ON Semiconductor Q1 2010 Earnings Call Transcript - TheStreet

ON Semiconductor Q1 2010 Earnings Call Transcript

ON Semiconductor Q1 2010 Earnings Call Transcript
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ON Semiconductor (ONNN)

Q1 2010 Earnings Call

May 05, 2010 5:00 pm ET

Executives

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Previous Statements by ONNN
» ON Semiconductor Corp. Q4 2009 Earnings Call Transcript
» ON Semiconductor Corporation Q3 2009 Earnings Call Transcript
» ON Semiconductor Corporation Q2 2009 Earnings Call Transcript

Keith Jackson - Chief Executive Officer, President, Director, Member of Executive Committee, Chief Executive Officer of Semiconductor Components Industries LLC and President of Semiconductor Components Industries LLC

Donald Colvin - Chief Financial Officer, Principal Accounting Officer, Executive Vice President, Treasurer, Chief Financial Officer of SCI LLC, Executive Vice President of SCI LLC and Treasurer of SCI LLC

Ken Rizvi - Director of Treasury, Investor Relations & Corporate Development

Analysts

Terence Whalen - Citigroup Inc

Tristan Gerra - Robert W. Baird & Co. Incorporated

Parag Agarwal - UBS Investment Bank

Ramesh Misra - C.E. Unterberg, Towbin

James Schneider - Goldman Sachs Group Inc.

Jonathan Smigie - Raymond James & Associates

Auguste Richard - Piper Jaffray Companies

Christopher Danely - JP Morgan Chase & Co

Patrick Wang - Wedbush Securities Inc.

John Vinh - Collins Stewart LLC

John Pitzer - Credit Suisse

Craig Berger - FBR Capital Markets & Co.

John Barton - Cowen and Company, LLC

Presentation

Operator

Good afternoon. My name is Julienne, and I will be your conference operator today. At this time, I would like to welcome everyone to the ON Semiconductor First Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Mr. Ken Rizvi. Please go ahead, sir.

Ken Rizvi

Thank you. Good afternoon, and thank you for joining ON Semiconductor's First Quarter 2010 Conference Call. I'm joined today by Keith Jackson, our President and CEO; and Donald Colvin, our CFO. This call is being webcast on the Investor Relations section of our website at onsemi.com and will be available for approximately 30 days following this conference call, along with our earnings release for the first quarter of 2010. The script for today's call is posted on our website and will be furnished via Form 8-K filing.

Our earnings release in this presentation include certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable measures under GAAP are in our earnings release and posted separately on our website in the Investor Relations section.

In the upcoming quarter, we will be hosting our annual stockholders meeting on May 18.

During the course of this conference call, we will make projections or other forward-looking statements regarding future events or the future financial performance of the company. The words believe, estimate, anticipate, intend, expect, plan or similar expressions are intended to identify forward-looking statements. We wish to caution that such statements are subject to risks and uncertainties that could cause actual events or results to differ materially. Important factors relating to our business, including factors that could cause actual results to differ from our forward-looking statements are described in our Form 10-K, Form 10-Qs and other filings with the SEC. The company assumes no obligation to update forward-looking statements to reflect actual results, changed assumptions or other factors.

Now let's hear from Donald Colvin, who will provide an overview of the first quarter results. Donald?

Donald Colvin

Thank you, Ken, and thanks to everyone joining us today. ON Semiconductor Corp. today announced that total revenues in the first quarter of 2010 were $550.2 million, an increase of approximately 11% from the fourth quarter of 2009.

During the first quarter of 2010, the company reported GAAP net income of $63 million or approximately $0.14 per diluted share. The first quarter 2010 GAAP net income included net charges of $22.3 million or $0.05 per fully diluted share from special items, which are detailed in schedules to our earnings release.

First quarter 2010 non-GAAP net income was $85.3 million or $0.19 per share on a fully-diluted basis and includes stock-based compensation expense. As anticipated, in the first quarter of 2010, we did not see the approximately $0.03 per fully diluted share benefit from the receipt of research and development grants and an actuarial gain on our overseas pension plans that we benefited from in the fourth quarter of 2009.

In the first quarter, we closed the acquisition of California Micro Devices for approximately $113 million. As of the transaction close, CMD had approximately $43 million of cash and cash equivalents on its balance sheet. Due to the transaction closing within the quarter and acquisition-related accounting, we recognized approximately $6 to $7 million in revenue from CMD. On a GAAP basis, net income was negatively impacted in the first quarter by approximately $9 million or $0.02 per fully diluted share due to acquisition-related costs such as restructuring, transaction-related legal and investment banking costs, expensing of appraised inventory fair market value step-up and amortization of intangibles.

On a non-GAAP basis, net income was negatively impacted by approximately $3 million or approximately $0.01 per fully diluted share primarily related to deal-related expenses such as legal and banking fees, which negatively impacted operating expenses during the quarter.

We exited the first quarter of 2010 with cash and cash equivalents of approximately $560 million. This was down slightly from the fourth quarter of 2009 due to the cash purchase of CMD.

Our Board of Directors approved a prepayment of approximately $170 million of our senior secured credit facility, which will occur in the second quarter of 2010. This is a significant milestone for the company as this facility, through various amendments, has remained with the company since the original LBO (leveraged buyout) more than a decade ago. Based on current LIBOR rates, this prepayment will save the company approximately $3.4 million per year in cash interest expense.

At the end of the first quarter, total days sales outstanding increased from the fourth quarter by approximately two days to approximately 50 days. ON Semiconductor's internal inventory increased slightly from fourth quarter levels on a days basis to approximately 84 days. Included in our total inventory, our internal inventory, is approximately $2 million of inventory written-up to fair value related to our acquisitions and approximately $5 million of inventory from our acquisition of CMD and $21 million of bridge inventory related to our announced closure of front-end manufacturing lines.

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