The Board of Directors of Digital Angel has announced that it has approved a restructuring program primarily focused on its Animal Identification business.
The program will feature further headcount reduction, outsourcing some manufacturing to lower cost suppliers, exiting some costly facilities, and moving some operations to lower cost countries. This restructuring program is expected to be substantially implemented by the end of 2008.
In addition, Digital Angel's corporate office will be relocated from Delray Beach, FL, to lower-cost office space in the Northeast, and will also undergo headcount reduction.
Joseph J. Grillo, Chief Executive Officer of Digital Angel, said: "The primary goal of our restructuring program for the Animal Identification business is the achievement of higher gross margins, which should allow us to become the low-cost producer of many of our products.
"My senior management team and I have prior experience in implementing similar operational changes, and we believe these measures are very doable and that they will have a beneficial impact on our financial results in the coming quarters."
Lorraine Breece, Senior Vice President and Chief Financial Officer, added, "We expect to take accounting charges relating to the restructuring program and associated costs in 2008 totaling approximately $9.0 million, the majority of which will be recorded in the second quarter. The total charges will consist of severance, contract and lease termination costs, as well as costs associated with the restructuring, including goodwill and fixed asset impairment, inventory write-downs and other restructuring related items.
"Approximately $4.0 million of these charges are expected to be cash costs; the rest should be non-cash. We believe that once full implementation of the program is complete, the Company will realize annual cost savings of approximately $4.5 million, or about 10 percent of total current Animal ID sales."
