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Gallery to Cut Staff by 10 Percent, Move Jobs to Portland

25 Oct, 2005 By: Holly J. Wagner

Movie Gallery will cut its staff by 10 percent and move its back office functions to the Portland, Ore., offices of recently acquired Hollywood Entertainment Corp., the company announced today.

The company will save $2 million a year by laying off 100 salaried and administrative workers over the next year and moving its finance, accounting, treasury, product, logistics, human resources and payroll departments to Portland, executives said.

"This decision was a difficult one, but we believe that it will enable us to reduce expenses, leverage the company's purchasing power and streamline the organization to drive top-line results," said chairman and CEO Joe Malugen. "Unfortunately, the process of making our company stronger will have an impact on a number of our valued and talented associates and partners."

Gallery executives said when the merger closed in April that they would be looking for synergies in the two companies. They had already announced the company should expect to realize cash savings of about $20 million this year and up to $50 million by the end of 2007 as a result of the Hollywood acquisition. Gallery had also eliminated 80 redundant positions after the deal closed.

"We are committed to treating all affected associates and partners fairly and providing the necessary assistance to make this transition as smooth as possible," Malugen said. "The company will provide severance pay as well as outplacement and other related services to assist affected employees in making a smooth transition to other employment. Furthermore, affected employees will receive priority in terms of applying for other open Movie Gallery positions, including open positions in Portland."

The company will incur after-tax costs of approximately $1.1 million for severance and other expenses during 2005 and 2006.

"Over the past few months we have taken significant steps to position the company for future growth," Malugen said. "While we are hopeful that the fourth quarter will begin to show some improvement due to the release to video of several box office hits, the profound softness in our market requires us to take a hard look at our cost structure."

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