filings.toolsItem 16. Form 10-K Summary
215K characters. Original on sec.gov · Markdown
Item 16. Form 10-K Summary
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| February 10, 2025 | ON Semiconductor Corporation | |||||||
| By: /s/ HASSANE EL-KHOURY | ||||||||
| Name: Hassane El-Khoury | ||||||||
| Title: President and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Titles | Date | ||||||
| /s/ HASSANE EL-KHOURY | President, Chief Executive Officer and Director | February 10, 2025 | ||||||
| Hassane El-Khoury | (Principal Executive Officer) | |||||||
| /s/ THAD TRENT | Executive Vice President, Chief Financial Officer and Treasurer | February 10, 2025 | ||||||
| Thad Trent | (Principal Financial and Accounting Officer) | |||||||
| * | Chair of the Board of Directors | February 10, 2025 | ||||||
| Alan Campbell | ||||||||
| * | Director | February 10, 2025 | ||||||
| Susan K. Carter | ||||||||
| * | Director | February 10, 2025 | ||||||
| Thomas L. Deitrich | ||||||||
| * | Director | February 10, 2025 | ||||||
| Bruce E. Kiddoo | ||||||||
| * | Director | February 10, 2025 | ||||||
| Christina Lampe-Önnerud | ||||||||
| * | Director | February 10, 2025 | ||||||
| Paul A. Mascarenas | ||||||||
| * | Director | February 10, 2025 | ||||||
| Gregory Waters | ||||||||
| * | Director | February 10, 2025 | ||||||
| Christine Y. Yan | ||||||||
| *By: /s/ THAD TRENT | Attorney-in-Fact | February 10, 2025 | ||||||
| Thad Trent |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of ON Semiconductor Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of ON Semiconductor Corporation and its subsidiaries (the "Company") as of December 31, 2024 and 2023, and the related consolidated statements of operations and comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2024, including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Valuation of Inventories
As described in Notes 2 and 8 to the consolidated financial statements, the Company’s inventory balance of $2,242.0 million as of December 31, 2024, is stated at the lower of standard cost (which approximates actual cost on a first-in, first-out basis) or net realizable value. Management writes down excess and obsolete inventories based upon a regular analysis of inventory on hand compared to historical and projected end-user demand.
The principal considerations for our determination that performing procedures relating to the valuation of inventories is a critical audit matter are the significant judgment by management in developing the write down for excess and obsolete inventories. This in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures to evaluate the reasonableness of management’s analysis, including the inputs utilized and the significant assumptions related to projected end-user demand employed within the analysis.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of inventories. These procedures also included, among others (i) testing management’s process for developing the write down for excess and obsolete inventories, (ii) evaluating the appropriateness of the analysis, and (iii) evaluating the reasonableness of the significant assumptions related to projected end-user demand used by management in developing the write down for excess and obsolete inventories. Evaluating the reasonableness of the assumptions related to projected end user demand involved considering the performance of product sales and whether they were consistent with evidence obtained in other areas of the audit.
/s/ PricewaterhouseCoopers LLP
Phoenix, Arizona
February 10, 2025
We have served as the Company’s auditor since 1999.
ON SEMICONDUCTOR CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share data)
| December 31, 2024 | December 31, 2023 | ||||||||||
| Assets | |||||||||||
| Cash and cash equivalents | $ | 2,691.3 | $ | 2,483.0 | |||||||
| Short-term investments | 300.0 | — | |||||||||
| Receivables, net | 1,160.1 | 935.4 | |||||||||
| Inventories | 2,242.0 | 2,111.8 | |||||||||
| Other current assets | 358.6 | 382.1 | |||||||||
| Total current assets | 6,752.0 | 5,912.3 | |||||||||
| Property, plant and equipment, net | 4,361.4 | 4,401.5 | |||||||||
| Goodwill | 1,587.9 | 1,577.6 | |||||||||
| Intangible assets, net | 257.9 | 299.3 | |||||||||
| Deferred tax assets | 729.9 | 600.8 | |||||||||
| ROU financing lease assets | 40.5 | 42.4 | |||||||||
| Other assets | 360.2 | 381.3 | |||||||||
| Total assets | $ | 14,089.8 | $ | 13,215.2 | |||||||
| Liabilities and Stockholders’ Equity | |||||||||||
| Accounts payable | $ | 574.5 | $ | 725.6 | |||||||
| Accrued expenses and other current liabilities | 760.0 | 663.2 | |||||||||
| Current portion of financing lease liabilities | 0.3 | 0.8 | |||||||||
| Current portion of long-term debt | — | 794.0 | |||||||||
| Total current liabilities | 1,334.8 | 2,183.6 | |||||||||
| Long-term debt | 3,345.9 | 2,542.6 | |||||||||
| Deferred tax liabilities | 37.6 | 38.7 | |||||||||
| Long-term financing lease liabilities | 20.7 | 22.4 | |||||||||
| Other long-term liabilities | 536.3 | 627.3 | |||||||||
| Total liabilities | 5,275.3 | 5,414.6 | |||||||||
| Commitments and contingencies (Note 13) | |||||||||||
| ON Semiconductor Corporation stockholders’ equity: | |||||||||||
| Common stock ($0.01 par value, 1,250,000,000 shares authorized, 622,655,553 and 616,281,996 shares issued, 422,955,173 and 426,386,426 shares outstanding, respectively) | 6.2 | 6.2 | |||||||||
| Additional paid-in capital | 5,372.2 | 5,210.9 | |||||||||
| Accumulated other comprehensive loss | (62.4) | (45.2) | |||||||||
| Accumulated earnings | 8,120.9 | 6,548.1 | |||||||||
| Less: Treasury stock, at cost; 199,700,380 and 189,895,570 shares, respectively | (4,640.5) | (3,937.4) | |||||||||
| Total ON Semiconductor Corporation stockholders’ equity | 8,796.4 | 7,782.6 | |||||||||
| Non-controlling interest | 18.1 | 18.0 | |||||||||
| Total stockholders' equity | 8,814.5 | 7,800.6 | |||||||||
| Total liabilities and stockholders' equity | $ | 14,089.8 | $ | 13,215.2 |
See accompanying notes to consolidated financial statements
ON SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in millions, except per share data)
| Year ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Revenue | $ | 7,082.3 | $ | 8,253.0 | $ | 8,326.2 | |||||||||||
| Cost of revenue | 3,866.2 | 4,369.5 | 4,249.0 | ||||||||||||||
| Gross profit | 3,216.1 | 3,883.5 | 4,077.2 | ||||||||||||||
| Operating expenses: | |||||||||||||||||
| Research and development | 612.7 | 577.3 | 600.2 | ||||||||||||||
| Selling and marketing | 273.5 | 279.1 | 287.9 | ||||||||||||||
| General and administrative | 376.3 | 362.4 | 343.2 | ||||||||||||||
| Amortization of acquisition-related intangible assets | 52.0 | 51.1 | 81.2 | ||||||||||||||
| Restructuring, asset impairments and other charges, net | 133.9 | 74.9 | 17.9 | ||||||||||||||
| Goodwill and intangible asset impairment | — | — | 386.8 | ||||||||||||||
| Total operating expenses | 1,448.4 | 1,344.8 | 1,717.2 | ||||||||||||||
| Operating income | 1,767.7 | 2,538.7 | 2,360.0 | ||||||||||||||
| Other income (expense), net: | |||||||||||||||||
| Interest expense | (62.3) | (74.8) | (94.9) | ||||||||||||||
| Interest income | 111.4 | 93.1 | 15.5 | ||||||||||||||
| Loss on debt refinancing and prepayment | — | (13.3) | (7.1) | ||||||||||||||
| Gain (loss) on divestiture of businesses | — | (0.7) | 67.0 | ||||||||||||||
| Other income (expense), net | 20.6 | (7.2) | 21.7 | ||||||||||||||
| Other income (expense), net | 69.7 | (2.9) | 2.2 | ||||||||||||||
| Income before income taxes | 1,837.4 | 2,535.8 | 2,362.2 | ||||||||||||||
| Income tax provision | (262.8) | (350.2) | (458.4) | ||||||||||||||
| Net income | 1,574.6 | 2,185.6 | 1,903.8 | ||||||||||||||
| Less: Net income attributable to non-controlling interest | (1.8) | (1.9) | (1.6) | ||||||||||||||
| Net income attributable to ON Semiconductor Corporation | $ | 1,572.8 | $ | 2,183.7 | $ | 1,902.2 | |||||||||||
| Net income for diluted earnings per share of common stock (Note 10) | $ | 1,572.8 | $ | 2,185.0 | $ | 1,904.2 | |||||||||||
| Net income per share of common stock attributable to ON Semiconductor Corporation: | |||||||||||||||||
| Basic | $ | 3.68 | $ | 5.07 | $ | 4.39 | |||||||||||
| Diluted | $ | 3.63 | $ | 4.89 | $ | 4.25 | |||||||||||
| Weighted-average shares of common stock outstanding: | |||||||||||||||||
| Basic | 427.4 | 430.7 | 433.2 | ||||||||||||||
| Diluted | 432.7 | 446.8 | 448.2 | ||||||||||||||
| Comprehensive income (loss), net of tax: | |||||||||||||||||
| Net income | $ | 1,574.6 | $ | 2,185.6 | $ | 1,903.8 | |||||||||||
| Foreign currency translation adjustments | (3.4) | (2.1) | (6.0) | ||||||||||||||
| Effects of cash flow hedges | (13.8) | (19.9) | 23.4 | ||||||||||||||
| Other comprehensive income (loss), net of tax | (17.2) | (22.0) | 17.4 | ||||||||||||||
| Comprehensive income | 1,557.4 | 2,163.6 | 1,921.2 | ||||||||||||||
| Comprehensive income attributable to non-controlling interest | (1.8) | (1.9) | (1.6) | ||||||||||||||
| Comprehensive income attributable to ON Semiconductor Corporation | $ | 1,555.6 | $ | 2,161.7 | $ | 1,919.6 |
See accompanying notes to consolidated financial statements
ON SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in millions, except share data)
| 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 | 493,484 | — | 22.9 | — | — | — | — | — | 22.9 | ||||||||||||||||||||||||||||||||||||||||||||
| RSUs released and stock grant awards issued | 3,739,726 | 0.1 | (0.1) | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Partial settlement - 1.625% Notes | 611,431 | — | (0.3) | — | — | — | — | — | (0.3) | ||||||||||||||||||||||||||||||||||||||||||||
| Partial settlement of warrants - 1.625% Notes | 478,993 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Partial settlement of bond hedges - 1.625% Notes | — | — | 43.4 | — | — | (617,554) | (43.4) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Payment of tax withholding for RSUs | — | — | — | — | — | (1,254,030) | (78.1) | — | (78.1) | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | 100.8 | — | — | — | — | — | 100.8 | ||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | — | — | — | (3,988,453) | (259.8) | — | (259.8) | ||||||||||||||||||||||||||||||||||||||||||||
| Dividend to non-controlling shareholder | — | — | — | — | — | — | — | (2.1) | (2.1) | ||||||||||||||||||||||||||||||||||||||||||||
| Comprehensive income | — | — | — | 17.4 | 1,902.2 | — | — | 1.6 | 1,921.2 | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | 608,367,713 | 6.1 | 4,670.9 | (23.2) | 4,364.4 | (176,431,298) | (2,829.7) | 18.5 | 6,207.0 | ||||||||||||||||||||||||||||||||||||||||||||
| Shares issued pursuant to the ESPP | 387,770 | — | 25.7 | — | — | — | — | — | 25.7 | ||||||||||||||||||||||||||||||||||||||||||||
| RSUs released and stock grant awards issued | 2,433,671 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Warrants and bond hedges, net - 0% Notes | — | — | (171.5) | — | — | — | — | — | (171.5) | ||||||||||||||||||||||||||||||||||||||||||||
| Tax impact of warrants and bond hedges, net | — | — | 92.3 | — | — | — | — | — | 92.3 | ||||||||||||||||||||||||||||||||||||||||||||
| Partial settlement - 0% Notes | 794 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Partial settlement of bond hedges - 0% Notes | — | — | 0.1 | — | — | (785) | (0.1) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Partial settlement of Warrants - 0% Notes | 179 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Partial settlement - 1.625% Notes | 5,091,710 | 0.1 | (0.1) | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Partial settlement of bond hedges - 1.625% Notes | — | — | 472.4 | — | — | (5,091,752) | (472.4) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Partial settlement of warrants - 1.625% Notes | 159 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Payment of tax withholding for RSUs | — | — | — | — | — | (805,107) | (67.1) | — | (67.1) | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | 121.1 | — | — | — | — | — | 121.1 | ||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | — | — | — | (7,566,628) | (568.1) | — | (568.1) | ||||||||||||||||||||||||||||||||||||||||||||
| Dividend to non-controlling shareholder | — | — | — | — | — | — | — | (2.4) | (2.4) | ||||||||||||||||||||||||||||||||||||||||||||
| Comprehensive income (loss) | — | — | — | (22.0) | 2,183.7 | — | — | 1.9 | 2,163.6 | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | 616,281,996 | 6.2 | 5,210.9 | (45.2) | 6,548.1 | (189,895,570) | (3,937.4) | 18.0 | 7,800.6 | ||||||||||||||||||||||||||||||||||||||||||||
| Shares issued pursuant to the ESPP | 435,407 | — | 25.2 | — | — | — | — | — | 25.2 | ||||||||||||||||||||||||||||||||||||||||||||
| RSUs released and stock grant awards issued | 1,909,867 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Partial settlement - 0% Notes | 53 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Settlement of Warrants - 0% Notes | 14 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Settlement of warrants - 1.625% Notes | 4,028,216 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Payment of tax withholding for RSUs | — | — | — | — | — | (676,539) | (50.8) | — | (50.8) | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | 136.1 | — | — | — | — | — | 136.1 | ||||||||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | — | — | — | (9,128,271) | (652.3) | — | (652.3) | ||||||||||||||||||||||||||||||||||||||||||||
| Dividend to non-controlling shareholder | — | — | — | — | — | — | — | (1.7) | (1.7) | ||||||||||||||||||||||||||||||||||||||||||||
| Comprehensive income (loss) | — | — | — | (17.2) | 1,572.8 | — | — | 1.8 | 1,557.4 | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | 622,655,553 | $ | 6.2 | $ | 5,372.2 | $ | (62.4) | $ | 8,120.9 | (199,700,380) | $ | (4,640.5) | $ | 18.1 | $ | 8,814.5 | |||||||||||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements
ON SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
| Year ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||
| Net income | $ | 1,574.6 | $ | 2,185.6 | $ | 1,903.8 | |||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||
| Depreciation and amortization | 642.9 | 609.5 | 551.8 | ||||||||||||||
| (Gain) loss on sale or disposal of fixed assets | 5.5 | 11.6 | (32.6) | ||||||||||||||
| (Gain) loss on divestiture of businesses | — | 0.7 | (67.0) | ||||||||||||||
| Loss on debt refinancing and prepayment | — | 13.3 | 7.1 | ||||||||||||||
| Amortization of debt discount and issuance costs | 11.1 | 11.3 | 11.0 | ||||||||||||||
| Share-based compensation | 136.1 | 121.1 | 100.8 | ||||||||||||||
| Non-cash asset impairment charges | 37.8 | 19.5 | 18.6 | ||||||||||||||
| Goodwill and intangible asset impairment charges | — | — | 386.8 | ||||||||||||||
| Change in deferred tax balances | (129.6) | (127.7) | 3.1 | ||||||||||||||
| Other | 10.0 | (4.7) | 0.1 | ||||||||||||||
| Changes in assets and liabilities (exclusive of acquisitions and divestitures): | |||||||||||||||||
| Receivables | (244.3) | (112.8) | (47.8) | ||||||||||||||
| Inventories | (129.6) | (495.2) | (235.2) | ||||||||||||||
| Other assets | 107.0 | 0.7 | (110.5) | ||||||||||||||
| Accounts payable | (62.5) | (91.7) | 38.2 | ||||||||||||||
| Accrued expenses and other current liabilities | 62.2 | (178.6) | 96.5 | ||||||||||||||
| Other long-term liabilities | (114.8) | 14.9 | 8.4 | ||||||||||||||
| Net cash provided by operating activities | 1,906.4 | 1,977.5 | 2,633.1 | ||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||
| Payments for acquisition of property, plant and equipment | (694.0) | (1,539.1) | (1,036.0) | ||||||||||||||
| Proceeds from sale of property, plant and equipment | 6.2 | 4.0 | 59.1 | ||||||||||||||
| Payments related to acquisition of business, net of cash acquired | (20.5) | (236.3) | (2.4) | ||||||||||||||
| Divestiture of business, net of cash transferred | — | — | 263.1 | ||||||||||||||
| Purchase of short-term investments and available-for-sale securities | (1,050.0) | — | (18.0) | ||||||||||||||
| Proceeds from maturity of short-term investments and available-for-sale securities | 750.0 | 33.5 | 28.8 | ||||||||||||||
| Other | (1.5) | — | — | ||||||||||||||
| Net cash used in investing activities | (1,009.8) | (1,737.9) | (705.4) | ||||||||||||||
| Cash flows from financing activities: | |||||||||||||||||
| Proceeds for the issuance of common stock under the ESPP | 25.2 | 25.8 | 22.9 | ||||||||||||||
| Payment of tax withholding for RSUs | (51.0) | (66.8) | (78.1) | ||||||||||||||
| Repurchase of common stock | (654.1) | (564.2) | (259.8) | ||||||||||||||
| Issuance and borrowings under debt agreements | — | 1,845.0 | 500.0 | ||||||||||||||
| Repayment of borrowings under debt agreements | — | (1,723.4) | (530.0) | ||||||||||||||
| Payment on principal portion of finance lease obligations | (2.2) | (15.3) | (11.5) | ||||||||||||||
| Payment for purchase of bond hedges | — | (414.0) | — | ||||||||||||||
| Proceeds from issuance of warrants | — | 242.5 | — | ||||||||||||||
| Other | (1.7) | (16.1) | (13.5) | ||||||||||||||
| Net cash used in financing activities | (683.8) | (686.5) | (370.0) | ||||||||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (4.4) | (1.1) | (2.4) | ||||||||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 208.4 | (448.0) | 1,555.3 | ||||||||||||||
| Cash, cash equivalents and restricted cash, beginning of period (Note 18) | 2,485.0 | 2,933.0 | 1,377.7 | ||||||||||||||
| Cash, cash equivalents and restricted cash, end of period (Note 18) | $ | 2,693.4 | $ | 2,485.0 | $ | 2,933.0 |
See accompanying notes to consolidated financial statements
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Background and Basis of Presentation
ON Semiconductor Corporation, with its wholly and majority-owned subsidiaries ("onsemi" or the "Company"), operates under the onsemiTM brand, and prepares its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Certain reclassifications within the statements of cash flows have been made to prior period amounts to conform to current period presentation. The Company is organized into three operating and reportable segments: the Power Solutions Group ("PSG"), the Analog and Mixed-Signal Group ("AMG") and the Intelligent Sensing Group ("ISG"). During the first quarter of 2024, onsemi reorganized the existing divisions within certain of its operating and reportable segments and renamed the Advanced Solutions Group ("ASG") reportable segment to AMG. See Note 3: ''Segments and Revenue'' for additional information regarding the segment reorganization. Unless otherwise noted, all dollar amounts are in millions, except per share amounts.
Note 2: Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the assets, liabilities, revenue and expenses of all wholly-owned and majority-owned subsidiaries over which the Company exercises control and, when applicable, entities in which the Company has a controlling financial interest or is the primary beneficiary. Investments in affiliates where the Company does not exert a controlling financial interest are not consolidated. All intercompany balances and transactions have been eliminated.
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) calculation of future payouts for customer incentives and amounts subject to allowances and returns; (ii) valuation and obsolescence relating to inventories; (iii) measurement of valuation allowances against deferred tax assets, and evaluations of uncertain tax positions; (iv) assumptions used in business combinations; and (v) testing for impairment of long-lived assets and goodwill. Actual results may differ from the estimates and assumptions used in the consolidated financial statements.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, demand deposits and highly liquid investments with original maturities at the time of purchase of three months or less. The Company maintains amounts on deposit at various financial institutions, which may at times exceed federally insured limits. However, management periodically evaluates the credit-worthiness of those institutions and has not experienced any losses on such deposits.
Short-Term Investments
Short-term investments are comprised of time deposits with original maturities of greater than three months at the time of purchase. Interest on these investments are included within Interest income.
Inventories
Inventories are stated at the lower of standard cost (which approximates actual cost on a first-in, first-out basis) or net realizable value. General market conditions, as well as the Company's design activities, can cause certain of its products to become obsolete. The Company writes down excess and obsolete inventories based upon a regular analysis of inventory on hand compared to historical and projected end-user demand. The determination of projected end-user demand requires the use of estimates and assumptions related to projected unit sales for each product. These write downs can influence results from operations. For example, when demand for a given part falls, all or a portion of the related inventory that is considered to be in excess of anticipated demand is written down, impacting cost of revenue and gross profit. The majority of product inventory that has been previously written down is ultimately discarded. Although the Company does sell some products that have
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
previously been written down, such sales have historically been consistently insignificant and the related impact on the Company's gross profit has also been insignificant.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost and are depreciated over estimated useful lives of 30 years for buildings and 3-20 years for computers, machinery and equipment using straight-line methods. Expenditures for maintenance and repairs are charged to operations in the period in which the expenses are incurred. When assets are retired or otherwise disposed of, the related costs and accumulated depreciation are removed from the balance sheet and any resulting gain or loss is reflected in operations in the period realized.
The Company evaluates the recoverability of the carrying amount of its property, plant and equipment whenever events or changes in circumstances indicate that the carrying value of an asset group may not be fully recoverable. A potential impairment charge is evaluated when the undiscounted expected cash flows derived from an asset group are less than its carrying amount. Impairment losses, if applicable, are measured as the amount by which the carrying value of an asset group exceeds its fair value. Judgment is used when applying these impairment rules to determine the timing of the impairment test, the undiscounted cash flows used to assess impairments and the fair value of the asset group.
Business Combination Purchase Price Allocation
The allocation of the purchase price of business combinations is based on management estimates and assumptions, which utilize established valuation techniques appropriate for the technology industry. These techniques include the income approach, cost approach or market approach, depending upon which approach is the most appropriate based on the nature and reliability of available data. Management records the acquired assets and liabilities at fair value. If the income approach is used, the fair value determination is predicated upon the value of the future cash flows that an asset is expected to generate over its economic life. The cost approach takes into account the cost to replace (or reproduce) the asset and the effects on the asset's value of physical, functional and/or economic obsolescence that has occurred with respect to the asset. The market approach is used to estimate value from an analysis of actual market transactions or offerings for economically comparable assets available as of the valuation date. Determining the fair value of acquired technology assets is judgmental in nature and requires the use of significant estimates and assumptions, including the discount rate, revenue growth rates, projected gross margins, and estimated research and development and other operating expenses.
Goodwill
Goodwill represents the excess of the purchase price over the estimated fair value of the net assets acquired in a business combination. The Company evaluates its goodwill for impairment annually during the fourth quarter and whenever events or changes in circumstances indicate the carrying value of a reporting unit may not be recoverable. The Company’s divisions are one level below the operating segments, constituting individual businesses, at which level the Company’s segment management conducts regular reviews of the operating results. The Company's divisions, either individually or in a combination, constitute reporting units for purposes of allocating and testing goodwill.
The Company's impairment evaluation consists of a qualitative assessment. If this assessment indicates that it is more likely than not the estimated fair value of a reporting unit exceeds its carrying value, goodwill is not considered impaired. Otherwise, a quantitative impairment test is performed by comparing the fair value of a reporting unit to its carrying value, including goodwill. The Company can bypass the qualitative assessment for any period and proceed directly to the quantitative impairment test. If the carrying value of the net assets associated with the reporting unit exceeds the fair value of the reporting unit, goodwill is considered impaired and will be determined as the amount by which the reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.
Determining the fair value of the Company's reporting units is subjective in nature and involves the use of significant estimates and assumptions, including projected net cash flows, discount rates and long-term growth rates. The Company determines the fair value of its reporting units based on an income approach derived from the present value of estimated future cash flows. The assumptions about estimated cash flows include factors such as future revenue, gross profit, operating expenses and industry trends. The Company considers historical rates and current market conditions when determining the discount and long-term growth rates to use in its analysis. The Company considers other valuation methods, such as the cost approach or market approach, if it is determined that these methods provide a more representative approximation of fair value.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Intangible Assets
The Company's acquisitions have resulted in intangible assets consisting of values assigned to customer relationships, patents, developed technology, licenses, and trademarks, which are considered long-lived assets and are stated at cost less accumulated amortization. These intangible assets are amortized over their estimated useful lives and are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset group containing these assets may not be recoverable.
Leases
The Company determines if an arrangement is a lease at its inception. Operating and financing lease arrangements are comprised primarily of real estate and equipment agreements. ROU assets are included in other assets and the corresponding lease liabilities, depending on their maturity, are included in accrued expenses and other current liabilities or other long-term liabilities.
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The lease term includes options to extend the lease when it is reasonably certain that the option will be exercised. Leases with a term of 12 months or less are not recorded on the Consolidated Balance Sheet.
The Company uses its estimated incremental borrowing rate in determining the present value of lease payments considering the term of the lease, which is derived from information available at the lease commencement date, giving consideration to publicly available data for instruments with similar characteristics. The Company accounts for the lease and non-lease components as a single lease component.
Debt Issuance Costs
Debt issuance costs for the Company's revolving credit facilities are capitalized and amortized over the term of the facility on a straight-line basis. Amortization is included in interest expense while the unamortized balance is included in other assets.
Debt issuance costs for the Company's convertible notes, senior notes and term debt are recorded as a direct deduction from the carrying amounts of such debt, consistent with debt discounts, and are amortized over their term using the effective interest method. Amortization is included in interest expense.
Government Incentives
The Company receives government incentives for various reasons including capital expenditures, operating expenses, or to develop specific technologies, which may require the Company to meet or maintain certain metrics, and may be subject to reduction, termination, or recapture if such conditions are not met or maintained. Incentives related to the acquisition or construction of property, plant and equipment are recognized as a reduction in the cost-basis of the underlying assets with a reduction to depreciation expense based on the useful lives of the related assets. Incentives related to specific operating activities are offset against the related expense in the period the expense is incurred. Government incentives received prior to being earned are recognized in current or non-current liabilities or restricted cash, whereas incentives earned prior to being received are recognized in current or non-current receivables. Cash incentives related to operating expenses along with incentives that can offset taxes payable are included in operating activities, while cash received related to the acquisition of property, plant, and equipment are included in investing activities in the Consolidated Statements of Cash Flows.
Contingencies
The Company is involved in a variety of legal and IP matters and environmental, financing and indemnification contingencies that arise in the ordinary course of business. Based on the information available, management evaluates the relevant range and likelihood of potential outcomes and records the appropriate liability when the amount is deemed probable and reasonably estimable.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Treasury Stock
Treasury stock is recorded at cost, inclusive of fees, commissions and other expenses, when outstanding common shares are repurchased, bond hedges issued in connection with the convertible notes are settled and when outstanding shares are withheld to satisfy tax withholding obligations in connection with certain shares pursuant to RSUs under the Company's share-based compensation plans. Re-issuance of shares held in treasury stock is accounted for on a first-in, first-out basis.
Revenue Recognition
The Company generates revenue from sales of its semiconductor products to direct customers and distributors. The Company also generates revenue, to a much lesser extent, from product development agreements and manufacturing services provided to customers. The Company applies a five-step approach in determining the amount and timing of revenue to be recognized: (i) identifying the contract with a customer; (ii) identifying the performance obligations in the contract; (iii) determining the transaction price; (iv) allocating the transaction price to the performance obligations in the contract; and (v) recognizing revenue when the performance obligation is satisfied. The Company allocates the transaction price to each distinct product based on its relative stand-alone selling price. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled.
Revenue is recognized when the Company satisfies a performance obligation in an amount reflecting the consideration to which it expects to be entitled. For sales agreements, the Company has identified the promise to transfer products, each of which is distinct, as the performance obligation. The Company recognizes revenue from sales agreements upon transferring control of a product to the customer, which typically occurs when products are shipped or delivered, depending on the delivery terms, or when products that are consigned at customer locations are consumed. Revenue is also recognized over time for products with no alternative use and an enforceable right to payment as they are manufactured, which represents a contract asset. The Company can receive cash payments from customers in advance of the performance obligation being satisfied, which represents a contract liability. Contract liabilities are recognized as revenue when the performance obligations are satisfied.
Frequently, the Company receives orders with multiple delivery dates that may extend across reporting periods. Each delivery constitutes an individual performance obligation, which consists of transferring control of the products to the customers based on their stand-alone selling price. The Company invoices the customer for each delivery upon shipment and recognizes revenue in accordance with delivery terms. As scheduled delivery dates are within one year, revenue allocated to future shipments of partially completed contracts is not disclosed.
For product development agreements, the Company has identified the completion of a service defined in the agreement as the performance obligation. The Company recognizes revenue from product development agreements over time based on the cost-to-cost method. The Company recognizes revenue from manufacturing services when it satisfies the performance obligation by transferring the promised goods or services to the customer. Depending on the terms of the applicable contractual agreement with the customer, revenue is recognized at the point in time when the customer obtains control of the promised goods or service, or over time when the created asset has no alternate use to the Company and there is an enforceable right to payment for the performance to date.
Sales agreements with customers are renewable periodically and contain terms and conditions with respect to payment, delivery, warranty and supply. In the absence of a sales agreement, the Company’s standard terms and conditions apply. Payment terms for direct customers generally require payment within 30 days but can extend up to 90 days. The Company considers the customer purchase orders, governed by sales agreements or the Company’s standard terms and conditions, to be the contract with the customer. The Company evaluates certain factors including the customer’s ability to pay (or credit risk). The Company’s direct customers do not have the right to return products, other than pursuant to the provisions of the Company’s standard warranty. Sales to distributors, however, are typically made pursuant to agreements that provide return rights and stock rotation provisions permitting limited levels of product returns. Sales to certain distributors, primarily those with ship and credit rights, can also be subject to price adjustment on certain products. Although payment terms vary, most distributor agreements require payment within 30 days. In addition, the Company offers cash discounts to certain customers for payments received within an agreed upon time, generally ten days after shipment, which is recorded as a reduction to revenue.
Sales returns and allowances, which include ship and credit reserves for distributors, are estimated based on historical claims data and expected future claims. Provisions for discounts and rebates to customers, estimated returns and allowances, ship and credit claims and other adjustments are provided for in the same period the related revenue is recognized, and are netted against revenue. The Company records freight and handling costs associated with outbound freight after control over a product has
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
transferred to a customer as a fulfillment cost and includes it in cost of revenue. Taxes assessed by government authorities on revenue-producing transactions, including value-added and excise taxes, are presented on a net basis (excluded from revenue). The Company generally warrants that products sold to its customers will, at the time of shipment, be free from defects in workmanship and materials and conform to specifications. The Company’s standard warranty extends for a period of two years from the date of delivery, except in the case of image sensor products, which are warrantied for one year from the date of delivery. At the time revenue is recognized, the Company establishes an accrual for estimated warranty expenses associated with its sales and records them as a component of the cost of revenue.
Research and Development Costs
Research and development costs are expensed as incurred.
Income Taxes
Income taxes are accounted for using the asset and liability method. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for those deferred tax assets for which management cannot conclude that it is more likely than not that such deferred tax assets will be realized.
In determining the amount of the valuation allowance, estimated future taxable income, feasible tax planning strategies, future reversals of existing temporary differences and taxable income in prior carryback years, if a carryback is permitted, are considered. If the Company determines it is more likely than not that all or a portion of the remaining deferred tax assets will not be realized, the valuation allowance will be increased with a charge to income tax expense. Conversely, if the Company determines it is more likely than not to be able to utilize all or a portion of the deferred tax assets for which a valuation allowance has been provided, the related portion of the valuation allowance will be recorded as a reduction to income tax expense.
The Company recognizes and measures benefits for uncertain tax positions using a two-step approach. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that is it more likely than not that the tax positions will be sustained upon audit, including resolution of any related appeals or litigation processes. For tax positions that are more likely than not to be sustained upon audit, the second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon settlement. No tax benefit is recognized for tax positions that are not more likely than not to be sustained. The Company's practice is to recognize interest and/or penalties related to income tax matters in income tax expense. Significant judgment is required to evaluate uncertain tax positions. Evaluations are based upon a number of factors, including changes in facts or circumstances, changes in tax law, correspondence with tax authorities during the course of tax audits and effective settlement of audit issues. Changes in the recognition or measurement of uncertain tax positions could result in significant increases or decreases in income tax expense in the period in which the change is made, which could have a significant impact on the Company's effective tax rate.
Foreign Currencies
Most of the Company's foreign subsidiaries conduct business primarily in U.S. dollars and, as a result, utilize the U.S. dollar as their functional currency. For the remeasurement of financial statements of these subsidiaries, assets and liabilities in foreign currencies that are receivable or payable in cash are remeasured at current exchange rates, while inventories and other non-monetary assets in foreign currencies are remeasured at historical rates. Gains and losses resulting from the remeasurement of such financial statements are included in the operating results, as are gains and losses incurred on foreign currency transactions.
Some of the Company's Japanese subsidiaries utilize Japanese Yen as their functional currency. The assets and liabilities of these subsidiaries are translated at current exchange rates, while revenue and expenses are translated at the average rates in effect for the period. The related translation gains and losses are included in other comprehensive income or loss within the Consolidated Statements of Operations and Comprehensive Income.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Defined Benefit Pension Plans
The Company maintains defined benefit pension plans covering certain of its foreign employees. Net periodic pension costs and pension obligations are determined based on actuarial assumptions, including discount rates for plan obligations, assumed rates of return on pension plan assets and assumed rates of compensation increases for employees participating in plans. These assumptions are based upon management's judgment and consultation with actuaries, considering all known trends and uncertainties. The service cost component of the net periodic pension cost is allocated between the cost of revenue, research and development, selling and marketing and general and administrative line items, while the other components are included in other expense in the Consolidated Statements of Operations and Comprehensive Income.
Fair Value Measurement
The Company measures certain of its financial and non-financial assets at fair value by using the fair value hierarchy that prioritizes certain inputs into individual fair value measurement approaches. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the third, unobservable. The Company has elected not to carry any of its debt instruments at fair value.
Note 3: Segments and Revenue
Segments
As of December 31, 2024, the Company was organized into three operating and reportable segments consisting of PSG, AMG and ISG. These segments represent management's view of the business for which separate financial information is available and evaluated regularly by the Chief Operating Decision Maker ("CODM"), which is the Company’s Chief Executive Officer. The CODM uses segment gross profit for evaluating product pricing, factory utilization, allocation of capital and the assessment of segment profitability. The operating costs of manufacturing facilities which service all business units are reflected in each segment's cost of revenue on the basis of product costs. Because operating segments are generally defined by the products they design and sell, they do not sell to each other. The Company does not allocate income taxes or interest expense to its operating segments as the operating segments are principally evaluated on gross profit. Additionally, restructuring, asset impairments and other charges, net and certain other operating expenses, which include corporate research and development costs and miscellaneous nonrecurring expenses, are not allocated to segments.
PSG formerly included the divisions of Advanced Power Division and Integrated Circuits, Protection and Signal Division ("IPS"). During the first quarter of 2024, management reorganized these divisions to the divisions of Automotive Power Division, Industrial Power Division and Multi-Market Power Division (“MPD”). Further, IPS was split, with portions remaining in MPD and portions moving to the new Integrated Circuits Division within AMG. Management performed a goodwill impairment analysis on the divisions (which were the reporting units) prior to and after the reorganization and did not identify an impairment.
Revenue and gross profit for the Company’s operating and reportable segments were as follows (in millions):
| PSG (1) | AMG (1) | ISG | Total | ||||||||||||||||||||
| Year ended December 31, 2024: | |||||||||||||||||||||||
| Revenue from external customers | $ | 3,348.2 | $ | 2,609.1 | $ | 1,125.0 | $ | 7,082.3 | |||||||||||||||
| Cost of revenue | 1,963.8 | 1,302.8 | 599.6 | 3,866.2 | |||||||||||||||||||
| Segment gross profit | $ | 1,384.4 | $ | 1,306.3 | $ | 525.4 | $ | 3,216.1 | |||||||||||||||
| Year ended December 31, 2023: | |||||||||||||||||||||||
| Revenue from external customers | $ | 3,880.4 | $ | 3,057.1 | $ | 1,315.5 | $ | 8,253.0 | |||||||||||||||
| Cost of revenue | 2,058.5 | 1,635.8 | 675.2 | 4,369.5 | |||||||||||||||||||
| Segment gross profit | $ | 1,821.9 | $ | 1,421.3 | $ | 640.3 | $ | 3,883.5 | |||||||||||||||
| Year ended December 31, 2022: | |||||||||||||||||||||||
| Revenue from external customers | $ | 3,467.1 | $ | 3,582.4 | $ | 1,276.7 | $ | 8,326.2 | |||||||||||||||
| Cost of revenue | 1,866.7 | 1,714.0 | 668.3 | 4,249.0 | |||||||||||||||||||
| Segment gross profit | $ | 1,600.4 | $ | 1,868.4 | $ | 608.4 | $ | 4,077.2 | |||||||||||||||
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1)During the first quarter of 2024, the Company reorganized certain reporting units and its segment reporting structure. As a result of the reorganization of divisions within PSG and AMG, 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 10% and 12% of the total revenue for the years ended December 31, 2024 and 2022, respectively. No customer exceeded 10% of the total revenue for the year ended December 31, 2023. One customer, a distributor, accounted for approximately 13% of the Company's accounts receivable balance as of December 31, 2024, and no single customer had an accounts receivable concentration of 10% or greater as of December 31, 2023.
Revenue for the Company's operating and reportable segments disaggregated into geographic locations based on sales billed from the respective country and sales channels was as follows (in millions):
| Year ended December 31, 2024 | |||||||||||||||||||||||
| PSG | AMG | ISG | Total | ||||||||||||||||||||
| Geographic Location: | |||||||||||||||||||||||
| Hong Kong | $ | 876.1 | $ | 661.6 | $ | 241.6 | $ | 1,779.3 | |||||||||||||||
| Singapore | 991.0 | 617.1 | 125.1 | 1,733.2 | |||||||||||||||||||
| United Kingdom | 712.8 | 502.5 | 422.5 | 1,637.8 | |||||||||||||||||||
| United States | 525.4 | 596.7 | 185.4 | 1,307.5 | |||||||||||||||||||
| Other | 242.9 | 231.2 | 150.4 | 624.5 | |||||||||||||||||||
| Total | $ | 3,348.2 | $ | 2,609.1 | $ | 1,125.0 | $ | 7,082.3 | |||||||||||||||
| Sales Channel: | |||||||||||||||||||||||
| Distributors | $ | 2,051.5 | $ | 1,338.7 | $ | 369.4 | $ | 3,759.6 | |||||||||||||||
| Direct Customers | 1,296.7 | 1,270.4 | 755.6 | 3,322.7 | |||||||||||||||||||
| Total | $ | 3,348.2 | $ | 2,609.1 | $ | 1,125.0 | $ | 7,082.3 |
| Year ended December 31, 2023 | |||||||||||||||||||||||
| PSG (1) | AMG (1) | ISG | Total | ||||||||||||||||||||
| Geographic Location: | |||||||||||||||||||||||
| Hong Kong | $ | 1,151.7 | $ | 764.2 | $ | 252.7 | $ | 2,168.6 | |||||||||||||||
| Singapore | 1,095.1 | 640.4 | 203.3 | 1,938.8 | |||||||||||||||||||
| United Kingdom | 769.9 | 647.6 | 335.9 | 1,753.4 | |||||||||||||||||||
| United States | 604.3 | 642.1 | 327.3 | 1,573.7 | |||||||||||||||||||
| Other | 259.4 | 362.8 | 196.3 | 818.5 | |||||||||||||||||||
| Total | $ | 3,880.4 | $ | 3,057.1 | $ | 1,315.5 | $ | 8,253.0 | |||||||||||||||
| Sales Channel: | |||||||||||||||||||||||
| Distributors | $ | 2,238.6 | $ | 1,494.2 | $ | 576.3 | $ | 4,309.1 | |||||||||||||||
| Direct Customers | 1,641.8 | 1,562.9 | 739.2 | 3,943.9 | |||||||||||||||||||
| Total | $ | 3,880.4 | $ | 3,057.1 | $ | 1,315.5 | $ | 8,253.0 |
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| Year ended December 31, 2022 | |||||||||||||||||||||||
| PSG (1) | AMG (1) | ISG | Total | ||||||||||||||||||||
| Geographic Location: | |||||||||||||||||||||||
| Hong Kong | $ | 1,083.1 | $ | 974.5 | $ | 258.2 | $ | 2,315.8 | |||||||||||||||
| Singapore | 955.7 | 978.2 | 200.0 | 2,133.9 | |||||||||||||||||||
| United Kingdom | 617.9 | 598.9 | 275.5 | 1,492.3 | |||||||||||||||||||
| United States | 543.7 | 585.6 | 335.4 | 1,464.7 | |||||||||||||||||||
| Other | 266.7 | 445.2 | 207.6 | 919.5 | |||||||||||||||||||
| Total | $ | 3,467.1 | $ | 3,582.4 | $ | 1,276.7 | $ | 8,326.2 | |||||||||||||||
| Sales Channel: | |||||||||||||||||||||||
| Distributors | $ | 2,167.5 | $ | 1,948.4 | $ | 691.4 | $ | 4,807.3 | |||||||||||||||
| Direct Customers | 1,299.6 | 1,634.0 | 585.3 | 3,518.9 | |||||||||||||||||||
| Total | $ | 3,467.1 | $ | 3,582.4 | $ | 1,276.7 | $ | 8,326.2 |
(1) During the first quarter of 2024, the Company reorganized certain reporting units and its segment reporting structure. As a result of the reorganization of divisions within PSG and AMG, the prior-period amounts have been reclassified to conform to current-period presentation.
The Company operates in various geographic locations. Sales to external customers have little correlation to where products are manufactured or the location of the end-customers. The Company believes it is, therefore, not meaningful to present operating profit by geographical location.
The following table illustrates the product technologies under each of the Company's reportable segments based on the Company's operating strategy. Because many products are sold into different end-markets, the total revenue reported for a segment is not indicative of actual sales in the end-market associated with that segment, but rather is the sum of the revenue from the product lines assigned to that segment. These segments represent the Company's view of the business and, as such, are used to evaluate progress of major initiatives and allocation of resources.
| PSG | AMG | ISG | ||||||||||||
| SiC products | Analog products | Actuator Drivers | ||||||||||||
| Discrete products | ASIC products | CMOS image sensors | ||||||||||||
| MOSFET products | Logic and Isolation products | Image Signal Processors | ||||||||||||
| Power Module products | Non-Volatile Memory products | Single Photon Detectors | ||||||||||||
| Foundry products/services | Short-Wavelength Infrared products | |||||||||||||
| Gate Driver products | Indirect Time of Flight sensors | |||||||||||||
| LSI products |
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 used in manufacturing are generally shared across and are not specifically ascribed to operating and reportable segments. In situations where the carrying amounts assigned to an asset group needs to be evaluated for recoverability, judgment is used to determine the carrying amounts of the asset group based on the facts and circumstances.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Property, plant and equipment, net by geographic location, is summarized below (in millions):
| As of December 31, | |||||||||||||||||
| 2024 | 2023 | ||||||||||||||||
| South Korea | $ | 1,423.8 | $ | 1,360.8 | |||||||||||||
| United States | 1,410.8 | 1,456.5 | |||||||||||||||
| Czech Republic | 612.3 | 559.7 | |||||||||||||||
| China | 228.8 | 252.2 | |||||||||||||||
| Philippines | 208.1 | 252.9 | |||||||||||||||
| Malaysia | 183.1 | 199.3 | |||||||||||||||
| Vietnam | 155.3 | 164.3 | |||||||||||||||
| Other | 139.2 | 155.8 | |||||||||||||||
| Total | $ | 4,361.4 | $ | 4,401.5 |
Revenue
The Company's revenue is derived primarily from product sales, and to a much lesser extent, from manufacturing services and product development agreements. Revenue recognized from product sales as a percentage of total revenue was approximately 99%, 97% and 98% for the years ended December 31, 2024, 2023 and 2022, respectively. Revenue recognized from manufacturing services and product development agreements as a percentage of total revenue was approximately 1%, 3% and 2% for the years ended December 31, 2024, 2023 and 2022, respectively.
The Company's revenue disaggregated into end-markets and product technologies was as follows (in millions):
| Year ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| End-Markets: | |||||||||||||||||
| Automotive | $ | 3,900.8 | $ | 4,319.9 | $ | 3,360.8 | |||||||||||
| Industrial | 1,800.8 | 2,278.4 | 2,290.5 | ||||||||||||||
| Other* | 1,380.7 | 1,654.7 | 2,674.9 | ||||||||||||||
| Total | $ | 7,082.3 | $ | 8,253.0 | $ | 8,326.2 | |||||||||||
| * Other includes the end-markets of computing, consumer, networking, communications, etc. | |||||||||||||||||
| Product Technologies: | |||||||||||||||||
| Intelligent Power | $ | 3,648.6 | $ | 4,214.8 | $ | 3,997.3 | |||||||||||
| Intelligent Sensing | 1,379.2 | 1,606.8 | 1,573.7 | ||||||||||||||
| Other | 2,054.5 | 2,431.4 | 2,755.2 | ||||||||||||||
| Total | $ | 7,082.3 | $ | 8,253.0 | $ | 8,326.2 |
Remaining Performance Obligations
A portion of the Company’s orders are firm commitments that are non-cancelable, 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 committed amounts ("Long-term Supply Agreements" or "LTSAs") for which the remaining performance obligations as of December 31, 2024 were approximately $11.9 billion (excluding the remaining performance obligations for contracts having a duration of one year or less). If products are shipped according to the terms of these contracts, the Company expects to recognize approximately 35% of this amount as revenue during the next twelve months. Total revenue estimates are based on negotiated contract prices and demand quantities, and could be influenced by risks and uncertainties, including manufacturing or supply chain constraints, modifications to customer agreements, and regulatory changes, among other factors. The timing, pricing or amounts of products delivered under LTSAs may be modified or canceled in circumstances upon mutual agreement, and the actual revenue recognized for the remaining performance obligations in future periods may significantly fluctuate from current estimates.
Certain LTSAs include non-cancelable capacity payments from the customer, which are generally due within 30 days of
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
agreement. These payments reserve production availability or are prepayments for the same purpose and are not recognized as revenue until the performance obligations are satisfied. Payments received in advance of the satisfaction of performance obligations are recorded as contract liabilities. During the years ended December 31, 2024 and 2023, $110.9 million and $88.2 million, respectively, were recognized as revenue for satisfying the associated performance obligations.
Contract assets and contract liabilities were as follows (in millions):
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Contract assets included in: | |||||||||||
| Other current assets | $ | 39.9 | $ | 83.1 | |||||||
| Other assets | — | 12.0 | |||||||||
| Total | $ | 39.9 | $ | 95.1 | |||||||
| Contract liabilities included in: | |||||||||||
| Accrued expenses and other current liabilities | $ | 98.2 | $ | 87.6 | |||||||
| Other long-term liabilities | 120.9 | 216.6 | |||||||||
| Total | $ | 219.1 | $ | 304.2 |
Note 4: Recent Accounting Pronouncements and Other Developments
Adopted
Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07")
In November 2023, the FASB issued ASU 2023-07 to enhance disclosures about significant segment expenses. The amendments in this ASU require a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment's profit or loss and assets that are currently required annually. The amendments in this ASU also clarify circumstances in which an entity can disclose multiple segment measures of profit or loss and provide new segment disclosure requirements for entities with a single reportable segment. For public business entities, the provisions of ASU 2023-07 are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. ASU 2023-07 was adopted for the year ended December 31, 2024 retrospectively to all periods presented in the financial statements. See Note 3: ''Segments and Revenue'' for additional information.
Pending Adoption
Income Statement (Subtopic 220-40): Reporting Comprehensive Income - Expense Disaggregation Disclosures ("ASU 2024-03")
In November 2024, the FASB issued ASU 2024-03, which requires public business entities to expand disclosures about specific expense categories. The amendments in this ASU require a public entity to disclose, in tabular format, in the notes to the financial statements, specific information about certain costs and expenses. Although the ASU does not change the expense captions an entity presents on the face of the income statement, it requires disaggregation of certain expense captions into specified categories. For public business entities, the provisions of ASU 2024-03 are effective for fiscal years beginning after December 15, 2026. Early adoption is permitted. Management is currently evaluating the requirements under this new standard.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09")
In December 2023, the FASB issued ASU 2023-09 to enhance disclosures about income taxes. The amendments in this ASU require a public entity to disclose in tabular format, using both percentages and reporting currency amounts, specific categories in the rate reconciliation and to provide additional information for reconciling items that meet a quantitative threshold. The amendments in this ASU also require taxes paid (net of refunds received) to be disaggregated by federal, state, and foreign taxes and further disaggregated for specific jurisdictions to the extent the related amounts exceed a quantitative threshold. For public business entities, the provisions of ASU 2023-09 are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. Management is currently evaluating the requirements under this new standard.
SEC Climate Disclosure
In March 2024, the SEC issued final rules requiring registrants to include comprehensive climate-related disclosures in annual reports and registration statements. As adopted, the final rules require large accelerated filers to make their first climate-related disclosures for fiscal years beginning in 2025. However, in April 2024, the SEC issued an order voluntarily staying the effectiveness of the new rules pending the completion of judicial review of certain legal challenges to their validity. Management is currently evaluating these rules as adopted while monitoring the status of the related litigation and the SEC’s stay.
Note 5: Acquisitions and Divestitures
The Company pursues acquisitions and divestitures from time to time to leverage its existing capabilities and further expand its business to achieve certain strategic goals. Acquisition costs are not included as components of consideration transferred and instead are accounted for as expenses in the period in which the costs are incurred. During the year ended December 31, 2024, the Company incurred acquisition and divestiture-related costs of approximately $13.1 million, an insignificant amount during the year ended 2023 and approximately $12.9 million during the year ended 2022, which were included in operating expenses in the Consolidated Statements of Operations and Comprehensive Income.
2024 Acquisition
In July 2024, the Company completed its acquisition of SWIR Visions Systems ("SWIR") within its ISG segment for cash consideration of approximately $20.5 million. SWIR commercialized quantum-dot-based infrared image sensors, making them a strategic addition to the Company's existing technologies.
2022 Acquisition and Divestitures
EFK Acquisition
On December 31, 2022, the Company completed the acquisition of the East Fishkill, New York site and fabrication facility ("EFK") and certain other assets and liabilities from GLOBALFOUNDRIES U.S. Inc. ("GFUS"), previously announced in April 2019, for total consideration of $406.3 million, which was accounted for as a business combination. The Company paid GFUS $100.0 million and $70.0 million during 2020 and 2019, respectively, and the remaining consideration of $236.3 million was paid on January 3, 2023. Separately, the Company paid GFUS a one-time license fee of $30.0 million in cash for certain technology during 2019, which has been recognized as an intangible asset subject to amortization.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the year ended December 31, 2023, the Company finalized its determination relating to the fair value of assets acquired and liabilities assumed from the EFK acquisition, which was completed on December 31, 2022. The final allocation of the purchase price of EFK to the assets acquired and liabilities assumed, based on their relative fair values, which was materially consistent with the preliminary allocation, was as follows (in millions):
| Purchase Price Allocation | ||||||||||||||
| Inventories | $ | 3.3 | ||||||||||||
| Other current assets | 4.4 | |||||||||||||
| Property, plant and equipment | 396.5 | |||||||||||||
| Other non-current assets | 11.4 | |||||||||||||
| Total assets acquired | 415.6 | |||||||||||||
| Current liabilities | 3.0 | |||||||||||||
| Other long-term liabilities | 6.3 | |||||||||||||
| Total liabilities assumed | 9.3 | |||||||||||||
| Net assets acquired/purchase price | $ | 406.3 |
Unaudited pro-forma consolidated results of operations are not included considering the significance of the acquisition to the results of the Company.
Divestitures
During 2022, the Company divested four wafer manufacturing facilities to various parties:
-
the Oudenaarde, Belgium manufacturing facility was divested to BelGaN Group BV for an aggregate consideration of approximately $19.9 million;
-
the South Portland, Maine, manufacturing facility was divested to Diodes Incorporated for an aggregate consideration of approximately $80.0 million;
-
the Pocatello, Idaho manufacturing facility was divested to LA Semiconductor for an aggregate consideration of approximately $80.0 million; and
-
the Niigata, Japan manufacturing facility was divested to JS Foundry K.K., a Japan-based foundry company, for aggregate consideration of approximately $90.3 million.
These divestiture transactions resulted in a net gain on divestiture of $67.0 million in 2022.
Note 6: Goodwill and Intangible Assets
Goodwill
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 fair value of a reporting unit below its carrying value.
As a result of the segment reorganization during the first quarter of 2024 discussed in Note 3: ''Segments and Revenue,'' management performed a goodwill impairment analysis on the divisions (which were the reporting units) prior to and after the reorganization and did not identify an impairment. In connection with the reorganization, the Company changed its reporting unit structure, which resulted in the reallocation of $25.9 million of goodwill from PSG to AMG based on the relative fair values of the businesses transferred.
During the year ended December 31, 2022, the Company recorded $330.0 million of goodwill impairment charges and $56.8 million of intangible impairment charges related to the exit of QCS. As of December 31, 2022, QCS had no remaining goodwill or intangible asset balances.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes goodwill by operating and reportable segments (in millions):
| As of December 31, 2024 | As of December 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating and Reportable Segments | Goodwill | Accumulated Impairment Losses | Reallocation | Carrying Value | Goodwill | Accumulated Impairment Losses | Carrying Value | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| AMG | $ | 1,536.4 | $ | (748.9) | $ | 25.9 | $ | 813.4 | $ | 1,536.4 | $ | (748.9) | $ | 787.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PSG | 708.0 | (31.9) | (25.9) | 650.2 | 708.0 | (31.9) | 676.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ISG | 124.3 | — | — | 124.3 | 114.0 | — | 114.0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 2,368.7 | $ | (780.8) | $ | — | $ | 1,587.9 | $ | 2,358.4 | $ | (780.8) | $ | 1,577.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The following table summarizes the change in goodwill (in millions):
| Net balance as of December 31, 2023 | $ | 1,577.6 | |||
| Addition due to business acquisition | 10.3 | ||||
| Net balance as of December 31, 2024 | $ | 1,587.9 |
There was no change in the balance of goodwill during the year ended December 31, 2023.
Intangible Assets
Intangible assets subject to amortization, net, were as follows (in millions):
| As of December 31, 2024 | |||||||||||||||||||||||||||||||||||
| Original Cost | Accumulated Amortization | Accumulated Impairment Losses | Carrying Value | ||||||||||||||||||||||||||||||||
| Customer relationships | $ | 581.7 | $ | (483.5) | $ | (36.3) | $ | 61.9 | |||||||||||||||||||||||||||
| Developed technology | 956.3 | (739.7) | (40.7) | 175.9 | |||||||||||||||||||||||||||||||
| Licenses | 30.0 | (9.9) | — | 20.1 | |||||||||||||||||||||||||||||||
| Other intangibles | 79.1 | (63.9) | (15.2) | — | |||||||||||||||||||||||||||||||
| Total | $ | 1,647.1 | $ | (1,297.0) | $ | (92.2) | $ | 257.9 |
| As of December 31, 2023 | |||||||||||||||||||||||||||||||||||
| Original Cost | Accumulated Amortization | Accumulated Impairment Losses | Carrying Value | ||||||||||||||||||||||||||||||||
| Customer relationships | $ | 581.5 | $ | (473.3) | $ | (36.3) | $ | 71.9 | |||||||||||||||||||||||||||
| Developed technology | 939.6 | (696.4) | (40.7) | 202.5 | |||||||||||||||||||||||||||||||
| Licenses | 30.0 | (5.1) | — | 24.9 | |||||||||||||||||||||||||||||||
| Other intangibles | 79.1 | (63.9) | (15.2) | — | |||||||||||||||||||||||||||||||
| Total | $ | 1,630.2 | $ | (1,238.7) | $ | (92.2) | $ | 299.3 |
Amortization of acquisition-related intangible assets amounted to $58.3 million, $56.8 million and $82.8 million for the years ended December 31, 2024, 2023 and 2022, respectively.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Amortization expense for intangible assets is expected to be as follows over the next five years, and thereafter (in millions):
| 2025 | $ | 48.0 | |||
| 2026 | 41.8 | ||||
| 2027 | 36.0 | ||||
| 2028 | 31.0 | ||||
| 2029 | 30.3 | ||||
| Thereafter | 70.8 | ||||
| Total estimated amortization expense | $ | 257.9 |
Note 7: Restructuring, Asset Impairments and Other Charges, net
Details of restructuring, asset impairments and other charges, net were as follows (in millions):
| Restructuring | Asset Impairments | Other | Total | |||||||||||||||||||||||
| Year ended December 31, 2024: | ||||||||||||||||||||||||||
| 2024 Business Realignment | $ | 75.7 | $ | 37.8 | (1) | $ | 16.3 | (2) | $ | 129.8 | ||||||||||||||||
| Other | 0.3 | — | 3.8 | 4.1 | ||||||||||||||||||||||
| Total | $ | 76.0 | $ | 37.8 | $ | 20.1 | $ | 133.9 | ||||||||||||||||||
| Year ended December 31, 2023: | ||||||||||||||||||||||||||
| 2023 Business Realignment | $ | 59.1 | $ | 9.3 | (1) | $ | 2.8 | $ | 71.2 | |||||||||||||||||
| Other | (0.6) | 10.2 | (3) | (5.9) | 3.7 | |||||||||||||||||||||
| Total | $ | 58.5 | $ | 19.5 | $ | (3.1) | $ | 74.9 | ||||||||||||||||||
| Year ended December 31, 2022: | ||||||||||||||||||||||||||
| QCS wind down | $ | 12.6 | $ | 18.6 | $ | 18.9 | (4) | $ | 50.1 | |||||||||||||||||
| Other | (1.4) | 4.0 | (34.8) | (5) | (32.2) | |||||||||||||||||||||
| Total | $ | 11.2 | $ | 22.6 | $ | (15.9) | $ | 17.9 |
(1)Primarily relates to property, plant and equipment impairment charges associated with the business realignment efforts.
(2)Primarily relates to equipment movement costs and accelerated amortization of ROU assets for certain leases.
(3)Property, plant and equipment and ROU asset impairment charges related to the site consolidation efforts in the U.S.
(4)Primarily relates to contract cancellation charges of approximately $15.4 million and legal charges of $3.5 million.
(5)Primarily relates to the gain on the sale of two office buildings and the previous corporate headquarters.
A summary of changes in accrued restructuring charges was as follows (in millions):
| Accrued Restructuring | |||||||||||||||||
| Balance as of December 31, 2022 | $ | 4.4 | |||||||||||||||
| Charges | 58.5 | ||||||||||||||||
| Usage | (45.0) | ||||||||||||||||
| Balance as of December 31, 2023 | 17.9 | ||||||||||||||||
| Charges | 76.0 | ||||||||||||||||
| Usage | (39.5) | ||||||||||||||||
| Balance as of December 31, 2024 | $ | 54.4 |
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year ended December 31, 2024:
2024 Business Realignment
During 2024, to further align with the "Fab Right" manufacturing strategy and consolidate its global footprint, the Company announced a restructuring plan that impacted approximately 1,500 employees. Approximately 1,200 employees were notified of their employment termination and around 300 additional employees were relocated to another onsemi site. The Company continues to evaluate employee positions and locations for potential operating improvements and efficiencies.
In connection with these actions, the Company expects to incur severance costs, related benefit expenses and other ancillary charges totaling approximately $77.9 million, of which approximately $75.7 million was recognized during the year ended December 31, 2024. Certain of the employees notified of their employment termination are required to render future service beyond a minimum retention period in order to receive severance benefits, and the related expense will be recognized ratably over the respective service periods.
Of the aggregate expenses relating to the actions announced in 2024, the Company paid approximately $39.5 million to approximately 1,100 terminated employees and had approximately $48.3 million accrued as of December 31, 2024. The remaining employees subject to this realignment are expected to be relocated or terminated and substantially all applicable severance and related benefit payments are expected to be paid over the next 12 months.
Year ended December 31, 2023:
2023 Business Realignment
During 2023, the Company announced the elimination of approximately 1,900 jobs in an effort to realign its operating models, drive organizational effectiveness and efficiencies, increase collaboration within its AMG (formerly "ASG") operating segment and IT support organizations, and right-size its workforce to consolidate manufacturing resources into fewer, common sites across the world to align with the next phase of the Company's multi-year "Fab Right" manufacturing strategy. As a result, AMG ceased its design and test operations in certain locations and there were changes in the IT operating model by transferring selected IT functions to strategic service providers. In connection with these actions, severance costs, related benefit expenses and other ancillary charges of $59.1 million were recorded during the year ended December 31, 2023.
Of the aggregate expense, during the years ended December 31, 2024 and 2023, the Company paid $11.1 million and $41.9 million, respectively, in connection with the approximately 1,600 employees who exited and $6.1 million remained accrued as of December 31, 2024.
Year ended December 31, 2022:
QCS wind down
On September 16, 2022, the Board of Directors approved an exit plan to wind down QCS as part of its ongoing efforts to focus on growth drivers and key markets, and to streamline its operations. As part of the exit plan, during the third quarter of 2022, the Company notified approximately 330 employees of their employment termination and incurred severance costs and other benefits of approximately $12.7 million. Approximately 304 employees exited during 2022 and the remaining employees exited during 2023.
In connection with the exit plan, the Company recorded $18.9 million of exit costs, which primarily relate to contract cancellation charges and litigation charges. The Company impaired $8.0 million of property, plant and equipment as well as $10.6 million of other miscellaneous assets. The Company recorded inventory reserves associated with the QCS wind down of $24.5 million, which was recorded in cost of revenue.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8: Balance Sheet Information
Certain significant amounts included in the Company's Consolidated Balance Sheets consist of the following (in millions):
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Inventories: | |||||||||||
| Raw materials | $ | 349.8 | $ | 469.3 | |||||||
| Work in process | 1,391.9 | 1,221.1 | |||||||||
| Finished goods | 500.3 | 421.4 | |||||||||
| Total | $ | 2,242.0 | $ | 2,111.8 | |||||||
| Property, plant and equipment, net: | |||||||||||
| Land | $ | 115.7 | $ | 117.8 | |||||||
| Buildings and improvements | 1,423.2 | 1,324.2 | |||||||||
| Machinery, equipment and other | 6,781.3 | 6,489.0 | |||||||||
| Property, plant and equipment, gross | 8,320.2 | 7,931.0 | |||||||||
| Less: Accumulated depreciation | (3,958.8) | (3,529.5) | |||||||||
| Total | $ | 4,361.4 | $ | 4,401.5 | |||||||
| Accrued expenses and other current liabilities: | |||||||||||
| Accrued payroll and related benefits | $ | 134.5 | $ | 183.8 | |||||||
| Sales-related reserves | 225.5 | 108.3 | |||||||||
| Contract liabilities | 98.2 | 87.6 | |||||||||
| Income taxes payable | 25.1 | 37.4 | |||||||||
| Other (1) | 276.7 | 246.1 | |||||||||
| Total | $ | 760.0 | $ | 663.2 |
(1)The current portion of operating lease liabilities is included in this amount. See discussion below.
Depreciation expense for property, plant and equipment totaled $523.6 million, $485.3 million and $398.1 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Included within sales-related reserves are ship and credit reserves for distributors amounting to $147.6 million and $74.3 million as of December 31, 2024 and 2023, respectively.
Leases
Operating and financing lease arrangements are comprised primarily of real estate and equipment agreements. The Company's existing leases do not contain significant restrictive provisions or residual value guarantees; however, certain leases contain renewal options and provisions for payment of real estate taxes, insurance and maintenance costs by the Company.
The components of operating lease expense were as follows (in millions):
| Year ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Operating lease | $ | 54.7 | $ | 48.0 | $ | 47.8 | |||||||||||
| Variable lease | 5.0 | 5.1 | 9.8 | ||||||||||||||
| Short-term lease | 1.9 | 1.7 | 2.6 | ||||||||||||||
| Total lease expense | $ | 61.6 | $ | 54.8 | $ | 60.2 |
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The operating lease liabilities included in the Consolidated Balance Sheets were as follows (in millions):
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Operating lease liabilities included in: | |||||||||||
| Accrued expenses and other current liabilities | $ | 31.5 | $ | 33.0 | |||||||
| Other long-term liabilities | 244.7 | 231.0 | |||||||||
| Total | $ | 276.2 | $ | 264.0 | |||||||
| Operating ROU assets included in: | |||||||||||
| Other assets | $ | 249.7 | $ | 247.3 | |||||||
As of December 31, 2024, the weighted-average remaining lease-terms and weighted-average discount rates were 10.2 years and 17.2 years, and 5.2% and 5.7%, for operating and financing leases, respectively.
As of December 31, 2024, there was an insignificant amount of commitments for operating leases that have not yet commenced. The reconciliation of the maturities of the operating and financing leases to the lease liabilities recorded in the Consolidated Balance Sheet as of December 31, 2024 was as follows (in millions):
| Operating Leases | Financing Leases | ||||||||||
| 2025 | $ | 44.2 | $ | 1.5 | |||||||
| 2026 | 40.1 | 1.6 | |||||||||
| 2027 | 35.6 | 1.6 | |||||||||
| 2028 | 30.5 | 1.7 | |||||||||
| 2029 | 28.1 | 1.7 | |||||||||
| Thereafter | 190.1 | 26.3 | |||||||||
| Total lease payments | 368.6 | 34.4 | |||||||||
| Less: Interest | (92.4) | (13.4) | |||||||||
| Total lease liabilities | $ | 276.2 | $ | 21.0 |
Note 9: Long-Term Debt
The Company's long-term debt consists of the following (annualized interest rates, dollars in millions):
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Revolving Credit Facility due 2028, interest payable monthly at 5.69% and 6.71% | $ | 375.0 | $ | 375.0 | |||||||
| 0.50% Notes due 2029 (1) | 1,500.0 | 1,500.0 | |||||||||
| 0% Notes due 2027 | 804.9 | 804.9 | |||||||||
| 3.875% Notes due 2028 (2) | 700.0 | 700.0 | |||||||||
| Gross long-term debt, including current maturities | 3,379.9 | 3,379.9 | |||||||||
| Less: Unamortized debt discount (3) | (3.4) | (4.2) | |||||||||
| Less: Unamortized debt issuance costs (4) | (30.6) | (39.1) | |||||||||
| Net long-term debt, including current maturities | 3,345.9 | 3,336.6 | |||||||||
| Less: Current maturities | — | (794.0) | |||||||||
| Net long-term debt | $ | 3,345.9 | $ | 2,542.6 |
(1)Interest is payable on March 1 and September 1 of each year at 0.50% annually.
(2)Fixed rate note due September 1, 2028 with interest payable on March 1 and September 1 of each year at 3.875%
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
annually.
(3)Debt discount of $3.4 million and $4.2 million for the 3.875% Notes as of December 31, 2024 and December 31, 2023, respectively.
(4)Debt issuance costs of $21.7 million and $26.8 million for the 0.50% Notes, $7.7 million and $10.9 million for the 0% Notes, $1.2 million and $1.4 million for the 3.875% Notes, in each case as of December 31, 2024 and December 31, 2023, respectively.
The Company’s long-term debt instruments are senior unsecured obligations and are fully and unconditionally guaranteed, on a joint and several basis, by each of the Company’s subsidiaries that is a borrower or guarantor under the Revolving Credit Facility.
Maturities
Expected maturities of gross long-term debt (including current portion - see section regarding 0% Notes below) as of December 31, 2024 are as follows (in millions):
| Expected Maturities | |||||
| 2025 | $ | — | |||
| 2026 | — | ||||
| 2027 | 804.9 | ||||
| 2028 | 1,075.0 | ||||
| 2029 | 1,500.0 | ||||
| Thereafter | — | ||||
| Total | $ | 3,379.9 |
Long-Term Debt Activity
In 2023, the Company repaid $119.6 million of the remaining outstanding principal amount of the 1.625% Notes in cash and settled the excess over the principal amount by issuing 4.5 million shares of our common stock, which resulted in $422.0 million being recorded to additional paid-in capital and treasury stock, with no overall impact to equity. In 2024, all outstanding warrants related to the 1.625% Notes were settled entirely during the first quarter. See Note 10: ''Earnings Per Share and Equity'' for additional information regarding the warrant settlement.
In 2023, the Company entered into a new $1.5 billion Revolving Credit Facility.
In 2023, the Company completed the offering of $1.5 billion aggregate principal amount of its 0.50% Notes and utilized the net proceeds along with cash generated from operations to (i) repay $1,086.0 million of the outstanding indebtedness under the Term Loan “B” Facility and the related transaction fees and expenses and (ii) pay the $171.5 million net cost of the related convertible note hedges after such costs were offset by the proceeds from the sale of warrants.
Revolving Credit Facility
As of December 31, 2024, the Company had approximately $1,125.0 million available under the Revolving Credit Facility for future borrowings, except for amounts utilized for the letters of credit. Future borrowings are available for general corporate purposes, including working capital, capital expenditures, and acquisitions, but also include a $25.0 million sub-limit for the issuance of letters of credit and a foreign currency sub-limit of $75.0 million.
The maturity date for the borrowings under the Credit Agreement is June 22, 2028. Interest is payable based on either Secured Overnight Financing Rate (“SOFR”) or base rate options, as established at the commencement of each borrowing period, plus an applicable rate that varies based on the total leverage ratio. Lenders are owed certain fees, including a commitment fee that varies based on the total leverage ratio. The Company may prepay loans under the Credit Agreement at any time, in whole or in part, upon payment of accrued interest and break funding payments, if applicable.
The obligations are guaranteed by certain of the Company’s domestic subsidiaries and SCI LLC and are collateralized by, among other things, a pledge of the equity interests in certain of the Company’s and SCI LLC’s domestic subsidiaries and
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
material first tier foreign subsidiaries. The affirmative and negative covenants are customary for credit agreements of this nature. The Credit Agreement contains customary events of default, the occurrence of which could result in the acceleration of the associated obligations. The financial covenant relates to a maximum total net leverage ratio of 4.00 to 1.00 calculated using the consolidated total indebtedness to consolidated earnings before interest, taxes, depreciation and amortization and other adjustments for the trailing four consecutive quarters. The Company was in compliance with the total net leverage ratio as of December 31, 2024.
0.50% Notes and 0% Notes
The 0.50% Notes and 0% Notes are convertible and will mature on March 1, 2029 and May 1, 2027, respectively, unless earlier repurchased or redeemed by the Company or converted pursuant to their terms. The maximum number of shares of common stock issuable in connection with the conversion of the 0.50% Notes and 0% Notes is approximately 19.1 million and 21.7 million, respectively. As of December 31, 2024, neither the 0.50% Notes nor the 0% Notes were eligible for conversion by noteholders and as such, the 0% Notes were reclassified from current to long-term as of December 31, 2024. On or after the first business day of the month immediately prior to each note’s respective maturity date, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the notes may convert all or a portion of their respective notes at any time.
The Company may redeem for cash all or any portion of the notes, at the Company’s option, on or after March 6, 2026 and May 1, 2024 in the case of the 0.50% Notes and 0% Notes, respectively, if the last reported sale price of the Company’s common stock has been at least 130% ($135.03 and $68.86 for the 0.50% Notes and 0% Notes, respectively) of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides the related notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. The Company has not elected to redeem any portion of the 0% Notes. Prior to the respective dates upon which the holders may convert their notes at any time, the holders may convert their notes at their option only under the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending on December 31, 2024 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (ii) during the five consecutive business-day period after any five consecutive trading-day period in which the trading price per $1,000 principal amount of the notes for each trading day of such period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; (iii) if the Company calls any or all of the notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (iv) upon the occurrence of specified corporate transactions described in each note's respective indenture agreement. The if-converted value of the 0% Notes exceeded its principal amount by $153.2 million as of December 31, 2024, calculated using the stock price on that date.
The Company also entered into warrant transactions with certain other financial institutions, whereby the Company sold warrants to acquire 14.4 million and 15.2 million shares of the Company's common stock with respect to the 0.50% Notes and 0% Notes, respectively. The number of shares of the Company’s common stock acquired for each sale of warrants is the same covered by the associated convertible note. The maximum number of shares of common stock issuable in connection with the warrants is approximately 28.9 million and 30.4 million with respect to the 0.50% Notes and 0% Notes, respectively.
In addition, for the 0.50% Notes and 0% Notes, the Company entered into convertible note hedge transactions with respect to the common stock with the initial purchasers or their affiliates and certain other financial institutions. The Company will exercise the note hedges simultaneously when the notes are settled. The convertible note hedges cover, subject to customary anti-dilution adjustments, the number of shares of common stock that initially underlie the associated note and that are expected to reduce the potential dilution to the common stock and/or offset potential cash payments in excess of the principal amount upon conversion of the notes.
The Company analyzed both the warrant and convertible note hedge transactions under ASC 815-40 - "Derivatives and Hedging - Contracts in Entity's Own Equity" and determined that the instruments met the criteria for classification as an equity transaction with no subsequent remeasurement.
See Note 10: ''Earnings Per Share and Equity'' for more information regarding outstanding warrants and convertible note hedges.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10: Earnings Per Share and Equity
Earnings Per Share
Net income per share of common stock attributable to ON Semiconductor Corporation is shown below (in millions, except per share data):
| Year ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Net income for basic earnings per share of common stock | $ | 1,572.8 | $ | 2,183.7 | $ | 1,902.2 | |||||||||||
| Add: Interest on 1.625% Notes | — | 1.3 | 2.0 | ||||||||||||||
| Net income for diluted earnings per share of common stock | $ | 1,572.8 | $ | 2,185.0 | $ | 1,904.2 | |||||||||||
| Basic weighted-average shares of common stock outstanding | 427.4 | 430.7 | 433.2 | ||||||||||||||
| Dilutive effect of share-based awards | 0.6 | 1.2 | 1.8 | ||||||||||||||
| Dilutive effect of convertible notes and warrants | 4.7 | 14.9 | 13.2 | ||||||||||||||
| Diluted weighted average shares of common stock outstanding | 432.7 | 446.8 | 448.2 | ||||||||||||||
| Net income per share of common stock: | |||||||||||||||||
| Basic | $ | 3.68 | $ | 5.07 | $ | 4.39 | |||||||||||
| Diluted | $ | 3.63 | $ | 4.89 | $ | 4.25 |
Basic income per share of common stock is computed by dividing net income attributable to the Company 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. The excluded number of anti-dilutive share-based awards was approximately 0.5 million, 0.1 million and 0.3 million for the years ended December 31, 2024, 2023 and 2022, respectively.
The dilutive impact related to the Company’s 0.50% Notes and 0% Notes has been calculated using the if-converted method. The 0.50% Notes and the 0% Notes are repayable in cash up to the par value and in cash or shares of common stock for the excess over par 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 0.50% Notes and 0% Notes when the stock price is above $103.87 and $52.97 per share, respectively.
The dilutive impact of the warrants issued concurrently with the issuance of the 0.50% Notes and 0% Notes with exercise prices of $156.78 and $74.34, respectively, has been included in the calculation of diluted weighted-average common shares outstanding, if applicable.
Warrants Settlement
At the time of issuance of the 1.625% Notes, the Company sold 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 $30.70 per share from the Company beginning on January 16, 2024. The bank counterparties exercised 6.7 million warrants during the first quarter of 2024, and the Company settled them by issuing 4.0 million shares of common stock on a net-share basis based on the average stock price on the day of exercise, for which no cash was exchanged. All outstanding warrants related to the 1.625% Notes were settled entirely during the quarter ended March 29, 2024.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Equity
Share Repurchase Program
In February 2023, the Board of Directors approved a new share repurchase program (the “Share Repurchase Program”) under which the Company may repurchase up to an aggregate of $3.0 billion of the Company's common stock (exclusive of fees, commissions and other expenses). Under the Share Repurchase Program, which does not require the Company to purchase any minimum amount of common stock or at all, the Company may repurchase shares from February 8, 2023 through December 31, 2025. The repurchases under the Share Repurchase Program amounted to $650 million and $564 million for the year ended December 31, 2024 and 2023, respectively, excluding fees, commissions and excise tax.
Under the Company's previous share repurchase program announced on November 15, 2018, the Company could 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. The repurchases under the previous share repurchase program amounted to approximately $260.0 million during the year ended December 31, 2022. The previous share repurchase program, which did not require the Company to purchase any particular amount of common stock and was subject to the discretion of the Board of Directors, expired on December 31, 2022, with approximately $1,036 million remaining unutilized.
Activity under both the Share Repurchase Program and the previous program was as follows (in millions, except per share data):
| Year ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Number of repurchased shares (1) | 9.1 | 7.6 | 4.0 | ||||||||||||||
| Aggregate purchase price | $ | 650.0 | $ | 564.0 | $ | 259.8 | |||||||||||
| Fees, commissions and excise tax | 2.3 | 4.1 | — | ||||||||||||||
| Total | $ | 652.3 | $ | 568.1 | $ | 259.8 | |||||||||||
| Weighted-average purchase price per share (2) | $ | 71.21 | $ | 74.54 | $ | 65.13 | |||||||||||
| Available amounts | $ | 1,786.0 | $ | 2,436.0 | $ | 1,036.0 |
(1)None of these shares had been reissued or retired as of December 31, 2024 but may be reissued or retired later.
(2) Exclusive of fees, commission or other expenses.
During January 2025, the Company acquired, subject to a 10b5-1 trading arrangement, 1.6 million shares for $100.0 million under the Share Repurchase Program.
Shares for Restricted Stock Units Tax Withholding
The amounts remitted for tax withholding during the years ended December 31, 2024, 2023 and 2022 were $50.8 million, $67.1 million and $78.1 million, respectively, for which the Company withheld approximately 0.7 million, 0.8 million and 1.3 million shares of common stock, respectively, that were underlying the RSUs that vested. This activity in connection with tax withholding upon vesting was not made under the Share Repurchase Program or the previous share repurchase program.
Non-Controlling Interest
Leshan operates assembly and test operations in Leshan, China. The Company owns 80% of the outstanding equity interests in Leshan, and the results of Leshan have been consolidated in the Company's financial statements. As of December 31, 2024, the Leshan non-controlling interest balance was $18.1 million. This balance included the Leshan non-controlling interest's $1.8 million share of the earnings for the year ended December 31, 2024, partially offset by $1.7 million of dividends paid to the non-controlling shareholder. As of December 31, 2023, the Leshan non-controlling interest balance was $18.0 million. This balance included the Leshan non-controlling interest's $1.9 million share of the earnings for the year ended December 31, 2023 offset by $2.4 million of dividends declared to the non-controlling shareholder.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11: Share-Based Compensation
Total share-based compensation expense related to the Company's RSUs, stock grant awards and ESPP was recorded within the Consolidated Statements of Operations and Comprehensive Income as follows (in millions):
| Year ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Cost of revenue | $ | 24.6 | $ | 18.1 | $ | 12.0 | |||||||||||
| Research and development | 24.7 | 20.5 | 17.6 | ||||||||||||||
| Selling and marketing | 21.3 | 18.6 | 16.4 | ||||||||||||||
| General and administrative | 65.5 | 63.9 | 54.8 | ||||||||||||||
| Share-based compensation expense | 136.1 | 121.1 | 100.8 | ||||||||||||||
| Income tax benefit | (28.6) | (25.4) | (21.2) | ||||||||||||||
| Share-based compensation expense, net of taxes | $ | 107.5 | $ | 95.7 | $ | 79.6 |
As of December 31, 2024, total unrecognized share-based compensation expense, net of estimated forfeitures, related to non-vested RSUs with service, performance and market conditions was $150.0 million, which is expected to be recognized over a weighted-average period of 1.6 years. Upon vesting of RSUs, stock grant awards or completion of a purchase under the ESPP, the Company issues new shares of common stock.
Share-Based Compensation Information
The fair value per unit of each RSU and stock grant award is determined on the grant date. Share-based compensation expense is based on awards ultimately expected to vest. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The annualized pre-vesting forfeitures for RSUs were estimated to be approximately 8% for the years ended December 31, 2024, 2023 and 2022.
Plan and Award Descriptions
On March 23, 2010, the Company adopted the Amended and Restated SIP which has been subsequently amended over the years primarily to increase the number of shares of common stock subject to all awards. Generally, RSUs granted under the Amended and Restated SIP vest ratably over three years for awards with service conditions and over two, three, or five 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. Generally, upon the termination of an RSU holder's employment, all unvested RSUs will immediately cancel, except under circumstances where the service condition has been fulfilled.
On May 20, 2021, the Company's stockholders approved certain amendments to the Amended and Restated SIP to extend the expiration date from 2022 to 2031 and to increase the number of shares of common stock subject to all awards by 22.5 million to 109.5 million. As of December 31, 2024, there was an aggregate of 33.6 million shares of common stock available for grant under the Amended and Restated SIP.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Restricted Stock Units
A summary of activity of RSUs during the year ended December 31, 2024 was as follows (number of shares in millions):
| Number of Shares | Weighted-Average Grant Date Fair Value | ||||||||||
| Nonvested shares of RSUs at December 31, 2023 | 3.2 | $ | 69.39 | ||||||||
| Granted | 2.3 | $ | 77.15 | ||||||||
| Achieved | 0.3 | $ | 61.20 | ||||||||
| Released | (1.9) | $ | 63.87 | ||||||||
| Forfeited | (0.4) | $ | 73.28 | ||||||||
| Nonvested shares of RSUs at December 31, 2024 | 3.5 | $ | 76.27 |
The RSUs awarded during 2024 include RSUs that vest upon satisfaction of service conditions and 0.9 million RSUs granted to certain officers and employees of the Company that vest upon the achievement of certain performance criteria and market conditions. The number of units expected to vest is evaluated each reporting period and compensation expense is recognized for those units for which achievement of the performance criteria is considered probable. Compensation expense for RSUs with market conditions is recognized based on the grant date fair value irrespective of the achievement of the condition. The fair values of the vested awards are based on the stock price as of the vesting dates, and during the years ended December 31, 2024, 2023 and 2022 totaled $142.9 million, $202.6 million and $232.8 million, respectively.
As of December 31, 2024, unrecognized compensation expense, net of estimated forfeitures related to non-vested RSUs granted under the Amended and Restated SIP with service, performance and market conditions, was $100.6 million, $12.6 million and $36.8 million, respectively. For RSUs with time-based service conditions, expense is being recognized over the vesting period; for RSUs with performance criteria, expense is recognized over the period when the performance criteria is expected to be achieved; for RSUs with market conditions, expense is recognized over the period in which the condition is assessed irrespective of whether it would be achieved or not. Unrecognized compensation cost for awards with certain performance criteria that are not expected to be achieved is not included here. Total compensation expense related to service-based, performance-based and market-based RSUs was $128.4 million for the year ended December 31, 2024, which included $75.1 million for RSUs with time-based service conditions that were granted in 2024 and prior that are expected to vest.
Employee Stock Purchase Plan
On February 17, 2000, the Company adopted the ESPP. During the years ended December 31, 2024, 2023 and 2022, employees purchased approximately 0.4 million, 0.4 million and 0.5 million shares, respectively, under the ESPP. On May 20, 2021, the stockholders approved an amendment to the ESPP, which increased the number of shares available to be issued pursuant to the ESPP by 6.0 million to 34.5 million. As of December 31, 2024, there were approximately 6.9 million shares available for issuance under the ESPP. Total compensation expense related to the ESPP for the year ended December 31, 2024 was $7.7 million.
Note 12: Employee Benefit Plans
Defined Benefit Pension Plans
The Company maintains defined benefit pension plans for employees of certain of its foreign subsidiaries. Such plans conform to local practice in terms of providing minimum benefits mandated by law, collective agreements or customary practice. The Company recognizes the aggregate amount of all overfunded plans as assets and the aggregate amount of all underfunded plans as liabilities in its Consolidated Balance Sheets. The Company's expected long-term rate of return on plan assets is updated at least annually, taking into consideration its asset allocation, historical returns on similar types of assets and the current economic environment. For estimation purposes, the Company assumes its long-term asset mix will generally be consistent with the current mix. The Company determines its discount rates using highly rated corporate bond yields and government bond yields.
Benefits under all of the plans are valued utilizing the projected unit credit cost method. The Company's policy is to fund its
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
defined benefit plans in accordance with local requirements and regulations. The funding is primarily driven by the current assessment of the economic environment and projected benefit payments of foreign subsidiaries. The measurement date for determining the defined benefit obligations for all plans is December 31 of each year.
The Company recognizes actuarial gains and losses during the period that the Company's annual pension plan actuarial valuations are prepared, which generally occurs during the fourth calendar quarter of each year, or during any interim period where a revaluation is deemed necessary. The Company recognized an actuarial gain of $12.2 million for the year ended December 31, 2024, an actuarial loss of $4.0 million for the year ended December 31, 2023 and an actuarial gain of $22.1 million for the year ended December 31, 2022. Of the actuarial gain for 2024, $9.5 million was primarily due to an increase in the discount rates and plan expense and $2.7 million was due to higher-than-expected returns on plan assets.
The following tables summarize the status of the Company's foreign defined benefit pension plans and the net periodic pension cost (dollars in millions):
| Year ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Service cost | $ | 5.0 | $ | 4.7 | $ | 8.1 | |||||||||||
| Interest cost | 5.6 | 6.3 | 4.0 | ||||||||||||||
| Expected return on plan assets | (4.7) | (4.7) | (4.3) | ||||||||||||||
| Actuarial (gains) losses | (12.2) | 4.0 | (22.1) | ||||||||||||||
| Total net periodic pension (gain) cost | $ | (6.3) | $ | 10.3 | $ | (14.3) | |||||||||||
| Weighted average assumptions: | |||||||||||||||||
| Discount rate used for net periodic pension costs | 3.28 | % | 3.27 | % | 1.54 | % | |||||||||||
| Discount rate used for pension benefit obligations | 3.84 | % | 3.63 | % | 3.63 | % | |||||||||||
| Expected return on plan assets | 3.65 | % | 3.46 | % | 2.98 | % | |||||||||||
| Rate of compensation increase | 4.32 | % | 4.26 | % | 3.43 | % |
The long-term rate of return on plan assets was determined using the weighted-average method, which incorporates factors that include the historical inflation rates, interest rate yield curve and current market conditions.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Change in projected benefit obligation ("PBO"): | |||||||||||
| PBO at the beginning of the year | $ | 191.1 | $ | 185.5 | |||||||
| Divestiture of business | (21.5) | — | |||||||||
| Service cost | 5.0 | 4.7 | |||||||||
| Interest cost | 5.6 | 6.3 | |||||||||
| Net actuarial (gain) loss | (9.5) | 7.8 | |||||||||
| Benefits paid by plan assets | (12.8) | (10.7) | |||||||||
| Benefits paid by the Company | (4.2) | (3.2) | |||||||||
| Participant contributions | — | 0.1 | |||||||||
| Translation and other (gain) loss | (10.7) | 0.6 | |||||||||
| PBO at the end of the year | 143.0 | 191.1 | |||||||||
| Accumulated benefit obligation at the end of the year | $ | 116.8 | $ | 157.3 | |||||||
| Change in plan assets: | |||||||||||
| Fair value of plan assets at the beginning of the year | $ | 140.3 | $ | 131.7 | |||||||
| Divestiture of businesses | (22.2) | — | |||||||||
| Actual return on plan assets | 7.4 | 8.5 | |||||||||
| Benefits paid from plan assets | (12.8) | (10.7) | |||||||||
| Employer contributions | 2.5 | 11.3 | |||||||||
| Translation and other loss | (9.1) | (0.5) | |||||||||
| Fair value of plan assets at the end of the year | $ | 106.1 | $ | 140.3 | |||||||
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Plans with underfunded or non-funded PBO: | |||||||||||
| PBO | $ | 101.0 | $ | 118.2 | |||||||
| Fair value of plan assets | 42.1 | 50.2 | |||||||||
| Plans with underfunded or non-funded accumulated benefit obligation: | |||||||||||
| Accumulated benefit obligation | $ | 76.4 | $ | 87.7 | |||||||
| Fair value of plan assets | 42.1 | 50.2 | |||||||||
| Amounts recognized in the balance sheet consist of: | |||||||||||
| Current assets | $ | — | $ | 0.7 | |||||||
| Non-current assets | 22.5 | 16.4 | |||||||||
| Current liabilities | (1.9) | (1.4) | |||||||||
| Non-current liabilities | (57.5) | (66.5) | |||||||||
| Funded status | $ | (36.9) | $ | (50.8) | |||||||
The PBO and pension asset balances for the divested fab in Niigata, Japan were derecognized during 2024 upon approval from the appropriate authorities. See Note 5: ''Acquisitions and Divestitures'' for further discussion of the Niigata factory sale.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Plan Assets
The Company's overall investment strategy is to focus on stable and low credit risk investments aimed at providing a positive rate of return to the plan assets. The Company has an investment mix with a wide diversification of asset types and fund strategies that are aligned with each region and foreign location's economy and market conditions. Investments in government securities are generally guaranteed by the respective government offering the securities. Investments in corporate bonds, equity securities, and foreign mutual funds are made with the expectation that these investments will give an adequate rate of long-term returns despite periods of high volatility. Other types of investments include investments in cash deposits, money market funds and insurance contracts. Asset allocations are based on the anticipated required funding amounts, timing of benefit payments, historical returns on similar assets and the influence of the current economic environment.
The following table sets forth, by level within the fair value hierarchy, a summary of investments measured at fair value and the asset allocations of the plan assets in the Company's foreign pension plans (in millions):
| As of December 31, 2024 | ||||||||||||||||||||||||||||||||
| Allocation | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||
| Asset Category: | ||||||||||||||||||||||||||||||||
| Cash/Money Markets | 3 | % | $ | 3.2 | $ | 3.2 | $ | — | $ | — | ||||||||||||||||||||||
| Foreign government/treasury securities (1) | 14 | % | 14.5 | 14.5 | — | — | ||||||||||||||||||||||||||
| Corporate bonds, debentures (2) | 24 | % | 25.3 | — | 25.3 | — | ||||||||||||||||||||||||||
| Equity securities (3) | 34 | % | 36.1 | — | 36.1 | — | ||||||||||||||||||||||||||
| Investment and insurance contracts (4) | 25 | % | 27.0 | — | 7.5 | 19.5 | ||||||||||||||||||||||||||
| Total | 100 | % | $ | 106.1 | $ | 17.7 | $ | 68.9 | $ | 19.5 | ||||||||||||||||||||||
| As of December 31, 2023 | ||||||||||||||||||||||||||||||||
| Allocation | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||
| Asset Category: | ||||||||||||||||||||||||||||||||
| Cash/Money Markets | 2 | % | $ | 3.5 | $ | 3.5 | $ | — | $ | — | ||||||||||||||||||||||
| Foreign government/treasury securities (1) | 7 | % | 9.9 | 9.9 | — | — | ||||||||||||||||||||||||||
| Corporate bonds, debentures (2) | 31 | % | 43.2 | — | 43.2 | — | ||||||||||||||||||||||||||
| Equity securities (3) | 22 | % | 31.3 | — | 31.3 | — | ||||||||||||||||||||||||||
| Mutual funds | 9 | % | 11.9 | — | 11.9 | — | ||||||||||||||||||||||||||
| Investment and insurance contracts (4) | 29 | % | 40.5 | — | 16.0 | 24.5 | ||||||||||||||||||||||||||
| Total | 100 | % | $ | 140.3 | $ | 13.4 | $ | 102.4 | $ | 24.5 |
(1)Includes investments primarily in guaranteed return securities
(2) Includes investments in government bonds and corporate bonds of developed countries, emerging market government bonds, emerging market corporate bonds and convertible bonds
(3) Includes investments in equity securities of developed countries and emerging markets
(4) Includes certain investments with insurance companies that guarantee a minimum rate of return on the investment
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
When available, the Company uses observable market data, including pricing on recently closed market transactions and quoted prices, which are included in Level 2. When data is unobservable, valuation methodologies using comparable market data are utilized and included in Level 3. Activity during the years ended December 31, 2024 and 2023, respectively, for plan assets with fair value measurement using significant unobservable inputs (Level 3) was as follows (in millions):
| Investment and Insurance Contracts | |||||||||||||||||||||||
| Balance at December 31, 2022 | $ | 23.8 | |||||||||||||||||||||
| Actual return on plan assets | 1.2 | ||||||||||||||||||||||
| Purchase, sales and settlements, net | (1.3) | ||||||||||||||||||||||
| Foreign currency impact | 0.8 | ||||||||||||||||||||||
| Balance at December 31, 2023 | 24.5 | ||||||||||||||||||||||
| Actual return on plan assets | 0.8 | ||||||||||||||||||||||
| Purchase, sales and settlements, net | (4.5) | ||||||||||||||||||||||
| Foreign currency impact | (1.3) | ||||||||||||||||||||||
| Balance at December 31, 2024 | $ | 19.5 |
The Company generally contributes to its foreign defined benefit plans based on specific plan or statutory requirements. In 2025, the Company expects contributions to be immaterial. The expected benefit payments from the Company's defined benefit plans from 2025 through 2029 and the five years thereafter are as follows (in millions):
| 2025 | $ | 7.6 | |||
| 2026 | 5.8 | ||||
| 2027 | 8.1 | ||||
| 2028 | 9.3 | ||||
| 2029 | 12.9 | ||||
| Five years thereafter | 55.4 | ||||
| Total | $ | 99.1 |
Defined Contribution Plans
The Company has a deferred compensation savings plan for all eligible U.S. employees established under the provisions of Section 401(k) of the Internal Revenue Code. Eligible employees may contribute a percentage of their salary subject to certain limitations. The Company has elected to match 100% of employee contributions between 0% and 4% of their salary, with an annual limit as mandated by the Internal Revenue Service. The Company recognized $20.0 million, $19.9 million and $14.7 million of expense relating to matching contributions in 2024, 2023 and 2022, respectively.
Certain foreign subsidiaries have defined contribution plans in which eligible employees participate. The Company recognized compensation expense of $23.7 million, $22.3 million and $20.5 million relating to these plans for the years ended 2024, 2023 and 2022, respectively.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13: Commitments and Contingencies
Purchase Obligations
The Company has agreements with suppliers, external manufacturers and other vendors for capital expenditures, inventory purchases, manufacturing services, information technology and other goods and services. The following is a schedule by year of future minimum purchase obligations under non-cancelable arrangements entered into during the ordinary course of business as of December 31, 2024 (in millions):
| 2025 | $ | 735.5 | |||
| 2026 | 350.9 | ||||
| 2027 | 77.8 | ||||
| 2028 | 46.0 | ||||
| 2029 | 29.7 | ||||
| Thereafter | 8.0 | ||||
| Total | $ | 1,247.9 |
Environmental Contingencies
The Company currently leases its headquarters in Scottsdale, Arizona on Salt River Maricopa Indian Community property.
Though the Company has encountered and dealt with a number of environmental issues over time relating to the various locations that comprise its operations, any costs to the Company in connection with such matters have not been, and, based on the information available, are not expected to be material.
The following presents a summary of such environmental contingencies:
-
East Greenwich, Rhode Island. The Company’s design center in East Greenwich, Rhode Island is located on property that has localized soil contamination. In connection with the purchase of the facility, the Company entered into a Settlement Agreement and Covenant Not to Sue with the State of Rhode Island. This agreement requires that remedial actions be undertaken and a quarterly groundwater monitoring program be initiated by the former owners of the property.
-
Santa Clara, California. As a result of the acquisition of AMIS in 2008, the Company is a "primary responsible party" to an environmental remediation and clean-up plan at AMIS’s former corporate headquarters in Santa Clara, California. Costs incurred by AMIS include implementation of the clean-up plan, operations and maintenance of remediation systems, and other project management costs. However, AMIS’s former parent company, a subsidiary of Nippon Mining, contractually agreed to indemnify AMIS and the Company for any obligations relating to environmental remediation and clean-up activities at this location. This facility was divested to Lincoln Property Company Commercial, Inc. in 2022.
-
South Portland, Maine. Through its acquisition of Fairchild, the Company acquired a facility in South Portland, Maine. This facility was divested to Diodes, Inc. in 2022. This facility has ongoing environmental remediation projects to respond to certain releases of hazardous substances that occurred prior to the leveraged recapitalization of Fairchild from its former parent company, National Semiconductor Corporation, which is now owned by TI. To the extent the Company could still incur liabilities with respect to these remediation projects, pursuant to a 1997 asset purchase agreement entered into in connection with the Fairchild recapitalization, National Semiconductor Corporation agreed to indemnify Fairchild, without limitation and for an indefinite period of time, for all future costs related to these projects.
-
Bucheon, South Korea. Under a 1999 asset purchase agreement pursuant to which Fairchild purchased the power device business of Samsung, Samsung agreed to indemnify Fairchild in an amount up to $150.0 million for remediation costs and other liabilities related to historical contamination at Samsung’s Bucheon, South Korea operations.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
Mountain Top, Pennsylvania. Under a 2001 asset purchase agreement pursuant to which Fairchild purchased a manufacturing facility in Mountain Top, Pennsylvania, Intersil Corp. (subsequently acquired by Renesas Electronics Corporation) agreed to indemnify Fairchild for remediation costs and other liabilities related to historical contamination at the facility.
-
Hartford, Illinois. The Company was notified by the EPA that it has been identified as a PRP under the Comprehensive Environmental, Response, Compensation, and Liability Act in the Chemetco Superfund matter. Chemetco, a defunct reclamation services supplier that operated in Hartford, Illinois at what is now a Superfund site, has performed reclamation services for the Company in the past. The EPA is pursuing Chemetco customers for contribution to the site clean-up activities. The Company has joined a PRP group, which is cooperating with the EPA in the evaluation and funding of the clean-up activities.
Financing Contingencies
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 December 31, 2024, the Company's Revolving Credit Facility included $25.0 million available for the issuance of letters of credit. There were $0.9 million letters of credit outstanding under the Revolving Credit Facility as of December 31, 2024, which reduced the Company's borrowing capacity. The Company also had outstanding guarantees and letters of credit outside of its Revolving Credit Facility totaling $6.6 million as of December 31, 2024.
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 December 31, 2024. 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
The Company is a party to a variety of agreements entered into in the ordinary course of business, including acquisition agreements, pursuant to which it may be obligated to indemnify the 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 the Company require it to indemnify the other party against losses due to IP infringement, property damage (including environmental contamination), personal injury, failure to comply with applicable laws, the Company’s negligence or willful misconduct or breach of representations and warranties and covenants related to such matters as title to sold assets. In the case of certain acquisition agreements, these agreements may require us to maintain such indemnification provisions for the acquiree’s directors, officers and other employees and agents, in certain cases for a number of years following the acquisition.
The Company faces risk of exposure to warranty and product liability claims in the event that its products fail to perform as expected or such failure of its products results, or is alleged to result, in economic damage, bodily injury or property damage. In addition, if any of the Company’s designed products are alleged to be defective, the Company may be required to participate in their recall. Depending on the significance of any particular customer and other relevant factors, the Company may agree to provide more favorable rights to such customer for valid defective product claims.
The Company and its subsidiaries provide for indemnification of directors, officers and other persons in accordance with limited liability company operating agreements, certificates of incorporation, by-laws, articles of association or similar organizational documents, as the case may be. Section 145 of the Delaware General Corporation Law ("DGCL") authorizes a court to award, or a corporation’s board of directors to grant, indemnity to directors and officers under certain circumstances and subject to certain limitations. The terms of Section 145 of the DGCL are sufficiently broad to permit indemnification under certain circumstances for liabilities, including reimbursement of expenses incurred, arising under the Exchange Act. As permitted by the DGCL, the Company’s Amended and Restated Certificate of Incorporation (as amended, the "Certificate of Incorporation") contains provisions relating to the limitation of liability and indemnification of directors and officers. The Certificate of Incorporation eliminates the personal liability of each of the Company’s directors to the fullest extent permitted by Section 102(b)(7) of the DGCL, as it may be amended or supplemented, and provides that the Company will indemnify its directors and officers to the fullest extent permitted by Section 145 of the DGCL, as amended from time to time.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company has entered into indemnification agreements with each of its directors and executive officers. The form of agreement (the "Indemnification Agreement") provides, subject to certain exceptions and conditions specified in the Indemnification Agreement, that the Company will indemnify each indemnitee to the fullest extent permitted by Delaware law against all expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with a proceeding or claim in which such person is involved because of his or her status as one of the Company’s directors or executive officers. In addition, the Indemnification Agreement provides that the Company will, to the extent not prohibited by law and subject to certain exceptions and repayment conditions, advance specified indemnifiable expenses incurred by the indemnitee in connection with such proceeding or claim.
The Company also maintains directors’ and officers’ insurance policies that indemnify its directors and officers against various liabilities, including certain liabilities under the Exchange Act, which might be incurred by any director or officer in his or her capacity as such.
While the Company’s 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 the Company’s obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under any of these indemnities have not had a material effect on the Company’s business, financial condition, results of operations or cash flows. Additionally, the Company does not believe that any amounts that it may be required to pay under these indemnities in the future will be material to the Company’s business, financial position, results of operations, or cash flows.
Government Assistance
2024 Government Incentives
The Company receives government incentives from U.S. federal and state governments and non-U.S. governments in the form of cash grants and tax abatements, which in most cases, attach conditions for a specific duration period, generally related to hiring, training and/or retaining employees, the construction or acquisition of assets and placing them in service or the development of specific technologies. If conditions are not satisfied or the duration period for the agreement is infringed, the incentives are subject to reduction, termination, or recapture.
As of December 31, 2024, relating to government incentives, $86.3 million and $2.4 million were included in other current assets and other non-current assets, respectively, substantially all of which represents the benefit of investment tax credits in excess of taxes payable. As December 31, 2024, $104.4 million was recorded as a net decrease to property, plant and equipment, net. Additionally, $10.8 million and $5.3 million were recorded as a reduction to cost of revenue and operating expenses, respectively, for the year ended December 31, 2024.
The duration of the agreements for the incentives received by the Company in 2024 ranges from one to twenty years, with a recapture period that can extend up to ten years.
2023 Government Incentives
As of December 31, 2023, relating to government incentives, $12.9 million and $5.2 million were included in other current assets and other non-current assets, respectively, representing the amounts receivable, $80.4 million was recorded as a net decrease to property, plant and equipment, net, and $83.6 million was recorded as a reduction to taxes payable included in accrued expenses and other current liabilities. Additionally, $5.1 million and $4.9 million were recorded as a reduction to cost of revenue and operating expenses, respectively, for the year ended December 31, 2023.
2022 Government Incentives
During the year ended December 31, 2022, the Company received a nominal amount related to these programs. To the extent amounts have been received by the Company in advance of the completion of the conditions, they have been recorded as a liability.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Legal Matters
From time to time, the Company is party to various legal proceedings arising in the ordinary course of business, including indemnification claims, claims of alleged infringement of patents, trademarks, copyrights and other IP rights, claims of alleged non-compliance with contract provisions and claims related to alleged violations of laws and regulations. The Company evaluates the status of the legal proceedings in which it is involved to assess whether a loss is reasonably estimable and either remote, reasonably possible or probable of occurring. The Company further evaluates each legal proceeding to assess whether an estimate of possible loss or range of possible loss can be made for disclosure purposes. Although litigation is inherently unpredictable, the Company believes that it has adequate provisions for any probable and reasonably estimable losses. However, the Company’s estimates may not represent its maximum possible exposure in any particular legal proceeding. Legal expenses related to defense, negotiations, settlements, rulings and advice of outside legal counsel are expensed as incurred.
The Company is currently involved in a variety of legal matters that arise in the ordinary course of business. Based on information currently available, except as disclosed below (if any), 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.
Securities Class Action and Derivative Litigation Concerning the Company's SiC Business
On December 13, 2023, a putative class action captioned Hubacek v. On Semiconductor Corp., et al., Case No. 1:23-cv-01429 (D. Del.) ("Hubacek"), was filed by an alleged stockholder of the Company in the U.S. District Court for the District of Delaware against the Company and certain of its officers. This action was transferred to the U.S. District Court for the District of Arizona in March of 2024. The initial complaint asserted claims for alleged violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The initial complaint alleged that the defendants made misleading statements regarding the Company's SiC business. An amended complaint was filed on May 31, 2024. The amended complaint again asserts claims for alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The plaintiff seeks a ruling that this case may proceed as a class action, and seeks damages, attorneys’ fees and costs. The Company filed a motion to dismiss the amended complaint on July 30, 2024. Upon reviewing the Company’s motion to dismiss the amended complaint, plaintiff deemed it necessary to further amend their complaint. On September 6, 2024, plaintiff filed their second amended complaint. The Company filed its motion to dismiss this second amended complaint on October 10, 2024. Full briefing for this motion to dismiss the second amended complaint was completed on December 20, 2024. The Company expects the court to make a ruling on this motion to dismiss in the first half of 2025. The Company believes that it has strong legal defenses to the claims asserted, and will vigorously defend them.
On January 3, 2024, a purported stockholder derivative action captioned Silva v. El-Khoury, et al., Case No. 1:24-cv-00007 (D. Del.) ("Silva"), was filed by a purported stockholder of the Company in the U.S. District Court for the District of Delaware. On February 12, 2024, a purported stockholder derivative action captioned Smalley et al. v. El-Khoury et al. Case No. 1:24-cv-00183 (D. Del.) ("Smalley"), was filed by a purported stockholder of the Company in the U.S. District Court for the District of Delaware. Both aforementioned derivative actions, Silva and Smalley, were voluntarily dismissed without prejudice on April 15, 2024. On February 28, 2024, a purported stockholder derivative action captioned Mumme et al. v. El-Khoury et al. Case No. CV2024-003974 (D. AZ.) ("Mumme"), was filed by a purported stockholder of the Company in the Superior Court of the State of Arizona in and for the County of Maricopa and on March 15, 2024, a purported stockholder derivative action captioned Chan et al. v. Abe et al. Case No. 2:24-cv-00552 (D. AZ.) ("Chan"), was filed by a purported stockholder of the Company in the U.S. District Court for the District of Arizona. The allegations in these derivative complaints are substantially similar to the allegations in the securities class action complaint discussed above. The derivative suits purport to assert claims (1) on behalf of the Company against certain of its officers for contribution under the federal securities laws and (2) against all of the defendants for breach of fiduciary duty, aiding and abetting, unjust enrichment, abuse of control, gross mismanagement, and waste. The plaintiffs seek an award of damages, pre-judgment interest, punitive damages, attorneys’ fees, and other costs and expenses related to the litigation. The Company believes that the plaintiffs lack standing to assert claims on the Company’s behalf. These two pending derivative actions, Mumme and Chan, were stayed by court order, pending the resolution of Hubacek.
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.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14: Fair Value Measurements
Fair Value of Financial Instruments
The following fair value tier level hierarchy is used to determine fair values of financial instruments:
-
Level 1: based on observable inputs that reflect quoted prices for identical assets or liabilities in active markets.
-
Level 2: based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly.
-
Level 3: based on the use of unobservable inputs for the assets and liabilities and other types of analyses.
The carrying value of cash and cash equivalents, which include money market funds and demand and time deposits, approximate fair value because of the short-term maturity of these instruments. The carrying amount of other current assets and liabilities, such as accounts receivable and accounts payable, approximates fair value due to the short-term maturity of the amounts, and such amounts are considered Level 2 in the fair value hierarchy.
The Company held $300.0 million of short-term investments in time deposits and an insignificant amount of cash equivalents in the form of time deposits and money market funds as of December 31, 2024. The Company held an insignificant amount of investments in money market funds and no cash equivalents in the form of demand deposits or time deposits or investments in other assets as of December 31, 2023. Money market funds and demand deposits are classified as Level 1, while time deposits are classified as Level 2 within the fair value hierarchy.
Fair Value of Long-Term Debt, including Current Portion
The carrying amounts and fair value of the Company’s long-term borrowings were as follows (in millions):
| As of December 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||||||||||
| Long-term debt, including current portion (1): | |||||||||||||||||||||||
| Revolving Credit Facility | $ | 375.0 | $ | 373.4 | $ | 375.0 | $ | 390.6 | |||||||||||||||
| 0.50% Notes | 1,478.2 | 1,450.4 | 1,473.1 | 1,596.6 | |||||||||||||||||||
| 0% Notes | 797.2 | 1,054.4 | 794.0 | 1,334.4 | |||||||||||||||||||
| 3.875% Notes | 695.5 | 656.3 | 694.4 | 652.0 |
(1)Long-term debt is carried on the Consolidated Balance Sheets at historical cost net of debt discount and issuance costs.
The fair value of the 0% Notes, 0.50% Notes and 3.875% Notes was estimated based on market prices in active markets (Level 1), and the Revolving Credit Facility was estimated based on discounting the remaining principal and interest payments using current market rates for similar debt (Level 2).
Fair Values Measured on a Non-Recurring Basis
The Company's non-financial assets, such as property, plant and equipment, goodwill and intangible assets, are recorded at fair value upon a business combination and are remeasured at fair value only if an impairment charge is recognized. The Company uses unobservable inputs to the valuation methodologies that are significant to the fair value measurements, and the valuations require management's judgment due to the absence of quoted market prices. The Company determines the fair value of its held and used assets, goodwill and intangible assets using an income, cost or market approach as determined reasonable.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the years ended December 31, 2024, 2023 and 2022, there were no non-financial assets included in the Company's Consolidated Balance Sheet that were remeasured at fair value on a non-recurring basis. The following table shows the adjustments to fair value of certain of the Company's non-financial assets that had an impact on the Company's results of operations (in millions):
| Year ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Nonrecurring fair value measurements: | |||||||||||||||||
| Goodwill impairments (Level 3) | $ | — | $ | — | $ | 330.0 | |||||||||||
| Intangibles impairment (Level 3) | — | — | 56.8 | ||||||||||||||
| Asset impairments (Level 3) | 37.8 | 10.5 | 14.8 | ||||||||||||||
| Total | $ | 37.8 | $ | 10.5 | $ | 401.6 |
Note 15: Financial Instruments
Foreign Currencies
As a multinational business, the Company's transactions 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 December 31, 2024 and 2023, the Company had outstanding foreign exchange contracts with notional amounts of $256.8 million and $262.2 million, respectively. Such contracts were obtained through financial institutions and were scheduled to mature within two 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 gains and losses on the underlying assets, liabilities and transactions to which they are related.
The following schedule summarizes the Company's net foreign exchange positions in U.S. dollars (in millions):
| As of December 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| Buy (Sell) | Notional Amount | Buy (Sell) | Notional Amount | ||||||||||||||||||||
| Euro | $ | 71.1 | $ | 71.1 | $ | 64.6 | $ | 64.6 | |||||||||||||||
| Philippine Peso | 41.0 | 41.0 | 47.3 | 47.3 | |||||||||||||||||||
| Korean Won | (39.5) | 39.5 | (14.3) | 14.3 | |||||||||||||||||||
| Japanese Yen | 35.0 | 35.0 | 55.2 | 55.2 | |||||||||||||||||||
| Czech Koruna | 24.0 | 24.0 | 16.8 | 16.8 | |||||||||||||||||||
| Other currencies - Buy | 39.6 | 39.6 | 54.4 | 54.4 | |||||||||||||||||||
| Other currencies - Sell | (6.6) | 6.6 | (9.6) | 9.6 | |||||||||||||||||||
| Total | $ | 164.6 | $ | 256.8 | $ | 214.4 | $ | 262.2 |
Amounts receivable or payable under the contracts were not material as of December 31, 2024 and 2023, and are included in other current assets or accrued expenses and other current liabilities in the accompanying Consolidated Balance Sheets. Realized and unrealized foreign currency transactions totaled a gain of $0.9 million for the year ended December 31, 2024 and a loss of $7.9 million and $0.7 million for the years ended December 31, 2023 and 2022, 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
Cash Flow Hedges
Foreign currency risk
During 2023, the Company entered into foreign currency forward contracts to hedge its exposure to foreign currency exchange rate risk related to future forecasted transactions denominated in certain currencies other than the U.S. dollar. These contracts generally mature within 12 months and are designated as cash flow hedges for accounting purposes.
As of December 31, 2024 and 2023, the notional value of outstanding foreign currency forward contracts designated as cash flow hedges was $145.1 million and $92.2 million, respectively, with a fair value of $8.2 million recorded as accrued expenses and other current liabilities for 2024 and $0.9 million recorded as other current assets for 2023. A loss of $10.0 million and $0.1 million was recognized as a component of cost of revenue for the years ended December 31, 2024 and 2023, respectively. The Company did not identify any ineffectiveness with respect to the notional amounts of the foreign currency forward contracts effective as of December 31, 2024.
Interest rate risk
During 2023, the Company terminated its interest rate swap agreements with a notional value of $500 million, received cash proceeds of $27.7 million, net of termination fees, and recognized $6.9 million of other income related to the termination. At the time of termination, approximately $20.7 million was recorded in accumulated other comprehensive loss, of which $11.9 million and $6.9 million were subsequently recognized as other income during the years ended December 31, 2024 and 2023, respectively, with the remaining portion recognized as part of the loss on debt refinancing and prepayment during 2023.
See Note 17: ''Changes in Accumulated Other Comprehensive Loss'' for the effective amounts related to derivative instruments designated as cash flow hedges affecting accumulated other comprehensive loss and the Consolidated Statements of Operations and Comprehensive Income for the year ended December 31, 2024.
Convertible Note Hedges
The Company entered into convertible note hedges in connection with the issuance of the 0% Notes, 0.50% Notes and 1.625% Notes. See Note 9: ''Long-Term Debt'' for more information.
Other
As of December 31, 2024, the Company had no outstanding commodity derivatives, currency swaps, options or equity investments held at subsidiaries or affiliated companies. 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 its hedge counterparties fail to perform their obligations. As of December 31, 2024, the counterparties to the Company's hedge contracts were held at financial institutions which the Company believes to be highly rated, and no credit-related losses are anticipated.
Note 16: Income Taxes
The Company's geographic sources of income before income taxes were as follows (in millions):
| Year ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| United States | $ | 1,584.3 | $ | 2,222.2 | $ | 1,979.8 | |||||||||||
| Foreign | 253.1 | 313.6 | 382.4 | ||||||||||||||
| Income before income taxes | $ | 1,837.4 | $ | 2,535.8 | $ | 2,362.2 |
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's provision for income taxes was as follows (in millions):
| Year ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 276.6 | $ | 372.7 | $ | 331.9 | |||||||||||
| State and local | 20.4 | 21.6 | 31.8 | ||||||||||||||
| Foreign | 52.0 | 76.9 | 73.8 | ||||||||||||||
| Total | 349.0 | 471.2 | 437.5 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | (58.2) | (107.9) | (36.9) | ||||||||||||||
| State and local | (18.1) | 13.2 | 25.7 | ||||||||||||||
| Foreign | (9.9) | (26.3) | 32.1 | ||||||||||||||
| Total | (86.2) | (121.0) | 20.9 | ||||||||||||||
| Total provision | $ | 262.8 | $ | 350.2 | $ | 458.4 |
A reconciliation of the U.S. federal statutory income tax rate to the Company's effective income tax rate was as follows:
| Year ended December 31, | ||||||||||||||||||||
| 2024 | 2023 | 2022 | ||||||||||||||||||
| U.S. federal statutory rate | 21.0 | % | 21.0 | % | 21.0 | % | ||||||||||||||
| Increase (decrease) resulting from: | ||||||||||||||||||||
| State and local taxes, net of federal tax benefit | 0.4 | 0.7 | 1.7 | |||||||||||||||||
| Impact of foreign operations | 1.4 | 0.3 | 1.7 | |||||||||||||||||
| Foreign derived intangible income benefit | (6.9) | (6.8) | (7.4) | |||||||||||||||||
| Nondeductible goodwill | — | — | 3.1 | |||||||||||||||||
| Change in valuation allowance and related effects (1) | 0.2 | 0.5 | (0.1) | |||||||||||||||||
| Share-based compensation costs | 0.2 | (0.2) | (0.5) | |||||||||||||||||
| U.S. federal R&D credit | (1.1) | (0.4) | (0.2) | |||||||||||||||||
| Non-deductible officer compensation | 0.4 | 0.3 | 0.3 | |||||||||||||||||
| Impact of audit settlement | (0.7) | (1.8) | — | |||||||||||||||||
| Other | (0.6) | 0.2 | (0.2) | |||||||||||||||||
| Total | 14.3 | % | 13.8 | % | 19.4 | % |
(1)For the year ended December 31, 2024, this included a benefit of $7.5 million, or 0.4% related to the decrease in the valuation allowance for the expiration of Japan net operating losses ("NOLs"), partially netted with an offsetting expense of $6.2 million or 0.3% related to the expiration of those same Japan NOLs. For the year ended December 31, 2023, this included a benefit of $13.7 million, or 0.5% related to a decrease in the valuation allowance for the expiration of Japan NOLs, partially netted with an offsetting expense of $15.3 million or 0.6% related to the expiration of those same Japan NOLs. For the year ended December 31, 2022, this included a benefit of $55.6 million, or 2.4% related to a decrease in the valuation allowance for the expiration of Japan NOLs, partially netted with an offsetting expense of $54.3 million, or 2.3% related to the expiration of those same Japan NOLs.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The tax effects of temporary differences in the recognition of income and expense for tax and financial reporting purposes that give rise to significant portions of the net deferred tax asset (liability) were as follows (in millions):
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| NOL and tax credit carryforwards | $ | 308.7 | $ | 227.6 | |||||||
| 163 (j) interest expense carryforward | 4.4 | 4.6 | |||||||||
| Lease liabilities | 57.6 | 59.7 | |||||||||
| ROU asset | (52.7) | (58.9) | |||||||||
| Tax-deductible goodwill and amortizable intangibles | (31.6) | (32.2) | |||||||||
| Capitalization of research and development expenses | 523.7 | 419.9 | |||||||||
| Reserves and accruals | 61.7 | 60.2 | |||||||||
| Property, plant and equipment | (122.1) | (165.1) | |||||||||
| Inventories | 116.0 | 134.2 | |||||||||
| Undistributed earnings of foreign subsidiaries | (77.8) | (67.7) | |||||||||
| Share-based compensation | 10.4 | 9.7 | |||||||||
| Pension | 0.2 | 5.8 | |||||||||
| Convertible Debt | 89.0 | 108.1 | |||||||||
| Other | 21.0 | 6.5 | |||||||||
| Deferred tax assets and liabilities before valuation allowance | 908.5 | 712.4 | |||||||||
| Valuation allowance | (216.2) | (150.3) | |||||||||
| Net deferred tax asset | $ | 692.3 | $ | 562.1 |
The Company has investment tax credits, which are accounted for pursuant to ASC 740, in Korea and the Czech Republic. The Company uses the deferral method of accounting for investment tax credits under which the credits are recognized as reductions in the carrying value of the related assets. Deferred tax related to differences in GAAP versus tax carrying value is recorded pursuant to the gross-up method. Further, the Company analyzes the need for a valuation allowance related to these credits, and as of December 31, 2024, the Company recorded a partial valuation of $67.9 million against the Korea investment tax credits forecasted to expire unutilized. See Schedule II - "Valuation and Qualifying Accounts" included elsewhere in this Form 10-K.
As of December 31, 2024 and 2023, the Company had approximately $4.4 million and $22.2 million, respectively, of U.S. federal NOL carryforwards, before the impact of unrecognized tax benefits. The decrease is due to current year utilization. These NOL carryforwards can be carried forward indefinitely until utilized. As of December 31, 2024 and 2023, the Company had approximately $0.5 million and $6.6 million, respectively, of U.S. federal credit carryforwards, before consideration of the impact of unrecognized tax benefits and the valuation allowance. The credits will expire in 2033 if unutilized. These NOL and credit carryforwards relate to acquisitions and, consequently, are limited in the amount that can be utilized in any one year.
As of December 31, 2024 and 2023, the Company had approximately $245.7 million and $273.3 million, respectively, of U.S. state NOL carryforwards, before consideration of valuation allowance or the impact of unrecognized tax benefits. The decrease is primarily due to current year utilization. The U.S. state NOL carryforwards will expire in varying amounts from 2025 to 2041, if unutilized. As of December 31, 2024 and 2023, the Company had $110.2 million and $111.8 million, respectively, of U.S. state credit carryforwards before consideration of valuation allowance or the impact of unrecognized tax benefits. The U.S. state credits will expire in varying amounts beginning in 2025 while a substantial amount of the state credits carryforward indefinitely.
As of December 31, 2024 and 2023, the Company had approximately $244.1 million and $232.3 million, respectively, of foreign NOL carryforwards, before consideration of valuation allowance. The increase is primarily due to generation of NOLs. As of December 31, 2024 and 2023, the Company had $157.6 million and $93.5 million, respectively, of foreign credit carryforwards before consideration of valuation allowance. A significant portion of the foreign NOLs and credit carryforwards will expire in varying amounts prior to 2035, if unutilized.
The Company maintains a partial valuation allowance of $90.9 million, net of federal benefit on its U.S. state deferred tax assets, primarily NOLs and credits. The remaining valuation allowance of $125.3 million primarily relates to NOLs and tax
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
credits in certain other foreign jurisdictions that primarily expire in 2025.
As of December 31, 2024, the Company was not indefinitely reinvested with respect to the earnings of its foreign subsidiaries and has therefore accrued withholding taxes that would be owed upon future distributions of such earnings.
The activity for unrecognized gross tax benefits was as follows (in millions):
| 2024 | 2023 | 2022 | |||||||||||||||
| Balance at beginning of year | $ | 67.7 | $ | 136.8 | $ | 137.2 | |||||||||||
| Additions for tax benefits related to the current year | 5.2 | 3.4 | 3.3 | ||||||||||||||
| Additions for tax benefits of prior years | 1.4 | 0.7 | 0.5 | ||||||||||||||
| Reductions for tax benefits of prior years | (22.3) | (48.0) | (0.3) | ||||||||||||||
| Lapse of statute | (4.0) | (9.9) | (3.8) | ||||||||||||||
| Settlements | (2.3) | (15.3) | (0.1) | ||||||||||||||
| Balance at end of year | $ | 45.7 | $ | 67.7 | $ | 136.8 |
Included in the December 31, 2024 balance of $45.7 million is $38.5 million related to unrecognized tax benefits that, if recognized, would affect the annual effective tax rate. Also included in the balance of unrecognized tax benefits as of December 31, 2024 is $7.2 million of benefit that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes. Although the Company cannot predict the timing of resolution with taxing authorities, if any, the Company believes it is reasonably possible that its unrecognized tax benefits will be reduced by $3.8 million in the next 12 months due to settlement with tax authorities or expiration of the applicable statute of limitations.
The Company recognizes interest and penalties accrued related to uncertain tax positions in tax expense in the Consolidated Statements of Operations and Comprehensive Income. The Company recognized approximately $1.6 million of net tax expense, $0.8 million of net tax benefit and $1.4 million of tax expense for interest and penalties during the year ended December 31, 2024, 2023 and 2022, respectively. The Company had approximately $3.6 million, $2.0 million, and $2.7 million of accrued interest and penalties as of December 31, 2024, 2023, and 2022, respectively.
The Company is currently under IRS examination for the 2022 and 2023 tax years. Tax years prior to 2021 are generally not subject to examination by the IRS. For state tax returns, the Company is generally not subject to income tax examinations for tax years prior to 2020. With respect to jurisdictions outside the United States, the Company is generally not subject to examination for tax years prior to 2014.
Note 17: Changes in Accumulated Other Comprehensive Loss
Amounts comprising the Company's accumulated other comprehensive loss and reclassifications were as follows (in millions):
| Currency Translation Adjustments | Effects of Cash Flow Hedges | Total | |||||||||||||||||||||||||||
| Balance December 31, 2022 | $ | (50.4) | $ | 27.2 | $ | (23.2) | |||||||||||||||||||||||
| Other comprehensive income (loss) prior to reclassifications | (2.1) | 0.9 | (1.2) | ||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | — | (20.8) | (20.8) | ||||||||||||||||||||||||||
| Net current period other comprehensive loss (1) | (2.1) | (19.9) | (22.0) | ||||||||||||||||||||||||||
| Balance December 31, 2023 | (52.5) | 7.3 | (45.2) | ||||||||||||||||||||||||||
| Other comprehensive income (loss) prior to reclassifications | (3.4) | 8.1 | 4.7 | ||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | — | (21.9) | (21.9) | ||||||||||||||||||||||||||
| Net current period other comprehensive loss (1) | (3.4) | (13.8) | (17.2) | ||||||||||||||||||||||||||
| Balance December 31, 2024 | $ | (55.9) | $ | (6.5) | $ | (62.4) |
(1)Effects of cash flow hedges are net of $2.0 million of tax benefit and $0.2 million of tax expense for the years ended December 31, 2024 and 2023, respectively.
ON SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Amounts reclassified from accumulated other comprehensive loss to the specific caption within the Consolidated Statements of Operations and Comprehensive Income were as follows (in millions):
| Year ended December 31, | |||||||||||||||||
| 2024 | 2023 | To caption | |||||||||||||||
| Cash flow hedges | $ | (10.0) | $ | (0.1) | Cost of revenue | ||||||||||||
| Interest rate swaps | — | (13.8) | Interest expense | ||||||||||||||
| Interest rate swaps terminations | (11.9) | (6.9) | Other Income | ||||||||||||||
| Total | $ | (21.9) | $ | (20.8) |
Note 18: Supplemental Disclosures
Supplemental Disclosure of Cash Flow Information
Certain of the Company's cash and non-cash activities were as follows (in millions):
| Year ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Non-cash investing activities: | |||||||||||||||||
| Capital expenditures in accounts payable and other long-term liabilities | $ | 210.4 | $ | 303.0 | $ | 324.8 | |||||||||||
| Operating ROU assets obtained in exchange of lease liabilities | 53.8 | 25.8 | 140.1 | ||||||||||||||
| Finance ROU assets obtained in exchange of lease liabilities | 0.5 | — | 25.4 | ||||||||||||||
| Amount due to seller in connection with the EFK acquisition | — | — | 236.3 | ||||||||||||||
| Cash paid for: | |||||||||||||||||
| Interest expense | $ | 62.7 | $ | 73.2 | $ | 80.7 | |||||||||||
| Income taxes | 347.5 | 428.2 | 443.2 | ||||||||||||||
| Operating lease payments in operating cash flows | 44.2 | 45.7 | 42.5 |
Following is a reconciliation of the captions in the Consolidated Balance Sheets to the Consolidated Statements of Cash Flows (in millions):
| As of December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Consolidated Balance Sheets: | |||||||||||||||||
| Cash and cash equivalents | $ | 2,691.3 | $ | 2,483.0 | $ | 2,919.0 | |||||||||||
| Restricted cash (included in other current assets) | 2.1 | 2.0 | 14.0 | ||||||||||||||
| Cash, cash equivalents and restricted cash in Consolidated Statements of Cash Flows | $ | 2,693.4 | $ | 2,485.0 | $ | 2,933.0 |
Note 19: Subsequent Events
On January 14, 2025, the Company completed the acquisition of the Silicon Carbide Junction Field-Effect Transistor ("SiC JFET") technology business from Qorvo US, Inc., and certain of its subsidiaries, for $118.8 million in cash, subject to working capital adjustments. The acquired SiC JFET technology expands the Company's EliteSiC power portfolio within the PSG reportable segment and enables the Company to help address the need for high energy efficiency and power density in the AC-DC stage in power supply units for AI data centers. Due to the timing of the transaction, a preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed could not be provided, and is expected to be completed by the end of the first fiscal quarter of 2025.
ON SEMICONDUCTOR CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
The table below details the activity of the valuation allowance against assets for the years ended December 31, 2024, 2023 and 2022 (in millions):
| Description | Balance at Beginning of Period | Charged (Credited) to Income | Charged to Other Accounts | Deductions/Write-offs | Balance at End of Period | |||||||||||||||||||||||||||
| Allowance for deferred tax assets | ||||||||||||||||||||||||||||||||
| Year ended December 31, 2022 | $ | 227.4 | $ | 7.0 | $ | (16.7) | (1) | $ | (65.3) | (2) | $ | 152.4 | ||||||||||||||||||||
| Year ended December 31, 2023 | 152.4 | 0.4 | 0.2 | (1) | (2.7) | (2) | 150.3 | |||||||||||||||||||||||||
| Year ended December 31, 2024 | 150.3 | 5.1 | 68.6 | (3) | (7.8) | (2) | 216.2 |
(1)Primarily represents the effects of cumulative translation adjustments.
(2)Primarily relates to the expiration of Japan net operating losses. See Note 16: ''Income Taxes'' in the notes to our audited consolidated financial statements included elsewhere in this Form 10-K.
(3)Primarily relates to the valuation allowance recorded against Korea Investment Tax Credits, accounted for under the deferral method. The benefit of the ITC was recognized as a reduction in the carrying value of the related assets. In addition to the ITC, this amount was partially offset by cumulative translation adjustments. See Note 16: ''Income Taxes'' in the notes to our audited consolidated financial statements included elsewhere in this form 10-K.
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