Hanesbrands Inc. will close nine plant in four countries and reduce worldwide management and administrative jobs as part of a multiyear effort the company began when it was spun off as an independent company in September 2006 to consolidate manufacturing and reduce costs.
“We are making significant progress in consolidating our organization and executing our global supply chain strategy,” Hanesbrands CEO Richard A. Noll said. “This streamlining is part of our larger cost-reduction and process-standardization strategies to increase competitiveness and become a more effective organization. Taking these actions will better position us to achieve our long-term growth goals and financial objectives and help us in our efforts to offset independent company costs and selected investments we are making in our business.”
Hanesbrands has long-term annual growth goals of 1% to 3% for sales, 6% to 8% for operating profit excluding actions and double-digit gains for earnings per share excluding actions. The foundation for achieving these long-term growth goals is baseline performance in 2007.
Most of the cost-saving actions announced today are expected to be completed by the end of the year. Approximately 5,300 employees will be affected, while the company has added or will add approximately 3,000 positions at other company manufacturing plants to absorb shifted production.
The company will close plants and operations affecting nearly 5,000 employees in Canada, the Dominican Republic, Mexico, and the United States and Puerto Rico, while moving production to lower-cost operations in Central America and Asia. In addition, approximately 350 management and administrative positions will be eliminated, with the majority of these positions based in the United States.
“These efforts are a competitive necessity to strengthen our overall company and its growth opportunities, but we regret that employees will be affected by losing jobs,” Noll said. “We have an outstanding workforce that exhibits continued commitment and professionalism even when receiving difficult news. We will work diligently to assist in their transition.”
Hanesbrands expects to incur restructuring and related charges for these actions, including severance costs and accelerated depreciation of fixed assets, totaling approximately $42 million, primarily in the second quarter of fiscal 2007 with the majority of the remainder in the second half of fiscal 2007. Approximately $12 million of the charges will be noncash. These charges, plus previously announced restructuring charges of $74 million, represent nearly half of the approximately $250 million in restructuring charges the company expects to incur in the three years following its spinoff.
Hanesbrands will continue to execute its global supply chain strategy of moving production and operations to lower-cost countries, operating fewer and bigger facilities and aligning production flow for maximum flexibility. In the long-term, the company expects to balance its supply chain between the Western Hemisphere and Asia.
Today's moves will help the company concentrate bra sewing and manufacturing to lower-cost operations in Central America and Asia, will further efforts to create a lower-cost sewing network for knit products in Central America, and will help consolidate the supply chain that was supporting retail sales in Canada and Mexico with our overall supply chain.
“In addition to improving cost competitiveness, these moves will improve the alignment of our sewing operations with the flow of textiles and will leverage the company's large scale in high-volume products,” said Gerald Evans, Hanesbrands executive vice president and chief global supply chain officer. “This realignment will also better position us for expansion of our Asian supply chain. In November, we acquired a sewing facility in Thailand, our first self-owned Asian production facility.”
Actions by Country
In Canada, the company's intimate apparel fabric cutting plant in Montreal will cease production, affecting approximately 50 employees. Production will shift to Asia.
In the Dominican Republic, the company will cease production at sewing plants in Santo Domingo and Santiago, shifting production to company sewing plants in Central America and Thailand. The plant closures will affect approximately 2,500 employees.
In Mexico, production will cease at sewing or fabric cutting plants for knit products and intimate apparel in Cadereyta de Montes, Madero, Merida and Nueva Rosita, affecting 2,200 employees. Production will shift to Central America and elsewhere in Mexico.
In Puerto Rico, the company will close its innerwear fabric cutting plant in Vega Baja, employing approximately 150. Production will move to company cutting plants in Central America and Thailand.
In the United States, intimate apparel fabric lamination and sewing in Statesville, N.C., with 70 employees, will cease operations and shift to Central America.
Of the approximately 350 management and administrative positions that will be eliminated worldwide, approximately 90 percent are in the United States.
