Microsemi To Close Manufacturing Facility, Expects Annual Savings Of $20-$25M

October 28, 2009 by Jeff Shepard

Microsemi Corp. announced consolidation plans that will result in the closure of its manufacturing facility in Scottsdale, Arizona by April 2011. The company said that the action is part of its ongoing program to reduce inventory levels and improve its overall cost structure and business model as it grows in both new and existing markets.

Microsemi expects that after the consolidation activities are completed in 18 months, annual savings benefiting operating income will range from $20 million to $25 million. The gross margin impact related to these savings would have equated to 400 to 500 basis points when applied to fiscal year 2009 consensus revenue estimates.

In the fourth quarter of fiscal year 2009, Microsemi expects to record one-time charges for restructuring and other reserves of between $24 million and $26 million for severance and related benefits, lease termination and facility closure costs. Additional consolidation costs of $3 million may be incurred over the closure period.

These costs will not impact the company’s non-GAAP guidance for its fourth quarter of fiscal year 2009. The company reiterates that the first quarter ending December 27, 2009 will be the final one in which transitional idle capacity will be used in describing financial performance.

The Scottsdale facility’s remaining product lines will be transferred to other Microsemi facilities similar to other transfers that have occurred to date. Microsemi will obtain all required DSCC certifications related to the closure and expects to transfer production throughout the consolidation period. Microsemi will collaborate closely with its customers to ensure an efficient transition.

"Microsemi is committed to optimizing its business model and cost structure as we increase the scope of our existing business, expand into new markets and grow both organically and via acquisition," said James J. Peterson, Microsemi President and Chief Executive Officer. "As Microsemi extends its leadership in a range of global markets, we will also remain diligent in ensuring that we continue to provide the highest level of service to our customers while we protect and enhance both our near- and long-term profitability."