01—Abstract
Summary
Summary of the 10-K filed February 27, 2009. Cited figures are marked; the original filing is the authoritative source.
ON Semiconductor Corporation (ON Semiconductor) reported 2008 revenues of $2,054.8 milliona, up from $1,566.2 million in 2007, with the increase driven largely by the March 2008 acquisition of AMIS and the October 2008 acquisition of Catalyst.
The company swung to a net loss of $380.1 millionb in 2008 (compared with net income of $242.2 million in 2007), primarily because of a $544.5 million goodwill impairment charge recorded in the fourth quarter. Gross margin fell to 36.3% from 37.7%, largely due to the sale of inventory written up to fair value in the acquisitions and lower average selling prices. Management described a weakening macroeconomic environment and said it is taking significant cost actions in response.
For 2009 it planned capital expenditures of $55 to $60 millionc, versus normalized levels of $130 to $140 million, and announced a reduction of about 1,500 personnel, factory closures, temporary shutdowns, and no bonuses. It expects cost reductions of $40 to $50 million per quarter and a cash breakeven revenue level of about $340 million per quarter. First-quarter 2009 revenue is expected to be $340 million to $380 million.
Balance sheet items include cash and cash equivalents of $458.7 milliond, total debt of $1,169.3 million, and stockholders' equity of $678.7 million at December 31, 2008. Total debt was reduced from $1,302.9 million at the end of 2003, and interest expense fell from $151.1 million in 2003 to $38.3 million in 2008. Management stated that cash flow from operations and existing cash are expected to be adequate to fund operating and capital needs through December 31, 2009.
02—Key points
Key Highlights
- Revenue rose 31.2% to $2,054.8 million in 2008, mainly from the AMIS acquisition, which contributed approximately $467.0 million.
- Net loss of $380.1 million in 2008, including a $544.5 million goodwill impairment charge, versus net income of $242.2 million in 2007.
- Gross profit margin declined to 36.3% from 37.7%, reflecting inventory step-up expense and lower average selling prices.
- Q1 2009 revenue outlook of $340 million to $380 million, with gross margin expected at 29% to 31%.
- Cost reduction program targets $40 to $50 million in quarterly fixed-cost savings, a workforce reduction of about 1,500, and 2009 capex of $55 to $60 million.
- Total debt reduced to $1,169.3 million at December 31, 2008, from $1,302.9 million in 2003; interest expense fell to $38.3 million from $151.1 million.
- Cash and cash equivalents of $458.7 million at year-end 2008, with working capital of $501.2 million including cash.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2008, On Semiconductor lost $0.21.
- Revenue$2.05B100.0%
- Cost of revenue−$1.31B63.7%
- Gross profit$745.5M36.3%
- Operating costs−$1.11B54.1%
- Operating income−$365.9M17.8%
- Interest, other & tax−$63.0M3.1%
- Net income−$428.9M20.9%
04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 27, 2009Financial Statements
| Revenue | $2.05B |
| Cost of Revenue | $1.31B |
| Gross Profit | $745.50M |
| Operating Expenses | $1.11B |
| Operating Income | -$365.90M |
| Interest Expense | $79.90M |
| Net Income | -$428.90M |
| EPS (Basic) | $-1.13 |
| EPS (Diluted) | $-1.13 |
| Shares Outstanding (Basic) | 379.00M |
| Shares Outstanding (Diluted) | 379.00M |
05—Questions
Frequently Asked Questions
Why did ON Semiconductor report a large net loss in 2008?
The company recorded a goodwill impairment charge of $544.5 million in the fourth quarter of 2008, related to the AMIS, PTC Business and Cherry acquisitions. The charge resulted from a decline in operating results and business outlook, primarily due to the macroeconomic environment. Operating loss for 2008 was $365.9 million.
How much did the AMIS and Catalyst acquisitions contribute?
AMIS was acquired on March 17, 2008 for an aggregate purchase price of approximately $939.7 million, and Catalyst was acquired on October 10, 2008 for approximately $120.1 million. The filing states AMIS contributed approximately $467.0 million of 2008 revenue, and AMIS represented 22.3% of consolidated revenue. Catalyst represented 0.4% of consolidated revenue.
What is the company doing to reduce costs and stay liquid?
Management reduced 2009 planned capital expenditures to $55 to $60 million, implemented a hiring freeze, and announced about 1,500 workforce reductions, factory closures and shutdowns, unpaid time off, and no merit increases or 2009 bonuses. It expects these actions to cut fixed costs by $40 to $50 million per quarter and lower cash breakeven revenue to about $340 million per quarter. Management believes operating cash flow and existing cash will be adequate through December 31, 2009.
What are the main debt obligations and covenant considerations?
Long-term debt at December 31, 2008 totaled $1,169.3 million, including $171.9 million under senior bank facilities, $199.1 million of zero coupon convertible notes due 2024, $95.0 million of 1.875% convertible notes due 2025, $484.0 million of 2.625% convertible notes due 2026, and $92.0 million of capital lease obligations. The company stated it was in compliance with its covenants at year-end 2008 and expects to remain so through December 31, 2009. The filing notes that some debt is secured and that a covenant breach could trigger acceleration of approximately $843.0 million of other debt.
06—Continue