ON Semiconductor Reports Fourth Quarter and 2009 Annual Results

PHOENIX, Ariz. – Feb. 3, 2010

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For the fourth quarter of 2009, highlights include:

  • Total revenues of approximately $497.1 million
  • Adjusted EBITDA of $135.4 million or approximately 27.2% of revenue
  • GAAP net income of $0.15 per fully diluted share
  • Non-GAAP net income of $0.19 per fully diluted share which includes stock based compensation expense
  • Record cash, cash equivalents and short-term investments of $571.2 million
  • Acquired PulseCore Semiconductor for approximately $17 million in an all-cash transaction
  • Signed definitive merger agreement to acquire California Micro Devices

For 2009, highlights include:

  • Total revenues of approximately $1.769 billion
  • Adjusted EBITDA of $381.8 million
  • GAAP net income of $0.14 per fully diluted share
  • Non-GAAP net income of $0.38 per fully diluted share which includes stock based compensation expense
  • Record low net debt position of approximately $362 million

PHOENIX, Ariz. – Feb. 3, 2010 ON Semiconductor Corporation (Nasdaq: ONNN) today announced that total revenues in the fourth quarter of 2009 were $497.1 million, an increase of approximately 5 percent from the third quarter of 2009.  During the fourth quarter of 2009, the company reported GAAP net income of $68.0 million, or $0.15 per fully diluted share.  The fourth quarter 2009 GAAP net income included net charges of $16.9 million, or $0.04 per fully diluted share, from special items.  The special item details can be found in the attached schedules.  During the third quarter of 2009, the company reported a GAAP net income of $29.9 million, or $0.07 per fully diluted share.   

Fourth quarter 2009 non-GAAP net income was $84.9 million, or $0.19 per share on a fully diluted basis and includes stock based compensation expense. Stock based compensation expense was previously excluded in our non-GAAP net income and fourth quarter 2009 outlook.  We intend to include stock based compensation expense on a go forward basis in our non-GAAP outlook.  Third quarter 2009 non-GAAP net income was $57.4 million, or $0.13 per share on a fully diluted basis and includes stock based compensation expense.  A reconciliation of these non-GAAP financial measures (and other non-GAAP measures used elsewhere in this release, such as non-GAAP gross margin and adjusted EBITDA) to the company’s most directly comparable measures prepared in accordance with U.S. GAAP are set forth in the attached schedules and on our website at www.onsemi.com.  

On a mix-adjusted basis, average selling prices in the fourth quarter of 2009 were down less than one percent when compared to the third quarter of 2009.  GAAP gross margin in the fourth quarter was 39.1 percent.  Non-GAAP gross margin in the fourth quarter of 2009 was 39.9 percent including stock based compensation expense.  Stock based compensation expense was previously excluded in our non-GAAP gross margin outlook for the fourth quarter of 2009.  GAAP gross margin in the fourth quarter included a net charge of approximately $3.9 million, or approximately 80 basis points, from special items.  The special item details can be found in the attached schedules.    

Adjusted EBITDA for the fourth quarter of 2009 was $135.4 million.  Adjusted EBITDA for the third quarter of 2009 was $110.2 million.     

Total revenues for 2009 were approximately $1.769 billion, a decrease of 14 percent from approximately $2.055 billion in 2008.  During 2009, the company reported GAAP net income of $61.0 million.  The 2009 GAAP net income included net charges of $104.9 million from special items.  During 2008, the company reported a GAAP net loss of $428.9 million.  The 2008 GAAP net loss included net charges of $736.7 million from special items, with the largest special item a $544.5 million non-cash goodwill impairment.  The special item details can be found in the attached schedules.

The non-GAAP net income for 2009 was $165.9 million, or $0.38 per share on a fully diluted basis and includes stock based compensation expense.  The non-GAAP net income for 2008 was $307.8 million, or $0.80 per share on a fully diluted basis and includes stock based compensation expense. 

The company’s GAAP gross margin in 2009 was 35.1 percent.  GAAP gross margin in 2009 included a net charge of approximately $13.8 million, or approximately 80 basis points from special items.  Non-GAAP gross margin in 2009 was 35.9 percent including stock based compensation expense.  Stock based compensation expense was previously excluded in our non-GAAP gross margin.  The company’s GAAP gross margin in 2008 was 36.3 percent.  GAAP gross margin in 2008 included a net charge of approximately $73.1 million, or approximately 350 basis points from special items.  Non-GAAP gross margin in 2008 was 39.8 percent including stock based compensation expense.  The special item details can be found in the attached schedules.    

“In 2009, ON Semiconductor was able to successfully navigate one of the most challenging economic periods in the company’s and industry’s history,” said Keith Jackson, ON Semiconductor president and CEO.  “Through the hard work and dedication of our employees, we were able to generate positive operating cash flow in even the most challenging quarter of the year.  During 2009, ON Semiconductor reduced its overall gross debt by approximately $76 million and increased its cash, cash equivalents and short-term investments by approximately $113 million.  We believe we entered 2010 in the strongest financial position in the company’s history with over $571 million of cash, cash equivalents and short-term investments and lowest net debt position in the company’s history of approximately $362 million.  We continue to look for opportunities to grow our product portfolio and completed the acquisition of California Micro Devices Corporation (CMD) on Jan. 27, 2010.  CMD’s expertise in protection solutions for the high brightness LED (HBLED) market, as well as their strengths in LC-based EMI (electromagnetic interference) filtering and low capacitance ESD (electrostatic discharge) protection complement our existing portfolio of protection and lighting solutions.” 

FIRST QUARTER 2010 OUTLOOK
“Based upon product booking trends, backlog levels and estimated turns levels, we anticipate that total revenues will be approximately $515 to $525 million in the first quarter of 2010,” Jackson said.  “Backlog levels at the beginning of the first quarter of 2010 were up from backlog levels at the beginning of the fourth quarter of 2009 and represent over 90 percent of our anticipated first quarter 2010 revenues.  We expect that average selling prices for the first quarter of 2010 will be down approximately one to two percent sequentially.  The non-GAAP outlook for the first quarter of 2010 includes stock based compensation expense of approximately $13 to $14 million.  The following table outlines our first quarter 2010 GAAP and non-GAAP outlook.”

Q1 2010 Business Outlook

* Convertible Notes, Non-cash Interest Expense are included in FASB’s Accounting Standards Codification (“ASC”) Topic 470 Debt.
** Fully diluted share count can vary for among other things, the actual exercise of options or restricted stock units, the incremental dilutive shares from all of the company’s convertible senior subordinated notes, and the repurchase or the issuance of stock or the sale of treasury shares.  Please refer to the table on our website for potential changes to the Fully Diluted Share Count.  
*** Special Items can include: restructuring, asset impairments and other, net; expensing of appraised inventory fair market value (FMV) step up; amortization of intangibles; goodwill impairments; income tax adjustments to approximate cash taxes; non-cash interest expense and certain other special items as necessary.
**** 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 these non-GAAP measures provide important supplemental information to investors. We use these measures, together with GAAP measures, for internal managerial purposes and as a means to evaluate period-to-period comparisons. 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 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 other companies’ non-GAAP financial measures, even if they have similar names.

FINANCIALS

TELECONFERENCE
ON Semiconductor will host a conference call for the financial community at 5:00 p.m. Eastern Time (ET) on Feb. 3, 2010 to discuss this announcement and ON Semiconductor’s results for the 2009 fourth quarter and annual results. The company will also provide a real-time audio broadcast of the teleconference on the Investor Relations page of its website at https://www.onsemi.com. The webcast replay will be available at this site approximately one hour following the live broadcast and will continue to be available for approximately 30 days following the conference call. Investors and interested parties can also access the conference call through a telephone call by dialing (888) 546-9664 (U.S./Canada) or (973) 935-8144 (International).  In order to join this conference call, you will be required to provide the Conference ID Number – which is 51283327.  Approximately one hour following the live broadcast, the company will provide a dial-in replay that will continue to be available through February 10, 2010. To listen to the teleconference replay, call 800-642-1687 (U.S./Canada) or 706-645-9291 (International). You will be required to provide the Conference ID Number – which is 51283327.

This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements related to the future financial performance of ON Semiconductor and our ability to increase cash flow from current levels. These forward-looking statements are based on information available to us as of the date of this release and current expectations, forecasts and assumptions and involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. Such risks and uncertainties include a variety of factors, some of which are beyond our control. In particular, such risks and uncertainties include, but are not limited to, difficulties encountered in integrating acquired businesses; the variable demand and the aggressive pricing environment for semiconductor products; dependence on our company’s ability to successfully manufacture in increasing volumes on a cost-effective basis and with acceptable quality for our current products; the adverse impact of competitive product announcements; revenues and operating performance; poor economic conditions and markets, including the current credit markets; the cyclical nature of the semiconductor industry; changes in demand for our products; changes in inventories at 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; risks associated with acquisitions and dispositions; risks associated with leverage and restrictive covenants in debt agreements; risks associated with international operations including foreign employment and labor matters associated with unions and collective bargaining agreements; the threat or occurrence of international armed conflict and terrorist activities both in the United States and internationally; risks and costs associated with increased and new regulation of corporate governance and disclosure standards (including pursuant to Section 404 of the Sarbanes-Oxley Act of 2002); and risks involving environmental or other governmental regulation.  Information concerning additional factors that could cause results to differ materially from those projected in the forward-looking statements is contained in ON Semiconductor’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other of our filings with the Securities and Exchange Commission. These forward-looking statements should not be relied upon as representing our views as of any subsequent date and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made.

About onsemi

onsemi (Nasdaq: ON) is driving disruptive innovations to help build a better future. With a focus on automotive and industrial end-markets, the company is accelerating change in megatrends such as vehicle electrification and safety, sustainable energy grids, industrial automation, and 5G and cloud infrastructure. With a highly differentiated and innovative product portfolio, onsemi creates intelligent power and sensing technologies that solve the world’s most complex challenges and leads the way in creating a safer, cleaner, and smarter world.

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