ON Semiconductor Q2 2010 Earnings Call Transcript

ON Semiconductor Q2 2010 Earnings Call Transcript
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ON Semiconductor (ONNN)

Q2 2010 Earnings Call

August 04, 2010 5:00 pm ET

Executives

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

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Previous Statements by ONNN
» ON Semiconductor Q1 2010 Earnings Call Transcript
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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

Analysts

Craig Berger - FBR Capital Markets & Co.

Terence Whalen - Citigroup Inc

James Schneider - Goldman Sachs Group Inc.

Parag Agarwal - UBS Investment Bank

Andrew Connor

Ross Seymore - Deutsche Bank AG

Scott Herlin

Ramesh Misra - Brigantine Advisors

Kevin Cassidy - Stifel, Nicolaus & Co., Inc.

Patrick Wang - Wedbush Securities Inc.

John Vinh - Collins Stewart LLC

Craig Ellis - Caris & Company

Presentation

Operator

Ladies and gentlemen, thank you for standing by. And welcome to the ON Semiconductor Second Quarter Earnings Call. [Operator Instructions] I would now like to turn the conference over to Mr. Ken Rizvi to begin.

Ken Rizvi

Thank you, Paula. Good afternoon, and thank you for joining ON Semiconductor Corp.'s Second 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 a replay will be available for approximately 30 days following this conference call, along with our earnings release for the second quarter of 2010. The script for today's call is posted on our website and will be furnished via a Form 8-K filing.

Our earnings release in this presentation includes 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 presenting at the Pacific Crest Technology Forum on August 10, and the Citigroup Technology Conference on September 8.

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, change assumptions or other factors.

Now let's hear from Donald Colvin, who will provide an overview of the second 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 second quarter of 2010 were $583.3 million, an increase of 6% from the first quarter of 2010.

During the second quarter of 2010, the company reported GAAP net income of $78.7 million, or $0.18 per fully diluted share. The second quarter of 2010 GAAP net income included net charges of $24.7 million, or $0.06 per fully diluted share for special items, which are detailed in the schedules included in our earnings release.

Second Quarter 2010 non-GAAP net income was $103.4 million, or $0.24 per share on a fully diluted basis and includes stock-based compensation expense. During the second quarter of 2010, our GAAP and non-GAAP operating expenses included approximately $4 million of acquisition-related expenses from our M&A activities that were not previously forecasted.

We entered in the second quarter of 2010 with cash and cash equivalents of approximately $467.1 million, a decline of approximately $94 million from the previous quarter. We also exited the quarter with the lowest net debt position in the company's history, at $286 million. In the second quarter, the company prepaid $170 million of senior secured credit facilities and used cash of $22 million for the acquisition of Sound Design Technologies on June 9.

At the end of the quarter, total days sales outstanding were flat with the first quarter of 2010 at around 50 days. ON Semiconductor's internal inventory increased slightly from the first quarter on a days basis to approximately 86 days. Included in our total internal inventory is $22 million of inventory related to our acquisitions, or bridge inventory build related to our announced closure of front-end manufacturing lines. Net of the bridge inventory and inventory from recent acquisitions, our inventory days would've been approximately 80 days in the second quarter.

Distribution inventories remain low at approximately eight weeks exiting the second quarter. The cash capital expenditures during the second quarter were around $53 million, bringing year-to-date capital expenditures to around $94 million.

We currently anticipate spending total capital expenditures for 2010 of approximately $200 million, of which approximately $30 million will be for buildings. Now I would like to turn it over to Keith Jackson for additional comments on the business environment.

Keith Jackson

Thanks, Don. Now for an overview of our end markets. During the second quarter of 2010, our end market splits were as follows: The Computing end market represented approximately 26% of second quarter 2010 sales; the Automotive end market represented approximately 20% of second quarter sales; the Industrial, Military and Aerospace end market represented approximately 19% of the sales; the Consumer Electronics end market represented approximately 17% of sales; the Communications end market, which includes wireless and networking, represented approximately 15% of sales; and Medical represented approximately 3% of sales.

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