ON Semiconductor reports 2nd quarter 2006 results

ON Semiconductor has announced that total revenues in the second quarter of 2006 were $375.3 million, an increase of approximately 12 percent from the first quarter of 2006.

ON Semiconductor has announced that total revenues in the second quarter of 2006 were $375.3 million, an increase of approximately 12 percent from the first quarter of 2006.

During the second quarter of 2006, the company reported net income of $67.5 million, or $0.19 per share on a fully diluted basis, which included approximately $3.3 million or $0.01 per share of restructuring, asset impairments and other charges (primarily associated with the impairment of certain IT projects).

Second quarter 2006 results include approximately $2.4 million associated with stock based compensation expense primarily due to our adoption of FAS 123 Share Based Payment.

During the first quarter of 2006, the company reported net income of $40.4 million, or $0.12 per share on a fully diluted basis.

First quarter 2006 results included approximately $1.9 million associated with stock based compensation expense and a $2.3 million investment gain reflected in other income.

On a mix-adjusted basis, average selling prices in the second quarter of 2006 were up approximately one percent from the first quarter of 2006.

The company's gross margin in the second quarter was 40.8 percent, an increase of approximately 560 basis points as compared to the first quarter of 2006 due to a combination of increased sales volume, improved mix, increased factory utilisation, improved pricing and the effect of a review in the depreciation life of manufacturing equipment.

In the second quarter of 2006, the company re-assessed the overall depreciation life of the company's manufacturing equipment.

Following this analysis, the company changed the estimated depreciation life of its manufacturing equipment consistent with the expected useful life of the equipment.

This change, which affects results only for the second quarter of 2006 and future periods, reduced depreciation by approximately $7.5 million and increased gross margin by approximately 200 basis points during the second quarter of 2006.

EBITDA for the second quarter of 2006 was $96.8 million, which included approximately $3.3 million of restructuring, asset impairment and other charges.

EBITDA for the first quarter of 2006 was $76.9 million.

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.

On May 15, 2006, the company completed its acquisition of LSI Logic's Gresham Wafer Fab.

In the second quarter of 2006, this purchase accounted for approximately $12.5 million of the company's total revenues.

Approximately $10.3 million of the company's sequential inventory growth from the first quarter of 2006 was also a result of this acquisition.

Further details regarding the financial impact of the acquisition will be provided in our Form 10-Q for the second quarter of 2006.

"The second quarter was another strong quarter for ON Semiconductor," said Keith Jackson, ON Semiconductor president and CEO.

"Our improving mix, new product introductions and cost competitive manufacturing capabilities helped drive record quarterly gross margin percentage, net income and earnings per share".

"During the second quarter we also grew cash and cash equivalents by approximately $43 million to a record high balance of approximately $295 million".

"Going forward, we look to continue our success and have focused the company on accelerating the growth of our power solutions portfolio".

"As part of this effort, beginning in the third quarter, we have re-aligned the company into four market-based divisions, the Digital and Consumer Products Group, the Computing Products Group, the Automotive and Power Regulation Group and the Standard Products Group".

"We believe this new organisational structure will enable ON Semiconductor to continue to expand its development of innovative power solutions for customers in these key markets".

"Based on product booking trends, backlog levels, anticipated foundry service revenue and estimated turns levels, we anticipate that total revenues will be approximately $405 to $415 million in the third quarter of 2006," Jackson said.

"Backlog levels at the beginning of the third quarter were up from backlog levels at the beginning of the second quarter of 2006, and represented over 90 percent of our anticipated third quarter 2006 revenues".

"We expect that average selling prices for the third quarter of 2006 will be approximately flat sequentially".

"Gross margins in the third quarter are expected to decline to approximately 38 percent, primarily associated with an increase in lower margin foundry service revenue".

"Beginning in the first quarter of 2006, we were required to expense stock based compensation in accordance with FAS No 123".

"We currently expect this expense to be approximately $2.5 million in the third quarter of 2006".

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