[April 23, 2015] |
|
Freescale Semiconductor Announces First Quarter 2015 Results
Freescale Semiconductor, Ltd. (NYSE:FSL) today announced financial
results for the first quarter ended April 3, 2015. Highlights include:
GAAP Results
|
|
Non-GAAP Results*
|
-
Net sales of $1.17 billion
-
Earnings per share of $0.22
|
|
-
Adjusted earnings per share of $0.48
|
"First quarter results marked another quarter of solid execution for
Freescale," said Gregg Lowe, president and CEO. "Revenue and earnings
per share both showed strong sequential and year over year improvement.
First quarter product revenue grew 6 percent year-on-year, starting off
2015 with another quarter of market share growth. In addition, the
increase in gross margin represents the ninth consecutive quarter of
growth in margins, and is the third quarter in a row of record gross
margins."
*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.
First Quarter Highlights
Net sales for the first quarter of 2015 were $1.17 billion, compared to
$1.10 billion in the fourth quarter of 2014 and $1.13 billion in the
first quarter of 2014.
Operating earnings for the period were $179 million, compared to $178
million in the fourth quarter of 2014 and $155 million in the first
quarter of 2014. Operating earnings were in line with the prior quarter.
On a year-over-year basis, operating earnings benefitted from higher
sales and improving gross margins. Included in first quarter 2015
operating earnings were $26 million of reorganization of business costs,
which was an increase over the prior quarter and comprised of severance
as well as costs associated with the company's planned merger with NXP
Semiconductors.
Net earnings for the first quarter were $70 million, or $0.22 per share,
compared to net earnings of $63 million, or $0.20 per share, in the
fourth quarter of 2014 and a net loss of $23 million, or $(0.08) per
share, in the first quarter of 2014. Included in first quarter 2015 net
earnings were $21 million of costs associated with the company's
redemption of $250 million of debt securities during the first quarter.
Adjusted operating earnings (defined in Note 1 to the Consolidated
Financial Information attached to this press release) for the three
months ended April 3, 2015 were $234 million compared to earnings of
$211 million in the fourth quarter of 2014 and $186 million in the first
quarter of 2014.
Adjusted net earnings (defined in Note 1 to the Consolidated Financial
Information attached to this press release) for the first quarter of
2015 were $150 million, or $0.48 per share, compared to $129 million, or
$0.42 per share, in the fourth quarter of 2014 and $77 million, or $0.27
per share, in the first quarter of 2014. Adjusted net earnings improved
sequentially due to improving sales and higher gross margins. On a
year-over-year basis, adjusted net earnings improved due to higher
sales, improving gross margins and lower interest expense.
Descriptions of EBITDA excluding the effects of other items, Adjusted
EBITDA, adjusted operating earnings and adjusted net earnings 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 first quarter of 2015 were as
follows:
-
Microcontrollers net sales were $235 million, compared to $232 million
in the fourth quarter of 2014 and $223 million in the first quarter of
last year. On a year-over-year basis, Microcontroller revenues
benefitted from increased sales of its 32-bit microcontroller products
into distribution and higher sales of applications processors into the
automotive market.
-
Digital Networking net sales were $214 million, compared to $217
million in the fourth quarter of 2014 and $249 million in the first
quarter of last year. Networking net sales declined compared to the
prior year due to lower sales to certain service provider customers
and lower sales into distribution.
-
Automotive MCU net sales were $307 million, compared to $271 million
in the fourth quarter of 2014 and $304 million in the first quarter of
last year. Automotive MCU sales benefitted from growth in all key
geographies and in distribution due to growth in vehicle semiconductor
content and higher worldwide automotive production.
-
Analog and Sensors net sales were $207 million, compared to $193
million in the fourth quarter of 2014 and $198 million in the first
quarter of last year. Analog and Sensors sales benefitted from
increased vehicle semiconductor content and growth in worldwide
automotive production.
-
RF net sales, which include sales of power amplifiers to the wireless
infrastructure market, were $184 million, compared to $164 million in
the fourth quarter of 2014 and $113 million in the first quarter of
last year. RF sales increased due to increased spending on 3G and 4G
wireless networks, particularly in China.
-
Other net sales were $22 million, compared to $26 million in the
fourth quarter of 2014 and $40 million in the first quarter of last
year. 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
-
Capital Expenditures for the quarter were $50 million;
-
Cash and Cash Equivalents were $501 million, inclusive of debt
redemption activities during the quarter totaling $268 million; and
-
Adjusted EBITDA* for the latest twelve months ended April 3, 2015 was
$1.15 billion.
*Adjusted for various items as indicated and defined in Note 1 to the
Notes to the Consolidated Financial Information attached to this press
release.
Second Quarter 2015 Outlook
For the second quarter of 2015, the company expects:
-
Net sales to be between $1.155 billion and $1.205 billion;
-
Gross margins to increase modestly on a sequential basis;
-
Operating expenses to decline on a sequential basis;
-
Adjusted earnings per share to increase 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 April 23, 2015. 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; our ability to meet
unscheduled or temporary increases in demand in our target markets,
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 (NYSE:FSL) enables secure, embedded processing
solutions for the Internet of Tomorrow. Freescale's solutions drive a
more innovative and connected world, simplifying our lives and making us
safer. While serving the world's largest companies, Freescale is also
committed to supporting science, technology, engineering and math (STEM)
education, enabling the next generation of innovators. www.freescale.com
Freescale and the Freescale logo are trademarks of Freescale
Semiconductor, Inc., Reg. U.S. Pat. & Tm. Off. All other product or
service names are the property of their respective owners. © 2015
Freescale Semiconductor, Inc.
|
|
|
|
|
|
|
Freescale Semiconductor, Ltd.
|
Condensed Consolidated Statements of Operations
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(in millions, except per share amounts)
|
|
Apr 3,
2015
|
|
Dec 31,
2014
|
|
Apr 4,
2014
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
1,169
|
|
|
$
|
1,103
|
|
|
$
|
1,127
|
|
Cost of sales
|
|
|
616
|
|
|
|
582
|
|
|
|
622
|
|
Gross margin
|
|
|
553
|
|
|
|
521
|
|
|
|
505
|
|
Research and development
|
|
|
222
|
|
|
|
204
|
|
|
|
210
|
|
Selling, general and administrative
|
|
|
121
|
|
|
|
123
|
|
|
|
126
|
|
Amortization expense for acquired intangible assets
|
|
|
5
|
|
|
|
4
|
|
|
|
3
|
|
Reorganization of business, merger expenses and other
|
|
|
26
|
|
|
|
12
|
|
|
|
11
|
|
Operating earnings
|
|
|
179
|
|
|
|
178
|
|
|
|
155
|
|
Loss on extinguishment or modification of long-term debt
|
|
|
(21
|
)
|
|
|
(10
|
)
|
|
|
(59
|
)
|
Other expense, net
|
|
|
(78
|
)
|
|
|
(77
|
)
|
|
|
(103
|
)
|
Earnings (loss) before income taxes
|
|
|
80
|
|
|
|
91
|
|
|
|
(7
|
)
|
Income tax expense
|
|
|
10
|
|
|
|
28
|
|
|
|
16
|
|
Net earnings (loss)
|
|
$
|
70
|
|
|
$
|
63
|
|
|
$
|
(23
|
)
|
|
|
|
|
|
|
|
Earnings (loss) per common share:
|
|
|
|
|
|
|
Basic
|
|
$
|
0.23
|
|
|
$
|
0.21
|
|
|
|
($0.08
|
)
|
Diluted
|
|
$
|
0.22
|
|
|
$
|
0.20
|
|
|
|
($0.08
|
)
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
Basic
|
|
|
307
|
|
|
|
304
|
|
|
|
280
|
|
Diluted
|
|
|
315
|
|
|
|
310
|
|
|
|
280
|
|
|
|
|
|
|
|
|
Freescale Semiconductor, Ltd.
|
Reconciliation of Non-GAAP Measures
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(in millions, except per share amounts)
|
|
Apr 3,
2015
|
|
Dec 31,
2014
|
|
Apr 4,
2014
|
|
|
|
|
|
|
|
Adjusted operating earnings
|
|
$
|
234
|
|
$
|
211
|
|
$
|
186
|
|
Amortization expense for acquired intangible assets (a)
|
|
|
5
|
|
|
4
|
|
|
3
|
|
Non-cash share-based compensation expense (b)
|
|
|
24
|
|
|
17
|
|
|
17
|
|
Reorganization of business, merger expenses and other (c)
|
|
|
26
|
|
|
12
|
|
|
11
|
|
Operating earnings
|
|
$
|
179
|
|
$
|
178
|
|
$
|
155
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net earnings
|
|
$
|
150
|
|
$
|
129
|
|
$
|
77
|
|
Amortization expense for acquired intangible assets (a)
|
|
|
5
|
|
|
4
|
|
|
3
|
|
Non-cash share-based compensation expense (b)
|
|
|
24
|
|
|
17
|
|
|
17
|
|
Deferred and non-current tax impact (d)
|
|
|
4
|
|
|
23
|
|
|
10
|
|
Loss on extinguishment or modification of long-term debt (e)
|
|
|
21
|
|
|
10
|
|
|
59
|
|
Reorganization of business, merger expenses and other (c)
|
|
|
26
|
|
|
12
|
|
|
11
|
|
Net earnings (loss)
|
|
$
|
70
|
|
$
|
63
|
|
$
|
(23
|
)
|
|
|
|
|
|
|
|
Adjusted earnings per common share:
|
|
|
|
|
|
|
Basic
|
|
$
|
0.49
|
|
$
|
0.42
|
|
$
|
0.28
|
|
Diluted (f)
|
|
$
|
0.48
|
|
$
|
0.42
|
|
$
|
0.27
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
Basic
|
|
|
307
|
|
|
304
|
|
|
280
|
|
Diluted (f)
|
|
|
315
|
|
|
310
|
|
|
285
|
|
|
|
|
|
|
|
|
Freescale Semiconductor, Ltd.
|
|
|
|
|
|
|
Product Group Net Sales Information
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(in millions)
|
|
Apr 3,
2015
|
|
Dec 31,
2014
|
|
Apr 4,
2014
|
|
|
|
|
|
|
|
Microcontrollers (1)
|
|
$
|
235
|
|
$
|
232
|
|
$
|
223
|
Digital Networking (2)
|
|
|
214
|
|
|
217
|
|
|
249
|
Automotive MCU (3)
|
|
|
307
|
|
|
271
|
|
|
304
|
Analog & Sensors (4)
|
|
|
207
|
|
|
193
|
|
|
198
|
RF (5)
|
|
|
184
|
|
|
164
|
|
|
113
|
Other (6)
|
|
|
22
|
|
|
26
|
|
|
40
|
Total
|
|
$
|
1,169
|
|
$
|
1,103
|
|
$
|
1,127
|
|
|
|
|
|
|
|
|
|
|
(1) Microcontrollers includes sales for industrial, multi-market,
smart energy, healthcare, connectivity and automotive & other
multimedia applications.
|
(2) Digital Networking includes sales of communication and wireless
infrastructure processors serving the networking and communications
markets.
|
(3) Automotive MCU includes microcontroller sales serving the
automotive market.
|
(4) Analog & Sensors includes sales of automotive analog,
mixed-signal analog and sensor products.
|
(5) RF includes sales of high power transistors.
|
(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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Apr 3,
2015
|
|
Dec 31,
2014
|
|
Apr 4,
2014
|
ASSETS
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
501
|
|
|
$
|
696
|
|
|
$
|
709
|
|
Accounts receivable, net
|
|
|
559
|
|
|
|
562
|
|
|
|
464
|
|
Inventory, net
|
|
|
749
|
|
|
|
745
|
|
|
|
724
|
|
Other current assets
|
|
|
174
|
|
|
|
166
|
|
|
|
147
|
|
Total current assets
|
|
|
1,983
|
|
|
|
2,169
|
|
|
|
2,044
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
758
|
|
|
|
750
|
|
|
|
693
|
|
Intangible assets, net
|
|
|
55
|
|
|
|
59
|
|
|
|
51
|
|
Other assets, net
|
|
|
300
|
|
|
|
297
|
|
|
|
312
|
|
Total assets
|
|
$
|
3,096
|
|
|
$
|
3,275
|
|
|
$
|
3,100
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' DEFICIT
|
|
|
|
|
|
|
Current portion of long-term debt and capital lease obligations
|
|
$
|
35
|
|
|
$
|
35
|
|
|
$
|
35
|
|
Accounts payable
|
|
|
425
|
|
|
|
413
|
|
|
|
447
|
|
Accrued liabilities and other
|
|
|
349
|
|
|
|
397
|
|
|
|
318
|
|
Total current liabilities
|
|
|
809
|
|
|
|
845
|
|
|
|
800
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
5,277
|
|
|
|
5,535
|
|
|
|
5,758
|
|
Other liabilities
|
|
|
464
|
|
|
|
476
|
|
|
|
393
|
|
|
|
|
|
|
|
|
Shareholders' deficit
|
|
|
(3,454
|
)
|
|
|
(3,581
|
)
|
|
|
(3,851
|
)
|
Total liabilities and shareholders' deficit
|
|
$
|
3,096
|
|
|
$
|
3,275
|
|
|
$
|
3,100
|
|
|
|
|
|
|
|
|
Freescale Semiconductor, Ltd.
|
Cash Flow Summary
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(in millions)
|
|
Apr 3,
2015
|
|
Dec 31,
2014
|
|
Apr 4,
2014
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
$
|
134
|
|
|
$
|
164
|
|
|
$
|
26
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
$
|
(75
|
)
|
|
$
|
(86
|
)
|
|
$
|
(75
|
)
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
$
|
(241
|
)
|
|
$
|
(112
|
)
|
|
$
|
10
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
$
|
(13
|
)
|
|
$
|
(7
|
)
|
|
$
|
1
|
|
|
|
|
|
|
|
|
Freescale Semiconductor, Ltd.
|
EBITDA, Adjusted EBITDA, Free Cash Flow and Adjusted Cash Flows
from Operating Activities Reconciliations
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(in millions)
|
|
Apr 3,
2015
|
|
Dec 31,
2014
|
|
Apr 4,
2014
|
|
|
|
|
|
|
|
EBITDA excluding the effects of other items
|
|
$
|
294
|
|
$
|
274
|
|
$
|
244
|
|
Non-cash share-based compensation expense (b)
|
|
|
24
|
|
|
17
|
|
|
17
|
|
Loss on extinguishment or modification of long-term debt (e)
|
|
|
21
|
|
|
10
|
|
|
59
|
|
Reorganization of business, merger expenses and other (c)
|
|
|
26
|
|
|
12
|
|
|
11
|
|
EBITDA
|
|
|
223
|
|
|
235
|
|
|
157
|
|
Depreciation
|
|
|
43
|
|
|
44
|
|
|
43
|
|
Amortization*
|
|
|
22
|
|
|
22
|
|
|
19
|
|
Interest expense, net
|
|
|
78
|
|
|
78
|
|
|
102
|
|
Income tax expense
|
|
|
10
|
|
|
28
|
|
|
16
|
|
Net earnings (loss)
|
|
$
|
70
|
|
$
|
63
|
|
$
|
(23
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months
Ended
Apr 3, 2015
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
344
|
|
|
|
|
Interest expense, net
|
|
|
319
|
|
|
|
|
Income tax expense
|
|
|
47
|
|
|
|
|
Depreciation and amortization expense*
|
|
|
260
|
|
|
|
|
Non-cash share-based compensation expense (b)
|
|
|
74
|
|
|
|
|
Loss on extinguishment or modification of long-term debt (e)
|
|
|
41
|
|
|
|
|
Reorganization of business, merger expenses and other (c)
|
|
|
52
|
|
|
|
|
Other terms (g)
|
|
|
8
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
1,145
|
|
|
|
|
|
|
|
|
|
|
|
*Excludes amortization of debt issuance costs, which are included in
interest expense, net.
|
|
|
|
|
|
|
|
(in millions)
|
|
Apr 3,
2015
|
|
Dec 31,
2014
|
|
Apr 4,
2014
|
|
|
|
|
|
|
|
Free cash flow
|
|
$
|
101
|
|
$
|
92
|
|
$
|
(26
|
)
|
Purchases of property, plant and equipment
|
|
|
50
|
|
|
74
|
|
|
56
|
|
Adjusted cash flows from operating activities
|
|
|
151
|
|
|
166
|
|
|
30
|
|
Excess tax benefits from share-based compensation (h)
|
|
|
17
|
|
|
2
|
|
|
4
|
|
Cash flows from operating activities
|
|
$
|
134
|
|
$
|
164
|
|
$
|
26
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION
|
|
|
Summary of Key Reconciling Items
|
|
|
(a)
|
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.
|
(b)
|
Reflects non-cash, share-based compensation expense under the
provisions of ASC Topic 718, "Compensation - Stock Compensation."
|
(c)
|
Reflects items related to our reorganization of business programs,
expenses associated with our proposed merger with NXP and other
items.
|
(d)
|
Adjustments to reflect cash income tax expense.
|
(e)
|
Reflects losses on extinguishments and modifications of our
long-term debt.
|
(f)
|
For the period in which we incurred a net loss but generated
adjusted net earnings, dilutive shares have been included in the
diluted weighted average shares and the diluted adjusted net
earnings per share calculations.
|
(g)
|
Reflects adjustments required by our debt instruments, including
business optimization expenses, relocation expenses and other
items.
|
(h)
|
Reflects non-cash income tax benefit resulting when compensation
cost from non-qualified share-based compensation recognized on the
entity's tax return exceeds cost from equity-based compensation
recognized in the financial statements.
|
|
|
|
|
|
|
Note 1
|
Adjusted operating earnings represents operating earnings adjusted
for the following, as necessary: the impact of acquisition
accounting, non-cash share-based compensation expense and
reorganization of business, merger expenses and other items.
Adjusted operating earnings is not a recognized term under U.S.
GAAP. Adjusted operating earnings does not represent operating
earnings, as that term is defined under U.S. GAAP, and should not be
considered an alternative to operating earnings as an indicator of
our operating performance. We have included information concerning
adjusted operating earnings because we use such information to
better evaluate the underlying performance of the Company. Adjusted
operating earnings as presented herein is not necessarily comparable
to similarly titled measures. A reconciliation of adjusted operating
earnings to operating earnings, the most directly comparable U.S.
GAAP measures, has 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 business, merger expenses and other items, which we believe are
not indicative of the performance of our ongoing operations.
Adjusted earnings per common share is calculated by dividing
adjusted net earnings by the basic or diluted weighted average
common shares outstanding for the period. We present adjusted net
earnings and adjusted earnings per share as supplemental performance
measures. We believe adjusted net earnings and adjusted earnings per
share are helpful to an understanding of our business and provide 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 and adjusted earnings per share facilitate internal
comparisons of our historical financial position and operating
performance on a more consistent basis, we also use adjusted net
earnings and adjusted earnings per share 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 and adjusted earnings per share
have limitations as analytical tools and should not be considered in
isolation or as a substitute for an analysis of our results as
reported under U.S. GAAP. 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 business, merger expenses and other items, as necessary. 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, 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 earnings (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 notes and senior credit facilities. Adjusted
EBITDA is net earnings 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, merger
expenses and other items and other charges that are included in net
earnings (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 earnings, 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 earnings. 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 earnings, 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.
|
|
|
Free cash flow represents adjusted cash flows from operating
activities, less purchases of property, plant and equipment, and is
a measure that takes into consideration the capital investments
required to maintain the operations of our business and execute our
strategy, as cash flows from operating activities adds back non-cash
depreciation expense to earnings but does not reflect a charge for
necessary capital expenditures. Adjusted cash flows from operating
activities represents cash flows from operating activities, plus
excess tax benefits from share-based compensation. U.S. GAAP
requires the excess tax benefits from share-based compensation to be
reported as a financing cash flow rather than as an operating cash
flow. We have added this benefit back to our calculation of adjusted
cash flows from operating activities and free cash flow in order to
generally classify cash flows arising from income taxes as operating
cash flows. We believe adjusted cash flows from operating activities
and free cash flow provides useful information to investors
regarding our ability to generate cash from business operations that
is available for acquisitions and other investments and service of
debt principal. We use adjusted cash flows from operating activities
and free cash flow as measures to monitor and evaluate performance.
Adjusted cash flows from operating activities and free cash flow
presented herein is not necessarily comparable to similarly titled
measures. A reconciliation of adjusted cash flows from operating
activities and free cash flow to cash flows from operating
activities, the most directly comparable U.S. GAAP measure, has been
included in the preceding tables.
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