ON Semiconductor Reports Third Quarter of 2009 Results
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PHOENIX--(BUSINESS WIRE)-- ON Semiconductor Corporation (Nasdaq: ONNN)
For the third quarter of 2009, highlights include:
-- Total revenues of $472.9 million
-- Adjusted EBITDA of $110.2 million
-- GAAP net income of $0.07 per fully diluted share
-- Non-GAAP net income of $0.16 per fully diluted share
-- Net cash provided by operating activities of $87.6 million
-- Cash, cash equivalents and short-term investments of $470.2 million
ON Semiconductor Corporation (Nasdaq: ONNN) today announced that total revenues in the third quarter of 2009 were $472.9 million, an increase of approximately 13 percent from the second quarter of 2009. During the third quarter of 2009, the company reported GAAP net income of $29.9 million, or $0.07 per fully diluted share. The third quarter 2009 GAAP net income included net charges of $41.0 million, or $0.09 per fully diluted share, from special items. The special item details can be found in the attached schedules. During the second quarter of 2009, the company reported a GAAP net loss of $3.0 million, or $0.01 per fully diluted share.
Third quarter 2009 non-GAAP net income was $70.9 million, or $0.16 per share on a fully diluted basis. Second quarter 2009 non-GAAP net income was $38.7 million, or $0.09 per share on a fully diluted basis. A reconciliation of these non-GAAP financial measures (and other non-GAAP measures used elsewhere in this release, such as non-GAAP gross margin and adjusted EBITDA) to the company's most directly comparable measures prepared in accordance with U.S. GAAP are set forth in the attached schedules and on our website at www.onsemi.com.
On a mix-adjusted basis, average selling prices in the third quarter of 2009 were down less than two percent when compared to the second quarter of 2009. GAAP gross margin in the third quarter was 37.2 percent. Non-GAAP gross margin in the third quarter of 2009 was 38.5 percent. GAAP gross margin in the third quarter included a net charge of approximately $6.5 million, or approximately 130 basis points, from special items. The special item details can be found in the attached schedules.
Adjusted EBITDA for the third quarter of 2009 was $110.2 million. Adjusted EBITDA for the second quarter of 2009 was $78.3 million.
"We exited the third quarter of 2009 with the highest level of cash, cash equivalents and short-term investments in the company's history at over $470 million and the lowest net debt position in the company's history at approximately $425 million," said Keith Jackson, ON Semiconductor president and CEO. "As a result of the strong financial performance, financial discipline and cash generating capabilities of the company we increased our cash, cash equivalents and short-term investments by approximately $67 million from the prior quarter. While there is still uncertainty as to how quickly the semiconductor industry will return to pre-recession revenue levels, our revenues continue to improve from the lows of the first quarter of 2009. We also believe that the overall supply chain remains very lean. Our weeks of distribution inventory were at the lowest level in the company's history at approximately 9 weeks exiting the third quarter of 2009."
"ON Semiconductor Corporation has recently completed the acquisition of privately-held PulseCore Holdings (Cayman) Inc. in an all cash transaction for initial consideration of approximately $17 million. PulseCore's previous owners and other stakeholders also have the ability to receive additional earn-out proceeds if, among other things, PulseCore is able to meet certain revenue and gross margin objectives in 2010 and 2011. The acquisition of PulseCore expands ON Semiconductor's high gross margin clock and circuit protection offerings for the consumer, wireless and computing end-market customers. PulseCore's capabilities in standard and custom high-speed and low power analog and mixed signal solutions for EMI (electromagnetic interference) reduction also enhance ON Semiconductor's overall EMI filtering and circuit protection portfolios. In addition, PulseCore's strong design capabilities and history in India represents ON Semiconductor's first foray into design activity in that country."
FOURTH QUARTER 2009 OUTLOOK
"Based upon product booking trends, backlog levels and estimated turns levels, we anticipate that total revenues will be approximately $480 to $495 million in the fourth quarter of 2009," Jackson said. "Backlog levels at the beginning of the fourth quarter of 2009 were up from backlog levels at the beginning of the third quarter of 2009 and represent over 90 percent of our anticipated fourth quarter 2009 revenues. We expect that average selling prices for the fourth quarter of 2009 will be down approximately one to two percent, sequentially. Starting in the first quarter of 2009, we began recording non-cash interest expense associated with the adoption of FASB Staff Position No. APB 14-1* related to our convertible senior subordinated notes. In the fourth quarter of 2009, we anticipate approximately $8 million of non-cash interest expense associated with this adoption. The following table outlines our fourth quarter 2009 GAAP and non-GAAP outlook."
ON SEMICONDUCTOR Q4 2009 BUSINESS OUTLOOK
Special
GAAP Items *** Non-GAAP****
Revenue $480 to $495 million $480 to $495 million
Gross Margin 38% to 39% $5 million 39% to 40%
Operating Expenses $130 to $135 million $25 million $105 to $110 million
Interest/Other $10 to $11 million $10 to $11 million
Expenses
Convertible Notes,
Non-cash Interest $8 million $8 million $0 million
Expense*
Tax $5 million $3 million $2 million
Fully Diluted Share 440 million 440 million
Count**
* Convertible Notes, Non-cash Interest Expense are included in FASB's Accounting Standards Codification ("ASC") Topic 470 Debt.
** Fully diluted share count can vary for among other things, the actual exercise of options or restricted stock units, the incremental dilutive shares from all of the company's convertible senior subordinated notes, and the repurchase or the issuance of stock or the sale of treasury shares. Please refer to the table on our website for potential changes to the Fully Diluted Share Count.
*** Special Items can include: stock based compensation expense; restructuring, asset impairments and other, net; expensing of appraised inventory fair market value (FMV) step up; amortization of intangibles; goodwill impairments; income tax adjustments to approximate cash taxes; non-cash interest expense and certain other special items as necessary.
**** Regulation G and other provisions of the securities laws regulate the use of financial measures that are not prepared in accordance with generally accepted accounting principles. We believe these non-GAAP measures provide important supplemental information to investors. We use these measures, together with GAAP measures, for internal managerial purposes and as a means to evaluate period-to-period comparisons. However, we do not, and you should not, rely on non-GAAP financial measures alone as measures of our performance. We believe that non-GAAP financial measures reflect an additional way of viewing aspects of our operations that - when taken together with GAAP results and the reconciliations to corresponding GAAP financial measures that we also provide in our news releases - provide a more complete understanding of factors and trends affecting our business. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures, even if they have similar names.
TELECONFERENCE
ON Semiconductor will host a conference call for the financial community at 5:00 p.m. Eastern Time (ET) on Nov. 4, 2009 to discuss this announcement and ON Semiconductor's results for the third quarter of 2009. The company will also provide a real-time audio broadcast of the teleconference on the Investor Relations page of its website at http://www.onsemi.com. The webcast replay will be available at this site approximately one hour following the live broadcast and will continue to be available for approximately 30 days following the conference call. Investors and interested parties can also access the conference call through a telephone call by dialing 888-546-9664 (U.S./Canada) or 973-935-8144 (International). In order to join this conference call, you will be required to provide the Conference ID Number - which is 36083041. Approximately one hour following the live broadcast, the company will provide a dial-in replay that will continue to be available through Nov. 11, 2009. To listen to the teleconference replay, call 800-642-1687 (U.S./Canada) or 706-645-9291 (International). You will be required to provide the Conference ID Number - which is 36083041.
About ON Semiconductor
With its global logistics network and broad product portfolio, ON Semiconductor (Nasdaq: ONNN) is a preferred supplier of high performance, energy efficient, silicon solutions that enable designers to quickly and cost-effectively improve system efficiency for electronics in the computing, communications, consumer, automotive, industrial, medical and military/aerospace markets. The company's portfolio includes power management, signal, logic, discrete and custom devices. The company operates a network of manufacturing facilities, sales offices, and design centers in key markets throughout North America, Europe, and the Asia Pacific regions. For more information, visit http://www.onsemi.com.
ON Semiconductor and the ON Semiconductor logo are registered trademarks of Semiconductor Components Industries, LLC. All other brand and product names appearing in this document are registered trademarks or trademarks of their respective holders. Although the company references its website in this news release, information on the website is not to be incorporated herein.
This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements related to the future financial performance of ON Semiconductor and our ability to increase cash flow from current levels. These forward-looking statements are based on information available to ON Semiconductor as of the date of this release and current expectations, forecasts and assumptions and involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. Such risks and uncertainties include a variety of factors, some of which are beyond ON Semiconductor's control. In particular, such risks and uncertainties include difficulties encountered in integrating acquired businesses; the variable demand and the aggressive pricing environment for semiconductor products; dependence on each company's ability to successfully manufacture in increasing volumes on a cost-effective basis and with acceptable quality for its current products; the adverse impact of competitive product announcements; revenues and operating performance; poor economic conditions and markets, including the current credit markets; the cyclical nature of the semiconductor industry; changes in demand for our products; changes in inventories at customers and distributors; technological and product development risks; availability of raw materials; competitors' actions; pricing and gross margin pressures; loss of key customers; order cancellations or reduced bookings; changes in manufacturing yields; control of costs and expenses; significant litigation; risks associated with acquisitions and dispositions; risks associated with leverage and restrictive covenants in debt agreements; risks associated with international operations including foreign employment and labor matters associated with unions and collective bargaining agreements; the threat or occurrence of international armed conflict and terrorist activities both in the United States and internationally; risks and costs associated with increased and new regulation of corporate governance and disclosure standards (including pursuant to Section 404 of the Sarbanes-Oxley Act of 2002); and risks involving environmental or other governmental regulation. Information concerning additional factors that could cause results to differ materially from those projected in the forward-looking statements is contained in ON Semiconductor's Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (the "SEC") on February 27, 2009, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other of ON Semiconductor's SEC filings. These forward-looking statements should not be relied upon as representing ON Semiconductor's views as of any subsequent date and ON Semiconductor does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made.
ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share data)
Quarter Ended Nine Months
October 2, July 3, September October 2, September 26,
2009 2009 26, 2009 2008(1)
2008(1)
Net revenues $ 472.9 $ 419.8 $ 581.5 $ 1,271.8 $ 1,566.1
Cost of 297.1 281.6 359.9 845.7 1,006.3
revenues
Gross profit 175.8 138.2 221.6 426.1 559.8
Gross margin 37.2 % 32.9 % 38.1 % 33.5 % 35.7 %
Operating
expenses:
Research and 53.8 50.7 67.2 148.1 175.0
development
Selling and 30.0 28.4 37.3 87.4 101.0
marketing
General and 27.1 30.0 34.2 84.4 89.9
administrative
In-process
research and - - - - 17.7
development
Amortization
of acquisition
related 7.3 7.3 6.8 21.8 15.9
intangible
assets
Restructuring,
asset 7.9 8.1 2.5 25.6 22.5
impairments
and other, net
Total
operating 126.1 124.5 148.0 367.3 422.0
expenses
Operating 49.7 13.7 73.6 58.8 137.8
income
Other income
(expenses),
net:
Interest (15.8 ) (15.7 ) (20.3 ) (49.2 ) (59.4 )
expense
Interest 0.1 0.2 1.7 0.7 5.5
income
Other (1.5 ) (0.5 ) 0.5 (4.2 ) (0.2 )
Loss on debt - (0.9 ) - (3.1 ) -
repurchase
Other (17.2 ) (16.9 ) (18.1 ) (55.8 ) (54.1 )
expenses, net
Income (loss)
before income 32.5 (3.2 ) 55.5 3.0 83.7
taxes
Income tax
benefit (1.9 ) 1.0 (4.5 ) (8.1 ) 11.5
(provision)
Net income 30.6 (2.2 ) 51.0 (5.1 ) 95.2
(loss)
Net (income)
loss
attributable to (0.7 ) (0.8 ) (0.4 ) (1.9 ) 0.6
minority
interest
Net income
(loss)
attributable to $ 29.9 $ (3.0 ) $ 50.6 $ (7.0 ) $ 95.8
ON
Semiconductor
Corporation
Net income
(loss) per
common share
attributable to
ON
Semiconductor
Corporation:
Basic: $ 0.07 $ (0.01 ) $ 0.13 $ (0.02 ) $ 0.26
Diluted: $ 0.07 $ (0.01 ) $ 0.13 $ (0.02 ) $ 0.26
Weighted
average common
shares
outstanding:
Basic 423.3 420.7 398.9 419.2 368.3
Diluted: 439.1 420.7 404.8 419.2 372.8
(1) The consolidated statement of operations for the quarter and nine months
ended September 26, 2008 has been modified compared to previously reported
amounts to reflect the adoption of FSP APB 14-1, "Accounting for Convertible
Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial
Cash Settlement)", which is now included in ASC 470 Debt, and the adoption of
SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements -
an amendment of ARB No. 51", which is now included in ASC 810 Consolidation,
during the first quarter of 2009.
ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEET
(in millions)
October 2, July 3, December 31,
2009 2009 2008 ((1))
Assets
Cash, cash equivalents and $ 470.2 $ 403.4 $ 458.7
short-term investments
Receivables, net 264.7 254.1 188.8
Inventories, net 264.2 269.5 335.5
Other current assets 42.7 44.1 55.5
Deferred income taxes, net of 15.7 14.3 12.0
allowances
Total current assets 1,057.5 985.4 1,050.5
Property, plant and equipment, net 715.3 734.1 770.8
Goodwill 162.4 160.5 160.2
Intangible assets, net 298.7 306.6 333.4
Other assets 40.7 37.6 44.6
Total assets $ 2,274.6 $ 2,224.2 $ 2,359.5
Liabilities and Stockholders' Equity
Accounts payable $ 147.2 $ 147.3 $ 178.2
Accrued expenses 135.1 136.4 138.4
Income taxes payable 6.7 6.5 4.1
Accrued interest 4.7 1.1 1.3
Deferred income on sales to 101.6 102.8 114.1
distributors
Current portion of long-term debt 165.7 174.8 107.9
Total current liabilities 561.0 568.9 544.0
Long-term debt 729.9 729.5 901.9
Other long-term liabilities 47.5 44.5 48.1
Deferred income taxes, net of 12.7 12.9 10.0
allowances
Total liabilities 1,351.1 1,355.8 1,504.0
ON Semiconductor Corporation
stockholders' equity:
Common stock 4.7 4.7 4.6
Additional paid-in capital 2,899.3 2,874.1 2,810.7
Accumulated other comprehensive loss (63.9 ) (67.6 ) (53.6 )
Accumulated deficit (1,572.4 ) (1,602.3 ) (1,565.4 )
Less: treasury stock, at cost (363.4 ) (359.0 ) (358.1 )
Total ON Semiconductor Corporation 904.3 849.9 838.2
stockholders' equity
Minority interest in consolidated 19.2 18.5 17.3
subsidiaries
Total equity 923.5 868.4 855.5
Total liabilities and equity $ 2,274.6 $ 2,224.2 $ 2,359.5
(1) The consolidated balance sheets as of December 31, 2008 have been modified
compared to previously reported amounts to reflect the adoption of FSP APB 14-1,
"Accounting for Convertible Debt Instruments That May Be Settled in Cash upon
Conversion (Including Partial Cash Settlement)", which is now included in ASC
470 Debt, and the adoption of SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements - an amendment of ARB No. 51", which is now
included in ASC 810 Consolidation, during the first quarter of 2009.
ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA* AND
CASH PROVIDED BY OPERATING ACTIVITIES
(in millions)
Quarter Ended Nine Months Ended
October 2, July 3, September 26, October 2, September 26,
2009 2009 2008(1) 2009 2008(1)
Net income $ 30.6 $ (2.2 ) $ 51.0 $ (5.1 ) $ 95.2
(loss)
Plus:
Depreciation
and 38.9 39.0 38.0 117.6 103.6
amortization
Interest 15.8 15.7 20.3 49.2 59.4
expense
Interest (0.1 ) (0.2 ) (1.7 ) (0.7 ) (5.5 )
income
Income tax
(benefit) 1.9 (1.0 ) 4.5 8.1 (11.5 )
provision
Net (income)
loss
attributable (0.7 ) (0.8 ) (0.4 ) (1.9 ) 0.6
to minority
interest
Stock
compensation 13.5 16.1 11.4 42.3 26.4
expense
Restructuring,
asset 7.9 8.1 2.5 25.6 22.5
impairments
and other, net
In-process
research and - - - - 17.7
development
Loss on debt - 0.9 - 3.1 -
repurchase
Expensing of
appraised
inventory fair 2.4 2.7 15.3 8.2 63.4
market value
step up
Adjusted 110.2 78.3 140.9 246.4 371.8
EBITDA*
Increase
(decrease):
Interest (15.8 ) (15.7 ) (20.3 ) (49.2 ) (59.4 )
expense
Interest 0.1 0.2 1.7 0.7 5.5
income
Income tax
benefit (1.9 ) 1.0 (4.5 ) (8.1 ) 11.5
(provision)
Net income
(loss)
attributable 0.7 0.8 0.4 1.9 (0.6 )
to minority
interest
Restructuring,
asset (7.9 ) (8.1 ) (2.5 ) (25.6 ) (22.5 )
impairments,
and other, net
Expensing of
appraised
inventory fair (2.4 ) (2.7 ) (15.3 ) (8.2 ) (63.4 )
market value
step up
(Gain) loss on
sale or (1.8 ) 0.9 (1.3 ) (2.2 ) (5.3 )
disposal of
fixed assets
Amortization
of debt
issuance costs 0.7 0.8 1.0 2.4 3.0
and debt
discount
Provision for
excess 4.1 4.0 5.0 15.7 10.7
inventories
Non-cash
interest 8.3 8.4 10.6 26.6 30.8
expense
Cash portion
of loss on - (0.7 ) - (2.4 ) -
debt
repurchase
Non-cash
impairment 5.4 0.2 - 5.6 12.0
charges
Deferred (1.1 ) (0.1 ) (2.5 ) (0.9 ) (9.6 )
income taxes
Other (0.4 ) (0.9 ) 0.4 (1.6 ) 0.7
Changes in
operating (10.6 ) (8.1 ) 20.2 (26.5 ) 27.4
assets and
liabilities
Net cash
provided by $ 87.6 $ 58.3 $ 133.8 $ 174.6 $ 312.6
operating
activities
(1) Certain amounts in the reconciliation of net income to adjusted EBITDA for
the quarters and nine months ended September 26, 2008 have been modified
compared to previously reported amounts to reflect the adoption of FSP APB 14-1,
"Accounting for Convertible Debt Instruments That May Be Settled in Cash upon
Conversion (Including Partial Cash Settlement)", which is now included in ASC
470 Debt, and the adoption of SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements - an amendment of ARB No. 51", which is now
included in ASC 810 Consolidation, during the first quarter of 2009.
* Adjusted EBITDA represents net income (loss) before interest expense, interest
income, provision for income taxes, depreciation and amortization expense and
special items. We use the adjusted EBITDA measure for internal managerial
evaluation purposes, as a performance metric for the vesting/releasing of
performance based equity awards, and for earning of corporate cash bonuses when
applicable. Not all of these items are necessarily included in the calculation
of net income (loss) each quarter. Adjusted EBITDA is a non-GAAP financial
measure. Regulation G and other provisions of the securities laws regulate the
use of financial measures that are not prepared in accordance with generally
accepted accounting principles. We believe this measure provides important
supplemental information to investors. We use this measure, together with GAAP
measures, for internal managerial purposes and as a means to evaluate
period-to-period comparisons. However, we do not, and you should not, rely on
non-GAAP financial measures alone as measures of our performance.
We believe that non-GAAP financial measures reflect an additional way of viewing
aspects of our operations that - when taken together with GAAP results and the
reconciliations to corresponding GAAP financial measures that we also provide in
our press releases - provide a more complete understanding of factors and trends
affecting our business. Because non-GAAP financial measures are not
standardized, it may not be possible to compare these financial measures with
other companies' non-GAAP financial measures, even if they have similar names.
ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
ANALYSIS OF GAAP VERSUS NON-GAAP DISCLOSURES
(in millions, except per share and percentage data)
Quarter Ended Nine Months Ended
Reconciliation of September
GAAP gross profit October 2, July 3, 26, October 2, September 26,
to non-GAAP gross 2009 2009 2008 2009 2008
profit:
GAAP gross profit $ 175.8 $ 138.2 $ 221.6 $ 426.1 $ 559.8
Special items:
Stock
a) compensation 3.5 4.2 3.6 10.6 7.3
expense
Expensing of
appraised
b) inventory fair 2.4 2.7 15.3 8.2 63.4
market value
step up
c) Amortization 0.6 0.5 0.6 1.7 1.8
of intangibles
Total Special 6.5 7.4 19.5 20.5 72.5
items
Non-GAAP gross $ 182.3 $ 145.6 $ 241.1 $ 446.6 $ 632.3
profit
Quarter Ended(1) Nine Months Ended(1)
Reconciliation of September
GAAP gross margin October 2, July 3, 26, October 2, September 26,
to non-GAAP gross 2009 2009 2008 2009 2008
margin:
GAAP gross margin 37.2 % 32.9 % 38.1 % 33.5 % 35.7 %
Special items:
Stock
a) compensation 0.7 % 1.0 % 0.6 % 0.8 % 0.5 %
expense
Expensing of
appraised
b) inventory fair 0.5 % 0.6 % 2.6 % 0.6 % 4.0 %
market value
step up
c) Amortization 0.1 % 0.1 % 0.1 % 0.1 % 0.1 %
of intangibles
Total Special 1.3 % 1.8 % 3.4 % 1.6 % 4.6 %
items
Non-GAAP gross 38.5 % 34.7 % 41.5 % 35.1 % 40.4 %
margin
A reconciliation
of GAAP net
income (loss) to
non-GAAP net
income is
included below.
Quarter Ended Nine Months Ended
Reconciliation of September
GAAP income October 2, July 3, 26, October 2, September 26,
(loss) to
non-GAAP net 2009 2009 2008 2009 2008
income:
GAAP net income
(loss)
attributable to $ 29.9 $ (3.0 ) $ 50.6 $ (7.0 ) $ 95.8
ON Semiconductor
Corporation
Special items:
Stock
a) compensation 3.5 4.2 3.6 10.6 7.3
expense - cost
of revenues
Stock
compensation
b) expense - 10.0 11.9 7.8 31.7 19.1
operating
expenses
Expensing of
appraised
c) inventory fair 2.4 2.7 15.3 8.2 63.4
market value
step up - cost
of revenues
In-process
d) research and - - - - 17.7
development
Amortization
e) of intangible 0.6 0.5 0.6 1.7 1.8
assets - cost
of revenues
Amortization
of acquisition
related
f) intangible 7.3 7.3 6.8 21.8 15.9
assets -
operating
expenses
Restructuring,
g) asset 7.9 8.1 2.5 25.6 22.5
impairments
and other, net
(Gain) loss on
h) debt - 0.9 - 3.1 -
prepayment
Non-cash
i) interest 8.3 8.4 10.6 26.6 30.8
expense
j) Cash taxes 1.0 (2.3 ) 2.6 1.0 (13.4 )
Total Special 41.0 41.7 49.8 130.3 165.1
items
Non-GAAP net $ 70.9 $ 38.7 $ 100.4 $ 123.3 $ 260.9
income
Non-GAAP net
income per share:
Basic $ 0.17 $ 0.09 $ 0.25 $ 0.29 $ 0.71
Diluted $ 0.16 $ 0.09 $ 0.25 $ 0.29 $ 0.70
Weighted average
common shares
outstanding:
Basic 423.3 420.7 398.9 419.2 368.3
Diluted: 439.1 420.7 404.8 425.1 372.8
(1)Certain amounts may not total due to rounding of individual components.
(2) Certain amounts for the quarter and nine months ended September 26, 2008
have been modified compared to previously reported amounts to reflect the
adoption of FSP APB 14-1, "Accounting for Convertible Debt Instruments That May
Be Settled in Cash upon Conversion (Including Partial Cash Settlement)", which
is now included in ASC 470 Debt, and the adoption of SFAS No. 160,
"Noncontrolling Interests in Consolidated Financial Statements - an amendment
of ARB No. 51", which is now included in ASC 810 Consolidation, during the
first quarter of 2009.
Non-GAAP Measures
To supplement the consolidated financial results prepared under GAAP, ON
Semiconductor uses non-GAAP measures which are adjusted from the most directly
comparable GAAP results to exclude items related to stock-based compensation,
amortization of intangible assets, amortization of acquisition-related
intangibles, expensing of appraised inventory fair market value step up,
purchased in-process research and development expenses, restructuring, asset
impairments and other, net, goodwill impairment charges, gains and losses on
debt prepayment, non-cash interest expense, their related tax effects and
certain other special items as necessary. Management does not consider these
charges in evaluating the core operational activities of ON Semiconductor.
Management uses these non-GAAP measures internally to make strategic decisions,
forecast future results and evaluate ON Semiconductor's current performance.
Most analysts covering ON Semiconductor use the non-GAAP measures as well.
Given management's use of these non-GAAP measures, ON Semiconductor believes
these measures are important to investors in understanding ON Semiconductor's
current and future operating results as seen through the eyes of management. In
addition, management believes these non-GAAP measures are useful to investors
in enabling them to better assess changes in ON Semiconductor's core business
across different time periods. These non-GAAP measures are not in accordance
with or an alternative to GAAP financial data and may be different from
non-GAAP measures used by other companies. Because non-GAAP financial measures
are not standardized it may not be possible to compare these financial measures
with other companies' non-GAAP financial measures, even if they have similar
names.
-- Non-GAAP gross profit and gross margin. The use of this non-GAAP financial
measure allows management to evaluate the gross margin of the company's core
businesses and trends across different reporting periods on a consistent basis,
independent of non-cash items including stock-based compensation expenses,
expensing of appraised inventory fair market value step up and amortization of
intangible assets. In addition, it is an important component of management's
internal performance measurement and reward process as it is used to assess the
current and historical financial results of the business, for strategic
decision making, preparing budgets and forecasting future results. Management
presents this non-GAAP financial measure to enable investors and analysts to
evaluate our revenue generation performance relative to the direct costs of
revenue of ON Semiconductor's core businesses.
-- Non-GAAP net income and net income per share. The use of these non-GAAP
financial measures allow management to evaluate the operating results of ON
Semiconductor's core businesses and trends across different reporting periods
on a consistent basis, independent of non-cash items including stock-based
compensation, amortization of intangible assets, amortization of
acquisition-related intangibles, expensing of appraised inventory fair market
value step up, purchased in-process research and development expenses,
restructuring, asset impairments and other, net, goodwill impairment charges,
gains and losses on debt prepayment, non-cash interest expense, their related
tax effects and certain other special items as necessary. In addition, they are
important components of management's internal performance measurement and
reward process as it is used to assess the current and historical financial
results of the business, for strategic decision making, preparing budgets and
forecasting future results. Management presents these non-GAAP financial
measures to enable investors and analysts to understand the results of
operations of ON Semiconductor's core businesses and to compare our results of
operations on a more consistent basis against that of other companies in our
industry.
Source: ON Semiconductor Corporation
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