Jacuzzi Brands, Inc. announced that it plans to close its spa manufacturing facility located in Plant City, FL, U.S. The plant is expected to cease operations by late November 2003.
The facility, which produces less than 10 percent of the spa volume for the company, will be absorbed by the company's new manufacturing facility in Chino, CA, U.S., without need for additional staffing.
Jacuzzi also announced that it will be eliminating its North American sanitary bath wholesale sales force, which is being replaced with independent manufacturers representatives to market its Eljer® brand products to the wholesale channel on a commission basis.
The company also said its North American Bath Operations will also be consolidating a number of administrative functions presently being performed in multiple locations by its North American whirlpool bath, spa, and sanitary bath divisions into a shared services operations center to be located in Dallas, TX, U.S. The shared services operations center, which is expected to be fully operational by the third quarter of fiscal 2004, will be located in office space that has remained vacant since the closing of the Zurn, Inc. corporate office in Dallas, TX, and is adjacent to the company's Eljer location.
Jacuzzi announced that it will record pre-tax one-time charges of approximately U.S. $2.6 million, or $0.02 per share, related to these actions in its fiscal 2003 fourth quarter ending Sept. 30, 2003. Approximately $1.5 million of these charges are associated with cash expenditures for severance and other costs expected to be incurred in fiscal 2004, net of recoveries from asset sales. The remaining, non-cash charges relate primarily to the write off of plant and equipment net of the reversal of reserves previously established for the vacant office space in Dallas, TX. As a result of these changes, the company expects annualized pre-tax savings of $ 2.5 million.
Jacuzzi is still reviewing its remaining operations, principally Eljer, for cost saving initiatives to restore profitability. As a result of this review, it anticipates further one-time charges in fiscal 2003 and 2004 to achieve its objectives of increased margins and growth.
"We are continuing to review every aspect of the North American Bath Products business, particularly Eljer, to reduce this segment's cost structure, expand margins and improve profitability," commented Donald C. Devine, president and chief operating officer. "These actions reflect management's ongoing commitment to effectively leverage the anticipated, significant growth in sales and market share at the Bath Products business beginning in fiscal 2004. Bath Products sales are expected to increase by approximately 14 percent for fiscal 2003, outperforming the industry."
David H. Clarke, chairman and CEO of Jacuzzi Brands, Inc., said the company stands by its previously announced financial expectations. "As we are close to our year end, we can confirm our previous sales guidance of approximately $1.18 billion," he said. "While additional costs and charges are being realized in the current fourth quarter, we believe that the actions which produced them are necessary as we rebuild the profitability and growth prospects of the Company. We expect to give a complete break down of these costs and charges and our plans for Eljer when we give our fiscal 2003 results in early December."
Mr. Clarke continued, "Aside from the potential charges mentioned above, we are comfortable with current analyst earnings estimates for fiscal 2004 of $0.50 per share."
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