Delta Apparel, Inc. saw net sales increase 17.3% for its fiscal second quarter ended December 31, an increase that received a boost from the inclusion of revenue from Junkfood Clothing Company which was acquired in August 2005.

Net sales were $57.7 million for the second quarter of fiscal 2006, compared to $49.2 million in the prior year quarter. Gross margins improved 970 basis points to 31.7% compared to 22.0% in the prior year second quarter and improved 80 basis points from the first fiscal quarter of 2006. Selling, general and administrative expenses were 23.9% of sales compared to 16.5% of sales in the prior year, primarily related to higher distribution costs, increased selling costs associated with the Junkfood business, and higher management incentive expenses. The increased distribution costs are primarily related to the addition of the New Jersey distribution center and the move to a new West Coast facility. Operating margin increased 300 basis points to 8.6% compared to 5.5% in the prior year period. Net income increased 105.9% to $2.4 million, or 28 cents per basic share, compared to the prior year's level of $1.2 million, or 14 cents per basic share.

Robert W. Humphreys, President and CEO, commented, “We are very pleased to have achieved record sales, increased margins and record earnings in our second fiscal quarter. Our Soffe business was on target for the quarter, and demand continues to be strong for Junkfood products. Although the total sales in our Delta business did not meet our expectations, we achieved significant margin improvements and believe we will see sales growth in this business in the second half of the year.”

Mr. Humphreys continued, “We have completed the move to our new West Coast distribution facility in the Delta business with no shipping disruptions and we will be consolidating Soffe distribution and the Intensity Athletics operations into the same facility in the upcoming quarter to better serve our customers. This move is intended to expand our Activewear Apparel capacity, lower our stock outages, enhance sales and maximize margins for our business in the West Coast region. Our Retail-Ready segment continues its focus on product development and will be offering a variety of new products this spring. As we approach the spring selling season, we are encouraged with our increasingly diversified product offering and believe we are well positioned to continue to increase our sales and profits in the second half of the year.”


Fiscal 2006 Guidance

For the third fiscal quarter ending April 1, 2006, the Company expects sales to be in the range of $66 to $70 million and basic earnings to be in the range of $0.29 to $0.33 per share. This compares to prior year fiscal third quarter sales of $58.3 million and basic earnings of $0.65 per share. In the prior year third quarter, the Company recorded a $0.26 per share gain related to the sale of the Edgefield, South Carolina yarn facility in January 2005 as well as a $0.08 per share gain related to the reversal of a foreign earnings tax liability. Excluding both of these one-time items, basic earnings per share in the prior year period would have been $0.31.

For the twelve months ending July 1, 2006, the Company continues to expect sales to be in the range of $265 to $275 million and basic earnings to be in the range of $1.71 to $1.80 per share. When comparing fiscal 2006 estimates to fiscal 2005 results, the following chart highlights the Company's fiscal year 2005 basic earnings per share, adjusted for the impact of the sale of its Edgefield, South Carolina yarn spinning facility and adjusted for the reversal of the tax liability associated with the Company's decision to permanently reinvest its foreign earnings in Honduras.

    Actual FY05 Basic Earnings Per Share          $1.35
    Sale of Edgefield Plant                       (0.26)
    Reversal of Foreign Earnings Tax Liability    (0.08)
    Adjusted FY05 Basic Earnings per Share        $1.01

Retail-Ready Apparel

This segment, which includes the Soffe and Junkfood businesses, reported a sales increase of 90.6% to $29.2 million for the second quarter of fiscal year 2006 compared to $15.3 million in the prior year. The sales increase was primarily driven by the acquisition of Junkfood Clothing Company. Operating income for the three months ended December 31, 2005 increased 209.0% to $2.7 million compared to $0.9 million in the prior year.

Activewear Apparel

This segment, which includes the Delta Apparel business, reported sales of $28.5 million for the second quarter of fiscal 2006 compared to $33.9 million in the prior year quarter. The decline in sales was due to lower sales volume in the Company's private label channel and in its long-sleeve products, along with lower average selling prices. Operating margins for the three months ended December 31, 2005 improved 200 basis points driving an increase in operating income to $2.2 million compared to $1.9 million in the prior year, primarily related to less expensive raw materials and lower manufacturing costs flowing through cost of sales. Additionally, the business recorded a $0.4 million gain on the insurance recovery associated with inventory damaged during Hurricane Katrina.

Dividend Payment

The Board of Directors declared a dividend of four cents per common share of stock payable on February 27, 2006 to shareholders of record as of the close of business on February 15, 2006. This dividend was declared pursuant to the Company's previously announced quarterly dividend program, which the Company may amend or terminate at any time.

SELECTED FINANCIAL DATA:
(In thousands, except per share amounts)

                                Three Months Ended   Six Months Ended
                                Dec 31,   Jan 1,    Dec 31,    Jan 1,
                                 2005      2005      2005       2005
                                -------- --------- --------- ---------

Net Sales                       $57,702   $49,195  $118,275  $103,495
Cost of Goods Sold               39,433    38,379    81,312    81,102
                                -------- --------- --------- ---------
Gross Margin                     18,269    10,816    36,963    22,393

Selling, General and
 Administrative                  13,768     8,094    26,468    16,540
Other Income (Expense)              433       (15)      404        (5)
                                -------- --------- --------- ---------
Operating Income                  4,934     2,707    10,899     5,848

Interest Expense                    997       835     1,682     1,538
Taxes                             1,561       718     3,464     1,712

                                -------- --------- --------- ---------
Net Income                       $2,376    $1,154    $5,753    $2,598
                                
Net Income per Common Share
Basic                             $0.28     $0.14     $0.67     $0.31
Diluted                           $0.27     $0.13     $0.67     $0.30