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These excerpts taken from the HBI 10-K filed Feb 19, 2008. Supply
Chain Consolidation and Globalization
Over the past several years, we have undertaken a variety of
restructuring efforts designed to improve operating efficiencies
and lower costs. We have closed plant locations, reduced our
workforce, and relocated some of our manufacturing capacity to
lower cost locations in Central America and Asia. For example,
during the year ended December 29, 2007, in furtherance of
our efforts to execute our consolidation and globalization
strategy, we approved actions to close 17 manufacturing
facilities and three distribution centers affecting
6,213 employees in the Dominican Republic, Mexico, the
United States, Brazil and Canada. In addition, 428 management
and administrative positions are being eliminated, with the
majority of these positions based in the United States. We also
have recognized accelerated depreciation with respect to owned
or leased assets associated with 17 manufacturing facilities and
five distribution centers which we anticipate closing in the
next three to five years as part of our consolidation and
globalization strategy. While we believe that these efforts have
had and will continue to have a beneficial impact on our
operational efficiency and cost structure, we have incurred
significant costs to implement these initiatives. In particular,
we have recorded charges for severance and other
employment-related obligations relating to workforce reductions,
as well as payments in connection with lease and other contract
terminations. These amounts are included in the “Cost of
sales,” “Restructuring” and “Selling,
general and administrative expenses” lines of our
statements of income.
We acquired our second offshore textile plant, the
1,300-employee textile manufacturing operations of Industrias
Duraflex, S.A. de C.V., in San Juan Opico, El Salvador.
This acquisition provides a textile base in Central America from
which to expand and leverage our large scale as well as supply
our sewing network throughout Central America. Also, we
announced plans to build a textile production plant in Nanjing,
China, which will be our first company-owned textile production
facility in Asia. The Nanjing textile facility will enable us to
expand and leverage our production scale in Asia as we balance
our supply chain across hemispheres. In December 2007, we
acquired the 900-employee sheer hosiery facility in Las Lourdes,
El Salvador of Inversiones Bonaventure, S.A. de C.V. For the
past 12 years, these operations had been a primary contract
sewing operation
Table of Contents
for Hanes and L’eggs hosiery products. The
acquisition streamlines a critical part of our overall hosiery
supply chain and is part of our strategy to operate larger,
company-owned production facilities.
As a result of the restructuring actions taken since our spin
off from Sara Lee on September 5, 2006, our cost structure
was reduced and efficiencies improved, generating savings of
$21 million during the year ended December 29, 2007.
Of the seven manufacturing facilities and distribution centers
approved for closure in 2006, two were closed in 2006 and five
were closed in 2007. Of the 20 manufacturing facilities and
distribution centers approved for closure in 2007, 10 were
closed in 2007 and 10 are expected to close in 2008. For more
information about our restructuring actions, see Note 5,
titled “Restructuring” to our Consolidated Financial
Statements included in this Annual Report on
Form 10-K.
As further plans are developed and approved by management and in
some cases our board of directors, we expect to recognize
additional restructuring costs to eliminate duplicative
functions within the organization and transition a significant
portion of our manufacturing capacity to lower-cost locations.
As a result of these efforts, we expect to incur approximately
$250 million in restructuring and related charges over the
three year period following the spin off from Sara Lee, of which
approximately half is expected to be noncash. As of
December 29, 2007, we have recognized approximately
$116 million in restructuring and related charges related
to these efforts. Of these charges, $43 million relates to
employee termination and other benefits, $61 million
relates to accelerated depreciation of buildings and equipment
for facilities that have been or will be closed and
$12 million relates to lease termination costs.
Supply Chain Consolidation and Globalization Over the past several years, we have undertaken a variety of restructuring efforts designed to improve operating efficiencies and lower costs. We have closed plant locations, reduced our workforce, and relocated some of our manufacturing capacity to lower cost locations in Central America and Asia. For example, during the year ended December 29, 2007, in furtherance of our efforts to execute our consolidation and globalization strategy, we approved actions to close 17 manufacturing facilities and three distribution centers affecting 6,213 employees in the Dominican Republic, Mexico, the United States, Brazil and Canada. In addition, 428 management and administrative positions are being eliminated, with the majority of these positions based in the United States. We also have recognized accelerated depreciation with respect to owned or leased assets associated with 17 manufacturing facilities and five distribution centers which we anticipate closing in the next three to five years as part of our consolidation and globalization strategy. While we believe that these efforts have had and will continue to have a beneficial impact on our operational efficiency and cost structure, we have incurred significant costs to implement these initiatives. In particular, we have recorded charges for severance and other employment-related obligations relating to workforce reductions, as well as payments in connection with lease and other contract terminations. These amounts are included in the “Cost of sales,” “Restructuring” and “Selling, general and administrative expenses” lines of our statements of income. We acquired our second offshore textile plant, the 1,300-employee textile manufacturing operations of Industrias Duraflex, S.A. de C.V., in San Juan Opico, El Salvador. This acquisition provides a textile base in Central America from which to expand and leverage our large scale as well as supply our sewing network throughout Central America. Also, we announced plans to build a textile production plant in Nanjing, China, which will be our first company-owned textile production facility in Asia. The Nanjing textile facility will enable us to expand and leverage our production scale in Asia as we balance our supply chain across hemispheres. In December 2007, we acquired the 900-employee sheer hosiery facility in Las Lourdes, El Salvador of Inversiones Bonaventure, S.A. de C.V. For the past 12 years, these operations had been a primary contract sewing operation
Table of Contentsfor Hanes and L’eggs hosiery products. The acquisition streamlines a critical part of our overall hosiery supply chain and is part of our strategy to operate larger, company-owned production facilities. As a result of the restructuring actions taken since our spin off from Sara Lee on September 5, 2006, our cost structure was reduced and efficiencies improved, generating savings of $21 million during the year ended December 29, 2007. Of the seven manufacturing facilities and distribution centers approved for closure in 2006, two were closed in 2006 and five were closed in 2007. Of the 20 manufacturing facilities and distribution centers approved for closure in 2007, 10 were closed in 2007 and 10 are expected to close in 2008. For more information about our restructuring actions, see Note 5, titled “Restructuring” to our Consolidated Financial Statements included in this Annual Report on Form 10-K. As further plans are developed and approved by management and in some cases our board of directors, we expect to recognize additional restructuring costs to eliminate duplicative functions within the organization and transition a significant portion of our manufacturing capacity to lower-cost locations. As a result of these efforts, we expect to incur approximately $250 million in restructuring and related charges over the three year period following the spin off from Sara Lee, of which approximately half is expected to be noncash. As of December 29, 2007, we have recognized approximately $116 million in restructuring and related charges related to these efforts. Of these charges, $43 million relates to employee termination and other benefits, $61 million relates to accelerated depreciation of buildings and equipment for facilities that have been or will be closed and $12 million relates to lease termination costs. | EXCERPTS ON THIS PAGE:
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