During the past two years, the company has been expanding its manufacturing capacity and improving its flexibility to focus on process improvement and cost reduction. Now the company is initiating a manufacturing realignment that will result in the closure of its textile plant in Maiden and the transition of production to its Honduran textile facility.

The company expects to support its Mexico sew and screen-print production with in-country sourced fabric. In addition, the company will source domestic fabric with current suppliers that will be sewn in the company’s Rowland, NC, plant to support its Made in the USA programmes.

Manufacturing realignment

Once completed, the realignment is expected to significantly lower production costs, thereby improving gross margins and increasing earnings by up to US 0.70 per diluted share.

The company is investing approximately US 7 million in new equipment for its offshore manufacturing operations that should be installed this quarter to expand output in those facilities. Expenses of approximately US 3 million are expected in fiscal 2016 as part of this realignment, including severance, shutdown and start-up inefficiency and other expenses, with the majority of this expense in the fiscal 2016 third quarter.

The realignment should be completed by the end of fiscal year 2016 and the company expects to begin realizing the associated cost benefits in the first half of fiscal 2017, with the savings in the back half of fiscal 2017 expected to annualize at approximately US 8 million.

Reducing costs

“Over this time, we have made changes to our manufacturing platform that have reduced costs significantly and give us the ability to produce open-width fabrications that should lessen our reliance on sourced fabric,” explained Robert W. Humphreys, Delta Apparel’s Chairman and Chief Executive Officer.

“Our manufacturing realignment and the expansion and modernization of our facilities should allow us to further increase efficiency, reduce fixed costs and ultimately better serve our customers through shorter lead times.”

“The decision to close the Maiden plant and eliminate the jobs of approximately 160 employees who have contributed significantly to our growth and success over the years was extremely difficult. However, we believe these steps are necessary to be cost-competitive with other global competitors.”

www.deltaapparelinc.com