ON Semiconductor Corp. Reports Operating Results (10-Q)

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Nov 05, 2009
ON Semiconductor Corp. (ONNN, Financial) filed Quarterly Report for the period ended 2009-10-02.

ON SEMICON CORP. is a supplier of broadband and power management integrated circuits and standard semiconductors used in numerous advanced devices ranging from high-speed fiber optic networking equipment to the precise power management functions found in portable electronics. Their products provide clock management and data flow management for precision computing and communications systems and power management for distributing and monitoring the supply of power to the different elements within virtually every electronic device. On Semiconductor Corp. has a market cap of $2.88 billion; its shares were traded at around $6.83 with a P/E ratio of 21.3 and P/S ratio of 1.5.

Highlight of Business Operations:

During the second quarter of 2008, we began the process of closing our wafer fabrication facility in Piestany, Slovakia which resulted in the elimination of approximately 430 positions. We expect full annual savings from this announcement to be approximately $12.0 million to $16.0 million annually which began in the second quarter of 2009 and is reflected in our outlook for the fourth quarter of 2009.

During the first quarter of 2009, in response to the economic downturn, we commenced certain actions to reduce overall spending levels. These actions include: a reduction in 2009 planned capital expenditures to approximately $75.0 million compared to normalized levels of between $130.0 million and $140.0 million; a temporary hiring freeze; the elimination of bonus payments during 2009; three weeks of unpaid time off for senior executives in both the first and second quarters of 2009; two weeks of unpaid time off or 4 day work week (based upon local legal requirements) for other employees in both the first and second quarters of 2009; no

Based upon current product booking trends, backlog levels and estimated turns levels, we anticipate that total revenues will be approximately $480.0 million to $495.0 million in the fourth quarter of 2009. Backlog levels at the beginning of the fourth quarter of 2009 were up from backlog levels at the beginning of the third quarter of 2009 and represent over 90% of our anticipated fourth quarter 2009 revenues. We expect that average selling prices for the fourth quarter 2009 will be down approximately 1% to 2% from the third quarter of 2009. We expect cash capital expenditures of approximately $25.0 million in the fourth quarter of 2009.

For the fourth quarter of 2009, we expect gross profit as a percentage of revenues to be approximately 38% to 39%. For the fourth quarter of 2009, we also expect total operating expenses of approximately $130.0 million to $135.0 million, which includes amortization of acquisition-related intangible assets, share based compensation expense, restructuring, asset impairment and other charges of approximately $25.0 million.

We anticipate that interest expense, net of interest income, and other expenses will be approximately $10.0 million to $11.0 million for the fourth quarter of 2009, which includes non-cash interest expense of approximately $8.0 million relating to our convertible senior subordinated notes. We expect the provision for income taxes to be approximately $5.0 million, with cash payments of income taxes to be approximately $2.0 million in the fourth quarter of 2009. We also expect share-based compensation expense of approximately $12.0 million to $13.0 million in the fourth quarter of 2009.

Revenues were $472.9 million and $581.5 million during the quarters ended October 2, 2009 and September 26, 2008, respectively. The decrease from the third quarter of 2008 to the third quarter of 2009 was primarily due to the drop in product volume and mix of 16% combined with a reduction in average selling prices of 5%, partially offset by an increase in revenues from our acquisition of Catalyst of $14.5 million or 3%. The revenues by reportable segment were as follows (dollars in millions):

Read the The complete ReportONNN is in the portfolios of HOTCHKIS & WILEY of HOTCHKIS & WILEY Capital Management LLC, PRIMECAP Management, Kenneth Fisher of Fisher Asset Management, LLC.