01—Abstract
Summary
Summary of the 10-K filed February 24, 2011. Cited figures are marked; the original filing is the authoritative source.
ON Semiconductor Corporation reported record 2010 total revenues of $2,313.4 milliona, up 30.8% from $1,768.9 million in 2009, with net income attributable to the company of $290.5 million, or $0.65 per diluted share, compared with $61.0 million in 2009.
Gross margin rose to 41.3% from 35.1%, driven mainly by higher factory utilization, profitability enhancement savings and lower inventory step-up expensing, partially offset by a 4.4% decline in average selling prices. Operating income was $374.2 millionb versus $142.6 million the prior year, and cash provided by operations was $551.8 million. The company's balance sheet strengthened during 2010: total debt fell to $888.8 million from $1,302.9 million in 2003, cash and cash equivalents were $623.3 million at year end, and stockholders' equity rose to $1,388.0 million from $1,004.6 million.
The senior bank facilities were fully prepaid in May 2010. Goodwill of $191.2 millionc remained after an $8.9 million impairment tied to the PulseCore acquisition, and an additional $7.2 million intangible impairment was recorded. Looking ahead, the company completed the SANYO Semiconductor acquisition on January 1, 2011, for approximately $663 million total purchase price (about $520 million consideration after liabilities assumed), funded partly by a $377.5 million seven-year note payable to SANYO Electric.
For Q1 2011, excluding SANYO, management guided revenue of $570.0 million to $590.0 milliond and gross profit of 40.0% to 41.0%, plus an incremental $260.0 million to $285.0 million of revenue from SANYO Semiconductor. Risks highlighted include cyclicality, integration of SANYO, restructuring charges of approximately $74 million to $86 million, customer concentration (Avnet at 13% of 2010 revenue) and high leverage.
02—Key points
Key Highlights
- Record 2010 revenues of $2,313.4 million, up 30.8% from $1,768.9 million in 2009
- Gross margin improved to 41.3% from 35.1%, reflecting better factory utilization and cost savings
- Net income attributable to ON Semiconductor of $290.5 million, or $0.65 per diluted share, versus $61.0 million ($0.14) in 2009
- Operating income of $374.2 million versus $142.6 million in 2009
- Cash and cash equivalents of $623.3 million at December 31, 2010; cash from operations of $551.8 million
- Total debt reduced to $888.8 million; senior bank facilities of $169.8 million prepaid in May 2010
- SANYO Semiconductor acquisition completed January 1, 2011, with a $377.5 million seven-year note payable to SANYO Electric
- Q1 2011 guidance of $570.0 million to $590.0 million in revenue excluding SANYO, plus $260.0 million to $285.0 million from SANYO Semiconductor
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, On Semiconductor kept $0.13.
- Revenue$2.31B100.0%
- Cost of revenue−$1.36B58.7%
- Gross profit$956.0M41.3%
- Operating costs−$581.8M25.1%
- Operating income$374.2M16.2%
- Interest, other & tax−$83.7M3.6%
- Net income$290.5M12.6%
Where FY2010 revenue went
$2.31B- Cost of revenue: $1.36B, 59% of revenue
- Operating costs: $581.8M, 25% of revenue
- Net income: $290.5M, 13% of revenue
- Interest, other & tax: $83.7M, 3.6% of revenue
Kept 13% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 24, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $2.31B$1.77B | +30.8% |
| Cost of Revenue | $1.36B$1.15B | +18.2% |
| Gross Profit | $956.00M$620.70M | +54.0% |
| Operating Expenses | $581.80M$478.10M | +21.7% |
| Operating Income | $374.20M$142.60M | +162.4% |
| Interest Expense | $61.40M$64.60M | −5.0% |
| Net Income | $290.50M$61.00M | +376.2% |
| EPS (Basic) | $0.67$0.14 | +378.6% |
| EPS (Diluted) | $0.65$0.14 | +364.3% |
| Shares Outstanding (Basic) | 431.00M420.80M | +2.4% |
| Shares Outstanding (Diluted) | 444.40M432.10M | +2.8% |
05—Questions
Frequently Asked Questions
How did ON Semiconductor's profitability change in 2010?
Net income attributable to ON Semiconductor rose to $290.5 million ($0.65 per diluted share) from $61.0 million ($0.14 per diluted share) in 2009. The improvement was driven by higher volume, better factory utilization, cost savings from profitability enhancement programs and lower inventory step-up expensing, partly offset by a 4.4% decline in average selling prices.
What is the impact of the SANYO Semiconductor acquisition?
ON Semiconductor completed the purchase of SANYO Semiconductor on January 1, 2011, at an aggregate purchase price of approximately ¥54.0 billion ($663 million), with consideration paid of about $520 million after liabilities assumed. The company expects SANYO to add $260.0 million to $285.0 million of revenue in Q1 2011 and anticipates SANYO will generate operating losses that quarter, and it expects approximately 6,000 full-time employees to join the company.
How strong is the company's balance sheet and liquidity?
Cash and cash equivalents were $623.3 million at December 31, 2010, and total stockholders' equity was $1,388.0 million. Long-term debt including current maturities was $888.8 million, down from $1,302.9 million at the end of 2003. Management believes cash flows and existing cash will be adequate for at least the next 12 months.
What are the main risks investors should consider?
The filing highlights semiconductor industry cyclicality, the high leverage and restrictive debt covenants, integration risk and expected restructuring charges of approximately ¥6 billion to ¥7 billion ($74 million to $86 million) tied to SANYO, customer concentration (Avnet at 13% of 2010 revenue), and ongoing securities class action and intellectual property litigation.
What is the company's near-term revenue outlook?
Excluding SANYO Semiconductor, management expects first-quarter 2011 revenue of approximately $570.0 million to $590.0 million and gross profit of 40.0% to 41.0% of revenue, with average selling prices down about 1% to 2% from the fourth quarter of 2010.
06—Continue