NXP Semiconductors N.V.
Introduction and Forward Looking Statements
This Form 10-Q and certain information incorporated herein by reference contains forward-looking statements, which are provided under the “safe harbor” protection of the Private Securities Litigation Reform Act of 1995. When used in this Form 10-Q, the words “anticipate”, “believe”, “estimate”, “forecast”, “expect”, “intend”, “plan” and “project” and similar expressions, as they relate to us, our management or third parties, identify forward-looking statements. Forward-looking statements include statements regarding our business strategy, financial condition, results of operations, market data as well as any other statements that are not historical facts. These statements reflect beliefs of our management, as well as assumptions made by our management and information currently available to us. Although we believe that these beliefs and assumptions are reasonable, these statements are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those projected. These factors, risks and uncertainties expressly qualify all subsequent oral and written forward-looking statements attributable to us or persons acting on our behalf and include, in addition to those listed in our Annual Report on Form 10-K for the year ended December 31, 2023 under Part I, Item 1A. Risk Factors and elsewhere in this Form 10-Q, the following:
•market demand and semiconductor industry conditions;
•our ability to successfully introduce new technologies and products;
•the demand for the goods into which our products are incorporated;
•trade disputes between the U.S. and China, potential increase of barriers to international trade and resulting disruptions to our established supply chains;
•the impact of government actions and regulations, including restrictions on the export of US-regulated products and technology;
•increasing and evolving cybersecurity threats and privacy risks, including theft of sensitive or confidential data;
•our ability to generate sufficient cash, raise sufficient capital or refinance our debt at or before maturity to meet our debt service, research and development and capital investment requirements;
•our ability to accurately estimate demand and match our production capacity accordingly or obtain supplies from third-party producers;
•our access to production from third-party outsourcing partners, and any events that might affect their business or our relationship with them;
•our ability to secure adequate and timely supply of equipment and materials from suppliers;
•our ability to avoid operational problems and product defects and, if such issues were to arise, to correct them quickly;
•our ability to form strategic partnerships and joint ventures and successfully cooperate with our strategic alliance partners;
•our ability to win competitive bid selection processes;
•our ability to develop products for use in our customers’ equipment and products;
•our ability to successfully hire and retain key management and senior product engineers;
•global hostilities, including the invasion of Ukraine by Russia and resulting regional instability, sanctions and any other retaliatory measures taken against Russia, and the continued hostilities and armed conflict in the Middle East, which could adversely impact the global supply chain, disrupt our operations or negatively impact the demand for our products in our primary end markets;
•our ability to maintain good relationships with our suppliers; and
•a change in tax laws could have an effect on our estimated effective tax rates.
We do not assume any obligation to update any forward-looking statements and disclaim any obligation to update our view of any risks or uncertainties described herein or to publicly announce the result of any revisions to the forward-looking statements made in this Form 10-Q, except as required by law.
In addition, this Form 10-Q contains information concerning the semiconductor industry, our end markets and business generally, which is forward-looking in nature and is based on a variety of assumptions regarding the ways in which the semiconductor industry, our end markets and business will develop. We have based these assumptions on information currently available to us, including through the market research and industry reports referred to in this Form 10-Q. If any one or more of these assumptions turn out to be incorrect, actual market results may differ from those predicted. While we do not know what impact any such differences may have on our business, if there are such differences, they could have a material adverse effect on our future results of operations and financial condition, and the trading price of our common stock. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak to results only as of the date the statements were made. Except for any ongoing obligation to disclose material information as required by the United States federal securities laws, NXP does not have any intention or obligation to publicly update or revise any forward-looking statements after we distribute this document, whether to reflect any future events or circumstances or otherwise.
The financial information included in this Form 10-Q is based on United States Generally Accepted Accounting Principles (U.S. GAAP), unless otherwise indicated.
In presenting and discussing our financial position, operating results and cash flows, management uses certain non-U.S. GAAP financial measures. These non-U.S. GAAP financial measures should not be viewed in isolation or as alternatives to the equivalent U.S. GAAP measures and should be used in conjunction with the most directly comparable U.S. GAAP measures. A discussion of non-U.S. GAAP measures included in this Form 10-Q and a reconciliation of such measures to the most directly comparable U.S. GAAP measures are set forth under “Use of Certain Non-U.S. GAAP Financial Measures” contained in this Form 10-Q under Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Unless otherwise required, all references herein to “we”, “our”, “us”, “NXP” and the “Company” are to NXP Semiconductors N.V. and its consolidated subsidiaries.
This Form 10-Q includes market data and certain other statistical information and estimates that are based on reports and other publications from industry analysts, market research firms, and other independent sources, as well as management’s own good faith estimates and analyses. NXP believes these third-party reports to be reputable, but has not independently verified the underlying data sources, methodologies or assumptions. The reports and other publications referenced are generally available to the public and were not commissioned by NXP. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
($ in millions, unless otherwise stated)
| | | | | | | | | | | | | | | | | |
| For the three months ended | | |
| March 31, 2024 | | April 2, 2023 | | | | |
Revenue | 3,126 | | | 3,121 | | | | | |
Cost of revenue | (1,343) | | | (1,351) | | | | | |
Gross profit | 1,783 | | | 1,770 | | | | | |
Research and development | (564) | | | (577) | | | | | |
Selling, general and administrative | (306) | | | (280) | | | | | |
Amortization of acquisition-related intangible assets | (51) | | | (85) | | | | | |
Total operating expenses | (921) | | | (942) | | | | | |
Other income (expense) | (6) | | | (3) | | | | | |
Operating income (loss) | 856 | | | 825 | | | | | |
Financial income (expense): | | | | | | | |
Extinguishment of debt | — | | | — | | | | | |
Other financial income (expense) | (70) | | | (82) | | | | | |
Income (loss) before income taxes | 786 | | | 743 | | | | | |
Benefit (provision) for income taxes | (141) | | | (118) | | | | | |
Results relating to equity-accounted investees | (1) | | | (2) | | | | | |
Net income (loss) | 644 | | | 623 | | | | | |
Less: Net income (loss) attributable to non-controlling interests | 5 | | | 8 | | | | | |
Net income (loss) attributable to stockholders | 639 | | | 615 | | | | | |
| | | | | | | |
Earnings per share data: | | | | | | | |
Net income (loss) per common share attributable to stockholders in $ | | | | | | | |
Basic | 2.49 | | | 2.37 | | | | | |
Diluted | 2.47 | | | 2.35 | | | | | |
| | | | | | | |
Weighted average number of shares of common stock outstanding during the period (in thousands): | | | | | | | |
Basic | 256,567 | | | 259,576 | | | | | |
Diluted | 258,954 | | | 261,210 | | | | | |
|
| | | | | | | | | | | |
| 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 | | |
| March 31, 2024 | | April 2, 2023 | | | | |
Net income (loss) | 644 | | | 623 | | | | | |
Other comprehensive income (loss), net of tax: | | | | | | | |
Change in fair value cash flow hedges | (8) | | | 3 | | | | | |
Change in foreign currency translation adjustment | (38) | | | 19 | | | | | |
| | | | | | | |
| | | | | | | |
Total other comprehensive income (loss) | (46) | | | 22 | | | | | |
Total comprehensive income (loss) | 598 | | | 645 | | | | | |
Less: Comprehensive income (loss) attributable to non-controlling interests | 5 | | | 8 | | | | | |
Total comprehensive income (loss) attributable to stockholders | 593 | | | 637 | | | | | |
|
| | | | | | | | | | | |
| 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)
| | | | | | | | | | | | | | |
| | March 31, 2024 | | December 31, 2023 |
ASSETS | | | |
Current assets: | | | |
| Cash and cash equivalents | 2,908 | | | 3,862 | |
| Short-term deposits | 400 | | | 409 | |
| Accounts receivable, net | 881 | | | 894 | |
| | | | |
| Inventories, net | 2,102 | | | 2,134 | |
| Other current assets | 603 | | | 565 | |
Total current assets | 6,894 | | | 7,864 | |
Non-current assets: | | | |
| Other non-current assets | 2,338 | | | 2,289 | |
| Property, plant and equipment, net of accumulated depreciation of $5,783 and $5,660 | 3,304 | | | 3,323 | |
| Identified intangible assets, net of accumulated amortization of $1,326 and $1,342 | 839 | | | 922 | |
| Goodwill | 9,945 | | | 9,955 | |
| Total non-current assets | 16,426 | | | 16,489 | |
Total assets | 23,320 | | | 24,353 | |
| | | |
LIABILITIES AND EQUITY | | | |
Current liabilities: | | | |
| Accounts payable | 954 | | | 1,164 | |
| | | | |
| Restructuring liabilities-current | 68 | | | 92 | |
| Other current liabilities | 1,906 | | | 1,855 | |
| Short-term debt | — | | | 1,000 | |
Total current liabilities | 2,928 | | | 4,111 | |
Non-current liabilities: | | | |
| Long-term debt | 10,178 | | | 10,175 | |
| Restructuring liabilities | 9 | | | 9 | |
| Deferred tax liabilities | 46 | | | 44 | |
| Other non-current liabilities | 1,009 | | | 1,054 | |
Total non-current liabilities | 11,242 | | | 11,282 | |
Total liabilities | 14,170 | | | 15,393 | |
Equity: | | | |
| Non-controlling interests | 321 | | | 316 | |
| | | | |
| Stockholders’ equity: | | | |
| Common stock, par value €0.20 per share: | 56 | | | 56 | |
| Capital in excess of par value | 14,619 | | | 14,501 | |
| Treasury shares, at cost: | | | |
| 18,424,194 shares (2023: 17,329,585 shares) | (3,469) | | | (3,210) | |
| Accumulated other comprehensive income (loss) | 44 | | | 90 | |
| Accumulated deficit | (2,421) | | | (2,793) | |
| Total stockholders’ equity | 8,829 | | | 8,644 | |
Total equity | 9,150 | | | 8,960 | |
Total liabilities and equity | 23,320 | | | 24,353 | |
|
| | | | | | |
| | 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 three months ended |
| March 31, 2024 | | April 2, 2023 |
Cash flows from operating activities: | | | |
Net income (loss) | 644 | | | 623 | |
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: | | | |
Depreciation and amortization | 235 | | | 283 | |
Share-based compensation | 115 | | | 99 | |
Amortization of discount (premium) on debt, net | 1 | | | 1 | |
Amortization of debt issuance costs | 2 | | | 2 | |
Net (gain) loss on sale of assets | (2) | | | — | |
(Gain) loss on equity security, net | 2 | | | 1 | |
| | | |
Results relating to equity-accounted investees | 1 | | | 2 | |
Deferred tax expense (benefit) | (64) | | | (62) | |
Changes in operating assets and liabilities: | | | |
(Increase) decrease in receivables and other current assets | (25) | | | (138) | |
(Increase) decrease in inventories | 32 | | | (196) | |
Increase (decrease) in accounts payable and other liabilities | (102) | | | 52 | |
Decrease (increase) in other non-current assets | 6 | | | (33) | |
Exchange differences | 3 | | | 5 | |
Other items | 3 | | | (7) | |
Net cash provided by (used for) operating activities | 851 | | | 632 | |
Cash flows from investing activities: | | | |
Purchase of identified intangible assets | (32) | | | (42) | |
Capital expenditures on property, plant and equipment | (226) | | | (251) | |
| | | |
Insurance recoveries received for equipment damage | 2 | | | — | |
Proceeds from disposals of property, plant and equipment | 2 | | | — | |
| | | |
| | | |
Proceeds of short-term deposits | 9 | | | — | |
| | | |
Purchase of investments | (34) | | | (58) | |
Proceeds from sale of investments | 5 | | | — | |
| | | |
Net cash provided by (used for) investing activities | (274) | | | (351) | |
Cash flows from financing activities: | | | |
Repurchase of long-term debt | (1,000) | | | — | |
| | | |
| | | |
| | | |
| | | |
Dividends paid to common stockholders | (261) | | | (219) | |
Proceeds from issuance of common stock through stock plans | 37 | | | 33 | |
Purchase of treasury shares and restricted stock unit withholdings | (303) | | | (11) | |
Other, net | (1) | | | (1) | |
Net cash provided by (used for) financing activities | (1,528) | | | (198) | |
Effect of changes in exchange rates on cash positions | (3) | | | 2 | |
Increase (decrease) in cash and cash equivalents | (954) | | | 85 | |
Cash and cash equivalents at beginning of period | 3,862 | | | 3,845 | |
Cash and cash equivalents at end of period | 2,908 | | | 3,930 | |
| | | | | | | | | | | |
Supplemental disclosures to the condensed consolidated cash flows |
Net cash paid during the period for: | | | |
Interest | 38 | | | 54 | |
Income taxes, net of refunds | 198 | | | 294 | |
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 | 223 | | | 176 | |
|
| | | | | |
| 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 StatementsCONDENSED 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 | | Accumu- lated other compre- hensive income (loss) | | Accumu- lated deficit | | Total stock- holders’ equity | | Non- con- trolling interests | | Total equity |
Balance as of December 31, 2023 | | 257,190 | | | 56 | | | 14,501 | | | (3,210) | | | 90 | | | (2,793) | | | 8,644 | | | 316 | | | 8,960 | |
Net income (loss) | | | | | | | | | | | | 639 | | | 639 | | | 5 | | | 644 | |
Other comprehensive income (loss) | | | | | | | | | | (46) | | | | | (46) | | | | | (46) | |
Share-based compensation plans | | | | | | 118 | | | | | | | | | 118 | | | | | 118 | |
Shares issued pursuant to stock awards | | 228 | | | | | | | 44 | | | | | (7) | | | 37 | | | | | 37 | |
Treasury shares repurchased and retired | | (1,323) | | | | | | | (303) | | | | | | | (303) | | | | | (303) | |
Dividends common stock ($1.014 per share) | | | | | | | | | | | | (260) | | | (260) | | | | | (260) | |
Balance as of March 31, 2024 | | 256,095 | | | 56 | | | 14,619 | | | (3,469) | | | 44 | | | (2,421) | | | 8,829 | | | 321 | | | 9,150 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Outstanding number of shares (in thousands) | | Common stock | | Capital in excess of par value | | Treasury shares at cost | | Accumu- lated other compre- hensive income (loss) | | Accumu- lated deficit | | Total stock- holders’ equity | | Non- con- trolling interests | | Total equity |
Balance as of December 31, 2022 | | 259,463 | | | 56 | | | 14,091 | | | (2,799) | | | 76 | | | (3,975) | | | 7,449 | | | 291 | | | 7,740 | |
Net income (loss) | | | | | | | | | | | | 615 | | | 615 | | | 8 | | | 623 | |
Other comprehensive income (loss) | | | | | | | | | | 22 | | | | | 22 | | | | | 22 | |
Share-based compensation plans | | | | | | 101 | | | | | | | | | 101 | | | | | 101 | |
Shares issued pursuant to stock awards | | 309 | | | | | | | 61 | | | | | (28) | | | 33 | | | | | 33 | |
Treasury shares repurchased and retired | | (37) | | | | | | | (7) | | | | | | | (7) | | | | | (7) | |
Dividends common stock ($1.014 per share) | | | | | | | | | | | | (264) | | | (264) | | | | | (264) | |
Balance as of April 2, 2023 | | 259,735 | | | 56 | | | 14,192 | | | (2,745) | | | 98 | | | (3,652) | | | 7,949 | | | 299 | | | 8,248 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
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‑F10-K for the year ended December 31, 2018.2023.
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-F10-K for the year ended December 31, 2018.2023.
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'sFor a discussion of our significant accounting policies disclosed in Note 2 Significantsee, “Part II – Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – “Significant Accounting Policies inPolicies” of our Annual Report on Form 20-F10-K for the year ended December 31, 2018. The2023. There have been no changes to our significant accounting policy information below is to aid inpolicies since our Annual Report on Form 10-K for the understanding of the financial information disclosed.year ended December 31, 2023.
Recent accounting standards
Accounting standards not yet adopted
In February 2016,November 2023, the FASB issued ASU 2016-02, Leases2023-07, Segment Reporting (Topic 842), followed in July 2018 by ASU 2018-10, Codification280): Improvements to Topic 842 Leases,Reportable Segment Disclosures, requiring disclosure of certain incremental segment information on an annual and ASU 2018-11, Leases (Topic 842): Targeted Improvements. Under the new transition method, aninterim basis, including (among other items) additional disclosure about significant segment expenses and that a public 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 ashas a single component, and considersreportable segment provide all the non-lease components as a separate unit of account.
Accounting standards adopted in 2019
In August 2017, the FASB issueddisclosures required by this ASU. 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 2017-042023-07 is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019,2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. TheWe will adopt ASU should be applied2023-07 for our annual periods starting in fiscal year 2024 (and interim periods thereafter) on a prospective basis. The Company does not expectretrospective basis and continue to evaluate the impact on our disclosures.
In December 2023, the FASB issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, requiring to disclose annually certain additional disaggregated income tax information related to the effective tax rate reconciliation and income taxes paid, among other items. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We will adopt the new requirements starting for our annual period starting in 2025 and continue to evaluate the basis of this guidanceadoption and impact on our disclosures.
No other new accounting pronouncements were issued or became effective in the 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
2024
There were 0no material acquisitions or divestments during the first ninethree months of 2019. On March 27, 2019, we sold our remaining equity interest in WeEn, receiving net cash proceeds of $37 million.2024.
2023
There were 0no material acquisitions or divestments during 2018. On July 10, 2018, NXP completed the salefirst three months 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.2023.
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 |
|
54 Supplemental Financial Information
Statement of Operations Information:
Disaggregation of revenue
The following table presents revenue disaggregated by sales channel:
| | | | | | | | | | | | | | | | | | | | | |
| For the three months ended | | | | |
| March 31, 2024 | | April 2, 2023 | | | | | | | | |
Distributors | 1,739 | | | 1,491 | | | | | | | | | |
Original Equipment Manufacturers and Electronic Manufacturing Services | 1,355 | | | 1,594 | | | | | | | | | |
Other | 32 | | | 36 | | | | | | | | | |
Total Revenue | 3,126 | | | 3,121 | | | | | | | | | |
|
| | | | | | | | | | | |
| 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 | | | | | | | | | | | | |
| March 31, 2024 | | April 2, 2023 | | | | | | | | | | | | | | | | |
Depreciation of property, plant and equipment | 145 | | | 160 | | | | | | | | | | | | | | | | | |
Amortization of internal use software | 7 | | | 4 | | | | | | | | | | | | | | | | | |
Amortization of other identified intangible assets | 83 | | | 119 | | | | | | | | | | | | | | | | | |
Total - Depreciation, amortization and impairment | 235 | | | 283 | | | | | | | | | | | | | | | | | |
Other income (expense)
AsEffective January 2024, we increased the estimated useful lives of January 1, 2019, income derivedcertain manufacturing equipment from manufacturing service arrangements (“MSA”) and transitional service arrangements (“TSA”) that are put5 to 10 years. This change has resulted in an insignificant increase in gross margin in the first quarter of 2024 when compared to what would have been the impact using the estimated useful life in place when we divest a business or activity, is included in other income (expense). These arrangements are short-term in nature and are expectedprior to decrease as the divested business or activity becomes more established.this change.
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 | | | | |
| March 31, 2024 | | April 2, 2023 | | | | | | | | |
Interest income | 50 | | | 42 | | | | | | | | | |
Interest expense | (105) | | | (111) | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total other financial income/ (expense) | (15) | | | (13) | | | | | | | | | |
Total | (70) | | | (82) | | | | | | | | | |
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 | | | | |
| March 31, 2024 | | April 2, 2023 | | | | | | | | |
Net income (loss) | 644 | | | 623 | | | | | | | | | |
Less: net income (loss) attributable to non-controlling interests | 5 | | | 8 | | | | | | | | | |
Net income (loss) attributable to stockholders | 639 | | | 615 | | | | | | | | | |
| | | | | | | | | | | |
Weighted average number of shares outstanding (after deduction of treasury shares) during the year (in thousands) | 256,567 | | | 259,576 | | | | | | | | | |
Plus incremental shares from assumed conversion of: | | | | | | | | | | | |
Options 1) | 172 | | | 206 | | | | | | | | | |
Restricted Share Units, Performance Share Units and Equity Rights 2) | 2,215 | | | 1,428 | | | | | | | | | |
Dilutive potential common shares | 2,387 | | | 1,634 | | | | | | | | | |
| | | | | | | | | | | |
Adjusted weighted average number of shares outstanding (after deduction of treasury shares) during the year (in thousands) | 258,954 | | | 261,210 | | | | | | | | | |
| | | | | | | | | | | |
EPS attributable to stockholders in $: | | | | | | | | | | | |
Basic net income (loss) | 2.49 | | | 2.37 | | | | | | | | | |
Diluted net income (loss) | 2.47 | | | 2.35 | | | | | | | | | |
1) StockThere were no stock options to purchase up to 0.1 million shares of NXP’s common stock that were outstanding in Q3 2019 (Q3 2018: 0.3 millionQ1 2024 (Q1 2023: 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 waswere greater than the weighted average number of shares underlying outstanding stock options.
2) Unvested RSUs, PSUs and equity rights of 0.2 million shares thatThere were outstanding in Q3 2019 (Q3 2018: 1.3 million shares) andno unvested RSUs, PSUs and equity rights of 0.3 million shares that were outstanding YTD 2019 (YTD 2018: 0.6in Q1 2024 (Q1 2023: 0.3 million 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 waswere 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, 2019March 31, 2024 and December 31, 2018,2023, our cash balance was $3,537$2,908 million and $2,789$3,862 million, respectively, of which $169$222 million and $140$214 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 dividendDuring both first three months of 2024 and 2023, 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 million as of September 29, 2019 (December 31, 2018: $52 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 |
|
| | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
Raw materials | 104 | | | 113 | |
Work in process | 1,580 | | | 1,633 | |
Finished goods | 418 | | | 388 | |
| 2,102 | | | 2,134 | |
The amounts recorded above are net of allowance for obsolescence of $114$198 million as of September 29, 2019March 31, 2024 (December 31, 2018: $1112023: $189 million).
Equity Investments
At March 31, 2024 and December 31, 2023, the total carrying value of investments in equity securities is summarized as follows:
| | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
Marketable equity securities | 9 | | | 12 | |
Non-marketable equity securities | 66 | | | 55 | |
Equity-accounted investments | 120 | | | 101 | |
| 195 | | | 168 | |
The total carrying value of investments in equity-accounted investees is summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
| Shareholding % | | Amount | | Shareholding % | | Amount |
SMART Growth Fund, L.P. | 8.41 | % | | 42 | | | 8.41 | % | | 42 | |
SigmaSense, LLC | 10.64 | % | | 32 | | | 10.64 | % | | 33 | |
Others | — | | | 46 | | | — | | | 26 | |
| | | 120 | | | | | 101 | |
| | | | | | | |
Results related to equity-accounted investees at the end of each period were as follows:
| | | | | | | | | | | | | | | | | |
| For the three months ended | | |
| March 31, 2024 | | April 2, 2023 | | | | |
Company's share in income (loss) | (2) | | | (2) | | | | | |
Other results | 1 | | | — | | | | | |
| (1) | | | (2) | | | | | |
Other current liabilities
Other current liabilities at March 31, 2024 and December 31, 2023 consisted of the following:
| | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
Accrued compensation and benefits | 502 | | | 500 | |
Customer programs | 339 | | | 280 | |
Income taxes payable | 168 | | | 170 | |
Dividend payable | 260 | | | 261 | |
Other | 637 | | | 644 | |
| 1,906 | | | 1,855 | |
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, 2023 | 177 | | | 1 | | | (88) | | | 90 | |
Other comprehensive income (loss) before reclassifications | (38) | | | (15) | | | — | | | (53) | |
Amounts reclassified out of accumulated other comprehensive income (loss) | — | | | 4 | | | — | | | 4 | |
Tax effects | — | | | 3 | | | — | | | 3 | |
Other comprehensive income (loss) | (38) | | | (8) | | | — | | | (46) | |
As of March 31, 2024 | 139 | | | (7) | | | (88) | | | 44 | |
|
| | | | | | | | | | | |
| 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 wasdividends were declared in 2019during the first quarters of 2024 and 20182023 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 2024 | | Fiscal year 2023 |
| Dividend per share | | Amount | | Dividend per share | | Amount |
First quarter | 1.014 | | | 260 | | | 1.014 | | | 263 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
The dividend declared in the first quarter (not yet paid) is classified in the condensed consolidated balance sheet in other current liabilities as of September 29, 2019March 31, 2024 and was subsequently paid on October 4, 2019.April 10, 2024.
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 2019:2024:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of January 1, 2024 | | Additions | | Utilized | | Released | | Other changes | | As of March 31, 2024 |
Restructuring liabilities | 101 | | | 8 | | | (31) | | | — | | | (1) | | | 77 | |
|
| | | | | | | | | | | | | | | | | |
| Balance January 1, 2019 |
| | Additions |
| | Utilized |
| | Released |
| | Other changes |
| | Balance September 29, 2019 |
|
Restructuring liabilities | 65 |
| | 30 |
| | (48 | ) | | (4 | ) | | (2 | ) | | 41 |
|
The total restructuring liability as of March 31, 2024 of $77 million is classified in the consolidated balance sheet under current liabilities ($68 million) and non-current liabilities ($9 million).
The components of restructuring charges recorded for eachthe three-month period ending March 31, 2024 consist of $7 million for personnel related costs for specific targeted actions. The restructuring charges for the three and nine month periods ended September 29, 2019 and September 30, 2018three-month period ending April 2, 2023 consist of $21 million for personnel related costs for a restructuring program in 2023, offset by a $3 million release for an earlier program.
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 | | |
| March 31, 2024 | | April 2, 2023 | | | | |
Cost of revenue | 3 | | | (2) | | | | | |
Research and development | 3 | | | 14 | | | | | |
Selling, general and administrative | 1 | | | 6 | | | | | |
| | | | | | | |
Net restructuring charges | 7 | | | 18 | | | | | |
|
| | | | | | | | | | | |
| 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 |
|
7
6 Income TaxesTax
Benefit/Each year NXP makes an estimate of its annual effective tax rate. This estimated annual effective tax rate ("EAETR") is then applied to the year-to-date Income (loss) before income taxes excluding discrete items, to determine the year-to-date benefit (provision) for income taxes. The income tax effects of any discrete items are recognized in the interim period in which they occur. As the year progresses, the Company continually refines the EAETR based upon actual events and the apportionment of our earnings (loss). This continual estimation process periodically may result in a change to our EAETR for the year. When this occurs, we adjust on an accumulated basis the benefit (provision) for income taxes during the quarter in which the change occurs.
Our provision for income taxes:
|
| | | | | | | | | | | |
| 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 impacttaxes for 2024 is based on our EAETR of tax incentives, non-deductible expenses, change in valuation allowance, a portion of our earnings being taxed in foreign jurisdictions at rates different17.5%, which is lower than the Netherlands statutory tax rate of 25.8%, primarily due to tax benefits from the Netherlands and the mix of income and losses in various jurisdictions. Ourforeign tax incentives.
| | | | | | | | | | | | | | | | | |
| For the three months ended | | |
| March 31, 2024 | | April 2, 2023 | | | | |
Tax benefit (provision) calculated at EAETR | (139) | | | (126) | | | | | |
Discrete tax benefit (provision) items | (2) | | | 8 | | | | | |
Benefit (provision) for income taxes | (141) | | | (118) | | | | | |
| | | | | | | |
Effective tax rate | 17.9 | % | | 15.9 | % | | | | |
The effective tax rate of 17.9% for the first nine monthsquarter of 20192024 was 21.4% compared with anhigher than the EAETR due to the income tax expense for discrete items of 14.2%$2 million. The discrete items are primarily related to changes in estimates for previous years, and the impact of foreign currency on a pre-tax profitincome tax related items.
The effective tax rate of 15.9% for the first nine monthsquarter of 2018. The movement in our effective tax rate reflects mainly2023 was lower compared to the decrease in tax incentives ($152 million),current period of 17.9% due to a different mix of the increasebenefit (provision) for income taxes in the prior year adjustments ($19 million) and the increaselocations that we operate in, the change in valuation allowance ($32 million).
The Company benefits from incomelower foreign tax incentives in certain jurisdictions which provide that we pay reducedthe current period as a result of a decrease in qualifying income, taxes in those jurisdictions for a fixed period of time that varies depending onand also due to the jurisdiction. The predominant income tax holiday is expected to expire at the end of 2026. The impact of this tax holiday decreased foreign taxes by $4 million and $5 million for the third quarter of 2019 anddiscrete items in the third quarter of 2018, respectively (YTD 2019: decrease of $8 million and YTD 2018: decrease of $15 million). The benefit of this tax holiday on net income per share (diluted) was $0.01 for the third quarter of 2019 (YTD 2019: $0.03) and $0.02 for the third quarter of 2018 (YTD 2018: $0.04).respective periods.
8
7 Identified Intangible Assets
Identified intangible assets as of September 29, 2019March 31, 2024 and December 31, 2018,2023, respectively, were composed of the following:
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
| Gross carrying amount | | Accumulated amortization | | Gross carrying amount | | Accumulated amortization |
In-process R&D (IPR&D) 1) | 70 | | | — | | | 70 | | | — | |
| | | | | | | |
Customer-related | 788 | | | (363) | | | 788 | | | (352) | |
Technology-based | 1,307 | | | (963) | | | 1,406 | | | (990) | |
Identified intangible assets | 2,165 | | | (1,326) | | | 2,264 | | | (1,342) | |
| | | | | | | |
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:
| | | | | |
2024 (remaining) | 203 | |
2025 | 172 | |
2026 | 90 | |
2027 | 64 | |
2028 | 61 | |
Thereafter | 249 | |
|
| |
2019 (remaining) | 380 (remaining) |
2020 | 1,310 |
2021 | 554 |
2022 | 437 |
2023 | 230 |
Thereafter | 495 |
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, 2019March 31, 2024 (December 31, 2018:2023: 4 years).
98 Debt
The following table summarizes the outstanding debt as of September 29, 2019March 31, 2024 and December 31, 2018:2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | March 31, 2024 | | December 31, 2023 |
| Maturities | | Amount | | Interest rate | | Amount | | Interest rate |
Fixed-rate 4.875% senior unsecured notes | Mar, 2024 | | — | | | 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 | Jun, 2027 | | 500 | | | 4.400 | | | 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 | | | 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 | | | 10,250 | | | | | 11,250 | | | |
| | | | | | | | | |
Unamortized discounts, premiums and debt issuance costs | | | (72) | | | | | (75) | | | |
Total debt, including unamortized discounts, premiums, debt issuance costs and fair value adjustments | | | 10,178 | | | | | 11,175 | | | |
Current portion of long-term debt | | | — | | | | | (1,000) | | | |
Long-term debt | | | 10,178 | | | | | 10,175 | | | |
|
| | | | | | | | | | | |
| | | 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 | | |
| March 31, 2024 | | April 2, 2023 | | | | |
Revenue and other income | 1 | | | 1 | | | | | |
Purchase of goods and services | 1 | | | — | | | | | |
|
| | | | | | | | | | | |
| 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:
| | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
Receivables | 1 | | | 1 | |
Payables | 7 | | | 7 | |
|
| | | | | |
| 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 LiabilitiesMeasurements
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 | | March 31, 2024 | | December 31, 2023 |
Assets: | | | | | |
Short-term deposits | 1 | | 400 | | | 409 | |
Money market funds | 1 | | 2,002 | | | 3,137 | |
Marketable equity securities | 1 | | 9 | | | 12 | |
Derivative instruments-assets | 2 | | 2 | | | 12 | |
| | | | | |
Liabilities: | | | | | |
| | | | | |
| | | | | |
| | | | | |
Derivative instruments-liabilities | 2 | | (15) | | | (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 assetsAssets and financial liabilities measured at fair value on a recurring basis
Investments in moneyshort-term deposits, representing liquid assets with original maturity beyond three months and having no significant risk of changes in fair value, are represented at carrying value as reasonable estimates of fair value due to the relatively short period of time between the origination of the instruments and their expected realization. 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 derivativesor 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 costequity 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 13 Litigation
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 March 31, 2024, the estimated fair value of current and non-current debt was $9.1 billion ($10.3 billion as of December 31, 2023). 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 March 31, 2024, the Company had purchase commitments of $4,118 million, which are due through 2044.
Legal Proceedings
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,Impinj Patent Litigation
On March 13, 2024, the Company also reevaluates at least onand Impinj, Inc. (“Impinj”) entered into 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,settlement agreement with the Company haspaying Impinj an aggregate amountimmaterial cash consideration, resolving all outstanding litigation and other proceedings between the parties, with all previously pending litigation and administrative proceedings being dismissed. In addition, each party agreed to release the other party from any claims to damages or monetary relief for alleged acts of $85 million accrued for potential and current legal proceedings pending as of September 29, 2019, compared to $123 million accrued (without reduction for any related insurance reimbursements) at December 31, 2018. The accruals are included in “Other current liabilities” and “Other non-current liabilities”. As of September 29, 2019, the Company’s balance related to insurance reimbursements was $50 million (December 31, 2018: $65 million) and is included in “Other current assets” and “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 ofpatent infringement across the various potential outcomespatent infringement litigations and not to file any additional action for legal or equitable relief. Prior to the settlement, Impinj had initiated a number 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, the Company believes that for all litigation pending its potential aggregate exposure to loss in excesslawsuits alleging infringement of the amount accrued (without reduction for any amounts that may possibly be recovered under insurance programs) could range between $0 and $122 million. Based upon our past experience with these matters, the Company would expect to receive insurance reimbursement ontheir IP rights by certain of these claims that would offset the potential maximum exposureour products and we initiated a lawsuit and countersuit alleging infringement of up to $109 million.our IP rights by certain products of Impinj.
In addition, theMotorola Personal Injury Lawsuits
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 2421 individuals. The Motorola suits allege exposures between 19651980 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, aA 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.
Legal Proceedings Related Accruals and Insurance Coverage The Company 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 most current information available to it and based on its best estimate. Based on the procedures described above, the Company has an aggregate amount of $95 million accrued for potential and current legal proceedings pending as of March 31, 2024, compared to $112 million accrued at December 31, 2023 (without reduction for any related insurance reimbursements). The accruals are included in “Other current liabilities” and in “Other non-current liabilities”. As of March 31, 2024, the Company’s related balance of insurance reimbursements was $67 million (December 31, 2023: $67 million) and is included 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, 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 March 31, 2024, 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 $93 million. Based upon our past experience with these matters, the Company would expect to receive additional insurance reimbursement of up to $70 million on certain of these claims that would partially offset the potential aggregate exposure to loss in excess of the amount accrued.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This interim Management’s Discussion and Analysis ("MD&A")(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‑F10-K for the year ended December 31, 2018. This discussion contains forward-looking2023, and the financial statements and the related notes that involveappear elsewhere in this document.
Overview
Quarter in Focus
•Revenue was $3.1 billion, up 0.2 percent year-on-year;
•GAAP gross margin was 57.0 percent, and GAAP operating margin was 27.4 percent;
•Non-GAAP gross margin was 58.2 percent, and non-GAAP operating margin was 34.5 percent;
•Cash flow from operations was $851 million, with net capital expenditures on property, plant and equipment of $224 million, resulting in non-GAAP free cash flow of $627 million;
•During the first quarter of 2024, NXP returned capital to shareholders with the payment of $261 million in cash dividends and the repurchase of $303 million of its common shares, for a numbertotal capital return of risks$564 million;
•On March 1, 2024, we fully retired at maturity our $1 billion aggregate principal amount of outstanding 4.875% senior unsecured notes using available cash on balance sheet;
•We published our annual Corporate Sustainability Report, reinforcing our commitment toward transparency and uncertainties, including any statements that refersustainable business practices;
Sequential Results
Q1 2024 compared to projectionsQ4 2023
Revenue for the three months ended March 31, 2024 was $3,126 million compared to $3,422 million for the three months ended December 31, 2023, a decrease of our future financial performance, our anticipated growth and trends$296 million or 8.6% quarter-on-quarter, in our businesses, uncertain events or assumptions, and other characterizations of future events or circumstances. Such statements are based on our currentline with management's expectations and could be affected byspread across all end markets. Our Automotive end market decreased $95 million or 5.0%, the uncertaintiesIndustrial IoT end market decreased $88 million or 13.3%, the Mobile end market decreased $57 million or 14.0%, and risk factors described throughout this filingour Communications Infrastructure & Other end market decreased $56 million or 12.3%.
When aggregating all end markets together and in “Risk Factors” in Part I, Item 3Dreviewing sales channel performance, revenues through NXP's third party distribution partners was $1,739 million, a decrease of our Annual Report on Form 20-F. 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$339 million or circumstances.
|
| | | | | | | | | | | |
($ 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 |
|
Q3 2019 compared to Q3 2018
In the quarter ended September 29, 2019, revenue declined by $180 million as16.3% compared to the quarter ended September 30, 2018. Includedprevious period. Revenues through NXP's third party direct OEM and EMS customers was $1,355 million, an increase of $45 million or 3.4% versus the previous period.
From a geographic perspective, revenue decreased across the China and Americas regions, with increases in revenues in the latter is $32EMEA and the Asia Pacific regions.
Our gross profit percentage for the three months ended March 31, 2024 of 57.0% was relatively consistent compared with 56.6% for the three months ended December 31, 2023.
Operating income for the three months ended March 31, 2024 was $856 million of revenue related to divested businesses or activities. As of January 1, 2019, income and expenses derived 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 decreased in the third quarter of 2019 as compared to the third quarter of 2018 primarily as a result of the decline in sales. Operating expenses in the third quarter of 2019 decreased as compared to the third quarter of 2018 both in research and development costs and selling, general and administrative. Other income (expense) in the third quarter of 2019 includes the result 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.
YTD 2019 compared to YTD 2018
In the nine month period ended September 29, 2019, revenue declined by $428$907 million as compared to the nine month period ended September 30, 2018. Included in the latter is $107 million of revenue related to divested businesses or activities. Gross profit decreased in the first nine months of 2019 as compared to the first nine months of 2018 primarily as a result of the decline in sales. Operating expenses in the first nine months of 2019 decreased as compared to the first nine months of 2018 primarily as a result of decreased research and development costs. Other income (expense) in the first nine months of 2019 includes the result 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 $2 billion termination compensation received from Qualcomm.
The table below depicts the Purchase Price Accounting (“PPA”) effects (reflecting the amortization related to the fair value adjustments resulting from the acquisition of Freescale in addition to the formation of NXP) for each offor the three and nine month periodsmonths ended September 29, 2019 and September 30, 2018, respectively, per line item in the statement of operations:
|
| | | | | | | | | | | |
($ 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 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 |
|
| Revenue |
| | Growth % |
| | Revenue |
| | Revenue |
| | Growth % |
| | Revenue |
|
| | | | | | | | | | | |
Revenue | 2,265 |
| | (7.4 | ) | | 2,445 |
| | 6,576 |
| | (6.1 | ) | | 7,004 |
|
Q3 2019 compared to Q3 2018
Revenue decreased $180 million to $2,265 million in the third quarter of 2019 compared to $2,445 million in the third quarter of 2018, a year-on-year decrease of 7.4%. Included in the third quarter of 2018 is the revenue related to divested businesses or activities of $32 million. The decline is mainly related to lower sales to distributors due to lower end-customer demand, in particular in the Greater China region and in our Automotive and Industrial & IOT end markets.
YTD 2019 compared to YTD 2018
Revenue decreased $428 million to $6,576 million in the first nine months of 2019 compared to $7,004 million in the first nine months of 2018, a year-on-year decrease of 6.1%. Included in the first nine months of 2018 is the revenue related to divested businesses or activities, $107 million. The decline is mainly related to lower sales to distributors due to lower end-customer demand, with Greater China region representing close to two-thirds of the compression and in particular in our Automotive, Industrial & IOT and Mobile end markets.
Gross Profit
The following table presents gross profit for each of the three and nine month periods ended September 29, 2019 and September 30, 2018, respectively:
|
| | | | | | | | | | | | | | | | | | | |
($ 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 compared to Q3 2018
Gross profit in the third quarter of 2019 was $1,186 million, or 52.4% of revenue compared to $1,256 million, or 51.4% of revenue in the third quarter of 2018,December 31, 2023, a decrease of $70 million, primarily driven by lower revenue resulting from lower demand. The gross margin percentage increased from 51.4% to 52.4%, mainly as a result of focused cost control and customer mix in the third quarter of 2019.
YTD 2019 compared to YTD 2018
Gross profit in the first nine months of 2019 was $3,409$51 million or 51.8%5.6%. Lower revenue drove the sequential decrease.
Results of revenue compared to $3,608 million, or 51.5% of revenue in the first nine months of 2018, a decrease of $199 million, primarily driven by lower revenue resulting from lower demand.operations
Operating expenses
The following table presents operating expensesresults for each of the three and nine monththree-month periods ended September 29, 2019March 31, 2024 and September 30, 2018:April 2, 2023, respectively:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
($ in millions, unless otherwise stated) | Q1 2024 | | % of Revenue | | Q1 2023 | | % of Revenue | | | | | | | | |
| | | | | | | | | | | | | | | |
Revenue | 3,126 | | | | | 3,121 | | | | | | | | | | | |
% nominal growth | 0.2 | | | | | (0.5) | | | | | | | | | | | |
Gross profit | 1,783 | | | | | 1,770 | | | | | | | | | | | |
Gross margin | 57.0 | % | | | | 56.7 | % | | | | | | | | | | |
Research and development | (564) | | | (18.0) | % | | (577) | | | (18.5) | % | | | | | | | | |
Selling, general and administrative | (306) | | | (9.8) | % | | (280) | | | (9.0) | % | | | | | | | | |
Amortization of acquisition-related intangible assets | (51) | | | (1.6) | % | | (85) | | | (2.7) | % | | | | | | | | |
Other income (expense) | (6) | | | (0.2) | % | | (3) | | | (0.1) | % | | | | | | | | |
Operating income (loss) | 856 | | | 27.4 | % | | 825 | | | 26.4 | % | | | | | | | | |
Financial income (expense) | (70) | | | (2.2) | % | | (82) | | | (2.6) | % | | | | | | | | |
Benefit (provision) for income taxes | (141) | | | (4.5) | % | | (118) | | | (3.8) | % | | | | | | | | |
Results relating to equity-accounted investees | (1) | | | — | % | | (2) | | | (0.1) | % | | | | | | | | |
Net income (loss) | 644 | | | 20.6 | % | | 623 | | | 20.0 | % | | | | | | | | |
Less: Net income (loss) attributable to non-controlling interests | 5 | | | 0.2 | % | | 8 | | | 0.3 | % | | | | | | | | |
Net income (loss) attributable to stockholders | 639 | | | 20.4 | % | | 615 | | | 19.7 | % | | | | | | | | |
| | | | | | | | | | | | | | | |
Diluted earnings per share | 2.47 | | | | | 2.35 | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
($ 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 |
Revenue
Q1 2024 Overview
The following table below presents
Q1 2024 compared to Q1 2023
Revenue for the compositionthree months ended March 31, 2024 was $3,126 million compared to $3,121 million for the three months ended April 2, 2023, an increase of operating expenses$5 million or 0.2%, in line with management’s expectations.
Revenue by line itemend market was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
($ in millions, unless otherwise stated) | Q1 2024 | | Q1 2023 | | % change | | | | | | |
Automotive | 1,804 | | | 1,828 | | | (1.3) | % | | | | | | |
Industrial & IoT | 574 | | | 504 | | | 13.9 | % | | | | | | |
Mobile | 349 | | | 260 | | | 34.2 | % | | | | | | |
Communication Infrastructure & Other | 399 | | | 529 | | | (24.6) | % | | | | | | |
Total Revenue | 3,126 | | | 3,121 | | | 0.2 | % | | | | | | |
Revenue by sales channel was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
($ in millions, unless otherwise stated) | Q1 2024 | | Q1 2023 | | % change | | | | | | |
Distributors | 1,739 | | | 1,491 | | | 16.6 | % | | | | | | |
OEM/EMS | 1,355 | | | 1,594 | | | (15.0) | % | | | | | | |
Other | 32 | | | 36 | | | (11.1) | % | | | | | | |
Total Revenue | 3,126 | | | 3,121 | | | 0.2 | % | | | | | | |
Revenue by geographic region, which is based on the customer’s shipped-to location was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
($ in millions, unless otherwise stated) | Q1 2024 | | Q1 2023 | | % change | | | | | | |
China 1) | 1,014 | | | 947 | | | 7.1 | % | | | | | | |
APAC, excluding China | 910 | | | 975 | | | (6.7) | % | | | | | | |
EMEA (Europe, the Middle East and Africa) | 743 | | | 725 | | | 2.5 | % | | | | | | |
Americas | 459 | | | 474 | | | (3.2) | % | | | | | | |
Total Revenue | 3,126 | | | 3,121 | | | 0.2 | % | | | | | | |
1) China includes Mainland China and Hong Kong | | | | |
Q1 2024 compared to Q1 2023
From an end market perspective, NXP experienced growth in its Mobile and Industrial IoT end markets which were offset by declines in the statementCommunication Infrastructure & Other and Automotive end markets versus the year ago period.
Revenue in the Automotive end market was $1,804 million, a decrease of operations:
|
| | | | | | | | | | | |
($ 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 |
|
$24 million or 1.3% versus the year ago period. The decrease in the Automotive end market revenue was attributable to declines in our automotive processors and ADAS – Safety products, which were offset by growth in our advanced analog portfolio.
Q3 2019
Revenue in the Industrial & IoT end market was $574 million, an increase of $70 million or 13.9% versus the year ago period. Within the Industrial & IoT end market the year-on-year increase was across the entire product portfolio, including processors, connectivity, advanced analog, and security.
Revenue in the Mobile end market was $349 million, an increase of $89 million or 34.2% versus the year ago period. The increase in the Mobile end market revenue was across the entire product portfolio, including mobile wallet and advanced analog.
Revenue in the Communication Infrastructure & Other end market was $399 million, a decrease of $130 million or 24.6% versus the year ago period. The decrease in revenue in secure cards and RF power products was due to weak end market demand. Communication Infrastructure & Other processors experienced anticipated end-of-life trends.
When aggregating all end markets together, and reviewing sales channel performance, revenues through NXP’s third party distribution partners was $1,739 million, an increase of 16.6% versus the year ago period. Revenues through direct OEM and EMS customers was $1,355 million, a decrease of 15.0% versus the year ago period.
From a geographic perspective, revenue increased year-on-year in the China and in the EMEA regions, while revenue decreased in APAC and the Americas regions.
Gross profit
Q1 2024 compared to Q3 2018Q1 2023
Gross profit for the three months ended March 31, 2024 was $1,783 million, or 57.0% of revenue, compared to $1,770 million, or 56.7% of revenue for the three months ended April 2, 2023, was relatively consistent with revenue and costs, both of which were comparatively flat year on year.
Operating expenses decreased $72 million to $975 million in the third quarter of 2019,
Q1 2024 compared to $1,047 million in the third quarter of 2018. The decrease 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.
YTD 2019 compared to YTD 2018Q1 2023
Operating expenses for the three months ended March 31, 2024 totaled $921 million, or 29.5% of revenue, compared to $942 million, or 30.2% of revenue, for the three months ended April 2, 2023.
•Research and development
| | | | | | | | | | | | | | | | | | | | | | | | | |
($ in millions, unless otherwise stated) | Q1 2024 | | Q1 2023 | | % change | | | | | | |
Research and development | 564 | | | 577 | | | (2.3) | % | | | | | | |
As a percentage of revenue | 18.0 | % | | 18.5 | % | | (0.5) | ppt | | | | | | |
Q1 2024 compared to Q1 2023
R&D costs for the three months ended March 31, 2024 decreased $136by $13 million, or 2.3%, when compared to $2,988 millionthe three months ended April 2, 2023 mainly driven in the first nine monthsform of 2019,subsidies and R&D tax credits in Q1 2024 of $19 million.
•Selling, general and administrative
| | | | | | | | | | | | | | | | | | | | | | | | | |
($ in millions, unless otherwise stated) | Q1 2024 | | Q1 2023 | | % change | | | | | | |
Selling, general and administrative | 306 | | | 280 | | | 9.3 | % | | | | | | |
As a percentage of revenue | 9.8 | % | | 9.0 | % | | 0.8 | ppt | | | | | | |
Q1 2024 compared to $3,124Q1 2023
SG&A costs for the three months ended March 31, 2024 increased by $26 million, inor 9.3%, when compared to the first ninethree months of 2018. The decrease in operating expenses isended April 2, 2023 mainly the result of ongoing cost control, resulting in lower expenditures in personnel and operating related costs due to a $16 million increase in legal expenses (related to ongoing litigation and a settlement, see Note 11 “Commitments and Contingencies”) and higher personnel-related costs of $7 million (attributable to higher salaries and wages of $6 million, higher share-based compensation costs of $7 million and lower merger-related expenses.restructuring costs of $5 million).
•Amortization of acquisition-related intangible assets
| | | | | | | | | | | | | | | | | | | | | | | | | |
($ in millions, unless otherwise stated) | Q1 2024 | | Q1 2023 | | % change | | | | | | |
Amortization of acquisition-related intangible assets | 51 | | | 85 | | | (40.0) | % | | | | | | |
As a percentage of revenue | 1.6 | % | | 2.7 | % | | (1.1) | ppt | | | | | | |
The following table presents operating income (loss)
Q1 2024 compared to Q1 2023
Amortization of acquisition-related intangible assets for each of the three and nine month periodsmonths 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 2019March 31, 2024 decreased by $34 million, or 40.0%, when 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 result of the $2 billion termination compensation received in the third quarter of 2018 from Qualcomm.
YTD 2019 compared to YTD 2018
Operating income (loss) decreased $2,042 million to $444 million in the first ninethree months of 2019, compared to $2,486 million in the first nine months of 2018. The decrease isended April 2, 2023 mainly relateddue to the $2 billion termination compensation received ineffect of certain acquisition-related intangibles becoming fully amortized (with regard to the third quarter of 2018 from Qualcomm.former Freescale acquisition).
Financial income (expense)
The following table presents the details of financial income and expenses:
|
| | | | | | | | | | | |
($ 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) | Q1 2024 | | Q1 2023 | | | | |
Interest income | 50 | | | 42 | | | | | |
Interest expense | (105) | | | (111) | | | | | |
Total other financial income/ (expense) | (15) | | | (13) | | | | | |
Total | (70) | | | (82) | | | | | |
Q3 2019
Q1 2024 compared to Q3 2018Q1 2023
Financial income (expense) was an expense of $85$70 million infor the third quarter of 2019,three months ended March 31, 2024, compared to an expense of $119$82 million for the three months ended April 2, 2023. The change in the third quarter of 2018. The decrease was mainly the result of one time charges ($60 million) on certain financial instruments for compensation relatedincome (expense) is attributable to an adjustment event required by the terminationincrease in interest income of the Qualcomm merger agreement and the origination fees ($11 million) related to the $1 billion bridge facility entered into in the third quarter of 2018, partly offset by the result of incremental interest expense, due to incremental debt raised in the fourth quarter of 2018.
YTD 2019 compared to YTD 2018
Financial income (expense) was an expense of $257$8 million in the first nine months of 2019, compared to an expense of $258 million in the first nine months of 2018. Asas a result of incremental debt inhigher interest rates. Interest expense decreased by $6 million mainly due to the fourth quarter of 2018, interest expense increased, partly offset by lower debt extinguishment costs and the absenceretirement of the one time charges and origination fee incurred in the first nine months of 2018.4.875% senior unsecured notes on March 1, 2024.
Benefit (provision) for income taxes
Q3 2019 compared to Q3 2018
Our effective tax rate reflects the impactprovision for income taxes for 2024 is based on our EAETR of tax incentives, non-deductible expenses, change in valuation allowance, a portion of our earnings being taxed in foreign jurisdictions at rates different17.5%, which is lower than the Netherlands statutory tax rate of 25.8%, primarily due to tax benefits from the Netherlands and the mix of income and losses in various jurisdictions. Ourforeign tax incentives.
| | | | | | | | | | | | | | | | | | | | | |
| Q1 2024 | | Q1 2023 | | | | | | | | |
Tax benefit (provision) calculated at EAETR | (139) | | | (126) | | | | | | | | | |
Discrete tax benefit (provision) items | (2) | | | 8 | | | | | | | | | |
Benefit (provision) for income taxes | (141) | | | (118) | | | | | | | | | |
| | | | | | | | | | | |
Effective tax rate | 17.9 | % | | 15.9 | % | | | | | | | | |
The effective tax rate of 17.9% for the thirdfirst quarter of 20192024 was anhigher than the EAETR due to the income tax expense for discrete items of 18.9%$2 million. The discrete items are primarily related to changes in estimates for previous years, and the impact of foreign currency on income tax related items.
Q1 2024 compared with an expense of 14.9% for the third quarter of 2018. to Q1 2023
The movement in our effective tax rate reflects mainlyof 15.9% for the first quarter of 2023 was lower compared to the current period of 17.9% due to a different mix of the benefit (provision) for income taxes in the locations that we operate in, lower foreign tax incentives in the current period as a result of a decrease in tax incentives ($160 million), the increase in the prior year adjustments ($26 million)qualifying income, and the increase in the change in valuation allowance ($9 million).
YTD 2019 comparedalso due to YTD 2018
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 of income and losses in various jurisdictions. Our effective tax rate for the first nine months of 2019 was a tax expense of 21.4% compared with an expense of 14.2% for the first nine months of 2018. The movement in our effective tax rate reflects mainly the decrease in tax incentives ($152 million), the increasediscrete items in the prior year adjustments ($19 million) and the increase in the change in valuation allowance ($32 million).respective periods.
Results relatingRelating to equity-accounted investees
Q3 2019 compared to Q3 2018Equity-accounted Investees
Results relating to equity-accounted investees amounted to a loss of $1 million for the third quarter of 2018 includedthree months ended March 31, 2024, whereas the net gain of $51 million resulting from the sale of ASEN in July 2018.
YTD 2019 compared to YTD 2018
Resultsthree months ended April 2, 2023 results relating to equity-accounted investees for the nine monthsamounted to a loss of 2018 included the net gain of $51 million resulting from the sale of ASEN in July 2018.
Net income (loss)
The following table presents the composition of net income for the periods reported:
|
| | | | | | | | | | | |
($ 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
$2 million.
Q3 2019 compared to Q3 2018
Non-controlling Interests
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$5 million infor the third quarter of 2019,three months ended March 31, 2024, 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$8 million infor the first ninethree 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.ended April 2, 2023.
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 thirdfirst quarter of 2019,2024, our cash balance was $3,537$2,908 million, an increasea decrease of $748$954 million compared to December 31, 2018.2023 having fully retired our $1 billion aggregate principal amount of outstanding 4.875% senior unsecured notes due March 2024 during the quarter. Taking into account the available amount of the Unsecured Revolving Credit Facility of $1,500$2,500 million, we had access to $5,037$5,408 million of liquidity as of September 29, 2019.
March 31, 2024. 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, short-term deposits, 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 million in the first nine months of 2019, compared to $441 million in the first nine months of 2018. During the nine month period ended September 29, 2019, we repurchased $1,369 million, or 15.2 million shares of our common stock pursuant to our share buyback program at a weighted average price of $90.16 per share.
Our total debt amounted to $8,505 million as of Q3 2019, an increase of $1,151 million compared to December 31, 2018 ($7,354 million). The fixed rate 1% convertible debt of $1,150 million is due December 2019. | | | | | | | | | | | |
($ in millions, unless otherwise stated) | YTD 2023 | | YTD 2022 |
Cash from operations | 851 | | | 632 | |
Capital expenditures | 226 | | | 251 | |
Cash to shareholders | 564 | | | 230 | |
Cash and short-term deposits
At September 29, 2019,March 31, 2024, our cash and short-term deposits balance was $3,537$3,308 million of which $169$222 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
Capital expenditures
Our cash outflows for capital expenditures were $226 million in the first ninethree months of 2019 (during2024, compared to $251 million in the second quarterfirst three months of 2018: $1392023.
Capital return
Under our Quarterly Dividend Program, interim dividends of $1.014 per ordinary share were paid on January 5, 2024 ($261 million) and dividends of $1.014 per ordinary share were paid on April 10, 2024 ($260 million).
In the first three months of 2024 we repurchased approximately $303 million of shares.
Debt
Our total debt, inclusive of aggregate principal, unamortized discounts, premiums, debt issuance costs and fair value adjustments, amounted to $10,178 million as of March 31, 2024, a decrease of $997 million compared to December 31, 2023 ($11,175 million). On March 1, 2024, we fully retired at maturity our $1 billion aggregate principal amount of outstanding 4.875% senior unsecured notes using available cash on balance sheet.
As of March 31, 2024, we had outstanding fixed-rate notes with varying maturities for an aggregate principal amount of $10,250 million (collectively the “Notes”), none are payable within 12 months. Future interest payments associated with the Notes total $3,051 million, with $378 million payable within 12 months
Our net debt position (see section Use of Certain Non-GAAP Financial Measures) at March 31, 2024 amounted to $6,870 million, compared to $6,904 million as of December 31, 2023.
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, 2023 in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. At March 31, 2024, other than 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, 2023.
Cash flows
Our cash and cash equivalents during the first ninethree months of 2019 increased2024 decreased by $753$951 million (excluding the effect of changes in exchange rates on our cash position of $5$(3) million) as follows:
| | | | | | | | | | | |
($ in millions, unless otherwise stated) | YTD 2024 | | YTD 2023 |
Net cash provided by (used for) operating activities | 851 | | | 632 | |
Net cash (used for) provided by investing activities | (274) | | | (351) | |
Net cash provided by (used for) financing activities | (1,528) | | | (198) | |
Increase (decrease) in cash and cash equivalents | (951) | | | 83 | |
|
| | | | | |
($ in millions, unless otherwise stated) | YTD 2019 |
| | YTD 2018 |
|
| | | |
Net cash provided by (used for) operating activities | 1,559 |
| | 3,638 |
|
Net cash provided by (used for) investing activities | (418 | ) | | (348 | ) |
Net cash provided by (used for) financing activities | (388 | ) | | (4,885 | ) |
Net cash increase (decrease) in cash and cash equivalents | 753 |
| | (1,595 | ) |
Cash Flow from Operating Activities
DuringFor the ninefirst three months ended September 29, 2019, cash generated byof 2024 our operating activities of $1,559provided $851 million in cash. This was primarily the result of $149 million of net income, non-cash adjustments to net income of $1,687$644 million, adjustments to reconcile the net income of $290 million and a decrease in the net changechanges in operating assets and liabilities of $282$(89) million. Cash used in investing activitiesAdjustments to net income (loss) includes offsetting non-cash items, such as depreciation and amortization of $418$235 million, during the nine months ended September 29, 2019 consistedshare-based compensation of cash used to acquire property, plant and equipment of $388 million, cash used to acquire intangible assets of $72$115 million and cash usedchanges in deferred taxes of $(64) million. Changes in operating assets and liabilities were primarily driven by a $102 million decrease in accounts payable and other liabilities as a result of lower purchase volumes and timing related to acquire available-for-sale securities of $19payments, $25 million increase in receivables and other current assets from prepayments to secure production supply with multiple vendors; partially offset by cash provided bya $32 million decrease in inventories as a result of inventory control efforts.
For the salefirst three months of 2023 our remaining equity interest in WeEn, net of tax 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 to repurchase long-term debt of $600 million, cash paid 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 by operating activities of $3,638provided $632 million in cash. This was primarily the result of $1,969 million of net income, non-cash adjustments to net income of $1,557$623 million, adjustments to reconcile the net income of $326 million and an increase in the net changechanges in operating assets and liabilities of $(315) million. Adjustments to net income (loss) includes offsetting non-cash items, such as depreciation and amortization of $283 million, share-based compensation of $99 million and changes in deferred taxes of $(62) million. Changes in operating assets and liabilities were primarily driven by a $196 million increase in inventories due to increased production levels in order to align inventory on hand with expected demand, $138 million increase in receivables and other current assets due to the linearity of revenue between the two periods, customer mix, and the related timing of cash collection, $33 million increase in other non-current assets from prepayments to secure long-term production supply with multiple vendors; partially offset by $52 million increase in accounts payable and other liabilities as a result of timing related to payments.
Cash Flow from Investing Activities
Net cash used infor investing activities amounted to $274 million for the first three months of $3482024 and principally consisted of the cash outflows for capital expenditures of $226 million, during$34 million for the nine months ended September 30, 2018consistedpurchase of investments (driven primarily by the initial capital contribution of approximately $22 million into European Semiconductor Manufacturing Company (ESMC) GmbH), and $32 million for the purchase of identified intangible assets, including EDA (electronic design automation).
Net cash used for investing activities amounted to acquire property, plant$351 million for the first three months of 2023 and equipmentprincipally consisted of $441the cash outflows for capital expenditures of $251 million, $42 million for the purchase of identified intangible assets, and $58 million for the purchase of investments.
Cash Flow from Financing Activities
Net cash used for financing activities was $1,528 million for the first three months of 2024 was primarily driven by the payment of $1 billion to purchase interests in a businessretire at maturity our outstanding 4.875% senior unsecured notes due March 2024, dividend payment to common stockholders of $18$261 million, and cash used to acquire intangible assetspurchase of $46 million,treasury shares and restricted stock unit holdings of $303 million; partially offset by cashthe proceeds from the saleissuance of 40%common stock through stock plans of $37 million.
Net cash used for financing activities was $198 million for the first three months of 2023 was primarily driven by the dividend payment to common stockholders of $219 million; partially offset by the proceeds from the issuance of common stock through stock plans of $33 million.
Information Regarding Guarantors of NXP (unaudited)
Summarized Combined Financial Information for Guarantee of Securities of Subsidiaries
All debt instruments are guaranteed, fully and unconditionally, jointly and severally, by NXP Semiconductors N.V. and issued or guaranteed by NXP USA, Inc., NXP B.V. and NXP LLC, (together, the “Subsidiary Obligors” and together with NXP Semiconductors N.V., the “Obligor Group”). Other than the Subsidiary Obligors, none of the Company’s subsidiaries (together the “Non-Guarantor Subsidiaries”) guarantee the Notes. The Company consolidates the Subsidiary Obligors in its consolidated financial statements and each of the Subsidiary Obligors are wholly owned subsidiaries of the Company.
All of the existing guarantees by the Company rank equally in right of payment with all of the existing and future senior indebtedness of the Obligor Group. There are no significant restrictions on the ability of the Obligor Group to obtain funds from respective subsidiaries by dividend or loan.
The following tables present summarized financial information of the Obligor Group on a combined basis, with intercompany balances and transactions between entities of the Obligor Group eliminated and investments and equity in the earnings of the Non-Guarantor Subsidiaries excluded. The Obligor Group’s amounts due from, amounts due to, and intercompany transactions with Non-Guarantor Subsidiaries have been disclosed below the table, when material.
Summarized Statements of Income
| | | | | |
| For the three months ended |
($ in millions) | March 31, 2024 |
| |
Revenue | 1,767 | |
Gross Profit | 914 | |
Operating income | 332 | |
Net income | 139 | |
Summarized Balance Sheets
| | | | | | | | | | | |
| As of |
($ in millions) | March 31, 2024 | | December 31, 2023 |
| | | |
Current assets | 3,273 | | | 4,298 | |
Non-current assets | 11,780 | | | 11,773 | |
Total assets | 15,053 | | | 16,071 | |
| | | |
Current liabilities | 897 | | | 2,005 | |
Non-current liabilities | 10,566 | | | 10,566 | |
Total liabilities | 11,463 | | | 12,571 | |
| | | |
Obligor's Group equity | 3,590 | | | 3,500 | |
Total liabilities and Obligor's Group equity | 15,053 | | | 16,071 | |
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 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 non-guarantors (for the three months ended March 31, 2024: $178 million). The Obligor Group has amounts due from equity financing (March 31, 2024: $7,299 million; December 31, 2023: $5,441 million) and due to debt financing (March 31, 2024: $2,692 million; December 31, 2023: $2,346 million) with non-guarantor subsidiaries.
Use of Certain Non-GAAP Financial Measures
Non-GAAP Financial Measures
In addition to providing financial information on a basis consistent with U.S. generally accepted accounting principles (“US GAAP” or “GAAP”), NXP also provides selected financial measures on a non-GAAP basis which are adjusted for specified items. The adjustments made to achieve these non-GAAP financial measures or the non-GAAP financial measures as specified are described below, including the usefulness to management and investors.
In managing NXP’s business on a consolidated basis, management develops an annual operating plan, which is approved by our Board of Directors, using non-GAAP financial measures. In measuring performance against this plan, management considers the actual or potential impacts on these non-GAAP financial measures from actions taken to reduce costs with the goal of increasing our gross margin and operating margin and when assessing appropriate levels of research and development efforts. In addition, management relies upon these non-GAAP financial measures when making decisions about product spending, administrative budgets, and other operating expenses. We believe that these non-GAAP financial measures, when coupled with the GAAP results and the reconciliations to corresponding GAAP financial measures, provide a more complete understanding of the Company’s results of operations and the factors and trends affecting NXP’s business. We believe that they enable investors to perform additional comparisons of our equity interestoperating results, to assess our liquidity and capital position and to analyze financial performance excluding the effect of expenses unrelated to core operating performance, certain non-cash expenses and share-based compensation expense, which may obscure trends in ASECNXP’s underlying performance. This information also enables investors to compare financial results between periods where certain items may vary independent of $127 millionbusiness performance, and the saleallow for greater transparency with respect to key metrics used by management.
The presentation of 24% of our equity interestthese and other similar items 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 millionNXP’s non-GAAP financial results should not be interpreted as implying that these items are non-recurring, infrequent, or unusual. These non-GAAP financial measures are provided in addition to, cash usedand not as a substitute for, or superior to, repurchase long-term debtmeasures of $1,273 million, offset by net borrowingsfinancial performance prepared in accordance with GAAP.
| | | | | | | | | | | | | | |
Non-GAAP Adjustment or Measure | | Definition | | Usefulness to Management and Investors |
Purchase price accounting effects | | Purchase price accounting ("PPA") effects reflect the fair value adjustments impacting acquisition accounting and other acquisition adjustments charged to the Consolidated Statement of Operations. This typically relates to inventory, property, plant and equipment, as well as intangible assets, such as developed technology and marketing and customer relationships acquired. The PPA effects are recorded within both cost of revenue and operating expenses in our US GAAP financial statements. These charges are recorded over the estimated useful life of the related acquired asset, and thus are generally recorded over multiple years. | | We believe that excluding these charges related to fair value adjustments for purposes of calculating certain non-GAAP measures allows the users of our financial statements to better understand the historic and current cost of our products, our gross margin, our operating costs, our operating margin, and also facilitates comparisons to peer companies. |
Restructuring | | Restructuring charges are costs primarily related to employee severance and benefit arrangements. Charges related to restructuring are recorded within both cost of revenue and operating expenses in our US GAAP financial statements | | We exclude restructuring charges, including any adjustments to charges recorded in prior periods, for purposes of calculating certain non-GAAP measures because these costs do not reflect our core operating performance. These adjustments facilitate a useful evaluation of our core operating performance and comparisons to past operating results and provide investors with additional means to evaluate expense trends. |
Share-based compensation | | Share-based compensation consists of incentive expense granted to eligible employees in the form of equity based instruments. Charges related to share-based compensation are recorded within both cost of revenue and operating expenses in our US GAAP financial statements. | | We exclude charges related to share-based compensation for purposes of calculating certain non-GAAP measures because we believe these charges, which are non-cash, are not representative of our core operating performance as they can fluctuate from period to period based on factors that are not within our control, such as our stock price on the dates share-based grants are issued. We believe these adjustments provide investors with a useful view, through the eyes of management, of our core business model, how management currently evaluates core operational performance, and additional means to evaluate expense trends. |
Other incidentals | | Other incidentals consist of certain items which may be non-recurring, unusual, infrequent or directly related to an event that is distinct and non-reflective of the Company’s core operating performance. These may include such items as process and product transfer costs, certain charges related to acquisitions and divestitures, litigation and legal settlements, costs associated with the exit of a product line, factory or facility, environmental or governmental settlements, and other items of similar nature. | | We exclude these certain items which may be non-recurring, unusual, infrequent or directly related to an event that is distinct and non-reflective of the Company’s core operating performance for purposes of calculating certain non-GAAP measures. These adjustments facilitate a useful evaluation of our core operating performance and comparisons to past operating results and provide investors with additional means to evaluate expense trends. |
| | | | | | | | | | | | | | |
Non-GAAP Adjustment or Measure | | Definition | | Usefulness to Management and Investors |
Non-GAAP Provision for income taxes | | Non-GAAP provision for income taxes is NXP's GAAP provision for income taxes adjusted for the income tax effects of the adjustments to our GAAP measure, including the effects of purchase price accounting (“PPA”), restructuring costs, share-based compensation, other incidental items and certain other adjustments to financial income (expense) items. Additionally, adjustments are made for the income tax effect of any discrete items that occur in the interim period. Discrete items primarily relate to unexpected tax events that may occur as these amounts cannot be forecasted (e.g., the impact of changes in tax law and/or rates, changes in estimates or resolved tax audits relating to prior year tax provisions, the excess or deficit tax effects on share-based compensation, etc.). | | The non-GAAP provision for income taxes is used to ascertain and present on a comparable basis NXP's provision for income tax after adjustments, the usefulness of which is described within this table. Additionally, the income tax effects of the adjustments to achieve the noted non-GAAP measures are used to determine NXP's non-GAAP net income (loss) attributable to stockholders and accordingly, our diluted non-GAAP earnings per share attributable to stockholders. |
Free Cash Flow | | Free Cash Flow represents operating cash flow adjusted for net additions to property, plant and equipment. | | We believe that free cash flow provides insight into our cash-generating capability and our financial performance, and is an efficient means by which users of our financial statements can evaluate our cash flow after meeting our capital expenditure. |
Net debt | | Net debt represents total debt (short-term and long-term) after deduction of cash and cash equivalents and short-term deposits. | | We believe this measure provides investors with useful supplemental information about the financial performance of our business, enables comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect of calculating our net leverage. |
The following are reconciliations of short-term debt of $1,000 million.our most comparable US GAAP measures to our non-GAAP measures presented:
| | | | | | | | | | | | | | | | | |
($ in millions) | For the three months ended |
| March 31, 2024 | | December 31, 2023 | | April 2, 2023 |
GAAP gross profit | $ | 1,783 | | | $ | 1,937 | | | $ | 1,770 | |
PPA effects | (12) | | | (13) | | | (13) | |
Restructuring | (3) | | | (13) | | | 2 | |
Share-based compensation | (15) | | | (14) | | | (13) | |
Other incidentals | (5) | | | (33) | | | (22) | |
Non-GAAP gross profit | $ | 1,818 | | | $ | 2,010 | | | $ | 1,816 | |
GAAP Gross Margin | 57.0 | % | | 56.6 | % | | 56.7 | % |
Non-GAAP Gross Margin | 58.2 | % | | 58.7 | % | | 58.2 | % |
GAAP research and development | $ | (564) | | | $ | (651) | | | $ | (577) | |
Restructuring | (3) | | | (49) | | | (14) | |
Share-based compensation | (58) | | | (55) | | | (52) | |
Other incidentals | (1) | | | (1) | | | (1) | |
Non-GAAP research and development | $ | (502) | | | $ | (546) | | | $ | (510) | |
GAAP selling, general and administrative | $ | (306) | | | $ | (311) | | | $ | (280) | |
PPA effects | — | | | (1) | | | (1) | |
Restructuring | (1) | | | (22) | | | (6) | |
Share-based compensation | (42) | | | (38) | | | (34) | |
Other incidentals | (29) | | | (5) | | | (21) | |
Non-GAAP selling, general and administrative | $ | (234) | | | $ | (245) | | | $ | (218) | |
GAAP operating income (loss) | $ | 856 | | | $ | 907 | | | $ | 825 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | | | | | | | | | | | | | |
($ in millions) | For the three months ended |
| March 31, 2024 | | December 31, 2023 | | April 2, 2023 |
GAAP operating income (loss) | $ | 856 | | | $ | 907 | | | $ | 825 | |
PPA effects | (63) | | | (77) | | | (99) | |
Restructuring | (7) | | | (84) | | | (18) | |
Share-based compensation | (115) | | | (107) | | | (99) | |
Other incidentals | (39) | | | (44) | | | (44) | |
Non-GAAP operating income (loss) | $ | 1,080 | | | $ | 1,219 | | | $ | 1,085 | |
GAAP Operating Margin | 27.4 | % | | 26.5 | % | | 26.4 | % |
Non-GAAP Operating Margin | 34.5 | % | | 35.6 | % | | 34.8 | % |
GAAP Income tax benefit (provision) | $ | (141) | | | $ | (124) | | | $ | (118) | |
Income tax effect | 30 | | | 54 | | | 49 | |
Non-GAAP Income tax benefit (provision) | $ | (171) | | | $ | (178) | | | $ | (167) | |
| | | | | |
During the first nine months of 2019, our contractual obligations decreased by $40 million resulting from normal business operations.
| | | | | | | | | | | | | | | | | |
($ in millions) | For the three months ended |
| March 31, 2024 | | December 31, 2023 | | April 2, 2023 |
Net cash provided by (used for) operating activities | $ | 851 | | | $ | 1,137 | | | $ | 632 | |
Net capital expenditures on property, plant and equipment | (224) | | | (175) | | | (251) | |
Non-GAAP free cash flow | $ | 627 | | | $ | 962 | | | $ | 381 | |
| | | | | |
Off-balance Sheet Arrangements
| | | | | | | | | | | | | | | | | |
($ in millions) | For the three months ended |
| March 31, 2024 | | December 31, 2023 | | April 2, 2023 |
Long-term debt | $ | 10,178 | | | $ | 10,175 | | | $ | 10,169 | |
Short-term debt | — | | | 1,000 | | | 998 | |
Total debt | 10,178 | | | 11,175 | | | 11,167 | |
Less: cash and cash equivalents | (2,908) | | | (3,862) | | | (3,930) | |
Less: short-term deposits | (400) | | | (409) | | | — | |
Net debt | $ | 6,870 | | | $ | 6,904 | | | $ | 7,237 | |
| | | | | |
At the end of the third quarter of 2019, we had no off-balance sheet arrangements other than commitments resulting from normal business operations. None of these arrangements has or is likely to have a material effect on our financial condition, results of operations or cash flows.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes to the Company’s market risk during the first ninethree months of 2019.2024. 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” of7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 20-F10-K for the year ended December 31, 2018.2023.
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.March 31, 2024. Based on that evaluation, the Certifying Officers concluded the Company's disclosure controls and procedures were effective as of September 29, 2019.March 31, 2024.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company's internal control over financial reporting during the three and nine month periodsthree-month period ended September 29, 2019,March 31, 2024, 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 have been no material changes from the risk factors previously disclosed in our Annual Report on Form 20-F10-K for the year ended December 31, 2018.2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Our Board has approved the purchase of shares from participants in NXP's equity programs to satisfy participants' tax withholding obligations and this authorization will remain in effect until terminated by the Board. In January 2022, the Board approved the repurchase of shares up to a maximum of $2 billion (the "2022 Share Repurchase Program"). Per March 31, 2024, there was approximately $1.2 billion remaining for the repurchase of shares under the 2022 Share Repurchase Program.
The following share repurchase activity occurred under these programs during the three months ended September 29, 2019 was as follows:March 31, 2024:
|
| | | | | | | | | | | | | | |
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) |
January 1, 2024 – February 4, 2024 | 559,696 | | $213.42 | | 545,629 | | 6,605,100 | | 14,067 |
February 5, 2024 – March 3, 2024 | 407,139 | | $235.11 | | 406,677 | | 5,143,153 | | 462 |
March 4, 2024 – March 31, 2024 | 356,075 | | $247.02 | | 356,075 | | 4,990,335 | | — |
Total | 1,322,910 | | | | 1,308,381 | | | | 14,529 |
(1) On June 18, 2019, the General Meeting of Shareholders extended the authorization of the Board of DirectorsReflects 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 announcedsatisfy 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 | | | |
3.2 | | | |
| 10.1* + | | |
10.2* + | | | |
10.3* + | | | |
31.1* | | | | |
31.2* | | | | |
32.1** | | | | |
101 | | The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 29, 2019,March 31, 2024, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations for the three and nine months ended September 29, 2019March 31, 2024 and September 30, 2018;April 2, 2023; (ii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 29, 2019March 31, 2024 and September 30, 2018;April 2, 2023; (iii) Condensed Consolidated Balance Sheets as of September 29, 2019March 31, 2024 and December 31, 2018;2023; (iv) Condensed Consolidated Statements of Cash Flows for the ninethree months ended September 29, 2019March 31, 2024 and September 30, 2018;April 2, 2023; (v) Condensed Consolidated Statements of Changes in Equity for the three and nine months ended September 29, 2019March 31, 2024 and September 30, 2018;April 2, 2023; 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, 2019April 30, 2024
| | | | | |
| |
NXP Semiconductors N.V. |
|
| /s/ William J. Betz |
| /s/ P. KellyName: William J. Betz, CFO |
| 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. |
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/ Kurt Sievers |
| | Kurt Sievers |
| By: | /s/ Richard L. Clemmer |
| | Richard L. Clemmer |
| | 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.; |
| |
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. |
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/ William J. Betz |
| | William J. Betz |
| By: | /s/ Peter Kelly |
| | Peter Kelly |
| | 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, 2019March 31, 2024 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
| | | | | | | | |
By: | | /s/ Kurt Sievers |
| | Kurt Sievers |
| By: | /s/ Richard L. Clemmer |
| | Richard L. Clemmer |
| | 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, 2019March 31, 2024 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
| | | | | | | | |
By: | | /s/ William J. Betz |
| | William J. Betz |
| By: | /s/ Peter Kelly |
| | Peter Kelly |
| | Chief Financial Officer |