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On Semiconductor Annual Report, Year Ended Dec 31, 2005

Filing Date
Filed February 22, 2006
Period End
December 31, 2005
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 February 22, 2006. Cited figures are marked; the original filing is the authoritative source.

ON Semiconductor Corporation, a global supplier of power and data management semiconductors and standard semiconductor components, reported net income of $100.6 milliona for 2005 on revenues of $1,260.6 million, compared with a net loss of $123.7 million on revenues of $1,266.9 million in 2004.

The company stated this was its highest annual net income since its 1999 recapitalization, and it was profitable in all four quarters of 2005. Gross profit was $418.5 millionb, or 33.2% of revenues, up from 32.4% in 2004, which the company attributed to profitability enhancement programs and higher sales volume. Operating income rose to $167.6 million from $149.9 million, and interest expense fell to $61.5 million from $101.2 million.

The balance sheet remains highly leveraged. Long-term debt including current maturities was $1,067.0 millionc at December 31, 2005, against cash and cash equivalents of $233.3 million, and the company reported a stockholders' deficit of $300.3 million. Following the November 2005 conversion of TPG's preferred stock into common stock, Texas Pacific Group and its affiliates held approximately 52.9% of the total voting power as of February 10, 2006.

The company also issued $95.0 milliond of 1.875% convertible senior subordinated notes in December 2005 to repay its junior subordinated note, and reported operating cash flow of $193.1 million for 2005. Management's outlook anticipates first-quarter 2006 revenues of approximately $330.0 million and a gross profit of approximately 35%, with the company also noting the adoption of SFAS 123R beginning in 2006 and an estimated $2.0 million stock compensation expense in the first quarter. Ongoing risks include the cyclical semiconductor industry, customer concentration (ten largest customers at approximately 55% of 2005 revenues), a securities class action settlement pending court approval, and the Delphi Corporation Chapter 11 filing affecting automotive receivables.

02—Key points

Key Highlights

  1. Net income of $100.6 million in 2005 versus a net loss of $123.7 million in 2004; the company described this as its highest annual net income since the 1999 recapitalization.
  2. Revenues of $1,260.6 million in 2005, essentially flat with $1,266.9 million in 2004, with a decline in average selling prices of approximately 6% partially offset by higher sales volume.
  3. Gross profit of $418.5 million, or 33.2% of revenues, compared with 32.4% in 2004, driven by profitability enhancement programs and higher volume.
  4. Interest expense reduced to $61.5 million in 2005 from $101.2 million in 2004 following debt refinancings; the weighted-average interest rate on long-term debt was 5.4%.
  5. Total long-term debt including current maturities of $1,067.0 million, a stockholders' deficit of $300.3 million, and cash and cash equivalents of $233.3 million at year-end 2005.
  6. Texas Pacific Group and affiliates held approximately 52.9% of total voting power as of February 10, 2006, following the November 2005 conversion of preferred stock into common stock.
  7. Management expects first-quarter 2006 revenues of approximately $330.0 million and gross profit of approximately 35%.

03—Questions

Frequently Asked Questions

  1. Why did ON Semiconductor return to profitability in 2005?

    The company attributed its return to profitability to increased demand for its products, cost savings from profitability enhancement and restructuring programs, and debt refinancings that reduced interest costs. Gross profit rose to 33.2% of revenues from 32.4% in 2004, and interest expense fell from $101.2 million to $61.5 million.

  2. How heavily leveraged is the company?

    At December 31, 2005, long-term debt including current maturities totaled $1,067.0 million, and the company reported a stockholders' deficit of $300.3 million. Its senior bank facilities carried a term loan of $639.1 million, and the company stated it was in compliance with its debt covenants at year-end 2005.

  3. Who controls the company?

    Texas Pacific Group and its affiliates beneficially owned approximately 165.2 million shares after the November 2005 preferred stock conversion and inducement share issuance, representing 52.9% of total voting power as of February 10, 2006. The filing states this allows TPG to elect all directors and control matters requiring stockholder approval.

  4. What are the main risks to investors?

    Key risks include the cyclical semiconductor industry, customer concentration (the ten largest customers accounted for approximately 55% of 2005 revenues), pricing pressure, high leverage and restrictive debt covenants, a securities class action settlement subject to court approval, and exposure to automotive customers, including Delphi, which filed for Chapter 11 reorganization in October 2005.

  5. What cost savings and capacity actions is the company pursuing?

    The company expects at least $20 million to $25 million of annual savings from closing its East Greenwich, Rhode Island facility, and plans to transfer wafer fabrication from Seremban, Malaysia to Phoenix, Arizona by the end of 2006, with estimated savings of $25.0 million to $30.0 million over five years. It also plans cash capital expenditures of approximately $110 million for 2006.

04—Continue

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