EXHIBIT 99.1
Anne Spitza | Ken Rizvi | |
Corporate Communications | M&A, Treasury & Investor Relations | |
ON Semiconductor | ON Semiconductor | |
(602) 244-6398 | (602) 244-3437 | |
anne.spitza@onsemi.com | ken.rizvi@onsemi.com |
ON Semiconductor Reports First Quarter of 2010 Results
For the first quarter of 2010, highlights include:
| • | Total revenues of approximately $550.2 million an increase of approximately 11 percent from the fourth quarter of 2009 |
| • | Record GAAP gross margin of 41.5 percent |
| • | Record non-GAAP gross margin of 42.1 percent |
| • | GAAP net income of $0.14 per fully diluted share |
| • | Non-GAAP net income of $0.19 per fully diluted share which includes stock based compensation expense |
| • | Acquired California Micro Devices on Jan. 27, 2010 in an all-cash transaction for approximately $113 million |
PHOENIX, Ariz. – May 5, 2010 – ON Semiconductor Corporation (Nasdaq: ONNN) today announced that total revenues in the first quarter of 2010 were $550.2 million, an increase of approximately 11 percent from the fourth quarter of 2009. During the first quarter of 2010, the company reported GAAP net income of $63.0 million, or $0.14 per fully diluted share. The first quarter 2010 GAAP net income included net charges of $22.3 million, or $0.05 per fully diluted share, from special items. The special item details can be found in the attached schedules. During the fourth quarter of 2009, the company reported a GAAP net income of $68.0 million, or $0.15 per fully diluted share.
First quarter 2010 non-GAAP net income was $85.3 million, or $0.19 per share on a fully diluted basis and includes stock based compensation expense. Fourth quarter 2009 non-GAAP net income was $84.9 million, or $0.19 per share on a fully diluted basis and includes stock-based compensation expense. A reconciliation of these non-GAAP financial measures (and other non-GAAP measures used elsewhere in this release, such as non-GAAP gross margin and adjusted EBITDA) to the company’s most directly comparable measures prepared in accordance with U.S. GAAP are set forth in the attached schedules and on our website atwww.onsemi.com.
On a mix-adjusted basis, average selling prices in the first quarter of 2010 were down approximately one to two percent when compared to the fourth quarter of 2009. GAAP gross margin in the first quarter was 41.5 percent. Non-GAAP gross margin in the first quarter of 2010 was 42.1 percent, including stock based compensation expense. GAAP gross margin in the first quarter included a net charge of approximately $3.7 million, or approximately 60 basis points, from special items. The special item details can be found in the attached schedules.
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ON Semiconductor Reports First Quarter of 2010 Results
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Adjusted EBITDA for the first quarter of 2010 was $127.3 million and includes stock-based compensation expense. Adjusted EBITDA for the fourth quarter of 2009 was $123.5 million and includes stock-based compensation expense.
“In the first quarter of 2010, we recorded the highest quarterly gross margin percent in the company’s history,” said Keith Jackson, ON Semiconductor president and CEO. “Through new product development, as well as products and capabilities gained from our successful acquisitions, we continue to transform our product portfolio and increase our value proposition to customers. Even with the cash purchase of California Micro Devices (CMD) on Jan. 27, 2010, the company exited the first quarter with approximately $560.7 million of cash and cash equivalents. In addition to the transformation of our product portfolio, we also continue to transform our balance sheet. Today, our Board of Directors approved the prepayment of ON Semiconductor’s $169.8 million Senior Secured Credit Facility. The repayment of this facility represents a significant milestone for the company. Through various amendments, this facility has remained with the company since the initial buy-out from Motorola more than a decade ago. With the repayment of this facility, we expect to save annual cash interest expense of approximately $3.4 million based on today’s LIBOR rate and have additional financial and business flexibility to continue to improve value for our shareholders.”
SECOND QUARTER 2010 OUTLOOK
“Based upon product booking trends, backlog levels and estimated turns levels, we anticipate that total revenues will be approximately $565 to $580 million in the second quarter of 2010,” Jackson said. “Backlog levels at the beginning of the second quarter of 2010 were up from backlog levels at the beginning of the first quarter of 2010 and represent over 90 percent of our anticipated second quarter 2010 revenues. We expect that average selling prices for the second quarter of 2010 will be down approximately one percent sequentially. The non-GAAP outlook for the second quarter of 2010 includes stock based compensation expense of approximately $13 to $14 million.”
The following table outlines ON Semiconductor’s second quarter 2010 GAAP and non-GAAP outlook.
ON SEMICONDUCTOR Q2 2010 BUSINESS OUTLOOK
GAAP | Special Items*** | Non-GAAP**** | ||||
Revenue | $565 to $580 million | $565 to $580 million | ||||
Gross Margin | 41.5% to 42.5% | $3 million | 42.0% to 43.0% | |||
Operating Expenses | $138 to $142 million | $10 million | $128 to $132 million | |||
Net Interest Expense / Other Expenses | $10 million | $10 million | ||||
Convertible Notes, Non-cash Interest Expense* | $7 million | $7 million | $0 million | |||
Tax | $4 million | $1 million | $3 million | |||
Fully Diluted Share Count** | 445 million | 445 million | ||||
| * | Convertible Notes, Non-cash Interest Expense are included in FASB’s Accounting Standards Codification (“ASC”) Topic 470 Debt. |
ON Semiconductor Reports First Quarter of 2010 Results
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| ** | Fully diluted share count can vary for, among other things, the actual exercise of options or restricted stock units, the incremental dilutive shares from all of the company’s convertible senior subordinated notes, and the repurchase or the issuance of stock or the sale of treasury shares. Please refer to the table on our website for potential changes to the Fully Diluted Share Count. |
| *** | Special Items can include: restructuring, asset impairments and other, net; expensing of appraised inventory fair market value (FMV) step up; amortization of intangibles; goodwill impairments; income tax adjustments to approximate cash taxes; non-cash interest expense and certain other special items as necessary. |
| **** | Regulation G and other provisions of the securities laws regulate the use of financial measures that are not prepared in accordance with GAAP. We believe these non-GAAP measures provide important supplemental information to investors. We use these measures, together with GAAP measures, for internal managerial purposes and as a means to evaluate period-to-period comparisons. 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 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 other companies’ non-GAAP financial measures, even if they have similar names. |
TELECONFERENCE
ON Semiconductor will host a conference call for the financial community at 5:00 p.m. Eastern Time (ET) on May 5, 2010 to discuss this announcement and ON Semiconductor’s results for the first quarter of 2010. The company will also provide a real-time audio broadcast of the teleconference on the Investor Relations page of its website athttp://www.onsemi.com. The webcast replay will be available at this site approximately one hour following the live broadcast and will continue to be available for approximately 30 days following the conference call. Investors and interested parties can also access the conference call through a telephone call by dialing (888) 546-9664 (U.S./Canada) or (973) 935-8144 (International). In order to join this conference call, you will be required to provide the Conference ID Number – which is 69488949. Approximately one hour following the live broadcast, the company will provide a dial-in replay that will continue to be available through May 12, 2010. To listen to the teleconference replay, call (800) 642-1687 (U.S./Canada) or (706) 645-9291 (International). You will be required to provide the Conference ID Number – which is 69488949.
About ON Semiconductor
ON Semiconductor (Nasdaq: ONNN) is a premier supplier of high performance, energy efficient, silicon solutions for green electronics. The company's broad portfolio of power and signal management, logic, discrete and custom devices helps customers effectively solve their design challenges in automotive, communications, computing, consumer, industrial, LED lighting, medical, military/aerospace and power applications. ON Semiconductor operates a world-class, value-added supply chain and a network of manufacturing facilities, sales offices and design centers in key markets throughout North America, Europe, and the Asia Pacific regions. For more information, visit http://www.onsemi.com.
# # #
ON Semiconductor and the ON Semiconductor logo are registered trademarks of Semiconductor Components Industries, LLC. All other brand and product names appearing in this document are registered trademarks or trademarks of their respective holders. Although the company references its website in this news release, information on the website is not to be incorporated herein.
This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements related to
ON Semiconductor Reports First Quarter of 2010 Results
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the future financial performance of ON Semiconductor and our ability to increase cash flow from current levels. These forward-looking statements are based on information available to us as of the date of this release and current expectations, forecasts and assumptions and involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. Such risks and uncertainties include a variety of factors, some of which are beyond our control. In particular, such risks and uncertainties include, but are not limited to, difficulties encountered in integrating acquired businesses; the variable demand and the aggressive pricing environment for semiconductor products; dependence on our company’s ability to successfully manufacture in increasing volumes on a cost-effective basis and with acceptable quality for our current products; the adverse impact of competitive product announcements; revenues and operating performance; poor economic conditions and markets, including the current credit markets; the cyclical nature of the semiconductor industry; changes in demand for our products; changes in inventories at customers and distributors; technological and product development risks; availability of raw materials; competitors' actions; pricing and gross margin pressures; loss of key customers; order cancellations or reduced bookings; changes in manufacturing yields; control of costs and expenses; significant litigation; risks associated with decisions to expend cash reserves for various uses such as debt prepayment rather than to retain such cash for future needs; risks associated with acquisitions and dispositions; risks associated with leverage and restrictive covenants in debt agreements; risks associated with international operations, including foreign employment and labor matters associated with unions and collective bargaining agreements; the threat or occurrence of international armed conflict and terrorist activities both in the United States and internationally; risks related to new legal requirements such as new health care reform; risks and costs associated with increased and new regulation of corporate governance and disclosure standards; and risks involving environmental or other governmental regulation. Information concerning additional factors that could cause results to differ materially from those projected in the forward-looking statements is contained in ON Semiconductor’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other of our filings with the Securities and Exchange Commission. These forward-looking statements should not be relied upon as representing our views as of any subsequent date and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made.
ON Semiconductor Reports First Quarter of 2010 Results
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ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share data)
| Quarter Ended | ||||||||||||
| April 2, 2010 | December 31, 2009 | April 3, 2009 | ||||||||||
Net revenues | $ | 550.2 | $ | 497.1 | $ | 379.1 | ||||||
Cost of revenues | 322.1 | 302.5 | 267.0 | |||||||||
Gross profit | 228.1 | 194.6 | 112.1 | |||||||||
Gross margin | 41.5 | % | 39.1 | % | 29.6 | % | ||||||
Operating expenses: | ||||||||||||
Research and development | 65.2 | 50.7 | 43.6 | |||||||||
Selling and marketing | 35.6 | 33.5 | 29.0 | |||||||||
General and administrative | 31.5 | 20.1 | 27.3 | |||||||||
Amortization of acquisition related intangible assets | 7.8 | 7.2 | 7.2 | |||||||||
Restructuring, asset impairments and other, net | 3.8 | (0.7 | ) | 9.6 | ||||||||
Total operating expenses | 143.9 | 110.8 | 116.7 | |||||||||
Operating income (loss) | 84.2 | 83.8 | (4.6 | ) | ||||||||
Other income (expenses), net: | ||||||||||||
Interest expense | (16.4 | ) | (15.4 | ) | (17.7 | ) | ||||||
Interest income | 0.1 | 0.1 | 0.4 | |||||||||
Other | (2.8 | ) | (0.5 | ) | (2.2 | ) | ||||||
Loss on debt repurchase | — | — | (2.2 | ) | ||||||||
Other expenses, net | (19.1 | ) | (15.8 | ) | (21.7 | ) | ||||||
Income (loss) before income taxes | 65.1 | 68.0 | (26.3 | ) | ||||||||
Income tax benefit (provision) | (1.4 | ) | 0.4 | (7.2 | ) | |||||||
Net income (loss) | 63.7 | 68.4 | (33.5 | ) | ||||||||
Net income attributable to minority interest | (0.7 | ) | (0.4 | ) | (0.4 | ) | ||||||
Net income (loss) attributable to ON Semiconductor Corporation | $ | 63.0 | $ | 68.0 | $ | (33.9 | ) | |||||
Net income (loss) per common share attributable to ON Semiconductor Corporation: | ||||||||||||
Basic: | $ | 0.15 | $ | 0.16 | $ | (0.08 | ) | |||||
Diluted: | $ | 0.14 | $ | 0.15 | $ | (0.08 | ) | |||||
Weighted average common shares outstanding: | ||||||||||||
Basic | 428.1 | 426.0 | 413.6 | |||||||||
Diluted: | 440.9 | 439.6 | 413.6 | |||||||||
ON Semiconductor Reports First Quarter of 2010 Results
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ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEET
(in millions)
| April 2, 2010 | December 31, 2009 | April 3, 2009 | ||||||||||
Assets | ||||||||||||
Cash, cash equivalents and short-term investments | $ | 560.7 | $ | 571.2 | $ | 402.4 | ||||||
Receivables, net | 298.9 | 260.9 | 192.6 | |||||||||
Inventories, net | 297.6 | 269.9 | 299.2 | |||||||||
Other current assets | 48.4 | 51.5 | 47.2 | |||||||||
Deferred income taxes, net of allowances | 14.6 | 15.1 | 13.2 | |||||||||
Total current assets | 1,220.2 | 1,168.6 | 954.6 | |||||||||
Restricted cash | 0.2 | 5.9 | — | |||||||||
Property, plant and equipment, net | 741.6 | 705.5 | 744.9 | |||||||||
Goodwill | 191.7 | 175.4 | 160.4 | |||||||||
Intangible assets, net | 330.6 | 298.7 | 314.4 | |||||||||
Other assets | 61.5 | 60.2 | 36.7 | |||||||||
Total assets | $ | 2,545.8 | $ | 2,414.3 | $ | 2,211.0 | ||||||
Liabilities and Stockholders’ Equity | ||||||||||||
Accounts payable | $ | 204.7 | $ | 172.9 | $ | 134.5 | ||||||
Accrued expenses | 141.6 | 135.5 | 127.9 | |||||||||
Income taxes payable | 2.9 | 5.0 | 5.1 | |||||||||
Accrued interest | 4.6 | 0.9 | 5.0 | |||||||||
Deferred income on sales to distributors | 109.1 | 98.8 | 100.9 | |||||||||
Current portion of long-term debt | 111.3 | 205.9 | 86.6 | |||||||||
Total current liabilities | 574.2 | 619.0 | 460.0 | |||||||||
Long-term debt | 823.5 | 727.6 | 844.3 | |||||||||
Other long-term liabilities | 45.0 | 49.3 | 45.9 | |||||||||
Deferred income taxes, net of allowances | 15.4 | 13.8 | 12.0 | |||||||||
Total liabilities | 1,458.1 | 1,409.7 | 1,362.2 | |||||||||
ON Semiconductor Corporation stockholders’ equity: | ||||||||||||
Common stock | 4.8 | 4.7 | 4.7 | |||||||||
Additional paid-in capital | 2,939.9 | 2,916.6 | 2,853.2 | |||||||||
Accumulated other comprehensive loss | (65.1 | ) | (64.9 | ) | (68.6 | ) | ||||||
Accumulated deficit | (1,441.4 | ) | (1,504.4 | ) | (1,599.3 | ) | ||||||
Less: treasury stock, at cost | (370.8 | ) | (367.0 | ) | (358.9 | ) | ||||||
Total ON Semiconductor Corporation stockholders’ equity | 1,067.4 | 985.0 | 831.1 | |||||||||
Minority interest in consolidated subsidiaries | 20.3 | 19.6 | 17.7 | |||||||||
Total equity | 1,087.7 | 1,004.6 | 848.8 | |||||||||
Total liabilities and equity | $ | 2,545.8 | $ | 2,414.3 | $ | 2,211.0 | ||||||
ON Semiconductor Reports First Quarter of 2010 Results
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ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA* AND
CASH PROVIDED BY OPERATING ACTIVITIES
(in millions)
| Quarter Ended | ||||||||||||
| April 2, 2010 | December 31, 2009 | April 3, 2009 | ||||||||||
Net income (loss) | $ | 63.7 | $ | 68.4 | $ | (33.5 | ) | |||||
Plus: | ||||||||||||
Depreciation and amortization | 39.7 | 38.0 | 39.7 | |||||||||
Interest expense | 16.4 | 15.4 | 17.7 | |||||||||
Interest income | (0.1 | ) | (0.1 | ) | (0.4 | ) | ||||||
Income tax (benefit) provision | 1.4 | (0.4 | ) | 7.2 | ||||||||
Net income attributable to minority interest | (0.7 | ) | (0.4 | ) | (0.4 | ) | ||||||
Restructuring, asset impairments and other, net | 3.8 | (0.7 | ) | 9.6 | ||||||||
Loss on debt repurchase | — | — | 2.2 | |||||||||
Expensing of appraised inventory fair market value step up | 3.1 | 3.3 | 3.1 | |||||||||
Adjusted EBITDA* | 127.3 | 123.5 | 45.2 | |||||||||
Increase (decrease): | ||||||||||||
Interest expense | (16.4 | ) | (15.4 | ) | (17.7 | ) | ||||||
Interest income | 0.1 | 0.1 | 0.4 | |||||||||
Income tax benefit (provision) | (1.4 | ) | 0.4 | (7.2 | ) | |||||||
Net income attributable to minority interest | 0.7 | 0.4 | 0.4 | |||||||||
Restructuring, asset impairments, and other, net | (3.8 | ) | 0.7 | (9.6 | ) | |||||||
Expensing of appraised inventory fair market value step up | (3.1 | ) | (3.3 | ) | (3.1 | ) | ||||||
Stock compensation expense | 13.7 | 11.9 | 12.7 | |||||||||
Gain on sale or disposal of fixed assets | (2.1 | ) | (1.7 | ) | (1.3 | ) | ||||||
Amortization of debt issuance costs and debt discount | 0.7 | 0.7 | 0.9 | |||||||||
Provision for excess inventories | (1.1 | ) | 4.7 | 7.6 | ||||||||
Non-cash interest expense | 8.7 | 8.3 | 9.9 | |||||||||
Cash portion of loss on debt repurchase | — | — | (1.7 | ) | ||||||||
Non-cash impairment charges | — | 0.7 | — | |||||||||
Deferred income taxes | 2.3 | 1.6 | 0.3 | |||||||||
Other | (1.0 | ) | 2.3 | (0.3 | ) | |||||||
Changes in operating assets and liabilities | (15.1 | ) | (32.6 | ) | (7.8 | ) | ||||||
Net cash provided by operating activities | $ | 109.5 | $ | 102.3 | $ | 28.7 | ||||||
| * | Adjusted EBITDA represents net income (loss) 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 performance metric for the vesting/releasing of certain of our performance based equity awards, and for earning of corporate cash bonuses when applicable. 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. We use this measure, together with GAAP measures, for internal managerial purposes and as a means to evaluate period-to-period comparisons. 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. |
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ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
ANALYSIS OF GAAP VERSUS NON-GAAP DISCLOSURES
(in millions, except per share and percentage data)
| Quarter Ended | ||||||||||||
| April 2, 2010 | December 31, 2009 | April 3, 2009 | ||||||||||
Reconciliation of GAAP gross profit to non-GAAP gross profit: | ||||||||||||
GAAP gross profit | $ | 228.1 | $ | 194.6 | $ | 112.1 | ||||||
Special items: | ||||||||||||
a) Expensing of appraised inventory fair market value step up | 3.1 | 3.3 | 3.1 | |||||||||
b) Amortization of intangibles | 0.6 | 0.6 | 0.6 | |||||||||
Total Special items | 3.7 | 3.9 | 3.7 | |||||||||
Non-GAAP gross profit | $ | 231.8 | $ | 198.5 | $ | 115.8 | ||||||
Reconciliation of GAAP gross margin to non-GAAP gross margin: | ||||||||||||
GAAP gross margin | 41.5 | % | 39.1 | % | 29.6 | % | ||||||
Special items: | ||||||||||||
a) Expensing of appraised inventory fair market value step up | 0.6 | % | 0.7 | % | 0.8 | % | ||||||
b) Amortization of intangibles | 0.1 | % | 0.1 | % | 0.2 | % | ||||||
Total Special items | 0.7 | % | 0.8 | % | 1.0 | % | ||||||
Non-GAAP gross margin | 42.1 | % | 39.9 | % | 30.5 | % | ||||||
Reconciliation of GAAP income (loss) to non-GAAP net income: | ||||||||||||
GAAP net income (loss) attributable to ON Semiconductor Corporation | $ | 63.0 | $ | 68.0 | $ | (33.9 | ) | |||||
Special items: | ||||||||||||
a) Expensing of appraised inventory fair market value step up - cost of revenues | 3.1 | 3.3 | 3.1 | |||||||||
b) Amortization of intangible assets - cost of revenues | 0.6 | 0.6 | 0.6 | |||||||||
c) Amortization of acquisition related intangible assets - operating expenses | 7.8 | 7.2 | 7.2 | |||||||||
d) Restructuring, asset impairments and other, net | 3.8 | (0.7 | ) | 9.6 | ||||||||
e) (Gain) loss on debt prepayment | — | — | 2.2 | |||||||||
f) Non-cash interest expense | 8.7 | 8.3 | 9.9 | |||||||||
g) Cash taxes | (1.7 | ) | (1.8 | ) | 2.3 | |||||||
Total Special items | 22.3 | 16.9 | 34.9 | |||||||||
Non-GAAP net income | $ | 85.3 | $ | 84.9 | $ | 1.0 | ||||||
Non-GAAP net income per share: | ||||||||||||
Basic | $ | 0.20 | $ | 0.20 | $ | 0.00 | ||||||
Diluted | $ | 0.1935 | $ | 0.19 | $ | 0.00 | ||||||
Weighted average common shares outstanding: | ||||||||||||
Basic | 428.1 | 426.0 | 413.6 | |||||||||
Diluted: | 440.9 | 439.6 | 416.7 | |||||||||
| Total share-based compensation expense, realated to the Company's stock options, restricted stock units, restricted stock awards and employee stock purchase plan is included below. | ||||||||||||
| Quarter Ended | ||||||||||||
| April 2, 2010 | December 31, 2009 | April 3, 2009 | ||||||||||
Cost of revenues | $ | 3.3 | $ | 3.1 | $ | 2.9 | ||||||
Research and development | 2.5 | 2.5 | 2.0 | |||||||||
Selling and marketing | 2.6 | 1.9 | 2.4 | |||||||||
General and administrative | 5.3 | 4.4 | 5.4 | |||||||||
Total share-based compensation expense | $ | 13.7 | $ | 11.9 | $ | 12.7 | ||||||
| (1) | Certain amounts may not total due to rounding of individual components. |
Non-GAAP Measures
To supplement the consolidated financial results prepared under GAAP, ON Semiconductor uses non-GAAP measures which are adjusted from the most directly comparable GAAP results to exclude items related to amortization of intangible assets, amortization of acquisition-related intangibles, expensing of appraised inventory fair market value step up, purchased in-process research and development expenses, restructuring, asset impairments and other, net, goodwill impairment charges, gains and losses on debt prepayment, non-cash interest expense, their related tax effects and certain other special items as necessary. Management does not consider these charges in evaluating the core operational activities of ON Semiconductor. Management uses these non-GAAP measures internally to make strategic decisions, forecast future results and evaluate ON Semiconductor's current performance. Most analysts covering ON Semiconductor use the non-GAAP measures as well. Given management's use of these non-GAAP measures, ON Semiconductor believes these measures are important to investors in understanding ON Semiconductor's current and future operating results as seen through the eyes of management. In addition, management believes these non-GAAP measures are useful to investors in enabling them to better assess changes in ON Semiconductor's core business across different time periods. These non-GAAP measures are not in accordance with or an alternative to GAAP financial data and may be different from non-GAAP measures used by other companies. Because non-GAAP financial measures are not standardized it may not be possible to compare these financial measures with other companies' non-GAAP financial measures, even if they have similar names.
– Non-GAAP gross profit and gross margin. The use of this non-GAAP financial measure allows management to evaluate the gross margin of the company's core businesses and trends across different reporting periods on a consistent basis, independent of non-cash items including expensing of appraised inventory fair market value step up and amortization of intangible assets. In addition, it is an important component of management's internal performance measurement and reward process as it is used to assess the current and historical financial results of the business, for strategic decision making, preparing budgets and forecasting future results. Management presents this non-GAAP financial measure to enable investors and analysts to evaluate our revenue generation performance relative to the direct costs of revenue of ON Semiconductor's core businesses.
– Non-GAAP net income and net income per share. The use of these non-GAAP financial measures allow management to evaluate the operating results of ON Semiconductor's core businesses and trends across different reporting periods on a consistent basis, independent of non-cash items including amortization of intangible assets, amortization of acquisition-related intangibles, expensing of appraised inventory fair market value step up, purchased in-process research and development expenses, restructuring, asset impairments and other, net, goodwill impairment charges, gains and losses on debt prepayment, non-cash interest expense, their related tax effects and certain other special items as necessary. In addition, they are important components of management's internal performance measurement and reward process as it is used to assess the current and historical financial results of the business, for strategic decision making, preparing budgets and forecasting future results. Management presents these non-GAAP financial measures to enable investors and analysts to understand the results of operations of ON Semiconductor's core businesses and to compare our results of operations on a more consistent basis against that of other companies in our industry.