Microsemi Corp., which manufactures high-performance analog mixed-signal ICs circuits and high-reliability semiconductors, announced consolidation plans that will result in the closure of its Scottsdale, Arizona, manufacturing facility by April 2011. The action is part of an ongoing program to reduce inventory levels and improve overall cost structure and business model as growth takes place in both new and existing markets.
After the consolidation activities are completed in 18 months, Microsemi expects that annual savings to its operating income will be $20 million to $25 million. The gross margin impact related to these savings would have equated to 400-500 basis points when applied to fiscal year 2009 consensus revenue estimates.
In the fourth quarter of the current year, Microsemi expects to record one-time charges for restructuring and other reserves of $24 million to $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 are not expected to affect the company's non-GAAP guidance for its fourth quarter of fiscal year 2009. Microsemi management reiterated that the first quarter ending Dec. 27, 2009, will be the final one in which transitional idle capacity will be used in describing financial performance.
The Scottsdale plant's remaining product lines will be transferred to other Microsemi facilities in a similar manner 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. The company will collaborate closely with its customers to ensure an efficient transition.
James J. Peterson, Microsemi President and CEO, indicated that the company is committed to optimizing its business model and cost structure as it increases the scope of its existing business, and expands into new markets and grows both organically and via acquisitions.
Microsemi
