DELTA APPAREL, INC, 10-Q filed on 5/7/2013
Quarterly Report
Document and Entity Information
9 Months Ended
Mar. 30, 2013
May 2, 2013
Document and Entity Information [Abstract]
 
 
Entity Registrant Name
DELTA APPAREL, INC 
 
Entity Central Index Key
0001101396 
 
Current Fiscal Year End Date
--06-29 
 
Entity Filer Category
Accelerated Filer 
 
Document Type
10-Q 
 
Document Period End Date
Mar. 30, 2013 
 
Document Fiscal Year Focus
2013 
 
Document Fiscal Period Focus
Q3 
 
Amendment Flag
false 
 
Entity Common Stock, Shares Outstanding
 
8,122,768 
Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Mar. 30, 2013
Jun. 30, 2012
Current assets:
 
 
Cash and cash equivalents
$ 489 
$ 467 
Accounts receivable, less allowances of $1,882 and $2,312 respectively
70,809 
73,856 
Income tax receivable
7,829 
8,796 
Inventories, net
165,822 
161,633 
Prepaid expenses and other current assets
4,312 
3,770 
Deferred income taxes
4,847 
4,964 
Total current assets
254,108 
253,486 
Property, plant and equipment, net
39,236 
39,425 
Goodwill
16,812 
16,812 
Intangibles, net
6,342 
6,797 
Other assets
3,600 
3,874 
Total assets
320,098 1
320,394 
Current liabilities:
 
 
Accounts payable
46,372 
46,320 
Accrued expenses
17,249 
16,608 
Current portion of long-term debt
3,529 
3,529 
Total current liabilities
67,150 
66,457 
Long-term debt, less current maturities
109,380 
110,949 
Deferred income taxes
3,384 
3,803 
Other liabilities
102 
218 
Total liabilities
180,016 
181,427 
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 8,149,138 and 8,424,709 shares outstanding as of March 30, 2013 and June 30, 2012, respectively
96 
96 
Additional paid-in capital
60,339 
60,367 
Retained earnings
96,043 
90,830 
Accumulated other comprehensive loss
(107)
(129)
Treasury stock —1,497,834 and 1,222,263 shares as of March 30, 2013 and June 30, 2012, respectively
(16,289)
(12,197)
Total shareholders’ equity
140,082 
138,967 
Total liabilities and shareholders' equity
$ 320,098 
$ 320,394 
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Mar. 30, 2013
Jun. 30, 2012
Statement of Financial Position [Abstract]
 
 
Allowances for accounts receivable
$ 1,882 
$ 2,312 
Shareholders' equity:
 
 
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
15,000,000 
15,000,000 
Common stock, shares issued
9,646,972 
9,646,972 
Common stock, shares outstanding
8,149,138 
8,424,709 
Preferred stock, par value
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
2,000,000 
2,000,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Treasury stock, shares
1,497,834 
1,222,263 
Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Mar. 30, 2013
Mar. 31, 2012
Mar. 30, 2013
Mar. 31, 2012
Income Statement [Abstract]
 
 
 
 
Net sales
$ 120,092 
$ 125,541 
$ 356,956 
$ 354,550 
Cost of goods sold
93,677 
100,350 
275,933 
297,963 
Gross profit
26,415 
25,191 
81,023 
56,587 
Selling, general and administrative expenses
23,706 
22,256 
71,442 
67,001 
Other expense (income), net
145 
79 
335 
19 
Operating income (loss)
2,564 
2,856 
9,246 
(10,433)
Interest expense, net
1,015 
1,017 
2,978 
2,901 
Earnings (loss) before (benefit) provision for income taxes
1,549 
1,839 
6,268 
(13,334)
(Benefit) provision for income taxes
(59)
(80)
1,051 
(6,076)
Net earnings (loss)
$ 1,608 
$ 1,919 
$ 5,217 
$ (7,258)
Basic earnings (loss) per share
$ 0.20 
$ 0.23 
$ 0.63 
$ (0.86)
Diluted earnings (loss) per share
$ 0.19 
$ 0.22 
$ 0.61 
$ (0.86)
Weighted average number of shares outstanding
8,165 
8,450 
8,288 
8,455 
Dilutive effect of stock options and awards
274 
336 
258 
Weighted average number of shares assuming dilution
8,439 
8,786 
8,546 
8,455 
Consolidated Statements of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Mar. 30, 2013
Mar. 31, 2012
Mar. 30, 2013
Mar. 31, 2012
Comprehensive income (loss):
 
 
 
 
Net earnings (loss)
$ 1,608 
$ 1,919 
$ 5,217 
$ (7,258)
Other comprehensive income (loss)
26 
(46)
22 
(114)
Comprehensive income (loss)
$ 1,634 
$ 1,873 
$ 5,239 
$ (7,372)
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Mar. 30, 2013
Mar. 31, 2012
Operating activities:
 
 
Net earnings (loss) from continuing operations
$ 5,217 
$ (7,258)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
Depreciation and amortization
5,983 
5,503 
Amortization of deferred financing fees
271 
271 
Excess tax benefits from exercise of stock options
(37)
(529)
Povision for deferred income taxes
(302)
(5,372)
Non-cash stock compensation
601 
1,250 
Loss on disposal of property and equipment
113 
61 
Inventory write-down
16,195 
Changes in operating assets and liabilities:
 
 
Accounts receivable
3,047 
3,117 
Inventories
(4,189)
(36,994)
Prepaid expenses and other current assets
(542)
(487)
Other non-current assets
111 
Accounts payable
53 
(3,432)
Accrued expenses
641 
(8,362)
Income taxes
1,004 
(3,118)
Other liabilities
(96)
87 
Net cash provided by (used in) operating activities
11,767 
(38,957)
Investing activities:
 
 
Purchases of property and equipment, net
(5,465)
(5,161)
Proceeds from Sale of Property, Plant, and Equipment
15 
Net cash used in investing activities
(5,450)
(5,161)
Financing activities:
 
 
Proceeds from long-term debt
364,753 
427,011 
Repayment of long-term debt
(366,322)
(381,170)
Repurchase of common stock
(4,524)
(2,289)
Proceeds from stock options
(239)
(54)
Excess tax benefits from exercise of stock options
37 
529 
Net cash (used in) provided by financing activities
(6,295)
44,027 
Net increase (decrease) in cash and cash equivalents
22 
(91)
Cash and cash equivalents at beginning of year
467 
656 
Cash and cash equivalents at end of year
489 
565 
Supplemental cash flow information:
 
 
Cash paid during the year for interest
2,631 
2,447 
Cash paid during the year for income taxes, net of refunds received
$ 367 
$ 2,348 
Basis of Presentation
Basis of Presentation
Basis of Presentation and Description of Business
We prepared the accompanying interim condensed consolidated financial statements in accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles ("U.S. GAAP") for complete financial statements. We believe these condensed consolidated financial statements reflect all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation. Operating results for the nine months ended March 30, 2013, are not necessarily indicative of the results that may be expected for our fiscal year ending June 29, 2013. Although our various product lines are sold on a year-round basis, the demand for specific products or styles reflects some seasonality, with sales in our fourth fiscal quarter generally being the highest and sales in our second fiscal quarter generally being the lowest. For more information regarding our results of operations and financial position, refer to the consolidated financial statements and footnotes included in our Form 10-K for our fiscal year ended June 30, 2012, filed with the United States Securities and Exchange Commission (“SEC”).

“Delta Apparel”, the “Company”, and “we”, “us” and “our” are used interchangeably to refer to Delta Apparel, Inc. together with our domestic wholly-owned subsidiaries, including M.J. Soffe, LLC (“Soffe”), Junkfood Clothing Company (“Junkfood”), To The Game, LLC (“To The Game”), Art Gun, LLC (“Art Gun”), and other international subsidiaries, as appropriate to the context.
Delta Apparel, Inc. is an international apparel design, marketing, manufacturing and sourcing company that features a diverse portfolio of lifestyle branded activewear and headwear, and produces high-quality private label programs. We specialize in selling casual and athletic products through a variety of distribution channels. Our products are sold across distribution tiers and in most store types, including specialty stores, boutiques, department stores, and mid and mass channels. We also have niche distribution at college bookstores and the U.S. military. Our products are made available direct-to-consumer on our websites at www.soffe.com, www.junkfoodclothing.com, www.saltlife.com and www.deltaapparel.com. Additional products can be viewed at www.2thegame.com and www.thecottonexchange.com. We design and internally manufacture the majority of our products, which allows us to offer a high degree of consistency and quality control as well as leverage scale efficiencies. We have manufacturing operations located in the United States, El Salvador, Honduras and Mexico, and use domestic and foreign contractors as additional sources of production. Our distribution facilities are strategically located throughout the United States to better serve our customers with same-day shipping on our catalog products and weekly replenishments to retailers.
We were incorporated in Georgia in 1999 and our headquarters is located at 322 South Main Street, 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 June 30.
Accounting Policies
Accounting Policies
Accounting Policies
Our accounting policies are consistent with those described in our Significant Accounting Policies in our Form 10-K for the fiscal year ended June 30, 2012, filed with the United States Securities and Exchange Commission.
New Accounting Standards
New Accounting Standards
Accounting Standards
Recently Adopted Standards
In June 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011-05, Comprehensive Income (Topic 220) - Presentation of Comprehensive Income ("ASU 2011-05"). This new guidance gives companies two choices on how to present items of net income, items of other comprehensive income and total comprehensive income: companies can create one continuous statement of comprehensive income or two separate consecutive statements. Other comprehensive income is no longer allowed to be presented solely in the statement of stockholders' equity. Earnings per share continues to be based on net income. ASU 2011-05 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, and applied on a retrospective basis. ASU 2011-05 was adopted on July 1, 2012, and the Condensed Consolidated Statements of Comprehensive Income herein comply with this guidance.
In December 2011, the FASB issued ASU No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 ("ASU 2011-12"). ASU 2011-12 indefinitely defers the new provisions under ASU 2011-05, which required entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented for both interim and annual financial statements. ASU 2011-12 is effective for the years beginning after December 15, 2011. ASU 2011-12 was adopted on July 1, 2012, and the Condensed Consolidated Statements of Comprehensive Income comply with this guidance.
In September 2011, the FASB issued ASU No. 2011-08, Intangibles - Goodwill and Other (Topic 350), Testing Goodwill for Impairment ("ASU 2011-08"). FASB decided to simplify how companies are required to test goodwill for impairment. Companies now have the option to first assess qualitative factors to determine whether it is more likely than not (likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount. If after considering the totality of events and circumstances a company determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it will not have to perform the two-step impairment test. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. ASU 2011-08 was adopted on July 1, 2012, and the adoption had no impact on our financial statements.
In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820) - Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS ("ASU 2011-04"). The new guidance results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between U.S. GAAP and International Financial Reporting Standards. Additional disclosure requirements in ASU 2011-04 include: (a) for Level 3 fair value measurements, quantitative information about unobservable inputs used, a description of the valuation processes used, and a qualitative discussion about the sensitivity of the measurements to changes in the unobservable inputs; (b) for the use of a nonfinancial asset that is different from the asset’s highest and best use, the reason for the difference; (c) for financial instruments not measured at fair value but for which disclosure of fair value is required, the fair value hierarchy level in which the fair value measurements were determined; and (d) the disclosure of all transfers between Level 1 and Level 2 of the fair value hierarchy. ASU 2011-04 is effective for interim periods beginning after December 15, 2011, and applied on a prospective basis. ASU 2011-04 was adopted on January 1, 2012, and did not have a material effect on our financial statements.
Standards Not Yet Adopted
In July 2012, FASB issued ASU No. 2012-02, Intangibles - Goodwill and Other (Topic 350), Testing Indefinite-Lived Intangible Assets for Impairment, ("ASU 2012-02"). This new guidance adds an optional qualitative assessment for determining whether an indefinite-lived intangible asset is impaired. Companies have the option to first perform a qualitative assessment to determine whether it is more likely than not (likelihood of more than 50%) that an indefinite-lived intangible is impaired. If a company determines that it is more likely than not that the fair value of such an asset exceeds its carrying amount, it would not need to calculate whether the fair value of such an asset exceeds its carrying amount and it would not need to calculate the fair value of the asset in that year. The company must, however, make a positive assertion about the conclusion and the circumstances taken into account to reach that conclusion. However, if the company determines otherwise, it must calculate the fair value of the asset and compare that value with its carrying amount. If the carrying amount of the company's intangible asset exceeds its fair value, the company must record an impairment charge for the amount of that excess, if any. ASU 2011-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. ASU 2012-02 is therefore effective for our fiscal year ending June 28, 2014.
In February 2013, FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220), Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASU 2013-02). This guidance requires companies to report information about reclassifications out of accumulated other comprehensive income in one place. These reclassifications must be presented by component. If these items are significant and are reclassified in their entirety in the period, companies must report the effect of the reclassifications on the respective line items in the statement where net income is presented. If the items are not reclassified in their entirety to net income in the period, companies must cross-reference in a note. ASU 2013-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2012. ASU 2013-02 is therefore effective for our fiscal year ending June 28, 2014.
Inventories
Inventories
Inventories
Inventories, net of reserves, consist of the following (in thousands):
 
March 30,
2013
 
June 30,
2012
Raw materials
$
11,550

 
$
11,759

Work in process
16,422

 
18,986

Finished goods
137,850

 
130,888

 
$
165,822

 
$
161,633


Raw materials include finished yarn and direct materials for the basics segment and include direct embellishment materials for the branded segment as well as undecorated garments and headwear for the Junkfood and To The Game business units. 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.
Debt
Debt
Debt
On May 27, 2011, Delta Apparel, Soffe, Junkfood, To The Game and Art Gun entered into a Fourth Amended and Restated Loan and Security Agreement (the “Amended Loan Agreement”) with the financial institutions named in the Amended Loan Agreement 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.
Pursuant to the Amended Loan Agreement, the line of credit is $145 million (subject to borrowing base limitations), and matures on May 26, 2016. Provided that no event of default exists, we have the option to increase the maximum credit available under the facility to $200 million (subject to borrowing base limitations), conditioned upon the Administrative Agent's ability to secure additional commitments and customary closing conditions.
At March 30, 2013, we had $103.1 million outstanding under our U.S. credit facility at an average interest rate of 2.3%, and had the ability to borrow an additional $30.4 million. Our credit facility includes a financial covenant requiring that if the amount of availability falls below an amount equal to 12.5% of the lesser of the borrowing base or $145 million, our Fixed Charge Coverage Ratio (“FCCR”) (as defined in the Amended Loan Agreement) for the preceding 12 month period must not be less than 1.1 to 1.0. As availability was above the minimum, we were not subject to the FCCR covenant at March 30, 2013. At March 30, 2013 and June 30, 2012, there was $12.9 million and $14.8 million, respectively, of retained earnings free of restrictions to make cash dividends or stock repurchases.
The credit facility contains 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 March 2011, we extinguished our existing debt with Banco Ficohsa, a Honduran bank, and entered into a new credit facility with them. As of March 30, 2013, we had $4.8 million outstanding on the installment portion of this loan and $5.0 million outstanding under the revolving portion of the agreement. The new revolving Honduran debt, by its nature, is not long-term, as it requires scheduled payments each six months. However, as the agreement permits us to re-borrow funds up to the amount repaid, subject to certain objective covenants, and we intend to re-borrow funds, subject to the objective criteria, the amounts have been classified as long-term debt.
Selling, General and Administrative Expense
Selling, General and Administrative Expense
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 $4.4 million and $4.0 million for the third quarter of fiscal years 2013 and 2012, respectively. Distribution costs included in selling, general and administrative expenses totaled $13.0 million and $11.6 million for the first nine months of fiscal years 2013 and 2012, 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. We expensed a one-time charge of $1.2 million in the fiscal 2013 first quarter for legal and professional fees related to the Audit Committee internal investigation that was completed during the first quarter.
Stock-based Compensation (Notes)
Stock-Based Compensation
Stock-Based Compensation
On November 11, 2010, the Delta Apparel, Inc. shareholders approved the Delta Apparel, Inc. 2010 Stock Plan ("2010 Stock Plan"). Upon shareholder approval of the 2010 Stock Plan, 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, all stock awards have and will be granted under the 2010 Stock Plan. The aggregate number of shares of common stock that may be delivered under the 2010 Stock Plan is 500,000 plus any shares of common stock subject to outstanding awards under the Option Plan or Award Plan that are subsequently forfeited or terminated for any reason before being exercised. We expense stock compensation costs in the cost of sales and selling, general and administrative expense line items of our Condensed Consolidated Statements of Operations over the vesting periods of each grant.
2010 Stock Plan
During the third quarter of fiscal years 2013 and 2012, we expensed $0.3 million and $0.1 million, respectively, in connection with the outstanding awards made under the 2010 Stock Plan. These amounts were included in selling, general, and administrative expenses in the Condensed Consolidated Statements of Operations.
During the second quarter of fiscal year 2013, we made adjustments to the expected vesting of the performance units and to the estimated forfeiture rate on the restricted share units. The Board of Directors previously granted 96,450 performance-based share units to certain executives. These share awards vest only upon achieving specified return on capital employed (as defined) performance targets over fiscal years 2012 and 2013. During the second quarter of fiscal year 2013, we determined that the ability to achieve the performance criteria related to these awards is no longer probable. As a result, we reversed $0.4 million of related share-based expense previously recognized and recognized no additional expense related to these awards. In addition, during the second quarter of fiscal 2013, we realized a benefit of $0.1 million from an actual forfeiture experience that was higher than previously estimated on restricted stock units, resulting primarily from an executive's departure from the Company. Accordingly, we increased the estimated forfeiture rate used in recognizing stock-based compensation expense on restricted stock units from a 5% forfeiture rate to a 16.5% forfeiture rate. The impact of these events, combined with the expense recorded on the restricted share units, resulted in a $0.3 million net benefit recorded during the quarter ended December 29, 2012.
During the first nine months of fiscal years 2013 and 2012, we expensed $0.5 million and $0.9 million, respectively, in connection with outstanding awards made under the 2010 Stock Plan. As of March 30, 2013, there was $0.9 million of total unrecognized compensation cost related to non-vested awards granted under the 2010 Stock Plan. This cost is expected to be recognized over a period of 2.4 years. During the quarter ended March 30, 2013, no stock awards were granted under the 2010 Stock Plan.
Option Plan
All options granted under the Option Plan have vested. As such, no expense was recognized during the first nine months of fiscal year 2013. During the third quarter and first nine months of fiscal year 2012, we expensed $44 thousand and $130 thousand, respectively, in connection with the Option Plan. During the quarter ended March 30, 2013, vested options representing 124,000 shares of our common stock were exercised, and the shares issued, in accordance with their respective agreements.
Award Plan
All awards granted under the Award Plan have vested and been exercised, and no awards remain outstanding. As such, no expense was recognized during the third quarter or first nine months of fiscal year 2013. During the third quarter of fiscal year 2012, no expense was recognized. During the first nine months of fiscal year 2012 we expensed $0.1 million in connection with the Award Plan.
Purchase Contracts
Purchase Contracts
Purchase Contracts
We have entered into agreements, and have fixed prices, to purchase yarn, natural gas, finished fabric, and finished apparel and headwear products. At March 30, 2013, minimum payments under these contracts were as follows (in thousands):
Yarn
$
13,822

Natural Gas
327

Finished fabric
2,387

Finished products
26,257

 
$
42,793

Business Segments
Business Segments
Business Segments
We operate our business in two distinct segments: branded and basics. Although the two segments are similar in their production processes and regulatory environments, they are distinct in their economic characteristics, products and distribution methods.
The branded segment is comprised of our business units focused on specialized apparel garments and headwear to meet consumer preferences and fashion trends, and includes Soffe, Junkfood, To The Game and Art Gun. These branded embellished and unembellished products are sold through specialty and boutique shops, upscale and traditional department stores, mid-tier retailers, sporting goods stores, college bookstores and the U.S. military. Products in this segment are marketed under our lifestyle brands of Soffe®, Intensity Athletics®, The Cotton Exchange®, Junk Food®, and The Game®, licensed brands of Salt Life® and Realtree Outfitters®, as well as other labels.
The basics segment is comprised of our business units primarily focused on garment styles that are characterized by low fashion risk, and includes our Delta Catalog and FunTees businesses. Within the Delta Catalog business, we market, distribute and manufacture unembellished knit apparel under the main brands of Delta Pro Weight® and Delta Magnum Weight®. Delta Catalog products are sold to a diversified audience ranging from large licensed screen printers all the way to small independent businesses. We also manufacture private label products for major branded sportswear companies, retailers, corporate industry programs, and sports licensed apparel marketers. Typically these products are sold with value-added services such as hangtags, ticketing, hangers, and embellishment so that they are fully ready for retail. The majority of the private label products are sold through the FunTees business.
Robert W. Humphreys, our chief operating decision maker, and management evaluate performance and allocate resources based on profit or loss from operations before interest, income taxes and special charges (“Segment Operating Income”). Our Segment Operating Income may not be comparable to similarly titled measures used by other companies. Intercompany transfers between operating segments are transacted at cost and have been eliminated within the segment amounts shown in the following table. We expensed a one-time charge of $1.2 million in the fiscal 2013 first quarter for legal and professional fees related to the previously disclosed Audit Committee internal investigation that was completed during that quarter. This one-time charge is included in the basics segment.
Information about our operations as of and for the three and nine months ended March 30, 2013, and March 31, 2012, by operating segment, is as follows (in thousands):
 
Basics
 
Branded
 
Consolidated
Three months ended March 30, 2013
 
 
 
 
 
Net sales
$
67,445

 
$
52,647

 
$
120,092

Segment operating income (loss)
3,655

 
(1,091
)
 
2,564

Segment assets *
166,771

 
153,327

 
320,098

 
 
 
 
 
 
Three months ended March 31, 2012
 
 
 
 
 
Net sales
$
67,048

 
$
58,493

 
$
125,541

Segment operating loss
1,514

 
1,342

 
2,856

Segment assets *
180,332

 
157,546

 
337,878

*
 
All goodwill and intangibles on our balance sheet are included in the branded segment.

 
Basics
 
Branded
 
Consolidated
Nine months ended March 30, 2013
 
 
 
 
 
Net sales
$
192,828

 
$
164,128

 
$
356,956

Segment operating income (loss)
10,461

 
(1,215
)
 
9,246

 
 
 
 
 
 
Nine months ended March 31, 2012
 
 
 
 
 
Net sales
$
177,200

 
$
177,350

 
$
354,550

Segment operating (loss) income
(15,592
)
 
5,159

 
(10,433
)

The following reconciles the segment operating income to the Company's consolidated income before income taxes (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
March 30,
2013
 
March 31,
2012
 
March 30,
2013
 
March 31,
2012
Segment operating income (loss)
$
2,564

 
$
2,856

 
$
9,246

 
$
(10,433
)
Unallocated interest expense
1,015

 
1,017

 
2,978

 
2,901

Consolidated earnings (loss) before taxes
$
1,549

 
$
1,839

 
$
6,268

 
$
(13,334
)
Income Taxes
Income Taxes
Income Taxes
We had an effective income tax rate of 16.8% for the nine months ended March 30, 2013, compared to an effective rate of 45.6% for the same period in the prior year and an effective rate of 76.4% for the fiscal year ended June 30, 2012. The effective tax rate for the fiscal year ended June 30, 2012, was impacted by the operating losses driven by the $16.2 million inventory markdown during that fiscal year, lowering our U.S. taxable income while maintaining profits in the offshore taxable and tax-free jurisdictions. Based on our current projected pre-tax income and the anticipated amount of U.S. taxable income compared to profits maintained in the offshore taxable and tax-free jurisdictions, our estimated effective income tax rate for the fiscal year ended June 29, 2013, is expected to be approximately 17%, a 650 basis point reduction from the expected effective income tax as of December 29, 2012.
We file income tax returns in the U.S. federal jurisdiction and various state, local and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state, local or non-U.S. income tax examinations by tax authorities for our tax years before 2008. However, net operating loss carryforwards remain subject to examination to the extent they are carried forward and impact a year that is open to examination by authorities.
Derivatives and Fair Value Measurements
Derivatives and Fair Value Measurements
Derivatives and Fair Value Measurements
From time to time, we may use interest rate swaps or other instruments to manage our interest rate exposure and reduce the impact of future interest rate changes. These financial instruments are not used for trading or speculative purposes.
 
Effective Date
 
Notational
Amount
 
Fixed LIBOR Rate
 
Maturity Date
Interest Rate Swap
September 1, 2011
 
$10 million
 
0.7650
%
 
September 1, 2013
Interest Rate Swap
September 1, 2011
 
$10 million
 
0.9025
%
 
March 1, 2014
Interest Rate Swap
September 1, 2011
 
$10 million
 
1.0700
%
 
September 1, 2014

FASB Codification No. 820, Fair Value Measurements and Disclosures (“ASC 820”), defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Assets and liabilities measured at fair value are grouped in three levels. The levels prioritize the inputs used to measure the fair value of the assets or liabilities. These levels are:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices that are observable for assets and liabilities, either directly or indirectly. These inputs include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are less active.
Level 3 – Unobservable inputs that are supported by little or no market activity for assets or liabilities and includes certain pricing models, discounted cash flow methodologies and similar techniques.
The following financial liabilities are measured at fair value on a recurring basis (in thousands):
 
Fair Value Measurements Using
Period Ended
Total
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Interest Rate Swaps
 
 
 
 
 
 
 
March 30, 2013
$
174

 

 
$
174

 

June 30, 2012
$
209

 

 
$
209

 

 
 
 
 
 
 
 
 
Contingent Consideration
 
 
 
 
 
 
 
March 30, 2013

 

 

 

June 30, 2012

 

 

 


The fair value of the interest rate swap agreements were derived from 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. We 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 Art Gun. Accordingly, the fair value measurement for contingent consideration falls in level 3 of the fair value hierarchy. The contingent consideration for Art Gun is remeasured at the end of each reporting period.
The following table summarizes the fair value and presentation in the Condensed Consolidated Balance Sheets for derivatives as of March 30, 2013, and June 30, 2012.
 
March 30,
2013
 
June 30,
2012
Accrued expenses
$
73

 
$

Deferred tax liabilities
(67
)
 
(80
)
Other liabilities
101

 
209

Accumulated other comprehensive loss
$
107

 
$
129

Legal Proceedings
Legal Proceedings
Legal Proceedings

We 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 our Junkfood division and its compliance with applicable product safety standards. The Commission subsequently investigated the matter, including whether we complied with the reporting requirements of the Consumer Product Safety Act (“CPSA”), and the garments in question were ultimately recalled. On or about July 25, 2012, Junkfood received notification from the Commission staff alleging that Junkfood knowingly violated CPSA Section 15(b) and that it will recommend to the Commission a $900,000 civil penalty. We contend that the Commission's allegations are without merit.

On August 27, 2012, Junkfood responded to the Commission staff regarding its recommended penalty, setting forth a number of defenses and mitigating factors that could result in a much lower penalty, if any, ultimately imposed by a court should the matter proceed to litigation. On March 27, 2013, the Commission requested additional information from Junkfood regarding the matter. While we will continue to defend against these allegations, we believe it is probable that a liability has been incurred. Based upon the terms of previously published CPSC settlements and related product recall notices, we believe if we settle the matter the minimum settlement amount would be $25,000. Should the Commission seek enforcement of the recommended civil penalty and ultimately prevail on its claims at trial, we could be required to pay amounts exceeding $900,000, along with interest and the Commission's costs and fees. During the quarter ended June 30, 2012, we recorded a liability for the most likely outcome within this range, and this liability remains recorded as of March 30, 2013.

In addition, at times we are party to various legal claims, actions and complaints. We believe that, as a result of legal defenses, insurance arrangements, and indemnification provisions with parties believed to be financially capable, such actions should not have a material effect on our operations, financial condition, or liquidity.
The Cotton Exchange Acquisition
The Cotton Exchange Acquisition
The Cotton Exchange Acquisition
On June 11, 2010, we formed a new North Carolina limited liability company, TCX, LLC, as a wholly-owned subsidiary of M.J. Soffe, LLC. Pursuant to an Asset Purchase Agreement dated July 5, 2010, on July 12, 2010, TCX acquired substantially all of the net assets of HPM Apparel, Inc. d/b/a The Cotton Exchange, including accounts receivable, inventory, and fixed assets, and assumed certain liabilities. The total purchase price, which included a post-closing working capital adjustment, was $9.9 million. We finalized the valuation for the assets acquired and liabilities assumed and have determined the final allocation of the purchase price. No goodwill or other intangible assets were recorded in conjunction with the acquisition of The Cotton Exchange. Effective January 1, 2012, TCX was merged into its parent entity, M.J. Soffe, LLC, for reasons of corporate simplification and as such, TCX no longer exists as a separate entity.
Repurchase of Common Stock
Repurchase of Common Stock
Repurchase of Common Stock
As of June 30, 2012, our Board of Directors had authorized management to use up to $20.0 million to repurchase Delta Apparel stock in open market transactions under our Stock Repurchase Program. On January 25, 3013 we announced that on January 23, 2013 the Board of Directors authorized an additional $10.0 million for share repurchases, bringing the aggregate total authorized to $30.0 million.
During the third quarter of fiscal year 2013, we purchased 103,571 shares of our common stock for a total cost of $1.5 million bringing our total to 316,322 shares for a cost of $4.5 million for the nine month period ending March 30, 2012. During the third quarter of fiscal year 2012, we did not purchase any shares of our common stock. As of March 30, 2013, we have purchased 1,685,869 shares of common stock for an aggregate of $18.8 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 March 29, 2013, $11.2 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 March 30, 2013:
Period
 
Total Number of Shares Purchased
 
Average Price Paid per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans
 
Dollar Value of Shares that May Yet Be Purchased Under the Plans
December 30, 2012 to February 2, 2013
 
94,483

 
$14.18
 
94,483

 

$11.4
 million
February 3 to March 2, 2013
 
5,993

 
$15.96
 
5,993

 

$11.3
 million
March 3 to March 30, 2013
 
3,095

 
$15.85
 
3,095

 

$11.2
 million
Total
 
103,571

 
$14.34
 
103,571

 

$11.2
 million
License Agreements
License Agreements
License Agreements
We have entered into license 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 $3.0 million and $2.9 million for the third quarter of fiscal years 2013 and 2012, respectively. Royalty expense was $11.8 million and $11.7 million for the first nine months of fiscal years 2013 and 2012, respectively.
At March 30, 2013, based on minimum sales requirements, future minimum royalty payments required under these license agreements were as follows (in thousands):
Fiscal Year
Amount
2013
$
453

2014
4,132

2015
2,212

2016
882

 
$
7,679

Goodwill and Intangible Assets
Goodwill and Intangible Assets
Goodwill and Intangible Assets
Components of intangible assets consist of the following (in thousands):
 
March 30, 2013
 
June 30, 2012
 
 
 
Cost
Accumulated Amortization
Net Value
 
Cost
Accumulated Amortization
Net Value
 
Economic Life
 
 
 
 
 
 
 
 
 
 
Goodwill
$
16,812

$

$
16,812

 
$
16,812

$

$
16,812

 
N/A
 
 
 
 
 
 
 
 
 
 
Intangibles:
 
 
 
 
 
 
 
 
 
Tradename/trademarks
$
1,530

$
(583
)
$
947

 
$
1,530

$
(526
)
$
1,004

 
20 yrs
Customer relationships
7,220

(2,757
)
4,463

 
7,220

(2,486
)
4,734

 
20 yrs
Technology
1,220

(398
)
822

 
1,220

(307
)
913

 
10 yrs
Non-compete agreements
517

(407
)
110

 
517

(371
)
146

 
4 – 8.5 yrs
Total intangibles
$
10,487

$
(4,145
)
$
6,342

 
$
10,487

$
(3,690
)
$
6,797

 
 


Amortization expense for intangible assets was $0.2 million and $0.5 million for the three months and nine months ended March 30, 2013, respectively, and $0.6 million for the fiscal year ended June 30, 2012. Amortization expense is estimated to be approximately $0.6 million each for fiscal years 2013, 2014, 2015, 2016 and 2017.
Selling, General and Administrative Expense (Policies)
Selling, General and Administrative Expenses
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.
Inventories (Tables)
Schedule of Inventories, Net of Reserves
Inventories, net of reserves, consist of the following (in thousands):
 
March 30,
2013
 
June 30,
2012
Raw materials
$
11,550

 
$
11,759

Work in process
16,422

 
18,986

Finished goods
137,850

 
130,888

 
$
165,822

 
$
161,633

Purchase Contracts (Tables)
Purchase contracts minimum payments
At March 30, 2013, minimum payments under these contracts were as follows (in thousands):
Yarn
$
13,822

Natural Gas
327

Finished fabric
2,387

Finished products
26,257

 
$
42,793

Business Segments (Tables)
Information about our operations as of and for the three and nine months ended March 30, 2013, and March 31, 2012, by operating segment, is as follows (in thousands):
 
Basics
 
Branded
 
Consolidated
Three months ended March 30, 2013
 
 
 
 
 
Net sales
$
67,445

 
$
52,647

 
$
120,092

Segment operating income (loss)
3,655

 
(1,091
)
 
2,564

Segment assets *
166,771

 
153,327

 
320,098

 
 
 
 
 
 
Three months ended March 31, 2012
 
 
 
 
 
Net sales
$
67,048

 
$
58,493

 
$
125,541

Segment operating loss
1,514

 
1,342

 
2,856

Segment assets *
180,332

 
157,546

 
337,878

*
 
All goodwill and intangibles on our balance sheet are included in the branded segment.
The following reconciles the segment operating income to the Company's consolidated income before income taxes (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
March 30,
2013
 
March 31,
2012
 
March 30,
2013
 
March 31,
2012
Segment operating income (loss)
$
2,564

 
$
2,856

 
$
9,246

 
$
(10,433
)
Unallocated interest expense
1,015

 
1,017

 
2,978

 
2,901

Consolidated earnings (loss) before taxes
$
1,549

 
$
1,839

 
$
6,268

 
$
(13,334
)
Derivatives and Fair Value Measurements (Tables)
These financial instruments are not used for trading or speculative purposes.
 
Effective Date
 
Notational
Amount
 
Fixed LIBOR Rate
 
Maturity Date
Interest Rate Swap
September 1, 2011
 
$10 million
 
0.7650
%
 
September 1, 2013
Interest Rate Swap
September 1, 2011
 
$10 million
 
0.9025
%
 
March 1, 2014
Interest Rate Swap
September 1, 2011
 
$10 million
 
1.0700
%
 
September 1, 2014
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 Swaps
 
 
 
 
 
 
 
March 30, 2013
$
174

 

 
$
174

 

June 30, 2012
$
209

 

 
$
209

 

 
 
 
 
 
 
 
 
Contingent Consideration
 
 
 
 
 
 
 
March 30, 2013

 

 

 

June 30, 2012

 

 

 

The following table summarizes the fair value and presentation in the Condensed Consolidated Balance Sheets for derivatives as of March 30, 2013, and June 30, 2012.
 
March 30,
2013
 
June 30,
2012
Accrued expenses
$
73

 
$

Deferred tax liabilities
(67
)
 
(80
)
Other liabilities
101

 
209

Accumulated other comprehensive loss
$
107

 
$
129

Repurchase of Common Stock (Tables)
Schedule of Repurchase of Common Stock
The following table summarizes the purchases of our common stock for the quarter ended March 30, 2013:
Period
 
Total Number of Shares Purchased
 
Average Price Paid per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Plans
 
Dollar Value of Shares that May Yet Be Purchased Under the Plans
December 30, 2012 to February 2, 2013
 
94,483

 
$14.18
 
94,483

 

$11.4
 million
February 3 to March 2, 2013
 
5,993

 
$15.96
 
5,993

 

$11.3
 million
March 3 to March 30, 2013
 
3,095

 
$15.85
 
3,095

 

$11.2
 million
Total
 
103,571

 
$14.34
 
103,571

 

$11.2
 million
License Agreements (Tables)
Schedule of future minimum royalty payments
At March 30, 2013, based on minimum sales requirements, future minimum royalty payments required under these license agreements were as follows (in thousands):
Fiscal Year
Amount
2013
$
453

2014
4,132

2015
2,212

2016
882

 
$
7,679

Goodwill and Intangible Assets (Tables)
Components of Intangible Assets
Components of intangible assets consist of the following (in thousands):
 
March 30, 2013
 
June 30, 2012
 
 
 
Cost
Accumulated Amortization
Net Value
 
Cost
Accumulated Amortization
Net Value
 
Economic Life
 
 
 
 
 
 
 
 
 
 
Goodwill
$
16,812

$

$
16,812

 
$
16,812

$

$
16,812

 
N/A
 
 
 
 
 
 
 
 
 
 
Intangibles:
 
 
 
 
 
 
 
 
 
Tradename/trademarks
$
1,530

$
(583
)
$
947

 
$
1,530

$
(526
)
$
1,004

 
20 yrs
Customer relationships
7,220

(2,757
)
4,463

 
7,220

(2,486
)
4,734

 
20 yrs
Technology
1,220

(398
)
822

 
1,220

(307
)
913

 
10 yrs
Non-compete agreements
517

(407
)
110

 
517

(371
)
146

 
4 – 8.5 yrs
Total intangibles
$
10,487

$
(4,145
)
$
6,342

 
$
10,487

$
(3,690
)
$
6,797

 
 
Basis of Presentation Basis of Presentation (Details)
6 Months Ended
Dec. 29, 2012
Basis of Presentation [Abstract]
 
Weeks in fiscal year, minimum
P52W 
Weeks in fiscal year, maximum
P53W 
Inventories (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 30, 2013
Jun. 30, 2012
Inventories, net of reserves:
 
 
Raw materials
$ 11,550 
$ 11,759 
Work in process
16,422 
18,986 
Finished goods
137,850 
130,888 
Inventories, net
$ 165,822 
$ 161,633 
Debt (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
9 Months Ended
Mar. 30, 2013
Jun. 30, 2012
May 27, 2011
Mar. 30, 2013
Revolving Credit Facility, due May 2016 [Member]
Revolving Credit Facility [Member]
Mar. 30, 2013
Term Loan [Member]
Loans Payable [Member]
Mar. 30, 2013
Revolving Credit Facility [Member]
Loans Payable [Member]
Mar. 30, 2013
Minimum [Member]
Revolving Credit Facility, due May 2016 [Member]
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
 
 
 
 
 
 
 
Line of credit after increase pursuant to amended loan agreement
 
 
$ 145 
 
 
 
 
Potential maximum credit available under the facility
 
 
200 
 
 
 
 
Outstanding under credit facility
 
 
 
103.1 
 
 
 
Average interest rate under outstanding credit facility (percentage)
 
 
 
2.30% 
 
 
 
Unused borrowing capacity
 
 
 
30.4 
 
 
 
Debt covenant, percent of borrowing base, benchmark
 
 
 
12.50% 
 
 
 
Debt covenant, maximum borrowing base
 
 
 
145 
 
 
 
Fixed charge coverage ratio, term
 
 
 
12 months 
 
 
 
Fixed charge coverage ratio
 
 
 
 
 
 
1.1 
Retained earnings free of restrictions
12.9 
14.8 
 
 
 
 
 
Long-term debt
 
 
 
 
$ 4.8 
$ 5.0 
 
Selling, General and Administrative Expense (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Mar. 30, 2013
Sep. 29, 2012
Mar. 31, 2012
Mar. 30, 2013
Mar. 31, 2012
Selling, General and Administratie Expense [Abstract]
 
 
 
 
 
Distribution costs
$ 4.4 
 
$ 4.0 
$ 13.0 
$ 11.6 
Selling, general and administrative expense
 
$ 1.2 
 
 
 
Stock-based Compensation (Narrative) (Details) (USD $)
3 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended
Mar. 30, 2013
Dec. 29, 2012
Dec. 31, 2011
Oct. 1, 2011
Mar. 30, 2013
2010 Stock Plan [Member]
Dec. 29, 2012
2010 Stock Plan [Member]
Mar. 31, 2012
2010 Stock Plan [Member]
Mar. 30, 2013
2010 Stock Plan [Member]
Mar. 31, 2012
2010 Stock Plan [Member]
Dec. 29, 2012
2010 Stock Plan [Member]
Restricted Stock Units (RSUs) [Member]
Dec. 29, 2012
2010 Stock Plan [Member]
Performance Stock Units [Member]
Mar. 31, 2012
Option Plan [Member]
Stock Options [Member]
Mar. 30, 2013
Option Plan [Member]
Stock Options [Member]
Mar. 31, 2012
Option Plan [Member]
Stock Options [Member]
Mar. 31, 2012
Award Plan [Member]
Mar. 31, 2012
Award Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate number of shares that may be delivered (shares)
 
 
 
96,450 
500,000 
 
 
500,000 
 
 
 
 
 
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award, Equity Instruments Other Than Options, Effect of Change in Fair Value Assumption
 
 
 
 
$ (300,000)
$ 300,000 
 
 
 
$ 100,000 
$ (400,000)
 
 
 
 
 
Share Based Compensation Arrangement By Share Based Payment Award, Fair Value Assumption, Expected Forfeiture Rate
 
16.50% 
5.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allocated share-based compensation expense
 
 
 
 
 
 
100,000 
500,000 
900,000 
 
 
44,000 
130,000 
100,000 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period
124,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total compensation cost not yet recognized
 
 
 
 
$ 900,000 
 
 
$ 900,000 
 
 
 
 
 
 
 
 
Period for recognition
 
 
 
 
 
 
 
2 years 4 months 24 days 
 
 
 
 
 
 
 
 
Purchase Contracts (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 30, 2013
Long-term Purchase Commitment [Line Items]
 
Oustanding minimum payments
$ 42,793 
Yarn [Member]
 
Long-term Purchase Commitment [Line Items]
 
Oustanding minimum payments
13,822 
Natural Gas [Member]
 
Long-term Purchase Commitment [Line Items]
 
Oustanding minimum payments
327 
Finished Fabric [Member]
 
Long-term Purchase Commitment [Line Items]
 
Oustanding minimum payments
2,387 
Finished Products [Member]
 
Long-term Purchase Commitment [Line Items]
 
Oustanding minimum payments
$ 26,257 
Business Segments (Details) (USD $)
3 Months Ended 9 Months Ended
Mar. 30, 2013
Sep. 29, 2012
Mar. 31, 2012
Mar. 30, 2013
segment
Mar. 31, 2012
Jun. 30, 2012
Segment Reporting Information [Line Items]
 
 
 
 
 
 
Professional Fees
 
$ 1,200,000 
 
 
 
 
Number of business segments
 
 
 
 
 
Net sales
120,092,000 
 
125,541,000 
356,956,000 
354,550,000 
 
Segment operating income (loss)
2,564,000 
 
2,856,000 
9,246,000 
(10,433,000)
 
Segment assets
320,098,000 1
 
337,878,000 1
320,098,000 1
337,878,000 1
320,394,000 
Payments to Acquire Property, Plant, and Equipment
 
 
 
5,465,000 
5,161,000 
 
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
 
 
 
 
 
 
Segment operating income (loss)
2,564,000 
 
2,856,000 
9,246,000 
(10,433,000)
 
Unallocated interest expense
1,015,000 
 
1,017,000 
2,978,000 
2,901,000 
 
Earnings (loss) before (benefit) provision for income taxes
1,549,000 
 
1,839,000 
6,268,000 
(13,334,000)
 
Basics [Member]
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
Net sales
67,445,000 
 
67,048,000 
192,828,000 
177,200,000 
 
Segment operating income (loss)
3,655,000 
 
1,514,000 
10,461,000 
(15,592,000)
 
Segment assets
166,771,000 
 
180,332,000 
166,771,000 
180,332,000 
 
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
 
 
 
 
 
 
Segment operating income (loss)
3,655,000 
 
1,514,000 
10,461,000 
(15,592,000)
 
Branded [Member]
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
Net sales
52,647,000 
 
58,493,000 
164,128,000 
177,350,000 
 
Segment operating income (loss)
(1,091,000)
 
1,342,000 
(1,215,000)
5,159,000 
 
Segment assets
153,327,000 
 
157,546,000 
153,327,000 
157,546,000 
 
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
 
 
 
 
 
 
Segment operating income (loss)
(1,091,000)
 
1,342,000 
(1,215,000)
5,159,000 
 
Operating segments [Member]
 
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
 
Segment operating income (loss)
2,564,000 
 
2,856,000 
9,246,000 
(10,433,000)
 
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
 
 
 
 
 
 
Segment operating income (loss)
2,564,000 
 
2,856,000 
9,246,000 
(10,433,000)
 
Unallocated amount to segment [Member]
 
 
 
 
 
 
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
 
 
 
 
 
 
Unallocated interest expense
$ 1,015,000 
 
$ 1,017,000 
$ 2,978,000 
$ 2,901,000 
 
Income Taxes (Details) (USD $)
In Thousands, unless otherwise specified
9 Months Ended 12 Months Ended
Mar. 30, 2013
Mar. 31, 2012
Jun. 29, 2013
Jun. 30, 2012
Income Tax Disclosure [Abstract]
 
 
 
 
Effective income tax rate, change from prior year rate
 
 
6.50% 
 
Effective income tax rate
16.80% 
45.60% 
17.00% 
76.40% 
Inventory write-down
$ 0 
$ 16,195 
 
 
Derivatives and Fair Value Measurements (Details) (USD $)
Mar. 30, 2013
Jun. 30, 2012
Fair Value, Assets and Liabilities Measured on Recurring Basis [Abstract]
 
 
Business Acquisition, Contingent Consideration, at Fair Value
$ 0 
$ 0 
Accrued Expenses [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Abstract]
 
 
Derivative liabilities, fair value
73,000 
Deferred Tax Liabilities [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Abstract]
 
 
Derivative liabilities, fair value
(67,000)
(80,000)
Other Liabilities [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Abstract]
 
 
Derivative liabilities, fair value
101,000 
209,000 
Accumulated Other Comprehensive Loss [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Abstract]
 
 
Derivative liabilities, fair value
107,000 
129,000 
Total [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Abstract]
 
 
Interest Rate Swap
174,000 
209,000 
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Abstract]
 
 
Interest Rate Swap
Significant Other Observable Inputs (Level 2) [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Abstract]
 
 
Interest Rate Swap
174,000 
209,000 
Significant Unobservable Inputs (Level 3) [Member]
 
 
Fair Value, Assets and Liabilities Measured on Recurring Basis [Abstract]
 
 
Interest Rate Swap
Maturity Date 9/1/2013 [Member]
 
 
Interest Rate Derivatives [Abstract]
 
 
Notional amount
 
10,000,000 
Fixed LIBOR Rate
 
0.765% 
Maturity Date 3/1/2014 [Member]
 
 
Interest Rate Derivatives [Abstract]
 
 
Notional amount
 
10,000,000 
Fixed LIBOR Rate
 
0.9025% 
Maturity Date 9/1/2014 [Member]
 
 
Interest Rate Derivatives [Abstract]
 
 
Notional amount
 
$ 10,000,000 
Fixed LIBOR Rate
 
1.07% 
Legal Proceedings (Details) (Pending Litigation [Member], USD $)
In Thousands, unless otherwise specified
Mar. 30, 2013
Pending Litigation [Member]
 
Loss Contingencies [Line Items]
 
Recommended civil penalty
$ 900 
Minimum possible loss
$ 25 
The Cotton Exchange Acquisition (Details) (USD $)
In Millions, unless otherwise specified
Jul. 12, 2010
Business Combinations [Abstract]
 
Purchase price
$ 9.9 
Repurchase of Common Stock (Details) (USD $)
In Millions, except Share data, unless otherwise specified
0 Months Ended 1 Months Ended 3 Months Ended 9 Months Ended 12 Months Ended
Jan. 23, 2013
Mar. 30, 2013
Mar. 2, 2013
Feb. 2, 2013
Mar. 30, 2013
Mar. 30, 2013
Jun. 30, 2012
Equity [Abstract]
 
 
 
 
 
 
 
Increase in value of shares authorized to be repurchased
$ 10.0 
 
 
 
 
 
 
Authorized amount
30.0 
 
 
 
30.0 
 
20.0 
Shares repurchased (shares)
 
 
 
 
103,571 
316,322 
 
Aggregated number of shares repurchased (shares)
 
1,685,869 
 
 
1,685,869 
1,685,869 
 
Shares repurchased, value
 
 
 
 
1.5 
4.5 
 
Aggregated shares repurchased, value
 
18.8 
 
 
18.8 
18.8 
 
Remaining authorized amount
 
11.2 
11.3 
11.4 
11.2 
11.2 
 
Purchases of Common Stock [Abstract]
 
 
 
 
 
 
 
Shares of common stock purchased (shares)
 
3,095 
5,993 
94,483 
103,571 
 
 
Average price paid per share (usd per share)
 
$ 15.85 
$ 15.96 
$ 14.18 
$ 14.34 
 
 
Total number of shares purchased as part of publicly announced plans (shares)
 
3,095 
5,993 
94,483 
103,571 
 
 
Dollar value of shares that may yet be purchased under the plans
 
$ 11.2 
$ 11.3 
$ 11.4 
$ 11.2 
$ 11.2 
 
License Agreements (Details) (USD $)
3 Months Ended 9 Months Ended
Mar. 30, 2013
Mar. 31, 2012
Mar. 30, 2013
Mar. 31, 2012
Commitments and Contingencies [Abstract]
 
 
 
 
Royalty expense
$ 3,000,000 
$ 2,900,000 
$ 11,800,000 
$ 11,700,000 
License Agreements, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
 
 
 
 
2013
453,000 
 
453,000 
 
2014
4,132,000 
 
4,132,000 
 
2015
2,212,000 
 
2,212,000 
 
2016
882,000 
 
882,000 
 
Total due
$ 7,679,000 
 
$ 7,679,000 
 
Goodwill and Intangible Assets (Details) (USD $)
3 Months Ended 9 Months Ended 12 Months Ended
Mar. 30, 2013
Mar. 30, 2013
Jun. 30, 2012
Goodwill and Finite-Lived Intangible Assets [Line Items]
 
 
 
Goodwill, Cost
$ 16,812,000 
$ 16,812,000 
$ 16,812,000 
Goodwill, Accumulated Amortization
Goodwill, Net Value
16,812,000 
16,812,000 
16,812,000 
Intangibles, Cost
10,487,000 
10,487,000 
10,487,000 
Intangibles, Accumulated Amortization
(4,145,000)
(4,145,000)
(3,690,000)
Intangibles, Net Value
6,342,000 
6,342,000 
6,797,000 
Amortization of intangible assets
200,000 
500,000 
600,000 
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
 
 
 
Amortization expense estimate for 2013
600,000 
600,000 
 
Amortization expense estimate for 2014
600,000 
600,000 
 
Amortization expense estimate for 2015
600,000 
600,000 
 
Amortization expense estimate for 2016
600,000 
600,000 
 
Amortization expense estimate for 2017
600,000 
600,000 
 
Tradename/Trademarks [Member]
 
 
 
Goodwill and Finite-Lived Intangible Assets [Line Items]
 
 
 
Intangibles, Cost
1,530,000 
1,530,000 
1,530,000 
Intangibles, Accumulated Amortization
(583,000)
(583,000)
(526,000)
Intangibles, Net Value
947,000 
947,000 
1,004,000 
Intangibles, economic life
 
20 years 
 
Customer Relationships [Member]
 
 
 
Goodwill and Finite-Lived Intangible Assets [Line Items]
 
 
 
Intangibles, Cost
7,220,000 
7,220,000 
7,220,000 
Intangibles, Accumulated Amortization
(2,757,000)
(2,757,000)
(2,486,000)
Intangibles, Net Value
4,463,000 
4,463,000 
4,734,000 
Intangibles, economic life
 
20 years 
 
Technology [Member]
 
 
 
Goodwill and Finite-Lived Intangible Assets [Line Items]
 
 
 
Intangibles, Cost
1,220,000 
1,220,000 
1,220,000 
Intangibles, Accumulated Amortization
(398,000)
(398,000)
(307,000)
Intangibles, Net Value
822,000 
822,000 
913,000 
Intangibles, economic life
 
10 years 
 
Non-compete Agreements [Member]
 
 
 
Goodwill and Finite-Lived Intangible Assets [Line Items]
 
 
 
Intangibles, Cost
517,000 
517,000 
517,000 
Intangibles, Accumulated Amortization
(407,000)
(407,000)
(371,000)
Intangibles, Net Value
$ 110,000 
$ 110,000 
$ 146,000 
Non-compete Agreements [Member] |
Minimum [Member]
 
 
 
Goodwill and Finite-Lived Intangible Assets [Line Items]
 
 
 
Intangibles, economic life
 
4 years 
 
Non-compete Agreements [Member] |
Maximum [Member]
 
 
 
Goodwill and Finite-Lived Intangible Assets [Line Items]
 
 
 
Intangibles, economic life
 
8 years 6 months