Delta Apparel, Inc. has signed an asset purchase agreement to acquire substantially all of the net assets of privately held Fun-Tees, Inc. The acquisition is expected to close on or around Monday, October 2, 2006, subject to the satisfaction of various closing conditions.

The purchase price for the transaction is $20 million in cash, subject to certain post-closing adjustments, including an adjustment based on the actual working capital purchased. Delta Apparel expects to finance the purchase through an amendment to its asset-based secured revolving credit facility. The agreement can be terminated under various circumstances, including, among others, by Delta Apparel if it is unable to obtain satisfactory financing and by either party if the transaction fails to close by October 31, 2006.

Fun-Tees, Inc. is in the business of designing, manufacturing, marketing, and selling private labeled custom knit t-shirts primarily to major branded sportswear companies. Delta Apparel believes that the strength of Fun-Tees is its flexibility to custom-manufacture products in a variety of garment styles, fabrics and colors. Fun-Tees was founded in 1972 and is headquartered in Concord, North Carolina.

Delta Apparel expects to integrate the Fun-Tees textile operations into its Maiden, North Carolina facility during fiscal year 2007 and to maintain the Fun-Tees off-shore cutting, sewing and decorating facilities located in El Salvador and Campeche, Mexico. Delta Apparel expects the Fun-Tees acquisition to increase the activewear segment sales by approximately $70 million in sales on an annual basis and be immediately accretive to per share earnings.

Robert W. Humphreys, President and CEO of Delta Apparel, commented, “We are excited to welcome Fun-Tees to our expanding business operations. Fun-Tees will enhance our Activewear segment through its private label programs and off-shore decorating capabilities. We believe their integration into our Activewear platform will result in improved manufacturing efficiencies and cost savings in our combined business. The acquisition of Fun-Tees is expected to be immediately accretive to our earnings, even with the costs associated with the integration of the Fun-Tees textile operations into our existing facility, which will take place during this fiscal year. The management team at Fun-Tees will continue to operate the business from its current location in Concord, North Carolina. All of us at Delta Apparel look forward to working with them to continue to grow the business.”

Lewis Reid, Chief Executive Officer of Fun-Tees, said, “We are excited to be teaming up with Delta Apparel. This acquisition will give us the resources necessary to improve our manufacturing operations to support our continued sales growth.”

In other Delta Apparel news, the company plans to open Ceiba Textiles, a state-of-the-art offshore textile manufacturing plant. The 300,000 square foot facility will be located in the Green Valley Industrial Park in San Pedro Sula, Honduras. The facility will knit, dye, finish, cut and sew fabrics into apparel, primarily for the Activewear segment of the business. The Company expects the facility will be completed during fiscal year 2007 and production will begin during the first quarter of fiscal year 2008. The Company expects production to build to 500,000 pounds per week during fiscal year 2008 and increase to one million pounds per week in fiscal year 2009. Ceiba Textiles is expected to result in pre-tax savings of approximately $1 million in fiscal year 2008 and at full capacity is expected to result in pre-tax savings of $7 million annually.

The Company expects the total capital investment in Ceiba Textiles to be approximately $25 million, which includes the cost of constructing the building. Delta Apparel will be leasing the building from the Green Valley Industrial Park. In addition to transferring some existing equipment from the United States to Honduras, the Company expects to invest approximately $15 million over the next three years in new equipment for the facility. The new capital is expected to be financed through a local Honduran bank.

Robert W. Humphreys, President and CEO commented, “We are excited to be expanding our operations in Honduras. We are expecting healthy demand for our apparel products over the next several years and believe the opening of Ceiba Textiles will allow us to meet the ongoing needs of our customer base and improve our cost structure. We are focused on maintaining our competitive position and are committed to maintaining efficient, low-cost manufacturing operations.”

Mr. Humphreys concluded, “Our record results released today are indicative of the strong demand in all of our product areas. As we look ahead, we continue to focus on initiatives that will grow our business, improve our margins, and maintain our position as a leading producer of high quality knit apparel.”