ON SEMICONDUCTOR CORP - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 1, 2005

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number 000-30419

ON SEMICONDUCTOR CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

36-3840979

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

5005 E. McDowell Road

Phoenix, AZ 85008

(602) 244-6600

(Address and telephone number of principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12-b-2 of the Exchange Act). Yes x No ¨

The number of shares outstanding of each of the issuer’s classes of common stock as of the close of business on May 2, 2005:


Class		Number of Shares
Common Stock; $.01 par value		255,216,064

INDEX


		Page
Part I

Financial Information

Item 1 Financial Statements		3

Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations		34

Item 3 Quantitative and Qualitative Disclosures About Market Risk		54

Item 4 Controls and Procedures		54

Part II

Other Information

Item 1 Legal Proceedings		56

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds		58

Item 3 Defaults Upon Senior Securities		58

Item 4 Submission of Matters to a Vote of Security Holders		58

Item 5 Other Information		58

Item 6 Exhibits		58

Signatures		59

Exhibits		60

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data)

(unaudited)


	April 1, 2005			December 31, 2004
Assets
Cash and cash equivalents	$	177.5		$	105.7
Short term investments		26.6			80.0
Receivables, net		151.2			131.5
Inventories, net		175.8			193.4
Other current assets		19.3			23.6
Deferred income taxes		3.1			2.8

Total current assets		553.5			537.0
Property, plant and equipment, net		455.6			472.0
Goodwill		77.3			77.3
Other assets		25.9			23.8

Total assets	$	1,112.3		$	1,110.1

Liabilities, Minority Interests, Redeemable Preferred Stock and Stockholders’ Deficit
Accounts payable	$	90.8		$	104.4
Accrued expenses		105.4			100.4
Income taxes payable		4.1			2.4
Accrued interest		0.4			1.2
Deferred income on sales to distributors		96.9			96.7
Current portion of long-term debt		19.1			20.0

Total current liabilities		316.7			325.1
Long-term debt		1,126.9			1,131.8
Other long-term liabilities		31.6			32.2
Deferred income taxes		0.4			2.3

Total liabilities		1,475.6			1,491.4

Commitments and contingencies (See Note 9)		—			—

Minority interests in consolidated subsidiaries		24.9			25.4

Series A cumulative, convertible, redeemable preferred stock ($0.01 par value 10,000 shares authorized, 10,000 shares issued and outstanding; 8% annual dividend rate; redemption value — $132.6 and $130.0		133.6			131.1

Common stock ($0.01 par value, 500,000,000 shares authorized, 255,209,185 and 254,790,578 shares issued and outstanding)		2.5			2.5
Additional paid-in capital		1,114.5			1,116.0
Accumulated other comprehensive income (loss)		3.8			1.1
Accumulated deficit		(1,642.6	)		(1,657.4	)

Total stockholders’ deficit		(521.8	)		(537.8	)

Total liabilities, minority interests, redeemable preferred stock and stockholders’ deficit	$	1,112.3		$	1,110.1

See accompanying notes to consolidated financial statements.

ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

(in millions, except per share data)

(unaudited)


	Quarter Ended
	April 1, 2005			April 2, 2004
Revenues	$	302.4		$	308.2
Cost of revenues		206.2			212.3

Gross profit		96.2			95.9

Operating expenses:
Research and development		23.1			23.5
Selling and marketing		19.3			18.4
General and administrative		20.4			17.2
Restructuring, asset impairments and other, net		1.1			13.1

Total operating expenses		63.9			72.2

Operating income		32.3			23.7

Other income (expenses), net:
Interest expense		(14.6	)		(34.3	)
Interest income		0.9			0.4
Realized and unrealized foreign currency gains (losses)		(1.0	)		(1.7	)
Loss on debt prepayment		—			(33.0	)

Other income (expenses), net		(14.7	)		(68.6	)

Income (loss) before income taxes and minority interests		17.6			(44.9	)
Income tax provision		(1.8	)		(1.6	)
Minority interests		(1.0	)		(1.1	)

Net income (loss)		14.8			(47.6	)
Less: Accretion to redemption value of convertible redeemable preferred stock		0.1			(1.8	)
Less: Convertible redeemable preferred stock dividends		(2.6	)		(2.4	)
Less: Allocation of undistributed earnings to preferred stockholders		(1.9	)		—

Net income (loss) applicable to common stock	$	10.4		$	(51.8	)

Comprehensive income (loss):
Net income (loss)	$	14.8		$	(47.6	)
Foreign currency translation adjustments		(0.7	)		0.7
Effects of cash flows hedges		3.6			1.2
Unrealized losses on deferred compensation plan investments		(0.2	)		—

Comprehensive income (loss):	$	17.5		$	(45.7	)

Income (loss) per common share:
Basic:	$	0.04		$	(0.23	)

Diluted:	$	0.04		$	(0.23	)

Weighted average common shares outstanding:
Basic		255.0			229.5

Diluted		287.8			229.5

See accompanying notes to consolidated financial statements.

ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)


	Quarter Ended
	April 1, 2005			April 2, 2004
Cash flows from operating activities:
Net income (loss)	$	14.8		$	(47.6	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		25.1			26.3
(Gain) loss on sale of fixed assets		(0.5	)		12.1
Non-cash portion of loss on debt prepayment ⁽¹⁾		—			12.0
Amortization of debt issuance costs and debt discount		0.5			1.9
Provision for excess inventories		3.1			—
Non-cash interest on junior subordinated note payable		3.9			3.5
Deferred income taxes		(2.2	)		(0.8	)
Other		0.7			1.2
Changes in assets and liabilities:
Receivables		(20.2	)		(17.3	)
Inventories		14.5			(12.2	)
Other assets		3.1			6.0
Accounts payable		(13.3	)		10.7
Accrued expenses		5.9			11.6
Income taxes payable		1.7			—
Accrued interest		(0.8	)		(9.2	)
Deferred income on sales to distributors		0.2			14.9
Other long-term liabilities		(0.3	)		(1.3	)

Net cash provided by operating activities		36.2			11.8

Cash flows from investing activities:
Purchases of property, plant and equipment		(9.0	)		(30.6	)
Proceeds from sales of property, plant and equipment		0.7			—
Purchases of held-to-maturity securities ⁽²⁾		(2.1	)		(0.5	)
Purchases of available-for-sale securities ⁽²⁾		(16.1	)		(71.5	)
Proceeds from sales of held-to-maturity securities ⁽²⁾		8.3			—
Proceeds from sales of available-for-sale securities ⁽²⁾		63.9			42.5

Net cash provided by (used in) investing activities		45.7			(60.1	)

Cash flows from financing activities:
Proceeds from issuance of common stock under the employee stock purchase plan		0.5			0.5
Proceeds from stock option exercises and warrants		0.5			3.9
Proceeds from issuance of common stock, net of issuance costs		—			228.9
Payment of capital lease obligation		(1.8	)		(0.6	)
Payment of debt issuance and amendment costs		(0.2	)		(0.3	)
Dividend to minority shareholder of consolidated subsidiary		(1.5	)		(1.0	)
Repayment of long-term debt		(7.6	)		(177.9	)

Net cash provided by (used in) financing activities		(10.1	)		53.5