On Semiconductor Corp 10-Q for FY2020 Q1

On Semiconductor Corp (ON)

10-Q 2020-05-11 For: 2020-04-03

Added on April 07, 2026

About this 10-Q

On Semiconductor Corp filed this 10-Q on May 11, 2020, covering the quarter ended April 3, 2020 (FY2020 Q1).

Headline figures

Quarter ended April 3, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.28B; down 7.8% from $1.39B a year earlier
Net loss: $14M; compared with net income of $114.1M a year earlier
Diluted EPS: -$0.03; compared with $0.27 a year earlier

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Delaware						36-3840979
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	ON	The Nasdaq Stock Market LLC


Large Accelerated Filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


Title of Each Class						Number of Shares
Common Stock, par value $0.01 per share						410,020,679


Part I: Financial Information
	Item 1. Financial Statements (unaudited)	4
	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	26
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	35
	Item 4. Controls and Procedures	36
Part II: Other Information
	Item 1. Legal Proceedings	37
	Item 1A. Risk Factors	37
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	40
	Item 3. Defaults Upon Senior Securities	41
	Item 4. Mine Safety Disclosures	41
	Item 5. Other Information	41
	Item 6. Exhibits	42
	Signatures	43


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


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


Abbreviated Term						Defined Term
1.00% Notes						1.00% Convertible Senior Notes due 2020
1.625% Notes						1.625% Convertible Senior Notes due 2023

Amended Credit Agreement						Credit Agreement, dated as of April 15, 2016, as subsequently amended, by and among the Company, as borrower, the several lenders party thereto, Deutsche Bank AG, New York Branch, as administrative agent and collateral agent, and certain other parties, providing for the Revolving Credit Facility and the Term Loan “B” Facility
Amended and Restated SIP						ON Semiconductor Corporation Amended and Restated Stock Incentive Plan, as amended
AMIS						AMIS Holdings, Inc.
Aptina						Aptina, Inc.
ASIC						Application specific integrated circuit

ASU						Accounting Standards Update



DSP						Digital signal processing

EPA						Environmental Protection Agency
ESPP						ON Semiconductor Corporation 2000 Employee Stock Purchase Plan, as amended
Exchange Act						Securities Exchange Act of 1934, as amended
Fairchild						Fairchild Semiconductor International, Inc.
FASB						Financial Accounting Standards Board
Freescale						Freescale Semiconductor, Inc.
IC						Integrated circuit
IoT						Internet-of-Things
IP						Intellectual property



LED						Light-emitting diode
LIBO Rate						A base rate per annum equal to the London Interbank Offered Rate as administered by the International Exchange Benchmark Administration

LiDAR						Light detection and ranging
MCU						Microcontroller unit
MOSFET						Metal oxide semiconductor field effect transistor
Motorola						Motorola Inc.
ODM						Original device manufacturers
OEM						Original equipment manufacturers



PRP						Potentially Responsible Party
Quantenna						Quantenna Communications, Inc.
Revolving Credit Facility						A $1.97 billion revolving credit facility created pursuant to the Amended Credit Agreement
RSU						Restricted stock unit


SEC						Securities and Exchange Commission
SoC						System on chip
Securities Act						Securities Act of 1933, as amended



Term Loan “B” Facility						A $2.4 billion term loan “B” facility created pursuant to the Amended Credit Agreement
Wi-Fi						Wireless radio technologies compliant with Institute of Electrical and Electronics Engineers Standard 802.11b and commonly used in wireless local area networking devices
WSTS						World Semiconductor Trade Statistics


	April 3, 2020		December 31, 2019
Assets
Cash and cash equivalents	$	1,982.0	$	894.2

Receivables, net	652.0		705.0
Inventories	1,251.9		1,232.4
Other current assets	146.4		188.4
Total current assets	4,032.3		3,020.0

Property, plant and equipment, net	2,579.9		2,591.6
Goodwill	1,663.4		1,659.2
Intangible assets, net	558.2		590.5
Deferred tax assets	331.0		307.8
Other assets	256.0		256.4
Total assets	$	9,420.8	$	8,425.5
Liabilities, Non-Controlling Interest and Stockholders’ Equity
Accounts payable	$	503.9	$	543.6
Accrued expenses and other current liabilities	542.6		538.8
Current portion of long-term debt	689.6		736.0
Total current liabilities	1,736.1		1,818.4
Long-term debt	4,043.0		2,876.5
Deferred tax liabilities	60.8		60.2
Other long-term liabilities	343.3		346.3
Total liabilities	6,183.2		5,101.4
Commitments and contingencies (Note 9)
ON Semiconductor Corporation stockholders’ equity:
Common stock ($0.01 par value, 1,250,000,000 shares authorized, 568,774,542 and 565,562,607 issued, 410,004,566 and 411,312,664 outstanding, respectively)	5.7		5.7
Additional paid-in capital	3,830.3		3,809.5
Accumulated other comprehensive loss	(66.5)		(54.3)
Accumulated earnings	1,177.3		1,191.3
Less: Treasury stock, at cost: 158,769,976 and 154,249,943 shares, respectively	(1,731.9)		(1,650.5)
Total ON Semiconductor Corporation stockholders’ equity	3,214.9		3,301.7
Non-controlling interest	22.7		22.4
Total stockholders' equity	3,237.6		3,324.1
Total liabilities and stockholders' equity	$	9,420.8	$	8,425.5


	Quarters Ended
	April 3, 2020		March 29, 2019
Revenue	$	1,277.9	$	1,386.6
Cost of revenue (exclusive of amortization shown below)	875.2		872.9
Gross profit	402.7		513.7
Operating expenses:
Research and development	171.0		151.8
Selling and marketing	76.8		77.1
General and administrative	71.2		72.9

Amortization of acquisition-related intangible assets	32.3		25.7
Restructuring, asset impairments and other charges, net	32.8		5.6
Intangible asset impairment	—		1.2
Total operating expenses	384.1		334.3
Operating income	18.6		179.4
Other income (expense), net:
Interest expense	(42.5)		(31.7)
Interest income	1.9		2.5



Other income	0.1		2.1
Other income (expense), net	(40.5)		(27.1)
Income (loss) before income taxes	(21.9)		152.3
Income tax (provision) benefit	8.2		(38.2)
Net income (loss)	(13.7)		114.1
Less: Net income attributable to non-controlling interest	(0.3)		—
Net income (loss) attributable to ON Semiconductor Corporation	$	(14.0)	$	114.1
Comprehensive income (loss), net of tax:
Net income (loss)	$	(13.7)	$	114.1
Foreign currency translation adjustments	0.6		0.1
Effects of cash flow hedges	(12.8)		(5.9)

Other comprehensive loss, net of tax	(12.2)		(5.8)
Comprehensive income (loss)	(25.9)		108.3
Comprehensive income attributable to non-controlling interest	(0.3)		—
Comprehensive income (loss) attributable to ON Semiconductor Corporation	$	(26.2)	$	108.3
Net income (loss) per common share attributable to ON Semiconductor Corporation:
Basic	$	(0.03)	$	0.28
Diluted	$	(0.03)	$	0.27
Weighted-average common shares outstanding:
Basic	410.6		410.6
Diluted	410.6		417.7


	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, 2019	565,562,607	$	5.7	$	3,809.5	$	(54.3)	$	1,191.3	(154,249,943)	$	(1,650.5)	$	22.4	$	3,324.1

Shares issued pursuant to the ESPP	487,438	—		5.1		—		—		—	—		—		5.1
RSUs and stock grant awards issued	2,724,497	—		—		—		—		—	—		—		—
Shares withheld for employee taxes on RSUs	—	—		—		—		—		(908,620)	(16.0)		—		(16.0)
Share-based compensation expense	—	—		15.7		—		—		—	—		—		15.7
Repurchase of common stock	—	—		—		—		—		(3,611,413)	(65.4)		—		(65.4)


Comprehensive (loss) income	—	—		—		(12.2)		(14.0)		—	—		0.3		(25.9)
Balance at April 3, 2020	568,774,542	$	5.7	$	3,830.3	$	(66.5)	$	1,177.3	(158,769,976)	$	(1,731.9)	$	22.7	$	3,237.6


Balance at December 31, 2018	558,701,620	$	5.6	$	3,702.3	$	(37.9)	$	979.6	(144,867,393)	$	(1,478.0)	$	22.5	$	3,194.1


Stock option exercises	70,717	—		0.5		—		—		—	—		—		0.5

RSUs and stock grant awards issued	3,544,754	—		—		—		—		—	—		—		—
Shares withheld for employee taxes on RSUs	—	—		—		—		—		(1,224,929)	(26.1)		—		(26.1)
Share-based compensation expense	—	—		19.7		—		—		—	—		—		19.7
Repurchase of common stock	—	—		—		—		—		(4,410,189)	(75.8)		—		(75.8)


Comprehensive (loss) income	—	—		—		(5.8)		114.1		—	—		—		108.3
Balance at March 29, 2019	562,317,091	$	5.6	$	3,722.5	$	(43.7)	$	1,093.7	(150,502,511)	$	(1,579.9)	$	22.5	$	3,220.7


	PSG		ASG		ISG		Total
For the quarter ended April 3, 2020:
Revenue from external customers	$	623.9	$	467.1	$	186.9	$	1,277.9
Gross profit	$	178.6	$	174.8	$	62.8	$	416.2
For the quarter ended March 29, 2019:
Revenue from external customers	$	704.2	$	494.1	$	188.3	$	1,386.6
Gross profit	$	249.0	$	200.1	$	74.9	$	524.0


	Quarters Ended
	April 3, 2020		March 29, 2019
Gross profit for reportable segments	$	416.2	$	524.0

Less: Unallocated manufacturing costs	(13.5)		(10.3)
Consolidated gross profit	$	402.7	$	513.7


	Quarter Ended April 3, 2020
	PSG		ASG		ISG		Total
Geographic Location
Singapore	$	194.3	$	172.6	$	41.4	$	408.3
Hong Kong	192.0		91.9		32.3		316.2
United Kingdom	105.1		76.8		45.1		227.0
United States	72.7		77.3		34.5		184.5
Other	59.8		48.5		33.6		141.9
Total	$	623.9	$	467.1	$	186.9	$	1,277.9

Sales Channel
Distributors	$	386.3	$	213.6	$	103.4	$	703.3
OEM/ODM	194.2		219.4		73.5		487.1
Electronic Manufacturing Service Providers	43.4		34.1		10.0		87.5
Total	$	623.9	$	467.1	$	186.9	$	1,277.9


	As of
	April 3, 2020		December 31, 2019
United States	$	633.3	$	616.7
South Korea	487.4		485.4
Philippines	426.4		433.5
China	238.1		243.6
Japan	216.3		218.1
Czech Republic	213.8		213.4
Malaysia	195.4		204.4
Other	169.2		176.5
Total	$	2,579.9	$	2,591.6


	Restructuring		Asset Impairments (1)		Other		Total
Quarter ended April 3, 2020
Voluntary separation program	$	27.5	$	—	$	—	$	27.5
General workforce reduction	3.4		—		—		3.4
Post-Quantenna acquisition restructuring	0.4		—		—		0.4

Other	—		1.4		0.1		1.5
Total	$	31.3	$	1.4	$	0.1	$	32.8


	As of
	April 3, 2020		December 31, 2019
Inventories:
Raw materials	$	142.7	$	138.4
Work in process	808.6		772.9
Finished goods	300.6		321.1
	$	1,251.9	$	1,232.4


	Quarters Ended
	April 3, 2020		March 29, 2019
Service cost	$	2.7	$	2.3
Interest cost	1.1		1.3
Expected return on plan assets	(1.5)		(1.5)



Total net periodic pension cost	$	2.3	$	2.1


	Quarter Ended March 29, 2019
	PSG		ASG		ISG		Total
Geographic Location
Singapore	$	225.0	$	153.0	$	47.2	$	425.2
Hong Kong	200.6		112.0		25.4		338.0
United Kingdom	125.8		79.5		41.6		246.9
United States	88.9		92.6		32.1		213.6
Other	63.9		57.0		42.0		162.9
Total	$	704.2	$	494.1	$	188.3	$	1,386.6

Sales Channel
Distributors	$	423.7	$	234.8	$	106.3	$	764.8
OEM	236.2		221.1		71.5		528.8
Electronic Manufacturing Service Providers	44.3		38.2		10.5		93.0
Total	$	704.2	$	494.1	$	188.3	$	1,386.6


Net balance as of December 31, 2019	$	1,659.2
Addition due to business combination	4.2

Net balance as of April 3, 2020	$	1,663.4


Period	Expected Maturities
Remainder of 2020	$	703.0
2021	16.3
2022	16.3
2023	591.4
2024	1,981.4
Thereafter	1,549.1
Total	$	4,857.5


	Number of Shares	Weighted-Average Grant Date Fair Value Per Share
Non-vested RSUs at December 31, 2019	8.9	$	20.84
Granted	4.8	18.94

Released	(2.7)	18.31
Forfeited	(0.1)	20.69
Non-vested RSUs at April 3, 2020	10.9	20.63


	As of		Fair Value Hierarchy
Description	April 3, 2020		Level 1		Level 2		Level 3
Assets:
Cash and cash equivalents:
Demand and time deposits	$	338.9	$	338.9	$	—	$	—


	Currency Translation Adjustments		Effects of Cash Flow Hedges		Total
Balance as of December 31, 2019	$	(42.4)	$	(11.9)	$	(54.3)
Other comprehensive income (loss) prior to reclassifications	0.6		(10.9)		(10.3)
Amounts reclassified from accumulated other comprehensive loss	—		(1.9)		(1.9)
Net current period other comprehensive income (loss) (1)	0.6		(12.8)		(12.2)
Balance as of April 3, 2020	$	(41.8)	$	(24.7)	$	(66.5)


	Quarter Ended April 3, 2020		As a % of Total Revenue ⁽¹⁾		Quarter Ended March 29, 2019		As a % of Total Revenue ⁽¹⁾
PSG	$	623.9	48.8	%	$	704.2	50.8	%
ASG	467.1		36.6	%	494.1		35.6	%
ISG	186.9		14.6	%	188.3		13.6	%
Total revenue	$	1,277.9			$	1,386.6


	Quarter Ended April 3, 2020		As a % of Segment Revenue ⁽¹⁾		Quarter Ended March 29, 2019		As a % of Segment Revenue ⁽¹⁾

PSG	$	178.6	28.6	%	$	249.0	35.4	%
ASG	174.8		37.4	%	200.1		40.5	%
ISG	62.8		33.6	%	74.9		39.8	%
Gross profit for all segments	$	416.2			$	524.0
Unallocated manufacturing costs	(13.5)		(1.1)	%	(10.3)		(0.7)	%
Total gross profit	$	402.7	31.5	%	$	513.7	37.0	%


Period⁽¹⁾	Total Number of Shares Purchased ⁽²⁾	Average Price Paid per Share ($) ⁽³⁾	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar value of Shares that May Yet be Purchased Under the Plans or Programs (in millions) ($)
January 1, 2020 - January 31, 2020	18,570	24.73	—	1,361.1
February 1, 2020 - February 28, 2020	1,729,900	19.63	1,720,912	1,327.4
February 29, 2020 - April 3, 2020	2,771,563	16.95	1,890,501	1,295.8
Total	4,520,033	18.01	3,611,413


^*			Reports filed under the Exchange Act (Form 10-K, Form 10-Q and Form 8-K) are filed under File No. 000-30419.


⁽¹⁾			Filed herewith.
⁽²⁾			Furnished herewith.


Date: May 11, 2020			/s/ KEITH D. JACKSON
			Keith D. Jackson
			Chief Executive Officer


Date: May 11, 2020			/s/ BERNARD GUTMANN
			Bernard Gutmann
			Chief Financial Officer