Total revenues in the fourth quarter of 2008 were $488.7 million, a decrease of about 16% from the third quarter of 2008. During the fourth quarter of 2008, the company reported a GAAP net loss of $519.6 million, or $1.27 per share. The fourth quarter 2008 GAAP net loss included net charges of $581.6 million, or $1.42 per share, from special items. The largest special item of $557.4 million arises from our annual goodwill impairment testing and is an estimate. The goodwill impairment is a non-cash charge. The company expects to report final results for the quarter and year end upon completion of the impairment analysis and the filing of its Form 10-K with the SEC for the fiscal year ended December 31, 2008. The special item details can be found in the attached schedules. During the third quarter of 2008, the company reported GAAP net income of $61.2 million, or $0.15 per share on a fully diluted basis.
Fourth quarter 2008 non-GAAP net income was $62.0 million, or $0.15 per share on a fully diluted basis. Third quarter 2008 non-GAAP net income was $100.4 million, or $0.25 per share on a fully diluted basis. 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 US.
On a mix-adjusted basis, average selling prices in the fourth quarter of 2008 were about flat with the third quarter of 2008. The company’s gross margin in the fourth quarter was 38.0%. Non-GAAP gross margin in the fourth quarter of 2008 was 39.9%. GAAP gross margin in the fourth quarter included a net charge of about $9.4 million, or about 190 basis points, from special items. The special item details can be found in the attached schedules.
Adjusted EBITDA for the fourth quarter of 2008 was $102.9 million. Adjusted EBITDA for the third quarter of 2008 was $140.9 million.
The 2008 GAAP net loss included net charges of $734.0 million from special items, with the largest special item estimated $557.4 million goodwill impairment. The goodwill impairment is a non-cash charge and will be finalized in connection with 2008 year end financial statements and the filing of the related Form 10-K with the SEC. During 2007, the company reported GAAP net income of $242.2 million. The 2007 GAAP net income included net charges of $25.1 million from special items.
The non-GAAP net income for 2008 was $341.0 million, or $0.89 per share on a fully diluted basis. The non-GAAP net income for 2007 was $267.3 million, or $0.89 per share on a fully diluted basis.
The company’s GAAP gross margin in 2008 was 36.3%. GAAP gross margin in 2008 included a net charge of about $81.9 million, or about 400 basis points from special items. Non-GAAP gross margin in 2008 was 40.3%. The company’s GAAP gross margin in 2007 was 37.7%. GAAP gross margin in 2007 included a net charge of about $7.1 million, or about 50 basis points from special items. Non-GAAP gross margin in 2007 was 38.2%.
“For ON Semiconductor, 2008 represented a transformational year,” said Keith Jackson, ON Semiconductor president and chief executive officer. “We successfully completed the acquisitions of AMIS Holdings, Inc. in March and of Catalyst Semiconductor in October. These acquisitions furthered the transformation of ON Semiconductor into an analog and power solutions leader, strengthening our relationships with market-making customers and expanding our addressable market. In addition, these acquisitions expanded our product portfolio and opened two additional end-market segments in military/aerospace and medical. We realize the global economic environment continues to remain very challenging and have taken pro-active measures to adjust our spending levels accordingly. Beginning in the fourth quarter of 2008, we began aligning our spending levels to our current revenue outlook through a number of permanent and temporary actions ranging from accelerated fab closures and a reduction in force to unpaid time off for all employees. While we believe these actions are significant enough to ensure ON Semiconductor is positioned to continue generating positive free cash flow, we are prepared to take additional cost reduction measures if the end-market environment deteriorates further.”
First Quarter 2009 Outlook:
“Based upon product booking trends, backlog levels, manufacturing services revenues and estimated turns levels, we anticipate that total revenues will be about $340 to $380 million in the first quarter of 2009,” Jackson said. “Backlog levels at the beginning of the first quarter of 2009 were down from backlog levels at the beginning of the fourth quarter of 2008 and represent about 80 to 90% of our anticipated first quarter 2009 revenues. We currently expect our distribution partners to reduce their inventories during the first quarter of 2009. With our sell-thru revenue recognition policy for this channel, this reduction is expected to result in incremental revenue above our beginning backlog levels. We expect that average selling prices for the first quarter of 2009 will be down about two% sequentially. Beginning in the first quarter of 2009 ON Semiconductor will begin recording non-cash interest expense of about $9 million associated with the adoption of FASB Staff Position No. APB 14-1 relating to our convertible senior subordinated notes. The following table outlines our first quarter 2009 GAAP and non-GAAP outlook.”
