Freescale Semiconductor 8-K Freescale Semiconductor Announces Third Quarter 2011 Results

Exhibit 99.1

Freescale Semiconductor Announces Third Quarter 2011 Results

AUSTIN, Texas--(BUSINESS WIRE)--October 20, 2011--Freescale Semiconductor Holdings I, Ltd. (NYSE:FSL) today announced financial results for the third quarter ended September 30, 2011. Highlights include:

GAAP Results

• Net Sales of $1.14 billion
• Gross margin of 42.1%
• Operating earnings of $110 million
• Loss per share of $.36

Non GAAP Results*

• Adjusted gross margin of 46.1%
• Adjusted operating earnings of $200 million
• Adjusted earnings per share of $.29

“Despite challenging macroeconomic environment conditions, Freescale continued to generate solid gross margins and overall profitability,” said Rich Beyer, chairman and CEO. “Looking ahead to the fourth quarter, we expect the weakness in the semiconductor market to continue to negatively impact our business.”

Third Quarter Highlights

Net sales for the third quarter of 2011 were $1.14 billion, compared to $1.22 billion in the second quarter of 2011 and $1.15 billion in the third quarter of 2010.

Income from operations for the three months ended September 30, 2011, was $110 million, compared to $31 million in the second quarter of 2011 and $1 million in the third quarter of 2010. Income from operations benefited from the partial settlement of an insurance claim the company made following the damage to its Sendai, Japan fabrication facility during the earthquake in March 2011. The benefit was partially offset by continuing charges associated with closing this facility. The net benefit for the third quarter was $20 million.

The net loss for the third quarter of 2011 was $88 million, or $.36 per share, compared to a loss of $168 million, or $.79 per share, in the second quarter of 2011 and a loss of $156 million, or $.79 per share, in the same period last year. The net loss for the third quarter included charges of $55 million associated with debt extinguishment costs related primarily to the completion of the company’s initial public offering and the 8.05% Notes issuance in June 2011.

Adjusted operating earnings (defined in Note 1 to the Notes to the Consolidated Financial Information attached to this press release) for the three months ended September 30, 2011, were $200 million compared to earnings of $216 million in the second quarter of 2011 and $158 million in the third quarter of 2010.

Adjusted net earnings (defined in Note 1 to the Notes to the Consolidated Financial Information attached to this press release) for the three months ended September 30, 2011, were $72 million, or $.29 per share, compared to earnings of $70 million, or $.33 per share, in the second quarter of 2011 and $12 million or $.06 per share, in the third quarter of 2010. Adjusted net earnings per share in the third quarter of 2011 were impacted by a higher number of diluted shares outstanding related to the full effect of the initial public offering completed late in the second quarter of 2011.

Descriptions of adjusted gross margin, EBITDA, Adjusted EBITDA, adjusted operating earnings (loss) and adjusted net earnings (loss) and the reconciliations to our GAAP results are included in the tables and notes attached to this press release.

Product Revenues

The company’s net sales figures for the third quarter of 2011 were as follows:

• Microcontroller net sales were $395 million, compared to $430 million in the second quarter of 2011 and $418 million in the third quarter of 2010.
• RF, Analog and Sensor net sales were $306 million, compared to $315 million in the second quarter of 2011 and $272 million in the third quarter of 2010.
• Networking and Multimedia net sales were $292 million, compared to $312 million in the second quarter of 2011 and $338 million in the third quarter of 2010.
• Cellular net sales were $97 million, compared to $122 million in the second quarter of 2011 and $90 million in the third quarter of 2010.
• Other net sales were $52 million, compared to $44 million in the second quarter of 2011 and $30 million in the third quarter of 2010.

Other Third Quarter Financial Information

• Capital Expenditures were $48 million;
• Cash and Cash Equivalents were $744 million;
• EBITDA* was $271 million; and
• Adjusted EBITDA* for the latest 12 months ended September 30, 2011, was $1.31 billion.

*Adjusted for various items as indicated and defined in Note 1 to the Notes to the Consolidated Financial Information attached to this press release.

Conference Call and Webcast

Freescale's quarterly earnings call is scheduled to begin at 4 p.m. Central Daylight Time on October 20, 2011. The company will offer a live webcast of the conference call over the Internet at www.freescale.com/investor.

Caution Regarding Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to our business strategy, goals and expectations concerning our market position, future operations, margins, profitability, liquidity and capital resources. Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect. Our operations involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. Actual results and trends in the future may differ materially from those suggested or implied by the forward-looking statements depending on a variety of factors. Some of the factors that we believe could affect our results include our substantial indebtedness; our ability to service our outstanding indebtedness and the impact such indebtedness may have on the way we operate our business; the loss of one or more of our significant customers or strategic relationships; general economic and business conditions and downturns in the cyclical industry in which we operate; our competitive environment and our ability to make technological advances; interruptions in our production or manufacturing capacity and our ability to obtain supplies; economic conditions in the industries in which our products are sold; maintenance and protection of our intellectual property; political and economic conditions in the countries where we conduct business; geological conditions in some of the earthquake-prone countries where certain of our customers and suppliers are based; integration of future acquisitions into our business; the costs of environmental compliance and/or the imposition of liabilities under environmental laws and regulations; potential product liability claims; inability to make necessary capital expenditures; loss of key personnel; the financial viability of our customers, distributors or suppliers; and our ability to achieve cost savings and the timing thereof, as well as other matters described under "Risk Factors" in our Annual Report on Form 10-K/A and other filings with the SEC. We undertake no obligation to update any information contained in this press release.

Non-GAAP Financial Measures

Included within this press release and the accompanying tables and notes are non-GAAP financial measures that supplement the company's consolidated financial information prepared under GAAP. The company describes these non-GAAP financial measures and reconciles them to the most directly comparable GAAP measures in the tables and notes attached to this press release. The company's management believes that these non-GAAP measures provide a more meaningful representation of the company’s ongoing financial performance than GAAP measures alone. In addition, the company uses Adjusted EBITDA to measure compliance with certain of its debt covenants. These non-GAAP measures are included solely for informational and comparative purposes and are not meant as a substitute for GAAP. You should consider them together with the consolidated financial information located in the tables attached to this press release.

About Freescale Semiconductor

Freescale Semiconductor (NYSE:FSL) is a global leader in the design and manufacture of embedded semiconductors for the automotive, consumer, industrial and networking markets. The company is based in Austin, Texas, and has design, research and development, manufacturing and sales operations around the world. www.freescale.com

Freescale™ and the Freescale logo are trademarks of Freescale Semiconductor, Inc. All other product or service names are the property of their respective owners. © Freescale Semiconductor, Inc. 2011.

Freescale Semiconductor Holdings I, Ltd.
Condensed Consolidated Statements of Operations
(Unaudited)
	Three Months Ended
(in millions)	Sept 30,			July 1,			Oct 1,
		2011			2011			2010
Net sales	$	1,142		$	1,223		$	1,148
Cost of sales		661			706			706
Gross margin		481			517			442
Selling, general and administrative		129			137			126
Research and development		200			207			201
Amortization expense for acquired intangible assets		62			63			121
Reorganization of business and other		(20	)		79			(7	)
Operating earnings		110			31			1
Loss on extinguishment or modification of long-term debt, net		(55	)		(42	)		(9	)
Other expense, net		(129	)		(151	)		(148	)
Loss before income taxes		(74	)		(162	)		(156	)
Income tax expense		14			6			-
Net loss	$	(88	)	$	(168	)	$	(156	)
Loss per common share:
Basic		($0.36	)		($0.79	)		($0.79	)
Diluted		($0.36	)		($0.79	)		($0.79	)
Weighted average common shares outstanding:
Basic		246			213			197
Diluted		248			215			197

Freescale Semiconductor Holdings I, Ltd.
Reconciliation of Non-GAAP Measures
(Unaudited)
	Three Months Ended
(in millions)	Sept 30,			July 1,			Oct 1,
		2011			2011			2010
Adjusted gross margin	$	527		$	558		$	484
Incremental depreciation expense (a)(g)		46			41			42
Gross margin	$	481		$	517		$	442
Adjusted operating earnings	$	200		$	216		$	158
Incremental depreciation expense (a)(g)		48			43			43
Amortization expense for acquired intangible assets (a)		62			63			121
Reorganization of business and other (f)		(20	)		79			(7	)
Operating earnings	$	110		$	31		$	1
Adjusted net earnings	$	72		$	70		$	12
Purchase price accounting impact (a)		110			106			161
Non-cash share-based compensation expense (b)		6			6			8
Fair value adjustment on interest rate and commodity derivatives (c)		(3	)		3			3
Deferred and non-current tax impact (d)		12			2			(9	)
Loss on extinguishment or modification of long-term debt, net (e)		55			42			9
Reorganization of business and other (f)		(20	)		79			(7	)
Other (g)		-			-			3
Net loss	$	(88	)	$	(168	)	$	(156	)
Adjusted net earnings per common share:
Basic	$	0.29		$	0.33		$	0.06
Diluted	$	0.29		$	0.33		$	0.06
Weighted average common shares outstanding:
Basic		246			213			197
Diluted		248			215			197

Freescale Semiconductor Holdings I, Ltd.
Product Group Net Sales Information
(Unaudited)
(in millions)	Three Months Ended
	Sept 30,		July 1,		Oct 1,
	2011		2011		2010
Microcontroller (1)	$	395	$	430	$	418
Networking and Multimedia (2)		292		312		338
RF, Analog and Sensors (3)		306		315		272
Cellular (4)		97		122		90
Other (5)		52		44		30
	$	1,142	$	1,223	$	1,148

(1) Microcontroller includes our microcontroller portfolio for automotive, consumer and industrial applications, as well as Infotainment, Multimedia & Telematics Operations.

(2) Networking & Multimedia includes our processor portfolio based on Power Architecture™, StarCore® DSP and i.MX platforms. This group includes the Networking Systems Division, Digital Home Operation and the Multimedia Applications Division.

(3) RF, Analog & Sensors incorporates the technologies of our RF, analog power management and sensing solutions.

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

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

Freescale Semiconductor Holdings I, Ltd.
Condensed Consolidated Balance Sheets
(Unaudited)
(in millions)	Sept 30,			July 1,			Oct 1,
		2011			2011			2010
ASSETS
Cash and cash equivalents	$	744		$	805		$	1,072
Restricted cash		-			887			-
Accounts receivable, net		508			473			464
Inventory, net		799			748			699
Other current assets		275			263			287
Total current assets		2,326			3,176			2,522
Property, plant and equipment, net		826			875			1,179
Intangible assets, net		128			188			415
Other assets, net		316			344			332
Total assets	$	3,596		$	4,583		$	4,448
LIABILITIES AND SHAREHOLDERS' DEFICIT
Notes payable and current portion of long-term debt and capital lease obligations	$	3		$	869		$	51
Accounts payable		405			405			464
Accrued liabilities and other		532			573			545
Total current liabilities		940			1,847			1,060
Long-term debt		6,589			6,593			7,589
Other liabilities		555			544			625
Shareholders' deficit		(4,488	)		(4,401	)		(4,826	)
Total liabilities and shareholders' deficit	$	3,596		$	4,583		$	4,448

Freescale Semiconductor Holdings I, Ltd.
Cash Flow Summary
(Unaudited)
	Three months ended
(in millions)	Sept 30,			July 1,			Oct 1,
		2011			2011			2010
Cash flows from operations	$	25		$	1		$	182
Cash flows from investing activities	$	(41	)	$	7		$	(131	)
Cash flows from financing activities	$	(35	)	$	(245	)	$	(70	)
Effect of exchange rate changes on cash and cash equivalents	$	(10	)	$	7		$	27

Freescale Semiconductor Holdings I, Ltd.
EBITDA and Adjusted EBITDA Reconciliations
(Unaudited)
	Three Months Ended
(in millions)	Sept 30,			July 1,			Oct 1,
		2011			2011			2010
EBITDA excluding the effects of other items	$	271		$	292		$	253
Fair value adjustment on interest rate and commodity derivatives (c)		(3	)		3			3
Loss on extinguishment or modification of long-term debt, net (e)		55			42			9
Reorganization of business and other (f)		(20	)		79			(7	)
EBITDA		239			168			248
Depreciation		99			97			122
Amortization*		83			83			139
Interest expense, net		131			150			144
Income tax expense (benefit)		14			6			-
Net loss	$	(88	)	$	(168	)	$	(157	)
(in millions)	Twelve months ended Sept 30, 2011
Net loss	$	(506	)
Interest expense, net		577
Income tax benefit		(9	)
Depreciation and amortization expense*		809
Non-cash share-based compensation expense (b)		26
Fair value adjustment on interest rate and commodity derivatives (c)		-
Loss on extinguishment or modification of long-term debt, net (e)		97
Reorganization of business and other (f)		162
Cost savings (h)		116
Other terms (i)		40
Adjusted EBITDA	$	1,312

*Excludes amortization of debt issuance costs, which are included in interest expense, net.

NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION

Summary of Key Reconciling Items

(a) Includes the effects of purchase price accounting relating to our acquisition by a consortium of investors in 2006 and our acquisition of SigmaTel, Inc. in 2008, including, as applicable, depreciation expense associated with the property, plant and equipment step up to fair value and amortization expense for acquired intangible assets related to developed technology and tradenames/trademarks.

(b) Reflects non-cash, share-based compensation expense under the provisions of ASC Topic 718, "Compensation - Stock Compensation.”

(c) Reflects the change in fair value of our interest rate and commodity derivatives which are not designated as cash flow hedges under the provisions of ASC Topic 815, "Derivatives and Hedging.”

(d) Adjustments to reflect cash income tax expense.

(e) Reflects losses on extinguishments and modifications of our long-term debt, net.

(f) Reflects losses related to our reorganization of business programs and other charges.

(g) Includes the acceleration of depreciation relating to the closure of certain of our 150mm manufacturing facilities.

(h) Reflects costs savings that we expect to achieve from initiatives commenced prior to December 31, 2009 under our reorganization of business programs that are in process or have already been completed.

(i) Reflects adjustments required by our debt instruments, including management fees payable to our Sponsors, relocation expenses and other items.

Note 1

Effective January 1, 2011, in order to more accurately reflect the expected useful lives of certain property, plant and equipment assets, we extended the estimated useful lives of certain of our probe, assembly and test equipment. As a result, depreciation expense in accordance with generally accepted accounting principles in the United States (U.S. GAAP) and in association with cost of sales and research and development was reduced by $16 million and $2 million, respectively, during the three month periods ended September 30, 2011 and July 1, 2011.

Adjusted gross margin and adjusted operating earnings (loss) represent gross margin and operating earnings (loss) adjusted for the following as necessary: incremental depreciation expense for property, plant and equipment fair value step-up and associated with reduction in lives of certain manufacturing assets, amortization of acquired intangible assets, and reorganization of businesses and other charges. Adjusted gross margin and adjusted operating earnings (loss) are not recognized terms under U.S. GAAP. Adjusted gross margin and adjusted operating earnings (loss) do not represent gross margin and operating earnings (loss), as those terms are defined under U.S. GAAP, and should not be considered as alternatives to gross margin or operating earnings (loss) as an indicator of our operating performance. We have included information concerning adjusted gross margin and adjusted operating earnings (loss) because we use such information when evaluating gross margin and operating earnings (loss) to better evaluate the underlying performance of the Company. Adjusted gross margin and adjusted operating earnings (loss) as presented herein are not necessarily comparable to similarly titled measures. A reconciliation of adjusted gross margin to gross margin and adjusted operating earnings (loss) to operating earnings (loss), the most directly comparable U.S. GAAP measures, has been included in the preceding tables.

Adjusted net earnings (loss) is net earnings (loss), adjusted for certain items that we believe are not indicative of the performance of our ongoing operations. We present adjusted net earnings (loss) as a supplemental performance measure. We believe adjusted net earnings (loss) is helpful to an understanding of our business and provides a means of evaluating our performance from period to period on a more consistent basis. This presentation should not be construed as an indication that similar items will not recur or that our future results will be unaffected by other items that we consider to be outside the ordinary course of our business. Because adjusted net earnings (loss) facilitates internal comparisons of our historical financial position and operating performance on a more consistent basis, we also use adjusted net earnings (loss) for business planning purposes, in measuring our performance relative to that of our competitors and in evaluating the effectiveness of our operational strategies. Adjusted net earnings (loss) has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for an analysis of our results as reported under U.S. GAAP. We compensate for these limitations by relying primarily on our U.S. GAAP results and using adjusted net earnings (loss) only supplementally. A reconciliation of adjusted net earnings (loss) to net earnings (loss), the most directly comparable U.S. GAAP performance measure, has been included in the preceding tables.

EBITDA (earnings before interest, taxes, depreciation and amortization) excluding the effects of other items is a non-U.S. GAAP financial measure. We have included information concerning EBITDA excluding the effects of other items because we use such information to supplementally evaluate the underlying performance of the Company. EBITDA excluding the effects of other items does not represent, and should not be considered an alternative to, net earnings (loss), operating earnings (loss), or cash flow from operations as those terms are defined by U.S. GAAP and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. While EBITDA excluding the effects of other items and similar measures are frequently used as measures of operations and the ability to meet debt service requirements by other companies, our use of this financial measure is not necessarily comparable to such other similarly titled captions of other companies.

Adjusted EBITDA as shown in the preceding tables is calculated in accordance with the indentures governing Freescale Semiconductor, Inc.’s existing notes and senior credit facilities. Adjusted EBITDA is net earnings (loss) adjusted for certain non-cash and other items that are included in net earnings (loss). Our ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is tied to ratios under the indentures and the senior credit facilities based on Adjusted EBITDA calculated for the most recent four fiscal quarters. Accordingly, we believe it is useful to provide the calculation of Adjusted EBITDA to investors for purposes of determining our ability to engage in these activities. Adjusted EBITDA is a non-U.S. GAAP financial measure. Adjusted EBITDA does not represent, and should not be considered an alternative to, net earnings (loss), operating earnings (loss), or cash flow from operations as those terms are defined by U.S. GAAP and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. Although Adjusted EBITDA and similar measures are frequently used as measures of operations and the ability to meet debt service requirements by other companies, our calculation of Adjusted EBITDA is not necessarily comparable to such other similarly titled captions of other companies. The calculation of Adjusted EBITDA in the indentures and the senior credit facilities allows us to add back certain charges that are deducted in calculating net earnings (loss). However, some of these expenses may recur, vary greatly and are difficult to predict. Further, our debt instruments require that Adjusted EBITDA be calculated for the most recent four fiscal quarters. We do not report Adjusted EBITDA on a quarterly basis. In addition, the measure can be disproportionately affected by quarterly fluctuations in our operating results, and it may not be comparable to the measure for any subsequent quarter, four-quarter period or any complete fiscal year. A reconciliation of net earnings (loss), which is a U.S. GAAP measure of our operating results, to Adjusted EBITDA, calculated as described above, has been included in the preceding tables.

CONTACT:
Freescale Semiconductor
Media:
Rob Hatley, 512-996-5134
robert.hatley@freescale.com
or
Investors:
Mitch Haws, 512-895-2454
mitch.haws@freescale.com