La-Z-Boy CEO explains outsourcing of U. S. jobs to Mexico

La-Z-Boy, which has already outsourced many of its jobs, continued the process earlier this week, announcing the closing of a Utah plant and the elimination of it cutting and sewing operations in this country.
The following news release was filed Friday with the Securities and Exchange Commission:

On March 31,2008, management committed to a restructuring plan which includes two major initiatives designed to strengthen its North American operations. As a result of this restructuring plan, the company will consolidate all of its domestic cutting and sewing operations in Mexico and will transfer production from its Tremonton, Utah plant, which will be closed, to its five remaining La-Z-Boy branded upholstery manufacturing facilities.

The transition of the company´s domestic cutting and sewing operations to Ramos Arizpe, Mexico, in the State of Coahuila, will impact approximately 1,050 La-Z-Boy employees at the five remaining facilities and will take place over a period of 18 to 24 months. La-Z-Boy expects to begin production at its Mexican facility in early calendar 2009.

The company´s Utah facility, which employs 630 people, will cease operations during the summer of 2008 and production will be shifted to the company´s remaining five facilities. As a result, La-Z-Boy expects to add approximately 400 production positions to its other facilities.

In connection with these activities, the Company expects to record total pre-tax restructuring and related asset impairment charges of $17 to $20 million or $0.20 to $0.24 per share as follows:

Asset impairment charges of $0.5 million in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets to write-down the facilities´ real and personal property to estimated fair market value, less costs to sell, will be recorded in the fourth quarter of fiscal 2008.

Severance and benefit costs of $9.0 to $11.0 million in accordance with SFAS No. 146 Accounting for Costs Associated with Exit or Disposal Activities will be recorded as follows: about $1.0 to $1.5 million in the fourth quarter of fiscal 2008, about $4.0 to $4.5 million in fiscal 2009 and the remainder in fiscal 2010.

Other costs incurred to close and consolidate facilities as well as transfer production to other facilities of $7.5 to $8.5 million will be recorded as follows: about $0.5 million in the fourth quarter of fiscal 2008, about $5.0 to $5.5 million in fiscal 2009 and the remainder in fiscal 2010.


All of the charges, except for the $0.5 million asset impairment charge, will result in future cash expenditures relating to severance, benefits and other plant exit and consolidation costs.

While initially, the La-Z-Boy Neosho plant will benefit from the addition of about 80 of the positions being cut in Utah, it appears in the long run La-Z-Boy's decision to send work across the border could have a huge impact on the local plant.