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On Semiconductor Annual Report, Year Ended Dec 31, 2004

Filing Date
Filed March 31, 2005
Period End
December 31, 2004
Security
ON
In the record · 2016–202610-K1110-Q338-K162

ON filed 11 annual reports (10-K), 33 quarterly reports (10-Q) and 162 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Oct ’18Oct ’18
  2. Leadership change8-K · Oct ’20Oct ’20
  3. Impairment8-K · Sep ’22Sep ’22
  4. Impairment8-K · Nov ’25Nov ’25

01—Abstract

Summary

Summary of the 10-K filed March 31, 2005. Cited figures are marked; the original filing is the authoritative source.

ON Semiconductor Corporation (ON), a global supplier of power and data management semiconductors and standard semiconductor components, reported 2004 revenues of $1,266.9 milliona, up from $1,069.1 million in 2003, with a net loss of $123.7 million compared with a net loss of $166.7 million in 2003.

Gross profit rose to $409.9 millionb (32.4% of revenues) from $300.7 million (28.1%), driven by higher sales volume and profitability enhancement programs, partly offset by lower average selling prices. Operating income was $149.9 million, but the net loss was driven by a $159.7 million loss on debt prepayment and $101.2 million of interest expense, reflecting a series of refinancings in 2004 that included two public equity offerings and the issuance of $260.0 million of zero coupon convertible senior subordinated notes. The company remains highly leveraged, with total long-term debt of $1,151.8 million and a stockholders' deficit of $537.8 million at December 31, 2004.

Cash, cash equivalents and short-term investments totaled $185.7 millionc, and operating cash flow was $38.4 million. Management expects revenues in the first quarter of 2005 to decline 4% to 5% from the fourth quarter of 2004, and it expects annualized savings of $20 million to $25 million from its ongoing restructuring programs beginning in the third quarter of 2005.

Texas Pacific Group affiliates hold over 51% of the voting power, and the company faces a securities class action whose proposed settlement awaits court approval. For investors, the key trade-off is improved operating performance and reduced interest costs against a still-thin cash position, heavy debt maturities (including $624.7 milliond due in 2009) and continued net losses.

02—Key points

Key Highlights

  1. Revenues rose to $1,266.9 million in 2004 from $1,069.1 million in 2003, with gross margin improving to 32.4% from 28.1%.
  2. Net loss narrowed to $123.7 million in 2004 from $166.7 million in 2003, though it included a $159.7 million loss on debt prepayment.
  3. Interest expense fell to $101.2 million in 2004 from $151.1 million in 2003, following debt reduction through equity offerings and refinancings.
  4. Long-term debt was $1,151.8 million at year-end 2004, and the company reported a stockholders' deficit of $537.8 million.
  5. Cash, cash equivalents and short-term investments totaled $185.7 million, and operating cash flow was $38.4 million in 2004.
  6. Management expects Q1 2005 revenues to decline 4% to 5% from Q4 2004, and anticipates $20 million to $25 million in annual savings from restructuring beginning Q3 2005.
  7. Texas Pacific Group affiliates hold over 51% of total voting power, and the securities class action settlement awaits final court approval.

03—Questions

Frequently Asked Questions

  1. Is ON Semiconductor profitable, and how did its results change in 2004?

    ON Semiconductor was not profitable in 2004. It reported a net loss of $123.7 million, an improvement from the $166.7 million net loss in 2003. Operating income increased to $149.9 million from $15.9 million, but the loss on debt prepayment of $159.7 million and interest expense of $101.2 million kept the company in a net loss position.

  2. How leveraged is the company, and how has its debt changed?

    The company is highly leveraged. Long-term debt, including current maturities, totaled $1,151.8 million at December 31, 2004, down from $1,302.9 million a year earlier. The stockholders' deficit was $537.8 million. Debt reduction came from common stock offerings in September 2003 and February 2004, along with refinancings that included the $260.0 million zero coupon convertible senior subordinated notes issued in April 2004.

  3. What are the main risks and near-term expectations for investors?

    The filing cites cyclical semiconductor demand, pricing pressure, capacity utilization and substantial debt service obligations as key risks. Management expects first-quarter 2005 revenues to decline 4% to 5% from the fourth quarter of 2004, with average selling prices down 2% to 3% and gross profit around 30%. The company also faces a securities class action, for which a proposed settlement has been preliminarily approved in part by the court.

  4. Who controls the company and what are the dilution risks?

    Affiliates of Texas Pacific Group own 111,858,369 common shares and 10,000 shares of Series A convertible redeemable preferred stock, representing over 51% of total voting power as of March 7, 2005. The preferred stock is convertible into a significant number of additional common shares, and the zero coupon convertible notes could convert into approximately 26.5 million shares, which creates potential dilution.

04—Continue

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