NXP Semiconductors Reports Fourth Quarter and Full Year 2017 Results
Summary
This information also enables investors to compare financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management.In addition to providing financial information on a basis consistent with U.S. generally accepted accounting principles (“GAAP”), NXP also provides the following selected financial measures on a non-GAAP basis: (i) Gross profit, (ii) Gross margin, (iii) Research and development, (iv) Selling, general and administrative, (v) Amortization of acquisition-related intangible assets, (vi) Other income, (vii) Operating income (loss), (viii) Operating margin, (ix) Financial Income (expense), (x) EBITDA, adjusted EBITDA and trailing 12 month adjusted EBITDA, and (xi) non-GAAP free cash flow and free cash flow as a percent of Revenue.NXP Semiconductors N.V. (NASDAQ: NXPI ) enables secure connections and infrastructure for a smarter world, advancing solutions that make lives easier, better and safer.By their nature, forward-looking statements are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those projected.NXP SemiconductorsTable 1: Condensed consolidated statement of operations (unaudited) ($ in millions except share data) Three Months EndedFull YearDecember 31,2017October 1, 2017December 31,201620172016Revenue$2,456 $2,387 $2,440 $9,256 $9,498 Cost of revenue (1,214) (1,172) (1,251) (4,637) (5,429) Gross profit1,242 1,215 1,189 4,619 4,069 Research and development (414) (392) (362) (1,554) (1,560)Selling, general and administrative (269) (292) (292) (1,090) (1,141)Amortization of acquisition-related intangible assets (347) (363) (363) (1,448) (1,527) Total operating expenses(1,030)(1,047)(1,017)(4,092)(4,228) Other income (expense) (2) (5) 1 1,575 9 Operating income (loss)210 163 173 2,102 (150) Financial income (expense):Extinguishment of debt - - - (41) (32)Other financial income (expense) (79) (76) (96) (325) (421) Income (loss) before taxes131 87 77 1,736 (603) Benefit (provision) for income taxes 629 30 456 483 851Results relating to equity-accounted investees 8 6 4 53 11Net income (loss) 768 123 537 2,272 259Less: Net income (loss) attributable to non-controlling interests 15 15 17 57 59 Net income (loss) attributable to stockholders753 108 520 2,215 200 Earnings per share data: Net income (loss) per common share attributable to stockholders in $:Basic$ 2.20$ 0.32$ 1.55$ 6.54$ 0.59Diluted$ 2.17$ 0.31$ 1.51$ 6.41$ 0.58Weighted average number of shares of common stock outstanding during the period (in thousands):Basic342,088338,586334,768338,646338,477Diluted347,176346,152343,546345,802347,607 NXP SemiconductorsTable 2: Condensed consolidated balance sheet (unaudited) ($ in millions) As ofDecember 31,2017October 1, 2017December 31,2016Current assets: Cash and cash equivalents$ 3,547$ 3,065$ 1,894Accounts receivable, net 879 915 1,033Assets held for sale - - 1,104Inventories, net 1,236 1,205 1,113Other current assets 382 321 254 Total current assets6,044 5,506 5,398 Non-current assets: Other non-current assets 981 862 962Property, plant and equipment, net 2,295 2,288 2,352Identified intangible assets, net 5,863 6,250 7,343Goodwill 8,866 8,887 8,843 Total non-current assets18,005 18,287 19,500 Total assets24,049 23,793 24,898 Current liabilities: Accounts payable 1,146 1,052 973Liabilities held for sale - - 198Restructuring liabilities-current 74 79 129Accrued liabilities 747 818 712Short-term debt 751 754 421 Total current liabilities2,718 2,703 2,433 Non-current liabilities: Long-term debt 5,814 5,802 8,766Restructuring liabilities 15 20 22Deferred tax liabilities 701 1,325 1,659Other non-current liabilities 1,085 954 862 Total non-current liabilities7,615 8,101 11,309 Non-controlling interests 189 174 221Stockholders’ equity 13,527 12,815 10,935 Total equity13,716 12,989 11,156 Total liabilities and equity24,049 23,793 24,898 NXP SemiconductorsTable 3: Condensed consolidated statement of cash flows (unaudited) ($ in millions) Three Months EndedFull YearDecember 31,2017October 1, 2017December 31,201620172016Cash Flows from operating activitiesNet income (loss)$768 $123 $537 $2,272 $259 Adjustments to reconcile net income (loss):Depreciation and amortization 542 537 530 2,173 2,205Stock-based compensation 78 68 82 281 338Excess tax benefits from share-based compensation plans - - - - (5)Amortization of discount on debt 10 10 10 40 34Amortization of debt issuance costs 3 3 4 12 16Net (gain) loss on sale of assets (4) - - (1,615) (11)Loss (gain) on extinguishment of debt - - - 41 32Results relating to equity accounted investees (8) (6) (4) (22) (11)Changes in deferred taxes (593) (109) (469) (797) (925) Changes in operating assets and liabilities: (Increase) decrease in receivables and other current assets (25) 3 67 31 (51)(Increase) decrease in inventories (31) (24) 24 (120) 568Increase (decrease) in accounts payable and accrued liabilities 82 36 (39) 225 (156)Decrease (Increase) in other non-current assets (92) (5) 6 (100) 5Exchange differences 5 8 (3) 30 15Other items 3 (1) (8) (4) (10) Net cash provided by (used for) operating activities738 643 737 2,447 2,303 Cash flows from investing activities: Purchase of identified intangible assets (10) (16) (25) (66) (59)Capital expenditures on property, plant and equipment (133) (162) (131) (552) (389)Proceeds from disposals of property, plant and equipment 1 1 - 2 1Purchase of interests in businesses, net of cash acquired - - - - (202)Proceeds from sale of interests in businesses, net of cash divested- 14 - 2,682 20Other 7 - (1) 6 2 Net cash provided by (used for) investing activities(135)(163)(157)2,072 (627)Cash flows from financing activities: Net (repayments) borrowings of short-term debt - - - - (6)Amounts drawn under the revolving credit facility - - - - 200Repayments under the revolving credit facility - - (200) - (200)Repurchase of long-term debt - - - (2,728) (3,295)Principal payments on long-term debt (4) (4) (9) (16) (38)Proceeds from the issuance of long-term debt - - - - 3,259Cash paid for debt issuance costs - - - - (26)Dividends paid to non-controlling interests - (89) - (89) (126)Cash proceeds from exercise of stock options 129 36 25 233 115Purchase of treasury shares and restricted stock unit withholdings (248) (2) (62) (286) (1,280)Excess tax benefits from share-based compensation plans - - - - 5 Net cash provided by (used for) financing activities(123)(59)(246)(2,886)(1,392) Effect of changes in exchange rates on cash positions 2 2 (9) 20 (4)Increase (decrease) in cash and cash equivalents 482 423 325 1,653 280 Cash and cash equivalents at beginning of period 3,065 2,642 1,569 1,894 1,614 Cash and cash equivalents at end of period3,547 3,065 1,894 3,547 1,894 Net cash paid during the period for: Interest8127109245348Income taxes771141636667 NXP SemiconductorsTable 4: Reconciliation of GAAP to non-GAAP Segment Results (unaudited) ($ in millions) Three Months EndedFull YearDecember 31,2017October 1, 2017December 31,201620172016 High Performance Mixed Signal (HPMS)2,3482,2882,0628,7458,086Standard Products--3231181,220 Product Revenue2,348 2,288 2,385 8,863 9,306 Corporate and Other1089955393192 Total Revenue$2,456 $2,387 $2,440 $9,256 $9,498 HPMS Revenue$2,348 $2,288 $2,062 $8,745 $8,086 Percent of Total Revenue95.6%95.9%84.5%94.5%85.1% HPMS segment GAAP gross profit1,228 1,203 1,058 4,527 3,625 PPA effects(78)(58)(59)(268)(679)Restructuring--1-(12)Stock based compensation(10)(7)(10)(33)(42)Merger-related costs-(1)-(1)- HPMS segment non-GAAP gross profit$1,316 $1,269 $1,126 $4,829 $4,358 HPMS segment GAAP gross margin52.3%52.6%51.3%51.8%44.8%HPMS segment non-GAAP gross margin56.0%55.5%54.6%55.2%53.9%HPMS segment GAAP operating profit246 235 124 656 (302) PPA effects(430)(425)(426)(1,737)(2,202)Restructuring--19(52)Stock based compensation(77)(67)(76)(278)(313)Merger-related costs(3)(3)-(10)-Other incidentals--(1)-12 HPMS segment non-GAAP operating profit$756 $730 $626 $2,672 $2,253 HPMS segment GAAP operating margin10.5%10.3%6.0%7.5%-3.7%HPMS segment non-GAAP operating margin32.2%31.9%30.4%30.6%27.9%Standard Products Revenue$- $- $323 $118 $1,220 Percent of Total Revenue - - 13.2%1.3%12.8% StandardProducts segment GAAP gross profit- - 130 45 437 PPA effects----(1)Restructuring--(1)-(1)Stock based compensation--(1)(1)(4)Other incidentals--13427 Standard Products segment non-GAAP gross profit$- $- $119 $42 $416 Standard Products segment GAAP gross margin- - 40.2%38.1%35.8%Standard Products segment non-GAAP gross margin- - 36.8%35.6%34.1%Standard Products segment GAAP operating profit- - 92 31 268 PPA effects--1-(19)Restructuring----(1)Stock based compensation--(6)(2)(23)Other incidentals--9417 Standard Products segment non-GAAP operating profit$- $- $88 $29 $294 Standard Products segment GAAP operating margin- - 28.5%26.3%22.0%Standard Products segment non-GAAP operating margin- - 27.2%24.6%24.1%Corporate and Other Revenue108 $99 $55 $393 $192 Percent of Total Revenue4.4%4.1%2.3%4.2%2.1% Corporate and Other segment GAAP gross profit14 12 1 47 7 PPA effects(1)(1)(1)(5)(6)Restructuring-(1)(1)(3)(5)Stock based compensation--(1)1(3)Other incidentals--1-5 Corporate and Other segment non-GAAP gross profit$15 $14 $3 $54 $16 Corporate and Other segment GAAP gross margin13.0%12.1%1.8%12.0%3.6%Corporate and Other segment non-GAAP gross margin13.9%14.1%5.5%13.7%8.3%Corporate and Other segment GAAP operating profit(36)(72)(43)1,415 (116) PPA effects(1)(1)(2)(5)(16)Restructuring-(7)(6)(10)(15)Stock based compensation(1)(1)-(1)(2)Merger-related costs(29)(39)(37)(129)(67)Other incidentals(12)(29)11,539- Corporate and Other segment non-GAAP operating profit$7 $5 $1 $21 $(16)Corporate and Other segment GAAP operating margin-33.3%-72.7%-78.2%360.1%-60.4%Corporate and Other segment non-GAAP operating margin6.5%5.1%1.8%5.3%-8.3%NXP SemiconductorsTable 5: Financial Reconciliation of GAAP to non-GAAP Results (unaudited) ($ in millions except share data) Three Months EndedFull YearDecember 31,2017October 1, 2017December 31,201620172016Revenue$2,456 $2,387 $2,440 $9,256 $9,498 GAAP Gross profit$1,242 $1,215 $1,189 $4,619 $4,069 PPA effects(79)(59)(60)(273)(686)Restructuring-(1)(1)(3)(18)Stock Based Compensation(10)(7)(12)(33)(49)Merger-related costs-(1)-(1)-Other incidentals--14432 Non-GAAP Gross profit$1,331 $1,283 $1,248 $4,925 $4,790 GAAP Gross margin50.6%50.9%48.7%49.9%42.8%Non-GAAP Gross margin54.2%53.7%51.1%53.2%50.4% GAAP Research and development$(414)$(392)$(362)$(1,554)$(1,560)Restructuring--212(41)Stock based compensation(35)(30)(32)(122)(123)Merger-related costs(1)--(2)-Other incidentals--(1)--Non-GAAP Research and development$(378)$(362)$(331)$(1,442)$(1,396)GAAP Selling, general and administrative$(269)$(292)$(292)$(1,090)$(1,141)PPA effects(5)(4)(5)(21)(21)Restructuring-(6)(6)(10)(9)Stock based compensation(33)(31)(38)(126)(166)Merger-related costs(31)(41)(37)(136)(67)Other incidentals(10)(23)(3)(34)(13)Non-GAAP Selling, general and administrative$(190)$(187)$(203)$(763)$(865)GAAP amortization of acquisition-related intangible assets$(347)$(363)$(363)$(1,448)$(1,527)PPA effects(347)(363)(363)(1,448)(1,527)Non-GAAP amortization of acquisition-related intangible assets$-$-$-$-$-