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On Semiconductor Annual Report, Year Ended Dec 31, 2011

Filing Date
Filed February 22, 2012
Period End
December 31, 2011
Security
ON
One revenue dollarkept$0.00
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, 2012. Cited figures are marked; the original filing is the authoritative source.

ON Semiconductor Corporation (ticker ONNN on Nasdaq Global Select Market) reported record total revenues of $3,442.3 milliona for 2011, up 49% from $2,313.4 million in 2010, driven mainly by the January 1, 2011 acquisition of SANYO Semiconductor.

Net income attributable to ON Semiconductor Corporation fell sharply to $11.6 millionb, or $0.03 per diluted share, from $290.5 million, or $0.65 per diluted share, in 2010. Gross margin declined to 29.3% from 41.3%, largely reflecting $58.3 million of expensed inventory step-up and $80.4 million of non-cash manufacturing expenses tied to the SANYO Semiconductor acquisition. Operating income was $113.4 million versus $374.2 million a year earlier, weighed down by restructuring, asset impairments and other charges of $102.7 million, including the closure of the Aizu, Japan wafer facility and flood damage in Thailand.

The company ended 2011 with cash, cash equivalents and short-term investments of $901.5 millionc, total assets of $3,883.5 million, and long-term debt including current maturities of $1,207.0 million. Operating cash flow was $545.5 million and capital expenditures were $316.4 million. In December 2011 ON entered into a $325.0 million five-year senior revolving credit facility, which had not been drawn as of year end.

For the first quarter of 2012, the company estimated revenues of $720.0 million to $760.0 milliond and gross margin of 31.5% to 32.5%. The company also disclosed that it will close its Aizu, Japan wafer fab and the Ayutthaya and Bang Pa In Thailand facilities during 2012, with the flood-related restoration expected to take multiple quarters. Key investor considerations include the thin 2011 bottom line despite record revenue, a heavy debt load that includes a $339.8 million loan from SANYO Electric, substantial pension and multi-employer withdrawal liabilities, a full valuation allowance on domestic deferred tax assets, and an ongoing dependence on the successful integration and margin improvement of SANYO Semiconductor.

02—Key points

Key Highlights

  1. Record 2011 revenues of $3,442.3 million, up 49% from $2,313.4 million in 2010, largely from the SANYO Semiconductor acquisition completed January 1, 2011
  2. Net income attributable to ON Semiconductor Corporation dropped to $11.6 million ($0.03 diluted EPS) from $290.5 million ($0.65 diluted EPS) in 2010
  3. Gross margin fell to 29.3% from 41.3%, including $58.3 million of expensed inventory step-up and $80.4 million of non-cash manufacturing expenses tied to SANYO Semiconductor
  4. Restructuring, asset impairments and other charges rose to $102.7 million, mainly from closing the Aizu, Japan wafer facility and Thailand flood damage
  5. Cash, cash equivalents and short-term investments reached $901.5 million; operating cash flow was $545.5 million and capital expenditures were $316.4 million
  6. Total long-term debt including current maturities was $1,207.0 million, including a $339.8 million loan from SANYO Electric, and a new $325.0 million revolving credit facility remained undrawn
  7. Q1 2012 outlook calls for revenues of $720.0 million to $760.0 million and gross margin of 31.5% to 32.5%

03—One dollar

Follow one dollar

Of each $1.00 of revenue in FY2011, On Semiconductor kept $0.00.

  1. Revenue$3.44B100.0%
  2. Cost of revenue−$2.43B70.7%
  3. Gross profit$1.01B29.3%
  4. Operating costs−$895.4M26.0%
  5. Operating income$113.4M3.3%
  6. Interest, other & tax−$101.8M3.0%
  7. Net income$11.6M0.3%
Computed from 10-KFY2011filed February 22, 2012Computed from this filing’s revenue, gross profit, operating income and net income · right columngrey figure: share of revenue

Where FY2011 revenue went

$3.44B
  • Cost of revenue: $2.43B, 71% of revenue
  • Operating costs: $895.4M, 26% of revenue
  • Net income: $11.6M, 0.3% of revenue
  • Interest, other & tax: $101.8M, 3.0% of revenue

Kept 0.3% as net incomeNet income $11.6M · 0.3%

Full revenue history →

04—Financials

Financial Highlights

Figures from 10-KFY2011filed February 22, 2012
Revenue$3.44B29.3% Gross MarginNet Income$11.60M0.3% Net MarginEPS (Diluted)$0.03Total Assets$3.88BCash & Equivalents$652.90MFree Cash Flow$229.10M

Financial Statements

FY2011 against FY2010

Line itemFY2011FY2010Change
Revenue$3.44B$2.31B+48.8%
Cost of Revenue$2.43B$1.36B+79.3%
Gross Profit$1.01B$956.00M+5.5%
Operating Expenses$895.40M$581.80M+53.9%
Operating Income$113.40M$374.20M−69.7%
Interest Expense$68.90M$61.40M+12.2%
Net Income$11.60M$290.50M−96.0%
EPS (Basic)$0.03$0.67−95.5%
EPS (Diluted)$0.03$0.65−95.4%
Shares Outstanding (Basic)446.70M431.00M+3.6%
Shares Outstanding (Diluted)457.20M444.40M+2.9%

05—Questions

Frequently Asked Questions

  1. Why did net income fall so sharply despite record revenue?

    Revenue growth came with a much lower gross margin, which dropped to 29.3% from 41.3%. The decline was driven by the SANYO Semiconductor business, including $58.3 million of expensed inventory fair value step-up and $80.4 million of non-cash manufacturing expenses, along with higher restructuring charges of $102.7 million and interest expense of $68.9 million.

  2. How much liquidity and debt does ON Semiconductor have?

    At December 31, 2011, cash and cash equivalents were $652.9 million and short-term investments were $248.6 million. Long-term debt including current maturities totaled $1,207.0 million. The company also has a $325.0 million five-year senior revolving credit facility entered into December 23, 2011, under which no borrowings had been made.

  3. What is driving the company's restructuring activity in 2012?

    The company committed in late 2011 to close its Aizu, Japan wafer facility by the end of the second quarter of 2012 and to close its Ayutthaya, Thailand probe, assembly and test operations and partially close its Bang Pa In, Thailand facility by mid-2012. These actions follow flood damage in Thailand and are part of efforts to migrate production to larger, high-volume facilities. Restructuring in 2012 is focused on the SANYO Semiconductor business.

  4. What risks does the filing highlight for investors?

    Key risks include semiconductor industry cyclicality, the ability to realize expected synergies and margin improvement from SANYO Semiconductor, the impact of the Thailand flooding on production and revenue, high leverage with variable-rate debt, dependence on a limited number of key suppliers, and potential goodwill impairments. The filing also notes a full valuation allowance on domestic deferred tax assets and reliance on SANYO Electric operational support that expires at the end of 2012.

06—Continue

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