[October 23, 2014] |
|
Freescale Semiconductor Announces Third Quarter 2014 Results
AUSTIN, Texas --(Business Wire)--
Freescale Semiconductor, Ltd. (NYSE:FSL) today announced financial
results for the third quarter ended October 3, 2014. Highlights include:
GAAP Results
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|
Non-GAAP Results*
|
-
Net sales of $1.21 billion
-
Earnings per share of $0.40
|
|
-
Adjusted earnings per share of $0.49
|
"Our improving profitability and cash flow generation demonstrate the
value of the growth and margin initiatives we have been delivering as a
company," said Gregg Lowe, president and CEO. "In addition, each of our
five product groups has grown at double digit rates so far in 2014, and
we are well positioned to continue gaining market share."
*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 effect of other items.
Third Quarter Highlights
Net sales for the third quarter of 2014 were $1.21 billion, compared to
$1.19 billion in the second quarter of 2014 and $1.09 billion in the
third quarter of 2013.
Operating earnings for the period were $215 million, compared to $180
million in the second quarter of 2014 and $157 million in the third
quarter of 2013. Operating earnings improved on a sequential basis due
to higher sales, improving gross margins and lower operating expenses.
On a year-over-year basis, operating earnings benefited from higher
sales and improving gross margins.
Net earnings for the third quarter were $125 million, or $0.40 per
share, compared to net earnings of $86 million, or $0.28 per share, in
the second quarter of 2014 and net earnings of $23 million, or $0.09 per
share in the third 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 October 3, 2014 were $243 million compared to earnings of
$208 million in the second quarter of 2014 and $174 million in the third
quarter of 2013.
Adjusted net earnings (defined in Note 1 to the Consolidated Financial
Information attached to this press release) for the third quarter of
2014 were $150 million, or $0.49 per share, compared to $117 million, or
$0.38 per share, in the second quarter of 2014 and $51 million, or $0.20
per share, in the third quarter of 2013. Adjusted net earnings improved
sequentially due to improving sales, higher gross margins and lower
operating expenses. On a year-over-year basis, adjusted net earnings
improved due to higher sales, improving gross margins and lower interest
expense.
Descriptions of EBITDA, 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 third quarter of 2014 were as
follows:
-
Microcontrollers net sales were $250 million, compared to $246 million
in the second quarter of 2014 and $230 million in the third quarter of
last year. On a year-over-year basis, Microcontroller revenues
benefited 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 $281 million, compared to $291
million in the second quarter of 2014 and $238 million in the third
quarter of last year. Networking net sales declined modestly on a
sequential basis due to lower sales to certain service provider
customers. Networking sales growth on a year-over-year basis was
broad-based across service providers, including wireless base stations
in China, enterprise and the general embedded segments.
-
Automotive MCU net sales were $303 million, compared to $308 million
in the second quarter of 2014 and $270 million in the third quarter of
last year. Sequentially, Automotive MCU sales declined in line with
normal seasonality. Automotive MCU sales benefited on a year-over-year
basis 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 $201 million, compared to $205
million in the second quarter of 2014 and $181 million in the third
quarter of last year. Sequentially, Analog and Sensors net sales were
lower due to automotive seasonality. Analog and Sensors sales
benefited on a year-over-year basis 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 $157 million, compared to $120 million in
the second quarter of 2014 and $89 million in the third 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.
-
Other net sales were $21 million, compared to $21 million in the
second quarter of 2014 and $77 million in the third 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 $63 million;
-
Cash and Cash Equivalents were $737 million, inclusive of debt
redemption activities during the quarter totaling $109 million; and
-
Adjusted EBITDA* for the latest twelve months ended October 3, 2014
was $1.06 billion.
Fourth Quarter 2014 Outlook
For the fourth quarter of 2014, the company expects:
-
Net sales to be between $1.075 billion and $1.125 billion;
-
Gross margins to decline approximately 75 - 100 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 October 23, 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; 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 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., Reg. U.S. Pat. & Tm. Off. All other product or
service names are the property of their respective owners. © 2014
Freescale Semiconductor, Inc.
|
|
|
|
|
|
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Freescale Semiconductor, Ltd.
|
Condensed Consolidated Statements of Operations
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(in millions, except per share amounts)
|
|
Oct 3,
2014
|
|
Jul 4,
2014
|
|
Sep 27,
2013
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
1,213
|
|
|
$
|
1,191
|
|
|
$
|
1,085
|
|
Cost of sales
|
|
|
651
|
|
|
|
654
|
|
|
|
612
|
|
Gross margin
|
|
|
562
|
|
|
|
537
|
|
|
|
473
|
|
Selling, general and administrative
|
|
|
122
|
|
|
|
128
|
|
|
|
120
|
|
Research and development
|
|
|
213
|
|
|
|
219
|
|
|
|
191
|
|
Amortization expense for acquired intangible assets
|
|
|
4
|
|
|
|
4
|
|
|
|
3
|
|
Reorganization of business and other
|
|
|
8
|
|
|
|
6
|
|
|
|
2
|
|
Operating earnings
|
|
|
215
|
|
|
|
180
|
|
|
|
157
|
|
Loss on extinguishment or modification of long-term debt
|
|
|
(10
|
)
|
|
|
-
|
|
|
|
(1
|
)
|
Other expense, net
|
|
|
(82
|
)
|
|
|
(83
|
)
|
|
|
(118
|
)
|
Earnings before income taxes
|
|
|
123
|
|
|
|
97
|
|
|
|
38
|
|
Income tax (benefit) expense
|
|
|
(2
|
)
|
|
|
11
|
|
|
|
15
|
|
Net earnings
|
|
$
|
125
|
|
|
$
|
86
|
|
|
$
|
23
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
Basic
|
|
$
|
0.41
|
|
|
$
|
0.28
|
|
|
$
|
0.09
|
|
Diluted
|
|
$
|
0.40
|
|
|
$
|
0.28
|
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
Basic
|
|
|
304
|
|
|
|
303
|
|
|
|
258
|
|
Diluted
|
|
|
309
|
|
|
|
308
|
|
|
|
261
|
|
|
|
|
|
|
|
|
Freescale Semiconductor, Ltd.
|
Reconciliation of Non-GAAP Measures
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(in millions, except per share amounts)
|
|
Oct 3,
2014
|
|
Jul 4,
2014
|
|
Sep 27,
2013
|
|
|
|
|
|
|
|
Adjusted gross margin
|
|
$
|
562
|
|
|
$
|
538
|
|
$
|
473
|
Acquisition accounting impact (a)
|
|
|
-
|
|
|
|
1
|
|
|
-
|
Gross margin
|
|
$
|
562
|
|
|
$
|
537
|
|
$
|
473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating earnings
|
|
$
|
243
|
|
|
$
|
208
|
|
$
|
174
|
Acquisition accounting impact (a)
|
|
|
4
|
|
|
|
5
|
|
|
3
|
Non-cash share-based compensation expense (b)
|
|
|
16
|
|
|
|
17
|
|
|
12
|
Reorganization of business and other (e)
|
|
|
8
|
|
|
|
6
|
|
|
2
|
Operating earnings
|
|
$
|
215
|
|
|
$
|
180
|
|
$
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net earnings
|
|
$
|
150
|
|
|
$
|
117
|
|
$
|
51
|
Acquisition accounting impact (a)
|
|
|
4
|
|
|
|
5
|
|
|
3
|
Non-cash share-based compensation expense (b)
|
|
|
16
|
|
|
|
17
|
|
|
12
|
Deferred and non-current tax impact (c)
|
|
|
(13
|
)
|
|
|
3
|
|
|
10
|
Loss on extinguishment or modification of long-term debt (d)
|
|
|
10
|
|
|
|
-
|
|
|
1
|
Reorganization of business and other (e)
|
|
|
8
|
|
|
|
6
|
|
|
2
|
Net earnings
|
|
$
|
125
|
|
|
$
|
86
|
|
$
|
23
|
|
|
|
|
|
|
|
Adjusted earnings per common share:
|
|
|
|
|
|
|
Basic
|
|
$
|
0.49
|
|
|
$
|
0.39
|
|
$
|
0.20
|
Diluted
|
|
$
|
0.49
|
|
|
$
|
0.38
|
|
$
|
0.20
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
Basic
|
|
|
304
|
|
|
|
303
|
|
|
258
|
Diluted
|
|
|
309
|
|
|
|
308
|
|
|
261
|
|
|
|
|
|
|
|
Freescale Semiconductor, Ltd.
|
Product Group Net Sales Information
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(in millions)
|
|
Oct 3,
2014
|
|
Jul 4,
2014
|
|
Sep 27,
2013
|
|
|
|
|
|
|
|
Microcontrollers (1)
|
|
$
|
250
|
|
$
|
246
|
|
$
|
230
|
Digital Networking (2)
|
|
|
281
|
|
|
291
|
|
|
238
|
Automotive MCU (3)
|
|
|
303
|
|
|
308
|
|
|
270
|
Analog & Sensors (4)
|
|
|
201
|
|
|
205
|
|
|
181
|
RF (5)
|
|
|
157
|
|
|
120
|
|
|
89
|
Other (6)
|
|
|
21
|
|
|
21
|
|
|
77
|
Total
|
|
$
|
1,213
|
|
$
|
1,191
|
|
$
|
1,085
|
(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 & 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)
|
|
Oct 3,
2014
|
|
Jul 4,
2014
|
|
Sep 27,
2013
|
ASSETS
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
737
|
|
|
$
|
744
|
|
|
$
|
700
|
|
Restricted cash for bond redemptions
|
|
|
-
|
|
|
|
-
|
|
|
|
782
|
|
Accounts receivable, net
|
|
|
605
|
|
|
|
583
|
|
|
|
426
|
|
Inventory, net
|
|
|
715
|
|
|
|
701
|
|
|
|
728
|
|
Other current assets
|
|
|
157
|
|
|
|
158
|
|
|
|
141
|
|
Total current assets
|
|
|
2,214
|
|
|
|
2,186
|
|
|
|
2,777
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
726
|
|
|
|
707
|
|
|
|
685
|
|
Intangible assets, net
|
|
|
54
|
|
|
|
59
|
|
|
|
56
|
|
Other assets, net
|
|
|
312
|
|
|
|
313
|
|
|
|
301
|
|
Total assets
|
|
$
|
3,306
|
|
|
$
|
3,265
|
|
|
$
|
3,819
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' DEFICIT
|
|
|
|
|
|
|
Current portion of long-term debt and capital lease obligations
|
|
$
|
35
|
|
|
$
|
35
|
|
|
$
|
753
|
|
Accounts payable
|
|
|
454
|
|
|
|
438
|
|
|
|
386
|
|
Accrued liabilities and other
|
|
|
392
|
|
|
|
379
|
|
|
|
399
|
|
Total current liabilities
|
|
|
881
|
|
|
|
852
|
|
|
|
1,538
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
5,643
|
|
|
|
5,750
|
|
|
|
6,375
|
|
Other liabilities
|
|
|
375
|
|
|
|
391
|
|
|
|
432
|
|
|
|
|
|
|
|
|
Shareholders' deficit
|
|
|
(3,593
|
)
|
|
|
(3,728
|
)
|
|
|
(4,526
|
)
|
Total liabilities and shareholders' deficit
|
|
$
|
3,306
|
|
|
$
|
3,265
|
|
|
$
|
3,819
|
|
|
|
|
|
|
|
|
Freescale Semiconductor, Ltd.
|
Cash Flow Summary
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(in millions)
|
|
Oct 3,
2014
|
|
Jul 4,
2014
|
|
Sep 27,
2013
|
|
|
|
|
|
|
|
Cash flows from operations
|
|
$
|
196
|
|
|
$
|
118
|
|
|
$
|
64
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
$
|
(81
|
)
|
|
$
|
(92
|
)
|
|
$
|
(61
|
)
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
$
|
(113
|
)
|
|
$
|
8
|
|
|
$
|
(89
|
)
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
$
|
(9
|
)
|
|
$
|
1
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
Freescale Semiconductor, Ltd.
|
EBITDA and Adjusted EBITDA Reconciliations
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
(in millions)
|
|
Oct 3,
2014
|
|
Jul 4,
2014
|
|
Sep 27,
2013
|
|
|
|
|
|
|
|
EBITDA excluding the effects of other items
|
|
$
|
304
|
|
|
$
|
266
|
|
$
|
236
|
Non-cash share-based compensation expense (b)
|
|
|
16
|
|
|
|
17
|
|
|
12
|
Loss on extinguishment or modification of long-term debt (d)
|
|
|
10
|
|
|
|
-
|
|
|
1
|
Reorganization of business and other (e)
|
|
|
8
|
|
|
|
6
|
|
|
2
|
Acquisition accounting impact (a)
|
|
|
-
|
|
|
|
1
|
|
|
-
|
EBITDA
|
|
|
270
|
|
|
|
242
|
|
|
221
|
Depreciation
|
|
|
44
|
|
|
|
42
|
|
|
45
|
Amortization*
|
|
|
22
|
|
|
|
21
|
|
|
20
|
Interest expense, net
|
|
|
81
|
|
|
|
82
|
|
|
118
|
Income tax (benefit) expense
|
|
|
(2
|
)
|
|
|
11
|
|
|
15
|
Net earnings
|
|
$
|
125
|
|
|
$
|
86
|
|
$
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months
Ended
Oct 3, 2014
|
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
70
|
|
|
|
|
|
Interest expense, net
|
|
|
384
|
|
|
|
|
|
Income tax expense
|
|
|
34
|
|
|
|
|
|
Depreciation and amortization expense*
|
|
|
256
|
|
|
|
|
|
Non-cash share-based compensation expense (b)
|
|
|
62
|
|
|
|
|
|
Loss on extinguishment or modification of long-term debt (d)
|
|
|
204
|
|
|
|
|
|
Reorganization of business and other (e)
|
|
|
39
|
|
|
|
|
|
Other terms (f)
|
|
|
10
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
1,059
|
|
|
|
|
|
|
|
|
|
|
|
|
*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) 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) Adjustments to reflect cash income tax expense.
|
|
(d) Reflects losses on extinguishments and modifications of our
long-term debt.
|
|
(e) Reflects charges related to our reorganization of business
programs and other items.
|
|
(f) 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, 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. 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 net
earnings per share as supplemental performance measures. We
believe adjusted net earnings and adjusted net earnings per share
are 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 and adjusted net 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. We compensate
for these limitations by relying primarily on our U.S. GAAP
results and using adjusted net earnings and adjusted net earnings
per share only supplementally. A reconciliation of adjusted net
earnings to net earnings, 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 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, 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, 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 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 and other
charges and other items that are included in net earnings. 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.
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