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ON Semiconductor Reports Fourth Quarter and 2016 Annual ResultsON Semiconductor Corporation (Nasdaq:ON), today announced that total revenues in the fourth quarter of 2016 were $1,261.0 million, up approximately 33 percent compared to the third quarter of 2016. Fourth quarter revenue includes contribution of approximately $358 million from our acquisition of Fairchild, which closed on Sept. 19, 2016. During the fourth quarter of 2016, the company reported GAAP net income of $110.9 million, or $0.26 per diluted share. Fourth quarter GAAP income before income taxes was $18.2 million as compared to $87.3 million in the third quarter. The fourth quarter 2016 GAAP income before income taxes was negatively impacted by approximately $113.8 million of special items, the majority of which were related to Fairchild. Fourth quarter 2016 non-GAAP income before income taxes was $132.0 million, compared to $107.3 million for the third quarter of 2016. Cash paid for taxes for the fourth quarter was approximately $8.2 million, as compared to $6.5 million in the third quarter. Fourth quarter GAAP gross margin was 30.5 percent, and non-GAAP gross margin in the fourth quarter was 35.2 percent. For the fourth quarter of 2016, GAAP operating margin was 4.4 percent, and non-GAAP operating margin was 12.9 percent. Adjusted EBITDA for the fourth quarter of 2016 was $252.0 million. Adjusted EBITDA for the third quarter of 2016 was $180.2 million. Total revenues for 2016 were $3,906.9 million, an increase of approximately 12 percent from $3,495.8 million in 2015. Total revenue for 2016 included a contribution of approximately $411 million from Fairchild. During 2016, the company reported GAAP net income of $182.1 million, or $0.43 per diluted share. The 2016 GAAP income before income taxes included charges of $231.5 million from special items, including $104.8 million of amortization of acquisition related intangible assets. The remaining charges and special items detail can be found in the attached schedules. During 2015, the company reported GAAP net income of $206.2 million, or $0.48 per diluted share. The 2015 GAAP income before income taxes included net charges of $159.8 million from special items. The company's GAAP gross margin in 2016 was 33.2 percent. GAAP gross margin in 2016 included a net charge of approximately $70.7 million from special items. Non-GAAP gross margin in 2016 was 35.0 percent. The company's GAAP gross margin in 2015 was 34.1 percent. GAAP gross margin in 2015 included a net benefit of approximately $(0.8) million from special items. Non-GAAP gross margin in 2015 was 34.1 percent. A reconciliation of non-GAAP financial measures used in this release 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 http://www.onsemi.com. Additional information on revenue by end market, region, distribution channel, business units and share count can be found on the "Investor Relations" section of our website. "Our results in the fourth quarter provide clear evidence of our strong execution on the integration of Fairchild, and the results also validate our strategic and financial rationale for the acquisition," said Keith Jackson, president and CEO of ON Semiconductor. "We continue to make rapid progress in the integration, and we are currently tracking significantly ahead of schedule in realizing synergies from the combination of Fairchild and ON Semiconductor." "I am very optimistic about our prospects in 2017 as our momentum in our strategic markets, which include automotive, industrial and communications, continues to grow and our design win pipeline continues to expand driven by our innovative products. With synergies from Fairchild and strong execution and cost control, we are well positioned to drive meaningful growth in our free cash flow in the current year and in following years." FIRST QUARTER 2017 OUTLOOK "Based upon product booking trends, backlog levels, and estimated turns levels, we anticipate that total ON Semiconductor revenue will be approximately $1,215 million to $1,265 million in the first quarter of 2017," Jackson said. "Backlog levels for the first quarter of 2017 represent approximately 80 to 85 percent of our anticipated first quarter 2017 revenue. The outlook for the first quarter of 2017 includes stock-based compensation expense of approximately $15 million to $17 million. Net cash paid for income taxes is expected to be $16 million to $20 million." The following table outlines ON Semiconductor's projected first quarter of 2017 GAAP and non-GAAP outlook.
The company has provided the following forward-looking non-GAAP financial measures: Operating Expenses and Other Income and Expense (including interest expense), net. The company does not provide reconciliations of these forward-looking non-GAAP financial measures, including the special items detailed above, to the most directly comparable GAAP financial measures because, due to variability and difficulty in making accurate forecasts and projections and/or certain information not being ascertainable or accessible, not all of the information necessary for quantitative reconciliations of these forward-looking non-GAAP financial measures to the most directly comparable GAAP financial measures are available to the company without unreasonable efforts. Consequently, any attempt to disclose such reconciliations would imply a degree of precision that could be confusing or misleading to investors. It is probable that the forward-looking non-GAAP financial measures may be materially different from the corresponding GAAP financial measures. TELECONFERENCE ON Semiconductor will host a conference call for the financial community at 9 a.m. Eastern Time (EST) on Feb. 13, 2017, to discuss this announcement and ON Semiconductor's results for the fourth quarter of 2016. The company will also provide a real-time audio webcast of the teleconference on the Investors page of its website at http://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 (877) 356-3762 (U.S./Canada) or (262) 558-6155 (International). In order to join this conference call, you will be required to provide the Conference ID Number - which is 25291906. About ON Semiconductor ON Semiconductor (Nasdaq: ON) is driving energy efficient innovations, empowering customers to reduce global energy use. The company is a leading supplier of semiconductor-based solutions, offering a comprehensive portfolio of energy efficient power management, analog, sensors, logic, timing, connectivity, discrete, SoC and custom devices. The company's products help engineers solve their unique design challenges in automotive, communications, computing, consumer, industrial, medical, aerospace and defense applications. ON Semiconductor operates a responsive, reliable, world-class supply chain and quality program, a robust compliance and ethics program, and a network of manufacturing facilities, sales offices and design centers in key markets throughout North America, Europe and the Asia Pacific regions. For more information, visit http://www.onsemi.com.
ON Semiconductor and the ON Semiconductor logo are registered trademarks of Semiconductor Components Industries, LLC. All other brand and product names appearing in this document are registered trademarks or trademarks of their respective holders. Although the company references its website in this news release, information on the website is not to be incorporated herein. This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included or incorporated in this document could be deemed forward-looking statements, particularly statements about the future financial performance of ON Semiconductor. These forward-looking statements are often characterized by the use of words such as "believes," "estimates," "expects," "projects," "may," "will," "intends," "plans," "should," or "anticipates," or by discussions of strategy, plans or intentions. All forward-looking statements in this document are made based on our current expectations, forecasts, estimates and assumptions, and involve risks, uncertainties and other factors that could cause results or events to differ materially from those expressed in the forward-looking statements. Among these factors are our revenues and operating performance, economic conditions and markets (including current financial conditions), effects of exchange rate fluctuations, the cyclical nature of the semiconductor industry, changes in demand for our products, changes in inventories at our customers and distributors, technological and product development risks, enforcement and protection of our intellectual property rights and related risks, risks related to the security of our information systems and secured network, availability of raw materials, electricity, gas, water and other supply chain uncertainties, our ability to effectively shift production to other facilities when required in order to maintain supply continuity for our customers, variable demand and the aggressive pricing environment for semiconductor products, our ability to successfully manufacture in increasing volumes on a cost-effective basis and with acceptable quality for our current products, competitor actions including the adverse impact of competitor product announcements, pricing and gross profit pressures, loss of key customers, order cancellations or reduced bookings, changes in manufacturing yields, control of costs and expenses and realization of cost savings and synergies from restructuring activities, significant litigation, risks associated with decisions to expend cash reserves for various uses in accordance with our capital allocation policy such as debt prepayment, stock repurchases or acquisitions rather than to retain such cash for future needs, risks associated with acquisitions and dispositions (including from integrating and consolidating and timely filing financial information with the Securities and Exchange Commission ("SEC") for acquired businesses and difficulties encountered in accurately predicting the future financial performance of acquired businesses), risks associated with our substantial leverage and restrictive covenants in our debt agreements that may be in place from time to time, risks associated with our worldwide operations, including foreign employment and labor matters associated with unions and collective bargaining arrangements, as well as man-made and/or natural disasters affecting our operations and finances/financials, 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, risks related to new legal requirements and risks involving environmental or other governmental regulation. Additional factors that could cause results to differ materially from those projected in the forward-looking statements are contained in ON Semiconductor's 2015 Annual Report on Form 10-K filed with the SEC on February 24, 2016 ("2015 Form 10-K"), Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other of our filings with the SEC. You should carefully consider the trends, risks and uncertainties described in this document, the 2015 Form 10-K and other reports filed with or furnished to the SEC before making any investment decision with respect to our securities. If any of these trends, risks or uncertainties actually occurs or continues, our business, financial condition or operating results could be materially adversely affected, the trading prices of our securities could decline, and you could lose all or part of your investment. The company will report final results for the fourth quarter 2016 and the fiscal year ended December 31, 2016 in its annual report on Form 10-K to be filed with the SEC. The company's fourth quarter 2016 results could change during the time between this announcement and the filing of its annual report on Form 10-K with SEC. Readers are cautioned not to place undue reliance on forward-looking statements. We assume no obligation to update such information, except as may be required by law. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement. The Company's purchase price allocation related to the Fairchild acquisition is preliminary, as such the related amortization of intangibles and the expensing of inventory-step-up are subject to change as the company finalizes this allocation.
* 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.
Certain of the amounts in the above table may not total due to rounding of individual amounts. Total share-based compensation expense, related to the company's stock options, restricted stock units, stock grant awards and employee stock purchase plan is included below.
Non-GAAP Measures To supplement the consolidated financial results prepared under GAAP, ON Semiconductor uses non-GAAP measures which are adjusted from the most directly comparable GAAP results to exclude items related to the amortization of intangible assets, amortization of acquisition-related intangibles, expensing of appraised inventory fair market value step-up, inventory valuation adjustments, purchased in-process research and development expenses, restructuring, asset impairments and other, net, goodwill impairment charges, gains and losses on debt prepayment, non-cash interest expense, actuarial (gains) losses on pension plans and other pension benefits, third party acquisition related costs, and certain other special items, as necessary. Management does not consider these charges in evaluating the core operational activities of ON Semiconductor. Management uses these non-GAAP measures internally to make strategic decisions, forecast future results and evaluate ON Semiconductor's current performance. In addition, we believe that most analysts covering ON Semiconductor use the non-GAAP measures as well. Given management's and other relevant use of these non-GAAP measures, ON Semiconductor believes these measures are important to investors in understanding ON Semiconductor's current and future operating results as seen through the eyes of management. In addition, management believes these non-GAAP measures are useful to investors in enabling them to better assess changes in ON Semiconductor's core business across different time periods. These non-GAAP measures are not in accordance with or an alternative to GAAP financial data and may be different from non-GAAP measures used by other companies. 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. Non-GAAP Gross Profit and Gross Margin The use of non-GAAP gross profit and gross margin allows management to evaluate, among other things, the gross margin and gross profit of the company's core businesses and trends across different reporting periods on a consistent basis, independent of non-cash items including, generally speaking, expensing of appraised inventory fair market value step-up and amortization of intangible assets. In addition, it is an important component of management's internal performance measurement and incentive and reward process as it is used to assess the current and historical financial results of the business, for strategic decision making, preparing budgets, obtaining targets, and forecasting future results. Management presents this non-GAAP financial measure to enable investors and analysts to evaluate our revenue generation performance relative to the direct costs of revenue of ON Semiconductor's core businesses. Non-GAAP Operating Profit and Operating Margin The use of non-GAAP operating profit and operating margin allows management to evaluate, among other things, the operating margin and operating profit of the company's core businesses and trends across different reporting periods on a consistent basis, independent of non-cash items including, generally speaking, expensing of appraised inventory fair market value step-up, amortization of intangible assets, third party acquisition related costs, and restructuring charges. In addition, it is an important component of management's internal performance measurement and incentive and reward process as it is used to assess the current and historical financial results of the business, for strategic decision making, preparing budgets, obtaining targets, and forecasting future results. Management presents this non-GAAP financial measure to enable investors and analysts to evaluate our revenue generation performance relative to the direct costs of operations of ON Semiconductor's core businesses. Non-GAAP Income Before Income Taxes The use of non-GAAP income before income taxes allows management to evaluate the operating results of ON Semiconductor's core businesses and trends across different reporting periods on a consistent basis, independent of non-cash items including, generally, the amortization of intangible assets, amortization of acquisition-related intangibles, expensing of appraised inventory fair market value step-up, purchased in-process research and development expenses, restructuring, asset impairments and other, net, goodwill impairment charges, gains and losses on debt prepayment, non-cash interest expense, actuarial (gains) losses on pension plans and other pension benefits, third party acquisition related costs, and certain other special items, as necessary. In addition, these items are important components of management's internal performance measurement and incentive and reward process, as they are used to assess the current and historical financial results of the business, for strategic decision making, preparing budgets, setting targets, and forecasting future results. Management presents these non-GAAP financial measures to enable investors and analysts to understand the results of operations of ON Semiconductor's core businesses and, to the extent comparable, to compare our results of operations on a more consistent basis against that of other companies in our industry. Diluted Share Count In periods when the quarterly average stock price per share exceeds $18.50, the Non-GAAP diluted share count includes the anti-dilutive impact of the company's hedge transactions, issued concurrently with the 1.00% Notes. At an average stock price per share between $18.50 and $25.96, the hedging activity offsets the potentially dilutive effect of the 1.00% Notes and warrants. View source version on businesswire.com: http://www.businesswire.com/news/home/20170212005034/en/ |