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ON Semiconductor Corporation (ONNN)

Q2 2009 Earnings Call Transcript

August 5, 2009 5:00 pm ET


Ken Rizvi – IR

Donald Colvin – EVP, CFO and Treasurer

Keith Jackson – President and CEO


Romit Shah – Barclays Capital

Craig Berger – FBR Capital Markets

Roy Tim [ph] – JPMorgan

Craig Ellis – Caris & Co.

John Barton – Cowen

Tristan Gerra – Robert Baird

Steve Smigie – Raymond James

Parag Agarwal – UBS

John Vinh – Collins Stewart

Ramesh Misra – Brigantine Advisors

Patrick Wang – Wedbush

Kevin Cassidy – Thomas Weisel Partners

Gus Richard – Piper Jaffray

Suji De Silva – Kaufman Brothers



Welcome to the ON Semiconductor second quarter earnings call. (Operator instructions) Thank you. I would now like to turn the conference over to Mr. Ken Rizvi. Sir, please go ahead.

Ken Rizvi

Good afternoon and thank you for joining ON Semiconductor Corporation’s second quarter 2009 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 and will be available for approximately 30 days following this conference call, along with our earnings release for the second quarter of 2009.

The script for today' 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 Piper Jaffray Semiconductor Summit on August 25th and Citigroup’s Global Technology Conference on September 9th and 10th.

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-Q’s 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 second quarter results. Donald?

Donald Colvin

Thanks, Ken, and thanks to everyone joining us today. ON Semiconductor Corporation today announced that total revenues in the second quarter of 2009 were $419.8 million, an increase of approximately 11% from the first quarter of 2009. During the second quarter of 2009, the company reported a GAAP net loss of $3 million or $0.01 per fully diluted share. The second quarter 2009 GAAP net loss included net charges of $41.7 million, or $0.10 per fully diluted share, from special items, which are detailed in schedules to our earnings release.

Second quarter 2009 non-GAAP net income was $38.7 million or $0.09 per share on a fully diluted basis. We exited the second quarter of 2009 with cash and equivalents of $403.4 million. During the second quarter of 2009, we reduced our total debt by approximately $27 million. We also exited the quarter with the lowest net debt position in the company’s history as a public company of approximately $501 million.

At the end of the second quarter, total days sales outstanding increased to approximately 55 days. Days sales outstanding increased from the first quarter due to a sharp increase in revenues during the last month of the quarter as well as the discontinuing of asset backed financings secured by offshore receivables.

ON Semiconductor total inventory was down approximately $30 million to $269.5 million or approximately 87 days. Included in our total inventory is approximately $8 million of inventory written-up to fair value related to our acquisitions and approximately $5 million to $10 million of bridge inventory built during the quarter in preparation for our announced closures of front-end manufacturing facilities. Distribution inventories came down by approximately $8 million in the second quarter and are at approximately 11 weeks. This is at the lower end of our historical range.

Cash capital expenditures during the second quarter were approximately $15 million. The majority of the second quarter capital expenditures were related to capital equipment received in 2008 and paid for in 2009.

During the second quarter, R&D and SG&A expenses were lower than expected due to continued aggressive cost control measures. We have reduced R&D and SG&A expenses excluding stock based comp and adjusted for the Catalyst acquisition by approximately 30% compared to the third quarter of 2008 through the hard work and effort made by all of our employees. This has enabled us to come through this difficult economic period with continued strong cash flow generation.

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 2009, our end market splits were as follows

The Computing end-market represented approximately 27% of second quarter 2009 sales. The Communications end-market which includes wireless and networking represented approximately 20% of sales

Industrial, Military and Aerospace represented approximately 18% of sales. The Automotive end-market represented approximately 17% of second quarter sales. The Consumer Electronics end-market represented approximately 13% of sales and Medical represented approximately 5% of sales.

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