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Freescale Semiconductor Announces Third Quarter 2013 Results

  Freescale Semiconductor Announces Third Quarter 2013 Results

Business Wire

AUSTIN, Texas -- October 24, 2013

Freescale Semiconductor, Ltd. (NYSE:FSL) today announced financial results for
the third quarter ended September 27, 2013. Highlights include:

GAAP Results                     Non-GAAP Results*
• Net sales of $1.09 billion        • EBITDA of $236 million
• Gross margin of 43.6%             • Adjusted earnings per share of $0.20
• Earnings per share of $0.09

“We continue to see solid progress on our strategic objectives sequentially
and year over year,” said Gregg Lowe, president and CEO. “Our team remains
focused on meeting our long-term goals of delivering revenue growth and margin
expansion.”

Third Quarter Highlights

Net sales for the third quarter of 2013 were $1.09 billion, compared to $1.04
billion in the second quarter of 2013 and $1.01 billion in the third quarter
of 2012.

Operating earnings for the period were $157 million, compared to $125 million
in the second quarter of 2013 and $127 million in the third quarter of 2012.
Income from operations improved on a sequential and year-over-year basis due
to higher sales and improved gross margins. Third quarter 2013 results
included a cash charge in selling, general and administrative expense related
to the settlement of an intellectual property litigation matter.

Net earnings for the third quarter were $23 million, or $0.09 per share,
compared to a loss of $65 million, or $0.25 per share, in the second quarter
of 2013 and a loss of $24 million, or $0.10 in the third quarter of 2012.

Adjusted operating earnings (defined in Note 1 to the Consolidated Financial
Information attached to this press release) for the three months ended
September 27, 2013 were $174 million compared to earnings of $151 million in
the second quarter of 2013 and $139 million in the third quarter of 2012.

Adjusted net earnings in the third quarter (defined in Note 1 to the
Consolidated Financial Information attached to this press release) were $51
million, or $0.20 per share compared to earnings of $23 million, or $0.09 per
share, in the second quarter of 2013 and earnings of $10 million, or $0.04 per
share, in the third quarter of 2012. Sequentially and year over year, adjusted
net earnings benefitted from higher sales, improving gross margins and lower
interest expense.

Descriptions of 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 third quarter of 2013 were as follows:

  *Microcontroller net sales were $230 million in the third quarter, compared
    to $199 million in the second quarter of 2013 and $192 million in the
    third quarter last year. Sequentially, sales benefitted from growth in
    microcontrollers and applications processors sold into the consumer
    markets. On a year-over-year basis, sales increased primarily due to
    growth in microcontrollers and applications processors sold into the
    automotive and general embedded markets.
  *Digital Networking net sales were $238 million, compared to $229 million
    in the second quarter of 2013 and $226 million in the third quarter last
    year. Networking sales benefitted both sequentially and year over year
    from higher spending on current and next generation enterprise systems and
    higher sales of products sold into the general embedded market.
  *Automotive Microcontroller net sales were $270 million, compared to $272
    million in the second quarter of 2013 and $252 million in the third
    quarter last year. Automotive microcontroller sales declined sequentially
    due to seasonally lower vehicle production in key geographies in which the
    company participates. On a year-over-year basis, sales improved due to
    increased vehicle production, primarilyin the U.S. and China markets.
  *Analog & Sensor net sales were $181 million, compared to $188 million in
    the second quarter of 2013 and $180 million in the third quarter last
    year. Analog & Sensor net sales declined sequentially primarily due to
    seasonally lower vehicle production. On a year-over-year basis, growth in
    automotive end markets was offset by declines in various consumer markets.
  *RF net sales, which include sales of power amplifiers to the wireless
    infrastructure market, were $89 million, compared to $81 million in the
    second quarter of 2013 and $73 million in the third quarter last year.
    Sales improved sequentially and year over year due to increased spending
    on next-generation wireless networks, primarily in China.
  *Other net sales were $77 million compared to $69 million in the second
    quarter of 2013 and $86 million in the third quarter last year. On a
    sequential basis, sales grew due primarily to higher IP revenue. Year over
    year, other net sales declined due primarily to lower sales into the
    wireless handset market.

Other Third Quarter 2013 Financial Information

  *Capital Expenditures were $45 million;
  *Cash and Cash Equivalents were $700 million and;
  *Adjusted EBITDA* for the latest twelve months ending September 27, 2013
    was $828 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.

Fourth Quarter 2013 Outlook

For the fourth quarter of 2013, the company expects:

  *Net sales to be between $1.03 billion and $1.07 billion;
  *Gross margins to be essentially flat with Q3 2013.

Conference Call and Webcast

Freescale's quarterly earnings call is scheduled to begin at 4:00 p.m. Central
Daylight Time on October 24, 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 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)    Sep 27,     Jun 28,      Sep 28,
                                            2013      2013       2012   
                                                                    
Net sales                                  $ 1,085     $ 1,038      $ 1,009
Cost of sales                               612       597        585    
Gross margin                                 473         441          424
Selling, general and administrative          120         115          110
Research and development                     191         187          187
Amortization expense for acquired            3           4            3
intangible assets
Reorganization of business and other        2         10         (3     )
Operating earnings                           157         125          127
Loss on extinguishment or modification       (1    )     (59    )     (3     )
of long-term debt
Other expense, net                          (118  )    (125   )    (134   )
Earnings (loss) before income taxes          38          (59    )     (10    )
Income tax expense                          15        6          14     
Net earnings (loss)                        $ 23       $ (65    )   $ (24    )
                                                                    
Earnings (loss) per common share:
Basic                                      $ 0.09        ($0.25 )     ($0.10 )
Diluted (a)                                $ 0.09        ($0.25 )     ($0.10 )
                                                                    
Weighted average common shares
outstanding:
Basic                                        258         255          249
Diluted                                      261         259          251

                                                                  
Freescale Semiconductor, Ltd.
Reconciliation of Non-GAAP Measures
(Unaudited)
                                                                      
                                                 Three Months Ended
(in millions, except per share amounts)          Sep 27,   Jun 28,    Sep 28,
                                                   2013    2013     2012 
                                                                      
                                                                      
Adjusted operating earnings                      $  174    $ 151      $ 139
Amortization expense for acquired intangible        3        4          3
assets (b)
Non-cash share-based compensation expense (c)       12       12         12
Reorganization of business and other (g)           2       10       (3   )
Operating earnings                               $  157    $ 125     $ 127  
                                                                      
                                                                      
Adjusted net earnings                            $  51     $ 23       $ 10
Amortization expense for acquired intangible        3        4          3
assets (b)
Non-cash share-based compensation expense (c)       12       12         12
Fair value adjustment on interest rate              -        -          7
derivatives (d)
Deferred and non-current tax impact (e)             10       3          12
Loss on extinguishment or modification of           1        59         3
long-term debt (f)
Reorganization of business and other (g)           2       10       (3   )
Net earnings (loss)                              $  23     $ (65  )   $ (24  )
                                                                      
Adjusted earnings per common share:
Basic                                            $  0.20   $ 0.09     $ 0.04
Diluted                                          $  0.20   $ 0.09     $ 0.04
                                                                      
Weighted average common shares outstanding:
Basic                                               258      255        249
Diluted                                             261      259        251

                                                
Freescale Semiconductor, Ltd.
Product Group Net Sales Information
(Unaudited)
                                                          
                                                          
                                                          
(in millions)                 Three Months Ended
                              Sep 27,       Jun 28,       Sep 28,
                               2013         2013         2012
                                                          
                                                          
Microcontrollers ^(1)         $ 230         $ 199         $ 192
Digital Networking ^(2)         238           229           226
Automotive MCU ^(3)             270           272           252
Analog & Sensors ^(4)           181           188           180
RF ^(5)                         89            81            73
Other ^(6)                     77           69           86
Total                         $ 1,085       $ 1,038       $ 1,009
                                                          

(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)                             Sep 27,      Jun 28,      Sep 28,
                                           2013       2013       2012   
ASSETS
Cash and cash equivalents                 $ 700        $ 785        $ 763
Restricted cash for bond redemptions        782          -            -
Accounts receivable, net                    426          399          440
Inventory, net                              728          737          810
Other current assets                       141        164        182    
Total current assets                        2,777        2,085        2,195
                                                                    
Property, plant and equipment, net          685          686          723
Intangible assets, net                      56           60           77
Other assets, net                          301        298        334    
Total assets                              $ 3,819     $ 3,129     $ 3,329  
                                                                    
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current portion of long-term debt and     $ 753        $ 28         $ 7
capital lease obligations
Accounts payable                            386          372          371
Accrued liabilities and other              399        450        512    
Total current liabilities                   1,538        850          890
                                                                    
Long-term debt                              6,375        6,413        6,476
Other liabilities                           432          449          452
                                                                    
Shareholders' deficit                      (4,526 )    (4,583 )    (4,489 )
Total liabilities and shareholders'       $ 3,819     $ 3,129     $ 3,329  
deficit


Freescale Semiconductor, Ltd.
Cash Flow Summary
(Unaudited)
                                                                 
                                                                      
                                                Three Months Ended
(in millions)                                   Sep 27,    Jun 28,    Sep 28,
                                                 2013     2013     2012 
                                                                      
Cash flows from operations                      $ 64       $ 69       $ 16
                                                                      
Cash flows from investing activities            $ (61  )   $ (58  )   $ (47  )
                                                                      
Cash flows from financing activities            $ (89  )   $ 9        $ (91  )
                                                                      
Effect of exchange rate changes on cash and     $ 1        $ (2   )   $ 4
cash equivalents

                                                                  
Freescale Semiconductor, Ltd.
EBITDA and Adjusted EBITDA Reconciliations
(Unaudited)
                                                                      
                                           Three Months Ended
(in millions)                              Sep 27,         Jun 28,    Sep 28,
                                              2013        2013     2012 
                                                                      
EBITDA excluding the effects of other      $   236         $ 212      $ 198
items
Non-cash share-based compensation              12            12         12
expense (c)
Fair value adjustment on interest rate         -             -          7
derivatives (d)
Loss on extinguishment or modification         1             59         3
of long-term debt (f)
Reorganization of business and other (g)      2           10       (3   )
EBITDA                                         221           131        179
Depreciation                                   45            46         44
Amortization*                                  20            19         20
Interest expense, net                          118           125        125
Income tax expense                            15          6        14   
Net earnings (loss)                        $   23         $ (65  )   $ (24  )
                                                                      
                                                                      
                                                                      
                                           Twelve Months
                                           Ended

                                           Sep 27, 2013
(in millions)
                                                                      
Net loss                                   $   (125   )
Interest expense, net                          491
Income tax benefit                             (7     )
Depreciation and amortization expense*         258
Non-cash share-based compensation              48
expense (c)
Fair value adjustment on interest rate         (1     )
derivatives (d)
Loss on extinguishment or modification         83
of long-term debt (f)
Reorganization of business and other (g)       30
Cost savings (h)                               41
Other terms (i)                               10     
Adjusted EBITDA                            $   828    
                                                                      
*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 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 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.

(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 represents operating earnings 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 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 when evaluating operating earnings 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 measure, has been included in the preceding
tables.

Adjusted net earnings 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 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. 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.
Media:
Jacey Zuniga, 512-895-7398
jacey.zuniga@freescale.com
or
Investors:
Mitch Haws, 512-895-2454
mitch.haws@freescale.com
 
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