ON Semiconductor Reports Third Quarter of 2009 Results
http://www.businesswire.com/news/home/20091104006299/en
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 Expenses $10 to $11 million $10 to $11 million
Convertible Notes, Non-cash Interest Expense* $8 million $8 million $0 million
Tax $5 million $3 million $2 million
Fully Diluted Share Count** 440 million 440 million
* 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 26, October 2, September 26,
2009 2009 2008 (1) 2009 2008 (1)
Net revenues $ 472.9 $ 419.8 $ 581.5 $ 1,271.8 $ 1,566.1
Cost of revenues 297.1 281.6 359.9 845.7 1,006.3
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 development 53.8 50.7 67.2 148.1 175.0
Selling and marketing 30.0 28.4 37.3 87.4 101.0
General and administrative 27.1 30.0 34.2 84.4 89.9
In-process research and development - - - - 17.7
Amortization of acquisition related intangible assets 7.3 7.3 6.8 21.8 15.9
Restructuring, asset impairments and other, net 7.9 8.1 2.5 25.6 22.5
Total operating expenses 126.1 124.5 148.0 367.3 422.0
Operating income 49.7 13.7 73.6 58.8 137.8
Other income (expenses), net:
Interest expense (15.8 ) (15.7 ) (20.3 ) (49.2 ) (59.4 )
Interest income 0.1 0.2 1.7 0.7 5.5
Other (1.5 ) (0.5 ) 0.5 (4.2 ) (0.2 )
Loss on debt repurchase - (0.9 ) - (3.1 ) -
Other expenses, net (17.2 ) (16.9 ) (18.1 ) (55.8 ) (54.1 )
Income (loss) before income taxes 32.5 (3.2 ) 55.5 3.0 83.7
Income tax benefit (provision) (1.9 ) 1.0 (4.5 ) (8.1 ) 11.5
Net income (loss) 30.6 (2.2 ) 51.0 (5.1 ) 95.2
Net (income) loss attributable to minority interest (0.7 ) (0.8 ) (0.4 ) (1.9 ) 0.6
Net income (loss) attributable to ON Semiconductor Corporation $ 29.9 $ (3.0 ) $ 50.6 $ (7.0 ) $ 95.8
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 short-term investments $ 470.2 $ 403.4 $ 458.7
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 allowances 15.7 14.3 12.0
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 distributors 101.6 102.8 114.1
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 allowances 12.7 12.9 10.0
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 stockholders' equity 904.3 849.9 838.2
Minority interest in consolidated subsidiaries 19.2 18.5 17.3
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 (loss) $ 30.6 $ (2.2 ) $ 51.0 $ (5.1 ) $ 95.2
Plus:
Depreciation and amortization 38.9 39.0 38.0 117.6 103.6
Interest expense 15.8 15.7 20.3 49.2 59.4
Interest income (0.1 ) (0.2 ) (1.7 ) (0.7 ) (5.5 )
Income tax (benefit) provision 1.9 (1.0 ) 4.5 8.1 (11.5 )
Net (income) loss attributable to minority interest (0.7 ) (0.8 ) (0.4 ) (1.9 ) 0.6
Stock compensation expense 13.5 16.1 11.4 42.3 26.4
Restructuring, asset impairments and other, net 7.9 8.1 2.5 25.6 22.5
In-process research and development - - - - 17.7
Loss on debt repurchase - 0.9 - 3.1 -
Expensing of appraised inventory fair market value step up 2.4 2.7 15.3 8.2 63.4
Adjusted EBITDA* 110.2 78.3 140.9 246.4 371.8
Increase (decrease):
Interest expense (15.8 ) (15.7 ) (20.3 ) (49.2 ) (59.4 )
Interest income 0.1 0.2 1.7 0.7 5.5
Income tax benefit (provision) (1.9 ) 1.0 (4.5 ) (8.1 ) 11.5
Net income (loss) attributable to minority interest 0.7 0.8 0.4 1.9 (0.6 )
Restructuring, asset impairments, and other, net (7.9 ) (8.1 ) (2.5 ) (25.6 ) (22.5 )
Expensing of appraised inventory fair market value step up (2.4 ) (2.7 ) (15.3 ) (8.2 ) (63.4 )
(Gain) loss on sale or disposal of fixed assets (1.8 ) 0.9 (1.3 ) (2.2 ) (5.3 )
Amortization of debt issuance costs and debt discount 0.7 0.8 1.0 2.4 3.0
Provision for excess inventories 4.1 4.0 5.0 15.7 10.7
Non-cash interest expense 8.3 8.4 10.6 26.6 30.8
Cash portion of loss on debt repurchase - (0.7 ) - (2.4 ) -
Non-cash impairment charges 5.4 0.2 - 5.6 12.0
Deferred income taxes (1.1 ) (0.1 ) (2.5 ) (0.9 ) (9.6 )
Other (0.4 ) (0.9 ) 0.4 (1.6 ) 0.7
Changes in operating assets and liabilities (10.6 ) (8.1 ) 20.2 (26.5 ) 27.4
Net cash provided by operating activities $ 87.6 $ 58.3 $ 133.8 $ 174.6 $ 312.6
(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 GAAP gross profit to non-GAAP gross profit: October 2, July 3, September 26, October 2, September 26,
2009 2009 2008 2009 2008
GAAP gross profit $ 175.8 $ 138.2 $ 221.6 $ 426.1 $ 559.8
Special items:
a) Stock compensation expense 3.5 4.2 3.6 10.6 7.3
b) Expensing of appraised inventory fair market value step up 2.4 2.7 15.3 8.2 63.4
c) Amortization of intangibles 0.6 0.5 0.6 1.7 1.8
Total Special items 6.5 7.4 19.5 20.5 72.5
Non-GAAP gross profit $ 182.3 $ 145.6 $ 241.1 $ 446.6 $ 632.3
Quarter Ended (1) Nine Months Ended (1)
Reconciliation of GAAP gross margin to non-GAAP gross margin: October 2, July 3, September 26, October 2, September 26,
2009 2009 2008 2009 2008
GAAP gross margin 37.2 % 32.9 % 38.1 % 33.5 % 35.7 %
Special items:
a) Stock compensation expense 0.7 % 1.0 % 0.6 % 0.8 % 0.5 %
b) Expensing of appraised inventory fair market value step up 0.5 % 0.6 % 2.6 % 0.6 % 4.0 %
c) Amortization of intangibles 0.1 % 0.1 % 0.1 % 0.1 % 0.1 %
Total Special items 1.3 % 1.8 % 3.4 % 1.6 % 4.6 %
Non-GAAP gross margin 38.5 % 34.7 % 41.5 % 35.1 % 40.4 %
A reconciliation of GAAP net income (loss) to non-GAAP net income is included below.
Quarter Ended Nine Months Ended
Reconciliation of GAAP income (loss) to non-GAAP net income: October 2, July 3, September 26, October 2, September 26,
2009 2009 2008 2009 2008
GAAP net income (loss) attributable to ON Semiconductor Corporation $ 29.9 $ (3.0 ) $ 50.6 $ (7.0 ) $ 95.8
Special items:
a) Stock compensation expense - cost of revenues 3.5 4.2 3.6 10.6 7.3
b) Stock compensation expense - operating expenses 10.0 11.9 7.8 31.7 19.1
c) Expensing of appraised inventory fair market value step up - cost of revenues 2.4 2.7 15.3 8.2 63.4
d) In-process research and development - - - - 17.7
e) Amortization of intangible assets - cost of revenues 0.6 0.5 0.6 1.7 1.8
f) Amortization of acquisition related intangible assets - operating expenses 7.3 7.3 6.8 21.8 15.9
g) Restructuring, asset impairments and other, net 7.9 8.1 2.5 25.6 22.5
h) (Gain) loss on debt prepayment - 0.9 - 3.1 -
i) Non-cash interest expense 8.3 8.4 10.6 26.6 30.8
j) Cash taxes 1.0 (2.3 ) 2.6 1.0 (13.4 )
Total Special items 41.0 41.7 49.8 130.3 165.1
Non-GAAP net income $ 70.9 $ 38.7 $ 100.4 $ 123.3 $ 260.9
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.
ON Semiconductor. Phoenix
Anne Spitza
Corporate Communications
602-244-6398
anne.spitza@onsemi.com
Ken Rizvi
Corporate Development, Treasury & Investor Relations
602-244-3437
ken.rizvi@onsemi.com
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