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Jones Apparel completes review of denim manufacturing operation in Mexico

Jul '05
Branded Footwear, apparel, and accessories marketer Jones Apparel Group Inc announced that it has completed a comprehensive review of its denim manufacturing facility located in Mexico.

The primary action plan arising from this review will result in closing the laundry, assembly and distribution operations located in San Luis, Mexico. All manufacturing will be consolidated into existing operations in Durango and Torreon, Mexico.

The closure is anticipated to be substantially completed by the end of September 2005. In connection with the closure, in the third quarter the Company will incur approximately $14 million of pre-tax restructuring costs as prescribed by Statement of Financial Accounting Standards No. 146 "Accounting for Costs Associated with Exit or Disposal Activities.

"The costs include non-cash write-downs of property, plant and equipment and leasehold improvements of $6.8 million and cash expenses of $7.2 million for employee severance and other related expenses. In addition to the restructuring costs, lost manufacturing efficiencies associated with the excess capacity were approximately $4.6 million in the second quarter and an estimated $3.4 million to be realized during the third quarter.”

Peter Boneparth, Chief Executive Officer and President, commented, "This was a very difficult decision, however it was necessary to address the underutilization of our denim manufacturing operations in Mexico. As a result of the consolidation, our manufacturing operations will perform more efficiently, thereby improving our operating performance. We estimate that the consolidation will result in annual operational savings of $5.0 million."

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