Everlast Worldwide will relocate its Bronx, New York sporting goods manufacturing facility and consolidate and integrate those professional and retail product operations into its Moberly, Missouri sporting goods manufacturing facility.
As part of the relocation and consolidation, the Company will recognize a non-recurring restructuring charge in the fourth quarter of fiscal 2003 against income from operations of approximately $1.7 million. This restructuring charge will consist of costs associated with the discontinuance of certain products, factory labor and related overhead costs resulting from idle capacity in the Bronx, severance, lease exit and other disposal costs. Approximately, $1.1 million of this charge will be non-cash in nature. The Bronx facility is expected to close in December 2003 and will affect approximately 100 employees.
“While we plan to incur non-recurring restructuring costs associated with the discontinuance of certain inventories, and other expenses related to the relocation and consolidation of approximately $1.7 million pretax in the fourth quarter of fiscal 2003, we believe the relocation and consolidation will have a direct and positive impact on our organization and are confident that we will begin to realize efficiencies and savings during our first quarter of our fiscal 2004. We are projecting annual savings of approximately $2.8 million from this relocation and integration,” said George Q Horowitz, Chairman and Chief Executive of Everlast Worldwide Inc.
Mr. Horowitz added, “The decision to relocate the sporting goods manufacturing facility in the Bronx was a difficult one. Regrettably, this closure will affect workers who have done a tremendous job for the Company over the years. We're in a highly competitive industry where few sporting good brands own and operate manufacturing facilities in North America. In order to remain competitive, we need to focus our resources on the most cost efficient manufacturing and supply chain processes while enhancing our sales and marketing efforts in support of our retail customer relationships. The Bronx facility, which we assumed as part of the Everlast World Boxing Headquarters, Inc. acquisition in October 2000, is leased through April 2004, however we were notified that the lease renewal would contain significant lease escalation costs, which would more than double the rent and make it cost prohibitive to continue to manufacture there. As a result, we concluded that it was best for the Company and its shareholders to consolidate and integrate the facility into our modern Moberly, Missouri facility which we own. This will result in the creation of additional jobs at the facility, whose employees are represented by LOCAL 820, International Union of Electronic, Salaried, Machine and Furniture Workers.”
Most employees affected by this decision are represented by the LOCAL 819, International Brotherhood of Teamsters. Relocation and severance arrangements for these employees will be guided by LOCAL 819 I.B.T. agreements with this union.
