ON Semiconductor Reports Second Quarter 2015 Results

(1)Amounts have been revised; for additional information about the revisions to prior periods, see our 2014 Form 10-K and our second quarter 2015 Form 10-Q to be filed on or around August 3, 2015.

* 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   Six Months Ended
July 3, 2015   April 3, 2015  

June 27, 2014 (1)

July 3, 2015  

June 27, 2014 (1)

Reconciliation of GAAP gross profit to non-GAAP gross profit:
GAAP gross profit $ 304.4   $ 300.4   $ 278.1   $ 604.8   $ 526.3  
Special item:
a) Expensing of appraised inventory at fair market value     1.3     1.3  
Non-GAAP gross profit $ 304.4   $ 300.4   $ 279.4   $ 604.8   $ 527.6  
Reconciliation of GAAP gross margin to non-GAAP gross margin:
GAAP gross margin 34.6 % 34.5 % 36.7 % 34.5 % 35.9 %
Special item:
a) Expensing of appraised inventory at fair market value % % 0.2 % % 0.1 %
Non-GAAP gross margin 34.6 % 34.5 % 36.9 % 34.5 % 36.0 %
Reconciliation of GAAP operating expenses to non-GAAP operating expenses:
GAAP operating expenses $ 236.6   $ 232.0   $ 191.3   $ 468.6   $ 368.8  
Special items:
a) Amortization of acquisition related intangible assets (33.6 ) (33.9 ) (10.4 ) (67.5 ) (18.6 )
b) Restructuring, asset impairments and other, net (3.5 ) 2.3 (4.1 ) (1.2 ) (9.9 )

c)

Goodwill and intangible asset impairments (3.7 ) (3.7 )
d) Third party acquisition related costs     (3.7 )   (4.0 )
Total special items (40.8 ) (31.6 ) (18.2 ) (72.4 ) (32.5 )
Non-GAAP operating expenses $ 195.8   $ 200.4   $ 173.1   $ 396.2   $ 336.3  
Reconciliation of GAAP operating income to non-GAAP operating income:
GAAP operating income $ 67.8   $ 68.4   $ 86.8   $ 136.2   $ 157.5  
Special items:
a) Expensing of appraised inventory at fair market value step up 1.3 1.3
b) Amortization of acquisition related intangible assets 33.6 33.9 10.4 67.5 18.6
c) Restructuring, asset impairments and other, net 3.5 (2.3 ) 4.1 1.2 9.9
d) Goodwill and intangible asset impairments 3.7 3.7
e) Third party acquisition related costs     3.7     4.0  
Total special items 40.8   31.6   19.5   72.4   33.8  
Non-GAAP operating income $ 108.6   $ 100.0   $ 106.3   $ 208.6   $ 191.3  

Reconciliation of GAAP operating margin to non-GAAP operating margin
(operating income / revenues) :

GAAP operating margin 7.7 % 7.9 % 11.5 % 7.8 % 10.8 %
Special items:
a) Expensing of appraised inventory at fair market value step up % % 0.2 % % 0.1 %
b) Amortization of acquisition related intangible assets 3.8 % 3.9 % 1.4 % 3.9 % 1.3 %
c) Restructuring, asset impairments and other, net 0.4 % (0.3 )% 0.5 % 0.1 % 0.7 %
d) Goodwill and intangible asset impairments 0.4 % % % 0.2 % %
e) Third party acquisition related costs % % 0.5 % % 0.3 %
Total special items 4.6 % 3.6 % 2.6 % 4.1 % 2.3 %
Non-GAAP operating margin 12.3 % 11.5 % 14.0 % 11.9 % 13.1 %
Reconciliation of GAAP net income to non-GAAP net income:
GAAP net income (loss) attributable to ON Semiconductor Corporation $ 50.7   $ 55.1   $ 94.1   $ 105.8   $ 149.8  
Special items:
a) Expensing of appraised inventory at fair market value 1.3 1.3
b) Amortization of acquisition related intangible assets (operating expenses) 33.6 33.9 10.4 67.5 18.6
c) Restructuring, asset impairments and other, net 3.5 (2.3 ) 4.1 1.2 9.9

d)

Goodwill and intangible asset impairments 3.7 3.7

e)

Third party acquisition related costs 3.7 4.0

f)

Loss on debt extinguishment 0.4 0.4

g)

Gain on sale of available-for-sale securities (1.3 ) (3.4 ) (4.7 )

h)

Non-cash interest on convertible notes 3.0 1.8 1.7 4.8 3.3

i)

Adjustment to reflect cash taxes 1.8   2.0   (19.5 ) 3.8   (18.6 )
Total special items 44.7   32.0   1.7   76.7   18.5  
Non-GAAP net income $ 95.4   $ 87.1   $ 95.8   $ 182.5   $ 168.3  
Non-GAAP net income per share:
Basic $ 0.22   $ 0.20   $ 0.22   $ 0.43   $ 0.38  
Diluted $ 0.22   $ 0.20   $ 0.22   $ 0.42   $ 0.38  
Weighted average common shares outstanding:
Basic 426.9   431.4   441.1   429.2   440.7  
Diluted 436.3   439.9   444.5   438.2   444.5  
 

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