Annual report pursuant to Section 13 and 15(d)

Stock-based Compensation

Stock-based Compensation

12 Months Ended

Oct. 03, 2015

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

STOCK-BASED COMPENSATION

On February 4, 2015, our shareholders re-approved the Delta Apparel, Inc. 2010 Stock Plan ("2010 Stock Plan") that was originally approved by our shareholders on November 11, 2010. The re-approval of the 2010 Stock Plan, including the material terms of the performance goals included in the 2010 Stock Plan, enables us to continue to grant equity incentive compensation awards that are structured in a manner intended to qualify as tax deductible, performance-based compensation under Section 162(m) of the Internal Revenue Code of 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, all stock awards have been 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. 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. 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 year 2015 was $1.9 million. 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 employee stock-based compensation expense was $0.7 million for the transition period ended September 28, 2013, and $1.2 million for fiscal year 2013.

Associated with the compensation cost are income tax benefits recognized of $0.7 million, $0.3 million and $0.5 million in fiscal year 2015, the transition period ended September 28, 2013, and fiscal year 2013, respectively. Tax expense of $35 thousand, associated with the reduction of expense, was recognized in fiscal year 2014.

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.

Stock Options

No stock options were granted during fiscal year 2015. All outstanding options granted by the Company have vested and are exercisable.

A summary of the stock option activity during the periods ended October 3, 2015, September 27, 2014, September 28, 2013, and June 29, 2013 is as follows:



	Fiscal Year Ended October 3, 2015				Fiscal Year Ended September 27, 2014			13-Week Transition Period Ended September 28, 2013			Fiscal Year Ended June 29, 2013
	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 period	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	(40,000	)	13.56		—	—		—	—		—	—
Stock options outstanding, end of period	10,000		$	13.07	50,000	$	13.47	50,000	$	13.47	50,000	$	13.47
Stock options outstanding and exercisable, end of period	10,000		$	13.07	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 vested and exercisable as of October 3, 2015:



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 Units

The following table summarizes the restricted stock unit and performance unit award activity during the periods ending October 3, 2015, September 27, 2014, September 28, 2013, and June 29, 2013:



	Fiscal Year Ended October 3, 2015				Fiscal Year Ended September 27, 2014				13-Week Transition Period Ended September 28, 2013				Fiscal Year Ended June 29, 2013
	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 period	215,352		$	14.31	348,852		$	14.25	224,870		$	15.37	337,700		$	16.05
Units granted	524,000		$	10.81	—		$	—	244,852		$	14.25	10,000		$	13.66
Units issued	(69,657	)	$	14.31	—		$	—	(120,870	)	$	16.34	—		$	—
Units forfeited	(150,895	)	$	14.26	(133,500	)	$	14.16	—		$	—	(122,830	)	$	17.10
Units outstanding, end of fiscal period	518,800		$	10.80	215,352		$	14.31	348,852		$	14.25	224,870		$	15.37

During fiscal year 2015, restricted stock units representing 355,000 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. Upon the filing of such Annual Report on Form 10-K, 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 stock units representing 169,000 shares of our common stock were granted. Of these performance units, 65,000 are based on the achievement of certain performance criteria for the fiscal year ended October 3, 2015, and vest upon the filing of our Annual Report on Form 10-K. Of these units, 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.

Of the remaining units, 52,000 are based on the achievement of certain performance criteria for the fiscal year ending October 1, 2016, and 52,000 units are based on the achievement of certain performance criteria for the fiscal year ending September 30, 2017. These units vest upon the filing of our Annual Report on Form 10-K for the periods ending October 1, 2016, and September 30, 2017, respectively. Upon the filing of each Annual Report on Form 10-K, 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. Based upon the performance achieved for fiscal year 2015, 59,800 units will vest upon the filing our Annual Report on Form 10-K for fiscal year 2015 and 5,200 units were forfeited on October 3, 2015.

During fiscal year 2015, previously issued restricted stock units representing 69,657 shares of our 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 shares representing 133,676 shares of our common stock were forfeited due to the failure to achieve the performance criteria specified in the award agreement.

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 were service-based and vested upon the filing of our Quarterly Report on Form 10-Q for the period ended June 27, 2015. Upon the filing of such Quarterly Report on Form 10-Q, 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.

During the transition period ended September 28, 2013, performance stock units representing 122,426 shares of our common stock were granted. The performance units were based on the achievement of certain performance criteria for the two-year period ended June 27, 2015, and vested upon the filing of our Quarterly Report on Form 10-Q for the period ended June 27, 2015, subject to the achievement of the performance goals. Upon the filing of such Quarterly Report on Form 10-Q, 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.

During fiscal year 2013, restricted stock units representing 5,000 shares of our common stock were granted. These restricted stock units were 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, performance units representing 5,000 shares of our common stock 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.

As of October 3, 2015, there was $3.5 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 3.2 years years.

The following table summarizes information about the unvested restricted stock units and performance units as of October 3, 2015.



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	260,000	$10.73	December 2018
Fiscal year 2015 Performance Units	23,920	$14.25	December 2015
Fiscal year 2015 Performance Units	35,880	$10.52	December 2015
Fiscal year 2015 Performance Units	52,000	$10.52	December 2016
Fiscal year 2015 Performance Units	52,000	$10.52	December 2017
	518,800

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 the periods ended October 3, 2015, September 27, 2014, September 28, 2013, and June 29, 2013, is as follows:



	Fiscal Year Ended October 3, 2015				Fiscal Year Ended September 27, 2014				13-Week Transition Period Ended September 28, 2013				Fiscal Year Ended June 29, 2013
	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 period	502,000		$	12.27	584,500		$	12.13	600,500		$	12.09	799,834		$	12.22
Stock options exercised	(350,000	)	$	13.12	(82,500	)	$	11.28	(16,000	)	$	10.83	(139,334	)	$	11.14
Stock options forfeited	(66,000	)	$	12.94	—		$	—	—		$	—	(60,000	)	$	15.91
Stock options outstanding, end of period	86,000		$	8.30	502,000		$	12.27	584,500		$	12.13	600,500		$	12.09
Stock options outstanding and exercisable, end of period	86,000		$	8.30	502,000		$	12.27	584,500		$	12.13	600,500		$	12.09

The total intrinsic value of options exercised during fiscal year 2015 was $0.3 million. Options exercised during fiscal year 2014 had no intrinsic value. The total intrinsic value of options exercised during the transition period and fiscal year 2013 was $1.8 million and $0.7 million, respectively. During fiscal year 2015, stock option exercises and forfeitures reduced previously deferred excess tax benefits by $0.7 million. During fiscal year 2014, the transition period and fiscal year 2013, exercised options resulted in excess tax benefits of $27 thousand, $1 thousand, and $34 thousand, respectively.

The following table summarizes information about our stock options outstanding, all of which are vested and exercisable as of October 3, 2015:



Date of Option Grant	Number of Options Outstanding and Exercisable	Exercise Price		Grant-Date Fair Value		Expiration Date
February 8, 2008	86,000	$	8.30	$	2.95	February 8, 2018
	86,000