This excerpt taken from the HBI 8-K filed Sep 13, 2006.
HANESBRANDS INC. WILL INCREASE ITS SUPPLY CHAIN COST COMPETITIVENESS AND FLEXIBILITY WITH THE CLOSURE OF THREE MANUFACTURING FACILITIES
Company Expects to Take Charges of $27 million in Fiscal 2007 Related to Latest Milestone in Continuing Manufacturing Reconfiguration
Winston-Salem, N.C. (Sept. 13, 2006) Hanesbrands Inc. (NYSE: HBI) announced today that it will strengthen the competitiveness and flexibility of its global supply chain operations by moving production from three plants in the United States and Mexico to lower-cost domestic, Caribbean basin and Central American manufacturing facilities.
The company will close plants in Monclova, Mexico, Lumberton, N.C., and Marion, S.C., that primarily make fleece sweatshirts and pants, outerwear T-shirts, sport shirts and sheer hosiery. The closings will result in a reduction of approximately 2,185 jobs at these locations.
The actions, a continuation of the companys long-term supply chain globalization strategy, will result in multiple benefits, including moving production to lower-cost manufacturing facilities, improving the alignment of sewing operations with the flow of textiles, leveraging the companys large scale in high-volume products, and consolidating hosiery production capacity.
These steps will strengthen our global supply chain by taking advantage of opportunities to improve the competitiveness, effectiveness and value of our operations, Hanesbrands CEO Richard A. Noll said. A cost competitive and flexible global supply chain plays a crucial role in contributing to our strong cash flow, increased profitability and investment in our brands and innovation.
Hanesbrands Inc. Will Increase its Supply Chain
Cost Competitiveness and Flexibility Page 2
Hanesbrands expects to take restructuring and related charges for the three plant actions, including severance costs and accelerated depreciation of fixed assets, totaling approximately $27 million in the fiscal year, primarily in the fiscal first half that ends Dec. 30, 2006. Approximately $17 million of the charges will be non-cash.
We are making significant improvements to the Hanesbrands supply chain in order to maximize execution, service levels, value creation, consistency and speed to market, said Gerald Evans, Hanesbrands executive vice president and chief global supply chain officer. We regret that employees at these locations will lose jobs, but we must design and continually update our network to take advantage of lower-cost, more-effective production opportunities in order to remain competitive and generate growth that allows our overall organization to thrive.
The Monclova, Mexico, plant, which has approximately 1,700 employees, sews fleece sweatshirts and pants and outerwear T-shirts. Production will be moved to other company facilities in the Caribbean basin and Central America. Production, which will be phased out, is expected to cease by the end of December 2006. Also, about 80 positions at the Rosita, Mexico, fabric cutting operation that supplies the Monclova plant will be eliminated as a result of the production transfer.
Production at the companys Lumberton, N.C., textile facility, which produces fabric for sport shirts and outerwear T-shirts, will cease by the end of November 2006. The plant has approximately 260 employees. Production will be shifted to Central America and the companys Forest City, N.C., plant.
The Marion, S.C., plant, which has approximately 145 employees, will cease production of sheer hosiery by the end of February 2007. Production will be consolidated into the companys Clarksville, Ark., hosiery production plant.