NXP Semiconductors N.V.

Form 10-Q

For the Fiscal Quarter Ended ~~September 29, 2019~~October 2, 2022

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

($ in millions, unless otherwise stated)


	For the three months ended		For the nine months ended
	October 2, 2022	October 3, 2021	October 2, 2022	October 3, 2021
Revenue	3,445	2,861	9,893	8,024
Cost of revenue	(1,478)	(1,278)	(4,267)	(3,664)
Gross profit	1,967	1,583	5,626	4,360
Research and development	(548)	(492)	(1,608)	(1,429)
Selling, general and administrative	(289)	(243)	(805)	(699)
Amortization of acquisition-related intangible assets	(131)	(137)	(400)	(456)
Total operating expenses	(968)	(872)	(2,813)	(2,584)
Other income (expense)	2	—	4	—
Operating income (loss)	1,001	711	2,817	1,776
Financial income (expense):
Extinguishment of debt	—	—	(18)	—
Other financial income (expense)	(98)	(93)	(313)	(280)
Income (loss) before income taxes	903	618	2,486	1,496
Benefit (provision) for income taxes	(149)	(95)	(392)	(200)
Results relating to equity-accounted investees	(4)	3	5	—
Net income (loss)	750	526	2,099	1,296
Less: Net income (loss) attributable to non-controlling interests	12	7	34	27
Net income (loss) attributable to stockholders	738	519	2,065	1,269

Earnings per share data:
Net income (loss) per common share attributable to stockholders in $
Basic	2.81	1.95	7.86	4.66
Diluted	2.79	1.91	7.80	4.57

Weighted average number of shares of common stock outstanding during the period (in thousands):
Basic	262,180	266,557	262,620	272,314
Diluted	264,705	271,359	264,838	277,886

For the three months ended For the nine months ended
September 29,
2019
September 30,
2018
September 29,
2019
September 30,
2018
Revenue 2,265
2,445
6,576
7,004
Cost of revenue (1,079 ) (1,189 ) (3,167 ) (3,396 )
Gross profit 1,186
1,256
3,409
3,608
Research and development (396 ) (433 ) (1,219 ) (1,297 )
Selling, general and administrative (221 ) (252 ) (699 ) (742 )
Amortization of acquisition-related intangible assets (358 ) (362 ) (1,070 ) (1,085 )
Total operating expenses (975 ) (1,047 ) (2,988 ) (3,124 )
Other income (expense) 22
2,002
23
2,002
Operating income (loss) 233
2,211
444
2,486
Financial income (expense):

Extinguishment of debt (1 ) —
(11 ) (26 )
Other financial income (expense) (84 ) (119 ) (246 ) (232 )
Income (loss) before income taxes 148
2,092
187
2,228
Benefit (provision) for income taxes (28 ) (311 ) (40 ) (317 )
Results relating to equity-accounted investees (1 ) 52
2
58
Net income (loss) 119
1,833
149
1,969
Less: Net income (loss) attributable to non-controlling interests 10
13
20
37
Net income (loss) attributable to stockholders 109
1,820
129
1,932

Earnings per share data:
Net income (loss) per common share attributable to stockholders in $
Basic 0.39
5.64
0.46
5.74
Diluted 0.38
5.60
0.45
5.69

Weighted average number of shares of common stock outstanding during the period (in thousands):
Basic 279,074
322,533
282,496
336,771
Diluted 283,518
325,267
285,819
339,791

See accompanying notes to the Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

($ in millions, unless otherwise stated)


	For the three months ended		For the nine months ended
	October 2, 2022	October 3, 2021	October 2, 2022	October 3, 2021
Net income (loss)	750	526	2,099	1,296
Other comprehensive income (loss), net of tax:
Change in fair value cash flow hedges	(13)	(2)	(25)	(16)
Change in foreign currency translation adjustment	(78)	(23)	(165)	(56)
Change in net actuarial gain (loss)	1	—	—	—

Total other comprehensive income (loss)	(90)	(25)	(190)	(72)
Total comprehensive income (loss)	660	501	1,909	1,224
Less: Comprehensive income (loss) attributable to non-controlling interests	12	7	34	27
Total comprehensive income (loss) attributable to stockholders	648	494	1,875	1,197

For the three months ended For the nine months ended
September 29,
2019
September 30,
2018
September 29,
2019
September 30,
2018
Net income (loss) 119
1,833
149
1,969
Other comprehensive income (loss), net of tax:
Change in fair value cash flow hedges (9 ) —
(4 ) (16 )
Change in foreign currency translation adjustment (41 ) 8
(47 ) (33 )
Change in net actuarial gain (loss) (1 ) (2 ) (5 ) (5 )
Change in unrealized gains/losses available-for-sale securities —
—
—
3
Total other comprehensive income (loss) (51 ) 6
(56 ) (51 )
Total comprehensive income (loss) 68
1,839
93
1,918
Less: Comprehensive income (loss) attributable to non-controlling interests 10
13
20
37
Total comprehensive income (loss) attributable to stockholders 58
1,826
73
1,881

See accompanying notes to the Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

($ in millions, unless otherwise stated)


		October 2, 2022	December 31, 2021
ASSETS
Current assets:
	Cash and cash equivalents	3,759	2,830
	Accounts receivable, net	1,012	923

	Inventories, net	1,581	1,189
	Other current assets	351	286
Total current assets		6,703	5,228
Non-current assets:
	Other non-current assets	1,940	1,346
	Property, plant and equipment, net of accumulated depreciation of $5,055 and $4,676	2,971	2,635
	Identified intangible assets, net of accumulated amortization of $2,729 and $3,021	1,417	1,694
	Goodwill	9,909	9,961
	Total non-current assets	16,237	15,636
Total assets		22,940	20,864

LIABILITIES AND EQUITY
Current liabilities:
	Accounts payable	1,534	1,252

	Restructuring liabilities-current	8	25
	Other current liabilities	1,677	1,175

Total current liabilities		3,219	2,452
Non-current liabilities:
	Long-term debt	11,162	10,572
	Restructuring liabilities	12	12
	Deferred tax liabilities	39	57
	Other non-current liabilities	1,123	1,001
Total non-current liabilities		12,336	11,642
Total liabilities		15,555	14,094
Equity:
	Non-controlling interests	279	242

	Stockholders’ equity:
	Common stock, par value €0.20 per share:	56	56
	Capital in excess of par value	13,996	13,727
	Treasury shares, at cost:
	14,130,857 shares (2021: 9,569,359 shares)	(2,765)	(1,932)
	Accumulated other comprehensive income (loss)	(142)	48
	Accumulated deficit	(4,039)	(5,371)
	Total stockholders’ equity	7,106	6,528
Total equity		7,385	6,770
Total liabilities and equity		22,940	20,864

September 29,
2019
December 31,
2018
ASSETS
Current assets:
Cash and cash equivalents 3,537
2,789
Accounts receivable, net 786
792
Assets held for sale 61
—
Inventories, net 1,134
1,279
Other current assets 426
365
Total current assets 5,944
5,225
Non-current assets:
Other non-current assets 712
545
Property, plant and equipment, net of accumulated depreciation of $3,632 and $3,299 2,401
2,436
Identified intangible assets, net of accumulated amortization of $5,729 and $4,716 3,406
4,467
Goodwill 8,791
8,857
Total non-current assets 15,310
16,305
Total assets 21,254
21,530

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable 862
999
Restructuring liabilities-current 41
60
Other current liabilities 1,081
1,219
Short-term debt 1,142
1,107
Total current liabilities 3,126
3,385
Non-current liabilities:
Long-term debt 7,363
6,247
Restructuring liabilities —
5
Deferred tax liabilities 285
450
Other non-current liabilities 885
753
Total non-current liabilities 8,533
7,455
Total liabilities 11,659
10,840
Equity:
Non-controlling interests 205
185

Stockholders’ equity:
Common stock, par value €0.20 per share: 67
67
Capital in excess of par value 15,722
15,460
Treasury shares, at cost:
49,224,336 shares (2018: 35,913,021 shares) (4,429 ) (3,238 )
Accumulated other comprehensive income (loss) 67
123
Accumulated deficit (2,037 ) (1,907 )
Total stockholders’ equity 9,390
10,505
Total equity 9,595
10,690
Total liabilities and equity 21,254
21,530

See accompanying notes to the Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

($ in millions, unless otherwise stated)


	For the nine months ended
	October 2, 2022	October 3, 2021
Cash flows from operating activities:
Net income (loss)	2,099	1,296
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization	948	952
Share-based compensation	267	265
Amortization of discount (premium) on debt, net	2	1
Amortization of debt issuance costs	5	5
Net (gain) loss on sale of assets	(2)	—
(Gain) loss on equity security, net	6	(2)
(Gain) loss on extinguishment of debt	18	—
Results relating to equity-accounted investees	(5)	—
Deferred tax expense (benefit)	(196)	6
Changes in operating assets and liabilities:
(Increase) decrease in receivables and other current assets	(165)	(214)
(Increase) decrease in inventories	(392)	(143)
Increase (decrease) in accounts payable and other liabilities	545	242
Decrease (increase) in other non-current assets	(325)	(106)
Exchange differences	(2)	(3)
Other items	16	(7)
Net cash provided by (used for) operating activities	2,819	2,292
Cash flows from investing activities:
Purchase of identified intangible assets	(122)	(99)
Capital expenditures on property, plant and equipment	(830)	(501)
Purchase of equipment leased to others	(5)	(14)
Insurance recoveries received for equipment damage	—	7
Proceeds from disposals of property, plant and equipment	2	1
Purchase of interests in businesses, net of cash acquired	(27)	(17)

Purchase of investments	(9)	(6)
Proceeds from sale of investments	12	8
Proceeds from return of equity investment	2	3
Net cash provided by (used for) investing activities	(977)	(618)
Cash flows from financing activities:
Repurchase of long-term debt	(917)	—

Proceeds from the issuance of long-term debt	1,496	2,000
Cash paid for debt issuance costs	(13)	(22)


Dividends paid to common stockholders	(594)	(412)
Proceeds from issuance of common stock through stock plans	58	60
Purchase of treasury shares and restricted stock unit withholdings	(920)	(3,265)
Other, net	(1)	(1)
Net cash provided by (used for) financing activities	(891)	(1,640)
Effect of changes in exchange rates on cash positions	(22)	(6)
Increase (decrease) in cash and cash equivalents	929	28
Cash and cash equivalents at beginning of period	2,830	2,275
Cash and cash equivalents at end of period	3,759	2,303


Supplemental disclosures to the condensed consolidated cash flows
Net cash paid during the period for:
Interest	217	216
Income taxes, net of refunds	432	250
Net gain (loss) on sale of assets:
Cash proceeds from the sale of assets	2	—
Book value of these assets	—	—
Non-cash investing activities:
Non-cash capital expenditures	176	224

For the nine months ended
September 29,
2019
September 30,
2018
Cash flows from operating activities:
Net income (loss) 149
1,969
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization 1,525
1,484
Share-based compensation 257
221
Amortization of discount on debt 34
31
Amortization of debt issuance costs 8
7
Net (gain) loss on sale of assets (20 ) —
(Gain) loss on extinguishment of debt 11
26
Results relating to equity-accounted investees (2 ) (53 )
Deferred tax expense (benefit) (126 ) (159 )
Changes in operating assets and liabilities:
(Increase) decrease in receivables and other current assets (28 ) 136
(Increase) decrease in inventories 135
(70 )
Increase (decrease) in accounts payable and other liabilities (425 ) 59
Decrease (increase) in other non-current assets 36
(26 )
Exchange differences 6
1
Other items (1 ) 12
Net cash provided by (used for) operating activities 1,559
3,638
Cash flows from investing activities:
Purchase of identified intangible assets (72 ) (46 )
Capital expenditures on property, plant and equipment (388 ) (441 )
Proceeds from disposals of property, plant and equipment 23
1
Purchase of interests in businesses, net of cash acquired —
(18 )
Proceeds from sale of interests in businesses 37
159
Proceeds from return of equity investment —
4
Purchase of available-for-sale securities (19 ) (7 )
Proceeds from the sale of securities 1
—
Net cash provided by (used for) investing activities (418 ) (348 )
Cash flows from financing activities:
Proceeds from Bridge Loan —
1,000
Repurchase of long-term debt (600 ) (1,273 )
Principal payments on long-term debt —
(1 )
Proceeds from the issuance of long-term debt 1,750
—
Cash paid for debt issuance costs (24 ) (11 )
Cash paid for Notes hedge derivatives (1 ) —
Dividends paid to non-controlling interests —
(54 )
Dividends paid to common stockholders (214 ) —
Proceeds from issuance of common stock through stock plans 70
36
Purchase of treasury shares and restricted stock unit withholdings (1,369 ) (4,582 )
Net cash provided by (used for) financing activities (388 ) (4,885 )
Effect of changes in exchange rates on cash positions (5 ) (8 )
Increase (decrease) in cash and cash equivalents 748
(1,603 )
Cash and cash equivalents at beginning of period 2,789
3,547
Cash and cash equivalents at end of period 3,537
1,944

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)~~

~~($ in millions, unless otherwise stated)~~

For the nine months ended
September 29,
2019
September 30,
2018
Supplemental disclosures to the condensed consolidated cash flows
Net cash paid during the period for:
Interest 147
103
Income taxes 334
127
Non-cash adjustment related to the adoption of ASC 606:
Receivables and other current assets —
(36 )
Inventories —
22

~~See accompanying notes to the Condensed Consolidated Financial Statements~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)~~

~~($ in millions, unless otherwise stated)~~

Outstanding
number of
shares (in
thousands)

Common
stock

Capital in
excess of
par value

Treasury
shares at
cost

Accumulated
other
comprehensive
income (loss)

Accumulated
deficit

Total
stock-
holders’
equity

Non-
controlling
interests

Total
equity

Balance as of December 31, 2018 292,790
67
15,460
(3,238 ) 123
(1,907 ) 10,505
185
10,690
Net income (loss)

(21 ) (21 ) 5
(16 )
Other comprehensive income

(14 )
(14 )
(14 )
Share-based compensation plans

87

87

87
Shares issued pursuant to stock awards 867

83

(51 ) 32

32
Treasury shares and restricted stock unit withholdings (8,482 )

(715 )

(715 )
(715 )
Shareholder tax on repurchased shares

(62 ) (62 )
(62 )
Dividends common stock ($0.25 per share)

(71 ) (71 )
(71 )
Balance as of March 31, 2019 285,175
67
15,547
(3,870 ) 109
(2,112 ) 9,741
190
9,931
Net income (loss)

41
41
5
46
Other comprehensive income

9

9

9
Share-based compensation plans

88

88

88
Shares issued pursuant to stock awards 194

18

(12 ) 6

6
Treasury shares and restricted stock unit withholdings (6,616 )

(645 )

(645 )
(645 )
Shareholder tax on repurchased shares

155
155

155
Dividends common stock ($0.25 per share)

(70 ) (70 )
(70 )
Balance as of June 30, 2019 278,753
67
15,635
(4,497 ) 118
(1,998 ) 9,325
195
9,520
Net income (loss)

109
109
10
119
Other comprehensive income

(51 )
(51 )
(51 )
Share-based compensation plans

87

87

87
Shares issued pursuant to stock awards 815

77

(45 ) 32

32
Treasury shares and restricted stock unit withholdings (89 )

(9 )

(9 )
(9 )
Shareholder tax on repurchased shares

2
2

2
Dividends common stock ($0.375 per share)

(105 ) (105 )
(105 )
Balance as of September 29, 2019 279,479
67
15,722
(4,429 ) 67
(2,037 ) 9,390
205
9,595

~~CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)~~

~~($ in millions, unless otherwise stated)~~

Outstanding
number of
shares (in
thousands)

Common
stock

Capital in
excess of
par value

Treasury
shares at
cost

Accumulated
other
comprehensive
income (loss)

Accumulated
deficit

Total
stock-
holders’
equity

Non-
controlling
interests

Total
equity

Balance as of December 31, 2017 342,924
71
15,960
(342 ) 177
(2,339 ) 13,527
189
13,716
Net income (loss)

58
58
12
70
Other comprehensive income

32

32

32
Share-based compensation plans

68

68

68
Shares issued pursuant to stock awards 1,320

139

(119 ) 20

20
Treasury shares and restricted stock unit withholdings (251 )

(30 )

(30 )
(30 )
Cumulative effect adjustments

3
11
14

14
Balance as of April 1, 2018 343,993
71
16,028
(233 ) 212
(2,389 ) 13,689
201
13,890
Net income (loss)

54
54
12
66
Other comprehensive income

(92 )
(92 )
(92 )
Share-based compensation plans

71

71

71
Shares issued pursuant to stock awards 369

43

(33 ) 10

10
Treasury shares and restricted stock unit withholdings (25 )

(2 )

(2 )
(2 )
Dividends non-controlling interests

(54 ) (54 )
Balance as of July 1, 2018 344,337
71
16,099
(192 ) 120
(2,368 ) 13,730
159
13,889
Net income (loss)

1,820
1,820
13
1,833
Other comprehensive income

6

6

6
Share-based compensation plans

82

82

82
Shares issued pursuant to stock awards 209

24

(18 ) 6

6
Treasury shares and restricted stock unit withholdings (49,044 )

(4,581 )

(4,581 )
(4,581 )
Tax on repurchased shares

(353 ) (353 )
(353 )
Dividends common stock ($0.25 per share)

(74 ) (74 )
(74 )
Cumulative effect adjustments

(3 ) (3 )
(3 )
Balance as of September 30, 2018 295,502
71
16,181
(4,749 ) 126
(996 ) 10,633
172
10,805

See accompanying notes to the Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)

($ in millions, unless otherwise stated)


	Outstanding number of shares (in thousands)	Common stock	Capital in excess of par value	Treasury shares at cost	Accumulated other comprehensive income (loss)	Accumulated deficit	Total stock- holders’ equity	Non- controlling interests	Total equity
Balance as of December 31, 2021	264,950	56	13,727	(1,932)	48	(5,371)	6,528	242	6,770
Net income (loss)						657	657	9	666
Other comprehensive income					(22)		(22)		(22)
Share-based compensation plans			92				92		92
Shares issued pursuant to stock awards	256			51		(23)	28		28
Treasury shares repurchased and retired	(2,653)			(552)			(552)		(552)
Dividends common stock ($0.845 per share)						(222)	(222)		(222)
Balance as of April 3, 2022	262,553	56	13,819	(2,433)	26	(4,959)	6,509	251	6,760
Net income (loss)						670	670	13	683
Other comprehensive income					(78)		(78)		(78)
Share-based compensation plans			85				85		85
Shares issued pursuant to stock awards	57			11		(11)	—		—
Treasury shares repurchased and retired	(15)			(2)			(2)		(2)

Dividends common stock ($0.845 per share)						(222)	(222)		(222)
Balance as of July 3, 2022	262,595	56	13,904	(2,424)	(52)	(4,522)	6,962	264	7,226
Net income (loss)						738	738	12	750
Other comprehensive income					(90)		(90)		(90)
Share-based compensation plans			92				92		92
Shares issued pursuant to stock awards	295			60		(30)	30		30
Treasury shares and restricted stock unit withholdings	(2,501)			(401)			(401)		(401)
Change in participation						(3)	(3)	3	—
Dividends common stock ($0.845 per share)						(222)	(222)		(222)
Balance as of October 2, 2022	260,389	56	13,996	(2,765)	(142)	(4,039)	7,106	279	7,385

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)

($ in millions, unless otherwise stated)


	Outstanding number of shares (in thousands)	Common stock	Capital in excess of par value	Treasury shares at cost	Accumulated other comprehensive income (loss)	Accumulated deficit	Total stock- holders’ equity	Non- controlling interests	Total equity
Balance as of December 31, 2020	280,475	59	14,133	(1,037)	117	(4,328)	8,944	207	9,151
Net income (loss)						353	353	11	364
Other comprehensive income					(56)		(56)		(56)
Share-based compensation plans			91				91		91
Shares issued pursuant to stock awards	361			37		(6)	31		31
Treasury shares repurchased and retired	(5,087)			(905)			(905)		(905)
Dividends common stock ($0.5625 per share)						(155)	(155)		(155)
Balance as of April 4, 2021	275,749	59	14,224	(1,905)	61	(4,136)	8,303	218	8,521
Net income (loss)						397	397	9	406
Other comprehensive income					9		9		9
Share-based compensation plans			88				88		88
Shares issued pursuant to stock awards	64			6		(6)	—		—
Treasury shares repurchased and retired	(6,103)			(1,203)			(1,203)		(1,203)

Dividends common stock ($0.5625 per share)						(152)	(152)		(152)
Balance as of July 4, 2021	269,710	59	14,312	(3,102)	70	(3,897)	7,442	227	7,669
Net income (loss)						519	519	7	526
Other comprehensive income					(25)		(25)		(25)
Share-based compensation plans			80				80		80
Shares issued pursuant to stock awards	2,430			231		(202)	29		29
Treasury shares and restricted stock unit withholdings	(5,800)			(1,157)			(1,157)		(1,157)
Dividends common stock ($0.5625 per share)						(150)	(150)		(150)
Balance as of October 3, 2021	266,340	59	14,392	(4,028)	45	(3,730)	6,738	234	6,972

See accompanying notes to the Condensed Consolidated Financial Statements

NXP SEMICONDUCTORS N.V.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

All amounts in millions of $ unless otherwise stated

1 Basis of Presentation and Overview

We prepared our interim condensed consolidated financial statements that accompany these notes in conformity with U.S. generally accepted accounting principles, consistent in all material respects with those applied in our Annual Report on Form ~~20‑F~~10-K for the year ended December 31, ~~2018.~~2021.

We have made estimates and judgments affecting the amounts reported in our condensed consolidated financial statements and the accompanying notes. The actual results that we experience may differ materially from our estimates. The interim financial information is unaudited, but reflects all normal adjustments that are, in our opinion, necessary to provide a fair statement of results for the interim periods presented. This interim information should be read in conjunction with the consolidated financial statements in our Annual Report on Form ~~20-F~~10-K for the year ended December 31, ~~2018.~~2021.

Prior to January 1, 2019, HPMS was our sole reportable segment. Corporate and Other represented the remaining portion to reconcile to the condensed consolidated financial statements. Effective January 1, 2019, NXP removed the reference to HPMS in its organizational structure in acknowledgment of the one reportable segment representing the entity as a whole.

On May 29, 2019, we entered into a definitive agreement with Marvell Technology Group Ltd. ("Marvell") under which NXP will acquire Marvell’s Wireless WiFi Connectivity Business Unit, Bluetooth technology portfolio and related assets, for $1.76 billion in cash. Subject to customary closing conditions, including regulatory approvals, the transaction is expected to close by the first quarter of 2020 even though there could be a possibility for an accelerated closing timeline.

2 Significant Accounting Policies and Recent Accounting Pronouncements

Significant Accounting Policies

~~Except for the changes below, no material changes have been made to the Company's~~For a discussion of our significant accounting policies ~~disclosed in Note 2 Significant~~see, “Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – “Significant Accounting ~~Policies in~~Policies” of our Annual Report on Form ~~20-F~~10-K for the year ended December 31, ~~2018. The~~2021. There have been no changes to our significant accounting ~~policy information below is to aid in~~policies since our Annual Report on Form 10-K for the ~~understanding of the financial information disclosed.~~year ended December 31, 2021.

New accounting standards not yet adopted

In ~~February 2016,~~September 2022, the FASB issued ASU ~~2016-02, Leases (Topic 842), followed~~2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations. ASU 2022-04, which require that a buyer in ~~July 2018 by ASU 2018-10, Codification Improvements~~a supplier finance program to ~~Topic 842 Leases, and ASU 2018-11, Leases (Topic 842): Targeted Improvements. Under~~disclose sufficient information about the new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. As a result of this adoption and the required disclosures, the Company revised its accounting policy for leases as stated below.

The new standard became effective for us on January 1, 2019. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. See also Note 10, Leases.

~~Leases~~

~~As of January 1, 2019, our impact resulting from operating leases is as follows:~~

~~we have recognized right-of-use (ROU) assets (within other non-current assets) and lease liabilities of $188 million;~~

~~the short-term portion of the lease liabilities of $53 million is classified in the condensed consolidated balance sheet in other current liabilities; and~~

~~the long-term portion of the lease liabilities of $135 million is classified in the condensed consolidated balance sheet in other non-current liabilities.~~

We elected to adopt the package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs, along with the practical expedient to use hindsight when determining the lease term.

We determine if an arrangement is a lease at inception of the arrangement. Once it is determined that an arrangement is, or contains, a lease, that determination should only be reassessed if the legal arrangement is modified. Changes to assumptions such as market-based factors do not trigger a reassessment. Determining whether a contract contains a lease requires judgement. In general, arrangements are considered to be a lease when all of the following apply:

~~it conveys the right to control the use of an identified asset for a period of time in exchange for consideration;~~

~~we have substantially all economic benefits from the use of the asset; and~~

~~we can direct the use of the identified asset.~~

The terms of a lease arrangement determine how a lease is classified and the resulting income statement recognition. When the terms of a lease effectively transfer control of the underlying asset, the lease represents an in substance financed purchase (sale) of an asset and the lease is classified as a finance lease by the lessee and a sales-type lease by the lessor. When a lease does not effectively transfer control of the underlying asset to the lessee, but the lessor obtains a guarantee for the value of the asset from a third party, the lessor would classify a lease as a direct financing lease. All other leases are classified as operating leases.

~~With the exception of two instances (with a combined value of approximately $30 million), the Company’s lease arrangements were all operating leases.~~

Lease assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at January 1, 2019 or commencement date, if later, in determining the present value of future payments. The lease ROU asset includes any lease payment made and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease which are included in the measurement of the ROU assets and lease liabilities when it is reasonably certain that we will exercise that option.

For operating leases the lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. For finance leases each lease payment is allocated between the liability and finance cost. The finance cost is charged to the condensed consolidated statement of operations over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The finance lease asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

We have lease agreements with lease and non-lease components. Except for gas and chemical contracts, NXP did not make the election to treat the lease and non-lease components as a single component, and considers the non-lease components as a separate unit of account.

~~Accounting standards adopted in 2019~~

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvement to Accounting for Hedging Activities. ASU 2017-12 simplifies certain aspects of hedge accounting and improves disclosures of hedging arrangements through the elimination of the requirement to separately measure and report hedge ineffectiveness. The ASU generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. Entities must apply the amendments to cash flow and net investment hedge relationships that exist on the date of adoption using a modified retrospective approach. The presentation and disclosure requirements must be applied prospectively. ASU 2017-12 became effective for us on January 1, 2019. The adoption of this guidance did not have a material impact on our financial position or results of operations.

~~Recently issued accounting standards~~

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. Instead, the one step quantitative impairment test calculates goodwill impairment as the excess of the carrying value of a reporting unit over its fair value, up to the carrying value of the goodwill. ASU 2017-04program, is effective for ~~annual or any interim goodwill impairment tests in~~ fiscal years beginning after December 15, ~~2019,~~2022, with early adoption permitted. The ~~ASU should be applied~~Company is currently evaluating the implications of adoption on ~~a prospective basis. The Company does not expect~~our Consolidated Financial Statements.

Accounting standards recently adopted

No new accounting pronouncements were issued or became effective in the ~~adoption of this guidance~~period that had, or are expected to have, a material impact on our ~~financial position or results of operations.~~Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 removes certain disclosure requirements, including the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. ASU 2018-13 also adds disclosure requirements, including changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements, and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2019, with early adoption permitted. The amendments on changes in unrealized gains and losses, and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company does not expect the adoption of this guidance to have a material impact on our financial statement disclosures.

In August 2018, the FASB issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans. ASU 2018-14 removes disclosures that no longer are considered cost beneficial, clarifies the specific requirements of disclosures, and adds disclosure requirements identified as relevant. ASU 2018-14 should be applied on a retrospective basis to all periods presented and is effective for annual reporting periods beginning after December 15, 2020, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on our financial statement disclosures.

In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 requires a customer in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. Therefore, a customer in a hosting arrangement that is a service contract determines which project stage an implementation activity relates to. Costs for implementation activities in the application development stage are capitalized depending on the nature of the costs, while costs incurred during the preliminary project and post-implementation stages are expensed as the activities are performed. ASU 2018-15 also requires the customer to expense the capitalized implementation costs over the term of the hosting arrangement, and to apply the existing impairment guidance in Subtopic 350-40 to the capitalized implementation costs as if the costs were long-lived assets. ASU 2018-15 can be applied either retrospectively or prospectively and is effective for annual reporting periods beginning after December 15, 2019, and interim periods therein, with early adoption permitted. The Company does not expect the adoption of this guidance to have a material impact on our financial position or results of operations.

3 Acquisitions and Divestments

2022

On July 19, 2022, we acquired PL Sense for a total consideration of $22.1 million, net of closing adjustments. There were 0no material ~~acquisitions~~divestments during the first nine months of ~~2019. On March 27, 2019, we sold our remaining equity interest in WeEn, receiving net cash proceeds of $37 million.~~2022.

There were 0 material acquisitions during 2018. On July 10, 2018, NXP completed the sale of its 40% equity interest in Suzhou ASEN Semiconductors Co., Ltd. to J&R Holding Limited, receiving $127 million in cash proceeds. The net gain realized on the sale of $51 million is included in the statement of operations in the line item "Results relating to equity-accounted investees". In June 2018, NXP completed the sale of 24% of its equity interest in WeEn to Tianjin Ruixin Semiconductor Industry Investment Centre LLP, receiving $32 million in cash proceeds. At December 31, 2018, due to the intended sale of the remaining interest in WeEn, NXP transferred the remaining holding to other current assets.

~~4 Assets Held for Sale~~

In the second quarter of 2019, NXP management, in reviewing its portfolio, concluded that certain activities (Voice and Audio Solutions (VAS)) no longer fit the NXP strategic portfolio and took actions that resulted in the assets meeting the held for sale criteria. On August 16, 2019, NXP reached a definitive agreement with Shenzhen Goodix Technology Co., Ltd. from China, under which it will acquire all of these assets for an amount of $165 million.

~~The following table summarizes the carrying value of these assets held for sale:~~



	~~September 29, 2019~~
~~Inventories~~	11
~~Identified intangible assets, net~~	1
~~Goodwill~~	49
~~Assets held for sale~~	61

2021

On July 6, 2021, we acquired Retune DSP for a total consideration of $15.7 million, net of closing adjustments.

4 Supplemental Financial Information

Statement of Operations Information:

Disaggregation of revenue

The following table presents revenue disaggregated by sales channel:


	For the three months ended		For the nine months ended
	October 2, 2022	October 3, 2021	October 2, 2022	October 3, 2021
Distributors	1,876	1,631	5,385	4,617
Original Equipment Manufacturers and Electronic Manufacturing Services	1,525	1,191	4,378	3,295
Other	44	39	130	112
Total	3,445	2,861	9,893	8,024

For the three months ended For the nine months ended
September 29,
2019
September 30,
2018
September 29,
2019
September 30,
2018
Distributors 1,145
1,270
3,190
3,595
Original Equipment Manufacturers and Electronic Manufacturing Services 1,082
1,081
3,308
3,115
Other ¹⁾
38
94
78
294
Total 2,265
2,445
6,576
7,004
1) Represents revenue for other services as of January 1, 2019 and represents revenue classified in Corporate and Other for prior periods.

Depreciation, amortization and impairment

For the three months ended For the nine months ended
September 29,
2019
September 30,
2018
September 29,
2019
September 30,
2018
Depreciation of property, plant and equipment 135
119
387
354
Amortization of internal use software 2
2
6
6
Amortization of other identified intangible assets 380
376
1,132
1,124
Total 517
497
1,525
1,484


	For the three months ended		For the nine months ended
	October 2, 2022	October 3, 2021	October 2, 2022	October 3, 2021
Depreciation of property, plant and equipment	156	139	447	406
Amortization of internal use software	3	1	9	5
Amortization of other identified intangible assets 1)	162	166	492	541
Total - Depreciation, amortization and impairment	321	306	948	952

1) For the nine month period ending October 3, 2021, the amount includes an impairment charge as a result of the discontinuation of an IPR&D project for an amount of $36 million.

~~Other income (expense)~~

As of January 1, 2019, income derived from manufacturing service arrangements (“MSA”) and transitional service arrangements (“TSA”) that are put in place when we divest a business or activity, is included in other income (expense). These arrangements are short-term in nature and are expected to decrease as the divested business or activity becomes more established.

~~The following table presents the split of other income (expense):~~

For the three months ended For the nine months ended
September 29,
2019
September 29,
2019
Income from MSA and TSA arrangements 9
58
Expenses from MSA and TSA arrangements (10 ) (57 )
Result from MSA and TSA arrangements (1 ) 1
Other, net 23
22
Total 22
23

Financial income and expense

For the three months ended For the nine months ended
September 29,
2019
September 30,
2018
September 29,
2019
September 30,
2018
Interest income 17
13
42
38
Interest expense (98 ) (61 ) (274 ) (197 )
Total interest expense, net (81 ) (48 ) (232 ) (159 )
Foreign exchange rate results 1
(1 ) (6 ) (1 )
Extinguishment of debt (1 ) —
(11 ) (26 )
Miscellaneous financing costs/income and other, net (4 ) (70 ) (8 ) (72 )
Total other financial income (expense) (4 ) (71 ) (25 ) (99 )
Total (85 ) (119 ) (257 ) (258 )


	For the three months ended		For the nine months ended
	October 2, 2022	October 3, 2021	October 2, 2022	October 3, 2021
Interest income	21	1	29	3
Interest expense	(109)	(96)	(319)	(273)
Total interest expense, net	(88)	(95)	(290)	(270)
Extinguishment of debt	—	—	(18)	—
Foreign exchange rate results	(1)	3	2	3
Miscellaneous financing costs/income and other, net	(9)	(1)	(25)	(13)
Total other financial income/ (expense)	(10)	2	(41)	(10)
Total - Financial income and expenses	(98)	(93)	(331)	(280)

Earnings per share

The computation of earnings per share (EPS) is presented in the following table:

For the three months ended For the nine months ended
September 29,
2019
September 30,
2018
September 29,
2019
September 30,
2018
Net income (loss) 119
1,833
149
1,969
Less: net income (loss) attributable to non-controlling interests 10
13
20
37
Net income (loss) attributable to stockholders 109
1,820
129
1,932

Weighted average number of shares outstanding (after deduction of treasury shares) during the year (in thousands) 279,074
322,533
282,496
336,771
Plus incremental shares from assumed conversion of:
Options ¹⁾
772
1,001
775
1,290
Restricted Share Units, Performance Share Units and Equity Rights ²⁾
3,672
1,733
2,548
1,730
Warrants ³⁾
—
—
—
—
Dilutive potential common shares 4,444
2,734
3,323
3,020

Adjusted weighted average number of shares outstanding (after deduction of treasury shares) during the year (in thousands) 283,518
325,267
285,819
339,791

EPS attributable to stockholders in $:
Basic net income (loss) 0.39
5.64
0.46
5.74
Diluted net income (loss) 0.38
5.60
0.45
5.69


	For the three months ended		For the nine months ended
	October 2, 2022	October 3, 2021	October 2, 2022	October 3, 2021
Net income (loss)	750	526	2,099	1,296
Less: net income (loss) attributable to non-controlling interests	12	7	34	27
Net income (loss) attributable to stockholders	738	519	2,065	1,269

Weighted average number of shares outstanding (after deduction of treasury shares) during the year (in thousands)	262,180	266,557	262,620	272,314
Plus incremental shares from assumed conversion of:
Options 1)	275	378	297	397
Restricted Share Units, Performance Share Units and Equity Rights 2)	2,250	4,424	1,921	5,175
Dilutive potential common shares	2,525	4,802	2,218	5,572

Adjusted weighted average number of shares outstanding (after deduction of treasury shares) during the year (in thousands)	264,705	271,359	264,838	277,886

EPS attributable to stockholders in $:
Basic net income (loss)	2.81	1.95	7.86	4.66
Diluted net income (loss)	2.79	1.91	7.80	4.57

¹⁾ ~~Stock~~There were no stock options to purchase ~~up to 0.1 million~~ shares of NXP’s common stock that were outstanding in Q3 ~~2019~~2022 and YTD 2022 (Q3 ~~2018: 0.3 million~~2021 and YTD 2021: no shares) ~~and stock options to purchase up to 0.1 million shares of NXP’s common stock~~ that ~~were outstanding YTD 2019 (YTD 2018: 0.1 million shares)~~ were anti-dilutive and were not included in the computation of diluted EPS because the exercise price was greater than the average fair market value of the common stock or the number of shares assumed to be repurchased using the proceeds of unrecognized compensation expense and exercise prices ~~was~~were greater than the weighted average number of shares underlying outstanding stock options.

²⁾ ~~Unvested RSUs, PSUs and equity rights of 0.2~~There were 0.3 million ~~shares that were outstanding in Q3 2019 (Q3 2018: 1.3 million shares) and~~ unvested RSUs, PSUs and equity rights ~~of 0.3 million shares~~ that were outstanding in Q3 2022 and 0.3 million outstanding YTD ~~2019 (YTD 2018: 0.6 million~~2022 (Q3 2021 and YTD 2021: no shares) that were anti-dilutive and were not included in the computation of diluted EPS because the number of shares assumed to be repurchased using the proceeds of unrecognized compensation expense ~~was~~were greater than the weighted average number of outstanding unvested RSUs, PSUs and equity rights or the performance goal has not been met yet.

³⁾Warrants to purchase up to 11.3 million shares of NXP’s common stock at a price of $131.39 per share were outstanding in Q3 and YTD 2019 (Q3 and YTD 2018: 11.2 million shares at a price of $132.96). Upon exercise, the warrants will be net share settled. At the end of both Q3 and YTD 2019 and Q3 and YTD 2018, the warrants were not included in the computation of diluted EPS because the warrants exercise price was greater than the average fair market value of the common shares.

Balance Sheet Information

Cash and cash equivalents

At ~~September 29, 2019~~October 2, 2022 and December 31, ~~2018,~~2021, our cash balance was ~~$3,537~~$3,759 million and ~~$2,789~~$2,830 million, respectively, of which ~~$169~~$215 million and ~~$140~~$208 million was held by SSMC, our consolidated joint venture company with TSMC. Under the terms of our joint venture agreement with TSMC, a portion of this cash can be distributed by way of a dividend to us, but 38.8% of the dividend will be paid to our joint venture partner. ~~There was 0 dividend~~During both first nine months of 2022 and 2021, no dividends were declared ~~in 2019 (2018: $139 million has been paid~~ by ~~SSMC).~~SSMC.

Inventories

The portion of finished goods stored at customer locations under consignment amounted to ~~$47~~$9 million as of ~~September 29, 2019~~October 2, 2022 (December 31, ~~2018: $52~~2021: $12 million).

Inventories are summarized as follows:

September 29,
2019
December 31,
2018
Raw materials 64
74
Work in process 858
949
Finished goods 212
256
1,134
1,279


	October 2, 2022	December 31, 2021
Raw materials	140	107
Work in process	1,133	846
Finished goods	308	236
	1,581	1,189

The amounts recorded above are net of allowance for obsolescence of ~~$114~~$129 million as of ~~September 29, 2019~~October 2, 2022 (December 31, ~~2018: $111~~2021: $120 million).

Equity Investments

At October 2, 2022 and December 31, 2021, the total carrying value of investments in equity securities is summarized as follows:


	October 2, 2022	December 31, 2021
Marketable equity securities	7	18
Non-marketable equity securities	14	19
Equity-accounted investments	81	75
	102	112

The total carrying value of investments in equity-accounted investees is summarized as follows:


	October 2, 2022			December 31, 2021
	Shareholding %		Amount	Shareholding %		Amount
SMART Growth Fund, L.P.1)	8.41	%	44	8.41	%	31
Others	—		37	—		44
			81			75
1) Previously named “Wise Road Industry Investment Fund I, L.P.”

Results related to equity-accounted investees at the end of each period were as follows:


	For the three months ended		For the nine months ended
	October 2, 2022	October 3, 2021	October 2, 2022	October 3, 2021
Company's share in income (loss)	(5)	4	3	1
Other results	1	(1)	2	(1)
	(4)	3	5	—

Other current liabilities

Other current liabilities at October 2, 2022 and December 31, 2021 consisted of the following:


	October 2, 2022	December 31, 2021
Accrued compensation and benefits	508	476
Income taxes payable	232	82
Dividend payable	221	149
Other	716	468
	1,677	1,175

Accumulated other comprehensive income (loss)

Total comprehensive income (loss) represents net income (loss) plus the results of certain equity changes not reflected in the condensed consolidated statements of operations. The after-tax components of accumulated other comprehensive income (loss) and their corresponding changes are shown below:


	Currency translation differences	Change in fair value cash flow hedges	Net actuarial gain/(losses)	Accumulated Other Comprehensive Income (loss)
As of December 31, 2021	207	—	(159)	48
Other comprehensive income (loss) before reclassifications	(165)	(53)	—	(218)
Amounts reclassified out of accumulated other comprehensive income (loss)	—	19	—	19
Tax effects	—	9	—	9
Other comprehensive income (loss)	(165)	(25)	—	(190)
As of October 2, 2022	42	(25)	(159)	(142)

Currency
translation
differences

Change in fair
value
cash flow hedges

Net actuarial
gain/(losses)

Accumulated
Other
Comprehensive
Income (loss)

As of December 31, 2018 218
(3 ) (92 ) 123
Other comprehensive income (loss) before
reclassifications (47 ) (14 ) (6 ) (67 )
Amounts reclassified out of accumulated other
comprehensive income (loss) —
9
—
9
Tax effects —
1
1
2
Other comprehensive income (loss) (47 ) (4 ) (5 ) (56 )
As of September 29, 2019 171
(7 ) (97 ) 67

Cash dividends

The following ~~dividend was~~dividends were declared ~~in 2019~~during the first three quarters of 2022 and ~~2018~~2021 under NXP’s quarterly dividend ~~program which was introduced as of the third quarter of 2018:~~program:

Fiscal year 2019 Fiscal year 2018
Dividend per share Amount Dividend per share Amount
First quarter 0.250 71
Second quarter 0.250 70
Third quarter 0.375 105 0.250 74
0.875 246 0.250 74


	Fiscal year 2022		Fiscal year 2021
	Dividend per share	Amount	Dividend per share	Amount
First quarter	0.845	222	0.5625	155
Second quarter	0.845	222	0.5625	152
Third quarter	0.845	221	0.5625	150

The dividend declared in the third quarter (not yet paid) is classified in the condensed consolidated balance sheet in other current liabilities as of ~~September 29, 2019~~October 2, 2022 and was subsequently paid on October ~~4, 2019.~~6, 2022.

~~Shareholder tax on repurchased shares~~

Under Dutch tax law, the repurchase of a company’s shares by an entity in the Netherlands is a taxable event (unless exemptions apply). The tax on the repurchased shares is attributed to the shareholders, with NXP making the payment on the shareholders’ behalf. As such, the tax on the repurchased shares is accounted for within stockholders’ equity. At September 29, 2019, within other current liabilities in our consolidated balance sheet, an accrual of $127 million remained for this tax.

65 Restructuring

At each reporting date, we evaluate our restructuring liabilities, which consist primarily of termination benefits, to ensure that our accruals are still appropriate.

The following table presents the changes in restructuring liabilities in ~~2019:~~2022:


	As of January 1, 2022	Additions	Utilized	Released	Other changes	As of October 2, 2022
Restructuring liabilities	37	1	(9)	(6)	(3)	20

Balance January 1, 2019
Additions
Utilized
Released
Other
changes
Balance September 29, 2019
Restructuring liabilities 65
30
(48 ) (4 ) (2 ) 41

~~The components of~~There were no significant restructuring ~~charges recorded~~costs incurred for ~~each of the three and~~both nine month periods ended ~~September 29, 2019~~October 2, 2022 and ~~September 30, 2018~~October 3, 2021 and the utilization of the restructuring liabilities mainly reflects the execution of ongoing restructuring programs the Company initiated in earlier years.

~~are as follows:~~

For the three months ended For the nine months ended
September 29,
2019
September 30,
2018
September 29,
2019
September 30,
2018
Personnel lay-off costs (1 ) 4
29
4
Other exit costs —
1
—
1
Net restructuring charges (1 ) 5
29
5

These restructuring charges recorded in operating income, for the periods indicated, are included in the following line items in the statement of operations:


	For the three months ended		For the nine months ended
	October 2, 2022	October 3, 2021	October 2, 2022	October 3, 2021
Cost of revenue	—	—	(3)	—
Research and development	—	—	(2)	1
Selling, general and administrative	—	—	—	—

Net restructuring charges	—	—	(5)	1

For the three months ended For the nine months ended
September 29,
2019
September 30,
2018
September 29,
2019
September 30,
2018
Cost of revenue (1 ) —
3
—
Selling, general and administrative —
5
10
6
Research and development —
—
16
—
Other income (expense) —
—
—
(1 )
Net restructuring charges (1 ) 5
29
5

76 Income Taxes

Benefit/provision for income taxes:


	For the three months ended				For the nine months ended
	October 2, 2022		October 3, 2021		October 2, 2022		October 3, 2021
Tax expense (benefit)	149		95		392		200
Effective tax rate	16.5	%	15.4	%	15.8	%	13.4	%

For the three months ended For the nine months ended
September 29,
2019
September 30,
2018
September 29,
2019
September 30,
2018
Tax expense (benefit) 28
311
40
317
Effective tax rate 18.9 % 14.9 % 21.4 % 14.2 %

Our effective tax rate reflects the impact of tax incentives, non-deductible expenses, change in valuation allowance, a portion of our earnings being taxed in foreign jurisdictions at rates different than the Netherlands statutory tax rate, and the mix ofprovision for income ~~and losses in various jurisdictions. Our effective tax rate~~taxes for the first nine months of ~~2019~~2022 was ~~21.4%~~$392 million (15.8% effective tax rate) compared ~~with an expense~~to a provision from income taxes of ~~14.2% on a pre-tax profit~~$200 million (13.4% effective tax rate) for the first nine months of ~~2018.~~2021. The ~~movement~~increase in ~~our effective~~the income tax ~~rate reflects mainly~~expense was due to higher income before income taxes as a result of the ~~decrease~~improved operational performance of the Company which was partly offset by an increase in tax incentives ~~($152 million),~~also taking into account the ~~increase~~effect of specific US tax law that became effective as from 2022. In addition to this, there is a higher tax expense in the first nine months of 2022 compared to the same period in 2021 due to unfavorable foreign currency effects in 2022 and favorable items in 2021 related to changes in estimates of prior ~~year adjustments ($19 million)~~positions, an excess tax benefit and ~~the increase~~a net change in the ~~change in~~ valuation allowance ~~($32 million).~~that led to a lower tax expense.

The Company benefits from income tax incentives in certain jurisdictions which provide that we pay reduced income taxes in those jurisdictions for a fixed period of time that varies depending on the jurisdiction. The predominant income tax holiday is expected to expire at the end of 2026. The impact of this tax holiday decreased foreign income taxes for the third quarter of 2022 by $4 million and $5decreased by $3 million for the third quarter ~~of 2019 and the third quarter of 2018, respectively~~2021 (YTD ~~2019:~~2022: a decrease of $8$12 million and YTD ~~2018:~~2021: a decrease of ~~$15~~$10 million). The benefit of this tax holiday on net income per share (diluted) was $0.01 for the third quarter of ~~2019~~2022 (YTD ~~2019: $0.03)~~2022: $0.04) and ~~$0.02~~$0.01 for the third quarter of ~~2018~~2021 (YTD ~~2018:~~2021: $0.04).

87 Identified Intangible Assets

Identified intangible assets as of ~~September 29, 2019~~October 2, 2022 and December 31, ~~2018,~~2021, respectively, were composed of the following:


	October 2, 2022		December 31, 2021
	Gross carrying amount	Accumulated amortization	Gross carrying amount	Accumulated amortization
In-process R&D (IPR&D) 1)	72	—	96	—
Marketing-related	—	—	81	(81)
Customer-related	822	(330)	852	(325)
Technology-based	3,252	(2,399)	3,686	(2,615)
Identified intangible assets	4,146	(2,729)	4,715	(3,021)

1) IPR&D is not subject to amortization until completion or abandonment of the associated research and development effort.

September 29, 2019 December 31, 2018

Gross carrying
amount

Accumulated
amortization

Gross carrying
amount

Accumulated
amortization

In-process R&D (IPR&D) ¹⁾
171
—
276
—
Marketing-related 82
(62 ) 81
(50 )
Customer-related 945
(326 ) 964
(301 )
Technology-based 7,937
(5,341 ) 7,862
(4,365 )
Identified intangible assets 9,135
(5,729 ) 9,183
(4,716 )

1) IPR&D is not subject to amortization until completion or abandonment of the associated research and development effort.

The estimated amortization expense for these identified intangible assets for each of the five succeeding years is:

2019 (remaining) 380 (remaining)
2020 1,310
2021 554
2022 437
2023 230
Thereafter 495


2022 (remaining)			143
2023			437
2024			263
2025			147
2026			80
Thereafter			347

All intangible assets, excluding IPR&D and goodwill, are subject to amortization and have no assumed residual value.

The expected weighted average remaining life of identified intangibles is 34 years as of ~~September 29, 2019~~October 2, 2022 (December 31, ~~2018:~~2021: 4 years).

98 Debt

Revolving Credit Facility

On August 26, 2022, NXP B.V., together with NXP Funding LLC, amended and restated its revolving credit agreement entered into on June 11, 2019. The amended and restated revolving credit agreement provides for $2.5 billion of senior unsecured revolving credit commitments and is scheduled to mature on August 26, 2027.

Exchange Offers

On April 14, 2022, we initiated a registered exchange offering of our outstanding Senior Unsecured Notes (the “Notes”) for new issues of substantially identical registered debt securities (the “Exchange Offers”). The Exchange Offers expired on May 16, 2022, at which time substantially all of the Notes were exchanged for registered senior unsecured notes.

Debt Issuance and redemption

On May 16, 2022, NXP B.V., together with NXP Funding LLC and NXP USA, Inc., issued $500 million of 4.4% senior unsecured notes due June 1, 2027 and $1 billion of 5.0% senior unsecured notes due January 15, 2033.

On May 27, 2022 we redeemed the $900 million aggregate principal amount of outstanding dollar-denominated 4.625% Senior Unsecured Notes due 2023 in accordance with the terms of the indenture.

The following table summarizes the outstanding debt as of ~~September 29, 2019~~October 2, 2022 and December 31, ~~2018:~~2021:


		October 2, 2022		December 31, 2021
	Maturities	Amount	Interest rate	Amount	Interest rate
Fixed-rate 4.625% senior unsecured notes	Jun, 2023	—	4.625	900	4.625
Fixed-rate 4.875% senior unsecured notes	Mar, 2024	1,000	4.875	1,000	4.875
Fixed-rate 2.7% senior unsecured notes	May, 2025	500	2.700	500	2.700
Fixed-rate 5.35% senior unsecured notes	Mar, 2026	500	5.350	500	5.350
Fixed-rate 3.875% senior unsecured notes	Jun, 2026	750	3.875	750	3.875
Fixed-rate 3.15% senior unsecured notes	May, 2027	500	3.150	500	3.150
Fixed-rate 4.40% senior unsecured notes	June, 2027	500	4.400	—	—
Fixed-rate 5.55% senior unsecured notes	Dec, 2028	500	5.550	500	5.550
Fixed-rate 4.3% senior unsecured notes	Jun, 2029	1,000	4.300	1,000	4.300
Fixed-rate 3.4% senior unsecured notes	May, 2030	1,000	3.400	1,000	3.400
Fixed-rate 2.5% senior unsecured notes	May, 2031	1,000	2.500	1,000	2.500
Fixed-rate 2.65% senior unsecured notes	Feb, 2032	1,000	2.650	1,000	2.650
Fixed-rate 5.00% senior unsecured notes	Jan, 2033	1,000	5.000	—	—
Fixed-rate 3.25% senior unsecured notes	May, 2041	1,000	3.250	1,000	3.250
Fixed-rate 3.125% senior unsecured notes	Feb, 2042	500	3.125	500	3.125
Fixed-rate 3.25% senior unsecured notes	Nov, 2051	500	3.250	500	3.250
Floating-rate revolving credit facility (RCF)	Aug, 2027	—	—	—	—
Total principal		11,250		10,650

Unamortized discounts, premiums and debt issuance costs		(88)		(78)
Total debt, including unamortized discounts, premiums, debt issuance costs and fair value adjustments		11,162		10,572
Current portion of long-term debt		—		—
Long-term debt		11,162		10,572

September 29, 2019 December 31, 2018
Maturities Amount
Effective
rate Amount
Effective
rate
Fixed-rate 4.125% senior unsecured notes Jun, 2020 —
— 600
4.125
Fixed-rate 4.125% senior unsecured notes Jun, 2021 1,350
4.125 1,350
4.125
Fixed-rate 4.625% senior unsecured notes Jun, 2022 400
4.625 400
4.625
Fixed-rate 3.875% senior unsecured notes Sep, 2022 1,000
3.875 1,000
3.875
Fixed-rate 4.625% senior unsecured notes Jun, 2023 900
4.625 900
4.625
Fixed-rate 4.875% senior unsecured notes Mar, 2024 1,000
4.875 1,000
4.875
Fixed-rate 5.35% senior unsecured notes Mar, 2026 500
5.350 500
5.350
Fixed-rate 3.875% senior unsecured notes Jun, 2026 750
3.875 —
—
Fixed-rate 5.55% senior unsecured notes Dec, 2028 500
5.550 500
5.550
Fixed-rate 4.3% senior unsecured notes Jun, 2029 1,000
4.300 —
—
Fixed-rate 1% cash convertible notes Dec, 2019 1,150
1.000 1,150
1.000
Floating-rate revolving credit facility (RCF) Jun, 2024 —
— —
—
Total principal 8,550
7,400

Liabilities arising from capital lease transactions —
27

Unamortized discounts, premiums and debt issuance costs (37 ) (31 )
Fair value of embedded cash conversion option (8 ) (42 )
Total debt, including unamortized discounts, premiums, debt
issuance costs and fair value adjustments 8,505
7,354

Current portion of long-term debt (1,142 ) (1,107 )
Long-term debt 7,363
6,247

~~10 Leases~~

Operating and finance lease assets relate to buildings (corporate offices, research and development and manufacturing facilities and datacenters), land, machinery and installations and other equipment (vehicles and certain office equipment). These leases have remaining lease terms of 1 to 30 years, some of which may include options to extend the leases for up to 5 years, and some of which may include options to terminate the leases within 1 year. As of September 29, 2019, assets recorded under finance leases were $29 million and accumulated depreciation associated with finance leases was $4 million.

~~The components of lease expense were as follows:~~

For the three months ended
For the nine months ended
September 29, 2019
September 29, 2019
Operating lease cost 15
41

Finance lease cost:
Amortization of right-of-use assets —
1
Interest on lease liabilities —
1
Total finance lease cost —
2

~~Other information related to leases was as follows:~~

For the three months ended
For the nine months ended
September 29, 2019
�� September 29, 2019
Supplemental cash flows information:
Operating cash flows from operating leases 15
41
Operating cash flows from finance leases (1 ) 1
Financing cash flows from finance leases 2
2

Right-of-use assets obtained in exchange for lease obligations:
Operating leases 1) 62
260
Finance leases —
—

1) $188 million recorded on January 1, 2019 in accordance with the adoption of ASC 842.

Weighted average remaining lease term:
Operating leases 6.0 years
Finance leases 12.7 years

Weighted average discount rate:
Operating leases 3.1 %
Finance leases 4.5 %

~~Future minimum lease payments as of September 29, 2019 were as follows:~~

As of
September 29, 2019
Operating leases Finance leases
2019 (remaining) 16
1
2020 57
3
2021 46
3
2022 32
3
2023 27
3
Thereafter 67
22
Total future minimum lease payments 245
35
Less: imputed interest (22 ) (9 )
Total 223
26

~~Lease liabilities related to leases are split between current and non-current:~~

As of
September 29, 2019
Operating leases Finance leases
Other current liabilities 55
2
Other non-current liabilities 168
24
Total 223
26

~~Operating lease right-of-use assets are $220 million as of September 29, 2019 and are included in other non-current assets in the condensed consolidated balance sheet.~~

119 Related-Party Transactions

The Company's related parties are the members of the board of directors of NXP Semiconductors N.V., the executive officers of NXP Semiconductors N.V. and equity-accounted ~~investees and, up to July 26, 2018, Qualcomm Incorporated ("Qualcomm"). As of the divestment of the SP business on February 7, 2017, the newly formed Nexperia has become a related party.~~investees.

We have a number of strategic alliances and joint ventures. We have relationships with certain of our alliance partners in the ordinary course of business whereby we enter into various sale and purchase transactions, generally on terms comparable to transactions with third parties. However, in certain instances upon divestment of former businesses where we enter into supply arrangements with the former owned business, sales are conducted at cost.

The following table presents the amounts related to revenue and other income and purchase of goods and services incurred in transactions with these related parties:


	For the three months ended		For the nine months ended
	October 2, 2022	October 3, 2021	October 2, 2022	October 3, 2021
Revenue and other income	2	2	7	6
Purchase of goods and services	1	1	3	3

For the three months ended For the nine months ended
September 29,
2019
September 30,
2018
September 29,
2019
September 30,
2018
Revenue and other income 19
26
63
105
Purchase of goods and services 15
25
50
77

The following table presents the amounts related to receivable and payable balances with these related parties:


	October 2, 2022	December 31, 2021
Receivables	1	1
Payables	3	3

September 29,
2019
December 31,
2018
Receivables 22
25
Payables 13
49

We have entered into lease commitments and related services to Nexperia, which are $48 million as of September 29, 2019, and committed $50 million to an investment fund affiliated with Nexperia’s owners. The lease commitments are reflected in our recorded lease liabilities in other current and non-current liabilities.

1210 Fair Value ~~of Financial Assets and Liabilities~~Measurements

The following table summarizes the estimated fair value ~~and carrying amount~~ of our financial instruments which are measured at fair value on a recurring basis:


		Estimated fair value
	Fair value hierarchy	October 2, 2022	December 31, 2021
Assets:
Money market funds	1	2,741	2,111
Marketable equity securities	1	7	18
Derivative instruments-assets	2	7	5

Liabilities:



Derivative instruments-liabilities	2	(31)	(3)

September 29, 2019 December 31, 2018
Fair value
hierarchy
Carrying
amount

Estimated
fair value

Carrying
amount

Estimated
fair value

Assets:
Money market funds 1 2,372
2,372
1,906
1,906
Notes hedges 3 88
88
24
24
Other financial assets 2 49
49
32
32
Derivative instruments – assets 2 3
3
6
6

Liabilities:
Short-term debt 2 —
—
(2 ) (2 )
Short-term debt (2019 Cash Convertible Senior Notes) 2 (1,142 ) (1,232 ) (1,105 ) (1,327 )
Long-term debt (bonds) 2 (7,363 ) (7,874 ) (6,222 ) (6,191 )
Other long-term debt 2 —
—
(25 ) (25 )
Notes Embedded Conversion Derivative 3 (88 ) (88 ) (24 ) (24 )
Derivative instruments – liabilities 2 (15 ) (15 ) (2 ) (2 )

The following methods and assumptions were used to estimate the fair value of financial instruments:

~~Financial assets~~Assets and ~~financial~~ liabilities measured at fair value on a recurring basis

Investments in money market funds (as part of our cash and cash equivalents) and marketable equity securities (as part of other non-current assets) have fair value measurements which are all based on quoted prices in active markets for identical assets or liabilities.

~~Other financial~~ For derivatives (as part of other current assets ~~and derivatives~~

~~For other financial assets and derivatives~~or accrued liabilities) the fair value is based upon significant other observable inputs depending on the nature of the ~~other financial asset and~~ derivative.

~~Notes hedges and Notes Embedded Conversion Derivative~~

At September 29, 2019, the Notes hedges and the Notes Embedded Conversion Derivative are measured at fair value using level 3 inputs. The instruments are not actively traded and are valued at the measurement date using an option pricing model that uses observable inputs for the share price of NXP’s common stock, risk-free interest rate, dividend yield and the term, in combination with a significant unobservable input for volatility. The volatility factor utilized at September 29, 2019 was 39.1% and at December 31, 2018 the volatility factor utilized was 34.8%. The change in the fair value of the Notes hedges and Notes Embedded Conversion Derivative was solely the gain and loss, respectively for each instrument that was recognized.

~~Debt~~

The fair value is estimated on the basis of observable inputs other than quoted market prices in active markets for identical liabilities for certain issues, or on the basis of discounted cash flow analyses. Accrued interest is included under accrued liabilities and not within the carrying amount or estimated fair value of debt.

Assets and liabilities recorded at fair value on a non-recurring basis

We measure and record our non-marketable equity ~~investments (non-marketable~~ securities, ~~and cost~~equity method ~~investments)~~investments and non-financial assets, such as intangible assets and property, plant and equipment, at fair value when an impairment charge is required.

Assets and liabilities not recorded at fair value on a recurring basis

Financial instruments not recorded at fair value on a recurring basis include non-marketable equity securities and equity method investments that have not been remeasured or impaired in the current period and debt.

As of October 2, 2022, the estimated fair value of current and non-current debt was $9.4 billion ($11.3 billion as of December 31, 2021). The fair value is estimated on the basis of broker-dealer quotes, which are Level 2 inputs. Accrued interest is included under accrued liabilities and not within the carrying amount or estimated fair value of debt.

11 Commitments and Contingencies

Purchase Commitments

The Company maintains purchase commitments with certain suppliers, primarily for raw materials, semi-finished goods and manufacturing services and for some non-production items. Purchase commitments for inventory materials are generally restricted to a forecasted time-horizon as mutually agreed upon between the parties. This forecasted time-horizon can vary for different suppliers. As of October 2, 2022, the Company had purchase commitments of $3,750 million, which are due through 2044. Our long-term obligations increased substantially in 2021 as we locked in long-term supply with our key manufacturing partners.

Litigation

We are regularly involved as plaintiffs or defendants in claims and litigation relating to a variety of matters such as contractual disputes, personal injury claims, employee grievances and intellectual property litigation. In addition, our acquisitions, divestments and financial transactions sometimes result in, or are followed by, claims or litigation. Some of these claims may possibly be recovered from insurance reimbursements. Although the ultimate disposition of asserted claims cannot be predicted with certainty, it is our belief that the outcome of any such claims, either individually or on a combined basis, will not have a material adverse effect on our consolidated financial position. However, such outcomes may be material to our condensed consolidated statement of operations for a particular period. The Company records an accrual for any claim that arises whenever it considers that it is probable that it is exposed to a loss contingency and the amount of the loss contingency can be reasonably estimated. The Company does not record a gain contingency until the period in which all contingencies are resolved and the gain is realized or realizable. Legal fees are expensed when incurred.

Based on the most current information available to it and based on its best estimate, the Company also reevaluates at least on a quarterly basis the claims that have arisen to determine whether any new accruals need to be made or whether any accruals made need to be adjusted. Based on the procedures described above, the Company has an aggregate amount of ~~$85~~$70 million accrued for potential and current legal proceedings pending as of ~~September 29, 2019,~~October 2, 2022, compared to ~~$123~~$65 million accrued at December 31, 2021 (without reduction for any related insurance reimbursements) ~~at December 31, 2018.~~. The accruals are included in “Other current liabilities” and in “Other non-current liabilities”. As of ~~September 29, 2019,~~October 2, 2022, the Company’s related balance ~~related to~~of insurance reimbursements was ~~$50~~$47 million (December 31, ~~2018: $65~~2021: $46 million) and is included in “Other current assets” and in “Other non-current assets”.

The Company also estimates the aggregate range of reasonably possible losses in excess of the amount accrued based on currently available information for those cases for which such estimate can be made. The estimated aggregate range requires significant judgment, given the varying stages of the proceedings, ~~(including the fact that many of them are currently in preliminary stages),~~ the existence of multiple defendants (including the Company) in such claims whose share of liability has yet to be determined, the numerous yet-unresolved issues in many of the claims, and the attendant uncertainty of the various potential outcomes of such claims. Accordingly, the Company’s estimate will change from time to time, and actual losses may be more than the current estimate. As at ~~September 29, 2019,~~October 2, 2022, the Company believes that for all litigation pending its potential aggregate exposure to loss in excess of the amount accrued (without reduction for any amounts that may possibly be recovered under insurance programs) could range between $0 and ~~$122~~$78 million. Based upon our past experience with these matters, the Company would expect to receive additional insurance reimbursement of up to $97 million on certain of these claims that would partially offset the potential ~~maximum~~aggregate exposure to loss in excess of ~~up to $109 million.~~the amount accrued.

In addition, the Company is currently assisting Motorola in the defense of personal injury lawsuits due to indemnity obligations included in the agreement that separated Freescale from Motorola in 2004. The ~~Company is also defending a suit related to semiconductor operations that occurred prior to NXP’s separation from Philips. The~~ multi-plaintiff Motorola lawsuits are pending in the Circuit Court of Cook County, ~~Illinois, and the legacy NXP suit is pending in Santa Fe, New Mexico.~~Illinois. These claims allege a link between working in semiconductor manufacturing clean room facilities and birth defects in 2422 individuals. The Motorola suits allege exposures between ~~1965~~1980 and ~~2006.~~2005. Each claim seeks an unspecified amount of damages for the alleged injuries; however, legal counsel representing the plaintiffs has indicated they will seek substantial compensatory and punitive damages from Motorola for the entire inventory of claims which, if proven and recovered, the Company considers to be material. ~~In the Motorola suits, a~~A portion of any indemnity due to Motorola will be reimbursed to NXP if Motorola receives an indemnification payment from its insurance coverage. Motorola has potential insurance coverage for many of the years indicated above, but with differing types and levels of coverage, self-insurance retention amounts and deductibles. We are in discussions with Motorola and their insurers regarding the availability of applicable insurance coverage for each of the individual cases. Motorola and NXP have denied liability for these alleged injuries based on numerous defenses.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This interim Management’s Discussion and Analysis ("MD&A") should be read in conjunction with our consolidated financial statements and notes and the MD&A in our Annual Report on Form ~~20‑F~~10-K for the year ended December 31, ~~2018.~~2021. This discussion contains forward-looking statements that involve a number of risks and uncertainties, including any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, uncertain events or assumptions, and other characterizations of future events or ~~circumstances.~~circumstances, including the expected timeline to remediate the identified material weakness in our internal control over financial reporting, the uncertain nature, magnitude, and duration of hostilities stemming from Russia's recent military invasion of the Ukraine, and our response to the current global pandemic and the potential impact the pandemic will have on our operations, liquidity, customers, facilities and supply chain. Such statements are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this filing, and in “Risk Factors” in Part I, Item 3D1A of our Annual Report on Form ~~20-F.~~10-K. Our actual results may differ materially from those contained in any forward-looking statements. We undertake no obligation to update any forward-looking statement to reflect subsequent events or circumstances.

($ in millions, unless otherwise stated) Q3 2019
Q3 2018
YTD 2019
YTD 2018

Revenue 2,265
2,445
6,576
7,004
% nominal growth (7.4 ) 2.4
(6.1 ) 3.0
Gross profit 1,186
1,256
3,409
3,608
Research and development (396 ) (433 ) (1,219 ) (1,297 )
Selling, general and administrative (221 ) (252 ) (699 ) (742 )
Amortization of acquisition-related intangible assets (358 ) (362 ) (1,070 ) (1,085 )
Other income (expense) 22
2,002
23
2,002
Operating income (loss) 233
2,211
444
2,486

Our MD&A is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition and cash flows. MD&A is organized as follows:

•Overview - Overall analysis of financial and other highlights to provide context for the MD&A

•Results of Operations - An analysis of our financial results

•Liquidity and Capital Resources - An analysis of changes in our balance sheets and cash flows

•Information Regarding Guarantors of NXP - Financial information of the Obligor Group on a combined basis

Overview


($ in millions, unless otherwise stated)	Q3 2022	Q3 2021	YTD 2022	YTD 2021

Revenue	3,445	2,861	9,893	8,024
Gross profit	1,967	1,583	5,626	4,360
Operating income (loss)	1,001	711	2,817	1,776
Cash flow from operating activities	1,144	924	2,819	2,292
Total debt	11,162	9,593	11,162	9,593
Net debt	7,403	7,290	7,403	7,290
Diluted weighted average number of shares outstanding	264,705	271,359	264,838	277,886
Diluted net income per share	2.79	1.91	7.80	4.57
Dividends per common share	0.8450	0.5625	2.5350	1.6875

Q3 ~~2019~~2022 compared to Q3 ~~2018~~2021

InRevenue for the three months ended October 2, 2022 was $3,445 million compared to $2,861 million for the three months ended October 3, 2021, an increase of $584 million or an increase of 20.4% year-on-year. Revenue growth during the quarter ~~ended September 29, 2019, revenue declined~~was due to increased volumes of products shipped driven by ~~$180 million as compared~~the continued industry-wide demand for semiconductors across most of the Company’s focused end markets. Additionally, the Company continued to experience the ~~quarter ended September 30, 2018. Included~~inflationary effects of increased input costs from its suppliers which were passed along to end customers in the ~~latter is $32 million~~form of ~~revenue related to divested businesses or activities. As~~higher average selling prices.

Our gross profit percentage for the third quarter of ~~January 1, 2019, income and expenses derived~~2022 increased from manufacturing service arrangements (“MSA”) and transitional service arrangements (“TSA”) that are put into place when we divest a business or activity, are included in other income (expense). Gross profit decreased55.3% in the third quarter of ~~2019 as compared~~2021 to 57.1%, primarily from the ~~third quarter~~continued significant acceleration of ~~2018 primarily as a result of the decline in sales. Operating expenses~~revenue in the third quarter of ~~2019 decreased as~~2022 compared to the same period in 2021, which led to improved factory loading, increased manufacturing volumes, and higher sales prices, which were mostly offset by higher input costs.

We continue to generate strong operating cash flows, with $1,144 million in cash flows from operations for the third quarter of ~~2018 both in research and development costs and selling, general and administrative. Other income (expense) in~~2022. We returned $589 million to our shareholders during the third quarter of ~~2019 includes~~2022. Our cash position at the ~~result~~end of ~~the sale of assets ($20 million) and the net result of income and expenses derived from the divested businesses or activities as discussed above. Other income (expense) in~~ the third quarter of ~~2018 includes the $2 billion termination compensation received from Qualcomm.~~

2022 was $3,759 million.

YTD ~~2019~~2022 compared to YTD ~~2018~~2021

InRevenue for the nine ~~month period~~months ended ~~September 29, 2019, revenue declined by $428~~October 2, 2022 was $9,893 million as compared to $8,024 million for the nine ~~month period~~months ended ~~September 30, 2018. Included~~October 3, 2021, an increase of $1,869 million or an increase of 23.3% year-on-year. The increase is attributed to strong demand and inflationary effects of increased input costs from its suppliers which were passed along to end customers in the ~~latter is $107 million~~form of ~~revenue related~~higher average selling prices, across all end markets.

Our gross profit percentage for the nine months ended October 2, 2022 increased from 54.3% for the nine months ended October 3, 2021 to ~~divested businesses or activities. Gross profit decreased~~56.9%, primarily from the continued significant acceleration of revenue in the first nine months of ~~2019 as~~2022 compared to the same period in 2021, which led to improved factory loading, increased manufacturing volumes, and higher sales prices, which were mostly offset by higher input costs.

Cash flow from operations for the first nine months of ~~2018 primarily as a result of the decline in sales. Operating expenses in~~2022 was $2,819 million. Total shareholder return for the first nine months of ~~2019 decreased as compared to~~2022 was $1,514 million. Our cash position remains solid, with the ~~first nine months~~net proceeds of ~~2018 primarily as a result of decreased research and development costs. Other income (expense)~~the $1.5 billion in issued debt in the ~~first nine months~~second quarter of ~~2019 includes the result~~2022 adding to our cash and cash equivalents.

Results of the sale of assets ($20 million) and the net result of income and expenses derived from divested businesses or activities as discussed above. Other income (expense) in the first nine months of 2018 includes the $2 billion termination compensation received from Qualcomm.

operations

~~The table below depicts the Purchase Price Accounting (“PPA”) effects (~~
~~reflecting the amortization related to the fair value adjustments resulting from the acquisition of Freescale in addition to the formation of NXP) for each of the three and nine month periods ended September 29, 2019 and September 30, 2018, respectively, per line item in the statement of operations:~~

($ in millions, unless otherwise stated) Q3 2019
Q3 2018
YTD 2019
YTD 2018

Gross profit (19 ) (20 ) (56 ) (59 )
Selling, general and administrative (5 ) (2 ) (8 ) (6 )
Amortization of acquisition-related intangible assets (358 ) (362 ) (1,070 ) (1,085 )
Operating income (loss) (382 ) (384 ) (1,134 ) (1,150 )

Prior to January 1, 2019, HPMS was our sole reportable segment. Corporate and Other represented the remaining portion to reconcile to the condensed consolidated financial statements. Effective January 1, 2019, NXP removed the reference to HPMS in its organizational structure in acknowledgement of the one reportable segment representing the entity as a whole.

~~Revenue~~

The following table presents ~~revenue and revenue growth~~operating income for each of the three and nine month periods ended ~~September 29, 2019~~October 2, 2022 and ~~September 30, 2018,~~October 3, 2021, respectively:

($ in millions, unless otherwise stated) Q3 2019 Q3 2018
YTD 2019 YTD 2018
Revenue
Growth %
Revenue
Revenue
Growth %
Revenue

Revenue 2,265
(7.4 ) 2,445
6,576
(6.1 ) 7,004


($ in millions, unless otherwise stated)	Q3 2022	Q3 2021	YTD 2022	YTD 2021

Revenue	3,445	2,861	9,893	8,024
% nominal growth	20.4	26.2	23.3	31.4
Gross profit	1,967	1,583	5,626	4,360
Research and development	(548)	(492)	(1,608)	(1,429)
Selling, general and administrative	(289)	(243)	(805)	(699)
Amortization of acquisition-related intangible assets	(131)	(137)	(400)	(456)
Other income (expense)	2	—	4	—
Operating income (loss)	1,001	711	2,817	1,776

Revenue

Q3 ~~2019~~2022 compared to Q3 ~~2018~~2021

Revenue for the three months ended October 2, 2022 was $3,445 million compared to $2,861 million for the three months ended October 3, 2021, an increase of $584 million or an increase of 20.4% year-on-year, with growth in all of the Company’s four focus end markets.

YTD 2022 compared to YTD 2021

Revenue for the nine months ended October 2, 2022 was $9,893 million compared to $8,024 million for the nine months ended October 3, 2021, an increase of $1,869 million or 23.3%, with growth in all of the Company’s four end markets.

Revenue ~~decreased $180~~by end market was as follows:


($ in millions, unless otherwise stated)	Q3 2022	Q3 2021	Change		YTD 2022	YTD 2021	Change
Automotive	1,804	1,455	24.0	%	5,074	3,946	28.6	%
Industrial & IoT	713	607	17.5	%	2,108	1,749	20.5	%
Mobile	410	345	18.8	%	1,199	1,038	15.5	%
Communication Infrastructure & Other	518	454	14.1	%	1,512	1,291	17.1	%
Revenue	3,445	2,861	20.4	%	9,893	8,024	23.3	%

Revenue by sales channel was as follows:


($ in millions, unless otherwise stated)	Q3 2022	Q3 2021	Change		YTD 2022	YTD 2021	Change
Distributors	1,876	1,631	15.0	%	5,385	4,617	16.6	%
OEM/EMS	1,525	1,191	28.0	%	4,378	3,295	32.9	%
Other	44	39	12.8	%	130	112	16.1	%
Revenue	3,445	2,861	20.4	%	9,893	8,024	23.3	%

Revenue by geographic region, which is based on the customer’s shipped-to location was as follows:


($ in millions, unless otherwise stated)	Q3 2022	Q3 2021	Change		YTD 2022	YTD 2021	Change
Greater China and Asia Pacific	1,923	1,653	16.3	%	5,454	4,638	17.6	%
EMEA (Europe, the Middle East and Africa)	672	536	25.4	%	1,978	1,464	35.1	%
Americas	468	346	35.3	%	1,335	1,003	33.1	%
Japan	200	210	(4.8)	%	648	587	10.4	%
South Korea	182	116	56.9	%	478	332	44.0	%
Revenue	3,445	2,861	20.4	%	9,893	8,024	23.3	%

Automotive

Mobile

Industrial IoT

Comm Infra & Other

Distributors

Other

OEM/EMS

Q3 2022 compared to Q3 2021

The increase in revenue is attributed to the combination of ongoing demand, across NXP’s Automotive, Mobile, and the Communications Infrastructure & Other end markets. While trends in the Industrial IoT end market experienced slower demand versus the year ago period. Furthermore, the effects of increased input costs from NXP suppliers which were passed along to our end customers in the form of higher average selling prices across all end markets.

From an end market perspective, the year-on-year growth within the Automotive end market was across the automotive product portfolio in support of the secular shift of electrification, advanced driver safety and assistance, and driver connectivity systems. The growth within the Industrial & IoT market reflects the adoption of our complete secure, connected edge processing solutions which leverage our broad processor portfolio, complimented by connectivity, analog attach and security products. The growth within the Mobile end market was due to ongoing adoption of our secure embed transaction solutions along with the Company’s growth in our advanced analog high-speed interfaces. The growth within the Communication Infrastructure & Other end market was attributable to the network edge equipment, the transit and access solutions, RFID tagging solutions, and cellular base stations. Offsetting these positive growth trends were declines in demand for the Company’s wireless access point solutions, as well as declines in demand for Company’s smart antennae products used in the Android mobile handset market, secure payment, and identification solutions.

When aggregating all end markets together, and reviewing sales channel performance, business transacted through NXP's direct OEM and EMS customers was $1,525 million, an increase of 28.0%. Sales to ~~$2,265~~NXP's third party distribution partners was $1,876 million, inan increase of 15.0% versus the third quarter of ~~2019 compared~~2021.

From a geographic perspective, revenue increased across all regions, with the exception of Japan showing a decline within the Automotive end market.

Revenue from the Automotive end market was $1,804 million, an increase of $349 million or 24.0% year-on-year. Within Automotive, customers are focused on the key functional pillars of safety, electrification and improved driver comfort to ~~$2,445 million~~accelerate competitive differentiation. These broad functional areas are fundamentally enabled by the secular adoption of new and increased levels of semiconductor content, which is layered on top of a strong base of existing electronic content in modern automobiles. The increase in Automotive revenue during the third quarter of ~~2018, a year-on-year decrease~~2022 can be attributed to strong growth for advanced analog, automotive processing and radar solutions.

Revenue from the Industrial & IoT end market was $713 million, an increase of ~~7.4%. Included~~$106 million or 17.5% year-on-year. The Industrial & IoT market is driven by the secular trend of multi-market OEMs seeking to enable secure, connected, high performance processing solutions at the edge of the network, whether it is in factory automation, smart building/smart home or the exploding plethora of connected IoT devices. The innovation in this market is being driven by thousands of relatively smaller customers, which NXP effectively services through its extended global distribution channel. During the third quarter of ~~2018 is~~2022, the ~~revenue related to divested businesses~~year-on-year increase was driven by the demand for the Company’s crossover processors, 32-bit ARM-based microcontrollers, application processors, industrial analog products, IoT connectivity and point-of-sale security solutions.

Revenue from the Mobile end market was $410 million with an increase of $65 million or ~~activities~~18.8% year-on-year. The year-on-year increase was driven by strong adoption of ~~$32 million. The decline is mainly related to lower sales to distributors due to lower end-customer~~secure mobile wallet solutions and increased demand in ~~particular~~our advanced analog high-speed interfaces, which was offset by declines in advanced power systems driven by load switch demand decline. Our mobile customers are primarily serviced through our global distribution channels.

Revenue in the ~~Greater China region~~Communication Infrastructure & Other end market was $518 million, an increase of $64 million or 14.1% year-on-year. The Communication Infrastructure & Other end market is an amalgamation of three separate product portfolios, which service multiple end markets, including cellular base stations, the network edge equipment, and the secure access, transit and government sponsored identification market. The growth within the Communication Infrastructure & Other end market was attributable to the network edge equipment, the transit and access solutions, RFID tagging solutions, and cellular base stations. Offsetting these positive growth trends were declines in ~~our Automotive~~demand for the Company’s wireless access point solutions, as well as declines in demand for Company’s smart antennae products used in the Android mobile handset market, secure payment, and ~~Industrial & IOT end markets.~~

identification solutions.

YTD ~~2019~~2022 compared to YTD ~~2018~~2021

The increase in revenue is attributed to the combination of strong demand across all of NXP’s end markets, and higher average pricing, which were the result of rising inflationary effects on input costs from NXP suppliers passed along to our end customers.

From an end market perspective, within the automotive end market the year-on-year growth was attributable to advanced analog, automotive processing and radar in support of the secular shift of electrification, advanced driver safety and assistance, and driver connectivity systems. The growth within the Industrial & IoT market reflects the successful continuation of adoption of our complete secure, connected edge processing solutions which leverage our broad processor portfolio, complimented by analog attach, connectivity, and security products. Growth within the Mobile end market was due to ongoing adoption of our secure embed transaction solutions along with the Company’s growth in our advanced analog high-speed interfaces. The growth within the Communication Infrastructure & Other end market was attributable to the network edge equipment, cellular base stations, the transit and access solutions, and RFID tagging solutions. Offsetting these positive growth trends were declines in demand for the Company’s smart antennae products used in the Android mobile handset market, as well as declines in demand for the Company’s wireless access point solutions, and secure payment.

When aggregating all end markets together, and reviewing sales channel performance, business transacted through direct OEM and EMS customers was $4,378 million, an increase of 32.9% versus the year ago period. NXP's third party distribution partners was $5,385 million, an increase of 16.6%.

From a geographic perspective, revenue increased across all regions.

Revenue ~~decreased $428 million to $6,576 million~~ in the ~~first nine months~~Automotive end market was $5,074 million, an increase of ~~2019 compared~~$1,128 million or 28.6% versus the year ago period due to ~~$7,004 million~~the ongoing demand for our automotive products supporting the secular shift of electrification, advanced driver safety and assistance, and driver connectivity systems.

Revenue in the ~~first nine months~~Industrial & IoT end market was $2,108 million, an increase of ~~2018, a year-on-year decrease of 6.1%. Included~~$359 million or 20.5% versus the year ago period driven by the continued demand for the Company’s crossover processors and 32-bit ARM-based microcontrollers, industrial analog products, application processors, and IoT connectivity and point-of-sale security solutions.

Revenue in the ~~first nine months~~Mobile end market was $1,199 million, an increase of ~~2018 is~~$161 million or 15.5% versus the ~~revenue related to divested businesses or activities, $107 million. The decline is mainly related to lower sales to distributors~~year ago period due to ~~lower end-customer~~strong adoption of secure mobile wallet solutions, and demand ~~with Greater China region representing close~~for our advanced analog high-speed interfaces, offset by declines in embedded power solutions.

Revenue in the Communication Infrastructure & Other end market was $1,512 million, an increase of $221 million or 17.1% versus the year ago period due to ~~two-thirds~~a combination of strength from RF Power products levered to network edge equipment, the ~~compression~~secular build-out of 5G base

stations, and the ongoing demand for transit market. Offsetting these positive growth trends were declines in ~~particular~~demand for the Company’s smart antennae products used in ~~our Automotive, Industrial & IOT~~the Android mobile handset market, as well as declines in demand for wireless access point solutions, and ~~Mobile end markets.~~secure payment.

Gross ~~Profit~~profit

~~The following table presents gross profit for each of the three and nine month periods ended September 29, 2019 and September 30, 2018, respectively:~~

($ in millions, unless otherwise stated) Q3 2019 Q3 2018 YTD 2019 YTD 2018
Gross profit
% of revenue Gross profit
% of revenue Gross profit
% of revenue Gross profit
% of revenue

Gross Profit 1,186
52.4 1,256
51.4 3,409
51.8 3,608
51.5

Q3 ~~2019~~2022 compared to Q3 ~~2018~~2021

Gross profit infor the ~~third quarter of 2019~~three months ended October 2, 2022 was ~~$1,186~~$1,967 million, or ~~52.4%~~57.1% of revenue, compared to ~~$1,256~~$1,583 million, or ~~51.4%~~55.3% of revenue for the three months ended October 3, 2021.The increase of $384 million in gross profit was driven by the significant higher revenue in the third quarter of ~~2018, a decrease of $70 million, primarily driven by lower revenue resulting from lower demand. The gross margin percentage increased from 51.4%~~2022 compared to ~~52.4%, mainly as a result of focused cost control and customer mix in~~ the third quarter of ~~2019.~~

2021, which led to improved factory loading, increased manufacturing volumes, and higher sales prices, which were mostly offset by higher input costs.

YTD ~~2019~~2022 compared to YTD ~~2018~~2021

Gross profit infor the ~~first~~ nine months ~~of 2019~~ended October 2, 2022 was ~~$3,409~~$5,626 million, or ~~51.8%~~56.9% of revenue, compared to ~~$3,608~~$4,360 million, or ~~51.5%~~54.3% of revenue for the nine months ended October 3, 2021. The increase of $1,266 million was primarily driven by the significant higher revenue in the first nine months of ~~2018, a decrease~~2022 compared to the first nine months of ~~$199 million, primarily driven~~2021, which led to improved factory loading, increased manufacturing volumes, and higher sales prices, which were mostly offset by ~~lower revenue resulting from lower demand.~~higher input costs.

Operating expenses

Q3 2022 compared to Q3 2021

~~The following table presents operating~~Operating expenses for ~~each of~~ the three ~~and~~months ended October 2, 2022 totaled $968 million, or 28.1% of revenue, compared to $872 million, or 30.5% of revenue, for the three months ended October 3, 2021.

YTD 2022 compared to YTD 2021

Operating expenses for the nine ~~month periods~~months ended ~~September 29, 2019 and September 30, 2018:~~October 2, 2022 totaled $2,813 million, or 28.4% of revenue, compared to $2,584 million, or 32.2% of revenue, for the nine months ended October 3, 2021.

($ in millions, unless otherwise stated) Q3 2019 Q3 2018 YTD 2019 YTD 2018

Operating
expenses

% of revenue
Operating
expenses

% of revenue
Operating
expenses

% of revenue
Operating
expenses

% of revenue

Operating expenses 975
43.0 1,047
42.8 2,988
45.4 3,124
44.6

The following table below presents the composition of operating expenses by line item in the statement of operations:


($ in millions, unless otherwise stated)	Q3 2022	Q3 2021	YTD 2022	YTD 2021
Research and development	548	492	1,608	1,429
Selling, general and administrative	289	243	805	699
Amortization of acquisition-related intangible assets	131	137	400	456
Total operating expenses	968	872	2,813	2,584

($ in millions, unless otherwise stated) Q3 2019
Q3 2018
YTD 2019
YTD 2018

Research and development 396
433
1,219
1,297
Selling, general and administrative 221
252
699
742
Amortization of acquisition-related intangible assets 358
362
1,070
1,085
Operating expenses 975
1,047
2,988
3,124

R&D

SG&A

Amortization acquisition-related

Q3 ~~2019~~2022 compared to Q3 ~~2018~~2021

~~Operating expenses decreased $72 million to $975 million in the third quarter of 2019, compared to $1,047 million in the third quarter of 2018.~~ The ~~decrease~~increase in operating expenses ~~is mainly the~~was a result of ~~ongoing cost control, resulting in lower expenditures in personnel~~the following items:

Research and ~~operating~~development (R&D) costs primarily consist of engineer salaries and wages (including share based compensation and other variable compensation), engineering related costs ~~due~~(including outside services, fixed-asset, IP and other licenses related costs), shared service center costs and other pre-production related expenses. R&D costs for the three months ended October 2, 2022 increased by $56 million, or 11.4%, when compared to ~~lower merger-related expenses.~~

the three months ended October 3, 2021 mainly driven by:

+ higher personnel-related costs, including variable compensation costs;

+ higher pre-production related expenses;

+ higher professional services; and

+ higher travel expense.

Selling, general and administrative (SG&A) costs primarily consist of personnel salaries and wages (including share based compensation and other variable compensation), communication and IT related costs, fixed-asset related costs and sales and marketing costs (including travel expenses). SG&A costs for the three months ended October 2, 2022 increased by $46 million, or 18.9%, when compared to the three months ended October 3, 2021 mainly due to:

+ higher personnel-related costs, including variable compensation costs;

+ higher professional services;

+ higher legal expense; and

+ higher travel expense.

Amortization of acquisition-related intangible assets decreased by $6 million, or 4.4%, when compared to the three months ended October 3, 2021 driven by:

- certain intangibles became fully amortized during 2021.

YTD ~~2019~~2022 compared to YTD ~~2018~~2021

~~Operating expenses decreased $136 million to $2,988 million in the first nine months of 2019, compared to $3,124 million in the first nine months of 2018.~~ The ~~decrease~~increase in operating expenses ~~is mainly the result of ongoing cost control, resulting in lower expenditures in personnel and operating related costs due to lower merger-related expenses.~~

~~Operating income (loss)~~

~~The following table presents operating income (loss) for each of the three and nine month periods ended September 29, 2019 and September 30, 2018:~~

($ in millions, unless otherwise stated) Q3 2019 Q3 2018 YTD 2019 YTD 2018

Operating
income (loss)

% of revenue
Operating
income (loss)

% of revenue
Operating
income (loss)

% of revenue
Operating
income (loss)

% of revenue

Operating income (loss) 233
10.3 2,211
90.4 444
6.8 2,486
35.5

~~Q3 2019 compared to Q3 2018~~

~~Operating income (loss) decreased $1,978 million to $233 million in the third quarter of 2019, compared to $2,211 million in the third quarter of 2018. The decrease is the~~was a result of the ~~$2 billion termination~~following items:

Research and development (R&D) costs primarily consist of engineer salaries and wages (including share based compensation ~~received in~~and other variable compensation), engineering related costs (including outside services, fixed-asset, IP and other licenses related costs), shared service center costs and other pre-production related expenses. R&D costs for the ~~third quarter of 2018 from Qualcomm.~~

~~YTD 2019~~nine months ended October 2, 2022 increased by $179 million, or 12.5%, when compared to ~~YTD 2018~~

~~Operating income (loss) decreased $2,042 million to $444 million in~~ the ~~first~~ nine months ended October 3, 2021 driven by:

+ higher personnel-related costs, including variable compensation costs;

+ higher pre-production related expenses; and

+ higher professional services .

Selling, general and administrative (SG&A) costs primarily consist of ~~2019,~~personnel salaries and wages (including share based compensation and other variable compensation), communication and IT related costs, fixed-asset related costs and sales and marketing costs (including travel expenses). SG&A costs for the nine months ended October 2, 2022 increased by $106 million, or 15.2%, when compared to ~~$2,486 million in~~ the ~~first~~ nine months ended October 3, 2021 mainly due to:

+ higher legal expense;

+ higher professional services;

+ higher travel expense; and

+ higher IT related expenses.

Amortization of ~~2018. The decrease is mainly related~~acquisition-related intangible assets decreased by $56 million, or 12.3%, when compared to the ~~$2 billion termination compensation received~~nine months ended October 3, 2021 driven by:

- an impairment charge in Q1 2021 as a result of the ~~third quarter~~discontinuation of ~~2018 from Qualcomm.~~an IPR&D project; and

- certain intangibles became fully amortized during 2021.

Financial income (expense)

The following table presents the details of financial income and expenses:

($ in millions, unless otherwise stated) Q3 2019
Q3 2018
YTD 2019
YTD 2018

Interest income 17
13
42
38
Interest expense (98 ) (61 ) (274 ) (197 )
Total interest expense, net (81 ) (48 ) (232 ) (159 )
Foreign exchange rate results 1
(1 ) (6 ) (1 )
Extinguishment of debt (1 ) —
(11 ) (26 )
Miscellaneous financing costs/income and other, net (4 ) (70 ) (8 ) (72 )
Total other financial income (expense) (4 ) (71 ) (25 ) (99 )
Total (85 ) (119 ) (257 ) (258 )


($ in millions, unless otherwise stated)	Q3 2022	Q3 2021	YTD 2022	YTD 2021
Interest income	21	1	29	3
Interest expense	(109)	(96)	(319)	(273)
Total interest expense, net	(88)	(95)	(290)	(270)
Extinguishment of debt	—	—	(18)	—
Foreign exchange rate results	(1)	3	2	3
Miscellaneous financing costs/income and other, net	(9)	(1)	(25)	(13)
Total other financial income (expense)	(10)	2	(41)	(10)
Total	(98)	(93)	(331)	(280)

Q3 ~~2019~~2022 compared to Q3 ~~2018~~2021

Financial income (expense) was an expense of ~~$85~~$98 million in the third quarter of ~~2019,~~2022 compared to an expense of ~~$119~~$93 million in the third quarter of ~~2018.~~2021. The ~~decrease was mainly the~~change in financial income (expense) is primarily attributable to an increase in interest expense as a result of ~~one time charges ($60 million) on certain financial instruments for compensation related to~~the net increase in debt. Higher interest rates resulted in an ~~adjustment event required by the termination of the Qualcomm merger agreement and the origination fees ($11 million) related to the $1 billion bridge facility entered into~~interest income increase in the third quarter of ~~2018, partly offset by the result of incremental interest expense,~~2022. Miscellaneous cost mainly increased due to ~~incremental debt raised~~fair value adjustments in ~~the fourth quarter of 2018.~~

equity accounted investees.

YTD ~~2019~~2022 compared to YTD ~~2018~~2021

Financial income (expense) was an expense of ~~$257~~$331 million in the first nine months of ~~2019,~~2022 compared to an expense of ~~$258~~$280 million in the first nine months of ~~2018. As~~2021. The change in financial income (expense) is primarily attributable to an increase in interest expense as a result of ~~incremental~~the net increase in debt, ~~in the fourth quarter of 2018, interest expense increased, partly offset by lower~~and debt extinguishment costs ~~and~~incurred in the ~~absence~~second quarter of ~~the one time charges and origination fee incurred~~2022. Higher interest rates resulted in an interest income increase in the first nine months of ~~2018.~~of 2022. Miscellaneous cost mainly increased due to fair value adjustments in equity accounted investees.

Benefit (provision) for income taxes

Q3 ~~2019~~2022 compared to Q3 ~~2018~~2021

Our provision for income taxes was $149 million (16.5% effective tax rate reflects the impact of tax incentives, non-deductible expenses, change in valuation allowance, a portion of our earnings being taxed in foreign jurisdictions at rates different than the Netherlands statutory tax rate, and the mix of income and losses in various jurisdictions. Our effective tax raterate) for the third quarter of ~~2019 was an expense~~2022 compared to a provision for income taxes of ~~18.9% compared with an expense of 14.9%~~$95 million (15.4% effective tax rate) for the third quarter of ~~2018.~~2021. The ~~movement~~increase in ~~our effective~~the income tax ~~rate reflects mainly~~expense was due to higher income before income taxes as a result of the ~~decrease~~improved operational performance of the Company, which was partly offset by an increase in tax incentives ~~($160 million),~~also taking into account the ~~increase~~effect of specific US tax law that became effective as from 2022. In addition to this, there is a higher tax expense in the ~~prior year adjustments ($26 million)~~third quarter of 2022 compared to the same period in 2021 due to unfavorable foreign currency-effects and ~~the increase in the change in valuation allowance ($9 million).~~

an excess tax benefit.

YTD ~~2019~~2022 compared to YTD ~~2018~~2021

Our effective tax rate reflects the impact of tax incentives, non-deductible expenses, change in valuation allowance, a portion of our earnings being taxed in foreign jurisdictions at rates different than the Netherlands statutory tax rate and the mix ofprovision for income ~~and losses in various jurisdictions. Our effective tax rate~~taxes for the first nine months of ~~2019~~2022 was $392 million (15.8% effective tax rate) compared to a provision for income taxes of $200 million) (13.4% effective tax ~~expense of 21.4% compared with an expense of 14.2%~~rate) for the first nine months of ~~2018.~~2021. The ~~movement~~increase in ~~our effective~~the income tax ~~rate reflects mainly~~expense was due to higher income before income taxes as a result of the ~~decrease~~improved operational performance of the Company which was partly offset by an increase in tax incentives ~~($152 million),~~also taking into account the ~~increase~~effect of specific US tax law that became effective as from 2022. In addition to this, there is a higher tax expense in the ~~prior year adjustments ($19 million) and the increase in the change in valuation allowance ($32 million).~~

~~Results relating to equity-accounted investees~~

~~Q3 2019 compared to Q3 2018~~

~~Results relating to equity-accounted investees for the third quarter of 2018 included the net gain of $51 million resulting from the sale of ASEN in July 2018.~~

~~YTD 2019 compared to YTD 2018~~

~~Results relating to equity-accounted investees for the~~first nine months of ~~2018 included~~2022 compared to the same period in 2021 due to unfavorable foreign currency effects in 2022 and favorable items in 2021 related to changes in estimates of prior positions, an excess tax benefit and a net ~~gain of $51 million resulting from~~change in the ~~sale of ASEN in July 2018.~~valuation allowance that led to a lower tax expense.

Net income (loss)

The following table presents the composition of net income for the periods reported:

($ in millions, unless otherwise stated) Q3 2019
Q3 2018
YTD 2019
YTD 2018

Operating income (loss) 233
2,211
444
2,486
Financial income (expense) (85 ) (119 ) (257 ) (258 )
Benefit (provision) for income taxes (28 ) (311 ) (40 ) (317 )
Results relating to equity-accounted investees (1 ) 52
2
58
Net income (loss) 119
1,833
149
1,969

~~Net income (loss) attributable to non-controlling interests~~


($ in millions, unless otherwise stated)	Q3 2022	Q3 2021	YTD 2022	YTD 2021

Operating income (loss)	1,001	711	2,817	1,776
Financial income (expense)	(98)	(93)	(331)	(280)
Benefit (provision) for income taxes	(149)	(95)	(392)	(200)
Results relating to equity-accounted investees	(4)	3	5	—
Net income (loss)	750	526	2,099	1,296

~~Q3 2019 compared to Q3 2018~~

Non-controlling interests are related to the third-party share in the results of consolidated companies, predominantly SSMC. Their share of non-controlling interests amounted to a profit of $10 million in the third quarter of 2019, compared to $13 million in the third quarter of 2018.

~~YTD 2019 compared to YTD 2018~~

Non-controlling interests are related to the third-party share in the results of consolidated companies, predominantly SSMC. Their share of non-controlling interests amounted to a profit of $20 million in the first nine months of 2019, compared to $37 million in the first nine months of 2018. The decrease is the result of lower sales due to lower customer demand, especially in the first half of 2019.

Liquidity and Capital Resources

We derive our liquidity and capital resources primarily from our cash flows from operations. We continue to generate strong positive operating cash flows. At the end of the third quarter of ~~2019,~~2022, our cash balance was ~~$3,537~~$3,759 million, an increase of ~~$748~~$929 million compared to December 31, ~~2018.~~2021. Taking into account the available amount of the Unsecured Revolving Credit Facility of ~~$1,500~~$2,500 million, we had access to ~~$5,037~~$6,259 million of liquidity as of ~~September 29, 2019.~~October 2, 2022.

We currently use cash to fund operations, meet working capital requirements, for capital expenditures and for potential common stock repurchases, dividends and strategic investments. Based on past performance and current expectations, we believe that our current available sources of funds (including cash and cash equivalents, RCF Agreement of $2.5 billion, plus anticipated cash generated from operations) will be adequate to finance our operations, working capital requirements, capital expenditures and potential dividends for at least the next twelve months. Our capital expenditures were ~~$388~~$830 million in the first nine months of ~~2019,~~2022, compared to ~~$441~~$501 million in the first nine months of ~~2018.~~2021. During the nine month period ended ~~September 29, 2019,~~October 2, 2022, we repurchased ~~$1,369 million, or 15.2~~5.2 million shares of our common stock pursuant to our share buyback ~~program~~programs at a weighted average price of ~~$90.16~~$184.66 per ~~share.~~share for $955 million in cash and payables.

Our total debt amounted to ~~$8,505~~$11,162 million as of Q3 ~~2019,~~2022, an increase of ~~$1,151~~$590 million compared to December 31, ~~2018~~2021 ($~~7,354~~10,572 million). On May 16, 2022, NXP issued $500 million aggregate principal amount of 4.400% Senior Notes due in 2027 (the “4.400% 2027 Notes”) and $1 billion aggregate principal amount of 5.000% Senior Notes due in 2033 (the “2033 Notes”). The ~~fixed rate 1% convertible~~net proceeds of the 4.400% 2027 Notes, together with cash on hand, has been used to redeem the $900 million aggregate principal amount of outstanding dollar-denominated 4.625% Senior Unsecured Notes due 2023 in accordance with the terms of the indenture. NXP will allocate an amount equal to the net proceeds of the offering of the 2033 Notes to the financing of, in whole or in part, one or more eligible green projects. Pending allocation, NXP will temporarily hold the remaining net proceeds of the 2033 Notes as cash and other short-term securities or use for general corporate purposes, which may include capital expenditures, short-term debt repayment or equity buyback transactions.

Revolving Credit Facility

On August 26, 2022, NXP B.V., together with NXP Funding LLC, amended and restated its revolving credit agreement entered into on June 11, 2019. The amended and restated revolving credit agreement provides for $2.5 billion of ~~$1,150 million~~senior unsecured revolving credit commitments and is scheduled to mature on August 26, 2027.

Exchange Offers

In connection with the sale of (i) NXP B.V.’s and NXP Funding LLC’s 4.875% Senior Notes due ~~December 2019.~~2024 (the “2024 Notes”), 5.350% Senior Notes due 2026 (the “5.350% 2026 Notes”) and 5.550% Senior Notes due 2028 (the “2028 Notes”) and (ii) NXP B.V.’s, NXP Funding LLC’s and NXP USA Inc.’s 2.700% Senior Notes due 2025 (the “2025 Notes”), 3.875% Senior Notes due 2026 (the “3.875% 2026 Notes”), 3.150% Senior Notes due 2027 (the “3.150% 2027 Notes”), 4.300% Senior Notes due 2029 (the “2029 Notes”), 3.400% Senior Notes due 2030 (the “2030 Notes”), 2.500% Senior Notes due 2031 (the “2031 Notes”), 2.650% Senior Notes due 2032 (the “2032 Notes”), 3.250% Senior Notes due 2041 (the “2041 Notes”), 3.125% Senior Notes due 2042 (the “2042 Notes”) and 3.250% Senior Notes due 2051 (the “2051 Notes”), which we collectively refer to as the “Notes”, the issuers of the Notes (the “Issuers”) entered into registration rights agreements pursuant to which the Issuers agreed, among other things, to use commercially reasonable efforts to file an exchange offer registration statement to exchange the Notes for new issues of substantially identical debt securities registered under the U.S. Securities Act of 1933 (the “Exchange Offers”).

On April 14, 2022, the registration statements on Form S-4 filed by the Issuers were declared effective by the SEC, registering the Exchange Offers. The Exchange Offers expired on May 16, 2022. Any outstanding Notes that were not tendered for exchange in the Exchange Offers remain outstanding and continue to accrue interest and are entitled to the rights and benefits that such holders have under the indentures related to such outstanding Notes, except for any rights under the applicable registration rights agreement which terminated upon consummation of the Exchange Offers. This exchange had no impact on our financial position, result of operations or cash flows.

At ~~September 29, 2019,~~October 2, 2022, our cash balance was ~~$3,537~~$3,759 million of which ~~$169~~$215 million was held by SSMC, our consolidated joint venture company with TSMC. Under the terms of our joint venture agreement with TSMC, a portion of this cash can be distributed by way of a dividend to us, but 38.8% of the dividend will be paid to our joint venture partner. ~~No dividend has been declared by SSMC in the first nine months of 2019 (during the second quarter of 2018: $139 million).~~

Cash flows

Our cash and cash equivalents during the first nine months of ~~2019~~2022 increased by ~~$753~~$951 million (excluding the effect of changes in exchange rates on our cash position of $5$(22) million) as follows:


($ in millions, unless otherwise stated)	YTD 2019		YTD 2018		($ in millions, unless otherwise stated)	YTD 2022	YTD 2021

Net cash provided by (used for) operating activities	1,559		3,638		Net cash provided by (used for) operating activities	2,819	2,292
Net cash provided by (used for) investing activities	(418	)	(348	)
Net cash (used for) provided by investing activities					Net cash (used for) provided by investing activities	(977)	(618)
Net cash provided by (used for) financing activities	(388	)	(4,885	)	Net cash provided by (used for) financing activities	(891)	(1,640)
Net cash increase (decrease) in cash and cash equivalents	753		(1,595	)
Increase (decrease) in cash and cash equivalents					Increase (decrease) in cash and cash equivalents	951	34

~~During~~Cash Flow from Operating Activities

For the first nine months ~~ended September 29, 2019, cash generated by~~of 2022 our operating activities ~~of $1,559~~provided $2,819 million in cash. This was primarily the result of ~~$149 million of~~ net income ~~non-cash~~of $2,099 million, adjustments to reconcile the net income of $1,043 million and changes in operating assets and liabilities of $(337) million. Adjustments to net income (loss) includes offsetting non-cash items, such as depreciation and amortization of ~~$1,687~~$948 million, share-based compensation of $267 million and ~~a decrease~~changes in ~~the net~~deferred taxes of $(196) million.

The change in operating assets and liabilities ~~of $282 million. Cash used~~was attributable to the following:

The $165 million increase in ~~investing activities of $418 million during~~receivables and other current assets for the nine months ended ~~September 29, 2019 consisted~~October 2, 2022 was mainly driven by the increase in accounts receivable due to the linearity of revenue between the two periods, customer mix, and the related timing of cash ~~used to acquire property, plant and equipment~~collections in the first nine months of ~~$388~~2022 compared with the same period in 2021.

The $392 million ~~cash used to acquire intangible assets of $72 million and cash used to acquire available-for-sale securities of $19 million, offset by cash provided by the sale of our remaining equity interest~~increase in ~~WeEn, net of tax~~inventories for ~~$37 million and proceeds from the disposal of property, plant and equipment for $23 million. Cash used in financing activities of $388 million during~~ the nine months ended ~~September 29, 2019 consisted of cash used~~October 2, 2022 was primarily related to ~~repurchase long-term debt of $600~~increased production levels as we work to align inventory on hand with the current revenue forecasts.

The $545 million ~~cash paid~~increase in accounts payable and other liabilities for debt issuance costs of $24 million, dividends paid to shareholders of $214 million and cash used to repurchase common stock of $1,369 million, offset by proceeds from the issuance of long-term debt of $1,750 million and the proceeds from the exercise of stock options of $70 million.

~~During~~ the nine months ended ~~September 30, 2018, cash generated~~October 2, 2022 was primarily related to the increase of trade accounts payable of $282 million as a result of increased demand and timing, $68 million in interest payable due to timing of interest payments, $145 million in income and social tax payables related to regulatory changes, and $51 million related to accruals for employee compensation; partially offset by $1 million of other net movements including the non-cash adjustment for capital expenditures and purchased IP.

The $325 million increase in other non-current assets for the nine months ended October 2, 2022 was primarily related to prepayments to secure long-term production supply with multiple vendors.

For the first nine months of 2021 our operating activities ~~of $3,638~~provided $2,292 million in cash. This was primarily the result of ~~$1,969 million of net income, non-cash adjustments to~~ net income of ~~$1,557~~$1,296 million, adjustments to reconcile the net income of $1,227 million and ~~an increase in the net change~~changes in operating assets and liabilities of ~~$99~~$(221) million. Adjustments to net income (loss) includes offsetting non-cash items, such as depreciation and amortization of $952 million, share-based compensation of $265 million and changes in deferred taxes of $6 million.

Cash Flow from Investing Activities

Net cash used infor investing activities ~~of $348~~amounted to $977 million ~~during the nine months ended September 30, 2018~~consisted primarily of cash used to acquire property, plant and equipment of $441 million, cash used to purchase interests in a business of $18 million and cash used to acquire intangible assets of $46 million, offset by cash proceeds from the sale of 40% of our equity interest in ASEC of $127 million and the sale of 24% of our equity interest in WeEn of $32 million. Cash used in financing activities of $4,885 million during the nine months ended September 30, 2018 consisted primarily of cash used to repurchase common stock of $4,582 million in addition to cash used to repurchase long-term debt of $1,273 million, offset by net borrowings of short-term debt of $1,000 million.

~~Contractual Obligations~~

~~During~~for the first nine months of ~~2019, our contractual obligations decreased by $40 million resulting from normal business operations.~~

~~Off-balance Sheet Arrangements~~

~~At the end~~2022 and principally consisted of the ~~third quarter~~cash outflows for capital expenditures of ~~2019, we had no off-balance sheet arrangements~~$830 million, $122 million for the purchase of identified intangible assets and $27 million for the net purchase of interests of businesses.

Net cash used for investing activities amounted to $618 million for the first nine months of 2021 and principally consisted of the cash outflows for capital expenditures of $501 million and $99 million for the purchase of identified intangible assets, $14 million for the purchase of equipment leased to others, $17 million for the net purchase of interests of businesses, partly offset by $7 million of insurance recoveries received for equipment damage.

Cash Flow from Financing Activities

Net cash used for financing activities was $891 million for the first nine months of 2022 compared to net cash provided by financing activities of $1,640 million for the first nine months of 2021, detailed in the table below:


($ in millions)	YTD 2022	YTD 2021

Repurchase of long-term debt	(917)	—
Proceeds from the issuance of long-term debt	1,496	2,000
Cash paid for debt issuance costs	(13)	(22)

Dividends paid to common stockholders	(594)	(412)
Cash proceeds from exercise of stock options and savings from ESPP	58	60
Purchase of treasury shares	(920)	(3,265)
Other, net	(1)	(1)

Additional Capital Requirements

Expected working and other capital requirements are described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. At October 2, 2022, other than ~~commitments resulting~~for changes disclosed in the “Notes to Condensed Consolidated Financial Statements” and “Liquidity and Capital Resources” in this Quarterly Report, there have been no other material changes to our expected working and other capital requirements described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Information Regarding Guarantors of NXP (unaudited)

Summarized Combined Financial Information for Guarantee of Securities of Subsidiaries

All debt instruments are guaranteed, fully and unconditionally, jointly and severally, by NXP Semiconductors N.V. and issued or guaranteed by NXP USA, Inc., NXP B.V. and NXP LLC, (together, the “Subsidiary Obligors” and together with NXP Semiconductors N.V., the “Obligor Group”). Other than the Subsidiary Obligors, none of the Company’s subsidiaries (together the “Non-Guarantor Subsidiaries”) guarantee the Notes. The Company consolidates the Subsidiary Obligors in its consolidated financial statements and each of the Subsidiary Obligors are wholly owned subsidiaries of the Company.

All of the existing guarantees by the Company rank equally in right of payment with all of the existing and future senior indebtedness of the Obligor Group. There are no significant restrictions on the ability of the Obligor Group to obtain funds from ~~normal business operations. None~~respective subsidiaries by dividend or loan.

The following tables present summarized financial information of ~~these arrangements~~the Obligor Group on a combined basis, with intercompany balances and transactions between entities of the Obligor Group eliminated and investments and equity in the earnings of the Non-Guarantor Subsidiaries excluded. The Obligor Group’s amounts due from, amounts due to, and intercompany transactions with Non-Guarantor Subsidiaries have been disclosed below the table, when material.

Summarized Statements of Income


			For the nine months ended
($ in millions)			October 2, 2022

Revenue			5,731
Gross Profit			2,938
Operating income			1,115
Net income			452

Summarized Balance Sheets


	As of
($ in millions)	October 2, 2022	December 31, 2021

Current assets	3,617	2,535
Non-current assets	11,572	11,576
Total assets	15,189	14,111

Current liabilities	1,057	637
Non-current liabilities	11,532	10,792
Total liabilities	12,589	11,429

Obligor's Group equity	2,600	2,682
Total liabilities and Obligor's Group equity	15,189	14,111

NXP Semiconductors N.V. is the head of a fiscal unity for the corporate income tax and VAT that contains the most significant Dutch wholly-owned group companies. The Company is therefore jointly and severally liable for the tax liabilities of the tax entity as a whole, and as such the income tax expense of the Dutch fiscal unity has ~~or is likely~~been included in the Net income of the Obligor Group.

The financial information of the Obligor Group includes sales executed through a Non-Guarantor Subsidiary single-billing entity as a sales agent on behalf of an entity in the Obligor Group. The Obligor Group has sales to ~~have a material effect on our financial condition, results of operations or cash flows.~~non-guarantors (for the nine months ended October 2, 2022: $582 million). The Obligor Group has amounts due from equity financing (October 2, 2022: $5,051 million; December 31, 2021: $5,167 million) and due to debt financing (October 2, 2022: $2,123 million; December 31, 2021: $3,053 million) with non-guarantor subsidiaries.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to the Company’s market risk during the first nine months of ~~2019.~~2022. For a discussion of the Company’s exposure to market risk, refer to the Company’s market risk disclosures set forth in Part I,II, Item ~~3.D, “Risk Factors”, “Risks related to our business” of~~7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form ~~20-F~~10-K for the year ended December 31, ~~2018.~~2021.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of the Chief Executive Officer and Chief Financial Officer (Certifying Officers), evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended) on ~~September 29, 2019.~~October 2, 2022. Based on that evaluation, the Certifying Officers concluded the Company's disclosure controls and procedures were not effective as of ~~September 29, 2019.~~such date due to a material weakness in internal control over financial reporting that was disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Ongoing Remediation of Previously Identified Material Weakness

As previously described in Part II, Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, we are implementing measures designed to ensure that control deficiencies contributing to the previously disclosed material weakness are remediated, such that these controls are designed, implemented, and operating effectively. These remediation actions are ongoing, whereas we have expanded our controls or control designs based on updated enhanced risk assessments, put in place policies and implemented training programs, expanded our team and engaged an advisor, and have enhanced both our reporting and our internal quality review on control execution. The remediation actions, including those listed above, remain in process where further modifications are necessary to address the material weakness. We expect these changes to materially improve our internal controls.

The weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. Management believes the remediation of this material weakness will be completed prior to the end of fiscal 2022. However, there is no assurance as to when such remediation will be completed.

Changes in Internal Control Over Financial Reporting

~~There~~As noted above, the Company has been implementing measures to remediate the material weakness in our internal control over financial reporting. Other than the remediation efforts underway, there were no changes in the Company's internal control over financial reporting during the three ~~and nine~~ month ~~periods~~period ended ~~September 29, 2019,~~October 2, 2022, which were identified in connection with management's evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Not applicable.

Item 1A. Risk Factors

~~There~~Our global business operations expose us to international business risks that could adversely affect our business

If any of the following international business risks were to materialize or become worse, they could have ~~been no~~a material ~~changes~~adverse effect on our business, financial condition and results of operations:

•negative economic developments in economies around the world and the instability of governments and international trade arrangements, such as the increase of barriers to international trade including the imposition of tariffs on imports by the United States and China, the withdrawal of the United Kingdom from the European Union, enhanced export controls on certain products and sanctions on certain industry sectors and parties in Russia and the sovereign debt crisis in certain European countries;

•social and political instability in a number of countries around the world, including continued hostilities and civil unrest in the Middle East and the Ukraine. The instability may have a negative effect on our business, financial condition and operations via our customers and global supply chain and volatility in energy prices and the financial markets;

•potential terrorist attacks;

•epidemics and pandemics, such as the coronavirus outbreak, which may adversely affect our workforce, as well as our suppliers and customers;

•adverse changes in government policies, especially those affecting trade and investment;

•volatility in foreign currency exchange rates, in particular with respect to the U.S. dollar, and transfer restrictions, in particular in China; and

•threats that our operations or property could be subject to nationalization and expropriation.

In addition, Russia’s recent invasion of Ukraine has led to sanctions, export controls and other penalties being levied by the United States, European Union and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic. Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets. Any Russian response could also disrupt commercial and financial transactions. Further, conflict between Ukraine and Russia could adversely impact the global supply chain, disrupt our operations, or negatively impact the demand for our products in our primary end markets. Any such disruption could result in an adverse impact to our financial results.

For a description of other applicable risk factors, ~~previously disclosed in~~please refer to Part I, Item 1A: “Risk Factors” of our Annual Report on Form ~~20-F~~10-K for the year ended December 31, ~~2018.~~2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

~~Share~~In January 2022, the board of directors of NXP (the “Board”) approved a new $2 billion 2022 share repurchase program. The new $2 billion share repurchase authorization is in addition to the $4 billion 2021 share repurchase program previously authorized by the Board. In addition, the Company purchases shares from participants in the Company’s equity programs who trade shares as trade for taxes.

The following share repurchase activity occurred under these programs during the three months ended ~~September 29, 2019 was as follows:~~October 2, 2022:

Period

Total Number
of Shares
Purchased
Average Price
Paid per Share Number of Shares Purchased as Part of Publicly Announced Buy Back Programs Maximum Number of
Shares That May
Yet Be Purchased
Under the Buy Back Program (1) Number of Shares Purchased as Trade for Tax (1)
July 1, 2019 – August 4, 2019 84,865
$101.81 —
—
84,865
August 5, 2019 – September 1, 2019 3,829
$100.78 —
—
3,829
September 2, 2019 – September 29, 2019 200
$106.00 —
—
200
Total 88,894
—
88,894


Period	Total Number of Shares Purchased	Average Price Paid per Share	Number of Shares Purchased as Part of Publicly Announced Buy Back Programs	Maximum Number of Shares That May Yet Be Purchased Under the Buy Back Program	Number of Shares Purchased as Trade for Tax (1)
July 4, 2022 – August 7, 2022	17,125	$181.53	—	17,663,112	17,125
August 8, 2022 – September 4, 2022	655,429	$164.34	655,410	19,095,814	19
September 5, 2022 – October 2, 2022	1,828,747	$158.25	1,828,747	19,060,244	—
Total	2,501,301		2,484,157		17,144

⁽¹⁾ ~~On June 18, 2019, the General Meeting of Shareholders extended the authorization of the Board of Directors~~Reflects shares surrendered by participants to ~~resolve to repurchase shares of our common stock up to 50% of the issued share capital. Since the 20% buy back program announced~~satisfy tax withholding obligations in 2018, which program has been completed in the meantime, the Board did not resolve on a new buy back program. The only shares repurchased in Q3 2019 under an ongoing approval by the Board were purchased from participants inconnection with the Company's equity ~~programs who traded shares as trade for tax.~~programs.

Item 5. Other Information

The Compensation Committee of the Board of Directors of NXP Semiconductors N.V. (the “Company”) has approved (i) a form of Director Restricted Stock Unit Award Agreement (attached as Exhibit 10.1 to this quarterly report on Form 10-Q (this “Report”)) for the award of equity grants to the non-executive directors of the Company’s Board of Directors and (ii) a form of Restricted Stock Unit Award Agreement (attached as Exhibit 10.2 to this Report) and a form of Performance Restricted Stock Unit Award Agreement (attached as Exhibit 10.3 to this Report) for the award of equity grants to our Chief Executive Officer, Chief Financial Officer and other executive officers of the Company. These equity awards will be granted under the NXP Semiconductors N.V. 2019 Omnibus Incentive Plan which was previously approved by the Company’s annual general meeting of shareholders.Not applicable.

Item 6. Exhibits

Exhibit

Number

Exhibit Description

3.1

~~Certificate~~Articles of ~~Incorporation~~Association of NXP Semiconductors N.V. dated June 9, 2020 (incorporated by reference to Exhibit 3.1 ~~of Amendment No. 7~~ to the ~~Registration Statement~~Company’s Quarterly Report on Form ~~F-1~~10-Q of NXP Semiconductors N.V., filed on ~~August 2, 2010 (File No. 333-166128))~~July 28, 2020)

~~3.2~~10.1

~~Articles~~Amended and Restated Revolving Credit Agreement, dated as of ~~Association of~~August 26, 2022, among NXP ~~Semiconductors N.V.~~B.V., NXP Funding LLC, the several lenders from time to time parties thereto, and Barclays Bank PLC, as administrative agent (incorporated by reference to Exhibit ~~3.2 of Amendment No. 7~~10.1 to the ~~Registration Statement~~Company’s Current Report on Form ~~F-1~~8-K of NXP Semiconductors N.V., filed on August ~~2, 2010 (File No. 333-166128))~~29, 2022).

~~10.1* +~~10.2

Amended and Restated Guaranty Agreement, dated as of August 26, 2022, among NXP Semiconductors N.V., NXP USA, Inc. and Barclays Bank PLC, as administrative agent (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K of ~~Director Restricted Stock Unit Award Agreement~~NXP Semiconductors N.V. filed on August 29, 2022).

10.2* 10.3*+

~~Form of Restricted Stock Unit Award Agreement~~

~~10.3* +~~

Form of Performance Restricted Stock Unit Award Agreement

31.1*

Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer

31.2*

Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer

32.1**

Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer

101

The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September 29, 2019,~~October 2, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations for the three and nine months ended ~~September 29, 2019~~October 2, 2022 and ~~September 30, 2018;~~October 3, 2021; (ii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended ~~September 29, 2019~~October 2, 2022 and ~~September 30, 2018;~~October 3, 2021; (iii) Condensed Consolidated Balance Sheets as of ~~September 29, 2019~~October 2, 2022 and December 31, ~~2018;~~2021; (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended ~~September 29, 2019~~October 2, 2022 and ~~September 30, 2018;~~October 3, 2021; (v) Condensed Consolidated Statements of Changes in Equity for the three and nine months ended ~~September 29, 2019~~October 2, 2022 and ~~September 30, 2018;~~October 3, 2021; and (vi) Notes to the Unaudited Condensed Consolidated Financial Statements.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).



+*		Filed or furnished herewith.
+		Indicates management contract or compensatory plan or arrangement.
*		~~Filed herewith.~~
**	~~Furnished herewith.~~

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: ~~October 29, 2019~~November 1, 2022


NXP Semiconductors N.V.

		/s/ William J. Betz
~~NXP Semiconductors N.V.~~Name: William J. Betz, CFO

	~~/s/ P. Kelly~~
~~Name: P. Kelly, CFO~~

Exhibit 31.1

CERTIFICATION

I, ~~Richard L. Clemmer,~~Kurt Sievers, certify that:

1.I have reviewed this quarterly report on Form 10-Q of NXP Semiconductors N.V.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize, and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: November 1, 2022


1.	~~I have reviewed this quarterly report on Form 10-Q of NXP Semiconductors N.V.;~~


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;


4.	The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and


5.	The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize, and report financial information; and


b)	~~Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.~~

~~Date: October 29, 2019~~



By:						/s/ ~~Richard L. Clemmer~~Kurt Sievers
						~~Richard L. Clemmer~~Kurt Sievers
						President & Chief Executive Officer

Exhibit 31.2

CERTIFICATION

I, ~~Peter Kelly,~~William J. Betz, certify that:

1.I have reviewed this quarterly report on Form 10-Q of NXP Semiconductors N.V.;

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: November 1, 2022


1.	~~I have reviewed this quarterly report on Form 10-Q of NXP Semiconductors N.V.;~~


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;


4.	The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and


5.	The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize, and report financial information; and


b)	~~Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.~~

~~Date: October 29, 2019~~



By:						/s/ ~~Peter Kelly~~William J. Betz
						~~Peter Kelly~~William J. Betz
						Chief Financial Officer

Exhibit 32.1

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, ~~Richard L. Clemmer,~~Kurt Sievers, certify, as of the date hereof, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of NXP Semiconductors N.V. on Form 10-Q for the period ended ~~September 29, 2019~~October 2, 2022 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of NXP Semiconductors N.V. at the dates and for the periods indicated.

Date: ~~October 29, 2019~~

November 1, 2022



By:						/s/ ~~Richard L. Clemmer~~Kurt Sievers
						~~Richard L. Clemmer~~Kurt Sievers
						President & Chief Executive Officer

I, ~~Peter Kelly,~~William J. Betz, certify, as of the date hereof, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of NXP Semiconductors N.V. on Form 10-Q for the period ended ~~September 29, 2019~~October 2, 2022 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of NXP Semiconductors N.V. at the dates and for the periods indicated.

Date: ~~October 29, 2019~~

November 1, 2022



By:						/s/ ~~Peter Kelly~~William J. Betz
						~~Peter Kelly~~William J. Betz
						Chief Financial Officer



Netherlands						98-1144352
(State or other jurisdiction of incorporation or organization)						(I.R.S. employer identification number)

60 High Tech Campus						5656 AG
Eindhoven
Netherlands
(Address of principal executive offices)						(Zip code)


	+31	40	2729999
(Registrant’s telephone number, including area code)



Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common shares, EUR 0.20 par value	NXPI	The Nasdaq Global Select Market



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐



		Page
Part I
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2014
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2524
Item 4.	Controls and Procedures	25

Part II
Item 1.	Legal Proceedings	2625
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 5.	Other Information	26
Item 6.	Exhibits	27



	For the three months ended				For the nine months ended
	September 29, 2019		September 30, 2018		September 29, 2019		September 30, 2018
Revenue	2,265		2,445		6,576		7,004
Cost of revenue	(1,079	)	(1,189	)	(3,167	)	(3,396	)
Gross profit	1,186		1,256		3,409		3,608
Research and development	(396	)	(433	)	(1,219	)	(1,297	)
Selling, general and administrative	(221	)	(252	)	(699	)	(742	)
Amortization of acquisition-related intangible assets	(358	)	(362	)	(1,070	)	(1,085	)
Total operating expenses	(975	)	(1,047	)	(2,988	)	(3,124	)
Other income (expense)	22		2,002		23		2,002
Operating income (loss)	233		2,211		444		2,486
Financial income (expense):
Extinguishment of debt	(1	)	—		(11	)	(26	)
Other financial income (expense)	(84	)	(119	)	(246	)	(232	)
Income (loss) before income taxes	148		2,092		187		2,228
Benefit (provision) for income taxes	(28	)	(311	)	(40	)	(317	)
Results relating to equity-accounted investees	(1	)	52		2		58
Net income (loss)	119		1,833		149		1,969
Less: Net income (loss) attributable to non-controlling interests	10		13		20		37
Net income (loss) attributable to stockholders	109		1,820		129		1,932

Earnings per share data:
Net income (loss) per common share attributable to stockholders in $
Basic	0.39		5.64		0.46		5.74
Diluted	0.38		5.60		0.45		5.69

Weighted average number of shares of common stock outstanding during the period (in thousands):
Basic	279,074		322,533		282,496		336,771
Diluted	283,518		325,267		285,819		339,791



		September 29, 2019		December 31, 2018
ASSETS
Current assets:
	Cash and cash equivalents	3,537		2,789
	Accounts receivable, net	786		792
	Assets held for sale	61		—
	Inventories, net	1,134		1,279
	Other current assets	426		365
Total current assets		5,944		5,225
Non-current assets:
	Other non-current assets	712		545
	Property, plant and equipment, net of accumulated depreciation of $3,632 and $3,299	2,401		2,436
	Identified intangible assets, net of accumulated amortization of $5,729 and $4,716	3,406		4,467
	Goodwill	8,791		8,857
	Total non-current assets	15,310		16,305
Total assets		21,254		21,530

LIABILITIES AND EQUITY
Current liabilities:
	Accounts payable	862		999
	Restructuring liabilities-current	41		60
	Other current liabilities	1,081		1,219
	Short-term debt	1,142		1,107
Total current liabilities		3,126		3,385
Non-current liabilities:
	Long-term debt	7,363		6,247
	Restructuring liabilities	—		5
	Deferred tax liabilities	285		450
	Other non-current liabilities	885		753
Total non-current liabilities		8,533		7,455
Total liabilities		11,659		10,840
Equity:
	Non-controlling interests	205		185

	Stockholders’ equity:
	Common stock, par value €0.20 per share:	67		67
	Capital in excess of par value	15,722		15,460
	Treasury shares, at cost:
	49,224,336 shares (2018: 35,913,021 shares)	(4,429	)	(3,238	)
	Accumulated other comprehensive income (loss)	67		123
	Accumulated deficit	(2,037	)	(1,907	)
	Total stockholders’ equity	9,390		10,505
Total equity		9,595		10,690
Total liabilities and equity		21,254		21,530



	Fiscal year 2019		Fiscal year 2018
	Dividend per share	Amount	Dividend per share	Amount
First quarter	0.250	71
Second quarter	0.250	70
Third quarter	0.375	105	0.250	74
	0.875	246	0.250	74



	Balance January 1, 2019	Additions	Utilized		Released		Other changes		Balance September 29, 2019
Restructuring liabilities	65	30	(48	)	(4	)	(2	)	41



	September 29, 2019			December 31, 2018
	Gross carrying amount	Accumulated amortization		Gross carrying amount	Accumulated amortization
In-process R&D (IPR&D) ¹⁾	171	—		276	—
Marketing-related	82	(62	)	81	(50	)
Customer-related	945	(326	)	964	(301	)
Technology-based	7,937	(5,341	)	7,862	(4,365	)
Identified intangible assets	9,135	(5,729	)	9,183	(4,716	)

1) IPR&D is not subject to amortization until completion or abandonment of the associated research and development effort.



2019 (remaining)	380 (remaining)
2020	1,310
2021	554
2022	437
2023	230
Thereafter	495



	As of
	September 29, 2019
	Operating leases		Finance leases
2019 (remaining)	16		1
2020	57		3
2021	46		3
2022	32		3
2023	27		3
Thereafter	67		22
Total future minimum lease payments	245		35
Less: imputed interest	(22	)	(9	)
Total	223		26



($ in millions, unless otherwise stated)	Q3 2019		Q3 2018		YTD 2019		YTD 2018

Revenue	2,265		2,445		6,576		7,004
% nominal growth	(7.4	)	2.4		(6.1	)	3.0
Gross profit	1,186		1,256		3,409		3,608
Research and development	(396	)	(433	)	(1,219	)	(1,297	)
Selling, general and administrative	(221	)	(252	)	(699	)	(742	)
Amortization of acquisition-related intangible assets	(358	)	(362	)	(1,070	)	(1,085	)
Other income (expense)	22		2,002		23		2,002
Operating income (loss)	233		2,211		444		2,486