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ON Semiconductor Reports Fourth Quarter and 2007 Annual Results
For the fourth quarter of 2007, highlights include:
- Total revenues of $407.9 million
- EBITDA of $95.5 million
- Net income per fully diluted share of $0.20
- Non-GAAP net income per fully diluted share of $0.23
- Cash and cash equivalents of $274.6 million
- Acquired CPU voltage and PC thermal monitoring products group from Analog Devices, Inc. on Dec. 31, 2007
- Announced definitive agreement to acquire AMI Holdings, Inc. in an all-stock transaction
For 2007, highlights include:
- Total revenues of $1.566 billion
- Record product gross margin of 40.4 percent
- EBITDA of $368.5 million
- Net income per fully diluted share of $0.80
- Non-GAAP net income per fully diluted share of $0.88
- Repurchased approximately $55 million of common stock
ON Semiconductor Corporation (NASDAQ: ONNN) today announced that total revenues in the fourth quarter of 2007 were $407.9 million, an increase of approximately one percent from the third quarter of 2007. Total revenues during the fourth quarter included approximately $385.1 million of product revenues and approximately $22.8 million of manufacturing services revenues. During the fourth quarter of 2007, the company reported net income of $61.1 million, or $0.20 per share on a fully diluted basis. Fourth quarter 2007 non-GAAP net income was $68.7 million or $0.23 per share on a fully diluted basis. During the third quarter of 2007, the company reported net income of $63.8 million, or $0.20 per share on a fully diluted basis. Third quarter 2007 non-GAAP net income was $70.9 million, or $0.22 per share on a fully diluted basis. A reconciliation of non-GAAP net income which is a non-GAAP financial measure, to the company’s net income prepared in accordance with U.S. GAAP is set forth in the attached schedule.
On a mix-adjusted basis, average selling prices in the fourth quarter of 2007 were down approximately one percent from the third quarter of 2007. The company’s total gross margin in the fourth quarter was 37.3 percent, a decrease of approximately 130 basis points as compared to the third quarter of 2007. Gross margins for product revenue were 39.4 percent during the fourth quarter of 2007 compared to 40.7 percent during the third quarter of 2007. The majority of the gross margin decrease during the fourth quarter was due to product mix and increases in manufacturing costs.
EBITDA for the fourth quarter of 2007 was $95.5 million, which included an approximately $1.0 million charge from restructuring, asset impairments and other. EBITDA for the third quarter of 2007 was $95.5 million and included charges of approximately $2.0 million associated with restructuring, asset impairments and other. A reconciliation of this non-GAAP financial measure to the company’s net income and net cash provided by operating activities prepared in accordance with U.S. GAAP is set forth in the attached schedule.
Total revenues for 2007 were $1.566 billion, an increase of 2 percent from $1.532 billion in 2006. During 2007, the company reported net income of $242.2 million and non-GAAP net income of $265.8 million. During 2006, the company reported net income of $272.1 million and non-GAAP net income of $278.2 million. The company’s total gross margin decreased by approximately 80 basis points to 37.7 percent in 2007 from 38.5 percent in 2006. The primary reason for this decrease is attributable to the lower gross margin associated with manufacturing services in 2007 versus 2006. The company’s product gross margin increased by approximately 60 basis points to 40.4 percent in 2007 from 39.8 percent in 2006.
"2007 was another solid year of performance for many of our business segments," said Keith Jackson, ON Semiconductor president and CEO. "We saw 14 percent growth in our computing end-market as our power management integrated circuits were adopted by a number of leading computing OEMs. In December, we also completed our acquisition of the CPU Voltage and Thermal Products Group from Analog Devices, Inc. The acquisition expands our overall computing power management business and accelerates our notebook power management revenue growth. Our automotive end-market also had a record year with revenues growing by over 10 percent versus 2006 and representing our highest automotive end-market revenues since 2002. Our wireless and consumer electronics end-markets declined slightly in 2007 as two major customers in these end-markets significantly reduced their builds compared to 2006. In December, we also signed a definitive merger agreement to acquire AMI Holdings, Inc, parent company of AMI Semiconductor. We are excited to complete this transaction, with a target closing date in the first half of 2008. We believe this business complements our existing automotive and industrial businesses and adds new opportunities for ON Semiconductor in the medical and military/aerospace end-markets.
"While we remain optimistic about our growth prospects for 2008, the business climate has become more challenging over the last few weeks. To help ensure that we continue to generate strong cash flows and earnings for our shareholders, we intend to accelerate our stand-alone cost reduction programs including a continued focus on the consolidation of our manufacturing operations. Over the course of the next 12 to 18 months or so, we have identified a total of over $40 million of additional annualized savings primarily in manufacturing costs through actions that we have already taken and actions we expect to take. The rate of these savings is expected to increase over that period to greater than $10 million per quarter."
FIRST QUARTER 2008 OUTLOOK
"Based upon product booking trends, backlog levels, anticipated manufacturing services revenue and estimated turns levels, we anticipate that total revenues will be down approximately three percent to seven percent sequentially in the first quarter of 2008," Jackson said. "Backlog levels at the beginning of the first quarter of 2008 were down from backlog levels at the beginning of the fourth quarter of 2007 and represent over 90 percent of our anticipated first quarter 2008 revenues. We expect that average selling prices for the first quarter of 2008 will be down approximately one percent sequentially. We expect our total gross margin in the first quarter of 2008 to be approximately 35.5 to 36.5 percent and our product gross margin to be approximately 37.5 to 38.5 percent. We expect the purchase accounting rules associated with our recent acquisition of the CPU Voltage and PC Thermal Products Group from Analog Devices, Inc. will negatively impact our total gross margins by approximately 50 basis points in the first quarter of 2008. This impact is already included in our gross margin guidance. We currently expect our stock-based compensation expense in accordance with FAS No. 123 (R) to be approximately $7 million in the first quarter of 2008 and amortization of intangibles associated with the CPU Voltage and Thermal Products Group to be approximately $2.5 million in the first quarter of 2008."
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