Delta Apparel, Inc. plans to restructure its U.S. textile operations by closing its manufacturing facility in Fayette, Alabama. As a part of the company's overall restructuring of its textile manufacturing operations, the company is also expensing its start-up and excess manufacturing costs associated with the integration of FunTees and the opening of its Honduran textile facility.

This reorganization is expected to occur in the company's fiscal first quarter of 2008, leaving the company with two U.S. textile operations, one located in Maiden, North Carolina and the other in Fayetteville, North Carolina. Approximately 110 U.S. jobs will be eliminated by the manufacturing restructuring.

The company expects to incur total costs of approximately $10.0 million, or 75 cents per diluted share, associated with the restructuring. The expenses will impact the company's fiscal fourth quarter of 2007 and the first two quarters of fiscal 2008. The expenses are expected to impact the company's financials as follows:

                   FY 07 Qtr 4  FY 08 Qtr 1  FY 08 Qtr 2      Total
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Cost of Sales $5.4 million $1.7 million $1.4 million $ 8.4 million
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Charges $1.5 million $0.1 million -- $ 1.6 million
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Total $6.9 million $1.8 million $1.4 million $10.0 million
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Diluted EPS
Impact $0.51 $0.13 $0.10 $0.75
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The 51 cents per diluted share expense in fiscal year 2007 includes 40 cents per diluted share of start-up, excess and other cash costs associated with the integration of FunTees and the opening of its Honduran textile facility and includes 11 cents per diluted share for the non-cash impact of asset impairments related to the reduction of textile operations in the U.S. The company expects its restructuring initiatives will result in costs savings per diluted share of approximately 26 cents in fiscal 2008, 62 cents in fiscal 2009, and 80 cents in fiscal 2010.

This restructuring comes as the company recently completed its integration of FunTees textiles into its existing Maiden, N.C. facility, which has improved operating margins in the FunTees business by approximately 300 basis points over pre-acquisition operating margin levels. Additionally, construction of the company's new textile facility in Honduras is on schedule and the company expects to open this facility in the second quarter of fiscal 2008. The company expects to be producing 500,000 pounds of fabric per week by its fourth quarter of fiscal 2008 and anticipates increasing production to one million pounds per week by its third quarter of fiscal 2009.

Robert W. Humphreys, president and CEO, commented, “We continue to focus on improving the performance of our wholesale activewear business. After evaluating our alternatives, we determined that we must eliminate some of our domestic manufacturing capacity. It is difficult to eliminate the jobs of these employees who have contributed significantly to our growth and success over the years. However, we believe the relocation of some of our U.S. textile capacity to Central America is necessary to be cost-competitive against other global producers. We believe our actions will result in improved margins and profitability in fiscal 2008 and beyond.”

Mr. Humphreys concluded, “We will continue to focus on maximizing our operating performance in all key areas of our business. The changes we are making should allow us to continue profitable growth in the highly competitive apparel industry and provide us with a platform to generate superior investment returns for our shareholders. We remain encouraged by the opportunities within both our private label and branded apparel businesses and believe the steps we are taking now will result in a stronger, more competitive company in the years to come.”

Fourth Quarter and Fiscal 2007 Preliminary Results

The company's sales for its 2007 fourth fiscal quarter are approximately $92 million. This brings sales for the full 2007 fiscal year to approximately $312 million, almost a 16% increase over the prior fiscal year.

Including the $6.9 million, or 51 cents per diluted share, of start-up, excess and impairment charges associated with its textile restructuring, the company now expects diluted earnings per share for its fourth quarter to be in the range of 6 cents to 8 cents versus its prior expectation of 50 cents to 55 cents. As a result, earnings for the full 2007 fiscal year are expected to be in the range of 71 cents to 73 cents per diluted share. This compares to the company's previously disclosed expectations of earnings in the range of $1.15 to $1.20 per diluted share prior to the restructuring related charges.

Fiscal 2008 Guidance

For the 2008 fiscal year ending June 28, 2008, the company expects net sales to be in the range of $335 million to $350 million and diluted earnings per share to be in the range of $1.36 to $1.52. This includes the $3.2 million, or 23 cents per diluted share, of anticipated expenses associated with the start-up of the new Honduran textile facility and the shutdown of the Fayette, Alabama facility that will impact results in the first two quarters of fiscal 2008.