What drove the company's 2000 revenue growth?

Net product revenues rose $388.0 million, or 23.9%, to $2,012.2 million, on unit volume growth of 32.5% that was partly offset by a 6.5% decline in average selling price. Broadband products grew 50.4%, and analog products grew 61.6%, helped by the Cherry acquisition and power management demand. Foundry revenues fell 61.7% to $61.7 million as the Motorola separation progressed.

Why was net income lower than operating income would suggest?

Operating income was $267.7 million, but interest expense was $131.2 million, up from $65.0 million in 1999 because of the borrowings used to finance the Recapitalization. Taxes were $50.1 million, and the extraordinary loss on debt prepayment reduced net income by $17.5 million after tax, leaving net income of $71.1 million.

What is the company's outlook for early 2001?

Management said customers were delaying or cancelling bookings to manage inventories and gave limited visibility. It projected first-quarter 2001 net product revenues down about 30% from fourth-quarter 2000 and an expected loss of $0.13 to $0.15 per share excluding restructuring charges and goodwill amortization. It plans cost actions, including moving manufacturing to lower-cost regions and streamlining overhead.

How is the company's debt structured?

At December 31, 2000, long-term debt including current maturities totaled $1,258.3 million: $869.3 million under senior bank facilities at variable LIBOR-based rates, $260.0 million of 12% senior subordinated notes, $104.5 million of junior subordinated notes payable to Motorola, and a $24.5 million Japanese bank note. Four interest rate swaps cover $255 million of variable-rate debt, and a 50 basis point rate increase would raise annual interest expense by $3.1 million.

Are there concentration or ownership risks for investors?

As of December 31, 2000 there were 98 stockholders of record and 172,746,435 common shares outstanding. The company has never paid cash dividends on its common stock since its IPO and does not intend to. Motorola continues as a significant customer, accounting for about 10% of 2000 total revenue, and the company has minimum commitments to buy manufacturing services from Motorola of approximately $56 million in 2001.

ON 10-K FY2000 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 30, 2001. Cited figures are marked; the original filing is the authoritative source.

ON Semiconductor Corporation's 10-K for fiscal 2000 describes the company as a global supplier of high-performance broadband and power management integrated circuits and standard semiconductors, with three product lines: broadband and advanced logic ($312 million^a in approximate 2000 net product revenues), power management and standard analog ($533 million), and standard semiconductors ($1,167 million).

Total revenues for 2000 were $2,073.9 million^b, up from $1,785.1 million on a pro forma 1999 basis, with net income of $71.1 million, or $0.38 diluted earnings per share, after a $17.5 million extraordinary loss on debt prepayment and a $26.9 million write-off of acquired in-process R&D tied to the April 2000 Cherry Semiconductor acquisition for $253.2 million. The company was recapitalized by Texas Pacific Group and Motorola on August 4, 1999, and completed its IPO on May 3, 2000, selling 34.5 million shares at $16 per share for net proceeds of approximately $514.8 million. Those proceeds were used to redeem preferred stock, repay part of the senior subordinated notes and prepay senior bank loans.

Long-term debt including current maturities was $1,258.3 million^c at December 31, 2000, and stockholders' equity was $337.7 million. Management stated that first-quarter 2001 net product revenues are projected to be down approximately 30% from fourth-quarter 2000, with an expected loss of about $0.13 to $0.15 per share excluding restructuring charges and amortization, and that a restructuring charge of $30 to $40 million (before taxes, mainly cash severance) is expected. For investors, the key tensions are the sharp expected sequential revenue decline and a heavy debt load with principal repayments on senior bank facilities beginning in the third quarter of 2001, weighed against cost-reduction actions, a 2000 gross margin of 34.7% of total revenues, and a stated focus on power management and broadband products.

02—Key points

Key Highlights

Total revenues were $2,073.9 million in 2000, versus $1,785.1 million on a pro forma 1999 basis; net income was $71.1 million, or $0.38 per diluted share.
Management projects first-quarter 2001 net product revenues to be down approximately 30% from fourth-quarter 2000 ($490.7 million), with an expected loss of $0.13 to $0.15 per share excluding restructuring and amortization.
A restructuring charge of approximately $30 to $40 million (before taxes, primarily severance) is expected in the first quarter of 2001.
Long-term debt including current maturities was $1,258.3 million at December 31, 2000, including $869.3 million under senior bank facilities, with required principal payments beginning in the third quarter of 2001.
The May 2000 IPO sold 34.5 million shares at $16 per share, raising net proceeds of about $514.8 million that were used to redeem preferred stock and reduce debt.
The April 2000 acquisition of Cherry Semiconductor for $253.2 million added $26.9 million of in-process R&D write-off and $16.8 million of amortization in 2000.
Customer concentration: sales to Arrow, Avnet and Motorola were approximately 12%, 11% and 10% of 2000 total revenue; market share declined from 10.3% in 1994 to 6.6% in 2000.

03—Questions

Frequently Asked Questions

What drove the company's 2000 revenue growth?
Net product revenues rose $388.0 million, or 23.9%, to $2,012.2 million, on unit volume growth of 32.5% that was partly offset by a 6.5% decline in average selling price. Broadband products grew 50.4%, and analog products grew 61.6%, helped by the Cherry acquisition and power management demand. Foundry revenues fell 61.7% to $61.7 million as the Motorola separation progressed.
Why was net income lower than operating income would suggest?
Operating income was $267.7 million, but interest expense was $131.2 million, up from $65.0 million in 1999 because of the borrowings used to finance the Recapitalization. Taxes were $50.1 million, and the extraordinary loss on debt prepayment reduced net income by $17.5 million after tax, leaving net income of $71.1 million.
What is the company's outlook for early 2001?
Management said customers were delaying or cancelling bookings to manage inventories and gave limited visibility. It projected first-quarter 2001 net product revenues down about 30% from fourth-quarter 2000 and an expected loss of $0.13 to $0.15 per share excluding restructuring charges and goodwill amortization. It plans cost actions, including moving manufacturing to lower-cost regions and streamlining overhead.
How is the company's debt structured?
At December 31, 2000, long-term debt including current maturities totaled $1,258.3 million: $869.3 million under senior bank facilities at variable LIBOR-based rates, $260.0 million of 12% senior subordinated notes, $104.5 million of junior subordinated notes payable to Motorola, and a $24.5 million Japanese bank note. Four interest rate swaps cover $255 million of variable-rate debt, and a 50 basis point rate increase would raise annual interest expense by $3.1 million.
Are there concentration or ownership risks for investors?
As of December 31, 2000 there were 98 stockholders of record and 172,746,435 common shares outstanding. The company has never paid cash dividends on its common stock since its IPO and does not intend to. Motorola continues as a significant customer, accounting for about 10% of 2000 total revenue, and the company has minimum commitments to buy manufacturing services from Motorola of approximately $56 million in 2001.

04—Continue

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