Annual report pursuant to Section 13 and 15(d)

Stock-based Compensation

Stock-based Compensation

12 Months Ended

Sep. 27, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

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. 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. ASC 718 requires that cash flows from tax benefits attributable to tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) be classified as financing cash flows. During the 2014 fiscal year, we reduced expense by $90 thousand in connection with our outstanding awards due to adjustments to the expected vesting of certain performance units granted and known forfeitures of certain restricted stock units granted. Total stock-based compensation expense was $0.7 million for the transition period ended September 28, 2013. Total stock-based compensation for fiscal years 2013 and 2012 was $1.2 million and $1.6 million, respectively. Tax expense of $35 thousand, associated with the reduction of expense, was recognized in fiscal year 2014.

Associated with the compensation cost are income tax benefits recognized of $0.3 million, $0.5 million and $0.6 million in the transition period and fiscal years 2013 and 2012, respectively.

2010 Stock Plan

Under the 2010 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 consist of stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock, performance units, and other stock and cash awards. 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. The 2010 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 any given calendar year. If a participant dies or becomes disabled (as defined in the 2010 Stock Plan) while employed by or serving as a director, all unvested awards become fully vested. The Compensation Committee is authorized to establish the terms and conditions of awards granted under the 2010 Stock Plan, to establish, amend and rescind any rules and regulations relating to the 2010 Stock Plan, and to make any other determinations that it deems necessary.

Compensation expense is recorded on the selling, general and administrative expense line item in our Consolidated Statements of Operations over the vesting periods.

Stock Options

No stock options were granted during fiscal year 2014. All outstanding options granted by us have vested and are exercisable.

A summary of the stock option activity during the periods ending September 27, 2014, September 28, 2013, June 29, 2013, and June 30, 2012 is presented below:



	September 27, 2014			September 28, 2013			June 29, 2013			June 30. 2012
	Shares	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
Stock options outstanding, beginning of fiscal year	50,000	$	13.47	50,000	$	13.47	50,000	$	13.47	50,000	$	13.47
Stock options granted	—	—		—	—		—	—		—	—
Stock options exercised	—	—		—	—		—	—		—	—
Stock options forfeited	—	—		—	—		—	—		—	—
Stock options outstanding, end of fiscal year	50,000	$	13.47	50,000	$	13.47	50,000	$	13.47	50,000	$	13.47
Stock options outstanding and exercisable, end of fiscal year	50,000	$	13.47	50,000	$	13.47	50,000	$	13.47	50,000	$	13.47

The following table summarizes information about our stock options outstanding, all of which are exercisable as of September 27, 2014:



Date of Option Grant	Number of Options Outstanding and Exercisable	Exercise Price		Grant-Date Fair Value		Expiration Date
February 2, 2011	25,000	$	13.86	$	6.15	February 18, 2018
February 2, 2011	25,000	$	13.07	$	6.35	February 18, 2018
	50,000

Restricted Stock Units and Performance Units

The following table summarizes the restricted stock units and performance units award activity during the periods ending September 27, 2014, September 28, 2013, June 29, 2013, and June 30, 2012:



	September 27, 2014				September 28, 2013				June 29, 2013				June 30. 2012
	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		Number of Units		Weighted average grant date fair value
Units outstanding, beginning of fiscal year	348,852		$	14.25	224,870		$	15.37	337,700		$	16.05	—		$	—
Units granted	—		$	—	244,852		$	14.25	10,000		$	13.66	390,900		$	16.04
Units issued	—		$	—	(120,870	)	$	16.34	—		$	—	—		$	—
Units forfeited	(133,500	)	$	14.16	—		$	—	(122,830	)	$	17.10	(53,200	)	$	(16.00	)
Units outstanding, end of fiscal year	215,352		$	14.31	348,852		$	14.25	224,870		$	15.37	337,700		$	16.05

During the transition period ended September 28, 2013, restricted stock units representing 122,426 shares of our common stock were granted. These restricted stock units are service-based and vest upon the filing of our Quarterly Report on Form 10-Q for the period ending June 27, 2015. Upon the filing of such Quarterly Report on Form 10-Q, one-half are payable in the common stock of Delta Apparel, Inc. and are therefore accounted for under the equity method pursuant to ASC 718 and one-half are payable in cash and are therefore accounted for under the liability method pursuant to ASC 718.

During the transition period ended September 28, 2013, performance stock units representing 122,426 shares of our common stock were granted. The performance units are based on the achievement of certain performance criteria for the two-year period ending June 27, 2015, and vest upon the filing of our Quarterly Report on Form 10-Q for the period ending June 27, 2015, subject to the achievement of the performance goals. Upon the filing of such Quarterly Report on Form 10-Q, one-half are payable in the common stock of Delta Apparel, Inc. and are therefore accounted for under the equity method pursuant to ASC 718 and one-half are payable in cash and are therefore accounted for under the liability method pursuant to ASC 718.

During fiscal years 2013 and 2012, restricted stock units representing 5,000 and 91,450 shares of our common stock, respectively, were granted. These restricted stock units are service-based and vested upon the filing of our Annual Report on Form 10-K for the fiscal year ended June 29, 2013. The restricted stock units were payable in the common stock of Delta Apparel, Inc. and were therefore accounted for under the equity method pursuant to ASC 718.

During fiscal year 2013 and 2012, performance units representing 5,000 and 91,450 shares of our common stock, respectively, were granted. The performance units were based on the achievement of certain performance criteria for the two-year period ended June 29, 2013, payable in the common stock of Delta Apparel, Inc. and were eligible to vest with the filing of our Annual Report on Form 10-K for the fiscal year ended June 29, 2013, subject to the achievement of the performance goals. We accounted for these performance units under the equity method pursuant to ASC 718. During the December quarter of fiscal year 2013, we determined that the ability to achieve the performance criteria was not probable. As a result, we reversed the $0.4 million of related share-based expense previously recognized. The performance criteria was not met and the performance units were forfeited on June 29, 2013.

During fiscal year 2012, performance units representing 52,000 shares of our common stock were also granted. These performance units were based on the achievement of certain performance criteria for the fiscal year ended June 30, 2012, and were eligible to vest upon the filing of our Annual Report on Form 10-K for fiscal year 2012; however, the performance criteria were not met and the performance units were forfeited on June 30, 2012.

In addition, during fiscal year 2012, performance units representing 156,000 shares of our common stock were granted. These units were based on the achievement of one-year performance criteria for each of the fiscal years 2013, 2014 and 2015, with one third of such units eligible to vest with the filing of our Annual Report on Form 10-K for each of the fiscal years. Upon achievement of the performance goals, 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. Based upon the performance achieved during fiscal year 2013, 39,520 units of the 52,000 units granted vested upon the filing of our Annual Report on Form 10-K for the fiscal year ended June 29, 2013 and 12,480 units were forfeited on June 29, 2013.

As of September 27, 2014, there was $0.6 million of total unrecognized compensation cost related to non-vested restricted stock units and performance units under the 2010 Stock Plan. This cost is expected to be recognized over a period of 0.9 years.

The following table summarizes information about the unvested restricted stock units and performance units as of September 27, 2014.



Restricted Stock Units/Performance Units	Number of Units	Average Market Price on Date of Grant	Vesting Date
Fiscal year 2012 Performance Units	52,000	$14.25	August 2015
Transition period Performance Units	74,176	$14.10	August 2015
Transition period Restricted Stock Units	74,176	$14.10	August 2015
Transition period Performance Units	7,500	$16.61	August 2015
Transition period Restricted Stock Units	7,500	$16.61	August 2015
	215,352

Option Plan

Prior to expiration of the Option Plan, the Compensation Committee of our Board of Directors had the discretion to grant options for up to 2,000,000 shares of common stock to officers and key and middle-level executives for the purchase of our stock at prices not less than fifty percent of the fair market value of the shares on the dates of grant, with an exercise term (as determined by the Compensation Committee) not to exceed 10 years. The Compensation Committee determined the vesting period for the stock options, which generally became exercisable over three to four years. Certain option awards in the Option Plan provided for accelerated vesting upon meeting specific retirement, death or disability criteria.

Compensation expense was recorded on the selling, general and administrative expense line item in our Consolidated Statements of Operations on a straight-line basis over the vesting periods.

A summary of our stock option activity during fiscal year 2014, the transition period ended September 28, 2013 and fiscal years 2013 and 2012 is presented below:



	Fiscal Year 2014				Transition Period				Fiscal Year 2013				Fiscal Year 2012
	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Stock options outstanding, beginning of fiscal year	584,500		$	12.13	600,500		$	12.09	799,834		$	12.22	851,167		$	12.16
Stock options exercised	(82,500	)	$	11.28	(16,000	)	$	10.83	(139,334	)	$	11.14	(25,333	)	$	8.11
Stock options forfeited			$	—			$	—	(60,000	)	$	15.91	(26,000	)	$	14.48
Stock options outstanding, end of fiscal year	502,000		$	12.27	584,500		$	12.13	600,500		$	12.09	799,834		$	12.22
Stock options outstanding and exercisable, end of fiscal year	502,000		$	12.27	584,500		$	12.13	600,500		$	12.09	799,834		$	12.22

Options exercised during fiscal year 2014 had no intrinsic value. The total intrinsic value of options exercised during the transition period and fiscal years 2013 and 2012 was $1.8 million, $0.7 million and $0.2 million respectively. During fiscal year 2014, the transition period and fiscal years 2013 and 2012, exercised options resulted in excess tax benefits of $27 thousand, $1 thousand, $34 thousand and $529 thousand, respectively. All outstanding options were vested as of September 27, 2014.

The following table summarizes information about our stock options outstanding, all of which are exercisable as of September 27, 2014:



Date of Option Grant	Number of Options Outstanding and Exercisable	Exercise Price		Grant-Date Fair Value		Expiration Date
July 4, 2005	350,000	$	13.35	$	5.18	July 4, 2015
July 27, 2006	30,000	$	17.24	$	6.20	July 27, 2016
February 8, 2008	112,000	$	8.30	$	2.95	February 8, 2018
March 16, 2009	10,000	$	4.01	$	2.00	February 18, 2018
	502,000

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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