ON SEMICONDUCTOR CORP [ON] Filings

10-Q 1 on-20220401.htm 10-Q on-20220401

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 1, 2022


☐			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)


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:


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

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 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,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act


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 27, 2022:


Title of Each Class						Number of Shares
Common Stock, par value $0.01 per share						434,505,663

Table of Contents

ON SEMICONDUCTOR CORPORATION FORM 10-Q

TABLE OF CONTENTS


Part I: Financial Information
	Item 1. Financial Statements (unaudited)	4
	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	24
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	31
	Item 4. Controls and Procedures	31
Part II: Other Information
	Item 1. Legal Proceedings	32
	Item 1A. Risk Factors	32
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	33
	Item 3. Defaults Upon Senior Securities	33
	Item 4. Mine Safety Disclosures	33
	Item 5. Other Information	33
	Item 6. Exhibits	34
	Signatures	35

(See the glossary of selected terms immediately following this table of contents for definitions of certain abbreviated terms)

Table of Contents

ON SEMICONDUCTOR CORPORATION

FORM 10-Q

GLOSSARY OF SELECTED ABBREVIATED TERMS*


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

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




ASU						Accounting Standards Update









Commission or SEC						Securities and Exchange Commission
ESPP						ON Semiconductor Corporation 2000 Employee Stock Purchase Plan, as amended
Exchange Act						Securities Exchange Act of 1934, as amended

FASB						Financial Accounting Standards Board
GTAT						GT Advanced Technologies Inc.



IP						Intellectual property


















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




Securities Act						Securities Act of 1933, as amended



Term Loan "B" Facility						A $2.4 billion term loan "B" facility created pursuant to the Amended Credit Agreement

* Terms used, but not defined, within the body of the Form 10-Q are defined in this Glossary.

Table of Contents

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

ON SEMICONDUCTOR CORPORATION

CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data)

(unaudited)


	April 1, 2022		December 31, 2021
Assets
Cash and cash equivalents	$	1,645.1	$	1,352.6

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

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)
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

See accompanying notes to consolidated financial statements

Table of Contents

ON SEMICONDUCTOR CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(in millions, except per share data)

(unaudited)


	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

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



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

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

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

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

Table of Contents

ON SEMICONDUCTOR CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in millions, except share data)

(unaudited)


	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

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)


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)		—		—		—	—		—		—







Payment of tax withholding for RSUs	—	—		—		—		—		(955,641)	(58.8)		—		(58.8)
Share-based compensation	—	—		22.5		—		—		—	—		—		22.5



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


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	204,415	—		5.7		—		—		—	—		—		5.7
RSUs and stock grant awards issued	2,269,328	—		—		—		—		—	—		—		—
Shares issued upon exercise of warrants for 1.00% Notes	6,313,262	0.1		(0.1)		—		—		—	—		—		—
Payment of tax withholding for RSUs	—	—		—		—		—		(733,223)	(28.5)		—		(28.5)
Share-based compensation	—	—		22.3		—		—		—	—		—		22.3



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

See accompanying notes to consolidated financial statements

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ON SEMICONDUCTOR CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)


	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

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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 ("onsemi," "we," "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 2022 having ended on April 1, 2022 and each fiscal year ending on December 31. The quarters ended April 1, 2022 and April 2, 2021 contained 91 and 92 days, respectively. As of April 1, 2022, the Company was organized into the following three 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 1, 2022 have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP"). 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, 2021 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. 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, 2021 included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on February 14, 2022 (the "2021 Form 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; and (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.

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ON SEMICONDUCTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(unaudited)

Note 2: Revenue and Segment Information

The Company is organized into three 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.

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
For the quarter ended April 1, 2022:
Revenue from external customers	$	986.7	$	689.3	$	269.0	$	1,945.0
Gross profit	$	474.7	$	366.7	$	119.9	$	961.3
For the quarter ended April 2, 2021:
Revenue from external customers	$	747.0	$	531.5	$	203.2	$	1,481.7
Gross profit	$	246.5	$	206.8	$	67.9	$	521.2

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 quarters ended April 1, 2022 and April 2, 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 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 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

The Company operates in various geographic locations. Sales to external customers have little correlation with the location of manufacturers. It 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.

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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
	April 1, 2022		December 31, 2021
United States	$	752.4	$	767.1
South Korea	573.0		492.8
Philippines	330.7		342.4
Czech Republic	220.7		214.2
China	214.0		216.8
Japan	188.1		198.6
Malaysia	172.8		175.3
Other	107.7		117.1
Total	$	2,559.4	$	2,524.3

Note 3: Recent Accounting Pronouncements

Adopted:

ASU 2020-06 - Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity ("ASU 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. 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 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 to the 2022 annual financial statements, and the Company is currently evaluating the applicable disclosures.

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ON SEMICONDUCTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(unaudited)

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 $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 result in a nominal gain or loss, and the corresponding assets have been classified as held for sale within other current assets.

Note 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 1, 2022


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 balance is as follows (in millions):


	As of						As of
	December 31, 2021		Charges		Usage		April 1, 2022
Employee separation charges	$	10.8	$	(0.5)	$	(4.8)	$	5.5

Total	$	10.8	$	(0.5)	$	(4.8)	$	5.5

The Other category primarily includes the gain from the sale of an office building. There were no new restructuring programs implemented and the activity during the quarter ended April 1, 2022 represented payments to employees whose employments were terminated during 2021.

The Company continues to evaluate employee positions and locations for potential efficiencies, and may incur additional charges in the future.

Note 6: Balance Sheet Information and Other

Goodwill

There was an insignificant change in the balance of goodwill from December 31, 2021 to April 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 1, 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

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):

Table of Contents

ON SEMICONDUCTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(unaudited)


	Quarters Ended
	April 1, 2022		April 2, 2021
Service cost	$	2.2	$	3.1
Interest cost	1.1		1.1
Expected return on plan assets	(1.2)		(1.7)

Curtailment loss	—		1.9

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
	April 1, 2022		April 2, 2021
Operating lease	$	11.2	$	9.9
Variable lease	1.6		1.0
Short-term lease	0.4		0.7
Total lease expense	$	13.2	$	11.6

The lease liabilities recognized in the Consolidated Balance Sheets are as follows (in millions):


	As of
	April 1, 2022		December 31, 2021
Operating lease liabilities included in:
Accrued expenses and other current liabilities	$	35.1	$	32.5
Other long-term liabilities	137.9		142.4
Total	$	173.0	$	174.9

Operating ROU assets included in:
Other assets	$	169.7	$	170.1

Financing lease liabilities included in:
Accrued expenses and other current liabilities	$	12.7	$	12.7
Other long-term liabilities	10.2		10.2
Total	$	22.9	$	22.9
Financing ROU assets included in:
Other assets	$	21.9	$	22.3

As of April 1, 2022, the weighted-average remaining lease-terms were 8.3 years and 19.8 years and the weighted-average discount rates were 4.2% and 6.0% for operating and financing leases, respectively.

Supplemental Disclosure of Cash Flow Information

Table of Contents

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

Operating ROU assets obtained in exchange of lease liabilities	10.7		7.1






Cash paid for:

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 of April 1, 2022, $15.0 million of the restricted cash balance was held in escrow relating to the acquisition of GTAT and will 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