ON Semiconductor Reports Third Quarter 2017 Results


ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data)

	Quarter Ended									Nine Months Ended
	September 29, 2017			June 30, 2017			September 30, 2016			September 29, 2017			September 30, 2016
Revenue	$	1,390.9		$	1,338.0		$	950.9		$	4,165.6		$	2,645.9
Cost of revenue (exclusive of amortization shown below)	866.7			845.9			621.9			2,646.0			1,733.5
Gross profit	524.2			492.1			329.0			1,519.6			912.4
Gross margin	37.7		%	36.8		%	34.6		%	36.5		%	34.5		%
Operating expenses:
Research and development	150.9			145.5			111.5			436.4			312.5
Selling and marketing	78.6			79.5			56.7			235.6			158.6
General and administrative	68.9			76.6			67.6			213.9			158.1
Amortization of acquisition-related intangible assets	37.3			28.6			24.7			95.0			71.9
Restructuring, asset impairments and other, net	9.7			5.9			21.8			16.1			28.7
Intangible asset impairment	1.5			1.8			—			7.7			2.2
Total operating expenses	346.9			337.9			282.3			1,004.7			732.0
Operating income	177.3			154.2			46.7			514.9			180.4
Other (expense) income, net:
Interest expense	(34.9		)	(34.7		)	(46.7		)	(108.0		)	(104.4		)
Interest income	0.7			0.5			1.4			1.8			3.8
Gain on divestiture of business	12.5			—			92.2			12.5			92.2
Licensing income	21.5			23.9			—			45.4			—
Loss on debt refinancing and prepayment	(6.7		)	—			(6.3		)	(32.9		)	(6.3		)
Other expense	(2.1		)	(0.7		)	—			(7.2		)	(3.3		)
Other (expense) income, net	(9.0		)	(11.0		)	40.6			(88.4		)	(18.0		)
Income before income taxes	168.3			143.2			87.3			426.5			162.4
Income tax provision	(59.4		)	(48.8		)	(76.7		)	(144.5		)	(89.6		)
Net income	108.9			94.4			10.6			282.0			72.8
Less: Net income attributable to non-controlling interest	(0.2		)	(0.5		)	(0.5		)	(1.2		)	(1.6		)
Net income attributable to ON Semiconductor Corporation	$	108.7		$	93.9		$	10.1		$	280.8		$	71.2
Net income per common share attributable to ON Semiconductor Corporation:
Basic	$	0.26		$	0.22		$	0.02		$	0.67		$	0.17
Diluted	$	0.25		$	0.22		$	0.02		$	0.66		$	0.17
Weighted average common shares outstanding:
Basic	422.2			420.8			415.8			421.0			414.4
Diluted	427.5			425.9			419.8			426.5			417.6


ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEETS (in millions)

	As of
	September 29, 2017			June 30, 2017			December 31, 2016
Assets
Cash and cash equivalents	$	901.2		$	871.6		$	1,028.1
Receivables, net	695.6			696.4			629.8
Inventories	1,029.0			1,002.0			1,030.2
Other current assets	189.6			194.3			181.0
Total current assets	2,815.4			2,764.3			2,869.1
Property, plant and equipment, net	2,238.2			2,215.0			2,159.1
Goodwill	916.9			924.7			924.7
Intangible assets, net	662.5			708.6			762.1
Deferred tax assets	148.8			148.4			138.9
Other assets	79.5			73.3			70.5
Total assets	$	6,861.3		$	6,834.3		$	6,924.4
Liabilities, Non-Controlling Interest and Stockholders’ Equity
Accounts payable	$	590.3		$	546.3		$	434.0
Accrued expenses	580.5			548.7			405.0
Deferred income on sales to distributors	—			—			109.8
Current portion of long-term debt	258.5			268.2			553.8
Total current liabilities	1,429.3			1,363.2			1,502.6
Long-term debt	2,684.4			2,872.3			3,068.5
Deferred tax liabilities	309.1			271.3			288.9
Other long-term liabilities	203.1			208.2			186.5
Total liabilities	4,625.9			4,715.0			5,046.5

2.625% Notes, Series B - Redeemable conversion feature	—			—			32.9

ON Semiconductor Corporation stockholders’ equity:
Common stock	5.5			5.5			5.4
Additional paid-in capital	3,557.1			3,538.5			3,473.3
Accumulated other comprehensive loss	(43.8		)	(43.8		)	(50.2		)
Accumulated deficit	(178.4		)	(287.1		)	(527.3		)
Less: Treasury stock, at cost	(1,128.0		)	(1,116.6		)	(1,078.0		)
Total ON Semiconductor Corporation stockholders’ equity	2,212.4			2,096.5			1,823.2
Non-controlling interest in consolidated subsidiary	23.0			22.8			21.8
Total stockholders' equity	2,235.4			2,119.3			1,845.0
Total liabilities and equity	$	6,861.3		$	6,834.3		$	6,924.4


ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES UNAUDITED RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA AND NET CASH PROVIDED BY OPERATING ACTIVITIES (in millions)

	Quarter Ended									Nine Months Ended
	September 29, 2017			June 30, 2017			September 30, 2016			September 29, 2017			September 30, 2016
Net income	$	108.9		$	94.4		$	10.6		$	282.0		$	72.8
Adjusted for:
Licensing income	(21.5		)	(23.9		)	—			(45.4		)	—
R&D costs related to licensing income	2.2			4.1			—			6.3			—
Restructuring, asset impairments and other, net	9.7			5.9			21.8			16.1			28.7
Intangible asset impairment	1.5			1.8			—			7.7			2.2
Interest expense	34.9			34.7			46.7			108.0			104.4
Interest income	(0.7		)	(0.5		)	(1.4		)	(1.8		)	(3.8		)
Loss on debt refinancing and prepayment	6.7			—			6.3			32.9			6.3
Income tax provision	59.4			48.8			76.7			144.5			89.6
Net income attributable to non-controlling interest	(0.2		)	(0.5		)	(0.5		)	(1.2		)	(1.6		)
Depreciation and amortization	127.7			116.5			83.8			358.5			244.1
Amortization of fair market value step-up of inventory	2.5			1.3			11.9			13.6			11.9
Sell-through to sell-in adjustment	—			—			—			(59.0		)	—
Gain on divestiture of business	(12.5		)	—			(92.2		)	(12.5		)	(92.2		)
Adjustment to contingent consideration	(0.3		)	0.8			(1.3		)	2.0			(1.3		)
Third party acquisition and divestiture related costs	0.5			0.7			17.8			2.2			22.3
Adjusted EBITDA	318.8			284.1			180.2			853.9			483.4
Increase (decrease):
Licensing income	21.5			23.9			—			45.4			—
R&D costs related to licensing income	(2.2		)	(4.1		)	—			(6.3		)	—
Restructuring, asset impairments and other, net	(9.7		)	(5.9		)	(21.8		)	(16.1		)	(28.7		)
Interest expense	(34.9		)	(34.7		)	(46.7		)	(108.0		)	(104.4		)
Interest income	0.7			0.5			1.4			1.8			3.8
Income tax provision	(59.4		)	(48.8		)	(76.7		)	(144.5		)	(89.6		)
Net income attributable to non-controlling interest	0.2			0.5			0.5			1.2			1.6
Amortization of fair market value step-up of inventory	(2.5		)	(1.3		)	(11.9		)	(13.6		)	(11.9		)
Third party acquisition and divestiture related costs	(0.5		)	(0.7		)	(17.8		)	(2.2		)	(22.3		)
Sell-through to sell-in adjustment	—			—			—			59.0			—
Loss (gain) on sale or disposal of fixed assets	1.0			(1.1		)	0.4			2.8			0.6
Amortization of debt discount and issuance costs	3.8			3.9			3.4			12.2			7.4
Non-cash asset impairment charges	6.4			—			—			7.3			—
Write-down of excess inventories	21.2			21.4			4.4			56.8			40.1
Adjustment to contingent consideration	0.3			(0.8		)	—			(2.0		)	—
Payments for term debt modification	—			—			(26.4		)	(2.4		)	(26.4		)
Non-cash share-based compensation expense	16.8			20.8			14.2			52.7			41.9
Non-cash interest on convertible notes	8.6			8.6			6.6			21.9			19.6
Change in deferred taxes	38.9			21.0			62.3			96.1			65.5
Other	0.6			0.5			2.0			2.6			(1.4		)
Changes in operating assets and liabilities	(1.4		)	45.4			58.6			(48.7		)	(27.4		)
Net cash provided by operating activities	$	328.2		$	333.2		$	132.7		$	869.9		$	351.8
Cash flows from investing activities:
Purchases of property, plant and equipment	$	(90.1	)	$	(69.0	)	$	(35.9	)	$	(211.8	)	$	(160.8	)
Proceeds from divestiture of business, net of cash transferred	20.0			—			104.0			20.0			104.0
Proceeds from sales of property, plant and equipment	0.3			1.6			—			2.1			0.4
Deposits (made) utilized for purchases of property, plant and equipment	(3.2		)	1.3			(1.3		)	(2.1		)	0.9
Purchase of business, net of cash acquired	—			—			(2,277.2		)	(0.8		)	(2,277.2		)
Cash received from escrow	—			—			23.8			—			23.8
Purchases of held-to-maturity securities	—			—			—			(1.6		)	—
Cash placed in escrow	—			—			—			—			(67.7		)
Other	—			0.3			0.8			0.3			1.8
Net cash used in investing activities	$	(73.0	)	$	(65.8	)	$	(2,185.8	)	$	(193.9	)	$	(2,374.8	)
Cash flows from financing activities:
Proceeds from issuance of common stock under the employee stock purchase plan	$	0.1		$	5.4		$	3.9		$	11.4		$	10.9
Proceeds from exercise of stock options	1.7			1.7			2.9			10.9			5.1
Payments of tax withholding for restricted shares	(11.4		)	(0.6		)	(2.2		)	(25.0		)	(10.4		)
Repurchase of common stock	—			—			—			(25.0		)	—
Proceeds from debt issuance	5.3			6.9			2,572.4			701.2			2,581.9
Purchase of convertible note hedges	—			—			—			(144.7		)	—
Proceeds from issuance of warrants	—			—			—			85.2			—
Payments of debt issuance and other financing costs	—			—			(3.4		)	—			(6.5		)
Repayment of long-term debt	(220.3		)	(136.9		)	(223.6		)	(1,411.6		)	(287.6		)
Payment of capital lease obligations	(1.2		)	(1.1		)	(2.8		)	(7.7		)	(12.2		)
Dividend to non-controlling shareholder of consolidated subsidiary	—			—			(1.9		)	—			(1.9		)
Net cash provided by (used in) financing activities	$	(225.8	)	$	(124.6	)	$	2,345.3		$	(805.3	)	$	2,279.3
Effect of exchange rate changes on cash and cash equivalents	$	0.2		$	(0.1	)	$	0.2		$	2.4		$	6.6
Net increase (decrease) in cash and cash equivalents	$	29.6		$	142.7		$	292.4		$	(126.9	)	$	262.9
Cash and cash equivalents, beginning of period	$	871.6		$	728.9		$	588.1		$	1,028.1		$	617.6
Cash and cash equivalents, end of period	$	901.2		$	871.6		$	880.5		$	901.2		$	880.5


ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES ANALYSIS OF GAAP VERSUS NON-GAAP DISCLOSURES (in millions, except per share and percentage data)

			Quarter Ended									Nine Months Ended
			September 29, 2017			June 30, 2017			September 30, 2016			September 29, 2017			September 30, 2016
Reconciliation of GAAP revenue to non-GAAP revenue:
GAAP revenue			$	1,390.9		$	1,338.0		$	950.9		$	4,165.6		$	2,645.9
	Special items:
	a)	Sell-through to sell-in adjustment	—			—			—			(155.1		)	—
		Total special items	—			—			—			(155.1		)	—
Non-GAAP revenue			$	1,390.9		$	1,338.0		$	950.9		$	4,010.5		$	2,645.9
Reconciliation of GAAP gross profit to non-GAAP gross profit:
GAAP gross profit			$	524.2		$	492.1		$	329.0		$	1,519.6		$	912.4
	Special items:
	a)	Expensing of appraised inventory at fair market value step up	2.5			1.3			11.9			13.6			11.9
	b)	Sell-through to sell-in adjustment	—			—			—			(59.0		)	—
		Total special items	2.5			1.3			11.9			(45.4		)	11.9
Non-GAAP gross profit			$	526.7		$	493.4		$	340.9		$	1,474.2		$	924.3
Reconciliation of GAAP gross margin to non-GAAP gross margin:
GAAP gross margin			37.7		%	36.8		%	34.6		%	36.5		%	34.5		%
	Special items:
	a)	Expensing of appraised inventory at fair market value step up	0.2		%	0.1		%	1.3		%	0.3		%	0.4		%
	b)	Sell-through to sell-in adjustment	—		%	—		%	—		%	(1.5		)%	—		%
		Total special items	0.2		%	0.1		%	1.3		%	(1.1		)%	0.4		%
Non-GAAP gross margin			37.9		%	36.9		%	35.9		%	35.4		%	34.9		%
Reconciliation of GAAP operating expenses to non-GAAP operating expenses:
GAAP operating expenses			$	346.9		$	337.9		$	282.3		$	1,004.7		$	732.0
	Special items:
	a)	Amortization of acquisition related intangible assets	(37.3		)	(28.6		)	(24.7		)	(95.0		)	(71.9		)
	b)	Restructuring, asset impairments and other, net	(9.7		)	(5.9		)	(21.8		)	(16.1		)	(28.7		)
	c)	Intangible asset impairments	(1.5		)	(1.8		)	—			(7.7		)	(2.2		)
	d)	Third party acquisition and divestiture related costs	(0.5		)	(0.7		)	(17.8		)	(2.2		)	(22.3		)
	e)	R&D Costs related to licensing income	(2.2		)	(4.1		)	—			(6.3		)	—
		Total special items	(51.2		)	(41.1		)	(64.3		)	(127.3		)	(125.1		)
Non-GAAP operating expenses			$	295.7		$	296.8		$	218.0		$	877.4		$	606.9
Reconciliation of GAAP operating income to non-GAAP operating income:
GAAP operating income			$	177.3		$	154.2		$	46.7		$	514.9		$	180.4
	Special items:
	a)	Expensing of appraised inventory at fair market value step up	2.5			1.3			11.9			13.6			11.9
	b)	Sell-through to sell-in adjustment	—			—			—			(59.0		)	—
	c)	Amortization of acquisition related intangible assets	37.3			28.6			24.7			95.0			71.9
	d)	Restructuring, asset impairments and other, net	9.7			5.9			21.8			16.1			28.7
	e)	Intangible asset impairments	1.5			1.8			—			7.7			2.2
	f)	Third party acquisition and divestiture related costs	0.5			0.7			17.8			2.2			22.3
	g)	R&D Costs related to licensing income	2.2			4.1			—			6.3			—
		Total special items	53.7			42.4			76.2			81.9			137.0
Non-GAAP operating income			$	231.0		$	196.6		$	122.9		$	596.8		$	317.4
*Reconciliation of GAAP operating margin to non-GAAP operating margin (operating income / revenue)* :**
GAAP operating margin			12.7		%	11.5		%	4.9		%	12.4		%	6.8		%
	Special items:
	a)	Expensing of appraised inventory at fair market value step up	0.2		%	0.1		%	1.3		%	0.3		%	0.4		%
	b)	Sell-through to sell-in adjustment	—		%	—		%	—		%	(1.5		)%	—		%
	c)	Amortization of acquisition related intangible assets	2.7		%	2.1		%	2.6		%	2.3		%	2.7		%
	d)	Restructuring, asset impairments and other, net	0.7		%	0.4		%	2.3		%	0.4		%	1.1		%
	e)	Intangible asset impairments	0.1		%	0.1		%	—		%	0.2		%	0.1		%
	f)	Third party acquisition and divestiture related costs	—		%	0.1		%	1.9		%	0.1		%	0.8		%
	g)	R&D Costs related to licensing income	0.2		%	0.3		%	—		%	0.2		%	—		%
		Total special items	3.9		%	3.2		%	8.0		%	1.9		%	5.2		%
Non-GAAP operating margin			16.6		%	14.7		%	12.9		%	14.3		%	12.0		%
Reconciliation of GAAP income before income taxes to non-GAAP income before income taxes:
GAAP income before income taxes			$	168.3		$	143.2		$	87.3		$	426.5		$	162.4
	Special items:
	a)	Expensing of appraised inventory at fair market value	2.5			1.3			11.9			13.6			11.9
	b)	Sell-through to sell-in adjustment	—			—			—			(59.0		)	—
	c)	Amortization of acquisition related intangible assets	37.3			28.6			24.7			95.0			71.9
	d)	Restructuring, asset impairments and other, net	9.7			5.9			21.8			16.1			28.7
	e)	Intangible asset impairments	1.5			1.8			—			7.7			2.2
	f)	Third party acquisition and divestiture related costs	0.5			0.7			17.8			2.2			22.3
	g)	R&D Costs related to licensing income	2.2			4.1			—			6.3			—
	h)	Loss on debt refinancing and prepayment	6.7			—			6.3			32.9			6.3
	i)	Non-cash interest on convertible notes	8.6			8.6			6.6			21.9			19.6
	j)	Pre-acquisition interest expense, net	—			—			24.4			—			48.3
	k)	Adjustment to contingent consideration	(0.3		)	0.8			(1.3		)	2.0			(1.3		)
	l)	Licensing income	(21.5		)	(23.9		)	—			(45.4		)	—
	m)	Gain on divestiture of business	(12.5		)	—			(92.2		)	(12.5		)	(92.2		)
		Total special items	34.7			27.9			20.0			80.8			117.7
Non-GAAP income before income taxes			$	203.0		$	171.1		$	107.3		$	507.3		$	280.1
Reconciliation of Net cash provided by operating activities to free cash flow:
Net cash provided by operating activities			$	328.2		$	333.2		$	132.7		$	869.9		$	351.8
	Special items:
	a)	Purchases of property, plant and equipment	(90.1		)	(69.0		)	(35.9		)	(211.8		)	(160.8		)
		Total special items	(90.1		)	(69.0		)	(35.9		)	(211.8		)	(160.8		)
Free cash flow			$	238.1		$	264.2		$	96.8		$	658.1		$	191.0

« Previous Page 1 | 2 | 3 | 4 | 5 | 6 | 7 Next Page »