COHERENT CORP.

Previous wording

Certain statements contained in the MD&A are forward-looking statements as defined by Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding projected growth rates, markets, product development, financial position, capital expenditures and foreign currency exposure. Forward-looking statements are also identified by words such as “expects,” “anticipates,” “intends,” “believes,” “plans,” “projects” or similar expressions.

Current wording

Certain statements contained in this Quarterly Report on Form 10-Q are forward-looking statements as defined by Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding projected growth rates, markets, product development, financial position, capital expenditures and foreign currency exposure. Forward-looking statements are also identified by words such as “expects,” “anticipates,” “intends,” “believes,” “plans,” “projects” or similar expressions.

Previous wording

In the three months ended September 30, 2024, these activities resulted in charges of $24 million, primarily for impairment losses associated with the sale of our Newton Aycliffe business, accelerated depreciation, and site move costs. In fiscal 2024, these activities resulted in charges of $27 million, primarily for accelerated depreciation, the write-off of property and equipment, and site move costs, with $3 million of those charges in the three months ended September 30, 2023. In fiscal 2023, these activities resulted in $119 million of charges primarily for employee termination costs, and the write-off of property and equipment, net of $65 million from reimbursement arrangements. We expect the restructuring actions to be substantially completed by the end of fiscal 2025. However, the actual timing and costs associated with these restructuring actions may differ from our current expectations and estimates and such differences may be material. See Note 17. Restructuring Plan to the Company’s Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for further information.

Current wording

In the three and six months ended December 31, 2024, these activities resulted in charges of $8 million and $32 million, respectively. The current quarter costs are primarily for site move costs, employee termination costs and accelerated depreciation and the current year-to-date costs are primarily for impairment losses associated with the sale of our Newton Aycliffe business, accelerated depreciation, employee termination costs and site move costs. In fiscal 2024, these activities resulted in charges of $27 million, primarily for accelerated depreciation, the write-off of property and equipment, and site move costs. In fiscal 2023, these activities resulted in $119 million of charges primarily for employee termination costs, and the write-off of property and equipment, net of $65 million from reimbursement arrangements. We expect the restructuring actions to be substantially completed by the end of fiscal 2025. However, the actual timing and costs associated with these restructuring actions may differ from our current expectations and estimates and such differences may be material. See Note 17. Restructuring Plan to the Company’s Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for further information.

Previous wording

On May 20, 2023, the Company announced that it has accelerated some of the actions planned as part of its multi-year synergy and site consolidation efforts following the acquisition of Coherent, Inc., including site consolidations and relocations to lower cost sites. These relocations and other actions are expected to result in the Company achieving its previously announced $250 million synergy plan, which includes savings from supply chain management, internal supply of enabling materials and components, operational efficiencies in all functions due to scale, global functional model efficiencies and consolidation of corporate costs. In the three months ended September 30, 2024, the acceleration of these activities resulted in $4 million of charges primarily for overlapping labor related to transition of manufacturing operations to other sites and shut down costs, partially offset by a benefit from the reversal of employee termination costs previously accrued. In fiscal 2024, the acceleration of these activities resulted in $40 million of charges primarily for overlapping labor related to transition of manufacturing operations to other sites, shut down costs for sites being exited, accelerated depreciation and employee termination costs, with $8 million of those charges in the three months ended September 30, 2023. In fiscal 2023, the acceleration of these activities resulted in $20 million in charges primarily for employee termination costs, the write-off of inventory for products that are being exited and shut down costs.

Current wording

On May 20, 2023, the Company announced that it had accelerated some of the actions planned as part of its multi-year synergy and site consolidation efforts following the acquisition of Coherent, Inc., including site consolidations and relocations to lower cost sites. These relocations and other actions resulted in the Company achieving its previously announced $250 million synergy plan, which includes savings from supply chain management, internal supply of enabling materials and components, operational efficiencies in all functions due to scale, global functional model efficiencies and consolidation of corporate costs. In the three and six months ended December 31, 2024, the acceleration of these activities resulted in $7 million and $11 million, respectively, of charges primarily for employee termination costs, overlapping labor related to transition of manufacturing operations to other sites and shut down costs. In fiscal 2024, the acceleration of these activities resulted in $40 million of charges primarily for overlapping labor related to transition of manufacturing operations to other sites, shut down costs for sites being exited, accelerated depreciation and employee termination costs, with $9 million and $16 million, respectively, of those charges in the three and six months ended December 31, 2023. In fiscal 2023, the acceleration of these activities resulted in $20 million in charges primarily for employee termination costs, the write-off of inventory for products that are being exited and shut down costs.

Previous wording

The following tables set forth select items from our Condensed Consolidated Statements of Earnings (Loss) for the three months ended September 30, 2024 and 2023 ($ in millions)(1):

Current wording

The following tables set forth select items from our Condensed Consolidated Statements of Earnings (Loss) for the three and six months ended December 31, 2024 and 2023 ($ in millions)(1):

Previous wording

Revenues. Revenues for the three months ended September 30, 2024 increased 28% to $1,348 million, compared to $1,053 million for the same period last fiscal year. Revenues increased $315 million (68%) in the communications market in both our datacom and telecom revenue. The increases in datacom were driven primarily by AI datacenter demand. Increases in telecom were due to a combination of end-market improvement as well as our new products. In our remaining markets, which are primarily Industrial-related applications, revenue decreased 3%. Within these markets, on-going strength in display capital equipment volumes was more than offset by weakness in precision manufacturing and other subsegments.

Current wording

Revenues for the six months ended December 31, 2024 increased 27% to $2,783 million, compared to $2,185 million for the same period last fiscal year. Revenues increased $618 million (63%) in the communications market, with increases in datacom driven primarily by ongoing strong AI datacenter demand and the continued recovery in telecom. In our remaining markets, which are primarily industrial-related applications, revenue decreased $19 million (2%). Within these markets, strong revenue growth in display capital equipment volumes was more than offset by weakness in precision manufacturing and other markets outside of datacom and telecom. From a segment perspective, Networking revenues increased 58% year-over-year due to strong AI datacenter demand in our communications market and the continued recovery in telecom. Lasers revenue increased 5% year-over-year reflecting on-going strength in display capital equipment volumes. Materials revenues decreased 3% year-over-year, primarily due to weak automotive end market demand.

Previous wording

Gross margin. Gross margin for the three months ended September 30, 2024 was $460 million, or 34% of total revenues, compared to $307 million, or 29% of total revenues, for the same period last fiscal year, an increase of 500 basis points. The increase as a percent of revenue for the three months ended September 30, 2024 was primarily due to higher revenue volume and favorable mix as well as yield improvements.

Current wording

Gross margin. Gross margin for the three months ended December 31, 2024 was $509 million, or 36% of total revenues, compared to $350 million, or 31% of total revenues, for the same period last fiscal year, an increase of 452 basis points. The increase as a percent of revenue for the three months ended December 31, 2024 was primarily due to higher revenue volume as well as cost reductions and improvements in manufacturing yields, partially offset by unfavorable product mix. Gross margin for the six months ended December 31, 2024 was $970 million, or 35% of total revenues, compared to $658 million, or 30% of total revenues, for the same period last fiscal year, an increase of 474 basis points. The increase as a percent of revenue for the six months ended December 31, 2024 was primarily due to higher revenue volume, cost reductions and improvements in manufacturing yields.

Previous wording

Research and development. Research and development (“R&D”) expenses for the three months ended September 30, 2024 were $132 million, or 10% of revenues, compared to $113 million, or 11% of revenues, for the same period last fiscal year. The decrease as a percentage of revenue for the three months ended September 30, 2024 was driven by higher revenues partially offset by an increase in investment spending. The R&D expenses are primarily related to continued investment in our product portfolios.

Current wording

Research and development. Research and development (“R&D”) expenses for the three months ended December 31, 2024 were $144 million, or 10% of revenues, compared to $111 million, or 10% of revenues, for the same period last fiscal year. Although flat as a percentage of revenue for the three months ended December 31, 2024, higher R&D expenses were primarily related to continued investment in our product portfolios, particularly in datacom. R&D expenses for the six months ended December 31, 2024 were $275 million, or 10% of revenues, compared to $225 million, or 10% of revenues, for the same period last fiscal year. The higher R&D expenses were primarily related to continued investment in our product portfolios.

Previous wording

Selling, general and administrative. Selling, general and administrative (“SG&A”) expenses for the three months ended September 30, 2024 were $229 million, or 17% of revenues, compared to $212 million, or 20% of revenues, for the same period last fiscal year. The decrease in SG&A as a percentage of revenue for the three months ended September 30, 2024 compared to the same period last fiscal year was primarily the result of higher sales volumes partially offset by the impact of higher variable compensation.

Current wording

Selling, general and administrative. Selling, general and administrative (“SG&A”) expenses for the three months ended December 31, 2024 were $221 million, or 15% of revenues, compared to $209 million, or 18% of revenues, for the same period last fiscal year. The decrease in SG&A as a percentage of revenue for the three months ended December 31, 2024 compared to the same period last fiscal year was primarily the result of higher sales volumes and lower integration consulting costs, partially offset by the impact of higher variable and share-based compensation. SG&A expenses for the six months ended December 31, 2024 were $450 million, or 16% of revenues, compared to $421 million, or 19% of revenues, for the same period last fiscal year. The decrease in SG&A as a percentage of revenue for the six months ended December 31, 2024 compared to the same period last fiscal year was primarily the result of higher sales volumes partially offset by the impact of higher variable and share-based compensation.

Previous wording

Restructuring charges. Restructuring charges related to our Restructuring Plan for the three months ended September 30, 2024 were $24 million and consist of impairment losses associated with the sale of our Newton Aycliffe business, accelerated depreciation, and move costs due to the consolidation of certain manufacturing sites. Restructuring charges related to our Restructuring Plan for the three months ended September 30, 2023 were $3 million and consisted of severance, move costs, equipment write-offs and accelerated depreciation due to the consolidation of certain manufacturing sites. See Note 17. Restructuring Plan included in Item 1 of this Quarterly Report on Form 10-Q for further information.

Current wording

Restructuring charges. Restructuring charges related to our Restructuring Plan for the three and six months ended December 31, 2024 were $8 million and $32 million, respectively, and consist of impairment losses associated with the sale of our Newton Aycliffe business as well as move costs, accelerated depreciation, and employee termination costs due to the consolidation of certain manufacturing sites. Restructuring charges related to our Restructuring Plan for the three and six months ended December 31, 2023 were a net recovery of $2 million and net charges of $1 million, respectively, and consisted of severance (including cumulative adjustments resulting in a recovery in the three months ended December 31, 2023), move costs, equipment write-offs and accelerated depreciation due to the consolidation of certain manufacturing sites. See Note 17. Restructuring Plan included in Item 1 of this Quarterly Report on Form 10-Q for further information.

Previous wording

Interest and other, net. Interest and other, net for the three months ended September 30, 2024 was expense of $56 million, compared to expense of $67 million for the same period last fiscal year, a decrease of $11 million. Included in Interest and other, net, were interest expense on borrowings, foreign currency gains and losses, amortization of debt issuance costs, equity gains and losses from unconsolidated investments, and interest and dividend income on excess cash balances. For the three months ended September 30, 2024, the decrease of $11 million in comparison to the same period last fiscal year was driven by $13 million incremental interest and dividend income due to increases in interest rates earned on investments as well as the increase in restricted cash balances. In addition, $7 million lower interest expense primarily due to lower interest expense on our New Term B Loans resulting from lower balances and lower interest rates. Additionally, we recorded higher interest expense benefit from our interest rate cap and swap partially offset by $11 million higher foreign exchange losses primarily due to higher volatility of exchange rates during the three months ended September 30, 2024.

Current wording

Interest and other, net. Interest and other, net for the three months ended December 31, 2024 was expense of $8 million, compared to expense of $69 million for the same period last fiscal year, a decrease of $61 million. Included in Interest and other, net, were interest expense on borrowings, foreign currency gains and losses, amortization of debt issuance costs, equity gains and losses from unconsolidated investments, and interest and dividend income on cash balances. For the three months ended December 31, 2024, the decrease of $61 million in comparison to the same period last fiscal year was driven by $41 million higher foreign exchange net gains, $10 million lower interest expense and $6 million incremental interest and dividend income due to increases in interest rates earned on investments as well as the increase in restricted cash balances. The $41 million higher foreign exchange gains were primarily due to higher volatility of exchange rates, particularly the Korean Won, Euro and Chinese Renminbi, during the three months ended December 31, 2024 in addition to the cessation of our balance sheet hedging program at the end of September 2024. The $10 million lower interest expense was primarily due to lower interest expense on our New Term B Loans resulting from lower balances and lower interest rates partially offset by lower interest expense benefit from our interest rate cap and swap. Interest and other, net for the six months ended December 31, 2024 was expense of $64 million, compared to expense of $136 million for the same period last fiscal year, a decrease of $72 million. For the six months ended December 31, 2024, the decrease of $72 million in comparison to the same period last fiscal year was driven by $31 million higher foreign exchange net gains, $18 million incremental interest and dividend income due to increases in interest rates earned on investments as well as the increase in restricted cash balances and $17 million lower interest expense. The $31 million higher foreign exchange gains were primarily due to higher volatility of exchange rates, particularly the Korean Won, Euro and Chinese Renminbi, during the six months ended December 31, 2024 in addition to the cessation of our balance sheet hedging program at the end of September 2024. The $17 million lower interest expense was primarily due to lower interest expense on our New Term B Loans resulting from lower balances and lower interest rates.

Previous wording

Income taxes. The Company’s year-to-date effective income tax rate at September 30, 2024 was (29)% compared to an effective tax rate of 24% for the same period in 2024. The variations between the Company’s effective tax rate and the U.S. statutory rate of 21% were due to tax rate differentials between U.S. and foreign jurisdictions. The current quarter rate was impacted by the recording of a $11 million windfall on stock awards due to the increase in stock price.

Current wording

Income taxes. The Company’s year-to-date effective income tax rate at December 31, 2024 was 14% compared to an effective tax rate of 24% for the same period in 2023. The variations between the Company’s effective tax rate and the U.S. statutory rate of 21% were due to tax rate differentials between U.S. and foreign jurisdictions. The current year-to-date rate was impacted by the recording of a $15 million windfall on stock awards due to the increase in stock price.

Previous wording

Net loss attributable to noncontrolling interests. Net loss attributable to noncontrolling interests for the three months ended September 30, 2024 was $1 million, and represents the noncontrolling interest holders’ shares of losses of Silicon Carbide LLC. See Note 11. Noncontrolling Interests included in Item 1 of this Quarterly Report on Form 10-Q for further information.

Current wording

Net loss attributable to noncontrolling interests. Net loss attributable to noncontrolling interests for the three and six months ended December 31, 2024 was $2 million and $3 million, respectively, and represents the noncontrolling interest holders’ shares of losses of Silicon Carbide LLC. Net loss attributable to noncontrolling interests for both the three and six months ended December 31, 2023 was $1 million. See Note 11. Noncontrolling Interests included in Item 1 of this Quarterly Report on Form 10-Q for further information.

Previous wording

Revenues for the three months ended September 30, 2024 increased 61% to $763 million, compared to $473 million for the same period last fiscal year. The increase in revenue of $290 million during the three months ended September 30, 2024 was related to AI datacenter demand in our communications market resulting from increased volumes in the datacom vertical.

Current wording

Revenues for the three months ended December 31, 2024 increased 56% to $816 million, compared to $524 million for the same period last fiscal year. Revenues for the six months ended December 31, 2024 increased 58% to $1,579 million, compared to $997 million for the same period last fiscal year. The increase in revenue of $292 million during the three months ended December 31, 2024 was due to ongoing strong AI datacenter demand resulting from increased volumes in the datacom vertical as well as the continued recovery in telecom, both in our communications market. Theincrease in revenues of $582 million during the six months ended December 31, 2024 was primarily due to AI datacenter demand in our communications market resulting from increased volumes in the datacom vertical and the continued recovery in telecom.

Previous wording

Revenues for the three months ended September 30, 2024 decreased 3% to $237 million, compared to revenues of $245 million for the same period last fiscal year. Compared to the three months ended September 30, 2023, Materials decreased $7 million year-over-year, with a decrease of $14 million in the electronics market primarily due to weak automotive end market demand as well as a decrease of $14 million in the industrial market due to macroeconomic conditions. The decreases were partially offset by $22 million higher volumes in the datacom vertical within the communications market.

Current wording

Revenues for the three months ended December 31, 2024 decreased 4% to $243 million, compared to revenues of $254 million for the same period last fiscal year. Revenues for the six months ended December 31, 2024 decreased 3% to $481 million, compared to $498 million for the same period last fiscal year. Compared to the three months ended December 31, 2023, Materials decreased $10 million year-over-year, with a decrease of $11 million in the electronics market primarily due to weak automotive end market demand as well as a decrease of $11 million in the industrial market due to macroeconomic conditions. The decreases were partially offset by $9 million higher volumes in the datacom vertical within the communications market. The decrease in revenues of $17 million during the six months ended December 31, 2024 was primarily related to decreases of $25 million in the electronics market primarily due to weak automotive end market demand and $24 million in the industrial market due to macroeconomic conditions, partially offset by $31 million higher volumes in the datacom vertical within the communications market.

Previous wording

Net cash provided by operating activities was $153 million for the three months ended September 30, 2024 compared to $199 million of net cash provided by operating activities for the same period last fiscal year. The decrease in cash flows provided by operating activities during the three months ended September 30, 2024 compared to the same period last fiscal year was primarily due to increases in accounts receivables and inventories as a result of higher revenues partially offset by higher earnings.

Current wording

Net cash provided by operating activities was $340 million for the six months ended December 31, 2024 compared to $266 million for the same period last fiscal year. The increase in cash flows provided by operating activities during the six months ended December 31, 2024 compared to the same period last fiscal year was primarily due to higher earnings partially offset by increases in accounts receivables and inventories as a result of higher revenues.

Previous wording

Net cash used in investing activities was $66 million for the three months ended September 30, 2024, compared to net cash used of $64 million for the same period last fiscal year. Lower cash used to fund capital expenditures of $30 million year-over-year was offset by cash received from the sale of a business of $27 million.

Current wording

Net cash used in investing activities was $172 million for the six months ended December 31, 2024, compared to $156 million for the same period last fiscal year. Lower cash used to fund capital expenditures of $44 million year-over-year was partially offset by $27 million cash received from the sale of a business.

Previous wording

Net cash used in financing activities was $126 million for the three months ended September 30, 2024, compared to $18 million for the same period last fiscal year. Cash outflows for both periods were primarily payments on existing debt.

Current wording

Net cash used in financing activities was $266 million for the six months ended December 31, 2024, compared to net cash provided by financing activities of $859 million for the same period last fiscal year. Cash outflows for the current fiscal year were primarily payments on existing debt. Financing inflows in the prior year period included the $1.0 billion contribution from noncontrolling interests, partially offset by payments on existing debt and equity issuance costs related to the contribution from noncontrolling interests.

Previous wording

On July 1, 2022, Coherent entered into a Credit Agreement by and among the Company, the lenders, and other parties thereto, and JP Morgan Chase Bank, N.A., as administrative agent and collateral agent, which provides for senior secured financing of $4.0 billion, consisting of a term loan A credit facility (the “Term A Facility”), with an aggregate principal amount of $850 million, a term loan B credit facility (the “Term B Facility” and, together with the Term A Facility, the “Term Facilities”), with an aggregate principal amount of $2,800 million, and a revolving credit facility (the “Revolving Credit Facility” and, together with the Term Facilities, the “Senior Credit Facilities”), in an aggregate available amount of $350 million, including a letter of credit sub-facility of up to $50 million. On March 31, 2023, Coherent entered into Amendment No. 1 to the Credit Agreement, which replaced the adjusted LIBOR-based rate of interest therein with an adjusted Secured Overnight Financing Rate (“SOFR”) based rate of interest. As amended, the Term A Facility and the Revolving Credit Facility each bear interest at an adjusted SOFR rate subject to a 0.10% floor plus a range of 1.75% to 2.50%, based on the Company’s total net leverage ratio. The Term A Facility and the Revolving Credit Facility borrowings bear interest at adjusted SOFR plus 1.85% as of September 30, 2024. On April 2, 2024, Coherent entered into Amendment No. 2 to the Credit Agreement, under which the principal amount of term B loans outstanding under the Credit Agreement (the “Existing Term B Loans”) were replaced with an equal amount of new term loans (the “New Term B Loans”) having substantially similar terms as the Existing Term B Loans, except with respect to the interest rate applicable to the New Term B Loans and certain other provisions. As further amended, the New Term B Loans will bear interest at an adjusted SOFR rate (subject to a 0.50% floor) plus 2.50% as of September 30, 2024. The maturity of the New Term Loans and revolving credit facility remains unchanged. In relation to the Term Facilities, the Company incurred expense of $53 million for the three months ended September 30, 2024, which is included in Interest expense in the Condensed Consolidated Statements of Earnings (Loss). On July 1, 2023, our interest rate cap became effective, which together with our interest rate swap, reduced interest expense by $13 million during the three months ended September 30, 2024.

Current wording

On July 1, 2022, Coherent entered into a Credit Agreement by and among the Company, the lenders, and other parties thereto, and JP Morgan Chase Bank, N.A., as administrative agent and collateral agent, which provides for senior secured financing of $4.0 billion, consisting of a term loan A credit facility (the “Term A Facility”) with an aggregate principal amount of $850 million, a term loan B credit facility (the “Term B Facility” and, together with the Term A Facility, the “Term Facilities”), with an aggregate principal amount of $2,800 million, and a revolving credit facility (the “Revolving Credit Facility” and, together with the Term Facilities, the “Senior Credit Facilities”), in an aggregate available amount of $350 million, including a letter of credit sub-facility of up to $50 million. On March 31, 2023, Coherent entered into Amendment No. 1 to the Credit Agreement, which replaced the adjusted LIBOR-based rate of interest therein with an adjusted Secured Overnight Financing Rate (“SOFR”) based rate of interest. As amended, the Term A Facility and the Revolving Credit Facility each bear interest at an adjusted SOFR rate subject to a 0.10% floor plus a range of 1.75% to 2.50%, based on the Company’s total net leverage ratio. The Term A Facility and the Revolving Credit Facility borrowings bear interest at adjusted SOFR plus 1.85% as of December 31, 2024. On April 2, 2024, Coherent entered into Amendment No. 2 to the Credit Agreement, under which the principal amount of term B loans outstanding under the Credit Agreement (the “Existing Term B Loans”) were replaced with an equal amount of new term loans (the “New Term B Loans”) having substantially similar terms as the Existing Term B Loans, except with respect to the interest rate applicable to the New Term B Loans and certain other provisions. As further amended, the New Term B Loans bear interest at an adjusted SOFR rate (subject to a 0.50% floor) plus 2.50% as of December 31, 2024. On January 2, 2025, Coherent entered into Amendment No. 3 to the Credit Agreement, under which the principal amount of the New Term B Loans were replaced with an equal amount of new term loans (the “New Term B-2 Loans”) having substantially similar terms as the New Term B Loans, except with respect to the interest rate applicable to the New Term B-2 Loans and certain other provisions. As further amended, the New Term B-2 Loans will bear interest at a SOFR rate (subject to a 0.50% floor) plus 2.00% as of January 2, 2025. The maturity of the New Term B-2 Loans and revolving credit facility remains unchanged. In relation to the Term Facilities, the Company incurred expense of $52 million and $106 million, respectively, for the three and six months ended December 31, 2024, which is included in Interest expense in the Condensed Consolidated Statements of Earnings (Loss). On July 1, 2023, our interest rate cap became effective, which together with our interest rate swap (through September 30, 2024), reduced interest…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

During the three months ended September 30, 2024, the Company made payments of $117 million for the Term Facilities, including voluntary payments of $100 million.

Current wording

During the six months ended December 31, 2024, the Company made payments of $248 million for the Term Facilities, including voluntary payments of $215 million.

Previous wording

On December 4, 2023, the Company consummated two investment agreements under which Silicon Carbide LLC, a Company subsidiary received$1.0 billion cash in exchange for 25% of the equity of that entity. Such funds will be used primarily to fund future capital expansion, including the previously-announced capital that Coherent intended to invest in its silicon carbide business. As a result, the transaction is enabling Coherent to allocate the capital it had intended to invest in this business unit to other corporate purposes, thus increasing its available free cash flow which will provide greater financial and operational flexibility. See Note 11. Noncontrolling Interests included in Item 1 of this Quarterly Report on Form 10-Q for further information.

Current wording

On December 4, 2023, the Company consummated two investment agreements under which Silicon Carbide LLC, a Company subsidiary, received$1.0 billion cash in exchange for 25% of the equity of that entity. Such funds have and will continue to be used primarily to fund future capital expansion in our silicon carbide business and will enableus to increase our available free cash flow to provide greater financial and operational flexibility to execute our capital allocation priorities. See Note 11. Noncontrolling Interests included in Item 1 of this Quarterly Report on Form 10-Q for further information.

Previous wording

Our cash and cash equivalent balances are generated and held in numerous locations throughout the world, including amounts held outside the United States. As of September 30, 2024, the Company held approxim ately $877 million of cash, cash equivalents and restricted cash outside of the United States. Generally, cash balances held outside the United States could be repatriated to the United States.

Current wording

Our cash and cash equivalent balances are generated and held in numerous locations throughout the world, including amounts held outside the United States. As of December 31, 2024, the Company held approxim ately $783 million of cash, cash equivalents and restricted cash outside of the United States. Generally, cash balances held outside the United States could be repatriated to the United States.

Previous wording

At September 30, 2024, we had $763 million of restricted cash, which includes $757 million at our Silicon Carbide LLC that is restricted for use by only that subsidiary.

Current wording

At December 31, 2024, we had $751 million of restricted cash, which includes $748 million at our Silicon Carbide LLC that is restricted for use by only that subsidiary.