About 400-500 employees, representing between 7 and 8 percent of Sola International's global workforce, have been let go over the past few months, and the total tally may grow to 600 by year-end. In general, Sola is moving production from California to Mexico, and from Mexico to China, while eliminating excess inventories and duplications among the different factories.
Cost containment and new product launches such as the Sola Max progressive lens are the major tenets of Sola's strategy for this year under its new CEO, Jeremy Bishop, in a bid to raise earnings this year to a level of about $1.00 a share. In the year ended last March 31, the US-based company had a net profit of only $741,000 or 3 cents a share, down from $12,521,000 or 49 cents a share on a fully diluted basis the year before.
Barry Packham, who has been with the company since 1993 as vice president of manufacturing development, has been promoted to the post of executive vice president of manufacturing and logistics to supervise the implementation of the new cost reduction, product migration and service initiatives. James Cox, who joined Sola in 1985 as vice president of manufacturing, will act as executive vice president and of business and product development.
In the 4th quarter, special charges of $26,155,000, half of which were related to the reorganization of the group's production structure, were largely responsible for a net loss of $15,093,000 on sales of $136,794,000. Sales declined in the quarter, but excluding the effect of currency changes, they actually increased by 0.2 percent from the year-ago period, with increases of 14.8 percent in Europe and 20.6 percent in the rest of the world offsetting a 15.9 percent decrease on the North American market.
For the full year, Sola's sales in constant currencies rose by 3.6 percent. While North American sales declined by 2.8 percent, Europe was up by 10.4 percent on this basis, and the rest of the world by 8.5 percent. American Optical's operations performed particularly well in Europe, and the German and Italian market came back. Part of the decline in North America was due to the bankruptcy filing of a major US customer that had ordered more than $5 million for the year, resulting in a pre-tax extraordinary charge of $13 million.
Sola's new management is endeavoring to improve working capital and cash flow. In the latest quarter alone, net debt was reduced by 4.3 percent to $232.6 million.
The board of directors has passed a resolution to buy back up to 5 percent of the company's common stock. Meanwhile, Sola has acquired the remaining 65 percent stake it didn't own yet in Optical Eyewear, a leading group of wholesale lens surfacing laboratories in Australia and New Zealand.