Earnings Per Share and Equity

6 Months Ended

Jul. 03, 2020

Note 8: Earnings Per Share and Equity

Earnings Per Share

Net income (loss) per share of common stock attributable to ON Semiconductor Corporation is calculated as follows (in millions, except per share data):


	Quarters Ended						Six Months Ended
	July 3, 2020		June 28, 2019		July 3, 2020		June 28, 2019
Net income (loss) attributable to ON Semiconductor Corporation	$	(1.4)	$	101.8	$	(15.4)	$	215.9
Basic weighted-average shares of common stock outstanding	410.1		411.9		410.3		411.3
Dilutive effect of share-based awards	—		1.9		—		2.6
Dilutive effect of convertible notes	—		3.9		—		3.9
Diluted weighted-average shares of common stock outstanding	410.1		417.7		410.3		417.8

Net income (loss) per share of common stock attributable to ON Semiconductor Corporation:
Basic	$	0.00	$	0.25	$	(0.04)	$	0.52
Diluted	$	0.00	$	0.24	$	(0.04)	$	0.52

Basic income (loss) per share of common stock is computed by dividing net income (loss) 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, the number of incremental shares from the assumed exercise of stock options and assumed issuance of shares relating to RSUs is calculated by applying the treasury stock

method. Share-based awards whose impact is considered to be anti-dilutive under the treasury stock method were excluded from the diluted net income per share calculation. The excluded number of anti-dilutive share-based awards was 3.6 million and 0.6 million for the quarters ended July 3, 2020 and June 28, 2019, respectively, and 3.1 million and 0.6 million for the six months ended July 3, 2020 and June 28, 2019, respectively. The increase in the anti-dilutive share-based awards was due to the net loss for the quarter and six months ended July 3, 2020, as the inclusion would have the effect of decreasing the diluted net loss per share of common stock attributable to the Company.

The dilutive impact related to the 1.00% Notes and 1.625% Notes is determined in accordance with the net share settlement requirements, under which the Company's convertible notes are assumed to be convertible into cash up to the par value, with the excess of par value being convertible into common stock. In addition to the net loss for the quarter ended July 3, 2020, the average share price did not exceed the conversion price for both the 1.00% Notes and 1.625% Notes, and as a result, was not included in calculating the diluted weighted-average shares of common stock outstanding.

Equity

Share Repurchase Program

Under the Company's share repurchase program announced on November 15, 2018 (the “Share Repurchase Program”), the Company may repurchase up to $1.5 billion (exclusive of fees, commissions and other expenses) of the Company’s common stock from December 1, 2018 through December 31, 2022.

There were no repurchases and $50.0 million in repurchases of the Company's common stock under the Share Repurchase Program during the quarters ended July 3, 2020 and June 28, 2019, respectively. There were $65.3 million and $125.7 million in repurchases of the Company's common stock under the Share Repurchase Program during the six months ended July 3, 2020 and June 28, 2019, respectively. As of July 3, 2020, the authorized amount remaining under the Share Repurchase Program was $1,295.8 million.

Activity under the Share Repurchase Program during the quarter and six months ended July 3, 2020 and June 28, 2019 were as follows (in millions, except per share data):


	Quarters Ended						Six Months Ended
	July 3, 2020		June 28, 2019		July 3, 2020		June 28, 2019
Number of repurchased shares (1)	—		2.6		3.6		7.0
Aggregate purchase price	$	—	$	50.0	$	65.3	$	125.7
Fees, commissions and other expenses	—		—		0.1		0.1

Total cash used for share repurchases	$	—	$	50.0	$	65.4	$	125.8
Weighted-average purchase price per share (2)	$	—	$	19.32	$	18.08	$	17.97

(1) None of these shares had been reissued or retired as of July 3, 2020, but may be reissued or retired at a later date.

(2) Exclusive of fees, commissions and other expenses.

Shares for Restricted Stock Units Tax Withholding

Shares with a fair market value equal to the applicable amount of the employee withholding taxes due are withheld by the Company upon the vesting of RSUs to pay the applicable amount of employee withholding taxes and are considered common stock repurchases. The Company then pays the applicable amount of withholding taxes in cash. The amounts remitted during the quarters and six months ended July 3, 2020 were $0.6 million and $16.6 million, respectively, for which the Company withheld less than 0.1 million and approximately 0.9 million shares of common stock, respectively, that were underlying the RSUs that vested. The amounts remitted during the quarters and six months ended June 28, 2019 were $1.1 million and $27.2 million, respectively, for which the Company withheld approximately 0.1 million and 1.3 million shares of common stock, respectively, that were underlying the RSUs that vested. Treasury stock is recorded at cost and is presented as a reduction of stockholders' equity in the accompanying consolidated financial statements. None of these shares had been reissued or retired as of July 3, 2020, but may be reissued or retired by the Company at a later date. These repurchases in connection with tax

withholding upon vesting were not made under the Share Repurchase Program, and the amounts spent in connection with such deemed repurchases did not reduce the authorized amount remaining under the Share Repurchase Program.

Non-Controlling Interest

The Company owns 80% of the outstanding equity interests in a joint venture, Leshan-Phoenix Semiconductor Company Limited (“Leshan”), which operates assembly and test operations in Leshan, China. The results of Leshan have been consolidated in the Company's financial statements. As of December 31, 2019, the non-controlling interest balance was $22.4 million. This balance increased to $23.2 million as of July 3, 2020, resulting from the non-controlling interest’s $0.8 million share of the earnings for the six months ended July 3, 2020.

During the quarter ended April 3, 2020, the Company acquired the remaining 40% of the equity interest in ON Semiconductor Aizu Co., Ltd., ("OSA") from Fujitsu Semiconductor Limited (“FSL”), whereby OSA became a wholly-owned subsidiary of the Company. OSA operates a front-end wafer fabrication facility in Aizuwakamatsu, Japan. The purchase price payable to FSL for the remaining 40% equity, offset by the purchase price adjustment, resulted in the Company receiving $26.0 million settlement of purchase price from FSL during the quarter ended April 3, 2020. The results of OSA have been consolidated in the Company’s financial statements since the fourth quarter of 2018, when the Company acquired the majority equity interest.

Stockholders' Rights Plan

On June 7, 2020, the Company's Board of Directors authorized and declared a dividend of one preferred share purchase right (a “Right”) to be issued as of 5:00 p.m. New York City time on June 18, 2020, for each outstanding share of common stock to the stockholders of record on that date. In connection with the Rights, the Company and Computershare Trust Company, N.A., as rights agent, entered into a Rights Agreement, dated as of June 8, 2020 (the “Rights Agreement”). Each Right entitles the registered holder of common stock to purchase from the Company one-hundred-thousandth of a share (a “Unit”) of Series B Junior Participating Preferred Stock, par value $0.01 per share, at a purchase price of $100.80 per Unit (the “Purchase Price”), subject to adjustment as provided in the Rights Agreement. Subject to certain exceptions, if a person or group becomes the beneficial owner of more than 15% of the Company’s outstanding shares of common stock, the Rights will become exercisable for that number of shares of Common Stock having a market value of two times the Purchase Price. The Rights, which have a de minimis value as of July 3, 2020, expire on the earlier of (i) the close of business on June 7, 2021, (ii) the time at which the Rights are redeemed pursuant to the Rights Agreement, (iii) the closing of any merger or other acquisition transaction involving the Company that has been approved by the Company’s Board of Directors, at which time the Rights are terminated, and (iv) the time at which the Rights are exchanged pursuant to the Rights Agreement. The Rights are in all respects subject to and governed by the provisions of the Rights Agreement.