ON Semiconductor Reports Third Quarter 2013 Results

ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS (in millions, except per share data)

	Quarter Ended									Nine Months Ended
	September 27, 2013			June 28, 2013			September 28, 2012			September 27, 2013			September 28, 2012
Revenues	$	715.4		$	688.3		$	725.5		$	2,064.7		$	2,214.7
Cost of revenues	466.2			456.5			487.5			1,379.2			1,473.2
Gross profit	249.2			231.8			238.0			685.5			741.5
Gross margin	34.8		%	33.7		%	32.8		%	33.2		%	33.5		%
Operating expenses:
Research and development	84.0			83.1			90.1			255.5			279.3
Selling and marketing	44.2			43.3			44.2			127.3			136.8
General and administrative	34.5			40.2			36.8			110.9			119.7
Amortization of acquisition-related intangible assets	8.2			8.2			11.1			24.8			33.3
Restructuring, asset impairments and other, net	11.0			6.1			11.2			11.1			57.3
Total operating expenses	181.9			180.9			193.4			529.6			626.4
Operating income	67.3			50.9			44.6			155.9			115.1
Other income (expenses), net:
Interest expense	(9.2		)	(9.3		)	(13.6		)	(28.6		)	(43.4		)
Interest income	0.3			0.4			0.3			1.0			1.1
Other	(1.4		)	4.1			(3.6		)	3.6			3.4
Loss on debt exchange	—			—			(7.8		)	(3.1		)	(7.8		)
Other income (expenses), net	(10.3		)	(4.8		)	(24.7		)	(27.1		)	(46.7		)
Income before income taxes	57.0			46.1			19.9			128.8			68.4
Income tax (provision) benefit	(4.2		)	2.6			(6.5		)	(4.0		)	(17.8		)
Net income	52.8			48.7			13.4			124.8			50.6
Less: Net income attributable to non-controlling interest	(1.0		)	(1.0		)	(0.9		)	(2.7		)	(3.0		)
Net income attributable to ON Semiconductor Corporation	$	51.8		$	47.7		$	12.5		$	122.1		$	47.6
Net income per common share attributable to ON Semiconductor Corporation:
Basic	$	0.12		$	0.11		$	0.03		$	0.27		$	0.10
Diluted	$	0.11		$	0.11		$	0.03		$	0.27		$	0.10
Weighted average common shares outstanding:
Basic	449.3			450.7			454.6			449.8			453.9
Diluted	452.1			453.3			456.2			452.6			458.2

ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEET (in millions)

	September 27, 2013			June 28, 2013			December 31, 2012
Assets
Cash and cash equivalents	$	369.5		$	396.1		$	486.9
Short-term investments	184.1			182.9			144.8
Receivables, net	419.2			407.6			357.8
Inventories	585.3			559.7			581.7
Other current assets	77.7			67.2			111.7
Deferred income taxes	9.9			8.3			10.5
Total current assets	1,645.7			1,621.8			1,693.4
Property, plant and equipment, net	1,092.9			1,101.5			1,103.3
Deferred income taxes	37.9			38.9			31.2
Goodwill	184.6			184.6			184.6
Intangible assets, net	231.8			240.1			257.0
Other assets	55.8			54.5			58.9
Total assets	$	3,248.7		$	3,241.4		$	3,328.4
Liabilities, Non-Controlling Interest and Stockholders’ Equity
Accounts payable	$	259.2		$	276.6		$	279.5
Accrued expenses	194.3			188.9			228.3
Income taxes payable	2.2			0.5			4.9
Accrued interest	5.0			2.3			0.6
Deferred income on sales to distributors	145.2			152.9			134.5
Deferred income taxes	23.2			24.1			22.9
Current portion of long-term debt	249.0			231.3			353.6
Total current liabilities	878.1			876.6			1,024.3
Long-term debt	659.4			686.3			658.3
Other long-term liabilities	186.0			191.9			232.2
Deferred income taxes	23.5			21.3			22.9
Total liabilities	1,747.0			1,776.1			1,937.7
ON Semiconductor Corporation stockholders’ equity:
Common stock	5.1			5.1			5.1
Additional paid-in capital	3,195.2			3,183.3			3,156.4
Accumulated other comprehensive loss	(48.6		)	(51.1		)	(41.1		)
Accumulated deficit	(1,170.8		)	(1,222.6		)	(1,292.9		)
Less: treasury stock, at cost	(511.5		)	(480.7		)	(466.4		)
Total ON Semiconductor Corporation stockholders’ equity	1,469.4			1,434.0			1,361.1
Non-controlling interest in consolidated subsidiary	32.3			31.3			29.6
Total stockholders' equity	1,501.7			1,465.3			1,390.7
Total liabilities and equity	$	3,248.7		$	3,241.4		$	3,328.4

	ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES *UNAUDITED RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA AND NET CASH PROVIDED BY OPERATING ACTIVITIES** (in millions)

		Quarter Ended									Nine Months Ended
		September 27, 2013			June 28, 2013			September 28, 2012			September 27, 2013			September 28, 2012
	Net income	$	52.8		$	48.7		$	13.4		$	124.8		$	50.6
	Adjusted for:
	Restructuring, asset impairments and other, net	11.0			6.1			11.2			11.1			57.3
	Interest expense	9.2			9.3			13.6			28.6			43.4
	Interest income	(0.3		)	(0.4		)	(0.3		)	(1.0		)	(1.1		)
	Loss on debt exchange	—			—			7.8			3.1			7.8
	Income tax provision (benefit)	4.2			(2.6		)	6.5			4.0			17.8
	Net income attributable to non-controlling interest	(1.0		)	(1.0		)	(0.9		)	(2.7		)	(3.0		)
	Depreciation and amortization	52.9			52.3			61.3			156.5			182.7
	Actuarial losses on pension plans and other pension benefits	—			—			—			13.6			3.4
	SANYO Semiconductor inventory item	—			—			3.1			—			8.0
	SANYO Semiconductor purchase agreement	—			—			—			—			(2.2		)
	Adjusted EBITDA*	128.8			112.4			115.7			338.0			364.7
	Increase (decrease):
	Restructuring, asset impairments and other, net	(11.0		)	(6.1		)	(11.2		)	(11.1		)	(57.3		)
	Interest expense	(9.2		)	(9.3		)	(13.6		)	(28.6		)	(43.4		)
	Interest income	0.3			0.4			0.3			1.0			1.1
	Income tax benefit (provision)	(4.2		)	2.6			(6.5		)	(4.0		)	(17.8		)
	Net income attributable to non-controlling interest	1.0			1.0			0.9			2.7			3.0
	Actuarial losses on pension plans and other pension benefits	—			—			—			(13.6		)	(3.4		)
	SANYO Semiconductor inventory item	—			—			(3.1		)	—			(8.0		)
	SANYO Semiconductor purchase agreement	—			—			—			—			2.2
	(Gain) loss on sale or disposal of fixed assets	(0.5		)	0.3			(2.7		)	(7.6		)	(4.7		)
	Amortization of debt issuance costs	0.3			0.3			0.6			0.9			1.7
	Provision for excess inventories	5.8			24.0			3.3			45.7			30.6
	Non-cash asset impairment charges	2.9			0.6			2.1			3.5			2.1
	Non-cash share-based compensation expense	7.0			10.6			2.1			23.4			14.7
	Non-cash interest	2.7			2.7			5.5			8.5			18.7
	Non-cash foreign currency translation gain	—			—			—			(21.0		)	—
	Deferred income taxes	0.7			(6.9		)	1.4			(5.7		)	3.4
	Other	0.1			(0.3		)	(0.8		)	—			(1.4		)
	Changes in operating assets and liabilities	(64.8		)	(77.1		)	(82.1		)	(131.8		)	(166.8		)
	Net cash provided by operating activities	$	59.9		$	55.2		$	11.9		200.3			139.4

*	Adjusted EBITDA represents net income before interest expense, interest income, provision for income taxes, depreciation and amortization expense and special items. We use the adjusted EBITDA measure for internal managerial evaluation purposes, as a means to evaluate period-to-period comparisons and as a performance metric for the vesting/releasing of certain of our performance-based equity awards. Adjusted EBITDA is a non-GAAP financial measure. Regulation G and other provisions of the securities laws regulate the use of financial measures that are not prepared in accordance with generally accepted accounting principles. We believe this measure provides important supplemental information to investors. However, we do not, and you should not, rely on non-GAAP financial measures alone as measures of our performance. We believe that non-GAAP financial measures reflect an additional way of viewing aspects of our operations that – when taken together with GAAP results and the reconciliations to corresponding GAAP financial measures that we also provide in our press releases – provide a more complete understanding of factors and trends affecting our business. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with non-GAAP financial measures used by our company or other companies, even if they have similar names.

	ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES ANALYSIS OF GAAP VERSUS NON-GAAP DISCLOSURES (in millions, except per share and percentage data)

			Quarter Ended									Nine Months Ended
			September 27, 2013			June 28, 2013			September 28, 2012			September 27, 2013			September 28, 2012
Reconciliation of GAAP gross profit to non-GAAP gross profit:
GAAP gross profit			$	249.2		$	231.8		$	238.0		$	685.5		$	741.5
	Special items:
	a)	Actuarial losses on pension plans and other pension benefits	—			—			—			6.7			2.6
	b)	SANYO Semiconductor inventory item	—			—			3.1			—			8.0
Non-GAAP gross profit			$	249.2		$	231.8		$	241.1		$	692.2		$	752.1
Reconciliation of GAAP gross margin to non-GAAP gross margin:
GAAP gross margin			34.8		%	33.7		%	32.8		%	33.2		%	33.5		%
	Special items:
	a)	Actuarial losses on pension plans and other pension benefits	—		%	—		%	—		%	0.3		%	0.1		%
	b)	SANYO Semiconductor inventory item	—		%	—		%	0.4		%	—		%	0.4		%
		Total special items	—		%	—		%	0.4		%	0.3		%	0.5		%
Non-GAAP gross margin			34.8		%	33.7		%	33.2		%	33.5		%	34.0		%
Reconciliation of GAAP operating expenses to non-GAAP operating expenses:
GAAP operating expenses			$	181.9		$	180.9		$	193.4		529.6			626.4
	Special items:
	a)	Amortization of acquisition related intangible assets	(8.2		)	(8.2		)	(11.1		)	(24.8		)	(33.3		)
	b)	Actuarial losses on pension plans and other pension benefits	—			—			—			(6.9		)	(0.8		)
	c)	Restructuring, asset impairments and other, net	(11.0		)	(6.1		)	(11.2		)	(11.1		)	(57.3		)
		Total special items	(19.2		)	(14.3		)	(22.3		)	(42.8		)	(91.4		)
Non-GAAP operating expenses			$	162.7		$	166.6		$	171.1		$	486.8		$	535.0
Reconciliation of GAAP net income to non-GAAP net income:
GAAP net income attributable to ON Semiconductor Corporation			$	51.8		$	47.7		$	12.5		$	122.1		$	47.6
	Special items:
	a)	Actuarial losses on pension plans and other pension benefits (cost of revenues)	—			—			—			6.7			2.6
	b)	SANYO Semiconductor inventory item	—			—			3.1			—			8.0
	c)	Amortization of acquisition related intangible assets (operating expenses)	8.2			8.2			11.1			24.8			33.3
	d)	Actuarial losses on pension plans and other pension benefits (operating expenses)	—			—			—			6.9			0.8
	e)	Restructuring, asset impairments and other, net	11.0			6.1			11.2			11.1			57.3
	f)	SANYO Semiconductor purchase agreement	—			—			—			—			(2.2		)
	g)	Loss on debt exchange	—			—			7.8			3.1			7.8
	h)	Non-cash interest on convertible notes	2.7			2.7			5.5			8.5			18.7
	i)	Adjustment to reflect cash taxes	1.7			(7.5		)	2.3			(5.9		)	2.1
		Total special items	23.6			9.5			41.0			55.2			128.4
Non-GAAP net income			$	75.4		$	57.2		$	53.5		$	177.3		$	176.0
Non-GAAP net income per share:
		Basic	$	0.17		$	0.13		$	0.12		$	0.39		$	0.39
		Diluted	$	0.17		$	0.13		$	0.12		$	0.39		$	0.38
Weighted average common shares outstanding:
		Basic	449.3			450.7			454.6			449.8			453.9
		Diluted	452.1			453.3			456.2			452.6			458.2

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