ON Semiconductor Reports Second Quarter 2016 Results

* 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 1, 2016   April 1, 2016   July 3, 2015 July 1, 2016   July 3, 2015

Reconciliation of GAAP gross profit to non-
GAAP gross profit:

GAAP gross profit $ 307.9   $ 275.5   $ 304.4   $ 583.4   $ 604.8  
Non-GAAP gross profit $ 307.9   $ 275.5   $ 304.4   $ 583.4   $ 604.8  

Reconciliation of GAAP gross margin to
non-GAAP gross margin:

GAAP gross margin 35.1 % 33.7 % 34.6 % 34.4 % 34.5 %
Non-GAAP gross margin 35.1 % 33.7 % 34.6 % 34.4 % 34.5 %

Reconciliation of GAAP operating expenses
to non-GAAP operating expenses:

GAAP operating expenses $ 232.6   $ 217.1   $ 236.6   $ 449.7   $ 468.6  
Special items:

a) Amortization of acquisition related intangible assets

(23.5 ) (23.7 ) (33.6 ) (47.2 ) (67.5 )

b) Restructuring, asset impairments and other, net

(5.2 ) (1.7 ) (3.5 ) (6.9 ) (1.2 )

c) Intangible asset impairments

(2.2 ) (3.7 ) (2.2 ) (3.7 )

d) Third party acquisition related costs

(2.0 ) (2.5 )   (4.5 )  
Total special items (32.9 ) (27.9 ) (40.8 ) (60.8 ) (72.4 )
Non-GAAP operating expenses $ 199.7   $ 189.2   $ 195.8   $ 388.9   $ 396.2  

Reconciliation of GAAP operating income to
non-GAAP operating income:

GAAP operating income $ 75.3   $ 58.4   $ 67.8   $ 133.7   $ 136.2  
Special items:

a) Amortization of acquisition related intangible assets

23.5 23.7 33.6 47.2 67.5

b) Restructuring, asset impairments and other, net

5.2 1.7 3.5 6.9 1.2

c) Intangible asset impairments

2.2 3.7 2.2 3.7

d) Third party acquisition related costs

2.0   2.5     4.5    
Total special items 32.9   27.9   40.8   60.8   72.4  
Non-GAAP operating income $ 108.2   $ 86.3   $ 108.6   $ 194.5   $ 208.6  
 
 
 
Quarter Ended Six Months Ended
July 1, 2016 April 1, 2016 July 3, 2015 July 1, 2016 July 3, 2015

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

GAAP operating margin 8.6 % 7.1 % 7.7 % 7.9 % 7.8 %
Special items:

a) Amortization of acquisition related intangible assets

2.7 % 2.9 % 3.8 % 2.8 % 3.9 %

b) Restructuring, asset impairments and other, net

0.6 % 0.2 % 0.4 % 0.4 % 0.1 %

c) Intangible asset impairments

0.3 % % 0.4 % 0.1 % 0.2 %

d) Third party acquisition related costs

0.2 % 0.3 % % 0.3 % %
Total special items 3.7 % 3.4 % 4.6 % 3.6 % 4.2 %
Non-GAAP operating margin 12.3 % 10.6 % 12.3 % 11.5 % 12.0 %

Reconciliation of GAAP net income to non-
GAAP net income:

GAAP net income attributable to ON
Semiconductor Corporation

$ 25.1   $ 36.0   $ 50.7   $ 61.1   $ 105.8  
Special items:

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

23.5 23.7 33.6 47.2 67.5

b) Restructuring, asset impairments and other, net

5.2 1.7 3.5 6.9 1.2

c) Intangible asset impairments

2.2 3.7 2.2 3.7

d) Third party acquisition related costs

2.0 2.5 4.5

e) Loss on debt extinguishment

0.4 0.4

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

(1.3 ) (4.7 )

g) Non-cash interest on convertible notes

6.5 6.5 3.0 13.0 4.8

h) Pre-acquisition interest expense, net

23.9 23.9

i) Adjustment to income taxes for special items

0.1   (0.1 ) (0.9 )   (1.2 )

Total special items

63.4   34.3   42.0   97.7   71.7  
Non-GAAP net income $ 88.5   $ 70.3   $ 92.7   $ 158.8   $ 177.5  

Reconciliation of GAAP basic net income
per share to non-GAAP basic net income
per share:

GAAP basic net income per share: $ 0.06   $ 0.09   $ 0.12   $ 0.15   $ 0.25  
Special items:

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

0.06 0.06 0.08 0.11 0.16

b) Restructuring, asset impairments and other, net

0.01 0.01 0.02

c) Intangible asset impairments

0.01 0.01 0.01 0.01

d) Third party acquisition related costs

0.01 0.01

e) Loss on debt extinguishment

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

(0.01 )

g) Non-cash interest on convertible notes

0.02 0.02 0.01 0.03 0.01

h) Pre-acquisition interest expense, net

0.06 0.06

i) Adjustment to income taxes for special items

         

Total special items

0.15   0.08   0.10   0.23   0.16  
Non-GAAP basic net income per share: $ 0.21   $ 0.17   $ 0.22   $ 0.38   $ 0.41  

Reconciliation of GAAP diluted net income
per share to non-GAAP diluted net income
per share:

GAAP diluted net income per share: $ 0.06   $ 0.09   $ 0.12   $ 0.15   $ 0.24  
Special items:

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

0.06 0.06 0.08 0.11 0.15

b) Restructuring, asset impairments and other, net

0.01 0.01 0.02

c) Intangible asset impairments

0.01 0.01 0.01 0.01

d) Third party acquisition related costs

0.01 0.01

e) Loss on debt extinguishment

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

(0.01 )

g) Non-cash interest on convertible notes

0.02 0.02 0.01 0.03 0.01

h) Pre-acquisition interest expense, net

0.06 0.06

i) Adjustment to income taxes for special items

         

Total special items

0.15   0.08   0.09   0.23   0.17  
Non-GAAP diluted net income per share: $ 0.21 $ 0.17 $ 0.21 $ 0.38 $ 0.41
Weighted average common shares outstanding:
Basic 414.9   412.6   426.9   413.7   429.2  
Diluted 417.6   415.5   436.3   416.5   438.2  
 

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