| [April 24, 2014] |
 |
Freescale Semiconductor Announces First Quarter 2014 Results
AUSTIN, Texas --(Business Wire)--
Freescale Semiconductor, Ltd. (NYSE:FSL) today announced financial
results for the first quarter ended April 4, 2014. Highlights include:
|
GAAP Results
|
|
|
Non-GAAP Results*
|
-
Net sales of $1.13 billion
|
|
|
-
Adjusted earnings per share of $0.27
|
"We continue to see solid progress on our initiatives to increase
revenue and improve gross margin," said Gregg Lowe, president and CEO.
"All five product groups generated revenue growth sequentially and year
over year. With a 15 percent year-over-year growth in revenue, the
company continues to make strides in gaining market share.
"Our results continue to benefit from margin expansion and deleveraging
efforts, as our sequential revenue increase of 4 percent drove an
adjusted earnings per share growth of 42 percent."
First Quarter Highlights
Net sales for the first quarter of 2014 were $1.13 billion, compared to
$1.08 billion in the fourth quarter of 2013 and $981 million in the
first quarter of 2013.
Operating earnings for the period were $155 million, compared to $145
million in the fourth quarter of 2013 and $104 million in the first
quarter of 2013. Operating earnings improved on a sequential and
year-over-year basis due to higher sales and improving gross margins,
partially offset by increased investments in new products and higher
incentive compensation.
Net loss for the first quarter was $23 million, or $0.08 per share,
compared to a net loss of $118 million, or $0.46 per share, in the
fourth quarter of 2013 and a net loss of $48 million, or $0.19 per share
in the first quarter of 2013. First quarter 2014 results included a $59
million loss associated with debt retirement and refinancing
transactions completed during the quarter, which will result in lower
interest expense in future quarters.
Adjusted operating earnings (defined in Note 1 to the Consolidated
Financial Information attached to this press release) for the three
months ended April 4, 2014 were $186 million, compared to earnings of
$174 million in the fourth quarter of 2013 and $117 million in the first
quarter of 2013.
Adjusted net earnings for the first quarter of 2014 were $77 million, or
$0.27 per share, compared to $50 million, or $0.19 per share, in the
fourth quarter of 2013 and a loss of $8 million, or $0.03 per share, in
the first quarter of 2013. Adjusted net earnings improved sequentially
and year over year due to improving sales and gross margin along with
lower interest expense associated with the company's capital structure
initiatives.
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 2014 were as
follows:
-
Microcontroller net sales were $223 million, compared to $220 million
in the fourth quarter of 2013 and $177 million in the first quarter of
last year. On a year-over-year basis, Microcontroller revenues
benefited from increased sales into distribution and higher sales of
applications processors into the automotive market.
-
Digital Networking net sales were $249 million, compared to $246
million in the fourth quarter of 2013 and $202 million in the first
quarter of last year. Year-over-year networking sales growth was broad
based across service provider, enterprise and general embedded
segments. Sequentially, the networking business benefited from higher
sales of service provider equipment, including wireless base stations
in China.
-
Automotive Microcontroller net sales were $304 million, compared to
$267 million in the fourth quarter of 2013 and $254 million in the
first quarter of last year. Automotive Microcontroller sales benefited
from growth in all key geographies and in distribution due to growth
in semiconductor content and higher automotive production levels.
-
Analog and Sensor net sales were $198 million, compared to $190
million in the fourth quarter of 2013 and $177 million in the first
quarter of last year. Analog and Sensor sales benefited on a
sequential and year-over-year basis from higher sales into the growing
worldwide automotive market.
-
RF net sales, which include sales of power amplifiers to the wireless
infrastructure market, were $113 million, compared to $96 million in
the fourth quarter of 2013 and $86 million in the first 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 $40 million, compared to $63 million in the
fourth quarter of 2013 and $85 million in the first quarter of last
year. Revenues declined primarily due to lower intellectual property
revenue along with 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 $56 million;
-
Cash and Cash Equivalents were $709 million and;
-
Adjusted EBITDA* for the latest twelve months ending April 4, 2014 was
$949 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.
**Reflects EBITDA excluding the effects of other items.
Second Quarter 2014 Outlook
For the second quarter of 2014, the company expects:
-
Net sales to be between $1.14 billion and $1.20 billion;
-
Gross margins to increase approximately 50 to 75 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 24, 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 and margins. 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 general economic and business conditions; our ability to
meet unscheduled or temporary increases in demand; 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; 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
"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. All other product or service names are the property
of their respective owners. © Freescale Semiconductor, Inc. 2014.
|
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|
|
|
|
|
|
|
Freescale Semiconductor, Ltd.
|
|
Condensed Consolidated Statements of Operations
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
(in millions, except per share amounts)
|
|
Apr 4,
2014
|
|
Dec 31,
2013
|
|
Mar 29,
2013
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
1,127
|
|
|
$
|
1,082
|
|
|
$
|
981
|
|
|
Cost of sales
|
|
|
622
|
|
|
|
607
|
|
|
|
583
|
|
|
Gross margin
|
|
|
505
|
|
|
|
475
|
|
|
|
398
|
|
|
Selling, general and administrative
|
|
|
126
|
|
|
|
118
|
|
|
|
111
|
|
|
Research and development
|
|
|
210
|
|
|
|
195
|
|
|
|
182
|
|
|
Amortization expense for acquired intangible assets
|
|
|
3
|
|
|
|
3
|
|
|
|
3
|
|
|
Reorganization of business and other
|
|
|
11
|
|
|
|
14
|
|
|
|
(2
|
)
|
|
Operating earnings
|
|
|
155
|
|
|
|
145
|
|
|
|
104
|
|
|
Loss on extinguishment or modification of long-term debt
|
|
|
(59
|
)
|
|
|
(135
|
)
|
|
|
(22
|
)
|
|
Other expense, net
|
|
|
(103
|
)
|
|
|
(119
|
)
|
|
|
(120
|
)
|
|
Loss before income taxes
|
|
|
(7
|
)
|
|
|
(109
|
)
|
|
|
(38
|
)
|
|
Income tax expense
|
|
|
16
|
|
|
|
9
|
|
|
|
10
|
|
|
Net loss
|
|
$
|
(23
|
)
|
|
$
|
(118
|
)
|
|
$
|
(48
|
)
|
|
|
|
|
|
|
|
|
|
Loss per common share:
|
|
|
|
|
|
|
|
Basic
|
|
|
($0.08
|
)
|
|
|
($0.46
|
)
|
|
|
($0.19
|
)
|
|
Diluted (a)
|
|
|
($0.08
|
)
|
|
|
($0.46
|
)
|
|
|
($0.19
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
|
|
280
|
|
|
|
258
|
|
|
|
252
|
|
|
Diluted
|
|
|
285
|
|
|
|
262
|
|
|
|
256
|
|
|
|
|
|
|
|
|
|
|
Freescale Semiconductor, Ltd.
|
|
Reconciliation of Non-GAAP Measures
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
(in millions, except per share amounts)
|
|
Apr 4,
2014
|
|
Dec 31,
2013
|
|
Mar 29,
2013
|
|
|
|
|
|
|
|
|
|
Adjusted operating earnings
|
|
$
|
186
|
|
|
$
|
174
|
|
|
$
|
117
|
|
|
Amortization expense for acquired intangible assets (b)
|
|
|
3
|
|
|
|
3
|
|
|
|
3
|
|
|
Non-cash share-based compensation expense (c)
|
|
|
17
|
|
|
|
12
|
|
|
|
12
|
|
|
Reorganization of business and other (g)
|
|
|
11
|
|
|
|
14
|
|
|
|
(2
|
)
|
|
Operating earnings
|
|
$
|
155
|
|
|
$
|
145
|
|
|
$
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net earnings (loss)
|
|
$
|
77
|
|
|
$
|
50
|
|
|
$
|
(8
|
)
|
|
Amortization expense for acquired intangible assets (b)
|
|
|
3
|
|
|
|
3
|
|
|
|
3
|
|
|
Non-cash share-based compensation expense (c)
|
|
|
17
|
|
|
|
12
|
|
|
|
12
|
|
|
Fair value adjustment on interest rate derivatives (d)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1
|
)
|
|
Deferred and non-current tax impact (e)
|
|
|
10
|
|
|
|
4
|
|
|
|
6
|
|
|
Loss on extinguishment or modification of long-term debt (f)
|
|
|
59
|
|
|
|
135
|
|
|
|
22
|
|
|
Reorganization of business and other (g)
|
|
|
11
|
|
|
|
14
|
|
|
|
(2
|
)
|
|
Net loss
|
|
$
|
(23
|
)
|
|
$
|
(118
|
)
|
|
$
|
(48
|
)
|
|
|
|
|
|
|
|
|
|
Adjusted earnings (loss) per common share:
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.28
|
|
|
$
|
0.19
|
|
|
|
($0.03
|
)
|
|
Diluted (a)
|
|
$
|
0.27
|
|
|
$
|
0.19
|
|
|
|
($0.03
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
|
|
280
|
|
|
|
258
|
|
|
|
252
|
|
|
Diluted
|
|
|
285
|
|
|
|
262
|
|
|
|
256
|
|
|
|
|
|
|
|
|
|
|
Freescale Semiconductor, Ltd.
|
|
Product Group Net Sales Information
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
(in millions)
|
|
Apr 4,
2014
|
|
Dec 31,
2013
|
|
Mar 29,
2013
|
|
|
|
|
|
|
|
|
|
Microcontrollers (1)
|
|
$
|
223
|
|
$
|
220
|
|
$
|
177
|
|
Digital Networking (2)
|
|
|
249
|
|
|
246
|
|
|
202
|
|
Automotive MCU (3)
|
|
|
304
|
|
|
267
|
|
|
254
|
|
Analog & Sensors (4)
|
|
|
198
|
|
|
190
|
|
|
177
|
|
RF (5)
|
|
|
113
|
|
|
96
|
|
|
86
|
|
Other (6)
|
|
|
40
|
|
|
63
|
|
|
85
|
|
Total
|
|
$
|
1,127
|
|
$
|
1,082
|
|
$
|
981
|
|
|
|
|
|
|
|
|
(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)
|
|
Apr 4,
2014
|
|
Dec 31,
2013
|
|
Mar 29,
2013
|
|
ASSETS
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
709
|
|
|
$
|
747
|
|
|
$
|
767
|
|
|
Accounts receivable, net
|
|
|
464
|
|
|
|
388
|
|
|
|
387
|
|
|
Inventory, net
|
|
|
724
|
|
|
|
733
|
|
|
|
764
|
|
|
Other current assets
|
|
|
147
|
|
|
|
127
|
|
|
|
158
|
|
|
Total current assets
|
|
|
2,044
|
|
|
|
1,995
|
|
|
|
2,076
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
693
|
|
|
|
681
|
|
|
|
692
|
|
|
Intangible assets, net
|
|
|
51
|
|
|
|
52
|
|
|
|
63
|
|
|
Other assets, net
|
|
|
312
|
|
|
|
319
|
|
|
|
308
|
|
|
Total assets
|
|
$
|
3,100
|
|
|
$
|
3,047
|
|
|
$
|
3,139
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
Current portion of long-term debt and capital lease obligations
|
|
$
|
35
|
|
|
$
|
93
|
|
|
$
|
28
|
|
|
Accounts payable
|
|
|
447
|
|
|
|
398
|
|
|
|
324
|
|
|
Accrued liabilities and other
|
|
|
318
|
|
|
|
371
|
|
|
|
515
|
|
|
Total current liabilities
|
|
|
800
|
|
|
|
862
|
|
|
|
867
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
5,758
|
|
|
|
6,386
|
|
|
|
6,361
|
|
|
Other liabilities
|
|
|
393
|
|
|
|
393
|
|
|
|
451
|
|
|
|
|
|
|
|
|
|
|
Shareholders' deficit
|
|
|
(3,851
|
)
|
|
|
(4,594
|
)
|
|
|
(4,540
|
)
|
|
Total liabilities and shareholders' deficit
|
|
$
|
3,100
|
|
|
$
|
3,047
|
|
|
$
|
3,139
|
|
|
|
|
|
|
|
|
|
|
Freescale Semiconductor, Ltd.
|
|
Cash Flow Summary
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
(in millions)
|
|
Apr 4,
2014
|
|
Dec 31,
2013
|
|
Mar 29,
2013
|
|
|
|
|
|
|
|
|
|
Cash flows from operations
|
|
$
|
26
|
|
|
$
|
118
|
|
|
$
|
70
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
$
|
(75
|
)
|
|
$
|
(58
|
)
|
|
$
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
$
|
10
|
|
|
$
|
(14
|
)
|
|
$
|
23
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
(4
|
)
|
|
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Freescale Semiconductor, Ltd.
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EBITDA and Adjusted EBITDA Reconciliations
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(Unaudited)
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Three Months Ended
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(in millions)
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Apr 4,
2014
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Dec 31,
2013
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Mar 29,
2013
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EBITDA excluding the effects of other items
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$
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244
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$
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236
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$
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178
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Non-cash share-based compensation expense (c)
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17
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12
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12
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Fair value adjustment on interest rate derivatives (d)
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-
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-
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(1
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)
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Loss on extinguishment or modification of long-term debt (f)
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59
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135
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22
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Reorganization of business and other (g)
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11
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14
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(2
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EBITDA
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157
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75
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147
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Depreciation
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43
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45
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45
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Amortization*
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19
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20
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19
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Interest expense, net
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102
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119
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121
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Income tax expense
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16
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9
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10
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Net loss
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$
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(23
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)
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$
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(118
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)
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$
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(48
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)
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Twelve Months
Ended
Apr 4, 2014
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(in millions)
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Net loss
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$
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(183
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)
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Interest expense, net
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464
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Income tax expense
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46
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Depreciation and amortization expense*
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257
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Non-cash share-based compensation expense (c)
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53
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Loss on extinguishment or modification of long-term debt (f)
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254
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Reorganization of business and other (g)
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37
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Cost savings (h)
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14
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Other terms (i)
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7
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Adjusted EBITDA
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$
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949
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*Excludes amortization of debt issuance costs, which are included in
interest expense, net.
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NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION
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Summary of Key Reconciling Items
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(a) No dilutive securities have been included in the diluted net
loss or adjusted net loss per share calculations in periods where a
net loss or adjusted net loss was incurred.
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(b) Reflects amortization expense for trademarks/tradenames due to
purchase price accounting relating to our acquisition by a
consortium of investors in 2006.
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(c) Reflects non-cash, share-based compensation expense under the
provisions of ASC Topic 718, "Compensation - Stock Compensation."
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(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."
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(e) Adjustments to reflect cash income tax expense.
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(f) Reflects losses on extinguishments and modifications of our
long-term debt.
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(g) Reflects charges (benefits) related to our reorganization of
business programs and other items.
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(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.
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(i) Reflects adjustments required by our debt instruments, including
business optimization expenses, relocation expenses and other items.
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Note 1
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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.
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Adjusted net earnings (loss) is net 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 loss, the most directly comparable U.S. GAAP performance
measure, has been included in the preceding tables.
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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 loss,
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 loss, the most directly comparable
U.S. GAAP measure, has been included in the preceding tables.
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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 loss adjusted for certain non-cash and other
items that are included in net 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 loss, 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 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 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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