NWY » Topics » Item 2.05 Costs Associated with Exit or Disposal Activities

This excerpt taken from the NWY 8-K filed Jan 8, 2009.

Item 2.05 Costs Associated with Exit or Disposal Activities

 

On January 8, 2009, New York & Company, Inc. (the “Company”) announced the launch of a multi-year strategic restructuring and cost reduction program.

 

The key components of the restructuring and cost reduction program include:

 

·

Strategic staff downsizing resulting in a permanent reduction of 12% of the Company’s field management and approximately a 10% reduction of corporate office professionals;

·

The optimization of the Company’s store portfolio, including the closure of 40 to 50 underperforming stores over a five year period;

·

A broad based cost reduction effort across all aspects of its business; and

·

Significant reductions in capital expenditure plans as compared to fiscal year 2008.

 

Restructuring and Cost Reduction Program Details

 

Strategic Staff Downsizing

 

The strategic staff reductions involve a streamlining of the Company’s field management organization which will result in a permanent net reduction of approximately 260 management level positions.  In addition, the Company has eliminated approximately 50 corporate office positions, consisting of salaried managers and support professionals.  The Company expects to incur a pre-tax charge of approximately $3 million during the fourth quarter of fiscal year 2008 in connection with these reductions.  These reductions are expected to result in pre-tax savings of approximately $12 million per year beginning in fiscal year 2009.

 

Optimization of Store Portfolio

 

The store optimization component of the restructuring involves the closure of approximately 40 to 50 underperforming stores and the related non-cash impairment of store assets in underperforming or closing stores.  The Company conducted a review of the performance of each of its stores in order to identify stores that do not demonstrate the potential to deliver an acceptable long-term return on investment.  The Company plans to close stores that do not meet this return on investment criteria in a staged approach over the next five years upon the termination of the respective leases or upon the exercise of kickout provisions, and as a result, the Company does not presently anticipate that it will incur significant lease exit costs associated with these decisions.  The Company expects to record a non-cash charge of approximately $22 million related to asset impairments for underperforming stores in the fourth quarter of fiscal year 2008.  In fiscal year 2008 these stores are estimated to achieve $60 to $70 million in sales and are expected to generate negative four-wall profit contribution.  The Company currently expects to close 10 to 15 of these underperforming stores in fiscal year 2009, with the remainder of the planned store closures occurring over fiscal years 2010 to 2013.  The Company currently estimates that these efforts will result in annualized pre-tax savings of $4 to $6 million beginning in fiscal year 2009.

 

Broad Based Cost Reductions

 

The Company has initiated a corporate-wide program to identify and implement strategic and structural cost improvements across all aspects of the Company’s business including store operations, sourcing, real estate, marketing, and general home office operations.  These efforts include the optimization of external resources, reduction of discretionary spending, consolidation of certain purchasing activities to leverage scale, and the renegotiation of existing agreements to achieve cost reductions.  The Company currently estimates that these efforts will result in annualized pre-tax savings of approximately $14 to $17 million per year beginning in fiscal year 2009.

 

Capital Expenditures

 

The Company plans to limit new store openings over the next year and as a result, expects capital expenditures to approximate $15 million in fiscal year 2009, which is down by $35 million from its expected fiscal year 2008 capital expenditures.

 

Summary

 

In total, the strategic restructuring and cost reduction program is anticipated to result in pre-tax restructuring charges of approximately $25 million during the fourth quarter of fiscal year 2008, which includes approximately $22 million in non-cash charges associated with the impairment of store assets and $3 million in cash charges related primarily to severance and various other costs necessary to implement the restructuring and cost reduction program.  The Company expects to achieve pre-tax savings of approximately $175 million over the next five years, of which approximately $30 million is expected to be realized in fiscal year 2009.

 

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Forward Looking Statements: This Current Report on Form 8-K contains certain forward looking statements.  Some of these statements can be identified by terms and phrases such as “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “could,” “may,” “plan,” “project,” “predict”, and similar expressions and include references to assumptions that we believe are reasonable and relate to our future prospects, developments and business strategies.  Such statements are subject to various risks and uncertainties that could cause actual results to differ materially.  These include, but are not limited to: (i) the impact of general economic conditions and their effect on consumer confidence and spending patterns, which have recently deteriorated significantly and may continue to do so for the foreseeable future; (ii) our ability to successfully integrate our restructuring and cost reduction program; (iii) the deteriorating economic conditions could negatively impact the Company’s merchandise vendors and their ability to deliver products; (iv) our ability to open and operate stores successfully; (v) seasonal fluctuations in our business; (vi) our ability to anticipate and respond to fashion trends; (vii) general economic conditions, consumer confidence and spending patterns; (viii) our dependence on mall traffic for our sales; (ix) competition in our market, including promotional and pricing competition; (x) our ability to retain, recruit and train key personnel; (xi) our reliance on third parties to manage some aspects of our business; (xii) our reliance on foreign sources of production; (xiii) our ability to protect our trademarks and other intellectual property rights; (xiv) our ability to maintain, and our reliance on, our information technology infrastructure; (xv) the effects of government regulation; (xvi) the control of the company by our sponsors and any potential change of ownership of those sponsors; and (xvii) other risks and uncertainties as described in our documents filed with the SEC, including our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. We undertake no obligation to revise the forward looking statements included in this Current Report on Form 8-K to reflect any future events or circumstances.

 

This excerpt taken from the NWY 8-K filed Oct 22, 2007.

Item 2.05 Costs Associated with Exit or Disposal Activities

On October 16, 2007, the board of directors of New York & Company, Inc. (the “Company”) approved management’s recommendation to close all 23 of the Company’s JasmineSola stores by the end of the fourth quarter, February 2, 2008 (the “closeout period”).  The decision to take this action resulted from a thorough assessment and analysis, which revealed that this strategy enables the Company to make additional investments in its New York & Company brand that can provide higher returns and profitability.

As a result of closing the JasmineSola stores, the Company anticipates recording total pre-tax charges and operating losses during the closeout period in the range of $46 million to $50 million, or $28 million to $30 million after-tax. During the third quarter, the Company anticipates recording a non-cash charge of approximately $35 million related to the impairment of intangible assets and property and equipment and a charge of approximately $0.5 million for severance payments. During the fourth quarter, the Company anticipates charges of approximately $1 million related to severance payments and between $6 million to $9 million for facilities-related and other costs.   In addition, the Company anticipates recording an operating loss for JasmineSola during the closeout period in the range of $3 million to $4 million.  The Company anticipates that the cash expenditures related to the charges and operating losses discussed above will be offset by the associated tax benefits, resulting in a minimal net cash impact for the Company.

The amounts of these charges, the operating losses and the related cash effect are preliminary and are subject to changes, pending, among other factors, the potential conversion of stores to the New York & Company concept, the outcome of negotiations with third parties and the degree of success experienced in connection with the inventory liquidation sales.

EXCERPTS ON THIS PAGE:

8-K
Jan 8, 2009
8-K
Oct 22, 2007

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