Freescale Semiconductor Announces First Quarter 2013 Results

  Freescale Semiconductor Announces First Quarter 2013 Results

Business Wire

AUSTIN, Texas -- April 25, 2013

Freescale Semiconductor, Ltd. (NYSE:FSL) today announced financial results for
the first quarter ended March 29, 2013. Highlights include:

GAAP Results                        Non-GAAP Results*
• Net sales of $981 million                 • EBITDA of $178 million
• Gross margin of 40.6%                     • Adjusted loss per share of $.03
• Loss per share of $.19                    

“Revenue and profitability improved sequentially in the first quarter and we
continued to improve our capital structure,” said Gregg Lowe, president and
CEO. “We are making good progress on our strategic initiatives targeting
growth market opportunities, reallocating R&D investments and expanding gross
margins.”

First Quarter Highlights

Net sales for the first quarter of 2013 were $981 million, compared to $957
million in the fourth quarter of 2012 and $950 million in the first quarter of
2012.

Income from operations for the period was $104 million, compared to $56
million in the fourth quarter of 2012 and $168 million in the first quarter of
2012. Income from operations improved on a sequential basis due to higher
sales, improved gross margins and lower operating expenses. Fourth quarter
2012 results also included charges associated with our strategic realignment.
On a year over year basis, income from operations declined due primarily to a
gain of $52 million related to insurance recoveries that benefited first
quarter 2012 results.

The net loss for the first quarter was $48 million, or $.19 per share,
compared to a loss of $35 million, or $.14 per share, in the fourth quarter of
2012 and a loss of $9 million, or $.04 in the first quarter of 2012. First
quarter 2013 results included a $22 million loss associated with a debt
refinancing transaction completed in March 2013, partially offset by lower
interest expense associated with the capital structure initiatives completed
in 2012.

Adjusted operating earnings (defined in Note 1 to the Consolidated Financial
Information attached to this press release) for the three months ended March
29, 2013 were $117 million, compared to earnings of $91 million in the fourth
quarter of 2012 and $128 million in the first quarter of 2012.

The first quarter adjusted net loss (defined in Note 1 to the Consolidated
Financial Information attached to this press release) was $8 million, or $.03
per share, compared to a loss or $37 million, or $.15 per share, in the fourth
quarter of 2012 and a loss of $9 million, or $.04 per share, in the first
quarter of 2012.

Descriptions of EBITDA, Adjusted EBITDA, 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 first quarter of 2013 were as follows:

  *Microcontroller net sales were $177 million in the first quarter, compared
    to $197 million in the fourth quarter of 2012 and $149 million in the
    first quarter last year. Sequentially, sales were negatively impacted by
    seasonality associated with the consumer market. On a year over year
    basis, Microcontroller revenues benefitted from increased sales into
    distribution in Asia as well as higher sales of applications processors
    into the general embedded and automotive markets.
  *Digital Networking net sales were $202 million, compared to $195 million
    in the fourth quarter of 2012 and $211 million in the first quarter last
    year. Sequentially, networking sales benefitted from higher spending on
    next generation networks, primarily 4G or ‘LTE’ investments in the Chinese
    and U.S. markets and higher sales of products used in enterprise
    solutions. Sales declined on an annual basis due primarily to a decline in
    certain general embedded products as well as products sold through
    distribution.
  *Automotive Microcontroller net sales were $254 million, compared to $236
    million in the fourth quarter of 2012 and $240 million in the first
    quarter last year.Automotive microcontrollers sales benefitted both
    sequentially and year over year from the positive vehicle market trends in
    the U.S. and China.
  *Analog & Sensor net sales were $177 million, compared to $175 million in
    the fourth quarter of 2012 and $177 million in the first quarter last
    year. Analog and sensor net sales benefitted on a sequential and year over
    year basis from higher sales into the automotive market, offset by
    declines in the consumer end market.
  *RF net sales were $86 million, compared to $97 million in the fourth
    quarter of 2012 and $67 million in the first quarter last year.
    Sequentially, sales declined following above average growth in the fourth
    quarter of 2012. On a year over year basis, RF sales increased due to
    increased spending on 3G and 4G wireless networks, particularly in China.
  *Other net sales were $85 million, compared to $57 million in the fourth
    quarter of 2012 and $106 million in the first quarter last year.
    Sequentially, other net sales benefitted from higher IP licensing revenue.
    Year over year, revenues declined due to lower sales into the wireless
    handset market, consistent with the company’s prior decision to exit that
    market, partially offset by higher IP licensing revenue.

Other First Quarter 2013 Financial Information

  *Capital Expenditures were $22 million;
  *Cash and Cash Equivalents were $767 million and;
  *Adjusted EBITDA* for the latest twelve months ending March 29, 2013 was
    $812 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.

Second Quarter 2013 Outlook

For the second quarter of 2013, the company expects:

  *Net sales to be between $1.00 billion and $1.04 billion;
  *Gross margins to increase approximately 90 to 130 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 April 25, 2013. 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 our strategic
direction, key personnel, 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 "RiskFactors" in our Annual
Report on Form 10-K/A 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. 2013.

                                                                
Freescale Semiconductor, Ltd.
Condensed Consolidated Statements of Operations
(Unaudited)
                                                                    
                                                                    
                                          Three Months Ended
(in millions, except per share amounts)   Mar 29,      Dec 31,      Mar 30,
                                           2013       2012       2012   
                                                                    
Net sales                                 $ 981        $ 957        $ 950
Cost of sales                              583        582        548    
Gross margin                                398          375          402
Selling, general and administrative         111          110          102
Research and development                    182          186          181
Amortization expense for acquired           3            3            3
intangible assets
Reorganization of business and other       (2     )    20         (52    )
Operating earnings                          104          56           168
Loss on extinguishment or modification      (22    )     (1     )     (28    )
of long-term debt, net
Other expense, net                         (120   )    (127   )    (135   )
(Loss) earnings before income taxes         (38    )     (72    )     5
Income tax expense (benefit)               10         (37    )    14     
Net loss                                  $ (48    )   $ (35    )   $ (9     )
                                                                    
Loss per common share:
Basic                                       ($0.19 )     ($0.14 )     ($0.04 )
Diluted ^(a)                                ($0.19 )     ($0.14 )     ($0.04 )
                                                                    
Weighted average common shares
outstanding:
Basic                                       252          249          247
Diluted                                     256          251          251

                                                                
Freescale Semiconductor, Ltd.
Reconciliation of Non-GAAP Measures
(Unaudited)
                                                                    
                                          Three Months Ended
(in millions, except per share amounts)   Mar 29,      Dec 31,      Mar 30,
                                           2013       2012       2012   
                                                                    
                                                                    
Adjusted operating earnings               $ 117        $ 91         $ 128
Amortization expense for acquired           3            3            3
intangible assets (b)
Non-cash share-based compensation           12           12           9
expense (c)
Reorganization of business and other       (2     )    20         (52    )
(g)
Operating earnings                        $ 104       $ 56        $ 168    
                                                                    
                                                                    
Adjusted net loss                         $ (8     )   $ (37    )   $ (9     )
Amortization expense for acquired           3            3            3
intangible assets (b)
Non-cash share-based compensation           12           12           9
expense (c)
Fair value adjustment on interest rate      (1     )     -            2
and commodity derivatives (d)
Deferred and non-current tax impact (e)     6            (38    )     10
Loss on extinguishment or modification      22           1            28
of long-term debt, net (f)
Reorganization of business and other       (2     )    20         (52    )
(g)
Net loss                                  $ (48    )   $ (35    )   $ (9     )
                                                                    
Adjusted net loss per common share:
Basic                                       ($0.03 )     ($0.15 )     ($0.04 )
Diluted ^(a)                                ($0.03 )     ($0.15 )     ($0.04 )
                                                                    
Weighted average common shares
outstanding:
Basic                                       252          249          247
Diluted                                     256          251          251

                                             
Freescale Semiconductor, Ltd.
Product Group Net Sales Information
(Unaudited)
                                                    
                                                    
                                                    
(in millions)               Three Months Ended
                            Mar 29,     Dec 31,     Mar 30,
                              2013       2012       2012
                                                    
                                                    
Microcontrollers ^(1)       $  177      $  197      $  149
Digital Networking ^(2)        202         195         211
Automotive MCU ^(3)            254         236         240
Analog & Sensors ^(4)          177         175         177
RF ^(5)                        86          97          67
Other ^(6)                    85         57         106
Total                       $  981      $  957      $  950
                                                    

(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.

(3) Automotive MCU includes microcontroller sales serving the automotive
market.

(4) Analog and Sensors includes sales of automotive analog, mixed-signal
analog and sensor products.

(5) RF includes sales of power amplifiers.

(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)                             Mar 29,      Dec 31,      Mar 30,
                                           2013       2012       2012   
ASSETS
Cash and cash equivalents                 $ 767        $ 711        $ 760
Accounts receivable, net                    387          384          434
Inventory, net                              764          797          816
Other current assets                       158        166        197    
Total current assets                        2,076        2,058        2,207
                                                                    
Property, plant and equipment, net          692          715          745
Intangible assets, net                      63           64           85
Other assets, net                          308        334        334    
Total assets                              $ 3,139     $ 3,171     $ 3,371  
                                                                    
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current portion of long-term debt and     $ 28         $ 6          $ 6
capital lease obligations
Accounts payable                            324          323          346
Accrued liabilities and other              515        543        411    
Total current liabilities                   867          872          763
                                                                    
Long-term debt                              6,361        6,375        6,579
Other liabilities                           451          455          501
                                                                    
Shareholders' deficit                      (4,540 )    (4,531 )    (4,472 )
Total liabilities and shareholders'       $ 3,139     $ 3,171     $ 3,371  
deficit


Freescale Semiconductor, Ltd.
Cash Flow Summary
(Unaudited)
                                                                  
                                                                      
                                                Three Months Ended
(in millions)                                   Mar 29,    Dec 31,    Mar 30,
                                                 2013     2012     2012 
                                                                      
Cash flows from operations                      $ 70       $ 82       $ 63
                                                                      
Cash flows from investing activities            $ (33  )   $ (33  )   $ (39  )
                                                                      
Cash flows from financing activities            $ 23       $ (100 )   $ (39  )
                                                                      
Effect of exchange rate changes on cash and     $ (4   )   $ (1   )   $ 3
cash equivalents

                                                           
Freescale Semiconductor, Ltd.
EBITDA and Adjusted EBITDA Reconciliations
(Unaudited)
                                                                    
                                             Three Months Ended
(in millions)                                Mar 29,         Dec 31,   Mar 30,
                                             2013            2012      2012
                                                                       
EBITDA excluding the effects of other        $ 178           $ 152     $ 192
items
Non-cash share-based compensation expense    12              12        9
(c)
Fair value adjustment on interest rate and   (1)             -         2
commodity derivatives (d)
Loss on extinguishment or modification of    22              1         28
long-term debt, net (f)
Reorganization of business and other (g)     (2)             20        (52)
EBITDA                                       147             119       205
Depreciation                                 45              45        47
Amortization*                                19              19        20
Interest expense, net                        121             127       133
Income tax expense (benefit)                 10              (37)      14
Net loss                                     $ (48)          $ (35)    $ (9)
                                                                       
                                                                       
                                                                       
                                             Twelve Months
                                             Ended         
                                             Mar 29, 2013
(in millions)
                                                                       
Net loss                                     $ (141)
Interest expense, net                        498
Income tax benefit                           (2)
Depreciation and amortization expense*       254
Non-cash share-based compensation expense    46
(c)
Fair value adjustment on interest rate and   14
commodity derivatives (d)
Loss on extinguishment or modification of    26
long-term debt, net (f)
Reorganization of business and other (g)     35
Cost savings (h)                             66
Other terms (i)                              16
Adjusted EBITDA                              $ 812
                                                                       
*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 and
adjusted net loss per share calculations, as a net loss was incurred in all
periods presented.

(b) Reflects amortization expense for trademarks/tradenames due to purchase
price accounting relating to our acquisition by a consortium of investors in
2006.

(c) Reflects non-cash, share-based compensation expense under the provisions
of ASC Topic 718, "Compensation - Stock Compensation.”

(d) Reflects the change in fair value of our interest rate and commodity
derivatives which are not designated as cash flow hedges under the provisions
of ASC Topic 815, "Derivatives and Hedging.”

(e) Adjustments to reflect cash income tax expense.

(f) Reflects losses on extinguishments and modifications of our long-term
debt, net.

(g) Reflects items related to our reorganization of business programs and
other.

(h) Reflects costs savings that we expect to achieve from initiatives
commenced prior to December 31, 2009 under our reorganization of business
programs that are in process or have already been completed.

(i) Reflects adjustments required by our debt instruments, including business
optimization expenses, relocation expenses and other items.

Note 1

Adjusted operating earnings (loss) represents operating earnings (loss)
adjusted for the amortization of acquired intangible assets, non-cash
share-based compensation expense and reorganization of businesses and other
charges (benefits). Adjusted operating earnings (loss) is not a recognized
term under U.S. GAAP. Adjusted operating earnings (loss) does not represent
operating earnings (loss), as that term is defined under U.S. GAAP, and should
not be considered an alternative to operating earnings (loss) as an indicator
of our operating performance. We have included information concerning adjusted
operating earnings (loss) because we use such information when evaluating
operating earnings (loss) to better evaluate the underlying performance of the
Company. Adjusted operating earnings (loss) as presented herein is not
necessarily comparable to similarly titled measures. A reconciliation of
adjusted operating earnings (loss) to operating earnings (loss), the most
directly comparable U.S. GAAP measure, has been included in the preceding
tables.

Adjusted net earnings (loss) is net earnings (loss), adjusted for certain
items that we believe are not indicative of the performance of our ongoing
operations. We present adjusted net earnings (loss) as a supplemental
performance measure. We believe adjusted net earnings (loss) 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 (loss) facilitates internal comparisons of our historical
financial position and operating performance on a more consistent basis, we
also use adjusted net earnings (loss) 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 (loss) 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 (loss) only
supplementally. A reconciliation of adjusted net earnings (loss) 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. 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 (loss), 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.

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 earnings
(loss) adjusted for certain non-cash and other items 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 (loss), operating earnings (loss), 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 (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 earnings (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.

Contact:

Freescale Semiconductor, Ltd.
Investors:
Mitch Haws, 512-895-2454
mitch.haws@freescale.com
or
Media:
Rob Hatley, 512-996-5134
robert.hatley@freescale.com
 
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