Freescale Semiconductor Announces Second Quarter 2013 Results

Freescale Semiconductor Announces Second Quarter 2013 Results

AUSTIN, Texas--(BUSINESS WIRE)-- Freescale Semiconductor, Ltd. (NYS: FSL) today announced financial results for the second quarter ended June 28, 2013. Highlights include:

GAAP Results

         

Non-GAAP Results*

• Net sales of $1.04 billion • EBITDA of $212 million
• Gross margin of 42.5% • Adjusted earnings per share of $0.09
• Loss per share of $0.25
 

"Our overall financial results continued to improve both sequentially and year over year," said Gregg Lowe, president and CEO. "Revenues, operating earnings and adjusted earnings per share all continued to grow and while we are still early into implementing our new strategy, we do see some signs of good progress."


Second Quarter Highlights

Net sales for the second quarter of 2013 were $1.04 billion, compared to $981 million in the first quarter of 2013 and $1.03 billion in the second quarter of 2012.

Income from operations for the period was $125 million, compared to $104 million in the first quarter of 2013 and $112 million in the second quarter of 2012. Income from operations improved on a sequential basis due to higher sales and improved gross margins. On a year over year basis, income from operations increased primarily due to lower reorganization of business expense.

The net loss for the second quarter was $65 million, or $0.25 per share, compared to a loss of $48 million, or $0.19 per share, in the first quarter of 2013 and a loss of $34 million, or $0.14, in the second quarter of 2012. Second quarter 2013 results included a $59 million charge associated with a debt refinancing transaction completed in June 2013.

Adjusted operating earnings (defined in Note 1 to the Consolidated Financial Information attached to this press release) for the three months ended June 28, 2013 were $151 million, compared to earnings of $117 million in the first quarter of 2013 and $146 million in the second quarter of 2012.

Second quarter adjusted net income (defined in Note 1 to the Consolidated Financial Information attached to this press release) was $23 million, or $0.09 per share, compared to a loss of $8 million, or $0.03 per share, in the first quarter of 2013 and income of $17 million, or $0.07 per share, in the second quarter of 2012. Sequentially, adjusted net income benefitted from higher sales and improving gross margins. On a year over year basis, adjusted net income benefitted primarily from higher operating income.

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 second quarter of 2013 were as follows:

  • Microcontroller net sales were $199 million in the second quarter, compared to $177 million in the first quarter of 2013 and $169 million in the second quarter last year. Sequentially and year over year, sales benefitted from increased sales into distribution in Asia as well as higher sales of applications processors into the general embedded and automotive markets.
  • Digital Networking net sales were $229 million, compared to $202 million in the first quarter of 2013 and $220 million in the second quarter last year. Networking sales benefitted both sequentially and year over year from higher spending on current and next generation wireless networks and higher sales of products used in enterprise solutions.
  • Automotive Microcontroller net sales were $272 million, compared to $254 million in the first quarter of 2013 and $258 million in the second quarter last year. Automotive microcontrollers sales benefitted both sequentially and year over year from the positive vehicle production and sales trends in the U.S. and China.
  • Analog & Sensor net sales were $188 million, compared to $177 million in the first quarter of 2013 and $190 million in the second quarter last year. Analog and sensor net sales benefitted on a sequential basis from increases in global automotive production.
  • RF net sales, which includes sales of power amplifiers to the wireless infrastructure market, were $81 million, compared to $86 million in the first quarter of 2013 and $66 million in the second quarter last year. On a year over year basis, RF sales increased due to increased spending on 3G and 4G wireless networks, particularly in China.
  • Other net sales were $69 million, compared to $85 million in the first quarter of 2013 and $126 million in the second quarter last year. Both sequentially and year over year, other net sales declined due to lower sales into the wireless handset market and a decline in IP revenue.

Other Second Quarter 2013 Financial Information

  • Capital Expenditures were $40 million;
  • Cash and Cash Equivalents were $785 million and;
  • Adjusted EBITDA* for the latest twelve months ending June 28, 2013 was $802 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.

Third Quarter 2013 Outlook

For the third quarter of 2013, the company expects:

  • Net sales to be between $1.05 billion and $1.09 billion;
  • Gross margins to increase approximately 75 to 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 July 25, 2013. The company will offer a live webcast of the conference call over the Internet at www.freescale.com/investor.

Caution Regarding Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to our business strategy, goals and expectations concerning our 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 "Risk Factors" 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 (NYS: FSL) 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. 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) Jun 28, Mar 29, Jun 29,
  2013     2013     2012  
 
Net sales $ 1,038 $ 981 $ 1,029
Cost of sales   597     583     589  
Gross margin 441 398 440
Selling, general and administrative 115 111 116
Research and development 187 182 188
Amortization expense for acquired intangible assets 4 3 4
Reorganization of business and other   10     (2 )   20  
Operating earnings 125 104 112
Loss on extinguishment or modification of long-term debt, net (59 ) (22 ) -
Other expense, net   (125 )   (120 )   (135 )
Loss before income taxes (59 ) (38 ) (23 )
Income tax expense   6     10     11  
Net loss $ (65 ) $ (48 ) $ (34 )
 
Loss per common share:
Basic ($0.25 ) ($0.19 ) ($0.14 )

Diluted (a)

($0.25 ) ($0.19 ) ($0.14 )
 
Weighted average common shares outstanding:
Basic 255 252 248
Diluted 259 256 250

 
 
Freescale Semiconductor, Ltd.
Reconciliation of Non-GAAP Measures
(Unaudited)
       
Three Months Ended
(in millions, except per share amounts) Jun 28, Mar 29, Jun 29,
  2013     2013     2012  
 
 
Adjusted operating earnings $ 151 $ 117 $ 146
Amortization expense for acquired intangible assets (b) 4 3 4
Non-cash share-based compensation expense (c) 12 12 10
Reorganization of business and other (g)   10     (2 )   20  
Operating earnings $ 125   $ 104   $ 112  
 
 
Adjusted net earnings (loss) $ 23 $ (8 ) $ 17
Amortization expense for acquired intangible assets (b) 4 3 4
Non-cash share-based compensation expense (c) 12 12 10
Fair value adjustment on interest rate and commodity derivatives (d) - (1 ) 8
Deferred and non-current tax impact (e) 3 6 9
Loss on extinguishment or modification of long-term debt, net (f) 59 22 -
Reorganization of business and other (g)   10     (2 )   20  
Net loss $ (65 ) $ (48 ) $ (34 )
 
Adjusted net earnings (loss) per common share:
Basic $0.09 ($0.03 ) $0.07

Diluted (a)

$0.09 ($0.03 ) $0.07
 
Weighted average common shares outstanding:
Basic 255 252 248
Diluted 259 256 250

 
 
Freescale Semiconductor, Ltd.
Product Group Net Sales Information
(Unaudited)
       
(in millions) Three Months Ended
Jun 28, Mar 29, Jun 29,
2013 2013 2012
 
 
Microcontrollers (1) $ 199 $ 177 $ 169
Digital Networking (2) 229 202 220
Automotive MCU (3) 272 254 258
Analog & Sensors (4) 188 177 190
RF (5) 81 86 66
Other (6)   69   85   126
Total $ 1,038 $ 981 $ 1,029
(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.


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Freescale Semiconductor, Ltd.
Condensed Consolidated Balance Sheets
(Unaudited)
           
(in millions) Jun 28, Mar 29, Jun 29,
  2013     2013     2012  
ASSETS
Cash and cash equivalents $ 785 $ 767 $ 881
Accounts receivable, net 399 387 444
Inventory, net 737 764 820
Other current assets   164     158     192  
Total current assets 2,085 2,076 2,337
 
Property, plant and equipment, net 686 692 736
Intangible assets, net 60 63 82
Other assets, net   298     308     344  
Total assets $ 3,129   $ 3,139   $ 3,499  
 
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current portion of long-term debt and capital lease obligations $ 28 $ 28 $ 6
Accounts payable 372 324 369
Accrued liabilities and other   450     515     588  
Total current liabilities
TWX -0.20 85.58

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