ON Semiconductor Reports Second Quarter 2006 Results; Record Quarterly Gross Margin Percentage, Net Income and Earnings Per Share.PHOENIX -- ON Semiconductor Corp. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : ONNN) today announced that total revenues in the second quarter of 2006 were $375.3 million, an increase of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 12 percent from the first quarter of 2006. During the second quarter of 2006, the company reported net income of $67.5 million, or $0.19 per share on a fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis, which included approximately $3.3 million or $0.01 per share of restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). , asset impairments and other charges (primarily associated with the impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of certain IT projects). Second quarter 2006 results include approximately $2.4 million associated with stock based compensation expense primarily due to our adoption of FAS 123(R) Share Based Payment. During the first quarter of 2006, the company reported net income of $40.4 million, or $0.12 per share on a fully diluted basis. First quarter 2006 results included approximately $1.9 million associated with stock based compensation expense and a $2.3 million investment gain reflected in other income. On a mix-adjusted basis, average selling prices The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. in the second quarter of 2006 were up approximately one percent from the first quarter of 2006. The company's gross margin in the second quarter was 40.8 percent, an increase of approximately 560 basis points as compared to the first quarter of 2006 due to a combination of increased sales volume, improved mix, increased factory utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be , improved pricing and the effect of a review in the depreciation life of manufacturing equipment. In the second quarter of 2006, the company re-assessed the overall depreciation life of the company's manufacturing equipment. Following this analysis, the company changed the estimated depreciation life of its manufacturing equipment consistent with the expected useful life of the equipment. This change, which affects results only for the second quarter of 2006 and future periods, reduced depreciation by approximately $7.5 million and increased gross margin by approximately 200 basis points during the second quarter of 2006. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become for the second quarter of 2006 was $96.8 million, which included approximately $3.3 million of restructuring, asset impairment and other charges. EBITDA for the first quarter of 2006 was $76.9 million. A reconciliation of this non-GAAP financial measure to the company's net income and net cash provided by operating activities prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with U.S. GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). is set forth in the attached schedule. On May 15, 2006, the company completed its acquisition of LSI LSI: see integrated circuit. (Large Scale Integration) Between 3,000 and 100,000 transistors on a chip. See SSI, MSI, VLSI and ULSI. Logic's Gresham Gresham (grĕsh`əm), city (2000 pop. 90,205), Multnomah co., NW Oregon, mainly residential suburb E of Portland, near the Columbia River; founded 1852, inc. 1905. Wafer (1) A small, thin continuous-loop magnetic tape cartridge that has been used from time to time for data storage and specialized applications. (2) The base unit of chip making. It is a slice taken from a salami-like silicon crystal ingot up to 12" (300mm) in diameter. Fab. In the second quarter of 2006, this purchase accounted for approximately $12.5 million of the company's total revenues. Approximately $10.3 million of the company's sequential One after the other in some consecutive order such as by name or number. inventory growth from the first quarter of 2006 was also a result of this acquisition. Further details regarding the financial impact of the acquisition will be provided in our Form 10-Q Form 10-Q See 10-Q. for the second quarter of 2006. "The second quarter was another strong quarter for ON Semiconductor," said Keith Jackson For the former professional American football player, see Keith Jackson (football player). Keith Jackson (born October 18, 1928, in Roopville, Georgia) is a former American sportscaster, known for his long career with ABC Sports television, his coverage of college football , ON Semiconductor president and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "Our improving mix, new product introductions and cost competitive manufacturing capabilities helped drive record quarterly gross margin percentage, net income and earnings per share. During the second quarter we also grew cash and cash equivalents by approximately $43 million to a record high balance of approximately $295 million. Going forward, we look to continue our success and have focused the company on accelerating the growth of our power solutions portfolio. As part of this effort, beginning in the third quarter, we have re-aligned the company into four market-based divisions, the Digital and Consumer Products Group, the Computing computing - computer Products Group, the Automotive and Power Regulation Group and the Standard Products Group. We believe this new organizational structure  This article has no lead section.To comply with Wikipedia's lead section guidelines, one should be written. will enable ON Semiconductor to continue to expand its development of innovative power solutions for customers in these key markets." THIRD QUARTER 2006 OUTLOOK "Based on product booking trends, backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. levels, anticipated foundry A semiconductor manufacturer that makes chips for third parties. It may be a large chip maker that sells its excess manufacturing capacity or one that makes chips exclusively for other companies. service revenue and estimated turns levels, we anticipate that total revenues will be approximately $405 to $415 million in the third quarter of 2006," Jackson Jackson. 1 City (1990 pop. 37,446), seat of Jackson co., S Mich., on the Grand River; inc. 1857. It is an industrial and commercial center in a farm region. said. "Backlog levels at the beginning of the third quarter were up from backlog levels at the beginning of the second quarter of 2006, and represented over 90 percent of our anticipated third quarter 2006 revenues. We expect that average selling prices for the third quarter of 2006 will be approximately flat sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen . Gross margins in the third quarter are expected to decline to approximately 38 percent, primarily associated with an increase in lower margin foundry service revenue. Beginning in the first quarter of 2006, we were required to expense stock based compensation in accordance with FAS No. 123(R). We currently expect this expense to be approximately $2.5 million in the third quarter of 2006." TELECONFERENCE ON Semiconductor will hold a conference call for the financial community at 5 p.m. Eastern time (ET) today to discuss the second quarter 2006 results. The company will provide a real-time 1. real-time - Describes an application which requires a program to respond to stimuli within some small upper limit of response time (typically milli- or microseconds). Process control at a chemical plant is the classic example. audio broadcast of the teleconference on the Investor Relations Investor relations The process by which the corporation communicates with its investors. page of its Web site at http://www.onsemi.com. The webcast will be available for approximately 30 days following the conference call. About ON Semiconductor With its global logistics logistics In military science, all the activities of armed-force units in support of combat units, including transport, supply, communications, and medical aid. The term, first used by Henri Jomini, Alfred Thayer Mahan, and others, was adopted by the U.S. network and strong portfolio of power semiconductor devices, ON Semiconductor is a preferred supplier of power solutions to engineers, purchasing professionals, distributors and contract manufacturers in the computer, cell phone, portable devices, automotive and industrial markets. For more information, please visit ON Semiconductor's Web site at http://www.onsemi.com. ON Semiconductor and the ON Semiconductor logo are registered trademarks of Semiconductor Components Industries, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control . All other brand and product names appearing in this document are registered trademarks or trademarks of their respective holders. Although the company references its Web site in this news release, information on the Web site is not to be incorporated herein. This news release includes "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " as that term is defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are statements that could be deemed forward-looking statements and are often characterized char·ac·ter·ize tr.v. character·ized, character·iz·ing, character·iz·es 1. To describe the qualities or peculiarities of: characterized the warden as ruthless. 2. by the use of words such as "believes," "expects," "estimates," "projects," "may," "will," "intends," "plans," or "anticipates," or by discussions of strategy, plans or intentions. In this news release, forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. information relates to the second quarter of 2006 and its bookings trends, backlog levels, estimated turns levels, revenues, gross margins and average selling prices, stock based compensation expense, completing the purchase of the Gresham wafer fabrication Wafer Fabrication is a procedure composed of many repeated sequential processes to produce complete electrical or photonic circuits. Examples include production of radio frequency (RF) amplifiers, LEDs, optical computer components, and CPUs for computers. facility and similar matters. All forward-looking statements in this news release are made based on management's current expectations and estimates, which involve risks, uncertainties and other factors that could cause results to differ materially from those expressed in forward-looking statements. Among these factors are changes in overall economic conditions, the cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. nature of the semiconductor industry, changes in demand for our products, changes in inventories at our 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 An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , risks associated with acquisitions and dispositions, risks associated with our substantial leverage and restrictive covenants Restrictive covenants Provisions that place constraints on the operations of borrowers, such as restrictions on working capital, fixed assets, future borrowing, and payment of dividends. in our debt agreements, risks associated with our international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. , the threat or occurrence of international armed conflict and terrorist activities both in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and internationally, risks and costs associated with increased and new regulation of corporate governance Corporate Governance The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. and disclosure standards (including pursuant to Section 404 of the Sarbanes-Oxley Act See SOX. of 2002), and risks involving environmental or other governmental regulation. Additional factors that could affect the company's future operating results are in Item 1A Risk Factors of our Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended Dec. 31, 2005 and other factors are described from time to time in our SEC filings. Readers are cautioned not to place undue reliance on forward-looking statements. We assume no obligation to update such information.
ON SEMICONDUCTOR CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share data)
Quarter Ended Six Months Ended
-------------------------- -----------------
June 30, March 31, July 1, June 30, July 1,
2006 2006 2005 2006 2005
--------------------------------------------
Revenues $ 375.3 $ 334.0 $ 302.8 $ 709.3 $ 605.2
Cost of revenues 222.1 216.3 204.3 438.4 410.5
-------- -------- -------- -------- --------
Gross profit 153.2 117.7 98.5 270.9 194.7
-------- -------- -------- -------- --------
Operating expenses:
Research and
development 25.2 23.6 23.0 48.8 46.1
Selling and marketing 22.7 21.0 18.9 43.7 38.2
General and
administrative 21.3 20.2 17.5 41.5 37.9
Restructuring, asset
impairments and
other, net 3.3 - 2.8 3.3 3.9
-------- -------- -------- -------- --------
Total operating
expenses 72.5 64.8 62.2 137.3 126.1
-------- -------- -------- -------- --------
Operating income 80.7 52.9 36.3 133.6 68.6
-------- -------- -------- -------- --------
Other income (expenses),
net:
Interest expense (13.1) (13.0) (15.4) (26.1) (30.0)
Interest income 2.8 2.0 1.2 4.8 2.1
Other (0.2) 1.0 (0.6) 0.8 (1.6)
-------- -------- -------- -------- --------
Other income
(expenses), net (10.5) (10.0) (14.8) (20.5) (29.5)
-------- -------- -------- -------- --------
Income before income
taxes and minority
interests 70.2 42.9 21.5 113.1 39.1
Income tax provision (1.8) (2.0) (2.0) (3.8) (3.8)
Minority interests (0.9) (0.5) (1.0) (1.4) (2.0)
-------- -------- -------- -------- --------
Net income 67.5 40.4 18.5 107.9 33.3
Less: Accretion to
redemption value of
convertible redeemable
preferred stock - - 0.1 - 0.2
Less: Convertible
redeemable preferred
stock dividends - - (2.6) - (5.2)
Less: Allocation of
undistributed earnings
to preferred
shareholders - - (2.5) - (4.4)
-------- -------- -------- -------- --------
Net income applicable to
common stock $ 67.5 $ 40.4 $ 13.5 $ 107.9 $ 23.9
======== ======== ======== ======== ========
Income per common share:
Basic: $ 0.21 $ 0.13 $ 0.05 $ 0.34 $ 0.09
======== ======== ======== ======== ========
Diluted: $ 0.19 $ 0.12 $ 0.05 $ 0.31 $ 0.09
======== ======== ======== ======== ========
Weighted average common
shares outstanding:
Basic 322.8 311.8 255.3 317.3 255.2
======== ======== ======== ======== ========
Diluted: 355.7 346.4 287.8 350.8 287.8
======== ======== ======== ======== ========
ON SEMICONDUCTOR CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEET
(in millions)
June 30, March 31, Dec. 31,
2006 2006 2005
---------- ---------- ----------
Assets
Cash and cash equivalents $ 294.7 $ 251.3 $ 233.3
Receivables, net 200.5 178.3 160.2
Inventories, net 195.1 175.1 169.5
Other current assets 38.5 36.2 29.9
Deferred income taxes 5.8 4.4 7.4
---------- ---------- ----------
Total current assets 734.6 645.3 600.3
Property, plant and equipment, net 567.4 450.0 438.5
Deferred income taxes 0.7 1.6 -
Goodwill 77.3 77.3 77.3
Intangible assets, net 11.6 - -
Other assets 31.4 36.8 32.4
---------- ---------- ----------
Total assets $ 1,423.0 $ 1,211.0 $ 1,148.5
========== ========== ==========
Liabilities, Minority Interests and
Stockholders' Deficit
Accounts payable $ 146.3 $ 132.1 $ 137.3
Accrued expenses 124.5 90.7 83.9
Income taxes payable 6.4 4.5 5.5
Accrued interest 0.5 1.3 0.6
Deferred income on sales to
distributors 126.9 113.2 97.1
Current portion of long-term debt 51.2 52.3 73.9
---------- ---------- ----------
Total current liabilities 455.8 394.1 398.3
Long-term debt 1,009.8 1,009.7 993.1
Other long-term liabilities 32.2 31.6 31.4
Deferred income taxes - - 1.2
---------- ---------- ----------
Total liabilities 1,497.8 1,435.4 1,424.0
---------- ---------- ----------
Minority interests in consolidated
subsidiaries 25.2 25.3 24.8
---------- ---------- ----------
Common stock 3.2 3.1 3.1
Additional paid-in capital 1,342.1 1,260.4 1,252.7
Accumulated other comprehensive
income 3.6 3.2 0.7
Accumulated deficit (1,448.9) (1,516.4) (1,556.8)
---------- ---------- ----------
Total stockholders' deficit (100.0) (249.7) (300.3)
---------- ---------- ----------
Total liabilities, minority
interests and stockholders'
deficit $ 1,423.0 $ 1,211.0 $ 1,148.5
========== ========== ==========
ON SEMICONDUCTOR CORP. AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF NET INCOME TO EBITDA(1) AND
CASH PROVIDED BY OPERATING ACTIVITIES
(in millions)
Quarter Ended Six Months Ended
----------------------- ----------------
June March July June July
30, 31, 1, 30, 1,
2006 2006 2005 2006 2005
------- ------- ------- -------- -------
Net income $ 67.5 $ 40.4 $ 18.5 $ 107.9 $ 33.3
Plus:
Depreciation and
amortization 17.2 23.5 24.8 40.7 49.9
Interest expense 13.1 13.0 15.4 26.1 30.0
Interest income (2.8) (2.0) (1.2) (4.8) (2.1)
Income tax provision 1.8 2.0 2.0 3.8 3.8
------- ------- ------- -------- -------
EBITDA(1) 96.8 76.9 59.5 173.7 114.9
Increase (decrease):
Interest expense (13.1) (13.0) (15.4) (26.1) (30.0)
Interest income 2.8 2.0 1.2 4.8 2.1
Income tax provision (1.8) (2.0) (2.0) (3.8) (3.8)
Loss (gain) on sale or
disposal of fixed assets (0.2) - 0.5 (0.2) -
Amortization of debt
issuance costs and debt
discount 0.7 0.6 0.4 1.3 0.9
Provision for excess
inventories 6.6 2.5 3.1 9.1 6.2
Non-cash impairment of
property, plant, and
equipment 4.7 - - 4.7 -
Non-cash interest on junior
subordinated note payable - - 3.9 - 7.8
Deferred income taxes (0.5) 0.4 (2.4) (0.1) (4.6)
Non-cash stock compensation
expense 2.4 1.9 - 4.3 -
Other 0.8 (1.0) 1.2 (0.2) 1.9
Changes in operating assets
and liabilities (18.0) (17.8) 12.0 (35.8) 2.8
------- ------- ------- -------- -------
Net cash provided by
operating activities $ 81.2 $ 50.5 $ 62.0 $ 131.7 $ 98.2
======= ======= ======= ======== =======
(1)EBITDA represents net income before interest expense, interest
income, provision for income taxes, depreciation and amortization
expense. While EBITDA is not intended to represent cash flow from
operations as defined by generally accepted accounting principles and
should not be considered as an indicator of operating performance or
an alternative to cash flow as a measure of liquidity, we believe
this measure is useful to investors to assess our ability to meet our
future debt service, capital expenditure and working capital
requirements. This calculation may differ in method of calculation
from similarly titled measures used by other companies. The table
above sets forth our EBITDA with a reconciliation to net cash
provided by operating activities, the most directly comparable
financial measure under generally accepted accounting principles.
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