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ON Semiconductor Reports First Quarter 2019 Results
- Revenue of $1,386.6 million
- Gross margin of 37.0 percent
-
GAAP operating margin of 12.9 percent and non-GAAP operating margin of
15.5 percent -
GAAP diluted earnings per share of $0.27 and non-GAAP diluted earnings
per share of $0.43
PHOENIX–(BUSINESS WIRE)–ON Semiconductor Corporation (Nasdaq: ON)
today announced that revenue in first quarter of 2019 was
$1,386.6 million, up approximately one percent compared to revenue in
first quarter of 2018. First quarter 2019 revenue was down approximately
eight percent as compared to revenue in fourth quarter of 2018.
“Our execution continues to be strong, despite soft business conditions.
While we are facing near-term headwinds, key secular drivers powering
our business remain intact, and we are well positioned to benefit from
increasing semiconductor content in automotive, industrial, and
cloud-power applications,” said Keith Jackson, president and CEO of ON
Semiconductor. “We are prudently managing our business, and we intend to
deliver strong operational results to mitigate the impact of slowing
demand environment.”
“We remain upbeat about our future, and we are making prudent long term
investments to strengthen our position in our strategic markets and to
further improve our industry-leading cost structure.”
|
First Quarter Results (GAAP) |
||||||||||||||||
| (in millions, except per share data) | 1Q 2019 | 1Q 2018 |
Year-Over- |
4Q 2018 |
Sequential
Change |
|||||||||||
| Revenue | $1,386.6 | $1,377.6 | 1 | % | $1,503.1 | (8 | )% | |||||||||
| Gross Profit | $513.7 | $517.4 | (1 | )% | $569.7 | (10 | )% | |||||||||
| Operating Income | $179.4 | $185.7 | (3 | )% | $222.7 | (19 | )% | |||||||||
| Net Income Attributable to ON Semiconductor Corporation | $114.1 | $139.6 | (18 | )% | $165.6 | (31 | )% | |||||||||
| Diluted Earnings Per Share | $0.27 | $0.31 | (13 | )% | $0.39 | (31 | )% | |||||||||
| Diluted Share Count | 417.7 | 444.2 | (6 | )% | 420.0 | (1 | )% | |||||||||
|
First Quarter Results (Non-GAAP) |
||||||||||||||||
| (in millions, except per share data) | 1Q 2019 | 1Q 2018 |
Year-Over- Year Change |
4Q 2018 |
Sequential
Change |
|||||||||||
| Revenue | $1,386.6 | $1,377.6 | 1 | % | $1,503.1 | (8 | )% | |||||||||
| Gross Profit | $513.7 | $517.4 | (1 | )% | $570.3 | (10 | )% | |||||||||
| Operating Income | $215.2 | $216.7 | (1 | )% | $253.0 | (15 | )% | |||||||||
| Net Income Attributable to ON Semiconductor Corporation | $177.1 | $170.7 | 4 | % | $222.0 | (20 | )% | |||||||||
| Diluted Earnings Per Share | $0.43 | $0.40 | 8 | % | $0.53 | (19 | )% | |||||||||
| Diluted Share Count | 413.8 | 431.6 | (4 | )% | 420.0 | (1 | )% | |||||||||
|
First Quarter Key Cash Flow Items |
|||||||||||||||||
| (in millions) | 1Q 2019 | 1Q 2018 |
Year-Over- Year Change |
4Q 2018 |
Sequential
Change |
||||||||||||
| Cash Taxes, net of indemnification | $15.2 | $19.1 | (20 | )% | $8.2 | 85 | % | ||||||||||
| Operating Cash Flow | $138.2 | $226.5 | (39 | )% | $421.0 | (67 | )% | ||||||||||
| Free Cash Flow | ($18.8 | ) | $127.0 | (115 | )% | $289.0 | (107 | )% | |||||||||
SECOND QUARTER 2019 OUTLOOK
Based on product booking trends, backlog levels, and estimated turns
levels, the Company anticipates revenue in second quarter of 2019 to be
approximately $1,360 to $1,410 million. Revenue outlook for second
quarter of 2019 includes revenue of approximately $15 million from
manufacturing services provided by ON Semiconductor Aizu Co., Ltd.
(“OSA”).
Gross margin for second quarter of 2019 is expected to be in range of
36.5 percent to 37.5 percent. Second quarter 2019 gross margin outlook
includes negative impact of 40 basis points from manufacturing services
provided by OSA.
The outlook for second quarter of 2019 also includes anticipated
stock-based compensation expense of approximately $26 million to $28
million. Net cash paid for income taxes is expected to be $12 million to
$16 million.
The following table outlines ON Semiconductor’s projected second quarter
of 2019 GAAP and non-GAAP outlook.
|
Total ON Semiconductor
GAAP |
Special
Items *** |
Total ON Semiconductor
Non-GAAP**** |
||||
| Revenue | $1,360 to $1,410 | $1,360 to $1,410 | ||||
| Gross Margin | 36.5% to 37.5% | 36.5% to 37.5% | ||||
| Operating Expenses | $322 to $340 million | $27 to $31 million | $295 to $309 million | |||
| Other Income and Expense (including interest expense), net | $31 to $34 million | $9 to $10 million* | $22 to $24 million | |||
| Diluted Share Count ** | 418 million | 4 million | 414 million |
| * |
Convertible Notes, Non-cash Interest Expense is calculated pursuant to FASB’s Accounting Standards Codification Topic 470: Debt. |
|
| ** |
Diluted share count can vary as a result of, among other things, the actual exercise of options or vesting of restricted stock units, the incremental dilutive shares from the Company’s convertible senior subordinated notes, and the repurchase or the issuance of stock or convertible notes or the sale of treasury shares. In periods in which the quarterly average stock price per share exceeds $18.50, the non-GAAP diluted share count and non-GAAP net income per share includes the impact of the Company’s hedge transactions issued concurrently with our 1.00% convertible notes. As such, 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% convertible notes. In periods when the quarterly average stock price per share exceeds $20.72, the non-GAAP diluted share count and non-GAAP net income per share includes the anti-dilutive impact of the Company’s hedge transactions issued concurrently with the 1.625% convertible notes. At an average stock price per share between $20.72 and $30.70, the hedging activity offsets the potentially dilutive effect of the 1.625% convertible notes. Both GAAP and non-GAAP diluted share counts are based on the Company’s stock price as of March 29, 2019. |
|
| *** |
Special items may include: 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; and certain other special items, as necessary. These special items are out of our control and could change significantly from period to period. As a result, we are not able to reasonably estimate and separately present the individual impact or probable significance of these special items, and we are similarly unable to provide a reconciliation of the non-GAAP measures. The reconciliation that is unavailable would include a forward-looking income statement, balance sheet and statement of cash flows in accordance with GAAP. For this reason, we use a projected range of the aggregate amount of special items in order to calculate our projected non-GAAP operating expense outlook. |
|
| **** |
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. |
TELECONFERENCE
ON Semiconductor will host a conference call for the financial community
at 9 a.m. Eastern Daylight Time (EDT) on April 29, 2019 to discuss this
announcement and ON Semiconductor’s results for first quarter of 2019.
The Company will also provide a real-time audio webcast of the
teleconference on the Investor Relations 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 2874546.
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,” as that term is
defined in Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. 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, including financial guidance for the
year ending December 31, 2019. Forward-looking statements are often
characterized by the use of words such as “believes,” “estimates,”
“expects,” “projects,” “may,” “will,” “intends,” “plans” 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 revenue and operating
performance; economic conditions and markets (including current
financial conditions); risks related to our ability to meet our
assumptions regarding outlook for revenue and gross margin as a
percentage of revenue; 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;
risks associated with restructuring actions and workforce reductions;
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; risks associated with our
acquisitions and dispositions generally, including our ability to
realize the anticipated benefits of our acquisitions and dispositions;
risks that acquisitions or dispositions may disrupt our current plans
and operations, the risk of unexpected costs, charges or expenses
resulting from acquisitions or dispositions and difficulties arising
from integrating and consolidating acquired businesses, our timely
filing of financial information with the Securities and Exchange
Commission (“SEC”) for acquired businesses and our ability to accurately
predict the future financial performance of acquired businesses);
competitor actions, including the adverse impact of competitor product
announcements; pricing and gross profit pressures; loss of key customers
or distributors; order cancellations or reduced bookings; changes in
manufacturing yields; control of costs and expenses and realization of
cost savings and synergies from restructurings; 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 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 changes in trade policies, foreign employment and labor
matters associated with unions and collective bargaining arrangements as
well as man-made and/or natural disasters affecting our operations or
financial results; the threat or occurrence of international armed
conflict and terrorist activities both in the United States and
internationally; risks of changes in U.S. or international tax rates or
legislation; 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 affect our
future results or events are described under Part I, Item 1A “Risk
Factors” in our 2018 Annual Report on Form 10-K filed with the SEC on
February 20, 2019 (our “2018 Form 10-K”) and from time-to-time in our
other SEC reports. 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. You should carefully
consider the trends, risks and uncertainties described in this document,
our 2018 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. All
forward-looking statements attributable to us or persons acting on our
behalf are expressly qualified in their entirety by this cautionary
statement.
| ON SEMICONDUCTOR CORPORATION | ||||||||||||
| UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS | ||||||||||||
|
(in millions, except per share data) |
||||||||||||
| Quarters Ended | ||||||||||||
| March 29, 2019 | December 31, 2018 | March 30, 2018 | ||||||||||
| Revenue | $ | 1,386.6 | $ | 1,503.1 | $ | 1,377.6 | ||||||
| Cost of revenue (exclusive of amortization shown below) | 872.9 | 933.4 | 860.2 | |||||||||
| Gross profit | 513.7 | 569.7 | 517.4 | |||||||||
| Gross margin | 37.0 | % | 37.9 | % | 37.6 | % | ||||||
| Operating expenses: | ||||||||||||
| Research and development | 151.8 | 162.2 | 155.2 | |||||||||
| Selling and marketing | 77.1 | 82.1 | 77.8 | |||||||||
| General and administrative | 72.9 | 74.5 | 70.9 | |||||||||
| Amortization of acquisition-related intangible assets | 25.7 | 28.4 | 27.4 | |||||||||
| Restructuring, asset impairments and other, net | 5.6 | (3.7 | ) | 0.4 | ||||||||
| Intangible asset impairment | 1.2 | 3.5 | — | |||||||||
|
Total operating expenses |
334.3 | 347.0 | 331.7 | |||||||||
| Operating income | 179.4 | 222.7 | 185.7 | |||||||||
| Other income (expense), net: | ||||||||||||
| Interest expense | (31.7 | ) | (32.9 | ) | (31.5 | ) | ||||||
| Interest income | 2.5 | 2.8 | 0.9 | |||||||||
| Licensing income | — | 3.7 | 3.8 | |||||||||
| Other income (expense) | 2.1 | (7.6 | ) | (2.0 | ) | |||||||
| Other income (expense), net | (27.1 | ) | (34.0 | ) | (28.8 | ) | ||||||
| Income before income taxes | 152.3 | 188.7 | 156.9 | |||||||||
| Income tax provision | (38.2 | ) | (22.7 | ) | (16.4 | ) | ||||||
| Net income | 114.1 | 166.0 | 140.5 | |||||||||
| Less: Net income attributable to non-controlling interest | — | (0.4 | ) | (0.9 | ) | |||||||
| Net income attributable to ON Semiconductor Corporation | $ | 114.1 | $ | 165.6 | $ | 139.6 | ||||||
|
Net income per common share attributable to ON Semiconductor Corporation: |
||||||||||||
| Basic | $ | 0.28 | $ | 0.40 | $ | 0.33 | ||||||
| Diluted | $ | 0.27 | $ | 0.39 | $ | 0.31 | ||||||
| Weighted average common shares outstanding: | ||||||||||||
| Basic | 410.6 | 416.9 | 425.9 | |||||||||
| Diluted | 417.7 | 420.0 | 444.2 | |||||||||
| ON SEMICONDUCTOR CORPORATION | ||||||||||||
| UNAUDITED CONSOLIDATED BALANCE SHEETS | ||||||||||||
|
(in millions) |
||||||||||||
| March 29, 2019 | December 31, 2018 | March 30, 2018 | ||||||||||
| Assets | ||||||||||||
| Cash and cash equivalents | $ | 939.6 | $ | 1,069.6 | $ | 924.9 | ||||||
| Receivables, net | 704.0 | 686.0 | 696.9 | |||||||||
| Inventories | 1,225.2 | 1,225.2 | 1,160.0 | |||||||||
| Other current assets | 177.9 | 187.0 | 185.2 | |||||||||
| Total current assets | 3,046.7 | 3,167.8 | 2,967.0 | |||||||||
| Property, plant and equipment, net | 2,585.0 | 2,549.6 | 2,336.4 | |||||||||
| Goodwill | 932.5 | 932.5 | 916.9 | |||||||||
| Intangible assets, net | 539.5 | 566.4 | 600.9 | |||||||||
| Deferred tax assets | 238.2 | 266.2 | 333.3 | |||||||||
| Other assets | 222.4 | 105.1 | 108.6 | |||||||||
| Total assets | $ | 7,564.3 | $ | 7,587.6 | $ | 7,263.1 | ||||||
| Liabilities, Non-Controlling Interest and Stockholders’ Equity | ||||||||||||
| Accounts payable | $ | 583.3 | $ | 671.7 | $ | 612.0 | ||||||
| Accrued expenses and other current liabilities | 603.4 | 659.1 | 585.8 | |||||||||
| Current portion of long-term debt | 130.8 | 138.5 | 747.2 | |||||||||
| Total current liabilities | 1,317.5 | 1,469.3 | 1,945.0 | |||||||||
| Long-term debt | 2,639.0 | 2,627.6 | 2,084.4 | |||||||||
| Deferred tax liabilities | 54.1 | 54.8 | 57.1 | |||||||||
| Other long-term liabilities | 333.0 | 241.8 | 225.1 | |||||||||
| Total liabilities | 4,343.6 | 4,393.5 | 4,311.6 | |||||||||
| ON Semiconductor Corporation stockholders’ equity: | ||||||||||||
| Common stock | 5.6 | 5.6 | 5.5 | |||||||||
| Additional paid-in capital | 3,722.5 | 3,702.3 | 3,615.5 | |||||||||
| Accumulated other comprehensive loss | (43.7 | ) | (37.9 | ) | (34.4 | ) | ||||||
| Accumulated earnings | 1,093.7 | 979.6 | 491.7 | |||||||||
| Less: Treasury stock, at cost | (1,579.9 | ) | (1,478.0 | ) | (1,149.9 | ) | ||||||
| Total ON Semiconductor Corporation stockholders’ equity | 3,198.2 | 3,171.6 | 2,928.4 | |||||||||
| Non-controlling interest | 22.5 | 22.5 | 23.1 | |||||||||
| Total stockholders’ equity | 3,220.7 | 3,194.1 | 2,951.5 | |||||||||
| Total liabilities and stockholders’ equity | $ | 7,564.3 | $ | 7,587.6 | $ | 7,263.1 | ||||||
| ON SEMICONDUCTOR CORPORATION | ||||||||||||
| UNAUDITED RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA AND | ||||||||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | ||||||||||||
|
(in millions) |
||||||||||||
| Quarters Ended | ||||||||||||
| March 29, 2019 | December 31, 2018 | March 30, 2018 | ||||||||||
| Net income | $ | 114.1 | $ | 166.0 | $ | 140.5 | ||||||
| Adjusted for: | ||||||||||||
| Licensing income | — | (3.7 | ) | (3.8 | ) | |||||||
| R&D costs related to licensing income | — | — | 2.8 | |||||||||
| Restructuring, asset impairments and other, net | 5.6 | (3.7 | ) | 0.4 | ||||||||
| Intangible asset impairment | 1.2 | 3.5 | — | |||||||||
| Interest expense | 31.7 | 32.9 | 31.5 | |||||||||
| Interest income | (2.5 | ) | (2.8 | ) | (0.9 | ) | ||||||
| Income tax provision | 38.2 | 22.7 | 16.4 | |||||||||
| Net income attributable to non-controlling interest | — | (0.4 | ) | (0.9 | ) | |||||||
| Depreciation and amortization | 135.8 | 136.2 | 119.9 | |||||||||
| Amortization of fair market value step-up of inventory | — | 0.6 | — | |||||||||
| Adjustment to contingent consideration | — | — | (2.1 | ) | ||||||||
| Actuarial losses on pension plans and other pension benefits | — | 5.8 | — | |||||||||
| Third party acquisition and divestiture related costs | 3.3 | 1.5 | 0.4 | |||||||||
| Indemnification gain | (4.9 | ) | — | — | ||||||||
| Adjusted EBITDA | 322.5 | 358.6 | 304.2 | |||||||||
| Increase (decrease): | ||||||||||||
| Licensing income | — | 3.7 | 3.8 | |||||||||
| R&D costs related to licensing income | — | — | (2.8 | ) | ||||||||
| Restructuring, asset impairments and other, net | (5.6 | ) | 3.7 | (0.4 | ) | |||||||
| Interest expense | (31.7 | ) | (32.9 | ) | (31.5 | ) | ||||||
| Interest income | 2.5 | 2.8 | 0.9 | |||||||||
| Income tax provision | (38.2 | ) | (22.7 | ) | (16.4 | ) | ||||||
| Net income attributable to non-controlling interest | — | 0.4 | 0.9 | |||||||||
| Amortization of fair market value step-up of inventory | — | (0.6 | ) | — | ||||||||
| Adjustment to contingent consideration | — | — | 2.1 | |||||||||
| Actuarial losses on pension plans and other pension benefits | — | (5.8 | ) | — | ||||||||
| Third party acquisition and divestiture related costs | (3.3 | ) | (1.5 | ) | (0.4 | ) | ||||||
| Indemnification gain | 4.9 | — | — | |||||||||
| Loss (gain) on sale or disposal of fixed assets | 0.4 | (1.2 | ) | 1.3 | ||||||||
| Amortization of debt discount and issuance costs | 3.2 | 3.4 | 3.3 | |||||||||
| Share-based compensation expense | 19.7 | 18.9 | 18.4 | |||||||||
| Non-cash interest on convertible notes | 9.1 | 9.5 | 8.7 | |||||||||
| Change in deferred taxes | 29.0 | (10.7 | ) | 7.5 | ||||||||
| Other | (4.3 | ) | 2.0 | (1.2 | ) | |||||||
| Changes in operating assets and liabilities | (170.0 | ) | 93.4 | (71.9 | ) | |||||||
| Net cash provided by operating activities | $ | 138.2 | $ | 421.0 | $ | 226.5 | ||||||
| Cash flows from investing activities: | ||||||||||||
| Purchase of property, plant and equipment | $ | (157.0 | ) | $ | (132.0 | ) | $ | (99.5 | ) | |||
| Proceeds from sales of property, plant and equipment | — | 30.2 | 5.6 | |||||||||
|
Deposits utilized (made) for purchase of property, plant and equipment |
(10.1 | ) | 9.7 | (11.6 | ) | |||||||
| Purchase of equity interest and assets, net of cash acquired | — | (4.8 | ) | — | ||||||||
| Proceeds from divestiture of business, net of cash transferred | — | 1.1 | — | |||||||||
| Other | — | 2.2 | — | |||||||||
| Net cash used in investing activities | $ | (167.1 | ) | $ | (93.6 | ) | $ | (105.5 | ) | |||
| Cash flows from financing activities: | ||||||||||||
| Proceeds for the issuance of common stock under the ESPP | 7.4 | $ | 6.3 | $ | — | |||||||
| Proceeds from exercise of stock options | 0.5 | 1.3 | 3.6 | |||||||||
| Payment of tax withholding for RSUs | (26.1 | ) | (2.4 | ) | (18.8 | ) | ||||||
| Repurchase of common stock | (75.0 | ) | (200.3 | ) | — | |||||||
| Proceeds from debt issuance | 4.5 | 7.1 | 5.3 | |||||||||
| Repayment of long-term debt | (12.2 | ) | (18.5 | ) | (135.9 | ) | ||||||
| Payment of finance lease obligations | (0.2 | ) | (0.3 | ) | (1.1 | ) | ||||||
| Dividend to non-controlling shareholder | — | (2.2 | ) | — | ||||||||
| Net cash used in financing activities | $ | (101.1 | ) | $ | (209.0 | ) | $ | (146.9 | ) | |||
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
$ | — | $ | 0.2 | $ | 1.6 | ||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | $ | (130.0 | ) | $ | 118.6 | $ | (24.3 | ) | ||||
| Cash, cash equivalents and restricted cash, beginning of period | $ | 1,087.1 | $ | 968.5 | $ | 966.6 | ||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 957.1 | $ | 1,087.1 | $ | 942.3 | ||||||
| ON SEMICONDUCTOR CORPORATION | |||||||||||||||
| RECONCILIATION OF GAAP VERSUS NON-GAAP DISCLOSURES | |||||||||||||||
|
(in millions, except per share and percentage data) |
|||||||||||||||
| Quarters Ended | |||||||||||||||
| March 29, 2019 | December 31, 2018 | March 30, 2018 | |||||||||||||
| Reconciliation of GAAP gross profit to non-GAAP gross profit: | |||||||||||||||
| GAAP gross profit | $ | 513.7 | $ | 569.7 | $ | 517.4 | |||||||||
| Special items: | |||||||||||||||
| a) | Expensing of appraised inventory at fair market value step-up | — | 0.6 | — | |||||||||||
| Total special items | — | 0.6 | — | ||||||||||||
| Non-GAAP gross profit | $ | 513.7 | $ | 570.3 | $ | 517.4 | |||||||||
| Reconciliation of GAAP gross margin to non-GAAP gross margin: | |||||||||||||||
| GAAP gross margin | 37.0 | % | 37.9 | % | 37.6 | % | |||||||||
| Special items: | |||||||||||||||
| a) | Expensing of appraised inventory at fair market value step-up | — | % | — | % | — | % | ||||||||
| Total special items | — | % | — | % | — | % | |||||||||
| Non-GAAP gross margin | 37.0 | % | 37.9 | % | 37.6 | % | |||||||||
|
Reconciliation of GAAP operating expenses to non-GAAP operating expenses: |
|||||||||||||||
| GAAP operating expenses | $ | 334.3 | $ | 347.0 | $ | 331.7 | |||||||||
| Special items: | |||||||||||||||
| a) | Amortization of acquisition-related intangible assets | (25.7 | ) | (28.4 | ) | (27.4 | ) | ||||||||
| b) | Restructuring, asset impairments and other, net | (5.6 | ) | 3.7 | (0.4 | ) | |||||||||
| c) | Intangible asset impairment | (1.2 | ) | (3.5 | ) | — | |||||||||
| d) | Third party acquisition and divestiture related costs | (3.3 | ) | (1.5 | ) | (0.4 | ) | ||||||||
| e) | R&D costs related to licensing income | — | — | (2.8 | ) | ||||||||||
| Total special items | (35.8 | ) | (29.7 | ) | (31.0 | ) | |||||||||
| Non-GAAP operating expenses | $ | 298.5 | $ | 317.3 | $ | 300.7 | |||||||||
|
Reconciliation of GAAP operating income to non-GAAP operating income: |
|||||||||||||||
| GAAP operating income | $ | 179.4 | $ | 222.7 | $ | 185.7 | |||||||||
| Special items: | |||||||||||||||
| a) | Expensing of appraised inventory at fair market value step-up | — | 0.6 | — | |||||||||||
| b) | Amortization of acquisition-related intangible assets | 25.7 | 28.4 | 27.4 | |||||||||||
| c) | Restructuring, asset impairments and other, net | 5.6 | (3.7 | ) | 0.4 | ||||||||||
| d) | Intangible asset impairment | 1.2 | 3.5 | — | |||||||||||
| e) | Third party acquisition and divestiture related costs | 3.3 | 1.5 | 0.4 | |||||||||||
| f) | R&D costs related to licensing income | — | — | 2.8 | |||||||||||
| Total special items | 35.8 | 30.3 | 31.0 | ||||||||||||
| Non-GAAP operating income | $ | 215.2 | $ | 253.0 | $ | 216.7 | |||||||||
|
Reconciliation of GAAP operating margin to non-GAAP operating margin (operating income / revenue): |
|||||||||||||||
| GAAP operating margin | 12.9 | % | 14.8 | % | 13.5 | % | |||||||||
| Special items: | |||||||||||||||
| a) | Expensing of appraised inventory at fair market value step-up | — | % | — | % | — | % | ||||||||
| b) | Amortization of acquisition-related intangible assets | 1.9 | % | 1.9 | % | 2.0 | % | ||||||||
| c) | Restructuring, asset impairments and other, net | 0.4 | % | (0.2 | )% | — | % | ||||||||
| d) | Intangible asset impairment | 0.1 | % | 0.2 | % | — | % | ||||||||
| e) | Third party acquisition and divestiture related costs | 0.2 | % | 0.1 | % | — | % | ||||||||
| f) | R&D costs related to licensing income | — | % | — | % | 0.2 | % | ||||||||
| Total special items | 2.6 | % | 2.0 | % | 2.2 | % | |||||||||
| Non-GAAP operating margin | 15.5 | % | 16.8 | % | 15.7 | % | |||||||||
|
Reconciliation of GAAP income before income taxes to non-GAAP income before income taxes: |
|||||||||||||||
| GAAP income before income taxes | $ | 152.3 | $ | 188.7 | $ | 156.9 | |||||||||
| Special items: | |||||||||||||||
| a) | Expensing of appraised inventory at fair market value step-up | — | 0.6 | — | |||||||||||
| b) | Amortization of acquisition-related intangible assets | 25.7 | 28.4 | 27.4 | |||||||||||
| c) | Restructuring, asset impairments and other, net | 5.6 | (3.7 | ) | 0.4 | ||||||||||
| d) | Intangible asset impairment | 1.2 | 3.5 | — | |||||||||||
| e) | Third party acquisition and divestiture related costs | 3.3 | 1.5 | 0.4 | |||||||||||
| f) | R&D costs related to licensing income | — | — | 2.8 | |||||||||||
| g) | Actuarial losses on pension plans and other pension benefits | — | 5.8 | — | |||||||||||
| h) | Non-cash interest on convertible notes | 9.1 | 9.5 | 8.7 | |||||||||||
| i) | Indemnification gain | (4.9 | ) | — | — | ||||||||||
| j) | Adjustment to contingent consideration | — | — | (2.1 | ) | ||||||||||
| k) | Licensing income | — | (3.7 | ) | (3.8 | ) | |||||||||
| Total special items | 40.0 | 41.9 | 33.8 | ||||||||||||
| Non-GAAP income before income taxes | $ | 192.3 | $ | 230.6 | $ | 190.7 | |||||||||
|
Reconciliation of GAAP net income attributable to ON Semiconductor Corporation to non-GAAP net income attributable to ON Semiconductor Corporation: |
|||||||||||||||
| GAAP net income attributable to ON Semiconductor Corporation | $ | 114.1 | $ | 165.6 | $ | 139.6 | |||||||||
| Special items: | |||||||||||||||
| a) | Expensing of appraised inventory at fair market value step-up | — | 0.6 | — | |||||||||||
| b) | Amortization of acquisition-related intangible assets | 25.7 | 28.4 | 27.4 | |||||||||||
| c) | Restructuring, asset impairments and other, net | 5.6 | (3.7 | ) | 0.4 | ||||||||||
| d) | Intangible asset impairment | 1.2 | 3.5 | — | |||||||||||
| e) | Third party acquisition and divestiture related costs | 3.3 | 1.5 | 0.4 | |||||||||||
| f) | R&D costs related to licensing income | — | — | 2.8 | |||||||||||
| g) | Actuarial losses on pension plans and other pension benefits | — | 5.8 | — | |||||||||||
| h) | Non-cash interest on convertible notes | 9.1 | 9.5 | 8.7 | |||||||||||
| i) | Indemnification gain | (4.9 | ) | — | — | ||||||||||
| j) | Adjustment to contingent consideration | — | — | (2.1 | ) | ||||||||||
| k) | Licensing income | — | (3.7 | ) | (3.8 | ) | |||||||||
| l) | Adjustment of income taxes | 23.0 | 14.5 | (2.7 | ) | ||||||||||
| Total special items | 63.0 | 56.4 | 31.1 | ||||||||||||
| Non-GAAP net income attributable to ON Semiconductor Corporation | $ | 177.1 | $ | 222.0 | $ | 170.7 | |||||||||
| Adjustment of income taxes: | |||||||||||||||
| Tax adjustment for special items (1) | $ | (8.4 | ) | $ | (8.8 | ) | $ | (7.1 | ) | ||||||
| Other non-GAAP tax adjustment (2) | 31.0 | 36.4 | 4.4 | ||||||||||||
| Non-cash impact of U.S. tax reform (3) | — | 35.1 | — | ||||||||||||
| Impact of U.S. tax method changes | — | (48.2 | ) | — | |||||||||||
| Tax indemnified by third parties | 0.4 | — | — | ||||||||||||
| Total adjustment of income taxes | $ | 23.0 | $ | 14.5 | $ | (2.7 | ) | ||||||||
|
Reconciliation of GAAP diluted share count to non-GAAP diluted share count: |
|||||||||||||||
| GAAP diluted share count | 417.7 | 420.0 | 444.2 | ||||||||||||
| Special items: | |||||||||||||||
| a) | Dilutive share count attributable to convertible notes | (3.9 | ) | — | (12.6 | ) | |||||||||
| Total special items | (3.9 | ) | — | (12.6 | ) | ||||||||||
| Non-GAAP diluted share count | 413.8 | 420.0 | 431.6 | ||||||||||||
| Non-GAAP diluted earnings per share: | |||||||||||||||
| Non-GAAP net income attributable to ON Semiconductor Corporation | $ | 177.1 | $ | 222.0 | $ | 170.7 | |||||||||
| Non-GAAP diluted share count | 413.8 | 420.0 | 431.6 | ||||||||||||
| Non-GAAP diluted earnings per share | $ | 0.43 | $ | 0.53 | $ | 0.40 | |||||||||
|
Reconciliation of net cash provided by operating activities to free cash flow: |
|||||||||||||||
| Net cash provided by operating activities | $ | 138.2 | $ | 421.0 | $ | 226.5 | |||||||||
| Special items: | |||||||||||||||
| a) | Purchase of property, plant and equipment | (157.0 | ) | (132.0 | ) | (99.5 | ) | ||||||||
| Total special items | (157.0 | ) | (132.0 | ) | (99.5 | ) | |||||||||
| Free cash flow | $ | (18.8 | ) | $ | 289.0 | $ | 127.0 | ||||||||
| (1) |
Tax impact of non-GAAP special items (a-k) is calculated using the federal statutory rate of 21% for all periods presented. |
||||||||||||||
| (2) |
The income tax adjustment primarily represents the use of the net operating loss, non-cash impact of not asserting indefinite reinvestment on earnings of our foreign subsidiaries, deferred tax expense not affecting taxes payable, and non-cash expense (benefit) related to uncertain tax positions. |
||||||||||||||
| (3) |
Tax impacts of U.S. tax reform legislation, H.R.1, commonly referred to as the “Tax Cuts and Jobs Act,” and related provisional impacts recorded pursuant to Staff Accounting Bulletin (SAB) No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act. |
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Contacts
Kris Pugsley
Corporate/Media Communications
ON Semiconductor
(312)
909-0661
kris.pugsley@onsemi.com
Parag Agarwal
Vice President – Investor Relations & Corporate
Development
ON Semiconductor
(602) 244-3437
investor@onsemi.com