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Freescale Semiconductor Announces Third Quarter 2012 Results

(2) Networking & Multimedia Solutions include our processor portfolio based on Power Architecture™, StarCore® DSP and i.MX platforms. These technologies support Networking Systems, Digital Home Operation, Multimedia Applications and Radio Frequency products.

(3) Cellular includes baseband, RF transceivers, power management, software and full platform development for the wireless handset market.

(4) Other includes licensing and sales of intellectual property, sales of wafers to other semiconductor companies and other miscellaneous items.

 
Freescale Semiconductor, Ltd.
Condensed Consolidated Balance Sheets
(Unaudited)
                 
 

 

(in millions) Sept 28, June 29, Sept 30,
2012 2012 2011
 
ASSETS
Cash and cash equivalents $ 763 $ 881 $ 744
Accounts receivable, net 440 444 508
Inventory, net 810 820 799
Other current assets   182     192     275  
Total current assets 2,195 2,337 2,326
 
Property, plant and equipment, net 723 736 826
Intangible assets, net 77 82 128
Other assets, net   334     344     316  
Total assets $ 3,329   $ 3,499   $ 3,596  
 
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current portion of long-term debt and capital lease obligations $ 7 $ 6 $ 3
Accounts payable 371 369 405
Accrued liabilities and other   512     588     532  
Total current liabilities 890 963 940
 
Long-term debt 6,476 6,578 6,589
Other liabilities 452 456 555
 
Shareholders' deficit   (4,489 )   (4,498 )   (4,488 )
Total liabilities and shareholders' deficit $ 3,329   $ 3,499   $ 3,596  
 

                 
Freescale Semiconductor, Ltd.
Cash Flow Summary
(Unaudited)
 
 
Three months ended
(in millions) Sept 28, June 29, Sept 30,
2012 2012 2011
 
Cash flows from operations $ 16 $ 189 $ 25
 
Cash flows from investing activities $ (47 ) $ (57 ) $ (41 )
 
Cash flows from financing activities $ (91 ) $ (2 ) $ (35 )
 
Effect of exchange rate changes on cash and cash equivalents $ 4 $ (9 ) $ (10 )
 

 
Freescale Semiconductor, Ltd.
EBITDA and Adjusted EBITDA Reconciliations
(Unaudited)
             

Three months ended

(in millions) Sept 28, June 29, Sept 30,
2012 2012 2011
 
EBITDA excluding the effects of other items $ 186 $ 192 $ 271
Fair value adjustment on interest rate and commodity derivatives (c) 7 8 (3 )
Loss on extinguishment or modification of long-term debt, net (e) 3 - 55
Reorganization of business and other (f)   (3 )   20     (20 )
EBITDA 179 164 239
Depreciation 44 43 99
Amortization* 20 19 83
Interest expense, net 125 125 131
Income tax expense   14     11     14  
Net loss $ (24 ) $ (34 ) $ (88 )
 
 
 

Twelve months ended Sept 28, 2012

(in millions)
 
Net loss (73 )
Interest expense, net 516
Income tax expense 50
Depreciation and amortization expense* 339
Non-cash share-based compensation expense (b) 39
Fair value adjustment on interest rate and commodity derivatives (c) 17
Loss on extinguishment or modification of long-term debt, net (e) 31
Reorganization of business and other (f) (103 )
Cost savings (g) 83
Other terms (h)   23  
Adjusted EBITDA $ 922  
 
*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) Includes the effects of purchase price accounting relating to our acquisition by a consortium of investors in 2006 and our acquisition of SigmaTel, Inc. in 2008, including, as applicable, depreciation expense associated with the property, plant and equipment step up to fair value and amortization expense for acquired intangible assets related to developed technology and tradenames/trademarks.
 
(b) Reflects non-cash, share-based compensation expense under the provisions of ASC Topic 718, "Compensation - Stock Compensation.”
 
(c) 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.”
 
(d) Adjustments to reflect cash income tax expense.
 
(e) Reflects losses on extinguishments and modifications of our long-term debt, net.
 
(f) Reflects items related to our reorganization of business programs and other charges.
 
(g) 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.
 
(h) Reflects adjustments required by our debt instruments, including business optimization expenses, relocation expenses and other items.
 
 
Note 1
 
Adjusted gross margin and adjusted operating earnings (loss) represent gross margin and operating earnings (loss) adjusted for the following as necessary: incremental depreciation expense for property, plant and equipment fair value step-up and associated with reduction in lives of certain manufacturing assets, amortization of acquired intangible assets, and reorganization of businesses and other charges. Adjusted gross margin and adjusted operating earnings (loss) are not recognized terms under U.S. GAAP. Adjusted gross margin and adjusted operating earnings (loss) do not represent gross margin and operating earnings (loss), as those terms are defined under U.S. GAAP, and should not be considered as alternatives to gross margin or operating earnings (loss) as an indicator of our operating performance. We have included information concerning adjusted gross margin and adjusted operating earnings (loss) because we use such information when evaluating gross margin and operating earnings (loss) to better evaluate the underlying performance of the Company. Adjusted gross margin and adjusted operating earnings (loss) as presented herein are not necessarily comparable to similarly titled measures. A reconciliation of adjusted gross margin to gross margin and adjusted operating earnings (loss) to operating earnings (loss), the most directly comparable U.S. GAAP measures, 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 you should not consider it 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.




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