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ON Semiconductor Corporation (ONNN)

Q1 2009 Earnings Call

May 6, 2009 05:00 pm ET


Keith Jackson - President and CEO

Donald Colvin - CFO

Ken Rizvi - IR


Tristan Gerra - Robert Baird

Steve Smigie - Raymond James

John Barton - Cowen & Company

John Pitzer - Credit Suisse

Venk Nathamuni - JPMorgan

Craig Berger - FBR Capital Markets

Romit Shah - Barclays Capital

Parag Agarwal - UBS

Terence Whalen - Citigroup

Ramesh Misra - Brigantine Advisors

John Vinh - Collins Stewart

Mark Lipacis - Morgan Stanley

Kevin Cassidy - Thomas Weisel Partners

Patrick Wang - Wedbush Morgan



At this time, I would like to welcome everyone to the ON Semiconductor first quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session. (Operator Instructions). Thank you.

I will now turn the call over to Mr. Ken Rizvi. Sir, you may begin your conference.

Ken Rizvi

Thank you, Marcelo. Good afternoon and thank you for joining ON Semiconductor Corporation’s first quarter 2009 conference call. I am 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 and will be available for approximately 30 days following this conference call, along with our earnings release for the first quarter of 2008. The script for today’s call is posted on our website and will be furnished via a Form 8-K filing.

Our earnings release and 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 present at the JPMorgan Technology Conference on May 18 and the UBS Technology Conference on June 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 results or events 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, our CFO, who will provide an overview of the first quarter results. Donald.

Donald Colvin

Thank you, Ken, and thanks to everyone who is joining us today. ON Semiconductor Corporation today announced that total revenues in the first quarter of 2009 were $379.1 million, a decrease of approximately 22% from the fourth quarter of 2008.

During the first quarter of 2009, the company reported a GAAP net loss of $33.9 million or $0.08 per fully diluted share. The first quarter 2009 GAAP net loss included net charges of $47.6 million, or $0.11 per share from special items, which are detailed in schedules to our earnings release.

First quarter 2009 non-GAAP net income was $13.7 million or $0.03 per share on a fully diluted basis. We exited the first quarter of 2009 with cash and equivalents of $402.4 million. This was down approximately $56 million versus the fourth quarter of 2008.

During the first quarter of 2009, we reduced our debt by approximately $79 million which represented just under $100 million in face value. We also exited the quarter with the lowest net debt position in the company’s history as a public company of approximately $529 million.

At the end of the first quarter, total days sales outstanding increased towards historical norms at approximately 46 days. ON Semiconductor total inventory was down approximately $36.3 million to $299.2 million or approximately 102 days.

Included in our total inventory is approximately $10 million of inventory written-up to fair value related to our acquisitions and approximately $10 million of bridge inventory built during the quarter in preparation for our announced closures of four front-end manufacturing lines.

Distribution inventories came down by approximately $28 million in the first quarter at just under 13 weeks.

Cash capital expenditures during the first quarter of 2009 were approximately $23 million. The majority of the first quarter capital expenditures were related to capital equipment received in 2008 and paid for in the first quarter of 2009. We still anticipate 2009 total capital expenditures of approximately $60 million.

During the first quarter, R&D and SG&A expenses were lower than expected due to aggressive cost control measures as well as the benefits from the settlement of intellectual property infringement cases of approximately $15 million.

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 first quarter of 2009, our end-market splits were as follows: The computing end-market represented approximately 24% of first quarter 2009 sales. Industrial, military and aerospace represented approximately 20% of sales.

The communications end-market which includes wireless and networking represented approximately 20% of sales. The automotive end-market represented approximately 17% of first quarter sales. The consumer electronics end-market represented approximately 14% of sales and medical represented approximately 5% of sales.

During the first quarter on a direct billings basis, no ON Semiconductor product OEM customer represented more than 5% of sales. Our top five product OEM customers were: Continental Automotive Systems, Delta, LG Electronics, Motorola and Samsung.

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