Kids Brands Fires LaJobi Executives

March 15, 2011  by in UnCategorized   

By Home Furnishings Business in Bedroom on March 16, 2011

Kids Brands Inc. has fired two executives of its LaJobi youth furniture subsidiary for violating antidumping regulations on wood bedroom furniture from China.

LaJobi's current president, Larry Bivona, and the company's current managing director of operations both have been terminated from employment. Rick Schaub, president of Kid Brand's Sassy subsidiary replaces Bivona as president of LaJobi. Schaub also will continue as Sassy president.

Kids Brands (NYSE: KID) made the moves based on its investigation into LaJobi, which was initiated after the Board of Directors was made aware of potential issues regarding customs duty paid on products imported into the United States. The Board's investigation found instances at LaJobi in which incorrect import duties were applied on certain wooden furniture imported from vendors in China, resulting in a violation of anti-dumping regulations. On the basis of the investigation, the Board concluded that there was misconduct involved on the part of certain LaJobi employees in connection with the incorrect payment of duties, including misidentifying the manufacturer and shipper of products. The ongoing investigation is also focusing on certain of LaJobi's business and staffing practices in Asia.

"Kid Brands is committed to the highest standards of business ethics and conduct," said Raphael Benaroya, chairman of the Board of Directors. "We have taken actions against personnel who engaged in misconduct and are introducing other remedial steps. The Board will consider additional appropriate actions necessary to uphold ethical standards."

Kid Brands is committed to working closely with U.S. Customs to address issues relating to incorrect import duties. The Company currently estimates that it will incur costs of approximately $7 million relating to customs duty owed and may be assessed additional penalties.

The Company previously disclosed a potential earnout payment of approximately $12 to $15 million in the aggregate relating to its acquisitions of LaJobi and CoCaLo, substantially all of which was estimated to relate to LaJobi. The Company no longer believes such amount is payable with respect to Kid Brands' acquisition of LaJobi, and the company does not intend to make any earnout payment related to LaJobi.

While Kid Brands expects 2010 net sales to exceed its previously disclosed outlook of $267 million, amounts owed to U.S. Customs and other costs and expenses relating to the investigation will adversely impact the company's reported income.