CommScope Inc., a global leader in infrastructure solutions for communications networks, plans to discontinue operations at its Connectivity Solutions Manufacturing Inc. (CSMI) subsidiary in Omaha, Neb., and relocate manufacturing to one or more existing CommScope facilities in North America.
CommScope announced its intent to analyze options for its Omaha manufacturing facility in January 2010 and recently finalized its review. The company expects annualized pretax savings of approximately $18 million to $22 million upon completion of relocation and closure of the facility in late 2011. Approximately one-half of these annualized pretax savings are expected to be realized in 2011, primarily in the second half of the year.
"A combination of difficult circumstances – including facility underutilization, high labor costs, customers' spending slowdown and their demand for lower-cost products – is causing CommScope to commit to alternative manufacturing options in order to satisfy customers while protecting the profitability of our business," said Eddie Edwards, president and chief operating officer, CommScope. "These actions are difficult yet unavoidable, and we regret the hardship on our employees. We are grateful to our CSMI Omaha workforce for their outstanding service."
The company expects to incur total pretax restructuring costs of $45 million to $53 million to complete this facility relocation. Of this amount, cash costs are estimated to be $35 million to $40 million. The principal estimated costs related to this initiative are:
- Employee-related costs of $35 million to $40 million
- Impairment charges of $8 million to $10 million related to the Omaha facility
- Equipment relocation costs of $2 million to $3 million
CommScope expects to recognize the impairment charges and certain employee-related charges totaling approximately $20 million in the first quarter of 2010. The remaining charges are expected to be recognized between April 2010 and December 2011. The company does not anticipate any material increase in capital spending to complete this relocation.
The company currently employs approximately 400 people in its CSMI subsidiary in Omaha, all of whom will be affected by the manufacturing relocation. Another 70 employees in non-manufacturing corporate functions, who currently are housed in the CSMI facility, are expected to relocate to a new Omaha location prior to the plant's closing.
"We are in the midst of a review of our global manufacturing footprint as we work to improve facility utilization, minimize cost and improve service to our global customers," Edwards said. "As we transition production, we intend to ensure that customers continue receiving the superior service they have come to expect from CommScope."
