Specifically, Plantronics plans to close AEG’s manufacturing facility in Dongguan, China; shut down a related Hong Kong research and development, sales and procurement office; and consolidate procurement, research and development activities for AEG in a new Shenzhen, China site. The selling, general and administrative functions of AEG will also be consolidated with those of Plantronics Audio Communication Group through-out the Asia-Pacific region. These steps are part of a strategic initiative designed to reduce fixed costs by outsourcing AEG manufacturing to the network of qualified contract manufacturers it already has in place.

These actions will eventually result in the elimination of all manufacturing operations positions in Dongguan, China and certain related support functions. The plan will proceed in phases and is expected to be complete by March 2008. As a result, we currently expect cost savings of approximately $3 million in FY09 and $4 million in FY10.

We currently estimate that we will incur total costs and charges of approximately $4 to $4.5 million in connection with this consolidation plan. Of this total, we currently estimate that approximately $3.7 million, or $0.07 per share, will be incurred over the balance of the current fiscal year which ends in March 2008. For the quarter ending December 31, 2007, we currently estimate that we will incur approximately $2.8 million. No tax benefit is currently expected to be associated with these charges and they are expected to reduce GAAP EPS by $0.06 per share in the third quarter in comparison to the previously provided guidance in our press release dated October 23, 2007.

The preliminary estimates of the total costs and charges of $4 to $4.5 million in connection with this consolidation plan consist of approximately $2.2 million in non-cash charges for accelerated depreciation and fixed asset write-offs, and the balance in cash charges for severance and other non-recurring costs associated with the plan.

We believe we will recover the costs associated with this plan through reduced future expenses within two calendar years, and that the net present value of the cash flows associated with the plan is positive in comparison to the alternative of continuing with the current cost structure.
Source: By Plantronics