UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended April 2, 20211, 2022
Or
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
(Commission File Number) 001-39317
ON SEMICONDUCTOR CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware | | 36-3840979 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
5005 E. McDowell Road
Phoenix, AZ 85008
(602) 244-6600
(Address, zip code and telephone number, including area code, of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.01 per share | ON | The Nasdaq Stock Market LLC |
Preferred Stock, Series B Junior Participating, Purchase Rights | N/A | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”,filer,” “accelerated filer”,filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act
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Large Accelerated Filer | ☒ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
| | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x
The number of shares outstanding of the issuer's class of common stock as of the close of business on April 28, 2021:
27, 2022: | | | | | | | | |
Title of Each Class | | Number of Shares |
Common Stock, par value $0.01 per share | | 427,008,100434,505,663 |
ON SEMICONDUCTOR CORPORATION FORM 10-Q
TABLE OF CONTENTS
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Part I: Financial Information | |
| Item 1. Financial Statements (unaudited) | |
| Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations | |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | |
| Item 4. Controls and Procedures | |
Part II: Other Information | |
| Item 1. Legal Proceedings | |
| Item 1A. Risk Factors | |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | |
| Item 3. Defaults Upon Senior Securities | |
| Item 4. Mine Safety Disclosures | |
| Item 5. Other Information | |
| Item 6. Exhibits | |
| Signatures | |
(See the glossary of selected terms immediately following this table of contents for definitions of certain abbreviated terms)
ON SEMICONDUCTOR CORPORATION
FORM 10-Q
GLOSSARY OF SELECTED ABBREVIATED TERMS*
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Abbreviated Term | | Defined Term |
0% Notes | | 0% Convertible Senior Notes due 2027 |
1.00% Notes | | 1.00% Convertible Senior Notes due 2020 |
1.625% Notes | | 1.625% Convertible Senior Notes due 2023 |
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3.875% Notes | | 3.875% Senior Notes due 2028 |
ADAS | | Advanced driver-assistance systems |
AEC | | Automotive Electronics Council |
Amended Credit Agreement | | Credit Agreement, dated as of April 15, 2016, as subsequently amended, by and among the Company, as borrower, the several lenders party thereto, Deutsche Bank AG, New York Branch, as administrative agent and collateral agent, and certain other parties, providing for the Revolving Credit Facility and the Term Loan “B” Facility |
Amended and Restated SIP | | ON Semiconductor Corporation Amended and Restated Stock Incentive Plan, as amended |
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ASIC | | Application specific integrated circuit |
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ASU | | Accounting Standards Update |
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DSP | | Digital signal processing |
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ESPP | | ON Semiconductor Corporation 2000 Employee Stock Purchase Plan, as amended |
Exchange Act | | Securities Exchange Act of 1934, as amended |
Fairchild | | Fairchild Semiconductor International, Inc. |
FASB | | Financial Accounting Standards Board |
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IC | | Integrated circuit |
IoT | | Internet-of-things |
IP | | Intellectual property |
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LIBO Rate | | A base rate per annum equal to the London Interbank Offered Rate as administered by the International Exchange Benchmark Administration |
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LiDAR | | Light detection and ranging |
MCU | | Microcontroller unit |
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QuantennaCommission or SEC | | Quantenna Communications,Securities and Exchange Commission |
ESPP | | ON Semiconductor Corporation 2000 Employee Stock Purchase Plan, as amended |
Exchange Act | | Securities Exchange Act of 1934, as amended |
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FASB | | Financial Accounting Standards Board |
GTAT | | GT Advanced Technologies Inc. |
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IP | | Intellectual property |
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IRS | | United States Internal Revenue Service |
OEM | | Original Equipment Manufacturer |
Revolving Credit Facility | | A $1.97 billion revolving credit facility created pursuant to the Amended Credit Agreement |
ROU | | Right-of-use |
RSU | | Restricted stock unit |
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SEC | | Securities and Exchange Commission |
SoC | | System on chip |
Securities Act | | Securities Act of 1933, as amended |
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Term Loan “B”"B" Facility | | A $2.4 billion term loan “B”"B" facility created pursuant to the Amended Credit Agreement |
Wi-Fi | | Wireless radio technologies compliant with Institute of Electrical and Electronics Engineers Standard 802.11b and commonly used in wireless local area networking devices |
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* Terms used, but not defined, within the body of the Form 10-Q are defined in this Glossary.
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
ON SEMICONDUCTOR CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share data)
(unaudited)
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| April 1, 2022 | | December 31, 2021 |
Assets | | | |
Cash and cash equivalents | $ | 1,645.1 | | | $ | 1,352.6 | |
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Receivables, net | 910.7 | | | 809.4 | |
Inventories | 1,496.0 | | | 1,379.5 | |
Other current assets | 315.6 | | | 240.1 | |
Total current assets | 4,367.4 | | | 3,781.6 | |
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Property, plant and equipment, net | 2,559.4 | | | 2,524.3 | |
Goodwill | 1,936.7 | | | 1,937.5 | |
Intangible assets, net | 474.5 | | | 495.7 | |
Deferred tax assets | 349.3 | | | 366.3 | |
Other assets | 525.1 | | | 520.6 | |
Total assets | $ | 10,212.4 | | | $ | 9,626.0 | |
Liabilities, Non-Controlling Interest and Stockholders’ Equity | | | |
Accounts payable | $ | 725.3 | | | $ | 635.1 | |
Accrued expenses and other current liabilities | 670.4 | | | 747.6 | |
Current portion of long-term debt | 170.4 | | | 160.7 | |
Total current liabilities | 1,566.1 | | | 1,543.4 | |
Long-term debt | 3,035.4 | | | 2,913.9 | |
Deferred tax liabilities | 40.9 | | | 43.2 | |
Other long-term liabilities | 552.0 | | | 521.1 | |
Total liabilities | 5,194.4 | | | 5,021.6 | |
Commitments and contingencies (Note 10) | 0 | | 0 |
ON Semiconductor Corporation stockholders’ equity: | | | |
Common stock ($0.01 par value, 1,250,000,000 shares authorized, 606,021,655 and 603,044,079 issued, 434,494,753 and 432,472,818 outstanding, respectively) | 6.1 | | | 6.0 | |
Additional paid-in capital | 4,533.3 | | | 4,633.3 | |
Accumulated other comprehensive loss | (26.4) | | | (40.6) | |
Accumulated earnings | 2,992.4 | | | 2,435.1 | |
Less: Treasury stock, at cost: 171,526,902 and 170,571,261 shares, respectively | (2,507.2) | | | (2,448.4) | |
Total ON Semiconductor Corporation stockholders’ equity | 4,998.2 | | | 4,585.4 | |
Non-controlling interest | 19.8 | | | 19.0 | |
Total stockholders' equity | 5,018.0 | | | 4,604.4 | |
Total liabilities and stockholders' equity | $ | 10,212.4 | | | $ | 9,626.0 | |
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| April 2, 2021 | | December 31, 2020 |
Assets | | | |
Cash and cash equivalents | $ | 1,042.5 | | | $ | 1,080.7 | |
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Receivables, net | 683.6 | | | 676.0 | |
Inventories | 1,295.5 | | | 1,251.4 | |
Other current assets | 166.0 | | | 176.0 | |
Total current assets | 3,187.6 | | | 3,184.1 | |
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Property, plant and equipment, net | 2,489.4 | | | 2,512.3 | |
Goodwill | 1,663.4 | | | 1,663.4 | |
Intangible assets, net | 441.1 | | | 469.0 | |
Deferred tax assets | 447.2 | | | 429.0 | |
Other assets | 401.7 | | | 410.2 | |
Total assets | $ | 8,630.4 | | | $ | 8,668.0 | |
Liabilities, Non-Controlling Interest and Stockholders’ Equity | | | |
Accounts payable | $ | 605.0 | | | $ | 572.9 | |
Accrued expenses and other current liabilities | 588.3 | | | 570.0 | |
Current portion of long-term debt | 536.7 | | | 531.6 | |
Total current liabilities | 1,730.0 | | | 1,674.5 | |
Long-term debt | 2,806.9 | | | 2,959.7 | |
Deferred tax liabilities | 53.9 | | | 57.3 | |
Other long-term liabilities | 390.0 | | | 418.4 | |
Total liabilities | 4,980.8 | | | 5,109.9 | |
Commitments and contingencies (Note 9) | 0 | | 0 |
ON Semiconductor Corporation stockholders’ equity: | | | |
Common stock ($0.01 par value, 1,250,000,000 shares authorized, 579,553,444 and 570,766,439 issued, 419,896,411 and 411,842,629 outstanding, respectively) | 5.8 | | | 5.7 | |
Additional paid-in capital | 4,161.0 | | | 4,133.1 | |
Accumulated other comprehensive loss | (55.9) | | | (57.6) | |
Accumulated earnings | 1,515.4 | | | 1,425.5 | |
Less: Treasury stock, at cost: 159,657,033 and 158,923,810 shares, respectively | (1,996.7) | | | (1,968.2) | |
Total ON Semiconductor Corporation stockholders’ equity | 3,629.6 | | | 3,538.5 | |
Non-controlling interest | 20.0 | | | 19.6 | |
Total stockholders' equity | 3,649.6 | | | 3,558.1 | |
Total liabilities and stockholders' equity | $ | 8,630.4 | | | $ | 8,668.0 | |
See accompanying notes to consolidated financial statements
ON SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in millions, except per share data)
(unaudited)
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| Quarters Ended | | |
| April 2, 2021 | | April 3, 2020 | | | | |
Revenue | $ | 1,481.7 | | | $ | 1,277.9 | | | | | |
Cost of revenue (exclusive of amortization shown below) | 960.5 | | | 875.2 | | | | | |
Gross profit | 521.2 | | | 402.7 | | | | | |
Operating expenses: | | | | | | | |
Research and development | 173.6 | | | 171.0 | | | | | |
Selling and marketing | 78.9 | | | 76.8 | | | | | |
General and administrative | 72.4 | | | 71.2 | | | | | |
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Amortization of acquisition-related intangible assets | 25.0 | | | 32.3 | | | | | |
Restructuring, asset impairments and other charges, net | 42.5 | | | 32.8 | | | | | |
Intangible asset impairment | 2.9 | | | 0 | | | | | |
Total operating expenses | 395.3 | | | 384.1 | | | | | |
Operating income | 125.9 | | | 18.6 | | | | | |
Other income (expense), net: | | | | | | | |
Interest expense | (33.4) | | | (42.5) | | | | | |
Interest income | 0.4 | | | 1.9 | | | | | |
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Other income | 4.5 | | | 0.1 | | | | | |
Other income (expense), net | (28.5) | | | (40.5) | | | | | |
Income (loss) before income taxes | 97.4 | | | (21.9) | | | | | |
Income tax (provision) benefit | (7.1) | | | 8.2 | | | | | |
Net income (loss) | 90.3 | | | (13.7) | | | | | |
Less: Net income attributable to non-controlling interest | (0.4) | | | (0.3) | | | | | |
Net income (loss) attributable to ON Semiconductor Corporation | $ | 89.9 | | | $ | (14.0) | | | | | |
Comprehensive income (loss), net of tax: | | | | | | | |
Net income (loss) | $ | 90.3 | | | $ | (13.7) | | | | | |
Foreign currency translation adjustments | (2.3) | | | 0.6 | | | | | |
Effects of cash flow hedges | 4.0 | | | (12.8) | | | | | |
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Other comprehensive income (loss), net of tax | 1.7 | | | (12.2) | | | | | |
Comprehensive income (loss) | 92.0 | | | (25.9) | | | | | |
Comprehensive income attributable to non-controlling interest | (0.4) | | | (0.3) | | | | | |
Comprehensive income (loss) attributable to ON Semiconductor Corporation | $ | 91.6 | | | $ | (26.2) | | | | | |
Net income (loss) per share of common stock attributable to ON Semiconductor Corporation: | | | | | | | |
Basic | $ | 0.22 | | | $ | (0.03) | | | | | |
Diluted | $ | 0.20 | | | $ | (0.03) | | | | | |
Weighted-average shares of common stock outstanding: | | | | | | | |
Basic | 413.4 | | | 410.6 | | | | | |
Diluted | 445.4 | | | 410.6 | | | | | |
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| Quarters Ended | | |
| April 1, 2022 | | April 2, 2021 | | | | |
Revenue | $ | 1,945.0 | | | $ | 1,481.7 | | | | | |
Cost of revenue (exclusive of amortization shown below) | 983.7 | | | 960.5 | | | | | |
Gross profit | 961.3 | | | 521.2 | | | | | |
Operating expenses: | | | | | | | |
Research and development | 156.8 | | | 173.6 | | | | | |
Selling and marketing | 71.1 | | | 78.9 | | | | | |
General and administrative | 77.9 | | | 72.4 | | | | | |
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Amortization of acquisition-related intangible assets | 21.3 | | | 25.0 | | | | | |
Restructuring, asset impairments and other charges, net | (13.0) | | | 42.5 | | | | | |
Intangible asset impairment | — | | | 2.9 | | | | | |
Total operating expenses | 314.1 | | | 395.3 | | | | | |
Operating income | 647.2 | | | 125.9 | | | | | |
Other income (expense), net: | | | | | | | |
Interest expense | (21.6) | | | (33.4) | | | | | |
Interest income | 0.4 | | | 0.4 | | | | | |
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Other income (expense) | 2.1 | | | 4.5 | | | | | |
Other income (expense), net | (19.1) | | | (28.5) | | | | | |
Income before income taxes | 628.1 | | | 97.4 | | | | | |
Income tax provision | (97.1) | | | (7.1) | | | | | |
Net income | 531.0 | | | 90.3 | | | | | |
Less: Net income attributable to non-controlling interest | (0.8) | | | (0.4) | | | | | |
Net income attributable to ON Semiconductor Corporation | $ | 530.2 | | | $ | 89.9 | | | | | |
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Net income for diluted earnings per share of common stock (Note 8) | 530.7 | | | 89.9 | | | | | |
Net income per share of common stock: | | | | | | | |
Basic | $ | 1.22 | | | $ | 0.22 | | | | | |
Diluted | $ | 1.18 | | | $ | 0.20 | | | | | |
Weighted-average shares of common stock outstanding: | | | | | | | |
Basic | 433.3 | | | 413.4 | | | | | |
Diluted | 448.9 | | | 445.4 | | | | | |
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Comprehensive income, net of tax: | | | | | | | |
Net income | $ | 531.0 | | | $ | 90.3 | | | | | |
Foreign currency translation adjustments | (2.4) | | | (2.3) | | | | | |
Effects of cash flow hedges and other adjustments | 16.6 | | | 4.0 | | | | | |
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Other comprehensive income, net of tax | 14.2 | | | 1.7 | | | | | |
Comprehensive income | 545.2 | | | 92.0 | | | | | |
Comprehensive income attributable to non-controlling interest | (0.8) | | | (0.4) | | | | | |
Comprehensive income attributable to ON Semiconductor Corporation | $ | 544.4 | | | $ | 91.6 | | | | | |
See accompanying notes to consolidated financial statements
ON SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in millions, except share data)
(unaudited)
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| Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | | Treasury Stock | Non-Controlling Interest | |
| Number of shares | At Par Value | Accumulated Earnings | Number of shares | At Cost | Total Equity |
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Balance at December 31, 2020 | 570,766,439 | | $ | 5.7 | | $ | 4,133.1 | | $ | (57.6) | | $ | 1,425.5 | | (158,923,810) | | $ | (1,968.2) | | $ | 19.6 | | $ | 3,558.1 | |
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Shares issued pursuant to the ESPP | 204,415 | | — | | 5.7 | | — | | — | | — | | — | | — | | 5.7 | |
RSUs and stock grant awards issued | 2,269,328 | | — | | — | | — | | — | | — | | — | | — | | 0 | |
Shares issued upon exercise of warrants for 1.00% Notes | 6,313,262 | | 0.1 | | (0.1) | | — | | — | | — | | — | | — | | 0 | |
Payment of tax withholding for RSUs | — | | — | | — | | — | | — | | (733,223) | | (28.5) | | — | | (28.5) | |
Share-based compensation | — | | — | | 22.3 | | — | | — | | — | | — | | — | | 22.3 | |
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Comprehensive income | — | | — | | — | | 1.7 | | 89.9 | | — | | — | | 0.4 | | 92.0 | |
Balance at April 2, 2021 | 579,553,444 | | $ | 5.8 | | $ | 4,161.0 | | $ | (55.9) | | $ | 1,515.4 | | (159,657,033) | | $ | (1,996.7) | | $ | 20.0 | | $ | 3,649.6 | |
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| Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | | Treasury Stock | Non-Controlling Interest | |
| Number of shares | At Par Value | Accumulated Earnings | Number of shares | At Cost | Total Equity |
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Balance at December 31, 2021 | 603,044,079 | | $ | 6.0 | | $ | 4,633.3 | | $ | (40.6) | | $ | 2,435.1 | | (170,571,261) | | $ | (2,448.4) | | $ | 19.0 | | $ | 4,604.4 | |
Impact of the adoption of ASU 2020-06 | — | | — | | (129.1) | | — | | 27.1 | | — | | — | | — | | (102.0) | |
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Shares issued pursuant to the ESPP | 126,388 | | — | | 6.7 | | — | | — | | — | | — | | — | | 6.7 | |
RSUs and stock grant awards issued | 2,851,188 | | 0.1 | | (0.1) | | — | | — | | — | | — | | — | | — | |
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Payment of tax withholding for RSUs | — | | — | | — | | — | | — | | (955,641) | | (58.8) | | — | | (58.8) | |
Share-based compensation | — | | — | | 22.5 | | — | | — | | — | | — | | — | | 22.5 | |
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Comprehensive income | — | | — | | — | | 14.2 | | 530.2 | | — | | — | | 0.8 | | 545.2 | |
Balance at April 1, 2022 | 606,021,655 | | $ | 6.1 | | $ | 4,533.3 | | $ | (26.4) | | $ | 2,992.4 | | (171,526,902) | | $ | (2,507.2) | | $ | 19.8 | | $ | 5,018.0 | |
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| Balance at December 31, 2019 | 565,562,607 | | $ | 5.7 | | $ | 3,809.5 | | $ | (54.3) | | $ | 1,191.3 | | (154,249,943) | | $ | (1,650.5) | | $ | 22.4 | | $ | 3,324.1 | | |
Balance at December 31, 2020 | | Balance at December 31, 2020 | 570,766,439 | | $ | 5.7 | | $ | 4,133.1 | | $ | (57.6) | | $ | 1,425.5 | | (158,923,810) | | $ | (1,968.2) | | $ | 19.6 | | $ | 3,558.1 | |
| Shares issued pursuant to the ESPP | Shares issued pursuant to the ESPP | 487,438 | | — | | 5.1 | | — | | — | | — | | — | | — | | 5.1 | | Shares issued pursuant to the ESPP | 204,415 | | — | | 5.7 | | — | | — | | — | | — | | — | | 5.7 | |
RSUs and stock grant awards issued | RSUs and stock grant awards issued | 2,724,497 | | 0 | | — | | — | | — | | — | | — | | — | | 0 | | RSUs and stock grant awards issued | 2,269,328 | | — | | — | | — | | — | | — | | — | | — | | — | |
Shares issued upon exercise of warrants for 1.00% Notes | | Shares issued upon exercise of warrants for 1.00% Notes | 6,313,262 | | 0.1 | | (0.1) | | — | | — | | — | | — | | — | | — | |
Payment of tax withholding for RSUs | Payment of tax withholding for RSUs | — | | — | | — | | — | | — | | (908,620) | | (16.0) | | — | | (16.0) | | Payment of tax withholding for RSUs | — | | — | | — | | — | | — | | (733,223) | | (28.5) | | — | | (28.5) | |
Share-based compensation | Share-based compensation | — | | — | | 15.7 | | — | | — | | — | | — | | — | | 15.7 | | Share-based compensation | — | | — | | 22.3 | | — | | — | | — | | — | | — | | 22.3 | |
Repurchase of common stock | — | | — | | — | | — | | — | | (3,611,413) | | (65.4) | | — | | (65.4) | | |
| Comprehensive (loss) income | — | | — | | — | | (12.2) | | (14.0) | | — | | — | | 0.3 | | (25.9) | | |
Balance at April 3, 2020 | 568,774,542 | | $ | 5.7 | | $ | 3,830.3 | | $ | (66.5) | | $ | 1,177.3 | | (158,769,976) | | $ | (1,731.9) | | $ | 22.7 | | $ | 3,237.6 | | |
| Comprehensive income | | Comprehensive income | — | | — | | — | | 1.7 | | 89.9 | | — | | — | | 0.4 | | 92.0 | |
Balance at April 2, 2021 | | Balance at April 2, 2021 | 579,553,444 | | $ | 5.8 | | $ | 4,161.0 | | $ | (55.9) | | $ | 1,515.4 | | (159,657,033) | | $ | (1,996.7) | | $ | 20.0 | | $ | 3,649.6 | |
|
See accompanying notes to consolidated financial statements
ON SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
| | | | | | | | | | | |
| Quarters Ended |
| April 2, 2021 | | April 3, 2020 |
Cash flows from operating activities: | | | |
Net income (loss) | $ | 90.3 | | | $ | (13.7) | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | |
Depreciation and amortization | 153.4 | | | 161.2 | |
Loss on sale or disposal of fixed assets | 0.3 | | | 0.2 | |
| | | |
| | | |
| | | |
Amortization of debt discount and issuance costs | 2.4 | | | 3.0 | |
| | | |
| | | |
Share-based compensation | 22.3 | | | 15.7 | |
Non-cash interest on convertible notes | 4.6 | | | 9.5 | |
Non-cash asset impairment charges | 6.1 | | | 1.4 | |
| | | |
Change in deferred tax balances | (23.2) | | | (19.0) | |
Other | (2.0) | | | 0 | |
Changes in assets and liabilities: | | | |
Receivables | (9.9) | | | 52.7 | |
Inventories | (42.0) | | | (19.5) | |
Other assets | 9.9 | | | 5.9 | |
Accounts payable | 8.9 | | | (12.4) | |
Accrued expenses and other current liabilities | 12.8 | | | (17.6) | |
Other long-term liabilities | (15.4) | | | (1.4) | |
Net cash provided by operating activities | $ | 218.5 | | | $ | 166.0 | |
Cash flows from investing activities: | | | |
Purchase of property, plant and equipment | $ | (77.0) | | | $ | (132.3) | |
Proceeds from sale of property, plant and equipment | 0.2 | | | 0 | |
Deposits utilized (made) for purchase of property, plant and equipment | (0.4) | | | 2.2 | |
| | | |
Purchase of business, net of cash acquired | 0 | | | (4.5) | |
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Settlement of purchase price from previous acquisition | 0 | | | 26.0 | |
Net cash used in investing activities | $ | (77.2) | | | $ | (108.6) | |
Cash flows from financing activities: | | | |
Proceeds for the issuance of common stock under the ESPP | $ | 6.6 | | | $ | 7.5 | |
| | | |
Payment of tax withholding for RSUs | (28.5) | | | (16.0) | |
Repurchase of common stock | 0 | | | (65.4) | |
Issuance and borrowings under debt agreements | 0 | | | 1,165.0 | |
| | | |
Repayment of borrowings under debt agreements | (154.1) | | | (56.0) | |
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Payments related to prior acquisition | (2.1) | | | (4.9) | |
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Net cash provided by (used in) financing activities | $ | (178.1) | | | $ | 1,030.2 | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (0.8) | | | 0.2 | |
Net increase (decrease) in cash, cash equivalents and restricted cash | (37.6) | | | 1,087.8 | |
Beginning cash, cash equivalents and restricted cash (Note 5) | 1,081.5 | | | 894.2 | |
Ending cash, cash equivalents and restricted cash (Note 5) | $ | 1,043.9 | | | $ | 1,982.0 | |
| | | | | | | | | | | |
| Quarters Ended |
| April 1, 2022 | | April 2, 2021 |
Cash flows from operating activities: | | | |
Net income | $ | 531.0 | | | $ | 90.3 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 140.6 | | | 153.4 | |
(Gain) loss on sale or disposal of fixed assets | (16.6) | | | 0.3 | |
| | | |
| | | |
| | | |
Amortization of debt discount and issuance costs | 3.2 | | | 2.4 | |
| | | |
| | | |
Share-based compensation | 22.5 | | | 22.3 | |
Non-cash interest on convertible notes | — | | | 4.6 | |
Non-cash asset impairment charges | 6.7 | | | 6.1 | |
| | | |
Change in deferred tax balances | 38.3 | | | (23.2) | |
Other | 0.5 | | | (2.0) | |
Changes in assets and liabilities (exclusive of divestiture): | | | |
Receivables | (107.2) | | | (9.9) | |
Inventories | (116.7) | | | (42.0) | |
Other assets | (0.8) | | | 9.9 | |
Accounts payable | 35.7 | | | 8.9 | |
Accrued expenses and other current liabilities | (83.2) | | | 12.8 | |
Other long-term liabilities | 24.6 | | | (15.4) | |
Net cash provided by operating activities | $ | 478.6 | | | $ | 218.5 | |
Cash flows from investing activities: | | | |
Purchase of property, plant and equipment | $ | (173.8) | | | $ | (77.0) | |
Proceeds from sale of property, plant and equipment | 36.7 | | | 0.2 | |
Deposits utilized (made) for purchase of property, plant and equipment | 1.6 | | | (0.4) | |
Divestiture of business, net of cash transferred and deposits received | 12.9 | | | — | |
Payments related to prior acquisition | (2.4) | | | — | |
| | | |
| | | |
| | | |
Purchase of available-for-sale securities | (7.8) | | | — | |
Proceeds from sale or maturity of available-for-sale securities | 3.4 | | | — | |
| | | |
| | | |
| | | |
| | | |
| | | |
Net cash used in investing activities | $ | (129.4) | | | $ | (77.2) | |
Cash flows from financing activities: | | | |
Proceeds for the issuance of common stock under the ESPP | $ | 7.8 | | | $ | 6.6 | |
| | | |
Payment of tax withholding for RSUs | (58.8) | | | (28.5) | |
| | | |
| | | |
| | | |
| | | |
Repayment of borrowings under debt agreements | (4.1) | | | (154.1) | |
| | | |
| | | |
Payments related to prior acquisition | — | | | (2.1) | |
| | | |
| | | |
Dividend to non-controlling shareholder | (2.2) | | | — | |
Net cash used in financing activities | $ | (57.3) | | | $ | (178.1) | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (0.7) | | | (0.8) | |
Net increase (decrease) in cash, cash equivalents and restricted cash | 291.2 | | | (37.6) | |
Cash, cash equivalents and restricted cash, beginning of period (Note 6) | 1,377.7 | | | 1,081.5 | |
Cash, cash equivalents and restricted cash, end of period (Note 6) | $ | 1,668.9 | | | $ | 1,043.9 | |
See accompanying notes to consolidated financial statements
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1: Background and Basis of Presentation
ON Semiconductor Corporation, together with its wholly and majority-owned subsidiaries, which operate under the onsemiTM brand ("ON Semiconductor,onsemi," "we," “us,” “our,”"us," "our" or the "Company"), uses a thirteen-week fiscal quarter accounting period for the first three fiscal quarters of each year, with the first quarter of 20212022 having ended on April 2, 20211, 2022 and each fiscal year ending on December 31. The quarters ended April 1, 2022 and April 2, 2021 contained 91 and April 3, 2020 contained 92 and 94 days, respectively. As of April 2, 2021,1, 2022, the Company was organized into the following 3 operating and reportable segments: the Power Solutions Group ("PSG"), the Advanced Solutions Group ("ASG") and the Intelligent Sensing Group ("ISG").
The accompanying unaudited financial statements as of and for the quarter ended April 2, 20211, 2022 have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") for unaudited interim financial information.. Accordingly, the unaudited financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. The balance sheet as of December 31, 20202021 was derived from the Company's audited financial statements, but does not include all disclosures required by GAAP for audited financial statements. In the opinion of the Company's management, the interim information includes all adjustments, which include normal recurring adjustments, necessary for a fair statement of the results for the interim periods. Certain reclassifications have been made to prior period amounts to conform to current-period presentation. The footnote disclosures related to the interim financial information included herein are also unaudited. Such financial information should be read in conjunction with the consolidated financial statements and related notes thereto for the year ended December 31, 20202021 included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020,2021, which was filed with the SEC on February 16, 202114, 2022 (the “2020"2021 Form 10-K”10-K").
Use of Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. Management evaluates these estimates and judgments on an ongoing basis and bases its estimates on experience, current and expected future conditions, third-party evaluations and various other assumptions that management believes are reasonable under the circumstances. Significant estimates have been used by management in conjunction with the following: (i) future payouts for customer incentives and amounts subject to allowances and returns; (ii) valuation and obsolescence relating to inventories; (iii) variable and share-based compensation; and (iv)(iii) measurement of valuation allowances against deferred tax assets and evaluations of uncertain tax positions. Additionally, during periods where it becomes applicable, significant estimates will be used by management in determining the future cash flows used to assess and test for impairment of long-lived assets and goodwill and in assumptions used in connection with business combinations. Actual results may differ from the estimates and assumptions used in the consolidated financial statements.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
Note 2: Revenue and Segment Information
The Company is organized into 3 operating and reportable segments consisting of PSG, ASG and ISG. These segments represent the Company’s view of the business, and its gross profit is used to evaluate the performance of the Company’s segments, the progress of major initiatives and the allocation of resources. Gross profit is exclusive of the amortization of acquisition-related intangible assets. Depreciation expense is included in segment gross profit.
During the quarter ended April 1, 2022, the Company received capacity payments and deposits of $5.5 million, which was recorded as a contract liability, of which an immaterial amount was recognized as revenue for satisfying the associated performance obligations. The remaining balances amounting to $27.6 million and $28.9 million were recorded as current liabilities and other long-term liabilities, respectively. Contract assets were immaterial as of April 1, 2022. There were no corresponding amounts for the quarter ended April 2, 2021.
A significant portion of the Company’s orders are firm commitments that are non-cancellable, including certain orders or contracts with a duration of less than one year. Certain of the Company's customer contracts are multi-year agreements that include firmly committed amounts for which the remaining performance obligations as of April 1, 2022 were approximately $8.6 billion (excluding the remaining performance obligations for contracts having a duration of one year or less). The Company expects to recognize approximately 30% of this amount as revenue during the next twelve months upon shipment of products under these contracts. Total sales estimates are based on negotiated contract prices and demand quantities, and could be influenced by manufacturing and supply chain constraints, among other things. Accordingly, the amount represented by remaining performance obligations may not be indicative of the actual revenue recognized for future periods.
Revenue and gross profit for the Company’s operating and reportable segments are as follows (in millions):
| | | PSG | | ASG | | ISG | | Total | | PSG | | ASG | | ISG | | Total |
For the quarter ended April 2, 2021: | | | | | | | | |
For the quarter ended April 1, 2022: | | For the quarter ended April 1, 2022: | | | | | | | |
Revenue from external customers | Revenue from external customers | $ | 747.0 | | | $ | 531.5 | | | $ | 203.2 | | | $ | 1,481.7 | | Revenue from external customers | $ | 986.7 | | | $ | 689.3 | | | $ | 269.0 | | | $ | 1,945.0 | |
Gross profit | Gross profit | $ | 246.5 | | | $ | 206.8 | | | $ | 67.9 | | | $ | 521.2 | | Gross profit | $ | 474.7 | | | $ | 366.7 | | | $ | 119.9 | | | $ | 961.3 | |
For the quarter ended April 3, 2020: | | |
For the quarter ended April 2, 2021: | | For the quarter ended April 2, 2021: | |
Revenue from external customers | Revenue from external customers | $ | 623.9 | | | $ | 467.1 | | | $ | 186.9 | | | $ | 1,277.9 | | Revenue from external customers | $ | 747.0 | | | $ | 531.5 | | | $ | 203.2 | | | $ | 1,481.7 | |
Gross profit (1) | Gross profit (1) | $ | 182.6 | | | $ | 157.8 | | | $ | 62.3 | | | $ | 402.7 | | Gross profit (1) | $ | 246.5 | | | $ | 206.8 | | | $ | 67.9 | | | $ | 521.2 | |
|
(1)Beginning in the first quarter of 2021, the Company started including unallocated manufacturing costs as part of segment operating results to determine segment gross profit. As a result, the prior-period amounts have been reclassified to conform to current-period presentation.
The Company had one customer, a distributor, whose revenue accounted for approximately 12.4% and 10.6% of the Company's total revenue for the quarterquarters ended April 1, 2022 and April 2, 2021.2021, respectively.
Revenue for the Company's operating and reportable segments disaggregated into geographic locations based on sales billed from the respective country and sales channels are as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| Quarter Ended April 2, 2021 |
| PSG | | ASG | | ISG | | Total |
Geographic Location | | | | | | | |
Singapore | $ | 274.5 | | | $ | 201.7 | | | $ | 32.8 | | | $ | 509.0 | |
Hong Kong | 196.1 | | | 100.5 | | | 45.6 | | | 342.2 | |
United Kingdom | 142.7 | | | 82.6 | | | 43.6 | | | 268.9 | |
United States | 75.3 | | | 70.2 | | | 38.8 | | | 184.3 | |
Other | 58.4 | | | 76.5 | | | 42.4 | | | 177.3 | |
Total | $ | 747.0 | | | $ | 531.5 | | | $ | 203.2 | | | $ | 1,481.7 | |
| | | | | | | |
Sales Channel | | | | | | | |
Distributors | $ | 523.9 | | | $ | 288.9 | | | $ | 121.2 | | | $ | 934.0 | |
Direct Customers | 223.1 | | | 242.6 | | | 82.0 | | | 547.7 | |
| | | | | | | |
Total | $ | 747.0 | | | $ | 531.5 | | | $ | 203.2 | | | $ | 1,481.7 | |
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| Quarter Ended April 1, 2022 |
| PSG | | ASG | | ISG | | Total |
Geographic Location | | | | | | | |
Singapore | $ | 280.5 | | | $ | 233.8 | | | $ | 41.4 | | | $ | 555.7 | |
Hong Kong | 303.1 | | | 173.9 | | | 52.6 | | | 529.6 | |
United Kingdom | 186.9 | | | 106.6 | | | 52.0 | | | 345.5 | |
United States | 144.9 | | | 92.3 | | | 74.5 | | | 311.7 | |
Other | 71.3 | | | 82.7 | | | 48.5 | | | 202.5 | |
Total | $ | 986.7 | | | $ | 689.3 | | | $ | 269.0 | | | $ | 1,945.0 | |
| | | | | | | |
Sales Channel | | | | | | | |
Distributors | $ | 633.9 | | | $ | 356.9 | | | $ | 150.6 | | | $ | 1,141.4 | |
Direct Customers | 352.8 | | | 332.4 | | | 118.4 | | | 803.6 | |
| | | | | | | |
Total | $ | 986.7 | | | $ | 689.3 | | | $ | 269.0 | | | $ | 1,945.0 | |
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ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
| | | Quarter Ended April 3, 2020 | | Quarter Ended April 2, 2021 |
| | PSG | | ASG | | ISG | | Total | | PSG | | ASG | | ISG | | Total |
Geographic Location | Geographic Location | | | | | | | | Geographic Location | | | | | | | |
Singapore | Singapore | $ | 194.3 | | | $ | 172.6 | | | $ | 41.4 | | | $ | 408.3 | | Singapore | $ | 274.5 | | | $ | 201.7 | | | $ | 32.8 | | | $ | 509.0 | |
Hong Kong | Hong Kong | 192.0 | | | 91.9 | | | 32.3 | | | 316.2 | | Hong Kong | 196.1 | | | 100.5 | | | 45.6 | | | 342.2 | |
United Kingdom | United Kingdom | 105.1 | | | 76.8 | | | 45.1 | | | 227.0 | | United Kingdom | 142.7 | | | 82.6 | | | 43.6 | | | 268.9 | |
United States | United States | 72.7 | | | 77.3 | | | 34.5 | | | 184.5 | | United States | 75.3 | | | 70.2 | | | 38.8 | | | 184.3 | |
Other | Other | 59.8 | | | 48.5 | | | 33.6 | | | 141.9 | | Other | 58.4 | | | 76.5 | | | 42.4 | | | 177.3 | |
Total | Total | $ | 623.9 | | | $ | 467.1 | | | $ | 186.9 | | | $ | 1,277.9 | | Total | $ | 747.0 | | | $ | 531.5 | | | $ | 203.2 | | | $ | 1,481.7 | |
| Sales Channel | Sales Channel | | Sales Channel | |
Distributors | Distributors | $ | 386.3 | | | $ | 213.6 | | | $ | 103.4 | | | $ | 703.3 | | Distributors | $ | 523.9 | | | $ | 288.9 | | | $ | 121.2 | | | $ | 934.0 | |
Direct Customers | Direct Customers | 237.6 | | | 253.5 | | | 83.5 | | | 574.6 | | Direct Customers | 223.1 | | | 242.6 | | | 82.0 | | | 547.7 | |
| Total | Total | $ | 623.9 | | | $ | 467.1 | | | $ | 186.9 | | | $ | 1,277.9 | | Total | $ | 747.0 | | | $ | 531.5 | | | $ | 203.2 | | | $ | 1,481.7 | |
| | |
The Company operates in various geographic locations. Sales to unaffiliatedexternal customers have little correlation with the location of manufacturers. Accordingly, the Company doesIt is, therefore, not meaningful to present operating profit by geographical location.
The Company does not discretely allocate assets to its operating segments, nor does management evaluate operating segments using discrete asset information. The Company’s consolidated assets are not specifically ascribed to its individual reportable segments. Rather, assets used in operations are generally shared across the Company’s operating and reportable segments.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
Property, plant and equipment, net by geographic location, is summarized as follows (in millions):
| | | As of | | As of |
| | April 2, 2021 | | December 31, 2020 | | April 1, 2022 | | December 31, 2021 |
United States | United States | $ | 690.8 | | | $ | 686.6 | | United States | $ | 752.4 | | | $ | 767.1 | |
South Korea | South Korea | 446.0 | | | 455.5 | | South Korea | 573.0 | | | 492.8 | |
Philippines | Philippines | 376.4 | | | 386.6 | | Philippines | 330.7 | | | 342.4 | |
Czech Republic | | Czech Republic | 220.7 | | | 214.2 | |
China | China | 224.5 | | | 229.6 | | China | 214.0 | | | 216.8 | |
Czech Republic | 211.3 | | | 216.1 | | |
Japan | Japan | 216.1 | | | 209.3 | | Japan | 188.1 | | | 198.6 | |
Malaysia | Malaysia | 188.3 | | | 190.2 | | Malaysia | 172.8 | | | 175.3 | |
Other | Other | 136.0 | | | 138.4 | | Other | 107.7 | | | 117.1 | |
Total | Total | $ | 2,489.4 | | | $ | 2,512.3 | | Total | $ | 2,559.4 | | | $ | 2,524.3 | |
Note 3: Recent Accounting Pronouncements
Pending adoption:Adopted:
ASU 2020-06 - Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“("ASU 2020-06”2020-06")
In August 2020, the FASB issued ASU 2020-06, which simplifies the guidance on the issuer’s accounting for convertible debt instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt and will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that is within the scope of ASU 2020-06. Also, ASU 2020-06 requires the application of the if-converted method for the purpose of calculating diluted earnings per share, and the treasury stock method will be no longer available.available for instruments that fall under this category. The Company adopted ASU 2020-06 as of January 1, 2022 using the modified retrospective method, and recorded adjustments to reduce additional paid-in capital by $129.1 million and increase opening retained earnings by $27.1 million to reflect the cumulative effect of the adoption. See Note 7: ''Long-Term Debt'' for further information.
Pending adoption:
ASU 2021-10 - Government Assistance (Topic 832) - Disclosures by Business Entities about Government Assistance ("ASU 2021-10")
In November 2021, the FASB issued ASU 2021-10, which requires business entities to make annual disclosures about the nature of the certain government assistance received and the related accounting policy used to account for such assistance along with certain other disclosures related to the transactions. If an entity omits any required disclosures because it is legally prohibited, it must disclose that fact. ASU 2021-10 will be applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. As required,to the 2022 annual financial statements, and the Company plans to adopt ASUis currently evaluating the applicable disclosures.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
2020-06
Note 4: Acquisition and Divestitures
Acquisition:
The Company finalized its determination relating to the fair value of assets acquired and liabilities assumed from GTAT. The final allocation of purchase price, which did not change from the preliminary allocation disclosed in the 2021 Form 10-K is as follows (in millions):
| | | | | | | | |
| | Purchase Price Allocation |
Cash and cash equivalents | | $ | 8.2 | |
Inventory and other current assets | | 10.0 | |
Property, plant and equipment | | 31.9 | |
Goodwill | | 274.8 | |
Intangible assets - Developed Technology | | 130.0 | |
Deferred tax assets | | 13.4 | |
Other non-current assets | | 7.4 | |
Total assets acquired | | 475.7 | |
Current liabilities | | 5.8 | |
Other long-term liabilities | | 35.0 | |
Total liabilities assumed | | 40.8 | |
Net assets acquired/purchase price | | $ | 434.9 | |
All assumptions and disclosures remained unchanged from the amounts included in the 2021 Form 10-K.
Divestitures:
Belgium fab
In February 2022, the Company divested its Oudenaarde, Belgium site to BelGaN Group BV, which primarily included the assets, liabilities and relevant employee group related to the six-inch front-end wafer manufacturing facility for an aggregate consideration of January 1,$19.9 million and recognized a nominal gain after offsetting the carrying values of the assets disposed and liabilities transferred.
South Portland, Maine fab
During the first quarter of 2022, the Company entered into an asset purchase agreement to divest its South Portland, Maine site to Diodes Incorporated, which includes the net assets and relevant employee group related to the eight-inch front-end wafer manufacturing facility. The transaction is expected to close during the second quarter of 2022 and is currently evaluating its impact onresult in a nominal gain or loss, and the consolidated financial statements and expects a decrease in interest expense and an increase in the dilutive effect of convertible notes included in diluted weighted-average shares of common stock outstandingcorresponding assets have been classified as held for the purpose of calculating diluted earnings per share.sale within other current assets.
Note 4:5: Restructuring, Asset Impairments and Other, Net
Details of restructuring, asset impairments and other charges, net are as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Restructuring | | Asset Impairments | | Other | | Total | | | | | |
Quarter ended April 2, 2021 | | | | | | | | | | | | | |
2021 Involuntary Separation Program | | $ | 33.0 | | | $ | 0 | | | $ | 0 | | | $ | 33.0 | | | | | | |
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Other | | 0 | | | 3.2 | | | 6.3 | | | 9.5 | | | | | | |
Total | | $ | 33.0 | | | $ | 3.2 | | | $ | 6.3 | | | $ | 42.5 | | | | | | |
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| | Restructuring | | Asset Impairments | | Other | | Total | | | | | |
Quarter ended April 1, 2022 | | | | | | | | | | | | | |
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Other | | $ | (0.5) | | | $ | 4.0 | | | $ | (16.5) | | | $ | (13.0) | | | | | | |
Total | | $ | (0.5) | | | $ | 4.0 | | | $ | (16.5) | | | $ | (13.0) | | | | | | |
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ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
A summary of changes in accrued restructuring from December 31, 2020 to April 2, 2021balance is as follows (in millions):
| | | As of | | | As of | | As of | | | | As of |
| | December 31, 2020 | | Charges | | Usage | | | April 2, 2021 | | December 31, 2021 | | Charges | | Usage | | | April 1, 2022 |
Employee separation charges | Employee separation charges | | $ | 6.2 | | | $ | 33.0 | | | $ | (11.4) | | | | $ | 27.8 | | Employee separation charges | | $ | 10.8 | | | $ | (0.5) | | | $ | (4.8) | | | | $ | 5.5 | |
| Total | Total | | $ | 6.2 | | | $ | 33.0 | | | $ | (11.4) | | | | $ | 27.8 | | Total | | $ | 10.8 | | | $ | (0.5) | | | $ | (4.8) | | | | $ | 5.5 | |
2021 Involuntary Separation Program
On March 4, 2021, as partThe Other category primarily includes the gain from the sale of its ongoing efforts to realign its investments to focus on growth driversan office building. There were no new restructuring programs implemented and key markets and to streamline its operations, the Company announced its plans to implement certain employee terminationsactivity during the first half of 2021 (the "ISP"). Under the ISP, the Company expects to terminate the employment of approximately 740 employees and incur severance costs and other benefits between $58 million and $62 million.
During the quarter ended April 2, 2021, the Company notified approximately 5001, 2022 represented payments to employees of their employment termination, and incurred severance costs and other benefits amounting to $33.0 million, pursuant to the ISP. As of April 2, 2021, $26.5 million of such severance costs and benefits remained accrued and, based on the exit dates of the notified employees, is expected to be paidwhose employments were terminated during the second quarter of 2021. The remaining employees are expected to be notified, and the corresponding severance costs will be incurred, during the second quarter of 2021.
The Company continues to evaluate employee positions and locations for potential efficiencies, and may incur additional severance and related charges in the future.
Note 5:6: Balance Sheet Information and Other
Goodwill
There was 0an insignificant change in the balance of goodwill from December 31, 20202021 to April 2, 2021. 1, 2022 relating to the divestiture of a business.
Goodwill is tested for impairment annually on the first day of the fourth quarter or more frequently if events or changes in circumstances (each, a "triggering event") would more likely than not reduce the carrying value of goodwill below its fair value. Management did not identify any triggering events during the quarter ended April 2, 20211, 2022 that would require an interim impairment analysis.
Inventory
Details of Inventory included in the Company’s Consolidated Balance Sheets are as follows (in millions): | | | | | | | | | | | |
| As of |
| April 1, 2022 | | December 31, 2021 |
Inventories: | | | |
Raw materials | $ | 193.5 | | | $ | 174.2 | |
Work in process | 971.5 | | | 888.9 | |
Finished goods | 331.0 | | | 316.4 | |
| $ | 1,496.0 | | | $ | 1,379.5 | |
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Other current assets
Assets classified as held-for-sale, consisting of properties and certain other assets, are required to be recorded at the lower of carrying value or fair value less costs to sell. Fixed assets of approximately $70 million have been classified as held-for-sale within other current assets as of April 1, 2022.
Defined Benefit Plans
The Company recognizes the aggregate amount of all over-funded plans as assets and the aggregate amount of all underfunded plans as liabilities in its financial statements. As of April 1, 2022, the net assets for the over-funded plans totaled $14.3 million. The total accrued pension liability for underfunded plans was $112.6 million, of which the current portion of $0.2 million was classified as accrued expenses and other current liabilities. As of December 31, 2021, the net funded status for all the plans was a liability of $103.9 million, of which the current portion of $0.2 million was classified as accrued expenses and other current liabilities.
The components of the net periodic pension expense were as follows (in millions):
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
Inventory
Details of Inventory included in the Company’s Consolidated Balance Sheets are as follows (in millions):
| | | | | | | | | | | |
| As of |
| April 2, 2021 | | December 31, 2020 |
Inventories: | | | |
Raw materials | $ | 139.0 | | | $ | 135.7 | |
Work in process | 834.4 | | | 829.7 | |
Finished goods | 322.1 | | | 286.0 | |
| $ | 1,295.5 | | | $ | 1,251.4 | |
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Defined Benefit Plans
The Company recognizes the aggregate amount of all overfunded plans as assets and the aggregate amount of all underfunded plans as liabilities in its financial statements. As of April 2, 2021, the net assets for the overfunded plans totaled $8.5 million. The total accrued pension liability for underfunded plans was $147.9 million, of which the current portion of $0.4 million was classified as accrued expenses and other current liabilities. As of December 31, 2020, the net funded status for all the plans was a liability of $141.9 million, of which the current portion of $0.3 million was classified as accrued expenses and other current liabilities.
The components of the net periodic pension expense were as follows (in millions):
| | | Quarters Ended | | | Quarters Ended | |
| | April 2, 2021 | | April 3, 2020 | | | April 1, 2022 | | April 2, 2021 | |
Service cost | Service cost | $ | 3.1 | | | $ | 2.7 | | | Service cost | $ | 2.2 | | | $ | 3.1 | | |
Interest cost | Interest cost | 1.1 | | | 1.1 | | | Interest cost | 1.1 | | | 1.1 | | |
Expected return on plan assets | Expected return on plan assets | (1.7) | | | (1.5) | | | Expected return on plan assets | (1.2) | | | (1.7) | | |
| Curtailment loss | Curtailment loss | 1.9 | | | 0 | | | Curtailment loss | — | | | 1.9 | | |
| Total net periodic pension cost | Total net periodic pension cost | $ | 4.4 | | | $ | 2.3 | | | Total net periodic pension cost | $ | 2.1 | | | $ | 4.4 | | |
Leases
Operating lease arrangements are comprised primarily of real estate and equipment agreements. The components of lease expense were as follows (in millions):
| | | Quarters Ended | | | Quarters Ended | |
| | April 2, 2021 | | April 3, 2020 | | | April 1, 2022 | | April 2, 2021 | |
Operating lease | Operating lease | $ | 9.9 | | | $ | 9.1 | | | Operating lease | $ | 11.2 | | | $ | 9.9 | | |
Variable lease | Variable lease | 1.0 | | | 1.1 | | | Variable lease | 1.6 | | | 1.0 | | |
Short-term lease | Short-term lease | 0.7 | | | 1.1 | | | Short-term lease | 0.4 | | | 0.7 | | |
Total lease expense | Total lease expense | $ | 11.6 | | | $ | 11.3 | | | Total lease expense | $ | 13.2 | | | $ | 11.6 | | |
The lease liabilities recognized in the Consolidated Balance Sheets are as follows (in millions):
| | | As of | | As of |
| | April 2, 2021 | | December 31, 2020 | | April 1, 2022 | | December 31, 2021 |
Operating lease liabilities included in: | | Operating lease liabilities included in: | | | |
Accrued expenses and other current liabilities | Accrued expenses and other current liabilities | $ | 32.9 | | | $ | 32.2 | | Accrued expenses and other current liabilities | $ | 35.1 | | | $ | 32.5 | |
Other long-term liabilities | Other long-term liabilities | 108.8 | | | 115.7 | | Other long-term liabilities | 137.9 | | | 142.4 | |
Total lease liabilities | $ | 141.7 | | | $ | 147.9 | | |
Total | | Total | $ | 173.0 | | | $ | 174.9 | |
| Operating ROU assets included in: | | Operating ROU assets included in: | | | |
Other assets | | Other assets | $ | 169.7 | | | $ | 170.1 | |
| Financing lease liabilities included in: | | Financing lease liabilities included in: | | | |
Accrued expenses and other current liabilities | | Accrued expenses and other current liabilities | $ | 12.7 | | | $ | 12.7 | |
Other long-term liabilities | | Other long-term liabilities | 10.2 | | | 10.2 | |
Total | | Total | $ | 22.9 | | | $ | 22.9 | |
Financing ROU assets included in: | | Financing ROU assets included in: | | | |
Other assets | | Other assets | $ | 21.9 | | | $ | 22.3 | |
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
Operating Right-of-use ("ROU") assets as of April 2, 2021 and December 31, 2020 amounted to $133.8 million and $136.3 million, respectively, and are included in other assets in the Consolidated Balance Sheets. As of April 2, 2021,1, 2022, the weighted-average remaining lease-term was 6.7lease-terms were 8.3 years and 19.8 years and the weighted-average discount rate was 4.8%.rates were 4.2% and 6.0% for operating and financing leases, respectively.
Supplemental Disclosure of Cash Flow Information
Certain of the Company's cash and non-cash activities were as follows (in millions):
| | | | | | | | | | | | | | | | | |
| | Quarters Ended | |
| | April 2, 2021 | | April 3, 2020 | | | |
Non-cash investing activities: | | | | | | | |
Capital expenditures in accounts payable and other long-term liabilities | | $ | 180.9 | | | $ | 123.5 | | | | |
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ROU assets obtained in exchange of lease liabilities | | 7.1 | | | 8.8 | | | | |
Non-cash financing activity: | | | | | | | |
Liability incurred for purchase of business | | $ | 0 | | | $ | 7.7 | | | | |
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Cash paid for: | | | | | | | |
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Interest expense | | $ | 31.4 | | | $ | 24.5 | | | | |
Income taxes | | 20.9 | | | 9.9 | | | | |
Operating lease payments in operating cash flows | | 10.3 | | | 8.2 | | | | |
Reconciliation of the captions in the Consolidated Balance Sheets to the Consolidated Statements of Cash Flows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of |
| | April 2, 2021 | | December 31, 2020 | | April 3, 2020 | | December 31, 2019 |
Consolidated Balance Sheets: | | | | | | | | |
Cash and cash equivalents | | $ | 1,042.5 | | | $ | 1,080.7 | | | $ | 1,982.0 | | | $ | 894.2 | |
Restricted cash (included in other current assets) | | 1.4 | | | 0.8 | | | 0 | | | 0 | |
Cash, cash equivalents and restricted cash in Consolidated Statements of Cash Flows | | $ | 1,043.9 | | | $ | 1,081.5 | | | $ | 1,982.0 | | | $ | 894.2 | |
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
Note 6: Long-Term Debt
The Company's long-term debt consists of the following (annualized interest rates, in millions):
| | | | | | | | | | | |
| As of |
| April 2, 2021 | | December 31, 2020 |
Amended Credit Agreement: | | | |
Revolving Credit Facility due 2024, interest payable monthly at 1.61% and 1.90%, respectively | $ | 550.0 | | | $ | 700.0 | |
Term Loan “B” Facility due 2026, interest payable monthly at 2.11% and 2.15%, respectively | 1,610.4 | | | 1,614.5 | |
3.875% Notes due 2028 (1) | 700.0 | | | 700.0 | |
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1.625% Notes due 2023 (2) | 575.0 | | | 575.0 | |
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Gross long-term debt, including current portion | $ | 3,435.4 | | | $ | 3,589.5 | |
Less: Debt discount (3) | (64.7) | | | (69.7) | |
Less: Debt issuance costs (4) | (27.1) | | | (28.5) | |
Net long-term debt, including current portion | $ | 3,343.6 | | | $ | 3,491.3 | |
Less: Current portion of long-term debt | (536.7) | | | (531.6) | |
Net long-term debt | $ | 2,806.9 | | | $ | 2,959.7 | |
(1) Interest is payable on March 1 and September 1 of each year at 3.875% annually.
(2) Interest is payable on April 15 and October 15 of each year at 1.625% annually.
(3) Debt discount of $6.4 million and $6.5 million for the 3.875% Notes, $49.6 million and $54.2 million for the 1.625% Notes and $8.7 million and $9.0 million for the Term Loan "B" Facility, in each case as of April 2, 2021 and December 31, 2020, respectively.
(4) Debt issuance costs of $2.2 million and $2.3 million for the 3.875% Notes, $4.8 million and $5.2 million for the 1.625% Notes and $20.1 million and $21.0 million for the Term Loan "B" Facility, in each case as of April 2, 2021 and December 31, 2020, respectively.
Expected maturities of gross long-term debt (including current portion - see 1.625% Notes section below) as of April 2, 2021 were as follows (in millions):
| | | | | | | | |
Period | | Expected Maturities |
Remainder of 2021 | | $ | 587.3 | |
2022 | | 16.3 | |
2023 | | 16.3 | |
2024 | | 566.4 | |
2025 | | 16.3 | |
Thereafter | | 2,232.8 | |
Total | | $ | 3,435.4 | |
The Company was in compliance with its covenants under all debt agreements as of April 2, 2021.
Revolving Credit Facility
During the quarter ended April 2, 2021, the Company repaid $150.0 million of the outstanding balance under the Revolving Credit Facility using the cash generated from its operations. As a result, as of April 2, 2021, the Company had approximately $1,419.0 million available for future borrowings under the Revolving Credit Facility.
1.625% Notes due 2023
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
Certain of the Company's cash and non-cash activities were as follows (in millions): | | | | | | | | | | | | | | | | | |
| | Quarters Ended | |
| | April 1, 2022 | | April 2, 2021 | | | |
Non-cash investing activities: | | | | | | | |
Capital expenditures in accounts payable and other long-term liabilities | | $ | 225.4 | | | $ | 180.9 | | | | |
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Operating ROU assets obtained in exchange of lease liabilities | | 10.7 | | | 7.1 | | | | |
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Cash paid for: | | | | | | | |
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Interest expense | | $ | 24.0 | | | $ | 31.4 | | | | |
Income taxes | | 15.7 | | | 20.9 | | | | |
Operating lease payments in operating cash flows | | 11.0 | | | 10.3 | | | | |
Reconciliation of the captions in the Consolidated Balance Sheets to the Consolidated Statements of Cash Flows (in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of |
| | April 1, 2022 | | December 31, 2021 | | April 2, 2021 | | December 31, 2020 |
Consolidated Balance Sheets: | | | | | | | | |
Cash and cash equivalents | | $ | 1,645.1 | | | $ | 1,352.6 | | | $ | 1,042.5 | | | $ | 1,080.7 | |
Restricted cash (included in other current assets) | | 18.8 | | | 20.1 | | | 1.4 | | | 0.8 | |
Restricted cash (included in other non-current assets) | | 5.0 | | | 5.0 | | | — | | | — | |
Cash, cash equivalents and restricted cash in Consolidated Statements of Cash Flows | | $ | 1,668.9 | | | $ | 1,377.7 | | | $ | 1,043.9 | | | $ | 1,081.5 | |
As determinedof April 1, 2022, $15.0 million of the restricted cash balance was held in escrow relating to the acquisition of GTAT and recordedwill be released to the former stockholders of GTAT upon satisfaction of certain outstanding items contained in the acquisition agreement.
Note 7: Long-Term Debt
The Company's long-term debt consists of the following (annualized interest rates, dollars in millions):
| | | | | | | | | | | |
| As of |
| April 1, 2022 | | December 31, 2021 |
Amended Credit Agreement: | | | |
| | | |
Term Loan "B" Facility due 2026, interest payable monthly at 2.46% and 2.10%, respectively | 1,594.1 | | | 1,598.2 | |
0% Notes due 2027 | 805.0 | | | 805.0 | |
3.875% Notes due 2028 (1) | 700.0 | | | 700.0 | |
| | | |
1.625% Notes due 2023 (2) | 155.1 | | | 155.1 | |
Gross long-term debt, including current maturities | $ | 3,254.2 | | | $ | 3,258.3 | |
Less: Debt discount (3) | (12.6) | | | (149.0) | |
Less: Debt issuance costs (4) | (35.8) | | | (34.7) | |
Net long-term debt, including current maturities | $ | 3,205.8 | | | $ | 3,074.6 | |
Less: Current maturities | (170.4) | | | (160.7) | |
Net long-term debt | $ | 3,035.4 | | | $ | 2,913.9 | |
(1)Interest is payable on March 1 and September 1 of each year at 3.875% annually.
(2)Interest is payable on April 15 and October 15 of each year at 1.625% annually.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
(3)Debt discount of $7.2 million and $7.5 million for the Term Loan "B" Facility and $5.4 million and $5.8 million for the 3.875% Notes, in each case as of April 1, 2022 and December 31, 2021, respectively. Debt discount of $126.1 million for the 0% Notes and $9.6 million for the 1.625% Notes, in each case as of December 31, 2020,2021. No debt discount as of April 1, 2022 for 0% Notes and 1.625% Notes due to the adoption of ASU 2020-06.
(4)Debt issuance costs of $16.8 million and $17.7 million for the Term Loan "B" Facility, $16.3 million and $14.1 million for the 0% Notes, $1.9 million and $2.0 million for the 3.875% Notes and $0.8 million and $0.9 million for the 1.625% Notes, in each case as of April 1, 2022 and December 31, 2021, respectively.
Expected maturities of gross long-term debt (including current portion - see section regarding 1.625% Notes below) as of April 1, 2022 were as follows (in millions):
| | | | | | | | |
Period | | Expected Maturities |
Remainder of 2022 | | $ | 167.4 | |
2023 | | 16.3 | |
2024 | | 16.3 | |
2025 | | 16.3 | |
2026 | | 1,532.9 | |
Thereafter | | 1,505.0 | |
Total | | $ | 3,254.2 | |
The Company was in compliance with its covenants under all debt agreements as of April 1, 2022.
Adoption of ASU 2020-06
As described in Note 3: Recent Accounting Pronouncements, the Company adopted ASU 2020-06 using a modified retrospective method and reduced additional paid-in capital by $129.1 million and increased opening retained earnings by $27.1 million to reflect the cumulative effect of adoption as of January 1, 2022. The application of the if-converted method to determine the net income for diluted earnings and diluted weighted-average shares of common stock outstanding did not have a meaningful impact on the diluted net income per share of common stock under the treasury stock method previously applied.
1.625% Notes due 2023
The remaining outstanding principal amount of the 1.625% Notes, amounting to $155.1 million, net of unamortized issuance costs continues to be classified as a current portion of long-term debt as of April 1, 2022. Pursuant to the indenture governing the 1.625% Notes, because the last reported sale price of the Company’s common stock for at least 20 trading days during the period of 30 consecutive trading days ending on March 31, 2021 continued to be2022 was greater than or equal to $26.94 (130% of the conversion price) on each applicable trading day. As a result,day, the Company maintained the outstanding balance of the 1.625% Notes amounting to $520.6 million, net of unamortized discount and issuance costs, as a current portion of long-term debt as of April 2, 2021. The holders have the right to surrender any portion of their 1.625% Notes (in minimum denominations of $1,000 in principal amount or an integral multiple thereof) for conversion during the calendar quarter ending June 30, 2021 (and2022, and only during such calendar quarter unless the trigger remains) pursuant to the termsquarter.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
Note 7:8: Earnings Per Share and Equity
Earnings Per Share
Net income (loss) per share of common stock attributable to ON Semiconductor Corporationfor calculating basic and diluted earnings per share is calculated as follows (in millions, except per share data):
| | | Quarters Ended | | | Quarters Ended | |
| | April 2, 2021 | | April 3, 2020 | | | April 1, 2022 | | April 2, 2021 | |
Net income (loss) attributable to ON Semiconductor Corporation | $ | 89.9 | | | $ | (14.0) | | | |
Net income for basic earnings per share of common stock | | Net income for basic earnings per share of common stock | $ | 530.2 | | | $ | 89.9 | | |
Add: Interest on 1.625% Notes | | Add: Interest on 1.625% Notes | 0.5 | | | — | | |
Net income for diluted earnings per share of common stock | | Net income for diluted earnings per share of common stock | $ | 530.7 | | | $ | 89.9 | | |
| Basic weighted-average shares of common stock outstanding | Basic weighted-average shares of common stock outstanding | 413.4 | | | 410.6 | | | Basic weighted-average shares of common stock outstanding | 433.3 | | | 413.4 | | |
Dilutive effect of share-based awards | Dilutive effect of share-based awards | 2.7 | | | 0 | | | Dilutive effect of share-based awards | 2.4 | | | 2.7 | | |
Dilutive effect of convertible notes and warrants | Dilutive effect of convertible notes and warrants | 29.3 | | | 0 | | | Dilutive effect of convertible notes and warrants | 13.2 | | | 29.3 | | |
Diluted weighted-average shares of common stock outstanding | Diluted weighted-average shares of common stock outstanding | 445.4 | | | 410.6 | | | Diluted weighted-average shares of common stock outstanding | 448.9 | | | 445.4 | | |
| Net income (loss) per share of common stock attributable to ON Semiconductor Corporation: | | | |
Net income per share of common stock: | | Net income per share of common stock: | | |
Basic | Basic | $ | 0.22 | | | $ | (0.03) | | | Basic | $ | 1.22 | | | $ | 0.22 | | |
Diluted | Diluted | $ | 0.20 | | | $ | (0.03) | | | Diluted | $ | 1.18 | | | $ | 0.20 | | |
Basic income (loss) per share of common stock is computed by dividing net income (loss) attributable to the Companyfor basic earnings by the weighted-average number of shares of common stock outstanding during the period. To calculate the diluted weighted-average shares of common stock outstanding, treasury stock method has been applied to calculate the number of incremental shares from the assumed issuance of shares relating to RSUs. Share-basedThe excluded number of anti-dilutive share-based awards ofwas approximately 0.70.2 million and 2.60.7 million for the quarters ended April 1, 2022 and April 2, 2021, and April 3, 2020, respectively, were excluded as the impact was considered anti-dilutive.respectively.
The dilutive impactimpacts related to the 0% Notes and 1.625% Notes hashave been determined in accordance withcalculated using the net share settlement requirements, under whichif-converted method. While the 1.625%0% Notes are assumed to be convertible intorepayable in cash up to the par value withand in cash or shares of common stock for the excess over par value, being convertible intothe 1.625% Notes are repayable in cash or shares of common stock.stock for their entire value. Prior to conversion, the convertible note hedges are not considered for purposes of the earnings per share calculations, as their effect would be anti-dilutive. Upon conversion, the convertible note hedges are expected to offset the dilutive effect of the 0% Notes and 1.625% Notes when the stock price is above $52.97 and $20.72 per share.share, respectively.
The dilutive impact of the warrants issued concurrently with the issuance of the 1.00%0% Notes and 1.625% Notes with exercise prices of $25.96$74.34 and $30.70, respectively, has been included in the calculation of diluted weighted-average common shares outstanding. Approximately half of the warrants issued in connection with the 1.00% Notes were settled during the quarter ended April 2, 2021.outstanding, if applicable.
Equity
Share Repurchase Program
Under the Company's share repurchase program announced on November 15, 2018 (the "Share Repurchase Program"), the Company may repurchase up to $1.5 billion (exclusive of fees, commissions and other expenses) of the Company's common stock from December 1, 2018 through December 31, 2022. There were no repurchases during the quarters ended April 1, 2022 and April 2, 2021 under the Share Repurchase Program. As of April 1, 2022, the authorized amount remaining under the Share Repurchase Program was $1,295.8 million.
Shares for Restricted Stock Units Tax Withholding
The amounts remitted for employee withholding taxes during the quarters ended April 1, 2022 and April 2, 2021 were $58.8 million and $28.5 million, respectively, for which the Company withheld approximately 1.0 million and 0.7 million shares of
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
Equity
Warrants Settlement
At the time of issuance of the 1.00% Notes, the Company sold 37.3 million warrants to bank counterparties whereby the holders of the warrants had the option to purchase the equivalent number of shares of the Company’s common stock, at a price of $25.96 per share fromrespectively, that were underlying the Company beginning in March 2021. The bank counterparties exercised 18.7 million warrants during the quarter ended April 2, 2021, and the Company settled them by issuing 6.3 million shares of common stock on a net-share basis based on the average stock price on the day of exercise. Subsequent to the end of the first quarter, the warrant holders exercised the remaining 18.6 million warrants and the Company settled them by issuing 7.1 million shares of common stock.
Share Repurchase Program
There were 0 repurchases during the quarter ended April 2, 2021 under the share repurchase program announced on November 15, 2018 (the “Share Repurchase Program”), as compared to $65.3 million in share repurchases made by the Company under the Share Repurchase Program during the quarter ended April 3, 2020. As of April 2, 2021, the authorized amount remaining under the Share Repurchase Program was $1,295.8 million.
Activity under the Share Repurchase Program during the quarters ended April 2, 2021 and April 3, 2020 was as follows (in millions, except per share data):
| | | | | | | | | | | | | | | |
| Quarters Ended | | |
| April 2, 2021 | | April 3, 2020 | | | | |
Number of repurchased shares (1) | 0 | | | 3.6 | | | | | |
Aggregate purchase price | $ | 0 | | | $ | 65.3 | | | | | |
Fees, commissions and other expenses | 0 | | | 0.1 | | | | | |
| | | | | | | |
Total cash used for share repurchases | $ | 0 | | | $ | 65.4 | | | | | |
Weighted-average purchase price per share (2) | $ | 0 | | | $ | 18.08 | | | | | |
(1)NaNRSUs that vested. None of these shares had been reissued or retired as of April 2, 2021,1, 2022, but may be reissued or retired at a later date.
(2)Exclusive of fees, commissionsin the future. These deemed repurchases in connection with tax withholding upon vesting were not made under the Share Repurchase Program, and other expenses.
Shares for Restricted Stock Units Tax Withholding
Thethe amounts remitted for employee withholding taxes duringspent in connection with such deemed repurchases did not reduce the quarters ended April 2, 2021 and April 3, 2020 were $28.5 million and $16.0 million, respectively, for whichauthorized amount remaining under the Company withheld approximately 0.7 million and approximately 0.9 million shares of common stock, respectively, that were underlying the RSUs that vested. NaN of these shares had been reissued or retired as of April 2, 2021, but may be reissued or retired by the Company at a later date.Share Repurchase Program.
Non-Controlling Interest in Leshan-Phoenix Semiconductor Company Limited (“Leshan”)
The results of Leshan have been consolidated in the Company's financial statements. As of December 31, 2020,2021, the non-controlling interest balance was $19.6$19.0 million and, along with the $0.4$0.8 million share of the earnings for the quarter ended April 2, 2021,1, 2022, increased to $20.0$19.8 million as of April 2, 2021.1, 2022.
Note 8:9: Share-Based Compensation
Total share-based compensation expense related to the Company's RSUs, stock grant awards and the ESPP was recorded within the Consolidated Statements of Operations and Comprehensive Income as follows (in millions):
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
| | | Quarters Ended | | | Quarters Ended | |
| | April 2, 2021 | | April 3, 2020 | | | April 1, 2022 | | April 2, 2021 | |
Cost of revenue | Cost of revenue | $ | 3.3 | | | $ | 2.5 | | | Cost of revenue | $ | 2.6 | | | $ | 3.3 | | |
Research and development | Research and development | 5.7 | | | 4.1 | | | Research and development | 4.4 | | | 5.7 | | |
Selling and marketing | Selling and marketing | 4.3 | | | 2.9 | | | Selling and marketing | 3.8 | | | 4.3 | | |
General and administrative | General and administrative | 9.0 | | | 6.2 | | | General and administrative | 11.7 | | | 9.0 | | |
Share-based compensation expense | Share-based compensation expense | $ | 22.3 | | | $ | 15.7 | | | Share-based compensation expense | $ | 22.5 | | | $ | 22.3 | | |
Income tax benefit | Income tax benefit | (4.7) | | | (3.3) | | | Income tax benefit | (4.7) | | | (4.7) | | |
Share-based compensation expense, net of taxes | Share-based compensation expense, net of taxes | $ | 17.6 | | | $ | 12.4 | | | Share-based compensation expense, net of taxes | $ | 17.8 | | | $ | 17.6 | | |
As of April 2, 2021,1, 2022, total unrecognized expected share-based compensation expense, net of estimated forfeitures, related to non-vested RSUs with service, performance and market conditions was $142.7$157.6 million, which is expected to be recognized over a weighted-average period of 1.8 years. There were no stock options exercised during the quarter ended April 2, 2021. Upon option exercise, vesting of RSUs, stock grant awards or completion of a purchase under the ESPP, the Company issues new shares of common stock. The annualized pre-vesting forfeiture rate for RSUs was estimated to be 6% for the quarter ended April 1, 2022 and 5% for each of the quartersquarter ended April 2, 2021 and April 3, 2020.2021.
Shares Available
As of April 2, 20211, 2022 and December 31, 2020,2021, there was an aggregate of 17.6of 39.9 million and 16.542.2 million sharesshares of common stock, respectively, available for grant under the Amended and Restated SIP. The increase in available shares is attributable to the forfeiture of certain awards granted in 2019 due to the non-achievement of the performance criteria. As of April 2, 2021 and December 31, 2020, there was an aggregate of 2.7 million and 3.0 million shares of common stock, respectively, available for issuance under the ESPP.
Restricted Stock Units
RSUs generally vest ratably over three years for awards with service conditions and over two or three years for awards with performance or market conditions, or a combination thereof, and are settled in shares of the Company's common stock upon vesting. A summary of the RSU transactions for the quarter ended April 2, 20211, 2022 is as follows (in millions, except per share data):
| | | | Number of Shares | | Weighted-Average Grant Date Fair Value Per Share | | | Number of Shares | | Weighted-Average Grant Date Fair Value Per Share |
Non-vested RSUs at December 31, 2020 | | 11.3 | | | $ | 20.73 | | |
Non-vested RSUs at December 31, 2021 | | Non-vested RSUs at December 31, 2021 | | 6.2 | | | $ | 28.60 | |
Granted | Granted | | 2.1 | | | 41.19 | | Granted | | 1.5 | | | 60.66 | |
| Achieved | | Achieved | | 0.2 | | | 41.35 | |
Released | Released | | (2.3) | | | 21.97 | | Released | | (2.9) | | | 25.19 | |
Forfeited | Forfeited | | (2.8) | | | 21.63 | | Forfeited | | (0.2) | | | 32.66 | |
Non-vested RSUs at April 2, 2021 | | 8.3 | | | 25.38 | | |
Non-vested RSUs at April 1, 2022 | | Non-vested RSUs at April 1, 2022 | | 4.8 | | | 40.83 | |
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
Note 9:10: Commitments and Contingencies
Environmental Contingencies
There are no new material environmental contingencies subsequent to the filing of the 20202021 Form 10-K.
Financing Contingencies
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
In the ordinary course of business, the Company provides standby letters of credit or other guarantee instruments to certain parties initiated by either the Company or its subsidiaries, as required for transactions, including, but not limited to, material purchase commitments, agreements to mitigate collection risk, leases, utilities or customs guarantees. As of April 2, 2021,1, 2022, the Company's Revolving Credit Facility included $15.0 million available for the issuance of letters of credit. There were $0.9 million in letters of credit outstanding under the Revolving Credit Facility as of April 2, 2021,1, 2022, which reduced the Company's borrowing capacity. As of April 2, 2021,1, 2022, the Company also had outstanding guarantees and letters of credit outside of its Revolving Credit Facility totaling $8.6$13.4 million.
As part of obtaining financing in the ordinary course of business, the Company issued guarantees related to certain of its subsidiaries, which totaled $0.9 million as of April 2, 2021.
1, 2022. Based on historical experience and information currently available, the Company believes that it will not be required to make payments under the standby letters of credit or guarantee arrangements for the foreseeable future.
Indemnification Contingencies
There are no new material indemnification contingencies subsequent to the filing of the 20202021 Form 10-K.
Legal Matters
The Company is currently involved in a variety of legal matters that arise in the ordinary course of business. Based on information currently available, the Company is not involved in any pending or threatened legal proceedings that it believes could reasonably be expected to have a material adverse effect on its financial condition, results of operations or liquidity. The litigation process is inherently uncertain, and the Company cannot guarantee that the outcome of any litigation matter will be favorable to the Company.
Intellectual Property Matters
The Company faces risk of exposure from claims of infringement of the IP rights of others. In the ordinary course of business, the Company receives letters asserting that the Company’s products or components breach another party’s rights. Such letters may request royalty payments from the Company, that the Company cease and desist using certain IP or other remedies.
Note 10:11: Fair Value Measurements
Fair Value of Financial Instruments
The Company invests portions of its excess cash in different marketable securities, which are classified as available-for-sale. The following table summarizes the Company's financial assets and liabilities, excluding pension assets, disaggregated by the security type, measured at fair value on a recurring basis (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of | | Fair Value Hierarchy |
Description | | April 2, 2021 | | Level 1 | | Level 2 | | Level 3 |
Assets: | | | | | | | | |
Cash and cash equivalents: | | | | | | | | |
Demand and time deposits | | $ | 8.5 | | | $ | 8.5 | | | $ | 0 | | | $ | 0 | |
| | | | | | | | |
| | | | | | | | |
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of April 1, 2022 | | Fair Value Level |
Description | | Amortized Cost | | Unrealized gains | | Unrealized losses | | Fair value | | Level 1 | | Level 2 | | Level 3 |
Assets: | | | | | | | | | | | | | | |
Cash and cash equivalents: | | | | | | | | | | | | | | |
Demand and time deposits | | $ | 19.6 | | | $ | — | | | $ | — | | | $ | 19.6 | | | $ | 19.6 | | | $ | — | | | $ | — | |
Money market funds | | 0.7 | | | — | | | — | | | 0.7 | | | 0.7 | | | — | | | — | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Other current assets: | | | | | | | | | | | | | | |
Corporate bonds | | $ | 22.3 | | | $ | — | | | $ | — | | | $ | 22.3 | | | $ | — | | | $ | 22.3 | | | $ | — | |
Certificate of deposit | | 3.0 | | | — | | | — | | | 3.0 | | | — | | | 3.0 | | | — | |
Commercial paper | | 6.8 | | | — | | | — | | | 6.8 | | | 3.8 | | | 3.0 | | | — | |
US Treasury bonds | | 0.7 | | | — | | | — | | | 0.7 | | | — | | | 0.7 | | | — | |
| | | | | | | | | | | | | | |
Other assets: | | | | | | | | | | | | | | |
Corporate bonds | | $ | 14.2 | | | $ | — | | | $ | — | | | $ | 14.2 | | | $ | — | | | $ | 14.2 | | | $ | — | |
| | | | | | | | | | | | | | |
US Treasury bonds | | 1.2 | | | — | | | — | | | 1.2 | | | — | | | 1.2 | | | — | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of | | Fair Value Hierarchy |
Description | | December 31, 2020 | | Level 1 | | Level 2 | | Level 3 |
Assets: | | | | | | | | |
Cash and cash equivalents: | | | | | | | | |
Demand and time deposits | | $ | 8.5 | | | $ | 8.5 | | | $ | 0 | | | $ | 0 | |
| | | | | | | | |
| | | | | | | | |
The investments included in other assets have maturity dates ranging between one and five years.
Other
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of December 31, 2021 | | Fair Value Level |
Description | | Amortized Cost | | Unrealized gains | | Unrealized losses | | Fair value | | Level 1 | | Level 2 | | Level 3 |
Assets: | | | | | | | | | | | | | | |
Cash and cash equivalents: | | | | | | | | | | | | | | |
Demand and time deposits | | $ | 19.5 | | | $ | — | | | $ | — | | | $ | 19.5 | | | $ | 19.5 | | | $ | — | | | $ | — | |
Money market funds | | 0.7 | | | — | | | — | | | 0.7 | | | 0.7 | | | — | | | — | |
Corporate bonds | | 1.6 | | | — | | | — | | | 1.6 | | | — | | | 1.6 | | | — | |
Commercial paper | | 2.0 | | | — | | | — | | | 2.0 | | | — | | | 2.0 | | | — | |
| | | | | | | | | | | | | | |
Other current assets: | | | | | | | | | | | | | | |
Corporate bonds | | $ | 16.0 | | | $ | — | | | $ | — | | | $ | 16.0 | | | $ | — | | | $ | 16.0 | | | $ | — | |
Certificate of deposit | | 1.9 | | | — | | | — | | | 1.9 | | | — | | | 1.9 | | | — | |
Commercial paper | | 5.0 | | | — | | | — | | | 5.0 | | | 3.0 | | | 2.0 | | | — | |
US Treasury bonds | | 0.4 | | | — | | | — | | | 0.4 | | | — | | | 0.4 | | | — | |
| | | | | | | | | | | | | | |
Other assets: | | | | | | | | | | | | | | |
Corporate bonds | | $ | 19.7 | | | $ | — | | | $ | — | | | $ | 19.7 | | | $ | — | | | $ | 19.7 | | | $ | — | |
| | | | | | | | | | | | | | |
US Treasury bonds | | 1.6 | | | — | | | — | | | 1.6 | | | — | | | 1.6 | | | — | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
0Other
The carrying amounts of other current assets and liabilities, such as accounts receivable and accounts payable, approximate fair value based on the short-term nature of these instruments.
Fair Value of Long-Term Debt, including Current Portion
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
Fair Value of Long-Term Debt, including Current Portion
The carrying amounts and fair values of the Company’s long-term borrowings were as follows (in millions):
| | | As of | | As of |
| | April 2, 2021 | | December 31, 2020 | | April 1, 2022 | | December 31, 2021 |
| | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
Long-term debt, including current portion (1) | Long-term debt, including current portion (1) | | | | | | | | Long-term debt, including current portion (1) | | | | | | | |
Convertible notes | $ | 520.6 | | | $ | 1,214.0 | | | $ | 515.6 | | | $ | 967.1 | | |
0% Notes | | 0% Notes | $ | 788.7 | | | $ | 1,077.7 | | | $ | 664.8 | | | $ | 1,183.1 | |
1.625% Notes | | 1.625% Notes | 154.3 | | | 474.0 | | | 144.6 | | | 513.6 | |
Other long-term debt | Other long-term debt | 2,823.0 | | | 2,781.4 | | | 2,975.7 | | | 2,966.8 | | Other long-term debt | 2,262.7 | | | 2,137.8 | | | 2,265.2 | | | 2,245.5 | |
(1) Carrying amounts shown are net of debt discount, if applicable, and debt issuance costs.
The fair values of the 3.875% Notes, 1.625% Notes and the 1.625%0% Notes were estimated based on market prices in active markets (Level 1). The fair value of other long-term debtthe Term Loan "B" Facility was estimated based on discounting the remaining principal and interest payments using current market rates for similar debt (Level 2).
Note 11:12: Financial Instruments
Foreign Currencies
As a multinational business, the Company’sCompany engages in transactions that are denominated in a variety of currencies. When appropriate, the Company uses forward foreign currency contracts to reduce its overall exposure to the effects of currency fluctuations on its results of operations and cash flows. The Company’s policy prohibits trading in currencies for which there are no underlying exposures and entering into trades for any currency to intentionally increase the underlying exposure. The Company primarily hedges existing assets and liabilities associated with transactions currently on its balance sheet, which are undesignated hedges for accounting purposes.
As of April 2, 20211, 2022 and December 31, 2020,2021, the Company had net outstanding foreign exchange contracts with notional amounts of $281.7$236.7 million and $263.4$288.3 million, respectively. Such contracts were obtained through financial institutions and were scheduled to mature within one to three months from the time of purchase. Management believes that these financial instruments should not subject the Company to increased risks from foreign exchange movements because gains and losses on these contracts should offset losses and gains on the underlying assets, liabilities and transactions to which they are related.
The following summarizes the Company’s net foreign exchange positions in U.S. Dollars (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of |
| | April 2, 2021 | | December 31, 2020 |
| | Buy (Sell) | | Notional Amount | | Buy (Sell) | | Notional Amount |
Japanese Yen | | 81.2 | | | 81.2 | | | 71.2 | | | 71.2 | |
Philippine Peso | | 65.1 | | | 65.1 | | | 57.2 | | | 57.2 | |
Euro | | 50.7 | | | 50.7 | | | 47.7 | | | 47.7 | |
Korean Won | | 36.9 | | | 36.9 | | | 34.4 | | | 34.4 | |
Chinese Yuan | | 13.3 | | | 13.3 | | | 17.7 | | | 17.7 | |
Malaysian Ringgit | | 11.9 | | | 11.9 | | | 11.7 | | | 11.7 | |
| | | | | | | | |
Other Currencies - Buy | | 17.3 | | | 17.3 | | | 12.4 | | | 12.4 | |
Other Currencies - Sell | | (5.3) | | | 5.3 | | | (11.1) | | | 11.1 | |
| | $ | 271.1 | | | $ | 281.7 | | | $ | 241.2 | | | $ | 263.4 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of |
| | April 1, 2022 | | December 31, 2021 |
| | Buy (Sell) | | Notional Amount | | Buy (Sell) | | Notional Amount |
Philippine Peso | | 56.9 | | | 56.9 | | | 67.1 | | | 67.1 | |
Japanese Yen | | 51.0 | | | 51.0 | | | 33.2 | | | 33.2 | |
Korean Won | | 38.9 | | | 38.9 | | | 44.1 | | | 44.1 | |
Czech Koruna | | 24.7 | | | 24.7 | | | 15.0 | | | 15.0 | |
Euro | | 12.9 | | | 12.9 | | | 65.9 | | | 65.9 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Other Currencies - Buy | | 46.6 | | | 46.6 | | | 58.7 | | | 58.7 | |
Other Currencies - Sell | | (5.7) | | | 5.7 | | | (4.3) | | | 4.3 | |
| | $ | 225.3 | | | $ | 236.7 | | | $ | 279.7 | | | $ | 288.3 | |
Amounts receivable or payable under the contracts are included in other current assets or accrued expenses and other current liabilities in the accompanying Consolidated Balance Sheets. During the quarters ended April 1, 2022 and April 2, 2021, realized and April 3, 2020,unrealized foreign currency transactions totaled a gain of $1.9 million and a gain of $4.0 million, respectively. The realized and unrealized foreign currency transactions are included in other income (expense) in the Company's Consolidated Statements of Operations and Comprehensive Income.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
realized and unrealized foreign currency transactions totaled a gain of $4.0 million and a loss of $0.2 million, respectively, and are included in other income (expense) in the Company's Consolidated Statements of Operations and Comprehensive Income.
Cash Flow Hedges
All derivatives are recognized on the Company’s Consolidated Balance Sheets at their fair value and classified based on the applicable instrument's maturity date.
Foreign Currency Risk
The purpose of the foreign currency hedging activities is to protect the Company from the risk that the eventual cash flows resulting from transactions in foreign currencies will be adversely affected by changes in exchange rates. The Company enters into forward contracts that are designated as a foreign currency cash flow hedgeshedge of selecteda forecasted paymentspayment denominated in currenciesa currency other than U.S. Dollars. For the quarters ended April 2, 20211, 2022 and April 3, 2020,2, 2021, the Company did not have outstanding derivatives for its foreign currency exposure designated as cash flow hedges.
Interest Rate Risk
The Company uses interest rate swap contracts to mitigate its exposure to interest rate fluctuations. During the quarter ended April 1, 2022, the Company had interest rate swap agreements for notional amounts totaling $750.0 million. The Company did not identify any ineffectiveness with respect to the notional amounts of the interest rate swap contracts effectiveoutstanding as of April 2, 20211, 2022 and April 3, 2020, amounting to $1.5 billion and $1.0 billion, respectively.2, 2021.
Other
As of April 2, 2021,1, 2022, the Company had no outstanding commodity derivatives, currency swaps or options relating to either its debt instruments or investments. The Company does not hedge the value of its equity investments in its subsidiaries or affiliated companies. The Company is exposed to credit-related losses if counterparties to hedge contracts fail to perform their obligations. As of April 2, 2021,1, 2022, the counterparties to the Company’s hedge contracts were held at financial institutions that the Company believes to be highly-rated, and no credit-related losses are anticipated.
Note 12:13: Income Taxes
The Company recognizes interest and penalties related to uncertain tax positions in tax expense on the Company's Consolidated Statements of Operations and Comprehensive Income. The Company had approximately $3.0$1.5 million and $5.2$3.0 million of net interest and penalties accrued as of April 2, 20211, 2022 and April 3, 2020,2, 2021, respectively. It is reasonably possible that $42.3$64.2 million of its uncertain tax positions will be reduced in the next 12 months due to settlement with tax authorities or expiration of the applicable statute of limitations.
The Company maintains a partial valuation allowance on its U.S. state deferred tax assets and a valuation allowance on foreign net operating losses and tax credits in certain foreign jurisdictions, a substantial portion of which relate to Japan and Hong Kong net operating losses, which are projected to expire prior to utilization.
The Company is currently under IRS examination for the 2017 tax year. Tax years prior to 2017 are generally not subject to examination by the United States Internal Revenue Service (the “IRS”) except for items involving tax attributes that have been carried forward to tax years with statutes of limitations that remain open. The Company is currently under IRS examination for the 2017 tax year.IRS. For state tax returns, the Company is generally not subject to income tax examinations for tax years prior to 2016.2017. The Company is also subject to routine examinations by various foreign tax jurisdictions in which it operates. With respect to jurisdictions outside the United States, the Company is generally not subject to examination for tax years prior to 2010.2011. The Company believes that adequate provisions have been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with the Company's expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(unaudited)
Note 13:14: Changes in Accumulated Other Comprehensive Loss
Amounts comprising the Company's accumulated other comprehensive loss and reclassifications are as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | |
| | Currency Translation Adjustments | | Effects of Cash Flow Hedges | | | | Total |
Balance as of December 31, 2020 | | $ | (40.6) | | | $ | (17.0) | | | | | $ | (57.6) | |
Other comprehensive income (loss) prior to reclassifications | | (2.3) | | | 8.6 | | | | | 6.3 | |
Amounts reclassified from accumulated other comprehensive loss | | 0 | | | (4.6) | | | | | (4.6) | |
Net current period other comprehensive income (loss) (1) | | (2.3) | | | 4.0 | | | | | 1.7 | |
Balance as of April 2, 2021 | | $ | (42.9) | | | $ | (13.0) | | | | | $ | (55.9) | |
| | | | | | | | | | | | | | | | | | | | | |
| | Currency Translation Adjustments | | Effects of Cash Flow Hedges and Other Adjustments | | | Total |
Balance as of December 31, 2021 | | $ | (44.4) | | | $ | 3.8 | | | | $ | (40.6) | |
Other comprehensive income (loss) prior to reclassifications | | (2.4) | | | 17.3 | | | | 14.9 | |
Amounts reclassified from accumulated other comprehensive loss | | — | | | (0.7) | | | | (0.7) | |
Net current period other comprehensive income (loss) (1) | | (2.4) | | | 16.6 | | | | 14.2 | |
Balance as of April 1, 2022 | | $ | (46.8) | | | $ | 20.4 | | | | $ | (26.4) | |
(1) Effects of cash flow hedges are net of tax expense of $1.2$5.1 million for the quarter ended April 2, 2021.1, 2022.
Amounts reclassified from accumulated other comprehensive loss to the specific caption within Consolidated Statements of Operations and Comprehensive Income were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Amounts Reclassified from Accumulated Other Comprehensive Loss |
| | Quarters Ended | | | | |
| | April 2, 2021 | | April 3, 2020 | | | | | | To caption |
| | | | | | | | | | |
| | | | | | | | | | |
Interest rate swaps | | $ | 4.6 | | | $ | 1.9 | | | | | | | Interest expense |
Total reclassifications | | $ | 4.6 | | | $ | 1.9 | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | Quarters Ended | | | | |
| | April 1, 2022 | | April 2, 2021 | | | | | | To caption |
| | | | | | | | | | |
| | | | | | | | | | |
Interest rate swaps | | $ | 0.7 | | | $ | 4.6 | | | | | | | Interest expense |
Total reclassifications | | $ | 0.7 | | | $ | 4.6 | | | | | | | |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion in conjunction with our audited historical consolidated financial statements, which are included in the 20202021 Form 10-K and our unaudited consolidated financial statements for the fiscal quarter ended April 2, 20211, 2022, which are included elsewhere in this Form 10-Q. This Management's Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risks, uncertainties and other factors. Actual results could differ materially because of the factors discussed below or elsewhere in this Form 10-Q. See Part II, Item 1A. "Risk Factors" of this Form 10-Q and Part I, Item 1A. "Risk Factors" of the 20202021 Form 10-K.
Executive Overview
ON Semiconductoronsemi Overview
ON Semiconductor isWe provide industry leading intelligent power and sensing solutions to help our customers solve the most challenging problems and create cutting edge products for a better future. Our intelligent power technologies enable the electrification of the automotive industry that allows for lighter and longer-range electric vehicles, empowers efficient fast-charging systems and propels sustainable energy for the highest efficiency solar strings, industrial power and storage systems. Our intelligent sensing technologies support the next-generation industry, allowing for smarter factories and buildings while also enhancing the automotive mobility experience with imaging and depth sensing that make advanced vehicle safety and automated driving innovationsystems possible.
onsemi’s intelligent power allows our customers to exceed range targets with lower weight and reduce system cost through efficiency. With our sensing integration, we believe onsemi’s intelligent power solutions achieve higher efficiencies compared to our peers and allow lower temperature operation, reducing cooling requirements, saving costs and minimizing weight while delivering the required power with less die per module and achieving higher range for a given battery capacity. onsemi’s intelligent sensing solutions offer proprietary features in energy-efficient electronics.smaller packages that support customers' use cases. We believe that our extensive portfolio of sensors, power management, connectivity, customintelligent sensing technology offers advanced features to achieve optimal results and SoC, analog, logic, timingour product integration drives improved efficiency. This performance is delivered in a smaller footprint while reducing system latency to increase safety and discrete devices helps customers efficientlythroughput by providing a proprietary feature set to solve their design challenges in advanced electronic systems and products. Our power management and motor driver semiconductor components control, convert, protect and monitor the supply of power to the different elements within a wide variety of electronic devices. Our ASICs and SoC devices use analog, MCU, DSP, mixed-signal and advanced logic capabilities to enable the application and uses of many of our automotive, consumer and industrial customers’ products. Our signal management semiconductor components provide high-performance clock management and data flow management for precision computing, communications and industrial systems. Our portfolio of sensors, including image sensors, radar and LiDAR, provides advanced solutions for automotive, industrial and IoT applications. Our high performance Wi-Fi solution creates a strong platform for addressing connectivity solutions for industrial IoT applications. Our standard semiconductor components serve as “building blocks” within virtually all types of electronic devices.cases.
We serve a broad base of end-user markets, including automotive, industrial and others which include communications, computing consumer, and industrial. Ourconsumer. We believe the evolution of automotive, with advancements in autonomous driving, ADAS, vehicle electrification and the increase in electronics content for vehicle platforms, is reshaping the boundaries of transportation. With our extensive portfolio of devices, which are found in a wide variety of end-products enables usAEC-qualified products, onsemi helps customers design high reliability solutions while delivering top performance. Within the industrial space, onsemi is helping OEMs develop innovative products to offer advanced ICs andnavigate the "building block" components that deliver system-level functionality and design solutions. We offer micro packages, which provide increased performance characteristics while reducing the critical board space inside today's ever-shrinking electronic devicesongoing transformation across energy infrastructure, factory automation and power modules, delivering improved energy efficiency and reliability for a wide variety of medium and high power applications.conversion.
We shipped approximately 17.5 billion units during the quarter ended April 2, 2021, as compared to 15.4 billion units during the quarter ended April 3, 2020, resulting in a period-over-period increase of approximately 14%. As of April 2, 2021,1, 2022, we were organized into the following three operating and reportable segments:segments of PSG, ASG and ISG.
Business Strategy Developments
Our primary focus continues to be on gross margin and operating margin expansion, while at the same time achieving significant revenue growth in our focused end-markets of automotive, industrial and communications infrastructure as well as being opportunistic in other end-markets.end-markets, including obtaining longer-term supply arrangements with strategic end-customers. We began the process of evaluatingare also focused on achieving efficiencies in our currentoperating expenditures. While we believe we have made significant progress on gross margin and operating margin expansion, we continue to rationalize our product portfolio during the first quarter of 2021 and continue to make progress in such efforts. We have allocated capital, research and development investments and resources to accelerate growth in high-margin products and end-markets by moving away from non-differentiated products, which have had historically lower gross margins.
During the first quarter, we divested our six-inch front-end wafer manufacturing facility in Oudenaarde, Belgium and entered into a definitive agreement to sell our eight-inch front-end wafer manufacturing facility in South Portland, Maine, which is expected to close during the second quarter of 2022. We are also exploring the sale of certain other manufacturing facilities. We believe these actions, among others, will also allow us to transition to a lighter internal fabrication model where our gross marginsfinancial performance will be less volatile and not as heavily influenced by our internal manufacturing volumes. WeAs actions are also rationalizinginitiated to achieve our manufacturing footprint to align with our investment priorities and corporate strategy. Our goal is to reduce volatilitybusiness strategy goals, we could incur accounting charges in our gross margins and maximize return on our manufacturing investments with the intention of having our product strategy drive our manufacturing footprint and capital investments.future.
On March 4,We are focused on sustainability as we drive a common theme across all markets. During 2021, as part ofonsemi announced its commitment to achieving net zero emissions by 2040. As we initiate steps to achieve our ongoing efforts to realign investments to focus on growth drivers and key markets and to streamline our operations, we announced our plans to implement the ISP during the first half of 2021. The Company expects that the ISP will impact approximately 740 employees, resulting in estimated severance charges and other benefits between $58.0 million and $62.0 million during this period. During the first quarter of 2021, we notified more than half of the impacted employees and incurred severance charges under the ISP of $33.0 million. We expect to notify the remaining employees and incur the corresponding severance charges during the second quarter of 2021.
sustainability goals, additional
investments may be required in the future in connection with such actions, although the timing and amounts of such investments are uncertain at this time.
Impact of the Novel Coronavirus Disease 2019 (“COVID-19”) Pandemic on our Business
TheWe have implemented proactive preventative protocols and updated our business practices in response to the ongoing COVID-19 pandemic has resulted in a significant volatility in global economic activity. As a result, we have experienced volatility in the end-markets in which we do business due to fluctuations in consumer and business spending, which, in-turn, had an impact on the demand for some of our products. The severity and duration of these economic repercussions due to the COVID-19 pandemic, including any resulting impact on our business, remain largely unknown and will depend on many factors. In response to business and industry trends, we have proactively implemented preventative protocols, which we continuously assess and update for current local conditions and emerging trends.pandemic. These stepschanges are intended to safeguard our employees, contractors, customers, suppliers and communities, and to ensure business continuity in case of further government restrictions or if severe outbreaks impact operations at certain of our facilities.
communities. While all of our global manufacturing sites and most of our distribution centers are currently operational, our facilities could be requiredgovernment mandates may order us to temporarily curtail production levels or temporarily ceasesuspend manufacturing or distribution operations based on government mandates in response to further outbreaks. The ultimate extent to which theoutbreaks or new COVID-19 pandemic will impact demand for our products depends on future developments, which are highly uncertain and difficult to predict, including the effectiveness and utilization of vaccines for COVID-19 and its variants, new information that may emerge concerning the severity and longevity of the COVID-19 pandemic and efforts undertaken by various governments to contain the spread of COVID-19 and its variants.
Results of Operations
Quarter Ended April 2, 20211, 2022 compared to the Quarter Ended April 3, 20202, 2021
The following table summarizes certain information relating to our operating results that has been derived from our unaudited consolidated financial statements (in millions):
| | | Quarters Ended | | | Quarters Ended | |
| | April 2, 2021 | | April 3, 2020 | | Dollar Change | | April 1, 2022 | | April 2, 2021 | | Dollar Change |
Revenue | Revenue | $ | 1,481.7 | | | $ | 1,277.9 | | | $ | 203.8 | | Revenue | $ | 1,945.0 | | | $ | 1,481.7 | | | $ | 463.3 | |
Cost of revenue (exclusive of amortization shown below) | Cost of revenue (exclusive of amortization shown below) | 960.5 | | | 875.2 | | | 85.3 | | Cost of revenue (exclusive of amortization shown below) | 983.7 | | | 960.5 | | | 23.2 | |
Gross profit | Gross profit | 521.2 | | | 402.7 | | | 118.5 | | Gross profit | 961.3 | | | 521.2 | | | 440.1 | |
Operating expenses: | Operating expenses: | | Operating expenses: | |
Research and development | Research and development | 173.6 | | | 171.0 | | | 2.6 | | Research and development | 156.8 | | | 173.6 | | | (16.8) | |
Selling and marketing | Selling and marketing | 78.9 | | | 76.8 | | | 2.1 | | Selling and marketing | 71.1 | | | 78.9 | | | (7.8) | |
General and administrative | General and administrative | 72.4 | | | 71.2 | | | 1.2 | | General and administrative | 77.9 | | | 72.4 | | | 5.5 | |
| Amortization of acquisition-related intangible assets | Amortization of acquisition-related intangible assets | 25.0 | | | 32.3 | | | (7.3) | | Amortization of acquisition-related intangible assets | 21.3 | | | 25.0 | | | (3.7) | |
Restructuring, asset impairments and other charges, net | Restructuring, asset impairments and other charges, net | 42.5 | | | 32.8 | | | 9.7 | | Restructuring, asset impairments and other charges, net | (13.0) | | | 42.5 | | | (55.5) | |
Intangible asset impairment | Intangible asset impairment | 2.9 | | | — | | | 2.9 | | Intangible asset impairment | — | | | 2.9 | | | (2.9) | |
Total operating expenses | Total operating expenses | 395.3 | | | 384.1 | | | 11.2 | | Total operating expenses | 314.1 | | | 395.3 | | | (81.2) | |
Operating income | Operating income | 125.9 | | | 18.6 | | | 107.3 | | Operating income | 647.2 | | | 125.9 | | | 521.3 | |
Other income (expense), net: | Other income (expense), net: | | | | | | Other income (expense), net: | | | | | |
Interest expense | Interest expense | (33.4) | | | (42.5) | | | 9.1 | | Interest expense | (21.6) | | | (33.4) | | | 11.8 | |
Interest income | Interest income | 0.4 | | | 1.9 | | | (1.5) | | Interest income | 0.4 | | | 0.4 | | | — | |
| Other income | 4.5 | | | 0.1 | | | 4.4 | | |
Other income (expense) | | Other income (expense) | 2.1 | | | 4.5 | | | (2.4) | |
Other income (expense), net | Other income (expense), net | (28.5) | | | (40.5) | | | 12.0 | | Other income (expense), net | (19.1) | | | (28.5) | | | 9.4 | |
Income (loss) before income taxes | 97.4 | | | (21.9) | | | 119.3 | | |
Income tax (provision) benefit | (7.1) | | | 8.2 | | | (15.3) | | |
Net income (loss) | 90.3 | | | (13.7) | | | 104.0 | | |
Income before income taxes | | Income before income taxes | 628.1 | | | 97.4 | | | 530.7 | |
Income tax provision | | Income tax provision | (97.1) | | | (7.1) | | | (90.0) | |
Net income | | Net income | 531.0 | | | 90.3 | | | 440.7 | |
Less: Net income attributable to non-controlling interest | Less: Net income attributable to non-controlling interest | (0.4) | | | (0.3) | | | (0.1) | | Less: Net income attributable to non-controlling interest | (0.8) | | | (0.4) | | | (0.4) | |
Net income (loss) attributable to ON Semiconductor Corporation | $ | 89.9 | | | $ | (14.0) | | | $ | 103.9 | | |
Net income attributable to ON Semiconductor Corporation | | Net income attributable to ON Semiconductor Corporation | $ | 530.2 | | | $ | 89.9 | | | $ | 440.3 | |
Revenue
Revenue was $1,481.7$1,945.0 million and $1,277.9$1,481.7 million for the quarters ended April 2, 20211, 2022 and April 3, 2020,2, 2021, respectively, representing an increase of $203.8$463.3 million, or approximately 16%31%. We had one customer, a distributor, whose revenue accounted for approximately 12.4% and 10.6% of theour total revenue for the quarterquarters ended April 1, 2022 and April 2, 2021.2021, respectively.
Revenue by operating and reportable segments was as follows (dollars in millions):
| | | Quarter Ended April 2, 2021 | | As a % of Total Revenue (1) | | Quarter Ended April 3, 2020 | | As a % of Total Revenue (1) | | Quarter Ended April 1, 2022 | | As a % of Total Revenue (1) | | Quarter Ended April 2, 2021 | | As a % of Total Revenue (1) |
PSG | PSG | $ | 747.0 | | | 50.4 | % | | $ | 623.9 | | | 48.8 | % | PSG | $ | 986.7 | | | 50.7 | % | | $ | 747.0 | | | 50.4 | % |
ASG | ASG | 531.5 | | | 35.9 | % | | 467.1 | | | 36.6 | % | ASG | 689.3 | | | 35.4 | % | | 531.5 | | | 35.9 | % |
ISG | ISG | 203.2 | | | 13.7 | % | | 186.9 | | | 14.6 | % | ISG | 269.0 | | | 13.8 | % | | 203.2 | | | 13.7 | % |
Total revenue | Total revenue | $ | 1,481.7 | | | $ | 1,277.9 | | | Total revenue | $ | 1,945.0 | | | $ | 1,481.7 | | |
(1) Certain amounts may not total due to rounding of individual amounts.
Revenue from PSG increased by $123.1$239.7 million, or approximately 20%32%, for the quarter ended April 2, 20211, 2022 compared to the quarter ended April 3, 2020.2, 2021. The revenue from our Advanced Power Division and our Protection, Signal and Integrated Circuits, Protection and Signal Division increased by $71.2$170.6 million and $51.9$69.1 million, respectively, primarily due to improving economic conditions resulting inour strategy to focus on a product mix
significantly increased demand for our productsthat yields higher margins and increase in average selling prices driven by improving economic conditions, compared to the quarter ended April 3, 2020. During the first quarter of 2020, we experienced delays in fulfilling certain customer orders due to supply chain constraints and certain of our factories operating at significantly reduced capacity levels as a result of the COVID-19 pandemic, neither of which were experienced during the first quarter of2, 2021.
Revenue from ASG increased by $64.4$157.8 million, or approximately 14%30%, for the quarter ended April 2, 20211, 2022 compared to the quarter ended April 3, 2020.2, 2021. The revenue from our Automotive Division, Industrial Solutions Division and Mobile, Computing and Cloud Division Industrial and Offline Power Division and Automotive Division increased by $37.3$55.2 million, $22.4$53.4 million and $19.7$43.2 million, respectively, which was partially offset by a decrease of $15.0 million in our Wireless Connectivity Solutions Division.respectively. The increases were primarily due to increasedour strategy to focus on a product mix that yields higher margins and increase in average selling prices driven by strong market demand, for our products in various end-markets duecompared to improving economic conditions. Additionally, as discussed above, during the first quarter of 2020, we experienced delays in fulfilling certain customer orders due to supply chain constraints and certain of our factories operating at significantly reduced capacity levels as a result of the COVID-19 pandemic, none of which were experienced during the first quarter ofended April 2, 2021.
Revenue from ISG increased by $16.3$65.8 million, or approximately 9%32%, for the quarter ended April 2, 20211, 2022 compared to the quarter ended April 3, 2020. The2, 2021, largely driven by an increase in revenue from our Automotive Sensing Division increased by $14.0 millionof $62.2 million. The increase was due to the significant improvement of economic conditions, specifically with automotive component manufacturersour strategy to focus on a product mix that yields higher margins, better demand and the automotive industry overall, resultingan increase in increased demand for these products.average selling prices.
Revenue by geographic location, based on sales billed from the respective country or regions,region, was as follows (dollars in millions):
| | | Quarter Ended April 2, 2021 | | As a % of Total Revenue (1) | | Quarter Ended April 3, 2020 | | As a % of Total Revenue (1) | | Quarter Ended April 1, 2022 | | As a % of Total Revenue (1) | | Quarter Ended April 2, 2021 | | As a % of Total Revenue (1) |
Singapore | Singapore | $ | 509.0 | | | 34.4 | % | | $ | 408.3 | | | 32.0 | % | Singapore | $ | 555.7 | | | 28.6 | % | | $ | 509.0 | | | 34.4 | % |
Hong Kong | Hong Kong | 342.2 | | | 23.1 | % | | 316.2 | | | 24.7 | % | Hong Kong | 529.6 | | | 27.2 | % | | 342.2 | | | 23.1 | % |
United Kingdom | United Kingdom | 268.9 | | | 18.1 | % | | 227.0 | | | 17.8 | % | United Kingdom | 345.5 | | | 17.8 | % | | 268.9 | | | 18.1 | % |
United States | United States | 184.3 | | | 12.4 | % | | 184.5 | | | 14.4 | % | United States | 311.7 | | | 16.0 | % | | 184.3 | | | 12.4 | % |
Other | Other | 177.3 | | | 12.0 | % | | 141.9 | | | 11.1 | % | Other | 202.5 | | | 10.4 | % | | 177.3 | | | 12.0 | % |
Total | $ | 1,481.7 | | | $ | 1,277.9 | | | |
Total revenue | | Total revenue | $ | 1,945.0 | | | $ | 1,481.7 | | |
(1) Certain amounts may not total due to rounding of individual amounts.
Gross Profit and Gross Margin (exclusive of amortization of acquisition-related intangible assets)
Our gross profit by operating and reportable segments was as follows (dollars in millions):
| | | Quarter Ended April 2, 2021 | | As a % of Segment Revenue (1) | | Quarter Ended April 3, 2020 (2) | | As a % of Segment Revenue (1) | | Quarter Ended April 1, 2022 | | As a % of Segment Revenue (1) | | Quarter Ended April 2, 2021 | | As a % of Segment Revenue (1) |
| PSG | PSG | $ | 246.5 | | | 33.0 | % | | $ | 182.6 | | | 29.3 | % | PSG | $ | 474.7 | | | 48.1 | % | | $ | 246.5 | | | 33.0 | % |
ASG | ASG | 206.8 | | | 38.9 | % | | 157.8 | | | 33.8 | % | ASG | 366.7 | | | 53.2 | % | | 206.8 | | | 38.9 | % |
ISG | ISG | 67.9 | | | 33.4 | % | | 62.3 | | | 33.3 | % | ISG | 119.9 | | | 44.6 | % | | 67.9 | | | 33.4 | % |
Total gross profit | Total gross profit | $ | 521.2 | | | $ | 402.7 | | | Total gross profit | $ | 961.3 | | | 49.4 | % | | $ | 521.2 | | | 35.2 | % |
(1)Certain amounts may not total due to rounding of individual amounts.
(2)Beginning in the first quarter of 2021, unallocated manufacturing costs were included as part of segment operating results to determine segment gross profit. As a result, the prior-period amounts have been reclassified to conform to current-period presentation.
Our gross profit increased by $118.5$440.1 million, or approximately 29%84%, from $402.7 million for the quarter ended April 3, 2020 to $521.2 million for the quarter ended April 2, 2021.2021 to $961.3 million for the quarter ended April 1, 2022. Our overall gross margin increased to 49.4% for the quarter ended April 1, 2022 from approximately 35.2% for the quarter ended April 2, 2021 from 31.5% for the quarter ended April 3, 2020.2021.
The significant increases in gross profit and gross margin were due to an increase in average selling prices and a favorable product mix with higher gross margins and improved manufacturing efficiencies. The favorable economic environment and significant improvement in demand from automotive component manufacturers andin all end-markets, specifically in the automotive industry overalland industrial end-markets, contributed to increased demand and better pricing for our products. The increaseWe were also able to pass most of the increases in gross profitinput cost of raw materials and gross margin was dueexternal manufacturing services to an increase in sales volume, increased utilizationour customers.
Operating Expenses
Research and a better mix in the portfolio of products sold. Also, duringdevelopment expenses were $156.8 million for the quarter ended April 3, 2020, we recorded1, 2022, as compared to $173.6 million for the quarter ended April 2, 2021, representing a decrease of $16.8 million, or approximately $20 million10%. The decrease was primarily due to a decrease in payroll-related expenses as a result of fixed overhead charges to cost of revenues, representingthe restructuring programs implemented during 2021.
under-absorbed inventory costs, primarily due to the COVID-19 pandemic, which adversely impacted our gross margin for that period.
Operating Expenses
ResearchSelling and developmentmarketing expenses were $173.6$71.1 million for the quarter ended April 2, 2021,1, 2022, as compared to $171.0 million for the quarter ended April 3, 2020, representing an increase of $2.6 million, or approximately 2%. The decrease in payroll expenses resulting from restructuring actions undertaken during 2020 was offset by an increase in variable compensation recorded during the quarter ended April 2, 2021.
Selling and marketing expenses were $78.9 million for the quarter ended April 2, 2021, as compared to $76.8 million for the quarter ended April 3, 2020, representing an increasea decrease of $2.1$7.8 million, or approximately 3%10%. The decrease in travel-related expenseswas primarily due to travel restrictions caused bya decrease in payroll-related expenses as a result of the COVID-19 pandemic was offset by an increase in variable compensation recordedrestructuring programs implemented during the quarter ended April 2, 2021.
General and administrative expenses were $77.9 million for the quarter ended April 1, 2022, as compared to $72.4 million for the quarter ended April 2, 2021, as compared to $71.2 million for the quarter ended April 3, 2020, representing an increase of $1.2$5.5 million, or approximately 2%8%. The decrease in the use of external consultants and travel-related expenses was offset by an increase in variable compensation recorded during the quarter ended April 2, 2021.
Other Operating Expenses
Amortization of Acquisition-Related Intangible Assets
Amortization of acquisition-related intangible assets was $21.3 million for the quarter ended April 1, 2022, as compared to $25.0 million for the quarter ended April 2, 2021, as compared to $32.3 million for the quarter ended April 3, 2020, representing a decrease of $7.3$3.7 million, or approximately 23%15%. The decrease in expense was primarily due to full amortization of certain of our technology-related assets from our previous acquisitions during 2020.2021.
Restructuring, Asset Impairments and Other, Net
Restructuring, asset impairments and other, net was a credit of $13.0 million for the quarter ended April 1, 2022, as compared to $42.5 million for the quarter ended April 2, 2021, as compared to $32.8 million2021. There were no new restructuring programs implemented during the quarter ended April 1, 2022. The credit includes a gain from the sale of an office building. Amounts incurred for the quarter ended April 3, 2020. The increase was2, 2021 primarily due to certain exit charges and costs relatingrelate to the ISP announced during the first quarter of 2021. The expense during the first quarter of 2020 related primarily to the voluntary separation program announced during that quarter.2021 involuntary severance plan. For additional information, seeSee Note 4:5: ''Restructuring, Asset Impairments and Other, Net'' in the notes to our unaudited consolidated financial statements included elsewhere in this Form 10-Q.
Interest Expense
Interest expense decreased by $9.1$11.8 million to $21.6 million during the quarter ended April 1, 2022, as compared to $33.4 million during the quarter ended April 2, 2021, as compared to $42.5 million during the quarter ended April 3, 2020.2021. The decrease was primarily due to thea decrease in our long-term debt, repayment of interest bearing debt using the one month LIBO Rate.proceeds from 0% Notes and the lack of amortization of debt discount on our convertible notes due to the adoption of ASU 2020-06. Our average gross long-term debt balance (including current maturities) for the quarter ended April 2, 20211, 2022 was $3,256.3 million at a weighted-average interest rate of 2.7%, as compared to $3,512.5 million at a weighted-average interest rate of 3.8%, as compared to $4,303.3 million at a weighted-average interest rate of 3.9% for the quarter ended April 3, 2020.2, 2021.
Other Income (Expense)
Other income (expense) increaseddecreased by $4.4$2.4 million tofrom an income of $4.5 million forduring the quarter ended April 2, 2021 compared to an income of $0.1$2.1 million forduring the quarter ended April 3, 2020. The increase was primarily due to the fluctuations in foreign currencies resulting in increased transaction gains offset by losses on hedges that were realized.1, 2022.
Income Tax Provision and Benefit
We recorded an income tax provision of $97.1 million and $7.1 million and an income tax benefit of $8.2 million duringfor the quarters ended April 2, 20211, 2022 and April 3, 2020, respectively.
The income tax provision for the quarter ended April 2, 2021, consisted primarilyrespectively, representing effective tax rates of a provision15.5% and 7.3%. The increase in our effective tax rate was substantially driven by the impact of $17.8 million for income and withholding taxes of certain of our foreign and domestic operations, partially offset bydiscrete tax benefits in the prior year, relative to prior year pre-tax income. The prior year discrete benefits of $4.0 million relatingprimarily related to releases in uncertain tax positions $4.2 million relating toand net equity award windfalls and $2.5 million of other discrete benefits.
The income tax benefit for the quarter ended April 3, 2020 consisted primarily of a benefit of $8.4 million for income and withholding taxes of certain of our foreign and domestic operations, partially offset by $0.2 million of discrete expenses.windfalls.
For additional information, see Note 12:13: ''Income Taxes'' in the notes to the unaudited consolidated financial statements included elsewhere in this Form 10-Q.
Liquidity and Capital Resources
This section includes a discussion and analysis of our cash requirements, off-balance sheet arrangements, contingencies, sources and uses of cash, operations, working capital and long-term assets and liabilities.
Contractual Obligations
As of April 2, 2021, there were no material changes outside the ordinary course of business to our contractual obligations table, including the notes thereto, contained in the 2020 Form 10-K.
Off-Balance Sheet Arrangements
In the ordinary course of business, we provide standby letters of credit or other guarantee instruments to certain parties in connection with certain transactions, including, but not limited to: material purchase commitments, agreements to mitigate collection risk, leases, utilities or customs guarantees. As of April 2, 2021, our Revolving Credit Facility included $15.0 million of commitment for the issuance of letters of credit subject to the available balance of the Revolving Credit Facility. There were $0.9 million letters of credit outstanding under our Revolving Credit Facility as of April 2, 2021, which reduced our borrowing capacity dollar-for-dollar. As of April 2, 2021, we also had outstanding guarantees and letters of credit outside of our Revolving Credit Facility in the amount of $8.6 million.
As part of securing financing in the ordinary course of business, we have issued guarantees related to certain of our subsidiaries, which totaled $0.9 million as of April 2, 2021. Based on historical experience and information currently available, we believe that we will not be required to make payments under the standby letters of credit or guarantee arrangements for the foreseeable future.
We have not recorded any liability in connection with these letters of credit and guarantee arrangements. See Note 6: ''Long-Term Debt'' and Note 9: ''Commitments and Contingencies'' in the notes to our unaudited consolidated financial statements found elsewhere in this Form 10-Q for additional information.
Contingencies
We are a party to a variety of agreements entered into in the ordinary course of business pursuant to which we may be obligated to indemnify other parties for certain liabilities that arise out of or relate to the subject matter of the agreements. Some of the agreements entered into by us require us to indemnify the other partiesparty against losses, including but not limited to, losses due to
IP infringement, environmental contamination and other property damage, personal injury, our failure to comply with applicable laws, our negligence or willful misconduct or our breach of representations, warranties or covenants related to such matters as title to sold assets.
We face risk of exposure to warranty and product liability claims in the event that our products fail to perform as expected or such failure of our products results, or is alleged to result, in economic damage, bodily injury or property damage. In addition, if any of our designed products are alleged to be defective, we may be required to participate in their recall. Depending on the significance of any particular customer and other relevant factors, we may agree to provide more favorable rights to such customer for valid defective product claims.
We maintain directors’ and officers’ insurance policies that indemnify our directors and officers against various liabilities, including certain liabilities under the Exchange Act that might be incurred by any director or officer in his or her capacity as such.
The agreement and plan of merger relating to the acquisition of Fairchild Semiconductor International Inc. (the "Fairchild Agreement") provides for indemnification and insurance rights in favor of Fairchild’s then-current and former directors, officers and employees. Specifically, we have agreed that, for no fewer than six years following the Fairchild acquisition, we will: (a) indemnify and hold harmless each such indemnitee against losses and expenses (including advancement of attorneys’ fees and expenses) in connection with any proceeding asserted against the indemnified party in connection with such person’s
serving as a director, officer, employee or other fiduciary of Fairchild or its subsidiaries prior to the effective time of the acquisition; (b) maintain in effect all provisions of the certificate of incorporation or bylaws of Fairchild or any of its subsidiaries or any other agreements of Fairchild or any of its subsidiaries with any indemnified party regarding elimination of liability, indemnification of officers, directors and employees and advancement of expenses in existence on the date of the Fairchild Agreement for acts or omissions occurring prior to the effective time of the acquisition; and (c) subject to certain qualifications, provide to Fairchild’s then-current directors and officers an insurance and indemnification policy that provides coverage for events occurring prior to the effective time of the acquisition that is no less favorable than Fairchild’s then-existing policy, or, if insurance coverage that is no less favorable is unavailable, the best available coverage.
Similarly, the agreement and plan of merger relating to the acquisition of Quantenna (the "Quantenna Agreement") provides for indemnification and insurance rights in favor of Quantenna’s then-current and former directors, officers, employees and agents. Specifically, the Company has agreed that, for no fewer than six years following the Quantenna acquisition, the Company will: (a) indemnify and hold harmless each such indemnified party to the fullest extent permitted by Delaware law in the event of any threatened or actual claim, suit, action, proceeding or investigation against the indemnified party based in whole or in part on, or pertaining to, such person’s serving as a director, officer, employee or agent of Quantenna or its subsidiaries or predecessors prior to the effective time of the acquisition or in connection with the Quantenna Agreement; (b) maintain in effect provisions of the certificate of incorporation and bylaws of Quantenna and each of its subsidiaries regarding the elimination of liability of directors and indemnification of officers, directors and employees that are no less advantageous to the intended beneficiaries than the corresponding provisions in the certificate of incorporation and bylaws of Quantenna and each of its subsidiaries in existence on the date of the Quantenna Agreement; and (c) obtain and fully pay the premium for a non-cancelable extension of directors’ and officers’ liability coverage of Quantenna’s directors’ and officers’ policies and Quantenna’s fiduciary liability insurance policies in effect as of the date of the Quantenna Agreement.
While our future obligations under certain agreements may contain limitations on liability for indemnification, other agreements do not contain such limitations, and under such agreements, it is not possible to predict the maximum potential amount of future payments due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by us under any of these indemnities have not had a material effect on our business, financial condition, results of operations or cash flows, and we do not believe that any amounts that we may be required to pay under these indemnities in the future will be material to our business, financial condition, results of operations or cash flows.
See Note 9:10: ''Commitments and Contingencies'' in the notes to our unaudited consolidated financial statements under the heading "Legal Matters" included elsewhere in this Form 10-Q for possible contingencies related to legal matters. See also Part I, Item 1 "Business - Government Regulation" of the 20202021 Form 10-K for information on certain environmental matters.
Sources and Uses of Cash
Our balance of cash and cash equivalents was $1,042.5$1,645.1 million as of April 2, 2021.1, 2022. We require cash to: (i) fund our operating expenses, working capital requirements, outlays for strategic acquisitions and investments; (ii) service our debt, including principal and interest; (iii) conduct research and development; (iv) makeincur capital expenditures; and (v) repurchase our common stock.
Our principal sources of liquidity are cash on hand, cash generated from operations, funds from external borrowings and equity issuances. In the near term, we expect to fund our primary cash requirements through cash generated from operations and with cash and cash equivalents on hand. We also have the ability to utilize our Revolving Credit Facility, which has $1,419.0 millionapproximately $1.97 billion available for future borrowings.
We believe that the key factors that could affect our internal and external sources of cash include:
•Geopolitical and macroeconomic factors caused by the COVID-19 pandemic, which has had, and is expected to continue to have, negative impacts on the economies of the majority of countries and industries. The ultimate effect of the COVID-19 pandemic and the responses of various governmental entities and industries thereto, the duration and severity and the possibility of the re-emergence of the pandemic in future months and the anticipated recovery period are uncertain.
•Factors that affect our results of operations and cash flows include the impact on our business and operations as a result of changes in demand for our products, including as a result of the COVID-19 pandemic, competitive pricing pressures, supply chain constraints, effective management of our manufacturing capacity, our ability to achieve further reductions in operating expenses, our ability to make progress on the achievement of our business strategy and sustainability goals, the impact of our restructuring programs on our production and cost
efficiency and our ability to make the research and development expenditures required to remain competitive in our business.business; and
•Factors that affect our access to bank financing and the debt and equity capital markets that could impair our ability to obtain needed financing on acceptable terms or to respond to business opportunities and developments as they arise, includeincluding interest rate fluctuations, macroeconomic conditions, including as a result of the COVID-19 pandemic, sudden reductions in the general availability of lending from banks or the related increase in cost to obtain bank financing and our ability to maintain compliance with covenants under our debt agreements in effect from time to time.
Our ability to service our long-term debt, including theour 0% Notes, 3.875% Notes, 1.625% Notes, the Revolving Credit Facility and the Term Loan "B" Facility, to remain in compliance with the various covenants contained in our debt agreements and to fund working capital, capital expenditures and business development efforts will depend on our ability to generate cash from operating activities, which is subject to, among other things, our future operating performance and the timing of the full economic recovery from the COVID-19 pandemic, as well as financial, competitive, legislative, geopolitical, regulatory and other conditions, some or all of which may be beyond our control.
If we fail to generate sufficient cash from operations, we may need to raise additional equity or borrow additional funds to achieve our longer-term objectives. There can be no assurance that such equity or borrowings will be available when we access the capital markets or, if available, will be at rates or prices acceptable to us.
During the ordinary course of business, we evaluate our cash requirements and, if necessary, adjust our expenditures for inventory, operating expenditures and capital expenditures to reflect the current market conditions and our projected sales and demand. Our capital expenditures are primarily directed towards manufacturing equipment. Our capital expenditure levelsequipment, and can materially influence our available cash for other initiatives. For example, duringDuring the quarterquarters ended April 1, 2022 and April 2, 2021, we paid $173.8 million and $77.0 million, for capital expenditures, while during the quarter ended April 3, 2020, we paid $132.3 millionrespectively, for capital expenditures. Our current minimum contractual capital expenditure commitment for the remainder of 2021 and 2022 and thereafter is approximately $57.3 million and $4.2 million, respectively. We expect to incurour capital expenditures to be in the range of approximately 7%12% to 8%14% of annual revenue forin 2022 to expand our manufacturing capabilities to meet the remainder of 2021.market demands and further improve our manufacturing cost structure. Future capital expenditures may be impacted by events and transactions that are not currently forecasted.
Primary Cash Flow Sources
Our long-term cash generation is dependent on the ability of our operations to generate cash. Our cash flows from operating activities were $218.5$478.6 million and $166.0$218.5 million for the quarters ended April 2, 20211, 2022 and April 3, 2020,2, 2021, respectively. The increase of $52.5$260.1 million was primarily attributable to a significant increase in net income due to our strategy to focus on a product mix that yields higher margins combined with better economic conditions resulting in increased demand for our products during the first quarter of 2021, partially offset by further investments in working capital to meet future demand.products. Our ability to maintain positive operating cash flows is dependent on, among other factors, our success in achieving our revenue goals and manufacturing and operating cost targets. Management of our assets and liabilities, including both working capital and long-term assets and liabilities, also influences our operating cash flows, and each of these components is discussed below.
Working Capital
Working capital, calculated as total current assets less total current liabilities, fluctuates depending on end-market demand and our effective management of certain items such as receivables, inventory and payables. Our working capital, excluding cash and cash equivalents and the current portion of long-term debt, was $951.8$1,326.6 million as of April 2, 20211, 2022, and has fluctuated between $1,057.1$1,326.6 million and $879.3$885.0 million at the end of each of our last eight fiscal quarters. Our working capital, including cash and cash equivalents and the current portion of long-term debt, was $1,457.6$2,801.3 million as of April 2, 20211, 2022, and has fluctuated between $2,379.8$2,801.3 million and $1,071.4$1,457.6 million at the end of each of our last eight fiscal quarters. The significant fluctuation was due to the withdrawal and repayment on our Revolving Credit Facility during 2020 as well as the reclassification of the 1.625% Notes as a current liability. During the quarter ended April 2, 2021, our working capital was positively impacted by reduced capital expenditures. We expect to pay a significant portion of the severance obligations incurredan increase in connection with the ISPcapital expenditures during the second quarter of 2021.2022.
Long-Term Assets and Liabilities
Our long-term assets consist primarily of property, plant and equipment, intangible assets, deferred taxes and goodwill. Our manufacturing rationalization plans have included efforts to utilize our existing manufacturing assets and supply arrangements more efficiently. We have taken certain measuresactions to add manufacturing capacity in connectionwith the acquisition of GTAT during 2021 and with the expected completion of the acquisition of the East Fishkill, New York fabrication facilities and certain related assets and liabilities on or around December 31, 2022. In connection with divestiture activities, we have wafer supply agreements in place for a period of time such that there is no disruption in our current ability to meet the demand for our products.
Our long-term liabilities, excluding long-term debt and deferred taxes, consist of liabilities under our foreign defined benefit pension plans, operating lease liabilities and contingent tax reserves. With regard to our foreign defined benefit pension plans, our annual funding of these obligations is equal to the minimum amount legally required in each jurisdiction in which the plans operate. This annual amount is dependent upon numerous actuarial assumptions. For additional information, seeSee Note 5:6: ''Balance Sheet Information and Other'' and Note 12:13: ''Income Taxes'' in the notes to our unaudited consolidated financial statements included elsewhere in this Form 10-Q.
Key Financing and Capital Events
Overview
ForOver the past several years, we have undertaken various measures to secure liquidity to pursue acquisitions, repurchase shares of our common stock, reduce interest costs, amend existing key financing arrangements and, in some cases, extend a portion of our debt maturities to continue to provide us additional operating flexibility.
Cash Management
Our ability to manage cash is limited, as our primary cash inflows and outflows are dictated by the terms of our sales and supply agreements, contractual obligations, debt instruments and legal and regulatory requirements. While we have some flexibility with respect to the timing of capital equipment purchases, we must invest in capital equipment on a timely basis to allow us to maintain our manufacturing efficiency and support our platforms for new products.
Debt Guarantees and Related Covenants
As of April 2, 2021,1, 2022, we were in compliance with the indentures relating to our 0% Notes, 3.875% Notes and 1.625% Notes and with covenants relating to our Term Loan “B”"B" Facility and Revolving Credit Facility. The 0% Notes, 3.875% Notes and 1.625% Notes are senior to the existing and future subordinated indebtedness of ON Semiconductoronsemi and its guarantor subsidiaries, rank equally in right of payment to all of our existing and future senior debt and, as unsecured obligations, are subordinated to all of our existing and future secured debt to the extent of the assets securing such debt.
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements, see our 20202021 Form 10-K and Note 3: "Recent Accounting Pronouncements" in the notes to our unaudited consolidated financial statements included elsewhere in this Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to financial market risks, includingThere have been no material changes in interest ratesmarket risk from the information presented in Part II, Item 7A “Quantitative and foreign currency exchange rates. To mitigate these risks, we utilize derivative financial instruments. We do not use derivative financial instruments for speculative or trading purposes.
As of April 2, 2021, our gross long-term debt (including current maturities) totaled $3,435.4 million. We have no interest rate exposure to rate changes on our fixed-rate debt, which totaled $2,775.0 million as of April 2, 2021. We do have interest rate exposure with respect to the $660.4 million balance of our variable interest rate debt outstanding as of April 2, 2021. A 50 basis point increase in interest rates would impact our expected annual interest expense for the next 12 months by approximately $4.3 million. However, some of this impact would be offset by additional interest earned on our cash and cash equivalents should rates on deposits and investments also increase. Our interest rate swaps hedge the majority of the risk of variability in cash flows resulting from future interest payments on our variable interest rate debt.
While we have observed some stabilizationQualitative Disclosures About Market Risk,” in the capital markets impacted by the COVID-19 pandemic, there can be no assurance that equity or borrowings will be available when we access the capital markets again or, if available, will be at rates or prices acceptable to us.
To ensure the adequacy and effectiveness of our foreign exchange hedge positions, we continually monitor our foreign exchange forward positions, both on a stand-alone basis and in conjunction with their underlying foreign currency exposures, from an accounting and economic perspective. However, given the inherent limitations of forecasting and the anticipatory nature of exposures intended to be hedged, we cannot provide any assurances that such programs will offset more than a portion of the adverse financial impact resulting from unfavorable movements in foreign exchange rates.
We are subject to risks associated with transactions that are denominated in currencies other than our functional currencies, as well as the effects of translating amounts denominated in a foreign currency to the U.S. Dollar as a normal part of the reporting process. Some of our Japanese operations utilize Japanese Yen as the functional currency, which results in a translation adjustment that is included as a component of accumulated other comprehensive income.
We enter into forward foreign currency contracts that economically hedge the gains and losses generated by the re-measurement of certain recorded assets and liabilities in a non-functional currency. Changes in the fair value of these undesignated hedges are recognized in other income (expense) immediately as an offset to the changes in the fair value of the assets or liabilities being hedged. The notional amount of foreign exchange contracts as of April 2, 2021 and December 31, 2020 was $281.7 million and $263.4 million, respectively. Our policies prohibit speculation on financial instruments, trading in currencies for which there are no underlying exposures, or entering into trades for any currency to intentionally increase the underlying exposure.
Substantially all of our revenue is transacted in U.S. Dollars. However, a significant amount of our operating expenditures and capital purchases are transacted in local currencies, including Chinese Renminbi, Czech Koruna, Euros, Japanese Yen, Korean Won, Malaysian Ringgit, Philippine Peso and Vietnamese Dong. Due to the materiality of our transactions in these local currencies, our results are impacted by changes in currency exchange rates measured against the U.S. Dollar. For example, we determined that based on a hypothetical weighted-average change of 10% in currency exchange rates, our results would have impacted our income before taxes by approximately $34.3 million as of April 2, 2021, assuming no offsetting hedge position or correlated activities.
See Note 11: ''Financial Instruments'' in the notes to the unaudited consolidated financial statements included elsewhere in this Form 10-Q for further information with respect to our hedging activity.10-K.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
We also carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the fiscal quarter ended April 2, 2021.1, 2022.
There have been no changes to our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the fiscal quarter ended April 2, 20211, 2022 which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
See Note 9: ''Commitments10: "Commitments and Contingencies''Contingencies" under the heading "Legal Matters" in the notes to the consolidated unaudited financial statements included elsewhere in this Form 10-Q for additional information on our legal proceedings and related matters. See also Part I, Item 1 "Business - Government Regulation" of the 20202021 Form 10-K for information on certain environmental matters.
Item 1A. Risk Factors
Our business, financial condition and results of operations are subject to a number of trends, risks and uncertainties. We review and, where applicable, update our risk factors each quarter. There have been no material changes from the risk factors disclosed in Part I, Item 1A of the 20202021 Form 10-K.
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes “forward-looking"forward-looking statements,”" as that term is defined in Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements, other than statements of historical facts, included or incorporated in this Form 10-Q could be deemed forward-looking statements, particularly statements about our plans, strategies and prospects under the heading “Management’s"Management’s Discussion and Analysis of Financial Condition and Results of Operations.”" Forward-looking statements are often characterized by the use of words such as “believes,” “estimates,” “expects,” “projects,” “may,” “will,” “intends,” “plans”"believes," "estimates," "expects," "projects," "may," "will," "intends," "plans" or “anticipates,”"anticipates," or by discussions of strategy, plans or intentions. All forward-looking statements in this Form 10-Q are made based on our current expectations, forecasts, estimates and assumptions and involve risks, uncertainties and other factors that could cause results or events to differ materially from those expressed in the forward-looking statements. Certain factors that could affect our future results or events are described under Part I, Item 1A “Risk Factors”"Risk Factors" in the 20202021 Form 10-K, in this Form 10-Q and from time to time in our other SEC reports. 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. You should carefully consider the trends, risks and uncertainties described in this Form 10-Q, Part I, Item 1A “Risk Factors” in the 2020 Form 10-K, Part IIthose reports and subsequent reports filed with or furnished to the SEC before making any investment decision with respect to our securities. If any of the following 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. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information regarding repurchases of our common stock during the quarter ended April 2, 2021:1, 2022:
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Period (1) | | Total Number of Shares Purchased (2) | | Average Price Paid per Share ($) (3) | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Approximate Dollar value of Shares that May Yet be Purchased Under the Plans or Programs (in millions) ($) |
January 1, 2021 - January 29, 2021 | | 13,576 | | | 34.92 | | | — | | | 1,295.8 | |
January 30, 2021 - February 26, 2021 | | 2,264 | | | 38.22 | | | — | | | 1,295.8 | |
February 27, 2021 - April 2, 2021 | | 717,383 | | | 39.01 | | | — | | | 1,295.8 | |
Total | | 733,223 | | | 38.93 | | | — | | | |
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Period (1) | | Total Number of Shares Purchased | | Average Price Paid per Share ($) | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Approximate Dollar value of Shares that May Yet be Purchased Under the Plans or Programs (in millions) ($) |
January 1, 2022 - January 28, 2022 | | — | | | — | | | — | | | 1,295.8 | |
January 29, 2022 - February 25, 2022 | | — | | | — | | | — | | | 1,295.8 | |
February 26, 2022 - April 1, 2022 | | — | | | — | | | — | | | 1,295.8 | |
Total | | — | | | — | | | — | | | |
(1) These time periods represent our fiscal month start and end dates for the first quarter of 2021.2022.
(2) The number of shares purchased represents shares of common stock held by employees who tendered owned shares of common stock to the Company
Shares withheld to satisfy the employeestatutory tax withholding taxes due uponrequirements related to the vesting of RSUs.
(3) The price per share is based onshare-based awards are not issued or considered repurchases of our common stock under our Share Repurchase Program and, therefore, are excluded from the fair market value at the time of tender or repurchase, respectively.table above.
Share Repurchase Program
Under the Share Repurchase Program, we may repurchase up to $1.5 billion (exclusive of fees, commissions and other expenses) of our common stock from December 1, 2018 through December 31, 2022, subject to certain contingencies. Subject to the discretion of our board of directors, we may repurchase our common stock from time to time in privately negotiated transactions or open market transactions, including pursuant to a trading plan in accordance with Rule 10b5-1 and Rule 10b-18 of the Exchange Act, and the timing of any repurchases and the actual number of shares repurchased dependsdepend on a variety of factors, including our stock price, corporate and regulatory requirements, restrictions under our debt obligations and other market and economic conditions. There were no shares repurchased under the Share Repurchase Program during the quarter ended April 2, 2021.1, 2022.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
EXHIBIT INDEX
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Exhibit No. | | | Exhibit Description* |
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| | 10.1 | | | |
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| | 10.2 | | | |
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| | 10.3 | | | |
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| | 10.4 | | | |
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| | 10.4 | | | |
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| | 10.5 | | | |
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| 31.1 | | | |
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| 31.2 | | | |
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| 32 | | | |
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| 101.INS | | | XBRL Instance Document(1)
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| 101.SCH | | | XBRL Taxonomy Extension Schema Document(1)
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| 101.CAL | | | XBRL Taxonomy Extension Calculation Linkbase Document(1)
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| 101.DEF | | | XBRL Taxonomy Extension Definition Linkbase Document(1)
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| 101.LAB | | | XBRL Taxonomy Extension Label Linkbase Document(1)
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| 101.PRE | | | XBRL Taxonomy Extension Presentation Linkbase Document(1)
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| | 104 | | | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.
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* | Reports filed under the Exchange Act (Form 10-K, Form 10-Q and Form 8-K) are filed under File No. 000-30419 and File No. 001-39317. |
† | The Company has omitted certain schedules and exhibits pursuant to Item 601(b)(2) of Regulation S-K and, upon request by the Commission, agrees to furnish supplementally to the Commission a copy of any omitted schedule or exhibit. |
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(1) | Filed herewith. |
(2) | Management contract or compensatory plan, contract or arrangement. |
(3) | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | ON SEMICONDUCTOR CORPORATION (Registrant) |
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Date: | May 3, 20212, 2022 | By: | /s/ THAD TRENT |
| | | Thad Trent |
| | | Executive Vice President, Chief Financial Officer and Treasurer |
| | | (Principal Financial Officer and officer duly authorized to sign this report) |
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| | By: | /s/ BERNARD R. COLPITTS, JR. |
| | | Bernard R. Colpitts, Jr. |
| | | Chief Accounting Officer |
| | | (Principal Accounting Officer and officer duly authorized to sign this report) |
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