ON Semiconductor Reports Third Quarter 2013 Results

ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share data)

       
Quarter Ended Nine Months Ended

September 27,
2013

 

June 28,
2013

 

September 28,
2012

September 27,
2013

 

September 28,
2012

Revenues $ 715.4 $ 688.3 $ 725.5 $ 2,064.7 $ 2,214.7
Cost of revenues 466.2   456.5   487.5   1,379.2   1,473.2  
Gross profit 249.2 231.8 238.0 685.5 741.5
Gross margin 34.8 % 33.7 % 32.8 % 33.2 % 33.5 %
Operating expenses:
Research and development 84.0 83.1 90.1 255.5 279.3
Selling and marketing 44.2 43.3 44.2 127.3 136.8
General and administrative 34.5 40.2 36.8 110.9 119.7
Amortization of acquisition-related intangible assets 8.2 8.2 11.1 24.8 33.3
Restructuring, asset impairments and other, net 11.0   6.1   11.2   11.1   57.3  
Total operating expenses 181.9   180.9   193.4   529.6   626.4  
Operating income 67.3   50.9   44.6   155.9   115.1  
Other income (expenses), net:
Interest expense (9.2 ) (9.3 ) (13.6 ) (28.6 ) (43.4 )
Interest income 0.3 0.4 0.3 1.0 1.1
Other (1.4 ) 4.1 (3.6 ) 3.6 3.4
Loss on debt exchange     (7.8 ) (3.1 ) (7.8 )
Other income (expenses), net (10.3 ) (4.8 ) (24.7 ) (27.1 ) (46.7 )
Income before income taxes 57.0 46.1 19.9 128.8 68.4
Income tax (provision) benefit (4.2 ) 2.6   (6.5 ) (4.0 ) (17.8 )
Net income 52.8 48.7 13.4 124.8 50.6
Less: Net income attributable to non-controlling interest (1.0 ) (1.0 ) (0.9 ) (2.7 ) (3.0 )
Net income attributable to ON Semiconductor Corporation $ 51.8   $ 47.7   $ 12.5   $ 122.1   $ 47.6  
Net income per common share attributable to ON Semiconductor Corporation:
Basic $ 0.12   $ 0.11   $ 0.03   $ 0.27   $ 0.10  
Diluted $ 0.11   $ 0.11   $ 0.03   $ 0.27   $ 0.10  
Weighted average common shares outstanding:
Basic 449.3   450.7   454.6   449.8   453.9  
Diluted 452.1   453.3   456.2   452.6   458.2  
 
 

ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEET
(in millions)

           

September 27,
2013

June 28,
2013

December 31,
2012

Assets
Cash and cash equivalents $ 369.5 $ 396.1 $ 486.9
Short-term investments 184.1 182.9 144.8
Receivables, net 419.2 407.6 357.8
Inventories 585.3 559.7 581.7
Other current assets 77.7 67.2 111.7
Deferred income taxes 9.9   8.3   10.5  
Total current assets 1,645.7 1,621.8 1,693.4
Property, plant and equipment, net 1,092.9 1,101.5 1,103.3
Deferred income taxes 37.9 38.9 31.2
Goodwill 184.6 184.6 184.6
Intangible assets, net 231.8 240.1 257.0
Other assets 55.8   54.5   58.9  
Total assets $ 3,248.7   $ 3,241.4   $ 3,328.4  
Liabilities, Non-Controlling Interest and Stockholders’ Equity
Accounts payable $ 259.2 $ 276.6 $ 279.5
Accrued expenses 194.3 188.9 228.3
Income taxes payable 2.2 0.5 4.9
Accrued interest 5.0 2.3 0.6
Deferred income on sales to distributors 145.2 152.9 134.5
Deferred income taxes 23.2 24.1 22.9
Current portion of long-term debt 249.0   231.3   353.6  
Total current liabilities 878.1 876.6 1,024.3
Long-term debt 659.4 686.3 658.3
Other long-term liabilities 186.0 191.9 232.2
Deferred income taxes 23.5   21.3   22.9  
Total liabilities 1,747.0   1,776.1   1,937.7  
ON Semiconductor Corporation stockholders’ equity:
Common stock 5.1 5.1 5.1
Additional paid-in capital 3,195.2 3,183.3 3,156.4
Accumulated other comprehensive loss (48.6 ) (51.1 ) (41.1 )
Accumulated deficit (1,170.8 ) (1,222.6 ) (1,292.9 )
Less: treasury stock, at cost (511.5 ) (480.7 ) (466.4 )
Total ON Semiconductor Corporation stockholders’ equity 1,469.4 1,434.0 1,361.1
Non-controlling interest in consolidated subsidiary 32.3   31.3   29.6  
Total stockholders' equity 1,501.7   1,465.3   1,390.7  
Total liabilities and equity $ 3,248.7   $ 3,241.4   $ 3,328.4  
 
 
 

ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA* AND
NET CASH PROVIDED BY OPERATING ACTIVITIES
(in millions)

       
Quarter Ended Nine Months Ended

September 27,
2013

 

June 28,
2013

 

September 28,
2012

September 27,
2013

 

September 28,
2012

Net income $ 52.8 $ 48.7 $ 13.4 $ 124.8   $ 50.6
Adjusted for:
Restructuring, asset impairments and other, net 11.0 6.1 11.2 11.1 57.3
Interest expense 9.2 9.3 13.6 28.6 43.4
Interest income (0.3 ) (0.4 ) (0.3 ) (1.0 ) (1.1 )
Loss on debt exchange 7.8 3.1 7.8
Income tax provision (benefit) 4.2 (2.6 ) 6.5 4.0 17.8
Net income attributable to non-controlling interest (1.0 ) (1.0 ) (0.9 ) (2.7 ) (3.0 )
Depreciation and amortization 52.9 52.3 61.3 156.5 182.7
Actuarial losses on pension plans and other pension benefits 13.6 3.4
SANYO Semiconductor inventory item 3.1 8.0
SANYO Semiconductor purchase agreement         (2.2 )
Adjusted EBITDA* 128.8 112.4 115.7 338.0 364.7
Increase (decrease):
Restructuring, asset impairments and other, net (11.0 ) (6.1 ) (11.2 ) (11.1 ) (57.3 )
Interest expense (9.2 ) (9.3 ) (13.6 ) (28.6 ) (43.4 )
Interest income 0.3 0.4 0.3 1.0 1.1
Income tax benefit (provision) (4.2 ) 2.6 (6.5 ) (4.0 ) (17.8 )
Net income attributable to non-controlling interest 1.0 1.0 0.9 2.7 3.0
Actuarial losses on pension plans and other pension benefits (13.6 ) (3.4 )
SANYO Semiconductor inventory item (3.1 ) (8.0 )
SANYO Semiconductor purchase agreement 2.2
(Gain) loss on sale or disposal of fixed assets (0.5 ) 0.3 (2.7 ) (7.6 ) (4.7 )
Amortization of debt issuance costs 0.3 0.3 0.6 0.9 1.7
Provision for excess inventories 5.8 24.0 3.3 45.7 30.6
Non-cash asset impairment charges 2.9 0.6 2.1 3.5 2.1
Non-cash share-based compensation expense 7.0 10.6 2.1 23.4 14.7
Non-cash interest 2.7 2.7 5.5 8.5 18.7
Non-cash foreign currency translation gain (21.0 )
Deferred income taxes 0.7 (6.9 ) 1.4 (5.7 ) 3.4
Other 0.1 (0.3 ) (0.8 ) (1.4 )
Changes in operating assets and liabilities (64.8 ) (77.1 ) (82.1 ) (131.8 ) (166.8 )
Net cash provided by operating activities $ 59.9   $ 55.2   $ 11.9   200.3   139.4  
 

*

Adjusted EBITDA represents net income 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 means to evaluate period-to-period comparisons and as a performance metric for the vesting/releasing of certain of our performance-based equity awards. 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. 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 non-GAAP financial measures used by our company or other companies, 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

September 27,
2013

 

June 28,
2013

 

September 28,
2012

September 27,
2013

 

September 28,
2012

Reconciliation of GAAP gross profit to non-GAAP gross profit:
GAAP gross profit $ 249.2   $ 231.8   $ 238.0   $ 685.5   $ 741.5  
Special items:
a) Actuarial losses on pension plans and other pension benefits 6.7 2.6
b) SANYO Semiconductor inventory item     3.1     8.0  
Non-GAAP gross profit $ 249.2   $ 231.8   $ 241.1   $ 692.2   $ 752.1  
Reconciliation of GAAP gross margin to non-GAAP gross margin:
GAAP gross margin 34.8 % 33.7 % 32.8 % 33.2 % 33.5 %
Special items:
a) Actuarial losses on pension plans and other pension benefits % % % 0.3 % 0.1 %
b) SANYO Semiconductor inventory item % % 0.4 % % 0.4 %
Total special items % % 0.4 % 0.3 % 0.5 %
Non-GAAP gross margin 34.8 %   33.7 % 33.2 % 33.5 % 34.0 %
Reconciliation of GAAP operating expenses to non-GAAP operating expenses:
GAAP operating expenses $ 181.9   $ 180.9   $ 193.4   529.6   626.4  
Special items:
a) Amortization of acquisition related intangible assets (8.2 ) (8.2 ) (11.1 ) (24.8 ) (33.3 )
b) Actuarial losses on pension plans and other pension benefits (6.9 ) (0.8 )
c) Restructuring, asset impairments and other, net (11.0 ) (6.1 ) (11.2 ) (11.1 ) (57.3 )
Total special items (19.2 ) (14.3 ) (22.3 ) (42.8 ) (91.4 )
Non-GAAP operating expenses $ 162.7   $ 166.6   $ 171.1   $ 486.8   $ 535.0  
Reconciliation of GAAP net income to non-GAAP net income:
GAAP net income attributable to ON Semiconductor Corporation $ 51.8   $ 47.7   $ 12.5   $ 122.1   $ 47.6  
Special items:
a) Actuarial losses on pension plans and other pension benefits (cost of revenues) 6.7 2.6
b) SANYO Semiconductor inventory item 3.1 8.0
c) Amortization of acquisition related intangible assets (operating expenses) 8.2 8.2 11.1 24.8 33.3
d) Actuarial losses on pension plans and other pension benefits (operating expenses) 6.9 0.8
e) Restructuring, asset impairments and other, net 11.0 6.1 11.2 11.1 57.3
f) SANYO Semiconductor purchase agreement (2.2 )
g) Loss on debt exchange 7.8 3.1 7.8
h) Non-cash interest on convertible notes 2.7 2.7 5.5 8.5 18.7
i) Adjustment to reflect cash taxes 1.7   (7.5 ) 2.3   (5.9 ) 2.1  
Total special items 23.6   9.5   41.0   55.2   128.4  
Non-GAAP net income $ 75.4   $ 57.2   $ 53.5   $ 177.3   $ 176.0  
Non-GAAP net income per share:
Basic $ 0.17   $ 0.13   $ 0.12   $ 0.39   $ 0.39  
Diluted $ 0.17   $ 0.13   $ 0.12   $ 0.39   $ 0.38  
Weighted average common shares outstanding:
Basic 449.3   450.7   454.6   449.8   453.9  
Diluted 452.1   453.3   456.2   452.6   458.2  
 
 

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