1097864--2/22/2006--ON_SEMICONDUCTOR

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{debt, indebtedness, cash}

{stock, price, operating}

{condition, economic, financial}

{cost, operation, labor}

{acquisition, growth, future}

{product, market, service}

{financial, litigation, operation}

{regulation, change, law}

{product, liability, claim}

{customer, product, revenue}

{property, intellectual, protect}

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{operation, international, foreign}

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{personnel, key, retain}

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{cost, contract, operation}

Trends, Risks and Uncertainties Related to Our Business We have experienced declines in revenues and operating losses, and we may experience additional declines in revenues and operating losses in the future. We operate in the highly cyclical semiconductor industry, which is subject to significant downturns. Our gross profit is dependent on a number of factors, including our level of capacity utilization. The failure to implement, as well as the completion and impact of, our profitability enhancement programs and cost reductions could adversely affect our business. If we are unable to implement our business strategy, our revenues and profitability may be adversely affected. We may require additional capital in the future, and additional funds may not be available on terms acceptable to us. We may be unable to make the substantial research and development investments required to remain competitive in our business. Uncertainties involving the ordering and shipment of, and payment for, our products could adversely affect our business. An inability to introduce new products could adversely affect us, and changing technologies or consumption patterns could reduce the demand for our products. Competition in our industry could prevent us from maintaining our revenues and from raising prices to offset increases in costs. Unless we maintain manufacturing efficiency, our future profitability could be adversely affected. We could be required to incur significant capital expenditures for manufacturing and information technology and equipment to remain competitive, the failure, inadequacy or delayed implementation of which could harm our ability to effectively operate our business. If we were to lose one of our large customers or if the existing downturn in the automotive market persists or deepens, our revenues and profitability could be adversely affected. The loss of our sources of raw materials or manufacturing services, or increases in the prices of such goods or services, could adversely affect our operations and productivity. Acquisitions and strategic alliances may harm our operating results or cause us to incur debt or assume contingent liabilities or dilute our stockholders. Our international operations subject us to risks inherent in doing business on an international level that could adversely impact our results of operations. If we fail to attract and retain highly-skilled personnel, our results of operations and competitive position could deteriorate. Changes in stock option accounting rules may adversely impact our results of operations prepared in accordance with generally accepted accounting principles, our stock price and our competitiveness in the employee marketplace. We use a significant amount of intellectual property in our business. Some of that intellectual property is currently subject to disputes with third parties, and litigation could arise in the future. If we are unable to protect the intellectual property we use, our business could be adversely affected. We are party to securities class action litigation which may be costly to defend and the outcome of which is uncertain. We are subject to litigation risks. We are exposed to increased costs and risks associated with complying with increasing and new regulation of corporate governance and disclosure standards including Section 404 of the Sarbanes-Oxley Act. Environmental and other regulatory matters could adversely affect our ability to conduct our business and could require expenditures that could have a material adverse effect on our results of operations and financial condition. Terrorist attacks, such as the attacks that occurred in New York and Washington D.C. on September 11, 2001, or threats or occurrences of international armed conflict or other terrorist activities both in the United States and internationally may affect the markets in which our common stock trades, the markets in which we operate and our profitability. Warranty claims, product liability claims and product recalls could harm our business, results of operations and financial condition. Trends, Risks and Uncertainties Relating to Our Indebtedness Our substantial debt could impair our financial condition and adversely affect our ability to operate our business. We may incur more debt, which could exacerbate the risks described above. The agreements relating to our indebtedness may restrict our current and future operations, particularly our ability to respond to changes or to take some actions. Our failure to comply with the agreements relating to our outstanding indebtedness, including as a result of events beyond our control, could result in an event of default that could materially and adversely affect our operating results and our financial condition. We may not be able to generate sufficient cash flow to meet our debt service obligations. Trends, Risks and Uncertainties Relating to Our Common Stock Fluctuations in our quarterly operating results may cause our stock price to decline. Our stock price may be volatile, which could result in substantial losses for investors in our securities. TPG, as our principal stockholder, controls our company, which will limit the ability of our other stockholders to influence the outcome of director elections and other matters submitted for a vote of the stockholders. Provisions in our charter documents may delay or prevent the acquisition of our company, which could decrease the value of our stock.

Full 10-K form ▸

1097864--2/22/2006--ON_SEMICONDUCTOR_CORP