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Delta Apparel, Inc. (NYSE MKT: DLA) today announced plans to consolidate fabric production for basic, blank tee shirts to its Ceiba Textiles facility in Honduras.
The consolidation transfers the production of some fabric for basic tees currently manufactured at the Company's Maiden, North Carolina plant to Honduras, increasing production at the Ceiba Textiles facility by approximately eight percent to roughly 900,000 pounds of fabric per week. This change shifts fabric production for blank tees to the Company's most cost-effective facilities and is expected to shorten the production cycle by approximately ten days. In addition, the Company is further reducing U.S. fabric production in order to better align inventory levels with sales expectations. Total fabric production at the Maiden facility will decrease by approximately thirty-five percent.
Bob Humphreys, Chairman and Chief Executive Officer, commented, “These decisions are always difficult, especially when they affect associates who have been dedicated and loyal to our Company for many years. However, the Company can no longer justify the additional cost associated with its current level of domestic fabric production for the highly competitive blank tee shirt business. We believe this economic decision is in the best long-term interest of Delta Apparel and our shareholders.”
The movement of production to the Ceiba Textiles facility will begin immediately and is scheduled to be completed by the end of June 2014. The Company expects to realize annual savings of approximately $1.1 million once the consolidation is complete. The anticipated aggregate costs associated with this transition are approximately $0.2 million, which is expected to be expensed in the Company’s fiscal year 2014 third quarter.
The consolidation will impact the employment of 70 associates at the Maiden facility. This facility will continue to employ approximately 190 associates producing fabric to support the Company’s USA-made marketed goods and private-label products, as well as the Company’s Mexico sewing operations.