PHOENIX--(BUSINESS WIRE)--ON Semiconductor Corporation (Nasdaq: ON) (the “Company”) announced today a change in its existing accounting estimates related to distributor revenue and allowances. Effective January 1, 2017, the Company will recognize revenue at the time the Company ships products to distributors with appropriate provisions for future price adjustments and returns (the “sell-in” method).
For the first quarter of 2017, the Company will provide the quantitative impact to its financial results associated with the transition to the “sell-in” method. As a result of the transition to the “sell-in” method, the Company expects to recognize significant one-time adjustments to various line items in its consolidated statement of operations for the quarter ended March 31, 2017, including the reported amounts of revenue, gross margin, operating margin, income before income taxes, net income and net income per share. Except for these one-time adjustments, the Company does not expect the transition to the “sell-in” method to have any material impact to the Company’s results for the quarter ended March 31, 2017.
Prior to transitioning to the “sell-in” method, the Company utilized the “sell-through” method pursuant to which the Company deferred the recognition of revenue until distributors reported that they had sold the Company’s products to end customers. The Company historically has utilized the “sell-through” method due to its inability to reasonably estimate the provisions for future price adjustments and returns necessary for “sell-in” revenue recognition. As a result of improvements in the Company’s systems and processes for sales into the distribution channel implemented during the first quarter of 2017, the Company concluded that it is now able to reasonably estimate returns and pricing concessions such as ship and credit rights. Therefore, commencing with first quarter of 2017 and for all periods thereafter, the Company will recognize revenue at the time the Company ships products to distributors with appropriate provisions for future price adjustments and returns. This change in estimate does not affect sales which originate through the systems and processes of Fairchild Semiconductor International, Inc. (“Fairchild”), which the Company acquired in September 2016. The systems and processes of Fairchild enable the Company to estimate up front the effects of returns and allowances provided to the distributors and thereby record the net revenue at the time of sale to distributors related to a legacy Fairchild system and process. The impact of this change will be that revenue from both legacy ON Semiconductor and Fairchild will be recognized upon shipment to the distributor in accordance with the “sell-in” method.
About ON Semiconductor
ON Semiconductor (Nasdaq: ON) is driving energy efficient innovations, empowering customers to reduce global energy use. The company is a leading supplier of semiconductor-based solutions, offering a comprehensive portfolio of energy efficient power management, analog, sensors, logic, timing, connectivity, discrete, SoC and custom devices. The company’s products help engineers solve their unique design challenges in automotive, communications, computing, consumer, industrial, medical, aerospace and defense applications. ON Semiconductor operates a responsive, reliable, world-class supply chain and quality program, a robust compliance and ethics program, 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.
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Additional factors that could affect our future results or events are described under Part I, Item 1A “Risk Factors” in our 2016 Annual Report on Form 10-K filed with the SEC on February 28, 2017 (“2016 Form 10-K”), Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K. You should carefully consider the trends, risks and uncertainties described in this document, the 2016 Form 10-K and other reports filed with or furnished to the SEC before making any investment decision with respect to our securities. If any of these trends, risks or uncertainties actually occurs or continues, our business, financial condition or operating results could be materially adversely affected, the trading prices of our securities could decline, and you could lose all or part of your investment. Readers are cautioned not to place undue reliance on forward-looking statements. We assume no obligation to update such information, except as may be required by law. 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