Delta Apparel, Inc., in a regulatory filing, reported that its Board of Directors approved a plan to exit its DTG2Go business unit, impacting 115 employees. The decision follows Delta’s announcement that it will take an impairment charge related to DTG2Go in its third quarter ended July 2, because DTG2Go’s largest customer indicated in May that it no longer intends to source production from the platform.

As part of the DTG2Go Exit Plan, Delta announced that it has ceased production operations related to all DTG2Go manufacturing effective June 13.

Delta said the DTG2Go Exit Plan reduces the number of company employees by approximately 115. In connection with the plan, Delta Apparel will permanently close its DTG2Go facility in Storm Lake, IA, in addition to its printing facilities within distribution centers devoted to the Delta Group operating segment in Cranbury, NJ; Fayetteville, NC; Phoenix, AZ; LaVergne, TN; and Miami, FL.

The company expects to implement the DTG2Go Exit Plan substantially within 120 days. Once all related activities are completed, the company will know the final costs and cash expenditures related to the Exit Plan.

The company expects to incur the following:

  1. Restructuring charges attributable to net cash payments primarily for employee-related benefits,
  2. Equipment decommission costs, and
  3. Other restructuring costs and future cash expenditures are the amounts the company cannot estimate in the Current Report on its Form 8-K. The restructuring charges are expected to be incurred at the beginning of the company’s third quarter of fiscal year 2024.

Delta said it continues to be “keenly focused on evaluating its business strategies and managing its working capital and costs in light of significant market, operational and liquidity challenges, including:

  • The company’s receipt of notice in May 2024 that the largest customer using DTG2Go’s digital model no longer intends to source production from the platform.
  • The company’s deteriorating liquidity position, including its limited cash and cash equivalents and its inability to raise additional capital or obtain necessary liquidity to have sufficient resources to fund its operations, continues to prevent it from purchasing the yarn, dyes, chemicals and other production materials needed to supply its manufacturing facilities and allow them to run at levels required to meet its business plans;
  • Significant reductions in demand across certain of the company’s business units during fiscal year 2023 and the beginning of fiscal year 2024, which has impacted the company’s operating results and financial position, and
  • Delta’s continued non-compliance with certain covenants in its U.S. asset-based revolving credit facility constitutes a breach of that agreement and an event of default that remains uncured at the time of the latest regulatory filing.

Delta said, “The DTG2Go Exit Plan was approved after evaluating the ongoing market, operational and liquidity challenges discussed above, including the expected impact of the loss of DTG2Go’s largest customer on forecasts of DTG2Go’s current and future years’ business performance. In addition, the company’s deteriorating liquidity position and lack of funding have continued to prevent it from purchasing raw materials necessary to operate its manufacturing facilities and to pay compensation and benefits due to employees. As previously disclosed, the company also continues to explore the potential sale of its Salt Life business and continues to evaluate all strategic options and alternatives.”

Image courtesy DTG2Go