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ON Semiconductor Corporation (ONNN)

Q3 2009 Earnings Call

November 4, 2009 5:00 pm ET


Ken Rizvi – IR

Donald Colvin – EVP, CFO and Treasurer

Keith Jackson – President and CEO


Parag Agarwal – UBS

James Schneider – Goldman Sachs

Chris Danely – JP Morgan

John Barton – Cowen

Craig Ellis – Caris & Co.

Craig Berger – FBR Capital Markets

Tristan Gerra – Robert Baird

Kevin Cassidy – Thomas Weisel Partners

Analyst for Ross Seymore – Deutsche Bank

Gus Richard – Piper Jaffray

Brian Piccioni – BMO Capital Markets

Ramesh Misra – Brigantine Advisors

Steve Smigie – Raymond James

John Vinh – Collins Stewart



Welcome to the ON Semiconductor third quarter earnings call. (Operator instructions) Thank you. I would now like to turn the conference over to Mr. Ken Rizvi. Sir you may begin.

Ken Rizvi

Thank you. Good afternoon and thank you for joining ON Semiconductor Corporation’s third 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 third quarter of 2009. 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 Credit Suisse Technology Conference on December 1st and the Barclays Global Technology Conference on December 9th.

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 third quarter results. Donald?

Donald Colvin

Thanks Ken, and thanks to everyone who is joining us today. ON Semiconductor Corporation today announced that total revenues in the third quarter of 2009 were $472.9 million, an increase of approximately 13% from the second quarter of 2009.

During the third quarter of 2009, the company reported GAAP net income of $29.9 million or $0.07 per fully diluted share. The third quarter 2009 GAAP net income included net charges of $41 million, or $0.09 per fully diluted share, from special items, which are detailed in schedules to our earnings release. Third quarter 2009 non-GAAP net income was $70.9 million or $0.16 per share on a fully diluted basis.

We exited the third quarter of 2009 with cash, cash equivalents and short-term investments of $470.2 million, a record high in the company’s history. In addition, we exited the third quarter with the lowest net debt position in the company’s history as a publicly-traded company of approximately $425 million.

At the end of the third quarter, total days sales outstanding decreased from the second quarter by approximately four days to approximately 51 days. ON Semiconductor’s total internal inventory was also down from second quarter levels by approximately six days to 81 days. Included in our total internal inventory is approximately $4 million of inventory written-up to fair value related to our acquisitions and approximately $30 million of bridge inventory built in preparation for our announced closures of front-end manufacturing lines. Distribution inventories were at the lowest level in the company’s history exiting the third quarter on a week’s basis at approximately nine weeks.

Cash capital expenditures during the third quarter of 2009 were approximately $9 million. We currently expect capital expenditures for 2009 of approximately $75 million. The increase from previous expectations is due to initial construction costs in the Philippines which will enable the consolidation of assembly and test operations in that country.

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 third quarter of 2009, our end market splits were as follows:

The computing end market represented approximately 27% of our third quarter 2009 sales. The automotive end market represented approximately 18% of third quarter sales. The communications end market, which includes wireless and networking, represented approximately 17% of sales. Industrial, military and aerospace represented approximately 17% of sales. The consumer electronics end market represented approximately 17% of sales and the medical represented approximately 4% of sales. During the third quarter on a direct billing basis, no ON Semiconductor product OEM customer represented more than 5% of sales.

Our top five product OEM customers were: Continental Automotive Systems, Delta, Hella, Motorola and Samsung. On a geographic basis, our contribution from sales in Asia represented approximately 64% of revenue. Our sales in the Americas represented approximately 21% of revenue and Europe represented approximately 15% of revenue during the quarter.

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