[July 24, 2014] |
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Freescale Semiconductor Announces Second Quarter 2014 Results
AUSTIN, Texas --(Business Wire)--
Freescale Semiconductor, Ltd. (NYSE:FSL) today announced financial
results for the second quarter ended July 4, 2014. Highlights include:
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GAAP Results
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Non-GAAP Results*
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• Net sales of $1.19 billion
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• EBITDA** of $266 million
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• Gross margin of 45.1%
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• Adjusted gross margin of 45.2%
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• Earnings per share of $0.28
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• Adjusted earnings per share of $0.38
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"Revenues, gross margins and earnings per share all showed solid
improvement, both sequentially and year over year," said Gregg Lowe,
president and CEO. "All five product groups contributed to the growth,
which is driving consistent gains in market share."
Second Quarter Highlights
Net sales for the second quarter of 2014 were $1.19 billion, compared to
$1.13 billion in the first quarter of 2014 and $1.04 billion in the
second quarter of 2013.
Operating earnings for the period were $180 million, compared to $155
million in the first quarter of 2014 and $125 million in the second
quarter of 2013. Operating earnings improved on a sequential and
year-over-year basis due to higher sales and improving gross margins,
partially offset by increased investments in new products and higher
incentive compensation.
Net earnings for the second quarter were $86 million, or $0.28 per
share, compared to a net loss of $23 million, or $0.08 per share, in the
first quarter of 2014 and a net loss of $65 million, or $0.25 per share
in the second quarter of 2013.
Adjusted operating earnings (defined in Note 1 to the Consolidated
Financial Information attached to this press release) for the three
months ended July 4, 2014 were $208 million compared to earnings of $186
million in the first quarter of 2014 and $151 million in the second
quarter of 2013.
Adjusted net earnings (defined in Note 1 to the Consolidated Financial
Information attached to this press release) for the second quarter of
2014 were $117 million, or $0.38 per share, compared to $77 million, or
$0.27 per share, in the first quarter of 2014 and $23 million, or $0.09
per share, in the second quarter of 2013. Adjusted net earnings improved
sequentially and year over year due to improving sales and gross margins
along with lower interest expense resulting from the company's capital
structure initiatives.
Descriptions of EBITDA, Adjusted EBITDA, adjusted gross margin, adjusted
operating earnings and adjusted net earnings (loss) and the
reconciliations to our GAAP results are included in the tables and notes
attached to this press release.
Product Group Revenues
The company's net sales figures for the second quarter of 2014 were as
follows:
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Microcontroller net sales were $246 million, compared to $223 million
in the first quarter of 2014 and $199 million in the second quarter of
last year. On a year-over-year basis, Microcontroller revenues
benefited from increased sales into distribution and higher sales of
applications processors into the automotive market.
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Digital Networking net sales were $291 million, compared to $249
million in the first quarter of 2014 and $229 million in the second
quarter of last year. Networking sales growth was broad-based across
service provider, including wireless base stations in China,
enterprise and the general embedded segments.
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Automotive Microcontroller net sales were $308 million, compared to
$304 million in the first quarter of 2014 and $272 million in the
second quarter of last year. Automotive Microcontroller sales
benefited from growth in all key geographies and in distribution due
to growth in vehicle semiconductor content and higher worldwide
automotive production.
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Analog and Sensors net sales were $205 million, compared to $198
million in the first quarter of 2014 and $188 million in the second
quarter of last year. Analog and Sensors sales benefited on a
sequential and year-over-year basis from increased vehicle
semiconductor content and growth in worldwide automotive production.
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RF net sales, which include sales of power amplifiers to the wireless
infrastructure market, were $120 million, compared to $113 million in
the first quarter of 2014 and $81 million in the second quarter of
last year. On a sequential and year-over-year basis, RF sales
increased due to increased spending on 3G and 4G wireless networks,
particularly in China.
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Other net sales were $21 million, compared to $40 million in the first
quarter of 2014 and $69 million in the second quarter of last year.
Sequentially, revenues declined primarily due to lower intellectual
property revenue. On a year-over-year basis, intellectual property
revenues declined and we experienced lower sales into the wireless
handset market, consistent with the company's prior decision to exit
that market.
Other Financial Information
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Capital Expenditures for the quarter were $56 million;
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Cash and Cash Equivalents were $744 million; and
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Adjusted EBITDA* for the latest twelve months ended July 4, 2014 was
$999 million.
*Adjusted for various items as indicated and defined in Note 1 to the
Notes to the Consolidated Financial Information attached to this press
release.
**Reflects EBITDA excluding the effects of other items.
Third Quarter 2014 Outlook
For the third quarter of 2014, the company expects:
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Net sales to be between $1.19 billion and $1.23 billion; and
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Gross margins to increase approximately 50 basis points on a
sequential basis.
Conference Call and Webcast
Freescale's quarterly earnings call is scheduled to begin at 4:00 p.m.
Central Daylight Time on July 24, 2014. The company will offer a live
webcast of the conference call over the Internet at www.freescale.com/investor.
Caution Regarding Forward-Looking Statements
This press release includes forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements relate to our business strategy, goals and expectations
concerning future revenues, operations, margins, profitability,
liquidity and capital resources. Although we believe the assumptions
upon which these forward-looking statements are based are reasonable,
any of these assumptions could prove to be inaccurate and the
forward-looking statements based on these assumptions could be
incorrect. Our operations involve risks and uncertainties, many of which
are outside our control, and any one of which, or a combination of
which, could materially affect our results of operations and whether the
forward-looking statements ultimately prove to be correct. Actual
results and trends in the future may differ materially from those
suggested or implied by the forward-looking statements depending on a
variety of factors. Some of the factors that we believe could affect our
results include our substantial indebtedness; our ability to service our
outstanding indebtedness and the impact such indebtedness may have on
the way we operate our business; the loss of one or more of our
significant customers or strategic relationships; general economic and
business conditions and any downturns in the cyclical industry in which
we operate; our competitive environment and our ability to make
technological advances; interruptions in our production or manufacturing
capacity and our ability to obtain supplies; economic conditions in the
industries in which our products are sold; maintenance and protection of
our intellectual property; political and economic conditions in the
countries where we conduct business; geological conditions in some of
the earthquake-prone countries where certain of our customers and
suppliers are based; the costs of environmental compliance and/or the
imposition of liabilities under environmental laws and regulations;
potential product liability or personal injury claims; inability to make
necessary capital expenditures; loss of key personnel; the financial
viability of our customers, distributors or suppliers; and our ability
to achieve cost savings as well as other matters described under
"Risk Factors" in our Annual Report on Form 10-K and other filings with
the SEC. We undertake no obligation to update any information contained
in this press release.
Non-GAAP Financial Measures
Included within this press release and the accompanying tables and notes
are non-GAAP financial measures that supplement the company's
consolidated financial information prepared under GAAP. The company
describes these non-GAAP financial measures and reconciles them to the
most directly comparable GAAP measures in the tables and notes attached
to this press release. The company's management believes that these
non-GAAP measures provide a more meaningful representation of the
company's ongoing financial performance than GAAP measures alone. In
addition, the company uses Adjusted EBITDA to measure compliance with
certain of its debt covenants. These non-GAAP measures are included
solely for informational and comparative purposes and are not meant as a
substitute for GAAP. You should consider them together with the
consolidated financial information located in the tables attached to
this press release.
About Freescale Semiconductor
Freescale Semiconductor is a global leader in embedded processing
solutions, providing industry leading products that are advancing the
automotive, consumer, industrial and networking markets. From
microprocessors and microcontrollers to sensors, analog integrated
circuits and connectivity - our technologies are the foundation for the
innovations that make our world greener, safer, healthier and more
connected. Some of our key applications and end-markets include
automotive safety, hybrid and all-electric vehicles, next generation
wireless infrastructure, smart energy management, portable medical
devices, consumer appliances and smart mobile devices.
The company is based in Austin, Texas, and has design, research and
development, manufacturing and sales operations around the world. http://www.freescale.com
Freescale and the Freescale logo are trademarks of Freescale
Semiconductor, Inc. All other product or service names are the property
of their respective owners. © Freescale Semiconductor, Inc. 2014.
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Freescale Semiconductor, Ltd.
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Condensed Consolidated Statements of Operations
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(Unaudited)
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Three Months Ended
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(in millions, except per share amounts)
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Jul 4, 2014
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Apr 4, 2014
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Jun 28, 2013
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Net sales
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$
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1,191
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$
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1,127
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$
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1,038
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Cost of sales
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654
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622
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597
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Gross margin
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537
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505
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441
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Selling, general and administrative
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128
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126
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115
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Research and development
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219
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210
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187
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Amortization expense for acquired intangible assets
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4
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3
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4
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Reorganization of business and other
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6
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11
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10
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Operating earnings
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180
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155
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125
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Loss on extinguishment or modification of long-term debt
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-
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(59
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)
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(59
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)
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Other expense, net
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(83
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)
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(103
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)
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(125
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)
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Earnings (loss) before income taxes
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97
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(7
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)
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(59
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)
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Income tax expense
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11
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16
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6
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Net earnings (loss)
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$
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86
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$
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(23
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)
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$
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(65
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)
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Earnings (loss) per common share:
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Basic
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$
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0.28
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($0.08
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)
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($0.25
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)
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Diluted (a)
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$
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0.28
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($0.08
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)
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($0.25
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)
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Weighted average common shares outstanding:
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Basic
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303
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|
|
280
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|
|
|
|
255
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Diluted
|
|
|
|
|
308
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|
|
|
|
285
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|
259
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Freescale Semiconductor, Ltd.
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Reconciliation of Non-GAAP Measures
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(Unaudited)
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Three Months Ended
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(in millions, except per share amounts)
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Jul 4, 2014
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Apr 4, 2014
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Jun 28,
2013
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Adjusted gross margin
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$ 538
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|
$ 505
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$ 441
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Acquisition accounting impact (b)
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1
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-
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|
-
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Gross margin
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|
$ 537
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|
$ 505
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|
$ 441
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Adjusted operating earnings
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|
$ 208
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|
|
$ 186
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|
|
$ 151
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Acquisition accounting impact (b)
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|
|
|
5
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|
|
3
|
|
|
4
|
Non-cash share-based compensation expense (c)
|
|
|
|
17
|
|
|
17
|
|
|
12
|
Reorganization of business and other (f)
|
|
|
|
6
|
|
|
11
|
|
|
10
|
Operating earnings
|
|
|
|
$ 180
|
|
|
$ 155
|
|
|
$ 125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net earnings
|
|
|
|
$ 117
|
|
|
$ 77
|
|
|
$ 23
|
Acquisition accounting impact (b)
|
|
|
|
5
|
|
|
3
|
|
|
4
|
Non-cash share-based compensation expense (c)
|
|
|
|
17
|
|
|
17
|
|
|
12
|
Deferred and non-current tax impact (d)
|
|
|
|
3
|
|
|
10
|
|
|
3
|
Loss on extinguishment or modification of long-term debt (e)
|
|
|
|
-
|
|
|
59
|
|
|
59
|
Reorganization of business and other (f)
|
|
|
|
6
|
|
|
11
|
|
|
10
|
Net earnings (loss)
|
|
|
|
$ 86
|
|
|
$ (23)
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|
|
$ (65)
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|
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|
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|
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Adjusted earnings per common share:
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|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
$0.39
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|
|
$0.28
|
|
|
$0.09
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Diluted
|
|
|
|
$0.38
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|
|
$0.27
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|
|
$0.09
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
303
|
|
|
280
|
|
|
255
|
Diluted
|
|
|
|
308
|
|
|
285
|
|
|
259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
Freescale Semiconductor, Ltd.
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Product Group Net Sales Information
|
(Unaudited)
|
|
|
|
|
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|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(in millions)
|
|
|
|
Jul 4, 2014
|
|
|
Apr 4, 2014
|
|
|
Jun 28, 2013
|
|
|
|
|
|
|
|
|
|
|
|
Microcontrollers (1)
|
|
|
|
$
|
246
|
|
|
$
|
223
|
|
|
$
|
199
|
Digital Networking (2)
|
|
|
|
|
291
|
|
|
|
249
|
|
|
|
229
|
Automotive MCU (3)
|
|
|
|
|
308
|
|
|
|
304
|
|
|
|
272
|
Analog & Sensors (4)
|
|
|
|
|
205
|
|
|
|
198
|
|
|
|
188
|
RF (5)
|
|
|
|
|
120
|
|
|
|
113
|
|
|
|
81
|
Other (6)
|
|
|
|
|
21
|
|
|
|
40
|
|
|
|
69
|
Total
|
|
|
|
$
|
1,191
|
|
|
$
|
1,127
|
|
|
$
|
1,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Microcontrollers includes sales for industrial, multi-market,
smart energy, healthcare, connectivity and multimedia applications.
|
|
(2) Digital Networking includes sales of communication and digital
signal processors serving the networking and communications markets.
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(3) Automotive MCU includes microcontroller sales serving the
automotive market.
|
|
(4) Analog & Sensors includes sales of automotive analog,
mixed-signal analog and sensor products.
|
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(5) RF includes sales of power amplifiers.
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|
(6) Other includes licensing and sales of intellectual property,
sales of products serving the wireless handset market, sales of
wafers to other semiconductor companies and other miscellaneous
items.
|
|
|
Freescale Semiconductor, Ltd.
|
Condensed Consolidated Balance Sheets
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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(in millions)
|
|
|
|
Jul 4, 2014
|
|
|
Apr 4, 2014
|
|
|
Jun 28, 2013
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
744
|
|
|
|
$
|
709
|
|
|
|
$
|
785
|
|
Accounts receivable, net
|
|
|
|
|
583
|
|
|
|
|
464
|
|
|
|
|
399
|
|
Inventory, net
|
|
|
|
|
701
|
|
|
|
|
724
|
|
|
|
|
737
|
|
Other current assets
|
|
|
|
|
158
|
|
|
|
|
147
|
|
|
|
|
164
|
|
Total current assets
|
|
|
|
|
2,186
|
|
|
|
|
2,044
|
|
|
|
|
2,085
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
|
|
707
|
|
|
|
|
693
|
|
|
|
|
686
|
|
Intangible assets, net
|
|
|
|
|
59
|
|
|
|
|
51
|
|
|
|
|
60
|
|
Other assets, net
|
|
|
|
|
313
|
|
|
|
|
312
|
|
|
|
|
298
|
|
Total assets
|
|
|
|
$
|
3,265
|
|
|
|
$
|
3,100
|
|
|
|
$
|
3,129
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt and capital lease obligations
|
|
|
|
$
|
35
|
|
|
|
$
|
35
|
|
|
|
$
|
28
|
|
Accounts payable
|
|
|
|
|
438
|
|
|
|
|
447
|
|
|
|
|
372
|
|
Accrued liabilities and other
|
|
|
|
|
379
|
|
|
|
|
318
|
|
|
|
|
450
|
|
Total current liabilities
|
|
|
|
|
852
|
|
|
|
|
800
|
|
|
|
|
850
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
5,750
|
|
|
|
|
5,758
|
|
|
|
|
6,413
|
|
Other liabilities
|
|
|
|
|
391
|
|
|
|
|
393
|
|
|
|
|
449
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' deficit
|
|
|
|
|
(3,728
|
)
|
|
|
|
(3,851
|
)
|
|
|
|
(4,583
|
)
|
Total liabilities and shareholders' deficit
|
|
|
|
$
|
3,265
|
|
|
|
$
|
3,100
|
|
|
|
$
|
3,129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freescale Semiconductor, Ltd.
|
Cash Flow Summary
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(in millions)
|
|
|
|
Jul 4, 2014
|
|
|
Apr 4, 2014
|
|
|
Jun 28, 2013
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operations
|
|
|
|
$
|
118
|
|
|
|
$
|
26
|
|
|
|
$
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
$
|
(92
|
)
|
|
|
$
|
(75
|
)
|
|
|
$
|
(58
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
$
|
8
|
|
|
|
$
|
10
|
|
|
|
$
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
|
$
|
1
|
|
|
|
$
|
1
|
|
|
|
$
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Freescale Semiconductor, Ltd.
|
EBITDA and Adjusted EBITDA Reconciliations
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(in millions)
|
|
|
|
Jul 4, 2014
|
|
Apr 4, 2014
|
|
Jun 28, 2013
|
|
|
|
|
|
|
|
|
|
EBITDA excluding the effects of other items
|
|
|
|
$
|
266
|
|
|
$
|
244
|
|
|
$
|
212
|
|
Non-cash share-based compensation expense (c)
|
|
|
|
|
17
|
|
|
|
17
|
|
|
|
12
|
|
Loss on extinguishment or modification of long-term debt (e)
|
|
|
|
|
-
|
|
|
|
59
|
|
|
|
59
|
|
Reorganization of business and other (f)
|
|
|
|
|
6
|
|
|
|
11
|
|
|
|
10
|
|
Acquisition accounting impact (b)
|
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
EBITDA
|
|
|
|
|
242
|
|
|
|
157
|
|
|
|
131
|
|
Depreciation
|
|
|
|
|
42
|
|
|
|
43
|
|
|
|
46
|
|
Amortization*
|
|
|
|
|
21
|
|
|
|
19
|
|
|
|
19
|
|
Interest expense, net
|
|
|
|
|
82
|
|
|
|
102
|
|
|
|
125
|
|
Income tax expense
|
|
|
|
|
11
|
|
|
|
16
|
|
|
|
6
|
|
Net earnings (loss)
|
|
|
|
$
|
86
|
|
|
$
|
(23
|
)
|
|
$
|
(65
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended Jul 4, 2014
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
$
|
(32
|
)
|
|
|
|
|
Interest expense, net
|
|
|
|
|
421
|
|
|
|
|
|
Income tax expense
|
|
|
|
|
51
|
|
|
|
|
|
Depreciation and amortization expense*
|
|
|
|
|
255
|
|
|
|
|
|
Non-cash share-based compensation expense (c)
|
|
|
|
|
58
|
|
|
|
|
|
Loss on extinguishment or modification of long-term debt (e)
|
|
|
|
|
195
|
|
|
|
|
|
Reorganization of business and other (f)
|
|
|
|
|
33
|
|
|
|
|
|
Cost savings (g)
|
|
|
|
|
6
|
|
|
|
|
|
Other terms (h)
|
|
|
|
|
12
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
|
$
|
999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Excludes amortization of debt issuance costs, which are included in
interest expense, net.
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION
|
|
Summary of Key Reconciling Items
|
|
(a) No dilutive securities have been included in the diluted net
loss per share calculations in periods where a net loss was incurred.
|
|
(b) Reflects the effects of acquisition accounting, including our
acquisition by a consortium of investors in 2006, and the related
amortization expense for developed technology, trademarks/tradenames
and customer relationships along with inventory step-up recognition,
as applicable.
|
|
(c) Reflects non-cash, share-based compensation expense under the
provisions of ASC Topic 718, "Compensation - Stock Compensation."
|
|
(d) Adjustments to reflect cash income tax expense.
|
|
(e) Reflects losses on extinguishments and modifications of our
long-term debt.
|
|
(f) Reflects charges related to our reorganization of business
programs and other items.
|
|
(g) Reflects costs savings that we expect to achieve from
initiatives commenced prior to December 1, 2009 under our
reorganization of business programs that are in process or have
already been completed.
|
|
(h) Reflects adjustments required by our debt instruments, including
business optimization expenses, relocation expenses and other items.
|
|
|
Note 1
|
|
Adjusted gross margin and adjusted operating earnings represent
gross margin and operating earnings adjusted for the following as
necessary: the impact of acquisition accounting, non-cash
share-based compensation expense and reorganization of businesses
and other charges. Adjusted gross margin and adjusted operating
earnings are not recognized terms under U.S. GAAP. Adjusted gross
margin and adjusted operating earnings do not represent gross margin
and operating earnings, as those terms are defined under U.S. GAAP,
and should not be considered an alternative to gross margin and
operating earnings as indicators of our operating performance. We
have included information concerning adjusted gross margin and
adjusted operating earnings because we use such information when
evaluating gross margin and operating earnings to better evaluate
the underlying performance of the Company. Adjusted gross margin and
adjusted operating earnings as presented herein are not necessarily
comparable to similarly titled measures. Reconciliations of gross
margin to adjusted gross margin and adjusted operating earnings to
operating earnings, the most directly comparable U.S. GAAP measures,
have been included in the preceding tables.
|
|
Adjusted net earnings is net earnings (loss), adjusted for the
impact of acquisition accounting, non-cash share-based compensation
expense, deferred and non-current tax expense, losses on
extinguishment or modification of long-term debt and reorganization
of businesses and other charges, which we believe are not indicative
of the performance of our ongoing operations. We present adjusted
net earnings as a supplemental performance measure. We believe
adjusted net earnings is helpful to an understanding of our business
and provides a means of evaluating our performance from period to
period on a more consistent basis. This presentation should not be
construed as an indication that similar items will not recur or that
our future results will be unaffected by other items that we
consider to be outside the ordinary course of our business. Because
adjusted net earnings facilitates internal comparisons of our
historical financial position and operating performance on a more
consistent basis, we also use adjusted net earnings for business
planning purposes, in measuring our performance relative to that of
our competitors and in evaluating the effectiveness of our
operational strategies. Adjusted net earnings has limitations as an
analytical tool, and should not be considered in isolation or as a
substitute for an analysis of our results as reported under U.S.
GAAP. We compensate for these limitations by relying primarily on
our U.S. GAAP results and using adjusted net earnings only
supplementally. A reconciliation of adjusted net earnings to net
earnings (loss), the most directly comparable U.S. GAAP performance
measure, has been included in the preceding tables.
|
|
EBITDA (earnings before interest, taxes, depreciation and
amortization) excluding the effects of other items, is a non-U.S.
GAAP financial measure and represents net earnings (loss) adjusted
for depreciation, amortization, interest expense, net, income tax
expense, non-cash share-based compensation expense, losses on
extinguishment or modification of long-term debt and reorganization
of businesses and other charges. We have included information
concerning EBITDA excluding the effects of other items because we
use such information to supplementally evaluate the underlying
performance of the Company. EBITDA excluding the effects of other
items does not represent, and should not be considered an
alternative to, net earnings (loss), operating earnings, or cash
flow from operations as those terms are defined by U.S. GAAP and
does not necessarily indicate whether cash flows will be sufficient
to fund cash needs. While EBITDA excluding the effects of other
items and similar measures are frequently used as measures of
operations and the ability to meet debt service requirements by
other companies, our use of this financial measure is not
necessarily comparable to such other similarly titled captions of
other companies. A reconciliation of EBITDA excluding the effects of
other items to net loss, the most directly comparable U.S. GAAP
measure, has been included in the preceding tables.
|
|
Adjusted EBITDA as shown in the preceding tables is calculated in
accordance with the agreement and indentures governing Freescale
Semiconductor, Inc.'s existing notes and senior credit facilities.
Adjusted EBITDA is net loss adjusted for interest expense, net,
income tax expense, depreciation and amortization expense, non-cash
share-based compensation expense, losses on extinguishment and
modification of long-term debt, reorganization of business and other
charges, cost savings and other items that are included in net loss.
The ability of our subsidiaries to engage in activities such as
incurring additional indebtedness, making investments and paying
dividends is tied to ratios under the indentures and the senior
credit facilities based on Adjusted EBITDA calculated for the most
recent four fiscal quarters. Accordingly, we believe it is useful to
provide the calculation of Adjusted EBITDA to investors for purposes
of determining our ability to engage in these activities. Adjusted
EBITDA is a non-U.S. GAAP financial measure. Adjusted EBITDA does
not represent, and should not be considered an alternative to, net
loss, operating earnings, or cash flow from operations as those
terms are defined by U.S. GAAP and does not necessarily indicate
whether cash flows will be sufficient to fund cash needs. Although
Adjusted EBITDA and similar measures are frequently used as measures
of operations and the ability to meet debt service requirements by
other companies, our calculation of Adjusted EBITDA is not
necessarily comparable to such other similarly titled captions of
other companies. The calculation of Adjusted EBITDA in the
indentures and the senior credit facilities allows us to add back
certain charges that are deducted in calculating net loss. However,
some of these expenses may recur, vary greatly and are difficult to
predict. Further, our debt instruments require that Adjusted EBITDA
be calculated for the most recent four fiscal quarters. We do not
report Adjusted EBITDA on a quarterly basis. In addition, the
measure can be disproportionately affected by quarterly fluctuations
in our operating results, and it may not be comparable to the
measure for any subsequent quarter, four-quarter period or any
complete fiscal year. A reconciliation of net loss, which is a U.S.
GAAP measure of our operating results, to Adjusted EBITDA,
calculated as described above, has been included in the preceding
tables.
|
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