Exhibit 99.1
Freescale Semiconductor Announces Third Quarter 2007 Results
AUSTIN, Texas--(BUSINESS WIRE)--Oct. 23, 2007--Freescale
Semiconductor Holdings I, Ltd. today announced financial results for
the third quarter ended September 28, 2007.
Highlights for the quarter include:
-- Net sales of $1.45 billion;
-- Adjusted EBITDA of $396 million;
-- Cash, cash equivalents and short-term investments of $772
million.
A description of Adjusted EBITDA and the reconciliations to our
GAAP results are included in this press release and the accompanying
tables.
Net Sales
Net sales for the third quarter of 2007 were $1.45 billion,
compared to $1.62 billion in the third quarter of 2006. "Third quarter
financial results improved sequentially and we generated strong cash
flow," said Michel Mayer, chairman and CEO. "The sequential
improvement was due primarily to higher wireless revenues."
Operating Highlights
Operating earnings, net earnings and Earnings Before Interest,
Taxes, Depreciation and Amortization (EBITDA) include non-cash
purchase accounting expenses related to the company's acquisition by a
private equity consortium in December 2006.
The company believes that providing operating earnings and EBITDA
exclusive of these expenses is a more meaningful representation of the
company's ongoing financial performance. Including the aforementioned
expenses, the operating and net losses for the third quarter of 2007
were $202 million and $261 million, respectively.
Excluding the aforementioned expenses, operating earnings were
$195 million and EBITDA was $353 million. This compares to operating
earnings of $270 million and EBITDA of $435 million in the third
quarter of 2006.
The company also uses Adjusted EBITDA to measure compliance with
certain of its debt covenants. Adjusted EBITDA for the third quarter
of 2007 was $396 million. Adjusted EBITDA for the 12 months ended
September 28, 2007 was $1.57 billion.
A table describing EBITDA and Adjusted EBITDA and reconciling net
income to these measures is included in this press release.
Segment Results
The Transportation and Standard Products segment reported net
sales of $653 million in the third quarter of 2007, compared to $682
million in the third quarter of 2006. EBITDA for the third quarter was
$177 million, or 27% of net sales.
The Networking and Computing Systems segment reported net sales of
$315 million in the third quarter of 2007, compared to $369 million in
the third quarter of 2006. EBITDA for the third quarter was $103
million, or 33% of net sales.
The Wireless and Mobile Solutions segment reported net sales of
$468 million in the third quarter of 2007, compared to $540 million in
the third quarter of 2006. EBITDA for the third quarter was $71
million, or 15% of net sales.
Liquidity Highlights
Cash, cash equivalents and short-term investments were $772
million on September 28, 2007, compared to $541 million at the second
quarter ending June 29, 2007. Capital expenditures were $73 million or
5% of net sales for the third quarter of 2007.
Conference Call and Webcast
Freescale's quarterly earnings call is scheduled to begin at 4
p.m. Central Daylight Time (USA) on October 23, 2007. 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, among other things, revenues, earnings, cash
flows, capital expenditures, working capital and other financial
items. These statements also relate to our business strategy, goals
and expectations concerning our market position, future operations,
margins, profitability, liquidity and capital resources. We have used
the words "anticipate," "believe," "could," "estimate," "expect,"
"intend," "may," "plan," "predict," "project," "will" and similar
terms and phrases to identify forward-looking statements in this
release.
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, which are described in greater detail under
"Risk Factors" in our Registration Statement on Form S-4/A filed with
the SEC on June 22, 2007. All future written and oral forward-looking
statements attributable to us or persons acting on our behalf are
expressly qualified in their entirety by the previous statements. We
undertake no obligation to update any information contained herein or
to publicly release the results of any revisions to any
forward-looking statements that may be made to reflect events or
circumstances that occur, or that we become aware of, after the date
of this release.
About Freescale Semiconductor
Freescale Semiconductor is a global leader in the design and
manufacture of embedded semiconductors for the automotive, consumer,
industrial, networking and wireless markets. The privately held
company is based in Austin, Texas, and has design, research and
development, manufacturing or sales operations in more than 30
countries. Freescale is one of the world's largest semiconductor
companies with 2006 sales of $6.4 billion (USD). www.freescale.com
Freescale(TM) and the Freescale logo are trademarks of Freescale
Semiconductor, Inc. All other product or service names are the
property of their respective owners. (C) Freescale Semiconductor, Inc.
2007.
Freescale Semiconductor Holdings I, Ltd.
Consolidated Statements of Operations
(Unaudited)
-------------- --------------- --------------
Successor Predecessor
------------------------------ --------------
Three months Three months
ended Three months ended
September 28, ended June 29, September 29,
(in millions) 2007 2007 2006
- ------------------------ -------------- --------------- --------------
Net sales $1,446 $1,376 $1,619
Cost of sales 869 809 873
-------------- --------------- --------------
Gross margin 577 567 746
Selling, general and
administrative 163 165 181
Research and development 270 286 295
Amortization expense for
acquired intangible
assets 346 346 3
Reorganization of
businesses and other - 38 (5)
Merger expenses - - 7
-------------- --------------- --------------
Operating (loss)
earnings (202) (268) 265
Other (expense) income,
net (194) (188) 2
-------------- --------------- --------------
(Loss) earnings before
income taxes (396) (456) 267
Income tax (benefit)
expense (135) (168) 10
-------------- --------------- --------------
Net (loss) earnings $(261) $(288) $257
============== =============== ==============
Freescale Semiconductor Holdings I, Ltd.
Consolidated Statements of Operations
(Unaudited)
--------------- ---------------
Successor Predecessor
--------------- ---------------
Nine months Nine months
ended ended
September 28, September 29,
(in millions) 2007 2006
- -------------------------------------- --------------- ---------------
Net sales $4,183 $4,744
Cost of sales 2,895 2,572
--------------- ---------------
Gross margin 1,288 2,172
Selling, general and administrative 488 553
Research and development 846 885
Amortization expense for acquired
intangible assets 1,037 9
Reorganization of businesses and other 38 (5)
Merger expenses 3 7
--------------- ---------------
Operating (loss) earnings (1,124) 723
Other (expense) income, net (580) 19
--------------- ---------------
(Loss) earnings before income taxes
and cumulative effect of accounting
change (1,704) 742
Income tax (benefit) expense (616) 20
--------------- ---------------
(Loss) earnings before cumulative
effect of accounting change (1,088) 722
Cumulative effect of accounting
change, net of income tax expense - 7
--------------- ---------------
Net (loss) earnings $(1,088) $729
=============== ===============
Freescale Semiconductor Holdings I, Ltd.
Reconciliation of Non-GAAP Measures
(Unaudited)
-------------------------------- ------------------
Successor Predecessor
-------------------------------- ------------------
Three months Three months Three months
ended ended ended
(in millions) September 28, 2007 June 29, 2007 September 29, 2006
- ------------------ ------------------ ------------- ------------------
Adjusted gross
margin $623 $605 $746
Incremental
depreciation
and
amortization
expense 46 38 -
------------------ ------------- ------------------
Gross margin $577 $567 $746
================== ============= ==================
Adjusted operating
earnings $195 $159 $270
Incremental
depreciation
and
amortization
expense 51 43 -
Amortization
expense for
acquired
intangible
assets 346 346 3
Reorganization
of businesses
and other - 38 (5)
Merger expenses - - 7
------------------ ------------- ------------------
Operating (loss)
earnings $(202) $(268) $265
================== ============= ==================
Adjusted gross margin and adjusted operating earnings represent gross
margin and operating (loss) earnings 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, reorganization of businesses and other charges, and merger
expenses. Adjusted gross margin and adjusted operating earnings are
not recognized terms under generally accepted accounting principles
(GAAP). Adjusted gross margin and adjusted operating earnings do not
represent gross margin or operating (loss) earnings, as those terms
are defined under GAAP, and should not be considered as alternatives
to gross margin or operating (loss) earnings as an indicator of our
operating performance. We have included information concerning
adjusted gross margin and adjusted operating earnings because we use
such information when evaluating gross margin and operating (loss)
earnings to better evaluate the underlying performance of the
Company. Adjusted gross margin and adjusted operating earnings as
presented herein are not necessarily comparable to similarly titled
measures.
Freescale Semiconductor Holdings I, Ltd.
Reconciliation of Non-GAAP Measures
(Unaudited)
-------------- --------------
Successor Predecessor
-------------- --------------
Nine months Nine months
ended ended
September 28, September 29,
(in millions) 2007 2006
- ---------------------------------------- -------------- --------------
Adjusted gross margin $1,822 $2,172
Inventory step-up recognition 416 -
Incremental depreciation and
amortization expense 118 -
-------------- --------------
Gross margin $1,288 $2,172
============== ==============
Adjusted operating earnings $503 $734
Inventory step-up recognition 416 -
Incremental depreciation and
amortization expense 133 -
Amortization expense for acquired
intangible assets 1,037 9
Reorganization of businesses and other 38 (5)
Merger expenses 3 7
-------------- --------------
Operating (loss) earnings $(1,124) $723
============== ==============
Adjusted gross margin and adjusted operating earnings represent gross
margin and operating (loss) earnings adjusted for the following as
necessary: inventory fair value step-up recognition, 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,
reorganization of businesses and other charges, and merger expenses.
Adjusted gross margin and adjusted operating earnings are not
recognized terms under generally accepted accounting principles
(GAAP). Adjusted gross margin and adjusted operating earnings do not
represent gross margin or operating (loss) earnings, as those terms
are defined under GAAP, and should not be considered as alternatives
to gross margin or operating (loss) earnings as an indicator of our
operating performance. We have included information concerning
adjusted gross margin and adjusted operating earnings because we use
such information when evaluating gross margin and operating (loss)
earnings to better evaluate the underlying performance of the
Company. Adjusted gross margin and adjusted operating earnings as
presented herein are not necessarily comparable to similarly titled
measures.
Freescale Semiconductor Holdings I, Ltd.
Condensed Consolidated Segment Information
(Unaudited)
(in millions) Three Months Ended
-------------------------------------
September 28, June 29, September 29,
2007 2007 2006
------------- --------- -------------
Net sales:
Transportation and Standard
Products $653 $684 $682
Networking and Computing Systems 315 328 369
Wireless and Mobile Solutions 468 353 540
Other 10 11 28
------------- --------- -------------
Segment totals $1,446 $1,376 $1,619
------------- --------- -------------
EBITDA:
Transportation and Standard
Products $177 $185 $207
Networking and Computing Systems 103 104 134
Wireless and Mobile Solutions 71 29 91
Other 2 (45) (4)
------------- --------- -------------
Segment totals $353 $273 $428
------------- --------- -------------
Freescale Semiconductor Holdings I, Ltd.
Segment EBITDA Excluding the Effects of Purchase Accounting and Other
Items
Non-GAAP Basis
(Unaudited)
(in millions) Three Months Ended
--------------------------------
September June September
28, 29, 29,
2007 2007 2006
--------- ----- ---------
Transportation and Standard Products $177 $185 $207
Networking and Computing Systems 103 104 134
Wireless and Mobile Solutions 71 29 91
Other 2 (7)(a) 3(b)
--------- ----- ---------
Segment totals $353 $311 $435
--------- ----- ---------
(a) Adjustment reflects add back of $38 million related to
reorganization expenses.
(b) Adjustment reflects add back of $7 million related to transaction
expenses arising from the merger.
Freescale Semiconductor Holdings I, Ltd.
Condensed Consolidated Segment Information
(Unaudited)
(in millions) Nine Months Ended
---------------------------
September 28, September 29,
2007 2006
------------- -------------
Net sales:
Transportation and Standard Products $2,002 $2,032
Networking and Computing Systems 963 1,090
Wireless and Mobile Solutions 1,185 1,560
Other 33 62
------------- -------------
Segment totals $4,183 $4,744
------------- -------------
EBITDA:
Transportation and Standard Products $354 $601
Networking and Computing Systems 119 383
Wireless and Mobile Solutions 76 272
Other (42) (44)
------------- -------------
Segment totals $507 $1,212
------------- -------------
Freescale Semiconductor Holdings I, Ltd.
Segment EBITDA Excluding the Effects of Purchase Accounting and Other
Items
Non-GAAP Basis
(Unaudited)
(in millions) Nine Months Ended
-------------------------
September September
28, 29,
2007 2006
--------- ---------
Transportation and Standard Products $540(a) $601
Networking and Computing Systems 297(b) 383
Wireless and Mobile Solutions 128(c) 272
Other (1)(d) (37)(e)
--------- ---------
Segment totals $964 $1,219
--------- ---------
(a) Adjustment reflects add back of $186 million from incremental
expense related to the recognition of the step-up of inventory to
fair value at the merger date.
(b) Adjustment reflects add back of $178 million from incremental
expense related to the recognition of the step-up of inventory to
fair value at the merger date.
(c) Adjustment reflects add back of $52 million from incremental
expense related to the recognition of the step-up of inventory to
fair value at the merger date.
(d) Adjustment reflects add back of $3 million related to transaction
expenses arising from the merger and $38 million related to
reorganization expenses.
(e) Adjustment reflects add back of $7 million related to transaction
expenses arising from the merger.
Freescale Semiconductor Holdings I, Ltd.
Adjusted EBITDA
(Unaudited)
Provided below is a reconciliation of net loss
to EBITDA to Adjusted EBITDA:
---------- ------------
Three Twelve
months months
ended ended
September September
(in millions) 28, 2007 28, 2007
---------- ------------
Net (loss) $(261) $(3,811)
Interest expense, net 196 630
Income tax (benefit) (135) (744)
Depreciation and amortization (a) 553 1,911
---------- ------------
EBITDA 353 (2,014)
Non-cash stock-based employee compensation (1) 11 357
Other non-cash charges (2) - 2,820
Non-recurring/one-time items (3) 5 255
Cost savings (4) 6 54
Other defined terms (5) 21 98
---------- ------------
Adjusted EBITDA $396 $1,570
========== ============
(a) Excludes amortization of debt issuance costs, which are included
in interest expense, net.
(1) Reflects non-cash stock-based employee compensation expense under
the provisions of SFAS No. 123(R), Share-based Payments.
(2) Reflects the non-cash charges related to purchase accounting
adjustments for in-process research and development, inventory and
other non-cash items.
(3) Reflects costs associated with Predecessor debt extinguishment,
one-time Merger expenses and our reorganization of business program.
(4) Reflects cost savings that we expect to achieve from certain
initiatives where actions have begun or have already been completed.
(5) Reflects other adjustments required in calculating our debt
covenant compliance.
Adjusted earnings before cumulative effect of accounting change,
interest, taxes, depreciation and amortization (EBITDA) is a non-U.S.
GAAP measure used to determine our compliance with certain covenants
contained in the Credit Facilities and the indentures governing the
Senior Notes and Senior Subordinated Notes. Adjusted EBITDA is
defined as EBITDA adjusted to add back certain non-cash, non-
recurring and other items that are included in EBITDA and/or net
income (loss), as required by various covenants in the indentures and
the Credit Facilities. We believe that the presentation of Adjusted
EBITDA for the twelve months ended September 28, 2007 is appropriate
to provide additional information to investors to demonstrate
compliance with our financing covenants. Our ability to engage in
activities such as incurring additional indebtedness, making
investments and paying dividends is tied to ratios based on Adjusted
EBITDA.
Adjusted EBITDA does not represent, and should not be considered an
alternative to, net income (loss), operating income (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 Adjusted EBITDA and similar measures are
frequently used as measures of operations and the ability to meet
debt service requirements by other companies, our use of Adjusted
EBITDA is not necessarily comparable to such other similarly titled
captions of other companies. The definition of Adjusted EBITDA in
the indentures and the Credit Facilities allows us to add back
certain charges that are deducted in calculating EBITDA and/or net
income (loss). However, some of these expenses may recur, vary
greatly and are difficult to predict. Further, our debt instruments
required that Adjusted EBITDA be calculated for the most recent four
fiscal quarters. As a result, the measure can be disproportionately
affected by a particularly strong or weak quarter. Further, it may
not be comparable to the measure for any subsequent four-quarter
period or any complete fiscal year.
Freescale Semiconductor Holdings I, Ltd.
Condensed Consolidated Balance Sheets
(in millions)
------------------ -------------
September 28, 2007 December 31,
(unaudited) 2006
------------------ -------------
ASSETS
Cash and cash equivalents $272 $177
Short-term investments 500 533
Accounts receivable, net 500 635
Inventory 846 1,188
Other current assets 356 317
------------------ -------------
Total current assets 2,474 2,850
Property, plant and equipment, net 2,929 3,232
Goodwill 5,317 5,313
Intangible assets, net 4,639 5,654
Other assets, net 567 690
------------------ -------------
Total assets $15,926 $17,739
================== =============
LIABILITIES AND STOCKHOLDER'S EQUITY
Notes payable and current portion of
long-term debt and capital lease
obligations $94 $85
Accounts payable 418 558
Accrued liabilities and other 743 716
------------------ -------------
Total current liabilities 1,255 1,359
Long-term debt 9,389 9,415
Deferred tax liabilities 1,197 1,858
Other liabilities 411 390
Stockholder's equity 3,674 4,717
------------------ -------------
Total liabilities and
stockholder's equity $15,926 $17,739
================== =============
CONTACT: Freescale Semiconductor
Investors:
Mitch Haws, 512-895-2454
mitch.haws@freescale.com
or
Media:
Robert Hatley, 512-996-5134
robert.hatley@freescale.com