ON Semiconductor Reports First Quarter 2016 Results

 

ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS

(in millions, except per share data)

 
Quarter Ended
April 1, 2016   December 31, 2015   April 3, 2015
Revenues $ 817.2 $ 840.3 $ 870.8
Cost of revenues (exclusive of amortization shown below) 541.7   560.4   570.4  
Gross profit 275.5 279.9 300.4
Gross margin 33.7 % 33.3 % 34.5 %
Operating expenses:
Research and development 98.0 91.0 100.4
Selling and marketing 49.2 48.3 53.3
General and administrative 44.5 45.7 46.7
Amortization of acquisition-related intangible assets 23.7 34.6 33.9
Restructuring, asset impairments and other, net 1.7   4.8   (2.3 )
Total operating expenses 217.1   224.4   232.0  
Operating income 58.4   55.5   68.4  
Other income (expense), net:
Interest expense (15.6 ) (14.9 ) (9.2 )
Interest income 0.3 0.3 0.3
Other (1.4 ) (0.2 ) 3.7  
Other (expense) income, net (16.7 ) (14.8 ) (5.2 )
Income before income taxes 41.7 40.7 63.2
Income tax (provision) benefit (5.3 ) 14.3   (7.4 )
Net income 36.4 55.0 55.8
Less: Net income attributable to non-controlling interest (0.4 ) (0.9 ) (0.7 )
Net income attributable to ON Semiconductor Corporation $ 36.0   $ 54.1   $ 55.1  
Net income per common share attributable to ON Semiconductor Corporation:
Basic $ 0.09   $ 0.13   $ 0.13  
Diluted $ 0.09   $ 0.13   $ 0.13  
Weighted average common shares outstanding:
Basic 412.6   412.5   431.4  
Diluted 415.5   416.9   439.9  
 
 

ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEET

(in millions)

     
April 1, 2016 December 31, 2015 April 3, 2015
Assets
Cash and cash equivalents $ 619.5 $ 617.6 $ 428.1
Short-term investments 1.3
Receivables, net 428.2 426.4 454.5
Inventories 759.7 750.4 746.9
Other current assets 94.3   97.1   128.1  
Total current assets 1,901.7 1,891.5 1,758.9
Property, plant and equipment, net 1,270.4 1,274.1 1,208.4
Goodwill 270.6 270.6 263.8
Intangible assets, net 302.3 325.8 424.6
Other assets 110.1   107.6   89.8  
Total assets $ 3,855.1   $ 3,869.6   $ 3,745.5  
Liabilities, Non-Controlling Interest and Stockholders’ Equity
Accounts payable $ 305.9 $ 337.7 $ 362.5
Accrued expenses 245.2 246.2 282.6
Deferred income on sales to distributors 112.9 112.0 156.0
Current portion of long-term debt 525.4   543.4   212.6  
Total current liabilities 1,189.4 1,239.3 1,013.7
Long-term debt 835.1 850.5 949.4
Other long-term liabilities 152.5   147.9   155.2  
Total liabilities 2,177.0   2,237.7   2,118.3  
ON Semiconductor Corporation stockholders’ equity:
Common stock 5.4 5.3 5.3
Additional paid-in capital 3,437.0 3,420.3 3,317.6
Accumulated other comprehensive loss (41.3 ) (42.3 ) (45.8 )
Accumulated deficit (673.4 ) (709.4 ) (860.5 )
Less: Treasury stock, at cost (1,073.7 ) (1,065.7 ) (811.0 )
Total ON Semiconductor Corporation stockholders’ equity 1,654.0 1,608.2 1,605.6
Non-controlling interest in consolidated subsidiary 24.1   23.7   21.6  
Total stockholders' equity 1,678.1   1,631.9   1,627.2  
Total liabilities and equity $ 3,855.1   $ 3,869.6   $ 3,745.5  
 
 

ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

UNAUDITED RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA* AND

NET CASH PROVIDED BY OPERATING ACTIVITIES

(in millions)

 
Quarter Ended
April 1, 2016   December 31, 2015   April 3, 2015
Net income $ 36.4 $ 55.0 $ 55.8
Adjusted for:
Restructuring, asset impairments and other, net 1.7 4.8 (2.3 )
Interest expense 15.6 14.9 9.2
Interest income (0.3 ) (0.3 ) (0.3 )
Gain on sale of available-for-sale securities (3.4 )
Income tax provision (benefit) 5.3 (14.3 ) 7.4
Net income attributable to non-controlling interest (0.4 ) (0.9 ) (0.7 )
Depreciation and amortization 80.7 89.8 90.2
Actuarial gains on pension plans and other pension benefits (5.0 )
Third party acquisition related costs 2.5   3.3    
Adjusted EBITDA* 141.5 147.3 155.9
Increase (decrease):
Restructuring, asset impairments and other, net (1.7 ) (4.8 ) 2.3
Interest expense (15.6 ) (14.9 ) (9.2 )
Interest income 0.3 0.3 0.3
Gain on sale of available-for-sale securities 3.4
Income tax provision (5.3 ) 14.3 (7.4 )
Net income attributable to non-controlling interest 0.4 0.9 0.7
Actuarial gains on pension plans and other pension benefits 5.0
Third party acquisition related costs (2.5 ) (3.3 )
Loss (gain) on sale or disposal of fixed assets (0.1 ) 0.2 (4.0 )
Amortization of debt issuance costs 1.0 0.9 0.3
Write-down of excess inventories 17.9 14.0 17.7
Non-cash share-based compensation expense 11.6 10.6 11.3
Non-cash interest 6.5 6.3 1.8
Change in deferred taxes 1.1 (9.3 ) (0.4 )
Other 1.5 2.7 (3.0 )
Changes in operating assets and liabilities (41.7 ) (13.0 ) (86.2 )
Net cash provided by operating activities $ 114.9   $ 157.2   $ 83.5  
 
* 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
April 1, 2016   December 31, 2015   April 3, 2015
Reconciliation of GAAP gross profit to non-GAAP gross profit:
GAAP gross profit $ 275.5   $ 279.9   $ 300.4  
Special item:

a) Actuarial gain on pension plans and other pension benefits

  (0.8 )  
Non-GAAP gross profit $ 275.5   $ 279.1   $ 300.4  
Reconciliation of GAAP gross margin to non-GAAP gross margin:
GAAP gross margin 33.7 % 33.3 % 34.5 %
Special item:

a) Actuarial gain on pension plans and other pension benefits

%

(0.1)

%

%
Non-GAAP gross margin 33.7 % 33.2 % 34.5 %
Reconciliation of GAAP operating expenses to non-GAAP operating expenses:
GAAP operating expenses $ 217.1   $ 224.4   $ 232.0  
Special items:

a) Amortization of acquisition related intangible assets

(23.7 ) (34.6 ) (33.9 )

b) Actuarial losses on pension plans and other pension benefits

4.2

c) Restructuring, asset impairments and other, net

(1.7 ) (4.8 ) 2.3

d) Third party acquisition related costs

(2.5 ) (3.3 )  
Total special items (27.9 ) (38.5 ) (31.6 )
Non-GAAP operating expenses $ 189.2   $ 185.9   $ 200.4  
Reconciliation of GAAP operating income to non-GAAP operating income:
GAAP operating income $ 58.4   $ 55.5   $ 68.4  
Special items:

a) Actuarial losses on pension plans and other pension benefits (cost of revenues)

(0.8 )

b) Amortization of acquisition related intangible assets

23.7 34.6 33.9

c) Actuarial losses on pension plans and other pension benefits (operating expenses)

(4.2 )

d) Restructuring, asset impairments and other, net

1.7 4.8 (2.3 )

e) Third party acquisition related costs

2.5   3.3    
Total special items 27.9   37.7   31.6  
Non-GAAP operating income $ 86.3   $ 93.2   $ 100.0  
 
 
 
 
Quarter Ended
April 1, 2016 December 31, 2015 April 3, 2015
Reconciliation of GAAP operating margin to non-GAAP operating margin (operating income / revenues) :
GAAP operating margin 7.1 % 6.6 % 7.9 %
Special items:

a) Actuarial (gains) pension plans and other pension benefits (cost of revenues)

%

(0.1)

%

%

b) Amortization of acquisition related intangible assets

2.9 % 4.1 % 3.9 %

c) Actuarial (gains) on pension plans and other pension benefits (operating expenses)

%

(0.5)

%

%

d) Restructuring, asset impairments and other, net

0.2 % 0.6 % (0.3 )%

e) Third party acquisition related costs

0.3 % 0.4 % %
Total special items 3.4 % 4.5 % 3.6 %
Non-GAAP operating margin 10.6 % 11.1 % 11.5 %
Reconciliation of GAAP net income to non-GAAP net income:
GAAP net income attributable to ON Semiconductor Corporation $ 36.0   $ 54.1   $ 55.1  
Special items:

a) Actuarial losses on pension plans and other pension benefits (cost of revenues)

(0.8 )

b) Amortization of acquisition related intangible assets (operating expenses)

23.7 34.6 33.9

c) Actuarial losses on pension plans and other pension benefits (operating expenses)

(4.2 )

d) Restructuring, asset impairments and other, net

1.7 4.8 (2.3 )

e) Third party acquisition related costs

2.5 3.3

f) Gain on sale of available-for-sale securities

(3.4 )

g) Non-cash interest on convertible notes

6.5 6.3 1.8

h) Adjustment to reflect cash taxes

(0.1 ) (19.2 ) 2.0  

Total special items

34.3   24.8   32.0  
Non-GAAP net income $ 70.3   $ 78.9   $ 87.1  
Non-GAAP net income per share:
Basic $ 0.17   $ 0.19   $ 0.20  
Diluted $ 0.17   $ 0.19   $ 0.20  
Weighted average common shares outstanding:
Basic 412.6   412.5   431.4  
Diluted 415.5   416.9   439.9  
Certain of the amounts in the above table may not total due to rounding of individual amounts.
 
Total share-based compensation expense, related to the company’s stock options, restricted stock units, stock grant awards and employee stock purchase plan is included below.
 
Quarter Ended
April 1, 2016   December 31, 2015   April 3, 2015
Cost of revenues $ 1.9 $ 1.9 $ 1.9
Research and development 2.5 2.2 2.3
Selling and marketing 2.1 1.8 2.2
General and administrative 5.1   4.7   4.9
Total share-based compensation expense $ 11.6   $ 10.6   $ 11.3
 

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