Delta Apparel Inc. (NYSE MKT:DLA) reported it completed the sale of its Maiden, NC textile facility and certain assets used in those operations.
The closure of this facility in July 2016 was part of the company’s previously announced manufacturing realignment aimed at maximizing production at its lower-cost facilities, eliminating duplicative fixed costs and utilizing updated dyeing and finishing technology.
The company expects the realignment to lower production costs, improve gross margins and ultimately boost operating earnings by an estimated $8 million annually, or approximately 70 cents per diluted share.
More than half of the expense associated with the manufacturing realignment was recorded in the company’s fiscal 2016 third-quarter earnings. The remainder, approximately 12 cents per diluted share, will be recorded in the fiscal fourth quarter. Cash flow realized from the sale of the Maiden assets was approximately $1.7 million, which will be used to lower debt levels.
“While it was a difficult decision to close the Maiden facility, we are pleased that the new owner plans to continue using it as a wet-processing facility that will provide continued employment opportunities in the Maiden community,” said Robert W. Humphreys, Delta Apparel’s chairman and CEO. “We have successfully partnered with established domestic textile producers to source fabric for our made-in-the-USA products previously produced at this plant, and will continue to sew the fabric into garments at our Rowland, North Carolina apparel facility.”
Humphreys added that the company is “efficiently sourcing in-country fabric to use in our Mexico sew and screen print facilities.” Delta Apparel also “began increasing fabric production in our Honduran textile facility in June…and should be at full production levels by the end of calendar 2016.”