 2017, October 1, 2016,2023, and October 3, 2015.30, 2017, October 1, 2016,2023, and October 3, 2015.30, 2017, October 1, 2016,2023, and October 3, 2015.30, 2017, October 1, 2016,2023, and October 3, 2015.Financial Statements Schedules:The following consolidated financial statement schedule of Delta Apparel, Inc. and subsidiaries is included in Item 15(c):Schedule II — Consolidated Valuation and Qualifying Accounts2.1Amended and Restated Stock Purchase Agreement dated as of October 3, 2003, among Delta Apparel, Inc., MJS Acquisition Company, M. J. Soffe Co., James F. Soffe, John D. Soffe, and Anthony M. Cimaglia (excluding schedules and exhibits): Incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K/A filed on October 17, 2003.2.1.1First Amendment to Amended and Restated Stock Purchase Agreement dated as of November 10, 2004, among Delta Apparel, Inc., M. J. Soffe Co., James F. Soffe, John D. Soffe, and Anthony M. Cimaglia: Incorporated by reference to Exhibit 2.2.1 to the Company’s Form 10-Q filed on February 9, 2005.2.2Asset Purchase Agreement dated as of August 22, 2005, among Delta Apparel, Inc., Junkfood Clothing Company, Liquid Blaino Designs, Inc. d/b/a Junkfood Clothing, Natalie Grof, and Blaine Halvorson (excluding schedules and exhibits): Incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on August 26, 2005.2.3Asset Purchase Agreement dated as of August 17, 2006, among Delta Apparel, Inc., Fun-Tees, Inc., Henry T. Howe, James C. Poag, Jr., Beverly H. Poag, Lewis G. Reid, Jr., Kurt R. Rawald, Larry L. Martin, Jr., Julius D. Cline and Marcus F. Weibel: Incorporated by reference to Exhibit 2.1 to the Company’s Form 8-K filed on August 21, 2006.2.4Asset Purchase Agreement dated as of November 18, 2004, among Delta Apparel, Inc. and Parkdale America LLC: Incorporated by reference to Exhibit 2.3 to the Company's Form 10-Q filed on February 9, 2005.2.4.1First Amendment to Asset Purchase Agreement dated as of December 31, 2004, among Delta Apparel, Inc. and Parkdale America LLC: Incorporated by reference to Exhibit 2.3.1 to the Company's Form 10-Q filed on February 9, 2005.10.14.3See Exhibits 2.1, 2.1.1, 2.2, 2.3, 2.4, 2.4.1 and 2.5.10.2Fourth Amended and Restated Loan and Security Agreement, dated May 27, 2011, among Delta Apparel, Inc., M.J. Soffe, LLC (successor by merger to TCX, LLC), Junkfood Clothing Company, To The Game, LLC, and Art Gun, LLC, the financial institutions named therein as Lenders, Wells Fargo Bank, National Association, as Administrative Agent, BankDescription of America, N.A., as Syndication Agent, Wells Fargo Capital Finance, LLC, as Sole Lead Arranger, and Wells Fargo Capital Finance, LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Joint Bookrunners:Securities: Incorporated by reference to Exhibit 10.14.3 to the Company’sCompany's Form 8-K10-K filed on June 3, 2011.November 21, 2019. 10.2.1Consent and First Amendment to Fourth Amended and Restated Loan and Security Agreement, dated August 27, 2013, among Delta Apparel, Inc., M.J. Soffe, LLC (successor by merger to TCX, LLC), Junkfood Clothing Company, To The Game, LLC, and Art Gun, LLC, the financial institutions named therein as Lenders, Wells Fargo Bank, National Association, as Administrative Agent, Bank of America, N.A., as Syndication Agent, Wells Fargo Capital Finance, LLC, as Sole Lead Arranger, and Wells Fargo Capital Finance, LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Joint Bookrunners: Incorporated by reference to10.1 to the Company’s Form 8-K filed on August 29, 2013.2.1.10.2.2Third Amendment to Fourth Amended and Restated Loan and Security Agreement, dated September 26, 2014, among Delta Apparel, Inc., M.J. Soffe, LLC (successor by merger to TCX, LLC), Junkfood Clothing Company, To The Game, LLC, and Art Gun, LLC, the financial institutions named therein as Lenders, Wells Fargo Bank, National Association, as Administrative Agent, Bank of America, N.A., as Syndication Agent, Wells Fargo Capital Finance, LLC, as Sole Lead Arranger, and Wells Fargo Capital Finance, LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Joint Bookrunners: Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on October 1, 2014.10.2.3Fourth Amendment to Fourth Amended and Restated Loan and Security Agreement, dated February 27, 2015, among Delta Apparel, Inc., M.J. Soffe, LLC (successor by merger to TCX, LLC), Junkfood Clothing Company, To The Game, LLC, and Art Gun, LLC, the financial institutions named therein as Lenders, Wells Fargo Bank, National Association, as Administrative Agent, Bank of America, N.A., as Syndication Agent, Wells Fargo Capital Finance, LLC, as Sole Lead Arranger, and Wells Fargo Capital Finance, LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Joint Bookrunners: Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on March 4, 2015.10.2.410.2.5Runner: Incorporated by reference to Exhibit 10.2.5 to the Company’s Annual Report on Form 10-K filed on November 28, 2017. 10.310.610.5.1Delta Apparel, Inc. 2020 Stock Plan: Incorporated by reference to Exhibit 1 to the Company's Proxy Statement filed on December 17, 2019.*** November 22, 2021+ November 22, 2021.+ November 22, 2021.+ November 22, 2021.+ Employment Agreement between Delta Apparel, Inc. and Martha M. Watson dated December 31, 2015: Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on January 7, 2016.***10.9Employment Agreement between Delta Apparel, Inc. and Steven E. Cochran dated December 31, 2012: Incorporated by reference to Exhibit 10.2 to the Company's Form 8-K filed on January 3, 2013.***10.9.1Amendment to Employment Agreement between Delta Apparel, Inc. and Steven E. Cochran dated January 28, 2013: Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on January 29, 2013.***10.1110.11.110.11.210.11.310.11.410.16Form of Restricted Stock Unit and Performance Unit Award Agreement: Incorporated by reference to Exhibit 10.14 to the Company's Form 10-K filed on August 29, 2013.***10.17Form of Restricted Stock Unit Award Agreement: Incorporated by reference to Exhibit 10.16 to the Company's Form 10-K filed on December 10, 2014.***10.19Form of Performance Unit Award Agreement: Incorporated by reference to Exhibit 10.17 to the Company's Form 10-K filed on December 10, 2014.***10.2010.2110.2210.23Agreement.***16.1February 13, 2014, Correspondence from Ernst & Young LLP to SEC:Agreement: Incorporated by reference to Exhibit 16.110.23 to the Company's Annual Report on Form 8-K10-K filed on February 13, 2014.December 19, 2023. 23.2Consent of Independent Registered Public Accounting Firm.31.1______________________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.CALInline 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). **+ Portions of this exhibit (indicated therein by asterisk) have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.treatment.(c) SchedulesSee information under (a)(1) and (2)SIGNATURES(Registrant) November 28, 2017 By: /s/ Deborah H. MerrillDate12/28/23 Deborah H. Merrill Chief Financial Officer andPresident, Delta Basics/s/Robert W. Humphreys 12/28/23 Chairman and Chief Executive Officer 12/28/23 12/28/23 Sonya E. Medina Director 11/12/28/201723/s/ Robert W. HumphreysA. Alexander Taylor, II11/12/28/201723J. Bradley Campbell Robert W. HumphreysA. Alexander Taylor, IIDirector Chairman and Chief Executive Officer Sam P. CortezDr. Bill C. Hardgrave11/12/28/201723 /s/ Deborah H. Merrill11/28/2017Sam P. CortezDateDeborah H. MerrillDateDirectorChief Financial Officer andPresident, Delta Basics(principal financial and accounting officer)/s/ Elizabeth J. Gatewood11/28/2017/s/ David G. Whalen11/12/28/201723Elizabeth J. GatewoodDavid G. Whalen Director G. Jay GogueGlenda E. Hood11/12/28/201723 /s/ Robert E. Staton, Sr.11/28/2017G. Jay GogueGlenda E. HoodDate Robert E. Staton, Sr.DateDirectorDirector Director /s/ A. Alexander Taylor, II11/28/2017 A. Alexander Taylor, IIDateDirectorF-9 F-14 F-15 F-15 F-15 F-16 F-16 F-19 F-21 F-22 F-22 F-24 F-27 F-27 Note 16—Subsequent Events F-29 The and Stockholders of Delta Apparel, Inc. and subsidiariessubsidiariesSubsidiaries (the Company) as of September 30, 2017,2023 and October 1, 2016, and2022, the related consolidated statements of operations, comprehensive (loss) income, (loss),shareholders’ equity and cash flows for each of the two years in the period ended September 30, 2017. Our audits also included2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial statement schedule listedposition of the Company at September 30, 2023 and October 1, 2022, and the results of its operations and its cash flows for each of the two years in the Index at Item 15(a). period ended September 30, 2023, in conformity with U.S. generally accepted accounting principles. and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits.Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesmisstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements. An auditOur audits also includes assessingincluded evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.In our opinion,financial statements referred to above present fairly, in all material respects, the consolidated financial position of Delta Apparel, Inc. and subsidiaries at September 30, 2017, and October 1, 2016, and the consolidated results of their operations and their cash flows for each of the two years in thecurrent period ended September 30, 2017, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Delta Apparel, Inc. and subsidiaries’ internal control over financial reporting as of September 30, 2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated November 28, 2017 expressed anunqualified opinion thereon./s/ Ernst & Young LLPAtlanta, GANovember 28, 2017Report of Independent Registered Public Accounting FirmThe Board of Directors and ShareholdersDelta Apparel, Inc.:We have audited the accompanying consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows of Delta Apparel, Inc. and subsidiaries for the year ended October 3, 2015. In connection with our audit of the consolidated financial statements we also have audited financial statement schedule II listed in Section 15 (a) (2). These consolidatedthat were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and the financial statement schedule are the responsibility(2) involved our especially challenging, subjective or complex judgments. The communication of the Company’s management. Our responsibility is to express ancritical audit matters does not alter in any way our opinion on these consolidated financial statements and the financial statement schedule based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Delta Apparel, Inc. and subsidiaries for the year ended October 3, 2015, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements, taken as a whole, presents fairly, in all material respects,and we are not, by communicating the information set forth therein.(signed) KPMG LLPGreenville, South CarolinaDecember 15, 2015, except for Note 14, ascritical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.Goodwill Valuation Related to the DTG2Go Reporting Unit date is November 29, 2016Company’s auditor since 2016. $ 187 $ 300 45,130 68,215 1,350 1,402 1,388 1,969 248,538 2,542 2,755 262,962 323,179 65,611 74,109 28,697 37,897 21,694 24,026 7,822 1,342 55,464 50,275 10,082 9,886 2,967 $ $ 523,681 $ 62,085 $ 83,553 27,414 710 379 8,442 8,163 9,124 8,876 16,567 9,176 137,561 2,131 2,841 14,029 16,776 47,254 42,721 126,465 136,750 — 4,310 $ 305,043 $ 340,959 — — 96 96 61,315 61,961 133,387 166,600 — 141 (43,896 ) (45,420 ) 150,902 183,378 (707 ) (656 ) 150,195 182,722 $ 455,238 $ 523,681 September 30, 2017 October 1, 2016 Assets Cash and cash equivalents $ 572 $ 397 Accounts receivable, net 47,304 63,013 Other receivables 253 596 Income tax receivable 352 86 Inventories, net 174,551 164,247 Note receivable 2,016 — Prepaid expenses and other current assets 2,646 4,145 Total current assets 227,694 232,484 Property, plant and equipment, net 42,706 43,503 Goodwill 19,917 36,729 Intangible assets, net 16,151 20,922 Deferred income taxes 5,002 5,246 Other assets 6,332 5,768 Total assets $ 317,802 $ 344,652 Liabilities and Shareholders’ Equity Liabilities: Accounts payable $ 47,183 $ 51,395 Accrued expenses 17,704 21,706 Current portion of long-term debt 7,548 9,192 Total current liabilities 72,435 82,293 Long-term debt, less current maturities 85,306 106,603 Other liabilities 2,574 1,241 Contingent consideration 1,600 2,500 Total liabilities $ 161,915 $ 192,637 Commitments and contingencies Shareholders’ equity: Preferred stock—$0.01 par value, 2,000,000 shares authorized, none issued and outstanding — — Common stock —$0.01 par value, 15,000,000 shares authorized, 9,646,972 shares issued, and 7,300,297 and 7,609,727 shares outstanding as of September 30, 2017, and October 1, 2016, respectively 96 96 Additional paid-in capital 61,065 60,847 Retained earnings 127,358 116,679 Accumulated other comprehensive loss (35 ) (112 ) Treasury stock —2,346,675 and 2,037,245 shares as of September 30, 2017, and October 1, 2016, respectively (32,597 ) (25,495 ) Total shareholders’ equity 155,887 152,015 Total liabilities and shareholders’ equity $ 317,802 $ 344,652 $ 415,351 $ 484,859 361,338 376,016 54,013 108,843 73,749 79,455 9,200 — 506 (2,393 ) (29,442 ) 31,781 14,194 7,732 (43,636 ) 24,049 (10,372 ) 4,307 $ (33,264 ) $ 19,742 (51 ) 2 $ (33,213 ) $ 19,740 $ (4.75 ) $ 2.84 $ (4.75 ) $ 2.80 6,989 6,953 — 94 6,989 7,047 Fiscal Year Ended September 30, 2017 October 1, 2016 October 3, 2015 Net sales $ 385,082 $ 425,249 $ 449,142 Cost of goods sold 304,360 331,750 360,823 Gross profit 80,722 93,499 88,319 Selling, general and administrative expenses 67,408 76,578 81,086 Change in fair value of contingent consideration (900 ) (600 ) (500 ) Gain on sale of business (1,295 ) — (7,704 ) Other income, net (670 ) (552 ) (682 ) Restructuring costs — 1,741 — Operating income 16,179 16,332 16,119 Interest expense 5,011 5,287 6,021 Earnings before provision for income taxes 11,168 11,045 10,098 Provision for income taxes 657 2,081 2,005 Net earnings $ 10,511 $ 8,964 $ 8,093 Basic earnings per share $ 1.40 $ 1.16 $ 1.03 Diluted earnings per share $ 1.33 $ 1.12 $ 1.00 Weighted average number of shares outstanding 7,531 7,726 7,874 Dilutive effect of stock options and awards 351 253 206 Weighted average number of shares assuming dilution 7,882 7,979 8,080 $ (33,213 ) $ 19,740 (141 ) 927 $ (33,354 ) $ 20,667 Fiscal Year Ended September 30, 2017 October 1, 2016 October 3, 2015 Net earnings $ 10,511 $ 8,964 $ 8,093 Other comprehensive income (loss) related to unrealized gain (loss) on derivatives, net of income tax 77 317 (160 ) Comprehensive income $ 10,588 $ 9,281 $ 7,933 9,646,972 $ 96 $ 60,831 $ 146,860 $ (786 ) 2,672,312 $ (42,149 ) $ (658 ) $ 164,194 — — — 19,740 — — — — 19,740 — — — — 927 — — — 927 — — — — — — — 2 2 — — — — — 136,181 (3,957 ) — (3,957 ) — — (1,783 ) — — (77,184 ) 686 — (1,097 ) — — 2,913 — — — — — 2,913 9,646,972 $ 96 $ 61,961 $ 166,600 $ 141 2,731,309 $ (45,420 ) $ (656 ) $ 182,722 — — — (33,213 ) — — — — (33,213 ) — — — — (141 ) — — — (141 ) — — — — — — — (51 ) (51 ) — — (2,067 ) — — (85,357 ) 1,524 — (543 ) — — 1,421 — — — — — 1,421 9,646,972 $ 96 $ 61,315 $ 133,387 — 2,645,952 $ (43,896 ) $ (707 ) $ 150,195 Shareholders’ Equitythousands, except share amounts)thousands) $ (33,264 ) $ 19,742 12,814 12,636 2,332 2,396 392 336 (10,742 ) 2,988 (1,906 ) 1,804 1,421 2,913 121 354 1,028 — 9,200 — — (1,897 ) (1,747 ) (848 ) 23,137 (1,438 ) 38,079 (88,639 ) 151 1,593 1,422 624 (22,011 ) 30,435 (9,004 ) (415 ) (408 ) 342 202 (1,992 ) — (1,049 ) 11,217 (20,115 ) (2,821 ) (12,378 ) 31 40 4,417 — — (131 ) — (583 ) 1,627 (13,052 ) 457,949 542,613 (460,843 ) (504,851 ) (9,191 ) (7,732 ) — (3,957 ) (330 ) (890 ) (542 ) (1,092 ) (12,957 ) 24,091 (113 ) (9,076 ) 300 9,376 $ 187 $ 300 $ 13,615 $ 7,404 $ 1,387 $ 3,044 Accumulated Additional Other Common Stock Paid-In Retained Comprehensive Treasury Stock Shares Amount Capital Earnings Income (Loss) Shares Amount Total Balance at September 27, 2014 9,646,972 $ 96 $ 59,649 $ 99,622 $ (269 ) 1,769,298 $ (20,891 ) $ 138,207 Net earnings and other comprehensive loss — — — 8,093 (160 ) — — 7,933 Stock grant — — (663 ) — — (42,244 ) 208 (455 ) Stock options exercised — — (304 ) — — (17,584 ) 502 198 Reduction of tax benefits recognized from stock options — — (673 ) — — — — (673 ) Purchase of common stock — — — — — 140,336 (2,101 ) (2,101 ) Stock based compensation — — 1,390 — — — — 1,390 Balance at October 3, 2015 9,646,972 96 59,399 107,715 (429 ) 1,849,806 (22,282 ) 144,499 Net earnings and other comprehensive income — — — 8,964 317 — — 9,281 Stock grant — — (493 ) — — (30,129 ) 330 (163 ) Excess tax benefits from stock awards — — 89 — — — — 89 Purchase of common stock — — — — — 217,568 (3,543 ) (3,543 ) Stock based compensation — — 1,852 — — — — 1,852 Balance at October 1, 2016 9,646,972 96 60,847 116,679 (112 ) 2,037,245 (25,495 ) 152,015 Net earnings and other comprehensive income — — — 10,511 77 — — 10,588 Stock grant — — (1,476 ) — — (72,991 ) 639 (837 ) Stock options exercised — — (385 ) — — (30,916 ) 54 (331 ) Excess tax benefits from stock options and awards — — (89 ) 168 — — — 79 Purchase of common stock — — — — — 413,337 (7,795 ) (7,795 ) Stock based compensation — — 2,168 — — — — 2,168 Balance at September 30, 2017 9,646,972 $ 96 $ 61,065 $ 127,358 $ (35 ) 2,346,675 $ (32,597 ) $ 155,887 Consolidated Statements of Cash Flows(Amounts in thousands) Fiscal Year Ended September 30, 2017 October 1, 2016 October 3, 2015 Operating activities: Net earnings $ 10,511 $ 8,964 $ 8,093 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation 8,489 8,295 8,204 Amortization of intangibles 1,120 1,330 1,338 Amortization of deferred financing fees 323 413 517 Excess tax benefits (deficit) from stock awards and option exercises 89 (89 ) (2 ) Provision for deferred income taxes 322 2,048 786 Benefit from allowances on accounts receivable, net (544 ) (1,007 ) (175 ) Non-cash stock compensation 1,872 1,852 1,390 Change in the fair value of contingent consideration (900 ) (600 ) (500 ) Loss on disposal of equipment 65 108 29 Fixed asset impairment charge — 607 — Gain on sale of Junkfood assets after transaction costs (1,295 ) — — Gain on sale of The Game assets before transaction costs — — (8,114 ) Changes in operating assets and liabilities, net of effect of acquisitions: Accounts receivable 16,596 140 6,236 Inventories, net (13,782 ) (15,662 ) 7,730 Prepaid expenses and other current assets 863 (1,302 ) 376 Other non-current assets (894 ) (346 ) (308 ) Accounts payable (4,201 ) (2,217 ) (4,370 ) Accrued expenses (4,451 ) (420 ) 158 Income taxes (355 ) (84 ) 1,447 Other liabilities 110 170 (528 ) Net cash provided by operating activities 13,938 2,200 22,307 Investing activities: Purchases of property and equipment (7,085 ) (12,315 ) (7,773 ) Proceeds from sale of property and equipment 1 1,861 470 Proceeds from sale of Junkfood assets 26,000 — — Proceeds from sale of The Game assets — — 14,913 Cash paid for businesses, net of cash acquired — (313 ) — Net cash provided by (used in) investing activities 18,916 (10,767 ) 7,610 Financing activities: Proceeds from long-term debt 453,860 488,093 497,364 Repayment of long-term debt (476,801 ) (474,510 ) (525,125 ) Payment of capital financing (633 ) (350 ) (150 ) Payment of financing fees — (1,018 ) (42 ) Repurchase of common stock (7,938 ) (3,477 ) (2,023 ) Proceeds from exercise of stock options — — 59 Payment of withholding taxes on stock awards and option exercises (1,167 ) (163 ) (314 ) — 89 2 Net cash (used in) provided by financing activities (32,679 ) 8,664 (30,229 ) Net increase (decrease) in cash and cash equivalents 175 97 (312 ) Cash and cash equivalents at beginning of period 397 300 612 Cash and cash equivalents at end of period $ 572 $ 397 $ 300 Supplemental cash flow information: Cash paid during the period for interest $ 4,372 $ 4,273 $ 4,803 Cash paid (received) during the period for income taxes, net of refunds received $ 506 $ 308 $ (328 ) Non-cash financing activity—shortfall to excess tax benefit pool $ — $ — $ 673 Non-cash financing activity—capital lease agreement $ 2,347 $ 781 $ — Accrued capital expenditures $ — $ 1,615 $ — See accompanying Notes to Consolidated Financial Statements.Delta Apparel, Inc. and Subsidiaries30, 2017NOTE Note 1—THE COMPANYana vertically-integrated, international apparel company. With approximately 6,800 employees worldwide, we design, marketing, manufacturingmanufacture, source, and sourcing company that featuresmarket a diverse portfolio of core activewear and lifestyle basicsapparel products under our primary brands of Salt Life®, Soffe®, and branded activewear apparel, headwearDelta. We are a market leader in the on-demand, digital print and related accessory products.fulfillment industry, bringing DTG2Go’s proprietary technology and innovation to our customers’ supply chains. We specialize in selling casual and athletic products through a variety of distribution channels and distribution tiers, including department stores, midoutdoor and mass channels, e-retailers, sporting goods and outdoor retailers, independent and specialty stores, department stores and mid-tier retailers, mass merchants and eRetailers, the U.S. military.military, and through our business-to-business digital platform. Our products are also made available direct-to-consumer on our websitesecommerce sites and in our branded retail stores. We believe thisOur diversified distribution allowsgo-to-market strategies allow us to capitalize on our strengths to provide casualour activewear and lifestyle apparel products to consumers purchasing from most types of retailers. whichwith more than 90% of the apparel that we sell sewn in our own facilities. This allows us to offer a high degree of consistency and quality, controls as well as leverage scale efficiencies. One of our strengths isefficiencies, and react quickly to changes in trends within the speed with which we can reach the market from design to delivery.NOTE Note 2—SIGNIFICANT ACCOUNTING POLICIESsubsidiaries.subsidiaries, as well as its majority-owned subsidiary, Salt Life Beverage, LLC (“Salt Life Beverage”). All significant intercompany accounts and transactions have been eliminated in consolidation. We apply the equity method of accounting for investments in companies where we have less than a 50% ownership interest and over which we exert significant influence. We do not exercise control over these companies and do not have substantive participating rights. As such, these entities are not considered variable interest entities.basicsDelta Group and branded.Salt Life Group. Although the two segments are similar in their production processes and regulatory environments, they are distinct in their economic characteristics, products, marketing, and distribution methods.52-5352- or 53- week fiscal year ending on the Saturday closest to September 30. The 2017All references to “2023” and 2016“2022” relate to the 52-week fiscal years were 52-week years thatyear ended on September 30, 2017, 2023, and the 52-week fiscal year ended on October 1, 2016, respectively. The 2015 fiscal year was a 53-week year that ended on October 3, 2015.U.S. generally accepted accounting principlesGAAP requires management to make certain estimates and assumptions that affect the reported amounts and disclosures of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates are adjusted to reflect actual experience when necessary. Significant estimates and assumptions affect many items in our financial statements; for example:statements, such as allowance for doubtful trade receivables, sales returns and allowances,accounts receivable, refund liabilities, inventory obsolescence, the carrying value of goodwill, income tax assets, and their related valuation allowance. Our actual results may differ from our estimates.consistsconsist of cash and temporary investments with original maturities of three months or less.allowances which include allowance for doubtful accounts, returns and allowances. The reserves for allowances were $1.4 million and $2.0 million as of September 30, 2017, and October 1, 2016, respectively.collectibilitycollectability of our accounts receivable and establish an allowance for doubtful accounts based upon this assessment. In situations where we are aware of a specific customer’s inability to meet its financial obligation, such as in the case of a bankruptcy filing, we assess the need for a specific reserve for bad debts is recorded against amounts due to reduce the net recognized receivable to the amount reasonably expected to be collected. For all other customers, reservesdebts. Reserves are determined through analysis of the aging of accounts receivable balances, historical bad debts, customer concentrations, customer credit-worthiness, current economic trends and changes in customer payment terms. In addition, reserves are established for other concessions that have been extended to customers, including advertising, markdowns and other accommodations, net of historical recoveries. These reserves are determined based upon historical deduction trends and evaluation of current market conditions. Bad debt expense was less than 1% of net sales in each of fiscal years 2017, 2016,the twelve months ended September 2023 and 2015.2022.marketnet realizable value, which approximates inventory cost, using the first-in, first-outfirst-in, first-out method. Inventory cost includes materials, labor and manufacturing overhead on manufactured inventory, and all direct and associated costs, including inbound freight, to acquire sourced products. See Note 2(y)2 for further information regarding yarn procurements. We regularly review inventory quantities on hand and record reserves for obsolescence, excess quantities, irregulars and slow-moving inventory based on historical selling prices, current market conditions, and forecasted product demand to reduce inventory to its net realizable value.AssetsRight of use assets that we acquire under non-cancelable leases that meet the criteria of capitalfinance leases are capitalized in property, plant and equipment and amortized over the useful lives of the related assets. When we retire or dispose of assets, the costs and accumulated depreciation or amortization are removed from the respective accounts, and we recognize any related gain or loss. Repairs and maintenance costs are charged to expense whenexpensed as incurred. Major replacements that substantially extend the useful life of an asset are capitalized and depreciated.Costs.FASB Codification No. 350-40, ASC 350-40,Intangibles-Goodwill and Other, Internal-Use Software. After technical feasibility has been established, we capitalize the cost of our software development process, including payroll and payroll benefits, by tracking the software development hours invested in the software projects. We amortize our software development costs in accordance with the estimated economic life of the software, which is generally three to ten years.FASB Codification No. ASC 360,Property, Plant, and Equipment, we determine whether the carrying value of any of our long-lived assets, are reviewedincluding amortizable intangibles other than goodwill, is impaired. We review long-lived assets for impairment wheneverwhen events or changes in circumstances indicate that the carrying amount of the long-lived assets may might not be recoverable. When evaluating assetsIf we determine that indicators of impairment are present, we determine whether the estimated undiscounted cash flows for potential impairment, we comparethe potentially impaired asset group are less than the carrying amountvalue. This requires management to estimate future cash flows through operations over the remaining useful life of the asset and its ultimate disposition. The assumptions we use to the undiscountedestimate future net cash flows expectedare consistent with the assumptions we use for internal planning purposes, updated to be generated byreflect current expectations. If our estimated undiscounted cash flows do not exceed the asset. If impairment is indicated,carrying value, we estimate the asset is permanently written down to its estimated fair value (based upon future discounted cash flows)of the assets and record an impairment losscharge if the carrying value is recognized.in conjunction with the acquisitionsas a result of Salt Life, Junkfood, Art Gun, and Coast. On March 31, 2017, we sold the Junkfood business to JMJD Ventures, LLC. See Note 3—Divestitures for further information on this transaction.several acquisitions. Intangible assets are amortized based on their estimated economic lives, ranging from four to twenty years. Goodwill represents the excess of the purchase price over the fair value of net identified tangible and intangible assets acquired and liabilities acquired,assumed and is not amortized. The total amount of goodwill is expected to be deductible for tax purposes. See Note 76 — Goodwill and Intangible Assets for further details. We As set forth in ASC 350,Intangibles — Goodwill and Other, we evaluate the carrying value of goodwill annually or more frequently, if events or circumstances indicate that an impairment loss may have occurred. Such circumstances could include, but are not limited to, a significant adverse change in business climate, increased competition or other economic conditions.quarter. Wequarter and whenever events or changes in circumstances indicate the carrying value may not be recoverable. ASC 350 allows an optional one-step qualitative assessment, prior to a quantitative assessment test, to determine whether it is “more likely than not” that the estimate fair value of the applicablea reporting unit exceeds its carrying amount. We assess the value of our goodwill under either a qualitative or quantitative approach. using a discounted cash flow methodology. This methodology represents a level 3compared to its fair value measurement as defined under ASC 820, Fair Value Measurementswell as events and Disclosures, since the inputschanges in circumstances that could include, but are not readily observable limited to, a significant adverse change in customer demand or business climate, an adverse action or assessment by a regulator, and significant adverse changes in the marketplace. The goodwillprice of the Company’s common stock. If such qualitative assessment indicates that impairment testingmay have occurred, an additional quantitative assessment is performed by comparing the carrying value of the assets to their respective estimated fair values.involves the use of significant assumptions, estimates and judgments with respect to a variety of factors, includinginclude, among other items, sales, gross margins, selling, general and administrative expenses, capital expenditures, cash flows and the selection of an appropriate discount rate, all of which are subject to inherent uncertainties and subjectivity. WhenThe assumptions we perform goodwill impairment testing, ouruse to estimate future cash flows are consistent with the assumptions are based onthat the reporting units use for internal planning purposes, including annual business plans and other forecasted results,forecasts, which we believe represent thosewould be generally consistent with that of a market participant. We select a discount rate, which is used to reflect market-based estimates ofIf we determine that the risks associated with the projected cash flows, based on the best information available as of the date of the impairment assessment. Based on the annual impairment analysis, there is not an impairment on the goodwill associated with Salt Life, the only goodwill recorded on our financial statements.Given the current macro-economic environment and the uncertainties regarding its potential impact on our business, there can be no assurance that our estimates and assumptions used in our impairment tests will prove to be accurate predictions of the future. If our assumptions regarding forecasted cash flows are not achieved, it is possible that an impairment review may be triggered and goodwill may be impaired.(l) Contingent Consideration: At the end of each reporting period, we are required to remeasure the fair value of the contingent consideration related to the Salt Life and Art Gun acquisitions in accordance with FASB Codification No. 805, Business Combinations (“ASC 805”). Based on the operating results and projections, we analyzed the fair value of the contingent consideration for Salt Life as of September 30, 2017. The estimated fair value of the contingent considerationreporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired. If we determine that the carrying value of the reporting unit exceeds its estimated fair value, we measure the goodwill impairment charge based on the excess of a reporting unit’s carrying amount over its estimated fair value, but not in excess of the total amount of goodwill allocated to the respective reporting unit, as required under Accounting Standards Update (“ASU”) 2017-04,Simplifying the Test for Salt Life was $1.6 million and $2.5 million at September 30, 2017, and October 1, 2016, respectively. The Art Gun contingent consideration agreement concluded duringGoodwill Impairment.20172023 as part of the annual impairment test, the Company quantitatively and no contingent considerationqualitatively assessed whether it was paid.(m) Self-Insurance Reserves: Prior to January 1, 2015, our medical, prescription and dental care benefits were primarily self-insured. Effective January 1, 2015, our medical and prescription benefits became fully insured, but our dental insurance remained self-insured. Our prior self-insurance accrualsmore likely than not that goodwill was impaired. Based on this assessment, the Company determined that its goodwill was not impaired as of April 2, 2023. Management’s estimates for the assumptions used in the annual impairment test were based on claims filedinformation known at the time of the impairment test.claims incurred but not reported. We develop estimates of claims incurred but not reported based upon the historical time it takes forCompany’s reporting units and could result in additional impairment charges in a claim to be reported and paid, and historical claim amounts. Self-insurance reserves were less than $0.1 million as of September 30, 2017, and October 1, 2016.(n)future period.Revenues from product sales are Revenue is recognized when ownershipperformance obligations under the terms of the contracts are satisfied. Our performance obligation primarily consists of transferring control of our products to our customers. Control is transferred upon providing the products to customers in our retail stores, upon shipment of our products to consumers from our ecommerce sites, and upon shipment from our distribution centers to our customers in our wholesale operations. Once control is transferred to the customer, we have completed our performance obligation.includes may not have occurred, we estimate such discounts, allowances, and returns that we expect to provide.passageextent that it is probable that we will not recognize a significant reversal of title, but alsorevenue due to the resolution of variable uncertainties at the time of sale. In determining our estimates for discounts, allowances, chargebacks, and returns, we consider historical and current trends, agreements with our customers and retailer performance. We record these discounts, returns and allowances as a reduction to net sales in our Consolidated Statements of Operations and as a refund liability in our accrued expenses in our Consolidated Balance Sheets, with the estimated value of inventory expected to be returned in prepaid and other current assets in our Consolidated Balance Sheets. As of September 2023, and September 2022, there was $0.8 million and $1.1 million, respectively, in refund liabilities for customer returns, allowances, markdowns and discounts included within accrued expenses.the risk of loss related to the product. At this point, the sales price is fixed and determinable,goods, and we are reasonably assureddo not adjust receivable amounts for the impact of the collectibilitytime value of money. We do not capitalize costs of obtaining a contract which we expect to recover, such as commissions, as the amortization period of the sale. The majority of our sales are shipped FOBasset recognized would be one year or Ex Worksshipping point and revenue is therefore recognized when the goods are shipped to the customer. For sales that are shipped FOB or Ex Works destination point, we do not recognize the revenue until the goods are received by the customer. Shipping and handling charges billed to our customers are included in net revenue and the related costs are included in cost of goods sold. Revenues are reported on a net sales basis, which is computed by deducting product returns, discounts and estimated returns and allowances. We estimate returns and allowances on an ongoing basis by considering historical and current trends.Royalty revenue is primarily derived from royalties paid to us by licensees of our intellectual property rights, which include, among other things, trademarks and copyrights. We execute license agreements with our licensees detailing the terms of the licensing arrangement. Royalties are generally recognized upon receipt of the licensees' royalty report in accordance with the terms of the executed license agreement and when all other revenue recognition criteria have been met.(o)less.(p)cost,costs, manufacturing labor costs, purchasing costs, inbound freight charges, insurance, inventory write-downs, and depreciation and amortization expense associated with our manufacturing and sourcing operations. Our gross margins may not be comparable to other companies, since some entities may include costs related to their distribution network in cost of goods sold, and we excludeinclude them from gross margin, including them instead in selling, general and administrative expenses.$14.6 million, $15.1$21.4 million and $16.8$22.2 million in fiscal years 2017, 2016,2023 and 2015,2022, respectively. In addition, selling, general and administrative expenses include costs related to sales associates, administrative personnel, cost, advertising and marketing expenses, royalty payments on licensed products, and other general and administrative expenses.(r)yearperiod in which they are incurred and are included in selling, general and administrative expenses in the Consolidated Statements of Operations. We participate in cooperative advertising programs with some of our customers. Depending on the customer, our defined cooperative programs allow the customer to use from 2% to 5% of its net purchases from us towards advertisements of our products. Because our products are being specifically advertised, we are receiving an identifiable benefit resulting from the consideration for cooperative advertising. Therefore, pursuant to FASB Codification No. 605-50, Revenue Recognition, Customers Payments and Incentives, weWe record cooperative advertising costs as a selling expense and the related cooperative advertising reserve as an accrued liability. Advertising costs totaled $4.6 million, $4.4$6.3 million and $4.7$5.6 million in fiscal years 2017, 2016,2023 and 2015,2022, respectively. IncludedIn 2023 and 2022, cooperative advertising costs of $0.6 million and $0.7 million, respectively, were included in these costs were $1.1 million in fiscal years 2017, 2016, and 2015 related to our cooperative advertising programs.(s)costs. cost is accounted for under the provisions of FASB Codification No. ASC 718,Compensation – Stock Compensation, (“ASC 718”), the Securities and Exchange Commission Staff Accounting Bulletin No. 107 ("SAB 107"), and the Securities and Exchange Commission Staff Accounting Bulletin No. 110 ("SAB 110"). ASC 718 which requires all stock-based payments to employees, including grants of employee stock options,awards, to be recognized as expense over the vesting period using a fair value method. The fair value of our restricted stock awards is the quoted market value of our stock on the grant date. For performance-based stock awards, in the event we determine it is no longer probable that we will achieve the minimum performance criteria specified in the award, we reverse all of the previously recognized compensation expense in the period such a determination is made. We recognize the fair value, net of estimated forfeitures, as a component of selling, general and administrative expense in the Consolidated Statements of Operations over the vesting period. We early adopted ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, (ASU 2016-09). For more information, see (aa) Recently Adopted Accounting Pronouncements within Note 2 — Significant Accounting Policies.(t)andas well as operating loss, interest deduction limitations, and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.(u) We generally recognize interest and penalties related to unrecognized tax benefits in income tax expense and there were no material interest and penalties recognized in fiscal year 2023 or 2022.("EPS"(“EPS”) by dividing net income by the weighted average number of common shares outstanding during the year pursuant to FASB Codification No. ASC 260,Earnings Per Share (“ASC 260”). Basic EPS includes no dilution. Diluted EPS is calculated, as set forth in ASC 260, by dividing net income by the weighted average number of common shares outstanding adjusted for the issuance of potentially dilutive shares. PotentialPotentially dilutive shares consist of common stock issuable under the assumed exercise of outstanding stock options and awards using the treasury stock method. This method as required by ASC 718, assumes that the potential common shares are issued and the proceeds from the exercise, along with the amount of compensation expense attributable to future services, are used to purchase common stock at the exercise date. The difference between the number of potential shares issued and the number of shares purchased is added as incremental shares to the actual number of shares outstanding to options and awards that result in lower potential shares issued than shares purchased under the treasury stock method are not included in the computation of diluted EPS since their inclusion would have an anti-dilutive effect on EPS.(v)and expensenet in the Consolidated Statements of Operations. These gains and losses are immaterial for all periods presented.(w)(x)Income (Loss):Comprehensive Income (Loss)comprehensive income consists of net earnings (loss) and unrealized gains (losses) from cash flow hedges, net of tax. Accumulated other comprehensive lossincome contained in the shareholders’ equity section of the Consolidated Balance Sheets was $35 thousand and $0.1 million as of September 30, 2017, and October 1, 2016, respectively, and was related to interest rate swap agreements.(y)agreements and, due to our final interest rate swap agreement maturing during fiscal year 2023, was zero as of September 2023 and a gain as of September 2022 $0.1 million. Any income tax effects released are included in accumulated other comprehensive and were immaterial for fiscal years 2023 and 2022.until that has been in place since 2005, with our existing agreement running through December 31, 2018.2024. Under the supply agreement, we purchase from Parkdale all of our yarn requirements for use in our manufacturing operations, excluding yarns that Parkdale does not manufacture or cannot manufacture due to temporary capacity constraints. The purchase price of yarn is based upon the cost of cotton plus a fixed conversion cost. Thus, we are subject to the commodity risk of cotton prices and cotton price movements, which could result in unfavorable yarn pricing for us. We fix the cotton prices as a component of the purchase price of yarn, pursuant to the supply agreement, in advance of the shipment of finished yarn from Parkdale. Prices are set according to prevailing prices, as reported by the New York Cotton Exchange, at the time we elect to fix specific cotton prices.FASB Codification No. ASC 815, (“ASC 815”), as amended. ASC 815 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and hedging activities. It requires the recognition of all derivative instruments as either assets or liabilities in the Consolidated Balance Sheets and measurement of those instruments at fair value. The accounting treatment of changes in fair value depends upon whether or not a derivative instrument is designated as a hedge and, if so, the type of hedge. We include all derivative instruments at fair value in our Consolidated Balance Sheets. For derivative financial instruments related to the production of our products that are not designated as a hedge, we recognize the changes in fair value in cost of sales. For derivatives designated as cash flow hedges, to the extent effective, we recognize the changes in fair value in accumulated other comprehensive income (loss) until the hedged item is recognized in income. Any ineffectiveness in the hedge is recognized immediately in income in the line item that is consistent with the nature of the hedged risk. We formally document all relationships between hedging instruments and hedged items, as well as risk management objectives and strategies for undertaking various hedge transactions, at the inception of the transactions.well establishedwell-established institutions, and, therefore, we believe the counterparty credit risk is minimal. significant raw material option agreements that were purchased during fiscal years 2017, 2016,outstanding at September 2023 or 2015.September 2013,January 2018, Delta Apparel, Inc. established Salt Life Beverage, of which Delta Apparel, through its subsidiary, holds a 60% ownership interest. Salt Life Beverage was formed to manufacture, market and sell Salt Life-branded alcoholic beverage products. We have concluded we entered into fourhave a controlling financial interest rate swap agreements, as follows:Effective DateNotationalAmountLIBOR RateMaturity DateInterest Rate SwapSeptember 9, 2013$15 million1.1700%September 9, 2016Interest Rate SwapSeptember 9, 2013$15 million1.6480%September 11, 2017Interest Rate SwapSeptember 19, 2013$15 million1.0030%September 19, 2016Interest Rate SwapSeptember 19, 2013$15 million1.4490%September 19, 2017During fiscal years 2017, 2016,in Salt Life Beverage and have consolidated its results in accordance with Accounting Standards Codification (“ASC”) ASC-810,Consolidations, and ASU No.2015 these-02, Consolidation (Topic 810); Amendments to Consolidations. The non–controlling interest rate swap agreements had minimal ineffectivenessrepresents the 40% proportionate share of the results of Salt Life Beverage. All significant intercompany accounts and were considered highly-effective hedges.In July 2017, we entered into two interest rate swap agreements, as follows:Effective DateNotationalAmountLIBOR RateMaturity DateInterest Rate SwapJuly 19, 2017$10 million1.7400%July 19, 2019Interest Rate SwapJuly 19, 2017$10 million1.9900%May 10, 2021During fiscal year 2017, these interest rate swap agreements had minimal ineffectivenesstransactions have been eliminated in consolidation. were considered highly effective hedges.Theliabilities assumed, including contingencies, to be recorded at the fair value determined at the acquisition date and changes thereafter recorded in income. We generally obtain independent third-party valuation studies for certain assets acquired and liabilities assumed to assist us in determining the fair value. Goodwill represents the purchase price over the fair value of tangible and intangible assets acquired and liabilities assumed. The results of acquired businesses are included in our results of operations from the interest rate swap agreements resulted in AOCI gains, netdate of taxes, of $0.1 million and $0.3 million for the years ended September 30, 2017, and October 1, 2016, respectively, and an AOCI loss, net of taxes, of $0.2 million for the year ended October 3, 2015. See Note 16(d) - Derivatives for further details.(aa)acquisition.March 2016, January 2017, the FASB issued ASU No. 2016-09, Improvements2017-04,Simplifying the Test for Goodwill Impairment, which amends the guidance in ASC 350,Intangibles – Goodwill and Other. The ASU eliminates the requirement to Employee Share-Based Paymentcalculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. We adopted ASU 2017-04 as of the beginning of fiscal year 2021, and the provisions did not have a material effect on our financial condition, results of operations, cash flows, or disclosures.(for Income Taxes (“ASU 2016-09). ASU 2016-092019-12”), which simplifies variousthe accounting for income taxes, eliminates certain exceptions within Accounting Standards Codification (“ASC”) 740, Income Taxes, and clarifies certain aspects of accounting for share-based payment transactions. The most significant change from this update amends the presentation of excess tax benefits and deficiencies incurrent guidance to promote consistency among reporting entities. Most amendments within the financial statements by eliminating tax pools and requiring these benefits and deficienciesstandard are required to be reflected inapplied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. We adopted ASU 2019-12 as of the income statement. It also allows employer withholdingbeginning of fiscal year 2022, and the provisions did not have a material effect on share based compensation upour financial condition, results of operations, cash flows, or disclosures.the maximum statutory rate without the possibility of triggering liabilityease potential accounting and allows companies to make a policy election as it relates to forfeitures. Additionally,financial reporting impacts of reference rate reform, including the ASU provides definitive guidance related to presentation of income tax benefit/deficiencies as an operating activity and payment of taxes for employee withholding from stock compensation as a financing activity within the Consolidated Statements of Cash Flows. ASU 2016-09 was adopted in our fiscal year beginning October 2, 2016, and we have elected to continue our policy of estimating forfeitures. As a result of this adoption, we recalculated previously released diluted earnings per share with updated calculations depicted in Note 17—Quarterly Financial Information. This resultedexpected transition from the exclusionLondon 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 excess tax benefits and tax deficiencies fromdebt securities classified as held-to-maturity. Entities may apply the calculationprovisions of assumed proceeds. Diluted earnings per share declined $0.01 per share inthe new standard at the beginning of the reporting period when the election is made. This guidance may be applied through December 31, 2024. The Company transitioned its LIBOR based loans to an alternative reference rate during the fiscal year. This change did not have a material effect on our March and June fiscal quarters and remained unchanged in our December quarter.(ab)financial condition, results of operations, cash flows or disclosures. See Note 8—Long-Term Debt for further information. May 2014, June 2016, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers2016-13,Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), ("ASU 2014-09"). This new guidancewhich requires an entity to recognizeassess impairment of its financial instruments based on the amount entity's estimate of revenueexpected credit losses. Since the issuance of ASU 2016-13, the FASB released several amendments to which it expects to be entitled forimprove and clarify the transferimplementation 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 promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. ASU 2014-09 isASC 326 are effective for annual periodsas of the beginning after December 15, 2017, for public business entities and permits the use of either the retrospective or cumulative effect transition method. Early application is permitted only for annual reporting periods beginning after December 15, 2016. ASU 2014-09 will therefore be effective in our fiscal year beginning September 30, 2018. Although we2024. We have not yet determined our adoption method, we have identified a committee, agreed on a methodology for reviewpreliminary evaluated the impacts of our revenue arrangements and initiated the review process for adoptionprovisions of this ASU, and are evaluating the effect that ASU 2014-09 will haveASC 326 on our Consolidated Financial Statementsfinancial condition, results of operations, cash flows, and related disclosures.In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, ("ASU 2015-11"). This new guidance requires an entity to measure inventory at the lower of costdisclosures, and net realizable value. Currently, entities measure inventory at the lower of cost or market. ASU 2015-11 replaces market with net realizable value. Net realizable valuedetermined there is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured under last-in, first-out or the retail inventory method. ASU 2015-11 requires prospective adoption for inventory measurements for fiscal years beginning after December 15, 2016, and interim periods within those years for public business entities. Early application is permitted. ASU 2015-11 will therefore be effective in our fiscal year beginning October 1, 2017. We are evaluating the effect that ASU 2015-11 will have on our Consolidated Financial Statements and related disclosures, but do not believe it will have a material impact.In February 2016, the FASB issued ASU No. 2016-02, Leases, (ASU 2016-02). ASU 2016-02 requires lessees to recognize assetsliabilities for most leases. All leases will be required to be recorded on the balance sheet with the exception of short-term leases. Earlyapplication is permitted. The guidance must be adopted using a modified retrospective approach for leases that exist orretail stores which are entered into after the beginning of the earliest comparative period in the financial statements. ASU 2016-02 is effective for financial statements issued for annual periods beginning after December 15, 2018, and interim periods within those annual periods. ASU 2016-02 will therefore be effective in our fiscal year beginning September 29, 2019. We are evaluating the effect that ASU 2016-02 will have on our Consolidated Financial Statements and related disclosures.NOTE 3—DIVESTITURESJunkfood DivestitureOn March 31, 2017, we completed the sale of our Junkfood business to JMJD Ventures, LLC for $27.9 million. The business sold consisted of vintage-inspired Junk Food branded and private label products sold in the United States and internationally. We received cash at closing of $25.0 million and recorded a $2.9 million note receivable with payments due between June 30, 2017, and March 30, 2018. The note receivable was amended on June 29, 2017, to revise the repayment schedule for payments to be made between September 29, 2017, and March 30, 2018.We realized a $1.3 million pre-tax gain on the sale of the Junkfood business resulting from the proceeds of $27.9 million less the costs of assets sold and other expenses, and less direct selling costs associated with the transaction. The pre-tax gain was recorded in the Condensed Consolidated Statement of Operations as Gain on sale of business.The Game DivestitureOn March 2, 2015, we completed the sale of our The Game branded collegiate headwear and apparel business to David Peyser Sportswear, Inc., owner of MV Sport, Inc., for $14.9 million. The business sold consisted of The Game branded products sold nationally in college bookstores and through team dealers. This transaction further strengthened our balance sheet and enabled us to focus on areas of our business that are more strategic to our long-term goals. Our Salt Life business and corporate business, Kudzu, previously operated within To The Game, LLC (now Salt Life, LLC) were not included in the sale of the collegiate part of the business.The sale included finished goods inventory of $6.0 million, $0.4 million in fixed assets, and $0.1 million in other assets, along with the requirement that we indemnify up to $0.3 million of legal costs associated with a particular litigation matter which was subsequently settled. The transaction did not include accounts receivable which we subsequently collected in the normal course of business, and certain undecorated apparel inventory. We incurred $0.4 million in direct selling expenses associated with the transaction. In addition, we incurred certain indirect costs associated with the transaction, including a $0.8 million devaluation of the inventory not included in the sale and $1.4 million in indirect incentive-based expenses.The pre-tax gain on the sale of The Game assets, inclusive of the direct and indirect expenses, was $5.6 million. The transaction and associated indirect expenses were recorded in our Consolidated Statements of Operations inOperations. The table below identifies the year ended October 3, 2015, as follows: (i) proceedsamount and percentage of $14.9 million less costs of assets sold and direct selling costs resulting in a gain of $7.7 million recorded as a gain on sale of business; (ii) $1.4 million in indirect expenses recorded in our selling, general and administrative expense; and (iii) $0.8 million of indirect expenses recorded in our cost of goods sold.NOTE 4—RESTRUCTURING PLANOn May 10, 2016, in connection with certain strategic manufacturing initiatives, we announced plans to restructure our manufacturing operations with the closing of our textile manufacturing facility in Maiden, North Carolina, the consolidation of sew facilities in Mexico,net sales by distribution channel (in thousands): September 2022 $ $ $ 16,478 $ 13,970 3 6,141 2 4,647 1 392,732 94 466,242 96 $ 415,351 100 $ 484,859 100 expansionpercentage of production at our lower-cost Ceiba Textiles facility in Honduras. In September 2016, we sold the Maiden facility real estate and certain machinery, equipment and supply parts used in the Maiden facilitynet sales by distribution channel for approximately $1.7 million. As parteach reportable segment: $ 356,336 0.0 0.3 99.7 59,015 27.7 8.7 63.6 $ 415,351 $ 424,799 0.1 0.3 99.6 60,060 22.6 5.6 71.8 $ 484,859 Fiscal Year Ended October 1, 2016 Excess manufacturing costs related to the shutdown and start-up operations $ 1,096 Total expenses included in cost of goods sold 1,096 Employee termination costs 597 Fixed asset impairment 607 Inventory and supply part impairment 144 Other costs to exit facility 393 Total restructuring costs 1,741 Total manufacturing realignment expenses $ 2,837 All of these expenses were recorded in our basics segment. We did not incur any significant additional costs related to the manufacturing initiative in fiscal year 2017. We paid $0.1 million and $0.4 million in employee termination benefits in fiscal years 2017 and 2016, respectively.NOTE 5—INVENTORIES9.815.8 million and $8.8$17.7 million as of September 30, 2017, 2023, and October 1, 2016, September 2022, respectively, consist of the following (in thousands): September 30,
2017 October 1,
2016Raw materials $ 8,973 $ 11,442 Work in process 18,543 18,158 Finished goods 147,035 134,647 $ 174,551 $ 164,247 $ 20,262 $ 22,603 17,695 23,501 174,408 202,434 $ 212,365 $ 248,538 basics segment,Delta Group, undecorated garments for the Art GunDTG2Go business, and direct embellishment materials for the branded segment. The fiscal year ended October 1, 2016, included $2.6 million of raw materialsSalt Life Group.$1.7 million of finished goods related to the since-divested Junkfood business.NOTE 6—PROPERTY, PLANT AND EQUIPMENTeconomicestimated useful life data): Estimated Useful Life (in years) 25 $ 636 $ 636 20 4,041 4,002 10 129,193 128,937 3-10 25,128 24,420 7 13,308 12,410 3-10 8,055 7,876 5 467 494 N/A 3,511 3,899 184,339 182,674 (118,728 ) (108,565 ) $ 65,611 $ 74,109 September 30,
2017 October 1,
2016Land and land improvements 25 years $ 572 $ 572 Buildings 20 years 2,989 3,369 Machinery and equipment 10 years 75,838 72,068 Computers and software 3-10 years 20,128 20,889 Furniture and fixtures 7 years 2,251 1,977 Leasehold improvements 3-10 years 5,275 3,686 Vehicles and related equipment 5 years 791 808 Construction in progress N/A 3,035 3,719 110,879 107,088 Less accumulated depreciation and amortization (68,173 ) (63,585 ) $ 42,706 $ 43,503 NOTE 7—GOODWILL AND INTANGIBLE ASSETS $ 18,592 $ (9,812 ) $ 8,780 $ 18,592 $ (612 ) $ 17,980 N/A 19,917 - 19,917 19,917 - 19,917 N/A $ 38,509 $ (9,812 ) $ 28,697 $ 38,509 $ (612 ) $ 37,897 $ 16,000 $ (5,384 ) $ 10,616 $ 16,000 $ (4,851 ) $ 11,149 7,400 (3,953 ) 3,447 7,400 (3,213 ) 4,187 10,083 (3,509 ) 6,574 10,083 (2,610 ) 7,473 2,100 (1,043 ) 1,057 2,100 (940 ) 1,160 1,657 (1,657 ) - 1,657 (1,600 ) 57 $ 37,240 $ (15,546 ) $ 21,694 $ 37,240 $ (13,214 ) $ 24,026 September 30, 2017 October 1, 2016 Cost Accumulated Amortization Net Value Cost Accumulated Amortization Net Value Economic Life Goodwill $ 19,917 $ — $ 19,917 $ 36,729 $ — $ 36,729 N/A Intangibles: Tradename/trademarks $ 16,090 $ (2,193 ) $ 13,897 $ 17,620 $ (2,514 ) $ 15,106 20 - 30 yrs Customer relationships — — — 7,220 (4,016 ) 3,204 20 yrs Technology 1,220 (947 ) 273 1,220 (826 ) 394 10 yrs License Agreements 2,100 (423 ) 1,677 2,100 (320 ) 1,780 15 - 30 yrs Non-compete agreements 1,037 (733 ) 304 1,287 (849 ) 438 4 – 8.5 yrs Total intangibles $ 20,447 $ (4,296 ) $ 16,151 $ 29,447 $ (8,525 ) $ 20,922 20112023, the Company recorded a goodwill impairment charge of $0.6 million. The goodwill recorded on our financial statements is all included in the branded segment. Goodwill was reduced by $16.8$9.2 million associated with the Junkfood divestiture. The saleDTG2Go reporting unit. This impairment resulted from an interim impairment assessment of Junkfood, completedDTG2Go goodwill, which we were required to perform in the fourth quarter of fiscal year 2023 due to the adverse impact of the market conditions on March 31, 2017, includedour current year profitability and estimated future business results and cash flows, as well as the significant decrease in our market capitalization because of a sustained decline in our common stock price. Refer to Note 2 – Significant Accounting Policies for further discussion of this impairment.netamortization is recorded under cost of accumulated amortization, consisting of trademarks of $0.6 milliongoods sold or selling, general and customer relationships of $3.0 million. In August 2016, we acquired substantially all of the assets of Coast Apparel, LLC for $313 thousand, which resulted in additional intangible assets of $0.1 million.$1.1$2.3 million for the year ended September 30, 20172023, and $1.3$2.4 million for each of the yearsyear ended October 1, 2016, and October 3, 2015September 2022. Amortization expense is estimated to be approximately $0.9$2.3 million for each of fiscal years 2018 and 2019, the year ended September 2024, approximately $0.7$2.2 million for fiscal year 2020, the years ended September 2025 and 2026, approximately $2.0 million for the years ended September 2027, and approximately $0.6$1.5 million for each of fiscal years 2021 and 2022.the year ended September 2028.NOTE 8—ACCRUED EXPENSES $ 12,119 $ 18,550 1,667 1,856 759 1,067 625 2,272 - 174 - 500 1,216 613 1,850 2,382 $ 18,236 $ 27,414 September 30,
2017 October 1,
2016Accrued employee compensation and benefits $ 12,683 $ 12,899 Taxes accrued and withheld 931 1,003 Accrued insurance 126 263 Accrued advertising 524 256 Accrued royalties 113 1,653 Accrued commissions 327 460 Accrued freight 1,060 1,105 Other 1,940 4,067 $ 17,704 $ 21,706 NOTE 9—LONG-TERM DEBT $ 128,227 $ 129,024 4,300 3,300 4,565 6,593 3,129 3,656 2,503 3,000 308 353 143,032 145,926 (16,567 ) (9,176 ) $ 126,465 $ 136,750 September 30,
2017 October 1,
2016Revolving U.S. credit facility, interest at base rate or adjusted LIBOR rate plus an applicable margin (interest at 2.9% on September 30, 2017) due May 2021 $ 74,608 $ 92,137 Revolving credit facility with Banco Ficohsa, a Honduran bank, interest at 8% due March 2019 (denominated in U.S. dollars) 4,975 5,000 Term loan with Banco Ficohsa, a Honduran bank, interest at 7%, monthly installments beginning March, 2011 through March 2018 (denominated in U.S. dollars) 486 1,459 Term loan with Banco Ficohsa, a Honduran bank, interest at 7.5%, monthly installments beginning November 2014 through December 2020 (denominated in U.S. dollars) 2,000 2,600 Term loan with Banco Ficohsa, a Honduran bank, interest at 8%, monthly installments beginning June 2016 through April 2022 (denominated in U.S. dollars) 1,358 1,650 Term loan with Banco Ficohsa, a Honduran bank, interest at 8%, monthly installments beginning June 2016 through July 2017 (denominated in U.S. dollars) — 4,833 Term loan with Banco Ficohsa, a Honduran bank, interest at 8%, monthly installments beginning October 2017 through September 2021 (denominated in U.S. dollars) 4,083 — Salt Life acquisition promissory note, imputed interest at 3.62%, quarterly payments beginning September 2016 through June 2019 5,344 8,116 92,854 115,795 Less current installments (7,548 ) (9,192 ) Long-term debt, excluding current installments $ 85,306 $ 106,603 amended our U.S. revolving credit facility and entered into a Fifth Amended and Restated Credit Agreement (the "Amended(as further amended, the “Amended Credit Agreement"Agreement”) with Wells Fargo Bank, National Association ("(“Wells Fargo"Fargo”), as Administrative Agent, the Sole Lead Arranger and the Sole Book Runner, and the financial institutions named therein as Lenders, which are Wells Fargo, PNC Bank, National Association and Regions Bank. Our subsidiaries M.J. Soffe, LLC, Culver City Clothing Company (f/k/a Junkfood Clothing Company,Company), Salt Life, LLC, and DTG2Go, LLC (f/k/a Art Gun, LLC (together withLLC) (collectively, the Company, the "Companies"“Borrowers”), are co-borrowers under the Amended Credit Agreement. The Borrowers entered into amendments to the Amended Credit Agreement was subsequently amended on November 27, 2017. For further information refer to Item 9B. Other Information.The Amended Credit Agreement amends and restates our Fourth Amended and Restated Loan and Security Agreement dated May 27, 2011, which was amended on four occasions and had a maturity date of May 27, 2017. Bank of America, N.A. departed the syndicate of Lenders and Regions Bank joined the syndicate of Lenders for the Amended Credit Agreement. Bank of America, N.A. also ceased to serve as the syndication agent for the facility, and Merrill Lynch, Pierce, Fenner and Smith Incorporated is no longer a joint book runner with Wells Fargo. Wells Fargo and the above-referenced Lenders consentedother lenders on November 27, 2017, March 9, 2018, October 8, 2018, November 19, 2019, April 27, 2020, August 28, 2020, June 2, 2022, January 3, 2023, February 3, 2023, March 3, 2023, and October 6, 2023. sale of our Junkfood business prior toFifth Amended and Restated Credit Agreement with Wells Fargo and the March 31, 2017, closing ofother lenders set forth therein (the “Fourth Amendment”). The Fourth Amendment, among other things, (i) increased the transaction.Theborrowing capacity under the Amended Credit Agreement allowsfrom $145 million to $170 million (subject to borrowing base limitations), (ii) extended the maturity date from May 21, 2021 to November 19, 2024, (iii) reduced pricing on the revolver and first-in last-out “FILO” borrowing components by 25 basis points, and (iv) added 25% of the fair value of eligible intellectual property to the borrowing base calculation. In addition, the Fourth Amendment amended the definition of Fixed Charge Coverage Ratio to exclude up to $10 million of capital expenditures incurred by the Borrowers in connection with the expansion of their distribution facility located within the Town of Clinton, Anderson County, Tennessee.$145$170 million (subject to borrowing base limitations), including a maximum of $25 million in letters of credit. Provided that no event of default exists, we have the option to increase the maximum credit to $200 million (subject to borrowing base limitations), conditioned upon the Administrative Agent'sAgent’s ability to secure additional commitments and customary closing conditions. The credit facility matures on May 10, 2021.Our U.S. revolving credit facility is secured byAmended Credit Agreement contains a first-priority lien on substantially all of the real“springing” lockbox arrangement (as defined in ASC 470, Debt) whereby remittances from customers will be forwarded to our general bank account and personal property of Delta Apparel, Junkfood, Soffe, Salt Life, and Art Gun. All loans bear interest at rates, at the Company's option, based on either (a) an adjusted LIBOR rate plus an applicable margin or (b) a base rate plus an applicable margin, with the base rate equal to the greater of (i) the federal funds rate plus 0.5%, (ii) the LIBOR rate plus 1.0%, or (iii) the prime rate announced by Wells Fargo, National Association. The facility requires monthly installment payments of approximately $0.2 million in connection with fixed asset amortizations, and these amountswill not reduce the amountoutstanding debt until and unless a specified event or an event of availabilitydefault occurs. We classify borrowings under the facility. Annual facility fees are 0.25% or 0.375% (subject to average excess availability)Amended Credit Agreement as long-term debt with consideration of the amount by which $145 million exceeds the average daily principal balance of the outstanding loans and letters of credit accommodations. The annual facility fees are charged monthly based on the principal balances during the immediately preceding month.30, 2017,2023, we had $74.6$128.2 million outstanding under our U.S. revolving credit facility at an average interest rate of 2.9%, and had8.2%. Our cash on hand combined with the ability to borrow an additional $37.5 million. Thisavailability under the U.S. credit facility includes the financial covenant that if the amount oftotaled $14.2 million (subject to minimum availability falls below the threshold amounts set forth in the Amended Credit Agreement, our Fixed Charge Coverage Ratio (“FCCR”) (as defined in the Amended Credit Agreement) for the preceding 12-month period must not be less than 1.1thresholds as referred to 1.0. We were not subject to the FCCR covenant as of September 30, 2017, because our availability was above the minimum required under the Amended Credit Agreement. At September 30, 2017, our FCCR was above the required 1.1 to 1.0 ratio and, therefore, we would have satisfied our financial covenanthad we been subject to it. In addition, the credit facility includes customary conditions to funding, representations and warranties, covenants, and events of default. The covenants include, among other things, limitations on asset sales, consolidations, mergers, liens, indebtedness, loans, investments, guaranties, acquisitions, dividends, stock repurchases, and transactions with affiliates.At Notwithstanding the foregoing, the Amended Credit Agreement currently restricts us from making cash dividends or stock repurchases until the later of (x) November 4, 2023 and (y) the date upon which (a) our availability (as defined in the Amended Credit Agreement) and (b) our average availability (as defined in the Amended Credit Agreement) for the immediately preceding 30 consecutive days, is equal to or more than the greater of (i) 17.50% of the lesser of (A) our borrowing base (as defined in the Amended Credit Agreement) or (B) the maximum revolver amount (as defined in the Amended Credit Agreement) and (ii) $25,000,000 and (II) certification that (x) our FCCR is equal to or greater than 1.00:1.00 for the trailing 12-month period and (y) as of such date, no default (as defined in the Amended Credit Agreement) or event of default exists. For purposes of this definition, availability and average availability will be calculated (x) after giving effect to the availability block (as defined in the Amended Credit Agreement) and (y) without giving effect to the application of the net cash proceeds from certain sale-leaseback transactions. Absent the restrictions referenced in the preceding two sentences, at September 30, 2017, 2023, and October 1, 2016, September 2022, there was $7.7$8.3 million and $10.7$24.9 million, respectively, of retained earnings free of restrictions to make cash dividends or stock repurchases.Thecontains a subjective acceleration clause and a “springing” lockbox arrangement (as defined in FASB Codification No. 470, Debt ("ASC 470")), whereby remittances from customers will be forwarded to our general bank account and will not reduce the outstanding debt until and unless a specified event or an event of default occurs. Pursuant to ASC 470, we classify borrowings under the facility as long-term debt.In August 2013, we acquired Salt Life and issued two promissory notes in the aggregate principal amount of $22.0 million, which included a one-time installment of $9.0 million that was paid as required on September 30, 2014, and quarterly installments commencing on March 31, 2015, with the final installment due on June 30, 2019. The promissory notes are zero-interest notes and state that interest will be imputed as required under Section 1274 of the Internal Revenue Code. We have imputed interest at 1.92% and 3.62% on the promissory notes that matured on June 30, 2016, and will mature on June 30, 2019, respectively. At September 30, 2017, the discounted value of the promissory note was $5.3 million.On December 6, 2013, we entered into an agreement (the "IMG Agreement") with IMG Worldwide, Inc. ("IMG") that provided for the termination of the Salt Life brand license agreements entered into between Delta on October 6, 2023, December 5, 2023, and IMG (as agent on behalf of Salt Life Holdings) prior to the acquisition of Salt Life as well as the agency agreement entered into between Salt Life Holdings and IMG prior to the acquisition of Salt Life. In addition, the IMG Agreement provides that Delta and Salt Life Holdings are released from all obligations and liabilities under those agreements or relating to the acquisition of Salt Life. Pursuant to the IMG Agreement, Salt Life and IMG entered into a separate, multi-year agency agreement, which has since been terminated, whereby IMG represented Salt Life with respect to the licensing of the Salt Life brand in connection with certain product and service categories. Salt Life agreed to pay IMG installments totaling $3,500,000 to terminate the existing arrangements. There was a $3,000,000 indemnification asset that was recorded as part of the purchase of Salt Life that was released from escrow during the quarter ended December 28, 2013, and applied towards these payment obligations, along with additional amounts previously accrued for royalty obligations under the above-referenced Salt Life brand license agreements. During the year ended October 3, 2015, we made payments of $0.8 million in accordance with the terms of the agreement. As of October 3, 2015, there were 3 quarterly installments of $195 thousand remaining, and we had recorded the fair value of the liability as of October 3, 2015, in our financials with $0.6 million in accrued expenses. During the year ended October 1, 2016, we made the final payments of $0.6 million in accordance with the terms of the agreement and no amounts remain accrued in our financial statements as of October 1, 2016.in order 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. In May 2022, we entered into a new term loan with a five-year term with a principal amount of $3.7 million. Each of these loans are secured by a first-priorityfirst-priority lien on the assets of our Honduran operations and are is not guaranteed by our U.S. entities. These loans are denominated in U.S. dollars, and the carrying value of the debt approximates theits fair value. The revolving credit facility requires minimum payments during each six-month period of the 18-month term; however the loan agreement permits additional drawdowns to the extent payments are made and certain objective covenants are met. The current revolving Honduran debt, by its nature, is not long-term, as it requires scheduled payments each six months. However, as the loan permits us to re-borrow funds up to the amount repaid, subject to certain covenants, andobjective covenants. While we intend to re-borrow funds, subject to those covenants, consistent with ASC 470 we have classified the objective covenants,explicit repayment amounts included within the amounts have been classifiedloan agreement as long-term debt.if due more than a year after September 30, 2023. Therefore, we have classified $6.1 million as short-term and $5.9 million as long-term.these loansthis loan and the outstanding balance as of September 30, 2017, is2023, and September 2022, respectively, are listed as part of the long-term debt schedule above.30, 2017, 2023, are as follows (in thousands): $ 16,567 7,640 5,574 113,251 — — $ 143,032 Fiscal Year Amount 2018 $ 7,548 2019 11,381 2020 4,062 2021 69,669 2022 194 Thereafter — $ 92,854 NOTE 10—INCOME TAXES $ 326 $ 921 44 203 - 195 $ 370 $ 1,319 $ (8,717 ) $ 2,532 (2,025 ) 456 (10,742 ) 2,988 $ (10,372 ) $ 4,307 Period ended September 30, 2017 October 1, 2016 October 3, 2015 Current: Federal $ 215 $ 36 $ — State 47 78 60 Foreign 127 179 186 Total current $ 389 $ 293 $ 246 Deferred: Federal $ (112 ) $ 1,462 $ 1,320 State 380 326 439 Total deferred 268 1,788 1,759 Provision for income taxes $ 657 $ 2,081 $ 2,005 Period ended September 30, 2017 October 1, 2016 October 3, 2015 United States $ 1,767 $ 3,966 $ 3,434 Foreign 9,401 7,079 6,664 $ 11,168 $ 11,045 $ 10,098 $ (50,993 ) $ 10,746 7,408 13,301 $ (43,585 ) $ 24,047 34.0%21.0% for fiscal years 2023 and 2022 is as follows (in thousands): Period ended September 30, 2017 October 1, 2016 October 3, 2015 Income tax expense at the statutory rate $ 3,797 $ 3,755 $ 3,433 State income tax (benefit) expense, net of federal income tax effect (80 ) 447 374 Impact of state rate changes 115 116 — Rate difference and nondeductible items in foreign jurisdictions 33 54 (30 ) Impact of foreign earnings in tax-free zone (3,052 ) (2,319 ) (2,168 ) Valuation allowance adjustments 362 (71 ) — Nondeductible compensation — — 335 Nondeductible amortization and other permanent differences (496 ) 96 81 Other (22 ) 3 (20 ) Provision for income taxes $ 657 $ 2,081 $ 2,005 Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. We have not provided deferred taxes on the $75.5 million of undistributed earnings of our foreign subsidiaries where the earnings are considered to be permanently reinvested. The undistributed earnings would become taxable in the United States if we decided to repatriate earnings for business, tax or foreign exchange reasons. If we made that decision, U.S. income taxes would be provided for net of foreign taxes already paid. The determination of the unrecognized deferred tax liability associated with these unremitted earnings is not practical at this time. $ (9,153 ) $ 5,050 (1,749 ) 553 (2,105 ) (2,598 ) 1,187 1,237 544 (179 ) (181 ) 10 367 178 718 56 $ (10,372 ) $ 4,307 $ 4,138 $ 1,997 5,991 - 549 - 2,728 - 222 300 793 1,649 1,298 2,948 12,065 10,039 4,111 4,670 $ 31,895 $ 21,603 (1,129 ) (640 ) $ 30,766 $ 20,963 (5,940 ) (7,242 ) (4,186 ) (6,038 ) (11,847 ) (9,720 ) (971 ) (931 ) $ (22,944 ) $ (23,931 ) $ 7,822 $ (2,968 ) September 30,
2017 October 1,
2016 Deferred tax assets: Federal net operating loss carryforwards $ 2,902 $ 6,256 State net operating loss carryforwards 1,573 1,784 Derivative — interest rate contracts 21 70 Alternative minimum tax credit carryforward 404 135 Inventories and reserves 3,681 3,426 Accrued compensation and benefits 3,139 3,331 Receivable allowances and reserves 543 767 Other 98 89 Gross deferred tax assets 12,361 15,858 Less valuation allowance — state net operating loss (493 ) (131 ) Net deferred tax assets 11,868 15,727 Deferred tax liabilities: Depreciation (3,501 ) (2,868 ) Goodwill and intangibles (3,319 ) (7,463 ) Other (46 ) (150 ) Gross deferred tax liabilities (6,866 ) (10,481 ) Net deferred tax asset 5,002 5,246 30, 2017, and October 1, 2016, 2023, we had federalstate net operating losses of approximately $79.3 million, with deferred tax assets of $4.1 million related to these state NOLs and related valuation allowances against them of approximately $1.1 million. These state net operating loss carryforwards of approximately $8.5 million and $18.3 million, respectively. The deferred tax assets resulting from federal net operating losses for September 30, 2017, and October 1, 2016, were $2.9 million and $6.3 million, respectively. There is no carryback opportunity for these losses and the carryforwards expire at various intervals from 2033 to 2035. We determined that no valuation allowance is required, as we expect that all such carryforwards more likely than not will be realized within statutory periods of carryover and utilization.As of September 30, 2017, and October 1, 2016, we had state net operating loss carryforwards of approximately $41.6 million and $45.4 million, respectively. These carryforwards expire at various intervals from 20192027 through 2036.2040. Our deferred tax asset related to state netmore likely than more-likely-than not to be realized.FASB Codification No. (“ASC 740”) requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than more-likely-than-not (i.e., a likelihood of more than fifty percent)50%) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than 50% percent likely of being realized upon ultimate settlement. Accrued interest and penalties related to unrecognized tax benefits would also be recorded.recorded to income tax expense. We did not have any material unrecognized tax benefits as of September 30, 20172023 or September 2022.or October 1, 2016.Thewe are indefinitely reinvested in the cumulative undistributed earnings of and original investments in our foreign subsidiaries, with the exception of our equity method investment, which has been properly accounted for. Future remittances could be subject to additional foreign withholding taxes, U.S. state taxes, and certain tax impacts relating to foreign currency exchange effects. It is not practicable to estimate the amount of any unrecognized tax effects on these reinvested earnings and original investments in foreign subsidiaries.2013 to 2015,2019,2020,2021, and 2022, according to statute and with few exceptions, remain open to examination by various federal, state, local, and foreign jurisdictions.NOTE 11—LEASESseveral non-cancelableelected to use the practical expedient present in ASC 842 to not separate lease and non-lease components for all significant underlying asset classes and instead account for them together as a single lease component in the measurement of our lease liabilities.primarily relatedis not readily determinable. Therefore, we discount future lease payments using our estimated incremental borrowing rate at lease commencement. We determine this rate based on a credit-adjusted risk-free rate, which approximates a secured rate over the lease term. The weighted average discount rate for operating leases was 4.6% for September 2023 and September 2022, respectively. We discount our finance lease payments based on the rate implicit and stated in the lease. The weighted average discount rate for finance leases was 6.6% and 5.7% as of September 2023 and September 2022, respectively.buildings, office equipmentour operating and computer systems. Certain landfinance lease liabilities, recorded as of September 2023 (in thousands): $ 11,326 $ 9,644 11,269 7,729 9,702 4,865 8,188 2,318 6,781 232 18,821 - $ 66,087 $ 24,788 (9,709) (2,317) $ 56,378 $ 22,471 (9,124) (8,442) $ 47,254 $ 14,029 building leases have renewal options generally for periods ranging from 5 to 10 years.Future minimum2022, we paid approximately $1.8 million in lease payments under non-cancelablethis arrangement.30, 2017,2023. As of September 2022, the average remaining lease terms were 6 years and 3 years, respectively.(infor the period ended September 2023 (in thousands):Fiscal Year Amount 2018 $ 8,259 2019 7,856 2020 6,703 2021 4,542 2022 3,220 Thereafter 14,386 $ 44,966 Rent expense $ 12,254 2,186 4,856 1,600 $ 20,896 all operating lease payments were $12.7 million during 2023 and $12.0 million during 2022. Cash outflows for interest payments on finance leases was $8.8were $1.6 million, $9.3 and $1.4 million during 2023 and $9.42022, respectively. These outflows are classified within net cash provided by (used in) operating activities on the Consolidated Statement of Cash Flows. Cash outflows for finance lease payments during 2023 and 2022 were $9.2 million and $7.7 million, respectively, and are classified within net cash (used in) provided by financing activities on the Consolidated Statement of Cash Flows.fiscal years 2017, 2016,operating lease liabilities during 2023 and 2015,2022 were $15.3 million and $13.9 million, respectively.NOTE 12—EMPLOYEE BENEFIT PLANS401(k)401(k) retirement savings plan (the “401(k)“401(k) Plan”) for our employees who meet certain requirements. The 401(k)401(k) Plan permits participants to make pre-tax contributions by salary reduction pursuant to Section 401(k)401(k) of the Internal Revenue Code, as well as a Roth Plan that allows for after tax contributions. The 401(k)401(k) Plan providesrequires for us to make a guaranteed match of a defined portion of the employee’s contributions. During fiscal years 2017, 2016, and 2015 weWe contributed approximately $0.9 million, $1.1 million and $1.1$0.9 million respectively, to the 401(k) Plan.certaina small group of retired employees. The plan is noncontributory and is unfunded, and therefore, benefits and expenses are paid from our general assets as they are incurred. All of the employees in the plan are fully vested, and the plan was closed to new employees in 1990. The discount rate used in determining the liability was fiscal years 20172023 and 2016.2022. The following table presents the benefit obligation, which is includedincluded in accrued expenses in the accompanying balance sheets (in thousands).: $ 264 $ 271 — — (9 ) (7 ) $ 255 $ 264 September 30,
2017 October 1,
2016Balance at beginning of year $ 344 $ 412 Interest expense 5 6 Benefits paid (6 ) (81 ) Adjustment — 7 Balance at end of year $ 343 $ 344 NOTE 13—STOCK-BASED COMPENSATION4, 2015, 6, 2020, our shareholders re-approvedapproved the Delta Apparel, Inc. 20102020 Stock Plan ("2010(“2020 Stock Plan"Plan”) thatto replace the 2010 Stock Plan, which was originally approvedpreviously re-approved by our shareholders on November 11, 2010. February 4, 2015, and was scheduled to expire by its terms on September 14, 2020. The re-approval2020 Stock Plan is substantially similar in both form and substance to the 2010 Stock Plan. The purpose of the 20102020 Stock Plan including the material terms of the performance goals included in the 2010 Stock Plan, enables usis to continue to grant equity incentive compensationgive our Board of Directors and its Compensation Committee the ability to offer a variety of compensatory awards that are structured in a manner intendeddesigned to qualify as tax deductible, performance-based compensation under Section 162(m) ofenhance the Internal Revenue Codeof 1986. Since November 2010, no additional awards have been or will be granted under either the Delta Apparel Stock Option Plan ("Option Plan") or the Delta Apparel Incentive Stock Award Plan ("Award Plan"); instead, allCompany’s long-term success by encouraging stock awards have beenownership among its executives, key employees and will continue to be granted under the 2010 Stock Plan.We account for these plans pursuant to ASC 718, SAB 107 and SAB 110. Shares are generally issued from treasury stock upon exercise of the options or the vesting of the restricted stock units and performance units. We early adopted ASU 2016-09 in our fiscal year beginning October 2, 2016. See Note 2—Significant Accounting Policies (aa) Recently Adopted Accounting Pronouncements for further detail. This new guidance requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. All excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) should be recognized as income tax expense or benefit in the income statement. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity also should recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period.Compensation expense is recorded on the selling, general and administrative expense line item in our Consolidated Statements of Operations over the vesting periods. Total employee stock-based compensation expense for fiscal years 2017, 2016, and 2015 was $2.3 million, $2.0 million and $1.9 million, respectively. Associated with the compensation cost are income tax benefits recognized of $0.9 million, $0.8 million and $0.7 million in fiscal years 2017, 2016, and 2015, respectively.2010 Stock Plan20102020 Stock Plan, the Compensation Committee of our Board of Directors has the authority to determine the employees and directors to whom awards may be granted and the size and type of each award and manner in which such awards will vest. The awards available under the plan consist of stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock, performance units, and other stock and cash awards. If a participant dies or becomes disabled (as defined in the 2020 Stock Plan) while employed by the Company or serving as a director, all unvested awards become fully vested. The Compensation Committee is authorized to establish the terms and conditions of awards granted under the 2020 Stock Plan, to establish, amend and rescind any rules and regulations relating to the 2020 Stock Plan, and to make any other determinations that it deems necessary. The aggregate number of shares of common stock that may be delivered under the 20102020 Stock Plan is 500,000449,714 plus any shares of common stock subject to outstanding awards under the Option Plan or Award2010 Stock Plan that are subsequently forfeited or terminated for any reason before being exercised. The Similar to the 2010 Stock Plan, the 2020 Stock Plan limits the number of shares that may be covered by awards to any participant in a given calendar year and also limits the aggregate awards of restricted stock, restricted stock units and performance stock granted in anya given calendar year. If a participant dies or becomes disabled (as defined inThe 2010 Stock Plan terminated and the 20102020 Stock Plan) while employed by or serving as a director,Plan became effective on February 6, 2020, the date of shareholders’ approval. On August 2, 2023, the 2020 Stock Plan was amended to require all unvested awards become fully vested. The Compensation Committee is authorized to establish the terms and conditions ofequity awards granted after August 2, 2023, to contain a "double-trigger" vesting provision such that vesting will require both a change-in-control and an additional event such as termination or other adverse employment action.20102020 Stock Plan, to establish, amendPlan.rescind any rulesadministrative expense line item in our Consolidated Statements of Operations over the vesting periods. Total employee stock-based compensation expense for 2023 and regulations relating to2022 was $1.0 million and $3.2 million, respectively. Associated with the 2010 Stock Plan,compensation cost are income tax benefits recognized of $0.2 million for 2023 and to make any other determinations that it deems necessary.Stock OptionsNo stock options were granted during fiscal year 2017. All outstanding options granted by the Company have vested and are exercisable.A summary of the stock option activity during the periods ended September 30, 2017, October 1, 2016, and October 3, 2015, is as follows: Fiscal Year Ended September 30, 2017 October 1, 2016 October 3, 2015 Shares Weighted Average Exercise Price Shares Weighted Average Exercise Price Shares Weighted Average Exercise Price Stock options outstanding, beginning of period 10,000 $ 13.07 10,000 $ 13.07 50,000 $ 13.47 Stock options granted — — — — — — Stock options exercised — — — — — — Stock options forfeited — — — — (40,000 ) 13.56 Stock options outstanding, end of period 10,000 $ 13.07 10,000 $ 13.07 10,000 $ 13.07 Stock options outstanding and exercisable, end of period 10,000 $ 13.07 10,000 $ 13.07 10,000 $ 13.07 The following table summarizes information about our stock options outstanding, all of which are vested and exercisable as of September 30, 2017:Date of Option Grant Number of Options Outstanding and Exercisable Exercise Price Grant-Date Fair Value Expiration Date February 2, 2011 10,000 $ 13.07 $ 6.35 February 18, 2018 10,000 Restricted Stock Units and Performance Units30, 2017, October 1, 2016, 2023, and October 3, 2015: Fiscal Year Ended September 30, 2017 October 1, 2016 October 3, 2015 Number of Units Weighted average grant date fair value Number of Units Weighted average grant date fair value Number of Units Weighted average grant date fair value Units outstanding, beginning of fiscal period 585,638 $ 11.54 518,800 $ 10.80 215,352 $ 14.31 Units granted 126,000 $ 17.97 159,138 $ 14.03 524,000 $ 10.81 Units issued (64,846 ) $ 11.14 (49,529 ) $ 12.32 (69,657 ) $ 14.31 Units forfeited (133,936 ) $ 12.02 (42,771 ) $ 10.87 (150,895 ) $ 14.26 Units outstanding, end of fiscal period 512,856 $ 13.09 585,638 $ 11.54 518,800 $ 10.80 385,250 $ 27.85 260,000 $ 20.38 26,000 $ 10.61 319,950 $ 30.09 (105,000 ) $ 21.04 (144,700 ) $ 19.42 (98,624 ) $ 27.35 (50,000 ) $ 27.72 207,626 $ 29.37 385,250 $ 27.85 fiscal year 2017, performance2023, restricted stock units representing 126,000105,000 shares of our common stock were granted. Of these units, and subject to satisfaction of the applicable performance criteria at target levels, 42,000 will vest withvested upon the filing of our Annual Report on Form 10-K10-K for the year ended September 2022, and were issued in accordance with their respective agreements. These restricted stock units were payable in common stock.fiscal year ending September, 29, 2018, 42,000 willcommon stock, respectively, were granted and are eligible to vest withupon the filing of our Annual Report on Form 10-K10-K for the year ended September 2023. These performance units and restricted stock units are payable one-half in common stock and one-half in cash.fiscal year ending September, 28, 2019,common stock, respectively, were granted and 42,000 willare eligible to vest withupon the filing of our Annual Report on Form 10-K10-K for our fiscalthe year ending October 3, 2020.During fiscal year 2017,September 2024. These performance units and restricted stock units are payable one-half in common stock andone-half in cash.8,4381,000 and 53,2481,000 shares of our common stock, respectively, were granted and are eligible to vest upon the filing of our Annual Report on Form 10-K for the year ending September 2025. These performance units and restricted stock units are payable one-half in common stock and one-half in cash.10-K10-K for the fiscal year ended October 1, 2016, September 2021, and were issued in accordance with their respective agreements. One-halfOf these vested units, 96,350 were paid in common stock and 46,350 were paid in cash.one-half were payableissued in cash. Allaccordance with their agreement.fiscal year 2017, in association with the sale of our Junkfood business (see Note 3—Divestitures),2022, restricted stock units and performance units representing 45,000110,625 and 5,000 shares of our common stock,68,625, respectively, vested on an accelerated basis as a result of the sale of the Junkfood business and were issued in accordance with their respective agreements. One-half of the performance units were payable in common stock and one-half were payable in cash. Of the restricted stock units, 42,500 were payable in common stock and 2,500 were payable in cash. The $0.3 million expense related to the accelerated vesting of equity awards in connection with the sale of the Junkfood business was recorded in the Gain on sale of business line item in our Condensed Consolidated Statements of Operations.During fiscal year 2016, restricted stock units representing 83,788 shares of our common stock were granted. These restricted stock units are service-based and 8,438 units were eligible to vest upon the filing of our Annual Report on Form 10-K for the year ended October 1, 2016. The remaining 75,350 units are eligible to vest upon the filing of our Annual Report on Form 10-K for the year ended September 30, 2017. Upon vesting, one-half of these awards are payable in the common stock of Delta Apparel, Inc. and are accounted for under the equity method pursuant to ASC 718, and one-half are payable in cash and are accounted for under the liability method pursuant to ASC 718.During fiscal year 2016, performance units representing 75,350 shares of our common stock were granted. These performance units are based on the achievement of certain performance criteria for the fiscal years ended October 1, 2016, and September 30, 2017,granted and are eligible to vest upon the filing of our Annual Report on Form 10-K10-K for the year ended September 30, 2017. Upon vesting, one-half of these awards2023. These restricted stock units and performance units are payable in the common stock of Delta Apparel, Inc. and are accounted for under the equity method pursuant to ASC 718 and one-half are payable in cash and are accounted for under the liability method pursuant to ASC 718.During fiscal year 2016, previously issued performance units representing 49,529 shares of our common stock vested upon the filing of our Annual Report on Form 10-K for the fiscal year ended October 3, 2015. Of these performance units, one-half were payableone-half in common stock and one-half were payableone-half in cash and were issued in accordance with their agreement.fiscal year 2015,2022, restricted stock units and performance units representing 355,00052,000 and 10,000 shares of our common stock were granted. These restricted stock units are serviced-based and vest upon the filing of our Annual Report on Form 10-K for the period ending September 29, 2018, assuming applicable vesting requirements are satisfied. Upon vesting, these units are payable in the common stock of Delta Apparel, Inc. and are therefore accounted for under the equity method pursuant to ASC 718.During fiscal year 2015, performance units representing 169,000 shares of our common stock were granted. Of these performance units, 65,000 were based on the achievement of certain performance criteria for the fiscal year ended October 3, 2015, and were eligible to vest upon the filing of our Annual Report on Form 10-K for such year. Of these units, one-half were payable in the common stock of Delta Apparel, Inc. and were therefore accounted for under the equity method pursuant to ASC 718, and one-half were payable in cash and were therefore accounted for under the liability method pursuant to ASC 718. Of the remaining units, 52,000 were based on the achievement of certain performance criteria for the fiscal year ended October 1, 2016, and vested upon the filing of our Annual Report on Form 10-K for that year, and 52,000 units are based on the achievement of certain performance criteria for the fiscal year ended September 30, 2017,granted and are eligible to vest upon the filing of our Annual Report on Form 10-K10-K for that year. Upon vesting, thesethe year ending September 2024. These restricted stock units were paid orand performance units are payable (as applicable)one-half in the common stock of Delta Apparel, Inc.and one-half in cash. In addition, restricted stock units representing 59,000 shares were granted and are therefore accounted for under the equity method pursuanteligible to ASC 718. Based upon the performance achieved for fiscal year 2015, 49,529 units were issuedvest upon the filing of our Annual Report on Form 10-K10-K for fiscalthe year 2015 and 5,200 units were forfeited on October 3, 2015. Based upon the performance achieved for fiscal year 2016, 53,248 units were issued upon the filing of our Annual Report on Form 10-K for fiscal year 2016.During fiscal year 2015, previously issuedending September 2024. These restricted stock units representing 69,657 shares of ourare payable in common stock vested upon the filing of our Quarterly Report on Form 10-Q for the period ended June 27, 2015, and were issued in accordance with their agreement, either in shares of common stock or cash. The total fair value of vested restricted stock units was $1.0 million in fiscal year 2015. No restricted stock units vested during fiscal years 2014 or 2013. In addition, during fiscal year 2015, previously issued restricted stock units representing 12,019 shares of our common stock were forfeited. During fiscal year 2015, previously issued performance units representing 133,676 shares of our common stock were forfeited due to the failure to achieve the performance criteria specified in the award agreement.30, 20172023, there was $2.8$1.2 million of total unrecognized compensation cost related to unvested restricted stock units and performance units under the 20102020 Stock Plan. This cost is expected to be recognized over a period of 3.22.2 years.30, 2017.Restricted Stock Units/Performance Units Number of Units Average Market Price on Date of Grant Vesting Date* Fiscal Year 2015 Restricted Stock Units 95,000 $10.52 December 2018 Fiscal Year 2015 Restricted Stock Units 140,000 $10.73 December 2018 Fiscal Year 2015 Performance Units 52,208 $10.52 November 2017 Fiscal Year 2016 Restricted Stock Units 57,600 $14.04 November 2017 Fiscal Year 2016 Performance Units 42,048 $14.04 November 2017 Fiscal Year 2017 Performance Units 42,000 $17.97 December 2018 Fiscal Year 2017 Performance Units 42,000 $17.97 December 2019 Fiscal Year 2017 Performance Units 42,000 $17.97 December 2020 512,856 95,626 $ 29.07 94,000 $ 31.19 16,000 $ 22.82 1,000 $ 10.61 1,000 $ 10.61 207,626 10-K10-K for the applicable fiscal year, which is anticipated to be during the month and year indicated in this column.Option PlanPrior to expirationOption Plan,following business units, which are primarily focused on core activewear styles: DTG2Go and Delta Activewear.Compensation Committeeon-demand, direct-to-garment digital print and fulfillment industry, bringing technology and innovation to the supply chains of our Boardmany customers. Our ‘On-Demand DC’ digital solution provides retailers and brands with immediate access to utilize DTG2Go’s broad network of Directors hadprint and fulfillment facilities, while offering the discretionscalability to grant options for upintegrate digital fulfillment within the customer’s own distribution facilities. We use highly-automated factory processes and our proprietary software to 2,000,000 shares of common stockdeliver on-demand, digitally printed apparel direct to officers and key and middle-level executives for the purchaseconsumers on behalf of our stock at prices not less than fifty percent ofcustomers. Via our seven fulfillment facilities throughout the fair market value of the shares on the dates of grant, with an exercise term (as determined by the Compensation Committee) notUnited States, DTG2Go offers a robust digital supply chain, shipping custom graphic products within 24 to exceed 10 years. The Compensation Committee determined the vesting period for the stock options, which generally became exercisable over three48 hours to four years. Certain option awardsconsumers in the Option Plan providedUnited States and to many countries worldwide. DTG2Go has made significant investments in its “digital-first” retail model providing digital graphic prints that meet the high-quality standards required for accelerated vesting upon meeting specific retirement, death or disability criteria.Compensation expense was recorded on the selling, generalbrands, retailers and administrative expense line itemintellectual property holders. In fiscal year 2023, we continued to invest in our Consolidated Statementsproprietary software and research and development initiatives related to the setups, formulas and processes needed to serve our customers. Through integration with Delta Activewear, DTG2Go also services the eRetailer, ad-specialty, promotional and screen print marketplaces, among others.Operations on a straight-line basis over the vesting periods.A summary of our stock option activity during the periods ended September 30, 2017, October 1, 2016,activewear apparel to regional and October 3, 2015,global brands as well as direct to retail and wholesale markets. The Activewear business is as follows: Fiscal Year Ended September 30, 2017 October 1, 2016 October 3, 2015 Shares Weighted Average Exercise Price Shares Weighted Average Exercise Price Shares Weighted Average Exercise Price Stock options outstanding, beginning of period 86,000 $ 8.30 86,000 $ 8.30 502,000 $ 12.27 Stock options exercised (80,000 ) $ 8.30 — $ — (350,000 ) $ 13.12 Stock options forfeited — $ — — $ — (66,000 ) $ 12.94 Stock options outstanding, end of period 6,000 $ 8.30 86,000 $ 8.30 86,000 $ 8.30 Stock options outstanding and exercisable, end of period 6,000 $ 8.30 86,000 $ 8.30 86,000 $ 8.30 The total intrinsic value of options exercised during fiscal year 2017 was $1.0 million. No stock options were exercised during fiscal year 2016. The total intrinsic value of options exercised during fiscal year 2015 was $0.3 million. During fiscal year 2017, stock option exercises resulted in a reduction of deferred excess tax benefits by $0.1 million. During fiscal year 2015, stock option exercises resulted in a reduction of deferred excess tax benefits by $0.7 million.The following table summarizes information about our stock options outstanding, all of which are vestedorganized around three key customer channels – Delta Direct, Global Brands, and exercisable as of September 30, 2017:Date of Option Grant Number of Options Outstanding and Exercisable Exercise Price Grant-Date Fair Value Expiration Date February 8, 2008 6,000 $ 8.30 $ 2.95 February 8, 2018 6,000 NOTE 14—BUSINESS SEGMENTSWe operate our business in two distinct segments: basics and branded.Although the two segments are similar in their production processes and regulatory environments, theyRetail Direct – that are distinct in their economic characteristics,go-to-market strategies and how their respective customer bases source their various apparel needs. Our Delta Direct channel services the screen print, promotional, and eRetailer markets as well as retail licensing customers that sell through to many mid-tier and mass market retailers. Delta Direct products marketing,include a broad portfolio of apparel and distribution methods.Theaccessories under the Delta, Delta Platinum, and Soffe brands as well as sourced items from select third party brands. Our fashion basics segment is comprised of our business units primarily focused on garment styles characterized by low fashion risk, andline includes our Platinum Collection, which offers fresh, fashionable silhouettes with a luxurious look and feel, as well as versatile fleece offerings. We offer innovative apparel products, including the Delta Activewear (which includesDri line of performance shirts built with moisture-wicking material to keep athletes dry and comfortable; ringspun garments with superior comfort, style and durability; and Delta CatalogSoft, a collection with an incredible feel and FunTees)price. We also offer our heritage, mid- and Art Gun business units. We market, distribute and manufacture unembellished knit apparel under the main brands ofheavier-weight Delta Pro Weight® Weight® and Magnum Weight® tee shirts.Magnum Weight® for saleand Soffe brand apparel, we provide our customers with a broad range of product categories from nationally recognized brands including polos, outerwear, headwear, bags and other accessories. Our Soffe products are also available direct to consumers at www.soffe.com.diversified audience ranging fromkey supply chain partner to large licensed screen printers to small independent businesses. We also manufacture private label products formulti-national brands, major branded sportswear companies, trendy regional brands, retailers, and sports licensed apparel marketers. Typically, our private labelall branches of the United States armed forces, providing services ranging from custom product development to shipment of branded products are sold with “retail-ready” value-added services such asincluding embellishment, hangtags, ticketing, hangers, and embellishment so that they are fully readyticketing.retail. Usingsmall-run decoration needs with on-demand digital print equipment and its proprietary technology, Art Gun embellishes garments to create private label, custom decorated apparel servicing the fast-growing e-retailer channels, as well as the ad specialty, promotional products and retail marketplaces.branded segmentSalt Life Group is comprised of our Salt Life business, units focusedwhich is built on specializedthe authentic, aspirational Salt Life lifestyle brand that represents a passion for the ocean, the salt air, and, more importantly, a way of life and all it offers, from surfing, fishing, and diving to beach fun and sun-soaked relaxation. The Salt Life brand combines function and fashion with a tailored fit for the active lifestyles of those that “live the Salt Life.” With increased worldwide appeal, Salt Life has continued to provide the cotton graphic tees and logo decals that originally drove awareness for the brand, and expanded into performance apparel, garments, headwearswimwear, board shorts, sunglasses, bags, and related accessoriesaccessories. In fiscal year 2023, Salt Life grew its retail footprint to meet consumer preferencesinclude twenty-five stores across the U.S. coastline from Southern California to Key West and fashion trends,up the eastern seaboard to Riverhead, New York. Consumers can also seamlessly experience the Salt Life brand through retail partners including surf shops, specialty stores, department stores, and includesoutdoor merchants or by accessing our Salt Life Soffe, and Coast business units. Our branded segment also included our The Game and Junkfood business units prior to their dispositions on March 2, 2015, and March 31, 2017, respectively. These branded products are sold through specialty and boutique shops, upscale and traditional department stores, mid-tier retailers, sporting goods stores, e-retailers and the U.S. military, as well as direct-to-consumer through branded ecommerce sites and "brick and mortar" retail stores. Products in this segment are marketed under our lifestyle brandssite at www.saltlife.com.("(“segment operating earnings"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. Intercompany transfers between operating segments are transacted at cost and have been eliminated within the segment amounts shown in the following table (in thousands). Fiscal Year Ended September 30, 2017 October 1, 2016 October 3, 2015 Segment net sales: Basics $ 280,283 $ 277,146 $ 282,467 Branded 104,799 148,103 166,675 Total net sales 385,082 425,249 449,142 Segment operating income: Basics 24,189 22,307 13,060 Branded 3,943 6,950 12,379 Total segment operating income 28,132 29,257 25,439 Purchases of property, plant and equipment: Basics 4,829 10,734 6,037 Branded 2,111 1,501 689 Corporate 145 80 1,047 Total purchases of property, plant and equipment 7,085 12,315 7,773 Depreciation and amortization: Basics 6,553 6,437 6,208 Branded 2,647 2,772 2,902 Corporate 409 416 432 Total depreciation and amortization 9,609 9,625 9,542 $ 356,336 $ 424,799 59,015 60,060 $ 415,351 $ 484,859 $ (26,179 ) $ 38,045 6,101 8,187 $ (20,078 ) $ 46,232 $ 2,194 $ 8,400 562 3,978 65 - $ 2,821 $ 12,378 $ 13,072 $ 13,376 1,851 1,656 $ 14,923 $ 15,032 $ 8,780 $ 17,980 19,917 19,917 $ 28,697 $ 37,897 Fiscal Year Ended September 30, 2017 October 1, 2016 October 3, 2015 Segment operating income $ 28,132 $ 29,257 $ 25,439 Unallocated corporate expenses 11,953 12,925 9,320 Unallocated interest expense 5,011 5,287 6,021 Consolidated income before provision for income taxes $ 11,168 $ 11,045 $ 10,098 $ (20,078 ) $ 46,232 9,364 14,451 14,194 7,732 $ (43,636 ) $ 24,049 Supplemental information regardingSales to foreign customers represented less than 1% of our revenues by geographic area based on the locationconsolidated net sales for both fiscal years 2023 and 2022. Fiscal Year Ended September 30, 2017 October 1, 2016 October 3, 2015 United States $ 383,672 $ 418,627 $ 442,207 Foreign 1,410 6,622 6,935 Total net sales $ 385,082 $ 425,249 $ 449,142 As of September 30, 2017 October 1, 2016 Total assets by segment: Basics 191,585 178,347 Branded 117,437 156,119 Corporate 8,780 10,186 Total assets 317,802 344,652 Equity investment in joint venture: Basics 4,140 3,593 Branded — — Total equity investment in joint venture 4,140 3,593 Our long-lived assets, excluding goodwill and intangible assets, consist of property, plant and equipment for all locations. $ 345,965 $ 426,406 97,934 90,580 11,339 6,695 $ 455,238 $ 523,681 $ 10,082 $ 9,886 — — $ 10,082 $ 9,886 the long-livedthese assets. Summarized financial information by geographic area is as follows (in thousands): $ 49,174 $ 54,200 10,856 13,366 4,826 5,381 755 1,162 16,437 19,909 $ 65,611 $ 74,109 As of September 30, 2017 October 1, 2016 United States $ 19,587 $ 18,523 Honduras 18,151 19,650 El Salvador 3,853 4,215 Mexico 1,115 1,115 All foreign countries 23,119 24,980 Total long-lived assets, excluding goodwill and intangibles $ 42,706 $ 43,503 NOTE 15—REPURCHASE OF COMMON STOCKAsNote 14—Repurchase of September 30, 2017, ourCommon Stockhadhas authorized management to use up to $50.0$60.0 million to repurchase stock in open market transactions under our Stock Repurchase Program. During the September 2017 quarter, There were no purchases of our Board of Directors approved management to repurchase an additional $10 million of the Company’s outstanding common stock bringing the total amount authorized under the program to the above-referenced $50 million.years 2017, 2016, and 2015,year 2022, we purchased 413,337136,181 shares 217,568 shares, and 140,336 shares, respectively, of our common stock for a total cost of $7.8 million, $3.5 million, and $2.1 million, respectively.$4.0 million. As of September 30, 2017,2023, we have purchased 2,893,4873,735,114 shares of common stock for an aggregate of $38.7$56.4 million since the inception of the Stock Repurchase Program. All purchases were made at the discretion of management and pursuant to the safe harbor provisions of SEC Rule 10b-18.10b-18. As of September 30, 2017, $11.32023, $3.6 million remained available for future purchases under our Stock Repurchase Program, which does not have an expiration date. The following table summarizes the purchases of our common stock for the quarter ended September 30, 2017:Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans Dollar Value of Shares that May Yet Be Purchased Under the Plans July 2 to August 5, 2017 66,319 $ 20.20 66,319 $3.8 million August 6 to September 2, 2017 128,710 $ 19.21 128,710 $1.3 million September 3 to September 30, 2017 — $ — — $11.3 million Total 195,029 $ 19.54 195,029 $11.3 million NOTE 16—COMMITMENTS AND CONTINGENCIESThe Sports Authority Bankruptcy LitigationSoffe is involved in several related litigation matters stemming from The Sports Authority's ("TSA") March 2, 2016, filing of a voluntary petition(s) for relief under Chapter 11 of the United States Bankruptcy Code (the "TSA Bankruptcy"). Prior to such filing, Soffe provided TSA with products to be sold on a consignment basis pursuant to a "pay by scan" agreement and the litigation matters relate to Soffe's interest in the products it provided TSA on a consignment basis (the "Products") and the proceeds derived from the sale of such products (the "Proceeds").TSA Stores, Inc. and related entities TSA Ponce, Inc. and TSA Caribe, Inc. filed an action against Soffe on March 16, 2016, in the United States Bankruptcy Court for the District of Delaware (the "TSA Action") essentially seeking a declaratory judgment that: (i) Soffe does not own the Products but rather has a security interest that is not perfected or senior and is avoidable; (ii) Soffe only has an unsecured claim against TSA; (iii) TSA and TSA's secured creditors have valid, unavoidable and senior rights in the Products and the Products are the property of TSA’s estate; (iv) Soffe does not have a perfected purchase money security interest in the Products; (v) Soffe is not entitled to a return of the Products; and (vi) TSA can continue to sell the Products and Soffe is not entitled to any proceeds from such sales other than as an unsecured creditor. The TSA Action also contains claims seeking to avoid Soffe's filing of a financing statement related to the Products as a preference and recover the value of that transfer as well as to disallow Soffe's claims until it has returned preferential transfers or their associated value. TSA also brings a claim for a permanent injunction barring Soffe from taking certain actions. We believe that many of the claims in the TSA Action, including TSA’s claim for injunction, are now moot as a result of Soffe’s agreement to permit TSA to continue selling the Products in TSA’s going-out-of-business sale.On May 16, 2016, TSA lender Wilmington Savings Fund Society, FSB, as Successor Administrative and Collateral Agent ("WSFS"), intervened in the TSA Action seeking a declaratory judgment that: (i) WSFS has a perfected interest in the Products and Proceeds that is senior to Soffe's interest; and (ii) the Proceeds paid to Soffe must be disgorged pursuant to an order previously issued by the court. WSFS's intervening complaint also contains a separate claim seeking the disgorgement of all Proceeds paid to Soffe along with accrued and unpaid interest.Soffe has asserted counterclaims against WSFS in the TSA Action essentially seeking a declaratory judgment that: (i) WSFS is not perfected in the Products; and (ii) WSFS's interest in the Products is subordinate to Soffe's interest.On May 24, 2016, Soffe joined an appeal filed by a number of TSA consignment vendors in the United States District Court for the District of Delaware challenging an order issued in the TSA Bankruptcy that, should WSFS or TSA succeed in the TSA Action, granted TSA and/or WSFS a lien on all Proceeds received by Soffe and requiring the automatic disgorgement of such Proceeds. Soffe and another entity are the remaining consignment vendors pursuing this appeal.Although we will continue to vigorously defend against the TSA Action and pursue the above-referenced counterclaims and appeal, should TSA and/or WSFS ultimately prevail on their claims, we could be forced to disgorge all Proceeds received and forfeit our ownership rights in any Products that remain in TSA's possession. We believe the range of possible loss in this matter is currently $0 to $3.3 million; however, it is too early to determine the probable outcome and, therefore, no amount has been accrued related to this matter.U.S. Consumer Product Safety CommissionWe previously received an inquiry from the U.S. Consumer Product Safety Commission (“Commission”) regarding a children's drawstring hoodie product sourced, distributed and sold by Junkfood, and its compliance with applicable product safety standards. The Commission subsequently investigated the matter, including whether Junkfood complied with the reporting requirements of the Consumer Product Safety Act (“CPSA”), and the garments in question were ultimately recalled. Junkfood subsequently received notification from the Commission staff alleging that Junkfood knowingly violated CPSA Section 15(b) and that the staff will recommend to the Commission a $900,000 civil penalty. We disputed the Commission's allegations and subsequently responded to the Commission staff regarding its recommended penalty, setting forth a number of defenses and mitigating factors that could have resulted in a much lower penalty, if any, ultimately imposed by a court had the matter proceeded to litigation.We believe that any claims brought by the Commission seeking enforcement of the recommended penalty would be time-barred under any reasonable interpretation of the applicable civil statute of limitations. Accordingly, we consider this matter to be resolved, and during the quarter ended October 1, 2016, we reversed the liability previously recorded in connection with this matter.California Wage and Hour LitigationWe were served with a complaint in the Superior Court of the State of California, County of Los Angeles, on or about March 13, 2013, by a former employee of our Delta Activewear business unit at our Santa Fe Springs, California distribution facility alleging violations of California wage and hour laws and unfair business practices with respect to meal and rest periods, compensation and wage statements, and related claims (the "Complaint"). The Complaint was brought as a class action and sought to include all of our Delta Activewear business unit's current and certain former employees within California who are or were non-exempt under applicable wage and hour laws. The Complaint also named as defendants Junkfood, Soffe, an independent contractor of Soffe, and a former employee, and sought to include all current and certain former employees of Junkfood, Soffe and the Soffe independent contractor within California who are or were non-exempt under applicable wage and hour laws. The Complaint sought injunctive and declaratory relief, monetary damages and compensation, penalties, attorneys' fees and costs, and pre-judgment interest.On or about August 22, 2014, we were served with an additional complaint in the Superior Court of the State of California, County of Los Angeles, by a former employee of Junkfood and two former employees of Soffe at our Santa Fe Springs, California distribution facility alleging violations of California wage and hour laws and unfair business practices the same or substantially similar to those alleged in the Complaint and seeking the same or substantially similar relief as sought in the Complaint. This complaint was brought as a class action and sought to include all current and certain former employees of Junkfood, Soffe, our Delta Activewear business unit, the Soffe independent contractor named in the Complaint and an individual employee of such contractor within California who are or were non-exempt under applicable wage and hour laws.On September 17, 2015, an agreement in principle was reached between all parties to settle the above-referenced wage and hour matters, with the defendants in the matters agreeing to pay an aggregate amount of $300,000 in exchange for a comprehensive release of all claims at issue in the matters. Delta Apparel, Inc., Soffe and Junkfood collectively agreed to contribute $200,000 towards the aggregate settlement amount, and we had this amount included in our accrued expenses as of October 1, 2016, and October 3, 2015. The settlement agreement was approved by the applicable court and these matters have been finally resolved, with the agreed amounts funded subsequent to the 2016 fiscal year-end.In addition, atdefenses,defense, 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.30, 2017, 2023, minimum payments under these contracts were as follows (in thousands): $ 10,021 1,783 12,418 $ 24,222 30, 2017,2023, and September 2022, we had outstanding standby letters of credit totaling $0.4 million.Derivatives and Contingent ConsiderationThe followingThere were no such financial instruments were outstanding as of September 30, 2017:Effective DateNotationalAmountLIBOR RateMaturity DateInterest Rate SwapJuly 19, 2017$10 million1.74%July 19, 2019Interest Rate SwapJuly 19, 2017$10 million1.99%May 10, 2021Condensed Consolidated Statement of Operations.FASB Codification No. No such cotton contracts were outstanding as of September 2023, or September 2022, respectively. (“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:◦◦◦ Fair Value Measurements Using Period Ended Total Interest Rate Swap September 30, 2017 $ (56 ) — $ (56 ) — October 1, 2016 $ (182 ) — $ (182 ) — October 3, 2015 $ (697 ) — $ (697 ) — Cotton Options September 30, 2017 $ (125 ) (125 ) — $ — October 1, 2016 $ — — — $ — October 3, 2015 $ — — — $ — Contingent Consideration September 30, 2017 $ (1,600 ) — — $ (1,600 ) October 1, 2016 $ (2,500 ) — — $ (2,500 ) October 3, 2015 $ (3,100 ) — — $ (3,100 ) $ — $ — $ — $ — $ 189 $ — $ 189 $ — werewas 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. Fair valuesOur interest rate swap agreement matured on July 25, 2023. At September 2022, book value for fixed rate debt areapproximates 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).In August 2013, we acquired Salt Life and issued contingent consideration payable in cash after the end of calendar year 2019 if financial performance targets involving the sale of Salt Life-branded products are met during the 2019 calendar year. We used a Monte Carlo model which used the historical results and projected cash flows based on the contractually defined terms, discounted as necessary, to estimate the fair value of the contingent consideration for Salt Life at acquisition, as well as to remeasure the contingent consideration related to the acquisition of Salt Life at each reporting period. Accordingly, the fair value measurement for contingent consideration falls in Level 3 of the fair value hierarchy. At September 30, 2017, we had $1.6 million accrued in contingent consideration related to the acquisition of Salt Life, a $0.9 million reduction from the accrual at October 1, 2016. The reduction in the fair value of contingent consideration is based on the inputs into the Monte Carlo model, including the time remaining in the measurement period. The sales expectations for calendar year 2019 have been reduced from the sales expectations used in the valuation of contingent consideration at acquisition due to overall softness in the retail environment.The Art Gun contingent consideration agreement concluded in fiscal year 2017, and no contingent consideration was paid under the terms of our acquisition of the Art Gun business.30, 2017, 2023, and October 1, 2016. $ — $ (48 ) — 189 — — $ — $ 141 September 30,
2017 October 1,
2016 Accrued expenses $ — $ (182 ) Deferred tax liabilities 21 70 Other liabilities (56 ) — Accumulated other comprehensive loss $ (35 ) $ (112 ) (e) License AgreementsWe havelicense agreements that provide for royalty payments of net sales of licensed products as set forth in the agreements. These license agreements are within our branded segment. We have incurred royalty expense (included in selling, general and administrative expenses) of approximately $2.2 million, $8.2 million and $10.1 million during fiscal years 2017, 2016, and 2015, respectively. The reduction in royalty expense is duean Eleventh Amendment to the March 31, 2017, sale of the Junkfood business to JMJD Ventures, LLC. See Note 3—Divestitures for further information on this transaction.NOTE 17—QUARTERLY FINANCIAL INFORMATION (UNAUDITED)Presented below is a summary of our unaudited consolidated quarterly financial information for the fiscal years ended September 30, 2017, and October 1, 2016 (in thousands, except per share amounts): 2017 Quarter Ended 2016 Quarter Ended December 31, 2016 April 1, 2017 July 1, 2017 September 30, 2017 January 2, 2016 April 2, 2016 July 2, 2016 October 1, 2016 Net sales $ 85,336 $ 104,138 $ 104,281 $ 91,327 $ 90,171 $ 109,160 $ 111,552 $ 114,366 Gross profit 17,559 24,230 22,269 16,664 18,879 25,726 24,986 23,908 Operating income 471 7,520 5,851 2,337 2,227 5,931 4,227 3,947 Net earnings (loss) (602 ) 4,546 4,468 2,099 681 3,436 2,542 2,305 Basic EPS $ (0.08 ) $ 0.60 $ 0.59 $ 0.28 $ 0.09 $ 0.44 $ 0.33 $ 0.30 Diluted EPS $ (0.08 ) $ 0.57 $ 0.56 $ 0.27 $ 0.09 $ 0.43 $ 0.32 $ 0.29 For fiscal year 2017, diluted earnings per share have been adjusted to reflect the impact of adopting ASU 2016-9. See Note 2—Significant Accounting Policies (aa) Recently Adopted Accounting Pronouncements for further detail. As discussed in Note 4, gross profit and operating income in the quarters ended July 2, 2016, and October 1, 2016, included restructuring expenses related to the manufacturing realignment.NOTE 18—SUBSEQUENT EVENTSFirst Amendment to Fifth Amended and Restated Credit AgreementOn November 27, 2017, Delta Apparel, Soffe, Junkfood, Salt Life, and Art Gun (collectively, the “Borrowers” (the “Agreement”) entered into a First Amendment to Fifth Amended and Restated Credit Agreement with Wells Fargo Bank National Association (“Wells Fargo”(the “Agent”) and the other lenders set forth therein (the “First“Eleventh Amendment”).Fifth Amended definitions of capitalized terms, if not so defined herein, may be found in the Agreement or the Eleventh Amendment. The Eleventh Amendment, among other things, extends the Accommodation Period established in the Ninth Amendment to the Agreement through the later of (x) November 4, 2023, and Restated Credit Agreement dated(y) the date upon which the Borrowers show Availability, as well as Average Availability for the preceding thirty (30) consecutive days, equal to or more than the greater of May 10, 2016, was filed as Exhibit 10.1(i) seventeen and one-half percent (17.5%) of the lesser of (A) the Borrowing Base or (B) the Maximum Revolver Amount and (ii) $25,000,000. The Eleventh Amendment also, among other things, (i) requires the Borrowers to maintain a Quarterly Report on Form 10-Q filed with the SEC on May 12, 2016.The First Amendment amends the definition of Fixed Charge Coverage Ratio withinof 1.00 to 1.00 for the Amended Credit Agreement to permit up to $10 millionimmediately preceding twelve (12) month period as of the proceeds received fromfiscal month ending November 4, 2023, and continuing with respect to the March 31, 2017, saleend of every fiscal month thereafter and (ii) eliminated the minimum EBITDA requirements established in the Ninth Amendment to the Agreement for the month ending September 2, 2023, and thereafter.assetsreal estate transactions and receipt of Junkfoodproceeds therefrom; (iii) reduces the Maximum Revolver Amount to $150,000,000; and (iv) provides that commencing with the fiscal month ending December 30, 2023, and as of the end of each fiscal month thereafter, if at any time (a) Availability (calculated without giving effect to the Availability Block) is less than $17,500,000 or (b) a Default or Event of Default exists or has occurred and is continuing, Borrowers will maintain a Fixed Charge Coverage Ratio, measured on a fiscal month-end basis for the immediately preceding 12 consecutive fiscal months, of not less than 1.00 to 1.00.used towards share repurchases for upcompleted on or around December 28, 2023, with the buyer’s obligation to one year fromclose subject to inspection, due diligence and other customary closing conditions. The Company plans to continue operations at the dateClinton property uninterrupted and, as a condition to the closing of that transaction. In addition, the definition of Permitted Purchase Money Indebtedness is amended to extendtransaction, the time period within which the Borrowers mayCompany or its wholly-owned subsidiary will enter into capital leases and to increasea long-term lease agreement with the aggregate principal amountbuyer or its affiliate. The Clinton property lease agreement will have an initial term of such leases into which the Borrowers may enter to up to $15 million. The definition of Permitted Investments is also amended to permit the Borrowers to make investments in entities that are not a party to the Amended Credit Agreement in an aggregate amount of up to $2 million. The First Amendment also permits Junkfood to change its name. See Part II, Item 9B. Other Information, for additional detail regarding the First Amendment.Section 15 (a)(2) SCHEDULE II — CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTSDELTA APPAREL, INC. AND SUBSIDIARIES(In thousands)ALLOWANCE FOR DOUBTFUL ACCOUNTS Expense 2017 $ 569 $ 86 $ (248 ) $ 407 2016 1,470 195 (1,096 ) 569 2015 1,047 771 (348 ) 1,470 RETURNS AND ALLOWANCES Expense 2017 $ 1,409 $ 8,980 $ (9,362 ) $ 1,027 2016 1,515 7,822 (7,928 ) 1,409 2015 2,113 12,173 (12,771 ) 1,515 TOTAL RESERVES FOR ALLOWANCES Expense 2017 $ 1,978 $ 9,066 $ (9,610 ) $ 1,434 2016 2,985 8,017 (9,024 ) 1,978 2015 3,160 12,944 (13,119 ) 2,985 F-32